[Federal Register Volume 65, Number 212 (Wednesday, November 1, 2000)]
[Notices]
[Pages 65364-65369]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-28049]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-24714; File No. 812-12054]


The Variable Annuity Life Insurance Company, et al.

October 26, 2000.
AGENCY: The Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order pursuant to Section 26(b) of 
the Investment Company Act of 1940 (the ``Act'') approving certain 
substitutions of securities and an order of exemption pursuant to 
Section 17(b) of the Act from Section 17(a) of the Act.

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Summary of Application: Applicants request an order to permit a unit 
investment trust to substitute (a) Shares of North American--Founders 
Large Cap Growth Fund for shares of Dreyfus Founders Growth Fund; (b) 
Shares of North American--American Century Income & Growth Fund for 
shares of Neuberger Berman Guardian Trust and for shares of Scudder 
Growth and Income Fund; (c) Shares of North American--Founders/T. Rowe 
Price Small Cap Fund for shares of T. Rowe Price Small-Cap Fund, Inc. 
and for shares of Dreyfus Variable Investment Fund Small Cap Portfolio 
(``Dreyfus VIF Small Cap''); (d) Shares of North American--American 
Century International Growth Fund for shares of Templeton International 
Securities Fund; (e) Shares of North American--AG Core Bond Fund for 
shares of American General Domestic Bond Fund; (f) Shares of North 
American--AG Moderate Growth Lifestyle Fund for shares of American 
General Balanced Fund; and (g) Shares of North American International 
Growth Fund for shares of American General International Value Fund. 
The shares are currently held by that unit investment trust to support 
certain deferred premium variable annuity contracts (the 
``Contracts'').

Applicants: The Variable Annuity Life Insurance Company (``VALIC''); 
VALIC Separate Account A (the ``Account''); North American Funds 
Variable Product Series I (``NAFV I'') and North American Funds 
Variable Product Series II (``NAFV II'') (VALIC and the Account are the 
``Substitution Applicants''; VALIC, the Account, NAFV I and NAFV II are 
the ``Section 17 Applicants'').

Filing Date: The application was filed on March 31, 2000; an amendment 
substantially conforming to this Notice will be filed during the 
pendencey of the Notice period.

Hearing of Notification of Hearing: An order granting the application 
will be issued unless the Commission orders a hearing. Interested 
persons may request a hearing by writing to the Secretary of the 
Commission and serving Applicants with a copy of the request, 
personally or by mail. Hearing requests should be received by the 
Commission by 5:30 p.m. on November 16, 2000, and should be accompanied 
by proof of service on Applicants, in the form of an affidavit or, for 
lawyers, a certificate of service. Hearing requests should state the 
nature of the writer's interest, the reason for the request, and the 
issues contested. Persons may request notification of a hearing by 
writing to the Secretary of the Commission.

ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth 
Street, NW., Washington, DC 20549-0609. Applicants: Nori Gabert, Esq., 
The Variable Annuity Life Insurance Company, 2929 Allen Parkway, 
Houston, Texas 77019, and David C. Mahaffey, Esq., Sullivan & Worcester 
LLP, 1025 Connecticut Avenue, NW., Washington, DC 20036.

FOR FURTHER INFORMATION CONTACT: Keith Carpenter, Branch Chief, or 
Rebecca A. Marquigny, Senior Counsel

[[Page 65365]]

at (202) 942-0670, Office of Insurance Products, Division of Investment 
Management.

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application; the complete application may be obtained for a fee from 
the Public Reference Branch of the Commission, 450 Fifth Street, N.W., 
Washington, D.C. 20549 (tel. (202) 942-8090).

