-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QIhQXjx9zwtjX/Ue1DM7CxuAfiImJPiXRVdru9w3W4rwbLuF7AbjfSLIjifFmqR2 v3XbVZckZF4J/rjKtbyGeQ== 0000005103-99-000048.txt : 19990628 0000005103-99-000048.hdr.sgml : 19990628 ACCESSION NUMBER: 0000005103-99-000048 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990625 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN GENERAL CORP /TX/ CENTRAL INDEX KEY: 0000005103 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] IRS NUMBER: 740483432 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 11-K SEC ACT: SEC FILE NUMBER: 001-07981 FILM NUMBER: 99652783 BUSINESS ADDRESS: STREET 1: 2929 ALLEN PKWY CITY: HOUSTON STATE: TX ZIP: 77019 BUSINESS PHONE: 7135221111 11-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _____________________ FORM 11-K ANNUAL REPORT Pursuant to Section 15(d) of the Securities Exchange Act of 1934 _____________________ [X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the fiscal year ended December 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from _______ to ______ Commission file number 1-7981 Full title of the Plan: THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN Name of the issuer of the securities held pursuant to the Plan and the address of its principal executive office: AMERICAN GENERAL CORPORATION 2929 Allen Parkway Houston, Texas 77019 THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES DECEMBER 31, 1998 Report of Independent Auditors 1 Audited Financial Statements Statements of Net Assets Available for Benefits with Fund Information 2 Statements of Changes in Net Assets Available for Benefits with Fund Information 8 Notes to Financial Statements 14 Supplemental Schedules Item 27a - Schedule of Assets Held for Investment Purposes 20 Item 27d - Schedule of Reportable Transactions 21 Report of Independent Auditors Administrative Board The Variable Annuity Life Insurance Company Agents' and Managers' Thrift Plan We have audited the accompanying statements of net assets available for benefits of the Variable Annuity Life Insurance Company Agents' and Managers' Thrift Plan as of December 31, 1998 and 1997, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 1998 and 1997, and the changes in net assets available for benefits for the years then ended, in conformity with generally accepted accounting principles. Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedules of assets held for investment purposes as of December 31, 1998 and reportable transactions for the year then ended are presented for the purpose of additional analysis and are not a required part of the financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These supplemental schedules are the responsibility of the Plan's management. The Fund Information in the statements of net assets available for benefits and the statements of changes in net assets available for benefits is presented for purposes of additional analysis rather than to present the net assets available for benefits and the changes in net assets available for benefits of each fund. The supplemental schedules and Fund Information have been subjected to the auditing procedures applied in the audits of the financial statements and, in our opinion, are fairly stated in all material respects in relation to the financial statements taken as a whole. ERNST & YOUNG LLP Houston, Texas June 11, 1999 -1- THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION DECEMBER 31, 1998 Participant Directed Stock Cash Mutual Foreign Fund Fund Fund A Fund Assets Investments at fair value American General Corporation common stock (1,651,839 shares) $50,076,327 $ - $ - $ - The Variable Annuity Life Insurance Company group deposit administration contract - 3,755,380 - - American General Series Portfolio Company Stock Index Fund (290,641 shares) - - 10,910,660 - Templeton Foreign Fund (130,002 shares) - - - 1,090,716 Putnam OTC & Emerging Growth Fund (138,207 shares) - - - - American General Series Portfolio Company Growth Fund (85,335 shares) - - - - Vanguard Fixed Income Securities Fund(67,244 shares) - - - Short-term investments 184,884 - - - Participant Loans - - - - Total investments 50,261,211 3,755,380 10,910,660 1,090,716 Receivables Contributions Participants' - 2,915 13,281 - Interest 562 95,935 - - Total receivables 562 98,850 13,281 - Total