<PAGE> 1
================================================================================
PRESIDENT'S LETTER 1
================================================================================
TO OUR PARTICIPANTS:
We are pleased to present the December 31, 1997, Annual Report to Contract
Owners for Separate Account A of The Variable Annuity Life Insurance Company. A
summary of the change in unit value for each fund and each product series
(Portfolio Director 1, Portfolio Director 2, Independence Plus, Group Unit
Purchase and Impact) appears on page two.
During 1997 equity markets produced returns well above those of 1996. The stock
market, as measured by the Standard & Poor's 500 Index (S&P 500(R)) had a total
return of 33.36%. The mid-sized companies followed closely, with the Standard &
Poor's MidCap 400 (MidCap 400) earning 32.24% and the Russell 2000(R) producing
22.36%.
The average mutual fund returns showed greater variability than that evidenced
by the broader averages. In the large capitalization area, growth and value were
rather close with one year returns of 26.45% and 26.60% respectively. However,
the mid-cap sector experienced wide variability with growth returning 15.53% and
value returning 26.80%. A somewhat similar experience occurred in the small-cap
arena where growth funds provided average returns of 14.42% while the value
sector returned 27.75%. The orientation of any specific fund was a major factor
in the performance differences.
The yield on the 30-year treasury bond opened the year at 6.64% and rose during
the spring on fears the strengthening economy would force the Federal Reserve
(Fed) to push up short-term rates. On March 25, the Fed raised the Fed Funds
rate 0.25%; subsequently on April 14, the 30-year T-bond yield hit 7.17%. Later
in April, as fears of further rate hikes subsided and inflation fell, yields
began to fall and bond prices rose.
The second half of the year, marked by low inflation and little fear of Fed
action, was a good period for the fixed-income investor. A strong dollar, aided
by the turmoil and uncertainty in Asia, encouraged investors to flee to the
safety of U.S. bonds.
The European markets were positive throughout the year as home market and cross
border mergers boosted returns and dollar-sensitive exporters had strong sales
and profits. Asian markets were decimated in the fourth quarter as a fearsome
currency, banking and debtor crisis started in Thailand and spread to most
Pacific Rim economies.
Throughout the developed world international bond prices rallied and yields
declined to thirty year lows. Inflation was minimal and most nations pursued
sound fiscal policy. The Asian crisis helped as investors bought high quality
government bonds as a safe haven asset allocation.
If you have any questions about your contract or this report, we would be happy
to hear from you.
Respectfully,
/s/ THOMAS L. WEST, JR.
Thomas L. West, Jr., President and CEO
The Variable Annuity Life Insurance Company
February 6, 1998
This report is not authorized for distribution as advertising or sales
literature. This report is published exclusively for the information of the
variable annuity contract owners of the Company in accordance with section 30
(d) of the Investment Company Act of 1940.
"S&P 500(R)" and "Standard & Poor's MidCap 400 Index" are trademarks Of
Standard & Poor's Corporation (S&P). The Stock Index Fund and MidCap Index Fund
are not sponsored, endorsed, sold or promoted by S&P and S&P makes no
representation regarding the advisability of investing in the funds. The Russell
2000(R) Index is a trademark / service mark of the Frank Russell Company.
Russell(TM) is a trademark of the Frank Russell Company.
<PAGE> 2
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2 PRESIDENT'S LETTER
================================================================================
<TABLE>
<CAPTION>
ONE YEAR
TOTAL RETURNS
GROUP PORTFOLIO PORTFOLIO FOR YEAR ENDING
UNIT INDEPENDENCE DIRECTOR DIRECTOR DECEMBER 31,
PURCHASE IMPACT PLUS 1 2 ------------------
DIVISION DIVISION DIVISION DIVISION DIVISION 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INTERNATIONAL GROWTH
AGSPC International Equities Fund........... -- -- 11 11 -- 1.18% 5.75%
Putnam Global Growth Fund................... -- -- -- -- 28 12.20 15.37
Templeton Foreign Fund...................... -- -- -- -- 32 5.57 16.74
Templeton International Fund................ -- -- -- 20 -- 12.54 22.50
AGGRESSIVE GROWTH
AGSPC Science & Technology Fund............. -- -- -- 17 17 1.57 12.68
AGSPC Small Cap Index Fund.................. -- -- 14 14 -- 21.18 15.57
Dreyfus Small Cap Portfolio................. -- -- -- 18 -- 15.37 15.14
Putnam New Opportunities Fund............... -- -- -- -- 26 21.31 9.70
Putnam OTC & Emerging Growth Fund........... -- -- -- -- 27 9.08 3.53
GROWTH
AGSPC Growth Fund........................... -- -- -- 15 15 19.80 18.18
AGSPC MidCap Index Fund..................... -- 4 4 4 -- 30.45 17.61
American Century -
Twentieth Century Ultra Fund............. -- -- -- -- 31 21.74 12.43
Founders Growth Fund........................ -- -- -- -- 30 25.25 15.35
GROWTH & INCOME
AGSPC Growth & Income Fund.................. -- -- -- 16 -- 22.60 22.10
AGSPC Social Awareness Fund................. -- -- 12 12 12 32.52 22.75
AGSPC Stock Index Fund ..................... 10A, 10B 10D 10C 10C 10C 31.77 21.53
Neuberger&Berman Guardian Trust............. -- -- -- -- 29 16.66 16.54
Scudder Growth and Income Fund.............. -- -- -- -- 21 28.80 20.63
Vanguard/Windsor II......................... -- -- -- -- 24 30.70 22.56
BALANCED GROWTH - INTERNATIONAL
Templeton Asset Allocation Fund............. -- -- -- 19 -- 14.07 17.40
BALANCED GROWTH - DOMESTIC
AGSPC Asset Allocation Fund................. -- 5 5 5 -- 21.40 9.99
Vanguard/Wellington Fund.................... -- -- -- -- 25 21.65 14.69
CURRENT INCOME
AGSPC Intl Government Bond Fund............. -- -- 13 13 13 (5.79) 3.36
CURRENT INCOME & CAPITAL PRESERVATION
AGSPC Capital Conservation Fund............. -- 1 7 7 -- 7.49 0.75
AGSPC Government Securities Fund............ -- -- 8 8 -- 7.83 0.90
Vanguard Fixed Income Securities Fund -
Long-Term Corporate Portfolio............ -- -- -- -- 22 12.32 (0.72)
Vanguard Fixed Income Securities Fund -
Long-Term U. S. Treasury Portfolio....... -- -- -- -- 23 12.44 (3.08)
LIQUIDITY & CAPITAL PRESERVATION
AGSPC Money Market Fund..................... -- 2 6 6 6 4.13 3.97
</TABLE>
The total returns displayed show value after all management, administration fees
and fund expenses and do not include potential sales charges or maintenance
fees, if applicable. For total return information over a longer period, see the
Portfolio Director 1 and 2 prospectuses. The performance shown represents past
performance. The 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. Past performance does not guarantee future returns.
