As filed with the Securities and Exchange Commission on July
13, 1998
File Nos. 333-_____________ and 811-08873
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
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. ___ [ ]
AMERICAN FIDELITY DUAL STRATEGY FUND, INC.
(Exact Name of Registrant as Specified in Charter)
2000 Classen Center
Oklahoma City, Oklahoma 73106
(Address of Principal Registrant's Telephone
Executive Offices) Number: (405) 523-2000
Stephen P. Garrett Copy to:
Senior Vice President
Law and Government Affairs Connie S. Stamets, Esq.
American Fidelity Assurance McAfee & Taft
Company A Professional Corporation
2000 Classen Center 10th Floor, Two Leadership Square
Oklahoma City, Oklahoma 73106 Oklahoma City, Oklahoma 73102
(Name and Address of Agent
for Service)
Approximate Date of Proposed
Public Offering: As soon as practicable after
effectiveness of the
Registration Statement
It is proposed that this filing will become effective (check
appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new
effective date for a previously filed post-effective amendment.
Title of Securities Being Registered: common stock, par value
$0.001
The Registrant hereby amends this Registration Statement under
the Securities Act of 1933 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 Section 8(a), may
determine.
AMERICAN FIDELITY DUAL STRATEGY FUND, INC.
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
Pursuant to Rule 495
N-1A
Item No. Item Caption
- - - -------- ----- -------
PART A INFORMATION REQUIRED IN PROSPECTUS
1 Cover Page Cover Page
2 Synopsis Not Applicable
3 Condensed Financial Information Condensed Financial
Information
4 General Description of Registrant Description of the Fund;
Other Information
5 Management of the Fund Management
5A Management's Discussion of Fund
Performance Not Applicable
6 Capital Stock and Other Securities Dividends, Distributions
and Taxes; Other
Information
7 Purchase of Securities Being
Offered Offering, Purchase and
Redemption of Shares
8 Redemption or Repurchase Offering, Purchase and
Redemption of Shares
9 Pending Legal Proceedings Not Applicable
PART B INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
10 Cover Page Cover Page
11 Table of Contents Table of Contents
12 General Information and History Introduction; Capital
Stock
13 Investment Objectives and Policies Investment Objectives
and Policies; Portfolio
Transactions
14 Management of the Fund Management
15 Control Persons and Principal
Holders of Securities Management
16 Investment Advisory and Other
Services Investment Advisory and
Other Services;
Custodian, Independent
Accountants and Counsel
17 Brokerage Allocation and Other
Practices Portfolio Transactions
18 Capital Stock and Other Securities Capital Stock
19 Purchase, Redemption and Pricing
of Securities Being Offered Capital Stock
20 Tax Status Federal Tax Matters
21 Underwriters Not Applicable
22 Calculation of Performance Data Calculation of
Performance Data
23 Financial Statements Not Applicable
Information required to be included in Part C is set
forth under the appropriate Item, so numbered, in Part
C of this Registration Statement.
<PAGE>
PROSPECTUS __________, 1998
AMERICAN FIDELITY DUAL STRATEGY FUND, INC.
2000 Classen Center
Oklahoma City, Oklahoma 73106
Telephone: (405) 523-2000
American Fidelity Dual Strategy Fund, Inc. (the "Fund") is an
open-end management investment company. The Fund seeks long-term
capital growth which the Fund endeavors to achieve through a
diversified investment portfolio consisting primarily of common
stock. A secondary objective of the Fund is the production of
income.
Shares of the Fund are offered only to separate accounts of
American Fidelity Assurance Company (the "Company") to fund the
benefits of variable annuity contracts. Individuals may not
purchase Fund shares directly from the Fund. Each variable
annuity contract involves fees and expenses not described in this
Prospectus. See the accompanying variable annuity contract
prospectus for information regarding contract fees and expenses
and any restrictions on purchases or allocations.
Pursuant to an investment advisory agreement and subject to the
authority of the Fund's Board of Directors, the Company serves as
the Fund's investment adviser and conducts the business and
affairs of the Fund. The Company has engaged Lawrence W. Kelly &
Associates, Inc. ("Kelly") and Todd Investment Advisors, Inc.
("Todd Investment") to act as the Fund's sub-advisers to provide
the day-to-day portfolio management for the Fund. Kelly and Todd
Investment are referred to together as the "Sub-Advisers."
This Prospectus contains concise information about the Fund that
a prospective purchaser of a variable annuity contract should
know before allocating purchase payments or premiums to the Fund.
It should be read in conjunction with the prospectus for the
variable annuity contract and should be retained for future
reference. A statement of additional information (the "Statement
of Additional Information") containing more detailed information
about the Fund is available free by writing to the Fund at P. O.
Box 25523, Oklahoma City, Oklahoma 73125-0523, or by calling
(800) 662-1106. The Statement of Additional Information, which
has the same date as this Prospectus, as it may be supplemented
from time to time, has been filed with the Securities and
Exchange Commission and is available along with other related
materials on the SEC's Web site (http://www.sec.gov). The
Statement of Additional Information is incorporated herein by
reference.
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.
This Prospectus should be read in conjunction with the prospectus
for the variable annuity contract.
Mutual fund shares are not deposits or obligations of, or
guaranteed or endorsed by, any bank, nor are fund shares
federally insured by the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other government agency.
Investing in fund shares involves certain investment risks,
including possible loss of principal.
TABLE OF CONTENTS
Page
CONDENSED FINANCIAL INFORMATION
DESCRIPTION OF THE FUND
General
Investment Objectives and Policies
Investment Considerations and Risks
State Insurance Regulation
MANAGEMENT
Directors and Officers
Investment Adviser
Investment Sub-Advisers
Expenses
Custodian
PERFORMANCE INFORMATION
DETERMINATION OF NET ASSET VALUE
OFFERING, PURCHASE AND REDEMPTION OF SHARES
DIVIDENDS, DISTRIBUTIONS AND TAXES
OTHER INFORMATION
<PAGE>
CONDENSED FINANCIAL INFORMATION
AS OF THE DATE OF THIS PROSPECTUS, THE FUND HAD NOT YET
COMMENCED OPERATIONS, HAD NO ASSETS OR LIABILITIES, HAD INCURRED
NO EXPENSES AND HAD RECEIVED NO INCOME. ACCORDINGLY, NO
CONDENSED FINANCIAL INFORMATION IS INCLUDED FOR THE FUND IN THIS
PROSPECTUS.
DESCRIPTION OF THE FUND
General
The Fund is the successor to American Fidelity Variable Annuity
Fund A ("Variable Annuity Fund A"), a separate account of the
Company which operated as an open-end diversified management
investment company from 1968 to _________, 1998. On that date it
was converted to a unit investment trust separate account and
renamed American Fidelity Separate Account A ("Separate Account
A"), and it transferred its investment portfolio to the Fund in
exchange for Fund shares (the "Reorganization"). Through this
Prospectus, the Fund is offering its shares to separate accounts
of the Company, initially only Separate Account A, to fund
benefits under variable annuity contracts issued by the Company.
The separate prospectus which accompanies this Prospectus
describes the variable annuity contracts.
As long as the Fund offers its shares only to separate accounts
of the Company, the Company will be the sole shareholder of the
Fund. Thus, the terms "shareholder" and "shareholders" refer to
the Company. The rights of the Company as a shareholder should
be distinguished from the rights of an owner of a variable
annuity contract funded by Fund shares. The Company will pass
through voting rights to variable annuity contract owners, but
contract owners are not shareholders of the Fund.
Investment Objectives and Policies
The Fund's primary investment objective is to seek long-term
growth of capital through investment in a diversified portfolio
of securities, primarily common stock. The production of income
is a secondary investment objective. Such objectives do not
preclude investments from time to time for short-term capital
appreciation. There can be no assurance that the Fund will
achieve its investment objectives. As with any security, a risk
of loss, including possible loss of principal, is inherent in an
investment in shares of the Fund.
In order to achieve its investment objectives, the Fund normally
invests in a diversified portfolio consisting primarily of common
stocks based upon an assessment of particular industries or
companies. Through its two Sub-Advisers, the Fund uses both a
growth and a value-oriented strategy to manage its investments.
Kelly is a growth stock manager. Its strategy is to invest in
high-quality companies with strong earnings growth and superior
product leadership. Todd Investment is a value-oriented manager.
It emphasizes a diversified portfolio of predominantly
undervalued, large capitalization, high quality equity
securities. Todd Investment seeks to include in the Fund's
portfolio companies which indicate the presence of some catalyst
for change.
The Fund is classified as "diversified," as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"). The
investment objectives and classification of the Fund may not be
changed without the approval of the holders of a majority of the
outstanding shares of the Fund. The Company has adopted a number
of restrictions and policies relating to the investment of its
assets and its activities which are fundamental policies and also
may not be changed without the approval of the holders of a
majority of outstanding Fund shares. See the Statement of
Additional Information for a complete description of such
restrictions and policies.
The following are fundamental policies of the Fund. The Fund
invests not more than 5% of its assets in any one issuer, except
obligations of the United States Government and instrumentalities
thereof, and will acquire not more than 10% of the voting
securities of any one issuer. In addition, the Fund invests not
more than 25% of the Fund's assets in any one industry and not
more than 10% of the Fund's assets in real estate (including real
estate investment trusts). The Fund may invest up to 35% of its
assets in equity securities of foreign issuers in the form of
American Depository Receipts ("ADRs"), other depository receipts
or ordinary shares if U.S. dollar denominated and publicly traded
in the United States. Investments in companies of any one
foreign country are limited to not more than 20% of Fund assets.
The Fund has a policy of not purchasing puts, calls or other
options. Although not a fundamental policy, the Fund does not
invest in tobacco-producing companies.
The Fund's Sub-Advisers may determine that prevailing market and
economic conditions indicate investment in other than common
stocks may be advantageous, in which event investments may be
made on a short-term basis in securities which are a direct
obligation or guaranteed by the United States Government or in
bonds, notes or other evidences of indebtedness, issued publicly
or privately, of a type customarily purchased for investment by
institutional investors. Such nongovernmental investments may be
convertible into stock or may be accompanied by stock purchase
options or warrants for the purchase of stock. The Fund is
normally fully invested, apart from cash balances needed to meet
redemptions. The Fund's assets may be held in cash equivalents
or securities which are direct obligations of the United States
Government for this purpose.
Investment Considerations and Risks
General. The Fund's net asset value per share should be expected
to fluctuate. Investors should consider the Fund as a supplement
to an overall investment program and should invest only if they
are willing to undertake the risks involved. Achievement of the
Fund's investment objectives cannot be assured due to the risks
of loss of capital or income inherent in any investment in equity
securities and the special risks associated with investing in the
equity securities of foreign corporations.
Equity Securities. Although equity securities have a history of
long-term growth, they fluctuate in value based on changes in an
issuer's financial condition and results of operations and often
based on factors unrelated to the value of the issuer of the
securities. Such fluctuations can be pronounced. Changes in the
value of the Fund's investments will result in changes in the
value of Fund shares and thus the Fund's total return to
investors.
Foreign Securities. Since the stocks of some foreign issuers are
included in the Fund's portfolio, the Fund is subject to
additional investment risks with respect to those securities that
are different in some respects from those incurred by a fund
which invests only in securities of domestic issuers. Such risks
include exposure to fluctuations in foreign currencies, less
publicly available information, nonuniform accounting, auditing
and financial reporting standards, less liquidity and more
volatility, foreign withholding or other taxes, and possible
adverse political and economic developments, seizure or
nationalization of foreign deposits or adoption of governmental
restrictions which might adversely affect or restrict the payment
of principal and interest on the foreign securities to investors
located outside the country of the issuer, whether from currency
blockage or otherwise. The Fund's foreign investments are
normally in the form of ADRs. ADRs are certificates issued by a
U.S. bank or trust company and represent the right to receive
securities of a foreign issuer which are deposited in a domestic
bank or foreign branch of a U.S. bank. ADRs are traded on a U.S.
exchange or in the over-the-counter market. Investment in ADRs
has certain advantages over direct investment in the underlying
foreign securities. ADRs are U.S. dollar-denominated investments
that are easily transferable and for which market quotations are
readily available. Also, issuers whose securities are
represented by ADRs generally provide more financial information
than non-ADR foreign issuers.
Year 2000 Risks. Like other mutual funds, financial and business
organizations and individuals around the world, the Fund could be
adversely affected if the computer systems used by the Company
and the Fund's other service providers do not properly process
and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000
Problem." The Company has had a formal project team (including 22
information systems professionals) working to correct the problem since
1996. In the briefest terms, the correction is to change all date
related fields in the Company's computer systems to four digits instead
of two digits. At the same time, all relationships with systems outside
the Company must be checked for the same change and all must be tested to
determine that relationships continue to be compatible. Those systems
tested on December 31, 1997 and went through year-end processing without
incident. The final test of all systems will be run on December 31, 1998.
Even though management of the Company is expending considerable resources
in a concerted effort to meet this technology-related threat, there is no
guarantee that there will be no adverse impact on the Fund of some sort as
January 1, 2000 passes.
State Insurance Regulation
The Fund is a funding vehicle for variable annuity contracts to
be offered by insurance companies and will seek to be offered in
as many jurisdictions as possible. Certain states have
regulations or guidelines concerning concentration of investments
and other investment techniques. If such regulations and
guidelines are applied to the Fund, the Fund may be limited in
its ability to invest in certain types of securities. The Fund
intends to operate in material compliance with current insurance
laws and regulations, as applied, in each jurisdiction in which
the Fund is offered.
MANAGEMENT
Directors and Officers
The Fund's Board of Directors is responsible for overseeing the
management of the Fund, including the establishment and
supervision of the Fund's investment policies and objectives,
reviewing and approving the Fund's contracts and other
arrangements and monitoring Fund performance and operations. The
officers of the Fund supervise its daily business operations.
The Statement of Additional Information contains information as
to the identity of, and other information about, the directors
and officers of the Fund.
Investment Adviser
The Company, located at 2000 Classen Center, Oklahoma City,
Oklahoma 73106, is the investment adviser of the Fund. The
Company is a stock life insurance company incorporated in the
state of Oklahoma in 1960. The Company acted as investment
adviser to Variable Annuity Fund A, the Fund's predecessor, from
1968 until the Fund acquired its investment portfolio in 1998.
The Company is a wholly owned subsidiary of American Fidelity
Corporation, which is itself controlled by Cameron Enterprises, A
Limited Partnership ("CELP"). The general partners of CELP are
Cameron Associates, Inc., Theodore M. Elam and, in their
capacities as trustees, William E. Durrett, Edward C. Joullian,
III, John W. Rex and the Bank of Oklahoma, N.A. In accordance
with the CELP partnership agreement, management of the affairs of
CELP is vested in five managing general partners: William M.
Cameron and Messrs. Durrett, Joullian, Rex and Elam.
The Fund has entered into a Management and Investment Advisory
Agreement with the Company under which the Company assumes
overall responsibility, subject to the supervision of the Fund's
Board of Directors, for administering all operations of the Fund
and for monitoring and evaluating the management of the assets of
the Fund by the Sub-Advisers on an ongoing basis. The Company
had the same management and investment advisory responsibility
for the Fund's predecessor under a similar agreement first
entered into in 1973. The Company provides or arranges for the
provision of the overall business management and administrative
services necessary for the Fund's operations and furnishes or
procures any other services and information necessary for the
proper conduct of the Fund's business. The Company also acts as
liaison among, and supervisor of, the various service providers
to the Fund.
For its services to the Fund, the Company receives an annual
management and investment advisory fee of 0.50% of the average
daily net assets of the Fund. The fee is deducted daily from the
assets of the Fund.
Investment Sub-Advisers
The Company has engaged Kelly and Todd Investment as Sub-
Advisers. Subject to the fundamental investment objectives and
policies of the Fund and any other guidelines provided by the
Company, each Sub-Adviser has complete discretion and authority
in the investment and reinvestment of the Fund assets under its
management. The Company has allocated Fund assets equally
between Kelly and Todd Investment on an annual basis and will
review the asset allocation between Sub-Advisers at least
annually. Each Sub-Adviser determines what securities are
acquired, held or disposed of and, subject to any instructions
from the Company as to the Fund's cash requirements from time to
time, the portion of Fund assets which will be held uninvested.
The Sub-Advisers are also authorized to exercise all voting
rights pertaining to the Fund assets they manage. The Sub-
Advisers are authorized to select brokers to effect securities
transactions on behalf of the Fund. Neither Sub-Adviser nor any
of their respective affiliates may act as a broker with respect
to securities transactions for the Fund.