assets 50,261,773 3,854,230 10,923,941 1,090,716 Liabilities Payables Excess contribution refunds 33,416 7,685 25,392 2,640 Forfeitures - - - - Total liabilities 33,416 7,685 25,392 2,640 Net assets available for benefits $50,228,357 $3,846,545 $10,898,549 $1,088,076 The accompanying notes are an integral part of these financial statements. -2- THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION (continued) DECEMBER 31, 1998 Participant Directed Small-Cap Large-Cap Bond Fund Fund Fund Assets Investments at fair value American General Corporation common stock (1,651,839 shares) $ - $ - $ - The Variable Annuity Life Insurance Company group deposit administration contract - - - American General Series Portfolio Company Stock Index Fund (290,641 shares) - - - Templeton Foreign Fund (130,002 shares) - - - Putnam OTC & Emerging Growth Fund (138,207 shares) 2,384,074 - - American General Series Portfolio Company Growth Fund (85,335 shares) - 1,949,898 - Vanguard Fixed Income Securities Fund(67,244 shares) - - 624,695 Short-term investments - - - Participant Loans - - - Total investments 2,384,074 1,949,898 624,695 Receivables Contributions Participants' - 6,118 - Interest - - - Total receivables - 6,118 - Total assets 2,384,074 1,956,016 624,695 Liabilities Payables Excess contribution refunds 4,601 4,286 2,160 Forfeitures - - - Total liabilities 4,601 4,286 2,160 Net assets available for benefits $2,379,473 $1,951,730 $622,535 The accompanying notes are an integral part of these financial statements. -3- THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION (continued) DECEMBER 31, 1998 Non- Participant Participant Directed Directed Loan Stock Fund Fund Total Assets Investments at fair value American General Corporation common stock (1,651,839 shares) $ - $78,767,112 $128,843,439 The Variable Annuity Life Insurance Company group deposit administration contract - - 3,755,380 American General Series Portfolio Company Stock Index Fund (290,641 shares) - - 10,910,660 Templeton Foreign Fund (130,002 shares) - - 1,090,716 Putnam OTC & Emerging Growth Fund (138,207 shares) - - 2,384,074 American General Series Portfolio Company Growth Fund (85,335 shares) - - 1,949,898 Vanguard Fixed Income Securities Fund(67,244 shares) - - 624,695 Short-term investments - - 184,884 Participant Loans 2,353,731 - 2,353,731 Total investments 2,353,731 78,767,112 152,097,477 Receivables Contributions Participants' - - 22,314 Interest - - 96,497 Total receivables - - 118,811 Total assets 2,353,731 78,767,112 152,216,288 Liabilities Payables Excess contribution refunds - 928,767 1,008,947 Forfeitures - 248,312 248,312 Total liabilities - 1,177,079 1,257,259 Net assets available for benefits $2,353,731 $77,590,033 $150,959,029 The accompanying notes are an integral part of these financial statements. -4- THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION DECEMBER 31, 1997 Participant Directed Stock Cash Mutual Fund Fund Fund A Assets Investments at fair value American General Corporation common stock (1,716,199 shares) $35,998,503 $ - $ - The Variable Annuity Life Insurance Company group deposit administration contract - 2,081,554 - American General Series Portfolio Company Stock Index Fund (296,591 shares) - - 8,808,762 Templeton Foreign Fund (129,451 shares) - - - Putnam OTC & Emerging Growth Fund (115,368 shares) - - - American General Series Portfolio Company Growth Fund (62,562 shares) - - - Vanguard Fixed Income Securities Fund (11,144 shares) - - - Short-term investments 124,339 2,316 32,124 Total investments 36,122,842 2,083,870 8,840,886 Receivables Contributions Company - - - Participants' 25,842 2,431 14,248 Interest 953 53,185 219 Total receivables 26,795 55,616 14,467 Total assets 36,149,637 2,139,486 8,855,353 Liabilities Payables Excess contribution refunds 142,926 6,965 61,233 Forfeitures - - - Total liabilities 142,926 6,965 61,233 Net assets available for benefits $36,006,711 $2,132,521 $8,794,120 The accompanying notes are an integral part of these financial statements. -5- THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION (continued) DECEMBER 31, 1997 Participant Directed Foreign Small-Cap Large-Cap Fund Fund Fund Assets Investments at fair value American General Corporation common stock (1,716,199 shares) $ - $ - $ - The Variable Annuity Life Insurance