Applicant's Representations

    1. VALIC is a stock life insurance company organized under the 
Texas Insurance Code. VALIC is an indirect wholly-owned subsidiary of 
American General Corporation.
    2. The Account is registered under the Act as a unit investment 
trust (File No. 811-03240). The assets of the Account support certain 
Contracts, and interests in the Account offered through such Contracts 
have been registered under the Securities Act of 1933 (``1933 Act'') on 
Form N-4.
    3. NAFV I and NAFV II are each registered under the Act as open-end 
management investment companies of the series type (File Nos. 811-03738 
and 811-08789). Securities of NAFV I and NAFV II are also registered 
under the 1933 Act (File Nos. 2-83631 and 333-53589).
    4. The Account currently has 53 sub-accounts, each of which 
reflects the investment performance of a series of NAFV I or NAFV II, 
or certain other registered management companies advised by advisers 
not affiliated with VALIC or the Account.
    5. Under the Contracts, VALIC reserves the right to substitute 
shares of one fund for shares of another.
    6. VALIC proposes, as applicable, to substitute (a) Shares of North 
American--Founders Large Cap Growth Fund for shares of Dreyfus Founders 
Growth Fund; (b) Shares of North American--American Century Income & 
Growth Fund for shares of Neuberger Berman Guardian Trust and for 
shares of Scudder Growth and Income Fund; (c) Shares of North 
American--Founders/T. Rowe Price Small Cap Fund for shares of T. Row 
Price Small-Cap Stock Fund, Inc. and for shares of Dreyfus VIF Small 
Cap; (d) Shares of North American--American Century International 
Growth Fund for shares of Templeton International Securities Fund; (e) 
Shares of North American--AG Core Bond Fund for shares of American 
General Domestic Bond Fund; (f) Shares of North American--AG Moderate 
Growth Lifestyle Fund for shares of American General Balanced Fund; and 
(g) Shares of North American International Growth Fund for shares of 
American General International Value Fund.
    7. Except for North American--AG Core Bond Fund, North American--AG 
Moderate Growth Lifestyle Fund, and North American International Growth 
Fund, each of which is a series of NAFV II, none of the replacement 
funds has commenced operations. The Applicants have filed an amendment 
to the registration statement on Form N-1A of NAFV I to reflect the 
addition of the new funds (the ``New Funds''), which became effective 
on September 29, 2000.
    8. Pursuant to an exemptive order issued to VALIC, NAFV II, and 
others, VALIC et al., Inv. Co. Act Rel. No. 23429 (Sept. 9, 1998) (the 
``Multi-Manager Order''), VALIC is authorized to enter into and amend 
sub-advisory agreements without shareholder approval under certain 
conditions.
    9. The investment objectives, policies and restrictions of the 
replacement funds are in each case substantially similar to the 
investment objectives, policies and restrictions of the respective 
existing funds. The investment objectives of each existing and the 
corresponding replacement fund are set forth below:

----------------------------------------------------------------------------------------------------------------
            Existing funds               Investment objective      Replacement funds       Investment objective
----------------------------------------------------------------------------------------------------------------
Dreyfus Founders Growth Fund.........  To seek long-term        North American-Founders  The same.
                                        growth of capital. The   Large Cap Growth Fund.
                                        fund seeks to attain
                                        its objective by
                                        investing a
                                        substantial portion of
                                        its assets in common
                                        stocks of well-
                                        established, high-
                                        quality growth
                                        companies.
Neuberger Berman Guardian Trust......  To seek long-term        North American-American  To seek dividend
                                        growth of capital;       Century Income &         growth, current
                                        current income is a      Growth Fund.             income, and capital
                                        secondary goal. The                               appreciation by
                                        fund invests mainly in                            investing in common
                                        common stocks of large                            stocks.
                                        capitalization
                                        companies.
Scudder Growth and Income Fund.......  To seek long-term        North American-American  To seek dividend
                                        growth of capital,       Century Income &         growth, current
                                        current income and       Growth Fund.             income, and capital
                                        growth of income.                                 appreciation by
                                                                                          investing in common
                                                                                          stocks.
T. Rowe Price Small-Cap Stock Fund,    To seek long-term        North American-Founders/ To seek long-term
 Inc..                                  capital growth in        T. Rowe Price Small      capital growth by
                                        investing primarily in   Cap Fund.                investing primarily in
                                        stocks in small                                   stocks of small
                                        companies.                                        companies.
Dreyfus VIF Small Cap................  To maximize capital      North American-Founders/ To seek long-term
                                        appreciation. The fund   T. Rowe price Small      capital growth by
                                        focuses on common        Cap Fund.                investing primarily in
                                        stocks of small-cap                               stocks of small
                                        companies with market                             companies.
                                        capitalization of less
                                        than $1.5 billion.
Templeton International Securities     To seek long-term        North American-American  To seek capital growth
 Fund.                                  capital growth. The      Century International    by investing primarily
                                        fund invests primarily   Growth Fund.             in equity securities
                                        in equity securities                              of companies in
                                        of companies outside                              developed countries
                                        the United States,                                other than the United
                                        including emerging                                States.
                                        markets.

