UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-08789
---------------------------------------------
VALIC Company II
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
2929 Allen Parkway, Houston, TX 77019
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Evelyn M. Curran
Senior Vice President
The Variable Annuity Life Insurance Company
2929 Allen Parkway
Houston, TX 77019
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (713) 831-6425
-----------------------------
Date of fiscal year end: August 31
--------------------------
Date of reporting period: August 31, 2007
--------------------------
Item 1. Reports to Stockholders
VALIC Company II
Annual Report
August 31, 2007
VALIC Company II
ANNUAL REPORT AUGUST 31, 2007
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
President's Letter......................................................... 1
Expense Example............................................................
2
Portfolios of Investments:
Aggressive Growth Lifestyle Fund........................................ 4
Capital Appreciation Fund............................................... 6
Conservative Growth Lifestyle Fund...................................... 9
Core Bond Fund.......................................................... 11
High Yield Bond Fund.................................................... 24
International Small Cap Equity Fund..................................... 36
Large Cap Value Fund.................................................... 41
Mid Cap Growth Fund..................................................... 44
Mid Cap Value Fund...................................................... 48
Moderate Growth Lifestyle Fund.......................................... 53
Money Market II Fund.................................................... 55
Small Cap Growth Fund................................................... 58
Small Cap Value Fund.................................................... 61
Socially Responsible Fund............................................... 67
Strategic Bond Fund..................................................... 71
Statements of Assets and Liabilities....................................... 92
Statements of Operations................................................... 94
Statements of Changes in Net Assets........................................ 96
Notes to Financial Statements.............................................. 100
Financial Highlights....................................................... 113
Report of Independent Registered Public Accounting Firm.................... 121
Approval of Advisory Agreements............................................ 122
Trustees & Officers Information............................................ 126
Shareholder Tax Information................................................ 128
Comparisons: Funds vs. Indexes............................................. 129
VALIC Company II
PRESIDENT'S LETTER
- --------------------------------------------------------------------------------
Dear Valued Investor:
We are pleased to provide you with the Annual Report for VALIC Company II. The
report contains the investment portfolio information and the financial
statements of VALIC Company II for the twelve month period ending August 31,
2007.
The market has been extremely volatile in recent months. Rising subprime
mortgage defaults in the United States quickly spread from a domestic economic
event to a global financial market event. Several European banks announced
problems associated with exposure to these loans and the credit markets seized
up, led by the market for asset-backed commercial paper. Investors poured money
into short term Treasuries, driving up prices and pushing down yields. These
events helped to topple equity markets which had reached record highs in
mid-July. On a positive front, the Federal Reserve has taken an active role in
ensuring that markets remain liquid by injecting cash into the economy and
lowering the discount rate. Despite the subprime mortgage meltdown, the S&P
500(R) grew by 15.13% during the twelve month period.
We believe that diversification is an important strategy in all markets, but
is especially well suited during times of volatility. Spreading your
investments between different asset classes (e.g., large and small
capitalization stocks, bonds, money markets and international investments) and
different investment styles (e.g., growth and value) is the best long-term
strategy to manage risk. With this in mind, we are committed to continually
monitor the investment expertise represented in VALIC Company II and to supply
you with the appropriate choices to meet your asset allocation objectives.
Additionally, once you have a plan in place based on your individual
retirement goals - stick with it. A common mistake of investors is to buy high
when enthusiasm is soaring and to sell low when fear sets in. Select a
portfolio that is appropriate for your needs and adjust it only as your needs
change or rebalance as necessary due to market conditions. We recommend that
you contact your financial advisor to make certain that your current portfolio
allocation is appropriate for you.
Thank you for your continued confidence in our ability to help you meet your
investment goals.
Sincerely,
/s/ Evelyn M. Curran
Evelyn M. Curran, President
VALIC Company II
1
VALIC Company II
EXPENSE EXAMPLE -- August 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Disclosure of Fund Expenses in Shareholder Reports
As a shareholder of a Fund in VALIC Company II ("VC II"), you incur ongoing
costs, including management fees and other Fund expenses. This Example is
intended to help you understand your ongoing costs (in dollars) of investing in
the Funds and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
March 1, 2007 and held until August 31, 2007. Shares of VC II are currently
issued and redeemed only in connection with investments in and payments under
variable annuity contracts and variable life insurance policies ("Variable
Contracts") and qualified retirement plans (the "Plans") offered by The
Variable Annuity Life Insurance Company ("VALIC"), the investment adviser to VC
II and other life insurance companies affiliated with VALIC. The fees and
expenses associated with the Variable Contracts and Plans are not included in
these Examples, and had such fees and expenses been included your costs would
have been higher. Please see your Variable Contract prospectus or Plan document
for more details on the fees associated with the Variable Contract or Plans.
Actual Expenses
The "Actual" section of the table provides information about your actual
account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid over the period. Simply divide your account value by $1,000 (for
example, an $8,600 account value divided by $1,000 = 8.6), then multiply the
result by the number in the column under the heading entitled "Expenses Paid
During the Six Months Ended August 31, 2007" to estimate the expenses you paid
on your account during this period. The "Expenses Paid During the Six Months
Ended August 31, 2007" column and the "Expense Ratio as of August 31, 2007"
column do not include fees and expenses that may be charged by the Variable
Contracts or Plans, in which the Funds are offered. Had these fees and expenses
been included, the "Expenses Paid During the Six Months Ended August 31, 2007"
column would have been higher and the "Ending Account Value" would have been
lower.
Hypothetical Example for Comparison Purposes
The "Hypothetical" section of the table provides information about
hypothetical account values and hypothetical expenses based on the Fund's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the Funds and other funds. To do so,
compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of other funds. The "Expenses Paid During the
Six Months Ended August 31, 2007" column and the "Expense Ratio as of August
31, 2007" column do not include fees and expenses that may be charged by the
Variable Contracts or Plans, in which the Funds are offered. Had these fees and
expenses been included, the "Expenses Paid During the Six Months Ended August
31, 2007" column would have been higher and the "Ending Account Value" would
have been lower.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any fees and expenses that may be charged
by the Variable Contracts or Plans. Please refer to your Variable Contract
prospectus or Plan document for more information. Therefore, the "hypothetical"
example is useful in comparing ongoing costs and will not help you determine
the relative total costs of owning different funds. In addition, if these fees
and expenses were included, your costs would have been higher.
2
VALIC Company II
EXPENSE EXAMPLE -- August 31, 2007 (Unaudited) -- (continued)
- --------------------------------------------------------------------------------
Actual Hypothetical
------------------------------------------ ------------------------------------------
Ending
Account Value
Ending Using a
Account Value Expenses Paid Hypothetical Expenses Paid Expense
Beginning Using Actual During the Six Beginning 5% Assumed During the Six Ratio
Account Value Return at Months Ended Account Value Return at Months Ended as of
at March 1, August 31, August 31, at March 1, August 31, August 31, August 31,
Fund 2007 2007 2007* 2007 2007 2007* 2007*
- ---- ------------- ------------- -------------- ------------- ------------- -------------- ----------
Aggressive Growth Lifestyle#... $1,000.00 $1,058.87 $0.52 $1,000.00 $1,024.70 $0.51 0.10%...
Capital Appreciation#@......... $1,000.00 $1,108.49 $4.52 $1,000.00 $1,020.92 $4.33 0.85%...
Conservative Growth Lifestyle#. $1,000.00 $1,033.88 $0.51 $1,000.00 $1,024.70 $0.51 0.10%...
Core Bond#..................... $1,000.00 $ 998.04 $3.88 $1,000.00 $1,021.32 $3.92 0.77%...
High Yield Bond#............... $1,000.00 $ 981.66 $4.94 $1,000.00 $1,020.21 $5.04 0.99%...
International Small Cap Equity# $1,000.00 $1,069.77 $5.22 $1,000.00 $1,020.16 $5.09 1.00%...
Large Cap Value#............... $1,000.00 $1,041.69 $4.17 $1,000.00 $1,021.12 $4.13 0.81%...
Mid Cap Growth#@............... $1,000.00 $1,069.71 $4.43 $1,000.00 $1,020.92 $4.33 0.85%...
Mid Cap Value#@................ $1,000.00 $1,031.31 $5.38 $1,000.00 $1,019.91 $5.35 1.05%...
Moderate Growth Lifestyle#..... $1,000.00 $1,049.08 $0.52 $1,000.00 $1,024.70 $0.51 0.10%...
Money Market II#............... $1,000.00 $1,024.19 $2.81 $1,000.00 $1,022.43 $2.80 0.55%...
Small Cap Growth #@............ $1,000.00 $1,018.86 $5.90 $1,000.00 $1,019.36 $5.90 1.16%...
Small Cap Value#@.............. $1,000.00 $ 987.14 $4.76 $1,000.00 $1,020.42 $4.84 0.95%...
Socially Responsible#@......... $1,000.00 $1,045.74 $2.89 $1,000.00 $1,022.38 $2.85 0.56%...
Strategic Bond#................ $1,000.00 $ 996.48 $4.48 $1,000.00 $1,020.72 $4.53 0.89%...
* Expenses are equal to the Fund's annualized expense ratio multiplied by the
average account value over the period, multiplied by 184 days then divided by
365 days. These ratios do not reflect fees and expenses associated with the
Variable Contracts or Plans. If such fees and expenses had been included, the
expenses would have been higher. Please refer to your Variable Contract
prospectus for details on the expenses that apply to the Variable Contracts
or your Plan document for details on the administration fees charged by your
Plan sponsor.
# During the stated period, the investment adviser waived a portion of or all
fees and assumed a portion of or all expenses for the Fund. As a result, if
these fees and expenses had not been waived or assumed, the
"Actual/Hypothetical Ending Account Value" would have been lower and the
"Actual/Hypothetical Expenses Paid During the Six Months Ended August 31,
2007" and the "Expense Ratios" would have been higher.
@ Through expense offset arrangements resulting from broker commission
recapture, a portion of the Fund's expenses has been reduced. Had the expense
reductions been taken into account, the Expense Example would have been as
follows:
Actual Hypothetical
------------------------------------------ ------------------------------------------
Ending
Account Value
Ending Using a
Account Value Expenses Paid Hypothetical Expenses Paid Expense
Beginning Using Actual During the Six Beginning 5% Assumed During the Six Ratio
Account Value Return at Months Ended Account Value Return at Months Ended as of
at March 1, August 31, August 31, at March 1, August 31, August 31, August 31,
Fund 2007 2007 2007* 2007 2007 2007* 2007*
- ---- ------------- ------------- -------------- ------------- ------------- -------------- ----------
Capital Appreciation Fund $1,000.00 $1,108.49 $4.52 $1,000.00 $1,020.92 $4.33 0.85%
Mid Cap Growth........... $1,000.00 $1,069.71 $4.38 $1,000.00 $1,020.97 $4.28 0.84%
Mid Cap Value............ $1,000.00 $1,031.31 $5.32 $1,000.00 $1,019.96 $5.30 1.04%
Small Cap Growth......... $1,000.00 $1,018.86 $5.90 $1,000.00 $1,019.36 $5.90 1.16%
Small Cap Value.......... $1,000.00 $ 987.14 $4.76 $1,000.00 $1,020.42 $4.84 0.95%
Socially Responsible..... $1,000.00 $1,045.74 $2.73 $1,000.00 $1,022.53 $2.70 0.53%
3
VALIC Company II Aggressive Growth Lifestyle Fund
PORTFOLIO PROFILE -- August 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Industry Allocation*
Domestic Equity Investment Companies......... 64.1%
International Equity Investment Companies.... 35.0%
Fixed Income Investment Company.............. 1.0%
-----
100.1%
=====
* Calculated as a percentage of net assets
4
VALIC Company II Aggressive Growth Lifestyle Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007
- --------------------------------------------------------------------------------
Value
Shares (Note 2)
---------------------------------------------------------------------------
AFFILIATED REGISTERED INVESTMENT COMPANIES#(1) -- 100.1%
Domestic Equity Investment Companies -- 64.1%
VALIC Co. I Stock Index Fund.................... 171,163 $ 6,584,642
VALIC Co. I Value Fund.......................... 403,218 5,185,389
VALIC Co. II Capital Appreciation Fund.......... 2,165,994 23,457,716
VALIC Co. II Large Cap Value Fund............... 941,261 14,815,440
VALIC Co. I Mid Cap Index Fund.................. 16,376 411,539
VALIC Co. II Mid Cap Value Fund................. 81,939 1,646,154
VALIC Co. II Small Cap Growth Fund+............. 28,246 412,104
VALIC Co. II Small Cap Value Fund............... 10,724 164,616
-----------
Total Domestic Equity Investment Companies
(cost $49,047,509)............................. 52,677,600
-----------
Fixed Income Investment Company -- 1.0%
VALIC Co. II Core Bond Fund (cost $820,654)..... 80,854 822,283
-----------
International Equity Investment Companies -- 35.0%
VALIC Co. I International Equities Fund+....... 2,240,672 24,692,210
VALIC Co. II International Growth II Fund...... 208,056 4,115,356
-----------
Total International Equity Investment Companies
(cost $27,138,962)............................. 28,807,566
-----------
TOTAL INVESTMENTS
(cost $77,007,125)(2).......................... 100.1% 82,307,449
Liabilities in excess of other assets............. (0.1)% (86,473)
--------- -----------
NET ASSETS -- 100.0% $82,220,976
========= ===========
- --------
# The Aggressive Growth Lifestyle Fund invests in various VALIC Company I or
VALIC Company II Funds, some of which are not presented in this report.
Additional information on the underlying funds is available at our website,
www.aigvalic.com.
+ Non-income producing security
(1)See Note 3
(2)See Note 5 for cost of investments on a tax basis.
See Notes to Financial Statements
5
VALIC Company II Capital Appreciation Fund
PORTFOLIO PROFILE -- August 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Industry Allocation*
Finance -- Investment Banker/Broker.......... 9.0%
Computers.................................... 5.7%
Metal Processors & Fabrication............... 5.5%
Medical -- Drugs............................. 4.7%
Engineering/R&D Services..................... 4.0%
Medical Products............................. 3.8%
Computers -- Memory Devices.................. 3.7%
Networking Products.......................... 3.6%
Repurchase Agreements........................ 3.6%
Enterprise Software/Service.................. 3.3%
Data Processing/Management................... 3.2%
Beverages -- Non-alcoholic................... 2.7%
Telephone -- Integrated...................... 2.5%
Agricultural Chemicals....................... 2.2%
Medical -- Biomedical/Gene................... 2.2%
Therapeutics................................. 2.2%
Investment Management/Advisor Services....... 2.1%
Cable TV..................................... 2.0%
Oil Field Machinery & Equipment.............. 2.0%
E-Commerce/Products.......................... 1.8%
Aerospace/Defense............................ 1.7%
Finance -- Other Services.................... 1.7%
Multimedia................................... 1.7%
Steel -- Specialty........................... 1.7%
Containers -- Metal/Glass.................... 1.5%
Retail -- Drug Store......................... 1.5%
Transport -- Services........................ 1.5%
Apparel Manufacturers........................ 1.4%
Banks -- Commercial.......................... 1.3%
Cellular Telecom............................. 1.3%
Retail -- Discount........................... 1.3%
Web Portals/ISP.............................. 1.3%
E-Commerce/Services.......................... 1.2%
Metal -- Aluminum............................ 1.2%
Diversified Manufacturing Operations......... 1.1%
Electronic Components -- Semiconductors...... 1.1%
Retail -- Regional Department Stores......... 1.1%
Telecommunication Equipment.................. 1.1%
X-Ray Equipment.............................. 1.1%
Computer Services............................ 1.0%
Medical Instruments.......................... 1.0%
Banks -- Fiduciary........................... 0.9%
Real Estate Management/Services.............. 0.9%
Advertising Agencies......................... 0.8%
Savings & Loans/Thrifts...................... 0.8%
Banks -- Super Regional...................... 0.6%
Finance -- Credit Card....................... 0.5%
Retail -- Apparel/Shoe....................... 0.5%
-----
102.6%
=====
* Calculated as a percentage of net assets
6
VALIC Company II Capital Appreciation Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007
- --------------------------------------------------------------------------------
Value
Security Description Shares (Note 2)
---------------------------------------------------------------------
COMMON STOCK -- 99.0%
Advertising Agency -- 0.8%
Omnicom Group, Inc............................... 13,600 $ 692,648
----------
Aerospace/Defense -- 1.7%
Lockheed Martin Corp............................. 14,400 1,427,616
----------
Agricultural Chemicals -- 2.2%
Monsanto Co...................................... 26,100 1,820,214
----------
Apparel Manufacturer -- 1.4%
Coach, Inc.+..................................... 26,500 1,180,045
----------
Banks - Commercial -- 1.3%
Synovus Financial Corp........................... 40,500 1,118,610
----------
Banks - Fiduciary -- 0.9%
State Street Corp................................ 11,800 724,048
----------
Banks - Super Regional -- 0.6%
US Bancorp....................................... 14,200 459,370
----------
Beverages - Non - alcoholic -- 2.7%
The Coca - Cola Co............................... 42,000 2,258,760
----------
Cable TV -- 2.0%
The DIRECTV Group, Inc.+......................... 73,700 1,719,421
----------
Cellular Telecom -- 1.3%
US Cellular Corp.+............................... 11,400 1,108,650
----------
Computer Services -- 1.0%
Cognizant Technology Solutions Corp., Class A+... 11,900 874,769
----------
Computers -- 5.7%
Apple, Inc.+..................................... 18,200 2,520,336
Hewlett - Packard Co............................. 46,500 2,294,775
----------
4,815,111
----------
Computers - Memory Devices -- 3.7%
EMC Corp.+....................................... 102,600 2,017,116
SanDisk Corp.+................................... 19,400 1,087,564
----------
3,104,680
----------
Containers - Metal/Glass -- 1.5%
Owens - Illinois, Inc.+.......................... 32,100 1,291,062
----------
Data Processing/Management -- 3.2%
Mastercard, Inc., Class A........................ 6,900 945,231
Paychex, Inc..................................... 38,700 1,719,441
----------
2,664,672
----------
Diversified Manufacturing Operations -- 1.1%
Illinois Tool Works, Inc......................... 15,600 907,452
----------
E - Commerce/Products -- 1.8%
Amazon.com, Inc.+................................ 18,900 1,510,299
----------
E - Commerce/Services -- 1.2%
eBay, Inc.+...................................... 30,700 1,046,870
----------
Electronic Components - Semiconductors -- 1.1%
Nvidia Corp.+.................................... 17,500 895,300
----------
Engineering/R&D Services -- 4.0%
McDermott International, Inc.+................... 35,100 3,369,249
----------
Enterprise Software/Service -- 3.3%
BMC Software, Inc.+.............................. 32,000 979,840
Oracle Corp.+.................................... 89,100 1,806,948
----------
2,786,788
----------
Finance - Credit Card -- 0.5%
Discover Financial Services+..................... 16,850 389,909
----------
Value
Security Description Shares (Note 2)
----------------------------------------------------------------
Finance - Investment Banker/Broker -- 9.0%
Charles Schwab Corp......................... 85,900 $1,700,820
Citigroup, Inc.............................. 27,500 1,289,200
JPMorgan Chase & Co......................... 25,600 1,139,712
Merrill Lynch & Co., Inc.................... 18,500 1,363,450
Morgan Stanley.............................. 33,700 2,101,869
----------
7,595,051
----------
Finance - Other Services -- 1.7%
CME Group, Inc.............................. 2,600 1,442,480
----------
Investment Management/Advisor Services -- 2.1%
Franklin Resources, Inc..................... 13,500 1,778,895
----------
Medical Instruments -- 1.0%
St. Jude Medical, Inc.+..................... 18,600 810,402
----------
Medical Products -- 3.8%
Johnson & Johnson........................... 24,600 1,520,034
Stryker Corp................................ 24,500 1,636,600
Zimmer Holdings, Inc.+...................... 1,000 78,330
----------
3,234,964
----------
Medical - Biomedical/Gene -- 2.2%
Amgen, Inc.+................................ 13,600 681,496
Biogen Idec, Inc.+.......................... 16,400 1,046,648
Genentech, Inc.+............................ 1,900 142,139
----------
1,870,283
----------
Medical - Drugs -- 4.7%
Bristol - Myers Squibb Co................... 38,000 1,107,700
Merck & Co., Inc............................ 18,900 948,213
Schering - Plough Corp...................... 63,400 1,903,268
----------
3,959,181
----------
Metal Processors & Fabrication -- 5.5%
Precision Castparts Corp.................... 35,300 4,599,943
----------
Metal - Aluminum -- 1.2%
Alcoa, Inc.................................. 28,500 1,041,105
----------
Multimedia -- 1.7%
The Walt Disney Co.......................... 41,700 1,401,120
----------
Networking Products -- 3.6%
Cisco Systems, Inc.+........................ 96,200 3,070,704
----------
Oil Field Machinery & Equipment -- 2.0%
Grant Prideco, Inc.+........................ 8,600 475,580
National - Oilwell Varco, Inc.+............. 9,700 1,241,600
----------
1,717,180
----------
Real Estate Management/Services -- 0.9%
CB Richard Ellis Group, Inc., Class A+...... 25,800 761,616
----------
Retail - Apparel/Shoe -- 0.5%
Nordstrom, Inc.............................. 9,300 447,330
----------
Retail - Discount -- 1.3%
Wal - Mart Stores, Inc...................... 25,300 1,103,839
----------
Retail - Drug Store -- 1.5%
Walgreen Co................................. 28,700 1,293,509
----------
Retail - Regional Department Stores -- 1.1%
Kohl's Corp.+............................... 15,800 936,940
----------
Savings & Loans/Thrifts -- 0.8%
Washington Mutual, Inc...................... 19,200 705,024
----------
Steel - Specialty -- 1.7%
Allegheny Technologies, Inc................. 14,200 1,411,338
----------
7
VALIC Company II Capital Appreciation Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Shares/
Principal Value
Security Description Amount (Note 2)
- ----------------------------------------------------------------------------------------
COMMON STOCK (continued)
Telecommunication Equipment -- 1.1%
Harris Corp................................................. 15,600 $ 948,948
-----------
Telephone - Integrated -- 2.5%
AT&T, Inc................................................... 30,700 1,224,009
Qwest Communications International, Inc.+................... 95,200 852,040
-----------
2,076,049
-----------
Therapeutics -- 2.2%
Gilead Sciences, Inc.+...................................... 49,800 1,811,226
-----------
Transport - Services -- 1.5%
C.H. Robinson Worldwide, Inc................................ 25,900 1,270,136
-----------
Web Portals/ISP -- 1.3%
Google, Inc., Class A+...................................... 2,100 1,082,025
-----------
X - Ray Equipment -- 1.1%
Hologic, Inc.+.............................................. 17,300 919,495
-----------
Total Long - Term Investment Securities
(cost $68,224,122)......................................... 83,454,326
-----------
REPURCHASE AGREEMENT -- 3.6%
Agreement with State Street Bank & Trust Co., bearing
interest at 4.68%, dated 08/31/07, to be repurchased
09/04/07 in the amount of $3,008,563 and collateralized
by Federal National Mtg. Assoc. Notes, bearing interest at
4.25% due 05/15/09 and having approximate value of
$3,099,503
(cost $3,007,000).......................................... $3,007,000 3,007,000
-----------
TOTAL INVESTMENTS
(cost $71,231,122)(1)...................................... 102.6% 86,461,326
Liabilities in excess of other assets......................... (2.6)% (2,192,543)
---------- -----------
NET ASSETS -- 100.0% $84,268,783
========== ===========
- --------
+ Non-income producing security
(1)See Note 5 for cost of investments on a tax basis.
See Notes to Financial Statements
8
VALIC Company II Conservative Growth Lifestyle Fund
PORTFOLIO PROFILE -- August 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Industry Allocation*
Domestic Equity Investment Companies... 52.1%
Fixed Income Investment Company........ 30.0
Registered Investment Company.......... 10.1
International Equity Investment Company 8.0
-----
100.2%
=====
* Calculated as a percentage of net assets
9
VALIC Company II Conservative Growth Lifestyle Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007
- --------------------------------------------------------------------------------
Value
Security Description Shares (Note 2)
----------------------------------------------------------------------------
AFFILIATED REGISTERED INVESTMENT
COMPANIES#(1) -- 90.1%
Domestic Equity Investment Companies -- 52.1%
VALIC Co. I Stock Index Fund...................... 110,746 $ 4,260,417
VALIC Co. I Value Fund............................ 213,245 2,742,326
VALIC Co. II Capital Appreciation Fund............ 904,342 9,794,025
VALIC Co. II Large Cap Value Fund................. 388,900 6,121,286
VALIC Co. II Mid Cap Value Fund................... 48,751 979,402
VALIC Co. II Small Cap Growth Fund+............... 70,582 1,029,785
VALIC Co. II Small Cap Value Fund................. 35,093 538,671
-----------
Total Domestic Equity Investment Companies
(cost $23,859,838) 25,465,912
-----------
Fixed Income Investment Company -- 30.0%
VALIC Co. II Core Bond Fund (cost $14,619,271).... 1,443,157 14,676,904
-----------
International Equity Investment Company -- 8.0%
VALIC Co. I International Equities Fund+
(cost $3,665,687)................................ 355,498 3,917,586
-----------
Total Long-Term Investment Securities
(cost $42,144,796)............................... 44,060,402
-----------
SHORT-TERM INVESTMENT SECURITIES -- 10.1%
Registered Investment Company -- 10.1%
VALIC Co. I Money Market I Fund (cost $4,916,609). 4,916,609 4,916,609
-----------
TOTAL INVESTMENTS
(cost $47,061,405)(2) 100.2% 48,977,011
Liabilities in excess of other assets............... (0.2) (80,237)
--------- -----------
NET ASSETS -- 100.0% $48,896,774
========= ===========
- --------
# The Conservative Growth Lifestyle Fund invests in various VALIC Company I or
VALIC Company II Funds, some of which are not presented in this report.
Additional information on the underlying funds is available at our website,
www.aigvalic.com.
+ Non-income producing security
(1)See Note 3
(2)See Note 5 for cost of investments on a tax basis.
See Notes to Financial Statements
10
VALIC Company II Core Bond Fund
PORTFOLIO PROFILE -- August 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Industry Allocation*
Federal National Mtg. Assoc.............. 18.8%
United States Treasury Notes............. 15.2%
Diversified Financial Services........... 12.5%
Federal Home Loan Mtg. Corp.............. 12.3%
Electric -- Integrated................... 4.3%
Repurchase Agreements.................... 2.1%
Telephone -- Integrated.................. 1.9%
Finance -- Investment Banker/Broker...... 1.7%
Special Purpose Entities................. 1.7%
Sovereign................................ 1.6%
Banks -- Commercial...................... 1.3%
Oil Companies -- Exploration & Production 1.3%
Pipelines................................ 1.1%
Savings & Loans/Thrifts.................. 1.0%
United States Treasury Bonds............. 0.9%
Banks -- Money Center.................... 0.8%
Finance -- Mortgage Loan/Banker.......... 0.7%
Multimedia............................... 0.7%
Steel -- Producers....................... 0.7%
Banks -- Super Regional.................. 0.6%
Cellular Telecom......................... 0.6%
Insurance -- Multi-line.................. 0.6%
Medical -- Drugs......................... 0.6%
Telecom Services......................... 0.6%
Metal -- Aluminum........................ 0.5%
Real Estate Investment Trusts............ 0.5%
Retail -- Drug Store..................... 0.5%
Transport -- Rail........................ 0.5%
Building -- Residential/Commercial....... 0.4%
Cable TV................................. 0.4%
Chemicals -- Specialty................... 0.4%
Federal Home Loan Bank................... 0.4%
Medical Products......................... 0.4%
Non -- Hazardous Waste Disposal.......... 0.4%
Oil Companies -- Integrated.............. 0.4%
Oil Refining & Marketing................. 0.4%
Transport -- Air Freight................. 0.4%
Aerospace/Defense -- Equipment........... 0.3%
Chemicals -- Diversified................. 0.3%
Containers -- Paper/Plastic.............. 0.3%
Electric -- Generation................... 0.3%
Electronic Components -- Semiconductors.. 0.3%
Finance -- Credit Card................... 0.3%
Food -- Misc............................. 0.3%
Independent Power Producers.............. 0.3%
Medical -- Hospitals..................... 0.3%
Medical -- Wholesale Drug Distribution... 0.3%
Office Automation & Equipment............ 0.3%
Oil -- Field Services.................... 0.3%
Rental Auto/Equipment.................... 0.3%
Retail -- Discount....................... 0.3%
Retail -- Regional Department Stores..... 0.3%
Auto -- Cars/Light Trucks................ 0.2%
Building Products -- Cement.............. 0.2%
Commercial Services -- Finance........... 0.2%
Diversified Operations................... 0.2%
Finance -- Auto Loans.................... 0.2%
Finance -- Commercial.................... 0.2%
Finance -- Consumer Loans................ 0.2%
Food -- Retail........................... 0.2%
Insurance -- Property/Casualty........... 0.2%
Medical -- HMO........................... 0.2%
Metal Processors & Fabrication........... 0.2%
Metal -- Diversified..................... 0.2%
Transport -- Marine...................... 0.2%
Agricultural Chemicals................... 0.1%
Airlines................................. 0.1%
Brewery.................................. 0.1%
Broadcast Services/Program............... 0.1%
Casino Hotels....................... 0.1%
Diversified Manufacturing Operations 0.1%
Finance -- Other Services........... 0.1%
Food -- Meat Products............... 0.1%
Funeral Services & Related Items.... 0.1%
Gas -- Distribution................. 0.1%
Insurance Brokers................... 0.1%
Insurance -- Life/Health............ 0.1%
Investment Companies................ 0.1%
Machinery -- Farming................ 0.1%
Mining.............................. 0.1%
Paper & Related Products............ 0.1%
Radio............................... 0.1%
Real Estate Operations & Development 0.1%
Recycling........................... 0.1%
Satellite Telecom................... 0.1%
Television.......................... 0.1%
Transport -- Services............... 0.1%
Travel Services..................... 0.1%
Wire & Cable Products............... 0.1%
----
98.7%
====
Credit Quality+#
Government -- Agency.. 32.7%
Government -- Treasury 16.8%
AAA................... 11.1%
AA.................... 2.4%
A..................... 11.5%
BBB................... 17.2%
BB.................... 3.4%
B..................... 2.3%
CCC................... 1.4%
Below C............... 0.2%
Not Rated@............ 1.0%
-----
100.0%
=====
* Calculated as a percentage of Net Assets.
@ Represent debt issues that either have no ratings, or the rating is
unavailable from the data source.
+ Source: Standard and Poors
# Calculated as percentage of total debt issues, excluding short-term
securities.
11
VALIC Company II Core Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------------------
ASSET BACKED SECURITIES -- 11.9%
Diversified Financial Services -- 11.9%
Banc of America Funding Corp.
Series 2007-C, Class 5A1
5.37% due 05/20/36(1)............................. $2,834,982 $2,807,810
Banc of America Funding Corp.
Series 2006-J, Class 2A1
5.89% due 01/20/47(1)(2).......................... 2,867,584 2,887,009
Bear Stearns Commercial Mtg. Securities, Inc.,
Series 2007-PW15, Class A2
5.20% due 02/11/44(3)............................. 650,000 641,487
Bear Stearns Commercial Mtg. Securities, Inc.,
Series 2006-PW12, Class G
5.75% due 09/11/38................................ 76,000 62,047
Bear Stearns Commercial Mtg. Securities, Inc.
Series 2006-PW12, Class F
5.93% due 09/11/38*(2)(3)......................... 445,000 376,811
Bear Stearns Commercial Mtg. Securities, Inc.
Series 2007-PW15, Class H
5.93% due 02/11/44*(2)(3)......................... 815,000 603,405
Chase Funding Mtg. Loan Asset - Backed Certs.
Series 2003-6, Class 1A6
4.59% due 05/25/15................................ 189,074 180,206
Chase Mortgage Finance Corp.
Series 2007-A2, Class 1A1
4.56% due 07/25/37(1)............................. 2,128,397 2,105,141
Commercial Mtg. Pass Through Certs.,
Series 2004-LB2A, Class A3
4.22% due 03/10/39(3)............................. 653,000 633,789
Commercial Mtg. Pass Through Certs.,
Series CN2A, Class A2FL
5.55% due 02/05/19*(3)(4)......................... 1,035,000 1,034,933
Countrywide Asset - Backed Certs.
Series 2006-S6, Class A3
5.66% due 03/25/34................................ 739,000 715,874
Countrywide Asset - Backed Certs.
Series 2006-S4, Class A3
5.80% due 07/25/34................................ 910,000 892,496
CS First Boston Mtg. Securities Corp.
Series 2002-CKN2, Class A3
6.13% due 04/15/37(3)............................. 1,475,000 1,507,440
J.P. Morgan Chase Commercial Mtg. Securities Corp.
Series 2006-CB16, Class E
5.84% due 05/12/45*(3)............................ 300,000 267,777
LB - UBS Commercial Mtg. Trust
Series 2007-C6, Class AM
6.11% due 07/15/40(3)............................. 4,250,000 4,282,871
LB-UBS Commercial Mtg. Trust
Series 2007-C6, Class B
6.45% due 07/15/40(3)............................. 360,000 355,767
Merrill Lynch Mtg. Investors Trust
Series 2004-A1, Class 3A
4.84% due 02/25/34(1)(2).......................... 757,111 745,089
Merrill Lynch Mtg. Investor Trust
Series 2007-5, Class H
6.12% due 08/25/48................................ 390,000 286,660
Morgan Stanley Capital I
Series 2006-IQ12, Class D
5.53% due 12/15/43(3)............................. 480,000 441,104
Ocwen Advance Receivables Backed
Notes, Series 2006-1A
5.36% due 11/24/15*(5)............................ 500,000 375,000
Residential Asset Securities Corp.
Series 2003-KS10, Class AI6
4.54% due 12/25/33................................ 193,559 182,103
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------------
Diversified Financial Services (continued)
Wachovia Bank Commercial Mtg. Trust,
Series 2006-WL7A, Class F
6.09% due 09/15/21*(3)(4)................... $1,065,000 $ 1,061,941
Wells Fargo Mtg. Backed Securities Trust
Series 2006-AR17, Class A2
5.84% due 10/25/36(1)(2).................... 1,987,015 1,992,458
Wells Fargo Mtg. Backed Securities Trust
Series 2006-AR12, Class 2A1
6.10% due 09/25/36(1)(2).................... 525,856 528,282
-----------
Total Asset Backed Securities
(cost $25,615,779).......................... 24,967,500
-----------
CONVERTIBLE BONDS & NOTES -- 0.0%
Telecom Services -- 0.0%
ICO North America, Inc.
Notes
7.50% due 08/15/09(5)(7)(8)
(cost $25,000).............................. 25,000 24,750
-----------
CORPORATE BONDS & NOTES -- 28.9%
Aerospace/Defense - Equipment -- 0.3%
United Technologies Corp.
Senior Notes
6.10% due 05/15/12.......................... 594,000 619,713
-----------
Agricultural Chemicals -- 0.1%
Mosaic Global Holdings, Inc.
Debentures
7.38% due 08/01/18.......................... 20,000 18,800
Terra Capital, Inc.
Company Guar. Notes
7.00% due 02/01/17.......................... 50,000 48,000
The Mosaic Co.
Senior Notes
7.38% due 12/01/14*......................... 95,000 96,662
-----------
163,462
-----------
Airlines -- 0.1%
American Airlines, Inc. Pass Through Certs.
Series 2001-1, Class A-2
6.82% due 05/23/11.......................... 145,000 138,928
Northwest Airlines, Inc. Pass Through Certs.
Series 2002-1 Class G2
6.26% due 11/20/21.......................... 172,102 169,520
-----------
308,448
-----------
Auto - Cars/Light Trucks -- 0.2%
DaimlerChrysler NA Holding Corp.
Company Guar. Notes
5.71% due 03/13/09(4)....................... 170,000 169,511
Ford Motor Co.
Debentures
6.38% due 02/01/29.......................... 160,000 112,800
General Motors Corp.
Debentures
8.25% due 07/15/23.......................... 80,000 63,800
General Motors Corp.
Senior Bonds
8.38% due 07/15/33.......................... 153,000 122,783
-----------
468,894
-----------
12
VALIC Company II Core Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Banks - Commercial -- 0.9%
Colonial Bank NA
Sub. Notes
6.38% due 12/01/15.................... $170,000 $ 168,691
Compass Bank
Notes
5.50% due 04/01/20.................... 300,000 288,535
First Maryland Capital II
Notes
6.21% due 02/01/27(4)................. 159,000 140,431
National City Bank
Sub. Notes
5.80% due 06/07/17.................... 250,000 249,536
Popular North America, Inc.
Company Guar. Notes
5.65% due 04/15/09.................... 120,000 120,595
Silicon Valley Bank
Senior Notes
5.70% due 06/01/12.................... 292,000 291,245
SouthTrust Bank
Sub. Notes
4.75% due 03/01/13.................... 170,000 166,149
SouthTrust Corp.
Sub. Notes
5.80% due 06/15/14.................... 293,000 293,250
Union Bank of California NA
Sub. Notes
5.95% due 05/11/16.................... 170,000 171,819
US Bank NA
Notes
3.90% due 08/15/08.................... 32,000 31,407
----------
1,921,658
----------
Banks - Money Center -- 0.1%
RBS Capital Trust I
Bonds
4.71% due 07/01/13(4)(9).............. 180,000 165,446
----------
Banks-Super Regional -- 0.5%
Capital One Financial Corp.
Senior Notes
5.70% due 09/15/11.................... 569,000 560,254
Capital One Financial Corp.
Senior Notes
6.75% due 09/15/17.................... 300,000 298,407
JPMorgan Chase Bank NA
Sub. Notes
6.13% due 11/01/08.................... 138,000 138,760
----------
997,421
----------
Brewery -- 0.1%
Anheuser-Busch Cos., Inc.
Bonds
6.00% due 11/01/41.................... 322,000 298,744
----------
Broadcast Services/Program -- 0.0%
Nexstar Finance, Inc.
Senior Sub. Notes
7.00% due 01/15/14.................... 55,000 51,975
----------
Building Products - Air & Heating -- 0.0%
American Standard, Inc.
Company Guar. Notes
7.38% due 02/01/08.................... 68,000 68,300
----------
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------
Building - Residential/Commerical -- 0.4%
Centex Corp.
Senior Notes
5.45% due 08/15/12.................... $200,000 $184,401
DR Horton, Inc.
Company Guar. Notes
5.00% due 01/15/09.................... 173,000 165,375
Lennar Corp.
Company Guar. Notes
5.95% due 10/17/11.................... 600,000 577,574
--------
927,350
--------
Cable TV -- 0.4%
Cablevision Systems Corp.
Senior Notes
8.00% due 04/15/12.................... 80,000 76,600
CCH I LLC
Company Guar. Notes
11.00% due 10/01/15................... 74,000 71,965
CCH II LLC/CCH II Capital Corp.
Company Guar. Notes
10.25% due 10/01/13................... 180,000 181,800
Comcast Corp.
Company Guar. Notes
5.85% due 11/15/15.................... 204,000 202,112
Comcast Corp.
Company Guar. Notes
5.88% due 02/15/18.................... 220,000 214,834
--------
747,311
--------
Casino Hotels -- 0.1%
MGM Mirage, Inc.
Senior Notes
5.88% due 02/27/14.................... 85,000 77,987
Turning Stone Resort Casino Enterprise
Senior Notes
9.13% due 09/15/14*................... 70,000 70,700
--------
148,687
--------
Cellular Telecom -- 0.6%
American Cellular Corp.
Senior Notes
10.00% due 08/01/11................... 30,000 31,125
Centennial Communications Corp.
Senior Notes
11.11% due 01/01/13(4)................ 200,000 205,000
Cingular Wireless Services, Inc.
Senior Notes
7.88% due 03/01/11.................... 324,000 348,967
Cricket Communications, Inc.
Company Guar. Notes
9.38% due 11/01/14.................... 70,000 68,600
Cricket Communications, Inc.
Company Guar. Notes
9.38% due 11/01/14*................... 35,000 34,300
MetroPCS Wireless, Inc.
Senior Notes
9.25% due 11/01/14*................... 105,000 103,425
Nextel Communications, Inc.
Company Guar. Notes
5.95% due 03/15/14.................... 400,000 381,644
13
VALIC Company II Core Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Cellular Telecom (continued)
Rural Cellular Corp.
Senior Sub. Notes
8.62% due 06/01/13*(4)..................... $ 60,000 $ 61,200
Rural Cellular Corp.
Senior Notes
11.11% due 11/01/12(4)..................... 5,000 5,150
----------
1,239,411
----------
Chemicals - Diversified -- 0.3%
EI Du Pont de Nemours & Co.
Senior Notes
4.88% due 04/30/14......................... 54,000 52,303
ICI Wilmington, Inc.
Company Guar. Notes
7.05% due 09/15/07......................... 230,000 230,033
Lyondell Chemical Co.
Company Guar. Notes
8.00% due 09/15/14......................... 110,000 119,625
Rohm & Haas Co.
Senior Notes
7.85% due 07/15/29......................... 167,000 187,197
----------
589,158
----------
Chemicals - Specialty -- 0.4%
Huntsman International LLC
Company Guar. Notes
7.88% due 11/15/14......................... 125,000 130,625
Lubrizol Corp.
Senior Notes
4.63% due 10/01/09......................... 600,000 590,968
Momentive Performance Materials, Inc.
Senior Sub. Notes
11.50% due 12/01/16*....................... 220,000 210,100
----------
931,693
----------
Commercial Services - Finance -- 0.2%
The Western Union Co.
Senior Notes
5.40% due 11/17/11......................... 525,000 524,371
----------
Computer Services -- 0.0%
Computer Sciences Corp.
Notes
3.50% due 04/15/08......................... 85,000 83,785
----------
Consumer Products - Misc. -- 0.0%
American Achievement Corp.
Senior Sub. Notes
8.25% due 04/01/12......................... 30,000 29,100
----------
Containers - Paper/Plastic -- 0.3%
Jefferson Smurfit Corp.
Company Guar. Notes
8.25% due 10/01/12......................... 25,000 24,438
Pliant Corp.
Company Guar. Notes
11.13% due 09/01/09........................ 146,000 132,130
Smurfit - Stone Container Enterprises, Inc.
Senior Notes
8.00% due 03/15/17......................... 475,000 453,031
----------
609,599
----------
Direct Marketing -- 0.0%
Affinity Group, Inc.
Senior Sub. Notes
9.00% due 02/15/12......................... 95,000 98,800
----------
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------------
Diversified Financial Services -- 0.1%
AXA Financial, Inc.
Senior Notes
6.50% due 04/01/08........................... $150,000 $150,664
--------
Diversified Operations -- 0.1%
Capmark Financial Group, Inc.
Company Guar. Notes
5.88% due 05/10/12*.......................... 195,000 172,702
--------
Electric - Distribution -- 0.0%
Old Dominion Electric Cooperative
1st Mtg. Bonds
5.68% due 12/01/28........................... 43,083 43,700
--------
Electric - Generation -- 0.3%
Bruce Mansfield Pass Through Certs.
6.85% due 06/01/34*.......................... 440,000 456,148
The AES Corp.
Senior Notes
8.88% due 02/15/11........................... 190,000 195,225
--------
651,373
--------
Electric - Integrated -- 4.2%
Centerpoint Energy, Inc.
Senior Notes
5.88% due 06/01/08........................... 190,000 189,445
Commonwealth Edison Co.
1st Mtg. Bonds
5.90% due 03/15/36........................... 400,000 368,103
Commonwealth Edison Co.
1st Mtg. Bonds
5.95% due 08/15/16........................... 795,000 795,346
Consumers Energy Co.
1st Mtg. Bonds
Series C
4.25% due 04/15/08........................... 170,000 168,567
Dominion Resources, Inc.
Senior Notes
5.69% due 05/15/08........................... 165,000 165,015
Dominion Resources, Inc.
Jr. Sub. Notes
6.30% due 09/30/66(4)........................ 266,000 263,560
Duke Energy Corp.
Senior Notes
4.20% due 10/01/08........................... 150,000 148,117
Duke Energy Indiana, Inc.
Debentures
5.00% due 09/15/13........................... 145,000 140,147
Entergy Louisiana LLC
1st Mtg. Bonds
5.83% due 11/01/10........................... 255,000 255,230
Mackinaw Power LLC
Secured Notes
6.30% due 10/31/23*.......................... 440,000 450,802
Mirant Americas Generation LLC
Senior Notes
8.30% due 05/01/11........................... 95,000 93,812
Mirant Mid - Atlantic LLC Pass Through Certs.
Series B
9.13% due 06/30/17........................... 89,453 98,398
Nisource Finance Corp.
Company Guar. Notes
5.25% due 09/15/17........................... 540,000 498,927
14
VALIC Company II Core Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Electric - Integrated (continued)
Pepco Holdings, Inc.
Senior Notes
6.45% due 08/15/12......................... $ 490,000 $ 508,619
PSEG Power LLC
Company Guar. Notes
7.75% due 04/15/11......................... 115,000 123,320
PSI Energy, Inc.
Debentures
7.85% due 10/15/07......................... 287,000 287,619
Public Service Electric & Gas Co.
1st Mtg. Bonds
5.80% due 05/01/37......................... 2,000,000 1,894,732
Puget Sound Energy, Inc.
Senior Notes
5.20% due 10/01/15......................... 268,000 259,483
Southern Energy, Inc.
Notes
7.90% due 07/15/09+(5)(7)(8)............... 150,000 0
Virginia Electric & Power Co.
Notes
4.10% due 12/15/08......................... 157,000 155,113
Virginia Electric and Power Co.
Senior Notes
6.00% due 05/15/37......................... 2,000,000 1,901,914
----------
8,766,269
----------
Electronic Components - Semiconductors -- 0.3%
Amkor Technology, Inc.
Senior Notes
9.25% due 06/01/16......................... 100,000 97,000
Freescale Semiconductor, Inc.
Senior Sub. Notes
10.13% due 12/15/16........................ 150,000 130,500
National Semiconductor Corp.
Senior Notes
6.60% due 06/15/17......................... 380,000 390,135
----------
617,635
----------
Electronics - Military -- 0.0%
L-3 Communications Corp.
Company Guar. Notes
6.38% due 10/15/15......................... 95,000 91,912
----------
Finance - Auto Loans -- 0.2%
Ford Motor Credit Co. LLC
Senior Notes
5.80% due 01/12/09......................... 9,000 8,480
Ford Motor Credit Co. LLC
Notes
7.38% due 10/28/09......................... 310,000 293,343
Ford Motor Credit Co. LLC
Notes
7.88% due 06/15/10......................... 10,000 9,388
General Motors Acceptance Corp.
Notes
6.88% due 09/15/11......................... 205,000 182,831
General Motors Acceptance Corp.
Notes
6.88% due 08/28/12......................... 8,000 7,067
----------
501,109
----------
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------
Finance - Commercial -- 0.2%
Caterpillar Financial Services Corp.
Senior Notes
5.85% due 09/01/17..................... $266,000 $ 266,386
Transamerica Finance Corp.
Senior Notes
6.40% due 09/15/08..................... 79,000 79,655
----------
346,041
----------
Finance - Consumer Loans -- 0.2%
John Deere Capital Corp.
Debentures
5.10% due 01/15/13..................... 528,000 521,940
----------
Finance - Credit Card -- 0.3%
Capital One Bank
Senior Sub. Notes
6.50% due 06/13/13..................... 684,000 697,461
----------
Finance - Investment Banker/Broker -- 1.7%
Citigroup, Inc.
Senior Notes
5.88% due 05/29/37..................... 185,000 175,184
Citigroup, Inc.
Senior Notes
6.00% due 08/15/17..................... 252,000 255,078
Goldman Sachs Group, Inc.
Sub. Notes
6.45% due 05/01/36..................... 205,000 197,728
JP Morgan Chase & Co.
Senior Notes
5.38% due 01/15/14..................... 410,000 407,899
Lehman Brothers Holdings, Inc.
Notes
5.50% due 04/04/16..................... 650,000 607,845
Lehman Brothers Holdings, Inc.
Sub. Notes
6.50% due 07/19/17..................... 215,000 211,676
Lehman Brothers Holdings, Inc.
Sub. Notes
6.88% due 07/17/37..................... 545,000 512,003
Merrill Lynch & Co., Inc.
Sub. Notes
6.11% due 01/29/37..................... 200,000 185,532
Morgan Stanley
Senior Notes
5.75% due 08/31/12..................... 420,000 419,436
The Bear Stearns Cos., Inc.
Sub. Notes
5.55% due 01/22/17..................... 770,000 708,923
----------
3,681,304
----------
Finance - Mortgage Loan/Banker -- 0.7%
Countrywide Financial Corp.
Company Guar. Notes
5.80% due 06/07/12..................... 81,000 76,119
Countrywide Financial Corp.
Sub. Notes
6.25% due 05/15/16..................... 255,000 226,307
Residential Capital LLC
Senior Notes
6.50% due 06/01/12..................... 648,000 492,480
15
VALIC Company II Core Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Finance - Mortgage Loan/Banker (continued)
Residential Capital LLC
Company Guar. Notes
6.50% due 04/17/13..................... $160,000 $ 120,400
Residential Capital LLC
Company Guar. Notes
6.88% due 06/30/15..................... 752,000 567,760
----------
1,483,066
----------
Food - Misc. -- 0.3%
Kraft Foods, Inc.
Senior Bonds
5.63% due 11/01/11..................... 150,000 150,620
Kraft Foods, Inc.
Senior Notes
7.00% due 08/11/37..................... 440,000 452,885
----------
603,505
----------
Funeral Services & Related Items -- 0.1%
Service Corp. International
Senior Notes
6.75% due 04/01/16..................... 155,000 146,087
----------
Home Furnishings -- 0.0%
Simmons Co.
Company Guar. Notes
7.88% due 01/15/14..................... 25,000 23,406
Simmons Co.
Senior Notes
10.00% due 12/15/14(10)................ 43,000 33,433
----------
56,839
----------
Independent Power Producers -- 0.3%
Calpine Corp.
Sec. Notes
8.75% due 07/15/13*(11)................ 380,000 400,900
NRG Energy, Inc.
Company Guar. Notes
7.38% due 02/01/16..................... 215,000 212,313
----------
613,213
----------
Insurance Brokers -- 0.1%
Marsh & McLennan Cos., Inc.
Senior Notes
5.15% due 09/15/10..................... 145,000 143,915
Marsh & McLennan Cos., Inc.
Senior Notes
7.13% due 06/15/09..................... 75,000 77,385
----------
221,300
----------
Insurance - Life/Health -- 0.1%
Americo Life, Inc.
Notes
7.88% due 05/01/13*.................... 109,000 111,623
Monumental Global Funding II
Notes
5.65% due 07/14/11*.................... 120,000 122,647
----------
234,270
----------
Insurance - Multi-line -- 0.3%
Metropolitan Life Global Funding I
Sec. Notes
5.75% due 07/25/11*.................... 590,000 604,086
----------
Insurance - Property/Casualty -- 0.2%
The Travelers Cos., Inc.
Senior Notes
6.25% due 06/15/37..................... 360,000 349,536
----------
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------
Machinery - Farming -- 0.1%
Case Corp.
Notes
7.25% due 01/15/16........................ $115,000 $116,150
--------
Medical Products -- 0.4%
Baxter International, Inc.
Senior Notes
5.90% due 09/01/16........................ 500,000 507,653
Johnson & Johnson
Notes
5.95% due 08/15/37........................ 387,000 394,077
--------
901,730
--------
Medical - Drugs -- 0.4%
American Home Products Corp.
Notes
6.95% due 03/15/11........................ 100,000 105,815
Wyeth Bonds
5.50% due 02/01/14........................ 693,000 692,448
--------
798,263
--------
Medical - HMO -- 0.2%
Coventry Health Care, Inc.
Senior Notes
5.95% due 03/15/17........................ 158,000 150,605
WellPoint, Inc.
Notes
3.75% due 12/14/07........................ 190,564 189,432
--------
340,037
--------
Medical - Hospitals -- 0.3%
Community Health Systems, Inc.
Senior Notes
8.88% due 07/15/15*....................... 50,000 49,938
HCA, Inc.
Senior Notes
6.25% due 02/15/13........................ 225,000 192,937
HCA, Inc.
Sec Notes.
9.13% due 11/15/14*....................... 50,000 51,250
HCA, Inc.
Sec. Notes
9.25% due 11/15/16*....................... 300,000 308,250
IASIS Healthcare LLC / IASIS Capital Corp.
Bank Guar. Notes
8.75% due 06/15/14........................ 25,000 24,375
--------
626,750
--------
Medical - Wholesale Drug Distribution -- 0.3%
Cardinal Health, Inc.
Senior Notes
5.80% due 10/15/16*....................... 683,000 677,244
--------
Metal Processors & Fabrication -- 0.2%
Commercial Metals Co.
Senior Notes
6.50% due 07/15/17........................ 349,000 363,659
Timken Co.
Notes
5.75% due 02/15/10........................ 133,000 134,412
--------
498,071
--------
Metal - Aluminum -- 0.4%
Alcoa, Inc.
Notes
6.00% due 01/15/12........................ 246,000 251,357
Alcoa, Inc.
Bonds
6.50% due 06/15/18........................ 485,000 502,037
--------
753,394
--------
16
VALIC Company II Core Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Metal - Diversified -- 0.1%
Freeport-McMoRan Copper & Gold, Inc.
Senior Notes
8.38% due 04/01/17........................... $140,000 $ 149,100
----------
Mining -- 0.1%
Newmont Mining Corp.
Company Guar. Notes
5.88% due 04/01/35........................... 205,000 179,605
----------
Multimedia -- 0.7%
Belo Corp.
Senior Notes
6.75% due 05/30/13........................... 80,000 81,961
Cox Enterprises, Inc.
Notes
7.88% due 09/15/10*.......................... 397,000 423,773
News America, Inc.
Company Guar. Bonds
7.30% due 04/30/28........................... 280,000 291,472
Time Warner Entertainment Co. LP
Senior Notes
8.38% due 07/15/33........................... 502,000 582,616
Viacom, Inc.
Senior Notes
6.88% due 04/30/36........................... 70,000 68,165
----------
1,447,987
----------
Non - Hazardous Waste Disposal -- 0.4%
Republic Services, Inc.
Notes
6.09% due 03/15/35........................... 75,000 68,201
Waste Management, Inc.
Company Guar. Notes
6.88% due 05/15/09........................... 583,000 601,121
Waste Management, Inc.
Company Guar. Notes
7.75% due 05/15/32........................... 200,000 221,778
----------
891,100
----------
Office Automation & Equipment -- 0.3%
IKON Office Solutions, Inc.
Senior Notes
7.75% due 09/15/15........................... 85,000 84,469
Pitney Bowes, Inc.
Notes
5.25% due 01/15/37........................... 510,000 495,235
----------
579,704
----------
Oil Companies - Exploration & Production -- 1.1%
Anadarko Petroleum Corp.
Senior Notes
5.95% due 09/15/16........................... 400,000 397,789
Apache Corp.
Senior Notes
6.25% due 04/15/12........................... 600,000 626,480
Chesapeake Energy Corp.
Company Guar. Notes
7.50% due 09/15/13........................... 465,000 473,138
Devon Financing Corp. ULC
Company Guar. Notes
6.88% due 09/30/11........................... 550,000 581,703
Sabine Pass LNG LP
Secured Notes
7.50% due 11/30/16........................... 300,000 291,750
----------
2,370,860
----------
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------------
Oil Companies-Integrated -- 0.4%
Hess Corp.
Notes
7.13% due 03/15/33........................... $295,000 $ 314,364
Hess Corp.
Bonds
7.88% due 10/01/29........................... 95,000 108,362
Phillips Petroleum Co.
Debentures
7.00% due 03/30/29........................... 293,000 320,657
----------
743,383
----------
Oil Refining & Marketing -- 0.4%
The Premcor Refining Group, Inc.
Company Guar. Notes
6.75% due 05/01/14........................... 396,000 409,819
Valero Energy Corp.
Senior Notes
6.63% due 06/15/37........................... 400,000 403,321
----------
813,140
----------
Oil - Field Services -- 0.3%
Allis-Chalmers Energy, Inc.
Company Guar. Notes
9.00% due 01/15/14........................... 230,000 228,850
Weatherford International, Inc.
Company Guar. Notes
6.80% due 06/15/37*.......................... 335,000 342,756
----------
571,606
----------
Paper & Related Products -- 0.1%
Bowater, Inc.
Notes
6.50% due 06/15/13........................... 110,000 85,250
Georgia-Pacific Corp.
Company Guar. Notes
7.00% due 01/15/15*.......................... 90,000 85,050
Georgia-Pacific Corp.
Company Guar. Notes
7.13% due 01/15/17*.......................... 20,000 18,800
----------
189,100
----------
Physicians Practice Management -- 0.0%
US Oncology, Inc.
Company Guar. Notes
10.75% due 08/15/14.......................... 25,000 25,125
----------
Pipelines -- 0.7%
CenterPoint Energy Resources Corp.
Notes
7.75% due 02/15/11........................... 670,000 711,076
Copano Energy LLC
Company Guar. Notes
8.13% due 03/01/16........................... 220,000 221,100
Duke Energy Field Services LLC
Notes
6.88% due 02/01/11........................... 80,000 83,218
Dynegy-Roseton Danskammer Pass Through Certs.
Series B
7.67% due 11/08/16........................... 100,000 99,125
Williams Cos., Inc.
Senior Notes
7.88% due 09/01/21........................... 240,000 257,400
----------
1,371,919
----------
17
VALIC Company II Core Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Publishing - Newspapers -- 0.0%
Knight Ridder, Inc.
Debentures
6.88% due 03/15/29................... $ 85,000 $ 69,045
--------
Publishing - Periodicals -- 0.0%
The Reader's Digest Association, Inc.
Senior Sub. Notes
9.00% due 02/15/17*.................. 120,000 103,200
--------
Radio -- 0.1%
Chancellor Media Corp.
Company Guar. Notes
8.00% due 11/01/08................... 238,000 241,570
--------
Real Estate Investment Trusts -- 0.5%
Health Care Property Investors, Inc.
Senior Notes
5.65% due 12/15/13................... 220,000 215,607
New Plan Excel Realty Trust
Senior Notes
4.50% due 02/01/11................... 329,000 323,331
PPF Funding, Inc.
Bonds
5.35% due 04/15/12*.................. 185,000 181,782
Reckson Operating Partnership LP
Senior Notes
6.00% due 03/31/16................... 47,000 45,095
Simon Property Group LP
Notes
5.38% due 08/28/08................... 84,000 83,258
Vornado Realty LP
Notes
4.50% due 08/15/09................... 150,000 147,071
--------
996,144
--------
Recycling -- 0.1%
Aleris International, Inc.
Company Guar. Notes
9.00% due 12/15/14................... 100,000 95,250
Aleris International, Inc.
Company Guar. Notes
10.00% due 12/15/16.................. 100,000 93,250
--------
188,500
--------
Rental Auto/Equipment -- 0.3%
Erac USA Finance Co.
Notes
7.35% due 06/15/08*.................. 490,000 494,594
United Rentals North America, Inc.
Senior Sub. Notes
7.75% due 11/15/13................... 90,000 92,700
--------
587,294
--------
Research & Development -- 0.0%
Alion Science and Technology Corp.
Company Guar. Notes
10.25% due 02/01/15.................. 95,000 90,725
--------
Retail - Discount -- 0.3%
Wal-Mart Stores, Inc.
Senior Notes
5.88% due 04/05/27................... 390,000 374,438
Wal-Mart Stores, Inc.
Senior Notes
6.50% due 08/15/37................... 229,000 234,820
--------
609,258
--------
Principal Value
Security Description Amount (Note 2)
- ---------------------------------------------------------------------------------
Retail - Drug Store -- 0.5%
CVS Caremark Corp.
Senior Notes
6.25% due 06/01/27....................................... $400,000 $ 385,473
CVS Lease Pass Through Trust
Pass Through Certs.
6.04% due 12/10/28*...................................... 591,333 576,626
----------
962,099
----------
Retail - Regional Department Stores -- 0.3%
Federated Retail Holdings, Inc.
Company Guar. Notes
5.90% due 12/01/16....................................... 195,000 187,863
JC Penney Corp., Inc.
Senior Notes
5.75% due 02/15/18....................................... 446,000 430,719
----------
618,582
----------
Savings & Loans/Thrifts -- 1.0%
Independence Community Bank Corp.
Sub. Notes
3.50% due 06/20/13(4).................................... 81,000 79,878
Sovereign Bancorp, Inc.
Senior Notes
4.80% due 09/01/10....................................... 280,000 275,504
Washington Mutual Bank
Sub. Notes
5.13% due 01/15/15....................................... 690,000 626,862
Washington Mutual Preferred Funding III
Bonds
6.90% due 06/15/12*(4)(9)................................ 400,000 409,606
Washington Mutual, Inc.
Senior Notes
5.50% due 08/24/11....................................... 600,000 586,289
Western Financial Bank
Senior Debentures
9.63% due 05/15/12....................................... 164,000 176,113
----------
2,154,252
----------
Special Purpose Entities -- 0.8%
BAE Systems Holdings, Inc.
Notes
5.20% due 08/15/15*...................................... 293,000 286,603
Capital One Capital IV
Company Guar. Bonds
6.75% due 02/17/37(4).................................... 180,000 150,257
CDX North America High Yield Pass Through Certs.
Series 8-T3
7.50% due 06/29/12*...................................... 125,000 117,969
Consolidated Communications Illinois/Texas Holdings, Inc.
Senior Notes
9.75% due 04/01/12....................................... 300,000 300,000
Cyrus Reinsurance Holdings SPC
Senior Notes
6.36% due 09/01/08*(4)(5)................................ 183,000 183,000
KAR Holdings, Inc.
Senior Notes
9.36% due 05/01/14*(4)................................... 75,000 66,750
Norbord Delaware GP I
Company Guar. Notes
6.45% due 02/15/17*...................................... 127,000 118,956
Pricoa Global Funding I
Notes
5.30% due 09/27/13*...................................... 220,000 221,168
18
VALIC Company II Core Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Special Purpose Entities (continued)
Principal Life Global Funding I
Sec. Notes
5.25% due 01/15/13*.................. $219,000 $ 218,832
----------
1,663,535
----------
Steel - Producers -- 0.7%
International Steel Group, Inc.
Senior Notes
6.50% due 04/15/14................... 370,000 371,545
Reliance Steel & Aluminum Co.
Company Guar. Notes
6.85% due 11/15/36................... 690,000 691,642
United States Steel Corp.
Senior Notes
6.05% due 06/01/17................... 240,000 233,441
United States Steel Corp.
Senior Notes
6.65% due 06/01/37................... 180,000 171,058
----------
1,467,686
----------
Telecom Services -- 0.5%
Bellsouth Telecommunications, Inc.
Debentures
7.00% due 12/01/95................... 264,000 264,375
PAETEC Holding Corp.
Senior Notes
9.50% due 07/15/15*.................. 10,000 9,550
Qwest Corp.
Senior Notes
7.50% due 10/01/14................... 135,000 138,375
Verizon Global Funding Corp.
Senior Notes
6.88% due 06/15/12................... 550,000 583,709
----------
996,009
----------
Telephone - Integrated -- 1.0%
AT&T Corp.
Senior Notes
7.30% due 11/15/11................... 640,000 685,520
BellSouth Corp.
Senior Notes
6.00% due 10/15/11................... 600,000 612,867
Citizens Communications Co.
Senior Notes
7.13% due 03/15/19................... 75,000 71,437
Citizens Communications Co.
Senior Notes
9.00% due 08/15/31................... 25,000 24,562
GTE Northwest, Inc.
Debentures
5.55% due 10/15/08................... 95,000 95,124
Level 3 Financing, Inc.
Company Guar. Notes
8.75% due 02/15/17................... 10,000 9,400
Level 3 Financing, Inc.
Company Guar. Notes
9.25% due 11/01/14................... 30,000 28,875
New England Telephone & Telegraph Co.
Debentures
7.88% due 11/15/29................... 115,000 128,486
Sprint Capital Corp.
Company Guar. Notes
6.88% due 11/15/28................... 335,000 326,078
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------
Telephone - Integrated (continued)
Verizon New York, Inc.
Debentures
6.88% due 04/01/12................. $ 80,000 $ 84,292
-----------
2,066,641
-----------
Television -- 0.1%
Paxson Communication Corp.
Sec. Senior Notes
11.61% due 01/15/13*(4)............ 245,000 245,000
Young Broadcasting, Inc.
Company Guar. Notes
10.00% due 03/01/11................ 55,000 49,500
-----------
294,500
-----------
Transport - Air Freight -- 0.4%
Atlas Air, Inc. Pass Through Certs.
Series 1991-1, Class A-1
7.20% due 01/02/19................. 298,054 289,112
Atlas Air, Inc. Pass Through Certs.
Series 1991-1, Class B
7.63% due 01/02/15................. 211,305 231,908
Atlas Air, Inc. Pass Through Certs.
Series 2000-1, Class A
8.71% due 01/02/19................. 252,143 264,750
-----------
785,770
-----------
Transport - Rail -- 0.4%
BNSF Funding Trust I
Company Guar. Bonds
6.61% due 12/15/55(4).............. 400,000 355,207
Union Pacific Corp.
Notes
3.88% due 02/15/09................. 459,000 452,272
Union Pacific Corp.
Debentures
7.00% due 02/01/16................. 111,000 118,907
-----------
926,386
-----------
Transport - Services -- 0.1%
FedEx Corp.
Company Guar. Notes
5.50% due 08/15/09................. 90,000 90,694
PHI, Inc.
Company Guar. Notes
7.13% due 04/15/13................. 25,000 23,438
Ryder System, Inc.
Notes
5.85% due 03/01/14................. 88,000 88,612
-----------
202,744
-----------
Travel Service -- 0.1%
Travelport LLC
Company Guar. Notes
9.99% due 09/01/14(4).............. 120,000 120,000
-----------
Wire & Cable Products -- 0.1%
Belden, Inc.
Senior Sub. Notes
7.00% due 03/15/17*................ 125,000 121,250
-----------
Total Corporate Bonds & Notes
(cost $62,168,025)................. 60,856,796
-----------
19
VALIC Company II Core Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount (Note 2)
---------------------------------------------------------------
FOREIGN CORPORATE BONDS & NOTES -- 5.7%
Banks-Commercial -- 0.4%
Banco Continental de Panama SA
Notes
6.63% due 12/01/10*...................... $ 48,000 $ 48,960
Caisse Nationale des Caisses
d'Epargne et de Prevoyance
Notes
5.39% due 12/30/09(4)(9)................. 132,000 106,541
Credit Agricole SA
Jr. Sub. Notes
6.64% due 05/31/17*(4)(9)................ 446,000 420,226
Societe Generale
Sub. Notes
5.92% due 04/05/17*(4)(9)................ 215,000 205,596
--------
781,323
--------
Banks - Money Center -- 0.4%
Deutsche Bank AG
Senior Notes
6.00% due 09/01/17....................... 420,000 423,747
HBOS Capital Funding LP
Bank Guar. Bonds
6.85% due 03/23/09(9).................... 288,000 271,440
Mizuho Financial Group Cayman, Ltd.
Bank Guar. Bonds
8.38% due 04/27/09(9).................... 165,000 171,463
National Westminster Bank PLC
Sub. Notes
7.75% due 10/16/07(6).................... 63,000 63,179
--------
929,829
--------
Broadcast Services/Program -- 0.1%
Grupo Televisa SA
Senior Notes
6.63% due 03/18/25....................... 176,000 178,479
--------
Building Products-Cement -- 0.2%
C8 Capital SPV, Ltd.
Notes
6.64% due 12/31/14*(4)(9)................ 535,000 518,698
--------
Cellular Telecom -- 0.0%
America Movil SA de CV
Bonds
6.38% due 03/01/35....................... 91,000 88,428
--------
Cruise Lines -- 0.0%
Royal Caribbean Cruises, Ltd.
Senior Notes
7.00% due 06/15/13....................... 100,000 98,320
--------
Diversified Financial Services -- 0.3%
CIT Group Funding Co. of Canada
Company Guar. Notes
5.20% due 06/01/15....................... 653,000 558,961
--------
Diversified Manufacturing Operations -- 0.1%
Tyco International Group SA
Company Guar. Notes
6.00% due 11/15/13....................... 160,000 160,995
--------
Diversified Operations -- 0.1%
Hutchison Whampoa Finance, Ltd.
Company Guar. Notes
7.50% due 08/01/27*...................... 280,000 305,082
--------
Electric - Integrated -- 0.1%
Empresa Nacional de Electricidad SA
Bonds
7.33% due 02/01/37....................... 210,000 221,456
--------
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------------
Electronic Components-Misc. -- 0.0%
NXP BV / NXP Funding LLC
Company Guar. Notes
9.50% due 10/15/15........................... $ 15,000 $ 12,975
--------
Finance - Other Services -- 0.1%
Lukoil International Finance BV
Company Guar. Notes
6.36% due 06/07/17*.......................... 300,000 280,500
--------
Food - Meat Products -- 0.1%
JBS SA
Company Guar. Notes
9.38% due 02/07/11........................... 100,000 99,250
--------
Food - Retail -- 0.2%
Delhaize Group
Notes
6.50% due 06/15/17*.......................... 359,000 363,015
--------
Gas - Distribution -- 0.1%
Nakilat, Inc.
Sec. Notes
6.07% due 12/31/33*.......................... 235,000 227,264
--------
Insurance - Multi-line -- 0.3%
Aegon NV
Sub. Bonds
5.86% due 07/15/14(4)(9)..................... 189,000 154,035
AXA SA
Sub. Notes
6.38% due 12/14/36*(4)(9).................... 200,000 180,292
ING Groep NV
Bonds
5.78% due 12/08/15(4)(9)..................... 330,000 317,048
--------
651,375
--------
Investment Companies -- 0.1%
Canadian Oil Sands, Ltd.
Notes
5.80% due 08/15/13*.......................... 164,000 162,833
--------
Medical - Drugs -- 0.2%
Angiotech Pharmaceuticals, Inc.
Company Guar. Notes
7.75% due 04/01/14........................... 160,000 136,800
Angiotech Pharmaceuticals, Inc.
Company Guar. Notes
9.11% due 12/01/13(4)........................ 60,000 59,400
Elan Finance PLC
Company Guar. Bonds
7.75% due 11/15/11........................... 145,000 141,375
--------
337,575
--------
Metal - Aluminum -- 0.1%
Alcan, Inc.
Senior Notes
5.75% due 06/01/35........................... 298,000 273,695
--------
Metal - Diversified -- 0.1%
Inco, Ltd.
Bonds
7.20% due 09/15/32........................... 242,000 252,066
--------
Oil Companies - Exploration & Production -- 0.2%
Nexen, Inc.
Bonds
6.40% due 05/15/37........................... 332,000 322,983
--------
20
VALIC Company II Core Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------
FOREIGN CORPORATE BONDS & NOTES (continued)
Paper & Related Products -- 0.0%
Abitibi-Consolidated, Inc.
Notes
8.55% due 08/01/10....................... $ 95,000 $ 85,025
----------
Pipelines -- 0.4%
Enbridge, Inc.
Bonds
5.80% due 06/15/14....................... 715,000 712,043
Kinder Morgan Finance Co. ULC
Company Guar. Notes
5.70% due 01/05/16....................... 138,000 122,854
----------
834,897
----------
Real Estate Operations & Development -- 0.1%
Brookfield Asset Management, Inc.
Notes
8.13% due 12/15/08....................... 166,000 172,309
----------
Satellite Telecom -- 0.1%
Intelsat Bermuda, Ltd.
Company Guar. Notes
8.89% due 01/15/15(4).................... 140,000 141,050
Intelsat Intermediate Holding Co., Ltd.
Senior Notes
9.25% due 02/01/15(10)................... 100,000 81,000
Intelsat, Ltd.
Senior Notes
6.50% due 11/01/13....................... 100,000 74,250
----------
296,300
----------
Special Purpose Entities -- 0.7%
Aries Vermoegensverwaltungs GmbH
Bonds
9.60% due 10/25/14....................... 500,000 621,250
Hybrid Capital Funding I LP
Sub. Notes
8.00% due 06/30/11(9).................... 260,000 245,375
Rio Tinto Finance USA, Ltd.
Notes
2.63% due 09/30/08....................... 110,000 107,311
SMFG Preferred Capital, Ltd.
Sub. Bonds
6.08% due 01/25/17*(4)(9)................ 272,000 253,689
SovRisc BV
Notes
4.63% due 10/31/08*...................... 174,000 173,675
----------
1,401,300
----------
Telecom Services -- 0.1%
Telenet Group Holdings NV
Notes
11.50% due 06/15/14*(10)................. 60,000 57,000
TELUS Corp.
Notes
8.00% due 06/01/11....................... 45,000 48,812
----------
105,812
----------
Telephone - Integrated -- 0.8%
British Telecommunications PLC
Bonds
8.63% due 12/15/30....................... 265,000 354,170
Telecom Italia Capital SA
Company Guar. Bonds
5.25% due 10/01/15....................... 505,000 476,311
Telecom Italia Capital SA
Company Guar. Bonds
6.20% due 07/18/11....................... 500,000 510,103
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------
Telephone-Integrated (continued)
Telefonica Emisiones SAU
Company Guar. Notes
6.22% due 07/03/17................ $310,000 $ 312,185
-----------
1,652,769
-----------
Transport - Marine -- 0.2%
DP World, Ltd.
Bonds
6.85% due 07/02/37*............... 495,000 499,486
-----------
Transport - Rail -- 0.1%
Canadian National Railway Co.
Notes
6.38% due 10/15/11................ 180,000 187,661
-----------
Total Foreign Corporate Bonds & Notes
(cost $12,387,698)................ 12,060,661
-----------
FOREIGN GOVERNMENT AGENCIES -- 1.6%
Sovereign -- 1.6%
Federal Republic of Brazil
Notes
8.00% due 01/15/18................ 250,000 275,000
Federal Republic of Brazil
Bonds
10.50% due 07/14/14............... 70,000 87,710
Government of United Kingdom
Notes
2.25% due 07/08/08*............... 123,000 120,375
Province of Quebec
Debentures
7.50% due 09/15/29................ 224,000 277,181
Republic of Argentina
Bonds
5.39% due 08/03/12(4)(12)......... 250,000 137,750
Republic of Argentina
Notes
8.28% due 12/31/33................ 290,239 248,155
Republic of Turkey
Notes
9.00% due 06/30/11................ 65,000 70,811
Republic of Turkey
Senior Notes
11.88% due 01/15/30............... 600,000 916,500
Republic of Venezuela
Notes
8.50% due 10/08/14................ 35,000 33,687
Republic of Venezuela
Bonds
9.25% due 09/15/27................ 800,000 792,000
Russian Federation
Bonds
7.50% due 03/31/30*............... 101,490 112,654
Russian Federation
Notes
8.25% due 03/31/10................ 313,341 322,084
United Mexican States
Notes
6.75% due 09/27/34................ 2,000 2,172
-----------
Total Foreign Government Agencies
(cost $3,319,765)................. 3,396,079
-----------
21
VALIC Company II Core Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------
U.S. GOVERNMENT AGENCIES -- 31.5%
Federal Home Loan Bank -- 0.4%
3.90% due 02/25/08................. $ 365,000 $ 362,627
4.50% due 09/08/08................. 440,000 438,157
-----------
800,784
-----------
Federal Home Loan Mtg. Corp. -- 12.3%
4.35% due 06/02/08................. 420,000 417,651
4.45% due 03/06/08................. 205,000 204,142
4.50% due 11/01/18................. 536,582 516,132
4.50% due 02/01/19................. 573,605 551,065
4.50% due 07/01/19................. 466,413 448,085
4.50% due 08/01/20................. 408,855 392,499
5.00% due 03/01/19................. 246,863 241,443
5.00% due 10/01/33................. 64,648 61,692
5.00% due 06/01/34................. 1,253,284 1,194,699
5.00% due 12/01/34................. 409,477 390,335
5.00% due 08/01/35................. 1,424,929 1,357,081
5.00% due 11/01/35................. 860,349 819,384
5.00% due 11/01/36................. 489,602 465,808
5.00% due 01/01/37................. 634,127 603,309
5.00% due 04/01/37................. 1,768,693 1,681,548
5.47% due 03/01/36(4).............. 536,880 529,950
5.50% due 11/01/18................. 274,290 273,295
5.50% due 10/01/33................. 673,649 659,876
5.50% due 07/01/34................. 431,959 422,658
5.50% due 02/01/35................. 532,278 520,328
5.50% due 07/01/35................. 19,006 18,579
5.50% due 05/01/37................. 1,409,471 1,376,583
5.50% due 06/01/37................. 1,926,816 1,881,857
5.70% due 08/01/36(4).............. 2,318,580 2,315,080
5.81% due 01/01/37(4).............. 657,573 653,564
5.81% due 01/01/37(4).............. 591,741 592,226
5.98% due 10/01/36(4).............. 2,616,187 2,612,617
6.00% due 07/01/35................. 600,985 601,133
6.00% due 12/01/36................. 821,483 821,027
6.50% due 12/01/32................. 455,077 464,873
6.50% due 02/01/36................. 233,724 237,610
6.50% due 09/01/36................. 12,262 12,448
6.50% due 05/01/37................. 1,240,719 1,259,459
7.00% due 11/01/16................. 36,940 38,202
7.00% due 07/01/32................. 66,795 68,879
7.50% due 12/01/30................. 6,117 6,391
7.50% due 04/01/31................. 83,693 87,366
8.00% due 02/01/30................. 5,512 5,812
8.00% due 07/01/30................. 2,089 2,203
Federal Home Loan Mtg. Corp. REMIC
Series 3349, Class HB
5.50% due 06/15/31(1)............. 1,106,000 1,101,145
-----------
25,908,034
-----------
Federal National Mtg. Assoc. -- 18.8%
3.88% due 02/01/08................. 315,000 313,240
4.50% due 06/01/18................. 136,528 131,501
4.67% due 10/01/35(4).............. 402,207 398,170
4.75% due 12/15/10................. 202,000 202,108
5.00% due 09/01/18................. 44,578 43,671
5.00% due 10/01/18................. 502,895 492,655
5.00% due 12/01/18................. 233,102 228,355
5.00% due 02/01/20................. 74,467 72,838
5.00% due 06/01/22................. 2,329,780 2,274,824
5.00% due 04/01/34................. 813,088 774,836
5.00% due 01/01/37................. 979,807 931,225
5.00% due 05/01/37................. 2,469,592 2,347,142
5.50% due 10/01/17................. 93,751 93,495
5.50% due 05/01/18................. 104,011 103,636
5.50% due 11/01/19................. 94,930 94,587
Principal Value
Security Description Amount/Shares (Note 2)
- --------------------------------------------------------------------------------
Federal National Mtg. Assoc. (continued)
5.50% due 12/01/33.................................. $ 602,847 $ 590,473
5.50% due 05/01/34.................................. 250,648 245,504
5.50% due 12/01/35.................................. 96,159 94,004
5.50% due 02/01/36(4)............................... 453,382 452,335
5.50% due 11/01/36.................................. 845,370 825,911
5.50% due 12/01/36.................................. 1,510,292 1,466,293
5.50% due 04/01/37.................................. 5,155,050 5,034,765
5.50% due 05/01/37.................................. 8,895,670 8,688,105
5.50% due 07/01/37.................................. 3,488,350 3,406,955
6.00% due 09/01/16.................................. 135,073 136,821
6.00% due 12/01/16.................................. 36,466 36,938
6.00% due 12/01/33.................................. 537,604 539,045
6.00% due 07/01/34.................................. 497,476 498,623
6.00% due 10/01/36.................................. 4,908,677 4,904,509
6.00% due 11/01/36.................................. 1,462,929 1,456,138
6.50% due 02/01/17.................................. 64,135 65,458
6.50% due 03/01/17.................................. 71,531 73,007
6.50% due 04/01/29.................................. 70,847 72,496
6.50% due 06/01/29.................................. 142,866 146,191
6.50% due 07/01/32.................................. 70,070 71,583
6.50% due 02/01/37.................................. 1,996,275 2,026,578
7.00% due 09/01/31.................................. 170,142 176,488
7.50% due 11/01/14.................................. 225 229
-----------
39,510,732
-----------
Government National Mtg. Assoc. -- 0.0%
6.50% due 06/15/29.................................. 22,823 23,347
7.00% due 09/15/28.................................. 22,832 23,822
-----------
47,169
-----------
Total U.S. Government Agencies
(cost $67,181,051)................................. 66,266,719
-----------
U.S. GOVERNMENT TREASURIES -- 16.1%
United States Treasury Bonds -- 0.9%
7.25% due 08/15/22.................................. 1,572,000 1,971,386
-----------
United States Treasury Notes -- 15.2%
4.25% due 08/15/14.................................. 4,000,000 3,969,064
4.50% due 05/15/10.................................. 9,600,000 9,682,502
4.50% due 04/30/12.................................. 2,000,000 2,020,312
4.63% due 07/31/09.................................. 6,000,000 6,049,218
4.63% due 10/31/11.................................. 2,000,000 2,029,376
4.63% due 07/31/12.................................. 2,000,000 2,032,032
4.88% due 06/30/09.................................. 6,000,000 6,070,782
-----------
31,853,286
-----------
Total U.S. Government Treasuries
(cost $33,473,207)................................. 33,824,672
-----------
PREFERRED STOCK -- 0.9%
Banks-Money Center -- 0.3%
Santander Finance Preferred SA
5.88%*(4).......................................... 23,200 568,400
-----------
Banks-Super Regional -- 0.1%
Wachovia Capital Trust IX
6.38%.............................................. 10,650 248,145
-----------
Diversified Financial Services -- 0.2%
General Electric Capital Corp.