Company group deposit administration contract - - - American General Series Portfolio Company Stock Index Fund (296,591 shares) - - - Templeton Foreign Fund (129,451 shares) 1,288,041 - - Putnam OTC & Emerging Growth Fund (115,368 shares) - 1,858,573 - American General Series Portfolio Company Growth Fund (62,562 shares) - - 1,264,994 Vanguard Fixed Income Securities Fund (11,144 shares) - - - Short-term investments 16,007 24,780 19,726 Total investments 1,304,048 1,883,353 1,284,720 Receivables Contributions Company - - - Participants' 6,057 9,735 8,661 Interest 74 94 73 Total receivables 6,131 9,829 8,734 Total assets 1,310,179 1,893,182 1,293,454 Liabilities Payables Excess contribution refunds 21,312 37,703 24,696 Forfeitures - - - Total liabilities 21,312 37,703 24,696 Net assets available for benefits $1,288,867 $1,855,479 $1,268,758 The accompanying notes are an integral part of these financial statements. -6- THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION (continued) DECEMBER 31, 1997 Non- Participant Participant Directed Directed Bond Stock Fund Fund Total Assets Investments at fair value American General Corporation common stock (1,716,199 shares) $ - $56,783,484 $ 92,781,987 The Variable Annuity Life Insurance Company group deposit administration contract - - 2,081,554 American General Series Portfolio Company Stock Index Fund (296,591 shares) - - 8,808,762 Templeton Foreign Fund (129,451 shares) - - 1,288,041 Putnam OTC & Emerging Growth Fund (115,368 shares) - - 1,858,573 American General Series Portfolio Company Growth Fund (62,562 shares) - - 1,264,994 Vanguard Fixed Income Securities Fund (11,144 shares) 103,194 - 103,194 Short-term investments 1,274 - 220,566 Total investments 104,468 56,783,484 108,407,671 Receivables Contributions Company - 46,003 46,003 Participants' 469 - 67,443 Interest 6 - 54,604 Total receivables 475 46,003 168,050 Total assets 104,943 56,829,487 108,575,721 Liabilities Payables Excess contribution refunds 4,603 788,900 1,088,338 Forfeitures - 30,920 30,920 Total liabilities 4,603 819,820 1,119,258 Net assets available for benefits $100,340 $56,009,667 $107,456,463 The accompanying notes are an integral part of these financial statements. -7- THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION YEAR ENDED DECEMBER 31, 1998 Participant Directed Stock Cash Mutual Foreign Fund Fund Fund A Fund Additions to net assets Investment income Dividends $ 988,177 $ - $ 161,200 $ 114,338 Interest 13,103 229,803 585 537 Net appreciation/(depreciation) in fair value of investments 15,317,484 - 2,260,131 (187,179) Total investment income (loss) 16,318,764 229,803 2,421,916 (72,304) Contributions Companies' - - - - Participants' 1,420,393 117,580 1,058,984 421,982 Total contributions 1,420,393 117,580 1,058,984 421,982 Total additions 17,739,157 347,383 3,480,900 349,678 Deductions from net assets Benefits paid to participants American General Corporation common stock (105,488 shares) 1,619,880 - - - Cash 316,429 171,084 562,250 124,421 Forfeitures - - - - Expenses 1,972 576 1,545 289 Total deductions 1,938,281 171,660 563,795 124,710 Interfund transfers, net (1,579,230) 1,538,301 (812,676) (425,759) Net increase (decrease) 14,221,646 1,714,024 2,104,429 (200,791) Net assets available for benefits Beginning of year 36,006,711 2,132,521 8,794,120 1,288,867 End of year $50,228,357 $3,846,545 $10,898,549 $1,088,076 The accompanying notes are an integral part of these financial statements. -8- THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION (continued) YEAR ENDED DECEMBER 31, 1998 Participant Directed Small-Cap Large-Cap Bond Fund Fund Fund Additions to net assets Investment income Dividends $ 73,391 $ 81,788 $ 26,112 Interest 985 695 222 Net appreciation/(depreciation) in fair value of investments 100,447 171,559 (2,674) Total investment income (loss) 174,823 254,042 23,660 Contributions Companies' - - - Participants' 922,977 656,233 186,269 Total contributions 922,977 656,233 186,269 Total additions 1,097,800 910,275 209,929 Deductions from net assets Benefits paid to participants American General Corporation common stock (105,488 shares) - - - Cash 177,373 94,588 9,929 Forfeitures - - - Expenses 515 402 24 Total deductions 177,888 94,990 9,953 Interfund transfers, net (395,918) (132,313) 322,219 Net increase (decrease) 523,994 