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FILED PURSUANT TO RULE 424(b)(5)
REGISTRATION NO. 333-40583
REGISTRATION NO. 333-40583-01
REGISTRATION NO. 333-40583-02
REGISTRATION NO. 333-40583-03
REGISTRATION NO. 333-40583-04
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PROSPECTUS SUPPLEMENT [AMERICAN GENERAL LOGO]
(TO PROSPECTUS DATED FEBRUARY 10, 1998)
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4,000,000 PREFERRED SECURITIES
AMERICAN GENERAL CAPITAL III
8.05% TRUST PREFERRED SECURITIES (TRUPS(R))
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, TO THE EXTENT DESCRIBED HEREIN, BY
AMERICAN GENERAL CORPORATION
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THE TRUST:
American General Capital III is a Delaware business trust which will:
- sell the preferred securities to the public;
- sell common securities to American General;
- use the proceeds from these sales to buy an equal principal amount of 8.05%
Junior Subordinated Debentures due 2049 of American General; and
- distribute the cash payments it receives from American General on the
debentures to the holders of the preferred securities and the common
securities.
QUARTERLY DISTRIBUTIONS:
- For each preferred security that you own, you will receive cumulative cash
distributions accumulating from December 7, 2000 at an annual rate of 8.05% of
the liquidation amount of $25 per preferred security, on March 31, June 30,
September 30 and December 31 of each year, beginning December 31, 2000.
- American General may defer interest payments on the debentures at any time,
and from time to time, for up to 20 consecutive quarterly periods. If American
General does defer interest payments, the Trust will also defer payments of
distributions on the preferred securities to you. However, deferred
distributions will themselves accumulate distributions at an annual rate of
8.05% (to the extent permitted by law).
OPTIONAL REDEMPTION:
- The Trust may redeem some or all of the preferred securities at times
discussed herein at a redemption price equal to $25 per preferred security,
plus accumulated distributions, if any.
AMERICAN GENERAL:
- American General will effectively guarantee, fully and unconditionally, the
payment by the Trust of amounts due on the preferred securities as discussed
herein and in the accompanying prospectus.
We plan to list the preferred securities on the New York Stock Exchange
under the symbol "AGCPrB." Trading on the New York Stock Exchange is expected to
commence within 30 days after the preferred securities are first issued.
INVESTING IN THE PREFERRED SECURITIES INVOLVES CERTAIN RISKS WHICH ARE
DESCRIBED IN THE "RISK FACTORS" SECTION BEGINNING ON PAGE S-6 OF THIS PROSPECTUS
SUPPLEMENT.
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PER
PREFERRED SECURITY TOTAL
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Public offering price(1).................................... $25.00 $100,000,000
Underwriting commission to be paid by American General...... $.7875 $3,150,000
Proceeds, before expenses, to the Trust..................... $25.00 $100,000,000
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(1) Plus accumulated distributions from December 7, 2000, if settlement occurs
after that date.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the accompanying prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
The preferred securities will be ready for delivery in book-entry form only
through The Depository Trust Company on or about December 7, 2000.
"TRUPS(R)" is a registered service mark of Salomon Smith Barney Inc.
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SALOMON SMITH BARNEY
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
PRUDENTIAL SECURITIES
UBS WARBURG LLC
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BANC OF AMERICA SECURITIES LLC BANC ONE CAPITAL MARKETS, INC. FIRST UNION
SECURITIES, INC.
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The date of this prospectus supplement is November 30, 2000.
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TABLE OF CONTENTS
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PAGE
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PROSPECTUS SUPPLEMENT
Summary Information -- Q&A.................................. S-3
Risk Factors................................................ S-6
American General Capital III................................ S-9
Capitalization.............................................. S-10
Ratio of Earnings to Fixed Charges and Ratio of Earnings to
Combined Fixed Charges and Preferred Stock Dividends...... S-11
Use of Proceeds............................................. S-11
Selected Financial Data of American General................. S-12
American General Corporation................................ S-14
Description of Securities................................... S-15
Certain Terms of the Preferred Securities................... S-15
Certain Terms of the Debentures............................. S-21
Certain United States Federal Income Tax Consequences....... S-23
ERISA Considerations........................................ S-27
Underwriting................................................ S-29
Legal Matters............................................... S-31
Experts..................................................... S-31
PROSPECTUS
Available Information....................................... 2
Incorporation by Reference.................................. 3
Information Concerning Forward-Looking Statements........... 4
American General Corporation................................ 4
The Trusts.................................................. 4
Use of Proceeds............................................. 5
Ratio of Earnings to Fixed Charges and Ratio of Earnings to
Combined Fixed Charges and Preferred Stock Dividends...... 6
Description of Junior Subordinated Debentures............... 6
Description of Preferred Securities......................... 18
Book-Entry Issuance......................................... 28
Description of Guarantees................................... 30
Relationship among the Preferred Securities, the
corresponding Junior Subordinated Debentures and the
Guarantees................................................ 33
Description of Common Stock................................. 35
Description of Preferred Stock.............................. 38
Plan of Distribution........................................ 42
Legal Matters............................................... 43
Experts..................................................... 43
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You should rely only on the information contained or incorporated by
reference in this prospectus supplement or the accompanying prospectus. We have
not, and the underwriters have not, authorized any person to provide you with
different information. If anyone provides you with different or inconsistent
information, you should not rely on it. We are not, and the underwriters are
not, making an offer to sell these securities in any jurisdiction where the
offer or sale is not permitted. You should assume that the information appearing
in this prospectus supplement or the accompanying prospectus, as well as
information we previously filed with the Securities and Exchange Commission and
incorporated by reference, is accurate as of the date on the front cover of this
prospectus supplement and the accompanying prospectus, respectively. American
General's business, financial condition, results of operations and prospects may
have changed since such dates.
The following information concerning American General, the Trust, the
preferred securities, the guarantee and the junior subordinated debentures adds
to, and should be read in conjunction with, the information contained in the
accompanying prospectus. Capitalized terms used in this prospectus supplement
have the same meanings as in the accompanying prospectus.
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SUMMARY INFORMATION -- Q&A
This prospectus supplement and the accompanying prospectus are referred to
collectively as the "Prospectus Documents" and should be read together. This
summary highlights selected information from the Prospectus Documents to help
you understand the preferred securities. You should carefully read the
Prospectus Documents to understand fully the terms of the preferred securities,
as well as the tax and other considerations that are important to you in making
a decision about whether to invest in the preferred securities. You should pay
special attention to the "Risk Factors" section beginning on page S-6 of this
prospectus supplement to determine whether an investment in the preferred
securities is appropriate for you.
For your convenience, we make reference to specific page numbers in this
prospectus supplement (pages S-1 through S-31) and the accompanying prospectus
(pages 1 through 43) for more detailed information regarding some of the terms
and concepts used throughout this prospectus supplement.
WHAT ARE THE PREFERRED SECURITIES?
Each preferred security represents an undivided beneficial interest in the
assets of the Trust. The underwriters are offering 4,000,000 preferred
securities at a public offering price of $25 for each preferred security. See
"Underwriting" beginning on page S-29.
WHO IS THE TRUST?
American General Capital III, referred to as "the Trust," is a Delaware
business trust. The Trust will sell its preferred securities to the public and
its common securities to American General. The Trust will use the proceeds from
these sales to buy a series of 8.05% Junior Subordinated Debentures due 2049
(the "debentures") from American General with the same economic terms as the
preferred securities.
There are five trustees of the Trust. Three of the trustees are employees
or officers of American General, referred to as the "administrative trustees."
Bankers Trust Company will act as the property trustee of the Trust and Bankers
Trust (Delaware) will act as the Delaware trustee, in each case until removed or
replaced by the holder of the common securities. For the purposes of compliance
with the provisions of the Trust Indenture Act, Bankers Trust Company will also
act as indenture trustee under the guarantee.
WHO IS AMERICAN GENERAL?
American General, with assets of $123 billion and shareholders' equity of
$6.9 billion as of September 30, 2000, is the parent company of one of the
nation's largest diversified financial services organizations. American
General's operating divisions deliver a wide range of retirement services, life
insurance, consumer loans, and investments to 12 million customers through
focused distribution channels.
American General, headquartered in Houston, was incorporated as a general
business corporation in Texas in 1980 and is the successor to American General
Insurance Company, an insurance company incorporated in Texas in 1926. The
principal executive offices of American General are located at 2929 Allen
Parkway, Houston, Texas 77019-2155, and its telephone number is (713) 522-1111.
WHEN WILL YOU RECEIVE QUARTERLY DISTRIBUTIONS ON THE PREFERRED SECURITIES?
If you purchase the preferred securities, you will be entitled to receive
cumulative cash distributions at an annual rate of 8.05% of the liquidation
amount of $25 per preferred security. Distributions will accumulate from
December 7, 2000 and will be payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year, beginning December 31, 2000.
WHEN CAN PAYMENT OF YOUR DISTRIBUTIONS BE DEFERRED?
American General may, on one or more occasions, defer interest payments on
the debentures for up to 20 consecutive quarterly periods unless an event of
default under the debentures has occurred and is continuing. See "Description of
Junior Subordinated Debentures -- Debenture Events of Default" beginning on page
13 for a description of the events of default under the debentures. A deferral
of interest payments cannot extend beyond the
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stated maturity date of the debentures (which is December 31, 2049).
If American General defers interest payments on the debentures, the Trust
will also defer its distributions on the preferred securities to you. During
this deferral period, distributions will continue to accumulate on the preferred
securities at an annual rate of 8.05% of the liquidation amount of $25 per
preferred security. Also, the deferred distributions will themselves accumulate
distributions at an annual rate of 8.05% (to the extent permitted by law). Once
American General makes all deferred interest payments on the debentures, with
accrued interest, it may again defer interest payments on the debentures if no
event of default under the debentures has then occurred and is continuing.
During any period in which American General defers interest payments on the
debentures, American General will not be permitted to (with certain exceptions
described under "Description of Junior Subordinated Debentures -- Restrictions
on Certain Payments" beginning on page 12):
- pay a dividend or make any other payment or distribution on its capital
stock;
- redeem, purchase or make a liquidation payment on any of its capital
stock; or
- make a principal, premium or interest payment, or repurchase or redeem,
any of its debt securities that rank equal with or junior to the
debentures.
If American General defers interest payments on the debentures, you will be
required to accrue interest income for United States federal income tax purposes
before you receive cash distributions. See "Certain United States Federal Income
Tax Consequences" beginning on page S-23 and "Risk Factors -- Ability to Defer
Distributions Has Tax Consequences For You and May Affect the Trading Price of
the Preferred Securities" on page S-7.
WHEN CAN THE TRUST REDEEM THE PREFERRED SECURITIES?
The Trust will redeem all of the outstanding preferred securities when the
debentures are paid either at maturity on December 31, 2049, or upon early
redemption.
American General will pay the debentures at maturity on December 31, 2049
and may redeem the debentures before their maturity at a redemption price equal
to 100% of the principal amount being redeemed plus accrued and unpaid interest
to the date of redemption:
- in whole or in part on one or more occasions any time on or after
December 7, 2005; or
- in whole but not in part before December 7, 2005, if certain changes in
tax or investment company law occur or will occur within 90 days (each of
which is a "Special Event" more fully described on pages S-16 and S-17).
