<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 26, 2000
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. 17 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 65 [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)
---------------------
PAULETTA P. COHN, ESQ.
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
2929 ALLEN PARKWAY, HOUSTON, TEXAS 77019
(NAME AND ADDRESS OF AGENT FOR SERVICE)
---------------------
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b) of Rule 485
_X_ May 1, 2000 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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
[Momento Photo}
PORTFOLIO DIRECTOR
SEPARATE ACCOUNT A
PROSPECTUS MAY 1, 2000
Units of Interest
Under Group and
Individual
Variable Annuity
Contracts
Portfolio Director
[Logo] Portfolio
Director
<PAGE> 3
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
PORTFOLIO DIRECTOR, PORTFOLIO DIRECTOR 2, PORTFOLIO DIRECTOR PLUS
SUPPLEMENT ISSUED MAY 1, 2000 TO THE PROSPECTUS DATED MAY 1, 2000
The Variable Annuity Life Insurance Company (the "Company") filed an application
with the Securities and Exchange Commission ("SEC") as of March 31, 2000
requesting an order allowing the Company to replace the shares of American
General Domestic Bond Fund of American General Series Portfolio Company 3
("AGSPC 3"), T. Rowe Price Small-Cap Stock Fund, Dreyfus Variable Investment
Fund -- Small Cap Portfolio, Scudder Growth and Income Fund, Neuberger Berman
Guardian Trust and Dreyfus Founders Growth Fund, each of which is a Variable
Investment Option currently available under our group and individual variable
annuity contracts, with shares of comparable series of AGSPC 3 and newly created
series of American General Series Portfolio Company ("AGSPC").
The Company believes that the proposed substitutions are in the best interest of
contract holders. In each case, the Substitute Series will have substantially
the same investment objective, practices and restrictions as the Replaced
Series. In the case of Dreyfus Variable Investment Fund -- Small Cap Portfolio
and T. Rowe Price Small-Cap Stock Fund, Inc., the Substitute Series will have
two sub-advisers, one of which is the Replaced Series' current investment
adviser, T. Rowe Price Associates, Inc., and an additional sub-adviser, Founders
Asset Management LLC, which has an outstanding long-term investment performance
record. In the case of Dreyfus Founders Growth Fund, the Substitute Series will
have the Replaced Series' current investment adviser, Founders Asset Management
LLC, as its sub-adviser. In the case of the other Replaced Series, the
Substitute Series will have as sub-advisers new managers with superior long-term
investment performance records in their respective asset classes.
The proposed substitutions and respective sub-advisers are:
<TABLE>
<CAPTION>
REPLACED SERIES SUBSTITUTE SERIES
<S> <C> <C>
Dreyfus Variable Investment Fund --
Small-Cap Portfolio -- AGSPC American General Select Small-Cap Fund (T. Rowe
Price Associates, Inc. and Founders Asset Management
LLC)
T. Rowe Price Small-Cap Stock Fund, Inc. -- AGSPC American General Select Small Cap Fund (T. Rowe
Price Associates, Inc. and Founders Asset Management
LLC)
Scudder Growth and Income Fund -- AGSPC American General American Century Income & Growth
Fund (American Century Investment Management, Inc.)
Neuberger Berman Guardian Trust -- AGSPC American General American Century Income & Growth
Fund (American Century Investment Management, Inc.)
Dreyfus Founders Growth Fund -- AGSPC American General Founders Growth Fund (Founders
Asset Management LLC)
AGSPC 3 American General Domestic Bond Fund -- AGSPC 3 American General Core Bond Fund (American
General Investment Management, L.P.)
</TABLE>
- --------------------------------------------------------------------------------
You should note that:
- - No action is required on your part. You will not need to vote a proxy, file a
new election, or take any other action if the SEC approves the substitutions.
- - The elections you have on file for allocating your account value, premium
payments and deductions will remain unchanged until you direct us otherwise.
- - You will not bear any expenses relating to the substitutions.
- - Although for two of the substitutions (Dreyfus Variable Investment
Fund -- Small Cap Portfolio and Scudder Growth and Income Fund) total contract
holder expenses are expected to be slightly higher for the Replaced Series,
the substitutions will result in a change to a sub-adviser with a superior
performance record.
- - On the effective date of the substitution, your account value in the Variable
Account Option will be the same as before the substitution.
- - The substitution will have no tax consequences for you.
The Company expects to complete the substitutions before October 2000. The newly
created series of AGSPC will commence operations at the time of the
substitutions. Completion of the substitutions is conditioned upon obtaining the
approval of the SEC and state insurance authorities, if applicable. Of course,
you may transfer amounts in your Contract among the Variable Investment Options
and Fixed Options, as usual. The substitutions will not be treated as a transfer
for purposes of the transfer provisions of your Contract. In addition, any
transfer charge that might otherwise be imposed will be waived from the date of
this Notice through the date that is 30 days after the substitutions.
We will send you a prospectus for AGSPC 3 and the new series of AGSPC, and
notice of the actual date of the substitutions, after we receive SEC approval.
You will receive confirmation when the substitution is complete.
Should you have any questions, you may contact us at 1-800-448-2542 (selection
1).
<PAGE> 4
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
UNITS OF INTEREST UNDER GROUP AND INDIVIDUAL
VARIABLE ANNUITY CONTRACTS
PORTFOLIO DIRECTOR
SEPARATE ACCOUNT A May 1, 2000
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
one or more Fixed Account Options and/or an array of 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:
FIXED ACCOUNT OPTIONS:
Fixed Account Plus
Short-Term Fixed Account
Multi-Year Enhanced Fixed Account*
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 Franklin Templeton Variable
Growth & Income Fund Social Awareness Fund Insurance Products Trust:
International Equities Fund Stock Index Fund Templeton Asset Strategy Fund -- Class 1
International Government Bond Fund Templeton International Securities
Fund -- Class 1
</TABLE>
* Available approximately May 22, 2000, subject to state approval.
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, 2000, contains additional
information about Portfolio Director and is part of this prospectus. For a free
copy 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 SEC 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> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ABOUT THE PROSPECTUS.......................... 1
FEE TABLE..................................... 2
SUMMARY....................................... 5
SELECTED PURCHASE UNIT DATA................... 9
GENERAL INFORMATION........................... 10
About Portfolio Director................. 10
About VALIC.............................. 10
About VALIC Separate Account A........... 10
Units of Interests....................... 10
Distribution of Contracts................ 11
VARIABLE ACCOUNT OPTIONS...................... 11
PURCHASE PERIOD............................... 12
Purchase Payments........................ 12
Purchase Units........................... 12
Calculation of Purchase Unit Value....... 12
Choosing Investment Options.............. 13
Fixed Account Options............... 13
Variable Account Options............ 13
Stopping Purchase Payments............... 13
TRANSFERS BETWEEN INVESTMENT OPTIONS.......... 14
During the Purchase Period............... 14
During the Payout Period................. 14
Communicating Transfer or Reallocation
Instructions........................... 14
Effective Date of Transfer............... 15
Market Timing............................ 15
FEES AND CHARGES.............................. 15
Account Maintenance Fee.................. 15
Surrender Charge......................... 15
Amount of Surrender Charge.......... 15
10% Free Withdrawal................. 15
Exceptions to Surrender Charge...... 16
Premium Tax Charge....................... 16
Separate Account Charges................. 16
Fund Annual Expense Charges.............. 17
Other Tax Charges........................ 17
Reduction or Waiver of Account
Maintenance Fee, Surrender, Mortality
and Expense Risk Fee or Administration
and Distribution Fee Charges........... 17
Separate Account Expense Reimbursement... 17
Market Value Adjustment.................. 18
PAYOUT PERIOD................................. 18
Fixed Payout............................. 18
Variable Payout.......................... 18
Combination Fixed and Variable Payout.... 19
Payout Date.............................. 19
Payout Options........................... 19
Enhancements to Payout Options........... 19
Payout Information....................... 19
SURRENDER OF ACCOUNT VALUE.................... 20
When Surrenders Are Allowed.............. 20
Amount That May Be Surrendered........... 20
Surrender Restrictions................... 20
Partial Surrenders....................... 20
Systematic Withdrawals................... 21
Distributions Required by Federal Tax
Law.................................... 21
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
EXCHANGE PRIVILEGE............................ 21
Restrictions on Exchange Privilege....... 21
Taxes and Conversion Costs............... 22
Surrender Charges........................ 22
Exchange Offers.......................... 22
Comparison of Contracts.................. 22
Features of Portfolio Director........... 22
Agents' and Managers' Retirement Plan
Exchange Offer......................... 22
DEATH BENEFITS................................ 23
Beneficiary Information.................. 23
Special Information for Individual
Non-Tax Qualified Contracts............ 24
During the Purchase Period............... 24
Interest Guaranteed Death Benefit... 24
Standard Death Benefit.............. 24
During the Payout Period................. 24
HOW TO REVIEW INVESTMENT PERFORMANCE OF
SEPARATE ACCOUNT DIVISIONS.................. 25
Types of Investment Performance
Information Advertised................. 25
Total Return Performance Information... 25
Standard Average Annual Total Return... 25
Nonstandard Average Annual Total
Return.............................. 25
Cumulative Total Return................ 25
Annual Change in Purchase Unit Value... 25
Cumulative Change in Purchase Unit
Value............................... 26
Total Return Based on Different
Investment Amounts.................. 26
An Assumed Account Value of $10,000.... 26
Yield Performance Information............ 26
AGSPC Money Market Division............ 26
Divisions Other Than The AGSPC Money
Market Division..................... 26
Performance Information: Average Annual
Total Return, Cumulative Return and
Annual and Cumulative Change in
Purchase Unit Value Tables............. 26
OTHER CONTRACT FEATURES....................... 32
Changes That May Not Be Made............. 32
Change of Beneficiary.................... 32
Contingent Owner......................... 32
Cancellation -- The 20 Day "Free Look"... 32
We Reserve Certain Rights................ 32
Relationship to Employer's Plan.......... 32
VOTING RIGHTS................................. 32
Who May Give Voting Instructions......... 32
Determination of Fund Shares Attributable
to Your Account........................ 33
During Purchase Period................... 33
During Payout Period or after a Death
Benefit Has Been Paid.................. 33
How Fund Shares Are Voted................ 33
FEDERAL TAX MATTERS........................... 33
Type of Plans............................ 33
Tax Consequences in General.............. 34
Effect of Tax-Deferred Accumulations..... 34
YEAR 2000..................................... 35
</TABLE>
(i)
<PAGE> 6
ABOUT THE PROSPECTUS
- --------------------------------------------------------------------------------
Unless otherwise specified in this prospectus, the words we, our, Company, and
VALIC mean The Variable Annuity Life Insurance Company. The words you and your,
unless otherwise specified in this prospectus, mean the participant, contract
owner, annuitant or beneficiary.
We will use a number of other specific terms in this prospectus. We will, when
that term is used in the prospectus, provide you with a definition of that term.
The terms used in this prospectus for which we will provide you a definition
are:
<TABLE>
<CAPTION>
Defined Terms Page No.
<S> <C>
Account Value 14
Annuitant 23
Assumed Investment Rate 18
Beneficiary 23
Contract Owner 24
Divisions 25
Fixed Account Options 24
Home Office 14
Mutual Fund or Fund 10
Participant 01
Participant Year 15
Payout Period 14
Payout Unit 18
Purchase Payments 12, 25
Purchase Period 14
Purchase Unit 12
VALIC Separate Account A 32
Variable Account Options 11, 24
</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> 7
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 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 Fund 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
Dreyfus Variable Investment
Fund -- Small Cap
Portfolio(4) 0.25 1.00 (0.15%) 1.10
Franklin Templeton Variable
Insurance Products Trust
Templeton Asset Strategy
Fund -- Class 1 0.25 1.00 -- 1.25
Templeton International
Securities Fund -- 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 Fund(6) 0.50% 0.07% 0.57%
AGSPC Capital Conservation Fund 0.50 0.10 0.60
AGSPC Government Securities Fund 0.50 0.09 0.59
AGSPC Growth Fund 0.80 0.06 0.86
AGSPC Growth & Income Fund 0.75 0.07 0.82
AGSPC International Equities Fund 0.35 0.08 0.43
AGSPC International
Government Bond Fund 0.50 0.07 0.57
AGSPC MidCap Index Fund 0.31 0.07 0.38
AGSPC Money Market Fund 0.50 0.07 0.57
AGSPC Science & Technology Fund 0.90 0.06 0.96
AGSPC Small Cap Index Fund 0.35 0.06 0.41
AGSPC Social Awareness Fund 0.50 0.07 0.57
AGSPC Stock Index Fund 0.26 0.06 0.32
Dreyfus Variable Investment Fund -- Small Cap
Portfolio 0.75 0.03 0.78
Franklin Templeton Variable Insurance
Products Trust(6)
Templeton Asset Strategy Fund(7) --
Class 1 0.60 0.18 0.78
Templeton International Securities
Fund(8) --
Class 1 0.69 0.19 0.88
</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.
2
<PAGE> 8
(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 certain payments received from the
underlying Fund or its affiliate for administrative and shareholder services
provided by the Company. See "Fees and Charges -- Separate Account Expense
Reimbursement" in this prospectus for more information.
(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. The Franklin Templeton Variable Insurance Products Trust was formerly
known as the Templeton Variable Products Series Fund.
(7) On February 8, 2000, shareholders of the Templeton Asset Allocation Fund
(previously offered under the Contract) approved a merger and reorganization
that combined the Templeton Asset Allocation Fund with the Templeton Global
Asset Allocation Fund, effective May 1, 2000. At the same time as the
merger, the Templeton Asset Allocation Fund changed its name to the
Templeton Asset Strategy Fund. The table shows restated total expenses for
the Templeton Asset Strategy Fund based on the new fund fees and the assets
of the Templeton Asset Allocation Fund as of December 31, 1999, and not the
assets of the combined fund. However, if the table reflected both the new
fund fees and the fund's combined assets, the fund's expenses after May 1,
2000 would be estimated as: Management Fees 0.60%, Other Expenses 0.14%, and
Annual Expenses 0.74%.
(8) On February 8, 2000, shareholders of the Templeton International Fund
(previously offered under the Contract) approved a merger and reorganization
that combined the Templeton International Fund with the Templeton
International Equity Fund, effective May 1, 2000. At the same time as the
merger, the Templeton International Fund changed its name to the Templeton
International Securities Fund. The table shows restated total expenses for
the Templeton International Securities Fund based on the new fund fees and
the assets of the Templeton International Fund as of December 31, 1999, and
not the assets of the combined fund. However, if the table reflected both
the new fund fees and the fund's combined assets, the fund's expenses after
May 1, 2000 would be estimated as: Management Fees 0.65%, Other Expenses
0.20%, and Annual Expenses 0.85%.
3
<PAGE> 9
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 $51 $ 88 $192
AGSPC Capital Conservation Division 7 $17 $52 $ 89 $195
AGSPC Government Securities Division 8 $17 $51 $ 89 $194
AGSPC Growth Division 15 $19 $60 $103 $223
AGSPC Growth & Income Division 16 $19 $58 $101 $218
AGSPC International Equities Division 11 $15 $46 $ 80 $176
AGSPC International Government Bond Division 13 $16 $51 $ 88 $192
AGSPC MidCap Index Division 4 $14 $45 $ 78 $171
AGSPC Money Market Division 6 $16 $51 $ 88 $192
AGSPC Science & Technology Division 17 $20 $63 $108 $233
AGSPC Small Cap Index Division 14 $15 $46 $ 79 $174
AGSPC Social Awareness Division 12 $16 $51 $ 88 $192
AGSPC Stock Index Division 10 $14 $43 $ 75 $164
Dreyfus Variable Investment Fund -- Small Cap
Portfolio Division 18 $19 $60 $104 $225
Franklin Templeton Variable Insurance Products
Trust
Templeton Asset Strategy -- Class 1 Division 19 $21 $65 $111 $240
Templeton International Securities -- Class 1
Division 20 $22 $68 $117 $251
</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 $101 $138 $192
AGSPC Capital Conservation Division 7 $63 $101 $139 $195
AGSPC Government Securities Division 8 $63 $101 $139 $194
AGSPC Growth Division 15 $66 $109 $153 $223
AGSPC Growth & Income Division 16 $65 $108 $151 $218
AGSPC International Equities Division 11 $62 $ 96 $130 $176
AGSPC International Government Bond Division 13 $63 $101 $138 $192
AGSPC MidCap Index Division 4 $61 $ 95 $128 $171
AGSPC Money Market Division 6 $63 $101 $138 $192
AGSPC Science & Technology Division 17 $67 $112 $158 $233
AGSPC Small Cap Index Division 14 $61 $ 96 $129 $174
AGSPC Social Awareness Division 12 $63 $101 $138 $192
AGSPC Stock Index Division 10 $60 $ 93 $125 $164
Dreyfus Variable Investment Fund -- Small Cap
Portfolio Division 18 $66 $110 $154 $225
Franklin Templeton Variable Insurance Products
Trust
Templeton Asset Strategy -- Class 1 Division 19 $67 $114 $161 $240
Templeton International Securities -- Class 1
Division 20 $68 $117 $167 $251
</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 description 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> 10
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 three Fixed Account Options. There may be certain limitations on how many
investment options you may invest in at any one time.(1)
- --------------------------------------------------------------------------------
<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
-------------------------------------------------------------------------------------------------------------------
Multi-Year Enhanced Multi-Year guaranteed interest income -- --
Fixed Account(1)
- ----------------------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS OBJECTIVE ADVISER SUBADVISER
- ----------------------------------------------------------------------------------------------------------------------------------
INDEX AGSPC International Seeks long-term growth of capital VALIC N/A
EQUITY Equities Fund through investments primarily in a
FUNDS 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.
-------------------------------------------------------------------------------------------------------------------
AGSPC MidCap Index Seeks growth of capital through VALIC N/A(2)
Fund(3) 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.
-------------------------------------------------------------------------------------------------------------------
AGSPC Small Cap Index Seeks growth of capital through VALIC N/A(2)
Fund(3) 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.
-------------------------------------------------------------------------------------------------------------------
AGSPC Stock Index Seeks long-term capital growth through VALIC N/A(2)
Fund(3) 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).
- ----------------------------------------------------------------------------------------------------------------------------------
ACTIVELY AGSPC Growth Fund Seeks long-term growth of capital VALIC Wellington Management
MANAGED through investment primarily in equity Company, LLP(4)
securities.
-------------------------------------------------------------------------------------------------------------------
EQUITY AGSPC Growth & Income Seeks long-term growth of capital and, VALIC N/A
FUNDS Fund secondarily, current income through
investment in common stocks and
equity-related securities.
-------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Seeks to maximize capital appreciation The Dreyfus N/A
Investment by investing at least 65% of its assets Corporation
Fund -- Small Cap in the common stock of U.S. and foreign
Portfolio companies. The portfolio focuses on
small-cap companies with total market
values of less than $1.5 billion.
-------------------------------------------------------------------------------------------------------------------
Templeton Seeks to achieve long-term capital Templeton N/A
International growth by investing primarily in stocks Investment Counsel
Securities of companies outside the United States, Inc.
Fund -- Class 1 including emerging markets.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Multi-Year Enhanced Fixed Account Option is also referred to in this
prospectus as the Market Value Adjustment ("MVA") Option. For purposes of
this limitation, each MVA Band under the Multi-Year Enhanced Fixed Option
will count as a separate investment option. An MVA Band is established for
each separate investment for a new guarantee period. The minimum allocation
to an MVA Band, as described in the Contract, may be changed from time to
time by the Company. Availability of this Option is subject to regulatory
approval within the state in which your Contract is issued. It may not be
available under your Contract. See MVA Option herein.
(2) Bankers Trust Company previously served as the sub-adviser to the AGSPC
MidCap Index Fund, the AGSPC Small Cap Index and the AGSPC Stock Index Fund.
VALIC reassumed direct management of each Fund's investment portfolio on
October 1, 1999.
(3) "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"). 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 those
Funds. The Russell 2000(R) Index is a trademark/servicemark of Frank Russell
Trust Company. Russell(TM) is a trademark of the Frank Russell Company.
(4) Wellington Management Company, LLP replaced T. Rowe Price Associates, Inc.
as sub-adviser to the Fund effective September 1, 1999. The investment
objective was also changed at that time.
5
<PAGE> 11
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
VARIABLE ACCOUNT INVESTMENT
OPTIONS OBJECTIVE ADVISER SUBADVISER
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME AGSPC Capital Seeks the highest possible total return VALIC N/A
Conservation Fund consistent with preservations of
capital through current income and
capital gains on investments in
intermediate and long-term debt
instruments and other income producing
securities.
-------------------------------------------------------------------------------------------------------------------
AGSPC Government Seeks high current income and VALIC N/A
Securities Fund protection of capital through
investments in intermediate and
long-term U.S. Government debt
securities.
-------------------------------------------------------------------------------------------------------------------
AGSPC International Seeks high current income through VALIC N/A
Government Bond Fund investment primarily in investment
grade debt securities issued or
guaranteed by foreign governments.
- ----------------------------------------------------------------------------------------------------------------------------------
SPECIALTY AGSPC Science Seeks long-term growth of capital VALIC T. Rowe Price
FUNDS & Technology Fund through investment primarily in the Associates, Inc.
common stocks and equity-related
securities of companies that are
expected to benefit from the
development, advancement and use of
science and technology.
-------------------------------------------------------------------------------------------------------------------
AGSPC Social Seeks growth of capital through VALIC N/A
Awareness Fund investment primarily in common stocks,
in companies which meet the social
criteria established for the Fund.
- ----------------------------------------------------------------------------------------------------------------------------------
MONEY AGSPC Money Market Fund Seeks liquidity, protection of capital VALIC N/A
MARKET and current income through investments
FUND in short- term money market
instruments.
- ----------------------------------------------------------------------------------------------------------------------------------
ASSET AGSPC Asset Maximum return through investments in a VALIC N/A
ALLOCATION Allocation Fund mix of stocks, bonds and money market
FUNDS securities
-------------------------------------------------------------------------------------------------------------------
Templeton Asset Seeks a high level of total return by Templeton Investment N/A
Strategy Fund -- Class investing in the following market Counsel Inc.
1 segments; stocks and bonds of any
nation, including emerging markets, and
money market investments.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 12
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.
Amounts invested in an MVA Option may be transferred to another investment
option at the end of an MVA term without application of a market value
adjustment.
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 from an MVA Option prior to the end of the applicable MVA term will
also be subject to a market value adjustment unless an exception applies. This
may increase or reduce the amount withdrawn. However, the market value
adjustment will not reduce the amount invested in the MVA Option below the
guaranteed amount.
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 may, in its discretion, reimburse to certain Divisions some or all
of the 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
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."
7
<PAGE> 13
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
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. The minimum amount to establish a new Multi-Year Enhanced Fixed
Option guarantee period (MVA Band), as described in the Contract, may be changed
from time to time by the Company.
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.
8
<PAGE> 14
SELECTED PURCHASE UNIT DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
----------------------- ----------------------- ---------------------------
PURCHASE PURCHASE PURCHASE PURCHASE ACCUMULATION
UNITS UNIT UNITS UNIT UNITS ACCUMULATION
IN FORCE VALUE IN FORCE VALUE IN FORCE UNIT VALUE
----------- --------- ----------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
AGSPC Asset Allocation
Division 5................... 61,240,667 $4.174280 60,237,818 $3.772519 53,307,351 $3.219282
AGSPC Capital Conservation
Division 7................... 24,749,727 $2.056559 28,751,662 $2.085846 28,242,598 $1.962239
AGSPC Government Securities
Division 8................... 45,292,728 $2.032753 53,729,671 $2.111727 45,034,894 $1.957755
AGSPC Growth Division 15...... 460,108,285 $2.582249 494,997,997 $2.428587 453,172,490 $2.076503
AGSPC Growth & Income Division
16........................... 124,329,201 $2.676995 129,550,695 $2.201234 132,434,555 $1.940905
AGSPC International Equities
Division 11.................. 94,415,343 $1.860227 101,811,751 $1.454644 122,716,744 $1.237299
AGSPC International Government
Bond
Division 13.................. 90,136,603 $1.609098 97,473,851 $1.728006 111,480,591 $1.490645
AGSPC MidCap Index Division
4(2)......................... 151,317,931 $5.721920 169,039,887 $5.029093 171,065,657 $4.269122
AGSPC Money Market Division
6............................ 233,940,123 $1.807351 147,547,688 $1.742617 84,182,251 $1.673590
AGSPC Science & Technology
Division 17.................. 517,699,561 $6.398997 418,601,069 $3.216190 397,842,959 $2.285739
AGSPC Small Cap Index Division
14........................... 94,031,183 $2.522643 107,321,015 $2.100506 106,279,077 $2.163595
AGSPC Social Awareness
Division 12.................. 136,226,993 $4.419383 114,382,494 $3.762308 81,577,104 $2.985333
AGSPC Stock Index Division
10(3)........................ 766,975,696 5.696582 691,680,049 $4.772052 615,053,124 $3.753436
Dreyfus Variable Investment
Fund -- Small Cap Portfolio
Division 18.................. 351,855,473 $2.059431 474,215,229 $1.690786 479,851,525 $1.770622
Franklin Templeton Variable
Insurance Products Trust
Templeton Asset Strategy --
Class 1 Division 19(3)..... 137,266,658 $2.058095 190,963,707 $1.695764 196,150,946 $1.513943
Templeton International
Securities -- Class 1
Division 20(4)............. 372,176,780 $2.076148 452,419,089 $1.700398 463,174,350 $1.575168
<CAPTION>
JULY 11,
DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994 1994
----------------------- ----------------------- ----------------------- ---------
PURCHASE PURCHASE PURCHASE PURCHASE PURCHASE PURCHASE PURCHASE
UNITS UNIT UNITS UNIT UNITS UNIT UNIT
IN FORCE VALUE IN FORCE VALUE IN FORCE VALUE VALUE(1)
----------- --------- ----------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
AGSPC Asset Allocation
Division 5................... 65,292,617 $2.651899 75,851,431 $2.411022 89,377,860 $1.951533 $1.916765
AGSPC Capital Conservation
Division 7................... 30,286,494 $1.825549 29,573,808 $1.812011 26,859,219 $1.515278 $1.506490
AGSPC Government Securities
Division 8................... 47,130,169 $1.815651 39,847,053 $1.799475 26,667,073 $1.547150 $1.532417
AGSPC Growth Division 15...... 366,272,509 $1.733324 164,417,848 $1.466652 32,633,370 $1.001834 $0.959407
AGSPC Growth & Income Division
16........................... 108,341,635 $1.583056 51,779,089 $1.296577 12,386,602 $0.993168 $0.959637
AGSPC International Equities
Division 11.................. 156,226,314 $1.222906 172,564,018 $1.156454 187,749,916 $1.054460 $1.085960
AGSPC International Government
Bond
Division 13.................. 112,601,593 $1.582230 73,369,250 $1.530780 25,691,713 $1.301357 $1.316282
AGSPC MidCap Index Division
4(2)......................... 172,816,978 $3.272588 172,613,690 $2.782677 171,442,018 $2.153183 $2.110512
AGSPC Money Market Division
6............................ 75,124,095 $1.607212 51,907,757 $1.545802 75,765,781 $1.479129 $1.455537
AGSPC Science & Technology
Division 17.................. 315,809,646 $2.250471 187,862,232 $1.997175 42,726,137 $1.247713 $0.950431
AGSPC Small Cap Index Division
14........................... 103,320,842 $1.785442 98,335,995 $1.544896 100,383,839 $1.222329 $1.180915
AGSPC Social Awareness
Division 12.................. 46,574,016 $2.252673 32,750,120 $1.835102 29,015,764 $1.333899 $1.328889
AGSPC Stock Index Division
10(3)........................ 536,806,965 $2.848437 455,255,243 $2.343900 416,234,288 $1.724134 $1.668065
Dreyfus Variable Investment
Fund -- Small Cap Portfolio
Division 18.................. 428,883,250 $1.534694 267,735,219 $1.332904 85,169,871 $1.043156 $1.000000
Franklin Templeton Variable
Insurance Products Trust
Templeton Asset Strategy --
Class 1 Division 19(3)..... 137,384,670 $1.414844 78,494,505 $1.205181 32,807,602 $0.995860 $1.000000
Templeton International
Securities -- Class 1
Division 20(4)............. 378,581,949 $1.399702 219,124,926 $1.142586 71,716,511 $0.999282 $1.000000
</TABLE>
- ------------
(1) Purchase Unit Value At Date Of Inception.
(2) Effective October 1, 1991, the Fund underlying the AGSPC MidCap Index
Division changed its name from the Capital Accumulation Fund to the MidCap
Index Fund and amended its investment objective, investment program and
investment restrictions accordingly. Historical purchase unit values prior
to October 1, 1991 reflect investment experience before these changes.
(3) Effective May 1, 2000 the Templeton Asset Allocation Fund merged with the
Templeton Global Asset Allocation Fund. At the same time as the merger, the
Templeton Asset Allocation Fund changed its name to the Templeton Asset
Strategy Fund. Accordingly, the Templeton Asset Allocation Fund Division 19
was renamed the Templeton Asset Strategy Fund Division 19. The Selected
Purchase Unit Data for the Division through December 31, 1999, reflects
units of the Templeton Asset Allocation Fund Division 19.
(4) Effective May 1, 2000 the Templeton International Fund merged with the
Templeton International Equity Fund. At the same time as the merger, the
Templeton International Fund changed its name to the Templeton International
Securities Fund. Accordingly, the Templeton International Fund Division 20
was renamed the Templeton International Securities Fund Division 20. The
Selected Purchase Unit Data for the Division through December 31, 1999,
reflects units of the Templeton International Fund Division 20.
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> 15
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.
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.
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> 16
GENERAL INFORMATION -- (CONTINUED)
- --------------------------------------------------------------------------------
DISTRIBUTION OF THE CONTRACTS
American General Distributors, Inc. (the "Distributor"), 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.
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. You may be
subject to further limits on how many options you may be invested in at any one
time or how many of the options you are invested in may be involved in certain
transactions at any one time. 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 and, for 2 of such funds, have one of the following sub-advisers:
Wellington Management Company, LLP and T. Rowe Price Associates, Inc.
- - Dreyfus Variable Investment Fund -- offers 1 fund, for which The Dreyfus
Corporation serves as investment adviser.
- - Franklin Templeton Variable Insurance Products Trust -- 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.
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.
The Distributor's
address is 2929 Allen
Parkway, Houston,
Texas 77019.
For more information
about THE DISTRIBUTOR
see "Distribution of Variable
Annuity Contracts" in the
Statement of Additional
Information
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.
11
<PAGE> 17
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 Money Market Division Option or other investment
option chosen by your employer. If your employer chooses another investment
option other than the Money Market Division, the value of your investment may
fluctuate and you could lose money. 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.)
Once we have established your account and have applied your initial Purchase
Payment as described above, any subsequent Purchase Payment that we receive at
our Home Office before the close of the Exchange will be credited the same
business day. 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, it 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.
12
<PAGE> 18
- --------------------------------------------------------------------------------
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 19 investment options offered in Portfolio Director. This includes 3
Fixed Account Options and 16 Variable Account Options. Unless provided
otherwise, you may select and combine up to 7 of the 19 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
The Fixed Account Plus and the Short Term Fixed Account are part of the
Company's general assets. The MVA Option may be invested in either the general
assets of the Company or in a Separate Account of the Company, depending upon
state requirements. You may allocate all or a portion of your Purchase Payment
to the Fixed Account Options listed in the "Summary" section 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. With the exception of a market value adjustment which generally will be
applied to withdrawals or transfers from an MVA Option prior to the end of an
MVA term, 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. The minimum amount to establish each new Multi-Year
Enhanced Fixed Option guarantee period (MVA Band) as described in the Contract,
may be changed from time to time by the Company.
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)
- ---------------
*This value may be subject to a market value adjustment under the MVA Option.
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 "Summary" and "Variable Account Options" sections in this
prospectus and in each Fund's 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.
13
<PAGE> 19
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)
Multi-Year
Enhanced Up to 100% At any time Withdrawals or
Fixed Transfers
Account(3): subject to
market value
adjustment if
prior to the end
of an MVA term.
Each MVA Band
will require a
minimum transfer
amount as
described in the
Contract.(4)
</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.
(3) The MVA Option may not be available unless it has been selected as an option
for your employer's retirement plan.
(4) The minimum transfer amount may be changed from time to time by the Company.
From time to time we may waive the 20% transfer restriction on Fixed Account
Plus for transfers to the Multi-Year Enhanced Fixed Account or to other
investment options.
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). All transfers to or from the
MVA Option will require written instruction.
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.
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.
14
<PAGE> 20
- --------------------------------------------------------------------------------
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.
MARKET TIMING
The Contracts are not designed for professional market timing organizations or
other entities using programmed and frequent transfers. We reserve the right at
any time and without prior notice to any party to terminate, suspend, or modify
our policies or procedures regarding transfer requests.
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.
In addition, certain charges may apply to the MVA Option which are discussed at
the end of this section.
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.
PARTICIPANT YEAR -- the first
twelve month period and
then each yearly anniversary
of that period following the
issue date of the contract or
certificate.
15
<PAGE> 21
- --------------------------------------------------------------------------------
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 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.
VALIC may waive any otherwise applicable surrender charge if you reinvest the
surrender proceeds in another VALIC insurance product. You will, however, be
subject to a surrender charge in the newly acquired product under the same terms
and conditions as the original product. For purposes of calculating any
surrender charge due, you will be considered to have acquired the new product as
of the date you acquired the original product.
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).
16
<PAGE> 22
- --------------------------------------------------------------------------------
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.
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
Some of the Mutual Funds or their affiliates may have an agreement with the
Company to pay the Company for administrative and shareholder
17
<PAGE> 23
- --------------------------------------------------------------------------------
services it provides to the underlying Fund. The Company may, in its discretion,
apply some or all of these payments to reduce its charges to the Division
investing in that Fund. In addition, the Company currently reimburses certain
Divisions a portion of the Company's administration and distribution fee. Such
reimbursement arrangements are, however, voluntary and may be changed by the
Company at any time. See the Fee Table in this prospectus for an identification
of those Funds for which a reimbursement applies and the amount of the
reimbursement.
MARKET VALUE ADJUSTMENT
Under the MVA Option you may establish one or more MVA Bands with a minimum
amount, as described in the Contract, per MVA Band in states in which the MVA
Option has been approved. The Company may change the minimum from time to time.
Each MVA Band will be guaranteed to receive a stated rate of interest through
the end of the selected MVA term. We guarantee your MVA Option will earn at
least the lowest minimum interest rate applicable to any of the fixed interest
options in the contract. A withdrawal will generally be subject to a surrender
charge if it exceeds the amount of any free withdrawal amount permitted under
your contract. Withdrawals or transfers from an MVA Band prior to the end of the
MVA term will be subject to a market value adjustment, unless an exception
applies. This adjustment may be positive or negative, based upon the differences
in selected interest rates at the time the MVA Band was established and at the
time of the withdrawal. This adjustment will not apply upon the Owner's death,
or if the Owner is not a natural person, upon the death of the Annuitant. This
adjustment applies independently from surrender charges, and can still apply to
a 10% Free Withdrawal. The market value adjustment may be waived for
distributions that are required under your contract. It will also be waived for
30 days following the end of an MVA term. Loans are not available from the MVA
Option. Please review your contract for additional information on the MVA
Option.
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.
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).
18
<PAGE> 24
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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.
- 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,
For more information about
PAYOUT OPTIONS OR
ENHANCEMENTS
of those Payout Options
available under the Contract,
see the "Statement of
Additional Information".
19
<PAGE> 25
- --------------------------------------------------------------------------------
- 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.
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, no surrender or partial
surrender will be allowed except attainment of age 70 1/2, retirement or other
termination of employment 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.
20
<PAGE> 26
- --------------------------------------------------------------------------------
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 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.
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. If you elect to exercise one of these exchange
offers, you should contact any of our Regional Offices. 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.
21
<PAGE> 27
- --------------------------------------------------------------------------------
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 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
22
<PAGE> 28
- --------------------------------------------------------------------------------
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.
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.
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.
23
<PAGE> 29
- --------------------------------------------------------------------------------
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.
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.
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, Short-Term
Fixed Account and Multi-Year
Enhanced 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.
24
<PAGE> 30
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 or life insurance products 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, 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 Total 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, 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.
25
<PAGE> 31
- --------------------------------------------------------------------------------
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, 1999 was 4.31%.
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, 1999 was 4.40%.
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.
26
<PAGE> 32
TABLE I
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
DIVISION SINCE
FUND AND DIVISION INCEPTION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- -------------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Asset Allocation (Division 5)......................... 09/06/83 9.05% 9.83% 15.78% 5.62%
AGSPC Capital Conservation (Division 7)..................... 01/16/86 5.19 5.49 5.42 (5.89)
AGSPC Government Securities (Division 8).................... 01/16/86 5.11 5.49 4.71 (8.12)
AGSPC Growth (Division 15).................................. 07/11/94 19.75 -- 20.28 1.49
AGSPC Growth & Income (Division 16)......................... 07/11/94 20.53 -- 21.38 16.56
AGSPC International Equities (Division 11).................. 10/02/89 6.13 5.99 11.29 22.82
AGSPC International Government Bond (Division 13)........... 10/01/91 5.84 -- 3.40 (11.11)
AGSPC MidCap Index (Division 4)**........................... 10/01/91 16.04 -- 21.03 8.72
AGSPC Money Market (Division 6)............................. 01/16/86 4.22 3.73 3.14 (1.00)
AGSPC Science & Technology (Division 17).................... 07/11/94 41.62 -- 38.30 93.87
AGSPC Small Cap Index (Division 14)......................... 05/01/92 12.72 -- 14.94 15.04
AGSPC Social Awareness (Division 12)........................ 10/02/89 15.49 15.80 26.59 12.41
AGSPC Stock Index (Division 10)............................. 04/20/87 14.58 16.38 26.52 14.32
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18)............................................. 07/11/94 14.03 -- 13.90 16.74
Franklin Templeton Variable Insurance Products Trust
Templeton Asset Strategy -- Class 1
(Division 19)(1)....................................... 07/11/94 14.01 -- 14.97 16.31
Templeton International Securities -- Class 1 (Division
20)(2)................................................. 07/11/94 14.19 -- 15.09 17.04
</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.
** 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.
(1) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Asset Strategy Fund. Also
effective with this merger, the Templeton Asset Allocation Fund Division 19
was renamed the Templeton Asset Strategy Fund Division 19. Accordingly, the
performance figures for the Division through December 31, 1999, reflect the
actual historical performance of the Templeton Asset Allocation Fund
Division 19.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Also effective with
this merger, the Templeton International Fund Division 20 was renamed the
Templeton International Securities Fund Division 20. Accordingly, the
performance figures for the Division through December 31, 1999, reflect the
actual historical performance of the Templeton International Fund Division
20.
TABLE II
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
FUND SINCE
FUND AND DIVISION INCEPTION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- -------------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15).................................. 04/29/94 18.11% -- 20.28% 1.49%
AGSPC Growth and Income (Division 16)....................... 04/29/94 18.86 -- 21.38 16.56
AGSPC Science and Technology (Division 17).................. 04/29/94 38.63 -- 38.30 93.87
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18)............................................. 08/31/90 34.03 -- 13.90 16.74
Franklin Templeton Variable Insurance Products Trust
Templeton Asset Strategy -- Class 1
(Division 19)(1)....................................... 08/24/88 11.44 11.57 14.97 16.31
Templeton International Securities -- Class 1 (Division
20)(2)................................................. 05/01/92 13.81 -- 15.09 17.04
</TABLE>
- ---------------
Divisions with an identical inception date as the underlying Funds' inception
date are not reflected in this Table. See preceding 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.
(1) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Asset Strategy Fund.
Accordingly, the performance figures in the Table for the Fund through
December 31, 1999, reflect the historical performance and inception date of
the Templeton Asset Allocation Fund.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Accordingly, the
performance figures in the Table for the Fund through December 31, 1999,
reflect the historical performance and inception date of the Templeton
International Fund.
27
<PAGE> 33
TABLE III
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
DIVISION SINCE
FUND AND DIVISION INCEPTION DATE INCEPTION 10 YEARS 5 YEARS 1 YEARS
----------------- -------------- --------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
AGSPC Asset Allocation (Division 5)......................... 09/06/83 9.15% 9.94% 16.42% 10.65%
AGSPC Capital Conservation (Division 7)..................... 01/16/86 5.30 5.59 6.30 (1.40)
AGSPC Government Securities (Division 8).................... 01/16/86 5.21 5.60 5.61 (3.74)
AGSPC Growth (Division 15).................................. 07/11/94 19.84 -- 20.85 6.33
AGSPC Growth & Income (Division 16)......................... 07/11/94 20.63 -- 21.93 21.61
AGSPC International Equities (Division 11).................. 10/02/89 6.24 6.11 12.02 27.88
AGSPC International Government Bond (Division 13)........... 10/01/91 5.94 -- 4.34 (6.88)
AGSPC MidCap Index (Division 4)**........................... 10/01/91 16.15 -- 21.59 13.78
AGSPC Money Market (Division 6)............................. 01/16/86 4.33 3.83 4.09 3.71
AGSPC Science & Technology (Division 17).................... 07/11/94 41.71 -- 38.68 98.96
AGSPC Small Cap Index (Division 14)......................... 05/01/92 12.82 -- 15.59 20.10
AGSPC Social Awareness (Division 12)........................ 10/02/89 15.60 15.91 27.07 17.46
AGSPC Stock Index (Division 10)............................. 04/20/87 14.68 16.48 27.00 19.37
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18)............................................. 07/11/94 14.12 -- 14.57 21.80
Franklin Templeton Variable Insurance Products Trust
Templeton Asset Strategy -- Class 1
(Division 19)(1)....................................... 07/11/94 14.11 -- 15.63 21.37
Templeton International Securities -- Class 1
(Division 20)(2)....................................... 07/11/94 14.29 -- 15.75 22.10
</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.
** 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.
(1) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Asset Strategy Fund. Also
effective with this merger, the Templeton Asset Allocation Fund Division 19
was renamed the Templeton Asset Strategy Fund Division 19. Accordingly, the
performance figures for the Division through December 31, 1999, reflect the
actual historical performance of the Templeton Asset Allocation Fund
Division 19.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Also effective with
this merger, the Templeton International Fund Division 20 was renamed the
Templeton International Securities Fund Division 20. Accordingly, the
performance figures for the Division through December 31, 1999, reflect the
actual historical performance of the Templeton International Fund Division
20.
TABLE IV
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
FUND SINCE
FUND AND DIVISION INCEPTION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- -------------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15).................................. 04/29/94 18.21% -- 20.85% 6.33%
AGSPC Growth & Income (Division 16)......................... 04/29/94 18.97 -- 21.93 21.61
AGSPC Science & Technology (Division 17).................... 04/29/94 38.73 -- 38.68 98.96
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18)............................................. 08/31/90 34.08 -- 14.57 21.80
Franklin Templeton Variable Insurance Products Trust
Templeton Asset Strategy -- Class 1 (Division 19)(1)...... 08/24/88 11.54 11.67 15.63 21.37
Templeton International Securities -- Class 1
(Division 20)(2)....................................... 05/01/92 13.92 -- 15.75 22.10
</TABLE>
- ---------------
Divisions with an identical inception date as the underlying Funds' inception
date are not reflected in this Table. See preceding 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.
(1) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Asset Strategy Fund.
Accordingly, the performance figures in the Table for the Fund through
December 31, 1999, reflect the historical performance and inception date of
the Templeton Asset Allocation Fund.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Accordingly, the
performance figures in the Table for the Fund through December 31, 1999,
reflect the historical performance and inception date of the Templeton
International Fund.
28
<PAGE> 34
TABLE V
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
DIVISION SINCE
FUND AND DIVISION INCEPTION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- -------------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Asset Allocation (Division 5)......................... 09/06/83 317.43% 157.96% 113.90% 10.65%
AGSPC Capital Conservation (Division 7)..................... 01/16/86 105.66 72.30 35.72 (1.40)
AGSPC Government Securities (Division 8).................... 01/16/86 103.28 72.38 31.39 (3.74)
AGSPC Growth (Division 15).................................. 07/11/94 169.15 -- 157.75 6.33
AGSPC Growth & Income (Division 16)......................... 07/11/94 178.96 -- 169.54 21.61
AGSPC International Equities (Division 11).................. 10/02/89 -- 80.88 76.42 27.88
AGSPC International Government Bond (Division 13)........... 10/01/91 60.91 -- 23.65 (6.88)
AGSPC MidCap Index (Division 4)**........................... 10/01/91 243.76 -- 165.74 13.78
AGSPC Money Market (Division 6)............................. 01/16/86 80.74 45.68 22.19 3.71
AGSPC Science & Technology (Division 17).................... 07/11/94 573.27 -- 412.86 98.96
AGSPC Small Cap Index (Division 14)......................... 05/01/92 152.26 -- 106.38 20.10
AGSPC Social Awareness (Division 12)........................ 10/02/89 -- 337.56 231.31 17.46
AGSPC Stock Index (Division 10)............................. 04/20/87 469.66 359.85 230.40 19.37
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18)............................................. 07/11/94 105.94 -- 97.42 21.80
Franklin Templeton Variable Insurance Product Trust
Templeton Asset Strategy -- Class 1 (Division 19)(1)...... 07/11/94 105.81 -- 106.67 21.37
Templeton International Securities -- Class 1 (Division
20)(2)................................................. 07/11/94 107.61 -- 107.76 22.10
</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.
** 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.
(1) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Asset Strategy Fund. Also
effective with this merger, the Templeton Asset Allocation Fund Division 19
was renamed the Templeton Asset Strategy Fund Division 19. Accordingly, the
performance figures for the Division through December 31, 1999, reflect the
actual historical performance of the Templeton Asset Allocation Fund
Division 19.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Also effective with
this merger, the Templeton International Fund Division 20 was renamed the
Templeton International Securities Fund Division 20. Accordingly, the
performance figures for the Division through December 31, 1999, reflect the
actual historical performance of the Templeton International Fund Division
20.
TABLE VI
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
FUND SINCE
FUND AND DIVISION INCEPTION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- -------------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)................................. 04/29/94 158.22% -- 157.75% 6.33%
AGSPC Growth & Income (Division 16)........................ 04/29/94 167.70 -- 169.54 21.61
AGSPC Science & Technology (Division 17)................... 04/29/94 539.90 -- 412.86 98.96
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18)............................................ 08/31/90 1,442.37 -- 97.42 21.80
Franklin Templeton Variable Insurance Product Trust
Templeton Asset Strategy -- Class 1 (Division 19)........ 08/24/88 245.41 201.66 106.67 21.37
Templeton International Securities -- Class 1 (Division
20)................................................... 05/01/92 171.69 -- 107.76 22.10
</TABLE>
- ---------------
Divisions with an identical inception date as the underlying Funds' inception
date are not reflected in this Table. See preceding 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.
(1) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Asset Strategy Fund.
Accordingly, the performance figures in the Table for the Fund through
December 31, 1999, reflect the historical performance and inception date of
the Templeton Asset Allocation Fund.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Accordingly, the
performance figures in the Table for the Fund through December 31, 1999,
reflect the historical performance and inception date of the Templeton
International Fund.
29
<PAGE> 35
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 1999 1998 1997 1996 1995
----------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
AGSPC Asset Allocation (Division
5)(2)............................. 10.65% 17.19% 21.40% 9.99% 23.55%
AGSPC Capital Conservation
(Division 7)(2)................... (1.40) 6.30 7.49 0.75 19.58
AGSPC Government Securities
(Division 8)(2)................... (3.74) 7.86 7.83 0.90 16.31
AGSPC Growth (Division 15)......... 6.33 16.96 19.80 18.18 46.40
AGSPC Growth & Income (Division
16)............................... 21.61 13.41 22.60 22.10 30.55
AGSPC International Equities
(Division 11)(2).................. 27.88 17.57 1.18 5.75 9.67
AGSPC International Government Bond
(Division 13)(2).................. (6.88) 15.92 (5.79) 3.36 17.63
AGSPC MidCap Index (Division
4)(1)(2).......................... 13.78 17.80 30.45 17.61 29.24
AGSPC Money Market (Division
6)(2)............................. 3.71 4.12 4.13 3.97 4.51
AGSPC Science & Technology
(Division 17)..................... 98.96 40.71 1.57 12.68 60.07
AGSPC Small Cap Index (Division
14)(2)............................ 20.10 (2.92) 21.18 15.57 26.39
AGSPC Social Awareness (Division
12)(2)............................ 17.46 26.03 32.52 22.75 37.57
AGSPC Stock Index (Division
10)(2)............................ 19.37 27.14 31.77 21.53 35.95
Dreyfus Variable Investment
Fund -- Small Cap Portfolio
(Division 18)..................... 21.80 (4.51) 15.37 15.14 27.78
Franklin Templeton Variable
Insurance Products Trust
Templeton Asset Strategy -- Class
1 (Division 19)(3).............. 21.37 5.07 14.07 17.40 21.02
Templeton International
Securities -- Class 1 (Division
20)(4).......................... 22.10 7.95 12.54 22.50 14.34
<CAPTION>
ANNUAL CHANGE IN PURCHASE UNIT VALUE FOR THE 12 MONTHS ENDED DECEMBER 31**
------------------------------------------------------
FUND AND DIVISION 1994 1993 1992 1991 1990
----------------- ------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
AGSPC Asset Allocation (Division
5)(2)............................. (2.29)% 8.19% (1.71)% 20.13% (3.38)%
AGSPC Capital Conservation
(Division 7)(2)................... (7.04) 10.88 7.55 16.00 (1.28)
AGSPC Government Securities
(Division 8)(2)................... (5.44) 9.70 6.14 13.59 4.91
AGSPC Growth (Division 15)......... 4.42 -- -- -- --
AGSPC Growth & Income (Division
16)............................... 3.49 -- -- -- --
AGSPC International Equities
(Division 11)(2).................. 6.90 28.58 (14.31) 10.06 (20.90)
AGSPC International Government Bond
(Division 13)(2).................. 3.42 13.08 2.05 9.05 --
AGSPC MidCap Index (Division
4)(1)(2).......................... (4.70) 11.78 8.79 11.63
AGSPC Money Market (Division
6)(2)............................. 2.77 1.67 2.22 4.49 6.83
AGSPC Science & Technology
(Division 17)..................... 31.28 -- -- -- --
AGSPC Small Cap Index (Division
14)(2)............................ (4.30) 14.77 11.28 -- --
AGSPC Social Awareness (Division
12)(2)............................ (2.42) 6.84 2.31 26.63 (2.21)
AGSPC Stock Index (Division
10)(2)............................ (0.30) 8.78 5.58 27.70 (4.83)
Dreyfus Variable Investment
Fund -- Small Cap Portfolio
(Division 18)..................... 4.32 -- -- -- --
Franklin Templeton Variable
Insurance Products Trust
Templeton Asset Strategy -- Class
1 (Division 19)(3).............. (0.41) -- -- -- --
Templeton International
Securities -- Class 1 (Division
20)(4).......................... (0.07) -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR EACH PERIOD END SINCE DECEMBER 31, 1989**
--------------------------------------------------------
FUND AND DIVISION 1999 1998 1997 1996 1995
----------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
AGSPC Asset Allocation (Division
5)(2)............................. 157.96% 133.14% 98.95% 63.88% 49.00%
AGSPC Capital Conservation
(Division 7)(2)................... 72.30 74.76 64.40 52.95 51.81
AGSPC Government Securities
(Division 8)(2)................... 72.38 79.08 66.02 53.97 52.60
AGSPC Growth (Division 15)......... 169.15 153.13 116.44 80.67 52.87
AGSPC Growth & Income (Division
16)............................... 178.96 129.38 102.25 64.96 35.11
AGSPC International Equities
(Division 11)(2).................. 80.88 41.45 20.31 18.91 12.45
AGSPC International Government Bond
(Division 13)(2).................. 60.91 72.80 49.06 58.22 53.08
AGSPC MidCap Index (Division
4)(1)(2).......................... 243.76 202.14 156.48 96.61 67.18
AGSPC Money Market (Division
6)(2)............................. 45.68 40.47 34.90 29.55 24.60
AGSPC Science & Technology
(Division 17)..................... 573.27 238.39 140.50 136.78 110.13
AGSPC Small Cap Index (Division
14)(2)............................ 152.26 110.05 116.36 78.54 54.49
AGSPC Social Awareness (Division
12)(2)............................ 337.56 272.50 195.58 123.04 81.69
AGSPC Stock Index (Division
10)(2)............................ 359.85 285.22 202.99 129.94 89.21
Dreyfus Variable Investment
Fund -- Small Cap Portfolio
(Division 18)..................... 105.94 69.08 77.06 53.47 33.29
Franklin Templeton Variable
Insurance Products Trust
Templeton Asset Strategy -- Class
1 (Division 19)(3).............. 105.81 69.58 61.39 41.48 20.52
Templeton International
Securities -- Class 1 (Division
20)(4).......................... 107.61 70.04 57.52 39.97 14.26
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR EACH PERIOD END SINCE DECEMBER 31, 1989**
------------------------------------------------------
FUND AND DIVISION 1994 1993 1992 1991 1990
----------------- ------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
AGSPC Asset Allocation (Division
5)(2)............................. 20.60% 23.43% 14.08% 16.07% (3.38)%
AGSPC Capital Conservation
(Division 7)(2)................... 26.95 36.57 23.17 14.52 (1.28)
AGSPC Government Securities
(Division 8)(2)................... 31.20 38.75 26.48 19.17 4.91
AGSPC Growth (Division 15)......... 4.42 -- -- -- --
AGSPC Growth & Income (Division
16)............................... 3.49 -- -- -- --
AGSPC International Equities
(Division 11)(2).................. 2.53 (4.09) (25.41) (12.95) (20.90)
AGSPC International Government Bond
(Division 13)(2).................. 30.14 25.83 11.28 9.05 --
AGSPC MidCap Index (Division
4)(1)(2).......................... 29.36 35.74 21.43 11.63 --
AGSPC Money Market (Division
6)(2)............................. 19.23 16.02 14.11 11.63 6.83
AGSPC Science & Technology
(Division 17)..................... 31.28 -- -- -- --
AGSPC Small Cap Index (Division
14)(2)............................ 22.23 27.72 11.28 -- --
AGSPC Social Awareness (Division
12)(2)............................ 32.07 35.34 26.68 23.82 (2.21)
AGSPC Stock Index (Division
10)(2)............................ 39.18 39.60 28.33 21.54 (4.83)
Dreyfus Variable Investment
Fund -- Small Cap Portfolio
(Division 18)..................... 4.32 -- -- -- --
Franklin Templeton Variable
Insurance Products Trust
Templeton Asset Strategy -- Class
1 (Division 19)(3).............. (0.41) -- -- -- --
Templeton International
Securities -- Class 1 (Division
20)(4).......................... (0.07) -- -- -- --
</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.
** 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) 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.
(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.
(3) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. As part of this merger, the Templeton Asset Allocation Fund
changed its name to the Templeton Asset Strategy Fund. At the same time as
the merger, the Templeton Asset Allocation Fund Division 19 was renamed the
Templeton Asset Strategy Fund Division 19. Accordingly, the performance
figures for the Division through December 31, 1999, reflect the actual
historical performance of the Templeton Asset Allocation Fund Division 19.
(4) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. As
part of this merger, the Templeton International Fund changed its name to
the Templeton International Securities Fund. At the same time as the merger,
the Templeton International Fund Division 20 was renamed the Templeton
International Securities Fund Division 20. Accordingly, the performance
figures for the Division through December 31, 1999, reflect the actual
historical performance of the Templeton International Fund Division 20.
30
<PAGE> 36
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*** 1999 1998 1997 1996 1995 1994 1993
-------------------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)......... 6.33% 16.96% 19.80% 18.18% 46.40% 0.18% --
AGSPC Growth & Income (Division
16)............................... 21.61 13.41 22.60 22.10 30.55 (0.68) --
AGSPC Science & Technology
(Division 17)..................... 98.96 40.71 1.57 12.68 60.07 24.77 --
Dreyfus Variable Investment
Fund -- Small Cap Portfolio
(Division 18)..................... 21.80 (4.51) 15.37 15.14 27.78 6.33 66.31%
Franklin Templeton Variable
Insurance Products Trust
Templeton Asset Strategy -- Class
1 (Division 19)(1).............. 21.37 5.07 14.07 17.40 21.02 (4.24) 24.59
Templeton International
Securities -- Class 1 (Division
20)(2).......................... 22.10 7.95 12.54 22.50 14.34 (3.49) 45.51
<CAPTION>
ANNUAL CHANGE IN PURCHASE UNIT VALUE FOR THE 12 MONTHS ENDED DECEMBER 31**
--------------------------------
FUND AND DIVISION*** 1992 1991 1990
-------------------- -------- -------- --------
<S> <C> <C> <C>
AGSPC Growth (Division 15)......... -- -- --
AGSPC Growth & Income (Division
16)............................... -- -- --
AGSPC Science & Technology
(Division 17)..................... -- -- --
Dreyfus Variable Investment
Fund -- Small Cap Portfolio
(Division 18)..................... 69.24% 156.75% 1.68%
Franklin Templeton Variable
Insurance Products Trust
Templeton Asset Strategy -- Class
1 (Division 19)(1).............. 6.74 26.13 (9.13)
Templeton International
Securities -- Class 1 (Division
20)(2).......................... (6.89) -- --
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR EACH PERIOD END SINCE DECEMBER 31, 1989**
--------------------------------------------------------------------------------------------
FUND AND DIVISION*** 1999 1998 1997 1996 1995 1994 1993 1992
-------------------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)......... 158.22% 142.86% 107.65% 73.33% 46.67% 0.18% -- --
AGSPC Growth & Income (Division
16)............................... 167.70 120.12 94.09 58.31 29.66 (0.68) -- --
AGSPC Science & Technology
(Division 17)..................... 539.90 221.62 128.57 125.05 99.72 24.77 -- --
Dreyfus Variable Investment
Fund -- Small Cap Portfolio
(Division 18)..................... 1,442.37 1,166.28 1,226.07 1,049.38 898.25 681.25 634.77% 341.81%
Franklin Templeton Variable
Insurance Products Trust
Templeton Asset Strategy -- Class
1 (Division 19)(1).............. 201.66 148.55 136.56 107.38 76.65 45.97 52.42 22.34
Templeton International
Securities -- Class 1 (Division
20)(2).......................... 171.69 122.51 106.13 83.17 49.52 30.77 35.49 (6.89)
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR EACH PERIOD END SINCE DECEMBER 31, 1989**
--------------------
FUND AND DIVISION*** 1991 1990
-------------------- -------- --------
<S> <C> <C>
AGSPC Growth (Division 15)......... -- --
AGSPC Growth & Income (Division
16)............................... -- --
AGSPC Science & Technology
(Division 17)..................... -- --
Dreyfus Variable Investment
Fund -- Small Cap Portfolio
(Division 18)..................... 161.05% 1.68%
Franklin Templeton Variable
Insurance Products Trust
Templeton Asset Strategy -- Class
1 (Division 19)(1).............. 14.61 (9.13)
Templeton International
Securities -- Class 1 (Division
20)(2).......................... -- --
</TABLE>
- ------------
Divisions with an identical inception date as the underlying Funds' inception
date are not reflected in this Table. See preceding 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.
(1) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Asset Strategy Fund.
Accordingly, the performance figures in the Table for the Fund through
December 31, 1999, reflect the historical performance and inception date of
the Templeton Asset Allocation Fund.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Accordingly, the
performance figures in the Table for the Fund through December 31, 1999,
reflect the historical performance and inception date of the Templeton
International Fund.
31
<PAGE> 37
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.
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.
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.
32
<PAGE> 38
- --------------------------------------------------------------------------------
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.
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), 403(a) and 401(k) 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
33
<PAGE> 39
- --------------------------------------------------------------------------------
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, 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. In
addition, based upon published guide issued by the IRS in 1999, it appears
likely that such limitations, if imposed, would only apply to Non-Qualified
Contracts.
Distributions are taxed differently depending on the program through which
Portfolio Director is offered and the previous tax characterization of the
contributions to which the distribution relates. Generally, the 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.
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 charges and may also incur account
maintenance fees and surrender charges. The chart does not reflect the deduction
of any such fees. An additional 10% tax penalty may apply to withdrawals before
34
<PAGE> 40
- --------------------------------------------------------------------------------
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.
YEAR 2000
- --------------------------------------------------------------------------------
As of March 10, 2000, all of our ultimate parent, American General Corporation's
("AGC") major technology systems, programs, and applications, including those
which rely on third parties, are operating smoothly following our transition
into 2000. We have experienced no interruptions to normal business operations,
including the processing of customer account data and transactions. We will
continue to monitor our technology systems, including critical third party
dependencies, as necessary to maintain our Year 2000 readiness. We do not expect
any future disruptions, if they occur, to have a material effect on the
company's results of operations, liquidity, or financial condition.
Through December 31, 1999, AGC incurred and expensed pretax costs of $98 million
related to Year 2000 readiness, including $18 million in 1999 and $65 million in
1998. In 1999, Year 2000 readiness expenses were included in division earnings.
The 1998 expenses were excluded from division earnings, consistent with the
manner in which we reviewed division results. In addition, we accelerated the
planned replacement of certain systems as part of our Year 2000 plans. The cost
of these replacement systems was immaterial. We do not anticipate incurring any
significant costs in the future to maintain Year 2000 readiness.
35
<PAGE> 41
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 or to the Home Office at the following address: VALIC, Customer
Service A3-01, 2929 Allen Parkway, Houston, TX 77019.
</TABLE>
<PAGE> 42
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information................................. 4
Marketing Information........................... 4
Endorsements and Published Ratings.............. 5
Types of Variable Annuity Contracts................. 6
Federal Tax Matters................................. 6
Tax Consequences of Purchase Payments........... 6
Tax Consequences of Distributions............... 8
Special Tax Consequences -- Early
Distribution.................................. 9
Special Tax Consequences -- Required
Distributions................................. 10
Tax Free Rollovers, Transfers and Exchanges..... 11
Exchange Privilege.................................. 11
Exchanges From Independence Plus Contracts...... 11
Exchanges From V-Plan Contracts................. 13
Exchanges From SA-1 and SA-2 Contracts.......... 13
Exchanges From Impact Contracts................. 15
Exchanges From Compounder Contracts............. 16
Information Which May Be Applicable To Any
Exchange...................................... 16
Calculation of Surrender Charge..................... 18
Illustration of Surrender Charge on Total
Surrender..................................... 18
Illustration of Surrender Charge on a 10%
Partial Surrender Followed by a Full
Surrender..................................... 18
Purchase Unit Value................................. 19
Illustration of Calculation of Purchase Unit
Value......................................... 19
Illustration of Purchase of Purchase Units...... 19
Performance Calculations............................ 19
AGSPC Money Market Division Yields.............. 19
Calculation of Current Yield for AGSPC Money
Market Division Six........................... 19
Illustration of Calculation of Current Yield for
AGSPC Money Market Division Six............... 19
Calculation of Effective Yield for AGSPC Money
Market Division Six........................... 20
Illustration of Calculation of Effective Yield
for AGSPC Money Market Division Six........... 20
Standardized Yield for Divisions Seven, Eight
and Thirteen.................................. 20
Calculation of Standardized Yield for Divisions
Seven, Eight and Thirteen..................... 20
Illustration of Calculation of Standardized
Yield for Divisions Seven, Eight and
Thirteen...................................... 20
Calculation of Average Annual Total Return...... 21
Calculation of MVA Option....................... 21
Performance Information............................. 22
Hypothetical $10,000 Account Value and
Cumulative Return as Compared to Benchmark
Tables........................................ 22
Performance Compared to Market Indices.......... 22
AGSPC 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................. 25
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AGSPC Capital Conservation Division Seven
Performance Compared to Merrill Lynch
Corporate Master Index........................ 26
AGSPC Government Securities Division Eight
Performance Compared to Lehman Brothers U.S.
Treasury Composite Index...................... 27
AGSPC Growth Division Fifteen Performance
Compared to S&P 500 Index..................... 27
AGSPC Growth & Income Division Sixteen
Performance Compared to S&P 500 Index......... 28
AGSPC International Equities Division Eleven
Performance Compared to EAFE Index............ 28
AGSPC International Government Bond Division
Thirteen Performance Compared to Salomon
Brothers Non-U.S. Dollar World Government Bond
Index......................................... 29
AGSPC MidCap Index Division Four Performance
Compared to S&P 500 Index and S&P MidCap 400
Index......................................... 30
AGSPC Money Market Division Six Performance
Compared to Certificate of Deposit Primary
Offering by New York City Banks, 30 Day
Index......................................... 31
AGSPC Science & Technology Division Seventeen
Performance Compared to S&P 500 Index......... 31
AGSPC Small Cap Index Division Fourteen
Performance Compared to Russell 2000 Index.... 32
AGSPC Social Awareness Division Twelve
Performance Compared to S&P 500 Index......... 32
AGSPC Stock Index Division Ten Performance
Compared to S&P 500 Index..................... 33
Dreyfus Small Cap Division Eighteen Performance
Compared to Russell 2000...................... 33
Templeton Asset Strategy Division Nineteen
Performance Compared to MSCI All Country World
Free Index and JP Morgan Global Government
Bond Index.................................... 34
Templeton International Securities Division
Twenty Performance Compared to MSCI World
Index......................................... 35
Payout Payments..................................... 35
Assumed Investment Rate......................... 35
Amount of Payout Payments....................... 35
Payout Unit Value............................... 36
Illustration of Calculation of Payout Unit
Value......................................... 36
Illustration of Payout Payments................. 37
Distribution of Variable Annuity Contracts.......... 37
Experts............................................. 37
Comments on Financial Statements.................... 38
</TABLE>
<PAGE> 43
Please tear off, complete and return the form below to one of our Regional
Offices. 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> 44
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
[VALIC LOGO]
PRINTED MATTER
PRINTED IN U.S.A. VA 10789 VER 5/00
(C)The Variable Annuity Life Insurance Company, Houston, Texas
Recycled Paper [RECYCLED PAPER LOGO]
<PAGE> 45
SUPPLEMENT DATED MAY 1, 2000
TO
PORTFOLIO DIRECTOR 2 SEPARATE ACCOUNT A
FOR SERIES 2.1 - 2.12 PROSPECTUS
DATED MAY 1, 2000
FOR
GEORGIA OPTIONAL RETIREMENT PLAN
The Prospectus is hereby amended by the addition of the following section under
"VARIABLE ACCOUNT OPTIONS":
RESTRICTIONS ON AVAILABILITY OF FUNDS
Pursuant to the requirements of the Georgia Optional Retirement Plan, the
AGSPC Science & Technology Fund and American Century Ultra Investors Fund
are not available as investment vehicles. You may consult directly with
American Century about the availability of their Funds.
VA9875-GAORP
<PAGE> 46
[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, 2000
<PAGE> 47
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
PORTFOLIO DIRECTOR, PORTFOLIO DIRECTOR 2, PORTFOLIO DIRECTOR PLUS
SUPPLEMENT ISSUED MAY 1, 2000 TO THE PROSPECTUS DATED MAY 1, 2000
The Variable Annuity Life Insurance Company (the "Company") filed an application
with the Securities and Exchange Commission ("SEC") as of March 31, 2000
requesting an order allowing the Company to replace the shares of American
General Domestic Bond Fund of American General Series Portfolio Company 3
("AGSPC 3"), T. Rowe Price Small-Cap Stock Fund, Dreyfus Variable Investment
Fund -- Small Cap Portfolio, Scudder Growth and Income Fund, Neuberger Berman
Guardian Trust and Dreyfus Founders Growth Fund, each of which is a Variable
Investment Option currently available under our group and individual variable
annuity contracts, with shares of comparable series of AGSPC 3 and newly created
series of American General Series Portfolio Company ("AGSPC").
The Company believes that the proposed substitutions are in the best interest of
contract holders. In each case, the Substitute Series will have substantially
the same investment objective, practices and restrictions as the Replaced
Series. In the case of Dreyfus Variable Investment Fund -- Small Cap Portfolio
and T. Rowe Price Small-Cap Stock Fund, Inc., the Substitute Series will have
two sub-advisers, one of which is the Replaced Series' current investment
adviser, T. Rowe Price Associates, Inc., and an additional sub-adviser, Founders
Asset Management LLC, which has an outstanding long-term investment performance
record. In the case of Dreyfus Founders Growth Fund, the Substitute Series will
have the Replaced Series' current investment adviser, Founders Asset Management
LLC, as its sub-adviser. In the case of the other Replaced Series, the
Substitute Series will have as sub-advisers new managers with superior long-term
investment performance records in their respective asset classes.
The proposed substitutions and respective sub-advisers are:
<TABLE>
<CAPTION>
REPLACED SERIES SUBSTITUTE SERIES
<S> <C> <C>
Dreyfus Variable Investment Fund -- -- AGSPC American General Select Small-Cap Fund (T. Rowe
Small-Cap Portfolio Price Associates, Inc. and Founders Asset Management
LLC)
T. Rowe Price Small-Cap Stock Fund, Inc. -- AGSPC American General Select Small Cap Fund (T. Rowe
Price Associates, Inc. and Founders Asset Management
LLC)
Scudder Growth and Income Fund -- AGSPC American General American Century Income & Growth
Fund (American Century Investment Management, Inc.)
Neuberger Berman Guardian Trust -- AGSPC American General American Century Income & Growth
Fund (American Century Investment Management, Inc.)
Dreyfus Founders Growth Fund -- AGSPC American General Founders Growth Fund (Founders
Asset Management LLC)
AGSPC 3 American General Domestic Bond Fund -- AGSPC 3 American General Core Bond Fund (American
General Investment Management, L.P.)
</TABLE>
- --------------------------------------------------------------------------------
You should note that:
- - No action is required on your part. You will not need to vote a proxy, file a
new election, or take any other action if the SEC approves the substitutions.
- - The elections you have on file for allocating your account value, premium
payments and deductions will remain unchanged until you direct us otherwise.
- - You will not bear any expenses relating to the substitutions.
- - Although for two of the substitutions (Dreyfus Variable Investment
Fund -- Small Cap Portfolio and Scudder Growth and Income Fund) total contract
holder expenses are expected to be slightly higher for the Replaced Series,
the substitutions will result in a change to a sub-adviser with a superior
performance record.
- - On the effective date of the substitution, your account value in the Variable
Account Option will be the same as before the substitution.
- - The substitution will have no tax consequences for you.
The Company expects to complete the substitutions before October 2000. The newly
created series of AGSPC will commence operations at the time of the
substitutions. Completion of the substitutions is conditioned upon obtaining the
approval of the SEC and state insurance authorities, if applicable. Of course,
you may transfer amounts in your Contract among the Variable Investment Options
and Fixed Options, as usual. The substitutions will not be treated as a transfer
for purposes of the transfer provisions of your Contract. In addition, any
transfer charge that might otherwise be imposed will be waived from the date of
this Notice through the date that is 30 days after the substitutions.
We will send you a prospectus for AGSPC 3 and the new series of AGSPC, and
notice of the actual date of the substitutions, after we receive SEC approval.
You will receive confirmation when the substitution is complete.
Should you have any questions, you may contact us at 1-800-448-2542 (selection
1).
<PAGE> 48
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, 2000
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
one or more Fixed Account Options and/or an array of 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:
FIXED ACCOUNT OPTIONS: Fixed Account Plus
Short-Term Fixed Account
Multi-Year Enhanced Fixed Account*
VARIABLE ACCOUNT OPTIONS**
<TABLE>
<S> <C> <C>
American General Series Portfolio Dreyfus Founders Funds, Inc.: Templeton Funds, Inc.:
Company (AGSPC): Dreyfus 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>
* Available approximately May 22, 2000, subject to state approval.
** 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, 2000, contains additional
information about Portfolio Director 2 and is part of this prospectus. For a
free copy 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 SEC 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> 49
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ABOUT THE PROSPECTUS.......................... 1
FEE TABLE..................................... 2
SUMMARY....................................... 5
SELECTED PURCHASE UNIT DATA................... 9
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............ 11
VARIABLE ACCOUNT OPTIONS...................... 11
PURCHASE PERIOD............................... 12
Purchase Payments........................ 12
Purchase Units........................... 12
Calculation of Purchase Unit Value....... 13
Choosing Investment Options.............. 13
Fixed Account Options............... 13
Variable Account Options............ 13
Stopping Purchase Payments............... 13
TRANSFERS BETWEEN INVESTMENT OPTIONS.......... 14
During the Purchase Period............... 14
During the Payout Period................. 14
Communicating Transfer or Reallocation
Instructions........................... 14
Effective Date of Transfer............... 15
Market Timing............................ 15
FEES AND CHARGES.............................. 15
Account Maintenance Fee.................. 15
Surrender Charge......................... 15
Amount of Surrender Charge.......... 16
10% Free Withdrawal................. 16
Exceptions to Surrender Charge...... 16
Premium Tax Charge....................... 16
Separate Account Charges................. 16
Fund Annual Expense Charges.............. 17
Other Tax Charges........................ 17
Reduction or Waiver of Account
Maintenance Fee, Surrender, Mortality
and Expense Risk Fee or Administration
and Distribution Fee Charges........... 17
Separate Account Expense Reimbursement... 18
Market Value Adjustment.................. 18
PAYOUT PERIOD................................. 18
Fixed Payout............................. 18
Variable Payout.......................... 18
Combination Fixed and Variable Payout.... 19
Payout Date.............................. 19
Payout Options........................... 19
Enhancements to Payout Options........... 19
Payout Information....................... 19
SURRENDER OF ACCOUNT VALUE.................... 20
When Surrenders Are Allowed.............. 20
Amount That May Be Surrendered........... 20
Surrender Restrictions................... 20
Partial Surrenders....................... 20
Systematic Withdrawals................... 21
Distributions Required by Federal Tax
Law.................................... 21
EXCHANGE PRIVILEGE............................ 21
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Restrictions on Exchange Privilege....... 21
Taxes and Conversion Costs............... 22
Surrender Charges........................ 22
Exchange Offers for Contracts Other Than
Portfolio Director and Portfolio
Director 2............................. 22
Exchange Offer for Portfolio Director and
Portfolio Director 2................... 22
Comparison of Contracts.................. 22
Features of Portfolio Director 2......... 23
Agents' and Managers' Retirement Plan
Exchange Offer......................... 23
DEATH BENEFITS................................ 24
Beneficiary Information.................. 24
Special Information for Individual
Non-Tax Qualified Contracts............ 24
During the Purchase Period............... 24
Interest Guaranteed Death Benefit... 24
Standard Death Benefit.............. 24
During the Payout Period................. 24
HOW TO REVIEW INVESTMENT PERFORMANCE OF
SEPARATE ACCOUNT DIVISIONS.................. 25
Types of Investment Performance
Information Advertised................. 25
Total Return Performance Information... 25
Standard Average Annual Total Return... 25
Nonstandard Average Annual Total
Return.............................. 25
Cumulative Total Return................ 25
Annual Change in Purchase Unit Value... 25
Cumulative Change in Purchase Unit
Value............................... 26
Total Return Based on Different
Investment Amounts.................. 26
An Assumed Account Value of $10,000.... 26
Yield Performance Information............ 26
AGSPC Money Market Division............ 26
Divisions Other Than The AGSPC Money
Market Division..................... 26
Performance Information: Average Annual
Total Return, Cumulative Return and
Annual and Cumulative Change in
Purchase Unit Value Tables............. 26
OTHER CONTRACT FEATURES....................... 32
Changes That May Not Be Made............. 32
Change of Beneficiary.................... 32
Contingent Owner......................... 32
Cancellation -- The 20 Day "Free Look"... 32
We Reserve Certain Rights................ 32
Relationship to Employer's Plan.......... 32
VOTING RIGHTS................................. 32
Who May Give Voting Instructions......... 32
Determination of Fund Shares Attributable
to Your Account........................ 33
During Purchase Period................. 33
During Payout Period or after a Death
Benefit Has Been Paid............... 33
How Fund Shares Are Voted................ 33
FEDERAL TAX MATTERS........................... 33
Type of Plans............................ 33
Tax Consequences in General.............. 33
Effect of Tax-Deferred Accumulations..... 34
YEAR 2000..................................... 36
</TABLE>
(i)
<PAGE> 50
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 14
Annuitant 24
Assumed Investment Rate 18
Beneficiary 24
Contract Owner 24
Divisions 25
Fixed Account Options 24
Home Office 14
Mutual Fund or Fund 10
Participant 01
Participant Year 15
Payout Period 14
Payout Unit 18
Purchase Payments 12, 25
Purchase Period 14
Purchase Unit 12
VALIC Separate Account A 32
Variable Account Options 11, 24
</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> 51
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) 0.25 1.00 (0.21%) 1.04
Dreyfus 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
Templeton Foreign Fund -- Class
A(4) 0.25 1.00 (0.25) 1.00
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 Wellington Fund 0.25 1.00 -- 1.25
Vanguard Windsor II Fund 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% -- 0.06% 0.86%
AGSPC International Government Bond Fund 0.50 -- 0.07 0.57
AGSPC Money Market Fund 0.50 -- 0.07 0.57
AGSPC Science & Technology Fund 0.90 -- 0.06 0.96
AGSPC Social Awareness Fund 0.50 -- 0.07 0.57
AGSPC Stock Index Fund 0.26 -- 0.06 0.32
American Century Ultra Fund(8) 1.00 -- --% 1.00
Dreyfus Founders Growth Fund(8) 0.67 0.25% 0.16 1.08
Neuberger Berman Guardian Trust(7)(8) 0.84 -- 0.04 0.88
Putnam Global Growth Fund -- Class A Shares 0.63 0.25 0.22 1.10
Putnam New Opportunities Fund -- Class A
Shares 0.48 0.25 0.20 0.93
Putnam OTC & Emerging Growth Fund -- Class
A Shares 0.55 0.25 0.18 0.98
Scudder Growth and Income Fund 0.45 -- 0.35 0.80
Templeton Foreign Fund -- Class A(8) 0.61 0.25 0.27 1.13
Vanguard -- Long-Term Corporate Fund(8) 0.28 -- 0.02 0.30
Vanguard -- Long-Term Treasury Fund(8) 0.25 -- 0.03 0.28
Vanguard Wellington Fund(8) 0.28 -- 0.02 0.30
Vanguard Windsor II Fund(8) 0.35 -- 0.02 0.37
</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> 52
- --------------------------------------------------------------------------------
(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 certain payments received 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.
(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 1999 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 Dreyfus Founders Growth Fund
was formerly known as the Founders Growth 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> 53
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 $60 $103 $223
AGSPC International Government Bond Division 13 16 51 88 192
AGSPC Money Market Division 6 16 51 88 192
AGSPC Science & Technology Division 17 20 63 108 233
AGSPC Social Awareness Division 12 16 51 88 192
AGSPC Stock Index Division 10 14 43 75 164
American Century Ultra Division 31 21 65 112 241
Dreyfus Founders Growth Division 30 21 66 114 246
Neuberger Berman Guardian Trust
Division 29 19 60 104 225
Putnam Global Growth -- Class A Shares Division
28 22 67 115 248
Putnam New Opportunities -- Class A Shares
Division 26 20 62 106 230
Putnam OTC & Emerging Growth -- Class A Shares
Division 27 20 63 109 235
Scudder Growth and Income Division 21 19 58 100 216
Templeton Foreign -- Class A Division 32 22 68 117 251
Vanguard Long-Term Corporate Division 22 14 42 73 162
Vanguard Long-Term Treasury Division 23 13 42 72 159
Vanguard Wellington Division 25 16 50 87 189
Vanguard Windsor II Division 24 17 52 90 197
</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 $153 $223
AGSPC International Government Bond Division 13 63 101 138 192
AGSPC Money Market Division 6 63 101 138 192
AGSPC Science & Technology Division 17 67 112 158 233
AGSPC Social Awareness Division 12 63 101 138 192
AGSPC Stock Index Division 10 60 93 125 164
American Century Ultra Division 31 67 114 162 241
Dreyfus Founders Growth Division 30 68 115 164 246
Neuberger Berman Guardian Trust Division 29 66 110 154 225
Putnam Global Growth -- Class A Shares Division 28 68 116 165 248
Putnam New Opportunities -- Class A Shares Division
26 66 111 156 230
Putnam OTC & Emerging Growth -- Class A Shares
Division 27 67 113 159 235
Scudder Growth and Income Division 21 65 107 150 216
Templeton Foreign -- Class A Division 32 68 117 167 251
Vanguard Long-Term Corporate Division 22 60 92 123 162
Vanguard Long-Term Treasury Division 23 60 92 122 159
Vanguard Wellington Division 25 63 100 137 189
Vanguard Windsor II Division 24 63 102 140 197
</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> 54
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 three Fixed Account Options. There may be certain limitations on how many
investment options you may invest in at any one time.(1) 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.
- --------------------------------------------------------------------------------
<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
------------------------------------------------------------------------------------------------------------------
Multi-Year Enhanced Multi-year guaranteed interest income -- --
Fixed Account(1)
- -----------------------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS OBJECTIVE ADVISER SUBADVISER
- -----------------------------------------------------------------------------------------------------------------------------------
INDEX AGSPC Stock Seeks long-term capital growth through VALIC N/A(2)
EQUITY Index investment in common stocks that, as a
FUND Fund(3) group, are expected to provide
investment results closely corresponding
to the performance of the Standard &
Poor's 500 Stock Index(R).
- -----------------------------------------------------------------------------------------------------------------------------------
ACTIVELY AGSPC Growth Seeks long-term growth of capital VALIC Wellington
MANAGED Fund through investment primarily in equity Management
securities. Company, LLP (4)
EQUITY FUNDS ------------------------------------------------------------------------------------------------------------------
Seeks capital growth through investments American Century N/A
American Century primarily in common stocks that are Investment Management,
Ultra Fund considered to have better-than-average Inc.
prospects for appreciation.
------------------------------------------------------------------------------------------------------------------
Dreyfus Founders Seeks long-term growth of capital by Founders Asset N/A
Growth investing primarily in common stocks of Management LLC
Fund well-established, high-quality growth
companies.
------------------------------------------------------------------------------------------------------------------
Neuberger Berman Seeks capital appreciation and, Neuberger Berman Neuberger Berman,
Guardian Trust secondarily, current income by investing Management Inc. LLC
primarily in common stocks of large-
capitalization companies.
------------------------------------------------------------------------------------------------------------------
Putnam Global Seeks capital appreciation. Current Putnam Investment N/A
Growth Fund -- income is only an incidental Management Inc.
Class A Shares 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.
------------------------------------------------------------------------------------------------------------------
Putnam New Seeks long-term capital appreciation. Putnam Investment N/A
Opportunities Fund -- Current income is only an incidental Management Inc.
Class A Shares 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.
------------------------------------------------------------------------------------------------------------------
Putnam OTC & Seeks capital appreciation by investing Putnam Investment N/A
Emerging Growth primarily in common stocks traded in the Management Inc.
Fund -- Class A Shares over-the-counter 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.
------------------------------------------------------------------------------------------------------------------
Scudder Growth Seeks long-term growth of capital, Scudder Kemper N/A
and Income Fund current income and growth of income by Investments, Inc.
investing primarily in common stocks,
preferred stocks, and securities
convertible into common stocks of
companies which offer the prospect for
growth of earning while paying current
dividends.
- -----------------------------------------------------------------------------------------------------------------------------------
(1) The Multi-Year Enhanced Fixed Account Option is also referred to in this prospectus as the Market Value Adjustment ("MVA")
Option. For purposes of this limitation, each MVA Band under the Multi-Year Enhanced Fixed Option will count as a separate
investment option. An MVA Band is established for each separate investment for a new guarantee period. The minimum allocation
to an MVA Band, as described in the Contract, may be changed from time to time by the Company. Availability of this Option is
subject to regulatory approval within the state in which your Contract is issued. It may not be available under your Contract.
See MVA Option herein.
(2) Bankers Trust Company previously served as sub-adviser to the AGSPC Stock Index Fund. VALIC re-assumed direct management of
the Fund's investment portfolio on October 1, 1999.
(3) "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"). 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.
(4) Wellington Management Company, LLP replaced T. Rowe Price Associates, Inc. as sub-adviser to the Fund effective September 1,
1999. The investment objective was also changed at that time.
</TABLE>
5
<PAGE> 55
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
VARIABLE ACCOUNT INVESTMENT
OPTIONS OBJECTIVE ADVISER SUBADVISER
- -----------------------------------------------------------------------------------------------------------------------------
Templeton Seeks long-term capital growth by Templeton Global N/A
Foreign investing primarily in the equity Advisors Limited
Fund -- Class A securities of companies outside the
United States, including emerging
markets.
-----------------------------------------------------------------------------------------------------------
Vanguard Seeks to provide long-term growth of Vanguard N/A
Windsor II Fund 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.
- -----------------------------------------------------------------------------------------------------------------------------
BALANCED Vanguard Seeks to conserve capital and provide Wellington Management N/A
FUND Wellington moderate long-term growth in capital and Company, LLP
Fund income by investing 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.
- -----------------------------------------------------------------------------------------------------------------------------
INCOME AGSPC International Seeks high current income through VALIC N/A
FUNDS Government investments primarily in investment
Bond Fund grade debt securities issued or
guaranteed by foreign governments.
-----------------------------------------------------------------------------------------------------------
Vanguard Seeks a high level of current income Wellington Management N/A
Long-Term consistent with the maintenance of Company, LLP
Corporate Fund principal and liquidity by investing in
a diversified portfolio of investment
grade corporate and Government bonds.
-----------------------------------------------------------------------------------------------------------
Vanguard Seeks a high level of current income Vanguard N/A
Long-Term consistent with the maintenance of
Treasury Fund principal and liquidity by investing at
least 85% of its total assets in
long-term securities backed by the full
faith and credit of the U.S. Government.
- -----------------------------------------------------------------------------------------------------------------------------
SPECIALTY AGSPC Science & Seeks long-term growth of capital VALIC T. Rowe Price
FUNDS Technology through investment primarily in the Associates, Inc.
Fund common stocks and equity-related
securities of companies that are
expected to benefit from the
development, advancement and use of
science and technology.
-----------------------------------------------------------------------------------------------------------
AGSPC Social Seeks growth of capital through VALIC N/A
Awareness investment, primarily in common stocks,
Fund in companies which meet the social
criteria established for the Fund.
- -----------------------------------------------------------------------------------------------------------------------------
MONEY AGSPC Money Seeks liquidity, protection of capital VALIC N/A
MARKET Market and current income through investments
FUND Fund in short-term money market instruments.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 56
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.
Amounts invested in an MVA Option may be transferred to another investment
option at the end of an MVA term without application of a market value
adjustment.
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 from an MVA Option prior to the end of the applicable MVA term will
also be subject to a market value adjustment unless an exception applies. This
may increase or reduce the amount withdrawn. However, the market value
adjustment will not reduce the amount invested in the MVA Option below the
guaranteed amount.
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 may, in its discretion, reimburse to certain Divisions some or all
of the 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
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."
7
<PAGE> 57
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
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. The minimum amount to establish a new Multi-Year Enhanced Fixed
Option guarantee period (MVA Band), as described in the Contract, may be changed
from time to time by the Company.
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.
8
<PAGE> 58
Selected Purchase Unit Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
------------------------ ------------------------ ------------------------
PURCHASE PURCHASE PURCHASE
UNITS PURCHASE UNITS IN PURCHASE UNITS PURCHASE
IN FORCE UNIT VALUE FORCE UNIT VALUE IN FORCE UNIT VALUE
----------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
AGSPC Growth Division 15....................... 460,108,285 $2.582249 494,997,997 $2.428587 453,172,490 $2.076503
AGSPC International Government Bond Division
13............................................ 90,136,603 $1.609098 97,473,851 $1.728006 111,480,591 $1.490645
AGSPC Money Market Division 6.................. 233,940,123 $1.807351 147,547,688 $1.742617 84,182,521 $1.673590
AGSPC Science & Technology Division 17......... 517,699,561 $6,398997 418,601,069 $3.216190 397,842,959 $2.285739
AGSPC Social Awareness Division 12............. 136,226,993 $4.419383 114,382,494 $3.762308 81,577,104 $2.985333
AGSPC Stock Index Division 10.................. 766,975,696 $5.696582 691,680,049 $4.772052 615,053,124 $3.753436
American Century Ultra Division 31............. 411,119,880 $2.359768 209,221,513 $1.685503 97,745,282 $1.265937
Dreyfus Founders Growth Division 30............ 357,129,398 $2.196620 250,777,959 $1.595913 132,167,162 $1.289513
Neuberger Berman Guardian Trust Division 29.... 40,241,067 $1.422424 45,261,146 $1.324970 35,406,663 $1.307438
Putnam Global Growth -- Class A Division 28.... 181,916,991 $2.465895 101,468,260 $1.512865 49,548,732 $1.186775
Putnam New Opportunities -- Class A Division
26............................................ 386,064,440 $2.376261 280,523,297 $1.415175 143,395,066 $1.149453
Putnam OTC & Emerging Growth -- Class A
Division 27................................... 170,725,977 $2.408872 129,463,792 $1.072660 99,785,041 $0.976262
Scudder Growth and Income Division 21.......... 146,888,390 $1.584519 159,815,811 $1.507724 94,225,984 $1.436011
Templeton Foreign -- Class A Division 32....... 219,168,378 $1.479830 198,616,024 $1.069704 159,201,107 $1.135778
Vanguard Long-Term Corporate Division 22....... 49,616,245 $1.179657 44,122,646 $1.271278 17,371,407 $1.176649
Vanguard Long-Term Treasury Division 23........ 110,102,115 $1.191635 86,673,300 $1.318263 20,041,920 $1.178938
Vanguard Wellington Division 25................ 328,701,408 $1.528992 253,840,498 $1.482836 116,429,781 $1.340109
Vanguard Windsor II Division 24................ 426,529,299 $1.566008 372,737,595 $1.683226 187,929,868 $1.464949
<CAPTION>
DECEMBER 31, 1996 JULY 1,
------------------------ 1996
PURCHASE PURCHASE
UNITS PURCHASE UNIT
IN FORCE UNIT VALUE VALUE(1)
----------- ---------- ---------
<S> <C> <C> <C>
AGSPC Growth Division 15....................... 366,272,509 $1.733324 $1.656467
AGSPC International Government Bond Division
13............................................ 112,601,593 $1.582230 $1.502160
AGSPC Money Market Division 6.................. 75,124,095 $1.607212 $1.575923
AGSPC Science & Technology Division 17......... 315,809,646 $2.250471 $2.103343
AGSPC Social Awareness Division 12............. 46,574,016 $2.252673 $2.017275
AGSPC Stock Index Division 10.................. 536,806,965 $2.848437 $2.564931
American Century Ultra Division 31............. 16,654,076 $1.039845 $1.000000
Dreyfus Founders Growth Division 30............ 31,197,464 $1.029522 $1.000000
Neuberger Berman Guardian Trust Division 29.... 8,211,592 $1.120770 $1.000000
Putnam Global Growth -- Class A Division 28.... 16,648,600 $1.057690 $1.000000
Putnam New Opportunities -- Class A Division
26............................................ 53,001,699 $0.947573 1.000000
Putnam OTC & Emerging Growth -- Class A
Division 27................................... 48,902,828 $0.894978 $1.000000
Scudder Growth and Income Division 21.......... 16,524,046 $1.114950 $1.000000
Templeton Foreign -- Class A Division 32....... 36,671,828 $1.075896 $1.000000
Vanguard Long-Term Corporate Division 22....... 3,370,441 $1.047595 $1.000000
Vanguard Long-Term Treasury Division 23........ 4,174,369 $1.048470 $1.000000
Vanguard Wellington Division 25................ 22,866,634 $1.101584 $1.000000
Vanguard Windsor II Division 24................ 37,292,761 $1.120855 $1.000000
</TABLE>
- ------------
(1) 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.
9
<PAGE> 59
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.
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.
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.
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> 60
GENERAL INFORMATION -- (CONTINUED)
- --------------------------------------------------------------------------------
DISTRIBUTION OF THE CONTRACTS
American General Distributors, Inc., (the "Distributor"), 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.
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. You may be
subject to further limits on how many options you may be invested in at any one
time or how many of the options you are invested in may be involved in certain
transactions at any one time. 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 and, for 2 of such funds, have one of the following sub-advisers:
Wellington Management Company, LLP and T. Rowe Price Associates, Inc.
- - American Century Mutual Funds, Inc. -- offers 1 fund for which American
Century Investment Management, Inc. serves as investment adviser.
- - Dreyfus Founders Funds, Inc. -- offers 1 fund for which Founders Asset
Management LLC serves as investment adviser. The Funds were formerly known as
Founders Funds, Inc.
- - 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.
The Distributor's
address is
2929 Allen Parkway,
Houston, Texas 77019.
For more information
about the Distributor,
see "Distribution of
Variable Annuity Contracts"
in the Statement of
Additional Information
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> 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 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 the Money Market Division or other investment option
chosen by your employer. If your employer chooses another investment option
other than the Money Market Division, the value of your investment may
fluctuate and you could lose money. 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.)
Once we have established your account and have applied your initial Purchase
Payment as described above, any subsequent Purchase Payment that we receive at
our Home Office before the close of the Exchange will be credited the same
business day. 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, it 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.
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.
12
<PAGE> 62
- --------------------------------------------------------------------------------
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.
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 21 investment options offered in Portfolio Director 2. This includes 3
Fixed Account Options and 18 Variable Account Options. Unless provided
otherwise, you may select and combine up to 7 of the 21 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
The Fixed Account Plus and the Short Term Fixed Account are part of the
Company's general assets. The MVA Option may be invested in either the general
assets of the Company or in a Separate Account of the Company, depending upon
state requirements. You may allocate all or a portion of your Purchase Payment
to the Fixed Account Options listed in the "Summary" section 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. With the exception of a market value adjustment which generally will be
applied to withdrawals or transfers from an MVA Option prior to the end of an
MVA term, we bear the entire investment risk for the Fixed Account Options. 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. The minimum amount to establish each new Multi-Year
Enhanced Fixed Option guarantee period (MVA Band), as described in the Contract,
may be changed from time to time by the Company.
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)
- -------
* This value may be subject to a market value adjustment under the MVA Option.
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 "Summary" and "Variable Account Options" sections in this
prospectus and in each Fund's 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
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<PAGE> 63
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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.
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)
Multi-Year
Enhanced Up to 100% At any time Withdrawals or
Fixed Transfers
Account(3): subject to
market value
adjustment if
prior to the end
of an MVA term.
Each MVA Band
will require a
minimum transfer
amount as
described in the
Contract.(4)
</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.
(3) The MVA Option may not be available unless it has been selected as an option
for your employer's retirement plan.
(4) The minimum transfer amount may be changed from time to time by the Company.
From time to time we may waive the 20% transfer restriction on Fixed Account
Plus for transfers to the Multi-Year Enhanced Fixed Account or to other
investment options.
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). All transfers to or from the
MVA Option will require written instruction.
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
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.
14
<PAGE> 64
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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.
MARKET TIMING
The Contracts are not designed for professional market timing organizations or
other entities using programmed and frequent transfers. We reserve the right at
any time and without prior notice to any party to terminate, suspend, or modify
our policies or procedures regarding transfer requests.
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.
In addition, certain charges may apply to the MVA Option which are discussed at
the end of this section.
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.
PARTICIPANT YEAR -- the first
twelve month period and
then each yearly anniversary
of that period following the
issue date of the contract or
certificate.
15
<PAGE> 65
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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 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.
VALIC may waive any otherwise applicable surrender charge if you reinvest the
surrender proceeds in another VALIC insurance product. You will, however, be
subject to a surrender charge in the newly acquired product under the same terms
and conditions as the original product. For purposes of calculating any
surrender charge due, you will be considered to have acquired the new product as
of the date you acquired the original product.
The surrender charge may also 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
16
<PAGE> 66
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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 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
17
<PAGE> 67
- --------------------------------------------------------------------------------
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 administrative and shareholder services it
provides to the underlying Fund. The Company may, in its discretion, apply some
or all of these payments to reduce its charges to the Division investing in that
Fund. In addition, the Company currently reimburses certain Divisions a portion
of the Company's administration and distribution fee. Such reimbursement
arrangements are, however, voluntary and may be changed by the Company at any
time. See the Fee Table in this prospectus for an identification of those Funds
for which a reimbursement applies and the amount of the reimbursement.
MARKET VALUE ADJUSTMENT
Under the MVA Option you may establish one or more MVA Bands with a minimum
amount, as described in the Contract, per MVA Band in states in which the MVA
Option has been approved. The Company may change the minimum from time to time.
Each MVA Band will be guaranteed to receive a stated rate of interest through
the end of the selected MVA term. We guarantee your MVA Option will earn at
least the lowest minimum interest rate applicable to any of the fixed interest
options in the contract. A withdrawal will generally be subject to a surrender
charge if it exceeds the amount of any free withdrawal amount permitted under
your contract. Withdrawals or transfers from an MVA Band prior to the end of the
MVA term will be subject to a market value adjustment, unless an exception
applies. This adjustment may be positive or negative, based upon the differences
in selected interest rates at the time the MVA Band was established and at the
time of the withdrawal. This adjustment will not apply upon the Owner's death,
or if the Owner is not a natural person, upon the death of the Annuitant. This
adjustment applies independently from surrender charges, and can still apply to
a 10% Free Withdrawal. The market value adjustment may be waived for
distributions that are required under your contract. It will also be waived for
30 days following the end of an MVA term. Loans are not available from the MVA
Option. Please review your contract for additional information on the MVA
Option.
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
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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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.
- 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:
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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- 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.
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, no surrender or partial
surrender will be allowed except attainment of age 70 1/2, retirement or other
termination of employment 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.
20
<PAGE> 70
- --------------------------------------------------------------------------------
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 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.
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. If you elect to exercise one of these
exchange offers, you should contact any of our Regional Offices. 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 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 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.
21
<PAGE> 71
- --------------------------------------------------------------------------------
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.
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.
22
<PAGE> 72
- --------------------------------------------------------------------------------
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 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.
23
<PAGE> 73
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.
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.
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, Short-Term
Fixed Account and
Multi-Year Enhanced
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.
24
<PAGE> 74
HOW TO REVIEW INVESTMENT PERFORMANCE
OF SEPARATE ACCOUNT DIVISIONS
- --------------------------------------------------------------------------------
We will advertise information about the investment performance of VALIC Separate
Account A Divisions. Our advertising of past investment performance results does
not mean that future performance will be the same. The performance information
will not predict what your actual investment experience will be in that Division
or show past performance under an actual contract. We may also show how the
Divisions rank on the basis of data compiled by independent ranking services.
Some of the Divisions (and underlying Funds) offered in this prospectus were
previously available through other annuity or life insurance products 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, 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 Total 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, 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.
25
<PAGE> 75
- --------------------------------------------------------------------------------
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, 1999 was 4.31%.
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, 1999 was 4.40%.
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.
26
<PAGE> 76
TABLE I
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
DIVISION
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15).................................. 07/11/94 19.76% -- 20.29% 1.49%
AGSPC International Government Bond (Division 13)........... 10/01/91 5.86 -- 3.40 (11.11)
AGSPC Money Market (Division 6)............................. 01/16/86 -- 3.76% 3.15 (1.00)
AGSPC Science & Technology (Division 17).................... 07/11/94 41.63 -- 38.31 93.87
AGSPC Social Awareness (Division 12)........................ 10/02/89 -- 15.82 26.60 12.41
AGSPC Stock Index (Division 10)............................. 04/20/87 -- 16.40 26.53 14.32
American Century Ultra (Division 31)........................ 07/01/96 26.94 -- -- 34.94
Dreyfus Founders Growth (Division 30)....................... 07/01/96 24.31 -- -- 32.57
Neuberger Berman Guardian Trust (Division 29)............... 07/01/96 9.40 -- -- 2.48
Putnam Global Growth -- Class A (Division 28)............... 07/01/96 28.58 -- -- 57.92
Putnam New Opportunities -- Class A (Division 26)........... 07/01/96 27.20 -- -- 62.83
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 07/01/96 27.71 -- -- 119.46
Scudder Growth and Income (Division 21)(1).................. 07/01/96 12.94 -- -- 0.32
Templeton Foreign -- Class A (Division 32)(2)............... 07/01/96 10.69 -- -- 33.27
Vanguard Long-Term Corporate (Division 22)**................ 07/01/96 3.48 -- -- (11.43)
Vanguard Long-Term Treasury (Division 23)**................. 07/01/96 3.79 -- -- (13.71)
Vanguard Wellington (Division 25)........................... 07/01/96 11.76 -- -- (1.57)
Vanguard Windsor II (Division 24)........................... 07/01/96 12.55 -- -- (11.19)
</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 Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(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.
TABLE II
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15).................................. 04/29/94 18.13% -- 20.29% 1.49%
AGSPC Science & Technology (Division 17).................... 04/29/94 38.64 -- 38.31 93.87
American Century Ultra (Division 31)........................ 11/02/81 -- 23.04% 27.84 34.94
Dreyfus Founders Growth (Division 30)....................... 01/05/62 -- 18.78 28.37 32.57
Neuberger Berman Guardian Trust (Division 29)............... 08/03/93 12.00 -- 13.41 2.48
Putnam Global Growth -- Class A (Division 28)............... 09/01/67 -- 15.02 24.55 57.92
Putnam New Opportunities -- Class A (Division 26)........... 08/31/90 30.69 -- 31.43 62.83
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 11/01/82 -- 22.90 33.49 119.46
Scudder Growth and Income (Division 21)(1).................. 11/13/84 -- 12.92 16.69 0.32
Templeton Foreign -- Class A (Division 32)(2)............... 10/05/82 -- 10.16 11.34 33.27
Vanguard Long-Term Corporate (Division 22)**................ 07/09/73 -- 7.12 6.04 (11.43)
Vanguard Long-Term Treasury (Division 23)**................. 05/19/86 -- 6.70 6.35 (13.71)
Vanguard Wellington (Division 25)........................... 07/01/29 -- 11.07 15.24 (1.57)
Vanguard Windsor II (Division 24)........................... 06/24/85 -- 12.31 18.02 (11.19)
</TABLE>
- ---------------
Divisions with an identical inception date as the underlying Funds' inception
date are not reflected in this Table. See preceding 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) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(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.
27
<PAGE> 77
TABLE III
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
DIVISION
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15).................................. 07/11/94 19.84% -- 20.85% 6.33%
AGSPC International Government Bond
(Division 13)............................................. 10/01/91 5.94 -- 4.34 (6.88)
AGSPC Money Market (Division 6)............................. 01/16/86 -- 3.83% 4.09 3.71
AGSPC Science & Technology (Division 17).................... 07/11/94 41.71 -- 38.68 98.96
AGSPC Social Awareness (Division 12)........................ 10/02/89 -- 15.91 27.07 17.46
AGSPC Stock Index (Division 10)............................. 04/20/87 -- 16.48 27.00 19.37
American Century Ultra (Division 31)........................ 07/01/96 27.80 -- -- 40.00
Dreyfus Founders Growth (Division 30)....................... 07/01/96 25.21 -- -- 37.64
Neuberger Berman Guardian Trust (Division 29)............... 07/01/96 10.59 -- -- 7.36
Putnam Global Growth -- Class A (Division 28)............... 07/01/96 29.42 -- -- 63.00
Putnam New Opportunities -- Class A (Division 26)........... 07/01/96 28.06 -- -- 67.91
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 07/01/96 28.56 -- -- 124.57
Scudder Growth and Income (Division 21)(1).................. 07/01/96 14.05 -- -- 5.09
Templeton Foreign -- Class A (Division 32)(2)............... 07/01/96 11.85 -- -- 38.34
Vanguard Long-Term Corporate (Division 22)**................ 07/01/96 4.83 -- -- (7.21)
Vanguard Long-Term Treasury (Division 23)**................. 07/01/96 5.14 -- -- (9.61)
Vanguard Wellington (Division 25)........................... 07/01/96 12.90 -- -- 3.11
Vanguard Windsor II (Division 24)........................... 07/01/96 13.67 -- -- (6.96)
</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.
(1) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(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.
TABLE IV
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15).................................. 04/29/94 18.21% -- 20.85% 6.33%
AGSPC Science & Technology (Division 17).................... 04/29/94 38.73 -- 38.68 98.96
American Century Ultra (Division 31)........................ 11/02/81 -- 23.11% 28.30 40.00
Dreyfus Founders Growth (Division 30)....................... 01/05/62 -- 18.86 28.83 37.64
Neuberger Berman Guardian Trust (Division 29)............... 08/03/93 12.08 -- 14.09 7.36
Putnam Global Growth -- Class A (Division 28)............... 09/01/67 -- 15.11 25.05 63.00
Putnam New Opportunities -- Class A (Division 26)........... 08/31/90 30.75 -- 31.85 67.91
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 11/01/82 -- 22.98 33.89 124.57
Scudder Growth and Income (Division 21)(1).................. 11/13/84 -- 13.00 17.30 5.09
Templeton Foreign -- Class A (Division 32)(2)............... 10/05/82 -- 10.24 12.06 38.34
Vanguard Long-Term Corporate (Division 22)**................ 07/09/73 -- 7.20 6.89 (7.21)
Vanguard Long-Term Treasury (Division 23)**................. 05/19/86 -- 6.78 7.20 (9.61)
Vanguard Wellington (Division 25)........................... 07/01/29 -- 11.15 15.89 3.11
Vanguard Windsor II (Division 24)........................... 06/24/85 -- 12.39 18.62 (6.96)
</TABLE>
- ---------------
Divisions with an identical inception date as the underlying Funds' inception
date are not reflected in this Table. See preceding 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) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(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.
28
<PAGE> 78
TABLE V
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
DIVISION
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15).................................. 07/11/94 169.15% -- 157.75% 6.33%
AGSPC International Government Bond (Division 13)........... 10/01/91 60.91 -- 23.65 (6.88)
AGSPC Money Market (Division 6)............................. 01/16/86 -- 45.68% 22.19 3.71
AGSPC Science & Technology (Division 17).................... 07/11/94 573.27 -- 412.86 98.96
AGSPC Social Awareness (Division 12)........................ 10/02/89 -- 337.56 231.31 17.46
AGSPC Stock Index (Division 10)............................. 04/20/87 -- 359.85 230.40 19.37
American Century Ultra (Division 31)........................ 07/01/96 135.98 -- -- 40.00
Dreyfus Founders Growth (Division 30)....................... 07/01/96 119.66 -- -- 37.64
Neuberger Berman Guardian Trust (Division 29)............... 07/01/96 42.24 -- -- 7.36
Putnam Global Growth -- Class A (Division 28)............... 07/01/96 146.59 -- -- 63.00
Putnam New Opportunities -- Class A (Division 26)........... 07/01/96 137.63 -- -- 67.91
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 07/01/96 140.89 -- -- 124.57
Scudder Growth and Income (Division 21)(1).................. 07/01/96 58.45 -- -- 5.09
Templeton Foreign -- Class A (Division 32)(2)............... 07/01/96 47.98 -- -- 38.34
Vanguard Long-Term Corporate (Division 22)**................ 07/01/96 17.97 -- -- (7.21)
Vanguard Long-Term Treasury (Division 23)**................. 07/01/96 19.16 -- -- (9.61)
Vanguard Wellington (Division 25)........................... 07/01/96 52.90 -- -- 3.11
Vanguard Windsor II (Division 24)........................... 07/01/96 56.60 -- -- (6.96)
</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.
(1) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(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.
TABLE VI
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15).................................. 04/29/94 158.22% -- 157.75% 6.33%
AGSPC Science & Technology (Division 17).................... 04/29/94 539.90 -- 412.86 98.96
American Century Ultra (Division 31)........................ 11/02/81 -- 699.41% 247.59 40.00
Dreyfus Founders Growth (Division 30)....................... 01/05/62 -- 462.89 254.82 37.64
Neuberger Berman Guardian Trust (Division 29)............... 08/03/93 107.76 -- 93.30 7.36
Putnam Global Growth -- Class A (Division 28)............... 09/01/67 -- 308.51 205.77 63.00
Putnam New Opportunities -- Class A (Division 26)........... 08/31/90 1,120.17 -- 298.49 67.91
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 11/01/82 -- 691.25 330.28 124.57
Scudder Growth and Income (Division 21)(1).................. 11/13/84 -- 239.54 122.11 5.09
Templeton Foreign -- Class A (Division 32)(2)............... 10/05/82 -- 165.20 76.74 38.34
Vanguard Long-Term Corporate (Division 22)**................ 07/09/73 -- 100.51 39.56 (7.21)
Vanguard Long-Term Treasury (Division 23)**................. 05/19/86 -- 92.73 41.56 (9.61)
Vanguard Wellington (Division 25)........................... 07/01/29 -- 187.81 109.00 3.11
Vanguard Windsor II (Division 24)........................... 06/24/85 -- 221.49 134.82 (6.96)
</TABLE>
- ---------------
Divisions with an identical inception date as the underlying Funds' inception
date are not reflected in this Table. See preceding 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) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(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.
29
<PAGE> 79
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 1999 1998 1997 1996 1995
- ----------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)(1)...... 6.33% 16.96% 19.80% 18.18% 46.40%
AGSPC International Government Bond
(Division 13)(1).................. (6.88) 15.92 (5.79) 3.36 17.63
AGSPC Money Market (Division
6)(1)............................. 3.71 4.12 4.13 3.97 4.51
AGSPC Science & Technology
(Division 17)(1).................. 98.96 40.71 1.57 12.68 60.07
AGSPC Social Awareness (Division
12)(1)............................ 17.46 26.03 32.52 22.75 37.57
AGSPC Stock Index (Division
10)(1)............................ 19.37 27.14 31.77 21.53 35.95
American Century Ultra (Division
31)............................... 40.00 33.14 21.74 3.99 --
Dreyfus Founders Growth (Division
30)............................... 37.64 23.76 25.25 2.95 --
Neuberger Berman Guardian Trust
(Division 29)..................... 7.36 1.34 16.66 12.08 --
Putnam Global Growth -- Class A
(Division 28)..................... 63.00 27.48 12.20 5.77 --
Putnam New Opportunities -- Class A
(Division 26)..................... 67.91 23.12 21.31 (5.24) --
Putnam OTC & Emerging
Growth -- Class A (Division 27)... 124.57 9.87 9.08 (10.50) --
Scudder Growth and Income (Division
21)(2)............................ 5.09 4.99 28.80 11.50 --
Templeton Foreign -- Class A
(Division 32)(3).................. 38.34 (5.82) 5.57 7.59 --
Vanguard Long-Term Corporate
(Division 22)***.................. (7.21) 8.04 12.32 4.76 --
Vanguard Long-Term Treasury
(Division 23)***.................. (9.61) 11.82 12.44 4.85 --
Vanguard Wellington (Division
25)............................... 3.11 10.65 21.65 10.16 --
Vanguard Windsor II (Division
24)............................... (6.96) 14.90 30.70 12.09 --
<CAPTION>
ANNUAL CHANGE IN PURCHASE UNIT VALUE FOR THE 12 MONTHS ENDED DECEMBER 31**
--------------------------------------------------------
FUND AND DIVISION 1994 1993 1992 1991 1990
- ----------------------------------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)(1)...... 4.42% -- -- -- --
AGSPC International Government Bond
(Division 13)(1).................. 3.42 13.08% 2.05% 9.05% --
AGSPC Money Market (Division
6)(1)............................. 2.77 1.67 2.22 4.49 6.83%
AGSPC Science & Technology
(Division 17)(1).................. 31.28 -- -- -- --
AGSPC Social Awareness (Division
12)(1)............................ (2.42) 6.84 2.31 26.63 (2.21)
AGSPC Stock Index (Division
10)(1)............................ (0.30) 8.78 5.58 27.70 (4.83)
American Century Ultra (Division
31)............................... -- -- -- -- --
Dreyfus 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)(2)............................ -- -- -- -- --
Templeton Foreign -- Class A
(Division 32)(3).................. -- -- -- -- --
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 1999 1998 1997 1996 1995
- ----------------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)(1)...... 169.15% 153.13% 116.44% 80.67% 52.87%
AGSPC International Government Bond
(Division 13)(1).................. 60.91 72.80 49.06 58.22 53.08
AGSPC Money Market (Division
6)(1)............................. 45.68 40.47 34.90 29.55 24.60
AGSPC Science & Technology
(Division 17)(1).................. 573.27 238.39 140.50 136.78 110.13
AGSPC Social Awareness (Division
12)(1)............................ 337.56 272.50 195.58 123.04 81.69
AGSPC Stock Index (Division
10)(1)............................ 359.85 285.22 202.99 129.94 89.21
American Century Ultra (Division
31)............................... 135.98 68.55 26.59 3.99 --
Dreyfus Founders Growth (Division
30)............................... 119.66 59.59 28.95 2.95 --
Neuberger Berman Guardian Trust
(Division 29)..................... 42.24 32.50 30.75 12.08 --
Putnam Global Growth -- Class A
(Division 28)..................... 146.59 51.29 18.68 5.77 --
Putnam New Opportunities -- Class A
(Division 26)..................... 137.63 41.52 14.95 (5.24) --
Putnam OTC & Emerging
Growth -- Class A (Division 27)... 140.89 7.27 (2.37) (10.50) --
Scudder Growth and Income (Division
21)(2)............................ 58.45 50.77 43.60 11.50 --
Templeton Foreign -- Class A
(Division 32)(3).................. 47.98 6.97 13.58 7.59 --
Vanguard Long-Term Corporate
(Division 22)***.................. 17.97 27.13 17.67 4.76 --
Vanguard Long-Term Treasury
(Division 23)***.................. 19.16 31.83 17.89 4.85 --
Vanguard Wellington (Division
25)............................... 52.90 48.28 34.01 10.16 --
Vanguard Windsor II (Division
24)............................... 56.60 68.32 46.50 12.09 --
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR EACH PERIOD END SINCE DECEMBER 31, 1989**
------------------------------------------------------
FUND AND DIVISION 1994 1993 1992 1991 1990
- ----------------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)(1)...... 4.42% -- -- --
AGSPC International Government Bond
(Division 13)(1).................. 30.14 25.83% 11.28% 9.05% --
AGSPC Money Market (Division
6)(1)............................. 19.23 16.02 14.11 11.63 6.83%
AGSPC Science & Technology
(Division 17)(1).................. 31.28 -- -- -- --
AGSPC Social Awareness (Division
12)(1)............................ 32.07 35.34 26.68 23.82 (2.21)
AGSPC Stock Index (Division
10)(1)............................ 39.18 39.60 28.33 21.54 (4.83)
American Century Ultra (Division
31)............................... -- -- -- -- --
Dreyfus 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)(2)............................ -- -- -- -- --
Templeton Foreign -- Class A
(Division 32)(3).................. -- -- -- -- --
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.
(2) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(3) 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.
30
<PAGE> 80
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*** 1999 1998 1997 1996 1995
- ----------------------------------- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)......... 6.33% 16.96% 19.80% 18.18% 46.40%
AGSPC Science & Technology
(Division 17)..................... 98.96 40.71 1.57 12.68 60.07
American Century Ultra (Division
31)............................... 40.00 33.14 21.74 12.43 36.23
Dreyfus Founders Growth (Division
30)............................... 37.64 23.76 25.25 15.35 44.15
Neuberger Berman Guardian Trust
(Division 29)..................... 7.36 1.34 16.66 16.54 30.69
Putnam Global Growth -- Class A
(Division 28)..................... 63.00 27.48 12.20 15.37 13.68
Putnam New Opportunities -- Class A
(Division 26)..................... 67.91 23.12 21.31 9.70 44.87
Putnam OTC & Emerging
Growth -- Class A (Division 27)... 124.57 9.87 9.08 3.53 54.45
Scudder Growth and Income (Division
21)(1)............................ 5.09 4.99 28.80 20.63 29.58
Templeton Foreign -- Class A
(Division 32)(2).................. 38.34 (5.82) 5.57 16.74 10.07
Vanguard Long-Term Corporate
(Division 22)****................. (7.21) 8.04 12.32 (0.72) 24.86
Vanguard Long-Term Treasury
(Division 23)****................. (9.61) 11.82 12.44 (3.08) 28.51
Vanguard Wellington (Division
25)............................... 3.11 10.65 21.65 14.69 31.30
Vanguard Windsor II (Division
24)............................... (6.96) 14.90 30.70 22.56 37.14
<CAPTION>
ANNUAL CHANGE IN PURCHASE UNIT VALUE FOR THE 12 MONTHS ENDED DECEMBER 31**
------------------------------------------------------
FUND AND DIVISION*** 1994 1993 1992 1991 1990
- ----------------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)......... 0.18% -- -- -- --
AGSPC Science & Technology
(Division 17)..................... 24.77 -- -- -- --
American Century Ultra (Division
31)............................... (4.62) 20.54% 0.20% 84.49% 8.21%
Dreyfus Founders Growth (Division
30)............................... (4.29) 24.30 3.21 45.94 (11.48)
Neuberger Berman Guardian Trust
(Division 29)..................... 0.53 6.92 -- -- --
Putnam Global Growth -- Class A
(Division 28)..................... (1.84) 30.56 (0.76) 16.81 (10.11)
Putnam New Opportunities -- Class A
(Division 26)..................... 2.29 31.40 24.37 65.93 10.41
Putnam OTC & Emerging
Growth -- Class A (Division 27)... 1.22 30.77 11.58 39.47 (10.75)
Scudder Growth and Income (Division
21)(1)............................ 1.33 14.17 8.22 26.60 (3.55)
Templeton Foreign -- Class A
(Division 32)(2).................. (0.62) 35.48 (0.89) 17.10 (3.95)
Vanguard Long-Term Corporate
(Division 22)****................. (6.47) 13.08 8.41 19.42 4.90
Vanguard Long-Term Treasury
(Division 23)****................. (8.17) 15.36 6.09 15.98 4.48
Vanguard Wellington (Division
25)............................... (1.71) 12.12 6.58 22.13 (4.01)
Vanguard Windsor II (Division
24)............................... (2.38) 12.21 10.59 27.11 (11.10)
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR EACH PERIOD END SINCE DECEMBER 31, 1989**
--------------------------------------------------------
FUND AND DIVISION*** 1999 1998 1997 1996 1995
- ----------------------------------- -------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)......... 158.22% 142.86% 107.65% 73.33% 46.67%
AGSPC Science & Technology
(Division 17)..................... 539.90 221.62 128.57 125.05 99.72
American Century Ultra (Division
31)............................... 699.41 470.99 328.86 252.27 213.32
Dreyfus Founders Growth (Division
30)............................... 462.89 308.96 230.44 163.82 128.71
Neuberger Berman Guardian Trust
(Division 29)..................... 107.76 93.53 90.97 63.70 40.47
Putnam Global Growth -- Class A
(Division 28)..................... 308.51 150.63 96.60 75.22 51.88
Putnam New Opportunities -- Class A
(Division 26)..................... 1,120.17 626.67 490.23 386.56 343.54
Putnam OTC & Emerging
Growth -- Class A (Division 27)... 691.25 252.34 220.68 193.98 183.97
Scudder Growth and Income (Division
21)(1)............................ 239.54 223.08 207.72 138.92 98.06
Templeton Foreign -- Class A
(Division 32)(2).................. 165.20 91.70 103.54 92.81 65.16
Vanguard Long-Term Corporate
(Division 22)****................. 100.51 116.08 100.00 78.06 79.36
Vanguard Long-Term Treasury
(Division 23)****................. 92.73 113.21 90.67 69.57 74.96
Vanguard Wellington (Division
25)............................... 187.81 179.12 152.26 107.36 80.80
Vanguard Windsor II (Division
24)............................... 221.49 245.55 200.74 130.10 87.74
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR EACH PERIOD END SINCE DECEMBER 31, 1989**
------------------------------------------------------
FUND AND DIVISION*** 1994 1993 1992 1991 1990
- ----------------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)......... 0.18% -- -- -- --
AGSPC Science & Technology
(Division 17)..................... 24.77 -- -- -- --
American Century Ultra (Division
31)............................... 129.99 141.14% 100.05% 99.65% 8.22%
Dreyfus Founders Growth (Division
30)............................... 58.64 65.76 33.35 29.19 (11.48)
Neuberger Berman Guardian Trust
(Division 29)..................... 7.48 6.92 -- -- --
Putnam Global Growth -- Class A
(Division 28)..................... 33.60 36.09 4.24 5.03 (10.09)
Putnam New Opportunities -- Class A
(Division 26)..................... 206.20 199.32 127.80 83.17 10.41
Putnam OTC & Emerging
Growth -- Class A (Division 27)... 83.89 81.65 38.92 24.51 (10.72)
Scudder Growth and Income (Division
21)(1)............................ 52.87 50.86 32.13 22.12 (3.53)
Templeton Foreign -- Class A
(Division 32)(2).................. 50.05 51.01 11.47 12.47 (3.96)
Vanguard Long-Term Corporate
(Division 22)****................. 43.67 53.59 35.82 25.27 4.90
Vanguard Long-Term Treasury
(Division 23)****................. 36.15 48.28 28.55 21.18 4.48
Vanguard Wellington (Division
25)............................... 37.71 40.11 24.96 17.24 (4.00)
Vanguard Windsor II (Division
24)............................... 36.91 40.25 25.00 13.01 (11.09)
</TABLE>
- ------------
Divisions with an identical inception date as the underlying Funds' inception
date are not reflected in this Table. See preceding 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.
(1) The Scudder Growth and Income Fund adopted its current name and objective
on November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(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 general applicable to Class A shares.
31
<PAGE> 81
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.
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.
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.
32
<PAGE> 82
- --------------------------------------------------------------------------------
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.
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), 403(a) and 401(k) 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
33
<PAGE> 83
- --------------------------------------------------------------------------------
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, 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. In
addition, based upon published guides issued by the IRS in 1999, it appears
likely that such limitations, if imposed, would only apply to Non-Qualified
Contracts.
Distributions are taxed differently depending on the program through which
Portfolio Director 2 is offered and the previous tax characterization of the
contributions to which the distribution relates. Generally, the portion of a
distribution which is not considered a return of investment in the Contract is
subject to income tax. For annuity payments, investment in the contract is
recovered ratably over the expected payout period. Special recovery rules might
apply in certain situations.
Amounts subject to income tax may also incur excise 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.
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 1999, the IRS confirmed this opinion,
reversing its previous position by modifying a contrary ruling it had issued in
1981.
In its ruling in 1981, the 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 was
superseded by subsequent legislation (Code Section 817(h)) which specifically
exempts these Qualified Contracts, and the IRS had no viable legal basis or
reason to apply the theory of the 1981 ruling to these Qualified Contracts under
current law.
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.
34
<PAGE> 84
- --------------------------------------------------------------------------------
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. Variable options
incur mortality and expense risk fee charges and may also incur account
maintenance fees and surrender charges. The chart does not reflect the deduction
of any such fees. 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-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.
35
<PAGE> 85
YEAR 2000
- --------------------------------------------------------------------------------
As of March 10, 2000, all of our ultimate parent, American General Corporation's
("AGC") major technology systems, programs, and applications, including those
which rely on third parties, are operating smoothly following our transition
into 2000. We have experienced no interruptions to normal business operations,
including the processing of customer account data and transactions. We will
continue to monitor our technology systems, including critical third party
dependencies, as necessary to maintain our Year 2000 readiness. We do not expect
any future disruptions, if they occur, to have a material effect on the
company's results of operations, liquidity, or financial condition.
Through December 31, 1999, AGC incurred and expensed pretax costs of $98 million
related to Year 2000 readiness, including $18 million in 1999 and $65 million in
1998. In 1999, Year 2000 readiness expenses were included in division earnings.
The 1998 expenses were excluded from division earnings, consistent with the
manner in which we reviewed division results. In addition, we accelerated the
planned replacement of certain systems as part of our Year 2000 plans. The cost
of these replacement systems was immaterial. We do not anticipate incurring any
significant costs in the future to maintain Year 2000 readiness.
36
<PAGE> 86
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 or to the Home Office at the following address: VALIC, Customer
Service A3-01, 2929 Allen Parkway, Houston, TX 77019.
</TABLE>
<PAGE> 87
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information................................. 3
Marketing Information........................... 3
Endorsements and Published Ratings.............. 4
Types of Variable Annuity Contracts................. 5
Federal Tax Matters................................. 5
Tax Consequences of Purchase Payments........... 5
Tax Consequences of Distributions............... 7
Special Tax Consequences -- Early
Distribution.................................. 8
Special Tax Consequences -- Required
Distributions................................. 9
Tax Free Rollovers, Transfers and Exchanges..... 10
Exchange Privilege.................................. 10
Exchanges From Portfolio Director............... 11
Exchanges From Independence Plus Contracts...... 11
Exchanges From V-Plan Contracts................. 12
Exchanges From SA-1 and SA-2 Contracts.......... 13
Exchanges From Impact Contracts................. 15
Exchanges From Compounder Contracts............. 16
Information Which May Be Applicable To Any
Exchange...................................... 16
Calculation of Surrender Charge..................... 18
Illustration of Surrender Charge on Total
Surrender..................................... 18
Illustration of Surrender Charge on a 10%
Partial Surrender Followed by a Full
Surrender..................................... 18
Purchase Unit Value................................. 19
Illustration of Calculation of Purchase Unit
Value......................................... 19
Illustration of Purchase of Purchase Units...... 19
Performance Calculations............................ 19
AGSPC Money Market Division Yields.............. 19
Calculation of Current Yield for AGSPC Money
Market Division Six........................... 19
Illustration of Calculation of Current Yield for
AGSPC Money Market Division Six............... 19
Calculation of Effective Yield for AGSPC Money
Market Division Six........................... 20
Illustration of Calculation of Effective Yield
for AGSPC Money Market Division Six........... 20
Standardized Yield for Bond Fund Divisions...... 20
Calculation of Standardized Yield for Bond Fund
Divisions..................................... 20
Illustration of Calculation of Standardized
Yield for Bond Fund Divisions................. 20
Calculation of Average Annual Total Return...... 21
Calculation of MVA Option....................... 21
Performance Information............................. 22
Hypothetical $10,000 Account Value and
Cumulative Return as Compared to Benchmark
Tables........................................ 22
Performance Compared to Market Indices.......... 22
AGSPC Growth Division Fifteen Performance
Compared to S&P 500 Index..................... 24
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AGSPC International Government Bond Division
Thirteen Performance Compared to Salomon
Brothers Non-U.S. Dollar World Government Bond
Index......................................... 24
AGSPC Money Market Division Six Performance
Compared to Certificate of Deposit Primary
Offering by New York City Banks, 30 Day
Index......................................... 25
AGSPC Science & Technology Division Seventeen
Performance Compared to S&P 500 Index......... 25
AGSPC Social Awareness Division Twelve
Performance Compared to S&P 500 Index......... 26
AGSPC Stock Index Division Ten Performance
Compared to S&P 500 Index..................... 26
American Century Ultra Division Thirty-one
Compared to S&P 500 Index and NASDAQ Composite
Index......................................... 27
Dreyfus Founders Growth Division Thirty Compared
to S&P 500 Index.............................. 28
Neuberger Berman Guardian Trust Division
Twenty-nine Compared to S&P 500 Index......... 28
Putnam Global Growth -- Class A Division Twenty-
eight Compared to MCSI All Country World Free
Index and S&P 500 Index....................... 29
Putnam New Opportunities -- Class A Division
Twenty-six Compared to S&P 500 Index.......... 30
Putnam OTC & Emerging Growth -- Class A Division
Twenty-seven Compared to Russell 2000 Index
and S&P 500 Index............................. 30
Scudder Growth and Income Division Twenty-one
Compared to S&P 500 Index..................... 31
Templeton Foreign Division Thirty-two Compared
to EAFE Index................................. 31
Vanguard Long-Term Corporate Division Twenty-two
Compared to Lehman Long Term Corporate AA or
Better Bond Index............................. 32
Vanguard Long-Term Treasury Division
Twenty-three Compared to Lehman Brothers U.S.
Treasury Long-Term Index...................... 32
Vanguard Wellington Division Twenty-five
Compared to S&P 500 Index and Merrill Lynch
Corporate Master Index........................ 33
Vanguard Windsor II Division Twenty-four
Compared to S&P 500 Index..................... 34
Payout Payments..................................... 35
Assumed Investment Rate......................... 35
Amount of Payout Payments....................... 35
Payout Unit Value............................... 35
Illustration of Calculation of Payout Unit
Value......................................... 36
Illustration of Payout Payments................. 36
Distribution of Variable Annuity Contracts.......... 37
Experts............................................. 37
Comments on Financial Statements.................... 37
</TABLE>
<PAGE> 88
Please tear off, complete and return the form below to one of our Regional
Offices. 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> 89
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
[VALIC LOGO]
PRINTED MATTER
PRINTED IN U.S.A. VA 9875 REV 5/00
(C)The Variable Annuity Life Insurance Company, Houston, Texas
Recycled Paper LOGO
<PAGE> 90
[Momento Photo]
PORTFOLIO DIRECTOR 2
SEPARATE ACCOUNT A
FOR SERIES 2.1.20-2.12.20
Prospectus
May 1, 2000
Units of Interest Under Group and
Individual Variable Annuity Contracts
Portfolio Director 2
VALIC
AN AMERICAN
GENERAL COMPANY
<PAGE> 91
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
PORTFOLIO DIRECTOR, PORTFOLIO DIRECTOR 2, PORTFOLIO DIRECTOR PLUS
SUPPLEMENT ISSUED MAY 1, 2000 TO THE PROSPECTUS DATED MAY 1, 2000
The Variable Annuity Life Insurance Company (the "Company") filed an application
with the Securities and Exchange Commission ("SEC") as of March 31, 2000
requesting an order allowing the Company to replace the shares of American
General Domestic Bond Fund of American General Series Portfolio Company 3
("AGSPC 3"), T. Rowe Price Small-Cap Stock Fund, Dreyfus Variable Investment
Fund -- Small Cap Portfolio, Scudder Growth and Income Fund, Neuberger Berman
Guardian Trust and Dreyfus Founders Growth Fund, each of which is a Variable
Investment Option currently available under our group and individual variable
annuity contracts, with shares of comparable series of AGSPC 3 and newly created
series of American General Series Portfolio Company ("AGSPC").
The Company believes that the proposed substitutions are in the best interest of
contract holders. In each case, the Substitute Series will have substantially
the same investment objective, practices and restrictions as the Replaced
Series. In the case of Dreyfus Variable Investment Fund -- Small Cap Portfolio
and T. Rowe Price Small-Cap Stock Fund, Inc., the Substitute Series will have
two sub-advisers, one of which is the Replaced Series' current investment
adviser, T. Rowe Price Associates, Inc., and an additional sub-adviser, Founders
Asset Management LLC, which has an outstanding long-term investment performance
record. In the case of Dreyfus Founders Growth Fund, the Substitute Series will
have the Replaced Series' current investment adviser, Founders Asset Management
LLC, as its sub-adviser. In the case of the other Replaced Series, the
Substitute Series will have as sub-advisers new managers with superior long-term
investment performance records in their respective asset classes.
The proposed substitutions and respective sub-advisers are:
<TABLE>
<CAPTION>
REPLACED SERIES SUBSTITUTE SERIES
<S> <C> <C>
Dreyfus Variable Investment Fund --
Small-Cap Portfolio -- AGSPC American General Select Small-Cap Fund (T. Rowe
Price Associates, Inc. and Founders Asset Management
LLC)
T. Rowe Price Small-Cap Stock Fund, Inc. -- AGSPC American General Select Small Cap Fund (T. Rowe
Price Associates, Inc. and Founders Asset Management
LLC)
Scudder Growth and Income Fund -- AGSPC American General American Century Income & Growth
Fund (American Century Investment Management, Inc.)
Neuberger Berman Guardian Trust -- AGSPC American General American Century Income & Growth
Fund (American Century Investment Management, Inc.)
Dreyfus Founders Growth Fund -- AGSPC American General Founders Growth Fund (Founders
Asset Management LLC)
AGSPC 3 American General Domestic Bond Fund -- AGSPC 3 American General Core Bond Fund (American
General Investment Management, L.P.)
</TABLE>
- --------------------------------------------------------------------------------
You should note that:
- - No action is required on your part. You will not need to vote a proxy, file a
new election, or take any other action if the SEC approves the substitutions.
- - The elections you have on file for allocating your account value, premium
payments and deductions will remain unchanged until you direct us otherwise.
- - You will not bear any expenses relating to the substitutions.
- - Although for two of the substitutions (Dreyfus Variable Investment
Fund -- Small Cap Portfolio and Scudder Growth and Income Fund) total contract
holder expenses are expected to be slightly higher for the Replaced Series,
the substitutions will result in a change to a sub-adviser with a superior
performance record.
- - On the effective date of the substitution, your account value in the Variable
Account Option will be the same as before the substitution.
- - The substitution will have no tax consequences for you.
The Company expects to complete the substitutions before October 2000. The newly
created series of AGSPC will commence operations at the time of the
substitutions. Completion of the substitutions is conditioned upon obtaining the
approval of the SEC and state insurance authorities, if applicable. Of course,
you may transfer amounts in your Contract among the Variable Investment Options
and Fixed Options, as usual. The substitutions will not be treated as a transfer
for purposes of the transfer provisions of your Contract. In addition, any
transfer charge that might otherwise be imposed will be waived from the date of
this Notice through the date that is 30 days after the substitutions.
We will send you a prospectus for AGSPC 3 and the new series of AGSPC, and
notice of the actual date of the substitutions, after we receive SEC approval.
You will receive confirmation when the substitution is complete.
Should you have any questions, you may contact us at 1-800-448-2542 (selection
1).
<PAGE> 92
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, 2000
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
one or more Fixed Account Options and/or an array of 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:
FIXED ACCOUNT OPTIONS: Fixed Account Plus
Short-Term Fixed Account
Multi-Year Enhanced Fixed Account*
VARIABLE ACCOUNT OPTIONS**
<TABLE>
<S> <C> <C>
American General Series Portfolio Dreyfus Founders Funds, Inc.: Templeton Funds, Inc.:
Company (AGSPC): Dreyfus Founders Growth Fund Templeton Foreign Fund -- Class
Growth Fund A
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>
* Available approximately May 22, 2000, subject to state approval.
** 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, 2000, contains additional
information about Portfolio Director 2 and is part of this prospectus. For a
free copy 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 SEC 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> 93
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ABOUT THE PROSPECTUS........................... 1
FEE TABLE...................................... 2
SUMMARY........................................ 5
SELECTED PURCHASE UNIT DATA.................... 9
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....................... 11
PURCHASE PERIOD................................ 12
Purchase Payments......................... 12
Purchase Units............................ 12
Calculation of Purchase Unit Value........ 13
Choosing Investment Options............... 13
Fixed Account Options................ 13
Variable Account Options............. 13
Stopping Purchase Payments................ 14
TRANSFERS BETWEEN INVESTMENT OPTIONS........... 14
During the Purchase Period................ 14
During the Payout Period.................. 15
Communicating Transfer or Reallocation
Instructions............................ 15
Effective Date of Transfer................ 15
Market Timing............................. 15
FEES AND CHARGES............................... 16
Account Maintenance Fee................... 16
Surrender Charge.......................... 16
Amount of Surrender Charge........... 16
10% Free Withdrawal.................. 16
Exceptions to Surrender Charge....... 16
Premium Tax Charge........................ 17
Separate Account Charges.................. 17
Fund Annual Expense Charges............... 18
Other Tax Charges......................... 18
Reduction or Waiver of Account Maintenance
Fee, Surrender, Mortality and Expense
Risk Fee or Administration and
Distribution Fee Charges................ 18
Separate Account Expense Reimbursement.... 19
Market Value Adjustment................... 19
PAYOUT PERIOD.................................. 19
Fixed Payout.............................. 19
Variable Payout........................... 19
Combination Fixed and Variable Payout..... 20
Payout Date............................... 20
Payout Options............................ 20
Enhancements to Payout Options............ 21
Payout Information........................ 21
SURRENDER OF ACCOUNT VALUE..................... 21
When Surrenders Are Allowed............... 21
Amount That May Be Surrendered............ 21
Surrender Restrictions.................... 21
Partial Surrenders........................ 22
Systematic Withdrawals.................... 22
Distributions Required by Federal Tax
Law..................................... 22
EXCHANGE PRIVILEGE............................. 23
Restrictions on Exchange Privilege........ 23
Taxes and Conversion Costs................ 23
Surrender Charges......................... 23
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Exchange Offers for Contracts Other Than
Portfolio Director and Portfolio
Director 2.............................. 23
Exchange Offer for Portfolio Director and
Portfolio Director 2.................... 24
Comparison of Contracts................... 24
Features of Portfolio Director 2.......... 24
Agents' and Managers' Retirement Plan
Exchange Offer.......................... 24
DEATH BENEFITS................................. 25
Beneficiary Information................... 25
Special Information for Individual Non-Tax
Qualified Contracts..................... 26
During the Purchase Period................ 26
Interest Guaranteed Death Benefit.... 26
Standard Death Benefit............... 26
During the Payout Period.................. 27
HOW TO REVIEW INVESTMENT PERFORMANCE OF
SEPARATE ACCOUNT DIVISIONS................... 27
Types of Investment Performance
Information Advertised.................. 27
Total Return Performance Information.... 27
Standard Average Annual Total Return.... 27
Nonstandard Average Annual Total
Return.................................. 28
Cumulative Total Return................. 28
Annual Change in Purchase Unit Value.... 28
Cumulative Change in Purchase Unit
Value................................ 28
Total Return Based on Different
Investment Amounts................... 28
An Assumed Account Value of $10,000..... 28
Yield Performance Information............. 28
AGSPC Money Market Division............. 28
Divisions Other Than The AGSPC Money
Market Division...................... 29
Performance Information: Average Annual
Total Return, Cumulative Return and
Annual and Cumulative Change in Purchase
Unit Value Tables....................... 29
OTHER CONTRACT FEATURES........................ 35
Changes That May Not Be Made.............. 35
Change of Beneficiary..................... 35
Contingent Owner.......................... 35
Cancellation -- The 20 Day "Free Look".... 35
We Reserve Certain Rights................. 35
Relationship to Employer's Plan........... 35
VOTING RIGHTS.................................. 35
Who May Give Voting Instructions.......... 35
Determination of Fund Shares Attributable
to Your Account......................... 36
During Purchase Period.................. 36
During Payout Period or after a Death
Benefit Has Been Paid................ 36
How Fund Shares Are Voted................. 36
FEDERAL TAX MATTERS............................ 36
Type of Plans............................. 36
Tax Consequences in General............... 37
Effect of Tax-Deferred Accumulations...... 37
YEAR 2000...................................... 39
</TABLE>
(i)
<PAGE> 94
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 14
Annuitant 25
Assumed Investment Rate 19
Beneficiary 25
Contract Owner 26
Divisions 27
Fixed Account Options 26
Home Office 14
Mutual Fund or Fund 10
Participant 01
Participant Year 16
Payout Period 15
Payout Unit 19
Purchase Payments 12,27
Purchase Period 14
Purchase Unit 12,13
VALIC Separate Account A 35
Variable Account Options 26
</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> 95
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) 0.25 0.80 (0.21%) 0.84
Dreyfus Founders Growth Fund(4) 0.25 0.80 (0.25) 0.80
Neuberger Berman Guardian Trust
Fund(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
Templeton Foreign Fund -- Class
A(4) 0.25 0.80 (0.25) 0.80
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 Wellington Fund 0.25 0.80 -- 1.05
Vanguard Windsor II Fund 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% -- 0.06% 0.86%
AGSPC International Government Bond
Fund 0.50 -- 0.07 0.57
AGSPC Money Market Fund 0.50 -- 0.07 0.57
AGSPC Science & Technology Fund 0.90 -- 0.06 0.96
AGSPC Social Awareness Fund 0.50 -- 0.07 0.57
AGSPC Stock Index Fund 0.26 -- 0.06 0.32
American Century Ultra Fund(8) 1.00 -- -- 1.00
Dreyfus Founders Growth Fund(8) 0.67 0.25% 0.16 1.08
Neuberger Berman Guardian Trust
Fund(7)(8) 0.84 -- 0.04 0.88
Putnam Global Growth Fund -- Class A
Shares 0.63 0.25 0.22 1.10
Putnam New Opportunities Fund -- Class
A Shares 0.48 0.25 0.20 0.93
Putnam OTC & Emerging Growth
Fund -- Class A Shares 0.55 0.25 0.18 0.98
Scudder Growth and Income Fund 0.45 -- 0.35 0.80
Templeton Foreign Fund(8) - Class A 0.61 0.25 0.27 1.13
Vanguard Long-Term Corporate Fund(8) 0.28 -- 0.02 0.30
Vanguard Long-Term Treasury Fund(8) 0.25 -- 0.03 0.28
Vanguard Wellington Fund(8) 0.28 -- 0.02 0.30
Vanguard Windsor II Fund(8) 0.35 -- 0.02 0.37
</TABLE>
- ------------
(1) Premium taxes are not shown here, but may be charged by some states. See:
"Premium Tax Charge" in this prospectus.
2
<PAGE> 96
- --------------------------------------------------------------------------------
(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 certain payments received 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.
(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 1999 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 Dreyfus Founders Growth fund
was formerly known as the Founders Growth 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> 97
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 $54 $ 92 $201
AGSPC International Government Bond Division 13 14 45 77 170
AGSPC Money Market Division 6 14 45 77 170
AGSPC Science & Technology Division 17 18 57 98 212
AGSPC Social Awareness Division 12 14 45 77 170
AGSPC Stock Index Division 10 12 37 64 141
American Century Ultra Division 31 19 59 102 221
Dreyfus Founders Growth Division 30 19 60 104 225
Neuberger Berman Guardian Trust Division 29 17 54 93 203
Putnam Global Growth -- Class A Shares Division
28 20 61 105 227
Putnam New Opportunities -- Class A Shares
Division 26 18 56 96 209
Putnam OTC & Emerging Growth -- Class A Shares
Division 27 18 57 99 214
Scudder Growth and Income Division 21 17 52 89 195
Templeton Foreign -- Class A Division 32 20 62 106 230
Vanguard Long-Term Corporate Division 22 12 36 63 139
Vanguard Long-Term Treasury Division 23 11 36 62 137
Vanguard Wellington Division 25 14 44 76 167
Vanguard Windsor II Division 24 15 46 80 175
</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 $201
AGSPC International Government Bond Division 13 61 95 127 170
AGSPC Money Market Division 6 61 95 127 170
AGSPC Science & Technology Division 17 65 106 148 212
AGSPC Social Awareness Division 12 61 95 127 170
AGSPC Stock Index Division 10 59 87 114 141
American Century Ultra Division 31 65 108 152 221
Dreyfus Founders Growth Division 30 66 110 154 225
Neuberger Berman Guardian Trust Division 29 64 104 143 203
Putnam Global Growth -- Class A Shares Division 28 66 110 155 227
Putnam New Opportunities -- Class A Shares Division
26 64 105 146 209
Putnam OTC & Emerging Growth -- Class A Shares
Division 27 65 107 149 214
Scudder Growth and Income Division 21 63 101 139 195
Templeton Foreign -- Class A Division 32 66 111 156 230
Vanguard Long-Term Corporate Division 22 58 86 113 139
Vanguard Long-Term Treasury Portfolio Division 23 58 86 112 137
Vanguard Wellington Division 25 61 94 126 167
Vanguard Windsor II Division 24 61 96 130 175
</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> 98
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 three Fixed Account Options. There may be certain limitations on how many
investment options you may invest in at any one time.(1) 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.
- --------------------------------------------------------------------------------
<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
------------------------------------------------------------------------------------------------------------------
Multi-Year Enhanced Multi-year guaranteed interest income -- --
Fixed Account(1)
------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS OBJECTIVE ADVISER SUBADVISER
- -------------------------------------------------------------------------------------------------------------------------------
INDEX AGSPC Stock Seeks long-term capital growth through VALIC N/A(2)
EQUITY Index investment in common stocks that, as a
FUND Fund(3) group, are expected to provide
investment results closely corresponding
to the performance of the Standard &
Poor's 500 Stock Index*.
- -------------------------------------------------------------------------------------------------------------------------------
ACTIVELY AGSPC Growth Seeks long-term growth of capital VALIC Wellington
MANAGED Fund through investment primarily in equity Management Company,
EQUITY securities. LLP (4)
------------------------------------------------------------------------------------------------------------------
FUNDS American Century Seeks capital growth through investments American Century N/A
Ultra Fund primarily in common stocks that are Investment
considered to have better-than-average Management, Inc.
prospects for appreciation.
------------------------------------------------------------------------------------------------------------------
Dreyfus Founders Seeks long-term growth of capital by Founders Asset N/A
Growth investing primarily in common stocks of Management LLC
Fund well-established, high-quality growth
companies.
------------------------------------------------------------------------------------------------------------------
Neuberger Berman Seeks capital appreciation and, Neuberger Berman Neuberger
Guardian Trust secondarily, current income by investing Management Inc. Berman, LLC
primarily in common stocks of
large-capitalization companies.
------------------------------------------------------------------------------------------------------------------
Putnam Global Seeks capital appreciation. Current Putnam Investment N/A
Growth Fund -- income is only an incidental Management Inc.
Class A Shares 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.
------------------------------------------------------------------------------------------------------------------
Putnam New Seeks long-term capital appreciation. Putnam Investment N/A
Opportunities Fund -- Current income is only an incidental Management Inc.
Class A Shares 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.
------------------------------------------------------------------------------------------------------------------
Putnam OTC & Seeks capital appreciation by investing Putnam Investment N/A
Emerging Growth primarily in common stocks traded in the Management Inc.
Fund -- Class A Shares over-the-counter 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.
- -------------------------------------------------------------------------------------------------------------------------------
(1) This Multi-Year Enhanced Fixed Account Option is also referred to in this prospectus as the Market Value Adjustment
("MVA") Option. For purposes of this limitation, each MVA Band under the Multi-Year Enhanced Fixed Option will count as a
separate investment option. An MVA Band is established for each separate investment for a new guarantee period. The
minimum allocation to an MVA Band, as described in the Contract, may be changed from time to time by the Company.
Availability of this Option is subject to regulatory approval within the state in which your Contract is issued. It may
not be available under your Contract. See MVA Option herein.
(2) Bankers Trust Company ("Bankers Trust") previously served as sub-adviser to the AGSPC Stock Index Fund. VALIC re-assumed
direct management of the Fund's investment portfolio on October 1, 1999.
(3) "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").
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.
(4) Wellington Management Company, LLP replaced T. Rowe Price Associates, Inc. as sub-adviser to the Fund effective September
1, 1999. The investment objective was also changed at that time.
</TABLE>
5
<PAGE> 99
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Scudder Growth Seeks long-term growth of capital, Scudder Kemper N/A
and Income Fund current income and growth of income by Investments, Inc.
investing primarily in common stocks,
preferred stocks, and securities
convertible into common stocks of
companies which offer the prospect for
growth of earning while paying current
dividends.
------------------------------------------------------------------------------------------------------------------
Templeton Seeks long-term capital growth by Templeton Global N/A
Foreign investing primarily in the equity Advisors Limited
Fund -- Class A securities of companies outside the
United States, including emerging
markets.
------------------------------------------------------------------------------------------------------------------
Vanguard Seeks to provide long-term growth of Vanguard N/A
Windsor II Fund 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.
- -------------------------------------------------------------------------------------------------------------------------------
BALANCED Vanguard Seeks to conserve capital and provide Wellington Management N/A
FUND Wellington moderate long-term growth in capital and Company, LLC
Fund income by investing 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 a high-quality,
longer-term corporate bonds with some
exposure to U.S. Treasury, government
agency, and mortgage-backed bonds.
- -------------------------------------------------------------------------------------------------------------------------------
INCOME AGSPC International Seeks high current income through VALIC N/A
FUNDS Government investments primarily in investment
Bond Fund grade debt securities issued or
guaranteed by foreign governments.
------------------------------------------------------------------------------------------------------------------
Vanguard Long-Term Seeks a high level of current income Wellington Management N/A
Corporate Fund consistent with the maintenance of Company, LLC
principal and liquidity by investing in
a diversified portfolio of investment
grade corporate and Government bonds.
------------------------------------------------------------------------------------------------------------------
Vanguard Long-Term Seeks a high level of current income Vanguard N/A
Treasury Fund consistent with the maintenance of
principal and liquidity by investing at
least 85% of its total assets in
long-term securities backed by the full
faith and credit of the U.S. Government.
- -------------------------------------------------------------------------------------------------------------------------------
SPECIALTY AGSPC Science & Seeks long-term growth of capital VALIC T. Rowe Price
FUNDS Technology Fund through investment primarily in the Associates, Inc.
common stocks and equity-related
securities of companies that are
expected to benefit from the
development, advancement and use of
science and technology.
------------------------------------------------------------------------------------------------------------------
AGSPC Social Seeks growth of capital through VALIC N/A
Awareness investment, primarily in common stocks,
Fund in companies which meet the social
criteria established for the Fund.
- -------------------------------------------------------------------------------------------------------------------------------
MONEY AGSPC Money Seeks liquidity, protection of capital VALIC N/A
MARKET Market and current income through investments
FUND Fund in short-term money market instruments.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 100
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.
Amounts invested in an MVA Option may be transferred to another investment
option at the end of an MVA term without application of a market value
adjustment.
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 from an MVA Option prior to the end of the applicable MVA term will
also be subject to a market value adjustment unless an exception applies. This
may increase or reduce the amount withdrawn. However, the market value
adjustment will not reduce the amount invested in the MVA Option below the
guaranteed amount.
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.
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> 101
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
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 may, in its discretion, reimburse to certain Divisions some or all
of the 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. The minimum amount to establish a new Multi-Year Enhanced Fixed
Option guarantee period (MVA Band), as described in the Contract, may be changed
from time to time by the Company.
8
<PAGE> 102
SELECTED PURCHASE UNIT DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JANUARY 2,
DECEMBER 31, 1999 DECEMBER 31, 1998 1998
------------------------- ----------------------- ----------
PURCHASE PURCHASE PURCHASE
UNIT VALUES PURCHASE UNITS PURCHASE UNIT
IN FORCE UNIT VALUES IN FORCE UNIT VALUE VALUE(1)
----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
AGSPC Growth Division 15........................ 8,377,232 $2.608476 4,324,799 $2.448443 $2.089333
AGSPC International Government Bond Division
13............................................ 1,058,856 $1.634588 408,156 $1.751922 $1.508273
AGSPC Money Market Division 6................... 9,613,663 $1.856681 5,325,479 $1.786658 $1.712478
AGSPC Science & Technology Division 17.......... 11,744,052 $6.462689 3,228,389 $3.241847 $2.299405
AGSPC Social Awareness Division 12.............. 3,028,346 $4.502622 1,218,871 $3.825649 $3.029567
AGSPC Stock Index Division 10................... 18,855,858 $5.830950 6,859,835 $4.875028 $3.826834
American Century Ultra Division 31.............. 20,827,045 $2.437771 8,116,612 $1.737734 $1.302531
Dreyfus Founders Growth Division 30............. 16,160,159 $2.252548 7,720,189 $1.633282 $1.317029
Neuberger Berman Guardian Trust Division 29..... 1,406,229 $1.471857 1,012,671 $1.368269 $1.347434
Putnam Global Growth -- Class A Division 28..... 11,313,375 $2.530785 6,153,771 $1.549587 $1.213127
Putnam New Opportunities -- Class A Division
26............................................ 19,231,737 $2.414279 10,725,927 $1.434946 $1.163156
Putnam OTC & Emerging Growth -- Class A Division
27............................................ 6,570,152 $2.471391 3,092,839 $1.098295 $0.997579
Scudder Growth and Income Division 21........... 6,367,461 $1.623952 4,494,004 $1.542160 $1.465844
Templeton Foreign -- Class A Division 32........ 8,660,425 $1.517785 5,437,288 $1.094954 $1.160235
Vanguard Long-Term Corporate Division 22........ 4,060,325 $1.220562 2,949,044 $1.312731 $1.212562
Vanguard Long-Term Treasury Division 23......... 7,578,682 $1.222216 3,682,809 $1.349397 $1.204344
Vanguard Wellington Division 25................. 28,195,817 $1.580569 19,636,072 $1.529797 $1.379756
Vanguard Windsor II Division 24................. 20,846,053 $1.606241 13,800,156 $1.723020 $1.496544
</TABLE>
- ------------
(1) 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.
9
<PAGE> 103
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.
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.
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> 104
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
American General Distributors, Inc. (the "Distributor"), 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.
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. You may be
subject to further limits on how many options you may be invested in at any one
time or how many of the options you are invested in may be involved in certain
transactions at any one time. 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 and, for 2 of such funds, have one of the following sub-advisers:
Wellington Management Company, LLP and T. Rowe Price Associates, Inc.
- - American Century Mutual Funds, Inc. -- offers 1 fund for which American
Century Investment Management, Inc. serves as investment adviser.
- - Dreyfus Founders Funds, Inc. -- offers 1 fund for which Founders Asset
Management LLC serves as investment adviser. The Funds were formerly known as
Founders Funds, Inc.
- - 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.
The Distributor's address
is 2929 Allen Parkway,
Houston, Texas 77019.
For more information
about the Distributor see
"Distribution of Variable
Annuity Contracts" in
the Statement of
Additional Information
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> 105
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 the Money Market Division or other investment option
chosen by your employer. If your employer chooses another investment option
other than the Money Market Division, the value of your investment may
fluctuate and you could lose money. 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.)
Once we have established your account and have applied your initial Purchase
Payment as described above, any subsequent Purchase Payment that we receive at
our Home Office before the close of the Exchange will be credited the same
business day. Purchase Units will be credited the same business day if Purchase
Payments are received by our
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.
12
<PAGE> 106
- --------------------------------------------------------------------------------
Home Office before the close of the Exchange. If not, it 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.
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 21 investment options offered in Portfolio Director 2. This includes 3
Fixed Account Options and 18 Variable Account Options. Unless provided
otherwise, you
may select and combine up to 7 of the 21 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
The Fixed Account Plus and the Short Term Fixed Account are part of the
Company's general assets. The MVA Option may be invested in either the general
assets of the Company or in a Separate Account of the Company, depending upon
state requirements. You may allocate all or a portion of your Purchase Payment
to the Fixed Account Options listed in the "Summary" section 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. With the exception of a market value adjustment which generally will be
applied to withdrawals or transfers from an MVA Option prior to the end of an
MVA term, we bear the entire investment risk for the Fixed Account Options. 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. The minimum amount to establish each new Multi-Year
Enhanced Fixed Option guarantee period (MVA Band), as described in the Contract,
may be changed from time to time by the Company.
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)
- -------
* This value may be subject to a market value adjustment under the MVA Option.
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 "Summary" and "Variable Account Options" sections in this
prospectus and in each Fund's 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
For more information as to
how PURCHASE UNIT VALUES
are calculated, see the
Statement of Additional
Information.
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.
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<PAGE> 107
- --------------------------------------------------------------------------------
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.
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)
Multi-Year
Enhanced Up to 100% At any time Withdrawals or
Fixed Transfers
Account(3): subject to
market value
adjustment if
prior to the end
of an MVA term.
Each MVA Band
will require a
minimum transfer
amount as
described in the
Contract.(4)
</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.
(3) The MVA Option may not be available unless it has been selected as an option
for your employer's retirement plan.
(4) The minimum transfer amount may be changed from time to time by the Company.
From time to time we may waive the 20% transfer restriction on Fixed Account
Plus for transfers to the Multi-Year Enhanced Fixed Account or to other
investment options.
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.
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<PAGE> 108
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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). All transfers to or from the
MVA Option will require written instruction.
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.
MARKET TIMING
The Contracts are not designed for professional market timing organizations or
other entities using programmed and frequent transfers. We reserve the right at
any time and without prior notice to any party to terminate, suspend, or modify
our policies or procedures regarding transfer requests.
PAYOUT PERIOD -- the time
that starts when you begin to
withdraw your money in a
steady stream of payments.
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<PAGE> 109
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.
In addition, certain charges may apply to the MVA Option which are discussed at
the end of this section.
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;
PARTICIPANT YEAR -- the first
twelve month period and
then each yearly anniversary
of that period following the
issue date of the contract or
certificate.
16
<PAGE> 110
- --------------------------------------------------------------------------------
- - 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 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.
VALIC may waive any otherwise applicable surrender charge if you reinvest the
surrender proceeds in another VALIC insurance product. You will, however, be
subject to a surrender charge in the newly acquired product under the same terms
and conditions as the original product. For purposes of calculating any
surrender charge due, you will be considered to have acquired the new product as
of the date you acquired the original product.
The surrender charge may also 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).
17
<PAGE> 111
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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 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.
18
<PAGE> 112
- --------------------------------------------------------------------------------
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 may, in its discretion, apply
some or all of these payments to reduce its charges to the Division investing in
that Fund. In addition, the Company currently reimburses certain Divisions a
portion of the Company's administration and distribution fee. Such reimbursement
arrangements are, however, voluntary and may be changed by the Company at any
time. See the Fee Table in this prospectus for an identification of those Funds
for which a reimbursement applies and the amount of the reimbursement.
MARKET VALUE ADJUSTMENT
Under the MVA Option you may establish one or more MVA Bands with a minimum
amount, as described in the Contract, per MVA Band in states in which the MVA
Option has been approved. The Company may change the minimum from time to time.
Each MVA Band will be guaranteed to receive a stated rate of interest through
the end of the selected MVA term. We guarantee your MVA Option will earn at
least the lowest minimum interest rate applicable to any of the fixed interest
options in the contract. A withdrawal will generally be subject to a surrender
charge if it exceeds the amount of any free withdrawal amount permitted under
your contract. Withdrawals or transfers from an MVA Band prior to the end of the
MVA term will be subject to a market value adjustment, unless an exception
applies. This adjustment may be positive or negative, based upon the differences
in selected interest rates at the time the MVA Band was established and at the
time of the withdrawal. This adjustment will not apply upon the Owner's death,
or if the Owner is not a natural person, upon the death of the Annuitant. This
adjustment applies independently from surrender charges, and can still apply to
a 10% Free Withdrawal. The market value adjustment may be waived for
distributions that are required under your contract. It will also be waived for
30 days following the end of an MVA term. Loans are not available from the MVA
Option. Please review your contract for additional information on the MVA
Option.
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
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> 113
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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.
- 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.
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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.
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
For more information about
PAYOUT OPTIONS OR
ENHANCEMENTS
of those Payout Options
available under the Contract,
see the "Statement of
Additional Information".
21
<PAGE> 115
- --------------------------------------------------------------------------------
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, no surrender or partial
surrender will be allowed except attainment of age 70 1/2, retirement or other
termination of employment 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 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.
22
<PAGE> 116
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. If you elect to exercise one of these
exchange offers, you should contact any of our Regional Offices. 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 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 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
23
<PAGE> 117
- --------------------------------------------------------------------------------
- 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.
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.
24
<PAGE> 118
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 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.
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.
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.
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<PAGE> 119
- --------------------------------------------------------------------------------
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.
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>
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, Short-Term
Fixed Account and Multi-Year
Enhanced 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.
26
<PAGE> 120
- --------------------------------------------------------------------------------
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.
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 or life insurance products 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, 5 and 10 year periods. If Standard
Average Annual Return for a Division is not available for a stated period, we
may show
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.
27
<PAGE> 121
- --------------------------------------------------------------------------------
the Standard Average Annual Total 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, 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.
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, 1999 was 4.51%.
28
<PAGE> 122
- --------------------------------------------------------------------------------
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, 1999 was 4.61%.
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 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.
29
<PAGE> 123
TABLE I
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 31, 1999)*
<TABLE>
<CAPTION>
DIVISION
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth Fund (Division 15)............................. 07/11/94 20.14% -- 20.51% 1.69%
AGSPC International Government Bond Fund (Division 13)...... 10/01/91 6.06 -- 3.61 (10.94)
AGSPC Money Market Fund (Division 6)........................ 01/16/86 -- 3.96% 3.36 (0.80)
AGSPC Science & Technology Fund (Division 17)............... 07/11/94 42.02 -- 38.56 94.26
AGSPC Social Awareness Fund (Division 12)................... 10/02/89 -- 16.03 26.82 12.64
AGSPC Stock Index Fund (Division 10)........................ 04/20/87 -- 16.61 26.75 14.55
American Century Ultra (Division 31)........................ 07/01/96 27.19 -- -- 35.22
Dreyfus Founders Growth (Division 30)....................... 07/01/96 24.55 -- -- 32.85
Neuberger Berman Guardian Trust (Division 29)............... 07/01/96 9.61 -- -- 2.68
Putnam Global Growth -- Class A (Division 28)............... 07/01/96 28.83 -- -- 58.24
Putnam New Opportunities -- Class A (Division 26)........... 07/01/96 27.45 -- -- 63.17
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 07/01/96 27.97 -- -- 119.91
Scudder Growth and Income (Division 21)(1).................. 07/01/96 13.15 -- -- 0.52
Templeton Foreign -- Class A (Division 32)(2)............... 07/01/96 10.91 -- -- 33.55
Vanguard Long-Term Corporate (Division 22)**................ 07/01/96 3.68 -- -- (11.25)
Vanguard Long-Term Treasury (Division 23)**................. 07/01/96 4.00 -- -- (13.54)
Vanguard Wellington (Division 25)........................... 07/01/96 11.97 -- -- (1.38)
Vanguard Windsor II (Division 24)........................... 07/01/96 12.76 -- -- (11.02)
</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 Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(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.
TABLE II
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 31, 1999)*
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15).................................. 04/29/94 18.34% -- 20.51% 1.69%
AGSPC Science & Technology (Division 17).................... 04/29/94 38.88 -- 38.56 94.26
American Century Ultra (Division 31)........................ 11/02/81 -- 23.25% 28.07 35.22
Dreyfus Founders Growth (Division 30)....................... 01/05/62 -- 19.00 28.60 32.85
Neuberger Berman Guardian Trust (Division 29)............... 08/03/93 12.21 -- 13.62 2.68
Putnam Global Growth -- Class A (Division 28)............... 09/01/67 -- 15.24 24.79 58.24
Putnam New Opportunities -- Class A (Division 26)........... 08/31/90 30.91 -- 31.67 63.17
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 11/01/82 -- 23.12 33.73 119.91
Scudder Growth and Income (Division 21)(1).................. 11/13/84 -- 13.12 16.89 0.52
Templeton Foreign -- Class A (Division 32)(2)............... 10/05/82 -- 10.37 11.56 33.55
Vanguard Long-Term Corporate (Division 22)**................ 07/09/73 -- 7.32 6.25 (11.25)
Vanguard Long-Term Treasury (Division 23)**................. 05/19/86 -- 6.90 6.56 (13.54)
Vanguard Wellington (Division 25)........................... 07/01/29 -- 11.27 15.45 (1.38)
Vanguard Windsor II (Division 24)........................... 06/24/85 -- 12.51 18.23 (11.02)
</TABLE>
- ---------------
Divisions with an identical inception date as the underlying Funds' inception
date are not reflected in this Table. See preceding 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) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(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.
30
<PAGE> 124
TABLE III
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION FUND INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
DIVISION
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- ------------------ --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth Fund (Division 15)............................. 07/11/94 20.22% -- 21.06% 6.54%
AGSPC International Government Bond Fund
(Division 13)............................................. 10/01/91 6.14 -- 4.54 (6.70)
AGSPC Money Market Fund (Division 6)........................ 01/16/86 -- 4.04% 4.29 3.92
AGSPC Science & Technology Fund (Division 17)............... 07/11/94 42.10 -- 38.92 99.35
AGSPC Social Awareness Fund (Division 12)................... 10/02/89 -- 16.12 27.29 17.70
AGSPC Stock Index Fund (Division 10)........................ 04/20/87 -- 16.69 27.22 19.61
American Century Ultra (Division 31)........................ 07/01/96 28.04 -- -- 40.28
Dreyfus Founders Growth (Division 30)....................... 07/01/96 25.45 -- -- 37.92
Neuberger Berman Guardian Trust (Division 29)............... 07/01/96 10.80 -- -- 7.57
Putnam Global Growth -- Class A (Division 28)............... 07/01/96 29.67 -- -- 63.32
Putnam New Opportunities -- Class A (Division 26)........... 07/01/96 28.31 -- -- 68.25
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 07/01/96 28.82 -- -- 125.02
Scudder Growth and Income (Division 21)(1).................. 07/01/96 14.26 -- -- 5.30
Templeton Foreign -- Class A (Division 32)(2)............... 07/01/96 12.07 -- -- 38.62
Vanguard Long-Term Corporate Portfolio (Division 22)**...... 07/01/96 5.03 -- -- (7.02)
Vanguard Long-Term Treasury Portfolio (Division 23)**....... 07/01/96 5.34 -- -- (9.43)
Vanguard Wellington (Division 25)........................... 07/01/96 13.11 -- -- 3.32
Vanguard Windsor II (Division 24)........................... 07/01/96 13.88 -- -- (6.78)
</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 Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(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.
TABLE IV
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- -------------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15).................................. 04/29/94 18.42% -- 21.06% 6.54%
AGSPC Science & Technology (Division 17).................... 04/29/94 38.97 -- 38.92 99.35
American Century Ultra (Division 31)........................ 11/02/81 -- 23.32% 28.53 40.28
Dreyfus Founders Growth (Division 30)....................... 01/05/62 -- 19.08 29.05 37.92
Neuberger Berman Guardian Trust (Division 29)............... 08/03/93 12.29 -- 14.30 7.57
Putnam Global Growth -- Class A (Division 28)............... 09/01/67 -- 15.33 25.28 63.32
Putnam New Opportunities -- Class A (Division 26)........... 08/31/90 30.97 -- 32.09 68.25
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 11/01/82 -- 23.20 34.14 125.02
Scudder Growth and Income (Division 21)(1).................. 11/13/84 -- 13.20 17.50 5.30
Templeton Foreign -- Class A (Division 32)(2)............... 10/05/82 -- 10.45 12.28 38.62
Vanguard Long-Term Corporate Portfolio (Division 22)**...... 07/09/73 -- 7.40 7.09 (7.02)
Vanguard Long-Term Treasury Portfolio (Division 23)**....... 05/19/86 -- 6.98 7.40 (9.43)
Vanguard Wellington (Division 25)........................... 07/01/29 -- 11.35 16.09 3.32
Vanguard Windsor II (Division 24)........................... 06/24/85 -- 12.59 18.82 (6.78)
</TABLE>
- ---------------
Divisions with an identical inception date as the underlying Funds' inception
date are not reflected in this Table. See preceding 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) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(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.
31
<PAGE> 125
TABLE V
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
DIVISION
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth Fund (Division 15)............................. 07/11/94 173.87% -- 160.02% 6.54%
AGSPC International Government Bond Fund (Division 13)...... 10/01/91 63.46 -- 24.85 (6.70)
AGSPC Money Market Fund (Division 6)........................ 01/16/86 -- 48.53% 23.38 3.92
AGSPC Science & Technology Fund (Division 17)............... 07/11/94 583.53 -- 417.46 99.35
AGSPC Social Awareness Fund (Division 12)................... 10/02/89 -- 345.59 234.19 17.70
AGSPC Stock Index Fund (Division 10)........................ 04/20/87 -- 368.26 233.28 19.61
American Century Ultra (Division 31)........................ 07/01/96 137.55 -- -- 40.28
Dreyfus Founders Growth (Division 30)....................... 07/01/96 121.12 -- -- 37.92
Neuberger Berman Guardian Trust (Division 29)............... 07/01/96 43.18 -- -- 7.57
Putnam Global Growth -- Class A (Division 28)............... 07/01/96 148.26 -- -- 63.32
Putnam New Opportunities -- Class A (Division 26)........... 07/01/96 139.26 -- -- 68.25
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 07/01/96 142.61 -- -- 125.02
Scudder Growth and Income (Division 21)(1).................. 07/01/96 59.45 -- -- 5.30
Templeton Foreign -- Class A (Division 32)(2)............... 07/01/96 48.99 -- -- 38.62
Vanguard Long-Term Corporate (Division 22)**................ 07/01/96 18.76 -- -- (7.02)
Vanguard Long-Term Treasury (Division 23)**................. 07/01/96 19.96 -- -- (9.43)
Vanguard Wellington (Division 25)........................... 07/01/96 53.89 -- -- 3.32
Vanguard Windsor II (Division 24)........................... 07/01/96 57.59 -- -- (6.78)
</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 Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(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.
TABLE VI
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15).................................. 04/29/94 160.85% -- 160.02% 6.54%
AGSPC Science & Technology (Division 17).................... 04/29/94 546.27 417.46 99.35
American Century Ultra (Division 31)........................ 11/02/81 713.67% 250.73 40.28
Dreyfus Founders Growth (Division 30)....................... 01/05/62 473.17 257.97 37.92
Neuberger Berman Guardian Trust (Division 29)............... 08/03/93 110.22 95.06 7.57
Putnam Global Growth -- Class A (Division 28)............... 09/01/67 316.29 208.64 63.32
Putnam New Opportunities -- Class A (Division 26)........... 08/31/90 1,139.69 302.08 68.25
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 11/01/82 705.86 334.25 125.02
Scudder Growth and Income (Division 21)(1).................. 11/13/84 245.57 124.01 5.30
Templeton Foreign -- Class A (Division 32)(2)............... 10/05/82 170.23 78.42 38.62
Vanguard Long-Term Corporate (Division 22)**................ 07/09/73 104.25 40.87 (7.02)
Vanguard Long-Term Treasury (Division 23)**................. 05/19/86 96.34 42.88 (9.43)
Vanguard Wellington (Division 25)........................... 07/01/29 193.04 110.84 3.32
Vanguard Windsor II (Division 24)........................... 06/24/85 227.24 136.81 (6.78)
</TABLE>
- ---------------
Divisions with an identical inception date as the underlying Funds' inception
date are not reflected in this Table. See preceding 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) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(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.
32
<PAGE> 126
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 1999 1998 1997 1996 1995 1994 1993
- ----------------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)(1)...... 6.54% 17.19% 20.01% 18.39% 46.60% 5.33% --
AGSPC International Government Bond
(Division 13)(1).................. (6.70) 16.15 (5.59) 3.56 17.83 3.62 13.28%
AGSPC Money Market (Division
6)(1)............................. 3.92 4.33 4.33 4.17 4.71 2.96 1.87
AGSPC Science & Technology
(Division 17)(1).................. 99.35 40.99 1.76 12.89 60.26 32.09 --
AGSPC Social Awareness (Division
12)(1)............................ 17.70 26.28 32.73 22.96 37.78 (2.22) 7.04
AGSPC Stock Index (Division
10)(1)............................ 19.61 27.39 31.98 21.73 36.15 (0.10) 8.98
American Century Ultra (Division
31)............................... 40.28 33.41 21.95 4.08 -- -- --
Dreyfus Founders Growth (Division
30)............................... 37.92 24.01 25.46 3.05 -- -- --
Neuberger Berman Guardian Trust
(Division 29)..................... 7.57 1.55 16.86 12.17 -- -- --
Putnam Global Growth -- Class A
(Division 28)..................... 63.32 27.73 12.41 5.86 -- -- --
Putnam New Opportunities -- Class A
(Division 26)..................... 68.25 23.37 21.51 (5.14) -- -- --
Putnam OTC & Emerging
Growth -- Class A (Division 27)... 125.02 10.10 9.29 (10.39) -- -- --
Scudder Growth and Income (Division
21)(2)............................ 5.30 5.21 28.99 11.58 -- -- --
Templeton Foreign -- Class A
(Division 32)(3).................. 38.62 (5.63) 5.77 7.68 -- -- --
Vanguard Long-Term Corporate
(Division 22)***.................. (7.02) 8.26 12.52 4.85 -- -- --
Vanguard Long-Term Treasury
(Division 23)***.................. (9.43) 12.04 12.64 4.94 -- -- --
Vanguard Wellington (Division
25)............................... 3.32 10.87 21.85 10.25 -- -- --
Vanguard Windsor II (Division
24)............................... (6.78) 15.13 30.90 12.17 -- -- --
<CAPTION>
ANNUAL CHANGE IN PURCHASE UNIT VALUE FOR THE 12 MONTHS ENDED DECEMBER 31**
--------------------------------
FUND AND DIVISION 1992 1991 1990
- ----------------- -------- -------- --------
<S> <C> <C> <C>
AGSPC Growth (Division 15)(1)...... -- -- --
AGSPC International Government Bond
(Division 13)(1).................. 2.25% 9.09% --
AGSPC Money Market (Division
6)(1)............................. 2.42 4.69 7.04%
AGSPC Science & Technology
(Division 17)(1).................. -- -- --
AGSPC Social Awareness (Division
12)(1)............................ 2.51 26.83 (2.01)
AGSPC Stock Index (Division
10)(1)............................ 5.78 27.91 (4.63)
American Century Ultra (Division
31)............................... -- -- --
Dreyfus 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)(2)............................ -- -- --
Templeton Foreign -- Class A
(Division 32)(3).................. -- -- --
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 1999 1998 1997 1996 1995 1994 1993 1992
- ----------------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)(1)...... 173.87% 157.07% 119.37% 82.79% 54.40% 5.33% -- --
AGSPC International Government Bond
(Division 13)(1).................. 63.46 75.19 50.83 59.76 54.27 30.92 26.35% 11.54%
AGSPC Money Market (Division
6)(1)............................. 48.53 42.93 36.99 31.31 26.05 20.38 16.91 14.77
AGSPC Science & Technology
(Division 17)(1).................. 583.53 242.88 143.20 138.98 111.70 32.09 -- --
AGSPC Social Awareness (Division
12)(1)............................ 345.59 278.59 199.81 125.88 83.70 33.33 36.36 27.40
AGSPC Stock Index (Division
10)(1)............................ 368.26 291.49 207.32 132.85 91.29 40.50 40.64 29.05
American Century Ultra (Division
31)............................... 137.55 69.34 26.93 4.08 -- -- -- --
Dreyfus Founders Growth (Division
30)............................... 121.12 60.33 29.29 3.05 -- -- -- --
Neuberger Berman Guardian Trust
(Division 29)..................... 43.18 33.11 31.08 12.17 -- -- -- --
Putnam Global Growth -- Class A
(Division 28)..................... 148.26 52.01 19.00 5.86 -- -- -- --
Putnam New Opportunities -- Class A
(Division 26)..................... 139.26 42.20 15.27 (5.14) -- -- -- --
Putnam OTC & Emerging
Growth -- Class A (Division 27)... 142.61 7.82 (2.07) (10.39) -- -- -- --
Scudder Growth and Income (Division
21)(2)............................ 59.45 51.42 43.92 11.58 -- -- -- --
Templeton Foreign -- Class A
(Division 32)(3).................. 48.99 7.48 13.89 7.68 -- -- -- --
Vanguard Long-Term Corporate
(Division 22)***.................. 18.76 27.73 17.98 4.85 -- -- -- --
Vanguard Long-Term Treasury
(Division 23)***.................. 19.96 32.45 18.21 4.94 -- -- -- --
Vanguard Wellington (Division
25)............................... 53.89 48.94 34.33 10.25 -- -- -- --
Vanguard Windsor II (Division
24)............................... 57.59 69.05 46.83 12.17 -- -- -- --
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR EACH PERIOD END SINCE DECEMBER 31, 1989**
--------------------
FUND AND DIVISION 1991 1990
- ----------------- -------- --------
<S> <C> <C>
AGSPC Growth (Division 15)(1)...... -- --
AGSPC International Government Bond
(Division 13)(1).................. 9.09% --
AGSPC Money Market (Division
6)(1)............................. 12.05 7.04%
AGSPC Science & Technology
(Division 17)(1).................. -- --
AGSPC Social Awareness (Division
12)(1)............................ 24.28 (2.01)
AGSPC Stock Index (Division
10)(1)............................ 21.99 (4.63)
American Century Ultra (Division
31)............................... -- --
Dreyfus 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)(2)............................ -- --
Templeton Foreign -- Class A
(Division 32)(3).................. -- --
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.