682,972 522,195 Net assets available for benefits Beginning of year 1,855,479 1,268,758 100,340 End of year $2,379,473 $1,951,730 $622,535 The accompanying notes are an integral part of these financial statements. -9- THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION (continued) YEAR ENDED DECEMBER 31, 1998 Non- Participant Participant Directed Directed Loan Stock Fund Fund Total Additions to net assets Investment income Dividends $ - $ 1,538,178 $ 2,983,184 Interest 78,564 1,976 326,470 Net appreciation/(depreciation) in fair value of investments - 24,168,695 41,828,463 Total investment income (loss) 78,564 25,708,849 45,138,117 Contributions Companies' - 3,045,025 3,045,025 Participants' - - 4,784,418 Total contributions - 3,045,025 7,829,443 Total additions 78,564 28,753,874 52,967,560 Deductions from net assets Benefits paid to participants American General Corporation common stock (105,488 shares) - 5,117,687 6,737,567 Cash - 1,047,136 2,503,210 Forfeitures - 217,392 217,392 Expenses - 1,502 6,825 Total deductions - 6,383,717 9,464,994 Interfund transfers, net 2,275,167 (789,791) - Net increase (decrease) 2,353,731 21,580,366 43,502,566 Net assets available for benefits Beginning of year - 56,009,667 107,456,463 End of year $2,353,731 $77,590,033 $150,959,029 The accompanying notes are an integral part of these financial statements. -10- THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION YEAR ENDED DECEMBER 31, 1997 Participant Directed Stock Cash Mutual Mutual Fund Fund Fund A Fund B Additions to net assets Investment income Dividends $ 934,576 $ - $ 158,766 $ - Interest 5,409 142,077 4,115 1,925 Net appreciation/(depreciation) in fair value of investments 8,861,685 - 2,020,074 - Total investment income 9,801,670 142,077 2,182,955 1,925 Contributions Company - - - - Participants' 1,672,298 143,884 902,601 - Total contributions 1,672,298 143,884 902,601 - Total additions 11,473,968 285,961 3,085,556 1,925 Deductions from net assets Benefits paid to participants American General Corporation common stock (101,622 shares) 1,669,635 - - - Cash 53,193 142,054 326,405 - Forfeitures - - - - Total deductions 1,722,828 142,054 326,405 - Interfund transfers, net (2,547,679) 684,900 (476,716) (297,977) Net increase (decrease) 7,203,461 828,807 2,282,435 (296,052) Net assets available for benefits Beginning of year 28,803,250 1,303,714 6,511,685 296,052 End of year $36,006,711 $2,132,521 $8,794,120 $ - The accompanying notes are an integral part of these financial statements. -11- THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION (continued) YEAR ENDED DECEMBER 31, 1997 Participant Directed Foreign Small-Cap Large-Cap Fund Fund Fund Additions to net assets Investment income Dividends $ 120,702 $ - $ 20,641 Interest 2,002 2,548 1,465 Net appreciation/(depreciation) in fair value of investments (119,162) 313,572 187,853 Total investment income 3,542 316,120 209,959 Contributions Company - - - Participants' 374,078 553,004 435,488 Total contributions 374,078 553,004 435,488 Total additions 377,620 869,124 645,447 Deductions from net assets Benefits paid to participants American General Corporation common stock (101,622 shares) - - - Cash 18,501 17,399 14,263 Forfeitures - - - Total deductions 18,501 17,399 14,263 Interfund transfers, net 929,748 1,003,754 637,574 Net increase (decrease) 1,288,867 1,855,479 1,268,758 Net assets available for benefits Beginning of year - - - End of year $1,288,867 $1,855,479 $1,268,758 The accompanying notes are an integral part of these financial statements. -12- THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION (continued) YEAR ENDED DECEMBER 31, 1997 Non- Participant Participant Directed Directed Bond Stock Fund Fund Total Additions to net assets Investment income Dividends $ 4,791 $ 1,464,793 $ 2,704,269 Interest 132 7,427 167,100 Net appreciation/(depreciation) in fair value of investments 6,903 14,011,784 25,282,709 Total investment income 11,826 15,484,004 28,154,078 Contributions Company - 2,179,098 2,179,098 Participants' 22,494 - 4,103,847 Total contributions 22,494 2,179,098 6,282,945 Total additions 34,320 17,663,102 34,437,023 Deductions from net assets Benefits paid to participants American General Corporation common stock (101,622 shares) - 3,019,176 4,688,811 Cash 376 72,607 644,798 Forfeitures - 