8.00%(10).......................................... 12,000 276,120
-----------
Special Purpose Entity -- 0.2%
Structured Repackaged Asset-Backed Trust Securities
5.97%(4)........................................... 21,200 428,240
-----------
Telephone-Integrated -- 0.1%
AT&T, Inc.
6.38%.............................................. 10,800 259,956
-----------
Total Preferred Stock
(cost $1,919,281).................................. 1,780,861
-----------
22
VALIC Company II Core Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount (Note 2)
- ------------------------------------------------------------------------------------
Total Long-Term Investment Securities
(cost $206,089,806)..................................... $203,178,038
------------
REPURCHASE AGREEMENT -- 2.1%
Agreement with State Street Bank & Trust Co., bearing
interest at 4.68%, dated 08/31/07, to be repurchased
09/04/07 in the amount of $4,492,335 and collateralized
by Federal National Mtg. Assoc. Disc. Notes,
bearing interest at 4.25%, due 05/15/09 and having an
approximate value of $4,626,648
(cost $4,490,000)....................................... $4,490,000 4,490,000
------------
TOTAL INVESTMENTS
(cost $210,579,806)(13)................................. 98.7% 207,668,038
Other assets less liabilities.............................. 1.3 2,653,868
---------- ------------
NET ASSETS 100.0% $210,321,906
========== ============
- --------
+ Non-income producing security
* Securities exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from registration,
normally to qualified institutional buyers. The Fund has no right to demand
registration of these securities. At August 31, 2007, the aggregate value of
these securities was $16,456,925 representing 7.8% of net assets. Unless
otherwise indicated these securities are not considered to be illiquid.
(1)Collateralized Mortgage Obligation
(2)Variable Rate Security -- the rate reflected is as of August 31, 2007,
maturity date reflects the stated maturity date.
(3)Commercial Mortgaged Back Security
(4)Floating rate security where the rate fluctuates. The rate moves up or down
at each reset date. The rate reflected is as of August 31, 2007.
(5)Fair valued security; see Note 2
(6)Variable Rate Security -- the rate reflected is as of August 31, 2007,
maturity date reflects next reset date.
(7)Illiquid security
(8)To the extent permitted by the Statement of Additional Information, the Core
Bond Fund may invest in restricted securities. The Fund has no right to
demand registration of these securities. The securities are valued pursuant
to Note 2. Restricted securities held by a Fund may not be sold except in
exempt transactions or in a public offering registered under the Securities
Act of 1933. The risk of investing in such securities is generally greater
than the risk of investing in the securities of widely held, publicly traded
companies. Lack of a secondary market and resale restrictions may result in
the inability of a Fund to sell a security at a fair price and may
substantially delay the sale of the security. In addition, these securities
may exhibit greater price volatility than securities for which secondary
markets exist. As of August 31, 2007, the Core Bond Fund held the following
restricted securities:
Market
Acquisition Principal Acquisition Market Value % of
Name Date Amount Cost Value Per Share Net Assets
- ----------------------- ----------- --------- ----------- ------- --------- ----------
ICO North America, Inc.
Notes
7.50% due
08/15/09.............. 08/11/2005 $ 25,000 $25,000 $24,750 $99.00 0.01%
Southern Energy, Inc.
Notes
7.90% due
07/15/09.............. 01/10/2006 150,000 0 0 0.00 0.00%
------- ----
$24,750 0.00%
======= ====
(9)Perpetual maturity -- maturity date reflects the next call date.
(10)"Step-up" security where the rate increases ("steps-up") at a predetermined
rate. Rate shown reflects the increased rate.
(11)Company has filed Chapter 11 bankruptcy protection.
(12)The par value of this security is at a ratio of 62.50/100
(13)See Note 5 for cost of investments on a tax basis.
REMIC -- Real Estate Mortgage Investment Conducts
See Notes to Financials Statements
23
VALIC Company II High Yield Bond Fund
PORTFOLIO PROFILE -- August 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Industry Allocation*
Oil Companies -- Exploration & Production 6.1%
Medical -- Hospitals..................... 4.2%
Repurchase Agreements.................... 4.2%
Special Purpose Entities................. 3.9%
Pipelines................................ 3.8%
Finance -- Auto Loans.................... 3.6%
Independent Power Producers.............. 3.5%
Cable TV................................. 3.4%
Cellular Telecom......................... 2.9%
Chemicals -- Specialty................... 2.7%
Electronic Components -- Semiconductors.. 2.5%
Auto -- Cars/Light Trucks................ 2.3%
Telephone -- Integrated.................. 2.3%
Casino Hotels............................ 2.2%
Medical -- Drugs......................... 2.2%
Metal -- Diversified..................... 2.0%
Television............................... 2.0%
Telecom Services......................... 1.9%
Satellite Telecom........................ 1.7%
Electric -- Generation................... 1.6%
Transport -- Air Freight................. 1.6%
Agricultural Chemicals................... 1.5%
Building & Construction Products -- Misc. 1.3%
Paper & Related Products................. 1.3%
Containers -- Paper/Plastic.............. 1.2%
Containers -- Metal/Glass................ 1.1%
Theaters................................. 1.1%
Airlines................................. 1.0%
Electric -- Integrated................... 1.0%
Gambling (Non-Hotel)..................... 1.0%
Rental Auto/Equipment.................... 1.0%
Recycling................................ 0.9%
Funeral Services & Related Items......... 0.9%
Retail -- Drug Store..................... 0.9%
Chemicals -- Diversified................. 0.8%
Diversified Manufacturing Operations..... 0.8%
Food -- Meat Products.................... 0.8%
Medical Products......................... 0.7%
Oil -- Field Services.................... 0.7%
Broadcast Services/Program............... 0.6%
Consumer Products -- Misc................ 0.6%
Electronics -- Military.................. 0.6%
Housewares............................... 0.6%
Non -- Hazardous Waste Disposal.......... 0.6%
Storage/Warehousing...................... 0.6%
Computer Services........................ 0.5%
Distribution/Wholesale................... 0.5%
Energy -- Alternate Sources.............. 0.5%
Insurance Brokers........................ 0.5%
Publishing -- Periodicals................ 0.5%
Steel -- Producers....................... 0.5%
Travel Services.......................... 0.5%
Wire & Cable Products.................... 0.5%
Auto/Truck Parts & Equipment -- Original. 0.4%
Direct Marketing......................... 0.4%
Home Furnishings......................... 0.4%
Medical Information Systems.............. 0.4%
Medical -- HMO........................... 0.4%
Medical -- Nursing Homes................. 0.4%
Office Automation & Equipment............ 0.4%
Printing -- Commercial................... 0.4%
Retail -- Discount....................... 0.4%
Transactional Software................... 0.4%
Beverages -- Non-alcoholic............... 0.3%
Building & Construction -- Misc.......... 0.3%
Cosmetics & Toiletries................... 0.3%
Diversified Financial Services........... 0.3%
Electronic Components -- Misc............ 0.3%
Food -- Misc............................. 0.3%
Machinery -- Farming................... 0.3%
Research & Development................. 0.3%
Retail -- Petroleum Products........... 0.3%
Retail -- Restaurants.................. 0.3%
Transport -- Marine.................... 0.3%
Applications Software.................. 0.2%
Beverages -- Wine/Spirits.............. 0.2%
Building Products -- Wood.............. 0.2%
Computers -- Memory Devices............ 0.2%
Golf................................... 0.2%
Hotels/Motels.......................... 0.2%
Metal Processors & Fabrication......... 0.2%
Oil & Gas Drilling..................... 0.2%
Physicians Practice Management......... 0.2%
Poultry................................ 0.2%
Publishing -- Books.................... 0.2%
Real Estate Investment Trusts.......... 0.2%
Retail -- Regional Department Stores... 0.2%
Rubber -- Tires........................ 0.2%
Specified Purpose Acquisitions......... 0.2%
Transport -- Services.................. 0.2%
Transport -- Truck..................... 0.2%
Advertising Services................... 0.1%
Commercial Services.................... 0.1%
Computers -- Integrated Systems........ 0.1%
Gas -- Distribution.................... 0.1%
Human Resources........................ 0.1%
Investment Companies................... 0.1%
Leisure Products....................... 0.1%
Machinery -- General Industrial........ 0.1%
Medical Instruments.................... 0.1%
Medical -- Outpatient/Home Medical..... 0.1%
Multimedia............................. 0.1%
Music.................................. 0.1%
Physical Therapy/Rehabilitation Centers 0.1%
Publishing -- Newspapers............... 0.1%
Retail -- Major Department Stores...... 0.1%
Semiconductor Equipment................ 0.1%
Steel -- Specialty..................... 0.1%
Transport -- Rail...................... 0.1%
----
98.7%
====
Credit Quality +#
A......... 0.3%
BBB....... 0.6%
BB........ 21.5%
B......... 45.4%
CCC....... 27.1%
Below C... 2.1%
Not Rated@ 3.0%
------
100.00%
======
* Calculated as a percentage of net assets.
@ Represents debt issues that either have no rating, or the rating is
unavailable from the data source.
+ Source: Standard & Poors
# Calculated as a percentage of total debt issues, excluding short-term
securities.
24
VALIC Company II High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------------
CONVERTIBLE BONDS & NOTES -- 0.4%
Electronic Components - Semiconductors -- 0.2%
Advanced Micro Devices, Inc.
Senior Notes
6.00% due 05/01/15*........................ $ 25,000 $ 21,438
Spansion, Inc.
Senior Sub. Notes
2.25% due 06/15/16*........................ 525,000 404,906
----------
426,344
----------
Medical Instruments -- 0.1%
Kyphon, Inc.
Senior Notes
1.25% due 02/01/14*........................ 50,000 63,125
----------
Medical - Biomedical/Gene -- 0.0%
Nektar Therapeutics
Sub. Notes
3.25% due 09/28/12......................... 75,000 62,344
----------
Telecom Services -- 0.1%
ICO North America, Inc.
Notes
7.50% due 08/15/09(1)(2)(3)................ 250,000 247,500
----------
Total Convertible Bonds & Notes
(cost $846,133)............................ 799,313
----------
CORPORATE BONDS & NOTES -- 81.7%
Advertising Services -- 0.1%
R.H. Donnelley Corp.
Senior Notes
6.88% due 01/15/13......................... 250,000 235,625
----------
Agricultural Chemicals -- 1.5%
Mosaic Global Holdings, Inc.
Debentures
7.38% due 08/01/18......................... 190,000 178,600
Terra Capital, Inc.
Company Guar. Notes
7.00% due 02/01/17......................... 995,000 955,200
The Mosaic Co.
Senior Notes
7.38% due 12/01/14*........................ 1,375,000 1,399,062
The Mosaic Co.
Senior Notes
7.63% due 12/01/16*........................ 385,000 394,625
----------
2,927,487
----------
Airlines -- 1.0%
American Airlines, Inc.
Pass Through Certs.
Series 2001-1, Class A-2
6.82% due 05/23/11......................... 1,100,000 1,053,938
Continental Airlines, Inc.
Pass Through Certs.,
Series 1991, Class A
6.55% due 02/02/19......................... 501,737 502,991
Continental Airlines, Inc.
Pass Through Certs.
Series 2000-2, Class B
8.31% due 04/02/18......................... 78,351 78,155
Delta Air Lines, Inc.
Pass Through Certs.
Series 2000-1, Class A-2
7.57% due 11/18/10......................... 150,000 151,875
United Air Lines, Inc.
Pass Through Certs.
Series 2001-1, Class A-2
6.20% due 09/01/08......................... 72,099 72,009
----------
1,858,968
----------
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------------------
Applications Software -- 0.2%
SS&C Technologies, Inc.
Company Guar.
Notes
11.75% due 12/01/13............................ $ 450,000 $ 474,750
----------
Auto - Cars/Light Trucks -- 2.3%
Ford Motor Co.
Debentures
6.38% due 02/01/29............................. 2,385,000 1,681,425
General Motors Corp.
Debentures
8.25% due 07/15/23............................. 1,260,000 1,004,850
General Motors Corp.
Senior Bonds
8.38% due 07/15/33............................. 2,263,000 1,816,057
----------
4,502,332
----------
Auto/Truck Parts & Equipment - Original -- 0.4%
Lear Corp.
Senior Notes
8.75% due 12/01/16............................. 575,000 531,875
Visteon Corp.
Senior Notes
8.25% due 08/01/10............................. 360,000 307,800
----------
839,675
----------
Auto/Truck Parts & Equipment - Replacement -- 0.0%
Exide Corp.
Notes
10.00% due 03/15/25+(1)(2)..................... 300,000 0
----------
Beverages - Non - alcoholic -- 0.1%
Cott Beverages USA Inc.
Company Guar.
Notes 8.00% due 12/15/11....................... 200,000 198,000
----------
Beverages - Wine/Spirits -- 0.2%
Constellation Brands, Inc.
Senior Notes
7.25% due 05/15/17*............................ 350,000 339,500
----------
Broadcast Services/Program -- 0.6%
Fisher Communications, Inc.
Senior Notes
8.63% due 09/15/14............................. 706,000 718,355
Nexstar Finance, Inc.
Senior Sub. Notes
7.00% due 01/15/14............................. 525,000 496,125
----------
1,214,480
----------
Building & Construction Products - Misc. -- 1.3%
Associated Materials, Inc.
Senior Sub. Notes
9.75% due 04/15/12............................. 625,000 634,375
Dayton Superior Corp.
Senior Sec. Notes
10.75% due 09/15/08............................ 567,000 572,670
Interline Brands, Inc.
Senior Sub. Notes
8.13% due 06/15/14............................. 550,000 539,000
NTK Holdings, Inc.
Senior Notes
10.75% due 03/01/14(4)......................... 1,125,000 703,125
----------
2,449,170
----------
Building Products - Wood -- 0.2%
Masonite Corp.
Company Guar. Notes
11.00% due 04/06/15............................ 545,000 444,175
----------
25
VALIC Company II High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Cable TV -- 3.4%
Cablevision Systems Corp.
Senior Notes
8.00% due 04/15/12......................... $1,005,000 $ 962,287
CCH I LLC
Company Guar. Notes
11.00% due 10/01/15........................ 1,530,000 1,487,925
CCH II LLC/CCH II Capital Corp.
Senior Notes
10.25% due 09/15/10........................ 425,000 426,063
CCH II LLC/CCH II Capital Corp.
Company Guar. Notes
10.25% due 10/01/13........................ 2,272,000 2,294,720
CCO Holdings LLC/CCO Holdings Capital Corp.
Senior Notes
8.75% due 11/15/13......................... 450,000 441,000
CSC Holdings, Inc.
Senior Notes
7.63% due 04/01/11......................... 410,000 403,850
Insight Communications Co., Inc.
Senior Notes
12.25% due 02/15/11........................ 565,000 581,244
----------
6,597,089
----------
Casino Hotels -- 2.2%
Eldorado Casino Corp.
Sec. Bonds
10.00% due 08/01/12(2)(5).................. 429,222 409,907
Eldorado Resorts LLC
Senior Notes
9.00% due 04/15/14(1)(2)................... 475,000 475,000
MGM Mirage, Inc.
Senior Notes
5.88% due 02/27/14......................... 1,685,000 1,545,988
Seminole Hard Rock Entertainment, Inc.
Sec. Notes
8.19% due 03/15/14*(6)..................... 125,000 121,250
Station Casinos, Inc.
Senior Sub. Notes
6.63% due 03/15/18......................... 75,000 60,375
Station Casinos, Inc.
Senior Sub. Notes
6.88% due 03/01/16......................... 780,000 653,250
Turning Stone Resort Casino Enterprise
Senior Notes
9.13% due 12/15/10*........................ 275,000 277,750
Turning Stone Resort Casino Enterprise
Senior Notes
9.13% due 09/15/14*........................ 625,000 631,250
----------
4,174,770
----------
Cellular Telecom -- 1.9%
American Cellular Corp.
Senior Notes
10.00% due 08/01/11........................ 99,000 102,712
Centennial Communications Corp.
Senior Notes
10.00% due 01/01/13........................ 514,000 537,130
Centennial Communications Corp.
Senior Notes
11.11% due 01/01/13(6)..................... 575,000 589,375
Cricket Communications, Inc.
Company Guar. Notes
9.38% due 11/01/14......................... 175,000 171,500
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------
Cellular Telecom (continued)
Cricket Communications, Inc.
Company Guar. Notes
9.38% due 11/01/14*.................. $ 600,000 $ 588,000
MetroPCS Wireless, Inc.
Senior Notes
9.25% due 11/01/14*.................. 775,000 763,375
Rural Cellular Corp.
Senior Sub. Notes
8.62% due 06/01/13*(6)............... 600,000 612,000
Rural Cellular Corp.
Senior Notes
11.11% due 11/01/12(6)............... 235,000 242,050
----------
3,606,142
----------
Chemicals - Diversified -- 0.8%
Equistar Chemicals LP
Senior Notes
10.63% due 05/01/11.................. 114,000 120,270
Lyondell Chemical Co.
Company Guar. Notes
6.88% due 06/15/17................... 600,000 649,500
Lyondell Chemical Co.
Company Guar. Notes
8.00% due 09/15/14................... 800,000 870,000
----------
1,639,770
----------
Chemicals - Specialty -- 2.7%
Huntsman International LLC
Company Guar. Notes
7.38% due 01/01/15................... 1,070,000 1,102,100
Huntsman International LLC
Company Guar. Notes
7.88% due 11/15/14................... 925,000 966,625
Johnsondiversey Holdings, Inc.
Company Guar. Notes
9.63% due 05/15/12................... 350,000 351,750
Momentive Performance Materials, Inc.
Senior Sub. Notes
11.50% due 12/01/16*................. 1,655,000 1,580,525
Tronox Worldwide LLC
Company Guar. Notes
9.50% due 12/01/12................... 1,125,000 1,136,250
----------
5,137,250
----------
Commercial Services -- 0.1%
DI Finance/DynCorp International
Senior Sub. Notes
9.50% due 02/15/13................... 162,000 164,430
----------
Computer Services -- 0.5%
Compucom Systems, Inc.
Senior Notes
12.00% due 11/01/14*................. 375,000 446,250
Sungard Data Systems, Inc.
Company Guar. Notes
9.13% due 08/15/13................... 440,000 454,300
----------
900,550
----------
Computers - Integrated Systems -- 0.1%
Activant Solutions, Inc.
Company Guar. Notes
9.50% due 05/01/16................... 175,000 154,875
----------
26
VALIC Company II High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Consumer Products - Misc. -- 0.6%
American Achievement Corp.
Senior Sub. Notes
8.25% due 04/01/12....................... $ 397,000 $ 385,090
Jostens Holding Corp.
Senior Notes
10.25% due 12/01/13(4)................... 655,000 600,963
Prestige Brands, Inc.
Senior Sub. Notes
9.25% due 04/15/12....................... 200,000 198,500
Visant Holding Corp.
Senior Notes
8.75% due 12/01/13....................... 75,000 75,000
----------
1,259,553
----------
Containers - Metal/Glass -- 1.1%
Crown Cork & Seal Co., Inc.
Debentures
7.38% due 12/15/26....................... 300,000 273,000
Crown Cork & Seal Co., Inc.
Debentures
8.00% due 04/15/23....................... 810,000 773,550
Owens - Brockway Glass Container, Inc.
Company Guar. Notes
8.25% due 05/15/13....................... 1,010,000 1,035,250
Owens - Brockway Glass Container, Inc.
Company Guar. Notes
8.88% due 02/15/09....................... 106,000 107,722
----------
2,189,522
----------
Containers - Paper/Plastic -- 1.2%
Jefferson Smurfit Corp.
Company Guar. Notes
8.25% due 10/01/12....................... 550,000 537,625
Pliant Corp.
Company Guar. Notes
11.13% due 09/01/09...................... 892,000 807,260
Smurfit-Stone Container Enterprises, Inc.
Senior Notes
8.00% due 03/15/17....................... 1,110,000 1,058,662
----------
2,403,547
----------
Cosmetics & Toiletries -- 0.3%
Revlon Consumer Products Corp.
Senior Sub. Notes
8.63% due 02/01/08....................... 475,000 466,688
Revlon Consumer Products Corp.
Senior Notes
9.50% due 04/01/11....................... 100,000 93,000
----------
559,688
----------
Direct Marketing -- 0.4%
Affinity Group, Inc.
Senior Sub. Notes
9.00% due 02/15/12....................... 675,000 702,000
----------
Distribution/Wholesale -- 0.5%
Varietal Distribution, Inc.
Senior Notes
10.25% due 07/15/15*..................... 1,025,000 953,250
----------
Diversified Manufacturing Operations -- 0.5%
Harland Clarke Holdings Corp.
Company Guar. Notes
9.50% due 05/15/15....................... 325,000 291,688
Harland Clarke Holdings Corp.
Company Guar. Notes
10.31% due 05/15/15(6)................... 250,000 223,125
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------------
Diversified Manufacturing Operations (continued)
Indalex Holding Corp.
Sec. Notes
11.50% due 02/01/14........................... $ 425,000 $ 398,437
----------
913,250
----------
Electric - Generation -- 1.6%
Edison Mission Energy
Senior Notes
7.20% due 05/15/19*........................... 300,000 283,500
Edison Mission Energy
Senior Notes
7.50% due 06/15/13............................ 250,000 251,875
Edison Mission Energy
Senior Notes
7.63% due 05/15/27*........................... 625,000 581,250
Edison Mission Energy
Senior Notes
7.75% due 06/15/16............................ 675,000 680,062
Reliant Energy Mid-Atlantic Power Holdings LLC
Pass Through Certs. Series B
9.24% due 07/02/17............................ 114,670 123,270
The AES Corp.
Sec. Notes
8.75% due 05/15/13*........................... 800,000 832,000
The AES Corp.
Senior Notes
8.88% due 02/15/11............................ 425,000 436,688
----------
3,188,645
----------
Electric - Integrated -- 1.0%
Mirant Americas Generation LLC
Senior Notes
8.30% due 05/01/11............................ 1,385,000 1,367,688
Mirant Americas Generation LLC
Senior Notes
8.50% due 10/01/21............................ 540,000 510,300
Southern Energy, Inc.
Notes
7.90% due 07/15/09+(1)(2)(3).................. 1,225,000 0
----------
1,877,988
----------
Electronic Components - Semiconductors -- 2.0%
Advanced Micro Devices, Inc.
Senior Notes
7.75% due 11/01/12............................ 420,000 367,500
Amkor Technology, Inc.
Senior Notes
9.25% due 06/01/16............................ 860,000 834,200
Freescale Semiconductor, Inc.
Senior Notes
9.13% due 12/15/14............................ 840,000 751,800
Freescale Semiconductor, Inc.
Senior Sub. Notes
10.13% due 12/15/16........................... 1,485,000 1,291,950
Spansion, Inc.
Senior Notes
11.25% due 01/15/16*.......................... 675,000 639,562
----------
3,885,012
----------
Electronics - Military -- 0.6%
L-3 Communications Corp.
Company Guar. Notes
6.13% due 07/15/13............................ 1,110,000 1,073,925
----------
27
VALIC Company II High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Energy - Alternate Sources -- 0.5%
Aventine Renewable Energy Holdings, Inc.
Company Guar. Notes
10.00% due 04/01/17..................... $ 500,000 $ 470,000
VeraSun Energy Corp.
Senior Notes
9.38% due 06/01/17*..................... 225,000 208,688
VeraSun Energy Corp.
Sec. Notes
9.88% due 12/15/12...................... 375,000 383,437
----------
1,062,125
----------
Finance - Auto Loans -- 3.6%
Ford Motor Credit Co. LLC
Senior Notes
5.80% due 01/12/09...................... 275,000 259,125
Ford Motor Credit Co. LLC
Notes
7.38% due 10/28/09...................... 4,925,000 4,660,360
Ford Motor Credit Co. LLC
Notes
7.88% due 06/15/10...................... 300,000 281,638
General Motors Acceptance Corp.
Notes
6.88% due 09/15/11...................... 825,000 735,784
General Motors Acceptance Corp.
Notes
6.88% due 08/28/12...................... 185,000 163,430
General Motors Acceptance Corp.
Notes
7.56% due 12/01/14(6)................... 625,000 528,154
GMAC LLC
Senior Notes
6.00% due 12/15/11...................... 300,000 257,940
----------
6,886,431
----------
Food - Meat Products -- 0.4%
Smithfield Foods, Inc.
Senior Notes
7.00% due 08/01/11...................... 125,000 125,000
Smithfield Foods, Inc.
Senior Notes
7.75% due 07/01/17...................... 600,000 603,000
----------
728,000
----------
Food - Misc. -- 0.3%
Del Monte Corp.
Company Guar. Notes
6.75% due 02/15/15...................... 275,000 261,250
Wornick Co.
Sec. Notes
10.88% due 07/15/11+(8)................. 450,000 328,500
----------
589,750
----------
Funeral Services & Related Items -- 0.9%
Service Corp. International
Senior Notes
6.75% due 04/01/16...................... 325,000 306,313
Service Corp. International
Senior Notes
7.00% due 06/15/17...................... 300,000 283,500
Service Corp. International
Senior Notes
7.38% due 10/01/14...................... 430,000 432,150
Service Corp. International
Senior Notes
7.63% due 10/01/18...................... 280,000 281,400
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------------
Funeral Services & Related Items (continued)
Stewart Enterprises, Inc.
Senior Notes
6.25% due 02/15/13....................... $ 400,000 $ 384,000
----------
1,687,363
----------
Gambling (Non-Hotel) -- 1.0%
Greektown Holdings LLC
Senior Notes
10.75% due 12/01/13*..................... 580,000 580,000
Jacobs Entertainment, Inc.
Company Guar. Bonds
9.75% due 06/15/14....................... 850,000 847,875
Shingle Springs Tribal Gaming Authority
Senior Notes
9.38% due 06/15/15*...................... 200,000 197,000
Waterford Gaming LLC
Senior Notes
8.63% due 09/15/12*...................... 235,000 239,700
----------
1,864,575
----------
Gas - Distribution -- 0.1%
Colorado Interstate Gas Co.
Senior Debentures
6.85% due 06/15/37....................... 175,000 171,944
----------
Golf -- 0.2%
True Temper Sports, Inc.
Company Guar. Notes
8.38% due 09/15/11....................... 450,000 351,000
----------
Home Furnishings -- 0.4%
Simmons Co.
Senior Notes
10.00% due 12/15/14(4)................... 923,000 717,633
----------
Hotel/Motel -- 0.2%
Gaylord Entertainment Co.
Company Guar. Notes
6.75% due 11/15/14....................... 425,000 403,750
----------
Human Resources -- 0.1%
Team Health, Inc.
Company Guar. Notes
11.25% due 12/01/13...................... 200,000 212,000
----------
Independent Power Producers -- 3.5%
Calpine Corp.
Sec. Notes
8.75% due 07/15/13*(7)................... 3,503,000 3,695,665
NRG Energy, Inc.
Company Guar. Notes
7.38% due 02/01/16....................... 1,600,000 1,580,000
Orion Power Holdings, Inc.
Senior Notes
12.00% due 05/01/10...................... 75,000 81,750
Reliant Energy, Inc.
Company Guar. Notes
6.75% due 12/15/14....................... 425,000 420,750
Reliant Energy, Inc.
Senior Notes
7.63% due 12/31/14....................... 400,000 392,000
Reliant Energy, Inc
Senior Notes
7.88% due 12/31/17....................... 675,000 659,812
----------
6,829,977
----------
28
VALIC Company II High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Insurance Brokers -- 0.5%
USI Holdings Corp.
Senior Notes
9.43% due 11/15/14*(6)............................... $ 300,000 $ 279,000
USI Holdings Corp.
Senior Sub. Notes
9.75% due 05/15/15*.................................. 700,000 640,500
----------
919,500
----------
Machinery - Farming -- 0.3%
Case Corp.
Notes
7.25% due 01/15/16................................... 365,000 368,650
Case New Holland, Inc.
Senior Notes
6.00% due 06/01/09................................... 300,000 298,500
----------
667,150
----------
Machinery - General Industrial -- 0.1%
Stewart & Stevenson LLC
Company Guar. Notes
10.00% due 07/15/14.................................. 275,000 277,750
----------
Medical Information Systems -- 0.4%
Spheris, Inc. Senior
Sub. Notes
11.00% due 12/15/12.................................. 725,000 715,938
----------
Medical Products -- 0.7%
ReAble Therapeutics Finance LLC / ReAble Therapeutics
Finance Corp.
Company Guar. Notes
11.75% due 11/15/14.................................. 650,000 624,000
Universal Hospital Services, Inc.
Sec. Bonds
8.50% due 06/01/15*.................................. 350,000 332,500
Universal Hospital Services, Inc.
Senior Notes
8.76% due 06/01/15*(6)............................... 400,000 386,000
----------
1,342,500
----------
Medical - Biomedical/Gene -- 0.0%
Bio - Rad Laboratories, Inc.
Senior Sub. Notes
6.13% due 12/15/14................................... 1,000 920
----------
Medical - Drugs -- 0.5%
Triax Pharmaceuticals LLC
Senior Sec. Notes
15.54% due 08/30/11(1)(2)(3)......................... 1,000,000 899,307
----------
Medical - HMO -- 0.4%
Multiplan, Inc.
Senior Sub. Notes
10.38% due 04/15/16*................................. 855,000 837,900
----------
Medical - Hospitals -- 4.2%
Community Health Systems, Inc.
Senior Notes
8.88% due 07/15/15*.................................. 2,785,000 2,781,519
HCA, Inc.
Senior Notes
6.25% due 02/15/13................................... 605,000 518,787
HCA, Inc.
Sec Notes.
9.13% due 11/15/14*.................................. 600,000 615,000
HCA, Inc.
Sec. Notes
9.25% due 11/15/16*.................................. 3,260,000 3,349,650
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------------
Medical - Hospitals (continued)
HCA, Inc.
Sec Notes.
9.63% due 11/15/16*.......................... $ 460,000 $ 475,525
IASIS Healthcare LLC / IASIS Capital Corp.
Bank Guar. Notes
8.75% due 06/15/14........................... 440,000 429,000
----------
8,169,481
----------
Medical - Nursing Homes -- 0.4%
Sun Healthcare Group, Inc.
Senior Sub. Notes
9.13% due 04/15/15*.......................... 875,000 875,000
----------
Metal Processors & Fabrication -- 0.2%
Metals USA, Inc.
Sec. Notes
11.13% due 12/01/15.......................... 310,000 330,150
----------
Metal - Diversified -- 2.0%
Freeport - McMoRan Copper & Gold, Inc.
Senior Notes
8.25% due 04/01/15........................... 350,000 371,000
Freeport - McMoRan Copper & Gold, Inc.
Senior Notes
8.38% due 04/01/17........................... 2,050,000 2,183,250
Noranda Aluminium Acquisition Corp.
Senior Notes
9.36% due 05/15/15*(6)....................... 1,025,000 963,500
Noranda Aluminium Holding Corp.
Senior Notes
11.15% due 11/15/14*(6)...................... 425,000 412,250
----------
3,930,000
----------
Multimedia -- 0.1%
Haights Cross Operating Co.
Company Guar.
Senior Notes
11.75% due 08/15/11.......................... 200,000 205,750
----------
Non - Ferrous Metals -- 0.0%
Renco Metals, Inc.
Bonds
11.50% due 07/01/03+(1)(2)(7)(11)............ 210,000 0
----------
Non - Hazardous Waste Disposal -- 0.6%
Allied Waste North America, Inc.
Company Guar. Notes
6.88% due 06/01/17........................... 1,185,000 1,149,450
----------
Office Automation & Equipment -- 0.4%
IKON Office Solutions, Inc.
Senior Notes
7.75% due 09/15/15........................... 800,000 795,000
----------
Oil & Gas Drilling -- 0.2%
Pride International, Inc.
Senior Notes
7.38% due 07/15/14........................... 375,000 378,750
----------
Oil Companies - Exploration & Production -- 3.9%
Belden & Blake Corp.
Company Guar. Sec. Notes
8.75% due 07/15/12........................... 125,000 125,000
Brigham Exploration Co.
Company Guar. Notes
9.63% due 05/01/14........................... 525,000 494,813
Chaparral Energy, Inc.
Company Guar. Notes
8.50% due 12/01/15........................... 1,020,000 912,900
29
VALIC Company II High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Oil Companies - Exploration & Production (continued)
Chesapeake Energy Corp.
Senior Notes
6.63% due 01/15/16............................... $1,450,000 $1,402,875
Dune Energy, Inc.
Sec. Notes
10.50% due 06/01/12*............................. 325,000 305,500
Encore Acquisition Co.
Senior Sub. Notes
6.00% due 07/15/15............................... 700,000 616,000
Encore Acquisition Co.
Senior Sub. Notes
6.25% due 04/15/14............................... 175,000 159,688
Energy Partners, Ltd.
Senior Notes
9.75% due 04/15/14*.............................. 300,000 279,000
Exco Resources, Inc.
Company Guar. Notes
7.25% due 01/15/11............................... 695,000 700,212
Hilcorp Energy I LP
Senior Notes
7.75% due 11/01/15*.............................. 775,000 742,062
Quicksilver Resources, Inc.
Company Guar. Notes
7.13% due 04/01/16............................... 200,000 191,000
Sabine Pass LNG LP
Secured Notes
7.25% due 11/30/13............................... 225,000 218,250
Sabine Pass LNG LP
Secured Notes
7.50% due 11/30/16............................... 1,130,000 1,098,925
Transmeridian Exploration, Inc.
Company Guar. Notes
12.00% due 12/15/10.............................. 300,000 276,750
----------
7,522,975
----------
Oil - Field Services -- 0.2%
Allis - Chalmers Energy, Inc.
Company Guar. Notes
9.00% due 01/15/14............................... 290,000 288,550
Oslo Seismic Services, Inc.
1st Mtg. Bonds
8.28% due 06/01/11............................... 168,424 173,439
----------
461,989
----------
Paper & Related Products -- 0.9%
Bowater, Inc.
Notes
6.50% due 06/15/13............................... 525,000 406,875
Caraustar Industries, Inc.
Notes
7.38% due 06/01/09............................... 535,000 466,119
Georgia - Pacific Corp.
Company Guar. Notes
7.00% due 01/15/15*.............................. 715,000 675,675
Georgia - Pacific Corp.
Company Guar. Notes
7.13% due 01/15/17*.............................. 225,000 211,500
----------
1,760,169
----------
Physical Therapy/Rehabilation Centers -- 0.1%
Psychiatric Solutions, Inc.
Senior Sub. Notes
7.75% due 07/15/15*.............................. 200,000 196,000
----------
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------
Physicians Practice Management -- 0.2%
US Oncology, Inc.
Company Guar. Notes
10.75% due 08/15/14.................. $ 325,000 $ 326,625
----------
Pipelines -- 3.8%
Atlas Pipeline Partners LP
Company Guar. Notes
8.13% due 12/15/15................... 560,000 555,800
Copano Energy LLC
Company Guar. Notes
8.13% due 03/01/16................... 825,000 829,125
Dynegy Holdings, Inc.
Senior Notes
8.75% due 02/15/12................... 700,000 707,000
Dynegy-Roseton Danskammer
Pass Through Certs. Series B
7.67% due 11/08/16................... 450,000 446,063
El Paso Corp.
Senior Sub. Notes
6.88% due 06/15/14................... 725,000 730,437
El Paso Natural Gas Co.
Debentures
8.63% due 01/15/22................... 625,000 725,977
MarkWest Energy Partners
LP Senior Notes
6.88% due 11/01/14................... 565,000 528,275
MarkWest Energy Partners LP
Company Guar. Notes
8.50% due 07/15/16................... 300,000 298,500
NGC Corp Capital Trust
Guar. Bonds
8.32% due 06/01/27................... 835,000 743,150
Tennessee Gas Pipeline Co.
Debentures
7.00% due 10/15/28................... 410,000 412,708
Transcontinental Gas Pipe Line Corp.
Notes
7.00% due 08/15/11................... 75,000 78,188
Williams Cos., Inc.
Senior Notes
7.88% due 09/01/21................... 1,200,000 1,287,000
----------
7,342,223
----------
Poultry -- 0.2%
Pilgrim's Pride Corp.
Senior Sub. Notes
8.38% due 05/01/17................... 300,000 300,750
----------
Printing - Commercial -- 0.2%
Valassis Communications, Inc.
Company Guar. Notes
8.25% due 03/01/15................... 535,000 454,750
----------
Publishing - Books -- 0.2%
TL Acquisitions, Inc.
Senior Notes
10.50% due 01/15/15*................. 325,000 304,688
----------
Publishing - Newspapers -- 0.1%
Medianews Group, Inc.
Senior Sub. Notes
6.88% due 10/01/13................... 140,000 111,300
----------
Publishing - Periodicals -- 0.5%
The Reader's Digest Association, Inc.
Senior Sub. Notes
9.00% due 02/15/17*.................. 1,060,000 911,600
----------
30
VALIC Company II High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Real Estate Investment Trusts -- 0.2%
Omega Healthcare Investors, Inc.
Senior Notes
7.00% due 04/01/14...................... $ 450,000 $ 441,000
----------
Recycling -- 0.9%
Aleris International, Inc.
Company Guar. Notes
9.00% due 12/15/14...................... 1,010,000 962,025
Aleris International, Inc.
Company Guar. Notes
10.00% due 12/15/16..................... 825,000 769,313
----------
1,731,338
----------
Rental Auto/Equipment -- 1.0%
H&E Equipment Services, Inc.
Company Guar. Notes
8.38% due 07/15/16...................... 575,000 589,375
Neff Corp.
Senior Notes
10.00% due 06/01/15*.................... 225,000 198,000
United Rentals North America, Inc.
Senior Sub. Notes
7.75% due 11/15/13...................... 1,100,000 1,133,000
----------
1,920,375
----------
Research & Development -- 0.3%
Alion Science and Technology Corp.
Company Guar. Notes
10.25% due 02/01/15..................... 580,000 553,900
----------
Retail - Discount -- 0.4%
Dollar General Corp.
Senior Notes
10.63% due 07/15/15*.................... 975,000 877,500
----------
Retail - Drug Store -- 0.9%
General Nutrition Centers, Inc.
Senior Notes
9.80% due 03/15/14*(6).................. 250,000 237,500
Rite Aid Corp.
Company Guar. Notes
9.50% due 06/15/17*..................... 1,650,000 1,497,375
----------
1,734,875
----------
Retail - Major Department Stores -- 0.1%
Saks, Inc.
Company Guar. Notes
9.88% due 10/01/11...................... 200,000 210,000
----------
Retail - Music Store -- 0.0%
MTS, Inc.
Senior Notes
10.00% due 03/15/09+(1)(2)(3)(5)(7)(8).. 16,572 4,309
----------
Retail - Petroleum Products -- 0.3%
Ferrellgas LP
Senior Notes
6.75% due 05/01/14...................... 525,000 498,750
----------
Retail - Regional Department Stores -- 0.2%
Neiman - Marcus Group, Inc.
Company Guar. Notes
9.00% due 10/15/15...................... 375,000 395,625
----------
Retail - Restaurants -- 0.3%
Dave & Buster's, Inc.
Company Guar. Notes
11.25% due 03/15/14..................... 375,000 358,125
Principal Value
Security Description Amount (Note 2)
- -------------------------------------------------------------------------------
Retail - Restaurants (continued)
NPC International, Inc.
Company Guar. Notes
9.50% due 05/01/14....................................... $225,000 $208,125
--------
566,250
--------
Rubber - Tires -- 0.2%
Cooper Standard Automotive, Inc.
Company Guar. Notes
8.38% due 12/15/14....................................... 425,000 367,625
--------
Rubber/Plastic Products -- 0.0%
Venture Holdings Co. LLC
Company Guar. Notes
11.00% due 06/01/07+(2)(9)(14)........................... 50,000 150
--------
Soap & Cleaning Preparation -- 0.0%
Johnsondiversey Holdings, Inc.
Notes
10.67% due 05/15/13...................................... 50,000 50,250
--------
Special Purpose Entities -- 3.6%
AAC Group Holding Corp.
Senior Notes
10.25% due 10/01/12(4)................................... 350,000 301,000
AMR HoldCo, Inc./EmCare HoldCo, Inc.
Senior Sub. Notes
10.00% due 02/15/15...................................... 175,000 185,500
CCM Merger, Inc.
Notes
8.00% due 08/01/13*...................................... 875,000 835,625
Chukchansi Economic Development Authority
Senior Notes
8.86% due 11/15/12*(6)................................... 175,000 175,438
Consolidated Communications Illinois/Texas Holdings, Inc.
Senior Notes
9.75% due 04/01/12....................................... 396,000 396,000
Hawker Beechcraft Acquisition Co. LLC
Senior Sub. Notes
9.75% due 04/01/17*...................................... 360,000 356,400
Hexion US Fin Corp.
Company Guar. Notes
9.75% due 11/15/14....................................... 350,000 378,000
KAR Holdings, Inc.
Senior Notes
8.75% due 05/01/14*...................................... 525,000 472,500
KAR Holdings, Inc.
Senior Notes
9.36% due 05/01/14*(6)................................... 450,000 400,500
Local TV Finance LLC
Senior Notes
9.25% due 06/15/15*...................................... 375,000 343,125
MedCath Holdings Corp.
Senior Notes
9.88% due 07/15/12....................................... 185,000 194,250
MXEnergy Holdings, Inc.
Senior Notes
12.81% due 08/01/11*(6).................................. 475,000 446,500
PNA Intermediate Holding Corp.
Senior Notes
12.56% due 02/15/13*(6).................................. 225,000 216,562
Seitel Acquisition Corp.
Senior Notes
9.75% due 02/15/14*...................................... 860,000 793,350
Snoqualmie Entertainment Authority
Sec. Notes
9.06% due 02/01/14*(6)................................... 50,000 48,813
31
VALIC Company II High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Special Purpose Entities (continued)
Snoqualmie Entertainment Authority
Notes
9.13% due 02/01/15*................ $870,000 $ 849,337
Southern Star Central Corp.
Senior Notes
6.75% due 03/01/16................. 125,000 120,000
Visant Corp.
Company Guar. Notes
7.63% due 10/01/12................. 400,000 401,000
----------
6,913,900
----------
Specified Purpose Acquisitions -- 0.2%
ESI Tractebel Acquisition Corp.
Company Guar. Bonds
7.99% due 12/30/11................. 307,000 315,575
----------
Steel - Producers -- 0.5%
Chaparral Steel Co.
Company Guar. Notes
10.00% due 07/15/13................ 360,000 408,600
Steel Dynamics, Inc.
Senior Notes
6.75% due 04/01/15*................ 600,000 577,500
----------
986,100
----------
Steel - Specialty -- 0.1%
Allegheny Technologies, Inc.
Notes
8.38% due 12/15/11................. 100,000 105,375
----------
Storage/Warehousing -- 0.6%
Mobile Mini, Inc.
Company Guar. Notes
6.88% due 05/01/15................. 400,000 384,000
Mobile Services Group, Inc.
Senior Notes
9.75% due 08/01/14*................ 690,000 695,175
----------
1,079,175
----------
Telecom Services -- 1.2%
Cincinnati Bell Telephone Co.
Company Guar. Notes
7.18% due 12/15/23................. 50,000 48,000
Cincinnati Bell Telephone Co.
Company Guar. Notes
7.20% due 11/29/23................. 275,000 261,250
Insight Midwest LP
Senior Notes
9.75% due 10/01/09................. 52,000 52,000
MasTec, Inc.
Senior Notes
7.63% due 02/01/17................. 250,000 248,750
PAETEC Holding Corp.
Senior Notes
9.50% due 07/15/15*................ 875,000 857,500
Qwest Corp.
Senior Notes
7.50% due 10/01/14................. 850,000 871,250
----------
2,338,750
----------
Telephone - Integrated -- 2.3%
Cincinnati Bell, Inc.
Senior Notes
7.25% due 06/15/23................. 50,000 47,500
Cincinnati Bell, Inc.
Company Guar. Notes
8.38% due 01/15/14................. 775,000 767,250
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------
Telephone - Integrated (continued)
Citizens Communications Co.
Senior Notes
7.13% due 03/15/19...................... $ 500,000 $ 476,250
Citizens Communications Co.
Senior Notes
9.00% due 08/15/31...................... 1,106,000 1,086,645
Level 3 Financing, Inc.
Company Guar.Notes
9.25% due 11/01/14...................... 325,000 312,812
Qwest Communications International, Inc.
Company Guar. Notes
7.50% due 02/15/14...................... 1,750,000 1,719,375
----------
4,409,832
----------
Television -- 2.0%
Allbritton Communications Co.
Senior Sub. Notes
7.75% due 12/15/12...................... 635,000 620,712
Bonten Media Acquisition Co.
Company Guar. Notes
9.00% due 06/01/15*..................... 175,000 152,250
LIN Television Corp.
Senior Sub. Notes
6.50% due 05/15/13...................... 535,000 502,900
Paxson Communication Corp.
Sec. Senior Notes
11.61% due 01/15/13*(6)................. 1,700,000 1,700,000
Young Broadcasting, Inc.
Senior Sub. Notes
8.75% due 01/15/14...................... 390,000 326,138
Young Broadcasting, Inc.
Company Guar. Notes
10.00% due 03/01/11..................... 550,000 495,000
----------
3,797,000
----------
Theaters -- 1.1%
AMC Entertainment, Inc.
Senior Sub. Notes
8.00% due 03/01/14...................... 1,350,000 1,248,750
Cinemark, Inc.
Senior Notes
9.75% due 03/15/14(4)................... 1,050,000 971,250
----------
2,220,000
----------
Transactional Software -- 0.4%
Open Solutions, Inc.
Senior Sub. Notes
9.75% due 02/01/15*..................... 765,000 726,750
----------
Transport - Air Freight -- 1.6%
Atlas Air, Inc.
Pass Through Certs.
Series 1991-1, Class A-2
6.88% due 01/02/11...................... 344,075 333,753
Atlas Air, Inc.
Pass Through Certs.
Series 1991-1, Class A-1
7.20% due 01/02/19...................... 396,038 384,156
Atlas Air, Inc.
Pass Through Certs.
Series A
7.38% due 01/02/18...................... 59,024 57,843
Atlas Air, Inc.
Pass Through Certs.
Series 1991-1, Class B
7.63% due 01/02/15...................... 862,020 946,066
32
VALIC Company II High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount (Note 2)
-------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Transport - Air Freight (continued)
Atlas Air, Inc.
Pass Through Certs.
Series 2000-1, Class A
8.71% due 01/02/19...................... $1,045,473 $ 1,097,747
Atlas Air, Inc.
Pass Through Certs.
Series 1991-1, Class C
8.77% due 01/02/11...................... 87,400 82,156
Atlas Air, Inc.
Pass Through Certs.
Series 2000-1, Class B
9.06% due 07/02/17...................... 197,175 234,639
------------
3,136,360
------------
Transport - Services -- 0.2%
Bristow Group, Inc.
Senior Notes
7.50% due 09/15/17*..................... 200,000 199,000
PHI, Inc.
Company Guar. Notes
7.13% due 04/15/13...................... 250,000 234,375
------------
433,375
------------
Transport - Truck -- 0.2%
Saint Acquisition Corp.
Sec. Senior Notes
13.31% due 05/15/15*(6)................. 250,000 173,750
Swift Acquisition Corp.
Sec. Notes
12.50% due 05/15/17*.................... 250,000 169,375
------------
343,125
------------
Travel Services -- 0.5%
Travelport LLC
Company Guar. Notes
9.88% due 09/01/14...................... 825,000 832,219
Travelport LLC
Company Guar. Notes
10.25% due 09/01/14(6).................. 175,000 175,875
Travelport LLC
Company Guar. Notes
11.88% due 09/01/16..................... 25,000 25,875
------------
1,033,969
------------
Wire & Cable Products -- 0.5%
Belden, Inc.
Senior Sub. Notes
7.00% due 03/15/17*..................... 1,075,000 1,042,750
------------
Total Corporate Bonds & Notes
(cost $163,370,387)..................... 157,791,564
------------
FOREIGN CORPORATE BONDS & NOTES -- 9.3%
Building & Construction - Misc. -- 0.3%
North American Energy Partners, Inc.
Senior Notes
8.75% due 12/01/11...................... 510,000 512,550
------------
Building Products - Doors & Windows -- 0.0%
Masonite International Corp.
Company Guar. Notes
11.00% due 04/06/15..................... 70,000 57,050
------------
Computers - Memory Devices -- 0.2%
Seagate Technology HDD Holdings
Company Guar. Notes
6.80% due 10/01/16...................... 425,000 409,063
------------
Principal Value
Security Description Amount (Note 2)
------------------------------------------------------------------------------
Diversified Manufacturing Operations -- 0.3%
Bombardier, Inc.
Senior Notes
8.00% due 11/15/14*.................................. $ 595,000 $ 614,337
----------
Electronic Components - Misc. -- 0.3%
NXP BV / NXP Funding LLC
Company Guar. Notes
9.50% due 10/15/15................................... 700,000 605,500
----------
Electronic Components - Semiconductors -- 0.3%
Avago Technologies Finance
Company Guar. Notes
10.13% due 12/01/13.................................. 400,000 418,000
STATS ChipPAC, Ltd.
Company Guar. Notes
6.75% due 11/15/11................................... 100,000 100,000
----------
518,000
----------
Food - Meat Products -- 0.4%
JBS SA
Company Guar. Notes
9.38% due 02/07/11................................... 450,000 446,625
JBS SA
Senior Notes
10.50% due 08/04/16*................................. 250,000 251,250
----------
697,875
----------
Housewares -- 0.6%
Vitro SA de CV
Senior Notes
9.13% due 02/01/17*.................................. 1,285,000 1,236,812
----------
Independent Power Producer -- 0.0%
AES Drax Energy, Ltd.
Sec. Notes
11.50% due 08/30/10+(2)(8)........................... 475,000 475
----------
Investment Companies -- 0.1%
Algoma Acquisition
Corp. Senior Notes
9.88% due 06/15/15*.................................. 200,000 187,000
----------
Medical - Drugs -- 1.7%
Angiotech Pharmaceuticals, Inc.
Company Guar. Notes
7.75% due 04/01/14................................... 440,000 376,200
Angiotech Pharmaceuticals, Inc.
Company Guar. Notes
9.11% due 12/01/13(6)................................ 575,000 569,250
Elan Finance PLC
Company Guar. Bonds
7.75% due 11/15/11................................... 810,000 789,750
Elan Finance PLC
Company Guar. Notes
8.88% due 12/01/13................................... 1,350,000 1,323,000
Elan Finance PLC
Company Guar. Notes
9.56% due 11/15/11(6)................................ 225,000 220,500
----------
3,278,700
----------
Music -- 0.1%
Corporacion Interamericana de Entetenimiento SA de CV
Senior Notes
8.88% due 06/14/15*.................................. 264,000 262,680
----------
Oil Companies - Exploration & Production -- 1.3%
Compton Petroleum Finance Corp.
Company Guar. Notes
7.63% due 12/01/13................................... 700,000 665,000
33
VALIC Company II High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------------------------
FOREIGN CORPORATE BONDS & NOTES (continued)
Oil Companies - Exploration & Production (continued)
OPTI Canada, Inc.
Secured Notes
7.88% due 12/15/14*.............................. $ 850,000 $ 852,125
OPTI Canada, Inc.
Company Guar. Notes
8.25% due 12/15/14*.............................. 375,000 379,687
Paramount Resources, Ltd.
Senior Notes
8.50% due 01/31/13............................... 490,000 501,025
----------
2,397,837
----------
Paper & Related Products -- 0.4%
Abitibi - Consolidated, Inc.
Notes
5.25% due 06/20/08............................... 75,000 72,000
Abitibi - Consolidated, Inc.
Notes
6.00% due 06/20/13............................... 175,000 129,500
Abitibi - Consolidated, Inc.
Notes
8.55% due 08/01/10............................... 560,000 501,200
Bowater Canada Finance Corp.
Company Guar. Notes
7.95% due 11/15/11............................... 125,000 106,250
----------
808,950
----------
Printing - Commercial -- 0.2%
Quebecor World Capital Corp.
Senior Notes
8.75% due 03/15/16*.............................. 475,000 427,500
----------
Satellite Telecom -- 1.7%
Intelsat Bermuda, Ltd.
Company Guar. Notes
8.89% due 01/15/15(6)............................ 585,000 589,388
Intelsat Bermuda, Ltd.
Senior Notes
11.25% due 06/15/16.............................. 625,000 653,906
Intelsat Intermediate Holding Co., Ltd.
Senior Notes
9.25% due 02/01/15(4)............................ 1,210,000 980,100
Intelsat, Ltd.
Senior Notes
6.50% due 11/01/13............................... 935,000 694,237
Intelsat, Ltd.
Senior Notes
7.63% due 04/15/12............................... 325,000 270,563
----------
3,188,194
----------
Semiconductor Equipment -- 0.1%
MagnaChip Semiconductor SA
Sec. Notes
6.88% due 12/15/11............................... 75,000 59,250
MagnaChip Semiconductor SA
Sec. Notes
8.94% due 12/15/11(6)............................ 50,000 41,750
----------
101,000
----------
Special Purpose Entity -- 0.3%
Hellas Telecommunications Luxembourg II
Sub. Notes
11.11% due 01/15/15*(6).......................... 665,000 651,700
----------
Telecom Services -- 0.6%
Global Crossing UK Finance PLC
Company Guar. Notes
10.75% due 12/15/14.............................. 275,000 288,750
Principal
Amount/ Value
Security Description Shares (Note 2)
----------------------------------------------------------------------------
Telecom Services (continued)
Telenet Group Holdings NV
Notes
11.50% due 06/15/14*(4)............................ $820,000 $ 779,000
-----------
1,067,750
-----------
Transport - Marine -- 0.3%
Navios Maritime Holdings, Inc.
Company Guar. Notes
9.50% due 12/15/14................................. 200,000 204,250
Ultrapetrol Bahamas, Ltd.
1st Mtg. Bonds
9.00% due 11/24/14................................. 375,000 367,969
-----------
572,219
-----------
Transport - Rail -- 0.1%
Grupo Transportacion Ferroviaria Mexicana SA de CV
Senior Notes
9.38% due 05/01/12................................. 137,000 141,795
Kansas City Southern de Mexico SA de CV
Senior Notes
7.38% due 03/01/14*................................ 125,000 121,250
-----------
263,045
-----------
Total Foreign Corporate Bonds & Notes
(cost $19,060,074)................................. 17,858,237
-----------
LOANS -- 0.6%
Beverages - Non - alcoholic -- 0.2%
Le - Natures, Inc.
9.36% due 03/01/11+(2)(7)(8)(12)(13)............... 600,000 366,000
-----------
Diversified Financial Services -- 0.3%
Wind Acquisitions Holdings Finance S.A.
12.61% due 12/21/11(2)(3)(12)(13).................. 516,237 515,807
-----------
Leisure Products -- 0.1%
AMC Entertainment Holdings, Inc.
10.36% due 06/15/12(12)(13)........................ 300,000 287,250
-----------
Total Loans
(cost $1,419,137).................................. 1,169,057
-----------
COMMON STOCK -- 1.6%
Casino Services -- 0.0%
Shreveport Gaming Holdings, Inc.+(1)(2)(3).......... 2,501 57,581
-----------
Cellular Telecom -- 1.0%
iPCS, Inc.(2)(3).................................... 58,957 1,997,463
-----------
Medical - Drugs -- 0.0%
Triax Pharmaceuticals LLC(1)(2)(3).................. 85,612 35,957
-----------
Medical - Outpatient/Home Medical -- 0.1%
Critical Care Systems International, Inc.+(1)(2)(3). 13,262 69,626
-----------
Oil Companies - Exploration & Production -- 0.0%
Transmeridian Exploration, Inc.+.................... 3,126 6,346
-----------
Oil - Field Services -- 0.5%
Trico Marine Services, Inc.+........................ 27,069 889,487
-----------
Retail - Music Store -- 0.0%
MTS, Inc.+(1)(2)(3)................................. 3,863 0
-----------
Total Common Stock
(cost $1,535,693).................................. 3,056,460
-----------
PREFERRED STOCK -- 0.9%
Medical - Drugs -- 0.0%
Triax Pharmaceuticals LLC
15.00%(1)(2)(3).................................... 26,118 52,235
-----------
34
VALIC Company II High Yield Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Shares/
Principal Value
Security Description Amount (Note 2)
- -----------------------------------------------------------------------------------------
PREFERRED STOCK (continued)
Oil Companies - Exploration & Production -- 0.9%
EXCO Resources, Inc. Convertible Series A-1,
7.00%(1)(3).................................................. 125 $ 1,425,000
Transmeridian Exploration, Inc.
15.00%(1).................................................... 2,287 176,099
------------
1,601,099
------------
Total Preferred Stock
(cost $1,522,668)............................................ 1,653,334
------------
WARRANTS -- 0.0%
Oil Companies - Exploration & Production -- 0.0%
Transmeridian Exploration, Inc. Expires 12/15/10
(strike price $4.31)+(1)..................................... 13,811 3,453
------------
Telephone - Integrated -- 0.0%
GT Group Telecom, Inc. Expires 02/01/10
(strike price $0.00)+*(1)(2)................................. 200 2
------------
Total Warrants
(cost $37,980)............................................... 3,455
------------
Total Long - Term Investment Securities
(cost $187,792,072).......................................... 182,331,420
------------
REPURCHASE AGREEMENT -- 4.2%
Agreement with State Street Bank & Trust Co. bearing interest
at 4.68%, dated 08/31/07, to be repurchased 09/04/07 in
the amount of $8,205,265 and collateralized by Federal
National Mtg. Assoc. Notes, bearing interest at 3.25% due
02/15/09 and having an approximate value of $8,447,068
(cost $8,201,000)............................................ $8,201,000 8,201,000
------------
TOTAL INVESTMENTS
(cost $195,993,072)(10)...................................... 98.7% 190,532,420
Other assets less liabilities................................... 1.3% 2,594,169
---------- ------------
NET ASSETS -- 100.0% $193,126,589
========== ============
- --------
* Securities exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from registration,
normally to qualified institutional buyers. The Fund has no right to demand
registration of these securities. At August 31, 2007, the aggregate value of
these securities was $51,233,958 representing 26.5% of net assets. Unless
otherwise indicated these securities are not considered to be illiquid.
+ Non-income producing security
(1)Fair valued security; see Note 2
(2)Illiquid security
(3)To the extent permitted by the Statement of Additional Information, the High
Yield Bond Fund may invest in restricted securities. The Fund has no right
to demand registration of these securities. The securities are valued
pursuant to Note 2. Restricted securities held by a Fund may not be sold
except in exempt transactions or in a public offering registered under the
Securities Act of 1933. The risk of investing in such securities is
generally greater than the risk of investing in the securities of widely
held, publicly traded companies. Lack of a secondary market and resale
restrictions may result in the inability of a Fund to sell a security at a
fair price and may substantially delay the sale of the security. In
addition, these securities may exhibit greater price volatility than
securities for which secondary markets exist. As of August 31, 2007, the
High Yield Bond Fund held the following restricted securities:
Principal Market Value as a
Acquisition Amount/ Acquisition Market Value % of
Name Date Shares Cost Value Per Share Net Assets
- --------------------- ----------- --------- ----------- ------- --------- ----------
Critical Care Systems
International, Inc.
Common Stock........ 06/04/05 $ 1,420 $ 12,824
2,368 21,394
4,737 37,189
4,737 35,230
------- --------
13,262 106,637 $69,626 $5.25 0.04%
------- --------
Principal Market Value as a
Acquisition Amount/ Acquisition Market Value % of
Name Date Shares Cost Value Per Share Net Assets
- ------------------------- ----------- --------- ----------- ---------- --------- ----------
Exco Resources, Inc.
Convertible
7.00% Preferred Stock... 03/29/07 125 1,250,000 1,425,000 11,400 0.74
ICO North America, Inc.:
7.50% due 08/15/09...... 08/11/05 250,000 250,000 247,500 99.00 0.13
iPCS, Inc.
Common Stock............ 08/12/04 57,705 894,412
07/28/05 1,252 0
--------- ---------
58,957 894,412 1,997,463 33.88 1.03
--------- ---------
MTS, Inc.:
Senior Notes
10.00% due 03/15/09..... 03/16/04 13,636 47,099
09/03/04 681 681
03/19/05 715 143
09/04/05 751 195
03/04/06 789 205
--------- ---------
16,572 48,323 4,309 26.00 0.00
--------- ---------
MTS, Inc.
Common Stock............ 03/16/04 3,863 0 0 0.00 0.00
Shreveport Gaming
Holdings, Inc.
Common Stock............ 07/21/05 531 12,228
07/29/05 1,970 45,355
--------- ---------
2,501 57,583 57,581 23.02 0.03
--------- ---------
Southern Energy, Inc.:
Notes
7.90% due 07/15/09...... 01/10/06 1,225,000 0 0 0.00 0.00
Triax Pharmaceuticals LLC
Senior Sec. Notes
15.54% due 08/30/11..... 08/31/2007 1,000,000 899,308 899,307 89.93 0.46
Triax Pharmaceuticals LLC
Common Stock............ 08/31/2007 85,612 35,957 35,957 0.42 0.02
Triax Pharmaceuticals LLC
15.00% Preferred Stock.. 08/31/2007 26117.6 52,235 52,235 2 0.03
Wind Acquisitions
Holdings Finance S.A.
12.61% due 12/21/11
Loan Agreement.......... 03/15/07 200,000 206,867
03/19/07 100,000 103,454
06/21/07 206,374 208,892
07/18/07 3,288 3,288
07/18/07 6,575 6,575
--------- ---------
516,237 529,076 515,807 99.92 0.27
--------- --------- ---------- ----
$5,304,785 2.75%
========== ====
(4)"Step-up" security where the rate increases ("steps-up") at a predetermined
rate. Rate shown reflects the increased rate.
(5)PIK ("Payment-in-Kind") security. Bond or preferred stock that pays
interest/dividends in the form of additional bonds or preferred stocks.
(6)Floating rate security where the rate fluctuates. The rate moves up or down
at each reset date. The rate reflected is as of August 31, 2007.
(7)Company has filed Chapter 11 bankruptcy.
(8)Bond in default
(9)Company has filed Chapter 7 bankruptcy.
(10)See Note 5 for cost of investments on a tax basis.
(11)Bond is in default and did not pay principal at maturity. Security is
subject to litigation, the outcome of which is still to be determined.
(12)Senior Loans are generally subject to mandatory and/or optional prepayment.
Because of these mandatory prepayment conditions and because there may be
significant economic incentives for a borrower to prepay, prepayments may
occur. As a result, the actual remaining maturity may be substantially less
than the stated maturities shown.
(13)The Portfolio invests in Senior Loans which generally pay interest at rates
which are periodically re-determined by reference to a base lending rate
plus a premium. These base lending rates are generally either the lending
rate offered by one or more major European banks, such as the London
InterBank Offer Rate ("LIBOR") or the prime rate offered by one or more
major United States banks, or the certificate of deposit rate. Senior Loans
are generally considered to be restrictive in that the Portfolio is
ordinarily contractually obligated to receive approval from the Agent Bank
and/or borrower prior to the disposition of a Senior Loan.
(14)Bond is in default and did not pay principal at maturity
ADR-- American Depository Receipt
See Notes to Financials Statements
35
VALIC Company II International Small Cap Equity Fund
PORTFOLIO PROFILE -- August 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Industry Allocation*
Building & Construction Products -- Misc............ 5.8%
Repurchase Agreements............................... 4.2%
Diversified Manufacturing Operations................ 3.4%
Auto/Truck Parts & Equipment -- Original............ 2.6%
Machinery -- General Industrial..................... 2.4%
Computers -- Integrated Systems..................... 2.3%
Chemicals -- Diversified............................ 2.2%
Electronic Components -- Misc....................... 2.2%
Distribution/Wholesale.............................. 2.1%
Building & Construction -- Misc..................... 1.9%
Machinery -- Electrical............................. 1.9%
Miscellaneous Manufacturing......................... 1.9%
Banks -- Commercial................................. 1.8%
Machinery -- Material Handling...................... 1.8%
Apparel Manufacturers............................... 1.7%
Medical -- Biomedical/Gene.......................... 1.7%
Rubber -- Tires..................................... 1.7%
Medical -- Drugs.................................... 1.6%
Rental Auto/Equipment............................... 1.6%
Finance -- Other Services........................... 1.5%
Retail -- Apparel/Shoe.............................. 1.5%
Retail -- Misc./Diversified......................... 1.5%
Oil Refining & Marketing............................ 1.4%
Chemicals -- Specialty.............................. 1.3%
Investment Management/Advisor Services.............. 1.3%
Computers........................................... 1.1%
Finance -- Investment Banker/Broker................. 1.1%
Gambling (Non-Hotel)................................ 1.1%
Machinery -- Construction & Mining.................. 1.1%
Office Automation & Equipment....................... 1.1%
Retail -- Restaurants............................... 1.1%
Brewery............................................. 1.0%
Energy -- Alternate Sources......................... 1.0%
Retail -- Discount.................................. 1.0%
Transport -- Marine................................. 1.0%
Audio/Video Products................................ 0.9%
Engineering/R&D Services............................ 0.9%
Enterprise Software/Service......................... 0.9%
Real Estate Operations & Development................ 0.9%
Water............................................... 0.9%
Advertising Sales................................... 0.8%
Beverages -- Non-alcoholic.......................... 0.8%
Direct Marketing.................................... 0.8%
E-Commerce/Services................................. 0.8%
Electronic Components -- Semiconductors............. 0.8%
Environmental Monitoring & Detection................ 0.8%
Footwear & Related Apparel.......................... 0.8%
Industrial Audio & Video Products................... 0.8%
Medical Products.................................... 0.8%
Oil Field Machinery & Equipment..................... 0.8%
Appliances.......................................... 0.7%
Coatings/Paint...................................... 0.7%
Electric -- Integrated.............................. 0.7%
Metal Processors & Fabrication...................... 0.7%
Resorts/Theme Parks................................. 0.7%
Shipbuilding........................................ 0.7%
Telecommunication Equipment......................... 0.7%
Travel Services..................................... 0.7%
Applications Software............................... 0.6%
Beverages -- Wine/Spirits........................... 0.6%
Medical Imaging Systems............................. 0.6%
Medical Instruments................................. 0.6%
Retail -- Automobile................................ 0.6%
Consulting Services................................. 0.5%
Electronics -- Military............................. 0.5%
Environmental Consulting & Engineering.............. 0.5%
Internet Content -- Information/News................ 0.5%
Veterinary Products................................. 0.5%
Building -- Maintance & Services.................... 0.4%
E-Services/Consulting............................... 0.4%
Finance -- Leasing Companies........................ 0.4%
Hotels/Motels....................................... 0.4%
Human Resources..................................... 0.4%
Medical -- Hospitals................................ 0.4%
Oil -- Field Services............................... 0.4%
Retail -- Sporting Goods............................ 0.4%
Textile -- Products................................. 0.4%
Transport -- Truck.................................. 0.4%
Machinery -- Print Trade............................ 0.3%
Medical -- Wholesale Drug Distribution.............. 0.3%
Protection/Safety................................... 0.3%
Publishing -- Newspapers............................ 0.3%
Real Estate Investment Trusts....................... 0.3%
Schools............................................. 0.3%
Agricultural Chemicals.............................. 0.2%
Cellular Telecom.................................... 0.2%
Coal................................................ 0.2%
Commercial Services................................. 0.2%
Computers -- Periphery Equipment.................... 0.2%
Decision Support Software........................... 0.2%
Diversified Minerals................................ 0.2%
Electric -- Generation.............................. 0.2%
Electronic Connectors............................... 0.2%
Electronic Parts Distribution....................... 0.2%
Entertainment Software.............................. 0.2%
Firearms & Ammunition............................... 0.2%
Fisheries........................................... 0.2%
Food -- Misc........................................ 0.2%
Internet Content -- Entertainment................... 0.2%
Printing -- Commercial.............................. 0.2%
Retail -- Consumer Electronics...................... 0.2%
Retail -- Major Department Stores................... 0.2%
Semiconductors Components -- Intergrated Circuits... 0.2%
Steel -- Producers.................................. 0.2%
Television.......................................... 0.2%
Toys................................................ 0.2%
Web Portals/ISP..................................... 0.2%
Batteries/Battery Systems........................... 0.1%
Building Products -- Wood........................... 0.1%
Commerce............................................ 0.1%
Cosmetics & Toiletries.............................. 0.1%
Hazardous Waste Disposal............................ 0.1%
Motion Pictures & Services.......................... 0.1%
Networking Products................................. 0.1%
Oil Companies -- Exploration & Production........... 0.1%
Recreational Centers................................ 0.1%
Textile -- Apparel.................................. 0.1%
Warehousing & Harbor Transportation Services........ 0.1%
----
99.0%
====
* Calculated as a percentage of net assets
36
VALIC Company II International Small Cap Equity Fund
PORTFOLIO PROFILE -- August 31, 2007 (Unaudited) -- (continued)
- --------------------------------------------------------------------------------
Country Allocation*
Japan............................................. 28.6%
Germany........................................... 12.9%
United Kingdom.................................... 5.5%
France............................................ 5.4%
Denmark........................................... 5.2%
Finland........................................... 4.4%
Sweden............................................ 4.4%
United States..................................... 4.2%
Switzerland....................................... 3.4%
Australia......................................... 2.7%
Bermuda........................................... 2.6%
Singapore......................................... 2.1%
Taiwan............................................ 1.8%
Italy............................................. 1.7%
South Korea....................................... 1.6%
Greece............................................ 1.5%
Cayman Islands.................................... 1.3%
Ireland........................................... 1.3%
Austria........................................... 1.2%
Netherlands....................................... 1.2%
Malaysia.......................................... 1.0%
Norway............................................ 1.0%
Belgium........................................... 0.8%
China............................................. 0.6%
Thailand.......................................... 0.6%
Indonesia......................................... 0.4%
Spain............................................. 0.4%
Hong Kong......................................... 0.3%
India............................................. 0.3%
New Zealand....................................... 0.3%
Philippines....................................... 0.3%
----
99.0%
====
* Calculated as a percentage of net assets
37
VALIC Company II International Small Cap Equity Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007
- --------------------------------------------------------------------------------
Value
Security Description Shares (Note 2)(1)
-------------------------------------------------------------------------
COMMON STOCK -- 92.2%
Australia -- 2.7%
Austal, Ltd...................................... 468,542 $ 1,358,392
Bradken, Ltd..................................... 152,556 1,326,593
Candle Australia, Ltd............................ 601,889 1,627,338
Dyno Nobel, Ltd.................................. 663,652 1,365,482
IBT Education, Ltd............................... 323,729 561,727
JB Hi - Fi, Ltd.................................. 126,877 1,298,214
Jubilee Mines NL................................. 100,119 1,266,813
MacArthur Coal, Ltd.............................. 206,129 1,172,771
Neptune Marine Services, Ltd.+................... 1,131,259 817,880
Oakton, Ltd...................................... 301,565 1,332,899
Primary Health Care, Ltd......................... 55,054 494,231
Seek, Ltd........................................ 116,670 787,963
Tassal Group, Ltd................................ 503,259 1,383,167
Tox Free Solutions, Ltd.+........................ 633,261 1,136,427
Transfield Services, Ltd......................... 108,594 1,168,991
West Australian Newspapers Holdings, Ltd......... 129,974 1,633,052
WorleyParsons, Ltd............................... 33,888 1,075,212
-----------
19,807,152
-----------
Austria -- 1.2%
Andritz AG....................................... 131,351 8,524,170
-----------
Belgium -- 0.8%
EVS Broadcast Equipment SA....................... 66,146 6,061,914
-----------
Bermuda -- 2.6%
Fairwood, Ltd.................................... 497,000 627,980
FerroChina, Ltd.................................. 1,299,000 1,681,359
Global Sources, Ltd.+............................ 42,400 817,472
Glorious Sun Enterprises, Ltd.................... 4,188,000 2,016,874
IT, Ltd.......................................... 9,502,000 1,905,982
Pacific Basin Shipping, Ltd...................... 1,804,000 3,295,422
Playmates Holdings, Ltd.......................... 12,912,000 1,495,067
Regal Hotels International Holdings, Ltd......... 17,062,000 1,325,233
Sino Techfibre, Ltd.............................. 2,072,000 1,815,074
TPV Technology, Ltd.............................. 2,300,000 1,454,791
Varitronix International, Ltd.................... 324,000 262,187
VTech Holdings, Ltd.............................. 278,000 2,125,364
-----------
18,822,805
-----------
Cayman Islands -- 1.3%
AAC Acoustic Technologies Holdings, Inc.+........ 1,434,000 1,513,736
Anta Sports Products, Ltd.+...................... 2,097,000 2,132,593
China Huiyuan Juice Group, Ltd.+................. 1,728,000 2,302,391
Hans Energy Co., Ltd.+........................... 14,122,000 1,173,426
Shenzhou International Group Holdings, Ltd....... 2,028,000 1,006,866
SINA Corp.+...................................... 34,300 1,429,624
-----------
9,558,636
-----------
China -- 0.6%
China BlueChemical, Ltd.......................... 2,936,000 1,663,362
Shanghai Jin Jiang International Hotels Group
Co., Ltd....................................... 2,280,000 1,180,853
Travelsky Technology, Ltd........................ 2,099,000 1,716,466
-----------
4,560,681
-----------
Denmark -- 5.2%
Bang & Olufsen A/S, Class B...................... 60,998 6,663,998
FLSmidth & Co. A/S............................... 142,990 13,505,746
Genmab A/S+...................................... 72,880 4,306,657
NKT Holding A/S.................................. 64,134 6,793,502
Royal UNIBREW A/S................................ 60,806 7,103,369
-----------
38,373,272
-----------
Finland -- 4.4%
KCI Konecranes Oyj............................... 193,312 7,377,338
Lassila & Tikanoja Oyj........................... 123,960 3,855,588
Value
Security Description Shares (Note 2)(1)
- --------------------------------------------------------------------------------
Finland (continued)
Nokian Renkaat Oyj..................................... 275,842 $ 9,716,051
Ramirent Oyj........................................... 491,600 11,717,175
-----------
32,666,152
-----------
France -- 5.4%
Guerbet................................................ 21,535 4,345,554
IMS International Metal Service........................ 88,406 3,847,343
Ingenico SA............................................ 158,558 4,094,119
Laurent - Perrier...................................... 19,110 3,028,124
Neopost SA............................................. 53,609 8,207,664
Sechilienne SA......................................... 86,163 6,324,868
Teleperformance........................................ 136,576 5,603,916
Virbac SA.............................................. 47,030 4,007,906
-----------
39,459,494
-----------
Germany -- 10.3%
AWD Holding AG......................................... 230,519 7,777,497
Bauer AG............................................... 80,380 6,055,508
ElringKlinger AG....................................... 87,256 8,036,626
Fielmann AG............................................ 161,137 10,610,511
Kloeckner & Co. AG..................................... 196,932 12,069,513
Pfleiderer AG.......................................... 199,478 5,094,198
Rational AG............................................ 21,045 3,928,701
Software AG............................................ 65,115 6,494,979
Symrise AG+............................................ 316,555 8,217,993
Wincor Nixdorf AG...................................... 83,020 7,154,417
-----------
75,439,943
-----------
Greece -- 1.5%
Athens Stock Exchange SA............................... 411,843 11,266,606
-----------
Hong Kong -- 0.3%
China Everbright International, Ltd.................... 2,736,000 1,074,187
Shaw Brothers (Hong Kong), Ltd......................... 430,000 821,401
-----------
1,895,588
-----------
India -- 0.3%
Asian Paints, Ltd...................................... 2,403 55,568
Chennai Petroleum Corp., Ltd........................... 292,380 1,880,129
-----------
1,935,697
-----------
Indonesia -- 0.4%
Medco Energi Internasional Tbk PT...................... 2,314,000 966,175
Perusahaan Perkebunan London Sumatra Indonesia Tbk PT+. 135,000 93,581
Ramayana Lestari Sentosa Tbk PT........................ 13,705,000 1,242,964
United Tractors Tbk PT................................. 1,096,000 950,893
-----------
3,253,613
-----------
Ireland -- 1.3%
Kingspan Group PLC..................................... 314,761 8,157,166
Norkom Group PLC+...................................... 688,560 1,612,067
-----------
9,769,233
-----------
Italy -- 1.7%
ASM SpA................................................ 866,040 5,117,113
Digital Multimedia Technologies SpA+................... 41,060 3,088,218
Piccolo Credito Valtellinese Scarl..................... 30,051 413,886
Tod's SpA.............................................. 44,551 3,918,503
-----------
12,537,720
-----------
Japan -- 28.6%
Amano Corp............................................. 151,100 1,838,871
Asahi Soft Drinks Co, Ltd.............................. 253,000 3,664,288
Chugoku Marine Paints, Ltd............................. 440,000 4,994,127
Daiichi Chuo Kisen Kaisha.............................. 173,000 1,311,088
Dena Co., Ltd.......................................... 901 3,900,786
38
VALIC Company II International Small Cap Equity Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Value
Security Description Shares (Note 2)(1)
-------------------------------------------------------------------------
COMMON STOCK (continued)
Japan (continued)
Digital Garage, Inc.+.............................. 1,289 $ 1,225,447
Disco Corp......................................... 54,100 3,178,782
Don Quijote Co, Ltd................................ 340,000 7,029,899
en - japan, Inc.................................... 582 2,166,648
EPS Co., Ltd....................................... 638 2,056,004
Exedy Corp......................................... 175,300 5,096,550
Fujimi, Inc........................................ 118,500 2,799,480
Glory, Ltd......................................... 48,200 1,425,210
Harmonic Drive Systems, Inc........................ 353 1,527,371
HIS Co., Ltd....................................... 193,400 4,890,792
Hisamitsu Pharmaceutical Co., Inc.................. 120,300 3,307,987
Hitachi Systems & Services, Ltd.................... 131,000 2,577,115
Imagineer Co., Ltd................................. 60,000 1,218,929
Intelligence, Ltd.................................. 797 1,172,451
Iriso Electronics Co., Ltd......................... 58,900 1,427,325
Japan Aviation Electronics Industry, Ltd........... 270,000 3,923,434
Japan Steel Works, Ltd............................. 392,000 5,851,840
Kaga Electronics Co., Ltd.......................... 88,000 1,514,997
Kakaku.com, Inc.................................... 1,019 2,715,198
Kenedix, Inc....................................... 984 1,444,973
Kitz Corp.......................................... 243,000 2,134,151
Koito Manufacturing Co., Ltd....................... 249,000 2,821,142
Kyoritsu Maintenance Co., Ltd...................... 158,000 3,047,094
La Parler Co., Ltd................................. 1,247 1,132,431
Land Business Co., Ltd............................. 215 177,167
Lintec Corp........................................ 174,000 3,259,477
Mani, Inc.......................................... 29,800 1,570,853
MCJ Co., Ltd.+..................................... 1,182 505,928
Miraca Holdings, Inc............................... 104,000 2,214,258
Miraial Co., Ltd................................... 38,600 2,248,420
Mitsubishi UFJ Lease & Finance Co., Ltd............ 68,610 2,712,549
Modec, Inc......................................... 158,000 4,925,202
Moshi Moshi Hotline, Inc........................... 120,600 5,607,036
Nabtesco Corp...................................... 416,000 5,819,749
Nichias Corp....................................... 478,000 5,027,828
Nihon Dempa Kogyo Co., Ltd......................... 62,400 3,671,139
Nishimatsuya Chain Co., Ltd........................ 225,200 2,968,179
Nissha Printing Co, Ltd............................ 53,400 1,487,076
NPC, Inc........................................... 28,000 704,897
Obic Co, Ltd....................................... 22,870 4,526,448
Okasan Holdings, Inc............................... 450,000 2,674,856
Otsuka Corp........................................ 58,900 5,946,927
Park24 Co, Ltd..................................... 138,600 1,334,748
Resort Solution Co., Ltd........................... 86,000 374,344
ResortTrust, Inc................................... 229,500 5,038,838
Right On Co., Ltd.................................. 250 2,609
Rohto Pharmaceutical Co., Ltd...................... 201,000 2,315,933
Saint Marc Holdings Co., Ltd....................... 45,700 1,984,081
Sankyu, Inc........................................ 589,000 3,266,278
Sasebo Heavy Industries Co., Ltd................... 589,000 3,606,804
Sato Corp.......................................... 132,000 2,555,154
Secom Techno Service Co., Ltd...................... 63,000 2,231,929
Star Micronics Co., Ltd............................ 247,400 7,241,665
Sumco Techxiv Corp................................. 15,200 1,016,260
Sysmex Corp........................................ 119,900 4,300,907
Taiyo Ink Manufacturing Co., Ltd................... 103,300 2,937,648
Takeei Corp.+...................................... 2,800 297,224
Teikoku Piston Ring Co., Ltd....................... 248,100 1,930,644
Telepark Corp...................................... 1,178 1,465,949
The Kagoshima Bank, Ltd............................ 243,000 1,760,862
Toho Pharmaceutical Co., Ltd....................... 131,700 2,271,636
Toshiba Machine Co., Ltd........................... 241,000 1,798,743
Toyo Tanso Co., Ltd................................ 63,400 6,088,100
Value
Security Description Shares (Note 2)(1)
-------------------------------------------------------------------------
Japan (continued)
Tsumura & Co..................................... 135,200 $ 2,204,494
Unicharm Petcare Corp............................ 40,200 1,684,757
Union Tool Co.................................... 78,300 3,501,613
USS Co, Ltd...................................... 69,550 4,679,417
Works Applications Co., Ltd...................... 3,188 2,641,678
Xebio Co., Ltd................................... 113,000 2,919,778
Yamaguchi Financial Group, Inc................... 125,000 1,485,909
------------
210,380,401
------------
Malaysia -- 1.0%
IGB Corp. Bhd.................................... 2,272,600 1,584,961
KNM Group Bhd.................................... 1,073,000 1,384,421
Muhibbah Engineering Bhd......................... 991,000 2,527,512
Sarawak Energy Bhd............................... 1,087,700 677,060
Star Publications Malaysia Bhd................... 1,093,000 1,069,934
Ta Ann Holdings Bhd.............................. 203,620 413,160
------------
7,657,048
------------
Netherlands -- 1.2%
Aalberts Industries NV........................... 383,710 9,152,887
------------
New Zealand -- 0.3%
Nufarm, Ltd...................................... 212,275 2,452,613
------------
Norway -- 1.0%
ProSafe ASA...................................... 69,880 1,057,701
Sevan Marine ASA+................................ 630,167 6,136,819
------------
7,194,520
------------
Philippines -- 0.3%
Aboitiz Power Corp.+............................. 5,050,000 585,948
Chemrez Technologies, Inc........................ 8,411,000 768,398
International Container Term Services, Inc....... 1,670,500 1,166,980
------------
2,521,326
------------
Singapore -- 2.1%
CDL Hospitality Trusts........................... 1,620,406 2,353,936
Ho Bee Investment, Ltd........................... 1,929,000 2,298,150
Inter - Roller Engineering, Ltd.................. 2,869,000 1,488,477
Jiutian Chemical Group, Ltd...................... 1,018,000 1,612,796
Raffles Education Corp., Ltd..................... 1,116,000 1,504,437
Raffles Medical Group, Ltd....................... 1,806,200 1,803,154
SC Global Developments, Ltd...................... 352,015 1,221,917
United Test and Assembly Center, Ltd.+........... 3,640,000 2,797,526
------------
15,080,393
------------
South Korea -- 1.6%
Jinro Distillers Co., Ltd........................ 81,772 1,255,182
Jinsung T.E.C.................................... 191,662 2,578,750
JVM Co., Ltd..................................... 39,825 1,896,134
Nexen Tire Corp.................................. 60,030 3,231,137
SSCP Co., Ltd.+.................................. 48,700 1,398,884
The Basic House Co., Ltd......................... 154,140 1,336,914
------------
11,697,001
------------
Spain -- 0.4%
Mecalux SA....................................... 82,846 3,261,138
------------
Sweden -- 4.4%
JM AB............................................ 295,603 7,827,194
Lindab International AB.......................... 389,367 10,727,031
Munters AB....................................... 394,917 5,576,937
RaySearch Laboratories AB+....................... 138,119 4,511,324
rnb Retail and Brands AB......................... 325,330 3,421,366
------------
32,063,852
------------
39
VALIC Company II International Small Cap Equity Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Shares/
Principal Value
Security Description Amount (Note 2)(1)
- ------------------------------------------------------------------------------------
COMMON STOCK (continued)
Switzerland -- 3.4%
Banque Cantonale Vaudoise.............................. 6,901 $ 3,260,881
Basilea Pharmaceutica AG+.............................. 26,887 5,857,190
Compagne Financiere Tradition.......................... 22,550 3,620,832
Gurit Holding AG....................................... 3,432 3,864,799
Speedel Holding AG+.................................... 16,221 2,083,435
Vontobel Holding AG.................................... 122,036 5,965,376
------------
24,652,513
------------
Taiwan -- 1.8%
CyberTAN Technology, Inc............................... 355,680 1,092,084
Everlight Electronics Co., Ltd......................... 499,511 2,177,810
International Games System Co., Ltd.................... 157,300 1,810,443
Kinsus Interconnect Technology Corp.................... 336,600 1,168,930
Mosel Vitelic, Inc..................................... 602,970 1,246,696
Polaris Securities Co., Ltd.+.......................... 2,658,000 1,355,640
Sanyo Electric Taiwan Co., Ltd......................... 1,422,000 1,269,886
Shin Zu Shing Co., Ltd................................. 205,000 1,350,227
Tainan Spinning Co., Ltd............................... 3,388,000 1,719,653
------------
13,191,369
------------
Thailand -- 0.6%
BEC World PCL(2)....................................... 2,358,800 1,594,992
Somboon Advance Technology PCL+(2)..................... 1,927,600 758,455
Thoresen Thai Agencies PCL............................. 1,216,100 1,866,743
------------
4,220,190
------------
United Kingdom -- 5.5%
Cookson Group PLC...................................... 625,961 9,722,532
Detica Group PLC....................................... 553,535 3,516,236
IG Group Holdings PLC.................................. 1,282,088 8,115,792
Luminar PLC............................................ 371,137 5,312,103
Northumbrian Water Group PLC........................... 947,904 6,618,999
Tanfield Group PLC+.................................... 2,356,757 7,534,870
------------
40,820,532
------------
Total Common Stock
(cost $602,345,704)................................... 678,278,459
------------
PREFERRED STOCK -- 2.6%
Germany -- 2.6%
Fuchs Petrolub AG...................................... 88,684 8,203,808
Hugo Boss AG........................................... 190,209 11,234,766
------------
Total Preferred Stock
(cost $15,150,493).................................... 19,438,574
------------
Total Long - Term Investment Securities
(cost $617,496,197)................................... 697,717,033
------------
REPURCHASE AGREEMENT -- 4.2%
Agreement with State Street Bank & Trust Co., bearing
interest at 4.68%, dated 08/31/07, to be repurchased
09/04/07 in the amount of $31,012,118 and
collateralized by Federal National Mtg. Assoc. Notes,
bearing interest at 6.00%, due 05/15/11 and having an
approximate value of $31,927,200
(cost $30,996,000).................................... $ 30,996,000 30,996,000
------------
TOTAL INVESTMENTS
(cost $648,492,197)(3)................................ 99.0% 728,713,033
Other assets less liabilities............................ 1.0% 7,130,489
------------ ------------
NET ASSETS -- 100.0% $735,843,522
============ ============
- --------
+ Non-income producing security
(1) A substantial number of the Portfolio's holdings were valued using the fair
value procedures at August 31, 2007. At August 31, 2007, the aggregate
value of these securities was $689,693,052 representing 93.7% of net
assets. See Note 2 regarding fair value pricing procedures for foreign
equity securities.