[[Page 65366]]

 
American General Domestic Bond Fund..  To seek the highest      North American-AG Core   To seek the highest
                                        possible total return    Bond Fund.               possible total return
                                        consistent with                                   consistent with
                                        conservation of                                   conservation of
                                        capital through                                   capital through
                                        investments primarily                             investments in medium
                                        in investment grade                               to high-quality fixed-
                                        fixed-income                                      income securities.
                                        securities and other
                                        income producing,
                                        securities.
American General Balanced Fund.......  To seek balanced         North American-AG        To seek growth and
                                        accomplishment of (i)    Moderate Growth          current income through
                                        conservation of          Lifestyle Fund.          investments in other
                                        principal and (ii)                                series of NAFV I and
                                        long-term growth of                               NAFV II.
                                        capital and income
                                        through investment in
                                        fixed income and
                                        equity securities.
American General International Value   To seek to provide       North American           To seek to provide long-
 Fund.                                  growth of capital and    International Growth     term capital
                                        future income through    Fund.                    appreciation by
                                        investments primarily                             investing in equity
                                        in securities of non-                             securities of non-U.S.
                                        U.S. issuers and                                  companies, the
                                        securities whose                                  majority of which are
                                        principal markets are                             in developed markets.
                                        outside the United
                                        States.
----------------------------------------------------------------------------------------------------------------

    10. Applicants assert that the substitutions are expected to 
provide significant benefits to Contract owners, including improved 
selection of portfolio managers and simplification of fund offerings 
through elimination of overlapping offerings. At the same time, 
Contract owners will continue to be able to select among a large number 
of funds, with a full range of investment objectives, investment 
strategies, and managers.
    11. The expenses of the existing funds and the pro forma expenses 
of the replacement funds are set forth below in the Appendix.
    12. By supplements to the various prospectus for the Contracts and 
the Account, VALIC will notify all owners of the Contracts of its 
intention to take the necessary actions, including seeking the other 
requested by this Application, to substitute shares of the funds as 
described therein. The prospectus supplements for the Account will 
advise Contract owners that from the date of the supplement until the 
date of the proposed substitution, owners will be permitted to make 
transfers among sub-accounts as usual. The supplements will also inform 
Contract owners that VALIC will not exercise any rights reserved under 
any Contract to impose additional restrictions on transfers until at 
least 30 days after the proposed substitution.
    13. Within five business days after the proposed substitutions, 
affected Contract owners will also be provided with a prospectus for 
the replacement funds.
    14. The proposed substitutions will take place at relative net 
assert value with no change in the amount of any Contract owners's 
Contract value, cash value or death benefit or in the dollar value of 
his or her investment in any of the Accounts.
    15. The process for accomplishing the transfer of assets from an 
existing fund to its respective replacement fund will be determined on 
a case-by-case basis. In certain cases, it is expected that the 
substitutions will be effected by redeeming shares of an existing fund 
for cash and using the cash to purchase shares of the replacement fund.
    16. In certain other cases, it is expected that the substitutions 
will be effected by redeeming the shares of an existing fund in-kind; 
these assets will then be contributed in-kind to the corresponding 
replacement fund to purchase shares of that fund. All in-kind 
redemptions from an existing fund of which any of the Substitution 
Applicants is an affiliated person will be effected in accordance with 
the conditions set forth in the Commission's no-action letter issued to 
Signature Financial Group, Inc. (available Dec. 29, 1999). In-kind 
purchases of a replacement fund will be conducted as described in the 
Application.
    17. Contract owners will not incur any fees or charges as a result 
of the substitutions, nor will their rights or VALIC's obligations 
under the Contracts be altered in any way. All expenses incurred in 
connection with the proposed substitutions, including brokerage, legal, 
accounting and other fees and expenses, will be paid by VALIC. In 
addition, the proposed substitutions will not impose any tax liability 
on Contract owners. The supplements will also inform Contract owners 
that VALIC will not exercise any rights reserved under any Contract to 
impose additional restrictions on transfers until at least 30 days 
after the proposed substitution.
    18. In addition to the prospectus supplements distributed to owners 
of Contracts, within five business days after the proposed 
substitutions, any Contract owners who were affected by the proposed 
substitutions will be sent a written notice informing them that the 
proposed substitutions were carried out and that they may make one 
transfer of all Contract value or cash value under a Contract invested 
in each of the affected sub-accounts to other available sub-account(s) 
without regard to any limitations on transfers that would otherwise 
apply and without charge. The notice will also reiterate the fact that 
VALIC will not exercise any rights reserved by it under the Contracts 
to impose additional restrictions on transfers until at least 30 days 
after the proposed substitutions.
    19. Before any of the New Funds may rely on the Multi-Manager 
Order, the operation of the New Fund as a multi-manager fund, as 
described in the application for the Multi-Manager Order, will be 
approved, following the substitutions proposed in this Application, by 
a majority of that New Fund's outstanding voting securities.
    20. Each of the New Funds (North American-Founders/T.Rowe Price 
Small Cap Fund, North American-American Century Income & Growth Fund, 
North American-American Century International Growth Fund, and North 
American-Founders Large Cap Growth Fund) have management fees higher 
than those of existing funds they will replace. Each such replacement 
fund will hold a shareholder meeting to approve the investment advisory 
contract pursuant to Section 15 of the Act within 120 after the 
substitution occurs. The difference between the management fee paid by 
the existing fund and the fee payable under the new investment advisory 
contract will be held in escrow pending the shareholder vote. If the 
shareholders of a New Fund