224,272 224,272 Total deductions 376 3,316,055 5,557,881 Interfund transfers, net 66,396 - - Net increase (decrease) 100,340 14,347,047 28,879,142 Net assets available for benefits Beginning of year - 41,662,620 78,577,321 End of year $100,340 $56,009,667 $107,456,463 The accompanying notes are an integral part of these financial statements. -13- THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN NOTES TO FINANCIAL STATEMENTS NOTE 1--SIGNIFICANT ACCOUNTING POLICIES The Variable Annuity Life Insurance Company Agents' and Managers' Thrift Plan (the "Plan") financial statements are prepared in conformity with generally accepted accounting principles. The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. Ultimate results could differ from those estimates. The fair value of investments in American General Corporation ("American General") common stock is based on published market prices. Fair values of other investments not having an established market are reported as follows: 1) The Variable Annuity Life Insurance Company ("VALIC", also referred to as the "Company") group deposit administration contract ("Cash Fund") at contract value (see Note 3), 2) investments in American General Series Portfolio Company ("AGSPC") Stock Index and Growth Funds, the Putnam OTC & Emerging Growth Fund, the Templeton Foreign Fund, and the Vanguard Fixed Income Securities Fund, at net asset value, which is based on the market value of the underlying investments; and 3) short-term investments at cost which approximates fair value. The contract value of the group deposit administration contract approximates fair value because the interest crediting rate is reset annually. AGSPC is an open-end management investment company (mutual fund) whose investment adviser is VALIC. Participant loans are valued at their outstanding balances. Dividends are recorded as income on ex-dividend dates and interest income is recorded using the accrual method of accounting. Contributions are recorded as income on the date they become payable to the Plan. Interfund transfers are recorded at the fair value of the amount transferred. Benefits paid to participants and related forfeitures are recorded upon distribution at the fair value of the assets distributed or forfeited. Benefits payable to participants are not accrued as liabilities in the financial statements. NOTE 2--DESCRIPTION OF THE PLAN The following description of the Plan provides only general information. The Plan document provides more complete descriptions of the Plan's provisions. General The Plan, which is subject to certain provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA), is a defined contribution plan offered to eligible agents and managers of VALIC and VALIC Investment Services Company ("VISCO"), ("the Companies") who have completed at least one year of service and have reached age twenty-one. The Plan provides for participant elective salary deferrals (participant pretax contributions) in accordance with Section 401(k) of the Internal Revenue Code of 1986, as amended (IRC). -14- THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN NOTES TO FINANCIAL STATEMENTS--Continued NOTE 2--DESCRIPTION OF THE PLAN--Continued The cost of administering the Plan is paid by VALIC. Investment Options Participants may elect to have their contributions invested in one of seven funds or a combination of funds. The funds invest in: 1) shares of American General common stock (Stock Fund); 2) a group deposit administration contract issued by VALIC (Cash Fund); 3) the AGSPC Stock Index Fund (Mutual Fund A); 4) shares of the Templeton Foreign Fund (Foreign Fund); 5) shares of the Putnam OTC & Emerging Growth Fund (Small-Cap Fund); 6) shares of the AGSPC Growth Fund (Large-Cap Fund) and 7) shares of the Vanguard Fixed Income Securities Fund (Bond Fund). Contributions which have not been used to purchase investments in the Stock Fund are temporarily invested in money-market fund investments. These investments are held in a bank-administered trust fund and income from these investments is allocated to Plan participants based on current contributions. Contributions Participants may contribute, on a pretax basis, a basic amount ranging from one to six percent of base pay and an additional amount ranging from one to four percent of base pay subject to the