File Nos. 333-
811-08178
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. ___ [ ]
Post-Effective Amendment No. ___ [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. ___ [ ]
(Check appropriate box or boxes.)
American Fidelity Separate Account B
_________________________________________
(Exact Name of Registrant)
American Fidelity Assurance Company
_________________________________________
(Name of Depositor)
2000 N. Classen Blvd., Oklahoma City, Oklahoma 73106
____________________________________________________________ __________
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (405) 523-2000
Name and Address of Agent for Service
Stephen P. Garrett
Senior Vice President
Law & Governmental Affairs Dept.
American Fidelity Corporation
2000 N. Classen Blvd.
Oklahoma City, OK 73106
Copies to:
Lynn K. Stone
Blazzard, Grodd & Hasenauer, P.C.
P.O. Box 5108
Westport, CT 06881
(203) 226-7866
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Filing.
Calculation of Registration Fee under the Securities Act of 1933:
Registrant is registering an indefinite number of securities under the
Securities Act of 1933 pursuant to Investment Company Act Rule 24f-2.
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The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
CROSS REFERENCE SHEET
(Required by Rule 495)
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Item No. Location
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PART A
Item 1. Cover Page Cover Page
Item 2. Definitions Glossary of Terms
Item 3. Synopsis Summary
Item 4. Condensed Financial Information Not Applicable
Item 5. General Description of Registrant, Depositor,
and Portfolio Companies Investment Options,
American Fidelity,
the Separate Account
Item 6. Deductions and Expenses Expenses
Item 7. General Description of Variable Annuity
Contracts The AFAdvantage
Variable Annuity
Item 8. Annuity Period Annuity Provisions
Item 9. Death Benefit Death Benefit
Item 10. Purchases and Contract Value How to Purchase the
AFAdvantage Variable
Annuity
Item 11. Redemptions Withdrawals
Item 12. Taxes Taxes
Item 13. Legal Proceedings. Legal Proceedings
Item 14. Table of Contents of the Statement of
Additional Information Table of Contents of
the Statement of
Additional Information
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CROSS REFERENCE SHEET (CONT'D)
(Required by Rule 495)
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Item No. Location
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PART B
Item 15. Cover Page Cover Page
Item 16. Table of Contents. Table of Contents
Item 17. General Information and History General Information
and History of the
Company
Item 18. Services Not Applicable
Item 19. Purchase of Securities Being Offered Not Applicable
Item 20. Underwriters Distributor
Item 21. Calculation of Performance Data Performance
Information
Item 22. Annuity Payments. Annuity Provisions
Item 23. Financial Statements Financial Statements
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PART C
Information required to be included in Part C is set forth under the
appropriate Item so numbered, in Part C to this Registration Statement.
PART A
THE AFADVANTAGE VARIABLE ANNUITY
issued by
AMERICAN FIDELITY SEPARATE ACCOUNT B
and
AMERICAN FIDELITY ASSURANCE COMPANY
___________, 1997
This prospectus describes the AFAdvantage Variable Annuity offered by American
Fidelity Assurance Company (American Fidelity, our, us or we). Our home office
is 2000 N. Classen Boulevard, Oklahoma City, Oklahoma 73106.
The annuity has 10 Investment Options - the Guaranteed Interest Account Option
and the following Portfolios:
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
Merrill Lynch Prime Bond Fund
Merrill Lynch Equity Growth Fund
Merrill Lynch American Balanced Fund
Merrill Lynch International Equity Focus Fund
Merrill Lynch High Current Income Fund
DREYFUS STOCK INDEX FUND
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
DREYFUS VARIABLE INVESTMENT FUND
Growth and Income Portfolio
Small Company Stock Portfolio
Please read this prospectus carefully before investing and keep it for future
reference. It contains important information about the AFAdvantage Variable
Annuity.
To learn more about the annuity offered by this prospectus, you can obtain a
copy of the Statement of Additional Information (SAI) dated _________, 1997.
The SAI has been filed with the Securities and Exchange Commission (SEC) and
is incorporated by reference into this prospectus. The Table of Contents of
the SAI is found on the last page of this prospectus. For a free copy of the
SAI, call us at (800) 662-1106 or write us at: P.O. Box 25523, Oklahoma City,
Oklahoma 73125-0523.
INVESTMENT IN A VARIABLE ANNUITY IS SUBJECT TO RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL. THE POLICIES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
TABLE OF CONTENTS
PAGE
GLOSSARY OF TERMS
SUMMARY
FEE TABLE
THE AFADVANTAGE VARIABLE ANNUITY
Policy Owner
Joint Owner
Beneficiary
Assignment of the Policy
ANNUITY PROVISIONS
Annuity Date
Selection of an Annuity Option
Annuity Payments
Annuity Options
HOW TO PURCHASE THE AFADVANTAGE VARIABLE ANNUITY
Purchase Payments
Allocation of Purchase Payments
Right to Examine Policy
Accumulation Units
INVESTMENT OPTIONS
Portfolios
Guaranteed Interest Account Option
Voting Rights
Substitution
Transfers
Transfers during the Accumulation Phase
Transfers during the Annuity Phase
PERFORMANCE
EXPENSES
Insurance Charges
Mortality and Expense Risk Charge
Administrative Charge
Distribution Expense Charge
Policy Maintenance Charge
Withdrawal Charge
Reduction or Elimination of the Withdrawal Charge
Transfer Fee
Premium Taxes
Income Taxes
Portfolio Expenses
TAXES
Annuities in General
Qualified and Non-Qualified Policies
Tax Treatment of Withdrawals - Non-Qualified Policies
Tax Treatment of Withdrawals - Qualified Policies
Tax Treatment of Withdrawals - Tax-Sheltered Annuities
Diversification
WITHDRAWALS
Systematic Withdrawal Program
Suspension of Payments or Transfers
LOANS
DEATH BENEFIT
Death Benefit Amount
Death of Owner Before Annuity Date
Death of Annuitant Before the Annuity Date
Death of Owner After the Annuity Date
Death of Annuitant After the Annuity Date
OTHER INFORMATION
American Fidelity
The Separate Account
Legal Proceedings
Distribution
Administration
Financial Statements
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
GLOSSARY OF TERMS
Some of the terms used in this prospectus are technical. To help you
understand these terms, we have defined them below and have capitalized them
throughout the prospectus.
ACCOUNTS: The Guaranteed Interest Account and the Portfolios.
ACCOUNT VALUE: The value of your Policy in the Investment Options during the
Accumulation Phase.
ACCUMULATION PHASE: Until you decide to begin receiving Annuity Payments, your
annuity is in the Accumulation Phase.
ACCUMULATION UNIT: The unit of measurement we use to keep track of the value
of your Policy invested in the Portfolios during the Accumulation Phase.
ANNUITANT: The natural person on whose life Annuity Payments are based.
ANNUITY DATE: The date Annuity Payments begin. You can choose the month and
year in which Annuity Payments will begin.
ANNUITY OPTIONS: You can choose among available pay-out plans for your Annuity
Payments. These are referred to as Annuity Options.
ANNUITY PAYMENTS: You can receive regular income payments from your Policy.
These are referred to as Annuity Payments.
ANNUITY PHASE: The period during which we make Annuity Payments.
ANNUITY UNIT: The unit of measurement we use to calculate your Annuity
Payments during the Annuity Phase.
BENEFICIARY: The person or entity you name to receive any death benefits.
FUNDS: Merrill Lynch Variable Series Funds, Inc., Dreyfus Stock Index Fund,
The Dreyfus Socially Responsible Growth Fund, Inc. and Dreyfus Variable
Investment Fund.
GUARANTEED INTEREST ACCOUNT OPTION: An investment option within our general
account which earns interest credited by us.
INVESTMENT OPTIONS: The Portfolios and the Guaranteed Interest Account Option.
JOINT OWNER: The Policy can be owned by you and your spouse (the Joint Owner).
NON-QUALIFIED: If you do not purchase the Policy under a Qualified plan, your
Policy is referred to as a Non-Qualified Policy.
POLICY: The AFAdvantage Variable Annuity.
POLICY ANNIVERSARY: The anniversary of the date your Policy was issued.
POLICY OWNER/OWNER: The person or entity entitled to ownership rights under a
Policy.
POLICY YEAR: The annual period which begins on the date your Policy was issued
and each anniversary of that date.
PORTFOLIOS: The variable investment options available under the Policy. Each
Portfolio has its own investment objective and is invested in a Fund or a
corresponding portfolio of a Fund.
PURCHASE PAYMENT: The money you invest to buy the Policy.
QUALIFIED: Policies purchased under special tax qualification rules (examples:
Individual Retirement Annuities, 403(b) Tax-Sheltered Annuities, H.R. 10 and
Corporate Pension and other qualified retirement plans).
TAX DEFERRAL: Tax deferral means that you are not taxed on earnings or
appreciation on the assets in your Policy until you take money out of your
Policy.
SUMMARY
The following information is a summary of some of the more important features
of your annuity Policy. More detailed information is contained in the
corresponding sections of this prospectus.
THE AFADVANTAGE VARIABLE ANNUITY. This prospectus describes the flexible
premium variable and fixed deferred annuity policy offered by American
Fidelity Assurance Company (American Fidelity). It is a contract between you,
the Policy Owner, and American Fidelity, an insurance company. The Policy
provides a means for investing on a Tax-Deferred basis in the Portfolios and
the Guaranteed Interest Account Option. The AFAdvantage Variable Annuity is
designed for people seeking long-term Tax-Deferred accumulation of assets,
generally for retirement or other long-term purposes. The Tax-Deferred feature
is most attractive to people in high federal and state tax brackets. You
should not buy the Policy if you are looking for a short-term investment or if
you cannot accept the risk of getting back less money than you put in.
Like all deferred annuities, your Policy has two phases: the Accumulation
Phase and the Annuity Phase. During the Accumulation Phase, you invest money
in your annuity and your earnings accumulate on a Tax-Deferred basis. Your
earnings are based on the investment performance of the Portfolios you
selected and/or the interest rate earned on the money you have in the
Guaranteed Interest Account. You can withdraw money from your Policy during
the Accumulation Phase. During the Accumulation Phase, the earnings are taxed
as income only when you make a withdrawal. A federal tax penalty may apply if
you make withdrawals before age 59 1/2. The Annuity Phase occurs when you
begin receiving regular payments from your Policy. Among other factors, the
amount of the payments you may receive during the Annuity Phase will depend
upon the amount of money you are able to accumulate in your Policy during the
Accumulation Phase.
ANNUITY PROVISIONS. You can receive monthly Annuity Payments from your Policy
under an Annuity Option. During the Annuity Phase, payments can come from the
Portfolios and/or the Guaranteed Interest Account.
HOW TO PURCHASE THE AFADVANTAGE VARIABLE ANNUITY. You may make purchase
payments at any time during the Accumulation Phase. Each payment must be at
least $25. You must complete an application and make your first Purchase
Payment to purchase the Policy.
INVESTMENT OPTIONS. You may allocate your money to the Guaranteed Interest
Account Option of American Fidelity or the following Portfolios:
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
Merrill Lynch Prime Bond Fund
Merrill Lynch Equity Growth Fund
Merrill Lynch American Balanced Fund
Merrill Lynch International Equity Focus Fund
Merrill Lynch High Current Income Fund
DREYFUS STOCK INDEX FUND
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
DREYFUS VARIABLE INVESTMENT FUND
Growth and Income Portfolio
Small Company Stock Portfolio
The Portfolios offer professionally managed investment choices and are fully
described in the attached prospectuses for the Funds. You can make or lose
money in the Portfolios, depending upon market conditions.
The Guaranteed Interest Account Option offers an interest rate that is
guaranteed by us. While your money is in the Guaranteed Interest Account
Option, the interest your money will earn (subject to a withdrawal charge on
any withdrawals from the Guaranteed Interest Account) as well as your
principal is guaranteed by American Fidelity.
EXPENSES. The following are the annual insurance charges which are deducted
from the average daily value of your Policy allocated to the Portfolios every
year: Mortality and Expense Risk Charge - 1.25%; Administrative Charge - .15%;
and Distribution Expense Charge - .10%. Each year we also deduct a $30 policy
maintenance charge from your Policy. There are also annual expenses of the
Portfolios which range from .30% to .96% of the average daily value of the
Portfolios, depending upon the Portfolio(s) you invest in.
You can transfer between accounts up to 12 times a Policy Year during the
Accumulation Phase. After that the charge is the lesser of $25 or 2% of the
amount transferred. You may make one transfer a Policy Year during the Annuity
Phase. The one transfer is free.
During the first Policy Year, any withdrawals you make will have a withdrawal
charge. After the first Policy Year, you may make a withdrawal of up to 10% of
the value of your Policy once each Policy Year without incurring a withdrawal
charge (referred to as the "free withdrawal amount"). If you do not use the
free withdrawal amount in any year, it may not be carried forward and used the
next Policy Year.
The withdrawal charge is a percentage of the amount withdrawn in excess of the
free withdrawal amount as shown below:
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Policy Year Withdrawal Charge %
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1 8%
2 7%
3 6%
4 5%
5 4%
6 3%
7 2%
8 1%
9 + 0%
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American Fidelity may assess a state premium tax charge which ranges from
0-4.0% (depending upon the state).
TAXES. Your earnings are not taxed until you take them out. In most cases, if
you take money out, earnings come out first and are taxed as income. If you
are younger than 59 1/2 when you take money out, you may be charged a federal
tax penalty on the taxable amounts withdrawn, which in most cases is 10% on
the taxable amounts. Payments during the Annuity Phase are considered partly
a return of your original investment. That part of each payment is not taxable
as income. If the Policy is tax-qualified, the entire payment may be taxable.
WITHDRAWALS. You may make a withdrawal at any time during the Accumulation
Phase. There may be limits to the amount you can withdraw from a Qualified
plan. Any partial withdrawal must be for at least $250 (there are exceptions
for withdrawals allowed under 403(b) and 401 hardship provisions), but a
withdrawal must not reduce the value of your Policy below $100. This
requirement is waived if the partial withdrawal is pursuant to the Systematic
Withdrawal Program. You may request a withdrawal or elect the Systematic
Withdrawal Program. Of course, you may also have to pay income tax and a tax
penalty on any money you take out.
DEATH BENEFIT. If you or the Annuitant die during the Accumulation Phase, the
person you have selected as your Beneficiary will receive a death benefit.
OTHER INFORMATION.
Free Look. If you cancel the Contract within 20 days after receiving it,
we will refund you the greater of the Purchase Payment paid or the value of
your Policy as of the earlier of the date we receive the Policy at our home
office or the date our agent receives the Policy.
No Probate. In most cases, when you die, your Beneficiary will receive
the death benefit without going through probate.
INQUIRIES. If you have any questions about your AFAdvantage Variable Annuity
or need more information, please contact us at:
American Fidelity Assurance Company
Annuity Services Department
P.O. Box 25523
Oklahoma City, OK 73125-0523
(800) 662-1106
FEE TABLE
OWNER TRANSACTION EXPENSES
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Withdrawal Charge
(see Note 2 below) Policy Year Withdrawal Charge
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1 8%
2 7%
3 6%
4 5%
5 4%
6 3%
7 2%
8 1%
9+ 0%
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Transfer Fee No charge for first 12 transfers in a Policy
Year during the Accumulation Phase and no
charge for one transfer allowed each Policy
Year during the Annuity Phase; thereafter the
fee is the lesser of $25 or 2% of the amount
transferred.
Policy Maintenance Charge $30 per Policy per Policy Year.
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SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Charge 1.25%
Administrative Charge .15%
Distribution Expense Charge .10%
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Total Separate Account Annual Expenses 1.50%
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FUND ANNUAL EXPENSES
(as a percentage of the average daily net assets of a Portfolio)
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Other
Expenses
Management (after expense Total Annual
Fees reimbursement) Expenses
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MERRILL LYNCH VARIABLE SERIES FUNDS INC.
Merrill Lynch Prime Bond Fund .44% .05% .49%
Merrill Lynch Equity Growth Fund .75% .06% .81%
Merrill Lynch American Balanced Fund .55% .05% .60%
Merrill Lynch International Equity Focus Fund .75% .14% .89%
Merrill Lynch High Current Income Fund .49% .05% .54%
DREYFUS STOCK INDEX FUND .245% .055% .30%
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND* .72% .24% .96%
DREYFUS VARIABLE INVESTMENT FUND
Growth and Income Portfolio .75% .08% .83%
Small Company Stock Portfolio* .56% .19% .75%
<FN>
* From time to time, The Dreyfus Corporation and, in the case of The Dreyfus Socially Responsible Growth Fund, Inc.,
NCM Capital Management Group, Inc., may waive all or part of their fees and/or voluntarily assume certain Fund
expenses. As of the date of this Prospectus, certain fees are being waived or expenses being assumed, in each case on
a voluntary basis. Without such waivers or reimbursements, the Management Fees, Other Expenses and Total Annual
Expenses that would have been incurred for the fiscal year ended December 31, 1996 would be - The Dreyfus Socially
Responsible Growth Fund, Inc.: .75%, .24% and .99%; and Dreyfus Variable Investment Fund - Small Company Stock
Portfolio: .75%, .19% and .94%. There is no guarantee that any fee waivers or expense reimbursements will continue in
the future.
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EXAMPLES
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on your money if: (a) you surrender your Policy at the end of
each time period; or (b) if your Policy is not surrendered or is annuitized:
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Time Periods
1 Year 3 Years
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
Merrill Lynch Prime Bond Fund a) $122.83 a) $188.54
b) $ 42.25 b) $127.19
Merrill Lynch Equity Growth Fund a) $125.87 a) $197.39
b) $ 45.46 b) $136.66
Merrill Lynch American Balanced Fund a) $123.84 a) $191.59
b) $ 43.35 b) $130.46
Merrill Lynch International Equity Focus Fund a) $126.51 a) $199.59
b) $ 42.26 b) $139.01
Merrill Lynch High Current Income Fund a) $123.29 a) $189.93
b) $ 42.75 b) $128.68
DREYFUS STOCK INDEX FUND a) $121.08 a) $183.24
b) $ 40.34 b) $121.53
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. a) $127.15 a) $201.51
b) $ 46.96 b) $141.06
DREYFUS VARIABLE INVESTMENT FUND
Growth and Income Portfolio a) $125.96 a) $197.94
b) $ 45.66 b) $137.24
Small Company Stock Portfolio a) $125.22 a) $195.74
b) $ 44.86 b) $134.89
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THE ANNUAL EXPENSES OF THE PORTFOLIOS ARE BASED ON DATA PROVIDED BY THE FUNDS.
WE HAVE NOT INDEPENDENTLY VERIFIED SUCH DATA.
1. The purpose of the Fee Table is to show you the various expenses you
can expect to incur directly or indirectly with the Policy. The Fee Table
reflects expenses of the Separate Account as well as the Portfolios.
2. Under certain circumstances, you can make a withdrawal without
incurring the withdrawal charge. (See Expenses - Withdrawal Charge.)
3. Premium taxes are not reflected. They may apply.
4. The assumed average Policy size is $1,360. The $30 policy maintenance
charge is reflected in the examples as $22.06.
5. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
As of the date of this prospectus, the sale of the AFAdvantage Variable
Annuity had not begun. Therefore, no condensed financial information is
presented.
THE AFADVANTAGE VARIABLE ANNUITY
An annuity is a contract between you, the Policy Owner, and an insurance
company (in this case American Fidelity), where the insurance company promises
to pay you (or someone else you choose) an income in the form of Annuity
Payments beginning on a date chosen by you. Until you decide to begin
receiving Annuity Payments, your annuity is in the Accumulation Phase. Once
you begin receiving Annuity Payments, your Policy is in the Annuity Phase. If
you or the Annuitant die during the Accumulation Phase, American Fidelity will
pay a death benefit to your Beneficiary.
The Policy benefits from Tax Deferral. Tax deferral means that you are not
taxed on earnings or appreciation on the assets in your Policy until you take
money out of your Policy.
The Policy is called a variable annuity because you can choose among the
available Portfolios and, depending upon market conditions, you can make or
lose money in any of these Portfolios. If you select the variable annuity
portion of the Policy, the amount of money you are able to accumulate in your
Policy during the Accumulation Phase depends in part upon the investment
performance of the Portfolio(s) you select. The Annuity Payments you will
receive during the Annuity Phase can come from the Portfolios and/or the
Guaranteed Interest Account.
The Guaranteed Interest Account Option offers an interest rate that is
guaranteed by American Fidelity. If you select the Guaranteed Interest Account
Option, your money will be placed with our other general assets. If you select
the Guaranteed Interest Account Option, the amount of money you are able to
accumulate in your Policy during the Accumulation Phase depends upon the total
interest credited to your Policy.
POLICY OWNER . You, as the Policy Owner, have all the rights under the Policy.
You can name a new Policy Owner. A change of Owner will revoke any prior
designation of Owner. Any ownership changes must be sent to our home office on
a form we accept. The change will go into effect when it is signed, subject to
any payments we make or other actions we take before we record it. American
Fidelity will not be liable for any payment made or action taken before it
records the change. The Policy Owner is as designated at the time the Policy
is issued, unless changed. A CHANGE OF OWNERSHIP MAY BE A TAXABLE EVENT.