Kelly has provided the Company research and investment advice
since 1985. Beginning in the fourth quarter of 1995, Kelly's
services relating to Fund assets (including the assets of the
Fund's predecessor) have been rendered pursuant to its sub-
advisory agreement with the Company, and its services relating to
other assets managed by the Company have been provided under a
separate consulting agreement. Lawrence W. Kelly, the chairman,
chief executive officer, treasurer and founder of Kelly, has 31
years of experience in the investment advisory business and he
and his wife, Janice M. Kelly, are the majority shareholders of
Kelly. Mr. Kelly has primary responsibility for the day-to-day
management of the Fund's portfolio managed by Kelly. From 1980
to 1985, Mr. Kelly was chairman of Webster Management
Corporation, an investment advisory firm which provided
investment advice to the Company. In addition, Mr. Kelly was a
vice president (1974 to 1988) and director (1981 to 1985) of
Kidder, Peabody & Co., Inc. and the chairman of five mutual funds
managed by Webster and Kidder from various dates between 1981 and
1984 until 1986. As of December 31, 1997, Kelly managed 50
client securities portfolios on a discretionary basis with an
aggregate market value of $396 million. It also managed or
supervised 16 client securities portfolios on a non-discretionary
basis with an aggregate market value of $992 million. Kelly has
not acted as an investment adviser to any investment company
registered under the 1940 Act other than the Fund and its
predecessor. Kelly is located at 200 South Los Robles Avenue,
Suite 510, Pasadena, California 91101.
Todd Investment has 30 years of experience managing investments
for institutional clients. At December 31, 1997, Todd Investment
managed over $2.7 billion for 50 clients, of which $1.2 billion
represented equity assets. Todd Investment generates all of its
revenues from fee-based investment counseling and employs six
portfolio managers. The primary portfolio manager for the Fund
assets managed by Todd Investment is Robert Bordogna, who has
been with Todd Investment since 1980 and in the business for 28
years. The backup portfolio manager is Curtiss M. Scott, Jr.,
who has been with Todd Investment since 1996, in the business for
19 years and is a chartered financial analyst. Prior to joining
Todd Investment, Scott was a partner and managing director of
Executive Investment Advisors, Inc. in Louisville, Kentucky.
Todd Investment has not acted as an investment adviser to a
registered investment company other than the Fund and its
predecessor. Todd Investment is located at 101 South Fifth
Street, Suite 3160, Louisville, Kentucky 40202 and, since
December 1993, has been an indirect wholly-owned subsidiary of
Stifel Financial Corporation, a financial services holding
company based in St. Louis, Missouri.
The fees of the Sub-Advisers are paid by the Company. Kelly
receives an annual fee of .30% of Fund assets under its
management. Todd Investment receives an annual fee of .38% of
Fund assets under its management or $50,000, whichever is
greater. The Sub-Advisers' fees are payable quarterly and, when
based on Fund assets, are calculated on the value of Fund assets
on the last trading day of each calendar quarter.
Expenses
The Fund pays the Company's management and investment advisory fee,
which has the effect of reducing investors' return. The Company
pays all other expenses of the Fund except investment transaction
costs. The Fund will not reimburse the Company at a later time for
any such amounts. The yield to investors increases to the extent that
the Fund does not bear all of its expenses.
In allocating brokerage transactions, the Sub-Advisers seek to
obtain the best execution of orders at the most favorable net
price. Subject to this determination, the Sub-Advisers may
consider, among other things, the receipt of research services as
a factor in the selection of broker-dealers to execute portfolio
transactions for the Fund. See "Portfolio Transactions" in the
Statement of Additional Information.
Custodian
Bank of Oklahoma, N.A., 6307 Waterford Boulevard, Oklahoma City,
Oklahoma 73118, is the custodian of the Fund's portfolio
securities.
PERFORMANCE INFORMATION
For the purpose of advertising, performance is calculated on the
basis of average annual total return and/or total return.
Average annual total return is calculated pursuant to a
standardized formula which assumes that an investment in the Fund
was purchased with an initial payment of $1,000 and that the
investment was redeemed at the end of a stated period of time,
after giving effect to the reinvestment of dividends and
distributions during the period. The return is expressed as a
percentage rate which, if applied on a compounded annual basis to
the original investment, would result in the redeemable value of
the investment at the end of the period. Advertisements of the
Fund's performance will include the Fund's average annual total
return for one, five and ten year periods.
Total return is computed based on an original $1,000 investment and
assumes the reinvestment of dividends and distributions. Total return
generally is expressed as a percentage rate which is calculated
by combining the income and principal changes for a specified
period and dividing by the net asset value per share at the
beginning of the period. Advertisements may include the
percentage rate of total return or may include the value of a
hypothetical investment at the end of the period which assumes
the application of the percentage rate of total return.
Performance will vary from time to time and past results are not
necessarily representative of future results. Performance
information, such as that described above, may not provide a
basis for comparison with other investments or other investment
companies using a different method of calculating performance.
As the successor to the Company's Variable Annuity Fund A, the
Fund treats the historical performance data of Variable Annuity
Fund A as its own for periods prior to the Reorganization. See
"Description of the Fund" on page 3. The performance data for
the Fund prior to the Reorganization assume that the charges
currently imposed by the Fund were in effect during that period.
Such performance data do not reflect any sales or insurance
charges that were imposed under the annuity contracts issued
through Variable Annuity Fund A.
Since the Fund is not available directly to the public, its
performance data will not be advertised unless accompanied by
comparable data for a participating separate account. The Fund's
performance data do not reflect separate account or contract
level charges.
The Fund's average annual total return and total return should
not be compared with other funds that offer their shares directly
to the public since the figures provided do not reflect charges
of participating separate accounts. In addition, the Fund's
total return should be distinguished from the rate of return of a
participating separate account, which rate will reflect the
deduction of additional charges, including mortality and expense
risk charges, and therefore will be lower. Contract owners
should consult the prospectus for such contract.
The investment results of the Fund will fluctuate over time and
any presentation of investment results for any prior period
should not be considered a representation of what an investment
may earn or what the Fund's performance may be in any future
period. In addition to information provided in shareholder
reports, the Fund may, in its discretion, from time to time make
a list of the Fund's holdings available to investors upon
request.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is normally determined
once daily as of the close of regular trading on the New York
Stock Exchange, currently 4:00 p.m. Eastern Time, on each day
when the New York Stock Exchange is open. The New York Stock
Exchange is scheduled to be open Monday through Friday throughout
the year, except for certain holidays. Net asset value per share
of the Fund is determined by dividing the value of the Fund's
securities, cash, and other assets (including accrued but
unallocated interest and dividends), less all liabilities
(including accrued expenses but excluding capital and surplus) by
the number of shares of the Fund outstanding.
The value of the Fund's securities and assets, except certain
short-term debt securities, is determined on the basis of their
market values. Short-term debt securities having remaining
maturities of less than one year are valued by the amortized cost
method, which approximates market value. Equity securities held
by the Fund are valued at the last sales price on a national
securities exchange or the Nasdaq National Market or, lacking any
sales, at the last reported bid price. Over-the-counter
securities not quoted in the Nasdaq National Market are valued at
the reported bid price. Investments for which market quotations
are not readily available, if any, are valued at their fair
market value as determined in good faith by the Board of
Directors.
OFFERING, PURCHASE AND REDEMPTION OF SHARES
Fund shares currently are offered only to one or more separate
accounts of the Company. Individuals may not place purchase or
redemption orders directly with the Fund.
Pursuant to a participation agreement between the Fund and the
Company, Fund shares are sold on a continuous basis to the
Company. The Company, on behalf of participating separate
accounts, places orders based on, among other things, the amount
of premium payments to be invested pursuant to separate account
variable annuity contracts. See the prospectus of the applicable
separate account for more information on the purchase of Fund
shares. Participating separate accounts purchase and redeem Fund
shares at net asset value without sales or redemption charges.
For each day on which the Fund's net asset value is calculated,
the Company will transmit to the Fund any orders to purchase or
redeem shares of the Fund based on the purchase payments,
redemption (surrender) requests, and transfer requests from
contract owners, annuitants and beneficiaries of participating
separate accounts that have been processed on that day. If an
order is received by the Fund or its agent by 3:00 p.m. Central
Time on any business day, Fund shares will be purchased or
redeemed at the net asset value determined as of the day the
order is received. Otherwise, Fund shares will be purchased or
redeemed at the net asset value determined on the next business day.
No charges are imposed by the Fund when shares are redeemed.
The Fund ordinarily will make payment for all shares redeemed
within seven days after receipt of a redemption request in proper
form, except as provided by the rules of the Securities and
Exchange Commission.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund ordinarily declares and pays dividends from net
investment income at least once a year and automatically
reinvests them in additional Fund shares at net asset value.
The Fund makes distributions from net realized securities gains,
if any, once a year, but may make distributions on a more frequent
basis to comply with the distribution requirements of the Internal
Revenue Code of 1986, as amended (the "Code"), in all events in a
manner consistent with the provisions of the 1940 Act. The Fund will
not make distributions from net realized securities gains unless
capital loss carryovers, if any, have been utilized or have
expired. If all shares in an account are redeemed at any time,
all dividends to which the shareholder is entitled will be paid
along with the proceeds of the redemption. All expenses are
accrued daily and deducted before declaration of dividends to
investors.
Section 817(h) of the Code requires that the investments of a
segregated asset account of an insurance company be "adequately
diversified" as provided therein or in accordance with U.S.
Treasury Regulations, in order for the account to serve as the
basis for variable annuity contracts. Section 817(h) and the
U.S. Treasury Regulations issued thereunder provide the manner in
which a segregated asset account will treat investments in a
regulated investment company for purposes of the diversification
requirements. If the Fund satisfies certain conditions, a
segregated asset account owning shares of the Fund will be
treated as owning multiple investments consisting of the
account's proportionate share of each of the assets of the Fund.
The Fund intends to satisfy these conditions so that the shares
of the Fund owned by a segregated asset account will be treated
as multiple investments. Further, the Fund intends to satisfy
the diversification standards prescribed under Section 817(h) for
segregated accounts. By meeting these and other requirements,
the Company, rather than variable annuity contract holders,
should be subject to tax on distributions received with respect
to Fund shares. The tax treatment on distributions to the
Company will depend on the Company's tax status.
Notice as to the tax status of dividends and distributions will
be mailed to shareholders annually. Dividends derived from net
investment income, together with distributions of net realized
short-term securities gains and all or a portion of any gains
realized from the sale or other disposition of certain market
discount bonds, generally are taxable as ordinary income.
Distributions from net realized long-term securities gains
generally are taxable as long-term capital gains. For
information concerning the federal income taxes to participating
separate account contract owners, see the applicable separate
account prospectus.
Management of the Fund believes that the Fund will qualify as a
"regulated investment company" under the Code. The Fund intends
to continue to so qualify if such qualification is in the best
interest of its shareholders. Qualification as a regulated
investment company relieves the Fund of any liability for federal
income taxes to the extent its earnings are distributed in
accordance with the applicable provisions of the Code. The Fund
is subject to a non-deductible 4% excise tax, measured with
respect to certain undistributed amounts of taxable investment
income and capital gains.
OTHER INFORMATION
The Fund was incorporated on March 18, 1998 as a Maryland
corporation and commenced operations upon completion of the
Reorganization described on page 3. The authorized capital stock
of the Fund consists of 200 million shares of common stock, par
value $.001 per share. Each share outstanding is entitled to one
vote on all matters submitted to a vote of shareholders of the
Fund and is entitled to a pro rata share of any distributions
made by the Fund and, in the event of liquidation, of its net
assets remaining after satisfaction of outstanding liabilities.
Each share of the Fund, when issued, is nonassessable and has no
preemptive or conversion rights. The shares have noncumulative
voting rights.
As a Maryland corporation, the Fund is not required to hold
regular annual shareholder meetings. The Fund is, however,
required to hold shareholder meetings for the following purposes:
(i) approving certain agreements as required by the 1940 Act;
(ii) changing fundamental investment objectives, policies and
restrictions of the Fund; and (iii) filing vacancies on the Board
of Directors in the event that less than a majority of the
members of the Board of Directors were elected by shareholders.
Directors may also be removed by shareholders by a vote of a
majority of all votes entitled to be cast for the election of
directors. The Fund has the obligation to assist in shareholder
communications. As the sole record holder of the outstanding
shares of the Fund, the Company will be deemed a controlling
person of the Fund, as that term is defined in the 1940 Act.
Annual reports containing audited financial statements of the
Fund and semiannual reports containing unaudited financial
statements, as well as proxy materials, are sent to participating
separate account contract owners, annuitants or beneficiaries, as
appropriate.
Inquiries may be made by writing to the Fund at P.O. Box 25523,
Oklahoma City, Oklahoma 73125-0523, or by calling toll-free (800)
662-1106.
<PAGE>
AMERICAN FIDELITY DUAL STRATEGY FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
_______________, 1998
This Statement of Additional Information is not a prospectus, and
should be read in conjunction with the current Prospectus of
American Fidelity Dual Strategy Fund, Inc. (the "Fund") dated
_________________, 1998, as it may be revised from time to time
(the "Prospectus"). A copy of the Prospectus may be obtained by
writing to the Fund at the following address or calling the
number listed below:
American Fidelity Dual Strategy Fund, Inc.
P. O. Box 25523
Oklahoma City, Oklahoma 73125-0523
1-800-662-1106
Shares of the Fund are offered only to variable annuity separate
accounts established by American Fidelity Assurance Company (the
"Company") to fund variable annuity contracts (the "Contracts").
The Company serves as the Fund's investment adviser. The Company
has engaged Lawrence W. Kelly & Associates, Inc. ("Kelly") and
Todd Investment Advisors, Inc. ("Todd Investment") to serve as
sub-advisers (together, the "Sub-Advisers") to the Fund and
provide day-to-day portfolio management for the Fund.
TABLE OF CONTENTS
Page
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-2
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . B-3
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-4
INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . . . . . . . . . . B-6
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . B-7
CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-8
FEDERAL TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . B-9
CALCULATION OF PERFORMANCE DATA. . . . . . . . . . . . . . . . . . . . B-10
CUSTODIAN, INDEPENDENT ACCOUNTANTS AND COUNSEL . . . . . . . . . . . . B-11
<PAGE>
INTRODUCTION
American Fidelity Dual Strategy Fund, Inc. is an open-end
management investment company established as a Maryland
corporation on March 18, 1998. The Fund is the intended
successor to American Fidelity Variable Annuity Fund A ("Variable
Annuity Fund A"). The reorganization (the "Reorganization") of
Variable Annuity Fund A from a management investment company
into a unit investment trust ("Separate Account A") is being
submitted for the approval of the Contract owners of Variable
Annuity Fund A at a meeting of Contract owners scheduled for
_______________, 1998. Once the Reorganization is approved, the
assets of Variable Annuity Fund A will be transferred intact to
the Fund in exchange for shares of the Fund which will be held by
the Company on behalf of Separate Account A.
By investing in the Fund, an investor becomes entitled to a pro
rata share of all dividends and distributions arising from the
net income and capital gains on the investments of the Fund.
Likewise, an investor shares pro rata in any losses of the Fund.
Initially, the Fund is offering its shares only to Separate
Account A as the underlying funding vehicle for the Contracts
supported by Separate Account A. The Fund does not offer its
stock directly to the general public. Separate Account A, like
the Fund, is registered as an investment company with the
Securities and Exchange Commission ("SEC"), and a separate
prospectus, which accompanies the Prospectus for the Fund,
describes that separate account and the Contracts it supports.
The prospectus for Separate Account A also has a statement of
additional information. The Fund may, in the future, offer its
stock to other separate accounts of the Company supporting other
variable annuity contracts.
Terms appearing in this Statement of Additional Information that
are defined in the Prospectus have the same meaning as in the
Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The Fund has adopted the fundamental policies listed below.
These policies cannot be changed without approval by the holders
of a majority, as defined in the Investment Company Act of 1940,
as amended (the "1940 Act"), of the Fund's outstanding voting
shares.
(1) Not more than 5% of the value of the Fund's assets will
be invested in securities of any one issuer, except obligations
of the United States Government and instrumentalities thereof.
(2) Not more than 10% of the voting securities of any one
issuer will be acquired.
(3) Not more than 25% of the value of the Fund's assets
will be invested in any one industry.
(4) No borrowings will be made except that the right is
reserved to borrow from banks for emergency purposes, provided
that such borrowings do not exceed 5% of the value of the assets
of the Fund and that there always will be asset coverage of at
least 300% for all outstanding borrowings of the Fund.
(5) The Fund will not act as an underwriter of securities
of other issuers, except to the extent that the Fund might be
construed to be a statutory underwriter by virtue of its
investment in restricted securities.
(6) Not more than 10% of the value of the assets of the
Fund may be invested in real estate (including shares of real
estate investment trusts), securities for which there is no
established market, or securities (including bonds, notes or
other evidences of indebtedness) which are not readily marketable
without registration under Federal or state securities laws.
(7) No purchase of commodities or commodity contracts will
be effected.
(8) Puts, calls or other options will not be purchased.
(9) Loans will not be made except through the acquisition
of bonds, debentures or other evidences of indebtedness of a type
customarily purchased by institutional investors, whether or not
publicly distributed.