(2) Fair valued security; see Note 2
(3) See Note 5 for cost of investments on a tax basis.
See Notes to Financial Statements
40
VALIC Company II Large Cap Value Fund
PORTFOLIO PROFILE -- August 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Industry Allocation*
Oil Companies -- Integrated......................... 13.4%
Finance -- Investment Banker/Broker................. 8.9%
Banks -- Super Regional............................. 6.7%
Insurance -- Multi-line............................. 5.5%
Telephone -- Integrated............................. 5.2%
Diversified Manufacturing Operations................ 3.9%
Schools............................................. 3.3%
Electric -- Integrated.............................. 2.8%
Investment Management/Advisor Services.............. 2.5%
Retail -- Computer Equipment........................ 2.5%
Tobacco............................................. 2.5%
Machinery -- Farming................................ 2.3%
Medical -- Drugs.................................... 2.3%
Insurance -- Reinsurance............................ 2.2%
Retail -- Restaurants............................... 2.1%
Oil Refining & Marketing............................ 2.0%
Commercial Services -- Finance...................... 1.8%
Medical -- HMO...................................... 1.8%
Insurance -- Property/Casualty...................... 1.7%
Internet Security................................... 1.7%
Wireless Equipment.................................. 1.6%
Batteries/Battery Systems........................... 1.5%
Registered Investment Companies..................... 1.5%
Containers -- Paper/Plastic......................... 1.4%
Retail -- Apparel/Shoe.............................. 1.4%
Computers........................................... 1.3%
Insurance Brokers................................... 1.2%
Insurance -- Life/Health............................ 1.2%
Retail -- Auto Parts................................ 1.2%
Television.......................................... 1.1%
Medical -- Wholesale Drug Distribution.............. 1.0%
Toys................................................ 1.0%
Telecom Services.................................... 0.9%
Machinery -- Construction & Mining.................. 0.8%
Vitamins & Nutrition Products....................... 0.8%
Consumer Products -- Misc........................... 0.7%
Oil Field Machinery & Equipment..................... 0.7%
Retail -- Discount.................................. 0.7%
E-Commerce/Products................................. 0.6%
Physicians Practice Management...................... 0.6%
Coatings/Paint...................................... 0.5%
Real Estate Investment Trusts....................... 0.5%
Semiconductors Components -- Intergrated Circuits... 0.5%
Medical Products.................................... 0.4%
Retail -- Consumer Electronics...................... 0.4%
Savings & Loans/Thrifts............................. 0.3%
Food -- Misc........................................ 0.2%
Gas -- Distribution................................. 0.2%
Oil Companies -- Exploration & Production........... 0.2%
Transport -- Marine................................. 0.2%
Aerospace/Defense................................... 0.1%
----
99.8%
====
* Calculated as a percentage of net assets
41
VALIC Company II Large Cap Value Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007
- --------------------------------------------------------------------------------
Value
Security Description Shares (Note 2)
----------------------------------------------------------------
COMMON STOCK -- 98.3%
Aerospace/Defense -- 0.1%
Lockheed Martin Corp...................... 6,100 $ 604,754
-----------
Banks - Super Regional -- 6.7%
Bank of America Corp...................... 398,400 20,190,912
KeyCorp................................... 21,800 725,940
PNC Financial Services Group, Inc......... 19,600 1,379,252
Wachovia Corp............................. 40,800 1,998,384
Wells Fargo & Co.......................... 98,400 3,595,536
-----------
27,890,024
-----------
Batteries/Battery Systems -- 1.5%
Energizer Holdings, Inc.+................. 58,400 6,186,312
-----------
Coatings/Paint -- 0.5%
The Sherwin - Williams Co................. 30,400 2,097,904
-----------
Commercial Services - Finance -- 1.8%
Deluxe Corp............................... 195,800 7,444,316
-----------
Computers -- 1.3%
Apple, Inc.+.............................. 40,300 5,580,744
-----------
Consumer Products - Misc. -- 0.7%
Tupperware Brands Corp.................... 97,900 3,014,341
-----------
Containers - Paper/Plastic -- 1.4%
Pactiv Corp.+............................. 200,300 5,858,775
-----------
Diversified Manufacturing Operations -- 3.9%
3M Co..................................... 30,800 2,802,492
General Electric Co....................... 348,800 13,557,856
-----------
16,360,348
-----------
E - Commerce/Products -- 0.6%
NutriSystem, Inc.+........................ 47,400 2,570,502
-----------
Electric - Integrated -- 2.8%
CenterPoint Energy, Inc................... 128,300 2,081,026
FPL Group, Inc............................ 20,500 1,206,220
MDU Resources Group, Inc.................. 54,800 1,482,340
Southern Co............................... 191,200 6,785,688
-----------
11,555,274
-----------
Finance - Investment Banker/Broker -- 8.9%
Citigroup, Inc............................ 419,800 19,680,224
JPMorgan Chase & Co....................... 307,360 13,683,667
Morgan Stanley............................ 62,000 3,866,940
-----------
37,230,831
-----------
Food - Misc. -- 0.2%
H.J. Heinz Co............................. 20,300 915,327
Kraft Foods, Inc., Class A................ 1,107 35,490
-----------
950,817
-----------
Gas - Distribution -- 0.2%
Energen Corp.............................. 16,900 907,530
-----------
Insurance Broker -- 1.2%
AON Corp.................................. 115,100 4,986,132
-----------
Insurance - Life/Health -- 1.2%
CIGNA Corp................................ 99,900 5,162,832
-----------
Insurance - Multi-line -- 5.5%
ACE, Ltd.................................. 114,300 6,601,968
Allstate Corp............................. 76,800 4,204,800
MetLife, Inc.............................. 79,800 5,111,190
XL Capital, Ltd., Class A................. 92,100 7,018,020
-----------
22,935,978
-----------
Value
Security Description Shares (Note 2)
--------------------------------------------------------------------
Insurance - Property/Casualty -- 1.7%
Arch Capital Group, Ltd.+..................... 20,200 $ 1,450,966
Chubb Corp.................................... 110,800 5,665,204
-----------
7,116,170
-----------
Insurance - Reinsurance -- 2.2%
Axis Capital Holdings, Ltd.................... 40,900 1,476,490
PartnerRe, Ltd................................ 19,000 1,381,490
RenaissanceRe Holdings, Ltd................... 108,000 6,186,240
-----------
9,044,220
-----------
Internet Security -- 1.7%
McAfee, Inc.+................................. 195,000 6,971,250
-----------
Investment Management/Advisor Services -- 2.5%
Ameriprise Financial, Inc..................... 122,000 7,443,220
Franklin Resources, Inc....................... 21,700 2,859,409
-----------
10,302,629
-----------
Machinery - Construction & Mining -- 0.8%
Caterpillar, Inc.............................. 47,000 3,561,190
-----------
Machinery - Farming -- 2.3%
AGCO Corp.+................................... 220,400 9,521,280
-----------
Medical Products -- 0.4%
Zimmer Holdings, Inc.+........................ 20,700 1,621,431
-----------
Medical - Drugs -- 2.3%
Forest Laboratories, Inc.+.................... 98,600 3,710,318
King Pharmaceuticals, Inc.+................... 286,500 4,306,095
Pfizer, Inc................................... 61,100 1,517,724
Pharmerica Corp+.............................. 6,986 123,862
-----------
9,657,999
-----------
Medical - HMO -- 1.8%
Humana, Inc.+................................. 100,400 6,434,636
WellCare Health Plans, Inc.+.................. 12,500 1,233,750
-----------
7,668,386
-----------
Medical - Wholesale Drug Distribution -- 1.0%
AmerisourceBergen Corp........................ 83,800 4,009,830
-----------
Oil Companies - Exploration & Production -- 0.2%
XTO Energy, Inc............................... 16,100 875,196
-----------
Oil Companies - Integrated -- 13.4%
Chevron Corp.................................. 152,100 13,348,296
ConocoPhillips................................ 140,400 11,497,356
Exxon Mobil Corp.............................. 291,740 25,010,870
Marathon Oil Corp............................. 82,500 4,445,925
Occidental Petroleum Corp..................... 29,500 1,672,355
-----------
55,974,802
-----------
Oil Field Machinery & Equipment -- 0.7%
Dresser Rand Group, Inc.+..................... 81,900 3,019,653
-----------
Oil Refining & Marketing -- 2.0%
Frontier Oil Corp............................. 88,900 3,647,567
Tesoro Corp................................... 60,100 2,964,733
Western Refining, Inc......................... 33,800 1,752,192
-----------
8,364,492
-----------
Physicians Practice Management -- 0.6%
Pediatrix Medical Group, Inc.+................ 41,300 2,463,545
-----------
Real Estate Investment Trusts -- 0.5%
ProLogis...................................... 35,300 2,123,648
-----------
Retail - Apparel/Shoe -- 1.4%
Aeropostale, Inc.+............................ 283,200 5,862,240
-----------
42
VALIC Company II Large Cap Value Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Value
Security Description Shares (Note 2)
- -------------------------------------------------------------------------------
COMMON STOCK (continued)
Retail - Auto Parts -- 1.2%
AutoZone, Inc.+...................................... 43,100 $ 5,227,599
------------
Retail - Computer Equipment -- 2.5%
GameStop Corp.+...................................... 210,200 10,539,428
------------
Retail - Consumer Electronics -- 0.4%
RadioShack Corp...................................... 63,100 1,499,887
------------
Retail - Discount -- 0.7%
Big Lots, Inc.+...................................... 97,400 2,899,598
------------
Retail - Restaurants -- 2.1%
McDonald's Corp...................................... 176,300 8,682,775
------------
Savings & Loans/Thrifts -- 0.3%
Washington Mutual, Inc............................... 39,300 1,443,096
------------
Schools -- 3.3%
Apollo Group, Inc.+.................................. 55,300 3,244,451
DeVry, Inc........................................... 89,990 3,107,355
ITT Educational Services, Inc.+...................... 67,100 7,367,580
------------
13,719,386
------------
Semiconductors Components - Integrated Circuits -- 0.5%
Atmel Corp.+......................................... 396,300 2,100,390
------------
Telecom Services -- 0.9%
Embarq Corp.......................................... 63,500 3,963,670
------------
Telephone - Integrated -- 5.2%
AT&T, Inc............................................ 259,661 10,352,684
CenturyTel, Inc...................................... 70,200 3,368,196
Citizens Communications Co........................... 129,100 1,873,241
Verizon Communications, Inc.......................... 152,600 6,390,888
------------
21,985,009
------------
Television -- 1.1%
CBS Corp., Class B................................... 141,100 4,446,061
------------
Tobacco -- 2.5%
Loews Corp. -- Carolina Group........................ 69,900 5,320,788
Universal Corp....................................... 102,400 5,030,912
------------
10,351,700
------------
Toys -- 1.0%
Mattel, Inc.......................................... 192,000 4,152,960
------------
Transport - Marine -- 0.2%
Overseas Shipholding Group, Inc...................... 10,200 728,280
------------
Vitamins & Nutrition Products -- 0.8%
NBTY, Inc.+.......................................... 96,200 3,530,540
------------
Wireless Equipment -- 1.6%
Motorola, Inc........................................ 395,500 6,703,725
------------
Total Long - Term Investment Securities
(cost $392,552,575)................................. 411,469,479
------------
SHORT - TERM INVESTMENT SECURITIES -- 1.5%
Registered Investment Company -- 1.5%
American Advantage Money Market Fund
(cost $6,009,199)................................... 6,009,199 6,009,199
------------
TOTAL INVESTMENTS
(cost $398,561,774)(1).............................. 99.8% 417,478,678
Other assets less liabilities.......................... 0.2% 1,029,179
--------- ------------
NET ASSETS -- 100.0% $418,507,857
========= ============
- --------
+ Non-income producing security
(1)See Note 5 for cost of investments on a tax basis.
See Notes to Financial Statements
43
VALIC Company II Mid Cap Growth Fund
PORTFOLIO PROFILE -- August 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Industry Allocation*
Engineering/R&D Services............................ 3.9%
Retail -- Apparel/Shoe.............................. 3.6%
Electronic Components -- Semiconductors............. 3.4%
Containers -- Metal/Glass........................... 3.2%
Apparel Manufacturers............................... 3.0%
Oil Field Machinery & Equipment..................... 2.8%
Medical -- Drugs.................................... 2.6%
Metal Processors & Fabrication...................... 2.6%
Casino Services..................................... 2.4%
Repurchase Agreements............................... 2.4%
Oil Companies -- Exploration & Production........... 2.3%
Wireless Equipment.................................. 2.1%
Cellular Telecom.................................... 2.0%
Diversified Manufacturing Operations................ 2.0%
Computer Services................................... 1.9%
Oil & Gas Drilling.................................. 1.8%
Advertising Sales................................... 1.6%
Computers -- Memory Devices......................... 1.6%
Consumer Products -- Misc........................... 1.6%
Private Corrections................................. 1.5%
Telecommunication Equipment......................... 1.5%
Wire & Cable Products............................... 1.5%
Entertainment Software.............................. 1.4%
Finance -- Investment Banker/Broker................. 1.4%
Aerospace/Defense................................... 1.2%
Medical -- Biomedical/Gene.......................... 1.2%
Medical -- HMO...................................... 1.2%
Retail -- Drug Store................................ 1.2%
Retail -- Pet Food & Supplies....................... 1.2%
Rubber -- Tires..................................... 1.2%
Transactional Software.............................. 1.2%
Computers -- Integrated Systems..................... 1.1%
Diagnostic Equipment................................ 1.1%
E-Marketing/Info.................................... 1.1%
Physical Therapy/Rehabilation Centers............... 1.1%
Retail -- Sporting Goods............................ 1.1%
Semiconductor Equipment............................. 1.1%
Agricultural Chemicals.............................. 1.0%
Banks -- Fiduciary.................................. 1.0%
Consulting Services................................. 1.0%
Electronic Connectors............................... 1.0%
Pipelines........................................... 1.0%
Research & Development.............................. 1.0%
Telephone -- Integrated............................. 1.0%
X-Ray Equipment..................................... 1.0%
Applications Software............................... 0.9%
Data Processing/Management.......................... 0.9%
Electric -- Integrated.............................. 0.9%
Electronic Design Automation........................ 0.9%
Food -- Misc........................................ 0.9%
Machinery -- Construction & Mining.................. 0.9%
Pharmacy Services................................... 0.9%
Retail -- Restaurants............................... 0.9%
Steel -- Specialty.................................. 0.9%
Telecom Services.................................... 0.9%
Transport -- Services............................... 0.9%
Aerospace/Defense -- Equipment...................... 0.8%
Chemicals -- Diversified............................ 0.8%
E-Commerce/Services................................. 0.8%
Finance -- Mortgage Loan/Banker..................... 0.8%
Semiconductors Components -- Integrated Circuits.... 0.8%
Finance -- Other Services........................... 0.7%
Industrial Automated/Robotic........................ 0.7%
Medical Information Systems......................... 0.7%
Banks -- Commercial................................. 0.6%
Investment Companies................................ 0.6%
Respiratory Products................................ 0.6%
Retail -- Computer Equipment........................ 0.6%
Transport -- Marine................................. 0.6%
Medical Products.................................... 0.5%
Non -- Ferrous Metals............................... 0.5%
Real Estate Management/Services..................... 0.5%
Real Estate Operations & Development................ 0.5%
Schools............................................. 0.5%
Oil -- Field Services............................... 0.4%
Beverages -- Non-alcoholic.......................... 0.2%
----
99.2%
====
* Calculated as a percentage of net assets
44
VALIC Company II Mid Cap Growth Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007
- --------------------------------------------------------------------------------
Value
Security Description Shares (Note 2)
--------------------------------------------------------------------
COMMON STOCK -- 96.0%
Advertising Sales -- 1.6%
Clear Channel Outdoor Holdings, Inc., Class A+... 17,055 $ 432,856
Focus Media Holding, Ltd. ADR+................... 22,783 917,471
----------
1,350,327
----------
Aerospace/Defense -- 1.2%
Spirit Aerosystems Holdings, Inc., Class A+...... 28,989 1,036,357
----------
Aerospace/Defense - Equipment -- 0.8%
BE Aerospace, Inc.+.............................. 16,627 647,954
----------
Agricultural Chemicals -- 1.0%
Potash Corp. of Saskatchewan, Inc................ 9,650 854,604
----------
Apparel Manufacturers -- 3.0%
Coach, Inc.+..................................... 15,422 686,742
Hanesbrands, Inc.+............................... 38,955 1,167,092
Polo Ralph Lauren Corp........................... 8,803 664,978
----------
2,518,812
----------
Applications Software -- 0.9%
Citrix Systems, Inc.+............................ 21,716 789,377
----------
Banks - Commercial -- 0.6%
Signature Bank+.................................. 13,983 483,252
----------
Banks - Fiduciary -- 1.0%
Northern Trust Corp.............................. 13,561 833,459
----------
Beverages - Non-alcoholic -- 0.2%
Hansen Natural Corp.+............................ 3,970 178,293
----------
Casino Services -- 2.4%
International Game Technology.................... 22,196 847,221
Scientific Games Corp., Class A+................. 33,490 1,168,466
----------
2,015,687
----------
Cellular Telecom -- 2.0%
Leap Wireless International, Inc.+............... 4,342 314,795
NII Holdings, Inc.+.............................. 17,783 1,408,058
----------
1,722,853
----------
Chemicals - Diversified -- 0.8%
Wacker Chemie AG(2).............................. 3,217 702,936
----------
Computer Services -- 1.9%
Cognizant Technology Solutions Corp., Class A+... 11,134 818,461
IHS, Inc.+....................................... 16,394 827,405
----------
1,645,866
----------
Computers - Integrated Systems -- 1.1%
NCR Corp.+....................................... 9,918 493,619
Riverbed Technology, Inc.+....................... 9,791 434,720
----------
928,339
----------
Computers - Memory Devices -- 1.6%
Network Appliance, Inc.+......................... 17,887 498,332
SanDisk Corp.+................................... 14,806 830,024
----------
1,328,356
----------
Consulting Services -- 1.0%
Gartner, Inc.+................................... 36,857 814,908
----------
Consumer Products - Misc. -- 1.6%
Jarden Corp.+.................................... 40,119 1,315,502
----------
Containers - Metal/Glass -- 3.2%
Crown Holdings, Inc.+............................ 51,986 1,248,704
Owens - Illinois, Inc.+.......................... 37,201 1,496,224
----------
2,744,928
----------
Value
Security Description Shares (Note 2)
--------------------------------------------------------------------
Data Processing/Management -- 0.9%
Fidelity National Information Services, Inc...... 16,676 $ 790,442
----------
Diagnostic Equipment -- 1.1%
Gen - Probe, Inc.+............................... 14,369 919,903
----------
Diversified Manufacturing Operations -- 2.0%
Acuity Brands, Inc............................... 14,828 779,063
Cooper Industries, Ltd. Class A.................. 17,354 888,004
----------
1,667,067
----------
E - Commerce/Services -- 0.8%
Orbitz Worldwide, Inc.+.......................... 53,396 666,916
----------
E - Marketing/Info -- 1.1%
Digital River, Inc.+............................. 20,057 929,843
----------
Electric - Integrated -- 0.9%
Constellation Energy Group, Inc.................. 8,727 723,817
----------
Electronic Components - Semiconductors -- 3.4%
MEMC Electronic Materials, Inc.+................. 14,363 882,175
Nvidia Corp.+.................................... 19,153 979,868
ON Semiconductor Corp.+.......................... 86,125 1,009,385
----------
2,871,428
----------
Electronic Connectors -- 1.0%
Amphenol Corp., Class A.......................... 24,624 889,173
----------
Electronic Design Automation -- 0.9%
Cadence Design Systems, Inc.+.................... 35,771 776,946
----------
Engineering/R&D Services -- 3.9%
Foster Wheeler, Ltd.+............................ 14,240 1,686,586
McDermott International, Inc.+................... 17,253 1,656,115
----------
3,342,701
----------
Entertainment Software -- 1.4%
Electronic Arts, Inc.+........................... 7,930 419,814
THQ, Inc.+....................................... 27,324 786,658
----------
1,206,472
----------
Finance - Investment Banker/Broker -- 1.4%
FBR Capital Markets Corp.+....................... 24,268 323,492
MF Global, Ltd.+................................. 33,371 899,015
----------
1,222,507
----------
Finance - Other Services -- 0.7%
IntercontinentalExchange, Inc.+.................. 4,003 583,918
----------
Food - Misc. -- 0.9%
Corn Products International, Inc................. 17,148 775,090
----------
Industrial Automated/Robotic -- 0.7%
Intermec, Inc.+.................................. 25,833 634,200
----------
Investment Companies -- 0.6%
KKR Financial Holdings, LLC...................... 34,896 540,539
----------
Machinery - Construction & Mining -- 0.9%
Joy Global, Inc.................................. 16,835 730,471
----------
Medical Information Systems -- 0.7%
Allscripts Healthcare Solutions, Inc.+........... 25,000 565,250
----------
Medical Products -- 0.5%
Henry Schein, Inc.+.............................. 7,200 418,968
----------
Medical - Biomedical/Gene -- 1.2%
AMAG Pharmaceuticals, Inc.+...................... 9,000 491,850
Genzyme Corp.+................................... 8,400 524,244
----------
1,016,094
----------
45
VALIC Company II Mid Cap Growth Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Value
Security Description Shares (Note 2)
------------------------------------------------------------------
COMMON STOCK (continued)
Medical - Drugs -- 2.6%
Adams Respiratory Therapeutics, Inc.+......... 12,000 $ 462,720
Cephalon, Inc.+............................... 12,100 908,105
Shire PLC(2).................................. 32,500 848,780
----------
2,219,605
----------
Medical - HMO -- 1.2%
Humana, Inc.+................................. 15,600 999,804
----------
Metal Processors & Fabrication -- 2.6%
Kaydon Corp................................... 18,780 991,584
Precision Castparts Corp...................... 9,253 1,205,758
----------
2,197,342
----------
Non - Ferrous Metals -- 0.5%
Titanium Metals Corp.+........................ 13,530 424,166
----------
Oil & Gas Drilling -- 1.8%
ENSCO International, Inc...................... 19,707 1,068,514
Noble Corp.................................... 9,600 470,976
----------
1,539,490
----------
Oil Companies - Exploration & Production -- 2.3%
Carrizo Oil & Gas, Inc.+...................... 16,500 647,955
Pioneer Natural Resources Co.................. 9,943 408,160
Southwestern Energy Co.+...................... 24,700 918,593
----------
1,974,708
----------
Oil Field Machinery & Equipment -- 2.8%
Cameron International Corp.+.................. 12,521 1,023,842
National - Oilwell Varco, Inc.+............... 10,276 1,315,328
----------
2,339,170
----------
Oil - Field Services -- 0.4%
Hercules Offshore, Inc.+...................... 14,800 376,512
----------
Pharmacy Services -- 0.9%
Express Scripts, Inc.+........................ 13,200 722,700
----------
Physical Therapy/Rehabilation Centers -- 1.1%
Psychiatric Solutions, Inc.+.................. 25,400 936,244
----------
Pipelines -- 1.0%
Williams Cos., Inc............................ 26,000 806,000
----------
Private Corrections -- 1.5%
Corrections Corp. of America+................. 50,257 1,289,595
----------
Real Estate Management/Services -- 0.5%
CB Richard Ellis Group, Inc., Class A+........ 15,330 452,542
----------
Real Estate Operations & Development -- 0.5%
Meruelo Maddux Properties, Inc.+.............. 74,649 448,641
----------
Research & Development -- 1.0%
Pharmaceutical Product Development, Inc....... 25,033 876,906
----------
Respiratory Products -- 0.6%
ResMed, Inc.+................................. 11,700 475,722
----------
Retail - Apparel/Shoe -- 3.6%
Abercrombie & Fitch Co., Class A.............. 15,549 1,223,707
Aeropostale, Inc.+............................ 19,057 394,480
Ross Stores, Inc.............................. 25,787 717,652
Under Armour, Inc., Class A+.................. 10,526 684,295
----------
3,020,134
----------
Value
Security Description Shares (Note 2)
---------------------------------------------------------------------------
Retail - Computer Equipment -- 0.6%
GameStop Corp.+...................................... 9,712 $ 486,960
-----------
Retail - Drug Store -- 1.2%
Shoppers Drug Mart Corp.............................. 20,588 1,038,368
-----------
Retail - Pet Food & Supplies -- 1.2%
PetSmart, Inc........................................ 28,093 974,827
-----------
Retail - Restaurants -- 0.9%
Burger King Holdings, Inc............................ 33,328 790,207
-----------
Retail - Sporting Goods -- 1.1%
Dick's Sporting Goods, Inc.+......................... 13,965 906,329
-----------
Rubber - Tires -- 1.2%
The Goodyear Tire & Rubber Co.+...................... 35,676 986,798
-----------
School -- 0.5%
Apollo Group, Inc.+.................................. 7,014 411,511
-----------
Semiconductor Equipment -- 1.1%
FormFactor, Inc.+.................................... 9,695 439,765
KLA - Tencor Corp.................................... 8,860 509,184
-----------
948,949
-----------
Semiconductors Components - Integrated Circuits -- 0.8%
Maxim Integrated Products, Inc....................... 23,505 705,385
-----------
Steel - Specialty -- 0.9%
Allegheny Technologies, Inc.......................... 7,971 792,238
-----------
Telecom Services -- 0.9%
Amdocs, Ltd.+........................................ 22,741 802,757
-----------
Telecommunication Equipment -- 1.5%
CommScope, Inc.+..................................... 16,200 916,920
Comverse Technology, Inc.+........................... 22,536 377,478
-----------
1,294,398
-----------
Telephone - Integrated -- 1.0%
Level 3 Communications, Inc.+........................ 157,206 822,187
-----------
Transactional Software -- 1.2%
VeriFone Holdings, Inc.+............................. 27,014 998,437
-----------
Transport - Marine -- 0.6%
American Commercial Lines, Inc.+..................... 19,017 491,209
-----------
Transport - Services -- 0.9%
UTI Worldwide, Inc................................... 34,328 763,798
-----------
Wire & Cable Products -- 1.5%
General Cable Corp.+................................. 22,535 1,311,086
-----------
Wireless Equipment -- 2.1%
American Tower Corp., Class A+....................... 23,276 922,195
Crown Castle International Corp.+.................... 23,196 852,685
-----------
1,774,880
-----------
X - Ray Equipment -- 1.0%
Hologic, Inc.+....................................... 15,300 813,195
-----------
Total Common Stock
(cost $74,093,951).................................. 81,396,355
-----------
46
VALIC Company II Mid Cap Growth Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Shares/
Principal Value
Security Description Amount (Note 2)
- -----------------------------------------------------------------------------------
PREFERRED STOCK -- 0.8%
Finance - Mortgage Loan/Banker -- 0.8%
Thornburg Mortgage, Inc. 10.00%
(cost $675,000)......................................... 27,000 $ 708,750
-----------
Total Long - Term Investment Securities
(cost $74,768,951)...................................... 82,105,105
-----------
REPURCHASE AGREEMENT -- 2.4%
Agreement with State Street Bank & Trust Co., bearing
interest at 4.68%, dated 08/31/07, to be repurchased
09/04/07 in the amount of $2,018,048 and collateralized
by Federal Home Loan Bank Bonds, bearing interest at
3.75% due 08/15/08 and having approximate value of
$2,078,891
(cost $2,017,000)....................................... $2,017,000 2,017,000
-----------
TOTAL INVESTMENTS
(cost $76,785,951)(1)................................... 99.2% 84,122,105
Other assets less liabilities.............................. 0.8% 642,661
---------- -----------
NET ASSETS -- 100.0% $84,764,766
========== ===========
- --------
+ Non-income producing security
(1)See Note 5 for cost of investments on a tax basis.
(2)Security was valued using fair value procedures at August 31, 2007. See Note
2 regarding fair value pricing procedures for foreign equity securities.
ADR--American Depository Receipt
See Notes to Financial Statements
47
VALIC Company II Mid Cap Value Fund
PORTFOLIO PROFILE -- August 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Industry Allocation*
Electric -- Integrated.............................. 5.1%
Banks -- Commercial................................. 3.3%
Diversified Manufacturing Operations................ 3.1%
Chemicals -- Diversified............................ 2.6%
Containers -- Metal/Glass........................... 2.3%
Oil Companies -- Exploration & Production........... 2.3%
Aerospace/Defense -- Equipment...................... 2.2%
Real Estate Investment Trusts....................... 2.1%
Insurance -- Life/Health............................ 2.0%
Medical -- Generic Drugs............................ 2.0%
Telecom Services.................................... 2.0%
Financial Guarantee Insurance....................... 1.9%
Insurance -- Reinsurance............................ 1.9%
Advertising Services................................ 1.8%
Electronic Parts Distribution....................... 1.8%
Semiconductor Equipment............................. 1.8%
Auto/Truck Parts & Equipment -- Original............ 1.7%
Chemicals -- Specialty.............................. 1.7%
Airlines............................................ 1.6%
Investment Management/Advisor Services.............. 1.6%
Engineering/R&D Services............................ 1.5%
Finance -- Investment Banker/Broker................. 1.5%
Agricultural Operations............................. 1.4%
Electronic Components -- Semiconductors............. 1.4%
Food -- Meat Products............................... 1.4%
Computer Services................................... 1.3%
Medical -- Drugs.................................... 1.3%
Repurchase Agreements............................... 1.3%
Gas -- Distribution................................. 1.2%
Electronic Components -- Misc....................... 1.1%
Food -- Misc........................................ 1.1%
Multimedia.......................................... 1.1%
Coal................................................ 1.0%
Garden Products..................................... 1.0%
Machine Tools & Related Products.................... 1.0%
Time Deposits....................................... 1.0%
Building Products -- Air & Heating.................. 0.9%
Finance -- Commercial............................... 0.9%
Fisheries........................................... 0.9%
Retail -- Apparel/Shoe.............................. 0.9%
Therapeutics........................................ 0.9%
Transport -- Truck.................................. 0.9%
Agricultural Chemicals.............................. 0.8%
Distribution/Wholesale.............................. 0.8%
Home Decoration Products............................ 0.8%
Insurance -- Property/Casualty...................... 0.8%
Medical Information Systems......................... 0.8%
Telecom Equipment -- Fiber Optics................... 0.8%
Transport -- Equipment & Leasng..................... 0.8%
Transport -- Marine................................. 0.8%
Electronic Connectors............................... 0.7%
Industrial Gases.................................... 0.7%
Internet Security................................... 0.7%
Medical Products.................................... 0.7%
Metal -- Iron....................................... 0.7%
Printing -- Commercial.............................. 0.7%
Retail -- Automobile................................ 0.7%
Retail -- Restaurants............................... 0.7%
Building -- Residential/Commerical.................. 0.6%
Food -- Wholesale/Distribution...................... 0.6%
Non -- Hazardous Waste Disposal..................... 0.6%
Oil & Gas Drilling.................................. 0.6%
Rental Auto/Equipment............................... 0.6%
Retail -- Consumer Electronics...................... 0.6%
Retail -- Office Supplies........................... 0.6%
Telecommunication Equipment......................... 0.6%
Banks -- Fiduciary.................................. 0.5%
Banks -- Super Regional............................. 0.5%
Beverages -- Non-alcoholic.......................... 0.5%
Coatings/Paint...................................... 0.5%
Consulting Services................................. 0.5%
Machinery -- Farming................................ 0.5%
Metal -- Diversified................................ 0.5%
Paper & Related Products............................ 0.5%
Radio............................................... 0.5%
Semiconductors Components -- Intergrated Circuits... 0.5%
Appliances.......................................... 0.4%
Applications Software............................... 0.4%
Auto -- Cars/Light Trucks........................... 0.4%
Cable TV............................................ 0.4%
Computers -- Integrated Systems..................... 0.4%
Consumer Products -- Misc........................... 0.4%
Electronic Measurement Instruments.................. 0.4%
Energy -- Alternate Sources......................... 0.4%
Leisure Products.................................... 0.4%
Oil Field Machinery & Equipment..................... 0.4%
Oil Refining & Marketing............................ 0.4%
Commercial Services................................. 0.3%
Finance -- Other Services........................... 0.3%
Insurance Brokers................................... 0.3%
Machinery -- Construction & Mining.................. 0.3%
Medical -- HMO...................................... 0.3%
Medical -- Wholesale Drug Distribution.............. 0.3%
Oil Companies -- Integrated......................... 0.3%
Tools -- Hand Held.................................. 0.3%
Diversified Operations.............................. 0.2%
Investment Companies................................ 0.2%
Office Automation & Equipment....................... 0.2%
Oil -- Field Services............................... 0.2%
Publishing -- Newspapers............................ 0.2%
Telephone -- Integrated............................. 0.2%
Real Estate Operations & Development................ 0.1%
Sugar............................................... 0.1%
----
99.8%
====
* Calculated as a percentage of net assets
48
VALIC Company II Mid Cap Value Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007
- --------------------------------------------------------------------------------
Value
Security Description Shares (Note 2)
-------------------------------------------------------------------
COMMON STOCK -- 97.5%
Advertising Services -- 1.8%
R.H. Donnelley Corp.+........................ 158,325 $ 9,314,260
-----------
Aerospace/Defense - Equipment -- 2.2%
Alliant Techsystems, Inc.+................... 44,700 4,707,357
Goodrich Corp................................ 109,547 6,918,989
-----------
11,626,346
-----------
Agricultural Chemicals -- 0.8%
UAP Holding Corp............................. 133,200 3,984,012
-----------
Agricultural Operations -- 1.4%
Bunge, Ltd................................... 83,351 7,621,615
-----------
Airlines -- 1.6%
AirTran Holdings, Inc.+...................... 133,579 1,403,915
Northwest Airlines Corp.+.................... 184,200 3,422,436
UAL Corp.+................................... 78,000 3,702,660
-----------
8,529,011
-----------
Appliances -- 0.4%
Whirlpool Corp............................... 21,400 2,063,174
-----------
Applications Software -- 0.4%
Intuit, Inc.+................................ 82,123 2,242,779
-----------
Auto - Cars/Light Trucks -- 0.4%
Ford Motor Co.+.............................. 242,389 1,893,058
-----------
Auto/Truck Parts & Equipment - Original -- 1.7%
Autoliv, Inc................................. 32,067 1,839,684
BorgWarner, Inc.............................. 45,343 3,831,484
WABCO Holdings, Inc.......................... 70,067 3,171,232
-----------
8,842,400
-----------
Banks - Commercial -- 3.3%
City National Corp........................... 40,847 2,916,067
Commerce Bancorp, Inc........................ 140,200 5,149,546
M&T Bank Corp................................ 11,971 1,267,490
Marshall & Ilsley Corp....................... 70,160 3,066,694
UnionBanCal Corp............................. 27,108 1,593,408
Webster Financial Corp....................... 62,190 2,640,587
Zions Bancorp................................ 11,880 838,728
-----------
17,472,520
-----------
Banks - Fiduciary -- 0.5%
Northern Trust Corp.......................... 39,894 2,451,885
-----------
Banks - Super Regional -- 0.5%
KeyCorp...................................... 71,888 2,393,870
-----------
Beverages - Non-alcoholic -- 0.5%
Pepsi Bottling Group, Inc.................... 82,133 2,840,981
-----------
Building Products - Air & Heating -- 0.9%
American Standard Cos., Inc.................. 130,794 4,817,143
-----------
Building - Residential/Commercial -- 0.6%
Centex Corp.................................. 27,825 804,421
M.D.C, Holdings, Inc......................... 58,500 2,602,665
-----------
3,407,086
-----------
Cable TV -- 0.4%
Cablevision Systems Corp., Class A+.......... 61,400 2,059,970
-----------
Chemicals - Diversified -- 2.6%
Celanese Corp., Class A...................... 134,600 4,834,832
FMC Corp..................................... 52,500 4,725,000
Rohm & Haas Co............................... 68,758 3,887,577
-----------
13,447,409
-----------
Value
Security Description Shares (Note 2)
------------------------------------------------------------------------
Chemicals - Specialty -- 1.7%
Chemtura Corp...................................... 354,400 $ 3,264,024
Cytec Industries, Inc.............................. 87,456 5,807,078
-----------
9,071,102
-----------
Coal -- 1.0%
Arch Coal, Inc..................................... 112,102 3,305,888
Peabody Energy Corp................................ 40,180 1,708,052
-----------
5,013,940
-----------
Coatings/Paint -- 0.5%
The Sherwin-Williams Co............................ 34,468 2,378,637
-----------
Commercial Services -- 0.3%
AerCap Holdings NV+................................ 57,665 1,466,998
-----------
Computer Services -- 1.3%
CACI International, Inc., Class A+................. 120,200 6,132,604
Electronic Data Systems Corp....................... 41,153 941,992
-----------
7,074,596
-----------
Computers - Integrated Systems -- 0.4%
NCR Corp.+......................................... 44,000 2,189,880
-----------
Consulting Services -- 0.5%
BearingPoint, Inc.+................................ 434,900 2,552,863
-----------
Consumer Products - Misc. -- 0.4%
Fortune Brands, Inc................................ 23,550 1,956,770
-----------
Containers - Metal/Glass -- 2.3%
Owens - Illinois, Inc.+............................ 305,443 12,284,917
-----------
Distribution/Wholesale -- 0.8%
United Stationers, Inc.+........................... 70,446 4,157,723
-----------
Diversified Manufacturing Operations -- 3.1%
Carlisle Cos., Inc................................. 86,424 4,254,653
Crane Co........................................... 63,663 2,851,466
Eaton Corp......................................... 23,884 2,250,350
Ingersoll - Rand Co., Ltd., Class A................ 36,876 1,914,971
Pentair, Inc....................................... 76,200 2,829,306
Trinity Industries, Inc............................ 60,601 2,276,780
-----------
16,377,526
-----------
Diversified Operations -- 0.2%
Walter Industries, Inc............................. 38,200 965,696
-----------
Electric - Integrated -- 5.1%
Constellation Energy Group, Inc.................... 22,426 1,860,012
Edison International............................... 55,373 2,918,711
Northeast Utilities................................ 149,300 4,128,145
PG&E Corp.......................................... 63,585 2,829,532
PPL Corp........................................... 187,556 9,051,453
TECO Energy, Inc................................... 99,764 1,580,262
Wisconsin Energy Corp.............................. 102,136 4,525,646
-----------
26,893,761
-----------
Electronic Components - Misc. -- 1.1%
Flextronics International, Ltd.+................... 435,862 4,964,468
Kingboard Laminates Holdings, Ltd.(2).............. 732,500 653,465
-----------
5,617,933
-----------
Electronic Components - Semiconductors -- 1.4%
Fairchild Semiconductor International, Inc.+....... 403,611 7,571,742
-----------
Electronic Connectors -- 0.7%
Amphenol Corp., Class A............................ 95,763 3,458,002
-----------
49
VALIC Company II Mid Cap Value Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Value
Security Description Shares (Note 2)
- -----------------------------------------------------------------------------------
COMMON STOCK (continued)
Electronic Measurement Instruments -- 0.4%
Tektronix, Inc............................................. 72,247 $ 2,322,741
-----------
Electronic Parts Distribution -- 1.8%
Arrow Electronics, Inc.+................................... 194,792 8,173,473
Avnet, Inc.+............................................... 28,407 1,116,679
-----------
9,290,152
-----------
Energy - Alternate Sources -- 0.4%
Brasil Ecodiesel Industria e Comercio de Biocombustiveis e
Oleos Vegetais SA ADR*.................................... 183,700 1,201,178
Brasil Ecodiesel Industria e Comercio de Biocombustiveis e
Oleos Vegetais SA ADR..................................... 119,900 784,002
-----------
1,985,180
-----------
Engineering/R&D Services -- 1.5%
Shaw Group, Inc.+.......................................... 66,300 3,318,315
URS Corp.+................................................. 85,575 4,573,128
-----------
7,891,443
-----------
Finance - Commercial -- 0.9%
CIT Group, Inc............................................. 122,413 4,599,056
-----------
Finance - Investment Banker/Broker -- 1.5%
E*TRADE Financial Corp.+................................... 239,300 3,728,294
Lazard, Ltd................................................ 59,082 2,368,597
TD Ameritrade Holding Corp.+............................... 88,839 1,612,428
-----------
7,709,319
-----------
Finance - Other Services -- 0.3%
Solar Cayman, Ltd.(1)(4)................................... 120,200 1,798,192
-----------
Financial Guarantee Insurance -- 1.9%
Ambac Financial Group, Inc................................. 123,034 7,728,996
MBIA, Inc.................................................. 15,218 913,080
PMI Group, Inc............................................. 48,146 1,525,265
-----------
10,167,341
-----------
Fishery -- 0.9%
Marine Harvest+(2)......................................... 4,016,000 4,744,299
-----------
Food - Meat Products -- 1.4%
Smithfield Foods, Inc.+.................................... 86,801 2,840,997
Tyson Foods, Inc., Class A................................. 218,528 4,709,278
-----------
7,550,275
-----------
Food - Misc. -- 1.1%
ConAgra Foods, Inc......................................... 116,234 2,988,376
Corn Products International, Inc........................... 63,503 2,870,336
-----------
5,858,712
-----------
Food - Wholesale/Distribution -- 0.6%
SUPERVALU, Inc............................................. 70,447 2,969,341
-----------
Garden Products -- 1.0%
Toro Co.................................................... 90,200 5,335,330
-----------
Gas - Distribution -- 1.2%
Sempra Energy.............................................. 54,385 2,992,806
UGI Corp................................................... 125,616 3,209,489
-----------
6,202,295
-----------
Home Decoration Products -- 0.8%
Newell Rubbermaid, Inc..................................... 154,583 3,986,696
-----------
Industrial Gases -- 0.7%
Airgas, Inc................................................ 79,049 3,653,645
-----------
Insurance Broker -- 0.3%
AON Corp................................................... 38,519 1,668,643
-----------
Value
Security Description Shares (Note 2)
------------------------------------------------------------------
Insurance - Life/Health -- 2.0%
CIGNA Corp.................................. 18,389 $ 950,344
Reinsurance Group of America, Inc........... 87,495 4,751,853
StanCorp Financial Group, Inc............... 39,894 1,879,007
UnumProvident Corp.......................... 116,285 2,845,494
-----------
10,426,698
-----------
Insurance - Property/Casualty -- 0.8%
Arch Capital Group, Ltd.+................... 12,975 931,994
W.R. Berkley Corp........................... 109,869 3,283,985
-----------
4,215,979
-----------
Insurance - Reinsurance -- 1.9%
Everest Re Group, Ltd....................... 67,556 6,882,605
Platinum Underwriters Holdings, Ltd......... 84,155 2,918,496
-----------
9,801,101
-----------
Internet Security -- 0.7%
McAfee, Inc.+............................... 108,800 3,889,600
-----------
Investment Companies -- 0.2%
KKR Financial Holdings, LLC................. 80,104 1,240,811
-----------
Investment Management/Advisor Services -- 1.6%
Affiliated Managers Group, Inc.+............ 35,976 4,074,282
AllianceBernstein Holding LP................ 22,119 1,827,250
Invesco PLC ADR............................. 99,243 2,450,310
-----------
8,351,842
-----------
Leisure Products -- 0.4%
WMS Industries, Inc.+....................... 72,698 2,140,229
-----------
Machine Tools & Related Products -- 1.0%
Kennametal, Inc............................. 67,100 5,412,286
-----------
Machinery - Construction & Mining -- 0.3%
Joy Global, Inc............................. 34,132 1,480,988
-----------
Machinery - Farming -- 0.5%
AGCO Corp.+................................. 59,900 2,587,680
-----------
Medical Information Systems -- 0.8%
IMS Health, Inc............................. 134,800 4,035,912
-----------
Medical Products -- 0.7%
The Cooper Cos., Inc........................ 75,100 3,661,876
-----------
Medical - Drugs -- 1.3%
Endo Pharmaceuticals Holdings, Inc.+........ 199,900 6,372,812
King Pharmaceuticals, Inc.+................. 47,182 709,145
-----------
7,081,957
-----------
Medical - Generic Drugs -- 2.0%
Barr Pharmaceuticals, Inc.+................. 132,235 6,728,117
Impax Laboratories, Inc.+................... 374,015 3,908,457
-----------
10,636,574
-----------
Medical - HMO -- 0.3%
Coventry Health Care, Inc.+................. 15,852 909,429
Humana, Inc.+............................... 14,140 906,233
-----------
1,815,662
-----------
Medical - Wholesale Drug Distribution -- 0.3%
AmerisourceBergen Corp...................... 28,961 1,385,784
-----------
Metal - Diversified -- 0.5%
Freeport - McMoRan Copper & Gold, Inc....... 32,352 2,828,212
-----------
Metal - Iron -- 0.7%
Cleveland - Cliffs, Inc..................... 48,600 3,706,722
-----------
50
VALIC Company II Mid Cap Value Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Value
Security Description Shares (Note 2)
--------------------------------------------------------------------
COMMON STOCK (continued)
Multimedia -- 1.1%
Cinram International Income Fund.............. 308,067 $ 5,650,812
-----------
Non - Hazardous Waste Disposal -- 0.6%
Republic Services, Inc........................ 109,284 3,397,640
-----------
Office Automation & Equipment -- 0.2%
Xerox Corp.+.................................. 51,371 879,985
-----------
Oil & Gas Drilling -- 0.6%
GlobalSantaFe Corp............................ 45,285 3,196,668
-----------
Oil Companies - Exploration & Production -- 2.3%
Newfield Exploration Co.+..................... 119,928 5,215,669
Noble Energy, Inc............................. 110,819 6,656,897
-----------
11,872,566
-----------
Oil Companies - Integrated -- 0.3%
Hess Corp..................................... 29,463 1,808,144
-----------
Oil Field Machinery & Equipment -- 0.4%
National - Oilwell Varco, Inc.+............... 17,247 2,207,616
-----------
Oil Refining & Marketing -- 0.4%
Sunoco, Inc................................... 27,530 2,013,544
-----------
Oil - Field Services -- 0.2%
SBM Offshore NV(2)............................ 23,428 879,135
-----------
Paper & Related Products -- 0.5%
Smurfit - Stone Container Corp.+.............. 260,884 2,754,935
-----------
Printing - Commercial -- 0.7%
R.R. Donnelley & Sons Co...................... 99,137 3,551,087
-----------
Publishing - Newspapers -- 0.2%
Gannett Co., Inc.............................. 21,925 1,030,475
-----------
Radio -- 0.5%
Entercom Communications Corp., Class A........ 129,000 2,747,700
-----------
Real Estate Investment Trusts -- 2.1%
Boston Properties, Inc........................ 17,220 1,723,206
Camden Property Trust......................... 17,617 1,083,269
Developers Diversified Realty Corp............ 34,717 1,856,665
First Industrial Realty Trust, Inc............ 74,700 3,046,266
Liberty Property Trust........................ 6,400 249,984
ProLogis...................................... 22,500 1,353,600
Realty Income Corp............................ 33,404 901,908
Weingarten Realty Investors, Inc.............. 16,146 649,231
-----------
10,864,129
-----------
Real Estate Operations & Development -- 0.1%
Brookfield Properties Corp.................... 29,305 676,359
-----------
Rental Auto/Equipment -- 0.6%
Avis Budget Group, Inc.+...................... 138,000 3,202,980
-----------
Retail - Apparel/Shoe -- 0.9%
Foot Locker, Inc.............................. 125,573 2,098,325
The Gap, Inc.................................. 139,463 2,616,326
-----------
4,714,651
-----------
Retail - Automobile -- 0.7%
Copart, Inc.+................................. 123,100 3,611,754
-----------
Shares/
Principal Value
Security Description Amount (Note 2)
- -------------------------------------------------------------------------------
Retail - Consumer Electronics -- 0.6%
Circuit City Stores, Inc............................. 270,400 $ 2,941,952
------------
Retail - Office Supplies -- 0.6%
Office Depot, Inc.+.................................. 126,200 3,085,590
------------
Retail - Restaurants -- 0.7%
Ruby Tuesday, Inc.................................... 59,980 1,328,557
Yum! Brands, Inc..................................... 74,937 2,451,939
------------
3,780,496
------------
Semiconductor Equipment -- 1.8%
Varian Semiconductor Equipment Associates, Inc.+..... 165,350 9,198,421
------------
Semiconductors Components - Integrated Circuits -- 0.5%
Maxim Integrated Products, Inc....................... 84,932 2,548,809
------------
Sugar -- 0.1%
Cosan, Ltd. Class A.................................. 75,400 792,454
------------
Telecom Equipment - Fiber Optics -- 0.8%
JDS Uniphase Corp.+.................................. 272,400 3,966,144
------------
Telecom Services -- 2.0%
Embarq Corp.......................................... 63,200 3,944,944
Time Warner Telecom, Inc.+........................... 105,527 2,316,318
Virgin Media, Inc.................................... 174,700 4,157,860
------------
10,419,122
------------
Telecommunication Equipment -- 0.6%
Harris Corp.......................................... 47,867 2,911,750
------------
Telephone - Integrated -- 0.2%
Qwest Communications International, Inc.+............ 107,101 958,554
------------
Therapeutics -- 0.9%
Theravance, Inc.+.................................... 153,271 4,814,242
------------
Tools - Hand Held -- 0.3%
Stanley Works........................................ 31,368 1,779,820
------------
Transport - Equipment & Leasing -- 0.8%
Genesis Lease, Ltd. ADR.............................. 179,200 4,212,992
------------
Transport - Marine -- 0.8%
American Commercial Lines, Inc.+..................... 165,300 4,269,699
------------
Transport - Truck -- 0.9%
Con - way, Inc....................................... 47,061 2,281,517
Werner Enterprises, Inc.............................. 124,295 2,313,130
------------
4,594,647
------------
Total Long - Term Investment Securities
(cost $454,366,803)................................. 511,807,050
------------
SHORT - TERM INVESTMENT SECURITIES -- 1.0%
Time Deposit -- 1.0%
Euro Time Deposit with State Street Bank & Trust Co.
4.05% due 09/04/07
(cost $5,297,000)................................... $5,297,000 5,297,000
------------
51
VALIC Company II Mid Cap Value Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Shares/
Principal Value
Security Description Amount (Note 2)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.3%
Agreement with State Street Bank & Trust Co.,
bearing interest at 4.68%, dated 08/31/07, to be
repurchased 09/04/07 in the amount of $6,743,504
and collateralized by Federal National Mtg. Assoc.
Notes, bearing interest at 4.25% due 05/15/09
and having approximate value of $6,942,484
(cost $6,740,000).................................. $6,740,000 $ 6,740,000
------------
TOTAL INVESTMENTS
(cost $466,403,803)(3)............................. 99.8% 523,844,050
Other assets less liabilities......................... 0.2% 1,274,761
---------- ------------
NET ASSETS -- 100.0% $525,118,811
========== ============
- --------
+ Non-income producing security
* Securities exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from registration,
normally to qualified institutional buyers. The Fund has no right to demand
registration of these securities. At August 31, 2007, the aggregate value of
these securities was $1,201,178 representing 0.2% of net assets. Unless
otherwise indicated these securities are not considered to be illiquid.
(1)Consists of more than one type of securities traded together as a unit.
(2)Security was valued using fair value procedures at August 31, 2007. See Note
2 regarding fair value pricing procedures for foreign equity securities.
(3)See Note 5 for cost of investments on a tax basis.
(4)Fair valued security; see Note 2.
ADR--American Depository Receipt
See Notes to Financial Statements
52
VALIC Company II Moderate Growth Lifestyle Fund
PORTFOLIO PROFILE -- August 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Industry Allocation*
Domestic Equity Investment Companies... 59.1%
Fixed Income Investment Company........ 20.0
International Equity Investment Company 15.0
Registered Investment Company.......... 6.0
-----
100.1%
=====
* Calculated as a percentage of net assets
53
VALIC Company II Moderate Growth Lifestyle Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007
- --------------------------------------------------------------------------------
Value
Security Description Shares (Note 2)
-----------------------------------------------------------------------------
AFFILIATED REGISTERED INVESTMENT
COMPANIES#(1) -- 94.1%
Domestic Equity Investment Companies -- 59.1%
VALIC Co. I Stock Index Fund...................... 127,561 $ 4,907,274
VALIC Co. I Value Fund............................ 410,212 5,275,320
VALIC Co. II Capital Appreciation Fund............ 3,115,190 33,737,513
VALIC Co. II Large Cap Value Fund................. 1,371,792 21,592,005
VALIC Co. I Mid Cap Index Fund.................... 24,409 613,409
VALIC Co. II Mid Cap Value Fund................... 122,132 2,453,637
VALIC Co. II Small Cap Growth Fund+............... 176,824 2,579,855
VALIC Co. II Small Cap Value Fund................. 79,923 1,226,819
------------
Total Domestic Equity Investment Companies
(cost $66,728,113) 72,385,832
------------
Fixed Income Investment Company -- 20.0%
VALIC Co. II Core Bond Fund (cost $24,446,952).... 2,410,250 24,512,246
------------
International Equity Investment Company -- 15.0%
VALIC Co. I International Equities Fund+
(cost $17,295,398)................................ 1,669,899 18,402,285
------------
Total Long-Term Investment Securities
(cost $108,470,463).............................. 115,300,363
------------
SHORT-TERM INVESTMENT SECURITIES -- 6.0%
Registered Investment Company -- 6.0%
VALIC Co. I Money Market I Fund (cost $7,390,000). 7,390,000 7,390,000
------------
TOTAL INVESTMENTS
(cost $115,860,463)(2) 100.1% 122,690,363
Liabilities in excess of other assets............. (0.1) (139,074)
--------- ------------
NET ASSETS.......................................... 100.0% $122,551,289
========= ============
# The Moderate Growth Lifestyle Fund invests in various VALIC Company I or
VALIC Company II Funds, some of which are not presented in this report.
Additional information on the underlying funds is available at our website,
www.aigvalic.com.
+ Non-income producing security
(1)See Note 3
(2)See Note 5 for cost of investments on a tax basis.
See Notes to Financial Statements
54
VALIC Company II Money Market II Fund
PORTFOLIO PROFILE -- August 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Industry Allocation*
Repurchase Agreement............. 23.7%
Commercial Banks................. 15.3%
U.S. Government Securities....... 13.9%
Foreign Banks.................... 8.7%
Asset Backed/Receivables......... 7.6%
Finance.......................... 6.2%
Asset Backed/Securities.......... 5.4%
Asset Backed/Multi-Asset......... 3.6%
Investment Bank/Brokerage........ 3.6%
Money Center Banks............... 3.0%
Sovereign Agencies............... 2.7%
Asset Backed/Loans............... 1.9%
Asset Backed/CLOs................ 1.5%
Diversified Financial Services... 1.5%
Asset Backed/Finance............. 1.2%
Domestic Banks................... 1.1%
Regional Banks................... 0.9%
Super-Regional Banks............. 0.7%
-----
102.5%
=====
Weighted Average Days to Maturity 15.7
Credit Quality+#
A-1 100.0%
=====
* Calculated as a percentage of net assets.
+ Source: Standard and Poors
# Calculated as a percentage of total debt issues.
55
VALIC Company II Money Market II Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount (Note 2)
----------------------------------------------------------------
SHORT-TERM INVESTMENT SECURITIES -- 66.1%
Asset-Backed Commercial Paper -- 20.8%
Amstel Funding Corp.
5.20% due 11/21/07*................... $1,500,000 $ 1,482,450
Amstel Funding Corp.
5.26% due 09/20/07*................... 2,000,000 1,994,448
Amstel Funding Corp.
5.27% due 09/17/07*................... 1,279,000 1,276,004
Amstel Funding Corp.
5.31% due 09/25/07*................... 1,238,000 1,233,618
Apreco LLC
5.27% due 09/21/07*................... 2,500,000 2,492,688
Atlantis One Funding Corp.
5.26% due 09/27/07*................... 5,000,000 4,981,024
Barton Capital Corp.
5.25% due 09/07/07*................... 1,750,000 1,748,469
Barton Capital Corp.
5.26% due 09/10/07*................... 2,301,000 2,297,974
Cafco LLC
5.25% due 09/06/07*................... 3,450,000 3,447,484
Cafco LLC
5.27% due 09/12/07*................... 2,000,000 1,996,779
Cancara Asset Securitisation LLC
5.20% due 10/11/07*................... 3,000,000 2,982,667
Cancara Asset Securitisation LLC
5.33% due 10/29/07*................... 1,000,000 991,413
Chariot Funding LLC
5.25% due 09/18/07*................... 2,000,000 1,995,042
Ciesco LLC
5.25% due 09/25/07*................... 2,500,000 2,491,250
CRC Funding LLC
5.25% due 09/11/07*................... 3,000,000 2,995,625
CRC Funding LLC
5.25% due 09/13/07*................... 3,000,000 2,994,750
Dorada Finance, Inc.
5.24% due 09/05/07*................... 3,000,000 2,998,253
Edison Asset Securitization LLC
5.24% due 09/26/07*................... 1,079,000 1,075,074
Edison Asset Securitization LLC
5.25% due 10/01/07*................... 1,037,000 1,032,463
Fountain Square Commercial Funding
5.23% due 10/26/07*................... 3,000,000 2,976,029
Fountain Square Commercial Funding
5.25% due 10/02/07*................... 3,500,000 3,484,177
Galaxy Funding, Inc.
5.24% due 10/23/07*................... 4,000,000 3,969,724
Giro Funding US Corp
5.26% due 10/15/07*................... 3,000,000 2,980,713
Kitty Hawk Funding Corp.
5.25% due 09/28/07*................... 2,000,000 1,992,125
Old Line Funding LLC
5.25% due 09/04/07*................... 1,236,000 1,235,459
Park Avenue Receivables Corp.
5.25% due 10/12/07*................... 3,139,000 3,120,231
Sydney Capital Corp.
5.27% due 09/17/07*................... 1,383,000 1,379,764
White Pine Finance LLC
5.22% due 09/28/07*................... 2,823,000 2,811,948
White Pine Finance LLC
5.27% due 09/17/07*................... 2,374,000 2,368,440
Windmill Funding Corp.
5.25% due 10/03/07*................... 1,500,000 1,493,000
-----------
Total Asset-Backed Commercial Paper
(amortized cost $70,319,085).......... 70,319,085
-----------
Principal Value
Security Description Amount (Note 2)
--------------------------------------------------------
Certificates of Deposit -- 6.6%
BNP Paribas
5.29% due 11/05/07............ $2,000,000 $ 1,999,709
Calyon NY
5.31% due 09/26/07............ 1,000,000 999,986
Calyon NY
5.32% due 03/04/08............ 4,000,000 4,000,099
First Tennessee Bank
5.30% due 09/18/07............ 3,000,000 3,000,000
Fortis Bank NY
5.30% due 02/19/08............ 2,500,000 2,500,057
Fortis Bank NY
5.45% due 04/28/08............ 1,700,000 1,699,669
HBOS Treasury Services PLC
5.35% due 10/25/07............ 1,000,000 1,000,000
HBOS Treasury Services PLC
5.36% due 10/22/07............ 2,000,000 2,000,041
Royal Bank of Scotland PLC
5.37% due 06/06/08............ 2,000,000 2,000,803
Royal Bank of Scotland PLC
5.56% due 09/14/07............ 3,000,000 2,999,983
-----------
Total Certificates of Deposit
(amortized cost $22,200,347).. 22,200,347
-----------
Commercial Paper -- 17.3%
Bank of America Corp.
5.29% due 09/05/07............ 1,500,000 1,499,138
Bank of America Corp.
5.49% due 12/28/07(1)......... 1,000,000 1,000,046
Barclays Bank PLC
5.27% due 10/11/07............ 3,000,000 3,000,000
Citibank NA
5.32% due 09/20/07............ 2,000,000 2,000,000
Dexia Delaware LLC
5.21% due 09/21/07............ 1,400,000 1,395,948
Dexia Delaware LLC
5.28% due 09/06/07............ 2,000,000 1,998,533
General Electric Capital Corp.
5.15% due 10/16/07............ 3,500,000 3,477,469
General Electric Capital Corp.
5.20% due 11/01/07............ 1,057,000 1,047,687
General Electric Capital Corp.
5.24% due 10/04/07............ 1,500,000 1,492,795
General Electric Capital Corp.
5.59% due 04/11/08............ 2,500,000 2,501,126
HBOS Treasury Services PLC
5.31% due 10/16/07............ 1,240,000 1,239,871
HSBC Bank USA, Inc.
5.20% due 12/27/07............ 3,000,000 2,949,300
HSBC Bank USA, Inc.
5.43% due 09/21/07(2)......... 2,500,000 2,500,178
J.P. Morgan Chase & Co.
5.23% due 09/04/07............ 5,000,000 4,997,821
Merrill Lynch & Co., Inc.
5.16% due 10/17/07............ 2,000,000 1,986,813
Merrill Lynch & Co., Inc.
5.18% due 12/04/07............ 2,175,000 2,145,582
Merrill Lynch & Co., Inc.
5.49% due 08/22/08............ 3,000,000 3,000,000
Morgan Stanley
5.07% due 09/10/07(2)......... 3,000,000 3,000,000
Royal Bank of Canada
5.24% due 10/04/07............ 2,500,000 2,499,636
Royal Bank of Canada
5.28% due 04/04/08............ 1,500,000 1,499,821
56
VALIC Company II Money Market II Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount (Note 2)
-----------------------------------------------------------------------------
SHORT-TERM INVESTMENT SECURITIES (continued)
Commercial Paper (continued)
Sedna Finance, Inc.
5.25% due 10/30/07............................ $ 5,000,000 $ 4,956,979
Societe Generale
5.25% due 09/04/07............................ 1,158,000 1,157,493
Societe Generale
5.25% due 09/10/07............................ 2,000,000 1,997,375
Societe Generale
5.25% due 10/05/07............................ 2,000,000 1,990,083
UBS Finance LLC
5.23% due 09/14/07............................ 1,838,000 1,834,529
UBS Finance LLC
5.25% due 09/17/07............................ 1,200,000 1,197,200
------------
Total Commercial Paper
(amortized cost $58,365,423).................. 58,365,423
------------
Medium Term Notes -- 4.8%
Barclays Bank PLC
5.41% due 11/02/07*........................... 2,000,000 2,000,000
Cheyne Finance LLC
5.32% due 09/06/07*(1)(5)(6).................. 2,000,000 1,999,997
Cheyne Finance LLC
5.34% due 01/07/08*(1)(5)(6)(7)............... 2,000,000 2,000,000
Merrill Lynch & Co., Inc.
5.62% due 10/15/07(1)......................... 1,000,000 1,000,000
Morgan Stanley Dean Witter Co.
5.49% due 01/18/08(1)......................... 1,000,000 1,000,577
Sedna Finance, Inc.
5.32% due 01/11/08*(1)........................ 2,500,000 2,499,955
Sigma Finance, Inc.
5.32% due 09/18/07*(1)........................ 2,000,000 1,999,995
Wells Fargo & Co.
5.34% due 09/02/08(1)......................... 1,000,000 1,000,000
Wells Fargo & Co.
5.40% due 03/10/08(1)......................... 2,630,000 2,631,089
------------
Total Medium Term Notes
(amortized cost $16,131,613).................. 16,131,613
------------
U.S. Government Agencies -- 2.7%
Federal Home Loan Bank
4.89% due 09/18/07
(amortized cost $8,982,885)................... 9,000,000 8,982,885
------------
U.S. Government Treasuries -- 13.9%
United States Treasury Bills
2.86% due 09/20/07............................ 9,000,000 8,986,463
3.76% due 09/13/07............................ 4,000,000 3,995,000
4.01% due 09/20/07............................ 4,000,000 3,991,556
4.21% due 09/17/07............................ 18,000,000 17,966,400
4.24% due 09/06/07............................ 4,000,000 3,997,644
4.31% due 09/13/07............................ 4,000,000 3,994,267
4.31% due 09/20/07............................ 4,000,000 3,990,922
------------
Total U.S. Government Treasuries
(amortized cost $46,922,252).................. 46,922,252
------------
Total Short-Term Investment Securities -- 66.1%
(amortized cost $222,921,605)................. 222,921,605
------------
REPURCHASE AGREEMENTS -- 36.4%
State Street Bank & Trust Co. Joint Repurchase
Agreement(3).................................. 42,515,000 42,515,000
UBS Warburg, LLC Joint Repurchase Agreement(3). 80,000,000 80,000,000
------------
Total Repurchase Agreements -- 36.4%
(amortized cost $122,515,000)................. 122,515,000
------------
TOTAL INVESTMENTS
(amortized cost $345,436,605)(4).............. 102.5% 345,436,605
Liabilities in excess of other assets............ (2.5)% (8,386,853)
----------- ------------
NET ASSETS -- 100.0% $337,049,752
=========== ============
- --------
* Securities exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from registration,
normally to qualified institutional buyers. The Fund has no right to demand
registration of these securities. At August 31, 2007, the aggregate value of
these securities was $80,819,032 representing 24.0% of net assets. Unless
otherwise indicated these securities are not considered to be illiquid.
(1)Floating rate security where the rate fluctuates. The rate moves up or down
at each reset date. The rate reflected is as of August 31, 2007.
(2)Variable Rate Security -- the rate reflected is as of August 31, 2007,
maturity date reflects next reset date.
(3)See Note 2 for details of Joint Repurchase Agreements.
(4)See Note 5 for cost of investments on a tax basis.
(5)On August 28, 2007, mark to market losses experienced in the investment
portfolio of Cheyne Finance PLC ("Cheyne"), the issuer of the underlying
notes held by Cheyne Finance LLC, the issuer of the medium term notes (the
"Notes") held by the VALIC Company II Money Market II Fund, triggered the
appointment of receivers (Deloitte & Touche LLP) (collectively, the
"Receiver"). On October 17, 2007, the Receiver determined that Cheyne is, or
is about to become, unable to pay its debts as they fall due and that an
insolvency event occurred. On the same date, the Receiver stated that Cheyne
would stop paying its debts and would pool debts on a pari-passu basis,
i.e., treat such debts equally regardless of maturity, rather than following
what had been the Receiver's practice of paying debt as it matured. These
events, which are based on published reports, materially adversely affect
the ability of Cheyne Finance LLC to make interest and principal payments
due on the Notes. According to additional reports, as of October 22, 2007,
the Receiver is in the process of negotiating a refinancing of Cheyne or a
sale of its assets, however, there can be no assurance that such a
transaction will be consummated.
(6)Illiquid security
(7)Fair valued security. See Note 2.
See Notes to Financial Statements
57
VALIC Company II Small Cap Growth Fund
PORTFOLIO PROFILE -- August 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Industry Allocation*
Electronic Measurement Instruments.................. 5.9%
Electronic Components -- Semiconductors............. 5.7%
Retail -- Restaurants............................... 4.7%
Banks -- Commercial................................. 3.2%
Retail -- Sporting Goods............................ 3.0%
Applications Software............................... 2.9%
Semiconductors Components -- Intergrated Circuits... 2.9%
E-Services/Consulting............................... 2.8%
Hotels/Motels....................................... 2.8%
Oil -- Field Services............................... 2.8%
Medical -- Drugs.................................... 2.7%
Semiconductor Equipment............................. 2.7%
Networking Products................................. 2.6%
Real Estate Investment Trusts....................... 2.6%
Oil Companies -- Exploration & Production........... 2.5%
U.S. Government Treasuries.......................... 2.4%
Consulting Services................................. 2.3%
Racetracks.......................................... 1.9%
Medical -- Biomedical/Gene.......................... 1.8%
Commercial Services -- Finance...................... 1.7%
Research & Development.............................. 1.7%
Aerospace/Defense -- Equipment...................... 1.6%
Building & Construction Products -- Misc............ 1.6%
Schools............................................. 1.5%
Computers -- Integrated Systems..................... 1.4%
Telecommunication Equipment......................... 1.4%
Finance -- Investment Banker/Broker................. 1.3%
Medical Information Systems......................... 1.3%
Wireless Equipment.................................. 1.3%
Computers -- Memory Devices......................... 1.2%
Instruments -- Scientific........................... 1.2%
Internet Connectivity Services...................... 1.2%
Physical Therapy/Rehabilation Centers............... 1.2%
Chemicals -- Diversified............................ 1.1%
Medical Products.................................... 1.1%
Veterinary Diagnostics.............................. 1.1%
Motion Pictures & Services.......................... 1.0%
Retail -- Gardening Products........................ 1.0%
Auto/Truck Parts & Equipment -- Original............ 0.9%
Entertainment Software.............................. 0.9%
Machinery -- General Industrial..................... 0.9%
Storage/Warehousing................................. 0.9%
Therapeutics........................................ 0.9%
Web Portals/ISP..................................... 0.9%
Advertising Services................................ 0.8%
Airlines............................................ 0.8%
Auto -- Heavy Duty Trucks........................... 0.8%
Physicians Practice Management...................... 0.8%
Casino Services..................................... 0.7%
Chemicals -- Specialty.............................. 0.7%
Commercial Services................................. 0.7%
Diversified Financial Services...................... 0.7%
Drug Delivery Systems............................... 0.7%
Medical Instruments................................. 0.7%
Computer Software................................... 0.6%
Appliances.......................................... 0.5%
Investment Companies................................ 0.5%
Machinery -- Pumps.................................. 0.5%
Medical -- Generic Drugs............................ 0.5%
Non -- Ferrous Metals............................... 0.4%
Savings & Loans/Thrifts............................. 0.4%
Internet Security................................... 0.3%
Retail -- Apparel/Shoe.............................. 0.2%
----
99.8%
====
* Calculated as a percentage of net assets
58
VALIC Company II Small Cap Growth Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007
- --------------------------------------------------------------------------------
Value
Security Description Shares (Note 2)
------------------------------------------------------------------
COMMON STOCK -- 97.4%
Advertising Services -- 0.8%
Marchex, Inc., Class B........................ 50,800 $ 463,296
----------
Aerospace/Defense - Equipment -- 1.6%
ARGON ST, Inc.+............................... 10,440 188,651
Orbital Sciences Corp.+....................... 31,600 693,936
----------
882,587
----------
Airlines -- 0.8%
Allegiant Travel Co.+......................... 14,900 432,100
----------
Appliances -- 0.5%
Hhgregg, Inc.+................................ 21,400 274,990
----------
Applications Software -- 2.9%
Nuance Communications, Inc.+.................. 37,598 706,842
Quest Software, Inc.+......................... 50,400 733,824
SourceForge, Inc.+............................ 72,300 185,088
----------
1,625,754
----------
Auto - Heavy Duty Trucks -- 0.8%
Force Protection, Inc.+(1).................... 28,100 484,163
----------
Auto/Truck Parts & Equipment - Original -- 0.9%
Tenneco, Inc.+................................ 15,482 491,553
----------
Banks - Commercial -- 3.2%
East West Bancorp, Inc........................ 10,600 379,480
Hancock Holding Co............................ 7,300 292,000
Signature Bank+............................... 11,700 404,352
UCBH Holdings, Inc............................ 20,400 339,048
Whitney Holding Corp.......................... 14,300 396,110
----------
1,810,990
----------
Building & Construction Products - Misc. -- 1.6%
Drew Industries, Inc.+........................ 22,900 899,283
----------
Casino Services -- 0.7%
Shuffle Master, Inc.+......................... 28,400 421,172
----------
Chemicals - Diversified -- 1.1%
FMC Corp...................................... 6,700 603,000
----------
Chemicals - Specialty -- 0.7%
Minerals Technologies, Inc.................... 5,900 388,869
----------
Commercial Services -- 0.7%
CoStar Group, Inc.+........................... 7,500 412,725
----------
Commercial Services - Finance -- 1.7%
Clayton Holdings, Inc.+....................... 50,700 430,950
Heartland Payment Systems, Inc................ 17,400 518,172
----------
949,122
----------
Computer Software -- 0.6%
Omniture, Inc.+............................... 12,900 320,049
----------
Computers - Integrated Systems -- 1.4%
MICROS Systems, Inc.+......................... 10,600 639,604
Super Micro Computer, Inc.+................... 20,600 171,804
----------
811,408
----------
Computers - Memory Devices -- 1.2%
Voltaire Ltd+................................. 27,300 193,284
Xyratex, Ltd.+................................ 22,200 462,204
----------
655,488
----------
Consulting Services -- 2.3%
BearingPoint, Inc.+........................... 65,200 382,724
Huron Consulting Group, Inc.+................. 9,700 640,685
LECG Corp.+................................... 17,000 260,780
----------
1,284,189
----------
Value
Security Description Shares (Note 2)
-----------------------------------------------------------------
Diversified Financial Services -- 0.7%
Newstar Financial, Inc.+.................... 34,500 $ 398,820
----------
Drug Delivery Systems -- 0.7%
Penwest Pharmaceuticals Co.+................ 33,600 414,960
----------
E-Services/Consulting -- 2.8%
RightNow Technologies, Inc.+................ 40,800 597,720
Sapient Corp.+.............................. 154,900 997,556
----------
1,595,276
----------
Electronic Components - Semiconductors -- 5.7%
Microsemi Corp.+............................ 42,500 1,077,800
Microtune, Inc.+............................ 64,020 380,919
Netlogic Microsystems, Inc.+................ 30,300 888,699
Silicon Laboratories, Inc.+................. 23,400 863,928
----------
3,211,346
----------
Electronic Measurement Instruments -- 5.9%
FLIR Systems, Inc.+......................... 21,700 1,068,508
National Instruments Corp................... 19,900 628,243
Tektronix, Inc.............................. 21,400 688,010
Trimble Navigation, Ltd.+................... 27,100 956,901
----------
3,341,662
----------
Entertainment Software -- 0.9%
THQ, Inc.+.................................. 17,300 498,067
----------
Finance - Investment Banker/Broker -- 1.3%
optionsXpress Holdings, Inc................. 31,300 736,176
----------
Hotels/Motels -- 2.8%
Gaylord Entertainment Co.+.................. 8,400 431,340
Orient-Express Hotels, Ltd.................. 19,400 970,970
Red Lion Hotels Corp.+...................... 18,000 169,740
----------
1,572,050
----------
Instruments - Scientific -- 1.2%
Varian, Inc.+............................... 11,300 678,226
----------
Internet Connectivity Services -- 1.2%
Internap Network Services Corp.+............ 49,900 700,097
----------
Internet Security -- 0.3%
Entrust, Inc.+.............................. 77,200 169,840
----------
Investment Companies -- 0.5%
Kohlberg Capital Corp....................... 17,700 270,633
----------
Machinery - General Industrial -- 0.9%
The Manitowoc Co., Inc...................... 6,600 524,634
----------
Machinery - Pumps -- 0.5%
Flowserve Corp.............................. 4,200 299,922
----------
Medical Information Systems -- 1.3%
Allscripts Healthcare Solutions, Inc.+...... 32,000 723,520
----------
Medical Instruments -- 0.7%
Dexcom, Inc.+............................... 41,800 384,560
----------
Medical Products -- 1.1%
American Medical Systems Holdings, Inc.+.... 33,600 618,240
----------
Medical - Biomedical/Gene -- 1.8%
Keryx Biopharmaceuticals, Inc.+............. 26,200 263,572
Myriad Genetics, Inc.+...................... 15,900 698,964
Panacos Pharmaceuticals, Inc.+.............. 11,600 33,524
----------
996,060
----------
Medical - Drugs -- 2.7%
Adams Respiratory Therapeutics, Inc.+....... 18,500 713,360
Angiotech Pharmaceuticals, Inc.+............ 86,800 510,384
59
VALIC Company II Small Cap Growth Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Value
Security Description Shares (Note 2)
------------------------------------------------------------------
COMMON STOCK (continued)
Medical - Drugs (continued)
Cadence Pharmaceuticals, Inc.+................ 20,206 $ 290,158
----------
1,513,902
----------
Medical - Generic Drugs -- 0.5%
Impax Laboratories, Inc.+..................... 28,600 298,870
----------
Motion Pictures & Services -- 1.0%
Lions Gate Entertainment Corp.+............... 58,000 551,000
----------
Networking Products -- 2.6%
Atheros Communications, Inc.+................. 23,800 711,858
Ixia+......................................... 80,900 736,190
----------
1,448,048
----------
Non - Ferrous Metals -- 0.4%
RTI International Metals, Inc.+............... 3,400 237,048
----------
Oil Companies - Exploration & Production -- 2.5%
Bill Barrett Corp.+........................... 23,900 842,236
Mariner Energy, Inc.+......................... 27,200 570,384
----------
1,412,620
----------
Oil - Field Services -- 2.8%
Helix Energy Solutions Group, Inc.+........... 21,900 841,617
Superior Energy Services, Inc.+............... 19,100 741,462
----------
1,583,079
----------
Physical Therapy/Rehabilation Centers -- 1.2%
Psychiatric Solutions, Inc.+.................. 18,100 667,166
----------
Physicians Practice Management -- 0.8%
Healthways, Inc.+............................. 9,400 468,120
----------
Racetrack -- 1.9%
Penn National Gaming, Inc.+................... 18,200 1,070,160
----------
Real Estate Investment Trusts -- 2.6%
FelCor Lodging Trust, Inc..................... 33,500 734,990
LaSalle Hotel Properties...................... 11,000 458,040
RAIT Investment Trust......................... 35,000 309,750
----------
1,502,780
----------
Research & Development -- 1.7%
Parexel International Corp.+.................. 23,000 989,230
----------
Retail - Apparel/Shoe -- 0.2%
Lululemon Athletica, Inc.+.................... 4,200 143,094
----------
Retail - Gardening Products -- 1.0%
Tractor Supply Co.+........................... 11,700 563,472
----------
Retail - Restaurants -- 4.7%
BJ's Restaurants, Inc.+....................... 19,000 430,350
Chipotle Mexican Grill, Inc., Class B+........ 11,100 1,042,179
Panera Bread Co., Class A+.................... 16,700 730,458
Ruth's Chris Steak House, Inc.+............... 28,500 473,670
----------
2,676,657
----------
Retail - Sporting Goods -- 3.0%
Big 5 Sporting Goods Corp.+................... 18,600 386,880
Hibbett Sports, Inc.+......................... 21,800 543,692
Zumiez, Inc.+................................. 16,300 791,039
----------
1,721,611
----------
Shares/
Principal Value
Security Description Amounts (Note 2)
- -------------------------------------------------------------------------------
Savings & Loans/Thrifts -- 0.4%
BankUnited Financial Corp. Class A................... 13,800 $ 235,980
-----------
Schools -- 1.5%
Strayer Education, Inc............................... 3,200 510,656
Universal Technical Institute, Inc.+................. 17,900 322,558
-----------
833,214
-----------
Semiconductor Equipment -- 2.7%
FormFactor, Inc.+.................................... 15,800 716,688
Varian Semiconductor Equipment Associates, Inc.+..... 15,025 835,841
-----------
1,552,529
-----------
Semiconductors Components - Integrated Circuits -- 2.9%
Hitte Microwave Corp.+............................... 9,900 419,463
Power Integrations, Inc.+............................ 44,600 1,248,354
-----------
1,667,817
-----------
Storage/Warehousing -- 0.9%
Mobile Mini, Inc.+................................... 20,900 505,989
-----------
Telecommunication Equipment -- 1.4%
Arris Group, Inc.+................................... 35,700 541,926
OpNext, Inc.+........................................ 23,400 281,034
-----------
822,960
-----------
Therapeutics -- 0.9%
Mannkind Corp.+...................................... 25,800 228,846
The Medicines Co.+................................... 18,600 310,620
-----------
539,466
-----------
Veterinary Diagnostics -- 1.1%
VCA Antech, Inc.+.................................... 15,300 625,617
-----------
Web Portals/ISP -- 0.9%
Trizetto Group, Inc.+................................ 32,200 503,286
-----------
Wireless Equipment -- 1.3%
ViaSat, Inc.+........................................ 24,400 744,688
-----------
Total Long - Term Investment Securities
(cost $49,573,245).................................. 55,223,230
-----------
SHORT - TERM INVESTMENT SECURITIES -- 2.4%
U.S. Government Agencies -- 2.4%
Freddie Mac Disc. Notes 4.30%, due 09/04/07
(cost $1,336,521)................................... $1,337,000 1,336,521
-----------
TOTAL INVESTMENTS
(cost $50,909,766)(2)............................... 99.8% 56,559,751
Other assets less liabilities.......................... 0.2% 118,400
---------- -----------
NET ASSETS -- 100.0% $56,678,151
========== ===========
- --------
+ Non-income producing security
(1)Illiquid security
(2)See Note 5 for cost of investments on a tax basis.