If American General redeems any debentures before their maturity, the Trust
will use the cash it receives on the redemption of the debentures to redeem, on
a pro rata basis, preferred securities and common securities having an aggregate
liquidation amount equal to the aggregate principal amount of the debentures
redeemed, unless an event of default under the amended and restated declaration
of trust of the Trust, referred to as the "trust agreement," or the
"declaration," has occurred and is continuing, in which case the preferred
securities will be redeemed before any common securities. An event of default
with respect to the debentures or the guarantee constitutes an event of default
under the trust agreement. See "Description of Junior Subordinated
Debentures -- Debenture Events of Default" beginning on page 13 and "Description
of Guarantees -- Events of Default" beginning on page 31 for a description of an
event of default in respect of the debentures and the guarantee. The redemption
price will be equal to $25 per security plus accumulated distributions, if any.
WHAT IS THE NATURE OF AMERICAN GENERAL'S GUARANTEE OF THE PREFERRED SECURITIES?
American General will fully and unconditionally guarantee the preferred
securities through a combination of:
- its obligations to make payments on the debentures;
- its obligations under its guarantee of the preferred securities, referred
to as the "guarantee;" and
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- its obligations under the trust agreement and its junior subordinated
indenture, referred to as the "indenture."
If American General does not make a required payment on the debentures, the
Trust will not have sufficient funds to make the related payment on the
preferred securities. The guarantee does not cover payments on the preferred
securities when the Trust does not have sufficient funds to make such payments.
American General's obligations under the debentures are junior to its
obligations to make payments on its Senior Indebtedness (as such term is defined
on page 16), and American General's obligations under the guarantee are junior
to its obligations to make payments on its Senior Indebtedness in the same
manner as the debentures. See "Risk Factors -- American General's Obligations
Under the Debentures and the Guarantee Are Subordinated" on page S-6.
WHEN CAN THE DEBENTURES BE DISTRIBUTED TO YOU?
American General, as the sponsor of the Trust, has the right to dissolve
the Trust at any time. If American General exercises this right to dissolve the
Trust, the Trust will be liquidated by distribution of the debentures to holders
of the preferred securities and the common securities.
WHAT HAPPENS IF THE TRUST IS DISSOLVED AND THE DEBENTURES ARE NOT DISTRIBUTED?
The Trust may also be dissolved in circumstances where the debentures will
not be distributed to you. In those situations, after satisfaction of creditors
of the Trust, if any, the Trust will be obligated to pay in cash the liquidation
amount of $25 for each preferred security plus accumulated distributions to the
date such payment is made. The Trust will be able to make this liquidation
distribution only if the debentures are paid or redeemed by American General.
WILL THE PREFERRED SECURITIES BE LISTED ON A STOCK EXCHANGE?
We plan to list the preferred securities on the New York Stock Exchange
under the symbol "AGCPrB." Trading of the preferred securities on the New York
Stock Exchange is expected to commence within 30 days after the preferred
securities are first issued. You should be aware that the listing of the
preferred securities will not necessarily ensure that a liquid trading market
for the preferred securities will develop or be maintained.
If the Trust distributes the debentures, American General will use its best
efforts to list them on the New York Stock Exchange or any other exchange or
other organization on which the preferred securities are then listed.
IN WHAT FORM WILL THE PREFERRED SECURITIES BE ISSUED?
The preferred securities will be represented by one or more global
securities that will be deposited with, or on behalf of, and registered in the
name of, The Depository Trust Company, New York, New York ("DTC") or its
nominee. This means that you will not receive a certificate for your preferred
securities but, instead, will hold your interest through DTC's book-entry
system. The preferred securities will be ready for delivery through DTC on or
about December 7, 2000.
S-5
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RISK FACTORS
Your investment in the preferred securities will involve certain risks. You
should carefully consider the following discussion of risks, and the other
information included or incorporated by reference in the Prospectus Documents,
before deciding whether an investment in the preferred securities is suitable
for you.
AMERICAN GENERAL'S OBLIGATIONS UNDER THE DEBENTURES AND THE GUARANTEE ARE
SUBORDINATED
American General's obligations under the debentures are unsecured and will
rank junior in priority of payment to American General's Senior Indebtedness.
This means that American General may not make any payments of principal
(including redemption payments) or interest on the debentures if it defaults on
a payment on its Senior Indebtedness. Also, payments on the debentures may be
blocked for up to 180 days in the event of certain non-payment defaults by
American General on its Senior Indebtedness. For more information on the
subordination provisions, see "Description of Junior Subordinated
Debentures -- Subordination" beginning on page 15. In the event of the
bankruptcy, liquidation or dissolution of American General, its assets would be
available to pay obligations under the debentures only after all payments had
been made on its Senior Indebtedness. At September 30, 2000, on a pro forma
basis, as if on that date American General and the Trust had issued and sold the
preferred securities and the debentures and applied the estimated net proceeds
thereof as described in this prospectus supplement, the total amount of American
General's Senior Indebtedness would have been approximately $3.6 billion. See
"Capitalization" on page S-10 and "Use of Proceeds" on page S-11.
American General's obligations under the guarantee are unsecured and will
rank in priority of payment:
- junior to all of American General's Senior Indebtedness in the same
manner as the debentures; and
- equally with certain guarantees previously issued by American General
with respect to certain preferred securities and with all other
guarantees of securities issued by affiliates of American General similar
to the preferred securities issued by the Trust.
This means that American General cannot make any payments on the guarantee
if it defaults on a payment of any of its Senior Indebtedness. In the event of
the bankruptcy, liquidation or dissolution of American General, its assets would
be available to pay obligations under the guarantee only after all payments had
been made on its Senior Indebtedness.
Also, since American General is a holding company, rights to participate in
any distribution of assets of any subsidiary upon its liquidation or
reorganization or otherwise (and thus the ability of holders of preferred
securities or debentures to benefit indirectly from such distribution) are
subject to the prior claims of creditors of that subsidiary, except to the
extent that American General may itself be a creditor of that subsidiary. Claims
on American General's subsidiaries by other creditors include substantial claims
for policy benefits and debt obligations, as well as other liabilities incurred
in the ordinary course of business. In addition, since many of American
General's subsidiaries are insurance companies subject to regulatory control by
various state insurance departments, the ability of such subsidiaries to pay
dividends to American General without prior regulatory approval is limited by
applicable laws and regulations. Further, certain non-insurance subsidiaries are
similarly restricted in their ability to make dividend payments by long-term
debt agreements.
Neither the debentures nor the guarantee will limit the ability of American
General and its subsidiaries to incur additional indebtedness, including
indebtedness that ranks senior in priority of payment to the debentures and the
guarantee.
For more information, see "Certain Terms of the
Debentures -- Subordination" on page S-21 and "Description of
Guarantees -- Status of the Guarantees" on page 31.
GUARANTEE COVERS PAYMENTS ONLY IF THE TRUST HAS CASH AVAILABLE
The ability of the Trust to pay distributions on the preferred securities,
the redemption price of the preferred securities and the liquidation amount of
each preferred security is solely dependent upon
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American General making the related payments on the debentures when due.
If American General defaults on its obligation to pay principal (including
redemption payments) or interest on the debentures, the Trust will not have
sufficient funds to pay distributions, the redemption price or the liquidation
amount of each preferred security. In those circumstances, you will not be able
to rely upon the guarantee for payment of these amounts because the guarantee
covers such payment only when the Trust has sufficient funds on hand but fails
to make such payment.
Instead, you may:
- seek legal redress against American General directly or seek other
remedies to collect your pro rata share of payments owed; or
- rely on the property trustee to enforce the Trust's rights under the
debentures.
ABILITY TO DEFER DISTRIBUTIONS HAS TAX CONSEQUENCES FOR YOU AND MAY AFFECT THE
TRADING PRICE OF THE PREFERRED SECURITIES
So long as no event of default under the debentures has occurred and is
continuing, American General may, on one or more occasions, defer interest
payments to the Trust on the debentures as described in this prospectus
supplement. See "Certain Terms of the Debentures -- Option to Extend Interest
Payment Period" on page S-22. If American General defers interest payments on
the debentures, the Trust will defer distributions on the preferred securities
to you during any deferral period.
If American General defers interest payments on the debentures, you will be
required to accrue interest income, as original issue discount or "OID," in
respect of the deferred stated interest allocable to your share of the preferred
securities for United States federal income tax purposes. As a result, you will
include such income in gross income for United States federal income tax
purposes prior to the receipt of any cash distributions. In addition, you will
not receive cash from the Trust related to such income if you dispose of your
preferred securities prior to the record date on which distributions of such
amounts are made.
American General has no current intention of deferring interest payments on
the debentures. However, if American General exercises its right to do so in the
future, the preferred securities may trade at a price that does not fully
reflect the value of accrued but unpaid interest on the debentures. If you sell
the preferred securities during an interest deferral period, you may not receive
the same return on investment as someone else who continues to hold the
preferred securities. In addition, the existence of American General's right to
defer payments of interest on the debentures may mean that the market price for
the preferred securities (which represent an undivided beneficial interest in
the debentures) may be more volatile than other securities that do not have this
right.
See "Certain United States Federal Income Tax Consequences" beginning on
page S-23 for more information regarding United States federal income tax
consequences.
PREFERRED SECURITIES MAY BE REDEEMED BEFORE DECEMBER 7, 2005, IF A SPECIAL EVENT
OCCURS
Upon the occurrence of a Special Event before December 7, 2005, American
General may redeem the debentures, in whole, but not in part, at a redemption
price equal to 100% of the principal amount thereof plus any accrued and unpaid
interest to the redemption date. The Trust will use the cash it receives on any
such redemption of the debentures to redeem an equivalent liquidation amount of
the preferred securities and the common securities on a pro rata basis, unless
an event of default under the trust agreement has occurred and is continuing, in
which case the preferred securities will be redeemed before any common
securities.
See "Certain Terms of the Preferred Securities -- Special Event Redemption"
beginning on page S-16 for more information.
PREFERRED SECURITIES MAY BE REDEEMED ON OR AFTER DECEMBER 7, 2005, AT AMERICAN
GENERAL'S OPTION
At American General's option, the debentures may be redeemed, in whole or
in part, at any time on or after December 7, 2005, at a redemption price equal
to 100% of the principal amount to be redeemed plus any accrued and unpaid
interest to the redemption date. See "Certain Terms of the
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Debentures -- Redemption" on page S-21. You should assume that American General
will exercise its redemption option when prevailing interest rates at the time
are lower than the interest rate on the debentures, so that the redemption
proceeds generally will not be able to be reinvested in a comparable security at
as high a rate. If American General exercises such redemption option, the Trust
will use the cash it receives on the redemption of the debentures to redeem an
equivalent liquidation amount of the preferred securities and the common
securities on a pro rata basis, unless an event of default under the trust
agreement has occurred and is continuing, in which case the preferred securities
will be redeemed before any common securities.
See "Certain Terms of the Preferred Securities -- Redemption" on page S-16
for more information.