<PAGE> 3
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FINANCIAL STATEMENTS 3
================================================================================
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
December 31, 1997
ASSETS: ALL DIVISIONS
---------------
<S> <C>
Total investment in shares of mutual funds, at market
(cost $8,087,103,381) ........................................ $10,324,166,205
Balance due from VALIC general account .......................... 3,148,203
---------------
NET ASSETS ...................................................... $10,327,314,408
===============
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts
(Net of applicable contract loans-- partial
withdrawals with right of reinvestment) ............... $10,307,955,440
Reserves for annuity contracts on benefit ....................... 19,358,968
---------------
TOTAL CONTRACT OWNER RESERVES ................................... $10,327,314,408
===============
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
INVESTMENT INCOME: ALL DIVISIONS
---------------
<S> <C>
Dividends from mutual funds ..................................... $ 121,206,942
---------------
EXPENSES:
Mortality and expense charges ................................... 92,522,835
Reimbursement of expenses (Note C) .............................. (2,073,989)
===============
Total expenses ......................................... 90,448,846
===============
NET INVESTMENT INCOME ........................................... 30,758,096
---------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments ................................ 161,505,567
Capital gains distributions from mutual funds ................... 289,703,358
Net unrealized appreciation of investments during the year ...... 1,001,756,337
===============
Net realized and unrealized gain on investments ........ 1,452,965,262
===============
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................ $ 1,483,723,358
===============
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS ALL DIVISIONS
-------------------------------------
1997 1996
---------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income .................................................................... $ 30,758,096 $ 31,159,663
Net realized gain on investments ......................................................... 161,505,567 96,618,063
Capital gains distributions from mutual funds ............................................ 289,703,358 175,625,286
Net unrealized appreciation of investments during the year ............................... 1,001,756,337 539,282,575
---------------- ----------------
Increase in net assets resulting from operations ................................ 1,483,723,358 842,685,587
================ ================
PRINCIPAL TRANSACTIONS:
Purchase payments ........................................................................ 1,798,552,034 1,307,543,093
Surrenders of accumulation units by terminations, withdrawals, and maintenance fees ...... (328,105,329) (210,060,345)
Annuity benefit payments ................................................................. (2,273,125) (1,897,648)
Amounts transferred from VALIC general account ........................................... 518,857,110 647,659,402
---------------- ----------------
Increase in net assets resulting from principal transactions .................... 1,987,030,690 1,743,244,502
---------------- ----------------
TOTAL INCREASE IN NET ASSETS ............................................................. 3,470,754,048 2,585,930,089
================ ================
NET ASSETS:
Beginning of year ........................................................................ 6,856,560,360 4,270,630,271
---------------- ----------------
End of year .............................................................................. $ 10,327,314,408 $ 6,856,560,360
================ ================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 4
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4 FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
AGSPC PUTNAM
INTERNATIONAL GLOBAL TEMPLETON TEMPLETON
STATEMENTS OF NET ASSETS EQUITIES GROWTH FOREIGN INTERNATIONAL
December 31, 1997 FUND FUND FUND FUND
DIVISION 11 DIVISION 28 DIVISION 32 DIVISION 20
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ............ $ 152,510,209 $ 58,836,553 $ 180,677,558 $ 731,342,182
Balance due (to) from VALIC general account ................ (509,427) (2,145) 174,443 (1,602,995)
------------- ------------- ------------- -------------
NET ASSETS ................................................. $ 152,000,782 $ 58,834,408 $ 180,852,001 $ 729,739,187
============= ============= ============= =============
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts (Net of applicable
contract loans -- partial withdrawals with
right of reinvestment) .................................. $ 151,837,305 $ 58,803,197 $ 180,817,115 $ 729,577,415
Reserves for annuity contracts on benefit .................. 163,477 31,211 34,886 161,772
------------- ------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES .............................. $ 152,000,782 $ 58,834,408 $ 180,852,001 $ 729,739,187
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
AMERICAN CENTURY - AGSPC AGSPC
TWENTIETH FOUNDERS GROWTH & SOCIAL
STATEMENTS OF NET ASSETS CENTURY ULTRA GROWTH INCOME AWARENESS
December 31, 1997 FUND FUND FUND FUND
DIVISION 31 DIVISION 30 DIVISION 16 DIVISION 12
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ............ $ 123,498,148 $ 170,135,993 $ 256,933,935 $ 243,460,767
Balance due (to) from VALIC general account ................ 270,241 332,238 162,040 119,205
------------- ------------- ------------- -------------
NET ASSETS ................................................. $ 123,768,389 $ 170,468,231 $ 257,095,975 $ 243,579,972
============= ============= ============= =============
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts (Net of
applicable contract loans -- partial withdrawals
with right of reinvestment) ............................. $ 123,739,369 $ 170,431,273 $ 257,042,890 $ 243,534,821
Reserves for annuity contracts on benefit .................. 29,020 36,958 53,085 45,151
------------- ------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES .............................. $ 123,768,389 $ 170,468,231 $ 257,095,975 $ 243,579,972
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
AGSPC AGSPC
STATEMENTS OF NET ASSETS TEMPLETON ASSET VANGUARD/ INTERNATIONAL
December 31, 1997 ASSET ALLOCATION ALLOCATION WELLINGTON GOVERNMENT
FUND FUND FUND BOND FUND
DIVISION 19 DIVISION 5 DIVISION 25 DIVISION 13
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ............ $ 316,804,111 $ 184,445,969 $ 155,754,286 $ 166,189,923
Balance due (to) from VALIC general account ................ 70,174 132,023 290,261 9,834
------------- ------------- ------------- -------------
NET ASSETS ................................................. $ 316,874,285 $ 184,577,992 $ 156,044,547 $ 166,199,757
============= ============= ============= =============
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts (Net of applicable
contract loans -- partial withdrawals with right of
reinvestment) ........................................... $ 316,576,446 $ 184,488,524 $ 156,028,597 $ 166,177,986
Reserves for annuity contracts on benefit .................. 297,839 89,468 15,950 21,771
------------- ------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES .............................. $ 316,874,285 $ 184,577,992 $ 156,044,547 $ 166,199,757
============= ============= ============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 5
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SEPARATE ACCOUNT A 5
================================================================================
<TABLE>
<CAPTION>
AGSPC AGSPC PUTNAM PUTNAM OTC & AGSPC
SCIENCE & SMALL CAP DREYFUS NEW EMERGING AGSPC MIDCAP
TECHNOLOGY INDEX SMALL CAP OPPORTUNITIES GROWTH GROWTH INDEX
FUND FUND PORTFOLIO FUND FUND FUND FUND
DIVISION 17 DIVISION 14 DIVISION 18 DIVISION 26 DIVISION 27 DIVISION 15 DIVISION 4
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 911,151,116 $ 230,728,350 $ 850,402,328 $ 164,603,317 $ 97,480,884 $ 941,261,746 $ 730,544,269
(1,489,662) (659,600) (578,020) 233,261 (24,754) 161,723 69,416
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 909,661,454 $ 230,068,750 $ 849,824,308 $ 164,836,578 $ 97,456,130 $ 941,423,469 $ 730,613,685
============== ============== ============== ============== ============== ============== ==============
$ 909,365,168 $ 229,944,880 $ 849,635,667 $ 164,825,889 $ 97,416,344 $ 941,014,035 $ 730,300,161
296,286 123,870 188,641 10,689 39,786 409,434 313,524
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 909,661,454 $ 230,068,750 $ 849,824,308 $ 164,836,578 $ 97,456,130 $ 941,423,469 $ 730,613,685
============== ============== ============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
NEUBERGER& SCUDDER
BERMAN GROWTH AND
AGSPC STOCK INDEX FUND GUARDIAN INCOME VANGUARD/
- ------------------------------------------------------------------------- TRUST FUND WINDSOR II
DIVISION 10A DIVISION 10B DIVISION 10C DIVISION 10D DIVISION 29 DIVISION 21 DIVISION 24
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 470,449,397 $ 36,956,225 $2,310,257,611 $ 49,705,360 $ 46,258,362 $ 135,121,244 $ 275,114,738
(666,014) (10,194) 69,889 (32,333) 48,461 263,157 282,461
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 469,783,383 $ 36,946,031 $2,310,327,500 $ 49,673,027 $ 46,306,823 $ 135,384,401 $ 275,397,199
============== ============== ============== ============== ============== ============== ==============
$ 456,754,846 $ 35,140,766 $2,308,562,536 $ 49,487,144 $ 46,292,017 $ 135,309,549 $ 275,307,672
13,028,537 1,805,265 1,764,964 185,883 14,806 74,852 89,527
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 469,783,383 $ 36,946,031 $2,310,327,500 $ 49,673,027 $ 46,306,823 $ 135,384,401 $ 275,397,199
============== ============== ============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
VANGUARD VANGUARD
AGSPC FIXED INCOME FIXED INCOME
GOVERNMENT SECURITIES FUND - SECURITIES FUND -
AGSPC CAPITAL CONSERVATION FUND SECURITIES L/T CORPORATE L/T U.S. TREASURY AGSPC MONEY MARKET FUND
- --------------------------------- FUND PORTFOLIO PORTFOLIO ---------------------------------
DIVISION 1 DIVISION 7 DIVISION 8 DIVISION 22 DIVISION 23 DIVISION 2 DIVISION 6
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 6,412,016 $ 55,381,861 $ 88,209,203 $ 20,418,430 $ 23,933,498 $ 4,526,778 $ 134,659,838
15,510 36,867 (41,915) 21,619 (295,284) 52,979 6,244,744
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 6,427,526 $ 55,418,728 $ 88,167,288 $ 20,440,049 $ 23,638,214 $ 4,579,757 $ 140,904,582
============== ============== ============== ============== ============== ============== ==============
$ 6,422,800 $ 55,418,728 $ 88,167,288 $ 20,440,049 $ 23,628,181 $ 4,579,757 $ 140,887,025
4,726 -- -- -- 10,033 -- 17,557
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 6,427,526 $ 55,418,728 $ 88,167,288 $ 20,440,049 $ 23,638,214 $ 4,579,757 $ 140,904,582
