AMERICAN FIDELITY
June 30, 1997
VARIABLE ANNUITY FUND A
<PAGE>
Dear Participant:
The U.S. equity markets reached new record highs during the second quarter
with the Dow Jones Industrial Average posting its tenth consecutive
positive quarter, a first since the early 1950's. Evidence of moderating
economic growth, after a robust first quarter with lower then expected
inflation numbers, pushed the stock and bond markets higher. Strong
corporate profits, constructive developments on the federal budget and the
continuation of positive liquidity trends were all instrumental in boosting
the value of financial assets to higher levels. Variable Annuity Fund A
also set a record value. The unit value was $17.86 on June 30, 1997, up
16.4% from $15.34 on December 31, 1996.
The pace of economic growth slowed considerably during the second quarter
following an overly robust 5.9% rate of growth in the first quarter.
Consumer demand, as measured by retail sales, slowed significantly by
posting three consecutive monthly declines. In addition, housing
expenditures and durable goods orders also weakened significantly from
their first quarter levels.
Lower than expected inflation readings were the primary spark behind the
second quarter rally in the financial markets. The Consumer Price Index
fell to a 2.2% year over year rate in May versus a 3.3% rate for all of
1996. In addition, labor costs as measured by the Employment Cost Index
held steady at a modest 2.9% annual rate in the first quarter despite the
lowest unemployment rate in over 24 years.
Interest rates as measured by the 30 year U.S. Treasury Bond staged a
significant rally during the quarter, reversing the one-half percent rise
earlier in the year to close the quarter at 6.79%. Signs of a slowdown in
economic expansion and weaker than expected inflation numbers, pushed
yields lower. In addition, the Federal Reserve kept the Federal Funds rate
unchanged at 5.5% following the quarter point increase in the first
quarter.
The equity market soared to new highs during the second quarter, posting
its fifth largest quarterly gain since World War II. The Dow Jones
Industrial Average advanced nearly 1,500 points from its lows in mid April
to its highs in late June, quickly reversing the sell off that began near
the end of the first quarter. Market liquidity remained quite favorable as
the supply of new equity issues was unable to keep pace with the continuing
wave of equity mutual fund cash inflows, and the shrinkage in available
shares due to corporate mergers and acquisitions and share buybacks.
Although valuation levels as measured by price to earnings ratios appear
high, historically low levels of inflation have been associated with higher
p/e ratios. We continue to believe the equity market offers excellent long
term appreciation potential. However, at current valuation levels, stocks
over the near term are clearly susceptible to any surprises on the
inflation, economic or corporate earnings front.
If you have any questions about your account or about Variable Annuity Fund
A, please let us know.
Sincerely,
JOHN W. REX
John W. Rex, Chairman
Board of Managers
JWR:jl
<PAGE>
AMERICAN FIDELITY
VARIABLE ANNUITY FUND A
<TABLE>
<CAPTION>
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1997
<S> <C>
ASSETS:
Cash & investments at market value $120,952,477
Accrued interest and dividends 175,460
Accounts Receivable for Securities Sold 957,182
------------
Total Assets $122,085,119
LIABILITIES:
Accounts Payable for Securities Purchased 927,309
Other accounts payable 0