DISTRIBUTION OF DEBENTURES MAY HAVE A POSSIBLE ADVERSE EFFECT ON TRADING PRICE
American General has the right to dissolve the Trust at any time. If
American General dissolves the Trust, the Trust will be liquidated by
distribution of the debentures to holders of the preferred securities and the
common securities.
Under current United States federal income tax laws, a distribution of
debentures to you on the dissolution of the Trust would not be a taxable event
to you. Nevertheless, if the Trust is classified for United States federal
income tax purposes as an association taxable as a corporation at the time it is
dissolved, the distribution of debentures to you would be a taxable event. In
addition, if there is a change in law, a distribution of debentures to you on
the dissolution of the Trust could also be a taxable event.
American General has no current intention of causing the termination of the
Trust and the distribution of the debentures. However, there are no restrictions
on its ability to do so at any time. American General anticipates that it would
consider exercising this right in the event that expenses associated with
maintaining the Trust were substantially greater than currently expected, such
as if a Special Event occurred. American General cannot predict the other
circumstances under which this right would be exercised.
Although American General will use its best efforts to list the debentures
on the New York Stock Exchange (or any other exchange or organization on which
the preferred securities are then listed) if they are distributed, we cannot
assure you that the debentures will be approved for listing or that a liquid
trading market for the debentures will develop or be maintained.
American General cannot predict the market prices for the debentures that
may be distributed. Accordingly, the debentures that you receive on a
distribution, or the preferred securities you hold pending such a distribution,
may trade at a discount to the price that you paid to purchase the preferred
securities.
Because you may receive debentures, you should make an investment decision
with regard to the debentures in addition to the preferred securities. You
should carefully review all the information regarding the debentures contained
in the Prospectus Documents. See "Certain United States Federal Income Tax
Consequences -- Receipt of Debentures or Cash Upon Liquidation of the Trust" on
page S-25 for more information.
LIMITED VOTING RIGHTS
You will have limited voting rights. In general, unless an event of default
under the trust agreement has occurred and is continuing, only American General
may elect or remove any of the trustees, and in no event may holders of the
preferred securities remove the administrative trustees.
See "The Trusts" beginning on page 4 and "Certain Terms of the Preferred
Securities -- Voting Rights" beginning on page S-17 for more information.
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AMERICAN GENERAL CAPITAL III
GENERAL
The Trust is a statutory business trust formed under Delaware law. The
declaration of trust for the Trust will be amended and restated in its entirety,
referred to as the "declaration" or the "trust agreement," substantially in a
form to be filed as an exhibit to a Current Report on Form 8-K filed by American
General and incorporated by reference into the registration statement of which
this prospectus supplement and the accompanying prospectus form a part. The
declaration will be qualified as an indenture under the Trust Indenture Act.
Upon issuance of the preferred securities, the purchasers thereof will own all
of the preferred securities. American General will directly or indirectly
acquire common securities in an aggregate liquidation amount equal to at least
3% of the total capital of the Trust and will own all of the issued and
outstanding common securities. The Trust exists for the exclusive purposes of:
- issuing the preferred securities and the common securities representing
undivided beneficial interests in the assets of the Trust;
- investing the gross proceeds of the preferred securities and the common
securities in the debentures; and
- engaging in only those other activities necessary, appropriate,
convenient or incidental thereto.
The Trust has a term of approximately 55 years, but may be terminated earlier as
provided in the declaration.
Pursuant to the declaration, the number of trustees initially is five.
Three of the trustees are employees or officers of American General. Bankers
Trust Company will serve as property trustee under the declaration and as
indenture trustee for the purposes of the Trust Indenture Act. Bankers Trust
(Delaware) will act as the Delaware trustee. The property trustee and the
Delaware trustee may at any time be removed or replaced by the holder of the
common securities. For purposes of compliance with the provisions of the Trust
Indenture Act, Bankers Trust Company will also act as indenture trustee under
the guarantee. See "Description of Guarantees" beginning on page 30.
The property trustee will hold title to the debentures for the benefit of
the Trust and the holders of the preferred securities and common securities and,
so long as the debentures are held by the Trust, the property trustee will have
the power to exercise all rights, powers, and privileges of a holder of
debentures under the indenture. In addition, the property trustee will maintain
exclusive control of a segregated non-interest bearing bank account to hold all
payments made in respect of the debentures for the benefit of the holders of the
preferred securities and common securities. The property trustee will make
payments of distributions and payments on liquidation, redemption and otherwise
to the holders of the preferred securities and common securities out of funds
from the property account. Bankers Trust Company will hold the guarantee for the
benefit of the holders of the preferred securities. American General, as the
direct or indirect holder of all the common securities, will have the right to
appoint, remove or replace any trustee (subject to the limitations set forth in
the declaration) and to increase or decrease the number of trustees. American
General will pay all fees, expenses, debts and obligations (other than with
respect to the preferred securities and common securities) related to the Trust
and the offering of the preferred securities.
The rights of the holders of the preferred securities, including economic
rights, rights to information and voting rights are set forth in the
declaration, the Delaware Business Trust Act, as amended, the indenture and the
Trust Indenture Act. See "Certain Terms of the Preferred Securities" beginning
on page S-15.
ACCOUNTING TREATMENT
The financial statements of the Trust will be reflected in American
General's consolidated financial statements, with the preferred securities shown
as "Company-obligated mandatorily redeemable preferred securities of
subsidiaries holding solely company subordinated notes." In a footnote to
American General's audited consolidated financial statements, there will be a
statement that the Trust is wholly-owned by American General and that the sole
asset of the Trust is the debentures (indicating the principal amount, interest
rate and maturity date thereof). See "Capitalization" on page S-10.
S-9
<PAGE> 10
CAPITALIZATION
The following table sets forth the consolidated short-term debt and
capitalization of American General as of September 30, 2000, and as adjusted to
give effect to the consummation of the offering of the preferred securities and
other long-term debt issued subsequent to September 30, 2000, and the
application of the proceeds thereof. See "Use of Proceeds" on page S-11. The
following data should be read in conjunction with the consolidated financial
statements and notes thereto of American General incorporated by reference
herein as described in "Incorporation by Reference" on page 3.
<TABLE>
<CAPTION>
September 30, 2000
-------------------------
AS
HISTORICAL ADJUSTED(a)
(UNAUDITED, IN MILLIONS) ---------- -----------
<S> <C> <C>
Short-term debt
Corporate.............................................. $ 2,165 $ 1,819
Consumer Finance....................................... 5,018 5,018
------- -------
Total short-term debt............................. $ 7,183 $ 6,837
======= =======
Long-term debt
Corporate.............................................. $ 1,088 $ 1,337
Consumer Finance....................................... 5,760 5,760
------- -------
Total long-term debt.............................. 6,848 7,097
------- -------
Company-obligated mandatorily redeemable preferred
securities of subsidiaries holding solely company
subordinated notes
Non-convertible........................................ 1,970 2,067
------- -------
Total redeemable equity........................... 1,970 2,067
------- -------
Shareholders' equity
Common stock........................................... 882 882
Retained earnings...................................... 8,099 8,099
Accumulated other comprehensive income (loss)(b)....... (1,101) (1,101)
Cost of treasury stock................................. (933) (933)
------- -------
Total shareholders' equity........................ 6,947 6,947
------- -------
Total capitalization (excluding short-term
debt)........................................... $15,765 $16,111
======= =======
</TABLE>
---------------
(a) Reflects application of the proceeds from the offering of the preferred
securities, the issuance by American General of $250 million principal
amount of long-term debt in November 2000, and the use of the net proceeds
therefrom to repay short-term indebtedness.
(b) Includes $1.1 billion net unrealized losses on fixed maturity securities at
September 30, 2000, due to the effect of SFAS 115. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
American General's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 2000, incorporated by reference herein as described in
"Incorporation by Reference" on page 3.
S-10
<PAGE> 11
RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratio of earnings to fixed charges and
ratio of earnings to combined fixed charges and preferred stock dividends of
American General for the periods indicated.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------- --------------------------------
2000 1999 1999 1998 1997 1996 1995
----- ----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges:
Consolidated operations........................ 2.7 3.5 3.4 2.9 2.5 2.5 2.3
Consolidated operations, corporate fixed
charges only................................ 7.3 9.6 9.3 7.3 6.4 6.4 5.3
Ratio of earnings to combined fixed charges and
preferred stock dividends:
Consolidated operations........................ 2.3 2.9 2.8 2.4 2.1 2.3 2.2
Consolidated operations, corporate fixed
charges and preferred stock dividends
only........................................ 4.4 5.8 5.6 4.3 3.7 4.7 4.7
</TABLE>
For purposes of computing these ratios, earnings represent income before
income tax expense, net dividends on preferred securities of subsidiaries, and
minority interest, adjusted for undistributed income of an equity investee and
fixed charges (excluding capitalized interest). Fixed charges consist primarily
of interest expense (including capitalized interest) on short-term and long-term
borrowings. Preferred stock dividends consist of dividends on preferred
securities of subsidiaries and convertible preferred stock.
USE OF PROCEEDS
The proceeds from the sale of the preferred securities will be invested by
the Trust in debentures of American General issued pursuant to the indenture
described herein. American General intends to use all of the net proceeds from
the sale of the debentures to repay short-term indebtedness. As of November 29,
2000, the weighted average interest rate of such short-term indebtedness was
6.67%.
S-11
<PAGE> 12
SELECTED FINANCIAL DATA OF AMERICAN GENERAL
The following table presents selected financial data of American General
and its consolidated subsidiaries for the periods indicated. All data presented
includes the operating results and financial position of USLIFE Corporation
("USLIFE"), which was acquired June 17, 1997. The acquisition was accounted for
using the pooling of interests method and, accordingly, American General's
consolidated financial statements for all periods prior to the acquisition have
been restated to include the results of operations, financial position, and cash
flows of USLIFE.
The financial data as of December 31, 1999, 1998, 1997, 1996, and 1995 and
for the five years ended December 31, 1999 was derived from American General's
audited consolidated financial statements, incorporated herein by reference.