(2) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(3) 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.
33
<PAGE> 127
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*** 1999 1998 1997 1996 1995
- -------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)......................... 6.54% 17.19% 20.01% 18.39% 46.60%
AGSPC Science & Technology (Division 17)........... 99.35 40.99 1.76 12.89 60.26
American Century Ultra (Division 31)............... 40.28 33.41 21.95 12.63 36.43
Dreyfus Founders Growth (Division 30).............. 37.92 24.01 25.46 15.56 44.37
Neuberger Berman Guardian Trust (Division 29)...... 7.57 1.55 16.86 16.74 30.89
Putnam Global Growth -- Class A (Division 28)...... 63.32 27.73 12.41 15.57 13.89
Putnam New Opportunities -- Class A (Division
26)............................................... 68.25 23.37 21.51 9.90 45.05
Putnam OTC & Emerging Growth -- Class A (Division
27)............................................... 125.02 10.10 9.29 3.73 54.62
Scudder Growth and Income (Division 21)(1)......... 5.30 5.21 28.99 20.82 29.75
Templeton Foreign -- Class A (Division 32)(2)...... 38.62 (5.63) 5.77 16.94 10.27
Vanguard Long-Term Corporate (Division 22)****..... (7.02) 8.26 12.52 (0.52) 25.03
Vanguard Long-Term Treasury (Division 23)****...... (9.43) 12.04 12.64 (2.88) 28.70
Vanguard Wellington (Division 25).................. 3.32 10.87 21.85 14.89 31.48
Vanguard Windsor II (Division 24).................. (6.78) 15.13 30.90 22.75 37.31
</TABLE>
<TABLE>
<CAPTION>
ANNUAL CHANGE IN PURCHASE UNIT VALUE FOR THE 12 MONTHS ENDED DECEMBER 31**
--------------------------------------------------------
FUND AND DIVISION*** 1994 1993 1992 1991 1990
- -------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)......................... 0.32% -- -- -- --
AGSPC Science & Technology (Division 17)........... 24.89 -- -- -- --
American Century Ultra (Division 31)............... (4.43) 20.74% 0.40% 84.68% 8.42%
Dreyfus Founders Growth (Division 30).............. (4.09) 24.51 3.42 46.15 (11.28)
Neuberger Berman Guardian Trust (Division 29)...... 0.73 6.99 -- -- --
Putnam Global Growth -- Class A (Division 28)...... (1.63) 30.75 (0.55) 17.02 (9.89)
Putnam New Opportunities -- Class A (Division
26)............................................... 2.50 31.60 24.57 66.09 10.47
Putnam OTC & Emerging Growth -- Class A (Division
27)............................................... 1.44 30.96 11.78 39.66 (10.52)
Scudder Growth and Income (Division 21)(1)......... 1.53 14.37 8.40 26.78 (3.33)
Templeton Foreign -- Class A (Division 32)(2)...... (0.43) 35.67 (0.69) 17.31 (3.76)
Vanguard Long-Term Corporate (Division 22)****..... (6.26) 13.28 8.62 19.61 5.10
Vanguard Long-Term Treasury (Division 23)****...... (7.98) 15.55 6.27 16.18 4.68
Vanguard Wellington (Division 25).................. (1.51) 12.32 6.78 22.32 (3.80)
Vanguard Windsor II (Division 24).................. (2.19) 12.40 10.80 27.30 (10.89)
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR EACH PERIOD END SINCE DECEMBER 31, 1989**
--------------------------------------------------------
FUND AND DIVISION*** 1999 1998 1997 1996 1995
-------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)......................... 160.85% 144.84% 108.93% 74.10% 47.06%
AGSPC Science & Technology (Division 17)........... 546.27 224.18 129.94 125.96 100.16
American Century Ultra (Division 31)............... 713.67 480.01 334.75 256.50 216.52
Dreyfus Founders Growth (Division 30).............. 473.17 315.60 235.13 167.12 131.16
Neuberger Berman Guardian Trust (Division 29)...... 110.22 95.42 92.45 64.68 41.06
Putnam Global Growth -- Class A (Division 28)...... 316.29 154.89 99.55 77.52 53.61
Putnam New Opportunities -- Class A (Division
26)............................................... 1,139.69 636.82 497.26 391.52 347.23
Putnam OTC & Emerging Growth -- Class A (Division
27)............................................... 705.86 258.13 225.29 197.63 186.93
Scudder Growth and Income (Division 21)(1)......... 245.57 228.16 211.92 141.83 100.15
Templeton Foreign -- Class A (Division 32)(2)...... 170.23 94.95 106.57 95.31 67.01
Vanguard Long-Term Corporate (Division 22)****..... 104.25 119.67 102.91 80.33 81.28
Vanguard Long-Term Treasury (Division 23)****...... 96.34 116.77 93.47 71.75 76.85
Vanguard Wellington (Division 25).................. 193.04 183.63 155.81 109.94 82.74
Vanguard Windsor II (Division 24).................. 227.24 251.03 204.89 132.92 89.75
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR EACH PERIOD END SINCE DECEMBER 31, 1989**
--------------------------------------------------------
FUND AND DIVISION*** 1994 1993 1992 1991 1990
-------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)......................... 0.32% -- -- -- --
AGSPC Science & Technology (Division 17)........... 24.89 -- -- -- --
American Century Ultra (Division 31)............... 131.99 142.74% 101.04% 100.23% 8.42%
Dreyfus Founders Growth (Division 30).............. 60.12 66.95 34.09 29.66 (11.28)
Neuberger Berman Guardian Trust (Division 29)...... 7.77 6.99 -- -- --
Putnam Global Growth -- Class A (Division 28)...... 34.88 37.11 4.86 5.44 (9.89)
Putnam New Opportunities -- Class A (Division
26)............................................... 208.32 200.79 128.57 83.48 10.47
Putnam OTC & Emerging Growth -- Class A (Division
27)............................................... 85.57 82.94 39.69 24.97 (10.52)
Scudder Growth and Income (Division 21)(1)......... 54.26 51.93 32.85 22.56 (3.33)
Templeton Foreign -- Class A (Division 32)(2)...... 51.45 52.11 12.12 12.90 (3.76)
Vanguard Long-Term Corporate (Division 22)****..... 44.99 54.67 36.54 25.71 5.10
Vanguard Long-Term Treasury (Division 23)****...... 37.42 49.34 29.24 21.61 4.68
Vanguard Wellington (Division 25).................. 38.99 41.13 25.65 17.67 (3.80)
Vanguard Windsor II (Division 24).................. 38.19 41.28 25.69 13.44 (10.89)
</TABLE>
- ------------
Divisions with an identical inception date as the underlying Funds' inception
date are not reflected in this Table. See preceding 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.
(1) The Scudder Growth and Income Fund adopted its current name and objective
on November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(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 general applicable to Class A shares.
34
<PAGE> 128
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.
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
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> 129
- --------------------------------------------------------------------------------
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.
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), 403(a) and 401(k) 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
36
<PAGE> 130
- --------------------------------------------------------------------------------
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, 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. In
addition, based upon published guides issued by the IRS in 1999, it appears
likely that such limitations, if imposed, would only apply to Non-Qualified
Contracts.
Distributions are taxed differently depending on the program through which
Portfolio Director 2 is offered and the previous tax characterization of the
contributions to which the distribution relates. Generally, the portion of a
distribution which is not considered a return of investment in the Contract is
subject to income tax. For annuity payments, investment in the contract is
recovered ratably over the expected payout period. Special recovery rules might
apply in certain situations.
Amounts subject to income tax may also incur excise 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.
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 1999, the IRS confirmed this opinion,
reversing its previous position by modifying a contrary ruling it had issued in
1981.
In its ruling in 1981, the 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 was
superseded by subsequent legislation (Code Section 817(h)) which specifically
exempts these Qualified Contracts, and the IRS had no viable legal basis or
reason to apply the theory of the 1981 ruling to these Qualified Contracts under
current law.
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.
37
<PAGE> 131
- --------------------------------------------------------------------------------
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. Variable options
incur mortality and expense risk fee charges and may also incur account
maintenance fees and surrender charges. The chart does not reflect the deduction
of any such fees. 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-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> 132
YEAR 2000
- --------------------------------------------------------------------------------
As of March 10, 2000, all of our ultimate parent, American General Corporation's
("AGC") major technology systems, programs, and applications, including those
which rely on third parties, are operating smoothly following our transition
into 2000. We have experienced no interruptions to normal business operations,
including the processing of customer account data and transactions. We will
continue to monitor our technology systems, including critical third party
dependencies, as necessary to maintain our Year 2000 readiness. We do not expect
any future disruptions, if they occur, to have a material effect on the
company's results of operations, liquidity, or financial condition.
Through December 31, 1999, AGC incurred and expensed pretax costs of $98 million
related to Year 2000 readiness, including $18 million in 1999 and $65 million in
1998. In 1999, Year 2000 readiness expenses were included in division earnings.
The 1998 expenses were excluded from division earnings, consistent with the
manner in which we reviewed division results. In addition, we accelerated the
planned replacement of certain systems as part of our Year 2000 plans. The cost
of these replacement systems was immaterial. We do not anticipate incurring any
significant costs in the future to maintain Year 2000 readiness.
39
<PAGE> 133
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 or to the Home Office at the following address: VALIC, Customer
Service A3-01, 2929 Allen Parkway, Houston, TX 77019.
</TABLE>
<PAGE> 134
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information................................. 3
Marketing Information........................... 3
Endorsements and Published Ratings.............. 4
Types of Variable Annuity Contracts................. 5
Federal Tax Matters................................. 5
Tax Consequences of Purchase Payments........... 5
Tax Consequences of Distributions............... 7
Special Tax Consequences -- Early
Distribution.................................. 8
Special Tax Consequences -- Required
Distributions................................. 9
Tax Free Rollovers, Transfers and Exchanges..... 10
Exchange Privilege.................................. 10
Exchanges From Portfolio Director............... 11
Exchanges From Independence Plus Contracts...... 11
Exchanges From V-Plan Contracts................. 12
Exchanges From SA-1 and SA-2 Contracts.......... 13
Exchanges From Impact Contracts................. 15
Exchanges From Compounder Contracts............. 16
Information Which May Be Applicable To Any
Exchange...................................... 16
Calculation of Surrender Charge..................... 18
Illustration of Surrender Charge on Total
Surrender..................................... 18
Illustration of Surrender Charge on a 10%
Partial Surrender Followed by a Full
Surrender..................................... 18
Purchase Unit Value................................. 19
Illustration of Calculation of Purchase Unit
Value......................................... 19
Illustration of Purchase of Purchase Units...... 19
Performance Calculations............................ 19
AGSPC Money Market Division Yields.............. 19
Calculation of Current Yield for AGSPC Money
Market Division Six........................... 19
Illustration of Calculation of Current Yield for
AGSPC Money Market Division Six............... 19
Calculation of Effective Yield for AGSPC Money
Market Division Six........................... 20
Illustration of Calculation of Effective Yield
for AGSPC Money Market Division Six........... 20
Standardized Yield for Bond Fund Divisions...... 20
Calculation of Standardized Yield for Bond Fund
Divisions..................................... 20
Illustration of Calculation of Standardized
Yield for Bond Fund Divisions................. 20
Calculation of Average Annual Total Return...... 21
Calculation of MVA Option....................... 21
Performance Information............................. 22
Hypothetical $10,000 Account Value and
Cumulative Return as Compared to Benchmark
Tables........................................ 22
Performance Compared to Market Indices.......... 22
AGSPC Growth Division Fifteen Performance
Compared to S&P 500 Index..................... 24
AGSPC International Government Bond Division
Thirteen Performance Compared to Salomon
Brothers Non-U.S. Dollar World Government Bond
Index......................................... 24
</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......................................... 25
AGSPC Science & Technology Division Seventeen
Performance Compared to S&P 500 Index......... 25
AGSPC Social Awareness Division Twelve
Performance Compared to S&P 500 Index......... 26
AGSPC Stock Index Division Ten Performance
Compared to S&P 500 Index..................... 26
American Century Ultra Division Thirty-one
Compared to S&P 500 Index and NASDAQ Composite
Index......................................... 27
Dreyfus Founders Growth Division Thirty Compared
to S&P 500 Index.............................. 28
Neuberger Berman Guardian Trust Division
Twenty-nine Compared to S&P 500 Index......... 28
Putnam Global Growth -- Class A Division
Twenty-eight Compared to MCSI All Country
World Free Index and S&P 500 Index............ 29
Putnam New Opportunities -- Class A Division
Twenty-six Compared to S&P 500 Index.......... 30
Putnam OTC & Emerging Growth -- Class A Division
Twenty-seven Compared to Russell 2000 Index
and S&P 500 Index............................. 30
Scudder Growth and Income Division Twenty-one
Compared to S&P 500 Index..................... 31
Templeton Foreign Division Thirty-two Compared
to EAFE Index................................. 31
Vanguard Long-Term Corporate Division Twenty-two
Compared to Lehman Long Term Corporate AA or
Better Bond Index............................. 32
Vanguard Long-Term Treasury Division
Twenty-three Compared to Lehman Brothers U.S.
Treasury Long-Term Index...................... 32
Vanguard Wellington Division Twenty-five
Compared to S&P 500 Index and Merrill Lynch
Corporate Master Index........................ 33
Vanguard Windsor II Division Twenty-four
Compared to S&P 500 Index..................... 34
Payout Payments..................................... 35
Assumed Investment Rate......................... 35
Amount of Payout Payments....................... 35
Payout Unit Value............................... 35
Illustration of Calculation of Payout Unit
Value......................................... 36
Illustration of Payout Payments................. 36
Distribution of Variable Annuity Contracts.......... 37
Experts............................................. 37
Comments on Financial Statements.................... 37
</TABLE>
<PAGE> 135
Please tear off, complete and return the form below to one of our Regional
Offices. 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> 136
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
[VALIC LOGO]
PRINTED MATTER
PRINTED IN U.S.A. VA 9875-20 REV 5/00
(C)The Variable Annuity Life Insurance Company, Houston, Texas
Recycled Paper LOGO
<PAGE> 137
[Momento Photo]
PORTFOLIO DIRECTOR 2
SEPARATE ACCOUNT A
FOR SERIES 2.1.40-2.12.40
Prospectus
May 1, 2000
Units of Interest Under Group and
Individual Variable Annuity Contracts
Portfolio Director 2
VALIC
AN AMERICAN
GENERAL COMPANY
<PAGE> 138
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
PORTFOLIO DIRECTOR, PORTFOLIO DIRECTOR 2, PORTFOLIO DIRECTOR PLUS
SUPPLEMENT ISSUED MAY 1, 2000 TO THE PROSPECTUS DATED MAY 1, 2000
The Variable Annuity Life Insurance Company (the "Company") filed an application
with the Securities and Exchange Commission ("SEC") as of March 31, 2000
requesting an order allowing the Company to replace the shares of American
General Domestic Bond Fund of American General Series Portfolio Company 3
("AGSPC 3"), T. Rowe Price Small-Cap Stock Fund, Dreyfus Variable Investment
Fund -- Small Cap Portfolio, Scudder Growth and Income Fund, Neuberger Berman
Guardian Trust and Dreyfus Founders Growth Fund, each of which is a Variable
Investment Option currently available under our group and individual variable
annuity contracts, with shares of comparable series of AGSPC 3 and newly created
series of American General Series Portfolio Company ("AGSPC").
The Company believes that the proposed substitutions are in the best interest of
contract holders. In each case, the Substitute Series will have substantially
the same investment objective, practices and restrictions as the Replaced
Series. In the case of Dreyfus Variable Investment Fund -- Small Cap Portfolio
and T. Rowe Price Small-Cap Stock Fund, Inc., the Substitute Series will have
two sub-advisers, one of which is the Replaced Series' current investment
adviser, T. Rowe Price Associates, Inc., and an additional sub-adviser, Founders
Asset Management LLC, which has an outstanding long-term investment performance
record. In the case of Dreyfus Founders Growth Fund, the Substitute Series will
have the Replaced Series' current investment adviser, Founders Asset Management
LLC, as its sub-adviser. In the case of the other Replaced Series, the
Substitute Series will have as sub-advisers new managers with superior long-term
investment performance records in their respective asset classes.
The proposed substitutions and respective sub-advisers are:
<TABLE>
<CAPTION>
REPLACED SERIES SUBSTITUTE SERIES
<S> <C> <C>
Dreyfus Variable Investment Fund -- -- AGSPC American General Select Small-Cap Fund (T. Rowe
Small-Cap Portfolio Price Associates, Inc. and Founders Asset Management
LLC)
T. Rowe Price Small-Cap Stock Fund, Inc. -- AGSPC American General Select Small Cap Fund (T. Rowe
Price Associates, Inc. and Founders Asset Management
LLC)
Scudder Growth and Income Fund -- AGSPC American General American Century Income & Growth
Fund (American Century Investment Management, Inc.)
Neuberger Berman Guardian Trust -- AGSPC American General American Century Income & Growth
Fund (American Century Investment Management, Inc.)
Dreyfus Founders Growth Fund -- AGSPC American General Founders Growth Fund (Founders
Asset Management LLC)
AGSPC 3 American General Domestic Bond Fund -- AGSPC 3 American General Core Bond Fund (American
General Investment Management, L.P.)
</TABLE>
- --------------------------------------------------------------------------------
You should note that:
- - No action is required on your part. You will not need to vote a proxy, file a
new election, or take any other action if the SEC approves the substitutions.
- - The elections you have on file for allocating your account value, premium
payments and deductions will remain unchanged until you direct us otherwise.
- - You will not bear any expenses relating to the substitutions.
- - Although for two of the substitutions (Dreyfus Variable Investment
Fund -- Small Cap Portfolio and Scudder Growth and Income Fund) total contract
holder expenses are expected to be slightly higher for the Replaced Series,
the substitutions will result in a change to a sub-adviser with a superior
performance record.
- - On the effective date of the substitution, your account value in the Variable
Account Option will be the same as before the substitution.
- - The substitution will have no tax consequences for you.
The Company expects to complete the substitutions before October 2000. The newly
created series of AGSPC will commence operations at the time of the
substitutions. Completion of the substitutions is conditioned upon obtaining the
approval of the SEC and state insurance authorities, if applicable. Of course,
you may transfer amounts in your Contract among the Variable Investment Options
and Fixed Options, as usual. The substitutions will not be treated as a transfer
for purposes of the transfer provisions of your Contract. In addition, any
transfer charge that might otherwise be imposed will be waived from the date of
this Notice through the date that is 30 days after the substitutions.
We will send you a prospectus for AGSPC 3 and the new series of AGSPC, and
notice of the actual date of the substitutions, after we receive SEC approval.
You will receive confirmation when the substitution is complete.
Should you have any questions, you may contact us at 1-800-448-2542 (selection
1).
<PAGE> 139
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, 2000
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
one or more Fixed Account Options and/or an array of 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:
FIXED ACCOUNT OPTIONS: Fixed Account Plus
Short-Term Fixed Account
Multi-Year Enhanced Fixed Account*
VARIABLE ACCOUNT OPTIONS**
<TABLE>
<S> <C> <C>
American General Series Portfolio Dreyfus Founders Funds, Inc.: Scudder Kemper Investments, Inc.:
Company (AGSPC): Dreyfus 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>
* Available approximately May 22, 2000, subject to state approval.
** 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, 2000, contains additional
information about Portfolio Director 2 and is part of this prospectus. For a
free copy 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 SEC 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> 140
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ABOUT THE PROSPECTUS.......................... 1
FEE TABLE..................................... 2
SUMMARY....................................... 5
SELECTED PURCHASE UNIT DATA................... 9
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
PURCHASE PERIOD............................... 11
Purchase Payments........................ 11
Purchase Units........................... 12
Calculation of Purchase Unit Value....... 12
Choosing Investment Options.............. 12
Fixed Account Options............... 12
Variable Account Options............ 13
Stopping Purchase Payments............... 13
TRANSFERS BETWEEN INVESTMENT OPTIONS.......... 14
During the Purchase Period............... 14
During the Payout Period................. 14
Communicating Transfer or Reallocation
Instructions........................... 14
Effective Date of Transfer............... 15
Market Timing............................ 15
FEES AND CHARGES.............................. 15
Account Maintenance Fee.................. 15
Surrender Charge......................... 15
Amount of Surrender Charge.......... 15
10% Free Withdrawal................. 15
Exceptions to Surrender Charge...... 16
Premium Tax Charge....................... 16
Separate Account Charges................. 16
Fund Annual Expense Charge............... 17
Other Tax Charges........................ 17
Reduction or Waiver of Account
Maintenance Fee, Surrender, Mortality
and Expense Risk Fee or Administration
and Distribution Fee Charges........... 17
Separate Account Expense
Reimbursement.......................... 17
Market Value Adjustment.................. 18
PAYOUT PERIOD................................. 18
Fixed Payout............................. 18
Variable Payout.......................... 18
Combination Fixed and Variable Payout.... 18
Payout Date.............................. 19
Payout Options........................... 19
Enhancements to Payout Options........... 19
Payout Information....................... 19
SURRENDER OF ACCOUNT VALUE.................... 20
When Surrenders are Allowed.............. 20
Amount That May Be Surrendered........... 20
Surrender Restrictions................... 20
Partial Surrenders....................... 20
Systematic Withdrawals................... 20
Distributions Required By Federal Tax
Law.................................... 21
EXCHANGE PRIVILEGE............................ 21
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Restrictions on Exchange Privilege....... 21
Taxes and Conversion Costs............... 21
Surrender Charges........................ 21
Exchange Offers for Contracts Other Than
Portfolio Director and Portfolio
Director 2............................. 22
Exchange Offer for Portfolio Director and
Portfolio Director 2................... 22
Comparison of Contracts.................. 22
Features of Portfolio Director 2......... 22
Agents' and Managers' Retirement Plan
Exchange Offer......................... 22
DEATH BENEFITS................................ 23
Beneficiary Information.................. 23
Special Information for Individual
Non-Tax Qualified Contracts............ 24
During the Purchase Period............... 24
Interest Guaranteed Death Benefit... 24
Standard Death Benefit.............. 24
During the Payout Period................. 24
HOW TO REVIEW INVESTMENT PERFORMANCE OF
SEPARATE ACCOUNT DIVISIONS.................. 25
Types of Investment Performance
Information Advertised................. 25
Total Return Performance Information... 25
Standard Average Annual Total Return... 25
Nonstandard Average Annual Total
Return................................. 25
Cumulative Total Return................ 25
Annual Change in Purchase Unit Value... 25
Cumulative Change in Purchase Unit
Value............................... 26
Total Return Based on Different
Investment Amounts.................. 26
An Assumed Account Value of $10,000.... 26
Yield Performance Information............ 26
AGSPC Money Market Division............ 26
Divisions Other Than The AGSPC Money
Market Division..................... 26
Performance Information: Average Annual
Total Return, Cumulative Return and
Annual and Cumulative Change in
Purchase Unit Value Tables............. 26
OTHER CONTRACT FEATURES....................... 32
Changes That May Not Be Made............. 32
Change of Beneficiary.................... 32
Contingent Owner......................... 32
Cancellation -- The 20 Day "Free Look"... 32
We Reserve Certain Rights................ 32
Relationship to Employer's Plan.......... 32
VOTING RIGHTS................................. 32
Who May Give Voting Instructions......... 32
Determination of Fund Shares Attributable
to Your Account........................ 33
During Purchase Period................. 33
During Payout Period or after a Death
Benefit Has Been Paid............... 33
How Fund Shares Are Voted................ 33
FEDERAL TAX MATTERS........................... 33
Type of Plans............................ 33
Tax Consequences in General.............. 34
Effect of Tax-Deferred Accumulations..... 34
YEAR 2000..................................... 36
</TABLE>
(i)
<PAGE> 141
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 14
Annuitant 23
Assumed Investment Rate 18
Beneficiary 23
Contract Owner 24
Divisions 25
Fixed Account Options 24
Home Office 14
Mutual Fund or Fund 10
Participant 01
Participant Year 15
Payout Period 14
Payout Unit 18
Purchase Payments 11, 25
Purchase Period 14
Purchase Unit 11
VALIC Separate Account A 32
Variable Account Options 11, 24
</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> 142
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) 0.25 0.60 (0.21%) 0.64
Dreyfus Founders Growth Fund(4) 0.25 0.60 (0.25) 0.60
Neuberger Berman Guardian Trust
Fund(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
Templeton Foreign Fund -- Class
A(4) 0.25 0.60 (0.25) 0.60
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 Wellington Fund 0.25 0.60 -- 0.85
Vanguard Windsor II Fund 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% -- 0.06% 0.86%
AGSPC International Government Bond Fund 0.50 -- 0.07 0.57
AGSPC Money Market Fund 0.50 -- 0.07 0.57
AGSPC Science & Technology Fund 0.90 -- 0.06 0.96
AGSPC Social Awareness Fund 0.50 -- 0.07 0.57
AGSPC Stock Index Fund 0.26 -- 0.06 0.32
American Century Ultra Fund(8) 1.00 -- -- 1.00
Dreyfus Founders Growth Fund(8) 0.67 0.25% 0.16 1.08
Neuberger Berman Guardian Trust
Fund(7)(8) 0.84 -- 0.04 0.88
Putnam Global Growth Fund -- Class A
Shares 0.63 0.25 0.22 1.10
Putnam New Opportunities Fund -- Class A
Shares 0.48 0.25 0.20 0.93
Putnam OTC & Emerging Growth Fund --
Class A Shares 0.55 0.25 0.18 0.98
Scudder Growth and Income Fund 0.45 -- 0.35 0.80
Templeton Foreign Fund -- Class A(8) 0.61 0.25 0.27 1.13
Vanguard Long-Term Corporate Fund(8) 0.28 -- 0.02 0.30
Vanguard Long-Term Treasury Fund(8) 0.25 -- 0.03 0.28
Vanguard Wellington Fund(8) 0.28 -- 0.02 0.30
Vanguard Windsor II Fund(8) 0.35 -- 0.02 0.37
</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.
2
<PAGE> 143
- --------------------------------------------------------------------------------
(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 certain payments received 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.
(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 1999 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 Dreyfus Founders Growth Fund
was formerly known as the Founders Growth 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> 144
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 $ 82 $179
AGSPC International Government Bond Division 13 12 38 67 147
AGSPC Money Market Division 6 12 38 67 147
AGSPC Science & Technology Division 17 16 51 87 190
AGSPC Social Awareness Division 12 12 38 67 147
AGSPC Stock Index Division 10 10 31 53 118
American Century Ultra Division 31 17 53 91 199
Dreyfus Founders Growth Division 30 17 54 93 203
Neuberger Berman Guardian Trust
Division 29 15 48 83 182
Putnam Global Growth -- Class A Shares Division
28 18 55 94 206
Putnam New Opportunities -- Class A Shares
Division 26 16 50 86 187
Putnam OTC & Emerging Growth -- Class A Shares
Division 27 16 51 88 193
Scudder Growth and Income Division 21 15 46 79 173
Templeton Foreign -- Class A Division 32 18 56 96 209
Vanguard Long-Term Corporate Division 22 10 30 52 116
Vanguard Long-Term Treasury Division 23 9 29 51 114
Vanguard Wellington Division 25 12 38 65 145
Vanguard Windsor II Division 24 13 40 69 153
</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 $132 $179
AGSPC International Government Bond Division 13 59 88 117 147
AGSPC Money Market Division 6 59 88 117 147
AGSPC Science & Technology Division 17 63 100 137 190
AGSPC Social Awareness Division 12 59 88 117 147
AGSPC Stock Index Division 10 57 81 103 118
American Century Ultra Division 31 64 103 141 199
Dreyfus Founders Growth Division 30 64 104 143 203
Neuberger Berman Guardian Trust
Division 29 62 98 133 182
Putnam Global Growth -- Class A Shares Division 28 64 104 144 206
Putnam New Opportunities -- Class A Shares Division
26 63 99 136 187
Putnam OTC & Emerging Growth -- Class A Shares
Division 27 63 101 138 193
Scudder Growth and Income Division 21 61 96 129 173
Templeton Foreign -- Class A Division 32 64 105 146 209
Vanguard Long-Term Corporate Division 22 56 80 102 116
Vanguard Long-Term Treasury Division 23 56 79 101 114
Vanguard Wellington Division 25 59 88 115 145
Vanguard Windsor II Division 24 60 90 119 153
</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> 145
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 three Fixed Account Options. There may be certain limits on how many
investment options you may invest in at any one time.(1) 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.
- --------------------------------------------------------------------------------
<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
------------------------------------------------------------------------------------------------------------
Multi-Year Enhanced Multi-year guaranteed interest income -- --
Fixed
Account(1)
- -------------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS OBJECTIVE ADVISER SUBADVISER
- -------------------------------------------------------------------------------------------------------------------------
INDEX AGSPC Stock Seeks long-term capital growth through VALIC N/A(2)
EQUITY Index investment in common stocks that, as a
FUND Fund(3) group, are expected to provide
investment results closely corresponding
to the performance of the Standard &
Poor's 500 Stock Index*.
- -------------------------------------------------------------------------------------------------------------------------
ACTIVELY AGSPC Growth Seeks long-term growth of capital VALIC Wellington
MANAGED Fund through investment primarily in equity Management
EQUITY securities. Company, LLP(4)
------------------------------------------------------------------------------------------------------------
FUNDS American Century Seeks capital growth through investments American Century N/A
Ultra Fund primarily in common stocks that are Investment Management,
considered to have better-than-average Inc.
prospects for appreciation.
------------------------------------------------------------------------------------------------------------
Dreyfus Founders Seeks long-term growth of capital by Founders Asset N/A
Growth investing primarily in common stocks of Management LLC
Fund well-established, high-quality growth
companies.
------------------------------------------------------------------------------------------------------------
Neuberger Berman Seeks capital appreciation and Neuberger Berman Neuberger
Guardian Trust secondarily, current income by investing Management Inc. Berman, LLC
primarily in common stocks of
large-capitalization companies.
------------------------------------------------------------------------------------------------------------
Putnam Global Seeks capital appreciation. Current Putnam Investment N/A
Growth Fund -- Class A income is only an incidental Management Inc.
Shares 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.
------------------------------------------------------------------------------------------------------------
Putnam New Opportunities Seeks long-term capital appreciation. Putnam Investment N/A
Fund -- Class A Shares Current income is only an incidental Management Inc.
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.
------------------------------------------------------------------------------------------------------------
Putnam OTC & Seeks capital appreciation by investing Putnam Investment N/A
Emerging Growth primarily in common stocks traded in the Management Inc.
Fund -- Class A Shares over-the-counter 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.
------------------------------------------------------------------------------------------------------------
Scudder Growth Seeks long-term growth of capital, Scudder Kemper N/A
and Income Fund current income and growth of income by Investments, Inc.
investing primarily in common stocks,
preferred stocks, and securities
convertible into common stocks of
companies which offer the prospect for
growth of earning while paying current
dividends.
------------------------------------------------------------------------------------------------------------
(1) The Multi-Year Enhanced Fixed Account Option is also referred to in this prospectus as the Market Value Adjustment
("MVA") Option. For purposes of this limitation, each MVA Band under the Multi-Year Enhanced Fixed Option will count
as a separate investment option. An MVA Band is established for each separate investment for a new guarantee period.
The minimum allocation to an MVA Band, as described in the Contract, may be changed from time to time by the
Company. Availability of this Option is subject to regulatory approval within the state in which your Contract is
issued. It may not be available under your Contract. See MVA Option herein.
(2) Bankers Trust Company ("Bankers Trust") previously served as sub-adviser to the AGSPC Stock Index Fund. VALIC
re-assumed direct management of the Fund's investment portfolio on October 1, 1999.
(3) "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"). 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.
(4) Wellington Management Company, LLP replaced T. Rowe Price Associates, Inc. as sub-adviser to the Fund effective
September 1, 1999. The investment objective was also changed at that time.
</TABLE>
5
<PAGE> 146
SUMMARY -- (CONTINUED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS OBJECTIVE ADVISER
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Templeton Seeks long-term capital growth by investing primarily in Templeton Global
Foreign Fund -- Class A the equity securities of companies outside the United Advisors Limited
States, including emerging markets.
-----------------------------------------------------------------------------------------------------------
Vanguard Seeks to provide long-term growth of capital by investing Vanguard
Windsor II Fund 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.
- -------------------------------------------------------------------------------------------------------------------------------
BALANCED Vanguard Seeks to conserve capital and provide moderate long-term Wellington Management
FUND Wellington growth in capital and income by investing approximately 60% Company, LLP
Fund 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.
- -------------------------------------------------------------------------------------------------------------------------------
INCOME AGSPC International Seeks high current income through investments primarily in VALIC
FUNDS Government investment grade debt securities issued or guaranteed by
Bond Fund foreign governments.
-----------------------------------------------------------------------------------------------------------
Vanguard Long-Term Seeks a high level of current income consistent with the Wellington Management
Corporate Fund maintenance of principal and liquidity by investing in a Company, LLP
diversified portfolio of investment grade corporate and
Government bonds.
-----------------------------------------------------------------------------------------------------------
Vanguard Long-Term Seeks a high level of current income consistent with the Vanguard
Treasury maintenance of principal and liquidity by investing at
least 85% of its total assets in long-term securities
backed by the full faith and credit of the U.S. Government.
- -------------------------------------------------------------------------------------------------------------------------------
SPECIALTY AGSPC Science & Seeks long-term growth of capital through investment VALIC
FUNDS Technology primarily in the common stocks and equity-related
Fund securities of companies that are expected to benefit from
the development, advancement and use of science and
technology.
-----------------------------------------------------------------------------------------------------------
AGSPC Social Seeks growth of capital through investment, primarily in VALIC
Awareness common stocks, in companies which meet the social criteria
Fund established for the Fund.
- -------------------------------------------------------------------------------------------------------------------------------
MONEY AGSPC Money Seeks liquidity, protection of capital and current income VALIC
MARKET Market through investments in short-term money market instruments.
FUND Fund
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SUBADVISER
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
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>
6
<PAGE> 147
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.
Amounts invested in an MVA Option may be transferred to another investment
option at the end of an MVA term without application of a market value
adjustment.
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 from an MVA Option prior to the end of the applicable MVA term will
also be subject to a market value adjustment unless an exception applies. This
may increase or reduce the amount withdrawn. However, the market value
adjustment will not reduce the amount invested in the MVA Option below the
guaranteed amount.
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 may, in its discretion, reimburse to certain Divisions some or all
of the 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
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> 148
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
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. The minimum amount to establish a new Multi-Year Enhanced Fixed
Option guarantee period (MVA Band), as described in the Contract, may be changed
from time to time by the Company.
8
<PAGE> 149
Selected Purchase Unit Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JANUARY 2,
DECEMBER 31, 1999 DECEMBER 31, 1998 1998
------------------------- -------------------- ---------------
PURCHASE PURCHASE PURCHASE PURCHASE PURCHASE
UNIT VALUES UNIT UNITS UNIT UNIT
IN FORCE VALUES IN FORCE VALUE VALUE(1)
----------- ----------- -------- --------- ---------------
<S> <C> <C> <C> <C> <C>
AGSPC Growth Division 15.................................... 3,034,597 $2.638280 3,570 $2.471473 $ 2.104727
AGSPC International Government Bond Division 13............. 308,660 1.661837 1,531 1.777571 1.527262
AGSPC Money Market Division 6............................... 7,687,167 1.909470 475 1.833793 1.754106
AGSPC Science & Technology Division 17...................... 3,286,480 6.536543 6,377 3.272354 2.316348
AGSPC Social Awareness Division 12.......................... 631,193 4.596034 1,451 3.897214 3.080009
AGSPC Stock Index Division 10............................... 11,637,991 5.981762 30,811 4.991135 3.910065
American Century Ultra Division 31.......................... 1,613,349 2.527648 23,002 1.798208 1.345142
Dreyfus Founders Growth Division 30......................... 23,525,351 2.316600 12,861 1.676366 1.349043
Neuberger Berman Guardian Trust Division 29................. 112,799 1.528673 253 1.418252 1.393834
Putnam Global Growth -- Class A Division 28................. 7,494,551 2.603644 5,760 1.591007 1.243031
Putnam New Opportunities -- Class A Division 26............. 21,386,431 2.459834 10,797 1.459115 1.180356
Putnam OTC & Emerging Growth -- Class A Division 27......... 1,605,024 2.542500 3,073 1.127653 1.022171
Scudder Growth and Income Division 21....................... 2,230,357 1.670148 3,163 1.582856 1.501484
Templeton Foreign -- Class A Division 32.................... 503,020 1.560956 2,604 1.123840 1.188439
Vanguard Long-Term Corporate Division 22.................... 3,874,406 1.267698 883 1.360696 1.254327
Vanguard Long-Term Treasury Division 23..................... 1,466,945 1.256142 7,820 1.384079 1.232803
Vanguard Wellington Division 25............................. 13,813,418 1.641601 9,214 1.585688 1.427280
Vanguard Windsor II Division 24............................. 18,903,967 1.653581 29,953 1.770257 1.534466
</TABLE>
- ------------
(1) 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.
9
<PAGE> 150
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.
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
American General Distributors, Inc. (the "Distributor"), 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.
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
The Distributor's
address is
2929 Allen Parkway,
Houston, Texas 77019.
For more information
about the Distributor
see "Distribution of Variable
Annuity Contracts" in
the Statement of
Additional Information
10
<PAGE> 151
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. You may be
subject to further limits on how many options you may be invested in at any one
time or how many of the options you are invested in may be involved in certain
transactions at any one time. 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 and, for 2 of such funds, have one of the following sub-advisers:
Wellington Management Company, LLP and T. Rowe Price Associates, Inc.
- - American Century Mutual Funds, Inc. -- offers 1 fund for which American
Century Investment Management, Inc. serves as investment adviser.
- - Dreyfus Founders Funds, Inc. -- offers 1 fund for which Founders Asset
Management LLC serves as investment adviser. The Funds were formerly known as
Founders Funds, Inc.
- - 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.
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
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.
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.
11
<PAGE> 152
- --------------------------------------------------------------------------------
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 Money Market Division or other investment option
chosen by your employer. If your employer chooses another investment option
other than the Money Market Division, the value of your investment may
fluctuate and you could lose money. 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.)
Once we have established your account and have applied your initial Purchase
Payment as described above, any subsequent Purchase Payment that we receive at
our Home Office before the close of the Exchange will be credited the same
business day. 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, it 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.
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 21 investment options offered in Portfolio Director 2. This includes 3
Fixed Account Options and 18 Variable Account Options. Unless provided
otherwise, you
may select and combine up to 7 of the 21 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
The Fixed Account Plus and the Short Term Fixed Account are part of the
Company's general assets. The MVA Option may be invested in either the general
assets of the Company or in a Separate Account of the Company, depending upon
state requirements. You may allocate all or a
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portion of your Purchase Payment to the Fixed Account Options listed in the
"Summary" section 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. With the exception of a market
value adjustment which generally will be applied to withdrawals or transfers
from an MVA Option prior to the end of an MVA term, we bear the entire
investment risk for the Fixed Account Options. 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. The minimum amount to establish each new Multi-Year Enhanced Fixed
Option guarantee period (MVA Band), as described in the Contract, may be changed
from time to time by the Company.
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)
* This value may be subject to a market value adjustment under the MVA
Option.
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 "Summary" and "Variable Account Options" sections in this
prospectus and in each Fund's 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.
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<PAGE> 154
TRANSFERS BETWEEN INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
You may transfer all or part of your Account Value between the various Fixed
Account and Variable Account Options in Portfolio Director 2 without a charge.
Transfer instructions may be made either in writing or by telephone as discussed
below. Transfers may be made during the Purchase Period or during the Payout
Period. We reserve the right to limit transfers as discussed below. Your
employer's plan may also limit your rights to transfer.
DURING THE PURCHASE PERIOD
During the Purchase Period, transfers may be made between Portfolio Director 2's
Fixed Account Options and Variable Account Options.
We currently permit transfers between Variable Account Options or from Variable
Account Options to Fixed Account Options, at any time. We may, however, limit
the number of transfers you can make.
Transfers are also permitted from the Fixed Account Options subject to the
following limitations:
<TABLE>
<CAPTION>
FIXED OTHER
ACCOUNT OPTION VALUE FREQUENCY RESTRICTIONS
- -------------- ------------- ----------- ----------------
<S> <C> <C> <C>
Fixed Account
Plus: Up to 20% per At any time None (1)
contract year
100% At any time If Account Value
is
less than or
equal
to $500
Short-Term
Fixed
Account: Up to 100% At any time 90-day Holding
Period If
transfer
was previously
made
into Short-Term
Fixed
Account.(2)
Multi-Year Up to 100% At any time Withdrawals or
Enhanced Transfers
Fixed subject to
Account(3): market value
adjustment if
prior to the end
of an MVA term.
Each MVA Band
will require a
minimum transfer
amount as
described in the
Contract.(4)
</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.
(3) The MVA Option may not be available unless it has been selected as an option
for your employer's retirement plan.
(4) The minimum transfer amount may be changed from time to time by the Company.
From time to time we may waive the 20% transfer restriction on Fixed Account
Plus for transfers to the Multi-Year Enhanced Fixed Account or to other
investment options.
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). All transfers to or from the
MVA Option will require written instruction.
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.
ACCOUNT VALUE -- the total
sum of your Fixed Account
and/or Variable Account
Options that have not yet
been applied to your Payout
Payments.
PAYOUT PERIOD -- the time
that starts when you begin to
withdraw your money in a
steady stream of 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.
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<PAGE> 155
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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.
MARKET TIMING
The Contracts are not designed for professional market timing organizations or
other entities using programmed and frequent transfers. We reserve the right at
any time and without prior notice to any party to terminate, suspend, or modify
our policies or procedures regarding transfer requests.
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.
In addition, certain charges may apply to the MVA Option which are discussed at
the end of this section.
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
PARTICIPANT YEAR -- the first
twelve month period and
then each yearly anniversary
of that period following the
issue date of the contract or
certificate.
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<PAGE> 156
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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 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.
VALIC may waive any otherwise applicable surrender charge if you reinvest the
surrender proceeds in another VALIC insurance product. You will, however, be
subject to a surrender charge in the newly acquired product under the same terms
and conditions as the original product. For purposes of calculating any
surrender charge due, you will be considered to have acquired the new product as
of the date you acquired the original product.
The surrender charge may also 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
16
<PAGE> 157
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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 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 administrative and shareholder services it
provides to the underlying Fund. The Company may, in its discretion, apply some
or all of these payments to reduce its charges to the Division investing in that
Fund. In addition, the Company currently reimburses certain Divisions a portion
of the Company's administration and distribution fee. Such reimbursement
arrangements are, however, voluntary and may be changed by the Company at any
time. See the Fee Table in this prospectus for an identification of those Funds
for which a reimbursement applies and the amount of the reimbursement.
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<PAGE> 158
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MARKET VALUE ADJUSTMENT
Under the MVA Option you may establish one or more MVA Bands with a minimum
amount, as described in the Contract, per MVA Band in states in which the MVA
Option has been approved. The Company may change the minimum from time to time.
Each MVA Band will be guaranteed to receive a stated rate of interest through
the end of the selected MVA term. We guarantee your MVA Option will earn at
least the lowest minimum interest rate applicable to any of the fixed interest
options in the contract. A withdrawal will generally be subject to a surrender
charge if it exceeds the amount of any free withdrawal amount permitted under
your contract. Withdrawals or transfers from an MVA Band prior to the end of the
MVA term will be subject to a market value adjustment, unless an exception
applies. This adjustment may be positive or negative, based upon the differences
in selected interest rates at the time the MVA Band was established and at the
time of the withdrawal. This adjustment will not apply upon the Owner's death,
or if the Owner is not a natural person, upon the death of the Annuitant. This
adjustment applies independently from surrender charges, and can still apply to
a 10% Free Withdrawal. The market value adjustment may be waived for
distributions that are required under your contract. It will also be waived for
30 days following the end of an MVA term. Loans are not available from the MVA
Option. Please review your contract for additional information on the MVA
Option.
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 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> 159
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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.
- 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> 160
SURRENDER OF ACCOUNT VALUE
- --------------------------------------------------------------------------------
WHEN SURRENDERS ARE ALLOWED
You may withdraw all or part of your Account Value at any time before the Payout
Period begins if:
- allowed under federal and state law; and
- allowed under your employer's plan.
For an explanation of charges that may apply if you surrender your Account
Value, see "Fees and Charges" in this prospectus.
AMOUNT THAT MAY BE SURRENDERED
The amount that may be surrendered at any time can be determined as follows:
<TABLE>
<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, no surrender or partial
surrender will be allowed except attainment of age 70 1/2, retirement or other
termination of employment 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
20
<PAGE> 161
- --------------------------------------------------------------------------------
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.
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. If you elect to exercise one of these
exchange offers, you should contact any of our Regional Offices. 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 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 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.
21
<PAGE> 162
- --------------------------------------------------------------------------------
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.
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.
22
<PAGE> 163
- --------------------------------------------------------------------------------
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 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.
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
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.
23
<PAGE> 164
- --------------------------------------------------------------------------------
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.
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.
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, Short-Term
Fixed Account and Multi-Year
Enhanced 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.
24
<PAGE> 165
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 or life insurance products 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, 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 Total 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, 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> 166
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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, 1999 was 4.71%.
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, 1999 was 4.82%.
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 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.
26
<PAGE> 167
TABLE I
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 31, 1999)*
<TABLE>
<CAPTION>
DIVISION
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth Fund (Division 15)............................. 07/11/1994 20.38% -- 20.75% 1.90%
AGSPC International Government Bond Fund (Division 13)...... 10/01/1991 6.27 -- 3.83 (10.76)
AGSPC Money Market Fund (Division 6)........................ 01/16/1986 -- 4.16% 3.57 (0.61)
AGSPC Science & Technology Fund (Division 17)............... 07/11/1994 42.30 -- 38.84 94.65
AGSPC Social Awareness Fund (Division 12)................... 10/02/1989 -- 16.27 27.08 12.87
AGSPC Stock Index Fund (Division 10)........................ 04/20/1987 -- 16.85 27.01 14.79
American Century Ultra (Division 31)........................ 07/01/1996 27.45 -- -- 35.50
Dreyfus Founders Growth (Division 30)....................... 07/01/1996 24.81 -- -- 33.13
Neuberger Berman Guardian Trust (Division 29)............... 07/01/1996 9.84 -- -- 2.89
Putnam Global Growth -- Class A (Division 28)............... 07/01/1996 29.10 -- -- 58.57
Putnam New Opportunities -- Class A (Division 26)........... 07/01/1996 27.71 -- -- 63.50
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 07/01/1996 28.24 -- -- 120.36
Scudder Growth and Income (Division 21)(1).................. 07/01/1996 13.39 -- -- 0.72
Templeton Foreign -- Class A (Division 32)(2)............... 07/01/1996 11.14 -- -- 33.83
Vanguard Long-Term Corporate (Division 22)**................ 07/01/1996 3.90 -- -- (11.07)
Vanguard Long-Term Treasury (Division 23)**................. 07/01/1996 4.22 -- -- (13.37)
Vanguard Wellington (Division 25)........................... 07/01/1996 12.20 -- -- (1.18)
Vanguard Windsor II (Division 24)........................... 07/01/1996 12.99 -- -- (10.84)
</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 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 Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(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 of this fund at net asset value and without sales charges
generally applicable to Class A shares.
TABLE II
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 31, 1999)*
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15).................................. 04/29/1994 18.58% -- 20.75% 1.90%
AGSPC Science & Technology (Division 17).................... 04/29/1994 39.16 -- 38.84 94.65
American Century Ultra (Division 31)........................ 11/02/1981 -- 23.50% 28.33 35.50
Dreyfus Founders Growth (Division 30)....................... 01/05/1962 -- 19.24 28.86 33.13
Neuberger Berman Guardian Trust (Division 29)............... 08/03/1993 12.43 -- 13.86 2.89
Putnam Global Growth -- Class A (Division 28)............... 09/01/1967 -- 15.47 25.04 58.57
Putnam New Opportunities -- Class A (Division 26)........... 08/31/1990 31.17 -- 31.93 63.50
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 11/01/1982 -- 23.37 34.01 120.36
Scudder Growth and Income (Division 21)(1).................. 11/13/1984 -- 13.35 17.13 0.72
Templeton Foreign -- Class A (Division 32)(2)............... 10/05/1982 -- 10.59 11.79 33.83
Vanguard Long-Term Corporate (Division 22)**................ 07/09/1973 -- 7.54 6.47 (11.07)
Vanguard Long-Term Treasury (Division 23)**................. 05/19/1986 -- 7.11 6.78 (13.37)
Vanguard Wellington (Division 25)........................... 07/01/1929 -- 11.49 15.69 (1.18)
Vanguard Windsor II (Division 24)........................... 06/24/1985 -- 12.73 18.47 (10.84)
</TABLE>
- ---------------
Divisions with an identical inception date as the underlying Funds' inception
date are not reflected in this Table. See preceding 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) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(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.
27
<PAGE> 168
TABLE III
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION FUND INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
DIVISION
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth Fund (Division 15)............................. 07/11/94 20.46% -- 21.30% 6.75%
AGSPC International Government Bond (Division 13)........... 10/01/91 6.35 -- 4.75 (6.51)
AGSPC Money Market (Division 6)............................. 01/16/86 -- 4.24% 4.50 4.13
AGSPC Science & Technology (Division 17).................... 07/11/94 42.39 -- 39.20 99.75
AGSPC Social Awareness (Division 12)........................ 10/02/89 -- 16.35 27.55 17.93
AGSPC Stock Index (Division 10)............................. 04/20/87 -- 16.93 27.48 19.85
American Century Ultra (Division 31)........................ 07/01/96 28.30 -- -- 40.56
Dreyfus Founders Growth (Division 30)....................... 07/01/96 25.70 -- -- 38.19
Neuberger Berman Guardian Trust (Division 29)............... 07/01/96 11.02 -- -- 7.79
Putnam Global Growth -- Class A (Division 28)............... 07/01/96 29.93 -- -- 63.65
Putnam New Opportunities -- Class A (Division 26)........... 07/01/96 28.56 -- -- 68.58
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 07/01/96 29.08 -- -- 125.47
Scudder Growth & Income (Division 21)(1).................... 07/01/96 14.49 -- -- 5.51
Templeton Foreign -- Class A (Division 32)(2)............... 07/01/96 12.29 -- -- 38.89
Vanguard Long-Term Corporate (Division 22)**................ 07/01/96 5.25 -- -- (6.83)
Vanguard Long-Term Treasury (Division 23)**................. 07/01/96 5.55 -- -- (9.24)
Vanguard Wellington (Division 25)........................... 07/01/96 13.33 -- -- 3.53
Vanguard Windsor II (Division 24)........................... 07/01/96 14.11 -- -- (6.59)
</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 Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(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.
TABLE IV
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15).................................. 04/29/94 18.66% -- 21.30% 6.75%
AGSPC Science & Technology (Division 17).................... 04/29/94 39.25 -- 39.20 99.75
American Century -- Ultra (Division 31)..................... 11/02/81 -- 23.57% 28.78 40.56
Dreyfus Founders Growth (Division 30)....................... 01/05/62 -- 19.32 29.31 38.19
Neuberger Berman Guardian Trust (Division 29)............... 08/03/93 12.51 -- 14.53 7.79
Putnam Global Growth -- Class A (Division 28)............... 09/01/67 -- 15.56 25.53 63.65
Putnam New Opportunities -- Class A (Division 26)........... 08/31/90 31.24 -- 32.35 68.58
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 11/01/82 -- 23.45 34.41 125.47
Scudder Growth & Income (Division 21)(1).................... 11/13/84 -- 13.43 17.74 5.51
Templeton Foreign -- Class A (Division 32)(2)............... 10/05/82 -- 10.67 12.50 38.89
Vanguard Long-Term Corporate Portfolio (Division 22)**...... 07/09/73 -- 7.62 7.31 (6.83)
Vanguard Long-Term Treasury Portfolio (Division 23)**....... 05/19/86 -- 7.19 7.61 (9.24)
Vanguard Wellington (Division 25)........................... 07/01/29 -- 11.57 16.32 3.53
Vanguard Windsor II (Division 24)........................... 06/24/85 -- 12.81 19.06 (6.59)
</TABLE>
- ---------------
Divisions with an identical inception date as the underlying Funds' inception
date are not reflected in this Table. See preceding 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) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(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.
28
<PAGE> 169
TABLE V
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
DIVISION
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- ---------- ---------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15).................................. 07/11/1994 176.86% -- 162.65% 6.75%
AGSPC International Government Bond (Division 13)........... 10/01/1991 66.18 -- 26.11 (6.51)
AGSPC Money Market (Division 6)............................. 01/16/1986 -- 51.53% 24.63 4.13
AGSPC Science & Technology (Division 17).................... 07/11/1994 591.00 -- 422.67 99.75
AGSPC Social Awareness (Division 12)........................ 10/02/1989 -- 354.60 237.56 17.93
AGSPC Stock Index (Division 10)............................. 04/20/1987 -- 377.74 236.64 19.85
American Century Ultra (Division 31)........................ 07/01/1996 139.23 -- -- 40.56
Dreyfus Founders Growth (Division 30)....................... 07/01/1996 122.68 -- -- 38.19
Neuberger Berman Guardian Trust (Division 29)............... 07/01/1996 44.19 -- -- 7.79
Putnam Global Growth -- Class A (Division 28)............... 07/01/1996 150.01 -- -- 63.65
Putnam New Opportunities -- Class A (Division 26)........... 07/01/1996 140.94 -- -- 68.58
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 07/01/1996 144.32 -- -- 125.47
Scudder Growth & Income (Division 21)(1).................... 07/01/1996 60.57 -- -- 5.51
Templeton Foreign -- Class A (Division 32)(2)............... 07/01/1996 50.04 -- -- 38.89
Vanguard Long-Term Corporate (Division 22)**................ 07/01/1996 19.60 -- -- (6.83)
Vanguard Long-Term Treasury (Division 23)**................. 07/01/1996 20.81 -- -- (9.24)
Vanguard Wellington (Division 25)........................... 07/01/1996 54.97 -- -- 3.53
Vanguard Windsor II (Division 24)........................... 07/01/1996 58.70 -- -- (6.59)
</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 Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(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.
TABLE VI
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- ---------- ---------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15).................................. 04/29/1994 163.83% -- 162.65% 6.75%
AGSPC Science & Technology (Division 17).................... 04/29/1994 553.65 -- 422.67 99.75
American Century Ultra (Division 31)........................ 11/02/1981 -- 730.13% 254.26 40.56
Dreyfus Founders Growth (Division 30)....................... 01/05/1962 -- 484.77 261.57 38.19
Neuberger Berman Guardian Trust (Division 29)............... 08/03/1993 112.94 -- 97.03 7.79
Putnam Global Growth -- Class A (Division 28)............... 09/01/1967 -- 324.72 211.76 63.65
Putnam New Opportunities -- Class A (Division 26)........... 08/31/1990 1,163.09 -- 306.13 68.58
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 11/01/1982 -- 722.16 338.63 125.47
Scudder Growth and Income (Division 21)(1).................. 11/13/1984 -- 252.56 126.27 5.51
Templeton Foreign -- Class A (Division 32)(2)............... 10/05/1982 -- 175.70 80.22 38.89
Vanguard Long-Term Corporate (Division 22)**................ 07/09/1973 -- 108.38 42.29 (6.83)
Vanguard Long-Term Treasury (Division 23)**................. 05/19/1986 -- 100.31 44.32 (9.24)
Vanguard Wellington (Division 25)........................... 07/01/1929 -- 198.98 112.97 3.53
Vanguard Windsor II (Division 24)........................... 06/24/1985 -- 233.86 139.19 (6.59)
</TABLE>
- ---------------
Divisions with an identical inception date as the underlying Funds' inception
date are not reflected in this Table. See preceding 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) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(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.
29
<PAGE> 170
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 1999 1998 1997 1996 1995
- ----------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)(1)...... 6.75% 17.42% 20.25% 18.62% 46.89%
AGSPC International Government Bond
(Division 13)(1).................. (6.51) 16.39 (5.40) 3.77 18.07
AGSPC Money Market (Division
6)(1)............................. 4.13 4.54 4.54 4.38 4.92
AGSPC Science & Technology
(Division 17)(1).................. 99.75 41.27 1.97 13.11 60.59
AGSPC Social Awareness (Division
12)(1)............................ 17.93 26.53 33.00 23.20 38.05
AGSPC Stock Index (Division
10)(1)............................ 19.85 27.65 32.24 21.97 36.42
American Century Ultra (Division
31)............................... 40.56 33.68 22.19 4.19 --
Dreyfus Founders Growth (Division
30)............................... 38.19 24.26 25.71 3.15 --
Neuberger Berman Guardian Trust
(Division 29)..................... 7.79 1.75 17.09 12.28 --
Putnam Global Growth -- Class A
(Division 28)..................... 63.65 27.99 12.63 5.97 --
Putnam New Opportunities -- Class A
(Division 26)..................... 68.58 23.62 21.76 (5.04) --
Putnam OTC & Emerging
Growth -- Class A (Division 27)... 125.47 10.32 9.51 (10.30) --
Scudder Growth and Income (Division
21)(2)............................ 5.51 5.42 29.25 11.69 --
Templeton Foreign -- Class A
(Division 32)(3).................. 38.89 (5.44) 5.98 7.79 --
Vanguard Long-Term Corporate
(Division 22)***.................. (6.83) 8.48 12.74 4.96 --
Vanguard Long-Term Treasury
(Division 23)***.................. (9.24) 12.27 12.87 5.05 --
Vanguard Wellington (Division
25)............................... 3.53 11.10 22.09 10.36 --
Vanguard Windsor II (Division
24)............................... (6.59) 15.37 31.16 12.28 --
<CAPTION>
ANNUAL CHANGE IN PURCHASE UNIT VALUE FOR THE 12 MONTHS ENDED DECEMBER 31**
------------------------------------------------------
FUND AND DIVISION 1994 1993 1992 1991 1990
- ----------------------------------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)(1)...... 5.41% -- -- -- --
AGSPC International Government Bond
(Division 13)(1).................. 3.83 13.50% 2.45% 9.14% --
AGSPC Money Market (Division
6)(1)............................. 3.17 2.07 2.63 4.90 7.25%
AGSPC Science & Technology
(Division 17)(1).................. 32.20 -- -- -- --
AGSPC Social Awareness (Division
12)(1)............................ (2.03) 7.25 2.71 27.08 (1.81)
AGSPC Stock Index (Division
10)(1)............................ 0.10 9.20 6.00 28.17 (4.44)
American Century Ultra (Division
31)............................... -- -- -- -- --
Dreyfus 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)(2)............................ -- -- -- -- --
Templeton Foreign -- Class A
(Division 32)(3).................. -- -- -- -- --
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 1999 1998 1997 1996 1995
- ----------------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)(1)...... 176.86% 159.36% 120.87% 83.68% 54.84%
AGSPC International Government Bond
(Division 13)(1).................. 66.18 77.76 52.73 61.45 55.59
AGSPC Money Market (Division
6)(1)............................. 51.53 45.53 39.21 33.16 27.57
AGSPC Science & Technology
(Division 17)(1).................. 591.00 245.93 144.87 140.14 112.30
AGSPC Social Awareness (Division
12)(1)............................ 354.60 285.48 204.65 129.06 85.92
AGSPC Stock Index (Division
10)(1)............................ 377.74 298.62 212.28 136.14 93.60
American Century Ultra (Division
31)............................... 139.23 70.19 27.31 4.19 --
Dreyfus Founders Growth (Division
30)............................... 122.68 61.14 29.68 3.15 --
Neuberger Berman Guardian Trust
(Division 29)..................... 44.19 33.78 31.47 12.28 --
Putnam Global Growth -- Class A
(Division 28)..................... 150.01 52.77 19.36 5.97 --
Putnam New Opportunities -- Class A
(Division 26)..................... 140.94 42.92 15.62 (5.04) --
Putnam OTC & Emerging
Growth -- Class A (Division 27)... 144.32 8.36 (1.77) (10.30) --
Scudder Growth and Income (Division
21)(2)............................ 60.57 52.18 44.36 11.69 --
Templeton Foreign -- Class A
(Division 32)(3).................. 50.04 8.03 14.24 7.79 --
Vanguard Long-Term Corporate
(Division 22)***.................. 19.60 28.37 18.33 4.96 --
Vanguard Long-Term Treasury
(Division 23)***.................. 20.81 33.11 18.56 5.05 --
Vanguard Wellington (Division
25)............................... 54.97 49.69 34.74 10.36 --
Vanguard Windsor II (Division
24)............................... 58.70 69.90 47.27 12.28 --
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR EACH PERIOD END SINCE DECEMBER 31, 1989**
------------------------------------------------------
FUND AND DIVISION 1994 1993 1992 1991 1990
- ----------------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)(1)...... 5.41% -- -- -- --
AGSPC International Government Bond
(Division 13)(1).................. 31.78 26.92% 11.82% 9.14%
AGSPC Money Market (Division
6)(1)............................. 21.59 17.85 15.46 12.50 7.25%
AGSPC Science & Technology
(Division 17)(1).................. 32.20 -- -- -- --
AGSPC Social Awareness (Division
12)(1)............................ 34.67 37.46 28.17 24.78 (1.81)
AGSPC Stock Index (Division
10)(1)............................ 41.91 41.77 29.83 22.48 (4.44)
American Century Ultra (Division
31)............................... -- -- -- -- --
Dreyfus 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)(2)............................ -- -- -- -- --
Templeton Foreign -- Class A
(Division 32)(3).................. -- -- -- -- --
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.
(2) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(3) 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.
30
<PAGE> 171
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*** 1999 1998 1997 1996 1995 1994 1993
- ------------------------------------------------ ------ ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)...................... 6.75% 17.42% 20.25% 18.62% 46.89% 0.45% --
AGSPC Science & Technology (Division 17)........ 99.75 41.27 1.97 13.11 60.59 25.06 --
American Century Ultra (Division 31)............ 40.56 33.68 22.19 12.86 36.71 (4.24) 20.98%
Dreyfus Founders Growth (Division 30)........... 38.19 24.26 25.71 15.79 44.66 (3.90) 24.76
Neuberger Berman Guardian Trust (Division 29)... 7.79 1.75 17.09 16.98 31.16 0.93 7.08
Putnam Global Growth -- Class A (Division 28)... 63.65 27.99 12.63 15.80 14.11 (1.43) 31.02
Putnam New Opportunities -- Class A (Division
26)............................................ 68.58 23.62 21.76 10.12 45.34 2.71 31.86
Putnam OTC & Emerging Growth -- Class A
(Division 27).................................. 125.47 10.32 9.51 3.94 54.93 1.64 31.22
Scudder Growth and Income (Division 21)(1)...... 5.51 5.42 29.25 21.06 30.01 1.74 14.59
Templeton Foreign -- Class A (Division 32)(2)... 38.89 (5.44) 5.98 17.18 10.49 (0.23) 35.94
Vanguard Long-Term Corporate (Division
22)****........................................ (6.83) 8.48 12.74 (0.32) 25.28 (6.07) 13.51
Vanguard Long-Term Treasury (Division 23)****... (9.24) 12.27 12.87 (2.69) 28.95 (7.80) 15.78
Vanguard Wellington (Division 25)............... 3.53 11.10 22.09 15.12 31.74 (1.32) 12.54
Vanguard Windsor II (Division 24)............... (6.59) 15.37 31.16 23.00 37.59 (1.99) 12.63
</TABLE>
<TABLE>
<CAPTION>
ANNUAL CHANGE IN PURCHASE UNIT VALUE FOR THE 12 MONTHS ENDED DECEMBER 31**
-----------------------------
FUND AND DIVISION*** 1992 1991 1990
- ------------------------------------------------ ----- ----- ------
<S> <C> <C> <C>
AGSPC Growth (Division 15)...................... -- -- --
AGSPC Science & Technology (Division 17)........ -- -- --
American Century Ultra (Division 31)............ 0.60% 85.05% 8.64%
Dreyfus Founders Growth (Division 30)........... 3.62 46.44 (11.10)
Neuberger Berman Guardian Trust (Division 29)... -- -- --
Putnam Global Growth -- Class A (Division 28)... (0.35) 17.25 (9.71)
Putnam New Opportunities -- Class A (Division
26)............................................ 24.82 66.42 10.54
Putnam OTC & Emerging Growth -- Class A
(Division 27).................................. 12.00 39.94 (10.34)
Scudder Growth and Income (Division 21)(1)...... 8.62 27.03 (3.14)
Templeton Foreign -- Class A (Division 32)(2)... (0.49) 17.54 (3.56)
Vanguard Long-Term Corporate (Division
22)****........................................ 8.83 19.85 5.31
Vanguard Long-Term Treasury (Division 23)****... 6.49 16.41 4.89
Vanguard Wellington (Division 25)............... 7.00 22.57 (3.61)
Vanguard Windsor II (Division 24)............... 11.02 27.56 (10.71)
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR EACH PERIOD END SINCE DECEMBER 31, 1989**
--------------------------------------------------------
FUND AND DIVISION*** 1999 1998 1997 1996 1995
- ----------------------------------- -------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)......... 163.83% 147.15% 110.47% 75.03% 47.55%
AGSPC Science & Technology
(Division 17)..................... 553.65 227.24 131.63 127.16 100.83
American Century Ultra (Division
31)............................... 730.13 490.57 341.77 261.53 220.34
Dreyfus Founders Growth (Division
30)............................... 484.77 323.16 240.54 170.89 133.95
Neuberger Berman Guardian Trust
(Division 29)..................... 112.94 97.56 94.15 65.81 41.75
Putnam Global Growth -- Class A
(Division 28)..................... 324.72 159.53 102.77 80.03 55.46
Putnam New Opportunities -- Class A
(Division 26)..................... 1,163.09 649.23 506.09 397.79 352.03
Putnam OTC & Emerging
Growth -- Class A (Division 27)... 722.16 264.65 230.54 201.83 190.40
Scudder Growth and Income (Division
21)(1)............................ 252.56 234.14 216.96 145.24 102.57
Templeton Foreign -- Class A
(Division 32)(2).................. 175.70 98.50 109.91 98.07 69.03
Vanguard Long-Term Corporate
(Division 22)****................. 108.38 123.67 106.19 82.88 83.47
Vanguard Long-Term Treasury
(Division 23)****................. 100.31 120.72 96.59 74.18 78.99
Vanguard Wellington (Division
25)............................... 198.98 188.79 159.94 112.90 84.95
Vanguard Windsor II (Division
24)............................... 233.86 257.42 209.81 136.21 92.04
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR EACH PERIOD END SINCE DECEMBER 31, 1989**
------------------------------------------------------
FUND AND DIVISION*** 1994 1993 1992 1991 1990
- ----------------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)......... 0.45% -- -- -- --
AGSPC Science & Technology
(Division 17)..................... 25.06 -- -- -- --
American Century Ultra (Division
31)............................... 134.33 144.69% 102.25% 101.03% 8.64%
Dreyfus Founders Growth (Division
30)............................... 61.73 68.30 34.90 30.18 (11.10)
Neuberger Berman Guardian Trust
(Division 29)..................... 8.07 7.08 -- -- --
Putnam Global Growth -- Class A
(Division 28)..................... 36.23 38.21 5.49 5.86 (9.71)
Putnam New Opportunities -- Class A
(Division 26)..................... 211.00 202.81 129.64 83.97 10.54
Putnam OTC & Emerging
Growth -- Class A (Division 27)... 87.44 84.41 40.53 25.47 (10.34)
Scudder Growth and Income (Division
21)(1)............................ 55.81 53.15 33.65 23.05 (3.14)
Templeton Foreign -- Class A
(Division 32)(2).................. 52.98 53.34 12.79 13.36 (3.56)
Vanguard Long-Term Corporate
(Division 22)****................. 46.45 55.92 37.37 26.21 5.31
Vanguard Long-Term Treasury
(Division 23)****................. 38.80 50.54 30.02 22.10 4.89
Vanguard Wellington (Division
25)............................... 40.39 42.26 26.41 18.14 (3.61)
Vanguard Windsor II (Division
24)............................... 39.58 42.41 26.45 13.89 (10.71)
</TABLE>
- ------------
Divisions with an identical inception date as the underlying Funds' inception
date are not reflected in this Table. See preceding 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.
(1) The Scudder Growth and Income Fund adopted its current name and objective
on November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(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 general applicable to Class A shares.
31
<PAGE> 172
OTHER CONTRACT FEATURES
- --------------------------------------------------------------------------------
CHANGES THAT MAY NOT BE MADE
The following terms in Portfolio Director 2 may not be changed once your account
has been established:
- The Contract Owner;
- The Participant; and
- The Annuitant.
CHANGE OF BENEFICIARY
The Beneficiary (if not irrevocable) may usually be changed at any time.
Under some retirement programs, the right to name or change a Beneficiary is
subject to approval by the spouse. Also, the right to name a Beneficiary other
than the spouse may be subject to certain tax laws and regulations.
If the Annuitant dies, and there is no Beneficiary, any death benefit will be
payable to the Annuitant's estate.
If a Beneficiary dies while receiving payments, and there is no co-Beneficiary
to continue to receive payments, any amount still due will be paid to the
Beneficiary's estate.
CONTINGENT OWNER
The Contract Owner may name a Contingent Owner under an individual non-tax
qualified Contract. During the Purchase Period, the Contingent Owner may be
changed. However, if the Contract Owner dies, benefits must be distributed as
required by the federal tax law.
CANCELLATION -- THE 20 DAY "FREE LOOK"
The Contract Owner may cancel an individual contract by returning it to the
Company within 20 days after delivery. (A longer period will be allowed if
required under state law.) A refund will be made to the Contract Owner within 7
days after receipt of the Contract within the required period. The amount of the
refund will be equal to all Purchase Payments received or the amount required
under state law, if larger.
WE RESERVE CERTAIN RIGHTS
We reserve the right to:
- Amend the Contract to conform with substitutions of investments;
- Amend the Contract to comply with tax or other laws;
- Make changes (upon written notice) to group Contracts that would apply only
to new Participants after the effective date of the changes;
- Operate VALIC Separate Account A as a management investment company under
the 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.
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
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.
32
<PAGE> 173
- --------------------------------------------------------------------------------
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.
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) and 401(k) 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
33
<PAGE> 174
- --------------------------------------------------------------------------------
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, 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. In
addition, based upon published guides issued by the IRS in 1999, it appears
likely that such limitations, if imposed, would only apply to Non-Qualified
Contracts.
Distributions are taxed differently depending on the program through which
Portfolio Director 2 is offered and the previous tax characterization of the
contributions to which the distribution relates. Generally, the portion of a
distribution which is not considered a return of investment in the Contract is
subject to income tax. For annuity payments, investment in the contract is
recovered ratably over the expected payout period. Special recovery rules might
apply in certain situations.
Amounts subject to income tax may also incur excise tax 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.
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 1999, the IRS confirmed this opinion,
revising its previous position by modifying a contrary ruling it had issued in
1981.
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 was superseded by subsequent legislation (Code Section
817(h)) which specifically exempts these Qualified Contracts, and the IRS had no
viable legal basis or reason to apply the theory of the 1981 ruling to these
Qualified Contracts under current law.
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.
34
<PAGE> 175
- --------------------------------------------------------------------------------
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. Variable options
incur mortality and expense risk fee charges and may also incur account
maintenance fees and surrender charges. The chart does not reflect the deduction
of any such fees. 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-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.
35
<PAGE> 176
YEAR 2000
- --------------------------------------------------------------------------------
As of March 10, 2000, all of our ultimate parent, American General Corporation's
("AGC") major technology systems, programs, and applications, including those
which rely on third parties, are operating smoothly following our transition
into 2000. We have experienced no interruptions to normal business operations,
including the processing of customer account data and transactions. We will
continue to monitor our technology systems, including critical third party
dependencies, as necessary to maintain our Year 2000 readiness. We do not expect
any future disruptions, if they occur, to have a material effect on the
company's results of operations, liquidity, or financial condition.
Through December 31, 1999, AGC incurred and expensed pretax costs of $98 million
related to Year 2000 readiness, including $18 million in 1999 and $65 million in
1998. In 1999, Year 2000 readiness expenses were included in division earnings.
The 1998 expenses were excluded from division earnings, consistent with the
manner in which we reviewed division results. In addition, we accelerated the
planned replacement of certain systems as part of our Year 2000 plans. The cost
of these replacement systems was immaterial. We do not anticipate incurring any
significant costs in the future to maintain Year 2000 readiness.
36
<PAGE> 177
REVOCATION OF TELEPHONE ASSET TRANSFER AUTHORITY
- ----------------------------------------------------------------------------
Participant/Contract Owner Name:
------------------------------------------------------------------------
Social Security Number:
------------------------------------------------------------------------
Birth Date:
- ----------------------------------------------------------------------------
I am the Participant under or Contract Owner of one or more variable annuity
contracts issued by The Variable Annuity Life Insurance Company ("VALIC"). I
hereby instruct VALIC not to accept any telephone instructions to transfer
Account Values among investment options or change the allocation of future
Purchase Payments from me, anyone representing me or anyone representing himself
or herself to be me. I understand as a result of executing this form that the
transfer of Account Values or Payout Values among investment options or changes
in the allocation of future Purchase Payments may only be effected upon the
receipt by VALIC of my written instructions.
<TABLE>
<S> <C>
- ------------------------------------------------------------ ---------------------------------------
Participant/Contract Owner Signature Date
Mail this form to any Regional Office or to the Home Office at the following address: VALIC, Customer
Service A3-01, 2929 Allen Parkway, Houston, TX 77019.
</TABLE>
<PAGE> 178
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information................................. 3
Marketing Information........................... 3
Endorsements and Published Ratings.............. 4
Types of Variable Annuity Contracts................. 5
Federal Tax Matters................................. 5
Tax Consequences of Purchase Payments........... 5
Tax Consequences of Distributions............... 7
Special Tax Consequences -- Early
Distribution.................................. 8
Special Tax Consequences -- Required
Distributions................................. 9
Tax Free Rollovers, Transfers and Exchanges..... 10
Exchange Privilege.................................. 10
Exchanges From Portfolio Director............... 11
Exchanges From Independence Plus Contracts...... 11
Exchanges From V-Plan Contracts................. 12
Exchanges From SA-1 and SA-2 Contracts.......... 13
Exchanges From Impact Contracts................. 15
Exchanges From Compounder Contracts............. 16
Information Which May Be Applicable To Any
Exchange...................................... 16
Calculation of Surrender Charge..................... 18
Illustration of Surrender Charge on Total
Surrender..................................... 18
Illustration of Surrender Charge on a 10%
Partial Surrender Followed by a Full
Surrender..................................... 18
Purchase Unit Value................................. 19
Illustration of Calculation of Purchase Unit
Value......................................... 19
Illustration of Purchase of Purchase Units...... 19
Performance Calculations............................ 19
AGSPC Money Market Division Yields.............. 19
Calculation of Current Yield for AGSPC Money
Market Division Six........................... 19
Illustration of Calculation of Current Yield for
AGSPC Money Market Division Six............... 19
Calculation of Effective Yield for AGSPC Money
Market Division Six........................... 20
Illustration of Calculation of Effective Yield
for AGSPC Money Market Division Six........... 20
Standardized Yield for Bond Fund Divisions...... 20
Calculation of Standardized Yield for Bond Fund
Divisions..................................... 20
Illustration of Calculation of Standardized
Yield for Bond Fund Divisions................. 20
Calculation of Average Annual Total Return...... 21
Calculation of MVA Option....................... 21
Performance Information............................. 22
Hypothetical $10,000 Account Value and
Cumulative Return as Compared to Benchmark
Tables........................................ 22
Performance Compared to Market Indices.......... 22
AGSPC Growth Division Fifteen Performance
Compared to S&P 500 Index..................... 24
AGSPC International Government Bond Division
Thirteen Performance Compared to Salomon
Brothers Non-U.S. Dollar World Government Bond
Index......................................... 24
</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......................................... 25
AGSPC Science & Technology Division Seventeen
Performance Compared to S&P 500 Index......... 25
AGSPC Social Awareness Division Twelve
Performance Compared to S&P 500 Index......... 26
AGSPC Stock Index Division Ten Performance
Compared to S&P 500 Index..................... 26
American Century Ultra Division Thirty-one
Compared to S&P 500 Index and NASDAQ Composite
Index......................................... 27
Dreyfus Founders Growth Division Thirty Compared
to S&P 500 Index.............................. 28
Neuberger Berman Guardian Trust Division
Twenty-nine Compared to S&P 500 Index......... 28
Putnam Global Growth -- Class A Division Twenty-
eight Compared to MCSI All Country World File
Index and S&P 500 Index....................... 29
Putnam New Opportunities -- Class A Division
Twenty-six Compared to S&P 500 Index.......... 30
Putnam OTC & Emerging Growth -- Class A Division
Twenty-seven Compared to Russell 2000 Index
and S&P 500 Index............................. 30
Scudder Growth and Income Division Twenty-one
Compared to S&P 500 Index..................... 31
Templeton Foreign Division Thirty-two Compared
to EAFE Index................................. 31
Vanguard Long-Term Corporate Division Twenty-two
Compared to Lehman Long Term Corporate AA or
Better Bond Index............................. 32
Vanguard Long-Term U.S. Treasury Division
Twenty-three Compared to Lehman Brothers
Treasury Long-Term Index...................... 32
Vanguard Wellington Division Twenty-five
Compared to S&P 500 Index and Merrill Lynch
Corporate Master Index........................ 33
Vanguard Windsor II Division Twenty-four
Compared to S&P 500 Index..................... 34
Payout Payments..................................... 35
Assumed Investment Rate......................... 35
Amount of Payout Payments....................... 35
Payout Unit Value............................... 35
Illustration of Calculation of Payout Unit
Value......................................... 36
Illustration of Payout Payments................. 36
Distribution of Variable Annuity Contracts.......... 37
Experts............................................. 37
Comments on Financial Statements.................... 37
</TABLE>
<PAGE> 179
Please tear off, complete and return the form below to one of our Regional
Offices. 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> 180
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
[VALIC LOGO]
PRINTED MATTER
PRINTED IN U.S.A. VA 9875-40 REV 5/00
(C)The Variable Annuity Life Insurance Company, Houston, Texas
Recycled Paper LOGO
<PAGE> 181
[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, 2000
<PAGE> 182
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
PORTFOLIO DIRECTOR, PORTFOLIO DIRECTOR 2, PORTFOLIO DIRECTOR PLUS
SUPPLEMENT ISSUED MAY 1, 2000 TO THE PROSPECTUS DATED MAY 1, 2000
The Variable Annuity Life Insurance Company (the "Company") filed an application
with the Securities and Exchange Commission ("SEC") as of March 31, 2000
requesting an order allowing the Company to replace the shares of American
General Domestic Bond Fund of American General Series Portfolio Company 3
("AGSPC 3"), T. Rowe Price Small-Cap Stock Fund, Dreyfus Variable Investment
Fund -- Small Cap Portfolio, Scudder Growth and Income Fund, Neuberger Berman
Guardian Trust and Dreyfus Founders Growth Fund, each of which is a Variable
Investment Option currently available under our group and individual variable
annuity contracts, with shares of comparable series of AGSPC 3 and newly created
series of American General Series Portfolio Company ("AGSPC").
The Company believes that the proposed substitutions are in the best interest of
contract holders. In each case, the Substitute Series will have substantially
the same investment objective, practices and restrictions as the Replaced
Series. In the case of Dreyfus Variable Investment Fund -- Small Cap Portfolio
and T. Rowe Price Small-Cap Stock Fund, Inc., the Substitute Series will have
two sub-advisers, one of which is the Replaced Series' current investment
adviser, T. Rowe Price Associates, Inc., and an additional sub-adviser, Founders
Asset Management LLC, which has an outstanding long-term investment performance
record. In the case of Dreyfus Founders Growth Fund, the Substitute Series will
have the Replaced Series' current investment adviser, Founders Asset Management
LLC, as its sub-adviser. In the case of the other Replaced Series, the
Substitute Series will have as sub-advisers new managers with superior long-term
investment performance records in their respective asset classes.
The proposed substitutions and respective sub-advisers are:
<TABLE>
<CAPTION>
REPLACED SERIES SUBSTITUTE SERIES
<S> <C> <C>
Dreyfus Variable Investment Fund --
Small-Cap Portfolio -- AGSPC American General Select Small-Cap Fund (T. Rowe
Price Associates, Inc. and Founders Asset Management
LLC)
T. Rowe Price Small-Cap Stock Fund, Inc. -- AGSPC American General Select Small Cap Fund (T. Rowe
Price Associates, Inc. and Founders Asset Management
LLC)
Scudder Growth and Income Fund -- AGSPC American General American Century Income & Growth
Fund (American Century Investment Management, Inc.)
Neuberger Berman Guardian Trust -- AGSPC American General American Century Income & Growth
Fund (American Century Investment Management, Inc.)
Dreyfus Founders Growth Fund -- AGSPC American General Founders Growth Fund (Founders
Asset Management LLC)
AGSPC 3 American General Domestic Bond Fund -- AGSPC 3 American General Core Bond Fund (American
General Investment Management, L.P.)
</TABLE>
- --------------------------------------------------------------------------------
You should note that:
- - No action is required on your part. You will not need to vote a proxy, file a
new election, or take any other action if the SEC approves the substitutions.
- - The elections you have on file for allocating your account value, premium
payments and deductions will remain unchanged until you direct us otherwise.
- - You will not bear any expenses relating to the substitutions.
- - Although for two of the substitutions (Dreyfus Variable Investment
Fund -- Small Cap Portfolio and Scudder Growth and Income Fund) total contract
holder expenses are expected to be slightly higher for the Replaced Series,
the substitutions will result in a change to a sub-adviser with a superior
performance record.
- - On the effective date of the substitution, your account value in the Variable
Account Option will be the same as before the substitution.
- - The substitution will have no tax consequences for you.
The Company expects to complete the substitutions before October 2000. The newly
created series of AGSPC will commence operations at the time of the
substitutions. Completion of the substitutions is conditioned upon obtaining the
approval of the SEC and state insurance authorities, if applicable. Of course,
you may transfer amounts in your Contract among the Variable Investment Options
and Fixed Options, as usual. The substitutions will not be treated as a transfer
for purposes of the transfer provisions of your Contract. In addition, any
transfer charge that might otherwise be imposed will be waived from the date of
this Notice through the date that is 30 days after the substitutions.
We will send you a prospectus for AGSPC 3 and the new series of AGSPC, and
notice of the actual date of the substitutions, after we receive SEC approval.
You will receive confirmation when the substitution is complete.
Should you have any questions, you may contact us at 1-800-448-2542 (selection
1).
<PAGE> 183
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
UNITS OF INTEREST UNDER GROUP AND INDIVIDUAL
VARIABLE ANNUITY CONTRACTS
PORTFOLIO DIRECTOR--Register Mark-- PLUS
SEPARATE ACCOUNT A
FOR SERIES 1 TO 12 May 1, 2000
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 one or more Fixed Account Options* and/or an array of 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.
* One of the Fixed Account Options, the Multi-Year Enhanced Fixed Account, will
be available approximately May 22, 2000, subject to state approval.
- --------------------------------------------------------------------------------
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, 2000, contains additional
information about Portfolio Director Plus and is part of this prospectus. For a
free copy 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 SEC 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> 184
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ABOUT THE PROSPECTUS.......................... 1
FEE TABLE..................................... 2
SUMMARY....................................... 7
SELECTED PURCHASE UNIT DATA................... 14
GENERAL INFORMATION........................... 15
About Portfolio Director Plus............ 15
About VALIC.............................. 15
About VALIC Separate Account A........... 15
Units of Interests....................... 16
Distribution of the Contracts............ 16
VARIABLE ACCOUNT OPTIONS...................... 16
PURCHASE PERIOD............................... 17
Purchase Payments........................ 17
Purchase Units........................... 18
Calculation of Purchase Unit Value....... 18
Choosing Investment Options.............. 18
Fixed Account Options............... 18
Variable Account Options............ 19
Stopping Purchase Payments............... 19
TRANSFERS BETWEEN INVESTMENT OPTIONS.......... 20
During the Purchase Period............... 20
During the Payout Period................. 20
Communicating Transfer or Reallocation
Instructions........................... 20
Effective Date of Transfer............... 21
Market Timing............................ 21
FEES AND CHARGES.............................. 21
Account Maintenance Fee.................. 21
Surrender Charge......................... 21
Amount of Surrender Charge.......... 22
10% Free Withdrawal................. 22
Exceptions to Surrender Charge...... 22
Premium Tax Charge....................... 22
Separate Account Charges................. 22
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........... 23
Separate Account Expense Reimbursement... 24
Market Value Adjustment.................. 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
EXCHANGE PRIVILEGE............................ 28
Restrictions on Exchange Privilege....... 28
Taxes and Conversion Costs............... 28
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Surrender Charges........................ 28
Exchange Offers for Contracts Other Than
Portfolio Director Plus................ 29
Comparison of Portfolio Director and
Portfolio Director 2 Contracts to
Portfolio Director Plus Contracts...... 29
Comparison of Other Contracts............ 29
Features of Portfolio Director Plus...... 29
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.................. 32
Types of Investment Performance
Information Advertised................. 32
Total Return Performance Information... 32
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............................... 33
Total Return Based on Different
Investment Amounts.................. 33
An Assumed Account Value of $10,000.... 33
Yield Performance Information............ 33
AGSPC Money Market and American General
Money Market Divisions.............. 33
Divisions Other Than The AGSPC Money
Market and American General Money
Market Divisions.................... 34
Performance Information: Average Annual
Total Return, Cumulative Return and
Annual and Cumulative Change in
Purchase Unit Value Tables............. 34
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................................. 46
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........................... 47
Type of Plans............................ 47
Tax Consequences in General.............. 48
Effect of Tax-Deferred Accumulations..... 49
YEAR 2000..................................... 50
</TABLE>
(i)
<PAGE> 185
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......................... 20
Annuitant............................. 31
Assumed Investment Rate............... 25
Beneficiary........................... 31
Contract Owner........................ 31
Divisions............................. 32
Fixed Account Options................. 31
Home Office........................... 20
Mutual Fund or Fund................... 15
Participant........................... 01
Participant Year...................... 22
Payout Period......................... 20
Payout Unit........................... 25
Purchase Payments..................... 17, 32
Purchase Period....................... 20
Purchase Unit......................... 18
VALIC Separate Account A.............. 47
Variable Account Options.............. 16, 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
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> 186
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 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 Founders Growth Fund(4) 0.25 1.00 (0.25) 1.00
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
Franklin Templeton Variable Insurance Products
Trust
Templeton Asset Strategy Fund -- Class 1 0.25 1.00 -- 1.25
Templeton International Securities Fund --
Class 1 0.25 1.00 -- 1.25
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
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 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 Wellington Fund 0.25 1.00 -- 1.25
Vanguard Windsor II Fund 0.25 1.00 -- 1.25
</TABLE>
2
<PAGE> 187
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% -- 0.07% 0.57%
AGSPC Capital Conservation Fund 0.50 -- 0.10 0.60
AGSPC Government Securities Fund 0.50 -- 0.09 0.59
AGSPC Growth Fund 0.80 -- 0.06 0.86
AGSPC Growth & Income Fund 0.75 -- 0.07 0.82
AGSPC International Equities Fund 0.35 -- 0.08 0.43
AGSPC International Government Bond Fund 0.50 -- 0.07 0.57
AGSPC MidCap Index Fund 0.31 -- 0.07 0.38
AGSPC Money Market Fund 0.50 -- 0.07 0.57
AGSPC Science & Technology Fund 0.90 -- 0.06 0.96
AGSPC Small Cap Index Fund 0.35 -- 0.06 0.41
AGSPC Social Awareness Fund 0.50 -- 0.07 0.57
AGSPC Stock Index Fund 0.26 -- 0.06 0.32
American Century Ultra Fund(11) 1.00 -- -- 1.00
American General Balanced Fund(9) 0.78 -- 0.02 0.80
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) 0.59 -- 0.18 0.77
American General Growth Lifestyle Fund(10) 0.10 -- -- 0.10
American General High Yield Bond Fund(9) 0.69 -- 0.29 0.98
American General International Growth Fund(9) 0.88 -- 0.25 1.13
American General International Value Fund(9) 0.97 -- 0.04 1.01
American General Large Cap Growth Fund(9) 0.52 -- 0.29 0.81
American General Large Cap Value Fund(9) 0.49 -- 0.31 0.80
American General Mid Cap Growth Fund(9) 0.63 -- 0.14 0.77
American General Mid Cap Value Fund(9) 0.74 -- 0.29 1.03
American General Moderate Growth Lifestyle Fund(10) 0.10 -- -- 0.10
American General Money Market Fund(9) 0.24 -- 0.30 0.54
American General Small Cap Growth Fund(9) 0.81 -- 0.30 1.11
American General Small Cap Value Fund(9) 0.74 -- 0.22 0.96
American General Socially Responsible Fund(9) 0.25 -- 0.30 0.55
American General Strategic Bond Fund(9) 0.59 -- 0.29 0.88
Dreyfus Founders Growth Fund 0.67 0.25% 0.16 1.08
Dreyfus Variable Investment Fund --
Small Cap Portfolio 0.75 -- 0.03 0.78
Evergreen Equity Trust
Evergreen Growth and Income Fund -- Class A 0.89 0.25 0.29 1.43
Evergreen Small Cap Value Fund -- Class A(11) 1.00 0.25 0.42 1.67
Evergreen Value Fund -- Class A 0.50 0.25 0.25 1.00
Franklin Templeton Variable Insurance Products
Trust(11)
Templeton Asset Strategy Fund -- Class 1(12) 0.60 -- 0.18 0.78
Templeton International Securities Fund -- Class
1(13) 0.69 -- 0.19 0.88
Neuberger Berman Guardian Trust(7)(11) 0.84 -- 0.04 0.88
Putnam Global Growth Fund -- Class A Shares 0.63 0.25 0.22 1.10
Putnam New Opportunities Fund -- Class A Shares 0.48 0.25 0.20 0.93
Putnam OTC & Emerging Growth Fund -- Class A Shares 0.55 0.25 0.18 0.98
Scudder Growth and Income Fund 0.45 -- 0.35 0.80
T. Rowe Price Small-Cap Stock Fund 0.77 -- 0.19 0.96
Templeton Foreign Fund -- Class A(11) 0.61 0.25 0.27 1.13
Vanguard LifeStrategy Conservative Growth
Fund(11)(14) 0.28 -- -- 0.28
Vanguard LifeStrategy Growth Fund(11)(14) 0.29 -- -- 0.29
Vanguard LifeStrategy Moderate Growth Fund(11)(14) 0.29 -- -- 0.29
Vanguard Long-Term Corporate Fund(11) 0.28 -- 0.02 0.30
Vanguard Long-Term Treasury Fund(11) 0.25 -- 0.03 0.28
Vanguard Wellington Fund(11) 0.28 -- 0.02 0.30
Vanguard Windsor II Fund(11) 0.35 -- 0.02 0.37
</TABLE>
3
<PAGE> 188
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 certain payments received 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.
(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 1999 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, 0.78%, 1.00% and 1.78%; American General
Core Bond Fund, 0.50%, 1.04% and 1.54%; American General Domestic Bond
Fund, 0.59%, 1.00% and 1.59%; American General High Yield Bond Fund, 0.69%,
1.05% and 1.74%; American General International Growth Fund, 0.88%, 1.02%
and 1.90%; American General International Value Fund, 0.97%, 1.00% and
1.97%; American General Large Cap Growth Fund, 0.52%, 0.92% and 1.44%;
American General Large Cap Value Fund, 0.49%, 1.02% and 1.51%; American
General Mid Cap Growth Fund, 0.63%, 1.01% and 1.64%; American General Mid
Cap Value Fund, 0.74%, 0.99% and 1.73%; American General Money Market Fund,
0.24%, 0.99% and 1.23%; American General Small Cap Growth Fund, 0.81%,
0.97% and 1.78%; American General Small Cap Value Fund, 0.74%, 1.01% and
1.75%; and American General Socially Responsible Fund, 0.25%, 0.98% and
1.23%; and American General Strategic Bond Fund, 0.59%, 1.05% and 1.64%.
(10) Total Combined Operating Expenses based on estimated total average weighted
combined operating expenses for the American General Conservative Growth
Lifestyle Fund is 0.95%, for American General Growth Lifestyle Fund 1.04%
and for American General Moderate Growth Lifestyle Fund 0.98%. 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 Dreyfus Founders Growth Fund
was formerly known as the Founders Growth Fund. The Evergreen Small Cap
Value Fund was formerly known as the Evergreen Small Cap Equity Income
Fund. The Franklin Templeton Variable Insurance Products Trust was formerly
known as the Templeton Variable Products Series 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
LifeStrategy 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) On February 8, 2000, shareholders of the Templeton Asset Allocation Fund
(previously offered under the Contract) approved a merger and
reorganization that combined the Templeton Asset Allocation Fund with the
Templeton Global Asset Allocation Fund, effective May 1, 2000. At the same
time as the merger, the Templeton Asset Allocation Fund changed its name to
the Templeton Asset Strategy Fund. The table shows restated total expenses
for the Templeton Asset Strategy Fund based on the new fund fees and the
assets of the Templeton Asset Allocation Fund as of December 31, 1999, and
not the assets of the combined fund. However, if the table reflected both
the new fund fees and the fund's combined assets, the fund's expenses after
May 1, 2000 would be estimated as: Management Fees 0.60%, Other Expenses
0.14%, and Annual Expenses 0.74%.
(13) On February 8, 2000, shareholders of the Templeton International Fund
(previously offered under the Contract) approved a merger and
reorganization that combined the Templeton International Fund with the
Templeton International Equity Fund, effective May 1, 2000. At the same
time as the merger, the Templeton International Fund changed its name to
the Templeton International Securities Fund. The table shows restated total
expenses for the Templeton International Securities Fund based on the new
fund fees and the assets of the Templeton International Fund as of December
31, 1999, and not the assets of the combined fund. However, if the table
reflected both the new fund fees and the fund's combined assets, the fund's
expenses after May 1, 2000 would be estimated as: Management Fees 0.65%,
Other Expenses 0.20%, and Annual Expenses 0.85%.
(14) The Vanguard LifeStrategy Funds did not incur any expenses in fiscal year
1999. 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 ratios that the Vanguard LifeStrategy Conservative Growth
Fund, Vanguard LifeStrategy Growth Fund and Vanguard LifeStrategy Moderate
Growth Fund incurred for the year ended December 31, 1999 was 0.28%, 0.29%
and 0.29%, respectively.
4
<PAGE> 189
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 $51 $ 88 $192
AGSPC Capital Conservation Division 7 17 52 89 195
AGSPC Government Securities Division 8 17 51 89 194
AGSPC Growth Division 15 19 60 103 223
AGSPC Growth & Income Division 16 19 58 101 218
AGSPC International Equities Division 11 15 46 80 176
AGSPC International Government Bond Division 13 16 51 88 192
AGSPC MidCap Index Division 4 14 45 78 171
AGSPC Money Market Division 6 16 51 88 192
AGSPC Science & Technology Division 17 20 63 108 233
AGSPC Small Cap Index Division 14 15 46 79 174
AGSPC Social Awareness Division 12 16 51 88 192
AGSPC Stock Index Division 10 14 43 75 164
American Century Ultra Division 31 21 65 112 241
American General Balanced Division 42 16 50 87 189
American General Conservative Growth Lifestyle Division 50 9 28 49 110
American General Core Bond Division 58 16 50 87 189
American General Domestic Bond Division 43 16 49 85 186
American General Growth Lifestyle Division 48 9 28 49 110
American General High Yield Bond Division 60 18 56 96 209
American General International Growth Division 33 19 60 104 225
American General International Value Division 34 18 57 98 212
American General Large Cap Growth Division 39 16 51 87 190
American General Large Cap Value Division 40 16 50 87 189
American General Mid Cap Growth Division 37 16 49 85 186
American General Mid Cap Value Division 38 18 57 99 214
American General Moderate Growth Lifestyle Division 49 9 28 49 110
American General Money Market Division 44 14 42 73 161
American General Small Cap Growth Division 35 19 60 103 223
American General Small Cap Value Division 36 18 55 95 207
American General Socially Responsible Division 41 14 42 73 162
American General Strategic Bond Division 59 17 53 91 198
Dreyfus Founders Growth Division 30 22 66 114 246
Dreyfus Variable Investment Fund --
Small Cap Portfolio Division 18 19 60 104 225
Evergreen Equity Trust
Evergreen Growth and Income -- Class A Division 56 25 77 132 281
Evergreen Small Cap Value -- Class A Division 55 27 84 144 304
Evergreen Value -- Class A Division 57 21 64 110 237
Franklin Templeton Variable Insurance Products Trust
Templeton Asset Strategy -- Class 1 Division 19 21 65 111 240
Templeton International Securities -- Class 1 Division 20 22 68 117 251
Neuberger Berman Guardian Trust Division 29 19 60 104 225
Putnam Global Growth -- Class A Shares Division 28 22 67 115 248
Putnam New Opportunities -- Class A Shares Division 26 20 62 106 230
Putnam OTC & Emerging Growth -- Class A Shares Division 27 21 63 109 235
Scudder Growth and Income Division 21 19 58 100 216
T. Rowe Price Small-Cap Stock Division 51 23 70 121 259
Templeton Foreign -- Class A Division 32 22 68 117 251
Vanguard LifeStrategy Conservative Growth Division 54 16 50 86 187
Vanguard LifeStrategy Growth Division 52 16 50 86 188
Vanguard LifeStrategy Moderate Growth Division 53 16 50 86 188
Vanguard Long-Term Corporate Division 22 14 42 73 162
Vanguard Long-Term Treasury Division 23 13 42 72 159
Vanguard Wellington Division 25 16 50 87 189
Vanguard Windsor II Division 24 17 52 90 197
</TABLE>
5
<PAGE> 190
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 $101 $138 $192
AGSPC Capital Conservation Division 7 63 101 139 195
AGSPC Government Securities Division 8 63 101 139 194
AGSPC Growth Division 15 66 109 153 223
AGSPC Growth & Income Division 16 65 108 151 218
AGSPC International Equities Division 11 62 96 130 176
AGSPC International Government Bond Division 13 63 101 138 192
AGSPC MidCap Index Division 4 61 95 128 171
AGSPC Money Market Division 6 63 101 138 192
AGSPC Science & Technology Division 17 67 112 158 233
AGSPC Small Cap Index Division 14 61 96 129 174
AGSPC Social Awareness Division 12 63 101 138 192
AGSPC Stock Index Division 10 60 93 125 164
American Century Ultra Division 31 67 114 162 241
American General Balanced Division 42 63 100 137 189
American General Conservative Growth Lifestyle Division 50 56 78 99 110
American General Core Bond Division 58 63 100 137 189
American General Domestic Bond Division 43 62 99 135 186
American General Growth Lifestyle Division 48 56 78 99 110
American General High Yield Bond Division 60 64 105 146 209
American General International Growth Division 33 66 110 154 225
American General International Value Division 34 65 106 148 212
American General Large Cap Growth Division 39 63 100 137 190
American General Large Cap Value Division 40 63 100 137 189
American General Mid Cap Growth Division 37 62 99 135 186
American General Mid Cap Value Division 38 65 107 149 214
American General Moderate Growth Lifestyle Division 49 56 78 99 110
American General Money Market Division 44 60 92 123 161
American General Small Cap Growth Division 35 66 109 153 223
American General Small Cap Value Division 36 64 105 145 207
American General Socially Responsible Division 41 60 92 123 162
American General Strategic Bond Division 59 63 102 141 198
Dreyfus Founders Growth Division 30 68 115 164 246
Dreyfus Variable Investment Fund --
Small Cap Portfolio Division 18 66 110 154 225
Evergreen Equity Trust
Evergreen Growth and Income -- Class A Division 56 71 125 182 281
Evergreen Small Cap Value -- Class A Division 55 73 132 194 304
Evergreen Value -- Class A Division 57 67 113 160 237
Franklin Templeton Variable Insurance Products Trust
Templeton Asset Strategy -- Class 1 Division 19 67 114 161 240
Templeton International Securities -- Class 1 Division 20 68 117 167 251
Neuberger Berman Guardian Trust Division 29 66 110 154 225
Putnam Global Growth -- Class A Shares Division 28 68 116 165 248
Putnam New Opportunities -- Class A Shares Division 26 66 111 156 230
Putnam OTC & Emerging Growth -- Class A Shares Division 27 67 113 159 235
Scudder Growth and Income Division 21 65 107 150 216
T. Rowe Price Small-Cap Stock Division 51 69 119 171 259
Templeton Foreign -- Class A Division 32 68 117 167 251
Vanguard LifeStrategy Conservative Growth Division 54 63 99 136 187
Vanguard LifeStrategy Growth Division 52 63 100 136 188
Vanguard LifeStrategy Moderate Growth Division 53 63 100 136 188
Vanguard Long-Term Corporate Division 22 60 92 123 162
Vanguard Long-Term Treasury Division 23 60 92 122 159
Vanguard Wellington Division 25 63 100 137 189
Vanguard Windsor II Division 24 63 102 140 197
</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> 191
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.
Depending upon the selection made by your employer's plan, if applicable, you
may 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 three Fixed Account
Options. There may be certain limitations on how many investment options you may
invest in at any one time.(1)
- --------------------------------------------------------------------------------
<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
---------------------------------------------------------------------------------------------------
Multi-Year Enhanced Multi-year guaranteed interest -- --
Fixed Account(1) income
- -----------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS OBJECTIVE ADVISER SUB-ADVISER
- -----------------------------------------------------------------------------------------------------------------
INDEX AGSPC International Seeks long-term growth of capital VALIC N/A
EQUITY Equities Fund* through investments primarily in a
FUNDS 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.
---------------------------------------------------------------------------------------------------
AGSPC MidCap Seeks growth of capital through VALIC N/A(2)
Index Fund*(3) 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.
---------------------------------------------------------------------------------------------------
AGSPC Small Cap Seeks growth of capital through VALIC N/A(2)
Index Fund*(3) 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.
---------------------------------------------------------------------------------------------------
AGSPC Stock Seeks long-term capital growth VALIC N/A(2)
Index Fund*(3) 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).
- -----------------------------------------------------------------------------------------------------------------
ACTIVELY AGSPC Growth Seeks long-term growth of capital VALIC Wellington
MANAGED Fund* through investment primarily in Management
EQUITY equity securities. Company, LLP(4)
FUNDS
---------------------------------------------------------------------------------------------------
AGSPC Growth & Seeks long-term growth of capital VALIC N/A
Income Fund* and, secondarily, current income
through investment in common stocks
and equity-related securities.
---------------------------------------------------------------------------------------------------
American Century Seeks capital growth through American Century N/A
Ultra Fund investments primarily in common Investment Management,
stocks that are considered to have Inc.
better-than-average prospects for
appreciation.
---------------------------------------------------------------------------------------------------
American General Seeks long-term capital VALIC Jacobs Asset
International appreciation by investing in equity Management
Growth securities of non-U.S. companies,
Fund** 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.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
* A series of American General Series Portfolio Company ("AGSPC").
** A series of American General Series Portfolio Company 3 ("AGSPC 3").
(1) This Fixed Account Option is also referred to in this prospectus as the
Market Value Adjustment ("MVA") Option. For purposes of this limitation,
each MVA Band under the Multi-Year Enhanced Fixed Option will count as a
separate investment option. An MVA Band is established for each separate
investment for a new guarantee period. The minimum allocation to an MVA
Band, as described in the Contract, may be changed from time to time by the
Company. Availability of this Option is subject to regulatory approval
within the state in which your Contract is issued. It may not be available
under your Contract. See MVA Option herein.
(2) Bankers Trust Company ("Bankers Trust") previously served as sub-adviser to
the AGSPC MidCap Index Fund, the AGSPC Small Cap Index Fund and the AGSPC
Stock Index Fund. VALIC re-assumed direct management of each Fund's
investment portfolio on October 1, 1999. Relative to the American General
Small Cap Value Fund, VALIC re-assumed that portion of the investment
portfolio previously managed by Bankers Trust as one of two sub-advisers to
the Fund.
(3) "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"). 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
those Funds. The Russell 2000(R) Index is a trademark/servicemark of Frank
Russell Trust Company. Russell(TM) is a trademark of the Frank Russell
Company.
(4) Wellington Management Company, LLP replaced T. Rowe Price Associates, Inc.
as sub-adviser to the Fund effective September 1, 1999. The investment
objective was also changed at that time.
7
<PAGE> 192
SUMMARY -- (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS OBJECTIVE ADVISER SUB-ADVISER
- -----------------------------------------------------------------------------------------------------------------
American General Seeks growth of capital and future VALIC Capital Guardian
International Value income through investments Trust Company
Fund** primarily in securities of non-U.S.
issuers and securities whose
principal markets are outside of
the United States.
---------------------------------------------------------------------------------------------------
American General Seeks long-term growth of capital VALIC Goldman Sachs
Large Cap Growth through a broadly diversified Asset Management
Fund** 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 Seeks total returns that exceed VALIC State Street Bank
Large Cap Value over time the Russell 1000(R) Value & Trust
Fund**(3) Index through investments in equity Company/State
securities. Street Global
Advisors
---------------------------------------------------------------------------------------------------
American General Seeks capital appreciation VALIC Brown Capital
Mid Cap Growth principally through investments in Management Inc.
Fund** medium capitalization equity
securities, such as common and
preferred stocks and securities
convertible into common stocks.
Current income is a secondary
objective.
---------------------------------------------------------------------------------------------------
American General Seeks capital growth through VALIC Neuberger Berman
Mid Cap Value investment in equity securities of Management Inc.
Fund** medium capitalization companies
using a value-oriented investment
approach.
---------------------------------------------------------------------------------------------------
American General Seeks long-term growth from a VALIC JP Morgan
Small Cap Growth portfolio of equity securities of Investment
Fund** small capitalization growth Management Inc.
companies.
---------------------------------------------------------------------------------------------------
American General Seeks maximum long-term return, VALIC Fiduciary
Small Cap Value consistent with reasonable risk to Management
Fund** principal by investing primarily in Associates,
equity securities of small Inc.(2)
capitalization companies in terms
of revenues and/or market
capitalization.
---------------------------------------------------------------------------------------------------
Dreyfus Founders Seeks long-term growth of capital Founders N/A
Growth by investing primarily in common Asset
Fund stocks of well-established, Management LLC
high-quality growth companies.
---------------------------------------------------------------------------------------------------
Dreyfus Variable Seeks to maximize capital The Dreyfus N/A
Investment Fund -- appreciation by investing at least Corporation
Small 65% of its assets in the common
Cap Portfolio stock of U.S. and foreign
companies. The portfolio focuses on
small-cap companies with total
market values of less than $1.5
billion.
---------------------------------------------------------------------------------------------------
Evergreen Growth Seeks capital growth in the value Evergreen Asset N/A
and Income Fund -- of its shares by investing in the Management Corp.
Class A*** securities of companies which are
temporarily undervalued in the
marketplace but display
characteristics of growth such as
high return on investment and
competitive advantage in their
industry.
---------------------------------------------------------------------------------------------------
Evergreen Small Cap Seeks current income and capital Evergreen Asset N/A
Value Fund -- Class growth in the value of its shares Management Corp.
A*** by investing in common stocks of
small U.S. companies (less than $1
billion in market capitalization).
---------------------------------------------------------------------------------------------------
Evergreen Value Seeks long-term capital growth with Evergreen Investment N/A
Fund -- Class A*** current income as a secondary Management
objective by investing at least 75%
of its assets in common stocks of
medium and large-cap U.S. companies
with prospects for earning growth
and dividends.
---------------------------------------------------------------------------------------------------
Neuberger Berman Seeks capital appreciation and, Neuberger Berman Neuberger
Guardian Trust secondarily, current income by Management Inc. Berman, LLC
investing primarily in common
stocks of large-capitalization
companies.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
** A series AGSPC 3.
*** A series of Evergreen Equity Trust.
(2) Bankers Trust Company ("Bankers Trust") previously served as sub-adviser
to the AGSPC MidCap Index Fund, the AGSPC Small Cap Index Fund and the
AGSPC Stock Index Fund. VALIC re-assumed direct management of each Fund's
investment portfolio on October 1, 1999. Relative to the American General
Small Cap Value Fund, VALIC re-assumed that portion of the investment
portfolio previously managed by Bankers Trust as one of two sub-advisers
to the Fund.
(3) The Russell 1000(R) Value Index is a trademark/servicemark of Frank
Russell Trust Company. Russell(TM) is a trademark of the Frank Russell
Company.
8
<PAGE> 193
SUMMARY -- (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS OBJECTIVE ADVISER SUB-ADVISER
- -----------------------------------------------------------------------------------------------------------------
Putnam Global Seeks capital appreciation. Current Putnam Investment N/A
Growth income is only an incidental Management Inc.
Fund -- Class A consideration in selecting
Shares 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.
---------------------------------------------------------------------------------------------------
Putnam New Seeks long-term capital Putnam Investment N/A
Opportunities appreciation. Current income is Management Inc.
Fund -- Class A only an incidental consideration.
Shares 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.
---------------------------------------------------------------------------------------------------
Putnam OTC & Seeks capital appreciation by Putnam Investment N/A
Emerging Growth investing primarily in common Management Inc.
Fund -- Class A stocks traded in the
Shares over-the-counter 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.
---------------------------------------------------------------------------------------------------
Scudder Growth Seeks long-term growth of capital, Scudder Kemper N/A
and Income Fund current income and growth of income Investments, Inc.
by investing primarily in common
stocks, preferred stocks, and
securities convertible into common
stocks of companies which offer the
prospect for growth of earning
while paying current dividends.
---------------------------------------------------------------------------------------------------
T. Rowe Price Seeks long-term capital growth T. Rowe Price N/A
Small-Cap Stock through investments primarily in Associates, Inc.
Fund stocks of small to medium-sized
companies.
---------------------------------------------------------------------------------------------------
Templeton Foreign Seeks long-term capital growth by Templeton Global N/A
Fund -- Class A investing primarily in the equity Advisors Limited
securities of companies outside the
United States, including emerging
markets.
---------------------------------------------------------------------------------------------------
Templeton Seeks to achieve long-term capital Templeton Investment N/A
International growth by investing primarily in Counsel, Inc.
Securities Fund -- stocks of companies outside the
Class 1**** United States, including emerging
markets.
---------------------------------------------------------------------------------------------------
Vanguard Seeks to provide long-term growth Vanguard N/A
Windsor II Fund 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.
- -----------------------------------------------------------------------------------------------------------------
BALANCED American General Seeks balanced accomplishment of VALIC Capital Guardian
FUNDS Balanced Fund** (i) conservation of principal and Trust Company
(ii) long-term growth of capital
and income through investment in
fixed income and equity securities.
---------------------------------------------------------------------------------------------------
Vanguard Wellington Seeks to conserve capital and Wellington Management N/A
Fund provide moderate long-term growth Company, LLP
in capital and income by investing
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.
- -----------------------------------------------------------------------------------------------------------------
INCOME AGSPC Capital Seeks the highest possible total VALIC N/A
FUNDS Conservation Fund* 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>
* A series of AGSPC.
** A series AGSPC 3.
**** A series of Franklin Templeton Variable Insurance Products Trust.
9
<PAGE> 194
SUMMARY -- (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS OBJECTIVE ADVISER SUB-ADVISER
- -----------------------------------------------------------------------------------------------------------------
AGSPC Government Seeks high current income and VALIC N/A
Securities Fund* protection of capital through
investments in intermediate and
long-term U.S. Government debt
securities.
---------------------------------------------------------------------------------------------------
AGSPC International Seeks high current income through VALIC N/A
Government investments primarily in investment
Bond Fund* grade debt securities issued or
guaranteed by foreign governments.
---------------------------------------------------------------------------------------------------
American General Seeks the highest possible total VALIC American General
Core Bond Fund** return consistent with conservation Investment
of capital through investment in Management, L.P.
medium to high quality fixed income
securities.
---------------------------------------------------------------------------------------------------
American General Seeks the highest possible total VALIC Capital Guardian
Domestic Bond return consistent with conservation Trust Company
Fund** of capital through investment
primarily in investment grade fixed
income securities and other income
producing securities.
---------------------------------------------------------------------------------------------------
American General Seeks the highest possible total VALIC American General
High Yield Bond return and income consistent with Investment
Fund** conservation of capital through Management, L.P.
investment in a diversified
portfolio of high yielding high
risk fixed income securities.
---------------------------------------------------------------------------------------------------
American General Seeks the highest possible total VALIC American General
Strategic Bond return and income consistent with Investment
Fund** conservation of capital through Management, L.P.
investment in a diversified
portfolio of income producing
securities.
---------------------------------------------------------------------------------------------------
Vanguard Long-Term Seeks a high level of current Wellington Management N/A
Corporate Fund income consistent with the Company, LLP
maintenance of principal and
liquidity by investing in a
diversified portfolio of investment
grade corporate and Government
bonds.
---------------------------------------------------------------------------------------------------
Vanguard Long-Term Seeks a high level of current Vanguard N/A
Treasury Fund income consistent with the
maintenance of principal and
liquidity by investing at least 85%
of its total assets in long-term
securities backed by the full faith
and credit of the U.S. Government.
- -----------------------------------------------------------------------------------------------------------------
SPECIALTY AGSPC Science & Seeks long-term growth of capital VALIC T. Rowe Price
FUNDS Technology through investment primarily in the Associates, Inc.
Fund* common stocks and equity-related
securities of companies that are
expected to benefit from the
development, advancement and use of
science and technology.
---------------------------------------------------------------------------------------------------
AGSPC Social Seeks growth of capital through VALIC N/A
Awareness Fund* investment, primarily in common
stocks, in companies which meet the
social criteria established for the
Fund.
---------------------------------------------------------------------------------------------------
American General Seeks growth of capital through VALIC N/A
Socially investment, primarily in equity
Responsible Fund** securities, in companies which meet
the social criteria established for
the Fund.
- -----------------------------------------------------------------------------------------------------------------
MONEY AGSPC Money Seeks liquidity, protection of VALIC N/A
MARKET Market Fund* capital and current income through
FUNDS investments in short-term money
market instruments.
---------------------------------------------------------------------------------------------------
American General Seeks liquidity, protection of VALIC N/A
Money Market Fund** capital and current income through
investments in short-term money
market instruments.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
* A series of AGSPC.
** A series AGSPC 3.
10
<PAGE> 195
SUMMARY -- (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS OBJECTIVE ADVISER SUB-ADVISER
- -----------------------------------------------------------------------------------------------------------------
LIFESTYLE American General Seeks current income and low to VALIC N/A
FUNDS Conservative Growth moderate growth of capital through
Lifestyle Fund** investments in AGSPC or AGSPC 3
Funds.
---------------------------------------------------------------------------------------------------
American General Seeks growth through investments in VALIC N/A
Growth Lifestyle AGSPC or AGSPC 3 Funds.
Fund**
---------------------------------------------------------------------------------------------------
American General Seeks growth and current income VALIC N/A
Moderate Growth through investments in AGSPC or
Lifestyle Fund** AGSPC 3 Funds.
---------------------------------------------------------------------------------------------------
Vanguard Seeks current income and Vanguard N/A
LifeStrategy low-to-moderate growth of capital
Conservative by investing in a relatively fixed
Growth Fund combination of other Vanguard
funds.
---------------------------------------------------------------------------------------------------
Vanguard Seeks growth of capital by Vanguard N/A
LifeStrategy Growth investing in a relatively fixed
Fund combination of other Vanguard
funds.
---------------------------------------------------------------------------------------------------
Vanguard Seeks growth of capital and a Vanguard N/A
LifeStrategy reasonable level of current income
Moderate Growth by investing in a relatively fixed
Fund combination of other Vanguard
funds.
- -----------------------------------------------------------------------------------------------------------------
ASSET AGSPC Asset Seeks maximum aggregate rate of VALIC N/A
ALLOCATION Allocation Fund* return over the long-term through
FUNDS controlled investment risk by
adjusting its investment mix among
stocks, long-term debt securities
and short-term money market
securities.
---------------------------------------------------------------------------------------------------
Templeton Asset Seeks a high level of total return Templeton Investment N/A
Strategy by investing in the following Counsel, Inc.
Fund -- Class 1**** market segments: stocks and bonds
of any nation, including emerging
markets, and money market
instruments.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
* A series of AGSPC.
** A series AGSPC 3.
**** A series of Franklin Templeton Variable Insurance Products Trust.
11
<PAGE> 196
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
A detailed description of the investment objective of each Mutual Fund can be
found 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.
Amounts invested in an MVA Option may be transferred to another investment
option at the end of an MVA term without application of a market value
adjustment.
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 from an MVA Option prior to the end of the applicable MVA term will
also be subject to a market value adjustment unless an exception applies. This
may increase or reduce the amount withdrawn. However, the market value
adjustment will not reduce the amount invested in the MVA Option below the
guaranteed amount.
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.
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."
12
<PAGE> 197
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
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 may, in its discretion, reimburse to certain Divisions some or all
of the 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. The minimum amount to establish a new Multi-Year Enhanced Fixed
Option guarantee period (MVA Band), as described in the Contract, may be changed
from time to time by the Company.
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.
13
<PAGE> 198
SELECTED PURCHASE UNIT DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, 1999 JANUARY 4, 1999 DECEMBER 31, 1998
------------------------ ------------------- ------------------------ SEPTEMBER 22,
PURCHASE PURCHASE PURCHASE PURCHASE 1998
UNITS PURCHASE UNITS IN UNIT UNITS PURCHASE PURCHASE
IN FORCE UNIT VALUE FORCE VALUE(1) IN FORCE UNIT VALUE UNIT VALUE(1)
----------- ---------- -------- -------- ----------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
AGSPC Asset Allocation Division 5..... 61,240,667 $4.174280 -- -- 60,237,818 $3.772519 $ 3.401223
AGSPC Capital Conservation Division
7................................... 24,749,727 $2.056559 -- -- 28,751,662 $2.085846 $ 2.048533
AGSPC Government Securities Division
8................................... 45,292,728 $2.032753 -- -- 53,729,671 $2.111727 $ 2.098372
AGSPC Growth Division 15.............. 460,108,285 $2.582249 -- -- 494,997,997 $2.428587 $ 1.923891
AGSPC Growth & Income Division 16..... 124,329,201 $2.676995 -- -- 129,550,695 $2.201234 $ 1.772957
AGSPC International Equities Division
11.................................. 94,415,343 $1.860227 -- -- 101,811,751 $1.454644 $ 1.205200
AGSPC International Government Bond
Division 13......................... 90,136,603 $1.609098 -- -- 97,473,851 $1.728006 $ 1.653681
AGSPC MidCap Index Division 4(2)...... 151,317,931 $5.721920 -- -- 169,039,887 $5.029093 $ 3.941295
AGSPC Money Market Division 6......... 233,940,123 $1.807351 -- -- 147,547,688 $1.742617 $ 1.723944
AGSPC Science & Technology Division
17.................................. 517,699,561 $6.398997 -- -- 418,601,069 $3.216190 $ 2.208120
AGSPC Small Cap Index Division 14..... 94,031,183 $2.522643 -- -- 107,321,015 $2.100506 $ 1.804083
AGSPC Social Awareness Division 12.... 136,226,993 $4.419383 -- -- 114,382,494 $3.762308 $ 3.138915
AGSPC Stock Index Division 10......... 766,975,696 $5.696582 -- -- 691,680,049 $4.772052 $ 3,972280
American Century Ultra Division 31.... 411,119,880 $2.359768 -- -- 209,221,513 $1.685503 $ 1.373875
American General Balanced Division
42.................................. 461,870 $1.323103 -- -- -- $ 1.70132 $ 1.021413
American General Conservative Growth
Lifestyle Division 50............... 203,221 $1.306897 -- -- -- $1.162045 $ 1.025412
American General Core Bond Division
58.................................. 54,349 $1.009692 -- -- -- $1.029153 $ 1.012421
American General Domestic Bond
Division 43......................... 188,580 $1.004631 -- -- -- $1.044434 $ 1.017417
American General Growth Lifestyle
Division 48......................... 139,443 $1.538200 -- -- -- $1.192541 $ 1.014416
American General High Yield Bond
Division 60......................... 136,423 $1.075994 -- -- -- $1.053096 $ 1.000425
American General International Growth
Division 33......................... 167,387 $1.634943 -- -- -- $1.051722 $ 0.941455
American General International Value
Division 34......................... 337,242 $1.915641 -- -- -- $1.149900 $ 0.945454
American General Large Cap Growth
Division 39......................... 519,825 $1.667518 -- -- -- $1.240768 $ 1.011419
American General Large Cap Value
Division 40......................... 216,072 $1.302905 -- -- -- $1.246581 $ 1.070388
American General Mid Cap Growth
Division 37......................... 477,094 $1.423173 -- -- -- $1.347693 $ 1.069389
American General Mid Cap Value
Division 38......................... 223,437 $1.521699 -- -- -- $1.254723 $ 1.049399
American General Moderate Growth
Lifestyle Division 49............... 215,575 $1.397661 -- -- -- $1.185441 $ 1.025411
American General Money Market Division
44.................................. 4,089,393 $1.053624 -- -- -- $1.013309 $ 1.002329
American General Small Cap Growth
Division 35......................... 298,665 $2.272711 -- -- -- $1.349354 $ 1.075387
American General Small Cap Value
Division 36......................... 166,013 $1.080558 -- -- -- $1.165259 $ 1.035409
American General Socially Responsible
Division 41......................... 282,396 $1.497374 -- -- -- $1.277759 $ 1.065392
American General Strategic Bond
Division 59......................... 2,324 $1.081981 -- -- -- $1.049867 $ 1.011421
Dreyfus Founders Growth Division 30... 357,129,398 $2.196620 -- -- 250,777,959 $1.595913 $ 1.337963
Dreyfus Variable Investment Fund
Small Cap Portfolio Division 18..... 351,855,473 $2.059431 -- -- 474,215,229 $1.690786 $ 1.412670
Evergreen Equity Trust
Evergreen Growth and Income Division
56................................ 175 $1.132919 -- $1.00 -- -- --
Evergreen Small Cap Value Division
55................................ 244 $0.995515 -- $1.00 -- -- --
Evergreen Value Division 57......... 4,240 $1.034113 -- $1.00 -- -- --
Franklin Templeton Variable Insurance
Products Trust
Templeton Asset Strategy -- Class 1
Division 19(3).................... 137,266,658 $2.058095 -- -- 190,963,707 $1.695764 $ 1.403278
Templeton International Securities
-- Class 1 Division 20(4)......... 372,176,780 $2.076148 -- -- 452,419,089 $1.700398 $ 1.467274
Neuberger Berman Guardian Trust
Division 29......................... 40,241,067 $1.422424 -- -- 45,261,146 $1.324970 $ 1.109162
Putnam Global Growth -- Class A
Division 28......................... 181,916,991 $2.465895 -- -- 101,468,260 $1.512865 $ 1.237343
Putnam New Opportunities -- Class A
Division 26......................... 386,064,440 $2.376261 -- -- 280,523,297 $1,415175 $ 1.109266
Putnam OTC & Emerging Growth -- Class
A Division 27....................... 170,725,977 $2.408872 -- -- 129,463,792 $1.072660 $ 0.839928
Scudder Growth and Income Division
21.................................. 146,888,390 $1.584519 -- -- 159,815,811 $1.507724 $ 1.348500
T. Rowe Price Small-Cap Stock Division
51.................................. 821,977 $1.293095 -- -- 122 $1.141049 $ 1.007776
Templeton Foreign -- Class A Division
32.................................. 219,168,378 $1.479830 -- -- 198,626,024 $1.069704 $ 0.923717
Vanguard LifeStrategy Conservative
Growth Division 54.................. 554,101 $1.153827 -- -- -- $1.084026 $ 1.006776
Vanguard LifeStrategy Growth Division
52.................................. 1,591,689 $1.352880 -- -- -- $1.168111 $ 1.006276
Vanguard LifeStrategy Moderate Growth
Division 53......................... 1,354,406 $1.244955 -- -- -- $1.125919 $ 1.002175
Vanguard Long-Term Corporate Division
22.................................. 49,616,245 $1.179657 -- -- 44,122,646 $1.271278 $ 1.253982
Vanguard Long-Term Treasury Division
23.................................. 110,102,115 $1.191635 -- -- 86,673,300 $1.318263 $ 1.310099
Vanguard Wellington Division 25....... 328,701,408 $1.528992 -- -- 253,840,498 $1.482836 $ 1.380127
Vanguard Windsor II Division 24....... 426,529,299 $1.566008 -- -- 372,737,595 $1.683226 $ 1.475161
</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.
(3) Effective May 1, 2000 the Templeton Asset Allocation Fund merged with the
Templeton Global Asset Allocation Fund. At the same time as the merger,
the Templeton Asset Allocation Fund changed its name to the Templeton Asset
Strategy Fund. Accordingly, the Templeton Asset Allocation Fund Division
19 was renamed the Templeton Asset Strategy Fund Division 19. The Selected
Purchase Unit Data for the Division through December 31, 1999, reflects
units of the Templeton Asset Allocation Fund Division 19.
(4) Effective May 1, 2000 the Templeton International Fund merged with the
Templeton International Equity Fund. At the same time as the merger, the
Templeton International Fund changed its name to the Templeton
International Securities Fund. Accordingly, the Templeton International
Fund Division 20 was renamed the Templeton International Securities Fund
Division 20. The Selected Purchase Unit Data for the Division through
December 31, 1999, reflects units of the Templeton International Fund
Division 20.
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.
14
<PAGE> 199
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.
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
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
15
<PAGE> 200
- --------------------------------------------------------------------------------
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
American General Distributors, Inc. (the "Distributor"), 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.
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. You may be
subject to further limits on how many options you may be invested in at any one
time or how many of the options you are invested in may be involved in certain
transactions at any one time. 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 and, for 2 of such funds, have one of the
following sub-advisers: Wellington Management Company, LLP and T. Rowe Price
Associates, Inc.
- - 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.,
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 Founders Funds, Inc. -- offers 1 fund for which Founders Asset
Management LLC serves as investment adviser. The Funds were formerly known as
Founders Funds, Inc.
- - 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 Evergreen Investment Management serves as investment
adviser.
- - Franklin Templeton Variable Insurance Products Trust -- offers 2 funds for
which Templeton Investment Counsel, Inc. serves as investment adviser.
- - Neuberger Berman Management Inc. -- offers 1 fund for which Neuberger Berman
Management Inc. serves as investment manager and Neuberger Berman LLC, serves
as sub-adviser.
- - Putnam Investments -- offers 3 funds for which Putnam Investment Management
Inc., serves as investment adviser.
The Distributor's
address is 2929 Allen Parkway,
Houston, Texas 77019.
For more information
about THE DISTRIBUTOR
see "Distribution of Variable
Annuity Contracts" in
the Statement of
Additional Information
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.
16
<PAGE> 201
- --------------------------------------------------------------------------------
- - 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.
- - 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.
Shares of certain of the Funds 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.
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
PURCHASE PAYMENTS -- an
amount of money you pay to
VALIC to receive the benefits
of an annuity Contract offered
by Portfolio Director Plus.
17
<PAGE> 202
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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, or other investment option
chosen by your employer. If your employer chooses another investment option
other than the Money Market Division, the value of your investment may
fluctuate and you could lose money. 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.)
Once we have established your account and have applied your initial Purchase
Payment as described above, any subsequent Purchase Payment that we receive at
our Home Office before the close of the Exchange will be credited the same
business day. If not, it 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.
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 56 investment options offered in Portfolio Director Plus. This
includes 3 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
The Fixed Account Plus and the Short Term Fixed Account are part of the
Company's general assets. The MVA Option may be invested in either the general
assets of the Company or in a Separate Account of the Company, depending upon
state requirements. You may allocate all or a
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.
For more information as to
how PURCHASE UNIT VALUES
are calculated, see the
Statement of Additional
Information.
18
<PAGE> 203
- --------------------------------------------------------------------------------
portion of your Purchase Payment to the Fixed Account Options listed in the
"Summary" section 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. With the exception of a market
value adjustment which generally will be applied to withdrawals or transfers
from an MVA Option prior to the end of an MVA term, we bear the entire
investment risk for the Fixed Account Options. 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. The minimum amount to establish each new Multi-Year Enhanced Fixed
Option guarantee period (MVA Band), as described in the Contract, may be changed
from time to time by the Company.
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)
- ---------------
* This value may be subject to a market value adjustment under the MVA Option.
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 "Summary" and "Variable Account Options" sections in this
prospectus and in each Fund's 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.
19
<PAGE> 204
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)
Multi-Year
Enhanced Up to 100% At any time Withdrawals or
Fixed Transfers
Account(3): subject to
market value
adjustment if
prior to the end
of an MVA term.
Each MVA Band
will require a
minimum transfer
amount, as
described in the
Contract.(4)
</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.
(3) The MVA Option may not be available unless it has been selected as an option
for your employer's retirement plan.
(4) The minimum transfer amount may be changed from time to time by the Company.
From time to time we may waive the 20% transfer restriction on Fixed Account
Plus for transfers to the Multi-Year Enhanced Fixed Account or to other
investment options.
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). All transfers to or from the
MVA Option will require written instruction.
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
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.
20
<PAGE> 205
- --------------------------------------------------------------------------------
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.
MARKET TIMING
The Contracts are not designed for professional market timing organizations or
other entities using programmed and frequent transfers. We reserve the right at
any time and without prior notice to any party to terminate, suspend, or modify
our policies or procedures regarding transfer requests.
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.
In addition, certain charges may apply to the MVA Option which are discussed at
the end of this section.
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.
21
<PAGE> 206
- --------------------------------------------------------------------------------
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 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.
VALIC may waive any otherwise applicable surrender charge if you reinvest the
surrender proceeds in another VALIC insurance product.You will, however, be
subject to a surrender charge in the newly acquired product under the same terms
and conditions as the original product. For purposes of calculating any
surrender charge due, you will be considered to have acquired the new product as
of the date you acquired the original product.
The surrender charge may also 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
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> 207
- --------------------------------------------------------------------------------
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.
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.
23
<PAGE> 208
- --------------------------------------------------------------------------------
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 administrative and shareholder services it
provides to the underlying Fund. The Company may, in its discretion, apply some
or all of these payments to reduce its charges to the Division investing in that
Fund. In addition, the Company currently reimburses certain Divisions a portion
of the Company's administration and distribution fee. Such reimbursement
arrangements are, however, voluntary and may be changed by the Company at any
time. See the Fee Table in this prospectus for an identification of those Funds
for which a reimbursement applies and the amount of the reimbursement.
MARKET VALUE ADJUSTMENT
Under the MVA Option you may establish one or more MVA Bands with a minimum
amount, as described in the Contract, per MVA Band in states in which the MVA
Option has been approved. The Company may change the minimum from time to time.
Each MVA Band will be guaranteed to receive a stated rate of interest through
the end of the selected MVA term. We guarantee your MVA Option will earn at
least the lowest minimum interest rate applicable to any of the fixed interest
options in the contract. A withdrawal will generally be subject to a surrender
charge if it exceeds the amount of any free withdrawal amount permitted under
your contract. Withdrawals or transfers from an MVA Band prior to the end of the
MVA term will be subject to a market value adjustment, unless an exception
applies. This adjustment may be positive or negative, based upon the differences
in selected interest rates at the time the MVA Band was established and at the
time of the withdrawal. This adjustment will not apply upon the Owner's death,
or if the Owner is not a natural person, upon the death of the Annuitant. This
adjustment applies independently from surrender charges, and can still apply to
a 10% Free Withdrawal. The market value adjustment may be waived for
distributions that are required under your contract. It will also be waived for
30 days following the end of an MVA term. Loans are not available from the MVA
Option. Please review your contract for additional information on the MVA
Option.
24
<PAGE> 209
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.
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 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.
- 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> 211
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, no surrender or partial
surrender will be allowed except attainment of age 70 1/2, retirement or other
termination of employment 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;
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<PAGE> 212
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- 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 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.
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. If you elect to exercise one of these
exchange offers, you should contact any of our Regional Offices. 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, except at the discretion of the Company.
- 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
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<PAGE> 213
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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.
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.
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<PAGE> 214
- --------------------------------------------------------------------------------
- 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 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> 215
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, Short-Term
Fixed Account and Multi- Year Enhanced Fixed Account.
Each option of this type
is guaranteed to earn at least
a minimum rate of interest.
VARIABLE ACCOUNT
OPTIONS -- investment
options that correspond to
VALIC Separate Account A
Divisions offered by Portfolio
Director Plus. Investment returns
on Variable Account Options
will be positive or negative
depending on the investment
performance of the
underlying mutual fund.
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<PAGE> 216
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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.
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 or life insurance products 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
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.
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<PAGE> 217
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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, 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 Total 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 Plus will
stay in the Division beyond the time that a surrender charge would apply. It may
be calculated for 1, 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.
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.
For more information on how
TOTAL RETURN PERFORMANCE
INFORMATION is calculated,
see the Statement of
Additional Information.
33
<PAGE> 218
- --------------------------------------------------------------------------------
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, 1999 was 4.31% and
4.55%, 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, 1999
was 4.40% and 4.66%, 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.
34
<PAGE> 219
TABLE I
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
DIVISION
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Asset Allocation (Division 5)......................... 09/06/83 -- 9.88% 15.81% 5.62%
AGSPC Capital Conservation (Division 7)..................... 01/16/86 -- 5.53 5.44 (5.89)
AGSPC Government Securities (Division 8).................... 01/16/86 -- 5.54 4.74 (8.12)
AGSPC Growth (Division 15).................................. 07/11/94 19.78% -- 20.31 1.49
AGSPC Growth & Income (Division 16)......................... 07/11/94 20.56 -- 21.41 16.56
AGSPC International Equities (Division 11).................. 10/02/89 -- 6.05 11.32 22.82
AGSPC International Government Bond (Division 13)........... 10/01/91 5.88 -- 3.42 (11.11)
AGSPC MidCap Index (Division 4)***.......................... 10/01/91 16.08 -- 21.06 8.72
AGSPC Money Market (Division 6)............................. 01/16/86 -- 3.78 3.17 (1.00)
AGSPC Science & Technology (Division 17).................... 07/11/94 41.64 -- 38.33 93.87
AGSPC Small Cap Index (Division 14)......................... 05/01/92 12.76 -- 14.96 15.04
AGSPC Social Awareness (Division 12)........................ 10/02/89 -- 15.84 26.62 12.41
AGSPC Stock Index (Division 10)............................. 04/20/87 -- 16.42 26.55 14.32
American Century Ultra (Division 31)........................ 07/01/96 26.95 -- -- 34.94
American General Balanced (Division 42)..................... 09/22/98 18.41 -- -- 8.02
American General Conservative Growth Lifestyle (Division
50)....................................................... 09/22/98 16.75 -- -- 7.41
American General Core Bond (Division 58).................... 09/22/98 (3.67) -- -- (6.35)
American General Domestic Bond (Division 43)................ 09/22/98 (4.42) -- -- (8.18)
American General Growth Lifestyle (Division 48)............. 09/22/98 33.91 -- -- 23.92
American General High Yield Bond (Division 60).............. 09/22/98 1.91 -- -- (2.47)
American General International Growth (Division 33)......... 09/22/98 49.29 -- -- 50.38
American General International Value (Division 34).......... 09/22/98 69.00 -- -- 61.51
American General Large Cap Growth (Division 39)............. 09/22/98 43.34 -- -- 29.33
American General Large Cap Value (Division 40).............. 09/22/98 12.28 -- -- (0.23)
American General Mid Cap Growth (Division 37)............... 09/22/98 20.62 -- -- 0.80
American General Mid Cap Value (Division 38)................ 09/22/98 30.47 -- -- 16.22
American General Moderate Growth Lifestyle (Division 49).... 09/22/98 23.16 -- -- 12.85
American General Money Market (Division 44)................. 09/22/98 0.24 -- -- (0.75)
American General Small Cap Growth (Division 35)............. 09/22/98 73.16 -- -- 63.35
American General Small Cap Value (Division 36).............. 09/22/98 (1.37) -- -- (11.48)
American General Socially Responsible (Division 41)......... 09/22/98 26.31 -- -- 12.13
American General Strategic Bond (Division 59)............... 09/22/98 1.64 -- -- (1.63)
Dreyfus Founders Growth (Division 30)....................... 07/01/96 24.32 -- -- 32.57
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18)............................................. 07/11/94 14.06 -- 13.92 16.74
Evergreen Growth and Income Fund (Division 56).............. 01/04/99 -- -- -- --
Evergreen Small Cap Value Fund (Division 55)................ 01/04/99 -- -- -- --
Evergreen Value Fund (Division 57).......................... 01/04/99 -- -- -- --
Franklin Templeton Variable Insurance Products Trust
Templeton Asset Strategy -- Class 1 (Division 19)(1)...... 07/11/94 14.04 -- 15.00 16.31
Templeton International Securities -- Class 1 (Division
20)(2).................................................. 07/11/94 14.23 -- 15.12 17.04
Neuberger Berman Guardian Trust (Division 29)............... 07/01/96 9.41 -- -- 2.48
Putnam Global Growth (Division 28).......................... 07/01/96 28.59 -- -- 57.92
Putnam New Opportunities (Division 26)...................... 07/01/96 27.21 -- -- 62.83
Putnam OTC & Emerging Growth (Division 27).................. 07/01/96 27.72 -- -- 119.46
Scudder Growth and Income (Division 21)(3).................. 07/01/96 12.95 -- -- 0.32
T. Rowe Price Small Cap Stock Fund (Division 51)............ 09/22/98 17.87 -- -- 8.27
Templeton Foreign -- Class A (Division 32)(4)............... 07/01/96 10.69 -- -- 33.27
Vanguard LifeStrategy Conservative Growth (Division 54)..... 09/22/98 7.72 -- -- 1.60
Vanguard LifeStrategy Growth (Division 52).................. 09/22/98 22.46 -- -- 10.76
Vanguard LifeStrategy Moderate Growth (Division 53)......... 09/22/98 14.78 -- -- 5.55
Vanguard Long-Term Corporate (Division 22)**................ 07/01/96 3.49 -- -- (11.43)
Vanguard Long-Term Treasury (Division 23)**................. 07/01/96 3.80 -- -- (13.71)
Vanguard Wellington (Division 25)........................... 07/01/96 11.77 -- -- (1.57)
Vanguard Windsor II (Division 24)........................... 07/01/96 12.56 -- -- (11.19)
</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.
(1) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Asset Strategy Fund. Also
effective with this merger, the Templeton Asset Allocation Fund Division 19
was renamed the Templeton Asset Strategy Fund Division 19. Accordingly, the
performance figures for the Division through December 31, 1999, reflect the
actual historical performance of the Templeton Asset Allocation Fund
Division 19.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Also effective with
this merger, the Templeton International Fund Division 20 was renamed the
Templeton International Securities Fund Division 20. Accordingly, the
performance figures for the Division through December 31, 1999, reflect the
actual historical performance of the Templeton International Fund Division
20.
(3) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(4) 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.
35
<PAGE> 220
TABLE II
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15).................................. 04/29/94 18.15% -- 20.31% 1.49%
AGSPC Growth & Income (Division 16)......................... 04/29/94 18.90 -- 21.41 16.56
AGSPC Science & Technology (Division 17).................... 04/29/94 38.66 -- 38.33 93.87
American Century Ultra (Division 31)........................ 11/02/81 -- 23.05% 27.86 34.94
Dreyfus Founders Growth (Division 30)....................... 01/05/62 -- 18.80 28.39 32.57
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18)............................................. 08/31/90 34.04 -- 13.92 16.74
Evergreen Growth and Income -- Class A (Division 56)........ 01/03/95 19.15 -- -- 8.24
Evergreen Small Cap Value -- Class A (Division 55).......... 01/03/95 12.00 -- -- (4.97)
Evergreen Value -- Class A (Division 57).................... 04/12/85 -- 11.43 15.89 (1.29)
Franklin Templeton Variable Insurance Products Trust........
Templeton Asset Strategy -- Class 1 (Division 19)(1)...... 08/24/88 -- 11.61 15.00 16.31
Templeton International Securities -- Class 1 (Division
20)(2)................................................. 05/01/92 13.86 -- 15.12 17.04
Neuberger Berman Guardian Trust (Division 29)............... 08/03/93 12.02 -- 13.43 2.48
Putnam Global Growth -- Class A (Division 28)............... 09/01/67 -- 15.05 24.57 57.92
Putnam New Opportunities -- Class A (Division 26)........... 08/31/90 30.70 -- 31.45 62.83
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 11/01/82 -- 22.92 33.51 119.46
Scudder Growth and Income (Division 21)(3).................. 11/13/84 -- 12.94 16.71 0.32
T. Rowe Price Small Cap Stock (Division 51)................. 06/01/50 -- 11.69 16.18 8.27
Templeton Foreign -- Class A (Division 32)(4)............... 10/05/82 -- 10.18 11.36 33.27
Vanguard LifeStrategy Conservative Growth (Division 54)..... 09/30/94 12.67 -- 12.79 1.60
Vanguard LifeStrategy Growth (Division 52).................. 09/30/94 18.35 -- 18.96 10.76
Vanguard LifeStrategy Moderate Growth (Division 53)......... 09/30/94 15.53 -- 16.06 5.55
Vanguard Long-Term Corporate (Division 22)**................ 07/09/73 -- 7.15 6.06 (11.43)
Vanguard Long-Term Treasury (Division 23)**................. 05/19/86 -- 6.72 6.37 (13.71)
Vanguard Wellington (Division 25)........................... 07/01/29 -- 11.09 15.26 (1.57)
Vanguard Windsor II (Division 24)........................... 06/24/85 -- 12.33 18.04 (11.19)
</TABLE>
- ---------------
Divisions with an identical inception date as the underlying Funds' inception
date are not reflected in this Table. See preceding 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 15-20 since inception
of each Division (July 11, 1994) and hypothetical performance for periods
prior to July 11, 1994 based on investment in a hypothetical Contract. 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 based on
investment in a hypothetical Contract. The Table reflects actual historical
performance of the related Separate Account Divisions 51-54 since inception
of each Division (September 22, 1998) and hypothetical performance for
periods prior to September 22, 1998 based on investment in a hypothetical
Contract. The Table reflects actual historical performance of the related
Separate Account Divisions 55-57 since inception of each Division (January
4, 1999) and hypothetical performance for periods prior to January 4, 1999
based on investment in a hypothetical Contract. 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) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Asset Strategy Fund.
Accordingly, the performance figures in the Table for the Fund through
December 31, 1999, reflect the historical performance and inception date of
the Templeton Asset Allocation Fund.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Accordingly, the
performance figures in the Table for the Fund through December 31, 1999,
reflect the historical performance and inception date of the Templeton
International Fund.
(3) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(4) 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.
36
<PAGE> 221
TABLE III
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
DIVISION
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Asset Allocation (Division 5)......................... 09/06/83 -- 9.94% 16.42% 10.65%
AGSPC Capital Conservation (Division 7)..................... 01/16/86 -- 5.59 6.30 (1.40)
AGSPC Government Securities (Division 8).................... 01/16/86 -- 5.60 5.61 (3.74)
AGSPC Growth (Division 15).................................. 07/11/94 19.84% -- 20.85 6.33
AGSPC Growth & Income (Division 16)......................... 07/11/94 20.63 -- 21.93 21.61
AGSPC International Equities (Division 11).................. 10/02/89 -- 6.11 12.02 27.88
AGSPC International Government Bond (Division 13)........... 10/01/91 5.94 -- 4.34 (6.88)
AGSPC MidCap Index (Division 4)***.......................... 10/01/91 16.15 -- 21.59 13.78
AGSPC Money Market (Division 6)............................. 01/16/86 -- 3.83 4.09 3.71
AGSPC Science & Technology (Division 17).................... 07/11/94 41.71 -- 38.68 98.96
AGSPC Small Cap Index (Division 14)......................... 05/01/92 12.82 -- 15.59 20.10
AGSPC Social Awareness (Division 12)........................ 10/02/89 -- 15.91 27.07 17.46
AGSPC Stock Index (Division 10)............................. 04/20/87 -- 16.48 27.00 19.37
American Century Ultra (Division 31)........................ 07/01/96 27.80 -- -- 40.00
American General Balanced (Division 42)..................... 09/22/98 22.23 -- -- 13.07
American General Conservative Growth Lifestyle (Division
50)....................................................... 09/22/98 20.59 -- -- 12.47
American General Core Bond (Division 58).................... 09/22/98 (0.05) -- -- (1.89)
American General Domestic Bond (Division 43)................ 09/22/98 (0.84) -- -- (3.81)
American General Growth Lifestyle (Division 48)............. 09/22/98 37.62 -- -- 28.99
American General High Yield Bond (Division 60).............. 09/22/98 5.74 -- -- 2.17
American General International Growth (Division 33)......... 09/22/98 52.91 -- -- 55.45
American General International Value (Division 34).......... 09/22/98 72.51 -- -- 66.59
American General Large Cap Growth (Division 39)............. 09/22/98 46.99 -- -- 34.39
American General Large Cap Value (Division 40).............. 09/22/98 16.15 -- -- 4.52
American General Mid Cap Growth (Division 37)............... 09/22/98 24.42 -- -- 5.60
American General Mid Cap Value (Division 38)................ 09/22/98 34.20 -- -- 21.28
American General Moderate Growth Lifestyle (Division 49).... 09/22/98 26.94 -- -- 17.90
American General Money Market (Division 44)................. 09/22/98 4.00 -- -- 3.98
American General Small Cap Growth (Division 35)............. 09/22/98 76.65 -- -- 68.43
American General Small Cap Value (Division 36).............. 09/22/98 2.33 -- -- (7.27)
American General Socially Responsible (Division 41)......... 09/22/98 30.07 -- -- 17.19
American General Strategic Bond (Division 59)............... 09/22/98 5.46 -- -- 3.06
Dreyfus Founders Growth (Division 30)....................... 07/01/96 25.21 -- -- 37.64
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18)............................................. 07/11/94 14.12 -- 14.57 21.80
Evergreen Growth and Income Fund (Division 56).............. 01/04/99 -- -- -- --
Evergreen Small Cap Value Fund (Division 55)................ 01/04/99 -- -- -- --
Evergreen Value Fund (Division 57).......................... 01/04/99 -- -- -- --
Franklin Templeton Variable Insurance Products Trust
Templeton Asset Strategy -- Class 1 (Division 19)(1)...... 07/11/94 14.11 -- 15.63 21.37
Templeton International Securities -- Class 1 (Division
20)(2).................................................. 07/11/94 14.29 -- 15.75 22.10
Neuberger Berman Guardian Trust (Division 29)............... 07/01/96 10.59 -- -- 7.36
Putnam Global Growth (Division 28).......................... 07/01/96 29.42 -- -- 63.00
Putnam New Opportunities (Division 26)...................... 07/01/96 28.06 -- -- 67.91
Putnam OTC & Emerging Growth (Division 27).................. 07/01/96 28.56 -- -- 124.57
Scudder Growth and Income (Division 21)(3).................. 07/01/96 14.05 -- -- 5.09
T. Rowe Price Small Cap Stock Fund (Division 51)............ 09/22/98 21.69 -- -- 13.33
Templeton Foreign -- Class A (Division 32)(4)............... 07/01/96 11.85 -- -- 38.34
Vanguard LifeStrategy Conservative Growth (Division 54)..... 09/22/98 11.63 -- -- 6.44
Vanguard LifeStrategy Growth (Division 52).................. 09/22/98 26.25 -- -- 15.82
Vanguard LifeStrategy Moderate Growth (Division 53)......... 09/22/98 18.63 -- -- 10.57
Vanguard Long-Term Corporate (Division 22)**................ 07/01/96 4.83 -- -- (7.21)
Vanguard Long-Term Treasury (Division 23)**................. 07/01/96 5.14 -- -- (9.61)
Vanguard Wellington (Division 25)........................... 07/01/96 12.90 -- -- 3.11
Vanguard Windsor II (Division 24)........................... 07/01/96 13.67 -- -- (6.96)
</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.
(1) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Asset Strategy Fund. Also
effective with this merger, the Templeton Asset Allocation Fund Division 19
was renamed the Templeton Asset Strategy Fund Division 19. Accordingly, the
performance figures for the Division through December 31, 1999, reflect the
actual historical performance of the Templeton Asset Allocation Fund
Division 19.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Also effective with
this merger, the Templeton International Fund Division 20 was renamed the
Templeton International Securities Fund Division 20. Accordingly, the
performance figures for the Division through December 31, 1999, reflect the
actual historical performance of the Templeton International Fund Division
20.
(3) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(4) 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.
37
<PAGE> 222
TABLE IV
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15).................................. 04/29/94 18.21% -- 20.85% 6.33%
AGSPC Growth & Income (Division 16)......................... 04/29/94 18.97 -- 21.93 21.61
AGSPC Science & Technology (Division 17).................... 04/29/94 38.73 -- 38.68 98.96
American Century Ultra (Division 31)........................ 11/02/81 -- 23.11% 28.30 40.00
Dreyfus Founders Growth (Division 30)....................... 01/05/62 -- 18.86 28.83 37.64
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18)............................................. 08/31/90 34.08 -- 14.57 21.80
Evergreen Growth and Income -- Class A (Division 56)........ 01/03/95 19.70 -- -- 13.29
Evergreen Small Cap Value -- Class A (Division 55).......... 01/03/95 12.70 -- -- (0.45)
Evergreen Value -- Class A (Division 57).................... 04/12/85 -- 11.49 16.51 3.41
Franklin Templeton Variable Insurance Products Trust........
Templeton Asset Strategy -- Class 1 (Division 19)(1)...... 08/24/88 -- 11.67 15.63 21.37
Templeton International Securities -- Class 1 (Division
20)(2)................................................. 05/01/92 13.92 -- 15.75 22.10
Neuberger Berman Guardian Trust (Division 29)............... 08/03/93 12.08 -- 14.09 7.36
Putnam Global Growth -- Class A (Division 28)............... 09/01/67 -- 15.11 25.05 63.00
Putnam New Opportunities -- Class A (Division 26)........... 08/31/90 30.75 -- 31.85 67.91
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 11/01/82 -- 22.98 33.89 124.57
Scudder Growth and Income (Division 21)(3).................. 11/13/84 -- 13.00 17.30 5.09
T. Rowe Price Small Cap Stock (Division 51)................. 06/01/50 -- 11.75 16.78 13.33
Templeton Foreign -- Class A (Division 32)(4)............... 10/05/82 -- 10.24 12.06 38.34
Vanguard LifeStrategy Conservative Growth (Division 54)..... 09/30/94 12.74 -- 13.46 6.44
Vanguard LifeStrategy Growth (Division 52).................. 09/30/94 18.41 -- 19.52 15.82
Vanguard LifeStrategy Moderate Growth (Division 53)......... 09/30/94 15.59 -- 16.67 10.57
Vanguard Long-Term Corporate (Division 22)**................ 07/09/73 -- 7.20 6.89 (7.21)
Vanguard Long-Term Treasury (Division 23)**................. 05/19/86 -- 6.78 7.20 (9.61)
Vanguard Wellington (Division 25)........................... 07/01/29 -- 11.15 15.89 3.11
Vanguard Windsor II (Division 24)........................... 06/24/85 -- 12.39 18.62 (6.96)
</TABLE>
- ---------------
Divisions with an identical inception date as the underlying Funds' inception
date are not reflected in this Table. See preceding 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 15-20 since inception
of each Division (July 11, 1994) and hypothetical performance for periods
prior to July 11, 1994 based on investment in a hypothetical Contract. 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 based on
investment in a hypothetical Contract. The Table reflects actual historical
performance of the related Separate Account Divisions 51-54 since inception
of each Division (September 22, 1998) and hypothetical performance for
periods prior to September 22, 1998 based on investment in a hypothetical
Contract. The Table reflects actual historical performance of the related
Separate Account Divisions 55-57 since inception of each Division (January
4, 1999) and hypothetical performance for periods prior to January 4, 1999
based on investment in a hypothetical Contract. 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) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Asset Strategy Fund.
Accordingly, the performance figures in the Table for the Fund through
December 31, 1999, reflect the historical performance and inception date of
the Templeton Asset Allocation Fund.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Accordingly, the
performance figures in the Table for the Fund through December 31, 1999,
reflect the historical performance and inception date of the Templeton
International Fund.
(3) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(4) 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> 223
TABLE V
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
DIVISION
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Asset Allocation (Division 5)......................... 09/06/83 -- 157.96% 113.90% 10.65%
AGSPC Capital Conservation (Division 7)..................... 01/16/86 -- 72.30 35.72 (1.40)
AGSPC Government Securities (Division 8).................... 01/16/86 -- 72.38 31.39 (3.74)
AGSPC Growth (Division 15).................................. 07/11/94 169.15% -- 157.75 6.33
AGSPC Growth & Income (Division 16)......................... 07/11/94 178.96 -- 169.54 21.61
AGSPC International Equities (Division 11).................. 10/02/89 -- 80.88 76.42 27.88
AGSPC International Government Bond (Division 13)........... 10/01/91 60.91 -- 23.65 (6.88)
AGSPC MidCap Index (Division 4)***.......................... 10/01/91 243.76 -- 165.74 13.78
AGSPC Money Market (Division 6)............................. 01/16/86 -- 45.68 22.19 3.71
AGSPC Science & Technology (Division 17).................... 07/11/94 573.27 -- 412.86 98.96
AGSPC Small Cap Index (Division 14)......................... 05/01/92 152.26 -- 106.38 20.10
AGSPC Social Awareness (Division 12)........................ 10/02/89 -- 337.56 231.31 17.46
AGSPC Stock Index (Division 10)............................. 04/20/87 -- 359.85 230.40 19.37
American Century Ultra (Division 31)........................ 07/01/96 135.98 -- -- 40.00
American General Balanced (Division 42)..................... 09/22/98 29.04 -- -- 13.07
American General Conservative Growth Lifestyle (Division
50)....................................................... 09/22/98 26.84 -- -- 12.47
American General Core Bond (Division 58).................... 09/22/98 (0.07) -- -- (1.89)
American General Domestic Bond (Division 43)................ 09/22/98 (1.06) -- -- (3.81)
American General Growth Lifestyle (Division 48)............. 09/22/98 50.01 -- -- 28.99
American General High Yield Bond (Division 60).............. 09/22/98 7.34 -- -- 2.17
American General International Growth (Division 33)......... 09/22/98 71.48 -- -- 55.45
American General International Value (Division 34).......... 09/22/98 99.87 -- -- 66.59
American General Large Cap Growth (Division 39)............. 09/22/98 63.10 -- -- 34.39
American General Large Cap Value (Division 40).............. 09/22/98 20.94 -- -- 4.52
American General Mid Cap Growth (Division 37)............... 09/22/98 31.98 -- -- 5.60
American General Mid Cap Value (Division 38)................ 09/22/98 45.29 -- -- 21.28
American General Moderate Growth Lifestyle (Division 49).... 09/22/98 35.38 -- -- 17.90
American General Money Market (Division 44)................. 09/22/98 5.11 -- -- 3.98
American General Small Cap Growth (Division 35)............. 09/22/98 105.98 -- -- 68.43
American General Small Cap Value (Division 36).............. 09/22/98 2.97 -- -- (7.27)
American General Socially Responsible (Division 41)......... 09/22/98 39.63 -- -- 17.19
American General Strategic Bond (Division 59)............... 09/22/98 6.98 -- -- 3.06
Dreyfus Founders Growth (Division 30)....................... 07/01/96 119.66 -- -- 37.64
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18)............................................. 07/11/94 105.94 -- 97.42 21.80
Evergreen Growth and Income Fund (Division 56).............. 01/04/99 13.29 -- -- --
Evergreen Small Cap Value Fund (Division 55)................ 01/04/99 (0.45) -- -- --
Evergreen Value Fund (Division 57).......................... 01/04/99 3.41 -- -- --
Franklin Templeton Variable Insurance Products Trust........
Templeton Asset Strategy -- Class 1 (Division 19)(1)...... 07/11/94 105.81 -- 106.67 21.37
Templeton International Securities -- Class 1 (Division
20)(2).................................................. 07/11/94 107.61 -- 107.76 22.10
Neuberger Berman Guardian Trust (Division 29)............... 07/01/96 42.24 -- -- 7.36
Putnam Global Growth (Division 28).......................... 07/01/96 146.59 -- -- 63.00
Putnam New Opportunities (Division 26)...................... 07/01/96 137.63 -- -- 67.91
Putnam OTC & Emerging Growth (Division 27).................. 07/01/96 140.89 -- -- 124.57
Scudder Growth and Income (Division 21)(3).................. 07/01/96 58.45 -- -- 5.09
T. Rowe Price Small Cap Stock Fund (Division 51)............ 09/22/98 28.31 -- -- 13.33
Templeton Foreign -- Class A (Division 32)(4)............... 07/01/96 47.98 -- -- 38.34
Vanguard LifeStrategy Conservative Growth (Division 54)..... 09/22/98 14.99 -- -- 6.44
Vanguard LifeStrategy Growth (Division 52).................. 09/22/98 34.44 -- -- 15.82
Vanguard LifeStrategy Moderate Growth (Division 53)......... 09/22/98 24.23 -- -- 10.57
Vanguard Long-Term Corporate (Division 22)**................ 07/01/96 17.97 -- -- (7.21)
Vanguard Long-Term Treasury (Division 23)**................. 07/01/96 19.16 -- -- (9.61)
Vanguard Wellington (Division 25)........................... 07/01/96 52.90 -- -- 3.11
Vanguard Windsor II (Division 24)........................... 07/01/96 56.60 -- -- (6.96)
</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.
(1) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Asset Strategy Fund. Also,
effective with this merger, the Templeton Asset Allocation Fund Division 19
was renamed the Templeton Asset Strategy Fund Division 19. Accordingly, the
performance figures for the Division through December 31, 1999, reflect the
actual historical performance of the Templeton Asset Allocation Fund
Division 19.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Also effective with
this merger, the Templeton International Fund Division 20 was renamed the
Templeton International Securities Fund Division 20. Accordingly, the
performance figures for the Division through December 31, 1999, reflect the
actual historical performance of the Templeton International Fund Division
20.
(3) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(4) 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> 224
TABLE VI
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15).................................. 04/29/94 158.22% -- 157.75% 6.33%
AGSPC Growth & Income (Division 16)......................... 04/29/94 167.70 -- 169.54 21.61
AGSPC Science & Technology (Division 17).................... 04/29/94 539.90 -- 412.86 98.96
American Century Ultra (Division 31)........................ 11/02/81 -- 699.41% 247.59 40.00
Dreyfus Founders Growth (Division 30)....................... 01/05/62 -- 462.89 254.82 37.64
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18)............................................. 08/31/90 1,442.37 -- 97.42 21.80
Evergreen Growth and Income -- Class A (Division 56)........ 01/03/95 145.33 -- -- 13.29
Evergreen Small Cap Value -- Class A (Division 55).......... 01/03/95 81.56 -- -- (0.45)
Evergreen Value -- Class A (Division 57).................... 04/12/85 -- 196.67 114.66 3.41
Franklin Templeton Variable Insurance Products Trust........
Templeton Asset Strategy -- Class 1 (Division 19)(1)...... 08/24/88 -- 201.66 106.67 21.37
Templeton International Securities -- Class 1 (Division
20)(2).................................................. 05/01/92 171.69 -- 107.76 22.10
Neuberger Berman Guardian Trust (Division 29)............... 08/03/93 107.76 -- 93.30 7.36
Putnam Global Growth -- Class A (Division 28)............... 09/01/67 -- 308.51 205.77 63.00
Putnam New Opportunities -- Class A (Division 26)........... 08/31/90 1,120.17 -- 298.49 67.91
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 11/01/82 -- 691.25 330.28 124.57
Scudder Growth and Income (Division 21)(3).................. 11/13/84 -- 239.54 122.11 5.09
T. Rowe Price Small Cap Stock (Division 51)................. 06/01/50 -- 203.83 117.22 13.33
Templeton Foreign -- Class A (Division 32)(4)............... 10/05/82 -- 165.20 76.74 38.34
Vanguard LifeStrategy Conservative Growth (Division 54)..... 09/30/94 87.63 -- 88.04 6.44
Vanguard LifeStrategy Growth (Division 52).................. 09/30/94 142.85 -- 143.86 15.82
Vanguard LifeStrategy Moderate Growth (Division 53)......... 09/30/94 113.99 -- 116.17 10.57
Vanguard Long-Term Corporate (Division 22)**................ 07/09/73 -- 100.51 39.56 (7.21)
Vanguard Long-Term Treasury (Division 23)**................. 05/19/86 -- 92.73 41.56 (9.61)
Vanguard Wellington (Division 25)........................... 07/01/29 -- 187.81 109.00 3.11
Vanguard Windsor II (Division 24)........................... 06/24/85 -- 221.49 134.82 (6.96)
</TABLE>
- ---------------
Divisions with an identical inception date as the underlying Funds' inception
date are not reflected in this Table. See preceding 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 15-20 since inception
of each Division (July 11, 1994) and hypothetical performance for periods
prior to July 11, 1994 based on investment in a hypothetical Contract. 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 based on
investment in a hypothetical Contract. The Table reflects actual historical
performance of the related Separate Account Divisions 51-54 since inception
of each Division (September 22, 1998) and hypothetical performance for
periods prior to September 22, 1998 based on investment in a hypothetical
Contract. The Table reflects actual historical performance of the related
Separate Account Divisions 55-57 since inception of each Division (January
4, 1999) and hypothetical performance for periods prior to January 4, 1999
based on investment in a hypothetical Contract. 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) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Asset Strategy Fund.
Accordingly, the performance figures in the Table for the Fund through
December 31, 1999, reflect the historical performance and inception date of
the Templeton Asset Allocation Fund.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Accordingly, the
performance figures in the Table for the Fund through December 31, 1999,
reflect the historical performance and inception date of the Templeton
International Fund.
(3) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(4) 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> 225
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 OR THE 12 MONTHS ENDED DECEMBER 31**
---------------------------------------------------------------------------------------
FUND AND DIVISION 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
----------------- ------ ----- ----- ------ ----- ------ ----- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AGSPC Asset Allocation (Division 5)..... 10.65% 17.19% 21.40% 9.99% 23.54% (2.29)% 8.19% (1.71)% 20.13% (3.38)%
AGSPC Capital Conservation (Division
7).................................... (1.40) 6.30 7.49 0.75 19.58 (7.04) 10.88 7.55 16.00 (1.28)
AGSPC Government Securities (Division
8).................................... (3.74) 7.86 7.83 0.90 16.31 (5.44) 9.70 6.14 13.59 4.91
AGSPC Growth (Division 15).............. 6.33 16.96 19.80 18.18 46.40 4.42 -- -- -- --
AGSPC Growth & Income (Division 16)..... 21.61 13.41 22.60 22.10 30.55 3.49 -- -- -- --
AGSPC International Equities (Division
11)................................... 27.88 17.57 1.18 5.75 9.67 6.90 28.58 (14.31) 10.06 (20.90)
AGSPC International Government Bond
(Division 13)......................... (6.88) 15.92 (5.79) 3.36 17.63 3.42 13.08 2.05 9.05 --
AGSPC MidCap Index (Division 4)****..... 13.78 17.80 30.45 17.61 29.24 (4.70) 11.78 8.79 11.63 --
AGSPC Money Market (Division 6)......... 3.71 4.12 4.13 3.97 4.51 2.77 1.67 2.22 4.49 6.83
AGSPC Science & Technology (Division
17)................................... 98.96 40.71 1.57 12.68 60.07 31.28 -- -- -- --
AGSPC Small Cap Index (Division 14)..... 20.10 (2.92) 21.18 15.57 26.39 (4.30) 14.77 11.28 -- --
AGSPC Social Awareness (Division 12).... 17.46 26.03 35.52 22.75 37.57 (2.42) 6.84 2.31 26.63 (2.21)
AGSPC Stock Index (Division 10)......... 19.37 27.14 31.77 21.53 35.95 (0.30) 8.78 5.58 27.70 (4.83)
American Century Ultra (Division 31).... 40.00 33.14 21.74 3.98 -- -- -- -- -- --
American General Balanced (Division
42)................................... 13.07 14.12 -- -- -- -- -- -- -- --
American General Conservative Growth
Lifestyle (Division 50)............... 12.47 12.78 -- -- -- -- -- -- -- --
American General Core Bond (Division
58)................................... (1.89) 1.86 -- -- -- -- -- -- -- --
American General Domestic Bond (Division
43)................................... (3.81) 2.86 -- -- -- -- -- -- -- --
American General Growth Lifestyle
(Division 48)......................... 28.99 16.30 -- -- -- -- -- -- -- --
American General High Yield Bond
(Division 60)......................... 2.17 5.06 -- -- -- -- -- -- -- --
American General International Growth
(Division 33)......................... 55.45 10.31 -- -- -- -- -- -- -- --
American General International Value
(Division 34)......................... 66.59 19.98 -- -- -- -- -- -- -- --
American General Large Cap Growth
(Division 39)......................... 34.39 21.36 -- -- -- -- -- -- -- --
American General Large Cap Value
(Division 40)......................... 4.52 15.71 -- -- -- -- -- -- -- --
American General Mid Cap Growth
(Division 37)......................... 5.60 24.98 -- -- -- -- -- -- -- --
American General Mid Cap Value (Division
38)................................... 21.28 19.80 -- -- -- -- -- -- -- --
American General Moderate Growth
Lifestyle (Division 49)............... 17.90 14.83 -- -- -- -- -- -- -- --
American General Money Market (Division
44)................................... 3.98 1.08 -- -- -- -- -- -- -- --
American General Small Cap Growth
(Division 35)......................... 68.43 22.30 -- -- -- -- -- -- -- --
American General Small Cap Value
(Division 36)......................... (7.27) 11.04 -- -- -- -- -- -- -- --
American General Socially Responsible
(Division 41)......................... 17.19 19.15 -- -- -- -- -- -- -- --
American General Strategic Bond
(Division 59)......................... 3.06 3.80 -- -- -- -- -- -- -- --
Dreyfus Founders Growth (Division 30)... 37.64 23.76 25.25 2.95 -- -- -- -- -- --
Dreyfus Variable Investment Fund
-- Small Cap Portfolio (Division
18)................................... 21.80 (4.51) 15.37 15.14 27.78 4.32 -- -- -- --
Evergreen Growth and Income -- Class A
(Division 56)......................... 13.29 -- -- -- -- -- -- -- -- --
Evergreen Small Cap Value -- Class A
(Division 55)......................... (0.45) -- -- -- -- -- -- -- -- --
Evergreen Value -- Class A (Division
57)................................... 3.41 -- -- -- -- -- -- -- -- --
Franklin Templeton Variable Insurance
Products Trust
Templeton Asset Strategy -- Class 1
(Division 19)(1).................... 21.37 5.07 14.07 17.40 21.02 (0.41) -- -- -- --
Templeton International
Securities -- Class 1 (Division
20)(2).............................. 22.10 7.95 12.54 22.50 14.34 (0.07) -- -- -- --
Neuberger Berman Guardian Trust
(Division 29)......................... 7.36 1.34 16.66 12.08 -- -- -- -- -- --
Putnam Global Growth -- Class A
(Division 28)......................... 63.00 27.48 12.20 5.77 -- -- -- -- -- --
Putnam New Opportunities -- Class A
(Division 26)......................... 67.91 23.12 21.30 (5.24) -- -- -- -- -- --
Putnam OTC & Emerging Growth -- Class A
(Division 27)......................... 124.57 9.87 9.08 (10.50) -- -- -- -- -- --
Scudder Growth and Income (Division
21)(3)................................ 5.09 4.99 28.80 11.50 -- -- -- -- -- --
T. Rowe Price Small Cap Stock (Division
51)................................... 13.33 13.22 -- -- -- -- -- -- -- --
Templeton Foreign -- Class A (Division
32)(4)................................ 38.34 (5.82) 5.57 7.59 -- -- -- -- -- --
Vanguard LifeStrategy Conservative
Growth (Division 54).................. 6.44 8.03 -- -- -- -- -- -- -- --
Vanguard LifeStrategy Growth (Division
52)................................... 15.82 16.08 -- -- -- -- -- -- -- --
Vanguard LifeStrategy Moderate Growth
(Division 53)......................... 10.57 12.35 -- -- -- -- -- -- -- --
Vanguard Long-Term Corporate (Division
22)***................................ (7.21) 8.04 12.32 4.76 -- -- -- -- -- --
Vanguard Long-Term Treasury (Division
23)***................................ (9.61) 11.82 12.44 4.85 -- -- -- -- -- --
Vanguard Wellington (Division 25)....... 3.11 10.65 21.65 10.16 -- -- -- -- -- --
Vanguard Windsor II (Division 24)....... (6.96) 14.90 30.70 12.09 -- -- -- -- -- --
</TABLE>
41
<PAGE> 226
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 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
- ---------------------------------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AGSPC Asset Allocation (Division 5)..... 157.96% 133.14% 98.95% 63.88% 49.00% 20.60% 23.43% 14.08% 16.07% (3.38)%
AGSPC Capital Conservation (Division
7).................................... 72.30 74.76 64.40 52.95 51.81 26.95 36.57 23.17 14.52 (1.28)
AGSPC Government Securities (Division
8).................................... 72.38 79.08 66.02 53.97 52.60 31.20 38.75 26.48 19.17 4.91
AGSPC Growth (Division 15).............. 169.15 153.13 116.44 80.67 52.87 4.42 -- -- -- --
AGSPC Growth & Income (Division 16)..... 178.96 129.38 102.25 64.96 35.11 3.49 -- -- -- --
AGSPC International Equities (Division
11)................................... 80.88 41.45 20.31 18.91 12.45 2.53 (4.09) (25.41) (12.95) (20.90)
AGSPC International Government Bond
(Division 13)......................... 60.91 72.80 49.06 58.22 53.08 30.14 25.83 11.28 9.05 --
AGSPC MidCap Index (Division 4)****..... 243.76 202.14 156.48 96.61 67.18 29.36 35.74 21.43 11.63 --
AGSPC Money Market (Division 6)......... 45.68 40.47 34.90 29.55 24.60 19.23 16.02 14.11 11.63 6.83
AGSPC Science & Technology (Division
17)................................... 573.27 238.39 140.50 136.78 110.13 31.28 -- -- -- --
AGSPC Small Cap Index (Division 14)..... 152.26 110.05 116.36 78.54 54.49 22.23 27.72 11.28 -- --
AGSPC Social Awareness (Division 12).... 337.56 272.50 195.58 123.04 81.69 32.07 35.34 26.68 23.82 (2.21)
AGSPC Stock Index (Division 10)......... 359.85 285.22 202.99 129.94 89.21 39.18 39.60 28.33 21.54 (4.83)
American Century Ultra (Division 31).... 135.98 68.55 26.59 3.98 -- -- -- -- -- --
American General Balanced (Division
42)................................... 29.04 14.12 -- -- -- -- -- -- -- --
American General Conservative Growth
Lifestyle (Division 50)............... 26.84 12.78 -- -- -- -- -- -- -- --
American General Core Bond (Division
58)................................... (0.07) 1.86 -- -- -- -- -- -- -- --
American General Domestic Bond (Division
43)................................... (1.06) 2.86 -- -- -- -- -- -- -- --
American General Growth Lifestyle
(Division 48)......................... 50.01 16.30 -- -- -- -- -- -- -- --
American General High Yield Bond
(Division 60)......................... 7.34 5.06 -- -- -- -- -- -- -- --
American General International Growth
(Division 33)......................... 71.48 10.31 -- -- -- -- -- -- -- --
American General International Value
(Division 34)......................... 99.87 19.98 -- -- -- -- -- -- -- --
American General Large Cap Growth
(Division 39)......................... 63.10 21.36 -- -- -- -- -- -- -- --
American General Large Cap Value
(Division 40)......................... 20.94 15.71 -- -- -- -- -- -- -- --
American General Mid Cap Growth
(Division 37)......................... 31.98 24.98 -- -- -- -- -- -- -- --
American General Mid Cap Value (Division
38)................................... 45.29 19.80 -- -- -- -- -- -- -- --
American General Moderate Growth
Lifestyle (Division 49)............... 35.38 14.83 -- -- -- -- -- -- -- --
American General Money Market (Division
44)................................... 5.11 1.08 -- -- -- -- -- -- -- --
American General Small Cap Growth
(Division 35)......................... 105.98 22.30 -- -- -- -- -- -- -- --
American General Small Cap Value
(Division 36)......................... 2.97 11.04 -- -- -- -- -- -- -- --
American General Socially Responsible
(Division 41)......................... 39.63 19.15 -- -- -- -- -- -- -- --
American General Strategic Bond
(Division 59)......................... 6.98 3.80 -- -- -- -- -- -- -- --
Dreyfus Founders Growth (Division 30)... 119.66 59.59 28.95 2.95 -- -- -- -- -- --
Dreyfus Variable Investment
Fund -- Small Cap Portfolio (Division
18)................................... 105.94 69.08 77.06 53.47 33.29 4.32 -- -- -- --
Evergreen Growth and Income -- Class A
(Division 56)......................... 13.29 -- -- -- -- -- -- -- -- --
Evergreen Small Cap Value -- Class A
(Division 55)......................... (0.45) -- -- -- -- -- -- -- -- --
Evergreen Value -- Class A (Division
57)................................... 3.41 -- -- -- -- -- -- -- -- --
Franklin Templeton Variable Insurance
Products Trust
Templeton Asset Strategy -- Class 1
(Division 19)(1).................... 105.81 69.58 61.39 41.48 20.52 (0.41) -- -- -- --
Templeton International
Securities -- Class 1 (Division
20)(2).............................. 107.61 70.04 57.52 39.97 14.26 (0.07) -- -- -- --
Neuberger Berman Guardian Trust
(Division 29)......................... 42.24 32.50 30.74 12.08 -- -- -- -- -- --
Putnam Global Growth -- Class A
(Division 28)......................... 146.59 51.29 18.68 5.77 -- -- -- -- -- --
Putnam New Opportunities -- Class A
(Division 26)......................... 137.63 41.52 14.95 (5.24) -- -- -- -- -- --
Putnam OTC & Emerging Growth -- Class A
(Division 27)......................... 140.89 7.27 (2.37) (10.50) -- -- -- -- -- --
Scudder Growth and Income (Division
21)(3)................................ 58.45 50.77 43.60 11.50 -- -- -- -- -- --
T. Rowe Price Small Cap Stock (Division
51)................................... 28.31 13.22 -- -- -- -- -- -- -- --
Templeton Foreign -- Class A (Division
32)(4)................................ 47.98 6.97 13.58 7.59 -- -- -- -- -- --
Vanguard LifeStrategy Conservative
Growth (Division 54).................. 14.99 8.03 -- -- -- -- -- -- -- --
Vanguard LifeStrategy Growth (Division
52)................................... 34.44 16.08 -- -- -- -- -- -- -- --
Vanguard LifeStrategy Moderate Growth
(Division 53)......................... 24.23 12.35 -- -- -- -- -- -- -- --
Vanguard Long-Term Corporate (Division
22)***................................ 17.97 27.13 17.66 4.76 -- -- -- -- -- --
Vanguard Long-Term Treasury (Division
23)***................................ 19.16 31.83 17.89 4.85 -- -- -- -- -- --
Vanguard Wellington (Division 25)....... 52.90 48.28 34.01 10.16 -- -- -- -- -- --
Vanguard Windsor II (Division 24)....... 56.60 68.32 46.49 12.09 -- -- -- -- -- --
</TABLE>
- ------------
* For the periods prior to September 22, 1998, for all Divisions other then
Divisions 55-57, 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 Divisions 55-57, the Contracts offered by this prospectus became
available for purchase on January 4, 1999.
