AMERICAN FIDELITY
95
1995
Annual
Report
Variable Annuity Fund A
<PAGE>
January 19, 1996
Dear Participant:
Fueled by a sharp drop in interest rates, low inflation, strong
corporate profits and a record flow of money into domestic stock
funds, the U.S. stock and bond markets enjoyed one of the best years
in decades. The Variable Annuity Fund A also set a record value.
The unit value was $12.20 on December 31, 1995, up 34.2% from $9.09
on December 31, 1994.
Investors pushed stocks to record highs several times throughout the
year as the Federal Reserve lowered short-term interest rates. The
bond market experienced a dramatic recovery in 1995 coming off its
worst year since 1927. At year-end, the 30 year Treasury rate had
fallen 193 basis points to close the year at 5.95%. At current
price levels, it appears that the bond market has largely antici-
pated or discounted further Federal Reserve easings in monetary
policy. Interest rates could trend somewhat lower over the next few
months as the economy continues to have moderate growth with low
inflation. We expect interest rates to trade in a more narrow range
in 1996 with slightly higher rates at year-end.
Inflation continued to decelerate in the fourth quarter, posting a
four year low of 0% measured by the CPI in November. For the year
the CPI was approximately 2.6% versus 2.7% in 1994. The economy's
slow and relatively stable expansion, plentiful world energy
supplies, rising corporate productivity, minimal wage pressures and
the ongoing success of the Fed's monetary policies should keep
inflation restrained throughout 1996 in the 2.7% to 3.0% range.
During the fourth quarter there were signs of a slowdown in economic
activity. Weak holiday retail sales, slowing capital goods orders
and flattening home sales combined to slow the pace of the economy.
In addition, the fourth quarter was impacted by the Boeing strike
and a decrease in Federal spending due to the partial government
shutdown. In spite of a softening in economic growth during the
fourth quarter of 1995, we expect real GDP for 1995 to be
approximately 3.0% versus 4.1% in 1994.
We anticipate continued progress for stocks in 1996, however, we do
not expect the U.S. equity market to match last year's stellar
performance. If the market is to continue to trend significantly
higher, investors will need evidence in the months ahead that the
economy is advancing at a steady growth rate. Recent economic data
suggests to us that the slowdown to date is not severe.
If you have any questions about Variable Annuity Fund A, please let
us know.
Sincerely,
JOHN W. REX
John W. Rex, Chairman
Board of Managers
<PAGE>
OBJECTIVES:
The Fund's principal investment objective is long-term growth of
capital. Occasional investments to seek short-term capital
appreciation may be made. A secondary investment objective is the
production of income.
VARIABLE ANNUITY FUND A
Historical Unit Values
12/31/70 1.0386
12/31/71 1.20
12/31/72 1.4432
12/31/73 1.0956
12/31/74 .8263
12/31/75 1.0537
12/31/76 1.3399
12/31/77 1.2949
12/31/78 1.3490
12/31/79 1.6040
12/31/80 2.0971
12/31/81 2.1868
12/31/82 2.7875
12/31/83 3.2029
12/31/84 3.2507
12/31/85 3.7903
12/31/86 4.4669
12/31/87 4.6009
12/31/88 5.1103
12/31/89 6.5142
12/31/90 6.9245
12/31/91 8.8663
12/31/92 9.1083
12/31/93 9.7090
12/31/94 9.0936
12/31/95 12.1986
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS
AMERICAN FIDELITY VARIABLE ANNUITY FUND A
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Market Value
Shares or -----------------------
Principal Percent
COMMON STOCKS: Amount Amount of Net Assets
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Chemicals and Allied Products:
Avery-Dennison Corporation 44,600 $2,235,575
American Home Products Corporation 22,800 2,211,600
Johnson & Johnson 20,600 1,763,875
Abbott Laboratories 42,100 1,757,675
Pfizer, Inc. 18,500 1,165,500