[[Page 65367]]

do not approve the advisory contract, VALIC will return the money held 
in escrow to the New Fund, and the directors will consider alternatives 
in the best interests of shareholders.
    21. Applicants further agree that for each of the New Funds, proxy 
materials will disclose, on a pro forma basis, the amount of the 
proposed management fee, other fund expenses, and total fund expenses. 
Applicants agree that VALIC will, for two years from the date of the 
substitution, limit total fund expenses for each New Fund to the 
percentage levels set forth in the Application and disclosed in the New 
Fund's proxy materials. Accordingly, annualized total fund expenses of 
each New Fund during the two-year period will be capped at the 
following levels.

North American--Founders/T. Rowe Price Small Cap Fund--.96%.
North American--American Century Income & Growth Fund--.83%
North American--American Century International Growth Fund--1.06%
North American--Founders Large Cap Growth Fund--1.06%

    22. In addition, in any case in which shareholders of a New Fund do 
not approve the new investment advisory contract, VALIC agrees that it 
will limit the annualized management fee of the New Fund to the same 
level as that of the existing fund and the total annualized expenses of 
the New Fund to that of the existing fund, adjusted to reflect any 
reductions in separate account charges that take effect in connection 
with the substitution. Such limitation will apply until shareholders 
approve a new investment advisory contract. Accordingly, the total 
annualized fund expenses of each New Fund in such a case would be as 
follows:

North American--Founders/T. Rowe Price Small Cap Fund--.88%
North American--American Century Income & Growth Fund--.80%
North American--American Century International Growth Fund--1.13%
North American--Founders Large Cap Growth Gund--1.08%

    23. North American--AG Core Bond Fund, North American AG Moderate 
Growth Lifestyle Fund and North American International Growth Fund have 
advisory fees lower than the existing funds they will replace. VALIC 
will cap each such replacement fund's total fund expenses at the same 
level as the total fund expenses of the respective existing fund (net 
of any waivers or reimbursements) at least until the end of the fiscal 
year ending August 31, 2002.
    Accordingly, annualized total fund expenses will be capped at the 
following levels for the period ending August 31, 2002.