** 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.
42
<PAGE> 227
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)
**** 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.
(1) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Asset Strategy Fund. Also
effective with this merger, the Templeton Asset Allocation Fund Division 19
was renamed the Templeton Asset Strategy Fund Division 19. Accordingly, the
performance figures for the Division through December 31, 1999, reflect the
actual historical performance of the Templeton Asset Allocation Fund
Division 19.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Also effective with
this merger, the Templeton International Fund Division 20 was renamed the
Templeton International Securities Fund Division 20. Accordingly, the
performance figures for the Division through December 31, 1999, reflect the
actual historical performance of the Templeton International Fund Division
20.
(3) The Scudder Growth and Income Fund adopted its current name and objective
on November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(4) 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> 228
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*** 1999 1998 1997 1996 1995
- --------------------------------------- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)............. 6.33% 16.96% 19.80% 18.18% 46.40%
AGSPC Growth & Income (Division 16).... 21.61 13.41 22.60 22.10 30.55
AGSPC Science & Technology (Division
17).................................. 98.96 40.71 1.57 12.68 60.07
American Century Ultra (Division 31)... 40.00 33.14 21.74 12.43 36.23
Dreyfus Founders Growth (Division
30).................................. 37.64 23.76 25.25 15.35 44.17
Dreyfus Variable Investment Fund
-- Small Cap Portfolio (Division
18).................................. 21.80 (4.51) 15.37 15.14 27.78
Evergreen Growth and Income -- Class A
(Division 56)........................ 13.29 3.90 29.66 22.31 31.42
Evergreen Small Cap Value -- Class A
(Division 55)........................ (0.45) (10.46) 32.06 20.83 27.64
Evergreen Value -- Class A (Division
57).................................. 3.41 8.44 24.51 17.77 30.54
Franklin Templeton Variable Insurance
Products Trust
Templeton Asset Strategy -- Class 1
(Division 19)(1)................... 21.37 5.07 14.07 17.40 21.02
Templeton International Securities --
Class 1 (Division 20)(2)........... 22.10 7.95 12.54 22.50 14.34
Neuberger Berman Guardian Trust
(Division 29)........................ 7.36 1.34 16.66 16.54 30.69
Putnam Global Growth -- Class A
(Division 28)........................ 63.00 27.48 12.20 15.37 13.68
Putnam New Opportunities -- Class A
(Division 26)........................ 67.91 23.12 21.30 9.70 44.85
Putnam OTC & Emerging Growth -- Class A
(Division 27)........................ 124.57 9.87 9.08 3.53 54.42
Scudder Growth and Income (Division
21)(3)............................... 5.09 4.99 28.80 20.63 29.56
T. Rowe Price Small Cap Stock (Division
51).................................. 13.33 (4.74) 27.25 19.58 32.24
Templeton Foreign -- Class A (Division
32)(4)............................... 38.34 (5.82) 5.57 16.74 10.07
Vanguard LifeStrategy Conservative
Growth (Division 54)................. 6.44 14.35 15.38 9.00 22.84
Vanguard LifeStrategy Growth (Division
52).................................. 15.82 19.77 20.78 14.00 27.68
Vanguard LifeStrategy Moderate Growth
(Division 53)........................ 10.57 17.43 18.31 11.33 26.39
Vanguard Long-Term Corporate (Division
22)****.............................. (7.21) 8.04 12.32 (0.72) 24.84
Vanguard Long-Term Treasury (Division
23)****.............................. (9.61) 11.82 12.44 (3.08) 28.51
Vanguard Wellington (Division 25)...... 3.11 10.65 21.65 14.69 31.29
Vanguard Windsor II (Division 24)...... (6.96) 14.90 30.70 22.56 37.13
<CAPTION>
ANNUAL CHANGE IN PURCHASE UNIT VALUE FOR THE 12 MONTHS ENDED DECEMBER 31**
------------------------------------------------------
FUND AND DIVISION*** 1994 1993 1992 1991 1990
- --------------------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)............. 0.18% -- -- -- --
AGSPC Growth & Income (Division 16).... (0.68) -- -- -- --
AGSPC Science & Technology (Division
17).................................. 24.77 -- -- -- --
American Century Ultra (Division 31)... (4.63) 20.54 0.20 84.49 8.22
Dreyfus Founders Growth (Division
30).................................. (4.29) 24.31 3.22 45.94 (11.48)
Dreyfus Variable Investment Fund
-- Small Cap Portfolio (Division
18).................................. 6.33 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).................................. 0.87 8.24 6.86 23.90 (4.39)
Franklin Templeton Variable Insurance
Products Trust
Templeton Asset Strategy -- Class 1
(Division 19)(1)................... (4.24) 24.59 6.74 26.13 (9.13)
Templeton International Securities --
Class 1 (Division 20)(2)........... (3.49) 45.51 (6.89) -- --
Neuberger Berman Guardian Trust
(Division 29)........................ 0.53 6.92 -- -- --
Putnam Global Growth -- Class A
(Division 28)........................ (1.83) 30.55 (0.75) 16.81 (10.09)
Putnam New Opportunities -- Class A
(Division 26)........................ 2.30 31.39 24.37 65.89 10.41
Putnam OTC & Emerging Growth -- Class A
(Division 27)........................ 1.24 30.76 11.58 39.46 (10.72)
Scudder Growth and Income (Division
21)(3)............................... 1.33 14.17 8.20 26.59 (3.53)
T. Rowe Price Small Cap Stock (Division
51).................................. (1.15) 16.96 12.51 36.93 (21.47)
Templeton Foreign -- Class A (Division
32)(4)............................... (0.63) 35.47 (0.89) 17.11 (3.96)
Vanguard LifeStrategy Conservative
Growth (Division 54)................. (0.21) -- -- -- --
Vanguard LifeStrategy Growth (Division
52).................................. (0.41) -- -- -- --
Vanguard LifeStrategy Moderate Growth
(Division 53)........................ (1.01) -- -- -- --
Vanguard Long-Term Corporate (Division
22)****.............................. (6.46) 13.08 8.42 19.42 4.90
Vanguard Long-Term Treasury (Division
23)****.............................. (8.18) 15.35 6.08 15.99 4.48
Vanguard Wellington (Division 25)...... (1.71) 12.12 6.59 22.13 (4.00)
Vanguard Windsor II (Division 24)...... (2.38) 12.20 10.61 27.11 11.09
</TABLE>
44
<PAGE> 229
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>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR EACH PERIOD END SINCE DECEMBER 31, 1989**
---------------------------------------------------------------------------------------------
FUND AND DIVISION 1999 1998 1997 1996 1995 1994 1993 1992
- ------------------------------- -------- -------- -------- -------- -------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)..... 158.22% 142.86% 107.65% 73.33% 46.67% 0.18% -- --
AGSPC Growth & Income (Division
16).......................... 167.70 120.12 94.09 58.31 29.66 (0.68) -- --
AGSPC Science & Technology
(Division 17)................ 539.90 221.62 128.57 125.05 99.72 24.77 -- --
American Century Ultra
(Division 31)................ 699.41 470.99 328.86 252.27 213.32 129.99 141.14 100.05
Dreyfus Founders Growth
(Division 30)................ 462.89 308.96 230.44 163.82 128.71 58.64 65.76 33.35
Dreyfus Variable Investment
Fund -- Small Cap Portfolio
(Division 18)................ 1,442.37 1,166.28 1,226.07 1,049.38 898.25 681.25 634.77 341.81
Evergreen Growth and Income --
Class A (Division 56)........ 145.33 116.55 108.42 60.74 31.42 -- -- --
Evergreen Small Cap Value --
Class A (Division 55)........ 81.56 82.37 103.67 54.22 27.64 -- -- --
Evergreen Value -- Class A
(Division 57)................ 196.67 186.89 164.56 112.47 80.42 38.21 37.02 26.59
Franklin Templeton Variable
Insurance Products Trust
Templeton Asset Strategy --
Class 1 (Division 19)(1)... 201.66 148.55 136.56 107.38 76.65 45.97 52.42 22.34
Templeton International
Securities -- Class 1
(Division 20)(2)........... 171.69 122.51 106.13 83.17 49.52 30.77 35.49 (6.89)
Neuberger Berman Guardian Trust
(Division 29)................ 107.76 93.53 90.97 63.70 40.47 7.48 6.92 --
Putnam Global Growth -- Class A
(Division 28)................ 308.51 150.63 96.60 75.22 51.88 33.60 36.09 4.24
Putnam New Opportunities --
Class A (Division 26)........ 1,120.17 626.67 490.23 386.56 343.54 206.20 199.32 127.80
Putnam OTC & Emerging
Growth -- Class A (Division
27).......................... 691.25 252.34 220.68 193.98 183.97 83.89 81.65 38.92
Scudder Growth and Income
(Division 21)(3)............. 239.54 223.08 207.72 138.92 98.06 52.87 50.86 32.13
T. Rowe Price Small Cap Stock
(Division 51)................ 203.83 168.10 181.45 121.17 84.96 39.87 41.50 20.98
Templeton Foreign -- Class A
(Division 32)(4)............. 165.20 91.70 103.54 92.81 65.16 50.05 51.01 11.47
Vanguard LifeStrategy
Conservative Growth (Division
54).......................... 87.63 76.28 54.16 33.61 22.58 (0.21) -- --
Vanguard LifeStrategy Growth
(Division 52)................ 142.85 109.69 75.07 44.95 27.15 (0.41) -- --
Vanguard LifeStrategy Moderate
Growth (Division 53)......... 113.99 93.53 64.80 39.29 25.12 (1.01) -- --
Vanguard Long-Term Corporate
(Division 22)***............. 100.51 116.08 100.00 78.06 79.36 43.67 53.59 35.82
Vanguard Long-Term Treasury
(Division 23)***............. 92.73 113.21 90.67 69.57 74.96 36.15 48.28 28.55
Vanguard Wellington (Division
25).......................... 187.81 179.12 152.26 107.36 80.80 37.71 40.11 24.96
Vanguard Windsor II (Division
24).......................... 221.49 245.55 200.74 130.10 87.74 36.91 40.25 25.00
CUMULATIVE CHANGE IN
PURCHASE UNIT VALUE
FOR EACH PERIOD END
SINCE DECEMBER 31,
1989**
--------------------
FUND AND DIVISION 1991 1990
- ------------------------------- ------ ------
<S> <C> <C>
AGSPC Growth (Division 15)..... -- --
AGSPC Growth & Income (Division
16).......................... -- --
AGSPC Science & Technology
(Division 17)................ -- --
American Century Ultra
(Division 31)................ 99.65 8.22
Dreyfus Founders Growth
(Division 30)................ 29.19 (11.48)
Dreyfus Variable Investment
Fund -- Small Cap Portfolio
(Division 18)................ 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)................ 18.46 (4.39)
Franklin Templeton Variable
Insurance Products Trust
Templeton Asset Strategy --
Class 1 (Division 19)(1)... 14.61 (9.13)
Templeton International
Securities -- Class 1
(Division 20)(2)........... -- --
Neuberger Berman Guardian Trust
(Division 29)................ -- --
Putnam Global Growth -- Class A
(Division 28)................ 5.03 (10.09)
Putnam New Opportunities --
Class A (Division 26)........ 83.17 10.41
Putnam OTC & Emerging
Growth -- Class A (Division
27).......................... 24.51 (10.72)
Scudder Growth and Income
(Division 21)(3)............. 22.12 (3.53)
T. Rowe Price Small Cap Stock
(Division 51)................ 7.53 (21.47)
Templeton Foreign -- Class A
(Division 32)(4)............. 12.47 (3.96)
Vanguard LifeStrategy
Conservative Growth (Division
54).......................... -- --
Vanguard LifeStrategy Growth
(Division 52)................ -- --
Vanguard LifeStrategy Moderate
Growth (Division 53)......... -- --
Vanguard Long-Term Corporate
(Division 22)***............. 25.27 4.90
Vanguard Long-Term Treasury
(Division 23)***............. 21.18 4.48
Vanguard Wellington (Division
25).......................... 17.24 (4.00)
Vanguard Windsor II (Division
24).......................... 13.01 (11.09)
</TABLE>
- ------------
Divisions with an identical inception date as the underlying Fund's inception
date are not reflected in this Table. See preceding Table.
* The Table reflects actual historical performance of the related Separate
Account Divisions 15-20 since inception of each Division (July 11, 1994) and
hypothetical performance for periods prior to July 11, 1994 based on
investment in a hypothetical Contract. 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 the periods
prior to July 1, 1996 based on investment in a hypothetical Contract. The
Table reflects actual historical performance of the related Separate Account
Divisions 51-54 since inception of each Division (September 22, 1998) and
hypothetical performance for periods prior to September 22, 1998 based on
investment in a hypothetical Contract. The Table reflects actual historical
performance of the related Separate Account Divisions 55-57 since inception
of each Division (January 4, 1999) and hypothetical performance for periods
prior to January 4, 1999 based on investment in a hypothetical Contract.
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.
** 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) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Asset Strategy Fund.
Accordingly, the performance figures in the Table for the Fund through
December 31, 1999, reflect the historical performance and inception date of
the Templeton Asset Allocation Fund.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Accordingly, the
performance figures in the Table for the Fund through December 31, 1999,
reflect the historical performance and inception date of the Templeton
International Fund.
(3) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(4) 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.
45
<PAGE> 230
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.
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.
46
<PAGE> 231
- --------------------------------------------------------------------------------
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.
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), 403(a) and 401(k) 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.
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> 232
- --------------------------------------------------------------------------------
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, 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. In
addition, based upon published guides issued by the IRS in 1999, it appears
likely that such limitations, if imposed, would only apply to Non-Qualified
Contracts.
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.
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 1999, the IRS confirmed this opinion,
reversing its previous position by modifying a contrary ruling it had issued in
1981.
In its ruling in 1981, the 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 was
superseded by subsequent legislation (Code Section 817(h)) which specifically
exempts these Qualified Contracts, and the IRS had no viable legal basis or
reason to apply the theory of the 1981 ruling to these Qualified Contracts under
current law.
48
<PAGE> 233
- --------------------------------------------------------------------------------
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. Variable options
incur mortality and expense risk fee charges and may also incur account
maintenance fees and surrender charges. The chart does not reflect the deduction
of any such fees. 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-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
49
<PAGE> 234
- --------------------------------------------------------------------------------
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.
YEAR 2000
- --------------------------------------------------------------------------------
As of March 10, 2000, all of our ultimate parent, American General Corporation's
("AGC") major technology systems, programs, and applications, including those
which rely on third parties, are operating smoothly following our transition
into 2000. We have experienced no interruptions to normal business operations,
including the processing of customer account data and transactions. We will
continue to monitor our technology systems, including critical third party
dependencies, as necessary to maintain our Year 2000 readiness. We do not expect
any future disruptions, if they occur, to have a material effect on the
company's results of operations, liquidity, or financial condition.
Through December 31, 1999, AGC incurred and expensed pretax costs of $98 million
related to Year 2000 readiness, including $18 million in 1999 and $65 million in
1998. In 1999, Year 2000 readiness expenses were included in division earnings.
The 1998 expenses were excluded from division earnings, consistent with the
manner in which we reviewed division results. In addition, we accelerated the
planned replacement of certain systems as part of our Year 2000 plans. The cost
of these replacement systems was immaterial. We do not anticipate incurring any
significant costs in the future to maintain Year 2000 readiness.
50
<PAGE> 235
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 or to the Home Office at the following address: VALIC, Customer
Service A3-01, 2929 Allen Parkway, Houston, TX 77019.
</TABLE>
<PAGE> 236
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information................................. 4
Marketing Information........................... 4
Endorsements and Published Ratings.............. 5
Types of Variable Annuity Contracts................. 6
Federal Tax Matters................................. 6
Tax Consequences of Purchase Payments........... 6
Tax Consequences of Distributions............... 8
Special Tax Consequences -- Early
Distribution.................................. 9
Special Tax Consequences -- Required
Distributions................................. 10
Tax Free Rollovers, Transfers and Exchanges..... 11
Exchange Privilege.................................. 11
Exchanges From Portfolio Director............... 12
Exchanges From Portfolio Director 2............. 12
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................. 16
Exchanges From Compounder Contracts............. 17
Information Which May Be Applicable To Any
Exchange...................................... 18
Calculation of Surrender Charge..................... 19
Illustration of Surrender Charge on Total
Surrender..................................... 19
Illustration of Surrender Charge on a 10%
Partial Surrender Followed by a Full
Surrender..................................... 19
Purchase Unit Value................................. 20
Illustration of Calculation of Purchase Unit
Value......................................... 20
Illustration of Purchase of Purchase Units...... 20
Performance Calculations............................ 20
AGSPC Money Market and American General Money
Market Divisions Yields....................... 20
Calculation of Current Yield for AGSPC Money
Market Division Six........................... 20
Calculation of Current Yield for American
General Money Market Division 44.............. 20
Illustration of Calculation of Current Yield for
AGSPC Money Market Division Six and American
General Money Market Division 44.............. 20
Calculation of Effective Yield for AGSPC Money
Market Division Six........................... 21
Calculation of Effective Yield for American
General Money Market Division 44.............. 21
Illustration of Calculation of Effective Yield
for AGSPC Money Market Division Six and
American General Money Market Division 44..... 21
Standardized Yield for Bond Fund Divisions...... 21
Calculation of Standardized Yield for Bond Fund
Divisions..................................... 21
Illustration of Calculation of Standardized
Yield for Bond Fund Divisions................. 21
Calculation of Average Annual Total Return...... 22
Calculation of MVA Option....................... 22
Performance Information............................. 23
Hypothetical $10,000 Account Value and
Cumulative Return as Compared to Benchmark
Tables........................................ 23
Performance Compared to Market Indices.......... 23
AGSPC Asset Allocation Division Five............ 27
AGSPC Capital Conservation Division Seven....... 28
AGSPC Government Securities Division Eight...... 28
AGSPC Growth Division Fifteen................... 29
AGSPC Growth & Income Division Sixteen.......... 29
AGSPC International Equities Division Eleven.... 30
AGSPC International Government Bond Division
Thirteen...................................... 31
AGSPC MidCap Index Division Four................ 31
AGSPC Money Market Division Six................. 32
AGSPC Science & Technology Division Seventeen... 33
AGSPC Small Cap Index Division Fourteen......... 33
AGSPC Social Awareness Division Twelve.......... 34
AGSPC Stock Index Division Ten.................. 35
American Century Ultra Division Thirty-One...... 35
American General Balanced Division Forty-Two.... 36
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
American General Conservative Growth Lifestyle
Division Fifty................................ 36
American General Core Bond Division
Fifty-Eight................................... 37
American General Domestic Bond Division
Forty-Three................................... 38
American General Growth Lifestyle Division
Forty-Eight................................... 38
American General High Yield Bond Division
Sixty......................................... 39
American General International Growth Division
Thirty-Three.................................. 39
American General International Value Division
Thirty-Four................................... 40
American General Large Cap Growth Division
Thirty-Nine................................... 40
American General Large Cap Value Division
Forty......................................... 41
American General Mid Cap Growth Division
Thirty-Seven.................................. 41
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.................................... 43
American General Small Cap Growth Division
Thirty-Five................................... 43
American General Small Cap Value Division
Thirty-Six.................................... 44
American General Socially Responsible Division
Forty-One..................................... 44
American General Strategic Bond Division
Fifty-Nine.................................... 45
Dreyfus Founders Growth Division Thirty......... 45
Dreyfus Variable Investment Fund -- Small Cap
Portfolio Division Eighteen................... 46
Evergreen Growth and Income Division
Fifty-Six..................................... 47
Evergreen Small Cap Value Division Fifty-Five... 47
Evergreen Value Division Fifty-Seven............ 48
Neuberger Berman Guardian Trust Division Twenty-
Nine.......................................... 48
Putnam Global Growth -- Class A Division Twenty-
Eight......................................... 49
Putnam New Opportunities -- Class A Division
Twenty-Six.................................... 50
Putnam OTC & Emerging Growth -- Class A Division
Twenty-Seven.................................. 50
Scudder Growth and Income Division Twenty-One... 51
T. Rowe Price Small-Cap Stock Division
Fifty-One..................................... 52
Templeton Asset Strategy Division Nineteen...... 52
Templeton Foreign Division Thirty-Two........... 53
Templeton International Securities Division
Twenty........................................ 54
Vanguard LifeStrategy Conservative Growth
Division Fifty-Four........................... 54
Vanguard LifeStrategy Growth Division
Fifty-Two..................................... 55
Vanguard LifeStrategy Moderate Growth Division
Fifty-Three................................... 56
Vanguard Long-Term Corporate Division
Twenty-Two.................................... 56
Vanguard Long-Term Treasury Division
Twenty-Three.................................. 57
Vanguard Wellington Division Twenty-Five........ 58
Vanguard Windsor II Division Twenty-Four........ 59
Payout Payments..................................... 60
Assumed Investment Rate......................... 60
Amount of Payout Payments....................... 60
Payout Unit Value............................... 60
Illustration of Calculation of Payout Unit
Value......................................... 61
Illustration of Payout Payments................. 61
Distribution of Variable Annuity Contracts.......... 62
Experts............................................. 62
Comments on Financial Statements.................... 62
</TABLE>
<PAGE> 237
Please tear off, complete and return the form below to one of our Regional
Offices. 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> 238
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
[VALIC LOGO]
PRINTED MATTER
PRINTED IN U.S.A. VA 10855 REV 5/00
(C)The Variable Annuity Life Insurance
Company, Houston, Texas
Recycled Paper [RECYCLED PAPER LOGO]
<PAGE> 239
[Momento Photo]
PORTFOLIO DIRECTOR(R) PLUS
SEPARATE ACCOUNT A
FOR SERIES 1.20 - 12.20
Prospectus
May 1, 2000
Units of Interest Under Group and
Individual Variable Annuity Contracts
Portfolio Director Plus
VALIC
AN AMERICAN
GENERAL COMPANY
<PAGE> 240
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
PORTFOLIO DIRECTOR, PORTFOLIO DIRECTOR 2, PORTFOLIO DIRECTOR PLUS
SUPPLEMENT ISSUED MAY 1, 2000 TO THE PROSPECTUS DATED MAY 1, 2000
The Variable Annuity Life Insurance Company (the "Company") filed an application
with the Securities and Exchange Commission ("SEC") as of March 31, 2000
requesting an order allowing the Company to replace the shares of American
General Domestic Bond Fund of American General Series Portfolio Company 3
("AGSPC 3"), T. Rowe Price Small-Cap Stock Fund, Dreyfus Variable Investment
Fund -- Small Cap Portfolio, Scudder Growth and Income Fund, Neuberger Berman
Guardian Trust and Dreyfus Founders Growth Fund, each of which is a Variable
Investment Option currently available under our group and individual variable
annuity contracts, with shares of comparable series of AGSPC 3 and newly created
series of American General Series Portfolio Company ("AGSPC").
The Company believes that the proposed substitutions are in the best interest of
contract holders. In each case, the Substitute Series will have substantially
the same investment objective, practices and restrictions as the Replaced
Series. In the case of Dreyfus Variable Investment Fund -- Small Cap Portfolio
and T. Rowe Price Small-Cap Stock Fund, Inc., the Substitute Series will have
two sub-advisers, one of which is the Replaced Series' current investment
adviser, T. Rowe Price Associates, Inc., and an additional sub-adviser, Founders
Asset Management LLC, which has an outstanding long-term investment performance
record. In the case of Dreyfus Founders Growth Fund, the Substitute Series will
have the Replaced Series' current investment adviser, Founders Asset Management
LLC, as its sub-adviser. In the case of the other Replaced Series, the
Substitute Series will have as sub-advisers new managers with superior long-term
investment performance records in their respective asset classes.
The proposed substitutions and respective sub-advisers are:
<TABLE>
<CAPTION>
REPLACED SERIES SUBSTITUTE SERIES
<S> <C> <C>
Dreyfus Variable Investment Fund -- -- AGSPC American General Select Small-Cap Fund (T. Rowe
Small-Cap Portfolio Price Associates, Inc. and Founders Asset Management
LLC)
T. Rowe Price Small-Cap Stock Fund, Inc. -- AGSPC American General Select Small Cap Fund (T. Rowe
Price Associates, Inc. and Founders Asset Management
LLC)
Scudder Growth and Income Fund -- AGSPC American General American Century Income & Growth
Fund (American Century Investment Management, Inc.)
Neuberger Berman Guardian Trust -- AGSPC American General American Century Income & Growth
Fund (American Century Investment Management, Inc.)
Dreyfus Founders Growth Fund -- AGSPC American General Founders Growth Fund (Founders
Asset Management LLC)
AGSPC 3 American General Domestic Bond Fund -- AGSPC 3 American General Core Bond Fund (American
General Investment Management, L.P.)
</TABLE>
- --------------------------------------------------------------------------------
You should note that:
- - No action is required on your part. You will not need to vote a proxy, file a
new election, or take any other action if the SEC approves the substitutions.
- - The elections you have on file for allocating your account value, premium
payments and deductions will remain unchanged until you direct us otherwise.
- - You will not bear any expenses relating to the substitutions.
- - Although for two of the substitutions (Dreyfus Variable Investment
Fund -- Small Cap Portfolio and Scudder Growth and Income Fund) total contract
holder expenses are expected to be slightly higher for the Replaced Series,
the substitutions will result in a change to a sub-adviser with a superior
performance record.
- - On the effective date of the substitution, your account value in the Variable
Account Option will be the same as before the substitution.
- - The substitution will have no tax consequences for you.
The Company expects to complete the substitutions before October 2000. The newly
created series of AGSPC will commence operations at the time of the
substitutions. Completion of the substitutions is conditioned upon obtaining the
approval of the SEC and state insurance authorities, if applicable. Of course,
you may transfer amounts in your Contract among the Variable Investment Options
and Fixed Options, as usual. The substitutions will not be treated as a transfer
for purposes of the transfer provisions of your Contract. In addition, any
transfer charge that might otherwise be imposed will be waived from the date of
this Notice through the date that is 30 days after the substitutions.
We will send you a prospectus for AGSPC 3 and the new series of AGSPC, and
notice of the actual date of the substitutions, after we receive SEC approval.
You will receive confirmation when the substitution is complete.
Should you have any questions, you may contact us at 1-800-448-2542 (selection
1).
<PAGE> 241
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, 2000
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 one or more Fixed Account Options* and/or an array of 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.
* One of the Fixed Account Options, the Multi-Year Enhanced Fixed Account, will
be available approximately May 22, 2000, subject to state approval.
- --------------------------------------------------------------------------------
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, 2000, contains additional
information about Portfolio Director Plus and is part of this prospectus. For a
free copy 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 SEC 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> 242
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ABOUT THE PROSPECTUS.......................... 1
FEE TABLE..................................... 2
SUMMARY....................................... 7
SELECTED PURCHASE UNIT DATA................... 14
GENERAL INFORMATION........................... 15
About Portfolio Director Plus............ 15
About VALIC.............................. 15
About VALIC Separate Account A........... 15
Units of Interests....................... 16
Distribution of the Contracts............ 16
VARIABLE ACCOUNT OPTIONS...................... 16
PURCHASE PERIOD............................... 17
Purchase Payments........................ 17
Purchase Units........................... 18
Calculation of Purchase Unit Value....... 18
Choosing Investment Options.............. 18
Fixed Account Options............... 18
Variable Account Options............ 19
Stopping Purchase Payments............... 19
TRANSFERS BETWEEN INVESTMENT OPTIONS.......... 19
During the Purchase Period............... 20
During the Payout Period................. 20
Communicating Transfer or Reallocation
Instructions........................... 20
Effective Date of Transfer............... 21
Market Timing............................ 21
FEES AND CHARGES.............................. 21
Account Maintenance Fee.................. 21
Surrender Charge......................... 21
Amount of Surrender Charge.......... 22
10% Free Withdrawal................. 22
Exceptions to Surrender Charge...... 22
Premium Tax Charge....................... 22
Separate Account Charges................. 22
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........... 23
Separate Account Expense Reimbursement... 24
Market Value Adjustment.................. 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
EXCHANGE PRIVILEGE............................ 28
Restrictions on Exchange Privilege....... 28
Taxes and Conversion Costs............... 28
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Surrender Charges........................ 29
Exchange Offers for Contracts Other Than
Portfolio Director Plus................ 29
Comparison of Portfolio Director and
Portfolio Director 2 Contracts to
Portfolio Director Plus Contracts...... 29
Comparison of Other Contracts............ 29
Features of Portfolio Director Plus...... 29
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.............. 31
During the Payout Period................. 32
HOW TO REVIEW INVESTMENT PERFORMANCE OF
SEPARATE ACCOUNT DIVISIONS.................. 32
Types of Investment Performance
Information Advertised................. 32
Total Return Performance Information... 32
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............................... 33
Total Return Based on Different
Investment Amounts.................. 33
An Assumed Account Value of $10,000.... 34
Yield Performance Information............ 34
AGSPC Money Market and American General
Money Market Divisions.............. 34
Divisions Other Than The AGSPC Money
Market and American General Money
Market Divisions.................... 34
Performance Information: Average Annual
Total Return, Cumulative Return and
Annual and Cumulative Change in
Purchase Unit Value Tables............. 34
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................................. 46
Who May Give Voting Instructions......... 46
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........................... 47
Type of Plans............................ 47
Tax Consequences in General.............. 48
Effect of Tax-Deferred Accumulations..... 48
YEAR 2000..................................... 50
</TABLE>
(i)
<PAGE> 243
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................... 20
Annuitant....................... 30
Assumed Investment Rate......... 24
Beneficiary..................... 30
Contract Owner.................. 30
Divisions....................... 32
Fixed Account Options........... 30
Home Office..................... 20
Mutual Fund or Fund............. 15
Participant..................... 01
Participant Year................ 21
Payout Period................... 20
Payout Unit..................... 24
Purchase Payments............... 17, 32
Purchase Period................. 20
Purchase Unit................... 18
VALIC Separate Account A........ 47
Variable Account Options........ 16, 30
</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> 244
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 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 Founders Growth Fund(4) 0.25 0.80 (0.25) 0.80
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
Franklin Templeton Variable Insurance Products
Trust
Templeton Asset Strategy Fund -- Class 1 0.25 0.80 -- 1.05
Templeton International Securities
Fund -- Class 1 0.25 0.80 -- 1.05
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
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 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 Wellington Fund 0.25 0.80 -- 1.05
Vanguard Windsor II Fund 0.25 0.80 -- 1.05
</TABLE>
2
<PAGE> 245
FEE TABLE -- (CONTINUED)
- --------------------------------------------------------------------------------
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% -- 0.07% 0.57%
AGSPC Capital Conservation Fund 0.50 -- 0.10 0.60
AGSPC Government Securities Fund 0.50 -- 0.09 0.59
AGSPC Growth Fund 0.80 -- 0.06 0.86
AGSPC Growth & Income Fund 0.75 -- 0.07 0.82
AGSPC International Equities Fund 0.35 -- 0.08 0.43
AGSPC International Government Bond Fund 0.50 -- 0.07 0.57
AGSPC MidCap Index Fund 0.31 -- 0.07 0.38
AGSPC Money Market Fund 0.50 -- 0.07 0.57
AGSPC Science & Technology Fund 0.90 -- 0.06 0.96
AGSPC Small Cap Index Fund 0.35 -- 0.06 0.41
AGSPC Social Awareness Fund 0.50 -- 0.07 0.57
AGSPC Stock Index Fund 0.26 -- 0.06 0.32
American Century Ultra Fund(11) 1.00 -- -- 1.00
American General Balanced Fund(9) 0.78 -- 0.02 0.80
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) 0.59 -- 0.18 0.77
American General Growth Lifestyle Fund(10) 0.10 -- -- 0.10
American General High Yield Bond Fund(9) 0.69 -- 0.29 0.98
American General International Growth Fund(9) 0.88 -- 0.25 1.13
American General International Value Fund(9) 0.97 -- 0.04 1.01
American General Large Cap Growth Fund(9) 0.52 -- 0.29 0.81
American General Large Cap Value Fund(9) 0.49 -- 0.31 0.80
American General Mid Cap Growth Fund(9) 0.63 -- 0.14 0.77
American General Mid Cap Value Fund(9) 0.74 -- 0.29 1.03
American General Moderate Growth Lifestyle Fund(10) 0.10 -- -- 0.10
American General Money Market Fund(9) 0.24 -- 0.30 0.54
American General Small Cap Growth Fund(9) 0.81 -- 0.30 1.11
American General Small Cap Value Fund(9) 0.74 -- 0.22 0.96
American General Socially Responsible Fund(9) 0.25 -- 0.30 0.55
American General Strategic Bond Fund(9) 0.59 -- 0.29 0.88
Dreyfus Founders Growth Fund 0.67 0.25% 0.16 1.08
Dreyfus Variable Investment Fund --
Small Cap Portfolio 0.75 -- 0.03 0.78
Evergreen Equity Trust
Evergreen Growth and Income Fund -- Class A 0.89 0.25 0.29 1.43
Evergreen Small Cap Value Fund -- Class A(11) 1.00 0.25 0.42 1.67
Evergreen Value Fund -- Class A 0.50 0.25 0.25 1.00
Franklin Templeton Variable Insurance Products
Trust(11)
Templeton Asset Strategy Fund -- Class 1(12) 0.60 -- 0.18 0.78
Templeton International Securities Fund -- Class
1(13) 0.69 -- 0.19 0.88
Neuberger Berman Guardian Trust(7)(11) 0.84 -- 0.04 0.88
Putnam Global Growth Fund -- Class A Shares 0.63 0.25 0.22 1.10
Putnam New Opportunities Fund -- Class A Shares 0.48 0.25 0.20 0.93
Putnam OTC & Emerging Growth Fund -- Class A Shares 0.55 0.25 0.18 0.98
Scudder Growth and Income Fund 0.45 -- 0.35 0.80
T. Rowe Price Small-Cap Stock Fund 0.77 -- 0.19 0.96
Templeton Foreign Fund -- Class A(11) 0.61 0.25 0.27 1.13
Vanguard LifeStrategy Conservative Growth
Fund(11)(14) 0.28 -- -- 0.28
Vanguard LifeStrategy Growth Fund(11)(14) 0.29 -- -- 0.29
Vanguard LifeStrategy Moderate Growth Fund(11)(14) 0.29 -- -- 0.29
Vanguard Long-Term Corporate Fund(11) 0.28 -- 0.02 0.30
Vanguard Long-Term Treasury Fund(11) 0.25 -- 0.03 0.28
Vanguard Wellington Fund(11) 0.28 -- 0.02 0.30
Vanguard Windsor II Fund(11) 0.35 -- 0.02 0.37
</TABLE>
3
<PAGE> 246
- ------------
(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
0.75% to 1.25%, depending upon the Variable Account Option selected.
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 certain payments received 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.
(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 1999 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, 0.78%, 1.00% and 1.78%; American General
Core Bond Fund, 0.50%, 1.04% and 1.54%; American General Domestic Bond
Fund, 0.59%, 1.00% and 1.59%; American General High Yield Bond Fund, 0.69%,
1.05% and 1.74%; American General International Growth Fund, 0.88%, 1.02%
and 1.90%; American General International Value Fund, 0.97%, 1.00% and
1.97%; American General Large Cap Growth Fund, 0.52%, 0.92% and 1.44%;
American General Large Cap Value Fund, 0.49%, 1.02% and 1.51%; American
General Mid Cap Growth Fund, 0.63%, 1.01% and 1.64%; American General Mid
Cap Value Fund, 0.74%, 0.99% and 1.73%; American General Money Market Fund,
0.24%, 0.99% and 1.23%; American General Small Cap Growth Fund, 0.81%,
0.97% and 1.78%; American General Small Cap Value Fund, 0.74%, 1.01% and
1.75%; and American General Socially Responsible Fund, 0.25%, 0.98% and
1.23%; and American General Strategic Bond Fund, 0.59%, 1.05% and 1.64%.
(10) Total Combined Operating Expenses based on estimated total average weighted
combined operating expenses for the American General Conservative Growth
Lifestyle Fund is 0.95%, for American General Growth Lifestyle Fund 1.04%
and for American General Moderate Growth Lifestyle Fund 0.98%. 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 Dreyfus Founders Growth Fund
was formerly known as the Founders Growth Fund. The Evergreen Small Cap
Value Fund was formerly known as the Evergreen Small Cap Equity Income
Fund. The Franklin Templeton Variable Insurance Products Trust was formerly
known as the Templeton Variable Products Series 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
LifeStrategy 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) On February 8, 2000, shareholders of the Templeton Asset Allocation Fund
(previously offered under the Contract) approved a merger and
reorganization that combined the Templeton Asset Allocation Fund with the
Templeton Global Asset Allocation Fund, effective May 1, 2000. At the same
time as the merger, the Templeton Asset Allocation Fund changed its name to
the Templeton Asset Strategy Fund. The table shows restated total expenses
for the Templeton Asset Strategy Fund based on the new fund fees and the
assets of the Templeton Asset Allocation Fund as of December 31, 1999, and
not the assets of the combined fund. However, if the table reflected both
the new fund fees and the fund's combined assets, the fund's expenses after
May 1, 2000 would be estimated as: Management Fees 0.60%, Other Expenses
0.14%, and Annual Expenses 0.74%.
(13) On February 8, 2000, shareholders of the Templeton International Fund
(previously offered under the Contract) approved a merger and
reorganization that combined the Templeton International Fund with the
Templeton International Equity Fund, effective May 1, 2000. At the same
time as the merger, the Templeton International Fund changed its name to
the Templeton International Securities Fund. The table shows restated total
expenses for the Templeton International Securities Fund based on the new
fund fees and the assets of the Templeton International Fund as of December
31, 1999, and not the assets of the combined fund. However, if the table
reflected both the new fund fees and the fund's combined assets, the fund's
expenses after May 1, 2000 would be estimated as: Management Fees 0.65%,
Other Expenses 0.20%, and Annual Expenses 0.85%.
(14) The Vanguard LifeStrategy Funds did not incur any expenses in fiscal year
1999. 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 ratios that the Vanguard LifeStrategy Conservative Growth
Fund, Vanguard LifeStrategy Growth Fund and Vanguard LifeStrategy Moderate
Growth Fund incurred for the year ended December 31, 1999 was 0.28%, 0.29%
and 0.29%, respectively.
4
<PAGE> 247
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 $ 14 $ 45 $ 77 $170
AGSPC Capital Conservation Division 7 15 46 79 173
AGSPC Government Securities Division 8 15 45 78 172
AGSPC Growth Division 15 17 54 92 201
AGSPC Growth & Income Division 16 17 52 90 197
AGSPC International Equities Division 11 13 40 70 154
AGSPC International Government Bond Division 13 14 45 77 170
AGSPC MidCap Index Division 4 12 39 67 148
AGSPC Money Market Division 6 14 45 77 170
AGSPC Science & Technology Division 17 18 57 98 212
AGSPC Small Cap Index Division 14 13 40 69 152
AGSPC Social Awareness Division 12 14 45 77 170
ST,,,0>AGSPC Stock Index Division 10 12 37 64 141
American Century Ultra Division 31 19 59 102 221
American General Balanced Division 42 14 44 76 167
American General Conservative Growth Lifestyle Division 50 7 22 38 86
American General Core Bond Division 58 14 44 76 167
American General Domestic Bond Division 43 14 43 75 164
American General Growth Lifestyle Division 48 7 22 38 86
American General High Yield Bond Division 60 16 50 86 187
American General International Growth Division 33 17 54 93 203
American General International Value Division 34 16 51 87 190
American General Large Cap Growth Division 39 14 44 77 168
American General Large Cap Value Division 40 14 44 76 167
American General Mid Cap Growth Division 37 14 43 75 164
American General Mid Cap Value Division 38 16 51 88 193
American General Moderate Growth Lifestyle Division 49 7 22 38 86
American General Money Market Division 44 12 36 62 138
American General Small Cap Growth Division 35 17 54 92 201
American General Small Cap Value Division 36 16 49 85 185
American General Socially Responsible Division 41 12 36 63 139
American General Strategic Bond Division 59 15 46 80 176
Dreyfus Founders Growth Division 30 19 60 104 225
Dreyfus Variable Investment Fund -- Small Cap Portfolio
Division 18 17 54 93 203
Evergreen Equity Trust
Evergreen Growth and Income -- Class A Division 56 23 71 122 261
Evergreen Small Cap Value -- Class A Division 55 25 78 134 285
Evergreen Value -- Class A Division 57 19 58 100 216
Franklin Templeton Variable Insurance Products Trust
Templeton Asset Strategy -- Class 1 Division 19 19 59 101 219
Templeton International Securities -- Class 1 Division 20 20 62 106 230
Neuberger Berman Guardian Trust Division 29 17 54 93 203
Putnam Global Growth -- Class A Shares Division 28 20 61 105 227
Putnam New Opportunities -- Class A Shares Division 26 18 56 96 209
Putnam OTC & Emerging Growth -- Class A Shares Division 27 18 57 99 214
Scudder Growth and Income Division 21 17 52 89 195
T. Rowe Price Small-Cap Stock Division 51 21 64 110 238
Templeton Foreign -- Class A Division 32 20 62 106 230
Vanguard LifeStrategy Conservative Growth Division 54 14 43 75 165
Vanguard LifeStrategy Growth Division 52 14 44 76 166
Vanguard LifeStrategy Moderate Growth Division 53 14 44 76 166
Vanguard Long-Term Corporate Division 22 12 36 63 139
Vanguard Long-Term Treasury Division 23 11 36 62 137
Vanguard Wellington Division 25 14 44 76 167
Vanguard Windsor II Division 24 15 46 80 175
</TABLE>
5
<PAGE> 248
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 $ 95 $127 $170
AGSPC Capital Conservation Division 7 61 96 129 173
AGSPC Government Securities Division 8 61 95 128 172
AGSPC Growth Division 15 64 103 142 201
AGSPC Growth & Income Division 16 63 102 140 197
AGSPC International Equities Division 11 60 90 120 154
AGSPC International Government Bond Division 13 61 95 127 170
AGSPC MidCap Index Division 4 59 89 117 148
AGSPC Money Market Division 6 61 95 127 170
AGSPC Science & Technology Division 17 65 106 148 212
AGSPC Small Cap Index Division 14 59 90 119 152
AGSPC Social Awareness Division 12 61 95 127 170
AGSPC Stock Index Division 10 59 87 114 141
American Century Ultra Division 31 65 108 152 221
American General Balanced Division 42 61 94 126 167
American General Conservative Growth Lifestyle Division 50 54 72 88 86
American General Core Bond Division 58 61 94 126 167
American General Domestic Bond Division 43 60 93 125 164
American General Growth Lifestyle Division 48 54 72 88 86
American General High Yield Bond Division 60 63 99 136 187
American General International Growth Division 33 64 104 143 203
American General International Value Division 34 63 100 137 190
American General Large Cap Growth Division 39 61 94 127 168
American General Large Cap Value Division 40 61 94 126 167
American General Mid Cap Growth Division 37 60 93 125 164
American General Mid Cap Value Division 38 63 101 138 193
American General Moderate Growth Lifestyle Division 49 54 72 88 86
American General Money Market Division 44 58 86 112 138
American General Small Cap Growth Division 35 64 103 142 201
American General Small Cap Value Division 36 62 99 135 185
American General Socially Responsible Division 41 58 86 113 139
American General Strategic Bond Division 59 62 96 130 176
Dreyfus Founders Growth Division 30 66 110 154 225
Dreyfus Variable Investment Fund -- Small Cap Portfolio
Division 18 64 104 143 203
Evergreen Equity Trust
Evergreen Growth and Income -- Class A Division 56 69 120 172 261
Evergreen Small Cap Value -- Class A Division 55 72 127 184 285
Evergreen Value -- Class A Division 57 65 107 150 216
Franklin Templeton Variable Insurance Products Trust
Templeton Asset Strategy -- Class 1 Division 19 65 108 151 219
Templeton International Securities -- Class 1 Division 20 66 111 156 230
Neuberger Berman Guardian Trust Division 29 64 104 143 203
Putnam Global Growth -- Class A Shares Division 28 66 110 155 227
Putnam New Opportunities -- Class A Shares Division 26 64 105 146 209
Putnam OTC & Emerging Growth -- Class A Shares Division 27 65 107 149 214
Scudder Growth and Income Division 21 63 101 139 195
T. Rowe Price Small-Cap Stock Division 51 67 113 160 238
Templeton Foreign -- Class A Division 32 66 111 156 230
Vanguard LifeStrategy Conservative Growth Division 54 61 93 125 165
Vanguard LifeStrategy Growth Division 52 61 94 126 166
Vanguard LifeStrategy Moderate Growth Division 53 61 94 126 166
Vanguard Long-Term Corporate Division 22 58 86 113 139
Vanguard Long-Term Treasury Division 23 58 86 112 137
Vanguard Wellington Division 25 61 94 126 167
Vanguard Windsor II Division 24 61 96 130 175
</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> 249
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.
Depending upon the selection made by your employer's plan, if applicable, you
may 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 three Fixed Account
Options. There may be certain limitations on how many investment options you may
invest in at any one time.(1)
- --------------------------------------------------------------------------------
<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
--------------------------------------------------------------------------------------------------------
Multi-Year Enhanced Multi-year guaranteed interest -- --
Fixed Account(1) income
- ---------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS OBJECTIVE ADVISER SUB-ADVISER
- ---------------------------------------------------------------------------------------------------------------------
INDEX AGSPC International Seeks long-term growth of capital VALIC N/A
EQUITY Equities Fund* through investments primarily in a
FUNDS 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.
--------------------------------------------------------------------------------------------------------
AGSPC MidCap Seeks growth of capital through VALIC N/A(2)
Index Fund(3) 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.
--------------------------------------------------------------------------------------------------------
AGSPC Small Cap Seeks growth of capital through VALIC N/A(2)
Index Fund(3) 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.
--------------------------------------------------------------------------------------------------------
AGSPC Stock Seeks long-term capital growth VALIC N/A(2)
Index Fund(3) 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).
- ---------------------------------------------------------------------------------------------------------------------
ACTIVELY AGSPC Growth Seeks long-term growth of capital VALIC Wellington
MANAGED Fund* through investment primarily in Management Company,
EQUITY equity securities. LLP(4)
FUNDS
--------------------------------------------------------------------------------------------------------
AGSPC Growth & Seeks long-term growth of capital VALIC N/A
Income Fund* and, secondarily, current income
through investment in common stocks
and equity-related securities.
--------------------------------------------------------------------------------------------------------
American Century Seeks capital growth through American Century N/A
Ultra Fund investments primarily in common Investment Management,
stocks that are considered to have Inc.
better-than-average prospects for
appreciation.
--------------------------------------------------------------------------------------------------------
American General Seeks long-term capital VALIC Jacobs Asset
International appreciation by investing in equity Management
Growth securities of non-U.S. companies,
Fund** 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.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* A series of American General Series Portfolio Company ("AGSPC").
** A series of American General Series Portfolio Company 3 ("AGSPC 3").
(1) This Fixed Account Option is also referred to in this prospectus as the
Market Value Adjustment ("MVA") Option. For purposes of this limitation,
each MVA Band under the Multi-Year Enhanced Fixed Option will count as a
separate investment option. An MVA Band is established for each separate
investment for a new guarantee period. The minimum allocation to an MVA
Band, as described in the Contract, may be changed from time to time by the
Company. Availability of this option is subject to regulatory approval
within the state in which your Contract is issued. It may not be available
under your Contract. See MVA Option herein.
(2) Bankers Trust Company ("Bankers Trust") previously served as sub-adviser to
the AGSPC MidCap Index Fund, the AGSPC Small Cap Index Fund and the AGSPC
Stock Index Fund. VALIC re-assumed direct management of each Fund's
investment portfolio on October 1, 1999. Relative to the American General
Small Cap Value Fund, VALIC re-assumed that portion of the investment
portfolio previously managed by Bankers Trust as one of two sub-advisers to
the Fund.
(3) "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"). 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
those Funds. The Russell 2000(R) Index is a trademark/servicemark of Frank
Russell Trust Company. Russell(TM) is a trademark of the Frank Russell
Company.
(4) Wellington Management Company, LLP replaced T. Rowe Price Associates, Inc.
as sub-adviser to the Fund effective September 1, 1999. The investment
objective was also changed at that time.
7
<PAGE> 250
SUMMARY -- (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS OBJECTIVE ADVISER SUB-ADVISER
- ---------------------------------------------------------------------------------------------------------------------
American General Seeks growth of capital and future VALIC Capital Guardian
International Value income through investments Trust Company
Fund** primarily in securities of non-U.S.
issuers and securities whose
principal markets are outside of
the United States.
--------------------------------------------------------------------------------------------------------
American General Seeks long-term growth of capital VALIC Goldman Sachs Asset
Large Cap Growth through a broadly diversified Management
Fund** 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 Seeks total returns that exceed VALIC State Street Bank &
Large Cap Value over time the Russell 1000(R) Value Trust Company/State
Fund**(3) Index through investments in equity Street Global
securities. Advisors
--------------------------------------------------------------------------------------------------------
American General Seeks capital appreciation VALIC Brown Capital
Mid Cap Growth principally through investments in Management Inc.
Fund** medium capitalization equity
securities, such as common and
preferred stocks and securities
convertible into common stocks.
Current income is a secondary
objective.
--------------------------------------------------------------------------------------------------------
American General Seeks capital growth through VALIC Neuberger Berman
Mid Cap Value investment in equity securities of Management Inc.
Fund** medium capitalization companies
using a value-oriented investment
approach.
--------------------------------------------------------------------------------------------------------
American General Seeks long-term growth from a VALIC JP Morgan
Small Cap Growth portfolio of equity securities of Investment
Fund** small capitalization growth Management Inc.
companies.
--------------------------------------------------------------------------------------------------------
American General Seeks maximum long-term return, VALIC Fiduciary
Small Cap Value consistent with reasonable risk to Management
Fund** principal by investing primarily in Associates, Inc.(2)
equity securities of small
capitalization companies in terms
of revenues and/or market
capitalization.
--------------------------------------------------------------------------------------------------------
Dreyfus Founders Seeks long-term growth of capital Founders N/A
Growth by investing primarily in common Asset
Fund stocks of well-established, Management LLC
high-quality growth companies.
--------------------------------------------------------------------------------------------------------
Dreyfus Variable Seeks to maximize capital The Dreyfus N/A
Investment Fund -- appreciation by investing at least Corporation
Small 65% of its assets in the common
Cap Portfolio stock of U.S. and foreign
companies. The portfolio focuses on
small-cap companies with total
market values of less than $1.5
billion.
--------------------------------------------------------------------------------------------------------
Evergreen Growth Seeks capital growth in the value Evergreen Asset N/A
and Income Fund -- of its shares by investing in the Management Corp.
Class A*** securities of companies which are
temporarily undervalued in the
marketplace but display
characteristics of growth such as
high return on investment and
competitive advantage in their
industry.
--------------------------------------------------------------------------------------------------------
Evergreen Small Cap Seeks current income and capital Evergreen Asset N/A
Value Fund -- Class growth in the value of its shares Management Corp.
A*** by investing in common stocks of
small U.S. companies (less than $1
billion in market capitalization).
--------------------------------------------------------------------------------------------------------
Evergreen Value Seeks long-term capital growth with Evergreen Investment N/A
Fund -- Class A*** current income as a secondary Management
objective by investing at least 75%
of its assets in common stocks of
medium and large-cap U.S. companies
with prospects for earning growth
and dividends.
--------------------------------------------------------------------------------------------------------
Neuberger Berman Seeks capital appreciation and, Neuberger Berman Neuberger
Guardian Trust secondarily, current income by Management Inc. Berman, LLC
investing primarily in common
stocks of large-capitalization
companies.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
** A series AGSPC 3.
*** A series of Evergreen Equity Trust.
(2) Bankers Trust Company ("Bankers Trust") previously served as sub-adviser
to the AGSPC MidCap Index Fund, the AGSPC Small Cap Index Fund and the
AGSPC Stock Index Fund. VALIC re-assumed direct management of each Fund's
investment portfolio on October 1, 1999. Relative to the American General
Small Cap Value Fund, VALIC re-assumed that portion of the investment
portfolio previously managed by Bankers Trust as one of two sub-advisers
to the Fund.
(3) The Russell 1000(R)Value Index is a trademark/servicemark of Frank
Russell Trust Company. Russell(TM) is a trademark of the Frank Russell
Company.
8
<PAGE> 251
SUMMARY -- (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS OBJECTIVE ADVISER SUB-ADVISER
- ---------------------------------------------------------------------------------------------------------------------
Putnam Global Seeks capital appreciation. Current Putnam Investment N/A
Growth income is only an incidental Management Inc.
Fund -- Class A consideration in selecting
Shares 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.
--------------------------------------------------------------------------------------------------------
Putnam New Seeks long-term capital Putnam Investment N/A
Opportunities appreciation. Current income is Management Inc.
Fund -- Class A only an incidental consideration.
Shares 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.
--------------------------------------------------------------------------------------------------------
Putnam OTC & Seeks capital appreciation by Putnam Investment N/A
Emerging Growth investing primarily in common Management Inc.
Fund -- Class A stocks traded in the
Shares over-the-counter 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.
--------------------------------------------------------------------------------------------------------
Scudder Growth Seeks long-term growth of capital, Scudder Kemper N/A
and Income Fund current income and growth of income Investments, Inc.
by investing primarily in common
stocks, preferred stocks, and
securities convertible into common
stocks of companies which offer the
prospect for growth of earning
while paying current dividends.
--------------------------------------------------------------------------------------------------------
T. Rowe Price Seeks long-term capital growth T. Rowe Price N/A
Small-Cap Stock through investments primarily in Associates, Inc.
Fund stocks of small to medium-sized
companies.
--------------------------------------------------------------------------------------------------------
Templeton Foreign Seeks long-term capital growth by Templeton Global N/A
Fund -- Class A investing primarily in the equity Advisors Limited
securities of companies outside the
United States, including emerging
markets.
--------------------------------------------------------------------------------------------------------
Templeton Seeks to achieve long-term capital Templeton Investment N/A
International growth by investing primarily in Counsel, Inc.
Securities Fund -- stocks of companies outside the
Class 1**** United States, including emerging
markets.
--------------------------------------------------------------------------------------------------------
Vanguard Seeks to provide long-term growth Vanguard N/A
Windsor II Fund 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.
- ---------------------------------------------------------------------------------------------------------------------
BALANCED American General Seeks balanced accomplishment of VALIC Capital Guardian
FUNDS Balanced Fund** (i) conservation of principal and Trust Company
(ii) long-term growth of capital
and income through investment in
fixed income and equity securities.
--------------------------------------------------------------------------------------------------------
Vanguard Wellington Seeks to conserve capital and Wellington Management N/A
Fund provide moderate long-term growth Company, LLP
in capital and income by investing
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.
- ---------------------------------------------------------------------------------------------------------------------
INCOME AGSPC Capital Seeks the highest possible total VALIC N/A
FUNDS Conservation Fund* 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>
<TABLE>
<S> <C> <C> <C> <C>
* A series of AGSPC.
** A series AGSPC 3.
**** A series of Franklin Templeton Variable Insurance Products Trust.
</TABLE>
9
- --------------------------------------------------------------------------------
10
<PAGE> 252
<TABLE>
<S> <C> <C> <C> <C>
SUMMARY --
(Continued)
- ------------
- ---------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS OBJECTIVE ADVISER SUB-ADVISER
- ---------------------------------------------------------------------------------------------------------------------
AGSPC Government Seeks high current income and VALIC N/A
Securities Fund* protection of capital through
investments in intermediate and
long-term U.S. Government debt
securities.
--------------------------------------------------------------------------------------------------------
AGSPC International Seeks high current income through VALIC N/A
Government investments primarily in investment
Bond Fund* grade debt securities issued or
guaranteed by foreign governments.
--------------------------------------------------------------------------------------------------------
American General Seeks the highest possible total VALIC American General
Core Bond Fund** return consistent with conservation Investment
of capital through investment in Management, L.P.
medium to high quality fixed income
securities.
--------------------------------------------------------------------------------------------------------
American General Seeks the highest possible total VALIC Capital Guardian
Domestic Bond return consistent with conservation Trust Company
Fund** of capital through investment
primarily in investment grade fixed
income securities and other income
producing securities.
--------------------------------------------------------------------------------------------------------
American General Seeks the highest possible total VALIC American General
High Yield Bond return and income consistent with Investment
Fund** conservation of capital through Management, L.P.
investment in a diversified
portfolio of high yielding high
risk fixed income securities.
--------------------------------------------------------------------------------------------------------
American General Seeks the highest possible total VALIC American General
Strategic Bond return and income consistent with Investment
Fund** conservation of capital through Management, L.P.
investment in a diversified
portfolio of income producing
securities.
--------------------------------------------------------------------------------------------------------
Vanguard Long-Term Seeks a high level of current Wellington Management N/A
Corporate Fund income consistent with the Company, LLP
maintenance of principal and
liquidity by investing in a
diversified portfolio of investment
grade corporate and Government
bonds.
--------------------------------------------------------------------------------------------------------
Vanguard Long-Term Seeks a high level of current Vanguard N/A
Treasury Fund income consistent with the
maintenance of principal and
liquidity by investing at least 85%
of its total assets in long-term
securities backed by the full faith
and credit of the U.S. Government.
- ---------------------------------------------------------------------------------------------------------------------
SPECIALTY AGSPC Science & Seeks long-term growth of capital VALIC T. Rowe Price
FUNDS Technology through investment primarily in the Associates, Inc.
Fund* common stocks and equity-related
securities of companies that are
expected to benefit from the
development, advancement and use of
science and technology.
--------------------------------------------------------------------------------------------------------
AGSPC Social Seeks growth of capital through VALIC N/A
Awareness investment, primarily in common
Fund* stocks, in companies which meet the
social criteria established for the
Fund.
--------------------------------------------------------------------------------------------------------
American General Seeks growth of capital through VALIC N/A
Socially investment, primarily in equity
Responsible Fund** securities, in companies which meet
the social criteria established for
the Fund.
- ---------------------------------------------------------------------------------------------------------------------
MONEY AGSPC Money Seeks liquidity, protection of VALIC N/A
MARKET Market capital and current income through
FUNDS Fund* investments in short-term money
market instruments.
--------------------------------------------------------------------------------------------------------
American General Seeks liquidity, protection of VALIC N/A
Money Market Fund** capital and current income through
investments in short-term money
market instruments.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* A series of AGSPC.
** A series AGSPC 3.
11
<PAGE> 253
SUMMARY -- (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS OBJECTIVE ADVISER SUB-ADVISER
- ---------------------------------------------------------------------------------------------------------------------
LIFESTYLE American General Seeks current income and low to VALIC N/A
FUNDS Conservative Growth moderate growth of capital through
Lifestyle Fund** investments in AGSPC or AGSPC 3
Funds.
--------------------------------------------------------------------------------------------------------
American General Seeks growth through investments in VALIC N/A
Growth AGSPC or AGSPC 3 Funds.
Lifestyle Fund**
--------------------------------------------------------------------------------------------------------
American General Seeks growth and current income VALIC N/A
Moderate Growth through investments in AGSPC or
Lifestyle Fund** AGSPC 3 Funds.
--------------------------------------------------------------------------------------------------------
Vanguard Seeks current income and Vanguard N/A
LifeStrategy low-to-moderate growth of capital
Conservative by investing in a relatively fixed
Growth Fund combination of other Vanguard
funds.
--------------------------------------------------------------------------------------------------------
Vanguard Seeks growth of capital by Vanguard N/A
LifeStrategy Growth investing in a relatively fixed
Fund combination of other Vanguard
funds.
--------------------------------------------------------------------------------------------------------
Vanguard Seeks growth of capital and a Vanguard N/A
LifeStrategy reasonable level of current income
Moderate Growth by investing in a relatively fixed
Fund combination of other Vanguard
funds.
- ---------------------------------------------------------------------------------------------------------------------
ASSET AGSPC Asset Seeks maximum aggregate rate of VALIC N/A
ALLOCATION Allocation Fund* return over the long-term through
FUNDS controlled investment risk by
adjusting its investment mix among
stocks, long-term debt securities
and short-term money market
securities.
--------------------------------------------------------------------------------------------------------
Templeton Asset Seeks a high level of total return Templeton Investment N/A
Strategy by investing in the following Counsel, Inc.
Fund -- Class 1**** market segments: stocks and bonds
of any nation, including emerging
markets, and money market
instruments.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* A series of AGSPC.
** A series AGSPC 3.
**** A series of Franklin Templeton Variable Insurance Products Trust.
12
<PAGE> 254
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.
Amounts invested in an MVA Option may be transferred to another investment
option at the end of an MVA term without application of a market value
adjustment.
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 from an MVA Option prior to the end of the applicable MVA term will
also be subject to a market value adjustment unless an exception applies. This
may increase or reduce the amount withdrawn. However, the market value
adjustment will not reduce the amount invested in the MVA Option below the
guaranteed amount.
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
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.
12
<PAGE> 255
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
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 may, in its discretion, reimburse to certain Divisions some or all
of the 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. The minimum amount to establish a new Multi-Year Enhanced Fixed
Option guarantee period (MVA Band), as described in the Contract, may be changed
from time to time by the Company.
13
<PAGE> 256
SELECTED PURCHASE UNIT DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, 1999 JANUARY 4, 1999 DECEMBER 31, 1998
------------------------ ------------------- ------------------------ SEPTEMBER 22,
PURCHASE PURCHASE PURCHASE PURCHASE 1998
UNITS PURCHASE UNITS UNIT UNITS PURCHASE PURCHASE
IN FORCE UNIT VALUE IN FORCE VALUE(1) IN FORCE UNIT VALUE UNIT VALUE(1)
----------- ---------- -------- -------- ----------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
AGSPC Asset Allocation Division 5..... 673,135 $4.303891 -- -- 31,350 $3.882024 $ 3.497989
AGSPC Capital Conservation Division
7................................... 95,480 $2.112183 -- -- -- $2.138060 $ 2.098635
AGSPC Government Securities Division
8................................... 243,537 $2.087744 -- -- -- $2.164605 $ 2.149706
AGSPC Growth Division 15.............. 8,377,232 $2.608476 -- -- 4,324,799 $2.448443 $ 1.938540
AGSPC Growth & Income Division 16..... 660,621 $2.704358 -- -- -- $2.219368 $ 1.786564
AGSPC International Equities Division
11.................................. 348,851 $1.898106 -- -- -- $1.481352 $ 1.226638
AGSPC International Government Bond
Division 13......................... 1,058,856 $1.634588 -- -- 408,156 $1.751922 $ 1.675623
AGSPC MidCap Index Division 4(2)...... 523,908 $5.590887 -- -- -- $5.183213 $ 4.059808
AGSPC Money Market Division 6......... 9,613,663 $1.856681 -- -- 5,325,479 $1.786658 $ 1.766523
AGSPC Science & Technology Division
17.................................. 11,744,052 $6.462689 -- -- 3,228,389 $3.241847 $ 2.224499
AGSPC Small Cap Index Division 14..... 522,127 $2.558263 -- -- 58,825 $2.125983 $ 1.824939
AGSPC Social Awareness Division 12.... 3,028,346 $4.502622 -- -- 1,218,871 $3.825649 $ 3.189972
AGSPC Stock Index Division 10......... 18,855,858 $5.830950 -- -- 6,859,835 $4.875028 $ 4.055730
American Century Ultra Division 31.... 20,827,045 $2.437771 -- -- 8,116,612 $1.737734 $ 1.415646
American General Balanced Division
42.................................. 38,339 $1.326598 -- -- -- $1.170920 $ 1.021530
American General Conservative Growth
Lifestyle Division 50............... 246,969 $1.310337 -- -- -- $1.162825 $ 1.025529
American General Core Bond Division
58.................................. 10,700 $1.012353 -- -- -- $1.029846 $ 1.012533
American General Domestic Bond
Division 43......................... -- $1.007290 -- -- -- $1.045141 $ 1.017530
American General Growth Lifestyle
Division 48......................... 46,149 $1.542278 -- -- -- $1.193346 $ 1.014536
American General High Yield Bond
Division 60......................... 2,397 $1.078842 -- -- -- $1.053808 $ 1.000539
American General International Growth
Division 33......................... 5,641 $1.639279 -- -- -- $1.052437 $ 0.941565
American General International Value
Division 34......................... 177,255 $1.920710 -- -- -- $1.150676 $ 0.945563
American General Large Cap Growth
Division 39......................... 95,862 $1.671932 -- -- -- $1.241613 $ 1.011535
American General Large Cap Value
Division 40......................... 221 $1.306351 -- -- -- $1.247414 $ 1.070508
American General Mid Cap Growth
Division 37......................... 1,244 $1.426935 -- -- -- $1.348594 $ 1.069509
American General Mid Cap Value
Division 38......................... 142,103 $1.525696 -- -- -- $1.255563 $ 1.049518
American General Moderate Growth
Lifestyle Division 49............... 213,355 $1.401340 -- -- -- $1.186235 $ 1.025530
American General Money Market Division
44.................................. 1,844,830 $1.056406 -- -- -- $1.013993 $ 1.002447
American General Small Cap Growth
Division 35......................... 119,661 $2.278700 -- -- -- $1.350262 $ 1.075508
American General Small Cap Value
Division 36......................... 232 $1.083393 -- -- -- $1.166035 $ 1.035526
American General Socially Responsible
Division 41......................... 106,148 $1.501310 -- -- -- $1.278609 $ 1.065511
American General Strategic Bond
Division 59......................... -- $1.084842 -- -- -- $1.050579 $ 1.011533
Dreyfus Founders Growth Division 30... 16,160,159 $2.252548 -- -- 7,720,189 $1.633282 $ 1.368506
Dreyfus Variable Investment Fund
Small Cap Portfolio Division 18..... 2,046,085 $2.089527 -- -- -- $1.712073 $ 1.429642
Evergreen Equity Trust
Evergreen Growth and Income Division
56................................ 5,326 $1.135195 -- $1.00 -- -- --
Evergreen Small Cap Value Division
55................................ -- $0.997510 -- $1.00 -- -- --
Evergreen Value Division 57......... -- $1.036194 -- $1.00 -- -- --
Franklin Templeton Variable Insurance
Products Trust
Templeton Asset Strategy -- Class 1
Division 19(3).................... 485,669 $2.102090 -- -- -- $1.728553 $ 1.429596
Templeton International Securities
-- Class 1 Division 20(4)......... 2,084,490 $2.105759 -- -- -- $1.721198 $ 1.484376
Neuberger Berman Guardian Trust
Division 29......................... 1,406,229 $1.471857 -- -- 1,012,671 $1.368269 $ 1.144758
Putnam Global Growth -- Class A
Division 28......................... 11,313,375 $2.530785 -- -- 6,153,771 $1.549587 $ 1.266657
Putnam New Opportunities -- Class A
Division 26......................... 19,231,737 $2.414279 -- -- 10,725,927 $1.434946 $ 1.124122
Putnam OTC & Emerging Growth -- Class
A Division 27....................... 6,570,152 $2.471391 -- -- 3,092,839 $1.098295 $ 0.859512
Scudder Growth and Income Division
21.................................. 6,357,461 $1.623952 -- -- 4,494,004 $1.542160 $ 1.378514
T. Rowe Price Small-Cap Stock Division
51.................................. 249,245 $1.296356 -- -- -- $1.141641 $ 1.028606
Templeton Foreign -- Class A Division
32.................................. 8,660,425 $1.617785 -- -- 5,437,288 $1.094954 $ 0.944980
Vanguard LifeStrategy Conservative
Growth Division 54.................. 375,819 $1.156739 -- -- -- $1.084591 $ 1.023206
Vanguard LifeStrategy Growth Division
52.................................. 1,468,333 $1.356289 -- -- -- $$1.168716 $ 1.032908
Vanguard LifeStrategy Moderate Growth
Division 53......................... 2,152,244 $1.248092 -- -- -- $1.126506 $ 1.023505
Vanguard Long-Term Corporate Division
22.................................. 4,060,325 $1.220562 -- -- 2,949,044 $1.312731 $ 1.294131
Vanguard Long-Term Treasury Division
23.................................. 7,578,662 $1.222216 -- -- 3,682,809 $1.349397 $ 1.340270
Vanguard Wellington Division 25....... 28,195,817 $1.580569 -- -- 19,636,072 $1.529797 $ 1.423024
Vanguard Windsor II Division 24....... 20,846,053 $1.606241 -- -- 13,800,156 $1.723020 $ 1.509170
</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.
(3) Effective May 1, 2000 the Templeton Asset Allocation Fund merged with the
Templeton Global Asset Allocation Fund. At the same time as the merger, the
Templeton Asset Allocation Fund changed its name to the Templeton Asset
Strategy Fund. Accordingly, the Templeton Asset Allocation Fund Division 19
was renamed the Templeton Asset Strategy Fund Division 19. The Selected
Purchase Unit Data for the Division through December 31, 1999, reflects
units of the Templeton Asset Allocation Fund Division 19.
(4) Effective May 1, 2000 the Templeton International Fund merged with the
Templeton International Equity Fund. At the same time as the merger, the
Templeton International Fund changed its name to the Templeton International
Securities Fund. Accordingly, the Templeton International Fund Division 20
was renamed the Templeton International Securities Fund Division 20. The
Selected Purchase Unit Data for the Division through December 31, 1999,
reflects units of the Templeton International Fund Division 20.
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.
14
<PAGE> 257
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.
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
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
15
<PAGE> 258
- --------------------------------------------------------------------------------
contract owner, participants, annuitants, and beneficiaries of Portfolio
Director Plus. When we discuss performance information in this prospectus, we
mean the performance of a VALIC Separate Account A Division.
UNITS OF INTERESTS
Your investment in a Division of VALIC Separate Account A is represented by
units of interest issued by VALIC Separate Account A. On a daily basis, the
units of interest issued by VALIC Separate Account A are revalued to reflect
that day's performance of the underlying mutual fund minus any applicable fees
and charges to VALIC Separate Account A.
DISTRIBUTION OF THE CONTRACTS
American General Distributors, Inc. (the "Distributor"), 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.
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. You may be
subject to further limits on how many options you may be invested in at any one
time or how many of the options you are invested in may be involved in certain
transactions at any one time. 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 and, for 2 of such funds, have one of the following sub-advisers:
Wellington Management Company, LLP and T. Rowe Price Associates, Inc.
- - 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.,
Brown Capital Manage-ment, 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 Founders Funds, Inc. -- offers 1 fund for which Founders Asset
Management LLC serves as investment adviser. The Funds were formerly known as
Founders Funds, Inc.
- - 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 Evergreen Investment Management serve as investment
adviser.
- - Franklin Templeton Variable Insurance Products Trust -- offers 2 funds for
which Templeton Investment Counsel, Inc. serves as investment adviser.
- - Neuberger Berman Management Inc. -- offers 1 fund for which Neuberger Berman
Management Inc. serves as investment manager and Neuberger Berman LLC, serves
as sub-adviser.
- - Putnam Investments -- offers 3 funds for which Putnam Investment Management
Inc., serves as investment adviser.
The Distributor's address
is 2929 Allen Parkway,
Houston, Texas 77019
For more information about
the Distributor, see "Distribution
of Variable Annuity
Contracts"; in the
Statement of
Additional Information
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.
16
<PAGE> 259
- --------------------------------------------------------------------------------
- - 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.
- - Franklin Templeton Variable Insurance Products Trust -- 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.
Shares of certain of the Funds 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.
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 applica-
PURCHASE PAYMENTS -- an
amount of money you pay to
VALIC to receive the benefits
of an annuity Contract offered
by Portfolio Director Plus.
17
<PAGE> 260
- --------------------------------------------------------------------------------
tion 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; or other investment option
chosen by your employer. If your employer chooses another investment option
other than the Money Market Division, the value of your investment may
fluctuate and you could lose money. 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.)
Once we have established your account and have applied your initial Purchase
Payment as described above, any subsequent Purchase Payment that we receive at
our Home Office before the close of the Exchange will be credited the same
business day. If not, it 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.
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 56 investment options offered in Portfolio Director Plus. This
includes 3 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
The Fixed Account Plus and the Short Term Fixed Account are part of the
Company's general assets. The MVA Option may be invested in either the general
assets of the Company or in
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.
18
<PAGE> 261
a Separate Account of the Company, depending upon state requirements. You may
allocate all or a portion of your Purchase Payment to the Fixed Account Options
listed in the "Summary" Section 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. With the exception of
a market value adjustment which generally will be applied to withdrawals or
transfers from an MVA Option prior to the end of an MVA term, we bear the entire
investment risk for the Fixed Account Options. 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. The minimum amount to establish each new Multi-Year Enhanced Fixed
Option guarantee period (MVA Band), as described in the Contract, may be changed
from time to time by the Company.
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)
- ---------------
* This value may be subject to a market value adjustment under the MVA Option.
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 "Summary" and "Variable Account Options" sections in this
prospectus and in each Fund's 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.
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.
19
<PAGE> 262
- --------------------------------------------------------------------------------
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)
Multi-Year
Enhanced Up to 100% At any time Withdrawals or
Fixed Transfers
Account(3): Subject to
market value
adjustment if
prior to the end
of an MVA term.
Each MVA Band
will require a
minimum transfer
amount as
described in the
Contract.(4)
</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.
(3) The MVA Option may not be available unless it has been selected as an option
for your employer's retirement plan.
(4) The minimum transfer amount may be changed from time to time by the Company.
From time to time we may waive the 20% transfer restriction on Fixed Account
Plus for transfers to the Multi-Year Enhanced Fixed Account or to other
investment options.
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). All transfers to or from the
MVA Option will require written instruction.
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;
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.
20
<PAGE> 263
- --------------------------------------------------------------------------------
(Normally, this will be 4:00 P.M. New York time); otherwise
- - The next date values are calculated.
MARKET TIMING
The Contracts are not designed for professional market timing organizations or
other entities using programmed and frequent transfers. We reserve the right at
any time and without prior notice to any party to terminate, suspend, or modify
our policies or procedures regarding transfer requests.
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.
In addition, certain charges may apply to the MVA Option which are discussed at
the end of this section.
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
PARTICIPANT YEAR -- the first
twelve month period and
then each yearly anniversary
of that period following the
issue date of the contract or
certificate.
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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 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.
VALIC may waive any otherwise applicable surrender charge if you reinvest the
surrender proceeds in another VALIC insurance product. You will, however, be
subject to a surrender charge in the newly acquired product under the same terms
and conditions as the original product. For purposes of calculating any
surrender charge due, you will be considered to have acquired the new product as
of the date you acquired the original product.
The surrender charge may also 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
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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.
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.
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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 administrative and shareholder services it
provides to the underlying Fund. The Company may, in its discretion, apply some
or all of these payments to reduce its charges to the Division investing in that
Fund. In addition, the Company currently reimburses certain Divisions a portion
of the Company's administration and
distribution fee. Such reimbursement
arrangements are, however, voluntary and may be changed by the Company at any
time. See the Fee Table in this prospectus for an identification of those Funds
for which a reimbursement applies and the amount of the reimbursement.
MARKET VALUE ADJUSTMENT
Under the MVA Option you may establish one or more MVA Bands with a minimum
amount, as described in the Contract, per MVA Band in states in which the MVA
Option has been approved. The Company may change the minimum from time to time.
Each MVA Band will be guaranteed to receive a stated rate of interest through
the end of the selected MVA term. We guarantee your MVA Option will earn at
least the lowest minimum interest rate applicable to any of the fixed interest
options in the contract. A withdrawal will generally be subject to a surrender
charge if it exceeds the amount of any free withdrawal amount permitted under
your contract. Withdrawals or transfers from an MVA Band prior to the end of the
MVA term will be subject to a market value adjustment, unless an exception
applies. This adjustment may be positive or negative, based upon the differences
in selected interest rates at the time the MVA Band was established and at the
time of the withdrawal. This adjustment will not apply upon the Owner's death,
or if the Owner is not a natural person, upon the death of the Annuitant. This
adjustment applies independently from surrender charges, and can still apply to
a 10% Free Withdrawal. The market value adjustment may be waived for
distributions that are required under your contract. It will also be waived for
30 days following the end of an MVA term. Loans are not available from the MVA
Option. Please review your contract for additional information on the MVA
Option.
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;
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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- - 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.
- 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
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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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.
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.
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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, no surrender or partial
surrender will be allowed except attainment of age 70 1/2, retirement or other
termination of employment 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 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.
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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.
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. If you elect to exercise one of these
exchange offers, you should contact any of our Regional Offices. 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, except at the discretion of the
Company.
- 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
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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.
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
29
<PAGE> 272
- --------------------------------------------------------------------------------
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 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.
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
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 Short-Term
Fixed Account and Multi- Year Enhanced Fixed Account.
Each option of this type is
guaranteed to earn at least a
minimum rate of interest.
VARIABLE ACCOUNT
OPTIONS -- investment
options that correspond to
VALIC Separate Account A
Divisions offered by Portfolio
Director Plus. Investment returns
on Variable Account Options
will be positive or negative
depending on the investment
performance of the
underlying mutual fund.
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<PAGE> 273
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- - 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.
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.
31
<PAGE> 274
- 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.
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 or life insurance products 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, 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 Total
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
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.
32
<PAGE> 275
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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.
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, 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.
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, 1999 was 4.51% and
4.76%, 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, 1999
was 4.61% and 4.88%, 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.
33
<PAGE> 276
- --------------------------------------------------------------------------------
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.
34
<PAGE> 277
TABLE I
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
DIVISION
INCEPTION SINCE
FUND AND DIVISION**** DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
--------------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Asset Allocation (Division 5)......................... 09/06/83 -- 10.09% 16.03% 5.83%
AGSPC Capital Conservation (Division 7)..................... 01/16/86 -- 5.73 5.65 (5.70)
AGSPC Government Securities (Division 8).................... 01/16/86 -- 5.74 4.94 (7.94)
AGSPC Growth (Division 15).................................. 07/11/94 20.16% -- 20.53 1.69
AGSPC Growth & Income (Division 16)......................... 07/11/94 21.07 -- 21.63 16.79
AGSPC International Equities (Division 11).................. 10/02/89 -- 6.26 11.54 23.07
AGSPC International Government Bond (Division 13)........... 10/01/91 6.08 -- 3.63 (10.94)
AGSPC MidCap Index (Division 4)***.......................... 10/01/91 16.29 -- 21.28 8.95
AGSPC Money Market (Division 6)............................. 01/16/86 -- 3.98 3.37 (0.80)
AGSPC Science & Technology (Division 17).................... 07/11/94 42.03 -- 38.58 94.26
AGSPC Small Cap Index (Division 14)......................... 05/01/92 12.97 -- 15.18 15.28
AGSPC Social Awareness (Division 12)........................ 10/02/89 -- 16.06 26.84 12.64
AGSPC Stock Index (Division 10)............................. 04/20/87 -- 16.63 26.77 14.55
American Century Ultra (Division 31)........................ 07/01/96 27.20 -- -- 35.22
American General Balanced (Division 42)..................... 09/22/98 18.65 -- -- 8.24
American General Conservative Growth Lifestyle (Division
50)....................................................... 09/22/98 16.99 -- -- 7.63
American General Core Bond (Division 58).................... 09/22/98 (3.48) -- -- (6.17)
American General Domestic Bond (Division 43)................ 09/22/98 (4.23) -- -- (8.00)
American General Growth Lifestyle (Division 48)............. 09/22/98 34.19 -- -- 24.18
American General High Yield Bond (Division 60).............. 09/22/98 2.11 -- -- (2.28)
American General International Growth (Division 33)......... 09/22/98 49.60 -- -- 50.69
American General International Value (Division 34).......... 09/22/98 69.35 -- -- 61.84
American General Large Cap Growth (Division 39)............. 09/22/98 43.64 -- -- 29.59
American General Large Cap Value (Division 40).............. 09/22/98 12.51 -- -- (0.04)
American General Mid Cap Growth (Division 37)............... 09/22/98 20.86 -- -- 1.00
American General Mid Cap Value (Division 38)................ 09/22/98 30.73 -- -- 16.46
American General Moderate Growth Lifestyle (Division 49).... 09/22/98 23.41 -- -- 13.08
American General Money Market (Division 44)................. 09/22/98 0.43 -- -- (0.55)
American General Small Cap Growth (Division 35)............. 09/22/98 73.51 -- -- 63.68
American General Small Cap Value (Division 36).............. 09/22/98 (1.18) -- -- (11.31)
American General Socially Responsible (Division 41)......... 09/22/98 26.57 -- -- 12.36
American General Strategic Bond (Division 59)............... 09/22/98 1.84 -- -- (1.43)
Dreyfus Founders Growth (Division 30)....................... 07/01/96 24.56 -- -- 32.85
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18)............................................. 07/11/94 14.25 -- 14.14 16.99
Evergreen Growth and Income Fund (Division 56).............. 01/04/99 -- -- -- --
Evergreen Small Cap Value Fund (Division 55)................ 01/04/99 -- -- -- --
Evergreen Value Fund (Division 57).......................... 01/04/99 -- -- -- --
Franklin Templeton Variable Insurance Products Trust
Templeton Asset Strategy -- Class 1 (Division 19)(1)...... 07/11/94 14.30 -- 15.21 16.55
Templeton International Securities -- Class 1 (Division
20)(2).................................................. 07/11/94 14.57 -- 15.34 17.28
Neuberger Berman Guardian Trust (Division 29)............... 07/01/96 9.62 -- -- 2.68
Putnam Global Growth (Division 28).......................... 07/01/96 28.84 -- -- 58.24
Putnam New Opportunities (Division 26)...................... 07/01/96 27.46 -- -- 63.17
Putnam OTC & Emerging Growth (Division 27).................. 07/01/96 27.98 -- -- 119.91
Scudder Growth and Income (Division 21)(3).................. 07/01/96 13.16 -- -- 0.52
T. Rowe Price Small Cap Stock Fund (Division 51)............ 09/22/98 18.11 -- -- 8.50
Templeton Foreign -- Class A (Division 32)(4)............... 07/01/96 10.92 -- -- 33.55
Vanguard LifeStrategy Conservative Growth (Division 54)..... 09/22/98 7.65 -- -- 1.80
Vanguard LifeStrategy Growth (Division 52).................. 09/22/98 22.71 -- -- 10.99
Vanguard LifeStrategy Moderate Growth (Division 53)......... 09/22/98 15.02 -- -- 5.76
Vanguard Long-Term Corporate (Division 22)**................ 07/01/96 3.69 -- -- (11.25)
Vanguard Long-Term Treasury (Division 23)**................. 07/01/96 4.01 -- -- (13.54)
Vanguard Wellington (Division 25)........................... 07/01/96 11.98 -- -- (1.38)
Vanguard Windsor II (Division 24)........................... 07/01/96 12.77 -- -- (11.02)
</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.
(1) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Asset Strategy Fund. Also
effective with this merger, the Templeton Asset Allocation Fund Division 19
was renamed the Templeton Asset Strategy Fund Division 19. Accordingly, the
performance figures for the Division through December 31, 1999, reflect the
actual historical performance of the Templeton Asset Allocation Fund
Division 19.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Also effective with
this merger, the Templeton International Fund Division 20 was renamed the
Templeton International Securities Fund Division 20. Accordingly, the
performance figures for the Division through December 31, 1999, reflect the
actual historical performance of the Templeton International Fund Division
20.
(3) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(4) 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.
35
<PAGE> 278
TABLE II
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15).................................. 04/29/94 18.36% -- 20.53% 1.69%
AGSPC Growth & Income (Division 16)......................... 04/29/94 19.11 -- 21.63 16.79
AGSPC Science & Technology (Division 17).................... 04/29/94 38.90 -- 38.58 94.26
American Century Ultra (Division 31)........................ 11/02/81 -- 23.27% 28.09 35.22
Dreyfus Founders Growth (Division 30)....................... 01/05/62 -- 19.02 28.62 32.85
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18)............................................. 08/31/90 34.25 -- 14.14 16.99
Evergreen Growth and Income -- Class A (Division 56)........ 01/03/95 19.37 -- -- 8.47
Evergreen Small Cap Value -- Class A (Division 55).......... 01/03/95 12.22 -- -- (4.78)
Evergreen Value -- Class A (Division 57).................... 04/12/85 -- 11.63 16.11 (1.09)
Franklin Templeton Variable Insurance Products Trust........
Templeton Asset Strategy -- Class 1 (Division 19)(1)...... 08/24/88 -- 11.82 15.21 16.55
Templeton International Securities -- Class 1 (Division
20)(2)................................................. 05/01/92 14.07 -- 15.34 17.28
Neuberger Berman Guardian Trust (Division 29)............... 08/03/93 12.23 -- 13.64 2.68
Putnam Global Growth -- Class A (Division 28)............... 09/01/67 -- 15.27 24.81 58.24
Putnam New Opportunities -- Class A (Division 26)........... 08/31/90 30.92 -- 31.69 63.17
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 11/01/82 -- 23.14 33.75 119.91
Scudder Growth and Income (Division 21)(3).................. 11/13/84 -- 13.14 16.91 0.52
T. Rowe Price Small Cap Stock (Division 51)................. 06/01/50 -- 11.90 16.40 8.50
Templeton Foreign -- Class A (Division 32)(4)............... 10/05/82 -- 10.39 11.58 33.55
Vanguard LifeStrategy Conservative Growth (Division 54)..... 09/30/94 12.88 -- 13.00 1.80
Vanguard LifeStrategy Growth (Division 52).................. 09/30/94 18.57 -- 19.18 10.99
Vanguard LifeStrategy Moderate Growth (Division 53)......... 09/30/94 15.75 -- 16.28 5.76
Vanguard Long-Term Corporate (Division 22)**................ 07/09/73 -- 7.34 6.26 (11.25)
Vanguard Long-Term Treasury (Division 23)**................. 05/19/86 -- 6.92 6.58 (13.54)
Vanguard Wellington (Division 25)........................... 07/01/29 -- 11.29 15.47 (1.38)
Vanguard Windsor II (Division 24)........................... 06/24/85 -- 12.53 18.25 (11.02)
</TABLE>
- ---------------
Divisions with an identical inception date as the underlying Funds' inception
date are not reflected in this Table. See preceding 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 15-20 since inception
of each Division (July 11, 1994) and hypothetical performance for periods
prior to July 11, 1994 based on investment in a hypothetical Contract. 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 based on
investment in a hypothetical Contract. The Table reflects actual historical
performance of the related Separate Account Divisions 51-54 since inception
of each Division (September 22, 1998) and hypothetical performance for
periods prior to September 22, 1998 based on investment in a hypothetical
Contract. The Table reflects actual historical performance of the related
Separate Account Divisions 55-57 since inception of each Division (January
4, 1999) and hypothetical performance for periods prior to January 4, 1999
based on investment in a hypothetical Contract. 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) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Asset Strategy Fund.
Accordingly, the performance figures in the Table for the Fund through
December 31, 1999, reflect the historical performance and inception date of
the Templeton Asset Allocation Fund.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Accordingly, the
performance figures in the Table for the Fund through December 31, 1999,
reflect the historical performance and inception date of the Templeton
International Fund.
(3) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(4) 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.
36
<PAGE> 279
TABLE III
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
DIVISION
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Asset Allocation (Division 5)......................... 09/06/83 -- 10.15% 16.64% 10.87%
AGSPC Capital Conservation (Division 7)..................... 01/16/86 -- 5.79 6.50 (1.21)
AGSPC Government Securities (Division 8).................... 01/16/86 -- 5.80 5.81 (3.55)
AGSPC Growth (Division 15).................................. 07/11/94 20.22% -- 21.06 6.54
AGSPC Growth & Income (Division 16)......................... 07/11/94 21.13 -- 22.15 21.85
AGSPC International Equities (Division 11).................. 10/02/89 -- 6.32 12.24 28.13
AGSPC International Government Bond (Division 13)........... 10/01/91 6.14 -- 4.54 (6.70)
AGSPC MidCap Index (Division 4)***.......................... 10/01/91 16.36 -- 21.80 14.00
AGSPC Money Market (Division 6)............................. 01/16/86 -- 4.04 4.29 3.92
AGSPC Science & Technology (Division 17).................... 07/11/94 42.10 -- 38.92 99.35
AGSPC Small Cap Index (Division 14)......................... 05/01/92 13.03 -- 15.80 20.33
AGSPC Social Awareness (Division 12)........................ 10/02/89 -- 16.12 27.29 17.70
AGSPC Stock Index (Division 10)............................. 04/20/87 -- 16.69 27.22 19.61
American Century Ultra (Division 31)........................ 07/01/96 28.04 -- -- 40.28
American General Balanced (Division 42)..................... 09/22/98 22.47 -- -- 13.30
American General Conservative Growth Lifestyle (Division
50)....................................................... 09/22/98 20.82 -- -- 12.69
American General Core Bond (Division 58).................... 09/22/98 0.14 -- -- (1.70)
American General Domestic Bond (Division 43)................ 09/22/98 (0.64) -- -- (3.62)
American General Growth Lifestyle (Division 48)............. 09/22/98 37.89 -- -- 29.24
American General High Yield Bond (Division 60).............. 09/22/98 5.95 -- -- 2.38
American General International Growth (Division 33)......... 09/22/98 53.21 -- -- 55.76
American General International Value (Division 34).......... 09/22/98 72.85 -- -- 66.92
American General Large Cap Growth (Division 39)............. 09/22/98 47.28 -- -- 34.66
American General Large Cap Value (Division 40).............. 09/22/98 16.38 -- -- 4.72
American General Mid Cap Growth (Division 37)............... 09/22/98 24.66 -- -- 5.81
American General Mid Cap Value (Division 38)................ 09/22/98 34.46 -- -- 21.51
American General Moderate Growth Lifestyle (Division 49).... 09/22/98 27.19 -- -- 18.13
American General Money Market (Division 44)................. 09/22/98 4.21 -- -- 4.18
American General Small Cap Growth (Division 35)............. 09/22/98 77.00 -- -- 68.76
American General Small Cap Value (Division 36).............. 09/22/98 2.53 -- -- (7.09)
American General Socially Responsible (Division 41)......... 09/22/98 30.32 -- -- 17.42
American General Strategic Bond (Division 59)............... 09/22/98 5.67 -- -- 3.26
Dreyfus Founders Growth (Division 30)....................... 07/01/96 25.45 -- -- 37.92
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18)............................................. 07/11/94 14.31 -- 14.78 22.05
Evergreen Growth and Income Fund (Division 56).............. 01/04/99 -- -- -- --
Evergreen Small Cap Value Fund (Division 55)................ 01/04/99 -- -- -- --
Evergreen Value Fund (Division 57).......................... 01/04/99 -- -- -- --
Franklin Templeton Variable Insurance Products Trust
Templeton Asset Strategy -- Class 1 (Division 19)(1)...... 07/11/94 14.36 -- 15.84 21.61
Templeton International Securities -- Class 1 (Division
20)(2).................................................. 07/11/94 14.63 -- 15.96 22.34
Neuberger Berman Guardian Trust (Division 29)............... 07/01/96 10.80 -- -- 7.57
Putnam Global Growth (Division 28).......................... 07/01/96 29.67 -- -- 63.32
Putnam New Opportunities (Division 26)...................... 07/01/96 28.31 -- -- 68.25
Putnam OTC & Emerging Growth (Division 27).................. 07/01/96 28.82 -- -- 125.02
Scudder Growth and Income (Division 21)(3).................. 07/01/96 14.26 -- -- 5.30
T. Rowe Price Small Cap Stock Fund (Division 51)............ 09/22/98 21.93 -- -- 13.55
Templeton Foreign -- Class A (Division 32)(4)............... 07/01/96 12.07 -- -- 38.62
Vanguard LifeStrategy Conservative Growth (Division 54)..... 09/22/98 11.56 -- -- 6.65
Vanguard LifeStrategy Growth (Division 52).................. 09/22/98 26.50 -- -- 16.05
Vanguard LifeStrategy Moderate Growth (Division 53)......... 09/22/98 18.87 -- -- 10.79
Vanguard Long-Term Corporate (Division 22)**................ 07/01/96 5.03 -- -- (7.02)
Vanguard Long-Term Treasury (Division 23)**................. 07/01/96 5.34 -- -- (9.42)
Vanguard Wellington (Division 25)........................... 07/01/96 13.11 -- -- 3.32
Vanguard Windsor II (Division 24)........................... 07/01/96 13.88 -- -- (6.78)
</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.
(1) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Asset Strategy Fund. Also
effective with this merger, the Templeton Asset Allocation Fund Division 19
was renamed the Templeton Asset Strategy Fund Division 19. Accordingly, the
performance figures for the Division through December 31, 1999, reflect the
actual historical performance of the Templeton Asset Allocation Fund
Division 19.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Also effective with
this merger, the Templeton International Fund Division 20 was renamed the
Templeton International Securities Fund Division 20. Accordingly, the
performance figures for the Division through December 31, 1999, reflect the
actual historical performance of the Templeton International Fund Division
20.
(3) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(4) 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.
37
<PAGE> 280
TABLE IV
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15).................................. 04/29/94 18.42% -- 21.06% 6.54%
AGSPC Growth & Income (Division 16)......................... 04/29/94 19.18 -- 22.15 21.85
AGSPC Science & Technology (Division 17).................... 04/29/94 38.97 -- 38.92 99.35
American Century Ultra (Division 31)........................ 11/02/81 -- 23.32% 28.53 40.28
Dreyfus Founders Growth (Division 30)....................... 01/05/62 -- 19.08 29.05 37.92
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18)............................................. 08/31/90 34.28 -- 14.78 22.05
Evergreen Growth and Income -- Class A (Division 56)........ 01/03/95 19.92 -- -- 13.52
Evergreen Small Cap Value -- Class A (Division 55).......... 01/03/95 12.90 -- -- (0.25)
Evergreen Value -- Class A (Division 57).................... 04/12/85 -- 11.69 16.72 3.62
Franklin Templeton Variable Insurance Products Trust........
Templeton Asset Strategy -- Class 1 (Division 19)(1)...... 08/24/88 -- 11.88 15.84 21.61
Templeton International Securities -- Class 1 (Division
20)(2)................................................. 05/01/92 14.13 -- 15.96 22.34
Neuberger Berman Guardian Trust (Division 29)............... 08/03/93 12.29 -- 14.30 7.57
Putnam Global Growth -- Class A (Division 28)............... 09/01/67 -- 15.33 25.28 63.32
Putnam New Opportunities -- Class A (Division 26)........... 08/31/90 30.97 -- 32.09 68.25
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 11/01/82 -- 23.20 34.14 125.02
Scudder Growth and Income (Division 21)(3).................. 11/13/84 -- 13.20 17.50 5.30
T. Rowe Price Small Cap Stock (Division 51)................. 06/01/50 -- 11.96 17.00 13.55
Templeton Foreign -- Class A (Division 32)(4)............... 10/05/82 -- 10.45 12.28 38.62
Vanguard LifeStrategy Conservative Growth (Division 54)..... 09/30/94 12.94 -- 13.67 6.65
Vanguard LifeStrategy Growth (Division 52).................. 09/30/94 18.63 -- 19.74 16.05
Vanguard LifeStrategy Moderate Growth (Division 53)......... 09/30/94 15.81 -- 16.89 10.79
Vanguard Long-Term Corporate (Division 22)**................ 07/09/73 -- 7.40 7.09 (7.02)
Vanguard Long-Term Treasury (Division 23)**................. 05/19/86 -- 6.98 7.40 (9.43)
Vanguard Wellington (Division 25)........................... 07/01/29 -- 11.35 16.09 3.32
Vanguard Windsor II (Division 24)........................... 06/24/85 -- 12.59 18.82 (6.78)
</TABLE>
- ---------------
Divisions with an identical inception date as the underlying Funds' inception
date are not reflected in this Table. See preceding 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 15-20 since inception
of each Division (July 11, 1994) and hypothetical performance for periods
prior to July 11, 1994 based on investment in a hypothetical Contract. 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 based on
investment in a hypothetical Contract. The Table reflects actual historical
performance of the related Separate Account Divisions 51-54 since inception
of each Division (September 22, 1998) and hypothetical performance for
periods prior to September 22, 1998 based on investment in a hypothetical
Contract. The Table reflects actual historical performance of the related
Separate Account Divisions 55-57 since inception of each Division (January
4, 1999) and hypothetical performance for periods prior to January 4, 1999
based on investment in a hypothetical Contract. 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) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Asset Strategy Fund.
Accordingly, the performance figures in the Table for the Fund through
December 31, 1999, reflect the historical performance and inception date of
the Templeton Asset Allocation Fund.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Accordingly, the
performance figures in the Table for the Fund through December 31, 1999,
reflect the historical performance and inception date of the Templeton
International Fund.
(3) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(4) 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> 281
TABLE V
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
DIVISION
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Asset Allocation (Division 5)......................... 09/06/83 -- 162.85% 115.86% 10.87%
AGSPC Capital Conservation (Division 7)..................... 01/16/86 -- 75.61 37.02 (1.21)
AGSPC Government Securities (Division 8).................... 01/16/86 -- 75.69 32.65 (3.55)
AGSPC Growth (Division 15).................................. 07/11/94 173.87% -- 160.02 6.54
AGSPC Growth & Income (Division 16)......................... 07/11/94 185.37 -- 171.93 21.85
AGSPC International Equities (Division 11).................. 10/02/89 -- 84.48 78.13 28.13
AGSPC International Government Bond (Division 13)........... 10/01/91 63.46 -- 24.85 (6.70)
AGSPC MidCap Index (Division 4)***.......................... 10/01/91 248.93 -- 168.11 14.00
AGSPC Money Market (Division 6)............................. 01/16/86 -- 48.53 23.38 3.92
AGSPC Science & Technology (Division 17).................... 07/11/94 583.53 -- 417.46 99.35
AGSPC Small Cap Index (Division 14)......................... 05/01/92 155.83 -- 108.25 20.33
AGSPC Social Awareness (Division 12)........................ 10/02/89 -- 345.59 234.19 17.70
AGSPC Stock Index (Division 10)............................. 04/20/87 -- 368.26 233.28 19.61
American Century Ultra (Division 31)........................ 07/01/96 137.55 -- -- 40.28
American General Balanced (Division 42)..................... 09/22/98 29.36 -- -- 13.30
American General Conservative Growth Lifestyle (Division
50)....................................................... 09/22/98 27.16 -- -- 12.69
American General Core Bond (Division 58).................... 09/22/98 0.18 -- -- (1.70)
American General Domestic Bond (Division 43)................ 09/22/98 (0.81) -- -- (3.62)
American General Growth Lifestyle (Division 48)............. 09/22/98 50.39 -- -- 29.24
American General High Yield Bond (Division 60).............. 09/22/98 7.61 -- -- 2.38
American General International Growth (Division 33)......... 09/22/98 71.92 -- -- 55.76
American General International Value (Division 34).......... 09/22/98 100.38 -- -- 66.92
American General Large Cap Growth (Division 39)............. 09/22/98 63.51 -- -- 34.66
American General Large Cap Value (Division 40).............. 09/22/98 21.24 -- -- 4.72
American General Mid Cap Growth (Division 37)............... 09/22/98 32.31 -- -- 5.81
American General Mid Cap Value (Division 38)................ 09/22/98 45.65 -- -- 21.51
American General Moderate Growth Lifestyle (Division 49).... 09/22/98 35.72 -- -- 18.13
American General Money Market (Division 44)................. 09/22/98 5.37 -- -- 4.18
American General Small Cap Growth (Division 35)............. 09/22/98 106.50 -- -- 68.76
American General Small Cap Value (Division 36).............. 09/22/98 3.23 -- -- (7.09)
American General Socially Responsible (Division 41)......... 09/22/98 39.98 -- -- 17.42
American General Strategic Bond (Division 59)............... 09/22/98 7.25 -- -- 3.26
Dreyfus Founders Growth (Division 30)....................... 07/01/96 121.12 -- -- 37.92
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18)............................................. 07/11/94 107.83 -- 99.24 22.05
Evergreen Growth and Income Fund (Division 56).............. 01/04/99 13.52 -- --
Evergreen Small Cap Value Fund (Division 55)................ 01/04/99 (0.25) -- --
Evergreen Value Fund (Division 57).......................... 01/04/99 3.62 -- --
Franklin Templeton Variable Insurance Products Trust
Templeton Asset Strategy -- Class 1 (Division 19)(1)...... 07/11/94 108.35 -- 108.58 21.61
Templeton International Securities -- Class 1 (Division
20)(2).................................................. 07/11/94 111.07 -- 109.70 22.34
Neuberger Berman Guardian Trust (Division 29)............... 07/01/96 43.18 -- -- 7.57
Putnam Global Growth (Division 28).......................... 07/01/96 148.26 -- -- 63.32
Putnam New Opportunities (Division 26)...................... 07/01/96 139.26 -- -- 68.25
Putnam OTC & Emerging Growth (Division 27).................. 07/01/96 142.61 -- -- 125.02
Scudder Growth and Income (Division 21)(3).................. 07/01/96 59.45 -- -- 5.30
T. Rowe Price Small Cap Stock Fund (Division 51)............ 09/22/98 28.64 -- -- 13.55
Templeton Foreign -- Class A (Division 32)(4)............... 07/01/96 48.99 -- -- 38.62
Vanguard LifeStrategy Conservative Growth (Division 54)..... 09/22/98 14.90 -- -- 6.65
Vanguard LifeStrategy Growth (Division 52).................. 09/22/98 34.79 -- -- 16.05
Vanguard LifeStrategy Moderate Growth (Division 53)......... 09/22/98 24.54 -- -- 10.79
Vanguard Long-Term Corporate (Division 22)**................ 07/01/96 18.76 -- -- (7.02)
Vanguard Long-Term Treasury (Division 23)**................. 07/01/96 19.96 -- -- (9.42)
Vanguard Wellington (Division 25)........................... 07/01/96 53.89 -- -- 3.32
Vanguard Windsor II (Division 24)........................... 07/01/96 57.59 -- -- (6.78)
</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.
(1) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Asset Strategy Fund.
Also, effective with this merger, the Templeton Asset Allocation Fund
Division 19 was renamed the Templeton Asset Strategy Fund Division 19.
Accordingly, the performance figures for the Division through December 31,
1999, reflect the actual historical performance of the Templeton Asset
Allocation Fund Division 19.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Also effective with
this merger, the Templeton International Fund Division 20 was renamed the
Templeton International Securities Fund Division 20. Accordingly, the
performance figures for the Division through December 31, 1999, reflect the
actual historical performance of the Templeton International Fund Division
20.
(3) The Scudder Growth and Income Fund adopted its current name and objective
on November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(4) 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> 282
TABLE VI
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15).................................. 04/29/94 160.85% -- 160.02% 6.54%
AGSPC Growth & Income (Division 16)......................... 04/29/94 170.44 -- 171.93 21.85
AGSPC Science & Technology (Division 17).................... 04/29/94 546.27 -- 417.46 99.35
American Century Ultra (Division 31)........................ 11/02/81 -- 713.67% 250.73 40.28
Dreyfus Founders Growth (Division 30)....................... 01/05/62 -- 473.17 257.97 37.92
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18)............................................. 08/31/90 1,464.91 -- 99.24 22.05
Evergreen Growth and Income -- Class A (Division 56)........ 01/03/95 147.60 -- -- 13.52
Evergreen Small Cap Value -- Class A (Division 55).......... 01/03/95 83.23 -- -- (0.25)
Evergreen Value -- Class A (Division 57).................... 04/12/85 -- 202.19 116.65 3.62
Franklin Templeton Variable Insurance Products Trust........
Templeton Asset Strategy -- Class 1 (Division 19)(1)...... 08/24/88 -- 207.31 108.58 21.61
Templeton International Securities -- Class 1 (Division
20)(2).................................................. 05/01/82 175.56 -- 109.70 22.34
Neuberger Berman Guardian Trust (Division 29)............... 08/03/93 110.22 -- 95.06 7.57
Putnam Global Growth -- Class A (Division 28)............... 09/01/67 -- 316.29 208.64 63.32
Putnam New Opportunities -- Class A (Division 26)........... 08/31/90 1,139.69 -- 302.08 68.25
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 11/01/82 -- 705.86 334.25 125.02
Scudder Growth and Income (Division 21)(3).................. 11/13/84 -- 245.57 124.01 5.30
T. Rowe Price Small Cap Stock (Division 51)................. 06/01/50 -- 209.46 119.24 13.55
Templeton Foreign -- Class A (Division 32)(4)............... 10/05/82 -- 170.23 78.42 38.62
Vanguard LifeStrategy Conservative Growth (Division 54)..... 09/30/94 89.47 -- 89.79 6.65
Vanguard LifeStrategy Growth (Division 52).................. 09/30/94 145.23 -- 146.13 16.05
Vanguard LifeStrategy Moderate Growth (Division 53)......... 09/30/94 116.08 -- 118.18 10.79
Vanguard Long-Term Corporate (Division 22)**................ 07/09/73 -- 104.25 40.87 (7.02)
Vanguard Long-Term Treasury (Division 23)**................. 05/19/86 -- 96.34 42.88 (9.43)
Vanguard Wellington (Division 25)........................... 07/01/29 -- 193.04 110.84 3.32
Vanguard Windsor II (Division 24)........................... 06/24/85 -- 227.24 136.81 (6.78)
</TABLE>
- ---------------
Divisions with an identical inception date as the underlying Funds' inception
date are not reflected in this Table. See preceding 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 15-20 since inception
of each Division (July 11, 1994) and hypothetical performance for periods
prior to July 11, 1994 based on investment in a hypothetical Contract. 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 based on
investment in a hypothetical Contract. The Table reflects actual historical
performance of the related Separate Account Divisions 51-54 since inception
of each Division (September 22, 1998) and hypothetical performance for
periods prior to September 22, 1998 based on investment in a hypothetical
Contract. The Table reflects actual historical performance of the related
Separate Account Divisions 55-57 since inception of each Division (January
4, 1999) and hypothetical performance for periods prior to January 4, 1999
based on investment in a hypothetical Contract. 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) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Asset Strategy Fund.
Accordingly, the performance figures in the Table for the Fund through
December 31, 1999, reflect the historical performance and inception date of
the Templeton Asset Allocation Fund.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Accordingly, the
performance figures in the Table for the Fund through December 31, 1999,
reflect the historical performance and inception date of the Templeton
International Fund.
(3) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(4) 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> 283
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 OR THE 12 MONTHS ENDED DECEMBER 31**
---------------------------------------------------------------------------------------
FUND AND DIVISION 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
----------------- ------ ----- ----- ------ ----- ------ ----- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AGSPC Asset Allocation (Division 5)..... 10.87% 17.42% 21.60% 10.19% 23.75% (2.09)% 8.39% (1.52)% 20.34% (3.18)%
AGSPC Capital Conservation (Division
7).................................... (1.21) 6.51 7.69 0.95 19.79 (6.85) 11.08 7.76 16.20 (1.08)
AGSPC Government Securities (Division
8).................................... (3.55) 8.08 8.03 1.10 16.51 (5.25) 9.90 6.34 13.79 5.11
AGSPC Growth (Division 15).............. 6.54 17.19 20.01 18.39 46.60 5.33 -- -- -- --
AGSPC Growth & Income (Division 16)..... 21.85 13.64 22.81 22.30 30.75 4.94 -- -- -- --
AGSPC International Equities (Division
11)................................... 28.13 17.80 1.38 5.95 9.87 7.10 28.79 (14.12) 10.26 (20.71)
AGSPC International Government Bond
(Division 13)......................... (6.70) 16.15 (5.59) 3.56 17.83 3.62 13.28 2.25 9.09 --
AGSPC MidCap Index (Division 4)****..... 14.00 18.04 30.66 17.81 29.44 (4.50) 11.98 8.99 11.66 --
AGSPC Money Market (Division 6)......... 3.92 4.33 4.33 4.17 4.71 2.96 1.87 2.42 4.69 7.04
AGSPC Science & Technology (Division
17)................................... 99.35 40.99 1.76 12.89 60.26 32.09 -- -- -- --
AGSPC Small Cap Index (Division 14)..... 20.33 (2.72) 21.39 15.77 26.59 (4.10) 14.98 11.41 -- --
AGSPC Social Awareness (Division 12).... 17.70 26.28 32.73 22.96 37.78 (2.22) 7.04 2.51 26.83 (2.01)
AGSPC Stock Index (Division 10)......... 19.61 27.39 31.98 21.73 36.15 (0.10) 8.98 5.78 27.91 (4.63)
American Century Ultra (Division 31).... 40.28 33.41 21.95 4.08 -- -- -- -- -- --
American General Balanced (Division
42)................................... 13.30 14.18 -- -- -- -- -- -- -- --
American General Conservative Growth
Lifestyle (Division 50)............... 12.69 12.84 -- -- -- -- -- -- -- --
American General Core Bond (Division
58)................................... (1.70) 1.91 -- -- -- -- -- -- -- --
American General Domestic Bond (Division
43)................................... (3.62) 2.92 -- -- -- -- -- -- -- --
American General Growth Lifestyle
(Division 48)......................... 29.24 16.37 -- -- -- -- -- -- -- --
American General High Yield Bond
(Division 60)......................... 2.38 5.12 -- -- -- -- -- -- -- --
American General International Growth
(Division 33)......................... 55.76 10.37 -- -- -- -- -- -- -- --
American General International Value
(Division 34)......................... 66.92 20.05 -- -- -- -- -- -- -- --
American General Large Cap Growth
(Division 39)......................... 34.66 21.43 -- -- -- -- -- -- -- --
American General Large Cap Value
(Division 40)......................... 4.72 15.77 -- -- -- -- -- -- -- --
American General Mid Cap Growth
(Division 37)......................... 5.81 25.05 -- -- -- -- -- -- -- --
American General Mid Cap Value (Division
38)................................... 21.51 19.86 -- -- -- -- -- -- -- --
American General Moderate Growth
Lifestyle (Division 49)............... 18.13 14.89 -- -- -- -- -- -- -- --
American General Money Market (Division
44)................................... 4.18 1.14 -- -- -- -- -- -- -- --
American General Small Cap Growth
(Division 35)......................... 68.76 22.36 -- -- -- -- -- -- -- --
American General Small Cap Value
(Division 36)......................... (7.09) 11.10 -- -- -- -- -- -- -- --
American General Socially Responsible
(Division 41)......................... 17.42 19.22 -- -- -- -- -- -- -- --
American General Strategic Bond
(Division 59)......................... 3.26 3.86 -- -- -- -- -- -- -- --
Dreyfus Founders Growth (Division 30)... 37.92 24.01 25.46 3.05 -- -- -- -- -- --
Dreyfus Variable Investment Fund
-- Small Cap Portfolio (Division
18)................................... 22.05 (4.32) 15.58 15.34 27.98 4.31 -- -- -- --
Evergreen Growth and Income -- Class A
(Division 56)......................... 13.52 -- -- -- -- -- -- -- -- --
Evergreen Small Cap Value -- Class A
(Division 55)......................... (0.25) -- -- -- -- -- -- -- -- --
Evergreen Value -- Class A (Division
57)................................... 3.62 -- -- -- -- -- -- -- -- --
Franklin Templeton Variable Insurance
Products Trust
Templeton Asset Strategy -- Class 1
(Division 19)(1) 21.61 5.28 14.28 17.60 21.22 (0.11) -- -- -- --
Templeton International
Securities -- Class 1 (Division
20)***(2)........................... 22.34 8.17 12.74 22.71 14.54 (0.65) -- -- -- --
Neuberger Berman Guardian Trust
(Division 29)......................... 7.57 1.55 16.86 12.17 -- -- -- -- -- --
Putnam Global Growth -- Class A
(Division 28)......................... 63.32 27.73 12.41 5.86 -- -- -- -- -- --
Putnam New Opportunities -- Class A
(Division 26)......................... 68.25 23.37 21.51 (5.14) -- -- -- -- -- --
Putnam OTC & Emerging Growth -- Class A
(Division 27)......................... 125.02 10.10 9.29 (10.39) -- -- -- -- -- --
Scudder Growth and Income (Division
21)(3)................................ 5.30 5.21 28.99 11.58 -- -- -- -- -- --
T. Rowe Price Small Cap Stock (Division
51)................................... 13.55 13.29 -- -- -- -- -- -- -- --
Templeton Foreign -- Class A (Division
32)(4)................................ 38.62 (5.63) 5.77 7.68 -- -- -- -- -- --
Vanguard LifeStrategy Conservative
Growth (Division 54).................. 6.65 7.73 -- -- -- -- -- -- -- --
Vanguard LifeStrategy Growth (Division
52)................................... 16.05 16.15 -- -- -- -- -- -- -- --
Vanguard LifeStrategy Moderate Growth
(Division 53)......................... 10.79 12.41 -- -- -- -- -- -- -- --
Vanguard Long-Term Corporate Bond
(Division 22)***...................... (7.02) 8.26 12.52 4.85 -- -- -- -- -- --
Vanguard Long-Term Treasury (Division
23)***................................ (9.42) 12.04 12.64 4.94 -- -- -- -- -- --
Vanguard Wellington (Division 25)....... 3.32 10.87 21.85 10.25 -- -- -- -- -- --
Vanguard Windsor II (Division 24)....... (6.78) 15.13 30.90 12.17 -- -- -- -- -- --
</TABLE>
41
<PAGE> 284
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 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
- ---------------------------------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AGSPC Asset Allocation (Division 5)..... 162.85% 137.08% 101.91% 66.05% 50.69% 21.77% 24.37% 14.74% 16.51% (3.18)%
AGSPC Capital Conservation (Division
7).................................... 75.61 77.76 66.90 54.98 53.53 28.17 37.59 23.87 14.95 (1.08)
AGSPC Government Securities (Division
8).................................... 75.69 82.16 68.54 56.01 54.32 32.45 39.78 27.19 19.61 5.11
AGSPC Growth (Division 15).............. 173.87 157.07 119.37 82.79 54.40 5.33 -- -- -- --
AGSPC Growth & Income (Division 16)..... 185.37 134.19 106.09 67.81 37.21 4.94 -- -- -- --
AGSPC International Equities (Division
11)................................... 84.48 43.98 22.22 20.56 13.79 3.57 (3.30) (24.92) (12.58) (20.71)
AGSPC International Government Bond
(Division 13)......................... 63.46 75.19 50.83 59.76 54.27 30.92 26.35 11.54 9.09 --
AGSPC MidCap Index (Division 4)****..... 248.93 206.08 159.31 98.46 68.46 30.14 36.28 21.70 11.66 --
AGSPC Money Market (Division 6)......... 48.53 42.93 36.99 31.31 26.05 20.38 16.91 14.77 12.05 7.04
AGSPC Science & Technology (Division
17)................................... 583.53 242.88 143.20 138.98 111.70 32.09 -- -- -- --
AGSPC Small Cap Index (Division 14)..... 155.83 112.60 118.55 80.04 55.51 22.84 28.09 11.41 -- --
AGSPC Social Awareness (Division 12).... 345.59 278.59 199.81 125.88 83.70 33.33 36.36 27.40 24.28 (2.01)
AGSPC Stock Index (Division 10c)........ 368.26 291.49 207.32 132.85 91.29 40.50 40.64 29.05 21.99 (4.63)
American Century Ultra (Division 31).... 137.55 69.34 26.93 4.08 -- -- -- -- -- --
American General Balanced (Division
42)................................... 29.36 14.18 -- -- -- -- -- -- -- --
American General Conservative Growth
Lifestyle (Division 50)............... 27.16 12.84 -- -- -- -- -- -- -- --
American General Core Bond (Division
58)................................... (0.18) 1.91 -- -- -- -- -- -- -- --
American General Domestic Bond (Division
43)................................... (0.81) 2.92 -- -- -- -- -- -- -- --
American General Growth Lifestyle
(Division 48)......................... 50.39 16.37 -- -- -- -- -- -- -- --
American General High Yield Bond
(Division 60)......................... 7.61 5.12 -- -- -- -- -- -- -- --
American General International Growth
(Division 33)......................... 71.92 10.37 -- -- -- -- -- -- -- --
American General International Value
(Division 34)......................... 100.38 20.05 -- -- -- -- -- -- -- --
American General Large Cap Growth
(Division 39)......................... 63.51 21.43 -- -- -- -- -- -- -- --
American General Large Cap Value
(Division 40)......................... 21.24 15.77 -- -- -- -- -- -- -- --
American General Mid Cap Growth
(Division 37)......................... 32.31 25.05 -- -- -- -- -- -- -- --
American General Mid Cap Value (Division
38)................................... 45.65 19.86 -- -- -- -- -- -- -- --
American General Moderate Growth
Lifestyle (Division 49)............... 35.72 14.89 -- -- -- -- -- -- -- --
American General Money Market (Division
44)................................... 5.37 1.14 -- -- -- -- -- -- -- --
American General Small Cap Growth
(Division 35)......................... 106.50 22.36 -- -- -- -- -- -- -- --
American General Small Cap Value
(Division 36)......................... 3.23 11.10 -- -- -- -- -- -- -- --
American General Socially Responsible
(Division 41)......................... 39.98 19.22 -- -- -- -- -- -- -- --
American General Strategic Bond
(Division 59)......................... 7.25 3.86 -- -- -- -- -- -- -- --
Dreyfus Founders Growth (Division 30)... 121.12 60.33 29.29 3.05 -- -- -- -- -- --
Dreyfus Variable Investment
Fund -- Small Cap Portfolio (Division
18)................................... 107.83 70.29 77.97 53.98 33.50 4.31 -- -- -- --
Evergreen Growth and Income -- Class A
(Division 56)......................... 13.52 -- -- -- -- -- -- -- -- --
Evergreen Small Cap Value -- Class A
(Division 55)......................... (0.25) -- -- -- -- -- -- -- -- --
Evergreen Value -- Class A (Division
57)................................... 3.62 -- -- -- -- -- -- -- -- --
Franklin Templeton Variable Insurance
Products Trust
Templeton Asset Strategy -- Class 1
(Division 19)(1).................... 108.35 71.32 62.73 42.40 21.09 (0.11) -- -- -- --
Templeton International
Securities -- Class 1 (Division
20)(2).............................. 111.07 72.52 59.49 41.47 15.29 (0.65) -- -- -- --
Neuberger Berman Guardian Trust
(Division 29)......................... 43.18 33.11 31.08 12.17 -- -- -- -- -- --
Putnam Global Growth -- Class A
(Division 28)......................... 148.26 52.01 19.00 5.86 -- -- -- -- -- --
Putnam New Opportunities -- Class A
(Division 26)......................... 139.26 42.20 15.27 (5.14) -- -- -- -- -- --
Putnam OTC & Emerging Growth -- Class A
(Division 27)......................... 142.61 7.82 (2.07) (10.39) -- -- -- -- -- --
Scudder Growth and Income (Division
21)(3)................................ 59.45 51.42 43.92 11.58 -- -- -- -- -- --
T. Rowe Price Small Cap Stock (Division
51)................................... 28.64 13.29 -- -- -- -- -- -- -- --
Templeton Foreign -- Class A (Division
32)(4)................................ 48.99 7.48 13.89 7.68 -- -- -- -- -- --
Vanguard LifeStrategy Conservative
Growth (Division 54).................. 14.90 7.73 -- -- -- -- -- -- -- --
Vanguard LifeStrategy Growth (Division
52)................................... 34.79 16.15 -- -- -- -- -- -- -- --
Vanguard LifeStrategy Moderate Growth
(Division 53)......................... 24.54 12.41 -- -- -- -- -- -- -- --
Vanguard Long-Term Corporate (Division
22)***................................ 18.76 27.73 17.98 4.85 -- -- -- -- -- --
Vanguard Long-Term Treasury (Division
23)***................................ 19.96 32.45 18.21 4.94 -- -- -- -- -- --
Vanguard Wellington (Division 25)....... 53.89 48.94 34.33 10.25 -- -- -- -- -- --
Vanguard Windsor II (Division 24)....... 57.59 69.05 46.83 12.17 -- -- -- -- -- --
</TABLE>
- ------------
* For the periods prior to September 22, 1998, for all Divisions other than
Divisions 55-57, 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 Divisions 55-57, the Contracts offered by this prospectus became
available for purchase on January 4, 1999.
** 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.
42
<PAGE> 285
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)
(1) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Asset Strategy Fund.
Also, effective with this merger, the Templeton Asset Allocation Fund
Division 19 was renamed the Templeton Asset Strategy Fund Division 19.
Accordingly, the performance figures for the Division through December 31,
1999, reflect the actual historical performance of the Templeton Asset
Allocation Fund Division 19.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Also effective with
this merger, the Templeton International Fund Division 20 was renamed the
Templeton International Securities Fund Division 20. Accordingly, the
performance figures for the Division through December 31, 1999, reflect the
actual historical performance of the Templeton International Fund Division
20.
(3) The Scudder Growth and Income Fund adopted its current name and objective
on November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(4) 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> 286
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 1999 1998 1997 1996 1995
- --------------------------------------- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)............. 6.54% 17.19% 20.01% 18.39% 46.60%
AGSPC Growth & Income (Division 16).... 21.85 13.64 22.81 22.30 30.75
AGSPC Science & Technology (Division
17).................................. 99.35 40.99 1.76 12.89 60.26
American Century Ultra (Division 31)... 40.28 33.41 21.95 12.63 36.43
Dreyfus Founders Growth (Division
30).................................. 37.92 24.01 25.46 15.56 44.37
Dreyfus Variable Investment Fund
-- Small Cap Portfolio (Division
18).................................. 22.05 (4.32) 15.58 15.34 27.98
Evergreen Growth and Income Fund
(Division 56)........................ 13.52 4.09 29.90 22.53 31.65
Evergreen Small Cap Equity Income Fund
(Division 55)........................ (0.25) (10.29) 32.30 21.05 27.86
Evergreen Value Fund (Division 57)..... 3.62 8.64 24.74 17.98 30.78
Franklin Templeton Variable Insurance
Products Trust
Templeton Asset Strategy (Division
19)(1)............................. 21.61 5.28 14.28 17.60 21.22
Templeton International Securities
(Division 20)(2)................... 22.34 8.17 12.74 22.71 14.54
Neuberger Berman Guardian Trust
(Division 29)........................ 7.57 1.55 16.86 16.74 30.89
Putnam Global Growth (Division 28)..... 63.32 27.73 12.41 15.57 13.89
Putnam New Opportunities (Division
26).................................. 68.25 23.37 21.51 9.90 45.05
Putnam OTC & Emerging Growth (Division
27).................................. 125.02 10.10 9.29 3.73 54.62
Scudder Growth and Income (Division
21)(3)............................... 5.30 5.21 28.99 20.82 29.75
T. Rowe Price Small Cap Stock (Division
51).................................. 13.55 (4.56) 27.48 19.79 32.47
Templeton Foreign (Division 32)(4)..... 38.62 (5.63) 5.77 16.94 10.27
Vanguard LifeStrategy Conservative
Growth (Division 54)................. 6.65 14.56 15.59 9.20 23.06
Vanguard LifeStrategy Growth (Division
52).................................. 16.05 20.00 21.00 14.21 27.91
Vanguard LifeStrategy Moderate Growth
(Division 53)........................ 10.79 17.65 18.52 11.53 26.62
Vanguard Long-Term Corporate (Division
22)****.............................. (7.02) 8.26 12.52 (0.52) 25.03
Vanguard Long-Term Treasury (Division
23)***............................... (9.43) 10.03 13.49 (2.88) 28.70
Vanguard Wellington (Division 25)...... 3.32 10.87 21.85 14.89 31.48
Vanguard Windsor II (Division 24)...... (6.78) 15.13 30.90 22.75 37.31
<CAPTION>
ANNUAL CHANGE IN PURCHASE UNIT VALUE FOR THE 12 MONTHS ENDED DECEMBER 31**
------------------------------------------------------
FUND AND DIVISION 1994 1993 1992 1991 1990
- --------------------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)............. 0.32% -- -- -- --
AGSPC Growth & Income (Division 16).... (0.55) -- -- -- --
AGSPC Science & Technology (Division
17).................................. 24.89 -- -- -- --
American Century Ultra (Division 31)... (4.43) 20.74 0.40 84.68 8.42
Dreyfus Founders Growth (Division
30).................................. (4.09) 24.51 3.42 46.15 (11.28)
Dreyfus Variable Investment Fund
-- Small Cap Portfolio (Division
18).................................. 6.53 66.50 69.44 156.87 1.74
Evergreen Growth and Income Fund
(Division 56)........................ -- -- -- -- --
Evergreen Small Cap Equity Income Fund
(Division 55)........................ -- -- -- -- --
Evergreen Value Fund (Division 57)..... 1.05 8.44 7.06 24.12 (4.21)
Franklin Templeton Variable Insurance
Products Trust
Templeton Asset Strategy (Division
19)(1)............................. (4.04) 24.79 6.95 26.34 (8.94)
Templeton International Securities
(Division 20)(2)................... (3.29) 45.71 (6.75) -- --
Neuberger Berman Guardian Trust
(Division 29)........................ 0.73 6.99 -- -- --
Putnam Global Growth (Division 28)..... (1.63) 30.75 (0.55) 17.02 (9.89)
Putnam New Opportunities (Division
26).................................. 2.50 31.60 24.57 66.09 10.47
Putnam OTC & Emerging Growth (Division
27).................................. 1.44 30.96 11.78 39.66 (10.52)
Scudder Growth and Income (Division
21)(3)............................... 1.53 14.37 8.40 26.78 (3.33)
T. Rowe Price Small Cap Stock (Division
51).................................. (0.97) 17.17 12.71 37.18 (21.33)
Templeton Foreign (Division 32)(4)..... (0.43) 35.67 (0.69) 17.31 (3.76)
Vanguard LifeStrategy Conservative
Growth (Division 54)................. (0.17) -- -- -- --
Vanguard LifeStrategy Growth (Division
52).................................. (0.37) -- -- -- --
Vanguard LifeStrategy Moderate Growth
(Division 53)........................ (0.96) -- -- -- --
Vanguard Long-Term Corporate (Division
22)****.............................. (6.26) 13.28 8.62 19.61 5.10
Vanguard Long-Term Treasury (Division
23)***............................... (7.98) 15.55 6.27 16.18 4.68
Vanguard Wellington (Division 25)...... 1.51 12.32 6.78 22.32 (3.80)
Vanguard Windsor II (Division 24)...... (2.19) 12.40 10.80 27.30 (10.89)
</TABLE>
44
<PAGE> 287
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 1999 1998 1997 1996 1995
- --------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)....... 160.85% 144.84% 108.93% 74.10% 47.06%
AGSPC Growth & Income (Division
16)............................ 170.44 121.94 95.30 59.03 30.03
AGSPC Science & Technology
(Division 17).................. 546.27 224.18 129.94 125.96 100.16
American Century Ultra (Division
31)............................ 713.67 480.01 334.75 256.50 216.52
Dreyfus Founders Growth (Division
30)............................ 473.17 315.60 235.13 167.12 131.16
Dreyfus Variable Investment
Fund -- Small Cap Portfolio
(Division 18).................. 1,464.91 1,182.22 1,240.05 1,059.43 905.21
Evergreen Growth and Income --
Class A (Division 56).......... 147.60 118.11 109.54 61.31 31.65
Evergreen Small Cap Value --
Class A (Division 55).......... 83.23 83.69 104.77 54.78 27.86
Evergreen Value -- Class A
(Division 57).................. 202.19 191.63 168.45 115.21 82.41
Franklin Templeton Variable
Insurance Products Trust
Templeton Asset Strategy --
Class 1 (Division 19)(1)..... 207.31 152.70 140.02 110.04 78.60
Templeton International
Securities -- Class 1
(Division 20)(2)............. 175.56 125.24 108.23 84.69 50.52
Neuberger Berman Guardian Trust
(Division 29).................. 110.22 95.42 92.45 64.68 41.06
Putnam Global Growth -- Class A
(Division 28).................. 316.29 154.89 99.55 77.52 53.61
Putnam New Opportunities -- Class
A (Division 26)................ 1,139.69 636.82 497.26 391.52 347.23
Putnam OTC & Emerging Growth --
Class A (Division 27).......... 705.86 258.13 225.29 197.63 186.93
Scudder Growth and Income
(Division 21)(3)............... 245.57 228.16 211.92 141.83 100.15
T. Rowe Price Small Cap Stock
(Division 51).................. 209.46 172.53 185.55 123.99 86.98
Templeton Foreign -- Class A
(Division 32)(4)............... 170.23 94.95 106.57 95.31 67.01
Vanguard LifeStrategy
Conservative Growth (Division
54)............................ 89.47 77.66 55.07 34.15 22.85
Vanguard LifeStrategy Growth
(Division 52).................. 145.23 111.31 76.10 45.54 27.44
Vanguard LifeStrategy Moderate
Growth (Division 53)........... 116.08 95.03 65.77 39.86 25.40
Vanguard Long-Term Corporate
(Division 22)***............... 104.25 119.67 102.91 80.33 81.28
Vanguard Long-Term Treasury
(Division 23)***............... 96.34 116.77 93.47 71.75 76.85
Vanguard Wellington (Division
25)............................ 193.04 183.63 155.81 109.94 82.74
Vanguard Windsor II (Division
24)............................ 227.24 251.03 204.89 132.92 89.75
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR EACH PERIOD END SINCE DECEMBER 31, 1989**
----------------------------------------------------
FUND AND DIVISION 1994 1993 1992 1991 1990
- --------------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)....... 0.32% -- -- -- --
AGSPC Growth & Income (Division
16)............................ (0.55) -- -- -- --
AGSPC Science & Technology
(Division 17).................. 24.89 -- -- -- --
American Century Ultra (Division
31)............................ 131.99 142.74 101.04 100.23 8.42
Dreyfus Founders Growth (Division
30)............................ 60.12 66.95 34.09 29.66 (11.28)
Dreyfus Variable Investment
Fund -- Small Cap Portfolio
(Division 18).................. 685.44 637.32 342.83 161.35 1.74
Evergreen Growth and Income --
Class A (Division 56).......... -- -- -- -- --
Evergreen Small Cap Value --
Class A (Division 55).......... -- -- -- -- --
Evergreen Value -- Class A
(Division 57).................. 39.48 38.04 27.29 18.90 (4.21)
Franklin Templeton Variable
Insurance Products Trust
Templeton Asset Strategy --
Class 1 (Division 19)(1)..... 47.34 53.54 23.04 15.05 (8.94)
Templeton International
Securities -- Class 1
(Division 20)(2)............. 31.41 35.87 (6.75) -- --
Neuberger Berman Guardian Trust
(Division 29).................. 7.77 6.99 -- -- --
Putnam Global Growth -- Class A
(Division 28).................. 34.88 37.11 4.86 5.44 (9.89)
Putnam New Opportunities -- Class
A (Division 26)................ 208.32 200.79 128.57 83.48 10.47
Putnam OTC & Emerging Growth --
Class A (Division 27).......... 85.57 82.94 39.69 24.97 (10.52)
Scudder Growth and Income
(Division 21)(3)............... 54.26 51.93 32.85 22.56 (3.33)
T. Rowe Price Small Cap Stock
(Division 51).................. 41.15 42.53 21.64 7.92 (21.33)
Templeton Foreign -- Class A
(Division 32)(4)............... 51.45 52.11 12.12 12.90 (3.76)
Vanguard LifeStrategy
Conservative Growth (Division
54)............................ (0.17) -- -- -- --
Vanguard LifeStrategy Growth
(Division 52).................. (0.37) -- -- -- --
Vanguard LifeStrategy Moderate
Growth (Division 53)........... (0.96) -- -- -- --
Vanguard Long-Term Corporate
(Division 22)***............... 44.99 54.67 36.54 25.71 5.10
Vanguard Long-Term Treasury
(Division 23)***............... 37.42 49.34 29.24 21.61 4.68
Vanguard Wellington (Division
25)............................ 38.99 41.13 25.65 17.67 (3.80)
Vanguard Windsor II (Division
24)............................ 38.19 41.28 25.69 13.44 (10.89)
</TABLE>
- ---------------
Divisions with an identical inception date as the underlying Funds' inception
date are not reflected in this Table. See preceding Table.
* The Table reflects actual historical performance of the related Separate
Account Divisions 15-20 since inception of each Division (July 11, 1994) and
hypothetical performance for periods prior to July 11, 1994 based on
investment in a hypothetical Contract. 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 the periods
prior to July 1, 1996 based on investment in a hypothetical Contract. The
Table reflects actual historical performance of the related Separate Account
Divisions 51-54 since inception of each Division (September 22, 1998) and
hypothetical performance for periods prior to September 22, 1998 based on
investment in a hypothetical Contract. The Table reflects actual historical
performance of the related Separate Account Divisions 55-57 since inception
of each Division (January 4, 1999) and hypothetical performance for periods
prior to January 4, 1999 based on investment in a hypothetical Contract.
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.
** 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) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Asset Strategy Fund.
Accordingly, the performance figures in the Table for the Fund through
December 31, 1999, reflect the historical performance and inception date of
the Templeton Asset Allocation Fund.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Accordingly, the
performance figures in the Table for the Fund through December 31, 1999,
reflect the historical performance and inception date of the Templeton
International Fund.
(3) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(4) 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.
45
<PAGE> 288
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.
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
46
<PAGE> 289
- --------------------------------------------------------------------------------
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.
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), 403(a) and 401(k) 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
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> 290
- --------------------------------------------------------------------------------
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, 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. In
addition, based upon published guides issued by the IRS in 1999, it appears
likely that such limitations, if imposed, would only apply to Non-Qualified
Contracts.
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.
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 1999, the IRS confirmed this opinion,
reversing its previous position by modifying a contrary ruling it had issued in
1981.
In its ruling in 1981, the 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 was
superseded by subsequent legislation (Code Section 817(h)) which specifically
exempts these Qualified Contracts, and the IRS had no viable legal basis or
reason to apply the theory of the 1981 ruling to these Qualified Contracts under
current law.
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.
48
<PAGE> 291
- --------------------------------------------------------------------------------
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. Variable options
incur mortality and expense risk fee charges and may also incur account
maintenance fees and surrender charges. The chart does not reflect the deduction
of any such fees. 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-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.
49
<PAGE> 292
YEAR 2000
- --------------------------------------------------------------------------------
As of March 10, 2000, all of our ultimate parent, American General Corporation's
("AGC") major technology systems, programs, and applications, including those
which rely on third parties, are operating smoothly following our transition
into 2000. We have experienced no interruptions to normal business operations,
including the processing of customer account data and transactions. We will
continue to monitor our technology systems, including critical third party
dependencies, as necessary to maintain our Year 2000 readiness. We do not expect
any future disruptions, if they occur, to have a material effect on the
company's results of operations, liquidity, or financial condition.
Through December 31, 1999, AGC incurred and expensed pretax costs of $98 million
related to Year 2000 readiness, including $18 million in 1999 and $65 million in
1998. In 1999, Year 2000 readiness expenses were included in division earnings.
The 1998 expenses were excluded from division earnings, consistent with the
manner in which we reviewed division results. In addition, we accelerated the
planned replacement of certain systems as part of our Year 2000 plans. The cost
of these replacement systems was immaterial. We do not anticipate incurring any
significant costs in the future to maintain Year 2000 readiness.
50
<PAGE> 293
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 or to the Home Office at the following address: VALIC, Customer
Service A3-01, 2929 Allen Parkway, Houston, TX 77019.
</TABLE>
<PAGE> 294
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information................................. 4
Marketing Information........................... 4
Endorsements and Published Ratings.............. 5
Types of Variable Annuity Contracts................. 6
Federal Tax Matters................................. 6
Tax Consequences of Purchase Payments........... 6
Tax Consequences of Distributions............... 8
Special Tax Consequences -- Early
Distribution.................................. 9
Special Tax Consequences -- Required
Distributions................................. 10
Tax Free Rollovers, Transfers and Exchanges..... 11
Exchange Privilege.................................. 11
Exchanges From Portfolio Director............... 12
Exchanges From Portfolio Director 2............. 12
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................. 16
Exchanges From Compounder Contracts............. 17
Information Which May Be Applicable To Any
Exchange...................................... 18
Calculation of Surrender Charge..................... 19
Illustration of Surrender Charge on Total
Surrender..................................... 19
Illustration of Surrender Charge on a 10%
Partial Surrender Followed by a Full
Surrender..................................... 19
Purchase Unit Value................................. 20
Illustration of Calculation of Purchase Unit
Value......................................... 20
Illustration of Purchase of Purchase Units...... 20
Performance Calculations............................ 20
AGSPC Money Market and American General Money
Market Divisions Yields....................... 20
Calculation of Current Yield for AGSPC Money
Market Division Six........................... 20
Calculation of Current Yield for American
General Money Market Division 44.............. 20
Illustration of Calculation of Current Yield for
AGSPC Money Market Division Six and American
General Money Market Division 44.............. 20
Calculation of Effective Yield for AGSPC Money
Market Division Six........................... 21
Calculation of Effective Yield for American
General Money Market Division 44.............. 21
Illustration of Calculation of Effective Yield
for AGSPC Money Market Division Six and
American General Money Market Division 44..... 21
Standardized Yield for Bond Fund Divisions...... 21
Calculation of Standardized Yield for Bond Fund
Divisions..................................... 21
Illustration of Calculation of Standardized
Yield for Bond Fund Divisions................. 21
Calculation of Average Annual Total Return...... 22
Calculation of MVA Option....................... 22
Performance Information............................. 23
Hypothetical $10,000 Account Value and
Cumulative Return as Compared to Benchmark
Tables........................................ 23
Performance Compared to Market Indices.......... 23
AGSPC Asset Allocation Division Five............ 27
AGSPC Capital Conservation Division Seven....... 28
AGSPC Government Securities Division Eight...... 28
AGSPC Growth Division Fifteen................... 29
AGSPC Growth & Income Division Sixteen.......... 29
AGSPC International Equities Division Eleven.... 30
AGSPC International Government Bond Division
Thirteen...................................... 31
AGSPC MidCap Index Division Four................ 31
AGSPC Money Market Division Six................. 32
AGSPC Science & Technology Division Seventeen... 33
AGSPC Small Cap Index Division Fourteen......... 33
AGSPC Social Awareness Division Twelve.......... 34
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AGSPC Stock Index Division Ten.................. 35
American Century Ultra Division Thirty-One...... 35
American General Balanced Division Forty-Two.... 36
American General Conservative Growth Lifestyle
Division Fifty................................ 36
American General Core Bond Division
Fifty-Eight................................... 37
American General Domestic Bond Division
Forty-Three................................... 38
American General Growth Lifestyle Division
Forty-Eight................................... 38
American General High Yield Bond Division
Sixty......................................... 39
American General International Growth Division
Thirty-Three.................................. 39
American General International Value Division
Thirty-Four................................... 40
American General Large Cap Growth Division
Thirty-Nine................................... 40
American General Large Cap Value Division
Forty......................................... 41
American General Mid Cap Growth Division Thirty-
Seven......................................... 41
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.................................... 43
American General Small Cap Growth Division
Thirty-Five................................... 43
American General Small Cap Value Division
Thirty-Six.................................... 44
American General Socially Responsible Division
Forty-One..................................... 44
American General Strategic Bond Division
Fifty-Nine.................................... 45
Dreyfus Founders Growth Division Thirty......... 45
Dreyfus Variable Investment Fund -- Small Cap
Portfolio Division Eighteen................... 46
Evergreen Growth and Income Division
Fifty-Six..................................... 47
Evergreen Small Cap Value Division Fifty-Five... 47
Evergreen Value Division Fifty-Seven............ 48
Neuberger Berman Guardian Trust Division
Twenty-Nine................................... 48
Putnam Global Growth-Class A Division
Twenty-Eight.................................. 49
Putnam New Opportunities-Class A Division
Twenty-Six.................................... 50
Putnam OTC & Emerging Growth-Class A Division
Twenty-Seven.................................. 50
Scudder Growth and Income Division Twenty-One... 51
T. Rowe Price Small-Cap Stock Division
Fifty-One..................................... 52
Templeton Asset Strategy Division Nineteen...... 52
Templeton Foreign Division Thirty-Two........... 53
Templeton International Securities Division
Twenty........................................ 54
Vanguard LifeStrategy Conservative Growth
Division Fifty-Four........................... 54
Vanguard LifeStrategy Growth Division
Fifty-Two..................................... 55
Vanguard LifeStrategy Moderate Growth Division
Fifty-Three................................... 56
Vanguard Long-Term Corporate Division
Twenty-Two.................................... 56
Vanguard Long-Term Treasury Division
Twenty-Three.................................. 57
Vanguard Wellington Division Twenty-Five........ 58
Vanguard Windsor II Division Twenty-Four........ 59
Payout Payments..................................... 60
Assumed Investment Rate......................... 60
Amount of Payout Payments....................... 60
Payout Unit Value............................... 60
Illustration of Calculation of Payout Unit
Value......................................... 61
Illustration of Payout Payments................. 61
Distribution of Variable Annuity Contracts.......... 62
Experts............................................. 62
Comments on Financial Statements.................... 62
</TABLE>
<PAGE> 295
Please tear off, complete and return the form below to one of our Regional
Offices. 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> 296
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
[VALIC LOGO]
PRINTED MATTER
PRINTED IN U.S.A. VA 10855-20 REV 5/00
(C)The Variable Annuity Life Insurance Company, Houston, Texas
Recycled Paper [RECYCLED PAPER LOGO]
<PAGE> 297
[Momento Photo]
PORTFOLIO DIRECTOR(R) PLUS
SEPARATE ACCOUNT A
FOR SERIES 1.40 - 12.40
Prospectus
May 1, 2000
Units of Interest Under Group and
Individual Variable Annuity Contracts
Portfolio Director Plus
VALIC
AN AMERICAN
GENERAL COMPANY
<PAGE> 298
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
PORTFOLIO DIRECTOR, PORTFOLIO DIRECTOR 2, PORTFOLIO DIRECTOR PLUS
SUPPLEMENT ISSUED MAY 1, 2000 TO THE PROSPECTUS DATED MAY 1, 2000
The Variable Annuity Life Insurance Company (the "Company") filed an application
with the Securities and Exchange Commission ("SEC") as of March 31, 2000
requesting an order allowing the Company to replace the shares of American
General Domestic Bond Fund of American General Series Portfolio Company 3
("AGSPC 3"), T. Rowe Price Small-Cap Stock Fund, Dreyfus Variable Investment
Fund -- Small Cap Portfolio, Scudder Growth and Income Fund, Neuberger Berman
Guardian Trust and Dreyfus Founders Growth Fund, each of which is a Variable
Investment Option currently available under our group and individual variable
annuity contracts, with shares of comparable series of AGSPC 3 and newly created
series of American General Series Portfolio Company ("AGSPC").
The Company believes that the proposed substitutions are in the best interest of
contract holders. In each case, the Substitute Series will have substantially
the same investment objective, practices and restrictions as the Replaced
Series. In the case of Dreyfus Variable Investment Fund -- Small Cap Portfolio
and T. Rowe Price Small-Cap Stock Fund, Inc., the Substitute Series will have
two sub-advisers, one of which is the Replaced Series' current investment
adviser, T. Rowe Price Associates, Inc., and an additional sub-adviser, Founders
Asset Management LLC, which has an outstanding long-term investment performance
record. In the case of Dreyfus Founders Growth Fund, the Substitute Series will
have the Replaced Series' current investment adviser, Founders Asset Management
LLC, as its sub-adviser. In the case of the other Replaced Series, the
Substitute Series will have as sub-advisers new managers with superior long-term
investment performance records in their respective asset classes.
The proposed substitutions and respective sub-advisers are:
<TABLE>
<CAPTION>
REPLACED SERIES SUBSTITUTE SERIES
<S> <C> <C>
Dreyfus Variable Investment Fund -- -- AGSPC American General Select Small-Cap Fund (T. Rowe
Small-Cap Portfolio Price Associates, Inc. and Founders Asset Management
LLC)
T. Rowe Price Small-Cap Stock Fund, Inc. -- AGSPC American General Select Small Cap Fund (T. Rowe
Price Associates, Inc. and Founders Asset Management
LLC)
Scudder Growth and Income Fund -- AGSPC American General American Century Income & Growth
Fund (American Century Investment Management, Inc.)
Neuberger Berman Guardian Trust -- AGSPC American General American Century Income & Growth
Fund (American Century Investment Management, Inc.)
Dreyfus Founders Growth Fund -- AGSPC American General Founders Growth Fund (Founders
Asset Management LLC)
AGSPC 3 American General Domestic Bond Fund -- AGSPC 3 American General Core Bond Fund (American
General Investment Management, L.P.)
</TABLE>
- --------------------------------------------------------------------------------
You should note that:
- - No action is required on your part. You will not need to vote a proxy, file a
new election, or take any other action if the SEC approves the substitutions.
- - The elections you have on file for allocating your account value, premium
payments and deductions will remain unchanged until you direct us otherwise.
- - You will not bear any expenses relating to the substitutions.
- - Although for two of the substitutions (Dreyfus Variable Investment
Fund -- Small Cap Portfolio and Scudder Growth and Income Fund) total contract
holder expenses are expected to be slightly higher for the Replaced Series,
the substitutions will result in a change to a sub-adviser with a superior
performance record.
- - On the effective date of the substitution, your account value in the Variable
Account Option will be the same as before the substitution.
- - The substitution will have no tax consequences for you.
The Company expects to complete the substitutions before October 2000. The newly
created series of AGSPC will commence operations at the time of the
substitutions. Completion of the substitutions is conditioned upon obtaining the
approval of the SEC and state insurance authorities, if applicable. Of course,
you may transfer amounts in your Contract among the Variable Investment Options
and Fixed Options, as usual. The substitutions will not be treated as a transfer
for purposes of the transfer provisions of your Contract. In addition, any
transfer charge that might otherwise be imposed will be waived from the date of
this Notice through the date that is 30 days after the substitutions.
We will send you a prospectus for AGSPC 3 and the new series of AGSPC, and
notice of the actual date of the substitutions, after we receive SEC approval.
You will receive confirmation when the substitution is complete.
Should you have any questions, you may contact us at 1-800-448-2542 (selection
1).
<PAGE> 299
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
UNITS OF INTEREST UNDER GROUP AND INDIVIDUAL
VARIABLE ANNUITY CONTRACTS
PORTFOLIO DIRECTOR--Registered Trademark-- PLUS
SEPARATE ACCOUNT A
FOR SERIES 1.40 TO 12.40 May 1, 2000
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 one or more Fixed Account Options* and/or an array of 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.
* One of the Fixed Account Options, the Multi-Year Enhanced Fixed Account, will
be available approximately May 22, 2000, subject to state approval.
- --------------------------------------------------------------------------------
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, 2000, contains additional
information about Portfolio Director Plus and is part of this prospectus. For a
free copy 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 SEC 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> 300
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ABOUT THE PROSPECTUS............................... 1
FEE TABLE.......................................... 2
SUMMARY............................................ 7
SELECTED PURCHASE UNIT DATA........................ 14
GENERAL INFORMATION................................ 15
About Portfolio Director Plus.................. 15
About VALIC.................................... 15
About VALIC Separate Account A................. 15
Units of Interests............................. 16
Distribution of the Contracts.................. 16
VARIABLE ACCOUNT OPTIONS........................... 16
PURCHASE PERIOD.................................... 17
Purchase Payments.............................. 17
Purchase Units................................. 18
Calculation of Purchase Unit Value............. 18
Choosing Investment Options.................... 18
Fixed Account Options..................... 18
Variable Account Options.................. 19
Stopping Purchase Payments..................... 19
TRANSFERS BETWEEN INVESTMENT OPTIONS............... 19
During the Purchase Period..................... 20
During the Payout Period....................... 20
Communicating Transfer or Reallocation
Instructions................................. 20
Effective Date of Transfer..................... 21
Market Timing.................................. 21
FEES AND CHARGES................................... 21
Account Maintenance Fee........................ 21
Surrender Charge............................... 21
Amount of Surrender Charge................ 22
10% Free Withdrawal....................... 22
Exceptions to Surrender Charge............ 22
Premium Tax Charge............................. 22
Separate Account Charges....................... 22
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...................................... 23
Separate Account Expense Reimbursement......... 24
Market Value Adjustment........................ 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
EXCHANGE PRIVILEGE................................. 28
Restrictions on Exchange Privilege............. 28
Taxes and Conversion Costs..................... 28
Surrender Charges.............................. 29
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Exchange Offers for Contracts Other Than
Portfolio Director Plus...................... 29
Comparison of Portfolio Director and Portfolio
Director 2 Contracts to Portfolio Director
Plus Contracts............................... 29
Comparison of Other Contracts.................. 29
Features of Portfolio Director Plus............ 29
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.................... 31
During the Payout Period....................... 32
HOW TO REVIEW INVESTMENT PERFORMANCE OF SEPARATE
ACCOUNT DIVISIONS................................ 32
Types of Investment Performance Information
Advertised................................... 32
Total Return Performance Information......... 32
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..... 33
Total Return Based on Different Investment
Amounts................................... 33
An Assumed Account Value of $10,000.......... 34
Yield Performance Information.................. 34
AGSPC Money Market and American General Money
Market Divisions............................. 34
Divisions Other Than The AGSPC Money Market
and American General Money Market
Divisions................................. 34
Performance Information: Average Annual Total
Return, Cumulative Return and Annual and
Cumulative Change in Purchase Unit Value
Tables....................................... 34
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...................................... 46
Who May Give Voting Instructions............... 46
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................................ 47
Type of Plans.................................. 47
Tax Consequences in General.................... 48
Effect of Tax-Deferred Accumulations........... 49
YEAR 2000.......................................... 50
</TABLE>
(i)
<PAGE> 301
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.................. 19
Annuitant...................... 31
Assumed Investment Rate........ 25
Beneficiary.................... 31
Contract Owner................. 31
Divisions...................... 32
Fixed Account Options.......... 31
Home Office.................... 20
Mutual Fund or Fund............ 15
Participant.................... 01
Participant Year............... 21
Payout Period.................. 20
Payout Unit.................... 25
Purchase Payments.............. 17, 32
Purchase Period................ 20
Purchase Unit.................. 18
VALIC Separate Account A....... 47
Variable Account Options....... 16, 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
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> 302
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 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 Founders Growth Fund(4) 0.25 0.60 (0.25) 0.60
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
Franklin Templeton Variable Insurance Products Trust
Templeton Asset Strategy Fund -- Class 1 0.25 0.60 -- 0.85
Templeton International Securities Fund -- Class 1 0.25 0.60 -- 0.85
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
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>
2
<PAGE> 303
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% -- 0.07% 0.57%
AGSPC Capital Conservation Fund 0.50 -- 0.10 0.60
AGSPC Government Securities Fund 0.50 -- 0.09 0.59
AGSPC Growth Fund 0.80 -- 0.06 0.86
AGSPC Growth & Income Fund 0.75 -- 0.07 0.82
AGSPC International Equities Fund 0.35 -- 0.08 0.43
AGSPC International Government Bond Fund 0.50 -- 0.07 0.57
AGSPC MidCap Index Fund 0.31 -- 0.07 0.38
AGSPC Money Market Fund 0.50 -- 0.07 0.57
AGSPC Science & Technology Fund 0.90 -- 0.06 0.96
AGSPC Small Cap Index Fund 0.35 -- 0.06 0.41
AGSPC Social Awareness Fund 0.50 -- 0.07 0.57
AGSPC Stock Index Fund 0.26 -- 0.06 0.32
American Century Ultra Fund(11) 1.00 -- -- 1.00
American General Balanced Fund(9) 0.78 -- 0.02 0.80
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) 0.59 -- 0.18 0.77
American General Growth Lifestyle Fund(10) 0.10 -- -- 0.10
American General High Yield Bond Fund(9) 0.69 -- 0.29 0.98
American General International Growth Fund(9) 0.88 -- 0.25 1.13
American General International Value Fund(9) 0.97 -- 0.04 1.01
American General Large Cap Growth Fund(9) 0.52 -- 0.29 0.81
American General Large Cap Value Fund(9) 0.49 -- 0.31 0.80
American General Mid Cap Growth Fund(9) 0.63 -- 0.14 0.77
American General Mid Cap Value Fund(9) 0.74 -- 0.29 1.03
American General Moderate Growth Lifestyle Fund(10) 0.10 -- -- 0.10
American General Money Market Fund(9) 0.24 -- 0.30 0.54
American General Small Cap Growth Fund(9) 0.81 -- 0.30 1.11
American General Small Cap Value Fund(9) 0.74 -- 0.22 0.96
American General Socially Responsible Fund(9) 0.25 -- 0.30 0.55
American General Strategic Bond Fund(9) 0.59 -- 0.29 0.88
Dreyfus Founders Growth Fund 0.67 0.25% 0.16 1.08
Dreyfus Variable Investment Fund -- Small Cap
Portfolio 0.75 -- 0.03 0.78
Evergreen Equity Trust
Evergreen Growth and Income Fund -- Class A 0.89 0.25 0.29 1.43
Evergreen Small Cap Value Fund -- Class A(11) 1.00 0.25 0.42 1.67
Evergreen Value Fund -- Class A 0.50 0.25 0.25 1.00
Franklin Templeton Variable Insurance Products
Trust(11)
Templeton Asset Strategy Fund -- Class 1(12) 0.60 -- 0.18 0.78
Templeton International Securities Fund -- Class
1(13) 0.69 -- 0.19 0.88
Neuberger Berman Guardian Trust(7)(11) 0.84 -- 0.04 0.88
Putnam Global Growth Fund -- Class A Shares 0.63 0.25 0.22 1.10
Putnam New Opportunities Fund -- Class A Shares 0.48 0.25 0.20 0.93
Putnam OTC & Emerging Growth Fund -- Class A Shares 0.55 0.25 0.18 0.98
Scudder Growth and Income Fund 0.45 -- 0.35 0.80
T. Rowe Price Small-Cap Stock Fund 0.77 -- 0.19 0.96
Templeton Foreign Fund -- Class A(11) 0.61 0.25 0.27 1.13
Vanguard LifeStrategy Conservative Growth
Fund(11)(14) 0.28 -- -- 0.28
Vanguard LifeStrategy Growth Fund(11)(14) 0.29 -- -- 0.29
Vanguard LifeStrategy Moderate Growth Fund(11)(14) 0.29 -- -- 0.29
Vanguard Long-Term Corporate Fund(11) 0.28 -- 0.02 0.30
Vanguard Long-Term Treasury Fund(11) 0.25 -- 0.03 0.28
Vanguard Wellington Fund(11) 0.28 -- 0.02 0.30
Vanguard Windsor II Fund(11) 0.35 -- 0.02 0.37
</TABLE>
3
<PAGE> 304
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) 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
0.75% to 1.25%, depending upon the Variable Account Option selected.
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 certain payments received 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.
(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 1999 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, 0.78%, 1.00% and 1.78%; American General
Core Bond Fund, 0.50%, 1.04% and 1.54%; American General Domestic Bond
Fund, 0.59%, 1.00% and 1.59%; American General High Yield Bond Fund, 0.69%,
1.05% and 1.74%; American General International Growth Fund, 0.88%, 1.02%
and 1.90%; American General International Value Fund, 0.97%, 1.00% and
1.97%; American General Large Cap Growth Fund, 0.52%, 0.92% and 1.44%;
American General Large Cap Value Fund, 0.49%, 1.02% and 1.51%; American
General Mid Cap Growth Fund, 0.63%, 1.01% and 1.64%; American General Mid
Cap Value Fund, 0.74%, 0.99% and 1.73%; American General Money Market Fund,
0.24%, 0.99% and 1.23%; American General Small Cap Growth Fund, 0.81%,
0.97% and 1.78%; American General Small Cap Value Fund, 0.74%, 1.01% and
1.75%; and American General Socially Responsible Fund, 0.25%, 0.98% and
1.23%; and American General Strategic Bond Fund, 0.59%, 1.05% and 1.64%.
(10) Total Combined Operating Expenses based on estimated total average weighted
combined operating expenses for the American General Conservative Growth
Lifestyle Fund is 0.95%, for American General Growth Lifestyle Fund 1.04%
and for American General Moderate Growth Lifestyle Fund 0.98%. 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 Dreyfus Founders Growth Fund
was formerly known as the Founders Growth Fund. The Evergreen Small Cap
Value Fund was formerly known as the Evergreen Small Cap Equity Income
Fund. The Franklin Templeton Variable Insurance Products Trust was formerly
known as the Templeton Variable Products Series 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
LifeStrategy 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) On February 8, 2000, shareholders of the Templeton Asset Allocation Fund
(previously offered under the Contract) approved a merger and
reorganization that combined the Templeton Asset Allocation Fund with the
Templeton Global Asset Allocation Fund, effective May 1, 2000. At the same
time as the merger, the Templeton Asset Allocation Fund changed its name to
the Templeton Asset Strategy Fund. The table shows restated total expenses
for the Templeton Asset Strategy Fund based on the new fund fees and the
assets of the Templeton Asset Allocation Fund as of December 31, 1999, and
not the assets of the combined fund. However, if the table reflected both
the new fund fees and the fund's combined assets, the fund's expenses after
May 1, 2000 would be estimated as: Management Fees 0.60%, Other Expenses
0.14%, and Annual Expenses 0.74%.
(13) On February 8, 2000, shareholders of the Templeton International Fund
(previously offered under the Contract) approved a merger and
reorganization that combined the Templeton International Fund with the
Templeton International Equity Fund, effective May 1, 2000. At the same
time as the merger, the Templeton International Fund changed its name to
the Templeton International Securities Fund. The table shows restated total
expenses for the Templeton International Securities Fund based on the new
fund fees and the assets of the Templeton International Fund as of December
31, 1999, and not the assets of the combined fund. However, if the table
reflected both the new fund fees and the fund's combined assets, the fund's
expenses after May 1, 2000 would be estimated as: Management Fees 0.65%,
Other Expenses 0.20%, and Annual Expenses 0.85%.
(14) The Vanguard LifeStrategy Funds did not incur any expenses in fiscal year
1999. 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 ratios that the Vanguard LifeStrategy Conservative Growth
Fund, Vanguard LifeStrategy Growth Fund and Vanguard LifeStrategy Moderate
Growth Fund incurred for the year ended December 31, 1999 was 0.28%, 0.29%
and 0.29%, respectively.
4
<PAGE> 305
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 $ 67 $147
AGSPC Capital Conservation Division 7 13 39 68 150
AGSPC Government Securities Division 8 13 39 68 149
AGSPC Growth Division 15 15 47 82 179
AGSPC Growth & Income Division 16 15 46 80 175
AGSPC International Equities Division 11 11 34 59 131
AGSPC International Government Bond Division 13 12 38 67 147
AGSPC MidCap Index Division 4 10 32 56 125
AGSPC Money Market Division 6 12 38 67 147
AGSPC Science & Technology Division 17 16 51 87 190
AGSPC Small Cap Index Division 14 11 33 58 129
AGSPC Social Awareness Division 12 12 38 67 147
AGSPC Stock Index Division 10 10 31 53 118
American Century Ultra Division 31 17 53 91 199
American General Balanced Division 42 12 38 65 145
American General Conservative Growth Lifestyle Division 50 5 16 27 62
American General Core Bond Division 58 12 38 65 145
American General Domestic Bond Division 43 12 37 64 141
American General Growth Lifestyle Division 48 5 16 27 62
American General High Yield Bond Division 60 14 43 75 165
American General International Growth Division 33 15 48 83 182
American General International Value Division 34 14 44 77 168
American General Large Cap Growth Division 39 12 38 66 146
American General Large Cap Value Division 40 12 38 65 145
American General Mid Cap Growth Division 37 12 37 64 141
American General Mid Cap Value Division 38 14 45 78 171
American General Moderate Growth Lifestyle Division 49 5 16 27 62
American General Money Market Division 44 9 30 52 115
American General Small Cap Growth Division 35 15 47 82 179
American General Small Cap Value Division 36 14 43 74 163
American General Socially Responsible Division 41 10 30 52 116
American General Strategic Bond Division 59 13 40 70 154
Dreyfus Founders Growth Division 30 17 54 93 203
Dreyfus Variable Investment Fund --
Small Cap Portfolio Division 18 15 48 83 182
Evergreen Equity Trust
Evergreen Growth and Income -- Class A Division 56 21 65 111 240
Evergreen Small Cap Value -- Class A Division 55 23 72 124 265
Evergreen Value -- Class A Division 57 17 52 89 195
Franklin Templeton Variable Insurance Products Trust
Templeton Asset Strategy -- Class 1 Division 19 17 53 91 198
Templeton International Securities -- Class 1 Division 20 18 56 96 209
Neuberger Berman Guardian Trust Division 29 15 48 83 182
Putnam Global Growth -- Class A Shares Division 28 18 55 94 206
Putnam New Opportunities -- Class A Shares Division 26 16 50 86 187
Putnam OTC & Emerging Growth -- Class A Shares Division 27 16 51 88 193
Scudder Growth and Income Division 21 15 46 79 173
T. Rowe Price Small-Cap Stock Division 51 19 58 100 217
Templeton Foreign -- Class A Division 32 18 56 96 209
Vanguard LifeStrategy Conservative Growth Division 54 12 37 64 142
Vanguard LifeStrategy Growth Division 52 12 37 65 144
Vanguard LifeStrategy Moderate Growth Division 53 12 37 65 144
Vanguard Long-Term Corporate Division 22 10 30 52 116
Vanguard Long-Term Treasury Division 23 9 29 51 114
Vanguard Wellington Division 25 12 38 65 145
Vanguard Windsor II Division 24 13 40 69 153
</TABLE>
5
<PAGE> 306
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 $117 $147
AGSPC Capital Conservation Division 7 59 89 118 150
AGSPC Government Securities Division 8 59 89 118 149
AGSPC Growth Division 15 62 97 132 179
AGSPC Growth & Income Division 16 61 96 130 175
AGSPC International Equities Division 11 58 84 109 131
AGSPC International Government Bond Division 13 59 88 117 147
AGSPC MidCap Index Division 4 57 82 106 125
AGSPC Money Market Division 6 59 88 117 147
AGSPC Science & Technology Division 17 63 100 137 190
AGSPC Small Cap Index Division 14 57 83 108 129
AGSPC Social Awareness Division 12 59 88 117 147
AGSPC Stock Index Division 10 57 81 103 118
American Century Ultra Division 31 64 103 141 199
American General Balanced Division 42 59 88 115 145
American General Conservative Growth Lifestyle Division 50 52 66 77 62
American General Core Bond Division 58 59 88 115 145
American General Domestic Bond Division 43 59 87 114 141
American General Growth Lifestyle Division 48 52 66 77 62
American General High Yield Bond Division 60 61 93 125 165
American General International Growth Division 33 62 98 133 182
American General International Value Division 34 61 94 127 168
American General Large Cap Growth Division 39 59 88 116 146
American General Large Cap Value Division 40 59 88 115 145
American General Mid Cap Growth Division 37 59 87 114 141
American General Mid Cap Value Division 38 61 95 128 171
American General Moderate Growth Lifestyle Division 49 52 66 77 62
American General Money Market Division 44 56 80 102 115
American General Small Cap Growth Division 35 62 97 132 179
American General Small Cap Value Division 36 60 93 124 163
American General Socially Responsible Division 41 56 80 102 116
American General Strategic Bond Division 59 60 90 120 154
Dreyfus Founders Growth Division 30 64 104 143 203
Dreyfus Variable Investment Fund -- Small Cap Portfolio
Division 18 62 98 133 182
Evergreen Equity Trust
Evergreen Growth and Income -- Class A Division 56 67 114 161 240
Evergreen Small Cap Value -- Class A Division 55 70 121 174 265
Evergreen Value -- Class A Division 57 63 101 139 195
Franklin Templeton Variable Insurance Products Trust
Templeton Asset Strategy -- Class 1 Division 19 63 102 141 198
Templeton International Securities -- Class 1 Division 20 64 105 146 209
Neuberger Berman Guardian Trust Division 29 62 98 133 182
Putnam Global Growth -- Class A Shares Division 28 64 104 144 206
Putnam New Opportunities -- Class A Shares Division 26 63 99 136 187
Putnam OTC & Emerging Growth -- Class A Shares Division 27 63 101 138 193
Scudder Growth and Income Division 21 61 96 129 173
T. Rowe Price Small-Cap Stock Division 51 65 108 150 217
Templeton Foreign -- Class A Division 32 64 105 146 209
Vanguard LifeStrategy Conservative Growth Division 54 59 87 114 142
Vanguard LifeStrategy Growth Division 52 59 87 115 144
Vanguard LifeStrategy Moderate Growth Division 53 59 87 115 144
Vanguard Long-Term Corporate Division 22 56 80 102 116
Vanguard Long-Term Treasury Division 23 56 79 101 114
Vanguard Wellington Division 25 59 88 115 145
Vanguard Windsor II Division 24 60 90 119 153
</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> 307
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.
Depending upon the selection made by your employer's plan, if applicable, you
may 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 three Fixed Account
Options. There may be certain limitations on how many investment options you may
invest in at any one time.(1)
- --------------------------------------------------------------------------------
<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
--------------------------------------------------------------------------------------------------------
Multi-Year Enhanced Multi-year guaranteed interest -- --
Fixed Account(1) income
- ---------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS OBJECTIVE ADVISER SUB-ADVISER
- ---------------------------------------------------------------------------------------------------------------------
INDEX AGSPC International Seeks long-term growth of capital VALIC N/A
EQUITY Equities Fund* through investments primarily in a
FUNDS 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.
--------------------------------------------------------------------------------------------------------
AGSPC MidCap Seeks growth of capital through VALIC N/A(2)
Index Fund*(3) 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.
--------------------------------------------------------------------------------------------------------
AGSPC Small Cap Seeks growth of capital through VALIC N/A(2)
Index Fund*(3) 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.
--------------------------------------------------------------------------------------------------------
AGSPC Stock Seeks long-term capital growth VALIC N/A(2)
Index Fund*(3) 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).
- ---------------------------------------------------------------------------------------------------------------------
ACTIVELY AGSPC Growth Seeks long-term growth of capital VALIC Wellington
MANAGED Fund* through investment primarily in Management Company,
EQUITY equity securities. LLP(4)
FUNDS
--------------------------------------------------------------------------------------------------------
AGSPC Growth & Seeks long-term growth of capital VALIC N/A
Income Fund* and, secondarily, current income
through investment in common stocks
and equity-related securities.
--------------------------------------------------------------------------------------------------------
American Century Seeks capital growth through American Century N/A
Ultra Fund investments primarily in common Investment Management,
stocks that are considered to have Inc.
better-than-average prospects for
appreciation.
--------------------------------------------------------------------------------------------------------
American General Seeks long-term capital VALIC Jacobs Asset
International appreciation by investing in equity Management
Growth securities of non-U.S. companies,
Fund** 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.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* A series of American General Series Portfolio Company ("AGSPC").
** A series of American General Series Portfolio Company 3 ("AGSPC 3").
(1) This Fixed Account Option is also referred to in this prospectus as the
Market Value Adjustment ("MVA") Option. For purposes of this limitation,
each MVA Band under the Multi-Year Enhanced Fixed Option will count as a
separate investment option. An MVA Band is established for each separate
investment for a new guarantee period. The minimum allocation to an MVA
Band, as described in the Contract, may be changed from time to time by
the Company. Availability of this Option is subject to regulatory approval
within the state in which your Contract is issued. It may not be available
under your Contract. See MVA Option herein.
(2) Bankers Trust Company ("Bankers Trust") previously served as sub-adviser
to the AGSPC MidCap Index Fund, the AGSPC Small Cap Index Fund and the
AGSPC Stock Index Fund. VALIC re-assumed direct management of each Fund's
investment portfolio on October 1, 1999. Relative to the American General
Small Cap Value Fund, VALIC re-assumed that portion of the investment
portfolio previously managed by Bankers Trust as one of two sub-advisers
to the Fund.