JOINT OWNER . The Policy can be owned by Joint Owners. If Joint Owners are
named, any Joint Owner must be the spouse of the other Owner. Upon the death
of either Owner, the surviving spouse will be the primary Beneficiary. Any
other Beneficiary designation will be treated as a contingent Beneficiary
unless otherwise indicated in a form we accept.
BENEFICIARY . The Beneficiary is the person(s) or entity you name to receive
any death benefit. The Beneficiary is named at the time the Policy is issued
unless changed at a later date. If the Beneficiary and the Policy Owner or
Annuitant, as applicable, die at the same time, we will assume that the
Beneficiary died first for purposes of payment of the death benefit. You can
name any Beneficiary to be an irrevocable Beneficiary. The interest of an
irrevocable Beneficiary cannot be changed without his or her consent.
You can change the Beneficiary at any time during the Annuitant's life. To do
so, you need to send a request to our home office. The request must be on a
form we accept. The change will go into effect when signed, subject to any
payments we make or actions we take before we record the change. A change
cancels all prior Beneficiaries, except a change will not cancel any
irrevocable Beneficiary without his or her consent. The interest of the
Beneficiary will be subject to: any assignment of the Policy which is binding
on us, and any Annuity Option in effect at the Annuitant's death.
ASSIGNMENT OF THE POLICY
During the Annuitant's life, you can assign some or all of your rights under
the Policy to someone else. A signed copy of the assignment must be sent to
our home office on a form we accept. The assignment will go into effect when
it is signed, subject to any payments we make or other actions we take before
we record it. We are not responsible for the validity or effect of any
assignment. If there are irrevocable Beneficiaries, you need their consent
before assigning your ownership rights in the Policy. Any assignment made
after the death benefit has become payable will be valid only with our
consent. If the Policy is assigned, your rights may only be exercised with the
consent of the assignee of record. AN ASSIGNMENT MAY BE A TAXABLE EVENT.
If the Policy is issued pursuant to a Qualified plan, there may be limitations
on your ability to assign it.
ANNUITY PROVISIONS
ANNUITY DATE
You can receive regular monthly income payments (Annuity Payments) under your
Policy. You can choose the month and year in which those payments begin. We
call that date the Annuity Date. You can select an Annuity Date at any time
during the Accumulation Phase. You must notify us of this date at least 30
days prior to the date you want your Annuity Payments to begin. Prior to the
Annuity Date, you may change the Annuity Date by written request. Any change
must be requested at least 30 days prior to the new Annuity Date. Your Annuity
Date must be the first day of a calendar month. The Annuity Date may not be
later than the earlier of when the Annuitant reaches attained age 85 or the
maximum date permitted under state law.
SELECTION OF AN ANNUITY OPTION
You can choose among income plans. We call those Annuity Options. A selection
to receive Annuity Payments under an Annuity Option must be made at least 30
days prior to the Annuity Date. If no option is selected, Option 2 with 120
monthly payments guaranteed will automatically be applied. Prior to the
Annuity Date, you may change the Annuity Option selected by written request.
Any change must be requested at least 30 days prior to the Annuity Date. If an
option is based on life expectancy, we will require proof of the payee's date
of birth.
ANNUITY PAYMENTS
Annuity Payments are paid in monthly installments. Annuity Payments can be
made on a variable basis (which means they will be based on the investment
performance of the Portfolios) and/or on a fixed basis (which means they will
come from the Guaranteed Interest Account). However, payments under Option 4
can only come from the Guaranteed Interest Account (fixed annuity). Depending
on your election, the value of your Policy (adjusted for the policy
maintenance charge and any taxes) will be applied to provide the Annuity
Payment. If no election has been made 30 days prior to the Annuity Date,
amounts in the Guaranteed Interest Account will be used to provide a fixed
annuity and amounts in the Portfolios will be used to provided a variable
annuity. The amount of the first Annuity Payment will depend on the Annuity
Option elected and the age of the Annuitant at the time the first payment is
due.
ANNUITY OPTIONS
You can choose one of the following Annuity Options or any other Annuity
Option acceptable to us. After Annuity Payments begin, you cannot change the
Annuity Option.
OPTION 1. LIFETIME ONLY ANNUITY: We will make monthly payments during the
life of the Annuitant. If this option is elected, payments will stop when the
Annuitant dies.
OPTION 2. LIFETIME ANNUITY WITH GUARANTEED PERIODS: We will make monthly
payments for the guaranteed period selected during the life of the Annuitant.
When the Annuitant dies, any amounts remaining under the guaranteed period
selected will be distributed to the Beneficiary at least as rapidly as they
were being paid as of the date of the Annuitant's death. The guaranteed period
may be 10 years or 20 years.
OPTION 3. JOINT AND SURVIVOR ANNUITY: We will make monthly payments during
the joint lifetime of the Annuitant and a Joint Annuitant. Payments will
continue during the lifetime of the surviving Annuitant and will be computed
on the basis of 100%, 66 2/3% or 50% of the Annuity Payment in effect during
the joint lifetime.
OPTION 4. PERIOD CERTAIN: We will make monthly payments for a specified
period. The specified period must be at least five years and cannot be more
than 30 years. This option is available as a fixed annuity only.
HOW TO PURCHASE THE AFADVANTAGE VARIABLE ANNUITY
PURCHASE PAYMENTS
A Purchase Payment is the money you give us to buy the Policy. You may make
Purchase Payments at any time during the Accumulation Phase. You may increase,
decrease, or change the frequency of such payments. However, each Purchase
Payment must be for at least $25. If in any year no Purchase Payments are
made, the Policy will not lapse. We reserve the right to reject any
application or Purchase Payment. We may deduct amounts from Purchase Payments
for premium taxes, if any. At the time you buy the Policy, you and the
Annuitant cannot be older than 85 years old.
ALLOCATION OF PURCHASE PAYMENTS
We will allocate the first net Purchase Payment to one or more Investment
Options according to your instructions. We will allocate subsequent Purchase
Payments in the same manner as the first unless you change your instructions.
You may change the allocations of Investment Options by using a form we
accept. We reserve the right to limit the available Investment Options from
which you may choose. All allocations must be in whole percentages, and must
not be less than $25.
Once we receive your Purchase Payment and application, we will issue your
Policy and allocate your first Purchase Payment within 2 business days. If you
do not give us all of the information we need, we will contact you to get it.
If for some reason we are unable to complete this process within 5 business
days, we will either send back your money or get your permission to keep it
until we get all of the necessary information. We will credit your subsequent
Purchase Payments to your Policy within one business day. Our business day
closes when the New York Stock Exchange closes, which is usually at 4:00 p.m.
Eastern time.
RIGHT TO EXAMINE POLICY
If you change your mind about owning the Policy, you can cancel it within 20
days after receiving it. When you cancel the Policy within this time period,
we will not assess a withdrawal charge. If you return the Policy, it will be
void from the beginning and we will refund to you the greater of: the Purchase
Payments paid, or the value of your Policy as of the earlier of the date we
receive the Policy at our home office, or the date our agent receives the
Policy.
ACCUMULATION UNITS
The value of the portion of your Policy allocated to the Portfolios will go up
or down depending upon the investment performance of the Portfolio(s) you
choose. The value of your Policy will also depend on the expenses of the
Policy. In order to keep track of the value of your Policy, we use a
measurement called an Accumulation Unit. During the Annuity Phase, we call the
unit an Annuity Unit.
Every business day we determine the value of an Accumulation Unit for a share
of a Portfolio by multiplying the Accumulation Unit value for the previous
period by a factor for each Portfolio for the current period. The factor for
each Portfolio is determined by:
1. dividing the value of the underlying Portfolio share at the end of
the current period by the value of an underlying Portfolio share for the
previous period; and
2. subtracting from that amount any mortality and expense risk,
administrative and distribution expense charges.
The value of an Accumulation Unit may go up or down from day to day.
When you make a Purchase Payment, we credit your Policy with Accumulation
Units. The number of Accumulation Units credited is determined by dividing the
amount of the Purchase Payment allocated to a Portfolio by the value of the
Accumulation Unit for that Portfolio.
We calculate the value of an Accumulation Unit for each Portfolio after the
New York Stock Exchange closes each day and then credit your Policy
accordingly.
EXAMPLE:
On Thursday we receive an additional Purchase Payment of $100 from you. You
direct this to go to the Merrill Lynch Equity Growth Fund investment option.
When the New York Stock Exchange closes on that Thursday, we determine that
the value of an Accumulation Unit for the Merrill Lynch Equity Growth Fund is
$10.75. We then divide $100 by $10.75 and credit your Policy on Thursday night
with 9.30 Accumulation Units for the Merrill Lynch Equity Growth Fund.
INVESTMENT OPTIONS
When you buy the Policy you can allocate your money to the Portfolios listed
below and/or the Guaranteed Interest Account.
PORTFOLIOS
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
Merrill Lynch Variable Series Funds, Inc. is an open-end management investment
company with sixteen separate funds. Merrill Lynch Asset Management, L.P. is
the investment adviser to the Funds. The following Funds are available under
the Policy:
Merrill Lynch Prime Bond Fund
Merrill Lynch Equity Growth Fund
Merrill Lynch American Balanced Fund
Merrill Lynch International Equity Focus Fund
Merrill Lynch High Current Income Fund
DREYFUS STOCK INDEX FUND
Dreyfus Stock Index Fund is an open-end, non-diversified, management
investment company. The Dreyfus Corporation serves as the Fund's manager.
Dreyfus has hired its affiliate, Mellon Equity Associates, to serve as the
Fund's index fund manager and provide day-to-day management of the Fund's
investments.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
The Dreyfus Socially Responsible Growth Fund, Inc. is an open-end, diversified
management investment company. The Dreyfus Corporation serves as the Fund's
investment adviser. NCM Capital Management Group, Inc. serves as the Fund's
sub-investment adviser and provides day-to-day management of the Fund's
portfolio.
THE DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund is an open-end management investment company
with thirteen portfolios. The Dreyfus Corporation serves as the investment
adviser. The following Funds are available under the Policy:
Growth and Income Portfolio
Small Company Stock Portfolio
Additional Portfolios and/or Funds may be available in the future.
Shares of the Funds are issued and redeemed in connection with investments in
and payments under certain variable annuity contracts and variable life
insurance policies of various life insurance companies which may or may not be
affiliated. The Funds do not believe that offering their shares in this manner
will be disadvantageous to you. Nevertheless, the Board of Trustees or the
Boards of Directors, as applicable, intend to monitor events in order to
identify any material irreconcilable conflicts which may possibly arise and to
determine what action, if any, should be taken. If such a conflict were to
occur, one or more insurance company separate accounts might withdraw its
investments in a Portfolio. An irreconcilable conflict might result in the
withdrawal of a substantial amount of a Portfolio's assets which could
adversely affect such Portfolio's net asset value per share.
YOU SHOULD READ THE PROSPECTUSES FOR THE FUNDS CAREFULLY BEFORE INVESTING.
THEY CONTAIN DETAILED INFORMATION ABOUT THE PORTFOLIOS AND ARE ATTACHED TO
THIS PROSPECTUS.
GUARANTEED INTEREST ACCOUNT OPTION
The Guaranteed Interest Account Option is an investment option within our
general account which earns interest credited by us.
Because of certain exemptive and exclusionary provisions, interests in the
Guaranteed Interest Account are not registered under the Securities Act of
1933 and the Guaranteed Interest Account is not registered as an investment
company under the Investment Company Act of 1940. Therefore, neither the
Guaranteed Interest Account nor any interests in it are subject to the
provisions of these Acts. The Company has been advised that the staff of the
Securities and Exchange Commission has not reviewed the disclosure in this
prospectus relating to the Guaranteed Interest Account Option. Disclosures
regarding the Guaranteed Interest Account may, however, be subject to certain
generally applicable provisions of the federal securities laws relating to the
accuracy and completeness of statements made in prospectuses.
VOTING RIGHTS
American Fidelity is the legal owner of the Portfolio shares. However,
American Fidelity believes that when a Portfolio solicits proxies in
conjunction with a shareholder vote, it is required to obtain from you and
other Policy Owners instructions as to how to vote those shares. When we
receive those instructions, we will vote all of the shares we own in
proportion to those instructions. Should we determine that we are no longer
required to comply with the above, we will vote the shares in our own right.
SUBSTITUTION
American Fidelity may substitute one of the Portfolios you have selected with
another Portfolio. We would not do this without the prior approval of the
Securities and Exchange Commission. We will give you notice of our intention
to do this.
TRANSFERS
You may direct us to make transfers between all Investment Options. A transfer
request must be in a form we accept. We reserve the right to limit the number
of transfers that may be made. If you elect to use this transfer privilege, we
will not be liable for transfers made as instructed by you. All transfers must
be in whole percentages. All transfers made on a given date count as one
transfer.
We reserve the right, at any time and without prior notice, to end, suspend or
change the transfer privilege.
TRANSFERS DURING THE ACCUMULATION PHASE . If you make more than 12 transfers
in a Policy Year, there is a transfer fee deducted. The fee is the lesser of
$25 per transfer or 2% of the amount transferred. The minimum amount which you
can transfer is $500 from an Account or your entire value in the Account. All
transfers must be in whole percentages.
TRANSFERS DURING THE ANNUITY PHASE . You may make transfers among the
Portfolios. You may also make transfers from the Portfolios to the Guaranteed
Interest Account Option to provide for a fixed annuity. You may only make one
transfer each Policy year during the Annuity Phase. There is no transfer fee
charged for the one transfer. You cannot make a transfer from your fixed
annuity to a Portfolio.
PERFORMANCE
American Fidelity may periodically advertise performance based on the
historical performance of the various Portfolios. American Fidelity will
calculate performance by determining the percentage change in the value of an
Accumulation Unit by dividing the increase (decrease) for that unit by the
value of the Accumulation Unit at the beginning of the period. This
performance number reflects the deduction of the insurance charges and
expenses of the Portfolios. It does not reflect the deduction of any
applicable withdrawal charge and policy maintenance charge. Results calculated
without the withdrawal charge and policy maintenance charge will be higher.
Any advertisement will also include average annual total return figures which
reflect the deduction of the insurance charges, policy maintenance charge,
withdrawal charges and the expenses of the Funds.
For periods starting prior to the date the Policies were first offered, the
performance will be based on the historical performance of the corresponding
Portfolios, modified to reflect the charges and expenses of the AFAdvantage
Variable Annuity as if the Policies had been in existence during the period
stated in the advertisement. These figures should not be interpreted to
reflect actual historic performance.
We may also in the future advertise yield information for one or more of the
Portfolios. If we do, we will provide you with information regarding how yield
is calculated. More detailed information regarding how performance is
calculated is found in the SAI.
Any past performance does not guarantee future results of the Portfolios.
EXPENSES
There are charges and other expenses associated with the Contract that will
reduce your investment return. These charges and expenses are:
INSURANCE CHARGES
We deduct insurance charges each day. We do this as part of the calculation of
the value of the Accumulation Units during the Accumulation Phase and the
Annuity Units during the Annuity Phase. The insurance charges are: 1) the
mortality and expense risk charge; 2) the administrative charge; and 3) the
distribution expense charge.
MORTALITY AND EXPENSE RISK CHARGE . This charge is equal, on an annual
basis, to 1.25% of the average daily value of the Policy invested in a
Portfolio, after the deduction of expenses. This charge compensates us for all
the insurance benefits provided by your Policy (for example, the guarantee of
annuity rates, the death benefits, certain expenses related to the Policy, and
for assuming the risk (expense risk) that the current charges will be
insufficient in the future to cover the cost of administering the Policy).
ADMINISTRATIVE CHARGE . This charge is equal, on an annual basis, to .15%
of the average daily value of the Policy invested in a Portfolio, after the
deduction of expenses. This charge may be increased but will never be more
than .25% of the average daily value of the Policy invested in a Portfolio.
This charge, together with the policy maintenance charge (which is explained
below), is for all the expenses associated with the administration of the
Policy. Some of these expenses include: preparation of the Policy,
confirmations, annual reports and statements, maintenance of Policy records,
personnel costs, legal and accounting fees, filing fees, and computer and
systems costs.
DISTRIBUTION EXPENSE CHARGE . This charge is equal, on an annual basis,
to .10% of the average daily value of the Policy invested in a Portfolio,
after the deduction of expenses. This charge may be increased but will never
be more than .25% of the average daily value of the Policy invested in a
Portfolio. This charge compensates American Fidelity for the costs associated
with the distribution of the Policies.
POLICY MAINTENANCE CHARGE
Every Policy Year American Fidelity deducts $30 from your Policy as a policy
maintenance charge. American Fidelity reserves the right to change the policy
maintenance charge, however, it will never be more than $36 per year. The
charge will be deducted pro-rata from the Accounts. During the Accumulation
Phase, the policy maintenance charge will be deducted on each Policy
Anniversary. If you make a total withdrawal on other than a Policy
Anniversary, the policy maintenance charge will be deducted at the time of the
withdrawal. During the Annuity Phase, the charge will be deducted pro-rata
from Annuity Payments.
WITHDRAWAL CHARGE
Withdrawals may be subject to a withdrawal charge. During the Accumulation
Phase, you can make withdrawals from your Policy (see the "Withdrawals"
section). During the first Policy Year, all withdrawals will have a withdrawal
charge. After the first Policy Year, you can make a withdrawal of up to 10% of
the value of your Policy once each Policy Year without incurring a withdrawal
charge (free withdrawal amount). If you do not use the free withdrawal amount
in any year, it cannot be carried forward to the next Policy Year.
The withdrawal charge is a percentage of the amount withdrawn in excess of the
free withdrawal amount as shown below:
<TABLE>
<CAPTION>
<S> <C>
Policy Year Withdrawal Charge %
- -------------------- -------------------
1 8%
2 7%
3 6%
4 5%
5 4%
6 3%
7 2%
8 1%
9+ 0%
</TABLE>
The withdrawal charge is calculated at the time of each withdrawal and will
never exceed 8% of the total Purchase Payments. For partial withdrawals, the
charge will be deducted from the value of your Policy remaining. No withdrawal
charge will be applied when a death benefit is paid or payment under any
annuity option providing at least seven annual or 72 monthly payments.
NOTE: For tax purposes, withdrawals are considered to have come from the last
money you put into the Policy. Thus, for tax purposes, earnings are considered
to come out first. THERE ARE LIMITS TO THE AMOUNT YOU CAN WITHDRAW FROM A
QUALIFIED PLAN KNOWN AS SECTION 403(b) PLAN. See Taxes and the discussion in
the SAI.
REDUCTION OR ELIMINATION OF THE WITHDRAWAL CHARGE
American Fidelity will reduce or eliminate the amount of the withdrawal charge
when the Policy is sold under circumstances which reduce its sales expenses.
Some examples are: if there is a large group of individuals that will be
purchasing the Policy or a prospective purchaser already had a relationship
with American Fidelity. American Fidelity will not deduct a withdrawal charge
under a Policy issued to an officer, director or employee of American Fidelity
or any of its affiliates. Any circumstances resulting in the reduction or
elimination of the withdrawal charge requires our prior approval.
TRANSFER FEE
There is no charge for the first 12 transfers in a Policy Year during the
Accumulation Phase. Thereafter, the fee is the lesser of $25 or 2% of the
amount transferred. During the Annuity Phase, there is no charge for the one
transfer allowed during each Policy Year.
The transfer fee is deducted from the Investment Option which is the source of
the transfer. If your entire interest in an Investment Option is being
transferred, the transfer fee will be deducted from the amount being
transferred. If you make transfers from multiple Investment Options, the
transfer fee will be deducted pro-rata from each source Investment Option.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. American Fidelity is responsible for the
payment of these taxes and will make a deduction from the value of your Policy
for them. Some of these taxes are due when the Policy is issued, others are
due when Annuity Payments begin. It is our current practice to pay any premium
taxes when they become payable to the states. Premium taxes generally range
from 0% to 4.0%, depending on the state.
INCOME TAXES
American Fidelity will deduct from the Policy any income taxes which it may
incur because of the Policy. Currently, American Fidelity is not making any
such deductions.
PORTFOLIO EXPENSES
There are deductions from and expenses paid out of the assets of the various
Portfolios which are described in the attached prospectuses for the Funds.
TAXES
NOTE: AMERICAN FIDELITY HAS PREPARED THE FOLLOWING INFORMATION ON TAXES AS A
GENERAL DISCUSSION OF THE SUBJECT. IT IS NOT INTENDED AS TAX ADVICE. YOU
SHOULD CONSULT YOUR OWN TAX ADVISER ABOUT YOUR OWN CIRCUMSTANCES. WE HAVE
INCLUDED ADDITIONAL INFORMATION REGARDING TAXES IN THE STATEMENT OF ADDITIONAL
INFORMATION.
ANNUITIES IN GENERAL
Annuity contracts are a means of setting aside money for future needs -
usually retirement. Congress recognized how important saving for retirement
was and provided special rules in the Internal Revenue Code (Code) for
annuities.