See Notes to Financial Statements
60
VALIC Company II Small Cap Value Fund
PORTFOLIO PROFILE -- August 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Industry Allocation*
Banks -- Commercial.............................. 10.5%
Real Estate Investment Trusts.................... 8.3%
Repurchase Agreements............................ 3.8%
Electric -- Integrated........................... 2.9%
Insurance -- Life/Health......................... 2.4%
Commercial Services -- Finance................... 2.2%
Chemicals -- Specialty........................... 2.0%
Gas -- Distribution.............................. 1.7%
Savings & Loans/Thrifts.......................... 1.7%
Diversified Manufacturing Operations............. 1.6%
Consumer Products -- Misc........................ 1.5%
Data Processing/Management....................... 1.4%
Insurance -- Property/Casualty................... 1.4%
Machinery -- General Industrial.................. 1.3%
Insurance -- Reinsurance......................... 1.2%
Oil Companies -- Exploration & Production........ 1.2%
Paper & Related Products......................... 1.2%
Retail -- Discount............................... 1.2%
Steel -- Producers............................... 1.2%
Transport -- Services............................ 1.2%
Enterprise Software/Service...................... 1.1%
Toys............................................. 1.0%
Airlines......................................... 0.9%
Applications Software............................ 0.9%
Auto/Truck Parts & Equipment -- Original......... 0.9%
Electronic Components -- Misc.................... 0.9%
Electronic Components -- Semiconductors.......... 0.9%
Engineering/R&D Services......................... 0.9%
Finance -- Consumer Loans........................ 0.9%
Insurance -- Multi-line.......................... 0.9%
Metal -- Iron.................................... 0.9%
Miscellaneous Manufacturing...................... 0.9%
Office Furnishings -- Original................... 0.9%
Oil -- Field Services............................ 0.9%
Retail -- Apparel/Shoe........................... 0.9%
Semiconductors Components -- Intergrated Circuits 0.9%
Aerospace/Defense -- Equipment................... 0.8%
Machinery -- Farming............................. 0.8%
Medical -- Biomedical/Gene....................... 0.8%
Semiconductor Equipment.......................... 0.8%
Agricultural Chemicals........................... 0.7%
Cellular Telecom................................. 0.7%
Computers -- Periphery Equipment................. 0.7%
Distribution/Wholesale........................... 0.7%
Finance -- Auto Loans............................ 0.7%
Food -- Wholesale/Distribution................... 0.7%
Human Resources.................................. 0.7%
Medical Products................................. 0.7%
Medical -- HMO................................... 0.7%
Medical -- Outpatient/Home Medical............... 0.7%
Retail -- Computer Equipment..................... 0.7%
Telecommunication Equipment...................... 0.7%
Telephone -- Integrated.......................... 0.7%
Apparel Manufacturers............................ 0.6%
Chemicals -- Diversified......................... 0.6%
Computer Aided Design............................ 0.6%
Containers -- Metal/Glass........................ 0.6%
Finance -- Investment Banker/Broker.............. 0.6%
Finance -- Mortgage Loan/Banker.................. 0.6%
Lasers -- System/Components...................... 0.6%
Medical Sterilization Products................... 0.6%
Publishing -- Books................... 0.6%
Retail -- Restaurants................. 0.6%
Tobacco............................... 0.6%
Auto Repair Centers................... 0.5%
Building -- Heavy Construction........ 0.5%
Circuit Boards........................ 0.5%
Oil & Gas Drilling.................... 0.5%
Oil Refining & Marketing.............. 0.5%
Retail -- Auto Parts.................. 0.5%
Vitamins & Nutrition Products......... 0.5%
Web Portals/ISP....................... 0.5%
Computer Services..................... 0.4%
Diagnostic Kits....................... 0.4%
Electronic Design Automation.......... 0.4%
Investment Management/Advisor Services 0.4%
Medical -- Drugs...................... 0.4%
Multimedia............................ 0.4%
Networking Products................... 0.4%
Physicians Practice Management........ 0.4%
Retail -- Bookstore................... 0.4%
Rubber/Plastic Products............... 0.4%
Transport -- Marine................... 0.4%
Chemicals -- Plastics................. 0.3%
Computers -- Memory Devices........... 0.3%
Finance -- Leasing Companies.......... 0.3%
Industrial Automated/Robotic.......... 0.3%
Internet Security..................... 0.3%
Medical -- Nursing Homes.............. 0.3%
Metal Processors & Fabrication........ 0.3%
Non -- Ferrous Metals................. 0.3%
Office Supplies & Forms............... 0.3%
Radio................................. 0.3%
Steel Pipe & Tube..................... 0.3%
Transport -- Truck.................... 0.3%
Capacitors............................ 0.2%
Commercial Services................... 0.2%
Computers -- Integrated Systems....... 0.2%
Containers -- Paper/Plastic........... 0.2%
Food -- Misc.......................... 0.2%
Funeral Services & Related Items...... 0.2%
Machinery -- Material Handling........ 0.2%
Medical Instruments................... 0.2%
Medical -- Generic Drugs.............. 0.2%
Music................................. 0.2%
Retail -- Convenience Store........... 0.2%
Television............................ 0.2%
Therapeutics.......................... 0.2%
Transport -- Air Freight.............. 0.2%
United States Treasury Bonds.......... 0.2%
Building Products -- Light Fixtures... 0.1%
Decision Support Software............. 0.1%
Energy -- Alternate Sources........... 0.1%
Footwear & Related Apparel............ 0.1%
Insurance Brokers..................... 0.1%
Optical Supplies...................... 0.1%
Retail -- Major Department Stores..... 0.1%
Retail -- Office Supplies............. 0.1%
Telecom Services...................... 0.1%
Wire & Cable Products................. 0.1%
----
99.5%
====
* Calculated as a percentage of net assets
61
VALIC Company II Small Cap Value Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007
- --------------------------------------------------------------------------------
Value
Security Description Shares (Note 2)
------------------------------------------------------------------
COMMON STOCK -- 95.5%
Aerospace/Defense - Equipment -- 0.8%
Orbital Sciences Corp.+...................... 98,500 $2,163,060
----------
Agricultural Chemicals -- 0.7%
CF Industries Holdings, Inc.................. 29,600 1,874,568
----------
Airlines -- 0.9%
Continental Airlines, Inc., Class B+......... 62,200 2,068,772
ExpressJet Holdings, Inc.+................... 67,000 292,120
----------
2,360,892
----------
Apparel Manufacturer -- 0.6%
Kellwood Co.................................. 77,700 1,530,690
----------
Applications Software -- 0.9%
EPIQ Systems, Inc.+.......................... 130,300 2,114,769
Progress Software Corp.+..................... 8,300 253,316
----------
2,368,085
----------
Auto Repair Center -- 0.5%
Midas, Inc.+................................. 61,200 1,241,136
----------
Auto/Truck Parts & Equipment - Original -- 0.9%
Accuride Corp.+.............................. 5,500 71,335
ArvinMeritor, Inc............................ 66,800 1,165,660
Modine Manufacturing Co...................... 26,200 734,910
Visteon Corp.+............................... 45,000 242,100
----------
2,214,005
----------
Banks - Commercial -- 10.5%
1st Source Corp.............................. 21,930 515,574
AMCORE Financial, Inc........................ 10,000 267,800
Bancfirst Corp............................... 15,000 676,350
Bank of Hawaii Corp.......................... 49,000 2,519,090
City Holding Co.............................. 34,600 1,279,508
Commerce Bancshares, Inc..................... 41,363 1,931,652
Community Bank Systems, Inc.................. 26,900 540,959
Community Trust Bancorp, Inc................. 22,600 723,426
Corus Bankshares, Inc........................ 28,400 379,424
Cullen/Frost Bankers, Inc.................... 10,200 526,116
First BanCorp Puerto Rico.................... 48,600 488,430
First Citizens BancShares, Inc., Class A..... 600 106,350
First Community Bancshares, Inc.............. 7,500 248,625
First Financial Bankshares, Inc.............. 1,700 71,910
First Indiana Corp........................... 7,950 245,814
First Regional Bancorp+...................... 6,700 157,450
First State Bancorp.......................... 8,500 164,135
FirstMerit Corp.............................. 77,000 1,487,640
FNB Corp..................................... 4,600 144,900
Fulton Financial Corp........................ 1,399 20,565
Great Southern Bancorp, Inc.................. 5,100 137,700
Greater Bay Bancorp.......................... 119,100 3,352,665
Heartland Financial USA, Inc................. 14,300 290,433
Horizon Financial Corp....................... 3,400 70,584
Lakeland Bancorp, Inc........................ 20,240 260,084
Lakeland Financial Corp...................... 7,000 163,030
MB Financial, Inc............................ 12,500 440,125
Mercantile Bank Corp......................... 8,142 182,707
Old National Bancorp......................... 7,800 123,864
Old Second Bancorp, Inc...................... 4,100 121,934
Pacific Capital Bancorp...................... 20,700 522,054
Provident Bankshares Corp.................... 23,800 735,420
Santander Bancorp............................ 1,400 16,800
SCBT Financial Corp.......................... 1,660 59,196
Simmons First National Corp., Class A........ 19,600 532,728
Southwest Bancorp, Inc....................... 8,800 187,792
Suffolk Bancorp.............................. 1,000 31,620
Taylor Capital Group, Inc.................... 8,000 239,520
Value
Security Description Shares (Note 2)
--------------------------------------------------------------
Banks - Commercial (continued)
TCF Financial Corp...................... 43,800 $ 1,106,826
Tompkins Trustco, Inc................... 6,180 238,548
UMB Financial Corp...................... 71,400 3,163,020
Umpqua Holding Corp..................... 18,500 401,450
W Holding Co., Inc...................... 68,800 160,992
Washington Trust Bancorp, Inc........... 28,800 747,072
Westamerica Bancorp..................... 9,300 451,515
Whitney Holding Corp.................... 39,750 1,101,075
-----------
27,334,472
-----------
Building Products - Light Fixtures -- 0.1%
LSI Industries, Inc..................... 14,500 294,060
-----------
Building - Heavy Construction -- 0.5%
Washington Group International, Inc.+... 16,100 1,363,670
-----------
Building - Residential/Commerical -- 0.0%
Amrep Corp.............................. 2,900 97,440
-----------
Capacitors -- 0.2%
KEMET Corp.+............................ 57,800 398,820
-----------
Cellular Telecom -- 0.7%
Dobson Communications Corp., Class A+... 139,700 1,764,411
-----------
Chemicals - Diversified -- 0.6%
Georgia Gulf Corp....................... 33,100 495,507
Pioneer Cos., Inc.+..................... 30,300 1,060,803
-----------
1,556,310
-----------
Chemicals - Plastics -- 0.3%
Spartech Corp........................... 32,800 710,448
-----------
Chemicals - Specialty -- 2.0%
H.B. Fuller Co.......................... 63,300 1,703,403
Sensient Technologies Corp.............. 23,800 644,742
Stepan Co............................... 21,800 654,436
Terra Industries, Inc.+................. 86,200 2,238,614
-----------
5,241,195
-----------
Circuit Boards -- 0.5%
Park Electrochemical Corp............... 46,100 1,362,716
-----------
Commercial Services -- 0.2%
Quanta Services, Inc.+.................. 18,700 528,649
-----------
Commercial Services - Finance -- 2.2%
Coinstar, Inc.+......................... 45,500 1,486,940
Deluxe Corp............................. 62,300 2,368,646
Dollar Financial Corp.+................. 45,148 1,082,649
Jackson Hewitt Tax Service, Inc......... 25,700 741,959
-----------
5,680,194
-----------
Computer Aided Design -- 0.6%
Aspen Technology, Inc.+................. 91,500 1,200,480
Parametric Technology Corp.+............ 21,920 386,011
-----------
1,586,491
-----------
Computer Services -- 0.4%
COMSYS IT Partners, Inc.+............... 8,800 167,288
Unisys Corp.+........................... 129,200 952,204
-----------
1,119,492
-----------
Computers - Integrated Systems -- 0.2%
Agilysys, Inc........................... 36,900 629,514
-----------
Computers - Memory Devices -- 0.3%
Imation Corp............................ 15,800 459,622
Silicon Storage Technology, Inc.+....... 69,100 215,592
-----------
675,214
-----------
62
VALIC Company II Small Cap Value Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Value
Security Description Shares (Note 2)
------------------------------------------------------------------
COMMON STOCK (continued)
Computers - Periphery Equipment -- 0.7%
Electronics for Imaging, Inc.+............... 73,200 $1,909,056
----------
Consumer Products - Misc. -- 1.5%
American Greetings Corp., Class A............ 74,100 1,833,234
Blyth, Inc................................... 20,600 460,616
Playtex Products, Inc.+...................... 91,300 1,661,660
----------
3,955,510
----------
Containers - Metal/Glass -- 0.6%
Silgan Holdings, Inc......................... 29,100 1,486,719
----------
Containers - Paper/Plastic -- 0.2%
Graphic Packaging Corp.+..................... 106,400 506,464
----------
Data Processing/Management -- 1.4%
Acxiom Corp.................................. 61,700 1,511,650
CSG Systems International, Inc.+............. 87,300 2,018,376
Fair Isaac Corp.............................. 5,200 192,348
----------
3,722,374
----------
Decision Support Software -- 0.1%
SPSS, Inc.+.................................. 3,000 122,250
----------
Diagnostic Kits -- 0.4%
Quidel Corp.+................................ 66,200 1,124,076
----------
Distribution/Wholesale -- 0.7%
BlueLinx Holdings, Inc....................... 43,800 356,970
Tech Data Corp.+............................. 18,600 725,214
United Stationers, Inc.+..................... 12,400 731,848
----------
1,814,032
----------
Diversified Manufacturing Operations -- 1.6%
Acuity Brands, Inc........................... 26,400 1,387,056
GenTek, Inc.+................................ 4,300 132,225
Teleflex, Inc................................ 32,500 2,527,525
----------
4,046,806
----------
Electric - Integrated -- 2.9%
Avista Corp.................................. 77,900 1,524,503
CenterPoint Energy, Inc...................... 116,100 1,883,142
El Paso Electric Co.+........................ 67,500 1,506,600
Great Plains Energy, Inc..................... 5,300 150,202
IDACORP, Inc................................. 23,000 746,810
Northwestern Corp............................ 14,300 383,812
Puget Energy, Inc............................ 60,200 1,404,466
----------
7,599,535
----------
Electronic Components - Misc. -- 0.9%
Bel Fuse, Inc., Class B...................... 11,642 366,723
CTS Corp..................................... 103,200 1,340,568
Cubic Corp................................... 14,000 553,420
----------
2,260,711
----------
Electronic Components - Semiconductors -- 0.9%
Fairchild Semiconductor International, Inc.+. 34,600 649,096
Lattice Semiconductor Corp.+................. 121,800 607,782
OmniVision Technologies, Inc.+............... 36,900 770,103
Semtech Corp.+............................... 12,300 219,432
----------
2,246,413
----------
Electronic Design Automation -- 0.4%
Ansoft Corp.+................................ 20,700 618,723
Magma Design Automation, Inc.+............... 33,200 456,168
----------
1,074,891
----------
Energy - Alternate Sources -- 0.1%
Headwaters, Inc.+............................ 11,800 194,936
----------
Value
Security Description Shares (Note 2)
---------------------------------------------------------------
Engineering/R&D Services -- 0.9%
EMCOR Group, Inc.+........................ 73,300 $2,297,955
----------
Enterprise Software/Service -- 1.1%
BMC Software, Inc.+....................... 70,400 2,155,648
MicroStrategy, Inc., Class A+............. 8,300 574,692
----------
2,730,340
----------
Finance - Auto Loans -- 0.7%
AmeriCredit Corp.+........................ 104,500 1,808,895
Credit Acceptance Corp.+.................. 5,126 113,848
----------
1,922,743
----------
Finance - Consumer Loans -- 0.9%
World Acceptance Corp.+................... 73,200 2,269,932
----------
Finance - Investment Banker/Broker -- 0.6%
AG Edwards, Inc........................... 9,200 768,936
Investment Technology Group, Inc.+........ 22,100 894,387
----------
1,663,323
----------
Finance - Leasing Companies -- 0.3%
Financial Federal Corp.................... 15,800 482,058
Marlin Business Services, Corp.+.......... 13,100 217,067
----------
699,125
----------
Finance - Mortgage Loan/Banker -- 0.6%
Federal Agricultural Mtg. Corp., Class C.. 50,500 1,646,300
----------
Finance - Other Services -- 0.0%
The Nasdaq Stock Market, Inc.+............ 800 26,128
----------
Food - Misc. -- 0.2%
Seaboard Corp............................. 200 415,800
----------
Food - Wholesale/Distribution -- 0.7%
Nash Finch Co............................. 48,400 1,815,484
----------
Footwear & Related Apparel -- 0.1%
Wolverine World Wide, Inc................. 7,400 194,546
----------
Funeral Services & Related Items -- 0.2%
Stewart Enterprises, Inc., Class A........ 77,500 555,675
----------
Gas - Distribution -- 1.7%
Nicor, Inc................................ 78,900 3,279,084
ONEOK, Inc................................ 6,200 290,470
Vectren Corp.............................. 29,700 810,810
----------
4,380,364
----------
Home Furnishings -- 0.0%
Kimball International, Inc., Class B...... 8,493 114,061
----------
Human Resources -- 0.7%
Heidrick & Struggles International, Inc.+. 36,900 1,728,765
----------
Industrial Automated/Robotic -- 0.3%
Cognex Corp............................... 35,100 647,595
----------
Insurance Broker -- 0.1%
Crawford & Co., Class B+.................. 36,600 235,338
----------
Insurance - Life/Health -- 2.4%
Conseco, Inc.+............................ 124,400 1,749,064
Delphi Financial Group, Inc., Class A..... 51,550 2,077,465
FBL Financial Group, Inc., Class A........ 6,600 258,258
Great American Financial Resources, Inc... 11,200 272,832
Protective Life Corp...................... 26,300 1,099,340
StanCorp Financial Group, Inc............. 14,900 701,790
----------
6,158,749
----------
63
VALIC Company II Small Cap Value Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Value
Security Description Shares (Note 2)
----------------------------------------------------------------
COMMON STOCK (continued)
Insurance - Multi-line -- 0.9%
Alfa Corp................................... 46,300 $ 824,140
Horace Mann Educators Corp.................. 79,400 1,535,596
----------
2,359,736
----------
Insurance - Property/Casualty -- 1.4%
Affirmative Insurance Holdings, Inc......... 9,000 114,660
Arch Capital Group, Ltd.+................... 6,000 430,980
Harleysville Group, Inc..................... 41,000 1,322,660
James River Group, Inc...................... 1,200 39,960
LandAmerica Financial Group, Inc............ 19,700 1,091,183
Meadowbrook Insurance Group, Inc.+.......... 23,300 205,739
ProAssurance Corp.+......................... 8,800 462,704
----------
3,667,886
----------
Insurance - Reinsurance -- 1.2%
Aspen Insurance Holdings, Ltd............... 37,300 935,857
Axis Capital Holdings, Ltd.................. 11,200 404,320
Odyssey Re Holdings Corp.................... 12,300 445,506
Platinum Underwriters Holdings, Ltd......... 26,300 912,084
RenaissanceRe Holdings, Ltd................. 7,500 429,600
----------
3,127,367
----------
Internet Security -- 0.3%
SonicWALL, Inc.+............................ 94,300 809,094
----------
Investment Management/Advisor Services -- 0.4%
Affiliated Managers Group, Inc.+............ 9,000 1,019,250
----------
Lasers - System/Components -- 0.6%
Coherent, Inc.+............................. 49,400 1,486,446
----------
Machinery - Farming -- 0.8%
AGCO Corp.+................................. 50,400 2,177,280
----------
Machinery - General Industrial -- 1.3%
Applied Industrial Technologies, Inc........ 40,100 1,282,398
Wabtec Corp................................. 55,200 2,068,344
----------
3,350,742
----------
Machinery - Material Handling -- 0.2%
NACCO, Industries, Inc., Class A............ 4,400 521,268
----------
Machinery - Pumps -- 0.0%
Flowserve Corp.............................. 1,100 78,551
----------
Medical Instruments -- 0.2%
Datascope Corp.............................. 18,600 620,496
----------
Medical Products -- 0.7%
Invacare Corp............................... 53,900 1,248,863
Mentor Corp................................. 14,100 628,719
----------
1,877,582
----------
Medical Sterilization Products -- 0.6%
STERIS Corp................................. 55,400 1,555,078
----------
Medical - Biomedical/Gene -- 0.8%
Arena Pharmaceuticals, Inc.+................ 10,800 144,720
Enzo Biochem, Inc.+......................... 28,800 518,688
Exelixis, Inc.+............................. 31,000 348,750
Illumina, Inc.+............................. 7,100 342,859
Keryx Biopharmaceuticals, Inc.+............. 13,500 135,810
Regeneron Pharmaceuticals, Inc.+............ 7,700 149,842
Savient Pharmaceuticals, Inc.+.............. 41,300 544,334
----------
2,185,003
----------
Medical - Drugs -- 0.4%
Acadia Pharmaceuticals, Inc.+............... 9,600 138,144
Adams Respiratory Therapeutics, Inc.+....... 7,700 296,912
Value
Security Description Shares (Note 2)
------------------------------------------------------------------
Medical - Drugs (continued)
Auxilium Pharmaceuticals, Inc.+............... 4,450 $ 86,330
Cubist Pharmaceuticals, Inc.+................. 7,400 169,312
Sucampo Pharmaceuticals, Inc.+................ 4,100 52,234
Uluru, Inc.+.................................. 17,800 84,372
ViroPharma, Inc.+............................. 15,900 157,569
----------
984,873
----------
Medical - Generic Drugs -- 0.2%
Alpharma, Inc., Class A....................... 19,300 441,970
----------
Medical - HMO -- 0.7%
Magellan Health Services, Inc.+............... 41,700 1,693,020
----------
Medical - Nursing Homes -- 0.3%
Manor Care, Inc............................... 11,500 734,735
----------
Medical - Outpatient/Home Medical -- 0.7%
Gentiva Health Services, Inc.+................ 88,100 1,827,194
----------
Metal Processors & Fabrication -- 0.3%
CIRCOR International, Inc..................... 4,200 177,618
Quanex Corp................................... 16,250 703,788
----------
881,406
----------
Metal - Iron -- 0.9%
Cleveland-Cliffs, Inc......................... 30,400 2,318,608
----------
Miscellaneous Manufacturing -- 0.9%
Freightcar America, Inc....................... 15,600 706,680
Reddy Ice Holdings, Inc....................... 57,400 1,660,582
----------
2,367,262
----------
Multimedia -- 0.4%
Belo Corp., Class A........................... 64,500 1,111,980
----------
Music -- 0.2%
Steinway Musical Instruments, Inc............. 17,900 572,263
----------
Networking Products -- 0.4%
Black Box Corp................................ 28,000 1,146,600
----------
Non - Ferrous Metals -- 0.3%
USEC, Inc.+................................... 48,200 645,398
----------
Office Furnishings-Original -- 0.9%
CompX International, Inc...................... 11,700 237,276
HNI Corp...................................... 27,000 1,102,680
Steelcase, Inc. Class A....................... 58,300 1,028,412
----------
2,368,368
----------
Office Supplies & Forms -- 0.3%
The Standard Register Co...................... 60,600 775,074
----------
Oil & Gas Drilling -- 0.5%
Grey Wolf, Inc.+.............................. 95,200 632,128
Helmerich & Payne, Inc........................ 22,000 692,780
----------
1,324,908
----------
Oil Companies - Exploration & Production -- 1.2%
Forest Oil Corp.+............................. 21,400 827,110
Harvest Natural Resources, Inc.+.............. 25,700 294,522
Mariner Energy, Inc.+......................... 43,991 922,491
Meridian Resource Corp.+...................... 38,900 90,248
Swift Energy Co.+............................. 25,900 963,998
----------
3,098,369
----------
Oil Refining & Marketing -- 0.5%
Holly Corp.................................... 18,400 1,226,360
----------
64
VALIC Company II Small Cap Value Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Value
Security Description Shares (Note 2)
---------------------------------------------------------------------
COMMON STOCK (continued)
Oil - Field Services -- 0.9%
Global Industries, Ltd.+....................... 30,100 $ 727,818
Trico Marine Services, Inc.+................... 50,900 1,672,574
-----------
2,400,392
-----------
Optical Supplies -- 0.1%
Advanced Medical Optics, Inc.+................. 11,700 336,258
-----------
Paper & Related Products -- 1.2%
Buckeye Technologies, Inc.+.................... 74,600 1,161,522
Neenah Paper, Inc.............................. 48,300 1,675,527
Smurfit - Stone Container Corp.+............... 16,900 178,464
-----------
3,015,513
-----------
Physicians Practice Management -- 0.4%
Healthways, Inc.+.............................. 19,800 986,040
-----------
Publishing - Books -- 0.6%
John Wiley & Sons, Inc., Class A............... 37,200 1,542,684
-----------
Radio -- 0.3%
Cumulus Media, Inc., Class A+.................. 48,800 522,160
Westwood One, Inc.............................. 62,800 181,492
-----------
703,652
-----------
Real Estate Investment Trusts -- 8.3%
Annaly Mortgage Management, Inc................ 37,200 524,148
Anworth Mortgage Asset Corp.................... 98,400 529,392
Apartment Investment & Management Co., Class A. 30,600 1,367,820
Brandywine Realty Trust........................ 8,346 215,160
Cousins Properties, Inc........................ 63,000 1,730,610
Deerfield Triarc Capital Corp.................. 22,000 192,500
Equity Inns, Inc............................... 112,300 2,528,996
Equity Lifestyle Properties, Inc............... 26,300 1,280,810
Home Properties, Inc........................... 30,900 1,570,338
LaSalle Hotel Properties....................... 18,600 774,504
Lexington Corporate Properties Trust........... 18,700 386,716
MFA Mtg. Investments, Inc...................... 130,700 1,012,925
Pennsylvania Real Estate Investment Trust...... 900 34,047
PS Business Parks, Inc......................... 33,300 1,881,450
Ramco - Gershenson Properties Trust............ 51,700 1,667,325
Sunstone Hotel Investors, Inc.................. 129,900 3,502,104
Taubman Centers, Inc........................... 34,900 1,800,142
Universal Health Realty Income Trust........... 19,700 660,344
-----------
21,659,331
-----------
Retail - Apparel/Shoe -- 0.9%
Collective Brands, Inc.+....................... 102,100 2,412,623
-----------
Retail - Auto Parts -- 0.5%
CSK Auto Corp.+................................ 104,500 1,381,490
-----------
Retail - Bookstore -- 0.4%
Barnes & Noble, Inc............................ 27,100 977,497
-----------
Retail - Computer Equipment -- 0.7%
GameStop Corp., Class A+....................... 36,800 1,845,152
-----------
Retail - Convenience Store -- 0.2%
The Pantry, Inc.+.............................. 15,400 513,282
-----------
Retail - Discount -- 1.2%
Big Lots, Inc.+................................ 99,800 2,971,046
-----------
Retail - Major Department Stores -- 0.1%
Saks, Inc...................................... 18,000 291,060
-----------
Retail - Office Supplies -- 0.1%
OfficeMax, Inc................................. 8,900 316,128
-----------
Retail - Restaurants -- 0.6%
Domino's Pizza, Inc............................ 15,500 272,645
Jack in the Box, Inc.+......................... 22,300 1,387,506
-----------
1,660,151
-----------
Value
Security Description Shares (Note 2)
--------------------------------------------------------------------------
Rubber/Plastic Products -- 0.4%
Myers Industries, Inc................................ 43,100 $ 918,030
----------
Savings & Loans/Thrifts -- 1.7%
Astoria Financial Corp............................... 90,900 2,369,763
First Financial Holdings, Inc........................ 6,700 213,395
First Niagara Financial Group, Inc................... 60,300 852,039
FirstFed Financial Corp.+............................ 12,500 628,125
United Community Financial Corp...................... 9,400 69,466
WSFS Financial Corp.................................. 3,300 198,792
----------
4,331,580
----------
Semiconductor Equipment -- 0.8%
Asyst Technologies, Inc.+............................ 137,400 806,538
Axcelis Technologies, Inc.+.......................... 51,200 241,152
Cohu, Inc............................................ 19,500 385,905
Novellus Systems, Inc.+.............................. 26,700 730,779
----------
2,164,374
----------
Semiconductors Components - Integrated Circuits -- 0.9%
Cirrus Logic, Inc.+.................................. 171,700 1,169,277
Emulex Corp.+........................................ 32,000 625,280
Genesis Microchip, Inc.+............................. 10,400 82,784
Integrated Device Technology, Inc.+.................. 8,100 126,684
TriQuint Semiconductor, Inc.+........................ 48,500 213,885
----------
2,217,910
----------
Steel Pipe & Tube -- 0.3%
Valmont Industries, Inc.............................. 7,700 686,686
----------
Steel - Producers -- 1.2%
Chaparral Steel Co................................... 31,900 2,727,450
Steel Dynamics, Inc.................................. 9,700 420,786
----------
3,148,236
----------
Telecom Services -- 0.1%
Consolidated Commerce Holdings, Inc.................. 18,500 343,730
----------
Telecommunication Equipment -- 0.7%
CommScope, Inc.+..................................... 26,400 1,494,240
North Pittsburgh Systems, Inc........................ 12,300 284,007
UTStarcom, Inc.+..................................... 47,600 144,704
----------
1,922,951
----------
Telephone - Integrated -- 0.7%
CenturyTel, Inc...................................... 15,600 748,488
Citizens Communications Co........................... 76,356 1,107,926
----------
1,856,414
----------
Television -- 0.2%
Sinclair Broadcast Group, Inc., Class A.............. 42,300 527,058
----------
Therapeutics -- 0.2%
Cypress Bioscience, Inc.+............................ 23,100 306,306
Progenics Pharmaceuticals, Inc.+..................... 4,800 110,736
United Therapeutics Corp.+........................... 2,800 191,772
----------
608,814
----------
Tobacco -- 0.6%
Alliance One International, Inc.+.................... 195,800 1,507,660
----------
Toys -- 1.0%
Hasbro, Inc.......................................... 58,000 1,636,180
JAKKS Pacific, Inc.+................................. 36,900 829,143
----------
2,465,323
----------
Transport - Air Freight -- 0.2%
Atlas Air Worldwide Holdings, Inc.+.................. 8,500 431,290
----------
65
VALIC Company II Small Cap Value Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Value
Security Description Shares (Note 2)
---------------------------------------------------------
COMMON STOCK (continued)
Transport - Marine -- 0.4%
General Maritime Corp.............. 8,100 $ 209,466
Gulfmark Offshore, Inc.+........... 11,600 531,860
Overseas Shipholding Group, Inc.... 5,700 406,980
------------
1,148,306
------------
Transport - Services -- 1.2%
Laidlaw International, Inc......... 70,300 2,436,598
Pacer International, Inc........... 34,900 754,538
------------
3,191,136
------------
Transport - Truck -- 0.3%
Arkansas Best Corp................. 13,600 488,240
Saia, Inc.+........................ 8,000 150,320
------------
638,560
------------
Vitamins & Nutrition Products -- 0.5%
NBTY, Inc.+........................ 34,900 1,280,830
------------
Web Portals/ISP -- 0.5%
United Online, Inc................. 82,300 1,182,651
------------
Wire & Cable Products -- 0.1%
Insteel Industries, Inc............ 18,300 345,870
------------
Total Common Stock
(cost $243,306,877)............... 247,945,403
------------
Shares/
Principal Value
Security Description Amount (Note 2)
- -------------------------------------------------------------------------------
U.S. GOVERNMENT TREASURIES -- 0.2%
United States Treasury Bonds -- 0.2%
United States Treasury Notes
4.25% due 11/30/07
(cost $542,197)(2)................................. $ 545,000 $ 545,681
------------
Total Long - Term Investment Securities
(cost $243,849,074)................................ 248,491,084
------------
REPURCHASE AGREEMENT -- 3.8%
Agreement with State Street Bank & Trust Co.,
bearing interest at 4.68%, dated 08/31/07, to be
repurchased 09/04/07 in the amount of $10,002,198
and collateralized by Federal National Mtg. Assoc.
Notes, bearing interest at 3.25% due 02/15/09
and having approximate value of $10,300,226
(cost $9,997,000).................................. 9,997,000 9,997,000
------------
TOTAL INVESTMENTS
(cost $253,846,074)(1)............................. 99.5% 258,488,084
Other assets less liabilities......................... 0.5% 1,216,369
---------- ------------
NET ASSETS -- 100.0% $259,704,453
========== ============
- --------
+ Non-income producing security
(1) See Note 5 for cost of investments on a tax basis.
(2) The security or a portion thereof was pledged as collateral to cover margin
requirements for open future contracts.
Open Futures Contracts
- --------------------------------------------------------------------------------------
Unrealized
Number of Expiration Value at Value as of Appreciation
Contracts Description Date Trade Date August 31, 2007 (Depreciation)
- --------------------------------------------------------------------------------------
26 Long Russell 2000 Index September 2007 $10,224,923 $10,332,400 $107,477
========
See Notes to Financial Statements
66
VALIC Company II Socially Responsible Fund
PORTFOLIO PROFILE -- August 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Industry Allocation*
Banks -- Super Regional......................... 7.7%
Finance -- Investment Banker/Broker............. 6.1
Commercial Paper................................ 5.8
Computers....................................... 4.3
Medical -- Drugs................................ 4.3
Oil Companies -- Exploration & Production....... 3.8
Beverages -- Non -- alcoholic................... 3.5
Multimedia...................................... 3.5
Applications Software........................... 2.7
Medical -- HMO.................................. 2.7
Networking Products............................. 2.4
Retail -- Drug Store............................ 2.4
Transport -- Services........................... 2.3
Insurance -- Multi-line......................... 1.9
Medical -- Biomedical/Gene...................... 1.8
Oil -- Field Services........................... 1.8
Cable TV........................................ 1.6
Enterprise Software/Service..................... 1.6
Retail -- Discount.............................. 1.5
Wireless Equipment.............................. 1.5
Food -- Misc.................................... 1.4
Medical Instruments............................. 1.4
Medical -- Generic Drugs........................ 1.4
Retail -- Restaurants........................... 1.4
Telephone -- Integrated......................... 1.4
Machinery -- Construction & Mining.............. 1.3
Web Portals/ISP................................. 1.3
Banks -- Fiduciary.............................. 1.2
Cosmetics & Toiletries.......................... 1.2
Athletic Footwear............................... 1.1
Finance -- Mortgage Loan/Banker................. 1.1
Industrial Gases................................ 1.1
Transport -- Rail............................... 1.1
Auto -- Heavy Duty Trucks....................... 1.0
Finance -- Credit Card.......................... 1.0
Pipelines....................................... 1.0
Semiconductor Equipment......................... 1.0
Machinery -- Farming............................ 0.9
Metal -- Copper................................. 0.9
Oil & Gas Drilling.............................. 0.9
Broadcast Services/Program...................... 0.8
Medical -- Wholesale Drug Distribution.......... 0.8
Savings & Loans/Thrifts......................... 0.8
Telecom Services................................ 0.8
Data Processing/Management...................... 0.7
Building & Construction Products -- Misc........ 0.6
Computers -- Memory Devices..................... 0.6
Insurance -- Property/Casualty.................. 0.6
Medical Products................................ 0.6
E-Commerce/Services............................. 0.5
Electric -- Integrated.......................... 0.5
U.S. Government Treasuries...................... 0.5
Advertising Agencies............................ 0.4
Banks -- Commercial............................. 0.4
Electric -- Generation.......................... 0.4
Electronic Components -- Semiconductors......... 0.4
Oil Field Machinery & Equipment................. 0.4
Publishing -- Newspapers........................ 0.4
Retail -- Regional Department Stores............ 0.4
Diversified Manufacturing Operations............ 0.3
Metal Processors & Fabrication.................. 0.3
Real Estate Investment Trusts................... 0.3
Retail -- Apparel/Shoe.......................... 0.3
Food -- Retail.................................. 0.2
Home Decoration Products........................ 0.2
Semiconductors Components -- Integrated Circuits 0.2
Food -- Confectionery........................... 0.1
Hotels/Motels................................... 0.1
Independent Power Producers..................... 0.1
Investment Management/Advisor Services 0.1
Motorcycle/Motor Scooter.............. 0.1
Repurchase Agreements................. 0.1
Retail -- Consumer Electronics........ 0.1
Therapeutics.......................... 0.1
Toys.................................. 0.1
----
99.6%
====
* Calculated as a percentage of net assets
67
VALIC Company II Socially Responsible Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007
- --------------------------------------------------------------------------------
Value
Security Description Shares (Note 2)
--------------------------------------------------------------------
COMMON STOCK -- 93.2%
Advertising Agency -- 0.4%
Omnicom Group, Inc............................ 70,300 $ 3,580,379
-----------
Applications Software -- 2.7%
Microsoft Corp................................ 868,419 24,949,678
-----------
Athletic Footwear -- 1.1%
NIKE, Inc., Class B........................... 174,120 9,809,921
-----------
Auto - Heavy Duty Trucks -- 1.0%
PACCAR, Inc................................... 104,920 8,975,906
-----------
Banks - Commercial -- 0.4%
Regions Financial Corp........................ 127,700 3,997,010
-----------
Banks - Fiduciary -- 1.2%
The Bank of New York Mellon Corp.............. 272,200 11,005,046
-----------
Banks - Super Regional -- 7.7%
Bank of America Corp.......................... 463,765 23,503,610
National City Corp............................ 112,540 3,028,451
US Bancorp.................................... 386,740 12,511,039
Wachovia Corp................................. 305,560 14,966,329
Wells Fargo & Co.............................. 464,536 16,974,146
-----------
70,983,575
-----------
Beverages - Non-alcoholic -- 3.5%
PepsiCo, Inc.................................. 238,677 16,237,196
The Coca - Cola Co............................ 297,562 16,002,885
-----------
32,240,081
-----------
Broadcast Services/Program -- 0.8%
Clear Channel Communications, Inc............. 201,657 7,513,740
-----------
Building & Construction Products - Misc. -- 0.6%
Masco Corp.................................... 204,320 5,316,406
-----------
Cable TV -- 1.6%
Comcast Corp., Class A+....................... 475,626 12,409,082
The DIRECTV Group, Inc.+...................... 118,600 2,766,938
-----------
15,176,020
-----------
Computers -- 4.3%
Apple, Inc.+.................................. 99,858 13,828,336
Dell, Inc.+................................... 291,900 8,246,175
Hewlett-Packard Co............................ 359,615 17,747,000
-----------
39,821,511
-----------
Computers-Memory Devices -- 0.6%
EMC Corp.+.................................... 283,000 5,563,780
Seagate Technology+(2)(3)(4).................. 510 0
-----------
5,563,780
-----------
Cosmetics & Toiletries -- 1.2%
Colgate - Palmolive Co........................ 167,765 11,126,175
-----------
Data Processing/Management -- 0.7%
First Data Corp............................... 162,550 5,399,911
Paychex, Inc.................................. 28,000 1,244,040
-----------
6,643,951
-----------
Diversified Manufacturing Operations -- 0.3%
Danaher Corp.................................. 39,100 3,036,506
-----------
E - Commerce/Products -- 0.0%
Amazon.com, Inc.+............................. 4,550 363,591
-----------
E - Commerce/Services -- 0.5%
eBay, Inc.+................................... 137,994 4,705,595
-----------
Electric - Generation -- 0.4%
The AES Corp.+................................ 184,300 3,337,673
-----------
Value
Security Description Shares (Note 2)
------------------------------------------------------------------
Electric - Integrated -- 0.5%
Energy East Corp............................ 42,950 $ 1,146,335
Pepco Holdings, Inc......................... 128,800 3,590,944
-----------
4,737,279
-----------
Electronic Components - Semiconductors -- 0.4%
Broadcom Corp., Class A+.................... 96,500 3,329,250
-----------
Enterprise Software/Service -- 1.6%
Oracle Corp.+............................... 712,699 14,453,536
-----------
Finance - Credit Card -- 1.0%
American Express Co......................... 153,250 8,983,515
-----------
Finance - Investment Banker/Broker -- 6.1%
Citigroup, Inc.............................. 509,498 23,885,266
JPMorgan Chase & Co......................... 420,024 18,699,468
Lehman Brothers Holdings, Inc............... 12,950 710,049
Merrill Lynch & Co., Inc.................... 158,690 11,695,453
The Charles Schwab Corp..................... 89,300 1,768,140
-----------
56,758,376
-----------
Finance - Mortgage Loan/Banker -- 1.1%
Fannie Mae.................................. 114,220 7,493,974
Freddie Mac................................. 37,700 2,322,697
-----------
9,816,671
-----------
Food - Confectionery -- 0.1%
The Hershey Co.............................. 15,250 709,125
-----------
Food - Misc. -- 1.4%
Campbell Soup Co............................ 116,400 4,394,100
General Mills, Inc.......................... 57,700 3,224,276
H.J. Heinz Co............................... 48,190 2,172,887
Kellogg Co.................................. 64,440 3,539,689
-----------
13,330,952
-----------
Food - Retail -- 0.2%
Safeway, Inc................................ 61,560 1,953,299
-----------
Home Decoration Products -- 0.2%
Newell Rubbermaid, Inc...................... 69,500 1,792,405
-----------
Hotel/Motel -- 0.1%
Marriott International, Inc., Class A....... 19,800 879,516
-----------
Independent Power Producers -- 0.1%
Dynegy, Inc., Class A+...................... 66,600 538,794
Reliant Energy, Inc.+....................... 29,000 739,790
-----------
1,278,584
-----------
Industrial Gases -- 1.1%
Praxair, Inc................................ 139,850 10,581,051
-----------
Insurance - Multi-line -- 1.9%
Allstate Corp............................... 169,150 9,260,962
Hartford Financial Services Group, Inc...... 72,350 6,432,638
MetLife, Inc................................ 34,250 2,193,713
-----------
17,887,313
-----------
Insurance - Property/Casualty -- 0.6%
The Travelers Cos., Inc..................... 120,370 6,083,500
-----------
Investment Management/Advisor Services -- 0.1%
Franklin Resources, Inc..................... 3,550 467,784
-----------
Machinery - Construction & Mining -- 1.3%
Caterpillar, Inc............................ 161,030 12,201,243
-----------
Machinery - Farming -- 0.9%
Deere & Co.................................. 60,770 8,268,366
-----------
68
VALIC Company II Socially Responsible Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Value
Security Description Shares (Note 2)
------------------------------------------------------------------
COMMON STOCK (continued)
Medical Instruments -- 1.4%
Boston Scientific Corp.+.................... 36,350 $ 466,370
Medtronic, Inc.............................. 242,600 12,818,984
-----------
13,285,354
-----------
Medical Products -- 0.6%
Stryker Corp................................ 87,820 5,866,376
-----------
Medical-Biomedical/Gene -- 1.8%
Amgen, Inc.+................................ 192,730 9,657,700
Genentech, Inc.+............................ 92,540 6,922,918
-----------
16,580,618
-----------
Medical-Drugs -- 4.3%
Allergan, Inc............................... 168,600 10,117,686
Bristol - Myers Squibb Co................... 437,610 12,756,332
Endo Pharmaceuticals Holdings, Inc.+........ 115,240 3,673,851
Forest Laboratories, Inc.+.................. 232,130 8,735,052
King Pharmaceuticals, Inc.+................. 273,700 4,113,711
Sepracor, Inc.+............................. 17,500 510,475
-----------
39,907,107
-----------
Medical - Generic Drugs -- 1.4%
Barr Pharmaceuticals, Inc.+................. 95,600 4,864,128
Mylan Laboratories, Inc..................... 295,690 4,464,919
Watson Pharmaceuticals, Inc.+............... 118,210 3,525,022
-----------
12,854,069
-----------
Medical - HMO -- 2.7%
Aetna, Inc.................................. 68,286 3,476,440
UnitedHealth Group, Inc..................... 258,460 12,925,585
WellPoint, Inc.+............................ 108,790 8,767,386
-----------
25,169,411
-----------
Medical - Wholesale Drug Distribution -- 0.8%
Cardinal Health, Inc........................ 104,550 7,149,129
-----------
Metal Processors & Fabrication -- 0.3%
Precision Castparts Corp.................... 20,100 2,619,231
-----------
Metal - Copper -- 0.9%
Southern Copper Corp........................ 81,860 8,615,765
-----------
Motorcycle/Motor Scooter -- 0.1%
Harley - Davidson, Inc...................... 15,750 847,193
-----------
Multimedia -- 3.5%
News Corp., Class A......................... 591,470 11,965,438
The McGraw - Hill Cos., Inc................. 142,651 7,198,170
The Walt Disney Co.......................... 399,830 13,434,288
-----------
32,597,896
-----------
Networking Products -- 2.4%
Cisco Systems, Inc.+........................ 693,910 22,149,607
-----------
Oil & Gas Drilling -- 0.9%
Transocean, Inc.+........................... 77,820 8,178,104
-----------
Oil Companies-Exploration & Production -- 3.8%
Apache Corp................................. 139,850 10,821,593
Chesapeake Energy Corp...................... 115,600 3,729,256
EOG Resources, Inc.......................... 149,450 10,066,952
Murphy Oil Corp............................. 51,650 3,147,551
Noble Energy, Inc........................... 118,600 7,124,302
-----------
34,889,654
-----------
Value
Security Description Shares (Note 2)
--------------------------------------------------------------------------
Oil Field Machinery & Equipment -- 0.4%
National - Oilwell Varco, Inc.+..................... 26,150 $ 3,347,200
-----------
Oil - Field Services -- 1.8%
Schlumberger, Ltd................................... 174,106 16,801,229
-----------
Pipelines -- 1.0%
Williams Cos., Inc.................................. 313,990 9,733,690
-----------
Publishing - Newspapers -- 0.4%
Gannett Co., Inc.................................... 85,130 4,001,110
-----------
Real Estate Investment Trusts -- 0.3%
Equity Residential.................................. 21,600 869,184
Simon Property Group, Inc........................... 19,300 1,831,956
-----------
2,701,140
-----------
Retail-Apparel/Shoe -- 0.3%
The Gap, Inc........................................ 155,500 2,917,180
-----------
Retail-Consumer Electronics -- 0.1%
Best Buy Co., Inc................................... 26,650 1,171,267
-----------
Retail-Discount -- 1.5%
Costco Wholesale Corp............................... 53,150 3,282,013
Target Corp......................................... 160,950 10,611,433
-----------
13,893,446
-----------
Retail-Drug Store -- 2.4%
CVS Caremark Corp................................... 280,245 10,598,866
Walgreen Co......................................... 265,390 11,961,127
-----------
22,559,993
-----------
Retail - Regional Department Stores -- 0.4%
Kohl's Corp.+....................................... 29,310 1,738,083
Macy's, Inc......................................... 58,700 1,861,964
-----------
3,600,047
-----------
Retail - Restaurants -- 1.4%
McDonald's Corp..................................... 257,883 12,700,738
-----------
Savings & Loans/Thrifts -- 0.8%
Washington Mutual, Inc.............................. 211,940 7,782,437
-----------
Semiconductor Equipment -- 1.0%
Applied Materials, Inc.............................. 456,250 9,745,500
-----------
Semiconductors Components-Intergrated Circuits -- 0.2%
Analog Devices, Inc................................. 48,100 1,773,928
-----------
Telecom Services -- 0.8%
Embarq Corp......................................... 113,350 7,075,307
-----------
Telephone-Integrated -- 1.4%
ALLTEL Corp......................................... 96,300 6,573,438
Citizens Communications Co.......................... 362,300 5,256,973
Qwest Communications International, Inc.+........... 115,700 1,035,515
Telecorp PCS+(2)(3)................................. 400 0
-----------
12,865,926
-----------
Therapeutics -- 0.1%
Gilead Sciences, Inc.+.............................. 12,750 463,718
-----------
Toys -- 0.1%
Mattel, Inc......................................... 25,250 546,158
-----------
Transport-Rail -- 1.1%
CSX Corp............................................ 81,460 3,339,860
Norfolk Southern Corp............................... 139,750 7,156,597
-----------
10,496,457
-----------
69
VALIC Company II Socially Responsible Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Shares/
Principal Value
Security Description Amount (Note 2)
- -----------------------------------------------------------------------------------
COMMON STOCK (continued)
Transport-Services -- 2.3%
FedEx Corp............................................. 62,070 $ 6,807,837
United Parcel Service, Inc. Class B.................... 186,588 14,154,566
------------
20,962,403
------------
Web Portals/ISP -- 1.3%
Google, Inc., Class A+................................. 21,160 10,902,690
Yahoo!, Inc.+.......................................... 51,550 1,171,731
------------
12,074,421
------------
Wireless Equipment -- 1.5%
QUALCOMM, Inc.......................................... 345,680 13,789,175
------------
Total Long-Term Investment Securities
(cost $857,833,788) 863,370,293
------------
SHORT-TERM INVESTMENT SECURITIES -- 6.3%
Commercial Paper -- 5.8%
KBC Financial Products International, Ltd.
5.22% due 09/04/07.................................... $34,000,000 33,985,210
Nationwide Bldg. Society
5.39% due 09/06/07.................................... 20,000,000 19,985,028
------------
53,970,238
------------
U.S. Government Treasuries -- 0.5%
United States Treasury Bills
2.31% due 10/11/07(1)................................. 85,000 84,783
2.91% due 10/11/07(1)................................. 2,025,000 2,018,475
3.42% due 10/11/07(1)................................. 10,000 9,962
3.48% due 10/11/07(1)................................. 60,000 59,769
3.77% due 10/11/07(1)................................. 145,000 144,396
4.27% due 10/11/07(1)................................. 215,000 213,985
4.29% due 10/11/07(1)................................. 220,000 218,959
4.43% due 10/11/07(1)................................. 60,000 59,707
4.51% due 09/20/07(1)................................. 70,000 69,834
4.73% due 09/06/07(1)................................. 130,000 129,915
4.74% due 09/06/07(1)................................. 170,000 169,889
4.75% due 09/06/07(1)................................. 30,000 29,980
4.80% due 09/06/07(1)................................. 110,000 109,927
4.81% due 09/06/07(1)................................. 150,000 149,900
4.81% due 09/20/07(1)................................. 70,000 69,824
4.83% due 09/20/07(1)................................. 110,000 109,722
4.84% due 09/20/07(1)................................. 110,000 109,721
4.87% due 09/06/07(1)................................. 170,000 169,885
4.93% due 09/06/07(1)................................. 50,000 49,966
4.94% due 09/06/07(1)................................. 100,000 99,932
4.95% due 09/06/07(1)................................. 100,000 99,932
4.97% due 09/06/07(1)................................. 100,000 99,931
------------
4,278,394
------------
Total Short-Term Investment Securities
(cost $58,248,632)...................................... 58,248,632
------------
REPURCHASE AGREEMENT -- 0.1%
Agreement with State Street Bank & Trust Co., bearing
interest at 4.68% dated 08/31/07, to be repurchased
09/04/07 in the amount of $813,423 and collateralized
by Federal Home Loan Bank, bearing interest at 3.75%
due 08/15/08 and having approximate value of
$841,456 (cost $813,000).............................. 813,000 813,000
------------
TOTAL INVESTMENTS
(cost $916,895,420) (5) 99.6% 922,431,925
Other assets less liabilities............................ 0.4 3,474,448
----------- ------------
NET ASSETS -- 100.0% $925,906,373
=========== ============
- --------
+ Non-income producing security
(1)The security or a portion thereof was pledged as collateral to cover margin
requirements for open futures contracts.
(2)Fair valued security; see Note 2
(3)Illiquid security
(4)To the extent permitted by the Statement of Additional Information, the
Socially Responsible Fund may invest in restricted securities. The Fund has
no right to demand registration of these securities. The securities are
valued pursuant to Note 2. Restricted securities held by a Fund may not be
sold except in exempt transactions or in a public offering registered under
the Securities Act of 1933. The risk of investing in such securities is
generally greater than the risk of investing in the securities of widely
held, publicly traded companies. Lack of a secondary market and resale
restrictions may result in the inability of a Fund to sell a security at a
fair price and may substantially delay the sale of the security. In
addition, these securities may exhibit greater price volatility than
securities for which secondary markets exist. As of August 31, 2007, the
Socially Responsible Fund held the following restricted securities:
---------------------------------------------------------------------------
Market
Acquisition Acquisition Market Value Per % of Net
Name Date Shares Cost Value Share Assets
---------------------------------------------------------------------------
Seagate Technology
Common Stock 11/22/2000 510 $0.00 $0.00 $0.00 0.00%
===== ===== ====
(5)See Note 5 for cost of investments on a tax basis.
Open Futures Contracts
- ----------------------------------------------------------------------------------------
Value as of Unrealized
Number of Value at August 31, Appreciation
Contracts Description Expiration Date Trade Date 2007 (Depreciation)
- ----------------------------------------------------------------------------------------
159 Long S&P 500 Index . . . . . September 2007 $59,110,625 $58,698,825 $(411,800)
=========
See Notes to Financial Statements
70
VALIC Company II Strategic Bond Fund
PORTFOLIO PROFILE -- August 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Industry Allocation*
Sovereign................................ 30.7%
Federal National Mtg. Assoc.............. 8.0%
Federal Home Loan Mtg. Corp.............. 6.3%
United States Treasury Notes............. 4.4%
Diversified Financial Services........... 4.0%
Repurchase Agreements.................... 3.5%
Oil Companies -- Exploration & Production 2.2%
Telephone -- Integrated.................. 2.1%
Special Purpose Entities................. 1.7%
Pipelines................................ 1.5%
Medical -- Hospitals..................... 1.4%
Cable TV................................. 1.3%
Cellular Telecom......................... 1.3%
Chemicals -- Specialty................... 1.1%
Finance -- Auto Loans.................... 1.1%
Independent Power Producers.............. 1.1%
Electric -- Integrated................... 0.9%
Electronic Components -- Semiconductors.. 0.9%
Casino Hotels............................ 0.8%
Auto -- Cars/Light Trucks................ 0.7%
Television............................... 0.7%
Electric -- Generation................... 0.6%
Medical -- Drugs......................... 0.6%
Metal -- Diversified..................... 0.6%
Telecom Services......................... 0.6%
Transport -- Air Freight................. 0.6%
Finance -- Investment Banker/Broker...... 0.5%
Paper & Related Products................. 0.5%
Retail -- Drug Store..................... 0.5%
Satellite Telecom........................ 0.5%
United States Treasury Bonds............. 0.5%
Banks -- Commercial...................... 0.4%
Broadcast Services/Program............... 0.4%
Building & Construction Products -- Misc. 0.4%
Chemicals -- Diversified................. 0.4%
Containers -- Metal/Glass................ 0.4%
Containers -- Paper/Plastic.............. 0.4%
Diversified Manufacturing Operations..... 0.4%
Medical Products......................... 0.4%
Multimedia............................... 0.4%
Oil Companies -- Integrated.............. 0.4%
Oil -- Field Services.................... 0.4%
Rental Auto/Equipment.................... 0.4%
Savings & Loans/Thrifts.................. 0.4%
Steel -- Producers....................... 0.4%
Theaters................................. 0.4%
Agricultural Chemicals................... 0.3%
Airlines................................. 0.3%
Banks -- Money Center.................... 0.3%
Finance -- Mortgage Loan/Banker.......... 0.3%
Food -- Misc............................. 0.3%
Funeral Services & Related Items......... 0.3%
Gambling (Non-Hotel)..................... 0.3%
Office Automation & Equipment............ 0.3%
Real Estate Investment Trusts............ 0.3%
Recycling................................ 0.3%
Aerospace/Defense -- Equipment........... 0.2%
Banks -- Super Regional.................. 0.2%
Computer Services........................ 0.2%
Consumer Products -- Misc................ 0.2%
Distribution/Wholesale................... 0.2%
Electronics -- Military.................. 0.2%
Energy -- Alternate Sources.............. 0.2%
Finance -- Credit Card................... 0.2%
Food -- Meat Products.................... 0.2%
Housewares............................... 0.2%
Medical -- HMO........................... 0.2%
Medical -- Wholesale Drug Distribution... 0.2%
Non -- Hazardous Waste Disposal.......... 0.2%
Printing -- Commercial.................. 0.2%
Retail -- Discount...................... 0.2%
Transport -- Rail....................... 0.2%
Applications Software................... 0.1%
Auto/Truck Parts & Equipment -- Original 0.1%
Beverages -- Wine/Spirits............... 0.1%
Brewery................................. 0.1%
Building & Construction -- Misc......... 0.1%
Building Products -- Wood............... 0.1%
Building -- Residential/Commercial...... 0.1%
Commercial Services -- Finance.......... 0.1%
Computers -- Memory Devices............. 0.1%
Cosmetics & Toiletries.................. 0.1%
Direct Marketing........................ 0.1%
Diversified Operations.................. 0.1%
Electronic Components -- Misc........... 0.1%
Federal Home Loan Bank.................. 0.1%
Finance -- Commercial................... 0.1%
Finance -- Consumer Loans............... 0.1%
Golf.................................... 0.1%
Home Furnishings........................ 0.1%
Hotels/Motels........................... 0.1%
Insurance Brokers....................... 0.1%
Insurance -- Multi -- line.............. 0.1%
Insurance -- Property/Casualty.......... 0.1%
Investment Companies.................... 0.1%
Leisure Products........................ 0.1%
Machinery -- Farming.................... 0.1%
Machinery -- General Industrial......... 0.1%
Medical Information Systems............. 0.1%
Medical -- Nursing Homes................ 0.1%
Metal Processors & Fabrication.......... 0.1%
Metal -- Aluminum....................... 0.1%
Music................................... 0.1%
Oil & Gas Drilling...................... 0.1%
Oil Refining & Marketing................ 0.1%
Physicians Practice Management.......... 0.1%
Publishing -- Books..................... 0.1%
Publishing -- Newspapers................ 0.1%
Publishing -- Periodicals............... 0.1%
Research & Development.................. 0.1%
Retail -- Major Department Stores....... 0.1%
Retail -- Petroleum Products............ 0.1%
Retail -- Restaurants................... 0.1%
Rubber -- Tires......................... 0.1%
Specified Purpose Acquisitions.......... 0.1%
Storage/Warehousing..................... 0.1%
Transactional Software.................. 0.1%
Transport -- Marine..................... 0.1%
Transport -- Services................... 0.1%
Transport -- Truck...................... 0.1%
Travel Services......................... 0.1%
----
98.3%
====
* Calculated as a percentage of net assets.
71
VALIC Company II Strategic Bond Fund
PORTFOLIO PROFILE -- August 31, 2007 (Unaudited) -- (continued)
- --------------------------------------------------------------------------------
Country Allocation*
United States. 63.1%
Brazil........ 4.3%
Canada........ 3.4%
Australia..... 2.1%
Turkey........ 2.1%
Norway........ 1.9%
Argentina..... 1.8%
Russia........ 1.7%
Sweden........ 1.7%
Venezuela..... 1.7%
Philippines... 1.6%
United Kingdom 1.5%
Japan......... 1.2%
Mexico........ 0.9%
Colombia...... 0.8%
Peru.......... 0.8%
Ukrainian SSR. 0.8%
Belgium....... 0.6%
Denmark....... 0.6%
Indonesia..... 0.6%
Uruguay....... 0.6%
Bermuda....... 0.5%
France........ 0.5%
Luxembourg.... 0.5%
Cayman Islands 0.4%
Germany....... 0.4%
Ecuador....... 0.3%
Greece........ 0.3%
Egypt......... 0.2%
Ireland....... 0.2%
Netherlands... 0.2%
Pakistan...... 0.2%
Panama........ 0.2%
Poland........ 0.2%
South Africa.. 0.2%
Spain......... 0.2%
----
98.3%
====
Credit Quality +#
Government--Agency.. 15.0%
Government--Treasury 5.2%
AAA................. 14.4%
AA.................. 2.7%
A................... 5.0%
BBB................. 10.1%
BB.................. 20.3%
B................... 16.5%
CCC................. 8.6%
Below C............. 0.6%
Not Rated@.......... 1.6%
------
100.00%
======
* Calculated as a percentage of net assets.
@ Represents debt issues that either have no rating, or the rating is
unavailable from the data source.
+ Source: Standard & Poors
# Calculated as a percentage of total debt issues, excluding short-term
securities.
72
VALIC Company II Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount(16) (Note 2)
- -------------------------------------------------------------------------------------
ASSET BACKED SECURITIES -- 3.8%
Diversified Financial Services -- 3.8%
Banc of America Funding Corp.
Series 2007-C, Class 5A1
5.37% due 05/20/36(1)............................. 1,417,491 $ 1,403,905
Banc of America Funding Corp.
Series 2006-J, Class 2A1
5.89% due 01/20/47(1)(2).......................... 549,620 553,344
Bear Stearns Commercial Mtg. Securities, Inc.
Series 2007-PW15, Class H
5.93% due 02/11/44*(2)(3)......................... 435,000 322,063
Bear Stearns Commercial Mtg. Securities, Inc.
Series 2006-PW12, Class F
5.93% due 09/11/38*(2)(3)......................... 220,000 186,288
Bear Stearns Commercial Mtg. Securities, Inc.,
Series 2007-PW15, Class A2
5.20% due 02/11/44(3)............................. 345,000 340,481
Bear Stearns Commercial Mtg. Securities, Inc.,
Series 2006-PW12, Class G
5.75% due 09/11/38................................ 38,000 31,023
Chase Mortgage Finance Corp.
Series 2007-A2, Class 1A1
4.56% due 07/25/37(1)............................. 1,238,024 1,224,497
Commercial Mtg. Pass Through Certificates
Series CN2A, Class A2FL
5.55% due 02/05/19*(3)(4)......................... 550,000 549,964
Commercial Mtg. Pass Through Certs.,
Series 2004-LB2A, Class A3
4.22% due 03/10/39(3)............................. 351,000 340,674
CS First Boston Mtg. Securities Corp.
Series 2002-CKN2, Class A3
6.13% due 04/15/37(3)............................. 800,000 817,595
J.P. Morgan Chase Commercial Mtg. Securities Corp.
Series 2006-CB16, Class E
5.84% due 05/12/45*(3)............................ 150,000 133,889
LB - UBS Commercial Mtg. Trust
Series 2007-C6, Class AM
6.11% due 07/15/40(3)............................. 2,000,000 2,015,469
LB - UBS Commercial Mtg. Trust
Series 2007-C6, Class B
6.45% due 07/17/40(3)............................. 375,000 370,591
Merrill Lynch Mtg. Investors Trust
Series 2004-A1, Class 3A
4.84% due 02/25/34(1)(2).......................... 385,734 379,608
Merrill Lynch
Series 2007-5, Class H
6.12% due 08/25/48................................ 175,000 128,629
Morgan Stanley Capital I
Series 2006-IQ12, Class D
5.53% due 12/15/43(3)............................. 220,000 202,173
Ocwen Advance Receivables Backed Notes,
Series 2006-1A
5.36% due 11/24/15*(5)............................ 250,000 187,500
Wachovia Bank Commercial Mtg. Trust,
Series 2006-WL7A, Class F
6.09% due 09/15/21*(3)(4)......................... 500,000 498,564
Wells Fargo Mtg. Backed Securities Trust
Series 2006-AR17, Class A2
5.84% due 10/25/36(1)(2).......................... 1,208,749 1,212,060
Wells Fargo Mtg. Backed Securities Trust
Series 2006-AR12, Class 2A1
6.10% due 09/25/36(1)(2).......................... 222,478 223,504
-----------
Total Asset Backed Securities
(cost $11,419,867)................................ 11,121,821
-----------
Principal Value
Security Description Amount(16) (Note 2)
-----------------------------------------------------------------------
CONVERTIBLE BONDS & NOTES -- 0.1%
Electronic Components - Semiconductors -- 0.1%
Advanced Micro Devices, Inc.
Senior Notes
6.00% due 05/01/15*........................ 25,000 $ 21,437
Spansion, Inc.
Senior Sub. Notes
2.25% due 06/15/16*........................ 200,000 154,250
--------
175,687
--------
Medical Instruments -- 0.0%
Kyphon, Inc.
Senior Notes
1.25% due 02/01/14*........................ 25,000 31,563
--------
Medical - Biomedical/Gene -- 0.0%
Nektar Therapeutics
Sub. Notes
3.25% due 09/28/12......................... 50,000 41,563
--------
Telecom Services -- 0.0%
ICO North America, Inc.
Notes
7.50% due 08/15/09(5)(7)(8)................ 125,000 123,750
--------
Total Convertible Bonds & Notes
(cost $394,401)............................ 372,563
--------
CORPORATE BONDS & NOTES -- 34.6%
Advertising Services -- 0.0%
R.H. Donnelley Corp.
Senior Notes
6.88% due 01/15/13......................... 100,000 94,250
--------
Aerospace/Defense - Equipment -- 0.2%
United Technologies Corp.
Senior Notes
6.10% due 05/15/12......................... 626,000 653,098
--------
Agricultural Chemicals -- 0.3%
Mosaic Global Holdings, Inc.
Debentures
7.38% due 08/01/18......................... 100,000 94,000
The Mosaic Co.
Senior Notes
7.38% due 12/01/14*........................ 540,000 549,450
The Mosaic Co.
Senior Notes
7.63% due 12/01/16*........................ 195,000 199,875
--------
843,325
--------
Airlines -- 0.3%
American Airlines, Inc.
Pass Through Certs.
Series 2001-1, Class A-2
6.82% due 05/23/11......................... 475,000 455,109
Continental Airlines, Inc.
Pass Through Certs.,
Series 1991, Class A
6.55% due 02/02/19......................... 270,166 270,841
Continental Airlines, Inc.
Pass Through Certs.
Series 2000-2, Class B
8.31% due 10/02/19......................... 47,011 46,893
Delta Air Lines, Inc.
Pass Through Certs.
Series 2000-1, Class A-2
7.57% due 11/18/10......................... 85,000 86,063
Northwest Airlines, Inc.
Pass Through Certs.
Series 2002-1 Class G2
6.26% due 11/20/21......................... 81,748 80,522
73
VALIC Company II Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount(16) (Note 2)
--------------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Airlines (continued)
United Air Lines, Inc.
Pass Through Certs.
Series 2001-1, Class A-2
6.20% due 09/01/08.......................... 48,066 $ 48,006
----------
987,434
----------
Applications Software -- 0.1%
SS&C Technologies, Inc.
Company Guar. Notes
11.75% due 12/01/13......................... 210,000 221,550
----------
Auto - Cars/Light Trucks -- 0.7%
DaimlerChrysler NA Holding Corp.
Company Guar. Notes
5.71% due 03/13/09(4)....................... 85,000 84,756
Ford Motor Co.
Debentures
6.38% due 02/01/29.......................... 1,105,000 779,025
General Motors Corp.
Debentures
8.25% due 07/15/23.......................... 600,000 478,500
General Motors Corp.
Senior Bonds
8.38% due 07/15/33.......................... 875,000 702,187
----------
2,044,468
----------
Auto/Truck Parts & Equipment - Original -- 0.1%
Lear Corp.
Senior Notes
8.75% due 12/01/16.......................... 265,000 245,125
Visteon Corp.
Senior Notes
8.25% due 08/01/10.......................... 210,000 179,550
----------
424,675
----------
Auto/Truck Parts & Equipment - Replacement -- 0.0%
Exide Corp.
Notes
10.00% due 03/15/25+(5)(8).................. 150,000 0
----------
Banks - Commercial -- 0.3%
Compass Bank
Notes
5.50% due 04/01/20.......................... 130,000 125,032
National City Bank
Sub. Notes
5.80% due 06/07/17.......................... 250,000 249,536
Popular North America, Inc.
Company Guar. Notes
5.65% due 04/15/09.......................... 68,000 68,337
Silicon Valley Bank
Senior Notes
5.70% due 06/01/12.......................... 143,000 142,630
SouthTrust Bank
Sub. Notes
4.75% due 03/01/13.......................... 100,000 97,735
SouthTrust Corp.
Sub. Notes
5.80% due 06/15/14.......................... 164,000 164,140
Union Bank of California NA
Sub. Notes
5.95% due 05/11/16.......................... 100,000 101,070
US Bank NA
Notes
3.90% due 08/15/08.......................... 65,000 63,795
----------
1,012,275
----------
Principal Value
Security Description Amount(16) (Note 2)
----------------------------------------------------------------------------
Banks - Money Center -- 0.0%
RBS Capital Trust I
Bonds
4.71% due 07/01/13(4)(9)..................... 77,000 $ 70,774
----------
Banks - Super Regional -- 0.2%
Capital One Financial Corp.
Senior Notes
5.70% due 09/15/11........................... 282,000 277,666
Capital One Financial Corp.
Senior Notes
6.75% due 09/15/17........................... 157,000 156,166
JPMorgan Chase Bank NA
Sub. Notes
6.13% due 11/01/08........................... 58,000 58,319
----------
492,151
----------
Beverages - Non-alcoholic -- 0.0%
Cott Beverages USA Inc.
Company Guar. Notes
8.00% due 12/15/11........................... 125,000 123,750
----------
Beverages - Wine/Spirits -- 0.1%
Constellation Brands, Inc.
Senior Notes
7.25% due 05/15/17*.......................... 170,000 164,900
----------
Brewery -- 0.1%
Anheuser - Busch Cos., Inc.
Bonds
6.00% due 11/01/41........................... 309,000 286,683
----------
Broadcast Services/Program -- 0.3%
Fisher Communications, Inc.
Senior Notes
8.63% due 09/15/14........................... 487,000 495,522
Nexstar Finance, Inc.
Senior Sub. Notes
7.00% due 01/15/14........................... 335,000 316,575
----------
812,097
----------
Building & Construction Products - Misc. -- 0.4%
Associated Materials, Inc.
Senior Sub. Notes
9.75% due 04/15/12........................... 360,000 365,400
Dayton Superior Corp.
Senior Sec. Notes
10.75% due 09/15/08.......................... 295,000 297,950
Interline Brands, Inc.
Senior Sub. Notes
8.13% due 06/15/14........................... 435,000 426,300
NTK Holdings, Inc.
Senior Notes
10.75% due 03/01/14(10)...................... 175,000 109,375
----------
1,199,025
----------
Building Products - Air & Heating -- 0.0%
American Standard, Inc.
Company Guar. Notes
7.38% due 02/01/08........................... 125,000 125,551
----------
Building Products - Wood -- 0.1%
Masonite Corp.
Company Guar. Notes
11.00% due 04/06/15.......................... 250,000 203,750
----------
Building - Residential/Commercial -- 0.1%
Centex Corp.
Senior Notes
5.45% due 08/15/12........................... 85,000 78,371
Lennar Corp.
Company Guar. Notes
5.95% due 10/17/11........................... 340,000 327,291
----------
405,662
----------
74
VALIC Company II Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount(16) (Note 2)
--------------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Cable TV -- 1.3%
Cablevision Systems Corp.
Senior Notes
8.00% due 04/15/12......................... 525,000 $ 502,688
CCH I LLC
Company Guar. Notes
11.00% due 10/01/15........................ 468,000 455,130
CCH II LLC/CCH II Capital Corp.
Senior Notes
10.25% due 09/15/10........................ 200,000 200,500
CCH II LLC/CCH II Capital Corp.
Company Guar. Notes
10.25% due 10/01/13........................ 1,378,000 1,391,780
CCO Holdings LLC/CCO Holdings Capital Corp.
Senior Notes
8.75% due 11/15/13......................... 230,000 225,400
Comcast Corp.
Company Guar. Notes
5.85% due 11/15/15......................... 110,000 108,982
Comcast Corp.
Company Guar. Notes
5.88% due 02/15/18......................... 466,000 455,056
CSC Holdings, Inc.
Senior Notes
7.63% due 04/01/11......................... 95,000 93,575
Insight Communications Co., Inc.
Senior Notes
12.25% due 02/15/11........................ 280,000 288,050
----------
3,721,161
----------
Casino Hotels -- 0.8%
Circus & Eldorado Joint Venture
Mtg. Notes
10.13% due 03/01/12........................ 335,000 350,075
Eldorado Casino Corp.
Sec. Bonds
10.00% due 08/01/12(8)(11)................. 362,426 346,117
Eldorado Resorts LLC
Senior Notes
9.00% due 04/15/14(5)(8)................... 250,000 250,000
MGM Mirage, Inc.
Senior Notes
5.88% due 02/27/14......................... 560,000 513,800
Seminole Hard Rock Entertainment, Inc.
Sec. Notes
8.19% due 03/15/14*(4)..................... 70,000 67,900
Station Casinos, Inc.
Senior Sub. Notes
6.63% due 03/15/18......................... 50,000 40,250
Station Casinos, Inc.
Senior Sub. Notes
6.88% due 03/01/16......................... 410,000 343,375
Turning Stone Resort Casino Enterprise
Senior Notes
9.13% due 12/15/10*........................ 185,000 186,850
Turning Stone Resort Casino Enterprise
Senior Notes
9.13% due 09/15/14*........................ 285,000 287,850
----------
2,386,217
----------
Cellular Telecom -- 0.8%
American Cellular Corp.
Senior Notes
10.00% due 08/01/11........................ 82,000 85,075
Centennial Communications Corp.
Senior Notes
10.00% due 01/01/13........................ 253,000 264,385
Principal Value
Security Description Amount(16) (Note 2)
--------------------------------------------------------------------
Cellular Telecom (continued)
Centennial Communications Corp.
Senior Notes
11.11% due 01/01/13(4)............... 260,000 $ 266,500
Cingular Wireless Services, Inc.
Senior Notes
7.88% due 03/01/11................... 457,000 492,216
Cricket Communications, Inc.
Company Guar. Notes
9.38% due 11/01/14................... 85,000 83,300
Cricket Communications, Inc.
Company Guar. Notes
9.38% due 11/01/14*.................. 290,000 284,200
MetroPCS Wireless, Inc.
Senior Notes
9.25% due 11/01/14*.................. 375,000 369,375
Nextel Communications, Inc.
Company Guar. Notes
5.95% due 03/15/14................... 225,000 214,674
Rural Cellular Corp.
Senior Sub. Notes
8.62% due 06/01/13*(4)............... 275,000 280,500
Rural Cellular Corp.
Senior Notes
11.11% due 11/01/12(4)............... 115,000 118,450
----------
2,458,675
----------
Chemicals - Diversified -- 0.4%
Equistar Chemicals LP
Senior Notes
10.63% due 05/01/11.................. 43,000 45,365
ICI Wilmington, Inc.
Company Guar. Notes
7.05% due 09/15/07................... 77,000 77,011
Lyondell Chemical Co.
Company Guar. Notes
8.00% due 09/15/14................... 900,000 978,750
Rohm & Haas Co.