(3) "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"). 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 those Funds. The Russell 2000(R) Index is a
trademark/servicemark of Frank Russell Trust Company. Russell(TM) is a
trademark of the Frank Russell Company.
(4) Wellington Management Company, LLP replaced T. Rowe Price Associates, Inc.
as sub-adviser to the Fund effective September 1, 1999. The investment
objective was also changed at that time.
7
<PAGE> 308
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS OBJECTIVE ADVISER SUB-ADVISER
- ---------------------------------------------------------------------------------------------------------------------
American General Seeks growth of capital and future VALIC Capital Guardian
International Value income through investments Trust Company
Fund** primarily in securities of non-U.S.
issuers and securities whose
principal markets are outside of
the United States.
--------------------------------------------------------------------------------------------------------
American General Seeks long-term growth of capital VALIC Goldman Sachs Asset
Large Cap Growth through a broadly diversified Management
Fund** 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 Seeks total returns that exceed VALIC State Street Bank &
Large Cap Value over time the Russell 1000(R) Value Trust Company/State
Fund**(3) Index through investments in equity Street Global
securities. Advisors
--------------------------------------------------------------------------------------------------------
American General Seeks capital appreciation VALIC Brown Capital
Mid Cap Growth principally through investments in Management Inc.
Fund** medium capitalization equity
securities, such as common and
preferred stocks and securities
convertible into common stocks.
Current income is a secondary
objective.
--------------------------------------------------------------------------------------------------------
American General Seeks capital growth through VALIC Neuberger Berman
Mid Cap Value investment in equity securities of Management Inc.
Fund** medium capitalization companies
using a value-oriented investment
approach.
--------------------------------------------------------------------------------------------------------
American General Seeks long-term growth from a VALIC JP Morgan
Small Cap Growth portfolio of equity securities of Investment
Fund** small capitalization growth Management Inc.
companies.
--------------------------------------------------------------------------------------------------------
American General Seeks maximum long-term return, VALIC Fiduciary
Small Cap Value consistent with reasonable risk to Management
Fund** principal by investing primarily in Associates, Inc.(2)
equity securities of small
capitalization companies in terms
of revenues and/or market
capitalization.
--------------------------------------------------------------------------------------------------------
Dreyfus Founders Seeks long-term growth of capital Founders N/A
Growth by investing primarily in common Asset
Fund stocks of well-established, Management LLC
high-quality growth companies.
--------------------------------------------------------------------------------------------------------
Dreyfus Variable Seeks to maximize capital The Dreyfus N/A
Investment Fund -- appreciation by investing at least Corporation
Small 65% of its assets in the common
Cap Portfolio stock of U.S. and foreign
companies. The portfolio focuses on
small-cap companies with total
market values of less than $1.5
billion.
--------------------------------------------------------------------------------------------------------
Evergreen Growth Seeks capital growth in the value Evergreen Asset N/A
and Income Fund -- of its shares by investing in the Management Corp.
Class A*** securities of companies which are
temporarily undervalued in the
marketplace but display
characteristics of growth such as
high return on investment and
competitive advantage in their
industry.
--------------------------------------------------------------------------------------------------------
Evergreen Small Cap Seeks current income and capital Evergreen Asset N/A
Value Fund -- Class growth in the value of its shares Management Corp.
A*** by investing in common stocks of
small U.S. companies (less than $1
billion in market capitalization).
--------------------------------------------------------------------------------------------------------
Evergreen Value Seeks long-term capital growth with Evergreen Investment N/A
Fund -- Class A*** current income as a secondary Management
objective by investing at least 75%
of its assets in common stocks of
medium and large-cap U.S. companies
with prospects for earning growth
and dividends.
--------------------------------------------------------------------------------------------------------
Neuberger Berman Seeks capital appreciation and, Neuberger Berman Neuberger
Guardian Trust secondarily, current income by Management Inc. Berman, LLC
investing primarily in common
stocks of large-capitalization
companies.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
** A series AGSPC 3.
*** A series of Evergreen Equity Trust.
(2) Bankers Trust Company ("Bankers Trust") previously served as sub-adviser
to the AGSPC MidCap Index Fund, the AGSPC Small Cap Index Fund and the
AGSPC Stock Index Fund. VALIC re-assumed direct management of each Fund's
investment portfolio on October 1, 1999. Relative to the American General
Small Cap Value Fund, VALIC re-assumed that portion of the investment
portfolio previously managed by Bankers Trust as one of two sub-advisers
to the Fund.
(3) The Frank Russell 1000(R) Value Index is a trademark/servicemark of Frank
Russell Trust Company. Russell(TM) is a trademark of the Frank Russell
Company.
8
<PAGE> 309
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS OBJECTIVE ADVISER SUB-ADVISER
- ---------------------------------------------------------------------------------------------------------------------
Putnam Global Seeks capital appreciation. Current Putnam Investment N/A
Growth income is only an incidental Management Inc.
Fund -- Class A consideration in selecting
Shares 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.
--------------------------------------------------------------------------------------------------------
Putnam New Seeks long-term capital Putnam Investment N/A
Opportunities appreciation. Current income is Management Inc.
Fund -- Class A only an incidental consideration.
Shares 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.
--------------------------------------------------------------------------------------------------------
Putnam OTC & Seeks capital appreciation by Putnam Investment N/A
Emerging Growth investing primarily in common Management Inc.
Fund -- Class A stocks traded in the
Shares over-the-counter 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.
--------------------------------------------------------------------------------------------------------
Scudder Growth Seeks long-term growth of capital, Scudder Kemper N/A
and Income Fund current income and growth of income Investments, Inc.
by investing primarily in common
stocks, preferred stocks, and
securities convertible into common
stocks of companies which offer the
prospect for growth of earning
while paying current dividends.
--------------------------------------------------------------------------------------------------------
T. Rowe Price Seeks long-term capital growth T. Rowe Price N/A
Small-Cap Stock through investments primarily in Associates, Inc.
Fund stocks of small to medium-sized
companies.
--------------------------------------------------------------------------------------------------------
Templeton Foreign Seeks long-term capital growth by Templeton Global N/A
Fund -- Class A investing primarily in the equity Advisors Limited
securities of companies outside the
United States, including emerging
markets.
--------------------------------------------------------------------------------------------------------
Templeton Seeks to achieve long-term capital Templeton Investment N/A
International growth by investing primarily in Counsel, Inc.
Securities Fund -- stocks of companies outside the
Class 1**** United States, including emerging
markets.
--------------------------------------------------------------------------------------------------------
Vanguard Seeks to provide long-term growth Vanguard N/A
Windsor II Fund 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.
- ---------------------------------------------------------------------------------------------------------------------
BALANCED American General Seeks balanced accomplishment of VALIC Capital Guardian
FUNDS Balanced Fund** (i) conservation of principal and Trust Company
(ii) long-term growth of capital
and income through investment in
fixed income and equity securities.
--------------------------------------------------------------------------------------------------------
Vanguard Wellington Seeks to conserve capital and Wellington Management N/A
Fund provide moderate long-term growth Company, LLP
in capital and income by investing
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.
- ---------------------------------------------------------------------------------------------------------------------
INCOME AGSPC Capital Seeks the highest possible total VALIC N/A
FUNDS Conservation Fund* 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>
* A series of AGSPC.
** A series AGSPC 3.
**** A series of Franklin Templeton Variable Insurance Products Trust.
9
<PAGE> 310
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS OBJECTIVE ADVISER SUB-ADVISER
- ---------------------------------------------------------------------------------------------------------------------
AGSPC Government Seeks high current income and VALIC N/A
Securities Fund* protection of capital through
investments in intermediate and
long-term U.S. Government debt
securities.
--------------------------------------------------------------------------------------------------------
AGSPC International Seeks high current income through VALIC N/A
Government investments primarily in investment
Bond Fund* grade debt securities issued or
guaranteed by foreign governments.
--------------------------------------------------------------------------------------------------------
American General Seeks the highest possible total VALIC American General
Core Bond Fund** return consistent with conservation Investment
of capital through investment in Management, L.P.
medium to high quality fixed income
securities.
--------------------------------------------------------------------------------------------------------
American General Seeks the highest possible total VALIC Capital Guardian
Domestic Bond return consistent with conservation Trust Company
Fund** of capital through investment
primarily in investment grade fixed
income securities and other income
producing securities.
--------------------------------------------------------------------------------------------------------
American General Seeks the highest possible total VALIC American General
High Yield Bond return and income consistent with Investment
Fund** conservation of capital through Management, L.P.
investment in a diversified
portfolio of high yielding high
risk fixed income securities.
--------------------------------------------------------------------------------------------------------
American General Seeks the highest possible total VALIC American General
Strategic Bond return and income consistent with Investment
Fund** conservation of capital through Management, L.P.
investment in a diversified
portfolio of income producing
securities.
--------------------------------------------------------------------------------------------------------
Vanguard Long-Term Seeks a high level of current Wellington Management N/A
Corporate Fund income consistent with the Company, LLP
maintenance of principal and
liquidity by investing in a
diversified portfolio of investment
grade corporate and Government
bonds.
--------------------------------------------------------------------------------------------------------
Vanguard Long-Term Seeks a high level of current Vanguard N/A
Treasury Fund income consistent with the
maintenance of principal and
liquidity by investing at least 85%
of its total assets in long-term
securities backed by the full faith
and credit of the U.S. Government.
- ---------------------------------------------------------------------------------------------------------------------
SPECIALTY AGSPC Science & Seeks long-term growth of capital VALIC T. Rowe Price
FUNDS Technology through investment primarily in the Associates, Inc.
Fund* common stocks and equity-related
securities of companies that are
expected to benefit from the
development, advancement and use of
science and technology.
--------------------------------------------------------------------------------------------------------
AGSPC Social Seeks growth of capital through VALIC N/A
Awareness investment, primarily in common
Fund* stocks, in companies which meet the
social criteria established for the
Fund.
--------------------------------------------------------------------------------------------------------
American General Seeks growth of capital through VALIC N/A
Socially investment, primarily in equity
Responsible Fund** securities, in companies which meet
the social criteria established for
the Fund.
- ---------------------------------------------------------------------------------------------------------------------
MONEY AGSPC Money Seeks liquidity, protection of VALIC N/A
MARKET Market capital and current income through
FUNDS Fund* investments in short-term money
market instruments.
--------------------------------------------------------------------------------------------------------
American General Seeks liquidity, protection of VALIC N/A
Money Market Fund** capital and current income through
investments in short-term money
market instruments.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* A series of AGSPC.
** A series AGSPC 3.
10
<PAGE> 311
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT
OPTIONS OBJECTIVE ADVISER SUB-ADVISER
- ---------------------------------------------------------------------------------------------------------------------
LIFESTYLE American General Seeks current income and low to VALIC N/A
FUNDS Conservative Growth moderate growth of capital through
Lifestyle Fund** investments in AGSPC or AGSPC 3
Funds.
--------------------------------------------------------------------------------------------------------
American General Seeks growth through investments in VALIC N/A
Growth AGSPC or AGSPC 3 Funds.
Lifestyle Fund**
--------------------------------------------------------------------------------------------------------
American General Seeks growth and current income VALIC N/A
Moderate Growth through investments in AGSPC or
Lifestyle Fund** AGSPC 3 Funds.
--------------------------------------------------------------------------------------------------------
Vanguard Seeks current income and Vanguard N/A
LifeStrategy low-to-moderate growth of capital
Conservative by investing in a relatively fixed
Growth Fund combination of other Vanguard
funds.
--------------------------------------------------------------------------------------------------------
Vanguard Seeks growth of capital by Vanguard N/A
LifeStrategy Growth investing in a relatively fixed
Fund combination of other Vanguard
funds.
--------------------------------------------------------------------------------------------------------
Vanguard Seeks growth of capital and a Vanguard N/A
LifeStrategy reasonable level of current income
Moderate Growth by investing in a relatively fixed
Fund combination of other Vanguard
funds.
- ---------------------------------------------------------------------------------------------------------------------
ASSET AGSPC Asset Seeks maximum aggregate rate of VALIC N/A
ALLOCATION Allocation Fund* return over the long-term through
FUNDS controlled investment risk by
adjusting its investment mix among
stocks, long-term debt securities
and short-term money market
securities.
--------------------------------------------------------------------------------------------------------
Templeton Asset Seeks a high level of total return Templeton Investment N/A
Strategy by investing in the following Counsel, Inc.
Fund -- Class 1**** market segments: stocks and bonds
of any nation, including emerging
markets, and money market
instruments.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* A series of AGSPC.
** A series AGSPC 3.
**** A series of Franklin Templeton Variable Insurance Products Trust.
11
<PAGE> 312
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.
Amounts invested in an MVA Option may be transferred to another investment
option at the end of an MVA term without application of a market value
adjustment.
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 from an MVA Option prior to the end of the applicable MVA term will
also be subject to a market value adjustment unless an exception applies. This
may increase or reduce the amount withdrawn. However, the market value
adjustment will not reduce the amount invested in the MVA Option below the
guaranteed amount.
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.
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.
12
<PAGE> 313
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
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 may, in its discretion, reimburse to certain Divisions some or all
of the 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. The minimum amount to establish a new Multi-Year Enhanced Fixed
Option guarantee period (MVA Band), as described in the Contract, may be changed
from time to time by the Company.
For more information on
PURCHASE PAYMENTS, refer
to the "Purchase Period"
section of the prospectus.
13
<PAGE> 314
SELECTED PURCHASE UNIT DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, 1999 JANUARY 4, 1999 DECEMBER 31, 1998
------------------------ ------------------- ------------------------ SEPTEMBER 22,
PURCHASE PURCHASE PURCHASE PURCHASE 1998
UNITS PURCHASE UNITS UNIT UNITS PURCHASE PURCHASE
IN FORCE UNIT VALUE IN FORCE VALUE(1) IN FORCE UNIT VALUE UNIT VALUE(1)
----------- ---------- -------- -------- ----------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
AGSPC Asset Allocation Division 5..... 516,580 $ 4.446999 -- -- -- $4.003086 $3.605017
AGSPC Capital Conservation Division
7................................... 194,756 $ 2.172271 -- -- -- $2.194489 $2.152785
AGSPC Government Securities Division
8................................... 338,782 $ 2.147126 -- -- -- $2.221715 $2.205164
AGSPC Growth Division 15.............. 3,034,597 $ 2.638280 -- -- 3,570 $2.471473 $1.955660
AGSPC Growth & Income Division 16..... 704,903 $ 2.735261 -- -- -- $2.240246 $1.802345
AGSPC International Equities Division
11.................................. 274,636 $ 1.937488 -- -- -- $1.509070 $1.248880
AGSPC International Government Bond
Division 13......................... 308,660 $1.1661837 -- -- 1,531 $1.777571 $1.699184
AGSPC MidCap Index Division 4(2)...... 1,244,725 $ 6.116544 -- -- -- $5.354659 $4.191708
AGSPC Money Market Division 6......... 7,687,167 $ 1.909470 -- -- 475 $1.833793 $1.812091
AGSPC Science & Technology Division
17.................................. 3,286,480 $ 6.536543 -- -- 6,377 $3.272354 $2.244150
AGSPC Small Cap Index Division 14..... 949,989 $ 2.597863 -- -- -- $2.154574 $1.848434
AGSPC Social Awareness Division 12.... 631,193 $ 4.569034 -- -- 1,451 $3.897214 $3.247795
AGSPC Stock Index Division 10......... 11,637,991 $ 5.981762 -- -- 30,811 $4.991135 $4.149958
American Century Ultra Division 31.... 1,613,349 $ 2.527648 -- -- 23,002 $1.798208 $1.464079
American General Balanced Division
42(1)............................... 1,968,894 $ 1.330160 -- -- -- $1.171721 $1.021648
American General Conservative Growth
Lifestyle Division 50(1)............ 1,160,286 $ 1.313858 -- -- -- $1.163619 $1.025646
American General Core Bond Division
58(1)............................... -- $ -- -- -- -- $1.030555 $1.012652
American General Domestic Bond
Division 43(1)...................... 370,695 $ 1.009996 -- -- -- $1.045861 $1.017652
American General Growth Lifestyle
Division 48(1)...................... 1,674,512 $ 1.546416 -- -- -- $1.194164 $1.014651
American General High Yield Bond
Division 60(1)...................... 410 $ 1.081775 -- -- -- $1.054539 $1.000656
American General International Growth
Division 33(1)...................... 329,526 $ 1.643677 -- -- -- $1.053156 $0.941675
American General International Value
Division 34(1)...................... 72,570 $ 1.925869 -- -- -- $1.151468 $0.945673
American General Large Cap Growth
Division 39(1)...................... 9,513,851 $ 1.676417 -- -- -- $1.242458 $1.011650
American General Large Cap Value
Division 40(1)...................... 287,197 $ 1.309860 -- -- -- $1.248274 $1.070634
American General Mid Cap Growth
Division 37(1)...................... 393,589 $ 1.430763 -- -- -- $1.349521 $1.069634
American General Mid Cap Value
Division 38(1)...................... 1,116,041 $ 1.529814 -- -- -- $1.256427 $1.049640
American General Moderate Growth
Lifestyle Division 49(1)............ 3,491,046 $ 1.405109 -- -- -- $1.187049 $1.025647
American General Money Market Division
44(1)............................... -- $ -- -- -- -- $1.014694 $1.002560
American General Small Cap Growth
Division 35(1)...................... 2,975,505 $ 2.284815 -- -- -- $1.351189 $1.075632
American General Small Cap Value
Division 36(1)...................... 80,739 $ 1.086316 -- -- -- $1.166837 $1.035646
American General Socially Responsible
Division 41(1)...................... 2,715,174 $ 1.505354 -- -- -- $1.279494 $1.065636
American General Strategic Bond
Division 59(1)...................... 33,066 $ 1.087771 -- -- -- $1.051306 $1.011653
Dreyfus Founders Growth Division 30... 23,525,351 $ 2.316600 -- -- 12,861 $1.676366 $1.403809
Dreyfus Variable Investment Fund
Small Cap Portfolio Division 18..... 23,669,214 $ 2.128984 -- -- -- $1.740909 $1.452893
Evergreen Equity Trust
Evergreen Growth and Income Division
56................................ -- -- -- $1.00 -- -- --
Evergreen Small Cap Value Division
55................................ -- -- -- $1.00 -- -- --
Evergreen Value Division 57......... -- -- -- $1.00 -- -- --
Franklin Templeton Variable Insurance
Products Trust
Templeton Asset Strategy -- Class 1
Division 19(3).................... 18,489,196 $ 2.150733 -- -- -- $1.765016 $1.458916
Templeton International Securities
-- Class 1 Division 20(4)......... 19,529,937 $ 2.138370 -- -- -- $1.744358 $1.503490
Neuberger Berman Guardian Trust
Division 29......................... 112,799 $ 1.528673 -- -- 253 $1.418252 $1.185901
Putnam Global Growth -- Class A
Division 28......................... 7,494,551 $ 2.603644 -- -- 5,760 $1.591007 $1.299768
Putnam New Opportunities -- Class A
Division 26......................... 21,386,431 $ 2.459834 -- -- 10,797 $1.459115 $1.142402
Putnam OTC & Emerging Growth -- Class
A Division 27....................... 1,605,024 $ 2.542500 -- -- 3,073 $1.127653 $0.881983
Scudder Growth and Income Division
21.................................. 2,230,357 $ 1.670148 -- -- 3,163 $1.582856 $1.414085
T. Rowe Price Small-Cap Stock Division
51(1)............................... 5,672,360 $ 1.299637 -- -- -- $1.142234 $1.007688
Templeton Foreign -- Class A Division
32.................................. 503,020 $ 1.560956 -- -- 2,604 $1.123840 $0.969355
Vanguard LifeStrategy Conservative
Growth Division 54(1)............... 3,665,491 $ 1.159659 -- -- -- $1.085160 $1.006687
Vanguard LifeStrategy Growth Division
52(1)............................... 15,310,158 $ 1.349710 -- -- -- $1.169326 $1.006188
Vanguard LifeStrategy Moderate Growth
Division 53(1)...................... 22,135,061 $ 1.251243 -- -- -- $1.127094 $1.002087
Vanguard Long-Term Corporate Division
22.................................. 3,874,406 $ 1.267698 -- -- 883 $1.360696 $1.340643
Vanguard Long-Term Treasury Division
23.................................. 1,466,945 $ 1.256142 -- -- 7,820 $1.384079 $1.373932
Vanguard Wellington Division 25....... 13,813,418 $ 1.641601 -- -- 9,214 $1.585688 $1.474171
Vanguard Windsor II Division 24....... 18,903,967 $ 1.653581 -- -- 29,953 $1.770257 $1.549662
</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.
(3) Effective May 1, 2000 the Templeton Asset Allocation Fund merged with the
Templeton Global Asset Allocation Fund. At the same time as the merger, the
Templeton Asset Allocation Fund changed its name to the Templeton Asset
Strategy Fund. Accordingly, the Templeton Asset Allocation Fund Division 19
was renamed the Templeton Asset Strategy Fund Division 19. The Selected
Purchase Unit Data for the Division through December 31, 1999, reflects
units of the Templeton Asset Allocation Fund Division 19.
(4) Effective May 1, 2000 the Templeton International Fund merged with the
Templeton International Equity Fund. At the same time as the merger, the
Templeton International Fund changed its name to the Templeton International
Securities Fund. Accordingly, the Templeton International Fund Division 20
was renamed the Templeton International Securities Fund Division 20. The
Selected Purchase Unit Data for the Division through December 31, 1999,
reflects units of the Templeton International Fund Division 20.
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.
14
<PAGE> 315
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.
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
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
15
<PAGE> 316
- --------------------------------------------------------------------------------
contract owner, participants, annuitants, and beneficiaries of Portfolio
Director Plus. When we discuss performance information in this prospectus, we
mean the performance of a VALIC Separate Account A Division.
UNITS OF INTERESTS
Your investment in a Division of VALIC Separate Account A is represented by
units of interest issued by VALIC Separate Account A. On a daily basis, the
units of interest issued by VALIC Separate Account A are revalued to reflect
that day's performance of the underlying mutual fund minus any applicable fees
and charges to VALIC Separate Account A.
DISTRIBUTION OF THE CONTRACTS
American General Distributors, Inc. (the "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.
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. You may be subject to further
limits on how many options you may be invested in at any one time or how many of
the options you are invested in may be involved in certain transactions at any
one time.
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 and, for 2 of such funds, have one of
the following sub-advisers: Wellington Management Company, LLP and T. Rowe
Price Associates, Inc.
- - 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.,
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 Founders Funds, Inc. -- offers 1 fund for which Founders Asset
Management LLC serves as investment adviser. The Funds were formerly known as
Founders Funds, Inc.
- - 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 Evergreen Investment Management serve as investment
adviser.
- - Franklin Templeton Variable Insurance Products Trust -- offers 2 funds for
which Templeton Investment Counsel, Inc. serves as investment adviser.
- - Neuberger Berman Management Inc. -- offers 1 fund for which Neuberger Berman
Management Inc. serves as investment manager and Neuberger Berman LLC, serves
as sub-adviser.
- - Putnam Investments -- offers 3 funds for which Putnam Investment Management
Inc., serves as investment adviser.
The Distributor's address
is 2929 Allen Parkway,
Houston, Texas 77019
For more information about
THE DISTRIBUTOR,
see "Distribution of
Variable Annuity Contracts"
in the Statement of
Additional Information
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.
16
<PAGE> 317
- --------------------------------------------------------------------------------
- - 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.
- - Franklin Templeton Variable Insurance Products Trust -- 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.
Shares of certain of the Funds 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.
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.
PURCHASE PAYMENTS -- an
amount of money you pay to
VALIC to receive the benefits
of an annuity Contract offered
by Portfolio Director Plus.
17
<PAGE> 318
- --------------------------------------------------------------------------------
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, or other investment option
chosen by your employer. If your employer chooses another investment option
other than the Money Market Division, the value of your investment may
fluctuate and you could lose money. 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.)
Once we have established your account and have applied your initial Purchase
Payment as described above, any subsequent Purchase Payment that we receive at
our Home Office before the close of the Exchange will be credited the same
business day. If not, it 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.
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 56 investment options offered in Portfolio Director Plus. This
includes 3 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
The Fixed Account Plus and the Short Term Fixed Account are part of the
Company's general assets. The MVA Option may be invested in
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.
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<PAGE> 319
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either the general assets of the Company or in a Separate Account of the
Company, depending upon state requirements. You may allocate all or a portion of
your Purchase Payment to the Fixed Account Options listed in the "Summary"
section 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. With the exception of a market
value adjustment which generally will be applied to withdrawals or transfers
from an MVA Option prior to the end of an MVA term, we bear the entire
investment risk for the Fixed Account Options. 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. The minimum amount to establish each new Multi-Year Enhanced Fixed
Option guarantee period (MVA Band), as described in the Contract, may be changed
from time to time by the Company.
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)
- ---------------
* This value may be subject to a market value adjustment under the MVA Option.
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 "Summary" and
"Variable Account Options" sections 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.
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.
ACCOUNT VALUE -- the total
sum of your Fixed Account
and/or Variable Account
Options that have not yet
been applied to your Payout
Payments.
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<PAGE> 320
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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)
Multi-Year
Enhanced Up to 100% At any time Withdrawals or
Fixed Transfers
Account(3): subject to
market value
adjustment if
prior to the end
of an MVA term.
Each MVA Band
will require a
minimum transfer
amount as
described in the
Contract.(4)
</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.
(3) The MVA Option may not be available unless it has been selected as an option
for your employer's retirement plan.
(4) The minimum transfer amount may be changed from time to time by the Company.
From time to time we may waive the 20% transfer restriction on Fixed Account
Plus for transfers to the Multi-Year Enhanced Fixed Account or to other
investment options.
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). All transfers to or from the
MVA Option will require written instructions.
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
PURCHASE PERIOD -- the time
between your first Purchase
Payment and your Payout
Period (or surrender).
PAYOUT PERIOD -- the time
that starts when you begin to
withdraw your money in a
steady stream of payments.
HOME OFFICE -- our
principal office at 2929 Allen
Parkway, Houston, Texas
77019.
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<PAGE> 321
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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.
MARKET TIMING
The Contracts are not designed for professional market timing organizations or
other entities using programmed and frequent transfers. We reserve the right at
any time and without prior notice to any party to terminate, suspend, or modify
our policies or procedures regarding transfer requests.
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.
In addition, certain charges may apply to the MVA Option which are discussed at
the end of this section.
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.
PARTICIPANT YEAR -- the first
twelve month period and
then each yearly anniversary
of that period following the
issue date of the contract or
certificate.
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<PAGE> 322
- --------------------------------------------------------------------------------
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 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.
VALIC may waive any otherwise applicable surrender charge if you reinvest the
surrender proceeds in another VALIC insurance product. You will, however, be
subject to a surrender charge in the newly acquired product under the same terms
and conditions as the original product. For purposes of calculating any
surrender charge due, you will be considered to have acquired the new product as
of the date you acquired the original product.
The surrender charge may also 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
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<PAGE> 323
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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.
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.
23
<PAGE> 324
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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 administrative and shareholder services it
provides to the underlying Fund. The Company may, in its discretion, apply some
or all of these payments to reduce its charges to the Division investing in that
Fund. In addition, the Company currently reimburses certain Divisions a portion
of the Company's administration and distribution fee. Such reimbursement
arrangements are, however, voluntary and may be changed by the Company at any
time. See the Fee Table in this prospectus for an identification of those Funds
for which a reimbursement applies and the amount of the reimbursement.
MARKET VALUE ADJUSTMENT
Under the MVA Option you may establish one or more MVA Bands with a minimum
amount, as described in the Contract, per MVA Band in states in which the MVA
Option has been approved. The Company may change the minimum from time to time.
Each MVA Band will be guaranteed to receive a stated rate of interest through
the end of the selected MVA term. We guarantee your MVA Option will earn at
least the lowest minimum interest rate applicable to any of the fixed interest
options in the contract. A withdrawal will generally be subject to a surrender
charge if it exceeds the amount of any free withdrawal amount permitted under
your contract. Withdrawals or transfers from an MVA Band prior to the end of the
MVA term will be subject to a market value adjustment, unless an exception
applies. This adjustment may be positive or negative, based upon the differences
in selected interest rates at the time the MVA Band was established and at the
time of the withdrawal. This adjustment will not apply upon the Owner's death,
or if the Owner is not a natural person, upon the death of the Annuitant. This
adjustment applies independently from surrender charges, and can still apply to
a 10% Free Withdrawal. The market value adjustment may be waived for
distributions that are required under your contract. It will also be waived for
30 days following the end of an MVA term. Loans are not available from the MVA
Option. Please review your contract for additional information on the MVA
Option.
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<PAGE> 325
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
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).
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> 326
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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.
- 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.
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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, no surrender or partial
surrender will be allowed except attainment of age 70 1/2, retirement or other
termination of employment 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
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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 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.
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. If you elect to exercise one of these
exchange offers, you should contact any of our Regional Offices. 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, except at the discretion of the Company.
- 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.
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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.
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.
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<PAGE> 330
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- 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 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:
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.
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 Plus are Fixed
Account Plus, and Multi-Year
Enhanced Fixed Account.
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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The Standard Death Benefit will be the greater of:
Your Account Value on the Date Proof of Death is
Received by VALIC
OR
100% of Purchase Payments (to Fixed
and/or Variable Account Options)
- -- (MINUS)
Amount of all Prior Withdrawals, Charges
and any portion of Account Value applied
under a Payout Option
DURING THE PAYOUT PERIOD
If death occurs during the Payout Period, your Beneficiary may receive a death
benefit depending on the Payout Option selected. The amount of death benefits
will also depend on the Payout Option that you selected. The Payout Options
available in Portfolio Director 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.
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 of life insurance products 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
PURCHASE PAYMENTS -- an
amount of money you pay to
VALIC to receive the benefits
of an annuity Contract offered
by Portfolio Director Plus.
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.
For more information on how
TOTAL RETURN PERFORMANCE
INFORMATION is calculated,
see the Statement of
Additional Information.
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<PAGE> 333
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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, 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 Total
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.
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, 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.
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.
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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, 1999 was 4.71% and
4.96%, 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, 1999
was 4.82% and 5.08%, 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 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.
34
<PAGE> 335
TABLE I
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
DIVISION
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Asset Allocation (Division 5)......................... 09/06/83 -- 10.31% 16.26% 6.04%
AGSPC Capital Conservation (Division 7)..................... 01/16/86 -- 5.95 5.87 (5.51)
AGSPC Government Securities (Division 8).................... 01/16/86 -- 5.95 5.16 (7.75)
AGSPC Growth (Division 15).................................. 07/11/94 20.40% -- 20.77 1.90
AGSPC Growth & Income (Division 16)......................... 07/11/94 21.31 -- 21.88 17.04
AGSPC International Equities (Division 11).................. 10/02/89 -- 6.47 11.77 23.33
AGSPC International Government Bond (Division 13)........... 10/01/91 6.29 -- 3.85 (10.76)
AGSPC MidCap Index (Division 4)***.......................... 10/01/91 16.53 -- 21.53 9.17
AGSPC Money Market (Division 6)............................. 01/16/86 -- 4.19 3.59 (0.61)
AGSPC Science & Technology (Division 17).................... 07/11/94 42.31 -- 38.86 94.65
AGSPC Small Cap Index (Division 14)......................... 05/01/92 13.19 -- 15.41 15.52
AGSPC Social Awareness (Division 12)........................ 10/02/89 -- 16.29 27.10 12.87
AGSPC Stock Index (Division 10)............................. 04/20/87 -- 16.87 27.03 14.79
American Century Ultra (Division 31)........................ 07/01/96 27.46 -- -- 35.50
American General Balanced (Division 42)..................... 09/22/98 18.90 -- -- 8.47
American General Conservative Growth Lifestyle (Division
50)....................................................... 09/22/98 17.24 -- -- 7.86
American General Core Bond (Division 58).................... 09/22/98 (3.28) -- -- (5.98)
American General Domestic Bond (Division 43)................ 09/22/98 (4.04) -- -- (7.82)
American General Growth Lifestyle (Division 48)............. 09/22/98 34.47 -- -- 24.44
American General High Yield Bond (Division 60).............. 09/22/98 2.32 -- -- (2.08)
American General International Growth (Division 33)......... 09/22/98 49.91 -- -- 51.00
American General International Value (Division 34).......... 09/22/98 69.70 -- -- 62.17
American General Large Cap Growth (Division 39)............. 09/22/98 43.94 -- -- 29.86
American General Large Cap Value (Division 40).............. 09/22/98 12.75 -- -- 0.16
American General Mid Cap Growth (Division 37)............... 09/22/98 21.12 -- -- 1.20
American General Mid Cap Value (Division 38)................ 09/22/98 31.01 -- -- 16.70
American General Moderate Growth Lifestyle (Division 49).... 09/22/98 23.67 -- -- 13.31
American General Money Market (Division 44)................. 09/22/98 0.64 -- -- (0.35)
American General Small Cap Growth (Division 35)............. 09/22/98 73.87 -- -- 64.02
American General Small Cap Value (Division 36).............. 09/22/98 (0.97) -- -- (11.13)
American General Socially Responsible (Division 41)......... 09/22/98 26.83 -- -- 12.60
American General Strategic Bond (Division 59)............... 09/22/98 2.05 -- -- (1.23)
Dreyfus Founders Growth (Division 30)....................... 07/01/96 24.82 -- -- 33.13
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18)............................................. 07/11/94 14.48 -- 14.37 17.23
Evergreen Growth and Income Fund (Division 56).............. 01/04/99 -- -- -- --
Evergreen Small Cap Value Fund (Division 55)(2)............. 01/04/99 -- -- -- --
Evergreen Value Fund (Division 57).......................... 01/04/99 -- -- -- --
Franklin Templeton Variable Insurance Products Trust
Templeton Asset Strategy -- Class 1 (Division 19)(1)...... 07/11/94 14.53 -- 15.45 16.79
Templeton International Securities -- Class 1 (Division
20)(2).................................................. 07/11/94 14.80 -- 15.58 17.53
Neuberger Berman Guardian Trust (Division 29)............... 07/01/96 9.85 -- -- 2.89
Putnam Global Growth (Division 28).......................... 07/01/96 29.11 -- -- 58.57
Putnam New Opportunities (Division 26)...................... 07/01/96 27.73 -- -- 63.50
Putnam OTC & Emerging Growth (Division 27).................. 07/01/96 28.25 -- -- 120.36
Scudder Growth and Income (Division 21)(3).................. 07/01/96 13.40 -- -- 0.72
T. Rowe Price Small Cap Stock Fund (Division 51)............ 09/22/98 18.36 -- -- 8.73
Templeton Foreign -- Class A (Division 32)(4)............... 07/01/96 11.15 -- -- 33.83
Vanguard LifeStrategy Conservative Growth (Division 54)..... 09/22/98 7.88 -- -- 2.01
Vanguard LifeStrategy Growth (Division 52).................. 09/22/98 22.97 -- -- 11.23
Vanguard LifeStrategy Moderate Growth (Division 53)......... 09/22/98 15.26 -- -- 5.97
Vanguard Long-Term Corporate (Division 22)**................ 07/01/96 3.91 -- -- (11.07)
Vanguard Long-Term Treasury (Division 23)**................. 07/01/96 4.22 -- -- (13.37)
Vanguard Wellington (Division 25)........................... 07/01/96 12.21 -- -- (1.18)
Vanguard Windsor II (Division 24)........................... 07/01/96 13.00 -- -- (10.84)
</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.
(1) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Global Asset Strategy
Fund. Also effective with this merger, the Templeton Asset Allocation Fund
Division 19 was renamed the Templeton Asset Strategy Fund Division 19.
Accordingly, the performance figures for the Division through December 31,
1999, reflect the actual historical performance of the Templeton Asset
Allocation Fund Division 19.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Also effective with
this merger, the Templeton International Fund Division 20 was renamed the
Templeton International Securities Fund Division 20. Accordingly, the
performance figures in the Table for the Fund through December 31, 1999,
reflect the historical performance and inception date of the Templeton
International Fund Division 20.
(3) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(4) 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.
35
<PAGE> 336
TABLE II
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15).................................. 04/29/94 18.60% -- 20.77% 1.90%
AGSPC Growth & Income (Division 16)......................... 04/29/94 19.35 -- 21.88 17.04
AGSPC Science & Technology (Division 17).................... 04/29/94 39.18 -- 38.86 94.65
American Century Ultra (Division 31)........................ 11/02/81 -- 23.51% 28.35 35.50
Dreyfus Founders Growth (Division 30)....................... 01/05/62 -- 19.26 28.88 33.13
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18)............................................. 08/31/90 34.52 -- 14.37 17.23
Evergreen Growth and Income -- Class A (Division 56)........ 01/03/95 19.63 -- -- 8.69
Evergreen Small Cap Value -- Class A (Division 55).......... 01/03/95 12.46 -- -- (4.59)
Evergreen Value -- Class A (Division 57).................... 04/12/85 -- 11.87 16.37 (0.89)
Franklin Templeton Variable Insurance Products Trust........
Templeton Asset Strategy -- Class 1 (Division 19)(1)...... 08/24/88 -- 12.04 15.45 16.79
Templeton International Securities -- Class 1 (Division
20)(2)................................................. 05/01/92 14.29 -- 15.58 17.53
Neuberger Berman Guardian Trust (Division 29)............... 08/03/93 12.45 -- 13.88 2.89
Putnam Global Growth -- Class A (Division 28)............... 09/01/67 -- 15.50 25.06 58.57
Putnam New Opportunities -- Class A (Division 26)........... 08/31/90 31.18 -- 31.95 63.50
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 11/01/82 -- 23.39 34.03 120.36
Scudder Growth and Income (Division 21)(3).................. 11/13/84 -- 13.37 17.15 0.72
T. Rowe Price Small Cap Stock (Division 51)................. 06/01/50 -- 12.14 16.65 8.73
Templeton Foreign -- Class A (Division 32)(4)............... 10/05/82 -- 10.61 11.81 33.83
Vanguard LifeStrategy Conservative Growth (Division 54)..... 09/30/94 13.12 -- 13.25 2.01
Vanguard LifeStrategy Growth (Division 52).................. 09/30/94 18.82 -- 19.44 11.23
Vanguard LifeStrategy Moderate Growth (Division 53)......... 09/30/94 15.99 -- 16.53 5.97
Vanguard Long-Term Corporate (Division 22)**................ 07/09/73 -- 7.56 6.48 (11.07)
Vanguard Long-Term Treasury (Division 23)**................. 05/19/86 -- 7.14 6.80 (13.37)
Vanguard Wellington (Division 25)........................... 07/01/29 -- 11.51 15.71 (1.18)
Vanguard Windsor II (Division 24)........................... 06/24/85 -- 12.75 18.49 (10.84)
</TABLE>
- ---------------
Divisions with an identical inception date as the underlying Funds' inception
date are not reflected in this Table. See preceding 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 15-20 since inception
of each Division (July 11, 1994) and hypothetical performance for periods
prior to July 11, 1994 based on investment in a hypothetical Contract. 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 based on
investment in a hypothetical Contract. The Table reflects actual historical
performance of the related Separate Account Divisions 51-54 since inception
of each Division (September 22, 1998) and hypothetical performance for
periods prior to September 22, 1998 based on investment in a hypothetical
Contract. The Table reflects actual historical performance of the related
Separate Account Divisions 55-57 since inception of each Division (January
4, 1999) and hypothetical performance for periods prior to January 4, 1999
based on investment in a hypothetical Contract. 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) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Asset Strategy Fund.
Accordingly, the performance figures in the Table for the Fund through
December 31, 1999, reflect the historical performance and inception date of
the Templeton Asset Allocation Fund.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Accordingly, the
performance figures in the Table for the Fund through December 31, 1999,
reflect the historical performance and inception date of the Templeton
International Fund.
(3) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(4) 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.
36
<PAGE> 337
TABLE III
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
DIVISION
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Asset Allocation (Division 5)......................... 09/06/83 -- 10.37% 16.87% 11.09%
AGSPC Capital Conservation (Division 7)..................... 01/16/86 -- 6.00 6.72 (1.01)
AGSPC Government Securities (Division 8).................... 01/16/86 -- 6.01 6.03 (3.36)
AGSPC Growth (Division 15).................................. 07/11/94 20.46% -- 21.30 6.75
AGSPC Growth & Income (Division 16)......................... 07/11/94 21.37 -- 22.39 22.10
AGSPC International Equities (Division 11).................. 10/02/89 -- 6.53 12.47 28.39
AGSPC International Government Bond (Division 13)........... 10/01/91 6.35 -- 4.75 (6.51)
AGSPC MidCap Index (Division 4)***.......................... 10/01/91 16.59 -- 22.05 14.23
AGSPC Money Market (Division 6)............................. 01/16/86 -- 4.24 4.50 4.13
AGSPC Science & Technology (Division 17).................... 07/11/94 42.39 -- 39.20 99.75
AGSPC Small Cap Index (Division 14)......................... 05/01/92 13.25 -- 16.04 20.57
AGSPC Social Awareness (Division 12)........................ 10/02/89 -- 16.35 27.55 17.93
AGSPC Stock Index (Division 10)............................. 04/20/87 -- 16.93 27.48 19.85
American Century Ultra (Division 31)........................ 07/01/96 28.30 -- -- 40.56
American General Balanced (Division 42)..................... 09/22/98 22.72 -- -- 13.52
American General Conservative Growth Lifestyle (Division
50)....................................................... 09/22/98 21.07 -- -- 12.91
American General Core Bond (Division 58).................... 09/22/98 0.35 -- -- (1.50)
American General Domestic Bond (Division 43)................ 09/22/98 (0.44) -- -- (3.43)
American General Growth Lifestyle (Division 48)............. 09/22/98 38.17 -- -- 29.50
American General High Yield Bond (Division 60).............. 09/22/98 6.16 -- -- 2.58
American General International Growth (Division 33)......... 09/22/98 53.52 -- -- 56.07
American General International Value (Division 34).......... 09/22/98 73.20 -- -- 67.25
American General Large Cap Growth (Division 39)............. 09/22/98 47.58 -- -- 34.93
American General Large Cap Value (Division 40).............. 09/22/98 16.61 -- -- 4.93
American General Mid Cap Growth (Division 37)............... 09/22/98 24.92 -- -- 6.02
American General Mid Cap Value (Division 38)................ 09/22/98 34.73 -- -- 21.76
American General Moderate Growth Lifestyle (Division 49).... 09/22/98 27.45 -- -- 18.37
American General Money Market (Division 44)................. 09/22/98 4.42 -- -- 4.39
American General Small Cap Growth (Division 35)............. 09/22/98 77.36 -- -- 69.10
American General Small Cap Value (Division 36).............. 09/22/98 2.74 -- -- (6.90)
American General Socially Responsible (Division 41)......... 09/22/98 30.59 -- -- 17.65
American General Strategic Bond (Division 59)............... 09/22/98 5.88 -- -- 3.47
Dreyfus Founders Growth (Division 30)....................... 07/01/96 25.70 -- -- 38.19
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18)............................................. 07/11/94 14.54 -- 15.01 22.29
Evergreen Growth and Income Fund (Division 56).............. 01/04/99 -- -- -- --
Evergreen Small Cap Value Fund (Division 55)................ 01/04/99 -- -- -- --
Evergreen Value Fund (Division 57).......................... 01/04/99 -- -- -- --
Franklin Templeton Variable Insurance Products Trust
Templeton Asset Strategy -- Class 1 (Division 19)(1)...... 07/11/94 14.59 -- 16.07 21.85
Templeton International Securities -- Class 1 (Division
20)(2).................................................. 07/11/94 14.86 -- 16.20 22.59
Neuberger Berman Guardian Trust (Division 29)............... 07/01/96 11.02 -- -- 7.79
Putnam Global Growth (Division 28).......................... 07/01/96 29.93 -- -- 63.65
Putnam New Opportunities (Division 26)...................... 07/01/96 28.56 -- -- 68.58
Putnam OTC & Emerging Growth (Division 27).................. 07/01/96 29.08 -- -- 125.47
Scudder Growth and Income (Division 21)(3).................. 07/01/96 14.49 -- -- 5.51
T. Rowe Price Small Cap Stock Fund (Division 51)............ 09/22/98 22.18 -- -- 13.78
Templeton Foreign -- Class A (Division 32)(4)............... 07/01/96 12.29 -- -- 38.89
Vanguard LifeStrategy Conservative Growth (Division 54)..... 09/22/98 11.78 -- -- 6.87
Vanguard LifeStrategy Growth (Division 52).................. 09/22/98 26.76 -- -- 16.28
Vanguard LifeStrategy Moderate Growth (Division 53)......... 09/22/98 19.11 -- -- 11.02
Vanguard Long-Term Corporate (Division 22)**................ 07/01/96 5.25 -- -- (6.83)
Vanguard Long-Term Treasury (Division 23)**................. 07/01/96 5.55 -- -- (9.24)
Vanguard Wellington (Division 25)........................... 07/01/96 13.33 -- -- 3.53
Vanguard Windsor II (Division 24)........................... 07/01/96 14.11 -- -- (6.59)
</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.
(1) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Asset Strategy Fund. Also
effective with this merger, the Templeton Asset Allocation Fund Division 19
was renamed the Templeton Asset Strategy Fund Division 19. Accordingly, the
performance figures for the Division through December 31, 1999, reflect the
actual historical performance of the Templeton Asset Allocation Fund
Division 19.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Also effective with
this merger, the Templeton International Fund Division 20 was renamed the
Templeton International Securities Fund Division 20. Accordingly, the
performance figures for the Division through December 31, 1999, reflect the
actual historical performance of the Templeton International Fund Division
20.
(3) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(4) 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.
37
<PAGE> 338
TABLE IV
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15).................................. 04/29/94 18.66% -- 21.30% 6.75%
AGSPC Growth & Income (Division 16)......................... 04/29/94 19.42 -- 22.39 22.10
AGSPC Science & Technology (Division 17).................... 04/29/94 39.25 -- 39.20 99.75
American Century Ultra (Division 31)........................ 11/02/81 -- 23.57% 28.78 40.56
Dreyfus Founders Growth (Division 30)....................... 01/05/62 -- 19.32 29.31 38.19
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18)............................................. 08/31/90 34.55 -- 15.01 22.29
Evergreen Growth and Income -- Class A (Division 56)........ 01/03/95 20.18 -- -- 13.75
Evergreen Small Cap Value -- Class A (Division 55).......... 01/03/95 13.14 -- -- (0.05)
Evergreen Value -- Class A (Division 57).................... 04/12/85 -- 11.94 16.97 3.83
Franklin Templeton Variable Insurance Products Trust........
Templeton Asset Strategy -- Class 1 (Division 19)(1)...... 08/24/88 -- 12.11 16.07 21.85
Templeton International Securities -- Class 1 (Division
20)(2)................................................. 05/01/92 14.36 -- 16.20 22.59
Neuberger Berman Guardian Trust (Division 29)............... 08/03/93 12.51 -- 14.53 7.79
Putnam Global Growth -- Class A (Division 28)............... 09/01/67 -- 15.56 25.53 63.65
Putnam New Opportunities -- Class A (Division 26)........... 08/31/90 31.24 -- 32.35 68.58
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 11/01/82 -- 23.45 34.41 125.47
Scudder Growth and Income (Division 21)(3).................. 11/13/84 -- 13.43 17.74 5.51
T. Rowe Price Small Cap Stock (Division 51)................. 06/01/50 -- 12.20 17.25 13.78
Templeton Foreign -- Class A (Division 32)(4)............... 10/05/82 -- 10.67 12.50 38.89
Vanguard LifeStrategy Conservative Growth (Division 54)..... 09/30/94 13.19 -- 13.91 6.87
Vanguard LifeStrategy Growth (Division 52).................. 09/30/94 18.89 -- 19.99 16.28
Vanguard LifeStrategy Moderate Growth (Division 53)......... 09/30/94 16.05 -- 17.14 11.02
Vanguard Long-Term Corporate (Division 22)**................ 07/09/73 -- 7.62 7.31 (6.83)
Vanguard Long-Term Treasury (Division 23)**................. 05/19/86 -- 7.19 7.61 (9.24)
Vanguard Wellington (Division 25)........................... 07/01/29 -- 11.57 16.32 3.53
Vanguard Windsor II (Division 24)........................... 06/24/85 -- 12.81 19.06 (6.59)
</TABLE>
- ---------------
Divisions with an identical inception date as the underlying Funds' inception
date are not reflected in this Table. See preceding 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 15-20 since inception
of each Division (July 11, 1994) and hypothetical performance for periods
prior to July 11, 1994 based on investment in a hypothetical Contract. 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 based on
investment in a hypothetical Contract. The Table reflects actual historical
performance of the related Separate Account Divisions 51-54 since inception
of each Division (September 22, 1998) and hypothetical performance for
periods prior to September 22, 1998 based on investment in a hypothetical
Contract. The Table reflects actual historical performance of the related
Separate Account Divisions 55-57 since inception of each Division (January
4, 1999) and hypothetical performance for periods prior to January 4, 1999
based on investment in a hypothetical Contract. 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) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Asset Strategy Fund.
Accordingly, the performance figures in the Table for the Fund through
December 31, 1999, reflect the historical performance and inception date of
the Templeton Asset Allocation Fund.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Accordingly, the
performance figures in the Table for the Fund through December 31, 1999,
reflect the historical performance and inception date of the Templeton
International Fund.
(3) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(4) 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> 339
TABLE V
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
DIVISION
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Asset Allocation (Division 5)......................... 09/06/83 --% 168.17% 118.03% 11.09%
AGSPC Capital Conservation (Division 7)..................... 01/16/86 -- 79.17 38.40 (1.01)
AGSPC Government Securities (Division 8).................... 01/16/86 -- 79.25 33.98 (3.36)
AGSPC Growth (Division 15).................................. 07/11/94 176.86 -- 162.65 6.75
AGSPC Growth & Income (Division 16)......................... 07/11/94 188.49 -- 174.67 22.10
AGSPC International Equities (Division 11).................. 10/02/89 -- 88.22 79.93 28.39
AGSPC International Government Bond (Division 13)........... 10/01/91 66.18 -- 26.11 (6.51)
AGSPC MidCap Index (Division 4)***.......................... 10/01/91 254.75 -- 170.81 14.23
AGSPC Money Market (Division 6)............................. 01/16/86 -- 51.53 24.63 4.13
AGSPC Science & Technology (Division 17).................... 07/11/94 591.00 -- 422.67 99.75
AGSPC Small Cap Index (Division 14)......................... 05/01/92 159.79 -- 110.35 20.57
AGSPC Social Awareness (Division 12)........................ 10/02/89 -- 354,60 237.56 17.93
AGSPC Stock Index (Division 10)............................. 04/20/87 -- 377.74 236.64 19.85
American Century Ultra (Division 31)........................ 07/01/96 139.23 -- -- 40.56
American General Balanced (Division 42)..................... 09/22/98 29.69 -- -- 13.52
American General Conservative Growth Lifestyle (Division
50)....................................................... 09/22/98 27.48 -- -- 12.91
American General Core Bond (Division 58).................... 09/22/98 0.44 -- -- (1.50)
American General Domestic Bond (Division 43)................ 09/22/98 (0.56) -- -- (3.43)
American General Growth Lifestyle (Division 48)............. 09/22/98 50.78 -- -- 29.50
American General High Yield Bond (Division 60).............. 09/22/98 7.89 -- -- 2.58
American General International Growth (Division 33)......... 09/22/98 72.36 -- -- 56.07
American General International Value (Division 34).......... 09/22/98 100.89 -- -- 67.25
American General Large Cap Growth (Division 39)............. 09/22/98 63.93 -- -- 34.93
American General Large Cap Value (Division 40).............. 09/22/98 21.55 -- -- 4.93
American General Mid Cap Growth (Division 37)............... 09/22/98 32.65 -- -- 6.02
American General Mid Cap Value (Division 38)................ 09/22/98 46.03 -- -- 21.76
American General Moderate Growth Lifestyle (Division 49).... 09/22/98 36.07 -- -- 18.37
American General Money Market (Division 44)................. 09/22/98 5.64 -- -- 4.39
American General Small Cap Growth (Division 35)............. 09/22/98 107.03 -- -- 69.10
American General Small Cap Value (Division 36).............. 09/22/98 3.50 -- -- (6.90)
American General Socially Responsible (Division 41)......... 09/22/98 40.34 -- -- 17.65
American General Strategic Bond (Division 59)............... 09/22/98 7.53 -- -- 3.47
Dreyfus Founders Growth (Division 30)....................... 07/01/96 122.68 -- -- 38.19
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18)............................................. 07/11/94 110.12 -- 101.25 22.29
Evergreen Growth and Income Fund (Division 56).............. 01/04/99 13.75 -- -- --
Evergreen Small Cap Value Fund (Division 55)................ 01/04/99 (0.05) -- -- --
Evergreen Value Fund (Division 57).......................... 01/04/99 3.83 -- -- --
Franklin Templeton Variable Insurance Products Trust........
Templeton Asset Strategy -- Class 1 (Division 19)(1)...... 07/11/94 110.65 -- 110.68 21.85
Templeton International Securities -- Class 1 (Division
20)(2).................................................. 07/11/94 113.40 -- 111.82 22.59
Neuberger Berman Guardian Trust (Division 29)............... 07/01/96 44.19 -- -- 7.79
Putnam Global Growth (Division 28).......................... 07/01/96 150.01 -- -- 63.65
Putnam New Opportunities (Division 26)...................... 07/01/96 140.94 -- -- 68.58
Putnam OTC & Emerging Growth (Division 27).................. 07/01/96 144.32 -- -- 125.47
Scudder Growth and Income (Division 21)(3).................. 07/01/96 60.57 -- -- 5.51
T. Rowe Price Small Cap Stock Fund (Division 51)............ 09/22/98 28.97 -- -- 13.78
Templeton Foreign -- Class A (Division 32)(4)............... 07/01/96 50.04 -- -- 38.89
Vanguard LifeStrategy Conservative Growth (Division 54)..... 09/22/98 15.20 -- -- 6.87
Vanguard LifeStrategy Growth (Division 52).................. 09/22/98 35.13 -- -- 16.28
Vanguard LifeStrategy Moderate Growth (Division 53)......... 09/22/98 24.86 -- -- 11.02
Vanguard Long-Term Corporate (Division 22)**................ 07/01/96 19.60 -- -- (6.83)
Vanguard Long-Term Treasury (Division 23)**................. 07/01/96 20.81 -- -- (9.24)
Vanguard Wellington (Division 25)........................... 07/01/96 54.97 -- -- 3.53
Vanguard Windsor II (Division 24)........................... 07/01/96 58.70 -- -- (6.59)
</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.
(1) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Asset Strategy Fund.
Also, effective with this merger, the Templeton Asset Allocation Fund
Division 19 was renamed the Templeton Asset Strategy Fund Division 19.
Accordingly, the performance figures for the Division through December 31,
1999, reflect the actual historical performance of the Templeton Asset
Allocation Fund Division 19.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Also effective with
this merger, the Templeton International Fund Division 20 was renamed the
Templeton International Securities Fund Division 20. Accordingly, the
performance figures for the Division through December 31, 1999, reflect the
actual historical performance of the Templeton International Fund Division
20.
(3) The Scudder Growth and Income Fund adopted its current name and objective
on November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(4) 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> 340
TABLE VI
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 31, 1999)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15).................................. 04/29/94 163.83% -- 162.65% 6.75%
AGSPC Growth & Income (Division 16)......................... 04/29/94 173.53 -- 174.67 22.10
AGSPC Science & Technology (Division 17).................... 04/29/94 553.65 -- 422.67 99.75
American Century Ultra (Division 31)........................ 11/02/81 -- 730.13% 254.26 40.56
Dreyfus Founders Growth (Division 30)....................... 01/05/62 -- 484.77 261.57 38.19
Dreyfus Variable Investment Fund -- Small Cap Portfolio
(Division 18)............................................. 08/31/90 1,494.46 -- 101.25 22.29
Evergreen Growth and Income -- Class A (Division 56)........ 01/03/95 150.24 -- -- 13.75
Evergreen Small Cap Value -- Class A (Division 55).......... 01/03/95 85.19 -- -- (0.05)
Evergreen Value -- Class A (Division 57).................... 04/12/85 -- 208.80 118.96 3.83
Franklin Templeton Variable Insurance Products Trust........
Templeton Asset Strategy -- Class 1 (Division 19)(1)...... 08/24/88 -- 213.53 110.68 21.85
Templeton International Securities -- Class 1 (Division
20)(2).................................................. 05/01/92 179.83 -- 111.82 22.59
Neuberger Berman Guardian Trust (Division 29)............... 08/03/93 112.94 -- 97.03 7.79
Putnam Global Growth -- Class A (Division 28)............... 09/01/67 -- 324.72 211.76 63.65
Putnam New Opportunities -- Class A (Division 26)........... 08/31/90 1,163.09 -- 306.13 68.58
Putnam OTC & Emerging Growth -- Class A (Division 27)....... 11/01/82 -- 722.16 338.63 125.47
Scudder Growth and Income (Division 21)(3).................. 11/13/84 -- 252.56 126.27 5.51
T. Rowe Price Small Cap Stock (Division 51)................. 06/01/50 -- 216.21 121.59 13.78
Templeton Foreign -- Class A (Division 32)(4)............... 10/05/82 -- 175.70 80.22 38.89
Vanguard LifeStrategy Conservative Growth (Division 54)..... 09/30/94 91.61 -- 91.82 6.87
Vanguard LifeStrategy Growth (Division 52).................. 09/30/94 147.99 -- 148.76 16.28
Vanguard LifeStrategy Moderate Growth (Division 53)......... 09/30/94 118.52 -- 120.51 11.02
Vanguard Long-Term Corporate (Division 22)**................ 07/09/73 -- 108.38 42.29 (6.83)
Vanguard Long-Term Treasury (Division 23)**................. 05/19/86 -- 100.31 44.32 (9.24)
Vanguard Wellington (Division 25)........................... 07/01/29 -- 198.98 112.97 3.53
Vanguard Windsor II (Division 24)........................... 06/24/85 -- 233.86 139.19 (6.59)
</TABLE>
- ---------------
Divisions with an identical inception date as the underlying Funds' inception
date are not reflected in this Table. See preceding 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 15-20 since inception
of each Division (July 11, 1994) and hypothetical performance for periods
prior to July 11, 1994 based on investment in a hypothetical Contract. 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 based on
investment in a hypothetical Contract. The Table reflects actual historical
performance of the related Separate Account Divisions 51-54 since inception
of each Division (September 22, 1998) and hypothetical performance for
periods prior to September 22, 1998 based on investment in a hypothetical
Contract. The Table reflects actual historical performance of the related
Separate Account Divisions 55-57 since inception of each Division (January
4, 1999) and hypothetical performance for periods prior to January 4, 1999
based on investment in a hypothetical Contract. 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) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Asset Strategy Fund.
Accordingly, the performance figures in the Table for the Fund through
December 31, 1999, reflect the historical performance and inception date of
the Templeton Asset Allocation Fund.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Accordingly, the
performance figures in the Table for the Fund through December 31, 1999,
reflect the historical performance and inception date of the Templeton
International Fund.
(3) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(4) 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> 341
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 OR THE 12 MONTHS ENDED DECEMBER 31**
---------------------------------------------------------------------------------------
FUND AND DIVISION 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
----------------- ------ ----- ----- ------ ----- ------ ----- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AGSPC Asset Allocation (Division 5)..... 11.09% 17.66% 21.85% 10.41% 24.00% (1.90)% 8.61% (1.32)% 20.58% (2.99)%
AGSPC Capital Conservation (Division
7)..................................... (1.01) 6.73 7.91 1.15 20.02 (6.66) 11.30 7.97 16.44 (0.88)
AGSPC Government Securities (Division
8)..................................... (3.36) 8.30 8.25 1.30 16.74 (5.06) 10.12 6.55 14.02 5.32
AGSPC Growth (Division 15).............. 6.75 17.42 20.25 18.62 46.89 5.41 -- -- -- --
AGSPC Growth & Income (Division 16)..... 22.10 13.87 23.06 22.54 31.01 5.03 -- -- -- --
AGSPC International Equities (Division
11).................................... 28.39 18.04 1.58 6.16 10.10 7.32 29.04 (13.94) 10.48 (20.55)
AGSPC International Government Bonds
(Division 13).......................... (6.51) 16.39 (5.40) 3.77 18.07 3.83 13.50 2.45 9.14 --
AGSPC MidCap Index (Division 4)**....... 14.23 18.27 30.93 18.05 29.70 (4.31) 12.21 9.21 11.72 --
AGSPC Money Market (Division 6)......... 4.13 4.54 4.54 4.38 4.92 3.17 2.07 2.63 4.90 7.25
AGSPC Science & Technology Fund
(Division 17).......................... 99.75 41.27 1.97 13.11 60.59 32.20 -- -- -- --
AGSPC Small Cap Index (Division 14)..... 20.57 (2.53) 21.63 16.01 26.85 (3.91) 15.21 11.56 -- --
AGSPC Social Awareness (Division 12).... 17.93 26.53 33.00 23.20 38.05 (2.03) 7.25 2.71 27.08 (1.81)
AGSPC Stock Index (Division 10)......... 19.85 27.65 32.24 21.97 36.42 0.10 9.20 6.00 28.17 (4.44)
American Century Ultra (Division 31).... 40.56 33.68 22.19 4.19 -- -- -- -- -- --
American General Balanced (Division
42).................................... 13.52 14.24 -- -- -- -- -- -- -- --
American General Conservative Growth
Lifestyle (Division 50)................ 12.91 12.90 -- -- -- -- -- -- -- --
American General Core Bond Fund
(Division 58).......................... (1.50) 1.97 -- -- -- -- -- -- -- --
American General Domestic Bond (Division
43).................................... (3.43) 2.98 -- -- -- -- -- -- -- --
American General Growth Lifestyle
(Division 48).......................... 29.50 16.43 -- -- -- -- -- -- -- --
American General High Yield Bond Fund
(Division 60).......................... 2.58 5.18 -- -- -- -- -- -- -- --
American General International Growth
(Division 33).......................... 56.07 10.43 -- -- -- -- -- -- -- --
American General International Value
(Division 34).......................... 67.25 20.11 -- -- -- -- -- -- -- --
American General Large Cap Growth
(Division 39).......................... 34.93 21.50 -- -- -- -- -- -- -- --
American General Large Cap Value
(Division 40).......................... 4.93 15.84 -- -- -- -- -- -- -- --
American General Mid Cap Growth
(Division 37).......................... 6.02 25.12 -- -- -- -- -- -- -- --
American General Mid Cap Value (Division
38).................................... 21.76 19.93 -- -- -- -- -- -- -- --
American General Moderate Growth
Lifestyle (Division 49)................ 18.37 14.95 -- -- -- -- -- -- -- --
American General Money Market (Division
44).................................... 4.39 1.20 -- -- -- -- -- -- -- --
American General Small Cap Growth
(Division 35).......................... 69.10 22.43 -- -- -- -- -- -- -- --
American General Small Cap Value
(Division 36).......................... (6.90) 11.17 -- -- -- -- -- -- -- --
American General Socially Responsible
(Division 41).......................... 17.65 19.29 -- -- -- -- -- -- -- --
American General Strategic Bond Fund
(Division 59).......................... 3.47 3.92 -- -- -- -- -- -- -- --
Dreyfus Founders Growth (Division 30)... 38.19 24.26 25.71 3.15 -- -- -- -- -- --
Dreyfus Variable Investment
Fund -- Small Cap Portfolio (Division
18).................................... 22.29 (4.12) 15.81 15.57 28.24 4.41 -- -- -- --
Evergreen Growth & Income Fund (Division
56).................................... 13.75 -- -- -- -- -- -- -- -- --
Evergreen Small Cap Value Fund (Division
55).................................... (0.05) -- -- -- -- -- -- -- -- --
Evergreen Value Fund (Division 57)...... 3.83 -- -- -- -- -- -- -- -- --
Franklin Templeton Variable Insurance
Products Trust
Templeton Asset Strategy -- Class 1
(Division 19)(1)..................... 21.85 5.50 14.51 17.83 21.46 (0.02) -- -- -- --
Templeton International
Securities -- Class 1 (Division
20)(2)............................... 22.59 8.39 12.97 22.95 14.77 0.75 -- -- -- --
Neuberger Berman Guardian Trust
(Division 29).......................... 7.79 1.75 17.09 12.28 -- -- -- -- -- --
Putnam Global Growth (Division 28)...... 63.65 27.99 12.63 5.97 -- -- -- -- -- --
Putnam New Opportunities (Division
26).................................... 68.58 23.62 21.76 (5.04) -- -- -- -- -- --
Putnam OTC & Emerging Growth (Division
27).................................... 125.47 10.32 9.51 (10.30) -- -- -- -- -- --
Scudder Growth & Income (Division
21)(3)................................. 5.51 5.42 29.25 11.69 -- -- -- -- -- --
T. Rowe Price Small Cap Stock (Division
51).................................... 13.78 13.35 -- -- -- -- -- -- -- --
Templeton Foreign -- Class A (Division
32)(4)................................. 38.89 (5.44) 5.98 7.79 -- -- -- -- -- --
Vanguard LifeStrategy Conservative
Growth (Division 54)................... 6.87 7.80 -- -- -- -- -- -- -- --
Vanguard LifeStrategy Growth (Division
52).................................... 16.28 16.21 -- -- -- -- -- -- -- --
Vanguard LifeStrategy Moderate Growth
(Division 53).......................... 11.02 12.47 -- -- -- -- -- -- -- --
Vanguard Long-Term Corporate (Division
22)***................................. (6.83) 8.48 12.74 4.96 -- -- -- -- -- --
Vanguard Long-Term Treasury (Division
23)***................................. (9.24) 12.27 12.87 5.05 -- -- -- -- -- --
Vanguard Wellington (Division 25)....... 3.53 11.10 22.09 10.36 -- -- -- -- -- --
Vanguard Windsor II (Division 24)....... (6.59) 15.37 31.16 12.28 -- -- -- -- -- --
</TABLE>
41
<PAGE> 342
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 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
- ---------------------------------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AGSPC Asset Allocation (Division 5)..... 168.17% 141.40% 105.17% 68.39% 52.51% 22.99% 25.37% 15.43% 16.97% (2.99)%
AGSPC Capital Conservation (Division
7).................................... 79.17 81.00 69.59 57.17 55.38 29.46 38.69 24.61 15.41 (0.88)
AGSPC Government Securities (Division
8).................................... 79.25 85.47 71.26 58.21 56.18 33.78 40.91 27.96 20.08 5.32
AGSPC Growth (Division 15).............. 176.86 159.36 120.87 83.68 54.84 5.41 -- -- -- --
AGSPC Growth & Income (Division 16)..... 188.49 136.28 107.50 68.63 37.60 5.03 -- -- -- --
AGSPC International Equities (Division
11)................................... 88.22 46.60 24.20 22.26 15.17 4.61 (2.53) (24.46) (12.22) (20.55)
AGSPC International Government Bond
(Division 13)......................... 66.18 77.76 52.73 61.45 55.59 31.78 26.92 11.82 9.14 --
AGSPC MidCap Index (Division 4)****..... 254.75 210.56 162.58 100.55 69.90 30.99 36.90 22.00 11.72 --
AGSPC Money Market (Division 6)......... 51.53 45.53 39.21 33.16 27.57 21.59 17.85 15.46 12.50 7.25
AGSPC Science & Technology (Division
17)................................... 591.00 245.93 144.87 140.14 112.30 32.20 -- -- -- --
AGSPC Small Cap Index (Division 14)..... 159.79 115.46 121.04 81.73 56.66 23.50 28.52 11.56 -- --
AGSPC Social Awareness (Division 12).... 354.6 285.48 204.65 129.06 85.92 34.67 37.46 28.17 24.78 (1.81)
AGSPC Stock Index (Division 10)......... 377.74 298.62 212.28 136.14 93.60 41.91 41.77 29.83 22.48 (4.44)
American Century Ultra (Division 31).... 139.23 70.19 27.31 4.19 -- -- -- -- -- --
American General Balanced (Division
42)................................... 29.69 14.24 -- -- -- -- -- -- -- --
American General Conservative Growth
Lifestyle (Division 50)............... 27.48 12.90 -- -- -- -- -- -- -- --
American General Core Bond (Division
58)................................... 0.44 1.97 -- -- -- -- -- -- -- --
American General Domestic Bond (Division
43)................................... (0.56) 2.98 -- -- -- -- -- -- -- --
American General Growth Lifestyle
(Division 48)......................... 50.78 16.43 -- -- -- -- -- -- -- --
American General High Yield Bond
(Division 60)......................... 7.89 5.18 -- -- -- -- -- -- -- --
American General International Growth
(Division 33)......................... 72.36 10.43 -- -- -- -- -- -- -- --
American General International Value
(Division 34)......................... 100.89 20.11 -- -- -- -- -- -- -- --
American General Large Cap Growth
(Division 39)......................... 63.93 21.50 -- -- -- -- -- -- -- --
American General Large Cap Value
(Division 40)......................... 21.55 15.84 -- -- -- -- -- -- -- --
American General Mid Cap Growth
(Division 37)......................... 32.65 25.12 -- -- -- -- -- -- -- --
American General Mid Cap Value (Division
38)................................... 46.03 19.93 -- -- -- -- -- -- -- --
American General Moderate Growth
Lifestyle (Division 49)............... 36.07 14.95 -- -- -- -- -- -- -- --
American General Money Market (Division
44)................................... 5.64 1.20 -- -- -- -- -- -- -- --
American General Small Cap Growth
(Division 35)......................... 107.03 22.43 -- -- -- -- -- -- -- --
American General Small Cap Value
(Division 36)......................... 3.50 11.17 -- -- -- -- -- -- -- --
American General Socially Responsible
(Division 41)......................... 40.34 19.29 -- -- -- -- -- -- -- --
American General Strategic Bond
(Division 59)......................... 7.53 3.92 -- -- -- -- -- -- -- --
Dreyfus Founders Growth (Division 30)... 122.68 61.14 29.68 3.15 -- -- -- -- -- --
Dreyfus Variable Investment
Fund -- Small Cap Portfolio (Division
18)................................... 110.12 71.82 79.21 54.74 33.89 4.41 -- -- -- --
Evergreen Growth and Income -- Class A
(Division 56)......................... 13.75 -- -- -- -- -- -- -- -- --
Evergreen Small Cap Value -- Class A
(Division 55)......................... (0.05) -- -- -- -- -- -- -- -- --
Evergreen Value -- Class A (Division
57)................................... 3.83 -- -- -- -- -- -- -- -- --
Franklin Templeton Variable Insurance
Products Trust
Templeton Asset Strategy -- Class 1
(Division 19)(1).................... 110.65 72.87 63.86 43.10 21.45 (0.02) -- -- -- --
Templeton International
Securities -- Class 1 (Division
20)(2).............................. 113.40 74.08 60.60 42.17 15.63 0.75 -- -- -- --
Neuberger Berman Guardian Trust
(Division 29)......................... 44.19 33.78 31.47 12.28 -- -- -- -- -- --
Putnam Global Growth -- Class A
(Division 28)......................... 150.01 52.77 19.36 5.97 -- -- -- -- -- --
Putnam New Opportunities -- Class A
(Division 26)......................... 140.94 42.92 15.62 (5.04) -- -- -- -- -- --
Putnam OTC & Emerging Growth -- Class A
(Division 27)......................... 144.32 8.36 (1.77) (10.30) -- -- -- -- -- --
Scudder Growth and Income (Division
21)(3)................................ 60.57 52.18 44.36 11.69 -- -- -- -- -- --
T. Rowe Price Small Cap Stock (Division
51)................................... 28.97 13.35 -- -- -- -- -- -- -- --
Templeton Foreign -- Class A (Division
32)(4)................................ 50.04 8.03 14.24 7.79 -- -- -- -- -- --
Vanguard LifeStrategy Conservative
Growth (Division 54).................. 15.20 7.80 -- -- -- -- -- -- -- --
Vanguard LifeStrategy Growth (Division
52)................................... 35.13 16.21 -- -- -- -- -- -- -- --
Vanguard LifeStrategy Moderate Growth
(Division 53)......................... 24.86 12.47 -- -- -- -- -- -- -- --
Vanguard Long-Term Corporate (Division
22)***................................ 19.60 28.37 18.33 4.96 -- -- -- -- -- --
Vanguard Long-Term Treasury (Division
23)***................................ 20.81 33.11 18.56 5.05 -- -- -- -- -- --
Vanguard Wellington (Division 25)....... 54.97 49.69 34.74 10.36 -- -- -- -- -- --
Vanguard Windsor II (Division 24)....... 58.70 69.90 47.27 12.28 -- -- -- -- -- --
</TABLE>
- ------------
* For the periods prior to September 22, 1998, for all Divisions other than
Divisions 55-57, 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 Divisions 55-57, the Contracts offered by this prospectus became
available for purchase on January 4, 1999.
** 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.
42
<PAGE> 343
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)
(1) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Global Asset Strategy
Fund. Also effective with this merger, the Templeton Asset Allocation Fund
Division 19 was renamed the Templeton Asset Strategy Fund Division 19.
Accordingly, the performance figures for the Division through December 31,
1999, reflect the actual historical performance of the Templeton Asset
Allocation Fund Division 19.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Also effective with
this merger, the Templeton International Fund Division 20 was renamed the
Templeton International Securities Fund Division 20. Accordingly, the
performance figures in the Table for the Fund through December 31, 1999,
reflect the historical performance and inception date of the Templeton
International Fund Division 20.
(3) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(4) 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> 344
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 1999 1998 1997 1996 1995
- --------------------------------------- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)............. 6.75% 17.42% 20.25% 18.62% 46.89%
AGSPC Growth & Income (Division 16).... 22.10 13.87 23.06 22.54 31.01
AGSPC Science & Technology (Division
17).................................. 99.75 41.27 1.97 13.11 60.59
American Century Ultra (Division 31)... 40.56 33.68 22.19 12.86 36.71
Dreyfus Founders Growth (Division
30).................................. 38.19 24.26 25.71 15.79 44.66
Dreyfus Variable Investment Fund --
Small Cap Portfolio (Division 18).... 22.29 (4.12) 15.81 15.57 28.24
Evergreen Growth & Income Fund
(Division 56)........................ 13.75 4.32 30.17 22.80 31.93
Evergreen Small Cap Value Fund
(Division 55)........................ (0.05) (10.09) 32.58 21.31 28.13
Evergreen Value Fund (Division 57)..... 3.83 8.87 25.01 18.23 31.06
Franklin Templeton Variable Insurance
Products Trust
Templeton Asset Strategy -- Class 1
(Division 19)(1) 21.85 5.50 14.51 17.83 21.46
Templeton International Securities --
Class 1 (Division 20)(2) 22.59 8.39 12.97 22.95 14.77
Neuberger Berman Guardian Trust
(Division 29)........................ 7.79 1.75 17.09 16.98 31.16
Putnam Global Growth (Division 28)..... 63.65 27.99 12.63 15.80 14.11
Putnam New Opportunities (Division
26).................................. 68.58 23.62 21.76 10.12 45.34
Putnam OTC & Emerging Growth (Division
27).................................. 125.47 10.32 9.51 3.94 54.93
Scudder Growth & Income (Division
21)(3)............................... 5.51 5.42 29.25 21.06 30.01
T. Rowe Price Small Cap Stock (Division
51).................................. 13.78 (4.35) 27.76 20.05 32.76
Templeton Foreign -- Class A (Division
32)(4)............................... 38.89 (5.44) 5.98 17.18 10.49
Vanguard LifeStrategy Conservative
Growth (Division 54)................. 6.87 14.81 15.84 9.44 23.32
Vanguard LifeStrategy Growth (Division
52).................................. 16.28 20.26 21.26 14.45 28.18
Vanguard LifeStrategy Moderate Growth
(Division 53)........................ 11.02 17.91 18.78 11.77 26.89
Vanguard Long-Term Corporate (Division
22)***............................... (6.83) 8.48 12.74 (0.32) 25.28
Vanguard Long-Term Treasury (Division
23)***............................... (9.24) 12.27 12.87 (2.69) 28.95
Vanguard Wellington (Division 25)...... 3.53 11.10 22.09 15.12 31.74
Vanguard Windsor II (Division 24)...... (6.59) 15.37 31.16 23.00 37.59
<CAPTION>
ANNUAL CHANGE IN PURCHASE UNIT VALUE FOR THE 12 MONTHS ENDED DECEMBER 31**
------------------------------------------------------
FUND AND DIVISION 1994 1993 1992 1991 1990
- --------------------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)............. 0.45% -- -- -- --
AGSPC Growth & Income (Division 16).... (0.42) -- -- -- --
AGSPC Science & Technology (Division
17).................................. 25.06 -- -- -- --
American Century Ultra (Division 31)... (4.24) 20.98 0.60 85.05 8.64
Dreyfus Founders Growth (Division
30).................................. (3.90) 24.76 3.62 46.44 (11.10)
Dreyfus Variable Investment Fund --
Small Cap Portfolio (Division 18).... 6.74 66.84 69.78 157.39 1.81
Evergreen Growth & Income Fund
(Division 56)........................ -- -- -- -- --
Evergreen Small Cap Value Fund
(Division 55)........................ -- -- -- -- --
Evergreen Value Fund (Division 57)..... 1.27 8.67 7.31 24.39 (4.00)
Franklin Templeton Variable Insurance
Products Trust
Templeton Asset Strategy -- Class 1
(Division 19)(1) (3.85) 25.04 7.16 26.59 (8.75)
Templeton International Securities --
Class 1 (Division 20)(2) (3.09) 46.00 (6.63) -- --
Neuberger Berman Guardian Trust
(Division 29)........................ 0.93 7.08 -- -- --
Putnam Global Growth (Division 28)..... (1.43) 31.02 (0.35) 17.25 (9.71)
Putnam New Opportunities (Division
26).................................. 2.71 31.86 24.82 66.42 10.54
Putnam OTC & Emerging Growth (Division
27).................................. 1.64 31.22 12.00 39.94 (10.34)
Scudder Growth & Income (Division
21)(3)............................... 1.74 14.59 8.62 27.03 (3.14)
T. Rowe Price Small Cap Stock (Division
51).................................. (0.75) 17.43 12.96 37.47 (21.15)
Templeton Foreign -- Class A (Division
32)(4)............................... (0.23) 35.94 (0.49) 17.54 (3.56)
Vanguard LifeStrategy Conservative
Growth (Division 54)................. (0.11) -- -- -- --
Vanguard LifeStrategy Growth (Division
52).................................. (0.31) -- -- -- --
Vanguard LifeStrategy Moderate Growth
(Division 53)........................ (0.91) -- -- -- --
Vanguard Long-Term Corporate (Division
22)***............................... (6.07) 13.51 8.83 19.85 5.31
Vanguard Long-Term Treasury (Division
23)***............................... (7.80) 15.78 6.49 16.41 4.89
Vanguard Wellington (Division 25)...... (1.32) 12.54 7.00 22.57 (3.61)
Vanguard Windsor II (Division 24)...... (1.99) 12.63 11.02 27.56 (10.71)
</TABLE>
44
<PAGE> 345
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 1999 1998 1997 1996 1995
- ------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)..... 163.83% 147.15% 110.47% 75.03% 47.55%
AGSPC Growth & Income (Division
16).......................... 173.53 124.02 96.74 59.88 30.47
AGSPC Science & Technology
(Division 17)................ 553.65 227.24 131.63 127.16 100.83
American Century Ultra
(Division 31)................ 730.13 490.57 341.77 261.53 220.34
Dreyfus Founders Growth
(Division 30)................ 484.77 323.16 240.54 170.89 133.95
Dreyfus Variable Investment
Fund -- Small Cap Portfolio
(Division 18)................ 1,494.46 1,203.82 1,259.87 1,074.22 915.99
Evergreen Growth & Income Fund
(Division 56)................ 150.24 120.00 110.89 62.01 31.93
Evergreen Small Cap Value Fund
(Division 55)................ 85.19 85.29 106.09 55.44 28.13
Evergreen Value Fund (Division
57).......................... 208.80 197.42 173.18 118.53 84.83
Franklin Templeton Variable
Insurance Products Trust
Templeton Asset Strategy --
Class 1 (Division 19)(1)... 213.53 157.30 143.90 113.00 80.76
Templeton International
Securities -- Class 1
(Division 20)(2)........... 179.83 128.27 110.60 86.43 51.63
Neuberger Berman Guardian Trust
(Division 29)................ 112.94 97.56 94.15 65.81 41.75
Putnam Global Growth (Division
28).......................... 324.72 159.53 102.77 80.03 55.46
Putnam New Opportunities
(Division 26)................ 1,163.09 649.23 506.09 397.79 352.03
Putnam OTC & Emerging Growth
(Division 27)................ 722.16 264.65 230.54 201.83 190.40
Scudder Growth & Income
(Division 21)(3)............. 252.56 234.14 216.96 145.24 102.57
T. Rowe Price Small Cap Stock
(Division 51)................ 216.21 177.91 190.55 127.43 89.44
Templeton Foreign -- Class A
(Division 32)(4)............. 175.70 98.50 109.91 98.07 69.03
Vanguard LifeStrategy
Conservative Growth (Division
54).......................... 91.61 79.30 56.17 34.81 23.18
Vanguard LifeStrategy Growth
(Division 52)................ 147.99 113.26 77.34 46.25 27.78
Vanguard LifeStrategy Moderate
Growth (Division 53)......... 118.52 96.83 66.94 40.54 25.74
Vanguard Long-Term Corporate
(Division 22)***............. 108.38 123.67 106.19 82.88 83.47
Vanguard Long-Term Treasury
(Division 23)***............. 100.31 120.72 96.59 74.18 78.99
Vanguard Wellington (Division
25).......................... 198.98 188.79 159.94 112.90 84.95
Vanguard Windsor II (Division
24).......................... 233.86 257.42 209.81 136.21 92.04
<CAPTION>
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE FOR EACH PERIOD END SINCE DECEMBER 31, 1989**
------------------------------------------------------
FUND AND DIVISION 1994 1993 1992 1991 1990
- ------------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
AGSPC Growth (Division 15)..... 0.45% -- -- -- --
AGSPC Growth & Income (Division
16).......................... (0.42) -- -- -- --
AGSPC Science & Technology
(Division 17)................ 25.06 -- -- -- --
American Century Ultra
(Division 31)................ 134.33 144.69 102.25 101.03 8.64
Dreyfus Founders Growth
(Division 30)................ 61.73 68.30 34.90 30.18 (11.10)
Dreyfus Variable Investment
Fund -- Small Cap Portfolio
(Division 18)................ 692.28 642.25 344.90 162.05 1.81
Evergreen Growth & Income Fund
(Division 56)................ -- -- -- -- --
Evergreen Small Cap Value Fund
(Division 55)................ -- -- -- -- --
Evergreen Value Fund (Division
57).......................... 41.03 39.26 28.14 19.42 (4.00)
Franklin Templeton Variable
Insurance Products Trust
Templeton Asset Strategy --
Class 1 (Division 19)(1)... 48.82 54.77 23.78 15.51 (8.75)
Templeton International
Securities -- Class 1
(Division 20)(2)........... 32.11 36.33 (6.63) -- --
Neuberger Berman Guardian Trust
(Division 29)................ 8.07 7.08 -- -- --
Putnam Global Growth (Division
28).......................... 36.23 38.21 5.49 5.86 (9.71)
Putnam New Opportunities
(Division 26)................ 211.00 202.81 129.64 83.97 10.54
Putnam OTC & Emerging Growth
(Division 27)................ 87.44 84.41 40.53 25.47 (10.34)
Scudder Growth & Income
(Division 21)(3)............. 55.81 53.15 33.65 23.05 (3.14)
T. Rowe Price Small Cap Stock
(Division 51)................ 42.70 43.78 22.44 8.40 (21.15)
Templeton Foreign -- Class A
(Division 32)(4)............. 52.98 53.34 12.79 13.36 (3.56)
Vanguard LifeStrategy
Conservative Growth (Division
54).......................... (0.11) -- -- -- --
Vanguard LifeStrategy Growth
(Division 52)................ (0.31) -- -- -- --
Vanguard LifeStrategy Moderate
Growth (Division 53)......... (0.91) -- -- -- --
Vanguard Long-Term Corporate
(Division 22)***............. 46.45 55.92 37.37 26.21 5.31
Vanguard Long-Term Treasury
(Division 23)***............. 38.80 50.54 30.02 22.10 4.89
Vanguard Wellington (Division
25).......................... 40.39 42.26 26.41 18.14 (3.61)
Vanguard Windsor II (Division
24).......................... 39.58 42.41 26.45 13.89 (10.71)
</TABLE>
- ------------
Divisions with an identical inception date as the underlying Funds' inception
date are not reflected in this Table. See preceding Table.
* The Table reflects actual historical performance of the related Separate
Account Divisions 15-20 since inception of each Division (July 11, 1994) and
hypothetical performance for periods prior to July 11, 1994 based on
investment in a hypothetical Contract. 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 based on investment in a hypothetical Contract. The
Table reflects actual historical performance of the related Separate Account
Divisions 51-54 since inception of each Division (September 22, 1998) and
hypothetical performance for periods prior to September 22, 1998 based on
investment in a hypothetical Contract. The Table reflects actual historical
performance of the related Separate Account Divisions 55-57 since inception
of each Division (January 4, 1999) and hypothetical performance for periods
prior to January 4, 1999 based on investment in a hypothetical Contract.
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.
** 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) Effective May 1, 2000 the Templeton Asset Allocation Fund (previously
offered under the Contract) merged with the Templeton Global Asset
Allocation Fund. At the same time as the merger, the Templeton Asset
Allocation Fund changed its name to the Templeton Asset Strategy Fund.
Accordingly, the performance figures in the Table for the Fund through
December 31, 1999, reflect the historical performance and inception date of
the Templeton Asset Allocation Fund.
(2) Effective May 1, 2000 the Templeton International Fund (previously offered
under the Contract) merged with the Templeton International Equity Fund. At
the same time as the merger, the Templeton International Fund changed its
name to the Templeton International Securities Fund. Accordingly, the
performance figures in the Table for the Fund through December 31, 1999,
reflect the historical performance and inception date of the Templeton
International Fund.
(3) The Scudder Growth and Income Fund adopted its current name and objective on
November 13, 1984. Its predecessor commenced operations on May 31, 1929.
(4) 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.
45
<PAGE> 346
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.
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
46
<PAGE> 347
- --------------------------------------------------------------------------------
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.
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), 403(a) and 401(k) 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."
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> 348
- --------------------------------------------------------------------------------
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, 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. In
addition, based upon published guides issued by the IRS in 1999, it appears
likely that such limitations, if imposed, would only apply to Non-Qualified
Contracts.
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.
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 1999, the IRS confirmed this opinion,
reversing its previous position by modifying a contrary ruling it had issued in
1981.
In its ruling in 1981, the 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 was
superseded by subsequent legislation (Code Section 817(h)) which specifically
exempts these Qualified Contracts, and the IRS had no viable legal basis or
reason to apply the theory of the 1981 ruling to these Qualified Contracts under
current law.
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
48
<PAGE> 349
- --------------------------------------------------------------------------------
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
<TABLE>
<CAPTION>
NONQUALIFIED CONTRACT
TAX DEFERRED ANNUITY TAX DEFERRED ANNUITY CONVENTIONAL SAVINGS
<S> <C> <C> <C>
10 YEARS $ 25,178 $ 18,128 $ 16,122
20 YEARS $ 79,536 $ 57,226 $ 44,347
30 YEARS $ 196,891 $ 141,761 $ 93,761
</TABLE>
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 charges and may also incur account
maintenance fees and surrender charges. The chart does not reflect the deduction
of any such fees. 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-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.
49
<PAGE> 350
YEAR 2000
- --------------------------------------------------------------------------------
As of March 10, 2000, all of our ultimate parent, American General Corporation's
("AGC") major technology systems, programs, and applications, including those
which rely on third parties, are operating smoothly following our transition
into 2000. We have experienced no interruptions to normal business operations,
including the processing of customer account data and transactions. We will
continue to monitor our technology systems, including critical third party
dependencies, as necessary to maintain our Year 2000 readiness. We do not expect
any future disruptions, if they occur, to have a material effect on the
company's results of operations, liquidity, or financial condition.
Through December 31, 1999, AGC incurred and expensed pretax costs of $98 million
related to Year 2000 readiness, including $18 million in 1999 and $65 million in
1998. In 1999, Year 2000 readiness expenses were included in division earnings.
The 1998 expenses were excluded from division earnings, consistent with the
manner in which we reviewed division results. In addition, we accelerated the
planned replacement of certain systems as part of our Year 2000 plans. The cost
of these replacement systems was immaterial. We do not anticipate incurring any
significant costs in the future to maintain Year 2000 readiness.
50
<PAGE> 351
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 or to the Home Office at the following address: VALIC, Customer
Service A3-01, 2929 Allen Parkway, Houston, TX 77019.
</TABLE>
<PAGE> 352
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information................................. 4
Marketing Information........................... 4
Endorsements and Published Ratings.............. 5
Types of Variable Annuity Contracts................. 6
Federal Tax Matters................................. 6
Tax Consequences of Purchase Payments........... 6
Tax Consequences of Distributions............... 8
Special Tax Consequences -- Early
Distribution.................................. 9
Special Tax Consequences -- Required
Distributions................................. 10
Tax Free Rollovers, Transfers and Exchanges..... 11
Exchange Privilege.................................. 11
Exchanges From Portfolio Director............... 12
Exchanges From Portfolio Director 2............. 12
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................. 16
Exchanges From Compounder Contracts............. 17
Information Which May Be Applicable To Any
Exchange...................................... 18
Calculation of Surrender Charge..................... 19
Illustration of Surrender Charge on Total
Surrender..................................... 19
Illustration of Surrender Charge on a 10%
Partial Surrender Followed by a Full
Surrender..................................... 19
Purchase Unit Value................................. 20
Illustration of Calculation of Purchase Unit
Value......................................... 20
Illustration of Purchase of Purchase Units...... 20
Performance Calculations............................ 20
AGSPC Money Market and American General Money
Market Divisions Yields....................... 20
Calculation of Current Yield for AGSPC Money
Market Division Six........................... 20
Calculation of Current Yield for American
General Money Market Division 44.............. 20
Illustration of Calculation of Current Yield for
AGSPC Money Market Division Six and American
General Money Market Division 44.............. 20
Calculation of Effective Yield for AGSPC Money
Market Division Six........................... 21
Calculation of Effective Yield for American
General Money Market Division 44.............. 21
Illustration of Calculation of Effective Yield
for AGSPC Money Market Division Six and
American General Money Market Division 44..... 21
Standardized Yield for Bond Fund Divisions...... 21
Calculation of Standardized Yield for Bond Fund
Divisions..................................... 21
Illustration of Calculation of Standardized
Yield for Bond Fund Divisions................. 21
Calculation of Average Annual Total Return...... 22
Calculation of MVA Option....................... 22
Performance Information............................. 23
Hypothetical $10,000 Account Value and
Cumulative Return as Compared to Benchmark
Tables........................................ 23
Performance Compared to Market Indices.......... 23
AGSPC Asset Allocation Division Five............ 27
AGSPC Capital Conservation Division Seven....... 28
AGSPC Government Securities Division Eight...... 28
AGSPC Growth Division Fifteen................... 29
AGSPC Growth & Income Division Sixteen.......... 29
AGSPC International Equities Division Eleven.... 30
AGSPC International Government Bond Division
Thirteen...................................... 31
AGSPC MidCap Index Division Four................ 31
AGSPC Money Market Division Six................. 32
AGSPC Science & Technology Division Seventeen... 33
AGSPC Small Cap Index Division Fourteen......... 33
AGSPC Social Awareness Division Twelve.......... 34
AGSPC Stock Index Division Ten.................. 35
American Century Ultra Division Thirty-One...... 35
American General Balanced Division Forty-Two.... 36
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
American General Conservative Growth Lifestyle
Division Fifty................................ 36
American General Core Bond Division
Fifty-Eight................................... 37
American General Domestic Bond Division
Forty-Three................................... 38
American General Growth Lifestyle Division
Forty-Eight................................... 38
American General High Yield Bond Division
Sixty......................................... 39
American General International Growth Division
Thirty-Three.................................. 39
American General International Value Division
Thirty-Four................................... 40
American General Large Cap Growth Division
Thirty-Nine................................... 40
American General Large Cap Value Division
Forty......................................... 41
American General Mid Cap Growth Division
Thirty-Seven.................................. 41
American General Mid Cap Value Division
Thirty-Eight.................................. 42
American General Moderate Lifestyle Division
Forty-Nine.................................... 42
American General Money Market Division
Forty-Four.................................... 43
American General Small Cap Growth Division
Thirty-Five................................... 43
American General Small Cap Value Division
Thirty-Six.................................... 44
American General Socially Responsible Division
Forty-One..................................... 44
American General Strategic Bond Division
Fifty-Nine.................................... 45
Dreyfus Founders Growth Division Thirty......... 45
Dreyfus Variable Investment Fund -- Small Cap
Portfolio Division Eighteen................... 46
Evergreen Growth and Income Division
Fifty-Six..................................... 47
Evergreen Small Cap Value Division Fifty-Five... 47
Evergreen Value Division Fifty-Seven............ 48
Neuberger Berman Guardian Trust Division
Twenty-Nine................................... 48
Putnam Global Growth -- Class A Division
Twenty-Eight.................................. 49
Putnam New Opportunities -- Class A Division
Twenty-Six.................................... 50
Putnam OTC & Emerging Growth -- Class A Division
Twenty-Seven.................................. 50
Scudder Growth and Income Division Twenty-One... 51
T. Rowe Price Small-Cap Stock Division
Fifty-One..................................... 52
Templeton Asset Strategy Division Nineteen...... 52
Templeton Foreign Division Thirty-Two........... 53
Templeton International Securities Division
Twenty........................................ 54
Vanguard LifeStrategy Conservative Growth
Division Fifty-Four........................... 54
Vanguard LifeStrategy Growth Division
Fifty-Two..................................... 55
Vanguard LifeStrategy Moderate Growth Division
Fifty-Three................................... 56
Vanguard Long-Term Corporate Division
Twenty-Two.................................... 56
Vanguard Long-Term Treasury Division
Twenty-Three.................................. 57
Vanguard Wellington Division Twenty-Five........ 58
Vanguard Windsor II Division Twenty-Four........ 59
Payout Payments..................................... 60
Assumed Investment Rate......................... 60
Amount of Payout Payments....................... 60
Payout Unit Value............................... 60
Illustration of Calculation of Payout Unit
Value......................................... 61
Illustration of Payout Payments................. 61
Distribution of Variable Annuity Contracts.......... 62
Experts............................................. 62
Comments on Financial Statements.................... 62
</TABLE>
<PAGE> 353
Please tear off, complete and return the form below to one of our Regional
Offices. 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> 354
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
[VALIC LOGO]
PRINTED MATTER
PRINTED IN U.S.A. VA 10855-40 REV 5/00
(C)The Variable Annuity Life Insurance Company, Houston, Texas
Recycled Paper [LOGO]
<PAGE> 355
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, 2000
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, 2000 ("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 American General Distributors,
Inc. (the "Distributor") at 2929 Allen Parkway, Houston, Texas 77019;
1-800-44-VALIC. Prospectuses are also available from regional sales offices of
the Distributor or from its registered sales representatives.
VA9084-1 Rev 5/00
1
<PAGE> 356
TABLE OF CONTENTS
<TABLE>
<S> <C>
General Information......................................... 4
Marketing Information..................................... 4
Endorsements and Published Ratings........................ 5
Types of Variable Annuity Contracts......................... 6
Federal Tax Matters......................................... 6
Tax Consequences of Purchase Payments..................... 6
Tax Consequences of Distributions......................... 8
Special Tax Consequences -- Early Distribution............ 9
Special Tax Consequences -- Required Distributions........ 10
Tax Free Rollovers, Transfers and Exchanges............... 11
Exchange Privilege.......................................... 11
Exchanges From Independence Plus Contracts................ 11
Exchanges From V-Plan Contracts........................... 13
Exchanges From SA-1 and SA-2 Contracts.................... 13
Exchanges From Impact Contracts........................... 15
Exchanges From Compounder Contracts....................... 16
Information Which May Be Applicable To Any Exchange....... 16
Calculation of Surrender Charge............................. 18
Illustration of Surrender Charge on Total Surrender....... 18
Illustration of Surrender Charge on a 10% Partial
Surrender Followed by a Full Surrender................. 18
Purchase Unit Value......................................... 19
Illustration of Calculation of Purchase Unit Value........ 19
Illustration of Purchase of Purchase Units................ 19
Performance Calculations.................................... 19
AGSPC Money Market Division Yields........................ 19
Calculation of Current Yield for AGSPC Money Market
Division Six........................................... 19
Illustration of Calculation of Current Yield for AGSPC
Money Market Division Six.............................. 19
Calculation of Effective Yield for AGSPC Money Market
Division Six........................................... 20
Illustration of Calculation of Effective Yield for AGPSC
Money Market Division Six.............................. 20
Standardized Yield for Divisions Seven, Eight and
Thirteen............................................... 20
Calculation of Standardized Yield for Divisions Seven,
Eight and Thirteen..................................... 20
Illustration of Calculation of Standardized Yield for
Divisions Seven, Eight and Thirteen.................... 20
Calculation of Average Annual Total Return................ 21
Calculation of MVA Option................................. 21
Performance Information..................................... 22
Hypothetical $10,000 Account Value and Cumulative Return
as Compared to
Benchmark Tables....................................... 22
Performance Compared to Market Indices.................... 22
AGSPC 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.................................................. 25
AGSPC Capital Conservation Division Seven Performance
Compared to Merrill Lynch Corporate Master Index....... 26
AGSPC Government Securities Division Eight Performance
Compared to Lehman Brothers U.S. Treasury Composite
Index.................................................. 27
AGSPC Growth Division Fifteen Performance Compared to S&P
500 Index.............................................. 27
AGSPC Growth & Income Division Sixteen Performance
Compared to S&P 500 Index.............................. 28
AGSPC International Equities Division Eleven Performance
Compared to EAFE Index................................. 28
AGSPC International Government Bond Division Thirteen
Performance Compared to Salomon Brothers Non-U.S.
Dollar World Government Bond Index..................... 29
AGSPC MidCap Index Division Four Performance Compared to
S&P MidCap 400 Index................................... 30
</TABLE>
2
<PAGE> 357
<TABLE>
<S> <C>
AGSPC Money Market Division Six Performance Compared to
Certificate of Deposit Primary Offering by New York
City Banks, 30 Day Index............................... 31
AGSPC Science & Technology Division Seventeen Performance
Compared to S&P 500 Index.............................. 31
AGSPC Small Cap Index Division Fourteen Performance
Compared to Russell 2000 Index......................... 32
AGSPC Social Awareness Division Twelve Performance
Compared to S&P 500 Index.............................. 32
AGSPC Stock Index Division Ten Performance Compared to S&P
500 Index.............................................. 33
Dreyfus Variable Investment Fund -- Small Cap Division
Eighteen Performance Compared to Russell 2000.......... 33
Templeton Asset Strategy Division Nineteen Performance
Compared to MSCI All Country World Free Index and JP
Morgan Global Government Bond Index.................... 34
Templeton International Securities Division Twenty
Performance Compared to MSCI World Index............... 35
Payout Payments............................................. 35
Assumed Investment Rate................................... 35
Amount of Payout Payments................................. 35
Payout Unit Value......................................... 36
Illustration of Calculation of Payout Unit Value.......... 36
Illustration of Payout Payments........................... 37
Distribution of Variable Annuity Contracts.................. 37
Experts..................................................... 37
Comments on Financial Statements............................ 38
</TABLE>
3
<PAGE> 358
GENERAL INFORMATION
MARKETING INFORMATION
The Company has targeted not-for-profit organizations as the central focus
of its marketing efforts for its Contracts. The Company has utilized as its
general marketing theme the concept that the Company is "America's Retirement
Plan Specialists." Specifically, the Company's marketing thrust is aimed at
individuals and groups associated with public and private schools, colleges and
universities, not-for-profit health care organizations, state and local
governments and other not-for-profit organizations.
This marketing concept has proven to be successful. In the aggregate,
premium deposits to the Company have grown from $37,000 in 1956 to more than
$4.2 billion as of December 31, 1999. The number of aggregate participant
accounts has increased from 155,000 accounts in 1980 to more than 2,191,033
accounts as of December 31, 1999. As of December 31, 1999, 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, 1999 the Company's assets totaled more than $47
billion.
The Company's growth can also be reviewed by examining each market segment
the Company targets.
The Company's growth can also be reviewed by examining certain milestones,
the number of participant accounts and cash values amongst the various market
segments or groups the Company targets. These markets include, but are not
limited to, public, primary and secondary schools, colleges, universities, state
and local government groups and healthcare markets.
The Company, in its marketing efforts to each of the market segments may,
from time to time, design sales literature and material specifically for its
particular market segments. The sales literature and material may address
specifically the group's contract and retirement plan.
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 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
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.
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, Inc. ("Lipper"), Laffer-Cantos, Inc., The Variable
Annuity Research & Data Services ("VARDS") Report, Wilson Associates,
Morningstar, Inc. ("Morningstar") 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
4
<PAGE> 359
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 may, from time to time, refer to the products of various
investment advisers and subadvisers referenced in the prospectus. The Company
may mention assets under management and others facts specific to each adviser.
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. The Company may also refer to the term "preferred provider" with the
group's consent.
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, 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
5
<PAGE> 360
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.
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.
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 $10,500 ($9,500 before 1998; $10,000 in 1998 and 1999), 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 $32,000 or less ($31,000 for 1999, $30,000
for 1998, $25,000 or less prior to 1998); or
(iv) are active participants in another retirement plan, are married, and have
adjusted gross income of $52,000 or less ($51,000 for 1999, $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
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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 2000 you and
your employer 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). 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 were not permitted to exceed $10,000 per year. In 2000,
they may not exceed $10,500. This limit is indexed and may be included in future
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,
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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).
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.
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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;
(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
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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 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-
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1987 amounts, and multiple plans may not be aggregated to satisfy the
requirement. Distributions must satisfy the irrevocable election requirements
applicable to 457 Plans.
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 Owner'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
Owner at the time of death. Similar distribution requirements will also apply if
the Owner is not a natural person, if the Annuitant dies or is changed.
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.
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. A full or partial exchange of one annuity contract for another is a
tax-free transaction under Section 1035, provided that the requirements of that
Section are satisfied. However, the exchange 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
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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 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 or other
investment managers for advisory fees at annual rates ranging from .28% to .90%
of each portfolio's or mutual fund's average daily net assets. Three 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.
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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 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 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
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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 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 either by the Company or other investment managers for advisory fees at
annual rates ranging from .28% to .90% of each portfolio's or mutual fund's
average daily net assets. Additionally, three 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.
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<PAGE> 369
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 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 either by the Company or
other investment managers, Counsel Inc., for advisory fees at annual rates
ranging from .29% to .90% of each portfolio's or mutual fund's average
15
<PAGE> 370
daily net assets. In addition, three 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 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 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
16
<PAGE> 371
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.
Under certain deferred annuity contracts issued before October 21, 1979,
upon the death of the owner the entire value of the contract as of the date of
death may be received income tax free by the beneficiary. This will not apply to
contracts that have been exchanged on or after October 21, 1979.
17
<PAGE> 372
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>
10/1/94......................... Purchase Payment $10,000
10/1/95......................... Purchase Payment 5,000
10/1/96......................... Purchase Payment 15,000
10/1/97......................... Purchase Payment 2,000
10/1/98......................... Purchase Payment 3,000
10/1/99......................... Purchase Payment 4,000
12/31/99........................ 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 10/1/94........ $ 0
2. Surrender Charge against Purchase Payment of 10/1/95........ $ 250
3. Surrender Charge against Purchase Payment of 10/1/96........ $ 750
4. Surrender Charge against Purchase Payment of 10/1/97........ $ 100
5. Surrender Charge against Purchase Payment of 10/1/98........ $ 150
6. Surrender Charge against Purchase Payment of 10/1/99........ $ 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>
10/1/94......................... Purchase Payment $10,000
10/1/95......................... Purchase Payment 5,000
10/1/96......................... Purchase Payment 15,000
10/1/97......................... Purchase Payment 2,000
10/1/98......................... Purchase Payment 3,000
10/1/99......................... Purchase Payment 4,000
12/31/99........................ 10% Partial Surrender (Assumes 3,900
Account Value is $39,000)
2/1/00.......................... Full Surrender 35,100
</TABLE>
a. Since this is the first partial surrender in this participant year,
calculate the excess over 10% of the value of the Purchase Units
10% of $39,000 = $3,900 [no charge on this 10% withdrawal]
b. The Account Value upon which Surrender Charge on the Full Surrender may
be calculated (levied) is $39,000 - $3,900 = $35,100
c. The Surrender Charge calculated on the Account Value withdrawn $35,100 X
.05 = $1,755
d. Since only $29,000 has been paid in Purchase Payments in the 60 months
prior to the Full Surrender, the charge can only be calculated on
$29,000. The $3,900 partial withdrawal does not reduce this amount.
Thus, the charge is $29,000 X (0.05) = $1,450.
18
<PAGE> 373
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: 4.31%
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, 1999, 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.
19
<PAGE> 374
CALCULATION OF EFFECTIVE YIELD FOR AGSPC MONEY MARKET DIVISION SIX
7-Day Effective Yield: 4.40%
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, 1999, 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:
365/7
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1) ] -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.......................................... 6.31% 5.44% 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, 1999, 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:
6
YIELD = 2 [( a - b + 1) - 1]
cd
Where:
<TABLE>
<S> <C>
a = net investment income earned during the period by the Fund
attributable to shares owned by the Division
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of Purchase Units outstanding
during the period
d = the maximum offering price per Purchase Unit on the last day
of the period
</TABLE>
Yield on each Division is earned from dividends declared and paid by the
Fund, which are
automatically reinvested in Fund shares.
20
<PAGE> 375
CALCULATION OF AVERAGE ANNUAL TOTAL RETURN
Average Annual Total Return quotations for the 1, 5, and 10 year periods
ended December 31, 1999, 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, 5, and 10 year periods that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
n
P (1+T) = 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, 5 or 10 year periods
of a hypothetical $1,000 Purchase Payment made at the
beginning of the 1, 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, 5 or 10 year
period and deduction of all nonrecurring charges at the end of each such period.
CALCULATION OF MVA OPTION
The effect of the market value adjustment may be positive or negative. If,
for example, on the date of a withdrawal, the index rate described below (plus
0.5%) is higher than that index rate as of the contract's date of issue, the
effect of the market value adjustment will be negative. If, for example, on the
date of a withdrawal, the index rate (plus 0.5%) is lower than that index rate
as of the contract's date of issue, the effect of the market value adjustment
will be positive. Any negative adjustment will be waived to the extent that it
would decrease the withdrawal value below the minimum guaranteed value.
The market value adjustment is determined by the formula below, using the
following factors:
- A is an index rate determined at the beginning of each MVA term, for a
security with time to maturity equal to that MVA term;
- B is an index rate determined at the time of withdrawal, for a security
with time to maturity equal to the current MVA term;
- N is the number of months remaining in the current MVA term (rounded up
to the next higher number of months); and
- The index rates for A and B will be the U.S. Treasury Yield as quoted by
Bloomberg or a comparable financial market news service, for the maturity
equal to the MVA term, using linear interpolation as appropriate.
The market value adjustment will equal:
The amount surrendered or transferred out prior to the end of the MVA term
multiplied by:
[(1+A) / (1+B+0.005)](N/12) -1
The market value adjustment will be added to or deducted from the amount
being withdrawn or transferred.
Index rates for any calendar month will equal the average of index rates
for the last 5 trading days of the previous calendar month.
21
<PAGE> 376
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" 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 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 in accordance with an asset
allocation model. The performance of the equity securities sector of the
Division may be compared to the record of the Standard & Poor's(R) Corporation
("S&P(R)")* Composite Stock Price Index ("S&P 500 Index"). The S&P 500(R) Index
is an unmanaged capitalization-weighted index of 500 stocks designed to measure
performance of the broad domestic economy through changes in the aggregate
market value of 500 stocks representing all major industries. The S&P 500 Index
represents approximately 73% of the aggregate United States equity markets
capitalization. The performance of the intermediate or long-term debt
- ---------------
* "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.
22
<PAGE> 377
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 3,600 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.
The 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 S&P 500(R) Index.
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 investors). The second method includes net
income (income earned after subtracting estimated foreign taxes). The Division
currently compares its performance with the index using the second method.
The performance of the 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 $1.64 billion as of March 31, 2000. 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
23
<PAGE> 378
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 Strategy Division Nineteen may be
compared to the performance of the equity securities sector of the Division as
reflected in the Morgan Stanley Capital International All Country World Free
Index ("MSCI All Country World Free Index"). The performance of the intermediate
or long-term debt securities sector may be compared to the JP Morgan Global
Government Bond Index. Total returns (with income reinvested) for the MSCI All
Country World Free 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 unmanaged MSCI All Country World Free Index measures the performance of
securities located in 48 countries, including emerging markets in Latin America,
Asia and Eastern Europe. The JP Morgan Global Government Bond Index tracks the
performance of government bond markets in thirteen countries.
The performance of the Templeton International Securities Division Twenty
may be compared to the Morgan Stanley Capital International World Index ("MSCI
World Index"). The MSCI World Index is an unmanaged capitalization weighted
index consisting of more than 1,364 issues from 22 countries as well as certain
South African gold.
- ---------------
** 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.
24
<PAGE> 379
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, 1990
<TABLE>
<CAPTION>
ASSET ALLOCATION S&P 500 BLENDED
DIVISION FIVE INDEX INDEX**
- ---------------------------------------------------------------- ------- -------
<S> <C> <C> <C>
01/01/90.............................................. $10,000 $10,000 $10,000
12/31/90.............................................. 9,662 9,689 10,221
12/31/91.............................................. 11,607 12,642 12,556
12/31/92.............................................. 11,408 13,605 13,467
12/31/93.............................................. 12,343 14,976 14,773
12/31/94.............................................. 12,060 15,174 14,772
12/31/95.............................................. 14,900 20,876 18,819
12/31/96.............................................. 16,388 25,671 21,422
12/31/97.............................................. 19,895 34,234 26,122
12/31/98.............................................. 23,314 44,018 31,313
12/31/99.............................................. 25,796 53,283 34,750
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division**
AGSPC Asset Allocation Division Five................... 157.96% 113.90% 10.65%
Benchmark Comparison
S&P 500 Index.......................................... 432.83% 251.15% 21.05%
Blended Index***....................................... 247.50% 135.23% 10.98%
</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.
25
<PAGE> 380
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, 1990
<TABLE>
<CAPTION>
MERRILL LYNCH
CAPITAL CONSERVATION CORPORATE MASTER
DIVISION SEVEN INDEX
- --------------------------------------------------------------- ----------------
<S> <C> <C>
01/01/90.............................................. $10,000 $10,000
12/31/90.............................................. 9,872 10,737
12/31/91.............................................. 11,452 12,695
12/31/92.............................................. 12,317 13,853
12/31/93.............................................. 13,657 15,575
12/31/94.............................................. 12,695 15,051
12/31/95.............................................. 15,181 18,299
12/31/96.............................................. 15,295 18,919
12/31/97.............................................. 16,440 20,884
12/31/98.............................................. 17,476 22,705
12/31/99.............................................. 17,230 22,277
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC Capital Conservation Division Seven.............. 72.30% 35.72% (1.40)%
Benchmark Comparison
Merrill Lynch Corporate Master Index................... 122.77% 48.01% (1.89)%
</TABLE>
- ---------------
* This Division was initiated on January 16, 1986.
26
<PAGE> 381
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, 1990
<TABLE>
<CAPTION>
LEHMAN BROTHERS
GOVERNMENT SECURITIES U.S. TREASURY
DIVISION EIGHT COMPOSITE INDEX
- --------------------------------------------------------------- ---------------
<S> <C> <C>
01/01/90............................................. $10,000 $10,000
12/31/90............................................. 10,491 10,861
12/31/91............................................. 11,917 12,529
12/31/92............................................. 12,648 13,435
12/31/93............................................. 13,875 14,878
12/31/94............................................. 13,120 14,368
12/31/95............................................. 15,260 17,005
12/31/96............................................. 15,397 17,476
12/31/97............................................. 16,602 19,131
12/31/98............................................. 17,908 21,059
12/31/99............................................. 17,238 20,518
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC Government Securities Division Eight............. 72.38% 31.39% (3.74)%
Benchmark Comparison
Lehman Brothers U.S. Treasury Composite Index.......... 105.18% 42.81% (2.57)%
</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
12/31/99............................................. 25,822 36,545
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC Growth Division Fifteen.......................... 158.22% 157.75% 6.33%
Benchmark Comparison
S&P 500 Index.......................................... 265.45% 251.15% 21.05%
</TABLE>
- ---------------
* This Division was initiated on April 29, 1994.
27
<PAGE> 382
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
12/31/99................................................... 26,770 36,545
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC Growth & Income Division Sixteen............... 167.70% 169.54% 21.61%
Benchmark Comparison
S&P 500 Index........................................ 265.45% 251.15% 21.05%
</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 JANUARY 1, 1990
<TABLE>
<CAPTION>
INTERNATIONAL EQUITIES EAFE
DIVISION ELEVEN INDEX
- ------------------------------------------------------------------------ -------------
<S> <C> <C>
01/01/90................................................. $ 10,000 $ 10,000
12/31/90................................................. 7,910 7,655
12/31/91................................................. 8,705 8,584
12/31/92................................................. 7,459 7,539
12/31/93................................................. 9,591 9,993
12/31/94................................................. 10,253 10,771
12/31/95................................................. 11,245 11,978
12/31/96................................................. 11,891 12,702
12/31/97................................................. 12,031 12,928
12/31/98................................................. 14,145 15,513
12/31/99................................................. 18,088 19,696
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC International Equities Division Eleven.......... 80.88% 76.42% 27.88%
Benchmark Comparison
EAFE Index............................................ 96.96% 82.87% 26.96%
</TABLE>
- ---------------
* This Division was initiated on October 2, 1989.
28
<PAGE> 383
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 BROTHERS
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
12/31/99................................................... 16,091 18,489
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC International Government Bond Division
Thirteen............................................. 60.91% 23.65% (6.88)%
Benchmark Comparison
Salomon Brothers Non-U.S. Dollar World Government Bond
Index................................................ 84.89% 32.07% (5.17)%
</TABLE>
- ---------------
* This Division was initiated on October 1, 1991.
29
<PAGE> 384
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
12/31/99............................................ 34,376 45,682 38,948
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION** 5 YEARS 1 YEAR
----------- -------- --------
<S> <C> <C> <C>
Investment Division*
AGSPC MidCap Index Division Four...................... 243.76% 165.74% 13.78%
Benchmark Comparison
S&P 500 Index......................................... 356.82% 251.15% 21.05%
S&P MidCap 400 Index.................................. 289.48% 182.11% 14.73%
</TABLE>
- ---------------
* The MidCap Index Fund was formerly known as the Capital Accumulation Fund.
Effective October 1, 1991, the Fund revised its investment objective,
investment program and investment restrictions accordingly, pursuant to
contract owner vote. This Division was originally initiated on October 13,
1982.
30
<PAGE> 385
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, 1990
<TABLE>
<CAPTION>
MONEY MARKET PRIMARY
DIVISION SIX CD INDEX
- --------------------------------------------------------------------- --------
<S> <C> <C>
01/01/90................................................... $10,000 $10,000
12/31/90................................................... 10,683 10,800
12/31/91................................................... 11,163 11,390
12/31/92................................................... 11,411 11,749
12/31/93................................................... 11,602 12,053
12/31/94................................................... 11,923 12,483
12/31/95................................................... 12,460 13,100
12/31/96................................................... 12,955 13,694
12/31/97................................................... 13,490 14,349
12/31/98................................................... 14,047 15,023
12/31/99................................................... 14,568 15,693
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC Money Market Division Six........................ 45.68% 22.19% 3.71%
Benchmark Comparison
Primary CD Index....................................... 56.93% 25.71% 4.46%
</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
12/31/99................................................... 63,990 36,545
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC Science & Technology Division
Seventeen.......................................... 539.90% 412.86% 98.96%
Benchmark Comparison
S&P 500 Index........................................ 265.45% 251.15% 21.05%
</TABLE>
- ---------------
* This Division was initiated on April 29, 1994.
31
<PAGE> 386
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
12/31/99................................................. 25,226 28,828
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 1 YEAR
--------- ------- --------
<S> <C> <C> <C>
Investment Division*
AGSPC Small Cap Index Division Fourteen................ 152.26% 106.38% 20.10%
Benchmark Comparison
Russell 2000........................................... 188.28% 116.37% 21.26%
</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 JANUARY 1, 1990
<TABLE>
<CAPTION>
SOCIAL AWARENESS S&P 500
DIVISION TWELVE INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
01/01/90................................................... $10,000 $10,000
12/31/90................................................... 9,779 9,689
12/31/91................................................... 12,382 12,642
12/31/92................................................... 12,668 13,605
12/31/93................................................... 13,534 14,976
12/31/94................................................... 13,207 15,174
12/31/95................................................... 18,169 20,876
12/31/96................................................... 22,304 25,671
12/31/97................................................... 29,558 34,234
12/31/98................................................... 37,250 44,018
12/31/99................................................... 43,756 53,283
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC Social Awareness Division Twelve................. 337.56% 231.31% 17.46%
Benchmark Comparison
S&P 500 Index.......................................... 432.83% 251.15% 21.05%
</TABLE>
- ---------------
* This Division was initiated on October 2, 1989.
32
<PAGE> 387
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, 1990
<TABLE>
<CAPTION>
STOCK INDEX S&P 500
DIVISION TEN INDEX
- ------------------------------------------------------------------ -------
<S> <C> <C>
01/01/90................................................. $10,000 $10,000
12/31/90................................................. 9,517 9,689
12/31/91................................................. 12,154 12,642
12/31/92................................................. 12,833 13,605
12/31/93................................................. 13,960 14,976
12/31/94................................................. 13,918 15,174
12/31/95................................................. 18,921 20,876
12/31/96................................................. 22,994 25,671
12/31/97................................................. 30,299 34,234
12/31/98................................................. 38,522 44,018
12/31/99................................................. 45,985 53,283
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC Stock Index Division Ten......................... 359.85% 230.40% 19.37%
Benchmark Comparison
S&P 500 Index.......................................... 432.83% 251.15% 21.05%
</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 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
154,237 41,849
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX*
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division*
Dreyfus Small Cap Division Eighteen................... 1,442.37% 97.42% 21.80%
Benchmark Comparison
Russell 2000.......................................... 318.49% 116.37% 21.26%
</TABLE>
- ---------------
* This Division was initiated July 11, 1994.
33
<PAGE> 388
Templeton Asset Strategy* Division Nineteen Performance Compared to MSCI All
Country World Free Index and JP Morgan Global Government Bond Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1990
<TABLE>
<CAPTION>
JP MORGAN
MSCI GLOBAL
TEMPLETON ASSET STRATEGY WORLD GOVERNMENT
DIVISION NINETEEN INDEX BOND INDEX
- ------------------------------------------------------------ ------- ----------
<S> <C> <C> <C>
01/01/90........................................... $10,000 $10,000 $10,000
12/31/90........................................... 9,087 8,298 11,176
12/31/91........................................... 11,461 9,815 12,902
12/31/92........................................... 12,234 9,303 13,490
12/31/93........................................... 15,242 11,396 15,144
12/31/94........................................... 14,597 11,974 15,338
12/31/95........................................... 17,665 14,455 18,300
12/31/96........................................... 20,738 16,404 19,105
12/31/97........................................... 23,656 18,990 19,373
12/31/98........................................... 24,855 23,611 22,340
12/31/99........................................... 30,166 29,499 21,205
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division**
Templeton Asset Strategy Division Nineteen........... 201.66% 106.67% 21.37%
Benchmark Comparison
MSCI All Country World Free Index.................... 194.99% 146.35% 24.94%
JP Morgan Global Government Bond Index............... 153.36% 89.33% 12.04%
</TABLE>
- ---------------
* The Templeton Asset Strategy Fund was formerly known as the Templeton Asset
Allocation Fund.
** This division was initiated on July 11, 1994.
34
<PAGE> 389
Templeton International Securities* 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 SECURITIES 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
12/31/99................................................... 27,169 32,289
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division**
Templeton International Securities Division Twenty... 171.69% 107.76% 22.10%
Benchmark Comparison
MSCI World Index..................................... 222.89% 146.35% 24.94%
</TABLE>
- ---------------
* The Templeton International Securities Fund was formerly known as the
Templeton International Fund.
** 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).
35
<PAGE> 390
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>
36
<PAGE> 391
ILLUSTRATION OF PAYOUT PAYMENTS
Example 9. Annuitant age 65, Life Annuity with 120 Payments Certain
<TABLE>
<S> <C>
1. Number of Purchase Units at Payout Date................. 10,000.00
2. Purchase Unit value (see Example 3)..................... $ 1.800000
3. Account Value of Contract (1)X(2)....................... $18,000.00
4. First monthly Payout Payment per $1,000 of Account
Value..................................................... $ 5.63
5. First monthly Payout Payment (3)X(4)/1,000.............. $ 101.34
6. Payout Unit value (see Example 10)...................... $ .980000
7. Number of Payout Units (5)/(6).......................... 103.408
8. Assume Payout Unit value for second month equal to...... $ .997000
9. Second monthly Payout Payment (7)X(8)................... $ 103.10
10. Assume Payout Unit value for third month equal to....... $ .953000
11. Third monthly Payout Payment (7)X(10)................... $ 98.55
</TABLE>
DISTRIBUTION OF VARIABLE ANNUITY CONTRACTS
The Company has qualified or intends to qualify the Contracts for sale in
all fifty states and the District of Columbia and will commence offering the
Contracts promptly upon qualification in each such jurisdiction.
The Contracts are sold in a continuous offering by licensed insurance
agents who are registered representatives of broker-dealers which are members of
the National Association of Securities Dealers, Inc. (the "NASD"). The principal
underwriter for VALIC Separate Account A is the Distributor, an affiliate of
VALIC. The Distributor is known as American General Financial Distributors of
Florida, Inc. and American General Financial Distributors of Illinois, Inc. in
Florida and Illinois, respectively. The address of the Distributor is 2929 Allen
Parkway, Houston, Texas 77019. The Distributor 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 the Distributor and VALIC
Separate Account A, the Company reimburses the Distributor 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 1999 was $23,245,799.
EXPERTS
The consolidated financial statements of the Company at December 31, 1999
and 1998, and for each of the three years in the period ended December 31, 1999,
and the financial statements of the Company's Separate Account A at December 31,
1999 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.
37
<PAGE> 392
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, 1999.
38
<PAGE> 393
TABLE OF CONTENTS
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A - ANNUAL REPORT
DECEMBER 31, 1999
Report of Independent Auditors........................................... 1
Summary of Financial Statements.......................................... 3
Statements of Net Assets................................................. 4
Statements of Operations................................................. 8
Statements of Changes in Net Assets...................................... 14
Notes to Financial Statements............................................ 34
Supplemental Information................................................. 39
<PAGE> 394
REPORT OF INDEPENDENT AUDITORS 1
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, and 48 through 60 inclusive) comprising the Separate Account as of
December 31, 1999. 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 50, inclusive, and divisions 58
through 60, inclusive, for which we have audited the statements of changes in
net assets for the year ended December 31, 1999, and for the period from August
26, 1998 (inception) to December 31, 1998; except for divisions 51 through 54,
inclusive, for which we have audited the statements of changes in net assets
for the year ended December 31, 1999, and for the period from September 22,
1998 (inception) to December 31, 1998; and except for divisions 55 through 57,
inclusive, for which we have audited the statements of operations and changes
in net assets for the period from January 4, 1999 (inception) to December 31,
1999. 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 auditing standards generally
accepted in the United States. 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, 1999, 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, 1999, and the
results of their operations and changes in their net assets for each of the
periods identified above, in conformity with accounting principles generally
accepted in the United States.