contribution limitations discussed below. The Companies contribute an amount ranging from 50 percent to 100 percent of the participants' basic contributions. The Companies contributed 75 percent of the employee's basic contributions during 1998 and 1997. The Plan allows participants to change their contribution rate and investment elections for future contributions, as well as transfer all or part of their account balances from one fund to another once a month. Contribution Limitations For 1998 and 1997, the total amount of participant pretax contributions is limited to $10,000 and $9,500, respectively, for all plans. Additionally, the total amount of annual participant and company contributions (including forfeitures) to all company sponsored defined contribution plans must not exceed the lesser of 25 percent of compensation or $30,000. During 1998 and 1997, the total amount of base pay that can be considered under the Plan is $160,000. The IRC provides that plans such as the Plan cannot discriminate in favor of highly compensated individuals. To comply with these laws, certain highly compensated individuals in the Plan may receive refunds of contributions in excess of IRC Sections 401(k)(3) and 401(m) limits for employee pretax contributions and employer matching contributions, respectively, and all earnings attributable to such contributions. Refunds will be made from the VALIC Agents' and Managers' Thrift Plan. Amounts in excess of the limits discussed above are designated on the Statements of Net Assets Available for Benefits as "Payables - Excess contribution refunds." These amounts will be refunded to the affected highly compensated participants on or before the last day of the subsequent plan year to ensure the tax qualified status of the Plan. -15- THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN NOTES TO FINANCIAL STATEMENTS--Continued NOTE 2--DESCRIPTION OF THE PLAN --Continued Participant Accounts Each participant's account is credited with the participant's contributions and an allocation of the Companies' contributions and Plan earnings. Allocations of Plan earnings are based on participants' account balances. The benefit to which a participant is entitled is the benefit that can be provided from the participant's account. Vesting Participants are immediately vested in their contributions plus the earnings thereon. A participant obtains a vested interest in the Companies' contributions and the earnings thereon at the rate determined by years of service. The vesting schedule is provided below: Years of Service Non-forfeitable Percentages 0 - 3 0 3 20 4 40 5 60 6 80 7 100 Vesting of the Companies' contributions shall be 100 percent upon death, disability, or the attainment of normal retirement age. Payment of Benefits Upon termination of service, and if consented to by the participant (consent only required if the total value, both vested and nonvested, of their account exceeded $5,000 during 1998 or $3,500 during 1997 and the participant is under the age of 65), a participant will receive a distribution equal to the vested value of his or her account. For tax years prior to January 1, 1997, a distribution must be made after a participant reaches age 70 1/2, regardless of whether service has been terminated. Effective for tax years beginning after December 31, 1996, distributions must begin by April 1st of the calendar year following the later of the calendar year in which the employee either reaches ages 70 1/2 or retires. Direct Rollover A participant may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the participant in a direct rollover. Participant Loans Beginning in 1998, participants may borrow from their fund accounts, in a single loan, a minimum of $1,000 and up to a maximum equal to the lesser of $50,000 or 50% of the participant's vested account balance. Loan terms range from 12 to 58 months. Loans are secured by the vested balance in the participant's account and bear interest at a rate commensurate with prevailing rates as determined from time to time. Principal and interest are paid to the participant's account through payroll deductions. Early loan payoff is allowed. -16- THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN NOTES TO FINANCIAL STATEMENTS--Continued Forfeitures Participants terminating employment shall forfeit their