Merck & Company, Inc. 11,700 769,275
Dupont 7,200 503,100
------------
10,406,600 14.22%
Depository Institutions:
Bank America Corporation 29,800 1,929,550
Mellon Bank Corporation 32,250 1,733,437
Citicorp 15,300 1,028,925
MBNA 20,000 737,500
CoreStates Financial Corporation 18,200 689,325
J.P. Morgan & Company 8,500 682,125
First Interstate 4,900 668,850
Wachovia Corporation 7,500 343,125
Regions Financial Corporation 7,800 335,400
------------
8,148,237 11.14%
Food and Kindred Products:
Pepsico, Inc. 41,800 2,335,575
The Coca-Cola Company 28,800 2,138,400
Philip Morris Company 15,000 1,357,500
------------
5,831,475 7.97%
Petroleum and Coal Products:
Texaco, Inc. 27,600 2,166,600
Kerr-McGee Corporation 18,100 1,149,350
Exxon Corporation 12,500 1,001,563
Repsol S.A. ADR** 21,900 719,963
Royal Dutch Petroleum** 5,000 705,625
------------
5,743,101 7.85%
Insurance Carriers:
American International Group 26,100 2,414,250
AFLAC, Inc. 39,850 1,728,494
U. S. Healthcare, Inc. 12,300 571,950
United Healthcare Company 8,700 569,850
------------
5,284,544 7.22%
Electronic and Other Electric Equipment:
Intel Corporation 28,000 1,589,000
Motorola, Inc. 25,000 1,425,000
General Electric Company 15,000 1,080,000
Duracell International 19,900 1,029,825
------------
5,123,825 7.00%
Business Services:
Interpublic Group of Companies 49,600 2,151,400
Cisco Systems, Inc.* 8,000 597,000
Microsoft Corporation* 5,550 487,013
Reuters Holdings PLC ADR ** 31,300 1,725,413
------------
4,960,826 6.78%
Communications:
Nynex Corporation 14,000 756,000
Ameritech 12,700 749,300
Capital Cities/ABC, Inc. 5,400 666,225
Airtouch Communications * 11,400 322,050
Vodafome Group PLC ADR ** 18,800 662,700
------------
3,156,275 4.31%
Industrial Machinery and Equipment:
Hewlett-Packard Company 24,900 2,085,375
Silicon Graphics 12,100 332,750
------------
2,418,125 3.31%
Food Stores:
Safeway, Inc.* 43,800 2,255,700
------------
2,255,700 3.08%
Non-Depository Institutions:
Federal National Mortgage
Association 18,100 2,246,663
------------
2,246,663 3.07%
Engineering and Management Services:
Dun & Bradstreet Corporation 17,700 1,146,075
Foster Wheeler Corporation 24,100 1,024,250
------------
2,170,325 2.97%
Fabricated Metal Products:
The Gillette Company 38,900 2,027,663
------------
2,027,663 2.77%
Eating and Drinking Places:
McDonald's Corporation 44,200 1,994,525
------------
1,994,525 2.73%
General Merchandise:
Sears Roebuck & Company 42,300 1,649,700
------------
1,649,700 2.26%
Building Materials and Gardening Supplies:
Home Depot, Inc. 27,600 1,321,350
------------
1,321,350 1.81%
Hotels and Other Lodging Places:
Mirage Resorts, Inc. * 30,900 1,066,050
------------
1,066,050 1.46%
Rubber and Miscellaneous Plastics Products:
Titan Wheel International 62,900 1,022,124
------------
1,022,124 1.40%
Railroad Transportation:
Burlington Northern/Santa Fe 10,300 803,400
------------
803,400 1.10%
Electric, Gas and Sanitary Services:
Texas Utilities 19,500 801,937
------------
801,937 1.10%
Transportation Equipment:
Chrysler Corporation 12,000 664,500
------------
664,500 0.91%
Holding and Other Investment Offices:
Meditrust 11,000 383,624
Federal Realty Investment Trust 11,000 250,250
------------
633,874 0.87%
Tobacco Products:
UST, Inc. 12,000 400,500
------------
400,500 0.55%
------------ ------
Total Common Stocks (Cost $52,671,828) $70,131,319 95.88%
------------ ------
Short Term Investments:
Associates Corporation of North America
Master Note Fltg (5.52% at 12/31/95) 2,797,374 2,797,374
--------- ------------
Total Short-Term Investments: $ 2,797,374 3.82%
------------ ------
Total Investments: (Cost $55,469,201) $72,928,693 99.70%
------------ ------
Other Assets and Liabilities, net: 223,841 0.30%
------------ ------
Total Net Assets: $73,152,534 100.00%
============ =======
</TABLE>
* Presently not producing dividend income.