Basically, these rules provide that you will not be taxed on the earnings on
the money held in your annuity until you take the money out. This is referred
to as Tax Deferral. There are different rules regarding how you will be taxed
depending upon how you take the money out and the type of Policy - Qualified
or Non-Qualified (see following sections).
You, as the Owner, will not be taxed on increases in the value of your Policy
until a distribution occurs - either as a withdrawal or as Annuity Payments.
When you make a withdrawal you are taxed on the amount of the withdrawal that
is earnings. For Annuity Payments, different rules apply. A portion of each
Annuity Payment you receive will be treated as a partial return of your
Purchase Payments and will not be taxed. The remaining portion of the Annuity
Payment will be treated as ordinary income. How the Annuity Payment is divided
between taxable and non-taxable portions depends upon the period over which
the Annuity Payments are expected to be made. Annuity Payments received after
you have received all of your Purchase Payments are fully includible in
income.
When a Non-Qualified Policy is owned by a non-natural person (e.g., a
corporation or certain other entities other than tax-qualified trusts), the
Policy will generally not be treated as an annuity for tax purposes. This
means that the Policy may not receive the benefits of Tax-Deferral. Income may
be taxed as ordinary income every year.
QUALIFIED AND NON-QUALIFIED POLICIES
If you purchase the Policy under a Qualified plan, your Policy is referred to
as a Qualified Policy. Examples of Qualified plans are: Individual Retirement
Annuities (IRAs), Tax-Sheltered Annuities (sometimes referred to as 403(b)
Policies), H.R. 10 Plans (sometimes referred to as Keogh plans) and Corporate
Pension and Profit-Sharing Plans.
If you do not purchase the Policy under a Qualified plan, your Policy is
referred to as a Non-Qualified Policy.
TAX TREATMENT OF WITHDRAWALS - NON-QUALIFIED POLICIES
If you make a withdrawal from your Policy, the Code treats such a withdrawal
as first coming from earnings and then from your Purchase Payments. In most
cases, such withdrawn earnings are includible in income.
The Code also provides that any amount received under an annuity contract
which is included in income may be subject to a tax penalty. The amount of the
penalty is equal to 10% of the amount that is includible in income. Some
withdrawals will be exempt from the penalty. They include any amounts: (1)
paid on or after the taxpayer reaches age 59 1/2; (2) paid after the Owner
dies; (3) paid if the taxpayer becomes totally disabled (as that term is
defined in the Code); (4) paid in a series of substantially equal payments
made annually (or more frequently) for the life or life expectancy of the
taxpayer; (5) paid under an immediate annuity; or (6) which come from purchase
payments made prior to August 14, 1982.
The Policy provides that when the Annuitant dies prior to the Annuity Date, a
death benefit will be paid to the Beneficiary. If the Owner is not the
Annuitant, such payments made when the Annuitant dies do not qualify for the
death of Owner exception described above, and will be subject to the 10% tax
penalty unless the Beneficiary is 59 1/2 years old or one of the other
exceptions to the penalty applies.
TAX TREATMENT OF WITHDRAWALS - QUALIFIED POLICIES
The above information describing the taxation of Non-Qualified Policies does
not apply to Qualified Policies. In the case of a withdrawal under a Qualified
Policy, a ratable portion of the amount received is taxable, generally based
on the ratio of your cost basis to your total accrued benefit under the
retirement plan. The Code imposes a 10% penalty tax on the taxable portion of
any distribution from qualified retirement plans, including Policies issued
and qualified under Code Sections 403(b) (Tax-Sheltered Annuities), 408(b)
(Individual Retirement Annuities) and 401 (H.R. 10 and Corporate Pension and
Profit-Sharing Plans). To the extent amounts are not includible in gross
income because they have been properly rolled over to an IRA or to another
eligible Qualified Plan, no tax penalty will be imposed. The tax penalty will
not apply to the following distributions: (a) if distribution is made on or
after the date on which the Owner or Annuitant (as applicable) reaches age 59
; (b) distributions following the death or disability of the Owner or
Annuitant (as applicable) (for this purpose disability is as defined in
Section 72(m)(7) of the Code); (c) after separation from service,
distributions that are part of substantially equal periodic payments made not
less frequently than annually for the life (or life expectancy) of the Owner
or Annuitant (as applicable) or the joint lives (or joint life expectancies)
of such Owner or Annuitant (as applicable) and his designated beneficiary;
(d) distributions to an Owner or Annuitant (as applicable) who has separated
from service after he has attained age 55; (e) distributions made to the Owner
or Annuitant (as applicable) to the extent such distributions do not exceed
the amount allowable as a deduction under Code Section 213 to the Owner or
Annuitant (as applicable) for amounts paid during the taxable year for medical
care; (f) distributions made to an alternate payee pursuant to a qualified
domestic relations order; and (g) distributions from an Individual Retirement
Annuity for the purchase of medical insurance (as described in Section
213(d)(1)(D) of the Code) for the Owner or Annuitant (as applicable) and his
or her spouse and dependents if the Owner or Annuitant (as applicable) has
received unemployment compensation for at least 12 weeks. This exception will
no longer apply after the Owner or Annuitant (as applicable) has been
re-employed for at least 60 days. The exceptions stated in items (d) and (f)
above do not apply in the case of an Individual Retirement Annuity. The
exception stated in item (c) applies to an Individual Retirement Annuity
without the requirement that there be a separation from service.
A more complete discussion of withdrawals from Qualified Policies is contained
in the SAI.
TAX TREATMENT OF WITHDRAWALS - TAX-SHELTERED ANNUITIES
The Code limits the withdrawal of purchase payments made by owners from
certain Tax-Sheltered Annuities. Withdrawals can only be made when an owner:
(1) reaches age 59 1/2; (2) leaves his/her job; (3) dies; (4) becomes disabled
(as that term is defined in the Code); or (5) in the case of hardship.
However, in the case of hardship, the owner can only withdraw the purchase
payments and not any earnings.
DIVERSIFICATION
The Code provides that the underlying investments for a variable annuity must
satisfy certain diversification requirements in order to be treated as an
annuity contract. American Fidelity believes that the Portfolios are being
managed so as to comply with the requirements.
Neither the Code nor the Internal Revenue Service Regulations issued to date
provide guidance as to the circumstances under which you, because of the
degree of control you exercise over the underlying investments, and not
American Fidelity would be considered the owner of the shares of the
Portfolios. If this occurs, it will result in the loss of the favorable tax
treatment for the Policy. It is unknown to what extent under federal tax law
Owners are permitted to select Portfolios, to make transfers among the
Portfolios or the number and type of Portfolios Owners may select from. If any
guidance is provided which is considered a new position, then the guidance
would generally be applied prospectively. However, if such guidance is
considered not to be a new position, it may be applied retroactively. This
would mean that you, as the Owner of the Policy, could be treated as the owner
of the Portfolios.
Due to the uncertainty in this area, American Fidelity reserves the right to
modify the Policy in an attempt to maintain favorable tax treatment.
WITHDRAWALS
You can have access to the money in your Policy: (1) by making a withdrawal
(either a partial or a total withdrawal); (2) by receiving Annuity Payments;
or (3) when a death benefit is paid to your Beneficiary. Withdrawals can only
be made during the Accumulation Phase.
You may withdraw all or some of the value of your Policy, minus taxes due, if
any, minus the withdrawal charge and policy maintenance charge. You must apply
for a withdrawal using a form we accept. Any partial withdrawal amount must be
at least $250, with exceptions for hardship. This requirement is waived if the
partial withdrawal is pursuant to the Systematic Withdrawal Program (see
below). After a withdrawal, the value of your Policy cannot be less than $100.
Any amount withdrawn will be deducted pro-rata from the Investment Options. If
you want to withdraw amounts in any other proportion, you must tell us using a
form we accept.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY
WITHDRAWAL YOU MAKE.
There are limits to the amount you can withdraw from a Qualified plan referred
to as a 403(b) plan. For a more complete explanation see - Taxes and the
discussion in the SAI.
SYSTEMATIC WITHDRAWAL PROGRAM
After the first Policy year, you can participate in a Systematic Withdrawal
Program in lieu of the 10% free withdrawal option. If the total amount of
systematic withdrawals during a Policy Year exceeds the 10% free withdrawal
amount, a withdrawal charge will be incurred. During the Policy Year that
systematic withdrawals begin, the 10% free withdrawal amount will be based on
the value of your Policy on the business day before you request systematic
withdrawals. The request must be made on a form we accept. During subsequent
years, the free withdrawal amount will be based on the value of your Policy on
the last Policy Anniversary. Systematic withdrawals can be made monthly,
quarterly or semi-annually. We reserve the right to limit the terms and
conditions under which systematic withdrawals can be elected and to stop
offering any or all systematic withdrawals at any time.
INCOME TAXES AND TAX PENALTIES MAY APPLY TO SYSTEMATIC WITHDRAWALS.
SUSPENSION OF PAYMENTS OR TRANSFERS
American Fidelity may be required to suspend or postpone payments for
withdrawals or transfers for any period when:
1. the New York Stock Exchange is closed (other than customary weekend
and holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of the Fund shares
is not reasonably practicable or American Fidelity cannot reasonably value the
Fund shares;
4. during any other period when the Securities and Exchange Commission,
by order, so permits for the protection of owners.
American Fidelity has reserved the right to defer payment for a withdrawal or
transfer from the Guaranteed Interest Account for the period permitted by law
but not for more than six months.
LOANS
If you purchased your Policy under a 403(b) Qualified plan, we may make a loan
to you at any time before Annuity Payments begin. However, no loans will be
made during the first Policy Year. The security for the loan will be the value
of your Policy in the Guaranteed Interest Account. The loan cannot be more
than the lesser of $50,000 or one-half of the value of your Policy in the
Guaranteed Interest Account. Under certain circumstances, the $50,000 limit
may be reduced. The minimum loan we will make is $2,500 (which can be changed
by us at our discretion).
If a loan payment is not made within 60 days of the date a payment is due, the
outstanding loan balance (principal plus interest) will become due and
payable. If not repaid, the loan balance plus interest will be considered in
default and will be treated as taxable income for the tax year of the default.
Satisfaction of any unpaid loan balance plus interest from the Guaranteed
Interest Account will only occur when you qualify for a plan distribution
under the federal tax guidelines. If the loan is in default and you do not yet
qualify for a distribution to satisfy the outstanding loan balance, the loan
will continue to accrue interest which, if not paid by you, will be taxable
income in the tax year accrued. Any amounts which may become taxable will be
reported as plan distributions and will be subject to income tax and tax
penalties, if applicable.
Upon your death, the Beneficiary will receive the death benefit reduced by the
loan balance. If Annuity Payments begin while there is an outstanding loan,
the value of the Guaranteed Interest Account will be reduced by the loan
balance.
DEATH BENEFIT
DEATH BENEFIT AMOUNT
The death benefit will be the greater of: (1) the Purchase Payments you have
made, less any money you have taken out and any applicable withdrawal charges;
or (2) the value of your Policy minus the policy maintenance charge and taxes,
if any, determined on the business day we receive proof of death and an
election for the payment period.
DEATH OF OWNER BEFORE ANNUITY DATE
If you or any Joint Owner dies before the Annuity Date, the death benefit will
be paid to your Beneficiary. When any Joint Owner dies, the surviving Joint
Owner, if any, will be treated as the primary Beneficiary. Any other person
chosen as a Beneficiary at the time of death will be treated as a contingent
Beneficiary. The death benefit will be paid under one of the following death
benefit options.
Death Benefit Options:
If you or any Joint Owner dies before the Annuity Date, a Beneficiary who is
not your spouse must elect the death benefit to be paid under one of the
following options:
1. lump sum payment;
2. payment of the entire death benefit within five years of the date of
your death or the death of any Joint Owner; or
3. payment of the death benefit under any Annuity Option. If this option
is chosen, the annuity must be distributed over the lifetime of the
Beneficiary or over a period not extending beyond the life expectancy of the
Beneficiary; and the distribution must begin within one year of the date of
your death or any Joint Owner's death.
Any portion of the death benefit not applied under an Annuity Option within
one year of the date of death must be distributed within five years of the
date of death.
If the Beneficiary is your spouse (spousal Beneficiary), he or she may:
1. choose to continue the Policy in his or her own name at the current
value of the Policy;
2. choose a lump sum payment of the death benefit; or
3. apply the death benefit to an Annuity Option.
If the deceased Owner was also the Annuitant and the spousal Beneficiary
continues the Policy or applies the death benefit to an Annuity Option, the
spousal Beneficiary will become the new Annuitant.
If a lump sum payment is requested, we will pay the amount within seven days
of receipt of proof of death and the election, unless the Suspension or
Deferral Payments Provision is in effect. Payment to the Beneficiary (other
than a lump sum payment) may only be elected during the 60 day period
beginning with the date we receive proof of death.
DEATH OF ANNUITANT BEFORE THE ANNUITY DATE
If you are not the Annuitant and the Annuitant dies before the Annuity Date,
the death benefit will be paid to the Beneficiary. The death benefit will be
paid in a lump sum and must be paid in full within five years of the date of
death. If the Owner is a non-individual (e.g., a corporation), the death of
the Annuitant will be treated as the death of the Owner.
DEATH OF OWNER AFTER THE ANNUITY DATE
If you, or any Joint Owner who is not the Annuitant, die during the Annuity
Period, any remaining payments under the Annuity Option elected will continue
at least as rapidly as they were being paid at your death or such Joint
Owner's death. When any Owner dies during the Annuity Period, the Beneficiary
becomes the Owner. Upon the death of any Joint Owner during the Annuity
Period, the surviving Joint owner, if any, will be treated as the primary
Beneficiary. Any other Beneficiary designation on record at the time of death
will be treated as a contingent Beneficiary.
DEATH OF ANNUITANT AFTER THE ANNUITY DATE
If the Annuitant dies on or after the Annuity Date, the death benefit, if any,
will be as set forth in the Annuity Option elected. Death benefits will be
paid at least as rapidly as they were being paid at the Annuitant's death.
OTHER INFORMATION
AMERICAN FIDELITY
American Fidelity Assurance Company (American Fidelity), 2000 Classen Center,
Oklahoma city, Oklahoma 73106 is an Oklahoma stock life insurance company
organized in 1960. The company is licensed to conduct life, annuity and
accident and health insurance business in forty-nine states and the District
of Columbia. American Fidelity is a wholly owned subsidiary of American
Fidelity Corporation since 1974.
THE SEPARATE ACCOUNT
American Fidelity established a separate account, American Fidelity Separate
Account B (Separate Account), to hold the assets that underlie the Policies.
Our Board of Directors adopted a resolution to establish the Separate Account
under Oklahoma insurance law on September 20, 1996. American Fidelity has
registered the Separate Account with the Securities and Exchange Commission as
a unit investment trust under the Investment Company Act of 1940. The Separate
Account is divided into sub-accounts. Each sub-account invests in a Portfolio.
The assets of the Separate Account are held in American Fidelity 's name on
behalf of the Separate Account and legally belong to American Fidelity.
However, those assets that underlie the Policies, are not chargeable with
liabilities arising out of any other business we may conduct. All the income,
gains and losses (realized or unrealized) resulting from these assets are
credited to or charged against the Policies and not against any other Policies
we may issue.
LEGAL PROCEEDINGS
There are no pending material legal proceedings affecting the Separate
Account, American Fidelity or American Fidelity Securities, Inc.
DISTRIBUTION
American Fidelity Securities, Inc. (AFS, Inc.) acts as the distributor of the
Policies. AFS, Inc. is a wholly-owned subsidiary of American Fidelity.
ADMINISTRATION
American Fidelity performs certain administrative services regarding the
Policies. The administrative services include issuance of the Policies and
maintenance of Policy Owner's records.
FINANCIAL STATEMENTS
The financial statements of American Fidelity have been included in the
Statement of Additional Information. No financial statements of the Separate
Account have been included because, as of the date of this prospectus, the
Separate Account had no assets.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
General Information and History of the Company
Experts
Legal Opinions
Distributor
Reduction or Elimination of the Withdrawal Charge
Performance Information
Tax Status
Annuity Provisions
Financial Statements
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________________________________________________________________________
__________________
__________________
__________________
FRONT
- -----
American Fidelity Assurance Company
Annuity Services Department
P.O. Box 25523
Oklahoma City, OK 73125-0523
________________________________________________________________________
________________________________________________________________________
Please send me, at no charge, the Statement of Additional Information
dated __________, 1997, for the AFAdvantage Variable Annuity issued by
American Fidelity Assurance Company.
(Please print or type and fill in all information)
BACK ________________________________________________________________________
- -----
Name
________________________________________________________________________
Address
________________________________________________________________________
City State Zip Code
________________________________________________________________________
Form #
</TABLE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FLEXIBLE PREMIUM VARIABLE AND FIXED DEFERRED
ANNUITY POLICIES
ISSUED BY
AMERICAN FIDELITY SEPARATE ACCOUNT B
AND
AMERICAN FIDELITY ASSURANCE COMPANY
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS DATED _____, 1997, FOR THE INDIVIDUAL
FLEXIBLE PREMIUM VARIABLE AND FIXED DEFERRED ANNUITY POLICIES WHICH ARE
REFERRED TO HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
SHOULD KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS CALL OR WRITE US
AT: AMERICAN FIDELITY ASSURANCE COMPANY, ANNUITY SERVICES DEPARTMENT, P.O. BOX
25523, OKLAHOMA CITY, OK 73125-0523, (800) 662-1106.
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED _____, 1997.
TABLE OF CONTENTS
PAGE
GENERAL INFORMATION AND HISTORY OF THE COMPANY
EXPERTS
LEGAL OPINIONS
DISTRIBUTOR
REDUCTION OR ELIMINATION OF THE WITHDRAWAL CHARGE
CALCULATION OF PERFORMANCE INFORMATION
TAX STATUS
ANNUITY PROVISIONS
FINANCIAL STATEMENTS
GENERAL INFORMATION AND HISTORY OF THE COMPANY
American Fidelity Assurance Company ("Company") was organized in the State of
Oklahoma in 1960 and during its existence has never changed its name. Neither
the sales of variable annuity contracts nor the sales of any other insurance
product by the Company have ever been suspended by any state where the Company
has done or is presently doing business.
The Company is a wholly owned subsidiary of American Fidelity Corporation, an
insurance holding company. The stock of American Fidelity Corporation is
controlled by a family investment partnership, Cameron Enterprises, A Limited
Partnership, an Oklahoma limited partnership ("CELP"). In accordance with the
partnership agreement, management of the affairs of CELP is vested in five
managing general partners: William M. Cameron, William E. Durrett, Edward C.
Joullian, III, John W. Rex and Theodore M. Elam.
EXPERTS
The financial statements of the Company as of and for the year ended December
31, 19__ included in this Statement of Additional Information have been
audited by _________________________, independent auditors, as indicated in
their reports included in this Statement of Additional Information and are
included herein in reliance upon such reports and upon the authority of said
firm as experts in accounting and auditing.
LEGAL OPINIONS
Legal matters in connection with the Policies described herein are being
passed upon by the law firm of Blazzard, Grodd & Hasenauer, P.C., Westport,
Connecticut.
DISTRIBUTOR
American Fidelity Securities, Inc., a wholly-owned subsidiary of the Company,
acts as the distributor. The offering is on a continuous basis.
REDUCTION OR ELIMINATION OF THE WITHDRAWAL CHARGE
The amount of the Withdrawal Charge on the Policies may be reduced or
eliminated when sales of the Policies are made to individuals or to a group of
individuals in a manner that results in savings of sales expenses. The
entitlement to a reduction of the withdrawal charge will be determined by the
Company after examination of the following factors: 1) the size of the group;
2) the total amount of purchase payments expected to be received from the
group; 3) the nature of the group for which the Policies are purchased, and
the persistency expected in that group; 4) the purpose for which the Policies
are purchased and whether that purpose makes it likely that expenses will be
reduced; and 5) any other circumstances which the Company believes to be
relevant to determining whether reduced sales or administrative expenses may
be expected. None of the reductions in charges for sales is contractually
guaranteed.
The withdrawal charge will be eliminated when the Policies are issued to an
officer, director or employee of the Company or any of its affiliates. In no
event will any reduction or elimination of the withdrawal charge be permitted
where the reduction or elimination will be unfairly discriminatory to any
person.
CALCULATION OF PERFORMANCE INFORMATION
From time to time, the Company may advertise performance data as described in
the Prospectus. All performance advertising will include quotations of
standardized total return, calculated in accordance with standard methods
prescribed by rules of the Securities and Exchange Commission, to facilitate
comparison with standardized total return advertised by other variable annuity
separate accounts. Standardized total return advertised for a specific period
is found by first taking a hypothetical $1,000 investment in a Portfolio on
the first day of the period at the offering price, which is the Accumulation
Unit value per unit (initial investment) and computing the ending redeemable
value (redeemable value) of that investment at the end of the period. The
redeemable value is then divided by the initial investment which is then
expressed as a percentage. Standardized total return reflects the expenses of
the Portfolio, the deduction of a policy maintenance charge and a mortality
and expense risk, distribution expense and administrative charges. The
redeemable value also reflects the effect of any applicable withdrawal charge
that may be imposed at the end of the period. No deduction is made for premium
taxes which may be assessed by certain states.