The financial data as of and for the nine months ended September 30, 2000
and 1999 was derived from American General's unaudited quarterly financial
statements (incorporated herein by reference from American General's Quarterly
Report on Form 10-Q for the quarterly period ended September 30, 2000), which,
in the opinion of management, reflect all adjustments necessary for a fair
presentation of such data. The data for the nine months ended September 30, 2000
and 1999 is not necessarily indicative of results of operations for the entire
year. The data should be read in conjunction with the consolidated financial
statements, related notes, "Management's Discussion and Analysis," and other
financial information incorporated by reference herein.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
---------------- ------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
(IN MILLIONS) ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Premiums and other considerations..... $2,903 $2,866 $ 3,772 $ 3,605 $3,362 $3,244 $2,969
Net investment income................. 4,054 3,897 5,232 5,095 4,020 3,773 3,584
Finance charges....................... 1,203 1,077 1,455 1,354 1,265 1,450 1,492
Realized investment gains (losses).... (129) (12) (19) 6 40 62 18
Equity in earnings of investee........ -- -- -- -- 54 40 43
Other................................. 234 181 239 191 186 145 130
------ ------ ------- ------- ------ ------ ------
Total revenues............... 8,265 8,009 10,679 10,251 8,927 8,714 8,236
------ ------ ------- ------- ------ ------ ------
Insurance and annuity benefits........ 4,128 4,020 5,313 5,159 4,332 4,218 4,085
Operating costs and expenses.......... 1,819 1,824 2,444 2,486 2,220 2,129 1,852
Provision for finance receivable
losses.............................. 147 150 207 212 248 417 574
Interest expense
Corporate......................... 167 146 197 181 158 162 197
Consumer Finance.................. 514 420 574 512 461 493 518
Litigation settlements and other
charges............................. 315(a) -- 57(b) 378(b) 50(b) 50(b) --
Merger-related costs.................. -- -- -- -- 272(b) -- --
Loss on sale of non-strategic
assets.............................. -- -- -- -- 113(b) 165(b) --
------ ------ ------- ------- ------ ------ ------
Total benefits and
expenses................... 7,090 6,560 8,792 8,928 7,854 7,634 7,226
------ ------ ------- ------- ------ ------ ------
Income before income tax expense...... 1,175 1,449 1,887 1,323 1,073 1,080 1,010
Income tax expense.................... 401 507 664 459 447 387 341
------ ------ ------- ------- ------ ------ ------
Income before net dividends on
preferred securities of subsidiaries
and minority interest............... 774 942 1,223 864 626 693 669
Net dividends on preferred securities
of subsidiaries..................... 76 68 92 89 84 40 19
Minority interest in net income of
investee............................ -- -- -- 11 -- -- --
------ ------ ------- ------- ------ ------ ------
Net income................... $ 698(a) $ 874 $ 1,131(c) $ 764(d) $ 542(e) $ 653(f) $ 650
====== ====== ======= ======= ====== ====== ======
</TABLE>
S-12
<PAGE> 13
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------------- -------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS)
FINANCIAL POSITION
Total assets(g)................. $123,202 $111,275 $115,447 $105,107 $80,620 $74,134 $69,083
Invested assets(g).............. 72,640 69,790 68,335 69,863 54,006 50,832 49,598
Finance receivables, net........ 11,257 9,790 10,634 9,275 7,639 7,230 7,918
Debt (including short-term)
Corporate................... 3,253 3,038 3,120 2,743 1,916 2,102 2,295
Consumer Finance............ 10,778 9,471 10,206 8,863 7,266 7,630 7,470
Total liabilities (excluding
debt)......................... 100,254 89,632 93,777 82,902 62,129 56,331 51,480
Redeemable equity............... 1,970 1,924 1,924 1,728 1,726 1,227 729
Shareholders' equity(g)......... 6,947 7,210 6,420 8,871 7,583 6,844 7,109
</TABLE>
---------------
(a) Includes effect of aftertax charges of $175 million for settlement of
industrial life insurance litigation and $32 million for alleged fraud loss.
See Note 9 of Item 1 within American General's Quarterly Report on Form 10-Q
for the quarter ended September 30, 2000, incorporated herein by reference.
(b) See Note 3 of Item 8 within American General's Annual Report on Form 10-K
for the years ended December 31, 1999 and 1998, incorporated herein by
reference.
(c) Includes effect of $36 million aftertax charge for litigation settlement
related to financing of satellite dishes (see Note (b) above).
(d) Includes effect of $246 million aftertax litigation charge for market
conduct class action lawsuits (see Note (b) above).
(e) Includes effect of $247 million aftertax USLIFE merger-related costs, $73
million aftertax loss on sale of non-strategic assets, and $33 million
aftertax litigation charge (see Note (b) above).
(f) Includes effect of $111 million aftertax loss on sale of non-strategic
assets and $32 million aftertax write-down of USLIFE group business (see
Note (b) above).
(g) Includes effect of SFAS 115. To facilitate analysis of period-to-period
balances, the effect of SFAS 115 on reported balances was as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
--------------- -------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS)
Increase (decrease) in assets............... $(1,143) $(412) $(1,426) $2,436 $1,782 $ 949 $1,956
Increase (decrease) in invested assets...... (1,502) (395) (1,750) 3,519 2,786 1,488 3,071
Increase (decrease) in shareholders' equity... (1,121) (267) (1,304) 1,575 1,154 610 1,265
</TABLE>
S-13
<PAGE> 14
AMERICAN GENERAL CORPORATION
American General Corporation ("American General" or the "Company"), with
assets of $123 billion and shareholders' equity of $6.9 billion as of September
30, 2000, is the parent company of one of the nation's largest diversified
financial services organizations. Our operating divisions deliver a wide range
of retirement services, life insurance, consumer loans, and investments to 12
million customers through focused distribution channels. American General, a
general business corporation headquartered in Houston, is the successor to
American General Insurance Company, an insurance company incorporated in Texas
in 1926. Our principal executive offices are located at 2929 Allen Parkway,
Houston, Texas 77019-2155, and our telephone number is (713) 522-1111.
RETIREMENT SERVICES
The retirement services division represented 37% of our total division
earnings for the year ended December 31, 1999, and 39% for the nine months ended
September 30, 2000. The division, with assets of $71 billion at September 30,
2000, is a leading provider of retirement products and services, and ranks as
the nation's third-largest writer of annuities. A broad range of retirement
savings products is offered through a sales force of over 1,800 financial
advisors and more than 36,000 financial institution representatives.
The division sells tax-qualified annuities and mutual funds to employees of
educational, health care, and government entities, and other not-for-profit
organizations. The division also markets non-qualified annuities through
financial institution representatives at 320 banks and other financial
institutions. The non-qualified annuities are developed jointly with the
financial institution and tailored to meet the customers' specific needs. The
division has approximately 3.0 million customer accounts.
LIFE INSURANCE
The life insurance division represented 48% of our total division earnings
for the year ended December 31, 1999, and 46% for the nine months ended
September 30, 2000. This division is the second-largest writer of new individual
life insurance in the United States and offers a comprehensive portfolio of life
and annuity products.
With assets of $38 billion at September 30, 2000, the division provides
traditional, interest-sensitive, and variable life insurance and annuities to 8
million customers. The division reaches its customers through a distribution
system of 37,000 independent and career agents, as well as banks,
broker-dealers, and financial planners.
CONSUMER FINANCE
The consumer finance division represented 15% of our total division
earnings for the year ended December 31, 1999, and 15% for the nine months ended
September 30, 2000. The division is a leading provider of mortgages, consumer
loans, and credit-related insurance products. Gross finance receivables,
consisting of 62% real estate-secured loans, totaled $11.6 billion at September
30, 2000.
The division services 2.2 million customer accounts through a nationwide
network of 1,330 branch offices located in 41 states and through financing
programs with 16,000 retail merchants. In addition to the mortgages originated
by the branch offices, the division acquires loans through bulk purchases.
S-14
<PAGE> 15
DESCRIPTION OF SECURITIES
The Prospectus Documents contain the material terms and conditions for
these securities, however, the summaries in this prospectus supplement are not
meant to be a complete description of the preferred securities, the guarantee
and the debentures. For more information, refer to the trust agreement, the
indenture and the guarantee. Forms of these documents are filed as exhibits to
the registration statement of which the prospectus is a part. All terms used in
the Prospectus Documents that are not defined in the Prospectus Documents have
the meanings given to them in the trust agreement, the indenture and the
guarantee.
CERTAIN TERMS OF THE PREFERRED SECURITIES
DISTRIBUTIONS
The preferred securities represent undivided beneficial interests in the
assets of the Trust. The only assets of the Trust will be the debentures.
Distributions on the preferred securities are cumulative and will accumulate
from December 7, 2000 at the annual rate of 8.05% of the $25 liquidation amount
of each preferred security. Distributions will be payable quarterly in arrears
on March 31, June 30, September 30 and December 31 of each year, beginning
December 31, 2000. Distributions not paid when due will themselves accumulate
distributions at the annual rate of 8.05% (to the extent permitted by law). When
we refer to any payment of distributions, any such additional distributions are
included. The amount of distributions payable for any full quarterly period will
be computed on the basis of a 360-day year of twelve 30-day months. The amount
of distributions payable for any partial period will be computed on the basis of
the actual number of days elapsed in such period.
If distributions are payable on a date that is not a business day (as
defined below), payment will be made on the next business day (and without any
interest or other payment in respect of such delay). However, if the next
business day is in the next calendar year, payment of distributions will be made
on the preceding business day. A "business day" means any day other than a
Saturday or a Sunday or a day on which banking institutions in New York, New
York are authorized or required by law or executive order to close.
DEFERRAL OF DISTRIBUTIONS
So long as no event of default has occurred and is continuing under the
debentures, American General may, on one or more occasions, defer interest
payments on the debentures to the Trust for up to 20 consecutive quarterly
periods. A deferral of interest payments cannot extend beyond the stated
maturity date of the debentures on December 31, 2049. If American General defers
interest payments on the debentures, the Trust will also defer quarterly
distributions on the preferred securities to you. During a deferral period, the
amount of distributions due to you would continue to accumulate and such
deferred distributions will themselves accumulate distributions at the rate
stated above (to the extent permitted by law).
Once American General makes all deferred interest payments on the
debentures, with accrued interest, it may again defer interest payments on the
debentures if no event of default under the debentures has then occurred and is
continuing.
American General has no current intention of deferring interest payments on
the debentures. If American General defers interest payments on the debentures,
American General will be subject to certain restrictions relating to the payment
of dividends on or redemption of its capital stock and payments on its debt
securities that rank equal with or junior to the debentures. See "Certain Terms
of the Debentures -- Option to Extend Interest Payment Period" on page S-22.
PAYMENT OF DISTRIBUTIONS
Distributions on the preferred securities will be payable to holders named
on the securities register of the Trust on the relevant record date. As long as
the preferred securities are represented by a global security, the record date
for the payment of distributions will be one business day before the relevant
payment date. If the preferred securities are ever issued in certificated form,
the record date for the payment of distributions will
S-15
<PAGE> 16
be the 15th day of the last month of each quarterly distribution period, even if
that day is not a business day.
As long as the preferred securities are represented by a global security,
payments on the preferred securities will be made in immediately available funds
to DTC, the depositary for the preferred securities. If the preferred securities
are ever issued in certificated form, payment of distributions on the preferred
securities will be made by check mailed on or before the due date to the holders
thereof on the relevant record date.
REDEMPTION
American General will repay the debentures at maturity on December 31,
2049. American General may redeem the debentures before their maturity:
- in whole or in part on one or more occasions any time on or after
December 7, 2005; and
- in whole but not in part before December 7, 2005, if certain changes in
tax or investment company law occur or will occur within 90 days (each of
which is a "Special Event" more fully described below).
When American General repays some or all of the debentures, either at
maturity on December 31, 2049 or upon early redemption, the Trust will use the
cash it receives upon the redemption of the debentures to redeem a like
liquidation amount of the preferred securities and, unless an event of default
under the trust agreement has occurred and is continuing, the common securities.
The preferred securities and common securities (if applicable) will be redeemed
at a price equal to their liquidation amount of $25 per security plus
accumulated distributions, if any. The redemption price for the debentures is
100% of their principal amount plus accrued and unpaid interest to the date of
redemption. See "Certain Terms of the Debentures -- Redemption" on page S-21.