/s/ ERNST & YOUNG LLP
-------------------------
ERNST & YOUNG LLP
Houston, Texas
February 22, 2000
<PAGE> 395
SUMMARY OF FINANCIAL STATEMENTS 3
STATEMENT OF NET ASSETS
December 31, 1999
<TABLE>
<CAPTION>
ALL DIVISIONS
----------------
ASSETS:
<S> <C>
Total investment in shares of mutual funds, at market (cost $15,133,600,700) ........... $ 21,292,842,069
Balance due from VALIC general account, net ............................................ 17,655,894
Payable for mutual fund purchases, net ................................................. (4,388,902)
----------------
NET ASSETS ............................................................................. $ 21,306,109,061
----------------
Contract Owner Reserves and Capital Surplus:
Reserves for redeemable annuity contracts
(Net of applicable contract loans - partial withdrawals with right of
reinvestment) ....................................................................... $ 21,173,161,490
Reserves for annuity contracts on benefit .............................................. 27,942,008
Capital surplus (Note C) ............................................................... 105,005,563
----------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ...................................... $ 21,306,109,061
----------------
</TABLE>
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
ALL DIVISIONS
----------------
<S> <C>
INVESTMENT INCOME:
Dividends from mutual funds ............................................................ $ 200,790,831
----------------
EXPENSES:
Mortality and expense risk charge ...................................................... 182,974,740
Reimbursement of expenses (Note C) ..................................................... (10,256,222)
----------------
Total expenses ...................................................................... 172,718,518
----------------
NET INVESTMENT INCOME .................................................................. 28,072,313
----------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments ....................................................... 492,418,714
Capital gains distributions from mutual funds .......................................... 1,237,635,279
Net unrealized appreciation of investments during the period ........................... 2,750,587,412
----------------
Net realized and unrealized gain on investments ..................................... 4,480,641,405
----------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ....................................... $ 4,508,713,718
----------------
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
ALL DIVISIONS
----------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income................................................................... $ 28,072,313 $ 32,906,355
Net realized gain on investments........................................................ 492,418,714 256,062,773
Capital gains distributions from mutual funds........................................... 1,237,635,279 599,950,396
Net unrealized appreciation of investments during the period............................ 2,750,587,412 1,171,591,212
----------------- ----------------
Increase in net assets resulting from operations .................................... 4,508,713,718 2,060,510,736
----------------- ----------------
PRINCIPAL TRANSACTIONS:
Purchase payments ...................................................................... 2,904,038,286 2,363,611,667
Surrenders of accumulation units by terminations, withdrawals, and maintenance fees .... (1,008,041,123) (576,063,916)
Annuity benefit payments ............................................................... (3,151,245) (2,688,910)
Amounts transferred from VALIC general account, net..................................... 312,589,668 419,275,772
----------------- ----------------
Increase in net assets resulting from principal transactions ........................ 2,205,435,586 2,204,134,613
----------------- ----------------
Total increase in net assets............................................................ 6,714,149,304 4,264,645,349
NET ASSETS:
Beginning of period..................................................................... 14,591,959,757 10,327,314,408
----------------- ----------------
End of period........................................................................... $ 21,306,109,061 $ 14,591,959,757
----------------- ----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 396
4 FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
AGSPC AGSPC AGSPC
STATEMENTS OF NET ASSETS INTERNATIONAL MIDCAP SMALL CAP
December 31, 1999 EQUITIES INDEX INDEX
FUND - FUND - FUND -
DIVISION 11 DIVISION 4 DIVISION 14 DIVISION 10A
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market .......... $ 175,007,894 $ 876,866,818 $ 241,145,168 $ 590,443,067
Balance due from (to) VALIC general account .............. 2,029,474 9,382 27,128 (319,779)
Receivable (payable) for mutual fund sales (purchases) ... -- -- -- --
-------------- -------------- -------------- --------------
NET ASSETS ............................................... $ 177,037,368 $ 876,876,200 $ 241,172,296 $ 590,123,288
-------------- -------------- -------------- --------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals with
right of reinvestment) ................................. $ 176,828,231 $ 876,371,622 $ 241,010,780 $ 574,871,892
Reserves for annuity contracts on benefit ................ 209,137 504,578 161,516 15,251,396
Capital surplus (Note C) ................................ -- -- -- --
-------------- -------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ........ $ 177,037,368 $ 876,876,200 $ 241,172,296 $ 590,123,288
-------------- -------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN AMERICAN
STATEMENTS OF NET ASSETS GENERAL GENERAL GENERAL GENERAL
December 31, 1999 INTERNATIONAL LARGE CAP LARGE CAP MID CAP
VALUE FUND - GROWTH FUND - VALUE FUND - GROWTH FUND
DIVISION 34 DIVISION 39 DIVISION 40 DIVISION 37
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market .......... $ 8,096,689 $ 21,699,827 $ 4,473,480 $ 7,065,815
Balance due from (to) VALIC general account .............. 2,758 81,423 3,679 5,305
Receivable (payable) for mutual fund sales (purchases) ... -- -- -- --
-------------- -------------- -------------- --------------
NET ASSETS ............................................... $ 8,099,447 $ 21,781,250 $ 4,477,159 $ 7,071,120
-------------- -------------- -------------- --------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals with
right of reinvestment) ................................. $ 1,126,250 $ 16,976,274 $ 657,997 $ 1,243,896
Reserves for annuity contracts on benefit ................ -- -- -- --
Capital surplus (Note C) ................................ 6,973,197 4,804,976 3,819,162 5,827,224
-------------- -------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ........ $ 8,099,447 $ 21,781,250 $ 4,477,159 $ 7,071,120
-------------- -------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
DREYFUS NEUBERGER PUTNAM PUTNAM
STATEMENTS OF NET ASSETS FOUNDERS BERMAN GLOBAL NEW
December 31, 1999 GROWTH GUARDIAN GROWTH OPPORTUNITIES
FUND - TRUST - FUND - FUND -
DIVISION 30 DIVISION 29 DIVISION 28 DIVISION 26
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market .......... $ 874,457,709 $ 59,467,223 $ 495,732,851 $1,014,850,850
Balance due from (to) VALIC general account .............. 1,861,813 50,794 2,263,104 3,449,185
Receivable (payable) for mutual fund sales (purchases) ... (830,550) (21,490) (1,135,006) (1,827,956)
-------------- -------------- -------------- --------------
NET ASSETS ............................................... $ 875,488,972 $ 59,496,527 $ 496,860,949 $1,016,472,079
-------------- -------------- -------------- --------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals with
right of reinvestment) ................................. $ 875,377,940 $ 59,482,061 $ 496,733,062 $1,016,427,721
Reserves for annuity contracts on benefit ................ 111,032 14,466 127,887 44,358
Capital surplus (Note C) ................................ -- -- -- --
-------------- -------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ........ $ 875,488,972 $ 59,496,527 $ 496,860,949 $1,016,472,079
-------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 397
SEPARATE ACCOUNT A 5
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1999 AGSPC STOCK INDEX FUND
--------------------------------------------------
DIVISION 10B DIVISION 10C DIVISION 10D
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market .......... $ 45,355,666 $4,551,706,741 $ 59,387,213
Balance due from (to) VALIC general account .............. (37,562) 1,396,109 4,396
Receivable (payable) for mutual fund sales (purchases) ... -- -- --
-------------- -------------- --------------
NET ASSETS ............................................... $ 45,318,104 $4,553,102,850 $ 59,391,609
-------------- -------------- --------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals with
right of reinvestment) ................................. $ 43,269,244 $4,548,703,203 $ 59,146,967
Reserves for annuity contracts on benefit ................ 2,048,860 4,399,647 244,642
Capital surplus (Note C) ................................ -- -- --
-------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ........ $ 45,318,104 $4,553,102,850 $ 59,391,609
-------------- -------------- --------------
<CAPTION>
AGSPC AMERICAN AMERICAN
STATEMENTS OF NET ASSETS AGSPC GROWTH & CENTURY GENERAL
December 31, 1999 GROWTH INCOME ULTRA INTERNATIONAL
FUND - FUND - FUND - GROWTH FUND -
DIVISION 15 DIVISION 16 DIVISION 31 DIVISION 33
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market .......... $1,218,557,601 $ 336,589,500 $1,023,333,380 $ 6,847,182
Balance due from (to) VALIC general account .............. 104,803 34,010 3,260,572 11,199
Receivable (payable) for mutual fund sales (purchases) ... -- -- (1,172,899) --
-------------- -------------- -------------- --------------
NET ASSETS ............................................... $1,218,662,404 $ 336,623,510 $1,025,421,053 $ 6,858,381
-------------- -------------- -------------- --------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals with
right of reinvestment) ................................. $1,217,972,085 $ 336,543,298 $1,024,997,082 $ 824,550
Reserves for annuity contracts on benefit ................ 690,319 80,212 423,971 --
Capital surplus (Note C) ................................ -- -- -- 6,033,831
-------------- -------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ........ $1,218,662,404 $ 336,623,510 $1,025,421,053 $ 6,858,381
-------------- -------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1999
AMERICAN AMERICAN AMERICAN
GENERAL GENERAL GENERAL
MID CAP SMALL CAP SMALL CAP
VALUE FUND GROWTH FUND - VALUE FUND -
DIVISION 38 DIVISION 35 DIVISION 36
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market .......... $ 8,329,863 $ 16,642,631 $ 4,470,644
Balance due from (to) VALIC general account .............. 11,302 71,324 1,032
Receivable (payable) for mutual fund sales (purchases) ... -- -- --
-------------- -------------- --------------
NET ASSETS ............................................... $ 8,341,165 $ 16,713,955 $ 4,471,676
-------------- -------------- --------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals with
right of reinvestment) ................................. $ 2,264,145 $ 7,749,930 $ 267,346
Reserves for annuity contracts on benefit ................ -- -- --
Capital surplus (Note C) ................................ 6,077,020 8,964,025 4,204,330
-------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ........ $ 8,341,165 $ 16,713,955 $ 4,471,676
-------------- -------------- --------------
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1999
DREYFUS VARIABLE EVERGREEN EVERGREEN
INVESTMENT FUND - GROWTH AND SMALL CAP EVERGREEN
SMALL CAP INCOME VALUE VALUE
PORTFOLIO FUND - FUND - FUND -
DIVISION 18 DIVISION 56 DIVISION 55 DIVISION 57
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market .......... $ 779,491,073 $ 6,220 $ 243 $ 4,388
Balance due from (to) VALIC general account .............. (127,757) 24 (1) (3)
Receivable (payable) for mutual fund sales (purchases) ... 242,882 -- -- --
-------------- -------------- -------------- --------------
NET ASSETS ............................................... $ 779,606,198 $ 6,244 $ 242 $ 4,385
-------------- -------------- -------------- --------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals with
right of reinvestment) ................................. $ 779,288,796 $ 6,244 $ 242 $ 4,385
Reserves for annuity contracts on benefit ................ 317,402 -- -- --
Capital surplus (Note C) ................................ -- -- -- --
-------------- -------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ........ $ 779,606,198 $ 6,244 $ 242 $ 4,385
-------------- -------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1999
PUTNAM OTC & SCUDDER
EMERGING GROWTH AND T. ROWE PRICE
GROWTH INCOME SMALL-CAP STOCK
FUND - FUND - FUND -
DIVISION 27 DIVISION 21 DIVISION 51
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market .......... $ 431,252,004 $ 246,635,934 $ 8,738,757
Balance due from (to) VALIC general account .............. 1,081,239 293,361 18,110
Receivable (payable) for mutual fund sales (purchases) ... (671,496) (20,902) 1,147
-------------- -------------- --------------
NET ASSETS ............................................... $ 431,661,747 $ 246,908,393 $ 8,758,014
-------------- -------------- --------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals with
right of reinvestment) ................................. $ 431,575,216 $ 246,812,922 $ 8,758,014
Reserves for annuity contracts on benefit ................ 86,531 95,471 --
Capital surplus (Note C) ................................ -- -- --
-------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ........ $ 431,661,747 $ 246,908,393 $ 8,758,014
-------------- -------------- --------------
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1999
AMERICAN
TEMPLETON TEMPLETON VANGUARD GENERAL
FOREIGN INTERNATIONAL WINDSOR II BALANCED
FUND - FUND - FUND - FUND -
DIVISION 32 DIVISION 20 DIVISION 24 DIVISION 42
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market .......... $ 336,480,225 $ 817,303,148 $ 732,870,656 $ 9,953,676
Balance due from (to) VALIC general account .............. (232,426) 1,784,124 243,278 13,511
Receivable (payable) for mutual fund sales (purchases) ... 2,067,517 65,094 (258,676) --
-------------- -------------- -------------- --------------
NET ASSETS ............................................... $ 338,315,316 $ 819,152,366 $ 732,855,258 $ 9,967,187
-------------- -------------- -------------- --------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals with
right of reinvestment) ................................. $ 338,261,796 $ 818,845,742 $ 732,691,320 $ 3,280,905
Reserves for annuity contracts on benefit ................ 53,520 306,624 163,938 --
Capital surplus (Note C) ................................ -- -- -- 6,686,282
-------------- -------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ........ $ 338,315,316 $ 819,152,366 $ 732,855,258 $ 9,967,187
-------------- -------------- -------------- --------------
</TABLE>
<PAGE> 398
6 FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
AGSPC
STATEMENTS OF NET ASSETS VANGUARD GOVERNMENT
December 31, 1999 WELLINGTON AGSPC CAPITAL CONSERVATION FUND - SECURITIES
FUND - --------------------------------- FUND -
DIVISION 25 DIVISION 1 DIVISION 7 DIVISION 8
------------- ---------------- --------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ...................... $569,864,636 $ 5,194,143 $ 51,502,808 $ 93,312,643
Balance due from (to) VALIC general account .......................... (85,749) 9,160 21,200 (7,864)
Receivable (payable) for mutual fund sales (purchases) ............... 265,989 -- -- --
------------ ----------- ------------ ------------
NET ASSETS ........................................................... $570,044,876 $ 5,203,303 $ 51,524,008 $ 93,304,779
------------ ----------- ------------ ------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) ... $569,823,378 $ 5,199,068 $ 51,524,008 $ 93,304,779
Reserves for annuity contracts on benefit ............................ 221,498 4,235 -- --
Capital surplus (Note C) ............................................. -- -- -- --
------------ ----------- ------------ ------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS .................... $570,044,876 $ 5,203,303 $ 51,524,008 $ 93,304,779
------------ ----------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS AGSPC AGSPC AMERICAN
December 31, 1999 SCIENCE & SOCIAL GENERAL SOCIALLY
TECHNOLOGY AWARENESS RESPONSIBLE AGSPC MONEY
FUND - FUND - FUND - MARKET FUND -
DIVISION 17 DIVISION 12 DIVISION 41 DIVISION 2
-------------- ------------ ---------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ...................... $3,406,706,628 $618,968,226 $12,225,981 $4,167,220
Balance due from (to) VALIC general account .......................... 4,735,467 (46,958) 12,104 11,866
Receivable (payable) for mutual fund sales (purchases) ............... -- -- -- --
-------------- ------------ ----------- ----------
NET ASSETS ........................................................... $3,411,442,095 $618,921,268 $12,238,085 $4,179,086
-------------- ------------ ----------- ----------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) ... $3,410,138,310 $618,575,740 $ 4,669,512 $4,179,086
Reserves for annuity contracts on benefit ............................ 1,303,785 345,528 -- --
Capital surplus (Note C) ............................................. -- -- 7,568,573 --
-------------- ------------ ----------- ----------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS .................... $3,411,442,095 $618,921,268 $12,238,085 $4,179,086
-------------- ------------ ----------- ----------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS VANGUARD AGSPC
December 31, 1999 LIFESTRATEGY ASSET TEMPLETON
MODERATE ALLOCATION ALLOCATION
GROWTH FUND - FUND - FUND -
DIVISION 53 DIVISION 5 DIVISION 19
------------- ------------- -------------
<S> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ...................... $ 32,046,248 $ 260,891,195 $ 323,940,365
Balance due from (to) VALIC general account .......................... 132,784 162,943 (130,432)
Receivable (payable) for mutual fund sales (purchases) ............... (110,319) -- (131,537)
------------- ------------- -------------
NET ASSETS ........................................................... $ 32,068,713 $ 261,054,138 $ 323,678,396
------------- ------------- -------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) ... $ 32,068,713 $ 260,830,021 $ 323,294,066
Reserves for annuity contracts on benefit ............................ -- 224,117 384,330
Capital surplus (Note C) ............................................. -- -- --
------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS .................... $ 32,068,713 $ 261,054,138 $ 323,678,396
------------- ------------- -------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 399
SEPARATE ACCOUNT A 7
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1999 AGSPC AMERICAN AMERICAN AMERICAN
INTERNATIONAL GENERAL GENERAL GENERAL
GOVERNMENT CORE DOMESTIC HIGH YIELD
BOND FUND - BOND FUND - BOND FUND - BOND FUND -
DIVISION 13 DIVISION 58 DIVISION 43 DIVISION 60
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ...................... $ 149,120,828 $ 5,168,278 $ 1,830,628 $ 5,587,119
Balance due from (to) VALIC general account .......................... (1,784,215) 103 2,420 234
Receivable (payable) for mutual fund sales (purchases) ............... -- -- -- --
------------- ------------- ------------- -------------
NET ASSETS ........................................................... $ 147,336,613 $ 5,168,381 $ 1,833,048 $ 5,587,353
------------- ------------- ------------- -------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) ... $ 147,282,364 $ 65,708 $ 563,854 $ 149,820
Reserves for annuity contracts on benefit ............................ 54,249 -- -- --
Capital surplus (Note C) ............................................. -- 5,102,673 1,269,194 5,437,533
------------- ------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS .................... $ 147,336,613 $ 5,168,381 $ 1,833,048 $ 5,587,353
------------- ------------- ------------- -------------
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1999 AMERICAN
GENERAL VANGUARD VANGUARD
STRATEGIC LONG-TERM LONG-TERM
BOND FUND - CORPORATE FUND - TREASURY FUND -
DIVISION 59 DIVISION 22 DIVISION 23
------------- ---------------- ---------------
<S> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ...................... $ 5,506,171 $ 68,263,542 $ 141,856,062
Balance due from (to) VALIC general account .......................... 335 186,923 834,134
Receivable (payable) for mutual fund sales (purchases) ............... -- (11,709) (371,585)
------------- ------------- -------------
NET ASSETS ........................................................... $ 5,506,506 $ 68,438,756 $ 142,318,611
------------- ------------- -------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) ... $ 38,482 $ 68,397,606 $ 142,307,011
Reserves for annuity contracts on benefit ............................ -- 41,150 11,600
Capital surplus (Note C) ............................................. 5,468,024 -- --
------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS .................... $ 5,506,506 $ 68,438,756 $ 142,318,611
------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS AMERICAN AMERICAN
December 31, 1999 GENERAL GENERAL
AGSPC MONEY MONEY MARKET CONSERVATIVE GROWTH
MARKET FUND - FUND - LIFESTYLE FUND -
DIVISION 6 DIVISION 44 DIVISION 50
------------- ------------- -------------------
<S> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ...................... $ 459,787,520 $ 11,553,720 $ 8,699,095
Balance due from (to) VALIC general account .......................... (4,431,676) 28,543 19,787
Receivable (payable) for mutual fund sales (purchases) ............... -- -- --
------------- ------------- -------------
NET ASSETS ........................................................... $ 455,355,844 $ 11,582,263 $ 8,718,882
------------- ------------ --------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) ... $ 455,339,835 $ 6,257,572 $ 2,113,653
Reserves for annuity contracts on benefit ............................ 16,009 -- --
Capital surplus (Note C) ............................................. -- 5,324,691 6,605,229
------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS .................... $ 455,355,844 $ 11,582,263 $ 8,718,882
------------- ------------ --------------
<CAPTION>
STATEMENTS OF NET ASSETS AMERICAN AMERICAN
December 31, 1999 GENERAL GENERAL
GROWTH MODERATE GROWTH
LIFESTYLE FUND - LIFESTYLE FUND -
DIVISION 48 DIVISION 49
---------------- ----------------
<S> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ...................... $ 10,625,442 $ 12,526,733
Balance due from (to) VALIC general account .......................... 25,237 42,928
Receivable (payable) for mutual fund sales (purchases) ............... -- --
------------- -------------
NET ASSETS ........................................................... $ 10,650,679 $ 12,569,661
------------- -------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) ... $ 2,875,158 $ 5,505,583
Reserves for annuity contracts on benefit ............................ -- --
Capital surplus (Note C) ............................................. 7,775,521 7,064,078
------------- -------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS .................... $ 10,650,679 $ 12,569,661
------------- -------------
<CAPTION>
STATEMENTS OF NET ASSETS VANGUARD
December 31, 1999 LIFESTRATEGY VANGUARD
CONSERVATIVE LIFESTRATEGY
GROWTH FUND - GROWTH FUND -
DIVISION 54 DIVISION 52
-------------- --------------
<S> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ...................... $ 5,319,180 $ 24,913,522
Balance due from (to) VALIC general account .......................... 195,040 326,669
Receivable (payable) for mutual fund sales (purchases) ............... (189,439) (277,967)
------------- -------------
NET ASSETS ........................................................... $ 5,324,781 $ 24,962,224
------------- -------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) ... $ 5,324,781 $ 24,962,224
Reserves for annuity contracts on benefit ............................ -- --
Capital surplus (Note C) ............................................. -- --
------------- -------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS .................... $ 5,324,781 $ 24,962,224
------------- -------------
</TABLE>
<PAGE> 400
8 FINANCIAL STATEMENTS
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
AGSPC AGSPC AGSPC
INTERNATIONAL MIDCAP SMALL CAP
EQUITIES INDEX INDEX
FUND - FUND - FUND -
DIVISION 11 DIVISION 4 DIVISION 14 DIVISION 10A
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ............................ $ 1,788,128 $ 6,878,578 $ 2,414,127 $ 5,674,702
------------- ------------- ------------- -------------
EXPENSES:
Mortality and expense risk charge ...................... 1,510,709 8,083,887 2,143,563 5,630,338
Reimbursement of expenses .............................. -- -- -- --
------------- ------------- ------------- -------------
Total expenses ...................................... 1,510,709 8,083,887 2,143,563 5,630,338
------------- ------------- ------------- -------------
NET INVESTMENT INCOME (LOSS) ........................... 277,419 (1,205,309) 270,564 44,364
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments ....................... 10,094,468 54,717,361 15,168,549 50,306,023
Capital gains distributions from mutual funds .......... 8,117,049 194,003,989 21,011,129 4,737,369
Net unrealized appreciation (depreciation)
of investments during the period .................... 20,902,728 (141,415,147) 4,167,711 45,440,162
------------- ------------- ------------- -------------
Net realized and unrealized gain on investments ........ 39,114,245 107,306,203 40,347,389 100,483,554
------------- ------------- ------------- -------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ........................... $ 39,391,664 $ 106,100,894 $ 40,617,953 $ 100,527,918
------------- ------------- ------------- -------------
</TABLE>
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN AMERICAN
GENERAL GENERAL GENERAL GENERAL
INTERNATIONAL LARGE CAP LARGE CAP MID CAP
VALUE FUND - GROWTH FUND - VALUE FUND - GROWTH FUND -
DIVISION 34 DIVISION 39 DIVISION 40 DIVISION 37
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ............................ $ 72,614 $ 8,826 $ 47,885 $ --
------------- ------------- ------------- -------------
EXPENSES:
Mortality and expense risk charge ...................... 2,951 55,394 3,021 4,606
Reimbursement of expenses .............................. (813) (22,462) (988) (1,410)
------------- ------------- ------------- -------------
Total expenses ...................................... 2,138 32,932 2,033 3,196
------------- ------------- ------------- -------------
NET INVESTMENT INCOME (LOSS) ........................... 70,476 (24,106) 45,852 (3,196)
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments ....................... 50,532 196,164 63,723 21,955
Capital gains distributions from mutual funds .......... 358,216 634,398 650,214 710,827
Net unrealized appreciation (depreciation)
of investments during the period .................... 2,597,347 3,810,394 (552,152) (258,735)
------------- ------------- ------------- -------------
Net realized and unrealized gain (loss)on investments .. 3,006,095 4,640,956 161,785 474,047
------------- ------------- ------------- -------------
INCREASE (DECREASE)IN NET ASSETS
RESULTING FROM OPERATIONS ........................... $ 3,076,571 $ 4,616,850 $ 207,637 $ 470,851
------------- ------------- ------------- -------------
</TABLE>
(*)Since inception January 4, 1999.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 401
SEPARATE ACCOUNT A 9
<TABLE>
<CAPTION>
AGSPC
AGSPC STOCK INDEX FUND - GROWTH
------------------------------------------------ FUND -
DIVISION 10B DIVISION 10C DIVISION 10D DIVISION 15
----------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ............................... $ 438,856 $ 39,607,878 $ 576,997 $ --
----------- ------------- ------------ -------------
EXPENSES:
Mortality and expense risk charge ......................... 223,569 38,759,190 572,435 11,859,802
Reimbursement of expenses ................................. (94,122) -- -- --
----------- ------------- ------------ -------------
Total expenses ........................................... 129,447 38,759,190 572,435 11,859,802
----------- ------------- ------------ -------------
NET INVESTMENT INCOME (LOSS) .............................. 309,409 848,688 4,562 (11,859,802)
----------- ------------- ------------ -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments .......................... 5,087,126 58,888,546 6,938,320 65,180,424
Capital gains distributions from mutual funds ............. 362,359 36,367,266 471,902 50,296,770
Net unrealized appreciation (depreciation)
of investments during the period ....................... 2,257,759 612,628,344 2,683,181 (29,390,145)
----------- ------------- ------------ -------------
Net realized and unrealized gain on investments ........... 7,707,244 707,884,156 10,093,403 86,087,049
----------- ------------- ------------ -------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .............................. $ 8,016,653 $ 708,732,844 $ 10,097,965 $ 74,227,247
----------- ------------- ------------ -------------
<CAPTION>
AGSPC AMERICAN
GROWTH & AMERICAN CENTURY GENERAL
INCOME ULTRA INTERNATIONAL
FUND - FUND - GROWTH FUND -
DIVISION 16 DIVISION 31 DIVISION 33
------------ ------------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ............................... $ 1,240,444 $ -- $ 84,670
------------ ------------- -----------
EXPENSES:
Mortality and expense risk charge ......................... 3,039,334 7,951,342 1,814
Reimbursement of expenses ................................. -- (1,545,916) (630)
------------ ------------- -----------
Total expenses ........................................... 3,039,334 6,405,426 1,184
------------ ------------- -----------
NET INVESTMENT INCOME (LOSS) .............................. (1,798,890) (6,405,426) 83,486
------------ ------------- -----------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments .......................... 14,837,619 5,962,303 12,371
Capital gains distributions from mutual funds ............. 33,787,657 29,663,737 179,573
Net unrealized appreciation (depreciation)
of investments during the period ....................... 13,472,567 227,838,963 2,105,762
------------ ------------- -----------
Net realized and unrealized gain on investments ........... 62,097,843 263,465,003 2,297,706
------------ ------------- -----------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .............................. $ 60,298,953 $ 257,059,577 $ 2,381,192
------------ ------------- -----------
</TABLE>
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN DREYFUS VARIABLE
GENERAL GENERAL GENERAL INVESTMENT FUND-
MID CAP SMALL CAP SMALL CAP SMALL CAP
VALUE FUND - GROWTH FUND - VALUE FUND - PORTFOLIO -
DIVISION 38 DIVISION 35 DIVISION 36 DIVISION 18
----------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ............................... $ 39,296 $ -- $ 56,427 $ 550,577
----------- ------------- ------------ -------------
EXPENSES:
Mortality and expense risk charge ......................... 8,195 17,485 1,592 9,073,382
Reimbursement of expenses ................................. (3,000) (6,824) (445) (1,114,672)
----------- ------------- ------------ -------------
Total expenses ............................................ 5,195 10,661 1,147 7,958,710
----------- ------------- ------------ -------------
NET INVESTMENT INCOME (LOSS) .............................. 34,101 (10,661) 55,280 (7,408,133)
----------- ------------- ------------ -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments .......................... 156,954 128,821 6,489 63,772,555
Capital gains distributions from mutual funds ............. 1,894,986 1,115,791 145,670 --
Net unrealized appreciation (depreciation)
of investments during the period ....................... (764,242) 4,835,156 (493,258) 89,787,753
----------- ------------- ------------ -------------
Net realized and unrealized gain (loss)on investments ..... 1,287,698 6,079,768 (341,099) 153,560,308
----------- ------------- ------------ -------------
INCREASE (DECREASE)IN NET ASSETS
RESULTING FROM OPERATIONS .............................. $ 1,321,799 $ 6,069,107 $ (285,819) $ 146,152,175
----------- ------------- ------------ -------------
<CAPTION>
EVERGREEN EVERGREEN
GROWTH SMALL CAP EVERGREEN
AND INCOME VALUE VALUE
FUND - FUND - FUND -
DIVISION 56(*) DIVISION 55(*) DIVISION 57(*)
------------ ------------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ............................... $ -- $ -- $ 11
------------ ------------- -----------
EXPENSES:
Mortality and expense risk charge ......................... 5 -- 9
Reimbursement of expenses ................................. -- -- (2)
------------ ------------- -----------
Total expenses ............................................ 5 -- 7
------------ ------------- -----------
NET INVESTMENT INCOME (LOSS) .............................. (5) -- 4
------------ ------------- -----------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments .......................... 31 -- --
Capital gains distributions from mutual funds ............. 7 -- 262
Net unrealized appreciation (depreciation)
of investments during the period ....................... 370 -- (319)
------------ ------------- -----------
Net realized and unrealized gain (loss)on investments ..... 408 -- (57)
------------ ------------- -----------
INCREASE (DECREASE)IN NET ASSETS
RESULTING FROM OPERATIONS .............................. $ 403 $ -- $ (53)
------------ ------------- -----------
</TABLE>
<PAGE> 402
10 FINANCIAL STATEMENTS
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
DREYFUS NEUBERGER PUTNAM PUTNAM
FOUNDERS BERMAN GLOBAL NEW
GROWTH GUARDIAN GROWTH OPPORTUNITIES
FUND - TRUST - FUND - FUND -
DIVISION 30 DIVISION 29 DIVISION 28 DIVISION 26
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ -- $ 461,168 $ -- $ --
------------- ------------- ------------- -------------
EXPENSES:
Mortality and expense risk charge .......................... 7,395,427 763,578 3,336,299 7,275,209
Reimbursement of expenses .................................. (1,510,809) (153,822) (678,613) (1,481,777)
------------- ------------- ------------- -------------
Total expenses .......................................... 5,884,618 609,756 2,657,686 5,793,432
------------- ------------- ------------- -------------
NET INVESTMENT INCOME (LOSS) ............................... (5,884,618) (148,588) (2,657,686) (5,793,432)
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .................... 4,207,339 232,115 4,532,574 5,405,004
Capital gains distributions from mutual funds .............. 127,949,776 10,764,888 43,772,448 73,606,083
Net unrealized appreciation (depreciation)
of investments during the period ........................ 95,948,371 (6,452,929) 131,823,273 313,953,044
------------- ------------- ------------- -------------
Net realized and unrealized gain (loss) on investments ..... 228,105,486 4,544,074 180,128,295 392,964,131
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 222,220,868 $ 4,395,486 $ 177,470,609 $ 387,170,699
------------- ------------- ------------- -------------
</TABLE>
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
VANGUARD AGSPC
WELLINGTON AGSPC CAPITAL CONSERVATION FUND - GOVERNMENT
FUND - --------------------------------- SECURITIES FUND -
DIVISION 25 DIVISION 1 DIVISION 7 DIVISION 8
------------- --------------- -------------- -----------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ 20,439,202 $ 372,745 $ 3,588,581 $ 5,630,206
------------- ------------- ------------- -------------
EXPENSES:
Mortality and expense risk charge .......................... 6,330,047 58,712 562,336 1,043,310
Reimbursement of expenses .................................. -- -- -- --
------------- ------------- ------------- -------------
Total expenses .......................................... 6,330,047 58,712 562,336 1,043,310
------------- ------------- ------------- -------------
NET INVESTMENT INCOME ...................................... 14,109,155 314,033 3,026,245 4,586,896
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .................... 1,861,183 (76,164) 8,827 661,487
Capital gains distributions from mutual funds .............. 28,847,888 -- -- --
Net unrealized depreciation
of investments during the period ........................ (30,879,706) (326,155) (3,853,099) (9,319,026)
------------- ------------- ------------- -------------
Net realized and unrealized loss on investments ............ (170,635) (402,319) (3,844,272) (8,657,539)
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 13,938,520 $ (88,286) $ (818,027) $ (4,070,643)
------------- ------------- ------------- -------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 403
SEPARATE ACCOUNT A 11
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS PUTNAM OTC & SCUDDER
For the Year Ended December 31, 1999 EMERGING GROWTH AND T. ROWE PRICE TEMPLETON
GROWTH INCOME SMALL-CAP FOREIGN
FUND - FUND - STOCK FUND - FUND -
DIVISION 27 DIVISION 21 DIVISION 51 DIVISION 32
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ -- $ 4,675,796 $ 28,773 $ 8,916,410
------------- ------------- ------------- -------------
EXPENSES:
Mortality and expense risk charge .......................... 2,422,441 3,097,648 49,327 3,329,351
Reimbursement of expenses .................................. (488,210) (624,445) -- (1,967,750)
------------- ------------- ------------- -------------
Total expenses .......................................... 1,934,231 2,473,203 49,327 1,361,601
------------- ------------- ------------- -------------
NET INVESTMENT INCOME (LOSS) ............................... (1,934,231) 2,202,593 (20,554) 7,554,809
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .................... 9,704,876 3,895,314 40,991 (2,951,879)
Capital gains distributions from mutual funds .............. 20,649,440 6,380,872 320,107 2,706,922
Net unrealized appreciation (depreciation)
of investments during the period ........................ 182,753,857 (283,526) 1,008,645 80,764,072
------------- ------------- ------------- -------------
Net realized and unrealized gain (loss) on investments ..... 213,108,173 9,992,660 1,369,743 80,519,115
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 211,173,942 $ 12,195,253 $ 1,349,189 $ 88,073,924
------------- ------------- ------------- -------------
<CAPTION>
STATEMENTS OF OPERATIONS TEMPLETON VANGUARD AMERICAN
For the Year Ended December 31, 1999 INTERNATIONAL WINDSOR II GENERAL
FUND - FUND - BALANCED FUND -
DIVISION 20 DIVISION 24 DIVISION 42
------------- ------------- ---------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ 20,611,275 $ 17,860,760 $ 196,132
------------- ------------- -------------
EXPENSES:
Mortality and expense risk charge .......................... 9,363,281 9,472,517 12,085
Reimbursement of expenses .................................. -- -- (4,448)
------------- ------------- -------------
Total expenses .......................................... 9,363,281 9,472,517 7,637
------------- ------------- -------------
NET INVESTMENT INCOME (LOSS) ............................... 11,247,994 8,388,243 188,495
------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .................... 48,058,679 6,166,843 30,618
Capital gains distributions from mutual funds .............. 71,597,060 67,184,211 432,947
Net unrealized appreciation (depreciation)
of investments during the period ........................ 22,890,344 (144,035,946) 350,211
------------- ------------- -------------
Net realized and unrealized gain (loss) on investments ..... 142,546,083 (70,684,892) 813,776
------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 153,794,077 $ (62,296,649) $ 1,002,271
------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS AGSPC AMERICAN AMERICAN AMERICAN
For the Year Ended December 31, 1999 INTERNATIONAL GENERAL GENERAL GENERAL
GOVERNMENT CORE DOMESTIC HIGH YIELD
BOND FUND - BOND FUND - BOND FUND - BOND FUND -
DIVISION 13 DIVISION 58 DIVISION 43 DIVISION 60
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ 5,352,492 $ 321,342 $ 100,593 $ 491,864
------------- ------------- ------------- -------------
EXPENSES:
Mortality and expense risk charge .......................... 1,576,167 483 2,594 937
Reimbursement of expenses .................................. -- (123) (907) (234)
------------- ------------- ------------- -------------
Total expenses .......................................... 1,576,167 360 1,687 703
------------- ------------- ------------- -------------
NET INVESTMENT INCOME ...................................... 3,776,325 320,982 98,906 491,161
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .................... 1,059,581 (446) (7,296) (357)
Capital gains distributions from mutual funds .............. 103,421 -- 36 --
Net unrealized depreciation
of investments during the period ........................ (16,515,559) (380,782) (139,402) (333,976)
------------- ------------- ------------- -------------
Net realized and unrealized loss on investments ............ (15,352,557) (381,228) (146,662) (334,333)
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ (11,576,232) $ (60,246) $ (47,756) $ 156,828
------------- ------------- ------------- -------------
<CAPTION>
STATEMENTS OF OPERATIONS AMERICAN
For the Year Ended December 31, 1999 GENERAL VANGUARD VANGUARD
STRATEGIC LONG-TERM LONG-TERM
BOND FUND - CORPORATE FUND - TREASURY FUND -
DIVISION 59 DIVISION 22 DIVISION 23
------------- ---------------- --------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ 414,269 $ 4,408,788 $ 8,420,055
------------- ------------- -------------
EXPENSES:
Mortality and expense risk charge .......................... 118 825,583 1,766,917
Reimbursement of expenses .................................. (47) (168,423) (354,616)
------------- ------------- -------------
Total expenses .......................................... 71 657,160 1,412,301
------------- ------------- -------------
NET INVESTMENT INCOME ...................................... 414,198 3,751,628 7,007,754
------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .................... 7 (398,632) (687,054)
Capital gains distributions from mutual funds .............. -- 410,483 1,589,174
Net unrealized depreciation
of investments during the period ........................ (211,104) (8,721,370) (21,800,390)
------------- ------------- -------------
Net realized and unrealized loss on investments ............ (211,097) (8,709,519) (20,898,270)
------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 203,101 $ (4,957,891) $ (13,890,516)
------------- ------------- -------------
</TABLE>
<PAGE> 404
12 FINANCIAL STATEMENTS
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
AGSPC AGSPC AMERICAN
SCIENCE & SOCIAL GENERAL SOCIALLY
TECHNOLOGY AWARENESS RESPONSIBLE AGSPC MONEY
FUND - FUND - FUND - MARKET FUND -
DIVISION 17 DIVISION 12 DIVISION 41 DIVISION 2
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ -- $ 4,238,975 $ 89,881 $ 206,849
--------------- --------------- --------------- ---------------
EXPENSES:
Mortality and expense risk charge .......................... 19,907,095 5,292,189 16,648 44,475
Reimbursement of expenses .................................. -- -- (6,574) --
--------------- --------------- --------------- ---------------
Total expenses .......................................... 19,907,095 5,292,189 10,074 44,475
--------------- --------------- --------------- ---------------
NET INVESTMENT INCOME (LOSS) ............................... (19,907,095) (1,053,214) 79,807 162,374
--------------- --------------- --------------- ---------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .................... 30,613,817 8,179,859 64,508 --
Capital gains distributions from mutual funds .............. 328,749,980 22,439,556 391,925 --
Net unrealized appreciation (depreciation)
of investments during the period ........................ 1,226,217,782 57,407,741 1,103,235 --
--------------- --------------- --------------- ---------------
Net realized and unrealized gain on investments ............ 1,585,581,579 88,027,156 1,559,668 --
--------------- --------------- --------------- ---------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 1,565,674,484 $ 86,973,942 $ 1,639,475 $ 162,374
--------------- --------------- --------------- ---------------
</TABLE>
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
VANGUARD
LIFESTRATEGY AGSPC TEMPLETON
MODERATE ASSET ALLOCATION ASSET ALLOCATION
GROWTH FUND - FUND - FUND -
DIVISION 53 DIVISION 5 DIVISION 19
--------------- --------------- -----------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ 770,171 $ 6,836,435 $ 6,944,378
--------------- --------------- ---------------
EXPENSES:
Mortality and expense risk charge .......................... 159,058 2,472,653 3,749,394
Reimbursement of expenses .................................. -- -- --
--------------- --------------- ---------------
Total expenses .......................................... 159,058 2,472,653 3,749,394
--------------- --------------- ---------------
NET INVESTMENT INCOME ...................................... 611,113 4,363,782 3,194,984
--------------- --------------- ---------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments ........................... 29,492 4,428,516 14,669,025
Capital gains distributions from mutual funds .............. 218,753 4,417,585 38,640,994
Net unrealized appreciation
of investments during the period ........................ 1,470,942 11,930,044 4,197,098
--------------- --------------- ---------------
Net realized and unrealized gain on investments ............ 1,719,187 20,776,145 57,507,117
--------------- --------------- ---------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 2,330,300 $ 25,139,927 $ 60,702,101
--------------- --------------- ---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 405
SEPARATE ACCOUNT A 13
<TABLE>
<CAPTION>
AMERICAN
AMERICAN GENERAL AMERICAN
GENERAL CONSERVATIVE GENERAL
AGSPC MONEY MONEY GROWTH GROWTH
MARKET FUND - MARKET FUND - LIFESTYLE FUND - LIFESTYLE FUND -
DIVISION 6 DIVISION 44 DIVISION 50 DIVISION 48
------------- ------------- ---------------- ----------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ 16,641,083 $ 411,008 $ 607,373 $ 749,801
------------- ------------- ------------- -------------
EXPENSES:
Mortality and expense risk charge .......................... 3,483,010 34,077 8,112 9,678
Reimbursement of expenses .................................. -- (9,035) (3,080) (3,858)
------------- ------------- ------------- -------------
Total expenses .......................................... 3,483,010 25,042 5,032 5,820
------------- ------------- ------------- -------------
NET INVESTMENT INCOME (LOSS)................................ 13,158,073 385,966 602,341 743,981
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .................... -- -- 895,570 63,773
Capital gains distributions from mutual funds .............. -- -- 1,025,645 323,571
Net unrealized appreciation (depreciation)
of investments during the period ........................ -- -- (1,418,604) 1,217,409
------------- ------------- ------------- -------------
Net realized and unrealized gain on investments ............ -- -- 502,611 1,604,753
------------- ------------- ------------- -------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........... $ 13,158,073 $ 385,966 $ 1,104,952 $ 2,348,734
------------- ------------- ------------- -------------
<CAPTION>
AMERICAN
GENERAL VANGUARD
MODERATE LIFESTRATEGY VANGUARD
GROWTH CONSERVATIVE LIFESTRATEGY
LIFESTYLE FUND - GROWTH FUND - GROWTH FUND -
DIVISION 49 DIVISION 54 DIVISION 52
---------------- ------------- -------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ 932,507 $ 159,968 $ 431,935
------------- ------------- -------------
EXPENSES:
Mortality and expense risk charge .......................... 20,370 27,564 123,427
Reimbursement of expenses .................................. (8,167) -- --
------------- ------------- -------------
Total expenses .......................................... 12,203 27,564 123,427
------------- ------------- -------------
NET INVESTMENT INCOME ...................................... 920,304 132,404 308,508
------------- ------------- -------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments ........................... 83,407 (924) 57,727
Capital gains distributions from mutual funds .............. 389,591 35,147 177,605
Net unrealized appreciation
of investments during the period ........................ 497,038 68,926 2,002,755
------------- ------------- -------------
Net realized and unrealized gain on investments ............ 970,036 103,149 2,238,087
------------- ------------- -------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........... $ 1,890,340 $ 235,553 $ 2,546,595
------------- ------------- -------------
</TABLE>
<PAGE> 406
14 FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC
INTERNATIONAL EQUITIES AGSPC MIDCAP INDEX
FUND - DIVISION 11 FUND - DIVISION 4
----------------------------- ------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER, 31 DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ..................................... $ 277,419 $ 1,608,036 $ (1,205,309) $ (689,428)
Net realized gain on investments ................................. 10,094,468 4,716,155 54,717,361 26,826,443
Capital gains distributions from mutual funds .................... 8,117,049 11,021,627 194,003,989 69,472,796
Net unrealized appreciation (depreciation)
of investments during the period ................................ 20,902,728 7,346,991 (141,415,147) 30,964,965
------------- ------------- ------------- -------------
Increase (decrease) in net assets resulting from operations .... 39,391,664 24,692,809 106,100,894 126,574,776
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................ 11,942,025 14,604,832 63,479,375 71,049,146
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................... (9,905,756) (9,033,065) (51,522,548) (37,639,412)
Annuity.benefit payments ......................................... (18,915) (17,602) (30,425) (23,570)
Amounts transferred interdivision, and from (to)
VALIC general account ........................................... (12,646,032) (33,973,374) (91,656,730) (40,068,991)
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ......................... (10,628,678) (28,419,209) (79,730,328) (6,682,827)
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .......................... 28,762,986 (3,726,400) 26,370,566 119,891,949
NET ASSETS:
Beginning of period .............................................. 148,274,382 152,000,782 850,505,634 730,613,685
------------- ------------- ------------- -------------
End of period .................................................... $ 177,037,368 $ 148,274,382 $ 876,876,200 $ 850,505,634
------------- ------------- ------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ........................... 101,811,751 122,716,744 169,039,887 171,065,657
Purchase payments ................................................ 7,577,362 10,549,627 12,121,341 16,010,438
Surrenders ....................................................... (6,375,893) (6,694,955) (9,823,005) (8,724,789)
Transfers - interdivision and from (to) VALIC general account .... (7,974,390) (24,759,665) (18,280,774) (9,311,419)
------------- ------------- ------------- -------------
Total units outstanding, end of period ........................... 95,038,830 101,811,751 153,057,449 169,039,887
------------- ------------ ------------- -------------
Units outstanding, by class:
Standard units .................................................. 94,415,343 101,811,751 151,288,816 169,039,887
Enhanced units:
20 bp.reduced .................................................. 348,851 -- 523,908 --
40 bp.reduced .................................................. 274,636 -- 1,244,725 --
------------- ------------ ------------- -------------
Accumulation units end of period ................................. 95,038,830 101,811,751 153,057,449 169,039,887
------------- ------------ ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................... $ 1.860227 $ 1.454644 $ 5.721920 $ 5.029093
Enhanced unit:
20 bp.reduced .................................................. 1.898106 -- 5.908866 --
40 bp.reduced .................................................. 1.937488 -- 6.116544 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 407
SEPARATE ACCOUNT A 15
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND -
AGSPC SMALL CAP -----------------------------
INDEX FUND - DIVISION 14 DIVISION 10A
----------------------------- -----------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ..................................... 270,564 $ 322,094 $ 44,364 $ 1,035,631
Net realized gain on investments ................................. 15,168,549 8,661,321 50,306,023 36,292,713
Capital gains distributions from mutual funds .................... 21,011,129 18,436,501 4,737,369 2,140,138
Net unrealized appreciation (depreciation)
of investments during the period ................................ 4,167,711 (34,899,835) 45,440,162 82,035,996
------------ ------------- ------------ ------------
Increase (decrease) in net assets resulting from operations .... 40,617,953 (7,479,919) 100,527,918 121,504,478
------------ ------------- ------------ ------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................ 23,105,395 28,153,952 2,842,259 4,116,842
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................... (13,990,673) (11,145,100) (40,751,241) (30,874,894)
Annuity benefit payments ......................................... (8,736) (7,293) (2,202,048) (1,996,857)
Amounts transferred interdivision, and from (to)
VALIC general account ........................................... (34,222,314) (13,919,719) (18,047,475) (14,779,077)
------------ ------------- ------------ ------------
Increase (decrease) in net assets
resulting from principal transactions ........................ (25,116,328) 3,081,840 (58,158,505) (43,533,986)
------------ ------------- ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .......................... 15,501,625 (4,398,079) 42,369,413 77,970,492
NET ASSETS:
Beginning of period .............................................. 225,670,671 230,068,750 547,753,875 469,783,383
------------ ------------- ------------ ------------
End of period .................................................... 241,172,296 $ 225,670,671 $590,123,288 $547,753,875
------------ ------------- ------------ ------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ........................... 107,379,840 106,279,077 23,726,504 25,835,933
Purchase payments ................................................ 10,679,162 13,084,095 117,449 206,729
Surrenders ....................................................... (6,306,665) (5,229,338) (1,676,844) (1,549,859)
Transfers - interdivision and from (to) VALIC general account..... (16,249,038) (6,753,994) (745,734) (766,299)
------------ ------------- ------------ ------------
Total units outstanding, end of period ........................... 95,503,299 107,379,840 21,421,375 23,726,504
------------ ------------- ------------ ------------
Units outstanding, by class:
Standard units .................................................. 94,031,183 107,321,015 21,421,375 23,726,504
Enhanced units:
20 bp reduced .................................................. 522,127 58,825 -- --
40 bp reduced .................................................. 949,989 -- -- --
------------ ------------- ------------ ------------
Accumulation units end of period ................................. 95,503,299 107,379,840 21,421,375 23,726,504
------------ ------------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND -
--------------------------------
DIVISION 10B
--------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) ............................................ $ 309,409 $ 358,014
Net realized gain on investments ........................................ 5,087,126 2,895,173
Capital gains distributions from mutual funds ........................... 362,359 166,018
Net unrealized appreciation (depreciation)
of investments during the period ....................................... 2,257,759 6,394,969
----------- -----------
Increase (decrease) in net assets resulting from operations ........... 8,016,653 9,814,174
----------- -----------
PRINCIPAL TRANSACTIONS:
Purchase payments ....................................................... 152,691 204,507
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ....................................... (4,474,719) (2,153,577)
Annuity benefit payments ................................................ (371,146) (327,696)
Amounts transferred interdivision, and from (to)
VALIC general account .................................................. (554,251) (1,934,563)
----------- -----------
Increase (decrease) in net assets
resulting from principal transactions ................................ (5,247,425) (4,211,329)
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS ................................. 2,769,228 5,602,845
NET ASSETS:
Beginning of period ..................................................... 42,548,876 36,946,031
----------- -----------
End of period ........................................................... $45,318,104 $42,548,876
----------- -----------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .................................. 1,131,113 1,256,974
Purchase payments ....................................................... 3,915 6,328
Surrenders .............................................................. (115,209) (68,344)
Transfers - interdivision and from (to) VALIC general account............ (14,204) (63,845)
----------- -----------
Total units outstanding, end of period .................................. 1,005,615 1,131,113
----------- -----------
Units outstanding, by class:
Standard units ......................................................... 1,005,615 1,131,113
Enhanced units:
20 bp reduced ......................................................... -- --
40 bp reduced ......................................................... -- --
----------- -----------
Accumulation units end of period ........................................ 1,005,615 1,131,113
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ...................... $2.522643 $2.100506 $26.836368 $22.479709 $43.027665 $35.792019
Enhanced unit:
20 bp reduced ...................... 2.558263 2.125983 -- -- -- --
40 bp reduced ...................... 2.597863 -- -- -- -- --
</TABLE>
<PAGE> 408
16 FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND -
---------------------------------------------------------------
DIVISION 10C DIVISION 10D
-------------------------------- ---------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
-------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................... $ 848,688 $ 5,965,482 $ 4,562 $ 105,740
Net realized gain on investments ................................ 58,888,546 21,789,375 6,938,320 4,368,980
Capital gains distributions from mutual funds ................... 36,367,266 13,033,369 471,902 219,975
Net unrealized appreciation (depreciation)
of investments during the period .............................. 612,628,344 631,036,013 2,683,181 7,900,957
-------------- -------------- ----------- -----------
Increase in net assets resulting from operations ............ 708,732,844 671,824,239 10,097,965 12,595,652
-------------- -------------- ----------- -----------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 544,822,404 372,858,039 535,672 654,342
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (226,510,857) (130,840,043) (4,345,956) (3,879,247)
Annuity benefit payments ........................................ (262,614) (164,035) (18,611) (15,905)
Amounts transferred interdivision, and from (to)
VALIC general account ......................................... 189,528,934 112,786,439 (3,390,505) (2,514,825)
-------------- -------------- ----------- -----------
Increase (decrease) in net assets
resulting from principal transactions ...................... 507,577,867 354,640,400 (7,219,400) (5,755,635)
-------------- -------------- ----------- -----------
TOTAL INCREASE IN NET ASSETS .................................... 1,216,310,711 1,026,464,639 2,878,565 6,840,017
NET ASSETS:
Beginning of period ............................................. 3,336,792,139 2,310,327,500 56,513,044 49,673,027
-------------- -------------- ----------- -----------
End of period ................................................... 4,553,102,850 3,336,792,139 $59,391,609 $56,513,044
-------------- -------------- ----------- -----------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... 698,570,695 615,053,124 6,655,796 7,438,537
Purchase payments ............................................... 102,379,268 85,764,962 65,246 88,428
Surrenders ...................................................... (41,417,044) (29,978,801) (477,997) (521,941)
Transfers - interdivision and from (to) VALIC general account ... 37,936,626 27,731,410 (384,522) (349,228)
-------------- -------------- ----------- -----------
Total units outstanding, end of period .......................... 797,469,545 698,570,695 5,858,523 6,655,796
-------------- -------------- ----------- -----------
Units outstanding, by class:
Standard units ................................................ 766,975,696 691,680,049 5,858,523 6,655,796
Enhanced units:
20 bp reduced ............................................... 18,855,858 6,859,835 -- --
40 bp reduced ............................................... 11,637,991 30,811 -- --
-------------- -------------- ----------- -----------
Accumulation units end of period ................................ 797,469,545 698,570,695 5,858,523 6,655,796
-------------- -------------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................. 5.696582 $ 4.772052 $10.095883 $ 8.457722
Enhanced unit:
20 bp reduced ............................................... 5.830950 4.875028 -- --
40 bp reduced ............................................... 5.981762 4.991135 -- --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 409
SEPARATE ACCOUNT A 17
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC GROWTH AGSPC GROWTH & INCOME
FUND - DIVISION 15 FUND - DIVISION 16
-------------------------------- ----------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
-------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ................................... $ (11,859,802) $ (10,623,737) $ (1,798,890) $ (1,424,066)
Net realized gain on investments ............................... 65,180,424 11,720,556 14,837,619 10,494,295
Capital gains distributions from mutual funds .................. 50,296,770 51,517,534 33,787,657 20,275,426
Net unrealized appreciation (depreciation)
of investments during the period ............................. (29,390,145) 114,925,718 13,472,567 3,996,252
-------------- -------------- ------------ ------------
Increase in net assets resulting from operations ........... 74,227,247 167,540,071 60,298,953 33,341,907
-------------- -------------- ------------ ------------
PRINCIPAL TRANSACTIONS:
Purchase payments .............................................. 161,308,154 183,983,180 32,568,050 39,532,854
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................ (68,528,954) (45,145,966) (19,456,775) (11,951,930)
Annuity benefit payments ....................................... (35,876) (23,099) (6,042) (3,597)
Amounts transferred interdivision, and from (to)
VALIC general account ........................................ (161,568,773) (34,517,049) (22,008,587) (32,787,298)
-------------- -------------- ------------ ------------
Increase (decrease) in net assets
resulting from principal transactions ..................... (68,825,449) 104,297,066 (8,903,354) (5,209,971)
-------------- -------------- ------------ ------------
TOTAL INCREASE IN NET ASSETS ................................... 5,401,798 271,837,137 51,395,599 28,131,936
NET ASSETS:
Beginning of period ............................................ 1,213,260,606 941,423,469 285,227,911 257,095,975
-------------- -------------- ------------ ------------
End of period .................................................. $1,218,662,404 $1,213,260,606 $336,623,510 $285,227,911
-------------- -------------- ------------ ------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ......................... 499,326,366 453,172,490 129,550,695 132,434,555
Purchase payments .............................................. 65,108,607 82,864,073 13,413,749 19,715,398
Surrenders ..................................................... (27,017,879) (20,670,419) (7,982,974) (6,142,924)
Transfers - interdivision and from (to) VALIC general account .. (65,896,980) (16,039,778) (9,286,745) (16,456,334)
-------------- -------------- ------------ ------------
Total units outstanding, end of period ......................... 471,520,114 499,326,366 125,694,725 129,550,695
-------------- -------------- ------------ ------------
Units outstanding, by class:
Standard units ............................................... 460,108,285 494,997,997 124,329,201 129,550,695
Enhanced units:
20 bp reduced .............................................. 8,377,232 4,324,799 660,621 --
40 bp reduced .............................................. 3,034,597 3,570 704,903 --
-------------- -------------- ------------ ------------
Accumulation units end of period ............................... 471,520,114 499,326,366 125,694,725 129,550,695
-------------- -------------- ------------ ------------
<CAPTION>
AMERICAN CENTURY AMERICAN GENERAL INTERNATIONAL
ULTRA FUND - DIVISION 31 GROWTH FUND - DIVISION 33
------------------------------ ------------------------------
FOR THE FOR THE FOR THE FOR THE PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED AUGUST 26, 1998
DECEMBER 31, DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
-------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ................................... $ (6,405,426) $ (2,282,917) $ 83,486 $ --
Net realized gain on investments ............................... 5,962,303 473,963 12,371 --
Capital gains distributions from mutual funds .................. 29,663,737 30,532,354 179,573 --
Net unrealized appreciation (depreciation)
of investments during the period ............................. 227,838,963 39,033,600 2,105,762 200,750
-------------- ------------ ----------- -----------
Increase in net assets resulting from operations ........... 257,059,577 67,757,000 2,381,192 200,750
-------------- ------------ ----------- -----------
PRINCIPAL TRANSACTIONS:
Purchase payments .............................................. 209,997,538 95,865,928 407,427 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................ (30,465,801) (6,987,387) (14,716) --
Annuity benefit payments ....................................... (8,296) (1,933) -- --
Amounts transferred interdivision, and from (to)
VALIC general account ........................................ 221,997,706 86,438,332 233,728 3,650,000
-------------- ------------ ----------- -----------
Increase (decrease) in net assets
resulting from principal transactions ..................... 401,521,147 175,314,940 626,439 3,650,000
-------------- ------------ ----------- -----------
TOTAL INCREASE IN NET ASSETS ................................... 658,580,724 243,071,940 3,007,631 3,850,750
NET ASSETS:
Beginning of period ............................................ 366,840,329 123,768,389 3,850,750 --
-------------- ------------ ----------- -----------
End of period .................................................. $1,025,421,053 $366,840,329 $ 6,858,381 $ 3,850,750
-------------- ------------ ----------- -----------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ......................... 217,361,127 97,745,282 -- --
Purchase payments .............................................. 109,879,713 63,913,168 349,422 --
Surrenders ..................................................... (15,131,159) (4,133,151) (32,064) --
Transfers - interdivision and from (to) VALIC general account .. 121,450,593 59,835,828 185,196 --
-------------- ------------ ----------- -----------
Total units outstanding, end of period ......................... 433,560,274 217,361,127 502,554 --
-------------- ------------ ----------- -----------
Units outstanding, by class:
Standard units ............................................... 411,119,880 209,221,513 167,387 --
Enhanced units:
20 bp reduced .............................................. 20,827,045 8,116,612 5,641 --
40 bp reduced .............................................. 1,613,349 23,002 329,526 --
-------------- ------------ ----------- -----------
Accumulation units end of period ............................... 433,560,274 217,361,127 502,554 --
-------------- ------------ ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................ $ 2.582249 $ 2.428587 2.676995 2.201234
Enhanced unit:
20 bp reduced .............................................. 2.608476 2.448443 2.704358 --
40 bp reduced .............................................. 2.638280 2.471473 2.735261 --
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................ 2.359768 $ 1.685503 $ 1.634943 $ --
Enhanced unit:
20 bp reduced .............................................. 2.437771 1.737734 1.639279 --
40 bp reduced .............................................. 2.527648 1.798208 1.643677 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 410
18 FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AMERICAN GENERAL INTERNATIONAL AMERICAN GENERAL LARGE CAP
VALUE FUND - DIVISION 34 GROWTH FUND - DIVISION 39
------------------------------- -----------------------------
FOR THE FOR THE PERIOD FOR THE FOR THE PERIOD
YEAR ENDED AUGUST 26, 1998 YEAR ENDED AUGUST 26, 1998
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
------------ --------------- ------------ ----------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ..................................... $ 70,476 $ 5,760 $ (24,106) $ 2,093
Net realized gain on investments ................................. 50,532 -- 196,164 --
Capital gains distributions from mutual funds .................... 358,216 -- 634,398 --
Net unrealized appreciation (depreciation)
of investments during the period ................................ 2,597,347 547,276 3,810,394 695,540
------------ -------------- ------------ --------------
Increase in net assets resulting from operations ............... 3,076,571 553,036 4,616,850 697,633
------------ -------------- ------------ --------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................ 555,334 -- 9,704,453 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ........ ...................... (15,637) -- (287,336) --
Annuity benefit payments ......................................... -- -- -- --
Amounts transferred interdivision, and from (to)
VALIC general account ........................................... 330,143 3,600,000 4,199,650 2,850,000
------------ -------------- ------------ --------------
Increase in net assets
resulting from principal transactions ......................... 869,840 3,600,000 13,616,767 2,850,000
------------ -------------- ------------ --------------
TOTAL INCREASE IN NET ASSETS ..................................... 3,946,411 4,153,036 18,233,617 3,547,633
NET ASSETS:
Beginning of period .............................................. 4,153,036 -- 3,547,633 --
------------ -------------- ------------ --------------
End of period .................................................... $ 8,099,447 $ 4,153,036 $ 21,781,250 $ 3,547,633
------------ -------------- ------------ --------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ........................... -- -- -- --
Purchase payments ................................................ 390,550 -- 7,178,778 --
Surrenders ....................................................... (16,250) -- (231,027) --
Transfers - interdivision and from (to) VALIC general account .... 212,767 -- 3,181,787 --
------------ -------------- ------------ --------------
Total units outstanding, end of period ........................... 587,067 -- 10,129,538 --
------------ -------------- ------------ --------------
Units outstanding, by class:
Standard units .................................................. 337,242 -- 519,825 --
Enhanced units:
20 bp reduced .................................................. 177,255 -- 95,862 --
40 bp reduced .................................................. 72,570 -- 9,513,851 --
------------ -------------- ------------ --------------
Accumulation units end of period ................................. 587,067 -- 10,129,538 --
------------ -------------- ------------ --------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................... $ 1.915641 $ -- $ 1.667518 $ --
Enhanced unit:
20 bp reduced .................................................. 1.920710 -- 1.671932 --
40 bp reduced .................................................. 1.925869 -- 1.676417 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 411
SEPARATE ACCOUNT A 19
<TABLE>
<CAPTION>
AMERICAN GENERAL LARGE CAP AMERICAN GENERAL MID CAP GROWTH
VALUE FUND - DIVISION 40 FUND - DIVISION 37
------------------------------ ------------------------------
FOR THE FOR THE PERIOD FOR THE FOR THE PERIOD
YEAR ENDED AUGUST 26, 1998 YEAR ENDED AUGUST 26, 1998
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................... $ 45,852 $ 10,224 $ (3,196) $ --
Net realized gain on investments ................................ 63,723 -- 21,955 --
Capital gains distributions from mutual funds ................... 650,214 -- 710,827 --
Net unrealized appreciation (depreciation)
of investments during the period ............................... (552,152) 716,526 (258,735) 1,425,600
------------ --------------- ------------ ---------------
Increase in net assets resulting from operations .............. 207,637 726,750 470,851 1,425,600
------------ --------------- ------------ ---------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 554,240 -- 1,017,137 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .............................. (26,803) -- (14,137) --
Annuity benefit payments ........................................ -- -- -- --
Amounts transferred interdivision, and from (to)
VALIC general account........................................... 115,335 2,900,000 121,669 4,050,000
------------ --------------- ------------ ---------------
Increase in net assets
resulting from principal transactions ........................ 642,772 2,900,000 1,124,669 4,050,000
------------ --------------- ------------ ---------------
TOTAL INCREASE IN NET ASSETS..................................... 850,409 3,626,750 1,595,520 5,475,600
NET ASSETS:
Beginning of period ............................................. 3,626,750 -- 5,475,600 --
------------ --------------- ------------ ---------------
End of period ................................................... $ 4,477,159 $ 3,626,750 $ 7,071,120 $ 5,475,600
------------ --------------- ------------ ---------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... -- -- -- --
Purchase payments ............................................... 439,688 -- 801,847 --
Surrenders ...................................................... (29,042) -- (24,159) --
Transfers - interdivision and from (to) VALIC general account ... 92,844 -- 94,239 --
------------ --------------- ------------ ---------------
Total units outstanding, end of period .......................... 503,490 -- 871,927 --
------------ --------------- ------------ ---------------
Units outstanding, by class:
Standard units ................................................. 216,072 -- 477,094 --
Enhanced units:
20 bp reduced ................................................. 221 -- 1,244 --
40 bp reduced ................................................. 287,197 -- 393,589 --
------------ --------------- ------------ ---------------
Accumulation units end of period ................................ 503,490 -- 871,927 --
------------ --------------- ------------ ---------------
<CAPTION>
AMERICAN GENERAL MID CAP VALUE AMERICAN GENERAL SMALL CAP
FUND - DIVISION 38 GROWTH FUND - DIVISION 35
------------------------------ ------------------------------
FOR THE FOR THE PERIOD FOR THE FOR THE PERIOD
YEAR ENDED AUGUST 26, 1998 YEAR ENDED AUGUST 26, 1998
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................... $ 34,101 $ 10,079 $ (10,661) $ --
Net realized gain on investments ................................ 156,954 -- 128,821 --
Capital gains distributions from mutual funds ................... 1,894,986 115,562 1,115,791 18,373
Net unrealized appreciation (depreciation)
of investments during the period ............................... (764,242) 896,569 4,835,156 1,361,100
------------ --------------- ------------ ---------------
Increase in net assets resulting from operations .............. 1,321,799 1,022,210 6,069,107 1,379,473
------------ --------------- ------------ ---------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 1,350,999 -- 2,566,013 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .............................. (22,598) -- (102,973) --
Annuity benefit payments ........................................ -- -- -- --
Amounts transferred interdivision, and from (to)
VALIC general account........................................... 718,756 3,949,999 2,902,335 3,900,000
Increase in net assets ------------ --------------- ------------ ---------------
resulting from principal transactions ......................... 2,047,157 3,949,999 5,365,375 3,900,000
------------ --------------- ------------ ---------------
TOTAL INCREASE IN NET ASSETS...................................... 3,368,956 4,972,209 11,434,482 5,279,473
NET ASSETS:
Beginning of period ............................................. 4,972,209 -- 5,279,473 --
------------ --------------- ------------ ---------------
End of period ................................................... $ 8,341,165 $ 4,972,209 $ 16,713,955 $ 5,279,473
------------ --------------- ------------ ---------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... -- -- -- --
Purchase payments ............................................... 982,289 -- 1,718,837 --
Surrenders ...................................................... (28,013) -- (83,425) --
Transfers - interdivision and from (to) VALIC general account ... 527,305 -- 1,758,419 --
------------ --------------- ------------ ---------------
Total units outstanding, end of period .......................... 1,481,581 -- 3,393,831 --
------------ --------------- ------------ ---------------
Units outstanding, by class:
Standard units ................................................. 223,437 -- 298,665 --
Enhanced units:
20 bp reduced ................................................. 142,103 -- 119,661 --
40 bp reduced ................................................. 1,116,041 -- 2,975,505 --
------------ --------------- ------------ ---------------
Accumulation units end of period ................................ 1,481,581 -- 3,393,831 --
------------ --------------- ------------ ---------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998 1999
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit $ 1.302905 $ -- $ 1.423173 $ -- $ 1.521699
Enhanced unit:
20 bp reduced 1.306351 -- 1.426935 -- 1.525696
40 bp reduced 1.309860 -- 1.430763 -- 1.529814
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1999 1998
--------------- ------------ ------------
<S> <C> <C> <C>
Accumulation value per unit:
Standard unit $ -- $ 2.272711 $ --
Enhanced unit:
20 bp reduced -- 2.278700 --
40 bp reduced -- 2.284815 --
</TABLE>
<PAGE> 412
20 FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
DREYFUS VARIABLE INVESTMENT FUND-
AMERICAN GENERAL SMALL CAP SMALL CAP PORTFOLIO-
VALUE FUND - DIVISION 36 DIVISION 18
---------------------------- ---------------------------------
FOR THE FOR THE PERIOD FOR THE FOR THE
YEAR ENDED AUGUST 26, 1998 YEAR ENDED YEAR ENDED
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
----------- --------------- ------------ -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................... $ 55,280 $ 13,079 $ (7,408,133) $ (9,100,355)
Net realized gain on investments ................................ 6,489 -- 63,772,555 19,673,784
Capital gains distributions from mutual funds ................... 145,670 51,644 -- 15,549,964
Net unrealized appreciation (depreciation)
of investments during the period .............................. (493,258) 585,384 89,787,753 (67,338,458)
----------- ----------- ------------- -------------
Increase (decrease) in net assets
resulting from operations ................................ (285,819) 650,107 146,152,175 (41,215,065)
----------- ----------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 204,028 -- 80,558,331 136,010,701
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (1,545) -- (48,924,631) (37,151,392)
Annuity benefit payments ........................................ -- -- (17,577) (12,769)
Amounts transferred interdivision, and from (to)
VALIC general account ......................................... 54,906 3,849,999 (200,169,015) (105,448,868)
----------- ----------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ..................... 257,389 3,849,999 (168,552,892) (6,602,328)
----------- ----------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ......................... (28,430) 4,500,106 (22,400,717) (47,817,393)
NET ASSETS:
Beginning of period ............................................. 4,500,106 -- 802,006,915 849,824,308
----------- ----------- ------------- -------------
End of period ................................................... $ 4,471,676 $ 4,500,106 $ 779,606,198 $ 802,006,915
----------- ----------- ------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... -- -- 474,215,229 479,851,525
Purchase payments ............................................... 206,905 -- 45,083,201 78,837,263
Surrenders ...................................................... (12,171) -- (28,155,056) (22,827,377)
Transfers - interdivision and from (to) VALIC general account ... 52,250 -- (113,572,602) (61,646,182)
----------- ----------- ------------- -------------
Total units outstanding, end of period .......................... 246,984 -- 377,570,772 474,215,229
----------- ----------- ------------- -------------
Units outstanding, by class:
Standard units ................................................ 166,013 -- 351,855,473 474,215,229
Enhanced units:
20 bp reduced ............................................... 232 -- 2,046,085 --
40 bp reduced ............................................... 80,739 -- 23,669,214 --
----------- ----------- ------------- -------------
Accumulation units end of period ................................ 246,984 -- 377,570,772 474,215,229
----------- ----------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
----------- --------------- ------------ -------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................ $1.080558 $ -- $ 2.059431 $ 1.690786
Enhanced unit:
20 bp reduced .............................................. 1.083393 -- 2.089527 --
40 bp reduced .............................................. 1.086316 -- 2.128984 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 413
SEPARATE ACCOUNT A 21
<TABLE>
<CAPTION>
EVERGREEN GROWTH AND INCOME EVERGREEN SMALL CAP VALUE
FUND-DIVISION 56 FUND-DIVISION 55
------------------------------- -----------------------------
FOR THE PERIOD FOR THE FOR THE PERIOD FOR THE
JANUARY 4, 1999 YEAR ENDED JANUARY 4, 1999 YEAR ENDED
TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
--------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................... $ (5) $ -- $ -- $ --
Net realized gain on investments ................................ 31 -- -- --
Capital gains distributions from mutual funds ................... 7 -- -- --
Net unrealized appreciation (depreciation)
of investments during the period .............................. 370 -- --
--------------- ------------- --------------- -------------
Increase (decrease) in net assets
resulting from operations ... ............................ 403 -- -- --
--------------- ------------- --------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 5,841 -- 242 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. -- -- -- --
Annuity benefit payments ........................................ -- -- -- --
Amounts transferred interdivision, and from (to)
VALIC general account ......................................... -- -- -- --
--------------- ------------- --------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ..................... 5,841 -- 242 --
--------------- ------------- --------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ......................... 6,244 -- 242 --
NET ASSETS:
Beginning of period ............................................. -- -- -- --
--------------- ------------- --------------- -------------
End of period ................................................... $ 6,244 $ -- $ 242 $ --
--------------- ------------- --------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... -- -- -- --
Purchase payments ............................................... 5,510 -- 244 --
Surrenders ...................................................... -- -- -- --
Transfers - interdivision and from (to) VALIC general account ... (9) -- -- --
--------------- ------------- --------------- -------------
Total units outstanding, end of period .......................... 5,501 -- 244 --
--------------- ------------- --------------- -------------
Units outstanding, by class:
Standard units ................................................ 175 -- 244 --
Enhanced units:
20 bp reduced ............................................... 5,326 -- -- --
40 bp reduced ............................................... -- -- -- --
--------------- ------------- --------------- -------------
Accumulation units end of period ................................ 5,501 -- 244 --
--------------- ------------- --------------- -------------
</TABLE>
<TABLE>
<CAPTION>
EVERGREEN VALUE DREYFUS FOUNDERS GROWTH
FUND-DIVISION 57 FUND-DIVISION 30
------------------------------- -------------------------------
FOR THE PERIOD FOR THE FOR THE FOR THE
JANUARY 4, 1999 YEAR ENDED YEAR ENDED YEAR ENDED
TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
--------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................... $ 4 $ -- $ (5,884,618) $ (2,702,478)
Net realized gain on investments ................................ -- -- 4,207,339 669,679
Capital gains distributions from mutual funds ................... 262 -- 127,949,776 21,151,616
Net unrealized appreciation (depreciation)
of investments during the period .............................. (319) -- 95,948,371 42,627,883
--------------- ------------- --------------- -------------
Increase (decrease) in net assets
resulting from operations ................................ (53) -- 222,220,868 61,746,700
--------------- ------------- --------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 4,435 -- 179,626,688 117,393,497
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. -- -- (27,384,768) (9,478,330)
Annuity benefit payments ........................................ -- -- (2,237) (1,096)
Amounts transferred interdivision, and from (to)
VALIC general account ......................................... 3 -- 88,107,501 72,791,918
--------------- ------------- --------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ..................... 4,438 -- 240,347,184 180,705,989
--------------- ------------- --------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ......................... 4,385 -- 462,568,052 242,452,689
NET ASSETS:
Beginning of period ............................................. -- -- 412,920,920 170,468,231
--------------- ------------- --------------- -------------
End of period ................................................... $ 4,385 $ -- $ 875,488,972 $ 412,920,920
--------------- ------------- --------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... -- -- 258,511,009 132,167,162
Purchase payments ............................................... 4,240 -- 100,769,102 80,460,723
Surrenders ...................................................... -- -- (14,640,042) (6,588,832)
Transfers - interdivision and from (to) VALIC general account ... -- -- 52,174,839 52,471,956
--------------- ------------- --------------- -------------
Total units outstanding, end of period .......................... 4,240 -- 396,814,908 258,511,009
--------------- ------------- --------------- -------------
Units outstanding, by class:
Standard units ................................................ 4,240 -- 357,129,398 250,777,959
Enhanced units:
20 bp reduced ............................................... -- -- 16,160,159 7,720,189
40 bp reduced ............................................... -- -- 23,525,351 12,861
--------------- ------------- --------------- -------------
Accumulation units end of period ................................ 4,240 -- 396,814,908 258,511,009
--------------- ------------- --------------- -------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
--------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................. $ 1.132919 $ -- $ 0.995515 $ --
Enhanced unit:
20 bp reduced ............................................... 1.135195 -- -- --
40 bp reduced ............................................... -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
--------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................. $ 1.034113 $ -- $ 2.196620 $ 1.595913
Enhanced unit:
20 bp reduced ............................................... -- -- 2.252548 1.633282
40 bp reduced ............................................... -- -- 2.316600 1.676366
</TABLE>
<PAGE> 414
22 FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
NEUBERGER BERMAN PUTNAM GLOBAL GROWTH
GUARDIAN TRUST-DIVISION 29 FUND - DIVISION 28
---------------------------- ------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................. $ (148,588) $ (316,186) $ (2,657,686) $ (417,807)
Net realized gain (loss) on investments ....................... 232,115 447,267 4,532,574 107,190
Capital gains distributions from mutual funds ................. 10,764,888 5,112,104 43,772,448 4,089,731
Net unrealized appreciation (depreciation)
of investments during the period ............................ (6,452,929) (5,621,588) 131,823,273 21,600,190
------------- ------------- ------------- -------------
Increase (decrease) in net assets resulting from
operations. ........................................... 4,395,486 (378,403) 177,470,609 25,379,304
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................. 12,562,405 18,727,026 77,466,315 45,226,423
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ........................... (3,739,131) (1,971,281) (10,501,490) (3,310,436)
Annuity benefit payments ...................................... (67) -- (4,995) (2,617)
Amounts transferred interdivision, and from (to)
VALIC general account ........................................ (15,092,015) (1,314,316) 89,335,469 36,967,959
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ................. (6,268,808) 15,441,429 156,295,299 78,881,329
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ....................... (1,873,322) 15,063,026 333,765,908 104,260,633
NET ASSETS:
Beginning of period ........................................... 61,369,849 46,306,823 163,095,041 58,834,408
------------- ------------- ------------- -------------
End of period ................................................. $ 59,496,527 $ 61,369,849 $ 496,860,949 $ 163,095,041
============= ============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ........................ 46,274,070 35,406,663 107,627,792 49,548,732
Purchase payments ............................................. 8,823,454 13,737,161 45,014,503 32,447,084
Surrenders .................................................... (2,554,943) (1,683,029) (5,810,559) (2,408,897)
Transfers-interdivision and from (to) VALIC general account.... (10,782,486) (1,186,725) 53,893,181 28,040,873
------------- ------------- ------------- -------------
Total units outstanding, end of period ........................ 41,760,095 46,274,070 200,724,917 107,627,792
============= ============= ============= =============
Units outstanding, by class:
Standard units .............................................. 40,241,067 45,261,146 181,916,991 101,468,260
Enhanced units:
20 bp reduced ............................................. 1,406,229 1,012,671 11,313,375 6,153,771
40 bp reduced ............................................. 112,799 253 7,494,551 5,761
------------- ------------- ------------- -------------
Accumulation units end of period .............................. 41,760,095 46,274,070 200,724,917 107,627,792
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ............................................... $ 1.422424 $ 1.324970 $ 2.465895 $ 1.512865
Enhanced unit:
20 bp reduced ............................................. 1.471857 1.368269 2.530785 1.549587
40 bp reduced ............................................. 1.528673 1.418252 2.603644 1.591007
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 415
SEPARATE ACCOUNT A 23
<TABLE>
<CAPTION>
PUTNAM NEW OPPORTUNITIES FUND- PUTNAM OTC & EMERGING GROWTH
DIVISION 26 FUND - DIVISION 27
------------------------------- ------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
-------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................. $ (5,793,432) $ (2,691,328) $ (1,934,231) $ 3,286,141
Net realized gain (loss) on investments ....................... 5,405,004 872,455 9,704,876 (332,944)
Capital gains distributions from mutual funds ................. 73,606,083 12,546,729 20,649,440 --
Net unrealized appreciation (depreciation)
of investments during the period ............................ 313,953,044 53,605,222 182,753,857 9,278,020
--------------- --------------- -------------- -------------
Increase (decrease) in net assets resulting from
operations ............................................ 387,170,699 64,333,078 211,173,942 12,231,217
--------------- --------------- -------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................. 156,130,519 108,017,017 40,430,971 36,165,527
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ........................... (25,813,365) (8,784,234) (8,888,544) (4,499,407)
Annuity benefit payments ...................................... (896) (575) (2,730) (2,072)
Amounts transferred interdivision, and from (to)
VALIC general account ........................................ 86,572,168 84,011,090 46,636,113 960,600
--------------- --------------- -------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ................. 216,888,426 183,243,298 78,175,810 32,624,648
--------------- --------------- -------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ....................... 604,059,125 247,576,376 289,349,752 44,855,865
NET ASSETS:
Beginning of period ........................................... 412,412,954 164,836,578 142,311,995 97,456,130
--------------- --------------- -------------- -------------
End of period ................................................. $ 1,016,472,079 $ 412,412,954 $ 431,661,747 $ 142,311,995
=============== =============== ============== =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ........................ 291,260,021 143,395,066 132,559,704 99,785,041
Purchase payments ............................................. 96,163,717 85,839,361 28,703,809 36,257,228
Surrenders .................................................... (15,044,221) (6,337,162) (6,296,909) (4,704,400)
Transfers-interdivision and from (to) VALIC general account ... 54,303,091 68,362,756 23,934,549 1,221,835
--------------- --------------- -------------- -------------
Total units outstanding, end of period ........................ 426,682,608 291,260,021 178,901,153 132,559,704
=============== =============== ============== =============
Units outstanding, by class:
Standard units .............................................. 386,064,440 280,523,297 170,725,977 129,463,792
Enhanced units:
20 bp reduced ............................................. 19,231,737 10,725,927 6,570,152 3,092,839
40 bp reduced ............................................. 21,386,431 10,797 1,605,024 3,073
--------------- --------------- -------------- -------------
Accumulation units end of period .............................. 426,682,608 291,260,021 178,901,153 132,559,704
=============== =============== ============== =============
</TABLE>
<TABLE>
<CAPTION>
SCUDDER GROWTH AND T. ROWE PRICE SMALL-CAP
INCOME FUND - DIVISION 21 STOCK FUND - DIVISION 51
------------------------------- -------------------------------
FOR THE FOR THE FOR THE FOR THE PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 22, 1998
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
-------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................. $ 2,202,593 $ 2,680,972 $ (20,554) $ --
Net realized gain (loss) on investments ....................... 3,895,314 1,067,960 40,991 --
Capital gains distributions from mutual funds ................. 6,380,872 17,737,903 320,107 --
Net unrealized appreciation (depreciation)
of investments during the period ............................ (283,526) (15,926,329) 1,008,645 --
--------------- --------------- -------------- -------------
Increase (decrease) in net assets resulting from
operations ............................................ 12,195,253 5,560,506 1,349,189 --
--------------- --------------- -------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................. 54,245,118 79,800,185 5,952,689 139
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ........................... (13,753,656) (7,670,739) (196,858) --
Annuity benefit payments ...................................... (4,562) (3,718) -- --
Amounts transferred interdivision, and from (to)
VALIC general account ........................................ (53,742,268) 34,897,873 1,652,855 --
--------------- --------------- -------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ................. (13,255,368) 107,023,601 7,408,686 139
--------------- --------------- -------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ....................... (1,060,115) 112,584,107 8,757,875 139
=============== =============== ============== =============
NET ASSETS:
Beginning of period ........................................... 247,968,508 135,384,401 139 --
--------------- --------------- -------------- -------------
End of period ................................................. $ 246,908,393 $ 247,968,508 $ 8,758,014 $ 139
=============== =============== ============== =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ........................ 164,312,979 94,225,984 122 --
Purchase payments ............................................. 34,048,172 51,892,138 5,428,689 122
Surrenders .................................................... (8,263,310) (5,008,156) (169,605) --
Transfers-interdivision and from (to) VALIC general account ... (34,611,633) 23,203,013 1,484,376 --
--------------- --------------- -------------- -------------
Total units outstanding, end of period ........................ 155,486,208 164,312,979 6,743,582 122
=============== =============== ============== =============
Units outstanding, by class:
Standard units .............................................. 146,888,390 159,815,811 821,977 122
Enhanced units:
20 bp reduced .............................................. 6,367,461 4,494,004 249,245 --
40 bp reduced .............................................. 2,230,357 3,164 5,672,360 --
--------------- --------------- -------------- -------------
Accumulation units end of period .............................. 155,486,208 164,312,979 6,743,582 122
=============== =============== ============== =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
--------------- --------------- -------------- -------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ............................................... $ 2.376261 $ 1.415175 $ 2.408872 $ 1.072660
Enhanced unit:
20 bp reduced ............................................. 2.414279 1.434946 2.471391 1.098295
40 bp reduced ............................................. 2.459834 1.459115 2.542500 1.127653
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
--------------- --------------- -------------- -------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ............................................... $ 1.584519 $ 1.507724 $ 1.293095 $ 1.141049
Enhanced unit:
20 bp reduced ............................................. 1.623952 1.542160 1.296356 --
40 bp reduced ............................................. 1.670148 1.582856 1.299637 --
</TABLE>
<PAGE> 416
24 FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
TEMPLETON FOREIGN TEMPLETON INTERNATIONAL
FUND - DIVISION 32 FUND - DIVISION 20
------------------------------ ------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ........................................... $ 7,554,809 $ 3,763,468 $ 11,247,994 $ 7,944,373
Net realized gain (loss) on investments ......................... (2,951,879) (1,076,896) 48,058,679 52,533,310
Capital gains distributions from mutual funds ................... 2,706,922 17,280,633 71,597,060 31,903,839
Net unrealized appreciation (depreciation)
of investments during the period .............................. 80,764,072 (34,315,820) 22,890,344 (37,039,574)
------------- ------------- ------------- -------------
Increase (decrease) in net assets resulting from
operations ................................................ 88,073,924 (14,348,615) 153,794,077 55,341,948
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 56,633,360 72,575,285 86,045,632 114,632,129
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (13,184,454) (7,939,318) (46,576,624) (35,093,007)
Annuity benefit payments ........................................ (2,321) (1,991) (11,559) (9,179)
Amounts transferred interdivision, and from (to)
VALIC general account ......................................... (11,673,466) (12,669,089) (143,595,363) (95,114,875)
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ..................... 31,773,119 51,964,887 (104,137,914) (15,584,932)
------------- ------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS .................................... 119,847,043 37,616,272 49,656,163 39,757,016
NET ASSETS:
Beginning of period ............................................. 218,468,273 180,852,001 769,496,203 729,739,187
------------- ------------- ------------- -------------
End of period ................................................... $ 338,315,316 $ 218,468,273 $ 819,152,366 $ 769,496,203
------------- ------------- ------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... 204,065,916 159,201,107 452,419,089 463,174,350
Purchase payments ............................................... 44,888,381 63,265,244 46,775,532 65,837,726
Surrenders ...................................................... (9,883,393) (7,600,467) (25,556,432) (21,321,029)
Transfers - interdivision and from (to) VALIC general account ... (10,739,081) (10,799,968) (79,846,982) (55,271,958)
------------- ------------- ------------- -------------
Total units outstanding, end of period .......................... 228,331,823 204,065,916 393,791,207 452,419,089
------------- ------------- ------------- -------------
Units outstanding, by class:
Standard units ................................................ 219,168,378 198,626,024 372,176,780 452,419,089
Enhanced units:
20 bp reduced ............................................... 8,660,425 5,437,288 2,084,490 --
40 bp reduced ............................................... 503,020 2,604 19,529,937 --
------------- ------------- ------------- -------------
Accumulation units end of period ................................ 228,331,823 204,065,916 393,791,207 452,419,089
------------- ------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................. $ 1.479830 $ 1.069704 $ 2.076148 $ 1.700398
Enhanced unit:
20 bp reduced ............................................... 1.517785 1.094954 2.105759 --
40 bp reduced ............................................... 1.560956 1.123840 2.138370 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 417
SEPARATE ACCOUNT A 25
<TABLE>
<CAPTION>
VANGUARD WINDSOR II AMERICAN GENERAL BALANCED
FUND - DIVISION 24 FUND - DIVISION 42
------------------------------ -------------------------------
FOR THE FOR THE FOR THE FOR THE PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED AUGUST 26, 1998
DECEMBER 31, DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ........................................... $ 8,388,243 $ 5,622,515 $ 188,495 $ 29,084
Net realized gain (loss) on investments ......................... 6,166,843 1,366,076 30,618 --
Capital gains distributions from mutual funds ................... 67,184,211 51,898,120 432,947 34,051
Net unrealized appreciation (depreciation)
of investments during the period .............................. (144,035,946) 278,987 350,211 805,536
------------- ------------- ------------- -------------
Increase (decrease) in net assets resulting from operations.. (62,296,649) 59,165,698 1,002,271 868,671
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 213,954,582 172,075,011 1,574,236 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (40,354,240) (18,029,126) (60,039) --
Annuity benefit payments ........................................ (9,743) (6,802) -- --
Amounts transferred interdivision, and from (to)
VALIC general account ......................................... (29,853,674) 162,813,002 1,582,048 5,000,000
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ..................... 143,736,925 316,852,085 3,096,245 5,000,000
------------- ------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS .................................... 81,440,276 376,017,783 4,098,516 5,868,671
NET ASSETS:
Beginning of period ............................................. 651,414,982 275,397,199 5,868,671 --
------------- ------------- ------------- -------------
End of period ................................................... $ 732,855,258 $ 651,414,982 $ 9,967,187 $ 5,868,671
------------- ------------- ------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... 386,567,704 187,929,868 -- --
Purchase payments ............................................... 122,755,122 105,145,249 1,250,285 --
Surrenders ...................................................... (22,363,367) (10,145,505) (58,555) --
Transfers - interdivision and from (to) VALIC general account ... (20,680,140) 103,638,092 1,277,373 --
------------- ------------- ------------- -------------
Total units outstanding, end of period .......................... 466,279,319 386,567,704 2,469,103 --
------------- ------------- ------------- -------------
Units outstanding, by class:
Standard units ................................................ 426,529,299 372,737,595 461,870 --
Enhanced units:
20 bp reduced ............................................... 20,846,053 13,800,156 38,339 --
40 bp reduced ............................................... 18,903,967 29,953 1,968,894 --
------------- ------------- ------------- -------------
Accumulation units end of period ................................ 466,279,319 386,567,704 2,469,103 --
------------- ------------- ------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
VANGUARD WELLINGTON
FUND-DIVISION 25
------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income ........................................... $ 14,109,155 $ 8,146,899
Net realized gain (loss) on investments ......................... 1,861,183 453,710
Capital gains distributions from mutual funds ................... 28,847,888 30,281,535
Net unrealized appreciation (depreciation)
of investments during the period .............................. (30,879,706) (13,016,167)
------------- -------------
Increase (decrease) in net assets resulting from ............ 13,938,520 25,865,977
------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 149,843,118 128,896,516
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (29,503,291) (11,075,983)
Annuity benefit payments ........................................ (4,939) (1,770)
Amounts transferred interdivision, and from (to)
VALIC general account ......................................... 29,260,803 106,781,378
------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ..................... 149,595,691 224,600,141
------------- -------------
TOTAL INCREASE IN NET ASSETS .................................... 163,534,211 250,466,118
NET ASSETS:
Beginning of period ............................................. 406,510,665 156,044,547
------------- -------------
End of period ................................................... $ 570,044,876 $ 406,510,665
------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... 273,485,784 116,429,781
Purchase payments ............................................... 96,236,923 87,356,196
Surrenders ...................................................... (18,147,782) (6,659,976)
Transfers - interdivision and from (to) VALIC general account ... 19,135,718 76,359,783
------------- -------------
Total units outstanding, end of period .......................... 370,710,643 273,485,784
------------- -------------
Units outstanding, by class:
Standard units ................................................ 328,701,408 253,840,498
Enhanced units:
20 bp reduced ............................................... 28,195,817 19,636,072
40 bp reduced ............................................... 13,813,418 9,214
------------- -------------
Accumulation units end of period ................................ 370,710,643 273,485,784
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................. $ 1.566008 $ 1.683226 $ 1.323103 $ --
Enhanced unit:
20 bp reduced ............................................... 1.606241 1.723020 1.326598 --
40 bp reduced ............................................... 1.653581 1.770257 1.330160 --
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------- -------------
<S> <C> <C>
Accumulation value per unit:
Standard unit ................................................. $ 1.528992 $ 1.482836
Enhanced unit:
20 bp reduced ............................................... 1.580569 1.529797
40 bp reduced ............................................... 1.641601 1.585688
</TABLE>
<PAGE> 418
26 FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS AGSPC CAPITAL CONSERVATION FUND -
--------------------------------------------------------
DIVISION 1 DIVISION 7
--------------------------- ---------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income .............................................. $ 314,033 $ 338,175 $ 3,026,245 $ 3,124,808
Net realized gain (loss) on investments ............................ (76,164) 12,194 8,827 413,199
Capital gains distributions from mutual funds ...................... -- -- -- --
Net unrealized appreciation (depreciation)
of investments during the period ................................. (326,155) 35,832 (3,853,099) (35,856)
----------- ----------- ----------- -----------
Increase (decrease) in net assets resulting from operations .... (88,286) 386,201 (818,027) 3,502,151
----------- ----------- ----------- -----------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................. 28,773 146,532 5,665,099 7,027,648
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ................................ (602,665) (562,370) (5,161,343) (3,833,561)
Annuity benefit payments ........................................... (539) (455) -- --
Amounts transferred interdivision, and from (to)
VALIC general account ............................................ (433,773) (97,641) (8,133,261) (2,143,426)
----------- ----------- ----------- -----------
Increase (decrease) in net assets
resulting from principal transactions ........................ (1,008,204) (513,934) (7,629,505) 1,050,661
----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................ (1,096,490) (127,733) (8,447,532) 4,552,812
NET ASSETS:
Beginning of period ................................................ 6,299,793 6,427,526 59,971,540 55,418,728
----------- ----------- ----------- -----------
End of period ...................................................... $ 5,203,303 $ 6,299,793 $51,524,008 $59,971,540
----------- ----------- ----------- -----------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ............................. 1,689,443 1,831,961 28,751,662 28,242,598
Purchase payments .................................................. 7,625 40,472 2,709,678 3,402,874
Surrenders ......................................................... (163,729) (155,629) (2,465,503) (1,879,505)
Transfers - interdivision and from (to) VALIC general account ...... (117,926) (27,361) (3,955,874) (1,014,305)
----------- ----------- ----------- -----------
Total units outstanding, end of period ............................. 1,415,413 1,689,443 25,039,963 28,751,662
----------- ----------- ----------- -----------
Units outstanding, by class:
Standard units ................................................... 1,415,413 1,689,443 24,749,727 28,751,662
Enhanced units:
20 bp reduced .................................................. -- -- 95,480 --
40 bp reduced .................................................. -- -- 194,756 --
----------- ----------- ----------- -----------
Accumulation units end of period ................................... 1,415,413 1,689,443 25,039,963 28,751,662
----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit .................................................... $3.673180 $3.726168 $2.056559 $2.085846
Enhanced unit:
20 bp reduced .................................................. -- -- 2.112183 --
40 bp reduced .................................................. -- -- 2.172271 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 419
SEPARATE ACCOUNT A 27
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
AGSPC GOVERNMENT SECURITIES
FUND - DIVISION 8
------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income .............................................. $ 4,586,896 $ 4,468,159
Net realized gain (loss) on investments ............................ 661,487 1,352,903
Capital gains distributions from mutual funds ...................... -- --
Net unrealized appreciation (depreciation)
of investments during the period ................................. (9,319,026) 1,437,930
------------- -------------
Increase (decrease) in net assets resulting from operations .... (4,070,643) 7,258,992
------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................. 11,734,225 12,902,909
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ................................ (9,010,978) (5,395,424)
Annuity benefit payments ........................................... -- --
Amounts transferred interdivision, and from (to)
VALIC general account ............................................ (18,810,222) 10,528,632
------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ........................ (16,086,975) 18,036,117
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................ (20,157,618) 25,295,109
NET ASSETS:
Beginning of period ................................................ 113,462,397 88,167,288
------------- -------------
End of period ...................................................... $ 93,304,779 $ 113,462,397
------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ............................. 53,729,671 45,034,894
Purchase payments .................................................. 5,561,118 6,558,071
Surrenders ......................................................... (4,281,237) (2,679,928)
Transfers - interdivision and from (to) VALIC general account ...... (9,134,505) 4,816,634
------------- -------------
Total units outstanding, end of period ............................. 45,875,047 53,729,671
------------- -------------
Units outstanding, by class:
Standard units ................................................... 45,292,728 53,729,671
Enhanced units:
20 bp reduced .................................................. 243,537 --
40 bp reduced .................................................. 338,782 --
------------- -------------
Accumulation units end of period ................................... 45,875,047 53,729,671
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS AGSPC INTERNATIONAL
GOVERNMENT BOND
FUND - DIVISION 13
------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income .............................................. $ 3,776,325 $ 1,997,004
Net realized gain (loss) on investments ............................ 1,059,581 (1,068,211)
Capital gains distributions from mutual funds ...................... 103,421 872,765
Net unrealized appreciation (depreciation)
of investments during the period ................................. (16,515,559) 21,926,900
------------- -------------
Increase (decrease) in net assets resulting from operations .... (11,576,232) 23,728,458
------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................. 21,815,358 25,413,792
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ................................ (9,363,283) (7,785,118)
Annuity benefit payments ........................................... (3,034) (2,691)
Amounts transferred interdivision, and from (to)
VALIC general account ............................................ (22,744,405) (38,345,989)
------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ........................ (10,295,364) (20,720,006)
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................ (21,871,596) 3,008,452
NET ASSETS:
Beginning of period ................................................ 169,208,209 166,199,757
------------- -------------
End of period ...................................................... $ 147,336,613 $ 169,208,209
------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ............................. 97,883,538 111,480,591
Purchase payments .................................................. 13,082,135 16,433,799
Surrenders ......................................................... (5,520,000) (5,105,973)
Transfers - interdivision and from (to) VALIC general account ...... (13,941,554) (24,924,879)
------------- -------------
Total units outstanding, end of period ............................. 91,504,119 97,883,538
------------- -------------
Units outstanding, by class:
Standard units ................................................... 90,136,603 97,473,851
Enhanced units:
20 bp reduced .................................................. 1,058,856 408,156
40 bp reduced .................................................. 308,660 1,531
------------- -------------
Accumulation units end of period ................................... 91,504,119 97,883,538
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
AMERICAN GENERAL CORE BOND
FUND - DIVISION 58
-------------------------------
FOR THE FOR THE PERIOD
YEAR ENDED AUGUST 26, 1998
DECEMBER 31, TO DECEMBER 31,
1999 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income .............................................. $ 320,982 $ 50,247
Net realized gain (loss) on investments ............................ (446) --
Capital gains distributions from mutual funds ...................... -- 16,291
Net unrealized appreciation (depreciation)
of investments during the period ................................. (380,782) 95,397
------------- -------------
Increase (decrease) in net assets resulting from operations .... (60,246) 161,935
------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................. 64,222 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ................................ (8) --
Annuity benefit payments ........................................... -- --
Amounts transferred interdivision, and from (to)
VALIC general account ............................................ 2,477 5,000,001
------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ........................ 66,691 5,000,001
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................ 6,445 5,161,936
NET ASSETS:
Beginning of period ................................................ 5,161,936 --
------------- -------------
End of period ...................................................... $ 5,168,381 $ 5,161,936
------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ............................. -- --
Purchase payments .................................................. 62,747 --
Surrenders ......................................................... (8) --
Transfers - interdivision and from (to) VALIC general account ...... 2,310 --
------------- -------------
Total units outstanding, end of period ............................. 65,049 --
------------- -------------
Units outstanding, by class:
Standard units ................................................... 54,349 --
Enhanced units:
20 bp reduced .................................................. 10,700 --
40 bp reduced .................................................. -- --
------------- -------------
Accumulation units end of period ................................... 65,049 --
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
AMERICAN GENERAL DOMESTIC BOND
FUND - DIVISION 43
------------------------------
FOR THE FOR THE PERIOD
YEAR ENDED AUGUST 26, 1998
DECEMBER 31, TO DECEMBER 31,
1999 1998
------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income .............................................. $ 98,906 $ 14,978
Net realized gain (loss) on investments ............................ (7,296) --
Capital gains distributions from mutual funds ...................... 36 15,898
Net unrealized appreciation (depreciation)
of investments during the period ................................. (139,402) 28,692
------------- -------------
Increase (decrease) in net assets resulting from operations .... (47,756) 59,568
------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................. 623,941 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ................................ (1,682) --
Annuity benefit payments ........................................... -- --
Amounts transferred interdivision, and from (to)
VALIC general account ............................................ (51,023) 1,250,000
------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ........................ 571,236 1,250,000
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................ 523,480 1,309,568
NET ASSETS:
Beginning of period ................................................ 1,309,568 --
------------- -------------
End of period ...................................................... $ 1,833,048 $ 1,309,568
------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ............................. -- --
Purchase payments .................................................. 637,229 --
Surrenders ......................................................... (29,632) --
Transfers - interdivision and from (to) VALIC general account ...... (48,322) --
------------- -------------
Total units outstanding, end of period ............................. 559,275 --
------------- -------------
Units outstanding, by class:
Standard units ................................................... 188,580 --
Enhanced units:
20 bp reduced .................................................. -- --
40 bp reduced .................................................. 370,695 --
------------- -------------
Accumulation units end of period ................................... 559,275 --
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................... $ 2.032753 $ 2.111727 $ 1.609098 $ 1.728006
Enhanced unit:
20 bp reduced ................. 2.087744 -- 1.634588 1.751922
40 bp reduced ................. 2.147126 -- 1.661837 1.777571
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................... $ 1.009692 $ -- $ 1.004631 $ --
Enhanced unit:
20 bp reduced ................. 1.012353 -- -- --
40 bp reduced ................. -- -- 1.009996 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 420
28 FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AMERICAN GENERAL
HIGH YIELD BOND AMERICAN GENERAL STRATEGIC BOND
FUND - DIVISION 60 FUND - DIVISION 59
---------------------------- ----------------------------
FOR THE FOR THE PERIOD FOR THE FOR THE PERIOD
YEAR ENDED AUGUST 26, 1998 YEAR ENDED AUGUST 26, 1998
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ....................................... $ 491,161 $ 92,262 $ 414,198 $ 69,000
Net realized gain (loss) on investments ............................ (357) -- 7 --
Capital gains distributions from mutual funds ...................... -- -- -- 11,064
Net unrealized appreciation (depreciation)
of investments during the period ................................. (333,976) 189,911 (211,104) 185,469
----------- ----------- ----------- -----------
Increase (decrease) in net assets resulting from operations ... 156,828 282,173 203,101 265,533
----------- ----------- ----------- -----------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................. 173,814 -- 33,916 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ................................ (1,458) -- (134) --
Annuity benefit payments ........................................... -- -- -- --
Amounts transferred interdivision, and from (to)
VALIC general account ........................................... (24,004) 5,000,000 4,091 4,999,999
----------- ----------- ----------- -----------
Increase in net assets
resulting from principal transactions ....................... 148,352 5,000,000 37,873 4,999,999
----------- ----------- ----------- -----------
TOTAL INCREASE IN NET ASSETS ....................................... 305,180 5,282,173 240,974 5,265,532
NET ASSETS:
Beginning of period ................................................ 5,282,173 -- 5,265,532 --
----------- ----------- ----------- -----------
End of period ...................................................... $ 5,587,353 $ 5,282,173 $ 5,506,506 $ 5,265,532
----------- ----------- ----------- -----------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ............................. -- -- -- --
Purchase payments .................................................. 163,306 -- 31,684 --
Surrenders ......................................................... (1,372) -- (125) --
Transfers - interdivision and from (to) VALIC general account ...... (22,704) -- 3,831 --
----------- ----------- ----------- -----------
Total units outstanding, end of period ............................. 139,230 -- 35,390 --
----------- ----------- ----------- -----------
Units outstanding, by class:
Standard units .................................................. 136,423 -- 2,324 --
Enhanced units:
20 bp reduced ................................................. 2,397 -- -- --
40 bp reduced ................................................. 410 -- 33,066 --
----------- ----------- ----------- -----------
Accumulation units end of period ................................... 139,230 -- 35,390 --
----------- ----------- ----------- -----------
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................... $ 1.075994 $ -- $ 1.081981 $ --
Enhanced unit:
20 bp reduced
40 bp reduced ................................................. 1.078842 -- -- --
1.081775 -- 1.087771 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 421
SEPARATE ACCOUNT A 29
<TABLE>
<CAPTION>
VANGUARD LONG-TERM VANGUARD LONG-TERM
CORPORATE FUND - DIVISION 22 TREASURY FUND - DIVISION 23
---------------------------------- ----------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ......................... $ 3,751,628 $ 2,052,614 $ 7,007,754 $ 2,857,159
Net realized gain (loss) on investments .............. (398,632) 136,212 (687,054) 1,195,397
Capital gains distributions from mutual funds ........ 410,483 1,044,043 1,589,174 --
Net unrealized appreciation (depreciation)
of investments during the period ................... (8,721,370) (64,200) (21,800,390) 2,611,560
--------------- --------------- --------------- ---------------
Increase (decrease) in net assets resulting
from operations ............................... (4,957,891) 3,168,669 (13,890,516) 6,664,116
--------------- --------------- --------------- ---------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................... 20,898,993 18,953,737 46,110,281 30,970,739
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .................. (3,914,976) (1,608,861) (8,715,834) (2,748,295)
Annuity benefit payments ............................. (2,439) -- (761) (813)
Amounts transferred interdivision, and from (to)
VALIC general account ............................. (3,549,583) 19,011,058 (436,765) 60,728,245
--------------- --------------- --------------- ---------------
Increase in net assets
resulting from principal transactions ......... 13,431,995 36,355,934 36,956,921 88,949,876
--------------- --------------- --------------- ---------------
TOTAL INCREASE IN NET ASSETS ......................... 8,474,104 39,524,603 23,066,405 95,613,992
NET ASSETS:
Beginning of period .................................. 59,964,652 20,440,049 119,252,206 23,638,214
--------------- --------------- --------------- ---------------
End of period ........................................ $ 68,438,756 $ 59,964,652 $ 142,318,611 $ 119,252,206
--------------- --------------- --------------- ---------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ............... 47,072,573 17,371,407 90,363,929 20,041,920
Purchase payments .................................... 16,695,613 15,098,601 35,729,706 23,916,542
Surrenders ........................................... (3,079,946) (1,333,865) (6,580,094) (1,937,227)
Transfers - interdivision and from (to) VALIC
general account ................................... (3,137,264) 15,936,430 (365,799) 48,342,694
--------------- --------------- --------------- ---------------
Total units outstanding, end of period ............... 57,550,976 47,072,573 119,147,742 90,363,929
--------------- --------------- --------------- ---------------
Units outstanding, by class:
Standard units .................................... 49,616,245 44,122,646 110,102,115 86,673,300
Enhanced units:
20 bp reduced ................................... 4,060,325 2,949,044 7,578,682 3,682,809
40 bp reduced ................................... 3,874,406 883 1,466,945 7,820
--------------- --------------- --------------- ---------------
Accumulation units end of period ..................... 57,550,976 47,072,573 119,147,742 90,363,929
--------------- --------------- --------------- ---------------
<CAPTION>
AGSPC SCIENCE & TECHNOLOGY AGSPC SOCIAL AWARENESS
FUND - DIVISION 17 FUND - DIVISION 12
---------------------------------- ----------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ......................... $ (19,907,095) $ (10,381,062) $ (1,053,214) $ 190,273
Net realized gain (loss) on investments .............. 30,613,817 34,745,563 8,179,859 2,220,138
Capital gains distributions from mutual funds ........ 328,749,980 113,616,462 22,439,556 37,003,617
Net unrealized appreciation (depreciation)
of investments during the period ................... 1,226,217,782 250,423,659 57,407,741 38,477,902
--------------- --------------- --------------- ---------------
Increase (decrease) in net assets resulting
from operations ............................... 1,565,674,484 388,404,622 86,973,942 77,891,930
--------------- --------------- --------------- ---------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................... 279,006,916 195,575,628 94,842,943 72,710,322
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .................. (99,642,197) (44,292,549) (25,298,865) (13,355,087)
Annuity benefit payments ............................. (48,492) (17,543) (24,585) (9,481)
Amounts transferred interdivision, and from (to)
VALIC general account ............................. 309,209,056 (92,089,284) 27,286,374 54,323,803
--------------- --------------- --------------- ---------------
Increase in net assets
resulting from principal transactions ......... 488,525,283 59,176,252 96,805,867 113,669,557
--------------- --------------- --------------- ---------------
TOTAL INCREASE IN NET ASSETS ......................... 2,054,199,767 447,580,874 183,779,809 191,561,487
NET ASSETS:
Beginning of period .................................. 1,357,242,328 909,661,454 435,141,459 243,579,972
--------------- --------------- --------------- ---------------
End of period ........................................ $ 3,411,442,095 $ 1,357,242,328 $ 618,921,268 $ 435,141,459
--------------- --------------- --------------- ---------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ............... 421,835,835 397,842,959 115,602,816 81,577,104
Purchase payments .................................... 64,052,931 77,332,989 23,030,880 21,359,028
Surrenders ........................................... (22,853,729) (17,946,718) (5,886,018) (3,889,138)
Transfers - interdivision and from (to) VALIC
general account ................................... 69,695,056 (35,393,395) 7,138,854 16,555,822
--------------- --------------- --------------- ---------------
Total units outstanding, end of period ............... 532,730,093 421,835,835 139,886,532 115,602,816
--------------- --------------- --------------- ---------------
Units outstanding, by class:
Standard units .................................... 517,699,561 418,601,069 136,226,993 114,382,494
Enhanced units:
20 bp reduced ................................... 11,744,052 3,228,389 3,028,346 1,218,871
40 bp reduced ................................... 3,286,480 6,377 631,193 1,451
--------------- --------------- --------------- ---------------
Accumulation units end of period ..................... 532,730,093 421,835,835 139,886,532 115,602,816
--------------- --------------- --------------- ---------------
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Accumulation value per unit: $ 1.179657 $ 1.271278 $ 1.191635 $ 1.318263
Standard unit ...................................................
Enhanced unit:
20 bp reduced 1.220562 1.312731 1.222216 1.349397
40 bp reduced ................................................. 1.267698 1.360696 1.256142 1.384079
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Accumulation value per unit: $ 6.398997 $ 3.216190 $ 4.419383 $ 3.762308
Standard unit ...................................................
Enhanced unit:
20 bp reduced 6.462689 3.241847 4.502622 3.825649
40 bp reduced ................................................. 6.536543 3.272354 4.596034 3.897214
</TABLE>
<PAGE> 422
30 FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC
AMERICAN GENERAL SOCIALLY MONEY MARKET FUND -
RESPONSIBLE FUND - DIVISION 41 DIVISION 2
------------------------------ -----------------------------
FOR THE FOR THE PERIOD FOR THE FOR THE
YEAR ENDED AUGUST 26, 1998 YEAR ENDED YEAR ENDED
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ............................................. $ 79,807 $ 23,760 $ 162,374 $ 184,017
Net realized gain on investments .................................. 64,508 -- -- --
Capital gains distributions from mutual funds ..................... 391,925 285,733 -- --
Net unrealized appreciation (depreciation)
of investments during the period ................................ 1,103,235 1,099,673 -- --
------------ ------------ ------------ ------------
Increase in net assets resulting from operations ............. 1,639,475 1,409,166 162,374 184,017
------------ ------------ ------------ ------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................. 2,903,630 -- 139,686 90,884
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................... (20,548) -- (275,980) (292,611)
Annuity benefit payments .......................................... -- -- -- --
Amounts transferred interdivision, and from (to)
VALIC general account .......................................... 1,306,362 5,000,000 (44,481) (364,560)
------------ ------------ ------------ ------------
Increase (decrease) in net assets
resulting from principal transactions .................... 4,189,444 5,000,000 (180,775) (566,287)
------------ ------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ........................... 5,828,919 6,409,166 (18,401) (382,270)
NET ASSETS:
Beginning of period ............................................... 6,409,166 -- 4,197,487 4,579,757
------------ ------------ ------------ ------------
End of period ..................................................... $ 12,238,085 $ 6,409,166 $ 4,179,086 $ 4,197,487
------------ ------------ ------------ ------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ............................ -- -- 1,700,333 1,931,439
Purchase payments ................................................. 2,155,410 -- 56,091 37,542
Surrenders ........................................................ (35,215) -- (110,243) (120,614)
Transfers - interdivision and from (to) VALIC general account ..... 983,523 -- (13,712) (148,034)
------------ ------------ ------------ ------------
Total units outstanding, end of period ............................ 3,103,718 -- 1,632,469 1,700,333
------------ ------------ ------------ ------------
Units outstanding, by class:
Standard units ................................................. 282,396 -- 1,632,469 1,700,333
Enhanced units:
20 bp reduced ................................................ 106,148 -- -- --
40 bp reduced ................................................ 2,715,174 -- -- --
------------ ------------ ------------ ------------
Accumulation units end of period .................................. 3,103,718 -- 1,632,469 1,700,333
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit .................................................. $ 1.497374 $ -- $ 2.559979 $ 2.468627
Enhanced unit:
20 bp reduced ................................................ 1.501310 -- -- --
40 bp reduced ................................................ 1.505354 -- -- --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 423
SEPARATE ACCOUNT A 31
<TABLE>
<CAPTION>
AGSPC
MONEY MARKET FUND - AMERICAN GENERAL MONEY MARKET
DIVISION 6 FUND - DIVISION 44
-------------------------------- --------------------------------
FOR THE FOR THE FOR THE FOR THE PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED AUGUST 26, 1998
DECEMBER 31, DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
OPERATIONS: <S> <C> <C> <C>
Net investment income .......................................... $ 13,158,073 $ 7,849,963 $ 385,966 $ 82,478
Net realized gain on investments ............................... -- -- -- --
Capital gains distributions from mutual funds .................. -- -- -- --
Net unrealized appreciation (depreciation)
of investments during the period .............................
------------- ------------- ------------- -------------
Increase in net assets resulting from operations .......... 13,158,073 7,849,963 385,966 82,478
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .............................................. 119,148,566 87,624,322 6,681,738 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................ (66,195,806) (33,439,890) (641,200) --
Annuity benefit payments ....................................... (1,607) (1,603) -- --
Amounts transferred interdivision, and from (to)
VALIC general account ....................................... 122,595,014 63,714,230 73,281 5,000,000
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ................. 175,546,167 117,897,059 6,113,819 5,000,000
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ........................ 188,704,240 125,747,022 6,499,785 5,082,478
NET ASSETS:
Beginning of period ............................................ 266,651,604 140,904,582 5,082,478 --
------------- ------------- ------------- -------------
End of period .................................................. $ 455,355,844 $ 266,651,604 $ 11,582,263 $ 5,082,478
------------- ------------- ------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ......................... 152,873,642 84,182,521 -- --
Purchase payments .............................................. 77,648,415 56,361,872 6,540,439 --
Surrenders ..................................................... (47,665,211) (17,562,213) (663,577) --
Transfers - interdivision and from (to) VALIC general account .. 68,384,107 29,891,462 57,361 --
------------- ------------- ------------- -------------
Total units outstanding, end of period ......................... 251,240,953 152,873,642 5,934,223 --
------------- ------------- ------------- -------------
Units outstanding, by class:
Standard units .............................................. 233,940,123 147,547,688 4,089,393 --
Enhanced units:
20 bp reduced ............................................. 9,613,663 5,325,479 1,844,830 --
40 bp reduced ............................................. 7,687,167 475 -- --
------------- ------------- ------------- -------------
Accumulation units end of period ............................... 251,240,953 152,873,642 5,934,223 --
------------- ------------- ------------- -------------
<CAPTION>
AMERICAN GENERAL
CONSERVATIVE GROWTH LIFESTYLE AMERICAN GENERAL GROWTH LIFESTYLE
FUND - DIVISION 50 FUND - DIVISION 48
------------------------------- --------------------------------
FOR THE FOR THE PERIOD FOR THE FOR THE PERIOD
YEAR ENDED AUGUST 26, 1998 YEAR ENDED AUGUST 26, 1998
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income ...........................................$ 602,341 $ 27,772 $ 743,981 $ 11,226
Net realized gain on investments ................................ 895,570 -- 63,773 --
Capital gains distributions from mutual funds ................... 1,025,645 -- 323,571 --
Net unrealized appreciation (depreciation)
of investments during the period .............................. (1,418,604) 800,941 1,217,409 970,379
------------- ------------- ------------- -------------
Increase in net assets resulting from operations ........... 1,104,952 828,713 2,348,734 981,605
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 1,836,447 -- 2,368,603 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (50,904) -- (49,197) --
Annuity benefit payments ........................................ -- -- -- --
Amounts transferred interdivision, and from (to)
VALIC general account ........................................ (326) 5,000,000 934 5,000,000
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions .................. 1,785,217 5,000,000 2,320,340 5,000,000
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ......................... 2,890,169 5,828,713 4,669,074 5,981,605
NET ASSETS:
Beginning of period ............................................. 5,828,713 -- 5,981,605 --
------------- ------------- ------------- -------------
End of period ...................................................$ 8,718,882 $ 5,828,713 $ 10,650,679 $ 5,981,605
------------- ------------- ------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... -- -- -- --
Purchase payments ............................................... 1,654,793 -- 1,895,721 --
Surrenders ...................................................... (41,867) -- (36,221) --
Transfers - interdivision and from (to) VALIC general account ... (2,450) -- 604 --
------------- ------------- ------------- -------------
Total units outstanding, end of period .......................... 1,610,476 -- 1,860,104 --
------------- ------------- ------------- -------------
Units outstanding, by class:
Standard units ............................................... 203,221 -- 139,443 --
Enhanced units:
20 bp reduced .............................................. 246,969 -- 46,149 --
40 bp reduced .............................................. 1,160,286 -- 1,674,512 --
------------- ------------- ------------- -------------
Accumulation units end of period ................................ 1,610,476 -- 1,860,104 --
------------- ------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................. $ 1.807351 $ 1.742617 $ 1.053624 $ --
Enhanced unit:
20 bp reduced ............................... 1.856681 1.786658 1.056406 --
40 bp reduced ............................... 1.909470 1.833793 -- --
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................. $ 1.306897 $ -- $ 1.538200 $ --
Enhanced unit:
20 bp reduced ............................... 1.310337 -- 1.542278 --
40 bp reduced ............................... 1.313858 -- 1.546416 --
</TABLE>
<PAGE> 424
32 FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AMERICAN GENERAL VANGUARD LIFESTRATEGY
MODERATE GROWTH LIFESTYLE CONSERVATIVE GROWTH FUND -
FUND - DIVISION 49 DIVISION 54
----------------------------- --------------------------------
FOR THE FOR THE PERIOD FOR THE FOR THE PERIOD
YEAR ENDED AUGUST 26, 1998 YEAR ENDED SEPTEMBER 22, 1998
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
------------ --------------- ------------ ------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ........................................... $ 920,304 $ 19,912 $ 132,404 $ --
Net realized gain (loss) on investments ......................... 83,407 -- (924) --
Capital gains distributions from mutual funds ................... 389,591 -- 35,147 --
Net unrealized appreciation (depreciation)
of investments during the period .............................. 497,038 925,696 68,926 --
------------ ------------ ------------ ------------
Increase in net assets resulting from operations ........... 1,890,340 945,608 235,553 --
------------ ------------ ------------ ------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 4,916,637 -- 3,578,560 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (119,332) -- (181,467) --
Annuity benefit payments ........................................ -- -- -- --
Amounts transferred interdivision, and from (to)
VALIC general account ........................................ (63,592) 5,000,000 1,692,135 --
------------ ------------ ------------ ------------
Increase (decrease) in net assets
resulting from principal transactions .................... 4,733,713 5,000,000 5,089,228 --
------------ ------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ......................... 6,624,053 5,945,608 5,324,781 --
NET ASSETS:
Beginning of period ............................................. 5,945,608 -- -- --
------------ ------------ ------------ ------------
End of period ................................................... $ 12,569,661 $ 5,945,608 $ 5,324,781 $ --
------------ ------------ ------------ ------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... -- -- -- --
Purchase payments ............................................... 4,077,444 -- 3,221,062 --
Surrenders ...................................................... (102,891) -- (162,437) --
Transfers - interdivision and from (to) VALIC general account ... (54,577) -- 1,536,786 --
------------ ------------ ------------ ------------
Total units outstanding, end of period .......................... 3,919,976 -- 4,595,411 --
------------ ------------ ------------ ------------
Units outstanding, by class:
Standard units ............................................... 215,575 -- 554,101 --
Enhanced units:
20 bp reduced .............................................. 213,355 -- 375,819 --
40 bp reduced .............................................. 3,491,046 -- 3,665,491 --
------------ ------------ ------------ ------------
Accumulation units end of period ................................ 3,919,976 -- 4,595,411 --
------------ ------------ ------------ ------------
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................ $ 1.397661 $ -- $ 1.153827 $ --
Enhanced unit:
20 bp reduced .............................................. 1.401340 -- 1.156739 --
40 bp reduced .............................................. 1.405109 -- 1.159659 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 425
SEPARATE ACCOUNT A 33
<TABLE>
<CAPTION>
VANGUARD LIFESTRATEGY VANGUARD LIFESTRATEGY
GROWTH FUND - MODERATE GROWTH FUND -
DIVISION 52 DIVISION 53
-------------------------------- --------------------------------
FOR THE FOR THE PERIOD FOR THE FOR THE PERIOD
YEAR ENDED SEPTEMBER 22, 1998 YEAR ENDED SEPTEMBER 22, 1998
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
------------- ------------------ ------------- ------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ........................................... $ 308,508 $ -- $ 611,113 $ --
Net realized gain (loss) on investments ......................... 57,727 -- 29,492 --
Capital gains distributions from mutual funds ................... 177,605 -- 218,753 --
Net unrealized appreciation (depreciation)
of investments during the period .............................. 2,002,755 -- 1,470,942 --
------------- ----------- ------------- -----------
Increase in net assets resulting from operations ........... 2,546,595 -- 2,330,300 --
------------- ----------- ------------- -----------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 16,026,935 -- 25,276,661 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (202,105) -- (684,329) --
Annuity benefit payments ........................................ -- -- -- --
Amounts transferred interdivision, and from (to)
VALIC general account ........................................ 6,590,799 -- 5,146,081 --
------------- ----------- ------------- -----------
Increase (decrease) in net assets
resulting from principal transactions .................... 22,415,629 -- 29,738,413 --
------------- ----------- ------------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS ......................... 24,962,224 -- 32,068,713 --
NET ASSETS:
Beginning of period ............................................. -- -- -- --
------------- ----------- ------------- -----------
End of period ................................................... $ 24,962,224 $ -- $ 32,068,713 $ --
------------- ----------- ------------- -----------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... -- -- -- --
Purchase payments ............................................... 13,077,473 -- 21,705,063 --
Surrenders ...................................................... (161,106) -- (580,717) --
Transfers - interdivision and from (to) VALIC general account ... 5,453,813 -- 4,517,365 --
------------- ----------- ------------- -----------
Total units outstanding, end of period .......................... 18,370,180 -- 25,641,711 --
------------- ----------- ------------- -----------
Units outstanding, by class:
Standard units ............................................... 1,591,689 -- 1,354,406 --
Enhanced units:
20 bp reduced .............................................. 1,468,333 -- 2,152,244 --
40 bp reduced .............................................. 15,310,158 -- 22,135,061 --
------------- ----------- ------------- -----------
Accumulation units end of period ................................ 18,370,180 -- 25,641,711 --
------------- ----------- ------------- -----------
</TABLE>
<TABLE>
<CAPTION>
AGSPC ASSET ALLOCATION TEMPLETON ASSET
FUND - DIVISION 5 ALLOCATION FUND - DIVISION 19
---------------------------- ------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ........................................... $ 4,363,782 $ 3,873,507 $ 3,194,984 $ 5,298,721
Net realized gain (loss) on investments ......................... 4,428,516 2,520,862 14,669,025 10,513,951
Capital gains distributions from mutual funds ................... 4,417,585 12,936,405 38,640,994 9,560,576~
Net unrealized appreciation (depreciation)
of investments during the period .............................. 11,930,044 13,072,376 4,197,098 (10,693,322)
------------- ------------- ------------- -------------
Increase in net assets resulting from operations ........... 25,139,927 32,403,150 60,702,101 14,679,926
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 21,853,335 16,199,430 36,161,331 55,452,646
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (17,081,242) (12,309,318) (21,505,474) (15,786,958)
Annuity benefit payments ........................................ (19,764) (9,811) (25,689) (22,337)
Amounts transferred interdivision, and from (to)
VALIC general account ........................................ 3,626,725 6,673,714 (75,781,880) (47,069,555)
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions .................... 8,379,054 10,554,015 (61,151,712) (7,426,204)
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ......................... 33,518,981 42,957,165 (449,611) 7,253,722
NET ASSETS:
Beginning of period ............................................. 227,535,157 184,577,992 324,128,007 316,874,285
------------- ------------- ------------- -------------
End of period ................................................... $ 261,054,138 $ 227,535,157 $ 323,678,396 $ 324,128,007
------------- ------------- ------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... 60,269,168 57,307,351 190,963,707 196,150,946
Purchase payments ............................................... 5,389,575 4,579,044 19,274,982 32,881,580
Surrenders ...................................................... (4,241,930) (3,567,970) (12,264,078) (10,222,721)
Transfers - interdivision and from (to) VALIC general account ... 1,013,569 1,950,743 (41,733,088) (27,846,098)
------------- ------------- ------------- -------------
Total units outstanding, end of period .......................... 62,430,382 60,269,168 156,241,523 190,963,707
------------- ------------- ------------- -------------
Units outstanding, by class:
Standard units ............................................... 61,240,667 60,237,818 137,266,658 190,963,707
Enhanced units:
20 bp reduced .............................................. 673,135 31,350 485,669 --
40 bp reduced .............................................. 516,580 -- 18,489,196 --
------------- ------------- ------------- -------------
Accumulation units end of period ................................ 62,430,382 60,269,168 156,241,523 190,963,707
------------- ------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Accumulation value per unit: $ 1.352880 $ -- $ 1.244955 $ --
Standard unit ................................................
Enhanced unit:
20 bp reduced .............................................. 1.356289 -- 1.248092 --
40 bp reduced .............................................. 1.359710 -- 1.251243 --
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Accumulation value per unit: $ 4.174280 $ 3.772519 $ 2.058095 $ 1.695764
Standard unit ................................................
Enhanced unit:
20 bp reduced .............................................. 4.303891 3.882024 2.102090 --
40 bp reduced .............................................. 4.446999 -- 2.150733 --
</TABLE>
<PAGE> 426
34 NOTES TO FINANCIAL STATEMENTS
NOTE A - ORGANIZATION
Separate Account A (the "Separate Account"), established by The Variable
Annuity Life Insurance Company ('VALIC") on April 18, 1979, is registered under
the Investment Company Act of 1940 as a unit investment trust. The Separate
Account is comprised of fifty-eight 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:
<TABLE>
<S> <C>
American General Series Portfolio Company ("AGSPC"): American Century Ultra Fund (Division 31) (formerly known as
AGSPC Asset Allocation Fund (Division 5) American Century-Twentieth Century Ultra Fund)
AGSPC Capital Conservation Fund (Divisions 1 and 7) Dreyfus Variable Investment Fund - Small Cap
AGSPC Government Securities Fund (Division 8) Portfolio (Division 18)
AGSPC Growth Fund (Division 15) Evergreen Growth and Income Fund - (Division 56)
AGSPC Growth & Income Fund (Division 16) Evergreen Small Cap Value Fund (Division 55) (formerly known as
AGSPC International Equities Fund (Division 11) Evergreen Small Cap Equity Income Fund)
AGSPC International Government Bond Fund (Division 13) Evergreen Value Fund - (Division 57)
AGSPC MidCap Index Fund (Division 4) Dreyfus Founders Growth Fund (Division 30) (formerly known as
AGSPC Money Market Fund (Divisions 2 and 6) Founders Growth Fund)
AGSPC Science & Technology Fund (Division 17) Neuberger Berman Guardian Trust (Division 29)
AGSPC Small Cap Index Fund (Division 14) Putnam Global Growth Fund (Division 28)
AGSPC Social Awareness Fund (Division 12) Putnam New Opportunities Fund (Division 26)
AGSPC Stock Index Fund (Divisions 10A, B, C, and D) Putnam OTC & Emerging Growth Fund (Division 27)
Scudder Growth and Income Fund (Division 21)
American General Series Portfolio Company 3 ("AGSPC 3"): Templeton Foreign Fund (Division 32)
American General Balanced Fund (Division 42) Templeton Variable Products Series Fund:
American General Conservative Growth Templeton Asset Allocation Fund (Division 19)
Lifestyle Fund (Division 50) Templeton International Fund (Division 20)
American General Core Bond Fund (Division 58) T. Rowe Price Small-Cap Stock Fund (Division 51)
American General Domestic Bond Fund (Division 43) Vanguard LifeStrategy Conservative Growth Fund (Division 54)
American General Growth Lifestyle Fund (Division 48) Vanguard LifeStrategy Growth Fund (Division 52)
American General High Yield Bond Fund (Division 60) Vanguard LifeStrategy Moderate Growth Fund (Division 53)
American General International Growth Fund (Division 33) Vanguard Long-Term Corporate Fund (Division 22)
American General International Value Fund (Division 34) Vanguard Long-Term Treasury Fund (Division 23)
American General Large Cap Growth Fund (Division 39) Vanguard Wellington Fund (Division 25)
American General Large Cap Value Fund (Division 40) Vanguard Windsor II Fund (Division 24)
American General Mid Cap Growth Fund (Division 37)
American General Mid Cap Value Fund (Division 38)
American General Moderate Growth Lifestyle Fund (Division 49)
American General Money Market Fund (Division 44)
American General Small Cap Growth Fund (Division 35)
American General Small Cap Value Fund (Division 36)
American General Socially Responsible Fund (Division 41)
American General Strategic Bond Fund (Division 59)
</TABLE>
Divisions 33 through 54 and 58 through 60 became available to contract
holders of the Separate Account effective September 22, 1998. Divisions 55
through 57 became available to contract holders of the Separate Account
effective January 4, 1999.
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The assets of the Separate Account are segregated from VALIC's other
assets. The operations of the Separate Account are part of VALIC. The following
is a summary of significant accounting policies consistently followed by the
Separate Account in the preparation of its financial statements.
USE OF ESTIMATES. The financial statements have been prepared in conformity
with accounting principles generally accepted in the United States. 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.
<PAGE> 427
NOTES TO FINANCIAL STATEMENTS 35
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.
NOTE C -- TRANSACTIONS WITH AFFILIATES
VALIC serves as investment adviser (the "Adviser"), transfer agent, and
accounting services agent to AGSPC 1 and AGSPC 3. American General Investment
Management, L.P., an affiliate of the Adviser, serves as investment sub-adviser
to certain AGSPC 3 mutual funds.
The Separate Account is charged for mortality and expense risk 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:
<TABLE>
<CAPTION>
DIVISIONS STANDARD CHARGE
------------------------------------------------------------------------
<S> <C>
10B 0.85% on the first $10 million
0.425% on the next $90 million
0.21% on the excess over $100 million
------------------------------------------------------------------------
1, 2, 4 through 8,
10A, 10C and 10D,
11 through 17, 1.00%
33 through 44,
48 through 50 and
58 through 60
------------------------------------------------------------------------
18 through 32
51 through 57 1.25%
------------------------------------------------------------------------
</TABLE>
Certain mutual funds reimburse VALIC for 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:
<TABLE>
<CAPTION>
DIVISIONS EXPENSE REDUCTION
------------------------------------------------------------------------
<S> <C>
21 through 23,
26 through 30,
32 through 44, 0.25%
48 through 50,
55 through 60
------------------------------------------------------------------------
31 0.20% on the first $75 million
0.25% on the excess over $75 million
------------------------------------------------------------------------
18 0.15%
------------------------------------------------------------------------
</TABLE>
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.
<PAGE> 428
36 NOTES TO FINANCIAL STATEMENTS
Expenses of VALIC Separate Account A Divisions 10A and 10B, (as defined to
include underlying mutual fund expenses) are limited to the following rates
based on average daily net assets:
<TABLE>
<CAPTION>
DIVISIONS EXPENSE LIMITATIONS
---------------------------------------------------------------------------------
<S> <C>
10A 1.4157% on the first $359,065,787
1.36% on the next $40,934,213
1.32% on the excess over $400 million
---------------------------------------------------------------------------------
10B 0.6966% on the first $25,434,267
0.50% on the next $74,565,733
0.25% on the excess over $100 million
---------------------------------------------------------------------------------
</TABLE>
Accordingly, during the years ended December 31, 1999 and 1998, VALIC
reduced expenses of Division 10B by $94,122 and $82,027, 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 $6,506,341 and $5,575,601 for the years
ended December 31, 1999 and 1998, respectively.
VALIC received surrender charges of $6,181,873 and $4,581,641 for the years
ended December 31, 1999 and 1998, respectively. In addition, VALIC received
$46,011 and $4,147 for the year ended December 31, 1999, in sales load on
variable annuity purchase payments for Divisions 10A and 10B, respectively.
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 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, 1999:
<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 12,681,732 $13.80 $175,007,894 $153,864,816 $ 21,143,078
AGSPC MidCap Index Fund....................... 4 39,427,464 22.24 876,866,818 761,782,279 115,084,539
AGSPC Small Cap Index Fund.................... 14 14,526,817 16.60 241,145,168 228,085,714 13,059,454
AGSPC Stock Index Fund........................ 10A,B,C,D 118,066,893 44.44 5,246,892,687 2,621,261,506 2,625,631,181
AGSPC Growth Fund............................. 15 51,853,516 23.50 1,218,557,601 902,850,565 315,707,036
AGSPC Growth & Income Fund.................... 16 15,306,480 21.99 336,589,500 252,817,396 83,772,104
American Century Ultra Fund................... 31 22,353,284 45.78 1,023,333,380 773,447,526 249,885,854
American General International Growth Fund.... 33 431,454 15.87 6,847,182 4,540,670 2,306,512
American General International Value Fund..... 34 443,411 18.26 8,096,689 4,952,066 3,144,623
American General Large Cap Growth Fund........ 39 1,329,646 16.32 21,699,827 17,193,893 4,505,934
American General Large Cap Value Fund......... 40 405,206 11.04 4,473,480 4,309,106 164,374
American General Mid Cap Growth Fund.......... 37 548,588 12.88 7,065,815 5,898,950 1,166,865
American General Mid Cap Value Fund........... 38 734,556 11.34 8,329,863 8,197,536 132,327
American General Small Cap Growth Fund........ 35 783,183 21.25 16,642,631 10,446,375 6,196,256
American General Small Cap Value Fund......... 36 435,735 10.26 4,470,644 4,378,518 92,126
Dreyfus Variable Investment Fund --
Small Cap Portfolio......................... 18 11,749,941 66.34 779,491,073 597,305,985 182,185,088
Evergreen Growth and Income Fund.............. 56 193 32.23 6,220 5,850 370
Evergreen Small Cap Value Fund................ 55 16 14.77 243 243 -
Evergreen Value Fund.......................... 57 212 20.69 4,388 4,707 (319)
</TABLE>
<PAGE> 429
NOTES TO FINANCIAL STATEMENTS 37
<TABLE>
<CAPTION>
UNREALIZED
MARKET APPRECIATION
UNDERLYING FUND DIVISION SHARES PRICE MARKET COST (DEPRECIATION)
- --------------------------------------------- -------- ---------- ------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Dreyfus Founders Growth Fund ................ 30 36,634,173 $ 23.87 $ 874,457,709 $ 744,045,046 $ 130,412,663
Neuberger Berman Guardian Trust ............. 29 4,205,603 14.14 59,467,223 72,768,026 (13,300,803)
Putnam Global Growth Fund ................... 28 26,666,641 18.59 495,732,851 350,405,108 145,327,743
Putnam New Opportunities Fund ............... 26 11,157,111 90.96 1,014,850,850 630,466,495 384,384,355
Putnam OTC & Emerging Growth Fund ........... 27 11,652,311 37.01 431,252,004 234,928,422 196,323,582
Scudder Growth and Income Fund .............. 21 9,240,762 26.69 246,635,934 258,757,360 (12,121,426)
T. Rowe Price Small-Cap Stock Fund .......... 51 383,280 22.80 8,738,757 7,730,112 1,008,645
Templeton Foreign Fund ...................... 32 29,989,326 11.22 336,480,225 305,197,182 31,283,043
Templeton International Fund ................ 20 36,732,726 22.25 817,303,148 697,567,268 119,735,880
Vanguard Windsor II Fund .................... 24 29,350,047 24.97 732,870,656 860,734,104 (127,863,448)
American General Balanced Fund .............. 42 806,619 12.34 9,953,676 8,797,929 1,155,747
Vanguard Wellington Fund .................... 25 20,381,425 27.96 569,864,636 610,206,190 (40,341,554)
AGSPC Capital Conservation Fund ............. 1 & 7 6,271,787 9.04 56,696,951 59,937,282 (3,240,331)
AGSPC Government Securities Fund ............ 8 9,791,463 9.53 93,312,643 99,573,538 (6,260,895)
AGSPC International ~Government Bond Fund ... 13 12,944,516 11.52 149,120,828 154,526,420 (5,405,592)
American General Core Bond Fund ............. 58 546,329 9.46 5,168,278 5,453,662 (285,384)
American General Domestic Bond Fund ......... 43 196,208 9.33 1,830,628 1,941,338 (110,710)
American General High Yield Bond Fund ....... 60 573,040 9.75 5,587,119 5,731,184 (144,065)
American General Strategic Bond Fund ........ 59 552,828 9.96 5,506,171 5,531,806 (25,635)
Vanguard Fixed Income Securities Fund:
Long-Term Corporate Fund .................. 22 8,417,206 8.11 68,263,542 76,417,392 (8,153,850)
Long-Term Treasury Fund ................... 23 14,669,704 9.67 141,856,062 159,944,453 (18,088,391)
AGSPC Science & Technology Fund ............. 17 72,283,188 47.13 3,406,706,628 1,882,063,789 1,524,642,83
AGSPC Social Awareness Fund ................. 12 23,981,721 25.81 618,968,226 477,460,805 141,507,421
American General Socially
Responsible Fund .......................... 41 885,926 13.80 12,225,981 10,023,073 2,202,908
AGSPC Money Market Fund ..................... 2 & 6 463,954,740 1.00 463,954,740 463,954,740 --
American General Money Market Fund .......... 44 11,553,720 1.00 11,553,720 11,553,720 --
American General Conservative
Growth Lifestyle Fund ...................... 50 809,972 10.74 8,699,095 9,316,758 (617,663)
American General Growth Lifestyle Fund ...... 48 761,135 13.96 10,625,442 8,437,654 2,187,788
American General Moderate
Growth Lifestyle Fund ..................... 49 994,186 12.60 12,526,733 11,103,999 1,422,734
Vanguard LifeStrategy
Conservative Growth Fund ................. 54 352,263 15.10 5,319,180 5,250,254 68,926
Vanguard LifeStrategy Growth Fund ........... 52 1,163,639 21.41 24,913,522 22,910,767 2,002,755
Vanguard LifeStrategy
Moderate Growth Fund ..................... 53 1,762,720 18.18 32,046,248 30,575,306 1,470,942
AGSPC Asset Allocation Fund ................. 5 17,289,012 15.09 260,891,195 212,925,934 47,965,261
Templeton Asset Allocation Fund ............. 19 13,861,377 23.37 323,940,365 286,019,883 37,920,482
------------- ----- --------------- --------------- --------------
Total .................................... 1,171,895,031 $21,292,842,069 $15,133,600,700 $6,159,241,369
============= ===== =============== =============== ==============
</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.
<PAGE> 430
38 NOTES TO FINANCIAL STATEMENTS
NOTE F -- SECURITY PURCHASES AND SALES
For the year ended December 31, 1999, 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.................................... $ 134,677,751 $ 139,385,819
AGSPC MidCap Index Fund Division 4............................................... 235,122,234 121,903,304
AGSPC Small Cap Index Fund Division 14........................................... 54,587,283 58,450,240
AGSPC Stock Index Fund:..........................................................
Division 10A.................................................................. 24,080,573 77,479,615
Division 10B.................................................................. 3,046,671 7,574,316
Division 10C.................................................................. 626,807,392 82,339,542
Division 10D.................................................................. 4,099,962 10,844,842
AGSPC Growth Fund Division 15.................................................... 88,504,403 118,778,430
AGSPC Growth & Income Fund Division 16........................................... 52,289,506 29,123,818
American Century Ultra Fund Division 31.......................................... 444,783,914 21,596,564
American General International Growth Fund Division 33........................... 946,472 70,990
American General International Value Fund Division 34 ........................... 1,433,853 138,079
American General Large Cap Growth Fund Division 39............................... 14,803,088 658,862
American General Large Cap Value Fund Division 40................................ 1,603,370 268,211
American General Mid Cap Growth Fund Division 37................................. 1,915,167 88,442
American General Mid Cap Value Fund Division 38.................................. 4,571,598 606,656
American General Small Cap Growth Fund Division 35............................... 6,687,388 288,207
American General Small Cap Value Fund Division 36................................ 599,894 142,588
Dreyfus Variable Investment Fund - Small Cap Portfolio Division 18............... 21,111,378 196,910,062
Evergreen Growth and Income Fund Division 56..................................... 11,440 5,621
Evergreen Small Cap Value Fund Division 55....................................... 243 --
Evergreen Value Fund Division 57................................................. 4,708 --
Dreyfus Founders Growth Fund Division 30......................................... 377,694,422 15,816,982
Neuberger Berman Guardian Trust Division 29...................................... 16,757,237 12,416,328
Putnam Global Growth Fund Division 28............................................ 211,644,710 15,117,798
Putnam New Opportunities Fund Division 26........................................ 296,792,660 13,090,798
Putnam OTC & Emerging Growth Fund Division 27.................................... 137,306,910 40,666,703
Scudder Growth and Income Fund Division 21....................................... 31,899,301 36,629,775
T. Rowe Price Small-Cap Stock Fund Division 51 .................................. 8,924,589 1,235,607
Templeton Foreign Fund Division 32............................................... 101,740,948 61,364,564
Templeton International Fund Division 20......................................... 189,502,177 212,566,145
Vanguard Windsor II Fund Division 24............................................. 269,298,579 49,634,770
American General Balanced Fund Division 42 ...................................... 3,866,126 161,950
Vanguard Wellington Fund Division 25............................................. 213,879,566 21,573,138
AGSPC Capital Conservation Fund:
Division 1.................................................................... 539,820 1,229,647
Division 7.................................................................... 8,884,731 13,555,587
AGSPC Government Securities Fund Division 8...................................... 43,737,807 55,270,473
AGSPC International Government Bond Fund Division 13............................. 110,344,428 114,909,023
American General Core Bond Fund Division 58...................................... 397,138 9,568
American General Domestic Bond Fund Division 43.................................. 902,534 234,776
American General High Yield Bond Fund Division 60................................ 669,191 29,912
American General Strategic Bond Fund Division 59 453,036 1,300
Vanguard Long-Term Corporate Fund Division 22.................................... 26,914,873 9,374,775
Vanguard Long-Term Treasury Fund Division 23..................................... 65,677,636 20,627,370
AGSPC Science & Technology Fund Division 17...................................... 858,454,770 65,588,109
AGSPC Social Awareness Fund Division 12.......................................... 133,894,631 15,404,062
American General Socially Responsible Fund Division 41........................... 4,913,557 264,485
AGSPC Money Market Fund:
Division 2.................................................................... 3,989,984 4,006,915
Division 6.................................................................... 533,688,517 340,162,602
American General Money Market Fund Division 44................................... 8,345,963 1,874,721
American General Conservative Growth Lifestyle Fund Division 50.................. 8,807,869 5,415,651
American General Growth Lifestyle Fund Division 48............................... 3,618,201 265,479
American General Moderate Growth Lifestyle Fund Division 49...................... 6,430,264 434,004
Vanguard LifeStrategy Conservative Growth Fund Division 54....................... 5,949,918 698,740
Vanguard LifeStrategy Growth Fund Division 52 ................................... 24,674,642 1,821,602
Vanguard LifeStrategy Moderate Growth Fund Division 53 .......................... 31,808,062 1,262,248
AGSPC Asset Allocation Fund Division 5........................................... 35,282,084 18,243,130
Templeton Asset Allocation Fund Division 19...................................... 62,685,987 81,750,675
-------------- --------------
Total ........................................................................... $5,562,061,156 $2,099,363,620
============== ==============
</TABLE>
<PAGE> 431
SUPPLEMENTAL INFORMATION 39
<TABLE>
<CAPTION>
GROUP PORTFOLIO
UNIT INDEPENDENCE DIRECTOR
PURCHASE IMPACT PLUS 1
DIVISION DIVISION DIVISION DIVISION
-------- -------- ------------ ---------
<S> <C> <C> <C> <C>
INDEX EQUITY FUNDS
AGSPC International Equities Fund .................... -- -- 11 11
AGSPC MidCap Index Fund .............................. -- 4 4 4
AGSPC Small Cap Index Fund ........................... -- -- 14 14
AGSPC Stock Index Fund ............................... 10A, 10B 10D 10C 10C
ACTIVELY MANAGED EQUITY FUNDS
AGSPC Growth Fund .................................... -- -- -- 15
AGSPC Growth & Income Fund ........................... -- -- -- 16
American Century Ultra Fund (formerly known as
American Century-Twentieth Century Ultra Fund) ..... -- -- -- --
American General International Growth Fund ........... -- -- -- --
American General International Value Fund ............ -- -- -- --
American General Large Cap Growth Fund ............... -- -- -- --
American General Large Cap Value Fund ................ -- -- -- --
American General Mid Cap Growth Fund ................. -- -- -- --
American General Mid Cap Value Fund .................. -- -- -- --
American General Small Cap Growth Fund ............... -- -- -- --
American General Small Cap Value Fund ................ -- -- -- --
Dreyfus Variable Investment Fund -
Small Cap Portfolio .............................. -- -- -- 18
Evergreen Growth and Income Fund ..................... -- -- -- --
Evergreen Small Cap Value Fund
(formerly known as the Evergreen Small
Cap Equity Income Fund) .......................... -- -- -- --
Evergreen Value Fund ................................. -- -- -- --
Dreyfus Founders Growth Fund
(formerly known as Founders Growth) .............. -- -- -- --
Neuberger Berman Guardian Trust ...................... -- -- -- --
Putnam Global Growth Fund ............................ -- -- -- --
Putnam New Opportunities Fund ........................ -- -- -- --
Putnam OTC & Emerging Growth Fund .................... -- -- -- --
Scudder Growth and Income Fund ....................... -- -- -- --
T. Rowe Price Small-Cap Stock Fund ................... -- -- -- --
Templeton Foreign Fund ............................... -- -- -- --
Templeton International Fund ......................... -- -- -- 20
Vanguard Windsor II Fund ............................. -- -- -- --
BALANCED FUNDS
American General Balanced Fund ....................... -- -- -- --
Vanguard Wellington Fund ............................. -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
YEAR TO DATE
TOTAL RETURN
PORTFOLIO PORTFOLIO FOR YEAR ENDING
DIRECTOR DIRECTOR DECEMBER 31,
2 PLUS -------------------------
DIVISION DIVISION 1999 1998
--------- ---------- -------- -------
<S> <C> <C> <C> <C>
INDEX EQUITY FUNDS
AGSPC International Equities Fund .................... -- 11 27.88% 17.57%
AGSPC MidCap Index Fund .............................. -- 4 13.78 17.80
AGSPC Small Cap Index Fund ........................... -- 14 20.10 (2.92)
AGSPC Stock Index Fund ............................... 10C 10C 19.37 27.14
ACTIVELY MANAGED EQUITY FUNDS
AGSPC Growth Fund .................................... 15 15 6.33 16.96
AGSPC Growth & Income Fund ........................... -- 16 21.61 13.41
American Century Ultra Fund (formerly known as
American Century-Twentieth Century Ultra Fund) ..... 31 31 40.00 33.14
American General International Growth Fund ........... -- 33 55.45 5.17(a)
American General International Value Fund ............ -- 34 66.59 14.99(a)
American General Large Cap Growth Fund ............... -- 39 34.39 24.08(a)
American General Large Cap Value Fund ................ -- 40 4.52 24.66(a)
American General Mid Cap Growth Fund ................. -- 37 5.60 34.77(a)
American General Mid Cap Value Fund .................. -- 38 21.28 25.47(a)
American General Small Cap Growth Fund ............... -- 35 68.43 34.94(a)
American General Small Cap Value Fund ................ -- 36 (7.27) 16.53(a)
Dreyfus Variable Investment Fund -
Small Cap Portfolio .............................. -- 18 21.80 (4.51)
Evergreen Growth and Income Fund ..................... -- 56 13.29 n/a(c)
Evergreen Small Cap Value Fund
(formerly known as the Evergreen Small
Cap Equity Income Fund) .......................... -- 55 (0.45) n/a(c)
Evergreen Value Fund ................................. -- 57 3.41 n/a(c)
Dreyfus Founders Growth Fund
(formerly known as Founders Growth) .............. 30 30 37.64 23.76
Neuberger Berman Guardian Trust ...................... 29 29 7.36 1.34
Putnam Global Growth Fund ............................ 28 28 63.00 27.48
Putnam New Opportunities Fund ........................ 26 26 67.91 23.12
Putnam OTC & Emerging Growth Fund .................... 27 27 124.57 9.87
Scudder Growth and Income Fund ....................... 21 21 5.09 4.99
T. Rowe Price Small-Cap Stock Fund ................... -- 51 13.33 14.10(b)
Templeton Foreign Fund ............................... 32 32 38.34 (5.82)
Templeton International Fund ......................... -- 20 22.10 7.95
Vanguard Windsor II Fund ............................. 24 24 (6.96) 14.90
BALANCED FUNDS
American General Balanced Fund ....................... -- 42 13.07 17.01(a)
Vanguard Wellington Fund ............................. 25 25 3.11 10.65
</TABLE>
(a) Since August 26, 1998, initial capitalization of the Division. See Note C
to financial statements.
(b) Since September 22, 1998, inception of the Division.
(c) Since January 4, 1999, 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 Plus prospectus. 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> 432
40 SUPPLEMENTAL INFORMATION
<TABLE>
<CAPTION>
GROUP PORTFOLIO PORTFOLIO PORTFOLIO
UNIT INDEPENDENCE DIRECTOR DIRECTOR DIRECTOR
PURCHASE IMPACT PLUS 1 2 PLUS
DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION
-------- -------- ------------ --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
INCOME FUNDS
AGSPC Capital Conservation Fund ....................... -- 1 7 7 -- 7
AGSPC Government Securities Fund ...................... -- -- 8 8 -- 8
AGSPC International Government Bond Fund .............. -- -- 13 13 13 13
American General Core Bond Fund ....................... -- -- -- -- -- 58
American General Domestic Bond Fund ................... -- -- -- -- -- 43
American General High Yield Bond Fund ................. -- -- -- -- -- 60
American General Strategic Bond Fund .................. -- -- -- -- -- 59
Vanguard Long-Term Corporate Fund (formerly
known as Vanguard Fixed Income Securities
Fund - Long-Term Corporate Fund) .................... -- -- -- -- 22 22
Vanguard Long-Term Treasury Fund (formerly
known as Vanguard Fixed Income Securities
Fund - Long-Term U.S. Treasury Portfolio) ........... -- -- -- -- 23 23
SPECIALTY FUNDS
AGSPC Science & Technology Fund ....................... -- -- -- 17 17 17
AGSPC Social Awareness Fund ........................... -- -- 12 12 12 12
American General Socially Responsible Fund ............ -- -- -- -- -- 41
MONEY MARKET FUNDS
AGSPC Money Market Fund ............................... -- 2 6 6 6 6
American General Money Market Fund .................... -- -- -- -- -- 44
LIFESTYLE FUNDS
American General Conservative Growth Lifestyle Fund ... -- -- -- -- -- 50
American General Growth Lifestyle Fund ................ -- -- -- -- -- 48
American General Moderate Growth Lifestyle Fund ....... -- -- -- -- -- 49
Vanguard LifeStrategy Conservative Growth Fund ........ -- -- -- -- -- 54
Vanguard LifeStrategy Growth Fund ..................... -- -- -- -- -- 52
Vanguard LifeStrategy Moderate Growth Fund ............ -- -- -- -- -- 53
ASSET ALLOCATION FUNDS
AGSPC Asset Allocation Fund ........................... -- 5 5 5 -- 5
Templeton Asset Allocation Fund ....................... -- -- -- 19 -- 19
</TABLE>
<TABLE>
<CAPTION>
YEAR TO DATE
TOTAL RETURN
FOR YEAR ENDING
DECEMBER 31,
-------------------------
1999 1998
----- -----
<S> <C> <C>
INCOME FUNDS
AGSPC Capital Conservation Fund ....................... (1.40)% 6.30%
AGSPC Government Securities Fund ...................... (3.74) 7.86
AGSPC International Government Bond Fund .............. (6.88) 15.92
American General Core Bond Fund ....................... (1.89) 2.92(a)
American General Domestic Bond Fund ................... (3.81) 4.44(a)
American General High Yield Bond Fund ................. 2.17 5.31(a)
American General Strategic Bond Fund .................. 3.06 4.99(a)
Vanguard Long-Term Corporate Fund (formerly
known as Vanguard Fixed Income Securities
Fund - Long-Term Corporate Fund) .................... (7.21) 8.04
Vanguard Long-Term Treasury Fund (formerly
known as Vanguard Fixed Income Securities
Fund - Long-Term U.S. Treasury Portfolio) ........... (9.61) 11.82
SPECIALTY FUNDS 98.96 40.71
AGSPC Science & Technology Fund ....................... 17.46 26.03
AGSPC Social Awareness Fund ........................... 17.19 27.78(a)
American General Socially Responsible Fund ............
MONEY MARKET FUNDS
AGSPC Money Market Fund ............................... 3.71 4.12
American General Money Market Fund .................... 3.98 1.33(a)
LIFESTYLE FUNDS
American General Conservative Growth Lifestyle Fund ... 12.47 16.20(a)
American General Growth Lifestyle Fund ................ 28.99 19.25(a)
American General Moderate Growth Lifestyle Fund .......
Vanguard LifeStrategy Conservative Growth Fund ........ 17.90 18.54(a)
Vanguard LifeStrategy Growth Fund ..................... 6.44 8.40(b)
Vanguard LifeStrategy Moderate Growth Fund ............ 15.82 16.81(b)
10.57 12.59(b)
ASSET ALLOCATION FUNDS
AGSPC Asset Allocation Fund ........................... 10.65 17.19
Templeton Asset Allocation Fund ....................... 21.37 5.07
</TABLE>
(a) Since August 26, 1998, initial capitalization of the Division. See Note C to
financial statements.
(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 Plus prospectus. 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> 433
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, 1999
and 1998, 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, 1999. 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 auditing standards generally
accepted in the United States. 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, 1999 and 1998,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
----------------------------------------
ERNST & YOUNG LLP
Houston, Texas
February 14, 2000
<PAGE> 434
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
At December 31
In millions, except per share data
<TABLE>
<CAPTION>
1999 1998
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS Investments - Notes 2, 7, 8, 9:
Fixed maturity securities
(amortized cost: $21,797 in 1999 and $21,733 in 1998) $ 21,258 $ 22,878
Equity securities (cost: $182 in 1999 and $176 in 1998) 220 194
Mortgage loans on real estate 1,478 1,213
Real estate 25 21
Policy loans 849 789
Other long-term invested assets 95 59
Short-term investments 94 164
--------------------------------------------------------------------------------------------------
Total investments 24,019 25,318
--------------------------------------------------------------------------------------------------
Investment income receivable 387 370
Cash 26 105
Receivable for securities sold 13 22
Deferred policy acquisition costs - Note 3 1,301 665
Cost of insurance purchased - Note 4 19 22
Due from reinsurer, net 12 13
Other assets 156 120
Assets held in Separate Accounts 21,390 14,712
--------------------------------------------------------------------------------------------------
Total assets $ 47,323 $ 41,347
- -----------------------------------------------------------------------------------------------------------------
LIABILITIES Policy reserves for fixed annuity investment contracts $ 23,441 $ 23,219
Payable for securities purchased -- 41
Remittances not allocated 50 96
Commissions, general expenses and taxes (other than income taxes) 55 38
Other liabilities 140 193
Income tax liabilities - Note 5 284 542
Liabilities related to Separate Accounts 21,390 14,712
--------------------------------------------------------------------------------------------------
Total liabilities 45,360 38,841
- -----------------------------------------------------------------------------------------------------------------
STOCKHOLDER'S Common stock, 5,000,000 shares authorized and 3,575,000 issued
EQUITY and outstanding in 1999 and 1998 - Note 6 4 4
Additional paid-in capital 851 833
Retained earnings 1,395 1,142
Accumulated other comprehensive income (loss) - Note 2 (287) 527
--------------------------------------------------------------------------------------------------
Total stockholder's equity 1,963 2,506
--------------------------------------------------------------------------------------------------
Total liabilities and stockholder's equity $ 47,323 $ 41,347
--------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
2
<PAGE> 435
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF INCOME
For the years ended December 31,
In millions
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES Premium and other considerations $ 19 $ -- $ --
Surrender charges 15 15 12
Mortality charges 184 135 94
Expense charges 8 7 6
Net investment income - Note 2 1,834 1,811 1,730
Realized investment gains (losses) - Note 2 5 (28) 20
Other income 28 19 17
--------------------------------------------------------------------------------------------------------------
Total revenues 2,093 1,959 1,879
- -------------------------------------------------------------------------------------------------------------------------------
BENEFITS AND Insurance policy benefits 19 -- --
EXPENSES Increase in policy reserves for fixed annuity contracts 1,213 1,296 1,286
Expenses:
Commissions 149 124 111
Salaries 94 71 59
Data processing 63 29 15
Postage and telephone 22 15 12
Sales promotion 11 10 10
Depreciation expense on furniture and equipment 16 10 9
Rent 12 10 8
Taxes, licenses and fees 10 8 7
Printing and supplies 8 7 5
Other expenses 41 61 35
Amortization of deferred policy acquisition costs, net - Note 3 56 55 42
Amortization of cost of insurance purchased, net - Note 4 3 2 --
Policy acquisition costs deferred - Note 3 (196) (160) (138)
--------------------------------------------------------------------------------------------------------------
Total expenses 289 242 175
--------------------------------------------------------------------------------------------------------------
Total costs and expenses 1,521 1,538 1,461
- -------------------------------------------------------------------------------------------------------------------------------
EARNINGS Income before income tax expense 572 421 418
Income tax expense - Note 5 195 137 144
--------------------------------------------------------------------------------------------------------------
Net income $ 377 $ 284 $ 274
--------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
3
<PAGE> 436
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
For the years ended December 31,
In millions, except per share data
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCK Balance at beginning and end of year $ 4 $ 4 $ 4
- -------------------------------------------------------------------------------------------------------------------------
ADDITIONAL Balance at beginning of year 833 711 459
PAID-IN-CAPITAL Capital contribution from stockholder 18 122 252
----------------------------------------------------------------------------------------------
Balance at end of year 851 833 711
- -------------------------------------------------------------------------------------------------------------------------
RETAINED Balance at beginning of year 1,142 1,039 1,144
EARNINGS Net income 377 284 274
Dividends paid to stockholder (124) (181) (379)
----------------------------------------------------------------------------------------------
Balance at end of year 1,395 1,142 1,039
- -------------------------------------------------------------------------------------------------------------------------
ACCUMULATED OTHER Balance at beginning of year 527 306 167
COMPREHENSIVE Change in net unrealized gains (losses) on securities (814) 221 139
----------------------------------------------------------------------------------------------
INCOME (LOSS) Balance at end of year (287) 527 306
- -------------------------------------------------------------------------------------------------------------------------
STOCKHOLDER'S
EQUITY Balance at end of year $ 1,963 $ 2,506 $ 2,060
----------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
NET INCOME Net income $ 377 $ 284 $ 274
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OTHER Change in net unrealized gains (losses) on securities
COMPREHENSIVE Fair value of fixed maturity securities (1,684) 155 468
INCOME (LOSS) Deferred policy acquisition costs and
cost of insurance purchased 499 172 (251)
Deferred income taxes 351 (124) (78)
-------------------------------------------------------------------------------------------
Change in fixed maturity securities (834) 203 139
Change in equity securities and other 20 18 -
-------------------------------------------------------------------------------------------
Total (814) 221 139
- ----------------------------------------------------------------------------------------------------------------------
COMPREHENSIVE
INCOME (LOSS) Comprehensive income (loss) $ (437) $ 505 $ 413
-------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
- --------------------------------------------------------------------------------
4
<PAGE> 437
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
For the years ended December 31,
In millions
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING Net income $ 377 $ 284 $ 274
ACTIVITIES Reconciling adjustments to net cash provided by
operating activities:
Insurance and annuity liabilities 1,213 1,296 1,286
Deferred policy acquisition costs
and cost of insurance purchased (137) (103) (96)
Other, net (74) (44) (51)
------------------------------------------------------------------------------------------------
Net cash provided by operating activities 1,379 1,433 1,413
- ----------------------------------------------------------------------------------------------------------------------
INVESTING Investment purchases (28,211) (15,180) (18,403)
ACTIVITIES Investment calls, maturities and sales 27,789 14,732 17,500
Net (increase) decrease in short-term investments 70 (104) (8)
------------------------------------------------------------------------------------------------
Net cash used for investing activities (352) (552) (911)
- ----------------------------------------------------------------------------------------------------------------------
FINANCING Policyholder account deposits 4,251 3,756 3,385
ACTIVITIES Policyholder account withdrawals (2,033) (1,777) (1,427)
Transfers to Separate Accounts (3,218) (2,728) (2,325)
Capital contribution from stockholder 18 122 252
Dividends paid to stockholder (124) (181) (379)
------------------------------------------------------------------------------------------------
Net cash used for financing activities (1,106) (808) (494)
- ----------------------------------------------------------------------------------------------------------------------
NET CHANGE Net increase (decrease) in cash (79) 73 8
IN CASH Cash at beginning of year 105 32 24
------------------------------------------------------------------------------------------------
Cash at end of year $ 26 $ 105 $ 32
------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
- -------------------------------------------------------------------------------
5
<PAGE> 438
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
In millions, 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
DERIVATIVES. In 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) 133, "Accounting for
Derivative Instruments and Hedging Activities," which requires all derivative
instruments to be recognized at fair value in the balance sheet. Changes in the
fair value of a derivative instrument will be reported as earnings or other
comprehensive income, depending upon the intended use of the derivative
instrument. VALIC will adopt SFAS 133 on January 1, 2001. VALIC does not expect
adoption to have a material impact on the consolidated results of operation 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 (loss) 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's amortized cost
is reduced to its fair value, and the reduction is recorded as a realized loss.
Beginning in 1998, VALIC held trading securities at various times and
reported them at fair value. VALIC held no trading securities at December 31,
1999 or 1998. Realized gains (losses) related to trading securities are included
in net investment income; however, trading securities did not have a material
effect on net investment income in 1999 or 1998.
MORTGAGE LOANS. Mortgage loans are reported at amortized cost, net of an
allowance for losses. The allowance covers estimated losses based on our
assessment of risk factors such as potential non-payment or non-monetary
default. The allowance is primarily based on a loan-specific review.
VALIC considers loans to be impaired when collection of all amounts due
under the contractual terms is not probable. VALIC generally looks to the
underlying collateral for repayment of these loans. Therefore, impaired loans
are reported at the lower of amortized cost or fair value of the underlying
collateral, less estimated cost 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.
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.
- --------------------------------------------------------------------------------
6
<PAGE> 439
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
In millions
1.5 DERIVATIVES RELATED TO INVESTMENTS-(CONTINUED)
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. Any amounts deemed
unrecoverable are charged to expense.
1.7 COST OF INSURANCE PURCHASED (CIP)
The cost assigned to certain acquired insurance contracts in force at the
acquisition date is reported as CIP. Interest is accreted on the unamortized
balance of CIP at rates ranging from 5.0% to 5.9% for both 1998 and 1999. CIP is
charged to expense and adjusted for the impact of net unrealized gains (losses)
on securities in the same manner as DPAC. VALIC reviews the carrying amount of
CIP on at least an annual basis using the same methods used to evaluate DPAC.
1.8 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's 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
consist primarily of shares in mutual funds, which are carried at fair value,
based on the quoted net asset value per share of the funds.
1.9 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, the 1983a Table, the Annuity
2000 Table, and the GAR 94 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%.
- --------------------------------------------------------------------------------
7
<PAGE> 440
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
In millions
1.10 RECOGNITION OF REVENUES AND COSTS
Most receipts for annuities are classified as deposits instead of revenues.
Revenues for these contracts consist of mortality, expense, and surrender
charges. For limited-payment contracts, net premiums are recorded as revenue.
1.11 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 the 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.
1.12 STATUTORY ACCOUNTING
State insurance laws and regulations prescribe accounting practices for
calculating statutory net income and equity of insurance companies. In addition,
state regulators may permit statutory accounting practices that differ from
prescribed practices. The use of such permitted practices did not have a
material effect on VALIC's statutory equity or net income at December 31, 1999,
1998, and 1997, or for the years then ended.
Statutory accounting practices differ from GAAP. Significant differences
were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------
<S> <C> <C> <C>
Statutory net income $ 256 $ 170 $ 238
Change in DPAC and CIP 137 103 96
Investment valuation
differences 21 48 --
Policy reserve adjustments 42 67 (5)
Deferred income taxes (58) (57) (27)
Other, net (21) (47) (28)
- -----------------------------------------------------------------
GAAP net income $ 377 $ 284 $ 274
- -----------------------------------------------------------------
Statutory equity $ 1,331 $ 1,237 $ 1,189
Asset valuation reserve 272 230 188
Investment valuation
differences* (550) 1,128 970
DPAC and CIP 1,320 687 392
Non-admitted assets 104 72 35
Policy reserve adjustments (92) (134) (187)
Deferred income taxes (266) (556) (375)
Other, net (156) (158) (152)
- -----------------------------------------------------------------
GAAP equity $ 1,963 $ 2,506 $ 2,060
- -----------------------------------------------------------------
</TABLE>
* Primarily GAAP unrealized gains (losses) on securities
1.13 COINSURANCE TRANSACTION
On May 21, 1998, VALIC completed the acquisition of a block of individual
annuity business in a coinsurance transaction for a cost of $24 million. This
transaction increased assets and insurance and annuity liabilities by $688
million.
2
INVESTMENTS
2.1 INVESTMENT INCOME
Income by type of investment was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------
<S> <C> <C> <C>
Non-affiliated fixed
maturity securities $1,670 $1,664 $1,563
Affiliated fixed
maturity securities 2 3 3
Equity securities 15 -- --
Mortgage loans on
real estate 104 113 124
Other 71 63 53
- ------------------------------------------------------------------
Gross investment income 1,862 1,843 1,743
Investment expense 28 32 13
- ------------------------------------------------------------------
Net investment income $1,834 $1,811 $1,730
- ------------------------------------------------------------------
</TABLE>
There were no investments during 1999 and 1998 that did not produce
investment income. The carrying value of investments that produced no investment
income during 1997 totaled $12 million or 0.05% of total invested assets. The
ultimate disposition of these assets is not expected to have a material effect
on VALIC's consolidated results of operations or financial position.
Derivative financial instruments related to investment securities did not
have a material effect on net investment income in any of the three years ended
December 31, 1999.
2.2 REALIZED INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturity securities
Gross gains $ 101 $ 14 $ 35
Gross losses (86) (50) (29)
- -------------------------------------------------------------------
Total fixed maturity
securities 15 (36) 6
- -------------------------------------------------------------------
Mortgage loans on real estate (4) 9 21
Real estate -- 7 4
Other long-term investments 2 -- --
DPAC amortization and
investment expense (8) (8) (11)
- -------------------------------------------------------------------
Realized investment gains
(losses) before taxes 5 (28) 20
Income tax expense (benefit) 2 (10) 7
- -------------------------------------------------------------------
Net realized investment
gains (losses) $ 3 $ (18) $ 13
- -------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
8
<PAGE> 441
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
In millions
- --------------------------------------------------------------------------------
2.3 FIXED MATURITY AND EQUITY SECURITIES
VALUATION. Amortized cost and fair value of fixed maturity and equity
securities at December 31 were as follows:
<TABLE>
<CAPTION>
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
----------------- ---------------------- ----------------------- -----------------
1999 1998 1999 1998 1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 159 $ 299 $ 10 $ 38 $ (1) $ -- $ 168 $ 337
Obligations of states and
political subdivisions 105 56 -- 3 (7) -- 98 59
Debt securities issued by
foreign governments 134 232 3 17 -- -- 137 249
Corporate securities 16,584 16,153 122 934 (639) (73) 16,067 17,014
Mortgage-backed securities 4,774 4,948 31 227 (58) (1) 4,747 5,174
Affiliated fixed maturity securities 27 25 -- -- -- -- 27 25
Redeemable preferred stock 14 20 -- -- -- -- 14 20
- --------------------------------------------------------------------------------------------------------------------------------
Total fixed maturity securities $21,797 $21,733 $ 166 $ 1,219 $ (705) $ (74) $21,258 $22,878
- --------------------------------------------------------------------------------------------------------------------------------
Equity securities $ 182 $ 176 $ 38 $ 18 $ -- $ -- $ 220 $ 194
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2.3 FIXED MATURITY AND EQUITY SECURITIES- (CONTINUED)
MATURITIES. The contractual maturities of fixed maturity securities at
December 31, 1999 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 $ 600 $ 602
In years two through five 4,558 4,576
In years six through ten 6,584 6,383
After ten years 5,281 4,950
Mortgage-backed securities 4,774 4,747
- ------------------------------------------------------------
Total fixed maturity securities $ 21,797 $21,258
- ------------------------------------------------------------
</TABLE>
Actual maturities may differ from contractual maturities since borrowers
may have the right to call or prepay obligations. Corporate requirements and
investment strategies may result in the sale of investments before maturity.
2.4 NET UNREALIZED GAINS (LOSSES) ON SECURITIES
Net unrealized gains (losses) on fixed maturity and equity securities
included in accumulated other comprehensive income (loss) at December 31 were as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized gains $ 204 $ 1,237 $ 1,011
Gross unrealized losses (705) (74) (21)
DPAC adjustments 159 (340) (512)
Deferred federal income taxes 55 (296) (172)
- ------------------------------------------------------------
Net unrealized gains
(losses) on securities $ (287) $ 527 $ 306
- ------------------------------------------------------------
</TABLE>
2.5 MORTGAGE LOANS ON REAL ESTATE
DIVERSIFICATION. Diversification of the geographic location and type of
property collateralizing mortgage loans reduces the concentration of credit
risk. For new loans, VALIC requires loan-to-value ratios of 75% or less, based
on management's credit assessment of the borrower.
At December 31 the mortgage loan portfolio was distributed as follows:
<TABLE>
<CAPTION>
1999 1998
- ---------------------------------------------
<S> <C> <C>
Geographic distribution:
Atlantic $ 656 $ 645
Pacific and Mountain 377 328
Central 459 252
Allowance for losses (14) (12)
- ---------------------------------------------
Total mortgage loans $ 1,478 $ 1,213
- ---------------------------------------------
Property type:
Office $ 577 $ 467
Retail 512 359
Industrial 265 250
Apartments 106 94
Residential and other 32 55
Allowance for losses (14) (12)
- ---------------------------------------------
Total mortgage loans $ 1,478 $ 1,213
- ---------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE> 442
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
In millions
2.5 MORTGAGE LOANS ON REAL ESTATE - (CONTINUED)
ALLOWANCE. Activity in the allowance for mortgage loan losses was as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1 $ 12 $ 21 $ 44
Provision for (recovery of)
mortgage loan losses 4 (7) (18)
Deductions (2) (2) (5)
- ----------------------------------------------------------
Balance at December 31 $ 14 $ 12 $ 21
- ----------------------------------------------------------
</TABLE>
IMPAIRED LOANS. Impaired mortgage loans were $17 million, $13 million, and
$28 million at December 31, 1999, 1998, and 1997, respectively. The average
investment in impaired loans was $15 million, $20 million, and $37 million at
December 31, 1999, 1998, and 1997, respectively. Interest income related to
impaired loans was $0 for 1999 and 1998, and $3 million in 1997.
2.6 CASH FLOWS FROM INVESTING ACTIVITIES
Uses of cash for investment purchases were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturity securities $ 10,823 $ 5,469 $ 5,175
Other 17,388 9,711 13,228
- ------------------------------------------------------------
Total $ 28,211 $ 15,180 $ 18,403
- ------------------------------------------------------------
</TABLE>
Sources of cash from investment dispositions and repayments were as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturity securities $ 10,829 $ 4,444 $ 4,224
Mortgage loans on
real estate 133 241 299
Equity securities 42 8 3
Real estate 4 17 22
Other 16,781 10,022 12,952
- ------------------------------------------------------------
Total $ 27,789 $ 14,732 $ 17,500
- ------------------------------------------------------------
</TABLE>
3
DEFERRED POLICY ACQUISITION COSTS (DPAC)
Activity in DPAC was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1 $ 665 $ 392 $ 558
Deferrals:
Commissions 90 83 77
Other acquisition costs 106 77 61
Amortization:
Accretion of interest 78 73 65
Operating earnings (134) (128) (107)
Offset to realized gains (3) (4) (11)
Effect of net unrealized
(gains) losses on securities 499 172 (251)
- -----------------------------------------------------------------
Balance at December 31 $ 1,301 $ 665 $ 392
- -----------------------------------------------------------------
</TABLE>
4
COST OF INSURANCE PURCHASED (CIP)
Activity in CIP was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1 $ 22 $ -- $ --
Additions from acquisitions -- 24 --
Accretion of interest 1 1 --
Amortization (4) (3) --
- -----------------------------------------------------------
Balance at December 31 $ 19 $ 22 $ --
- -----------------------------------------------------------
</TABLE>
CIP amortization, net of accretion, expected to be recorded in each of the
next five years is $3 million, $2 million, $2 million, $2 million, and $1
million.
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>
1999 1998
- ----------------------------------------------------------------------
<S> <C> <C>
Current tax liabilities (assets) $ 18 $ (14)
- ----------------------------------------------------------------------
Deferred tax liabilities, applicable to:
Basis differential of investments 31 438
DPAC and CIP 451 230
Other 40 32
- ----------------------------------------------------------------------
Total deferred tax liabilities 522 700
- ----------------------------------------------------------------------
Deferred tax assets, applicable to:
Policy reserves (140) (134)
Basis differential of investments (176) (2)
Other (8) (8)
- ----------------------------------------------------------------------
Gross deferred tax assets (324) (144)
Valuation allowance 68 --
- ----------------------------------------------------------------------
Total deferred tax assets, net (256) (144)
- ----------------------------------------------------------------------
Net deferred tax liabilities 266 556
- ----------------------------------------------------------------------
Total income tax liabilities $ 284 $ 542
- ----------------------------------------------------------------------
</TABLE>
The 1999 deferred tax asset applicable to basis differential of investments
was due to unrealized losses on securities. Since a portion of this deferred tax
asset may not be realized, a valuation allowance of $68 million was provided at
December 31, 1999. This valuation allowance had no income statement impact.
- --------------------------------------------------------------------------------
10
<PAGE> 443
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- -------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
In millions
5.3 TAX EXPENSE
Components of income tax expense were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 133 $ 78 $ 114
State 4 2 3
- ------------------------------------------------------------------------------
Total current income tax expense 137 80 117
- ------------------------------------------------------------------------------
Deferred, applicable to:
DPAC 48 35 29
Policy reserves (6) 4 (15)
Basis differential of investments 8 13 4
Other, net 8 5 9
- ------------------------------------------------------------------------------
Total deferred income tax expense 58 57 27
- ------------------------------------------------------------------------------
Income tax expense $ 195 $ 137 $ 144
- ------------------------------------------------------------------------------
</TABLE>
A reconciliation between the federal income tax rate and the effective tax
rate follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal income tax rate 35% 35% 35%
Income tax expense at applicable rate $ 200 $ 147 $ 146
Dividends received deduction (13) (8) (5)
Tax-exempt interest (ESOP) (2) (3) (4)
State income taxes 5 4 4
Other items 5 (3) 3
- ------------------------------------------------------------------------------
Income tax expense $ 195 $ 137 $ 144
- ------------------------------------------------------------------------------
</TABLE>
Income taxes paid were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal $ 99 $ 93 $ 106
State 1 3 3
- -------------------------------------------------------------------------------
</TABLE>
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 2000 is
$240 million.
7
DERIVATIVE FINANCIAL INSTRUMENTS
7.1 INTEREST RATE AND CURRENCY SWAP AGREEMENTS
Interest rate and currency swap agreements related to investment
securities at December 31 were as follows:
<TABLE>
<CAPTION>
1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
Interest rate swap agreements
to pay fixed rate
Notional amount $ 132 $ 332
Average receive rate 6.72 % 5.97%
Average pay rate 6.52 5.37
- -------------------------------------------------------------------------------------
Currency swap agreements (receive U.S. $/pay Canadian $)
Notional amount (in U.S. $) $108 $ 108
Average exchange rate 1.50 1.50
- -------------------------------------------------------------------------------------
Currency swap agreements (receive U.S. $/pay Australian $)
Notional amount (in U.S. $) $ 23 $ --
Average exchange rate 1.85 --
- -------------------------------------------------------------------------------------
</TABLE>
7.2 SWAPTIONS
Swaptions at December 31 were as follows:
<TABLE>
<CAPTION>
1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
Call swaptions
Notional amount $ 2 $ 950
Average strike rate 4.63% 4.07%
- -------------------------------------------------------------------------------------
Put swaptions
Notional amount $ 1 $ 690
Average strike rate 8.50% 8.33%
- -------------------------------------------------------------------------------------
</TABLE>
The swaptions outstanding at December 31, 1999 expire in 2000. 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.
7.3 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> 444
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
In millions
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,
including the values of underlying customer relationships and distribution
systems, and (2) the reporting of investments at fair value without a
corresponding revaluation of related policyholder liabilities can be
misinterpreted.
<TABLE>
<CAPTION>
1999 1998
---------------------------------- -------------------------------------
FAIR VALUE CARRYING AMOUNT Fair Value Carrying Amount
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Fixed maturity and equity securities $ 21,478* $ 21,478* $ 23,072 * $ 23,072
Mortgage loans on real estate 1,414 1,478 1,252 1,213
Policy loans 806 849 801 789
Short-term investments 94 94 164 164
Assets held in Separate Accounts 21,390 21,390 14,712 14,712
Liabilities
Insurance investment contracts $ 21,817 $ 23,441 $ 23,314 $ 23,219
Liabilities related to Separate Accounts 21,390 21,390 14,712 14,712
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Includes derivative financial instruments with a fair value of ($4) in
1999 and $19 in 1998.
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.
ASSETS AND LIABILITIES RELATED TO SEPARATE ACCOUNTS. Fair value of separate
account assets and liabilities was based on quoted net asset value per share of
the underlying mutual funds.
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, 1999 were as follows:
Operating expenses include $44 million in 1999, $47 million in 1998, and
$22 million in 1997, 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 $2 million in 1999, $0 in 1998, and
$1 million in 1997.
On November 4, 1982, VALIC invested $12 million in ~13 1?2% Restricted
Subordinated Note due November 4, 2002 issued by AGC. Principal payments of $1
million were received on November 4, 1999, 1998, and 1997. VALIC recognized $1
million in interest income during 1999, 1998, 1997.
On December 31, 1984, VALIC entered into a $49 million 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 $2.4 million were received on December 29, 1999, 1998, and
1997. VALIC recognized $1 million of interest income on the note during 1999,
1998, and 1997.
VALIC paid common stock dividends of $124 million, $34.69 per share; $181
million, $50.63 per share; and $379 million, $106.01 per share, to AGL in 1999,
1998, and 1997, respectively.
- --------------------------------------------------------------------------------
12
<PAGE> 445
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
In millions
9. TRANSACTIONS WITH AFFILIATED COMPANIES - (CONTINUED)
VALIC received capital contributions of $17 million, $122 million, and $250
million from AGL in 1999, 1998, and 1997, respectively.
VALIC acquired bonds of various issuers from American General Life and
Accident Insurance Company at a cost of $22 million and $26 million 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 $130 million.
10
COMMENTS 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. The accrued liability for
anticipated assessments was $6 million, $5 million, and $7 million, at December
31, 1999, 1998, and 1997, respectively. The 1999 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
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.
The components of pension expense and underlying assumptions for the
defined benefit plan were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------
<S> <C> <C> <C>
Service cost (benefits earned)
during period $ 1 $ 2 $ 1
Interest cost on projected
benefit obligation 2 1 1
Expected return on plan assets (1) (1) --
- ------------------------------------------------------------
Total pension expense $ 2 $ 2 $ 2
- ------------------------------------------------------------
Weighted-average discount rate
on benefit obligation 7.75% 7.00% 7.25%
Rate of increase in
compensation levels 4.25 4.25 4.00
Expected long-term rate of
return on plan assets 10.35 10.25 10.00
- ------------------------------------------------------------
</TABLE>
The following table sets forth the funded status and amounts recognized in
the consolidated balance sheet at December 31, 1999 and 1998 for VALIC's defined
benefit pension plan:
<TABLE>
<CAPTION>
1999 1998
- -----------------------------------------------------------
<S> <C> <C>
Projected benefit obligation $ 22 $ 21
Plan assets at fair value 18 15
- -----------------------------------------------------------
Projected benefit obligation in excess of
plan assets (4) (6)
Unrecognized net gain (loss) (2) 1
- -----------------------------------------------------------
Net pension liability $ (6) $ (5)
- -----------------------------------------------------------
</TABLE>
At December 31, 1999, the plans' assets were invested as follows: (1) 71%
in equity mutual funds managed outside of AGC; (2) 26% in fixed income mutual
funds managed by one of AGC's subsidiaries; (3) 1% in AGC stock; and (4) 1% in
deposit administration insurance contracts issued by AGC subsidiaries.
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.
The life plans are fully insured; the retiree medical and dental plans are
unfunded and self-insured. The accrued liability for postretirement benefits was
$2.7 million and $2.4 million at year-end 1999 and 1998, respectively. These
liabilities were discounted at the same rates used for the pension plans.
Postretirement benefit expense in 1999, 1998, and 1997 was immaterial.
- --------------------------------------------------------------------------------
13
<PAGE> 446
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
In millions
12
IMPACT OF YEAR 2000 (UNAUDITED)
As of March 10, 2000, all of VALIC's major technology systems, programs,
and applications, including those which rely on third parties, are operating
smoothly following the transition into 2000. No interruptions to normal business
operations have been experienced, including the processing of customer account
data and transactions. VALIC will continue to monitor its technology systems,
including critical third party dependencies, as necessary to maintain Year 2000
readiness. VALIC does not expect any future disruptions, if they occur, to have
a material effect on the results of operations, liquidity, or financial
condition.
Through December 31, 1999, VALIC incurred and expensed pretax costs of $32
million related to Year 2000 readiness, including $5 million in 1999, $20
million in 1998, and $6 million in 1997. In addition, the planned replacement of
certain systems was accelerated as part of the Year 2000 plans. The cost of
these replacement systems was immaterial. VALIC does not anticipate incurring
any significant costs in the future to maintain Year 2000 readiness.
- --------------------------------------------------------------------------------
14
<PAGE> 447
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, 2000
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, 2000 ("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 American General Distributors,
Inc. (the "Distributor") at 2929 Allen Parkway, Houston, Texas 77019;
1-800-44-VALIC. Prospectuses are also available from regional sales offices of
the Distributor or from its registered sales representatives.
VA 9875-1 REV 5/00
1
<PAGE> 448
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information................................. 3
Marketing Information........................... 3
Endorsements and Published Ratings.............. 4
Types of Variable Annuity Contracts................. 5
Federal Tax Matters................................. 5
Tax Consequences of Purchase Payments........... 5
Tax Consequences of Distributions............... 7
Special Tax Consequences -- Early
Distribution.................................. 8
Special Tax Consequences -- Required
Distributions................................. 9
Tax Free Rollovers, Transfers and Exchanges..... 10
Exchange Privilege.................................. 10
Exchanges From Portfolio Director............... 11
Exchanges From Independence Plus Contracts...... 11
Exchanges From V-Plan Contracts................. 12
Exchanges From SA-1 and SA-2 Contracts.......... 13
Exchanges From Impact Contracts................. 15
Exchanges From Compounder Contracts............. 16
Information Which May Be Applicable To Any
Exchange...................................... 16
Calculation of Surrender Charge..................... 18
Illustration of Surrender Charge on Total
Surrender..................................... 18
Illustration of Surrender Charge on a 10%
Partial Surrender Followed by a Full
Surrender..................................... 18
Purchase Unit Value................................. 19
Illustration of Calculation of Purchase Unit
Value......................................... 19
Illustration of Purchase of Purchase Units...... 19
Performance Calculations............................ 19
AGSPC Money Market Division Yields.............. 19
Calculation of Current Yield for AGSPC Money
Market Division Six........................... 19
Illustration of Calculation of Current Yield for
AGSPC Money Market Division Six............... 19
Calculation of Effective Yield for AGSPC Money
Market Division Six........................... 20
Illustration of Calculation of Effective Yield
for AGSPC Money Market Division Six........... 20
Standardized Yield for Bond Fund Divisions...... 20
Calculation of Standardized Yield for Bond Fund
Divisions..................................... 20
Illustration of Calculation of Standardized
Yield for Bond Fund Divisions................. 20
Calculation of Average Annual Total Return...... 21
Calculation of MVA Option....................... 21
Performance Information............................. 22
Hypothetical $10,000 Account Value and
Cumulative Return as Compared to Benchmark
Tables........................................ 22
Performance Compared to Market Indices.......... 22
AGSPC Growth Division Fifteen Performance
Compared to S&P 500 Index..................... 24
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AGSPC International Government Bond Division
Thirteen Performance Compared to Salomon
Brothers Non-U.S. Dollar World Government Bond
Index......................................... 24
AGSPC Money Market Division Six Performance
Compared to Certificate of Deposit Primary
Offering by New York City Banks, 30 Day
Index......................................... 25
AGSPC Science & Technology Division Seventeen
Performance Compared to S&P 500 Index......... 25
AGSPC Social Awareness Division Twelve
Performance Compared to S&P 500 Index......... 26
AGSPC Stock Index Division Ten Performance
Compared to S&P 500 Index..................... 26
American Century Ultra Division Thirty-one
Compared to S&P 500 Index and NASDAQ Composite
Index......................................... 27
Dreyfus Founders Growth Division Thirty Compared
to S&P 500 Index.............................. 28
Neuberger Berman Guardian Trust Division
Twenty-nine Compared to S&P 500 Index......... 28
Putnam Global Growth -- Class A Division Twenty-
eight Compared to MSCI All Country World Free
Index and S&P 500 Index....................... 29
Putnam New Opportunities -- Class A Division
Twenty-six Compared to S&P 500 Index.......... 30
Putnam OTC & Emerging Growth -- Class A Division
Twenty-seven Compared to Russell 2000 Index
and S&P 500 Index............................. 30
Scudder Growth and Income Division Twenty-one
Compared to S&P 500 Index..................... 31
Templeton Foreign Division Thirty-two Compared
to EAFE Index................................. 31
Vanguard Long-Term Corporate Division Twenty-two
Compared to Lehman Long-Term Corporate AA or
Better Bond Index............................. 32
Vanguard Long-Term Treasury Division
Twenty-three Compared to Lehman Brothers U.S.
Treasury Long-Term Index...................... 32
Vanguard Wellington Division Twenty-five
Compared to S&P 500 Index and Merrill Lynch
Corporate Master Index........................ 33
Vanguard Windsor II Division Twenty-four
Compared to S&P 500 Index..................... 34
Payout Payments..................................... 35
Assumed Investment Rate......................... 35
Amount of Payout Payments....................... 35
Payout Unit Value............................... 35
Illustration of Calculation of Payout Unit
Value......................................... 36
Illustration of Payout Payments................. 36
Distribution of Variable Annuity Contracts.......... 37
Experts............................................. 37
Comments on Financial Statements.................... 37
</TABLE>
2
<PAGE> 449
GENERAL INFORMATION
MARKETING INFORMATION
The Company has targeted not-for-profit organizations as the central focus
of its marketing efforts for its Contracts. The Company has utilized as its
general marketing theme the concept that the Company is "America's Retirement
Plan Specialists." Specifically, the Company's marketing thrust is aimed at
individuals and groups associated with public and private schools, colleges and
universities, not-for-profit health care organizations, state and local
governments and other not-for-profit organizations.
This marketing concept has proven to be successful. In the aggregate,
premium deposits to the Company have grown from $37,000 in 1956 to more than
$4.2 billion as of December 31, 1999. The number of aggregate participant
accounts has increased from 155,000 accounts in 1980 to more than 2,191,033
accounts as of December 31, 1999. As of December 31, 1999, 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, 1999 the Company's assets totaled more than $47
billion.
The Company's growth can also be reviewed by examining each market segment
the Company targets.
The Company's growth can also be reviewed by examining certain milestones,
the number of participant accounts and cash values amongst the various market
segments or groups the Company targets. These markets include, but are not
limited to, public, primary and secondary schools, colleges, universities, state
and local government groups and healthcare markets.
The Company, in its marketing efforts to each of the market segments may,
from time to time, design sales literature and material specifically for its
particular market segments. The sales literature and material may address
specifically the group's contract and retirement plan.
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 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).
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.
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, Inc. ("Lipper"), Laffer-Cantos, Inc., The Variable
Annuity Research & Data Services ("VARDS") Report, Wilson Associates,
Morningstar, Inc. ("Morningstar") 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
3
<PAGE> 450
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 may, from time to time, refer to the products of various
investment advisers and subadvisers referenced in the prospectus. The Company
may mention assets under management and others facts specific to each adviser.
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. The Company may also refer to the term "preferred provider" with the
group's consent.
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, Morningstar and
CDA/Wiesenberger Investment Companies ("CDA/Wiesenberger") when discussing the
performance of its Divisions. Lipper, Morningstar and CDA/Wiesenberger are
leading publishers of statistical data about the investment company industry in
the United States.
Additionally, the Company may compare the performance of the Divisions to
categories published by Lipper and Morningstar. Morningstar has not, however,
ranked the Neuberger&Berman Guardian Trust. The published categories which may
be utilized in comparison with the performance of the Divisions include the
Morningstar Growth and Income Mutual Fund Category, Morningstar Aggressive
Growth Mutual Fund Category, Morningstar Growth Mutual Fund Category,
Morningstar International Stock Mutual Fund Category, Lipper Growth and Income
Mutual Fund Category, Lipper Small Company Growth Mutual Fund Category, Lipper
Growth Mutual Fund Category and Lipper International Mutual Fund Category.
Additional Lipper or Morningstar categories may be utilized if they are deemed
by the Company
4
<PAGE> 451
relevant to the performance of the Company's Divisions.
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.
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. In 1999, the Internal Revenue Service ("IRS")
confirmed this opinion, reversing its previous position by modifying a contrary
ruling it had issued in 1981.
In its ruling in 1981, the 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 was
superseded by subsequent legislation (Code Section 817(h)) which specifically
exempts these Qualified Contracts, and the IRS had no viable legal basis or
reason to apply the theory of the 1981 ruling to these Qualified Contracts under
current law.
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.
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. 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.
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
$10,500 ($9,500 before 1998; $10,000 in 1998 and 1999), 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
5
<PAGE> 452
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 $32,000 or less ($31,000 for 1999, $30,000
for 1998, $25,000 or less prior to 1998); or
(iv) are active participants in another retirement plan, are married, and have
adjusted gross income of $52,000 or less ($51,000 for 1999, $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 2000 you and
your employer 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). Additional, catch-up
deferrals are permitted in the final three years before the year you reach
normal retirement age.
6
<PAGE> 453
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 were not permitted to exceed $10,000 per year. In 2000,
they may not exceed $10,500. 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 employees contributions under a SIMPLE Retirement
Account Plan are made to a separate individual retirement account or annuity for
each employee. Employee salary reduction contributions cannot exceed $6,000 in
any year. Employer contributions can be a matching or a nonelective contribution
of a percentage as specified in the Code. Only employers with 100 or fewer
employees can maintain a SIMPLE IRA plan, which must also be the only plan the
employer maintains.
Non-Qualified Contracts. Purchase Payments made under Non-Qualified
Contracts are neither excludible from the gross income of the Contract Owner nor
deductible for tax purposes. However, any increase in the Purchase Unit Value of
a Non-Qualified Contract resulting from the investment performance of VALIC
Separate Account A is not taxable to the Contract Owner until received by him.
Contract Owners that are not natural persons, however, are currently taxable on
any increase in the Purchase Unit Value attributable to Purchase Payments made
after February 28, 1986 to such Contracts.
TAX CONSEQUENCES OF DISTRIBUTIONS
403(b) Annuities. Voluntary salary reduction amounts accumulated after
December 31, 1988, and earnings on voluntary contributions before and after that
date, may not be distributed before one of the following:
(1) attainment of age 59 1/2;
(2) separation from service;
(3) death;
(4) disability, or
(5) hardship (hardship distributions are limited to salary reduction
contributions only, exclusive of earnings thereon).
Similar restrictions will apply to all amounts transferred from a section
403(b)(7) custodial account other than rollover contributions.
Distributions are taxed as ordinary income to the recipient in accordance
with Section 72.
401(a) and 403(a) Qualified Plans. Distributions from Contracts purchased
under qualified plans are taxable as ordinary income, except to the extent
allocable to an employee's after-tax contributions (investment in the Contract).
If you or your Beneficiary receive a "lump sum distribution" (legally defined
term), the taxable portion may be subject to special 5-year or 10-year income
averaging treatment. Five-year forward averaging is unavailable for
distributions occurring after December 31, 1999. Ten-year income averaging uses
tax rates in effect for 1986, allows 20% capital gains treatment for the taxable
portion of a lump sum distribution attributable to years of service before 1974,
and is available if you were 50 or older on January 1, 1986.
408(b) IRA, SEPs and SIMPLE IRAs. Distributions are generally taxed as
ordinary income to the recipient. Rollovers from an IRA to a Roth IRA, and
conversions of an IRA to a Roth IRA, where permitted, are generally taxable in
the year of the rollover or conversion. Such rollovers of conversions completed
in 1998 are generally eligible for pro-rata federal income taxation over four
years. Individuals with adjusted gross income over
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$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
(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.
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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 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) Annui-
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ties, 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. Distributions must satisfy the
irrevocable election requirements applicable to 457 Plans.
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 Owner'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
Owner at the time of death. Similar distribution requirements will also apply if
the Owner is not a natural person, if the Annuitant dies or is changed.
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. A full or partial exchange of one annuity contract for another is a
tax-free transaction under Section 1035, provided that the requirements of that
Section are satisfied. However, the exchange 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 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.
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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, or other investment
managers for advisory fees at annual rates ranging from .28% to .90% of each
portfolio's or mutual fund's average daily net assets. Three 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. Three fixed investment
options are also available.
Annuity Options
Both Portfolio Director and Portfolio Director 2 provide the same annuity
options.
EXCHANGES FROM INDEPENDENCE PLUS CONTRACTS
Sales/Surrender Charges. Under an Independence Plus Contract, no sales
charge is deducted at the time a Purchase Payment is made, but a surrender
charge may be imposed on partial or total surrenders. The surrender charge may
not exceed 5% of any Purchase Payments withdrawn within five years of the date
such Purchase Payments were made. The most recent Purchase Payments are deemed
to be withdrawn first. Up to 10% of the Account Value may be surrendered in a
Participant Year without any surrender charge being imposed. Portfolio Director
2 imposes a similar surrender charge upon total or partial surrenders. Both the
Portfolio Director 2 and Independence Plus Contracts have other similar
provisions where surrender charges are not imposed. However, Portfolio Director
2 provides at least one additional provision, not included in Independence Plus
Contracts, under which no surrender charge will be imposed. An additional
provision allows election of a systematic withdrawal method without surrender
charges. (See "Surrender Charge" in the prospectus.) For purposes of satisfying
the fifteen-year and five-year holding requirements described under "Surrender
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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 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. Three fixed investment options are
also available.
Annuity Options. Annuity options under Independence Plus Contracts provide
for payments on a fixed or variable basis, or a combination of both. The
Independence Plus Contract permits annuity payments for a designated period
between 3 and 30 years on a fixed basis only. Portfolio Director 2 permits
annuity payments for a designated period between of 5 and 30 years on a fixed
basis only. Independence Plus Contracts and Portfolio Director 2 both provide
for "betterment of rates." Under this provision, annuity payments for fixed
annuities will be based on mortality tables then being used by the Company, if
more favorable to the Annuitant than those included in the Contract.
EXCHANGES FROM V-PLAN CONTRACTS
Sales/Surrender Charges. Under a V-Plan Contract, no sales charge is
deducted at the time a Purchase Payment is made, but a surrender charge may be
imposed on partial or total surrenders. The surrender charge is equal to 7% of
the Purchase Payments withdrawn within five years of the date such Purchase
Payments were made. The most recent Purchase Payments are deemed to be withdrawn
first. Up to 10% of the account value may be surrendered in a Participant Year
without any surrender charge being imposed. Portfolio Director 2 also imposes a
surrender charge upon total or partial
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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 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
Portfo-
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lio 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 either by 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, three fixed investment options are
available under Portfolio Director 2.
Annuity Options. Annuity options under the SA-1 and SA-2 Contracts provide
for payments on a fixed or variable basis, or a combination of both. The SA-1
Contract annuity payments under a designated period option are limited to 15
years on a fixed basis only. Under this Contract, the designated period option
may, subject to adverse tax consequences, be commuted at any time for its
remaining value. SA-2 Contracts do not provide a designated period option nor do
they provide for commutation. Portfolio Director 2 permits Payout Payments for a
designated period of between 5 and 30 years on a fixed basis only. Portfolio
Director 2 does not provide for commutation. The SA-1 and SA-2 Contracts make no
provision for transfers from a separate account to a fixed annuity during the
annuity period. This option, subject to certain conditions, is available under
Portfolio Director 2. The SA-1 Contracts provide an option for monthly variable
14
<PAGE> 461
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 either by 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. Three fixed investment options are
available under Portfolio Director 2.
Annuity Options. Annuity options under Impact Contracts provide for
payments on a fixed or
15
<PAGE> 462
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 Director 2, the Compounder
Contracts contain no "betterment of rates" provision.
INFORMATION WHICH MAY BE APPLICABLE TO
ANY EXCHANGE
Guaranteed Annuity Rates. Mortality rates have improved since annuity rates
were developed for the other contracts. Therefore, the annuity rates guaranteed
in Portfolio Director 2 are less favorable
16
<PAGE> 463
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.
Under certain deferred annuity contracts issued before October 21, 1979,
upon the death of the owner the entire value of the contract as of the date of
death may be received income tax free by the beneficiary. This will not apply to
contracts that have been exchanged on or after October 21, 1979.
17
<PAGE> 464
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>
10/1/94......................... Purchase Payment $10,000
10/1/95......................... Purchase Payment 5,000
10/1/96......................... Purchase Payment 15,000
10/1/97......................... Purchase Payment 2,000
10/1/98......................... Purchase Payment 3,000
10/1/99......................... Purchase Payment 4,000
12/31/99........................ 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 10/1/94........ $ 0
2. Surrender Charge against Purchase Payment of 10/1/95........ $ 250
3. Surrender Charge against Purchase Payment of 10/1/96........ $ 750
4. Surrender Charge against Purchase Payment of 10/1/97........ $ 100
5. Surrender Charge against Purchase Payment of 10/1/98........ $ 150
6. Surrender Charge against Purchase Payment of 10/1/99........ $ 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>
10/1/94......................... Purchase Payment $10,000
10/1/95......................... Purchase Payment 5,000
10/1/96......................... Purchase Payment 15,000
10/1/97......................... Purchase Payment 2,000
10/1/98......................... Purchase Payment 3,000
10/1/99......................... Purchase Payment 4,000
12/31/99........................ 10% Partial Surrender (Assumes 3,900
Account Value is $39,000)
2/1/00.......................... Full Surrender 35,100
</TABLE>
a. Since this is the first partial surrender in this participant year,
calculate the excess over 10% of the value of the Purchase Units
10% of $39,000 = $3,900 [no charge on this 10% withdrawal]
b. The Account Value upon which Surrender Charge on the Full Surrender may
be calculated (levied) is $39,000 - $3,900 = $35,100
c. The Surrender Charge calculated on the Account Value withdrawn $35,100 X
.05 = $1,755
d. Since only $29,000 has been paid in Purchase Payments in the 60 months
prior to the Full Surrender, the charge can only be calculated on
$29,000. The $3,900 partial withdrawal does not reduce this amount.
Thus, the charge is $29,000 X (0.05) = $1,450.
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<PAGE> 465
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: 4.31%
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, 1999, 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.
19
<PAGE> 466
CALCULATION OF EFFECTIVE YIELD FOR AGSPC MONEY MARKET DIVISION SIX
7-Day Effective Yield: 4.40%
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, 1999, 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% 6.42% 5.60%
</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, 1999, the date of the most recent balance sheet of the Registrant included
in the registration statement is computed by dividing the net investment income
per Purchase Unit earned during the period by the maximum offering price per
Unit on the last day of the period, according to the following formula:
YIELD = 2 [( a - b + 1)6 - 1]
cd
Where:
<TABLE>
<S> <C>
a = net investment income earned during the period by the Fund
attributable to shares owned by the Division
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of Purchase Units outstanding
during the period
d = the maximum offering price per Purchase Unit on the last day
of the period
</TABLE>
Yield on each Division is earned from dividends declared and paid by the
Fund, which are
automatically reinvested in Fund shares.
20
<PAGE> 467
CALCULATION OF AVERAGE ANNUAL TOTAL RETURN
Average Annual Total Return quotations for the 1, 5, and 10 year periods
ended December 31, 1999, 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, 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, 5 or 10 year periods
of a hypothetical $1,000 Purchase Payment made at the
beginning of the 1, 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, 5 or 10 year
period and deduction of all nonrecurring charges at the end of each such period.
CALCULATION OF MVA OPTION
The effect of the market value adjustment may be positive or negative. If,
for example, on the date of a withdrawal, the index rate described below (plus
0.5%) is higher than that index rate as of the contract's date of issue, the
effect of the market value adjustment will be negative. If, for example, on the
date of a withdrawal, the index rate (plus 0.5%) is lower than that index rate
as of the contract's date of issue, the effect of the market value adjustment
will be positive. Any negative adjustment will be waived to the extent that it
would decrease the withdrawal value below the minimum guaranteed value.
The market value adjustment is determined by the formula below, using the
following factors:
- A is an index rate determined at the beginning of each MVA term, for a
security with time to maturity equal to that MVA term;
- B is an index rate determined at the time of withdrawal, for a security
with time to maturity equal to the current MVA term;
- N is the number of months remaining in the current MVA term (rounded up
to the next higher number of months); and
- The index rates for A and B will be the U.S. Treasury Yield as quoted by
Bloomberg or a comparable financial market news service, for the maturity
equal to the MVA term, using linear interpolation as appropriate.
The market value adjustment will equal:
The amount surrendered or transferred out prior to the end of the MVA term
multiplied by:
[(1+A)/(1+B+0.005)](N/12)-1
The market value adjustment will be added to or deducted from the amount
being withdrawn or transferred.
Index rates for any calendar month will equal the average of index rates
for the last 5 trading days of the previous calendar month.
21
<PAGE> 468
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" 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, Dreyfus 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 S&P 500 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 second method includes net income (income
earned
- ---------------
* "Standard & Poor's(R)", "S&P(R)" and "S&P 500(R)" are trademarks of Standard
and Poor's ("S&P"). The Stock Index Fund is not sponsored, endorsed, sold or
promoted by S&P and S&P makes no representation regarding the advisability of
investing in this Fund.
22
<PAGE> 469
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 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 1999, over 4,000
issues were contained in the NASDAQ Composite Price Index.
The performance of Putnam Global Growth Division Twenty-eight may be
compared to the Morgan Stanley Capital International All Country World Free
Index ("MSCI All Country World Free Index"). Total returns (with income
reinvested) for the MSCI All Country World Free 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 All Country World Free Index is an unmanaged
index of global equity securities available to non-domestic investors, with all
values expressed in U.S. dollars. The performance of Division Twenty-eight may
also be compared to the S&P 500.
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 performance of Division Twenty-seven may also be compared
to the S&P 500 Index.
The performance of Templeton Foreign Division Thirty-two may be compared to
the Morgan Stanley Capital International Europe, Australia, and Far East Index
("EAFE Index"). The EAFE Index, which commenced in 1969, is an unmanaged stock
index consisting of more than 1,000 companies from Europe, Australia and the Far
East. The index is capitalization weighted. It is a well known measure for
international stock performance. Total returns (with income reinvested) for the
EAFE Index are published using two methods. The first method includes gross
income (income earned without subtracting foreign income taxes which may be
withheld from foreign investors). The second method includes net income (income
earned after subtracting estimated foreign taxes). The Division currently
compares it performance with the index using the second method.
The performance of 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 Russell 2000(R) Index is a trademark/servicemark of the Frank Russell
Trust Company. RussellTM is a trademark of the Frank Russell Company.
23
<PAGE> 470
The performance of the Vanguard Welling-
ton Division Twenty-five may be compared to a Blended Index, a measure of the
investment performance of a balanced portfolio of stocks and bonds, comprised of
the S&P 500 Index (65%) and the Merrill Lynch Corporate Master Index (35%). The
Merrill Lynch Corporate Master Index consists of an index of approximately 3,600
corporate bond holdings of which assets are rated BBB- to AAA. The average years
to maturity of the corporate bond holdings are approximately 12 years.
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
12/31/99................................................... 25,822 36,545
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC Growth Division Fifteen........................ 158.22% 157.75% 6.33%
Benchmark Comparison
S&P 500 Index........................................ 265.45% 251.15% 21.05%
</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 BROTHERS
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
12/31/99................................................... 16,091 18,489
</TABLE>
24
<PAGE> 471
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC International Government Bond Division
Thirteen............................................ 60.91% 23.65% (6.88)%
Benchmark Comparison
Salomon Brothers Non-U.S. Dollar World Government Bond
Index............................................... 84.89% 32.07% (5.17)%
</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, 1990
<TABLE>
<CAPTION>
MONEY MARKET PRIMARY
DIVISION SIX CD INDEX
------------ --------
<S> <C> <C>
01/01/90................................ $10,000 $10,000
12/31/90................................ 10,683 10,800
12/31/91................................ 11,163 11,390
12/31/92................................ 11,411 11,749
12/31/93................................ 11,602 12,053
12/31/94................................ 11,923 12,483
12/31/95................................ 12,460 13,100
12/31/96................................ 12,955 13,694
12/31/97................................ 13,490 14,349
12/31/98................................ 14,047 15,023
12/31/99................................ 14,568 15,693
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC Money Market Division Six........................ 45.68% 22.19% 3.71%
Benchmark Comparison
Primary CD Index....................................... 56.93% 25.71% 4.46%
</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
12/31/99................................................... 63,990 36,545
</TABLE>
25
<PAGE> 472
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC Science & Technology Division Seventeen........ 539.90% 412.86% 98.96%
Benchmark Comparison
S&P 500 Index........................................ 265.45% 251.15% 21.05%
</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 JANUARY 1, 1990
<TABLE>
<CAPTION>
SOCIAL AWARENESS S&P 500
DIVISION TWELVE INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
01/01/90................................................... $10,000 $10,000
12/31/90................................................... 9,779 9,689
12/31/91................................................... 12,382 12,642
12/31/92................................................... 12,668 13,605
12/31/93................................................... 13,534 14,976
12/31/94................................................... 13,207 15,174
12/31/95................................................... 18,169 20,876
12/31/96................................................... 22,304 25,671
12/31/97................................................... 29,558 34,234
12/31/98................................................... 37,250 44,018
12/31/99................................................... 43,756 53,283
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC Social Awareness Division Twelve............... 337.56% 231.31% 17.46%
Benchmark Comparison
S&P 500 Index........................................ 432.83% 251.15% 21.05%
</TABLE>
- ---------------
* This Division was initiated on October 2, 1989.
AGSPC Stock Index Division Ten Performance Compared to S&P 500 Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1990
<TABLE>
<CAPTION>
STOCK INDEX S&P 500
DIVISION TEN INDEX
- ------------------------------------------------------------------------ -------------
<S> <C> <C>
01/01/90................................................. $ 10,000 $ 10,000
12/31/90................................................. 9,517 9,689
12/31/91................................................. 12,154 12,642
12/31/92................................................. 12,833 13,605
12/31/93................................................. 13,960 14,976
12/31/94................................................. 13,918 15,174
12/31/95................................................. 18,921 20,876
12/31/96................................................. 22,994 25,671
12/31/97................................................. 30,299 34,234
12/31/98................................................. 38,522 44,018
12/31/99................................................. 45,985 53,283
</TABLE>
26
<PAGE> 473
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- -------- --------
<S> <C> <C> <C>
Investment Division*
AGSPC Stock Index Division Ten......................... 359.85% 230.40% 19.37%
Benchmark Comparison
S&P 500 Index.......................................... 432.83% 251.15% 21.05%
</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, 1990
<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......................................... 10,822 9,689 8,220
12/31/90......................................... 19,965 12,642 12,892
12/31/91......................................... 20,005 13,605 14,884
12/31/92......................................... 24,114 14,976 17,079
12/31/93......................................... 22,999 15,174 16,533
12/31/94......................................... 31,332 20,876 23,133
12/31/95......................................... 35,227 25,671 28,386
12/31/96......................................... 42,886 34,234 34,527
12/31/97......................................... 57,099 44,018 48,210
12/31/98......................................... 79,941 53,283 89,471
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division**
American Century Ultra Division Thirty-One........... 699.41% 247.59% 40.00%
Benchmark Comparison
S&P 500 Index........................................ 432.83% 251.15% 21.05%
NASDAQ Composite Index***............................ 794.71% 441.16% 85.59%
</TABLE>
- ---------------
* 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.
27
<PAGE> 474
Dreyfus 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, 1990
<TABLE>
<CAPTION>
FOUNDERS GROWTH S&P 500
DIVISION THIRTY INDEX
- ------------------------------------------------------------------- --------
<S> <C> <C>
01/01/90................................................. $10,000 $10,000
12/31/90................................................. 8,852 9,689
12/31/91................................................. 12,919 12,642
12/31/92................................................. 13,335 13,605
12/31/93................................................. 16,576 14,976
12/31/94................................................. 15,864 15,174
12/31/95................................................. 22,871 20,876
12/31/96................................................. 26,382 25,671
12/31/97................................................. 33,044 34,234
12/31/98................................................. 40,896 44,018
12/31/99................................................. 56,289 53,283
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division**
Dreyfus Founders Growth Division Thirty.............. 462.89% 254.82% 37.64%
Benchmark Comparison
S&P 500 Index........................................ 432.83% 251.15% 21.05%
</TABLE>
- ---------------
* The Dreyfus Founders Growth Fund was formerly known as the Founders Growth
Fund.
** 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
12/31/99................................................. 20,776 37,407
</TABLE>
28
<PAGE> 475
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE INCEPTION 5 YEARS 1 YEAR
--------------- ------- ------
<S> <C> <C> <C>
Investment Division**
Neuberger Berman Guardian Trust Division
Twenty-Nine.................................... 107.76% 93.30% 7.36%
Benchmark Comparison
S&P 500 Index.................................... 274.07% 251.15% 21.05%
</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 All Country World Free Index and S&P 500 Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1990
<TABLE>
<CAPTION>
MSCI
ALL
COUNTRY
GLOBAL GROWTH -- CLASS A SHARES WORLD FREE S&P 500
DIVISION TWENTY-EIGHT INDEX INDEX
- --------------------------------------------------- ---------- --------
<S> <C> <C> <C>
01/01/90................................. $10,000 $10,000 $10,000
12/31/90................................. 8,991 8,352 9,689
12/31/91................................. 10,503 10,015 12,642
12/31/92................................. 10,424 9,591 13,605
12/31/93................................. 13,609 11,978 14,976
12/31/94................................. 13,360 12,580 15,174
12/31/95................................. 15,188 15,028 20,876
12/31/96................................. 17,522 17,012 25,671
12/31/97................................. 19,660 19,562 34,234
12/31/98................................. 25,063 23,860 44,018
12/31/99................................. 40,851 30,258 53,283
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division*
Putnam Global Growth -- Class A Shares
Division Twenty-Eight................................ 308.51% 205.77% 63.00%
Benchmark Comparison
MSCI All Country World Free Index...................... 202.58% 140.53% 26.82%
S&P 500 Index.......................................... 432.83% 251.15% 21.05%
</TABLE>
- ---------------
* This Division was initiated on July 1, 1996.
29
<PAGE> 476
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
12/31/99................................................ 122,017 57,003
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 1 YEAR
---------- ------- ------
<S> <C> <C> <C>
Investment Division*
Putnam New Opportunities -- Class A Shares
Division Twenty-Six.................................. 1,120.17% 298.49% 67.91%
Benchmark Comparison
S&P 500 Index.......................................... 470.03% 251.15% 21.05%
</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, 1990
<TABLE>
<CAPTION>
OTC & EMERGING GROWTH -- CLASS A SHARES RUSSELL S&P 500
DIVISION TWENTY-SEVEN 2000 INDEX
- --------------------------------------------------- ------- -------
<S> <C> <C> <C>
01/01/90.................................. $10,000 $10,000 $10,000
12/31/90.................................. 8,928 8,047 9,689
12/31/91.................................. 12,451 11,760 12,642
12/31/92.................................. 13,892 13,925 13,605
12/31/93.................................. 18,165 16,554 14,976
12/31/94.................................. 18,389 16,252 15,174
12/31/95.................................. 28,397 20,876 20,876
12/31/96.................................. 29,398 24,319 25,671
12/31/97.................................. 32,068 29,758 34,234
12/31/98.................................. 35,234 29,000 44,018
12/31/99.................................. 79,125 35,164 53,283
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division*
Putnam OTC & Emerging Growth -- Class A Shares
Division Twenty-Seven................................ 691.25% 330.28% 124.57%
Benchmark Comparison
Russell 2000 Index..................................... 251.64% 116.37% 21.26%
S&P 500 Index.......................................... 432.83% 251.15% 21.05%
</TABLE>
- ---------------
* This Division was initiated on July 1, 1996.
30
<PAGE> 477
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, 1990
<TABLE>
<CAPTION>
SCUDDER GROWTH AND INCOME S&P 500
DIVISION TWENTY-ONE INDEX
- --------------------------------------------------------------------- --------
<S> <C> <C>
01/01/90................................................... $10,000 $10,000
12/31/90................................................... 9,647 9,689
12/31/91................................................... 12,212 12,642
12/31/92................................................... 13,213 13,605
12/31/93................................................... 15,086 14,976
12/31/94................................................... 15,287 15,174
12/31/95................................................... 19,806 20,876
12/31/96................................................... 23,892 25,671
12/31/97................................................... 30,772 34,234
12/31/98................................................... 32,308 44,018
12/31/99................................................... 33,954 53,283
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division*
Scudder Growth and Income
Division Twenty-One................................ 239.54% 122.11% 5.09%
Benchmark Comparison
S&P 500 Index........................................ 432.83% 251.15% 21.05%
</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, 1990
<TABLE>
<CAPTION>
FOREIGN EAFE
DIVISION THIRTY-TWO INDEX
- ------------------------------------------------------------------------ -------------
<S> <C> <C>
01/01/90................................................. $ 10,000 $ 10,000
12/31/90................................................. 9,604 7,655
12/31/91................................................. 11,247 8,584
12/31/92................................................. 11,147 7,539
12/31/93................................................. 15,101 9,993
12/31/94................................................. 15,005 10,771
12/31/95................................................. 16,516 11,978
12/31/96................................................. 19,281 12,702
12/31/97................................................. 20,354 12,928
12/31/98................................................. 19,170 15,513
12/31/99................................................. 26,520 19,696
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division*
Templeton Foreign Division Thirty-Two................. 165.20% 76.74% 38.34%
Benchmark Comparison
EAFE Index............................................ 96.96% 82.87% 26.96%
</TABLE>
- ---------------
* The Division was initiated on July 1, 1996.
31
<PAGE> 478
Vanguard Long-Term Corporate* Division Twenty-Two Performance Compared to Lehman
Long-Term Corporate AA or Better Bond Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1990
<TABLE>
<CAPTION>
LEHMAN LONG-TERM
LONG-TERM CORPORATE CORPORATE AA OR
DIVISION TWENTY-TWO BETTER BOND INDEX
- --------------------------------------------------------------- -----------------
<S> <C> <C>
01/01/90............................................. $10,000 $10,000
12/31/90............................................. 10,490 10,692
12/31/91............................................. 12,527 12,853
12/31/92............................................. 13,582 13,968
12/31/93............................................. 15,359 15,778
12/31/94............................................. 14,367 14,869
12/31/95............................................. 17,936 18,840
12/31/96............................................. 17,806 19,107
12/31/97............................................. 20,000 21,691
12/31/98............................................. 21,608 23,973
12/31/99............................................. 20,051 22,294
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division*
Vanguard Long-Term Corporate Fund Division
Twenty-Two......................................... 100.51% 39.56% (7.21)%
Benchmark Comparison
Lehman Long-Term Corporate AA or Better Bond Index... 906.96% 49.06% (7.00)%
</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, 1990
<TABLE>
<CAPTION>
LEHMAN BROTHERS
U.S. TREASURY
LONG-TERM TREASURY LONG-TERM
DIVISION TWENTY-THREE INDEX
- ----------------------------------------------------------------- ---------------
<S> <C> <C>
01/01/90............................................... $10,000 $10,000
12/31/90............................................... 10,448 10,631
12/31/91............................................... 12,118 12,599
12/31/92............................................... 12,855 13,602
12/31/93............................................... 14,828 15,949
12/31/94............................................... 13,615 14,730
12/31/95............................................... 17,496 19,250
12/31/96............................................... 16,957 19,083
12/31/97............................................... 19,067 21,959
12/31/98............................................... 21,321 24,926
12/31/99............................................... 19,273 22,747
</TABLE>
32
<PAGE> 479
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division*
Vanguard Long-Term Treasury Fund Division
Twenty-Three........................................ 92.73% 41.56% (9.61)%
Benchmark Comparison
Lehman Brothers U.S. Treasury Long-Term Index......... 127.47% 54.43% (8.74)%
</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, 1990
<TABLE>
<CAPTION>
VANGUARD WELLINGTON BLENDED
DIVISION TWENTY-FIVE INDEX***
- --------------------------------------------------------------------- --------
<S> <C> <C>
01/01/90................................................... $10,000 $10,000
12/31/90................................................... 9,600 10,067
12/31/91................................................... 11,724 12,715
12/31/92................................................... 12,496 13,758
12/31/93................................................... 14,011 15,263
12/31/94................................................... 13,771 15,220
12/31/95................................................... 18,080 20,063
12/31/96................................................... 20,736 23,245
12/31/97................................................... 25,226 29,074
12/31/98................................................... 27,912 35,443
12/31/99................................................... 28,781 39,929
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division**
Vanguard Wellington Division Twenty-Five............. 187.81% 109.00% 3.11%
Benchmark Comparison
Blended Index***..................................... 299.29% 162.35% 12.66%
</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.
33
<PAGE> 480
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, 1990
<TABLE>
<CAPTION>
VANGUARD WINDSOR II S&P 500
DIVISION TWENTY-FOUR INDEX
- --------------------------------------------------------------------- --------
<S> <C> <C>
01/01/90................................................... $10,000 $10,000
12/31/90................................................... 8,891 9,689
12/31/91................................................... 11,301 12,642
12/31/92................................................... 12,500 13,605
12/31/93................................................... 14,025 14,976
12/31/94................................................... 13,691 15,174
12/31/95................................................... 18,774 20,876
12/31/96................................................... 23,010 25,671
12/31/97................................................... 30,074 34,234
12/31/98................................................... 34,555 44,018
12/31/99................................................... 32,149 53,283
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division**
Vanguard Windsor II Division Twenty-Four............. 221.49% 134.82% (6.96)%
Benchmark Comparison
S&P 500 Index........................................ 432.83% 251.15% 21.05%
</TABLE>
- ---------------
* The Vanguard Windsor II Fund was formerly known as the Vanguard/Windsor II
Fund.
** This Division was initiated on July 1, 1996.
34
<PAGE> 481
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-
35
<PAGE> 482
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>
36
<PAGE> 483
DISTRIBUTION OF VARIABLE ANNUITY CONTRACTS
The Company has qualified or intends to qualify the Contracts for sale in
all fifty states and the District of Columbia and will commence offering the
Contracts promptly upon qualification in each such jurisdiction.
The Contracts are sold in a continuous offering by licensed insurance
agents who are registered representatives of broker-dealers which are members of
the National Association of Securities Dealers, Inc. (the "NASD"). The principal
underwriter for VALIC Separate Account A is the Distributor, an affiliate of
VALIC. The Distributor is known as American General Financial Distributors of
Florida, Inc. and American General Financial Distributors of Illinois, Inc. in
Florida and Illinois, respectively. The address of the Distributor is 2929 Allen
Parkway, Houston, Texas 77019. The Distributor 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 the Distributor and VALIC
Separate Account A, the Company reimburses the Distributor 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 1999 was $75,580,708.
EXPERTS
The consolidated financial statements of the Company at December 31, 1999
and 1998, and for each of the three years in the period ended December 31, 1999,
and the financial statements of the Company's Separate Account A at December 31,
1999 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.
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, 1999.
37
<PAGE> 484
TABLE OF CONTENTS
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A - ANNUAL REPORT
DECEMBER 31, 1999
Report of Independent Auditors........................................... 1
Summary of Financial Statements.......................................... 3
Statements of Net Assets................................................. 4
Statements of Operations................................................. 8
Statements of Changes in Net Assets...................................... 14
Notes to Financial Statements............................................ 34
Supplemental Information................................................. 39
<PAGE> 485
REPORT OF INDEPENDENT AUDITORS 1
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, and 48 through 60 inclusive) comprising the Separate Account as of
December 31, 1999. 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 50, inclusive, and divisions 58
through 60, inclusive, for which we have audited the statements of changes in
net assets for the year ended December 31, 1999, and for the period from August
26, 1998 (inception) to December 31, 1998; except for divisions 51 through 54,
inclusive, for which we have audited the statements of changes in net assets
for the year ended December 31, 1999, and for the period from September 22,
1998 (inception) to December 31, 1998; and except for divisions 55 through 57,
inclusive, for which we have audited the statements of operations and changes
in net assets for the period from January 4, 1999 (inception) to December 31,
1999. 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 auditing standards generally
accepted in the United States. 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, 1999, 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, 1999, and the
results of their operations and changes in their net assets for each of the
periods identified above, in conformity with accounting principles generally
accepted in the United States.