============== ============== ============== ============== ============== ============== ==============
</TABLE>
<PAGE> 6
================================================================================
6 FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
AGSPC PUTNAM
STATEMENTS OF OPERATIONS INTERNATIONAL GLOBAL TEMPLETON TEMPLETON
For the year ended December 31, 1997 EQUITIES GROWTH FOREIGN INTERNATIONAL
FUND FUND FUND FUND
DIVISION 11 DIVISION 28 DIVISION 32 DIVISION 20
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ............................. $ 3,295,464 $ 1,207,561 $ 4,714,678 $ 15,319,152
------------ ------------ ------------ ------------
EXPENSES:
Mortality and expense risk charge ....................... 1,749,279 476,142 1,434,900 8,274,446
Reimbursement of expenses (Note C) ...................... -- (94,544) (286,433) --
------------ ------------ ------------ ------------
Total expenses ....................................... 1,749,279 381,598 1,148,467 8,274,446
------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) ............................ 1,546,185 825,963 3,566,211 7,044,706
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments ................. 8,844,811 172,968 180,290 24,143,886
Capital gains distributions from mutual funds ........... 4,593,062 9,300,593 12,359,374 6,157,699
Net unrealized appreciation (depreciation)
of investments during the year ....................... (11,693,489) (7,591,166) (16,286,999) 33,826,345
------------ ------------ ------------ ------------
Net realized and unrealized gain (loss) on investments .. 1,744,384 1,882,395 (3,747,335) 64,127,930
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............................ $ 3,290,569 $ 2,708,358 $ (181,124) $ 71,172,636
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
AMERICAN CENTURY - AGSPC AGSPC
STATEMENTS OF OPERATIONS TWENTIETH FOUNDERS GROWTH & SOCIAL
For the year ended December 31, 1997 CENTURY ULTRA GROWTH INCOME AWARENESS
FUND FUND FUND FUND
DIVISION 31 DIVISION 30 DIVISION 16 DIVISION 12
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ............................. $ 46,196 $ 679,687 $ 1,001,521 $ 1,994,870
------------ ------------ ------------ ------------
EXPENSES:
Mortality and expense risk charge ....................... 807,995 1,135,755 2,207,637 1,713,350
Reimbursement of expenses (Note C) ...................... (128,556) (226,231) -- --
------------ ------------ ------------ ------------
Total expenses ....................................... 679,439 909,524 2,207,637 1,713,350
------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) ............................ (633,243) (229,837) (1,206,116) 281,520
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments ........................ 316,651 270,661 3,270,580 1,158,707
Capital gains distributions from mutual funds ........... 24,559,704 21,678,474 2,863,622 9,560,562
Net unrealized appreciation (depreciation)
of investments during the year ....................... (16,326,801) (6,466,051) 38,217,716 33,369,211
------------ ------------ ------------ ------------
Net realized and unrealized gain on investments ......... 8,549,554 15,483,084 44,351,918 44,088,480
------------ ------------ ------------ ------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............................ $ 7,916,311 $ 15,253,247 $ 43,145,802 $ 44,370,000
============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 7
================================================================================
SEPARATE ACCOUNT A 7
================================================================================
<TABLE>
<CAPTION>
AGSPC AGSPC PUTNAM PUTNAM OTC & AGSPC
SCIENCE & SMALL CAP DREYFUS NEW EMERGING AGSPC MIDCAP
TECHNOLOGY INDEX SMALL CAP OPPORTUNITIES GROWTH GROWTH INDEX
FUND FUND PORTFOLIO FUND FUND FUND FUND
DIVISION 17 DIVISION 14 DIVISION 18 DIVISION 26 DIVISION 27 DIVISION 15 DIVISION 4
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ -- $ 2,345,234 $ 905,477 $ -- $ -- $ 301,605 $ 6,916,070
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
8,359,405 2,023,765 9,406,874 1,313,649 899,240 7,852,023 6,380,871
-- -- (624,143) (261,355) (179,227) -- --
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
8,359,405 2,023,765 8,782,731 1,052,294 720,013 7,852,023 6,380,871
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(8,359,405) 321,469 (7,877,254) (1,052,294) (720,013) (7,550,418) 535,199
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
27,202,326 7,403,801 10,514,976 242,887 (47,363) 6,207,654 19,471,600
-- 17,477,318 47,781,324 3,494,327 -- 15,041,175 39,891,431
(11,571,856) 13,195,192 56,534,602 18,445,868 8,912,297 132,575,644 109,426,279
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
15,630,470 38,076,311 114,830,902 22,183,082 8,864,934 153,824,473 168,789,310
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 7,271,065 $ 38,397,780 $ 106,953,648 $ 21,130,788 $ 8,144,921 $ 146,274,055 $ 169,324,509
============= ============= ============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
NEUBERGER & SCUDDER
BERMAN GROWTH AND
AGSPC STOCK INDEX FUND GUARDIAN INCOME VANGUARD/
- ----------------------------------------------------------------------- TRUST FUND WINDSOR II
DIVISION 10A DIVISION 10B DIVISION 10C DIVISION 10D DIVISION 29 DIVISION 21 DIVISION 24
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ 6,376,307 $ 509,353 $ 28,785,179 $ 696,438 $ 163,304 $ 1,817,754 $ 4,925,455
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
4,346,291 195,472 19,442,387 474,226 328,578 854,677 1,887,542
-- (85,996) -- -- (65,533) (121,971) --
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
4,346,291 109,476 19,442,387 474,226 263,045 732,706 1,887,542
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
2,030,016 399,877 9,342,792 222,212 (99,741) 1,085,048 3,037,913
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
23,392,823 2,137,197 19,691,626 3,421,747 406,993 269,953 741,743
2,365,369 185,844 11,611,427 249,976 3,161,542 8,952,194 18,541,072
89,338,679 6,910,324 475,943,738 9,003,055 (1,574,737) 4,003,711 16,110,878
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
115,096,871 9,233,365 507,246,791 12,674,778 1,993,798 13,225,858 35,393,693
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 117,126,887 $ 9,633,242 $ 516,589,583 $ 12,896,990 $ 1,894,057 $ 14,310,906 $ 38,431,606
============= ============= ============= ============= ============= ============= =============
</TABLE>
<PAGE> 8
================================================================================
8 FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
AGSPC AGSPC
STATEMENTS OF OPERATIONS TEMPLETON ASSET VANGUARD/ INTERNATIONAL
For the year ended December 31, 1997 ASSET ALLOCATION ALLOCATION WELLINGTON GOVERNMENT
FUND FUND FUND BOND FUND
DIVISION 19 DIVISION 5 DIVISION 25 DIVISION 13
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ............................... $ 6,145,468 $ 5,564,660 $ 4,059,866 $ 6,334,867
------------ ------------ ------------ ------------
EXPENSES:
Mortality and expense risk charge ......................... 3,318,569 1,796,304 1,047,948 1,739,103
Reimbursement of expenses (Note C) ........................ -- -- -- --
------------ ------------ ------------ ------------
Total expenses ......................................... 3,318,569 1,796,304 1,047,948 1,739,103
------------ ------------ ------------ ------------
NET INVESTMENT INCOME ..................................... 2,826,899 3,768,356 3,011,918 4,595,764
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments ................... 982,063 5,941,975 713,048 (3,911,328)
Capital gains distributions from mutual funds ............. 11,661,872 10,546,782 7,375,024 136,607
Net unrealized appreciation (depreciation)
of investments during the year ......................... 13,366,704 14,486,554 3,998,391 (11,068,351)
------------ ------------ ------------ ------------
Net realized and unrealized gain (loss) on investments .... 26,010,639 30,975,311 12,086,463 (14,843,072)
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .............................. $ 28,837,538 $ 34,743,667 $ 15,098,381 $(10,247,308)
============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 9
================================================================================
SEPARATE ACCOUNT A 9
================================================================================
<TABLE>
<CAPTION>
VANGUARD VANGUARD
AGSPC FIXED INCOME FIXED INCOME
GOVERNMENT SECURITIES FUND - SECURITIES FUND -
AGSPC CAPITAL CONSERVATION FUND SECURITIES L/T CORPORATE L/T U.S. TREASURY AGSPC MONEY MARKET FUND
- -------------------------------- FUND PORTFOLIO PORTFOLIO --------------------------------
DIVISION 1 DIVISION 7 DIVISION 8 DIVISION 22 DIVISION 23 DIVISION 2 DIVISION 6
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ 408,376 $ 3,451,243 $ 5,076,640 $ 621,319 $ 708,134 $ 235,282 $ 6,599,782
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
63,768 537,683 846,335 114,664 140,570 46,769 1,306,618
-- -- -- -- -- -- --
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
63,768 537,683 846,335 114,664 140,570 46,769 1,306,618
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
344,608 2,913,560 4,230,305 506,655 567,564 188,513 5,293,164
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
23,005 (805,486) (985,278) 36,716 94,335 -- --
-- -- -- 156,984 -- -- --
90,579 1,739,391 3,130,717 643,127 1,066,785 -- --
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
113,584 933,905 2,145,439 836,827 1,161,120 -- --
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 458,192 $ 3,847,465 $ 6,375,744 $ 1,343,482 $ 1,728,684 $ 188,513 $ 5,293,164
============= ============= ============= ============= ============= ============= =============
</TABLE>
<PAGE> 10
================================================================================
10 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC
INTERNATIONAL EQUITIES
FUND PUTNAM GLOBAL GROWTH FUND
--------------------------------- ----------------------------------
DIVISION 11 DIVISION 28
--------------------------------- ----------------------------------
1997 1996 1997 1996*
------------- ------------- ------------- -------------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income (loss) ...................... $ 1,546,185 $ 1,591,421 $ 825,963 $ 354,551
Net realized gain on investments .................. 8,844,811 10,405,298 172,968 1,237
Capital gains distributions from mutual funds ..... 4,593,062 6,021,502 9,300,593 765,977
Net unrealized appreciation (depreciation)
of investments during the year ................. (11,693,489) (6,663,813) (7,591,166) (504,554)
------------- ------------- ------------- -------------
Increase (decrease) in net assets resulting
from operations ............................ 3,290,569 11,354,408 2,708,358 617,211
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................. 21,604,936 34,022,917 18,196,466 3,174,282
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .............. (8,085,959) (8,616,063) (812,004) (15,952)