(10) Investment will not be made in the securities of a
company for the purpose of exercising management or control.
(11) Although it is not intended that investments be made in
securities of other investment companies, the Fund may make such
investments up to a maximum of 10% of its assets, provided that
not more than 3% of the total outstanding voting stock of any one
investment company may be held.
(12) Investments in repurchase agreements will be limited to
the top thirty-five U.S. Banks, by deposits, that are rated at
least "B/C" by Keefe, Bruyette, Woods, a national bank rating
agency, or a comparable rating from a similar bank rating
service. Additionally, there must be an appropriate amount of
excess collateralization depending upon the length of the
agreement, to protect against downward market fluctuation and the
Fund must take delivery of the collateral. The market value of
the securities held as collateral will be valued daily. In the
event the market value of the collateral falls below the
repurchase price, the bank issuing the repurchase agreement will
be required to provide additional collateral sufficient to cover
the repurchase price.
(13) Short sales of securities will not be made.
(14) Purchases will not be made on margin, except for such
short-term credits as are necessary for the clearance of
transactions.
(15) Investments in high-yield or non-investment grade bonds
will not be made.
(16) Investments in the equity securities of foreign issuers
will be limited to American Depositary Receipts ("ADRs"), other
depository receipts or ordinary shares if U.S. dollar denominated
and publicly traded in the United States. Not more than 35% of
the Fund's assets will be invested in foreign issuers. In
addition, not more than 20% of the Fund's assets will be invested
in issuers of any one foreign country.
If a percentage restriction is adhered to at the time of
investment, a later increase or decrease in percentage resulting
from a change in values or assets will not constitute a violation
of that restriction.
The Fund has also adopted the following non-fundamental
investment policies:
(1) The Fund should generally conform to the issuer
guidelines noted below with exceptions noted at time of
recommendation and variances reviewed annually:
(a) $150,000,000 or more in assets,
(b) Operational for at least 10 years, and
(c) $50,000,000 or more in stockholders' equity.
(2) Although the Fund does not intend to engage to a large
extent in short-term trading, it may make investments for the
purpose of seeking short-term capital appreciation.
(3) The Fund will not invest in the securities of tobacco-
producing companies.
MANAGEMENT
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus captioned
"Management."
Information about each director and officer of the Fund is as
follows:
Principal
Position(s) Held Occupation(s)
Name, Address and Age with Registrant During Past 5 Years
- - - --------------------- ---------------- -------------------
John W. Rex, 64 Chairman of the Director (1982 to
2000 Classen Center Board, President present), President and
Oklahoma City, OK and Treasurer(1) Chief Operating Officer
73106 (2) (1992 to present), and
Treasurer (1972 to 1995)
of the Company; Director
(1982 to present),
Executive Vice President
(1990 to present) and
Treasurer (1972 to 1995)
of American Fidelity
Corporation
Daniel D. Adams, Director and Vice President and
Jr., 55 Secretary(1) Investment Officer of the
2000 Classen Center Company and American
Oklahoma City, OK Fidelity Corporation
73106
Jean G. Gumerson, Director President and Chief
75 Executive Officer,
711 Stanton L. Presbyterian Health
Young Blvd., Foundation
Suite 604
Oklahoma City, OK
73104
Edward C. Joullian, Director(1)(2) Chairman of the Board
III, 68 and Chief Executive
2000 Classen Center Officer, Mustang Fuel
800 East Corporation; Director
Oklahoma City, OK of the Company and
73106 American Fidelity
Corporation; Director,
Fleming Companies, Inc.;
Director, The LTV
Corporation
Gregory M. Love, 36 Director President and Chief
10601 N. Pennsylvania Operating Officer (1995
Avenue to present), Vice
Oklahoma City, OK President -- Real Estate
73120 and Development (1990 to
1995) of Love's Country
Stores, Inc.; Director,
Affiliated Food Stores,
Inc.
J. Dean Robertson, Director Private practice in
D.D.S., 80 pediatric dentistry;
5222 North Portland Professor Emeritus,
Oklahoma City, OK University of Oklahoma,
73112 College of Dentistry
G. Rainey Williams, Director President, Pinnacle Asset
Jr., 37 Management, Inc. (1996 to
6301 N. Western present); Managing
Oklahoma City, OK Partner, Marco Capital
73118 Group (1988-1996);
Director, Mustang Fuel
Corporation
______________
(1) "Interested Person" of the Fund under Section 2(a)(19) of the
1940 Act.
(2) Also a director of the Company.
Until the date of the Reorganization, all members of the Board of
Directors were members of the Board of Managers of the Fund's
predecessor, Variable Annuity Fund A.
No officer or director of the Fund or the Company receives any
remuneration from the Fund. Members of the Board of Directors
who are not employees of the Company receive a fee, paid by the
Company, of $500 for each meeting attended.
A shareholder that owns more than 25% of the Fund's voting
securities may be deemed to be a "control person," as defined in
the 1940 Act, of the Fund. The Company is the sole shareholder
of record of the Fund. The only person known by the Fund to own
beneficially 5% or more of the securities of Variable Annuity
Fund A, the Fund's predecessor, is American Fidelity Companies
Employee Savings Plan Trust (9.01% as of June 17, 1998). Its
address is 2000 Classen Center, Oklahoma City, Oklahoma 73106.
After the Reorganization, the Trust's beneficial ownership
percentage of the Fund's shares will be the same as its
beneficial ownership percentage of Variable Annuity Fund A
securities immediately prior to the Reorganization. No officer
or director of the Fund beneficially owns any shares of the Fund,
although Messrs. Rex and Adams are participants in the Trust and
therefore beneficially own securities of the Fund's predecessor
prior to the Reorganization. After the Reorganization, their
beneficial ownership percentage of Fund shares will be the same
as their pre-Reorganization percentage in the predecessor. Their
beneficial ownership, together, as of June 17, 1998, was less
than 1%.
INVESTMENT ADVISORY AND OTHER SERVICES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus captioned
"Management."
Management and Investment Advisory Agreement
The Company provides management services and serves as the
investment adviser to the Fund pursuant to a Management and
Investment Advisory Agreement. Under this Agreement, the Company
assumes overall responsibility, subject to the supervision of the
Board of Directors, for administering all operations of the Fund,
including monitoring and evaluating the management of the Fund's
portfolio by the Sub-Advisers on an ongoing basis. The Company
provides or arranges for the provision of the overall business
management and administrative services necessary for the Fund's
operations. The Company is also responsible for overseeing the
Fund's compliance with the requirements of applicable law and
conformity with the Fund's investment objectives and policies,
including oversight of the Sub-Advisers.
For its services to the Fund, the Company receives an annual
management and investment advisory fee of 0.50% of the average
daily net assets of the Fund. The Company supplies or pays for
occupancy and office rental, clerical and bookkeeping, accounting,
stationery, supplies, the expenses of printing and distributing any
prospectuses, reports or sales literature in connection with the
sale of Fund shares, salaries and other compensation of the Fund's
directors and officers, costs of shareholder reports and meetings,
costs of any independent pricing service, the cost of any
advertising, the Sub-Advisers' fees, custodian fees, legal and auditing
fees, registration and filing fees, and all ordinary expenses
incurred in the ordinary course of business.
The Company received investment and advisory fees from Variable
Annuity Fund A, the Fund's predecessor, of $200,800 in 1995,
$353,000 in 1996 and $416,700 in 1997 pursuant to a management
and investment advisory agreement having the same fee arrangement
as the Agreement with the Fund from and after July 1, 1996
(previously provided for an annual fee of .325% of average daily
net assets).
The Management and Investment Advisory Agreement was approved for
the Fund by the Board of Directors, including a majority of the
directors who are not "interested persons," as defined in the
1940 Act, on __________, 1998 and will be submitted for the
approval of the Contract owners of Variable Annuity Fund A at a
meeting of Contract owners scheduled to be held on ____________,
1998. The Agreement will remain in effect until _______________,
2000, and from year to year thereafter provided such continuance
is approved at least annually by (i) the Fund's Board of
Directors or (ii) the vote of a "majority," as defined in the
1940 Act, of the outstanding voting securities of the Fund, and
in either event by a majority of the members of the Board of
Directors who are not interested persons by vote cast in person
at a meeting called for the purpose of voting on such approval.
The Agreement is terminable without penalty, on 60 days' notice,
by the Fund's Board of Directors or by the vote of the holders of
a majority of the Fund's shares. The Company may not terminate
the Agreement without the approval of a new investment advisory
agreement by a majority of the Fund's shares. The Agreement will
terminate automatically in the event of its "assignment," as
defined in the 1940 Act.
American Fidelity Corporation is the parent of the Company.
American Fidelity Corporation is itself controlled by Cameron
Enterprises, A Limited Partnership ("CELP"). The general
partners of CELP are Cameron Associates, Inc., Theodore M. Elam
and, in their capacities as trustees, William E. Durrett, Edward
C. Joullian, III, John W. Rex and the Bank of Oklahoma, N.A. In
accordance with the CELP partnership agreement, management of the
affairs of CELP is vested in five managing general partners:
William M. Cameron and Messrs. Durrett, Joullian, Rex and Elam.
Investment Sub-Advisory Agreements
The Company has contracted with the Sub-Advisers to provide day-
to-day portfolio investment management services to the Fund. The
fees of the Sub-Advisers are paid by the Company. Kelly receives
an annual fee of .30% of Fund assets under its management. Todd
Investment receives an annual fee of .38% of Fund assets under
its management or $50,000, whichever is greater. The Sub-
Advisers' fees are payable quarterly and, when based on Fund
assets, are calculated on the value of Fund assets on the last
trading day of each calendar quarter.
Kelly served as a research consultant to Variable Annuity Fund A,
the Fund's predecessor, from 1985 until it became a sub-adviser
to Variable Annuity Fund A in October 1995. Kelly provided
investment research and specific investment recommendations to
the Company and Variable Annuity Fund A for an annual fee of
$50,000. The Company paid all of Kelly's fees under the
consulting agreement, of which $20,100 in 1995 was allocated to
Variable Annuity Fund A. Pursuant to sub-advisory agreements
with Variable Annuity Fund A containing the same fee arrangements
as are in the Sub-Advisers' Agreements with the Fund, in 1995,
1996 and 1997, the Company paid Kelly $27,150, $131,000 and
$182,050, respectively, and Todd Investment $34,700, $165,300 and
$234,600, respectively.
The Investment Sub-Advisory Agreement for each of the Sub-
Advisers was approved for the Fund by the Board of Directors,
including a majority of the directors who are not "interested
persons," as defined in the 1940 Act, on __________, 1998 and
will be submitted for the approval of the Contract owners of
Variable Annuity Fund A at a meeting of Contract owners scheduled
to be held on ____________, 1998. Each Agreement will remain in
effect from year to year provided such continuance is approved at
least annually by (i) the Fund's Board of Directors or (ii) the
vote of a "majority," as defined in the 1940 Act, of the
outstanding voting securities of the Fund, and in either event by
a majority of the members of the Board of Directors who are not
interested persons by vote cast in person at a meeting called for
the purpose of voting on such approval. Each Agreement is
terminable without penalty, on 30 days' notice, by the Company,
the Fund's Board of Directors or by the vote of the holders of a
majority of the Fund's shares or, upon 30 days' notice, by the
Sub-Adviser. Each Agreement will terminate automatically in the
event of its "assignment," as defined in the 1940 Act.
Lawrence W. Kelly and his wife, Janice M. Kelly, are the majority
shareholders of Kelly, each holding 48.8% of Kelly's outstanding
stock. Todd Investment is a wholly-owned subsidiary of Stifel
Asset Management Corp., which is a wholly-owned subsidiary of
Stifel Financial Corporation.
PORTFOLIO TRANSACTIONS
Each of the Sub-Advisers is responsible for decisions to buy and
sell securities for the Fund, the selection of brokers to effect
transactions and the negotiation of brokerage commissions, in
each case with respect to Fund securities under its management.
Neither Sub-Adviser nor any of their respective affiliates may
act as a broker for Fund securities transactions.
In selecting a broker to execute portfolio transactions, Kelly's
objective is to obtain the best execution, while at the same time
obtaining research used to service its clients. The selection of
a broker takes into account the quality of brokerage services,
including such factors as execution capability, financial
stability and clearance and settlement capability. Research
furnished by brokers may be used in serving any or all of Kelly's
clients, including clients which have not paid commissions to the
broker providing the research. Kelly evaluates the
reasonableness of brokerage commissions on an on-going basis in
light of the general level of commissions being paid from time to
time and the value of research services received. In order to
obtain lower commission rates for clients, Kelly engages from
time to time in block trades, i.e., grouping orders with a single
broker. Accounts involved in such transactions receive the
average executed price, except that brokers may charge smaller
accounts a minimum commission resulting in smaller accounts
paying slightly more in commissions per share than larger
accounts.
In selecting brokers to effect portfolio transactions, Todd
Investment uses its best efforts to obtain for its clients the
most favorable price and execution available except to the extent
that it determines that clients should pay a higher brokerage
commission for brokerage and research services. In evaluating
the overall reasonableness of brokerage commissions paid, Todd
Investment reviews the type and quality of the execution services
rendered and the quantity and nature of the portfolio
transactions effected and compares generally the commissions paid
to brokers with the commissions believed to be charged by other
brokers for effecting similar transactions as well as with
commissions generally charged by brokers prior to the
introduction of negotiated commission rates. In addition, it
takes into account the quality and usefulness of the brokerage
and research services, if any, that may be furnished by such
brokers. Research services provided by brokers may be used by
Todd Investment in advising all of its clients and not all such
services may be used by the clients which paid the commissions.
Conversely, however, a client of Todd Investment may benefit from
research services provided by brokers whose commissions are paid
by other clients. As a result, Todd Investment may cause clients
to pay a broker which provides brokerage and research services to
Todd Investment a higher brokerage commission than would have
been charged by another broker which was not providing such
services.
Research services provided by brokers may include research
reports on companies, industries and securities; economic and
financial data, including reports on macro-economic trends and
monetary and fiscal policy; financial publications; computer data
bases; quotation equipment and services; and research-oriented
computer hardware, software and services.
For the years 1995, 1996 and 1997, the Fund's predecessor,
Variable Annuity Fund A, paid brokerage commissions of $137,100,
$87,100 and $90,500. The higher commissions in 1995 were largely
because of the increased trading in the fourth quarter after the
Sub-Advisers started managing Variable Annuity Fund A's
portfolio. As a percentage of net assets, commissions were .18%
in 1995, .09% in 1996 and .07% in 1997.
The rate of portfolio turnover is not a limiting factor when
changes are deemed appropriate. Under normal circumstances the
annual portfolio turnover will not exceed 80% although, in any
particular year, conditions could result in portfolio activity at
a greater rate than anticipated. A turnover ratio is the lesser
of the cost of securities purchased or the consideration of
securities sold divided by the monthly average value of
securities held during a year. A higher turnover rate than
anticipated does not, in and of itself, indicate a variation of
investment policy. During periods of increased market
volatility, or after a prolonged advance in the equity market, a
turnover rate of more than 100% may be incurred in order to shift
assets from securities that are more fully valued to securities
that are perceived to be undervalued. A high portfolio turnover
rate may involve correspondingly greater broker commissions and
other transaction costs which will be borne by the Fund. The
Fund will not engage in transactions contributing to a high
portfolio turnover rate unless the Sub-Advisers believe their
added benefit exceeds their added cost. The Fund does not expect
that the assets of the Fund will be subject to Federal income
tax. Therefore, any change in portfolio activity is not expected
to have any adverse tax consequences at this time. See "Federal
Tax Matters."
The annual portfolio turnover rate for Variable Annuity Fund A,
predecessor to the Fund, during the years 1995, 1996 and 1997 was
66.1%, 36.9% and 26.6%, respectively.
CAPITAL STOCK
Each issued and outstanding share of the Fund is entitled to
participate equally in dividends and distributions declared for
the Fund's stock and, upon liquidation or dissolution, in the
Fund's net assets remaining after satisfaction of outstanding
liabilities.
The shares of the Fund, when issued, will be fully paid and non-
assessable and have no preemptive or conversion rights.
As the designated successor to Variable Annuity Fund A, the Fund
will receive the assets of Variable Annuity Fund A in exchange
for shares of the Fund.
Under normal circumstances, subject to the reservation of rights
explained below, the Fund will redeem shares in cash within seven
days. However, the right of a shareholder to redeem shares and
the date of payment by the Fund may be suspended for more than
seven days for any period during which the New York Stock
Exchange is closed, other than customary weekends or holidays, or
when trading on such Exchange is restricted as determined by the
SEC; or during any emergency, as determined by the SEC, as a
result of which it is not reasonably practicable for the Fund to
dispose of securities owned by it or fairly to determine the
value of its net assets; or for such other period as the SEC may
by order permit for the protection of shareholders.
Under Maryland law, the Fund is not required to hold annual
shareholder meetings and does not intend to do so.