Senior Notes
7.85% due 07/15/29................... 68,000 76,224
----------
1,177,350
----------
Chemicals - Specialty -- 1.1%
Huntsman International LLC
Company Guar. Notes
7.38% due 01/01/15................... 480,000 494,400
Huntsman International LLC
Company Guar. Notes
7.88% due 11/15/14................... 395,000 412,775
Johnsondiversey Holdings, Inc.
Company Guar. Notes
9.63% due 05/15/12................... 155,000 155,775
Lubrizol Corp.
Senior Notes
4.63% due 10/01/09................... 650,000 640,215
Momentive Performance Materials, Inc.
Senior Sub. Notes
11.50% due 12/01/16*................. 860,000 821,300
Tronox Worldwide LLC
Company Guar. Notes
9.50% due 12/01/12................... 545,000 550,450
----------
3,074,915
----------
Commercial Services - Finance -- 0.1%
The Western Union Co.
Senior Notes
5.40% due 11/17/11................... 224,000 223,731
----------
75
VALIC Company II Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount(16) (Note 2)
------------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Computer Services -- 0.2%
Compucom Systems, Inc.
Senior Notes
12.00% due 11/01/14*..................... 230,000 $ 273,700
Computer Sciences Corp.
Notes
3.50% due 04/15/08....................... 45,000 44,357
Sungard Data Systems, Inc.
Company Guar. Notes
9.13% due 08/15/13....................... 155,000 160,037
----------
478,094
----------
Computers - Integrated Systems -- 0.0%
Activant Solutions, Inc.
Company Guar. Notes
9.50% due 05/01/16....................... 100,000 88,500
----------
Consumer Products - Misc. -- 0.2%
American Achievement Corp.
Senior Sub. Notes
8.25% due 04/01/12....................... 228,000 221,160
Jostens Holding Corp.
Senior Notes
10.25% due 12/01/13(10).................. 198,000 181,665
Prestige Brands, Inc.
Senior Sub. Notes
9.25% due 04/15/12....................... 75,000 74,437
Visant Holding Corp.
Senior Notes
8.75% due 12/01/13....................... 35,000 35,000
----------
512,262
----------
Containers - Metal/Glass -- 0.4%
Crown Cork & Seal Co., Inc.
Debentures
7.38% due 12/15/26....................... 140,000 127,400
Crown Cork & Seal Co., Inc.
Debentures
8.00% due 04/15/23....................... 510,000 487,050
Owens-Brockway Glass Container, Inc.
Company Guar. Notes
8.25% due 05/15/13....................... 545,000 558,625
Owens-Brockway Glass Container, Inc.
Company Guar. Notes
8.88% due 02/15/09....................... 57,000 57,926
----------
1,231,001
----------
Containers - Paper/Plastic -- 0.4%
Jefferson Smurfit Corp.
Company Guar. Notes
8.25% due 10/01/12....................... 280,000 273,700
Pliant Corp.
Company Guar. Notes
11.13% due 09/01/09...................... 453,000 409,965
Smurfit-Stone Container Enterprises, Inc.
Senior Notes
8.00% due 03/15/17....................... 565,000 538,869
----------
1,222,534
----------
Cosmetics & Toiletries -- 0.1%
Revlon Consumer Products Corp.
Senior Sub. Notes
8.63% due 02/01/08....................... 225,000 221,062
Principal Value
Security Description Amount(16) (Note 2)
- -------------------------------------------------------------------------------
Cosmetics & Toiletries (continued)
Revlon Consumer Products Corp.
Senior Notes
9.50% due 04/01/11.............................. 50,000 $ 46,500
----------
267,562
----------
Direct Marketing -- 0.1%
Affinity Group, Inc.
Senior Sub. Notes
9.00% due 02/15/12.............................. 336,000 349,440
----------
Distribution/Wholesale -- 0.2%
Varietal Distribution, Inc.
Senior Notes
10.25% due 07/15/15*............................ 475,000 441,750
----------
Diversified Financial Services -- 0.0%
AXA Financial, Inc.
Senior Notes
6.50% due 04/01/08.............................. 70,000 70,310
----------
Diversified Manufacturing Operations -- 0.2%
Harland Clarke Holdings Corp.
Company Guar. Notes
9.50% due 05/15/15.............................. 175,000 157,062
Harland Clarke Holdings Corp.
Company Guar. Notes
10.31% due 05/15/15(4).......................... 125,000 111,563
Indalex Holding Corp.
Sec. Notes
11.50% due 02/01/14............................. 260,000 243,750
----------
512,375
----------
Diversified Operations -- 0.0%
Capmark Financial Group, Inc.
Company Guar. Notes
5.88% due 05/10/12*............................. 85,000 75,280
----------
Electric - Generation -- 0.6%
Bruce Mansfield
Pass Through Certs.
6.85% due 06/01/34*............................. 220,000 228,074
Edison Mission Energy
Senior Notes
7.20% due 05/15/19*............................. 140,000 132,300
Edison Mission Energy
Senior Notes
7.50% due 06/15/13.............................. 150,000 151,125
Edison Mission Energy
Senior Notes
7.63% due 05/15/27*............................. 300,000 279,000
Edison Mission Energy
Senior Notes
7.75% due 06/15/16.............................. 260,000 261,950
Reliant Energy Mid - Atlantic Power Holdings LLC
Pass Through Certs. Series B
9.24% due 07/02/17.............................. 57,335 61,635
The AES Corp.
Sec. Notes
8.75% due 05/15/13*............................. 325,000 338,000
The AES Corp.
Senior Notes
8.88% due 02/15/11.............................. 235,000 241,463
----------
1,693,547
----------
Electric - Integrated -- 0.9%
Commonwealth Edison Co.
1st Mtg. Bonds
5.90% due 03/15/36.............................. 175,000 161,045
76
VALIC Company II Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount(16) (Note 2)
--------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Electric - Integrated (continued)
Commonwealth Edison Co.
1st Mtg. Bonds
5.95% due 08/15/16................ 400,000 $ 400,174
Dominion Resources, Inc.
Senior Notes
5.69% due 05/15/08................ 99,000 99,009
Dominion Resources, Inc.
Jr. Sub. Notes
6.30% due 09/30/66(4)............. 115,000 113,945
Duke Energy Corp.
Senior Notes
4.20% due 10/01/08................ 90,000 88,870
Duke Energy Indiana, Inc.
Debentures
5.00% due 09/15/13................ 65,000 62,825
Entergy Louisiana LLC
1st Mtg. Bonds
5.83% due 11/01/10................ 135,000 135,122
Mackinaw Power LLC
Secured Notes
6.30% due 10/31/23*............... 209,000 214,131
Mirant Americas Generation LLC
Senior Notes
8.30% due 05/01/11................ 575,000 567,812
Mirant Americas Generation LLC
Senior Notes
8.50% due 10/01/21................ 300,000 283,500
Nisource Finance Corp.
Company Guar. Notes
5.25% due 09/15/17................ 61,000 56,360
Pepco Holdings, Inc.
Senior Notes
6.45% due 08/15/12................ 245,000 254,309
PSEG Power LLC
Company Guar. Notes
7.75% due 04/15/11................ 40,000 42,894
PSI Energy, Inc.
Debentures
7.85% due 10/15/07................ 119,000 119,257
Puget Sound Energy, Inc.
Senior Notes
5.20% due 10/01/15................ 130,000 125,869
Southern Energy, Inc.
Notes
7.90% due 07/15/09+(5)(7)(8)...... 725,000 0
----------
2,725,122
----------
Electronic Components - Semiconductors -- 0.7%
Advanced Micro Devices, Inc.
Senior Notes
7.75% due 11/01/12................. 390,000 341,250
Amkor Technology, Inc.
Senior Notes
9.25% due 06/01/16................. 425,000 412,250
Freescale Semiconductor, Inc.
Senior Notes
9.13% due 12/15/14................. 335,000 299,825
Freescale Semiconductor, Inc.
Senior Sub. Notes
10.13% due 12/15/16................ 690,000 600,300
National Semiconductor Corp.
Senior Notes
6.60% due 06/15/17................. 180,000 184,801
Spansion, Inc.
Senior Notes
11.25% due 01/15/16*............... 190,000 180,025
----------
2,018,451
----------
Principal Value
Security Description Amount(16) (Note 2)
-----------------------------------------------------------------------
Electronics - Military -- 0.2%
L-3 Communications Corp.
Company Guar. Notes
6.13% due 07/15/13...................... 420,000 $ 406,350
L-3 Communications Corp.
Company Guar. Notes
6.38% due 10/15/15...................... 125,000 120,937
----------
527,287
----------
Energy - Alternate Sources -- 0.2%
Aventine Renewable Energy Holdings, Inc.
Company Guar. Notes
10.00% due 04/01/17..................... 235,000 220,900
VeraSun Energy Corp.
Senior Notes
9.38% due 06/01/17*..................... 95,000 88,113
VeraSun Energy Corp.
Sec. Notes
9.88% due 12/15/12...................... 235,000 240,287
----------
549,300
----------
Finance - Auto Loans -- 1.1%
Ford Motor Credit Co. LLC
Notes
7.38% due 10/28/09...................... 2,085,000 1,972,965
Ford Motor Credit Co. LLC
Notes
7.88% due 06/15/10...................... 225,000 211,228
General Motors Acceptance Corp.
Notes
6.88% due 09/15/11...................... 390,000 347,826
General Motors Acceptance Corp.
Notes
6.88% due 08/28/12...................... 5,000 4,417
General Motors Acceptance Corp.
Notes
7.56% due 12/01/14(4)................... 330,000 278,865
GMAC LLC
Senior Notes
6.00% due 12/15/11...................... 300,000 257,940
----------
3,073,241
----------
Finance - Commercial -- 0.1%
Caterpillar Financial Services Corp.
Senior Notes
5.85% due 09/01/17...................... 140,000 140,203
Transamerica Finance Corp.
Senior Notes
6.40% due 09/15/08...................... 33,000 33,274
----------
173,477
----------
Finance - Consumer Loans -- 0.1%
John Deere Capital Corp.
Debentures
5.10% due 01/15/13...................... 384,000 379,592
----------
Finance - Credit Card -- 0.2%
Capital One Bank
Senior Sub. Notes
6.50% due 06/13/13...................... 433,000 441,521
----------
Finance - Investment Banker/Broker -- 0.5%
Citigroup, Inc.
Senior Notes
5.88% due 05/29/37...................... 100,000 94,694
Citigroup, Inc.
Senior Notes
6.00% due 08/15/17...................... 144,000 145,759
77
VALIC Company II Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount(16) (Note 2)
--------------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Finance - Investment Banker/Broker (continued)
Goldman Sachs Group, Inc.
Sub. Notes
6.45% due 05/01/36......................... 110,000 $ 106,098
JP Morgan Chase & Co.
Senior Notes
5.38% due 01/15/14......................... 180,000 179,078
Lehman Brothers Holdings, Inc.
Sub. Notes
6.50% due 07/19/17......................... 110,000 108,299
Lehman Brothers Holdings, Inc.
Sub. Notes
6.88% due 07/17/37......................... 246,000 231,106
Merrill Lynch & Co., Inc.
Sub. Notes
6.11% due 01/29/37......................... 100,000 92,766
Morgan Stanley
Senior Notes
5.75% due 08/31/12......................... 215,000 214,711
The Bear Stearns Cos., Inc.
Sub. Notes
5.55% due 01/22/17......................... 395,000 363,668
----------
1,536,179
----------
Finance - Mortgage Loan/Banker -- 0.3%
Countrywide Financial Corp.
Company Guar. Notes
5.80% due 06/07/12......................... 13,000 12,217
Countrywide Financial Corp.
Sub. Notes
6.25% due 05/15/16......................... 109,000 96,735
Residential Capital LLC
Senior Notes
6.50% due 06/01/12......................... 297,000 225,720
Residential Capital LLC
Company Guar. Notes
6.50% due 04/17/13......................... 232,000 174,580
Residential Capital LLC
Company Guar. Notes
6.88% due 06/30/15......................... 291,000 219,705
----------
728,957
----------
Food - Meat Products -- 0.1%
Smithfield Foods, Inc.
Senior Notes
7.00% due 08/01/11......................... 55,000 55,000
Smithfield Foods, Inc.
Senior Notes
7.75% due 07/01/17......................... 250,000 251,250
----------
306,250
----------
Food - Misc. -- 0.3%
Del Monte Corp.
Company Guar. Notes
6.75% due 02/15/15......................... 140,000 133,000
Kraft Foods, Inc.
Senior Bonds
5.63% due 11/01/11......................... 189,000 189,782
Kraft Foods, Inc.
Senior Notes
7.00% due 08/11/37......................... 253,000 260,409
Wornick Co.
Sec. Notes
10.88% due 07/15/11+(14)................... 225,000 164,250
----------
747,441
----------
Principal Value
Security Description Amount(16) (Note 2)
----------------------------------------------------------------------
Funeral Services & Related Items -- 0.3%
Service Corp. International
Senior Notes
6.75% due 04/01/16..................... 50,000 $ 47,125
Service Corp. International
Senior Notes
7.00% due 06/15/17..................... 125,000 118,125
Service Corp. International
Senior Notes
7.38% due 10/01/14..................... 285,000 286,425
Service Corp. International
Senior Notes
7.63% due 10/01/18..................... 285,000 286,425
Stewart Enterprises, Inc.
Senior Notes
6.25% due 02/15/13..................... 260,000 249,600
----------
987,700
----------
Gambling (Non - Hotel) -- 0.3%
Greektown Holdings LLC
Senior Notes
10.75% due 12/01/13*................... 335,000 335,000
Jacobs Entertainment, Inc.
Company Guar. Bonds
9.75% due 06/15/14..................... 250,000 249,375
Shingle Springs Tribal Gaming Authority
Senior Notes
9.38% due 06/15/15*.................... 100,000 98,500
Waterford Gaming LLC
Senior Notes
8.63% due 09/15/12*.................... 70,000 71,400
----------
754,275
----------
Gas - Distribution -- 0.0%
Colorado Interstate Gas Co.
Senior Debentures
6.85% due 06/15/37..................... 75,000 73,690
----------
Golf -- 0.1%
True Temper Sports, Inc.
Company Guar. Notes
8.38% due 09/15/11..................... 310,000 241,800
----------
Home Furnishings -- 0.1%
Simmons Co.
Senior Notes
10.00% due 12/15/14(10)................ 450,000 349,875
----------
Hotel/Motel -- 0.1%
Gaylord Entertainment Co.
Company Guar. Notes
6.75% due 11/15/14..................... 260,000 247,000
----------
Human Resources -- 0.0%
Team Health, Inc.
Company Guar. Notes
11.25% due 12/01/13.................... 65,000 68,900
----------
Independent Power Producers -- 1.1%
Calpine Corp.
Sec. Notes
8.75% due 07/15/13*(12)................ 1,615,000 1,703,825
NRG Energy, Inc.
Company Guar. Notes
7.38% due 02/01/16..................... 725,000 715,937
Orion Power Holdings, Inc.
Senior Notes
12.00% due 05/01/10.................... 30,000 32,700
78
VALIC Company II Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount(16) (Note 2)
-------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Independent Power Producers (continued)
Reliant Energy, Inc.
Company Guar. Notes
6.75% due 12/15/14.................. 200,000 $ 198,000
Reliant Energy, Inc.
Senior Notes
7.63% due 12/31/14.................. 180,000 176,400
Reliant Energy, Inc
Senior Notes
7.88% due 12/31/17.................. 310,000 303,025
----------
3,129,887
----------
Insurance Brokers -- 0.1%
Marsh & McLennan Cos., Inc.
Senior Notes
5.15% due 09/15/10.................. 65,000 64,514
Marsh & McLennan Cos., Inc.
Senior Notes
7.13% due 06/15/09.................. 35,000 36,113
USI Holdings Corp.
Senior Notes
9.43% due 11/15/14*(4).............. 125,000 116,250
USI Holdings Corp.
Senior Sub. Notes
9.75% due 05/15/15*................. 95,000 86,925
----------
303,802
----------
Insurance - Life/Health -- 0.0%
Americo Life, Inc.
Notes
7.88% due 05/01/13*................. 28,000 28,674
Monumental Global Funding II
Notes
5.65% due 07/14/11*................. 60,000 61,323
----------
89,997
----------
Insurance - Multi - line -- 0.0%
Metropolitan Life Global Funding I
Sec. Notes
5.75% due 07/25/11*................. 50,000 51,194
----------
Insurance - Property/Casualty -- 0.1%
The Travelers Cos., Inc.
Senior Notes
6.25% due 06/15/37.................. 170,000 165,058
----------
Machinery - Farming -- 0.1%
Case Corp.
Notes
7.25% due 01/15/16.................. 185,000 186,850
Case New Holland, Inc.
Senior Notes
6.00% due 06/01/09.................. 175,000 174,125
----------
360,975
----------
Machinery - General Industrial -- 0.1%
Stewart & Stevenson LLC
Company Guar. Notes
10.00% due 07/15/14................. 150,000 151,500
----------
Medical Information Systems -- 0.1%
Spheris, Inc.
Senior Sub. Notes
11.00% due 12/15/12................. 400,000 395,000
----------
Medical Products -- 0.4%
Baxter International, Inc.
Senior Notes
5.90% due 09/01/16.................. 400,000 406,123
Johnson & Johnson
Notes
5.95% due 08/15/37.................. 216,000 219,950
Principal Value
Security Description Amount(16) (Note 2)
-------------------------------------------------------------------------
Medical Products (continued)
ReAble Therapeutics Finance LLC / ReAble
Therapeutics Finance Corp.
Company Guar. Notes
11.75% due 11/15/14....................... 335,000 $ 321,600
Universal Hospital Services, Inc.
Sec. Bonds
8.50% due 06/01/15*....................... 125,000 118,750
Universal Hospital Services, Inc.
Senior Notes
8.76% due 06/01/15*(4).................... 185,000 178,525
----------
1,244,948
----------
Medical - Biomedical/Gene -- 0.0%
Bio - Rad Laboratories, Inc.
Senior Sub. Notes
6.13% due 12/15/14........................ 10,000 9,200
----------
Medical - Drugs -- 0.2%
American Home Products Corp.
Notes
6.95% due 03/15/11........................ 131,000 138,618
Wyeth
Bonds
5.50% due 02/01/14........................ 478,000 477,619
----------
616,237
----------
Medical - HMO -- 0.2%
Multiplan, Inc.
Senior Sub. Notes
10.38% due 04/15/16*...................... 400,000 392,000
WellPoint, Inc.
Notes
3.75% due 12/14/07........................ 277,282 275,635
----------
667,635
----------
Medical - Hospitals -- 1.4%
Community Health Systems, Inc.
Senior Notes
8.88% due 07/15/15*....................... 1,240,000 1,238,450
HCA, Inc.
Senior Notes
6.25% due 02/15/13........................ 310,000 265,825
HCA, Inc.
Sec. Notes
9.13% due 11/15/14*....................... 275,000 281,875
HCA, Inc.
Sec. Notes
9.25% due 11/15/16*....................... 1,725,000 1,772,437
HCA, Inc.
Sec. Notes
9.63% due 11/15/16*....................... 185,000 191,244
IASIS Healthcare LLC / IASIS Capital Corp.
Bank Guar. Notes
8.75% due 06/15/14........................ 200,000 195,000
----------
3,944,831
----------
Medical - Nursing Homes -- 0.1%
Sun Healthcare Group, Inc.
Senior Sub. Notes
9.13% due 04/15/15*....................... 225,000 225,000
----------
Medical - Wholesale Drug Distribution -- 0.2%
Cardinal Health, Inc.
Senior Notes
5.80% due 10/15/16*....................... 648,000 642,539
----------
79
VALIC Company II Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount(16) (Note 2)
---------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Metal Processors & Fabrication -- 0.1%
Commercial Metals Co.
Senior Notes
6.50% due 07/15/17.................... 175,000 $ 182,351
Metals USA, Inc.
Sec. Notes
11.13% due 12/01/15................... 150,000 159,750
----------
342,101
----------
Metal - Aluminum -- 0.1%
Alcoa, Inc.
Notes
6.00% due 01/15/12.................... 114,000 116,483
Alcoa, Inc.
Bonds
6.50% due 06/15/18.................... 221,000 228,763
----------
345,246
----------
Metal - Diversified -- 0.6%
Freeport - McMoRan Copper & Gold, Inc.
Senior Notes
8.25% due 04/01/15.................... 395,000 418,700
Freeport - McMoRan Copper & Gold, Inc.
Senior Notes
8.38% due 04/01/17.................... 660,000 702,900
Noranda Aluminium Acquisition Corp.
Senior Notes
9.36% due 05/15/15*(4)................ 485,000 455,900
Noranda Aluminium Holding Corp.
Senior Notes
11.15% due 11/15/14*(4)............... 200,000 194,000
----------
1,771,500
----------
Mining -- 0.0%
Newmont Mining Corp.
Company Guar. Notes
5.88% due 04/01/35.................... 85,000 74,470
----------
Multimedia -- 0.4%
Belo Corp.
Senior Notes
6.75% due 05/30/13.................... 45,000 46,103
Haights Cross Operating Co.
Company Guar. Senior Notes
11.75% due 08/15/11................... 100,000 102,875
News America, Inc.
Company Guar. Bonds
7.30% due 04/30/28.................... 383,000 398,692
Time Warner Entertainment Co. LP
Senior Notes
8.38% due 07/15/33.................... 203,000 235,600
Viacom, Inc.
Senior Notes
6.88% due 04/30/36.................... 383,000 372,961
----------
1,156,231
----------
Networking Products -- 0.0%
Cisco Systems, Inc.
Senior Notes
5.50% due 02/22/16.................... 131,000 130,472
----------
Non - Ferrous Metals -- 0.0%
Renco Metals, Inc.
Bonds
11.50% due 07/01/03+(5)(8)(12)(17).... 75,000 0
----------
Principal Value
Security Description Amount(16) (Note 2)
--------------------------------------------------------------------------
Non - Hazardous Waste Disposal -- 0.2%
Waste Management, Inc.
Company Guar. Notes
6.88% due 05/15/09........................... 330,000 $340,257
Waste Management, Inc.
Company Guar. Notes
7.75% due 05/15/32........................... 85,000 94,256
--------
434,513
--------
Office Automation & Equipment -- 0.3%
IKON Office Solutions, Inc.
Senior Notes
7.75% due 09/15/15........................... 700,000 695,625
Pitney Bowes, Inc.
Notes
5.25% due 01/15/37........................... 219,000 212,660
--------
908,285
--------
Oil & Gas Drilling -- 0.1%
Pride International, Inc.
Senior Notes
7.38% due 07/15/14........................... 235,000 237,350
--------
Oil Companies - Exploration & Production -- 1.4%
Anadarko Petroleum Corp.
Senior Notes
5.95% due 09/15/16........................... 170,000 169,060
Apache Corp.
Senior Notes
6.25% due 04/15/12........................... 600,000 626,480
Belden & Blake Corp.
Company Guar. Sec. Notes
8.75% due 07/15/12........................... 100,000 100,000
Brigham Exploration Co.
Company Guar. Notes
9.63% due 05/01/14........................... 335,000 315,737
Chaparral Energy, Inc.
Company Guar. Notes
8.50% due 12/01/15........................... 285,000 255,075
Chesapeake Energy Corp.
Senior Notes
6.25% due 01/15/18........................... 425,000 397,906
Chesapeake Energy Corp.
Senior Notes
6.63% due 01/15/16........................... 185,000 178,988
Chesapeake Energy Corp.
Company Guar. Notes
6.88% due 11/15/20........................... 75,000 72,000
Dune Energy, Inc.
Sec. Notes
10.50% due 06/01/12*......................... 145,000 136,300
Encore Acquisition Co.
Senior Sub. Notes
6.00% due 07/15/15........................... 310,000 272,800
Encore Acquisition Co.
Senior Sub. Notes
6.25% due 04/15/14........................... 135,000 123,188
Energy Partners, Ltd.
Senior Notes
9.75% due 04/15/14*.......................... 125,000 116,250
Exco Resources, Inc.
Company Guar. Notes
7.25% due 01/15/11........................... 65,000 65,488
Hilcorp Energy I LP
Senior Notes
7.75% due 11/01/15*.......................... 410,000 392,575
80
VALIC Company II Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount(16) (Note 2)
- -----------------------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Oil Companies - Exploration & Production (continued)
Quicksilver Resources, Inc.
Company Guar. Notes
7.13% due 04/01/16............................... 160,000 $ 152,800
Sabine Pass LNG LP
Secured Notes
7.25% due 11/30/13............................... 210,000 203,700
Sabine Pass LNG LP
Secured Notes
7.50% due 11/30/16............................... 415,000 403,587
Transmeridian Exploration, Inc.
Company Guar. Notes
12.00% due 12/15/10.............................. 195,000 179,888
----------
4,161,822
----------
Oil Companies - Integrated -- 0.3%
Hess Corp.
Notes
7.13% due 03/15/33............................... 447,000 476,342
Hess Corp.
Bonds
7.88% due 10/01/29............................... 160,000 182,504
Phillips Petroleum Co.
Debentures
7.00% due 03/30/29............................... 290,000 317,374
----------
976,220
----------
Oil Refining & Marketing -- 0.1%
The Premcor Refining Group, Inc.
Company Guar. Notes
6.75% due 05/01/14............................... 180,000 186,281
Valero Energy Corp.
Senior Notes
6.63% due 06/15/37............................... 190,000 191,578
----------
377,859
----------
Oil - Field Services -- 0.2%
Allis - Chalmers Energy, Inc.
Company Guar. Notes
9.00% due 01/15/14............................... 200,000 199,000
Oslo Seismic Services, Inc.
1st Mtg. Bonds
8.28% due 06/01/11............................... 105,266 108,400
Weatherford International, Inc.
Company Guar. Notes
6.80% due 06/15/37*.............................. 163,000 166,774
----------
474,174
----------
Paper & Related Products -- 0.3%
Bowater, Inc.
Notes
6.50% due 06/15/13............................... 275,000 213,125
Caraustar Industries, Inc.
Notes
7.38% due 06/01/09............................... 335,000 291,869
Georgia - Pacific Corp.
Company Guar. Notes
7.00% due 01/15/15*.............................. 325,000 307,125
Georgia - Pacific Corp.
Company Guar. Notes
7.13% due 01/15/17*.............................. 110,000 103,400
----------
915,519
----------
Physical Therapy/Rehabilation Centers -- 0.0%
Psychiatric Solutions, Inc.
Senior Sub. Notes
7.75% due 07/15/15*.............................. 100,000 98,000
----------
Principal Value
Security Description Amount(16) (Note 2)
-------------------------------------------------------------------
Physicians Practice Management -- 0.1%
US Oncology, Inc.
Company Guar. Notes
10.75% due 08/15/14................. 140,000 $ 140,700
----------
Pipelines -- 1.4%
Atlas Pipeline Partners LP
Company Guar. Notes
8.13% due 12/15/15.................. 260,000 258,050
CenterPoint Energy Resources Corp.
Notes
7.75% due 02/15/11.................. 330,000 350,232
Copano Energy LLC
Company Guar. Notes
8.13% due 03/01/16.................. 360,000 361,800
Duke Energy Field Services LLC
Notes
6.88% due 02/01/11.................. 50,000 52,011
Dynegy Holdings, Inc.
Senior Notes
8.75% due 02/15/12.................. 360,000 363,600
Dynegy-Roseton Danskammer
Pass Through Certs. Series B
7.67% due 11/08/16.................. 310,000 307,288
El Paso Corp.
Senior Sub. Notes
6.88% due 06/15/14.................. 325,000 327,437
El Paso Natural Gas Co.
Debentures
8.63% due 01/15/22.................. 275,000 319,430
MarkWest Energy Partners LP
Senior Notes
6.88% due 11/01/14.................. 235,000 219,725
MarkWest Energy Partners LP
Company Guar. Notes
8.50% due 07/15/16.................. 310,000 308,450
NGC Corp Capital Trust
Guar. Bonds
8.32% due 06/01/27.................. 375,000 333,750
Tennessee Gas Pipeline Co.
Debentures
7.00% due 10/15/28.................. 200,000 201,321
Transcontinental Gas Pipe Line Corp.
Notes
7.00% due 08/15/11.................. 100,000 104,250
Williams Cos., Inc.
Senior Notes
7.88% due 09/01/21.................. 660,000 707,850
----------
4,215,194
----------
Poultry -- 0.0%
Pilgrim's Pride Corp.
Senior Sub. Notes
8.38% due 05/01/17.................. 120,000 120,300
----------
Printing - Commercial -- 0.1%
Valassis Communications, Inc.
Company Guar. Notes
8.25% due 03/01/15.................. 310,000 263,500
----------
Publishing - Books -- 0.1%
TL Acquisitions, Inc.
Senior Notes
10.50% due 01/15/15*................ 150,000 140,625
----------
Publishing - Newspapers -- 0.1%
Knight Ridder, Inc.
Debentures
6.88% due 03/15/29.................. 146,000 118,595
81
VALIC Company II Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount(16) (Note 2)
--------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Publishing - Newspapers (continued)
Medianews Group, Inc.
Senior Sub. Notes
6.88% due 10/01/13................... 80,000 $ 63,600
----------
182,195
----------
Publishing - Periodicals -- 0.1%
The Reader's Digest Association, Inc.
Senior Sub. Notes
9.00% due 02/15/17*.................. 495,000 425,700
----------
Real Estate Investment Trusts -- 0.3%
Health Care Property Investors, Inc.
Senior Notes
5.65% due 12/15/13................... 291,000 285,189
New Plan Excel Realty Trust
Senior Notes
4.50% due 02/01/11................... 164,000 161,174
Omega Healthcare Investors, Inc.
Senior Notes
7.00% due 04/01/14................... 310,000 303,800
PPF Funding, Inc.
Bonds
5.35% due 04/15/12*.................. 80,000 78,609
Reckson Operating Partnership LP
Senior Notes
6.00% due 03/31/16................... 25,000 23,986
Simon Property Group LP
Notes
5.38% due 08/28/08................... 40,000 39,647
Vornado Realty LP
Notes
4.50% due 08/15/09................... 65,000 63,731
----------
956,136
----------
Recycling -- 0.3%
Aleris International, Inc.
Company Guar. Notes
9.00% due 12/15/14................... 435,000 414,337
Aleris International, Inc.
Company Guar. Notes
10.00% due 12/15/16.................. 360,000 335,700
----------
750,037
----------
Rental Auto/Equipment -- 0.4%
Erac USA Finance Co.
Notes
7.35% due 06/15/08*.................. 210,000 211,969
H&E Equipment Services, Inc.
Company Guar. Notes
8.38% due 07/15/16................... 285,000 292,125
United Rentals North America, Inc.
Senior Sub. Notes
7.75% due 11/15/13................... 510,000 525,300
----------
1,029,394
----------
Research & Development -- 0.1%
Alion Science and Technology Corp.
Company Guar. Notes
10.25% due 02/01/15.................. 240,000 229,200
----------
Retail - Discount -- 0.2%
Dollar General Corp.
Senior Notes
10.63% due 07/15/15*................. 425,000 382,500
Wal - Mart Stores, Inc.
Senior Notes
5.88% due 04/05/27................... 180,000 172,818
Principal Value
Security Description Amount(16) (Note 2)
-------------------------------------------------------------------------
Retail - Discount (continued)
Wal - Mart Stores, Inc.
Senior Notes
6.50% due 08/15/37........................ 125,000 $ 128,177
----------
683,495
----------
Retail - Drug Store -- 0.5%
CVS Caremark Corp.
Senior Notes
6.25% due 06/01/27........................ 190,000 183,100
CVS Lease Pass Through Trust
Pass Through Certs.
6.04% due 12/10/28*....................... 364,655 355,586
General Nutrition Centers, Inc.
Senior Notes
9.80% due 03/15/14*(4).................... 170,000 161,500
Rite Aid Corp.
Company Guar. Notes
9.50% due 06/15/17*....................... 760,000 689,700
----------
1,389,886
----------
Retail - Major Department Stores -- 0.1%
Saks, Inc.
Company Guar. Notes
9.88% due 10/01/11........................ 150,000 157,500
----------
Retail - Music Store -- 0.0%
MTS, Inc.
Senior Notes
10.00% due 03/15/09+(5)(7)(8)(11)(12)(14). 16,572 4,309
----------
Retail - Petroleum Products -- 0.1%
Ferrellgas LP
Senior Notes
6.75% due 05/01/14........................ 435,000 413,250
----------
Retail - Regional Department Stores -- 0.0%
Federated Retail Holdings, Inc.
Company Guar. Notes
5.90% due 12/01/16........................ 85,000 81,889
JC Penney Corp., Inc.
Senior Notes
5.75% due 02/15/18........................ 19,000 18,349
----------
100,238
----------
Retail - Restaurants -- 0.1%
Dave & Buster's, Inc.
Company Guar. Notes
11.25% due 03/15/14....................... 210,000 200,550
NPC International, Inc.
Company Guar. Notes
9.50% due 05/01/14........................ 205,000 189,625
----------
390,175
----------
Rubber - Tires -- 0.1%
Cooper Standard Automotive, Inc.
Company Guar. Notes
8.38% due 12/15/14........................ 210,000 181,650
----------
Rubber/Plastic Products -- 0.0%
Venture Holdings Co. LLC
Company Guar. Notes
11.00% due 06/01/07+(8)(15)(20)........... 25,000 75
----------
Savings & Loans/Thrifts -- 0.4%
Independence Community Bank Corp.
Sub. Notes
3.50% due 06/20/13(4)..................... 48,000 47,335
Sovereign Bancorp, Inc.
Senior Notes
4.80% due 09/01/10........................ 120,000 118,073
82
VALIC Company II Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount(16) (Note 2)
-----------------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Savings & Loans/Thrifts (continued)
Washington Mutual Bank
Sub. Notes
5.13% due 01/15/15............................ 300,000 $ 272,549
Washington Mutual Preferred Funding III
Bonds
6.90% due 06/15/12*(4)(9)..................... 200,000 204,803
Washington Mutual, Inc.
Senior Notes
5.50% due 08/24/11............................ 280,000 273,602
Western Financial Bank
Senior Debentures
9.63% due 05/15/12............................ 92,000 98,795
----------
1,015,157
----------
Soap & Cleaning Preparation -- 0.0%
Johnsondiversey Holdings, Inc.
Notes
10.67% due 05/15/13........................... 25,000 25,125
----------
Special Purpose Entities -- 1.3%
AAC Group Holding Corp.
Senior Notes
10.25% due 10/01/12(10)....................... 175,000 150,500
AMR HoldCo, Inc./EmCare HoldCo, Inc.
Senior Sub. Notes
10.00% due 02/15/15........................... 100,000 106,000
BAE Systems Holdings, Inc.
Notes
5.20% due 08/15/15*........................... 478,000 467,564
Capital One Capital IV
Company Guar. Bonds
6.75% due 02/17/37(4)......................... 85,000 70,955
CCM Merger, Inc.
Notes
8.00% due 08/01/13*........................... 285,000 272,175
Chukchansi Economic Development Authority
Senior Notes
8.86% due 11/15/12*(4)........................ 75,000 75,188
Consolidated Communications Illinois/Texas
Holdings, Inc.
Senior Notes
9.75% due 04/01/12............................ 151,000 151,000
Cyrus Reinsurance Holdings SPC
Senior Notes
6.36% due 09/01/08*(4)(5)..................... 76,000 76,000
Hawker Beechcraft Acquisition Co. LLC / Hawker
Beechcraft Notes Co.
Senior Sub. Notes
9.75% due 04/01/17*........................... 235,000 232,650
Hexion US Fin Corp.
Company Guar. Notes
9.75% due 11/15/14............................ 180,000 194,400
ING USA Global Funding Trust
Notes
4.25% due 10/01/10............................ 80,000 78,846
KAR Holdings, Inc.
Senior Notes
8.75% due 05/01/14*........................... 100,000 90,000
KAR Holdings, Inc.
Senior Notes
9.36% due 05/01/14*(4)........................ 210,000 186,900
Local TV Finance LLC
Senior Notes
9.25% due 06/15/15*........................... 175,000 160,125
MedCath Holdings Corp.
Senior Notes
9.88% due 07/15/12............................ 92,000 96,600
Principal Value
Security Description Amount(16) (Note 2)
------------------------------------------------------------------
Special Purpose Entities (continued)
MXEnergy Holdings, Inc.
Senior Notes
12.81% due 08/01/11*(4)............ 245,000 $ 230,300
Norbord Delaware GP I
Company Guar. Notes
6.45% due 02/15/17*................ 58,000 54,326
PNA Intermediate Holding Corp.
Senior Notes
12.56% due 02/15/13*(4)............ 160,000 154,000
Pricoa Global Funding I
Notes
5.30% due 09/27/13*................ 100,000 100,531
Principal Life Global Funding I
Sec. Notes
5.25% due 01/15/13*................ 163,000 162,875
Seitel Acquisition Corp.
Senior Notes
9.75% due 02/15/14*................ 235,000 216,787
Snoqualmie Entertainment Authority
Sec. Notes
9.06% due 02/01/14*(4)............. 25,000 24,406
Snoqualmie Entertainment Authority
Notes
9.13% due 02/01/15*................ 150,000 146,438
Southern Star Central Corp.
Senior Notes
6.75% due 03/01/16................. 75,000 72,000
Visant Corp.
Company Guar. Notes
7.63% due 10/01/12................. 300,000 300,750
----------
3,871,316
----------
Specified Purpose Acquisitions -- 0.1%
ESI Tractebel Acquisition Corp.
Company Guar. Bonds
7.99% due 12/30/11................. 209,000 214,838
----------
Steel - Producers -- 0.4%
Chaparral Steel Co.
Company Guar. Notes
10.00% due 07/15/13................ 175,000 198,625
International Steel Group, Inc.
Senior Notes
6.50% due 04/15/14................. 210,000 210,877
Reliance Steel & Aluminum Co.
Company Guar. Notes
6.85% due 11/15/36................. 380,000 380,904
Steel Dynamics, Inc.
Senior Notes
6.75% due 04/01/15*................ 310,000 298,375
United States Steel Corp.
Senior Notes
6.65% due 06/01/37................. 84,000 79,827
----------
1,168,608
----------
Steel - Specialty -- 0.0%
Allegheny Technologies, Inc.
Notes
8.38% due 12/15/11................. 50,000 52,688
----------
Storage/Warehousing -- 0.1%
Mobile Mini, Inc.
Company Guar. Notes
6.88% due 05/01/15................. 140,000 134,400
Mobile Services Group, Inc.
Senior Notes
9.75% due 08/01/14*................ 75,000 75,562
----------
209,962
----------
83
VALIC Company II Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount(16) (Note 2)
-----------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Telecom Services -- 0.5%
Cincinnati Bell Telephone Co.
Company Guar. Notes
7.18% due 12/15/23...................... 25,000 $ 24,000
Cincinnati Bell Telephone Co.
Company Guar. Notes
7.20% due 11/29/23...................... 125,000 118,750
Insight Midwest LP
Senior Notes
9.75% due 10/01/09...................... 26,000 26,000
MasTec, Inc.
Senior Notes
7.63% due 02/01/17...................... 150,000 149,250
PAETEC Holding Corp.
Senior Notes
9.50% due 07/15/15*..................... 420,000 411,600
Qwest Corp.
Senior Notes
7.50% due 10/01/14...................... 375,000 384,375
Verizon Global Funding Corp.
Senior Notes
6.88% due 06/15/12...................... 200,000 212,258
----------
1,326,233
----------
Telephone - Integrated -- 1.4%
AT&T Corp.
Senior Notes
7.30% due 11/15/11...................... 344,000 368,467
BellSouth Corp.
Senior Notes
6.00% due 10/15/11...................... 600,000 612,867
Cincinnati Bell, Inc.
Senior Notes
7.25% due 06/15/23...................... 25,000 23,750
Cincinnati Bell, Inc.
Company Guar. Notes
8.38% due 01/15/14...................... 385,000 381,150
Citizens Communications Co.
Senior Notes
7.13% due 03/15/19...................... 285,000 271,463
Citizens Communications Co.
Senior Notes
9.00% due 08/15/31...................... 547,000 537,428
GTE Northwest, Inc.
Debentures
5.55% due 10/15/08...................... 40,000 40,052
Level 3 Financing, Inc.
Company Guar. Notes
9.25% due 11/01/14...................... 200,000 192,500
New England Telephone & Telegraph Co.
Debentures
7.88% due 11/15/29...................... 50,000 55,863
Qwest Communications International, Inc.
Company Guar. Notes
7.50% due 02/15/14...................... 995,000 977,587
Southwestern Bell Telephone Co.
Notes
6.55% due 10/07/08...................... 200,000 202,067
Sprint Capital Corp.
Company Guar. Notes
6.88% due 11/15/28...................... 338,000 328,998
Verizon New York, Inc.
Debentures
6.88% due 04/01/12...................... 130,000 136,974
----------
4,129,166
----------
Principal Value
Security Description Amount(16) (Note 2)
------------------------------------------------------------------
Television -- 0.7%
Allbritton Communications Co.
Senior Sub. Notes
7.75% due 12/15/12................. 385,000 $ 376,337
Bonten Media Acquisition Co.
Company Guar. Notes
9.00% due 06/01/15*................ 75,000 65,250
LIN Television Corp.
Senior Sub. Notes
6.50% due 05/15/13................. 275,000 258,500
Paxson Communication Corp.
Sec. Senior Notes
11.61% due 01/15/13*(4)............ 830,000 830,000
Univision Communications, Inc.
Company Guar. Notes
3.50% due 10/15/07................. 45,000 44,775
Young Broadcasting, Inc.
Senior Sub. Notes
8.75% due 01/15/14................. 210,000 175,613
Young Broadcasting, Inc.
Company Guar. Notes
10.00% due 03/01/11................ 360,000 324,000
----------
2,074,475
----------
Theaters -- 0.4%
AMC Entertainment, Inc.
Senior Sub. Notes
8.00% due 03/01/14................. 825,000 763,125
Cinemark, Inc.
Senior Notes
9.75% due 03/15/14(10)............. 535,000 494,875
----------
1,258,000
----------
Transactional Software -- 0.1%
Open Solutions, Inc.
Senior Sub. Notes
9.75% due 02/01/15*................ 365,000 346,750
----------
Transport - Air Freight -- 0.6%
Atlas Air, Inc. Pass Through Certs.
Series 1991-1, Class A-2
6.88% due 01/02/11................. 147,460 143,036
Atlas Air, Inc. Pass Through Certs.
Series 1991-1, Class A-1
7.20% due 01/02/19................. 357,900 347,163
Atlas Air, Inc. Pass Through Certs.
Series 1991-1, Class B
7.63% due 01/02/15................. 486,267 533,678
Atlas Air, Inc. Pass Through Certs.
Series 2000-1, Class A
8.71% due 01/02/19................. 461,238 484,300
Atlas Air, Inc. Pass Through Certs.
Series 1991-1, Class C
8.77% due 01/02/11................. 37,457 35,210
Atlas Air, Inc. Pass Through Certs.
Series 2000-1, Class B
9.06% due 07/02/17................. 197,175 234,639
----------
1,778,026
----------
Transport - Rail -- 0.2%
BNSF Funding Trust I
Company Guar. Bonds
6.61% due 12/15/55(4).............. 170,000 150,963
Union Pacific Corp.
Notes
3.88% due 02/15/09................. 326,000 321,222
84
VALIC Company II Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount(16) (Note 2)
-----------------------------------------------------------------------------
CORPORATE BONDS & NOTES (continued)
Transport - Rail (continued)
Union Pacific Corp.
Debentures
7.00% due 02/01/16.......................... 48,000 $ 51,419
------------
523,604
------------
Transport - Services -- 0.1%
Bristow Group, Inc.
Senior Notes
7.50% due 09/15/17*......................... 80,000 79,600
FedEx Corp.
Company Guar. Notes
5.50% due 08/15/09.......................... 45,000 45,347
PHI, Inc.
Company Guar. Notes
7.13% due 04/15/13.......................... 130,000 121,875
Ryder System, Inc.
Notes
5.85% due 03/01/14.......................... 43,000 43,299
------------
290,121
------------
Transport - Truck -- 0.1%
Saint Acquisition Corp.
Sec. Senior Notes
13.31% due 05/15/15*(4)..................... 110,000 76,450
Swift Acquisition Corp.
Sec. Notes
12.50% due 05/15/17*........................ 115,000 77,912
------------
154,362
------------
Travel Services -- 0.1%
Travelport LLC
Company Guar. Notes
9.88% due 09/01/14.......................... 285,000 287,494
Travelport LLC
Company Guar. Notes
9.99% due 09/01/14(4)....................... 85,000 85,425
------------
372,919
------------
Total Corporate Bonds & Notes
(cost $104,081,381)......................... 101,066,654
------------
FOREIGN CORPORATE BONDS & NOTES -- 4.9%
Banks - Commercial -- 0.1%
Banco Continental de Panama SA
Notes
6.63% due 12/01/10*......................... 15,000 15,300
Caisse Nationale des Caisses d'Epargne et de
Prevoyance
Notes
5.39% due 12/30/09(4)(9).................... 78,000 62,956
Credit Agricole SA
Jr. Sub. Notes
6.64% due 05/31/17*(4)(9)................... 203,000 191,269
Societe Generale
Sub. Notes
5.92% due 04/05/17*(4)(9)................... 90,000 86,063
------------
355,588
------------
Banks - Money Center -- 0.2%
Deutsche Bank AG
Senior Notes
6.00% due 09/01/17.......................... 220,000 221,963
HBOS Capital Funding LP
Bank Guar. Bonds
6.85% due 03/23/09(9)....................... 125,000 117,812
Mizuho Financial Group Cayman, Ltd.
Bank Guar. Bonds
8.38% due 04/27/09(9)....................... 100,000 103,917
Principal Value
Security Description Amount(16) (Note 2)
------------------------------------------------------------------------
Banks - Money Center (continued)
National Westminster Bank PLC
Sub. Notes
7.75% due 10/16/07(6)...................... 38,000 $ 38,108
--------
481,800
--------
Broadcast Services/Program -- 0.1%
Grupo Televisa SA
Senior Notes
6.63% due 03/18/25......................... 149,000 151,099
--------
Building & Construction-Misc. -- 0.1%
North American Energy Partners, Inc.
Senior Notes
8.75% due 12/01/11......................... 300,000 301,500
--------
Building Products - Doors & Windows -- 0.0%
Masonite International Corp.
Company Guar. Notes
11.00% due 04/06/15........................ 35,000 28,525
--------
Cellular Telecom -- 0.2%
Mobile Telesystems Finance SA
Company Guar. Notes
8.38% due 10/14/10......................... 600,000 611,718
--------
Computers - Memory Devices -- 0.1%
Seagate Technology HDD Holdings
Company Guar. Notes
6.80% due 10/01/16......................... 285,000 274,313
--------
Diversified Financial Services -- 0.0%
CIT Group Funding Co. of Canada
Company Guar. Notes
5.20% due 06/01/15......................... 155,000 132,678
--------
Diversified Manufacturing Operations -- 0.2%
Bombardier, Inc.
Senior Notes
8.00% due 11/15/14*........................ 335,000 345,887
Tyco International Group SA
Company Guar. Notes
6.00% due 11/15/13......................... 100,000 100,622
--------
446,509
--------
Diversified Operations -- 0.1%
Hutchison Whampoa Finance, Ltd.
Company Guar. Notes
7.50% due 08/01/27*........................ 200,000 217,916
--------
Electronic Components-Misc. -- 0.1%
NXP BV / NXP Funding LLC
Company Guar. Notes
9.50% due 10/15/15......................... 270,000 233,550
--------
Electronic Components - Semiconductors -- 0.1%
Avago Technologies Finance
Company Guar. Notes
10.13% due 12/01/13........................ 150,000 156,750
STATS ChipPAC, Ltd.
Company Guar. Notes
6.75% due 11/15/11......................... 35,000 35,000
--------
191,750
--------
Finance - Other Services -- 0.0%
Lukoil International Finance BV
Company Guar. Notes
6.36% due 06/07/17*........................ 138,000 129,030
--------
Food - Meat Products -- 0.1%
JBS SA
Company Guar. Notes
9.38% due 02/07/11......................... 250,000 248,125
85
VALIC Company II Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount(16) (Note 2)
- ---------------------------------------------------------------------------------
FOREIGN CORPORATE BONDS & NOTES (continued)
Food - Meat Products (continued)
JBS SA
Senior Notes
10.50% due 08/04/16*.............................. 175,000 $ 175,875
----------
424,000
----------
Housewares -- 0.2%
Vitro SA de CV
Senior Notes
9.13% due 02/01/17*............................... 620,000 596,750
----------
Independent Power Producer -- 0.0%
AES Drax Energy, Ltd.
Sec. Notes
11.50% due 08/30/10+(8)(14)....................... 175,000 175
----------
Insurance - Multi - line -- 0.1%
Aegon NV
Sub. Bonds
5.86% due 07/15/14(4)(9).......................... 112,000 91,280
AXA SA
Sub. Notes
6.38% due 12/14/36*(4)(9)......................... 92,000 82,935
ING Groep NV
Bonds
5.78% due 12/08/15(4)(9).......................... 230,000 220,973
----------
395,188
----------
Investment Companies -- 0.1%
Algoma Acquisition Corp.
Senior Notes
9.88% due 06/15/15*............................... 105,000 98,175
Canadian Oil Sands, Ltd.
Notes
5.80% due 08/15/13*............................... 92,000 91,345
----------
189,520
----------
Medical - Drugs -- 0.4%
Angiotech Pharmaceuticals, Inc.
Company Guar. Notes
7.75% due 04/01/14................................ 260,000 222,300
Angiotech Pharmaceuticals, Inc.
Company Guar. Notes
9.11% due 12/01/13(4)............................. 265,000 262,350
Elan Finance PLC
Company Guar. Bonds
7.75% due 11/15/11................................ 255,000 248,625
Elan Finance PLC
Company Guar. Notes
8.88% due 12/01/13................................ 225,000 220,500
Elan Finance PLC
Company Guar. Notes
9.56% due 11/15/11(4)............................. 100,000 98,000
----------
1,051,775
----------
Metal - Aluminum -- 0.0%
Alcan, Inc.
Senior Notes
5.75% due 06/01/35................................ 140,000 128,582
----------
Music -- 0.1%
Corporacion Interamericana de Entetenimiento SA de
CV
Senior Notes
8.88% due 06/14/15*............................... 160,000 159,200
----------
Oil Companies - Exploration & Production -- 0.5%
Compton Petroleum Finance Corp.
Company Guar. Notes
7.63% due 12/01/13................................ 385,000 365,750
Principal Value
Security Description Amount(16) (Note 2)
- --------------------------------------------------------------------------------
Oil Companies - Exploration & Production (continued)
Nexen, Inc.
Bonds
6.40% due 05/15/37............................... 141,000 $ 137,171
OPTI Canada, Inc.
Secured Notes
7.88% due 12/15/14*.............................. 375,000 375,937
OPTI Canada, Inc.
Company Guar. Notes
8.25% due 12/15/14*.............................. 210,000 212,625
Paramount Resources, Ltd.
Senior Notes
8.50% due 01/31/13............................... 225,000 230,063
----------
1,321,546
----------
Oil Companies - Integrated -- 0.1%
ENI Coordination Center SA
Company Guar. Notes
5.25% due 12/27/07............................... GBP 135,000 271,302
----------
Paper & Related Products -- 0.2%
Abitibi - Consolidated, Inc.
Notes
5.25% due 06/20/08............................... 40,000 38,400
Abitibi - Consolidated, Inc.
Notes
6.00% due 06/20/13............................... 75,000 55,500
Abitibi - Consolidated, Inc.
Notes
8.55% due 08/01/10............................... 295,000 264,025
Bowater Canada Finance Corp.
Company Guar. Notes
7.95% due 11/15/11............................... 110,000 93,500
----------
451,425
----------
Pipelines -- 0.1%
Enbridge, Inc.
Bonds
5.80% due 06/15/14............................... 338,000 336,602
Kinder Morgan Finance Co. ULC
Company Guar. Notes
5.70% due 01/05/16............................... 78,000 69,439
----------
406,041
----------
Printing - Commercial -- 0.1%
Quebecor World Capital Corp.
Senior Notes
8.75% due 03/15/16*.............................. 285,000 256,500
----------
Real Estate Operations & Development -- 0.0%
Brookfield Asset Management, Inc.
Notes
8.13% due 12/15/08............................... 69,000 71,622
----------
Satellite Telecom -- 0.5%
Intelsat Bermuda, Ltd.
Company Guar. Notes
8.89% due 01/15/15(4)............................ 200,000 201,500
Intelsat Bermuda, Ltd.
Senior Notes
11.25% due 06/15/16.............................. 285,000 298,181
Intelsat Intermediate Holding Co., Ltd.
Senior Notes
9.25% due 02/01/15(10)........................... 590,000 477,900
Intelsat, Ltd.
Senior Notes
6.50% due 11/01/13............................... 460,000 341,550
Intelsat, Ltd.
Senior Notes
7.63% due 04/15/12............................... 145,000 120,713
----------
1,439,844
----------
86
VALIC Company II Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount(16) (Note 2)
--------------------------------------------------------------------
FOREIGN CORPORATE BONDS & NOTES (continued)
Semiconductor Equipment -- 0.0%
MagnaChip Semiconductor SA
Sec. Notes
6.88% due 12/15/11...................... 25,000 $ 19,750
MagnaChip Semiconductor SA
Sec. Notes
8.61% due 12/15/11(4)................... 25,000 20,875
-----------
40,625
-----------
Special Purpose Entities -- 0.3%
Hellas Telecommunications Luxembourg II
Sub. Notes
11.11% due 01/15/15*(4)................. 355,000 347,900
Hybrid Capital Funding I LP
Sub. Notes
8.00% due 06/30/11(9)................... 286,000 269,912
Rio Tinto Finance USA, Ltd.
Notes
2.63% due 09/30/08...................... 55,000 53,656
SMFG Preferred Capital, Ltd.
Sub. Bonds
6.08% due 01/25/17*(4)(9)............... 121,000 112,854
-----------
784,322
-----------
Telecom Services -- 0.1%
Global Crossing UK Finance PLC
Company Guar. Notes
10.75% due 12/15/14..................... 75,000 78,750
Telenet Group Holdings NV
Notes
11.50% due 06/15/14*(10)................ 368,000 349,600
-----------
428,350
-----------
Telephone - Integrated -- 0.6%
British Telecommunications PLC
Bonds
8.63% due 12/15/30...................... 643,000 859,363
Telecom Italia Capital SA
Company Guar. Bonds
5.25% due 10/01/15...................... 478,000 450,845
Telecom Italia Capital SA
Company Guar. Bonds
6.20% due 07/18/11...................... 350,000 357,072
Telefonica Emisiones SAU
Company Guar. Notes
6.22% due 07/03/17...................... 147,000 148,036
-----------
1,815,316
-----------
Transport - Marine -- 0.1%
Navios Maritime Holdings, Inc.
Company Guar. Notes
9.50% due 12/15/14...................... 105,000 107,231
Ultrapetrol Bahamas, Ltd.
1st Mtg. Bonds
9.00% due 11/24/14...................... 235,000 230,594
-----------
337,825
-----------
Transport - Rail -- 0.0%
Canadian National Railway Co.
Notes
6.38% due 10/15/11...................... 90,000 93,830
Kansas City Southern de Mexico SA de CV
Senior Notes
7.38% due 03/01/14*..................... 50,000 48,500
-----------
142,330
-----------
Total Foreign Corporate Bonds & Notes
(cost $15,007,631)...................... 14,268,214
-----------
Principal Value
Security Description Amount(16) (Note 2)
---------------------------------------------------------------
FOREIGN GOVERNMENT AGENCIES -- 29.7%
Sovereign -- 29.7%
Arab Republic of Egypt
Notes
8.75% due 07/18/12*.............. EGP 3,520,000 $ 613,922
Federal Republic of Brazil
Bonds
5.44% due 01/05/16............... 1,218,000 701,497
Federal Republic of Brazil
Bonds
6.00% due 01/17/17............... 1,180,000 1,172,920
Federal Republic of Brazil
Bonds
7.13% due 01/20/37............... 570,000 620,730
Federal Republic of Brazil
Notes
7.88% due 03/07/15............... 850,000 951,150
Federal Republic of Brazil
Notes
8.00% due 01/15/18............... 2,130,000 2,343,000
Federal Republic of Brazil
Bonds
8.25% due 01/20/34............... 650,000 796,250
Federal Republic of Brazil
Notes
8.75% due 02/04/25............... 1,070,000 1,334,290
Federal Republic of Brazil
Bonds
8.88% due 10/14/19............... 750,000 900,000
Federal Republic of Brazil
Notes
8.88% due 04/15/24............... 240,000 297,000
Federal Republic of Brazil
Bonds
10.50% due 07/14/14.............. 330,000 413,490
Federal Republic of Brazil
Notes
11.00% due 08/17/40.............. 2,170,000 2,871,995
Federal Republic of Germany
Bonds
5.50% due 01/04/31............... EUR 498,000 769,720
Government of Australia
Bonds
5.25% due 08/15/10............... AUD 2,515,000 2,005,972
Government of Australia
Bonds
5.75% due 06/15/11............... AUD 3,040,000 2,453,809
Government of Australia
Bonds
7.50% due 09/15/09............... AUD 2,145,000 1,796,940
Government of Canada
Bonds
4.00% due 09/01/10............... CAD 3,045,000 2,853,419
Government of Canada
Bonds
5.00% due 06/01/14............... CAD 2,110,000 2,068,819
Government of Canada
Bonds
5.25% due 06/01/13............... CAD 1,360,000 1,343,296
Government of France
Bonds
4.75% due 04/25/35............... EUR 820,000 1,148,098
Government of Japan
Bonds
1.40% due 12/20/15............... JPY 425,000,000 3,646,885
87
VALIC Company II Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount(16) (Note 2)
------------------------------------------------------------------
FOREIGN GOVERNMENT AGENCIES (continued)
Sovereign (continued)
Government of Peru
Bonds
6.55% due 03/14/37.................. 460,000 $ 459,770
Government of Poland
Bonds
5.75% due 03/24/10.................. PLN 1,500,000 538,311
Kingdom of Belgium
Bonds
4.00% due 03/28/17.................. EUR 850,000 1,123,047
Kingdom of Denmark
Bonds
7.00% due 11/15/07.................. DKK 9,450,000 1,735,754
Kingdom of Norway
Bonds
5.50% due 05/15/09.................. NOK 20,220,000 3,505,494
Kingdom of Norway
Bonds
6.50% due 05/15/13.................. NOK 11,570,000 2,150,948
Kingdom of Spain
Bonds
5.75% due 07/30/32.................. EUR 170,000 270,166
Kingdom of Sweden
Bonds
4.50% due 08/12/15.................. SEK 4,065,000 600,208
Kingdom of Sweden
Bonds
5.00% due 01/28/09.................. SEK 29,600,000 4,344,340
Republic of Argentina
Notes
5.25% due 12/31/38(10).............. 2,837,637 1,064,114
Republic of Argentina
Bonds
7.00% due 03/28/11.................. 1,078,000 1,009,008
Republic of Argentina
Bonds
7.00% due 09/12/13.................. 1,090,000 933,585
Republic of Argentina
Bonds
7.00% due 10/03/15.................. 1,970,000 1,566,150
Republic of Argentina
Notes
8.28% due 12/31/33.................. 911,354 779,207
Republic of Colombia
Notes
7.38% due 01/27/17.................. 500,000 531,000
Republic of Colombia
Bonds
7.38% due 09/18/37.................. 535,000 567,368
Republic of Colombia
Bonds
12.00% due 10/22/15................. COP 630,000,000 315,724
Republic of Columbia
Bonds
8.13% due 05/21/24.................. 250,000 282,625
Republic of Columbia
Notes
8.25% due 12/22/14.................. 630,000 698,733
Republic of Ecuador
Bonds
10.00% due 08/15/30................. 890,000 783,200
Republic of El Salvador
Bonds
7.65% due 06/15/35*................. 190,000 206,150
Republic of Greece
Senior Bonds
4.50% due 09/20/37.................. EUR 545,000 695,193
Principal Value
Security Description Amount(16) (Note 2)
---------------------------------------------------
Sovereign (continued)
Republic of Indonesia
Bonds
6.63% due 02/17/37...... 905,000 $ 826,308
Republic of Indonesia
Bonds
7.50% due 01/15/16...... 440,000 458,867
Republic of Indonesia
Notes
8.50% due 10/12/35...... 430,000 479,984
Republic of Pakistan
Bonds
6.88% due 06/01/17*..... 710,000 603,500
Republic of Panama
Bonds
6.70% due 01/26/36...... 650,000 643,500
Republic of Peru
Notes
7.35% due 07/21/25...... 1,005,000 1,108,012
Republic of Peru
Bonds
8.75% due 11/21/33...... 380,000 482,600
Republic of Philippines
Bonds
7.75% due 01/14/31...... 750,000 796,875
Republic of Philippines
Notes
8.00% due 01/15/16...... 910,000 985,075
Republic of Philippines
Notes
8.25% due 01/15/14...... 460,000 496,800
Republic of Philippines
Notes
8.88% due 03/17/15...... 1,030,000 1,153,600
Republic of Philippines
Senior Notes
9.50% due 02/02/30...... 900,000 1,136,250
Republic of South Africa
Notes
5.88% due 05/30/22...... 600,000 578,250
Republic of Turkey
Notes
6.88% due 03/17/36...... 1,240,000 1,164,050
Republic of Turkey
Bonds
7.00% due 09/26/16...... 529,000 535,613
Republic of Turkey
Notes
7.00% due 06/05/20...... 1,180,000 1,181,475
Republic of Turkey
Notes
7.25% due 03/15/15...... 820,000 844,600
Republic of Turkey
Notes
7.38% due 02/05/25...... 1,150,000 1,175,875
Republic of Turkey
Notes
9.50% due 01/15/14...... 580,000 665,550
Republic of Turkey
Senior Notes
11.88% due 01/15/30..... 400,000 611,000
Republic of Uruguay
Bonds
8.00% due 11/18/22...... 1,270,000 1,365,250
Republic of Uruguay
Notes
9.25% due 05/17/17...... 280,000 326,200
88
VALIC Company II Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal Value
Security Description Amount(16) (Note 2)
------------------------------------------------------------------
FOREIGN GOVERNMENT AGENCIES (continued)
Sovereign (continued)
Republic of Venezuela
Bonds
5.75% due 02/26/16.................. 750,000 $ 609,375
Republic of Venezuela
Bonds
6.00% due 12/09/20.................. 180,000 138,150
Republic of Venezuela
Bonds
7.00% due 12/01/18.................. 200,000 169,000
Republic of Venezuela
Bonds
7.65% due 04/21/25.................. 760,000 651,700
Republic of Venezuela
Notes
8.50% due 10/08/14.................. 405,000 389,813
Republic of Venezuela
Bonds
9.25% due 09/15/27.................. 2,160,000 2,138,400
Republic of Venezuela
Bonds
9.38% due 01/13/34.................. 1,310,000 1,296,900
Russian Federation
Bonds
7.50% due 03/31/30*................. 4,009,850 4,458,953
Russian Federation
Notes
12.75% due 06/24/28................. 280,000 493,746
Ukrainian Soviet Socialist Republic
Bonds
6.39% due 06/26/12*................. 510,000 507,435
Ukrainian Soviet Socialist Republic
Senior Bonds
6.58% due 11/21/16*................. 570,000 560,737
Ukrainian Soviet Socialist Republic
Senior Notes
6.58% due 11/21/16.................. 250,000 246,268
Ukrainian Soviet Socialist Republic
Notes
7.65% due 06/11/13.................. 720,000 757,728
United Mexican States
Bonds
8.00% due 09/24/22.................. 890,000 1,085,800
United Mexican States
Bonds
8.30% due 08/15/31.................. 220,000 282,150
-----------
Total Foreign Government Agencies
(cost $86,957,011).................. 86,668,686
-----------
FOREIGN GOVERNMENT TREASURIES -- 1.0%
Sovereign -- 1.0%
Government of United Kingdom
Bonds
4.00% due 09/07/16.................. GBP 600,000 1,120,217
Government of United Kingdom
Bonds
4.25% due 03/07/11.................. GBP 615,000 1,199,780
Government of United Kingdom
Bonds
5.00% due 03/07/08.................. GBP 299,000 601,292
-----------
Total Foreign Government Treasuries
(cost $2,875,640)................... 2,921,289
-----------
LOANS -- 0.2%
Diversified Financial Services -- 0.1%
Wind Acquisition Holdings
Finance S.A.
12.61% due 12/21/11(7)(8)(18)(19)... 309,763 309,505
-----------
Principal Value
Security Description Amount(16) (Note 2)
-------------------------------------------------------------
Leisure Products -- 0.1%
AMC Entertainment Holdings, Inc.
10.36% due 06/15/12(18)(19)...... 200,000 $ 191,500
-----------
Total Loans
(cost $511,930)................... 501,005
-----------
U.S. GOVERNMENT AGENCIES -- 14.4%
Federal Home Loan Bank -- 0.1%
Federal Home Loan Bank
4.50% due 09/08/08............... 400,000 398,325
-----------
Federal Home Loan Mtg. Corp. -- 6.3%
4.13% due 07/12/10................ 200,000 196,817
4.25% due 06/23/08................ 400,000 397,412
4.35% due 06/02/08................ 400,000 397,762
4.45% due 03/06/08................ 400,000 398,326
4.50% due 02/01/20................ 408,597 392,252
4.50% due 08/01/20................ 163,542 157,000
4.75% due 01/18/11................ 280,000 280,311
5.00% due 09/01/18................ 526,591 515,857
5.00% due 07/01/20................ 384,254 375,347
5.00% due 05/01/22................ 2,849,562 2,782,345
5.00% due 05/01/34................ 608,453 580,011
5.00% due 02/01/35................ 98,407 93,807
5.00% due 08/01/35................ 781,176 743,980
5.00% due 11/01/35................ 884,672 842,548
5.00% due 11/01/36................ 46,471 44,212
5.00% due 11/01/36................ 492,577 468,639
5.00% due 01/01/37................ 292,674 278,450
5.00% due 04/01/37................ 766,929 729,142
5.33% due 12/01/35(4)............. 422,388 418,208
5.50% due 10/01/21................ 1,972,678 1,961,213
5.50% due 07/01/35................ 321,499 314,281
5.70% due 08/01/36(4)............. 874,936 873,615
5.81% due 01/01/37(4)............. 328,786 326,782
5.81% due 01/01/37(4)............. 252,990 253,198
5.98% due 10/01/36(4)............. 1,510,276 1,508,215
6.00% due 01/01/30................ 28,540 28,730
6.00% due 02/01/32................ 207,956 209,040
6.00% due 07/01/35................ 248,704 248,765
6.00% due 05/01/37................ 29,030 29,009
6.20% due 09/01/36(4)............. 132,357 132,966
6.50% due 07/01/29................ 5,605 5,736
6.50% due 12/01/35................ 1,715 1,743
6.50% due 02/01/36................ 173,040 175,917
6.50% due 05/01/37................ 559,540 567,991
6.88% due 09/15/10................ 772,000 817,577
7.00% due 06/01/29................ 13,702 14,174
Federal Home Loan Mtg. Corp.
REMIC
Series 3349, Class HB
5.50% due 06/15/31............... 642,000 639,182
-----------
18,200,560
-----------
Federal National Mtg. Assoc. -- 8.0%
4.50% due 06/01/19................ 347,436 333,898
4.75% due 12/15/10................ 251,000 251,134
5.00% due 01/01/37................ 391,923 372,490
5.00% due 05/01/37................ 642,094 610,257
5.50% due 03/01/18................ 24,273 24,207
5.50% due 07/01/19................ 114,505 113,982
5.50% due 01/01/29................ 64,296 63,171
5.50% due 05/01/29................ 21,761 21,366
5.50% due 06/01/34................ 385,323 377,037
5.50% due 02/01/36(4)............. 226,691 226,168
5.50% due 11/01/36................ 734,736 717,824
5.50% due 11/01/36................ 62,892 61,444
5.50% due 12/01/36................ 755,146 733,146
5.50% due 04/01/37................ 2,379,254 2,323,738
5.50% due 05/01/37................ 4,645,517 4,537,121
5.50% due 07/01/37................ 1,439,193 1,405,612
5.51% due 01/01/37(4)............. 1,252,621 1,260,881
6.00% due 02/01/32................ 71,244 71,590
89
VALIC Company II Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
Principal
Amount/ Value
Security Description Shares(16) (Note 2)
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (continued)
Federal National Mtg. Assoc. (continued)
6.00% due 10/01/34.................................. 657,248 $ 658,137
6.00% due 10/01/34.................................. 3,538 3,543
6.00% due 10/01/36.................................. 2,624,172 2,621,944
6.00% due 11/01/36.................................. 731,464 728,069
6.00% due 07/01/37.................................. 1,998,048 1,995,967
6.50% due 12/01/31.................................. 84,334 86,242
6.50% due 04/01/34.................................. 173,690 176,915
6.50% due 02/01/35.................................. 98,887 100,535
6.50% due 07/01/36.................................. 726,400 737,427
6.50% due 07/01/37.................................. 2,739,518 2,780,897
7.50% due 03/01/32.................................. 8,897 9,278
8.50% due 08/01/31.................................. 12,271 13,180
-----------
23,417,200
-----------
Total U.S. Government Agencies
(cost $42,236,834)................................. 42,016,085
-----------
U.S. GOVERNMENT TREASURIES -- 4.9%
United States Treasury Bonds -- 0.5%
4.50% due 02/15/36................................. 548,000 519,444
4.75% due 02/15/37................................. 1,000,000 986,406
-----------
1,505,850
-----------
United States Treasury Notes -- 4.4%
3.00% due 11/15/07................................. 2,000,000 1,996,406
3.63% due 01/15/10................................. 538,000 531,359
4.00% due 06/15/09................................. 2,810,000 2,799,682
4.25% due 01/15/11................................. 1,000,000 1,001,875
4.50% due 11/15/15................................. 586,000 586,595
4.50% due 02/15/16................................. 2,000,000 2,000,782
4.50% due 05/15/17................................. 1,000,000 980,156
4.63% due 11/15/16................................. 130,000 130,833
4.63% due 02/15/17................................. 1,000,000 1,005,703
4.88% due 04/30/11................................. 300,000 306,657
4.88% due 06/30/12................................. 1,000,000 992,265
6.50% due 02/15/10................................. 300,000 315,820
-----------
12,648,133
-----------
Total U.S. Government Treasuries
(cost $14,006,803)................................. $14,153,983
-----------
COMMON STOCK -- 0.5%
Casino Services -- 0.0%
Shreveport Gaming Holdings,
Inc.+(5)(7)(8)..................................... 1,280 29,469
-----------
Cellular Telecom -- 0.3%
iPCS, Inc.(7)(8).................................... 27,658 937,053
-----------
Medical - Outpatient/Home Medical -- 0.0%
Critical Care Systems International, Inc.+(5)(7)(8). 5,372 28,203
-----------
Oil Companies - Exploration & Production -- 0.0%
Transmeridian Exploration, Inc.+.................... 1,783 3,620
-----------
Oil - Field Services -- 0.2%
Trico Marine Services, Inc.+........................ 15,969 524,741
-----------
Retail - Music Store -- 0.0%
MTS, Inc.+(5)(7)(8)................................. 3,863 0
-----------
Total Common Stock
(cost $846,679).................................... 1,523,086
-----------
PREFERRED STOCK -- 0.7%
Banks - Money Center -- 0.1%
Santander Finance Preferred SA
5.88%*(4).......................................... 11,600 284,200
-----------
Principal
Amount/ Value
Security Description Shares(16) (Note 2)
PREFERRED STOCK (continued)
Banks-Super Regional -- 0.0%
Wachovia Capital Trust IX
6.38%............................................ 4,350 $ 101,355
------------
Diversified Financial Services -- 0.1%
General Electric Capital Corp.
8.00%(10)........................................ 12,000 276,120
------------
Oil Companies-Exploration & Production -- 0.3%
EXCO Resources, Inc. Convertible
Series A-1, 7.00%(5)(7).......................... 55 627,000
Transmeridian Exploration, Inc.
15.00%(5)........................................ 1,143 88,011
------------
715,011
------------
Special Purpose Entity -- 0.1%
Structured Repackaged Asset-Backed
Trust Securities
5.97%(4)......................................... 9,200 185,840
------------
Telephone-Integrated -- 0.1%
AT&T, Inc.
6.38%............................................ 15,000 361,050
------------
Total Preferred Stock
(cost $1,949,588)................................ 1,923,576
------------
WARRANTS -- 0.0%
Oil Companies - Exploration & Production -- 0.0%
Transmeridian Exploration, Inc.
Expires 12/15/10 (strike price $4.31)+(5)........ 6,905 1,726
------------
Telephone - Integrated -- 0.0%
GT Group Telecom, Inc.
Expires 02/01/10 (strike price $0.00)*+(5)(8).... 50 1
------------
Total Warrants
(cost $18,990)................................... 1,727
------------
Total Long - Term Investment Securities
(cost $280,306,755).............................. 276,538,689
------------
REPURCHASE AGREEMENT -- 3.5%
Agreement with State Street Bank & Trust Co.
bearing interest at 4.68%, dated 08/31/07, to be
repurchased 09/04/07 in the amount of
$10,152,276 and collateralized by Federal
Home Loan Bank Bonds, bearing interest at
4.38% due 09/17/10 and having an
approximate value of $10,452,578 (cost
$10,147,000)..................................... $10,147,000 10,147,000
------------
TOTAL INVESTMENTS
(cost $290,453,755)(13).......................... 98.3% 286,685,689
Other assets less liabilities....................... 1.7% 5,041,740
----------- ------------
NET ASSETS 100.0% $291,727,429
=========== ============
- --------
* Securities exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from registration,
normally to qualified institutional buyers. The Fund has no right to demand
registration of these securities. At August 31, 2007, the aggregate value of
these securities was $31,060,488 representing 10.6% of net assets. Unless
otherwise indicated these securities are not considered to be illiquid.
+ Non-income producing security
(1)Collateralized Mortgage Obligation
(2)Variable Rate Security--the rate reflected is as of August 31, 2007,
maturity date reflects the stated maturity date.
(3)Commercial Mortgaged Back Security
(4)Floating rate security where the rate fluctuates. The rate moves up or down
at each reset date. The rate reflected is as of August 31, 2007.
(5)Fair valued security; see Note 2
90
VALIC Company II Strategic Bond Fund
PORTFOLIO OF INVESTMENTS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
(6)Variable Rate Security -- the rate reflected is as of August 31, 2007,
maturity date reflects next reset date.
(7)To the extent permitted by the Statement of Additional Information, the
Strategic Bond Fund may invest in restricted securities. The Fund has no
right to demand registration of these securities. The securities are valued
pursuant to Note 2. Restricted securities held by a Fund may not be sold
except in exempt transactions or in a public offering registered under the
Securities Act of 1933. The risk of investing in such securities is
generally greater than the risk of investing in the securities of widely
held, publicly traded companies. Lack of a secondary market and resale
restrictions may result in the inability of a Fund to sell a security at a
fair price and may substantially delay the sale of the security. In
addition, these securities may exhibit greater price volatility than
securities for which secondary markets exist. As of August 31, 2007, the
Strategic Bond Fund held the following restricted securities:
Principal Market Value as a
Acquisition Amount/ Acquisition Market Value % of
Name Date Shares Cost Value Per Share Net Assets
- ----------------------- ----------- --------- ----------- ---------- --------- ----------
Critical Care Systems
International, Inc.
Common Stock.......... 06/17/04 $ 635 $ 5,490
11/09/04 4,737 35,231
-------- --------
5,372 40,721 $ 28,203 $ 5.25 0.01%
Exco Resources, Inc.
Convertible
Preferred Stock
7.00%................. 03/29/07 11 110,000
08/22/07 44 440,000
-------- --------
55 550,000 627,000 11,400 0.21
ICO North America, Inc.
Notes
7.50% due
08/15/09.............. 08/11/05 125,000 125,000 123,750 99.00 0.04
iPCS, Inc.
Common Stock.......... 08/12/04 27,658 419,580 937,053 33.88 0.32
MTS, Inc.
Senior Notes
10.00% due
03/15/09.............. 03/16/04 13,636 49,087
09/03/04 681 681
03/19/05 715 143
09/04/05 751 195
03/04/06 789 205
-------- --------
16,572 50,311 4,309 26.00 0.00
MTS, Inc.
Common Stock.......... 03/16/04 3,863 0 0 0.00 0.00
Shreveport Gaming
Holdings, Inc......... 07/21/05 257 5,919
Common Stock.......... 07/29/05 1,023 23,550
-------- --------
1,280 29,469 29,469 23.02 0.01
Southern Energy, Inc.
Notes
7.90% due
07/15/09.............. 01/10/06 725,000 0 0 0.00 0.00
Wind Acquisitions
Holdings Finance
S.A.
12.61% due
12/21/11
Loan.................. 03/15/07 100,000 103,494
03/19/07 100,000 103,454
06/21/07 103,187 104,446
07/18/07 3,288 3,288
07/18/07 3,288 3,288
-------- --------
309,763 317,970 309,505 99.92 0.11
---------- ----
$2,059,289 0.70%
========== ====
(8)Illiquid security
(9)Perpetual maturity--maturity date reflects the next call date.
(10)"Step-up" security where the rate increases ("steps-up") at a predetermined
rate. Rate shown reflects the increased rate.
(11)PIK ("Payment-in-Kind") security. Bond or preferred stock that pays
interest/dividends in the form of additional bonds or preferred stocks.
(12)Company has filed Chapter 11 bankruptcy.
(13)See Note 5 for cost of investments on a tax basis.
(14)Bond in default
(15)Company has filed Chapter 7 bankruptcy.
(16)Denominated in United States Dollars unless otherwise indicated.
(17)Bond is in default and did not pay principal at maturity. Security is
subject to litigation, the outcome of which is still to be determined.
(18)Senior Loans are generally subject to mandatory and/or optional prepayment.
Because of these mandatory prepayment conditions and because there may be
significant economic incentives for a borrower to prepay, prepayments may
occur. As a result, the actual remaining maturity may be substantially less
than the stated maturities shown.
(19)The Portfolio invests in Senior Loans which generally pay interest at rates
which are periodically re-determined by reference to a base lending rate
plus a premium. These base lending rates are generally either the lending
rate offered by one or more major European banks, such as the London
InterBank Offer Rate ("LIBOR") or the prime rate offered by one or more
major United States banks, or the certificate of deposit rate. Senior Loans
are generally considered to be restrictive in that the Portfolio is
ordinarily contractually obligated to receive approval from the Agent Bank
and/or borrower prior to the disposition of a Senior Loan.
(20)Bond is in default and did not pay principal at maturity.