North American AG Core Bond Fund--.77%
North American AG Moderate Growth Lifestyle Fund--.80%
North American International Growth Fund--1.01%

    24. Applicants further agree that VALIC will not increase total 
separate account charges (net of any waivers or reimbursements) for any 
of the Contracts involved in the substitution for a period of two years 
from the date of the substitution. Accordingly, total annualized 
separate account charges (net of any waivers or reimbursements) during 
the two year period will not exceed the following levels:

1.00% for North American--Founders/T.Rowe Price Small Cap Fund, North 
American--American Century Income & Growth Fund, North American--
American Century International Growth Fund, and North American--
Founders Large Cap Growth Fund.
.75% for North American--AG Core Bond Fund, North American--AG Moderate 
Growth Lifestyle Fund, and North American International Growth Fund.

Applicants' Legal Analysis

    1. Section 26(b) of the Act requires the depositor of a registered 
unit investment trust holding the securities of a single issuer to 
obtain Commission approval before substituting the securities held by 
the trust. Specifically, Section 26(b) states:

    It shall be unlawful for any depositor or trustee of a 
registered unit investment trust holding the security of a single 
issuer to substitute another security for such security unless the 
Commission shall have approved such substitution. The Commission 
shall issue an order approving such substitution if the evidence 
establishes that it is consistent with the protection of investors 
and the purposes fairly intended by the policy and provisions of 
this title.

    2. The Substitution Applicants state that the proposed 
substitutions appear to involve substitutions of securities within the 
meaning of Section 26(b) of the Act and request that the Commission 
issue an order pursuant to Section 26(b) of the Act approving the 
proposed substitutions.
    3. The Contracts expressly reserve for VLAIC the right, subject to 
Commission approval, to substitute shares of another Management Company 
for shares of a Management Company held by a sub-account of the 
Account.
    4. The Substitution Applicants request an order of the Commission 
pursuant to Section 26(b) of the Act approving the proposed 
substitutions by VALIC. The Substitution Applicants assert that the 
proposed substitutions are consistent with the protection of investors 
and the purposes fairly intended by the policy and provisions of the 
Act.
    5. The Substitution Applicants assert that each of the proposed 
substitutions is not the type of substitution which Section 26(b) was 
designed to prevent. Unlike traditional unit investment trusts where a 
depositor could only substitute an investment security in a manner 
which permanently affected all the investors in the trust, the 
Contracts provide that each Contract owner has the right to exercise 
his or her own judgment and transfer Contract or cash value into other 
sub-accounts. Moreover, the Contracts will offer Contract owners the 
opportunity to transfer amounts out of the affected sub-accounts into 
any of the remaining sub-accounts without cost or other disadvantage. 
The Substitution Applicants assert that the proposed substitutions, 
therefore, will not result in the type of costly forced redemption 
which Section 26(b) was designed to prevent.
    6. The Substitution Applicants assert that proposed substitutions 
also are unlike the type of substitution which Section 26(b) was 
designed to prevent in that by purchasing a Contract, Contract owners 
select much more than a particular investment company in which to 
invest their account values. They also select the specific type of 
insurance coverage offered by VALIC under their Contract as well as 
numerous other rights and privileges set forth in the Contract. 
Contract owners may also have considered VALIC's size, financial 
condition, and its reputation for service in selecting their Contract. 
These factors will not change as a result of the proposed 
substitutions.
    7. Section 17(a)(1) of the Act, in relevant part, prohibits any 
affiliated person of a registered investment company, or any affiliated 
person of such person, acting as principal, from knowingly selling any 
security or other property to that company. Section 17(a)(2) of the Act 
generally prohibits the persons described above, acting as principals, 
from knowingly purchasing any security or other property form the 
registered company.
    8. Section 2(a)(3) of the Act defines the term ``affiliated person 
of another person'' in relevant part as:
    (A) any person directly or indirectly owning, controlling, or 
holding with power to vote, 5 per centum or more of the outstanding 
voting securities of such person; (B) any person 5 per centum or