FEDERAL TAX MATTERS
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus captioned
"Dividends, Distributions and Taxes."
The Fund intends to qualify and to continue to qualify as a
regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). In order to
qualify for that treatment, the Fund must distribute to its
shareholders for each taxable year at least 90% of its investment
company taxable income, consisting of net investment income, net
short-term capital gain and net gains from certain foreign
currency transactions.
Sources of Gross Income
To qualify for treatment as a regulated investment company, the
Fund must also, among other things, derive its income from
certain sources. Specifically, in each taxable year, the Fund
must generally derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of securities or foreign
currencies, or other income (including, but not limited to, gains
from options, futures or forward contracts) derived with respect
to its business of investing in securities, or foreign
currencies.
Diversification of Assets
To qualify for treatment as a regulated investment company, the
Fund must also satisfy certain requirements with respect to the
diversification of its assets. The Fund must have, at the close
of each quarter of the Fund's taxable year, at least 50% of the
value of its total assets represented by cash, cash items, United
States Government securities, securities of other regulated
investment companies, and other securities which, in respect of
any one issuer, do not exceed 5% of the value of the Fund's total
assets and that do not represent more than 10% of the outstanding
voting securities of the issuer. In addition, not more than 25%
of the value of the Fund's total assets may be invested in
securities (other than United States Government securities or the
securities of other regulated investment companies) of any one
issuer, or of two or more issuers which the Fund controls and
which are engaged in the same or similar trades or businesses or
related trades or businesses. The Fund's investments in U.S.
Government securities are not subject to these limitations. The
foregoing diversification requirements are in addition to those
imposed by the 1940 Act.
Because the Fund is established as an investment medium for
variable annuity contracts, Section 817(h) of the Code imposes
additional diversification requirements on the Fund. These
requirements which are in addition to the diversification
requirements mentioned above, place certain limitations on the
proportion of the Fund's assets that may be represented by any
single investment. In general, no more than 55% of the value of
the assets of the Fund may be represented by any one investment;
no more than 70% by any two investments; no more than 80% by any
three investments; and no more than 90% by any four investments.
For these purposes, all securities of the same issuer are treated
as a single investment and each United States government agency
or instrumentality is treated as a separate issuer.
Additional Tax Considerations
The Fund will not be subject to the 4% federal excise tax imposed
on amounts not distributed to shareholders on a timely basis
because the Fund intends to make sufficient distributions to
avoid such excise tax. If the Fund fails to qualify as a
regulated investment company, owners of Contracts based on the
Fund: (1) might be taxed currently on the investment earnings
under their Contracts and thereby lose the benefit of tax
deferral; and (2) the Fund might incur additional taxes. In
addition, if the Fund failed to qualify as a regulated investment
company, or if the Fund failed to comply with the diversification
requirements of Section 817(h) of the Code, owners of Contracts
based on the Fund would be taxed on the investment earnings under
their Contracts and thereby lose the benefit of tax deferral.
The foregoing is a general and abbreviated summary of the
applicable provisions of the Code and Treasury Regulations
currently in effect. It is not intended to be a complete
explanation or a substitute for consultation with individual tax
advisers. For the complete provisions, reference should be made
to the pertinent Code sections and the Treasury Regulations
promulgated thereunder. The Code and Regulations are subject to
change.
CALCULATION OF PERFORMANCE DATA
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus captioned
"Performance Information."
The Fund may from time to time quote or otherwise use average
annual total return information for the Fund in advertisements,
shareholder reports or sales literature. Average annual total
return quotations are computed by finding the average annual
compounded rates of return over one, five and ten year periods
that would equate the initial amount invested to the ending
redeemable value, according to the following formula:
P(1+T)*n=ERV
Where:
P = a hypothetical initial investment of $1,000
T = average annual total return
* = to the power of
n = number of years
ERV = ending redeemable value of a
hypothetical $1,000 investment made
at the beginning of the one, five
or ten-year period.
Any performance data quoted for the Fund will represent
historical performance and the investment return and principal
value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than original
cost. As the successor to Variable Annuity Fund A, the Fund will
treat the historical performance data of Variable Annuity Fund A
as its own for periods prior to the Reorganization.
In computing its standardized total returns for periods prior to
the Reorganization, the Fund will assume that the charges
currently imposed by the Fund were in effect through each of the
periods for which the standardized returns are presented. The
Fund's performance data will not reflect any sales or insurance
charges that were imposed under the annuity contracts issued
through Variable Annuity Fund A.
CUSTODIAN, INDEPENDENT ACCOUNTANTS AND COUNSEL
All of the assets of the Fund are held under a custodial
safekeeping agreement by Bank of Oklahoma, N.A., 6307 Waterford
Boulevard, Oklahoma City, Oklahoma 73118. Under its agreement
with the Fund, Bank of Oklahoma, N.A. holds the Fund's portfolio
securities and keeps all necessary accounts and records.
This Statement of Additional Information does not contain audited
or unaudited financial statements for the Fund because as of the
date of this statement the Fund has not yet commenced operations,
has no assets or liabilities, has incurred no expenses and has
received no income. It is anticipated that KPMG Peat Marwick
LLP, Oklahoma City, Oklahoma will act as the Fund's independent
certified public accountants.
McAfee & Taft A Professional Corporation, Two Leadership Square,
Tenth Floor, Oklahoma City, Oklahoma 73102 has rendered its
opinion as to certain legal matters regarding the shares being
sold pursuant to the Fund's Prospectus.
<PAGE>
PART C
OTHER INFORMATION
Item 24 -- Financial Statements and Exhibits
(a) Financial Statements
No financial statements are included in this Registration
Statement.
(b) Exhibits
Exhibit
Number
- - - -------
1* - Articles of Incorporation of Registrant.
2* - Bylaws of Registrant.
3 - Not applicable.
4 - Not applicable.
5.1* - Form of Management and Investment Advisory Agreement
between Registrant and American Fidelity Assurance
Company (the "Company").
5.2* - Form of Investment Sub-Advisory Agreement between the
Company and Lawrence W. Kelly & Associates, Inc.
5.3* - Form of Investment Sub-Advisory Agreement between the
Company and Todd Investment Advisors, Inc.
6* - Form of Participation Agreement between Registrant and
the Company.
7 - Not applicable.
8* - Form of Corporate Custodial Agreement between
Registrant and Bank of Oklahoma, N.A.
9 - Not applicable.
10** - Opinion and Consent of Counsel.
11 - Not applicable.
12 - Not applicable.
13* - Form of Agreement and Plan of Reorganization among
Registrant, the Company and American Fidelity Variable
Annuity Fund A.
14 - Not applicable.
15 - Not applicable.
16** - Schedule for computation of performance calculation.
17 - Not applicable.
18 - Not applicable.
24 - Power of Attorney.
_______________
* Filed herewith
** To be filed by amendment
Item 25 -- Persons Controlled by or Under Common Control with the
Registrant
The Registrant is controlled by American Fidelity Assurance
Company, an Oklahoma corporation and a wholly-owned subsidiary of
American Fidelity Corporation, a Nevada corporation. American
Fidelity Corporation is controlled by a family investment
partnership, Cameron Enterprises, a Limited Partnership, whose
managing partners are William M. Cameron, William E. Durrett,
Edward C. Joullian, III, John W. Rex and Theodore M. Elam. The
following chart shows the affiliated entities.
CAMERON ENTERPRISES, A LIMITED PARTNERSHIP (CELP) - OK<F2>
73-1267299
<TABLE>
<S> <C> <C> <C> <C>
CELP Ltd. Agency, Inc.
100% - OK
73-1369092
North American
Ins. Agency, Inc.
(NAIA)
91.5% - OK
73-0687265
Shade Works, LLC Agar Ins. Agency, Inc. North American Ins.
33.33% - OK 95.4% - OK Agency of
73-1475654 73-0675989 Colorado, Inc.
100% - CO
84-0599059
N.A.I.A. of North American North American
Louisiana, Inc. Insurance Agency of Ins. Agency of
100% - LA New Mexico, Inc. Tulsa, Inc.
72-0761691 100% - NM 100% - OK
85-0441542 73-0778755
North American N.A.I.A. Ins. Agency,
Ltd. Agency, Inc. Inc.
100% - OK 100% - OK
73-1356772 73-1527682
National Ins.
Marketers Agency,
Inc.
100% - OK
73-1437538
American Fidelity Corp.
(AFC)
92.47% - NV
73-0966202
Market Place Realty American Mortgage Security General
Corp. (MPRC) & Investment Co. Life Ins. Co.
100% - OK (AMICO) (SGL)<F1>
73-1160212 98.7% - OK 100% - OK
73-1232134 73-0741925
NAIC #68691
Holliday Mortgage Corp.
100% - OK
73-1284635
Concourse C, Inc. American Fidelity Cimarron
100% - OK Property Co. (AFPC) Investment
73-1505641 100% - OK Co., Inc.
73-1290496 100% - KS
48-0759023
Home Rentals, Inc.
100% - OK
73-1364226
Shade Works, LLC
16.67% - OK
73-1475634
American Fidelity
Assurance Co.<F1>
(AFA)
100% - OK
73-0714500
NAIC #60410
AF Apartments, Inc. American Fidelity American Fidelity
100% - OK Securities, Inc. Ltd. Agency, Inc.
73-1512985 (AFS) (AFLA)
100% - OK 100% - OK
73-0783902 73-1352430
American
Fidelity
General
Agency, Inc.
(AFGA)
100% - OK
73-1352431
Balliet's, L.L.C. Apple Creek
75% - OK Apartments, Inc.
73-0761950 100% - OK
73-1408485
American Fidelity
International
Holdings, Inc.
100% - OK
73-1421879
American Fidelity American Fidelity
Offshore Care, LLC
Investments, Ltd. 33% - OK
Bermuda - 100% 73-1424864
NAIC #20400
Reg. #BC20754
American Fidelity American Fidelity Covenant
(Cypress) Limited (China), Ltd. Underwriters
- Cypress<F3> Bermuda (93%)<F3> (Bermuda) Ltd.
99% 33.33%
Mari El Development Soyuznik Insurance
Corporation Limited Co.<F3>
Republic of Cyprus, Russian
Reg. #7035 Federation - 34%
(AFOI) - 51.3%
_______________
<FN>
<F1> Insurance Company
<F2> A Limited Partnership
<F3> No tax or registration numbers
</FN>
</TABLE>
NOTE: All of the above organizations are corporations that have
the word Company, Inc., or Corp. The above organizations
which have the letters L.L.C. or L.C. are limited
liability companies.
Item 26 -- Number of Holders of Securities
As of the date of this Registration Statement, American
Fidelity Assurance Company was the sole holder of common stock of
the Registrant.
Item 27 -- Indemnification
Article Eighth, Section 2 of the Registrant's Articles of
Incorporation provides as follows:
The corporation shall indemnify and advance expenses to
its currently acting and its former directors to the
fullest extent that indemnification of directors is
permitted by the Maryland General Corporation Law. The
corporation shall indemnify and advance expenses to its
officers to the same extent as its directors and to
such further extent as is consistent with law. The
Board of Directors may, through a by-law, resolution or
agreement, make further provisions for indemnification
of directors, officers, employees and agents to the
fullest extent permitted by the Maryland General
Corporation Law.
The By-Laws of Registrant provide in Article VIII as
follows:
1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The
corporation shall indemnify its directors to the fullest
extent that indemnification of directors is permitted by
law. The corporation shall indemnify its officers to the
same extent as its directors and to such further extent as
is consistent with law. The corporation shall indemnify its
directors and officers who while serving as directors or
officers also serve at the request of the corporation as a
director, officer, partner, trustee, employee, agent or
fiduciary of another corporation, partnership, joint
venture, trust, other enterprise or employee benefit plan to
the same extent as its directors and, in the case of
officers, to such further extent as is consistent with law.
The indemnification and other rights provided by this
Article shall continue as to a person who has ceased to be a
director or officer and shall inure to the benefit of the
heirs, executors and administrators of such a person. This
Article shall not protect any such person against any
liability to the corporation or any stockholder thereof to
which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
office ("disabling conduct").
2. ADVANCES. Any current or former director or officer of
the corporation seeking indemnification within the scope of
this Article shall be entitled to advances from the
corporation for payment of the reasonable expenses incurred
by him in connection with the matter as to which he is
seeking indemnification in the manner and to the fullest
extent permissible under the General Corporation Law. The
person seeking indemnification shall provide to the
corporation a written affirmation of his good faith belief
that the standard of conduct necessary for indemnification
by the corporation has been met and a written undertaking to
repay any such advance if it should ultimately be determined
that the standard of conduct has not been met. In addition,
at least one of the following additional conditions shall be
met: (a) the person seeking indemnification shall provide
security in form and amount acceptable to the corporation
for his undertaking; (b) the corporation is insured against
losses arising by reason of the advance; or (c) a majority
of a quorum of directors of the corporation who are neither
"interested persons" as defined in Section 2(a)(19) of the
Investment Company Act of 1940, as amended, nor parties to
the proceeding ("disinterested non-party directors"), or
independent legal counsel, in a written opinion, shall have
determined, based on a review of facts readily available to
the corporation at the time the advance is proposed to be
made that there is reason to believe that the person seeking
indemnification will ultimately be found to be entitled to
indemnification.
3. PROCEDURE. At the request of any person claiming
indemnification under this Article, the Board of Directors
shall determine, or cause to be determined, in a manner
consistent with the General Corporation Law, whether the
standards required by this Article have been met.
Indemnification shall be made only following: (a) a final
decision on the merits by a court or other body before whom
the proceeding was brought that the person to be indemnified
was not liable by reason of disabling conduct or (b) in the
absence of such a decision, a reasonable determination,
based upon a review of the facts, that the person to be
indemnified was not liable by reason of disabling conduct by
(i) the vote of a majority of a quorum of disinterested non-
party directors or (ii) an independent legal counsel in a
written opinion.
4. INDEMNIFICATION OF EMPLOYEES AND AGENTS. Employees and
agents who are not officers or directors of the corporation
may be indemnified and reasonable expenses may be advanced
to such employees or agents, as may be provided by action of
the Board of Directors or by contract, subject to any
limitations imposed by the Investment Company Act of 1940,
as amended.
5. OTHER RIGHTS. The Board of Directors may make further
provision consistent with law for indemnification and
advance of expenses to directors, officers, employees and
agents by resolution, agreement or otherwise. The
indemnification provided by this Article shall not be deemed
exclusive of any other right, with respect to
indemnification or otherwise, to which those seeking
indemnification may be entitled under any insurance or other
agreement or resolution of stockholders or disinterested
non-party directors or otherwise.
6. AMENDMENTS. References in this Article are to the
General Corporation Law and to the Investment Company Act of
1940 as from time to time amended. No amendment of the by-
laws shall affect any right of any person under this Article
based on any event, omission or proceeding prior to the
amendment.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant 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 is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the
Registrant 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
Registrant 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.
In accordance with Section 17(h) of the Investment Company
Act of 1940 (the "1940 Act"), the members of the Board of
Directors of Registrant do hereby waive any provision for
indemnification to the extent such provision violates Section
17(h). The members of the Board of Directors and the officers
signing this Registration Statement agree that indemnification of
any of them is precluded for any liability, whether or not there
is an adjudication of liability, arising by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of their respective offices
("disabling conduct") unless (1) there is a final decision on the
merits by a court or other body before whom the proceeding was
brought that the person to be indemnified was not liable by
reason of disabling conduct; (2) a reasonable determination that
the person to be indemnified was not liable by reason of
disabling conduct by the vote of a majority of a quorum of
directors who are neither "interested persons" of the Registrant
nor parties to the proceeding; or (3) such a determination by an
independent legal counsel in a written opinion.
Item 28 -- Business and Other Connections of Investment Adviser
American Fidelity Assurance Company (the "Company") is
primarily engaged in writing life, accident and health and
annuity business. Set forth below are the names of each of the
directors and executive officers of the Company, their positions
and offices with the Company and any other business, profession,
vocation or employment of a substantial nature in which each is
or has been, during the past two fiscal years, engaged for his or
her own account or in the capacity of director, officer,
employer, partner or trustee:
Positions and
Name and Principal Offices
Business Address* with the Company Other Affiliations
- - - ------------------ ---------------- ------------------
Lynda L. Cameron Director President, Cameron
Equestrian Centers,
Inc.