ADR-- American Depository Receipt
See Notes to Financials Statements
91
VALIC Company II
STATEMENTS OF ASSETS AND LIABILITIES -- August 31, 2007
- --------------------------------------------------------------------------------
AGGRESSIVE CAPITAL CONSERVATIVE
GROWTH APPRECIATION GROWTH
LIFESTYLE FUND FUND LIFESTYLE FUND CORE BOND FUND
- --------------------------------------------------------------------------------------------------------------------------
ASSETS:
Long-term investment securities, at value (unaffiliated)*.. $ - $ 83,454,326 $ - $ 203,178,038
Long-term investment securities, at value (affiliated)*.... 82,307,449 - 44,060,402 -
Short-term investment securities, at value (unaffiliated)*. - - - -
Short-term investment securities, at value (affiliated)*... - - 4,916,609 -
Repurchase agreements (cost equals market value)........... - 3,007,000 - 4,490,000
-------------- -------------- -------------- --------------
Total Investments.......................................... 82,307,449 86,461,326 48,977,011 207,668,038
-------------- -------------- -------------- --------------
Cash....................................................... 137 227 2,409 5,141
Foreign cash*.............................................. - - - -
Receivable for:
Trust shares sold....................................... 146,128 206,112 126,553 1,253,348
Dividends and interest.................................. - 25,188 - 2,081,596
Investments sold........................................ 78,914 - 128,629 5,444,952
Prepaid expenses and other assets.......................... 2,865 4,602 2,760 5,737
Due from investment adviser for expense reimbursements/fee
waivers................................................... 8,291 11,749 6,746 24,612
Variation margin on futures contracts...................... - - - -
-------------- -------------- -------------- --------------
TOTAL ASSETS............................................... 82,543,784 86,709,204 49,244,108 216,483,424
-------------- -------------- -------------- --------------
LIABILITIES:
Payable for:
Trust shares reacquired................................. 52,900 215,154 59,600 13,946
Investments purchased................................... 172,141 2,052,229 195,582 5,841,459
Investment advisory and management fees................. 6,776 37,647 4,067 84,979
Shareholder services.................................... - 17,112 - 42,532
Administrative service fee.............................. - 4,791 - 11,909
Transfer agent fees and expenses........................ 114 246 39 213
Trustees' fees and expenses............................. 52,905 54,659 52,132 108,812
Other accrued expenses.................................. 37,972 58,583 35,914 57,668
Due to custodian........................................... - - - -
-------------- -------------- -------------- --------------
TOTAL LIABILITIES.......................................... 322,808 2,440,421 347,334 6,161,518
-------------- -------------- -------------- --------------
NET ASSETS................................................. $ 82,220,976 $ 84,268,783 $ 48,896,774 $ 210,321,906
============== ============== ============== ==============
NET ASSETS REPRESENTED BY:
Trust shares at par value of $0.01 per share............... $ 65,302 $ 77,787 $ 43,320 $ 206,709
Additional paid in capital................................. 70,194,963 79,676,238 44,116,468 207,359,553
Accumulated undistributed net investment income (loss)..... 1,302,001 238,858 698,235 7,485,684
Accumulated undistributed net realized gain (loss) on
investments, futures contracts, securities sold short,
foreign exchange transactions and capital gains
distributions received from underlying funds.............. 5,358,386 (10,954,304) 2,123,145 (1,818,272)
Unrealized appreciation (depreciation) on investments...... 5,300,324 15,230,204 1,915,606 (2,911,768)
Unrealized appreciation (depreciation) on futures contracts
and options contracts..................................... - - - -
Unrealized foreign exchange gain (loss) on other assets and
liabilities............................................... - - - -
Accrued capital gains tax on unrealized appreciation
(depreciation)............................................ - - - -
-------------- -------------- -------------- --------------
NET ASSETS.............................................. $ 82,220,976 $ 84,268,783 $ 48,896,774 $ 210,321,906
============== ============== ============== ==============
SHARES OF BENEFICIAL INTEREST:
Authorized (Par value $0.01 per share).................. 1,000,000,000 1,000,000,000 1,000,000,000 1,000,000,000
Outstanding............................................. 6,530,211 7,778,707 4,331,958 20,670,947
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE.............................................. $ 12.59 $ 10.83 $ 11.29 $ 10.17
============== ============== ============== ==============
- --------
*Cost
Long-term investment securities (unaffiliated).......... $ - $ 68,224,122 $ - $ 206,089,806
============== ============== ============== ==============
Long-term investment securities (affiliated)............ $ 77,007,125 $ - $ 42,144,796 $ -
============== ============== ============== ==============
Short-term investment securities (unaffiliated)......... $ - $ - $ - $ -
============== ============== ============== ==============
Short-term investment securities (affiliated)........... $ - $ - $ 4,916,609 $ -
============== ============== ============== ==============
Foreign Cash............................................ $ - $ - $ - $ -
============== ============== ============== ==============
INTERNATIONAL
HIGH YIELD BOND SMALL CAP LARGE CAP MID CAP
FUND EQUITY FUND VALUE FUND GROWTH FUND
- --------------------------------------------------------------------------------------------------------------------------
ASSETS:
Long-term investment securities, at value (unaffiliated)*.. $ 182,331,420 $ 697,717,033 $ 411,469,479 $ 82,105,105
Long-term investment securities, at value (affiliated)*.... - - - -
Short-term investment securities, at value (unaffiliated)*. - - 6,009,199 -
Short-term investment securities, at value (affiliated)*... - - - -
Repurchase agreements (cost equals market value)........... 8,201,000 30,996,000 - 2,017,000
-------------- -------------- -------------- --------------
Total Investments.......................................... 190,532,420 728,713,033 417,478,678 84,122,105
-------------- -------------- -------------- --------------
Cash....................................................... 491 939 32 689
Foreign cash*.............................................. 28,820 10,139,176 - 143,657
Receivable for:
Trust shares sold....................................... 182,083 1,312,479 888,822 113,975
Dividends and interest.................................. 3,771,327 745,695 585,216 17,275
Investments sold........................................ 206,793 167,037 - 1,579,842
Prepaid expenses and other assets.......................... 29,223 7,056 5,743 6,085
Due from investment adviser for expense reimbursements/fee
waivers................................................... 13,089 313,857 51,469 25,178
Variation margin on futures contracts...................... - - - -
-------------- -------------- -------------- --------------
TOTAL ASSETS............................................... 194,764,246 741,399,272 419,009,960 86,008,806
-------------- -------------- -------------- --------------
LIABILITIES:
Payable for:
Trust shares reacquired................................. 10,625 44,873 48,867 33,795
Investments purchased................................... 1,326,775 4,523,290 - 1,009,704
Investment advisory and management fees................. 114,492 495,111 170,881 54,927
Shareholder services.................................... 40,890 152,068 85,440 17,601
Administrative service fee.............................. 11,449 42,579 23,923 4,928
Transfer agent fees and expenses........................ 226 173 119 159
Trustees' fees and expenses............................. 76,445 99,822 97,091 71,935
Other accrued expenses.................................. 56,755 197,834 75,782 50,991
Due to custodian........................................... - - - -
-------------- -------------- -------------- --------------
TOTAL LIABILITIES.......................................... 1,637,657 5,555,750 502,103 1,244,040
-------------- -------------- -------------- --------------
NET ASSETS................................................. $ 193,126,589 $ 735,843,522 $ 418,507,857 $ 84,764,766
============== ============== ============== ==============
NET ASSETS REPRESENTED BY:
Trust shares at par value of $0.01 per share............... $ 212,248 $ 372,049 $ 265,887 $ 90,520
Additional paid in capital................................. 187,104,394 588,160,271 374,195,899 68,322,067
Accumulated undistributed net investment income (loss)..... 10,886,628 3,460,789 3,908,140 (71,508)
Accumulated undistributed net realized gain (loss) on
investments, futures contracts, securities sold short,
foreign exchange transactions and capital gains
distributions received from underlying funds.............. 382,609 63,705,271 21,221,027 9,086,459
Unrealized appreciation (depreciation) on investments...... (5,460,652) 80,220,836 18,916,904 7,336,154
Unrealized appreciation (depreciation) on futures contracts
and options contracts..................................... - - - -
Unrealized foreign exchange gain (loss) on other assets and
liabilities............................................... 1,362 (12,729) - 1,074
Accrued capital gains tax on unrealized appreciation
(depreciation)............................................ - (62,965) - -
-------------- -------------- -------------- --------------
NET ASSETS.............................................. $ 193,126,589 $ 735,843,522 $ 418,507,857 $ 84,764,766
============== ============== ============== ==============
SHARES OF BENEFICIAL INTEREST:
Authorized (Par value $0.01 per share).................. 1,000,000,000 1,000,000,000 1,000,000,000 1,000,000,000
Outstanding............................................. 21,224,809 37,204,898 26,588,704 9,052,017
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE.............................................. $ 9.10 $ 19.78 $ 15.74 $ 9.36
============== ============== ============== ==============
- --------
*Cost
Long-term investment securities (unaffiliated).......... $ 187,792,072 $ 617,496,197 $ 392,552,575 $ 74,768,951
============== ============== ============== ==============
Long-term investment securities (affiliated)............ $ - $ - $ - $ -
============== ============== ============== ==============
Short-term investment securities (unaffiliated)......... $ - $ - $ 6,009,199 $ -
============== ============== ============== ==============
Short-term investment securities (affiliated)........... $ - $ - $ - $ -
============== ============== ============== ==============
Foreign Cash............................................ $ 27,458 $ 10,149,480 $ - $ 142,512
============== ============== ============== ==============
See Notes to Financial Statements
92
VALIC Company II
STATEMENTS OF ASSETS AND LIABILITIES -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
MID MODERATE MONEY
CAP VALUE GROWTH MARKET II
FUND LIFESTYLE FUND FUND
- --------------------------------------------------------------------------------------------------------------------------
ASSETS:
Long-term investment securities, at value (unaffiliated)*................... $ 511,807,050 $ - $ -
Long-term investment securities, at value (affiliated)*..................... - 115,300,363 -
Short-term investment securities, at value (unaffiliated)*.................. 5,297,000 - 222,921,605
Short-term investment securities, at value (affiliated)*.................... - 7,390,000 -
Repurchase agreements (cost equals market value)............................ 6,740,000 - 122,515,000
-------------- -------------- --------------
Total Investments........................................................... 523,844,050 122,690,363 345,436,605
-------------- -------------- --------------
Cash........................................................................ 1,686 - 385
Foreign cash*............................................................... 313,408 - -
Receivable for:
Trust shares sold........................................................ 521,399 311,380 1,583,970
Dividends and interest................................................... 590,485 - 751,796
Investments sold......................................................... 2,788,506 355,989 -
Prepaid expenses and other assets........................................... 21,424 3,448 6,024
Due from investment adviser for expense reimbursements/fee waivers.......... 17,074 7,388 26,776
Variation margin on futures contracts....................................... - - -
-------------- -------------- --------------
TOTAL ASSETS................................................................ 528,098,032 123,368,568 347,805,556
-------------- -------------- --------------
LIABILITIES:
Payable for:
Trust shares reacquired.................................................. 466,788 319,273 1,444,507
Investments purchased.................................................... 1,701,527 347,824 8,982,885
Investment advisory and management fees.................................. 313,247 10,110 69,923
Shareholder services..................................................... 109,339 - 69,924
Administrative service fee............................................... 30,615 - 19,579
Transfer agent fees and expenses......................................... 332 114 131
Trustees' fees and expenses.............................................. 258,532 95,540 120,287
Other accrued expenses................................................... 98,841 44,145 48,568
Due to custodian............................................................ - 273 -
-------------- -------------- --------------
TOTAL LIABILITIES........................................................... 2,979,221 817,279 10,755,804
-------------- -------------- --------------
NET ASSETS.................................................................. $ 525,118,811 $ 122,551,289 $ 337,049,752
============== ============== ==============
NET ASSETS REPRESENTED BY:
Trust shares at par value of $0.01 per share................................ $ 261,387 $ 94,015 $ 3,370,498
Additional paid in capital.................................................. 424,461,862 107,090,189 333,676,532
Accumulated undistributed net investment income (loss)...................... 2,029,123 1,632,090 2,722
Accumulated undistributed net realized gain (loss) on investments, futures
contracts, securities sold short, foreign exchange transactions and capital
gains distributions received from underlying funds......................... 40,924,688 6,905,095 -
Unrealized appreciation (depreciation) on investments....................... 57,440,247 6,829,900 -
Unrealized appreciation (depreciation) on futures contracts and options
contracts.................................................................. - - -
Unrealized foreign exchange gain (loss) on other assets and liabilities..... 1,504 - -
Accrued capital gains tax on unrealized appreciation (depreciation)......... - - -
-------------- -------------- --------------
NET ASSETS............................................................... $ 525,118,811 $ 122,551,289 $ 337,049,752
============== ============== ==============
SHARES OF BENEFICIAL INTEREST:
Authorized (Par value $0.01 per share)................................... 1,000,000,000 1,000,000,000 1,000,000,000
Outstanding.............................................................. 26,138,717 9,401,453 337,049,752
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE................. $ 20.09 $ 13.04 $ 1.00
============== ============== ==============
- --------
*Cost
Long-term investment securities (unaffiliated)........................... $ 454,366,803 $ - $ -
============== ============== ==============
Long-term investment securities (affiliated)............................. $ - $ 108,470,463 $ -
============== ============== ==============
Short-term investment securities, at value (affiliated).................. $ - $ 7,390,000 $ -
============== ============== ==============
Short-term investment securities (unaffiliated).......................... $ 5,297,000 $ - $ 222,921,605
============== ============== ==============
Foreign Cash............................................................. $ 313,394 $ - $ -
============== ============== ==============
SMALL CAP SMALL CAP SOCIALLY
GROWTH VALUE RESPONSIBLE
FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------------------------
ASSETS:
Long-term investment securities, at value (unaffiliated)*................... $ 55,223,230 $ 248,491,084 $ 863,370,293
Long-term investment securities, at value (affiliated)*..................... - - -
Short-term investment securities, at value (unaffiliated)*.................. 1,336,521 - 58,248,632
Short-term investment securities, at value (affiliated)*.................... - - -
Repurchase agreements (cost equals market value)............................ - 9,997,000 813,000
-------------- -------------- --------------
Total Investments........................................................... 56,559,751 258,488,084 922,431,925
-------------- -------------- --------------
Cash........................................................................ 1,103 3,830 670
Foreign cash*............................................................... - - -
Receivable for:
Trust shares sold........................................................ 104,197 522,354 2,408,654
Dividends and interest................................................... 10,150 241,259 886,445
Investments sold......................................................... 239,381 858,273 -
Prepaid expenses and other assets........................................... 4,918 6,300 111,070
Due from investment adviser for expense reimbursements/fee waivers.......... 7,522 30,060 98,055
Variation margin on futures contracts....................................... - 130,395 600,225
-------------- -------------- --------------
TOTAL ASSETS................................................................ 56,927,022 260,280,555 926,537,044
-------------- -------------- --------------
LIABILITIES:
Payable for:
Trust shares reacquired.................................................. 25,993 35,837 32,757
Investments purchased.................................................... 56,699 164,505 -
Investment advisory and management fees.................................. 40,271 142,745 189,692
Shareholder services..................................................... 11,845 53,269 189,692
Administrative service fee............................................... 3,316 14,915 53,113
Transfer agent fees and expenses......................................... 200 171 85
Trustees' fees and expenses.............................................. 61,761 101,452 76,750
Other accrued expenses................................................... 48,786 63,208 88,582
Due to custodian............................................................ - - -
-------------- -------------- --------------
TOTAL LIABILITIES........................................................... 248,871 576,102 630,671
-------------- -------------- --------------
NET ASSETS.................................................................. $ 56,678,151 $ 259,704,453 $ 925,906,373
============== ============== ==============
NET ASSETS REPRESENTED BY:
Trust shares at par value of $0.01 per share................................ $ 38,843 $ 169,179 $ 686,509
Additional paid in capital.................................................. 47,742,891 241,803,748 859,085,198
Accumulated undistributed net investment income (loss)...................... (61,940) 1,417,497 9,034,492
Accumulated undistributed net realized gain (loss) on investments, futures
contracts, securities sold short, foreign exchange transactions and capital
gains distributions received from underlying funds......................... 3,308,372 11,564,542 51,975,469
Unrealized appreciation (depreciation) on investments....................... 5,649,985 4,642,010 5,536,505
Unrealized appreciation (depreciation) on futures contracts and options
contracts.................................................................. - 107,477 (411,800)
Unrealized foreign exchange gain (loss) on other assets and liabilities..... - - -
Accrued capital gains tax on unrealized appreciation (depreciation)......... - - -
-------------- -------------- --------------
NET ASSETS............................................................... $ 56,678,151 $ 259,704,453 $ 925,906,373
============== ============== ==============
SHARES OF BENEFICIAL INTEREST:
Authorized (Par value $0.01 per share)................................... 1,000,000,000 1,000,000,000 1,000,000,000
Outstanding.............................................................. 3,884,258 16,917,948 68,650,934
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE................. $ 14.59 $ 15.35 $ 13.49
============== ============== ==============
- --------
*Cost
Long-term investment securities (unaffiliated)........................... $ 49,573,245 $ 243,849,074 $ 857,833,788
============== ============== ==============
Long-term investment securities (affiliated)............................. $ - $ - $ -
============== ============== ==============
Short-term investment securities, at value (affiliated).................. $ - $ - $ -
============== ============== ==============
Short-term investment securities (unaffiliated).......................... $ 1,336,521 $ - $ 58,248,632
============== ============== ==============
Foreign Cash............................................................. $ - $ - $ -
============== ============== ==============
STRATEGIC
BOND
FUND
- --------------------------------------------------------------------------------------------
ASSETS:
Long-term investment securities, at value (unaffiliated)*................... $ 276,538,689
Long-term investment securities, at value (affiliated)*..................... -
Short-term investment securities, at value (unaffiliated)*.................. -
Short-term investment securities, at value (affiliated)*.................... -
Repurchase agreements (cost equals market value)............................ 10,147,000
--------------
Total Investments........................................................... 286,685,689
--------------
Cash........................................................................ 401,280
Foreign cash*............................................................... 2,224,886
Receivable for:
Trust shares sold........................................................ 385,250
Dividends and interest................................................... 4,362,626
Investments sold......................................................... 4,214,862
Prepaid expenses and other assets........................................... 4,985
Due from investment adviser for expense reimbursements/fee waivers.......... 19,899
Variation margin on futures contracts....................................... -
--------------
TOTAL ASSETS................................................................ 298,299,477
--------------
LIABILITIES:
Payable for:
Trust shares reacquired.................................................. 28,418
Investments purchased.................................................... 6,133,998
Investment advisory and management fees.................................. 139,391
Shareholder services..................................................... 61,202
Administrative service fee............................................... 17,137
Transfer agent fees and expenses......................................... 187
Trustees' fees and expenses.............................................. 102,018
Other accrued expenses................................................... 89,697
Due to custodian............................................................ -
--------------
TOTAL LIABILITIES........................................................... 6,572,048
--------------
NET ASSETS.................................................................. $ 291,727,429
==============
NET ASSETS REPRESENTED BY:
Trust shares at par value of $0.01 per share................................ $ 257,435
Additional paid in capital.................................................. 280,193,654
Accumulated undistributed net investment income (loss)...................... 13,325,373
Accumulated undistributed net realized gain (loss) on investments, futures
contracts, securities sold short, foreign exchange transactions and capital
gains distributions received from underlying funds......................... 1,710,337
Unrealized appreciation (depreciation) on investments....................... (3,768,066)
Unrealized appreciation (depreciation) on futures contracts and options
contracts.................................................................. -
Unrealized foreign exchange gain (loss) on other assets and liabilities..... 8,696
Accrued capital gains tax on unrealized appreciation (depreciation)......... -
--------------
NET ASSETS............................................................... $ 291,727,429
==============
SHARES OF BENEFICIAL INTEREST:
Authorized (Par value $0.01 per share)................................... 1,000,000,000
Outstanding.............................................................. 25,743,474
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE................. $ 11.33
==============
- --------
*Cost
Long-term investment securities (unaffiliated)........................... $ 280,306,755
==============
Long-term investment securities (affiliated)............................. $ -
==============
Short-term investment securities, at value (affiliated).................. $ -
==============
Short-term investment securities (unaffiliated).......................... $ -
==============
Foreign Cash............................................................. $ 2,214,918
==============
See Notes to Financial Statements
93
VALIC Company II
STATEMENTS OF OPERATIONS -- August 31, 2007
- --------------------------------------------------------------------------------
AGGRESSIVE CONSERVATIVE
GROWTH CAPITAL GROWTH
LIFESTYLE APPRECIATION LIFESTYLE CORE BOND
FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------
INCOME:
Dividends (unaffiliated)............................................ $ - $ 839,951 $ - $ 65,239
Dividends (affiliated).............................................. 1,420,609 - 789,791 -
Interest (unaffiliated)............................................. 32 94,541 54 8,694,039
---------- ----------- ---------- -----------
Total investment income*......................................... 1,420,641 934,492 789,845 8,759,278
---------- ----------- ---------- -----------
EXPENSES:
Investment advisory and management fees............................. 70,031 419,123 42,616 780,263
Administrative service fee.......................................... - 53,343 - 109,251
Shareholder services................................................ - 190,510 - 390,183
Transfer agent fees and expenses.................................... 1,232 1,927 1,158 2,085
Registration fees................................................... 1,023 1,023 1,023 1,023
Custodian fees...................................................... 22,053 36,280 22,253 64,284
Reports to shareholders............................................. 16,137 26,487 10,325 36,536
Audit and tax fees.................................................. 22,097 23,243 22,097 27,576
Legal fees.......................................................... 11,340 11,530 10,470 13,339
Trustees' fees and expenses......................................... 11,604 13,374 6,137 25,541
Interest expense.................................................... - 1,603 - 438
Interest expense on securities sold short........................... - - - -
Other expenses...................................................... 5,578 9,562 4,660 5,723
---------- ----------- ---------- -----------
Total expenses before fee waivers, expense reimbursements,
and fees paid indirectly........................................ 161,095 788,005 120,739 1,456,242
---------- ----------- ---------- -----------
Fees waived and expenses reimbursed by investment adviser
(Note 3)........................................................ (91,063) (140,270) (78,124) (254,477)
Fees paid indirectly (Note 7).................................... - (1,548) - -
---------- ----------- ---------- -----------
Net expenses..................................................... 70,032 646,187 42,615 1,201,765
---------- ----------- ---------- -----------
Net investment income (loss)........................................ 1,350,609 288,305 747,230 7,557,513
---------- ----------- ---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated)**.......... - 1,073,427 - 137,715
Net realized gain (loss) on investments (affiliated).............. 4,323,271 - 1,980,231 -
Net realized gain (loss) from capital gain distributions received
from underlying funds (affiliated)............................... 1,064,664 - 398,629 -
Net realized gain (loss) on securities sold short................. - - - 9,323
Net realized gain (loss) on futures contracts and written options
contracts........................................................ - - - -
Net realized foreign exchange gain (loss) on other assets and
liabilities...................................................... - - - -
Net realized gain (loss) on disposal of investments in violation
of investment restrictions (Note 3).............................. - - - -
Net increase from payments by affiliates (Note 3)................. - 54,757 - -
---------- ----------- ---------- -----------
Net realized gain (loss) on investments and foreign currencies...... 5,387,935 1,128,184 2,378,860 147,038
---------- ----------- ---------- -----------
Change in unrealized appreciation (depreciation) on investments
(unaffiliated)................................................... - 13,912,020 - (3,084,255)
Change in unrealized appreciation (depreciation) on investments
(affiliated)..................................................... 3,189,892 - 1,184,799 -
Change in unrealized appreciation (depreciation) on futures
contracts and options contracts.................................. - - - 10,840
Change in unrealized foreign exchange gain (loss) on other
assets and liabilities........................................... - - - -
Change in unrealized appreciation (depreciation) on securities
sold short....................................................... - - - -
Change in accrued capital gains tax on unrealized appreciation
(depreciation)................................................... - - - -
---------- ----------- ---------- -----------
Net unrealized gain (loss) on investments and foreign currencies.... 3,189,892 13,912,020 1,184,799 (3,073,415)
---------- ----------- ---------- -----------
Net realized and unrealized gain (loss) on investments and foreign
currencies......................................................... 8,577,827 15,040,204 3,563,659 (2,926,377)
---------- ----------- ---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS......................................................... $9,928,436 $15,328,509 $4,310,889 $ 4,631,136
========== =========== ========== ===========
*Net of foreign withholding taxes on interest and dividends of...... $ - $ - $ - $ 3,008
---------- ----------- ---------- -----------
**Net of foreign withholding taxes on capital gains of.............. $ - $ - $ - $ -
---------- ----------- ---------- -----------
INTERNATIONAL LARGE CAP MID CAP
HIGH YIELD SMALL CAP VALUE GROWTH
BOND FUND EQUITY FUND FUND FUND
- -------------------------------------------------------------------------------------------------------------------------
INCOME:
Dividends (unaffiliated)............................................ $ 764,028 $ 10,189,987 $ 6,764,997 $ 280,669
Dividends (affiliated).............................................. - - - -
Interest (unaffiliated)............................................. 12,227,439 1,076,396 2,248 133,931
----------- ------------ ----------- -----------
Total investment income*......................................... 12,991,467 11,266,383 6,767,245 414,600
----------- ------------ ----------- -----------
EXPENSES:
Investment advisory and management fees............................. 1,054,448 4,996,618 1,715,732 551,576
Administrative service fee.......................................... 105,459 428,454 240,202 49,147
Shareholder services................................................ 376,639 1,530,193 857,866 175,525
Transfer agent fees and expenses.................................... 2,102 1,989 1,741 1,781
Registration fees................................................... 1,023 1,023 1,023 1,023
Custodian fees...................................................... 56,345 630,530 56,183 31,908
Reports to shareholders............................................. 35,766 149,814 83,275 18,199
Audit and tax fees.................................................. 27,563 33,032 23,215 23,213
Legal fees.......................................................... 13,519 29,261 19,748 11,201
Trustees' fees and expenses......................................... 24,110 86,261 51,416 4,728
Interest expense.................................................... - - - -
Interest expense on securities sold short........................... 44,205 - - -
Other expenses...................................................... 6,899 20,157 10,727 9,165
----------- ------------ ----------- -----------
Total expenses before fee waivers, expense reimbursements,
and fees paid indirectly........................................ 1,748,078 7,907,332 3,061,128 877,466
----------- ------------ ----------- -----------
Fees waived and expenses reimbursed by investment adviser
(Note 3)........................................................ (256,587) (1,786,560) (281,641) (280,680)
Fees paid indirectly (Note 7).................................... - - - (8,427)
----------- ------------ ----------- -----------
Net expenses..................................................... 1,491,491 6,120,772 2,779,487 588,359
----------- ------------ ----------- -----------
Net investment income (loss)........................................ 11,499,976 5,145,611 3,987,758 (173,759)
----------- ------------ ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated)**.......... 845,651 63,786,389 21,512,718 9,536,734
Net realized gain (loss) on investments (affiliated).............. - - - -
Net realized gain (loss) from capital gain distributions received
from underlying funds (affiliated)............................... - - - -
Net realized gain (loss) on securities sold short................. (36,624) - - -
Net realized gain (loss) on futures contracts and written options
contracts........................................................ - - - (4,232)
Net realized foreign exchange gain (loss) on other assets and
liabilities...................................................... - (502,068) - (9,099)
Net realized gain (loss) on disposal of investments in violation
of investment restrictions (Note 3).............................. - (168,728) - -
Net increase from payments by affiliates (Note 3)................. - 168,728 - -
----------- ------------ ----------- -----------
Net realized gain (loss) on investments and foreign currencies...... 809,027 63,284,321 21,512,718 9,523,403
----------- ------------ ----------- -----------
Change in unrealized appreciation (depreciation) on investments
(unaffiliated)................................................... (9,055,180) 48,861,267 9,029,565 3,433,293
Change in unrealized appreciation (depreciation) on investments
(affiliated)..................................................... - - - -
Change in unrealized appreciation (depreciation) on futures
contracts and options contracts.................................. - - - -
Change in unrealized foreign exchange gain (loss) on other
assets and liabilities........................................... 1,715 (8,488) - 1,074
Change in unrealized appreciation (depreciation) on securities
sold short....................................................... - - - -
Change in accrued capital gains tax on unrealized appreciation
(depreciation)................................................... - (44,140) - -
----------- ------------ ----------- -----------
Net unrealized gain (loss) on investments and foreign currencies.... (9,053,465) 48,808,639 9,029,565 3,434,367
----------- ------------ ----------- -----------
Net realized and unrealized gain (loss) on investments and foreign
currencies......................................................... (8,244,438) 112,092,960 30,542,283 12,957,770
----------- ------------ ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS......................................................... $ 3,255,538 $117,238,571 $34,530,041 $12,784,011
=========== ============ =========== ===========
*Net of foreign withholding taxes on interest and dividends of...... $ 7,058 $ 1,013,095 $ - $ 1,545
----------- ------------ ----------- -----------
**Net of foreign withholding taxes on capital gains of.............. $ - $ 75,972 $ - $ -
----------- ------------ ----------- -----------
See Notes to Financial Statements
94
VALIC Company II
STATEMENTS OF OPERATIONS -- August 31, 2007 -- (continued)
- --------------------------------------------------------------------------------
MODERATE
GROWTH MONEY
MID CAP LIFESTYLE MARKET II
VALUE FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME:
Dividends (unaffiliated).................................................................. $ 6,458,693 $ - $ -
Dividends (affiliated).................................................................... - 1,825,364 -
Interest (unaffiliated)................................................................... 568,649 56 12,680,288
----------- ----------- -----------
Total investment income*............................................................... 7,027,342 1,825,420 12,680,288
----------- ----------- -----------
EXPENSES:
Investment advisory and management fees................................................... 3,312,933 104,685 594,639
Administrative service fee................................................................ 322,823 - 166,499
Shareholder services...................................................................... 1,152,940 - 594,639
Transfer agent fees and expenses.......................................................... 3,519 1,232 998
Registration fees......................................................................... 1,023 1,023 -
Custodian fees............................................................................ 93,719 22,034 26,716
Reports to shareholders................................................................... 105,964 23,673 55,009
Audit and tax fees........................................................................ 22,949 21,018 21,346
Legal fees................................................................................ 19,876 12,113 16,720
Trustees' fees and expenses............................................................... 76,248 18,194 37,489
Interest expense.......................................................................... 91 - -
Interest expense on securities sold short................................................. - - -
Other expenses............................................................................ 21,609 6,054 6,041
----------- ----------- -----------
Total expenses before fee waivers, expense reimbursements, and fees paid
indirectly............................................................................ 5,133,694 210,026 1,520,096
----------- ----------- -----------
Fees waived and expenses reimbursed by investment adviser (Note 3)..................... (291,348) (105,340) (206,402)
Fees paid indirectly (Note 7).......................................................... (69,437) - -
----------- ----------- -----------
Net expenses........................................................................... 4,772,909 104,686 1,313,694
----------- ----------- -----------
Net investment income (loss).............................................................. 2,254,433 1,720,734 11,366,594
----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated)**................................ 41,439,581 - -
Net realized gain (loss) on investments (affiliated).................................... - 6,003,876 -
Net realized gain (loss) from capital gain distributions received from underlying funds
(affiliated)........................................................................... - 1,158,626 -
Net realized gain (loss) on securities sold short....................................... - - -
Net realized gain (loss) on futures contracts and written options contracts............. - - -
Net realized foreign exchange gain (loss) on other assets and liabilities............... 9,085 - -
Net realized gain (loss) on disposal of investments in violation of investment
restrictions (Note 3).................................................................. - - -
Net increase from payments by affiliates (Note 3)....................................... - - -
----------- ----------- -----------
Net realized gain (loss) on investments and foreign currencies............................ 41,448,666 7,162,502 -
----------- ----------- -----------
Change in unrealized appreciation (depreciation) on investments (unaffiliated).......... 24,689,455 - -
Change in unrealized appreciation (depreciation) on investments (affiliated)............ - 4,145,030 -
Change in unrealized appreciation (depreciation) on futures contracts and options
contracts.............................................................................. - - -
Change in unrealized appreciation (depreciation) on securities sold short............... - - -
Change in unrealized foreign exchange gain (loss) on other assets and liabilities....... (704) - -
----------- ----------- -----------
Net unrealized gain (loss) on investments and foreign currencies.......................... 24,688,751 4,145,030 -
----------- ----------- -----------
Net realized and unrealized gain (loss) on investments and foreign currencies............. 66,137,417 11,307,532 -
----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................... $68,391,850 $13,028,266 $11,366,594
=========== =========== ===========
*Net of foreign withholding taxes on interest and dividends of............................ $ 117,599 $ - $ -
----------- ----------- -----------
**Net of foreign withholding taxes on capital gains of.................................... $ - $ - $ -
----------- ----------- -----------
SMALL CAP SOCIALLY
GROWTH SMALL CAP RESPONSIBLE
FUND VALUE FUND FUND
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME:
Dividends (unaffiliated).................................................................. $ 199,740 $ 2,968,437 $ 9,398,243
Dividends (affiliated).................................................................... - - -
Interest (unaffiliated)................................................................... 65,171 400,941 2,972,843
---------- ----------- -----------
Total investment income*............................................................... 264,911 3,369,378 12,371,086
---------- ----------- -----------
EXPENSES:
Investment advisory and management fees................................................... 458,448 1,323,246 1,540,564
Administrative service fee................................................................ 37,755 137,119 431,358
Shareholder services...................................................................... 134,838 489,710 1,540,564
Transfer agent fees and expenses.......................................................... 2,072 1,793 1,369
Registration fees......................................................................... 1,023 1,023 -
Custodian fees............................................................................ 30,772 94,657 76,779
Reports to shareholders................................................................... 12,575 37,809 124,442
Audit and tax fees........................................................................ 23,192 23,233 23,198
Legal fees................................................................................ 10,735 14,668 27,363
Trustees' fees and expenses............................................................... 9,989 31,107 87,422
Interest expense.......................................................................... - - -
Interest expense on securities sold short................................................. - - -
Other expenses............................................................................ 8,971 13,528 16,320
---------- ----------- -----------
Total expenses before fee waivers, expense reimbursements, and fees paid
indirectly............................................................................ 730,370 2,167,893 3,869,379
---------- ----------- -----------
Fees waived and expenses reimbursed by investment adviser (Note 3)..................... (104,723) (306,994) (418,517)
Fees paid indirectly (Note 7).......................................................... (3,245) (733) (162,646)
---------- ----------- -----------
Net expenses........................................................................... 622,402 1,860,166 3,288,216
---------- ----------- -----------
Net investment income (loss).............................................................. (357,491) 1,509,212 9,082,870
---------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated)**................................ 5,291,165 11,511,225 49,443,858
Net realized gain (loss) on investments (affiliated).................................... - - -
Net realized gain (loss) from capital gain distributions received from underlying funds
(affiliated)........................................................................... - - -
Net realized gain (loss) on securities sold short....................................... - - -
Net realized gain (loss) on futures contracts and written options contracts............. - 302,788 5,086,748
Net realized foreign exchange gain (loss) on other assets and liabilities............... - - -
Net realized gain (loss) on disposal of investments in violation of investment
restrictions (Note 3).................................................................. - 1,875 -
Net increase from payments by affiliates (Note 3)....................................... - - 11,787
---------- ----------- -----------
Net realized gain (loss) on investments and foreign currencies............................ 5,291,165 11,815,888 54,542,393
---------- ----------- -----------
Change in unrealized appreciation (depreciation) on investments (unaffiliated).......... 2,203,111 (5,550,901) (3,824,382)
Change in unrealized appreciation (depreciation) on investments (affiliated)............ - - -
Change in unrealized appreciation (depreciation) on futures contracts and options
contracts.............................................................................. - 38,090 (918,900)
Change in unrealized appreciation (depreciation) on securities sold short............... - - -
Change in unrealized foreign exchange gain (loss) on other assets and liabilities....... - - -
---------- ----------- -----------
Net unrealized gain (loss) on investments and foreign currencies.......................... 2,203,111 (5,512,811) (4,743,282)
---------- ----------- -----------
Net realized and unrealized gain (loss) on investments and foreign currencies............. 7,494,276 6,303,077 49,799,111
---------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................... $7,136,785 $ 7,812,289 $58,881,981
========== =========== ===========
*Net of foreign withholding taxes on interest and dividends of............................ $ - $ 972 $ -
---------- ----------- -----------
**Net of foreign withholding taxes on capital gains of.................................... $ - $ - $ -
---------- ----------- -----------
STRATEGIC
BOND
FUND
- -------------------------------------------------------------------------------------------------------
INCOME:
Dividends (unaffiliated).................................................................. $ 397,888
Dividends (affiliated).................................................................... -
Interest (unaffiliated)................................................................... 15,402,181
-----------
Total investment income*............................................................... 15,800,069
-----------
EXPENSES:
Investment advisory and management fees................................................... 1,438,865
Administrative service fee................................................................ 173,465
Shareholder services...................................................................... 619,518
Transfer agent fees and expenses.......................................................... 2,390
Registration fees......................................................................... 1,023
Custodian fees............................................................................ 151,496
Reports to shareholders................................................................... 58,514
Audit and tax fees........................................................................ 27,530
Legal fees................................................................................ 16,273
Trustees' fees and expenses............................................................... 40,812
Interest expense.......................................................................... -
Interest expense on securities sold short................................................. -
Other expenses............................................................................ 8,690
-----------
Total expenses before fee waivers, expense reimbursements, and fees paid
indirectly............................................................................ 2,538,576
-----------
Fees waived and expenses reimbursed by investment adviser (Note 3)..................... (333,092)
Fees paid indirectly (Note 7).......................................................... -
-----------
Net expenses........................................................................... 2,205,484
-----------
Net investment income (loss).............................................................. 13,594,585
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on investments (unaffiliated)**................................ 2,170,711
Net realized gain (loss) on investments (affiliated).................................... -
Net realized gain (loss) from capital gain distributions received from underlying funds
(affiliated)........................................................................... -
Net realized gain (loss) on securities sold short....................................... (6,507)
Net realized gain (loss) on futures contracts and written options contracts............. -
Net realized foreign exchange gain (loss) on other assets and liabilities............... 34,408
Net realized gain (loss) on disposal of investments in violation of investment
restrictions (Note 3).................................................................. -
Net increase from payments by affiliates (Note 3)....................................... -
-----------
Net realized gain (loss) on investments and foreign currencies............................ 2,198,612
-----------
Change in unrealized appreciation (depreciation) on investments (unaffiliated).......... (7,053,177)
Change in unrealized appreciation (depreciation) on investments (affiliated)............ -
Change in unrealized appreciation (depreciation) on futures contracts and options
contracts.............................................................................. -
Change in unrealized appreciation (depreciation) on securities sold short............... 4,697
Change in unrealized foreign exchange gain (loss) on other assets and liabilities....... 14,286
-----------
Net unrealized gain (loss) on investments and foreign currencies.......................... (7,034,194)
-----------
Net realized and unrealized gain (loss) on investments and foreign currencies............. (4,835,582)
-----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................... $ 8,759,003
===========
*Net of foreign withholding taxes on interest and dividends of............................ $ 59,331
-----------
**Net of foreign withholding taxes on capital gains of.................................... $ -
-----------
See Notes to Financial Statements
95
VALIC Company II
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
AGGRESSIVE GROWTH CAPITAL
LIFESTYLE FUND APPRECIATION FUND
------------------------ ------------------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
August 31, August 31, August 31, August 31,
2007 2006 2007 2006
----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss)................................... $ 1,350,609 $ 602,724 $ 288,305 $ 126,987
Net realized gain (loss) on investments and foreign
currencies.................................................. 5,387,935 6,060,208 1,128,184 2,786,200
Net unrealized gain (loss) on investments and foreign
currencies.................................................. 3,189,892 (2,333,278) 13,912,020 (3,740,363)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting from operations 9,928,436 4,329,654 15,328,509 (827,176)
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income........................................ - (686,468) (134,676) (28,150)
Net realized gain on securities.............................. (5,135,146) (887,991) - -
----------- ----------- ----------- -----------
Total distributions to shareholders............................ (5,135,146) (1,574,459) (134,676) (28,150)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting from capital
share transactions (Note 6)................................... 23,440,534 10,608,697 (337,464) 21,328,616
----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS........................ 28,233,824 13,363,892 14,856,369 20,473,290
NET ASSETS:
Beginning of period............................................ 53,987,152 40,623,260 69,412,414 48,939,124
----------- ----------- ----------- -----------
End of period+................................................. $82,220,976 $53,987,152 $84,268,783 $69,412,414
=========== =========== =========== ===========
+ Includesaccumulated undistributed
net investment income (loss)......................... $ 1,302,001 $ (48,608) $ 238,858 $ 85,229
=========== =========== =========== ===========
CONSERVATIVE GROWTH
LIFESTYLE FUND CORE BOND FUND
------------------------ --------------------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
August 31, August 31, August 31, August 31,
2007 2006 2007 2006
----------- ----------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss)................................... $ 747,230 $ 473,590 $ 7,557,513 $ 4,349,639
Net realized gain (loss) on investments and foreign
currencies.................................................. 2,378,860 2,365,423 147,038 (1,731,587)
Net unrealized gain (loss) on investments and foreign
currencies.................................................. 1,184,799 (1,018,035) (3,073,415) (717,946)
----------- ----------- ------------ ------------
Net increase (decrease) in net assets resulting from operations 4,310,889 1,820,978 4,631,136 1,900,106
----------- ----------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income........................................ - (558,981) (3,641,316) (1,200,000)
Net realized gain on securities.............................. (2,069,637) (1,543,386) - (149,409)
----------- ----------- ------------ ------------
Total distributions to shareholders............................ (2,069,637) (2,102,367) (3,641,316) (1,349,409)
----------- ----------- ------------ ------------
Net increase (decrease) in net assets resulting from capital
share transactions (Note 6)................................... 9,346,808 3,121,786 100,325,173 7,157,586
----------- ----------- ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........................ 11,588,060 2,840,397 101,314,993 7,708,283
NET ASSETS:
Beginning of period............................................ 37,308,714 34,468,317 109,006,913 101,298,630
----------- ----------- ------------ ------------
End of period+................................................. $48,896,774 $37,308,714 $210,321,906 $109,006,913
=========== =========== ============ ============
+ Includesaccumulated undistributed
net investment income (loss)......................... $ 698,235 $ (48,995) $ 7,485,684 $ 3,506,980
=========== =========== ============ ============
See Notes to Financial Statements
96
VALIC Company II
STATEMENTS OF CHANGES IN NET ASSETS -- (continued)
- --------------------------------------------------------------------------------
INTERNATIONAL
HIGH YIELD BOND FUND SMALL CAP EQUITY FUND
-------------------------- --------------------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
August 31, August 31, August 31, August 31,
2007 2006 2007 2006
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss)............................ $ 11,499,976 $ 6,252,130 $ 5,145,611 $ 2,023,036
Net realized gain (loss) on investments and foreign
currencies........................................... 809,027 2,285,228 63,284,321 22,716,578
Net unrealized gain (loss) on investments and foreign
currencies........................................... (9,053,465) (1,395,749) 48,808,639 18,370,631
------------ ------------ ------------ ------------
Net increase (decrease) in net assets resulting from
operations............................................. 3,255,538 7,141,609 117,238,571 43,110,245
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................................. (5,583,929) (1,500,000) (1,929,012) (439,407)
Net realized gain on securities....................... (2,645,527) (844,831) (23,900,444) (2,878,425)
------------ ------------ ------------ ------------
Total distributions to shareholders..................... (8,229,456) (2,344,831) (25,829,456) (3,317,832)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets resulting from
capital share transactions (Note 6).................... 92,030,498 20,608,362 216,997,297 283,614,749
------------ ------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS................. 87,056,580 25,405,140 308,406,412 323,407,162
NET ASSETS:
Beginning of period..................................... 106,070,009 80,664,869 427,437,110 104,029,948
------------ ------------ ------------ ------------
End of period+.......................................... $193,126,589 $106,070,009 $735,843,522 $427,437,110
============ ============ ============ ============
+Includes accumulated undistributed net
investment income (loss)............................... $ 10,886,628 $ 4,969,454 $ 3,460,789 $ 822,230
============ ============ ============ ============
LARGE CAP VALUE FUND MID CAP GROWTH FUND
-------------------------- ------------------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
August 31, August 31, August 31, August 31,
2007 2006 2007 2006
------------ ------------ ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss)............................ $ 3,987,758 $ 1,550,513 $ (173,759) $ (90,638)
Net realized gain (loss) on investments and foreign
currencies........................................... 21,512,718 12,540,321 9,523,403 7,182,659
Net unrealized gain (loss) on investments and foreign
currencies........................................... 9,029,565 (1,226,016) 3,434,367 (3,194,707)
------------ ------------ ----------- -----------
Net increase (decrease) in net assets resulting from
operations............................................. 34,530,041 12,864,818 12,784,011 3,897,314
------------ ------------ ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................................. (1,363,622) (390,000) - -
Net realized gain on securities....................... (12,590,683) (5,343,846) (3,839,151) -
------------ ------------ ----------- -----------
Total distributions to shareholders..................... (13,954,305) (5,733,846) (3,839,151) -
------------ ------------ ----------- -----------
Net increase (decrease) in net assets resulting from
capital share transactions (Note 6).................... 220,195,126 81,753,118 11,236,831 8,350,384
------------ ------------ ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS................. 240,770,862 88,884,090 20,181,691 12,247,698
NET ASSETS:
Beginning of period..................................... 177,736,995 88,852,905 64,583,075 52,335,377
------------ ------------ ----------- -----------
End of period+.......................................... $418,507,857 $177,736,995 $84,764,766 $64,583,075
============ ============ =========== ===========
+Includes accumulated undistributed net
investment income (loss)............................... $ 3,908,140 $ 1,284,004 $ (71,508) $ (60,655)
============ ============ =========== ===========
See Notes to Financial Statements
97
VALIC Company II
STATEMENTS OF CHANGES IN NET ASSETS -- (continued)
- --------------------------------------------------------------------------------
MODERATE GROWTH
MID CAP VALUE FUND LIFESTYLE FUND
-------------------------- -------------------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
August 31, August 31, August 31, August 31,
2007 2006 2007 2006
------------ ------------ ------------ -----------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss)............................. $ 2,254,433 $ 1,354,964 $ 1,720,734 $ 1,079,550
Net realized gain (loss) on investments and foreign
currencies............................................ 41,448,666 37,446,500 7,162,502 7,184,313
Net unrealized gain (loss) on investments and foreign
currencies............................................ 24,688,751 (6,045,559) 4,145,030 (3,015,592)
------------ ------------ ------------ -----------
Net increase (decrease) in net assets resulting from
operations.............................................. 68,391,850 32,755,905 13,028,266 5,248,271
------------ ------------ ------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.................................. (1,400,022) (127,930) (861,432) (340,001)
Net realized gain on securities........................ (37,658,896) (23,322,429) (7,200,192) (2,483,137)
------------ ------------ ------------ -----------
Total distributions to shareholders...................... (39,058,918) (23,450,359) (8,061,624) (2,823,138)
------------ ------------ ------------ -----------
Net increase (decrease) in net assets resulting from
capital share transactions (Note 6)..................... 133,407,337 51,059,027 29,026,314 12,328,767
------------ ------------ ------------ -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS.................. 162,740,269 60,364,573 33,992,956 14,753,900
NET ASSETS:
Beginning of period...................................... 362,378,542 302,013,969 88,558,333 73,804,433
------------ ------------ ------------ -----------
End of period+........................................... $525,118,811 $362,378,542 $122,551,289 $88,558,333
============ ============ ============ ===========
+Includes accumulated undistributed net investment income
(loss).................................................. $ 2,029,123 $ 1,165,627 $ 1,632,090 $ 772,788
============ ============ ============ ===========
MONEY MARKET II FUND SMALL CAP GROWTH FUND
-------------------------- ------------------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
August 31, August 31, August 31, August 31,
2007 2006 2007 2006
------------ ------------ ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss)............................. $ 11,366,594 $ 3,946,777 $ (357,491) $ (271,673)
Net realized gain (loss) on investments and foreign
currencies............................................ - - 5,291,165 5,910,938
Net unrealized gain (loss) on investments and foreign
currencies............................................ - - 2,203,111 (4,270,831)
------------ ------------ ----------- -----------
Net increase (decrease) in net assets resulting from
operations.............................................. 11,366,594 3,946,777 7,136,785 1,368,434
------------ ------------ ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.................................. (11,366,594) (3,946,777) - -
Net realized gain on securities........................ - - - -
------------ ------------ ----------- -----------
Total distributions to shareholders...................... (11,366,594) (3,946,777) - -
------------ ------------ ----------- -----------
Net increase (decrease) in net assets resulting from
capital share transactions (Note 6)..................... 185,723,493 75,490,366 187,503 1,897,583
------------ ------------ ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS.................. 185,723,493 75,490,366 7,324,288 3,266,017
NET ASSETS:
Beginning of period...................................... 151,326,259 75,835,893 49,353,863 46,087,846
------------ ------------ ----------- -----------
End of period+........................................... $337,049,752 $151,326,259 $56,678,151 $49,353,863
============ ============ =========== ===========
+Includes accumulated undistributed net investment income
(loss).................................................. $ 2,722 $ 2,722 $ (61,940) $ (58,079)
============ ============ =========== ===========
See Notes to Financial Statements
98
VALIC Company II
STATEMENTS OF CHANGES IN NET ASSETS -- (continued)
- --------------------------------------------------------------------------------
SMALL CAP VALUE FUND
--------------------------
For the For the
Year Ended Year Ended
August 31, August 31,
2007 2006
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss)................................................... $ 1,509,212 $ 735,651
Net realized gain (loss) on investments and foreign currencies............... 11,815,888 9,941,602
Net unrealized gain (loss) on investments and foreign currencies............. (5,512,811) (1,845,515)
------------ ------------
Net Increase (decrease) in net assets resulting from operations................ 7,812,289 8,831,738
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income........................................................ (650,058) (120,001)
Net realized gain on securities.............................................. (10,098,534) (11,678,539)
------------ ------------
Total distributions to shareholders............................................ (10,748,592) (11,798,540)
------------ ------------
Net increase (decrease) in net assets resulting from capital share transactions
(Note 6)...................................................................... 147,831,273 20,462,567
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........................................ 144,894,970 17,495,765
NET ASSETS:
Beginning of period............................................................ 114,809,483 97,313,718
------------ ------------
End of period+................................................................. $259,704,453 $114,809,483
============ ============
+Includes accumulated undistributed net investment income (loss)............... $ 1,417,497 $ 558,343
============ ============
SOCIALLY RESPONSIBLE FUND
--------------------------
For the For the
Year Ended Year Ended
August 31, August 31,
2007 2006
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss)................................................... $ 9,082,870 $ 2,649,497
Net realized gain (loss) on investments and foreign currencies............... 54,542,393 5,169,269
Net unrealized gain (loss) on investments and foreign currencies............. (4,743,282) 9,489,648
------------ ------------
Net Increase (decrease) in net assets resulting from operations................ 58,881,981 17,308,414
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income........................................................ (2,245,369) (600,000)
Net realized gain on securities.............................................. (7,535,170) (3,035,140)
------------ ------------
Total distributions to shareholders............................................ (9,780,539) (3,635,140)
------------ ------------
Net increase (decrease) in net assets resulting from capital share transactions
(Note 6)...................................................................... 581,574,251 88,953,017
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........................................ 630,675,693 102,626,291
NET ASSETS:
Beginning of period............................................................ 295,230,680 192,604,389
------------ ------------
End of period+................................................................. $925,906,373 $295,230,680
============ ============
+Includes accumulated undistributed net investment income (loss)............... $ 9,034,492 $ 2,196,991
============ ============
STRATEGIC BOND FUND
--------------------------
For the For the
Year Ended Year Ended
August 31, August 31,
2007 2006
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income (loss)................................................... $ 13,594,585 $ 8,697,970
Net realized gain (loss) on investments and foreign currencies............... 2,198,612 2,157,592
Net unrealized gain (loss) on investments and foreign currencies............. (7,034,194) (1,065,041)
------------ ------------
Net Increase (decrease) in net assets resulting from operations................ 8,759,003 9,790,521
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income........................................................ (7,715,285) (2,050,000)
Net realized gain on securities.............................................. (2,328,243) (2,453,570)
------------ ------------
Total distributions to shareholders............................................ (10,043,528) (4,503,570)
------------ ------------
Net increase (decrease) in net assets resulting from capital share transactions
(Note 6)...................................................................... 97,598,762 53,831,570
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........................................ 96,314,237 59,118,521
NET ASSETS:
Beginning of period............................................................ 195,413,192 136,294,671
------------ ------------
End of period+................................................................. $291,727,429 $195,413,192
============ ============
+Includes accumulated undistributed net investment income (loss)............... $ 13,325,373 $ 7,373,155
============ ============
See Notes to Financial Statements
99
VALIC Company II
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 1 -- Organization
VALIC Company II ("VC II") was organized as a Delaware business trust on
May 6, 1998, by The Variable Annuity Life Insurance Company ("VALIC" or the
"Adviser"). VALIC, the investment adviser to VC II, is an indirect wholly-owned
subsidiary of American International Group, Inc. ("AIG"). VC II is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end, management investment company. VC II consists of 15 separate mutual
funds (the "Funds"), each of which issues its own class of shares of beneficial
interest:
Aggressive Growth Lifestyle Fund* Mid Cap Value Fund
Capital Appreciation Fund Moderate Growth Lifestyle Fund*
Conservative Growth Lifestyle Fund* Money Market II Fund
Core Bond Fund Small Cap Growth Fund
High Yield Bond Fund Small Cap Value Fund
International Small Cap Equity Fund Socially Responsible Fund
Large Cap Value Fund Strategic Bond Fund
Mid Cap Growth Fund
- --------
*The Lifestyle Funds represent "Funds of Funds" which invest in either the
VALIC Company I ("VC I") or VALIC Company II Mutual Funds.
Each Fund is diversified with the exception of Aggressive Growth Lifestyle
Fund, Conservative Growth Lifestyle Fund and Moderate Growth Lifestyle Fund,
which are non-diversified as defined by the 1940 Act.
Indemnifications. Under the Funds organizational documents, its officers and
trustees are indemnified against certain liability arising out of the
performance of their duties to the Funds. In addition, in the normal course of
business the Funds enter into contracts that contain the obligation to
indemnify others. The Funds maximum exposure under these arrangements is
unknown. Currently, however, the Funds expect the risk of loss to be remote.
Note 2 -- Significant Accounting Policies
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles ("GAAP") requires management to make estimates
and assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from these estimates. The
following is a summary of the significant accounting policies followed by the
Funds in the preparation of their financial statements:
A. Security Valuation
Stocks are generally valued based upon closing sales prices reported on
recognized securities exchanges. Stocks listed on the NASDAQ are valued using
the NASDAQ Official Closing Price ("NOCP"). Generally, the NOCP will be the
last sale price unless the reported trade for the stock is outside the range of
the bid/ask price. In such cases, the NOCP will be normalized to the nearer of
the bid or ask price. For listed securities having no sales reported and for
unlisted securities, such securities will be valued based upon the last
reported bid price.
As of the close of regular trading on the New York Stock Exchange, securities
traded primarily on security exchanges outside the United States are valued at
the last sale price on such exchanges on the day of valuation, or if there is
no sale on the day of valuation, at the last-reported bid price. If a
security's price is available from more than one exchange, the Fund uses the
exchange that is the primary market for the security. However, depending on the
foreign market, closing prices may be up to 15 hours old when they are used to
price the Fund's shares, and the Fund may determine that certain closing prices
do not reflect the fair value of securities. This determination will be based
on review of a number of factors, including developments in foreign markets,
the performance of U.S. securities markets, and the performance of instruments
trading in U. S. markets that represent foreign securities and baskets of
foreign securities. If the Fund determines that closing prices do not reflect
the fair value of the securities, the Fund will adjust the previous closing
prices in accordance with pricing procedures approved by the Board to reflect
what it believes to be the fair value of the securities as of the close of
regular trading on the New York Stock Exchange. The Fund may also fair value
securities in other situations, for example, when a particular foreign market
is closed but the Fund is open. For foreign equity securities, the Fund uses an
outside pricing service to provide it with closing market prices and
information used for adjusting those prices.
Non-convertible bonds and debentures, other long-term debt securities, and
short term debt securities with maturities in excess of 60 days, are valued at
bid prices obtained for the day of valuation from a bond pricing service, when
such prices are available. If a vendor quote is unavailable the securities may
be priced at the mean of two independent quotes obtained from brokers.
Securities for which market quotations are not readily available are valued as
determined pursuant to procedures adopted in good faith by the Board of
Trustees.
Short-term securities with 60 days or less to maturity are amortized to
maturity based on their cost to the Fund if acquired within 60 days of maturity
or, if already held by the Fund on the 60th day, are amortized to maturity
based on the value determined on the 61st day.
Future contracts and options traded on national securities exchanges are
valued as of the close of the exchange upon which they trade. Forward contracts
are valued at the 4:00 p.m. eastern time forward rate. Other securities are
valued on the basis of last sale or bid price (if a last sale price is not
available) in what is, in the opinion of the Adviser or Subadviser, the
broadest and most representative market, that may be either a securities
exchange or the over-the-counter market. Mutual funds held by the Fund are
valued at the net asset value (market value) of the underlying fund. Senior
Secured Floating Rate Loans ("Loans") for which an active secondary market
exists to a reliable degree, will be valued at the mean of the last available
bid and ask prices in the market for such Loans, as provided by a third party
pricing service.
For the Money Market II Fund, securities are valued at amortized cost, which
approximates market value. The amortized cost method involves valuing a
security at its cost on the date of purchase and thereafter assuming a constant
amortization to maturity of any discount or premium.
Securities for which market quotations are not readily available or if a
development/significant event occurs that may significantly impact the value of
the security, then these securities are valued, as determined pursuant to
procedures adopted in good faith by the Board of Trustees.
100
VALIC Company II
NOTES TO FINANCIAL STATEMENTS -- (continued)
- --------------------------------------------------------------------------------
B. Options, Futures and Forward Currency Contracts
Options. An option is a contract conveying a right to buy or sell a financial
instrument at a specified price during a stipulated period. The premium paid by
a Fund for the purchase of a call or a put option is included in the Fund's
Statement of Assets and Liabilities as an investment and subsequently marked to
market to reflect the current market value of the option. When a Fund writes a
call or a put option, an amount equal to the premium received by the Fund is
included in the Fund's Statement of Assets and Liabilities as a liability and
is subsequently marked to market to reflect the current market value of the
option written. If an option which the Fund has written either expires on its
stipulated expiration date, or if the Fund enters into a closing purchase
transaction, the Fund realizes a gain (or loss if the cost of a closing
purchase transaction exceeds the premium received when the option was written)
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such options is extinguished. If a call option which
the Fund has written is exercised, the Fund realizes a gain or loss from the
sale of the underlying security and the proceeds from such sale are increased
by the premium originally received. If a put option which the Fund has written
is exercised, the amount of the premium originally received reduces the cost of
the security which the Fund purchased upon exercise of the option.
During the period ended August 31, 2007, the following Fund had options
written:
Written Options
------------------
Mid Cap Growth Fund
------------------
Number of Premiums
Contracts Received
--------- --------
Options outstanding as of August 31, 2006......... -- $ --
Options written................................... 156 23,971
Options terminated in closing purchase
transactions..................................... (41) (4,387)
Options exercised................................. (25) (4,800)
Options expired................................... (90) (14,784)
--- --------
Options outstanding as of August 31, 2007......... -- $ --
--- --------
Futures Contracts. A futures contract is an agreement between two parties to
buy and sell a financial instrument at a set price on a future date. Upon
entering into a futures transaction, a Fund will be required to segregate an
initial margin payment of cash or other liquid securities with the Futures
Commission Merchant ("the broker"). The Funds' activities in futures contracts
are used primarily for hedging purposes, and from time to time for income
enhancement. Futures contracts are conducted through regulated exchanges that
minimize counter-party credit risks. A Fund's participation in the futures
markets involves certain risks, including imperfect correlation between
movements in the price of futures contracts and movements in the price of the
securities hedged or used for cover. Pursuant to a contract, the Funds agree to
receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known as
"variation margin" and are recorded by the Funds as unrealized appreciation or
depreciation. Futures contracts involve elements of risk in excess of the
amount reflected in the Statement of Assets and Liabilities. When a contract is
closed, the Funds record a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value at
the time it was closed.
Forward Foreign Currency Contracts. Certain Funds may enter into forward
foreign currency contracts ("forward contracts") to attempt to protect
securities and related receivables and payables against changes in future
foreign exchange rates or to enhance return. A forward contract is an agreement
between two parties to buy or sell currency at a set price on a future date.
The market value of the contract will fluctuate with changes in currency
exchange rates. The contract is marked-to-market daily using the forward rate
and the change in market value is recorded by the Fund as unrealized gain or
loss. On the settlement date, the Fund records either realized gains or losses
equal to the difference between the value of the contract at the time it was
opened and the value at the time it was closed. Risks may arise upon entering
into these contracts from the potential inability of counterparties to meet the
terms of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar. Forward contracts involve
elements of risk in excess of the amount reflected in the Statement of Assets
and Liabilities. The Fund bears the risk of an unfavorable change in the
foreign exchange rate underlying the forward contract.
C. Repurchase Agreements
The Funds, along with other affiliated registered investment companies,
pursuant to exemptive relief granted by the Securities and Exchange Commission,
may transfer uninvested cash balances into a single joint account, the daily
aggregate balance of which is invested in one or more repurchase agreements
collateralized by U.S. Treasury or federal agency obligations. For repurchase
agreements and joint repurchase agreements, the Funds' custodian takes
possession of the collateral pledged for investments in such repurchase
agreements. The underlying collateral is valued daily on a mark-to-market basis
to ensure that the value, at the time the agreement is entered into, is equal
to at least 102% of the repurchase price, including accrued interest. In the
event of default of the obligation to repurchase, a Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. If the seller defaults and the value of the collateral declines or
if bankruptcy proceedings are commenced with respect to the seller of the
security, realization of the collateral by the Fund may be delayed or limited.
As of August 31, 2007, the following fund held an undivided interest in the
joint repurchase agreement with State Street Bank & Trust Co.:
Percentage Principal
Fund Ownership Amount
-------------------- ---------- -----------
Money Market II Fund 16.01% $42,515,000
101
VALIC Company II
NOTES TO FINANCIAL STATEMENTS -- (continued)
- --------------------------------------------------------------------------------
As of such date, the repurchase agreement in that joint account and the
collateral therefore were as follows:
State Street Bank & Trust Co. Repurchase Agreement, dated August 31, 2007,
bearing interest at a rate of 4.82% per annum, with a principal amount of
$265,526,000, a repurchase price of $265,668,204, and maturity date of
September 4, 2007. The repurchase agreement is collateralized by the following:
Interest Maturity Principal Market
Type of Collateral Rate Date Amount Value
------------------ -------- -------- ------------ ------------
U.S. Treasury Bond 4.50% 11/30/11 $157,745,000 $160,899,900
U.S. Treasury Bond 7.50% 11/15/16 88,840,000 109,939,500
As of August 31, 2007, the following fund held an undivided interest in the
joint repurchase agreement with UBS Warburg, LLC:
Percentage Principal
Fund Ownership Amount
-------------------- ---------- -----------
Money Market II Fund 11.03% $80,000,000
As of such date, the repurchase agreement in that joint account and the
collateral therefore were as follows:
UBS Warburg, LLC, dated August 31, 2007, bearing interest at a rate of 5.05%
per annum, with a principal amount of $725,000,000, a repurchase price of
$725,406,806, and maturity date of September 4, 2007. The repurchase agreement
is collateralized by the following:
Interest Maturity Principal Market
Type of Collateral Rate Date Amount Value
- ----------------------------------- -------- -------- ------------ ------------
U.S. Treasury Inflation Index Bonds 2.00% 1/15/16 $105,782,000 $107,897,850
U.S. Treasury Inflation Index Bonds 2.63% 7/15/17 316,580,000 322,912,210
U.S. Treasury Inflation Index Bonds 3.38% 4/15/32 302,638,000 308,691,515
D. Mortgage-Backed Dollar Rolls
During the period ended August 31, 2007, the Core Bond Fund and the Strategic
Bond Fund entered into dollar rolls using "to be announced" ("TBA")
mortgage-backed securities ("TBA Rolls"). The Fund's policy is to record the
components of TBA Rolls as purchase/sale transactions. Any difference between
the purchase and sale price is recorded as a realized gain or loss on the date
the transaction is entered into. As of August 31, 2007 there were no
outstanding TBA rolls. Dollar roll transactions involve the risk that the
market value of the securities held by the Fund may decline below the price of
the securities that the Fund has sold but is obligated to repurchase under the
agreement. In the event that the buyer of securities in a dollar roll
transaction files bankruptcy or becomes insolvent, the Fund's use of the
proceeds from the sale of the securities may be restricted pending a
determination by the other party, or its trustee or receiver, whether to
enforce the Fund's obligation to repurchase the securities. The return earned
by the Fund with the proceeds of the dollar roll transaction may not exceed
transaction costs.
E. Foreign Currency Translation
The books and records of VC II are maintained in U.S. dollars. Assets and
liabilities denominated in foreign currencies and commitments under forward
foreign currency contracts are translated into U.S. dollars based on the
exchange rate of such currencies against U.S. dollars on the date of valuation.
VC II does not isolate that portion of the results of operations arising as a
result of changes in the foreign exchange rates from the changes in the market
prices of securities held at the end of the period. Similarly, VC II does not
isolate the effect of changes in foreign exchange rates from the changes in the
market prices of portfolio securities sold during the period.
Realized foreign exchange gains and losses on other assets and liabilities and
change in unrealized foreign exchange gains and losses on other assets and
liabilities located in the Statement of Operations include realized foreign
exchange gains and losses from currency gains or losses between the trade and
the settlement dates of securities transactions, the difference between the
amounts of interest, dividends and foreign withholding taxes recorded on VC
II's books and the U.S. dollar equivalent amounts actually received or paid and
changes in the unrealized foreign exchange gains and losses relating to the
other assets and liabilities arising as a result of changes in the exchange
rate.
F. Short Sales
All Funds, except for the Money Market II Fund and the three Lifestyle Funds,
may engage in "short sales against the box." This technique involves selling
either a security that a Fund owns, or a security equivalent in kind and amount
to the security sold short. A Fund may enter into a short sale against the box
to hedge against anticipated declines in the market price of that security. The
High Yield Bond Fund may also engage in "naked" short sales. To complete such
transactions, the Fund must borrow the security to make delivery to the buyer.
The Fund then is obligated to replace the security borrowed by purchasing it at
market price at the time of replacement. The price at such time may be more or
less than the price at which the security was sold by the Fund. Until the
security is replaced, the Fund is required to pay to the lender any dividends
or interest that accrue during the period of the loan. To borrow the security,
the Fund also may be required to pay a premium, which would increase the cost
of the security sold. The proceeds of the short sale will be retained by the
broker, to the extent necessary to meet margin requirements, until the short
position is closed out. Until the Fund replaces a borrowed security, the Fund
will maintain daily a segregated account, containing cash or liquid securities,
at such a level that (i) the amount deposited in the account plus the amount
deposited with the broker as collateral will equal the current value of the
security sold short and (ii) the amount deposited in the segregated account
plus the amount deposited with the broker as collateral will not be less than
the market value of the security at the time it was sold short. Liabilities for
securities sold short are reported at market value in the financial statements.
Such liabilities are subject to off balance sheet risk to the extent of any
future increases in market value of the securities sold short. The ultimate
liability for securities sold short could exceed the liabilities recorded in
the Statement of Assets and Liabilities. The Fund bears the risk of potential
inability of the broker to meet their obligation to perform.
102
VALIC Company II
NOTES TO FINANCIAL STATEMENTS -- (continued)
- --------------------------------------------------------------------------------
G. Securities Transactions, Investment Income, Expenses, Dividends and
Distributions to Shareholders
Security transactions are recorded on a trade date basis. Realized gains and
losses on securities sold are determined on the basis of identified cost.
Dividend income and capital gain distributions received are recorded on the
ex-dividend date except for certain dividends from foreign securities, which
are recorded as soon as VC II is informed after the ex-dividend date. Interest
income is accrued daily except when collection is not expected. For financial
statement purposes, VC II amortizes all premiums and accretes all discounts on
fixed income securities. Funds which earn foreign income and capital gains may
be subject to foreign withholding taxes and capital gains taxes at various
rates. Under applicable foreign law, a withholding of tax may be imposed on
interest, dividends and capital gains at various rates. India, Thailand and
certain other countries tax regulations require that taxes be paid on capital
gains realized by the Fund.
Common expenses incurred by VC II are allocated among the Funds based upon
relative net assets or other appropriate allocation methods. In all other
respects, expenses are charged to each Fund as incurred on a specific
identification basis. For the Lifestyle Funds, the expenses included in the
accompanying financial statements reflect the expenses of the Lifestyle Funds
and do not include any expenses associated with the underlying Funds.
Dividends from net investment income, if any, are normally declared and paid
annually, except for the Money Market II Fund, which declares and pays daily.
Distributions from net realized capital gains, if any, are normally declared
and paid annually.
The Funds record dividends and distributions to their shareholders on the
ex-dividend date. The amount of dividends and distributions from net investment
income and net realized gains are determined and presented in accordance with
federal income tax regulations, which may differ from U.S. generally accepted
accounting principles. These "book/ tax" differences are either considered
temporary or permanent in nature. To the extent these differences are permanent
in nature, such amounts are reclassified within the capital accounts at fiscal
year end based on their federal tax-basis treatment; temporary differences do
not require reclassification. Net investment income (loss), net realized gain
(loss) and net assets are not affected by these reclassifications.
Each Fund intends to comply with the requirements of the Internal Revenue
Code, as amended, applicable to regulated investment companies and distribute
all of its taxable income, including any net realized gain on investments, to
its shareholders. Therefore, no federal tax provision is required. Each Fund is
considered a separate entity for tax purposes.
H. New Accounting Pronouncements
On July 13, 2006, the Financial Accounting Standards Board (FASB) released
FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" ("FIN
48"). FIN 48 provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial statements. FIN
48 requires the evaluation of tax positions taken or expected to be taken in
the course of preparing the Fund's tax returns to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Adoption of FIN 48 is required for fiscal years beginning after
December 15, 2006 and is to be applied to all open tax years as of the
effective date. However, Registered Investment Companies are not required to
implement FIN 48 until their last net asset value calculation in the first
required financial statement reporting period for fiscal years beginning after
December 15, 2006. At this time, management does not anticipate the adoption of
FIN 48 to have a material impact on the financial statements.
In September 2006, the Financial Accounting Standards Board (FASB) issued
Statement on Financial Accounting Standards No. 157, "Fair Value Measurements"
(FAS 157). This standard clarifies the definition of fair value for financial
reporting, establishes a framework for measuring fair value and requires
additional disclosures about the use of fair value measurements. FAS 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007 and interim periods within those fiscal years. As of
August 31, 2007, the Fund does not believe the adoption of FAS 157 will impact
the amounts reported in the financial statements, however, additional
disclosures will be required about the inputs used to develop the measurements
of fair value.
Note 3 -- Advisory Fees and Other Transactions with Affiliates
VALIC, serves as investment adviser to VC II. Certain officers and trustees of
VC II are officers and directors of VALIC or affiliates of VALIC. VALIC
receives from VC II a monthly fee based on each Fund's average daily net asset
value at the following annual rates:
Aggressive Growth Lifestyle Fund 0.10%
---------------------------------------------------------------------
Capital Appreciation Fund 0.55%
---------------------------------------------------------------------
Conservative Growth Lifestyle Fund 0.10%
---------------------------------------------------------------------
Core Bond Fund 0.50% on the first $200 million
0.45% on the next $300 million
0.40% on assets over $500 million
---------------------------------------------------------------------
High Yield Bond Fund 0.70% on the first $200 million
0.60% on the next $300 million
0.55% on assets over $500 million
---------------------------------------------------------------------
International Small Cap Equity Fund 0.90% on the first $100 million
0.80% on assets over $100 million
---------------------------------------------------------------------
Large Cap Value Fund 0.50%
---------------------------------------------------------------------
Mid Cap Growth Fund 0.80% on the first $50 million
0.75% on the next $50 million
0.70% on the next $150 million
0.65% on the next $250 million
0.60% on assets over $500 million
---------------------------------------------------------------------
103
VALIC Company II
NOTES TO FINANCIAL STATEMENTS -- (continued)
- --------------------------------------------------------------------------------
Mid Cap Value Fund 0.75% on the first $100 million
0.725% on the next $150 million
0.70% on the next $250 million
0.675% on the next $250 million
0.65% on the assets over $750 million
--------------------------------------------------------------------
Moderate Growth Lifestyle Fund 0.10%
--------------------------------------------------------------------
Money Market II Fund 0.25%
--------------------------------------------------------------------
Small Cap Growth Fund 0.85%
--------------------------------------------------------------------
Small Cap Value Fund 0.75% on the first $50 million
0.65% on the assets over $50 million
--------------------------------------------------------------------
Socially Responsible Fund 0.25%
--------------------------------------------------------------------
Strategic Bond Fund 0.60% on the first $200 million
0.50% on the next $300 million
0.45% on assets over $500 million
--------------------------------------------------------------------
VALIC entered into sub-advisory agreements with the following:
AIG Global Investment Corp. ("AIGGIC")--subadviser for the International
Small Cap Equity Fund, Socially Responsible Fund, High Yield Bond Fund,
Strategic Bond Fund, Core Bond Fund, Aggressive, Moderate and
Conservative Growth Lifestyle Funds.
AIG SunAmerica Asset Management Corp. ("AIG SunAmerica")--subadviser for
the Money Market II Fund.
A I M Capital Management, Inc.--subadviser for the Mid Cap Growth Fund.
Bridgeway Capital Management, Inc.--subadviser for the Capital
Appreciation Fund.
FAF Advisors, Inc.--subadviser for a portion of the Mid Cap Value Fund.
Franklin Advisers, Inc.--subadviser for the Small Cap Growth Fund.
JPMorgan Investment Advisors, Inc.--subadviser for Small Cap Value Fund.
SSgA Funds Management, Inc.--subadviser for the Large Cap Value Fund.
Wellington Management Co. LLP--subadviser for a portion of the Mid Cap
Value Fund.
The subadvisers are compensated for their services by VALIC.
VALIC has agreed to contractually waive a portion of its management fee or to
reimburse certain expenses of the Funds listed below through 12/31/07. The
table below reflects total annual operating expenses by Fund, as limited by the
Adviser, shown as a percentage of average net assets:
Maximum Expense
Fund Limitation
------------------------------ ---------------
Aggressive Growth Lifestyle... 0.10%
Capital Appreciation.......... 0.85%
Conservative Growth Lifestyle. 0.10%
Core Bond..................... 0.77%
High Yield Bond............... 0.99%
International Small Cap Equity 1.00%
Large Cap Value............... 0.81%
Mid Cap Growth................ 0.85%
Mid Cap Value................. 1.05%
Moderate Growth Lifestyle..... 0.10%
Money Market II*.............. 0.55%
Small Cap Growth.............. 1.16%
Small Cap Value............... 0.95%
Socially Responsible.......... 0.56%
Strategic Bond................ 0.89%
- --------
*Prior to January 1, 2007, the expense limitation for the Money Market II Fund
was 0.56%.
VC II, on behalf of each Fund, has entered into an Administrative Services
Agreement with AIG SunAmerica. AIG SunAmerica receives from each Fund, other
than the Lifestyle Funds, an annual fee of 0.07% based on the average daily net
asset value of the Fund. Under the agreement, AIG SunAmerica will provide
certain accounting and administrative services to VC II. During the period
ended August 31, 2007, VC II accrued $2,254,875 for accounting and
administrative services.
VC II, on behalf of each Fund, has entered into a Transfer Agency and Services
Agreement with VALIC. Under this agreement, VALIC provides services which
include the issuance and redemption of shares, payment of dividends between VC
II and their "Institutional" shareholders and certain shareholder reporting
services including confirmation of transactions, statements of accounts and tax
reporting. For the period ended August 31, 2007, VC II accrued $27,388 in
transfer agency and services fees.
104
VALIC Company II
NOTES TO FINANCIAL STATEMENTS -- (continued)
- --------------------------------------------------------------------------------
VC II, on behalf of each Fund, has entered into a Shareholder Services
Agreement with VALIC. Under the agreement, VALIC provides record keeping,
account maintenance, and other administrative and shareholder services for
contract owners and participants. VALIC receives from each Fund, other than the
Lifestyle Funds, an annual fee of 0.25% based on average daily net assets of
the Fund. For the period ended August 31, 2007, VC II accrued $8,053,125 in
shareholder service expenses.
On January 23, 2001, the Board of Trustees ratified a Deferred Compensation
Plan for its independent trustees who are not officers, directors, or employees
of VALIC, or an affiliate of VALIC. The effective date of the plan was
January 1, 2001. The first deferred payment was made in March of 2001. Under
the deferred compensation plan, trustees may elect to defer all or a portion of
their compensation. Amounts deferred may be invested in up to six different
affiliated mutual funds that are specified in the plan as selected by the
trustees. For the period ended August 31, 2007, VC II has deferred $7,284 of
trustee compensation.
On January 23, 2001, the Board of Trustees approved a retirement plan for its
independent trustees who are not officers, directors, or employees of VALIC or
an affiliate of VALIC. VC II is responsible for the payment of the retirement
benefits, as well as all administration expenses of the plan. Generally,
benefits vested under the plan are payable for a ten-year period upon
retirement and are based upon each Trustee's years of service. In the event of
a Trustee's death prior to complete distribution of benefits, the Trustee's
beneficiary or estate will be entitled to receive installment payments or a
discounted lump-sum payments of the remaining benefits. The following amounts
for the retirement plan liability are included in the payable for Trustees'
fees and expenses line on the Statement of Assets and Liabilities and the
amounts for the retirement plan expenses are included in the Trustees' fees and
expenses line on the Statement of Operations:
Retirement Plan Retirement Plan
Retirement Plan Expense Payments
Liability as of --------------- ---------------
August 31, For the period ended
Fund 2007 August 31, 2007
------------------------------ --------------- -------------------------------
Aggressive Growth Lifestyle... $ 51,662 $ 4,204 $ --
Capital Appreciation.......... 51,987 4,999 153
Conservative Growth Lifestyle. 50,748 2,780 --
Core Bond..................... 105,685 8,737 276
High Yield Bond............... 70,243 8,322 267
International Small Cap Equity 94,682 32,835 1,094
Large Cap Value............... 92,143 16,441 576
Mid Cap Growth................ 62,471 4,467 136
Mid Cap Value................. 251,093 28,234 872
Moderate Growth Lifestyle..... 93,343 6,666 --
Money Market II............... 116,187 12,088 409
Small Cap Growth.............. 59,321 3,733 108
Small Cap Value............... 97,895 10,438 333
Socially Responsible.......... 70,570 26,480 960
Strategic Bond................ 98,701 14,842 466
At August 31, 2007, VALIC, through their insurance company separate accounts,
owned over five percent of the outstanding shares of the following Funds:
Fund VALIC
------------------------------ -------
Aggressive Growth Lifestyle... 100.00%
Capital Appreciation.......... 100.00%
Conservative Growth Lifestyle. 100.00%
Core Bond..................... 100.00%
High Yield Bond............... 99.68%
International Small Cap Equity 100.00%
Large Cap Value............... 100.00%
Mid Cap Growth................ 100.00%
Mid Cap Value................. 99.37%
Moderate Growth Lifestyle..... 100.00%
Money Market II............... 100.00%
Small Cap Growth.............. 100.00%
Small Cap Value............... 100.00%
Socially Responsible.......... 99.99%
Strategic Bond................ 99.57%
105
VALIC Company II
NOTES TO FINANCIAL STATEMENTS -- (continued)
- --------------------------------------------------------------------------------
As disclosed in the schedule of investments, certain Funds own securities
issued by AIG or an affiliate thereof. As of August 31, 2007, the following
Funds recorded realized gains (losses) and income on security transactions of
AIG and subsidiaries of AIG as follows:
Capital Gain
Distribution
Fund Security Income Received
- ----------------------------- ----------------------------- ---------- ------------
Aggressive Growth Lifestyle.. Various VC I and VC II Funds* $1,420,609 $1,064,664
Conservative Growth Lifestyle Various VC I and VC II Funds* 789,791 398,629
Moderate Growth Lifestyle.... Various VC I and VC II Funds* 1,825,364 1,158,626
Change in
Market Value Cost of Proceeds Realized Unrealized
Fund Security at 8/31/06 Purchases from Sales Gain/(Loss) Gain/(Loss)
- ----------------------------- ----------------------------- ------------ ------------ ----------- ----------- -----------
Aggressive Growth Lifestyle.. Various VC I and VC II Funds* $54,057,210 $58,139,371+ $37,402,295 $4,323,271 3,189,892
Conservative Growth Lifestyle Various VC I and VC II Funds* 37,382,856 39,920,364+ 31,491,238 1,980,231 1,184,798
Moderate Growth Lifestyle.... Various VC I and VC II Funds* 88,671,332 90,100,185+ 66,230,060 6,003,876 4,145,030
Market Value
Fund at 8/31/07
- ----------------------------- ------------
Aggressive Growth Lifestyle.. $ 82,307,449
Conservative Growth Lifestyle 48,977,011
Moderate Growth Lifestyle.... 122,690,363
- --------
*See Portfolio of Investments for details.
+Includes reinvestment of distributions paid.
On December 11, 2006 and December 12, 2006, AIGGIC, the subadviser for the
International Small Cap Equity Fund, sold 110,112 and 41,641 shares,
respectively, of Kingspan Group PLC common stock which reduced the Fund's
position more than what was intended. On December 14, 2006, AIGGIC repurchased
120,366 shares resulting in a loss of $168,728 to the Fund, which was
reimbursed by AIGGIC.
On August 28, 2007, the subadviser for the Small Cap Value Fund purchased
shares of Centerline Holding, a Master Limited Partnership. The fund has an
investment restriction which prohibits it from investing in Master Limited
Partnerships. On August 31, 2007, the shares were sold resulting in a gain of
$1,875 to the fund.
On June 29, 2007, VALIC made payments to Capital Appreciation Fund and
Socially Responsible Fund for $54,757 and $11,787 respectively, which represent
the net difference between amounts realized by those funds upon the disposition
of AIG stock and amounts those funds would have realized had they sold such AIG
stock at the time that VALIC became an indirect wholly-owned subsidiary of AIG
(based on the closing prices on August 29, 2001).
Note 4 -- Investment Activity
The cost of purchases and proceeds from sales and maturities of long-term
investments, during the period ended August 31, 2007, were as follows:
Purchases of Sales of
Investment Investment
Securities Securities
(Excluding U.S. (Excluding U.S. Purchase of U.S. Sales of U.S.