Nonstandardized total return may also be advertised. Nonstandardized total
return may be for periods other than those required to be presented or may
otherwise differ from standardized total return.
The standardized total return quotations will be current to the last day of
the calendar quarter preceding the date on which an advertisement is submitted
for publication. The standardized total return will be based on calendar
quarters and will cover at least periods of one, five, and ten years, or a
period covering the time the Portfolio has been in existence if it has not
been in existence for one of the prescribed periods. If Accumulation Units for
the Policies have not been in existence for as long as the corresponding
Portfolio, the standardized total return and nonstandardized total return
quotations will show what the investment performance of Accumulation Units
would have been (reduced by the applicable charges) had they been held in a
Portfolio for the period quoted (see below).
Quotations of standardized total return and nonstandardized total return are
based upon historical earnings and will fluctuate. Past performance does not
guarantee future results. Factors affecting the performance of a Portfolio
include general market conditions, operating expenses and investment
management. An Owner's value upon a withdrawal of a Policy may be more or less
than the original purchase payment.
PERFORMANCE INFORMATION
The Accumulation Units of the Separate Account are new and therefore have no
performance history. However, the corresponding Portfolios have been in
existence for some time and consequently have investment performance history.
In order to demonstrate how the historical investment experience of the
Portfolios affects Accumulation Unit values, the following performance
information was developed. The information is based upon the historical
experience of the Portfolios and is for the periods shown.
ACTUAL PERFORMANCE WILL VARY AND THE HYPOTHETICAL RESULTS SHOWN ARE NOT
NECESSARILY REPRESENTATIVE OF FUTURE RESULTS. Performance for periods ending
after those shown may vary substantially from the examples shown below. Chart
1 shows the performance of the Accumulation Units calculated for a specified
period of time assuming an initial Purchase Payment of $1,000 allocated to
each Portfolio and a deduction of all charges and deductions (see "Expenses"
in the prospectus). Chart 2 is identical to chart 1 except that it does not
reflect the deduction of the withdrawal charge and policy maintenance charge.
The performance figures in both charts also reflect the actual fees and
expenses paid by each Portfolio during 1996. The percentage increases are
determined by subtracting the initial Purchase Payment from the ending value
and dividing the remainder by the beginning value.
For periods ending 12/31/96
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CHART 1
10 YEARS
or Since INCEPTION
1 YEAR 5 YEARS Inception DATE
Merrill Lynch Variable Series
Funds, Inc. Prime Bond
Merrill Lynch Variable Series
Funds, Inc. Equity Growth
Merrill Lynch Variable Series
Funds, Inc. American Balanced
Merrill Lynch Variable Series
Funds, Inc. International
Equity Focus
Merrill Lynch Variable Series
Funds, Inc. High Current
Income
Dreyfus Stock Index
The Dreyfus Socially
Responsible Growth
Growth and Income
Small Company Stock
</TABLE>
<TABLE>
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CHART 2
10 YEARS
or Since INCEPTION
1 YEAR 5 YEARS Inception DATE
Merrill Lynch Variable Series
Funds, Inc. Prime Bond
Merrill Lynch Variable Series
Funds, Inc. Equity Growth
Merrill Lynch Variable Series
Funds, Inc. American Balanced
Merrill Lynch Variable Series
Funds, Inc. International
Equity Focus
Merrill Lynch Variable Series
Funds, Inc. High Current
Income
Dreyfus Stock Index
The Dreyfus Socially
Responsible Growth
Growth and Income
Small Company Stock
</TABLE>
TAX STATUS
NOTE: THE FOLLOWING DESCRIPTION IS BASED UPON THE COMPANY'S UNDERSTANDING OF
CURRENT FEDERAL INCOME TAX LAW APPLICABLE TO ANNUITIES IN GENERAL. THE COMPANY
CANNOT PREDICT THE PROBABILITY THAT ANY CHANGES IN SUCH LAWS WILL BE MADE.
PURCHASERS ARE CAUTIONED TO SEEK COMPETENT TAX ADVICE REGARDING THE
POSSIBILITY OF SUCH CHANGES. THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF
THE POLICIES. PURCHASERS BEAR THE COMPLETE RISK THAT THE POLICIES MAY NOT BE
TREATED AS "ANNUITY CONTRACTS" UNDER FEDERAL INCOME TAX LAWS. IT SHOULD BE
FURTHER UNDERSTOOD THAT THE FOLLOWING DISCUSSION IS NOT EXHAUSTIVE AND THAT
SPECIAL RULES NOT DESCRIBED HEREIN MAY BE APPLICABLE IN CERTAIN SITUATIONS.
MOREOVER, NO ATTEMPT HAS BEEN MADE TO CONSIDER ANY APPLICABLE STATE OR OTHER
TAX LAWS.
GENERAL
Section 72 of the Code governs taxation of annuities in general. An Owner is
not taxed on increases in the value of a Policy until distribution occurs,
either in the form of a lump sum payment or as annuity payments under the
Annuity Option elected. For a lump sum payment received as a total surrender
(total redemption) or death benefit, the recipient is taxed on the portion of
the payment that exceeds the cost basis of the Policy. For Non-Qualified
Policies, this cost basis is generally the purchase payments, while for
Qualified Policies there may be no cost basis. The taxable portion of the lump
sum payment is taxed at ordinary income tax rates.
For annuity payments, a portion of each payment in excess of an exclusion
amount is includable in taxable income. The exclusion amount for payments
based on a fixed annuity option is determined by multiplying the payment by
the ratio that the cost basis of the Policy (adjusted for any period certain
or refund feature) bears to the expected return under the Policy. The
exclusion amount for payments based on a variable annuity option is determined
by dividing the cost basis of the Policy (adjusted for any period certain or
refund guarantee) by the number of years over which the annuity is expected to
be paid. Payments received after the investment in the Policy has been
recovered (i.e. when the total of the excludable amounts equal the investment
in the Policy) are fully taxable. The taxable portion is taxed at ordinary
income rates. For certain types of Qualified Plans there may be no cost basis
in the Policy within the meaning of Section 72 of the Code. Owners, Annuitants
and Beneficiaries under the Policies should seek competent financial advice
about the tax consequences of any distributions.
The Company is taxed as a life insurance company under the Code. For federal
income tax purposes, the Separate Account is not a separate entity from the
Company, and its operations form a part of the Company.
DIVERSIFICATION
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not
adequately diversified in accordance with regulations prescribed by the United
States Treasury Department ("Treasury Department"). Disqualification of the
Policy as an annuity contract would result in imposition of federal income tax
to the Policy Owner with respect to earnings allocable to the Policy prior to
the receipt of payments under the Policy. The Code contains a safe harbor
provision which provides that annuity contracts such as the Policies meet the
diversification requirements if, as of the end of each quarter, the underlying
assets meet the diversification standards for a regulated investment company
and no more than fifty-five percent (55%) of the total assets consist of cash,
cash items, U.S. government securities and securities of other regulated
investment companies.
On March 2, 1989, the Treasury Department issued regulations (Treas. Reg.
1.817-5) which established diversification requirements for the investment
portfolios underlying variable contracts such as the Policies. The regulations
amplify the diversification requirements for variable contracts set forth in
the Code and provide an alternative to the safe harbor provision described
above.
Under the regulations, an investment portfolio will be deemed adequately
diversified if: (1) no more than 55% of the value of the total assets of the
portfolio is represented by any one investment; (2) no more than 70% of the
value of the total assets of the portfolio is represented by any two
investments; (3) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (4) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments.
The Code provides that for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable
contracts by Section 817(h) of the Code have been met, "each United States
government agency or instrumentality shall be treated as a separate issuer."
The Company intends that all Portfolios underlying the Policies will be
managed by the investment advisers for the Portfolios in such a manner as to
comply with these diversification requirements.
The Treasury Department has indicated that the diversification Regulations do
not provide guidance regarding the circumstances in which owner control of the
investments of the Separate Account will cause the owner to be treated as the
owner of the assets of the Separate Account, thereby resulting in the loss of
favorable tax treatment for the Policy. At this time it cannot be determined
whether additional guidance will be provided and what standards may be
contained in such guidance.
The amount of Owner control which may be exercised under the Policy is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the Owner's ability to transfer among
investment choices or the number and type of investment choices available,
would cause the Owner to be considered as the owner of the assets of the
Separate Account resulting in the imposition of federal income tax to the
Owner with respect to earnings allocable to the Policy prior to receipt of
payments under the Policy.
In the event any forthcoming guidance or ruling is considered to set forth a
new position, such guidance or ruling will generally be applied only
prospectively. However, if such ruling or guidance was not considered to set
forth a new position, it may be applied retroactively resulting in the Owner
being retroactively determined to be the owner of the assets of the Separate
Account.
Due to the uncertainty in this area, the Company reserves the right to modify
the Policy in an attempt to maintain favorable tax treatment.
MULTIPLE POLICIES
The Code provides that multiple non-qualified annuity contracts which are
issued within a calendar year period to the same contract owner by one company
or its affiliates are treated as one annuity contract for purposes of
determining the tax consequences of any distribution. Such treatment may
result in adverse tax consequences, including more rapid taxation of the
distributed amounts from such combination of contracts. Owners should consult
a tax adviser prior to purchasing more than one non-qualified annuity contract
in any calendar year period.
POLICIES OWNED BY OTHER THAN NATURAL PERSONS
Under Section 72(u) of the Code, the investment earnings on purchase payments
for the Policies will be taxed currently to the Owner if the Owner is a
non-natural person, e.g., a corporation or certain other entities. Such
Policies generally will not be treated as annuities for federal income tax
purposes. However, this treatment is not applied to Policies held by a trust
or other entity as an agent for a natural person nor to Policies held by
qualified plans. Purchasers should consult their own tax counsel or other tax
adviser before purchasing a Policy to be owned by a non-natural person.
TAX TREATMENT OF ASSIGNMENTS
An assignment or pledge of a Policy may be a taxable event. Owners should
therefore consult competent tax advisers should they wish to assign or pledge
their Policies.
INCOME TAX WITHHOLDING
All distributions or the portion thereof which is includible in the gross
income of the Owner are subject to federal income tax withholding. Generally,
amounts are withheld from periodic payments at the same rate as wages and at
the rate of 10% from non-periodic payments. However, the Owner, in most cases,
may elect not to have taxes withheld or to have withholding done at a
different rate.
Effective January 1, 1993, certain distributions from retirement plans
qualified under Section 401 or Section 403(b) of the Code, which are not
directly rolled over to another eligible retirement plan or individual
retirement account or individual retirement annuity, are subject to a
mandatory 20% withholding for federal income tax. The 20% withholding
requirement generally does not apply to: a) a series of substantially equal
payments made at least annually for the life or life expectancy of the
participant or joint and last survivor expectancy of the participant and a
designated beneficiary, or for a specified period of 10 years or more; or b)
distributions which are required minimum distributions; or (c) the portion of
the distributions not includible in gross income (i.e. returns of after-tax
contributions). Participants should consult their own tax counsel or other tax
adviser regarding withholding requirements.
TAX TREATMENT OF WITHDRAWALS - NON-QUALIFIED POLICIES
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the contract value exceeds the aggregate
purchase payments made, any amount withdrawn will be treated as coming first
from the earnings and then, only after the income portion is exhausted, as
coming from the principal. Withdrawn earnings are includible in gross income.
It further provides that a ten percent (10%) penalty will apply to the income
portion of any distribution. However, the penalty is not imposed on amounts
received: (a) after the taxpayer reaches age 59 1/2; (b) after the death of
the Owner; (c) if the taxpayer is totally disabled (for this purpose
disability is as defined in Section 72(m)(7) of the Code); (d) in a series of
substantially equal periodic payments made not less frequently than annually
for the life (or life expectancy) of the taxpayer or for the joint lives (or
joint life expectancies) of the taxpayer and his Beneficiary; (e) under an
immediate annuity; or (f) which are allocable to purchase payments made prior
to August 14, 1982.
The Policy provides that upon the death of the Annuitant prior to the Annuity
Date, the death benefit will be paid to the named Beneficiary. Such payments
made upon the death of the Annuitant who is not the Owner of the Policy do not
qualify for the death of Owner exception described above, and will be subject
to the ten (10%) percent distribution penalty unless the Beneficiary is 59 1/2
years old or one of the other exceptions to the penalty applies.
The above information does not apply to Qualified Policies. However,
separate tax withdrawal penalties and restrictions may apply to such Qualified
Policies. (See "Tax Treatment of Withdrawals - Qualified Policies.")
QUALIFIED PLANS
The Policies offered by the Prospectus are designed to be suitable for use
under various types of Qualified Plans. Because of the minimum purchase
payment requirements, the Policies may not be appropriate for some periodic
payment retirement plans. Taxation of participants in each Qualified Plan
varies with the type of plan and terms and conditions of each specific plan.
Owners, Annuitants and Beneficiaries are cautioned that benefits under a
Qualified Plan may be subject to the terms and conditions of the plan
regardless of the terms and conditions of the Policies issued pursuant to the
plan. Some retirement plans are subject to distribution and other requirements
that are not incorporated into the Company's administrative procedures.
Owners, participants and Beneficiaries are responsible for determining that
contributions, distributions and other transactions with respect to the
Policies comply with applicable law. Following are general descriptions of the
types of Qualified Plans with which the Policies may be used. Such
descriptions are not exhaustive and are for general informational purposes
only. The tax rules regarding Qualified Plans are very complex and will have
differing applications, depending on individual facts and circumstances. Each
purchaser should obtain competent tax advice prior to purchasing a Policy
issued under a Qualified Plan.
Policies issued pursuant to Qualified Plans include special provisions
restricting Policy provisions that may otherwise be available and described in
this Statement of Additional Information. Generally, Policies issued pursuant
to Qualified Plans are not transferable except upon surrender or
annuitization. Various penalty and excise taxes may apply to contributions or
distributions made in violation of applicable limitations. Furthermore,
certain withdrawal penalties and restrictions may apply to surrenders from
Qualified Policies. (See "Tax Treatment of Withdrawals - Qualified Policies.")
a. Tax-Sheltered Annuities
Section 403(b) of the Code permits the purchase of "tax-sheltered annuities"
by public schools and certain charitable, educational and scientific
organizations described in Section 501(c)(3) of the Code. These qualifying
employers may make contributions to the Policies for the benefit of their
employees. Such contributions are not includable in the gross income of the
employee until the employee receives distributions from the Policy. The amount
of contributions to the tax-sheltered annuity is limited to certain maximums
imposed by the Code. Furthermore, the Code sets forth additional restrictions
governing such items as transferability, distributions, nondiscrimination and
withdrawals. (See "Tax Treatment of Withdrawals Qualified Policies" and
"Tax-Sheltered Annuities - Withdrawal Limitations.") Employee loans are
allowed under these Policies. Any employee should obtain competent tax advice
as to the tax treatment and suitability of such an investment and the tax
consequences of loans.
b. Individual Retirement Annuities
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity"
("IRA"). Under applicable limitations, certain amounts may be contributed to
an IRA which may be deductible from the individual's gross income. These IRAs
are subject to limitations on eligibility, contributions, transferability and
distributions. (See "Tax Treatment of Withdrawals - Qualified Policies.")
Under certain conditions, distributions from other IRAs and other Qualified
Plans may be rolled over or transferred on a tax-deferred basis into an IRA.
Sales of Policies for use with IRAs are subject to special requirements
imposed by the Code, including the requirement that certain informational
disclosure be given to persons desiring to establish an IRA. Purchasers of
Policies to be qualified as Individual Retirement Annuities should obtain
competent tax advice as to the tax treatment and suitability of such an
investment.
c. H.R. 10 Plans
Section 401 of the Code permits self-employed individuals to establish
Qualified Plans for themselves and their employees, commonly referred to as
"H.R. 10" or "Keogh" plans. Contributions made to the plan for the benefit of
the employees will not be included in the gross income of the employees until
distributed from the Plan. The tax consequences to participants may vary
depending upon the particular plan design. However, the Code places
limitations and restrictions on all plans including on such items as: amount
of allowable contributions; form, manner and timing of distributions;
transferability of benefits; vesting and nonforfeitability of interests;
nondiscrimination in eligibility and participation; and the tax treatment of
distributions, withdrawals and surrenders. (See "Tax Treatment of Withdrawals
- - Qualified Policies.") Purchasers of Policies for use with an H.R. 10 Plan
should obtain competent tax advice as to the tax treatment and suitability of
such an investment.
d. Corporate Pension and Profit-Sharing Plans
Sections 401(a) and 401(k) of the Code permit corporate employers to establish
various types of retirement plans for employees. These retirement plans may
permit the purchase of the Policies to provide benefits under the plan.
Contributions to the plan for the benefit of employees will not be includible
in the gross income of the employees until distributed from the plan. The tax
consequences to participants may vary depending upon the particular plan
design. However, the Code places limitations and restrictions on all plans
including on such items as: amount of allowable contributions; form, manner
and timing of distributions; transferability of benefits; vesting and
nonforfeitability of interests; nondiscrimination in eligibility and
participation; and the tax treatment of distributions, withdrawals and
surrenders. (See "Tax Treatment of Withdrawals - Qualified Policies.")
Purchasers of Policies for use with Corporate Pension or Profit Sharing Plans
should obtain competent tax advice as to the tax treatment and suitability of
such an investment.
TAX TREATMENT OF WITHDRAWALS - QUALIFIED POLICIES
In the case of a withdrawal under a Qualified Policy, a ratable portion of the
amount received is taxable, generally based on the ratio of the individual's
cost basis to the individual's total accrued benefit under the retirement
plan. Special tax rules may be available for certain distributions from a
Qualified Policy. Section 72(t) of the Code imposes a 10% penalty tax on the
taxable portion of any distribution from qualified retirement plans, including
Policies issued and qualified under Code Sections 403(b) (Tax-Sheltered
Annuities), 408(b) (Individual Retirement Annuities) and 401 (H.R. 10 and
Corporate Pension and Profit-Sharing Plans). To the extent amounts are not
includible in gross income because they have been properly rolled over to an
IRA or to another eligible Qualified Plan, no tax penalty will be imposed. The
tax penalty will not apply to the following distributions: (a) if distribution
is made on or after the date on which the Owner or Annuitant (as applicable)
reaches age 59 ; (b) distributions following the death or disability of the
Owner or Annuitant (as applicable) (for this purpose disability is as defined
in Section 72(m)(7) of the Code); (c) after separation from service,
distributions that are part of substantially equal periodic payments made not
less frequently than annually for the life (or life expectancy) of the Owner
or Annuitant (as applicable) or the joint lives (or joint life expectancies)
of such Owner or Annuitant (as applicable) and his designated beneficiary;
(d) distributions to an Owner or Annuitant (as applicable) who has separated
from service after he has attained age 55; (e) distributions made to the Owner
or Annuitant (as applicable) to the extent such distributions do not exceed
the amount allowable as a deduction under Code Section 213 to the Owner or
Annuitant (as applicable) for amounts paid during the taxable year for medical
care; (f) distributions made to an alternate payee pursuant to a qualified
domestic relations order; and (g) distributions from an Individual Retirement
Annuity for the purchase of medical insurance (as described in Section
213(d)(1)(D) of the Code) for the Owner or Annuitant (as applicable) and his
or her spouse and dependents if the Owner or Annuitant (as applicable) has
received unemployment compensation for at least 12 weeks. This exception will
no longer apply after the Owner or Annuitant (as applicable) has been
re-employed for at least 60 days. The exceptions stated in items (d) and (f)
above do not apply in the case of an Individual Retirement Annuity. The
exception stated in item (c) applies to an Individual Retirement Annuity
without the requirement that there be a separation from service.
Generally, distributions from a Qualified Plan must commence no later than
April 1 of the calendar year following the later of: (a) the year in which the
employee attains age 70 1/2 or (b) the calendar year in which the employee
retires. The date set forth in (b) does not apply to an Individual Retirement
Annuity. Required distributions must be over a period not exceeding the life
expectancy of the individual or the joint lives or life expectancies of the
individual and his or her designated beneficiary. If the required minimum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed.
TAX-SHELTERED ANNUITIES - WITHDRAWAL LIMITATIONS
The Code limits the withdrawal of amounts attributable to contributions made
pursuant to a salary reduction agreement (as defined in Section 403(b)(11) of
the Code) to circumstances only when the Owner: (1) attains age 59 ; (2)
separates from service; (3) dies; (4) becomes disabled (within the meaning of
Section 72(m)(7) of the Code); or (5) in the case of hardship. However,
withdrawals for hardship are restricted to the portion of the Owner's Contract
value which represents contributions by the Owner and does not include any
investment results. The limitations on withdrawals apply only to salary
reduction contributions made after the end of the plan year beginning in 1988,
and to income attributable to such contributions and to income attributable to
amounts held as of the end of the plan year beginning in 1988. The limitations
on withdrawals do not affect rollovers and transfers between certain Qualified
Plans. Owners should consult their own tax counsel or other tax adviser
regarding any distributions.