If less than all the preferred securities and common securities are to be
redeemed in situations where common securities may be redeemed consistent with
the provisions described under "-- Subordination of Common Securities" on page
S-18, then the aggregate liquidation amount of preferred securities and common
securities to be redeemed will be allocated pro rata based on the liquidation
amount of the preferred securities and the common securities.
SPECIAL EVENT REDEMPTION
Upon the occurrence of a Tax Event or an Investment Company Event, as
defined below (each a "Special Event"), before December 7, 2005, American
General may redeem the debentures, in whole but not in part, within 90 days
following the occurrence of the Special Event.
"Tax Event" means that the Trust has received an opinion of counsel
experienced in such matters to the effect that, as a result of any:
- amendment to, or change (including any announced proposed change) in, the
laws or regulations of the United States or any political subdivision or
taxing authority affecting taxation; or
- official or administrative pronouncement or action, or judicial decision,
interpreting or applying such laws or regulations
where such change or amendment becomes effective, or such pronouncement, action
or decision is announced or occurs, on or after the date of this prospectus
supplement, there is more than an insubstantial risk that:
- the Trust is or, within 90 days of the date of such opinion, would be
subject to United States federal income tax with respect to interest
accrued or received on the debentures;
- interest payable by American General on the debentures is not or, within
90 days of the date of such opinion, would not be deductible by American
General in whole or in part for United States federal income tax
purposes; or
- the Trust is or, within 90 days of the date of such opinion, would be
subject to more than a minimal amount of other taxes, duties, assessments
or other governmental charges.
"Investment Company Event" means that the Trust has received an opinion of
counsel experienced in such matters to the effect that, as a
S-16
<PAGE> 17
result of the occurrence of a change in law or regulation or a change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority, there is more than an
insubstantial risk that the Trust is or will be considered an "investment
company" under the Investment Company Act of 1940 that is required to be
registered under this law, which change becomes effective on or after the date
of this prospectus supplement.
REDEMPTION PROCEDURES
The Trust will give you at least 30 days, but not more than 60 days,
written notice before any redemption of preferred securities. To the extent
funds are available for payment, the Trust will irrevocably deposit with DTC
sufficient funds to pay the redemption amount for the preferred securities being
redeemed. The Trust will also give DTC irrevocable instructions and authority to
pay the redemption amount in immediately available funds to the beneficial
owners of the global securities representing the preferred securities.
Distributions to be paid on or before the redemption date for any preferred
securities called for redemption will be payable to the holders on the record
dates for the related dates of distribution.
Once notice of redemption is given and funds are irrevocably deposited,
distributions on the preferred securities will cease to accumulate immediately
prior to the close of business on the redemption date and all rights of the
holders of the preferred securities called for redemption will cease, except for
the right to receive the redemption amount (but without interest on such
redemption amount).
If any redemption date is not a business day, then the redemption amount
will be payable on the next business day (and without any interest or other
payment in respect of any such delay).
If payment of the redemption amount for any preferred securities called for
redemption is improperly withheld or refused and not paid either by the Trust or
by American General, distributions on the preferred securities will continue to
accumulate at the applicable rate from the original redemption date scheduled to
the actual date of payment. In this case, the actual payment date will be
considered the redemption date for purposes of calculating the redemption
amount.
In compliance with applicable law (including the United States federal
securities laws), American General or its affiliates may, at any time, purchase
outstanding preferred securities by tender, in the open market, or by private
agreement or otherwise.
EVENTS OF DEFAULT
An event of default under the indenture (an "indenture event of default")
constitutes an event of default under the declaration with respect to the
preferred securities (a "declaration event of default"), provided that pursuant
to the declaration, the holder of the common securities will be deemed to have
waived any declaration event of default with respect to the common securities
until all declaration events of default with respect to the preferred securities
have been cured, waived or otherwise eliminated. Until such declaration event of
default with respect to the preferred securities has been cured, waived or
otherwise eliminated, the property trustee will be deemed to be acting solely on
behalf of the holders of the preferred securities and only the holders of the
preferred securities will have the right to direct the property trustee with
respect to certain matters under the declaration, and therefore the indenture.
Upon the occurrence of a declaration event of default, the indenture
trustee or the property trustee will have the right under the indenture to
declare the principal of and interest on the debentures to be immediately due
and payable.
VOTING RIGHTS
Subject to the requirement of the property trustee obtaining a tax opinion
in certain circumstances set forth in the last sentence of this paragraph, the
holders of a majority in aggregate liquidation amount of the preferred
securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the property trustee, or direct the
exercise of any trust or power conferred upon the property trustee under the
declaration, including
S-17
<PAGE> 18
the right to direct the property trustee, as holder of the debentures, to
- exercise the remedies available under the indenture with respect to the
debentures,
- waive any past indenture event of default that is waivable under the
indenture, or
- exercise any right to rescind or annul a declaration that the principal
of all the debentures shall be due and payable, or consent to any
amendment, modification or termination of the indenture or the
debentures, where such consent should be required;
provided, however, that, where a consent or action under the indenture would
require the consent or act of the holders of greater than a majority in
principal amount of debentures affected thereby (a "super-majority"), the
property trustee may only give such consent or take such action at the written
direction of the holders of at least the proportion in liquidation amount of the
preferred securities which the relevant super-majority represents of the
aggregate principal amount of the debentures outstanding. The property trustee
shall notify all holders of the preferred securities of any notice of default
received from the indenture trustee with respect to the debentures. Except with
respect to directing the time, method and place of conducting a proceeding for a
remedy, the property trustee shall not take any of the actions described in the
bullet points above unless the property trustee has obtained an opinion of tax
counsel to the effect that, as a result of such action, the Trust will not be
classified as an association taxable as a corporation for United States federal
income tax purposes.
In the event the consent of the property trustee, as the holder of the
debentures, is required under the indenture with respect to any amendment,
modification or termination of the indenture or the debentures, the property
trustee shall request the direction of the holders of the preferred securities
with respect to such amendment, modification or termination and shall vote with
respect to such amendment, modification or termination as directed by a majority
in liquidation amount of the preferred securities voting together as a single
class; provided, however, that where a consent under the indenture would require
the consent of a super-majority, the property trustee may only give such consent
at the direction of the holders of at least the proportion in liquidation amount
of the preferred securities which the relevant super-majority represents of the
aggregate principal amount of the debentures outstanding. The property trustee
shall not take any such action in accordance with the directions of the holders
of the preferred securities unless the property trustee has obtained an opinion
of tax counsel to the effect that the Trust will not be classified as an
association taxable as a corporation for United States federal income tax
purposes on account of such action.
In addition to the provisions described under "Description of Preferred
Securities -- Voting Rights; Amendment of Each Declaration" on page 25, the
declaration may be amended by the trustees and American General with (1) the
consent of holders representing a majority in liquidation amount of all
outstanding preferred securities, and (2) receipt by the trustees of an opinion
of counsel to the effect that such amendment or the exercise of any power
granted to the trustees in accordance with such amendment will not affect the
Trust's status as a grantor trust for United States federal income tax purposes
or the Trust's exemption from status as an investment company under the
Investment Company Act of 1940, provided that, without the consent of each
holder of preferred securities, the trust agreement may not be amended to (1)
change the amount or timing of any distribution or other payment on the
preferred securities or otherwise adversely affect the amount of any
distribution or other payment required to be made in respect of the preferred
securities as of a specified date, (2) change the purpose of the Trust, (3)
change the time or circumstances in which the preferred securities may be
redeemed or the amount payable upon such a redemption, (4) change the
liquidation distribution or other provisions relating to the timing or amount of
such distribution, (5) affect the limited liability of any holder of preferred
securities, or (6) restrict the right of holders of preferred securities to
institute suit for the enforcement of any such payment on or after such date.
SUBORDINATION OF COMMON SECURITIES
Payment of distributions on, and the redemption and liquidation amount of,
the
S-18
<PAGE> 19
preferred securities and the common securities will be made pro rata based on
the aggregate liquidation amounts of the preferred securities and the common
securities. However, if an event of default under the trust agreement has
occurred and is continuing, no payments may be made on the common securities
unless all unpaid amounts on the preferred securities have been provided for or
paid in full.
If an event of default under the trust agreement has occurred and is
continuing, the common securities holder will be deemed to have waived any right
to take any action with respect to the event of default until the event of
default has been cured, waived or eliminated. Until any such event of default
has been cured, waived or eliminated, the property trustee will act solely on
behalf of the holders of the preferred securities, and such holders will have
the right to direct the property trustee to act on their behalf.
BOOK-ENTRY-ONLY ISSUANCE -- DTC
The preferred securities will be represented by one or more global
securities that will be deposited with, or on behalf of, and registered in the
name of, DTC or its nominee. This means that the Trust will not issue
certificates to you for the preferred securities. Each global security will be
issued to DTC which will keep a computerized record of its participants (for
example, a broker) whose clients have purchased the preferred securities. Each
participant will then keep a record of its clients. Unless a global security is
exchanged in whole or in part for a certificated security, a global security may
not be transferred. However, DTC, its nominees and their successors may transfer
a global security as a whole to one another.
Beneficial interests in a global security will be shown on, and transfers
of the global security will be made only through, records maintained by DTC and
its participants. DTC holds securities that its participants ("direct
participants") deposit with DTC. DTC also records the settlement among direct
participants of securities transactions, such as transfers and pledges, in
deposited securities through computerized records for direct participant's
accounts. This eliminates the need to exchange certificates. Direct participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations.
DTC's book-entry system is also used by other organizations such as
securities brokers and dealers, banks and trust companies that work through a
direct participant. The rules that apply to DTC and its participants are on file
with the Securities and Exchange Commission.
DTC is owned by a number of its direct participants and by the New York
Stock Exchange, the American Stock Exchange and the National Association of
Securities Dealers.
DTC has advised American General and the Trust that DTC is a
limited-purpose trust company organized under New York Banking Law, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as amended.
Purchases under the DTC System
When you purchase preferred securities through the DTC system, the
purchases must be made by or through a direct participant, who will receive
credit for the preferred securities on DTC's records. Because you actually own
the preferred security, you are the beneficial owner. Your ownership interest
will be recorded only on the direct (or indirect) participants' records. DTC has
no knowledge of your individual ownership of the preferred securities. DTC's
records show only the identity of the direct participants and the amount of the
preferred securities held by or through them. You will not receive a written
confirmation of your purchase or sale or any periodic account statement directly
from DTC. You will receive these from your direct (or indirect) participant. As
a result, the direct (or indirect) participants are responsible for keeping
accurate account of the holdings of their customers, like you.
Payments under the DTC System
The property trustee will wire payments on the preferred securities to
DTC's nominee. American General, the Trust and the property
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trustee will treat DTC's nominee as the owner and holder of each global security
representing preferred securities for all purposes. Accordingly, American
General, the Trust and the property trustee will have no direct responsibility
or liability to pay amounts due on the global security to you or any other
beneficial owners in the global security.