Government Government Government Government
Fund Securities) Securities) Securities Securities
- ------------------------------ --------------- --------------- ---------------- -------------
Aggressive Growth Lifestyle... $ 55,654,098 $ 37,402,296 $ -- $ --
Capital Appreciation.......... 25,411,612 23,637,971 -- --
Conservative Growth Lifestyle. 38,731,943 31,491,238 -- --
Core Bond..................... 205,579,164 138,288,871 142,744,684 91,961,168
High Yield Bond............... 172,813,194 62,545,065 -- --
International Small Cap Equity 601,237,558 425,623,587 -- --
Large Cap Value............... 560,748,233 355,239,766 -- --
Mid Cap Growth................ 90,180,937 82,364,756 -- --
Mid Cap Value................. 359,054,761 265,987,138 -- --
Moderate Growth Lifestyle..... 87,116,196 66,230,040 -- --
Small Cap Growth.............. 30,293,349 30,913,640 -- --
Small Cap Value............... 210,655,669 61,361,782 587,122 --
Socially Responsible.......... 1,423,831,328 850,002,880 -- --
Strategic Bond................ 311,899,821 219,944,487 82,778,250 54,528,207
106
VALIC Company II
NOTES TO FINANCIAL STATEMENTS -- (continued)
- --------------------------------------------------------------------------------
Note 5 -- Federal Income Taxes
The following tables detail the tax basis of distributions as well as the
components of distributable earnings. The tax basis components of distributable
earnings differ from the amounts reflected in the Statements of Assets and
Liabilities due to temporary book/tax differences primarily arising from wash
sales, post October losses, investments in passive foreign investment
companies, and derivative transactions. Also included in the following tables
are the capital loss carryforwards at August 31, 2007.
The information in the following table is presented on the basis of cost for
federal income tax purposes at August 31, 2007:
Identified Cost Gross Gross Net Unrealized
of Investments Unrealized Unrealized Appreciation
Fund Owned Appreciation Depreciation (Depreciation)
- ------------------------------ --------------- ------------ ------------ --------------
Aggressive Growth Lifestyle... $ 77,033,218 $ 5,584,625 $ 310,394 $ 5,274,231
Capital Appreciation.......... 71,234,974 16,437,999 1,211,647 15,226,352
Conservative Growth Lifestyle. 47,094,935 1,960,060 77,984 1,882,076
Core Bond..................... 210,658,189 1,152,870 4,143,021 (2,990,151)
High Yield Bond............... 196,028,883 3,816,933 9,313,396 (5,496,463)
International Small Cap Equity 649,760,470 110,305,433 31,352,870 78,952,563
Large Cap Value............... 399,067,129 32,820,247 14,408,698 18,411,549
Mid Cap Growth................ 76,904,232 10,384,355 3,166,482 7,217,873
Mid Cap Value................. 466,992,438 75,409,927 18,558,315 56,851,612
Moderate Growth Lifestyle..... 115,884,320 6,987,434 181,391 6,806,043
Money Market II............... 345,436,605 -- -- --
Small Cap Growth.............. 50,942,183 10,125,748 4,508,180 5,617,568
Small Cap Value............... 254,153,984 19,435,942 15,101,842 4,334,100
Socially Responsible.......... 918,680,378 39,521,977 35,770,430 3,751,547
Strategic Bond................ 290,835,583 4,294,121 8,444,015 (4,149,894)
The tax character of distributions paid may differ from the Statement of
Changes in Net Assets due to short-term capital gains being treated as ordinary
income for tax purposes. The tax basis distributable earnings at August 31,
2007 and the tax character of distributions paid during the year ended
August 31, 2007 were as follows:
Distributable Earnings Tax Distributions
------------------------------------------ -------------------------
Long-Term Gains/
Capital Loss Unrealized
Ordinary Carryover And Appreciation Ordinary Long-Term
Fund Income Other Losses (Depreciation) Income Capital Gains
- ------------------------------ ----------- ---------------- -------------- ----------- -------------
Aggressive Growth Lifestyle... $ 1,704,533 $ 5,034,919 $ 5,274,231 $ 757,435 $ 4,377,711
Capital Appreciation.......... 293,482 (10,950,452) 15,226,352 134,676 --
Conservative Growth Lifestyle. 1,039,974 1,866,810 1,882,076 434,456 1,635,181
Core Bond..................... 7,643,237 (1,597,126) (2,990,151) 3,641,316 --
High Yield Bond............... 11,547,136 418,420 (5,495,101) 5,583,929 2,645,527
International Small Cap Equity 30,991,369 37,745,822 78,876,869 14,316,655 11,512,801
Large Cap Value............... 17,023,308 8,707,988 18,411,549 4,298,805 9,655,500
Mid Cap Growth................ 2,729,499 6,475,242 7,218,947 -- 3,839,151
Mid Cap Value................. 13,215,383 30,590,757 56,853,116 15,018,210 24,040,708
Moderate Growth Lifestyle..... 2,475,944 6,180,652 6,806,043 2,255,241 5,806,383
Money Market II............... 123,968 -- -- 11,366,594 --
Small Cap Growth.............. -- 3,340,789 5,617,568 -- --
Small Cap Value............... 5,112,230 8,387,779 4,334,100 2,641,351 8,107,241
Socially Responsible.......... 51,293,940 11,165,320 3,751,547 8,500,868 1,279,671
Strategic Bond................ 14,683,239 1,108,310 (4,141,198) 7,715,285 2,328,243
107
VALIC Company II
NOTES TO FINANCIAL STATEMENTS -- (continued)
- --------------------------------------------------------------------------------
The tax character of distributions paid during the year ended August 31, 2006
were as follows:
Tax Distributions
------------------------
Ordinary Long-Term
Fund Income Capital Gains
------------------------------ ---------- -------------
Aggressive Growth Lifestyle... $ 686,468 $ 887,991
Capital Appreciation.......... 28,150 --
Conservative Growth Lifestyle. 558,981 1,543,386
Core Bond..................... 1,349,409 --
High Yield Bond............... 1,742,080 602,751
International Small Cap Equity 3,317,832 --
Large Cap Value............... 2,960,923 2,772,923
Mid Cap Growth................ -- --
Mid Cap Value................. 6,761,108 16,689,251
Moderate Growth Lifestyle..... 340,001 2,483,137
Money Market II............... 3,946,777 --
Small Cap Growth.............. -- --
Small Cap Value............... 1,825,160 9,973,380
Socially Responsible.......... 2,832,068 803,072
Strategic Bond................ 3,273,998 1,229,572
As of August 31, 2007, the Funds indicated below have capital loss
carryforwards, which expire in the year indicated and are available to offset
future capital gains, if any:
Capital Loss Carryforward
-------------------------------------------------------------
Fund 2010 2011 2012 2013 2014 2015
- ------------------------------ ---------- ---------- ---------- -------- -------- ----------
Aggressive Growth Lifestyle... $ -- $ -- $ -- $ -- $ -- $ --
Capital Appreciation.......... 2,158,710 6,282,529 2,100,734 408,479 -- --
Conservative Growth Lifestyle. -- -- -- -- -- --
Core Bond..................... -- -- -- -- 348,311 1,248,815
High Yield Bond............... -- -- -- -- -- --
International Small Cap Equity -- -- -- -- -- --
Large Cap Value............... -- -- -- -- -- --
Mid Cap Growth................ -- -- -- -- -- --
Mid Cap Value................. -- -- -- -- -- --
Moderate Growth Lifestyle..... -- -- -- -- -- --
Money Market II............... -- -- -- -- -- --
Small Cap Growth.............. -- -- -- -- -- --
Small Cap Value............... -- -- -- -- -- --
Socially Responsible.......... -- -- -- -- -- --
Strategic Bond................ -- -- -- -- -- --
The Funds indicated below utilized capital loss carryforwards, which offset
net taxable gains realized in the year ended August 31, 2007.
Capital Loss
Carryforward
Fund Utilized
------------------------------ ------------
Aggressive Growth Lifestyle... $ --
Capital Appreciation.......... 1,118,634
Conservative Growth Lifestyle. --
Core Bond..................... --
High Yield Bond............... --
International Small Cap Equity --
Large Cap Value............... --
Mid Cap Growth................ --
Mid Cap Value................. --
Moderate Growth Lifestyle..... --
Money Market II............... --
Small Cap Growth.............. 1,961,307
Small Cap Value............... --
Socially Responsible.......... --
Strategic Bond................ --
108
VALIC Company II
NOTES TO FINANCIAL STATEMENTS -- (continued)
- --------------------------------------------------------------------------------
Under the current law, capital losses related to securities and foreign
currency realized after October 31 and prior to the Fund's fiscal year end may
be deferred as occurring on the first day of the following year. For the fiscal
year ended August 31, 2007, the Funds elected to defer capital losses as
follows:
Deferred Post-October Deferred Post-October
Fund Capital Loss Currency Loss
------------------------------ --------------------- ---------------------
Aggressive Growth Lifestyle... $ -- $ --
Capital Appreciation.......... -- --
Conservative Growth Lifestyle. -- --
Core Bond..................... 142,762 --
High Yield Bond............... -- --
International Small Cap Equity -- 100,867
Large Cap Value............... -- --
Mid Cap Growth................ -- 6,220
Mid Cap Value................. -- --
Moderate Growth Lifestyle..... -- --
Money Market II............... -- --
Small Cap Growth.............. -- --
Small Cap Value............... -- --
Socially Responsible.......... -- --
Strategic Bond................ -- --
For the period ended August 31, 2007, the reclassifications arising from
book/tax differences resulted in increases (decreases) that were primarily due
to net investment losses, disposition of PFIC securities, principle paydown
adjustments, treatment of foreign currency and disposition of defaulted bonds,
to the components of net assets as follows:
Accumulated Accumulated
Undistributed Net Undistributed Net
Investment Income Realized Gain Capital
Fund (Loss) (Loss) Paid-in
------------------------------ ----------------- ----------------- ---------
Aggressive Growth Lifestyle... $ -- $ -- $ --
Capital Appreciation.......... -- -- --
Conservative Growth Lifestyle. -- -- --
Core Bond..................... 62,506 (62,506) --
High Yield Bond............... 1,127 (1,127) --
International Small Cap Equity (578,040) 577,829 211
Large Cap Value............... -- -- --
Mid Cap Growth................ 162,906 (162,906) --
Mid Cap Value................. 9,085 (9,085) --
Moderate Growth Lifestyle..... -- -- --
Money Market II............... -- -- --
Small Cap Growth.............. 353,630 -- (353,630)
Small Cap Value............... -- -- --
Socially Responsible.......... -- -- --
Strategic Bond................ 72,918 (72,918) --
109
VALIC Company II
NOTES TO FINANCIAL STATEMENTS -- (continued)
- --------------------------------------------------------------------------------
Note 6 -- Capital Share Transactions
Transactions in capital shares of each Fund were as follows:
Aggressive Growth Lifestyle
------------------------------------------------------
For the year ended For the year ended
August 31, 2007 August 31, 2006
--------------------------- -------------------------
Shares Amount Shares Amount
------------ ------------- ----------- ------------
Shares sold............ 3,162,967 $ 39,016,416 2,020,505 $ 23,207,686
Reinvested dividends... 434,078 5,135,146 140,176 1,574,459
Shares redeemed........ (1,678,669) (20,711,028) (1,248,988) (14,173,448)
------------ ------------- ----------- ------------
Net increase (decrease) 1,918,376 $ 23,440,534 911,693 $ 10,608,697
============ ============= =========== ============
Conservative Growth Lifestyle
------------------------------------------------------
For the year ended For the year ended
August 31, 2007 August 31, 2006
--------------------------- -------------------------
Shares Amount Shares Amount
------------ ------------- ----------- ------------
Shares sold............ 1,882,325 $ 20,964,355 1,455,082 $ 15,428,176
Reinvested dividends... 191,279 2,069,637 201,523 2,102,367
Shares redeemed........ (1,229,912) (13,687,184) (1,358,113) (14,408,757)
------------ ------------- ----------- ------------
Net increase (decrease) 843,692 $ 9,346,808 298,492 $ 3,121,786
============ ============= =========== ============
High Yield Bond
------------------------------------------------------
For the year ended For the year ended
August 31, 2007 August 31, 2006
--------------------------- -------------------------
Shares Amount Shares Amount
------------ ------------- ----------- ------------
Shares sold............ 13,102,725 $ 122,509,571 5,240,567 $ 47,186,720
Reinvested dividends... 906,328 8,229,456 270,853 2,344,831
Shares redeemed........ (4,161,297) (38,708,529) (3,224,553) (28,923,189)
------------ ------------- ----------- ------------
Net increase (decrease) 9,847,756 $ 92,030,498 2,286,867 $ 20,608,362
============ ============= =========== ============
Large Cap Value
------------------------------------------------------
For the year ended For the year ended
August 31, 2007 August 31, 2006
--------------------------- -------------------------
Shares Amount Shares Amount
------------ ------------- ----------- ------------
Shares sold............ 18,623,169 $ 286,763,039 8,020,214 $113,685,333
Reinvested dividends... 921,076 13,954,305 423,402 5,733,846
Shares redeemed........ (5,148,004) (80,522,218) (2,726,855) (37,666,061)
------------ ------------- ----------- ------------
Net increase (decrease) 14,396,241 $ 220,195,126 5,716,761 $ 81,753,118
============ ============= =========== ============
Mid Cap Value
------------------------------------------------------
For the year ended For the year ended
August 31, 2007 August 31, 2006
--------------------------- -------------------------
Shares Amount Shares Amount
------------ ------------- ----------- ------------
Shares sold............ 8,858,190 $ 176,900,418 5,320,454 $ 97,662,735
Reinvested dividends... 2,112,435 39,058,918 1,340,021 23,450,359
Shares redeemed........ (4,162,526) (82,551,999) (3,858,333) (70,054,067)
------------ ------------- ----------- ------------
Net increase (decrease) 6,808,099 $ 133,407,337 2,802,142 $ 51,059,027
============ ============= =========== ============
Money Market II
------------------------------------------------------
For the year ended For the year ended
August 31, 2007 August 31, 2006
--------------------------- -------------------------
Shares Amount Shares Amount
------------ ------------- ----------- ------------
Shares sold............ 370,731,455 $ 370,731,455 157,487,749 $157,487,749
Reinvested dividends... 11,366,594 11,366,594 3,946,777 3,946,777
Shares redeemed........ (196,374,556) (196,374,556) (85,944,160) (85,944,160)
------------ ------------- ----------- ------------
Net increase (decrease) 185,723,493 $ 185,723,493 75,490,366 $ 75,490,366
============ ============= =========== ============
Capital Appreciation
----------------------------------------------------
For the year ended For the year ended
August 31, 2007 August 31, 2006
------------------------- -------------------------
Shares Amount Shares Amount
---------- ------------- ---------- -------------
Shares sold............ 3,983,573 $ 40,505,922 4,467,101 $ 40,890,979
Reinvested dividends... 13,898 134,676 3,030 28,150
Shares redeemed........ (4,015,512) (40,978,062) (2,172,046) (19,590,513)
---------- ------------- ---------- -------------
Net increase (decrease) (18,041) $ (337,464) 2,298,085 $ 21,328,616
========== ============= ========== =============
Core Bond
----------------------------------------------------
For the year ended For the year ended
August 31, 2007 August 31, 2006
------------------------- -------------------------
Shares Amount Shares Amount
---------- ------------- ---------- -------------
Shares sold............ 16,217,225 $ 164,707,098 7,150,257 $ 70,689,516
Reinvested dividends... 360,884 3,641,316 138,212 1,349,409
Shares redeemed........ (6,709,586) (68,023,241) (6,557,628) (64,881,339)
---------- ------------- ---------- -------------
Net increase (decrease) 9,868,523 $ 100,325,173 730,841 $ 7,157,586
========== ============= ========== =============
International Small Cap Equity
----------------------------------------------------
For the year ended For the year ended
August 31, 2007 August 31, 2006
------------------------- -------------------------
Shares Amount Shares Amount
---------- ------------- ---------- -------------
Shares sold............ 17,238,389 $ 321,086,380 24,383,197 $ 388,289,558
Reinvested dividends... 1,447,839 25,829,456 217,301 3,317,832
Shares redeemed........ (6,926,044) (129,918,539) (6,561,047) (107,992,641)
---------- ------------- ---------- -------------
Net increase (decrease) 11,760,184 $ 216,997,297 18,039,451 $ 283,614,749
========== ============= ========== =============
Mid Cap Growth
----------------------------------------------------
For the year ended For the year ended
August 31, 2007 August 31, 2006
------------------------- -------------------------
Shares Amount Shares Amount
---------- ------------- ---------- -------------
Shares sold............ 4,047,382 $ 37,134,898 3,212,319 $ 26,063,891
Reinvested dividends... 455,956 3,839,151 -- --
Shares redeemed........ (3,380,057) (29,737,218) (2,203,843) (17,713,507)
---------- ------------- ---------- -------------
Net increase (decrease) 1,123,281 $ 11,236,831 1,008,476 $ 8,350,384
========== ============= ========== =============
Moderate Growth Lifestyle
----------------------------------------------------
For the year ended For the year ended
August 31, 2007 August 31, 2006
------------------------- -------------------------
Shares Amount Shares Amount
---------- ------------- ---------- -------------
Shares sold............ 4,144,235 $ 53,343,062 3,024,569 $ 37,158,514
Reinvested dividends... 653,292 8,061,624 233,257 2,823,138
Shares redeemed........ (2,517,726) (32,378,372) (2,265,572) (27,652,885)
---------- ------------- ---------- -------------
Net increase (decrease) 2,279,801 $ 29,026,314 992,254 $ 12,328,767
========== ============= ========== =============
Small Cap Growth
----------------------------------------------------
For the year ended For the year ended
August 31, 2007 August 31, 2006
------------------------- -------------------------
Shares Amount Shares Amount
---------- ------------- ---------- -------------
Shares sold............ 1,369,933 $ 19,598,282 1,710,180 $ 22,318,958
Reinvested dividends... -- -- -- --
Shares redeemed........ (1,377,549) (19,410,779) (1,597,679) (20,421,375)
---------- ------------- ---------- -------------
Net increase (decrease) (7,616) $ 187,503 112,501 $ 1,897,583
========== ============= ========== =============
110
VALIC Company II
NOTES TO FINANCIAL STATEMENTS -- (continued)
- --------------------------------------------------------------------------------
Small Cap Value Socially Responsible
-------------------------------------------------- ---------------------------------------------------
For the year ended For the year ended For the year ended For the year ended
August 31, 2007 August 31, 2006 August 31, 2007 August 31, 2006
------------------------ ------------------------ ------------------------ -------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ ---------- ------------ ---------- -------------
Shares sold............ 10,498,009 $167,268,938 3,226,235 $ 47,811,244 49,596,955 $653,308,019 16,723,063 $ 195,591,227
Reinvested dividends... 701,148 10,748,592 843,018 11,798,540 760,540 9,780,539 316,393 3,635,140
Shares redeemed........ (1,902,938) (30,186,257) (2,682,922) (39,147,217) (6,192,895) (81,514,307) (9,733,170) (110,273,350)
---------- ------------ ---------- ------------ ---------- ------------ ---------- -------------
Net increase (decrease) 9,296,219 $147,831,273 1,386,331 $ 20,462,567 44,164,600 $581,574,251 7,306,286 $ 88,953,017
========== ============ ========== ============ ========== ============ ========== =============
Strategic Bond
--------------------------------------------------
For the year ended For the year ended
August 31, 2007 August 31, 2006
------------------------ ------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Shares sold............ 11,478,796 $131,229,482 7,282,768 $ 80,284,471
Reinvested dividends... 891,174 10,043,528 416,023 4,503,570
Shares redeemed........ (3,821,963) (43,674,248) (2,805,272) (30,956,471)
---------- ------------ ---------- ------------
Net increase (decrease) 8,548,007 $ 97,598,762 4,893,519 $ 53,831,570
========== ============ ========== ============
Note 7 -- Expense Reductions
Through expense offset arrangements, resulting from broker commission
recapture, a portion of the Fund's expenses have been reduced. For the period
ended August 31, 2007, the amount of expense reductions received by each fund,
used to offset the Fund's non-affiliated expenses, were as follows:
Fund Expense Reductions
-------------------- ------------------
Capital Appreciation $ 1,548
Mid Cap Growth...... 8,427
Mid Cap Value....... 69,437
Small Cap Growth.... 3,245
Small Cap Value..... 733
Socially Responsible 162,646
Note 8 -- Investment Concentration
The High Yield Bond Fund's investment in high yield securities, whether rated
or unrated, may be considered speculative and subject to greater market
fluctuations and risk of loss of income and principal than lower-yielding,
higher-rated, fixed-income securities. The risk of loss due to default by the
issuer may be significantly greater for the holders of high yield securities,
because such securities are generally unsecured and are often subordinated to
other creditors of the issuer.
The Core Bond Fund and Strategic Bond Fund invest in U.S. Government sponsored
securities. No assurance can be given that the U.S. Government will provide
support to such U.S. Government sponsored agencies or instrumentalities in the
future since it is not required to do so by law. As a result of a Fund's
concentration in such investments, it may be subject to risks associated with
the U.S. Government. At the end of the period, the Funds had 31.5% and 14.4%,
respectively, of their total net assets invested in such securities.
Some of the Funds may invest internationally, including in "emerging market"
countries. Emerging market securities involve risks not typically associated
with investing in securities of issuers in more developed markets. These
investments are subject to various risk factors including market, credit,
exchange rate and sovereign risk. The markets in which these securities trade
can be volatile and at times illiquid. These securities may be denominated in
currencies other than U.S. dollars. While investing internationally may reduce
portfolio risk by increasing the diversification of portfolio investments, the
value of the investment may be affected by fluctuating currency values,
changing local and regional economic, political and social conditions, and
greater market volatility. These risks are primary risks of the International
Small Cap Equity Fund and Strategic Bond Fund. At the end of the period, the
International Small Cap Equity Fund had 28.6% of its net assets invested in
equity securities domiciled in Japan. At the end of the period, Strategic Bond
Fund had 29.7% of its net assets invested in securities issued by foreign
government agencies.
Note 9 -- Lines of Credit
Except for the VC II Large Cap Value Fund, VC I and VC II have established an
$85 million committed and a $40 million uncommitted line of credit with State
Street Bank and Trust Company, the Funds' custodian. Interest is currently
payable at the Federal Funds Rate plus 50 basis points on the committed line
and State Street's discretionary bid rate on the uncommitted line of credit.
There is also a commitment fee of 10 basis points per annum for the daily
unused portion of the committed line of credit, which is included in interest
expense on the Statement of Operations. Borrowings under the line of credit
will commence when the Fund's cash shortfall exceeds $100,000.
111
VALIC Company II
NOTES TO FINANCIAL STATEMENTS -- (continued)
- --------------------------------------------------------------------------------
For the period ended August 31, 2007, the following Funds had borrowings:
Average Weighted
Days Interest Debt Average
Fund Outstanding Charges Utilized Interest
-------------------- ----------- -------- ---------- --------
Capital Appreciation 16 $1,603 $ 625,900 5.76%
Core Bond........... 1 438 2,744,010 5.75%
Mid Cap Value....... 1 91 563,568 5.81%
As of August 31, 2007, none of the Funds had outstanding borrowings.
Note 10 -- Interfund Lending Agreement
Pursuant to the exemptive relief granted by the Securities and Exchange
Commission, the Funds are permitted to participate in an interfund lending
program among investment companies advised by VALIC or an affiliate. The
interfund lending program allows the participating portfolios to borrow money
from and lend money to each other for temporary or emergency purposes. An
interfund loan will be made under this facility only if the participating funds
receive a more favorable interest rate than would otherwise be available from a
typical bank for a comparable transaction. For the period ended August 31,
2007, none of the Funds participated in this program.
Note 11 -- Security Transactions with Affiliated Portfolios
The Funds are permitted to purchase or sell securities from certain other
affiliated funds under specified conditions outlined in the procedures adopted
by the Board of Trustees of the Series. The procedures have been designed to
ensure that any purchase or sale of securities by a fund from or to another
fund that is or could be considered an affiliate by virtue of having a common
investment adviser (or affiliated investment adviser), common Trustees and/or
common officers complies with Rule 17a-7 under the 1940 Act. Further, as
defined under the procedures, each transaction is effective at the current
market price. For the year ended August 31, 2007, the following Funds engaged
in security transactions with affiliated Funds:
Proceeds
Cost of from Realized
Fund Purchases sales Gain/(Loss)
---------------- --------- -------- -----------
Mid Cap Growth.. $906,880 $991,855 $(145,518)
Small Cap Growth 138,684 -- --
Note 12 -- Other Matters
The matter related to AIG's settlement with the Securities and Exchange
Commission (the "Commission") and other governmental authorities that was
reported in recent shareholder reports has been resolved. With respect to such
matter, in September 2007, the Commission issued a permanent exemptive order
(the "Order") pursuant to Section 9(c) of the Investment Company Act of 1940,
as amended, to American International Group, Inc. (AIG) and certain affiliated
persons of AIG, including AIG SunAmerica Asset Management Corp., The Variable
Annuity Life Insurance Company, American General Distributors, Inc. and AIG
Global Investment Corp. The Order permits each entity to continue to provide
advisory or distribution services to the Funds. There has been no adverse
impact on the Funds or the Funds' shareholders.
112
VALIC Company II
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Per share data is for a share of beneficial interest outstanding throughout the
period. Total return includes reinvestment of distributions on the reinvestment
date.
Aggressive Growth Lifestyle Fund
---------------------------------------
Year Ended August 31,
---------------------------------------
2007 2006 2005 2004
------- ------- ------- -------
PER SHARE DATA
Net asset value at beginning of period............................................ $ 11.71 $ 10.98 $ 9.10 $ 8.37
---------------------------------------
Income (loss) from investment operations:
Net investment income (loss)/(d)/.............................................. 0.23 0.15 0.08 0.08
Net realized and unrealized gain (loss) on investments and foreign currencies.. 1.64 1.00 1.88 0.73
Net increase from payments by affiliates....................................... - - - -
---------------------------------------
Total income (loss) from investment operations................................. 1.87 1.15 1.96 0.81
---------------------------------------
Distributions from:
Net investment income.......................................................... -. (0.18) (0.08) (0.08)
Net realized gain on securities................................................ (0.99) (0.24) - -
---------------------------------------
Total distributions............................................................ (0.99) (0.42) (0.08) (0.08)
---------------------------------------
Net asset value at end of period.................................................. $ 12.59 $ 11.71 $ 10.98 $ 9.10
---------------------------------------
TOTAL RETURN/(a)/................................................................. 16.53% 10.65% 21.62% 9.66%
---------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/...................................... 0.10% 0.10% 0.10% 0.10%
Ratio of expenses to average net assets/(c)/...................................... 0.23% 0.29% 0.30% 0.34%
Ratio of expense reductions to average net assets................................. - - - -
Ratio of net investment income (loss) to average net assets/(b)/.................. 1.93% 1.31% 0.80% 0.89%
Ratio of net investment income (loss) to average net assets/(c)/.................. 1.80% 1.12% 0.60% 0.65%
Portfolio turnover rate........................................................... 53% 79% 40% 71%
Number of shares outstanding at end of period (000's)............................. 6,530 4,612 3,700 3,683
Net assets at the end of period (000's)........................................... $82,221 $53,987 $40,623 $33,520
----
----
2003
-------
PER SHARE DATA
Net asset value at beginning of period............................................ $ 7.43
----
Income (loss) from investment operations:
Net investment income (loss)/(d)/.............................................. 0.07
Net realized and unrealized gain (loss) on investments and foreign currencies.. 0.94
Net increase from payments by affiliates....................................... -
----
Total income (loss) from investment operations................................. 1.01
----
Distributions from:
Net investment income.......................................................... (0.07)
Net realized gain on securities................................................ -
----
Total distributions............................................................ (0.07)
----
Net asset value at end of period.................................................. $ 8.37
----
TOTAL RETURN/(a)/................................................................. 13.66%
----
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/...................................... 0.10%
Ratio of expenses to average net assets/(c)/...................................... 0.34%
Ratio of expense reductions to average net assets................................. -
Ratio of net investment income (loss) to average net assets/(b)/.................. 0.92%
Ratio of net investment income (loss) to average net assets/(c)/.................. 0.68%
Portfolio turnover rate........................................................... 52%
Number of shares outstanding at end of period (000's)............................. 3,419
Net assets at the end of period (000's)........................................... $28,627
Capital Appreciation Fund
-----------------------------------------
Year Ended August 31,
-----------------------------------------
2007 2006 2005 2004
------- ------- ------- -------
PER SHARE DATA
Net asset value at beginning of period............................................ $ 8.90 $ 8.90 $ 7.79 $ 7.66
-----------------------------------------
Income (loss) from investment operations:
Net investment income (loss)/(d)/.............................................. 0.04 0.02 0.03 (0.02)
Net realized and unrealized gain (loss) on investments and foreign currencies.. 1.91 (0.01) 1.11 0.15
Net increase from payments by affiliates....................................... 0.00 - - -
-----------------------------------------
Total income (loss) from investment operations................................. 1.95 0.01 1.14 0.13
-----------------------------------------
Distributions from:
Net investment income.......................................................... (0.02) (0.01) (0.03) -
Net realized gain on securities................................................ - - - -
-----------------------------------------
Total distributions............................................................ (0.02) (0.01) (0.03) -
-----------------------------------------
Net asset value at end of period.................................................. $ 10.83 $ 8.90 $ 8.90 $ 7.79
-----------------------------------------
TOTAL RETURN/(a)/................................................................. 21.90%/(e)/ 0.06% 14.58% 1.70%
-----------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/...................................... 0.85% 0.85% 0.85% 0.85%
Ratio of expenses to average net assets/(c)/...................................... 1.03% 1.03% 1.13% 1.19%
Ratio of expense reductions to average net assets................................. 0.00% - - -
Ratio of net investment income (loss) to average net assets/(b)/.................. 0.38% 0.21% 0.34% (0.22)%
Ratio of net investment income (loss) to average net assets/(c)/.................. 0.19% 0.03% 0.06% (0.56)%
Portfolio turnover rate........................................................... 32% 169% 105% 119%
Number of shares outstanding at end of period (000's)............................. 7,779 7,797 5,499 5,462
Net assets at the end of period (000's)........................................... $84,269 $69,412 $48,939 $42,544
--------
--------
2003
-------
PER SHARE DATA
Net asset value at beginning of period............................................ $ 6.71
--------
Income (loss) from investment operations:
Net investment income (loss)/(d)/.............................................. (0.00)
Net realized and unrealized gain (loss) on investments and foreign currencies.. 0.95
Net increase from payments by affiliates....................................... -
--------
Total income (loss) from investment operations................................. 0.95
--------
Distributions from:
Net investment income.......................................................... -
Net realized gain on securities................................................ -
--------
Total distributions............................................................ -
--------
Net asset value at end of period.................................................. $ 7.66
--------
TOTAL RETURN/(a)/................................................................. 14.22%
--------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/...................................... 0.85%
Ratio of expenses to average net assets/(c)/...................................... 1.29%
Ratio of expense reductions to average net assets................................. -
Ratio of net investment income (loss) to average net assets/(b)/.................. (0.03)%
Ratio of net investment income (loss) to average net assets/(c)/.................. (0.47)%
Portfolio turnover rate........................................................... 87%
Number of shares outstanding at end of period (000's)............................. 4,588
Net assets at the end of period (000's)........................................... $35,152
/(a)/Total return is not annualized. It does include, if any, expense
reimbursements and expense reductions. The effect of fees and charges
incurred at the separate account level are not reflected in these
performance figures. If such expenses had been included, the total return
would have been lower for each period presented.
/(b)/Includes expense reimbursements, but excludes expense reductions.
/(c)/Excludes expense reimbursements and expense reductions.
/(d)/The per share amounts are calculated using the average share method.
/(e)/The Fund's performance was increased by less than 0.01% from a
reimbursement by an affiliate. (See Note 3)
113
VALIC Company II
FINANCIAL HIGHLIGHTS -- (continued)
- --------------------------------------------------------------------------------
Per share data is for a share of beneficial interest outstanding throughout the
period. Total return includes reinvestment of distributions on the reinvestment
date.
Conservative Growth Lifestyle Fund
-------------------------------------------
Year Ended August 31,
-------------------------------------------
2007 2006 2005 2004 2003
------- ------- ------- ------- -------
PER SHARE DATA
Net asset value at beginning of period................................. $ 10.70 $ 10.81 $ 9.79 $ 9.37 $ 8.73
-------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)/(d)/................................... 0.19 0.15 0.24 0.30 0.21
Net realized and unrealized gain (loss) on investments and foreign
currencies......................................................... 0.99 0.42 1.03 0.41 0.64
Net increase from payments by affiliates............................ - - - - -
-------------------------------------------
Total income (loss) from investment operations...................... 1.18 0.57 1.27 0.71 0.85
-------------------------------------------
Distributions from:
Net investment income............................................... - (0.18) (0.25) (0.29) (0.21)
Net realized gain on securities..................................... (0.59) (0.50) - - -
-------------------------------------------
Total distributions................................................. (0.59) (0.68) (0.25) (0.29) (0.21)
-------------------------------------------
Net asset value at end of period....................................... $ 11.29 $ 10.70 $ 10.81 $ 9.79 $ 9.37
-------------------------------------------
TOTAL RETURN/(a)/...................................................... 11.28% 5.50% 13.03% 7.60% 9.90%
-------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/........................... 0.10% 0.10% 0.10% 0.10% 0.10%
Ratio of expenses to average net assets/(c)/........................... 0.28% 0.33% 0.31% 0.36% 0.34%
Ratio of expense reductions to average net assets...................... - - - - -
Ratio of net investment income (loss) to average net assets/(b)/....... 1.75% 1.38% 2.35% 3.01% 2.41%
Ratio of net investment income (loss) to average net assets/(c)/....... 1.57% 1.15% 2.14% 2.75% 2.17%
Portfolio turnover rate................................................ 75% 81% 46% 67% 65%
Number of shares outstanding at end of period (000's).................. 4,332 3,488 3,190 3,130 2,952
Net assets at the end of period (000's)................................ $48,897 $37,309 $34,468 $30,649 $27,652
Core Bond Fund
------------------------------------------------
Year Ended August 31,
------------------------------------------------
2007 2006 2005 2004
-------- -------- -------- -------
PER SHARE DATA
Net asset value at beginning of period................................. $ 10.09 $ 10.06 $ 10.00 $ 10.02
------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)/(d)/................................... 0.48 0.49 0.42 0.34
Net realized and unrealized gain (loss) on investments and foreign
currencies......................................................... (0.11) (0.31) 0.08 0.22
Net increase from payments by affiliates............................ - - - -
------------------------------------------------
Total income (loss) from investment operations...................... 0.37 0.18 0.50 0.56
------------------------------------------------
Distributions from:
Net investment income............................................... (0.29) (0.13) (0.41) (0.35)
Net realized gain on securities..................................... - (0.02) (0.03) (0.23)
------------------------------------------------
Total distributions................................................. (0.29) (0.15) (0.44) (0.58)
------------------------------------------------
Net asset value at end of period....................................... $ 10.17 $ 10.09 $ 10.06 $ 10.00
------------------------------------------------
TOTAL RETURN/(a)/...................................................... 3.67% 1.82% 5.05% 5.71%
------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/........................... 0.77% 0.77% 0.77% 0.77%
Ratio of expenses to average net assets/(c)/........................... 0.93% 1.03% 1.00% 1.07%
Ratio of expense reductions to average net assets...................... - - - -
Ratio of net investment income (loss) to average net assets/(b)/....... 4.84% 4.91% 4.23% 3.37%
Ratio of net investment income (loss) to average net assets/(c)/....... 4.68% 4.66% 3.99% 3.07%
Portfolio turnover rate................................................ 155% 202% 212%/(e)/ 187%/(e)/
Number of shares outstanding at end of period (000's).................. 20,671 10,802 10,072 7,138
Net assets at the end of period (000's)................................ $210,322 $109,007 $101,299 $71,409
--------
--------
2003
-------
PER SHARE DATA
Net asset value at beginning of period................................. $ 9.95
--------
Income (loss) from investment operations:
Net investment income (loss)/(d)/................................... 0.31
Net realized and unrealized gain (loss) on investments and foreign
currencies......................................................... 0.09
Net increase from payments by affiliates............................ -
--------
Total income (loss) from investment operations...................... 0.40
--------
Distributions from:
Net investment income............................................... (0.33)
Net realized gain on securities..................................... -
--------
Total distributions................................................. (0.33)
--------
Net asset value at end of period....................................... $ 10.02
--------
TOTAL RETURN/(a)/...................................................... 4.08%
--------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/........................... 0.77%
Ratio of expenses to average net assets/(c)/........................... 1.12%
Ratio of expense reductions to average net assets...................... -
Ratio of net investment income (loss) to average net assets/(b)/....... 3.13%
Ratio of net investment income (loss) to average net assets/(c)/....... 2.77%
Portfolio turnover rate................................................ 214%/(e)/
Number of shares outstanding at end of period (000's).................. 6,336
Net assets at the end of period (000's)................................ $63,519
/(a)/Total return is not annualized. It does include, if any, expense
reimbursements and expense reductions. The effect of fees and charges
incurred at the separate account level are not reflected in these
performance figures. If such expenses had been included, the total return
would have been lower for each period presented.
/(b)/Includes expense reimbursements, but excludes expense reductions.
/(c)/Excludes expense reimbursements and expense reductions.
/(d)/The per share amounts are calculated using the average share method.
/(e)/Portfolio turnover includes paydowns on securities. Previously, portfolio
turnover was calculated prior to including paydowns on securities and was
as follows:
Fund 2005 2004 2003
--------- ---- ---- ----
Core Bond 205% 179% 197%
114
VALIC Company II
FINANCIAL HIGHLIGHTS -- (continued)
- --------------------------------------------------------------------------------
Per share data is for a share of beneficial interest outstanding throughout the
period. Total return includes reinvestment of distributions on the reinvestment
date.
High Yield Bond Fund
-----------------------------------------------------
Year Ended August 31,
-----------------------------------------------------
2007 2006 2005 2004
-------- -------- ------- --------
PER SHARE DATA
Net asset value at beginning of period................................. $ 9.32 $ 8.87 $ 8.28 $ 7.73
-----------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)/(d)/................................... 0.69 0.63 0.62 0.69
Net realized and unrealized gain (loss) on investments and foreign
currencies......................................................... (0.26) 0.07 0.78 0.54
Net increase from payments by
affiliates......................................................... - 0.00 - -
-----------------------------------------------------
Total income (loss) from investment operations...................... 0.43 0.70 1.40 1.23
-----------------------------------------------------
Distributions from:
Net investment income............................................... (0.44) (0.16) (0.63) (0.68)
Net realized gain on securities..................................... (0.21) (0.09) (0.18) -
-----------------------------------------------------
Total distributions................................................. (0.65) (0.25) (0.81) (0.68)
-----------------------------------------------------
Net asset value at end of period....................................... $ 9.10 $ 9.32 $ 8.87 $ 8.28
-----------------------------------------------------
TOTAL RETURN/(a)/...................................................... 4.62% 8.16%/(g)/ 17.45% 16.27%
-----------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/........................... 0.99% 0.99% 0.99% 0.99%
Ratio of expenses to average net assets/(c)/........................... 1.16% 1.19% 1.27% 1.31%//
Ratio of expense reductions to average net assets...................... - - - -
Ratio of net investment income (loss) to average net assets/(b)/....... 7.63% 7.07% 7.30% 8.45%
Ratio of net investment income (loss) to average net assets/(c)/....... 7.46% 6.87% 7.01% 8.12%
Portfolio turnover rate................................................ 47% 53% 58%/(f)/ 110%/(f)/
Number of shares outstanding at end of period (000's).................. 21,225 11,377 9,090 6,470
Net assets at the end of period (000's)................................ $193,127 $106,070 $80,665 $53,562
--------
--------
2003
-------
PER SHARE DATA
Net asset value at beginning of period................................. $ 6.82
--------
Income (loss) from investment operations:
Net investment income (loss)/(d)/................................... 0.69
Net realized and unrealized gain (loss) on investments and foreign
currencies......................................................... 0.90
Net increase from payments by
affiliates......................................................... -
--------
Total income (loss) from investment operations...................... 1.59
--------
Distributions from:
Net investment income............................................... (0.68)
Net realized gain on securities..................................... -
--------
Total distributions................................................. (0.68)
--------
Net asset value at end of period....................................... $ 7.73
--------
TOTAL RETURN/(a)/...................................................... 24.25%
--------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/........................... 0.99%
Ratio of expenses to average net assets/(c)/........................... 1.42%
Ratio of expense reductions to average net assets...................... -
Ratio of net investment income (loss) to average net assets/(b)/....... 9.69%
Ratio of net investment income (loss) to average net assets/(c)/....... 9.26%
Portfolio turnover rate................................................ 124%/(f)/
Number of shares outstanding at end of period (000's).................. 5,433
Net assets at the end of period (000's)................................ $41,986
International Small Cap Equity Fund
-----------------------------------------------------
Year Ended August 31,
-----------------------------------------------------
2007 2006 2005 2004
-------- -------- -------- -------
PER SHARE DATA
Net asset value at beginning of period................................. $ 16.80 $ 14.05 $ 10.36 $ 9.07
-----------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)/(d)/................................... 0.16 0.11 0.12 0.11
Net realized and unrealized gain (loss) on investments and foreign
currencies......................................................... 3.68 2.87 3.68 1.29
Net increase from payments by
affiliates......................................................... 0.00 0.00 - -
-----------------------------------------------------
Total income (loss) from investment operations...................... 3.84 2.98 3.80 1.40
-----------------------------------------------------
Distributions from:
Net investment income............................................... (0.06) (0.03) (0.04) (0.11)
Net realized gain on securities..................................... (0.80) (0.20) (0.07) -
-----------------------------------------------------
Total distributions................................................. (0.86) (0.23) (0.11) (0.11)
-----------------------------------------------------
Net asset value at end of period....................................... $ 19.78 $ 16.80 $ 14.05 $ 10.36
-----------------------------------------------------
TOTAL RETURN/(a)/...................................................... 23.44%/(h)/ 21.36%/(e)/ 36.89%/(e)/ 15.42%
-----------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/........................... 1.00% 1.00% 1.00% 1.00%
Ratio of expenses to average net assets/(c)/........................... 1.29% 1.37% 1.57% 1.62%
Ratio of expense reductions to average net assets...................... - - - -
Ratio of net investment income (loss) to average net assets/(b)/....... 0.84% 0.72% 0.99% 1.09%
Ratio of net investment income (loss) to average net assets/(c)/....... 0.55% 0.35% 0.42% 0.47%
Portfolio turnover rate................................................ 72% 69% 143% 85%
Number of shares outstanding at end of period (000's).................. 37,205 25,445 7,405 3,980
Net assets at the end of period (000's)................................ $735,844 $427,437 $104,030 $41,227
--------
--------
2003
-------
PER SHARE DATA
Net asset value at beginning of period................................. $ 8.67
--------
Income (loss) from investment operations:
Net investment income (loss)/(d)/................................... 0.11
Net realized and unrealized gain (loss) on investments and foreign
currencies......................................................... 0.40
Net increase from payments by
affiliates......................................................... -
--------
Total income (loss) from investment operations...................... 0.51
--------
Distributions from:
Net investment income............................................... (0.11)
Net realized gain on securities..................................... -
--------
Total distributions................................................. (0.11)
--------
Net asset value at end of period....................................... $ 9.07
--------
TOTAL RETURN/(a)/...................................................... 5.94%
--------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/........................... 1.01%
Ratio of expenses to average net assets/(c)/........................... 1.71%
Ratio of expense reductions to average net assets...................... -
Ratio of net investment income (loss) to average net assets/(b)/....... 1.34%
Ratio of net investment income (loss) to average net assets/(c)/....... 0.65%
Portfolio turnover rate................................................ 70%
Number of shares outstanding at end of period (000's).................. 4,654
Net assets at the end of period (000's)................................ $42,206
/(a)/Total return is not annualized. It does include, if any, expense
reimbursements and expense reductions. The effect of fees and charges
incurred at the separate account level are not reflected in these
performance figures. If such expenses had been included, the total return
would have been lower for each period presented.
/(b)/Includes expense reimbursements, but excludes expense reductions.
/(c)/Excludes expense reimbursements and expense reductions.
/(d)/The per share amounts are calculated using the average share method.
/(e)/The Fund's performance figure was increased by less than 0.01% from
reimbursements for losses realized on the disposal of investments in
violation of investment restrictions.
/(f)/Portfolio turnover includes paydowns on securities. Previously, portfolio
turnover was calculated prior to including paydowns on securities and was
as follows:
Fund 2005 2004 2003
--------------- ---- ---- ----
High Yield Bond 57% 110% 124%
/(g)/The Fund's performance figure was increased by less than 0.01% from a
reimbursement by an affiliate.
/(h)/The Fund's performance figure was increased by 0.06% from a reimbursement
for losses realized on the disposal of investments in violation of
investment restrictions. (See Note 3)
115
VALIC Company II
FINANCIAL HIGHLIGHTS -- (continued)
- --------------------------------------------------------------------------------
Per share data is for a share of beneficial interest outstanding throughout the
period. Total return includes reinvestment of distributions on the reinvestment
date.
Large Cap Value Fund
-------------------------------------------------------
Year Ended August 31,
-------------------------------------------------------
2007 2006 2005 2004 2003
-------- -------- ------- ------- -------
PER SHARE DATA
Net asset value at beginning of period.......................... $ 14.58 $ 13.72 $ 12.18 $ 10.97 $ 10.22
-------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)/(d)/............................ 0.18 0.21 0.18 0.15 0.13
Net realized and unrealized gain (loss) on investments and
foreign currencies.......................................... 1.67 1.50 2.05 1.21 0.74
Net increase from payments by affiliates..................... - 0.00 - - -
-------------------------------------------------------
Total income (loss) from investment operations............... 1.85 1.71 2.23 1.36 0.87
-------------------------------------------------------
Distributions from:
Net investment income........................................ (0.07) (0.06) (0.17) (0.15) (0.12)
Net realized gain on securities.............................. (0.62) (0.79) (0.52) - -
-------------------------------------------------------
Total distributions.......................................... (0.69) (0.85) (0.69) (0.15) (0.12)
-------------------------------------------------------
Net asset value at end of period................................ $ 15.74 $ 14.58 $ 13.72 $ 12.18 $ 10.97
-------------------------------------------------------
TOTAL RETURN/(a)/............................................... 12.89% 12.98%/(f)/ 18.62% 12.42%/(e)/ 8.59%
-------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/.................... 0.81% 0.81% 0.81% 0.81% 0.81%
Ratio of expenses to average net assets/(c)/.................... 0.89% 0.97% 1.01% 1.08% 1.19%
Ratio of expense reductions to average net assets............... - - - - -
Ratio of net investment income (loss) to average net assets/(b)/ 1.16% 1.54% 1.41% 1.26% 1.28%
Ratio of net investment income (loss) to average net assets/(c)/ 1.08% 1.38% 1.21% 0.99% 0.90%
Portfolio turnover rate......................................... 105% 103% 84% 97% 67%
Number of shares outstanding at end of period (000's)........... 26,589 12,192 6,476 5,735 4,091
Net assets at the end of period (000's)......................... $418,508 $177,737 $88,853 $69,831 $44,883
Mid Cap Growth Fund
-----------------------------------------------
Year Ended August 31,
-----------------------------------------------
2007 2006 2005 2004 2003
------- ------- ------- ------- -------
PER SHARE DATA
Net asset value at beginning of period.......................... $ 8.15 $ 7.56 $ 5.94 $ 5.70 $ 4.44
-----------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)/(d)/............................ (0.02) (0.01) (0.01) (0.03) (0.02)
Net realized and unrealized gain (loss) on investments and
foreign currencies.......................................... 1.80 0.60 1.63 0.27 1.28
Net increase from payments by affiliates..................... - - - - -
-----------------------------------------------
Total income (loss) from investment operations............... 1.78 0.59 1.62 0.24 1.26
-----------------------------------------------
Distributions from:
Net investment income........................................ - - - - -
Net realized gain on securities.............................. (0.57) - - - -
-----------------------------------------------
Total distributions.......................................... (0.57) - - - -
-----------------------------------------------
Net asset value at end of period................................ $ 9.36 $ 8.15 $ 7.56 $ 5.94 $ 5.70
-----------------------------------------------
TOTAL RETURN/(a)/............................................... 22.57% 7.80% 27.27% 4.21% 28.38%
-----------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/.................... 0.85% 0.85% 0.85% 0.85% 0.85%
Ratio of expenses to average net assets/(c)/.................... 1.25% 1.34% 1.37% 1.40% 1.51%
Ratio of expense reductions to average net assets............... 0.01% - - - -
Ratio of net investment income (loss) to average net assets/(b)/ (0.26)% (0.15)% (0.18)% (0.41)% (0.41)%
Ratio of net investment income (loss) to average net assets/(c)/ (0.66)% (0.64)% (0.70)% (0.96)% (1.07)%
Portfolio turnover rate......................................... 121% 142% 125% 123% 99%
Number of shares outstanding at end of period (000's)........... 9,052 7,929 6,920 7,487 7,682
Net assets at the end of period (000's)......................... $84,765 $64,583 $52,335 $44,446 $43,785
/(a)/Total return is not annualized. It does include, if any, expense
reimbursements and expense reductions. The effect of fees and charges
incurred at the separate account level are not reflected in these
performance figures. If such expenses had been included, the total return
would have been lower for each period presented.
/(b)/Includes expense reimbursements, but excludes expense reductions.
/(c)/Excludes expense reimbursements and expense reductions.
/(d)/The per share amounts are calculated using the average share method.
/(e)/The Fund's performance figure increased by 0.09% from a gain realized on
the disposal of investments in violation of investment restrictions.
/(f)/The Fund's performance figure was increased by less than 0.01% from
reimbursements for losses realized on the disposal of investments in
violation of investment restrictions.
116
VALIC Company II
FINANCIAL HIGHLIGHTS -- (continued)
- --------------------------------------------------------------------------------
Per share data is for a share of beneficial interest outstanding throughout the
period. Total return includes reinvestment of distributions on the reinvestment
date.
Mid Cap Value Fund
--------------------------------------------------
Year Ended August 31,
--------------------------------------------------
2007 2006 2005 2004 2003
-------- -------- -------- -------- --------
PER SHARE DATA
Net asset value at beginning of period.......................... $ 18.75 $ 18.27 $ 16.18 $ 14.10 $ 11.75
--------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)/(d)/............................ 0.10 0.08 0.01 0.02 0.02
Net realized and unrealized gain (loss) on investments and
foreign currencies.......................................... 3.14 1.79 3.63 2.08 2.36
Net increase from payments by affiliates..................... - - - - -
--------------------------------------------------
Total income (loss) from investment operations............... 3.24 1.87 3.64 2.10 2.38
--------------------------------------------------
Distributions from:
Net investment income........................................ (0.07) (0.01) (0.01) (0.02) (0.03)
Net realized gain on securities.............................. (1.83) (1.38) (1.54) - -
--------------------------------------------------
Total distributions.......................................... (1.90) (1.39) (1.55) (0.02) (0.03)
--------------------------------------------------
Net asset value at end of period................................ $ 20.09 $ 18.75 $ 18.27 $ 16.18 $ 14.10
--------------------------------------------------
TOTAL RETURN/(a)/............................................... 18.15% 10.74% 23.18% 14.86% 20.28%
--------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/.................... 1.05% 1.05% 1.05% 1.05% 1.05%
Ratio of expenses to average net assets/(c)/.................... 1.11% 1.20% 1.18% 1.25% 1.32%
Ratio of expense reductions to average net assets............... 0.02% 0.01% 0.02% 0.03% 0.04%
Ratio of net investment income (loss) to average net assets/(b)/ 0.47% 0.40% 0.01% 0.09% 0.11%
Ratio of net investment income (loss) to average net assets/(c)/ 0.41% 0.25% (0.11)% (0.11)% (0.16)%
Portfolio turnover rate......................................... 59% 76% 46% 57% 48%
Number of shares outstanding at end of period (000's)........... 26,139 19,331 16,528 11,902 9,587
Net assets at the end of period (000's)......................... $525,119 $362,379 $302,014 $192,607 $135,190
Moderate Growth Lifestyle Fund
--------------------------------------------
Year Ended August 31,
--------------------------------------------
2007 2006 2005 2004 2003
-------- ------- ------- ------- -------
PER SHARE DATA
Net asset value at beginning of period.......................... $ 12.44 $ 12.04 $ 10.46 $ 9.80 $ 8.93
--------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)/(d)/............................ 0.21 0.16 0.18 0.22 0.17
Net realized and unrealized gain (loss) on investments and
foreign currencies.......................................... 1.49 0.70 1.58 0.66 0.87
Net increase from payments by affiliates..................... - - - - -
--------------------------------------------
Total income (loss) from investment operations............... 1.70 0.86 1.76 0.88 1.04
--------------------------------------------
Distributions from:
Net investment income........................................ (0.12) (0.06) (0.18) (0.22) (0.17)
Net realized gain on securities.............................. (0.98) (0.40) - - -
--------------------------------------------
Total distributions.......................................... (1.10) (0.46) (0.18) (0.22) (0.17)
--------------------------------------------
Net asset value at end of period................................ $ 13.04 $ 12.44 $ 12.04 $ 10.46 $ 9.80
--------------------------------------------
TOTAL RETURN/(a)/............................................... 14.18% 7.21% 16.88% 8.96% 11.84%
--------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/.................... 0.10% 0.10% 0.10% 0.10% 0.10%
Ratio of expenses to average net assets/(c)/.................... 0.20% 0.24% 0.25% 0.32% 0.32%
Ratio of expense reductions to average net assets............... - - - - -
Ratio of net investment income (loss) to average net assets/(b)/ 1.64% 1.35% 1.58% 2.12% 1.94%
Ratio of net investment income (loss) to average net assets/(c)/ 1.54% 1.21% 1.44% 1.89% 1.72%
Portfolio turnover rate......................................... 64% 70% 38% 76% 65%
Number of shares outstanding at end of period (000's)........... 9,401 7,122 6,129 5,379 4,865
Net assets at the end of period (000's)......................... $122,551 $88,558 $73,804 $56,244 $47,692
/(a)/Total return is not annualized. It does include, if any, expense
reimbursements and expense reductions. The effect of fees and charges
incurred at the separate account level are not reflected in these
performance figures. If such expenses had been included, the total return
would have been lower for each period presented.
/(b)/Includes expense reimbursements, but excludes expense reductions.
/(c)/Excludes expense reimbursements and expense reductions.
/(d)/The per share amounts are calculated using the average share method.
117
VALIC Company II
FINANCIAL HIGHLIGHTS -- (continued)
- --------------------------------------------------------------------------------
Per share data is for a share of beneficial interest outstanding throughout the
period. Total return includes reinvestment of distributions on the reinvestment
date.
Money Market II Fund
--------------------------------------------- ---------
Year Ended August 31,
--------------------------------------------- ---------
2007 2006 2005 2004 2003 2007
-------- -------- ------- ------- ------- -------
PER SHARE DATA
Net asset value at beginning of period.......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 12.68
--------------------------------------------- ---------
Income (loss) from investment operations:
Net investment income (loss)/(d)/............................ 0.05 0.04 0.02 0.01 0.01 (0.09)
Net realized and unrealized gain (loss) on investments and
foreign currencies.......................................... - - - - - 2.00
Net increase from payments by affiliates..................... - - - - - -
--------------------------------------------- ---------
Total income (loss) from investment operations............... 0.05 0.04 0.02 0.01 0.01 1.91
--------------------------------------------- ---------
Distributions from:
Net investment income........................................ (0.05) (0.04) (0.02) (0.01) (0.01) -
Net realized gain on securities.............................. - - - - - -
--------------------------------------------- ---------
Total distributions.......................................... (0.05) (0.04) (0.02) (0.01) (0.01) -
--------------------------------------------- ---------
Net asset value at end of period................................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 14.59
--------------------------------------------- ---------
TOTAL RETURN/(a)/............................................... 4.88% 4.09% 1.99% 0.59% 0.83% 15.06%
--------------------------------------------- ---------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/.................... 0.55% 0.56% 0.56% 0.55% 0.56% 1.16%
Ratio of expenses to average net assets/(c)/.................... 0.64% 0.67% 0.75% 0.80% 0.85% 1.35%
Ratio of expense reduction to average net assets................ - - - - - 0.01%
Ratio of net investment income (loss) to average net assets/(b)/ 4.78% 4.13% 1.98% 0.59% 0.82% (0.67)%
Ratio of net investment income (loss) to average net assets/(c)/ 4.69% 4.02% 1.78% 0.34% 0.53% (0.86)%
Portfolio turnover rate......................................... N/A N/A N/A N/A N/A 58%
Number of shares outstanding at end of period (000's)........... 337,050 151,326 75,836 72,901 79,798 3,884
Net assets at the end of period (000's)......................... $337,050 $151,326 $75,836 $72,901 $79,798 $56,678
Small Cap Growth Fund
--------------------------------------
Year Ended August 31,
--------------------------------------
2006 2005 2004 2003
------- ------- ------- -------
PER SHARE DATA
Net asset value at beginning of period.......................... $ 12.19 $ 10.20 $ 9.70 $ 7.40
--------------------------------------
Income (loss) from investment operations:
Net investment income (loss)/(d)/............................ (0.07) (0.09) (0.09) (0.05)
Net realized and unrealized gain (loss) on investments and
foreign currencies.......................................... 0.56 2.08 0.59 2.35
Net increase from payments by affiliates..................... - - - -
--------------------------------------
Total income (loss) from investment operations............... 0.49 1.99 0.50 2.30
--------------------------------------
Distributions from:
Net investment income........................................ - - - -
Net realized gain on securities.............................. - - - -
--------------------------------------
Total distributions.......................................... - - - -
--------------------------------------
Net asset value at end of period................................ $ 12.68 $ 12.19 $ 10.20 $ 9.70
--------------------------------------
TOTAL RETURN/(a)/............................................... 4.02% 19.51% 5.15% 31.08%
--------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/.................... 1.16% 1.16% 1.16% 1.16%
Ratio of expenses to average net assets/(c)/.................... 1.40% 1.44% 1.46% 1.57%
Ratio of expense reduction to average net assets................ - - - -
Ratio of net investment income (loss) to average net assets/(b)/ (0.55)% (0.81)% (0.84)% (0.66)%
Ratio of net investment income (loss) to average net assets/(c)/ (0.79)% (1.09)% (1.14)% (1.06)%
Portfolio turnover rate......................................... 69% 46% 66% 37%
Number of shares outstanding at end of period (000's)........... 3,892 3,779 3,800 4,565
Net assets at the end of period (000's)......................... $49,354 $46,088 $38,755 $44,290
/(a)/Total return is not annualized. It does include, if any, expense
reimbursements and expense reductions. The effect of fees and charges
incurred at the separate account level are not reflected in these
performance figures. If such expenses had been included, the total return
would have been lower for each period presented.
/(b)/Includes expense reimbursements, but excludes expense reductions.
/(c)/Excludes expense reimbursements and expense reductions.
/(d)/The per share amounts are calculated using the average share method.
118
VALIC Company II
FINANCIAL HIGHLIGHTS -- (continued)
- --------------------------------------------------------------------------------
Per share data is for a share of beneficial interest outstanding throughout the
period. Total return includes reinvestment of distributions on the reinvestment
date.
Small Cap Value Fund
---------------------------------------------------
Year Ended August 31,
---------------------------------------------------
2007 2006 2005 2004 2003
-------- -------- -------- ------- -------
PER SHARE DATA
Net asset value at beginning of period.......................... $ 15.06 $ 15.61 $ 13.68 $ 11.70 $ 10.04
---------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)/(d)/............................ 0.12 0.11 0.12// 0.04 0.07
Net realized and unrealized gain (loss) on investments and
foreign currencies.......................................... 1.27 1.25 2.68 1.99 1.84
Net increase from payments by affiliates..................... 0.00 - - - -
---------------------------------------------------
Total income (loss) from investment operations............... 1.39 1.36 2.80 2.03 1.91
---------------------------------------------------
Distributions from:
Net investment income........................................ (0.07) (0.02) (0.13) (0.05) (0.09)
Net realized gain on securities.............................. (1.03) (1.89) (0.74) - (0.16)
---------------------------------------------------
Total distributions.......................................... (1.10) (1.91) (0.87) (0.05) (0.25)
---------------------------------------------------
Net asset value at end of period................................ $ 15.35 $ 15.06 $ 15.61 $ 13.68 $ 11.70
---------------------------------------------------
TOTAL RETURN/(a)/............................................... 9.22%/(g)/ 9.69% 20.84% 17.37% 19.47%
---------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/.................... 0.95% 0.95% 0.95% 0.95% 0.95%
Ratio of expenses to average net assets/(c)/.................... 1.11% 1.21% 1.22% 1.28% 1.40%
Ratio of expense reductions to average net assets............... 0.00% - - - -
Ratio of net investment income (loss) to average net assets/(b)/ 0.77% 0.74% 0.83% 0.34% 0.72%
Ratio of net investment income (loss) to average net assets/(c)/ 0.61% 0.49% 0.56% 0.01% 0.26%
Portfolio turnover rate......................................... 33% 58% 85% 47% 42%
Number of shares outstanding at end of period (000's)........... 16,918 7,622 6,235 5,217 5,035
Net assets at the end of period (000's)......................... $259,704 $114,809 $97,314 $71,371 $58,923
Socially Responsible Fund
---------------------------------------------------------
Year Ended August 31,
---------------------------------------------------------
2007 2006 2005 2004 2003
-------- -------- --------- ------- -------
PER SHARE DATA
Net asset value at beginning of period.......................... $ 12.06 $ 11.21 $ 10.25 $ 9.42 $ 8.44
---------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)/(d)/............................ 0.19 0.17 0.15// 0.09 0.09
Net realized and unrealized gain (loss) on investments and
foreign currencies.......................................... 1.51 0.96 0.96 0.82 0.96
Net increase from payments by affiliates..................... 0.00 - 0.00 - 0.00
---------------------------------------------------------
Total income (loss) from investment operations............... 1.70 1.13 1.11 0.91 1.05
---------------------------------------------------------
Distributions from:
Net investment income........................................ (0.06) (0.05) (0.15) (0.08) (0.07)
Net realized gain on securities.............................. (0.21) (0.23) - - -
---------------------------------------------------------
Total distributions.......................................... (0.27) (0.28) (0.15) (0.08) (0.07)
---------------------------------------------------------
Net asset value at end of period................................ $ 13.49 $ 12.06 $ 11.21 $ 10.25 $ 9.42
---------------------------------------------------------
TOTAL RETURN/(a)/............................................... 14.22%/(f)/ 10.16% 10.85%/(e)/ 9.70% 12.58%/(e)/
---------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/.................... 0.56% 0.56% 0.56% 0.56% 0.56%
Ratio of expenses to average net assets/(c)/.................... 0.63% 0.71% 0.71% 0.96% 1.30%
Ratio of expense reductions to average net assets............... 0.03% - - - -
Ratio of net investment income (loss) to average net assets/(b)/ 1.45% 1.52% 1.47% 0.91% 1.11%
Ratio of net investment income (loss) to average net assets/(c)/ 1.38% 1.37% 1.32% 0.51% 0.37%
Portfolio turnover rate......................................... 152% 172% 74% 117% 96%
Number of shares outstanding at end of period (000's)........... 68,651 24,486 17,180 3,205 1,314
Net assets at the end of period (000's)......................... $925,906 $295,231 $192,604 $32,850 $12,380
/(a)/Total return is not annualized. It does include, if any, expense
reimbursements and expense reductions. The effect of fees and charges
incurred at the separate account level are not reflected in these
performance figures. If such expenses had been included, the total return
would have been lower for each period presented.
/(b)/Includes expense reimbursements, but excludes expense reductions.
/(c)/Excludes expense reimbursements and expense reductions.
/(d)/The per share amounts are calculated using the average share method.
/(e)/The Fund's performance figure was increased by less than 0.01% from
reimbursements for losses realized on the disposal of investments in
violation of investment restrictions.
/(f)/The Fund's performance was increased by less than 0.01% from a
reimbursement by an affiliate (See Note 3).
/(g)/The Fund's performance figure was increased by less than 0.01% from a gain
realized on the disposal of investments in violation of investment
restrictions. (See Note 3).
119
VALIC Company II
FINANCIAL HIGHLIGHTS -- (continued)
- --------------------------------------------------------------------------------
Per share data is for a share of beneficial interest outstanding throughout the
period. Total return includes reinvestment of distributions on the reinvestment
date.
Strategic Bond Fund
-------------------------------------------------------------
Year Ended August 31,
-------------------------------------------------------------
2007 2006 2005 2004 2003
-------- -------- -------- ------- -------
PER SHARE DATA
Net asset value at beginning of period............. $ 11.36 $ 11.08 $ 10.66 $ 10.28 $ 9.31
-------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)/(d)/............... 0.61 0.58 0.56 0.57 0.66
Net realized and unrealized gain (loss) on
investments and foreign currencies............. (0.12) 0.04 0.65 0.46 0.95
Net increase from payments by affiliates........ - 0.00 - - -
-------------------------------------------------------------
Total income (loss) from investment operations.. 0.49 0.62 1.21 1.03 1.61
-------------------------------------------------------------
Distributions from:
Net investment income........................... (0.40) (0.16) (0.54) (0.56) (0.64)
Net realized gain on securities................. (0.12) (0.18) (0.25) (0.09) -
-------------------------------------------------------------
Total distributions............................. (0.52) (0.34) (0.79) (0.65) (0.64)
-------------------------------------------------------------
Net asset value at end of period................... $ 11.33 $ 11.36 $ 11.08 $ 10.66 $ 10.28
-------------------------------------------------------------
TOTAL RETURN/(a)/.................................. 4.32% 5.75%/(g)/ 11.66%/(e)/ 10.30% 17.73%
-------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets/(b)/....... 0.89% 0.89% 0.89% 0.88% 0.89%
Ratio of expenses to average net assets/(c)/....... 1.02% 1.12% 1.09% 1.22% 1.52%
Ratio of expense reductions to average net assets.. - - - - -
Ratio of net investment income (loss) to average
net assets/(b)/................................... 5.49% 5.38% 5.21% 5.54% 6.79%
Ratio of net investment income (loss) to average
net assets/(c)/................................... 5.35% 5.16% 5.01% 5.20% 6.17%
Portfolio turnover rate............................ 120% 104% 155%/(f)/ 128%/(f)/ 76%/(f)/
Number of shares outstanding at end of period
(000's)........................................... 25,743 17,195 12,302 7,484 4,431
Net assets at the end of period (000's)............ $291,727 $195,413 $136,295 $79,793 $45,565
/(a)/Total return is not annualized. It does include, if any, expense
reimbursements and expense reductions. The effect of fees and charges
incurred at the separate account level are not reflected in these
performance figures. If such expenses had been included, the total return
would have been lower for each period presented.
/(b)/Includes expense reimbursements, but excludes expense reductions.
/(c)/Excludes expense reimbursements and expense reductions.
/(d)/The per share amounts are calculated using the average share method.
/(e)/The Fund's performance figure increased by 0.10% from a gain realized on
the disposal of investments in violation of investment restrictions.
/(f)/Portfolio turnover includes paydowns on securities. Previously, portfolio
turnover was calculated prior to including paydowns on securities and was
as follows:
Fund 2005 2004 2003
-------------- ---- ---- ----
Strategic Bond 153% 127% 63%
/(g)/The Fund's performance figure was increased by less than 0.01% from a
reimbursement by an affiliate.
120
VALIC Company II
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Shareholders of and Board of Trustees of
VALIC Company II:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of VALIC Company II's Aggressive Growth
Lifestyle Fund, Capital Appreciation Fund, Conservative Growth Lifestyle Fund,
Core Bond Fund, High Yield Bond Fund, International Small Cap Equity Fund,
Large Cap Value Fund, Mid Cap Growth Fund, Mid Cap Value Fund, Moderate Growth
Lifestyle Fund, Money Market II Fund, Small Cap Growth Fund, Small Cap Value
Fund, Socially Responsible Fund, and Strategic Bond Fund as of August 31, 2007,
and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the five years in the
period then ended. These financial statements and financial highlights are the
responsibility of VALIC Company II's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. We were not engaged to perform an audit of the Funds' internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Funds' internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our procedures included
confirmation of securities owned as of August 31, 2007, by correspondence with
the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of VALIC
Company II's Aggressive Growth Lifestyle Fund, Capital Appreciation Fund,
Conservative Growth Lifestyle Fund, Core Bond Fund, High Yield Bond Fund,
International Small Cap Equity Fund, Large Cap Value Fund, Mid Cap Growth Fund,
Mid Cap Value Fund, Moderate Growth Lifestyle Fund, Money Market II Fund, Small
Cap Growth Fund, Small Cap Value Fund, Socially Responsible Fund, and Strategic
Bond Fund as of August 31, 2007, the results of their operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended, in conformity with U.S. generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
Houston, Texas
October 25, 2007
121
VALIC Company II
APPROVAL OF ADVISORY AGREEMENTS (Unaudited)
- --------------------------------------------------------------------------------
At a meeting held on July 17-18, 2007, the Board of Trustees (the "Board"),
including the Trustees that are not interested persons of VC II, as such term
is defined in the Investment Company Act of 1940, as amended (the "1940 Act")
(the "Independent Trustees"), approved with respect to each Fund the Investment
Advisory Agreement between The Variable Annuity Life Insurance Company
("VALIC") and VC II (the "Advisory Agreement") and the investment subadvisory
agreements between VALIC and each of the following sub-advisers of VC II
(collectively, the "Subadvisory Agreements): AIG Global Investment Corp.
("AIGGIC"), AIG SunAmerica Asset Management Corp. ("AIG SAAMCo"), A I M Capital
Management, Inc. ("AIM"), Franklin Advisers, Inc. ("Franklin"), FAF Advisors,
Inc. ("FAF"), JP Morgan Investment Advisors, Inc. ("JP Morgan"), SSgA Funds
Management, Inc. ("SSgA FM") and Wellington Management Company, LLP
("Wellington") (collectively referred to as the "Sub-advisers"). The Investment
Advisory Agreement and Subadvisory Agreements are collectively referred to as
the "Advisory Contracts."
The Board was advised that the Sub-advisers completed detailed questionnaires
and that their responses were reviewed by management and counsel to the
Independent Trustees. The Trustees were advised of the various factors that
they should consider in their review of the Advisory Contracts.
In connection with the approval of the Advisory Contracts, the Board received
materials related to certain factors the Board considered in determining to
renew such Advisory Contracts. Those factors included: (1) the nature, extent
and quality of services provided by VALIC and the Sub-advisers; (2) the
investment performance of the Funds compared to performance of comparable funds
as selected by an independent third-party provider of investment company data
("Performance Group/Universe") and against each Fund's benchmarks; (3) the
costs of services and the benefits potentially derived by VALIC and the
Sub-advisers; (4) whether the Funds will benefit from possible economies of
scale; (5) the profitability of VALIC and the Sub-advisers; (6) the advisory
fee and subadvisory fees charged in connection with VALIC's and the
Sub-advisers' management of the Funds, compared to advisory fee rates and
subadvisory fee rates of a group of funds with similar investment objectives
(respectively, the "Expense Group/Universe" and the "Sub-Advisor Expense
Group/Universe"), as selected an independent third-party provider of investment
company data; and (7) the terms of the Advisory Contracts.
The Trustees also took into account performance, fee and expense information
regarding each Fund that is provided to them on a quarterly basis. The
Independent Trustees were separately represented by counsel that is independent
of VALIC in connection with their consideration of approval of the Advisory
Contracts. The matters discussed below were also considered separately by the
Independent Trustees in executive sessions held at a special meeting held in
June 2007 and the regular meeting held in July 2007, during which such
independent counsel provided guidance to the Independent Trustees.
Nature, Extent and Quality of Services. The Board considered the nature,
quality and extent of services to be provided to the Funds by VALIC and the
Sub-advisers. The Board reviewed information provided by VALIC relating to its
operations and personnel. The Board also took into account their familiarity
with VALIC's management through Board meetings, discussions and reports during
the preceding year. The Board considered that VALIC is responsible for the
management of the day-to-day operations of the Funds, including but not limited
to, general supervision of and coordination of the services provided by the
Sub-advisers, and is also responsible for monitoring and reviewing the
activities of the Sub-advisers and other third-party service providers. The
Board also noted that VALIC's and the Sub-advisers' management of the Funds is
subject to the oversight of the Board, and must be made in accordance with the
investment objectives, policies and restrictions set forth in the Funds'
prospectus and statement of additional information.
The Board noted that VALIC personnel meet on a periodic basis to discuss the
performance of the Funds, as well as the positioning of the insurance products,
employer-sponsored retirement plans and the Funds generally vis-a-vis
competitors. In addition, it was considered that VALIC works to develop
marketing strategies to promote an identity for the Funds separate and apart
from the insurance products and the employer-sponsored retirement plans. The
Board also considered VALIC's financial condition and whether it had the
financial wherewithal to provide the services under the Investment Advisory
Agreement with respect to each Fund.
With respect to the services provided by the Sub-advisers, the Board
considered information provided to them regarding the services provided by each
Sub-adviser, including information presented throughout the previous year. The
Board noted that each Sub-adviser (i) determines the securities to be purchased
or sold on behalf of the Funds it manages as may be necessary in connection
therewith; (ii) provides VALIC with records concerning its activities, which
VALIC or the Funds are required to maintain; and (iii) renders regular reports
to VALIC and to officers and Trustees of the Funds concerning its discharge of
the foregoing responsibilities. The Board reviewed each Sub-adviser's history
and investment experience and received information regarding the
qualifications, background and responsibilities of the Sub-advisers investment
and compliance personnel who provide services to the Funds. The Board also took
into account the financial condition of the Sub-advisers (or the Sub-advisers'
parent company). The Board also reviewed each Sub-adviser's brokerage practices.
The Board reviewed VALIC's and the administrator's, AIG SAAMCo, an affiliate,
compliance program and personnel. It also considered, VALIC's and each
Sub-adviser's regulatory history, including information whether it was
currently involved in any regulatory actions or investigations as well as
material litigation. The Board concluded that there was no information provided
to the Board that would have a material adverse effect on VALIC's or the
Sub-advisers' ability to provide services to the Funds.
The Board concluded that the scope and quality of the advisory services
provided by VALIC and Sub-advisers were satisfactory and that each has the size
and resources to attract and retain highly qualified investment professionals.
Fees and Expenses; Investment Performance. The Board received and reviewed
information regarding each Fund's total expenses, advisory and subadvisory
fees, and other expenses compared against the expenses and fees of the funds in
its Expense Group, Expense Universe and Subadvisor Expense Group and, in some
cases as noted below, the Subadvisor Expense Universe. It was noted that VALIC
negotiates the subadvisory fees with each of the unaffiliated Sub-advisers at
arms-length. The Board also considered that the subadvisory fees are paid by
VALIC out of its advisory fees it receives from the Funds and is not paid by
the Funds, and that subadvisory fees may vary widely within the Subadvisor
Expense Group/Universe for various reasons, including market pricing demands,
existing relationships, experience and success, and individual client needs.
The Board also noted that VALIC was annually waiving a portion of its advisory
fee and/or reimbursing expenses of the Funds.
The total expense information, advisory fee information, and subadvisory fee
information considered by the Board, among other fee and expense data, is
summarized below. It was noted that expense ratio data included in the
independent third-party reports was based on the most recently available
audited annual report dated August 31, 2006.
The Board received and reviewed information prepared by management and by an
independent third-party regarding the Funds' investment performance compared
against their benchmarks and their respective Performance Groups/Universes. It
was noted that performance information provided by the independent third party
was for the period ended April 30, 2007 and that benchmark information
presented by management was through the period June 30, 2007.
122
VALIC Company II
APPROVAL OF ADVISORY AGREEMENTS (Unaudited) -- (continued)
- --------------------------------------------------------------------------------
. Aggressive Growth Lifestyle Fund (subadvised by AIGGIC). The Board
considered that total expenses and actual advisory fees were at or below
the median of its Expense Universe but above the medians of its Expense
Group. The Board considered that the Fund's performance trailed the median
of its Performance Universe and the Lipper VUF Global Core Index for the
one-, three- and five-year periods. The Board also noted that the Fund
slightly outperformed its blended benchmark for the one-, three- and
five-year period. The blended benchmark consists of the Dow Jones Wilshire
5000 Total Market Index ("Wilshire 5000") (65%), Lehman Brothers U.S.
Aggregate Index (10%) and the Morgan Stanley Capital International Europe,
Australasia, Far East Index ("MSCI EAFE Index") (25%). The Board took into
account management's discussion of the Fund's performance, including the
effect of the peer universe chosen for comparison. The Board also noted
the Fund's Morningstar ratings. The Board concluded that the Fund's
performance has been satisfactory in light of all factors considered.
. Capital Appreciation Fund (subadvised Bridgeway Capital Management, Inc.).
The Board considered that the Fund's actual advisory fees and total
expenses were below the medians of its Expense Group/Universe. It was
noted that the Board was not being asked to approve the investment
subadvisory agreement between VALIC and Bridgeway Capital Management, Inc.
("Bridgeway") since the Board had approved the agreement for an initial
two-year term at its July 2006 meeting.
However, the Board considered that since assuming subadvisory duties for
the Fund in August 2006 the Fund's performance has improved. The Board
considered that the Fund's performance for the three- and five-year
periods trailed the Index and medians of the Performance Group/Universe,
which included the performance of the prior sub-adviser that was
terminated in August 2006. The Board noted that for the one-year period,
the Fund had outperformed the Lipper VUF Multi-Cap Growth Index and the
medians of its Performance Group/Universe. Management also reported that
the Fund had outperformed the Russell 1000(R) Growth Index for such
period. The Board concluded that appropriate action has been taken to
address the Fund's performance and that the Fund's more recent performance
has been satisfactory.
. Conservative Growth Lifestyle Fund (subadvised by AIGGIC). The Board
considered that total expenses and actual advisory fees were at or below
the median of its Expense Group/Universe. The Board considered that the
Fund's performance exceeded the median of its Performance
Group/Performance Universe and the Lipper VUF Mixed-Asset Target
Allocation Moderate Index for the three- and five-year periods and that it
trailed the Group/Universe and Index for the one-year period. In addition,
the Board noted that the Fund slightly outperformed its blended benchmark
for the one-, three- and five-year periods. The Fund's blended benchmark
consists of the Wilshire 5000 (42%), Lehman Brothers U.S. Aggregate Index
(50%) and the MSCI EAFE Index (8%). The Board took into account
management's discussion of the Fund's more recent performance. The Board
concluded that the Fund's performance has been satisfactory in light of
all factors considered.
. Core Bond Fund (subadvised by AIGGIC). The Board considered that the
Fund's actual advisory fees and total expenses were below and at the
median, respectively, of its Expense Group and that the actual advisory
fees and total expenses were above the median of its Expense Universe. The
Board considered that VALIC was reimbursing certain expenses of the Fund.
In addition, the Board noted that the Fund's subadvisory fees were above
the median of its Subadvisor Expense Group but that there were a limited
number of funds in the Group.
The Board noted that the Fund equaled or outperformed the medians of its
Performance Group/Universe for the one-, three- and five-year periods. The
Board considered that the Fund's performance was slightly above the Lipper
VUF Corporate A-Rated Bond Index for the three-year period but trailed for
the Index for the one- and five-year periods. Management also reported
that the Fund slightly trailed its benchmark, the Lehman Brothers U.S.
Aggregate Index, for the one- and five-year periods but slightly
outperformed the benchmark for the three-year period. The Board concluded
that the Fund's performance has been satisfactory in light of all factors
considered.
. High Yield Bond Fund (subadvised by AIGGIC). The Board considered that the
Fund's actual advisory fees were above the medians of its Expense
Group/Universe and that the Fund's total expenses were below the median of
its Expense Group and above the median of its Expense Universe. The Board
also considered that the Fund's subadvisory fees were above the medians of
its Subadvisor Expense Group/Universe.
The Board considered that the Fund's performance exceeded medians of its
Performance Group/Universe and the Lipper VUF High Yield Bond Index for
the three- and five-year periods. It also considered that the Fund's
performance trailed the Index and Universe for the one-year period. The
board noted that the Fund outperformed the Performance Group for one-,
three- and five-year periods. Management also reported that the Fund
outperformed its benchmark, the Citigroup High Yield Index, for the three-
and five-year periods, but trailed such benchmark for the one-year period.
The Board concluded that the Fund's performance has been satisfactory in
light of all factors considered.
. International Small Cap Equity Fund (subadvised by AIGGIC). The Board
considered that the Fund's actual advisory fees were at the medians of its
Expense Group/Universe and that the Fund's total expenses were below the
median of its Expense Group/Universe. The Board also noted that the Fund's
subadvisory fees were above the medians of its Subadvisor Expense
Group/Universe. The Board noted that VALIC was reimbursing certain
expenses of the Fund.
The Board considered that the Fund outperformed or equaled the median of
its Performance Group/Universe and the Lipper VUF International Core Index
for the three- and five-year periods, but noted that it trailed the
medians of the Group/Universe and the Index for the one-year period. The
Board took into consideration management's discussion of the Fund's
performance including that Lipper's comparative Index focused on
international multi-cap funds and not on international small-cap funds.
Management further noted that the Fund outperformed its benchmark, the
MSCI EAFE Small Cap Index, for the one- and three-year periods since
AIGGIC assumed subadvisory duties in October 2004. It was also noted that
with the subadviser change in 2004, the Fund's investment strategy changed
from an international large-cap growth strategy to an international
small-cap core strategy. The Board concluded that the Fund's performance
has been satisfactory in light of all factors considered.