[[Page 65368]]

more of whose outstanding voting securities are directly or indirectly 
owned, controlled, or held with power to vote, by such person; (C) any 
person directly or indirectly controlling, controlled by, or under 
common control with, such other person; * * * (E) if such other person 
is an investment company, any investment adviser thereof * * *.
    Section 2(a)(9) of the Act states that any person who owns 
beneficially, either directly or through one or more controlled 
companies, more than 25% of the voting securities of a company shall be 
presumed to control such company.
    9. Because shares held by a separate account of an insurance 
company are legally owned by the insurance company, VALIC owns of 
record substantially all of the shares of NAFV I and NAFV II. 
Therefore, NAFV I and NAFV II and their respective funds are arguably 
under the control of VALIC notwithstanding the fact that Contract 
owners may be considered the beneficial owners of those shares held in 
the Account. If NAFV I and NAFV II and their respective funds are under 
VALIC control, then VALIC is an affiliated person of NAFV I and NAFV II 
and their respective funds. If NAFV I and NAFV II and their respective 
funds are under VALIC control, then NAFV I and NAFV II and their 
respective funds are affiliated person of each other.
    10. Regardless of whether or not VALIC can be considered to control 
NAFV I and NAFV II and their respective funds, because VALIC owns of 
record more than 5% of the shares of each of them and is each 
replacement fund's investment adviser, VALIC is an affiliated person of 
both NAFV I and NAFV II and their respective Funds. Likewise, their 
respective funds are each an affiliated person of an affiliated person 
of each other.
    11. Because the substitutions may be effected, in whole or in part, 
by means of in-kind redemptions and purchases, the substitutions may be 
deemed to involve one or more purchases or sales of securities or 
property between affiliated persons or between affiliated persons of 
affiliated persons. The proposed transactions may involve a transfer of 
portfolio securities by the existing funds to the Account; immediately 
thereafter, the Account would purchase shares of the replacement funds 
with the portfolio securities received from the existing funds. 
Accordingly, as the Account and the replacement funds could be viewed 
as affiliated persons of one another under Section 2(a)(3) of the Act, 
it is conceivable that this aspect of the substitutions could be viewed 
as being prohibited by Section 17(a). Accordingly, the Section 17 
Applicants have determined that it is prudent to seek relief from 
Section 17(a) in the context of this Application for the in-kind 
purchases and sales of the replacement fund shares.\1\
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    \1\ With respect to the in-kind redemptions of any shares of the 
Existing Funds, as previously stated above, Applicants will make any 
such in-kind redemptions only in accordance with the conditions set 
out in the Signature no-action letter. In light of this fact, the 
Section 17 Applicants are not requesting relief with respect to 
those in-kind redemptions.
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    12. Section 17(b) of the Act provides that the Commission may, upon 
application, grant an order exempting any transaction from the 
prohibitions of Section 17(a) if the evidence establishes that: (a) The 
terms of the proposed transaction, including the consideration to be 
paid or received, are reasonable and fair and do not involve 
overreaching on the part of any person concerned; (b) the proposed 
transaction is consistent with the policy of each registered investment 
company concerned, as recited in its registration statement and records 
filed under the Act, and (c) the proposed transaction is consistent 
with the general purposes of the Act.
    13. The Section 17 Applicants submit that the terms of the proposed 
in-kind purchases of shares of the replacement funds by the Account, 
including the consideration to be paid and received, as described in 
this Application, are reasonable and fair and do not involve 
overreaching on the part of any person concerned. The Section 17 
Applicants also submit that the proposed in-kind purchases by VALIC are 
consistent with the policies of each of the replacement funds. Finally, 
the Section 17 Applicants submit that the proposed substitutions are 
consistent with the general purposes of the Act.

Conclusion

    Applicants assert that, for the reasons summarized above, the 
proposed substitutions and related transactions meet the standards of 
Section 26(b) of the Act and are consistent with the standards of 
Section 17(b) of the Act and that the requested orders should be 
granted.

    For the Commission, by the Division of Investment Management 
pursuant to delegated authority.
Jonathan G. Katz,
Secretary.