** Foreign Investments
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
ASSETS:
Investments at market value
(Cost: $55,469,201 and $46,790,323
in 1995 and 1994, respectively) $72,928,693 $50,453,521
Cash 224,163 520,764
Receivables from broker 1,500,277 0
Accrued interest and dividends 113,477 92,237
----------- -----------
Total assets 74,766,610 51,066,522
LIABILITIES:
Accounts payable 50 50
Payables to broker 1,614,026 0
----------- -----------
Total liabilities 1,614,076 50
----------- -----------
NET ASSETS $73,152,534 $51,066,472
=========== ===========
ACCUMULATION UNITS OUTSTANDING 5,996,795 5,615,645
=========== ===========
NET ASSET VALUE PER UNIT $ 12.1986 $ 9.0936
=========== ===========
</TABLE>
See accompanying notes to financial statements.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1995 1994
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Income:
Dividends $ 1,097,364 $ 954,180
Interest 161,264 183,858
------------- ----------
1,258,628 1,138,038
------------- ----------
Expenses:
Mortality and expense guaranty
fees (note 3) 593,042 482,034
Investment management fees (note 3) 200,769 163,189
793,811 645,223
------------- ----------
NET INVESTMENT INCOME 464,817 492,815
REALIZED GAINS ON INVESTMENTS:
Proceeds from sales 38,990,793 19,900,586
Cost of securities sold 35,180,383 18,499,626
------------- ----------
NET REALIZED GAINS 3,810,410 1,400,960
------------- ----------
UNREALIZED APPRECIATION
OF INVESTMENTS:
End of year 17,459,492 3,663,198
Beginning of year 3,663,198 8,815,460
------------- ----------
INCREASE (DECREASE) IN UNREALIZED 13,796,294 (5,152,262)
APPRECIATION OF INVESTMENTS
------------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $18,071,521 ($3,258,487)
============= ==========
</TABLE>
See accompanying notes to financial statements.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1995 1994
---- ----
<S> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income $ 464,817 $ 492,815
Net realized gains on investments 3,810,410 1,400,960
Increase (decrease) in unrealized
appreciation of investments 13,796,294 (5,152,262)
------------ ------------
Net increase (decrease) in net
assets resulting from operations 18,071,521 (3,258,487)
------------ ------------
Changes from principal transactions:
Net purchase payments received (note 3) 11,269,062 9,827,945
Withdrawal of funds (7,254,521) (5,154,540)
------------ ------------
Increase in net assets derived from
principal transactions 4,014,541 4,673,405
------------ ------------
Increase in net assets 22,086,062 1,414,918
NET ASSETS:
Beginning of year 51,066,472 49,651,554
------------ ------------
End of year $73,152,534 $51,066,472
============ ============
ACCUMULATION UNITS:
Outstanding, beginning of year 5,615,645 5,113,999
Increase for payments received 1,061,993 1,054,765
Decrease for withdrawal of funds (680,843) (553,119)
------------ ------------
Outstanding, end of year 5,996,795 5,615,645
============ ============
</TABLE>
See accompanying notes to financial statements.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Per-Unit Income and Capital Changes
Years Ended December 31,
----------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME AND EXPENSES:
Investment Income $0.2163 $0.2105 $0.2113 $0.2267 $0.2329
Operating Expenses 0.1364 0.1193 0.1180 0.1113 0.1000
------- ------- ------- ------- -------
Net Investment Income 0.0799 0.0912 0.0933 0.1154 0.1329
CAPITAL CHANGES:
Net realized and unrealized
gains(losses) from
securities 3.0251 (0.7066) 0.5074 0.1266 1.8089
------- ------- ------- ------- -------
Net increase (decrease) in
accumulation unit value 3.1050 (0.6154) 0.6007 0.2420 1.9418
Accumulation unit value,
beginning of period 9.0936 9.7090 9.1083 8.8663 6.9245
------- ------- ------- ------- -------
Accumulation unit value,
end of period $12.1986 $9.0936 $9.7090 $9.1083 $8.8663
========= ========= ========= ========= =========
NUMBER OF ACCUMULATION
UNITS OUTSTANDING,
END OF PERIOD 5,996,795 5,615,645 5,113,999 4,644,455 4,267,756
========= ========= ========= ========= =========
RATIOS:
Ratio of expenses to
average net assets 1.2880% 1.2826% 1.2783% 1.2812% 1.2800%
Ratio of net investment
income to average
net assets 0.7542% 0.9797% 1.0110% 1.3289% 1.7004%
Portfolio turnover rate 66.1% 43.5% 51.2% 31.7% 41.2%
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
- -------
American Fidelity Variable Annuity Fund A (the Fund) is a separate
account of American Fidelity Assurance Company (AFA). The Fund is
registered as an open-end, diversified management investment company
under the Investment Company Act of 1940, as amended. The purpose
of the Fund is to provide a means of investing for supplemental
retirement income. Shares are only available in connection with
variable annuity policies issued by AFA.