Accounts payable - redemptions 0
------------
NET ASSETS $121,157,810
============
ACCUMULATION UNITS OUTSTANDING 6,782,145
============
NET ASSET VALUE PER UNIT 17.8642
============
</TABLE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
June 30, 1997
<S> <C>
Net assets, beginning of year $98,829,399
Net investment income 309,408
Realized gain on investments 3,852,050
Increase (decrease) in unrealized
appreciation of investments 12,609,447
Net purchase payments received 9,609,924
Withdrawal of funds (4,052,418)
------------
Net assets at end of June $121,157,810
============
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
June 30, 1997
<S> <C> <C>
INVESTMENT INCOME:
Dividends $971,185
Interest 123,773
------------
1,094,958
EXPENSES:
Mortality and expense guaranty fees 516,526
Investment management fee 269,024 785,550
------- ------------
NET INVESTMENT INCOME $309,408
============
REALIZED GAIN ON INVESTMENTS: $ 3,852,050
============
UNREALIZED APPRECIATION OF INVESTMENTS: $ 12,609,447
============
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS Shares or Market
June 30, 1997 Principal Value
Amount Amount
--------- -------
<S> <C> <C>
COMMON STOCKS:
Chemicals & Allied Products
Pfizer, Inc. 29,800 3,561,100
American Home Products Corporation 40,700 3,113,550
Johnson & Johnson 44,000 2,832,500
Avery-Dennison Corporation 66,400 2,664,300
Novartis AG-ADR** 29,000 2,323,625
Proctor & Gamble Company 11,300 1,596,125
Merck & Company, Inc. 11,700 1,210,950
Abbott Laboratories 16,800 1,121,400
Dupont 14,400 905,400
Lilly Eli and Company 6,400 699,597
------------
20,028,547
Business Services
Cisco Systems, Inc.* 47,500 3,188,438
Interpublic Group of Companies 44,300 2,716,122
First Data Corporation 45,200 1,985,952
Oracle Corporation 33,800 1,702,675
Automatic Data Processing 34,000 1,598,000
Microsoft Corporation 8,100 1,023,637
Computer Associates 17,200 957,816
Reuters Holdings PLC ADR** 13,000 819,000
------------
13,991,640
Depository Institutions
Citicorp 16,500 1,989,273
Wells Fargo & Company 7,100 1,913,450
MBNA 45,000 1,648,125
Bank America Corporation 20,000 1,291,240
Nationsbank Corporation 19,400 1,251,300
J.P. Morgan & Company 10,000 1,043,750
Corestates Financial Corporation 18,200 978,250
Wachovia Corporation 13,500 787,212
Regions Financial Corporation 17,600 556,600
------------
11,459,200
Petroleum & Coal Products
Royal Dutch Petroleum 61,200 3,304,800
Texaco, Inc. 27,600 3,001,500
Exxon Corporation 36,000 2,214,000
------------
8,520,300
Insurance Carriers
American International Group 26,100 3,898,688
AFLAC, Inc. 59,775 2,824,369
Allstate Corporation 21,000 1,533,000
------------
8,256,057
Electronic & Other Electric Equipment
General Electric Company 72,500 4,739,687
Intel Corporation 20,800 2,949,690
------------
7,689,377
Communications
GTE 34,800 1,526,850
Nynex Corporation 22,000 1,267,750
SBC Communications, Inc. 18,800 1,163,250
Ameritech 16,700 1,134,548
Bellsouth Corporation 15,000 695,625
------------
5,788,023
Industrial Machinery & Equipment
Hewlett-Packard Company 36,600 2,049,600
International Business Machines
Corporation 14,000 1,262,618
3Com Corporation* 22,800 1,026,000
United Technologies 10,000 830,000
------------
5,168,218
Food & Kindred Products
The Coca-Cola Company 55,200 3,726,000
Oil & Gas Extraction
Diamond Offshore* 25,200 1,968,750
Schlumbereger, LTD. 13,000 1,625,000
------------
3,593,750
Holding & Other Investment Offices
First Industrial Realty Trust 28,000 819,000
CALI Realty Corporation 20,400 693,600
Felcor Suite Hotels, Inc. 17,300 644,425