ANNUITY PROVISIONS
VARIABLE ANNUITY PAYOUT
An owner may elect a variable annuity payout. Variable annuity payments
reflect the investment performance of the Funds in accordance with the
allocation of the value of the Policy to the Funds during the Annuity Period.
Variable annuity payments are not guaranteed as to dollar amount.
The Company will determine the number of Annuity Units payable for each
payment by dividing the dollar amount of the first annuity payment by the
Annuity Unit value for each applicable Fund on the Annuity Date. This sets the
number of Annuity Units for each applicable Fund. The number of Annuity Units
payable remains the same unless an owner transfers a portion of the annuity
benefit to another Fund or to a fixed annuity. The dollar amount is not fixed
and will change from month to month.
The dollar amount of the variable annuity payments for each applicable Fund
after the first payment is determined by multiplying the fixed number of
Annuity Units per payment in each Fund by the Annuity Unit value for the last
valuation period of the month preceding the month for which the payment is
due. This result is the dollar amount of the payment for each applicable Fund.
The total dollar amount of each variable annuity payment is the sum of all
variable annuity payments reduced by the applicable portion of the policy
maintenance charge.
VARIABLE ANNUITY UNIT
The value of any annuity unit for each Fund was arbitrarily set initially at
$10. The Annuity unit value at the end of any subsequent valuation period is
determined as follows:
1. The net investment factor for the current valuation period is
multiplied by the value of the Annuity Unit for the Fund for the immediately
preceding valuation period.
2. The result is then divided by the assumed investment rate factor
which equals 1.00 plus the assumed investment rate for the number of days
since the preceding valuation date.
An Owner can choose either a 3%, 4%, or 5% assumed investment rate. If one is
not chosen, the assumed investment rate will be 3%.
The assumed investment rate is the assumed rate of return used to determine
the first annuity payment for a variable annuity option. A higher assumed
investment rate will result in a higher first payment. Choice of a lower
assumed investment rate will result in a lower first payment. Payments will
increase whenever the actual return exceeds the chosen rate. Payments will
decrease whenever the actual return is less than the chosen rate.
FIXED ANNUITY PAYOUT
The dollar amount of each fixed annuity payment will be at least as great as
that determined in accordance with the 3% Annuity Table. The fixed annuity
provides a 3% annual guaranteed interest rate on all Annuity Options. The
Company may pay or credit excess interest on a fixed annuity at its
discretion.
FINANCIAL STATEMENTS
The financial statements of the Company included herein should be considered
only as bearing upon the ability of the Company to meet its obligations under
the Policies.
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
A. FINANCIAL STATEMENTS
Financial Statements for the Company will be included in an amendment.
B. EXHIBITS
1. Resolution of Board of Directors of the Company authorizing the
establishment of the Separate Account.
2. Not Applicable.
3. Form of Principal Underwriters Agreement (to be filed by amendment).
4. (i) Individual Variable and Fixed Deferred Annuity.
(ii) Loan Rider
(iii) 403(b) Annuity Rider
(iv) Individual Retirement Annuity Rider
5. Application Form.
6. (i) Copy of Articles of Incorporation of the Company
(to be filed by amendment).
(ii) Copy of the Bylaws of the Company (to be filed by amendment).
7. Not Applicable.
8. Form of Fund Participation Agreement (to be filed by amendment).
9. Opinion and Consent of Counsel (to be filed by amendment).
10. Consent of Independent Auditors (to be filed by amendment).
11. Not Applicable.
12. Not Applicable.
13. Calculation of Performance Information (to be filed by amendment).
14. Not Applicable.
15. Company Organizational Chart (to be filed by amendment).
27. Not Applicable.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The following are the Executive Officers and Directors of the Company:
<TABLE>
<CAPTION>
<S> <C>
Name and Principal Position and Offices
Business Address* with Depositor
- ----------------------- -----------------------------------
Lynda L. Cameron Director
William M. Cameron Vice Chairman and Chief Executive
Officer, Director
David R. Carpenter Senior Vice President, Treasurer
William E. Durrett Chairman of the Board, Director
Stephen P. Garrett Senior Vice President, Secretary
Edward C. Joullian, III Director
Kenneth D. Klehm Senior Vice President
Alfred L. Litchenburg Senior Vice President
John W. Rex President, Chief Operating Officer,
Director
Galen P. Robbins, M.D. Director
3433 N.W. 56th
Oklahoma City, OK
John D. Smith Director
P.O. Box 18832
Atlanta, GA
<FN>
* The principal business address for all officers and directors listed above
is 2000 Classen Center, Oklahoma City, Oklahoma except as noted above.
</TABLE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR
OR REGISTRANT
The Company organizational chart will be filed by amendment.
ITEM 27. NUMBER OF CONTRACT OWNERS
Not Applicable.
ITEM 28. INDEMNIFICATION
The Bylaws of the Company (Article VIII, Section 3) provide, in part, that:
(a) The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee, or agent
of another corporation, partnership, joint venture, trust, or other
enterprise, against expenses (including attorneys' fees), amounts paid in
settlement (whether with or without court approval), judgments, fines actually
and reasonably incurred by him in connection with such action, suit, or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, if he had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit, or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendre or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation,
and, with respect to any criminal action or proceeding, had reasonable cause
to believe that his conduct was unlawful.
(b) The Corporation shall indemnify every person who is or was a party or
is or was threatened to be made a party to any threatened, pending, or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee, or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee, or agent or in
any other capacity of or in another corporation, or a partnership, joint
venture, trust, or other enterprise, or by reason of any action alleged to
have been taken or not taken by him while acting in such capacity, against
expenses (including attorneys' fees) actually and reasonably incurred by him
in connection with the defense or settlement of such threatened, pending, or
completed action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation. The termination of any such threatened or actual action or suit
by a settlement or by an adverse judgment or order shall not of itself create
a presumption that the person did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
Corporation. Nevertheless, there shall be no indemnification with respect to
expenses incurred in connection with any claim, issue, or matter as to which
such person shall have been adjudged to be liable for negligence or misconduct
in the performance of his duty to the Corporation, unless, and only to the
extent that the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of
all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses as such court shall deem proper.
(c) To the extent that a director, officer, employee, or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit, or proceeding referred to in Subsections (a) and (b) hereof, or
in defense of any claim, issue, or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred
by him in connection with such defense.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted directors and officers or controlling persons of the
Company pursuant to the foregoing, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Not Applicable.
American Fidelity Securities, Inc. ("AFS, Inc.") is the principal underwriter
for the Policies. The following persons are the officers and directors of
AFS, Inc. The principal business address for each officer and director of AFS,
Inc. is 2000 N. Classen Blvd., Oklahoma City, Oklahoma 73106.
<TABLE>
<CAPTION>
<C> <S> <C>
(b) Name and Principal Positions and Offices
Business Address with Underwriter
------------------ ------------------------------------
William E. Durrett Director, Chairman, President
David R. Carpenter Director, Senior Vice President,
Treasurer, Chief Financial Officer
Marvin R. Ewy Director, Vice President, Secretary,
Chief Operations Officer
Nancy K. Steeber Second Vice President, Operations
Officer
</TABLE>
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
David R. Carpenter, Senior Vice President and Treasurer, whose address is 2000
Classen Blvd., Oklahoma City, OK 73106, maintains physical possession of the
accounts, books or documents of the Separate Account required to be maintained
by Section 31(a) of the Investment Company Act of 1940 and the rules
promulgated thereunder.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
a. Registrant hereby undertakes to file a post-effective amendment to
this registration statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement are never more than
sixteen (16) months old for so long as payment under the variable annuity
contracts may be accepted.
b. Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
c. Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statement required to be made available under
this Form promptly upon written or oral request.
d. American Fidelity Assurance Company ("Company") hereby represents that
the fees and charges deducted under the Policies described in the Prospectus,
in the aggregate, are reasonable in relation to the services rendered, the
expenses to be incurred and the risks assumed by the Company.
REPRESENTATIONS
The Company hereby represents that it is relying upon a No-Action Letter
issued to the American Council of Life Insurance dated November 28, 1988
(Commission ref. IP-6-88) and that the following provisions have been complied
with:
1. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in each registration statement, including the
prospectus, used in connection with the offer of the contract;
2. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in any sales literature used in connection with
the offer of the contract;
3. Instruct sales representatives who solicit participants to purchase
the contract specifically to bring the redemption restrictions imposed by
Section 403(b)(11) to the attention of the potential participants;
4. Obtain from each plan participant who purchases a Section 403(b)
annuity contract, prior to or at the time of such purchase, a signed statement
acknowledging the participant's understanding of (1) the restrictions on
redemption imposed by Section 403(b)(11), and (2) other investment
alternatives available under the employer's Section 403(b) arrangement to
which the participant may elect to transfer his contract value.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, as amended, the Registrant has caused this Registration Statement to be
signed on its behalf in the City of Oklahoma City and State of Oklahoma, on
this 18th day of April, 1997.
AMERICAN FIDELITY SEPARATE ACCOUNT B
(Registrant)
By: AMERICAN FIDELITY ASSURANCE COMPANY
(Depositor)
By: /S/ JOHN W. REX
_______________________
John W. Rex, President
AMERICAN FIDELITY ASSURANCE COMPANY
(Depositor)
By: /S/ JOHN W. REX
_____________________
John W. Rex, President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title Date
- -------------------------- ------------------------ -------
Vice Chairman, Chief
/S/WILLIAM. M. CAMERON Executive Officer and 4/18/97
- ---------------------- -------
William M. Cameron Director (Principal
Executive Officer)
/S/WILLIAM E. DURRETT Chairman of the Board 4/18/97
- ---------------------- -------
William E. Durrett and Director
LYNDA L. CAMERON* Director 4/18/97
- ---------------------- -------
Lynda L. Cameron*
/S/JOHN W. REX Director, President and 4/18/97
- ---------------------- -------
John W. Rex Chief Operating Officer
/S/EDWARD C. JOULLIAN, III Director 4/18/97
- -------------------------- -------
Edward C. Joullian, III
/S/GALEN P. ROBBINS, M.D. Director 4/18/97
- ------------------------- -------
Galen P. Robbins, M.D.
JOHN D. SMITH* Director 4/18/97
- ----------------------- -------
John D. Smith*
Senior Vice President,
/S/DAVID R. CARPENTER Controller & Treasurer 4/18/97
- ---------------------- -------
David R. Carpenter (Principal Financial
Officer)
</TABLE>
*By /S/JOHN W. REX
______________________________
John W. Rex, Power of Attorney
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Lynda L. Cameron, a Director of
American Fidelity Assurance Company (AFA), a corporation duly organized under
the laws of the State of Oklahoma, do hereby appoint John W. Rex and David R.
Carpenter, each individually, as my attorney and agent, for me, and in my name
as a Director of AFA on behalf of AFA or otherwise, with full power to
execute, deliver and file with the Securities and Exchange Commission all
documents required for registration of a security under the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as amended, and to
do and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand and seal this 13th day of December, 1996.
WITNESS:
/S/ MARSHA BRYAN /S/ LYNDA L. CAMERON
________________ ____________________
Marsha Bryan Lynda L. Cameron
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, William M. Cameron, a Director of
American Fidelity Assurance Company (AFA), a corporation duly organized under
the laws of the State of Oklahoma, do hereby appoint John W. Rex and David R.
Carpenter, each individually, as my attorney and agent, for me, and in my name
as a Director of AFA on behalf of AFA or otherwise, with full power to
execute, deliver and file with the Securities and Exchange Commission all
documents required for registration of a security under the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as amended, and to
do and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand and seal this 24th day of December, 1996.
WITNESS:
/S/ MARSHA BRYAN /S/ WILLIAM M. CAMERON
________________ ______________________
Marsha Bryan William M. Cameron
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, William E. Durrett, a Director of
American Fidelity Assurance Company (AFA), a corporation duly organized under
the laws of the State of Oklahoma, do hereby appoint John W. Rex and David R.
Carpenter, each individually, as my attorney and agent, for me, and in my name
as a Director of AFA on behalf of AFA or otherwise, with full power to
execute, deliver and file with the Securities and Exchange Commission all
documents required for registration of a security under the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as amended, and to
do and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand and seal this 20th day of December, 1996.
WITNESS:
/S/ MARSHA BRYAN /S/ WILLIAM E. DURRETT
________________ ______________________
Marsha Bryan William E. Durrett
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Edward C. Joullian, III, a Director of
American Fidelity Assurance Company (AFA), a corporation duly organized under
the laws of the State of Oklahoma, do hereby appoint John W. Rex and David R.
Carpenter, each individually, as my attorney and agent, for me, and in my name
as a Director of AFA on behalf of AFA or otherwise, with full power to
execute, deliver and file with the Securities and Exchange Commission all
documents required for registration of a security under the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as amended, and to
do and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand and seal this 12th day of December, 1996.
WITNESS:
/S/ MARCIA N. HICKMAN /S/ EDWARD C. JOULLIAN, III
_______________________ ___________________________
Marcia N. Hickman Edward C. Joullian, III
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Galen P. Robbins, a Director of
American Fidelity Assurance Company (AFA), a corporation duly organized under
the laws of the State of Oklahoma, do hereby appoint John W. Rex and David R.
Carpenter, each individually, as my attorney and agent, for me, and in my name
as a Director of AFA on behalf of AFA or otherwise, with full power to
execute, deliver and file with the Securities and Exchange Commission all
documents required for registration of a security under the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as amended, and to
do and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand and seal this 12th day of December, 1996.
WITNESS:
/S/ MARSHA R. BRYAN /S/ GALEN P. ROBBINS
___________________ ____________________
Marsha R. Bryan Galen P. Robbins
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, John D. Smith, a Director of American
Fidelity Assurance Company (AFA), a corporation duly organized under the laws
of the State of Oklahoma, do hereby appoint John W. Rex and David R.
Carpenter, each individually, as my attorney and agent, for me, and in my name
as a Director of AFA on behalf of AFA or otherwise, with full power to
execute, deliver and file with the Securities and Exchange Commission all
documents required for registration of a security under the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as amended, and to
do and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand and seal this 17th day of December, 1996.
WITNESS:
/S/ EILEEN R. SILVA /S/ JOHN D. SMITH
___________________ _________________
Eileen R. Silva John D. Smith
EXHIBITS
TO
FORM N-4
FOR
AMERICAN FIDELITY SEPARATE ACCOUNT B
AMERICAN FIDELITY ASSURANCE COMPANY
INDEX TO EXHIBITS
EXHIBIT NO.
EX-99.B1 Resolution of Board of Directors of the Company
authorizing the establishment of the Separate Account.
EX-99.B4(i) Individual Variable and Fixed Deferred Annuity.
EX-99.B4(ii) Loan Rider
EX-99.B4(iii) 403(b) Annuity Rider
EX-99.B4(iv) Individual Retirement Annuity Rider
EX-99.B5 Application Form.
AMERICAN FIDELITY ASSURANCE COMPANY
RECORD AND MEMORANDUM OF ACTION
OF THE BOARD OF DIRECTORS
SEPTEMBER 20,1996
------------------------------------------------------------------------------
The undersigned, being all the members of the Board of Directors of
American Fidelity Assurance Company, an Oklahoma corporation (the
"Corporation"), hereby take and record the following action:
WHEREAS, the Corporation is desirous of developing and marketing certain
additional types of variable and fixed annuity contracts which may be required
to be registered with the Securities and Exchange Commission pursuant to the
various securities laws; and
WHEREAS, it will be necessary to take certain actions including, but not
limited to, establishing separate accounts for segregating of assets and seeking
approval of regulatory authorities.
NOW, THEREFORE, BE IT RESOLVED: That the Corporation is hereby authorized
to develop the necessary program in order to effectuate the issuance and
sale of additional variable and fixed annuity contracts.
FURTHER RESOLVED: That the Corporation is hereby authorized to establish
American Fidelity Separate Account B in accordance with the provisions of
state insurance law. Furthermore, the purpose of such separate account
shall be to provide an investment medium for such additional variable and
fixed annuity contracts issued by the Corporation as may be designated as
participating therein. Any such separate account shall receive, hold,
invest and reinvest only the monies arising from (i) premiums,
contributions or payments made pursuant to the variable and fixed annuity
contracts participating therein; (ii) such assets of the Corporation as
shall be deemed appropriate to be invested in the same manner as the assets
applicable to the Corporation's reserve liability under the variable and
fixed annuity contracts participating in such separate account; or as may
be necessary for the establishment of such separate account; (iii) the
dividends, interest and gains produced by the foregoing.
FURTHER RESOLVED: That the proper officers of the Corporation are hereby
authorized:
(i) to register the variable and fixed annuity contracts participating in
any such separate accounts under the provision of the Securities Act
of 1933 to the extent that it shall be determined that such
registration is necessary;
(ii) to register any such separate account with the Securities and Exchange
Commission under the provisions of the Investment Company Act of 1940
to the extent that it shall be determined that such registration is
necessary;
(iii)to prepare, execute and file such amendments to any registration
statements filed under the aforementioned Acts (including
post-effective amendments), supplements and exhibits thereto as they
may be deemed necessary or desirable;
(iv) to apply for exemption from those provisions of the aforementioned
Acts as shall be deemed necessary and to take any and all other
actions which shalt be deemed necessary, desirable, or appropriate in
connection with such Acts;
(v) to file variable and fixed annuity contracts participating in any such
separate accounts with the appropriate state insurance departments and
to prepare and execute all necessary documents to obtain approval of
the insurance departments;
(vi) to prepare or have prepared and execute all necessary documents to
obtain approval of, or clearance with, or other appropriate actions
required, of any other regulatory authority that may be necessary.
FURTHER RESOLVED: That for the purposes of facilitating the execution and
filing of any registration statement and of remedying any deficiencies
therein by appropriate amendments (including post-effective amendments) or
supplements thereto, the President of the Corporation and the Secretary of
the Corporation, and each of them, are hereby designated as attorneys and
agents of the Corporation; and that the appropriate officers of the
Corporation be, and they hereby are, authorized and directed to grant the
power of attorney of the Corporation to the President of the Corporation
and the Secretary of the Corporation by executing and delivering to such
individuals, on behalf of the Corporation, a power of attorney.
FURTHER RESOLVED: That in connection with the offering and sale of the
fixed and variable annuity contracts in the various States of the United
States, as and to the extent necessary, the appropriate officers of the
Corporation be, and they hereby are, authorized to take any and alt such
actions, including but not limited to the preparation, execution and filing
with proper State authorities, on behalf of and in the name of the
Corporation, of such applications, notices, certificates, affidavits,
powers of attorney, consents to service of process, issuers covenants,
certified copies of minutes of shareholders and directors' meetings, bonds,
escrow and impounding agreements and other writings and instruments, as may
be required in order to render permissible the offering and sale of the
fixed and variable annuity contracts in such jurisdictions.
FURTHER RESOLVED: That the forms of any resolutions required by State
authority to be filed in connection with any of the documents or
instruments referred to in any of the preceding resolutions be, and the
same hereby are, adopted as if fully set forth herein if (1) in the opinion
of the appropriate officers of the Corporation, the adoption of the
resolutions is advisable and (2) the Secretary or any Assistant Secretary
of the Corporation evidences such adoption by inserting into these minutes
copies of such resolutions.
FURTHER RESOLVED: That the officers of the Corporation, and each of them,
are hereby authorized to prepare and to execute the necessary documents and
to take such further actions as may be deemed necessary or appropriate, in
their discretion, to implement the purpose of these resolutions.
DATED as of the 20th day of September, 1996.
/s/ WILLIAM M. CAMERON /s/ LYNDA L. CAMERON
- ---------------------- ------------------------
William M. Cameron Lynda L. Cameron
/s/WILLIAM E. DURRETT /s/ EDWARD C. JOULLIAN
- ---------------------- ------------------------
William E. Durrett Edward C. Joullian, III
/s/ GALEN P. ROBBINS /s/ JOHN W. REX
- --------------------- ------------------------
Galen P. Robbins John W. Rex
/s/ JOHN D. SMITH
---------------------
John D. Smith
MANAGEMENT APPROVAL
/s/ KENNETH D. KLEHM /s/ JOANN ANDERSON
- ------------------------ -----------------------
Kenneth D. Klehm JoAnn Anderson
Senior Vice President Internal Audit
- ------------------------------------------------------------------------------
AMERICAN FIDELITY ASSURANCE COMPANY
(a Stock Company)
2000 N. CLASSEN BLVD. OKLAHOMA CITY, OKLAHOMA 73106
- ------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE
AND FIXED DEFERRED ANNUITY
In this policy, "you" and "your" refer to the Owner. "We", "us", "our" and
"Company" refer to American Fidelity Assurance Company.
POLICY AGREEMENT
While this policy is in force, we will pay annuity and other benefits as
provided in this policy. The provisions of this and the following pages and any
attached application are part of this policy. This policy is issued in return
for the application and payment of the first purchase payment.
RIGHT TO EXAMINE POLICY
You may return the policy to us or to our agent within 20 days after it is
delivered. If returned, the policy will be void from the beginning and we will
refund the greater of: the purchase payments paid; or, the Account Value as of
the earlier of the date we receive the policy at our home office, or the date
our agent receives the policy.