The Fund's investment objectives are primarily long-term growth of
capital and secondarily the production of income. In order to
achieve these investment objectives, the Fund normally invests in
a diversified portfolio consisting primarily of common stocks.
Investments
- -----------
Investments in corporate stocks are valued by Merrill Lynch Pricing
Service. Domestic securities for which published quotations are not
available are valued at the quotation obtained from the Fund's
primary broker. Short-term investments are valued on the basis of
amortized cost, which approximates market.
The Fund's portfolio of investments is diversified such that not
more than five percent (5%) of the value of the total assets of the
Fund are invested in any one issuer and not more than twenty-five
percent (25%) are invested in any one industry or group of
industries. Management does not believe the Fund has any
significant concentrations of credit risk.
Realized gains and losses from investment transactions and
unrealized appreciation or depreciation of investments are
determined on the specific-identification basis.
Dividend income is recorded on the ex-dividend date, and interest
income is recorded on the daily accrual basis. For certain
securities in which the exact dividend is unknown on the ex-dividend
date, such as stock in foreign companies, an estimate of the
dividend is recorded on the ex-dividend date, and any necessary
adjustments are added to the Fund's investment income on the date
the dividend is received by the Fund. Any taxes withheld by foreign
governments or any foreign exchange expenses (gains or losses)
incurred by investment in such securities are paid by the Fund. The
Fund does not expect these costs to be significant.
Income Taxes
- ------------
The fund is not taxed separately because the operations of the Fund
are part of the total operations of AFA. AFA files its federal
income tax returns under sections of the Internal Revenue Code
applicable to life insurance companies. The Fund's net increase in
net assets from operations is not expected to result in taxable
income under present regulations. The Fund will not be taxed as a
"Regulated Investment Company' under Subchapter "M" of the Internal
Revenue Code.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
increase and decrease in net assets from operations during the
period. Actual results could differ from those estimates.
NOTE 2 - INVESTMENTS
- --------------------
The aggregate dollar amount of investment purchases (exclusive of
short-term investments) was $43,967,652 and $26,850,916 for the
years ended December 31, 1995 and 1994, respectively. At December
31, 1995, net unrealized appreciation on investments of $17,459,492
was composed of gross appreciation of $17,616,115 and gross
depreciation of $156,623.
NOTE 3 - VARIABLE ANNUITY CONTRACTS
- -----------------------------------
Net purchase payments received represent gross payments less
deductions of $433,049 and $422,102 for the years ended December 31,
1995 and 1994, respectively. The deductions are comprised of sales
and administrative expenses, minimum death benefits, administrative
charges, and certificate issuance fees. These deductions were paid
to AFA.
AFA acts as the Fund's investment manager and assumes certain
mortality and expense risks under the variable annuity contracts.
Investment management fees are equal to .0008904% of the Fund's
daily net assets. (.325% per annum). These fees are to increase
to .5% upon approval of all states. Mortality and expense guaranty
fees are equal to .0026308% of the Fund's daily net assets (.96025%
per annum). Such fees were paid to AFA.
During the accumulation period, contract owners may partially or
totally withdraw from the Fund by surrendering a portion or all of
their accumulation units. The Internal Revenue Code may limit
certain withdrawals based upon age, disability, and other factors.
When contract owners withdraw, they receive the current value of
their accumulation units.