/s/ ERNST & YOUNG LLP
-------------------------
ERNST & YOUNG LLP
Houston, Texas
February 22, 2000
<PAGE> 486
SUMMARY OF FINANCIAL STATEMENTS 3
STATEMENT OF NET ASSETS
December 31, 1999
<TABLE>
<CAPTION>
ALL DIVISIONS
----------------
ASSETS:
<S> <C>
Total investment in shares of mutual funds, at market (cost $15,133,600,700) ........... $ 21,292,842,069
Balance due from VALIC general account, net ............................................ 17,655,894
Payable for mutual fund purchases, net ................................................. (4,388,902)
----------------
NET ASSETS ............................................................................. $ 21,306,109,061
----------------
Contract Owner Reserves and Capital Surplus:
Reserves for redeemable annuity contracts
(Net of applicable contract loans - partial withdrawals with right of
reinvestment) ....................................................................... $ 21,173,161,490
Reserves for annuity contracts on benefit .............................................. 27,942,008
Capital surplus (Note C) ............................................................... 105,005,563
----------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ...................................... $ 21,306,109,061
----------------
</TABLE>
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
ALL DIVISIONS
----------------
<S> <C>
INVESTMENT INCOME:
Dividends from mutual funds ............................................................ $ 200,790,831
----------------
EXPENSES:
Mortality and expense risk charge ...................................................... 182,974,740
Reimbursement of expenses (Note C) ..................................................... (10,256,222)
----------------
Total expenses ...................................................................... 172,718,518
----------------
NET INVESTMENT INCOME .................................................................. 28,072,313
----------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments ....................................................... 492,418,714
Capital gains distributions from mutual funds .......................................... 1,237,635,279
Net unrealized appreciation of investments during the period ........................... 2,750,587,412
----------------
Net realized and unrealized gain on investments ..................................... 4,480,641,405
----------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ....................................... $ 4,508,713,718
----------------
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
ALL DIVISIONS
----------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income................................................................... $ 28,072,313 $ 32,906,355
Net realized gain on investments........................................................ 492,418,714 256,062,773
Capital gains distributions from mutual funds........................................... 1,237,635,279 599,950,396
Net unrealized appreciation of investments during the period............................ 2,750,587,412 1,171,591,212
----------------- ----------------
Increase in net assets resulting from operations .................................... 4,508,713,718 2,060,510,736
----------------- ----------------
PRINCIPAL TRANSACTIONS:
Purchase payments ...................................................................... 2,904,038,286 2,363,611,667
Surrenders of accumulation units by terminations, withdrawals, and maintenance fees .... (1,008,041,123) (576,063,916)
Annuity benefit payments ............................................................... (3,151,245) (2,688,910)
Amounts transferred from VALIC general account, net..................................... 312,589,668 419,275,772
----------------- ----------------
Increase in net assets resulting from principal transactions ........................ 2,205,435,586 2,204,134,613
----------------- ----------------
Total increase in net assets............................................................ 6,714,149,304 4,264,645,349
NET ASSETS:
Beginning of period..................................................................... 14,591,959,757 10,327,314,408
----------------- ----------------
End of period........................................................................... $ 21,306,109,061 $ 14,591,959,757
----------------- ----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 487
4 FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
AGSPC AGSPC AGSPC
STATEMENTS OF NET ASSETS INTERNATIONAL MIDCAP SMALL CAP
December 31, 1999 EQUITIES INDEX INDEX
FUND - FUND - FUND -
DIVISION 11 DIVISION 4 DIVISION 14 DIVISION 10A
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market .......... $ 175,007,894 $ 876,866,818 $ 241,145,168 $ 590,443,067
Balance due from (to) VALIC general account .............. 2,029,474 9,382 27,128 (319,779)
Receivable (payable) for mutual fund sales (purchases) ... -- -- -- --
-------------- -------------- -------------- --------------
NET ASSETS ............................................... $ 177,037,368 $ 876,876,200 $ 241,172,296 $ 590,123,288
-------------- -------------- -------------- --------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals with
right of reinvestment) ................................. $ 176,828,231 $ 876,371,622 $ 241,010,780 $ 574,871,892
Reserves for annuity contracts on benefit ................ 209,137 504,578 161,516 15,251,396
Capital surplus (Note C) ................................ -- -- -- --
-------------- -------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ........ $ 177,037,368 $ 876,876,200 $ 241,172,296 $ 590,123,288
-------------- -------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN AMERICAN
STATEMENTS OF NET ASSETS GENERAL GENERAL GENERAL GENERAL
December 31, 1999 INTERNATIONAL LARGE CAP LARGE CAP MID CAP
VALUE FUND - GROWTH FUND - VALUE FUND - GROWTH FUND
DIVISION 34 DIVISION 39 DIVISION 40 DIVISION 37
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market .......... $ 8,096,689 $ 21,699,827 $ 4,473,480 $ 7,065,815
Balance due from (to) VALIC general account .............. 2,758 81,423 3,679 5,305
Receivable (payable) for mutual fund sales (purchases) ... -- -- -- --
-------------- -------------- -------------- --------------
NET ASSETS ............................................... $ 8,099,447 $ 21,781,250 $ 4,477,159 $ 7,071,120
-------------- -------------- -------------- --------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals with
right of reinvestment) ................................. $ 1,126,250 $ 16,976,274 $ 657,997 $ 1,243,896
Reserves for annuity contracts on benefit ................ -- -- -- --
Capital surplus (Note C) ................................ 6,973,197 4,804,976 3,819,162 5,827,224
-------------- -------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ........ $ 8,099,447 $ 21,781,250 $ 4,477,159 $ 7,071,120
-------------- -------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
DREYFUS NEUBERGER PUTNAM PUTNAM
STATEMENTS OF NET ASSETS FOUNDERS BERMAN GLOBAL NEW
December 31, 1999 GROWTH GUARDIAN GROWTH OPPORTUNITIES
FUND - TRUST - FUND - FUND -
DIVISION 30 DIVISION 29 DIVISION 28 DIVISION 26
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market .......... $ 874,457,709 $ 59,467,223 $ 495,732,851 $1,014,850,850
Balance due from (to) VALIC general account .............. 1,861,813 50,794 2,263,104 3,449,185
Receivable (payable) for mutual fund sales (purchases) ... (830,550) (21,490) (1,135,006) (1,827,956)
-------------- -------------- -------------- --------------
NET ASSETS ............................................... $ 875,488,972 $ 59,496,527 $ 496,860,949 $1,016,472,079
-------------- -------------- -------------- --------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals with
right of reinvestment) ................................. $ 875,377,940 $ 59,482,061 $ 496,733,062 $1,016,427,721
Reserves for annuity contracts on benefit ................ 111,032 14,466 127,887 44,358
Capital surplus (Note C) ................................ -- -- -- --
-------------- -------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ........ $ 875,488,972 $ 59,496,527 $ 496,860,949 $1,016,472,079
-------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 488
SEPARATE ACCOUNT A 5
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1999 AGSPC STOCK INDEX FUND
--------------------------------------------------
DIVISION 10B DIVISION 10C DIVISION 10D
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market .......... $ 45,355,666 $4,551,706,741 $ 59,387,213
Balance due from (to) VALIC general account .............. (37,562) 1,396,109 4,396
Receivable (payable) for mutual fund sales (purchases) ... -- -- --
-------------- -------------- --------------
NET ASSETS ............................................... $ 45,318,104 $4,553,102,850 $ 59,391,609
-------------- -------------- --------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals with
right of reinvestment) ................................. $ 43,269,244 $4,548,703,203 $ 59,146,967
Reserves for annuity contracts on benefit ................ 2,048,860 4,399,647 244,642
Capital surplus (Note C) ................................ -- -- --
-------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ........ $ 45,318,104 $4,553,102,850 $ 59,391,609
-------------- -------------- --------------
<CAPTION>
AGSPC AMERICAN AMERICAN
STATEMENTS OF NET ASSETS AGSPC GROWTH & CENTURY GENERAL
December 31, 1999 GROWTH INCOME ULTRA INTERNATIONAL
FUND - FUND - FUND - GROWTH FUND -
DIVISION 15 DIVISION 16 DIVISION 31 DIVISION 33
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market .......... $1,218,557,601 $ 336,589,500 $1,023,333,380 $ 6,847,182
Balance due from (to) VALIC general account .............. 104,803 34,010 3,260,572 11,199
Receivable (payable) for mutual fund sales (purchases) ... -- -- (1,172,899) --
-------------- -------------- -------------- --------------
NET ASSETS ............................................... $1,218,662,404 $ 336,623,510 $1,025,421,053 $ 6,858,381
-------------- -------------- -------------- --------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals with
right of reinvestment) ................................. $1,217,972,085 $ 336,543,298 $1,024,997,082 $ 824,550
Reserves for annuity contracts on benefit ................ 690,319 80,212 423,971 --
Capital surplus (Note C) ................................ -- -- -- 6,033,831
-------------- -------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ........ $1,218,662,404 $ 336,623,510 $1,025,421,053 $ 6,858,381
-------------- -------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1999
AMERICAN AMERICAN AMERICAN
GENERAL GENERAL GENERAL
MID CAP SMALL CAP SMALL CAP
VALUE FUND GROWTH FUND - VALUE FUND -
DIVISION 38 DIVISION 35 DIVISION 36
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market .......... $ 8,329,863 $ 16,642,631 $ 4,470,644
Balance due from (to) VALIC general account .............. 11,302 71,324 1,032
Receivable (payable) for mutual fund sales (purchases) ... -- -- --
-------------- -------------- --------------
NET ASSETS ............................................... $ 8,341,165 $ 16,713,955 $ 4,471,676
-------------- -------------- --------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals with
right of reinvestment) ................................. $ 2,264,145 $ 7,749,930 $ 267,346
Reserves for annuity contracts on benefit ................ -- -- --
Capital surplus (Note C) ................................ 6,077,020 8,964,025 4,204,330
-------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ........ $ 8,341,165 $ 16,713,955 $ 4,471,676
-------------- -------------- --------------
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1999
DREYFUS VARIABLE EVERGREEN EVERGREEN
INVESTMENT FUND - GROWTH AND SMALL CAP EVERGREEN
SMALL CAP INCOME VALUE VALUE
PORTFOLIO FUND - FUND - FUND -
DIVISION 18 DIVISION 56 DIVISION 55 DIVISION 57
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market .......... $ 779,491,073 $ 6,220 $ 243 $ 4,388
Balance due from (to) VALIC general account .............. (127,757) 24 (1) (3)
Receivable (payable) for mutual fund sales (purchases) ... 242,882 -- -- --
-------------- -------------- -------------- --------------
NET ASSETS ............................................... $ 779,606,198 $ 6,244 $ 242 $ 4,385
-------------- -------------- -------------- --------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals with
right of reinvestment) ................................. $ 779,288,796 $ 6,244 $ 242 $ 4,385
Reserves for annuity contracts on benefit ................ 317,402 -- -- --
Capital surplus (Note C) ................................ -- -- -- --
-------------- -------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ........ $ 779,606,198 $ 6,244 $ 242 $ 4,385
-------------- -------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1999
PUTNAM OTC & SCUDDER
EMERGING GROWTH AND T. ROWE PRICE
GROWTH INCOME SMALL-CAP STOCK
FUND - FUND - FUND -
DIVISION 27 DIVISION 21 DIVISION 51
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market .......... $ 431,252,004 $ 246,635,934 $ 8,738,757
Balance due from (to) VALIC general account .............. 1,081,239 293,361 18,110
Receivable (payable) for mutual fund sales (purchases) ... (671,496) (20,902) 1,147
-------------- -------------- --------------
NET ASSETS ............................................... $ 431,661,747 $ 246,908,393 $ 8,758,014
-------------- -------------- --------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals with
right of reinvestment) ................................. $ 431,575,216 $ 246,812,922 $ 8,758,014
Reserves for annuity contracts on benefit ................ 86,531 95,471 --
Capital surplus (Note C) ................................ -- -- --
-------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ........ $ 431,661,747 $ 246,908,393 $ 8,758,014
-------------- -------------- --------------
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1999
AMERICAN
TEMPLETON TEMPLETON VANGUARD GENERAL
FOREIGN INTERNATIONAL WINDSOR II BALANCED
FUND - FUND - FUND - FUND -
DIVISION 32 DIVISION 20 DIVISION 24 DIVISION 42
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market .......... $ 336,480,225 $ 817,303,148 $ 732,870,656 $ 9,953,676
Balance due from (to) VALIC general account .............. (232,426) 1,784,124 243,278 13,511
Receivable (payable) for mutual fund sales (purchases) ... 2,067,517 65,094 (258,676) --
-------------- -------------- -------------- --------------
NET ASSETS ............................................... $ 338,315,316 $ 819,152,366 $ 732,855,258 $ 9,967,187
-------------- -------------- -------------- --------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals with
right of reinvestment) ................................. $ 338,261,796 $ 818,845,742 $ 732,691,320 $ 3,280,905
Reserves for annuity contracts on benefit ................ 53,520 306,624 163,938 --
Capital surplus (Note C) ................................ -- -- -- 6,686,282
-------------- -------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ........ $ 338,315,316 $ 819,152,366 $ 732,855,258 $ 9,967,187
-------------- -------------- -------------- --------------
</TABLE>
<PAGE> 489
6 FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
AGSPC
STATEMENTS OF NET ASSETS VANGUARD GOVERNMENT
December 31, 1999 WELLINGTON AGSPC CAPITAL CONSERVATION FUND - SECURITIES
FUND - --------------------------------- FUND -
DIVISION 25 DIVISION 1 DIVISION 7 DIVISION 8
------------- ---------------- --------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ...................... $569,864,636 $ 5,194,143 $ 51,502,808 $ 93,312,643
Balance due from (to) VALIC general account .......................... (85,749) 9,160 21,200 (7,864)
Receivable (payable) for mutual fund sales (purchases) ............... 265,989 -- -- --
------------ ----------- ------------ ------------
NET ASSETS ........................................................... $570,044,876 $ 5,203,303 $ 51,524,008 $ 93,304,779
------------ ----------- ------------ ------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) ... $569,823,378 $ 5,199,068 $ 51,524,008 $ 93,304,779
Reserves for annuity contracts on benefit ............................ 221,498 4,235 -- --
Capital surplus (Note C) ............................................. -- -- -- --
------------ ----------- ------------ ------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS .................... $570,044,876 $ 5,203,303 $ 51,524,008 $ 93,304,779
------------ ----------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS AGSPC AGSPC AMERICAN
December 31, 1999 SCIENCE & SOCIAL GENERAL SOCIALLY
TECHNOLOGY AWARENESS RESPONSIBLE AGSPC MONEY
FUND - FUND - FUND - MARKET FUND -
DIVISION 17 DIVISION 12 DIVISION 41 DIVISION 2
-------------- ------------ ---------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ...................... $3,406,706,628 $618,968,226 $12,225,981 $4,167,220
Balance due from (to) VALIC general account .......................... 4,735,467 (46,958) 12,104 11,866
Receivable (payable) for mutual fund sales (purchases) ............... -- -- -- --
-------------- ------------ ----------- ----------
NET ASSETS ........................................................... $3,411,442,095 $618,921,268 $12,238,085 $4,179,086
-------------- ------------ ----------- ----------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) ... $3,410,138,310 $618,575,740 $ 4,669,512 $4,179,086
Reserves for annuity contracts on benefit ............................ 1,303,785 345,528 -- --
Capital surplus (Note C) ............................................. -- -- 7,568,573 --
-------------- ------------ ----------- ----------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS .................... $3,411,442,095 $618,921,268 $12,238,085 $4,179,086
-------------- ------------ ----------- ----------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS VANGUARD AGSPC
December 31, 1999 LIFESTRATEGY ASSET TEMPLETON
MODERATE ALLOCATION ALLOCATION
GROWTH FUND - FUND - FUND -
DIVISION 53 DIVISION 5 DIVISION 19
------------- ------------- -------------
<S> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ...................... $ 32,046,248 $ 260,891,195 $ 323,940,365
Balance due from (to) VALIC general account .......................... 132,784 162,943 (130,432)
Receivable (payable) for mutual fund sales (purchases) ............... (110,319) -- (131,537)
------------- ------------- -------------
NET ASSETS ........................................................... $ 32,068,713 $ 261,054,138 $ 323,678,396
------------- ------------- -------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) ... $ 32,068,713 $ 260,830,021 $ 323,294,066
Reserves for annuity contracts on benefit ............................ -- 224,117 384,330
Capital surplus (Note C) ............................................. -- -- --
------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS .................... $ 32,068,713 $ 261,054,138 $ 323,678,396
------------- ------------- -------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 490
SEPARATE ACCOUNT A 7
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1999 AGSPC AMERICAN AMERICAN AMERICAN
INTERNATIONAL GENERAL GENERAL GENERAL
GOVERNMENT CORE DOMESTIC HIGH YIELD
BOND FUND - BOND FUND - BOND FUND - BOND FUND -
DIVISION 13 DIVISION 58 DIVISION 43 DIVISION 60
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ...................... $ 149,120,828 $ 5,168,278 $ 1,830,628 $ 5,587,119
Balance due from (to) VALIC general account .......................... (1,784,215) 103 2,420 234
Receivable (payable) for mutual fund sales (purchases) ............... -- -- -- --
------------- ------------- ------------- -------------
NET ASSETS ........................................................... $ 147,336,613 $ 5,168,381 $ 1,833,048 $ 5,587,353
------------- ------------- ------------- -------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) ... $ 147,282,364 $ 65,708 $ 563,854 $ 149,820
Reserves for annuity contracts on benefit ............................ 54,249 -- -- --
Capital surplus (Note C) ............................................. -- 5,102,673 1,269,194 5,437,533
------------- ------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS .................... $ 147,336,613 $ 5,168,381 $ 1,833,048 $ 5,587,353
------------- ------------- ------------- -------------
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1999 AMERICAN
GENERAL VANGUARD VANGUARD
STRATEGIC LONG-TERM LONG-TERM
BOND FUND - CORPORATE FUND - TREASURY FUND -
DIVISION 59 DIVISION 22 DIVISION 23
------------- ---------------- ---------------
<S> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ...................... $ 5,506,171 $ 68,263,542 $ 141,856,062
Balance due from (to) VALIC general account .......................... 335 186,923 834,134
Receivable (payable) for mutual fund sales (purchases) ............... -- (11,709) (371,585)
------------- ------------- -------------
NET ASSETS ........................................................... $ 5,506,506 $ 68,438,756 $ 142,318,611
------------- ------------- -------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) ... $ 38,482 $ 68,397,606 $ 142,307,011
Reserves for annuity contracts on benefit ............................ -- 41,150 11,600
Capital surplus (Note C) ............................................. 5,468,024 -- --
------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS .................... $ 5,506,506 $ 68,438,756 $ 142,318,611
------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS AMERICAN AMERICAN
December 31, 1999 GENERAL GENERAL
AGSPC MONEY MONEY MARKET CONSERVATIVE GROWTH
MARKET FUND - FUND - LIFESTYLE FUND -
DIVISION 6 DIVISION 44 DIVISION 50
------------- ------------- -------------------
<S> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ...................... $ 459,787,520 $ 11,553,720 $ 8,699,095
Balance due from (to) VALIC general account .......................... (4,431,676) 28,543 19,787
Receivable (payable) for mutual fund sales (purchases) ............... -- -- --
------------- ------------- -------------
NET ASSETS ........................................................... $ 455,355,844 $ 11,582,263 $ 8,718,882
------------- ------------ --------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) ... $ 455,339,835 $ 6,257,572 $ 2,113,653
Reserves for annuity contracts on benefit ............................ 16,009 -- --
Capital surplus (Note C) ............................................. -- 5,324,691 6,605,229
------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS .................... $ 455,355,844 $ 11,582,263 $ 8,718,882
------------- ------------ --------------
<CAPTION>
STATEMENTS OF NET ASSETS AMERICAN AMERICAN
December 31, 1999 GENERAL GENERAL
GROWTH MODERATE GROWTH
LIFESTYLE FUND - LIFESTYLE FUND -
DIVISION 48 DIVISION 49
---------------- ----------------
<S> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ...................... $ 10,625,442 $ 12,526,733
Balance due from (to) VALIC general account .......................... 25,237 42,928
Receivable (payable) for mutual fund sales (purchases) ............... -- --
------------- -------------
NET ASSETS ........................................................... $ 10,650,679 $ 12,569,661
------------- -------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) ... $ 2,875,158 $ 5,505,583
Reserves for annuity contracts on benefit ............................ -- --
Capital surplus (Note C) ............................................. 7,775,521 7,064,078
------------- -------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS .................... $ 10,650,679 $ 12,569,661
------------- -------------
<CAPTION>
STATEMENTS OF NET ASSETS VANGUARD
December 31, 1999 LIFESTRATEGY VANGUARD
CONSERVATIVE LIFESTRATEGY
GROWTH FUND - GROWTH FUND -
DIVISION 54 DIVISION 52
-------------- --------------
<S> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ...................... $ 5,319,180 $ 24,913,522
Balance due from (to) VALIC general account .......................... 195,040 326,669
Receivable (payable) for mutual fund sales (purchases) ............... (189,439) (277,967)
------------- -------------
NET ASSETS ........................................................... $ 5,324,781 $ 24,962,224
------------- -------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) ... $ 5,324,781 $ 24,962,224
Reserves for annuity contracts on benefit ............................ -- --
Capital surplus (Note C) ............................................. -- --
------------- -------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS .................... $ 5,324,781 $ 24,962,224
------------- -------------
</TABLE>
<PAGE> 491
8 FINANCIAL STATEMENTS
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
AGSPC AGSPC AGSPC
INTERNATIONAL MIDCAP SMALL CAP
EQUITIES INDEX INDEX
FUND - FUND - FUND -
DIVISION 11 DIVISION 4 DIVISION 14 DIVISION 10A
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ............................ $ 1,788,128 $ 6,878,578 $ 2,414,127 $ 5,674,702
------------- ------------- ------------- -------------
EXPENSES:
Mortality and expense risk charge ...................... 1,510,709 8,083,887 2,143,563 5,630,338
Reimbursement of expenses .............................. -- -- -- --
------------- ------------- ------------- -------------
Total expenses ...................................... 1,510,709 8,083,887 2,143,563 5,630,338
------------- ------------- ------------- -------------
NET INVESTMENT INCOME (LOSS) ........................... 277,419 (1,205,309) 270,564 44,364
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments ....................... 10,094,468 54,717,361 15,168,549 50,306,023
Capital gains distributions from mutual funds .......... 8,117,049 194,003,989 21,011,129 4,737,369
Net unrealized appreciation (depreciation)
of investments during the period .................... 20,902,728 (141,415,147) 4,167,711 45,440,162
------------- ------------- ------------- -------------
Net realized and unrealized gain on investments ........ 39,114,245 107,306,203 40,347,389 100,483,554
------------- ------------- ------------- -------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ........................... $ 39,391,664 $ 106,100,894 $ 40,617,953 $ 100,527,918
------------- ------------- ------------- -------------
</TABLE>
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN AMERICAN
GENERAL GENERAL GENERAL GENERAL
INTERNATIONAL LARGE CAP LARGE CAP MID CAP
VALUE FUND - GROWTH FUND - VALUE FUND - GROWTH FUND -
DIVISION 34 DIVISION 39 DIVISION 40 DIVISION 37
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ............................ $ 72,614 $ 8,826 $ 47,885 $ --
------------- ------------- ------------- -------------
EXPENSES:
Mortality and expense risk charge ...................... 2,951 55,394 3,021 4,606
Reimbursement of expenses .............................. (813) (22,462) (988) (1,410)
------------- ------------- ------------- -------------
Total expenses ...................................... 2,138 32,932 2,033 3,196
------------- ------------- ------------- -------------
NET INVESTMENT INCOME (LOSS) ........................... 70,476 (24,106) 45,852 (3,196)
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments ....................... 50,532 196,164 63,723 21,955
Capital gains distributions from mutual funds .......... 358,216 634,398 650,214 710,827
Net unrealized appreciation (depreciation)
of investments during the period .................... 2,597,347 3,810,394 (552,152) (258,735)
------------- ------------- ------------- -------------
Net realized and unrealized gain (loss)on investments .. 3,006,095 4,640,956 161,785 474,047
------------- ------------- ------------- -------------
INCREASE (DECREASE)IN NET ASSETS
RESULTING FROM OPERATIONS ........................... $ 3,076,571 $ 4,616,850 $ 207,637 $ 470,851
------------- ------------- ------------- -------------
</TABLE>
(*)Since inception January 4, 1999.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 492
SEPARATE ACCOUNT A 9
<TABLE>
<CAPTION>
AGSPC
AGSPC STOCK INDEX FUND - GROWTH
------------------------------------------------ FUND -
DIVISION 10B DIVISION 10C DIVISION 10D DIVISION 15
----------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ............................... $ 438,856 $ 39,607,878 $ 576,997 $ --
----------- ------------- ------------ -------------
EXPENSES:
Mortality and expense risk charge ......................... 223,569 38,759,190 572,435 11,859,802
Reimbursement of expenses ................................. (94,122) -- -- --
----------- ------------- ------------ -------------
Total expenses ........................................... 129,447 38,759,190 572,435 11,859,802
----------- ------------- ------------ -------------
NET INVESTMENT INCOME (LOSS) .............................. 309,409 848,688 4,562 (11,859,802)
----------- ------------- ------------ -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments .......................... 5,087,126 58,888,546 6,938,320 65,180,424
Capital gains distributions from mutual funds ............. 362,359 36,367,266 471,902 50,296,770
Net unrealized appreciation (depreciation)
of investments during the period ....................... 2,257,759 612,628,344 2,683,181 (29,390,145)
----------- ------------- ------------ -------------
Net realized and unrealized gain on investments ........... 7,707,244 707,884,156 10,093,403 86,087,049
----------- ------------- ------------ -------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .............................. $ 8,016,653 $ 708,732,844 $ 10,097,965 $ 74,227,247
----------- ------------- ------------ -------------
<CAPTION>
AGSPC AMERICAN
GROWTH & AMERICAN CENTURY GENERAL
INCOME ULTRA INTERNATIONAL
FUND - FUND - GROWTH FUND -
DIVISION 16 DIVISION 31 DIVISION 33
------------ ------------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ............................... $ 1,240,444 $ -- $ 84,670
------------ ------------- -----------
EXPENSES:
Mortality and expense risk charge ......................... 3,039,334 7,951,342 1,814
Reimbursement of expenses ................................. -- (1,545,916) (630)
------------ ------------- -----------
Total expenses ........................................... 3,039,334 6,405,426 1,184
------------ ------------- -----------
NET INVESTMENT INCOME (LOSS) .............................. (1,798,890) (6,405,426) 83,486
------------ ------------- -----------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments .......................... 14,837,619 5,962,303 12,371
Capital gains distributions from mutual funds ............. 33,787,657 29,663,737 179,573
Net unrealized appreciation (depreciation)
of investments during the period ....................... 13,472,567 227,838,963 2,105,762
------------ ------------- -----------
Net realized and unrealized gain on investments ........... 62,097,843 263,465,003 2,297,706
------------ ------------- -----------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .............................. $ 60,298,953 $ 257,059,577 $ 2,381,192
------------ ------------- -----------
</TABLE>
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN DREYFUS VARIABLE
GENERAL GENERAL GENERAL INVESTMENT FUND-
MID CAP SMALL CAP SMALL CAP SMALL CAP
VALUE FUND - GROWTH FUND - VALUE FUND - PORTFOLIO -
DIVISION 38 DIVISION 35 DIVISION 36 DIVISION 18
----------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ............................... $ 39,296 $ -- $ 56,427 $ 550,577
----------- ------------- ------------ -------------
EXPENSES:
Mortality and expense risk charge ......................... 8,195 17,485 1,592 9,073,382
Reimbursement of expenses ................................. (3,000) (6,824) (445) (1,114,672)
----------- ------------- ------------ -------------
Total expenses ............................................ 5,195 10,661 1,147 7,958,710
----------- ------------- ------------ -------------
NET INVESTMENT INCOME (LOSS) .............................. 34,101 (10,661) 55,280 (7,408,133)
----------- ------------- ------------ -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments .......................... 156,954 128,821 6,489 63,772,555
Capital gains distributions from mutual funds ............. 1,894,986 1,115,791 145,670 --
Net unrealized appreciation (depreciation)
of investments during the period ....................... (764,242) 4,835,156 (493,258) 89,787,753
----------- ------------- ------------ -------------
Net realized and unrealized gain (loss)on investments ..... 1,287,698 6,079,768 (341,099) 153,560,308
----------- ------------- ------------ -------------
INCREASE (DECREASE)IN NET ASSETS
RESULTING FROM OPERATIONS .............................. $ 1,321,799 $ 6,069,107 $ (285,819) $ 146,152,175
----------- ------------- ------------ -------------
<CAPTION>
EVERGREEN EVERGREEN
GROWTH SMALL CAP EVERGREEN
AND INCOME VALUE VALUE
FUND - FUND - FUND -
DIVISION 56(*) DIVISION 55(*) DIVISION 57(*)
------------ ------------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ............................... $ -- $ -- $ 11
------------ ------------- -----------
EXPENSES:
Mortality and expense risk charge ......................... 5 -- 9
Reimbursement of expenses ................................. -- -- (2)
------------ ------------- -----------
Total expenses ............................................ 5 -- 7
------------ ------------- -----------
NET INVESTMENT INCOME (LOSS) .............................. (5) -- 4
------------ ------------- -----------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments .......................... 31 -- --
Capital gains distributions from mutual funds ............. 7 -- 262
Net unrealized appreciation (depreciation)
of investments during the period ....................... 370 -- (319)
------------ ------------- -----------
Net realized and unrealized gain (loss)on investments ..... 408 -- (57)
------------ ------------- -----------
INCREASE (DECREASE)IN NET ASSETS
RESULTING FROM OPERATIONS .............................. $ 403 $ -- $ (53)
------------ ------------- -----------
</TABLE>
<PAGE> 493
10 FINANCIAL STATEMENTS
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
DREYFUS NEUBERGER PUTNAM PUTNAM
FOUNDERS BERMAN GLOBAL NEW
GROWTH GUARDIAN GROWTH OPPORTUNITIES
FUND - TRUST - FUND - FUND -
DIVISION 30 DIVISION 29 DIVISION 28 DIVISION 26
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ -- $ 461,168 $ -- $ --
------------- ------------- ------------- -------------
EXPENSES:
Mortality and expense risk charge .......................... 7,395,427 763,578 3,336,299 7,275,209
Reimbursement of expenses .................................. (1,510,809) (153,822) (678,613) (1,481,777)
------------- ------------- ------------- -------------
Total expenses .......................................... 5,884,618 609,756 2,657,686 5,793,432
------------- ------------- ------------- -------------
NET INVESTMENT INCOME (LOSS) ............................... (5,884,618) (148,588) (2,657,686) (5,793,432)
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .................... 4,207,339 232,115 4,532,574 5,405,004
Capital gains distributions from mutual funds .............. 127,949,776 10,764,888 43,772,448 73,606,083
Net unrealized appreciation (depreciation)
of investments during the period ........................ 95,948,371 (6,452,929) 131,823,273 313,953,044
------------- ------------- ------------- -------------
Net realized and unrealized gain (loss) on investments ..... 228,105,486 4,544,074 180,128,295 392,964,131
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 222,220,868 $ 4,395,486 $ 177,470,609 $ 387,170,699
------------- ------------- ------------- -------------
</TABLE>
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
VANGUARD AGSPC
WELLINGTON AGSPC CAPITAL CONSERVATION FUND - GOVERNMENT
FUND - --------------------------------- SECURITIES FUND -
DIVISION 25 DIVISION 1 DIVISION 7 DIVISION 8
------------- --------------- -------------- -----------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ 20,439,202 $ 372,745 $ 3,588,581 $ 5,630,206
------------- ------------- ------------- -------------
EXPENSES:
Mortality and expense risk charge .......................... 6,330,047 58,712 562,336 1,043,310
Reimbursement of expenses .................................. -- -- -- --
------------- ------------- ------------- -------------
Total expenses .......................................... 6,330,047 58,712 562,336 1,043,310
------------- ------------- ------------- -------------
NET INVESTMENT INCOME ...................................... 14,109,155 314,033 3,026,245 4,586,896
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .................... 1,861,183 (76,164) 8,827 661,487
Capital gains distributions from mutual funds .............. 28,847,888 -- -- --
Net unrealized depreciation
of investments during the period ........................ (30,879,706) (326,155) (3,853,099) (9,319,026)
------------- ------------- ------------- -------------
Net realized and unrealized loss on investments ............ (170,635) (402,319) (3,844,272) (8,657,539)
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 13,938,520 $ (88,286) $ (818,027) $ (4,070,643)
------------- ------------- ------------- -------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 494
SEPARATE ACCOUNT A 11
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS PUTNAM OTC & SCUDDER
For the Year Ended December 31, 1999 EMERGING GROWTH AND T. ROWE PRICE TEMPLETON
GROWTH INCOME SMALL-CAP FOREIGN
FUND - FUND - STOCK FUND - FUND -
DIVISION 27 DIVISION 21 DIVISION 51 DIVISION 32
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ -- $ 4,675,796 $ 28,773 $ 8,916,410
------------- ------------- ------------- -------------
EXPENSES:
Mortality and expense risk charge .......................... 2,422,441 3,097,648 49,327 3,329,351
Reimbursement of expenses .................................. (488,210) (624,445) -- (1,967,750)
------------- ------------- ------------- -------------
Total expenses .......................................... 1,934,231 2,473,203 49,327 1,361,601
------------- ------------- ------------- -------------
NET INVESTMENT INCOME (LOSS) ............................... (1,934,231) 2,202,593 (20,554) 7,554,809
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .................... 9,704,876 3,895,314 40,991 (2,951,879)
Capital gains distributions from mutual funds .............. 20,649,440 6,380,872 320,107 2,706,922
Net unrealized appreciation (depreciation)
of investments during the period ........................ 182,753,857 (283,526) 1,008,645 80,764,072
------------- ------------- ------------- -------------
Net realized and unrealized gain (loss) on investments ..... 213,108,173 9,992,660 1,369,743 80,519,115
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 211,173,942 $ 12,195,253 $ 1,349,189 $ 88,073,924
------------- ------------- ------------- -------------
<CAPTION>
STATEMENTS OF OPERATIONS TEMPLETON VANGUARD AMERICAN
For the Year Ended December 31, 1999 INTERNATIONAL WINDSOR II GENERAL
FUND - FUND - BALANCED FUND -
DIVISION 20 DIVISION 24 DIVISION 42
------------- ------------- ---------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ 20,611,275 $ 17,860,760 $ 196,132
------------- ------------- -------------
EXPENSES:
Mortality and expense risk charge .......................... 9,363,281 9,472,517 12,085
Reimbursement of expenses .................................. -- -- (4,448)
------------- ------------- -------------
Total expenses .......................................... 9,363,281 9,472,517 7,637
------------- ------------- -------------
NET INVESTMENT INCOME (LOSS) ............................... 11,247,994 8,388,243 188,495
------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .................... 48,058,679 6,166,843 30,618
Capital gains distributions from mutual funds .............. 71,597,060 67,184,211 432,947
Net unrealized appreciation (depreciation)
of investments during the period ........................ 22,890,344 (144,035,946) 350,211
------------- ------------- -------------
Net realized and unrealized gain (loss) on investments ..... 142,546,083 (70,684,892) 813,776
------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 153,794,077 $ (62,296,649) $ 1,002,271
------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS AGSPC AMERICAN AMERICAN AMERICAN
For the Year Ended December 31, 1999 INTERNATIONAL GENERAL GENERAL GENERAL
GOVERNMENT CORE DOMESTIC HIGH YIELD
BOND FUND - BOND FUND - BOND FUND - BOND FUND -
DIVISION 13 DIVISION 58 DIVISION 43 DIVISION 60
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ 5,352,492 $ 321,342 $ 100,593 $ 491,864
------------- ------------- ------------- -------------
EXPENSES:
Mortality and expense risk charge .......................... 1,576,167 483 2,594 937
Reimbursement of expenses .................................. -- (123) (907) (234)
------------- ------------- ------------- -------------
Total expenses .......................................... 1,576,167 360 1,687 703
------------- ------------- ------------- -------------
NET INVESTMENT INCOME ...................................... 3,776,325 320,982 98,906 491,161
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .................... 1,059,581 (446) (7,296) (357)
Capital gains distributions from mutual funds .............. 103,421 -- 36 --
Net unrealized depreciation
of investments during the period ........................ (16,515,559) (380,782) (139,402) (333,976)
------------- ------------- ------------- -------------
Net realized and unrealized loss on investments ............ (15,352,557) (381,228) (146,662) (334,333)
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ (11,576,232) $ (60,246) $ (47,756) $ 156,828
------------- ------------- ------------- -------------
<CAPTION>
STATEMENTS OF OPERATIONS AMERICAN
For the Year Ended December 31, 1999 GENERAL VANGUARD VANGUARD
STRATEGIC LONG-TERM LONG-TERM
BOND FUND - CORPORATE FUND - TREASURY FUND -
DIVISION 59 DIVISION 22 DIVISION 23
------------- ---------------- --------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ 414,269 $ 4,408,788 $ 8,420,055
------------- ------------- -------------
EXPENSES:
Mortality and expense risk charge .......................... 118 825,583 1,766,917
Reimbursement of expenses .................................. (47) (168,423) (354,616)
------------- ------------- -------------
Total expenses .......................................... 71 657,160 1,412,301
------------- ------------- -------------
NET INVESTMENT INCOME ...................................... 414,198 3,751,628 7,007,754
------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .................... 7 (398,632) (687,054)
Capital gains distributions from mutual funds .............. -- 410,483 1,589,174
Net unrealized depreciation
of investments during the period ........................ (211,104) (8,721,370) (21,800,390)
------------- ------------- -------------
Net realized and unrealized loss on investments ............ (211,097) (8,709,519) (20,898,270)
------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 203,101 $ (4,957,891) $ (13,890,516)
------------- ------------- -------------
</TABLE>
<PAGE> 495
12 FINANCIAL STATEMENTS
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
AGSPC AGSPC AMERICAN
SCIENCE & SOCIAL GENERAL SOCIALLY
TECHNOLOGY AWARENESS RESPONSIBLE AGSPC MONEY
FUND - FUND - FUND - MARKET FUND -
DIVISION 17 DIVISION 12 DIVISION 41 DIVISION 2
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ -- $ 4,238,975 $ 89,881 $ 206,849
--------------- --------------- --------------- ---------------
EXPENSES:
Mortality and expense risk charge .......................... 19,907,095 5,292,189 16,648 44,475
Reimbursement of expenses .................................. -- -- (6,574) --
--------------- --------------- --------------- ---------------
Total expenses .......................................... 19,907,095 5,292,189 10,074 44,475
--------------- --------------- --------------- ---------------
NET INVESTMENT INCOME (LOSS) ............................... (19,907,095) (1,053,214) 79,807 162,374
--------------- --------------- --------------- ---------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .................... 30,613,817 8,179,859 64,508 --
Capital gains distributions from mutual funds .............. 328,749,980 22,439,556 391,925 --
Net unrealized appreciation (depreciation)
of investments during the period ........................ 1,226,217,782 57,407,741 1,103,235 --
--------------- --------------- --------------- ---------------
Net realized and unrealized gain on investments ............ 1,585,581,579 88,027,156 1,559,668 --
--------------- --------------- --------------- ---------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 1,565,674,484 $ 86,973,942 $ 1,639,475 $ 162,374
--------------- --------------- --------------- ---------------
</TABLE>
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
VANGUARD
LIFESTRATEGY AGSPC TEMPLETON
MODERATE ASSET ALLOCATION ASSET ALLOCATION
GROWTH FUND - FUND - FUND -
DIVISION 53 DIVISION 5 DIVISION 19
--------------- --------------- -----------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ 770,171 $ 6,836,435 $ 6,944,378
--------------- --------------- ---------------
EXPENSES:
Mortality and expense risk charge .......................... 159,058 2,472,653 3,749,394
Reimbursement of expenses .................................. -- -- --
--------------- --------------- ---------------
Total expenses .......................................... 159,058 2,472,653 3,749,394
--------------- --------------- ---------------
NET INVESTMENT INCOME ...................................... 611,113 4,363,782 3,194,984
--------------- --------------- ---------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments ........................... 29,492 4,428,516 14,669,025
Capital gains distributions from mutual funds .............. 218,753 4,417,585 38,640,994
Net unrealized appreciation
of investments during the period ........................ 1,470,942 11,930,044 4,197,098
--------------- --------------- ---------------
Net realized and unrealized gain on investments ............ 1,719,187 20,776,145 57,507,117
--------------- --------------- ---------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 2,330,300 $ 25,139,927 $ 60,702,101
--------------- --------------- ---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 496
SEPARATE ACCOUNT A 13
<TABLE>
<CAPTION>
AMERICAN
AMERICAN GENERAL AMERICAN
GENERAL CONSERVATIVE GENERAL
AGSPC MONEY MONEY GROWTH GROWTH
MARKET FUND - MARKET FUND - LIFESTYLE FUND - LIFESTYLE FUND -
DIVISION 6 DIVISION 44 DIVISION 50 DIVISION 48
------------- ------------- ---------------- ----------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ 16,641,083 $ 411,008 $ 607,373 $ 749,801
------------- ------------- ------------- -------------
EXPENSES:
Mortality and expense risk charge .......................... 3,483,010 34,077 8,112 9,678
Reimbursement of expenses .................................. -- (9,035) (3,080) (3,858)
------------- ------------- ------------- -------------
Total expenses .......................................... 3,483,010 25,042 5,032 5,820
------------- ------------- ------------- -------------
NET INVESTMENT INCOME (LOSS)................................ 13,158,073 385,966 602,341 743,981
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .................... -- -- 895,570 63,773
Capital gains distributions from mutual funds .............. -- -- 1,025,645 323,571
Net unrealized appreciation (depreciation)
of investments during the period ........................ -- -- (1,418,604) 1,217,409
------------- ------------- ------------- -------------
Net realized and unrealized gain on investments ............ -- -- 502,611 1,604,753
------------- ------------- ------------- -------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........... $ 13,158,073 $ 385,966 $ 1,104,952 $ 2,348,734
------------- ------------- ------------- -------------
<CAPTION>
AMERICAN
GENERAL VANGUARD
MODERATE LIFESTRATEGY VANGUARD
GROWTH CONSERVATIVE LIFESTRATEGY
LIFESTYLE FUND - GROWTH FUND - GROWTH FUND -
DIVISION 49 DIVISION 54 DIVISION 52
---------------- ------------- -------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ 932,507 $ 159,968 $ 431,935
------------- ------------- -------------
EXPENSES:
Mortality and expense risk charge .......................... 20,370 27,564 123,427
Reimbursement of expenses .................................. (8,167) -- --
------------- ------------- -------------
Total expenses .......................................... 12,203 27,564 123,427
------------- ------------- -------------
NET INVESTMENT INCOME ...................................... 920,304 132,404 308,508
------------- ------------- -------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments ........................... 83,407 (924) 57,727
Capital gains distributions from mutual funds .............. 389,591 35,147 177,605
Net unrealized appreciation
of investments during the period ........................ 497,038 68,926 2,002,755
------------- ------------- -------------
Net realized and unrealized gain on investments ............ 970,036 103,149 2,238,087
------------- ------------- -------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........... $ 1,890,340 $ 235,553 $ 2,546,595
------------- ------------- -------------
</TABLE>
<PAGE> 497
14 FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC
INTERNATIONAL EQUITIES AGSPC MIDCAP INDEX
FUND - DIVISION 11 FUND - DIVISION 4
----------------------------- ------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER, 31 DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ..................................... $ 277,419 $ 1,608,036 $ (1,205,309) $ (689,428)
Net realized gain on investments ................................. 10,094,468 4,716,155 54,717,361 26,826,443
Capital gains distributions from mutual funds .................... 8,117,049 11,021,627 194,003,989 69,472,796
Net unrealized appreciation (depreciation)
of investments during the period ................................ 20,902,728 7,346,991 (141,415,147) 30,964,965
------------- ------------- ------------- -------------
Increase (decrease) in net assets resulting from operations .... 39,391,664 24,692,809 106,100,894 126,574,776
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................ 11,942,025 14,604,832 63,479,375 71,049,146
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................... (9,905,756) (9,033,065) (51,522,548) (37,639,412)
Annuity.benefit payments ......................................... (18,915) (17,602) (30,425) (23,570)
Amounts transferred interdivision, and from (to)
VALIC general account ........................................... (12,646,032) (33,973,374) (91,656,730) (40,068,991)
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ......................... (10,628,678) (28,419,209) (79,730,328) (6,682,827)
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .......................... 28,762,986 (3,726,400) 26,370,566 119,891,949
NET ASSETS:
Beginning of period .............................................. 148,274,382 152,000,782 850,505,634 730,613,685
------------- ------------- ------------- -------------
End of period .................................................... $ 177,037,368 $ 148,274,382 $ 876,876,200 $ 850,505,634
------------- ------------- ------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ........................... 101,811,751 122,716,744 169,039,887 171,065,657
Purchase payments ................................................ 7,577,362 10,549,627 12,121,341 16,010,438
Surrenders ....................................................... (6,375,893) (6,694,955) (9,823,005) (8,724,789)
Transfers - interdivision and from (to) VALIC general account .... (7,974,390) (24,759,665) (18,280,774) (9,311,419)
------------- ------------- ------------- -------------
Total units outstanding, end of period ........................... 95,038,830 101,811,751 153,057,449 169,039,887
------------- ------------ ------------- -------------
Units outstanding, by class:
Standard units .................................................. 94,415,343 101,811,751 151,288,816 169,039,887
Enhanced units:
20 bp.reduced .................................................. 348,851 -- 523,908 --
40 bp.reduced .................................................. 274,636 -- 1,244,725 --
------------- ------------ ------------- -------------
Accumulation units end of period ................................. 95,038,830 101,811,751 153,057,449 169,039,887
------------- ------------ ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................... $ 1.860227 $ 1.454644 $ 5.721920 $ 5.029093
Enhanced unit:
20 bp.reduced .................................................. 1.898106 -- 5.908866 --
40 bp.reduced .................................................. 1.937488 -- 6.116544 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 498
SEPARATE ACCOUNT A 15
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND -
AGSPC SMALL CAP -----------------------------
INDEX FUND - DIVISION 14 DIVISION 10A
----------------------------- -----------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ..................................... 270,564 $ 322,094 $ 44,364 $ 1,035,631
Net realized gain on investments ................................. 15,168,549 8,661,321 50,306,023 36,292,713
Capital gains distributions from mutual funds .................... 21,011,129 18,436,501 4,737,369 2,140,138
Net unrealized appreciation (depreciation)
of investments during the period ................................ 4,167,711 (34,899,835) 45,440,162 82,035,996
------------ ------------- ------------ ------------
Increase (decrease) in net assets resulting from operations .... 40,617,953 (7,479,919) 100,527,918 121,504,478
------------ ------------- ------------ ------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................ 23,105,395 28,153,952 2,842,259 4,116,842
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................... (13,990,673) (11,145,100) (40,751,241) (30,874,894)
Annuity benefit payments ......................................... (8,736) (7,293) (2,202,048) (1,996,857)
Amounts transferred interdivision, and from (to)
VALIC general account ........................................... (34,222,314) (13,919,719) (18,047,475) (14,779,077)
------------ ------------- ------------ ------------
Increase (decrease) in net assets
resulting from principal transactions ........................ (25,116,328) 3,081,840 (58,158,505) (43,533,986)
------------ ------------- ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .......................... 15,501,625 (4,398,079) 42,369,413 77,970,492
NET ASSETS:
Beginning of period .............................................. 225,670,671 230,068,750 547,753,875 469,783,383
------------ ------------- ------------ ------------
End of period .................................................... 241,172,296 $ 225,670,671 $590,123,288 $547,753,875
------------ ------------- ------------ ------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ........................... 107,379,840 106,279,077 23,726,504 25,835,933
Purchase payments ................................................ 10,679,162 13,084,095 117,449 206,729
Surrenders ....................................................... (6,306,665) (5,229,338) (1,676,844) (1,549,859)
Transfers - interdivision and from (to) VALIC general account..... (16,249,038) (6,753,994) (745,734) (766,299)
------------ ------------- ------------ ------------
Total units outstanding, end of period ........................... 95,503,299 107,379,840 21,421,375 23,726,504
------------ ------------- ------------ ------------
Units outstanding, by class:
Standard units .................................................. 94,031,183 107,321,015 21,421,375 23,726,504
Enhanced units:
20 bp reduced .................................................. 522,127 58,825 -- --
40 bp reduced .................................................. 949,989 -- -- --
------------ ------------- ------------ ------------
Accumulation units end of period ................................. 95,503,299 107,379,840 21,421,375 23,726,504
------------ ------------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND -
--------------------------------
DIVISION 10B
--------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) ............................................ $ 309,409 $ 358,014
Net realized gain on investments ........................................ 5,087,126 2,895,173
Capital gains distributions from mutual funds ........................... 362,359 166,018
Net unrealized appreciation (depreciation)
of investments during the period ....................................... 2,257,759 6,394,969
----------- -----------
Increase (decrease) in net assets resulting from operations ........... 8,016,653 9,814,174
----------- -----------
PRINCIPAL TRANSACTIONS:
Purchase payments ....................................................... 152,691 204,507
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ....................................... (4,474,719) (2,153,577)
Annuity benefit payments ................................................ (371,146) (327,696)
Amounts transferred interdivision, and from (to)
VALIC general account .................................................. (554,251) (1,934,563)
----------- -----------
Increase (decrease) in net assets
resulting from principal transactions ................................ (5,247,425) (4,211,329)
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS ................................. 2,769,228 5,602,845
NET ASSETS:
Beginning of period ..................................................... 42,548,876 36,946,031
----------- -----------
End of period ........................................................... $45,318,104 $42,548,876
----------- -----------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .................................. 1,131,113 1,256,974
Purchase payments ....................................................... 3,915 6,328
Surrenders .............................................................. (115,209) (68,344)
Transfers - interdivision and from (to) VALIC general account............ (14,204) (63,845)
----------- -----------
Total units outstanding, end of period .................................. 1,005,615 1,131,113
----------- -----------
Units outstanding, by class:
Standard units ......................................................... 1,005,615 1,131,113
Enhanced units:
20 bp reduced ......................................................... -- --
40 bp reduced ......................................................... -- --
----------- -----------
Accumulation units end of period ........................................ 1,005,615 1,131,113
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ...................... $2.522643 $2.100506 $26.836368 $22.479709 $43.027665 $35.792019
Enhanced unit:
20 bp reduced ...................... 2.558263 2.125983 -- -- -- --
40 bp reduced ...................... 2.597863 -- -- -- -- --
</TABLE>
<PAGE> 499
16 FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND -
---------------------------------------------------------------
DIVISION 10C DIVISION 10D
-------------------------------- ---------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
-------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................... $ 848,688 $ 5,965,482 $ 4,562 $ 105,740
Net realized gain on investments ................................ 58,888,546 21,789,375 6,938,320 4,368,980
Capital gains distributions from mutual funds ................... 36,367,266 13,033,369 471,902 219,975
Net unrealized appreciation (depreciation)
of investments during the period .............................. 612,628,344 631,036,013 2,683,181 7,900,957
-------------- -------------- ----------- -----------
Increase in net assets resulting from operations ............ 708,732,844 671,824,239 10,097,965 12,595,652
-------------- -------------- ----------- -----------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 544,822,404 372,858,039 535,672 654,342
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (226,510,857) (130,840,043) (4,345,956) (3,879,247)
Annuity benefit payments ........................................ (262,614) (164,035) (18,611) (15,905)
Amounts transferred interdivision, and from (to)
VALIC general account ......................................... 189,528,934 112,786,439 (3,390,505) (2,514,825)
-------------- -------------- ----------- -----------
Increase (decrease) in net assets
resulting from principal transactions ...................... 507,577,867 354,640,400 (7,219,400) (5,755,635)
-------------- -------------- ----------- -----------
TOTAL INCREASE IN NET ASSETS .................................... 1,216,310,711 1,026,464,639 2,878,565 6,840,017
NET ASSETS:
Beginning of period ............................................. 3,336,792,139 2,310,327,500 56,513,044 49,673,027
-------------- -------------- ----------- -----------
End of period ................................................... 4,553,102,850 3,336,792,139 $59,391,609 $56,513,044
-------------- -------------- ----------- -----------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... 698,570,695 615,053,124 6,655,796 7,438,537
Purchase payments ............................................... 102,379,268 85,764,962 65,246 88,428
Surrenders ...................................................... (41,417,044) (29,978,801) (477,997) (521,941)
Transfers - interdivision and from (to) VALIC general account ... 37,936,626 27,731,410 (384,522) (349,228)
-------------- -------------- ----------- -----------
Total units outstanding, end of period .......................... 797,469,545 698,570,695 5,858,523 6,655,796
-------------- -------------- ----------- -----------
Units outstanding, by class:
Standard units ................................................ 766,975,696 691,680,049 5,858,523 6,655,796
Enhanced units:
20 bp reduced ............................................... 18,855,858 6,859,835 -- --
40 bp reduced ............................................... 11,637,991 30,811 -- --
-------------- -------------- ----------- -----------
Accumulation units end of period ................................ 797,469,545 698,570,695 5,858,523 6,655,796
-------------- -------------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................. 5.696582 $ 4.772052 $10.095883 $ 8.457722
Enhanced unit:
20 bp reduced ............................................... 5.830950 4.875028 -- --
40 bp reduced ............................................... 5.981762 4.991135 -- --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 500
SEPARATE ACCOUNT A 17
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC GROWTH AGSPC GROWTH & INCOME
FUND - DIVISION 15 FUND - DIVISION 16
-------------------------------- ----------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
-------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ................................... $ (11,859,802) $ (10,623,737) $ (1,798,890) $ (1,424,066)
Net realized gain on investments ............................... 65,180,424 11,720,556 14,837,619 10,494,295
Capital gains distributions from mutual funds .................. 50,296,770 51,517,534 33,787,657 20,275,426
Net unrealized appreciation (depreciation)
of investments during the period ............................. (29,390,145) 114,925,718 13,472,567 3,996,252
-------------- -------------- ------------ ------------
Increase in net assets resulting from operations ........... 74,227,247 167,540,071 60,298,953 33,341,907
-------------- -------------- ------------ ------------
PRINCIPAL TRANSACTIONS:
Purchase payments .............................................. 161,308,154 183,983,180 32,568,050 39,532,854
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................ (68,528,954) (45,145,966) (19,456,775) (11,951,930)
Annuity benefit payments ....................................... (35,876) (23,099) (6,042) (3,597)
Amounts transferred interdivision, and from (to)
VALIC general account ........................................ (161,568,773) (34,517,049) (22,008,587) (32,787,298)
-------------- -------------- ------------ ------------
Increase (decrease) in net assets
resulting from principal transactions ..................... (68,825,449) 104,297,066 (8,903,354) (5,209,971)
-------------- -------------- ------------ ------------
TOTAL INCREASE IN NET ASSETS ................................... 5,401,798 271,837,137 51,395,599 28,131,936
NET ASSETS:
Beginning of period ............................................ 1,213,260,606 941,423,469 285,227,911 257,095,975
-------------- -------------- ------------ ------------
End of period .................................................. $1,218,662,404 $1,213,260,606 $336,623,510 $285,227,911
-------------- -------------- ------------ ------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ......................... 499,326,366 453,172,490 129,550,695 132,434,555
Purchase payments .............................................. 65,108,607 82,864,073 13,413,749 19,715,398
Surrenders ..................................................... (27,017,879) (20,670,419) (7,982,974) (6,142,924)
Transfers - interdivision and from (to) VALIC general account .. (65,896,980) (16,039,778) (9,286,745) (16,456,334)
-------------- -------------- ------------ ------------
Total units outstanding, end of period ......................... 471,520,114 499,326,366 125,694,725 129,550,695
-------------- -------------- ------------ ------------
Units outstanding, by class:
Standard units ............................................... 460,108,285 494,997,997 124,329,201 129,550,695
Enhanced units:
20 bp reduced .............................................. 8,377,232 4,324,799 660,621 --
40 bp reduced .............................................. 3,034,597 3,570 704,903 --
-------------- -------------- ------------ ------------
Accumulation units end of period ............................... 471,520,114 499,326,366 125,694,725 129,550,695
-------------- -------------- ------------ ------------
<CAPTION>
AMERICAN CENTURY AMERICAN GENERAL INTERNATIONAL
ULTRA FUND - DIVISION 31 GROWTH FUND - DIVISION 33
------------------------------ ------------------------------
FOR THE FOR THE FOR THE FOR THE PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED AUGUST 26, 1998
DECEMBER 31, DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
-------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ................................... $ (6,405,426) $ (2,282,917) $ 83,486 $ --
Net realized gain on investments ............................... 5,962,303 473,963 12,371 --
Capital gains distributions from mutual funds .................. 29,663,737 30,532,354 179,573 --
Net unrealized appreciation (depreciation)
of investments during the period ............................. 227,838,963 39,033,600 2,105,762 200,750
-------------- ------------ ----------- -----------
Increase in net assets resulting from operations ........... 257,059,577 67,757,000 2,381,192 200,750
-------------- ------------ ----------- -----------
PRINCIPAL TRANSACTIONS:
Purchase payments .............................................. 209,997,538 95,865,928 407,427 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................ (30,465,801) (6,987,387) (14,716) --
Annuity benefit payments ....................................... (8,296) (1,933) -- --
Amounts transferred interdivision, and from (to)
VALIC general account ........................................ 221,997,706 86,438,332 233,728 3,650,000
-------------- ------------ ----------- -----------
Increase (decrease) in net assets
resulting from principal transactions ..................... 401,521,147 175,314,940 626,439 3,650,000
-------------- ------------ ----------- -----------
TOTAL INCREASE IN NET ASSETS ................................... 658,580,724 243,071,940 3,007,631 3,850,750
NET ASSETS:
Beginning of period ............................................ 366,840,329 123,768,389 3,850,750 --
-------------- ------------ ----------- -----------
End of period .................................................. $1,025,421,053 $366,840,329 $ 6,858,381 $ 3,850,750
-------------- ------------ ----------- -----------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ......................... 217,361,127 97,745,282 -- --
Purchase payments .............................................. 109,879,713 63,913,168 349,422 --
Surrenders ..................................................... (15,131,159) (4,133,151) (32,064) --
Transfers - interdivision and from (to) VALIC general account .. 121,450,593 59,835,828 185,196 --
-------------- ------------ ----------- -----------
Total units outstanding, end of period ......................... 433,560,274 217,361,127 502,554 --
-------------- ------------ ----------- -----------
Units outstanding, by class:
Standard units ............................................... 411,119,880 209,221,513 167,387 --
Enhanced units:
20 bp reduced .............................................. 20,827,045 8,116,612 5,641 --
40 bp reduced .............................................. 1,613,349 23,002 329,526 --
-------------- ------------ ----------- -----------
Accumulation units end of period ............................... 433,560,274 217,361,127 502,554 --
-------------- ------------ ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................ $ 2.582249 $ 2.428587 2.676995 2.201234
Enhanced unit:
20 bp reduced .............................................. 2.608476 2.448443 2.704358 --
40 bp reduced .............................................. 2.638280 2.471473 2.735261 --
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................ 2.359768 $ 1.685503 $ 1.634943 $ --
Enhanced unit:
20 bp reduced .............................................. 2.437771 1.737734 1.639279 --
40 bp reduced .............................................. 2.527648 1.798208 1.643677 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 501
18 FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AMERICAN GENERAL INTERNATIONAL AMERICAN GENERAL LARGE CAP
VALUE FUND - DIVISION 34 GROWTH FUND - DIVISION 39
------------------------------- -----------------------------
FOR THE FOR THE PERIOD FOR THE FOR THE PERIOD
YEAR ENDED AUGUST 26, 1998 YEAR ENDED AUGUST 26, 1998
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
------------ --------------- ------------ ----------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ..................................... $ 70,476 $ 5,760 $ (24,106) $ 2,093
Net realized gain on investments ................................. 50,532 -- 196,164 --
Capital gains distributions from mutual funds .................... 358,216 -- 634,398 --
Net unrealized appreciation (depreciation)
of investments during the period ................................ 2,597,347 547,276 3,810,394 695,540
------------ -------------- ------------ --------------
Increase in net assets resulting from operations ............... 3,076,571 553,036 4,616,850 697,633
------------ -------------- ------------ --------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................ 555,334 -- 9,704,453 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ........ ...................... (15,637) -- (287,336) --
Annuity benefit payments ......................................... -- -- -- --
Amounts transferred interdivision, and from (to)
VALIC general account ........................................... 330,143 3,600,000 4,199,650 2,850,000
------------ -------------- ------------ --------------
Increase in net assets
resulting from principal transactions ......................... 869,840 3,600,000 13,616,767 2,850,000
------------ -------------- ------------ --------------
TOTAL INCREASE IN NET ASSETS ..................................... 3,946,411 4,153,036 18,233,617 3,547,633
NET ASSETS:
Beginning of period .............................................. 4,153,036 -- 3,547,633 --
------------ -------------- ------------ --------------
End of period .................................................... $ 8,099,447 $ 4,153,036 $ 21,781,250 $ 3,547,633
------------ -------------- ------------ --------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ........................... -- -- -- --
Purchase payments ................................................ 390,550 -- 7,178,778 --
Surrenders ....................................................... (16,250) -- (231,027) --
Transfers - interdivision and from (to) VALIC general account .... 212,767 -- 3,181,787 --
------------ -------------- ------------ --------------
Total units outstanding, end of period ........................... 587,067 -- 10,129,538 --
------------ -------------- ------------ --------------
Units outstanding, by class:
Standard units .................................................. 337,242 -- 519,825 --
Enhanced units:
20 bp reduced .................................................. 177,255 -- 95,862 --
40 bp reduced .................................................. 72,570 -- 9,513,851 --
------------ -------------- ------------ --------------
Accumulation units end of period ................................. 587,067 -- 10,129,538 --
------------ -------------- ------------ --------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................... $ 1.915641 $ -- $ 1.667518 $ --
Enhanced unit:
20 bp reduced .................................................. 1.920710 -- 1.671932 --
40 bp reduced .................................................. 1.925869 -- 1.676417 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 502
SEPARATE ACCOUNT A 19
<TABLE>
<CAPTION>
AMERICAN GENERAL LARGE CAP AMERICAN GENERAL MID CAP GROWTH
VALUE FUND - DIVISION 40 FUND - DIVISION 37
------------------------------ ------------------------------
FOR THE FOR THE PERIOD FOR THE FOR THE PERIOD
YEAR ENDED AUGUST 26, 1998 YEAR ENDED AUGUST 26, 1998
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................... $ 45,852 $ 10,224 $ (3,196) $ --
Net realized gain on investments ................................ 63,723 -- 21,955 --
Capital gains distributions from mutual funds ................... 650,214 -- 710,827 --
Net unrealized appreciation (depreciation)
of investments during the period ............................... (552,152) 716,526 (258,735) 1,425,600
------------ --------------- ------------ ---------------
Increase in net assets resulting from operations .............. 207,637 726,750 470,851 1,425,600
------------ --------------- ------------ ---------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 554,240 -- 1,017,137 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .............................. (26,803) -- (14,137) --
Annuity benefit payments ........................................ -- -- -- --
Amounts transferred interdivision, and from (to)
VALIC general account........................................... 115,335 2,900,000 121,669 4,050,000
------------ --------------- ------------ ---------------
Increase in net assets
resulting from principal transactions ........................ 642,772 2,900,000 1,124,669 4,050,000
------------ --------------- ------------ ---------------
TOTAL INCREASE IN NET ASSETS..................................... 850,409 3,626,750 1,595,520 5,475,600
NET ASSETS:
Beginning of period ............................................. 3,626,750 -- 5,475,600 --
------------ --------------- ------------ ---------------
End of period ................................................... $ 4,477,159 $ 3,626,750 $ 7,071,120 $ 5,475,600
------------ --------------- ------------ ---------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... -- -- -- --
Purchase payments ............................................... 439,688 -- 801,847 --
Surrenders ...................................................... (29,042) -- (24,159) --
Transfers - interdivision and from (to) VALIC general account ... 92,844 -- 94,239 --
------------ --------------- ------------ ---------------
Total units outstanding, end of period .......................... 503,490 -- 871,927 --
------------ --------------- ------------ ---------------
Units outstanding, by class:
Standard units ................................................. 216,072 -- 477,094 --
Enhanced units:
20 bp reduced ................................................. 221 -- 1,244 --
40 bp reduced ................................................. 287,197 -- 393,589 --
------------ --------------- ------------ ---------------
Accumulation units end of period ................................ 503,490 -- 871,927 --
------------ --------------- ------------ ---------------
<CAPTION>
AMERICAN GENERAL MID CAP VALUE AMERICAN GENERAL SMALL CAP
FUND - DIVISION 38 GROWTH FUND - DIVISION 35
------------------------------ ------------------------------
FOR THE FOR THE PERIOD FOR THE FOR THE PERIOD
YEAR ENDED AUGUST 26, 1998 YEAR ENDED AUGUST 26, 1998
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................... $ 34,101 $ 10,079 $ (10,661) $ --
Net realized gain on investments ................................ 156,954 -- 128,821 --
Capital gains distributions from mutual funds ................... 1,894,986 115,562 1,115,791 18,373
Net unrealized appreciation (depreciation)
of investments during the period ............................... (764,242) 896,569 4,835,156 1,361,100
------------ --------------- ------------ ---------------
Increase in net assets resulting from operations .............. 1,321,799 1,022,210 6,069,107 1,379,473
------------ --------------- ------------ ---------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 1,350,999 -- 2,566,013 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .............................. (22,598) -- (102,973) --
Annuity benefit payments ........................................ -- -- -- --
Amounts transferred interdivision, and from (to)
VALIC general account........................................... 718,756 3,949,999 2,902,335 3,900,000
Increase in net assets ------------ --------------- ------------ ---------------
resulting from principal transactions ......................... 2,047,157 3,949,999 5,365,375 3,900,000
------------ --------------- ------------ ---------------
TOTAL INCREASE IN NET ASSETS...................................... 3,368,956 4,972,209 11,434,482 5,279,473
NET ASSETS:
Beginning of period ............................................. 4,972,209 -- 5,279,473 --
------------ --------------- ------------ ---------------
End of period ................................................... $ 8,341,165 $ 4,972,209 $ 16,713,955 $ 5,279,473
------------ --------------- ------------ ---------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... -- -- -- --
Purchase payments ............................................... 982,289 -- 1,718,837 --
Surrenders ...................................................... (28,013) -- (83,425) --
Transfers - interdivision and from (to) VALIC general account ... 527,305 -- 1,758,419 --
------------ --------------- ------------ ---------------
Total units outstanding, end of period .......................... 1,481,581 -- 3,393,831 --
------------ --------------- ------------ ---------------
Units outstanding, by class:
Standard units ................................................. 223,437 -- 298,665 --
Enhanced units:
20 bp reduced ................................................. 142,103 -- 119,661 --
40 bp reduced ................................................. 1,116,041 -- 2,975,505 --
------------ --------------- ------------ ---------------
Accumulation units end of period ................................ 1,481,581 -- 3,393,831 --
------------ --------------- ------------ ---------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998 1999
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit $ 1.302905 $ -- $ 1.423173 $ -- $ 1.521699
Enhanced unit:
20 bp reduced 1.306351 -- 1.426935 -- 1.525696
40 bp reduced 1.309860 -- 1.430763 -- 1.529814
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1999 1998
--------------- ------------ ------------
<S> <C> <C> <C>
Accumulation value per unit:
Standard unit $ -- $ 2.272711 $ --
Enhanced unit:
20 bp reduced -- 2.278700 --
40 bp reduced -- 2.284815 --
</TABLE>
<PAGE> 503
20 FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
DREYFUS VARIABLE INVESTMENT FUND-
AMERICAN GENERAL SMALL CAP SMALL CAP PORTFOLIO-
VALUE FUND - DIVISION 36 DIVISION 18
---------------------------- ---------------------------------
FOR THE FOR THE PERIOD FOR THE FOR THE
YEAR ENDED AUGUST 26, 1998 YEAR ENDED YEAR ENDED
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
----------- --------------- ------------ -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................... $ 55,280 $ 13,079 $ (7,408,133) $ (9,100,355)
Net realized gain on investments ................................ 6,489 -- 63,772,555 19,673,784
Capital gains distributions from mutual funds ................... 145,670 51,644 -- 15,549,964
Net unrealized appreciation (depreciation)
of investments during the period .............................. (493,258) 585,384 89,787,753 (67,338,458)
----------- ----------- ------------- -------------
Increase (decrease) in net assets
resulting from operations ................................ (285,819) 650,107 146,152,175 (41,215,065)
----------- ----------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 204,028 -- 80,558,331 136,010,701
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (1,545) -- (48,924,631) (37,151,392)
Annuity benefit payments ........................................ -- -- (17,577) (12,769)
Amounts transferred interdivision, and from (to)
VALIC general account ......................................... 54,906 3,849,999 (200,169,015) (105,448,868)
----------- ----------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ..................... 257,389 3,849,999 (168,552,892) (6,602,328)
----------- ----------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ......................... (28,430) 4,500,106 (22,400,717) (47,817,393)
NET ASSETS:
Beginning of period ............................................. 4,500,106 -- 802,006,915 849,824,308
----------- ----------- ------------- -------------
End of period ................................................... $ 4,471,676 $ 4,500,106 $ 779,606,198 $ 802,006,915
----------- ----------- ------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... -- -- 474,215,229 479,851,525
Purchase payments ............................................... 206,905 -- 45,083,201 78,837,263
Surrenders ...................................................... (12,171) -- (28,155,056) (22,827,377)
Transfers - interdivision and from (to) VALIC general account ... 52,250 -- (113,572,602) (61,646,182)
----------- ----------- ------------- -------------
Total units outstanding, end of period .......................... 246,984 -- 377,570,772 474,215,229
----------- ----------- ------------- -------------
Units outstanding, by class:
Standard units ................................................ 166,013 -- 351,855,473 474,215,229
Enhanced units:
20 bp reduced ............................................... 232 -- 2,046,085 --
40 bp reduced ............................................... 80,739 -- 23,669,214 --
----------- ----------- ------------- -------------
Accumulation units end of period ................................ 246,984 -- 377,570,772 474,215,229
----------- ----------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
----------- --------------- ------------ -------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................ $1.080558 $ -- $ 2.059431 $ 1.690786
Enhanced unit:
20 bp reduced .............................................. 1.083393 -- 2.089527 --
40 bp reduced .............................................. 1.086316 -- 2.128984 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 504
SEPARATE ACCOUNT A 21
<TABLE>
<CAPTION>
EVERGREEN GROWTH AND INCOME EVERGREEN SMALL CAP VALUE
FUND-DIVISION 56 FUND-DIVISION 55
------------------------------- -----------------------------
FOR THE PERIOD FOR THE FOR THE PERIOD FOR THE
JANUARY 4, 1999 YEAR ENDED JANUARY 4, 1999 YEAR ENDED
TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
--------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................... $ (5) $ -- $ -- $ --
Net realized gain on investments ................................ 31 -- -- --
Capital gains distributions from mutual funds ................... 7 -- -- --
Net unrealized appreciation (depreciation)
of investments during the period .............................. 370 -- --
--------------- ------------- --------------- -------------
Increase (decrease) in net assets
resulting from operations ... ............................ 403 -- -- --
--------------- ------------- --------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 5,841 -- 242 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. -- -- -- --
Annuity benefit payments ........................................ -- -- -- --
Amounts transferred interdivision, and from (to)
VALIC general account ......................................... -- -- -- --
--------------- ------------- --------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ..................... 5,841 -- 242 --
--------------- ------------- --------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ......................... 6,244 -- 242 --
NET ASSETS:
Beginning of period ............................................. -- -- -- --
--------------- ------------- --------------- -------------
End of period ................................................... $ 6,244 $ -- $ 242 $ --
--------------- ------------- --------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... -- -- -- --
Purchase payments ............................................... 5,510 -- 244 --
Surrenders ...................................................... -- -- -- --
Transfers - interdivision and from (to) VALIC general account ... (9) -- -- --
--------------- ------------- --------------- -------------
Total units outstanding, end of period .......................... 5,501 -- 244 --
--------------- ------------- --------------- -------------
Units outstanding, by class:
Standard units ................................................ 175 -- 244 --
Enhanced units:
20 bp reduced ............................................... 5,326 -- -- --
40 bp reduced ............................................... -- -- -- --
--------------- ------------- --------------- -------------
Accumulation units end of period ................................ 5,501 -- 244 --
--------------- ------------- --------------- -------------
</TABLE>
<TABLE>
<CAPTION>
EVERGREEN VALUE DREYFUS FOUNDERS GROWTH
FUND-DIVISION 57 FUND-DIVISION 30
------------------------------- -------------------------------
FOR THE PERIOD FOR THE FOR THE FOR THE
JANUARY 4, 1999 YEAR ENDED YEAR ENDED YEAR ENDED
TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
--------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................... $ 4 $ -- $ (5,884,618) $ (2,702,478)
Net realized gain on investments ................................ -- -- 4,207,339 669,679
Capital gains distributions from mutual funds ................... 262 -- 127,949,776 21,151,616
Net unrealized appreciation (depreciation)
of investments during the period .............................. (319) -- 95,948,371 42,627,883
--------------- ------------- --------------- -------------
Increase (decrease) in net assets
resulting from operations ................................ (53) -- 222,220,868 61,746,700
--------------- ------------- --------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 4,435 -- 179,626,688 117,393,497
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. -- -- (27,384,768) (9,478,330)
Annuity benefit payments ........................................ -- -- (2,237) (1,096)
Amounts transferred interdivision, and from (to)
VALIC general account ......................................... 3 -- 88,107,501 72,791,918
--------------- ------------- --------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ..................... 4,438 -- 240,347,184 180,705,989
--------------- ------------- --------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ......................... 4,385 -- 462,568,052 242,452,689
NET ASSETS:
Beginning of period ............................................. -- -- 412,920,920 170,468,231
--------------- ------------- --------------- -------------
End of period ................................................... $ 4,385 $ -- $ 875,488,972 $ 412,920,920
--------------- ------------- --------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... -- -- 258,511,009 132,167,162
Purchase payments ............................................... 4,240 -- 100,769,102 80,460,723
Surrenders ...................................................... -- -- (14,640,042) (6,588,832)
Transfers - interdivision and from (to) VALIC general account ... -- -- 52,174,839 52,471,956
--------------- ------------- --------------- -------------
Total units outstanding, end of period .......................... 4,240 -- 396,814,908 258,511,009
--------------- ------------- --------------- -------------
Units outstanding, by class:
Standard units ................................................ 4,240 -- 357,129,398 250,777,959
Enhanced units:
20 bp reduced ............................................... -- -- 16,160,159 7,720,189
40 bp reduced ............................................... -- -- 23,525,351 12,861
--------------- ------------- --------------- -------------
Accumulation units end of period ................................ 4,240 -- 396,814,908 258,511,009
--------------- ------------- --------------- -------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
--------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................. $ 1.132919 $ -- $ 0.995515 $ --
Enhanced unit:
20 bp reduced ............................................... 1.135195 -- -- --
40 bp reduced ............................................... -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
--------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................. $ 1.034113 $ -- $ 2.196620 $ 1.595913
Enhanced unit:
20 bp reduced ............................................... -- -- 2.252548 1.633282
40 bp reduced ............................................... -- -- 2.316600 1.676366
</TABLE>
<PAGE> 505
22 FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
NEUBERGER BERMAN PUTNAM GLOBAL GROWTH
GUARDIAN TRUST-DIVISION 29 FUND - DIVISION 28
---------------------------- ------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................. $ (148,588) $ (316,186) $ (2,657,686) $ (417,807)
Net realized gain (loss) on investments ....................... 232,115 447,267 4,532,574 107,190
Capital gains distributions from mutual funds ................. 10,764,888 5,112,104 43,772,448 4,089,731
Net unrealized appreciation (depreciation)
of investments during the period ............................ (6,452,929) (5,621,588) 131,823,273 21,600,190
------------- ------------- ------------- -------------
Increase (decrease) in net assets resulting from
operations. ........................................... 4,395,486 (378,403) 177,470,609 25,379,304
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................. 12,562,405 18,727,026 77,466,315 45,226,423
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ........................... (3,739,131) (1,971,281) (10,501,490) (3,310,436)
Annuity benefit payments ...................................... (67) -- (4,995) (2,617)
Amounts transferred interdivision, and from (to)
VALIC general account ........................................ (15,092,015) (1,314,316) 89,335,469 36,967,959
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ................. (6,268,808) 15,441,429 156,295,299 78,881,329
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ....................... (1,873,322) 15,063,026 333,765,908 104,260,633
NET ASSETS:
Beginning of period ........................................... 61,369,849 46,306,823 163,095,041 58,834,408
------------- ------------- ------------- -------------
End of period ................................................. $ 59,496,527 $ 61,369,849 $ 496,860,949 $ 163,095,041
============= ============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ........................ 46,274,070 35,406,663 107,627,792 49,548,732
Purchase payments ............................................. 8,823,454 13,737,161 45,014,503 32,447,084
Surrenders .................................................... (2,554,943) (1,683,029) (5,810,559) (2,408,897)
Transfers-interdivision and from (to) VALIC general account.... (10,782,486) (1,186,725) 53,893,181 28,040,873
------------- ------------- ------------- -------------
Total units outstanding, end of period ........................ 41,760,095 46,274,070 200,724,917 107,627,792
============= ============= ============= =============
Units outstanding, by class:
Standard units .............................................. 40,241,067 45,261,146 181,916,991 101,468,260
Enhanced units:
20 bp reduced ............................................. 1,406,229 1,012,671 11,313,375 6,153,771
40 bp reduced ............................................. 112,799 253 7,494,551 5,761
------------- ------------- ------------- -------------
Accumulation units end of period .............................. 41,760,095 46,274,070 200,724,917 107,627,792
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ............................................... $ 1.422424 $ 1.324970 $ 2.465895 $ 1.512865
Enhanced unit:
20 bp reduced ............................................. 1.471857 1.368269 2.530785 1.549587
40 bp reduced ............................................. 1.528673 1.418252 2.603644 1.591007
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 506
SEPARATE ACCOUNT A 23
<TABLE>
<CAPTION>
PUTNAM NEW OPPORTUNITIES FUND- PUTNAM OTC & EMERGING GROWTH
DIVISION 26 FUND - DIVISION 27
------------------------------- ------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
-------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................. $ (5,793,432) $ (2,691,328) $ (1,934,231) $ 3,286,141
Net realized gain (loss) on investments ....................... 5,405,004 872,455 9,704,876 (332,944)
Capital gains distributions from mutual funds ................. 73,606,083 12,546,729 20,649,440 --
Net unrealized appreciation (depreciation)
of investments during the period ............................ 313,953,044 53,605,222 182,753,857 9,278,020
--------------- --------------- -------------- -------------
Increase (decrease) in net assets resulting from
operations ............................................ 387,170,699 64,333,078 211,173,942 12,231,217
--------------- --------------- -------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................. 156,130,519 108,017,017 40,430,971 36,165,527
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ........................... (25,813,365) (8,784,234) (8,888,544) (4,499,407)
Annuity benefit payments ...................................... (896) (575) (2,730) (2,072)
Amounts transferred interdivision, and from (to)
VALIC general account ........................................ 86,572,168 84,011,090 46,636,113 960,600
--------------- --------------- -------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ................. 216,888,426 183,243,298 78,175,810 32,624,648
--------------- --------------- -------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ....................... 604,059,125 247,576,376 289,349,752 44,855,865
NET ASSETS:
Beginning of period ........................................... 412,412,954 164,836,578 142,311,995 97,456,130
--------------- --------------- -------------- -------------
End of period ................................................. $ 1,016,472,079 $ 412,412,954 $ 431,661,747 $ 142,311,995
=============== =============== ============== =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ........................ 291,260,021 143,395,066 132,559,704 99,785,041
Purchase payments ............................................. 96,163,717 85,839,361 28,703,809 36,257,228
Surrenders .................................................... (15,044,221) (6,337,162) (6,296,909) (4,704,400)
Transfers-interdivision and from (to) VALIC general account ... 54,303,091 68,362,756 23,934,549 1,221,835
--------------- --------------- -------------- -------------
Total units outstanding, end of period ........................ 426,682,608 291,260,021 178,901,153 132,559,704
=============== =============== ============== =============
Units outstanding, by class:
Standard units .............................................. 386,064,440 280,523,297 170,725,977 129,463,792
Enhanced units:
20 bp reduced ............................................. 19,231,737 10,725,927 6,570,152 3,092,839
40 bp reduced ............................................. 21,386,431 10,797 1,605,024 3,073
--------------- --------------- -------------- -------------
Accumulation units end of period .............................. 426,682,608 291,260,021 178,901,153 132,559,704
=============== =============== ============== =============
</TABLE>
<TABLE>
<CAPTION>
SCUDDER GROWTH AND T. ROWE PRICE SMALL-CAP
INCOME FUND - DIVISION 21 STOCK FUND - DIVISION 51
------------------------------- -------------------------------
FOR THE FOR THE FOR THE FOR THE PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 22, 1998
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
-------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................. $ 2,202,593 $ 2,680,972 $ (20,554) $ --
Net realized gain (loss) on investments ....................... 3,895,314 1,067,960 40,991 --
Capital gains distributions from mutual funds ................. 6,380,872 17,737,903 320,107 --
Net unrealized appreciation (depreciation)
of investments during the period ............................ (283,526) (15,926,329) 1,008,645 --
--------------- --------------- -------------- -------------
Increase (decrease) in net assets resulting from
operations ............................................ 12,195,253 5,560,506 1,349,189 --
--------------- --------------- -------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................. 54,245,118 79,800,185 5,952,689 139
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ........................... (13,753,656) (7,670,739) (196,858) --
Annuity benefit payments ...................................... (4,562) (3,718) -- --
Amounts transferred interdivision, and from (to)
VALIC general account ........................................ (53,742,268) 34,897,873 1,652,855 --
--------------- --------------- -------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ................. (13,255,368) 107,023,601 7,408,686 139
--------------- --------------- -------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ....................... (1,060,115) 112,584,107 8,757,875 139
=============== =============== ============== =============
NET ASSETS:
Beginning of period ........................................... 247,968,508 135,384,401 139 --
--------------- --------------- -------------- -------------
End of period ................................................. $ 246,908,393 $ 247,968,508 $ 8,758,014 $ 139
=============== =============== ============== =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ........................ 164,312,979 94,225,984 122 --
Purchase payments ............................................. 34,048,172 51,892,138 5,428,689 122
Surrenders .................................................... (8,263,310) (5,008,156) (169,605) --
Transfers-interdivision and from (to) VALIC general account ... (34,611,633) 23,203,013 1,484,376 --
--------------- --------------- -------------- -------------
Total units outstanding, end of period ........................ 155,486,208 164,312,979 6,743,582 122
=============== =============== ============== =============
Units outstanding, by class:
Standard units .............................................. 146,888,390 159,815,811 821,977 122
Enhanced units:
20 bp reduced .............................................. 6,367,461 4,494,004 249,245 --
40 bp reduced .............................................. 2,230,357 3,164 5,672,360 --
--------------- --------------- -------------- -------------
Accumulation units end of period .............................. 155,486,208 164,312,979 6,743,582 122
=============== =============== ============== =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
--------------- --------------- -------------- -------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ............................................... $ 2.376261 $ 1.415175 $ 2.408872 $ 1.072660
Enhanced unit:
20 bp reduced ............................................. 2.414279 1.434946 2.471391 1.098295
40 bp reduced ............................................. 2.459834 1.459115 2.542500 1.127653
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
--------------- --------------- -------------- -------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ............................................... $ 1.584519 $ 1.507724 $ 1.293095 $ 1.141049
Enhanced unit:
20 bp reduced ............................................. 1.623952 1.542160 1.296356 --
40 bp reduced ............................................. 1.670148 1.582856 1.299637 --
</TABLE>
<PAGE> 507
24 FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
TEMPLETON FOREIGN TEMPLETON INTERNATIONAL
FUND - DIVISION 32 FUND - DIVISION 20
------------------------------ ------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ........................................... $ 7,554,809 $ 3,763,468 $ 11,247,994 $ 7,944,373
Net realized gain (loss) on investments ......................... (2,951,879) (1,076,896) 48,058,679 52,533,310
Capital gains distributions from mutual funds ................... 2,706,922 17,280,633 71,597,060 31,903,839
Net unrealized appreciation (depreciation)
of investments during the period .............................. 80,764,072 (34,315,820) 22,890,344 (37,039,574)
------------- ------------- ------------- -------------
Increase (decrease) in net assets resulting from
operations ................................................ 88,073,924 (14,348,615) 153,794,077 55,341,948
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 56,633,360 72,575,285 86,045,632 114,632,129
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (13,184,454) (7,939,318) (46,576,624) (35,093,007)
Annuity benefit payments ........................................ (2,321) (1,991) (11,559) (9,179)
Amounts transferred interdivision, and from (to)
VALIC general account ......................................... (11,673,466) (12,669,089) (143,595,363) (95,114,875)
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ..................... 31,773,119 51,964,887 (104,137,914) (15,584,932)
------------- ------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS .................................... 119,847,043 37,616,272 49,656,163 39,757,016
NET ASSETS:
Beginning of period ............................................. 218,468,273 180,852,001 769,496,203 729,739,187
------------- ------------- ------------- -------------
End of period ................................................... $ 338,315,316 $ 218,468,273 $ 819,152,366 $ 769,496,203
------------- ------------- ------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... 204,065,916 159,201,107 452,419,089 463,174,350
Purchase payments ............................................... 44,888,381 63,265,244 46,775,532 65,837,726
Surrenders ...................................................... (9,883,393) (7,600,467) (25,556,432) (21,321,029)
Transfers - interdivision and from (to) VALIC general account ... (10,739,081) (10,799,968) (79,846,982) (55,271,958)
------------- ------------- ------------- -------------
Total units outstanding, end of period .......................... 228,331,823 204,065,916 393,791,207 452,419,089
------------- ------------- ------------- -------------
Units outstanding, by class:
Standard units ................................................ 219,168,378 198,626,024 372,176,780 452,419,089
Enhanced units:
20 bp reduced ............................................... 8,660,425 5,437,288 2,084,490 --
40 bp reduced ............................................... 503,020 2,604 19,529,937 --
------------- ------------- ------------- -------------
Accumulation units end of period ................................ 228,331,823 204,065,916 393,791,207 452,419,089
------------- ------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................. $ 1.479830 $ 1.069704 $ 2.076148 $ 1.700398
Enhanced unit:
20 bp reduced ............................................... 1.517785 1.094954 2.105759 --
40 bp reduced ............................................... 1.560956 1.123840 2.138370 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 508
SEPARATE ACCOUNT A 25
<TABLE>
<CAPTION>
VANGUARD WINDSOR II AMERICAN GENERAL BALANCED
FUND - DIVISION 24 FUND - DIVISION 42
------------------------------ -------------------------------
FOR THE FOR THE FOR THE FOR THE PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED AUGUST 26, 1998
DECEMBER 31, DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ........................................... $ 8,388,243 $ 5,622,515 $ 188,495 $ 29,084
Net realized gain (loss) on investments ......................... 6,166,843 1,366,076 30,618 --
Capital gains distributions from mutual funds ................... 67,184,211 51,898,120 432,947 34,051
Net unrealized appreciation (depreciation)
of investments during the period .............................. (144,035,946) 278,987 350,211 805,536
------------- ------------- ------------- -------------
Increase (decrease) in net assets resulting from operations.. (62,296,649) 59,165,698 1,002,271 868,671
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 213,954,582 172,075,011 1,574,236 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (40,354,240) (18,029,126) (60,039) --
Annuity benefit payments ........................................ (9,743) (6,802) -- --
Amounts transferred interdivision, and from (to)
VALIC general account ......................................... (29,853,674) 162,813,002 1,582,048 5,000,000
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ..................... 143,736,925 316,852,085 3,096,245 5,000,000
------------- ------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS .................................... 81,440,276 376,017,783 4,098,516 5,868,671
NET ASSETS:
Beginning of period ............................................. 651,414,982 275,397,199 5,868,671 --
------------- ------------- ------------- -------------
End of period ................................................... $ 732,855,258 $ 651,414,982 $ 9,967,187 $ 5,868,671
------------- ------------- ------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... 386,567,704 187,929,868 -- --
Purchase payments ............................................... 122,755,122 105,145,249 1,250,285 --
Surrenders ...................................................... (22,363,367) (10,145,505) (58,555) --
Transfers - interdivision and from (to) VALIC general account ... (20,680,140) 103,638,092 1,277,373 --
------------- ------------- ------------- -------------
Total units outstanding, end of period .......................... 466,279,319 386,567,704 2,469,103 --
------------- ------------- ------------- -------------
Units outstanding, by class:
Standard units ................................................ 426,529,299 372,737,595 461,870 --
Enhanced units:
20 bp reduced ............................................... 20,846,053 13,800,156 38,339 --
40 bp reduced ............................................... 18,903,967 29,953 1,968,894 --
------------- ------------- ------------- -------------
Accumulation units end of period ................................ 466,279,319 386,567,704 2,469,103 --
------------- ------------- ------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
VANGUARD WELLINGTON
FUND-DIVISION 25
------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income ........................................... $ 14,109,155 $ 8,146,899
Net realized gain (loss) on investments ......................... 1,861,183 453,710
Capital gains distributions from mutual funds ................... 28,847,888 30,281,535
Net unrealized appreciation (depreciation)
of investments during the period .............................. (30,879,706) (13,016,167)
------------- -------------
Increase (decrease) in net assets resulting from ............ 13,938,520 25,865,977
------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 149,843,118 128,896,516
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (29,503,291) (11,075,983)
Annuity benefit payments ........................................ (4,939) (1,770)
Amounts transferred interdivision, and from (to)
VALIC general account ......................................... 29,260,803 106,781,378
------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ..................... 149,595,691 224,600,141
------------- -------------
TOTAL INCREASE IN NET ASSETS .................................... 163,534,211 250,466,118
NET ASSETS:
Beginning of period ............................................. 406,510,665 156,044,547
------------- -------------
End of period ................................................... $ 570,044,876 $ 406,510,665
------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... 273,485,784 116,429,781
Purchase payments ............................................... 96,236,923 87,356,196
Surrenders ...................................................... (18,147,782) (6,659,976)
Transfers - interdivision and from (to) VALIC general account ... 19,135,718 76,359,783
------------- -------------
Total units outstanding, end of period .......................... 370,710,643 273,485,784
------------- -------------
Units outstanding, by class:
Standard units ................................................ 328,701,408 253,840,498
Enhanced units:
20 bp reduced ............................................... 28,195,817 19,636,072
40 bp reduced ............................................... 13,813,418 9,214
------------- -------------
Accumulation units end of period ................................ 370,710,643 273,485,784
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................. $ 1.566008 $ 1.683226 $ 1.323103 $ --
Enhanced unit:
20 bp reduced ............................................... 1.606241 1.723020 1.326598 --
40 bp reduced ............................................... 1.653581 1.770257 1.330160 --
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------- -------------
<S> <C> <C>
Accumulation value per unit:
Standard unit ................................................. $ 1.528992 $ 1.482836
Enhanced unit:
20 bp reduced ............................................... 1.580569 1.529797
40 bp reduced ............................................... 1.641601 1.585688
</TABLE>
<PAGE> 509
26 FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS AGSPC CAPITAL CONSERVATION FUND -
--------------------------------------------------------
DIVISION 1 DIVISION 7
--------------------------- ---------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income .............................................. $ 314,033 $ 338,175 $ 3,026,245 $ 3,124,808
Net realized gain (loss) on investments ............................ (76,164) 12,194 8,827 413,199
Capital gains distributions from mutual funds ...................... -- -- -- --
Net unrealized appreciation (depreciation)
of investments during the period ................................. (326,155) 35,832 (3,853,099) (35,856)
----------- ----------- ----------- -----------
Increase (decrease) in net assets resulting from operations .... (88,286) 386,201 (818,027) 3,502,151
----------- ----------- ----------- -----------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................. 28,773 146,532 5,665,099 7,027,648
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ................................ (602,665) (562,370) (5,161,343) (3,833,561)
Annuity benefit payments ........................................... (539) (455) -- --
Amounts transferred interdivision, and from (to)
VALIC general account ............................................ (433,773) (97,641) (8,133,261) (2,143,426)
----------- ----------- ----------- -----------
Increase (decrease) in net assets
resulting from principal transactions ........................ (1,008,204) (513,934) (7,629,505) 1,050,661
----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................ (1,096,490) (127,733) (8,447,532) 4,552,812
NET ASSETS:
Beginning of period ................................................ 6,299,793 6,427,526 59,971,540 55,418,728
----------- ----------- ----------- -----------
End of period ...................................................... $ 5,203,303 $ 6,299,793 $51,524,008 $59,971,540
----------- ----------- ----------- -----------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ............................. 1,689,443 1,831,961 28,751,662 28,242,598
Purchase payments .................................................. 7,625 40,472 2,709,678 3,402,874
Surrenders ......................................................... (163,729) (155,629) (2,465,503) (1,879,505)
Transfers - interdivision and from (to) VALIC general account ...... (117,926) (27,361) (3,955,874) (1,014,305)
----------- ----------- ----------- -----------
Total units outstanding, end of period ............................. 1,415,413 1,689,443 25,039,963 28,751,662
----------- ----------- ----------- -----------
Units outstanding, by class:
Standard units ................................................... 1,415,413 1,689,443 24,749,727 28,751,662
Enhanced units:
20 bp reduced .................................................. -- -- 95,480 --
40 bp reduced .................................................. -- -- 194,756 --
----------- ----------- ----------- -----------
Accumulation units end of period ................................... 1,415,413 1,689,443 25,039,963 28,751,662
----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit .................................................... $3.673180 $3.726168 $2.056559 $2.085846
Enhanced unit:
20 bp reduced .................................................. -- -- 2.112183 --
40 bp reduced .................................................. -- -- 2.172271 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 510
SEPARATE ACCOUNT A 27
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
AGSPC GOVERNMENT SECURITIES
FUND - DIVISION 8
------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income .............................................. $ 4,586,896 $ 4,468,159
Net realized gain (loss) on investments ............................ 661,487 1,352,903
Capital gains distributions from mutual funds ...................... -- --
Net unrealized appreciation (depreciation)
of investments during the period ................................. (9,319,026) 1,437,930
------------- -------------
Increase (decrease) in net assets resulting from operations .... (4,070,643) 7,258,992
------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................. 11,734,225 12,902,909
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ................................ (9,010,978) (5,395,424)
Annuity benefit payments ........................................... -- --
Amounts transferred interdivision, and from (to)
VALIC general account ............................................ (18,810,222) 10,528,632
------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ........................ (16,086,975) 18,036,117
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................ (20,157,618) 25,295,109
NET ASSETS:
Beginning of period ................................................ 113,462,397 88,167,288
------------- -------------
End of period ...................................................... $ 93,304,779 $ 113,462,397
------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ............................. 53,729,671 45,034,894
Purchase payments .................................................. 5,561,118 6,558,071
Surrenders ......................................................... (4,281,237) (2,679,928)
Transfers - interdivision and from (to) VALIC general account ...... (9,134,505) 4,816,634
------------- -------------
Total units outstanding, end of period ............................. 45,875,047 53,729,671
------------- -------------
Units outstanding, by class:
Standard units ................................................... 45,292,728 53,729,671
Enhanced units:
20 bp reduced .................................................. 243,537 --
40 bp reduced .................................................. 338,782 --
------------- -------------
Accumulation units end of period ................................... 45,875,047 53,729,671
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS AGSPC INTERNATIONAL
GOVERNMENT BOND
FUND - DIVISION 13
------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income .............................................. $ 3,776,325 $ 1,997,004
Net realized gain (loss) on investments ............................ 1,059,581 (1,068,211)
Capital gains distributions from mutual funds ...................... 103,421 872,765
Net unrealized appreciation (depreciation)
of investments during the period ................................. (16,515,559) 21,926,900
------------- -------------
Increase (decrease) in net assets resulting from operations .... (11,576,232) 23,728,458
------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................. 21,815,358 25,413,792
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ................................ (9,363,283) (7,785,118)
Annuity benefit payments ........................................... (3,034) (2,691)
Amounts transferred interdivision, and from (to)
VALIC general account ............................................ (22,744,405) (38,345,989)
------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ........................ (10,295,364) (20,720,006)
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................ (21,871,596) 3,008,452
NET ASSETS:
Beginning of period ................................................ 169,208,209 166,199,757
------------- -------------
End of period ...................................................... $ 147,336,613 $ 169,208,209
------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ............................. 97,883,538 111,480,591
Purchase payments .................................................. 13,082,135 16,433,799
Surrenders ......................................................... (5,520,000) (5,105,973)
Transfers - interdivision and from (to) VALIC general account ...... (13,941,554) (24,924,879)
------------- -------------
Total units outstanding, end of period ............................. 91,504,119 97,883,538
------------- -------------
Units outstanding, by class:
Standard units ................................................... 90,136,603 97,473,851
Enhanced units:
20 bp reduced .................................................. 1,058,856 408,156
40 bp reduced .................................................. 308,660 1,531
------------- -------------
Accumulation units end of period ................................... 91,504,119 97,883,538
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
AMERICAN GENERAL CORE BOND
FUND - DIVISION 58
-------------------------------
FOR THE FOR THE PERIOD
YEAR ENDED AUGUST 26, 1998
DECEMBER 31, TO DECEMBER 31,
1999 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income .............................................. $ 320,982 $ 50,247
Net realized gain (loss) on investments ............................ (446) --
Capital gains distributions from mutual funds ...................... -- 16,291
Net unrealized appreciation (depreciation)
of investments during the period ................................. (380,782) 95,397
------------- -------------
Increase (decrease) in net assets resulting from operations .... (60,246) 161,935
------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................. 64,222 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ................................ (8) --
Annuity benefit payments ........................................... -- --
Amounts transferred interdivision, and from (to)
VALIC general account ............................................ 2,477 5,000,001
------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ........................ 66,691 5,000,001
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................ 6,445 5,161,936
NET ASSETS:
Beginning of period ................................................ 5,161,936 --
------------- -------------
End of period ...................................................... $ 5,168,381 $ 5,161,936
------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ............................. -- --
Purchase payments .................................................. 62,747 --
Surrenders ......................................................... (8) --
Transfers - interdivision and from (to) VALIC general account ...... 2,310 --
------------- -------------
Total units outstanding, end of period ............................. 65,049 --
------------- -------------
Units outstanding, by class:
Standard units ................................................... 54,349 --
Enhanced units:
20 bp reduced .................................................. 10,700 --
40 bp reduced .................................................. -- --
------------- -------------
Accumulation units end of period ................................... 65,049 --
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
AMERICAN GENERAL DOMESTIC BOND
FUND - DIVISION 43
------------------------------
FOR THE FOR THE PERIOD
YEAR ENDED AUGUST 26, 1998
DECEMBER 31, TO DECEMBER 31,
1999 1998
------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income .............................................. $ 98,906 $ 14,978
Net realized gain (loss) on investments ............................ (7,296) --
Capital gains distributions from mutual funds ...................... 36 15,898
Net unrealized appreciation (depreciation)
of investments during the period ................................. (139,402) 28,692
------------- -------------
Increase (decrease) in net assets resulting from operations .... (47,756) 59,568
------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................. 623,941 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ................................ (1,682) --
Annuity benefit payments ........................................... -- --
Amounts transferred interdivision, and from (to)
VALIC general account ............................................ (51,023) 1,250,000
------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ........................ 571,236 1,250,000
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................ 523,480 1,309,568
NET ASSETS:
Beginning of period ................................................ 1,309,568 --
------------- -------------
End of period ...................................................... $ 1,833,048 $ 1,309,568
------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ............................. -- --
Purchase payments .................................................. 637,229 --
Surrenders ......................................................... (29,632) --
Transfers - interdivision and from (to) VALIC general account ...... (48,322) --
------------- -------------
Total units outstanding, end of period ............................. 559,275 --
------------- -------------
Units outstanding, by class:
Standard units ................................................... 188,580 --
Enhanced units:
20 bp reduced .................................................. -- --
40 bp reduced .................................................. 370,695 --
------------- -------------
Accumulation units end of period ................................... 559,275 --
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................... $ 2.032753 $ 2.111727 $ 1.609098 $ 1.728006
Enhanced unit:
20 bp reduced ................. 2.087744 -- 1.634588 1.751922
40 bp reduced ................. 2.147126 -- 1.661837 1.777571
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................... $ 1.009692 $ -- $ 1.004631 $ --
Enhanced unit:
20 bp reduced ................. 1.012353 -- -- --
40 bp reduced ................. -- -- 1.009996 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 511
28 FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AMERICAN GENERAL
HIGH YIELD BOND AMERICAN GENERAL STRATEGIC BOND
FUND - DIVISION 60 FUND - DIVISION 59
---------------------------- ----------------------------
FOR THE FOR THE PERIOD FOR THE FOR THE PERIOD
YEAR ENDED AUGUST 26, 1998 YEAR ENDED AUGUST 26, 1998
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ....................................... $ 491,161 $ 92,262 $ 414,198 $ 69,000
Net realized gain (loss) on investments ............................ (357) -- 7 --
Capital gains distributions from mutual funds ...................... -- -- -- 11,064
Net unrealized appreciation (depreciation)
of investments during the period ................................. (333,976) 189,911 (211,104) 185,469
----------- ----------- ----------- -----------
Increase (decrease) in net assets resulting from operations ... 156,828 282,173 203,101 265,533
----------- ----------- ----------- -----------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................. 173,814 -- 33,916 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ................................ (1,458) -- (134) --
Annuity benefit payments ........................................... -- -- -- --
Amounts transferred interdivision, and from (to)
VALIC general account ........................................... (24,004) 5,000,000 4,091 4,999,999
----------- ----------- ----------- -----------
Increase in net assets
resulting from principal transactions ....................... 148,352 5,000,000 37,873 4,999,999
----------- ----------- ----------- -----------
TOTAL INCREASE IN NET ASSETS ....................................... 305,180 5,282,173 240,974 5,265,532
NET ASSETS:
Beginning of period ................................................ 5,282,173 -- 5,265,532 --
----------- ----------- ----------- -----------
End of period ...................................................... $ 5,587,353 $ 5,282,173 $ 5,506,506 $ 5,265,532
----------- ----------- ----------- -----------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ............................. -- -- -- --
Purchase payments .................................................. 163,306 -- 31,684 --
Surrenders ......................................................... (1,372) -- (125) --
Transfers - interdivision and from (to) VALIC general account ...... (22,704) -- 3,831 --
----------- ----------- ----------- -----------
Total units outstanding, end of period ............................. 139,230 -- 35,390 --
----------- ----------- ----------- -----------
Units outstanding, by class:
Standard units .................................................. 136,423 -- 2,324 --
Enhanced units:
20 bp reduced ................................................. 2,397 -- -- --
40 bp reduced ................................................. 410 -- 33,066 --
----------- ----------- ----------- -----------
Accumulation units end of period ................................... 139,230 -- 35,390 --
----------- ----------- ----------- -----------
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................... $ 1.075994 $ -- $ 1.081981 $ --
Enhanced unit:
20 bp reduced
40 bp reduced ................................................. 1.078842 -- -- --
1.081775 -- 1.087771 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 512
SEPARATE ACCOUNT A 29
<TABLE>
<CAPTION>
VANGUARD LONG-TERM VANGUARD LONG-TERM
CORPORATE FUND - DIVISION 22 TREASURY FUND - DIVISION 23
---------------------------------- ----------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ......................... $ 3,751,628 $ 2,052,614 $ 7,007,754 $ 2,857,159
Net realized gain (loss) on investments .............. (398,632) 136,212 (687,054) 1,195,397
Capital gains distributions from mutual funds ........ 410,483 1,044,043 1,589,174 --
Net unrealized appreciation (depreciation)
of investments during the period ................... (8,721,370) (64,200) (21,800,390) 2,611,560
--------------- --------------- --------------- ---------------
Increase (decrease) in net assets resulting
from operations ............................... (4,957,891) 3,168,669 (13,890,516) 6,664,116
--------------- --------------- --------------- ---------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................... 20,898,993 18,953,737 46,110,281 30,970,739
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .................. (3,914,976) (1,608,861) (8,715,834) (2,748,295)
Annuity benefit payments ............................. (2,439) -- (761) (813)
Amounts transferred interdivision, and from (to)
VALIC general account ............................. (3,549,583) 19,011,058 (436,765) 60,728,245
--------------- --------------- --------------- ---------------
Increase in net assets
resulting from principal transactions ......... 13,431,995 36,355,934 36,956,921 88,949,876
--------------- --------------- --------------- ---------------
TOTAL INCREASE IN NET ASSETS ......................... 8,474,104 39,524,603 23,066,405 95,613,992
NET ASSETS:
Beginning of period .................................. 59,964,652 20,440,049 119,252,206 23,638,214
--------------- --------------- --------------- ---------------
End of period ........................................ $ 68,438,756 $ 59,964,652 $ 142,318,611 $ 119,252,206
--------------- --------------- --------------- ---------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ............... 47,072,573 17,371,407 90,363,929 20,041,920
Purchase payments .................................... 16,695,613 15,098,601 35,729,706 23,916,542
Surrenders ........................................... (3,079,946) (1,333,865) (6,580,094) (1,937,227)
Transfers - interdivision and from (to) VALIC
general account ................................... (3,137,264) 15,936,430 (365,799) 48,342,694
--------------- --------------- --------------- ---------------
Total units outstanding, end of period ............... 57,550,976 47,072,573 119,147,742 90,363,929
--------------- --------------- --------------- ---------------
Units outstanding, by class:
Standard units .................................... 49,616,245 44,122,646 110,102,115 86,673,300
Enhanced units:
20 bp reduced ................................... 4,060,325 2,949,044 7,578,682 3,682,809
40 bp reduced ................................... 3,874,406 883 1,466,945 7,820
--------------- --------------- --------------- ---------------
Accumulation units end of period ..................... 57,550,976 47,072,573 119,147,742 90,363,929
--------------- --------------- --------------- ---------------
<CAPTION>
AGSPC SCIENCE & TECHNOLOGY AGSPC SOCIAL AWARENESS
FUND - DIVISION 17 FUND - DIVISION 12
---------------------------------- ----------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ......................... $ (19,907,095) $ (10,381,062) $ (1,053,214) $ 190,273
Net realized gain (loss) on investments .............. 30,613,817 34,745,563 8,179,859 2,220,138
Capital gains distributions from mutual funds ........ 328,749,980 113,616,462 22,439,556 37,003,617
Net unrealized appreciation (depreciation)
of investments during the period ................... 1,226,217,782 250,423,659 57,407,741 38,477,902
--------------- --------------- --------------- ---------------
Increase (decrease) in net assets resulting
from operations ............................... 1,565,674,484 388,404,622 86,973,942 77,891,930
--------------- --------------- --------------- ---------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................... 279,006,916 195,575,628 94,842,943 72,710,322
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .................. (99,642,197) (44,292,549) (25,298,865) (13,355,087)
Annuity benefit payments ............................. (48,492) (17,543) (24,585) (9,481)
Amounts transferred interdivision, and from (to)
VALIC general account ............................. 309,209,056 (92,089,284) 27,286,374 54,323,803
--------------- --------------- --------------- ---------------
Increase in net assets
resulting from principal transactions ......... 488,525,283 59,176,252 96,805,867 113,669,557
--------------- --------------- --------------- ---------------
TOTAL INCREASE IN NET ASSETS ......................... 2,054,199,767 447,580,874 183,779,809 191,561,487
NET ASSETS:
Beginning of period .................................. 1,357,242,328 909,661,454 435,141,459 243,579,972
--------------- --------------- --------------- ---------------
End of period ........................................ $ 3,411,442,095 $ 1,357,242,328 $ 618,921,268 $ 435,141,459
--------------- --------------- --------------- ---------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ............... 421,835,835 397,842,959 115,602,816 81,577,104
Purchase payments .................................... 64,052,931 77,332,989 23,030,880 21,359,028
Surrenders ........................................... (22,853,729) (17,946,718) (5,886,018) (3,889,138)
Transfers - interdivision and from (to) VALIC
general account ................................... 69,695,056 (35,393,395) 7,138,854 16,555,822
--------------- --------------- --------------- ---------------
Total units outstanding, end of period ............... 532,730,093 421,835,835 139,886,532 115,602,816
--------------- --------------- --------------- ---------------
Units outstanding, by class:
Standard units .................................... 517,699,561 418,601,069 136,226,993 114,382,494
Enhanced units:
20 bp reduced ................................... 11,744,052 3,228,389 3,028,346 1,218,871
40 bp reduced ................................... 3,286,480 6,377 631,193 1,451
--------------- --------------- --------------- ---------------
Accumulation units end of period ..................... 532,730,093 421,835,835 139,886,532 115,602,816
--------------- --------------- --------------- ---------------
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Accumulation value per unit: $ 1.179657 $ 1.271278 $ 1.191635 $ 1.318263
Standard unit ...................................................
Enhanced unit:
20 bp reduced 1.220562 1.312731 1.222216 1.349397
40 bp reduced ................................................. 1.267698 1.360696 1.256142 1.384079
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Accumulation value per unit: $ 6.398997 $ 3.216190 $ 4.419383 $ 3.762308
Standard unit ...................................................
Enhanced unit:
20 bp reduced 6.462689 3.241847 4.502622 3.825649
40 bp reduced ................................................. 6.536543 3.272354 4.596034 3.897214
</TABLE>
<PAGE> 513
30 FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC
AMERICAN GENERAL SOCIALLY MONEY MARKET FUND -
RESPONSIBLE FUND - DIVISION 41 DIVISION 2
------------------------------ -----------------------------
FOR THE FOR THE PERIOD FOR THE FOR THE
YEAR ENDED AUGUST 26, 1998 YEAR ENDED YEAR ENDED
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ............................................. $ 79,807 $ 23,760 $ 162,374 $ 184,017
Net realized gain on investments .................................. 64,508 -- -- --
Capital gains distributions from mutual funds ..................... 391,925 285,733 -- --
Net unrealized appreciation (depreciation)
of investments during the period ................................ 1,103,235 1,099,673 -- --
------------ ------------ ------------ ------------
Increase in net assets resulting from operations ............. 1,639,475 1,409,166 162,374 184,017
------------ ------------ ------------ ------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................. 2,903,630 -- 139,686 90,884
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................... (20,548) -- (275,980) (292,611)
Annuity benefit payments .......................................... -- -- -- --
Amounts transferred interdivision, and from (to)
VALIC general account .......................................... 1,306,362 5,000,000 (44,481) (364,560)
------------ ------------ ------------ ------------
Increase (decrease) in net assets
resulting from principal transactions .................... 4,189,444 5,000,000 (180,775) (566,287)
------------ ------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ........................... 5,828,919 6,409,166 (18,401) (382,270)
NET ASSETS:
Beginning of period ............................................... 6,409,166 -- 4,197,487 4,579,757
------------ ------------ ------------ ------------
End of period ..................................................... $ 12,238,085 $ 6,409,166 $ 4,179,086 $ 4,197,487
------------ ------------ ------------ ------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ............................ -- -- 1,700,333 1,931,439
Purchase payments ................................................. 2,155,410 -- 56,091 37,542
Surrenders ........................................................ (35,215) -- (110,243) (120,614)
Transfers - interdivision and from (to) VALIC general account ..... 983,523 -- (13,712) (148,034)
------------ ------------ ------------ ------------
Total units outstanding, end of period ............................ 3,103,718 -- 1,632,469 1,700,333
------------ ------------ ------------ ------------
Units outstanding, by class:
Standard units ................................................. 282,396 -- 1,632,469 1,700,333
Enhanced units:
20 bp reduced ................................................ 106,148 -- -- --
40 bp reduced ................................................ 2,715,174 -- -- --
------------ ------------ ------------ ------------
Accumulation units end of period .................................. 3,103,718 -- 1,632,469 1,700,333
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit .................................................. $ 1.497374 $ -- $ 2.559979 $ 2.468627
Enhanced unit:
20 bp reduced ................................................ 1.501310 -- -- --
40 bp reduced ................................................ 1.505354 -- -- --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 514
SEPARATE ACCOUNT A 31
<TABLE>
<CAPTION>
AGSPC
MONEY MARKET FUND - AMERICAN GENERAL MONEY MARKET
DIVISION 6 FUND - DIVISION 44
-------------------------------- --------------------------------
FOR THE FOR THE FOR THE FOR THE PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED AUGUST 26, 1998
DECEMBER 31, DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
OPERATIONS: <S> <C> <C> <C>
Net investment income .......................................... $ 13,158,073 $ 7,849,963 $ 385,966 $ 82,478
Net realized gain on investments ............................... -- -- -- --
Capital gains distributions from mutual funds .................. -- -- -- --
Net unrealized appreciation (depreciation)
of investments during the period .............................
------------- ------------- ------------- -------------
Increase in net assets resulting from operations .......... 13,158,073 7,849,963 385,966 82,478
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .............................................. 119,148,566 87,624,322 6,681,738 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................ (66,195,806) (33,439,890) (641,200) --
Annuity benefit payments ....................................... (1,607) (1,603) -- --
Amounts transferred interdivision, and from (to)
VALIC general account ....................................... 122,595,014 63,714,230 73,281 5,000,000
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ................. 175,546,167 117,897,059 6,113,819 5,000,000
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ........................ 188,704,240 125,747,022 6,499,785 5,082,478
NET ASSETS:
Beginning of period ............................................ 266,651,604 140,904,582 5,082,478 --
------------- ------------- ------------- -------------
End of period .................................................. $ 455,355,844 $ 266,651,604 $ 11,582,263 $ 5,082,478
------------- ------------- ------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ......................... 152,873,642 84,182,521 -- --
Purchase payments .............................................. 77,648,415 56,361,872 6,540,439 --
Surrenders ..................................................... (47,665,211) (17,562,213) (663,577) --
Transfers - interdivision and from (to) VALIC general account .. 68,384,107 29,891,462 57,361 --
------------- ------------- ------------- -------------
Total units outstanding, end of period ......................... 251,240,953 152,873,642 5,934,223 --
------------- ------------- ------------- -------------
Units outstanding, by class:
Standard units .............................................. 233,940,123 147,547,688 4,089,393 --
Enhanced units:
20 bp reduced ............................................. 9,613,663 5,325,479 1,844,830 --
40 bp reduced ............................................. 7,687,167 475 -- --
------------- ------------- ------------- -------------
Accumulation units end of period ............................... 251,240,953 152,873,642 5,934,223 --
------------- ------------- ------------- -------------
<CAPTION>
AMERICAN GENERAL
CONSERVATIVE GROWTH LIFESTYLE AMERICAN GENERAL GROWTH LIFESTYLE
FUND - DIVISION 50 FUND - DIVISION 48
------------------------------- --------------------------------
FOR THE FOR THE PERIOD FOR THE FOR THE PERIOD
YEAR ENDED AUGUST 26, 1998 YEAR ENDED AUGUST 26, 1998
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income ...........................................$ 602,341 $ 27,772 $ 743,981 $ 11,226
Net realized gain on investments ................................ 895,570 -- 63,773 --
Capital gains distributions from mutual funds ................... 1,025,645 -- 323,571 --
Net unrealized appreciation (depreciation)
of investments during the period .............................. (1,418,604) 800,941 1,217,409 970,379
------------- ------------- ------------- -------------
Increase in net assets resulting from operations ........... 1,104,952 828,713 2,348,734 981,605
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 1,836,447 -- 2,368,603 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (50,904) -- (49,197) --
Annuity benefit payments ........................................ -- -- -- --
Amounts transferred interdivision, and from (to)
VALIC general account ........................................ (326) 5,000,000 934 5,000,000
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions .................. 1,785,217 5,000,000 2,320,340 5,000,000
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ......................... 2,890,169 5,828,713 4,669,074 5,981,605
NET ASSETS:
Beginning of period ............................................. 5,828,713 -- 5,981,605 --
------------- ------------- ------------- -------------
End of period ...................................................$ 8,718,882 $ 5,828,713 $ 10,650,679 $ 5,981,605
------------- ------------- ------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... -- -- -- --
Purchase payments ............................................... 1,654,793 -- 1,895,721 --
Surrenders ...................................................... (41,867) -- (36,221) --
Transfers - interdivision and from (to) VALIC general account ... (2,450) -- 604 --
------------- ------------- ------------- -------------
Total units outstanding, end of period .......................... 1,610,476 -- 1,860,104 --
------------- ------------- ------------- -------------
Units outstanding, by class:
Standard units ............................................... 203,221 -- 139,443 --
Enhanced units:
20 bp reduced .............................................. 246,969 -- 46,149 --
40 bp reduced .............................................. 1,160,286 -- 1,674,512 --
------------- ------------- ------------- -------------
Accumulation units end of period ................................ 1,610,476 -- 1,860,104 --
------------- ------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................. $ 1.807351 $ 1.742617 $ 1.053624 $ --
Enhanced unit:
20 bp reduced ............................... 1.856681 1.786658 1.056406 --
40 bp reduced ............................... 1.909470 1.833793 -- --
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................. $ 1.306897 $ -- $ 1.538200 $ --
Enhanced unit:
20 bp reduced ............................... 1.310337 -- 1.542278 --
40 bp reduced ............................... 1.313858 -- 1.546416 --
</TABLE>
<PAGE> 515
32 FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AMERICAN GENERAL VANGUARD LIFESTRATEGY
MODERATE GROWTH LIFESTYLE CONSERVATIVE GROWTH FUND -
FUND - DIVISION 49 DIVISION 54
----------------------------- --------------------------------
FOR THE FOR THE PERIOD FOR THE FOR THE PERIOD
YEAR ENDED AUGUST 26, 1998 YEAR ENDED SEPTEMBER 22, 1998
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
------------ --------------- ------------ ------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ........................................... $ 920,304 $ 19,912 $ 132,404 $ --
Net realized gain (loss) on investments ......................... 83,407 -- (924) --
Capital gains distributions from mutual funds ................... 389,591 -- 35,147 --
Net unrealized appreciation (depreciation)
of investments during the period .............................. 497,038 925,696 68,926 --
------------ ------------ ------------ ------------
Increase in net assets resulting from operations ........... 1,890,340 945,608 235,553 --
------------ ------------ ------------ ------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 4,916,637 -- 3,578,560 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (119,332) -- (181,467) --
Annuity benefit payments ........................................ -- -- -- --
Amounts transferred interdivision, and from (to)
VALIC general account ........................................ (63,592) 5,000,000 1,692,135 --
------------ ------------ ------------ ------------
Increase (decrease) in net assets
resulting from principal transactions .................... 4,733,713 5,000,000 5,089,228 --
------------ ------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ......................... 6,624,053 5,945,608 5,324,781 --
NET ASSETS:
Beginning of period ............................................. 5,945,608 -- -- --
------------ ------------ ------------ ------------
End of period ................................................... $ 12,569,661 $ 5,945,608 $ 5,324,781 $ --
------------ ------------ ------------ ------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... -- -- -- --
Purchase payments ............................................... 4,077,444 -- 3,221,062 --
Surrenders ...................................................... (102,891) -- (162,437) --
Transfers - interdivision and from (to) VALIC general account ... (54,577) -- 1,536,786 --
------------ ------------ ------------ ------------
Total units outstanding, end of period .......................... 3,919,976 -- 4,595,411 --
------------ ------------ ------------ ------------
Units outstanding, by class:
Standard units ............................................... 215,575 -- 554,101 --
Enhanced units:
20 bp reduced .............................................. 213,355 -- 375,819 --
40 bp reduced .............................................. 3,491,046 -- 3,665,491 --
------------ ------------ ------------ ------------
Accumulation units end of period ................................ 3,919,976 -- 4,595,411 --
------------ ------------ ------------ ------------
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................ $ 1.397661 $ -- $ 1.153827 $ --
Enhanced unit:
20 bp reduced .............................................. 1.401340 -- 1.156739 --
40 bp reduced .............................................. 1.405109 -- 1.159659 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 516
SEPARATE ACCOUNT A 33
<TABLE>
<CAPTION>
VANGUARD LIFESTRATEGY VANGUARD LIFESTRATEGY
GROWTH FUND - MODERATE GROWTH FUND -
DIVISION 52 DIVISION 53
-------------------------------- --------------------------------
FOR THE FOR THE PERIOD FOR THE FOR THE PERIOD
YEAR ENDED SEPTEMBER 22, 1998 YEAR ENDED SEPTEMBER 22, 1998
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
------------- ------------------ ------------- ------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ........................................... $ 308,508 $ -- $ 611,113 $ --
Net realized gain (loss) on investments ......................... 57,727 -- 29,492 --
Capital gains distributions from mutual funds ................... 177,605 -- 218,753 --
Net unrealized appreciation (depreciation)
of investments during the period .............................. 2,002,755 -- 1,470,942 --
------------- ----------- ------------- -----------
Increase in net assets resulting from operations ........... 2,546,595 -- 2,330,300 --
------------- ----------- ------------- -----------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 16,026,935 -- 25,276,661 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (202,105) -- (684,329) --
Annuity benefit payments ........................................ -- -- -- --
Amounts transferred interdivision, and from (to)
VALIC general account ........................................ 6,590,799 -- 5,146,081 --
------------- ----------- ------------- -----------
Increase (decrease) in net assets
resulting from principal transactions .................... 22,415,629 -- 29,738,413 --
------------- ----------- ------------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS ......................... 24,962,224 -- 32,068,713 --
NET ASSETS:
Beginning of period ............................................. -- -- -- --
------------- ----------- ------------- -----------
End of period ................................................... $ 24,962,224 $ -- $ 32,068,713 $ --
------------- ----------- ------------- -----------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... -- -- -- --
Purchase payments ............................................... 13,077,473 -- 21,705,063 --
Surrenders ...................................................... (161,106) -- (580,717) --
Transfers - interdivision and from (to) VALIC general account ... 5,453,813 -- 4,517,365 --
------------- ----------- ------------- -----------
Total units outstanding, end of period .......................... 18,370,180 -- 25,641,711 --
------------- ----------- ------------- -----------
Units outstanding, by class:
Standard units ............................................... 1,591,689 -- 1,354,406 --
Enhanced units:
20 bp reduced .............................................. 1,468,333 -- 2,152,244 --
40 bp reduced .............................................. 15,310,158 -- 22,135,061 --
------------- ----------- ------------- -----------
Accumulation units end of period ................................ 18,370,180 -- 25,641,711 --
------------- ----------- ------------- -----------
</TABLE>
<TABLE>
<CAPTION>
AGSPC ASSET ALLOCATION TEMPLETON ASSET
FUND - DIVISION 5 ALLOCATION FUND - DIVISION 19
---------------------------- ------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ........................................... $ 4,363,782 $ 3,873,507 $ 3,194,984 $ 5,298,721
Net realized gain (loss) on investments ......................... 4,428,516 2,520,862 14,669,025 10,513,951
Capital gains distributions from mutual funds ................... 4,417,585 12,936,405 38,640,994 9,560,576~
Net unrealized appreciation (depreciation)
of investments during the period .............................. 11,930,044 13,072,376 4,197,098 (10,693,322)
------------- ------------- ------------- -------------
Increase in net assets resulting from operations ........... 25,139,927 32,403,150 60,702,101 14,679,926
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 21,853,335 16,199,430 36,161,331 55,452,646
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (17,081,242) (12,309,318) (21,505,474) (15,786,958)
Annuity benefit payments ........................................ (19,764) (9,811) (25,689) (22,337)
Amounts transferred interdivision, and from (to)
VALIC general account ........................................ 3,626,725 6,673,714 (75,781,880) (47,069,555)
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions .................... 8,379,054 10,554,015 (61,151,712) (7,426,204)
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ......................... 33,518,981 42,957,165 (449,611) 7,253,722
NET ASSETS:
Beginning of period ............................................. 227,535,157 184,577,992 324,128,007 316,874,285
------------- ------------- ------------- -------------
End of period ................................................... $ 261,054,138 $ 227,535,157 $ 323,678,396 $ 324,128,007
------------- ------------- ------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... 60,269,168 57,307,351 190,963,707 196,150,946
Purchase payments ............................................... 5,389,575 4,579,044 19,274,982 32,881,580
Surrenders ...................................................... (4,241,930) (3,567,970) (12,264,078) (10,222,721)
Transfers - interdivision and from (to) VALIC general account ... 1,013,569 1,950,743 (41,733,088) (27,846,098)
------------- ------------- ------------- -------------
Total units outstanding, end of period .......................... 62,430,382 60,269,168 156,241,523 190,963,707
------------- ------------- ------------- -------------
Units outstanding, by class:
Standard units ............................................... 61,240,667 60,237,818 137,266,658 190,963,707
Enhanced units:
20 bp reduced .............................................. 673,135 31,350 485,669 --
40 bp reduced .............................................. 516,580 -- 18,489,196 --
------------- ------------- ------------- -------------
Accumulation units end of period ................................ 62,430,382 60,269,168 156,241,523 190,963,707
------------- ------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Accumulation value per unit: $ 1.352880 $ -- $ 1.244955 $ --
Standard unit ................................................
Enhanced unit:
20 bp reduced .............................................. 1.356289 -- 1.248092 --
40 bp reduced .............................................. 1.359710 -- 1.251243 --
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Accumulation value per unit: $ 4.174280 $ 3.772519 $ 2.058095 $ 1.695764
Standard unit ................................................
Enhanced unit:
20 bp reduced .............................................. 4.303891 3.882024 2.102090 --
40 bp reduced .............................................. 4.446999 -- 2.150733 --
</TABLE>
<PAGE> 517
34 NOTES TO FINANCIAL STATEMENTS
NOTE A - ORGANIZATION
Separate Account A (the "Separate Account"), established by The Variable
Annuity Life Insurance Company ('VALIC") on April 18, 1979, is registered under
the Investment Company Act of 1940 as a unit investment trust. The Separate
Account is comprised of fifty-eight 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:
<TABLE>
<S> <C>
American General Series Portfolio Company ("AGSPC"): American Century Ultra Fund (Division 31) (formerly known as
AGSPC Asset Allocation Fund (Division 5) American Century-Twentieth Century Ultra Fund)
AGSPC Capital Conservation Fund (Divisions 1 and 7) Dreyfus Variable Investment Fund - Small Cap
AGSPC Government Securities Fund (Division 8) Portfolio (Division 18)
AGSPC Growth Fund (Division 15) Evergreen Growth and Income Fund - (Division 56)
AGSPC Growth & Income Fund (Division 16) Evergreen Small Cap Value Fund (Division 55) (formerly known as
AGSPC International Equities Fund (Division 11) Evergreen Small Cap Equity Income Fund)
AGSPC International Government Bond Fund (Division 13) Evergreen Value Fund - (Division 57)
AGSPC MidCap Index Fund (Division 4) Dreyfus Founders Growth Fund (Division 30) (formerly known as
AGSPC Money Market Fund (Divisions 2 and 6) Founders Growth Fund)
AGSPC Science & Technology Fund (Division 17) Neuberger Berman Guardian Trust (Division 29)
AGSPC Small Cap Index Fund (Division 14) Putnam Global Growth Fund (Division 28)
AGSPC Social Awareness Fund (Division 12) Putnam New Opportunities Fund (Division 26)
AGSPC Stock Index Fund (Divisions 10A, B, C, and D) Putnam OTC & Emerging Growth Fund (Division 27)
Scudder Growth and Income Fund (Division 21)
American General Series Portfolio Company 3 ("AGSPC 3"): Templeton Foreign Fund (Division 32)
American General Balanced Fund (Division 42) Templeton Variable Products Series Fund:
American General Conservative Growth Templeton Asset Allocation Fund (Division 19)
Lifestyle Fund (Division 50) Templeton International Fund (Division 20)
American General Core Bond Fund (Division 58) T. Rowe Price Small-Cap Stock Fund (Division 51)
American General Domestic Bond Fund (Division 43) Vanguard LifeStrategy Conservative Growth Fund (Division 54)
American General Growth Lifestyle Fund (Division 48) Vanguard LifeStrategy Growth Fund (Division 52)
American General High Yield Bond Fund (Division 60) Vanguard LifeStrategy Moderate Growth Fund (Division 53)
American General International Growth Fund (Division 33) Vanguard Long-Term Corporate Fund (Division 22)
American General International Value Fund (Division 34) Vanguard Long-Term Treasury Fund (Division 23)
American General Large Cap Growth Fund (Division 39) Vanguard Wellington Fund (Division 25)
American General Large Cap Value Fund (Division 40) Vanguard Windsor II Fund (Division 24)
American General Mid Cap Growth Fund (Division 37)
American General Mid Cap Value Fund (Division 38)
American General Moderate Growth Lifestyle Fund (Division 49)
American General Money Market Fund (Division 44)
American General Small Cap Growth Fund (Division 35)
American General Small Cap Value Fund (Division 36)
American General Socially Responsible Fund (Division 41)
American General Strategic Bond Fund (Division 59)
</TABLE>
Divisions 33 through 54 and 58 through 60 became available to contract
holders of the Separate Account effective September 22, 1998. Divisions 55
through 57 became available to contract holders of the Separate Account
effective January 4, 1999.
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The assets of the Separate Account are segregated from VALIC's other
assets. The operations of the Separate Account are part of VALIC. The following
is a summary of significant accounting policies consistently followed by the
Separate Account in the preparation of its financial statements.
USE OF ESTIMATES. The financial statements have been prepared in conformity
with accounting principles generally accepted in the United States. 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.
<PAGE> 518
NOTES TO FINANCIAL STATEMENTS 35
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.
NOTE C -- TRANSACTIONS WITH AFFILIATES
VALIC serves as investment adviser (the "Adviser"), transfer agent, and
accounting services agent to AGSPC 1 and AGSPC 3. American General Investment
Management, L.P., an affiliate of the Adviser, serves as investment sub-adviser
to certain AGSPC 3 mutual funds.
The Separate Account is charged for mortality and expense risk 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:
<TABLE>
<CAPTION>
DIVISIONS STANDARD CHARGE
------------------------------------------------------------------------
<S> <C>
10B 0.85% on the first $10 million
0.425% on the next $90 million
0.21% on the excess over $100 million
------------------------------------------------------------------------
1, 2, 4 through 8,
10A, 10C and 10D,
11 through 17, 1.00%
33 through 44,
48 through 50 and
58 through 60
------------------------------------------------------------------------
18 through 32
51 through 57 1.25%
------------------------------------------------------------------------
</TABLE>
Certain mutual funds reimburse VALIC for 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:
<TABLE>
<CAPTION>
DIVISIONS EXPENSE REDUCTION
------------------------------------------------------------------------
<S> <C>
21 through 23,
26 through 30,
32 through 44, 0.25%
48 through 50,
55 through 60
------------------------------------------------------------------------
31 0.20% on the first $75 million
0.25% on the excess over $75 million
------------------------------------------------------------------------
18 0.15%
------------------------------------------------------------------------
</TABLE>
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.
<PAGE> 519
36 NOTES TO FINANCIAL STATEMENTS
Expenses of VALIC Separate Account A Divisions 10A and 10B, (as defined to
include underlying mutual fund expenses) are limited to the following rates
based on average daily net assets:
<TABLE>
<CAPTION>
DIVISIONS EXPENSE LIMITATIONS
---------------------------------------------------------------------------------
<S> <C>
10A 1.4157% on the first $359,065,787
1.36% on the next $40,934,213
1.32% on the excess over $400 million
---------------------------------------------------------------------------------
10B 0.6966% on the first $25,434,267
0.50% on the next $74,565,733
0.25% on the excess over $100 million
---------------------------------------------------------------------------------
</TABLE>
Accordingly, during the years ended December 31, 1999 and 1998, VALIC
reduced expenses of Division 10B by $94,122 and $82,027, 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 $6,506,341 and $5,575,601 for the years
ended December 31, 1999 and 1998, respectively.
VALIC received surrender charges of $6,181,873 and $4,581,641 for the years
ended December 31, 1999 and 1998, respectively. In addition, VALIC received
$46,011 and $4,147 for the year ended December 31, 1999, in sales load on
variable annuity purchase payments for Divisions 10A and 10B, respectively.
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 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, 1999:
<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 12,681,732 $13.80 $175,007,894 $153,864,816 $ 21,143,078
AGSPC MidCap Index Fund....................... 4 39,427,464 22.24 876,866,818 761,782,279 115,084,539
AGSPC Small Cap Index Fund.................... 14 14,526,817 16.60 241,145,168 228,085,714 13,059,454
AGSPC Stock Index Fund........................ 10A,B,C,D 118,066,893 44.44 5,246,892,687 2,621,261,506 2,625,631,181
AGSPC Growth Fund............................. 15 51,853,516 23.50 1,218,557,601 902,850,565 315,707,036
AGSPC Growth & Income Fund.................... 16 15,306,480 21.99 336,589,500 252,817,396 83,772,104
American Century Ultra Fund................... 31 22,353,284 45.78 1,023,333,380 773,447,526 249,885,854
American General International Growth Fund.... 33 431,454 15.87 6,847,182 4,540,670 2,306,512
American General International Value Fund..... 34 443,411 18.26 8,096,689 4,952,066 3,144,623
American General Large Cap Growth Fund........ 39 1,329,646 16.32 21,699,827 17,193,893 4,505,934
American General Large Cap Value Fund......... 40 405,206 11.04 4,473,480 4,309,106 164,374
American General Mid Cap Growth Fund.......... 37 548,588 12.88 7,065,815 5,898,950 1,166,865
American General Mid Cap Value Fund........... 38 734,556 11.34 8,329,863 8,197,536 132,327
American General Small Cap Growth Fund........ 35 783,183 21.25 16,642,631 10,446,375 6,196,256
American General Small Cap Value Fund......... 36 435,735 10.26 4,470,644 4,378,518 92,126
Dreyfus Variable Investment Fund --
Small Cap Portfolio......................... 18 11,749,941 66.34 779,491,073 597,305,985 182,185,088
Evergreen Growth and Income Fund.............. 56 193 32.23 6,220 5,850 370
Evergreen Small Cap Value Fund................ 55 16 14.77 243 243 -
Evergreen Value Fund.......................... 57 212 20.69 4,388 4,707 (319)
</TABLE>
<PAGE> 520
NOTES TO FINANCIAL STATEMENTS 37
<TABLE>
<CAPTION>
UNREALIZED
MARKET APPRECIATION
UNDERLYING FUND DIVISION SHARES PRICE MARKET COST (DEPRECIATION)
- --------------------------------------------- -------- ---------- ------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Dreyfus Founders Growth Fund ................ 30 36,634,173 $ 23.87 $ 874,457,709 $ 744,045,046 $ 130,412,663
Neuberger Berman Guardian Trust ............. 29 4,205,603 14.14 59,467,223 72,768,026 (13,300,803)
Putnam Global Growth Fund ................... 28 26,666,641 18.59 495,732,851 350,405,108 145,327,743
Putnam New Opportunities Fund ............... 26 11,157,111 90.96 1,014,850,850 630,466,495 384,384,355
Putnam OTC & Emerging Growth Fund ........... 27 11,652,311 37.01 431,252,004 234,928,422 196,323,582
Scudder Growth and Income Fund .............. 21 9,240,762 26.69 246,635,934 258,757,360 (12,121,426)
T. Rowe Price Small-Cap Stock Fund .......... 51 383,280 22.80 8,738,757 7,730,112 1,008,645
Templeton Foreign Fund ...................... 32 29,989,326 11.22 336,480,225 305,197,182 31,283,043
Templeton International Fund ................ 20 36,732,726 22.25 817,303,148 697,567,268 119,735,880
Vanguard Windsor II Fund .................... 24 29,350,047 24.97 732,870,656 860,734,104 (127,863,448)
American General Balanced Fund .............. 42 806,619 12.34 9,953,676 8,797,929 1,155,747
Vanguard Wellington Fund .................... 25 20,381,425 27.96 569,864,636 610,206,190 (40,341,554)
AGSPC Capital Conservation Fund ............. 1 & 7 6,271,787 9.04 56,696,951 59,937,282 (3,240,331)
AGSPC Government Securities Fund ............ 8 9,791,463 9.53 93,312,643 99,573,538 (6,260,895)
AGSPC International ~Government Bond Fund ... 13 12,944,516 11.52 149,120,828 154,526,420 (5,405,592)
American General Core Bond Fund ............. 58 546,329 9.46 5,168,278 5,453,662 (285,384)
American General Domestic Bond Fund ......... 43 196,208 9.33 1,830,628 1,941,338 (110,710)
American General High Yield Bond Fund ....... 60 573,040 9.75 5,587,119 5,731,184 (144,065)
American General Strategic Bond Fund ........ 59 552,828 9.96 5,506,171 5,531,806 (25,635)
Vanguard Fixed Income Securities Fund:
Long-Term Corporate Fund .................. 22 8,417,206 8.11 68,263,542 76,417,392 (8,153,850)
Long-Term Treasury Fund ................... 23 14,669,704 9.67 141,856,062 159,944,453 (18,088,391)
AGSPC Science & Technology Fund ............. 17 72,283,188 47.13 3,406,706,628 1,882,063,789 1,524,642,83
AGSPC Social Awareness Fund ................. 12 23,981,721 25.81 618,968,226 477,460,805 141,507,421
American General Socially
Responsible Fund .......................... 41 885,926 13.80 12,225,981 10,023,073 2,202,908
AGSPC Money Market Fund ..................... 2 & 6 463,954,740 1.00 463,954,740 463,954,740 --
American General Money Market Fund .......... 44 11,553,720 1.00 11,553,720 11,553,720 --
American General Conservative
Growth Lifestyle Fund ...................... 50 809,972 10.74 8,699,095 9,316,758 (617,663)
American General Growth Lifestyle Fund ...... 48 761,135 13.96 10,625,442 8,437,654 2,187,788
American General Moderate
Growth Lifestyle Fund ..................... 49 994,186 12.60 12,526,733 11,103,999 1,422,734
Vanguard LifeStrategy
Conservative Growth Fund ................. 54 352,263 15.10 5,319,180 5,250,254 68,926
Vanguard LifeStrategy Growth Fund ........... 52 1,163,639 21.41 24,913,522 22,910,767 2,002,755
Vanguard LifeStrategy
Moderate Growth Fund ..................... 53 1,762,720 18.18 32,046,248 30,575,306 1,470,942
AGSPC Asset Allocation Fund ................. 5 17,289,012 15.09 260,891,195 212,925,934 47,965,261
Templeton Asset Allocation Fund ............. 19 13,861,377 23.37 323,940,365 286,019,883 37,920,482
------------- ----- --------------- --------------- --------------
Total .................................... 1,171,895,031 $21,292,842,069 $15,133,600,700 $6,159,241,369
============= ===== =============== =============== ==============
</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.
<PAGE> 521
38 NOTES TO FINANCIAL STATEMENTS
NOTE F -- SECURITY PURCHASES AND SALES
For the year ended December 31, 1999, 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.................................... $ 134,677,751 $ 139,385,819
AGSPC MidCap Index Fund Division 4............................................... 235,122,234 121,903,304
AGSPC Small Cap Index Fund Division 14........................................... 54,587,283 58,450,240
AGSPC Stock Index Fund:..........................................................
Division 10A.................................................................. 24,080,573 77,479,615
Division 10B.................................................................. 3,046,671 7,574,316
Division 10C.................................................................. 626,807,392 82,339,542
Division 10D.................................................................. 4,099,962 10,844,842
AGSPC Growth Fund Division 15.................................................... 88,504,403 118,778,430
AGSPC Growth & Income Fund Division 16........................................... 52,289,506 29,123,818
American Century Ultra Fund Division 31.......................................... 444,783,914 21,596,564
American General International Growth Fund Division 33........................... 946,472 70,990
American General International Value Fund Division 34 ........................... 1,433,853 138,079
American General Large Cap Growth Fund Division 39............................... 14,803,088 658,862
American General Large Cap Value Fund Division 40................................ 1,603,370 268,211
American General Mid Cap Growth Fund Division 37................................. 1,915,167 88,442
American General Mid Cap Value Fund Division 38.................................. 4,571,598 606,656
American General Small Cap Growth Fund Division 35............................... 6,687,388 288,207
American General Small Cap Value Fund Division 36................................ 599,894 142,588
Dreyfus Variable Investment Fund - Small Cap Portfolio Division 18............... 21,111,378 196,910,062
Evergreen Growth and Income Fund Division 56..................................... 11,440 5,621
Evergreen Small Cap Value Fund Division 55....................................... 243 --
Evergreen Value Fund Division 57................................................. 4,708 --
Dreyfus Founders Growth Fund Division 30......................................... 377,694,422 15,816,982
Neuberger Berman Guardian Trust Division 29...................................... 16,757,237 12,416,328
Putnam Global Growth Fund Division 28............................................ 211,644,710 15,117,798
Putnam New Opportunities Fund Division 26........................................ 296,792,660 13,090,798
Putnam OTC & Emerging Growth Fund Division 27.................................... 137,306,910 40,666,703
Scudder Growth and Income Fund Division 21....................................... 31,899,301 36,629,775
T. Rowe Price Small-Cap Stock Fund Division 51 .................................. 8,924,589 1,235,607
Templeton Foreign Fund Division 32............................................... 101,740,948 61,364,564
Templeton International Fund Division 20......................................... 189,502,177 212,566,145
Vanguard Windsor II Fund Division 24............................................. 269,298,579 49,634,770
American General Balanced Fund Division 42 ...................................... 3,866,126 161,950
Vanguard Wellington Fund Division 25............................................. 213,879,566 21,573,138
AGSPC Capital Conservation Fund:
Division 1.................................................................... 539,820 1,229,647
Division 7.................................................................... 8,884,731 13,555,587
AGSPC Government Securities Fund Division 8...................................... 43,737,807 55,270,473
AGSPC International Government Bond Fund Division 13............................. 110,344,428 114,909,023
American General Core Bond Fund Division 58...................................... 397,138 9,568
American General Domestic Bond Fund Division 43.................................. 902,534 234,776
American General High Yield Bond Fund Division 60................................ 669,191 29,912
American General Strategic Bond Fund Division 59 453,036 1,300
Vanguard Long-Term Corporate Fund Division 22.................................... 26,914,873 9,374,775
Vanguard Long-Term Treasury Fund Division 23..................................... 65,677,636 20,627,370
AGSPC Science & Technology Fund Division 17...................................... 858,454,770 65,588,109
AGSPC Social Awareness Fund Division 12.......................................... 133,894,631 15,404,062
American General Socially Responsible Fund Division 41........................... 4,913,557 264,485
AGSPC Money Market Fund:
Division 2.................................................................... 3,989,984 4,006,915
Division 6.................................................................... 533,688,517 340,162,602
American General Money Market Fund Division 44................................... 8,345,963 1,874,721
American General Conservative Growth Lifestyle Fund Division 50.................. 8,807,869 5,415,651
American General Growth Lifestyle Fund Division 48............................... 3,618,201 265,479
American General Moderate Growth Lifestyle Fund Division 49...................... 6,430,264 434,004
Vanguard LifeStrategy Conservative Growth Fund Division 54....................... 5,949,918 698,740
Vanguard LifeStrategy Growth Fund Division 52 ................................... 24,674,642 1,821,602
Vanguard LifeStrategy Moderate Growth Fund Division 53 .......................... 31,808,062 1,262,248
AGSPC Asset Allocation Fund Division 5........................................... 35,282,084 18,243,130
Templeton Asset Allocation Fund Division 19...................................... 62,685,987 81,750,675
-------------- --------------
Total ........................................................................... $5,562,061,156 $2,099,363,620
============== ==============
</TABLE>
<PAGE> 522
SUPPLEMENTAL INFORMATION 39
<TABLE>
<CAPTION>
GROUP PORTFOLIO
UNIT INDEPENDENCE DIRECTOR
PURCHASE IMPACT PLUS 1
DIVISION DIVISION DIVISION DIVISION
-------- -------- ------------ ---------
<S> <C> <C> <C> <C>
INDEX EQUITY FUNDS
AGSPC International Equities Fund .................... -- -- 11 11
AGSPC MidCap Index Fund .............................. -- 4 4 4
AGSPC Small Cap Index Fund ........................... -- -- 14 14
AGSPC Stock Index Fund ............................... 10A, 10B 10D 10C 10C
ACTIVELY MANAGED EQUITY FUNDS
AGSPC Growth Fund .................................... -- -- -- 15
AGSPC Growth & Income Fund ........................... -- -- -- 16
American Century Ultra Fund (formerly known as
American Century-Twentieth Century Ultra Fund) ..... -- -- -- --
American General International Growth Fund ........... -- -- -- --
American General International Value Fund ............ -- -- -- --
American General Large Cap Growth Fund ............... -- -- -- --
American General Large Cap Value Fund ................ -- -- -- --
American General Mid Cap Growth Fund ................. -- -- -- --
American General Mid Cap Value Fund .................. -- -- -- --
American General Small Cap Growth Fund ............... -- -- -- --
American General Small Cap Value Fund ................ -- -- -- --
Dreyfus Variable Investment Fund -
Small Cap Portfolio .............................. -- -- -- 18
Evergreen Growth and Income Fund ..................... -- -- -- --
Evergreen Small Cap Value Fund
(formerly known as the Evergreen Small
Cap Equity Income Fund) .......................... -- -- -- --
Evergreen Value Fund ................................. -- -- -- --
Dreyfus Founders Growth Fund
(formerly known as Founders Growth) .............. -- -- -- --
Neuberger Berman Guardian Trust ...................... -- -- -- --
Putnam Global Growth Fund ............................ -- -- -- --
Putnam New Opportunities Fund ........................ -- -- -- --
Putnam OTC & Emerging Growth Fund .................... -- -- -- --
Scudder Growth and Income Fund ....................... -- -- -- --
T. Rowe Price Small-Cap Stock Fund ................... -- -- -- --
Templeton Foreign Fund ............................... -- -- -- --
Templeton International Fund ......................... -- -- -- 20
Vanguard Windsor II Fund ............................. -- -- -- --
BALANCED FUNDS
American General Balanced Fund ....................... -- -- -- --
Vanguard Wellington Fund ............................. -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
YEAR TO DATE
TOTAL RETURN
PORTFOLIO PORTFOLIO FOR YEAR ENDING
DIRECTOR DIRECTOR DECEMBER 31,
2 PLUS -------------------------
DIVISION DIVISION 1999 1998
--------- ---------- -------- -------
<S> <C> <C> <C> <C>
INDEX EQUITY FUNDS
AGSPC International Equities Fund .................... -- 11 27.88% 17.57%
AGSPC MidCap Index Fund .............................. -- 4 13.78 17.80
AGSPC Small Cap Index Fund ........................... -- 14 20.10 (2.92)
AGSPC Stock Index Fund ............................... 10C 10C 19.37 27.14
ACTIVELY MANAGED EQUITY FUNDS
AGSPC Growth Fund .................................... 15 15 6.33 16.96
AGSPC Growth & Income Fund ........................... -- 16 21.61 13.41
American Century Ultra Fund (formerly known as
American Century-Twentieth Century Ultra Fund) ..... 31 31 40.00 33.14
American General International Growth Fund ........... -- 33 55.45 5.17(a)
American General International Value Fund ............ -- 34 66.59 14.99(a)
American General Large Cap Growth Fund ............... -- 39 34.39 24.08(a)
American General Large Cap Value Fund ................ -- 40 4.52 24.66(a)
American General Mid Cap Growth Fund ................. -- 37 5.60 34.77(a)
American General Mid Cap Value Fund .................. -- 38 21.28 25.47(a)
American General Small Cap Growth Fund ............... -- 35 68.43 34.94(a)
American General Small Cap Value Fund ................ -- 36 (7.27) 16.53(a)
Dreyfus Variable Investment Fund -
Small Cap Portfolio .............................. -- 18 21.80 (4.51)
Evergreen Growth and Income Fund ..................... -- 56 13.29 n/a(c)
Evergreen Small Cap Value Fund
(formerly known as the Evergreen Small
Cap Equity Income Fund) .......................... -- 55 (0.45) n/a(c)
Evergreen Value Fund ................................. -- 57 3.41 n/a(c)
Dreyfus Founders Growth Fund
(formerly known as Founders Growth) .............. 30 30 37.64 23.76
Neuberger Berman Guardian Trust ...................... 29 29 7.36 1.34
Putnam Global Growth Fund ............................ 28 28 63.00 27.48
Putnam New Opportunities Fund ........................ 26 26 67.91 23.12
Putnam OTC & Emerging Growth Fund .................... 27 27 124.57 9.87
Scudder Growth and Income Fund ....................... 21 21 5.09 4.99
T. Rowe Price Small-Cap Stock Fund ................... -- 51 13.33 14.10(b)
Templeton Foreign Fund ............................... 32 32 38.34 (5.82)
Templeton International Fund ......................... -- 20 22.10 7.95
Vanguard Windsor II Fund ............................. 24 24 (6.96) 14.90
BALANCED FUNDS
American General Balanced Fund ....................... -- 42 13.07 17.01(a)
Vanguard Wellington Fund ............................. 25 25 3.11 10.65
</TABLE>
(a) Since August 26, 1998, initial capitalization of the Division. See Note C
to financial statements.
(b) Since September 22, 1998, inception of the Division.
(c) Since January 4, 1999, 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 Plus prospectus. 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> 523
40 SUPPLEMENTAL INFORMATION
<TABLE>
<CAPTION>
GROUP PORTFOLIO PORTFOLIO PORTFOLIO
UNIT INDEPENDENCE DIRECTOR DIRECTOR DIRECTOR
PURCHASE IMPACT PLUS 1 2 PLUS
DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION
-------- -------- ------------ --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
INCOME FUNDS
AGSPC Capital Conservation Fund ....................... -- 1 7 7 -- 7
AGSPC Government Securities Fund ...................... -- -- 8 8 -- 8
AGSPC International Government Bond Fund .............. -- -- 13 13 13 13
American General Core Bond Fund ....................... -- -- -- -- -- 58
American General Domestic Bond Fund ................... -- -- -- -- -- 43
American General High Yield Bond Fund ................. -- -- -- -- -- 60
American General Strategic Bond Fund .................. -- -- -- -- -- 59
Vanguard Long-Term Corporate Fund (formerly
known as Vanguard Fixed Income Securities
Fund - Long-Term Corporate Fund) .................... -- -- -- -- 22 22
Vanguard Long-Term Treasury Fund (formerly
known as Vanguard Fixed Income Securities
Fund - Long-Term U.S. Treasury Portfolio) ........... -- -- -- -- 23 23
SPECIALTY FUNDS
AGSPC Science & Technology Fund ....................... -- -- -- 17 17 17
AGSPC Social Awareness Fund ........................... -- -- 12 12 12 12
American General Socially Responsible Fund ............ -- -- -- -- -- 41
MONEY MARKET FUNDS
AGSPC Money Market Fund ............................... -- 2 6 6 6 6
American General Money Market Fund .................... -- -- -- -- -- 44
LIFESTYLE FUNDS
American General Conservative Growth Lifestyle Fund ... -- -- -- -- -- 50
American General Growth Lifestyle Fund ................ -- -- -- -- -- 48
American General Moderate Growth Lifestyle Fund ....... -- -- -- -- -- 49
Vanguard LifeStrategy Conservative Growth Fund ........ -- -- -- -- -- 54
Vanguard LifeStrategy Growth Fund ..................... -- -- -- -- -- 52
Vanguard LifeStrategy Moderate Growth Fund ............ -- -- -- -- -- 53
ASSET ALLOCATION FUNDS
AGSPC Asset Allocation Fund ........................... -- 5 5 5 -- 5
Templeton Asset Allocation Fund ....................... -- -- -- 19 -- 19
</TABLE>
<TABLE>
<CAPTION>
YEAR TO DATE
TOTAL RETURN
FOR YEAR ENDING
DECEMBER 31,
-------------------------
1999 1998
----- -----
<S> <C> <C>
INCOME FUNDS
AGSPC Capital Conservation Fund ....................... (1.40)% 6.30%
AGSPC Government Securities Fund ...................... (3.74) 7.86
AGSPC International Government Bond Fund .............. (6.88) 15.92
American General Core Bond Fund ....................... (1.89) 2.92(a)
American General Domestic Bond Fund ................... (3.81) 4.44(a)
American General High Yield Bond Fund ................. 2.17 5.31(a)
American General Strategic Bond Fund .................. 3.06 4.99(a)
Vanguard Long-Term Corporate Fund (formerly
known as Vanguard Fixed Income Securities
Fund - Long-Term Corporate Fund) .................... (7.21) 8.04
Vanguard Long-Term Treasury Fund (formerly
known as Vanguard Fixed Income Securities
Fund - Long-Term U.S. Treasury Portfolio) ........... (9.61) 11.82
SPECIALTY FUNDS 98.96 40.71
AGSPC Science & Technology Fund ....................... 17.46 26.03
AGSPC Social Awareness Fund ........................... 17.19 27.78(a)
American General Socially Responsible Fund ............
MONEY MARKET FUNDS
AGSPC Money Market Fund ............................... 3.71 4.12
American General Money Market Fund .................... 3.98 1.33(a)
LIFESTYLE FUNDS
American General Conservative Growth Lifestyle Fund ... 12.47 16.20(a)
American General Growth Lifestyle Fund ................ 28.99 19.25(a)
American General Moderate Growth Lifestyle Fund .......
Vanguard LifeStrategy Conservative Growth Fund ........ 17.90 18.54(a)
Vanguard LifeStrategy Growth Fund ..................... 6.44 8.40(b)
Vanguard LifeStrategy Moderate Growth Fund ............ 15.82 16.81(b)
10.57 12.59(b)
ASSET ALLOCATION FUNDS
AGSPC Asset Allocation Fund ........................... 10.65 17.19
Templeton Asset Allocation Fund ....................... 21.37 5.07
</TABLE>
(a) Since August 26, 1998, initial capitalization of the Division. See Note C to
financial statements.
(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 Plus prospectus. 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> 524
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, 1999
and 1998, 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, 1999. 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 auditing standards generally
accepted in the United States. 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, 1999 and 1998,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
----------------------------------------
ERNST & YOUNG LLP
Houston, Texas
February 14, 2000
<PAGE> 525
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
At December 31
In millions, except per share data
<TABLE>
<CAPTION>
1999 1998
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS Investments - Notes 2, 7, 8, 9:
Fixed maturity securities
(amortized cost: $21,797 in 1999 and $21,733 in 1998) $ 21,258 $ 22,878
Equity securities (cost: $182 in 1999 and $176 in 1998) 220 194
Mortgage loans on real estate 1,478 1,213
Real estate 25 21
Policy loans 849 789
Other long-term invested assets 95 59
Short-term investments 94 164
--------------------------------------------------------------------------------------------------
Total investments 24,019 25,318
--------------------------------------------------------------------------------------------------
Investment income receivable 387 370
Cash 26 105
Receivable for securities sold 13 22
Deferred policy acquisition costs - Note 3 1,301 665
Cost of insurance purchased - Note 4 19 22
Due from reinsurer, net 12 13
Other assets 156 120
Assets held in Separate Accounts 21,390 14,712
--------------------------------------------------------------------------------------------------
Total assets $ 47,323 $ 41,347
- -----------------------------------------------------------------------------------------------------------------
LIABILITIES Policy reserves for fixed annuity investment contracts $ 23,441 $ 23,219
Payable for securities purchased -- 41
Remittances not allocated 50 96
Commissions, general expenses and taxes (other than income taxes) 55 38
Other liabilities 140 193
Income tax liabilities - Note 5 284 542
Liabilities related to Separate Accounts 21,390 14,712
--------------------------------------------------------------------------------------------------
Total liabilities 45,360 38,841
- -----------------------------------------------------------------------------------------------------------------
STOCKHOLDER'S Common stock, 5,000,000 shares authorized and 3,575,000 issued
EQUITY and outstanding in 1999 and 1998 - Note 6 4 4
Additional paid-in capital 851 833
Retained earnings 1,395 1,142
Accumulated other comprehensive income (loss) - Note 2 (287) 527
--------------------------------------------------------------------------------------------------
Total stockholder's equity 1,963 2,506
--------------------------------------------------------------------------------------------------
Total liabilities and stockholder's equity $ 47,323 $ 41,347
--------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
2
<PAGE> 526
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF INCOME
For the years ended December 31,
In millions
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES Premium and other considerations $ 19 $ -- $ --
Surrender charges 15 15 12
Mortality charges 184 135 94
Expense charges 8 7 6
Net investment income - Note 2 1,834 1,811 1,730
Realized investment gains (losses) - Note 2 5 (28) 20
Other income 28 19 17
--------------------------------------------------------------------------------------------------------------
Total revenues 2,093 1,959 1,879
- -------------------------------------------------------------------------------------------------------------------------------
BENEFITS AND Insurance policy benefits 19 -- --
EXPENSES Increase in policy reserves for fixed annuity contracts 1,213 1,296 1,286
Expenses:
Commissions 149 124 111
Salaries 94 71 59
Data processing 63 29 15
Postage and telephone 22 15 12
Sales promotion 11 10 10
Depreciation expense on furniture and equipment 16 10 9
Rent 12 10 8
Taxes, licenses and fees 10 8 7
Printing and supplies 8 7 5
Other expenses 41 61 35
Amortization of deferred policy acquisition costs, net - Note 3 56 55 42
Amortization of cost of insurance purchased, net - Note 4 3 2 --
Policy acquisition costs deferred - Note 3 (196) (160) (138)
--------------------------------------------------------------------------------------------------------------
Total expenses 289 242 175
--------------------------------------------------------------------------------------------------------------
Total costs and expenses 1,521 1,538 1,461
- -------------------------------------------------------------------------------------------------------------------------------
EARNINGS Income before income tax expense 572 421 418
Income tax expense - Note 5 195 137 144
--------------------------------------------------------------------------------------------------------------
Net income $ 377 $ 284 $ 274
--------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
3
<PAGE> 527
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
For the years ended December 31,
In millions, except per share data
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCK Balance at beginning and end of year $ 4 $ 4 $ 4
- -------------------------------------------------------------------------------------------------------------------------
ADDITIONAL Balance at beginning of year 833 711 459
PAID-IN-CAPITAL Capital contribution from stockholder 18 122 252
----------------------------------------------------------------------------------------------
Balance at end of year 851 833 711
- -------------------------------------------------------------------------------------------------------------------------
RETAINED Balance at beginning of year 1,142 1,039 1,144
EARNINGS Net income 377 284 274
Dividends paid to stockholder (124) (181) (379)
----------------------------------------------------------------------------------------------
Balance at end of year 1,395 1,142 1,039
- -------------------------------------------------------------------------------------------------------------------------
ACCUMULATED OTHER Balance at beginning of year 527 306 167
COMPREHENSIVE Change in net unrealized gains (losses) on securities (814) 221 139
----------------------------------------------------------------------------------------------
INCOME (LOSS) Balance at end of year (287) 527 306
- -------------------------------------------------------------------------------------------------------------------------
STOCKHOLDER'S
EQUITY Balance at end of year $ 1,963 $ 2,506 $ 2,060
----------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
NET INCOME Net income $ 377 $ 284 $ 274
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OTHER Change in net unrealized gains (losses) on securities
COMPREHENSIVE Fair value of fixed maturity securities (1,684) 155 468
INCOME (LOSS) Deferred policy acquisition costs and
cost of insurance purchased 499 172 (251)
Deferred income taxes 351 (124) (78)
-------------------------------------------------------------------------------------------
Change in fixed maturity securities (834) 203 139
Change in equity securities and other 20 18 -
-------------------------------------------------------------------------------------------
Total (814) 221 139
- ----------------------------------------------------------------------------------------------------------------------
COMPREHENSIVE
INCOME (LOSS) Comprehensive income (loss) $ (437) $ 505 $ 413
-------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
- --------------------------------------------------------------------------------
4
<PAGE> 528
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
For the years ended December 31,
In millions
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING Net income $ 377 $ 284 $ 274
ACTIVITIES Reconciling adjustments to net cash provided by
operating activities:
Insurance and annuity liabilities 1,213 1,296 1,286
Deferred policy acquisition costs
and cost of insurance purchased (137) (103) (96)
Other, net (74) (44) (51)
------------------------------------------------------------------------------------------------
Net cash provided by operating activities 1,379 1,433 1,413
- ----------------------------------------------------------------------------------------------------------------------
INVESTING Investment purchases (28,211) (15,180) (18,403)
ACTIVITIES Investment calls, maturities and sales 27,789 14,732 17,500
Net (increase) decrease in short-term investments 70 (104) (8)
------------------------------------------------------------------------------------------------
Net cash used for investing activities (352) (552) (911)
- ----------------------------------------------------------------------------------------------------------------------
FINANCING Policyholder account deposits 4,251 3,756 3,385
ACTIVITIES Policyholder account withdrawals (2,033) (1,777) (1,427)
Transfers to Separate Accounts (3,218) (2,728) (2,325)
Capital contribution from stockholder 18 122 252
Dividends paid to stockholder (124) (181) (379)
------------------------------------------------------------------------------------------------
Net cash used for financing activities (1,106) (808) (494)
- ----------------------------------------------------------------------------------------------------------------------
NET CHANGE Net increase (decrease) in cash (79) 73 8
IN CASH Cash at beginning of year 105 32 24
------------------------------------------------------------------------------------------------
Cash at end of year $ 26 $ 105 $ 32
------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
- -------------------------------------------------------------------------------
5
<PAGE> 529
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
In millions, 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
DERIVATIVES. In 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) 133, "Accounting for
Derivative Instruments and Hedging Activities," which requires all derivative
instruments to be recognized at fair value in the balance sheet. Changes in the
fair value of a derivative instrument will be reported as earnings or other
comprehensive income, depending upon the intended use of the derivative
instrument. VALIC will adopt SFAS 133 on January 1, 2001. VALIC does not expect
adoption to have a material impact on the consolidated results of operation 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 (loss) 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's amortized cost
is reduced to its fair value, and the reduction is recorded as a realized loss.
Beginning in 1998, VALIC held trading securities at various times and
reported them at fair value. VALIC held no trading securities at December 31,
1999 or 1998. Realized gains (losses) related to trading securities are included
in net investment income; however, trading securities did not have a material
effect on net investment income in 1999 or 1998.
MORTGAGE LOANS. Mortgage loans are reported at amortized cost, net of an
allowance for losses. The allowance covers estimated losses based on our
assessment of risk factors such as potential non-payment or non-monetary
default. The allowance is primarily based on a loan-specific review.
VALIC considers loans to be impaired when collection of all amounts due
under the contractual terms is not probable. VALIC generally looks to the
underlying collateral for repayment of these loans. Therefore, impaired loans
are reported at the lower of amortized cost or fair value of the underlying
collateral, less estimated cost 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.
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.
- --------------------------------------------------------------------------------
6
<PAGE> 530
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
In millions
1.5 DERIVATIVES RELATED TO INVESTMENTS-(CONTINUED)
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. Any amounts deemed
unrecoverable are charged to expense.
1.7 COST OF INSURANCE PURCHASED (CIP)
The cost assigned to certain acquired insurance contracts in force at the
acquisition date is reported as CIP. Interest is accreted on the unamortized
balance of CIP at rates ranging from 5.0% to 5.9% for both 1998 and 1999. CIP is
charged to expense and adjusted for the impact of net unrealized gains (losses)
on securities in the same manner as DPAC. VALIC reviews the carrying amount of
CIP on at least an annual basis using the same methods used to evaluate DPAC.
1.8 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's 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
consist primarily of shares in mutual funds, which are carried at fair value,
based on the quoted net asset value per share of the funds.
1.9 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, the 1983a Table, the Annuity
2000 Table, and the GAR 94 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%.
- --------------------------------------------------------------------------------
7
<PAGE> 531
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
In millions
1.10 RECOGNITION OF REVENUES AND COSTS
Most receipts for annuities are classified as deposits instead of revenues.
Revenues for these contracts consist of mortality, expense, and surrender
charges. For limited-payment contracts, net premiums are recorded as revenue.
1.11 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 the 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.
1.12 STATUTORY ACCOUNTING
State insurance laws and regulations prescribe accounting practices for
calculating statutory net income and equity of insurance companies. In addition,
state regulators may permit statutory accounting practices that differ from
prescribed practices. The use of such permitted practices did not have a
material effect on VALIC's statutory equity or net income at December 31, 1999,
1998, and 1997, or for the years then ended.
Statutory accounting practices differ from GAAP. Significant differences
were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------
<S> <C> <C> <C>
Statutory net income $ 256 $ 170 $ 238
Change in DPAC and CIP 137 103 96
Investment valuation
differences 21 48 --
Policy reserve adjustments 42 67 (5)
Deferred income taxes (58) (57) (27)
Other, net (21) (47) (28)
- -----------------------------------------------------------------
GAAP net income $ 377 $ 284 $ 274
- -----------------------------------------------------------------
Statutory equity $ 1,331 $ 1,237 $ 1,189
Asset valuation reserve 272 230 188
Investment valuation
differences* (550) 1,128 970
DPAC and CIP 1,320 687 392
Non-admitted assets 104 72 35
Policy reserve adjustments (92) (134) (187)
Deferred income taxes (266) (556) (375)
Other, net (156) (158) (152)
- -----------------------------------------------------------------
GAAP equity $ 1,963 $ 2,506 $ 2,060
- -----------------------------------------------------------------
</TABLE>
* Primarily GAAP unrealized gains (losses) on securities
1.13 COINSURANCE TRANSACTION
On May 21, 1998, VALIC completed the acquisition of a block of individual
annuity business in a coinsurance transaction for a cost of $24 million. This
transaction increased assets and insurance and annuity liabilities by $688
million.
2
INVESTMENTS
2.1 INVESTMENT INCOME
Income by type of investment was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------
<S> <C> <C> <C>
Non-affiliated fixed
maturity securities $1,670 $1,664 $1,563
Affiliated fixed
maturity securities 2 3 3
Equity securities 15 -- --
Mortgage loans on
real estate 104 113 124
Other 71 63 53
- ------------------------------------------------------------------
Gross investment income 1,862 1,843 1,743
Investment expense 28 32 13
- ------------------------------------------------------------------
Net investment income $1,834 $1,811 $1,730
- ------------------------------------------------------------------
</TABLE>
There were no investments during 1999 and 1998 that did not produce
investment income. The carrying value of investments that produced no investment
income during 1997 totaled $12 million or 0.05% of total invested assets. The
ultimate disposition of these assets is not expected to have a material effect
on VALIC's consolidated results of operations or financial position.
Derivative financial instruments related to investment securities did not
have a material effect on net investment income in any of the three years ended
December 31, 1999.
2.2 REALIZED INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturity securities
Gross gains $ 101 $ 14 $ 35
Gross losses (86) (50) (29)
- -------------------------------------------------------------------
Total fixed maturity
securities 15 (36) 6
- -------------------------------------------------------------------
Mortgage loans on real estate (4) 9 21
Real estate -- 7 4
Other long-term investments 2 -- --
DPAC amortization and
investment expense (8) (8) (11)
- -------------------------------------------------------------------
Realized investment gains
(losses) before taxes 5 (28) 20
Income tax expense (benefit) 2 (10) 7
- -------------------------------------------------------------------
Net realized investment
gains (losses) $ 3 $ (18) $ 13
- -------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
8
<PAGE> 532
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
In millions
- --------------------------------------------------------------------------------
2.3 FIXED MATURITY AND EQUITY SECURITIES
VALUATION. Amortized cost and fair value of fixed maturity and equity
securities at December 31 were as follows:
<TABLE>
<CAPTION>
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
----------------- ---------------------- ----------------------- -----------------
1999 1998 1999 1998 1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 159 $ 299 $ 10 $ 38 $ (1) $ -- $ 168 $ 337
Obligations of states and
political subdivisions 105 56 -- 3 (7) -- 98 59
Debt securities issued by
foreign governments 134 232 3 17 -- -- 137 249
Corporate securities 16,584 16,153 122 934 (639) (73) 16,067 17,014
Mortgage-backed securities 4,774 4,948 31 227 (58) (1) 4,747 5,174
Affiliated fixed maturity securities 27 25 -- -- -- -- 27 25
Redeemable preferred stock 14 20 -- -- -- -- 14 20
- --------------------------------------------------------------------------------------------------------------------------------
Total fixed maturity securities $21,797 $21,733 $ 166 $ 1,219 $ (705) $ (74) $21,258 $22,878
- --------------------------------------------------------------------------------------------------------------------------------
Equity securities $ 182 $ 176 $ 38 $ 18 $ -- $ -- $ 220 $ 194
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2.3 FIXED MATURITY AND EQUITY SECURITIES- (CONTINUED)
MATURITIES. The contractual maturities of fixed maturity securities at
December 31, 1999 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 $ 600 $ 602
In years two through five 4,558 4,576
In years six through ten 6,584 6,383
After ten years 5,281 4,950
Mortgage-backed securities 4,774 4,747
- ------------------------------------------------------------
Total fixed maturity securities $ 21,797 $21,258
- ------------------------------------------------------------
</TABLE>
Actual maturities may differ from contractual maturities since borrowers
may have the right to call or prepay obligations. Corporate requirements and
investment strategies may result in the sale of investments before maturity.
2.4 NET UNREALIZED GAINS (LOSSES) ON SECURITIES
Net unrealized gains (losses) on fixed maturity and equity securities
included in accumulated other comprehensive income (loss) at December 31 were as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized gains $ 204 $ 1,237 $ 1,011
Gross unrealized losses (705) (74) (21)
DPAC adjustments 159 (340) (512)
Deferred federal income taxes 55 (296) (172)
- ------------------------------------------------------------
Net unrealized gains
(losses) on securities $ (287) $ 527 $ 306
- ------------------------------------------------------------
</TABLE>
2.5 MORTGAGE LOANS ON REAL ESTATE
DIVERSIFICATION. Diversification of the geographic location and type of
property collateralizing mortgage loans reduces the concentration of credit
risk. For new loans, VALIC requires loan-to-value ratios of 75% or less, based
on management's credit assessment of the borrower.
At December 31 the mortgage loan portfolio was distributed as follows:
<TABLE>
<CAPTION>
1999 1998
- ---------------------------------------------
<S> <C> <C>
Geographic distribution:
Atlantic $ 656 $ 645
Pacific and Mountain 377 328
Central 459 252
Allowance for losses (14) (12)
- ---------------------------------------------
Total mortgage loans $ 1,478 $ 1,213
- ---------------------------------------------
Property type:
Office $ 577 $ 467
Retail 512 359
Industrial 265 250
Apartments 106 94
Residential and other 32 55
Allowance for losses (14) (12)
- ---------------------------------------------
Total mortgage loans $ 1,478 $ 1,213
- ---------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE> 533
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
In millions
2.5 MORTGAGE LOANS ON REAL ESTATE - (CONTINUED)
ALLOWANCE. Activity in the allowance for mortgage loan losses was as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1 $ 12 $ 21 $ 44
Provision for (recovery of)
mortgage loan losses 4 (7) (18)
Deductions (2) (2) (5)
- ----------------------------------------------------------
Balance at December 31 $ 14 $ 12 $ 21
- ----------------------------------------------------------
</TABLE>
IMPAIRED LOANS. Impaired mortgage loans were $17 million, $13 million, and
$28 million at December 31, 1999, 1998, and 1997, respectively. The average
investment in impaired loans was $15 million, $20 million, and $37 million at
December 31, 1999, 1998, and 1997, respectively. Interest income related to
impaired loans was $0 for 1999 and 1998, and $3 million in 1997.
2.6 CASH FLOWS FROM INVESTING ACTIVITIES
Uses of cash for investment purchases were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturity securities $ 10,823 $ 5,469 $ 5,175
Other 17,388 9,711 13,228
- ------------------------------------------------------------
Total $ 28,211 $ 15,180 $ 18,403
- ------------------------------------------------------------
</TABLE>
Sources of cash from investment dispositions and repayments were as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturity securities $ 10,829 $ 4,444 $ 4,224
Mortgage loans on
real estate 133 241 299
Equity securities 42 8 3
Real estate 4 17 22
Other 16,781 10,022 12,952
- ------------------------------------------------------------
Total $ 27,789 $ 14,732 $ 17,500
- ------------------------------------------------------------
</TABLE>
3
DEFERRED POLICY ACQUISITION COSTS (DPAC)
Activity in DPAC was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1 $ 665 $ 392 $ 558
Deferrals:
Commissions 90 83 77
Other acquisition costs 106 77 61
Amortization:
Accretion of interest 78 73 65
Operating earnings (134) (128) (107)
Offset to realized gains (3) (4) (11)
Effect of net unrealized
(gains) losses on securities 499 172 (251)
- -----------------------------------------------------------------
Balance at December 31 $ 1,301 $ 665 $ 392
- -----------------------------------------------------------------
</TABLE>
4
COST OF INSURANCE PURCHASED (CIP)
Activity in CIP was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1 $ 22 $ -- $ --
Additions from acquisitions -- 24 --
Accretion of interest 1 1 --
Amortization (4) (3) --
- -----------------------------------------------------------
Balance at December 31 $ 19 $ 22 $ --
- -----------------------------------------------------------
</TABLE>
CIP amortization, net of accretion, expected to be recorded in each of the
next five years is $3 million, $2 million, $2 million, $2 million, and $1
million.