READ THIS POLICY CAREFULLY. THIS POLICY IS A LEGAL CONTRACT BETWEEN YOU AND US.
WARNING
ANY PERSON WHO KNOWINGLY, AND WITH INTENT TO INJURE, DEFRAUD OR DECEIVE ANY
INSURER, MAKES ANY CLAIM FOR THE PROCEEDS OF AN INSURANCE POLICY CONTAINING ANY
FALSE, INCOMPLETE OR MISLEADING INFORMATION MAY BE GUILTY OF INSURANCE FRAUD.
Signed for us at our home office in Oklahoma City, Oklahoma.
/s/ JOHN W. REX /s/ STEPHEN P. GARRETT
President Secretary
FLEXIBLE PREMIUM VARIABLE AND FIXED DEFERRED ANNUITY
Non-participating
ALL PAYMENTS AND VALUES PROVIDED IN THIS POLICY, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
DOLLAR AMOUNT
<TABLE>
<CAPTION>
GUIDE TO POLICY PROVISIONS
Page Page
<S> <C> <C> <C>
Policy Agreement 1 Proceeds Payable on Death Provision (con't)
Death of Annuitant on or After the Annuity 10
Right to Examine Policy 1 Date
Payment of Death Benefit 10
Warning 1 Beneficiary 10
Suspension or Deferral of Payments 10
Policy Schedule 3 Provision
Definitions 4 Ownership and Assignment Provisions
Ownership 11
Purchase Payments Joint Owner 11
Purchase Payments 5 Assignment of a Policy 11
Allocation of Purchase Payments 5
Annuity Provisions
Variable Investment Options Annuity Date 11
Available Variable Investment Options 5 Selection of an Annuity Option 11
Variable Investment Option Value 5 Annuity Options 12
Accumulation Unit 6 Fixed Annuity 12
Accumulation Unit Value 6 Variable Annuity 12
Net Investment Factor 6 Variable Annuity Unit 13
Mortality and Expense Risk, Administrative, 6 Mortality Tables 13
and Distribution Expense Charges
General Provisions
Guaranteed Interest Account Provision The Separate Account 13
Guaranteed Interest Account Values 7 The Policy 13
Interest 7 Misstatement of Age 13
Incontestability 13
Policy Maintenance Charge 7 Changes 14
Section 72 14
Transfer Provisions Non-Alienation of Benefits 14
Transfers During the Accumulation Period 7 Reserves 14
Transfers During the Annuity Period 8 Non-Participating 14
Evidence of Survival 14
Withdrawal Provisions Proof of Age 14
Withdrawals 8 Reports 14
Withdrawal Charge 8 Taxes 14
Systematic Withdrawal Program 9
3% Life Income Table 15
Proceeds Payable on Death Provision
Death Benefit Amount Prior to the 9 4% Life Income Table 16
Annuity Date
Death of Owner Prior to the Annuity Date 9 5% Life Income Table 17
Death Benefit Options - Death of Owner 9
Prior to the Annuity Date Fixed Period Table 18
Death of Annuitant Prior to the Annuity Date 10
Death of Owner on or After the Annuity Date 10 Riders, if any Insert
</TABLE>
POLICY SCHEDULE
ANNUITANT: JOHN DOE AGE AT ISSUE: 35
OWNER: JANE DOE AGE AT ISSUE: 35
POLICY NUMBER: 1234567891 DATE OF ISSUE:
ANNUITY DATE: 01/01/2047
POLICY MAINTENANCE CHARGE: $30 per Policy Year
MORTALITY AND EXPENSE RISK CHARGE: 1.25% of the average daily net asset value of
the Separate Account per Policy Year
ADMINISTRATIVE CHARGE: .15% of the average daily net asset value of the Separate
Account per Policy Year. This charge may be increased but the maximum charge
will never be more than .25%.
DISTRIBUTION EXPENSE CHARGE: .10% of the average daily net asset value of the
Separate Account per Policy Year. This charge may be increased but the maximum
charge will never be more than .25%.
NUMBER OF FREE TRANSFERS DURING ACCUMULATION PERIOD: 12 per Policy Year
NUMBER OF FREE TRANSFERS DURING ANNUITY PERIOD: 1 Per Policy Year
TRANSFER FEE: The lesser of $25 or 2% of the amount transferred
MINIMUM AMOUNT TO BE TRANSFERRED: $500, or your entire interest in the Variable
Investment Option or Guaranteed Interest Account, if less. All transfers must be
in whole percentages.
MINIMUM PARTIAL WITHDRAWAL AMOUNT: $250 with exceptions for hardship. This
requirement is waived if the partial withdrawal is pursuant to the Systematic
Withdrawal Program.
ELIGIBLE FUNDS:
Merrill Lynch Prime Bond Fund
Merrill Lynch Equity Growth Fund
Merrill Lynch American Balanced Fund
Merrill Lynch International Equity Focus Fund
Merrill Lynch High Current Income Fund
Dreyfus Growth and Income Fund
Dreyfus Socially Responsible Growth Fund
Dreyfus Small Company Fund
Dreyfus Stock Index Fund
DEFINITIONS
We define here some of the words and phrases used in this policy. We explain
others in other parts of the text.
ACCUMULATION PERIOD is the period during which you may make purchase payments.
ACCUMULATION UNIT is a unit of measure used to determine the value of your
Variable Investment Option(s) during the Accumulation Period.
ACCOUNT VALUE for any Valuation Period is the sum of the values of each of the
Investment Options during the Accumulation Period.
ADJUSTED ACCOUNT VALUE is the Account Value minus the Policy Maintenance Charge
and taxes, if any.
ANNUITANT is the person on whose life annuity payments are based.
ANNUITY DATE is the date the annuity payments begin. The Annuity Date is shown
on the Policy Schedule. (Please refer to Annuity Provisions for further
details.)
ANNUITY PERIOD is the period of time during which annuity payments are made by
us.
ANNUITY UNIT is the accounting unit of measure used to calculate the payment
amount during the Annuity Period.
CASH VALUE at any given time, is equal to the Account Value minus taxes due, if
any, minus the Withdrawal Charge and Policy Maintenance Charge that would apply
if the entire value was withdrawn.
DATE OF ISSUE is the date from which policy years and policy anniversaries will
be determined. The Date of Issue is shown on the Policy Schedule.
ELIGIBLE FUND is an investment entity shown on the Policy Schedule.
FIXED ANNUITY is an annuity providing payments that are guaranteed as to dollar
amount by us. These payments are made during the Annuity Period.
GENERAL ACCOUNT is the general investment account which contains our assets
other than those in the Separate Account or any other segregated asset account.
GUARANTEED INTEREST ACCOUNT OPTION is an investment option within the General
Account which earns interest credited by us during the Accumulation Period.
INVESTMENT OPTIONS include any Guaranteed Interest Account Option and Variable
Investment Option.
OWNER refers to the person or entity listed on the Policy Schedule, and is
entitled to the ownership rights stated in this policy.
POLICY ANNIVERSARY means the anniversary of the Date of Issue shown on the
Policy Schedule.
POLICY YEAR is the annual period which begins on the Date of Issue and each
anniversary of that Date.
SEPARATE ACCOUNT means our Separate Account which provides Variable Investment
Options. This account is called American Fidelity Separate Account B.
VALUATION DATE means each day on which the New York Stock Exchange and the
company are open for business.
VALUATION PERIOD is the period of time beginning at the close of business of the
New York Stock Exchange on each Valuation Date and ending at the close of
business for the next succeeding Valuation Date.
VARIABLE ANNUITY is an annuity providing payments that vary as to dollar amount
in relation to the investment performance of Variable Investment Options. These
payments are made during the Annuity Period.
VARIABLE INVESTMENT OPTIONS are sub-accounts of the Separate Account. These
options provide benefits which are variable and are not guaranteed as to dollar
amount.
PURCHASE PAYMENTS
PURCHASE PAYMENTS
You may make purchase payments at any time during the Accumulation Period. You
may increase, decrease, or change the frequency of such payments. However, each
payment must be at least $25. If in any year no purchase payments are made, the
policy will not lapse. We reserve the right to reject any application or
purchase payment. We may deduct amounts from purchase payments for premium
taxes, if any.
ALLOCATION OF PURCHASE PAYMENTS
We will allocate the first net purchase payment to one or more Investment
Options according to your directions. Subsequent purchase payments are allocated
in the same manner as the first unless you change your directions. You may
change the allocations of Investment Options by using a form we accept. We
reserve the right to limit the available Investment Options from which you may
choose. All allocations must be in whole percentages, and must not be less than
$25.
VARIABLE INVESTMENT OPTIONS
AVAILABLE VARIABLE INVESTMENT OPTIONS
We may, from time to time, add additional Eligible Funds to those shown on the
Policy Schedule. You may be permitted to transfer account values or allocate
purchase payments to the additional Variable Investment Options. However, the
right to make such transfers or allocations will be limited by the terms and
conditions imposed by us.
Shares of an Eligible Fund may become unavailable for investment by the Separate
Account; or, we may deem further investment in shares of an Eligible Fund
inappropriate. In this event, we may limit further purchase of such shares or
replace shares of another Eligible Fund for shares already purchased under this
policy. We will give you written notice of the removal and replacement of
Eligible Funds.
VARIABLE INVESTMENT OPTION VALUE
The value of the Variable Investment Options are variable and are not guaranteed
as to dollar amount. The value of a Variable Investment Option is determined by
multiplying the number of Accumulation Units allocated to the Variable
Investment Option by the Accumulation Unit Value.
ACCUMULATION UNIT
Accumulation Unit is a unit of measure for Variable Investment Options during
the Accumulation Period. It is used to account for all amounts allocated to or
withdrawn from the Variable Investment Options. Amounts allocated or withdrawn
result from purchase payments, withdrawals, transfers or fees and charges. We
will determine the number of Accumulation Units purchased or surrendered. This
will be done by dividing the amount allocated to, or withdrawn from, the
Variable Investment Option by the dollar value of one Accumulation Unit of the
Variable Investment Option as of the end of the Valuation Period during which
the request for the transaction is received at our home office.
ACCUMULATION UNIT VALUE
The Accumulation Unit Value is the value of one Accumulation Unit of a Variable
Investment Option. The Accumulation Unit Value for each Variable Investment
Option was arbitrarily set initially at $10. Subsequent Accumulation Unit Values
for each Variable Investment Option are determined by multiplying the
Accumulation Unit Value for the immediately preceding Valuation Period by the
Net Investment Factor for the Variable Investment Option for the current period.
NET INVESTMENT FACTOR
The Net Investment Factor for each Variable Investment Option is equal to:
A
___ - C
B
"A" equals the following and is referred to as the Adjusted Net Asset Value:
1. the net asset value per share of the Eligible Fund held by the Variable
Investment Option at the end of the current Valuation Period; plus,
2. any dividends or gains per share of the Eligible Fund held by the
Variable Investment Option for the current Valuation Period; less,
3. any per accumulation unit amount for taxes or any amount set aside as a
reserve for taxes attributable to the operation of the Separate Account for
the current Valuation Period.
"B" equals the Adjusted Net Asset Value for the immediately preceding Valuation
Period.
"C" equals the charges per share deducted from the Variable Investment Option
on each Valuation Period for the Mortality and Expense Risk Charge, the
Administrative Charge and the Distribution Expense Charge.
The Accumulation Unit Value may increase or decrease from Valuation Period to
Valuation Period.
MORTALITY AND EXPENSE RISK, ADMINISTRATIVE, AND DISTRIBUTION EXPENSE CHARGES
Each Valuation Period, we deduct charges from the Separate Account for Mortality
and Expense Risk, Administration, and Distribution Expense. The Mortality and
Expense Risk Charge compensates us for assuming the mortality and expense risks
under this policy. The Administrative Charge compensates us for the costs
associated with the administration of this policy and the Separate Account. The
Distribution Expense Charge compensates us for the costs associated with the
sale and distribution of the policy(ies).
The charges are equal, on an annual basis, to a percentage of the average daily
net asset value of the Separate Account. The Mortality and Expense Risk,
Administrative, and Distribution Expense Charges are listed on the Policy
Schedule page.
GUARANTEED INTEREST ACCOUNT PROVISIONS
GUARANTEED INTEREST ACCOUNT VALUES
The Guaranteed Interest Account Value, at any given time, is equal to:
1. the total of all purchase payments allocated to the Guaranteed
Interest Account: plus,
2. any amounts transferred to the Guaranteed Interest Account; plus,
3. credited interest; less,
4. any prior withdrawals and Withdrawal Charges from the Guaranteed
Interest Account (see Withdrawal Charge Provision); less,
5. any amounts transferred from the Guaranteed Interest Account; less,
6. any applicable premium taxes, Policy Maintenance Charges or Transfer
Fees deducted from the Guaranteed Interest Account.
INTEREST
Guaranteed interest is credited to the Guaranteed Interest Account Value at a
yearly rate of 3%. Interest is compounded yearly on the Policy Anniversary. We
may declare additional interest at our discretion.
POLICY MAINTENANCE CHARGE
We deduct the Policy Maintenance Charge shown on the Policy Schedule from the
Account Value each year. We will deduct this Charge by subtracting values from
the Guaranteed Interest Account and/or by surrendering Accumulation Units from
each applicable Variable Investment Option. This Charge reimburses us for
expenses relating to maintenance of this policy. The Policy Maintenance Charge
will be deducted from the Investment Options in the same proportion as the
values of the Variable Investment Option(s) and the Guaranteed Interest Account
Option bear to the total Account Value. During the Annuity Period, the Policy
Maintenance Charge will be deducted pro-rata from Annuity Payments. This
deduction will result in a reduction of each Annuity Payment.
We reserve the right to change the Policy Maintenance Charge; however, this
Charge will never exceed the maximum of $36 per Policy Year.
During the Accumulation Period, the Policy Maintenance Charge will be deducted
from the Account Value on each Policy Anniversary while this policy is in force.
TRANSFER PROVISIONS
You may direct transfers of assets between all Investment Options of this
policy. A transfer request must be in a form we accept. We reserve the right to
limit the number of transfers that may be made.
If you elect to use this transfer privilege, we will not be liable for transfers
made as instructed by you. Amounts, Accumulation Units and Annuity Units
eligible for transfer will be determined as of the end of the Valuation Period
during which the request for transfer is received at our home office. All
transfers must be in whole percentages. All asset transfers on a given date
count as one transfer.
We reserve the right, at any time and without prior notice, to end, suspend or
change the transfer privilege described.
TRANSFERS DURING THE ACCUMULATION PERIOD
The number of free transfers you may make each Policy Year during the
Accumulation Period is shown on the Policy Schedule. We will charge a transfer
fee for each transfer over the number of free transfers allowed in a Policy
Year. This transfer fee is shown on the Policy Schedule. The transfer fee is
deducted from the Investment Option which is the source of the transfer. If your
entire interest in an Investment Option is being transferred, the amount being
transferred will be reduced by the transfer fee. If there are multiple source
Investment Options, the transfer fee will be deducted pro-rata from each source
Investment Option.
TRANSFERS DURING THE ANNUITY PERIOD
During the Annuity Period, you may transfer Annuity Unit values among the
Variable Investment Options. You may also transfer Annuity Unit values from the
Variable Investment Options underlying a Variable Annuity to provide a Fixed
Annuity. You may make only one transfer per Policy Year during the Annuity
Period. There will be no fee charged for this privilege. You will not be allowed
to transfer from your Fixed Annuity to a Variable Investment Option.
WITHDRAWAL PROVISIONS
WITHDRAWALS
During the Accumulation Period, you may withdraw all or some of the Cash Value.
You must apply using a form we accept. Any partial withdrawal amount must be at
least the amount shown on the Policy Schedule, but must not reduce the Account
Value below $100.00. Any amount withdrawn will be deducted from the Investment
Option(s) in the same proportion as the Variable Investment Option(s) and the
Guaranteed Interest Account Option values bear to the total Account Value. In
the event you wish to withdraw amounts in any other proportion, you must specify
the Investment Option(s) to be surrendered using a form we accept. If a total
withdrawal is made on other than a Policy Anniversary, the Policy Maintenance
Charge will be deducted at the time of withdrawal. We will mail any payment
within seven days after the date of receipt of the acceptable request unless the
Suspension or Deferral of Payment Provision is in effect.
WITHDRAWAL CHARGE
During the first Policy Year, any withdrawals will have a Withdrawal Charge.
After the first Policy Year, you may make a withdrawal of up to 10% of the
Account Value once each Policy Year without incurring a Withdrawal Charge. This
10% free withdrawal amount will not be carried forward to the next Policy Year.
The Withdrawal Charge is a percentage of the amount withdrawn in excess of the
free withdrawal amount as shown below:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Policy Withdrawal Policy Withdrawal
Year Charge % Year Charge %
1 8% 6 3%
2 7% 7 2%
3 6% 8 1%
4 5% 9+ 0%
5 4%
</TABLE>
The Charge is calculated at the time of each withdrawal. The Withdrawal Charge
will never exceed 8% of the total purchase payments. For partial withdrawals,
the Charge will be deducted from the Account Value remaining in the policy. No
Withdrawal Charge will be applied upon payment of a death benefit or payment
under any Life, Joint and Survivor, or Period Certain annuity providing at least
seven annual or 72 monthly payments.
SYSTEMATIC WITHDRAWAL PROGRAM
After the first Policy Year, you may be able to participate in a Systematic
Withdrawal Program in lieu of the 10% free withdrawal option. If the total
amount of systematic withdrawals during a Policy Year exceeds the 10% free
withdrawal, a Withdrawal Charge will be incurred. During the Policy Year that
systematic withdrawals begin, the 10% free withdrawal will be based on the
Account Value on the Valuation Date immediately preceding the date the request
for systematic withdrawals is processed. The request must be made on a form that
we accept. During subsequent years, the free withdrawal will be based on the
Account Value on the last Policy Anniversary. Systematic Withdrawals can be made
monthly, quarterly or semi-annually. We reserve the right to: limit the terms
and conditions under which systematic withdrawals can be elected; and, stop
offering any or all systematic withdrawals at any time.
PROCEEDS PAYABLE ON DEATH
DEATH BENEFIT AMOUNT PRIOR TO THE ANNUITY DATE
The death benefit will be the greater of the purchase payments, less any
withdrawals and Withdrawal Charges; or, Adjusted Account Value determined as of
the Valuation Period during which we receive both due proof of death and an
election for the payment period.
DEATH OF OWNER PRIOR TO THE ANNUITY DATE
If you or any Joint Owner die prior to the Annuity Date, the death benefit will
be paid to the Beneficiary you designate. Upon the death of any Joint Owner, the
surviving Joint Owner, if any, will be treated as the Primary Beneficiary. Any
other Beneficiary designation on record at the time of death will be treated as
a Contingent Beneficiary. The death benefit will be paid under one of the Death
Benefit Options below. If the Beneficiary is your spouse, he or she may continue
this policy as the Owner.
DEATH BENEFIT OPTIONS - DEATH OF OWNER PRIOR TO THE ANNUITY DATE
In the event of the death of the Owner or any Joint Owner prior to the Annuity
Date, a non-spousal Beneficiary must elect the death benefit to be paid under
one of the following options:
1. lump sum payment of the death benefit;
2. payment of the entire death benefit within five years of the date of
your death or the death of any Joint Owner; or,
3. payment of the death benefit under an Annuity Option provided that:
a. the annuity is distributed over the lifetime of the Beneficiary
or over a period not extending beyond the life expectancy of the
Beneficiary; and,
b. the distribution begins within one year of the date of your death
or any Joint Owner's death.
Any portion of the death benefit that is not applied under an Annuity Option
within one year of the date of death must be distributed within five years of
the date of death.
A spousal Beneficiary may:
1. elect to continue this policy in his or her own name at the current
Account Value;
2. elect a lump sum payment of the death benefit; or,
3. apply the death benefit to an Annuity Option.
If the deceased Owner was also the Annuitant and the spousal Beneficiary elects
to continue the policy or apply the death benefit to an Annuity Option, the
spousal Beneficiary will become the new Annuitant.
If a lump sum payment is requested, the amount will be paid within seven days of
receipt of proof of death and the election, unless the Suspension or Deferral of
Payments Provision is in effect. Payment to the Beneficiary, other than in a
lump sum, may only be elected during the 60 day period beginning with the date
of receipt of proof of death.
DEATH OF ANNUITANT PRIOR TO THE ANNUITY DATE
If you are not the Annuitant and the Annuitant dies prior to the Annuity Date,
the death benefit will be paid to the Beneficiary. The death benefit will be
paid in a lump sum payment and must be paid in full within five years of the
date of death. If the Owner is a non-individual, the death of any Annuitant
will be treated as the death of the Owner.
DEATH OF OWNER ON OR AFTER THE ANNUITY DATE
If you, or any Joint Owner who is not the Annuitant, die during the Annuity
Period, any remaining payments under the Annuity Option elected will continue at
least as rapidly as under the method of distribution in effect at your death or
such Joint Owner's death. Upon the death of any Owner during the Annuity Period,
the Beneficiary becomes the Owner. Upon the death of any Joint Owner during the
Annuity Period, the surviving Joint Owner, if any, will be treated as the
Primary Beneficiary. Any other Beneficiary designation on record at the time of
death will be treated as a Contingent Beneficiary.