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Managers and Contract Owners
American Fidelity Variable Annuity Fund A:
We have audited the accompanying statements of assets and
liabilities of American Fidelity Variable Annuity Fund A (the Fund)
as of December 31, 1995 and 1994, and the related statements of
operations and changes in net assets for the years then ended, the
financial highlights for each of the years in the five-year period
ended December 31, 1995, and the schedule of portfolio investments
as of December 31, 1995. These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities
owned as of December 31, 1995 and 1994, by correspondence with the
custodian and the broker. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of American Fidelity Variable Annuity Fund A as
of December 31, 1995 and 1994, the results of its operations and
changes in its net assets for the years then ended, and the
financial highlights for each of the years in the five-year period
ended December 31, 1995, in conformity with generally accepted
accounting principles.
KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Oklahoma City, Oklahoma
February 7, 1996
<PAGE>
PARTICIPANTS' BENEFITS
As a participant of Variable Annuity Fund A, you benefit from a
number of valuable and helpful services which help you meet your
investment needs. Some of the services you currently enjoy are the
following:
RE-INVESTMENT WITHOUT CHARGE
- ----------------------------
Dividends and interest from investment income as well as capital
gain contributions are automatically re-invested without charge.
PROFESSIONAL MANAGEMENT
- -----------------------
Knowledgeable, full-time management constantly monitors market
opportunities for your fund.
CAPITAL FULLY INVESTED
- ----------------------
Accumulation units are issued in full and fractional amounts so that
your net payments are immediately available for investment purposes.
ANNUAL STATEMENT OF ACCOUNT
- ---------------------------
You receive an annual statement of account each year. This
statement is a valuable, permanent, personal record. In the event
that you should have occasion to redeem some of your accumulation
units, you are also provided with the proper tax form for your
convenience in filing your income tax return.
REDEMPTION WITHOUT CHARGE
- -------------------------
American Fidelity Variable Annuity Fund A will redeem your
accumulation units without charge at the full value when your
request is received in Oklahoma City as described in the Prospectus.
SYSTEMATIC RETIREMENT OPTIONS
- -----------------------------
At your retirement a range of pay out options is available in order
to tailor your retirement income payments as closely as possible to
your needs.
PERSONAL SERVICE
- ----------------
Continuous personal service is available to you through the team of
American Fidelity trained salaried representatives or directly from
the Annuity Services Department in our Home Office.
<PAGE>
Board of Managers JOHN W. REX, Chairman
American Fidelity President and Director
Variable Annuity American Fidelity Assurance Company
Fund A
DANIEL D. ADAMS, JR., Secretary
Vice President
American Fidelity Assurance Company
JEAN G. GUMERSON
President
Presbyterian Health Foundation
EDWARD C. JOULLIAN, III
Chairman of the Board and
Chief Executive Officer
Mustang Fuel Corporation
GREGORY M. LOVE
President and Chief Operating Officer
Love's Country Stores, Inc.
J. DEAN ROBERTSON, D.D.S
Pediatric Dentistry
Private Practice
G. RAINEY WILLIAMS, JR.
Managing Partner,
MARCO Investment Company
- -----------------------------------------------------------------------------
Safekeeping of Securities Boatmen's Trust Company
Oklahoma City, Oklahoma
- -----------------------------------------------------------------------------
Independent Auditors KPMG Peat Marwick LLP
Oklahoma City, Oklahoma
- -----------------------------------------------------------------------------
Investment Manager American Fidelity Assurance Company
Oklahoma City, Oklahoma
- -----------------------------------------------------------------------------
Investment Sub-Advisors Lawrence W. Kelly & Associates, Inc.
Pasadena, California
Todd Investment Advisors, Inc.
Louisville, Kentucky
- -----------------------------------------------------------------------------
Board of Directors LYNDA L. CAMERON
American Fidelity President
Assurance Company Cameron Equestrian Center, Inc.
Cameron Arabian, Inc.
WILLIAM M. CAMERON
Vice Chairman of the Board and
Chief Executive Officer
American Fidelity Assurance Company
WILLIAM E. DURRETT
Chairman of the Board
American Fidelity Assurance Company
EDWARD C. JOULLIAN, III
Chairman of the Board and President
Mustang Fuel Corporation
JOHN W. REX
President
American Fidelity Assurance Company
GALEN P. ROBBINS, M.D.
Physician and Director
of Cardiovascular Clinic
JOHN D. SMITH
Director and President
John D. Smith Developments, Inc.
<PAGE>
19
[AF LOGO] AMERICAN FIDELITY
ASSURANCE COMPANY
2000 Classen Boulevard
Oklahoma City, Okla. 73106
Telephone 1-800-654-8489