Any redemption notices will be sent by American General and the Trust
directly to DTC, who will in turn inform the direct participants, who will then
contact you as a beneficial owner. If less than all of the preferred securities
are being redeemed, DTC's practice is to choose by lot the amount of the
interest of each direct participant to be redeemed. The direct participant will
then use an appropriate method to allocate the redemption among its beneficial
owners, like you.
It is DTC's current practice, upon receipt of any payment of distributions
or liquidation or redemption amount, to credit direct participants' accounts on
the payment date based on their holdings of beneficial interests in the global
securities as shown on DTC's records. In addition, it is DTC's current practice
to assign any consenting or voting rights to direct participants whose accounts
are credited with preferred securities on a record date, by using an omnibus
proxy. Payments by participants to owners of beneficial interests in the global
securities, and voting by participants, will be based on the customary practices
between the participants and owners of beneficial interests, as is the case with
securities held for the account of customers registered in "street name."
However, payments will be the responsibility of the participants and not of DTC,
the property trustee, American General or the Trust.
EXCHANGE OF GLOBAL SECURITIES
Preferred securities represented by a global security will be exchangeable
for certificated securities with the same terms in authorized denominations only
if:
- DTC is unwilling, unable or ineligible to continue as depositary and a
successor depositary is not appointed by the Trust within 90 days; or
- American General decides to discontinue use of the system of book-entry
transfer through DTC (or any successor depositary).
If the book-entry-only system is discontinued, the property trustee will
keep the registration books for the preferred securities at its corporate office
and follow the practices and procedures discussed below.
CERTIFICATED SECURITIES -- REGISTRATION AND TRANSFER
If the Trust issues certificated securities, they will be registered in the
name of the security-holder. The preferred securities may be transferred or
exchanged, based on administrative procedures in the trust agreement, without
the payment of any service charge (other than any tax or other governmental
charge) by contacting the property trustee, Bankers Trust Company, Four Albany
Street, New York, New York 10006, attention: Corporate Trust and Agency
Services -- Corporate Market Services.
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CERTAIN TERMS OF THE DEBENTURES
The debentures will be issued as a series pursuant to a supplemental
indenture or a resolution of American General's board of directors or a
committee thereof as provided for in the indenture.
SUBORDINATION
The debentures are unsecured and are junior in right of payment to all of
American General's Senior Indebtedness (as defined on page 16). American General
may not make any payments of principal (including redemption payments) or
interest on the debentures if it defaults on a payment on its Senior
Indebtedness. Also, payments on the debentures may be blocked for up to 180 days
in the event of certain non-payment defaults by American General on its Senior
Indebtedness. See "Description of Junior Subordinated
Debentures -- Subordination" beginning on page 15 for more detailed information
on the subordination provisions.
On any distribution of assets of American General to creditors upon any
liquidation, dissolution, winding-up, reorganization, assignment for the benefit
of creditors, marshalling of assets or liabilities or any bankruptcy, insolvency
or similar proceedings, all principal, premium, if any, and interest due or to
become due on all Senior Indebtedness must be paid in full before the holders of
the debentures are entitled to receive or retain any payment.
Neither the debentures nor the guarantee will limit the ability of American
General and its subsidiaries to incur additional indebtedness, including
indebtedness that ranks senior in priority of payment to the debentures and the
guarantee. At September 30, 2000, on a pro forma basis, as if on that date
American General and the Trust had issued and sold the preferred securities and
the debentures and applied the estimated net proceeds thereof as described in
this prospectus supplement, the total amount of American General's Senior
Indebtedness would have been approximately $3.6 billion. See "Capitalization" on
page S-10 and "Use of Proceeds" on page S-11.
INTEREST RATE AND MATURITY
The debentures will mature on December 31, 2049 and will bear interest,
accruing from December 7, 2000, at the annual rate of 8.05% of their principal
amount, payable quarterly in arrears on March 31, June 30, September 30 and
December 31 of each year, beginning December 31, 2000. Interest payments not
paid when due will themselves accrue additional interest at the annual rate of
8.05% (to the extent permitted by law). When we refer to any payment of
interest, interest includes such additional interest and any Additional Sums, as
defined below. The interest payment provisions for the debentures correspond to
the distribution provisions of the preferred securities. The debentures do not
have a sinking fund. This means that American General is not required to make
any principal payments prior to maturity.
ADDITIONAL SUMS
If the Trust is required to pay any taxes, duties, assessments or
governmental charges of whatever nature (other than withholding taxes) imposed
by the United States, or any other taxing authority (collectively, "Taxes"),
then American General will be required to pay additional amounts ("Additional
Sums") on the debentures so that after the Trust pays any Taxes, the Trust will
be in the same position it would have been if it did not have to pay such Taxes.
REDEMPTION
American General may redeem the debentures before their maturity:
- in whole or in part on one or more occasions any time on or after
December 7, 2005; or
- in whole but not in part before December 7, 2005, upon the occurrence of
a Special Event.
If American General decides to redeem debentures in these circumstances,
the redemption price of each debenture redeemed will be equal to 100% of the
principal amount of such debenture plus accrued and unpaid interest on such
debenture to the date of redemption.
DISTRIBUTION OF DEBENTURES
If the property trustee distributes the debentures to the preferred
securities holders and
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common securities holder upon the dissolution and liquidation of the Trust, the
debentures will be issued in denominations of $25 principal amount and integral
multiples thereof. American General anticipates that the debentures would be
distributed in the form of one or more global securities and DTC, or any
successor depositary for the preferred securities, would act as depositary for
the debentures. The depositary arrangements for the debentures would be
substantially similar to those in effect for the preferred securities.
For a description of DTC and the terms of the depositary arrangements
relating to payments, transfers, voting rights, redemption, other notices and
other matters, see "Certain Terms of the Preferred Securities -- Book-Entry-Only
Issuance -- DTC" beginning on page S-19.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
American General may, on one or more occasions, defer interest payments on
the debentures for up to 20 consecutive quarterly periods, if no event of
default has occurred and is continuing with respect to the debentures. A
deferral of interest payments cannot extend beyond the stated maturity date of
the debentures. No interest will be due and payable on the debentures until the
end of the deferral period unless the debentures are redeemed prior to such
time.
American General may pay at any time all or any portion of the interest
accrued to that point during a deferral period. At the end of the deferral
period or at a redemption or maturity date, American General will be obligated
to pay all accrued and unpaid interest.
Once American General makes all interest payments on the debentures, with
accrued interest, it may again defer interest payments on the debentures if no
event of default under the debentures has then occurred and is continuing.
During any deferral period and subject to the exceptions described on page
12, American General will not be permitted to:
- declare or pay any dividends or distributions or redeem, purchase,
acquire or make a liquidation payment with respect to, any shares of its
capital stock;
- make any payment of principal, interest or premium, if any, on or repay
or repurchase or redeem any debt securities issued by American General
which rank equal with or junior to the debentures; or
- make any guarantee payments with respect to any guarantee by American
General of the debt securities of any subsidiary of American General if
such guarantee ranks equal with or junior to the debentures.
Because the debentures to be issued to the Trust will rank equal with all
other series of junior subordinated debt securities of American General
initially issued to the other trusts referred to in the accompanying prospectus
or to certain other trusts, partnerships or other entities affiliated with
American General, during an interest deferral period, American General will not
be permitted to make payments on such other series of junior subordinated debt
securities. Likewise, if American General defers interest payments on any other
of such series of junior subordinated debt securities, it is not expected that
American General will be permitted to make payments on the debentures.
The restrictions described in the bullet points above will also apply if
there occurs and is continuing a default or event of default under the indenture
of which American General has actual knowledge and in respect of which American
General has not taken reasonable steps to cure or if American General defaults
on its obligations under the guarantee.
American General will give the Trust, the administrative trustees, the
property trustee and the indenture trustee notice if it decides to defer
interest payments on the debentures as specified in the terms of the debentures.
There is no limitation on the number of times that American General may
elect to begin an extension period. The administrative trustees will give notice
to the property trustee and the holders of preferred securities if American
General decides to defer interest payments on the debentures.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
GENERAL
In this section, we summarize certain of the material United States federal
income tax consequences of purchasing, holding and selling the preferred
securities. Except where we state otherwise, this summary deals only with
preferred securities held as capital assets (as defined in the Internal Revenue
Code of 1986) by a US Holder (as defined below) who purchases the preferred
securities at their original offering price when the Trust originally issues
them.
We do not address all of the tax consequences that may be relevant to a US
Holder. We also do not address, except as stated below, any of the tax
consequences to holders that are Non-US Holders (as defined below) or to holders
that may be subject to special tax treatment including banks, thrift
institutions, real estate investment trusts, personal holding companies,
tax-exempt organizations, regulated investment companies, insurance companies,
and brokers and dealers in securities or currencies. Further, we do not address:
- the United States federal income tax consequences to shareholders in, or
partners or beneficiaries of, an entity that is a holder of the preferred
securities;
- the United States federal estate and gift or alternative minimum tax
consequences of the purchase, ownership or sale of the preferred
securities;
- persons who hold the preferred securities in a "straddle" or as part of a
"hedging," "conversion" or "constructive sale" transaction or whose
"functional currency" is not the United States dollar; or
- any state, local or foreign tax consequences of the purchase, ownership
and sale of preferred securities.
Accordingly, you should consult your tax advisor regarding the tax
consequences of purchasing, owning and selling the preferred securities in light
of your circumstances.
A "US Holder" is a preferred securities holder who or which is:
- a citizen or resident of the United States;
- a corporation or partnership created or organized in or under the laws of
the United States, any state thereof or the District of Columbia (unless,
in the case of a partnership, Treasury regulations provide otherwise);
- an estate if its income is subject to United States federal income
taxation regardless of its source; or
- a trust if (1) a United States court can exercise primary supervision
over its administration and (2) one or more United States persons have
the authority to control all of its substantial decisions.
A "Non-US Holder" is a preferred securities holder other than a US Holder.
This summary is based on the Internal Revenue Code, Treasury regulations
(proposed and final) issued under the Internal Revenue Code, and administrative
and judicial interpretations thereof, all as they currently exist as of the date
of this prospectus supplement. These income tax laws and regulations, however,
may change at any time, possibly on a retroactive basis. Any such changes may
affect this summary.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
In connection with the issuance of the debentures, Vinson & Elkins L.L.P.,
counsel to American General and the Trust ("Counsel"), will render a legal
opinion generally to the effect that under current law and assuming full
compliance with the terms of the indenture and certain other documents, and
based on certain facts and assumptions described in the opinion, the debentures
that will be held by the Trust will be classified, for United States federal
income tax purposes, as indebtedness of American General.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the preferred securities, Counsel will
render a legal opinion generally to the effect that, under current
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law and assuming full compliance with the terms of the trust agreement, the
indenture, and certain other documents, and based on certain facts and
assumptions described in the opinion, the Trust will be classified for United
States federal income tax purposes as a grantor trust and will not be subject to
tax as a corporation. Accordingly, for United States federal income tax
purposes, you will generally be treated as the owner of an undivided interest in
the assets of the Trust, including the debentures. You will be required to
include in ordinary income for United States federal income tax purposes your
allocable share of interest (or OID, if any) paid or accrued on the debentures.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under the Treasury regulations relating to OID, a debt instrument will be
deemed to be issued with OID if there is more than a "remote" contingency that
periodic stated interest payments due on the instrument will not be timely paid.