DEATH OF ANNUITANT ON OR AFTER THE ANNUITY DATE
Upon the death of an Annuitant on or after the Annuity Date, the death benefit,
if any, will be as specified in the Annuity Option elected. Death benefits will
be paid at least as rapidly as under the method of distribution in effect at the
Annuitant's death.
PAYMENT OF DEATH BENEFIT
We will require due proof of death before any death benefit is paid. All death
benefits will be paid in accordance with applicable law or regulations governing
death benefit payments.
BENEFICIARY
The Beneficiary is the person or entity who will receive the death benefit
payable under this policy. The Beneficiary designation in effect on the Date of
Issue will remain in effect, unless changed. Unless you provide otherwise, the
death benefit will be paid in equal shares or all to the survivor as follows:
1. to the Primary Beneficiary who survives the Owner's and/or the
Annuitant's death as applicable; or if there is none,
2. to the Contingent Beneficiaries who survive the Owner's and/or the
Annuitant's death, as applicable; or if there are none,
3. to your estate or legal successors.
In the event the Beneficiary and the Owner or Annuitant, as applicable, die at
the same time, we will assume that the Beneficiary died first for purpose of
payment of the death benefit. You can name any Beneficiary to be an irrevocable
Beneficiary. The interest of an irrevocable Beneficiary cannot be changed
without his or her consent. Otherwise, you can change Beneficiaries as explained
below.
You can change the Beneficiary at any time during the Annuitant's life. To do
so, send a request to our home office. The request must be on a form we accept.
The change will go into effect when signed, subject to any payments we make or
actions we take before we record the change. A change cancels all prior
Beneficiaries, except a change will not cancel any irrevocable Beneficiary
without his or her consent. The interest of the Beneficiary will be subject to:
any assignment of this policy which is binding on us; and, any annuity income
option in effect at the Annuitant's death.
SUSPENSION OR DEFERRAL OF PAYMENTS PROVISION
We reserve the right to suspend or postpone payments from the Separate Account
for a withdrawal or transfer for any period when:
1. the New York Stock Exchange is closed (other than customary weekend
and holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of securities held
in the Separate Account is not reasonably practicable or it is not
reasonably practicable to determine the value of the Separate
Account's net assets; or,
4. during any other period when the Securities and Exchange Commission,
by order, so permits for the protection of Owners; provided that
applicable rules and regulations of the Securities and Exchange
Commission will govern as to whether the conditions described in 2 and
3 exist.
We further reserve the right to postpone payment from the Guaranteed Interest
Account for a period of up to six months.
OWNERSHIP AND ASSIGNMENT PROVISIONS
OWNERSHIP
As the Owner, you can exercise the rights given by this policy. You can name a
new Owner. A change of Owner will revoke any prior designation of Owner. Any
change in ownership must be sent to our home office on a form we accept. The
change will go into effect when it is signed, subject to any payments we make or
other actions we take before we record it. We will not be liable for any payment
made or action taken before we record the change.
JOINT OWNER
A policy may be owned by Joint Owners. If Joint Owners are named, any Joint
Owner must be the spouse of the other Owner. Upon the death of either Owner, the
surviving spouse will be the Primary Beneficiary. Any other Beneficiary
designation will be treated as a Contingent Beneficiary unless otherwise
indicated in a form we accept.
ASSIGNMENT OF A POLICY
During the Annuitant's life, you can assign some or all of your rights under
this policy to someone else. A signed copy of the assignment must be sent to our
home office on a form we accept. The assignment will go into effect when it is
signed, subject to any payments we make or other actions we take before we
record it. We are not responsible for the validity or effect of any assignment.
If there are irrevocable Beneficiaries, you need their consent before assigning
your ownership rights in the policy. Any assignment made after the death benefit
has become payable will be valid only with our consent. If the policy is
assigned, your rights may only be exercised with the consent of the assignee of
record.
ANNUITY PROVISIONS
ANNUITY DATE
You may select an Annuity Date at any time during the Accumulation Period. You
must notify us of this date at least 30 days prior to the date you wish your
annuity payments to begin. The Annuity Date must be the first day of a calendar
month. The Annuity Date may not be later than the earlier of when the Annuitant
reaches attained age 85 or the maximum date permitted under state law. Prior to
the Annuity Date, you may, subject to the above, change the Annuity Date by
written request. Any change must be requested at least 30 days prior to the new
Annuity Date.
SELECTION OF AN ANNUITY OPTION
A selection to receive annuity payments under an annuity option described below
must be made at least 30 days prior to the Annuity Date. If no option is
selected, Option 2 with 120 monthly payments guaranteed will automatically be
applied. Prior to the Annuity Date, you may change the Annuity Option selected
by written request. Any change must be requested at least 30 days prior to the
Annuity Date. If an option is based on life expectancy, proof of the payee's
date of birth will be required.
ANNUITY OPTIONS
You may elect to have a Fixed Annuity, a Variable Annuity, or a combination
Fixed Annuity and Variable Annuity. Depending on your election, the Adjusted
Account Value will be applied to provide the annuity payment. If no election
has been made 30 days prior to the Annuity Date, amounts in fixed investment
options will be used to provide a fixed annuity and amounts in variable
investment options will be used to provide a variable annuity.
The amount of the first annuity payment will depend on the Annuity Option
elected and the age of the Annuitant at the time the first payment is due. The
Adjusted Account Value will be applied to the applicable Annuity Table based
upon the Annuity Option you selected. The Annuity Tables show the amount of the
first annuity payments for each $1,000 of Adjusted Account Value.
The following Annuity Options, or any other annuity option acceptable to us, may
be selected:
OPTION 1. LIFETIME ONLY ANNUITY: We will make monthly payments during the
life of the Annuitant. If this option is elected, payments will cease
immediately upon the death of the Annuitant and the annuity will end
without further value.
OPTION 2. LIFETIME ANNUITY WITH GUARANTEED PERIODS: We will make monthly
payments for the guaranteed period selected and thereafter for the life of
the Annuitant. Upon the death of the Annuitant, any amounts remaining under
the guaranteed period selected will be distributed to the Beneficiary at
least as rapidly as under the method of distribution being used as of the
date of the Annuitant's death. The guaranteed period may be 10 years or 20
years.
OPTION 3. JOINT AND SURVIVOR ANNUITY: We will make monthly payments during
the joint lifetime of the Annuitant and a Joint Annuitant. Payments will
continue during the lifetime of the surviving Annuitant and will be
computed on the basis of 100%, 66 2/3% or 50% of the annuity payment in
effect during the joint lifetime. Annuity Tables are available upon
request.
OPTION 4. PERIOD CERTAIN: We will make monthly payments for a specified
period. The specified period must be at least five years and cannot be more
than 30 years. This option is available as a Fixed Annuity only.
FIXED ANNUITY
You may elect to have the Adjusted Account Value applied to provide a Fixed
Annuity. The dollar amount of each payment will be at least as great as that
determined in accordance with the 3% Annuity Table. The Fixed Annuity provides a
3% annual guaranteed interest rate on all Annuity Options. We may pay or credit
excess interest on a Fixed Annuity at our discretion.
VARIABLE ANNUITY
You may elect to have the Adjusted Account Value applied to provide a Variable
Annuity. Variable Annuity payments reflect the investment performance of the
Separate Account in accordance with the allocation of the Adjusted Account Value
to the Variable Investment Options during the Annuity Period. Variable Annuity
payments are not guaranteed as to dollar amount.
The dollar amount of the first Variable Annuity payment is determined in
accordance with the second paragraph in the Annuity Options section. We will
determine the number of Annuity Units payable for each payment We will divide
the dollar amount of the first annuity payment by the Annuity Unit Value for
each applicable Variable Investment Option on the Annuity Date. This sets the
number of Annuity Units for each applicable Variable Investment Option. The
number of Annuity Units payable remains the same unless you transfer a portion
of the annuity benefit to another Variable Investment Option or to a Fixed
Annuity. The dollar amount is not fixed and will change from month to month.
The dollar amount of the Variable Annuity payments for each applicable Variable
Investment Option after the first payment is determined by multiplying the fixed
number of Annuity Units per payment in each Variable Investment Option by the
Annuity Unit Value for the Variable Investment Option for the last Valuation
Period of the month preceding the month for which the payment is due. This
result is the dollar amount of the payment for each applicable Variable
Investment Option. The total dollar amount of each Variable Annuity payment is
the sum of all Variable Investment Option Annuity payments reduced by the
applicable portion of the Policy Maintenance Charge.
VARIABLE ANNUITY UNIT
The value of any Annuity Unit for each Variable Investment Option was
arbitrarily set initially at $10. The Variable Investment Option Annuity Unit
Value at the end of any subsequent Valuation Period is determined as follows:
1. The Net Investment Factor for the current Valuation Period is
multiplied by the value of the Annuity Unit for the Variable
Investment Option for the immediately preceding Valuation Period.
2. The result is then divided by the Assumed Investment Rate Factor which
equals 1.00 plus the Assumed Investment Rate for the number of days
since the preceding Valuation Date.
You can choose either a 3%, 4%, or 5% Assumed Investment Rate. If you do not
choose an Assumed Investment Rate, the Assumed Investment Rate for your Annuity
Option will be 3%.
The Assumed Investment Rate is the assumed rate of return used to determine the
first annuity payment for a Variable Annuity Option. A higher Assumed Investment
Rate will result in a higher first payment. Choice of a lower Assumed Investment
Rate will result in a lower first payment. Payments will increase whenever the
actual return exceeds the chosen rate. Payments will decrease whenever the
actual return is less than the chosen rate.
MORTALITY TABLES
The mortality table used in establishing the Annuity Tables is the Modified 1983
Table a mortality table. The dollar amount of an annuity payment for any age not
shown in the Tables, or for any other form of Annuity Option agreed to by us,
will be provided by us upon request.
GENERAL PROVISIONS
THE SEPARATE ACCOUNT
The Separate Account, American Fidelity Separate Account B, consists of assets
set aside by us, which are kept separate from that of the general assets and all
other Separate Account assets of the company. The assets of the Separate Account
equal to reserves and other policy liabilities with respect to the Separate
Account will not be chargeable with liabilities arising out of any other
business we may conduct.
THE POLICY
The entire contract consists of this policy and any attached endorsements and
application. A copy of the application is attached to the policy.
MISSTATEMENT OF AGE
If the age of any payee has been incorrectly stated, any benefits payable under
this policy will be those that the purchase payments would have purchased for
the correct age. After annuity payments have begun, any underpayments will be
made up in one sum with the next annuity payment. Any overpayments will be
deducted from future annuity payments until the total is repaid.
INCONTESTABILITY
This policy will not be contestable from the Date of Issue.
CHANGES
Any change in this policy or waiver of its provisions must be made in writing
and signed by an authorized officer of the Company.
SECTION 72
In the event of any conflict between Section 72 of the Internal Revenue Code and
the terms of this policy, such Internal Revenue Code section will govern so as
to maintain the treatment of this policy as an annuity policy.
NON-ALIENATION OF BENEFITS
To the extent allowed by law, the values represented in this policy will be free
from creditor's claims or legal process brought against you or any payee. The
Annuitant, if other than the Owner, shall have no right to assign, sell or
otherwise decrease the value of this policy.
RESERVES
The reserves and guaranteed values for this policy will at no time be less than
the minimum benefits required by law of the state in which it is delivered.
NON-PARTICIPATING
This policy is non-participating. It does not share in the profits of the
Company.
EVIDENCE OF SURVIVAL
We may require satisfactory evidence of the continued survival of any person(s)
on whose life annuity payments are based.
PROOF OF AGE
We may require evidence of age of any Annuitant and any Owner.
REPORTS
At least once each calendar year, we will furnish you with a report showing the
Account Value and any other information as may be required by law. We will also
furnish an annual report of the Separate Account.
TAXES
Any taxes paid to any governmental entity relating to any policy may be deducted
from the purchase payment or Account Value when incurred. We will determine when
taxes have resulted from: the investment experience of the Separate Account;
receipt by us of the purchase payments; or, commencement of annuity payments. We
may pay taxes when due and deduct that amount from the Account Value at a later
date. Payment at an earlier date does not waive any right we may have to deduct
amounts at a later date. We reserve the right to establish a provision for
federal income taxes if we determine that we will incur a tax as a result of the
operation of the Separate Account. We will deduct for any income taxes incurred
by us as a result of the operation of the Separate Account. We will deduct this
tax whether or not there was a provision for taxes and whether or not it was
sufficient. We will deduct any withholding taxes required by law.
<TABLE>
<CAPTION>
3% LIFE INCOME TABLE
- ------------------------------------------------------------------------------------------------------------
MONTHLY LIFE INCOME PER $1,000 OF CASH VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LIFE INCOME LIFE INCOME LIFE INCOME
AGE ONLY WITH 10 WITH 20
LAST NO GUARANTEED YEARS YEARS
BIRTHDAY PERIOD GUARANTEED GUARANTEED
50 $ 3.90 $ 3.89 $ 3.82
51 3.97 3.95 3.88
52 4.03 4.01 3.93
53 4.10 4.08 3.99
54 4.18 4.15 4.04
55 4.25 4.22 4.11
56 4.34 4.30 4.17
57 4.42 4.38 4.23
58 4.52 4.47 4.30
59 4.61 4.56 4.37
60 4.72 4.66 4.44
61 4.83 4.76 4.51
62 4.95 4.86 4.58
63 5.07 4.98 4.65
64 5.21 5.10 4.72
65 5.35 5.22 4.79
66 5.51 5.36 4.86
67 5.67 5.50 4.93
68 5.85 5.65 5.00
69 6.04 5.80 5.06
70 6.25 5.96 5.12
71 6.47 6.14 5.18
72 6.71 6.31 5.23
73 6.97 6.50 5.28
74 7.26 6.69 5.32
75 7.56 6.89 5.35
</TABLE>
<TABLE>
<CAPTION>
4% LIFE INCOME TABLE
- ----------------------------------------------------------------------------------------------------------
MONTHLY LIFE INCOME PER $1,000 OF CASH VALUE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LIFE INCOME LIFE INCOME LIFE INCOME
AGE ONLY WITH 10 WITH 20
LAST NO GUARANTEED YEARS YEARS
BIRTHDAY PERIOD GUARANTEED GUARANTEED
50 $4.50 $4.47 $4.40
51 4.56 4.53 4.45
52 4.62 4.59 4.50
53 4.69 4.66 4.56
54 4.76 4.72 4.61
55 4.84 4.80 4.67
56 4.92 4.87 4.73
57 5.00 4.95 4.79
58 5.09 5.03 4.85
59 5.19 5.12 4.91
60 5.29 5.22 4.98
61 5.40 5.32 5.05
62 5.52 5.42 5.11
63 5.65 5.53 5.18
64 5.78 5.65 5.25
65 5.92 5.77 5.32
66 6.08 5.90 5.39
67 6.24 6.04 5.45
68 6.42 6.19 5.51
69 6.61 6.34 5.58
70 6.81 6.50 5.63
71 7.04 6.67 5.69
72 7.28 6.84 5.73
73 7.54 7.02 5.78
74 7.83 7.21 5.82
75 8.14 7.40 5.85
</TABLE>
<TABLE>
<CAPTION>
5% LIFE INCOME TABLE
- ------------------------------------------------------------------------------------------------------------
MONTHLY LIFE INCOME PER $1,000 OF CASH VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LIFE INCOME LIFE INCOME LIFE INCOME
AGE ONLY WITH 10 WITH 20
LAST NO GUARANTEED YEARS YEARS
BIRTHDAY PERIOD GUARANTEED GUARANTEED
50 $5.12 $5.09 $5.01
51 5.17 5.14 5.05
52 5.23 5.20 5.10
53 5.30 5.26 5.15
54 5.37 5.33 5.20
55 5.44 5.40 5.26
56 5.52 5.47 5.31
57 5.60 5.54 5.37
58 5.69 5.62 5.43
59 5.79 5.71 5.49
60 5.89 5.80 5.55
61 6.00 5.90 5.61
62 6.11 6.00 5.67
63 6.23 6.11 5.74
64 6.37 6.22 5.80
65 6.51 6.34 5.87
66 6.66 6.47 5.93
67 6.82 6.60 5.99
68 7.00 6.74 6.05
69 7.19 6.89 6.11
70 7.39 7.05 6.16
71 7.62 7.21 6.21
72 7.86 7.38 6.26
73 8.12 7.56 6.30
74 8.41 7.74 6.34
75 8.72 7.93 6.37
</TABLE>
<TABLE>
<CAPTION>
FIXED PERIOD TABLE
- -----------------------------------------------------------------------------------------------------------------
PAYMENT FOR EACH $1,000 OF PROCEEDS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEARS OF YEARS OF
FIXED ANNUAL MONTHLY FIXED ANNUAL MONTHLY
PERIOD PAYMENT PAYMENT PERIOD PAYMENT PAYMENT
5 $ 17.91 18 $70.59 $5.96
6 $179.22 15.14 19 67.78 5.73
7 155.83 13.16 20 65.26 5.51
8 138.31 11.68 21 62.98 5.32
9 124.69 10.53 22 60.92 5.15
10 113.82 9.61 23 59.04 4.99
11 104.93 8.86 24 57.33 4.84
12 97.54 8.24 25 55.76 4.71
13 91.29 7.71 26 54.31 4.59
14 85.95 7.26 27 52.97 4.47
15 81.33 6.87 28 51.74 4.37
16 77.29 6.53 29 50.60 4.27
17 73.74 6.23 30 49.53 4.18
</TABLE>
AMERICAN FIDELITY ASSURANCE COMPANY
2000 N. Classen Boulevard Oklahoma City, Oklahoma 73106
LOAN RIDER
The policy this rider is attached to is amended as follows:
After the first Policy Year, we may make a loan to you at any time before
annuity payments begin. The security for the loan will be the Guaranteed
Interest Account Value.
A loan cannot exceed the lesser of $50,000 or one-half of the Guaranteed
Interest Account Value. If you have had a loan under this policy, another 403(b)
plan or a qualified retirement plan during the last twelve months, the $50,000
limit may be reduced. The reduction will be the highest loan balance owed during
this one year period.
The minimum loan will be $2,500. The minimum loan amount may be changed by us at
our discretion.
Loan interest will be at an annual rate of 5.0%. While there is an outstanding
loan, the loan value will earn interest at an annual rate of 3.0% to be applied
to the Guaranteed Interest Account.
Loan payments will be at the times set forth in the loan agreement. The loan may
be repaid in full or in part at any time. However, if a loan payment is not made
within 60 days of a payment due date, the outstanding loan balance, principal
plus interest, will become due and payable. If not repaid, the loan balance plus
interest will be considered in default and will be treated as taxable income for
the tax year of the default. Satisfaction of any unpaid loan balance plus
interest from the Guaranteed Interest Account will occur when you qualify for a
Plan distribution under the federal tax guidelines. If the loan is in default
and you do not yet qualify for a distribution to satisfy the outstanding loan
balance, the loan will continue to accrue interest which, if not paid by you,
will be taxable income in the tax year accrued. Any amounts which may become
taxable will be reported as Plan distributions and will be subject to income tax
and tax penalties, if applicable.
If you are eligible for a distribution and the entire Cash Value is withdrawn
while there is an outstanding loan, the Cash Value will be reduced by the loan
balance and the Withdrawal Charge. Upon your death, the Beneficiary will receive
the death benefit reduced by the loan balance. If annuity payments begin while
there is an outstanding loan, the Guaranteed Interest Account Value will be
reduced by the loan balance.
This rider shall not change any other provisions of this policy.
The effective date of this rider is the policy Issue Date.
/s/ STEPHEN P. GARRETT
Secretary
AMERICAN FIDELITY ASSURANCE COMPANY
2000 N. Classen Boulevard Oklahoma City, Oklahoma 73106
403(b) ANNUITY RIDER
This rider is attached to and made a part of the annuity Policy (the "Policy")
issued by American Fidelity Assurance Company (the "Issuer") to qualify the
policy as a tax-sheltered annuity under Section 403(b) of the Internal Revenue
Code (the "Code"), as the same may be amended or supplemented from time to time.
If any provisions of the Policy conflict with this rider, the provisions of this
rider will apply.
ARTICLE I - PURPOSE
1. It is the intent of the Employer by the authorization of a 403(b)
arrangement to allow employees to augment their retirement income through
participation in this 403(b) Agreement.
2. The Participant is solely responsible for determining the amount of
premiums contributed to the 403(b) Agreement. The Participant accepts full
responsibility for any and all tax ramifications resulting from
participation in the 403(b) Agreement. The 403(b) Agreement is purchased by
the Employer for the exclusive benefit of the Participant.
3. By electing to reduce his or her compensation and have the Employer
contribute into the 403(b) Agreement, the Participant will not be taxed on
contributions or earnings attributable to such contributions until a
distribution is taken.
ARTICLE II - PARTICIPATION
1. A Participant may eject to participate in the 403(b) Agreement by executing
the Policy and this rider and signing and delivering any form or document
as may be required by the Employer or Issuer.