Meditrust 15,600 622,050
Federal Realty Investment Trust 22,300 602,100
------------
3,381,175
Fabricated Metal Products
The Gillette Company 34,200 3,240,450
Food Stores
Safeway, Inc.* 68,600 3,164,175
Railroad Transportation
Burlington Northern/Santa Fe 31,000 2,786,125
Personal Services
Loewen Group, Inc.** 71,000 2,467,250
Transportation Equipment
Allied Signal, Inc. 15,000 1,260,000
Chrysler Corporation 24,000 787,488
------------
2,047,488
Miscellaneous Retail
Costco Company, Inc.* 57,700 1,896,888
Electric, Gas & Sanitary Services
Texas Utilities 19,500 671,521
Teco Energy, Inc. 21,000 536,802
Central & Southwest Corporation 19,000 403,750
------------
1,612,073
Hotels & Other Lodging Places
Mirage Resorts, Inc.* 61,800 1,560,450
Motion Pictures
Disney (Walt) Company 19,200 1,540,800
Non-Depository Institutions
Federal National Mortgage Association 34,400 1,500,700
General Merchandise
Sears Roebuck & Company 15,000 806,250
Wal-Mart Corporation 5,600 189,347
------------
995,597
Eating & Drinking Places
McDonald's Corporation 16,000 772,992
Building Materials & Gardening Supplies
Home Depot, Inc. 7,000 482,559
Health Services
MedPartners, Inc.* 8,000 173,000
Paper & Allied Product
Kimberly-Clark Corporation 3,300 164,175
------------
Total Common Stocks (Cost $71,257,320) $116,007,009
------------
SHORT-TERM INVESTMENTS:
Associates Corporation of North America
Master Note Fltg (5.57% at June 30, 1997) 4,333,800
------------
Total Short-Term Investments 4,333,800
------------
Total Investments $120,340,809
============
</TABLE>
SAFEKEEPING OF SECURITIES
Bank of Oklahoma, N.A.
Oklahoma City, OK
INVESTMENT MANAGER
American Fidelity Assurance Company
Oklahoma City, OK
INVESTMENT SUB ADVISORS
Lawrence Kelly & Associates, Inc. Todd Investment Advisors
Los Angeles, CA Louisville, KY
PARTICIPANT'S UNIT VALUE
June 1992 8.4491
Dec. 1992 9.1083
June 1993 9.0570
Dec. 1993 9.7090
June 1994 8.9789
Dec. 1994 9.0936
June 1995 10.8409
Dec. 1995 12.1986
June 1996 13.7321
Dec. 1996 15.3389
June 1997 17.8462
SERVICES PROVIDED BY AMERICAN FIDELITY
Services for Educators:
. Disability Income Plans
. Tax-Deferred Annuities
. Variable Annuities
. Fixed Annuities
. Universal Life Insurance
Cancer Protection
HR-10 Retirement Plans for the Self-Employed
Individual Retirement Annuities
Simplified Employee Pension Plans
Group Life and Permanent Group Ordinary
Young Advantage Life
Association and Group Life Plans
Individual Permanent and Term Life Insurance
HOME OFFICE
2000 CLASSEN CENTER
OKLAHOMA CITY, OKLA. 73106
GVA-276(7/97) Telephone: (405) 523-2000
<PAGE>
Proxy Results
During the six months prior ended June 30, 1997, American Fidelity Variable
Annuity Fund A Contract Owners voted on the following proposals. The pro-
posals were approved at the annual meeting on June 6, 1997. The description
of each proposal and number of units voted are as follows:
1. To elect the Fund's Board of Managers:
Units Units Voted
For Without Authority
-------------- -----------------
John W. Rex 3,693,979.9583 52,747.9457
Daniel D. Adams, Jr. 3,700,047.7093 46,680.1957
Jean G. Gumerson 3,676,197.4862 70,530.4188
Edward C. Joullian, III 3,688,829.2624 57,898.6426
Gregory M. Love 3,697,046.1503 49,681.7547
J. Dean Robertson 3,652,477.2400 94,250.6650
G. Rainey Williams 3,686,024.2967 60,703.6083
2. To ratify the selection of KPMG Peat Marwick, LLC
as the independent auditors of the Fund for the current year.
Units Voted Units Voted Units Voted
For Against Abstain
------------- ------------ -----------
3,586,857.7159 51,242.6856 108,627.5035