                                                               Appendix--Comparison of Expenses of Existing and Replacement Funds
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                     Current fund and separate account expenses  (percent of net asset value)                       Replacement fund and separate account expenses  (percent of net asset value)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      Total
                                                       fund
                                           Total      assets
                                            fund     held by     Mgmt.     Other    M&E and   Separate    Total                                  Mgmt.     Other    M&E and   Separate    Total
             Existing fund                 assets      the        fee      fund       A&D     account    expenses       Replacement fund          fee      fund       A&D     account   expenses
                                            (in      account             expenses  expenses  reimb.\1\                                                   expenses  expenses  reimb.\1\
                                         millions)     (in
                                                    millions)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF Small Cap..................   $1,611.6     $906.8      0.75      0.03      1.25     (0.15)      1.88   North American--Founders/       0.90      0.06      1.00          0      1.96
                                                                                                                    T. Rowe Price Small Cap
                                                                                                                    Stock Fund.
T.Rowe Price Small Cap Stock Fund......    2,084.2       14.8      0.77      0.19      1.25          0      2.21   Same as above.............
Scudder Growth and Income Fund.........    6,079.2      236.7      0.45      0.35      1.25     (0.25)      1.80   North American--American        0.77      0.06      1.00          0      1.83
                                                                                                                    Century Income & Growth
                                                                                                                    Fund.
Neuberger Berman Guardian Trust........    1,094.7       59.4      0.84      0.04      1.25     (0.25)      1.88   Same as above.............

[[Page 65369]]

 
Templeton International Securities Fund    1,756.8      737.6      0.69      0.19      1.25          0      2.13   North American--American        1.00      0.06      1.00          0      2.06
                                                                                                                    Century International
                                                                                                                    Growth Fund.
Dreyfus Founders Growth Fund...........    3,480.0    1,069.1      0.67      0.41      1.25     (0.25)      2.08   North American--Founders        1.00      0.60      1.00          0      2.06
                                                                                                                    Large Cap Growth Fund.
American General Domestic Bond Fund....       14.5       14.5      0.59      0.18      1.00     (0.25)      1.52   North American--AG Core         0.50      0.25      1.00     (0.25)      1.50
                                                                                                                    Bond Fund.
American General Balanced Fund.........       12.8       12.8      0.78  \2\ 0.02      1.00     (0.25)      1.55   North American--AG              0.10  \3\ 0.88      1.00     (0.25)      1.73
                                                                                                                    Moderate Growth Lifestyle
                                                                                                                    Fund.
American General International Value          13.2       13.2      0.97  \4\ 0.04      1.00     (0.25)      1.76   North American                  0.88  \5\ 0.25      1.00     (0.25)     1.88
 Fund.                                                                                                              International Growth Fund.
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\1\ VALIC reimburses a subaccount for fees it receives from a fund or its affiliate or distributor for providing the fund administrative or shareholder services.
\2\ VALIC currently waives or reimburses certain fees and expenses of American General Balanced Fund. During the fiscal year ended August 31, 1999, these waivers and reimbursements equaled
  0.98% of net assets of the fund. Without these waivers and reimbursements, the total Other Fund Expenses of American General Balanced Fund would have been 1.00% of net assets.
\3\ These expenses are those of the underlying funds in which the North American--AG Moderate Growth Lifestyle Fund invests.
\4\ VALIC currently waives or reimburses certain fees and expenses of American General International Value Fund. During the fiscal year ended August 31, 1999, those waivers and reimbursements
  equaled 0.96% of net assets of the fund. Without these waivers and reimbursements, the total Other Fund Expenses of American General International Fund would have been 1.00% of net assets.
\5\ VALIC currently waives or reimburses certain fees and expenses of North American International Growth Fund. During the fiscal year ended August 31, 1999, those waivers and reimbursements
  equaled 0.77% of net assets of the fund. Without these waivers and reimbursements, the total Other Fund Expenses of North American International Growth Fund would have been 1.02% of net
  assets.

[FR Doc. 00-28049 Filed 10-31-00; 8:45 am]
BILLING CODE 8010-01-M