2. A Participant may modify his or her payroll deduction election with the
Employer as allowed by the Employer. An election is effective on a
prospective basis only.
3. An election to participate shall be effective as of a reasonable period
following the delivery of the election form to the Employer. Such period
shall be uniform for all employees of the Employer.
ARTICLE III - PREMIUMS
1. A Participant may elect to reduce his or her Includible Compensation and
have such amounts contributed as premiums to the 403(b) Agreement.
a. Any amounts contributed as premiums to the 403(b) Agreement for a
Participant's tax year shall reduce the Participant's Includible
Compensation for such tax year as described in the Code.
b. The premiums contributed to the 403(b) Agreement and the reduction in
a Participant's Includible Compensation shall not exceed the
applicable limitations for such reductions as described in the Code.
The premiums may be based on any valid election made by the
Participant to use any special increase options.
2. The Employer, in its sole discretion, retains the right to make Employer
contributions on behalf of those Participants entitled to such
contributions.
The amount of the contribution shall be set forth in the plan document
governing such contributions. The amount of the contributions shall not
exceed any applicable federal or state limitations on such Employer
contributions and shall be made in a nondiscriminatory manner as determined
by applicable law and regulation. This rider and the Policy shall not
necessarily comply with the provisions of any plan document maintained by
the Employer for purposes of Employer contributions. Notwithstanding
the previous sentence, the Issuer may, at its option, agree to conform this
rider and the Policy to the provisions of any plan document for Employer
contributions, provided the Employer furnishes a copy of such plan document
to the Issuer for review.
3. In no event shall the premiums for a tax year on behalf of a Participant
exceed the maximum allowable amounts permitted under current law or
regulation.
a. The maximum premium contributed for a tax year on behalf of a
Participant, when aggregated with other amounts contributed through
the Employer (or controlled group of Employers under IRC 414(b), (c),
(m) or (o)), shall not exceed the lesser of the maximum permitted
amount for a Participant under Sections 403(b)(2) and 415(c) of the
Code for that year.
b. The maximum of all premiums contributed during a calendar year for the
Participant shall not exceed the limitations set forth in Section
402(g) of the Code.
4. The Participant is solely responsible for determining his or her maximum
annual premium.
5. The Participant may transfer to the Issuer amounts from other 403(b)
arrangements. The Participant shall certify in a manner
acceptable to the Issuer that such amounts are eligible for transfer.
ARTICLE IV - PAYMENT OF BENEFITS
1. A Participant may elect to receive benefits from the 403(b) Agreement only
upon the Participant's certification, in a form and manner acceptable to
the Issuer, that the Participant has separated from service, attained age
59 1/2, is Disabled or is encountering a financial hardship.
If the value of the Policy immediately preceding the 1989 plan year is
ascertainable, such pre-1989 amounts are not subject to the distribution
limitations described above. In the event financial hardship distributions
occur from post 1989 amounts, the distribution amount will be limited to
premium only.
2. The surviving spouse of the Participant (or other named Beneficiary if
there is no surviving spouse or if the surviving spouse has consented in
writing to an alternate Beneficiary) may elect to receive benefits from the
403(b) Agreement upon the death of the Participant.
3. The benefit shall be paid to the Participant or Beneficiary in a form
permitted under the Policy.
4. At the election of a Participant (or the surviving spouse Beneficiary of a
deceased Participant) the Issuer shall pay any eligible rollover
distribution to an individual retirement plan described in Section 408 of
the Code or another annuity policy or account described in Section 403(b)
of the Code in a direct rollover for that Participant (or Beneficiary). The
term "Eligible Rollover Distribution" shall have the meaning set forth in
Sections 402(c)(2) and (4) of the Code and Q&A-3 through Q&A-8 of Treasury
Regulations Section 1.402(c)-2T.
The Participant (or surviving spouse Beneficiary) who desires a direct
rollover must specify the individual retirement plan or 403(b) plan to
which the Eligible Rollover Distribution is to be paid and satisfy such
other reasonable requirements as the Issuer may impose.
5. Benefit payments shall conform to the minimum distribution requirements of
Section 401(a)(9) of the Code and Regulations thereunder, including
Treasury Regulations Section 1.401(a)(9)-2 and 1.403(b)-2.
If the value of the 403(b) Agreement prior to 1987 is determinable, the
pre-87 amount need not be subject to a required minimum distribution until
the calendar year the Participant attains age 75.
6. Notwithstanding any other provision to the contrary, the Issuer may make an
immediate single sum distribution to the Participant or Beneficiary (if
applicable) if the value of the 403(b) Agreement does not exceed $3,500
and if the Participant or Beneficiary is currently eligible to receive
benefit payments.
ARTICLE V - AMENDMENT AND TERMINATION
1 The Issuer reserves the right to amend the 403(b) Agreement at any time by
giving at least 30 days written notice to the Participant.
2. The Participant reserves the right to terminate further premiums to his or
her 403(b) Agreement by executing and delivering proper written notice to
the Employer and the Issuer.
ARTICLE VI - MISCELLANEOUS
1. The Issuer shall provide all required reports to the Participant or
Employer if applicable.
2. The Participant agrees to provide the Issuer all information necessary for
the Issuer to perform its duties under this 403(b) Agreement.
3. The Participant warrants that any information he or she supplies is correct
and may be fully relied upon by the Issuer.
4. The Policy and the rider is intended to qualify as a tax-sheltered annuity
under Section 403(b) of the Code. The Policy and the rider shall be
interpreted and operated with this intent.
5. The Employer and Participant shall, to the extent permitted under law,
indemnify and hold the Issuer, its employees and agents harmless from and
against any liability which may occur in the administration of the 403(b)
Agreement unless arising from the Issuer's breach of its responsibilities
under this 403(b) Agreement. By execution of this 403(b) Agreement, it is
the specific intention of the parties that no fiduciary duties be conferred
upon the Issuer, its employees or agents nor shall any be implied from this
403(b) Agreement or the acts of the Issuer, its employees or agents.
6. The Issuer may charge fees in connection with the 403(b) Agreement. In
addition, the Issuer has the right to be reimbursed for any taxes or
expenses incurred by or on behalf of the 403(b) Agreement. The Issuer
reserves the right to change its fee schedule, or add new fees, at any
time upon 30 days prior written notice to the Participant.
7. To the extent not governed by federal law, the 403(b) Agreement shall
be governed by the laws of the state of Oklahoma. If any provisions of
this 403(b) Agreement shall for any reason be deemed invalid or
unenforceable, the remaining provisions shall, nevertheless, continue
in full force and effect and shall not be invalidated.
8. The 403(b) Agreement shall be nonforfeitable at all times. The
Participant may not assign, pledge or in any manner encumber this
403(b) Agreement, nor shall this 403(b) Agreement be subject to
garnishment, attachment, execution or levy of any kind.
9. Upon receipt of a domestic relations order the Issuer may retain an
independent third party to determine if the order is a Qualified
Domestic Relations Order pursuant to Section 414(p) of the Code.
ARTICLE VII - DEFINITIONS
1. Policy - Shall mean the underlying annuity agreement issued by the
Issuer in its entirety and any attachment or riders attached hereto.
2. Disabled - Shall mean the inability to engage in any substantial
gainful activity by reason of a medically determinable physical or
mental impairment which can be expected to result in death or to be of
an indefinite nature as defined in Section 72(m)(7) of the Code.
3. Employer - Shall mean an Employer described in Section 501 (c)(3) of
the Code which is exempt from tax under Section 501(a) of the Code, an
educational organization described in Section 170(b)(1)(A)(ii) of the
Code, a state, a political subdivision of a state, or an agency or
instrumentality of a state.
4. 403(b) Agreement - Shall mean the Policy as modified by this rider.
5. Includible Compensation - Shall mean the compensation received from
the Employer which is includible income of the Employee as defined in
Section 403(b)(3) of the Code. Includible Compensation shall not
exceed $150,000, as adjusted for increases in the cost-of-living in
accordance with Section 401(a)(17)(B) of the Code.
6. Participant - Shall mean any current or former employee who has made
valid premium payments to the 403(b) Contract.
This rider is subject to all of the provisions of the Policy as long as this
rider does not amend them. This rider will terminate on the same date as the
Policy to which it is attached.
/s/ STEPHEN P. GARRETT
Secretary
AMERICAN FIDELITY ASSURANCE COMPANY
2000 N. Classen Boulevard Oklahoma City, Oklahoma 73106
INDIVIDUAL RETIREMENT ANNUITY RIDER
This rider is attached to and made a part of the annuity Policy (the "Policy")
issued by American Fidelity Assurance Company to qualify the Policy as an
Individual Retirement Annuity under Section 408(b) of the Internal Revenue Code
(the "Code"), as the same may be amended or supplemented from time to time. All
references to Code Sections are to those Sections as they may be amended and/or
renumbered from time to time. If any provisions of the Policy conflict with this
rider, the provisions of this rider will apply.
ARTICLE I - OWNERSHIP
The individual who participates in this individual retirement annuity (the
"Owner") is the Owner of the Policy. The Policy is established for the exclusive
benefit of the Owner and his or her Beneficiary. The Owner may exercise all
rights under the Policy during his or her lifetime. The Owner's interest in the
Policy is nonforfeitable and nontransferable. The Policy may not be sold,
assigned, discounted or pledged as collateral or as security for the performance
of an obligation or for any other purpose. Separate records will be maintained
for the interest of each individual.
ARTICLE II - DEPOSIT LIMITS
American Fidelity Assurance Company may accept deposits on behalf of the Owner
for a tax year of the Owner. Deposits shall be in cash and shall not be fixed,
and the total deposit shall be limited to a maximum of $2,000 for any tax year
unless the deposit is a rollover contribution described in Section 402(c),
403(a)(4), 403(b)(8) or 408(d)(3) of the Code or an employer contribution to a
simplified employee pension plan as described in Section 408(k) of the Code.
Any refund of premiums (other than those attributable to excess deposits) will
be applied, before the close of the calendar year following the year of the
refund, toward the payment of future premiums or the purchase of additional
benefits.
ARTICLE III - NO LIFE INSURANCE OR COLLECTIBLES
No part of the Policy may be invested in life insurance nor may any part of the
Policy be invested in collectibles (within the meaning of Section 408(m) of the
Code).
ARTICLE IV - DISTRIBUTION LIMITS
1. The distribution of an individual's interest shall be made in accordance
with the minimum distribution requirements of Section 408(b)(3) of the Code
and the regulations thereunder, including the incidental death benefit
provisions of Section 1.401 (a)(9)-2 of the proposed regulations, all of
which are herein incorporated by reference. Life expectancy is computed by
use of the expected return multiples in Tables V and VI of Section 1.72-9
of the Income Tax Regulations. Life expectancies shall be recalculated each
year. Such election shall be irrevocable by the Owner and shall apply to
all subsequent years.
2. The Owner's entire interest in the Policy must be distributed or begin to
be distributed, by the Owner's required beginning date, which is the April
1 following the calendar year in which the Owner reaches age 70 1/2. For
each succeeding year, a distribution must be made on or before December 31.
By the required beginning date the Owner may elect to have the balance in
the Policy distributed in a manner acceptable to American Fidelity
Assurance Company.
3. Payments must be made in periodic payments at intervals of no longer than
one year. If the Owner elects distributions in the form of annuity
payments, the payments must be either nonincreasing or they may increase
only as provided in Q & A. F-3 of Section 1.401 (a)(9)- 1 of the Proposed
Income Tax Regulations.
4. If the Owner does not elect a method of payout by the April 1 following the
calendar year in which he or she reaches age 70 1/2, American Fidelity
Assurance Company shall have complete and sole discretion to make payments
pursuant to one of the forms described in paragraph 2 above or in the
manner described in the contract to which this rider is attached.
5. If the Owner rolls over or transfers individual retirement annuity or
account (IRA) funds or qualified retirement plan funds into the Policy,
within the meaning of Code Section 402(c), after April 1 of the year
following the year he or she attained age 70 1/2, the choice of the method
of payout will be made according to whether the Owner had elected to
recalculate or to not recalculate the minimum distributions from the
distributing or transferring plan, as follows:
a. If the Owner elected to not recalculate the minimum distributions
from the distributing or transferring plan, the payout option
applicable for this Policy must be made over a period certain not
exceeding the remaining applicable life expectancy. The remaining
applicable life expectancy is the applicable life expectancy used
to determine the minimum distribution from the distributing or
transferring plan for the year in which the transaction occurs
(the distribution which may not be rolled over or transferred
into this receiving plan), minus 1.0. Payout may not be made for
the life of the Owner or for the lives of the Owner and the
Beneficiary.
b. If the Owner elected to recalculate the minimum distributions,
payout from this Policy may be made (1) for the life of the
Owner, (2) for the lives of the Owner and the Beneficiary, (3)
for the life of the Owner or for the lives of the Owner and the
Beneficiary with a period certain not longer than the remaining
applicable life expectancy, or (4) a period certain not longer
than the remaining applicable life expectancy. The remaining
applicable life expectancy is the applicable life expectancy used
to determine the current year minimum distribution from the
distributing or transferring plan for the year in which the
transaction occurs (the distribution which may not be rolled over
or transferred into this receiving plan), minus 1.0.
6. If the Owner receives payout according to a period certain, the period
certain may not be lengthened after the date payout begins, even if the
original period established is shorter than the maximum permitted.
7 If the payout option is a life annuity or a life annuity with a period
certain not exceeding 20 years, the following rule will apply. The first
payout made on or before the April 1 following the year the Owner attained
age 70 1/2 must be in the amount required for one payout interval. The
second payout need not be made until the end of the next payout interval,
even if that payout interval ends in the next calendar year.
If the payout schedule is a period certain annuity without a life
contingency or a life annuity with a period certain exceeding 20 years,
period payout for each distribution calendar year (i.e., a year for which a
minimum distribution is required) will be combined and treated as an annual
amount. The amount which is required to be distributed on or before April 1
following the year the Owner attains age 70 1/2 is the annual amount for
the Owner's first distribution calendar year. The annual amount for other
distribution calendar years, including the annual amount for the calendar
year in which the Owner's required beginning date occurs, must be
distributed on or before December 31 of the calendar year for which the
distribution is required.
8. If the Owner dies before his or her entire interest is distributed, the
entire remaining interest will be distributed as follows:
a. If the Owner dies on or after distributions have begun under
Article IV, Section 2, the entire remaining interest must be
distributed at least as rapidly as provided under the section.
b. If the Owner dies before distributions have begun under Article
IV, Section 2, the entire remaining interest must be distributed
as elected by the Owner or, if the Owner has not so elected, as
elected by the Beneficiary or Beneficiaries, as follows:
1) by December 31st of the year containing the fifth anniversary
of the Owner's death; or
2) in equal or substantially equal payments over the life or life
expectancy of the designated Beneficiary or Beneficiaries
starting by December 31st of the year following the year of the
Owner's death. If, however, the Beneficiary is the Owner's
surviving spouse, then this distribution is not required to begin
before December 31st of the year in which the Owner would have
turned 70 1/2.
c. If the Beneficiary is the Owner surviving spouse, the spouse may
treat the Owner's IRA as his or her own IRA. This will be deemed
to have occurred if such surviving spouse makes a regular
contribution to the IRA, or fails to elect any of the above
provisions. In addition, the Beneficiary may roll over or
transfer the Owner's interest to the Beneficiary's own IRA if the
Beneficiary is the Owner's surviving spouse.
9. Unless otherwise elected by the Owner prior to the commencement of
distributions under Article IV, Section 2, or, if applicable, by the
surviving spouse where the Owner dies before distributions have commenced,
life expectancies of an Owner or spouse Beneficiary shall be recalculated
annually for purposes of distributions under this Article. An election not
to recalculate shall be irrevocable and shall apply to all subsequent
years. The life expectancy of a nonspouse Beneficiary shall not be
recalculated.
10. An individual may satisfy the minimum distributions requirements under
Sections 408(a)(6) and 408(b)(3) of the Code by receiving a distribution
from one IRA that is equal to the amount required to satisfy the minimum
distribution requirements for two or more IRA's. For this purpose, the
Owner of two or more IRAS may use the "alternative method" described in
Notice 88-38, 1988-1 C.B 524, to satisfy the minimum distribution
requirements described above.
ARTICLE V - REPORTING
Unless the Owner dies, is Disabled (as defined in Code Section 72(m)), or
reaches age 59 1/2 before any amount is paid out from the Policy, American
Fidelity Assurance Company must receive from the Owner a statement explaining
how he or she intends to dispose of the amount paid out.
The Owner agrees to provide American Fidelity Assurance Company with information
necessary for American Fidelity Assurance Company to prepare any report required
under Section 408(i) of the Code and Regulations Sections 1.408-5 and 1.408-6.
American Fidelity Assurance Company agrees to submit reports to the Internal
Revenue Service.
ARTICLE VI - AMENDMENTS
Any amendment made for the purpose of complying with provisions of the Code and
related regulations may be made without the consent of the Owner. The Owner will
be deemed to have consented to any other amendment unless the Owner notifies
American Fidelity Assurance Company that he or she does not consent within 30
days from the date American Fidelity Assurance company mails the amendment to
the Owner.
ARTICLE VII - RESPONSIBILITY OF THE PARTIES
American Fidelity Assurance Company shall not be responsible for any penalties,
taxes, judgments or expenses incurred by the Owner in connection with this IRA
and shall have no duty to determine whether any contributions to or
distributions from this IRA comply with the Code, regulations or rulings.
This rider is subject to all of the provisions of the Policy as long as this
rider does not amend them. This rider will terminate on the same date as the
policy to which it is attached.
/s/ STEPHEN P. GARRETT
Secretary
<TABLE>
<CAPTION>
ANNUITY AMERICAN FIDELITY ASSURANCE COMPANY
APPLICATION 2000 N. CLASSEN BLVD OKLAHOMA CITY, OKLAHOMA 731O6
PROPOSED ANNUITANT INFORMATION
- -----------------------------------------------------------------------------------------------------------------
Last Name (maiden name) First Name Full Middle Name Suffix
Age Date of Birth Sex Soc Sec. Number Requested Eff Date Date of Employment
Mo Day Yr M F Mo Day Yr Mo Day Yr
- ------------------------------------------------------------------------------------------------------------------
Number and Street Work Phone # Home Phone #
( ) ( )
- ------------------------------------------------------------------------------------------------------------------
City State Zip
- ------------------------------------------------------------------------------------------------------------------
Employer MCP # Salary $ Occupation
Annual Monthly
- ------------------------------------------------------------------------------------------------------------------
Do you now have or have you ever had any other coverage with us? Yes No
If so, write the existing Customer Number in the box in the upper right
corner.
- ------------------------------------------------------------------------------------------------------------------
PLAN INFORMATION:
<S> <C> <C>
Choose One Plan: PAYMENT ALLOCATION: BILLING METHOD
__ New Amounts shown below should __ List Bill
TAX QUALIFIED PLANS __ Increase reflect the new total payment Payor # ________
__ 403(b) Salary Reduction __ Decrease after any increase/decrease __ Direct Bill
__ 403(b) Transfer/Rollover __ Fixed Annuity (select one) __ Bank Draft
__ 403(b) Employer Contribution __ Standard __ HIO Rider
__ IRA $ ________________ NAME ON BILL:
__ Spousal IRA __ Annuitant
__ IRA Transfer/Rollover __ Owner
__ SEP/IRA __ Variable Annuity Fund A
__ SEP/IRA Transfer/Rollover qualified plans only $ _____ FOR OFFICE USE ONLY
__ ________________________ (Complete Form #ASI-34)
__ AFAdvantage Variable Annuity
(Complete Form #ASI-35) $ _____
NON-TAX QUALIFIED PLANS
__ After-Tax Annuity (ATA)
__ ATA-1035 Exchange TOTAL PAYMENT $ _______________
__ __________________________ Payment Frequency: _______________
</TABLE>
- ------------------------------------------------------------------------------
Does this contract, if issued replace any insurance or annuity contract now in
force? Yes No
If yes, please give the name of the company and the policy number.
- ------------------------------------------------------------------------------
SPECIAL INSTRUCTIONS:
- ------------------------------------------------------------------------------
BENEFICIARY
- ------------------------------------------------------------------------------
Primary First Name Full Middle Name Last Name Suffix
Relationship to Annuitant
Contingent
- ------------------------------------------------------------------------------
POLICY OWNER (COMPLETE ONLY IF OTHER THAN ANNUITANT)
- ------------------------------------------------------------------------------
First Name Full Middle Name Last Name Suffix
SSN # or Tax ID Number(s)
- ------------------------------------------------------------------------------
Number and Street City State Zip
- ------------------------------------------------------------------------------
Agent Statement: To the best of my knowledge the policy applied for does __
does not __ replace the existing insurance or annuity policy. In the event
a Variable Annuity is selected, this application is not complete without the
appropriate Application Supplement.
_______________________________
SIGNATURE OF WITNESS
(Licensed resident agent where required by law)
Signed At _________________
Date Signed _______________
__________________________
SIGNATURE OF OWNER
Agent #
__________________________
SIGNATURE OF JOINT OWNER
(If Applicable)