. Large Cap Value Fund (subadvised by SSgA FM). The Board considered that
the Fund's actual advisory fees and total expenses were below the medians
of its Expense Group/Universe. The Board also noted that the Fund's
subadvisory fees were below the medians of its Subadvisor Expense
Group/Universe.
The Board considered that the Fund outperformed the medians of its
Performance Group/Universe and the Lipper VUF Multi-Cap Value Index for
the one-, three- and five-year periods. Management noted that the Fund
underperformed its benchmark, the Russell 1000(R) Value Index, for the
one-, three- and five-year periods. The Board concluded that the Fund's
performance has been satisfactory in light of all factors considered.
. Mid Cap Growth Fund (subadvised by AIM). The Board considered that the
Fund's actual advisory fees were above the medians of its Expense
Group/Universe and total expenses were below the medians of its Expense
Group/Universe. The Board also noted that the Fund's subadvisory fees were
above the medians of its Subadvisor Expense Group/Universe. The Board
considered that VALIC was reimbursing certain expenses of the Fund.
123
VALIC Company II
APPROVAL OF ADVISORY AGREEMENTS (Unaudited) -- (continued)
- --------------------------------------------------------------------------------
The Board also considered that the Fund's performance exceeded the median
of its Performance Group/Universe and the Lipper VUF Mid-Cap Growth Index
for the one-, three- and five-year periods. Management reported that the
Fund outperformed its benchmark, the Russell Midcap(R) Growth Index, for
the one-, three- and five-year periods. Management also noted that AIM
began subadvising the Fund in October 2004 and that the Fund's performance
has improved since such time. The Board concluded that the Fund's
performance has been satisfactory in light of all factors considered.
. Mid Cap Value Fund (subadvised by Wellington and FAF). The Board
considered that the Fund's actual advisory fees were slightly above the
median of its Expense Group but slightly below the median of its Expense
Universe. It also noted that the Fund's total expenses were above or at
the median of its Expense Group/Universe. The Board also noted that the
Fund's subadvisory fees were slightly above the medians of its Subadvisor
Expense Group/Universe. The Board considered that VALIC was reimbursing
certain expenses of the Fund.
The Board considered that the Fund outperformed the median of its
Performance Group/Universe and the Lipper VUF Mid-Cap Value Index for the
one-, three- and five-year periods. Management also reported that the Fund
outperformed its benchmark, the Russell 2500(R) Value Index, for the one-,
three- and five-year periods. The Board concluded that the Fund's
performance has been satisfactory.
. Moderate Growth Lifestyle Fund (subadvised by AIGGIC). The Board
considered that total expenses and actual advisory fees were at or below
the median of its Expense Group/Universe. The Board considered that the
Fund's performance exceeded or equaled the medians of its Performance
Group/Universe and Lipper VUF Mixed-Asset Target Allocation Growth Index
for the three- and five-year periods but trailed the medians and Index for
the one-year period. In addition, the Board noted that the Fund slightly
trailed its blended benchmark for the one- and five-year periods but
outperformed the blended benchmark for the three-year period. The Fund's
blended benchmark consists of the Wilshire 5000 (55%), Lehman Brothers
U.S. Aggregate Index (30%) and the MSCI EAFE Index (15%). The Board took
into account management's discussion of the Fund's more recent
performance. The Board concluded that the Fund's performance has been
satisfactory in light of all factors considered.
. Money Market II Fund (subadvised by AIG SAAMCo). The Board considered that
the Fund's actual advisory fees and total expenses were below or at the
median of its Expense Group/Universe. The Board also noted that the Fund's
subadvisory fees were below the medians of its Subadvisor Expense
Group/Universe.
The Board considered that the Fund's performance was above the median of
its Performance Group for the one-, three- and five-year periods and at
the median of its Performance Universe for the same periods. It also noted
that the Fund slightly trailed the Lipper VUF Money Market Index for such
periods. Management also reported that the Fund underperformed its
benchmark, the Treasury Bill 3 Month Index, for the three- and five-year
periods but slightly outperformed the benchmark for the one-year period.
The Board took into account the relatively small range in performance
returns among the Performance Group/Universe. The Board concluded that the
Fund's performance has been satisfactory in light of all factors
considered.
. Small Cap Growth Fund (subadvised by Franklin Advisers). The Board
considered that the Fund's actual advisory fees were slightly above the
median of its Expense Group and slightly below the median of its Expense
Universe and that the Fund's total expenses were below the median of its
Expense Group and above the median of its Expense Universe. The Board also
noted that the Fund's subadvisory fees were at the median of its
Subadvisor Expense Group. The Board also considered that VALIC was
reimbursing certain expenses of the Fund.
The Board noted that the Fund's performance was slightly above the medians
of its Performance Group/Universe for the one-year period but trailed such
medians for the three- and five-year periods. The Board also considered
that the Fund's performance trailed the Lipper VUF Small Cap Growth Index
for the one-, three- and five-year periods. In addition, Management
reported that the Fund trailed its benchmark, the Russell 2000(R) Growth
Index, for the one-, three- and five-year periods. The Trustees took into
account management's discussion of its plans to address the Fund's
performance. The Board concluded that appropriate action is being taken to
address the Fund's performance.
. Small Cap Value Fund (subadvised by JP Morgan). The Board considered that
the Fund's actual advisory fees and total expenses were below the medians
of its Expense Group/Universe. The Board also noted that the Fund's
subadvisory fees were slightly below the medians of its Subadvisor Expense
Group/Universe.
The Board considered that the Fund's performance exceeded the medians of
its Performance Group/Universe and the Lipper VUF Small Cap Value Index
and for the one-year period but that it equaled or was below the Index and
such medians for the three- and five-year periods. Management reported
that the Fund outperformed its benchmark, the Russell 2000(R) Value Index,
for the one-year period but trailed the benchmark for the three- and
five-year periods. Management also noted that JP Morgan changed its
portfolio managers responsible for the Fund in January 2005 and
performance has improved. The Board concluded that appropriate actions are
being taken to continue to monitor the Fund's performance.
. Socially Responsible Fund (subadvised by AIGGIC). The Board considered
that the Fund's actual advisory fees and total expenses were below the
medians of its Expense Group/Universe. The Board also noted that the
Fund's subadvisory fees were below the medians of its Subadvisor Expense
Group/Universe.
The Board noted that the Fund's performance exceeded the medians of its
Performance Group/Universe for the one-, three- and five-year periods. The
Board also that the Fund's performance exceeded the Lipper VUF Large Cap
Core Index for the one- and five-year periods but trailed the Index for
the three-year period. In addition, Management reported that the Fund
underperformed its benchmark, the S&P 500(R) Index, for the one-, three-
and five-year periods. The Board concluded that the Fund's performance has
been satisfactory in light of all factors considered.
. Strategic Bond Fund (subadvised by AIGGIC). The Board noted that the
Fund's actual advisory fees were slightly below the medians of its Expense
Group/Universe. The Board also considered that the Fund's total expenses
were below the median of its Expense Group and slightly above the median
of its Expense Universe. In addition, the Board considered that the Fund's
subadvisory fees were above the median of its Subadvisor Expense Group but
that there were a limited number of funds in the group. The Board
considered that VALIC was reimbursing certain expenses of the Fund.
124
VALIC Company II
APPROVAL OF ADVISORY AGREEMENTS (Unaudited) -- (continued)
- --------------------------------------------------------------------------------
The Board considered that the Fund's performance exceeded the medians of
its Performance Group/ Universe and the Lipper VUF General Bond Index for
the one-, three- and five-year periods. Management reported that the Fund
outperformed its benchmark, the Lehman Brothers Aggregate Bond Index, for
the one-, three- and five-year periods. The Board concluded that the
Fund's performance has been satisfactory.
The Board concluded that the advisory fee and subadvisory fee for each Fund
are fair and reasonable in light of the usual and customary charges made for
services of the same nature and quality and the other factors considered.
Cost of Services, Indirect Benefits and Profitability. The Board was provided
information related to the cost of services and profits realized in connection
with the Investment Advisory Agreement. The Board considered the costs that are
borne by the Funds. For its services, VALIC receives a fee, payable monthly,
from each Fund in an amount that is calculated as a percentage of the average
daily net assets of the respective Fund. The Board reviewed the advisory and
subadvisory fees of each Fund and noted that VALIC has agreed to cap expenses
for certain Funds and is currently waiving a portion of its advisory fee or
reimbursing expenses for the Funds.
It was noted that VALIC reviews a number of factors in determining appropriate
fee levels for the Funds as well as the fee VALIC pays each Sub-adviser. Such
factors include a review of (1) style class peers primarily within the variable
annuity and qualified plan universe; (2) key competitor analysis; (3) clone
fund analysis; (4) product suitability; and (5) special considerations such as
competitor sub-account characteristics, uniqueness of the product and prestige
of the manager.
The Board considered that VALIC receives benefits in addition to the advisory
fee paid by each Fund, as noted previously and which include (i) shareholder
services fees paid by the Funds (except for the Lifestyle Funds) and (ii)
transfer agency fees paid by the Funds. The Board also considered that VALIC
may exclude from its taxable income a portion of the ordinary dividends paid by
underlying U.S. equities in the Funds to the same extent the Funds receive
certain dividends with respect to shares of stock issued by domestic
corporations, subject to applicable tax laws and regulations. In addition, it
was noted that VALIC may receive foreign tax credits with respect to certain
foreign securities held in certain Funds that benefit VALIC.
The Board considered that VC II pays VALIC a fee for the provision of record
keeping and shareholder services to contract owners and participants, which is
provided at cost. Such payment is allocated to each Fund based on the number of
accounts serviced. The Board also considered that VC II pays VALIC an annual
fee of 0.25% on average daily net assets of each Fund (other than the Lifestyle
Funds) pursuant to a Shareholder Services Agreement. Finally, it was noted that
VALIC pays AIG SAAMCo, an annual fee of approximately 0.07% based on each
Fund's average daily net assets, for the provision of certain accounting and
administrative services to those funds. Out of the fee AIG SAAMCo receives from
the Funds, AIG SAAMCo reimburses VALIC for certain administrative and
recordkeeping services and the Funds custodian, State Street Bank and Trust
Company, for calculation of the daily net asset value.
The Board concluded that any indirect costs are inconsequential to the
analysis of the adequacy of the advisory fees and that any other collateral
benefits derived as a result of providing advisory services to the Funds are
not material and do not impact upon the reasonable of the advisory fees.
As noted previously, the Board considered that the fees paid under the
Subadvisory Agreements are paid by VALIC out of the advisory fees that it
receives under the Advisory Agreements. In addition, with respect to the
Sub-advisers not affiliated with VALIC, VALIC negotiated the Subadvisory
Agreements and the fees thereunder at arm's length. For these reasons, the
Board concluded that the cost of services to be provided by each unaffiliated
Sub-adviser and the profitability to each such Sub-adviser from its
relationship with a Fund are not material factors to its consideration.
The Board received and reviewed information prepared by VALIC that reflect an
allocation of costs that results in a reasonable determination of profitability
of VALIC, as adviser, for each of the Funds. Furthermore, the Board noted that
VALIC serves as a transfer agent to the Funds and AIG SAAMCo serves as the
administrator to the Funds and that the fees for such services are paid for by
the Funds. With respect to VALIC and its affiliates, the Board determined that
VALIC's profitability was reasonable.
With respect to the profitability of the Sub-advisers that are not affiliated
with VALIC, it was noted that the subadvisory fees are paid by VALIC out of the
advisory fees that VALIC receives from the Funds. The Board determined that the
profitability to each Sub-adviser in connection with the Sub-advisers'
relationship with the Funds is therefore not a material factor in their
consideration of the Subadvisory Agreements.
Economies of Scale. The Board noted that certain of the Funds currently have
breakpoints in their advisory and subadvisory fees. The Board also noted that
VALIC is currently waiving advisory fees or reimbursing expenses for all of the
Funds and that VALIC pays the subadvisory fees out of its advisory fees
received from the Funds. The Board also took into account management's
discussion of the Fund's advisory fee structure. The Board concluded that each
Fund's existing advisory fee schedule reflect the economies of scale inherent
in providing investment advice to a Fund in its particular asset category and
asset size and that no changes to the advisory fee structure were necessary.
For similar reasons as stated above with respect to the Sub-advisers'
profitability and the costs of their providing services, the Board concluded
that the potential for economies of scale in the Sub-advisers' management of
the Funds are not a material factor to the approval of the Subadvisory
Agreements and, additional, it was noted that most of the Funds have
breakpoints at the subadvisory level.
Terms of the Advisory Contracts. The Board reviewed the terms of the Advisory
Contracts including the duties and responsibilities undertaken by VALIC. The
Board also reviewed the terms of payment for services rendered by VALIC and the
Sub-advisers and noted that VALIC compensates the Sub-advisers out of the fees
it received from the Funds. The Board noted that the Subadvisory Agreements
provide that each Sub-adviser will pay all of its own expenses in connection
with the performance of its duties as well as the cost of maintaining staff and
personnel as necessary for it to perform its obligations. The Board considered
the termination and liability provisions of the Advisory Contracts as well as
other provisions contained therein.
Conclusions. In reaching its decision to approve the Advisory Contracts, the
Board did not identify any single factor as being controlling, but based its
recommendation on each of the factors it considered and each Trustee
contributed different weight to the various factors. Based upon the materials
it reviewed, the representations made to it and the considerations described
above, and as part of their deliberations, the Board, including the Independent
Trustees, concluded that VALIC and each of the Sub-advisers possess the
capability and resources to perform the duties required of it under their
respective Advisory Contract and that the terms of the respective Advisory
Contracts were reasonable.
125
VALIC Company II
TRUSTEES AND OFFICERS INFORMATION -- August 31, 2007 (Unaudited)
- --------------------------------------------------------------------------------
Number of
Funds in
Position Term of Office Fund Complex
Name, Birth Date Held With and Length of Overseen by
and Address* VALIC Complex Time Served(4) Principal Occupations During Past Five Years Trustee(2)
- ----------------------------------------------------------------------------------------------------------------------
Independent Trustees
Thomas J. Brown Trustee 2005- Retired. Formerly, Chief Operating Officer 47
DOB: December 24, 1945 Present and Chief Financial Officer, American
General Asset Management, (Investment
Management) (2000-2002).
- ----------------------------------------------------------------------------------------------------------------------
Dr. Judith L. Craven Trustee 1998- Retired Administrator. 89
DOB: October 6, 1945 Present
- ----------------------------------------------------------------------------------------------------------------------
William F. Devin Chairman of 2001- Retired. 89
DOB: December 30, 1938 the Board(5) Present
- ----------------------------------------------------------------------------------------------------------------------
Dr. Timothy J. Ebner Trustee 1998- Professor and Head, Department of 47
DOB: July 15, 1949 Present Neuroscience (1980-Present), and
Visscher Chair of Physiology, University
of Minnesota (1999-Present).
- ----------------------------------------------------------------------------------------------------------------------
Judge Gustavo E. Gonzales, Jr. Trustee 1998- Attorney At Law, General Practice 47
DOB: July 27, 1940 Present (2005-Present); Formerly, Municipal
Court Judge, Dallas, TX (1995-2004).
- ----------------------------------------------------------------------------------------------------------------------
Dr. John Wm. Lancaster Trustee 1998- Pastor Emeritus (1997-Present) and 47
DOB: December 15, 1923 Present formerly, Director of Planned Giving
(1997-2005), First Presbyterian Church,
Houston, TX.
- ----------------------------------------------------------------------------------------------------------------------
Kenneth J. Lavery Trustee 2001- Vice President, Massachusetts Capital 47
DOB: December 30, 1949 Present Resources Co. (1982-Present).
- ----------------------------------------------------------------------------------------------------------------------
Ben H. Love Trustee 1998- Retired. 47
DOB: September 26, 1930 Present
- ----------------------------------------------------------------------------------------------------------------------
Dr. John E. Maupin, Jr. Trustee 1998- President, Morehouse School of Medicine, 47
DOB: October 28, 1946 Present Atlanta, Georgia (2006-Present). Formerly,
President, Meharry Medical College,
Nashville, Tennessee (1994-2006).
- ----------------------------------------------------------------------------------------------------------------------
Interested Trustees
Peter A. Harbeck(1) Trustee 2001- President, CEO and Director, AIG 98
DOB: January 23, 1954 Present SunAmerica (August 1995-Present);
Director, AIG SunAmerica Capital
Services, Inc. ("SACS") (August 1993 to
Present) President and CEO, AIG Advisor
Group, Inc. (June 2004 to Present).
- ----------------------------------------------------------------------------------------------------------------------
Name, Birth Date Other Directorships
and Address* Held by Trustee(3)
- -------------------------------------------------------------
Independent Trustees
Thomas J. Brown Trustee, Merrimac Funds, a
DOB: December 24, 1945 mutual fund company (2004-
Present).
- -------------------------------------------------------------
Dr. Judith L. Craven Director, Belo
DOB: October 6, 1945 Corp., a media company
(1992-Present); Director
SYSCO Corp., a food
marketing and distribution
company (1996-Present);
Director, Luby's, Inc., a
restaurant chain (1998-
Present); Director, University
of Texas Board of Regents
(2001-Present).
- -------------------------------------------------------------
William F. Devin Director, Boston Stock
DOB: December 30, 1938 Exchange (1985-Present).
- -------------------------------------------------------------
Dr. Timothy J. Ebner None.
DOB: July 15, 1949
- -------------------------------------------------------------
Judge Gustavo E. Gonzales, Jr. None.
DOB: July 27, 1940
- -------------------------------------------------------------
Dr. John Wm. Lancaster None.
DOB: December 15, 1923
- -------------------------------------------------------------
Kenneth J. Lavery None.
DOB: December 30, 1949
- -------------------------------------------------------------
Ben H. Love None.
DOB: September 26, 1930
- -------------------------------------------------------------
Dr. John E. Maupin, Jr. Director,
DOB: October 28, 1946 Life Point Hospitals, Inc.
(2005-Present); Director,
HealthSouth Corp. (2004-
Present).
- -------------------------------------------------------------
Interested Trustees
Peter A. Harbeck(1) None.
DOB: January 23, 1954
- -------------------------------------------------------------
126
VALIC Company II
TRUSTEES AND OFFICERS INFORMATION -- August 31, 2007 (Unaudited) -- (continued)
- --------------------------------------------------------------------------------
Number of
Funds in
Term of Office Fund Complex
Name, Birth Date Position Held With and Length of Overseen by
and Address* VALIC Complex Time Served(4) Principal Occupations During Past Five Years Trustee(2)
- ---------------------------------------------------------------------------------------------------------------------
Officers
Evelyn M. Curran President 2002- Senior Vice President, Variable Products N/A
DOB: June 4, 1965 Present and Funds, VALIC (2001-Present).
- ---------------------------------------------------------------------------------------------------------------------
John Packs Vice President 2001- Vice President and Senior Investment N/A
DOB: December 9, 1955 and Senior Present Officer, VC I and VC II (2001-Present);
Investment Senior Investment Officer, VALIC
Officer (2001-Present).
- ---------------------------------------------------------------------------------------------------------------------
Gregory R. Kingston Treasurer and 2000- Vice President, AIG SunAmerica N/A
DOB: January 18, 1966 Principal Present (2001-Present).
Financial Officer
- ---------------------------------------------------------------------------------------------------------------------
Nori L. Gabert Vice President 2000- Vice President and Deputy General N/A
DOB: August 15, 1953 and Secretary Present Counsel, AIG SunAmerica (2001-Present).
- ---------------------------------------------------------------------------------------------------------------------
Gregory N. Bressler Vice President 2005- Senior Vice President and General Counsel, N/A
DOB: November 17, 1966 Present AIG SunAmerica (2005-Present); Vice
President and Director of U.S. Asset
Management Compliance, Goldman Sachs
Asset Management (2004-2005); Deputy
General Counsel, Credit Suisse Asset
Management (2002-2004): Counsel, Credit
Suisse Asset Management (2000-2002).
- ---------------------------------------------------------------------------------------------------------------------
Cynthia A. Gibbons Vice President 2002- Vice President, AIG SunAmerica (August N/A
DOB: December 6, 1967 and Present 2002-Present); Securities Compliance
Chief Compliance Manager, American General Investment
Officer ("CCO") Management (2000-2002).
- ---------------------------------------------------------------------------------------------------------------------
Matthew J. Hackethal Anti-Money 2007- Senior Compliance Manager, AIG N/A
DOB: December 31, 1971 Laundering Present SunAmerica (2006-Present); Vice
Compliance President, Credit Suisse Asset Management
Officer (2001-2006); CCO, Credit Suisse
Alternative Funds (2005-2006); CCO,
Credit Suisse Asset Management
Securities, Inc. (2004-2005)
- ---------------------------------------------------------------------------------------------------------------------
Donna M. Handel Vice President 2002- Senior Vice President, AIG SunAmerica N/A
DOB: June 25, 1966 and Assistant Present (2004-Present); Vice President, AIG
Treasurer SunAmerica (1997-2004); Assistant
Treasurer, AIG SunAmerica (1993-2002).
- ---------------------------------------------------------------------------------------------------------------------
Name, Birth Date Other Directorships
and Address* Held by Trustee(3)
- --------------------------------------------
Officers
Evelyn M. Curran N/A
DOB: June 4, 1965
- --------------------------------------------
John Packs N/A
DOB: December 9, 1955
- --------------------------------------------
Gregory R. Kingston N/A
DOB: January 18, 1966
- --------------------------------------------
Nori L. Gabert N/A
DOB: August 15, 1953
- --------------------------------------------
Gregory N. Bressler N/A
DOB: November 17, 1966
- --------------------------------------------
Cynthia A. Gibbons N/A
DOB: December 6, 1967
- --------------------------------------------
Matthew J. Hackethal N/A
DOB: December 31, 1971
- --------------------------------------------
Donna M. Handel N/A
DOB: June 25, 1966
- --------------------------------------------
* The business address for each Trustee is, 2929 Allen Parkway, Houston, TX,
77019.
(1)Interested Trustee, as defined within the Investment Company Act of 1940
(the "1940 Act"), because of current employment with AIG SunAmerica, a
company affiliated with VALIC.
(2)The "Fund Complex" consists of all registered investment company portfolios
for which VALIC or an affiliated person of VALIC serves as investment
adviser or administrator. The "Fund Complex" includes the SunAmerica Equity
Funds (9 portfolios), SunAmerica Income Funds (5 funds), SunAmerica Money
Market Funds, Inc. (2 funds), SunAmerica Senior Floating Rate Fund, Inc. (1
fund), AIG Series Trust (5 portfolios), SunAmerica Focused Series, Inc. (18
portfolios), SunAmerica Focused Alpha Growth Fund, Inc. (1 fund), SunAmerica
Focused Alpha Large Cap Fund (1 fund), Anchor Series Trust (9 portfolios),
Seasons Series Trust (24 portfolios), SunAmerica Series Trust (35
portfolios), VALIC Company I (32 funds), and VALIC Company II (15 funds).
(3)Directorships of companies required to report to the Securities and Exchange
Commission under the Securities Exchange Act of 1934 (i.e. "public
companies") or other investment companies registered under the 1940 Act
other than those listed under the preceding column.
(4)Trustees serve until their successors are duly elected and qualified.
(5)Mr. Devin became Chairman of the Board effective July 27, 2005 and has been
a Trustee since 2001.
Additional Information concerning the Trustee is contained in the Statement
of Additional Information and is available without charge by calling
1-800-448-2542.
127
VALIC Company II
SHAREHOLDERS TAX INFORMATION -- August 31, 2007 (Unaudited)
Certain tax information regarding VALIC Company II is required to be provided
to the shareholders based upon each Fund's income and capital gain
distributions for the taxable year ended August 31, 2007.
The information and distributions reported herein may differ from the
information and distributions taxable to the shareholders for the calendar year
ending December 31, 2007, which will be made available after the end of the
calendar year.
During the year ended August 31, 2007 the Portfolios paid the following
dividends along with the percentage of ordinary income dividends that qualified
for the 70% dividends received deductions for corporations.
Net Net Qualifying % for the
Total Ordinary Long-term Foreign Foreign 70% Dividends
Fund Dividends Income Capital Gains Tax Credit* Source Income Received Deduction
- ------------------------------ ----------- ----------- ------------- ----------- ------------- --------------------
Aggressive Growth Lifestyle... $ 5,135,146 $ 757,435 $ 4,377,711 $ -- $ -- 15.82%
Capital Appreciation.......... 134,676 134,676 -- -- -- 100.00
Conservative Growth Lifestyle. 2,069,637 434,456 1,635,181 -- -- 12.13
Core Bond..................... 3,641,316 3,641,316 -- -- -- 0.74
High Yield Bond............... 8,229,456 5,583,929 2,645,527 -- -- 1.59
International Small Cap Equity 25,829,456 14,316,655 11,512,801 925,017 8,308,968 0.28
Large Cap Value............... 13,954,305 4,298,805 9,655,500 -- -- 47.40
Mid Cap Growth................ 3,839,151 -- 3,839,151 -- -- --
Mid Cap Value................. 39,058,918 15,018,210 24,040,708 -- -- 24.59
Moderate Growth Lifestyle..... 8,061,624 2,255,241 5,806,383 -- -- 13.56
Money Market II............... 11,366,594 11,366,594 -- -- -- --
Small Cap Growth.............. -- -- -- -- -- --
Small Cap Value............... 10,748,592 2,641,351 8,107,241 -- -- 41.91
Socially Responsible.......... 9,780,539 8,500,868 1,279,671 -- -- 29.90
Strategic Bond................ 10,043,528 7,715,285 2,328,243 -- -- 0.91
*The Funds make an election under the Internal Revenue Code Section 853 to pass
through foreign taxes paid to the shareholders.
128
VALIC Company II
COMPARISONS: FUNDS VS. INDEXES (Unaudited)
- --------------------------------------------------------------------------------
In the following pages, we have included graphs that compare the Fund's
performance with certain market indices. These graphs show the hypothetical
growth of a $10,000 investment in each Fund versus the same $10,000 investment
in comparable market indices. Descriptions of these market indices are provided
below in the individual graphs. It is important to note that the VCII Funds are
professionally managed mutual funds while the indices are not available for
investment and are unmanaged.
Please note that the graphs and tables that accompany the following investment
comments include all fund expenses, but do not reflect the insurance company
expenses associated with the variable annuity contract. All dividends are
assumed to be reinvested. No expenses are deducted from the performance of the
indices.
Investments in stocks and bonds are subject to risk, including stock market and
interest rate fluctuations. Investments in non-U.S. stocks are subject to
additional risks, including political and social instability, differing
securities regulations and accounting standards, and limited public
information. Mortgage-backed securities are subject to prepayment, which can
result in reinvestment of principal at lower yields. Money market instruments
generally offer stability and income, but an investment in these securities,
like investments in other portfolios, are not guaranteed by the U.S. government
or any other federal government entity.
129
VALIC Company II Aggressive Growth Lifestyle Fund
COMPARISON: FUND VS. INDEX
- --------------------------------------------------------------------------------
MANAGEMENT OVERVIEW
A discussion with AIG Global Investment Corp.
The equity and fixed income markets had positive returns in the year ended
August 31, 2007, as the Wilshire 5000 Index rose 15.59%, the MSCI EAFE Index
returned 18.71% and the Lehman Brothers U.S. Aggregate Index had a 5.26%
return. For the year, the Aggressive Growth Lifestyle Fund returned 16.53%
compared to 15.13% for the S&P 500(R) Index and 15.35% for the Blended Index.
Within domestic equities the results were mixed between growth and value while
mid and large cap funds outperformed small cap. The VC II Capital Appreciation
Fund, the Fund's largest holding and the worst performer in the previous year,
was the best performer this year, returning 21.90%, 4.20% better than its
Russell 1000(R) Growth benchmark, and 6.31% ahead of the Wilshire 5000 Index.
The VC II Core Bond Fund went the other direction, underperforming the Lehman
Brothers U.S. Aggregate Index by 1.59% after outperforming last year by 0.90%.
Several component changes were made during the year with the best being the
addition of the VC I Value Fund which rose 8.43% during the last half of the
year while its Russell 1000 Value benchmark returned only 2.76%. Other
additions to the Fund's lineup were the VC I Stock Index and MidCap Index
Funds. In addition, the VC II International Small Cap Equity Fund returned to
the lineup after being removed last year.
Growth of $10,000 Investment
[CHART]
Aggressive Dow Jones
Growth Wilshire 5000 Lehman Brothers
Lifestyle S & P 500/R/ Blended Total Market MSCI EAFE U.S. Aggregrate
Fund Index Index Index Index Index
---- ----- ----- ----- ----- ----------
9/21/1998 $10,000 $10,000 $10,000 $10,000
9/30/1998 10,079 9,937 $10,079 9,962 $10,079 10,111
8/31/1999 12,638 13,057 12,778 12,986 13,067 9,958
8/31/2000 16,418 15,188 14,850 15,583 14,315 10,709
8/31/2001 12,300 11,484 11,600 11,601 10,829 12,033
8/31/2002 10,453 9,417 10,009 9,680 9,210 13,009
8/31/2003 11,897 10,553 11,265 11,118 10,049 13,576
8/31/2004 13,046 11,762 12,810 12,396 12,324 14,408
8/31/2005 15,868 13,238 14,938 14,365 15,230 15,006
8/31/2006 17,557 14,413 16,699 15,624 18,928 15,262
8/31/2007 20,459 16,595 19,263 18,059 22,468 16,065
For the year ended August 31, 2007, the Aggressive Growth Lifestyle Fund
returned 16.53% compared to 15.13% for the S&P 500(R) Index and 15.35% for the
Blended Index.
* The S&P 500(R) Index consists of 500 stocks chosen for market size,
liquidity, and industry group representation. It is a market-value weighted
index, with each stock's percentage in the Index in proportion to its
market value.
** The blended index of the Fund consists of a combination of Dow Jones
Wilshire 5000 Total Market Index ("Wilshire") (65%), Morgan Stanley Capital
International Europe, Australasia, Far East ("MSCI EAFE") Index (25%), and
Lehman Brothers U.S. Aggregate Index (10%).
*** Wilshire measures the performance of all U.S. headquartered equity
securities with readily available price data. Over 5,000 capitalization
weighted security returns are used to adjust the index.
****The MSCI EAFE Index is comprised of 21 Morgan Stanley Capital International
country indices and measures the performance of approximately 1,000
large-cap stocks.
*****The Lehman Brothers U.S. Aggregate Index covers the U.S. investment grade
fixed rate bond market, with index components for government and corporate
securities, mortgage pass-through securities, and asset-backed securities.
Average Annual Total Return
- -------------------------------
1 Year 5 Years Since Inception*
- -------------------------------
16.53% 14.38% 8.33%
- -------------------------------
*Inception date of the Fund: September 21, 1998
Past performance is not predictive of future performance. The performance data
quoted represents past performance; past performance does not guarantee future
results; the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost; current performance may be lower or higher than
the performance data quoted.
The Fund's returns reflect investment management fees and other Fund expenses.
The Fund's returns do not reflect charges included in the Variable Annuity
Contract or Qualified Retirement Plan for mortality and expense guarantees,
administrative fees or surrender charges.
130
VALIC Company II Capital Appreciation Fund
COMPARISON: FUND VS. INDEX
- --------------------------------------------------------------------------------
MANAGEMENT OVERVIEW
A discussion with Bridgeway Capital Management
The Capital Appreciation Fund posted a return of 21.90% for the twelve-month
period ending August 31, 2007, compared to a return of 17.70% for the Russell
1000(R) Growth Index.
Bridgeway Capital Management replaced the previous subadviser for the Fund on
August, 25, 2006.
The Fund invests solely in domestically traded equities. Our best stock
selection for the period was Precision Castparts. Fund leaders also include
Apple and McDermott International. While the Fund is well diversified across
sectors and industries, our largest sector is technology comprising 18.1% of
assets and our largest industry is diversified financial services with 13.4% of
assets followed by computers at 10.5% of assets. Precision Castparts, due to
appreciation, is our single largest holding at 5.4% of total assets. Our
biggest loser, Amgen (down 30.4%) a biotechnology company, engages in the
discovery, development, manufacture, and marketing of human therapeutics based
on advances in cellular and molecular biology.
GROWTH of $10,000 Investment
[CHART]
Capital Russell 1000\R\
Appreciation Fund Growth Index*
------------------- ----------------
9/21/1998 $10,000 $10,000
9/30/1998 9,783 9,964
8/31/1999 13,811 13,726
8/31/2000 18,048 18,318
8/31/2001 9,843 10,016
8/31/2002 7,239 7,795
8/31/2003 8,281 8,893
8/31/2004 8,422 9,369
8/31/2005 9,649 10,506
8/31/2006 9,655 10,892
8/31/2007 11,769 12,821
For the year ended August 31, 2007, the Capital Appreciation Fund returned
21.90% compared to 17.70% for the Russell 1000(R) Growth Index.
*The Russell 1000(R) Growth Index measures the performance of those Russell
1000 companies with higher price-to-book ratios and higher forecasted growth
values.
Average Annual Total Return
- -------------------------------
1 Year 5 Years Since Inception*
- -------------------------------
21.90% 10.21% 1.84%
- -------------------------------
*Inception date of the Fund: September 21, 1998
Past performance is not predictive of future performance. The performance data
quoted represents past performance; past performance does not guarantee future
results; the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost; current performance may be lower or higher than
the performance data quoted.
The Fund's returns reflect investment management fees and other Fund expenses.
The Fund's returns do not reflect charges included in the Variable Annuity
Contract or Qualified Retirement Plan for mortality and expense guarantees,
administrative fees or surrender charges.
131
VALIC Company II Conservative Growth Lifestyle Fund
COMPARISON: FUND VS. INDEX
- --------------------------------------------------------------------------------
MANAGEMENT OVERVIEW
A discussion with AIG Global Investment Corp.
The equity and fixed income markets had positive returns in the year ended
August 31, 2007, as the Wilshire 5000 rose 15.59%, the MSCI EAFE Index returned
18.71% and the Lehman Brothers U.S. Aggregate Index had a 5.26% return. For the
year, the Moderate Growth Lifestyle Fund returned 11.28% compared to 15.13% for
the S&P 500(R) Index and 10.65% for the Blended Index.
Within domestic equities the results were mixed between growth and value while
mid and large cap funds outperformed small cap. The VC II Capital Appreciation
Fund, the Fund's largest holding and the worst performer in the previous year,
was the best performer this year, returning 21.90%, 4.20% better than its
Russell 1000 Growth benchmark, and 6.31% ahead of the Wilshire 5000 Index. The
VC II Core Bond Fund went the other direction, underperforming the Lehman
Brothers U.S. Aggregate Index by 1.59% after outperforming last year by 0.90%.
Several component changes were made during the year with the best being the
addition of the VC I Value Fund which rose 8.43% during the last half of the
year while its Russell 1000 Value benchmark returned only 2.76%. Other
additions to the Fund's lineup were the VC I Stock Index, MidCap Index and
Money Market I Funds.
Growth of $10,000 Investment
[CHART]
Conservative Dow Jones
Growth Wilshire Lehman Brothers
Lifestyle S&P 500 Blended MSCI 5000 Total U.S.Aggregrate
Fund Index* Index** EAFE Index**** Market Index*** Index*****
---- ----- ----- --------- ------------ -----
9/21/1998 $10,000 $10,000 $10,000.00 $10,000
9/30/1998 10,058 9,937 10,058.48 10,058.48 9,961.78 10,111
8/31/1999 11,599 13,057 11,422.94 13,040.69 12,985.80 9,958
8/31/2000 13,841 15,188 12,922.46 14,286.34 15,583.45 10,709
8/31/2001 12,906 11,484 11,906.36 10,807.31 11,600.82 12,033
8/31/2002 12,309 9,417 11,391.48 9,191.51 9,680.00 13,009
8/31/2003 13,528 10,553 12,487.28 10,029.07 11,118.10 13,576
8/31/2004 14,557 11,762 13,708.01 12,299.55 12,396.46 14,408
8/31/2005 16,454 13,238 15,159.82 15,199.55 14,365.06 15,006
8/31/2006 17,359 14,413 16,130.84 18,889.42 15,624.06 15,262
8/31/2007 19,317 16,595 17,849.15 22,423.09 18,059.31 16,065
For the year ended August 31, 2007, the Conservative Growth Lifestyle Fund
returned 11.28% compared to 15.13% for the S&P 500(R) Index and 10.65% for the
Blended Index.
* The S&P 500(R) Index consists of 500 stocks chosen for market size,
liquidity, and industry group representation. It is a market-value weighted
index, with each stock's percentage in the Index in proportion to its
market value.
** The blended index of the Fund consists of a combination of the Dow Jones
Wilshire 5000 Total Market Index ("Wilshire") (42%), Morgan Stanley Capital
International(R) Europe, Australasia, Far East ("MSCI EAFE") Index (8%),
and Lehman Brothers U.S. Aggregate Index (50%).
*** Wilshire measures the performance of all U.S. headquartered equity
securities with readily available price data. Over 5,000 capitalization
weighted security returns are used to adjust the index.
****The MSCI EAFE Index is comprised of 21 Morgan Stanley Capital International
country indices and measures the performance of approximately 1,000
large-cap stocks.
*****The Lehman Brothers U.S. Aggregate Index covers the U.S. investment grade
fixed rate bond market, with index components for government and corporate
securities, mortgage pass-through securities, and asset-backed securities.
Average Annual Total Return
- -------------------------------
1 Year 5 Years Since Inception*
- -------------------------------
11.28% 9.43% 7.64%
- -------------------------------
*Inception date of the Fund: September 21, 1998
Past performance is not predictive of future performance. The performance data
quoted represents past performance; past performance does not guarantee future
results; the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost; current performance may be lower or higher than
the performance data quoted.
The Fund's returns reflect investment management fees and other Fund expenses.
The Fund's returns do not reflect charges included in the Variable Annuity
Contract or Qualified Retirement Plan for mortality and expense guarantees,
administrative fees or surrender charges.
132
VALIC Company II Core Bond Fund
COMPARISON: FUND VS. INDEX
- --------------------------------------------------------------------------------
MANAGEMENT OVERVIEW
A discussion with AIG Global Investment Corp.
The Core Bond Fund posted a return of 3.67% for the twelve-month period ending
August 31, 2007, compared to a return of 5.26% for the Lehman Brothers U.S.
Aggregate Index.
Specific security selection proved once again to be a primary driver of returns
in the fund. Moreover, market conditions over the past year have called for a
particular focus on individual security selection as differentiation among
broader sectors and asset classes has been increasingly difficult. Top
performing securities for the year included U.S. Treasuries, long maturity
mortgage backed securities and Republic of Turkey. Poor performers included
Venezuela and commercial asset back securities.
Growth of $10,000 Investment
[CHART]
Core Bond Lehman Brothers
Fund U.S. Aggregrate Index*
--------- ------------------------
9/21/1998 $10,000 $10,000
9/30/1998 10,109 10,111
8/31/1999 9,983 9,958
8/31/2000 10,513 10,709
8/31/2001 11,649 12,033
8/31/2002 12,334 13,009
8/31/2003 12,836 13,576
8/31/2004 13,569 14,408
8/31/2005 14,254 15,006
8/31/2006 14,513 15,262
8/31/2007 15,060 16,065
For the year ended August 31, 2007, the Core Bond Fund returned 3.67% compared
to 5.26% for the Lehman Brothers U.S. Aggregate Index.
*The Lehman Brothers U.S. Aggregate Index covers the investment grade fixed
rate bond market, with index components for government and corporate
securities, mortgage pass-through securities, and asset-backed securities.
Average Annual Total Return
- -------------------------------
1 Year 5 Years Since Inception*
- -------------------------------
3.67% 4.08% 4.69%
- -------------------------------
*Inception date of the Fund: September 21, 1998
Past performance is not predictive of future performance. The performance data
quoted represents past performance; past performance does not guarantee future
results; the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost; current performance may be lower or higher than
the performance data quoted.
The Fund's returns reflect investment management fees and other Fund expenses.
The Fund's returns do not reflect charges included in the Variable Annuity
Contract or Qualified Retirement Plan for mortality and expense guarantees,
administrative fees or surrender charges.
133
VALIC Company II High Yield Bond Fund
COMPARISON: FUND VS. INDEX
- --------------------------------------------------------------------------------
MANAGEMENT OVERVIEW
A discussion with AIG Global Investment Corp.
The High Yield Bond Fund posted a return of 4.62% for the twelve-month period
ending August 31, 2007, compared to a return of 6.34% for the Citigroup High
Yield Market Index.
For the fiscal year, security selection was the primary contributor to the
Fund's under performance against the index. The primary detractors to
performance in the period were our holdings in iPCS and Le-Nature's within the
wireless and food processing/beverage sectors, respectively. To a lesser
extent, the Fund's cash allocation was a negative contributor to performance
due to the solid market return for the period. Notable positive contributors to
performance in the period were our holdings in HCA and Calpine Corporation
within the healthcare and utilities sectors, respectively.
Industry selection played an important role in the performance for the period.
A notable sector was the homebuilders. Our underweight positions within this
sector contributed to the Fund's performance, as these sectors underperformed
the index for the period.
Growth of $10,000 Investment
[CHART]
High Yield Citigroup High Yield
Bond Fund Market Index*
---------- --------------------
9/21/1998 $10,000 $10,079.92
9/30/1998 10,080 9,941.30
8/31/1999 10,540 10,433.61
8/31/2000 11,173 10,540.77
8/31/2001 10,927 9,905.82
8/31/2002 10,060 9,574.08
8/31/2003 12,481 12,759.46
8/31/2004 14,512 14,169.67
8/31/2005 17,064 15,448.51
8/31/2006 18,436 16,230.50
8/31/2007 19,287 17,260.30
For the year ended August 31, 2007, the High Yield Bond Fund returned 4.62%
compared to 6.34% for the Citigroup High Yield Market Index.
*The Citigroup High Yield Market Index measures the performance of below
investment grade debt issued by corporations domiciled in the United States or
Canada. All of the bonds in such index are publicly placed, have a fixed
coupon, and are nonconvertible.
Average Annual Total Return
- -------------------------------
1 Year 5 Years Since Inception*
- -------------------------------
4.62% 13.90% 7.62%
- -------------------------------
*Inception date of the Fund: September 21, 1998
Past performance is not predictive of future performance. The performance data
quoted represents past performance; past performance does not guarantee future
results; the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost; current performance may be lower or higher than
the performance data quoted.
The Fund's returns reflect investment management fees and other Fund expenses.
The Fund's returns do not reflect charges included in the Variable Annuity
Contract or Qualified Retirement Plan for mortality and expense guarantees,
administrative fees or surrender charges.
134
VALIC Company II International Small Cap Equity Fund
COMPARISON: FUND VS. INDEX
- --------------------------------------------------------------------------------
MANAGEMENT OVERVIEW
A discussion with AIG Global Investment Corp.
The International Small Cap Equity Fund posted a return of 23.44% for the
twelve-month period ending August 31, 2007, compared to a return of 18.25% for
the Morgan Stanley Capital International Europe, Australasia, Far East Small
Cap Index.
The most positive contribution to performance was from the industrials and
consumer discretionary sectors via an overweight position, and an underweight
position in the financials sector. Security selection had a positive effect on
performance and the top five performers were Bauer (Germany), Ramirent
(Finland), FLSmidth (Denmark), ElringKlinger (Germany) and Kloeckner & Co.
(Germany). The bottom three performers were Culture Convenience (Japan),
Tandberg Television (Norway) and Wolfson Microelectronics (UK).
The countries with the highest positive impact on performance were Japan,
Finland, Germany, Sweden, Greece and Denmark.
Growth of $10,000 Investment
[CHART]
International Small MSCI EAFE Small
Cap Equity Fund Cap Index*
--------------- ---------
9/21/1998 $10,000
9/30/1998 10,191 $10,191.08
8/31/1999 11,911 13,656.67
8/31/2000 16,355 14,098.17
8/31/2001 11,752 11,571.91
8/31/2002 10,234 10,485.26
8/31/2003 10,842 12,568.27
8/31/2004 12,514 16,190.92
8/31/2005 17,131 21,477.85
8/31/2006 20,790 25,235.59
8/31/2007 25,663 29,326.29
For the year ended August 31, 2007, the International Small Cap Equity Fund
returned 23.44% compared to 18.25% for the MSCI EAFE Small Cap Index.
*The Morgan Stanley Capital International Europe, Australasia, and the Far East
Index ("MSCI EAFE") Small Cap Index is comprised of 40% of the full market
capitalization of the eligible small cap universe with each industry group and
each country in the MSCI EAFE Index.
Average Annual Total Return
- -------------------------------
1 Year 5 Years Since Inception*
- -------------------------------
23.44% 20.19% 11.11%
- -------------------------------
*Inception date of the Fund: September 21, 1998
Past performance is not predictive of future performance. The performance data
quoted represents past performance; past performance does not guarantee future
results; the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost; current performance may be lower or higher than
the performance data quoted.
The Fund's returns reflect investment management fees and other Fund expenses.
The Fund's returns do not reflect charges included in the Variable Annuity
Contract or Qualified Retirement Plan for mortality and expense guarantees,
administrative fees or surrender charges.
135
VALIC Company II Large Cap Value Fund
COMPARISON: FUND VS. INDEX
- --------------------------------------------------------------------------------
MANAGEMENT OVERVIEW
A discussion with SSgA Funds Management, Inc.
The Large Cap Value Fund posted a return of 12.89% for the twelve-month period
ending August 31, 2007, compared to a return of 12.85% for the Russell 1000(R)
Value Index.
Our sector exposures relative to the benchmark are a function of stock
selection. In the Large Cap Value Fund, contribution from sector exposures has
been minimal over the past twelve months.
Stock selection has been particularly strong within the industrials, consumer
discretionary and financials sectors. Overweights to AGCO Corporation and ITT
Educational Services helped relative performance within industrials. Within
consumer discretionary, GameStop and Big Lots were two of the successful
positions. Finally, within financials, underweights to some of the large
investment banks such as Lehman Brothers and Bear Stearns helped relative
performance. Within energy and technology, stock selection was the weakest.
Overweights to Lexmark International and Advanced Micro Devices offset gains
realized in the Fund. Also at the stock level, overweights to Aeropostale and
First Marblehead hurt performance.
Growth of $10,000 Investment
[CHART]
Large Cap Russell 1000/R/
Value Fund Value Index*
---------- ---------------
9/21/1998 $10,000 $10,000
9/30/1998 9,907 9,953
8/31/1999 12,126 12,244
8/31/2000 13,018 12,753
8/31/2001 12,672 12,610
8/31/2002 11,786 10,954
8/31/2003 12,798 12,227
8/31/2004 14,388 14,369
8/31/2005 17,066 16,791
8/31/2006 19,282 19,135
8/31/2007 21,766 21,595
For the year ended August 31, 2007, the Large Cap Value Fund returned 12.89% as
compared to 12.85% for the Russell 1000(R) Value Index.
*The Russell 1000(R) Value Index measures the performance of those Russell 1000
companies with lower price-to-book ratios and lower forecasted growth values.
Average Annual Total Return
- -------------------------------
1 Year 5 Years Since Inception*
- -------------------------------
12.89% 13.05% 9.09%
- -------------------------------
*Inception date of the Fund: September 21, 1998
Past performance is not predictive of future performance. The performance data
quoted represents past performance; past performance does not guarantee future
results; the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost; current performance may be lower or higher than
the performance data quoted.
The Fund's returns reflect investment management fees and other Fund expenses.
The Fund's returns do not reflect charges included in the Variable Annuity
Contract or Qualified Retirement Plan for mortality and expense guarantees,
administrative fees or surrender charges.
136
VALIC Company II Mid Cap Growth Fund
COMPARISON: FUND VS. INDEX
- --------------------------------------------------------------------------------
MANAGEMENT OVERVIEW
A discussion with A I M Capital Management, Inc.
The Mid Cap Growth Fund posted a return of 22.57% for the twelve-month period
ending August 31, 2007, compared to a return of 19.31% for the Russell
MidCap(R) Growth Index.
The Fund outperformed the benchmark index by the widest margin in the
industrials and consumer discretionary sectors. In the industrials sector,
stock selection in construction/engineering stocks, and an overweight position
in aerospace/defense stocks positively contributed to the Fund's relative
performance. In the consumer discretionary sector, an overweight position in
textiles/apparel/luxury goods contributed the most to the Fund's performance
relative to the Russell MidCap(R) Growth Index. Also within the sector, stock
selection in the hotels/restaurants/leisure industry positively contributed to
the Fund's relative performance.
Despite a positive absolute return in the sector, the Fund's financial stocks
underperformed relative to the benchmark. This was due in large part to the
real estate investments trusts (REITs) and other real estate related holdings.
At the close of the twelve-month period, the Fund's largest overweight
positions included the following industries: textiles/apparel/luxury goods,
containers and packaging and wireless telecommunication services. The Fund's
largest underweight industries included multi-line retail, energy
equipment/services and semiconductors/semiconductor equipment.
Growth of $10,000 Investment
[CHART]
Mid Cap Russell Midcap/R/
Growth Fund Growth Index*
---------- --------------------
9/21/1998 $10,000 $10,000
9/30/1998 10,037 9,896
8/31/1999 11,636 13,692
8/31/2000 17,017 22,891
8/31/2001 9,020 12,580
8/31/2002 6,460 9,639
8/31/2003 8,293 12,568
8/31/2004 8,642 13,506
8/31/2005 10,999 17,078
8/31/2006 11,857 18,102
8/31/2007 14,534 21,597
For the year ended August 31, 2007, the Mid Cap Growth Fund returned 22.57%
compared to 19.31% for the Russell Midcap(R) Growth Index.
*The Russell MidCap(R) Growth Index measures the performance of those mid cap
companies with higher price-to-book ratios and higher forecasted growth
values. The stocks are also members of the Russell(R) 1000 Growth Index.
Average Annual Total Return
- -------------------------------
1 Year 5 Years Since Inception*
- -------------------------------
22.57% 17.61% 4.27%
- -------------------------------
*Inception date of the Fund: September 21, 1998
Past performance is not predictive of future performance. The performance data
quoted represents past performance; past performance does not guarantee future
results; the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost; current performance may be lower or higher than
the performance data quoted.
The Fund's returns reflect investment management fees and other Fund expenses.
The Fund's returns do not reflect charges included in the Variable Annuity
Contract or Qualified Retirement Plan for mortality and expense guarantees,
administrative fees or surrender charges.
137
VALIC Company II Mid Cap Value Fund
COMPARISON: FUND VS. INDEX
- --------------------------------------------------------------------------------
MANAGEMENT OVERVIEW
A discussion with Wellington Management Company, LLP.
The Mid Cap Value Fund posted a return of 18.15% for the twelve-month period
ending August 31, 2007, compared to a return of 8.76% for the Russell 2500(R)
Value Index.
A discussion with Wellington Management Company, LLP -- regarding their portion
of the Fund ("the portfolio")
The portfolio's overall sector selection contributed to relative performance
during the period. An underweight to financials, the worst performing sector
during the period, and an overweight to the industrials and materials sectors,
contributed to relative results.
The portfolio's overall security selection was the primary driver of relative
outperformance during the period. Stock selection was strongest within
materials, information technology and industrials. Materials holdings
Owens-Illinois, Celanese, and Cleveland-Cliffs led gains in the sector. In
industrials, Goodrich, a holding outside of the benchmark, was the largest
contributor. United Airlines and Kennametal were also among the top
contributors in this sector. Varian Seminconductor, Arrow Electronics, and
CheckFree were the top gainers in information technology. The portfolio also
benefited from owning agriculture and food company Bunge. The largest relative
detractors during the period were Ambac Financial, Circuit City and Foot Locker.
A discussion with FAF Advisors, Inc (formerly US Bancorp Asset Management) --
regarding their portion of the Fund ("the portfolio")
Sector selection contributed positively to performance as the portfolio
benefited from its overweight position in the consumer staples and underweight
allocation to financial stocks. Stock selection also contributed to performance
due to positive stock selection in the materials, energy, utility and
technology sectors that was partially offset by adverse stock selection in the
financials, consumer, and industrial sectors.
Specifically, Owens-Illinois, Freeport-McMoRan Copper & Gold, Airgas and Rohm &
Haas in the materials space posted strong returns. Oil service companies
National Oilwell Varco and Global Santa Fe in the energy sector advanced.
Utility companies Constellation Energy Group and PPL posted higher returns
versus other utility stocks. In the technology sector, Harris Corporation,
Avnet and Freescale Seminconductor rose during the period.
Financial holdings in the portfolio that were impacted by the correction in
this sector include IndyMac Bancorp, Ambac Financial Group, CIT Group and PMI
Group. The portfolio continues to maintain an underweight position in the
financial sector. Consumer stock selection was negative given poor returns from
housing related stocks including Hovnanian Enterprises, Standard Pacific and
Pulte Homes. Convenience store operator Pantry also declined during the period.
These consumer stocks are no longer held in the portfolio given the fundamental
deterioration we expect to continue over our investment horizon. Industrial
stock selection was also negative during the period.
Growth of $10,000 Investment
[CHART]
Mid Cap Russell 2500/R/
Value Fund Value Index*
---------- -----------------
9/21/1998 $10,000 $10,000
9/30/1998 10,105 10,008
8/31/1999 13,560 11,202
8/31/2000 17,534 12,633
8/31/2001 18,365 14,481
8/31/2002 16,502 13,934
8/31/2003 19,865 16,911
8/31/2004 22,818 20,275
8/31/2005 28,107 25,346
8/31/2006 31,127 27,913
8/31/2007 36,775 30,358
For the year ended August 31, 2007, the Mid Cap Value Fund returned 18.15%
compared to 8.76% for the Russell 2500(R) Value Index.
*The Russell 2500(R) Value Index measures the performance of those Russell
2500(R) companies (the 2500 smallest companies, by market capitalization in
the Russell 3000(R) Index) with lower price-to-book ratios and lower
forecasted growth values.
Average Annual Total Return
- -------------------------------
1 Year 5 Years Since Inception*
- -------------------------------
18.15% 17.38% 15.68%
- -------------------------------
*Inception date of the Fund: September 21, 1998
Past performance is not predictive of future performance. The performance data
quoted represents past performance; past performance does not guarantee future
results; the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost; current performance may be lower or higher than
the performance data quoted.
The Fund's returns reflect investment management fees and other Fund expenses.
The Fund's returns do not reflect charges included in the Variable Annuity
Contract or Qualified Retirement Plan for mortality and expense guarantees,
administrative fees or surrender charges.
138
VALIC Company II Moderate Growth Lifestyle Fund
COMPARISON: FUND VS. INDEX
- --------------------------------------------------------------------------------
MANAGEMENT OVERVIEW
A discussion with AIG Global Investment Corp.
The equity and fixed income markets had positive returns in the year ended
August 31, 2007, as the Wilshire 5000 Index rose 15.59%, the MSCI EAFE Index
returned 18.71% and the Lehman Brothers U.S. Aggregate Index had a 5.26%
return. For the year, the Moderate Growth Lifestyle Fund returned 14.18%
compared to 15.13% for the S&P 500(R) Index and 12.95% for the Blended Index.
Within domestic equities the results were mixed between growth and value while
mid and large cap funds outperformed small cap. The VC II Capital Appreciation
Fund, the Fund's largest holding and the worst performer in the previous year,
was the best performer this year, returning 21.90%, 4.20% better than its
Russell 1000 Growth benchmark, and 6.31% ahead of the Wilshire 5000 Index. The
VC II Core Bond Fund went the other direction, underperforming the Lehman
Brothers U.S. Aggregate Index by 1.59% after outperforming last year by 0.90%.
Several component changes were made during the year with the best being the
addition of the VC I Value Fund which rose 8.43% during the last half of the
year while its Russell 1000 Value benchmark returned only 2.76%. Other
additions to the Fund's lineup were the VC I Stock Index, MidCap Index and
Money Market I Funds.
Growth of $10,000 Investment
[CHART]
Moderate Dow Jones
Growth Wilshire 5000 Lehman Brothers
Lifestyle S & P 500/R/ Blended Total Market MSCI EAFE U.S. Aggregrate
Fund Index* Index** Index*** Index**** Index*****
---- ------ ------- -------- --------- ----------
9/21/1998 $10,000 $10,000 $10,000 $10,000
9/30/1998 10,058 9,937 $10,058 9,961.78 $10,058.48 10,111
8/31/1999 12,039 13,057 12,075 12,986.8 13,041.69 9,958
8/31/2000 14,843 15,188 13,869 15,583.45 14,286.34 10,709
8/31/2001 12,748 11,484 11,773 11,601.82 10,807.31 12,033
8/31/2002 11,650 9,417 10,703 9,680 9,192.51 13,009
8/31/2003 13,029 10,553 11,907 11,118.1 10,029.07 13,576
8/31/2004 14,197 11,762 13,287 12,396.46 12,300.55 14,408
8/31/2005 16,593 13,238 15,078 14,365.06 15,200.55 15,006
8/31/2006 17,790 14,413 16,414 15,624.06 18,889.42 15,262
8/31/2007 20,297 16,595 18,538 18,059.31 22,423.09 16,065
For the year ended August 31, 2007, the Moderate Growth Lifestyle Fund returned
14.18% compared to 15.13% for the S&P 500(R) Index and 12.95% for the Blended
Index.
* The S&P 500(R) Index consists of 500 stocks chosen for market size,
liquidity, and industry group representation. It is a market-value weighted
index, with each stock's percentage in the Index in proportion to its
market value.
** The blended index of the Fund consists of a combination of the Dow Jones
Wilshire 5000 Total Market Index ("Wilshire") (55%), Morgan Stanley Capital
International(R) Europe, Australasia, Far East ("MSCI EAFE") (15%) Index,
and Lehman Brothers U.S. Aggregate Index (30%).
*** Wilshire measures the performance of all U.S. headquartered equity
securities with readily available price data. Over 5,000 capitalization
weighted security returns are used to adjust the index.
****The MSCI EAFE Index is comprised of 21 Morgan Stanley Capital International
country indices and measures the performance of approximately 1,000
large-cap stocks.
*****The Lehman Brothers U.S. Aggregate Index covers the U.S. investment grade
fixed rate bond market, with index components for government and corporate
securities, mortgage pass-through securities, and asset-backed securities.
Average Annual Total Return
- -------------------------------
1 Year 5 Years Since Inception*
- -------------------------------
14.18% 11.74% 8.24%
- -------------------------------
*Inception date of the Fund: September 21, 1998
Past performance is not predictive of future performance. The performance data
quoted represents past performance; past performance does not guarantee future
results; the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost; current performance may be lower or higher than
the performance data quoted.
The Fund's returns reflect investment management fees and other Fund expenses.
The Fund's returns do not reflect charges included in the Variable Annuity
Contract or Qualified Retirement Plan for mortality and expense guarantees,
administrative fees or surrender charges.
139
VALIC Company II Money Market II Fund
COMPARISON: FUND VS. INDEX
- --------------------------------------------------------------------------------
MANAGEMENT OVERVIEW
A discussion with AIG SunAmerica Asset Management Corp.
The Money Market II Fund returned 4.88% for the twelve-month period ending
August 31, 2007, compared to a return of 4.80% for the T-Bill 3 Month Index.
During the fiscal year, the economy exhibited solid quarterly growth with Gross
Domestic Product (GDP). However, this occurred in the face of a decline in
non-farm payroll, from an average 192 million new jobs in 2006 to an average of
109 million during the first eight months of 2007. At the same time, the
Federal Reserve held interest rates at a constant rate throughout the period.
Currently, the Federal Funds rate stands at 5.25% compared to the 1.00% rate
when the tightening policy was initiated in June 2004.
We implemented a defensive strategy in the Fund in mid-August due to extreme
credit spread widening. The defensive positioning was initiated in response to
the uncertainty and illiquidity in fixed income markets caused by sub-prime
mortgage defaults. We continued to allocate a fairly high percentage of the
Fund's assets to the purchase of U.S. Government Treasury securities, U.S.
agency securities and repurchase agreements collateralized by U.S. Government
treasuries.
Yields on the money market securities increased steadily throughout the period
with the 1-month CD average yielding 5.70% at the end of the period, up from
the 5.26% level at the start of the fiscal year.
Average Annual Total Return
- --------------------------------
1 Year 5 Years Since Inception**
- --------------------------------
4.88% 2.46% 3.27%
- --------------------------------
**Inception date of the Fund: September 21, 1998
Past performance is not predictive of future performance. The performance data
quoted represents past performance; past performance does not guarantee future
results; the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost; current performance may be lower or higher than
the performance data quoted.
The Fund's returns reflect investment management fees and other Fund expenses.
The Fund's returns do not reflect charges included in the Variable Annuity
Contract or Qualified Retirement Plan for mortality and expense guarantees,
administrative fees or surrender charges.
140
VALIC Company II Small Cap Growth Fund
COMPARISON: FUND VS. INDEX
- --------------------------------------------------------------------------------
MANAGEMENT OVERVIEW
A discussion with Franklin Advisers, Inc.
The Small Cap Growth Fund posted a return of 15.06% for the twelve-month period
ending August 31, 2007, compared to a return of 16.36% for the Russell 2000(R)
Growth Index.
Significant contributors to performance relative to the benchmark index came
from our investments in the consumer services sector, where stock selection in
the casinos and gaming industry helped performance, as did stock selection in
the restaurants industry. An overweighted allocation to hotels, resorts and
cruiselines aided relative results. Performance relative to the index was
positively impacted by stock selection in the producer manufacturing and energy
sectors. The Fund's overweighted position and stock selection in the electronic
technology sector also contributed to relative Fund performance.
The Fund had some detractors from performance during the fiscal year. An
overweighted allocation and stock selection in the finance sector hurt relative
results. Stock selection in the technology services and health technology
sectors also hindered relative performance.
Growth of $10,000 Investment
[CHART]
Small Cap Russell 2000/R/
Growth Fund Growth Index*
----------- --------------
9/21/1998 $10,000 $10,000
9/30/1998 10,242 10,047
8/31/1999 13,831 13,072
8/31/2000 23,362 18,181
8/31/2001 12,512 11,828
8/31/2002 8,661 8,750
8/31/2003 11,353 11,804
8/31/2004 11,938 12,203
8/31/2005 14,267 15,072
8/31/2006 14,841 15,976
8/31/2007 17,053 18,590
For the year ended August 31, 2007, the Small Cap Growth Fund returned 15.06%
compared to 16.36% for the Russell 2000(R) Growth Index.
*The Russell 2000(R) Growth Index measures the performance of those Russell
2000(R) companies with higher price-to-book ratios and higher forecasted
growth values.
Average Annual Total Return
- -------------------------------
1 Year 5 Years Since Inception*
- -------------------------------
15.06% 14.51% 6.15%
- -------------------------------
*Inception date of the Fund: September 21, 1998
Past performance is not predictive of future performance. The performance data
quoted represents past performance; past performance does not guarantee future
results; the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost; current performance may be lower or higher than
the performance data quoted.
The Fund's returns reflect investment management fees and other Fund expenses.
The Fund's returns do not reflect charges included in the Variable Annuity
Contract or Qualified Retirement Plan for mortality and expense guarantees,
administrative fees or surrender charges.
141
VALIC Company II Small Cap Value Fund
COMPARISON: FUND VS. INDEX
- --------------------------------------------------------------------------------
MANAGEMENT OVERVIEW
A discussion with JPMorgan Investment Advisors, Inc.
The Small Cap Value Fund posted a return of 9.22% for the twelve-month period
ending August 31, 2007, compared to a return of 6.64% for the Russell 2000(R)
Value Index.
Stock selection in the REIT's and retail sectors contributed to performance,
while the insurance and pharmaceutical sectors detracted from performance. The
largest contributor to performance was Terex Corporation, a maker of
construction and industrial equipment. GameStop, a video game retailer also
contributed to performance.
Kellwood, a sportswear and women's apparel retailer was one of the largest
detractors from performance.
Growth of $10,000 Investment
[CHART]
Small Cap Russell 2000/R/
Value Fund Value Index*
----------- ------------
9/21/1998 $10,000 $10,000
9/30/1998 10,058 10,033
8/31/1999 10,361 10,834
8/31/2000 12,176 12,318
8/31/2001 13,636 14,540
8/31/2002 12,469 13,726
8/31/2003 14,912 16,976
8/31/2004 17,502 20,286
8/31/2005 21,150 24,872
8/31/2006 23,198 28,036
8/31/2007 25,338 29,897
For the year ended August 31, 2007, the Small Cap Value Fund returned 9.22%
compared to 6.64% for the Russell 2000(R) Value Index.
*The Russell 2000(R) Value Index measures the performance of those Russell 2000
companies with lower price-to-book ratios and lower forecasted growth values.
Average Annual Total Return
- -------------------------------
1 Year 5 Years Since Inception*
- -------------------------------
9.22% 15.24% 10.96%
- -------------------------------
*Inception date of the Fund: September 21, 1998
Past performance is not predictive of future performance. The performance data
quoted represents past performance; past performance does not guarantee future
results; the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost; current performance may be lower or higher than
the performance data quoted.
The Fund's returns reflect investment management fees and other Fund expenses.
The Fund's returns do not reflect charges included in the Variable Annuity
Contract or Qualified Retirement Plan for mortality and expense guarantees,
administrative fees or surrender charges.
142
VALIC Company II Socially Responsible Fund
COMPARISON: FUND VS. INDEX
- --------------------------------------------------------------------------------
MANAGEMENT OVERVIEW
A discussion with AIG Global Investment Corp.
The Socially Responsible Fund posted a return of 14.22% for the twelve-month
period ending August 31, 2007, compared to a return of 15.13% for the S&P
500(R) Index.
The underperformance is primarily due to sector weightings. Over the past year,
the sector that had the greatest negative impact on performance was the
financials sector. Financials is a sector that has very little constraints due
to the social mandate. As a result, the Fund is usually overweight financials
and with the sub-prime and credit concerns over the past year the Fund
suffered. The Fund's performance was enhanced by stock selection. For example,
Apple Computer increased by over 100% for the year. Legal activities in the
healthcare space had a negative impact on the Fund's performance. For example,
Amgen decreased by 26% for the year.
Growth of $10,000 Investment
[CHART]
Socially
Responsible Fund S & P 500/R/ Index*
---------------- -------------------
9/21/1998 $10,000 $10,000
9/30/1998 9,925 9,937
8/31/1999 12,783 13,057
8/31/2000 14,672 15,188
8/31/2001 11,087 11,484
8/31/2002 9,019 9,417
8/31/2003 10,153 10,553
8/31/2004 11,138 11,762
8/31/2005 12,346 13,238
8/31/2006 13,601 14,413
8/31/2007 15,534 16,595
For the year ended August 31, 2007, the Socially Responsible Fund returned
14.22% compared to 15.13% for the S&P 500(R) Index.
*The S&P 500(R) Index consists of 500 stocks chosen for market size, liquidity,
and industry group representation. It is a market-value weighted index with
each stock's weight in the index proportionate to its market value.
Average Annual Total Return
- -------------------------------
1 Year 5 Years Since Inception*
- -------------------------------
14.22% 11.49% 5.05%
- -------------------------------
*Inception date of the Fund: September 21, 1998
Past performance is not predictive of future performance. The performance data
quoted represents past performance; past performance does not guarantee future
results; the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost; current performance may be lower or higher than
the performance data quoted.
The Fund's returns reflect investment management fees and other Fund expenses.
The Fund's returns do not reflect charges included in the Variable Annuity
Contract or Qualified Retirement Plan for mortality and expense guarantees,
administrative fees or surrender charges.
143
VALIC Company II Strategic Bond Fund
COMPARISON: FUND VS. INDEX
- --------------------------------------------------------------------------------
MANAGEMENT OVERVIEW
A discussion with AIG Global Investment Corp.
The Strategic Bond Fund posted a return of 4.32% for the twelve-month period
ending August 31, 2007, compared to a return of 5.26% for the Lehman Brothers
U.S. Aggregate Index.
Specific security selection proved once again to be a primary driver of returns
in the Fund. Each asset class is managed from a bottom-up perspective which
places a high degree of weight on the manager's ability to select the best
performing securities available. Top performing securities for the year
included Norway and Columbia sovereigns and Calpine Corporation. Poor
performers included Venezuela and Argentina sovereigns and Le-Natures.
Country selection had an impact on returns in both emerging markets and
non-dollar investment grade sectors. Columbia, Brazil, Norway and Canada proved
to be positive contributors to the yearly return while Germany, Venezuela, and
Argentina proved to be negative drags on yearly returns.
Growth of $10,000 Investment
[CHART]
Strategic Lehman Brother
Bond Fund U.S. Aggregrate Index*
--------- ----------------------
9/21/1998 $10,000 $10,000
9/30/1998 10,119 10,111
8/31/1999 10,409 9,958
8/31/2000 11,286 10,709
8/31/2001 11,951 12,033
8/31/2002 12,326 13,009
8/31/2003 14,511 13,576
8/31/2004 16,021 14,408
8/31/2005 17,873 15,006
8/31/2006 18,900 15,262
8/31/2007 19,716 16,065
For the year ended August 31, 2007, the Strategic Bond Fund returned 4.32%
compared to 5.26% for the Lehman Brothers U.S. Aggregate Index.
*The Lehman Brothers U.S. Aggregate Index covers the U.S. investment grade
fixed rate bond market, with index components for government and corporate
securities, mortgage pass-through securities, and asset-backed securities.
Average Annual Total Return
- -------------------------------
1 Year 5 Years Since Inception*
- -------------------------------
4.32% 9.85% 7.89%
- -------------------------------
*Inception date of the Fund: September 21, 1998
Past performance is not predictive of future performance. The performance data
quoted represents past performance; past performance does not guarantee future
results; the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost; current performance may be lower or higher than
the performance data quoted.
The Fund's returns reflect investment management fees and other Fund expenses.
The Fund's returns do not reflect charges included in the Variable Annuity
Contract or Qualified Retirement Plan for mortality and expense guarantees,
administrative fees or surrender charges.
144
VALIC Company II
- --------------------------------------------------------------------------------
BOARD OF TRUSTEES
Thomas J. Brown
Judith L. Craven
William F. Devin
Timothy J. Ebner
Gustavo E. Gonzales, Jr.
Peter A. Harbeck
John W. Lancaster
Kenneth J. Lavery
Ben H. Love
John E. Maupin, Jr.
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
INVESTMENT ADVISER
The Variable Annuity Life Insurance Company (VALIC)
2929 Allen Parkway
Houston, Texas 77019
INVESTMENT SUBADVISERS
AIG Global Investment Corp.
70 Pine Street
New York, New York 10270
AIG SunAmerica Asset Management Corp.
Haborside Financial Center
3200 Plaza 5
Jersey City, New Jersey 07311
A I M Capital Management, Inc.
11 Greenway Plaza
Houston, Texas 77046
Bridgeway Capital Management, Inc.
5615 Kirby Dr., Suite 518
Houston, TX 77005
FAF Advisors, Inc.
800 Nicollet Mall
Minneapolis, Minnesota 55402
Franklin Advisers, Inc.
One Franklin Parkway
San Mateo, California 94403-1906
JPMorgan Investment Advisors, Inc.
1111 Polaris Parkway
Columbus, Ohio 43271-0211
SSgA Funds Management, Inc.
State Street Financial Center
One Lincoln Street
Boston, Massachusetts 02111-2900
Wellington Management Co. LLP
75 State Street
Boston, Massachusetts 02109
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
5 Houston Center
1401 McKinney Street, Suite 1200
Houston, Texas 77010
TRANSFER AND SHAREHOLDER
SERVICE AGENT
The Variable Annuity Life
Insurance Company (VALIC)
2929 Allen Parkway
Houston, Texas 77019
OFFICERS
Evelyn M. Curran,
President and Principal Executive Officer
John Packs,
Vice President and Senior Investment Officer
Gregory R. Kingston,
Treasurer and Principal Financial Officer
Nori L. Gabert,
Vice President, Chief Legal Officer and Secretary
Gregory N. Bressler,
Vice President
Cynthia A. Gibbons,
Vice President and Chief Compliance Officer
Donna Handel,
Vice President and Assistant Treasurer
Kathryn A. Pearce,
Assistant Treasurer
Mark Matthes,
Assistant Secretary
Matthew J. Hackethal,
Anti-Money Laundering Compliance Officer
DISCLOSURE OF QUARTERLY FUND PORTFOLIO HOLDINGS
VALIC Company II is required to file its complete schedule of portfolio
holdings with the U.S. Securities and Exchange Commission for its first and
third fiscal quarters on Form N-Q. VALIC Company II's Forms N-Q are available
on the U.S. Securities and Exchange Commission's website at www.sec.gov. You
can also review and obtain copies of Forms N-Q at the U.S. Securities and
Exchange Commission's Public Reference Room in Washington, DC (information on
the operation of the Public Reference Room may be obtained by calling
1-800-SEC-0330).
VOTING PROXIES ON VALIC COMPANY II PORTFOLIO SECURITIES
A description of the policies and procedures that VALIC Company II uses to
determine how to vote proxies related to securities held in the Fund's
portfolios, which is available in VALIC Company II's Statement of Additional
Information, may be obtained without charge upon request, by calling
800-448-2542. This information is also available from the EDGAR database on the
U.S. Securities and Exchange Commission's website at http://www.sec.gov.
PROXY VOTING RECORD ON VALIC COMPANY II PORTFOLIO SECURITIES
Information regarding how VALIC Company II voted proxies relating to
securities held in the VALIC Company II Funds portfolios during the most recent
twelve month period ended June 30, is available, once filed with the U.S.
Securities and Exchange Commission without charge, upon request, by calling
800-448-2542 or on the U.S. Securities and Exchange Commission's website at
http://www.sec.gov.
This report is for the information of the shareholders and variable contract
owners investing in VALIC Company II. It is authorized for distribution to
other persons only when preceded or accompanied by an effective prospectus
which contains information on how to purchase shares and other pertinent
information.
If you would like further information about this material or products issued
by VALIC or American General Life Insurance Company, please contact your
financial professional.
AIG VALIC ONLINE
Account Access
You must establish a Manage your account on the Web through AIG VALIC
Personal Identification Online!
Number (PIN) before
using the automated Enjoy quick, easy and secure access -- now or anytime.
account services. Go to www.aigvalic.com and click on LOGIN in the "AIG
VALIC Online" Section.
Your PIN is valid for You'll find these exciting features:
both AIG VALIC by Phone
at 1.800.448.2542 . View your account portfolio including values
and AIG VALIC Online. . View, download or print account and transaction
confirmation statements
. View current and historical fund performance and
unit values
. View or download transaction history
. View your financial advisor's contact information
. Update or reset your Personal Identification Number
(PIN)
. Change your contact information such as telephone,
address or e-mail
. Initiate account transactions including:
(greater than)Allocation changes
(greater than)Transfer money among investment options
(greater than)
Rebalance account to your desired allocation mix
. Loan modeling
. Request forms for a variety of services
. Ability to display information from other accounts
. Enroll in the electronic document delivery service
Start exploring AIG VALIC Online today by establishing
a Personal Identification Number (PIN)!
To set up a PIN through AIG VALIC Online:
. Go to www.aigvalic.com
. Click on LOGIN in the "AIG VALIC Online" Section
. Click "I am a new user"
. Enter the information required to establish a new
PIN
. Click "I Agree" to accept AIG VALIC'S access
agreement (required)
. Verify and/or update your address, e-mail and
telephone number information
. Click "Continue" to update your record and proceed
to the Client Summary screen
Your PIN setup is complete when the Client Summary
screen appears.
This PIN is valid for both AIG VALIC by Phone at
1-800-448-2542 and AIG VALIC Online.
AIG VALIC by Phone is AIG VALIC'S toll-free automated
phone line providing 24-hour access to your account.
---------------
VALIC Company II PRSRT STD
P.O. Box 3206 U.S. POSTAGE
Houston, Texas 77253-3206 PAID
LANCASTER, PA
PERMIT NO. 1765
---------------
VL 11288 VER 08/07
Item 2. Code of Ethics.
VALIC Company II ("the Registrant") has adopted a Code of Ethics applicable to
its Principal Executive and Principal Accounting Officers pursuant to Section
406 of the Sarbanes-Oxley Act of 2002.
Item 3. Audit Committee Financial Expert.
The Registrant's Board of Trustees has determined that Thomas J. Brown qualifies
as an audit committee financial expert, as to be defined in instructions to item
3(a)of Form N-CSR. Mr. Brown is considered "independent" for purposes of
item 3(a)(2) of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a)-(d) Aggregate fees billed to the Registrant for the last two fiscal
years for professional services rendered by the Registrant's
principal accountant were as follows:
2006 2007
Audit Fees $267,750 $277,500
Audit-Related Fees $ 85,194 $ 0
Tax Fees $ 60,730 $ 66,959
All Other Fees $ 0 $ 0
Audit Fees include amounts related to the audit of the
Registrant's annual financial statements and services normally
provided by the principal accountant in connection with
statutory and regulatory filings. Audit-Related Fees principally
include a SAS No. 100 review of the Registrant's Semiannual
Shareholder Report. Tax Fees principally include tax compliance,
tax advice, tax planning and preparation of tax returns.
Aggregate fees billed to the investment adviser and Adviser
Affiliates(as defined below in Item 4(e)) that are required to
be pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X for the last two fiscal years for services
rendered by the Registrant's principal accountant were as
follows:
2006 2007
(b)Audit-Related Fees $ 0 $ 0
(c)Tax Fees $ 0 $ 0
(d)All Other Fees $2,211,681 $2,362,788
(e)
(1) The Registrant's audit committee pre-approves
all audit services provided by the
Registrant's principal accountant for the
Registrant and all non -audit services provided
by the Registrant's principal accountant for the
Registrant, its investment adviser and any
entity controlling, controlled by, or under
common control with the investment adviser
("Adviser Affiliate") that provides ongoing
services to the Registrant, if the engagement
by the investment adviser or Adviser Affiliate
relates directly to the operations and financial
reporting of the Registrant. The audit committee
has not presently established any pre-approval
policies and procedures that permit the pre-
approval of the services other than by the
full audit committee. Certain de minimis
exceptions are allowed for the non-audited
services in accordance with Rule 2-01 (c)(7)(i)
(c)of regulation S-X as set forth in the
Registrant's audit committee charter.
(2) No services included in (b)-(d)above in
connection with fees billed to the Registrant or
the investment adviser or Adviser Affiliates
were approved pursuant to paragraph (c)(7)(i)(C)
of Rule 2-01 of Regulation S-X.
(f) Not Applicable.
(g) The aggregate fees billed for the most recent fiscal
year and the preceding fiscal year by the Registrant's
principal accountant for non-audit services rendered to
the Registrant, its investment adviser, and Adviser
Affiliates that provides ongoing services to the
Registrant for 2007 and 2006 were $2,448,454 and
$2,322,603, respectively.
(h) Non-audit services rendered to the Registrant's
investment adviser and any Adviser Affiliate that were
not pre-approved pursuant to Paragraph (c)(7)(ii) of
Rule 2-01 of Regulation S-X were considered by the
Registrant's audit committee as to whether they were
compatible with maintaining the principal accountant's
independence.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Included in Item 1 to the Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There were no material changes to the procedures by which shareholders may
recommend nominees to the registrant's Board of Trustees that were implemented
after the registrant last provided disclosure in response to the requirements of
Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407)(as required by 22(b)(15))
of Schedule 14A (17 CFR 240.14a-101), or this Item 10.
Item 11. Controls and Procedures.
(a) An evaluation was performed within 90 days of the filing of this
report, under the supervision and with the participation of the
registrant's management, including the President and Treasurer,
of the effectiveness of the design and operation of the
registrant's disclosure controls and procedures as defined under
Rule 30a-3(c) under the Investment Company Act of 1940
(17 CFR 270.30a-3(c)). Based on that evaluation, the
Registrant's management, including the President and Treasurer,
concluded that the Registrant's disclosure controls and
procedures are effective.
(b) There was no change in the Registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the
Investment Company Act of 1940 (17 CFR 270.30a-3(d))) that
occurred during the last fiscal quarter of the period covered
by this report that has materially affected, or is reasonably
likely to materially affect, the Registrant's internal contro1
over financial reporting.
Item 12. Exhibits.
(a) (1) Code of Ethics applicable to its Principal Executive and
Principal Accounting Officers pursuant to Section 406 of the
Sarbanes-Oxley Act of 2002 attached hereto as Exhibit
99.406.Code of Ethics.
(2) Certification pursuant to Rule 30a-2 under the Investment
Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as
Exhibit 99.CERT.
(3) Not applicable.
(b) Certification pursuant to Rule 30a-2(b) under the Investment
Company Act of 1940 (17 CFR 270.30a-2(a)) and Section 906 of the
Sarbanes-Oxley Act of 2002 attached hereto as Exhibit 99.906.
CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
VALIC Company II
By: /s/ Evelyn M. Curran
----------------------------
Evelyn M. Curran
President
Date: November 8, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By: /s/ Evelyn M. Curran
----------------------------
Evelyn M. Curran
President
Date: November 8, 2007
By: /s/ Gregory R. Kingston
----------------------------
Gregory R. Kingston
Treasurer
Date: November 8, 2007