nonvested interest in the Companies' contributions on the earlier of (1) the distribution of the entire nonforfeitable portion of their account or (2) upon incurring a period of severance equal to five consecutive one-year breaks in service. Forfeitures are available to reduce the Companies' future contributions. Participants who terminate and are reemployed with a participating company before incurring five consecutive one-year breaks in service are entitled to their nonvested or forfeited amounts, subject to certain provisions as stated in the Plan document. NOTE 3--INVESTMENT CONTRACT WITH INSURANCE COMPANY The Plan maintains an investment contract with VALIC, a wholly owned subsidiary of American General Corporation. The group deposit administration contract is valued at contract value, which represents contributions and transfers under the contract, plus income earned, less funds used to pay benefits. The contract had a guaranteed minimum rate of 6.00% through March 31, 1997; effective April 1, 1997 the rate changed to 6.25%. This rate is declared annually and remained at 6.25% through December 31, 1998. Any earnings in excess of the guaranteed minimum rate are credited to the participants' accounts. The effective earned yield is calculated based on the calendar year. The effective earned yield of the investment contract was 8.05% for 1998 and 7.79% for 1997. NOTE 4--PLAN TERMINATION Although it has not expressed any intent to do so, the Companies have the right under the Plan to discontinue its contributions at any time and to terminate from the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100 percent vested in their accounts. -17- THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN NOTES TO FINANCIAL STATEMENTS--Continued NOTE 5 - RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500 The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500: December 31, 1998 1997 Net assets available for benefits per the financial statements $150,959,029 $107,456,463 Benefits payable to withdrawing participants (351,043) (789,778) Net assets available for benefits per the Form 5500 $150,607,986 $106,666,685 The following is a reconciliation of benefits paid to participants per the financial statements to the Form 5500: Year Ended December 31, 1998 Benefits paid to participants per the financial statements American General Corporation common stock $6,737,567 Cash 2,503,210 Total benefits paid to participants per the financial statements 9,240,777 Add: Amounts allocated to withdrawing participants at December 31, 1998 351,043 Less: Amounts allocated to withdrawing participants at December 31, 1997 (789,778) Benefits paid to participants per the Form 5500 $8,802,042 Amounts allocated to withdrawing participants are recorded on the Form 5500 for benefit claims that have been processed and approved for payment prior to December 31 but not yet paid as of that date. NOTE 6--FEDERAL INCOME TAXES Based on a favorable determination letter dated December 8, 1995, the Internal Revenue Service (IRS) has ruled that the Plan, as restated and amended effective August 31, 1990, December 6, 1991, March 4, 1992, May 26, 1993, December 6, 1993, and August 25, 1995, is qualified under Section 401(a) of the IRC and, therefore, exempt under Section 501(a) from federal income taxes. Once qualified, the Plan is required to operate in conformity with the IRC to maintain its qualification. The Plan Administrator is not aware of any course of action or series of events that have occurred that might adversely affect the Plan's qualified status. -18- THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN NOTES TO FINANCIAL STATEMENTS--Continued NOTE 7--YEAR 2000 ISSUE (UNAUDITED) As of December 31, 1998, the Companies have completed Year 2000 readiness activities for substantially all of its critical internal systems, making them Year 2000 ready. The Companies have also developed a plan to assess and attempt to mitigate the risks associated with the potential failure of third parties to achieve Year 2000 readiness. Due to the various stages of third parties' Year 2000 readiness, the Companies' testing activities related to third parties will continue throughout 1999. The Companies have commenced contingency planning to reduce the risk of Year 2000 related business failures. The Companies have