Because the exercise by American General of its option to defer payments of
stated interest on the debentures would prevent American General from (i)
declaring dividends, or engaging in certain other capital transactions, with
respect to its capital stock, or (ii) making any payment on any debt securities
issued by American General which rank equal with or junior to the debentures,
American General believes that the likelihood of its exercising the option is
"remote" within the meaning of the Treasury regulations. As a result, American
General intends to take the position, based on the advice of Counsel, that the
debentures will not be deemed to be issued with OID. Based on this position,
stated interest payments on the debentures will be includible in your ordinary
income at the time that such payments are received or accrued in accordance with
your regular method of accounting. Because the Internal Revenue Service has not
yet addressed the Treasury regulations in any published rulings or other
interpretations, it is possible that the Internal Revenue Service could take a
position contrary to the position taken by American General. In that event, the
Internal Revenue Service may, for example, require you to include interest on
the debentures in your taxable income as it accrues rather than when you receive
payment even though you use the cash method of accounting for federal income tax
purposes.
EXERCISE OF DEFERRAL OPTIONS
Under Treasury regulations, if American General were to exercise its option
to defer the payment of interest on the debentures, the debentures would be
treated as redeemed and reissued for OID purposes and the sum of the remaining
interest payments on the debentures would be treated as OID, which you would be
required to accrue and include in taxable income on an economic accrual basis
(regardless of your method of accounting for income tax purposes) over the
remaining term of the debentures (including any period of interest deferral),
without regard to the timing of payments under the debentures. The amount of
interest income includible in your taxable income would be determined on the
basis of a constant yield method over the remaining term of the debentures and
the actual receipt of future payments of stated interest on the debentures would
no longer be separately reported as taxable income. The amount of OID that would
accrue, in the aggregate, during the deferred interest payment period would be
approximately equal to the amount of the cash payment due at the end of such
period. Any OID included in income would increase your adjusted tax basis in
your preferred securities, and your actual receipt of cash interest payments
would reduce your basis in the preferred securities.
CORPORATE US HOLDERS
Corporate US Holders of the preferred securities will not be entitled to a
dividends-received deduction for any income from the preferred securities.
SALES OF PREFERRED SECURITIES
If you sell your preferred securities, you will recognize gain or loss in
an amount equal to the difference between your adjusted tax basis in the
preferred securities and the amount realized from the sale (generally, your
selling price less any amount received in respect of accrued but unpaid interest
not previously included in your income). Your adjusted tax basis in the
preferred securities generally will equal (1) the initial purchase price that
you paid for the preferred securities plus (2) any accrued and unpaid
distributions that you were required to treat as OID less any cash distributions
received in respect of accrued OID.
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Gain or loss on the sale of preferred securities generally will be capital gain
or loss.
The preferred securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest (or OID if the debentures are
treated as having been issued or reissued with OID) relating to the underlying
debentures. If you dispose of your preferred securities, you will be required to
include in ordinary income for United States federal income tax purposes any
portion of the amount realized that is attributable to accrued but unpaid
interest (including OID, if any) through the date of sale. This income inclusion
will increase your adjusted tax basis in the preferred securities but may not be
reflected in the sale price. To the extent the sale price is less than your
adjusted tax basis, you will recognize a capital loss. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes.
RECEIPT OF DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST
If American General dissolves the Trust and causes the Trust to distribute
the debentures on a pro rata basis to you, you will not be subject to tax.
Rather, you would have an adjusted tax basis in the debentures received in the
liquidation equal to the adjusted tax basis in your preferred securities
surrendered for the debentures. Your holding period for the debentures would
include the period during which you had held the preferred securities. If,
however, the Trust is classified, for United States federal income tax purposes,
as an association that is subject to tax as a corporation at the time of the
liquidation, the distribution of the debentures would constitute a taxable event
to you and you would acquire a new holding period in the debentures received.
If the debentures are redeemed for cash and the proceeds of the redemption
are distributed to you in redemption of your preferred securities, the
redemption would be treated as a sale of the preferred securities, in which gain
or loss would be recognized, as described above under "-- Sales of Preferred
Securities."
INFORMATION REPORTING AND BACK-UP WITHHOLDING
Generally, income on the preferred securities will be reported to you on an
Internal Revenue Service Form 1099, which should be mailed to you by January 31
following each calendar year. If you fail to supply your correct taxpayer
identification number or under-report your tax liability, the Internal Revenue
Service may require the property trustee or its agent to withhold federal income
tax at the rate of 31% from each interest payment. You will be permitted to
credit any withheld tax against your federal income tax liability.
NON-US HOLDERS
Payments to a Non-US Holder will generally not be subject to United States
federal withholding tax, provided the Non-US Holder:
- does not own (directly or indirectly, actually or constructively) 10% or
more of the total combined voting power of all classes of stock of
American General entitled to vote;
- is not a controlled foreign corporation that is related to American
General through stock ownership; and
- is not a bank receiving interest described in section 881(c)(3)(A) of the
Internal Revenue Code.
To qualify for this exemption from withholding, the last United States
payer in the chain of payment prior to payment to a Non-US Holder (the
"withholding agent") must have received in the year in which a payment of
interest or principal occurs, or in either of the two preceding calendar years,
a statement that:
- is signed by the Non-US Holder under penalties of perjury;
- certifies that the holder of the preferred securities is a Non-US Holder;
and
- provides the name and address of the Non-US Holder.
The statement may be made on an Internal Revenue Service Form W-8BEN or a
substantially similar form, and the Non-US Holder must inform the withholding
agent of any change in the information on the statement within 30 days of any
change. If the preferred securities are held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide a signed
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statement to the withholding agent along with a copy of Internal Revenue Service
Form W-8BEN or the substitute form provided by the Non-US Holder.
A Non-US Holder will generally not be subject to United States federal
withholding or income tax on any gain realized upon the sale or other
disposition of the preferred securities. If, however, a Non-US Holder holds the
preferred securities in connection with a trade or business conducted in the
United States or is present in the United States for 183 days or more during the
taxable year of disposition and certain other conditions are met, it may be
subject to income tax on all income and gains recognized.
NON-US HOLDER WITHHOLDING REGULATIONS
The Treasury Department has issued regulations which make certain
modifications to the withholding, backup withholding and information reporting
rules described above. These regulations attempt to unify certification
requirements and modify reliance standards. The regulations will generally be
effective for payments made after December 31, 2000, subject to certain
transition rules. Prospective investors are urged to consult their own tax
advisors regarding these regulations.
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ERISA CONSIDERATIONS
Each fiduciary of a pension, profit-sharing or other employee benefit plan
subject to Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") (a "Plan"), should consider the fiduciary standards of ERISA
in the context of the Plan's particular circumstances before authorizing an
investment in the Preferred Securities with assets of the Plan. Accordingly,
among other factors, the fiduciary should consider whether the investment would
satisfy the prudence and diversification requirements of ERISA and would be
consistent with the documents and instruments governing the Plan.
Section 406 of ERISA and Section 4975 of the Code prohibit Plans, as well
as individual retirement accounts and Keogh plans subject to Section 4975 of the
Code (also "Plans"), from engaging in certain transactions involving "plan
assets" with persons who are "parties in interest" under ERISA or "disqualified
persons" under the Code ("Parties in Interest") with respect to such Plan. A
violation of these "prohibited transaction" rules may result in an excise tax or
other liabilities under ERISA and/or Section 4975 of the Code for such persons,
unless exemptive relief is available under an applicable statutory or
administrative exemption.
Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA), certain church plans (as defined in Section 3(33) of ERISA) and
foreign plans (as described in Section 4(b)(4) of ERISA) are not subject to the
requirements of ERISA or Section 4975 of the Code; however, such plans may be
subject to federal, state or local laws or regulations which affect their
ability to invest in the preferred securities. Any fiduciary of such a
governmental, church or foreign plan considering an investment in the preferred
securities should determine the need for, and, if necessary, the availability
of, any exemptive relief under such laws or regulations.
Under a regulation (the "Plan Assets Regulation") issued by the U.S.
Department of Labor (the "DOL"), the assets of the Trust may be deemed to be
"plan assets" of a Plan for purposes of ERISA and Section 4975 of the Code if
"plan assets" of the Plan were used to acquire an equity interest in the Trust
and no exception were applicable under the Plan Assets Regulation. An "equity
interest" is defined under the Plan Assets Regulation as any interest in an
entity other than an instrument which is treated as indebtedness under
applicable local law and which has no substantial equity features and
specifically includes a beneficial interest in a trust.
Pursuant to an exception contained in the Plan Assets Regulation, the
assets of the Trust would not be deemed to be "plan assets" of investing Plans
if the preferred securities qualify as "publicly-offered securities" as defined
in the Plan Assets Regulation. In general, to qualify as "publicly-offered
securities," the preferred securities must be (i) sold as part of an offering of
securities pursuant to an effective registration statement under the Securities
Act of 1933, (ii) part of a class of securities that is registered under the
Securities Exchange Act of 1934, (iii) freely transferrable, and (iv) upon the
completion of the initial offering of such securities, owned by 100 or more
investors independent of the Trust and of one another. Although no assurance can
be given, it is currently anticipated that the preferred securities would be
considered to be "publicly-offered securities" under the Plan Assets Regulation.
All of the common securities will be purchased and held by American General.
Certain transactions involving the Trust could be deemed to constitute
direct or indirect prohibited transactions under ERISA and Section 4975 of the
Code with respect to a Plan if the preferred securities were acquired with "plan
assets" of such Plan and the assets of the Trust were deemed to be "plan assets"
of Plans investing in the Trust. For example, if American General were a Party
in Interest with respect to a Plan (either directly or by reason of ownership of
its subsidiaries), extensions of credit between American General and the Trust
(as represented by the debentures and the guarantee) would likely be prohibited
by Section 406(a)(1)(B) of ERISA and Section 4975(c)(1)(B) of the Code, unless
exemptive relief were available under an applicable administrative exemption
(see below). In addition, if American General were considered to be a fiduciary
with respect to the Trust as a result of certain powers it holds (such as the
powers to remove and replace the property trustee and the administrative
trustees), certain operations of the Trust, including the optional redemption or
acceleration of the debentures, could be considered to be prohibited
transactions under Section 406(b) of ERISA and
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Section 4975(c)(1)(E) of the Code. In order to avoid such prohibited
transactions, each investing plan, by purchasing preferred securities, will be
deemed to have directed the Trust to invest in the debentures and to have
appointed the property trustee.
The DOL has issued five prohibited transaction class exemptions ("PTCEs")
that may provide exemptive relief if required for direct or indirect prohibited
transactions that may arise from the purchase or holding of the preferred
securities if assets of the Trust were deemed to be "plan assets" of Plans
investing in the Trust as described above. Those class exemptions are PTCE 96-23
(for certain transactions determined by in-house asset managers), PTCE 95-60
(for certain transactions involving insurance company general accounts), PTCE
91-38 (for certain transactions involving bank collective investment funds),
PTCE 90-1 (for certain transactions involving insurance company separate
accounts), and PTCE 84-14 (for certain transactions determined by independent
qualified asset managers).