Annuity benefit payments .......................... (10,712) (13,432) (1,799) --
Amounts transferred interdivision, and (to) from
VALIC general account .......................... (56,024,580) (45,208,742) 21,134,329 13,833,517
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ...... (42,516,315) (19,815,320) 38,516,992 16,991,847
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ........... (39,225,746) (8,460,912) 41,225,350 17,609,058
NET ASSETS:
Beginning of year ................................. 191,226,528 199,687,440 17,609,058 --
------------- ------------- ------------- -------------
End of year ....................................... $ 152,000,782 $ 191,226,528 $ 58,834,408 $ 17,609,058
============= ============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year .............. 156,226,314 172,564,018 16,648,600 --
Purchase payments ................................. 17,325,859 28,526,458 15,748,353 3,377,941
Surrenders ........................................ (6,456,410) (7,207,422) (675,628) (16,466)
Transfers -- interdivision and (to) from VALIC
general account ................................ (44,379,019) (37,656,740) 17,827,407 13,287,125
------------- ------------- ------------- -------------
Accumulation units end of year .................... 122,716,744 156,226,314 49,548,732 16,648,600
============= ============= ============= =============
<CAPTION>
DECEMBER 31: DECEMBER 31:
--------------------------------- ----------------------------------
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Accumulation unit value .......................... $ 1.237299 $ 1.222906 $ 1.186775 $ 1.057690
============= ============= ============= =============
Annuity unit value assuming a 3.5%
discount factor .................................. $ 0.931882 $ 0.953246 $ 1.127017 $ 1.039552
============= ============= ============= =============
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 11
================================================================================
SEPARATE ACCOUNT A 11
================================================================================
<TABLE>
<CAPTION>
AGSPC
AGSPC SMALL CAP
TEMPLETON FOREIGN FUND TEMPLETON INTERNATIONAL FUND SCIENCE & TECHNOLOGY FUND INDEX FUND
- ----------------------------- ------------------------------ ------------------------------ -----------------------------
DIVISION 32 DIVISION 20 DIVISION 17 DIVISION 14
- ----------------------------- ------------------------------ ------------------------------ -----------------------------
1997 1996* 1997 1996 1997 1996 1997 1996
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 3,566,211 $ 482,633 $ 7,044,706 $ (394,601) $ (8,359,405) $ (5,521,307) $ 321,469 $ 637,395
180,290 125 24,143,886 3,551,468 27,202,326 20,659,560 7,403,801 4,544,601
12,359,374 285,587 6,157,699 1,324,253 -- 32,117,202 17,477,318 11,216,991
(16,286,999) 1,121,790 33,826,345 78,888,709 (11,571,856) 15,569,750 13,195,192 7,711,563
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(181,124) 1,890,135 71,172,636 83,369,829 7,271,065 62,825,205 38,397,780 24,110,550
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
63,929,059 9,386,263 127,443,761 121,376,573 203,196,325 181,422,903 26,031,893 31,004,229
(2,231,179) (122,577) (21,498,080) (9,699,818) (27,661,660) (14,164,178) (8,101,115) (7,478,000)
(1,149) -- (6,675) (3,367) (17,353) (40,073) (6,381) (563)
79,881,321 28,301,252 22,603,734 84,599,243 15,908,913 105,706,951 (10,731,749) (15,148,966)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
141,578,052 37,564,938 128,542,740 196,272,631 191,426,225 272,925,603 7,192,648 8,376,700
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
141,396,928 39,455,073 199,715,376 279,642,460 198,697,290 335,750,808 45,590,428 32,487,250
39,455,073 -- 530,023,811 250,381,351 710,964,164 375,213,356 184,478,322 151,991,072
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 180,852,001 $ 39,455,073 $ 729,739,187 $ 530,023,811 $ 909,661,454 $ 710,964,164 $ 230,068,750 $ 184,478,322
============= ============= ============= ============= ============= ============= ============= =============
36,671,828 -- 378,581,949 219,124,926 315,809,646 187,862,232 103,320,842 98,335,995
55,441,897 10,156,940 81,609,273 97,229,761 88,179,109 84,389,312 13,258,805 18,844,484
(1,875,284) (116,295) (13,712,830) (7,187,616) (11,448,429) (6,049,987) (4,191,154) (4,305,572)
68,962,666 26,631,183 16,695,958 69,414,878 5,302,633 49,608,089 (6,109,416) (9,554,065)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
159,201,107 36,671,828 463,174,350 378,581,949 397,842,959 315,809,646 106,279,077 103,320,842
============= ============= ============= ============= ============= ============= ============= =============
<CAPTION>
DECEMBER 31: DECEMBER 31: DECEMBER 31: DECEMBER 31:
- ----------------------------- ------------------------------ ------------------------------ -----------------------------
1997 1996 1997 1996 1997 1996 1997 1996
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.135778 $ 1.075896 $ 1.575168 $ 1.399702 $ 2.285739 $ 2.250471 $ 2.163595 $ 1.785442
============= ============= ============= ============= ============= ============= ============= =============
$ 1.078588 $ 1.057446 $ 1.397849 $ 1.285567 $ 2.014348 $ 2.052612 $ 1.780625 $ 1.520786
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
<PAGE> 12
================================================================================
12 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
DREYFUS SMALL CAP PORTFOLIO PUTNAM NEW OPPORTUNITIES FUND
----------------------------- ------------------------------
DIVISION 18 DIVISION 26
----------------------------- ------------------------------
1997 1996 1997 1996*
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ...................................... $ (7,877,254) $ (5,324,689) $ (1,052,294) $ (91,811)
Net realized gain (loss) on investments ........................... 10,514,976 1,994,033 242,887 9,737
Capital gains distributions from mutual funds ..................... 47,781,324 19,221,026 3,494,327 333,297
Net unrealized appreciation (depreciation)
of investments during the year ................................. 56,534,602 56,124,110 18,445,868 (1,619,779)
------------- ------------- ------------- -------------
Increase (decrease) in net assets resulting from operations .. 106,953,648 72,014,480 21,130,788 (1,368,556)
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................. 152,268,343 168,538,535 51,769,269 11,510,093
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .............................. (25,995,894) (13,795,343) (2,540,805) (87,148)
Annuity benefit payments .......................................... (13,079) (8,413) (61) --
Amounts transferred interdivision, and (to) from VALIC general
account ........................................................ (41,774,769) 74,732,906 44,254,408 40,168,590
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ...................... 84,484,601 229,467,685 93,482,811 51,591,535
------------- ------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS ...................................... 191,438,249 301,482,165 114,613,599 50,222,979
NET ASSETS:
Beginning of year ................................................. 658,386,059 356,903,894 50,222,979 --
------------- ------------- ------------- -------------
End of year ....................................................... $ 849,824,308 $ 658,386,059 $ 164,836,578 $ 50,222,979
============= ============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year .............................. 428,883,250 267,735,219 53,001,699 --
Purchase payments ................................................. 92,300,416 117,376,109 49,995,408 13,342,250
Surrenders ........................................................ (15,764,818) (8,756,141) (2,517,125) (87,502)
Transfers -- interdivision and (to) from VALIC general account .... (25,567,323) 52,528,063 42,915,084 39,746,951
------------- ------------- ------------- -------------
Accumulation units end of year .................................... 479,851,525 428,883,250 143,395,066 53,001,699
============= ============= ============= =============
<CAPTION>
DECEMBER 31: DECEMBER 31:
---------------------------- ------------------------------
1997 1996 1997 1996*
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Accumulation unit value .......................................... $ 1.770622 $ 1.534694 $ 1.149453 $ 0.947573
============= ============= ============= =============
Annuity unit value assuming a 3.5% discount factor ............... $ 1.571300 $ 1.409551 $ 1.091574 $ 0.931324
============= ============= ============= =============
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 13
================================================================================
SEPARATE ACCOUNT A 13
================================================================================
<TABLE>
<CAPTION>
PUTNAM OTC & EMERGING AGSPC AGSPC AMERICAN CENTURY -
GROWTH FUND GROWTH FUND MIDCAP INDEX FUND TWENTIETH CENTURY ULTRA FUND
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
DIVISION 27 DIVISION 15 DIVISION 4 DIVISION 31
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
1997 1996* 1997 1996 1997 1996 1997 1996*
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (720,013) $ (87,360) $ (7,550,418) $ (2,278,501) $ 535,199 $ 1,513,296 $ (633,243) $ (37,059)
(47,363) 9,014 6,207,654 130,878 19,471,600 17,436,698 316,651 18,993
-- 2,846,114 15,041,175 11,891,551 39,891,431 33,690,174 24,559,704 884,238
8,912,297 (4,620,592) 132,575,644 58,161,783 109,426,279 33,029,566 (16,326,801) (659,907)
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
8,144,921 (1,852,824) 146,274,055 67,905,711 169,324,509 85,669,734 7,916,311 206,265
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
32,976,492 11,571,920 185,814,571 164,255,730 66,141,090 76,583,041 43,175,072 4,513,492
(1,887,137) (77,988) (24,997,689) (10,378,550) (24,993,718) (21,727,656) (1,444,132) (29,941)
(1,777) -- (18,116) (38,688) (20,499) (19,036) (950) --
14,456,676 34,125,847 (764,959) 172,227,639 (45,549,090) (55,201,966) 56,804,430 12,627,842
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
45,544,254 45,619,779 160,033,807 326,066,131 (4,422,217) (365,617) 98,534,420 17,111,393
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
53,689,175 43,766,955 306,307,862 393,971,842 164,902,292 85,304,117 106,450,731 17,317,658
43,766,955 -- 635,115,607 241,143,765 565,711,393 480,407,276 17,317,658 --
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
$ 97,456,130 $ 43,766,955 $941,423,469 $635,115,607 $730,613,685 $565,711,393 $123,768,389 $ 17,317,658
============================== ============================== ============================== ==============================
48,902,828 -- 366,272,509 164,417,848 172,816,978 172,613,690 16,654,076 --
36,775,163 13,681,504 99,349,760 101,043,809 17,600,471 25,301,831 36,243,458 4,747,541
(2,370,530) (82,877) (12,033,793) (5,693,969) (6,688,206) (7,030,990) (1,152,164) (27,374)