2000 Classen Center
Oklahoma City, OK
73106
William M. Cameron Chairman and Chief Director, Chairman, President
Executive Officer, and Chief Executive Officer
Director (January 1998 to present); Vice
Chairman and Senior Vice
President (prior to 1998),
American Fidelity Corporation
David R. Carpenter Senior Vice Senior Vice President,
President, American Fidelity Corporation
Treasurer
William E. Durrett Senior Chairman, Director, Senior Chairman
Director (January 1998 to present);
Chairman, President and Chief
Executive Officer (prior to
1998), American Fidelity
Corporation
Stephen P. Garrett Senior Vice Senior Vice President and
President, Secretary, American Fidelity
Secretary Corporation
Edward C. Joullian, III Director Chairman of the Board
and Chief Executive
Officer, Mustang
Fuel Corporation
2000 N. Classen,
Suite 800 East
Oklahoma City, OK
73106
Kenneth D. Klehm Senior Vice Senior Vice President, Treasurer,
President Controller and Chief Financial
Officer, American Fidelity
Corporation
Alfred L. Litchenburg Senior Vice None
President
John W. Rex President, Chief Executive Vice
Operating Officer, President and
Director Director, American
Fidelity Corporation
Galen P. Robbins, M.D. Director Physician and
Director,
Cardiovascular Clinic
3433 N.W. 56th
Oklahoma City, OK
73112
John D. Smith Director President, John D.
Smith Developments, Inc.
3400 Peach Tree Road
Suite 831
Atlanta, GA 30326
William A. Hagstrom Director President and
Chairman,
UroCor, Inc.
800 Research Parkway
Oklahoma City, OK
73104
David R. Lopez Director President, Oklahoma
Division of
Southwestern Bell
Telephone Company
800 N. Harvey, Room
300
Oklahoma City, OK
73102
_________________
* Principal business address is 2000 Classen Center, Oklahoma
City, Oklahoma 73106 or, if applicable, the address set forth
under "Other Affiliations."
A description of the other investment advisory activities of
the Sub-Advisers is included in the Prospectus under
"Management."
Lawrence W. Kelly and Janice M. Kelly are the majority
shareholders and directors of Lawrence W. Kelly & Associates,
Inc., 200 South Los Robles Avenue, Suite 510, Pasadena,
California 91101. The officers of Kelly and the positions they
have held since January 1, 1996 or earlier are as follows:
Name Positions
---- ---------
Lawrence W. Kelly Chairman, Chief Executive
Officer and Treasurer
Nicholas J. Welsh Executive Vice President
(1996-present); Senior
Vice President
(1995-1996)
H. James Darcey Executive Vice President
(1996-present); Chairman,
President and Chief
Executive Officer, First
Security Investment
Management, Inc., Salt
Lake City, UT (1988-1995)
Maria Alejandra Tescher Executive Vice President
-Senior Trader &
Operations Manager
(1996-present);
Vice President
(1995-1996)
Catherin M. Oaks Vice President-Operations
and Compliance (1997-
present); Registered
Sales Assistant, Morgan
Stanley Dean Witter
(1996-1997); Branch
Administrative Assistant,
Dean Witter (1994-1996)
Janice M. Kelly Secretary
Todd Investment Advisors, Inc., 101 South Fifth Street,
Suite 3160, Louisville, Kentucky 40202, is a wholly-owned
subsidiary of Stifel Asset Management Corp. ("SAMC"), which is a
wholly-owned subsidiary of Stifel Financial Corporation ("SFC").
The address of both SAMC and SFC is 500 North Broadway, St.
Louis, Missouri 63102. Stifel, Nicolaus & Company ("Stifel"), a
registered broker-dealer and investment adviser, is another
wholly-owned subsidiary of SFC. Todd Investment is managed by the
following persons, who have held the positions indicated since
January 1, 1996 or earlier:
Name Positions
---- ---------
Bosworth M. Todd Chairman; Director, First Capital
Bank of Kentucky, Louisville, KY
(1996- present); Director of SAMC
Robert P. Bordogna President and Chief Executive
Officer; Director of SAMC
George Herbert Walker, III Chairman of SFC and SAMC
Richard A. Loebig Executive Vice President (1996-
present); Vice President, Chandler
Liquid Asset Management, San
Diego, CA (1996); Vice President,
PNC Bank, Kentucky, Louisville,
KY (1991-1996)
Gayle S. Dorsey Executive Vice President (1997-
present); Vice President,
J.J.B. Hilliard, W.L. Lyons, Inc.,
Louisville, KY (1976-1997)
Sam C. Ellington Vice President (1996-present); Vice
President, PNC Bank, Kentucky,
Louisville, KY (1993-1996)
Curtiss M. Scott, Jr. Vice President (1996-present);
Partner and Managing Director,
Executive Investment Advisors,
Inc., Louisville, KY (1993-1996)
Margaret C. Bell Vice President of Marketing
C. Kevin Blair Vice President, Business
Development (1997-Present); Vice
President, PNC Bank, Kentucky,
Louisville, KY (1992-1997)
Directors of Todd Investment are also employees of Stifel.
Item 29 -- Principal Underwriters
(a) American Fidelity Securities, Inc. ("AFS"), a wholly-
owned subsidiary of the Company, is the sole underwriter for the
Fund. AFS is also the underwriter for American Fidelity Separate
Account A and American Fidelity Separate Account B.
(b) AFS director and officer information is as follows:
Positions and
Name and Principal Offices with Positions and
Business Address Underwriter Offices with Fund
- - - ------------------ ------------- -----------------
David R. Carpenter Director, Chairman None
P. O. Box 25523 of the Board,
Oklahoma City, OK 73125 President, Treasurer,
Chief Financial
Officer and Registered
Limited Principal
Marvin R. Ewy Director, Vice None
P. O. Box 25523 President, Secretary,
Oklahoma City, OK 73125 Chief Operations
Officer and
Registered Limited
Principal
Nancy K. Steeber Director, Vice None
P.O. Box 25523 President, Operations
Oklahoma City, OK 73125 Officer and
Registered Limited
Principal
(c) Not applicable.
Item 30 -- Location of Accounts and Records
All records relating to the Fund required by Section 31(a)
of the 1940 Act are kept by the Registrant or its custodian at
the following addresses:
American Fidelity Dual Strategy Fund, Inc.
2000 Classen Center
Oklahoma City, Oklahoma 73106
or
Bank of Oklahoma, N.A.
6307 Waterford Boulevard
Oklahoma City, Oklahoma 73118
Item 31 -- Management Services
See -- "Investment Advisory and Other Services" in Part B of
this Registration Statement.
Item 32 -- Undertakings
The Fund hereby undertakes to:
(a) not applicable;
(b) file a post-effective amendment, using financial
statements of the Fund which need not be certified,
within four to six months from the effective date of
the Fund's 1933 Act registration statement; and
(c) to furnish each person to whom a prospectus is
delivered with a copy of its most recent annual report
to shareholders, upon request and without charge.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment
Company Act of 1940 the Registrant has duly caused this
Registration Statement to be signed on its behalf, in the City of
Oklahoma City, and State of Oklahoma on this 13th day of July, 1998.
AMERICAN FIDELITY DUAL STRATEGY
FUND, INC.
By JOHN W. REX
John W. Rex, Chairman of the
Board and President
As required by the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the
capacities indicated on July 13, 1998.
JOHN W. REX
John W. Rex, Chairman of the Board,
President and Treasurer
DANIEL D. ADAMS, JR.
Daniel D. Adams, Jr., Director and Secretary
JEAN G. GUMERSON
Jean G. Gumerson, Director
EDWARD C. JOULLIAN, III
Edward C. Joullian, III, Director
GREGORY M. LOVE
Gregory M. Love, Director
J. DEAN ROBERTSON
J. Dean Robertson, Director
G. RAINEY WILLIAMS, JR.
G. Rainey Williams, Jr., Director
<PAGE>
EXHIBIT INDEX
Exhibit Description
No. of Exhibit Method of Filing
- - - ------- ----------- ----------------
1 Articles of Incorporation of Filed herewith
Registrant. electronically
2 Bylaws of Registrant. Filed herewith
electronically
5.1 Form of Management and Investment Filed herewith
Advisory Agreement between the electronically
Registrant and American Fidelity
Assurance Company (the "Company").
5.2 Form of Investment Sub-Advisory Filed herewith
Agreement between the Company and electronically
Lawrence W. Kelly & Associates,
Inc.
5.3 Form of Investment Sub-Advisory Filed herewith
Agreement between the Company and electronically
Todd Investment Advisors, Inc.
6 Form of Participation Agreement Filed herewith
between the Registrant and electronically
American First Assurance Company.
8 Form of Corporate Custodial Filed herewith
Agreement between Registrant and electronically
Bank of Oklahoma, N.A.
13 Form of Agreement and Plan of Filed herewith
Reorganization among Registrant, electronically
the Company and American Fidelity
Variable Annuity Fund A.
24 Power of Attorney Filed herewith
electronically
ARTICLES OF INCORPORATION
OF
AMERICAN FIDELITY DUAL STRATEGY FUND, INC.
FIRST: The undersigned, Jerry A. Warren, whose address is
10th Floor, Two Leadership Square, Oklahoma City, Oklahoma 73102,
being at least eighteen years of age, hereby forms a corporation
under the Maryland General Corporation Law.
SECOND: The name of the corporation (hereinafter called the
"corporation") is American Fidelity Dual Strategy Fund, Inc.
THIRD: The corporation is formed for the following purpose
or purposes:
(a) to conduct, operate and carry on the business of
an investment company;
(b) to subscribe for, invest in, reinvest in, purchase
or otherwise acquire, hold, pledge, sell, assign, transfer, lend,
write options on, exchange, distribute or otherwise dispose of
and deal in and with securities of every nature, kind, character,
type and form, including without limitation of the generality of
the foregoing all types of stocks, shares, future contracts,
bonds, debentures, notes, bills and other negotiable or non-
negotiable instruments, obligations, evidences of interest,
certificates of interest, certificates of participation,
certificates, interests, evidences of ownership, guarantees,
warrants, options or evidences or indebtedness issued or created
by or guaranteed as to principal and interest by any state or
local government or any agency or instrumentality thereof, by the
United States Government or any agency, instrumentality,
territory, district or possession thereof, by any foreign
government or any agency, instrumentality, territory, district or
possession thereof, by any corporation organized under the laws
of any state, the United States or any territory or possession
thereof or under the laws of any foreign country, bank
certificates of deposit, bank time deposits, banker's acceptances
and commercial paper; to pay for the same in cash or by the issue
of stock, including treasury stock, bonds or notes of the
corporation or otherwise; and to exercise any and all rights
powers and privileges of ownership or interest in respect of any
and all such investments of every kind and description, including
without limitation, the right to consent and otherwise act with
respect thereto, with power to designate one or more persons,
firms, associations or corporations to exercise any of said
rights, powers and privileges in respect of any said instruments;
(c) to borrow money or otherwise obtain credit and to
secure the same by mortgaging, pledging or otherwise subjecting
as security the assets of the corporation;
(d) to issue, sell, repurchase, redeem, retire,
cancel, acquire, hold, resell, reissue, dispose of, transfer, and
otherwise deal in, shares of stock of the corporation, including
shares of stock of the corporation in fractional denominations,
and to apply to any such repurchase, redemption, retirement,
cancellation or acquisition of shares of stock of the corporation
any funds or property of the corporation whether capital or
surplus or otherwise, to the full extent now or hereafter
permitted by the laws of the State of Maryland;
(e) to conduct its business, promote its purposes and
carry on its operations in any and all of its branches and
maintain offices both within and without the State of Maryland,
in any States of the United States of America, in the District of
Columbia and in any other parts of the world; and
(f) to do all and everything necessary, suitable,
convenient or proper for the conduct, promotion and attainment of
any of the businesses and purposes herein specified or which at
any time may be incidental thereto or may appear conducive to or
expedient for the accomplishment of any of such businesses and
purposes and which might be engaged in or carried on by a
corporation incorporated or organized under the Maryland General
Corporation Law, and to have and exercise all of the powers
conferred by the laws of the State of Maryland upon corporations
incorporated or organized under the Maryland General Corporation
Law.
The foregoing provisions of this Article THIRD shall be
construed both as purposes and powers and each as an independent
purpose and power. The foregoing enumeration of specific
purposes and powers shall not be held to limit or restrict in any
manner the purposes and powers of the corporation, and the
purposes and powers herein specified shall, except when otherwise
provided in this Article THIRD, be in no wise limited or
restricted by reference to, or inference from the terms of any
provision of this or any other Article of these Articles of
Incorporation; provided, that the corporation shall not conduct
any business, promote any purpose, or exercise any power or
privilege within or without the State of Maryland which, under
the laws thereof, the corporation may not lawfully conduct,
promote, or exercise.
FOURTH. The address of the principal office of the
corporation is 2000 Classen Center, Oklahoma City, Oklahoma
73106.
FIFTH. The post office address of the corporation within
the State of Maryland, and the registered agent of the
corporation within the State of Maryland, is The Corporation
Trust Incorporated, 300 East Lombard Street, Baltimore, Maryland
21202.
SIXTH: (1) The total number of shares of stock which the
corporation has authority to issue is Two Hundred Million
(200,000,000) shares of Common Stock, all of which are of a par
value of one tenth of one cent ($.001) each.
(2) The aggregate par value of all the authorized shares of
stock is Two Hundred Thousand ($200,000) dollars.
(3) The Board of Directors of the corporation is
authorized, from time to time, to fix the price or the minimum
price or the consideration or minimum consideration for, and to
issue, the shares of stock of the corporation.
(4) The Board of Directors of the corporation is
authorized, from time to time, to classify or to reclassify, as
the case may be, any unissued shares of stock of the corporation.
(5) Subject to the power of the Board of Directors to
reclassify unissued shares, the shares of each class of stock of
the corporation shall have the following preferences, conversion
and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption:
(i) All consideration received by the corporation
for the issuance or sale of shares together with all
income, earnings, profits and proceeds thereof, shall
irrevocably belong to such class for all purposes,
subject only to the rights of creditors, and are herein
referred to as "assets belonging to" such class.
(ii) The assets belonging to such class shall be
charged with the liabilities of the corporation in
respect of such class and with such class, share of the
general liabilities of the corporation, in the latter
case in proportion that the net asset value of such
class bears to the net asset value of all classes. The
determination of the Board of Directors shall be
conclusive as to the allocation of liabilities,
including accrued expenses and reserves to a class.
(iii) Dividends or distributions on shares of
each class, whether payable in stock or cash, shall be
paid only out of earnings, surplus or other assets
belonging to such class.
(iv) In the event of the liquidation or
dissolution of the corporation, stockholders of each
class shall be entitled to receive, as a class, out of
the assets of the corporation available for
distribution to stockholders, the assets belonging to
such class and the assets so distributable to the
stockholders of such class shall be distributed among
such stockholders in proportion to the number of shares
of such class held by the.
(v) On each matter submitted to a vote of the
stockholders, each holder of a share of stock shall be
entitled to one vote for each such share of stock
standing in his name on the books of the corporation
irrespective of the class thereof, provided, however,
that to the extent class voting is required by the
Investment Company Act of 1940 or Maryland law as to
any such matter, those requirements shall apply.
Except as provided above, all provisions of the Articles of
Incorporation relating to stock of the corporation shall apply to
shares of, and to the holders of, all classes of stock.
(6) Notwithstanding any provisions of the Maryland General
Corporation Law requiring a greater proportion than a majority of
the votes of stockholders entitled to be cast in order to take or
authorize any action, any such action may be taken or authorized
upon the concurrence of a majority of the aggregate number of
votes entitled to be cast thereon.
(7) The presence in person or by proxy of the holders of
one-third of the shares of stock of the corporation entitled to
vote (without regard to class) shall constitute a quorum at any
meeting of the stockholders, except with respect to any matter
which, under applicable statutes or regulatory requirements,
requires approval by a separate vote of one or more classes of
stock, in which case the presence in person or by proxy of the
holders of one-third of the shares of stock of each class
required to vote as a class on the matter shall constitute a
quorum.
(8) The corporation may issue shares of stock in fractional
denominations to the same extent as its whole shares, and shares
in fractional denominations shall be shares of stock having
proportionately to the respective fractions represented thereby
all the rights of whole shares, including, without limitation,
the right to vote, the right to receive dividends and
distributions and the right to participate upon liquidation of
the corporation, but excluding the right to receive a stock
certificate evidencing a fractional share.
(9) No holder of any shares of any class of the corporation
shall be entitled as of right to subscribe for, purchase, or
otherwise acquire any shares of any class which the corporation
proposes to issue, or any rights or options which the corporation
proposes to issue or to grant for the purchase of shares of any
class or for the purchase of any shares, bonds, securities, or
obligations of the corporation which are convertible into or
exchangeable for, or which carry any rights to subscribe for,
purchase, or otherwise acquire shares of any class of the
corporation; and any and all of such shares, bonds, securities or
obligations of the corporation, whether now or hereafter
authorized or created, may be issued, or may be reissued or
transferred if the same have been reacquired and have treasury
status, and any and all of such rights and options may be granted
by the Board of Directors to such persons, firms, corporations
and associations, and for such lawful consideration, and on such
terms, as the Board of Directors in its discretion may determine,
without first offering the same, or any thereof, to any said
holder.
SEVENTH: (1) The number of directors of the corporation,
until such number shall be increased or decreased pursuant to the
by-laws of the corporation, is seven. The number of directors
shall never be less than the minimum number prescribed by the
Maryland General Corporation Law.