Because of the potential prohibited transaction exposures described above,
the preferred securities may not be purchased and should not be held by any
Plan, any entity whose underlying assets include "plan assets" by reason of any
Plan's investment in the entity (a "Plan Asset Entity") or any person investing
"plan assets" of any Plan, unless such purchaser or holder is eligible for the
exemptive relief available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or
another applicable exemption. Any purchaser or holder of the preferred
securities or any interest therein will be deemed to have represented by its
purchase and holding thereof that it either (a) is not a Plan or a Plan Asset
Entity and is not purchasing such securities on behalf of or with "plan assets"
of any Plan, or (b) is eligible for the exemptive relief available under PTCE
96-23, 95-60, 91-38, 90-1 or 84-14 or another applicable exemption with respect
to such purchase or holding.
Due to the complexity of these rules and the penalties that may be imposed
upon persons involved in non-exempt prohibited transactions, it is particularly
important that fiduciaries or other persons considering purchasing the preferred
securities on behalf of or with "plan assets" of any Plan consult with their
counsel regarding the potential consequences if the assets of the Trust were
deemed to be "plan assets" and the availability of exemptive relief under PTCE
96-23, 95-60, 91-38, 90-1 or 84-14 or any other applicable exemption.
A Plan fiduciary should consider whether the purchase of preferred
securities could result in a delegation of fiduciary authority to the property
trustee, and, if so, whether such a delegation of authority is permissible under
the Plan's governing instrument or any investment management agreement with the
Plan. In making such a determination, a Plan fiduciary should note that, under
the governing documents, the property trustee will have only limited custodial
and ministerial authority with respect to Trust assets and will be required to
follow instructions of investors rather than exercising independent fiduciary
authority over Trust assets.
THE DISCUSSION HEREIN OF ERISA IS GENERAL IN NATURE AND IS NOT INTENDED TO
BE COMPLETE. ANY FIDUCIARY OF A PLAN, GOVERNMENTAL PLAN, CHURCH PLAN OR FOREIGN
PLAN CONSIDERING AN INVESTMENT IN THE PREFERRED SECURITIES SHOULD CONSULT WITH
ITS LEGAL ADVISORS REGARDING THE CONSEQUENCES AND ADVISABILITY OF SUCH
INVESTMENT.
S-28
<PAGE> 29
UNDERWRITING
Subject to the terms and conditions of an underwriting agreement, the Trust
has agreed to sell to each of the underwriters named below, and each of the
underwriters, for whom Salomon Smith Barney Inc., Merrill Lynch, Pierce, Fenner
& Smith Incorporated, Morgan Stanley & Co. Incorporated, Prudential Securities
Incorporated, UBS Warburg LLC, Banc of America Securities LLC, Banc One Capital
Markets, Inc. and First Union Securities, Inc. are acting as the
representatives, has severally agreed to purchase from the Trust, the number of
preferred securities set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
PREFERRED
UNDERWRITER SECURITIES
----------- ----------
<S> <C>
Salomon Smith Barney Inc.................................... 605,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... 600,000
Morgan Stanley & Co. Incorporated........................... 600,000
Prudential Securities Incorporated.......................... 600,000
UBS Warburg LLC............................................. 600,000
Banc of America Securities LLC.............................. 75,000
Banc One Capital Markets, Inc............................... 75,000
First Union Securities, Inc................................. 75,000
ABN AMRO Incorporated....................................... 30,000
Bear Stearns & Co. Inc. .................................... 30,000
Charles Schwab & Co. Inc. .................................. 30,000
Chase Securities Inc. ...................................... 30,000
CIBC World Markets Corp. ................................... 30,000
Credit Suisse First Boston Corporation...................... 30,000
Dain Rauscher Wessels, a division of Dain Rauscher
Incorporated.............................................. 30,000
Fifth Third Securities ..................................... 30,000
Fleet Securities Inc. ...................................... 30,000
H&R Block, Inc. ............................................ 30,000
J.P. Morgan Securities Inc. ................................ 30,000
McDonald Investments Inc. .................................. 30,000
NatCity Investments, Inc. .................................. 30,000
Raymond James & Associates, Inc. ........................... 30,000
Robert W. Baird & Co. Incorporated.......................... 30,000
The Robinson-Humphrey Company, LLC ......................... 30,000
Suntrust Equitable Securities Corp. ........................ 30,000
U.S. Bancorp Piper Jaffray Inc. ............................ 30,000
Wachovia Securities, Inc. .................................. 30,000
Advest, Inc. ............................................... 10,000
BB&T Capital Markets, a Division of Scott & Stringfellow.... 10,000
C.L. King & Associates, Inc. ............................... 10,000
D.A. Davidson & Co. Incorporated............................ 10,000
Davenport & Company LLC .................................... 10,000
Fahnestock & Co. Inc. ...................................... 10,000
Gibraltar Securities Co. ................................... 10,000
Gruntal & Co., L.L.C. ...................................... 10,000
J.J.B. Hilliard, W.L. Lyons, Inc. .......................... 10,000
Janney Montgomery Scott Inc. ............................... 10,000
Legg Mason Wood Walker, Incorporated........................ 10,000
Mesirow Financial, Inc. .................................... 10,000
Morgan Keegan & Company, Inc. .............................. 10,000
Stephens Inc. .............................................. 10,000
</TABLE>
S-29
<PAGE> 30
<TABLE>
<CAPTION>
NUMBER OF
PREFERRED
UNDERWRITER SECURITIES
----------- ----------
<S> <C>
Stifel, Nicolaus & Co., Inc................................. 10,000
TD Securities (USA) Inc. ................................... 10,000
Tucker Anthony Inc.......................................... 10,000
Utendahl Capital Partners, L.P. ............................ 10,000
Wedbush Morgan Securities, Inc. ............................ 10,000
William Blair & Company, L.L.C. ............................ 10,000
---------
Total........................................... 4,000,000
=========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the preferred securities included in this offering are
subject to approval of certain legal matters by counsel and to certain other
conditions. The underwriters are obligated to purchase all of the preferred
securities if they purchase any of the preferred securities.
The underwriters propose to offer some of the preferred securities directly
to the public at the initial public offering price set forth on the cover page
of this prospectus supplement, and some of the preferred securities to certain
dealers at the initial public offering price less a concession of $0.50 per
preferred security. The underwriters may allow, and such dealers may reallow, a
concession not in excess of $0.30 per preferred security to certain brokers and
dealers. After the initial offering of the preferred securities to the public,
the public offering price and other selling terms may be changed by the
representatives.
In view of the fact that the proceeds of the sale of the preferred
securities will ultimately be used to purchase the debentures, the underwriting
agreement provides that American General will pay as compensation to the
underwriters $0.7875 per preferred security for the accounts of the several
underwriters ($3,150,000 in the aggregate).
In connection with the offering, Salomon Smith Barney Inc., on behalf of
the underwriters, may purchase and sell preferred securities in the open market.
These transactions may include over-allotment, syndicate covering transactions
and stabilizing transactions. Over-allotment involves syndicate sales of
preferred securities in excess of the principal amount of preferred securities
to be purchased by the underwriters in the offering, which creates a syndicate
short position. Syndicate covering transactions involve purchases of the
preferred securities in the open market after the distribution has been
completed in order to cover syndicate short positions. Stabilizing transactions
consist of certain bids or purchases of preferred securities made for the
purpose of preventing or retarding a decline in the market price of the
preferred securities while the offering is in progress.
The underwriters also may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Salomon Smith Barney Inc., in covering syndicate short positions or making
stabilizing purchases, repurchases preferred securities originally sold by that
syndicate member.
Any of these activities may cause the price of the preferred securities to
be higher than the price that otherwise would exist in the open market in the
absence of such transactions. These transactions may be effected in the
over-the-counter market or otherwise and, if commenced, may be discontinued at
any time.
The expenses associated with the offer and sale of the preferred securities
are estimated to be $250,000.
Certain of the underwriters and their affiliates have in the past provided,
and may in the future provide, investment banking services to American General
and its affiliates in the ordinary course of business.
American General and the Trust have agreed to indemnify the several
underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or contribute to payments the underwriters
may be required to make in respect of any of those liabilities.
S-30
<PAGE> 31
Application has been made to list the preferred securities on the New York
Stock Exchange. If approved, trading of the preferred securities on the New York
Stock Exchange is expected to commence within a 30-day period after the initial
delivery of the preferred securities. Prior to this offering, there has been no
public market for the preferred securities. In order to meet one of the
requirements for listing the preferred securities on the New York Stock
Exchange, the underwriters will undertake to sell lots of 100 or more preferred
securities to a minimum of 400 beneficial holders.
American General and the Trust have agreed that, until after the issuance
of the preferred securities, they will not offer, sell, contract to sell, or
otherwise dispose of any preferred securities, any other beneficial interests of
the Trust, or any securities of American General, that are substantially similar
to the preferred securities, including the guarantee, and including but not
limited to any securities that are convertible into or exchangeable for, or that
represent the right to receive preferred securities or any such substantially
similar securities of either the Trust or American General (except the
debentures and the preferred securities offered hereby), without the prior
consent of the representatives.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the preferred
securities, the enforceability of the trust agreement and the creation of the
Trust will be passed upon on behalf of the Trust by Richards, Layton & Finger,
P.A., Wilmington, Delaware, special Delaware counsel to the Trust and American
General. The validity of the debentures, the guarantee and certain matters
relating thereto, will be passed upon on behalf of American General and the
Trust by Vinson & Elkins L.L.P. Attorneys of Vinson & Elkins L.L.P. working on
this offering of preferred securities own Common Stock of American General
representing less than one percent of the outstanding Common Stock of American
General. Certain legal matters will be passed upon for the underwriters by Brown
& Wood LLP, New York, New York. Vinson & Elkins L.L.P. and Brown & Wood LLP will
rely on the opinion of Richards, Layton & Finger, P.A. as to matters of Delaware
law. Certain matters relating to United States federal income tax considerations
will be passed upon for American General by Vinson & Elkins L.L.P.
EXPERTS
The consolidated financial statements of American General Corporation
incorporated by reference in American General Corporation's Annual Report (Form
10-K) for the year ended December 31, 1999, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon incorporated by
reference therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given on the authority of such firm as experts in accounting and
auditing.
S-31
<PAGE> 32
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4,000,000 PREFERRED SECURITIES
AMERICAN GENERAL CAPITAL III
8.05% TRUST PREFERRED SECURITIES (TRUPS(R))
FULLY AND UNCONDITIONALLY
GUARANTEED, TO THE EXTENT DESCRIBED HEREIN, BY
AMERICAN GENERAL CORPORATION
------------
PROSPECTUS SUPPLEMENT
NOVEMBER 30, 2000
------------
SALOMON SMITH BARNEY
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
PRUDENTIAL SECURITIES
UBS WARBURG LLC
BANC OF AMERICA SECURITIES LLC
BANC ONE CAPITAL MARKETS, INC.
FIRST UNION SECURITIES, INC.
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