16,477,580 35,304,201 (415,986) 106,504,821 (12,663,586) (18,067,553) 45,999,912 11,933,909
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
99,785,041 48,902,828 453,172,490 366,272,509 171,065,657 172,816,978 97,745,282 16,654,076
============================== ============================== ============================== ==============================
<CAPTION>
DECEMBER 31: DECEMBER 31: DECEMBER 31: DECEMBER 31:
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
1997 1996 1997 1996 1997 1996 1997 1996
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 0.976262 $ 0.894978 $ 2.076503 $ 1.733324 $ 4.269122 $ 3.272588 $ 1.265937 $ 1.039845
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
$ 0.927104 $ 0.879630 $ 1.829953 $ 1.580931 $ 2.577196 $ 2.044683 $ 1.202193 $ 1.022013
============================== ============================== ============================== ==============================
</TABLE>
<PAGE> 14
================================================================================
14 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC
FOUNDERS GROWTH FUND GROWTH & INCOME FUND
------------------------------ ------------------------------
DIVISION 30 DIVISION 16
------------------------------ ------------------------------
1997 1996* 1997 1996
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)................................... $ (229,837) $ (28,065) $ (1,206,116) $ (402,222)
Net realized gain on investments............................... 270,661 -- 3,270,580 483,596
Capital gains distributions from mutual funds.................. 21,678,474 2,106,129 2,863,622 3,131,642
Net unrealized appreciation (depreciation)
of investments during the year.............................. (6,466,051) (1,697,540) 38,217,716 19,205,904
------------------------------ ------------------------------
Increase in net assets resulting from operations.......... 15,253,247 380,524 43,145,802 22,418,920
------------------------------ ------------------------------
PRINCIPAL TRANSACTIONS:
Purchase payments.............................................. 54,770,398 8,595,522 44,825,180 41,180,652
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees........................... (1,863,811) (36,494) (8,344,519) (2,962,157)
Annuity benefit payments....................................... (66) -- (2,954) (1,598)
Amounts transferred (to) from VALIC general account............ 70,189,987 23,178,924 5,944,261 43,756,812
------------------------------ ------------------------------
Increase (decrease) in net assets
resulting from principal transactions................... 123,096,508 31,737,952 42,421,968 81,973,709
------------------------------ ------------------------------
TOTAL INCREASE IN NET ASSETS................................... 138,349,755 32,118,476 85,567,770 104,392,629
NET ASSETS:
Beginning of year.............................................. 32,118,476 -- 171,528,205 67,135,576
------------------------------ ------------------------------
End of year.................................................... $170,468,231 $ 32,118,476 $257,095,975 $171,528,205
============================== ==============================
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year........................... 31,197,464 -- 108,341,635 51,779,089
Purchase payments.............................................. 45,575,203 9,274,157 24,988,066 28,095,895
Surrenders..................................................... (1,491,261) (32,596) (4,697,640) (1,842,881)
Transfers - interdivision and (to) from VALIC general account.. 56,885,756 21,955,903 3,802,494 30,309,532
------------------------------ ------------------------------
Accumulation units end of year................................. 132,167,162 31,197,464 132,434,555 108,341,635
============================== ==============================
<CAPTION>
DECEMBER 31: DECEMBER 31:
------------------------------ ------------------------------
1997 1996 1997 1996
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
Accumulation unit value........................................ $ 1.289513 $ 1.029522 $ 1.940905 $ 1.583056
------------------------------ ------------------------------
Annuity unit value assuming a 3.5% discount factor............. $ 1.224581 $ 1.011867 $ 1.710454 $ 1.443874
============================== ==============================
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 15
================================================================================
SEPARATE ACCOUNT A 15
================================================================================
<TABLE>
<CAPTION>
AGSPC
SOCIAL AWARENESS FUND AGSPC STOCK INDEX FUND
- ------------------------------ ---------------------------------------------------------------
DIVISION 12 DIVISION 10A DIVISION 10B
- ------------------------------ ------------------------------ ------------------------------
1997 1996 1997 1996 1997 1996
- ------------------------------ ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C>
$ 281,520 $ 546,469 $ 2,030,016 $ 3,186,584 $ 399,877 $ 462,074
1,158,707 778,115 23,392,823 12,767,086 2,137,197 2,085,848
9,560,562 10,715,745 2,365,369 2,739,498 185,844 222,372
33,369,211 4,483,540 89,338,679 51,675,655 6,910,324 3,182,195
- ------------------------------ ------------------------------ ------------------------------
44,370,000 16,523,869 117,126,887 70,368,823 9,633,242 5,952,489
- ------------------------------ ------------------------------ ------------------------------
44,746,508 18,543,307 3,670,819 4,265,439 231,218 501,306
(5,475,293) (3,798,307) (24,373,318) (22,309,652) (2,331,031) (2,364,484)
- - (1,717,390) (1,401,028) (285,785) (250,350)
55,022,728 13,547,350 (3,572,644) (13,443,730) (1,027,537) (1,406,730)
- ------------------------------ ------------------------------ ------------------------------
94,293,943 28,292,350 (25,992,533) (32,888,971) (3,413,135) (3,520,258)
- ------------------------------ ------------------------------ ------------------------------
138,663,943 44,816,219 91,134,354 37,479,852 6,220,107 2,432,231
104,916,029 60,099,810 378,649,029 341,169,177 30,725,924 28,293,693
- ------------------------------ ------------------------------ ------------------------------
$243,579,972 $104,916,029 $469,783,383 $378,649,029 $ 36,946,031 $ 30,725,924
============================== ============================== ==============================
46,574,016 32,750,120 27,379,389 29,995,363 1,380,401 1,560,525
16,505,152 9,143,695 226,321 323,038 9,647 26,729
(1,970,414) (1,827,332) (1,529,579) (1,822,126) (92,576) (123,291)
20,468,350 6,507,533 (240,198) (1,116,886) (40,498) (83,562)
- ------------------------------ ------------------------------ ------------------------------
81,577,104 46,574,016 25,835,933 27,379,389 1,256,974 1,380,401
============================== ============================== ==============================
<CAPTION>
DECEMBER 31: DECEMBER 31: DECEMBER 31:
- ------------------------------ ------------------------------ ------------------------------
1997 1996 1997 1996 1997 1996
- ------------------------------ ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C>
$ 2.985333 $ 2.252673 $ 17.679054 $ 13.413891 $ 27.956641 $ 21.070956
- ------------------------------ ------------------------------ ------------------------------
$ 2.248428 $ 1.755941 $ 4.932202 $ 3.873132 $ 6.632506 $ 5.173716
============================== ============================== ==============================
</TABLE>
<PAGE> 16
================================================================================
16 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC Stock Index Fund
------------------------------------------------------------------
DIVISION 10C DIVISION 10D
--------------------------------- ------------------------------
1997 1996 1997 1996
--------------------------------- ------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)................................... $ 9,342,792 $ 11,741,408 $ 222,212 $ 363,909
Net realized gain on investments............................... 19,691,626 10,129,542 3,421,747 2,391,364
Capital gains distributions from mutual funds.................. 11,611,427 11,061,404 249,976 307,213
Net unrealized appreciation (depreciation)
of investments during the year.............................. 475,943,738 222,475,966 9,003,055 4,964,983
--------------------------------- ------------------------------
Increase in net assets resulting from operations.......... 516,589,583 255,408,320 12,896,990 8,027,469
--------------------------------- ------------------------------
PRINCIPAL TRANSACTIONS:
Purchase payments.............................................. 264,734,800 210,185,191 789,193 1,004,698
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees........................... (73,944,144) (49,624,470) (2,598,402) (2,219,367)
Annuity benefit payments....................................... (120,896) (61,625) (13,201) (10,433)
Amounts transferred (to) from VALIC general account............ 72,721,787 47,055,243 (3,872,680) (5,536,446)
--------------------------------- ------------------------------
Increase (decrease) in net assets
resulting from principal transactions................... 263,391,547 207,554,339 (5,695,090) (6,761,548)
--------------------------------- ------------------------------
TOTAL INCREASE IN NET ASSETS................................... 779,981,130 462,962,659 7,201,900 1,265,921
NET ASSETS:
Beginning of year.............................................. 1,530,346,370 1,067,383,711 42,471,127 41,205,206
--------------------------------- ------------------------------
End of year.................................................... $2,310,327,500 $1,530,346,370 $ 49,673,027 $ 42,471,127
================================= ==============================
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year........................... 536,806,965 455,255,243 8,381,704 9,885,873
Purchase payments.............................................. 77,757,636 80,768,570 132,628 231,458
Surrenders..................................................... (20,920,257) (18,096,464) (430,026) (486,940)
Transfers - interdivision and (to) from VALIC general account.. 21,408,780 18,879,616 (645,769) (1,248,687)
--------------------------------- ------------------------------
Accumulation units end of year................................. 615,053,124 536,806,965 7,438,537 8,381,704
================================= ==============================
<CAPTION>
DECEMBER 31: DECEMBER 31:
--------------------------------- ------------------------------
1997 1996 1997 1996
--------------------------------- ------------------------------
<S> <C> <C> <C> <C>
Accumulation unit value........................................ $ 3.753436 $ 2.848437 $ 6.652806 $ 5.049088
--------------------------------- ------------------------------
Annuity unit value assuming a 3.5% discount factor............. $ 2.655080 $ 2.085358 $ 3.860513 $ 3.032347
================================= ==============================
</TABLE>
*For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 17
================================================================================