(2) The names of the persons who shall act as directors of
the corporation until their successors are duly chosen and
qualify are as follows:
Daniel D. Adams, Jr. Jean G. Gumerson
Edward C. Joullian, III Gregory M. Love
John W. Rex J. Dean Robertson
G. Rainey Williams, Jr.
(3) The initial by-laws of the corporation shall be adopted
by the directors at their organizational meeting or by their
informal written action, as the case may be. Thereafter, the
power to make, alter, and repeal the by-laws of the corporation
shall be vested in the Board of Directors of the corporation.
(4) Any determination made in good faith by or pursuant to
the direction of the Board of Directors, as to the amount of the
assets, debts, obligations, or liabilities of the corporation;
the amount of any reserves or charges set up and the propriety
thereof; the time of or purpose for creating such reserves or
charges; the use, alteration or cancellation of any reserves or
charges (whether or not any debt, obligation or liability for
which such reserves or charges shall have been created shall have
been paid or discharged or shall be then or thereafter required
to be paid or discharged); the value of any investment or fair
value of any other asset of the corporation; the amount of net
investment income; the number of shares of stock outstanding; the
estimated expense in connection with purchases or redemptions of
the corporation's stock; the ability to liquidate investments in
orderly fashion; the extent to which it is practicable to deliver
a cross-section of the portfolio of the corporation in payment
for any such shares, or as to any other matters relating to the
issue, sale, purchase, redemption and/or other acquisition or
disposition of investments or shares of the corporation, or the
determination of the net asset value of shares of the
corporation, shall be final and conclusive, and shall be binding
upon the corporation and all holders of its shares, past, present
and future, and shares of the corporation are issued and sold on
the condition and understanding that any and all such
determinations shall be binding as aforesaid.
EIGHTH: (1) To the fullest extent that limitations on the
liability of directors and officers are permitted by the Maryland
General Corporation Law, no director or officer of the
corporation shall have any liability to the corporation or its
stockholders for damages. This limitation on liability applies
to events occurring at the time a person serves as a director or
officer of the corporation whether or not such person is a
director or officer at the time of any proceeding in which
liability is asserted.
(2) The corporation shall indemnify and advance expenses to
its currently acting and its former directors to the fullest
extent that indemnification of directors is permitted by the
Maryland General Corporation Law. The corporation shall
indemnify and advance expenses to its officers to the same extent
as its directors and to such further extent as is consistent with
law. The Board of Directors may, through a by-law, resolution or
agreement, make further provisions for indemnification of
directors, officers, employees and agents to the fullest extent
permitted by the Maryland General Corporation Law.
(3) No provision of this Article EIGHTH shall be effective
to protect or purport to protect any director or officer of the
corporation against any liability to the corporation or its
stockholders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
(4) References to the Maryland General Corporation Law in
this Article EIGHTH are to the law as from time to time amended.
No amendment to the Articles of Incorporation of the corporation
shall affect any right of any person under this Article EIGHTH
based on any event, omission or proceeding prior to such
amendment.
NINTH: Any holder of shares of stock of the corporation may
require the corporation to redeem and the corporation shall be
obligated to redeem at the option of such holder all or any part
of the shares of the corporation owed by said holder, at the
redemption price, pursuant to the method, upon the terms and
subject to the conditions hereinafter set forth:
(a) The redemption price per share shall be the net
asset value per share determined at such time or times as the
Board of Directors of the corporation shall designate in
accordance with any provision of the Investment Company Act of
1940, any rule or regulation thereunder or exemption or exception
therefrom, or any rule or regulation made or adopted by any
securities association registered under the Securities Exchange
Act of 1934.
(b) Net asset value per share of a class shall be
determined by dividing:
(i) The total value of the assets of such class
determined as provided in Subsection (c) below less, to
the extent determined by or pursuant to the direction
of the Board of Directors, all debts, obligations and
liabilities of such class (which debts, obligations and
liabilities shall include, without limitation of the
generality of the foregoing, any and all debts,
obligations, liabilities, or claims, of any and every
kind and nature, fixed, accrued and otherwise,
including the estimated accrued expenses of management
and supervision, administration and distribution and
any reserves or charges for any or all of the
foregoing, whether for taxes, expenses or otherwise)
but excluding such class's liability upon its shares
and its surplus, by
(ii) The total number of shares of such class
outstanding.
The Board of Directors is empowered, in its absolute
discretion, to establish other methods for determining such net
asset value whenever such other methods are deemed by it to be
necessary in order to enable the corporation to comply with, or
are deemed by it to be desirable provided they are not
inconsistent with, any provision of the Investment Company Act of
1940 or any rule or regulation thereunder.
(c) In determining for the purposes of these Articles
of Incorporation the total value of the assets of the corporation
at any time, investments and any other assets of the corporation
shall be valued in such manner as may be determined from time to
time by the Board of Directors.
(d) Payment of the redemption price by the corporation
may be made either in cash or in securities or other assets at
the time owned by the corporation or partly in cash and partly in
securities or other assets at the time owned by the corporation.
The value of any part of such payment to be made in securities or
other assets of the corporation shall be the value employed in
determining the redemption price. Payment of the redemption
price shall be made on or before the seventh day following the
day on which the shares are properly presented for redemption
hereunder, except that delivery of any securities included in any
such payment shall be made as promptly as any necessary transfers
on the books of the issuers whose securities are to be delivered
may be made.
The corporation, pursuant to resolution of the Board of
Directors, may deduct from the payment made for any shares
redeemed a liquidating charge not in excess of one percent (1%)
of the redemption price of the shares so redeemed, and the Board
of Directors may alter or suspend any such liquidating charge
from time to time.
(e) The right of any holder of shares of stock
redeemed by the corporation as provided in this Article NINTH to
receive dividends or distributions thereon and all other rights
of such holder with respect to such shares shall terminate at the
time as of which the redemption price of such shares is
determined, except the right of such holder to receive (i) the
redemption price of such shares from the corporation in
accordance with the provisions hereof, and (ii) any dividend or
distribution to which such holder had previously become entitled
as the record holder of such shares on the record date for such
dividend or distribution.
(f) Redemption of shares of stock by the corporation
is conditional upon the corporation having funds or property
legally available therefor.
(g) The corporation, either directly or through an
agent, may repurchase its shares, out of funds legally available
therefor, upon such terms and conditions and for such
consideration as the Board of Directors shall deem advisable, by
agreement with the owner at a price not exceeding the net asset
value per share as determined by the corporation at such time or
times as the Board of Directors of the corporation shall
designate, less a charge not to exceed on percent (1%) of such
net asset value, if and as fixed by resolution of the Board of
Directors of the corporation from time to time, and take all
other steps deemed necessary or advisable in connection
therewith.
(h) The corporation, pursuant to resolution of the
Board of Directors, may cause the redemption, upon the terms set
forth in such resolution and in subsections (a) through (f) and
subsection (i) of this Article NINTH, of shares of stock owned by
stockholders whose shares have an aggregate net asset value of
five hundred dollars or less. Notwithstanding any other
provision of this Article NINTH, if certificates representing
such shares have been issued, the redemption price need not be
paid by the corporation until such certificates are presented in
proper form for transfer to the corporation or the agent of the
corporation appointed for such purpose; however, the redemption
shall be effective, in accordance with the resolution of the
Board of Directors, regardless of whether or not such
presentation has been made.
(i) The obligations set forth in this Article NINTH
may be suspended or postponed as may be permissible under the
Investment Company Act of 1940 and the rules and regulations
thereunder.
(j) The Board of Directors may establish other terms
and conditions and procedures for redemption, including
requirements as to the delivery of certificates evidencing
shares, if issued.
TENTH: All persons who shall acquire stock or other
securities of the corporation shall acquire the same subject to
the provisions of the corporation's Articles of Incorporation, as
from time to time amended.
ELEVENTH: From time to time any of the provisions of the
Articles of Incorporation of the corporation may be amended,
altered or repealed, including amendments which alter the
contract rights of any class of stock outstanding, and other
provisions authorized by the Maryland General Corporation Law at
the time in force may be added or inserted in the manner and at
the time prescribed by said Law, and all rights at any time
conferred upon the stockholders of the corporation by its
Articles of Incorporation are granted subject to the provisions
of this Article.
IN WITNESS WHEREOF, I have adopted and signed these Articles
of Incorporation and do hereby acknowledge that the adoption and
signing are my act.
Dated: March 17, 1998.
JERRY A. WARREN
Jerry A. Warren
[Incorporator]
BY-LAWS
OF
AMERICAN FIDELITY DUAL STRATEGY FUND, INC.
(A Maryland Corporation)
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Certificates representing
shares of stock shall set forth thereon the statements prescribed
by Section 2-211 of the Maryland General Corporation Law
("General Corporation Law") and by any other applicable provision
of law and shall be signed by the Chairman of the Board, the
President or a Vice President and countersigned by the Secretary
or an Assistant Secretary or the Treasurer or an Assistant
Treasurer and may be sealed with the corporate seal. The
signatures of any such officers may be either manual or facsimile
signatures and the corporate seal may be either facsimile or any
other form of seal. In case any such officer who has signed
manually or by facsimile any such certificate ceases to be such
officer before the certificate is issued, it nevertheless be
issued by the corporation with the same effect as if the officer
had not ceased to be such officer as of the date of its issue.
No certificate representing shares of stock shall be issued for
any share of stock until such share is fully paid, except as
otherwise authorized by the General Corporation Law.
The corporation may issue a new certificate of stock in place of
any certificate theretofore issued by it, alleged to have been
lost, stolen or destroyed, and the Board of Directors may
require, in its discretion, the owner of any such certificate or
his legal representative to give bond, with sufficient surety, to
the corporation to indemnify it against any loss or claim that
may arise by reason of the issuance of a new certificate.
2. SHARE TRANSFERS. Upon compliance with provisions
restricting the transferability of shares of stock, if any,
transfers of shares of stock of the corporation shall be made
only on the stock transfer books of the corporation by the record
holder thereof or by his attorney thereunto authorized by power
of attorney duly executed and filed with the Secretary of the
corporation or with a transfer agent or a registrar, if any, and
on surrender of the certificate or certificates for such shares
of stock properly endorsed and the payment of all taxes due
thereon.
3. RECORD DATE FOR STOCKHOLDERS. The Board of Directors may
fix, in advance, a date as the record date for the purpose of
determining stockholders entitled to notice of, or to vote at,
any meeting of stockholders, or stockholders entitled to receive
payment of any dividend or the allotment of any rights or in
order to make a determination of stockholders for any other
proper purpose. Such date, in any case, shall be not more than
90 days, and in case of a meeting of stockholders at least 10
days, prior to the date on which the meeting or particular action
requiring such determination of stockholders is to be held or
taken. In lieu of fixing a record date, the Board of Directors
may provide that the stock transfer books shall be closed for a
stated period but not to exceed 20 days. If the stock transfer
books are closed for the purpose of determining stockholders
entitle to notice of, or to vote at, a meeting of stockholders,
such books shall be closed for at least 10 days immediately
preceding such meeting. If no record date is fixed and the stock
transfer books are not closed for the determination of
stockholders: (1) The record date for the determination of
stockholders entitled to notice of, or to vote at, a meeting of
stockholders shall be at the close of business on the day on
which the notice of meeting is mailed or the day 30 days before
the meeting, whichever is the closer date to the meeting; and (2)
The record date for the determination of stockholders entitled to
receive payment of a dividend or an allotment of any rights shall
be at the close of business on the day on which the resolution of
the Board of Directors declaring the dividend or allotment of
rights is adopted, provided that the payment or allotment date
shall not be more than 60 days after the date on which the
resolution is adopted.
4. MEANING OF CERTAIN TERMS. As used herein in respect of the
right to notice of a meeting of stockholders or a waiver thereof
or to participate or vote thereat or to consent or dissent in
writing in lieu of a meeting, as the case may be, the term "share
of stock" or "shares of stock" or "stockholder" or "stockholders"
refers to an outstanding share or shares of stock and to a holder
or holders of record of outstanding shares of stock when the
corporation is authorized to issue only one class of shares of
stock and said reference also is intended to include any
outstanding share or shares of stock and any holder or holders of
record of outstanding shares of stock of any class or series upon
which or upon whom the Articles of Incorporation confers such
rights where there are two or more classes or series of shares or
upon which or upon whom the General Corporation Law confers such
rights notwithstanding that the Articles of Incorporation may
provide for more than one class or series or shares of stock, one
or more of which are limited or denied such rights thereunder.
5. STOCKHOLDER MEETINGS.
- ANNUAL MEETINGS. If a meeting of the stockholders of the
corporation is required by the Investment Company Act of 1940, as
amended, to elect the directors, then there shall be submitted to
the stockholders at such meeting the question of the election of
directors, and a meeting called for that purpose shall be
designated the annual meeting of stockholders for that year.
Such meeting shall be held no later than 120 days after the
occurrence of the event requiring the meeting. In other years in
which no action by stockholders is required for the aforesaid
election of directors, no annual meeting need be held.
- SPECIAL MEETINGS. Special stockholder meetings for any
purpose may be called by the Board of Directors or the President.
The Secretary shall call a special meeting of stockholders
whenever the holders of shares entitled to at least twenty-five
percent of all votes entitled to be cast at such meeting shall
make a duly authorized request that such meeting be called. Such
request shall state the purpose of such meeting and the matters
proposed to be acted on thereat, and no other business shall be
transacted at any such special meeting. The Secretary shall
inform such stockholders of the reasonably estimated costs of
preparing and mailing the notice of the meeting, and upon payment
to the corporation of such costs, the Secretary shall give notice
in the manner provided for below. Notwithstanding the foregoing,
unless requested by stockholders entitled to cast a majority of
the votes entitled to be cast at the meeting, a special meeting
of the stockholders need not be called at the request of
stockholders to consider any matter that is substantially the
same as a matter voted on at any special meeting of the
stockholders held during the preceding twelve months.
- PLACE AND TIME. Stockholder meetings shall be held at
such place, either within the State of Maryland or at such other
place within the United States, and at such date or dates as the
directors from time to time may fix.
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER OF NOTICE.
Written or printed notice of all meetings shall be given by the
Secretary and shall state the time and place of the meeting. The
notice of a special meeting shall state in all instances the
purpose or purposes for which the meeting is called. Written or
printed notice of any meeting shall be given to each stockholder
either by mail or by presenting it to him personally or by
leaving it at his residence or usual place of business not less
than ten days and not more than ninety days before the date of
the meeting, unless any provisions of the General Corporation Law
shall prescribe a different elapsed period of time, to each
stockholder at his address appearing on the books of the
corporation or the address supplied by him for the purpose of
notice. If mailed, notice shall be deemed to be given when
deposited in the United States mail addressed to the stockholder
at his post office address as it appears on the records of the
corporation with postage thereon prepaid. Whenever any notice of
the time, place or purpose of any meeting of stockholders is
required to be given under the provisions of these by-laws or of
the General Corporation Law, a waiver thereof in writing, signed
by the stockholder and filed with the records of the meeting,
whether before or after the holding thereof, or actual attendance
or representation at the meeting shall be deemed equivalent to
the giving of such notice to such stockholder. The foregoing
requirements of notice also shall apply, whenever the corporation
shall have any class of stock which is not entitled to vote, to
holders of stock who are not entitled to vote at the meeting, but
who are entitled to notice thereof and to dissent from any action
taken thereat.
- STATEMENT OF AFFAIRS. The President of the corporation
or, if the Board of Directors shall determine otherwise, some
other executive officer thereof, shall prepare or cause to be
prepared annually a full and correct statement of the affairs of
the corporation, including a balance sheet and a financial
statement of operations for the preceding fiscal year, which
shall be filed at the principal office of the corporation in the
State of Maryland.
- CONDUCT OF MEETING. Meetings of the stockholders shall
be presided over by one of the following officers in the order of
seniority and if present and acting: the President, the Chairman
of the Board, a Vice President or, if none of the foregoing is in
office and present and acting, by a chairman to be chosen by the
stockholders. The Secretary of the corporation or, in his
absence, an Assistant Secretary, shall act as secretary of every
meeting, but if neither the Secretary nor an Assistant Secretary
is present the chairman of the meeting shall appoint a secretary
of the meeting.
- PROXY REPRESENTATION. Every stockholder may authorize
another person or persons to act for him by proxy in all matters
in which a stockholder is entitled to participate, whether for
the purposes of determining his presence at a meeting, or whether
by waiving notice of any meeting, voting or participating at a
meeting, expressing consent or dissent without a meeting or
otherwise. Every proxy shall be executed in writing by the
stockholder or by his duly authorized attorney-in-fact and filed
with the Secretary of the corporation. No unrevoked proxy shall
be valid after eleven months from the date of its execution,
unless a longer time is expressly provided therein.