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>
1999 1998
- ----------------------------------------------------------------------
<S> <C> <C>
Current tax liabilities (assets) $ 18 $ (14)
- ----------------------------------------------------------------------
Deferred tax liabilities, applicable to:
Basis differential of investments 31 438
DPAC and CIP 451 230
Other 40 32
- ----------------------------------------------------------------------
Total deferred tax liabilities 522 700
- ----------------------------------------------------------------------
Deferred tax assets, applicable to:
Policy reserves (140) (134)
Basis differential of investments (176) (2)
Other (8) (8)
- ----------------------------------------------------------------------
Gross deferred tax assets (324) (144)
Valuation allowance 68 --
- ----------------------------------------------------------------------
Total deferred tax assets, net (256) (144)
- ----------------------------------------------------------------------
Net deferred tax liabilities 266 556
- ----------------------------------------------------------------------
Total income tax liabilities $ 284 $ 542
- ----------------------------------------------------------------------
</TABLE>
The 1999 deferred tax asset applicable to basis differential of investments
was due to unrealized losses on securities. Since a portion of this deferred tax
asset may not be realized, a valuation allowance of $68 million was provided at
December 31, 1999. This valuation allowance had no income statement impact.
- --------------------------------------------------------------------------------
10
<PAGE> 534
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- -------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
In millions
5.3 TAX EXPENSE
Components of income tax expense were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 133 $ 78 $ 114
State 4 2 3
- ------------------------------------------------------------------------------
Total current income tax expense 137 80 117
- ------------------------------------------------------------------------------
Deferred, applicable to:
DPAC 48 35 29
Policy reserves (6) 4 (15)
Basis differential of investments 8 13 4
Other, net 8 5 9
- ------------------------------------------------------------------------------
Total deferred income tax expense 58 57 27
- ------------------------------------------------------------------------------
Income tax expense $ 195 $ 137 $ 144
- ------------------------------------------------------------------------------
</TABLE>
A reconciliation between the federal income tax rate and the effective tax
rate follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal income tax rate 35% 35% 35%
Income tax expense at applicable rate $ 200 $ 147 $ 146
Dividends received deduction (13) (8) (5)
Tax-exempt interest (ESOP) (2) (3) (4)
State income taxes 5 4 4
Other items 5 (3) 3
- ------------------------------------------------------------------------------
Income tax expense $ 195 $ 137 $ 144
- ------------------------------------------------------------------------------
</TABLE>
Income taxes paid were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal $ 99 $ 93 $ 106
State 1 3 3
- -------------------------------------------------------------------------------
</TABLE>
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 2000 is
$240 million.
7
DERIVATIVE FINANCIAL INSTRUMENTS
7.1 INTEREST RATE AND CURRENCY SWAP AGREEMENTS
Interest rate and currency swap agreements related to investment
securities at December 31 were as follows:
<TABLE>
<CAPTION>
1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
Interest rate swap agreements
to pay fixed rate
Notional amount $ 132 $ 332
Average receive rate 6.72 % 5.97%
Average pay rate 6.52 5.37
- -------------------------------------------------------------------------------------
Currency swap agreements (receive U.S. $/pay Canadian $)
Notional amount (in U.S. $) $108 $ 108
Average exchange rate 1.50 1.50
- -------------------------------------------------------------------------------------
Currency swap agreements (receive U.S. $/pay Australian $)
Notional amount (in U.S. $) $ 23 $ --
Average exchange rate 1.85 --
- -------------------------------------------------------------------------------------
</TABLE>
7.2 SWAPTIONS
Swaptions at December 31 were as follows:
<TABLE>
<CAPTION>
1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
Call swaptions
Notional amount $ 2 $ 950
Average strike rate 4.63% 4.07%
- -------------------------------------------------------------------------------------
Put swaptions
Notional amount $ 1 $ 690
Average strike rate 8.50% 8.33%
- -------------------------------------------------------------------------------------
</TABLE>
The swaptions outstanding at December 31, 1999 expire in 2000. 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.
7.3 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> 535
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
In millions
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,
including the values of underlying customer relationships and distribution
systems, and (2) the reporting of investments at fair value without a
corresponding revaluation of related policyholder liabilities can be
misinterpreted.
<TABLE>
<CAPTION>
1999 1998
---------------------------------- -------------------------------------
FAIR VALUE CARRYING AMOUNT Fair Value Carrying Amount
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Fixed maturity and equity securities $ 21,478* $ 21,478* $ 23,072 * $ 23,072
Mortgage loans on real estate 1,414 1,478 1,252 1,213
Policy loans 806 849 801 789
Short-term investments 94 94 164 164
Assets held in Separate Accounts 21,390 21,390 14,712 14,712
Liabilities
Insurance investment contracts $ 21,817 $ 23,441 $ 23,314 $ 23,219
Liabilities related to Separate Accounts 21,390 21,390 14,712 14,712
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Includes derivative financial instruments with a fair value of ($4) in
1999 and $19 in 1998.
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.
ASSETS AND LIABILITIES RELATED TO SEPARATE ACCOUNTS. Fair value of separate
account assets and liabilities was based on quoted net asset value per share of
the underlying mutual funds.
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, 1999 were as follows:
Operating expenses include $44 million in 1999, $47 million in 1998, and
$22 million in 1997, 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 $2 million in 1999, $0 in 1998, and
$1 million in 1997.
On November 4, 1982, VALIC invested $12 million in ~13 1?2% Restricted
Subordinated Note due November 4, 2002 issued by AGC. Principal payments of $1
million were received on November 4, 1999, 1998, and 1997. VALIC recognized $1
million in interest income during 1999, 1998, 1997.
On December 31, 1984, VALIC entered into a $49 million 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 $2.4 million were received on December 29, 1999, 1998, and
1997. VALIC recognized $1 million of interest income on the note during 1999,
1998, and 1997.
VALIC paid common stock dividends of $124 million, $34.69 per share; $181
million, $50.63 per share; and $379 million, $106.01 per share, to AGL in 1999,
1998, and 1997, respectively.
- --------------------------------------------------------------------------------
12
<PAGE> 536
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
In millions
9. TRANSACTIONS WITH AFFILIATED COMPANIES - (CONTINUED)
VALIC received capital contributions of $17 million, $122 million, and $250
million from AGL in 1999, 1998, and 1997, respectively.
VALIC acquired bonds of various issuers from American General Life and
Accident Insurance Company at a cost of $22 million and $26 million 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 $130 million.
10
COMMENTS 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. The accrued liability for
anticipated assessments was $6 million, $5 million, and $7 million, at December
31, 1999, 1998, and 1997, respectively. The 1999 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
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.
The components of pension expense and underlying assumptions for the
defined benefit plan were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------
<S> <C> <C> <C>
Service cost (benefits earned)
during period $ 1 $ 2 $ 1
Interest cost on projected
benefit obligation 2 1 1
Expected return on plan assets (1) (1) --
- ------------------------------------------------------------
Total pension expense $ 2 $ 2 $ 2
- ------------------------------------------------------------
Weighted-average discount rate
on benefit obligation 7.75% 7.00% 7.25%
Rate of increase in
compensation levels 4.25 4.25 4.00
Expected long-term rate of
return on plan assets 10.35 10.25 10.00
- ------------------------------------------------------------
</TABLE>
The following table sets forth the funded status and amounts recognized in
the consolidated balance sheet at December 31, 1999 and 1998 for VALIC's defined
benefit pension plan:
<TABLE>
<CAPTION>
1999 1998
- -----------------------------------------------------------
<S> <C> <C>
Projected benefit obligation $ 22 $ 21
Plan assets at fair value 18 15
- -----------------------------------------------------------
Projected benefit obligation in excess of
plan assets (4) (6)
Unrecognized net gain (loss) (2) 1
- -----------------------------------------------------------
Net pension liability $ (6) $ (5)
- -----------------------------------------------------------
</TABLE>
At December 31, 1999, the plans' assets were invested as follows: (1) 71%
in equity mutual funds managed outside of AGC; (2) 26% in fixed income mutual
funds managed by one of AGC's subsidiaries; (3) 1% in AGC stock; and (4) 1% in
deposit administration insurance contracts issued by AGC subsidiaries.
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.
The life plans are fully insured; the retiree medical and dental plans are
unfunded and self-insured. The accrued liability for postretirement benefits was
$2.7 million and $2.4 million at year-end 1999 and 1998, respectively. These
liabilities were discounted at the same rates used for the pension plans.
Postretirement benefit expense in 1999, 1998, and 1997 was immaterial.
- --------------------------------------------------------------------------------
13
<PAGE> 537
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
In millions
12
IMPACT OF YEAR 2000 (UNAUDITED)
As of March 10, 2000, all of VALIC's major technology systems, programs,
and applications, including those which rely on third parties, are operating
smoothly following the transition into 2000. No interruptions to normal business
operations have been experienced, including the processing of customer account
data and transactions. VALIC will continue to monitor its technology systems,
including critical third party dependencies, as necessary to maintain Year 2000
readiness. VALIC does not expect any future disruptions, if they occur, to have
a material effect on the results of operations, liquidity, or financial
condition.
Through December 31, 1999, VALIC incurred and expensed pretax costs of $32
million related to Year 2000 readiness, including $5 million in 1999, $20
million in 1998, and $6 million in 1997. In addition, the planned replacement of
certain systems was accelerated as part of the Year 2000 plans. The cost of
these replacement systems was immaterial. VALIC does not anticipate incurring
any significant costs in the future to maintain Year 2000 readiness.
- --------------------------------------------------------------------------------
14
<PAGE> 538
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, 2000
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, 2000 ("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 American General Distributors,
Inc. (the "Distributor") at 2929 Allen Parkway, Houston, Texas 77019;
1-800-44-VALIC. Prospectuses are also available from regional sales offices of
the Distributor or from its registered sales representatives.
VA 10855-1 REV 5/00 1
<PAGE> 539
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information......................................... 4
Marketing Information..................................... 4
Endorsements and Published Ratings........................ 5
Types of Variable Annuity Contracts......................... 6
Federal Tax Matters......................................... 6
Tax Consequences of Purchase Payments..................... 6
Tax Consequences of Distributions......................... 8
Special Tax Consequences -- Early Distribution............ 9
Special Tax Consequences -- Required Distributions........ 10
Tax Free Rollovers, Transfers and Exchanges............... 11
Exchange Privilege.......................................... 11
Exchanges From Portfolio Director......................... 12
Exchanges From Portfolio Director 2....................... 12
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........................... 16
Exchanges From Compounder Contracts....................... 17
Information Which May Be Applicable To Any Exchange....... 18
Calculation of Surrender Charge............................. 19
Illustration of Surrender Charge on Total Surrender....... 19
Illustration of Surrender Charge on a 10% Partial
Surrender Followed by a Full Surrender................. 19
Purchase Unit Value......................................... 20
Illustration of Calculation of Purchase Unit Value........ 20
Illustration of Purchase of Purchase Units................ 20
Performance Calculations.................................... 20
AGSPC Money Market and American General Money Market
Divisions Yields....................................... 20
Calculation of Current Yield for AGSPC Money Market
Division Six........................................... 20
Calculation of Current Yield for American General Money
Market Division 44..................................... 20
Illustration of Calculation of Current Yield for AGSPC
Money Market Division Six and American General Money
Market Division 44..................................... 20
Calculation of Effective Yield for AGSPC Money Market
Division Six........................................... 21
Calculation of Effective Yield for American General Money
Market Division 44..................................... 21
Illustration of Calculation of Effective Yield for AGSPC
Money Market Division Six and American General Money
Market Division 44..................................... 21
Standardized Yield for Bond Fund Divisions................ 21
Calculation of Standardized Yield for Bond Fund
Divisions.............................................. 21
Illustration of Calculation of Standardized Yield for Bond
Fund Divisions......................................... 21
Calculation of Average Annual Total Return................ 22
Calculation of MVA Option................................. 22
Performance Information..................................... 23
Hypothetical $10,000 Account Value and Cumulative Return
as Compared to Benchmark Tables........................ 23
Performance Compared to Market Indices.................... 23
AGSPC Asset Allocation Division Five...................... 27
AGSPC Capital Conservation Division Seven................. 28
AGSPC Government Securities Division Eight................ 28
AGSPC Growth Division Fifteen............................. 29
AGSPC Growth & Income Division Sixteen.................... 29
AGSPC International Equities Division Eleven.............. 30
AGSPC International Government Bond Division Thirteen..... 31
AGSPC MidCap Index Division Four.......................... 31
AGSPC Money Market Division Six........................... 32
AGSPC Science & Technology Division Seventeen............. 33
</TABLE>
2
<PAGE> 540
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AGSPC Small Cap Index Division Fourteen................... 33
AGSPC Social Awareness Division Twelve.................... 34
AGSPC Stock Index Division Ten............................ 35
American Century Ultra Division Thirty-One................ 35
American General Balanced Division Forty-Two.............. 36
American General Conservative Growth Lifestyle Division
Fifty.................................................. 36
American General Core Bond Division Fifty-Eight........... 37
American General Domestic Bond Division Forty-Three....... 38
American General Growth Lifestyle Division Forty-Eight.... 38
American General High Yield Bond Division Sixty........... 39
American General International Growth Division
Thirty-Three........................................... 39
American General International Value Division
Thirty-Four............................................ 40
American General Large Cap Growth Division Thirty-Nine.... 40
American General Large Cap Value Division Forty........... 41
American General Mid Cap Growth Division Thirty-Seven..... 41
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......... 43
American General Small Cap Growth Division Thirty-Five.... 43
American General Small Cap Value Division Thirty-Six...... 44
American General Socially Responsible Division
Forty-One.............................................. 44
American General Strategic Bond Division Fifty-Nine....... 45
Dreyfus Founders Growth Division Thirty................... 45
Dreyfus Variable Investment Fund -- Small Cap Portfolio
Division Eighteen...................................... 46
Evergreen Growth and Income Division Fifty-Six............ 47
Evergreen Small Cap Value Division Fifty-Five............. 47
Evergreen Value Division Fifty-Seven...................... 48
Neuberger Berman Guardian Trust Division Twenty-Nine...... 48
Putnam Global Growth -- Class A Division Twenty-Eight..... 49
Putnam New Opportunities -- Class A Division Twenty-Six... 50
Putnam OTC & Emerging Growth -- Class A Division
Twenty-Seven........................................... 50
Scudder Growth and Income Division Twenty-One............. 51
T. Rowe Price Small-Cap Stock Division Fifty-One.......... 52
Templeton Asset Strategy Division Nineteen................ 52
Templeton Foreign Division Thirty-Two..................... 53
Templeton International Securities Division Twenty........ 54
Vanguard LifeStrategy Conservative Growth Division
Fifty-Four............................................. 54
Vanguard LifeStrategy Growth Division Fifty-Two........... 55
Vanguard LifeStrategy Moderate Growth Division
Fifty-Three............................................ 56
Vanguard Long-Term Corporate Division Twenty-Two.......... 56
Vanguard Long-Term Treasury Division Twenty-Three......... 57
Vanguard Wellington Division Twenty-Five.................. 58
Vanguard Windsor II Division Twenty-Four.................. 59
Payout Payments............................................. 60
Assumed Investment Rate................................... 60
Amount of Payout Payments................................. 60
Payout Unit Value......................................... 60
Illustration of Calculation of Payout Unit Value.......... 61
Illustration of Payout Payments........................... 61
Distribution of Variable Annuity Contracts.................. 62
Experts..................................................... 62
Comments on Financial Statements............................ 62
</TABLE>
3
<PAGE> 541
GENERAL INFORMATION
MARKETING INFORMATION
The Company has targeted organizations in specific market sectors as the
central focus of its marketing efforts for its Contracts. The Company has
utilized as its general marketing theme the concept that the Company is
"America's Retirement Plan Specialists." Specifically, the Company's marketing
thrust is aimed at individuals and groups associated with public and private,
primary and secondary schools, colleges and universities, healthcare
organizations, state and local governments and other organizations.
This marketing concept has proven to be successful. In the aggregate,
premium deposits to the Company have grown from $37,000 in 1956 to more than
$4.2 billion as of December 31, 1999. The number of aggregate participant
accounts has increased from 155,000 accounts in 1980 to 2,191,033 accounts as of
December 31, 1999. As of December 31, 1999, 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, 1999 the Company's assets totaled more than $47 billion.
The Company's growth can also be reviewed by examining each market segment
the Company targets.
The Company's growth can also be reviewed by examining certain milestones,
the number of participant accounts and cash values amongst the various market
segments or groups the Company targets. These markets include, but are not
limited to, public, primary and secondary schools, colleges, universities, state
and local government groups and healthcare markets.
The Company, in its marketing efforts to each of the market segments may,
from time to time, design sales literature and material specifically for its
particular market segments. The sales literature and material may address
specifically the group's contract and retirement plan.
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 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 1000 Value 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).
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.
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, Inc. ("Lipper") Laffer-Cantos, Inc., The Variable
Annuity Research & Data Services ("VARDS") Report, Wilson Associates,
Morningstar, Inc. ("Morningstar") 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,
4
<PAGE> 542
the use of dollar cost averaging techniques, the tax status of contributions,
and the periodic rebalancing of diversified portfolios.
The Company may, from time to time, refer to the products of various
investment advisers and sub-advisers referenced in the prospectus. The Company
may mention assets under management and others facts specific to each adviser.
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. The Company may also refer to the term "preferred provider" with the
group's consent.
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, Morningstar and
CDA/Wiesenberger Investment Companies ("CDA/Wiesenberger") when discussing the
performance of its Divisions. Lipper, Morningstar and CDA/Wiesenberger are
leading publishers of statistical data about the investment company industry in
the United States.
Additionally, the Company may compare the performance of the Divisions to
categories published by Lipper and Morningstar. Morningstar has not, however,
ranked the Neuberger Berman Guardian Trust. The published categories which may
be utilized in comparison with the performance of the Divisions include the
Morningstar Growth and Income Mutual Fund Category, Morningstar Aggressive
Growth Mutual Fund Category, Morningstar Growth Mutual Fund Category,
Morningstar International Stock Mutual Fund Category, Lipper Growth and Income
Mutual Fund Category, Lipper Small Company Growth Mutual Fund Category, Lipper
Growth Mutual Fund Category and Lipper International Mutual Fund Category.
Additional Lipper or Morningstar categories may be utilized if they are deemed
by the Company
5
<PAGE> 543
relevant to the performance of the Company's Divisions.
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.
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. In 1999, the Internal Revenue Service ("IRS")
confirmed this opinion, reversing its previous position by modifying a contrary
ruling it had issued in 1981.
In its ruling in 1981, the 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 was
superseded by subsequent legislation (Code Section 817(h)) which specifically
exempts these Qualified Contracts, and the IRS had no viable legal basis or
reason to apply the theory of the 1981 ruling to these Qualified Contracts under
current law.
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.
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. 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.
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.
Your voluntary salary reduction contributions are generally limited to
$10,500 ($9,500 before 1998; $10,000 in 1998 and 1999), 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
6
<PAGE> 544
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 $32,000 or less ($31,000 for 1999, $30,000
for 1998, $25,000 or less prior to 1998); or
(iv) are active participants in another retirement plan, are married, and have
adjusted gross income of $52,000 or less ($51,000 for 1999, $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 2000 you and
your employer 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.
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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 were not permitted to exceed $10,000 per year. In 2000,
they may not exceed $10,500. 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.
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
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$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, 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;
(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
(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%
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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 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
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"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. Distributions must satisfy the
irrevocable election requirements applicable to 457 Plans.
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 Owner'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
Owner at the time of death. Similar distribution requirements will also apply if
the Owner is not a natural person, if the Annuitant dies or is changed.
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. A full or partial exchange of one annuity contract for another is a
tax-free transaction under Section 1035, provided that the requirements of that
Section are satisfied. However, the exchange is reportable to the IRS.
EXCHANGE PRIVILEGE
In the prospectus we described generally how under certain conditions we
will allow you to exchange from other fixed and/or variable contracts we issue
(other contracts) to Portfolio Director Plus. These other contracts are listed
in the prospec-
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tus. 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, or other investment
managers for advisory fees at annual rates ranging from .28% to .90% of each
portfolio's or mutual fund's average daily net assets. Three 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. Three 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.
Other Charges
Portfolio Director 2 and Portfolio Director Plus have the same provisions
for imposing the quarterly account maintenance fee.
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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. Three 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. Three fixed investment options are also
available.
Annuity Options
Portfolio Director, Portfolio Director 2 and Portfolio Director Plus
provide the same annuity options.
EXCHANGES FROM INDEPENDENCE PLUS CONTRACTS
Sales/Surrender Charges. Under an Independence Plus Contract, no sales
charge is deducted at the time a Purchase Payment is made, but a surrender
charge may be imposed on partial or total surrenders. The surrender charge may
not exceed 5% of any Purchase Payments withdrawn within five years of the date
such Purchase Payments were made. The most recent Purchase Payments are deemed
to be withdrawn first. Up to 10% of the Account Value may be surrendered in a
Participant Year without any surrender charge being imposed. Portfolio Director
Plus imposes a similar surrender charge upon total or partial surrenders. Both
the Portfolio Director Plus and Independence Plus Contracts have other similar
provisions where surrender charges are not imposed. However, Portfolio Director
Plus provides at least one additional provision, not included in Independence
Plus Contracts, under which no surrender charge will be imposed. An additional
provision allows election of a systematic withdrawal method without surrender
charges. (See "Surrender Charge" in the prospectus.) For purposes of satisfying
the fifteen-year and five-year holding requirements described under "Surrender
Charge" in the prospectus, Portfolio Director Plus will be deemed to have been
issued on the same date as the Independence Plus Contract or certificate
thereunder, but no earlier than January 1, 1982. Purchase Payments exchanged
into Portfolio Director Plus and which were made within five years before the
date of exchange will be treated as Purchase Payments under Portfolio Director
Plus for purposes of calculating the surrender charge. Exchanged payments will
be deemed to have been made under Portfolio Director Plus on the date they were
made to Independence Plus Contracts for purposes of calculating the surrender
charge under Portfolio Director Plus.
Other Charges. Under the Independence Plus Contracts, a maintenance charge
of $20 is assessed for the first year and an annual charge of $15 is assessed
for the second and later years during the accumulation period. The charge is due
in quarterly installments. A daily fee is charged at the annual rate of 1% of
the daily net asset value allocable to the Variable Subaccounts to cover
administrative expenses (other than those covered by the annual charge) and
mortality risks assumed by the Company. For Portfolio Director Plus, a quarterly
account maintenance fee of $3.75 is assessed for each calendar quarter during
the Purchase Period during which any Variable Account Option Account Value is
credited to a Participant's Account. The fee is to reimburse the Company for
some of the administrative expenses associated with the Variable Account
Options. No fee is assessed for any calendar quarter if the Account Value is
credited only to the Fixed
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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 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. Three 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 to the V-Plan Contract for purposes of calculating the surrender charge
under Portfolio Director Plus.
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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, 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 as-
15
<PAGE> 553
sessed 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 either by 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. Three
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 requirements, Portfolio Director Plus will be
deemed to have been issued on the same date as the Impact Contract, or
certificate thereunder, but no earlier
16
<PAGE> 554
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
either by 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. Three 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 the case of a partial surrender, all
Purchase Payments to Portfolio Director Plus will be deemed to be withdrawn
before any Exchanged Amount is
17
<PAGE> 555
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 Plus provides for a
designated period of 5 and 30 years. Unlike Portfolio Director Plus, 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.
Under certain deferred annuity contracts issued before October 21, 1979,
upon the death of the owner the entire value of the contract as of the date of
death may be received income tax free by the beneficiary. This will not apply to
contracts that have been exchanged on or after October 21, 1979.
18
<PAGE> 556
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>
10/1/94......................... Purchase Payment $10,000
10/1/95......................... Purchase Payment 5,000
10/1/96......................... Purchase Payment 15,000
10/1/97......................... Purchase Payment 2,000
10/1/98......................... Purchase Payment 3,000
10/1/99......................... Purchase Payment 4,000
12/31/99........................ 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 10/1/94................................... $ 0
2. Surrender Charge against Purchase Payment of 10/1/95................................... $ 250
3. Surrender Charge against Purchase Payment of 10/1/96................................... $ 750
4. Surrender Charge against Purchase Payment of 10/1/97................................... $ 100
5. Surrender Charge against Purchase Payment of 10/1/98................................... $ 150
6. Surrender Charge against Purchase Payment of 10/1/99................................... $ 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>
10/1/94......................... Purchase Payment $10,000
10/1/95......................... Purchase Payment 5,000
10/1/96......................... Purchase Payment 15,000
10/1/97......................... Purchase Payment 2,000
10/1/98......................... Purchase Payment 3,000
10/1/99......................... Purchase Payment 4,000
12/31/99........................ 10% Partial Surrender (Assumes 3,900
Account Value is $39,000)
2/1/00.......................... 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.
19
<PAGE> 557
PURCHASE UNIT VALUE
The calculation of Purchase Unit value is discussed in the Prospectus under
"Purchase Period." The following illustrations show a calculation of a new Unit
value and the purchase of Purchase Units (using hypothetical examples):
ILLUSTRATION OF CALCULATION OF PURCHASE UNIT VALUE
Example 3.
<TABLE>
<S> <C>
1. Purchase Unit value, beginning of
period................................ $ 1.800000
2. Value of Fund share, beginning of
period................................ $ 21.200000
3. Change in value of Fund share........ $ .500000
4. Gross investment return (3)/(2)...... .023585
5. Daily separate account fee*.......... .000027
*Mortality and expense risk fee and
administration and distribution
fee of 1% per annum used for
illustrative purposes.
6. Net investment return (4)-(5)........ .023558
7. Net investment factor 1.000000+(6)... 1.023558
8. Purchase Unit value, end of period
(1)X(7)............................... $ 1.842404
</TABLE>
ILLUSTRATION OF PURCHASE OF PURCHASE UNITS (ASSUMING NO STATE PREMIUM TAX)
Example 4.
<TABLE>
<S> <C>
1. First Periodic Purchase Payment.......................... $ 100.00
2. Purchase Unit value on effective date of purchase (see
Example 3)............................................... $ 1.800000
3. Number of Purchase Units purchased (1)/(2)............... 55.556
4. Purchase Unit value for valuation date following purchase
(see Example 3).......................................... $ 1.842404
5. Value of Purchase Units in account for valuation date
following purchase (3)X(4)............................... $ 102.36
</TABLE>
PERFORMANCE CALCULATIONS*
AGSPC MONEY MARKET AND AMERICAN GENERAL MONEY MARKET DIVISIONS YIELDS
CALCULATION OF CURRENT YIELD FOR AGSPC MONEY MARKET DIVISION SIX
7-Day Current Yield: 4.31%
CALCULATION OF CURRENT YIELD FOR AMERICAN GENERAL MONEY MARKET DIVISION 44
7-Day Current Yield: 4.55%
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, 1999 ("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.
20
<PAGE> 558
CALCULATION OF EFFECTIVE YIELD FOR AGSPC MONEY MARKET DIVISION SIX
7-Day Effective Yield: 4.40%
CALCULATION OF EFFECTIVE YIELD FOR AMERICAN GENERAL MONEY MARKET DIVISION 44
7-Day Effective Yield: 4.66%
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, 1999 ("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:
365/7
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1) ] -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........... 6.31% 5.44% 3.28% 6.42% 5.60% 5.29% 5.64% 7.34% 10.21%
</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, 1999 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:
6
YIELD = 2 [( a - b + 1) - 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.
21
<PAGE> 559
CALCULATION OF AVERAGE ANNUAL TOTAL RETURN
Average Annual Total Return quotations for the 1, 5, and 10 year periods
ended December 31, 1999, 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, 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, 5 or 10 year periods
of a hypothetical $1,000 Purchase Payment made at the
beginning of the 1, 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, 5 or 10 year
period and deduction of all nonrecurring charges at the end of each such period.
CALCULATION OF MVA OPTION
The effect of the market value adjustment may be positive or negative. If,
for example, on the date of a withdrawal, the index rate described below (plus
0.5%) is higher than that index rate as of the contract's date of issue, the
effect of the market value adjustment will be negative. If, for example, on the
date of a withdrawal, the index rate (plus 0.5%) is lower than that index rate
as of the contract's date of issue, the effect of the market value adjustment
will be positive. Any negative adjustment will be waived to the extent that it
would decrease the withdrawal value below the minimum guaranteed value.
The market value adjustment is determined by the formula below, using the
following factors:
- A is an index rate determined at the beginning of each MVA term, for a
security with time to maturity equal to that MVA term;
- B is an index rate determined at the time of withdrawal, for a security
with time to maturity equal to the current MVA term;
- N is the number of months remaining in the current MVA term (rounded up
to the next higher number of months); and
- The index rates for A and B will be the U.S. Treasury Yield as quoted by
Bloomberg or a comparable financial market news service, for the maturity
equal to the MVA term, using linear interpolation as appropriate.
The market value adjustment will equal:
The amount surrendered or transferred out prior to the end of the MVA term
multiplied by:
[(1+A)/(1+B+0.005)](N/12)-1
The market value adjustment will be added to or deducted from the amount
being withdrawn or transferred.
Index rates for any calendar month will equal the average of index rates
for the last 5 trading days of the previous calendar month.
22
<PAGE> 560
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" 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 in accordance with an asset
allocation model. The performance of the equity securities sector of the
Division 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 S&P
500 Index represents approximately 73% of the aggregate United States equity
markets capitalization.
- ---------------
* "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.
23
<PAGE> 561
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 3,600 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.
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,
Dreyfus Founders Growth Division Thirty, Neuberger Berman Guardian Trust
Division Twenty-Nine, Putnam New Opportunities Division Twenty-Six, Putnam OTC &
Emerging Growth Division Twenty-Seven, Scudder Growth and Income Division
Twenty-One, and Vanguard Windsor II Division Twenty-Four may be compared to the
S&P 500(R) Index.
The 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 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 its
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 $1.64 billion as of March 31, 2000. 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 than $100,000. The Index for 30 days is
published daily.
24
<PAGE> 562
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 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 1999, over 4,000
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 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 performance of Putnam Global Growth -- Class A Division Twenty-Eight
may be compared to the Morgan Stanley Capital International All Country World
Free Index ("MSCI All Country World Free Index"). Total returns (with income
reinvested) for the MSCI All Country World Free 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 unmanaged MSCI
- ---------------
** The "Russell 2000(R) Index" and the "Russell 1000(R) Index" are
trademark/servicemarks of the Frank Russell Trust Company. RussellTM is a
trademark of the Frank Russell Company.
25
<PAGE> 563
All Country World Free Index is an unmanaged index of global equity securities
available to non-domestic investors, with all values expressed in U.S. dollars.
The performance of the Templeton Asset Strategy Division Nineteen may be
compared to the performance of the equity securities sector of the Division as
reflected in the MSCI All Country World Free. The performance of the
intermediate or long-term debt securities sector may be compared to the JP
Morgan Global Government Bond Index. The unmanaged MSCI Index measures the
performance of securities located in 48 countries, including emerging markets in
Latin America, Asia and Eastern Europe. The performance of Division Twenty-Eight
may also be compared to the S&P 500 Index. The JP Morgan Global Government Bond
Index tracks the performance of government bond markets in thirteen countries.
The performance of the Templeton International Securities Division Twenty
may be compared to the Morgan Stanley Capital International World Index ("MSCI
World Index"). The MSCI World Index is an unmanaged capitalization weighted
index consisting of more than 1,364 issues from 22 countries as well as certain
South Africa gold. Total returns (with income reinvested) for the MSCI 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 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%).
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%).
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 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 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
26
<PAGE> 564
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, 1990
<TABLE>
<CAPTION>
ASSET ALLOCATION S&P 500 BLENDED
DIVISION FIVE INDEX INDEX***
- ---------------------------------------------------- -------- --------
<S> <C> <C> <C>
01/01/90.................................. $10,000 $10,000 $10,000
12/31/90.................................. 9,662 9,689 10,221
12/31/91.................................. 11,607 12,642 12,556
12/31/92.................................. 11,408 13,605 13,467
12/31/93.................................. 12,343 14,976 14,773
12/31/94.................................. 12,060 15,174 14,772
12/31/95.................................. 14,900 20,876 18,819
12/31/96.................................. 16,388 25,671 21,422
12/31/97.................................. 19,895 34,234 26,122
12/31/98.................................. 23,314 44,018 31,313
12/31/99.................................. 25,796 53,283 34,750
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division**
AGSPC Asset Allocation Division Five................... 157.96% 113.90% 10.65%
Benchmark Comparison
S&P 500 Index.......................................... 432.83% 251.15% 21.05%
Blended Index***....................................... 247.50% 135.23% 10.98%
</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.
27
<PAGE> 565
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, 1990
<TABLE>
<CAPTION>
MERRILL LYNCH
CAPITAL CONSERVATION CORPORATE MASTER
DIVISION SEVEN INDEX
- --------------------------------------------------------------- ----------------
<S> <C> <C>
01/01/90............................................. $10,000 $10,000
12/31/90............................................. 9,872 10,737
12/31/91............................................. 11,452 12,695
12/31/92............................................. 12,317 13,853
12/31/93............................................. 13,657 15,575
12/31/94............................................. 12,695 15,051
12/31/95............................................. 15,181 18,299
12/31/96............................................. 15,295 18,919
12/31/97............................................. 16,440 20,884
12/31/98............................................. 17,476 22,705
12/31/99............................................. 17,230 22,277
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC Capital Conservation Division Seven.............. 72.30% 35.72% (1.40)%
Benchmark Comparison
Merrill Lynch Corporate Master Index................... 122.77% 48.01% (1.89)%
</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, 1990
<TABLE>
<CAPTION>
LEHMAN BROTHERS
GOVERNMENT SECURITIES U.S. TREASURY
DIVISION EIGHT COMPOSITE INDEX
- --------------------------------------------------------------- ---------------
<S> <C> <C>
01/01/90............................................. $10,000 $10,000
12/31/90............................................. 10,491 10,861
12/31/91............................................. 11,917 12,529
12/31/92............................................. 12,648 13,435
12/31/93............................................. 13,875 14,878
12/31/94............................................. 13,120 14,368
12/31/95............................................. 15,260 17,005
12/31/96............................................. 15,397 17,476
12/31/97............................................. 16,602 19,131
12/31/98............................................. 17,908 21,059
12/31/99............................................. 17,238 20,518
</TABLE>
28
<PAGE> 566
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC Government Securities Division Eight............. 72.38% 31.39% (3.74)%
Benchmark Comparison
Lehman Brothers U.S. Treasury Composite Index.......... 105.18% 42.81% (2.57)%
</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
12/31/99................................................... 25,822 36,545
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC Growth Division Fifteen........................ 158.22% 157.75% 6.33%
Benchmark Comparison
S&P 500 Index........................................ 265.45% 251.15% 21.05%
</TABLE>
- ---------------
* This Division was initiated on April 29, 1994.
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
12/31/99................................................... 26,770 36,545
</TABLE>
29
<PAGE> 567
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC Growth & Income Division Sixteen............... 167.70% 169.54% 21.61%
Benchmark Comparison
S&P 500 Index........................................ 265.45% 251.15% 21.05%
</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 JANUARY 1, 1990
<TABLE>
<CAPTION>
INTERNATIONAL EQUITIES EAFE
DIVISION ELEVEN INDEX
- --------------------------------------------------------------------- --------
<S> <C> <C>
01/01/90................................................... $10,000 $10,000
12/31/90................................................... 7,910 7,655
12/31/91................................................... 8,705 8,584
12/31/92................................................... 7,459 7,539
12/31/93................................................... 9,591 9,993
12/31/94................................................... 10,253 10,771
12/31/95................................................... 11,245 11,978
12/31/96................................................... 11,891 12,702
12/31/97................................................... 12,031 12,928
12/31/98................................................... 14,145 15,513
12/31/99................................................... 18,088 19,696
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC International Equities Division Eleven........... 80.88% 76.42% 27.88%
Benchmark Comparison
EAFE Index............................................. 96.96% 82.87% 26.96%
</TABLE>
- ---------------
* This Division was initiated on October 2, 1989.
30
<PAGE> 568
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 BROTHERS
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
12/31/99................................................... 16,091 18,489
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC International Government Bond Division
Thirteen............................................. 60.91% 23.65% (6.88)%
Benchmark Comparison
Salomon Brothers Non-U.S. Dollar World Government Bond
Index................................................ 84.89% 32.07% (5.17)%
</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
12/31/99................................................. 34,376 38,948
</TABLE>
31
<PAGE> 569
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC MidCap Index Division Four.................... 243.76% 165.74% 13.78%
Benchmark Comparison
S&P MidCap 400 Index................................ 289.48% 182.11% 14.73%
</TABLE>
- ---------------
* The MidCap Index Fund was formerly known as the Capital Accumulation Fund.
Effective October 1, 1991, the Fund revised its investment objective,
investment program and investment restrictions accordingly, pursuant to
contract owner vote. ** The Division was originally initiated on October 13,
1982.
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, 1990
<TABLE>
<CAPTION>
MONEY MARKET PRIMARY
DIVISION SIX CD INDEX
- -------------------------------------------------- --------
<S> <C> <C>
01/01/90................................ $10,000 $10,000
12/31/90................................ 10,683 10,800
12/31/91................................ 11,163 11,390
12/31/92................................ 11,411 11,749
12/31/93................................ 11,602 12,053
12/31/94................................ 11,923 12,483
12/31/95................................ 12,460 13,100
12/31/96................................ 12,955 13,694
12/31/97................................ 13,490 14,349
12/31/98................................ 14,047 15,023
12/31/99................................ 14,568 15,693
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC Money Market Division Six........................ 45.68% 22.19% 3.71%
Benchmark Comparison
Primary CD Index....................................... 56.93% 25.71% 4.46%
</TABLE>
- ---------------
* The Division was initiated on January 16, 1986.
32
<PAGE> 570
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
12/31/99................................................... 63,990 36,545
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC Science & Technology Division Seventeen........ 539.90% 412.86% 98.96%
Benchmark Comparison
S&P 500 Index........................................ 265.45% 251.15% 21.05%
</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
12/31/99................................................ 25,226 28,828
</TABLE>
33
<PAGE> 571
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC Small Cap Index Division Fourteen................ 152.26% 106.38% 20.10%
Benchmark Comparison
Russell 2000 Index..................................... 188.28% 116.37% 21.26%
</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 JANUARY 1, 1990
<TABLE>
<CAPTION>
SOCIAL AWARENESS S&P 500
DIVISION TWELVE INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
01/01/90................................................... $10,000 $10,000
12/31/90................................................... 9,779 9,689
12/31/91................................................... 12,382 12,642
12/31/92................................................... 12,668 13,605
12/31/93................................................... 13,534 14,976
12/31/94................................................... 13,207 15,174
12/31/95................................................... 18,169 20,876
12/31/96................................................... 22,304 25,671
12/31/97................................................... 29,558 34,234
12/31/98................................................... 37,250 44,018
12/31/99................................................... 43,756 53,283
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC Social Awareness Division Twelve................. 337.56% 231.31% 17.46%
Benchmark Comparison
S&P 500 Index.......................................... 432.83% 251.15% 21.05%
</TABLE>
- ---------------
* This Division was initiated on October 2, 1989.
34
<PAGE> 572
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, 1990
<TABLE>
<CAPTION>
STOCK INDEX S&P 500
DIVISION TEN INDEX
- ------------------------------------------------------------------------ -------------
<S> <C> <C>
01/01/90................................................. $ 10,000 $ 10,000
12/31/90................................................. 9,517 9,689
12/31/91................................................. 12,154 12,642
12/31/92................................................. 12,833 13,605
12/31/93................................................. 13,960 14,976
12/31/94................................................. 13,918 15,174
12/31/95................................................. 18,921 20,876
12/31/96................................................. 22,994 25,671
12/31/97................................................. 30,299 34,234
12/31/98................................................. 38,522 44,018
12/31/99................................................. 45,985 53,283
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- -------- --------
<S> <C> <C> <C> <C>
Investment Division*
AGSPC Stock Index Division Ten............. 359.85% 230.40% 19.37%
Benchmark Comparison
S&P 500 Index.............................. 432.83% 251.15% 21.05%
</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, 1990
<TABLE>
<CAPTION>
NASDAQ
ULTRA S&P 500 COMPOSITE
DIVISION THIRTY-ONE INDEX INDEX***
- ---------------------------------------------------------- ------- ---------
<S> <C> <C> <C>
01/01/90......................................... $10,000 $10,000 $10,000
12/31/90......................................... 10,822 9,689 8,220
12/31/91......................................... 19,965 12,642 12,892
12/31/92......................................... 20,005 13,605 14,884
12/31/93......................................... 24,114 14,976 17,079
12/31/94......................................... 22,999 15,174 16,533
12/31/95......................................... 31,332 20,876 23,133
12/31/96......................................... 35,227 25,671 28,386
12/31/97......................................... 42,886 34,234 34,527
12/31/98......................................... 57,099 44,018 48,210
12/31/99......................................... 79,941 53,283 89,471
</TABLE>
35
<PAGE> 573
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division**
American Century Ultra Division Thirty-One........... 699.41% 247.59% 40.00%
Benchmark Comparison
S&P 500 Index........................................ 432.83% 251.15% 21.05%
NASDAQ Composite Index***............................ 794.71% 441.16% 85.59%
</TABLE>
- ---------------
* 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.
AMERICAN GENERAL BALANCED DIVISION FORTY-TWO PERFORMANCE COMPARED TO S&P 500
INDEX AND LEHMAN BROTHERS GOVERNMENT AND CORPORATE INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE SEPTEMBER 22, 1998
<TABLE>
<CAPTION>
BALANCED BLENDED
DIVISION FORTY-TWO INDEX**
- -------------------------------------------------------------------- -------
<S> <C> <C>
09/22/98................................................... $10,000 $10,000
12/31/98................................................... 11,412 11,267
12/31/99................................................... 12,904 12,552
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 1 YEAR
--------- ------
<S> <C> <C>
Investment Division*
American General Balanced Division Forty-Two........... 29.04% 13.07%
Benchmark Comparison
Blended Index**........................................ 25.52% 11.40%
</TABLE>
- ---------------
* This Division was initiated on September 22, 1998.
** The Blended Index is composed of the following indices: S&P 500 Index 60% and
Lehman Brothers Government and Corporate Index 40%.
AMERICAN GENERAL CONSERVATIVE GROWTH LIFESTYLE DIVISION FIFTY COMPARED TO
BLENDED INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE SEPTEMBER 22, 1998
<TABLE>
<CAPTION>
CONSERVATIVE GROWTH LIFESTYLE BLENDED
DIVISION FIFTY INDEX(1)**
- ------------------------------------------------------------------ ----------
<S> <C> <C>
09/22/98................................................. $10,000 $10,000
12/31/98................................................. 11,278 11,126
12/31/99................................................. 12,684 12,309
</TABLE>
36
<PAGE> 574
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)(1)
<TABLE>
<CAPTION>
SINCE
INCEPTION 1 YEAR
--------- ------
<S> <C> <C>
Investment Division*
American General Conservative Growth Lifestyle Division
Fifty................................................. 26.84% 12.47%
Benchmark Comparison
Blended Index(1)**..................................... 23.09% 10.63%
</TABLE>
- ---------------
(1) Reflects returns from October 1, 1998 to December 31, 1999, because the
benchmark's value is only published at the end of each month.
* This Division was initiated on September 22, 1998.
** The Conservative Growth Lifestyle Blended Index is composed of the following
indices: EAFE 5%, Salomon Brothers Primary Market Index 5%, S&P 500 15%,
Russell 1000 Value 15%, Russell Mid Cap Growth 5%, Russell Mid Cap Value 5%,
Lehman Aggregate 40%, Russell 2000 Growth 5% and Russell 2000 Value 5%.
AMERICAN GENERAL CORE BOND DIVISION FIFTY-EIGHT PERFORMANCE COMPARED TO
LEHMAN BROTHERS AGGREGATE INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE SEPTEMBER 22, 1998
<TABLE>
<CAPTION>
LEHMAN
CORE BOND BROTHERS
DIVISION FIFTY-EIGHT AGGREGATE INDEX
- --------------------------------------------------------------- ---------------
<S> <C> <C>
09/22/98.............................................. $10,000 $10,000
12/31/98.............................................. 10,186 10,145
12/31/99.............................................. 9,993 10,061
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 1 YEAR
--------- ------
<S> <C> <C>
Investment Division*
American General Core Bond Division Fifty-Eight........ (0.07)% (1.89)%
Benchmark Comparison
Lehman Brothers Aggregate Index........................ 0.61% (0.83)%
</TABLE>
- ---------------
* This Division was initiated on September 22, 1998.
37
<PAGE> 575
AMERICAN GENERAL DOMESTIC BOND DIVISION FORTY-THREE PERFORMANCE COMPARED TO
LEHMAN BROTHERS AGGREGATE INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE SEPTEMBER 22, 1998
<TABLE>
<CAPTION>
DOMESTIC BOND LEHMAN BROTHERS
DIVISION FORTY-THREE AGGREGATE INDEX
- -------------------------------------------------------------- ---------------
<S> <C> <C>
09/22/98............................................. $10,000 $10,000
12/31/98............................................. 10,286 10,145
12/31/99............................................. 9,894 10,061
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 1 YEAR
--------- ------
<S> <C> <C>
Investment Division*
American General Domestic Bond Division Forty-Three.... (1.06)% (3.81)%
Benchmark Comparison
Lehman Brothers Aggregate Index........................ 0.61% (0.83)%
</TABLE>
- ---------------
* This Division was initiated on September 22, 1998
AMERICAN GENERAL GROWTH LIFESTYLE DIVISION FORTY-EIGHT COMPARED TO BLENDED INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE SEPTEMBER 22, 1998
<TABLE>
<CAPTION>
GROWTH LIFESTYLE BLENDED
DIVISION FORTY-EIGHT INDEX(1)**
- ---------------------------------------------------------------- ------------
<S> <C> <C>
09/22/98............................................... $10,000 $10,000
12/31/98............................................... 11,630 11,709
12/31/99............................................... 15,001 13,867
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)(1)
<TABLE>
<CAPTION>
SINCE
INCEPTION 1 YEAR
--------- ------
<S> <C> <C>
Investment Division*
American General Growth Lifestyle Division
Forty-Eight........................................... 50.01% 28.99%
Benchmark Comparison
Blended Index(1)**..................................... 38.67% 18.43%
</TABLE>
- ---------------
(1) Reflects returns from October 1, 1998 to December 31, 1999, because the
benchmark's value is only published at the end of each month.
* This Division was initiated on September 22, 1998.
** The Growth Lifestyle Blended Index is composed of the following indices:
EAFE 15%, Salomon Brothers Primary Market Index 15%, S&P 500 13%, Russell
1000 Value 12%, Russell Mid Cap Growth 7%, Russell Mid Cap Value 8%, Lehman
Aggregate 10%, Russell 2000 Growth 10% and Russell 2000 Value 10%.
38
<PAGE> 576
AMERICAN GENERAL HIGH YIELD BOND DIVISION SIXTY PERFORMANCE COMPARED TO
SALOMON BROTHERS HIGH YIELD MARKET INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE SEPTEMBER 22, 1998
<TABLE>
<CAPTION>
SALOMON BROTHERS
HIGH YIELD BOND HIGH YIELD MARKET
DIVISION SIXTY INDEX(1)
- ------------------------------------------------------------- -----------------
<S> <C> <C>
09/22/98............................................ $10,000 $10,000
12/31/98............................................ 10,506 10,350
12/31/99............................................ 10,734 10,529
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)(1)
<TABLE>
<CAPTION>
SINCE
INCEPTION 1 YEAR
--------- ------
<S> <C> <C>
Investment Division *
American General High Yield Bond Division Sixty........ 7.34% 2.17%
Benchmark Comparison
Salomon Brothers High Yield Market Index(1)............ 5.29% 1.74%
</TABLE>
- ---------------
(1) Reflects returns from October 1, 1998 to December 31, 1999, because the
benchmark's value is only published at the end of each month.
* This Division was initiated on September 22, 1998.
AMERICAN GENERAL INTERNATIONAL GROWTH DIVISION THIRTY-THREE PERFORMANCE COMPARED
TO
SALOMON PRIMARY MARKET WORLD INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE SEPTEMBER 22, 1998
<TABLE>
<CAPTION>
SALOMON PRIMARY
INTERNATIONAL GROWTH MARKET WORLD
DIVISION THIRTY-THREE INDEX
- -------------------------------------------------------------- ---------------
<S> <C> <C>
09/22/98............................................. $10,000 $10,000
12/31/98............................................. 11,031 12,092
12/31/99............................................. 17,148 15,056
</TABLE>
39
<PAGE> 577
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 1 YEAR
--------- ------
<S> <C> <C>
Investment Division*
American General International Growth Division
Thirty-Three.......................................... 71.48% 55.45%
Benchmark Comparison
Salomon Primary Market World Index..................... 50.56% 24.51%
</TABLE>
- ---------------
* This Division was initiated on September 22, 1998.
AMERICAN GENERAL INTERNATIONAL VALUE DIVISION THIRTY-FOUR PERFORMANCE COMPARED
TO
SALOMON PRIMARY MARKET WORLD INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE SEPTEMBER 22, 1998
<TABLE>
<CAPTION>
SALOMON PRIMARY
INTERNATIONAL VALUE MARKET WORLD
DIVISION THIRTY-FOUR INDEX
- -------------------------------------------------------------- ---------------
<S> <C> <C>
09/22/98............................................. $10,000 $10,000
12/31/98............................................. 11,998 12,092
12/31/99............................................. 19,987 15,056
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 1 YEAR
--------- ------
<S> <C> <C>
Investment Division*
American General International Value Division
Thirty-Four........................................... 99.87% 66.59%
Benchmark Comparison
Salomon Primary Market World Index..................... 50.56% 24.51%
</TABLE>
- ---------------
* This Division was initiated on September 22, 1998.
AMERICAN GENERAL LARGE CAP GROWTH DIVISION THIRTY-NINE PERFORMANCE COMPARED TO
RUSSELL 1000 GROWTH INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE SEPTEMBER 22, 1998
<TABLE>
<CAPTION>
LARGE CAP GROWTH RUSSELL 1000
DIVISION THIRTY-NINE GROWTH INDEX
- ----------------------------------------------------------------- ------------
<S> <C> <C>
09/22/98................................................ $10,000 $10,000
12/31/98................................................ 12,136 12,629
12/31/99................................................ 16,310 16,816
</TABLE>
40
<PAGE> 578
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 1 YEAR
--------- ------
<S> <C> <C>
Investment Division*
American General Large Cap Growth Division
Thirty-Nine........................................... 63.10% 34.39%
Benchmark Comparison
Russell 1000 Growth Index.............................. 68.16% 33.16%
</TABLE>
- ---------------
* This Division was initiated on September 22, 1998.
AMERICAN GENERAL LARGE CAP VALUE DIVISION FORTY PERFORMANCE COMPARED TO
RUSSELL 1000 VALUE INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE SEPTEMBER 22, 1998
<TABLE>
<CAPTION>
LARGE CAP VALUE RUSSELL 1000
DIVISION FORTY VALUE INDEX
- ----------------------------------------------------------------- ------------
<S> <C> <C>
09/22/98................................................ $10,000 $10,000
12/31/98................................................ 11,571 11,605
12/31/99................................................ 12,094 12,458
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 1 YEAR
--------- ------
<S> <C> <C>
Investment Division*
American General Large Cap Value Division Forty........ 20.94% 4.52%
Benchmark Comparison
Russell 1000 Value Index............................... 24.58% 7.35%
</TABLE>
- ---------------
* This Division was initiated on September 22, 1998.
AMERICAN GENERAL MID CAP GROWTH DIVISION THIRTY-SEVEN PERFORMANCE COMPARED TO
RUSSELL MID CAP GROWTH INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE SEPTEMBER 22, 1998
<TABLE>
<CAPTION>
MID CAP GROWTH RUSSELL MID CAP
DIVISION THIRTY-SEVEN GROWTH INDEX
- -------------------------------------------------------------- ---------------
<S> <C> <C>
09/22/98............................................. $10,000 $10,000
12/31/98............................................. 12,498 12,515
12/31/99............................................. 13,198 18,935
</TABLE>
41
<PAGE> 579
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 1 YEAR
--------- ------
<S> <C> <C>
Investment Division*
American General Mid Cap Growth Division
Thirty-Seven.......................................... 31.98% 5.60%
Benchmark Comparison
Russell Mid Cap Growth................................. 89.35% 51.29%
</TABLE>
- ---------------
* This Division was initiated on September 22, 1998.
AMERICAN GENERAL MID CAP VALUE DIVISION THIRTY-EIGHT PERFORMANCE COMPARED TO
RUSSELL MID CAP VALUE INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE SEPTEMBER 22, 1998
<TABLE>
<CAPTION>
MID CAP VALUE RUSSELL MID CAP
DIVISION THIRTY-EIGHT VALUE INDEX
- -------------------------------------------------------------- ---------------
<S> <C> <C>
09/22/98............................................. $10,000 $10,000
12/31/98............................................. 11,980 11,313
12/31/99............................................. 14,529 11,300
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 1 YEAR
--------- ------
<S> <C> <C>
Investment Division*
American General Mid Cap Value Division Thirty-Eight... 45.29% 21.28%
Benchmark Comparison
Russell Mid Cap Value.................................. 13.00% (0.11)%
</TABLE>
- ---------------
* This Division was initiated on September 22, 1998.
AMERICAN GENERAL MODERATE GROWTH LIFESTYLE DIVISION FORTY-NINE COMPARED TO
BLENDED INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE SEPTEMBER 22, 1998
<TABLE>
<CAPTION>
MODERATE GROWTH LIFESTYLE BLENDED
DIVISION FORTY-NINE INDEX(1)**
- ----------------------------------------------------------------- ------------
<S> <C> <C>
09/22/98................................................ $10,000 $10,000
12/31/98................................................ 11,483 11,398
12/31/99................................................ 13,538 12,967
</TABLE>
42
<PAGE> 580
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)(1)
<TABLE>
<CAPTION>
SINCE
INCEPTION 1 YEAR
--------- ------
<S> <C> <C>
Investment Division*
American General Moderate Growth Lifestyle Division
Forty-Nine............................................ 35.38% 17.90%
Benchmark Comparison
Blended Index(1)**..................................... 29.67% 13.77%
</TABLE>
- ---------------
(1) Reflects returns from October 1, 1998 to December 31, 1999, because the
benchmark's value is only published at the end of each month.
* This Division was initiated on September 22, 1998.
** The Moderate Growth Lifestyle Blended Index is composed of the following
indices: EAFE 7%, Salomon Brothers Primary Market Index 8%, S&P 500 15%,
Russell 1000 Value 15%, Russell Mid Cap Growth 7%, Russell Mid Cap Value 8%,
Lehman Aggregate 25%, Russell 2000 Growth 7% and Russell 2000 Value 8%.
AMERICAN GENERAL MONEY MARKET DIVISION FORTY-FOUR PERFORMANCE COMPARED TO
CERTIFICATE OF DEPOSIT PRIMARY OFFERING BY NEW YORK CITY BANKS, 30 DAY INDEX
(PRIMARY CD INDEX)
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE SEPTEMBER 22, 1998
<TABLE>
<CAPTION>
MONEY MARKET PRIMARY CD
DIVISION FORTY-FOUR INDEX
- ------------------------------------------------------------------ ----------
<S> <C> <C>
09/22/98................................................. $10,000 $10,000
12/31/98................................................. 10,108 10,122
12/31/99................................................. 10,511 10,573
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 1 YEAR
--------- ------
<S> <C> <C>
Investment Division*
American General Money Market Division Forty-Four...... 5.11% 3.98%
Benchmark Comparison
Primary CD Index....................................... 5.73% 4.46%
</TABLE>
- ---------------
* This Division was initiated on September 22, 1998.
AMERICAN GENERAL SMALL CAP GROWTH DIVISION THIRTY-FIVE PERFORMANCE COMPARED TO
RUSSELL 2000 GROWTH INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE SEPTEMBER 22, 1998
<TABLE>
<CAPTION>
SMALL CAP GROWTH RUSSELL 2000
DIVISION THIRTY-FIVE GROWTH INDEX
- ----------------------------------------------------------------- ------------
<S> <C> <C>
09/22/98................................................ $10,000 $10,000
12/31/98................................................ 12,230 12,422
12/31/99................................................ 20,598 17,774
</TABLE>
43
<PAGE> 581
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 1 YEAR
--------- ------
<S> <C> <C>
Investment Division*
American General Small Cap Growth Division
Thirty-Five........................................... 105.98% 68.43%
Benchmark Comparison
Russell 2000 Growth Index.............................. 77.74% 43.09%
</TABLE>
- ---------------
* This Division was initiated on September 22, 1998.
AMERICAN GENERAL SMALL CAP VALUE DIVISION THIRTY-SIX PERFORMANCE COMPARED TO
RUSSELL 2000 VALUE INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE SEPTEMBER 22, 1998
<TABLE>
<CAPTION>
SMALL CAP VALUE RUSSELL 2000
DIVISION THIRTY-SIX VALUE INDEX
- ----------------------------------------------------------------- ------------
<S> <C> <C>
09/22/98................................................ $10,000 $10,000
12/31/98................................................ 11,104 10,943
12/31/99................................................ 10,297 10,780
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 1 YEAR
--------- ------
<S> <C> <C>
Investment Division*
American General Small Cap Value Division Thirty-Six... 2.97% (7.27)%
Benchmark Comparison
Russell 2000 Value Index............................... 7.80% (1.49)%
</TABLE>
- ---------------
* This Division was initiated on September 22, 1998.
AMERICAN GENERAL SOCIALLY RESPONSIBLE DIVISION FORTY-ONE PERFORMANCE COMPARED TO
S&P 500 INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE SEPTEMBER 22, 1998
<TABLE>
<CAPTION>
SOCIALLY RESPONSIBLE S&P 500
DIVISION FORTY-ONE INDEX
- -------------------------------------------------------------------- -------
<S> <C> <C>
09/22/98................................................... $10,000 $10,000
12/31/98................................................... 11,915 12,052
12/31/99................................................... 13,963 14,588
</TABLE>
44
<PAGE> 582
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 1 YEAR
--------- ------
<S> <C> <C>
Investment Division*
American General Socially Responsible Division
Forty-One............................................. 39.63% 17.19%
Benchmark Comparison
S&P 500 Index.......................................... 45.88% 21.05%
</TABLE>
- ---------------
* This Division was initiated on September 22, 1998.
AMERICAN GENERAL STRATEGIC BOND DIVISION FIFTY-NINE PERFORMANCE COMPARED TO
LEHMAN BROTHERS AGGREGATE INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE SEPTEMBER 22, 1998
<TABLE>
<CAPTION>
STRATEGIC BOND LEHMAN BROTHERS
DIVISION FIFTY-NINE AGGREGATE INDEX
- -------------------------------------------------------------- ---------------
<S> <C> <C>
09/22/98............................................. $10,000 $10,000
12/31/98............................................. 10,380 10,145
12/31/99............................................. 10,698 10,061
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 1 YEAR
--------- ------
<S> <C> <C>
Investment Division*
American General Strategic Bond Division Fifty-Nine.... 6.98% 3.06%
Benchmark Comparison
Lehman Brothers Aggregate Index........................ 0.61% (0.83)%
</TABLE>
- ---------------
* This Division was initiated on September 22, 1998.
DREYFUS 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, 1990
<TABLE>
<CAPTION>
FOUNDERS GROWTH S&P 500
DIVISION THIRTY INDEX
- --------------------------------------------------------------------- --------
<S> <C> <C>
01/01/90................................................... $10,000 $10,000
12/31/90................................................... 8,852 9,689
12/31/91................................................... 12,919 12,642
12/31/92................................................... 13,335 13,605
12/31/93................................................... 16,576 14,976
12/31/94................................................... 15,864 15,174
12/31/95................................................... 22,871 20,876
12/31/96................................................... 26,382 25,671
12/31/97................................................... 33,044 34,234
12/31/98................................................... 40,896 44,018
12/31/99................................................... 56,289 53,283
</TABLE>
45
<PAGE> 583
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division**
Dreyfus Founders Growth Division Thirty.............. 462.89% 254.82% 37.64%
Benchmark Comparison
S&P 500 Index........................................ 432.83% 251.15% 21.05%
</TABLE>
- ---------------
* The Dreyfus Founders Growth Fund was formerly known as the Founders Growth
Fund.
** This Division was initiated on July 1, 1996.
DREYFUS VARIABLE INVESTMENT FUND -- 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
12/31/99............................................... 154,237 41,849
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE INCEPTION 5 YEARS 1 YEAR
--------------- ------- ------
<S> <C> <C> <C>
Investment Division*
Dreyfus Small Cap Division Eighteen................ 1,442.37% 97.42% 21.80%
Benchmark Comparison
Russell 2000 Index................................. 318.49% 116.37% 21.26%
</TABLE>
- ---------------
* This Division was initiated on July 11, 1994.
46
<PAGE> 584
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
12/31/99................................................. 24,533 28,192
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 1 YEAR
--------- ------
<S> <C> <C>
Investment Division*
Evergreen Growth and Income
Division Fifty-Six................................... 145.33% 13.29%
Benchmark Comparison
S&P MidCap 400 Index................................... 181.92% 14.73%
</TABLE>
- ---------------
* This Division was initiated on January 4, 1999.
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
12/31/99................................................ 18,156 21,655
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 1 YEAR
--------- ------
<S> <C> <C>
Investment Division**
Evergreen Small Cap Value
Division Fifty-Five.................................. 81.56% (0.45)%
Benchmark Comparison
Russell 2000 Index..................................... 116.55% 21.26%
</TABLE>
- ---------------
* The Evergreen Small Cap Value Fund was formerly known as the Evergreen Small
Cap Equity Income Fund.
** This Division was initiated on January 4, 1999.
47
<PAGE> 585
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, 1990
<TABLE>
<CAPTION>
EVERGREEN VALUE S&P 500
DIVISION FIFTY-SEVEN INDEX
- ------------------------------------------------------------------ -------
<S> <C> <C>
01/01/90................................................ $10,000 $10,000
12/31/90................................................ 9,561 9,689
12/31/91................................................ 11,846 12,642
12/31/92................................................ 12,659 13,605
12/31/93................................................ 13,702 14,976
12/31/94................................................ 13,821 15,174
12/31/95................................................ 18,042 20,876
12/31/96................................................ 21,247 25,671
12/31/97................................................ 26,456 34,234
12/31/98................................................ 28,689 44,018
12/31/99................................................ 29,667 53,283
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division*
Evergreen Value Division Fifty-Seven................... 196.67% 114.66% 3.41%
Benchmark Comparison
S&P 500 Index.......................................... 432.83% 251.15% 21.05%
</TABLE>
- ---------------
* This Division was initiated on January 4, 1999.
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
12/31/99................................................... 20,776 37,407
</TABLE>
48
<PAGE> 586
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division**
Neuberger Berman Guardian Trust Division Twenty-Nine... 107.76% 93.30% 7.36%
Benchmark Comparison
S&P 500 Index.......................................... 274.07% 251.15% 21.05%
</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 ALL COUNTRY WORLD FREE INDEX AND S&P 500 INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1990
<TABLE>
<CAPTION>
MSCI
ALL
COUNTRY
GLOBAL GROWTH -- CLASS A SHARES WORLD FREE S&P 500
DIVISION TWENTY-EIGHT INDEX INDEX
- --------------------------------------------------- ---------- --------
<S> <C> <C> <C>
01/01/90................................. $10,000 $10,000 $10,000
12/31/90................................. 8,991 8,352 9,689
12/31/91................................. 10,503 10,015 12,642
12/31/92................................. 10,424 9,591 13,605
12/31/93................................. 13,609 11,978 14,976
12/31/94................................. 13,360 12,580 15,174
12/31/95................................. 15,188 15,028 20,876
12/31/96................................. 17,522 17,012 25,671
12/31/97................................. 19,660 19,562 34,234
12/31/98................................. 25,063 23,860 44,018
12/31/99................................. 40,851 30,258 53,283
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division*
Putnam Global Growth -- Class A Shares Division
Twenty-Eight....................................... 308.51% 205.77% 63.00%
Benchmark Comparison
MSCI All Country World Free Index.................... 202.58% 140.53% 26.82%
S&P 500 Index........................................ 432.83% 251.15% 21.05%
</TABLE>
- ---------------
* This Division was initiated on July 1, 1996.
49
<PAGE> 587
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
12/31/99................................................... 122,017 57,003
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division*
Putnam New Opportunities -- Class A Shares Division
Twenty-Six........................................... 1,120.17% 298.49% 67.91%
Benchmark Comparison
S&P 500 Index.......................................... 470.03% 251.15% 21.05%
</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, 1990
<TABLE>
<CAPTION>
OTC & EMERGING GROWTH -- CLASS A SHARES RUSSELL S&P 500
DIVISION TWENTY-SEVEN 2000 INDEX
- ---------------------------------------------------- -------- --------
<S> <C> <C> <C>
01/01/90.................................. $10,000 $10,000 $10,000
12/31/90.................................. 8,928 8,047 9,689
12/31/91.................................. 12,451 11,760 12,642
12/31/92.................................. 13,892 13,925 13,605
12/31/93.................................. 18,165 16,554 14,976
12/31/94.................................. 18,389 16,252 15,174
12/31/95.................................. 28,397 20,876 20,876
12/31/96.................................. 29,398 24,319 25,671
12/31/97.................................. 32,068 29,758 34,234
12/31/98.................................. 35,234 29,000 44,018
12/31/99.................................. 79,125 35,164 53,283
</TABLE>
50
<PAGE> 588
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division*
Putnam OTC & Emerging Growth -- Class A Shares
Division Twenty-Seven............................. 691.25% 330,28% 124.57%
Benchmark Comparison
Russell 2000 Index.................................. 251.64% 116.37% 21.26%
S&P 500 Index....................................... 432.83% 251.15% 21.05%
</TABLE>
- ---------------
* This Division was initiated on July 1, 1996.
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, 1990
<TABLE>
<CAPTION>
SCUDDER GROWTH AND INCOME S&P 500
DIVISION TWENTY-ONE INDEX
- --------------------------------------------------------------------- --------
<S> <C> <C>
01/01/90................................................... $10,000 $10,000
12/31/90................................................... 9,647 9,689
12/31/91................................................... 12,212 12,642
12/31/92................................................... 13,213 13,605
12/31/93................................................... 15,086 14,976
12/31/94................................................... 15,287 15,174
12/31/95................................................... 19,806 20,876
12/31/96................................................... 23,892 25,671
12/31/97................................................... 30,772 34,234
12/31/98................................................... 32,308 44,018
12/31/99................................................... 33,954 53,283
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division*
Scudder Growth and Income
Division Twenty-One................................ 239.54% 122.11% 5.09%
Benchmark Comparison
S&P 500 Index........................................ 432.83% 251.15% 21.05%
</TABLE>
- ---------------
* This Division was initiated on July 1, 1996.
51
<PAGE> 589
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, 1990
<TABLE>
<CAPTION>
SMALL-CAP STOCK RUSSELL 2000
DIVISION FIFTY-ONE INDEX
- --------------------------------------------------------------------- ------------
<S> <C> <C>
01/01/90................................................... $10,000 $10,000
12/31/90................................................... 7,853 8,047
12/31/91................................................... 10,753 11,760
12/31/92................................................... 12,098 13,925
12/31/93................................................... 14,150 16,554
12/31/94................................................... 13,987 16,252
12/31/95................................................... 18,496 20,876
12/31/96................................................... 22,117 24,319
12/31/97................................................... 28,145 29,758
12/31/98................................................... 26,810 29,000
12/31/99................................................... 30,383 35,164
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division*
T. Rowe Price Small-Cap Stock
Division Fifty-One................................. 203.83% 117.22% 13.33%
Benchmark Comparison
Russell 2000 Index................................... 251.64% 116.37% 21.26%
</TABLE>
- ---------------
* This Division was initiated on September 22, 1998.
TEMPLETON ASSET STRATEGY* DIVISION NINETEEN PERFORMANCE COMPARED TO MSCI ALL
COUNTRY WORLD FREE INDEX AND JP MORGAN GLOBAL GOVERNMENT BOND INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1990
<TABLE>
<CAPTION>
JP MORGAN
MSCI GLOBAL
TEMPLETON ASSET STRATEGY WORLD GOVERNMENT
DIVISION NINETEEN INDEX BOND INDEX
- ------------------------------------------------------ ------- ----------
<S> <C> <C> <C>
01/01/90..................................... $10,000 $10,000 $10,000
12/31/90..................................... 9,087 8,298 11,176
12/31/91..................................... 11,461 9,815 12,902
12/31/92..................................... 12,234 9,303 13,490
12/31/93..................................... 15,242 11,396 15,144
12/31/94..................................... 14,597 11,974 15,338
12/31/95..................................... 17,665 14,455 18,300
12/31/96..................................... 20,738 16,404 19,105
12/31/97..................................... 23,656 18,990 19,373
12/31/98..................................... 24,855 23,611 22,340
12/31/99..................................... 30,166 29,499 21,205
</TABLE>
52
<PAGE> 590
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division**
Templeton Asset Strategy
Division Nineteen.................................. 201.66% 106.67% 21.37%
Benchmark Comparison
MSCI All Country World Free Index.................... 194.99% 146.35% 24.94%
JP Morgan Global Government Bond Index............... 153.36% 89.33% 12.04%
</TABLE>
- ---------------
* The Templeton Asset Strategy Fund was formerly known as the Templeton Asset
Allocation Fund.
** The Division was initiated on July 11, 1994.
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, 1990
<TABLE>
<CAPTION>
FOREIGN EAFE
DIVISION THIRTY-TWO INDEX
- ------------------------------------------------------------------------ -------------
<S> <C> <C>
01/01/90................................................. $ 10,000 $ 10,000
12/31/90................................................. 9,604 7,655
12/31/91................................................. 11,247 8,584
12/31/92................................................. 11,147 7,539
12/31/93................................................. 15,101 9,993
12/31/94................................................. 15,005 10,771
12/31/95................................................. 16,516 11,978
12/31/96................................................. 19,281 12,702
12/31/97................................................. 20,354 12,928
12/31/98................................................. 19,170 15,513
12/31/99................................................. 26,520 19,696
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division*
Templeton Foreign Division Thirty-Two................. 165.20% 76.74% 38.34%
Benchmark Comparison
EAFE Index............................................ 96.96% 82.87% 26.96%
</TABLE>
- ---------------
* The Division was initiated on July 1, 1996.
53
<PAGE> 591
TEMPLETON INTERNATIONAL SECURITIES* 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 SECURITIES* 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
12/31/99.................................................... 27,169 32,289
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division**
Templeton International Securities Division Twenty... 171.69% 107.76% 22.10%
Benchmark Comparison
MSCI World Index..................................... 222.89% 146.35% 24.94%
</TABLE>
- ---------------
* The Templeton International Securities Fund was formerly known as the
Templeton International Fund.
** 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
12/31/99.................................................... 18,763 19,464
</TABLE>
54
<PAGE> 592
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division*
Vanguard LifeStrategy Conservative Growth Fund
Division Fifty-Four............................... 87.63% 88.04% 6.44%
Benchmark Comparison
Blended Index**..................................... 94.64% 78.78% 9.98%
</TABLE>
- ---------------
* This Division was initiated on September 22, 1998.
** 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.
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 21,781
12/31/99.................................................... 24,285 25,949
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division*
Vanguard LifeStrategy Growth Fund Division
Fifty-Two....................................... 142.85% 143.86% 15.82%
Benchmark Comparison
Blended Index**................................... 159.49% 131.73% 19.14%
</TABLE>
- ---------------
* This Division was initiated on September 22, 1998.
** 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.
55
<PAGE> 593
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 19,989
12/31/99.................................................... 21,399 22,763
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division*
Vanguard LifeStrategy Moderate Growth Division
Fifty-Three..................................... 113.99% 116.17% 10.57%
Benchmark Comparison
Blended Index**................................... 127.63% 105.67% 13.88%
</TABLE>
- ---------------
* This Division was initiated on September 22, 1998.
** 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.
VANGUARD LONG-TERM CORPORATE* DIVISION TWENTY-TWO PERFORMANCE COMPARED TO LEHMAN
LONG-TERM CORPORATE AA OR BETTER BOND INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1990
<TABLE>
<CAPTION>
LEHMAN LONG-TERM
LONG-TERM CORPORATE CORPORATE AA OR
DIVISION TWENTY-TWO BETTER BOND INDEX
- --------------------------------------------------------------- -----------------
<S> <C> <C>
01/01/90............................................. $10,000 $10,000
12/31/90............................................. 10,490 10,692
12/31/91............................................. 12,527 12,853
12/31/92............................................. 13,582 13,968
12/31/93............................................. 15,359 15,778
12/31/94............................................. 14,367 14,869
12/31/95............................................. 17,936 18,840
12/31/96............................................. 17,806 19,107
12/31/97............................................. 20,000 21,691
12/31/98............................................. 21,608 23,973
12/31/99............................................. 20,051 22,294
</TABLE>
56
<PAGE> 594
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division**
Vanguard Long-Term Corporate Fund Division
Twenty-Two........................................... 100.51% 39.56% (7.21)%
Benchmark Comparison
Lehman Long-Term Corporate AA or Better Bond Index..... 906.96% 49.06% (7.00)%
</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, 1990
<TABLE>
<CAPTION>
LEHMAN BROTHERS
U.S. TREASURY
LONG-TERM TREASURY LONG-TERM
DIVISION TWENTY-THREE INDEX
- ----------------------------------------------------------------- ---------------
<S> <C> <C>
01/01/90............................................... $10,000 $10,000
12/31/90............................................... 10,448 10,631
12/31/91............................................... 12,118 12,599
12/31/92............................................... 12,855 13,602
12/31/93............................................... 14,828 15,949
12/31/94............................................... 13,615 14,730
12/31/95............................................... 17,496 19,250
12/31/96............................................... 16,957 19,083
12/31/97............................................... 19,067 21,959
12/31/98............................................... 21,321 24,926
12/31/99............................................... 19,273 22,747
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division**
Vanguard Long-Term Treasury Fund Division
Twenty-Three......................................... 92.73% 41.56% (9.61)%
Benchmark Comparison
Lehman Brothers U.S. Treasury
Long-Term Index...................................... 127.47% 54.43% (8.74)%
</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.
57
<PAGE> 595
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, 1990
<TABLE>
<CAPTION>
VANGUARD WELLINGTON BLENDED
DIVISION TWENTY-FIVE INDEX***
- --------------------------------------------------------------------- --------
<S> <C> <C>
01/01/90................................................... $10,000 $10,000
12/31/90................................................... 9,600 10,067
12/31/91................................................... 11,724 12,715
12/31/92................................................... 12,496 13,758
12/31/93................................................... 14,011 15,263
12/31/94................................................... 13,771 15,220
12/31/95................................................... 18,080 20,063
12/31/96................................................... 20,736 23,245
12/31/97................................................... 25,226 29,074
12/31/98................................................... 27,912 35,443
12/31/99................................................... 28,781 39,929
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division**
Vanguard/Wellington Division Twenty-Five............. 187.81% 109.00% 3.11%
Benchmark Comparison
Blended Index***..................................... 299.29% 162.35% 12.66%
</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.
58
<PAGE> 596
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, 1990
<TABLE>
<CAPTION>
VANGUARD WINDSOR II S&P 500
DIVISION TWENTY-FOUR INDEX
- --------------------------------------------------------------------- --------
<S> <C> <C>
01/01/90................................................... $10,000 $10,000
12/31/90................................................... 8,891 9,689
12/31/91................................................... 11,301 12,642
12/31/92................................................... 12,500 13,605
12/31/93................................................... 14,025 14,976
12/31/94................................................... 13,691 15,174
12/31/95................................................... 18,774 20,876
12/31/96................................................... 23,010 25,671
12/31/97................................................... 30,074 34,234
12/31/98................................................... 34,555 44,018
12/31/99................................................... 32,149 53,283
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division**
Vanguard Windsor II Division Twenty-Four............. 221.49% 134.82% (6.96)%
Benchmark Comparison
S&P 500 Index........................................ 432.83% 251.15% 21.05%
</TABLE>
- ---------------
* The Vanguard Windsor II Fund was formerly known as the Vanguard/Windsor II
Fund.
** This Division was initiated on July 1, 1996.
59
<PAGE> 597
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
60
<PAGE> 598
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>
61
<PAGE> 599
DISTRIBUTION OF VARIABLE ANNUITY CONTRACTS
The Company has qualified or intends to qualify the Contracts for sale in
all fifty states and the District of Columbia and will commence offering the
Contracts promptly upon qualification in each such jurisdiction.
The Contracts are sold in a continuous offering by licensed insurance
agents who are registered representatives of broker-dealers which are members of
the National Association of Securities Dealers, Inc. (the "NASD"). The principal
underwriter for VALIC Separate Account A is the Distributor, an affiliate of
VALIC. The Distributor is known as American General Financial Distributors of
Florida, Inc. and American General Financial Distributors of Illinois, Inc. in
Florida and Illinois, respectively. The address of the Distributor is 2929 Allen
Parkway, Houston, Texas 77019. The Distributor 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 the Distributor and VALIC
Separate Account A, the Company reimburses the Distributor 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 1999 was $883,061.
EXPERTS
The consolidated financial statements of the Company at December 31, 1999
and 1998, and for each of the three years in the period ended December 31, 1999,
and the financial statements of the Company's Separate Account A at December 31,
1999 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.
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, 1999.
62
<PAGE> 600
TABLE OF CONTENTS
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A - ANNUAL REPORT
DECEMBER 31, 1999
Report of Independent Auditors........................................... 1
Summary of Financial Statements.......................................... 3
Statements of Net Assets................................................. 4
Statements of Operations................................................. 8
Statements of Changes in Net Assets...................................... 14
Notes to Financial Statements............................................ 34
Supplemental Information................................................. 39
<PAGE> 601
REPORT OF INDEPENDENT AUDITORS 1
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, and 48 through 60 inclusive) comprising the Separate Account as of
December 31, 1999. 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 50, inclusive, and divisions 58
through 60, inclusive, for which we have audited the statements of changes in
net assets for the year ended December 31, 1999, and for the period from August
26, 1998 (inception) to December 31, 1998; except for divisions 51 through 54,
inclusive, for which we have audited the statements of changes in net assets
for the year ended December 31, 1999, and for the period from September 22,
1998 (inception) to December 31, 1998; and except for divisions 55 through 57,
inclusive, for which we have audited the statements of operations and changes
in net assets for the period from January 4, 1999 (inception) to December 31,
1999. 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 auditing standards generally
accepted in the United States. 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, 1999, 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, 1999, and the
results of their operations and changes in their net assets for each of the
periods identified above, in conformity with accounting principles generally
accepted in the United States.
/s/ ERNST & YOUNG LLP
-------------------------
ERNST & YOUNG LLP
Houston, Texas
February 22, 2000
<PAGE> 602
SUMMARY OF FINANCIAL STATEMENTS 3
STATEMENT OF NET ASSETS
December 31, 1999
<TABLE>
<CAPTION>
ALL DIVISIONS
----------------
ASSETS:
<S> <C>
Total investment in shares of mutual funds, at market (cost $15,133,600,700) ........... $ 21,292,842,069
Balance due from VALIC general account, net ............................................ 17,655,894
Payable for mutual fund purchases, net ................................................. (4,388,902)
----------------
NET ASSETS ............................................................................. $ 21,306,109,061
----------------
Contract Owner Reserves and Capital Surplus:
Reserves for redeemable annuity contracts
(Net of applicable contract loans - partial withdrawals with right of
reinvestment) ....................................................................... $ 21,173,161,490
Reserves for annuity contracts on benefit .............................................. 27,942,008
Capital surplus (Note C) ............................................................... 105,005,563
----------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ...................................... $ 21,306,109,061
----------------
</TABLE>
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
ALL DIVISIONS
----------------
<S> <C>
INVESTMENT INCOME:
Dividends from mutual funds ............................................................ $ 200,790,831
----------------
EXPENSES:
Mortality and expense risk charge ...................................................... 182,974,740
Reimbursement of expenses (Note C) ..................................................... (10,256,222)
----------------
Total expenses ...................................................................... 172,718,518
----------------
NET INVESTMENT INCOME .................................................................. 28,072,313
----------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments ....................................................... 492,418,714
Capital gains distributions from mutual funds .......................................... 1,237,635,279
Net unrealized appreciation of investments during the period ........................... 2,750,587,412
----------------
Net realized and unrealized gain on investments ..................................... 4,480,641,405
----------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ....................................... $ 4,508,713,718
----------------
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
ALL DIVISIONS
----------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income................................................................... $ 28,072,313 $ 32,906,355
Net realized gain on investments........................................................ 492,418,714 256,062,773
Capital gains distributions from mutual funds........................................... 1,237,635,279 599,950,396
Net unrealized appreciation of investments during the period............................ 2,750,587,412 1,171,591,212
----------------- ----------------
Increase in net assets resulting from operations .................................... 4,508,713,718 2,060,510,736
----------------- ----------------
PRINCIPAL TRANSACTIONS:
Purchase payments ...................................................................... 2,904,038,286 2,363,611,667
Surrenders of accumulation units by terminations, withdrawals, and maintenance fees .... (1,008,041,123) (576,063,916)
Annuity benefit payments ............................................................... (3,151,245) (2,688,910)
Amounts transferred from VALIC general account, net..................................... 312,589,668 419,275,772
----------------- ----------------
Increase in net assets resulting from principal transactions ........................ 2,205,435,586 2,204,134,613
----------------- ----------------
Total increase in net assets............................................................ 6,714,149,304 4,264,645,349
NET ASSETS:
Beginning of period..................................................................... 14,591,959,757 10,327,314,408
----------------- ----------------
End of period........................................................................... $ 21,306,109,061 $ 14,591,959,757
----------------- ----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 603
4 FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
AGSPC AGSPC AGSPC
STATEMENTS OF NET ASSETS INTERNATIONAL MIDCAP SMALL CAP
December 31, 1999 EQUITIES INDEX INDEX
FUND - FUND - FUND -
DIVISION 11 DIVISION 4 DIVISION 14 DIVISION 10A
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market .......... $ 175,007,894 $ 876,866,818 $ 241,145,168 $ 590,443,067
Balance due from (to) VALIC general account .............. 2,029,474 9,382 27,128 (319,779)
Receivable (payable) for mutual fund sales (purchases) ... -- -- -- --
-------------- -------------- -------------- --------------
NET ASSETS ............................................... $ 177,037,368 $ 876,876,200 $ 241,172,296 $ 590,123,288
-------------- -------------- -------------- --------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals with
right of reinvestment) ................................. $ 176,828,231 $ 876,371,622 $ 241,010,780 $ 574,871,892
Reserves for annuity contracts on benefit ................ 209,137 504,578 161,516 15,251,396
Capital surplus (Note C) ................................ -- -- -- --
-------------- -------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ........ $ 177,037,368 $ 876,876,200 $ 241,172,296 $ 590,123,288
-------------- -------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN AMERICAN
STATEMENTS OF NET ASSETS GENERAL GENERAL GENERAL GENERAL
December 31, 1999 INTERNATIONAL LARGE CAP LARGE CAP MID CAP
VALUE FUND - GROWTH FUND - VALUE FUND - GROWTH FUND
DIVISION 34 DIVISION 39 DIVISION 40 DIVISION 37
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market .......... $ 8,096,689 $ 21,699,827 $ 4,473,480 $ 7,065,815
Balance due from (to) VALIC general account .............. 2,758 81,423 3,679 5,305
Receivable (payable) for mutual fund sales (purchases) ... -- -- -- --
-------------- -------------- -------------- --------------
NET ASSETS ............................................... $ 8,099,447 $ 21,781,250 $ 4,477,159 $ 7,071,120
-------------- -------------- -------------- --------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals with
right of reinvestment) ................................. $ 1,126,250 $ 16,976,274 $ 657,997 $ 1,243,896
Reserves for annuity contracts on benefit ................ -- -- -- --
Capital surplus (Note C) ................................ 6,973,197 4,804,976 3,819,162 5,827,224
-------------- -------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ........ $ 8,099,447 $ 21,781,250 $ 4,477,159 $ 7,071,120
-------------- -------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
DREYFUS NEUBERGER PUTNAM PUTNAM
STATEMENTS OF NET ASSETS FOUNDERS BERMAN GLOBAL NEW
December 31, 1999 GROWTH GUARDIAN GROWTH OPPORTUNITIES
FUND - TRUST - FUND - FUND -
DIVISION 30 DIVISION 29 DIVISION 28 DIVISION 26
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market .......... $ 874,457,709 $ 59,467,223 $ 495,732,851 $1,014,850,850
Balance due from (to) VALIC general account .............. 1,861,813 50,794 2,263,104 3,449,185
Receivable (payable) for mutual fund sales (purchases) ... (830,550) (21,490) (1,135,006) (1,827,956)
-------------- -------------- -------------- --------------
NET ASSETS ............................................... $ 875,488,972 $ 59,496,527 $ 496,860,949 $1,016,472,079
-------------- -------------- -------------- --------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals with
right of reinvestment) ................................. $ 875,377,940 $ 59,482,061 $ 496,733,062 $1,016,427,721
Reserves for annuity contracts on benefit ................ 111,032 14,466 127,887 44,358
Capital surplus (Note C) ................................ -- -- -- --
-------------- -------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ........ $ 875,488,972 $ 59,496,527 $ 496,860,949 $1,016,472,079
-------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 604
SEPARATE ACCOUNT A 5
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1999 AGSPC STOCK INDEX FUND
--------------------------------------------------
DIVISION 10B DIVISION 10C DIVISION 10D
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market .......... $ 45,355,666 $4,551,706,741 $ 59,387,213
Balance due from (to) VALIC general account .............. (37,562) 1,396,109 4,396
Receivable (payable) for mutual fund sales (purchases) ... -- -- --
-------------- -------------- --------------
NET ASSETS ............................................... $ 45,318,104 $4,553,102,850 $ 59,391,609
-------------- -------------- --------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals with
right of reinvestment) ................................. $ 43,269,244 $4,548,703,203 $ 59,146,967
Reserves for annuity contracts on benefit ................ 2,048,860 4,399,647 244,642
Capital surplus (Note C) ................................ -- -- --
-------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ........ $ 45,318,104 $4,553,102,850 $ 59,391,609
-------------- -------------- --------------
<CAPTION>
AGSPC AMERICAN AMERICAN
STATEMENTS OF NET ASSETS AGSPC GROWTH & CENTURY GENERAL
December 31, 1999 GROWTH INCOME ULTRA INTERNATIONAL
FUND - FUND - FUND - GROWTH FUND -
DIVISION 15 DIVISION 16 DIVISION 31 DIVISION 33
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market .......... $1,218,557,601 $ 336,589,500 $1,023,333,380 $ 6,847,182
Balance due from (to) VALIC general account .............. 104,803 34,010 3,260,572 11,199
Receivable (payable) for mutual fund sales (purchases) ... -- -- (1,172,899) --
-------------- -------------- -------------- --------------
NET ASSETS ............................................... $1,218,662,404 $ 336,623,510 $1,025,421,053 $ 6,858,381
-------------- -------------- -------------- --------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals with
right of reinvestment) ................................. $1,217,972,085 $ 336,543,298 $1,024,997,082 $ 824,550
Reserves for annuity contracts on benefit ................ 690,319 80,212 423,971 --
Capital surplus (Note C) ................................ -- -- -- 6,033,831
-------------- -------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ........ $1,218,662,404 $ 336,623,510 $1,025,421,053 $ 6,858,381
-------------- -------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1999
AMERICAN AMERICAN AMERICAN
GENERAL GENERAL GENERAL
MID CAP SMALL CAP SMALL CAP
VALUE FUND GROWTH FUND - VALUE FUND -
DIVISION 38 DIVISION 35 DIVISION 36
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market .......... $ 8,329,863 $ 16,642,631 $ 4,470,644
Balance due from (to) VALIC general account .............. 11,302 71,324 1,032
Receivable (payable) for mutual fund sales (purchases) ... -- -- --
-------------- -------------- --------------
NET ASSETS ............................................... $ 8,341,165 $ 16,713,955 $ 4,471,676
-------------- -------------- --------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals with
right of reinvestment) ................................. $ 2,264,145 $ 7,749,930 $ 267,346
Reserves for annuity contracts on benefit ................ -- -- --
Capital surplus (Note C) ................................ 6,077,020 8,964,025 4,204,330
-------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ........ $ 8,341,165 $ 16,713,955 $ 4,471,676
-------------- -------------- --------------
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1999
DREYFUS VARIABLE EVERGREEN EVERGREEN
INVESTMENT FUND - GROWTH AND SMALL CAP EVERGREEN
SMALL CAP INCOME VALUE VALUE
PORTFOLIO FUND - FUND - FUND -
DIVISION 18 DIVISION 56 DIVISION 55 DIVISION 57
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market .......... $ 779,491,073 $ 6,220 $ 243 $ 4,388
Balance due from (to) VALIC general account .............. (127,757) 24 (1) (3)
Receivable (payable) for mutual fund sales (purchases) ... 242,882 -- -- --
-------------- -------------- -------------- --------------
NET ASSETS ............................................... $ 779,606,198 $ 6,244 $ 242 $ 4,385
-------------- -------------- -------------- --------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals with
right of reinvestment) ................................. $ 779,288,796 $ 6,244 $ 242 $ 4,385
Reserves for annuity contracts on benefit ................ 317,402 -- -- --
Capital surplus (Note C) ................................ -- -- -- --
-------------- -------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ........ $ 779,606,198 $ 6,244 $ 242 $ 4,385
-------------- -------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1999
PUTNAM OTC & SCUDDER
EMERGING GROWTH AND T. ROWE PRICE
GROWTH INCOME SMALL-CAP STOCK
FUND - FUND - FUND -
DIVISION 27 DIVISION 21 DIVISION 51
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market .......... $ 431,252,004 $ 246,635,934 $ 8,738,757
Balance due from (to) VALIC general account .............. 1,081,239 293,361 18,110
Receivable (payable) for mutual fund sales (purchases) ... (671,496) (20,902) 1,147
-------------- -------------- --------------
NET ASSETS ............................................... $ 431,661,747 $ 246,908,393 $ 8,758,014
-------------- -------------- --------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals with
right of reinvestment) ................................. $ 431,575,216 $ 246,812,922 $ 8,758,014
Reserves for annuity contracts on benefit ................ 86,531 95,471 --
Capital surplus (Note C) ................................ -- -- --
-------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ........ $ 431,661,747 $ 246,908,393 $ 8,758,014
-------------- -------------- --------------
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1999
AMERICAN
TEMPLETON TEMPLETON VANGUARD GENERAL
FOREIGN INTERNATIONAL WINDSOR II BALANCED
FUND - FUND - FUND - FUND -
DIVISION 32 DIVISION 20 DIVISION 24 DIVISION 42
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market .......... $ 336,480,225 $ 817,303,148 $ 732,870,656 $ 9,953,676
Balance due from (to) VALIC general account .............. (232,426) 1,784,124 243,278 13,511
Receivable (payable) for mutual fund sales (purchases) ... 2,067,517 65,094 (258,676) --
-------------- -------------- -------------- --------------
NET ASSETS ............................................... $ 338,315,316 $ 819,152,366 $ 732,855,258 $ 9,967,187
-------------- -------------- -------------- --------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals with
right of reinvestment) ................................. $ 338,261,796 $ 818,845,742 $ 732,691,320 $ 3,280,905
Reserves for annuity contracts on benefit ................ 53,520 306,624 163,938 --
Capital surplus (Note C) ................................ -- -- -- 6,686,282
-------------- -------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS ........ $ 338,315,316 $ 819,152,366 $ 732,855,258 $ 9,967,187
-------------- -------------- -------------- --------------
</TABLE>
<PAGE> 605
6 FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
AGSPC
STATEMENTS OF NET ASSETS VANGUARD GOVERNMENT
December 31, 1999 WELLINGTON AGSPC CAPITAL CONSERVATION FUND - SECURITIES
FUND - --------------------------------- FUND -
DIVISION 25 DIVISION 1 DIVISION 7 DIVISION 8
------------- ---------------- --------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ...................... $569,864,636 $ 5,194,143 $ 51,502,808 $ 93,312,643
Balance due from (to) VALIC general account .......................... (85,749) 9,160 21,200 (7,864)
Receivable (payable) for mutual fund sales (purchases) ............... 265,989 -- -- --
------------ ----------- ------------ ------------
NET ASSETS ........................................................... $570,044,876 $ 5,203,303 $ 51,524,008 $ 93,304,779
------------ ----------- ------------ ------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) ... $569,823,378 $ 5,199,068 $ 51,524,008 $ 93,304,779
Reserves for annuity contracts on benefit ............................ 221,498 4,235 -- --
Capital surplus (Note C) ............................................. -- -- -- --
------------ ----------- ------------ ------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS .................... $570,044,876 $ 5,203,303 $ 51,524,008 $ 93,304,779
------------ ----------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS AGSPC AGSPC AMERICAN
December 31, 1999 SCIENCE & SOCIAL GENERAL SOCIALLY
TECHNOLOGY AWARENESS RESPONSIBLE AGSPC MONEY
FUND - FUND - FUND - MARKET FUND -
DIVISION 17 DIVISION 12 DIVISION 41 DIVISION 2
-------------- ------------ ---------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ...................... $3,406,706,628 $618,968,226 $12,225,981 $4,167,220
Balance due from (to) VALIC general account .......................... 4,735,467 (46,958) 12,104 11,866
Receivable (payable) for mutual fund sales (purchases) ............... -- -- -- --
-------------- ------------ ----------- ----------
NET ASSETS ........................................................... $3,411,442,095 $618,921,268 $12,238,085 $4,179,086
-------------- ------------ ----------- ----------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) ... $3,410,138,310 $618,575,740 $ 4,669,512 $4,179,086
Reserves for annuity contracts on benefit ............................ 1,303,785 345,528 -- --
Capital surplus (Note C) ............................................. -- -- 7,568,573 --
-------------- ------------ ----------- ----------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS .................... $3,411,442,095 $618,921,268 $12,238,085 $4,179,086
-------------- ------------ ----------- ----------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS VANGUARD AGSPC
December 31, 1999 LIFESTRATEGY ASSET TEMPLETON
MODERATE ALLOCATION ALLOCATION
GROWTH FUND - FUND - FUND -
DIVISION 53 DIVISION 5 DIVISION 19
------------- ------------- -------------
<S> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ...................... $ 32,046,248 $ 260,891,195 $ 323,940,365
Balance due from (to) VALIC general account .......................... 132,784 162,943 (130,432)
Receivable (payable) for mutual fund sales (purchases) ............... (110,319) -- (131,537)
------------- ------------- -------------
NET ASSETS ........................................................... $ 32,068,713 $ 261,054,138 $ 323,678,396
------------- ------------- -------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) ... $ 32,068,713 $ 260,830,021 $ 323,294,066
Reserves for annuity contracts on benefit ............................ -- 224,117 384,330
Capital surplus (Note C) ............................................. -- -- --
------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS .................... $ 32,068,713 $ 261,054,138 $ 323,678,396
------------- ------------- -------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 606
SEPARATE ACCOUNT A 7
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1999 AGSPC AMERICAN AMERICAN AMERICAN
INTERNATIONAL GENERAL GENERAL GENERAL
GOVERNMENT CORE DOMESTIC HIGH YIELD
BOND FUND - BOND FUND - BOND FUND - BOND FUND -
DIVISION 13 DIVISION 58 DIVISION 43 DIVISION 60
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ...................... $ 149,120,828 $ 5,168,278 $ 1,830,628 $ 5,587,119
Balance due from (to) VALIC general account .......................... (1,784,215) 103 2,420 234
Receivable (payable) for mutual fund sales (purchases) ............... -- -- -- --
------------- ------------- ------------- -------------
NET ASSETS ........................................................... $ 147,336,613 $ 5,168,381 $ 1,833,048 $ 5,587,353
------------- ------------- ------------- -------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) ... $ 147,282,364 $ 65,708 $ 563,854 $ 149,820
Reserves for annuity contracts on benefit ............................ 54,249 -- -- --
Capital surplus (Note C) ............................................. -- 5,102,673 1,269,194 5,437,533
------------- ------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS .................... $ 147,336,613 $ 5,168,381 $ 1,833,048 $ 5,587,353
------------- ------------- ------------- -------------
<CAPTION>
STATEMENTS OF NET ASSETS
December 31, 1999 AMERICAN
GENERAL VANGUARD VANGUARD
STRATEGIC LONG-TERM LONG-TERM
BOND FUND - CORPORATE FUND - TREASURY FUND -
DIVISION 59 DIVISION 22 DIVISION 23
------------- ---------------- ---------------
<S> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ...................... $ 5,506,171 $ 68,263,542 $ 141,856,062
Balance due from (to) VALIC general account .......................... 335 186,923 834,134
Receivable (payable) for mutual fund sales (purchases) ............... -- (11,709) (371,585)
------------- ------------- -------------
NET ASSETS ........................................................... $ 5,506,506 $ 68,438,756 $ 142,318,611
------------- ------------- -------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) ... $ 38,482 $ 68,397,606 $ 142,307,011
Reserves for annuity contracts on benefit ............................ -- 41,150 11,600
Capital surplus (Note C) ............................................. 5,468,024 -- --
------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS .................... $ 5,506,506 $ 68,438,756 $ 142,318,611
------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS AMERICAN AMERICAN
December 31, 1999 GENERAL GENERAL
AGSPC MONEY MONEY MARKET CONSERVATIVE GROWTH
MARKET FUND - FUND - LIFESTYLE FUND -
DIVISION 6 DIVISION 44 DIVISION 50
------------- ------------- -------------------
<S> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ...................... $ 459,787,520 $ 11,553,720 $ 8,699,095
Balance due from (to) VALIC general account .......................... (4,431,676) 28,543 19,787
Receivable (payable) for mutual fund sales (purchases) ............... -- -- --
------------- ------------- -------------
NET ASSETS ........................................................... $ 455,355,844 $ 11,582,263 $ 8,718,882
------------- ------------ --------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) ... $ 455,339,835 $ 6,257,572 $ 2,113,653
Reserves for annuity contracts on benefit ............................ 16,009 -- --
Capital surplus (Note C) ............................................. -- 5,324,691 6,605,229
------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS .................... $ 455,355,844 $ 11,582,263 $ 8,718,882
------------- ------------ --------------
<CAPTION>
STATEMENTS OF NET ASSETS AMERICAN AMERICAN
December 31, 1999 GENERAL GENERAL
GROWTH MODERATE GROWTH
LIFESTYLE FUND - LIFESTYLE FUND -
DIVISION 48 DIVISION 49
---------------- ----------------
<S> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ...................... $ 10,625,442 $ 12,526,733
Balance due from (to) VALIC general account .......................... 25,237 42,928
Receivable (payable) for mutual fund sales (purchases) ............... -- --
------------- -------------
NET ASSETS ........................................................... $ 10,650,679 $ 12,569,661
------------- -------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) ... $ 2,875,158 $ 5,505,583
Reserves for annuity contracts on benefit ............................ -- --
Capital surplus (Note C) ............................................. 7,775,521 7,064,078
------------- -------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS .................... $ 10,650,679 $ 12,569,661
------------- -------------
<CAPTION>
STATEMENTS OF NET ASSETS VANGUARD
December 31, 1999 LIFESTRATEGY VANGUARD
CONSERVATIVE LIFESTRATEGY
GROWTH FUND - GROWTH FUND -
DIVISION 54 DIVISION 52
-------------- --------------
<S> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ...................... $ 5,319,180 $ 24,913,522
Balance due from (to) VALIC general account .......................... 195,040 326,669
Receivable (payable) for mutual fund sales (purchases) ............... (189,439) (277,967)
------------- -------------
NET ASSETS ........................................................... $ 5,324,781 $ 24,962,224
------------- -------------
CONTRACT OWNER RESERVES AND CAPITAL SURPLUS:
Reserves for redeemable annuity contracts (Net of applicable
contract loans - partial withdrawals with right of reinvestment) ... $ 5,324,781 $ 24,962,224
Reserves for annuity contracts on benefit ............................ -- --
Capital surplus (Note C) ............................................. -- --
------------- -------------
TOTAL CONTRACT OWNER RESERVES AND CAPITAL SURPLUS .................... $ 5,324,781 $ 24,962,224
------------- -------------
</TABLE>
<PAGE> 607
8 FINANCIAL STATEMENTS
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
AGSPC AGSPC AGSPC
INTERNATIONAL MIDCAP SMALL CAP
EQUITIES INDEX INDEX
FUND - FUND - FUND -
DIVISION 11 DIVISION 4 DIVISION 14 DIVISION 10A
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ............................ $ 1,788,128 $ 6,878,578 $ 2,414,127 $ 5,674,702
------------- ------------- ------------- -------------
EXPENSES:
Mortality and expense risk charge ...................... 1,510,709 8,083,887 2,143,563 5,630,338
Reimbursement of expenses .............................. -- -- -- --
------------- ------------- ------------- -------------
Total expenses ...................................... 1,510,709 8,083,887 2,143,563 5,630,338
------------- ------------- ------------- -------------
NET INVESTMENT INCOME (LOSS) ........................... 277,419 (1,205,309) 270,564 44,364
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments ....................... 10,094,468 54,717,361 15,168,549 50,306,023
Capital gains distributions from mutual funds .......... 8,117,049 194,003,989 21,011,129 4,737,369
Net unrealized appreciation (depreciation)
of investments during the period .................... 20,902,728 (141,415,147) 4,167,711 45,440,162
------------- ------------- ------------- -------------
Net realized and unrealized gain on investments ........ 39,114,245 107,306,203 40,347,389 100,483,554
------------- ------------- ------------- -------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ........................... $ 39,391,664 $ 106,100,894 $ 40,617,953 $ 100,527,918
------------- ------------- ------------- -------------
</TABLE>
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN AMERICAN
GENERAL GENERAL GENERAL GENERAL
INTERNATIONAL LARGE CAP LARGE CAP MID CAP
VALUE FUND - GROWTH FUND - VALUE FUND - GROWTH FUND -
DIVISION 34 DIVISION 39 DIVISION 40 DIVISION 37
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ............................ $ 72,614 $ 8,826 $ 47,885 $ --
------------- ------------- ------------- -------------
EXPENSES:
Mortality and expense risk charge ...................... 2,951 55,394 3,021 4,606
Reimbursement of expenses .............................. (813) (22,462) (988) (1,410)
------------- ------------- ------------- -------------
Total expenses ...................................... 2,138 32,932 2,033 3,196
------------- ------------- ------------- -------------
NET INVESTMENT INCOME (LOSS) ........................... 70,476 (24,106) 45,852 (3,196)
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments ....................... 50,532 196,164 63,723 21,955
Capital gains distributions from mutual funds .......... 358,216 634,398 650,214 710,827
Net unrealized appreciation (depreciation)
of investments during the period .................... 2,597,347 3,810,394 (552,152) (258,735)
------------- ------------- ------------- -------------
Net realized and unrealized gain (loss)on investments .. 3,006,095 4,640,956 161,785 474,047
------------- ------------- ------------- -------------
INCREASE (DECREASE)IN NET ASSETS
RESULTING FROM OPERATIONS ........................... $ 3,076,571 $ 4,616,850 $ 207,637 $ 470,851
------------- ------------- ------------- -------------
</TABLE>
(*)Since inception January 4, 1999.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 608
SEPARATE ACCOUNT A 9
<TABLE>
<CAPTION>
AGSPC
AGSPC STOCK INDEX FUND - GROWTH
------------------------------------------------ FUND -
DIVISION 10B DIVISION 10C DIVISION 10D DIVISION 15
----------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ............................... $ 438,856 $ 39,607,878 $ 576,997 $ --
----------- ------------- ------------ -------------
EXPENSES:
Mortality and expense risk charge ......................... 223,569 38,759,190 572,435 11,859,802
Reimbursement of expenses ................................. (94,122) -- -- --
----------- ------------- ------------ -------------
Total expenses ........................................... 129,447 38,759,190 572,435 11,859,802
----------- ------------- ------------ -------------
NET INVESTMENT INCOME (LOSS) .............................. 309,409 848,688 4,562 (11,859,802)
----------- ------------- ------------ -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments .......................... 5,087,126 58,888,546 6,938,320 65,180,424
Capital gains distributions from mutual funds ............. 362,359 36,367,266 471,902 50,296,770
Net unrealized appreciation (depreciation)
of investments during the period ....................... 2,257,759 612,628,344 2,683,181 (29,390,145)
----------- ------------- ------------ -------------
Net realized and unrealized gain on investments ........... 7,707,244 707,884,156 10,093,403 86,087,049
----------- ------------- ------------ -------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .............................. $ 8,016,653 $ 708,732,844 $ 10,097,965 $ 74,227,247
----------- ------------- ------------ -------------
<CAPTION>
AGSPC AMERICAN
GROWTH & AMERICAN CENTURY GENERAL
INCOME ULTRA INTERNATIONAL
FUND - FUND - GROWTH FUND -
DIVISION 16 DIVISION 31 DIVISION 33
------------ ------------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ............................... $ 1,240,444 $ -- $ 84,670
------------ ------------- -----------
EXPENSES:
Mortality and expense risk charge ......................... 3,039,334 7,951,342 1,814
Reimbursement of expenses ................................. -- (1,545,916) (630)
------------ ------------- -----------
Total expenses ........................................... 3,039,334 6,405,426 1,184
------------ ------------- -----------
NET INVESTMENT INCOME (LOSS) .............................. (1,798,890) (6,405,426) 83,486
------------ ------------- -----------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments .......................... 14,837,619 5,962,303 12,371
Capital gains distributions from mutual funds ............. 33,787,657 29,663,737 179,573
Net unrealized appreciation (depreciation)
of investments during the period ....................... 13,472,567 227,838,963 2,105,762
------------ ------------- -----------
Net realized and unrealized gain on investments ........... 62,097,843 263,465,003 2,297,706
------------ ------------- -----------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .............................. $ 60,298,953 $ 257,059,577 $ 2,381,192
------------ ------------- -----------
</TABLE>
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN DREYFUS VARIABLE
GENERAL GENERAL GENERAL INVESTMENT FUND-
MID CAP SMALL CAP SMALL CAP SMALL CAP
VALUE FUND - GROWTH FUND - VALUE FUND - PORTFOLIO -
DIVISION 38 DIVISION 35 DIVISION 36 DIVISION 18
----------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ............................... $ 39,296 $ -- $ 56,427 $ 550,577
----------- ------------- ------------ -------------
EXPENSES:
Mortality and expense risk charge ......................... 8,195 17,485 1,592 9,073,382
Reimbursement of expenses ................................. (3,000) (6,824) (445) (1,114,672)
----------- ------------- ------------ -------------
Total expenses ............................................ 5,195 10,661 1,147 7,958,710
----------- ------------- ------------ -------------
NET INVESTMENT INCOME (LOSS) .............................. 34,101 (10,661) 55,280 (7,408,133)
----------- ------------- ------------ -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments .......................... 156,954 128,821 6,489 63,772,555
Capital gains distributions from mutual funds ............. 1,894,986 1,115,791 145,670 --
Net unrealized appreciation (depreciation)
of investments during the period ....................... (764,242) 4,835,156 (493,258) 89,787,753
----------- ------------- ------------ -------------
Net realized and unrealized gain (loss)on investments ..... 1,287,698 6,079,768 (341,099) 153,560,308
----------- ------------- ------------ -------------
INCREASE (DECREASE)IN NET ASSETS
RESULTING FROM OPERATIONS .............................. $ 1,321,799 $ 6,069,107 $ (285,819) $ 146,152,175
----------- ------------- ------------ -------------
<CAPTION>
EVERGREEN EVERGREEN
GROWTH SMALL CAP EVERGREEN
AND INCOME VALUE VALUE
FUND - FUND - FUND -
DIVISION 56(*) DIVISION 55(*) DIVISION 57(*)
------------ ------------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ............................... $ -- $ -- $ 11
------------ ------------- -----------
EXPENSES:
Mortality and expense risk charge ......................... 5 -- 9
Reimbursement of expenses ................................. -- -- (2)
------------ ------------- -----------
Total expenses ............................................ 5 -- 7
------------ ------------- -----------
NET INVESTMENT INCOME (LOSS) .............................. (5) -- 4
------------ ------------- -----------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments .......................... 31 -- --
Capital gains distributions from mutual funds ............. 7 -- 262
Net unrealized appreciation (depreciation)
of investments during the period ....................... 370 -- (319)
------------ ------------- -----------
Net realized and unrealized gain (loss)on investments ..... 408 -- (57)
------------ ------------- -----------
INCREASE (DECREASE)IN NET ASSETS
RESULTING FROM OPERATIONS .............................. $ 403 $ -- $ (53)
------------ ------------- -----------
</TABLE>
<PAGE> 609
10 FINANCIAL STATEMENTS
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
DREYFUS NEUBERGER PUTNAM PUTNAM
FOUNDERS BERMAN GLOBAL NEW
GROWTH GUARDIAN GROWTH OPPORTUNITIES
FUND - TRUST - FUND - FUND -
DIVISION 30 DIVISION 29 DIVISION 28 DIVISION 26
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ -- $ 461,168 $ -- $ --
------------- ------------- ------------- -------------
EXPENSES:
Mortality and expense risk charge .......................... 7,395,427 763,578 3,336,299 7,275,209
Reimbursement of expenses .................................. (1,510,809) (153,822) (678,613) (1,481,777)
------------- ------------- ------------- -------------
Total expenses .......................................... 5,884,618 609,756 2,657,686 5,793,432
------------- ------------- ------------- -------------
NET INVESTMENT INCOME (LOSS) ............................... (5,884,618) (148,588) (2,657,686) (5,793,432)
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .................... 4,207,339 232,115 4,532,574 5,405,004
Capital gains distributions from mutual funds .............. 127,949,776 10,764,888 43,772,448 73,606,083
Net unrealized appreciation (depreciation)
of investments during the period ........................ 95,948,371 (6,452,929) 131,823,273 313,953,044
------------- ------------- ------------- -------------
Net realized and unrealized gain (loss) on investments ..... 228,105,486 4,544,074 180,128,295 392,964,131
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 222,220,868 $ 4,395,486 $ 177,470,609 $ 387,170,699
------------- ------------- ------------- -------------
</TABLE>
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
VANGUARD AGSPC
WELLINGTON AGSPC CAPITAL CONSERVATION FUND - GOVERNMENT
FUND - --------------------------------- SECURITIES FUND -
DIVISION 25 DIVISION 1 DIVISION 7 DIVISION 8
------------- --------------- -------------- -----------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ 20,439,202 $ 372,745 $ 3,588,581 $ 5,630,206
------------- ------------- ------------- -------------
EXPENSES:
Mortality and expense risk charge .......................... 6,330,047 58,712 562,336 1,043,310
Reimbursement of expenses .................................. -- -- -- --
------------- ------------- ------------- -------------
Total expenses .......................................... 6,330,047 58,712 562,336 1,043,310
------------- ------------- ------------- -------------
NET INVESTMENT INCOME ...................................... 14,109,155 314,033 3,026,245 4,586,896
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .................... 1,861,183 (76,164) 8,827 661,487
Capital gains distributions from mutual funds .............. 28,847,888 -- -- --
Net unrealized depreciation
of investments during the period ........................ (30,879,706) (326,155) (3,853,099) (9,319,026)
------------- ------------- ------------- -------------
Net realized and unrealized loss on investments ............ (170,635) (402,319) (3,844,272) (8,657,539)
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 13,938,520 $ (88,286) $ (818,027) $ (4,070,643)
------------- ------------- ------------- -------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 610
SEPARATE ACCOUNT A 11
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS PUTNAM OTC & SCUDDER
For the Year Ended December 31, 1999 EMERGING GROWTH AND T. ROWE PRICE TEMPLETON
GROWTH INCOME SMALL-CAP FOREIGN
FUND - FUND - STOCK FUND - FUND -
DIVISION 27 DIVISION 21 DIVISION 51 DIVISION 32
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ -- $ 4,675,796 $ 28,773 $ 8,916,410
------------- ------------- ------------- -------------
EXPENSES:
Mortality and expense risk charge .......................... 2,422,441 3,097,648 49,327 3,329,351
Reimbursement of expenses .................................. (488,210) (624,445) -- (1,967,750)
------------- ------------- ------------- -------------
Total expenses .......................................... 1,934,231 2,473,203 49,327 1,361,601
------------- ------------- ------------- -------------
NET INVESTMENT INCOME (LOSS) ............................... (1,934,231) 2,202,593 (20,554) 7,554,809
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .................... 9,704,876 3,895,314 40,991 (2,951,879)
Capital gains distributions from mutual funds .............. 20,649,440 6,380,872 320,107 2,706,922
Net unrealized appreciation (depreciation)
of investments during the period ........................ 182,753,857 (283,526) 1,008,645 80,764,072
------------- ------------- ------------- -------------
Net realized and unrealized gain (loss) on investments ..... 213,108,173 9,992,660 1,369,743 80,519,115
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 211,173,942 $ 12,195,253 $ 1,349,189 $ 88,073,924
------------- ------------- ------------- -------------
<CAPTION>
STATEMENTS OF OPERATIONS TEMPLETON VANGUARD AMERICAN
For the Year Ended December 31, 1999 INTERNATIONAL WINDSOR II GENERAL
FUND - FUND - BALANCED FUND -
DIVISION 20 DIVISION 24 DIVISION 42
------------- ------------- ---------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ 20,611,275 $ 17,860,760 $ 196,132
------------- ------------- -------------
EXPENSES:
Mortality and expense risk charge .......................... 9,363,281 9,472,517 12,085
Reimbursement of expenses .................................. -- -- (4,448)
------------- ------------- -------------
Total expenses .......................................... 9,363,281 9,472,517 7,637
------------- ------------- -------------
NET INVESTMENT INCOME (LOSS) ............................... 11,247,994 8,388,243 188,495
------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .................... 48,058,679 6,166,843 30,618
Capital gains distributions from mutual funds .............. 71,597,060 67,184,211 432,947
Net unrealized appreciation (depreciation)
of investments during the period ........................ 22,890,344 (144,035,946) 350,211
------------- ------------- -------------
Net realized and unrealized gain (loss) on investments ..... 142,546,083 (70,684,892) 813,776
------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 153,794,077 $ (62,296,649) $ 1,002,271
------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS AGSPC AMERICAN AMERICAN AMERICAN
For the Year Ended December 31, 1999 INTERNATIONAL GENERAL GENERAL GENERAL
GOVERNMENT CORE DOMESTIC HIGH YIELD
BOND FUND - BOND FUND - BOND FUND - BOND FUND -
DIVISION 13 DIVISION 58 DIVISION 43 DIVISION 60
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ 5,352,492 $ 321,342 $ 100,593 $ 491,864
------------- ------------- ------------- -------------
EXPENSES:
Mortality and expense risk charge .......................... 1,576,167 483 2,594 937
Reimbursement of expenses .................................. -- (123) (907) (234)
------------- ------------- ------------- -------------
Total expenses .......................................... 1,576,167 360 1,687 703
------------- ------------- ------------- -------------
NET INVESTMENT INCOME ...................................... 3,776,325 320,982 98,906 491,161
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .................... 1,059,581 (446) (7,296) (357)
Capital gains distributions from mutual funds .............. 103,421 -- 36 --
Net unrealized depreciation
of investments during the period ........................ (16,515,559) (380,782) (139,402) (333,976)
------------- ------------- ------------- -------------
Net realized and unrealized loss on investments ............ (15,352,557) (381,228) (146,662) (334,333)
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ (11,576,232) $ (60,246) $ (47,756) $ 156,828
------------- ------------- ------------- -------------
<CAPTION>
STATEMENTS OF OPERATIONS AMERICAN
For the Year Ended December 31, 1999 GENERAL VANGUARD VANGUARD
STRATEGIC LONG-TERM LONG-TERM
BOND FUND - CORPORATE FUND - TREASURY FUND -
DIVISION 59 DIVISION 22 DIVISION 23
------------- ---------------- --------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ 414,269 $ 4,408,788 $ 8,420,055
------------- ------------- -------------
EXPENSES:
Mortality and expense risk charge .......................... 118 825,583 1,766,917
Reimbursement of expenses .................................. (47) (168,423) (354,616)
------------- ------------- -------------
Total expenses .......................................... 71 657,160 1,412,301
------------- ------------- -------------
NET INVESTMENT INCOME ...................................... 414,198 3,751,628 7,007,754
------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .................... 7 (398,632) (687,054)
Capital gains distributions from mutual funds .............. -- 410,483 1,589,174
Net unrealized depreciation
of investments during the period ........................ (211,104) (8,721,370) (21,800,390)
------------- ------------- -------------
Net realized and unrealized loss on investments ............ (211,097) (8,709,519) (20,898,270)
------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 203,101 $ (4,957,891) $ (13,890,516)
------------- ------------- -------------
</TABLE>
<PAGE> 611
12 FINANCIAL STATEMENTS
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
AGSPC AGSPC AMERICAN
SCIENCE & SOCIAL GENERAL SOCIALLY
TECHNOLOGY AWARENESS RESPONSIBLE AGSPC MONEY
FUND - FUND - FUND - MARKET FUND -
DIVISION 17 DIVISION 12 DIVISION 41 DIVISION 2
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ -- $ 4,238,975 $ 89,881 $ 206,849
--------------- --------------- --------------- ---------------
EXPENSES:
Mortality and expense risk charge .......................... 19,907,095 5,292,189 16,648 44,475
Reimbursement of expenses .................................. -- -- (6,574) --
--------------- --------------- --------------- ---------------
Total expenses .......................................... 19,907,095 5,292,189 10,074 44,475
--------------- --------------- --------------- ---------------
NET INVESTMENT INCOME (LOSS) ............................... (19,907,095) (1,053,214) 79,807 162,374
--------------- --------------- --------------- ---------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .................... 30,613,817 8,179,859 64,508 --
Capital gains distributions from mutual funds .............. 328,749,980 22,439,556 391,925 --
Net unrealized appreciation (depreciation)
of investments during the period ........................ 1,226,217,782 57,407,741 1,103,235 --
--------------- --------------- --------------- ---------------
Net realized and unrealized gain on investments ............ 1,585,581,579 88,027,156 1,559,668 --
--------------- --------------- --------------- ---------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 1,565,674,484 $ 86,973,942 $ 1,639,475 $ 162,374
--------------- --------------- --------------- ---------------
</TABLE>
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
VANGUARD
LIFESTRATEGY AGSPC TEMPLETON
MODERATE ASSET ALLOCATION ASSET ALLOCATION
GROWTH FUND - FUND - FUND -
DIVISION 53 DIVISION 5 DIVISION 19
--------------- --------------- -----------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ 770,171 $ 6,836,435 $ 6,944,378
--------------- --------------- ---------------
EXPENSES:
Mortality and expense risk charge .......................... 159,058 2,472,653 3,749,394
Reimbursement of expenses .................................. -- -- --
--------------- --------------- ---------------
Total expenses .......................................... 159,058 2,472,653 3,749,394
--------------- --------------- ---------------
NET INVESTMENT INCOME ...................................... 611,113 4,363,782 3,194,984
--------------- --------------- ---------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments ........................... 29,492 4,428,516 14,669,025
Capital gains distributions from mutual funds .............. 218,753 4,417,585 38,640,994
Net unrealized appreciation
of investments during the period ........................ 1,470,942 11,930,044 4,197,098
--------------- --------------- ---------------
Net realized and unrealized gain on investments ............ 1,719,187 20,776,145 57,507,117
--------------- --------------- ---------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 2,330,300 $ 25,139,927 $ 60,702,101
--------------- --------------- ---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 612
SEPARATE ACCOUNT A 13
<TABLE>
<CAPTION>
AMERICAN
AMERICAN GENERAL AMERICAN
GENERAL CONSERVATIVE GENERAL
AGSPC MONEY MONEY GROWTH GROWTH
MARKET FUND - MARKET FUND - LIFESTYLE FUND - LIFESTYLE FUND -
DIVISION 6 DIVISION 44 DIVISION 50 DIVISION 48
------------- ------------- ---------------- ----------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ 16,641,083 $ 411,008 $ 607,373 $ 749,801
------------- ------------- ------------- -------------
EXPENSES:
Mortality and expense risk charge .......................... 3,483,010 34,077 8,112 9,678
Reimbursement of expenses .................................. -- (9,035) (3,080) (3,858)
------------- ------------- ------------- -------------
Total expenses .......................................... 3,483,010 25,042 5,032 5,820
------------- ------------- ------------- -------------
NET INVESTMENT INCOME (LOSS)................................ 13,158,073 385,966 602,341 743,981
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .................... -- -- 895,570 63,773
Capital gains distributions from mutual funds .............. -- -- 1,025,645 323,571
Net unrealized appreciation (depreciation)
of investments during the period ........................ -- -- (1,418,604) 1,217,409
------------- ------------- ------------- -------------
Net realized and unrealized gain on investments ............ -- -- 502,611 1,604,753
------------- ------------- ------------- -------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........... $ 13,158,073 $ 385,966 $ 1,104,952 $ 2,348,734
------------- ------------- ------------- -------------
<CAPTION>
AMERICAN
GENERAL VANGUARD
MODERATE LIFESTRATEGY VANGUARD
GROWTH CONSERVATIVE LIFESTRATEGY
LIFESTYLE FUND - GROWTH FUND - GROWTH FUND -
DIVISION 49 DIVISION 54 DIVISION 52
---------------- ------------- -------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ 932,507 $ 159,968 $ 431,935
------------- ------------- -------------
EXPENSES:
Mortality and expense risk charge .......................... 20,370 27,564 123,427
Reimbursement of expenses .................................. (8,167) -- --
------------- ------------- -------------
Total expenses .......................................... 12,203 27,564 123,427
------------- ------------- -------------
NET INVESTMENT INCOME ...................................... 920,304 132,404 308,508
------------- ------------- -------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments ........................... 83,407 (924) 57,727
Capital gains distributions from mutual funds .............. 389,591 35,147 177,605
Net unrealized appreciation
of investments during the period ........................ 497,038 68,926 2,002,755
------------- ------------- -------------
Net realized and unrealized gain on investments ............ 970,036 103,149 2,238,087
------------- ------------- -------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........... $ 1,890,340 $ 235,553 $ 2,546,595
------------- ------------- -------------
</TABLE>
<PAGE> 613
14 FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC
INTERNATIONAL EQUITIES AGSPC MIDCAP INDEX
FUND - DIVISION 11 FUND - DIVISION 4
----------------------------- ------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER, 31 DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ..................................... $ 277,419 $ 1,608,036 $ (1,205,309) $ (689,428)
Net realized gain on investments ................................. 10,094,468 4,716,155 54,717,361 26,826,443
Capital gains distributions from mutual funds .................... 8,117,049 11,021,627 194,003,989 69,472,796
Net unrealized appreciation (depreciation)
of investments during the period ................................ 20,902,728 7,346,991 (141,415,147) 30,964,965
------------- ------------- ------------- -------------
Increase (decrease) in net assets resulting from operations .... 39,391,664 24,692,809 106,100,894 126,574,776
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................ 11,942,025 14,604,832 63,479,375 71,049,146
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................... (9,905,756) (9,033,065) (51,522,548) (37,639,412)
Annuity.benefit payments ......................................... (18,915) (17,602) (30,425) (23,570)
Amounts transferred interdivision, and from (to)
VALIC general account ........................................... (12,646,032) (33,973,374) (91,656,730) (40,068,991)
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ......................... (10,628,678) (28,419,209) (79,730,328) (6,682,827)
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .......................... 28,762,986 (3,726,400) 26,370,566 119,891,949
NET ASSETS:
Beginning of period .............................................. 148,274,382 152,000,782 850,505,634 730,613,685
------------- ------------- ------------- -------------
End of period .................................................... $ 177,037,368 $ 148,274,382 $ 876,876,200 $ 850,505,634
------------- ------------- ------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ........................... 101,811,751 122,716,744 169,039,887 171,065,657
Purchase payments ................................................ 7,577,362 10,549,627 12,121,341 16,010,438
Surrenders ....................................................... (6,375,893) (6,694,955) (9,823,005) (8,724,789)
Transfers - interdivision and from (to) VALIC general account .... (7,974,390) (24,759,665) (18,280,774) (9,311,419)
------------- ------------- ------------- -------------
Total units outstanding, end of period ........................... 95,038,830 101,811,751 153,057,449 169,039,887
------------- ------------ ------------- -------------
Units outstanding, by class:
Standard units .................................................. 94,415,343 101,811,751 151,288,816 169,039,887
Enhanced units:
20 bp.reduced .................................................. 348,851 -- 523,908 --
40 bp.reduced .................................................. 274,636 -- 1,244,725 --
------------- ------------ ------------- -------------
Accumulation units end of period ................................. 95,038,830 101,811,751 153,057,449 169,039,887
------------- ------------ ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................... $ 1.860227 $ 1.454644 $ 5.721920 $ 5.029093
Enhanced unit:
20 bp.reduced .................................................. 1.898106 -- 5.908866 --
40 bp.reduced .................................................. 1.937488 -- 6.116544 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 614
SEPARATE ACCOUNT A 15
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND -
AGSPC SMALL CAP -----------------------------
INDEX FUND - DIVISION 14 DIVISION 10A
----------------------------- -----------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ..................................... 270,564 $ 322,094 $ 44,364 $ 1,035,631
Net realized gain on investments ................................. 15,168,549 8,661,321 50,306,023 36,292,713
Capital gains distributions from mutual funds .................... 21,011,129 18,436,501 4,737,369 2,140,138
Net unrealized appreciation (depreciation)
of investments during the period ................................ 4,167,711 (34,899,835) 45,440,162 82,035,996
------------ ------------- ------------ ------------
Increase (decrease) in net assets resulting from operations .... 40,617,953 (7,479,919) 100,527,918 121,504,478
------------ ------------- ------------ ------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................ 23,105,395 28,153,952 2,842,259 4,116,842
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................... (13,990,673) (11,145,100) (40,751,241) (30,874,894)
Annuity benefit payments ......................................... (8,736) (7,293) (2,202,048) (1,996,857)
Amounts transferred interdivision, and from (to)
VALIC general account ........................................... (34,222,314) (13,919,719) (18,047,475) (14,779,077)
------------ ------------- ------------ ------------
Increase (decrease) in net assets
resulting from principal transactions ........................ (25,116,328) 3,081,840 (58,158,505) (43,533,986)
------------ ------------- ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .......................... 15,501,625 (4,398,079) 42,369,413 77,970,492
NET ASSETS:
Beginning of period .............................................. 225,670,671 230,068,750 547,753,875 469,783,383
------------ ------------- ------------ ------------
End of period .................................................... 241,172,296 $ 225,670,671 $590,123,288 $547,753,875
------------ ------------- ------------ ------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ........................... 107,379,840 106,279,077 23,726,504 25,835,933
Purchase payments ................................................ 10,679,162 13,084,095 117,449 206,729
Surrenders ....................................................... (6,306,665) (5,229,338) (1,676,844) (1,549,859)
Transfers - interdivision and from (to) VALIC general account..... (16,249,038) (6,753,994) (745,734) (766,299)
------------ ------------- ------------ ------------
Total units outstanding, end of period ........................... 95,503,299 107,379,840 21,421,375 23,726,504
------------ ------------- ------------ ------------
Units outstanding, by class:
Standard units .................................................. 94,031,183 107,321,015 21,421,375 23,726,504
Enhanced units:
20 bp reduced .................................................. 522,127 58,825 -- --
40 bp reduced .................................................. 949,989 -- -- --
------------ ------------- ------------ ------------
Accumulation units end of period ................................. 95,503,299 107,379,840 21,421,375 23,726,504
------------ ------------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND -
--------------------------------
DIVISION 10B
--------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) ............................................ $ 309,409 $ 358,014
Net realized gain on investments ........................................ 5,087,126 2,895,173
Capital gains distributions from mutual funds ........................... 362,359 166,018
Net unrealized appreciation (depreciation)
of investments during the period ....................................... 2,257,759 6,394,969
----------- -----------
Increase (decrease) in net assets resulting from operations ........... 8,016,653 9,814,174
----------- -----------
PRINCIPAL TRANSACTIONS:
Purchase payments ....................................................... 152,691 204,507
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ....................................... (4,474,719) (2,153,577)
Annuity benefit payments ................................................ (371,146) (327,696)
Amounts transferred interdivision, and from (to)
VALIC general account .................................................. (554,251) (1,934,563)
----------- -----------
Increase (decrease) in net assets
resulting from principal transactions ................................ (5,247,425) (4,211,329)
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS ................................. 2,769,228 5,602,845
NET ASSETS:
Beginning of period ..................................................... 42,548,876 36,946,031
----------- -----------
End of period ........................................................... $45,318,104 $42,548,876
----------- -----------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .................................. 1,131,113 1,256,974
Purchase payments ....................................................... 3,915 6,328
Surrenders .............................................................. (115,209) (68,344)
Transfers - interdivision and from (to) VALIC general account............ (14,204) (63,845)
----------- -----------
Total units outstanding, end of period .................................. 1,005,615 1,131,113
----------- -----------
Units outstanding, by class:
Standard units ......................................................... 1,005,615 1,131,113
Enhanced units:
20 bp reduced ......................................................... -- --
40 bp reduced ......................................................... -- --
----------- -----------
Accumulation units end of period ........................................ 1,005,615 1,131,113
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ...................... $2.522643 $2.100506 $26.836368 $22.479709 $43.027665 $35.792019
Enhanced unit:
20 bp reduced ...................... 2.558263 2.125983 -- -- -- --
40 bp reduced ...................... 2.597863 -- -- -- -- --
</TABLE>
<PAGE> 615
16 FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND -
---------------------------------------------------------------
DIVISION 10C DIVISION 10D
-------------------------------- ---------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
-------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................... $ 848,688 $ 5,965,482 $ 4,562 $ 105,740
Net realized gain on investments ................................ 58,888,546 21,789,375 6,938,320 4,368,980
Capital gains distributions from mutual funds ................... 36,367,266 13,033,369 471,902 219,975
Net unrealized appreciation (depreciation)
of investments during the period .............................. 612,628,344 631,036,013 2,683,181 7,900,957
-------------- -------------- ----------- -----------
Increase in net assets resulting from operations ............ 708,732,844 671,824,239 10,097,965 12,595,652
-------------- -------------- ----------- -----------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 544,822,404 372,858,039 535,672 654,342
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (226,510,857) (130,840,043) (4,345,956) (3,879,247)
Annuity benefit payments ........................................ (262,614) (164,035) (18,611) (15,905)
Amounts transferred interdivision, and from (to)
VALIC general account ......................................... 189,528,934 112,786,439 (3,390,505) (2,514,825)
-------------- -------------- ----------- -----------
Increase (decrease) in net assets
resulting from principal transactions ...................... 507,577,867 354,640,400 (7,219,400) (5,755,635)
-------------- -------------- ----------- -----------
TOTAL INCREASE IN NET ASSETS .................................... 1,216,310,711 1,026,464,639 2,878,565 6,840,017
NET ASSETS:
Beginning of period ............................................. 3,336,792,139 2,310,327,500 56,513,044 49,673,027
-------------- -------------- ----------- -----------
End of period ................................................... 4,553,102,850 3,336,792,139 $59,391,609 $56,513,044
-------------- -------------- ----------- -----------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... 698,570,695 615,053,124 6,655,796 7,438,537
Purchase payments ............................................... 102,379,268 85,764,962 65,246 88,428
Surrenders ...................................................... (41,417,044) (29,978,801) (477,997) (521,941)
Transfers - interdivision and from (to) VALIC general account ... 37,936,626 27,731,410 (384,522) (349,228)
-------------- -------------- ----------- -----------
Total units outstanding, end of period .......................... 797,469,545 698,570,695 5,858,523 6,655,796
-------------- -------------- ----------- -----------
Units outstanding, by class:
Standard units ................................................ 766,975,696 691,680,049 5,858,523 6,655,796
Enhanced units:
20 bp reduced ............................................... 18,855,858 6,859,835 -- --
40 bp reduced ............................................... 11,637,991 30,811 -- --
-------------- -------------- ----------- -----------
Accumulation units end of period ................................ 797,469,545 698,570,695 5,858,523 6,655,796
-------------- -------------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................. 5.696582 $ 4.772052 $10.095883 $ 8.457722
Enhanced unit:
20 bp reduced ............................................... 5.830950 4.875028 -- --
40 bp reduced ............................................... 5.981762 4.991135 -- --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 616
SEPARATE ACCOUNT A 17
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC GROWTH AGSPC GROWTH & INCOME
FUND - DIVISION 15 FUND - DIVISION 16
-------------------------------- ----------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
-------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ................................... $ (11,859,802) $ (10,623,737) $ (1,798,890) $ (1,424,066)
Net realized gain on investments ............................... 65,180,424 11,720,556 14,837,619 10,494,295
Capital gains distributions from mutual funds .................. 50,296,770 51,517,534 33,787,657 20,275,426
Net unrealized appreciation (depreciation)
of investments during the period ............................. (29,390,145) 114,925,718 13,472,567 3,996,252
-------------- -------------- ------------ ------------
Increase in net assets resulting from operations ........... 74,227,247 167,540,071 60,298,953 33,341,907
-------------- -------------- ------------ ------------
PRINCIPAL TRANSACTIONS:
Purchase payments .............................................. 161,308,154 183,983,180 32,568,050 39,532,854
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................ (68,528,954) (45,145,966) (19,456,775) (11,951,930)
Annuity benefit payments ....................................... (35,876) (23,099) (6,042) (3,597)
Amounts transferred interdivision, and from (to)
VALIC general account ........................................ (161,568,773) (34,517,049) (22,008,587) (32,787,298)
-------------- -------------- ------------ ------------
Increase (decrease) in net assets
resulting from principal transactions ..................... (68,825,449) 104,297,066 (8,903,354) (5,209,971)
-------------- -------------- ------------ ------------
TOTAL INCREASE IN NET ASSETS ................................... 5,401,798 271,837,137 51,395,599 28,131,936
NET ASSETS:
Beginning of period ............................................ 1,213,260,606 941,423,469 285,227,911 257,095,975
-------------- -------------- ------------ ------------
End of period .................................................. $1,218,662,404 $1,213,260,606 $336,623,510 $285,227,911
-------------- -------------- ------------ ------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ......................... 499,326,366 453,172,490 129,550,695 132,434,555
Purchase payments .............................................. 65,108,607 82,864,073 13,413,749 19,715,398
Surrenders ..................................................... (27,017,879) (20,670,419) (7,982,974) (6,142,924)
Transfers - interdivision and from (to) VALIC general account .. (65,896,980) (16,039,778) (9,286,745) (16,456,334)
-------------- -------------- ------------ ------------
Total units outstanding, end of period ......................... 471,520,114 499,326,366 125,694,725 129,550,695
-------------- -------------- ------------ ------------
Units outstanding, by class:
Standard units ............................................... 460,108,285 494,997,997 124,329,201 129,550,695
Enhanced units:
20 bp reduced .............................................. 8,377,232 4,324,799 660,621 --
40 bp reduced .............................................. 3,034,597 3,570 704,903 --
-------------- -------------- ------------ ------------
Accumulation units end of period ............................... 471,520,114 499,326,366 125,694,725 129,550,695
-------------- -------------- ------------ ------------
<CAPTION>
AMERICAN CENTURY AMERICAN GENERAL INTERNATIONAL
ULTRA FUND - DIVISION 31 GROWTH FUND - DIVISION 33
------------------------------ ------------------------------
FOR THE FOR THE FOR THE FOR THE PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED AUGUST 26, 1998
DECEMBER 31, DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
-------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ................................... $ (6,405,426) $ (2,282,917) $ 83,486 $ --
Net realized gain on investments ............................... 5,962,303 473,963 12,371 --
Capital gains distributions from mutual funds .................. 29,663,737 30,532,354 179,573 --
Net unrealized appreciation (depreciation)
of investments during the period ............................. 227,838,963 39,033,600 2,105,762 200,750
-------------- ------------ ----------- -----------
Increase in net assets resulting from operations ........... 257,059,577 67,757,000 2,381,192 200,750
-------------- ------------ ----------- -----------
PRINCIPAL TRANSACTIONS:
Purchase payments .............................................. 209,997,538 95,865,928 407,427 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................ (30,465,801) (6,987,387) (14,716) --
Annuity benefit payments ....................................... (8,296) (1,933) -- --
Amounts transferred interdivision, and from (to)
VALIC general account ........................................ 221,997,706 86,438,332 233,728 3,650,000
-------------- ------------ ----------- -----------
Increase (decrease) in net assets
resulting from principal transactions ..................... 401,521,147 175,314,940 626,439 3,650,000
-------------- ------------ ----------- -----------
TOTAL INCREASE IN NET ASSETS ................................... 658,580,724 243,071,940 3,007,631 3,850,750
NET ASSETS:
Beginning of period ............................................ 366,840,329 123,768,389 3,850,750 --
-------------- ------------ ----------- -----------
End of period .................................................. $1,025,421,053 $366,840,329 $ 6,858,381 $ 3,850,750
-------------- ------------ ----------- -----------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ......................... 217,361,127 97,745,282 -- --
Purchase payments .............................................. 109,879,713 63,913,168 349,422 --
Surrenders ..................................................... (15,131,159) (4,133,151) (32,064) --
Transfers - interdivision and from (to) VALIC general account .. 121,450,593 59,835,828 185,196 --
-------------- ------------ ----------- -----------
Total units outstanding, end of period ......................... 433,560,274 217,361,127 502,554 --
-------------- ------------ ----------- -----------
Units outstanding, by class:
Standard units ............................................... 411,119,880 209,221,513 167,387 --
Enhanced units:
20 bp reduced .............................................. 20,827,045 8,116,612 5,641 --
40 bp reduced .............................................. 1,613,349 23,002 329,526 --
-------------- ------------ ----------- -----------
Accumulation units end of period ............................... 433,560,274 217,361,127 502,554 --
-------------- ------------ ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................ $ 2.582249 $ 2.428587 2.676995 2.201234
Enhanced unit:
20 bp reduced .............................................. 2.608476 2.448443 2.704358 --
40 bp reduced .............................................. 2.638280 2.471473 2.735261 --
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................ 2.359768 $ 1.685503 $ 1.634943 $ --
Enhanced unit:
20 bp reduced .............................................. 2.437771 1.737734 1.639279 --
40 bp reduced .............................................. 2.527648 1.798208 1.643677 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 617
18 FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AMERICAN GENERAL INTERNATIONAL AMERICAN GENERAL LARGE CAP
VALUE FUND - DIVISION 34 GROWTH FUND - DIVISION 39
------------------------------- -----------------------------
FOR THE FOR THE PERIOD FOR THE FOR THE PERIOD
YEAR ENDED AUGUST 26, 1998 YEAR ENDED AUGUST 26, 1998
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
------------ --------------- ------------ ----------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ..................................... $ 70,476 $ 5,760 $ (24,106) $ 2,093
Net realized gain on investments ................................. 50,532 -- 196,164 --
Capital gains distributions from mutual funds .................... 358,216 -- 634,398 --
Net unrealized appreciation (depreciation)
of investments during the period ................................ 2,597,347 547,276 3,810,394 695,540
------------ -------------- ------------ --------------
Increase in net assets resulting from operations ............... 3,076,571 553,036 4,616,850 697,633
------------ -------------- ------------ --------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................ 555,334 -- 9,704,453 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ........ ...................... (15,637) -- (287,336) --
Annuity benefit payments ......................................... -- -- -- --
Amounts transferred interdivision, and from (to)
VALIC general account ........................................... 330,143 3,600,000 4,199,650 2,850,000
------------ -------------- ------------ --------------
Increase in net assets
resulting from principal transactions ......................... 869,840 3,600,000 13,616,767 2,850,000
------------ -------------- ------------ --------------
TOTAL INCREASE IN NET ASSETS ..................................... 3,946,411 4,153,036 18,233,617 3,547,633
NET ASSETS:
Beginning of period .............................................. 4,153,036 -- 3,547,633 --
------------ -------------- ------------ --------------
End of period .................................................... $ 8,099,447 $ 4,153,036 $ 21,781,250 $ 3,547,633
------------ -------------- ------------ --------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ........................... -- -- -- --
Purchase payments ................................................ 390,550 -- 7,178,778 --
Surrenders ....................................................... (16,250) -- (231,027) --
Transfers - interdivision and from (to) VALIC general account .... 212,767 -- 3,181,787 --
------------ -------------- ------------ --------------
Total units outstanding, end of period ........................... 587,067 -- 10,129,538 --
------------ -------------- ------------ --------------
Units outstanding, by class:
Standard units .................................................. 337,242 -- 519,825 --
Enhanced units:
20 bp reduced .................................................. 177,255 -- 95,862 --
40 bp reduced .................................................. 72,570 -- 9,513,851 --
------------ -------------- ------------ --------------
Accumulation units end of period ................................. 587,067 -- 10,129,538 --
------------ -------------- ------------ --------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................... $ 1.915641 $ -- $ 1.667518 $ --
Enhanced unit:
20 bp reduced .................................................. 1.920710 -- 1.671932 --
40 bp reduced .................................................. 1.925869 -- 1.676417 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 618
SEPARATE ACCOUNT A 19
<TABLE>
<CAPTION>
AMERICAN GENERAL LARGE CAP AMERICAN GENERAL MID CAP GROWTH
VALUE FUND - DIVISION 40 FUND - DIVISION 37
------------------------------ ------------------------------
FOR THE FOR THE PERIOD FOR THE FOR THE PERIOD
YEAR ENDED AUGUST 26, 1998 YEAR ENDED AUGUST 26, 1998
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................... $ 45,852 $ 10,224 $ (3,196) $ --
Net realized gain on investments ................................ 63,723 -- 21,955 --
Capital gains distributions from mutual funds ................... 650,214 -- 710,827 --
Net unrealized appreciation (depreciation)
of investments during the period ............................... (552,152) 716,526 (258,735) 1,425,600
------------ --------------- ------------ ---------------
Increase in net assets resulting from operations .............. 207,637 726,750 470,851 1,425,600
------------ --------------- ------------ ---------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 554,240 -- 1,017,137 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .............................. (26,803) -- (14,137) --
Annuity benefit payments ........................................ -- -- -- --
Amounts transferred interdivision, and from (to)
VALIC general account........................................... 115,335 2,900,000 121,669 4,050,000
------------ --------------- ------------ ---------------
Increase in net assets
resulting from principal transactions ........................ 642,772 2,900,000 1,124,669 4,050,000
------------ --------------- ------------ ---------------
TOTAL INCREASE IN NET ASSETS..................................... 850,409 3,626,750 1,595,520 5,475,600
NET ASSETS:
Beginning of period ............................................. 3,626,750 -- 5,475,600 --
------------ --------------- ------------ ---------------
End of period ................................................... $ 4,477,159 $ 3,626,750 $ 7,071,120 $ 5,475,600
------------ --------------- ------------ ---------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... -- -- -- --
Purchase payments ............................................... 439,688 -- 801,847 --
Surrenders ...................................................... (29,042) -- (24,159) --
Transfers - interdivision and from (to) VALIC general account ... 92,844 -- 94,239 --
------------ --------------- ------------ ---------------
Total units outstanding, end of period .......................... 503,490 -- 871,927 --
------------ --------------- ------------ ---------------
Units outstanding, by class:
Standard units ................................................. 216,072 -- 477,094 --
Enhanced units:
20 bp reduced ................................................. 221 -- 1,244 --
40 bp reduced ................................................. 287,197 -- 393,589 --
------------ --------------- ------------ ---------------
Accumulation units end of period ................................ 503,490 -- 871,927 --
------------ --------------- ------------ ---------------
<CAPTION>
AMERICAN GENERAL MID CAP VALUE AMERICAN GENERAL SMALL CAP
FUND - DIVISION 38 GROWTH FUND - DIVISION 35
------------------------------ ------------------------------
FOR THE FOR THE PERIOD FOR THE FOR THE PERIOD
YEAR ENDED AUGUST 26, 1998 YEAR ENDED AUGUST 26, 1998
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................... $ 34,101 $ 10,079 $ (10,661) $ --
Net realized gain on investments ................................ 156,954 -- 128,821 --
Capital gains distributions from mutual funds ................... 1,894,986 115,562 1,115,791 18,373
Net unrealized appreciation (depreciation)
of investments during the period ............................... (764,242) 896,569 4,835,156 1,361,100
------------ --------------- ------------ ---------------
Increase in net assets resulting from operations .............. 1,321,799 1,022,210 6,069,107 1,379,473
------------ --------------- ------------ ---------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 1,350,999 -- 2,566,013 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .............................. (22,598) -- (102,973) --
Annuity benefit payments ........................................ -- -- -- --
Amounts transferred interdivision, and from (to)
VALIC general account........................................... 718,756 3,949,999 2,902,335 3,900,000
Increase in net assets ------------ --------------- ------------ ---------------
resulting from principal transactions ......................... 2,047,157 3,949,999 5,365,375 3,900,000
------------ --------------- ------------ ---------------
TOTAL INCREASE IN NET ASSETS...................................... 3,368,956 4,972,209 11,434,482 5,279,473
NET ASSETS:
Beginning of period ............................................. 4,972,209 -- 5,279,473 --
------------ --------------- ------------ ---------------
End of period ................................................... $ 8,341,165 $ 4,972,209 $ 16,713,955 $ 5,279,473
------------ --------------- ------------ ---------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... -- -- -- --
Purchase payments ............................................... 982,289 -- 1,718,837 --
Surrenders ...................................................... (28,013) -- (83,425) --
Transfers - interdivision and from (to) VALIC general account ... 527,305 -- 1,758,419 --
------------ --------------- ------------ ---------------
Total units outstanding, end of period .......................... 1,481,581 -- 3,393,831 --
------------ --------------- ------------ ---------------
Units outstanding, by class:
Standard units ................................................. 223,437 -- 298,665 --
Enhanced units:
20 bp reduced ................................................. 142,103 -- 119,661 --
40 bp reduced ................................................. 1,116,041 -- 2,975,505 --
------------ --------------- ------------ ---------------
Accumulation units end of period ................................ 1,481,581 -- 3,393,831 --
------------ --------------- ------------ ---------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998 1999
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit $ 1.302905 $ -- $ 1.423173 $ -- $ 1.521699
Enhanced unit:
20 bp reduced 1.306351 -- 1.426935 -- 1.525696
40 bp reduced 1.309860 -- 1.430763 -- 1.529814
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1999 1998
--------------- ------------ ------------
<S> <C> <C> <C>
Accumulation value per unit:
Standard unit $ -- $ 2.272711 $ --
Enhanced unit:
20 bp reduced -- 2.278700 --
40 bp reduced -- 2.284815 --
</TABLE>
<PAGE> 619
20 FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
DREYFUS VARIABLE INVESTMENT FUND-
AMERICAN GENERAL SMALL CAP SMALL CAP PORTFOLIO-
VALUE FUND - DIVISION 36 DIVISION 18
---------------------------- ---------------------------------
FOR THE FOR THE PERIOD FOR THE FOR THE
YEAR ENDED AUGUST 26, 1998 YEAR ENDED YEAR ENDED
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
----------- --------------- ------------ -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................... $ 55,280 $ 13,079 $ (7,408,133) $ (9,100,355)
Net realized gain on investments ................................ 6,489 -- 63,772,555 19,673,784
Capital gains distributions from mutual funds ................... 145,670 51,644 -- 15,549,964
Net unrealized appreciation (depreciation)
of investments during the period .............................. (493,258) 585,384 89,787,753 (67,338,458)
----------- ----------- ------------- -------------
Increase (decrease) in net assets
resulting from operations ................................ (285,819) 650,107 146,152,175 (41,215,065)
----------- ----------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 204,028 -- 80,558,331 136,010,701
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (1,545) -- (48,924,631) (37,151,392)
Annuity benefit payments ........................................ -- -- (17,577) (12,769)
Amounts transferred interdivision, and from (to)
VALIC general account ......................................... 54,906 3,849,999 (200,169,015) (105,448,868)
----------- ----------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ..................... 257,389 3,849,999 (168,552,892) (6,602,328)
----------- ----------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ......................... (28,430) 4,500,106 (22,400,717) (47,817,393)
NET ASSETS:
Beginning of period ............................................. 4,500,106 -- 802,006,915 849,824,308
----------- ----------- ------------- -------------
End of period ................................................... $ 4,471,676 $ 4,500,106 $ 779,606,198 $ 802,006,915
----------- ----------- ------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... -- -- 474,215,229 479,851,525
Purchase payments ............................................... 206,905 -- 45,083,201 78,837,263
Surrenders ...................................................... (12,171) -- (28,155,056) (22,827,377)
Transfers - interdivision and from (to) VALIC general account ... 52,250 -- (113,572,602) (61,646,182)
----------- ----------- ------------- -------------
Total units outstanding, end of period .......................... 246,984 -- 377,570,772 474,215,229
----------- ----------- ------------- -------------
Units outstanding, by class:
Standard units ................................................ 166,013 -- 351,855,473 474,215,229
Enhanced units:
20 bp reduced ............................................... 232 -- 2,046,085 --
40 bp reduced ............................................... 80,739 -- 23,669,214 --
----------- ----------- ------------- -------------
Accumulation units end of period ................................ 246,984 -- 377,570,772 474,215,229
----------- ----------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
----------- --------------- ------------ -------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................ $1.080558 $ -- $ 2.059431 $ 1.690786
Enhanced unit:
20 bp reduced .............................................. 1.083393 -- 2.089527 --
40 bp reduced .............................................. 1.086316 -- 2.128984 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 620
SEPARATE ACCOUNT A 21
<TABLE>
<CAPTION>
EVERGREEN GROWTH AND INCOME EVERGREEN SMALL CAP VALUE
FUND-DIVISION 56 FUND-DIVISION 55
------------------------------- -----------------------------
FOR THE PERIOD FOR THE FOR THE PERIOD FOR THE
JANUARY 4, 1999 YEAR ENDED JANUARY 4, 1999 YEAR ENDED
TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
--------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................... $ (5) $ -- $ -- $ --
Net realized gain on investments ................................ 31 -- -- --
Capital gains distributions from mutual funds ................... 7 -- -- --
Net unrealized appreciation (depreciation)
of investments during the period .............................. 370 -- --
--------------- ------------- --------------- -------------
Increase (decrease) in net assets
resulting from operations ... ............................ 403 -- -- --
--------------- ------------- --------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 5,841 -- 242 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. -- -- -- --
Annuity benefit payments ........................................ -- -- -- --
Amounts transferred interdivision, and from (to)
VALIC general account ......................................... -- -- -- --
--------------- ------------- --------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ..................... 5,841 -- 242 --
--------------- ------------- --------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ......................... 6,244 -- 242 --
NET ASSETS:
Beginning of period ............................................. -- -- -- --
--------------- ------------- --------------- -------------
End of period ................................................... $ 6,244 $ -- $ 242 $ --
--------------- ------------- --------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... -- -- -- --
Purchase payments ............................................... 5,510 -- 244 --
Surrenders ...................................................... -- -- -- --
Transfers - interdivision and from (to) VALIC general account ... (9) -- -- --
--------------- ------------- --------------- -------------
Total units outstanding, end of period .......................... 5,501 -- 244 --
--------------- ------------- --------------- -------------
Units outstanding, by class:
Standard units ................................................ 175 -- 244 --
Enhanced units:
20 bp reduced ............................................... 5,326 -- -- --
40 bp reduced ............................................... -- -- -- --
--------------- ------------- --------------- -------------
Accumulation units end of period ................................ 5,501 -- 244 --
--------------- ------------- --------------- -------------
</TABLE>
<TABLE>
<CAPTION>
EVERGREEN VALUE DREYFUS FOUNDERS GROWTH
FUND-DIVISION 57 FUND-DIVISION 30
------------------------------- -------------------------------
FOR THE PERIOD FOR THE FOR THE FOR THE
JANUARY 4, 1999 YEAR ENDED YEAR ENDED YEAR ENDED
TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
--------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................... $ 4 $ -- $ (5,884,618) $ (2,702,478)
Net realized gain on investments ................................ -- -- 4,207,339 669,679
Capital gains distributions from mutual funds ................... 262 -- 127,949,776 21,151,616
Net unrealized appreciation (depreciation)
of investments during the period .............................. (319) -- 95,948,371 42,627,883
--------------- ------------- --------------- -------------
Increase (decrease) in net assets
resulting from operations ................................ (53) -- 222,220,868 61,746,700
--------------- ------------- --------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 4,435 -- 179,626,688 117,393,497
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. -- -- (27,384,768) (9,478,330)
Annuity benefit payments ........................................ -- -- (2,237) (1,096)
Amounts transferred interdivision, and from (to)
VALIC general account ......................................... 3 -- 88,107,501 72,791,918
--------------- ------------- --------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ..................... 4,438 -- 240,347,184 180,705,989
--------------- ------------- --------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ......................... 4,385 -- 462,568,052 242,452,689
NET ASSETS:
Beginning of period ............................................. -- -- 412,920,920 170,468,231
--------------- ------------- --------------- -------------
End of period ................................................... $ 4,385 $ -- $ 875,488,972 $ 412,920,920
--------------- ------------- --------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... -- -- 258,511,009 132,167,162
Purchase payments ............................................... 4,240 -- 100,769,102 80,460,723
Surrenders ...................................................... -- -- (14,640,042) (6,588,832)
Transfers - interdivision and from (to) VALIC general account ... -- -- 52,174,839 52,471,956
--------------- ------------- --------------- -------------
Total units outstanding, end of period .......................... 4,240 -- 396,814,908 258,511,009
--------------- ------------- --------------- -------------
Units outstanding, by class:
Standard units ................................................ 4,240 -- 357,129,398 250,777,959
Enhanced units:
20 bp reduced ............................................... -- -- 16,160,159 7,720,189
40 bp reduced ............................................... -- -- 23,525,351 12,861
--------------- ------------- --------------- -------------
Accumulation units end of period ................................ 4,240 -- 396,814,908 258,511,009
--------------- ------------- --------------- -------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
--------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................. $ 1.132919 $ -- $ 0.995515 $ --
Enhanced unit:
20 bp reduced ............................................... 1.135195 -- -- --
40 bp reduced ............................................... -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
--------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................. $ 1.034113 $ -- $ 2.196620 $ 1.595913
Enhanced unit:
20 bp reduced ............................................... -- -- 2.252548 1.633282
40 bp reduced ............................................... -- -- 2.316600 1.676366
</TABLE>
<PAGE> 621
22 FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
NEUBERGER BERMAN PUTNAM GLOBAL GROWTH
GUARDIAN TRUST-DIVISION 29 FUND - DIVISION 28
---------------------------- ------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................. $ (148,588) $ (316,186) $ (2,657,686) $ (417,807)
Net realized gain (loss) on investments ....................... 232,115 447,267 4,532,574 107,190
Capital gains distributions from mutual funds ................. 10,764,888 5,112,104 43,772,448 4,089,731
Net unrealized appreciation (depreciation)
of investments during the period ............................ (6,452,929) (5,621,588) 131,823,273 21,600,190
------------- ------------- ------------- -------------
Increase (decrease) in net assets resulting from
operations. ........................................... 4,395,486 (378,403) 177,470,609 25,379,304
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................. 12,562,405 18,727,026 77,466,315 45,226,423
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ........................... (3,739,131) (1,971,281) (10,501,490) (3,310,436)
Annuity benefit payments ...................................... (67) -- (4,995) (2,617)
Amounts transferred interdivision, and from (to)
VALIC general account ........................................ (15,092,015) (1,314,316) 89,335,469 36,967,959
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ................. (6,268,808) 15,441,429 156,295,299 78,881,329
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ....................... (1,873,322) 15,063,026 333,765,908 104,260,633
NET ASSETS:
Beginning of period ........................................... 61,369,849 46,306,823 163,095,041 58,834,408
------------- ------------- ------------- -------------
End of period ................................................. $ 59,496,527 $ 61,369,849 $ 496,860,949 $ 163,095,041
============= ============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ........................ 46,274,070 35,406,663 107,627,792 49,548,732
Purchase payments ............................................. 8,823,454 13,737,161 45,014,503 32,447,084
Surrenders .................................................... (2,554,943) (1,683,029) (5,810,559) (2,408,897)
Transfers-interdivision and from (to) VALIC general account.... (10,782,486) (1,186,725) 53,893,181 28,040,873
------------- ------------- ------------- -------------
Total units outstanding, end of period ........................ 41,760,095 46,274,070 200,724,917 107,627,792
============= ============= ============= =============
Units outstanding, by class:
Standard units .............................................. 40,241,067 45,261,146 181,916,991 101,468,260
Enhanced units:
20 bp reduced ............................................. 1,406,229 1,012,671 11,313,375 6,153,771
40 bp reduced ............................................. 112,799 253 7,494,551 5,761
------------- ------------- ------------- -------------
Accumulation units end of period .............................. 41,760,095 46,274,070 200,724,917 107,627,792
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ............................................... $ 1.422424 $ 1.324970 $ 2.465895 $ 1.512865
Enhanced unit:
20 bp reduced ............................................. 1.471857 1.368269 2.530785 1.549587
40 bp reduced ............................................. 1.528673 1.418252 2.603644 1.591007
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 622
SEPARATE ACCOUNT A 23
<TABLE>
<CAPTION>
PUTNAM NEW OPPORTUNITIES FUND- PUTNAM OTC & EMERGING GROWTH
DIVISION 26 FUND - DIVISION 27
------------------------------- ------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
-------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................. $ (5,793,432) $ (2,691,328) $ (1,934,231) $ 3,286,141
Net realized gain (loss) on investments ....................... 5,405,004 872,455 9,704,876 (332,944)
Capital gains distributions from mutual funds ................. 73,606,083 12,546,729 20,649,440 --
Net unrealized appreciation (depreciation)
of investments during the period ............................ 313,953,044 53,605,222 182,753,857 9,278,020
--------------- --------------- -------------- -------------
Increase (decrease) in net assets resulting from
operations ............................................ 387,170,699 64,333,078 211,173,942 12,231,217
--------------- --------------- -------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................. 156,130,519 108,017,017 40,430,971 36,165,527
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ........................... (25,813,365) (8,784,234) (8,888,544) (4,499,407)
Annuity benefit payments ...................................... (896) (575) (2,730) (2,072)
Amounts transferred interdivision, and from (to)
VALIC general account ........................................ 86,572,168 84,011,090 46,636,113 960,600
--------------- --------------- -------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ................. 216,888,426 183,243,298 78,175,810 32,624,648
--------------- --------------- -------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ....................... 604,059,125 247,576,376 289,349,752 44,855,865
NET ASSETS:
Beginning of period ........................................... 412,412,954 164,836,578 142,311,995 97,456,130
--------------- --------------- -------------- -------------
End of period ................................................. $ 1,016,472,079 $ 412,412,954 $ 431,661,747 $ 142,311,995
=============== =============== ============== =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ........................ 291,260,021 143,395,066 132,559,704 99,785,041
Purchase payments ............................................. 96,163,717 85,839,361 28,703,809 36,257,228
Surrenders .................................................... (15,044,221) (6,337,162) (6,296,909) (4,704,400)
Transfers-interdivision and from (to) VALIC general account ... 54,303,091 68,362,756 23,934,549 1,221,835
--------------- --------------- -------------- -------------
Total units outstanding, end of period ........................ 426,682,608 291,260,021 178,901,153 132,559,704
=============== =============== ============== =============
Units outstanding, by class:
Standard units .............................................. 386,064,440 280,523,297 170,725,977 129,463,792
Enhanced units:
20 bp reduced ............................................. 19,231,737 10,725,927 6,570,152 3,092,839
40 bp reduced ............................................. 21,386,431 10,797 1,605,024 3,073
--------------- --------------- -------------- -------------
Accumulation units end of period .............................. 426,682,608 291,260,021 178,901,153 132,559,704
=============== =============== ============== =============
</TABLE>
<TABLE>
<CAPTION>
SCUDDER GROWTH AND T. ROWE PRICE SMALL-CAP
INCOME FUND - DIVISION 21 STOCK FUND - DIVISION 51
------------------------------- -------------------------------
FOR THE FOR THE FOR THE FOR THE PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 22, 1998
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
-------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................. $ 2,202,593 $ 2,680,972 $ (20,554) $ --
Net realized gain (loss) on investments ....................... 3,895,314 1,067,960 40,991 --
Capital gains distributions from mutual funds ................. 6,380,872 17,737,903 320,107 --
Net unrealized appreciation (depreciation)
of investments during the period ............................ (283,526) (15,926,329) 1,008,645 --
--------------- --------------- -------------- -------------
Increase (decrease) in net assets resulting from
operations ............................................ 12,195,253 5,560,506 1,349,189 --
--------------- --------------- -------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................. 54,245,118 79,800,185 5,952,689 139
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ........................... (13,753,656) (7,670,739) (196,858) --
Annuity benefit payments ...................................... (4,562) (3,718) -- --
Amounts transferred interdivision, and from (to)
VALIC general account ........................................ (53,742,268) 34,897,873 1,652,855 --
--------------- --------------- -------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ................. (13,255,368) 107,023,601 7,408,686 139
--------------- --------------- -------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ....................... (1,060,115) 112,584,107 8,757,875 139
=============== =============== ============== =============
NET ASSETS:
Beginning of period ........................................... 247,968,508 135,384,401 139 --
--------------- --------------- -------------- -------------
End of period ................................................. $ 246,908,393 $ 247,968,508 $ 8,758,014 $ 139
=============== =============== ============== =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ........................ 164,312,979 94,225,984 122 --
Purchase payments ............................................. 34,048,172 51,892,138 5,428,689 122
Surrenders .................................................... (8,263,310) (5,008,156) (169,605) --
Transfers-interdivision and from (to) VALIC general account ... (34,611,633) 23,203,013 1,484,376 --
--------------- --------------- -------------- -------------
Total units outstanding, end of period ........................ 155,486,208 164,312,979 6,743,582 122
=============== =============== ============== =============
Units outstanding, by class:
Standard units .............................................. 146,888,390 159,815,811 821,977 122
Enhanced units:
20 bp reduced .............................................. 6,367,461 4,494,004 249,245 --
40 bp reduced .............................................. 2,230,357 3,164 5,672,360 --
--------------- --------------- -------------- -------------
Accumulation units end of period .............................. 155,486,208 164,312,979 6,743,582 122
=============== =============== ============== =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
--------------- --------------- -------------- -------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ............................................... $ 2.376261 $ 1.415175 $ 2.408872 $ 1.072660
Enhanced unit:
20 bp reduced ............................................. 2.414279 1.434946 2.471391 1.098295
40 bp reduced ............................................. 2.459834 1.459115 2.542500 1.127653
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
--------------- --------------- -------------- -------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ............................................... $ 1.584519 $ 1.507724 $ 1.293095 $ 1.141049
Enhanced unit:
20 bp reduced ............................................. 1.623952 1.542160 1.296356 --
40 bp reduced ............................................. 1.670148 1.582856 1.299637 --
</TABLE>
<PAGE> 623
24 FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
TEMPLETON FOREIGN TEMPLETON INTERNATIONAL
FUND - DIVISION 32 FUND - DIVISION 20
------------------------------ ------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ........................................... $ 7,554,809 $ 3,763,468 $ 11,247,994 $ 7,944,373
Net realized gain (loss) on investments ......................... (2,951,879) (1,076,896) 48,058,679 52,533,310
Capital gains distributions from mutual funds ................... 2,706,922 17,280,633 71,597,060 31,903,839
Net unrealized appreciation (depreciation)
of investments during the period .............................. 80,764,072 (34,315,820) 22,890,344 (37,039,574)
------------- ------------- ------------- -------------
Increase (decrease) in net assets resulting from
operations ................................................ 88,073,924 (14,348,615) 153,794,077 55,341,948
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 56,633,360 72,575,285 86,045,632 114,632,129
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (13,184,454) (7,939,318) (46,576,624) (35,093,007)
Annuity benefit payments ........................................ (2,321) (1,991) (11,559) (9,179)
Amounts transferred interdivision, and from (to)
VALIC general account ......................................... (11,673,466) (12,669,089) (143,595,363) (95,114,875)
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ..................... 31,773,119 51,964,887 (104,137,914) (15,584,932)
------------- ------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS .................................... 119,847,043 37,616,272 49,656,163 39,757,016
NET ASSETS:
Beginning of period ............................................. 218,468,273 180,852,001 769,496,203 729,739,187
------------- ------------- ------------- -------------
End of period ................................................... $ 338,315,316 $ 218,468,273 $ 819,152,366 $ 769,496,203
------------- ------------- ------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... 204,065,916 159,201,107 452,419,089 463,174,350
Purchase payments ............................................... 44,888,381 63,265,244 46,775,532 65,837,726
Surrenders ...................................................... (9,883,393) (7,600,467) (25,556,432) (21,321,029)
Transfers - interdivision and from (to) VALIC general account ... (10,739,081) (10,799,968) (79,846,982) (55,271,958)
------------- ------------- ------------- -------------
Total units outstanding, end of period .......................... 228,331,823 204,065,916 393,791,207 452,419,089
------------- ------------- ------------- -------------
Units outstanding, by class:
Standard units ................................................ 219,168,378 198,626,024 372,176,780 452,419,089
Enhanced units:
20 bp reduced ............................................... 8,660,425 5,437,288 2,084,490 --
40 bp reduced ............................................... 503,020 2,604 19,529,937 --
------------- ------------- ------------- -------------
Accumulation units end of period ................................ 228,331,823 204,065,916 393,791,207 452,419,089
------------- ------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................. $ 1.479830 $ 1.069704 $ 2.076148 $ 1.700398
Enhanced unit:
20 bp reduced ............................................... 1.517785 1.094954 2.105759 --
40 bp reduced ............................................... 1.560956 1.123840 2.138370 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 624
SEPARATE ACCOUNT A 25
<TABLE>
<CAPTION>
VANGUARD WINDSOR II AMERICAN GENERAL BALANCED
FUND - DIVISION 24 FUND - DIVISION 42
------------------------------ -------------------------------
FOR THE FOR THE FOR THE FOR THE PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED AUGUST 26, 1998
DECEMBER 31, DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ........................................... $ 8,388,243 $ 5,622,515 $ 188,495 $ 29,084
Net realized gain (loss) on investments ......................... 6,166,843 1,366,076 30,618 --
Capital gains distributions from mutual funds ................... 67,184,211 51,898,120 432,947 34,051
Net unrealized appreciation (depreciation)
of investments during the period .............................. (144,035,946) 278,987 350,211 805,536
------------- ------------- ------------- -------------
Increase (decrease) in net assets resulting from operations.. (62,296,649) 59,165,698 1,002,271 868,671
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 213,954,582 172,075,011 1,574,236 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (40,354,240) (18,029,126) (60,039) --
Annuity benefit payments ........................................ (9,743) (6,802) -- --
Amounts transferred interdivision, and from (to)
VALIC general account ......................................... (29,853,674) 162,813,002 1,582,048 5,000,000
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ..................... 143,736,925 316,852,085 3,096,245 5,000,000
------------- ------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS .................................... 81,440,276 376,017,783 4,098,516 5,868,671
NET ASSETS:
Beginning of period ............................................. 651,414,982 275,397,199 5,868,671 --
------------- ------------- ------------- -------------
End of period ................................................... $ 732,855,258 $ 651,414,982 $ 9,967,187 $ 5,868,671
------------- ------------- ------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... 386,567,704 187,929,868 -- --
Purchase payments ............................................... 122,755,122 105,145,249 1,250,285 --
Surrenders ...................................................... (22,363,367) (10,145,505) (58,555) --
Transfers - interdivision and from (to) VALIC general account ... (20,680,140) 103,638,092 1,277,373 --
------------- ------------- ------------- -------------
Total units outstanding, end of period .......................... 466,279,319 386,567,704 2,469,103 --
------------- ------------- ------------- -------------
Units outstanding, by class:
Standard units ................................................ 426,529,299 372,737,595 461,870 --
Enhanced units:
20 bp reduced ............................................... 20,846,053 13,800,156 38,339 --
40 bp reduced ............................................... 18,903,967 29,953 1,968,894 --
------------- ------------- ------------- -------------
Accumulation units end of period ................................ 466,279,319 386,567,704 2,469,103 --
------------- ------------- ------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
VANGUARD WELLINGTON
FUND-DIVISION 25
------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income ........................................... $ 14,109,155 $ 8,146,899
Net realized gain (loss) on investments ......................... 1,861,183 453,710
Capital gains distributions from mutual funds ................... 28,847,888 30,281,535
Net unrealized appreciation (depreciation)
of investments during the period .............................. (30,879,706) (13,016,167)
------------- -------------
Increase (decrease) in net assets resulting from ............ 13,938,520 25,865,977
------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 149,843,118 128,896,516
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (29,503,291) (11,075,983)
Annuity benefit payments ........................................ (4,939) (1,770)
Amounts transferred interdivision, and from (to)
VALIC general account ......................................... 29,260,803 106,781,378
------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ..................... 149,595,691 224,600,141
------------- -------------
TOTAL INCREASE IN NET ASSETS .................................... 163,534,211 250,466,118
NET ASSETS:
Beginning of period ............................................. 406,510,665 156,044,547
------------- -------------
End of period ................................................... $ 570,044,876 $ 406,510,665
------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... 273,485,784 116,429,781
Purchase payments ............................................... 96,236,923 87,356,196
Surrenders ...................................................... (18,147,782) (6,659,976)
Transfers - interdivision and from (to) VALIC general account ... 19,135,718 76,359,783
------------- -------------
Total units outstanding, end of period .......................... 370,710,643 273,485,784
------------- -------------
Units outstanding, by class:
Standard units ................................................ 328,701,408 253,840,498
Enhanced units:
20 bp reduced ............................................... 28,195,817 19,636,072
40 bp reduced ............................................... 13,813,418 9,214
------------- -------------
Accumulation units end of period ................................ 370,710,643 273,485,784
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................. $ 1.566008 $ 1.683226 $ 1.323103 $ --
Enhanced unit:
20 bp reduced ............................................... 1.606241 1.723020 1.326598 --
40 bp reduced ............................................... 1.653581 1.770257 1.330160 --
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------- -------------
<S> <C> <C>
Accumulation value per unit:
Standard unit ................................................. $ 1.528992 $ 1.482836
Enhanced unit:
20 bp reduced ............................................... 1.580569 1.529797
40 bp reduced ............................................... 1.641601 1.585688
</TABLE>
<PAGE> 625
26 FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS AGSPC CAPITAL CONSERVATION FUND -
--------------------------------------------------------
DIVISION 1 DIVISION 7
--------------------------- ---------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income .............................................. $ 314,033 $ 338,175 $ 3,026,245 $ 3,124,808
Net realized gain (loss) on investments ............................ (76,164) 12,194 8,827 413,199
Capital gains distributions from mutual funds ...................... -- -- -- --
Net unrealized appreciation (depreciation)
of investments during the period ................................. (326,155) 35,832 (3,853,099) (35,856)
----------- ----------- ----------- -----------
Increase (decrease) in net assets resulting from operations .... (88,286) 386,201 (818,027) 3,502,151
----------- ----------- ----------- -----------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................. 28,773 146,532 5,665,099 7,027,648
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ................................ (602,665) (562,370) (5,161,343) (3,833,561)
Annuity benefit payments ........................................... (539) (455) -- --
Amounts transferred interdivision, and from (to)
VALIC general account ............................................ (433,773) (97,641) (8,133,261) (2,143,426)
----------- ----------- ----------- -----------
Increase (decrease) in net assets
resulting from principal transactions ........................ (1,008,204) (513,934) (7,629,505) 1,050,661
----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................ (1,096,490) (127,733) (8,447,532) 4,552,812
NET ASSETS:
Beginning of period ................................................ 6,299,793 6,427,526 59,971,540 55,418,728
----------- ----------- ----------- -----------
End of period ...................................................... $ 5,203,303 $ 6,299,793 $51,524,008 $59,971,540
----------- ----------- ----------- -----------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ............................. 1,689,443 1,831,961 28,751,662 28,242,598
Purchase payments .................................................. 7,625 40,472 2,709,678 3,402,874
Surrenders ......................................................... (163,729) (155,629) (2,465,503) (1,879,505)
Transfers - interdivision and from (to) VALIC general account ...... (117,926) (27,361) (3,955,874) (1,014,305)
----------- ----------- ----------- -----------
Total units outstanding, end of period ............................. 1,415,413 1,689,443 25,039,963 28,751,662
----------- ----------- ----------- -----------
Units outstanding, by class:
Standard units ................................................... 1,415,413 1,689,443 24,749,727 28,751,662
Enhanced units:
20 bp reduced .................................................. -- -- 95,480 --
40 bp reduced .................................................. -- -- 194,756 --
----------- ----------- ----------- -----------
Accumulation units end of period ................................... 1,415,413 1,689,443 25,039,963 28,751,662
----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit .................................................... $3.673180 $3.726168 $2.056559 $2.085846
Enhanced unit:
20 bp reduced .................................................. -- -- 2.112183 --
40 bp reduced .................................................. -- -- 2.172271 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 626
SEPARATE ACCOUNT A 27
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
AGSPC GOVERNMENT SECURITIES
FUND - DIVISION 8
------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income .............................................. $ 4,586,896 $ 4,468,159
Net realized gain (loss) on investments ............................ 661,487 1,352,903
Capital gains distributions from mutual funds ...................... -- --
Net unrealized appreciation (depreciation)
of investments during the period ................................. (9,319,026) 1,437,930
------------- -------------
Increase (decrease) in net assets resulting from operations .... (4,070,643) 7,258,992
------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................. 11,734,225 12,902,909
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ................................ (9,010,978) (5,395,424)
Annuity benefit payments ........................................... -- --
Amounts transferred interdivision, and from (to)
VALIC general account ............................................ (18,810,222) 10,528,632
------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ........................ (16,086,975) 18,036,117
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................ (20,157,618) 25,295,109
NET ASSETS:
Beginning of period ................................................ 113,462,397 88,167,288
------------- -------------
End of period ...................................................... $ 93,304,779 $ 113,462,397
------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ............................. 53,729,671 45,034,894
Purchase payments .................................................. 5,561,118 6,558,071
Surrenders ......................................................... (4,281,237) (2,679,928)
Transfers - interdivision and from (to) VALIC general account ...... (9,134,505) 4,816,634
------------- -------------
Total units outstanding, end of period ............................. 45,875,047 53,729,671
------------- -------------
Units outstanding, by class:
Standard units ................................................... 45,292,728 53,729,671
Enhanced units:
20 bp reduced .................................................. 243,537 --
40 bp reduced .................................................. 338,782 --
------------- -------------
Accumulation units end of period ................................... 45,875,047 53,729,671
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS AGSPC INTERNATIONAL
GOVERNMENT BOND
FUND - DIVISION 13
------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income .............................................. $ 3,776,325 $ 1,997,004
Net realized gain (loss) on investments ............................ 1,059,581 (1,068,211)
Capital gains distributions from mutual funds ...................... 103,421 872,765
Net unrealized appreciation (depreciation)
of investments during the period ................................. (16,515,559) 21,926,900
------------- -------------
Increase (decrease) in net assets resulting from operations .... (11,576,232) 23,728,458
------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................. 21,815,358 25,413,792
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ................................ (9,363,283) (7,785,118)
Annuity benefit payments ........................................... (3,034) (2,691)
Amounts transferred interdivision, and from (to)
VALIC general account ............................................ (22,744,405) (38,345,989)
------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ........................ (10,295,364) (20,720,006)
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................ (21,871,596) 3,008,452
NET ASSETS:
Beginning of period ................................................ 169,208,209 166,199,757
------------- -------------
End of period ...................................................... $ 147,336,613 $ 169,208,209
------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ............................. 97,883,538 111,480,591
Purchase payments .................................................. 13,082,135 16,433,799
Surrenders ......................................................... (5,520,000) (5,105,973)
Transfers - interdivision and from (to) VALIC general account ...... (13,941,554) (24,924,879)
------------- -------------
Total units outstanding, end of period ............................. 91,504,119 97,883,538
------------- -------------
Units outstanding, by class:
Standard units ................................................... 90,136,603 97,473,851
Enhanced units:
20 bp reduced .................................................. 1,058,856 408,156
40 bp reduced .................................................. 308,660 1,531
------------- -------------
Accumulation units end of period ................................... 91,504,119 97,883,538
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
AMERICAN GENERAL CORE BOND
FUND - DIVISION 58
-------------------------------
FOR THE FOR THE PERIOD
YEAR ENDED AUGUST 26, 1998
DECEMBER 31, TO DECEMBER 31,
1999 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income .............................................. $ 320,982 $ 50,247
Net realized gain (loss) on investments ............................ (446) --
Capital gains distributions from mutual funds ...................... -- 16,291
Net unrealized appreciation (depreciation)
of investments during the period ................................. (380,782) 95,397
------------- -------------
Increase (decrease) in net assets resulting from operations .... (60,246) 161,935
------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................. 64,222 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ................................ (8) --
Annuity benefit payments ........................................... -- --
Amounts transferred interdivision, and from (to)
VALIC general account ............................................ 2,477 5,000,001
------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ........................ 66,691 5,000,001
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................ 6,445 5,161,936
NET ASSETS:
Beginning of period ................................................ 5,161,936 --
------------- -------------
End of period ...................................................... $ 5,168,381 $ 5,161,936
------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ............................. -- --
Purchase payments .................................................. 62,747 --
Surrenders ......................................................... (8) --
Transfers - interdivision and from (to) VALIC general account ...... 2,310 --
------------- -------------
Total units outstanding, end of period ............................. 65,049 --
------------- -------------
Units outstanding, by class:
Standard units ................................................... 54,349 --
Enhanced units:
20 bp reduced .................................................. 10,700 --
40 bp reduced .................................................. -- --
------------- -------------
Accumulation units end of period ................................... 65,049 --
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
AMERICAN GENERAL DOMESTIC BOND
FUND - DIVISION 43
------------------------------
FOR THE FOR THE PERIOD
YEAR ENDED AUGUST 26, 1998
DECEMBER 31, TO DECEMBER 31,
1999 1998
------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income .............................................. $ 98,906 $ 14,978
Net realized gain (loss) on investments ............................ (7,296) --
Capital gains distributions from mutual funds ...................... 36 15,898
Net unrealized appreciation (depreciation)
of investments during the period ................................. (139,402) 28,692
------------- -------------
Increase (decrease) in net assets resulting from operations .... (47,756) 59,568
------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................. 623,941 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ................................ (1,682) --
Annuity benefit payments ........................................... -- --
Amounts transferred interdivision, and from (to)
VALIC general account ............................................ (51,023) 1,250,000
------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ........................ 571,236 1,250,000
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................ 523,480 1,309,568
NET ASSETS:
Beginning of period ................................................ 1,309,568 --
------------- -------------
End of period ...................................................... $ 1,833,048 $ 1,309,568
------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ............................. -- --
Purchase payments .................................................. 637,229 --
Surrenders ......................................................... (29,632) --
Transfers - interdivision and from (to) VALIC general account ...... (48,322) --
------------- -------------
Total units outstanding, end of period ............................. 559,275 --
------------- -------------
Units outstanding, by class:
Standard units ................................................... 188,580 --
Enhanced units:
20 bp reduced .................................................. -- --
40 bp reduced .................................................. 370,695 --
------------- -------------
Accumulation units end of period ................................... 559,275 --
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................... $ 2.032753 $ 2.111727 $ 1.609098 $ 1.728006
Enhanced unit:
20 bp reduced ................. 2.087744 -- 1.634588 1.751922
40 bp reduced ................. 2.147126 -- 1.661837 1.777571
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................... $ 1.009692 $ -- $ 1.004631 $ --
Enhanced unit:
20 bp reduced ................. 1.012353 -- -- --
40 bp reduced ................. -- -- 1.009996 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 627
28 FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AMERICAN GENERAL
HIGH YIELD BOND AMERICAN GENERAL STRATEGIC BOND
FUND - DIVISION 60 FUND - DIVISION 59
---------------------------- ----------------------------
FOR THE FOR THE PERIOD FOR THE FOR THE PERIOD
YEAR ENDED AUGUST 26, 1998 YEAR ENDED AUGUST 26, 1998
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ....................................... $ 491,161 $ 92,262 $ 414,198 $ 69,000
Net realized gain (loss) on investments ............................ (357) -- 7 --
Capital gains distributions from mutual funds ...................... -- -- -- 11,064
Net unrealized appreciation (depreciation)
of investments during the period ................................. (333,976) 189,911 (211,104) 185,469
----------- ----------- ----------- -----------
Increase (decrease) in net assets resulting from operations ... 156,828 282,173 203,101 265,533
----------- ----------- ----------- -----------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................................. 173,814 -- 33,916 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ................................ (1,458) -- (134) --
Annuity benefit payments ........................................... -- -- -- --
Amounts transferred interdivision, and from (to)
VALIC general account ........................................... (24,004) 5,000,000 4,091 4,999,999
----------- ----------- ----------- -----------
Increase in net assets
resulting from principal transactions ....................... 148,352 5,000,000 37,873 4,999,999
----------- ----------- ----------- -----------
TOTAL INCREASE IN NET ASSETS ....................................... 305,180 5,282,173 240,974 5,265,532
NET ASSETS:
Beginning of period ................................................ 5,282,173 -- 5,265,532 --
----------- ----------- ----------- -----------
End of period ...................................................... $ 5,587,353 $ 5,282,173 $ 5,506,506 $ 5,265,532
----------- ----------- ----------- -----------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ............................. -- -- -- --
Purchase payments .................................................. 163,306 -- 31,684 --
Surrenders ......................................................... (1,372) -- (125) --
Transfers - interdivision and from (to) VALIC general account ...... (22,704) -- 3,831 --
----------- ----------- ----------- -----------
Total units outstanding, end of period ............................. 139,230 -- 35,390 --
----------- ----------- ----------- -----------
Units outstanding, by class:
Standard units .................................................. 136,423 -- 2,324 --
Enhanced units:
20 bp reduced ................................................. 2,397 -- -- --
40 bp reduced ................................................. 410 -- 33,066 --
----------- ----------- ----------- -----------
Accumulation units end of period ................................... 139,230 -- 35,390 --
----------- ----------- ----------- -----------
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................... $ 1.075994 $ -- $ 1.081981 $ --
Enhanced unit:
20 bp reduced
40 bp reduced ................................................. 1.078842 -- -- --
1.081775 -- 1.087771 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 628
SEPARATE ACCOUNT A 29
<TABLE>
<CAPTION>
VANGUARD LONG-TERM VANGUARD LONG-TERM
CORPORATE FUND - DIVISION 22 TREASURY FUND - DIVISION 23
---------------------------------- ----------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ......................... $ 3,751,628 $ 2,052,614 $ 7,007,754 $ 2,857,159
Net realized gain (loss) on investments .............. (398,632) 136,212 (687,054) 1,195,397
Capital gains distributions from mutual funds ........ 410,483 1,044,043 1,589,174 --
Net unrealized appreciation (depreciation)
of investments during the period ................... (8,721,370) (64,200) (21,800,390) 2,611,560
--------------- --------------- --------------- ---------------
Increase (decrease) in net assets resulting
from operations ............................... (4,957,891) 3,168,669 (13,890,516) 6,664,116
--------------- --------------- --------------- ---------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................... 20,898,993 18,953,737 46,110,281 30,970,739
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .................. (3,914,976) (1,608,861) (8,715,834) (2,748,295)
Annuity benefit payments ............................. (2,439) -- (761) (813)
Amounts transferred interdivision, and from (to)
VALIC general account ............................. (3,549,583) 19,011,058 (436,765) 60,728,245
--------------- --------------- --------------- ---------------
Increase in net assets
resulting from principal transactions ......... 13,431,995 36,355,934 36,956,921 88,949,876
--------------- --------------- --------------- ---------------
TOTAL INCREASE IN NET ASSETS ......................... 8,474,104 39,524,603 23,066,405 95,613,992
NET ASSETS:
Beginning of period .................................. 59,964,652 20,440,049 119,252,206 23,638,214
--------------- --------------- --------------- ---------------
End of period ........................................ $ 68,438,756 $ 59,964,652 $ 142,318,611 $ 119,252,206
--------------- --------------- --------------- ---------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ............... 47,072,573 17,371,407 90,363,929 20,041,920
Purchase payments .................................... 16,695,613 15,098,601 35,729,706 23,916,542
Surrenders ........................................... (3,079,946) (1,333,865) (6,580,094) (1,937,227)
Transfers - interdivision and from (to) VALIC
general account ................................... (3,137,264) 15,936,430 (365,799) 48,342,694
--------------- --------------- --------------- ---------------
Total units outstanding, end of period ............... 57,550,976 47,072,573 119,147,742 90,363,929
--------------- --------------- --------------- ---------------
Units outstanding, by class:
Standard units .................................... 49,616,245 44,122,646 110,102,115 86,673,300
Enhanced units:
20 bp reduced ................................... 4,060,325 2,949,044 7,578,682 3,682,809
40 bp reduced ................................... 3,874,406 883 1,466,945 7,820
--------------- --------------- --------------- ---------------
Accumulation units end of period ..................... 57,550,976 47,072,573 119,147,742 90,363,929
--------------- --------------- --------------- ---------------
<CAPTION>
AGSPC SCIENCE & TECHNOLOGY AGSPC SOCIAL AWARENESS
FUND - DIVISION 17 FUND - DIVISION 12
---------------------------------- ----------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ......................... $ (19,907,095) $ (10,381,062) $ (1,053,214) $ 190,273
Net realized gain (loss) on investments .............. 30,613,817 34,745,563 8,179,859 2,220,138
Capital gains distributions from mutual funds ........ 328,749,980 113,616,462 22,439,556 37,003,617
Net unrealized appreciation (depreciation)
of investments during the period ................... 1,226,217,782 250,423,659 57,407,741 38,477,902
--------------- --------------- --------------- ---------------
Increase (decrease) in net assets resulting
from operations ............................... 1,565,674,484 388,404,622 86,973,942 77,891,930
--------------- --------------- --------------- ---------------
PRINCIPAL TRANSACTIONS:
Purchase payments .................................... 279,006,916 195,575,628 94,842,943 72,710,322
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .................. (99,642,197) (44,292,549) (25,298,865) (13,355,087)
Annuity benefit payments ............................. (48,492) (17,543) (24,585) (9,481)
Amounts transferred interdivision, and from (to)
VALIC general account ............................. 309,209,056 (92,089,284) 27,286,374 54,323,803
--------------- --------------- --------------- ---------------
Increase in net assets
resulting from principal transactions ......... 488,525,283 59,176,252 96,805,867 113,669,557
--------------- --------------- --------------- ---------------
TOTAL INCREASE IN NET ASSETS ......................... 2,054,199,767 447,580,874 183,779,809 191,561,487
NET ASSETS:
Beginning of period .................................. 1,357,242,328 909,661,454 435,141,459 243,579,972
--------------- --------------- --------------- ---------------
End of period ........................................ $ 3,411,442,095 $ 1,357,242,328 $ 618,921,268 $ 435,141,459
--------------- --------------- --------------- ---------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ............... 421,835,835 397,842,959 115,602,816 81,577,104
Purchase payments .................................... 64,052,931 77,332,989 23,030,880 21,359,028
Surrenders ........................................... (22,853,729) (17,946,718) (5,886,018) (3,889,138)
Transfers - interdivision and from (to) VALIC
general account ................................... 69,695,056 (35,393,395) 7,138,854 16,555,822
--------------- --------------- --------------- ---------------
Total units outstanding, end of period ............... 532,730,093 421,835,835 139,886,532 115,602,816
--------------- --------------- --------------- ---------------
Units outstanding, by class:
Standard units .................................... 517,699,561 418,601,069 136,226,993 114,382,494
Enhanced units:
20 bp reduced ................................... 11,744,052 3,228,389 3,028,346 1,218,871
40 bp reduced ................................... 3,286,480 6,377 631,193 1,451
--------------- --------------- --------------- ---------------
Accumulation units end of period ..................... 532,730,093 421,835,835 139,886,532 115,602,816
--------------- --------------- --------------- ---------------
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Accumulation value per unit: $ 1.179657 $ 1.271278 $ 1.191635 $ 1.318263
Standard unit ...................................................