SEPARATE ACCOUNT A 17
================================================================================
<TABLE>
<CAPTION>
NEUBERGER&BERMAN SCUDDER GROWTH AND
GUARDIAN TRUST INCOME FUND VANGUARD/WINDSOR II
- ------------------------------ -------------------------------- --------------------------------
DIVISION 29 DIVISION 21 DIVISION 24
- ------------------------------ -------------------------------- --------------------------------
1997 1996* 1997 1996* 1997 1996*
- ------------------------------ -------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C>
$ (99,741) $ 15,594 $ 1,085,048 $ 120,254 $ 3,037,913 $ 488,057
406,993 10,864 269,953 22,419 741,743 11,774
3,161,542 128,127 8,952,194 607,596 18,541,072 1,554,790
(1,574,737) 348,451 4,003,711 84,718 16,110,878 (217,368)
- ------------------------------ -------------------------------- --------------------------------
1,894,057 503,036 14,310,906 834,987 38,431,606 1,837,253
- ------------------------------ -------------------------------- --------------------------------
14,861,097 2,108,685 37,754,331 4,643,308 82,698,118 10,178,409
(661,852) (21,439) (1,502,937) (23,004) (3,075,223) (103,527)
-- -- (2,106) -- (1,497) --
21,010,215 6,613,024 66,400,722 12,968,194 115,544,417 29,887,643
- ------------------------------ -------------------------------- --------------------------------
35,209,460 8,700,270 102,650,010 17,588,498 195,165,815 39,962,525
- ------------------------------ -------------------------------- --------------------------------
37,103,517 9,203,306 116,960,916 18,423,485 233,597,421 41,799,778
9,203,306 -- 18,423,485 -- 41,799,778 --
- ------------------------------ -------------------------------- --------------------------------
$ 46,306,823 $ 9,203,306 $ 135,384,401 $ 18,423,485 $ 275,397,199 $ 41,799,778
============================== ================================ ================================
8,211,592 -- 16,524,046 -- 37,292,761 --
11,711,541 2,109,025 28,874,922 4,726,075 63,199,633 10,359,662
(501,980) (19,267) (1,088,301) (21,254) (2,242,658) (91,924)
15,985,510 6,121,834 49,915,317 11,819,225 89,680,132 27,025,023
- ------------------------------ -------------------------------- --------------------------------
35,406,663 8,211,592 94,225,984 16,524,046 187,929,868 37,292,761
============================== ================================ ================================
<CAPTION>
DECEMBER 31: DECEMBER 31: DECEMBER 31:
- ------------------------------ -------------------------------- --------------------------------
1997 1996 1997 1996 1997 1996
- ------------------------------ -------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C>
$ 1.307438 $ 1.120770 $ 1.436011 $ 1.114950 $ 1.464949 $ 1.120855
- ------------------------------ -------------------------------- --------------------------------
$ 1.241604 $ 1.101550 $ 1.363703 $ 1.095830 $ 1.391183 $ 1.101634
============================== ================================ ================================
<CAPTION>
TEMPLETON ASSET
ALLOCATION FUND
- --------------------------------
DIVISION 19
- --------------------------------
1997 1996
- --------------------------------
<S> <C>
$ 2,826,899 $ 1,458,222
982,063 430,651
11,661,872 2,566,073
13,366,704 19,843,521
- --------------------------------
28,837,538 24,298,467
- --------------------------------
61,278,823 46,026,342
(9,457,167) (3,839,217)
(19,742) (39,584)
41,633,946 33,529,527
- --------------------------------
93,435,860 75,677,068
- --------------------------------
122,273,398 99,975,535
194,600,887 94,625,352
- --------------------------------
$ 316,874,285 $ 194,600,887
================================
137,384,670 78,494,505
38,574,901 35,369,271
(5,822,716) (2,676,756)
26,014,091 26,197,650
- --------------------------------
196,150,946 137,384,670
================================
<CAPTION>
DECEMBER 31:
- --------------------------------
1997 1996
- --------------------------------
<C> <C>
$ 1.613943 $ 1.414844
- --------------------------------
$ 1.432259 $ 1.299474
================================
</TABLE>
<PAGE> 18
================================================================================
18 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC
ASSET ALLOCATION
FUND VANGUARD/WELLINGTON FUND
-------------------------------- --------------------------------
DIVISION 5 DIVISION 25
-------------------------------- --------------------------------
1997 1996 1997 1996*
-------------------------------- --------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income.................................... $ 3,768,356 $ 4,134,407 $ 3,011,918 $ 326,600
Net realized gain (loss) on investments.................. 5,941,975 7,668,485 713,048 --
Capital gains distributions from mutual funds............ 10,546,782 18,741,770 7,375,024 818,129
Net unrealized appreciation (depreciation)
of investments during the year........................ 14,486,554 (13,565,417) 3,998,391 (444,072)
-------------------------------- --------------------------------
Increase (decrease) in net assets resulting
from operations.................................. 34,743,667 16,979,245 15,098,381 700,657
-------------------------------- --------------------------------
PRINCIPAL TRANSACTIONS:
Purchase payments........................................ 11,497,764 15,126,160 51,882,204 7,042,246
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees..................... (10,611,952) (11,037,733) (2,456,686) (12,075)
Annuity benefit payments................................. (8,301) (7,329) (68) --
Amounts transferred (to) from VALIC general account...... (24,272,661) (30,784,573) 66,331,198 17,458,690
-------------------------------- --------------------------------
Increase (decrease) in net assets
resulting from principal transactions............. (23,395,150) (26,703,475) 115,756,648 24,488,861
-------------------------------- --------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS.................. 11,348,517 (9,724,230) 130,855,029 25,189,518
NET ASSETS:
Beginning of year........................................ 173,229,475 182,953,705 25,189,518 --
-------------------------------- --------------------------------
End of year.............................................. $ 184,577,992 $ 173,229,475 $ 156,044,547 $ 25,189,518
================================ ================================
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year..................... 65,292,617 75,851,431 22,866,634 --
Purchase payments........................................ 3,898,053 6,003,535 42,072,769 7,335,077
Surrenders............................................... (3,591,047) (4,376,494) (1,913,812) (12,748)
Transfers - interdivision and (to) from VALIC
general account....................................... (8,292,272) (12,185,855) 53,404,190 15,544,305
-------------------------------- --------------------------------
Accumulation units end of year........................... 57,307,351 65,292,617 116,429,781 22,866,634
================================ ================================
<CAPTION>
DECEMBER 31: DECEMBER 31:
-------------------------------- --------------------------------
1997 1996 1997 1996
-------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Accumulation unit value.................................. $ 3.219282 $ 2.651899 $ 1.340109 $ 1.101584
-------------------------------- --------------------------------
Annuity unit value assuming a 3.5% discount factor....... $ 1.971210 $ 1.680570 $ 1.272630 $ 1.082693
================================ ================================
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 19
================================================================================
SEPARATE ACCOUNT A 19
================================================================================
<TABLE>
<CAPTION>
AGSPC AGSPC
INTERNATIONAL GOVERNMENT AGSPC GOVERNMENT SECURITIES
BOND FUND CAPITAL CONSERVATION FUND FUND
- -------------------------------- ------------------------------------------------------------- ------------------------------
DIVISION 13 DIVISION 1 DIVISION 7 DIVISION 8
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
1997 1996 1997 1996 1997 1996 1997 1996
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 4,595,764 $ 6,561,676 $ 344,608 $ 385,044 $ 2,913,560 $ 3,053,956 $ 4,230,305 $ 4,076,937
(3,911,328) 1,815,703 23,005 60,355 (805,486) (425,696) (985,278) (378,294)
136,607 295,588 -- -- -- -- -- --
(11,068,351) (2,362,017) 90,579 (428,426) 1,739,391 (2,170,354) 3,130,717 (2,658,037)
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
(10,247,308) 6,310,950 458,192 16,973 3,847,465 457,906 6,375,744 1,040,606
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
40,582,861 48,300,297 366,816 280,092 7,324,860 10,990,401 12,424,460 18,451,360
(6,757,210) (4,925,561) (389,473) (624,478) (3,026,469) (2,515,394) (3,958,609) (3,354,710)
(274) (33) (526) (512) -- -- -- --
(35,550,483) 16,174,338 (509,353) (953,654) (8,016,607) (7,231,500) (12,246,246) (2,269,092)
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
(1,725,106) 59,549,041 (532,536) (1,298,552) (3,718,216) 1,243,507 (3,780,395) 12,827,558
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
(11,972,414) 65,859,991 (74,344) (1,281,579) 129,249 1,701,413 2,595,349 13,868,164
178,172,171 112,312,180 6,501,870 7,783,449 55,289,479 53,588,066 85,571,939 71,703,775
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
$ 166,199,757 $ 178,172,171 $ 6,427,526 $ 6,501,870 $ 55,418,728 $ 55,289,479 $ 88,167,288 $ 85,571,939
================================ ============================ ============================== ==============================
112,601,593 73,369,250 1,991,536 2,402,085 30,286,494 29,573,808 47,130,169 39,847,053
27,009,353 31,815,367 109,285 87,169 3,840,755 6,098,740 6,646,726 10,391,393
(4,696,042) (3,112,236) (116,952) (196,821) (1,555,673) (1,343,357) (2,143,349) (1,871,516)
(23,434,313) 10,529,212 (151,908) (300,897) (4,328,978) (4,042,697) (6,598,652) (1,236,761)
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
111,480,591 112,601,593 1,831,961 1,991,536 28,242,598 30,286,494 45,034,894 47,130,169
================================ ============================ ============================== ==============================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31: DECEMBER 31: DECEMBER 31: DECEMBER 31:
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
1997 1996 1997 1996 1997 1996 1997 1996
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.490645 $ 1.582230 $ 3.505970 $ 3.262402 $ 1.962239 $ 1.825549 $ 1.957755 $ 1.815651
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
$ 1.203136 $ 1.321708 $ 1.863379 $ 1.794552 $ 1.303657 $ 1.255251 $ 1.300676 $ 1.248443
================================ ============================ ============================== ==============================
</TABLE>
<PAGE> 20
================================================================================
20 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
VANGUARD FIXED INCOME VANGUARD FIXED INCOME
SECURITIES FUND - L/T SECURITIES FUND - L/T