- INSPECTORS OF ELECTION. The directors, in advance of any
meeting, may, but need not, appoint one or more inspectors to act
at the meeting or any adjournment thereof. If an inspector or
inspectors are not appointed, the person presiding at the meeting
may, but need not, appoint one or more inspectors. In case any
person who may be appointed as an inspector fails to appear or
act, the vacancy may be filled by appointment made by the
directors in advance of the meeting or at the meeting by the
person presiding thereat. Each inspector, if any, before
entering upon the discharge of his duties, shall take and sign an
oath to execute faithfully the duties of inspector at such
meeting with strict impartiality and according to the best of his
ability. The inspectors, if any, shall determine the number of
shares outstanding and the voting power of each, the shares
represented at the meeting, the existence of a quorum and the
validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate
all votes, ballots or consents, determine the result and do such
acts as are proper to conduct the election or vote with fairness
to all stockholders. On request of the person presiding at the
meeting or any stockholder, the inspector or inspectors, if any,
shall make a report in writing of any challenge, question or
matter determined by him or them and execute a certificate of any
fact found by him or them.
- VOTING. Each share of stock shall entitle the holder
thereof to one vote, except in the election of directors, at
which each said vote may be cast for as many persons as there are
directors to be elected. Except for election of directors, a
majority of the votes cast at a meeting of stockholder, duly
called at which a quorum is present, shall be sufficient to take
or authorize action upon any matter which may come before a
meeting, unless more than a majority of votes cast is required by
the corporation's Articles of Incorporation. A plurality of all
the votes cast at a meeting at which a quorum is present shall be
sufficient to elect a director.
6. INFORMAL ACTION. Any action required or permitted to be
taken at a meeting of stockholders may be taken without a meeting
if a consent in writing, setting forth such action, is signed by
all the stockholders entitled to vote on the subject matter
thereof and any other stockholders entitled to notice of a
meeting of stockholders (but not to vote thereat) have waived in
writing any rights which they may have to dissent from such
action and such consent and waiver are filed with the records of
the corporation.
7. CERTIFICATION OF BENEFICIAL OWNERSHIP. The Board of
Directors is authorized to adopt a resolution establishing a
procedure in accordance with Section 2-514 of the General
Corporation Law pursuant to which a stockholder of record may
certify that the shares are for the account of a specified
person.
ARTICLE II
BOARD OF DIRECTORS
1. FUNCTIONS AND DEFINITION. The business and affairs of the
corporation shall be managed under the direction of a Board of
Directors. The use of the phrase "entire board" herein refers to
the total number of directors which the corporation would have if
there were no vacancies.
2. QUALIFICATIONS AND NUMBERS. Each director shall be a
natural person of legal age. A director need not be a
stockholder, a citizen of the United States or a resident of the
State of Maryland. The initial Board of Directors shall consist
of seven persons. Thereafter, the number of directors
constituting the entire board shall never be less than three. At
any regular meeting or at any special meeting called for that
purpose, a majority of the entire Board of Directors may increase
or decrease the number of directors, provided that the number
thereof shall never be less than three, nor more than twelve and
further provided that the tenure of office of a director shall
not be affected by any decrease in the number of directors.
3. ELECTION AND TERM. The first Board of Directors shall
consist of the directors named in the Articles of Incorporation
and each shall hold office until his or her successor has been
elected and qualified. Thereafter, directors who are elected at
a meeting of stockholders, and directors who are elected in the
interim to fill vacancies and newly created directorships, shall
hold office until their successors have been elected and
qualified. Newly created directorships and any vacancies in the
Board of Directors, other than vacancies resulting from the
removal of directors by the stockholders, may be filled by the
Board of Directors, subject to the provisions of the Investment
Company Act of 1940. Newly created directorships filled by the
Board of Directors shall be by action of a majority of the entire
Board of Directors. All other vacancies to be filled by the
Board of Directors may be filled by a majority of the remaining
members of the Board of Directors, although such majority is less
than a quorum thereof.
4. MEETINGS.
- TIME. Meetings shall be held at such time as the Board
shall fix, except that the first meeting of a newly elected Board
shall be held as soon after its election as the directors
conveniently may assemble.
- PLACE. Meetings shall be held at such place within or
without the State of Maryland as shall be fixed by the Board.
- CALL. No call shall be required for regular meetings for
which the time and place have been fixed. Special meetings may
be called by or at the direction of the President or of a
majority of the directors in office.
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. Whenever any
notice of the time, place or purpose of any meeting of directors
or any committee thereof is required to be given under the
provisions of the General Corporation Law or of these by-laws, a
waiver thereof in writing, signed by the director or committee
member entitled to such notice and filed with the records of the
meeting, whether before or after the holding thereof, or actual
attendance at the meeting shall be deemed equivalent to the
giving of such notice to such director or such committee member.
- QUORUM AND ACTION. A majority of the entire Board of
Directors shall constitute a quorum except when a vacancy or
vacancies prevents such majority, whereupon a majority of the
directors in office shall constitute a quorum, provided such
majority shall constitute at least one-third of the entire Board
and, in no event, less than two directors. A majority of the
directors present, whether or not a quorum is present, may
adjourn a meeting to another time and place. Except as otherwise
specifically provided by the Articles of Incorporation, the
General Corporation Law or these by-laws, the action of a
majority of the directors present at a meeting at which a quorum
is present shall be the action of the Board of Directors.
- CHAIRMAN OF THE MEETING. The Chairman of the Board, if
any and if present and acting, or the President or any other
director chosen by the Board, shall preside at all meetings.
5. REMOVAL OF DIRECTORS. Any or all of the directors may be
removed for cause or without cause by the stockholders by the
affirmative vote of a majority of all votes entitled to be cast
for the election of directors, who may elect a successor
successors to fill any resulting vacancy or vacancies for the
unexpired term of the removed director or directors.
6. COMMITTEES. The Board of Directors may appoint from among
its members an Executive Committee and other committees composed
of two or more directors and may delegate to such committee or
committees, in the intervals between meetings of the Board of
Directors, any or all of the powers of the Board of Directors in
the management of the business and affairs of the corporation,
except the power to amend the by-laws, to approve any
consolidation, merger, share exchange or transfer of assets, to
declare dividends, to issue stock or to recommend to stockholders
any action requiring the stockholders' approval. In the absence
of any member of any such committee, the members thereof present
at any meeting, whether or not they constitute a quorum, may
appoint a member of the Board of Directors to act in the place of
such absent member.
7. INFORMAL ACTION. Any action required or permitted to be
taken at any meeting of the Board of Directors or at any
committee thereof may be taken without a meeting, if a written
consent to such action is signed by all members of the Board of
Directors or any such committee, as the case may be, and such
written consent is filed with the minutes of the proceedings of
the Board or any such committee.
Members of the Board of Directors or any committee designated
thereby may participate in a meeting of such Board or committee
by means of a conference telephone or similar communications
equipment by means of which all persons participating in the
meeting can hear each other at the same time. Participation by
such means shall constitute presence in person at a meeting.
ARTICLE III
OFFICERS
The corporation may have a Chairman of the Board and shall have a
President, a Secretary and a Treasurer, who shall be elected by
the Board of Directors, and may have such other officers,
assistant officers and agents as the Board of Directors shall
authorize from time to time. Any two or more officers, except
those of President and Vice President, may be held by the same
person, but no person shall execute, acknowledge or verify any
instrument in more than one capacity, if such instrument is
required by law to be executed, acknowledged or verified by two
or more officers.
Any officer or agent may be removed by the Board of Directors
whenever, in its judgment, the best interests of the corporation
will be served thereby.
ARTICLE IV
PRINCIPAL OFFICE - RESIDENT AGENT - STOCK LEDGER
The address of the principal office of the corporation in the
State of Maryland prescribed by the General Corporation Law is 32
South Street, c/o The Corporation Trust Incorporated, Baltimore,
Maryland 21202. The name and address of the resident agent in
the State of Maryland prescribed by the General Corporation Law
are: The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202.
The corporation shall maintain at its principal office in the
State of Maryland prescribed by the General Corporation Law or at
the business office or an agency of the corporation, an original
or duplicate stock ledger containing the names and addresses of
all stockholders and the number of shares of each class held by
each stockholder. Such stock ledger may be in written form or
any other form capable of being converted into written form
within a reasonable time for visual inspection.
ARTICLE V
CORPORATE SEAL
The corporate seal shall have inscribed therein the name of the
corporation and shall be in such form and contain such other
words and/or figures as the Board of Directors shall determine or
the law require.
ARTICLE VI
FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall be
subject to change, by the Board of Directors.
ARTICLE VII
CONTROL OVER BY-LAWS
The power to make, alter, amend and repeal the by-laws is vested
in the Board of Directors of the corporation.
ARTICLE VIII
INDEMNIFICATION
1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The corporation
shall indemnify its directors to the fullest extent that
indemnification of directors is permitted by the law. The
corporation shall indemnify its officers to the same extent as
its directors and to such further extent as is consistent with
law. The corporation shall indemnify its directors and officers
who while serving as directors or officers also serve at the
request of the corporation as a director, officer, partner,
trustee, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, other enterprise or employee
benefit plan to the same extent as its directors and, in the case
of officers, to such further extent as is consistent with law.
The indemnification and other rights provided by this Article
shall continue as to a person who has ceased to be a director or
officer and shall inure to the benefit of the heirs, executors
and administrators of such a person. This Article shall not
protect any such person against any liability to the corporation
or any stockholder thereof to which such person would otherwise
be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his office ("disabling conduct").
2. ADVANCES. Any current or former director or officer of the
corporation seeking indemnification within the scope of this
Article shall be entitled to advances from the corporation for
payment of the reasonable expenses incurred by him in connection
with the matter as to which he is seeking indemnification in the
manner and to the fullest extent permissible under the General
Corporation Law. The person seeking indemnification shall
provide to the corporation a written affirmation of his good
faith belief that the standard of conduct necessary for
indemnification by the corporation has been met and a written
undertaking to repay any such advance if it should ultimately be
determined that the standard of conduct has not been met. In
addition, at least one of the following additional conditions
shall be met: (a) the person seeking indemnification shall
provide a security in form and amount acceptable to the
corporation for his undertaking; (b) the corporation is insured
against losses arising by reason of the advance; or (c) a
majority of a quorum of directors of the corporation who are
neither "interested persons" as defined in Section 2(a)(19) of
the Investment Company Act of 1940, as amended, nor parties to
the proceeding ("disinterested non-party directors"), or
independent legal counsel, in a written opinion, shall have
determined, based on a review of facts readily available to the
corporation at the time the advance is proposed to be made that
there is reason to believe that the person seeking
indemnification will ultimately be found to be entitled to
indemnification.
3. PROCEDURE. At the request of any person claiming
indemnification under this Article, the Board of Directors shall
determine, or cause to be determined, in a manner consistent with
the General Corporation Law, whether the standards required by
this Article have been met. Indemnification shall be made only
following: (a) a final decision on the merits by a court or
other body before whom the proceeding was brought that the person
to be indemnified was not liable by reason of disabling conduct
or (b) in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that the person
to be indemnified was not liable by reason of disabling conduct
by (i) the vote of a majority of a quorum of disinterested non-
party directors or (ii) an independent legal counsel in a written
opinion.
4. INDEMNIFICATION OF EMPLOYEES AND AGENTS. Employees and
agents who are not officers or directors of the corporation may
be indemnified and reasonable expenses may be advanced to such
employees or agents, as may be provided by action of the Board of
Directors or by contract, subject to any limitations imposed by
the Investment Company Act of 1940, as amended.
5. OTHER RIGHTS. The Board of Directors may make further
provision consistent with law for indemnification and advance of
expenses to directors, officers, employees and agents by
resolution, agreement or otherwise. The indemnification provided
by this Article shall not be deemed exclusive of any other right,
with respect to indemnification or otherwise, to which those
seeking indemnification may be entitled under any insurance or
other agreement or resolution of stockholders or disinterested
non-party directors or otherwise.
6. AMENDMENTS. References in this Article are to the General
Corporation Law and to the Investment Company Act of 1940 as from
time to time amended. No amendment of the by-laws shall affect
any right of any person under this Article based on any event,
omission or proceeding prior to the amendment.
DATED: March 19, 1998.
MANAGEMENT AND INVESTMENT
ADVISORY AGREEMENT
AGREEMENT dated as of the _____ day of _________, 1998,
between AMERICAN FIDELITY ASSURANCE COMPANY, an insurance
corporation organized under the laws of the State of Oklahoma and
having its principal place of business in Oklahoma City, Oklahoma
(the "Manager"), and AMERICAN FIDELITY DUAL STRATEGY FUND, INC.,
a Maryland corporation, having its principal place of business in
Oklahoma City, Oklahoma (the "Fund").
WHEREAS, the Fund proposes to engage in business as an
open-end management investment company and has applied for
registration under the Investment Company Act of 1940;
WHEREAS, the Manager proposes to engage in the business
of acting as manager and investment adviser for one or more
investment companies;
WHEREAS, the Fund desires to retain the Manager to
render such services in the manner and on the terms and
conditions hereinafter set forth; and
WHEREAS, the Manager desires to perform such services
in the manner and on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, this Agreement
W I T N E S S E T H:
In consideration of the foregoing and of the mutual
covenants hereinafter contained, it is agreed as follows:
1. The Fund hereby employs the Manager to provide
investment advisory, statistical and research facilities and
services, to supervise the composition of the Fund's portfolio
and to determine the nature and timing of changes therein and the
manner of effectuating such changes, subject to supervision of
the Fund's Board of Directors and for the period and on the terms
set forth in this agreement. The Manager hereby accepts such
employment and agrees to render the services and to assume the
obligations herein set forth, for the compensation herein
provided.
2. The Manager shall:
(a) Furnish to the Fund research and statistical
and other factual information and reports
with respect to securities held by the Fund
or which the Fund might purchase. It will
also furnish to the Fund such information as
may be appropriate concerning developments
which may affect issuers of securities held
by the Fund or which the Fund might purchase
or the business in which such issuers may be
engage. Such statistical and other factual
information and reports shall include
information and reports on industries,
business, corporations and all types of
securities, whether or not the Fund has at
any time any holdings in such industries,
business, corporations or securities. The
Manager reserves the right, in its
discretion, to purchase statistical
information and other services from other
sources, including affiliated persons of the
Manager.
(b) Furnish to the Fund, from time to time,
advice, information and recommendations with
respect to the acquisition, holding, or
disposal by the Fund of securities.
(c) Furnish to the Fund necessary assistance in:
(i) The preparation of all reports now or
hereafter required by Federal or other
laws.
(ii) The preparation of prospectuses,
registration statements and amendments
thereto that may be required by Federal
or other laws of by the rules or
regulations of any duly authorized
commission or administrative body.
(d) Furnish to the Fund at the Manager's expense,
office space in the offices of the Manger or
in such other place or places as may be
agreed upon from time to time, and all
necessary office facilities, business
equipment, supplies, utilities and telephone
service for managing the affairs and
investments and keeping the general accounts
of the Fund (exclusive of the necessary
records of any dividend disbursing agent,
transfer agent, registrar or custodian).
Manager shall compensate all personnel,
officers, and directors of the Fund if such
persons are also employees of the Manager or
its affiliates. The Manager agrees to pay
those legal and other expenses, incident to
organization of the Fund and to registration
with Federal and state authorities of the
initial offering of the Fund's shares.
Registration fees and legal and accounting
expenses incurred in connection with
subsequent Federal and other registrations of
Fund shares and all amendments and
supplements to the initial registration of
Fund shares shall be paid by the Fund and all
other costs and expenses incurred in such
connection shall be paid by the Manager.
(e) Provide and maintain a bond issued by a
reputable insurance company authorized to do
business in the place where the bond is
issued, against larceny and embezzlement
covering each offer and employee of the Fund,
who may singly or jointly with others have
access to securities of the Fund, with direct
or indirect authority to draw upon such funds
or to direct generally the disposition of
such funds. The bond shall be in such
reasonable amount as a majority of the Board
of Directors of the Fund who are not officers
or employees of the Fund shall determine with
due consideration to the aggregate assets of
the Fund to which any such officer or
employee may have access.
3. In connection with the management of the
investment and reinvestment of the assets of the Fund, the
Manager acting by its own officers, directors or employees or by
duly authorized subcontractor is authorized to select the brokers
or dealers that will execute purchase and sale transactions for
the Fund and is directed to use its best efforts to obtain the
best available price and most favorable execution with respect to
all such purchases and sales of portfolio securities for the
Fund. Subject to this primary requirement, and maintaining as
its first consideration the benefits to the Fund and its
shareholders, the Manager shall have the right, subject to the
control of the Board of Directors, to follow a policy of
selecting brokers and dealers who furnish statistical, research
and other services to the Fund or to the Manager.
4. For the services to be rendered and the charges
and expenses assumed and to be paid by the Manager, the Fund
shall pay the Manager as a basic advisory and service fee as soon
as practical after the last day of each week and at the close of
each calendar week an amount equal to .0013698% (.50% on an
annual basis) of the current value of the Fund for each day of
the valuation period for investment services.