substantially completed all significant planning activities. Based on these activities and plans, the Companies believe that they will experience at most isolated and minor disruptions of business processes following the turn of the century. Such disruptions are not expected to have a material effect on the Plan's operations. NOTE 8--SUBSEQUENT EVENTS Effective January 1, 1999, the following changes were made to the Plan: The Companies contribute an amount equal to 100 percent of the first 3 percent of the Participant's basic contribution, plus 50 percent of the next 3 percent of the participant's basic contribution. Participants will be 100 percent vested in the Companies' matching contributions made in 1999 and subsequent years. Pre-1999 contributions by the Companies will continue to vest under the existing vesting schedule. These changes place the Plan under the safe harbor provisions of the IRC. Under the safe harbor provisions, nondiscrimination testing and refunds of excess contributions will no longer be required. Also, effective January 1, 1999, the Plan's eligibility requirements were changed from one year of service to 30 days of service. -19- THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES DECEMBER 31, 1998 Identity of Description of Shares or Current Issuer Investment Units Cost Value *American General Common stock 1,651,839 shares $45,578,955 $128,843,439 Corporation *The Variable Annuity Group deposit 3,755,380 3,755,380 Life Insurance administration Company contract *American General Mutual fund 290,641 shares 5,777,186 10,910,660 Series Portfolio Company Stock Index Fund Templeton Foreign Mutual fund 130,002 shares 1,325,319 1,090,716 Fund Putnam OTC & Mutual fund 138,207 shares 1,989,249 2,384,074 Emerging Growth Fund *American General Mutual fund 85,335 shares 1,628,902 1,949,898 Series Portfolio Company Growth Fund Vanguard Fixed Mutual fund 67,244 shares 625,149 624,695 Income Securities Fund *State Street Bank Short-term investment 184,884 184,884 & Trust Company money-market fund *Participant Loans Loans to participants at interest rates ranging from 8.75% to 9.5% and maturities up to five years - 2,353,731 $60,865,024 $152,097,477 *Party-in-interest -20- THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS YEAR ENDED DECEMBER 31, 1998 Identity of Purchase Selling Cost of Party Involved Description Price Price Asset Sold Category (iii) - series of transactions in excess of 5% of Plan assets State Street Purchases of Bank and money market Trust Company fund investments 12,285,978 - - State Street Sales of money Bank and market fund Trust Company investments - 12,321,660 23,321,660 American Purchases of General American General Corporation Corporation 10,465,460 - - common stock American Sales of General American General Corporation Corporation common stock - 14,658,521 5,684,955 -21- THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS (continued) YEAR ENDED DECEMBER 31, 1998 Current Value of Asset on Identity of Transaction Net Gain/ Party Involved Description Date (Loss) Category (iii) - series of transactions in excess of 5% of Plan assets State Street Purchases of Bank and money market Trust Company fund investments 12,285,978 - State Street Sales of money Bank and market fund Trust Company investments 12,321,660 - American Purchases of General American General Corporation Corporation common stock 10,465,460 - American Sales of General American General Corporation Corporation common stock 14,658,521 8,973,566 -22- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, The Variable Annuity Life Insurance Company Agents' and Managers' Thrift Plan Administrative Board has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AGENTS' AND MANAGERS' THRIFT PLAN June 25, 1999 ELIZABETH A. DOBBS Elizabeth A. Dobbs Vice President - Benefits and Payroll Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-13395) pertaining to The Variable Annuity Life Insurance Company Agents' and Managers' Thrift Plan of our report dated June 11, 1999, with respect to the financial statements and supplemental schedules of The Variable Annuity Life Insurance Company Agents' and Managers' Thrift Plan included in this Annual Report (Form 11-K) for the year ended December 31, 1998. ERNST & YOUNG LLP Houston, Texas June 23, 1999 -----END PRIVACY-ENHANCED MESSAGE-----