CORPORATE PORTFOLIO U.S. TREASURY PORTFOLIO
------------------------------ ----------------------------
DIVISION 22 DIVISION 23
------------------------------ ----------------------------
1997 1996* 1997 1996*
------------------------------ ----------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income.......................................... $ 506,655 $ 36,167 $ 567,564 $ 46,282
Net realized gain on investments............................... 36,716 2,260 94,335 2,349
Capital gains distributions from mutual funds.................. 156,984 31,298 -- --
Net unrealized appreciation (depreciation)
of investments during the year.............................. 643,127 (11,407) 1,066,785 33,654
------------------------------ ----------------------------
Increase in net assets resulting from operations.......... 1,343,482 58,318 1,728,684 82,285
------------------------------ ----------------------------
PRINCIPAL TRANSACTIONS:
Purchase payments.............................................. 6,013,744 1,030,635 6,985,216 1,117,289
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees........................... (167,812) (3,212) (265,787) (9,447)
Annuity benefit payments....................................... -- -- (176) --
Amounts transferred (to) from VALIC general account............ 9,719,778 2,445,116 10,813,576 3,186,574
------------------------------ ----------------------------
Increase (decrease) in net assets
resulting from principal transactions................... 15,565,710 3,472,539 17,532,829 4,294,416
------------------------------ ----------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........................ 16,909,192 3,530,857 19,261,513 4,376,701
NET ASSETS:
Beginning of year.............................................. 3,530,857 -- 4,376,701 --
------------------------------ ----------------------------
End of year.................................................... $ 20,440,049 $ 3,530,857 $ 23,638,214 $ 4,376,701
============================== ============================
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year........................... 3,370,441 -- 4,174,369 --
Purchase payments.............................................. 5,633,849 1,099,573 6,619,458 1,138,211
Surrenders..................................................... (151,626) (3,347) (227,789) (9,203)
Transfers - interdivision and (to) from VALIC general account.. 8,518,743 2,274,215 9,475,882 3,045,361
------------------------------ ----------------------------
Accumulation units end of year................................. 17,371,407 3,370,441 20,041,920 4,174,369
============================== ============================
<CAPTION>
DECEMBER 31: DECEMBER 31:
------------------------------ ----------------------------
1997 1996 1997 1996
------------------------------ ----------------------------
<S> <C> <C> <C> <C>
Accumulation unit value........................................ $ 1.176649 $ 1.047595 $ 1.178938 $ 1.048470
------------------------------ ----------------------------
Annuity unit value assuming a 3.5% discount factor............. $ 1.117400 $ 1.029630 $ 1.119575 $ 1.030490
============================== ============================
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 21
================================================================================
SEPARATE ACCOUNT A 21
================================================================================
<TABLE>
<CAPTION>
AGSPC
MONEY MARKET FUND
- ------------------------------------------------------------
DIVISION 2 DIVISION 6
- ---------------------------- ----------------------------
1997 1996 1997 1996
- ---------------------------- ----------------------------
<S> <C> <C> <C>
$ 188,513 $ 216,537 $ 5,293,164 $ 3,525,805
-- -- -- --
-- -- -- --
-- -- -- --
- ---------------------------- ----------------------------
188,513 216,537 5,293,164 3,525,805
- ---------------------------- ----------------------------
123,738 163,293 58,442,609 40,448,483
(277,223) (465,203) (16,317,039) (13,617,200)
-- -- (1,592) (1,584)
(334,772) (1,426,148) (27,271,186) 10,145,727
- ---------------------------- ----------------------------
(488,257) (1,728,058) 14,852,792 36,975,426
- ---------------------------- ----------------------------
(299,744) (1,511,521) 20,145,956 40,501,231
4,879,501 6,391,022 120,758,626 80,257,395
- ---------------------------- ----------------------------
$ 4,579,757 $ 4,879,501 $ 140,904,582 $120,758,626
============================ ============================
2,142,534 2,917,361 75,124,095 51,907,757
53,405 73,255 35,256,772 25,572,924
(119,264) (208,252) (10,205,685) (8,565,366)
(145,236) (639,830) (15,992,661) 6,208,780
- ---------------------------- ----------------------------
1,931,439 2,142,534 84,182,521 75,124,095
============================ ============================
<CAPTION>
DECEMBER 31: DECEMBER 31:
- ---------------------------- ----------------------------
1997 1996 1997 1996
- ---------------------------- ----------------------------
<S> <C> <C> <C>
$ 2.371163 $ 2.277444 $ 1.673590 $ 1.607212
- ---------------------------- ----------------------------
$ 1.407542 $ 1.399179 $ 1.099730 $ 1.093041
============================ ============================
</TABLE>
<PAGE> 22
================================================================================
22 NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE A -- ORGANIZATION
Separate Account A (the "Separate Account"), established by The Variable
Annuity Life Insurance Company ("VALIC") on April 18, 1979, is registered under
the Investment Company Act of 1940 as a unit investment trust. The Separate
Account is comprised of thirty-three subaccounts or "divisions." Each division,
which represents a variable investment vehicle available only through a VALIC
annuity contract, invests in one of the following mutual funds:
American General Series Portfolio Company ("AGSPC"):
AGSPC Stock Index Fund (Divisions 10A, B, C, and D)
AGSPC MidCap Index Fund (Division 4)
AGSPC Small Cap Index Fund (Division 14)
AGSPC International Equities Fund (Division 11)
AGSPC Growth Fund (Division 15)
AGSPC Growth & Income Fund (Division 16)
AGSPC Science & Technology Fund (Division 17)
AGSPC Social Awareness Fund (Division 12)
AGSPC Asset Allocation Fund (formerly Timed
Opportunity Fund) (Division 5)
AGSPC Capital Conservation Fund (Divisions 1 and 7)
AGSPC Government Securities Fund (Division 8)
AGSPC International Government Bond Fund (Division 13)
AGSPC Money Market Fund (Divisions 2 and 6)
Dreyfus Variable Investment Fund -
Dreyfus Small Cap Portfolio (Division 18)
Founders Growth Fund (Division 30)
Neuberger&Berman Guardian Trust (Division 29)
Putnam Global Growth Fund (Division 28)
Putnam New Opportunities Fund (Division 26)
Putnam OTC & Emerging Growth Fund (Division 27)
Scudder Growth and Income Fund (Division 21)
Templeton Foreign Fund (Division 32)
Templeton Variable Products Series Fund:
Templeton Asset Allocation Fund (Division 19)
Templeton International Fund (Division 20)
American Century - Twentieth Century
Ultra Fund (Division 31)
Vanguard Fixed Income Securities Fund:
Long-Term Corporate Portfolio (Division 22)
Long-Term U.S. Treasury Portfolio (Division 23)
Vanguard/Wellington Fund (Division 25)
Vanguard/Windsor II (Division 24)
Divisions 21 through 32 commenced operations on July 1, 1996.
NOTE B -- SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The assets of the Separate Account are segregated from VALIC's other
assets. The operations of the Separate Account are part of VALIC. The following
is a summary of significant accounting policies consistently followed by the
Separate Account in the preparation of its financial statements.
INVESTMENT VALUATION. Investments in mutual funds (the "Funds") are valued
at the net asset (market) value per share at the close of each business day as
reported by the Fund.
INVESTMENT TRANSACTIONS. Investment transactions are accounted for on the
trade date. Realized gains and losses on investments are determined on the basis
of identified cost. Capital gain distributions from mutual funds are recorded on
the ex-dividend date and reinvested upon receipt.
INVESTMENT INCOME. Dividend income from mutual funds is recorded on the
ex-dividend date and reinvested upon receipt.
ANNUITY RESERVES. Net payments made by variable annuity contract owners are
accumulated based on the performance of the investments of the Separate Account
until the date the contract owners select to commence annuity payments. Reserves
for annuities on which benefits are currently payable are provided for based
upon estimated mortality and other assumptions, including provisions for the
risk of adverse deviation from assumptions, which were appropriate at the time
the contracts were issued. The 1983(a) Individual Mortality Table has been used
in the computation of annuity reserves for currently payable contracts.
Participants are able to elect assumed investment rates between 3.0% and 6.0%,
as regulated by the applicable state laws.
<PAGE> 23
================================================================================
SEPARATE ACCOUNT A 23
================================================================================
NOTE C -- TRANSACTIONS WITH AFFILIATES
VALIC serves as investment adviser, transfer agent, and accounting services
agent to AGSPC.
The Separate Account is charged for mortality and expense risks assumed by
VALIC. The charge, based on the daily net assets of each division, is assessed
daily based on the following annual rates: for Division 10B, 0.85% on the first
$10,000,000, 0.425% on the next $90,000,000, and 0.21% on the excess over
$100,000,000; for Divisions 1, 2, 4, 5, 6, 7, 8, 10A, 10C, 10D, 11, 12, 13, 14,
15, 16, and 17, 1.00%; and for Divisions 18 through 32, 1.25%. Certain
unaffiliated mutual funds reimburse to VALIC a portion of the distribution or
administrative costs associated with offering their funds through a VALIC
annuity contract. VALIC, in turn reduces the separate account charge to that
division by the amount of the reimbursement. The expense reduction is credited
daily based on the following annual rates: for Divisions 21, 26 through 30 and
Division 32, 0.25%; for Division 31, 0.20% (effective December 8, 1997 the
expense reduction for Division 31 became 0.20% on the first $75,000,000, and
0.25% on the excess over $75,000,000); for Division 18, 0.15% (commencing
July 1, 1997).
Pursuant to the reorganization agreement entered into on April 17, 1987,
which transferred VALIC Separate Accounts One and Two into Separate Account A
Divisions 10A and 10B, respectively, expenses of each division (as defined to
include underlying mutual fund expenses) are limited to the following rates
based on average daily net assets: Division 10A, 1.4157% on the first
$359,065,787, 1.36% on the next $40,934,213, and 1.32% on the excess over
$400,000,000; Division 10B, 0.6966% on the first $25,434,267, 0.5% on the next
$74,565,733, and 0.25% on the excess over $100,000,000. Accordingly, during the
years ended December 31, 1997 and December 31, 1996, VALIC reduced expenses of
Division 10B by $85,996 and $73,695, respectively.