Enhanced unit:
20 bp reduced 1.220562 1.312731 1.222216 1.349397
40 bp reduced ................................................. 1.267698 1.360696 1.256142 1.384079
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Accumulation value per unit: $ 6.398997 $ 3.216190 $ 4.419383 $ 3.762308
Standard unit ...................................................
Enhanced unit:
20 bp reduced 6.462689 3.241847 4.502622 3.825649
40 bp reduced ................................................. 6.536543 3.272354 4.596034 3.897214
</TABLE>
<PAGE> 629
30 FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC
AMERICAN GENERAL SOCIALLY MONEY MARKET FUND -
RESPONSIBLE FUND - DIVISION 41 DIVISION 2
------------------------------ -----------------------------
FOR THE FOR THE PERIOD FOR THE FOR THE
YEAR ENDED AUGUST 26, 1998 YEAR ENDED YEAR ENDED
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ............................................. $ 79,807 $ 23,760 $ 162,374 $ 184,017
Net realized gain on investments .................................. 64,508 -- -- --
Capital gains distributions from mutual funds ..................... 391,925 285,733 -- --
Net unrealized appreciation (depreciation)
of investments during the period ................................ 1,103,235 1,099,673 -- --
------------ ------------ ------------ ------------
Increase in net assets resulting from operations ............. 1,639,475 1,409,166 162,374 184,017
------------ ------------ ------------ ------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................. 2,903,630 -- 139,686 90,884
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................... (20,548) -- (275,980) (292,611)
Annuity benefit payments .......................................... -- -- -- --
Amounts transferred interdivision, and from (to)
VALIC general account .......................................... 1,306,362 5,000,000 (44,481) (364,560)
------------ ------------ ------------ ------------
Increase (decrease) in net assets
resulting from principal transactions .................... 4,189,444 5,000,000 (180,775) (566,287)
------------ ------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ........................... 5,828,919 6,409,166 (18,401) (382,270)
NET ASSETS:
Beginning of period ............................................... 6,409,166 -- 4,197,487 4,579,757
------------ ------------ ------------ ------------
End of period ..................................................... $ 12,238,085 $ 6,409,166 $ 4,179,086 $ 4,197,487
------------ ------------ ------------ ------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ............................ -- -- 1,700,333 1,931,439
Purchase payments ................................................. 2,155,410 -- 56,091 37,542
Surrenders ........................................................ (35,215) -- (110,243) (120,614)
Transfers - interdivision and from (to) VALIC general account ..... 983,523 -- (13,712) (148,034)
------------ ------------ ------------ ------------
Total units outstanding, end of period ............................ 3,103,718 -- 1,632,469 1,700,333
------------ ------------ ------------ ------------
Units outstanding, by class:
Standard units ................................................. 282,396 -- 1,632,469 1,700,333
Enhanced units:
20 bp reduced ................................................ 106,148 -- -- --
40 bp reduced ................................................ 2,715,174 -- -- --
------------ ------------ ------------ ------------
Accumulation units end of period .................................. 3,103,718 -- 1,632,469 1,700,333
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit .................................................. $ 1.497374 $ -- $ 2.559979 $ 2.468627
Enhanced unit:
20 bp reduced ................................................ 1.501310 -- -- --
40 bp reduced ................................................ 1.505354 -- -- --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 630
SEPARATE ACCOUNT A 31
<TABLE>
<CAPTION>
AGSPC
MONEY MARKET FUND - AMERICAN GENERAL MONEY MARKET
DIVISION 6 FUND - DIVISION 44
-------------------------------- --------------------------------
FOR THE FOR THE FOR THE FOR THE PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED AUGUST 26, 1998
DECEMBER 31, DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
OPERATIONS: <S> <C> <C> <C>
Net investment income .......................................... $ 13,158,073 $ 7,849,963 $ 385,966 $ 82,478
Net realized gain on investments ............................... -- -- -- --
Capital gains distributions from mutual funds .................. -- -- -- --
Net unrealized appreciation (depreciation)
of investments during the period .............................
------------- ------------- ------------- -------------
Increase in net assets resulting from operations .......... 13,158,073 7,849,963 385,966 82,478
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .............................................. 119,148,566 87,624,322 6,681,738 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................ (66,195,806) (33,439,890) (641,200) --
Annuity benefit payments ....................................... (1,607) (1,603) -- --
Amounts transferred interdivision, and from (to)
VALIC general account ....................................... 122,595,014 63,714,230 73,281 5,000,000
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ................. 175,546,167 117,897,059 6,113,819 5,000,000
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ........................ 188,704,240 125,747,022 6,499,785 5,082,478
NET ASSETS:
Beginning of period ............................................ 266,651,604 140,904,582 5,082,478 --
------------- ------------- ------------- -------------
End of period .................................................. $ 455,355,844 $ 266,651,604 $ 11,582,263 $ 5,082,478
------------- ------------- ------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period ......................... 152,873,642 84,182,521 -- --
Purchase payments .............................................. 77,648,415 56,361,872 6,540,439 --
Surrenders ..................................................... (47,665,211) (17,562,213) (663,577) --
Transfers - interdivision and from (to) VALIC general account .. 68,384,107 29,891,462 57,361 --
------------- ------------- ------------- -------------
Total units outstanding, end of period ......................... 251,240,953 152,873,642 5,934,223 --
------------- ------------- ------------- -------------
Units outstanding, by class:
Standard units .............................................. 233,940,123 147,547,688 4,089,393 --
Enhanced units:
20 bp reduced ............................................. 9,613,663 5,325,479 1,844,830 --
40 bp reduced ............................................. 7,687,167 475 -- --
------------- ------------- ------------- -------------
Accumulation units end of period ............................... 251,240,953 152,873,642 5,934,223 --
------------- ------------- ------------- -------------
<CAPTION>
AMERICAN GENERAL
CONSERVATIVE GROWTH LIFESTYLE AMERICAN GENERAL GROWTH LIFESTYLE
FUND - DIVISION 50 FUND - DIVISION 48
------------------------------- --------------------------------
FOR THE FOR THE PERIOD FOR THE FOR THE PERIOD
YEAR ENDED AUGUST 26, 1998 YEAR ENDED AUGUST 26, 1998
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income ...........................................$ 602,341 $ 27,772 $ 743,981 $ 11,226
Net realized gain on investments ................................ 895,570 -- 63,773 --
Capital gains distributions from mutual funds ................... 1,025,645 -- 323,571 --
Net unrealized appreciation (depreciation)
of investments during the period .............................. (1,418,604) 800,941 1,217,409 970,379
------------- ------------- ------------- -------------
Increase in net assets resulting from operations ........... 1,104,952 828,713 2,348,734 981,605
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 1,836,447 -- 2,368,603 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (50,904) -- (49,197) --
Annuity benefit payments ........................................ -- -- -- --
Amounts transferred interdivision, and from (to)
VALIC general account ........................................ (326) 5,000,000 934 5,000,000
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions .................. 1,785,217 5,000,000 2,320,340 5,000,000
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ......................... 2,890,169 5,828,713 4,669,074 5,981,605
NET ASSETS:
Beginning of period ............................................. 5,828,713 -- 5,981,605 --
------------- ------------- ------------- -------------
End of period ...................................................$ 8,718,882 $ 5,828,713 $ 10,650,679 $ 5,981,605
------------- ------------- ------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... -- -- -- --
Purchase payments ............................................... 1,654,793 -- 1,895,721 --
Surrenders ...................................................... (41,867) -- (36,221) --
Transfers - interdivision and from (to) VALIC general account ... (2,450) -- 604 --
------------- ------------- ------------- -------------
Total units outstanding, end of period .......................... 1,610,476 -- 1,860,104 --
------------- ------------- ------------- -------------
Units outstanding, by class:
Standard units ............................................... 203,221 -- 139,443 --
Enhanced units:
20 bp reduced .............................................. 246,969 -- 46,149 --
40 bp reduced .............................................. 1,160,286 -- 1,674,512 --
------------- ------------- ------------- -------------
Accumulation units end of period ................................ 1,610,476 -- 1,860,104 --
------------- ------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................. $ 1.807351 $ 1.742617 $ 1.053624 $ --
Enhanced unit:
20 bp reduced ............................... 1.856681 1.786658 1.056406 --
40 bp reduced ............................... 1.909470 1.833793 -- --
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................. $ 1.306897 $ -- $ 1.538200 $ --
Enhanced unit:
20 bp reduced ............................... 1.310337 -- 1.542278 --
40 bp reduced ............................... 1.313858 -- 1.546416 --
</TABLE>
<PAGE> 631
32 FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AMERICAN GENERAL VANGUARD LIFESTRATEGY
MODERATE GROWTH LIFESTYLE CONSERVATIVE GROWTH FUND -
FUND - DIVISION 49 DIVISION 54
----------------------------- --------------------------------
FOR THE FOR THE PERIOD FOR THE FOR THE PERIOD
YEAR ENDED AUGUST 26, 1998 YEAR ENDED SEPTEMBER 22, 1998
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
------------ --------------- ------------ ------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ........................................... $ 920,304 $ 19,912 $ 132,404 $ --
Net realized gain (loss) on investments ......................... 83,407 -- (924) --
Capital gains distributions from mutual funds ................... 389,591 -- 35,147 --
Net unrealized appreciation (depreciation)
of investments during the period .............................. 497,038 925,696 68,926 --
------------ ------------ ------------ ------------
Increase in net assets resulting from operations ........... 1,890,340 945,608 235,553 --
------------ ------------ ------------ ------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 4,916,637 -- 3,578,560 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (119,332) -- (181,467) --
Annuity benefit payments ........................................ -- -- -- --
Amounts transferred interdivision, and from (to)
VALIC general account ........................................ (63,592) 5,000,000 1,692,135 --
------------ ------------ ------------ ------------
Increase (decrease) in net assets
resulting from principal transactions .................... 4,733,713 5,000,000 5,089,228 --
------------ ------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ......................... 6,624,053 5,945,608 5,324,781 --
NET ASSETS:
Beginning of period ............................................. 5,945,608 -- -- --
------------ ------------ ------------ ------------
End of period ................................................... $ 12,569,661 $ 5,945,608 $ 5,324,781 $ --
------------ ------------ ------------ ------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... -- -- -- --
Purchase payments ............................................... 4,077,444 -- 3,221,062 --
Surrenders ...................................................... (102,891) -- (162,437) --
Transfers - interdivision and from (to) VALIC general account ... (54,577) -- 1,536,786 --
------------ ------------ ------------ ------------
Total units outstanding, end of period .......................... 3,919,976 -- 4,595,411 --
------------ ------------ ------------ ------------
Units outstanding, by class:
Standard units ............................................... 215,575 -- 554,101 --
Enhanced units:
20 bp reduced .............................................. 213,355 -- 375,819 --
40 bp reduced .............................................. 3,491,046 -- 3,665,491 --
------------ ------------ ------------ ------------
Accumulation units end of period ................................ 3,919,976 -- 4,595,411 --
------------ ------------ ------------ ------------
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Accumulation value per unit:
Standard unit ................................................ $ 1.397661 $ -- $ 1.153827 $ --
Enhanced unit:
20 bp reduced .............................................. 1.401340 -- 1.156739 --
40 bp reduced .............................................. 1.405109 -- 1.159659 --
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 632
SEPARATE ACCOUNT A 33
<TABLE>
<CAPTION>
VANGUARD LIFESTRATEGY VANGUARD LIFESTRATEGY
GROWTH FUND - MODERATE GROWTH FUND -
DIVISION 52 DIVISION 53
-------------------------------- --------------------------------
FOR THE FOR THE PERIOD FOR THE FOR THE PERIOD
YEAR ENDED SEPTEMBER 22, 1998 YEAR ENDED SEPTEMBER 22, 1998
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1999 1998 1999 1998
------------- ------------------ ------------- ------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ........................................... $ 308,508 $ -- $ 611,113 $ --
Net realized gain (loss) on investments ......................... 57,727 -- 29,492 --
Capital gains distributions from mutual funds ................... 177,605 -- 218,753 --
Net unrealized appreciation (depreciation)
of investments during the period .............................. 2,002,755 -- 1,470,942 --
------------- ----------- ------------- -----------
Increase in net assets resulting from operations ........... 2,546,595 -- 2,330,300 --
------------- ----------- ------------- -----------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 16,026,935 -- 25,276,661 --
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (202,105) -- (684,329) --
Annuity benefit payments ........................................ -- -- -- --
Amounts transferred interdivision, and from (to)
VALIC general account ........................................ 6,590,799 -- 5,146,081 --
------------- ----------- ------------- -----------
Increase (decrease) in net assets
resulting from principal transactions .................... 22,415,629 -- 29,738,413 --
------------- ----------- ------------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS ......................... 24,962,224 -- 32,068,713 --
NET ASSETS:
Beginning of period ............................................. -- -- -- --
------------- ----------- ------------- -----------
End of period ................................................... $ 24,962,224 $ -- $ 32,068,713 $ --
------------- ----------- ------------- -----------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... -- -- -- --
Purchase payments ............................................... 13,077,473 -- 21,705,063 --
Surrenders ...................................................... (161,106) -- (580,717) --
Transfers - interdivision and from (to) VALIC general account ... 5,453,813 -- 4,517,365 --
------------- ----------- ------------- -----------
Total units outstanding, end of period .......................... 18,370,180 -- 25,641,711 --
------------- ----------- ------------- -----------
Units outstanding, by class:
Standard units ............................................... 1,591,689 -- 1,354,406 --
Enhanced units:
20 bp reduced .............................................. 1,468,333 -- 2,152,244 --
40 bp reduced .............................................. 15,310,158 -- 22,135,061 --
------------- ----------- ------------- -----------
Accumulation units end of period ................................ 18,370,180 -- 25,641,711 --
------------- ----------- ------------- -----------
</TABLE>
<TABLE>
<CAPTION>
AGSPC ASSET ALLOCATION TEMPLETON ASSET
FUND - DIVISION 5 ALLOCATION FUND - DIVISION 19
---------------------------- ------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ........................................... $ 4,363,782 $ 3,873,507 $ 3,194,984 $ 5,298,721
Net realized gain (loss) on investments ......................... 4,428,516 2,520,862 14,669,025 10,513,951
Capital gains distributions from mutual funds ................... 4,417,585 12,936,405 38,640,994 9,560,576~
Net unrealized appreciation (depreciation)
of investments during the period .............................. 11,930,044 13,072,376 4,197,098 (10,693,322)
------------- ------------- ------------- -------------
Increase in net assets resulting from operations ........... 25,139,927 32,403,150 60,702,101 14,679,926
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 21,853,335 16,199,430 36,161,331 55,452,646
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (17,081,242) (12,309,318) (21,505,474) (15,786,958)
Annuity benefit payments ........................................ (19,764) (9,811) (25,689) (22,337)
Amounts transferred interdivision, and from (to)
VALIC general account ........................................ 3,626,725 6,673,714 (75,781,880) (47,069,555)
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions .................... 8,379,054 10,554,015 (61,151,712) (7,426,204)
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ......................... 33,518,981 42,957,165 (449,611) 7,253,722
NET ASSETS:
Beginning of period ............................................. 227,535,157 184,577,992 324,128,007 316,874,285
------------- ------------- ------------- -------------
End of period ................................................... $ 261,054,138 $ 227,535,157 $ 323,678,396 $ 324,128,007
------------- ------------- ------------- -------------
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of period .......................... 60,269,168 57,307,351 190,963,707 196,150,946
Purchase payments ............................................... 5,389,575 4,579,044 19,274,982 32,881,580
Surrenders ...................................................... (4,241,930) (3,567,970) (12,264,078) (10,222,721)
Transfers - interdivision and from (to) VALIC general account ... 1,013,569 1,950,743 (41,733,088) (27,846,098)
------------- ------------- ------------- -------------
Total units outstanding, end of period .......................... 62,430,382 60,269,168 156,241,523 190,963,707
------------- ------------- ------------- -------------
Units outstanding, by class:
Standard units ............................................... 61,240,667 60,237,818 137,266,658 190,963,707
Enhanced units:
20 bp reduced .............................................. 673,135 31,350 485,669 --
40 bp reduced .............................................. 516,580 -- 18,489,196 --
------------- ------------- ------------- -------------
Accumulation units end of period ................................ 62,430,382 60,269,168 156,241,523 190,963,707
------------- ------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Accumulation value per unit: $ 1.352880 $ -- $ 1.244955 $ --
Standard unit ................................................
Enhanced unit:
20 bp reduced .............................................. 1.356289 -- 1.248092 --
40 bp reduced .............................................. 1.359710 -- 1.251243 --
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Accumulation value per unit: $ 4.174280 $ 3.772519 $ 2.058095 $ 1.695764
Standard unit ................................................
Enhanced unit:
20 bp reduced .............................................. 4.303891 3.882024 2.102090 --
40 bp reduced .............................................. 4.446999 -- 2.150733 --
</TABLE>
<PAGE> 633
34 NOTES TO FINANCIAL STATEMENTS
NOTE A - ORGANIZATION
Separate Account A (the "Separate Account"), established by The Variable
Annuity Life Insurance Company ('VALIC") on April 18, 1979, is registered under
the Investment Company Act of 1940 as a unit investment trust. The Separate
Account is comprised of fifty-eight 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:
<TABLE>
<S> <C>
American General Series Portfolio Company ("AGSPC"): American Century Ultra Fund (Division 31) (formerly known as
AGSPC Asset Allocation Fund (Division 5) American Century-Twentieth Century Ultra Fund)
AGSPC Capital Conservation Fund (Divisions 1 and 7) Dreyfus Variable Investment Fund - Small Cap
AGSPC Government Securities Fund (Division 8) Portfolio (Division 18)
AGSPC Growth Fund (Division 15) Evergreen Growth and Income Fund - (Division 56)
AGSPC Growth & Income Fund (Division 16) Evergreen Small Cap Value Fund (Division 55) (formerly known as
AGSPC International Equities Fund (Division 11) Evergreen Small Cap Equity Income Fund)
AGSPC International Government Bond Fund (Division 13) Evergreen Value Fund - (Division 57)
AGSPC MidCap Index Fund (Division 4) Dreyfus Founders Growth Fund (Division 30) (formerly known as
AGSPC Money Market Fund (Divisions 2 and 6) Founders Growth Fund)
AGSPC Science & Technology Fund (Division 17) Neuberger Berman Guardian Trust (Division 29)
AGSPC Small Cap Index Fund (Division 14) Putnam Global Growth Fund (Division 28)
AGSPC Social Awareness Fund (Division 12) Putnam New Opportunities Fund (Division 26)
AGSPC Stock Index Fund (Divisions 10A, B, C, and D) Putnam OTC & Emerging Growth Fund (Division 27)
Scudder Growth and Income Fund (Division 21)
American General Series Portfolio Company 3 ("AGSPC 3"): Templeton Foreign Fund (Division 32)
American General Balanced Fund (Division 42) Templeton Variable Products Series Fund:
American General Conservative Growth Templeton Asset Allocation Fund (Division 19)
Lifestyle Fund (Division 50) Templeton International Fund (Division 20)
American General Core Bond Fund (Division 58) T. Rowe Price Small-Cap Stock Fund (Division 51)
American General Domestic Bond Fund (Division 43) Vanguard LifeStrategy Conservative Growth Fund (Division 54)
American General Growth Lifestyle Fund (Division 48) Vanguard LifeStrategy Growth Fund (Division 52)
American General High Yield Bond Fund (Division 60) Vanguard LifeStrategy Moderate Growth Fund (Division 53)
American General International Growth Fund (Division 33) Vanguard Long-Term Corporate Fund (Division 22)
American General International Value Fund (Division 34) Vanguard Long-Term Treasury Fund (Division 23)
American General Large Cap Growth Fund (Division 39) Vanguard Wellington Fund (Division 25)
American General Large Cap Value Fund (Division 40) Vanguard Windsor II Fund (Division 24)
American General Mid Cap Growth Fund (Division 37)
American General Mid Cap Value Fund (Division 38)
American General Moderate Growth Lifestyle Fund (Division 49)
American General Money Market Fund (Division 44)
American General Small Cap Growth Fund (Division 35)
American General Small Cap Value Fund (Division 36)
American General Socially Responsible Fund (Division 41)
American General Strategic Bond Fund (Division 59)
</TABLE>
Divisions 33 through 54 and 58 through 60 became available to contract
holders of the Separate Account effective September 22, 1998. Divisions 55
through 57 became available to contract holders of the Separate Account
effective January 4, 1999.
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The assets of the Separate Account are segregated from VALIC's other
assets. The operations of the Separate Account are part of VALIC. The following
is a summary of significant accounting policies consistently followed by the
Separate Account in the preparation of its financial statements.
USE OF ESTIMATES. The financial statements have been prepared in conformity
with accounting principles generally accepted in the United States. 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.
<PAGE> 634
NOTES TO FINANCIAL STATEMENTS 35
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.
NOTE C -- TRANSACTIONS WITH AFFILIATES
VALIC serves as investment adviser (the "Adviser"), transfer agent, and
accounting services agent to AGSPC 1 and AGSPC 3. American General Investment
Management, L.P., an affiliate of the Adviser, serves as investment sub-adviser
to certain AGSPC 3 mutual funds.
The Separate Account is charged for mortality and expense risk 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:
<TABLE>
<CAPTION>
DIVISIONS STANDARD CHARGE
------------------------------------------------------------------------
<S> <C>
10B 0.85% on the first $10 million
0.425% on the next $90 million
0.21% on the excess over $100 million
------------------------------------------------------------------------
1, 2, 4 through 8,
10A, 10C and 10D,
11 through 17, 1.00%
33 through 44,
48 through 50 and
58 through 60
------------------------------------------------------------------------
18 through 32
51 through 57 1.25%
------------------------------------------------------------------------
</TABLE>
Certain mutual funds reimburse VALIC for 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:
<TABLE>
<CAPTION>
DIVISIONS EXPENSE REDUCTION
------------------------------------------------------------------------
<S> <C>
21 through 23,
26 through 30,
32 through 44, 0.25%
48 through 50,
55 through 60
------------------------------------------------------------------------
31 0.20% on the first $75 million
0.25% on the excess over $75 million
------------------------------------------------------------------------
18 0.15%
------------------------------------------------------------------------
</TABLE>
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.
<PAGE> 635
36 NOTES TO FINANCIAL STATEMENTS
Expenses of VALIC Separate Account A Divisions 10A and 10B, (as defined to
include underlying mutual fund expenses) are limited to the following rates
based on average daily net assets:
<TABLE>
<CAPTION>
DIVISIONS EXPENSE LIMITATIONS
---------------------------------------------------------------------------------
<S> <C>
10A 1.4157% on the first $359,065,787
1.36% on the next $40,934,213
1.32% on the excess over $400 million
---------------------------------------------------------------------------------
10B 0.6966% on the first $25,434,267
0.50% on the next $74,565,733
0.25% on the excess over $100 million
---------------------------------------------------------------------------------
</TABLE>
Accordingly, during the years ended December 31, 1999 and 1998, VALIC
reduced expenses of Division 10B by $94,122 and $82,027, 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 $6,506,341 and $5,575,601 for the years
ended December 31, 1999 and 1998, respectively.
VALIC received surrender charges of $6,181,873 and $4,581,641 for the years
ended December 31, 1999 and 1998, respectively. In addition, VALIC received
$46,011 and $4,147 for the year ended December 31, 1999, in sales load on
variable annuity purchase payments for Divisions 10A and 10B, respectively.
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 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, 1999:
<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 12,681,732 $13.80 $175,007,894 $153,864,816 $ 21,143,078
AGSPC MidCap Index Fund....................... 4 39,427,464 22.24 876,866,818 761,782,279 115,084,539
AGSPC Small Cap Index Fund.................... 14 14,526,817 16.60 241,145,168 228,085,714 13,059,454
AGSPC Stock Index Fund........................ 10A,B,C,D 118,066,893 44.44 5,246,892,687 2,621,261,506 2,625,631,181
AGSPC Growth Fund............................. 15 51,853,516 23.50 1,218,557,601 902,850,565 315,707,036
AGSPC Growth & Income Fund.................... 16 15,306,480 21.99 336,589,500 252,817,396 83,772,104
American Century Ultra Fund................... 31 22,353,284 45.78 1,023,333,380 773,447,526 249,885,854
American General International Growth Fund.... 33 431,454 15.87 6,847,182 4,540,670 2,306,512
American General International Value Fund..... 34 443,411 18.26 8,096,689 4,952,066 3,144,623
American General Large Cap Growth Fund........ 39 1,329,646 16.32 21,699,827 17,193,893 4,505,934
American General Large Cap Value Fund......... 40 405,206 11.04 4,473,480 4,309,106 164,374
American General Mid Cap Growth Fund.......... 37 548,588 12.88 7,065,815 5,898,950 1,166,865
American General Mid Cap Value Fund........... 38 734,556 11.34 8,329,863 8,197,536 132,327
American General Small Cap Growth Fund........ 35 783,183 21.25 16,642,631 10,446,375 6,196,256
American General Small Cap Value Fund......... 36 435,735 10.26 4,470,644 4,378,518 92,126
Dreyfus Variable Investment Fund --
Small Cap Portfolio......................... 18 11,749,941 66.34 779,491,073 597,305,985 182,185,088
Evergreen Growth and Income Fund.............. 56 193 32.23 6,220 5,850 370
Evergreen Small Cap Value Fund................ 55 16 14.77 243 243 -
Evergreen Value Fund.......................... 57 212 20.69 4,388 4,707 (319)
</TABLE>
<PAGE> 636
NOTES TO FINANCIAL STATEMENTS 37
<TABLE>
<CAPTION>
UNREALIZED
MARKET APPRECIATION
UNDERLYING FUND DIVISION SHARES PRICE MARKET COST (DEPRECIATION)
- --------------------------------------------- -------- ---------- ------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Dreyfus Founders Growth Fund ................ 30 36,634,173 $ 23.87 $ 874,457,709 $ 744,045,046 $ 130,412,663
Neuberger Berman Guardian Trust ............. 29 4,205,603 14.14 59,467,223 72,768,026 (13,300,803)
Putnam Global Growth Fund ................... 28 26,666,641 18.59 495,732,851 350,405,108 145,327,743
Putnam New Opportunities Fund ............... 26 11,157,111 90.96 1,014,850,850 630,466,495 384,384,355
Putnam OTC & Emerging Growth Fund ........... 27 11,652,311 37.01 431,252,004 234,928,422 196,323,582
Scudder Growth and Income Fund .............. 21 9,240,762 26.69 246,635,934 258,757,360 (12,121,426)
T. Rowe Price Small-Cap Stock Fund .......... 51 383,280 22.80 8,738,757 7,730,112 1,008,645
Templeton Foreign Fund ...................... 32 29,989,326 11.22 336,480,225 305,197,182 31,283,043
Templeton International Fund ................ 20 36,732,726 22.25 817,303,148 697,567,268 119,735,880
Vanguard Windsor II Fund .................... 24 29,350,047 24.97 732,870,656 860,734,104 (127,863,448)
American General Balanced Fund .............. 42 806,619 12.34 9,953,676 8,797,929 1,155,747
Vanguard Wellington Fund .................... 25 20,381,425 27.96 569,864,636 610,206,190 (40,341,554)
AGSPC Capital Conservation Fund ............. 1 & 7 6,271,787 9.04 56,696,951 59,937,282 (3,240,331)
AGSPC Government Securities Fund ............ 8 9,791,463 9.53 93,312,643 99,573,538 (6,260,895)
AGSPC International ~Government Bond Fund ... 13 12,944,516 11.52 149,120,828 154,526,420 (5,405,592)
American General Core Bond Fund ............. 58 546,329 9.46 5,168,278 5,453,662 (285,384)
American General Domestic Bond Fund ......... 43 196,208 9.33 1,830,628 1,941,338 (110,710)
American General High Yield Bond Fund ....... 60 573,040 9.75 5,587,119 5,731,184 (144,065)
American General Strategic Bond Fund ........ 59 552,828 9.96 5,506,171 5,531,806 (25,635)
Vanguard Fixed Income Securities Fund:
Long-Term Corporate Fund .................. 22 8,417,206 8.11 68,263,542 76,417,392 (8,153,850)
Long-Term Treasury Fund ................... 23 14,669,704 9.67 141,856,062 159,944,453 (18,088,391)
AGSPC Science & Technology Fund ............. 17 72,283,188 47.13 3,406,706,628 1,882,063,789 1,524,642,83
AGSPC Social Awareness Fund ................. 12 23,981,721 25.81 618,968,226 477,460,805 141,507,421
American General Socially
Responsible Fund .......................... 41 885,926 13.80 12,225,981 10,023,073 2,202,908
AGSPC Money Market Fund ..................... 2 & 6 463,954,740 1.00 463,954,740 463,954,740 --
American General Money Market Fund .......... 44 11,553,720 1.00 11,553,720 11,553,720 --
American General Conservative
Growth Lifestyle Fund ...................... 50 809,972 10.74 8,699,095 9,316,758 (617,663)
American General Growth Lifestyle Fund ...... 48 761,135 13.96 10,625,442 8,437,654 2,187,788
American General Moderate
Growth Lifestyle Fund ..................... 49 994,186 12.60 12,526,733 11,103,999 1,422,734
Vanguard LifeStrategy
Conservative Growth Fund ................. 54 352,263 15.10 5,319,180 5,250,254 68,926
Vanguard LifeStrategy Growth Fund ........... 52 1,163,639 21.41 24,913,522 22,910,767 2,002,755
Vanguard LifeStrategy
Moderate Growth Fund ..................... 53 1,762,720 18.18 32,046,248 30,575,306 1,470,942
AGSPC Asset Allocation Fund ................. 5 17,289,012 15.09 260,891,195 212,925,934 47,965,261
Templeton Asset Allocation Fund ............. 19 13,861,377 23.37 323,940,365 286,019,883 37,920,482
------------- ----- --------------- --------------- --------------
Total .................................... 1,171,895,031 $21,292,842,069 $15,133,600,700 $6,159,241,369
============= ===== =============== =============== ==============
</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.
<PAGE> 637
38 NOTES TO FINANCIAL STATEMENTS
NOTE F -- SECURITY PURCHASES AND SALES
For the year ended December 31, 1999, 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.................................... $ 134,677,751 $ 139,385,819
AGSPC MidCap Index Fund Division 4............................................... 235,122,234 121,903,304
AGSPC Small Cap Index Fund Division 14........................................... 54,587,283 58,450,240
AGSPC Stock Index Fund:..........................................................
Division 10A.................................................................. 24,080,573 77,479,615
Division 10B.................................................................. 3,046,671 7,574,316
Division 10C.................................................................. 626,807,392 82,339,542
Division 10D.................................................................. 4,099,962 10,844,842
AGSPC Growth Fund Division 15.................................................... 88,504,403 118,778,430
AGSPC Growth & Income Fund Division 16........................................... 52,289,506 29,123,818
American Century Ultra Fund Division 31.......................................... 444,783,914 21,596,564
American General International Growth Fund Division 33........................... 946,472 70,990
American General International Value Fund Division 34 ........................... 1,433,853 138,079
American General Large Cap Growth Fund Division 39............................... 14,803,088 658,862
American General Large Cap Value Fund Division 40................................ 1,603,370 268,211
American General Mid Cap Growth Fund Division 37................................. 1,915,167 88,442
American General Mid Cap Value Fund Division 38.................................. 4,571,598 606,656
American General Small Cap Growth Fund Division 35............................... 6,687,388 288,207
American General Small Cap Value Fund Division 36................................ 599,894 142,588
Dreyfus Variable Investment Fund - Small Cap Portfolio Division 18............... 21,111,378 196,910,062
Evergreen Growth and Income Fund Division 56..................................... 11,440 5,621
Evergreen Small Cap Value Fund Division 55....................................... 243 --
Evergreen Value Fund Division 57................................................. 4,708 --
Dreyfus Founders Growth Fund Division 30......................................... 377,694,422 15,816,982
Neuberger Berman Guardian Trust Division 29...................................... 16,757,237 12,416,328
Putnam Global Growth Fund Division 28............................................ 211,644,710 15,117,798
Putnam New Opportunities Fund Division 26........................................ 296,792,660 13,090,798
Putnam OTC & Emerging Growth Fund Division 27.................................... 137,306,910 40,666,703
Scudder Growth and Income Fund Division 21....................................... 31,899,301 36,629,775
T. Rowe Price Small-Cap Stock Fund Division 51 .................................. 8,924,589 1,235,607
Templeton Foreign Fund Division 32............................................... 101,740,948 61,364,564
Templeton International Fund Division 20......................................... 189,502,177 212,566,145
Vanguard Windsor II Fund Division 24............................................. 269,298,579 49,634,770
American General Balanced Fund Division 42 ...................................... 3,866,126 161,950
Vanguard Wellington Fund Division 25............................................. 213,879,566 21,573,138
AGSPC Capital Conservation Fund:
Division 1.................................................................... 539,820 1,229,647
Division 7.................................................................... 8,884,731 13,555,587
AGSPC Government Securities Fund Division 8...................................... 43,737,807 55,270,473
AGSPC International Government Bond Fund Division 13............................. 110,344,428 114,909,023
American General Core Bond Fund Division 58...................................... 397,138 9,568
American General Domestic Bond Fund Division 43.................................. 902,534 234,776
American General High Yield Bond Fund Division 60................................ 669,191 29,912
American General Strategic Bond Fund Division 59 453,036 1,300
Vanguard Long-Term Corporate Fund Division 22.................................... 26,914,873 9,374,775
Vanguard Long-Term Treasury Fund Division 23..................................... 65,677,636 20,627,370
AGSPC Science & Technology Fund Division 17...................................... 858,454,770 65,588,109
AGSPC Social Awareness Fund Division 12.......................................... 133,894,631 15,404,062
American General Socially Responsible Fund Division 41........................... 4,913,557 264,485
AGSPC Money Market Fund:
Division 2.................................................................... 3,989,984 4,006,915
Division 6.................................................................... 533,688,517 340,162,602
American General Money Market Fund Division 44................................... 8,345,963 1,874,721
American General Conservative Growth Lifestyle Fund Division 50.................. 8,807,869 5,415,651
American General Growth Lifestyle Fund Division 48............................... 3,618,201 265,479
American General Moderate Growth Lifestyle Fund Division 49...................... 6,430,264 434,004
Vanguard LifeStrategy Conservative Growth Fund Division 54....................... 5,949,918 698,740
Vanguard LifeStrategy Growth Fund Division 52 ................................... 24,674,642 1,821,602
Vanguard LifeStrategy Moderate Growth Fund Division 53 .......................... 31,808,062 1,262,248
AGSPC Asset Allocation Fund Division 5........................................... 35,282,084 18,243,130
Templeton Asset Allocation Fund Division 19...................................... 62,685,987 81,750,675
-------------- --------------
Total ........................................................................... $5,562,061,156 $2,099,363,620
============== ==============
</TABLE>
<PAGE> 638
SUPPLEMENTAL INFORMATION 39
<TABLE>
<CAPTION>
GROUP PORTFOLIO
UNIT INDEPENDENCE DIRECTOR
PURCHASE IMPACT PLUS 1
DIVISION DIVISION DIVISION DIVISION
-------- -------- ------------ ---------
<S> <C> <C> <C> <C>
INDEX EQUITY FUNDS
AGSPC International Equities Fund .................... -- -- 11 11
AGSPC MidCap Index Fund .............................. -- 4 4 4
AGSPC Small Cap Index Fund ........................... -- -- 14 14
AGSPC Stock Index Fund ............................... 10A, 10B 10D 10C 10C
ACTIVELY MANAGED EQUITY FUNDS
AGSPC Growth Fund .................................... -- -- -- 15
AGSPC Growth & Income Fund ........................... -- -- -- 16
American Century Ultra Fund (formerly known as
American Century-Twentieth Century Ultra Fund) ..... -- -- -- --
American General International Growth Fund ........... -- -- -- --
American General International Value Fund ............ -- -- -- --
American General Large Cap Growth Fund ............... -- -- -- --
American General Large Cap Value Fund ................ -- -- -- --
American General Mid Cap Growth Fund ................. -- -- -- --
American General Mid Cap Value Fund .................. -- -- -- --
American General Small Cap Growth Fund ............... -- -- -- --
American General Small Cap Value Fund ................ -- -- -- --
Dreyfus Variable Investment Fund -
Small Cap Portfolio .............................. -- -- -- 18
Evergreen Growth and Income Fund ..................... -- -- -- --
Evergreen Small Cap Value Fund
(formerly known as the Evergreen Small
Cap Equity Income Fund) .......................... -- -- -- --
Evergreen Value Fund ................................. -- -- -- --
Dreyfus Founders Growth Fund
(formerly known as Founders Growth) .............. -- -- -- --
Neuberger Berman Guardian Trust ...................... -- -- -- --
Putnam Global Growth Fund ............................ -- -- -- --
Putnam New Opportunities Fund ........................ -- -- -- --
Putnam OTC & Emerging Growth Fund .................... -- -- -- --
Scudder Growth and Income Fund ....................... -- -- -- --
T. Rowe Price Small-Cap Stock Fund ................... -- -- -- --
Templeton Foreign Fund ............................... -- -- -- --
Templeton International Fund ......................... -- -- -- 20
Vanguard Windsor II Fund ............................. -- -- -- --
BALANCED FUNDS
American General Balanced Fund ....................... -- -- -- --
Vanguard Wellington Fund ............................. -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
YEAR TO DATE
TOTAL RETURN
PORTFOLIO PORTFOLIO FOR YEAR ENDING
DIRECTOR DIRECTOR DECEMBER 31,
2 PLUS -------------------------
DIVISION DIVISION 1999 1998
--------- ---------- -------- -------
<S> <C> <C> <C> <C>
INDEX EQUITY FUNDS
AGSPC International Equities Fund .................... -- 11 27.88% 17.57%
AGSPC MidCap Index Fund .............................. -- 4 13.78 17.80
AGSPC Small Cap Index Fund ........................... -- 14 20.10 (2.92)
AGSPC Stock Index Fund ............................... 10C 10C 19.37 27.14
ACTIVELY MANAGED EQUITY FUNDS
AGSPC Growth Fund .................................... 15 15 6.33 16.96
AGSPC Growth & Income Fund ........................... -- 16 21.61 13.41
American Century Ultra Fund (formerly known as
American Century-Twentieth Century Ultra Fund) ..... 31 31 40.00 33.14
American General International Growth Fund ........... -- 33 55.45 5.17(a)
American General International Value Fund ............ -- 34 66.59 14.99(a)
American General Large Cap Growth Fund ............... -- 39 34.39 24.08(a)
American General Large Cap Value Fund ................ -- 40 4.52 24.66(a)
American General Mid Cap Growth Fund ................. -- 37 5.60 34.77(a)
American General Mid Cap Value Fund .................. -- 38 21.28 25.47(a)
American General Small Cap Growth Fund ............... -- 35 68.43 34.94(a)
American General Small Cap Value Fund ................ -- 36 (7.27) 16.53(a)
Dreyfus Variable Investment Fund -
Small Cap Portfolio .............................. -- 18 21.80 (4.51)
Evergreen Growth and Income Fund ..................... -- 56 13.29 n/a(c)
Evergreen Small Cap Value Fund
(formerly known as the Evergreen Small
Cap Equity Income Fund) .......................... -- 55 (0.45) n/a(c)
Evergreen Value Fund ................................. -- 57 3.41 n/a(c)
Dreyfus Founders Growth Fund
(formerly known as Founders Growth) .............. 30 30 37.64 23.76
Neuberger Berman Guardian Trust ...................... 29 29 7.36 1.34
Putnam Global Growth Fund ............................ 28 28 63.00 27.48
Putnam New Opportunities Fund ........................ 26 26 67.91 23.12
Putnam OTC & Emerging Growth Fund .................... 27 27 124.57 9.87
Scudder Growth and Income Fund ....................... 21 21 5.09 4.99
T. Rowe Price Small-Cap Stock Fund ................... -- 51 13.33 14.10(b)
Templeton Foreign Fund ............................... 32 32 38.34 (5.82)
Templeton International Fund ......................... -- 20 22.10 7.95
Vanguard Windsor II Fund ............................. 24 24 (6.96) 14.90
BALANCED FUNDS
American General Balanced Fund ....................... -- 42 13.07 17.01(a)
Vanguard Wellington Fund ............................. 25 25 3.11 10.65
</TABLE>
(a) Since August 26, 1998, initial capitalization of the Division. See Note C
to financial statements.
(b) Since September 22, 1998, inception of the Division.
(c) Since January 4, 1999, 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 Plus prospectus. 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> 639
40 SUPPLEMENTAL INFORMATION
<TABLE>
<CAPTION>
GROUP PORTFOLIO PORTFOLIO PORTFOLIO
UNIT INDEPENDENCE DIRECTOR DIRECTOR DIRECTOR
PURCHASE IMPACT PLUS 1 2 PLUS
DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION
-------- -------- ------------ --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
INCOME FUNDS
AGSPC Capital Conservation Fund ....................... -- 1 7 7 -- 7
AGSPC Government Securities Fund ...................... -- -- 8 8 -- 8
AGSPC International Government Bond Fund .............. -- -- 13 13 13 13
American General Core Bond Fund ....................... -- -- -- -- -- 58
American General Domestic Bond Fund ................... -- -- -- -- -- 43
American General High Yield Bond Fund ................. -- -- -- -- -- 60
American General Strategic Bond Fund .................. -- -- -- -- -- 59
Vanguard Long-Term Corporate Fund (formerly
known as Vanguard Fixed Income Securities
Fund - Long-Term Corporate Fund) .................... -- -- -- -- 22 22
Vanguard Long-Term Treasury Fund (formerly
known as Vanguard Fixed Income Securities
Fund - Long-Term U.S. Treasury Portfolio) ........... -- -- -- -- 23 23
SPECIALTY FUNDS
AGSPC Science & Technology Fund ....................... -- -- -- 17 17 17
AGSPC Social Awareness Fund ........................... -- -- 12 12 12 12
American General Socially Responsible Fund ............ -- -- -- -- -- 41
MONEY MARKET FUNDS
AGSPC Money Market Fund ............................... -- 2 6 6 6 6
American General Money Market Fund .................... -- -- -- -- -- 44
LIFESTYLE FUNDS
American General Conservative Growth Lifestyle Fund ... -- -- -- -- -- 50
American General Growth Lifestyle Fund ................ -- -- -- -- -- 48
American General Moderate Growth Lifestyle Fund ....... -- -- -- -- -- 49
Vanguard LifeStrategy Conservative Growth Fund ........ -- -- -- -- -- 54
Vanguard LifeStrategy Growth Fund ..................... -- -- -- -- -- 52
Vanguard LifeStrategy Moderate Growth Fund ............ -- -- -- -- -- 53
ASSET ALLOCATION FUNDS
AGSPC Asset Allocation Fund ........................... -- 5 5 5 -- 5
Templeton Asset Allocation Fund ....................... -- -- -- 19 -- 19
</TABLE>
<TABLE>
<CAPTION>
YEAR TO DATE
TOTAL RETURN
FOR YEAR ENDING
DECEMBER 31,
-------------------------
1999 1998
----- -----
<S> <C> <C>
INCOME FUNDS
AGSPC Capital Conservation Fund ....................... (1.40)% 6.30%
AGSPC Government Securities Fund ...................... (3.74) 7.86
AGSPC International Government Bond Fund .............. (6.88) 15.92
American General Core Bond Fund ....................... (1.89) 2.92(a)
American General Domestic Bond Fund ................... (3.81) 4.44(a)
American General High Yield Bond Fund ................. 2.17 5.31(a)
American General Strategic Bond Fund .................. 3.06 4.99(a)
Vanguard Long-Term Corporate Fund (formerly
known as Vanguard Fixed Income Securities
Fund - Long-Term Corporate Fund) .................... (7.21) 8.04
Vanguard Long-Term Treasury Fund (formerly
known as Vanguard Fixed Income Securities
Fund - Long-Term U.S. Treasury Portfolio) ........... (9.61) 11.82
SPECIALTY FUNDS 98.96 40.71
AGSPC Science & Technology Fund ....................... 17.46 26.03
AGSPC Social Awareness Fund ........................... 17.19 27.78(a)
American General Socially Responsible Fund ............
MONEY MARKET FUNDS
AGSPC Money Market Fund ............................... 3.71 4.12
American General Money Market Fund .................... 3.98 1.33(a)
LIFESTYLE FUNDS
American General Conservative Growth Lifestyle Fund ... 12.47 16.20(a)
American General Growth Lifestyle Fund ................ 28.99 19.25(a)
American General Moderate Growth Lifestyle Fund .......
Vanguard LifeStrategy Conservative Growth Fund ........ 17.90 18.54(a)
Vanguard LifeStrategy Growth Fund ..................... 6.44 8.40(b)
Vanguard LifeStrategy Moderate Growth Fund ............ 15.82 16.81(b)
10.57 12.59(b)
ASSET ALLOCATION FUNDS
AGSPC Asset Allocation Fund ........................... 10.65 17.19
Templeton Asset Allocation Fund ....................... 21.37 5.07
</TABLE>
(a) Since August 26, 1998, initial capitalization of the Division. See Note C to
financial statements.
(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 Plus prospectus. 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> 640
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, 1999
and 1998, 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, 1999. 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 auditing standards generally
accepted in the United States. 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, 1999 and 1998,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
----------------------------------------
ERNST & YOUNG LLP
Houston, Texas
February 14, 2000
<PAGE> 641
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
At December 31
In millions, except per share data
<TABLE>
<CAPTION>
1999 1998
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS Investments - Notes 2, 7, 8, 9:
Fixed maturity securities
(amortized cost: $21,797 in 1999 and $21,733 in 1998) $ 21,258 $ 22,878
Equity securities (cost: $182 in 1999 and $176 in 1998) 220 194
Mortgage loans on real estate 1,478 1,213
Real estate 25 21
Policy loans 849 789
Other long-term invested assets 95 59
Short-term investments 94 164
--------------------------------------------------------------------------------------------------
Total investments 24,019 25,318
--------------------------------------------------------------------------------------------------
Investment income receivable 387 370
Cash 26 105
Receivable for securities sold 13 22
Deferred policy acquisition costs - Note 3 1,301 665
Cost of insurance purchased - Note 4 19 22
Due from reinsurer, net 12 13
Other assets 156 120
Assets held in Separate Accounts 21,390 14,712
--------------------------------------------------------------------------------------------------
Total assets $ 47,323 $ 41,347
- -----------------------------------------------------------------------------------------------------------------
LIABILITIES Policy reserves for fixed annuity investment contracts $ 23,441 $ 23,219
Payable for securities purchased -- 41
Remittances not allocated 50 96
Commissions, general expenses and taxes (other than income taxes) 55 38
Other liabilities 140 193
Income tax liabilities - Note 5 284 542
Liabilities related to Separate Accounts 21,390 14,712
--------------------------------------------------------------------------------------------------
Total liabilities 45,360 38,841
- -----------------------------------------------------------------------------------------------------------------
STOCKHOLDER'S Common stock, 5,000,000 shares authorized and 3,575,000 issued
EQUITY and outstanding in 1999 and 1998 - Note 6 4 4
Additional paid-in capital 851 833
Retained earnings 1,395 1,142
Accumulated other comprehensive income (loss) - Note 2 (287) 527
--------------------------------------------------------------------------------------------------
Total stockholder's equity 1,963 2,506
--------------------------------------------------------------------------------------------------
Total liabilities and stockholder's equity $ 47,323 $ 41,347
--------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
2
<PAGE> 642
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF INCOME
For the years ended December 31,
In millions
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES Premium and other considerations $ 19 $ -- $ --
Surrender charges 15 15 12
Mortality charges 184 135 94
Expense charges 8 7 6
Net investment income - Note 2 1,834 1,811 1,730
Realized investment gains (losses) - Note 2 5 (28) 20
Other income 28 19 17
--------------------------------------------------------------------------------------------------------------
Total revenues 2,093 1,959 1,879
- -------------------------------------------------------------------------------------------------------------------------------
BENEFITS AND Insurance policy benefits 19 -- --
EXPENSES Increase in policy reserves for fixed annuity contracts 1,213 1,296 1,286
Expenses:
Commissions 149 124 111
Salaries 94 71 59
Data processing 63 29 15
Postage and telephone 22 15 12
Sales promotion 11 10 10
Depreciation expense on furniture and equipment 16 10 9
Rent 12 10 8
Taxes, licenses and fees 10 8 7
Printing and supplies 8 7 5
Other expenses 41 61 35
Amortization of deferred policy acquisition costs, net - Note 3 56 55 42
Amortization of cost of insurance purchased, net - Note 4 3 2 --
Policy acquisition costs deferred - Note 3 (196) (160) (138)
--------------------------------------------------------------------------------------------------------------
Total expenses 289 242 175
--------------------------------------------------------------------------------------------------------------
Total costs and expenses 1,521 1,538 1,461
- -------------------------------------------------------------------------------------------------------------------------------
EARNINGS Income before income tax expense 572 421 418
Income tax expense - Note 5 195 137 144
--------------------------------------------------------------------------------------------------------------
Net income $ 377 $ 284 $ 274
--------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
3
<PAGE> 643
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
For the years ended December 31,
In millions, except per share data
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCK Balance at beginning and end of year $ 4 $ 4 $ 4
- -------------------------------------------------------------------------------------------------------------------------
ADDITIONAL Balance at beginning of year 833 711 459
PAID-IN-CAPITAL Capital contribution from stockholder 18 122 252
----------------------------------------------------------------------------------------------
Balance at end of year 851 833 711
- -------------------------------------------------------------------------------------------------------------------------
RETAINED Balance at beginning of year 1,142 1,039 1,144
EARNINGS Net income 377 284 274
Dividends paid to stockholder (124) (181) (379)
----------------------------------------------------------------------------------------------
Balance at end of year 1,395 1,142 1,039
- -------------------------------------------------------------------------------------------------------------------------
ACCUMULATED OTHER Balance at beginning of year 527 306 167
COMPREHENSIVE Change in net unrealized gains (losses) on securities (814) 221 139
----------------------------------------------------------------------------------------------
INCOME (LOSS) Balance at end of year (287) 527 306
- -------------------------------------------------------------------------------------------------------------------------
STOCKHOLDER'S
EQUITY Balance at end of year $ 1,963 $ 2,506 $ 2,060
----------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
NET INCOME Net income $ 377 $ 284 $ 274
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OTHER Change in net unrealized gains (losses) on securities
COMPREHENSIVE Fair value of fixed maturity securities (1,684) 155 468
INCOME (LOSS) Deferred policy acquisition costs and
cost of insurance purchased 499 172 (251)
Deferred income taxes 351 (124) (78)
-------------------------------------------------------------------------------------------
Change in fixed maturity securities (834) 203 139
Change in equity securities and other 20 18 -
-------------------------------------------------------------------------------------------
Total (814) 221 139
- ----------------------------------------------------------------------------------------------------------------------
COMPREHENSIVE
INCOME (LOSS) Comprehensive income (loss) $ (437) $ 505 $ 413
-------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
- --------------------------------------------------------------------------------
4
<PAGE> 644
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
For the years ended December 31,
In millions
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING Net income $ 377 $ 284 $ 274
ACTIVITIES Reconciling adjustments to net cash provided by
operating activities:
Insurance and annuity liabilities 1,213 1,296 1,286
Deferred policy acquisition costs
and cost of insurance purchased (137) (103) (96)
Other, net (74) (44) (51)
------------------------------------------------------------------------------------------------
Net cash provided by operating activities 1,379 1,433 1,413
- ----------------------------------------------------------------------------------------------------------------------
INVESTING Investment purchases (28,211) (15,180) (18,403)
ACTIVITIES Investment calls, maturities and sales 27,789 14,732 17,500
Net (increase) decrease in short-term investments 70 (104) (8)
------------------------------------------------------------------------------------------------
Net cash used for investing activities (352) (552) (911)
- ----------------------------------------------------------------------------------------------------------------------
FINANCING Policyholder account deposits 4,251 3,756 3,385
ACTIVITIES Policyholder account withdrawals (2,033) (1,777) (1,427)
Transfers to Separate Accounts (3,218) (2,728) (2,325)
Capital contribution from stockholder 18 122 252
Dividends paid to stockholder (124) (181) (379)
------------------------------------------------------------------------------------------------
Net cash used for financing activities (1,106) (808) (494)
- ----------------------------------------------------------------------------------------------------------------------
NET CHANGE Net increase (decrease) in cash (79) 73 8
IN CASH Cash at beginning of year 105 32 24
------------------------------------------------------------------------------------------------
Cash at end of year $ 26 $ 105 $ 32
------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
- -------------------------------------------------------------------------------
5
<PAGE> 645
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
In millions, 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
DERIVATIVES. In 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) 133, "Accounting for
Derivative Instruments and Hedging Activities," which requires all derivative
instruments to be recognized at fair value in the balance sheet. Changes in the
fair value of a derivative instrument will be reported as earnings or other
comprehensive income, depending upon the intended use of the derivative
instrument. VALIC will adopt SFAS 133 on January 1, 2001. VALIC does not expect
adoption to have a material impact on the consolidated results of operation 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 (loss) 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's amortized cost
is reduced to its fair value, and the reduction is recorded as a realized loss.
Beginning in 1998, VALIC held trading securities at various times and
reported them at fair value. VALIC held no trading securities at December 31,
1999 or 1998. Realized gains (losses) related to trading securities are included
in net investment income; however, trading securities did not have a material
effect on net investment income in 1999 or 1998.
MORTGAGE LOANS. Mortgage loans are reported at amortized cost, net of an
allowance for losses. The allowance covers estimated losses based on our
assessment of risk factors such as potential non-payment or non-monetary
default. The allowance is primarily based on a loan-specific review.
VALIC considers loans to be impaired when collection of all amounts due
under the contractual terms is not probable. VALIC generally looks to the
underlying collateral for repayment of these loans. Therefore, impaired loans
are reported at the lower of amortized cost or fair value of the underlying
collateral, less estimated cost 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.
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.
- --------------------------------------------------------------------------------
6
<PAGE> 646
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
In millions
1.5 DERIVATIVES RELATED TO INVESTMENTS-(CONTINUED)
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. Any amounts deemed
unrecoverable are charged to expense.
1.7 COST OF INSURANCE PURCHASED (CIP)
The cost assigned to certain acquired insurance contracts in force at the
acquisition date is reported as CIP. Interest is accreted on the unamortized
balance of CIP at rates ranging from 5.0% to 5.9% for both 1998 and 1999. CIP is
charged to expense and adjusted for the impact of net unrealized gains (losses)
on securities in the same manner as DPAC. VALIC reviews the carrying amount of
CIP on at least an annual basis using the same methods used to evaluate DPAC.
1.8 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's 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
consist primarily of shares in mutual funds, which are carried at fair value,
based on the quoted net asset value per share of the funds.
1.9 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, the 1983a Table, the Annuity
2000 Table, and the GAR 94 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%.
- --------------------------------------------------------------------------------
7
<PAGE> 647
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
In millions
1.10 RECOGNITION OF REVENUES AND COSTS
Most receipts for annuities are classified as deposits instead of revenues.
Revenues for these contracts consist of mortality, expense, and surrender
charges. For limited-payment contracts, net premiums are recorded as revenue.
1.11 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 the 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.
1.12 STATUTORY ACCOUNTING
State insurance laws and regulations prescribe accounting practices for
calculating statutory net income and equity of insurance companies. In addition,
state regulators may permit statutory accounting practices that differ from
prescribed practices. The use of such permitted practices did not have a
material effect on VALIC's statutory equity or net income at December 31, 1999,
1998, and 1997, or for the years then ended.
Statutory accounting practices differ from GAAP. Significant differences
were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------
<S> <C> <C> <C>
Statutory net income $ 256 $ 170 $ 238
Change in DPAC and CIP 137 103 96
Investment valuation
differences 21 48 --
Policy reserve adjustments 42 67 (5)
Deferred income taxes (58) (57) (27)
Other, net (21) (47) (28)
- -----------------------------------------------------------------
GAAP net income $ 377 $ 284 $ 274
- -----------------------------------------------------------------
Statutory equity $ 1,331 $ 1,237 $ 1,189
Asset valuation reserve 272 230 188
Investment valuation
differences* (550) 1,128 970
DPAC and CIP 1,320 687 392
Non-admitted assets 104 72 35
Policy reserve adjustments (92) (134) (187)
Deferred income taxes (266) (556) (375)
Other, net (156) (158) (152)
- -----------------------------------------------------------------
GAAP equity $ 1,963 $ 2,506 $ 2,060
- -----------------------------------------------------------------
</TABLE>
* Primarily GAAP unrealized gains (losses) on securities
1.13 COINSURANCE TRANSACTION
On May 21, 1998, VALIC completed the acquisition of a block of individual
annuity business in a coinsurance transaction for a cost of $24 million. This
transaction increased assets and insurance and annuity liabilities by $688
million.
2
INVESTMENTS
2.1 INVESTMENT INCOME
Income by type of investment was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------
<S> <C> <C> <C>
Non-affiliated fixed
maturity securities $1,670 $1,664 $1,563
Affiliated fixed
maturity securities 2 3 3
Equity securities 15 -- --
Mortgage loans on
real estate 104 113 124
Other 71 63 53
- ------------------------------------------------------------------
Gross investment income 1,862 1,843 1,743
Investment expense 28 32 13
- ------------------------------------------------------------------
Net investment income $1,834 $1,811 $1,730
- ------------------------------------------------------------------
</TABLE>
There were no investments during 1999 and 1998 that did not produce
investment income. The carrying value of investments that produced no investment
income during 1997 totaled $12 million or 0.05% of total invested assets. The
ultimate disposition of these assets is not expected to have a material effect
on VALIC's consolidated results of operations or financial position.
Derivative financial instruments related to investment securities did not
have a material effect on net investment income in any of the three years ended
December 31, 1999.
2.2 REALIZED INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturity securities
Gross gains $ 101 $ 14 $ 35
Gross losses (86) (50) (29)
- -------------------------------------------------------------------
Total fixed maturity
securities 15 (36) 6
- -------------------------------------------------------------------
Mortgage loans on real estate (4) 9 21
Real estate -- 7 4
Other long-term investments 2 -- --
DPAC amortization and
investment expense (8) (8) (11)
- -------------------------------------------------------------------
Realized investment gains
(losses) before taxes 5 (28) 20
Income tax expense (benefit) 2 (10) 7
- -------------------------------------------------------------------
Net realized investment
gains (losses) $ 3 $ (18) $ 13
- -------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
8
<PAGE> 648
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
In millions
- --------------------------------------------------------------------------------
2.3 FIXED MATURITY AND EQUITY SECURITIES
VALUATION. Amortized cost and fair value of fixed maturity and equity
securities at December 31 were as follows:
<TABLE>
<CAPTION>
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
----------------- ---------------------- ----------------------- -----------------
1999 1998 1999 1998 1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 159 $ 299 $ 10 $ 38 $ (1) $ -- $ 168 $ 337
Obligations of states and
political subdivisions 105 56 -- 3 (7) -- 98 59
Debt securities issued by
foreign governments 134 232 3 17 -- -- 137 249
Corporate securities 16,584 16,153 122 934 (639) (73) 16,067 17,014
Mortgage-backed securities 4,774 4,948 31 227 (58) (1) 4,747 5,174
Affiliated fixed maturity securities 27 25 -- -- -- -- 27 25
Redeemable preferred stock 14 20 -- -- -- -- 14 20
- --------------------------------------------------------------------------------------------------------------------------------
Total fixed maturity securities $21,797 $21,733 $ 166 $ 1,219 $ (705) $ (74) $21,258 $22,878
- --------------------------------------------------------------------------------------------------------------------------------
Equity securities $ 182 $ 176 $ 38 $ 18 $ -- $ -- $ 220 $ 194
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2.3 FIXED MATURITY AND EQUITY SECURITIES- (CONTINUED)
MATURITIES. The contractual maturities of fixed maturity securities at
December 31, 1999 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 $ 600 $ 602
In years two through five 4,558 4,576
In years six through ten 6,584 6,383
After ten years 5,281 4,950
Mortgage-backed securities 4,774 4,747
- ------------------------------------------------------------
Total fixed maturity securities $ 21,797 $21,258
- ------------------------------------------------------------
</TABLE>
Actual maturities may differ from contractual maturities since borrowers
may have the right to call or prepay obligations. Corporate requirements and
investment strategies may result in the sale of investments before maturity.
2.4 NET UNREALIZED GAINS (LOSSES) ON SECURITIES
Net unrealized gains (losses) on fixed maturity and equity securities
included in accumulated other comprehensive income (loss) at December 31 were as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized gains $ 204 $ 1,237 $ 1,011
Gross unrealized losses (705) (74) (21)
DPAC adjustments 159 (340) (512)
Deferred federal income taxes 55 (296) (172)
- ------------------------------------------------------------
Net unrealized gains
(losses) on securities $ (287) $ 527 $ 306
- ------------------------------------------------------------
</TABLE>
2.5 MORTGAGE LOANS ON REAL ESTATE
DIVERSIFICATION. Diversification of the geographic location and type of
property collateralizing mortgage loans reduces the concentration of credit
risk. For new loans, VALIC requires loan-to-value ratios of 75% or less, based
on management's credit assessment of the borrower.
At December 31 the mortgage loan portfolio was distributed as follows:
<TABLE>
<CAPTION>
1999 1998
- ---------------------------------------------
<S> <C> <C>
Geographic distribution:
Atlantic $ 656 $ 645
Pacific and Mountain 377 328
Central 459 252
Allowance for losses (14) (12)
- ---------------------------------------------
Total mortgage loans $ 1,478 $ 1,213
- ---------------------------------------------
Property type:
Office $ 577 $ 467
Retail 512 359
Industrial 265 250
Apartments 106 94
Residential and other 32 55
Allowance for losses (14) (12)
- ---------------------------------------------
Total mortgage loans $ 1,478 $ 1,213
- ---------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE> 649
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
In millions
2.5 MORTGAGE LOANS ON REAL ESTATE - (CONTINUED)
ALLOWANCE. Activity in the allowance for mortgage loan losses was as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1 $ 12 $ 21 $ 44
Provision for (recovery of)
mortgage loan losses 4 (7) (18)
Deductions (2) (2) (5)
- ----------------------------------------------------------
Balance at December 31 $ 14 $ 12 $ 21
- ----------------------------------------------------------
</TABLE>
IMPAIRED LOANS. Impaired mortgage loans were $17 million, $13 million, and
$28 million at December 31, 1999, 1998, and 1997, respectively. The average
investment in impaired loans was $15 million, $20 million, and $37 million at
December 31, 1999, 1998, and 1997, respectively. Interest income related to
impaired loans was $0 for 1999 and 1998, and $3 million in 1997.
2.6 CASH FLOWS FROM INVESTING ACTIVITIES
Uses of cash for investment purchases were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturity securities $ 10,823 $ 5,469 $ 5,175
Other 17,388 9,711 13,228
- ------------------------------------------------------------
Total $ 28,211 $ 15,180 $ 18,403
- ------------------------------------------------------------
</TABLE>
Sources of cash from investment dispositions and repayments were as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturity securities $ 10,829 $ 4,444 $ 4,224
Mortgage loans on
real estate 133 241 299
Equity securities 42 8 3
Real estate 4 17 22
Other 16,781 10,022 12,952
- ------------------------------------------------------------
Total $ 27,789 $ 14,732 $ 17,500
- ------------------------------------------------------------
</TABLE>
3
DEFERRED POLICY ACQUISITION COSTS (DPAC)
Activity in DPAC was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1 $ 665 $ 392 $ 558
Deferrals:
Commissions 90 83 77
Other acquisition costs 106 77 61
Amortization:
Accretion of interest 78 73 65
Operating earnings (134) (128) (107)
Offset to realized gains (3) (4) (11)
Effect of net unrealized
(gains) losses on securities 499 172 (251)
- -----------------------------------------------------------------
Balance at December 31 $ 1,301 $ 665 $ 392
- -----------------------------------------------------------------
</TABLE>
4
COST OF INSURANCE PURCHASED (CIP)
Activity in CIP was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1 $ 22 $ -- $ --
Additions from acquisitions -- 24 --
Accretion of interest 1 1 --
Amortization (4) (3) --
- -----------------------------------------------------------
Balance at December 31 $ 19 $ 22 $ --
- -----------------------------------------------------------
</TABLE>
CIP amortization, net of accretion, expected to be recorded in each of the
next five years is $3 million, $2 million, $2 million, $2 million, and $1
million.
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>
1999 1998
- ----------------------------------------------------------------------
<S> <C> <C>
Current tax liabilities (assets) $ 18 $ (14)
- ----------------------------------------------------------------------
Deferred tax liabilities, applicable to:
Basis differential of investments 31 438
DPAC and CIP 451 230
Other 40 32
- ----------------------------------------------------------------------
Total deferred tax liabilities 522 700
- ----------------------------------------------------------------------
Deferred tax assets, applicable to:
Policy reserves (140) (134)
Basis differential of investments (176) (2)
Other (8) (8)
- ----------------------------------------------------------------------
Gross deferred tax assets (324) (144)
Valuation allowance 68 --
- ----------------------------------------------------------------------
Total deferred tax assets, net (256) (144)
- ----------------------------------------------------------------------
Net deferred tax liabilities 266 556
- ----------------------------------------------------------------------
Total income tax liabilities $ 284 $ 542
- ----------------------------------------------------------------------
</TABLE>
The 1999 deferred tax asset applicable to basis differential of investments
was due to unrealized losses on securities. Since a portion of this deferred tax
asset may not be realized, a valuation allowance of $68 million was provided at
December 31, 1999. This valuation allowance had no income statement impact.
- --------------------------------------------------------------------------------
10
<PAGE> 650
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- -------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
In millions
5.3 TAX EXPENSE
Components of income tax expense were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 133 $ 78 $ 114
State 4 2 3
- ------------------------------------------------------------------------------
Total current income tax expense 137 80 117
- ------------------------------------------------------------------------------
Deferred, applicable to:
DPAC 48 35 29
Policy reserves (6) 4 (15)
Basis differential of investments 8 13 4
Other, net 8 5 9
- ------------------------------------------------------------------------------
Total deferred income tax expense 58 57 27
- ------------------------------------------------------------------------------
Income tax expense $ 195 $ 137 $ 144
- ------------------------------------------------------------------------------
</TABLE>
A reconciliation between the federal income tax rate and the effective tax
rate follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal income tax rate 35% 35% 35%
Income tax expense at applicable rate $ 200 $ 147 $ 146
Dividends received deduction (13) (8) (5)
Tax-exempt interest (ESOP) (2) (3) (4)
State income taxes 5 4 4
Other items 5 (3) 3
- ------------------------------------------------------------------------------
Income tax expense $ 195 $ 137 $ 144
- ------------------------------------------------------------------------------
</TABLE>
Income taxes paid were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal $ 99 $ 93 $ 106
State 1 3 3
- -------------------------------------------------------------------------------
</TABLE>
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 2000 is
$240 million.
7
DERIVATIVE FINANCIAL INSTRUMENTS
7.1 INTEREST RATE AND CURRENCY SWAP AGREEMENTS
Interest rate and currency swap agreements related to investment
securities at December 31 were as follows:
<TABLE>
<CAPTION>
1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
Interest rate swap agreements
to pay fixed rate
Notional amount $ 132 $ 332
Average receive rate 6.72 % 5.97%
Average pay rate 6.52 5.37
- -------------------------------------------------------------------------------------
Currency swap agreements (receive U.S. $/pay Canadian $)
Notional amount (in U.S. $) $108 $ 108
Average exchange rate 1.50 1.50
- -------------------------------------------------------------------------------------
Currency swap agreements (receive U.S. $/pay Australian $)
Notional amount (in U.S. $) $ 23 $ --
Average exchange rate 1.85 --
- -------------------------------------------------------------------------------------
</TABLE>
7.2 SWAPTIONS
Swaptions at December 31 were as follows:
<TABLE>
<CAPTION>
1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
Call swaptions
Notional amount $ 2 $ 950
Average strike rate 4.63% 4.07%
- -------------------------------------------------------------------------------------
Put swaptions
Notional amount $ 1 $ 690
Average strike rate 8.50% 8.33%
- -------------------------------------------------------------------------------------
</TABLE>
The swaptions outstanding at December 31, 1999 expire in 2000. 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.
7.3 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> 651
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
In millions
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,
including the values of underlying customer relationships and distribution
systems, and (2) the reporting of investments at fair value without a
corresponding revaluation of related policyholder liabilities can be
misinterpreted.
<TABLE>
<CAPTION>
1999 1998
---------------------------------- -------------------------------------
FAIR VALUE CARRYING AMOUNT Fair Value Carrying Amount
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Fixed maturity and equity securities $ 21,478* $ 21,478* $ 23,072 * $ 23,072
Mortgage loans on real estate 1,414 1,478 1,252 1,213
Policy loans 806 849 801 789
Short-term investments 94 94 164 164
Assets held in Separate Accounts 21,390 21,390 14,712 14,712
Liabilities
Insurance investment contracts $ 21,817 $ 23,441 $ 23,314 $ 23,219
Liabilities related to Separate Accounts 21,390 21,390 14,712 14,712
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Includes derivative financial instruments with a fair value of ($4) in
1999 and $19 in 1998.
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.
ASSETS AND LIABILITIES RELATED TO SEPARATE ACCOUNTS. Fair value of separate
account assets and liabilities was based on quoted net asset value per share of
the underlying mutual funds.
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, 1999 were as follows:
Operating expenses include $44 million in 1999, $47 million in 1998, and
$22 million in 1997, 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 $2 million in 1999, $0 in 1998, and
$1 million in 1997.
On November 4, 1982, VALIC invested $12 million in ~13 1?2% Restricted
Subordinated Note due November 4, 2002 issued by AGC. Principal payments of $1
million were received on November 4, 1999, 1998, and 1997. VALIC recognized $1
million in interest income during 1999, 1998, 1997.
On December 31, 1984, VALIC entered into a $49 million 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 $2.4 million were received on December 29, 1999, 1998, and
1997. VALIC recognized $1 million of interest income on the note during 1999,
1998, and 1997.
VALIC paid common stock dividends of $124 million, $34.69 per share; $181
million, $50.63 per share; and $379 million, $106.01 per share, to AGL in 1999,
1998, and 1997, respectively.
- --------------------------------------------------------------------------------
12
<PAGE> 652
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
In millions
9. TRANSACTIONS WITH AFFILIATED COMPANIES - (CONTINUED)
VALIC received capital contributions of $17 million, $122 million, and $250
million from AGL in 1999, 1998, and 1997, respectively.
VALIC acquired bonds of various issuers from American General Life and
Accident Insurance Company at a cost of $22 million and $26 million 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 $130 million.
10
COMMENTS 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. The accrued liability for
anticipated assessments was $6 million, $5 million, and $7 million, at December
31, 1999, 1998, and 1997, respectively. The 1999 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
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.
The components of pension expense and underlying assumptions for the
defined benefit plan were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------
<S> <C> <C> <C>
Service cost (benefits earned)
during period $ 1 $ 2 $ 1
Interest cost on projected
benefit obligation 2 1 1
Expected return on plan assets (1) (1) --
- ------------------------------------------------------------
Total pension expense $ 2 $ 2 $ 2
- ------------------------------------------------------------
Weighted-average discount rate
on benefit obligation 7.75% 7.00% 7.25%
Rate of increase in
compensation levels 4.25 4.25 4.00
Expected long-term rate of
return on plan assets 10.35 10.25 10.00
- ------------------------------------------------------------
</TABLE>
The following table sets forth the funded status and amounts recognized in
the consolidated balance sheet at December 31, 1999 and 1998 for VALIC's defined
benefit pension plan:
<TABLE>
<CAPTION>
1999 1998
- -----------------------------------------------------------
<S> <C> <C>
Projected benefit obligation $ 22 $ 21
Plan assets at fair value 18 15
- -----------------------------------------------------------
Projected benefit obligation in excess of
plan assets (4) (6)
Unrecognized net gain (loss) (2) 1
- -----------------------------------------------------------
Net pension liability $ (6) $ (5)
- -----------------------------------------------------------
</TABLE>
At December 31, 1999, the plans' assets were invested as follows: (1) 71%
in equity mutual funds managed outside of AGC; (2) 26% in fixed income mutual
funds managed by one of AGC's subsidiaries; (3) 1% in AGC stock; and (4) 1% in
deposit administration insurance contracts issued by AGC subsidiaries.
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.
The life plans are fully insured; the retiree medical and dental plans are
unfunded and self-insured. The accrued liability for postretirement benefits was
$2.7 million and $2.4 million at year-end 1999 and 1998, respectively. These
liabilities were discounted at the same rates used for the pension plans.
Postretirement benefit expense in 1999, 1998, and 1997 was immaterial.
- --------------------------------------------------------------------------------
13
<PAGE> 653
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999
In millions
12
IMPACT OF YEAR 2000 (UNAUDITED)
As of March 10, 2000, all of VALIC's major technology systems, programs,
and applications, including those which rely on third parties, are operating
smoothly following the transition into 2000. No interruptions to normal business
operations have been experienced, including the processing of customer account
data and transactions. VALIC will continue to monitor its technology systems,
including critical third party dependencies, as necessary to maintain Year 2000
readiness. VALIC does not expect any future disruptions, if they occur, to have
a material effect on the results of operations, liquidity, or financial
condition.
Through December 31, 1999, VALIC incurred and expensed pretax costs of $32
million related to Year 2000 readiness, including $5 million in 1999, $20
million in 1998, and $6 million in 1997. In addition, the planned replacement of
certain systems was accelerated as part of the Year 2000 plans. The cost of
these replacement systems was immaterial. VALIC does not anticipate incurring
any significant costs in the future to maintain Year 2000 readiness.
- --------------------------------------------------------------------------------
14
<PAGE> 654
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 Separate Account A --
Report of Independent Auditors
Summary of Financial Statements
Statements of Net Assets
Statements of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
Supplemental Information
(ii) Audited Financial Statements
The Variable Annuity Life Insurance Company
Report of Independent Auditors
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Changes in Stockholder's Equity
Consolidated Statement of Comprehensive Income
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions, are inapplicable, or the related
information is included in the financial statements and therefore such
schedules have been omitted.
C-1
<PAGE> 655
(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(a). -- 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).
3(b). -- Underwriting Agreement between The Variable Annuity
Life Insurance Company, The Variable Annuity Life
Insurance Company, The Variable Annuity Life
Insurance Company Separate Account A and A.G.
Distributors, Inc.
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 issuance;
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>
C-2
<PAGE> 656
<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). -- (1) 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).
(2) Form of Redacted Participation Agreement between
Franklin Templeton Variable Insurance Products
Trust, Franklin Templeton Distributors, Inc. and The
Variable Annuity Life Insurance Company dated May 1,
2000.
(3) 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).
(4) Form of Redacted Administrative Services Agreement between
The Variable Annuity Life Insurance Company and Franklin
Templeton Services, Inc.
</TABLE>
C-3
<PAGE> 657
<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).
(3) Amendment No. 1 dated November 1, 1999 to Agreement
between The Dreyfus Corporation and The Variable
Annuity Life Insurance Company dated July 1, 1997.
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, 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).
(3) Amendment No. 2 dated January 1, 2000 to Fund
Participation Agreement between The Variable Annuity
Life Insurance Company, American Century Mutual Funds, Inc.
and American Century Investment Management, Inc. dated
April 30, 1996, as amended December 8, 1997.
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) Amended and Restated Participation Agreement dated
July 1, 1999 between Founders Funds, Inc., Premier
Mutual Fund Services, Inc., Founders Asset
Management, LLC and The Variable Annuity Life
Insurance Company.
(3) 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). -- (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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<PAGE> 658
<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(h). -- 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(i). -- 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(j). -- Participation Agreement between The Variable Annuity Life Insurance Company and
Evergreen Equity Trust, dated January 4, 1999 incorporated herein by reference to
Post-Effective Amendment No. 16 filed with the SEC on April 26, 1999 (File No.
33-75292/811-3240).
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 incorporated herein
by reference to Post-Effective Amendment No. 16 filed with the SEC on April 26, 1999
(File No. 33-75292/811-3240).
16(e). -- Copy of manually signed powers of attorney for The Variable Annuity Life Insurance
Company Directors Bruce R. Abrams, Kent E. Barrett, Rebecca G. Campbell,
Robert P. Condon, John A. Graf and Carl J. Santillo.
</TABLE>
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<PAGE> 659
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The directors and principal officers of the Company are set forth below.
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>
John A. Graf Chairman, Director, President and Chief Executive Officer
Bruce R. Abrams Director
Kent E. Barrett Director, Executive Vice President and Chief Financial Officer
Rebecca G. Campbell Director and Senior Vice President - Human Resources
Robert P. Condon Director and Executive Vice President - Institutional Marketing
Robert M. Devlin Director
Carl J. Santillo Director and Executive Vice President - Operations
Mary Cavanaugh Executive Vice President - General Counsel and Secretary
Kathleen Adamson Senior Vice President - Customer Service
Michael J. Akers Senior Vice President and Chief Actuary
Dick Baily Senior Vice President - Planning and Expense Management
Michael A. Betts Senior Vice President - Systems
Stephen G. Kellison Senior Vice President - Product Management
Richard J. Lindsay Senior Vice President - Marketing
Robert E. Steele Senior Vice President - Specialty Products
Rosemary Beauvais Vice President - Corporate Technology Services
James D. Bonsall Vice President - Financial Reporting
Gregory S. Broer Vice President - Actuarial
Richard A. Combs Vice President - Actuarial
Neil J. Davidson Vice President - Actuarial
David H. denBoer Vice President - Compliance
Stephen R. Duff Vice President - New Account Acquisitions
Daniel Fritz Vice President - Actuarial
Michael D. Gifford Vice President - Case Development
Joseph P. Girgenti Vice President - Sales Support
Calvin King Vice President - North Houston Customer Care Center
Traci P. Langford Vice President - Account Management
Thomas G. Norwood Vice President - Broker/Dealer
Rembert R. Owen, Jr. Vice President and Assistant Secretary
Stephen J. Poston Vice President - Training and National Accounts
Larry Robinson Vice President - Product Development
Steven D. Rubinstein Vice President - Financial Planning and Reporting
Richard W. Scott Vice President and Chief Investment Officer
Gary N. See Vice President - Group Actuarial
Gregory R. Seward Vice President - Variable Product Accounting
Nancy K. Shumbera Vice President - Applications Development
Brenda Simmons Vice President - Premium Processing
Norman A. Skinrood, Jr. Vice President - Investment Products Group
David Snyder Vice President - Electronic Commerce
Paula F. Snyder Vice President - AGRS Marketing Communications
</TABLE>
C-6
<PAGE> 660
<TABLE>
<CAPTION>
NAMES AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES HELD WITH DEPOSITOR
------------------- -----------------------------------------
<S> <C>
James P. Steele Vice President - Specialty Products
Kenneth R. Story Vice President - Information Technology
Brian R. Toldan Vice President and General Auditor
Michael A. Tompkins Vice President - PR Acquisitions
Peter V. Tuters Vice President and Investment Officer
William A. Wilson Vice President - Government Affairs
Jane E. Bates Chief Compliance Officer
Roger E. Hahn Investment Officer
C. Scott Inglis Investment Officer
Craig R. Mitchell Investment Officer
Julia S. Tucker Investment Officer
W. Lary Mask Real Estate Investment Officer and Assistant Secretary
D. Lynne Walters Tax Officer
</TABLE>
ITEM 26. PERSON CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
The following is a list of American General Corporation's subsidiaries as of
March 31, 2000. All subsidiaries listed are corporations, unless otherwise
indicated. Subsidiaries of subsidiaries are indicated by indentations and unless
otherwise indicated, all subsidiaries are wholly owned. Inactive subsidiaries
are denoted by an asterisk (*).
<TABLE>
<CAPTION>
Jurisdiction of
Name Incorporation
- -------------------------------------------------------------------------------- ---------------
<S> <C>
AGC Life Insurance Company ..................................................... Missouri
American General Property Insurance Company(16) ............................. Tennessee
American General Property Insurance Company of Florida ................... Florida
American General Life and Accident Insurance Company(6) ..................... Tennessee
American General Life Insurance Company(7) .................................. Texas
American General Annuity Service Corporation ............................. Texas
American General Life Companies .......................................... Delaware
American General Life Insurance Company of New York ..................... New York
The Winchester Agency Ltd. ............................................ New York
The Variable Annuity Life Insurance Company .............................. Texas
Parkway 1999 Trust(17) ................................................ Maryland
PESCO Plus, Inc(14) ................................................... Delaware
American General Gateway Services, L.L.C(15) .......................... Delaware
The Variable Annuity Marketing Company ................................ Texas
American General Financial Advisors, Inc............................... Texas
VALIC Retirement Services Company ..................................... Texas
VALIC Trust Company ................................................... Texas
American General Assignment Corporation of New York ................... New York
The Franklin Life Insurance Company ......................................... Illinois
The American Franklin Life Insurance Company ............................. Illinois
Franklin Financial Services Corporation .................................. Delaware
HBC Development Corporation ................................................. Virginia
Templeton American General Life of Bermuda, Ltd(13) ......................... Bermuda
Western National Corporation................................................. Delaware
WNL Holding Corp.......................................................... Delaware
American General Annuity Insurance Company ............................ Texas
American General Assignment Corporation ............................... Texas
American General Distributors, Inc. ................................... Delaware
A.G. Investment Advisory Services, Inc. ............................... Delaware
American General Financial Institutions Group, Inc..................... Delaware
WNL Insurance Services, Inc. .......................................... Delaware
American General International, Inc. ........................................... Delaware
American General Enterprise Services, Inc. ..................................... Delaware
American General Corporation* .................................................. Delaware
American General Delaware Management Corporation(1) ............................ Delaware
American General Finance, Inc. ................................................. Indiana
</TABLE>
C-7
<PAGE> 661
<TABLE>
<CAPTION>
Jurisdiction of
Name Incorporation
- -------------------------------------------------------------------------------- ---------------
<S> <C>
HSA Residential Mortgage Services of Texas, Inc.............................. Delaware
AGF Investment Corp. ........................................................ Indiana
American General Auto Finance, Inc. ........................................ Delaware
American General Finance Corporation(8) ..................................... Indiana
American General Finance Group, Inc. ..................................... Delaware
American General Financial Services, Inc.(9) .......................... Delaware
The National Life and Accident Insurance Company .................. Texas
Merit Life Insurance Co. ................................................. Indiana
Yosemite Insurance Company ............................................... Indiana
American General Finance, Inc................................................ Alabama
A.G. Financial Service Center, Inc. ......................................... Utah
American General Bank, FSB .................................................. Utah
American General Financial Center, Inc.* .................................... Indiana
American General Financial Center, Incorporated* ............................ Indiana
American General Financial Center Thrift Company* ........................... California
Thrift, Incorporated* ....................................................... Indiana
American General Investment Advisory Services, Inc.* .......................... Texas
American General Investment Holding Corporation(10) ............................ Delaware
American General Investment Management, L.P.(10) ............................ Delaware
American General Investment Management Corporation(10) ......................... Delaware
American General Realty Advisors, Inc. ......................................... Delaware
American General Realty Investment Corporation ................................. Texas
AGLL Corporation(11) ........................................................ Delaware
American General Land Holding Company Delaware
AG Land Associates, LLC(11) .............................................. California
GDI Holding, Inc.*(12) ...................................................... California
Pebble Creek Service Corporation Florida
SR/HP/CM Corporation ........................................................ Texas
Green Hills Corporation ........................................................ Delaware
Knickerbocker Corporation ...................................................... Texas
American Athletic Club, Inc. ................................................ Texas
Pavilions Corporation........................................................... Delaware
USLIFE Corporation.............................................................. Delaware
All American Life Insurance Company.......................................... Illinois
American General Assurance Company........................................... Illinois
American General Indemnity Company........................................ Nebraska
USLIFE Credit Life Insurance Company of Arizona........................... Arizona
American General Life Insurance Company of Pennsylvania...................... Pennsylvania
I.C. Cal*.................................................................... California
North Central Administrators, Inc............................................ Minnesota
North Central Life Insurance Company......................................... Minnesota
North Central Caribbean Life, Ltd......................................... Nevis
The Old Line Life Insurance Company of America............................... Wisconsin
The United States Life Insurance Company in the City of New York New York
</TABLE>
C-8
<PAGE> 662
<TABLE>
<CAPTION>
Jurisdiction of
Name Incorporation
- -------------------------------------------------------------------------------- ---------------
<S> <C>
American General Bancassurance Services, Inc................................. Illinois
USMRP, Ltd................................................................ Turks & Caicos
USLIFE Realty Corporation.................................................... Texas
USLIFE Real Estate Services Corporation................................ Texas
USLIFE Systems Corporation................................................... Delaware
</TABLE>
American General Finance Foundation, Inc. is not included on this list. It is a
non-profit corporation.
NOTES
(1) The following limited liability companies were formed in the State of
Delaware on March 28, 1995. The limited liability interests of each are
jointly owned by AGC and AGDMC and the business and affairs of each are
managed by AGDMC:
American General Capital, L.L.C. American General Delaware, L.L.C.
(2) On November 26, 1996, American General Institutional Capital A ("AG Cap
Trust A"), a Delaware business trust, was created. On March 10, 1997,
American General Institutional Capital B ("AG Cap Trust B"), also a
Delaware business trust, was created. Both AG Cap Trust A's and AG Cap
Trust B's business and affairs are conducted through their trustees:
Bankers Trust Company and Bankers Trust (Delaware). Capital securities of
each are held by non-affiliated third party investors and common securities
of AG Cap Trust A and AG Cap Trust B are held by AGC.
(3) On November 14, 1997, American General Capital I, American General Capital
II, American General Capital III, and American General Capital IV
(collectively, the "Trusts"), all Delaware business trusts, were created.
Each of the Trusts' business and affairs are conducted through its
trustees: Bankers Trust (Delaware) and James L. Gleaves (not in his
individual capacity, but solely as Trustee).
(4) On July 10, 1997, the following insurance subsidiaries o AGC became the
direct owners of the indicated percentages of membership units of SBIL B,
L.L.C. ("SBIL B"), a U.S. limited liability company: VALIC (22.6%), FL
(8.1%), AGLA (4.8%) and AGL (4.8%). Through their aggregate 40.3% interest
in SBIL B, VALIC, FL, AGLA and AGL indirectly own approximately 28% of the
securities of SBI, an English company, and 14% of the securities of ESBL,
an English company, SBP, an English company, and SBFL, a Cayman Islands
company. These interests are held for investment purposes only.
(5) Effective December 5, 1997, AGC and Grupo Nacional Provincial, S.A. ("GNP")
completed the purchase by AGC of a 40% interest in Grupo Nacional
Provincial Pensions S.A. de C.V., a new holding company formed by GNP, one
of Mexico's largest financial services companies.
(6) AGLA owns approximately 12% of Whirlpool Financial Corp ("Whirlpool")
preferred stock. AGLA's holdings in Whirlpool represents approximately 3%
of the voting power of the capital
C-9
<PAGE> 663
stock of Whirlpool. The interests in Whirlpool (which is a corporation that
is not associated with AGC) are held for investment purposes only.
(7) AGL owns 100% of the common stock of American General Securities
Incorporated ("AGSI"), a full-service NASD broker-dealer. AGSI, in turn,
owns 100% of the stock of the following insurance agencies:
American General Insurance Agency, Inc. (Missouri)
American General Insurance Agency of Hawaii, Inc. (Hawaii)
American General Insurance Agency of Massachusetts, Inc. (Massachusetts)
In addition, the following agencies are indirectly related to AGSI, but not
owned or controlled by AGSI: American General Insurance Agency of Ohio,
Inc. (Ohio) American General Insurance Agency of Texas, Inc. (Texas)
American General Insurance Agency of Oklahoma, Inc. (Oklahoma) Insurance
Masters Agency, Inc. (Texas)
The foregoing indirectly related agencies are not affiliates or
subsidiaries of AGL under applicable holding company laws, but they are
part of the AGC group of companies under other laws.
(8) American General Finance Corporation is the parent of an additional 42
wholly-owned subsidiaries incorporated in 25 states for the purpose of
conducting its consumer finance operations, in addition to those noted in
footnote 9 below.
(9) American General Financial Services, Inc., is the direct or indirect parent
of an additional 8 wholly-owned subsidiaries incorporated in 5 states and
Puerto Rico for the purpose of conducting its consumer finance operations.
(10) American General Investment Management, L.P., a Delaware limited
partnership, is jointly owned by AGIHC and AGIMC. AGIHC holds a 99% limited
partnership interest, and AGIMC owns a 1% general partnership interest.
(11) AG Land Associates, LLC is jointly owned by AGLH and AGLL. AGLH holds a
98.75% managing interest and AGLL owns a 1.25% managing interest.
(12) AGRI owns a 75% interest in GDI Holding, Inc.
(13) AGCL owns 50% of the common stock of TAG Life. Templeton International,
Inc., a Delaware corporation, owns the remaining 50% of TAG Life. Templeton
International, Inc. is not affiliated with AGC.
(14) VALIC holds 90% of the outstanding common shares of PESC Plus, Inc. The
Florida Education Association/United, a Florida teachers union and
unaffiliated third party, holds the remaining 10% of the outstanding common
shares.
(15) VALIC holds 90% of the outstanding common shares of American General
Gateway Services, L.L.C. Gateway Investment Services, Inc., a California
corporation and an unaffiliated third party, holds the remaining 10% of the
outstanding common shares.
(16) AGPIC is jointly owned by AGCL and AGLA. AGCL owns 51.85% and AGLA owns
48.15% of the issued and outstanding shares of AGPIC.
(17) Parkway 1999 Trust was formed as a Maryland business trust to function as
an investment subsidiary. VALIC owns 100% of its common equity.
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<PAGE> 664
COMPANY ABBREVIATIONS AS USED IN ITEM 26:
<TABLE>
<CAPTION>
State/Jur.
Abb. Company of Domicile
---- ------- -----------
<S> <C> <C>
AAL All American Life Insurance Company..................................... IL
AAth American Athletic Club, Inc. ........................................... TX
AFLI The American Franklin Life Insurance Company ........................... IL
AGAIC American General Annuity Insurance Company ............................. TX
ASGN-NY American General Assignment Corporation of New York .................... NY
AGAC American General Assurance Company...................................... IL
AGAS American General Annuity Service Corporation ........................... TX
AGBS American General Distributors, Inc. .................................... DE
AGB American General Bank, FSB ............................................. UT
AGC American General Corporation ........................................... TX
AGCL AGC Life Insurance Company ............................................. MO
AGDMC American General Delaware Management Corporation ....................... DE
AGES American General Enterprise Services, Inc. ............................. DE
AGF American General Finance, Inc. ......................................... IN
AGFC American General Finance Corporation ................................... IN
AGFCI American General Financial Center, Incorporated ........................ IN
AGFCT American General Financial Center Thrift Company ....................... CA
AGFG American General Finance Group, Inc. ................................... DE
AGF Inv AGF Investment Corp. ................................................... IN
AGFn A.G. Financial Service Center, Inc. .................................... UT
AGFnC American General Financial Center, Inc. ................................ IN
AGFS American General Financial Services, Inc. .............................. DE
AGFA American General Financial Advisors, Inc................................ TX
AGFIG American General Financial Institutions Group, Inc. ................... DE
AGGS American General Gateway Services, L.L.C................................ DE
AGIA American General Insurance Agency, Inc. ................................ MO
AGIAH American General Insurance Agency of Hawaii, Inc. ...................... HI
AGIAM American General Insurance Agency of Massachusetts, Inc. ............... MA
AGIAO American General Insurance Agency of Ohio, Inc. OH
AGIAOK American General Insurance Agency of Oklahoma, Inc. .................... OK
AGIAS A.G. Investment Advisory Services, Inc.................................. DE
AGIAT American General Insurance Agency of Texas, Inc TX
AGII American General International, Inc. DE
AGIHC American General Investment Holding Corporation DE
AGIM American General Investment Management, L.P. DE
AGIMC American General Investment Management Corporation DE
AGIND American General Indemnity Company...................................... NE
</TABLE>
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<PAGE> 665
<TABLE>
<CAPTION>
State/Jur.
Abb. Company of Domicile
---- ------- -----------
<S> <C> <C>
AGL American General Life Insurance Company ................................ TX
AGLC American General Life Companies......................................... DE
AGLA American General Life and Accident Insurance Company.................... TN
AGLH American General Land Holding Company .................................. DE
AGLL AGLL Corporation........................................................ DE
AGNY American General Life Insurance Company of New York .................... NY
AGPA American General Life Insurance Company of Pennsylvania................. PA
AGPIC American General Property Insurance Company ............................ TN
AGRA American General Realty Advisors, Inc. ................................. DE
AGRI American General Realty Investment Corporation ......................... TX
AGSI American General Securities Incorporated ............................... TX
AGX American General Exchange, Inc. ........................................ TN
ASGN American General Assignment Corporation................................. TX
FFSC Franklin Financial Services Corporation ................................ DE
FL The Franklin Life Insurance Company .................................... IL
GHC Green Hills Corporation ................................................ DE
HBDC HBC Development Corporation............................................. VA
KC Knickerbocker Corporation .............................................. TX
ML Merit Life Insurance Co. ............................................... IN
NLA The National Life and Accident Insurance Company ....................... TX
NCA North Central Administrators, Inc. ..................................... MN
NCL North Central Life Insurance Company.................................... MN
NCCL North Central Caribbean Life, Ltd....................................... T&C
OLL The Old Line Life Insurance Company of America.......................... WI
PKWY Parkway 1999 Trust...................................................... MD
PAV Pavilions Corporation................................................... DE
PCSC Pebble Creek Service Corporation ....................................... FL
PIFLA American General Property Insurance Company of Florida.................. FL
PPI PESCO Plus, Inc......................................................... DE
RMST HSA Residential Mortgage Services of Texas, Inc......................... DE
SRHP SR/HP/CM Corporation ................................................... TX
TAG Life Templeton American General Life of Bermuda, Ltd. ....................... BA
TI Thrift, Incorporated ................................................... IN
UAS American General Bancassurance Services, Inc............................ IL
UC USLIFE Corporation...................................................... DE
UCLA USLIFE Credit Life Insurance Company of Arizona ........................ AZ
URC USLIFE Realty Corporation............................................... TX
USC USLIFE Systems Corporation.............................................. DE
USL The United States Life Insurance Company in the City of New York........ NY
USMRP USMRP, Ltd.............................................................. T&C
VALIC The Variable Annuity Life Insurance Company ............................ TX
VAMCO The Variable Annuity Marketing Company ................................. TX
VRSCO VALIC Retirement Services Company....................................... TX
</TABLE>
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<PAGE> 666
<TABLE>
<CAPTION>
State/Jur.
Abb. Company of Domicile
---- ------- -----------
<S> <C> <C>
VTC VALIC Trust Company..................................................... TX
WA The Winchester Agency Ltd. ............................................. NY
WIS WNL Insurance Services, Inc............................................. DE
WNC Western National Corporation ........................................... DE
WNLH WNL Holding Corp........................................................ DE
YIC Yosemite Insurance Company ............................................. IN
</TABLE>
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ITEM 27. NUMBER OF CONTRACT OWNERS
<TABLE>
<CAPTION>
As of April 14, 2000
QUALIFIED CONTRACTS NON-QUALIFIED CONTRACTS
----------------------- -----------------------
GROUP INDIVIDUAL GROUP INDIVIDUAL
------- ---------- ----- ----------
<S> <C> <C> <C> <C>
Portfolio Director: 617,879 266,256 515 23,081
Portfolio Director 2: 873,435 345,446 -0- -0-
Portfolio Director Plus: 133,224 474 -0- 98
</TABLE>
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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<PAGE> 668
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) American General Distributors, Inc. 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-15
<PAGE> 669
(b) The following information is furnished with respect to each officer and
director of American General Distributors, Inc.:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER
---------------- ---------------------
<S> <C>
(*)
Robert P. Condon Chairman, Director, Chief Executive Officer
and President
(*)
Mary Cavanaugh Director and Secretary
(*)
Thomas G. Norwood Director, Chief Financial Officer and Treasurer
(*)
Jane E. Bates Vice President and Chief Compliance Officer
(*)
V. Keith Roberts Vice President- Operations
(*)
D. Lynne Walters Tax Officer
(*)
Cheryl G. Hemley Assistant Secretary
(*)
Daniel R. Cricks Assistant Tax Officer
(*)
James D. Bonsall Assistant Treasurer
(*)
Steven D. Rubinstein Assistant Treasurer
(*)
Marylyn S. Zlotnick Assistant Treasurer
</TABLE>
C-16
<PAGE> 670
- ---------------
(*) 2929 Allen Parkway, Houston, Texas 77019
(c) American General Distributors, Inc. 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-17
<PAGE> 671
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.
c. Additional Commitments
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-18
<PAGE> 672
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-19
<PAGE> 673
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant, The Variable Annuity Life Insurance Company
Separate Account A, certifies that it meets the requirements of Securities Act
Rule 485(b) for effectiveness of this Registration Statement, 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 this 24th day of April, 2000.
THE VARIABLE ANNUITY
LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
THE VARIABLE ANNUITY
LIFE INSURANCE COMPANY
Attest: /s/ Mary L. Cavanaugh By: /s/ John A. Graf
---------------------------- --------------------------
Mary L. Cavanaugh John A. Graf
Senior Vice President, General Counsel Chairman, Chief Executive
and Secretary Officer and President
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Depositor, The Variable Annuity Life Insurance Company,
certifies that it meets the requirements of Securities Act Rule 485(b) for
effectiveness of this Registration Statement, and has duly caused this amendment
to be signed on its behalf by the undersigned thereunto duly authorized, and its
seal to be hereunto affixed and attested, all in the City of Houston, State of
Texas, on this 24th day of April, 2000.
THE VARIABLE ANNUITY
LIFE INSURANCE COMPANY
Attest: /s/ Mary L. Cavanaugh By: /s/ John A. Graf
------------------------------------ --------------------------
Mary L. Cavanaugh John A. Graf
Senior Vice President, General Counsel Chairman, Chief Executive
and Secretary Officer and President
<PAGE> 674
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/ John A. Graf Chairman, Chief Executive April 24, 2000
- -------------------------------- Officer and President
John A. Graf
/s/ Kent E. Barrett Director, Executive Vice President, April 24, 2000
- -------------------------------- Chief Financial Officer and
Kent E. Barrett Principal Accounting Officer
* Director and Executive Vice President - April 24, 2000
- -------------------------------- Sales
Bruce R. Abrams
* Director and Executive Vice President - April 24, 2000
- -------------------------------- Operations
Carl J. Santillo
Director
- --------------------------------
Robert M. Devlin
* Director and Executive Vice President - April 24, 2000
- -------------------------------- Institutional Marketing
Robert P. Condon
* Director and Senior Vice President - April 24, 2000
- -------------------------------- Human Resources
Rebecca G. Campbell
</TABLE>
*By: /s/ Mary L. Cavanaugh
----------------------
Mary L. Cavanaugh
Attorney-in-Fact
<PAGE> 675
INDEX TO EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO. 17
TO
FORM N-4
FOR
SEPARATE ACCOUNT A
OF
THE VARIABLE ANNUITY
LIFE INSURANCE COMPANY
<TABLE>
<CAPTION>
EXHIBIT NO.
-----------
<C> <S>
3(b). -- Underwriting Agreement between The Variable Annuity Life
Insurance Company, The Variable Annuity Life Insurance
Company Separate Account A and A.G. Distributors, Inc.
8(a)(2). -- Form of Redacted Participation Agreement between Franklin
Templeton Variable Insurance Products Trust, Franklin
Templeton Distributors, Inc. and The Variable Annuity Life
Insurance Company dated May 1, 2000.
8(a)(4). -- Form of Redacted Administrative Services Agreement between
The Variable Annuity Life Insurance Company and Franklin
Templeton Services, Inc.
8(b)(3). -- Amendment No. 1 dated November 1, 1999 to Agreement
between The Dreyfus Corporation and The Variable
Annuity Life Insurance Company dated July 1, 1997.
8(e)(3). -- Amendment No. 2 dated January 1, 2000 to Fund
Participation Agreement between The Variable Annuity
Life Insurance Company, American Life Insurance
Company, American Century Mutual Funds, Inc. and
American Century Investment Management, Inc. dated
April 30, 1996, as amended December 8, 1997.
8(f)(2). -- Amended and Restated Participation Agreement dated
July 1, 1999 between Founders Funds, Inc., Premier
Mutual Fund Services, Inc., Founders Asset
Management, LLC and The Variable Annuity Life
Insurance Company.
10. -- Consent of Independent Auditors.
16(e). -- Copy of manually signed powers of attorney for The
Variable Annuity Life Insurance Company Directors Bruce R.
Abrams, Kent E. Barrett, Rebecca G. Campbell, Robert P.
Condon, John A. Graf and Carl J. Santillo.
</TABLE>
<PAGE> 1
Exhibit 3(b)
UNDERWRITING AGREEMENT
This AGREEMENT is made this 1st day of May, 1999 by and between THE
VARIABLE ANNUITY LIFE INSURANCE COMPANY ("VALIC"), THE VARIABLE ANNUITY LIFE
INSURANCE COMPANY SEPARATE ACCOUNT A (the "ACCOUNT") and A.G. DISTRIBUTORS, INC.
("A.G. DISTRIBUTORS").
VALIC, the ACCOUNT and A.G. DISTRIBUTORS RECOGNIZE THE FOLLOWING:
a. VALIC is a life insurance company organized under Chapter 3
of the Texas Insurance Code.
b. The ACCOUNT is a separate account established by VALIC
under Section 7 of Article 3.72 of the Texas Insurance Code to fund certain
individual variable annuity contracts issued by VALIC and the ACCOUNT. The
variable annuity contracts give rise to security interests in the ACCOUNT. Under
the Texas Insurance Code, the ACCOUNT's assets will not be chargeable with
liabilities arising out of any other business which VALIC may conduct, but will
be held and applied exclusively for the benefit of the owners, participants and
beneficiaries of the variable annuity contracts. The Account is a registered
unit investment trust under the Investment Company Act of 1940.
c. A.G. DISTRIBUTORS is organized under the laws of Delaware.
It was established for the purpose of marketing certain variable annuity
contracts issued by VALIC, the ACCOUNT and certain affiliates of VALIC. A.G.
DISTRIBUTORS is a registered broker-dealer under the Securities Exchange Act of
1934 and is a member of the National Association of Securities Dealers ("NASD").
It has facilities for marketing variable annuity contracts.
VALIC, the ACCOUNT and A.G. DISTRIBUTORS, THEREFORE, AGREE AS FOLLOWS:
1. Principal Underwriting
A.G. DISTRIBUTORS shall act as the principal underwriter for
the offer, sale and distribution, throughout the world, of the variable annuity
contracts of which VALIC and the ACCOUNT are the issuers ("Contracts") in each
state and other jurisdiction in which the Contracts may be lawfully sold.
A.G. DISTRIBUTORS shall report periodically to VALIC Board of
Directors regarding the performance of services under this Agreement.
2. Sale of Contracts
A.G. DISTRIBUTORS shall use its best efforts to obtain
applications for the purchase of the Contracts under such terms as may be
provided in the Contracts and the then
1
<PAGE> 2
current prospectus relating to the Contracts. A.G. DISTRIBUTORS, however, shall
not solicit applications at any time when it has received notice from VALIC or
the ACCOUNT that issuance of the Contracts have, for any reason, been
temporarily or permanently suspended or discontinued.
A.G. DISTRIBUTORS shall offer and sell the Contracts through
insurance agents of VALIC who are duly and appropriately licensed for the sale
of the Contracts in each state or other jurisdiction. It shall transmit
completed applications for the Contracts to VALIC for acceptance and rejection
in accordance with VALIC's underwriting rules. It shall cause initial purchase
payments under the Contracts to be made by check payable to VALIC and to be
transmitted promptly to VALIC.
3. Allocation of Sale Proceeds
VALIC shall pay into the ACCOUNT proceeds from the sale of the
Contracts, less any deductions determined in accordance with the Contracts with
the then current prospectus relating to the Contracts. VALIC shall receive the
amounts deducted in accordance with the Contracts and then current prospectus.
4. Underwriter's Compensation
VALIC shall pay such amounts to A.G. DISTRIBUTORS as shall be
required (a) to reimburse A.G. DISTRIBUTORS for all reasonable expenses incurred
in connection with the sale of the Contracts, including a reasonably allocable
portion of A.G. DISTRIBUTORS' overhead expenses and (b) to enable A.G.
DISTRIBUTORS to meet the net capital requirements for broker-dealers under the
Securities Exchange Act of 1934 on a continuing basis.
5. Books and Records
VALIC, the ACCOUNT, and A.G. DISTRIBUTORS shall maintain their
books, accounts and records as to all transactions hereunder so as to clearly
and accurately disclose the nature and details of the transaction and support
the reasonableness of the amounts to be paid by VALIC to A.G. DISTRIBUTORS.
6. Scope of Underwriter's Duties
A.G. DISTRIBUTORS, and any affiliated person of A.G.
DISTRIBUTORS, shall be free to act as principal underwriter for other separate
accounts or for any other person, or to engage in any other business, so long as
the services rendered to the ACCOUNT are not impaired.
A.G. DISTRIBUTORS shall not be liable to the ACCOUNT, or to
any contract owner in the ACCOUNT, for any act or omission in rendering services
under this Agreement, so long as there has been no willful misfeasance, bad
faith, gross negligence, or reckless disregard of obligations or duties on the
part of A.G. DISTRIBUTORS.
2
<PAGE> 3
Except as otherwise required by the Investment Company Act of
1940, any of the contract owners of the ACCOUNT may be a shareholder, director,
officer or employee of, or be otherwise interested in, A.G. DISTRIBUTORS and any
affiliated person of A.G. DISTRIBUTORS. Similarly, A.G. DISTRIBUTORS and any
affiliated person of A.G. DISTRIBUTORS may have a security interest in the
ACCOUNT.
7. Continuance and Termination
This Agreement shall become effective upon execution. It shall
continue in force from year to year thereafter. This Agreement shall terminate
automatically upon assignment. This Agreement may be terminated at any time by
VALIC's Board of Directors or by a vote of a majority of the ACCOUNT'S
outstanding variable annuity contract votes, on not more than 60 days, nor less
than 30 days, written notice, or upon such shorter notice as may be mutually
agreed upon. This Agreement may be terminated by VALIC or A.G. DISTRIBUTORS,
upon such notice, so long as the ACCOUNT has entered into another underwriting
agreement. Termination shall be without the payment of any penalty.
8. Applicability of Federal Securities Laws
The parties hereto shall comply with, and this Agreement shall
be interpreted in accordance with, applicable federal securities laws, including
such exceptions as may be granted to VALIC, the ACCOUNT, or A.G. DISTRIBUTORS by
the Securities and Exchange Commission or such interpretive positions as may be
taken by the Commission or its staff.
3
<PAGE> 4
VALIC, the ACCOUNT, and A.G. DISTRIBUTORS have each caused this
Agreement to be signed on its behalf by a duly authorized officer on the date
specified above.
THE VARIABLE ANNUITY LIFE
INSURANCE COMPANY
Attest /s/ CYNTHIA TOLES By /s/ JOHN E. ARANT
---------------------------- --------------------------------------
John E. Arant
THE VARIABLE ANNUITY LIFE
INSURANCE COMPANY SEPARATE
ACCOUNT A
Attest /s/ CYNTHIA TOLES By /s/ JOHN E. ARANT
---------------------------- --------------------------------------
John E. Arant
A.G. DISTRIBUTORS, INC.
Attest /s/ CYNTHIA TOLES By /s/ BRUCE R. ABRAMS
---------------------------- --------------------------------------
Bruce R. Abrams
4
<PAGE> 1
EXHIBIT 8(a)(2)
PARTICIPATION AGREEMENT
as of May 1, 2000
Franklin Templeton Variable Insurance Products Trust
Franklin Templeton Distributors, Inc.
The Variable Annuity Life Insurance Company
CONTENTS
<TABLE>
<CAPTION>
Paragraph Subject Matter
--------- --------------
<S> <C>
1. Parties and Purpose
2. Representations and Warranties
3. Purchase and Redemption of Trust Portfolio Shares
4. Fees, Expenses, Prospectuses, Proxy Materials and Reports
5. Voting
6. Sales Material, Information and Trademarks
7. Indemnification
8. Notices
9. Termination
10. Miscellaneous
SCHEDULES TO THIS AGREEMENT
A. The Company
B. Accounts of the Company
C. Available Portfolios and Classes of Shares of the Trust; Investment Advisers
D. Contracts of the Company
E. Other Portfolios Available under the Contracts
F. [REDACTED]
G. Addresses for Notices
H. Shared Funding Order
</TABLE>
1. PARTIES AND PURPOSE
This agreement (the "Agreement") is between Franklin Templeton Variable
Insurance Products Trust, an open-end management investment company organized as
a business trust under Massachusetts law (the "Trust"), Franklin Templeton
Distributors, Inc., a California corporation which is the principal underwriter
for the Trust (the "Underwriter," and together with the Trust, "we" or "us") and
the insurance company identified on Schedule a ("you"), on your own behalf and
on behalf of each segregated asset account maintained by you that is listed on
Schedule B, as that schedule may be amended from time to time ("Account" or
"Accounts").
<PAGE> 2
[REDACTED]
2. REPRESENTATIONS AND WARRANTIES
(a) REPRESENTATIONS AND WARRANTIES BY YOU
You represent and warrant that:
1. You are an insurance company duly organized and in good
standing under the laws of your state of incorporation.
2. All of your directors, officers, employees, and other
individuals or entities dealing with the money and/or securities of the Trust
are and shall be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Trust, in an amount not less than $5 million.
Such bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company. You agree to make all reasonable efforts
to see that this bond or another bond containing such provisions is always in
effect, and you agree to notify us in the event that such coverage no longer
applies.
3. Each Account is a duly organized, validly existing
segregated asset account under applicable insurance law and interests in each
Account are offered exclusively through the purchase of or transfer into a
"variable contract" within the meaning of such terms under Section 817 of the
Internal Revenue Code of 1986, as amended ("Code") and the regulations
thereunder. You will use your best efforts to continue to meet such definitional
requirements, and will notify us immediately upon having a reasonable basis for
believing that such requirements have ceased to be met or that they might not be
met in the future.
4. Each Account either: (i) has been registered or, prior to
any issuance or sale of the Contracts, will be registered as a unit investment
trust under the Investment Company Act of 1940 ("1940 Act"); or (ii) has not
been so registered in proper reliance upon an exemption from registration under
Section 3(c) of the 1940 Act; if the Account is exempt from registration as an
investment company under Section 3(c) of the 1940 Act, you will make every
effort to maintain such exemption and will notify us immediately upon having a
reasonable basis for believing that such exemption no longer applies or might
not apply in the future.
5. The Contracts or interests in the Accounts: (i) are or,
prior to any issuance or sale will be, registered as securities under the
Securities Act of 1933, as amended (the "1933 Act"); or (ii) are not registered
because they are properly exempt from registration under Section 3(a)(2) of the
1933 Act or will be offered exclusively in transactions that are properly exempt
from registration under Section 4(2) or Regulation D of the 1933 Act, in which
case you will make every effort to maintain such exemption and will notify us
immediately upon having a reasonable basis for believing that such exemption no
longer applies or might not apply in the future.
2
<PAGE> 3
6. The Contracts: (i) will be sold by broker-dealers, or their
registered representatives, who are registered with the Securities and Exchange
Commission ("SEC") under the Securities and Exchange Act of 1934, as amended
(the "1934 Act") and who are members in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"); (ii) will be issued and
sold in compliance in all material respects with all applicable federal and
state laws; and (iii) will be sold in compliance in all material respects with
state insurance suitability requirements and NASD suitability guidelines.
7. { }
8. The fees and charges deducted under each Contract, in the
aggregate, are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by you.
9. You will use shares of the Trust only for the purpose of
funding benefits of the Contracts through the Accounts.
10. Contracts will not be sold outside of the United States.
11. With respect to any Accounts which are exempt from
registration under the 1940 Act in reliance on 3(c)(1) or Section 3(c)(7)
thereof:
a. the principal underwriter for each such
Account and any subaccounts thereof is a
registered broker-dealer with the SEC under
the 1934 Act;
b. the shares of the Portfolios of the Trust
are and will continue to be the only
investment securities held by the
corresponding subaccounts; and
c. with regard to each Portfolio, you, on
behalf of the corresponding subaccount;
will:
(i) vote such shares held by it in the
same proportion as the vote of all
other holders of such shares; and
(ii) refrain from substituting
shares of another security for such
shares unless the SEC has approved
such substitution in the manner
provided in Section 26 of the 1940
Act.
(b) REPRESENTATIONS AND WARRANTIES BY THE TRUST
The Trust represents and warrants that:
1. It is duly organized and in good standing under the laws of
the State of Massachusetts.
3
<PAGE> 4
2. All of its directors, officers, employees and others
dealing with the money and/or securities of a Portfolio are and shall be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
the Trust in an amount not less that the minimum coverage required by Rule 17g-1
or other regulations under the 1940 Act. Such bond shall include coverage for
larceny and embezzlement and be issued by a reputable bonding company.
3. It is registered as an open-end management investment
company under the 1940 Act.
4. Each class of shares of the Portfolios of the Trust is
registered under the 1933 Act.
5. It will amend its registration statement under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares.
6. It will comply, in all material respects, with the 1933 and
1940 Acts and the rules and regulations thereunder.
7. It is currently qualified as a "regulated investment
company" under Subchapter M of the Code, it will make every effort to maintain
such qualification, and will notify you 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.
8. The investments of each Portfolio will comply with the
diversification requirements for variable annuity, endowment or life insurance
contracts set forth in Section 817(h) of the Code, and the rules and regulations
thereunder, including without limitation Treasury Regulation 1.817-5. Upon
having a reasonable basis for believing any Portfolio has ceased to comply and
will not be able to comply within the grace period afforded by Regulation
1.817-5, the Trust will notify you immediately and will take all reasonable
steps to adequately diversify the Portfolio to achieve compliance.
9. [ ]
(c) REPRESENTATIONS AND WARRANTIES BY THE UNDERWRITER
The Underwriter represents and warrants that:
1. It is registered as a broker dealer with the SEC under the
1934 Act, and is a member in good standing of the NASD.
2. Each investment adviser listed on Schedule C (each, an
"Adviser") is duly registered as an investment adviser under the Investment
Advisers Act of 1940, as amended, and any applicable state securities law.
(d) WARRANTY AND AGREEMENT BY BOTH YOU AND US
4
<PAGE> 5
We received an order from the SEC dated November 16, 1993 (file no.
812-8546), which was amended by a notice and an order we received on September
17, 1999 and October 13, 1999, respectively (file no. 812-11698) (collectively,
the "Shared Funding Order," attached to this Agreement as Schedule H). The
Shared Funding Order grants exemptions from certain provisions of the 1940 Act
and the regulations thereunder to the extent necessary to permit shares of the
Trust to be sold to and held by variable annuity and variable life insurance
separate accounts of both affiliated and unaffiliated life insurance companies
and qualified pension and retirement plans outside the separate account context.
You and we both warrant and agree that both you and we will comply with the
"Applicants' Conditions" prescribed in the Shared Funding Order as though such
conditions were set forth verbatim in this Agreement, including, without
limitation, the provisions regarding potential conflicts of interest between the
separate accounts which invest in the Trust and regarding contract owner voting
privileges.
3. PURCHASE AND REDEMPTION OF TRUST PORTFOLIO SHARES
(a) We will make shares of the Portfolios available to the Accounts for
the benefit of the Contracts. The shares will be available for purchase at the
net asset value per share next computed after we (or our agent) receive a
purchase order, as established in accordance with the provisions of the then
current prospectus of the Trust. Notwithstanding the foregoing, the Trust's
Board of Trustees ("Trustees") may refuse to sell shares of any Portfolio to any
person, or may suspend or terminate the offering of shares of any Portfolio if
such action is required by law or by regulatory authorities having jurisdiction
or if, in the sole discretion of the Trustees, they deem such action to be in
the best interests of the shareholders of such Portfolio. Without limiting the
foregoing, the Trustees have determined that there is a significant risk that
the Trust and its shareholders may be adversely affected by investors whose
purchase and redemption activity follows a market timing pattern, and have
authorized the Trust, the Underwriter and the Trust's transfer agent to adopt
procedures and take other action (including, without limitation, rejecting
specific purchase orders) as they deem necessary to reduce, discourage or
eliminate market timing activity. You agree to cooperate with us to assist us in
implementing the Trust's restrictions on purchase and redemption activity that
follows a market timing pattern.
(b) We agree that shares of the Trust will be sold only to life
insurance companies which have entered into fund participation agreements with
the Trust ("Participating Insurance Companies") and their separate accounts or
to qualified pension and retirement plans in accordance with the terms of the
Shared Funding Order. No shares of any Portfolio will be sold to the general
public.
(c) { }
(d) { }
(e) { }
(f) { }
5
<PAGE> 6
(g) We will redeem any full or fractional shares of any Portfolio, when
requested by you on behalf of an Account, at the net asset value next computed
after receipt by us (or our agent) of the request for redemption, as established
in accordance with the provisions of the then current prospectus of the Trust.
We shall make payment for such shares in the manner we establish from time to
time, but in no event shall payment be delayed for a greater period than is
permitted by the 1940 Act. Payments for the purchase or redemption of shares by
you may be netted against one another on any Business Day for the purpose of
determining the amount of any wire transfer on that Business Day.
(h) Issuance and transfer of the Portfolio shares will be by book entry
only. Stock certificates will not be issued to you or the Accounts. Portfolio
shares purchased from the Trust will be recorded in the appropriate title for
each Account or the appropriate subaccount of each Account.
(i) We shall furnish, on or before the ex-dividend date, notice to you
of any income dividends or capital gain distributions payable on the shares of
any Portfolio. You hereby elect to receive all such income dividends and capital
gain distributions as are payable on shares of a Portfolio in additional shares
of that Portfolio, and you reserve the right to change this election in the
future. We will notify you of the number of shares so issued as payment of such
dividends and distributions.
4. FEES, EXPENSES, PROSPECTUSES, PROXY MATERIALS AND REPORTS
(a) { }
(b) We shall prepare and be responsible for filing with the SEC, and
any state regulators requiring such filing, all shareholder reports, notices,
proxy materials (or similar materials such as voting instruction solicitation
materials), prospectuses and statements of additional information of the Trust.
We shall bear the costs of preparation and filing of the documents listed in the
preceding sentence, registration and qualification of the Trust's shares of the
Portfolios.
(c) We shall use reasonable efforts to provide you, on a timely basis,
with such information about the Trust, the Portfolios and each Adviser, in such
form as you may reasonably require, as you shall reasonably request in
connection with the preparation of disclosure documents and annual and
semi-annual reports pertaining to the Contracts.
(d) { }
(e) { }
(f) You assume sole responsibility for ensuring that the Trust's
prospectuses, shareholder reports and communications, and proxy materials are
delivered to Contract owners in accordance with applicable federal and state
securities laws.
5. VOTING
6
<PAGE> 7
(a) All Participating Insurance Companies shall have the obligations
and responsibilities regarding pass-through voting and conflicts of interest
corresponding to those contained in the Shared Funding Order.
(b) If and to the extent required by law, you shall: (i) solicit voting
instructions from Contract owners; (ii) vote the Trust shares in accordance with
the instructions received from Contract owners; and (iii) vote Trust shares for
which no instructions have been received in the same proportion as Trust shares
of such Portfolio for which instructions have been received; so long as and to
the extent that the SEC continues to interpret the 1940 Act to require
pass-through voting privileges for variable contract owners. You reserve the
right to vote Trust shares held in any Account in your own right, to the extent
permitted by law.
(c) So long as, and to the extent that, the SEC interprets the 1940 Act
to require pass-through voting privileges for Contract owners, you shall provide
pass-through voting privileges to Contract owners whose Contract values are
invested, through the Accounts, in shares of one or more Portfolios of the
Trust. We shall require all Participating Insurance Companies to calculate
voting privileges in the same manner and you shall be responsible for assuring
that the Accounts calculate voting privileges in the manner established by us.
With respect to each Account, you will vote shares of each Portfolio of the
Trust held by an Account and for which no timely voting instructions from
Contract owners are received in the same proportion as those shares held by that
Account for which voting instructions are received. You and your agents will in
no way recommend or oppose or interfere with the solicitation of proxies for
Portfolio shares held to fund the Contracts without our prior written consent,
which consent may be withheld in our sole discretion.
6. SALES MATERIAL, INFORMATION AND TRADEMARKS
(a) { }
(b) { }
(c) You and your agents shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust,
the Underwriter or an Adviser, other than information or representations
contained in and accurately derived from the registration statement or
prospectus for the Trust shares (as such registration statement and prospectus
may be amended or supplemented from time to time), annual and semi-annual
reports of the Trust, Trust-sponsored proxy statements, or in Sales literature
or other Promotional material approved by the Trust or its designee, except as
required by legal process or regulatory authorities or with the written
permission of the Trust or its designee.
(d) We shall not give any information or make any representations or
statements on behalf of you or concerning you, the Accounts or the Contracts
other than information or representations contained in and accurately derived
from disclosure documents for the Contracts (as such disclosure documents may be
amended or supplemented from time to time), or in materials approved by you for
distribution, including Sales literature or other Promotional materials, except
as required by legal process or regulatory authorities or with
7
<PAGE> 8
your written permission. We may use the names of you, the Accounts and the
Contracts in our sales literature and disclosure documents.
(e) Except as provided in Section 6(b), you shall not use any
designation comprised in whole or part of the names or marks "Franklin" or
"Templeton" or any logo or other trademark relating to the Trust or the
Underwriter without prior written consent, and upon termination of this
Agreement for any reason, you shall cease all use of any such name or mark as
soon as reasonably practicable.
7. INDEMNIFICATION
(a) INDEMNIFICATION BY YOU
1. You agree to indemnify and hold harmless the Underwriter,
the Trust and each of its Trustees, officers, employees and agents and each
person, if any, who controls the Trust within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" and individually the
"Indemnified Party" for purposes of this Section 7) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with your
written consent, which consent shall not be unreasonably withheld) or expenses
(including the reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees incurred
in connection therewith) (collectively, "Losses"), to which the Indemnified
Parties may become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses are related to the sale or acquisition of
shares of the Trust or the Contracts and
a. arise out of or are based upon any untrue
statements or alleged untrue statements of any material fact contained
in a disclosure document for the Contracts or in the Contracts
themselves or in sales literature generated or approved by you on
behalf of the Contracts or Accounts (or any amendment or supplement to
any of the foregoing) (collectively, "Company Documents" for the
purposes of this Section 7), 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 indemnity 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 was accurately
derived from written information furnished to you by or on behalf of
the Trust for use in Company Documents or otherwise for use in
connection with the sale of the Contracts or Trust shares; or
b. arise out of or result from statements or
representations (other than statements or representations contained in
and accurately derived from Trust Documents as defined below in Section
7(b)) or wrongful conduct of you or persons under your control, with
respect to the sale or acquisition of the Contracts or Trust shares; or
c. arise out of or result from any untrue statement
or alleged untrue statement of a material fact contained in Trust
Documents as defined below in
8
<PAGE> 9
Section 7(b) 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 was
made in reliance upon and accurately derived from written information
furnished to the Trust by or on behalf of you; or
d. arise out of or result from any failure by you to
provide the services or furnish the materials required under the terms
of this Agreement;
e. arise out of or result from any material breach of
any representation and/or warranty made by you in this Agreement or
arise out of or result from any other material breach of this Agreement
by you; or
f. arise out of or result from a Contract failing to
be considered a life insurance policy or an annuity Contract, whichever
is appropriate, under applicable provisions of the Code thereby
depriving the Trust of its compliance with Section 817(h) of the Code.
2. You shall not be liable under this indemnification
provision with respect to any Losses to which an Indemnified Party would
otherwise be 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 the Trust or Underwriter,
whichever is applicable. You shall also not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified you 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 you of any such claim shall not relieve
you from any liability which it may have to the Indemnified Party against whom
such action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against the Indemnified Parties,
you shall be entitled to participate, at your own expense, in the defense of
such action. Unless the Indemnified Party releases you from any further
obligations under this Section 7(a), you also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from you to such party of the your election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and you 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.
3. The Indemnified Parties will promptly notify you of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Trust shares or the Contracts or the operation of
the Trust.
(b) INDEMNIFICATION BY THE UNDERWRITER
9
<PAGE> 10
1. The Underwriter agrees to indemnify and hold harmless you,
and each of your directors and officers and each person, if any, who controls
you within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" and individually an "Indemnified Party" for purposes of
this Section 7(b)) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Underwriter, which consent shall not be unreasonably withheld) or expenses
(including the reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees incurred
in connection therewith) (collectively, "Losses") to which the Indemnified
Parties may become subject under any statute, at common law or otherwise,
insofar as such Losses are related to the sale or acquisition of the shares of
the Trust or the Contracts and:
a. arise out of or are based upon any untrue
statements or alleged untrue statements of any material fact contained
in the Registration Statement, prospectus or sales literature of the
Trust (or any amendment or supplement to any of the foregoing)
(collectively, the "Trust Documents") 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 of
such alleged statement or omission was made in reliance upon and in
conformity with information furnished to us by or on behalf of you for
use in the Registration Statement or prospectus for the Trust or in
sales literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Trust shares; or
b. arise out of or as a result of statements or
representations (other than statements or representations contained in
the disclosure documents or sales literature for the Contracts not
supplied by the Underwriter or persons under its control) or wrongful
conduct of the Trust, Adviser or Underwriter or persons under their
control, with respect to the sale or distribution of the Contracts or
Trust shares; or
c. arise out of any untrue statement or alleged
untrue statement of a material fact contained in a disclosure document
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 statement or statements therein not misleading, if such
statement or omission was made in reliance upon information furnished
to you by or on behalf of the Trust; or
d. arise as a result of any failure by us to provide
the services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in good faith
or otherwise, to comply with the qualification representation specified
above in Section 2(b)(7) and the diversification requirements specified
above in Section 2(b)(8); or
e. arise out of or result from any material breach of
any representation and/or warranty made by the Underwriter in this
Agreement or arise out
10
<PAGE> 11
of or result from any other material breach of this Agreement by the
Underwriter; as limited by and in accordance with the provisions of
Sections 7(b)(2) and 7(b)(3) hereof.
2. The Underwriter shall not be liable under this
indemnification provision with respect to any Losses to which an Indemnified
Party would otherwise be 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 you or the
Accounts, whichever is applicable.
3. The Underwriter 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 the Underwriter 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 the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. Unless the Indemnified
Party releases the Underwriter from any further obligations under this Section
7(b), the Underwriter also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
Underwriter to such party of the Underwriter's election to assume the defense
thereof, the Indemnified Party shall bear the expenses of any additional counsel
retained by it, and the Underwriter 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.
4. You agree promptly to notify the Underwriter of the
commencement of any litigation or proceedings against you or the Indemnified
Parties in connection with the issuance or sale of the Contracts or the
operation of each Account.
11
<PAGE> 12
(c) INDEMNIFICATION BY THE TRUST
1. The Trust agrees to indemnify and hold harmless you, and
each of your directors and officers and each person, if any, who controls you
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 7(c)) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Trust, which consent shall not be unreasonably withheld) or
litigation (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements result from the gross negligence, bad faith or willful
misconduct of the Board or any member thereof, are related to the operations of
the Trust, and arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this Agreement or arise out
of or result from any other material breach of this Agreement by the Trust; as
limited by and in accordance with the provisions of Sections 7(c)(2) and 7(c)(3)
hereof. It is understood and expressly stipulated that neither the holders of
shares of the Trust nor any Trustee, officer, agent or employee of the Trust
shall be personally liable hereunder, nor shall any resort be had to other
private property for the satisfaction of any claim or obligation hereunder, but
the Trust only shall be liable.
2. The Trust shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against any Indemnified Party as such may arise from 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
you, the Trust, the Underwriter or each Account, whichever is applicable.
3. The Trust 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 the Trust in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claims 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 the Trust of any
such claim shall not relieve the Trust from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Trust will be entitled to participate, at
its own expense, in the defense thereof. Unless the Indemnified Party releases
the Trust from any further obligations under this Section 7(c), the Trust also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Trust to such party of the
Trust's election to assume the defense thereof, the Indemnified Party shall bear
the fees and expenses of any additional counsel retained by it, and the Trust
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.
12
<PAGE> 13
4. You agree promptly to notify the Trust of the commencement
of any litigation or proceedings against you or the Indemnified Parties in
connection with this Agreement, the issuance or sale of the Contracts, with
respect to the operation of the Account, or the sale or acquisition of shares of
the Trust.
8. NOTICES
Any notice shall be sufficiently given when sent by registered or certified mail
to the other party at the address of such party set forth in Schedule G below or
at such other address as such party may from time to time specify in writing to
the other party.
9. TERMINATION
(a) This Agreement may be terminated by any party in its entirety or
with respect to one, some or all Portfolios for any reason by sixty (60) days
advance written notice delivered to the other parties, and shall terminate
immediately in the event of its assignment, as that term is used in the 1940
Act.
(b) This Agreement may be terminated immediately by us upon written
notice to you if:
1. you notify the Trust or the Underwriter that the exemption
from registration under Section 3(c) of the 1940 Act no longer applies,
or might not apply in the future, to the unregistered Accounts, or that
the exemption from registration under Section 4(2) or Regulation D
promulgated under the 1933 Act no longer applies or might not apply in
the future, to interests under the unregistered Contracts; or
2. either one or both of the Trust or the Underwriter
respectively, shall determine, in their sole judgment exercised in good
faith, that you have suffered a material adverse change in your
business, operations, financial condition or prospects since the date
of this Agreement or are the subject of material adverse publicity; or
3. you give us the written notice specified above in Section
3(c) and at the same time you give us such notice there was no notice
of termination outstanding under any other provision of this Agreement;
provided, however, that any termination under this Section 9(b)(3)
shall be effective forty-five (45) days after the notice specified in
Section 3(c) was given; or
4. upon your assignment of this Agreement without our prior
written approval.
(c) If this Agreement is terminated for any reason, except as required
by the Shared Funding Order or pursuant to Section 9(b)(1), above, we shall, at
your option, continue to make available additional shares of any Portfolio and
redeem shares of any Portfolio pursuant to all of the terms and conditions of
this Agreement for all Contracts in effect on the effective
13
<PAGE> 14
date of termination of this Agreement. If this Agreement is terminated as
required by the Shared Funding Order, its provisions shall govern.
(d) The provisions of Sections 2 (Representations and Warranties) and 7
(Indemnification) shall survive the termination of this Agreement. All other
applicable provisions of this Agreement shall survive the termination of this
Agreement, as long as shares of the Trust are held on behalf of Contract owners
in accordance with Section 9(c), except that we shall have no further obligation
to sell Trust shares with respect to Contracts issued after termination.
(e) You shall not redeem Trust shares attributable to the Contracts (as
opposed to Trust shares attributable to your assets held in the Account) except:
(i) as necessary to implement Contract owner initiated or approved transactions;
(ii) as required by state and/or federal laws or regulations or judicial or
other legal precedent of general application (hereinafter referred to as a
"Legally Required Redemption"); or (iii) as permitted by an order of the SEC
pursuant to Section 26(b) of the 1940 Act. Upon request, you shall promptly
furnish to us the opinion of your counsel (which counsel shall be reasonably
satisfactory to us) to the effect that any redemption pursuant to clause (ii)
above is a Legally Required Redemption. Furthermore, except in cases where
permitted under the terms of the Contracts, you shall not prevent Contract
owners from allocating payments to a Portfolio that was otherwise available
under the Contracts without first giving us ninety (90) days notice of your
intention to do so.
10. MISCELLANEOUS
(a) The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions of this
Agreement or otherwise affect their construction or effect.
(b) This Agreement may be executed simultaneously in two or more
counterparts, all of which taken together shall constitute one and the same
instrument.
(c) If any provision 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.
(d) This Agreement shall be construed and its provisions interpreted
under and in accordance with the laws of the State of California. It shall also
be subject to the provisions of the federal securities laws and the rules and
regulations thereunder, to any orders of the SEC on behalf of the Trust granting
it exemptive relief, and to the conditions of such orders. We shall promptly
forward copies of any such orders to you.
(e) The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer,
14
<PAGE> 15
agent or holder of shares of beneficial interest of the Trust shall be
personally liable for any such liabilities.
(f) Each party to this Agreement shall cooperate with each other party
and all appropriate governmental authorities (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.
(g) Each party to this Agreement shall treat as confidential all
information reasonably identified as confidential in writing by any other party
to this Agreement, and, except as permitted by this Agreement or as required by
legal process or regulatory authorities, shall not disclose, disseminate, or use
such names and addresses and other confidential information until such time as
they may come into the public domain, without the express written consent of the
affected party. Without limiting the foregoing, no party to this Agreement shall
disclose any information that such party has been advised is proprietary, except
such information that such party is required to disclose by any appropriate
governmental authority (including, without limitation, the SEC, the NASD, and
state securities and insurance regulators).
(h) 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 to this Agreement are
entitled to under state and federal laws.
(i) The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect, except as provided above in
Section 3(c).
(j) Neither this Agreement nor any rights or obligations created by it
may be assigned by any party without the prior written approval of the other
parties.
(k) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.
15
<PAGE> 16
IN WITNESS WHEREOF, each of the parties have caused their duly
authorized officers to execute this Agreement.
The Company: The Variable Annuity Life Insurance Company
By:
------------------------------------------------
Name:
----------------------------------------------
Title:
---------------------------------------------
The Trust: Franklin Templeton Variable Insurance Products Trust
By:
------------------------------------------------
Name: Karen L. Skidmore
Title: Assistant Vice President, Assistant Secretary
The Underwriter: Franklin Templeton Distributors, Inc.
By:
------------------------------------------------
Name: [ ]
Title: [ ]
16
<PAGE> 17
SCHEDULE A
THE COMPANY
[name]
[address]
[state of incorporation]
[name]
[address]
[state of incorporation]
17
<PAGE> 18
SCHEDULE B
ACCOUNTS OF THE COMPANY
1. Name: [name]
Date Established: [date]
SEC Registration Number: 811-____
2. Name: [name]
Date Established: [date]
SEC Registration Number: 811-____
18
<PAGE> 19
SCHEDULE C
AVAILABLE PORTFOLIOS AND CLASSES OF SHARES OF THE TRUST; INVESTMENT ADVISERS
<TABLE>
<CAPTION>
Franklin Templeton Variable Insurance Products Trust Investment Adviser
- ---------------------------------------------------- ------------------
<S> <C>
</TABLE>
19
<PAGE> 20
SCHEDULE D
CONTRACTS OF THE COMPANY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
CONTRACT 1 CONTRACT 2 CONTRACT 3
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONTRACT/PRODUCT NAME
- ----------------------------------------------------------------------------------------------------------------------------
REGISTERED (Y/N)
- ----------------------------------------------------------------------------------------------------------------------------
SEC REGISTRATION NUMBER
- ----------------------------------------------------------------------------------------------------------------------------
REPRESENTATIVE FORM
NUMBERS
- ----------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT
NAME/DATE ESTABLISHED
- ----------------------------------------------------------------------------------------------------------------------------
SEC REGISTRATION NUMBER
- ----------------------------------------------------------------------------------------------------------------------------
PORTFOLIOS AND CLASSES
- -ADVISER
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 21
SCHEDULE D CONT.
CONTRACTS OF THE COMPANY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
CONTRACT 4 CONTRACT 5 CONTRACT 6
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONTRACT/PRODUCT NAME
- ----------------------------------------------------------------------------------------------------------------------------
REGISTERED (Y/N)
- ----------------------------------------------------------------------------------------------------------------------------
SEC REGISTRATION NUMBER
- ----------------------------------------------------------------------------------------------------------------------------
REPRESENTATIVE FORM
NUMBERS
- ----------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT
NAME/DATE ESTABLISHED
- ----------------------------------------------------------------------------------------------------------------------------
SEC REGISTRATION NUMBER
- ----------------------------------------------------------------------------------------------------------------------------
PORTFOLIOS AND CLASSES
- -ADVISER
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE> 22
SCHEDULE E
OTHER PORTFOLIOS AVAILABLE UNDER THE CONTRACTS
[names of other portfolios]
22
<PAGE> 23
SCHEDULE F
[REDACTED]
23
<PAGE> 24
SCHEDULE G
ADDRESSES FOR NOTICES
To the Company: [ ] Insurance Company
[address]
[address]
Attention: [name, title]
To the Trust: Franklin Templeton Variable Insurance Products Trust
777 Mariners Island Boulevard
San Mateo, California 94404
Attention: Karen L. Skidmore
[title]
To the Underwriter: Franklin Templeton Distributors, Inc.
777 Mariners Island Boulevard
San Mateo, California 94404
Attention: [name, title]
24
<PAGE> 25
SCHEDULE H
SHARED FUNDING ORDER
25
<PAGE> 1
EXHIBIT 8(a)(4)
Franklin Templeton Services, Inc.
777 Mariners Island Blvd.
San Mateo, CA 94404
Re: Administrative Services Agreement
Gentlemen:
This letter sets forth the agreement (the "Agreement") between The Variable
Annuity Life Insurance Company (the "Company") and Franklin Templeton Services,
Inc. (the "Fund Administrator") concerning certain administrative services with
respect to the series (each a "Fund") of Templeton Variable Products Series Fund
(the "Trust"), as specified in the Participation Agreement identified below, as
of May 1, 2000.
1. Administrative Services and Expenses. Administrative services for the
Company's Separate Accounts (the "Accounts") with respect to their ongoing
investments in the Funds pursuant to the Fund Participation Agreement, as
amended from time to time, among the Company, the Trust, and Franklin Templeton
Distributors, Inc. (the "Underwriter"), among others, dated May 1, 2000 (the
"Participation Agreement"), and administrative services for purchasers of
variable life and annuity contracts (the "Contracts") issued through the
Accounts, are and shall be the responsibility of the Company. Administrative
services for the Funds in which the Account invests, and for purchasers of
shares of the Funds, are and shall be the responsibility of the Fund
Administrator or its affiliates.
2. Administrative Expense Payments. The Fund Administrator recognizes the
Company, on behalf of the Accounts, as the shareholder of shares of the Funds
purchased under the Participation Agreement on behalf of the Accounts. The Fund
Administrator further recognizes that it will derive a substantial
administrative convenience by virtue of having the Company be the shareholder of
record of shares of the Funds purchased under the Participation Agreement,
rather than multiple shareholders having record ownership of such shares. The
Fund Administrator recognizes that the Company will provide administrative
services necessary to facilitate investment in the Funds.
3. Nature of Payments. The parties to this letter agreement recognize and agree
that the Fund Administrator's payments to the Company relates to administrative
services only and do not constitute payment in any manner for investment
advisory services or for costs of distribution of Contracts or of shares of the
Fund, and that these payments are not otherwise related to investment advisory
or distribution services or expenses. The amount of the payments made by the
Fund Administrator to the Company pursuant to Paragraph 2 of this letter
agreement will not be deemed to be conclusive with respect to actual
administrative expenses incurred by the Company or savings of the Fund
Administrator.
4. Term. This letter agreement will remain in full force and effect from the
date of this Agreement specified on page 1, for so long as any assets of the
Funds are attributable to amounts invested by the Account under the
Participation Agreement, unless terminated in accordance with Paragraph 5 of
this letter agreement. In accordance with the Participation Agreement, the
<PAGE> 2
fee described in Paragraph 2, above, will continue to be due and payable with
respect to the shares attributable to Contracts existing and in effect on the
date this letter agreement is terminated pursuant to Paragraph 5, below.
5. Termination. This letter agreement may be terminated upon either (1) thirty
(30) days' written notice from one party to the other; or (2) upon cessation of
investment by the Account in the Fund pursuant to the Participation Agreement.
6. Amendment. This letter agreement may be amended only upon mutual agreement of
the parties hereto in writing.
7. Counterparts. This letter agreement may be executed in counterparts, each of
which will be deemed an original but all of which will together constitute one
and the same instrument.
8. Entire Agreement. This letter agreement, together with the attached Schedules
or attachments, contains the entire agreement among the parties and supersedes
any prior or inconsistent agreements, understandings or arrangements among the
parties with respect to the subject matter of this letter agreement, all of
which are merged herein.
9. Arbitration. In the event of a dispute concerning any provision of this
Agreement, either party may require the dispute to be submitted to binding
arbitration under the commercial arbitration rules of the American Arbitration
Association. Judgment upon any arbitration award may be entered by any court
having jurisdiction. This Agreement shall be interpreted in accordance with the
laws of the state of Florida and shall be subject to any applicable federal
securities laws.
<PAGE> 3
If this letter agreement is consistent with your understanding of the matters we
discussed concerning administrative expense payments, kindly sign below and
return a signed copy.
Very truly yours,
The Variable Annuity Life Insurance Company
By:
--------------------------------
Name:
-----------------------------
Title:
----------------------------
ATTEST:
By:
--------------------------------
Name:
-----------------------------
Title:
----------------------------
Acknowledged and Agreed:
FRANKLIN TEMPLETON SERVICES, INC.
By:
--------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE> 4
SCHEDULE A
<PAGE> 1
EXHIBIT 8(b)(3)
AMENDMENT 1
AMENDMENT 1 made as of November 1, 1999, to that certain Agreement dated as of
the 1st day of July, 1997 by and between Dreyfus, a New York Corporation, and
The Variable Annuity Life Insurance Company ("Client") a Texas corporation.
Capitalized terms used but not defined in this Amendment shall have the meanings
assigned to them in the Agreement unless the context requires otherwise.
WHEREAS, Dreyfus and Client desire to amend the Agreement to reflect a higher
annual fee rate for the Administrative Services performed by Client under the
Agreement;
NOW, THEREFORE, Dreyfus and Client hereby agree to amend the Agreement by
replacing paragraph 7 thereof in its entirety with the following revised
paragraph 7:
7. In consideration of the performance of the Administrative Services
by Client, Dreyfus agrees to pay client a monthly fee at an annual rate
of _____ of the value of each Fund's average daily net assets deposited
and maintained in the Master Account for Client Customers. Payment
shall be made within 30 days following the end of each month.
EXECUTED, on the date or dates set forth below to be effective as of the date
first above written.
VARIABLE ANNUITY LIFE INSURANCE COMPANY
By: /s/ ROBERT P. CONDON
---------------------------------------
Name: Robert P. Condon
-------------------------------------
Its: Executive Vice President - AGRS
--------------------------------------
Date: January 6, 2000
-------------------------------------
THE DREYFUS CORPORATION
By: /s/ WILLIAM H. MARESCA
---------------------------------------
Name: William H. Maresca
-------------------------------------
Its: Controller
--------------------------------------
Date: December 17, 1999
-------------------------------------
<PAGE> 1
EXHIBIT (8)(e)(3)
AMENDMENT NO. 2 TO FUND PARTICIPATION AGREEMENT
THIS AMENDMENT NO. 2 TO FUND PARTICIPATION AGREEMENT (the "Amendment")
is effective as of January 1, 2000, by and among THE VARIABLE ANNUITY LIFE
INSURANCE COMPANY (the "Company"), AMERICAN CENTURY MUTUAL FUNDS, INC (the
"Issuer") and AMERICAN CENTURY INVESTMENT MANAGEMENT, INC. ("ACIM"). Capitalized
terms not otherwise defined herein shall have the meaning ascribed to them in
the Agreement (defined below).
RECITALS
WHEREAS, the Company, Issuer and ACIM are parties to that certain Fund
Participation Agreement dated April 30, 1996, as amended December 8, 1997 (the
"Agreement") in connection with the participation by the Funds in Contracts
offered by the Company; and
WHEREAS, the parties wish to amend the Agreement to provide a change in
reimbursement for shareholder services as provided herein.
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, the Company, Issuer and ACIM agree as follows:
1. Change in Applicable Fee. Based on its understanding that the
Company will be adding approximately $200 million to the assets managed by ACIM
for the Company as of July 1, 2000, ACIM has agreed to raise the amount of the
Administrative Services Fee effective as of January 1, 2000. If the Company
fails to add the additional assets, however, beginning July 15, 2000 the
Administrative Services Fee shall revert to that in effect as of December 31,
1999. Exhibit A to the Agreement is hereby deleted in its entirety and replaced
with Exhibit A attached hereto.
2. Ratification and Confirmation of Agreement. In the event of a
conflict between the terms of this Amendment and the Agreement, it is the
intention of the parties that the terms of this Amendment shall control and the
Agreement shall be interpreted on that basis. To the extent the provisions of
the Agreement have not been amended by this Amendment, the parties hereby
confirm and ratify the Agreement.
3. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall be an original and all of which together shall
constitute one instrument.
4. Full Force and Effect. Except as expressly supplemented, amended or
consented to hereby, all of the representations, warranties, terms, covenants
and conditions of the Agreement shall remain unamended and shall continue to be
in full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 2
as of the date first above written.
THE VARIABLE ANNUITY LIFE AMERICAN CENTURY INVESTMENT
INSURANCE COMPANY MANAGEMENT, INC.
By: /s/ ALICE T. KANE By: /s/ WILLIAM M. LYONS
----------------------------------- --------------------------------
Name: Alice T. Kane Name: William M. Lyons
Title: AG Fund Group, President Title: Executive Vice President
VALIC, EVP
AMERICAN CENTURY MUTUAL
FUNDS, INC.
By: /s/ CHARLES A. ETHERINGTON
----------------------------------
Name: Charles A. Etherington
Title: Assistant Vice President
<PAGE> 3
EXHIBIT A
FUNDS AVAILABLE AND APPLICABLE FEE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ISSUER NAME OF FUND APPLICABLE FEE*
- --------------------------------------------------------------------------------
<S> <C> <C>
American Century Mutual Funds, Ultra
Inc.
- --------------------------------------------------------------------------------
</TABLE>
* Subject to Section 5 of the Agreement
** Basis Points
NOTE: If the Company fails to have ACIM begin managing an additional $200
million in new assets in May, 2000, as of July 15, 2000, the applicable
fee will be:
Assets > 0 but < $75 million, 20 BPs (0.20%); Assets $75 million,
25 BPs (0.25%).
<PAGE> 4
EXHIBIT C
1. DISTRIBUTOR or 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:
<TABLE>
<CAPTION>
12b-1 Fee
Fund Per Annum
- ---- ---------
<S> <C>
Founders Growth Fund
---------
</TABLE>
2. ADVISER or FUND will pay VALIC the following asset-based administrative
services fee computed daily and payable quarterly on the average net asset value
of the shares of each FUND maintained in accounts established with the FUND by
VALIC, except that the fee for the initial term (July 1 to December 31, 1999)
may be paid as a lump sum:
<TABLE>
<CAPTION>
Administrative Services
Fund Fee Per Annum
- ---- -------------
<S> <C>
Founders Growth Fund
---------
</TABLE>
VALIC shall provide ADVISER with the number of contracts owners for whose
benefit FUND shares are held in such accounts as of the end of each month as
well as such other documentation as ADVISER may reasonably request in order to
permit ADVISER to convert the asset-based administrative services fee to a per
participant fee for its internal purposes.
All payments to VALIC shall be remitted to the following address:
2929 Allen Parkway, L7-01
Houston, Texas 77019
Attn: Greg Seward
<PAGE> 1
EXHIBIT 8(f)(2)
AMENDED AND RESTATED
PARTICIPATION AGREEMENT
THIS AGREEMENT is made by and between Founders Funds, Inc., a Maryland
corporation, on behalf of its Founders Growth Fund series 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"), Premier Mutual Fund Services,
Inc. ("DISTRIBUTOR"), Founders Asset Management, LLC ("ADVISER"), 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
WHEREAS, DISTRIBUTOR is registered as a broker-dealer under the
Securities Exchange Act of 1934 (the "1934 Act") and any applicable state
securities law; and
WHEREAS, ADVISER is registered as an investment adviser under the
Investment Advisers Act of 1940 and any applicable state securities law, and as
a transfer agent under the 1934 Act; and
WHEREAS, VALIC has established ACCOUNT to offer variable contracts (the
"Contracts") and is desirous of having FUND as one of the underlying funding
vehicles for the Contracts; and
WHEREAS, FUND, DISTRIBUTOR and ADVISER know 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;
<PAGE> 2
NOW, THEREFORE, in consideration of their mutual promises, VALIC, FUND,
DISTRIBUTOR and ADVISER agree as follows:
1. FUND and DISTRIBUTOR agree 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 or DISTRIBUTOR, as the Fund's designee 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 or DISTRIBUTOR 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.
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.
(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. 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.
2
<PAGE> 3
(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 (each, a "Pricing Error") greater than or equal to $.01 per
share of FUND, shall be reported immediately upon discovery to VALIC. Pricing
Errors will be corrected in accordance with the FUND's pricing error policy
established by its board of directors.
(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, 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. (a) FUND or ADVISER 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 or ADVISER 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.
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
3
<PAGE> 4
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 ADVISER 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; and
(iii) camera ready copy of the annual and
semi-annual reports for printing by VALIC.
6. (a) VALIC will furnish, or will cause to be furnished, to
ADVISER or its designee, each piece of sales literature or other promotional
material in which FUND or ADVISER is named at least fifteen days prior to its
intended use. No such material will be used if ADVISER or its designee objects
to its use in writing within ten days after receipt of such material.
(b) ADVISER 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 ADVISER or
concerning FUND or ADVISER 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
ADVISER or its designee, except with the permission of ADVISER.
(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
4
<PAGE> 5
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.
7. Compensation and Expenses. In consideration of its providing the
administrative and record-keeping services below, VALIC shall be entitled to
receive from DISTRIBUTOR and ADVISER, or the FUND, the fees set forth in Exhibit
C hereto. The obligation of DISTRIBUTOR and ADVISER, or 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 ADVISER 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;
(f) cooperating with the FUND, DISTRIBUTOR, ADVISER 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
5
<PAGE> 6
(h) communicating directly with Contract owners concerning
FUND operations. FUND or ADVISER 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, DISTRIBUTOR and ADVISER and each director of the Board of FUND and
officers of FUND and each person, if any, who controls FUND and each of the
directors and officers of DISTRIBUTOR or of ADVISER and each person, if any, who
controls DISTRIBUTOR or 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 or acquisition 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
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
(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
6
<PAGE> 7
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 any failure by VALIC to
substantially provide the services and
furnish the materials under the terms of
this Agreement; or
(v) arise out of or result from any material
breach of any representation and/or warranty
made by VALIC in this Agreement or arise out
of or result from any other material breach
of this Agreement by VALIC.
(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.
(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), ADVISER agrees to indemnify and hold harmless VALIC
and each of its 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 ADVISER) 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:
7
<PAGE> 8
(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
ADVISER or 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
(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
ADVISER or FUND or its adviser or persons
under their control) or wrongful conduct of
FUND or ADVISER 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 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 ADVISER in this
8
<PAGE> 9
Agreement or arise out of or result from
any other material breach of this
Agreement by ADVISER.
(b) ADVISER 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) ADVISER 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 ADVISER 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 ADVISER of any such
claim shall not relieve ADVISER 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,
ADVISER shall be entitled to participate at its own expense in the defense
thereof. ADVISER also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from ADVISER
to such party of ADVISER's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and ADVISER 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.
10. (a) Except as limited by and in accordance with the provisions
of Sections 10(b) and 10(c), DISTRIBUTOR agrees to indemnify and hold harmless
VALIC and each of its 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 10) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of DISTRIBUTOR) 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
9
<PAGE> 10
upon and in conformity with information
furnished to DISTRIBUTOR or 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
(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
DISTRIBUTOR or FUND or its adviser or
persons under their control) or wrongful
conduct of FUND or DISTRIBUTOR 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 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 DISTRIBUTOR in this Agreement or
arise out of or result from any other
material breach of this Agreement by
DISTRIBUTOR.
(b) DISTRIBUTOR 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.
10
<PAGE> 11
(c) DISTRIBUTOR 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 DISTRIBUTOR 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 DISTRIBUTOR of any
such claim shall not relieve DISTRIBUTOR 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, DISTRIBUTOR shall be entitled to participate at its own
expense in the defense thereof. DISTRIBUTOR also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from DISTRIBUTOR to such party of DISTRIBUTOR's election to assume
the defense thereof, the Indemnified Party shall bear the fees and expenses of
any additional counsel retained by it, and DISTRIBUTOR 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.
11. 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.
12. 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 in compliance in all material
respects with all applicable federal and state laws.
13. 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, proxy statements, exemptive
applications and all amendments or supplements to
11
<PAGE> 12
any of the above that relate to ACCOUNT promptly after the filing of each such
document with the SEC or other regulatory authority.
14. 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.
15. 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 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.
16. FUND, DISTRIBUTOR and ADVISER agree 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, DISTRIBUTOR or
ADVISER to be unduly burdensome, in which event any Party may exercise its
option to terminate this Agreement under Section 17 hereof, except that such
termination shall be effective immediately.
17. (a) This Agreement shall be effective as of the date hereof
and shall continue in force until terminated in accordance with the provisions
herein. This Agreement shall supersede the Participation Agreement, dated May 1,
1996, and any amendments, among FUND, ADVISER and VALIC, the ADVISER's interest
in which was assigned to DISTRIBUTOR effective April 1, 1998.
(b) This Agreement shall terminate automatically in the event
of its assignment unless such assignment is made with the written consent of
each party.
(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 each party 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. Notice of
election to terminate shall be furnished by
VALIC and termination shall be effective ten
days after FUND's receipt of said notice
unless FUND makes available a sufficient
number of shares to meet the requirements of
the Contracts within said ten-day period;
12
<PAGE> 13
(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, 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;
(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 and/or
ADVISER, (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 and ADVISER
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;
(vii) In the event FUND's shares are not
registered, issued or sold in accordance
with applicable federal law, or such law
precludes
13
<PAGE> 14
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;
(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;
(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
14
<PAGE> 15
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.
(xv) At the option of DISTRIBUTOR upon prior
written notice in the event that
DISTRIBUTOR'S Underwriting Agreement with
FUND is terminated and DISTRIBUTOR'S
interest in this Agreement has not been
assigned to a successor distributor prior to
the effective date of the termination of
such Underwriting Agreement.
(d) No termination of this Agreement (except a termination
under Section 17(c)(xiv) immediately above) 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.
(e) Notwithstanding any termination of this Agreement pursuant
to Section 17(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.
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.
15
<PAGE> 16
If to FUND or ADVISER: Founders Asset Management LLC
2930 East Third Avenue
Denver, CO 80206
Attn: General Counsel
If to VALIC: The Variable Annuity Life Insurance Company
2929 Allen Parkway
Houston, TX 77019
Attn: Cynthia A. Toles
If to DISTRIBUTOR: Premier Mutual Fund Services, Inc.
60 State Street, Suite 1300
Boston, MA 02109
Attn: President
(with a copy to General Counsel at same address)
19. Confidentiality. Each party agrees that all books, records,
information and data pertaining to the business of the other parties 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 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 State of Texas.
22. This Agreement may be executed in two or more counterparts, each of
which taken together shall constitute one instrument.
Executed effective the 1st day of July, 1999.
Founders Funds, Inc.
Attest: /s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
------------------------------ --------------------------------------
Founders Asset Management, LLC
Attest: /s/ KENNETH R. CHRISTOFFERSON By: /s/ DAVID L. RAY
------------------------------ --------------------------------------
David L. Ray
Sr. Vice President-Administration
16
<PAGE> 17
The Variable Annuity Life
Insurance Company
Attest: /s/ LINDA G. THOMPSON By: /s/ ROBERT P. CONDON
------------------------------ --------------------------------------
Linda G. Thompson Robert P. Condon
Executive Vice President-AGRS
Premier Mutual Fund Services, Inc.
Attest: By: /s/ [ILLEGIBLE]
------------------------------ --------------------------------------
17
<PAGE> 18
SCHEDULE A
Funds
The following series of Founders Funds, Inc.:
Founders Growth Fund
<PAGE> 19
SCHEDULE B
Accounts
The Variable Annuity Life Insurance Company
Separate Account A
<PAGE> 1
EXHIBIT 10
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated February 14, 2000 as to The Variable Annuity Life
Insurance Company and February 22, 2000 as to The Variable Annuity Life
Insurance Company Separate Account A in Post-Effective Amendment No. 17 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 21, 2000
<PAGE> 1
EXHIBIT 16(e)
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 John A. Graf, Kent E. Barrett, and Mary L.
Cavanaugh, 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
1st day of March, 2000.
/s/ Bruce R. Abrams
---------------------
Bruce R. Abrams
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 John A. Graf, Kent E. Barrett, and Mary L.
Cavanaugh, 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
1st day of March, 2000.
/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 John A. Graf, Kent E. Barrett, and Mary L.
Cavanaugh, 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
1st day of March, 2000.
/s/ Rebecca G. Campbell
---------------------
Rebecca G. Campbell
In the Presence of:
/s/ Cheryl G. Hemley
- --------------------------
<PAGE> 4
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 John A. Graf, Kent E. Barrett, and Mary L.
Cavanaugh, 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
1st day of March, 2000.
/s/ Robert P. Condon
----------------------
Robert P. Condon
In the Presence of:
/s/ Cheryl G. Hemley
- --------------------------
<PAGE> 5
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 John A. Graf, Kent E. Barrett, and Mary L.
Cavanaugh, 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
1st day of March, 2000.
/s/ John A. Graf
---------------------
John A. Graf
In the Presence of:
/s/ Cheryl G. Hemley
- --------------------------
<PAGE> 6
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 John A. Graf, Kent E. Barrett, and Mary L.
Cavanaugh, 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
1st day of March, 2000.
/s/ Carl J. Santillo
---------------------
Carl J. Santillo
In the Presence of:
/s/ Cheryl G. Hemley
- --------------------------
