Strategy. The Fund seeks to achieve its objectives by investing under normal conditions approximately 70% to 90% of its assets in shares of the Underlying Funds, which are portfolios of VALIC Company I, (the Fund-of-Funds Component) and 10% to 30% of its assets in a portfolio of derivative instruments, fixed income securities and short-term investments (the Overlay Component). The Fund-of-Funds Component will allocate approximately 50% to 80% of its assets to Underlying Funds investing primarily in equity securities and 20% to 50% of its assets to Underlying Funds investing primarily in fixed income securities and short-term investments, which may include mortgage- and asset-backed securities, to seek capital appreciation and generate income. The Variable Annuity Life Insurance Company is the Funds investment … Show more… The Fund seeks to achieve its objectives by investing under normal conditions approximately 70% to 90% of its assets in shares of the Underlying Funds, which are portfolios of VALIC Company I, (the Fund-of-Funds Component) and 10% to 30% of its assets in a portfolio of derivative instruments, fixed income securities and short-term investments (the Overlay Component). The Fund-of-Funds Component will allocate approximately 50% to 80% of its assets to Underlying Funds investing primarily in equity securities and 20% to 50% of its assets to Underlying Funds investing primarily in fixed income securities and short-term investments, which may include mortgage- and asset-backed securities, to seek capital appreciation and generate income. The Variable Annuity Life Insurance Company is the Funds investment adviser (VALIC or the Adviser). The Fund is sub-advised by AllianceBernstein L.P. (AllianceBernstein). The Adviser will determine the allocation between the Fund-of-Funds Component and the Overlay Component. AllianceBernstein is responsible for managing the Fund-of-Funds Components investment in Underlying Funds, so it will determine the target allocation between Underlying Funds that invest primarily in equity securities and Underlying Funds that invest primarily in fixed income securities. AllianceBernstein performs an investment analysis of possible investments for the Fund and selects the universe of permitted Underlying Funds as well as the allocation to each Underlying Fund. The Adviser may change the Funds asset allocation between the Fund-of-Funds Component and the Overlay Component from time to time without prior notice. AllianceBernstein may change the Fund-of-Funds Components allocation among the Underlying Funds. The Fund-of-Funds Component seeks to achieve capital appreciation primarily through its investments in Underlying Funds that invest in equity securities of both U.S. and non-U.S. companies of all market capitalizations . The Fund normally does not expect to have more than 25% of its total assets allocated to Underlying Funds investing primarily in foreign securities, and no more than 5% of its total assets to Underlying Funds investing primarily in emerging markets (an emerging market is any country that is included in the MSCI Emerging Markets Index). The Fund-of-Funds Component seeks to achieve current income through its investments in Underlying Funds that primarily invest in fixed income securities, including both U.S. and foreign investment grade securities, but the Fund normally does not expect to have more than 5% of total assets allocated to Underlying Funds investing primarily in high-yield, high-risk bonds (commonly known as junk bonds), which are considered speculative. A portion of the Funds indirect holdings may also include money market securities. Fund cash flows are expected to be used to maintain or move Underlying Fund exposure close to target allocations, but sales and purchases of Underlying Funds may also be used to change or remain near target allocations. The Overlay Component comprises the remaining 10%-30% of the Funds total assets. AllianceBernstein is responsible for managing the Overlay Component, which includes management of the derivative instruments, fixed income securities and short-term investments. AllianceBernstein may invest the Overlay Component in derivative instruments to increase or decrease the Funds overall net equity exposure and, therefore, its volatility and return potential. Volatility is a statistical measurement of the magnitude of up and down fluctuations in the value of a financial instrument or index over time. High levels of volatility may result from rapid and dramatic price swings. Through its use of derivative instruments, AllianceBernstein may adjust the Funds net equity exposure down to a minimum of 25% or up to a maximum of 100%, although the Funds average net equity exposure over long term periods is expected to be approximately 60%-65%. The Funds net equity exposure is primarily adjusted through the use of derivative instruments, such as stock index futures and stock index options, and to a lesser extent options on stock index futures and stock index swaps, as the allocation among Underlying Funds in the Fund-of-Funds Component is expected to remain fairly stable. For example, when the market is in a state of higher volatility, AllianceBernstein may decrease the Funds net equity exposure by taking a short position in derivative instruments. A short sale involves the sale by the Fund of a security or instrument it does not own with the expectation of purchasing the same security or instrument at a later date at a lower price. The operation of the Overlay Component may therefore expose the Fund to leverage. Because derivative instruments may be purchased with a fraction of the assets that would be needed to purchase the equity securities directly, the remainder of the assets in the Overlay Component will be invested in a variety of fixed income securities. The Funds performance may be lower than similar Funds that do not seek to manage their equity exposure. If AllianceBernstein increases the Funds net equity exposure and equity markets decline, the Fund may underperform traditional or static allocation funds. Likewise, if AllianceBernstein reduces the Funds net equity exposure and equity markets rise, the Fund may also underperform traditional or static allocation funds. Efforts to manage the Funds volatility may also expose the Fund to additional costs. In addition, AllianceBernstein will seek to reduce exposure to certain downside risks by purchasing equity index put options that aim to reduce the Fund exposure to certain severe and unanticipated market events that could significantly detract from returns. In addition to managing the Funds overall net equity exposure as described above, AllianceBernstein will, within established guidelines, manage the Overlay Component in an attempt to generate income, manage Fund cash flows and liquidity needs, and manage collateral for the derivative instruments. These investments may include Underlying Funds that invest in equity securities of both U.S. and non-U.S. companies of all market capitalizations . At least 50% of the Overlay Components fixed income investments will be invested in U.S. Government securities, cash, repurchase agreements, and money market securities. A portion of the Overlay Component may be held in short-term investments as needed, in order to manage daily cash flows to or from the Fund or to serve as collateral. AllianceBernstein may also invest the Overlay Component in derivative instruments to generate income and manage Funds cash flows and liquidity needs. The following chart sets forth the target allocations of the Fund on or about May 31, 2025, to equity and fixed income Underlying Funds and securities. These target allocations represent the Funds current goal for the allocation of its assets and does not take into account any change in net equity exposure from use of derivatives in the Overlay Component. The Funds actual allocations could vary substantially from the target allocations due to market valuation changes, changes in the target allocations and AllianceBernsteins management of the Overlay Component in response to volatility changes. Asset Class % of Fund-of-Fund % of Total Fund Equity 75% 60% U.S. Large Cap 58.2% 46.6% U.S. Small and Mid Cap 5.8% 4.7% Foreign Equity 9.5% 7.5% Alternatives (REITs) 1.5% 1.2% Fixed Income 25% 20% U.S. Investment Grade 23.5% 18.8% U.S. High Yield 1.0% 0.8% Foreign Fixed Income 0.5% 0.4% 100.0% 80.0% Show less