A portion of the annual contract maintenance charge is assessed each contract
(except those relating to Divisions 10A and 10B) by VALIC on the last day of the
calendar quarter in which VALIC receives the first purchase payment, and in
quarterly installments thereafter during the accumulation period. Maintenance
charges assessed totaled $4,510,903 and $3,625,368 for the years ended December
31, 1997, and December 31, 1996, respectively.
VALIC received surrender charges of $2,769,370 and $1,998,356 for the years
ended December 31, 1997 and December 31, 1996, respectively. In addition, VALIC
received $63,727 and $7,426 for the year ended December 31, 1997, in sales load
on variable annuity purchase payments for Divisions 10A and 10B, respectively.
VALIC received $76,330 and $11,846 for the year ended December 31, 1996, in
sales load on variable annuity purchase payments for Divisions 10A and 10B,
respectively.
NOTE D -- INVESTMENTS
The cost of fund shares is the same for financial reporting and federal
income tax purposes. The following is a summary of fund shares owned as of
December 31, 1997:
<TABLE>
<CAPTION>
UNREALIZED
MARKET APPRECIATION
UNDERLYING FUND DIVISION SHARES PRICE MARKET COST (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AGSPC International Equities Fund........ 11 14,442,247 $ 10.56 $ 152,510,209 $ 159,616,851 (7,106,642)
Putnam Global Growth Fund................ 28 5,907,316 9.96 58,836,553 66,932,273 (8,095,720)
Templeton Foreign Fund................... 32 18,158,539 9.95 180,677,558 195,842,767 (15,165,209)
Templeton International Fund............. 20 36,240,937 20.18 731,342,182 597,457,072 133,885,110
AGSPC Science & Technology Fund.......... 17 45,443,952 20.05 911,151,116 863,149,718 48,001,398
AGSPC Small Cap Index Fund............... 14 13,430,059 17.18 230,728,350 186,936,772 43,791,578
Dreyfus Small Cap Portfolio.............. 18 14,882,781 57.14 850,402,328 690,666,534 159,735,794
Putnam New Opportunities Fund............ 26 3,383,421 48.65 164,603,317 147,777,228 16,826,089
Putnam OTC & Emerging Growth Fund........ 27 6,050,956 16.11 97,480,884 93,189,180 4,291,704
AGSPC Growth Fund........................ 15 46,551,005 20.22 941,261,746 711,090,283 230,171,463
AGSPC MidCap Index Fund.................. 4 31,073,774 23.51 730,544,269 505,009,548 225,534,721
American Century - Twentieth Century
Ultra Fund............................ 31 4,523,746 27.30 123,498,148 140,484,856 (16,986,708)
Founders Growth Fund..................... 30 9,845,834 17.28 170,135,993 178,299,584 (8,163,591)
AGSPC Growth & Income Fund............... 16 13,572,839 18.93 256,933,935 190,630,650 66,303,285
AGSPC Social Awareness Fund.............. 12 12,327,131 19.75 243,460,767 197,838,989 45,621,778
AGSPC Stock Index Fund................... 10A,B,C,D 96,544,410 29.70 2,867,368,593 1,632,114,793 1,235,253,800
Neuberger&Berman Guardian Trust.......... 29 2,673,859 17.30 46,258,362 47,484,648 (1,226,286)
Scudder Growth and Income Fund........... 21 4,944,060 27.33 135,121,244 131,032,815 4,088,429
Vanguard/Windsor II...................... 24 9,612,687 28.62 275,114,738 259,221,228 15,893,510
Templeton Asset Allocation Fund.......... 19 14,174,679 22.35 316,804,111 272,387,404 44,416,707
AGSPC Asset Allocation Fund.............. 5 14,166,349 13.02 184,445,969 161,483,128 22,962,841
Vanguard/Wellington Fund................. 25 5,288,776 29.45 155,754,286 152,199,967 3,554,319
AGSPC Intl Government Bond Fund.......... 13 14,931,704 11.13 166,189,923 177,006,856 (10,816,933)
AGSPC Capital Conservation Fund.......... 1 & 7 6,430,166 9.61 61,793,877 60,854,930 938,947
AGSPC Government Securities Fund......... 8 8,785,778 10.04 88,209,203 86,589,002 1,620,201
Vanguard Fixed Income Securities Fund:
Long-Term Corporate Portfolio......... 22 2,205,013 9.26 20,418,430 19,786,709 631,721
Long-Term U.S. Treasury Portfolio .... 23 2,249,389 10.64 23,933,498 22,833,059 1,100,439
AGSPC Money Market Fund.................. 2 & 6 139,186,616 1.00 139,186,616 139,186,616 -
10,324,166,205 8,087,103,460 2,237,062,745
</TABLE>
<PAGE> 24
================================================================================
24 NOTES TO FINANCIAL STATEMENTS - continued
================================================================================
NOTE E -- FEDERAL INCOME TAXES
VALIC is taxed as a life insurance company under the Internal Revenue Code
and includes the operations of the Separate Account in determining its federal
income tax liability. Under current federal income tax law the investment income
and capital gains from sale of investments realized by the Separate Account are
not taxable. Therefore, no federal income tax provision has been made.
NOTE F -- SECURITY PURCHASES AND SALES
For the year ended December 31, 1997, the aggregate cost of purchases and
proceeds from sales of investments were:
<TABLE>
<CAPTION>
PURCHASES SALES
---------------------------------
<S> <C> <C>
AGSPC International Equities Fund Division 11 ................ $ 86,790,464 $ 122,541,754
Putnam Global Growth Fund Division 28 ........................ 50,459,460 1,699,287
Templeton Foreign Fund Division 32 ........................... 160,310,836 2,593,318
Templeton International Fund Division 20 ..................... 218,671,212 74,944,745
AGSPC Science & Technology Fund Division 17 .................. 258,533,591 72,590,864
AGSPC Small Cap Index Fund Division 14 ....................... 52,449,672 26,841,519
Dreyfus Small Cap Portfolio Division 18 ...................... 157,428,080 31,479,333
Putnam New Opportunities Fund Division 26 .................... 98,274,415 2,172,704
Putnam OTC & Emerging Growth Fund Division 27 ................ 49,539,022 4,465,936
AGSPC Growth Fund Division 15 ................................ 181,937,002 13,277,956
AGSPC MidCap Index Fund Division 4 ........................... 85,646,062 49,680,500
American Century - Twentieth Century Ultra Fund Division 31 .. 123,895,156 1,646,296
Founders Growth Fund Division 30 ............................. 146,266,635 1,807,870
AGSPC Growth & Income Fund Division 16 ....................... 51,440,343 7,278,659
AGSPC Social Awareness Fund Division 12 ...................... 107,158,295 2,998,054
AGSPC Stock Index Fund:
Division 10A .............................................. 21,747,453 42,886,487
Division 10B .............................................. 1,302,470 4,114,905
Division 10C .............................................. 322,262,616 37,384,769
Division 10D .............................................. 2,169,786 7,370,870
Neuberger&Berman Guardian Trust Division 29 .................. 40,109,321 1,827,836
Scudder Growth and Income Fund Division 21 ................... 113,908,912 1,386,588
Vanguard/Windsor II Division 24 .............................. 219,813,022 2,987,200
Templeton Asset Allocation Fund Division 19 .................. 112,031,546 3,848,099
AGSPC Asset Allocation Fund Division 5 ....................... 19,398,830 28,526,541
Vanguard/Wellington Fund Division 25 ......................... 132,887,405 6,870,260
AGSPC International Government Bond Fund Division 13 ......... 54,824,769 51,676,974
AGSPC Capital Conservation Fund:
Division 1 ................................................ 696,514 886,751
Division 7 ................................................ 10,599,204 11,407,082
AGSPC Government Securities Fund Division 8 .................. 14,228,467 13,735,066
Vanguard Fixed Income Securities Fund:
Long-Term Corporate Portfolio Division 22 ................. 17,995,829 1,785,593
Long-Term U.S. Treasury Portfolio Division 23 ............. 20,859,345 2,676,268
AGSPC Money Market Fund:
Division 2 ................................................ 2,451,062 2,794,492
Division 6 ................................................ 315,474,364 301,193,083
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Total .................................................. $3,251,561,160 $ 939,377,659
=================================
</TABLE>
NOTE G -- YEAR 2000 (UNAUDITED)
VALIC is in the process of modifying its information technology to be ready
for the year 2000. VALIC expects the project to be substantially complete by
late 1998. All costs associated with required modifications will be paid for by
VALIC.
<PAGE> 25
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REPORT OF INDEPENDENT AUDITORS 25
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TO THE BOARD OF THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AND CONTRACT OWNERS
OF THE VARIABLE ANNUITY LIFE INSURANCE COMPANY SEPARATE ACCOUNT A
We have audited the accompanying statements of net assets of The Variable
Annuity Life Insurance Company Separate Account A ("Separate Account A") and
each of the divisions (1, 2, 4, 5, 6, 7, 8, 10A, 10B, 10C, 10D, and 11 through
32, inclusive) comprising Separate Account A as of December 31, 1997. We have
also audited the related statements of operations for the year then ended and
the statements of changes in net assets for each of the two years in the period
then ended of Separate Account A and each of its divisions except for divisions
21 through 32, inclusive, for which we have audited the statements of changes in
net assets for the year ended December 31, 1997 and period from July 1, 1996
(inception) to December 31, 1996. These financial statements are the
responsibility of Separate Account A's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1997, by correspondence with
the transfer agent. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Separate Account A and each of
the divisions comprising Separate Account A at December 31, 1997, and the
results of their operations and changes in their net assets for each of the
periods identified above, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Houston, Texas
February 6, 1998