5. The Fund shall cause its books and accounts to be
audited at least once each year by a reputable, independent
public accountant or organization of public accountants who shall
render a report to the Fund.
6. This Agreement shall continue in full force and
effect from year to year, provided that it shall not continue for
more than two years from the date hereof unless such continuance
is specifically approved, at least annually by the Board of
Directors of the Fund, which affirmative vote shall include a
majority of the members of the Board of Directors of the Fund who
are not interested persons of the Manager or of the Fund.
"Interested Persons" are those persons defined in Section
2(a)(19) of the Investment Company Act of 1940.
7. This Agreement shall automatically terminate in
the event of its assignment, within the meaning of the Investment
Company Act of 1940, as amended, unless an order of the
Securities and Exchange Commission is issued exempting such
assignment. This Agreement may be terminated at any time, on 60
days' written notice to the Manager, without payment of any
penalty, by the Board of Directors of the Fund or by shareholders
casting a majority of the votes which may be cast by all
shareholders. This Agreement may not be terminated by the
Manager without the approval of a new investment advisory
agreement by the shareholders casting a majority of the votes
which may be cast by all shareholders.
8. This Agreement may be amended at any time by
mutual consent of the parties provided that such consent on the
part of the Fund shall have been approved by the shareholders
casting a majority of the votes which may be cast by all
shareholders.
9. No provision of this Agreement shall be deemed to
protect the Manager against any liability to the Fund or its
shareholders to which it might otherwise be subject by reason of
any willful misfeasance, bad faith or gross negligence in the
performance of its duties or the reckless disregard of its
obligations under this Agreement. Nor shall any provision hereof
be deemed to protect any director or officer of the Fund against
any such liability to which he or she might otherwise be subject
by reason of any willful misfeasance, bad faith or gross
negligence in the performance of his or her duties or the
reckless disregard of his or her obligations. If any provision
of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day and year first above written.
AMERICAN FIDELITY DUAL
STRATEGY FUND, INC.
By
John W. Rex, President
AMERICAN FIDELITY ASSURANCE
COMPANY
By
John W. Rex, President
INVESTMENT SUB-ADVISORY AGREEMENT
THIS INVESTMENT SUB-ADVISORY AGREEMENT (the "Agree-
ment") is made and entered into on the date hereafter set forth
between AMERICAN FIDELITY ASSURANCE COMPANY (the "Client"), which
is the investment adviser to the American Fidelity Dual Strategy
Fund, Inc. (the "Fund"), and LAWRENCE W. KELLY & ASSOCIATES, INC.
(the "Investment Sub-Adviser").
1. APPOINTMENT OF INVESTMENT SUB-ADVISER. Effective on the
Effective Date, the Client hereby appoints Investment Sub-Adviser
to serve as investment adviser to the Client in respect of those
assets of the Fund specified in writing on or before the Effec-
tive Date by the Client to be subject to this Agreement (which
assets, together with any assets which are added at a subsequent
date or which are received as a result of the sale, exchange, or
transfer of any of such assets are herein collectively referred
to as the "Investment Assets"). The "Effective Date" shall be
the Closing Date of the Reorganization, as such terms are defined
in that certain Agreement and Plan of Reorganization dated
_________, 1998 among the Client, the Fund and American Fidelity
Variable Annuity Fund A.
The Investment Sub-Adviser hereby accepts such appointment
and agrees to render the services and to assume the obligations
herein set forth, for the compensation herein provided.
2. THE INVESTMENT ASSETS. The Investment Assets shall consist
of such cash, stocks, bonds and other securities which, from time
to time, the Client places under the investment supervision of
the Investment Sub-Adviser and/or which shall become part of the
Investment Assets as a result of transactions therein or other-
wise. The Client may make additions to or withdrawals from the
Investment Assets in such amounts as the Client shall determine.
3. CUSTODIANSHIP OF THE INVESTMENT ASSETS. The Investment
Assets have been deposited with Bank of Oklahoma, N.A. (the
"Custodian") and are maintained by the Custodian in safekeeping
on its premises, in a recognized clearing corporation, or in the
Federal Reserve book-entry system, in the name of the Fund, the
Custodian or the clearing corporation, or in the nominee name of
any of the foregoing. The Investment Sub-Adviser is hereby
authorized to give instructions to the Custodian with respect to
the consummation of transactions on behalf of the Client in the
Investment Assets, and the Custodian is hereby authorized to act
in response to instructions given by the Investment Sub-Adviser.
The Client agrees to take any other action and deliver any
certificates reasonably necessary to confirm the foregoing
authorization to the Custodian. The Client shall advise the
Investment Sub-Adviser if any other entity is appointed to serve
as Custodian for the Investment Assets prior to the date such
entity succeeds the Custodian. The term "Custodian" includes all
successors to the presently serving Custodian.
4. MANAGEMENT OF INVESTMENT ASSETS.
4.1 General Powers and Duties. So long as the Investment
Sub-Adviser's appointment under Section 1 hereof remains in
effect, the Investment Sub-Adviser shall, subject to the provi-
sions of Section 4.2 hereof, have complete discretion and author-
ity in the investment and reinvestment of the Investment Assets
and shall determine what securities or other property shall be
acquired, held, or disposed of and, subject to the provisions of
Section 4.4 hereof, what portion of the Investment Assets shall
be held uninvested. The Investment Sub-Adviser's investment and
reinvestment authority shall include, without limitation, author-
ity to purchase, sell, exchange, convert, trade, and generally to
deal in the Investment Assets. The Investment Sub-Adviser shall
have authority to direct the Custodian with respect to the
investment and management of the Investment Assets.
The Investment Sub-Adviser's authority shall include the
exercise of all voting rights pertaining to the Investment
Assets. However, the Investment Sub-Adviser shall have no
obligation to exercise any particular voting rights unless the
Custodian or the Client shall have furnished the pertinent
proxies to the Investment Sub-Adviser a reasonable time prior to
the deadline before which such proxies are required to be submit-
ted. The Investment Sub-Adviser has the duty to maintain accu-
rate records as to any vote or action taken with respect to any
stock or other securities which are part of the Investment Assets
and to take such further action as may be necessary for the Fund
to participate fully in any transaction undertaken by issuers of
Investment Assets.
4.2 Investment Policy. Investment objectives, policies and
other guidelines for the management of Investment Assets, includ-
ing requirements as to diversification are set forth in Exhibit A
to this Agreement. The Investment Sub-Adviser shall discharge
its duties hereunder in accordance with said investment guide-
lines as the same may be revised or supplemented from time to
time by the Client.
4.3 Prudence and Diversification. The Investment Sub-
Adviser shall discharge its duties hereunder at all times with
the care, skill, prudence, and diligence under the circumstances
then prevailing that a prudent person acting in a like capacity
and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims.
4.4 Minimum Liquidity Requirements. The Client shall give
the Investment Sub-Adviser reasonable advance notice of any cash
requirements from the Investment Assets, and the Investment Sub-
Adviser shall maintain in cash or cash equivalents sufficient
assets to meet such cash requirements.
4.5 Instructions to Securities Brokers and Dealers. The
Investment Sub-Adviser is hereby empowered to issue orders for
the purchase, sale or exchange of securities with respect to the
Investment Assets directly to a broker or dealer. The Investment
Sub-Adviser shall give the Custodian and the Client prompt
written notification of each such execution in accordance with
the provisions of Section 5.1 hereof, and the Investment Sub-
Adviser shall instruct the broker or dealer concerned to forward
a copy of the confirmation of the execution of such order to the
Custodian and the Client.
4.6 Selection of Securities Brokers and Dealers. The
Investment Sub-Adviser may select and employ securities brokers
and dealers to effect any securities transactions concerning the
investment management of the Investment Assets. In the selection
of such brokers and dealers by the Investment Sub-Adviser and the
placing of orders with them, the Investment Sub-Adviser shall use
its best efforts to obtain for the Investment Assets the most
favorable net price and execution available except to the extent
otherwise provided by Section 28(e) of the Securities Exchange
Act of 1934, as amended, or by other applicable law. Notwith-
standing anything in this Section 4.6 to the contrary, the Client
may instruct the Investment Sub-Adviser in writing to engage
securities brokers and dealers specified by the Client to effect,
with respect to the Investment Assets, securities transactions,
or particular securities transactions, and the Investment Sub-
Adviser shall act in accordance with such instructions. The
Investment Sub-Adviser shall not be responsible or liable for any
acts or omissions by any broker or dealer selected pursuant to
this Section 4.6 provided the Investment Sub-Adviser has acted
reasonably in the exercise of due care in the selection of such
broker or dealer and has not otherwise participated in, directly
or indirectly, such acts or omissions by such broker or dealer.
4.7 Other Accounts of the Investment Sub-Adviser. It is
understood that the Investment Sub-Adviser performs investment
advisory services for various clients and accounts other than the
Client. The Investment Sub-Adviser may give advice and take
action in the performance of its duties with respect to any of
such other clients or accounts which may be the same as or differ
from the timing or nature of action taken with respect to the
Investment Assets, provided that the Investment Sub-Advisor
allocates to the Investment Assets, to the extent practicable,
opportunities to acquire or dispose of investments over a period
of time on a basis no less favorable than its allocation of such
opportunities to such other clients and accounts and seeks over a
period of time to obtain comparable execution of similar
transactions among its clients. It is understood that the
Investment Sub-Adviser shall not have any obligation to purchase
or sell, or to recommend for purchase or sale, for the Fund any
security which the Investment Sub-Adviser, its principals,
affiliates or employees may purchase or sell for its or their own
accounts or for the account of any other client, if in the
opinion of the Investment Sub-Adviser such transaction or
investment appears unsuitable, impractical or undesirable for the
Fund.
4.8 Limit of Liability. The Investment Sub-Adviser shall
act in good faith and shall not be liable for any error of
judgment or loss incurred by the Fund in connection with
recommendations or investments made by the Investment Sub-Adviser
in its management of the Investment Assets.
5. INFORMATION AND REPORTS.
5.1 Reports to Client. Initially, the Investment Sub-
Adviser shall submit a daily written report to the Client
promptly following the close of regular trading on the New York
Stock Exchange detailing the actions taken by the Investment Sub-
Adviser under this Agreement during such day. The report shall
contain such information in such form as the Client has
specified, or from time to time shall specify, to the Investment
Sub-Adviser. In addition, the Investment Sub-Adviser shall
provide such other reports on the performance of the Investment
Assets at such times, for such periods and in such form as the
Client shall reasonably request, taking into account the
Investment Sub-Adviser's ability to produce such reports without
undue burden to the Investment Sub-Adviser.
5.2 Records and Accounts. The Investment Sub-Adviser shall
keep accurate and detailed records and accounts of the Investment
Assets and of all receipts, disbursements, and other transactions
hereunder affecting the Investment Assets. All such records and
accounts, and all documents relating thereto shall be open at all
reasonable times and under reasonable conditions to inspection
and audit by any person or persons designated by the Client.
5.3 Exchange of Information. The Client and the Investment
Sub-Adviser agree to provide to each other such information as
the Investment Adviser or the Client, as the case may be, may
reasonably request to enable it to carry out its duties,
obligations, and responsibilities under this Agreement or
applicable law.
5.4 Information to be Confidential. All information and
advice furnished to or obtained by the Client or the Investment
Sub-Adviser under or in connection with this Agreement shall be
treated as confidential and shall not be disclosed to third
parties except as required by law, including the disclosure
obligations of an investment company to its securities holders
under the federal securities laws.
6. FEE PAYABLE TO INVESTMENT SUB-ADVISER. For services under
this Agreement, the Investment Sub-Adviser shall be entitled to
receive from the Client a fee in an amount equal to .075% of the
current value of the Investment Assets as of the close of the
last trading day of March, June, September and December (.30% on
an annual basis). Such fee shall be payable in arrears as soon
as practicable, but not more than 10 business days, after the
last day of each calendar quarter.
7. REPRESENTATIONS BY CLIENT. The Client hereby represents and
warrants to the Investment Sub-Adviser that:
(a) Maryland Corporation. The Fund is a corporation
formed under the Maryland General Corporation Law.
(b) Investment Company. The Fund is registered with
the Securities and Exchange Commission (the "Commission") as an
open-end diversified management investment company under the
Investment Company Act of 1940, as amended (the "Investment
Company Act").
(c) Investment Adviser. The Client has been duly
appointed to serve as the investment adviser of the Fund.
(d) Delivery of Information. The Client will deliver
to the Investment Sub-Adviser, in writing, all of the
information, documents and instruments which the Investment Sub-
Adviser may reasonably request in order that it shall be able to
perform its duties hereunder.
(e) Approval of Agreement. This Agreement has been
approved by the Investment Committee of the Client, by the Board
of Directors of the Fund, including a majority of the members of
the Fund's Board of Directors who are not Interested Persons of
the Investment Sub-Adviser or the Fund and, prior to the
Effective Date, will be approved by a Majority Vote of
Shareholders. "Majority Vote of Shareholders" means, in
accordance with Section 2(a)(42) of the Investment Company Act,
the vote, at an annual or a special meeting of shareholders of
the Fund, duly called, (a) of 67% or more of the voting
securities present at such meeting, if the holders of more than
50% of the outstanding voting securities of the Fund are present
or represented by proxy, or (b) of more than 50% of the
outstanding voting securities of the Fund, whichever is less.
"Interested Persons" are those persons defined in Section
2(a)(19) of the Investment Company Act.
(f) Owner of Investment Assets. The Fund is the owner
of all Investment Assets which are the subject of this Agreement.
(g) Receipt by Client of Part II of Form ADV. The
Client acknowledges that it has received from the Investment Sub-
Adviser prior to or contemporaneously with the Client's execution
of this Agreement a copy of Part II of the Investment Sub-
Adviser's Form ADV as currently on file with the Commission under
the Investment Advisers Act of 1940, as amended (the "Investment
Advisers Act").
8. REPRESENTATIONS BY INVESTMENT SUB-ADVISER. The Investment
Sub-Adviser hereby represents and warrants to and agrees with the
Client that:
(a) Registration as Investment Adviser. The
Investment Sub-Adviser is and will be duly registered as an
"investment adviser" in accordance with the Investment Advisers
Act and with any other regulatory authorities pursuant to any
other applicable laws. The Investment Sub-Adviser is not subject
to any order of the Commission or any other regulatory authority
restricting its activities.
(b) Affiliated Brokers. Unless authorized in writing
by the Client, neither the Investment Sub-Adviser nor any parent,
subsidiary or related firm, individual or other entity related to
the Investment Sub-Adviser shall act as a securities broker with
respect to any purchases or sales of securities which may be made
on behalf of the Fund.
(c) Meetings with Client and Fund. A representative
of the Investment Sub-Adviser shall personally meet with the
Investment Committee of the Client or its designated
representative as reasonably requested by the Client to explain
the investment and management activities of the Investment Sub-
Adviser, and any reports related thereto, at such times as may be
mutually agreed by the Investment Sub-Adviser and the Client. In
addition, a representative of the Investment Sub-Adviser shall
attend the Fund's annual Board of Directors meetings and shall be
prepared to discuss the Investment Sub-Adviser's economic
outlook, investment strategy, individual holdings included in the
Investment Assets and such other related matters as the Board of
Directors shall request.
(d) Compliance With Laws. Nothing in this Agreement
shall be deemed to authorize the Investment Sub-Adviser to effect
any transactions in contravention of its fiduciary obligations,
duties or responsibilities under the Investment Advisers Act,
this Agreement or any other applicable federal or state laws or
regulations (including all applicable securities laws and regula-
tions) or the rules of any national securities exchange. The
Investment Sub-Adviser shall at all times in the performance of
its duties hereunder comply with the Investment Advisers Act and
such other laws, regulations and rules.
(e) Indemnification. In addition to any other rights
which the Client or the Fund may have against the Investment Sub-
Adviser, the Investment Sub-Adviser shall indemnify the Client
and the Fund and hold them harmless with respect to any loss or
damage, or costs or expenses suffered by them as a result of (i)
a breach by the Investment Sub-Adviser of this Agreement, or (ii)
the willful misfeasance, bad faith or gross negligence of the
Investment Sub-Adviser or any of its employees or agents acting
under its supervision or control to perform any of its
obligations and duties, or by reason of its reckless disregard of
its obligations and duties, under this Agreement, the Investment
Advisers Act or any other applicable law or regulation; provided,
the Investment Sub-Adviser shall have no responsibility or
liability for any loss incurred by reason of any act or omission
of the Client, a custodian or any broker-dealer.
9. MISCELLANEOUS.
9.1 Amendment. This Agreement may be amended at any time
by mutual agreement of the Client and the Investment Sub-Adviser,
provided that any material amendment shall have been approved by
a Majority Vote of Shareholders, by the Fund's Board of Directors
and by the vote of a majority of the members of the Fund's Board
of Directors who are not Interested Persons of the Investment
Sub-Adviser or the Fund cast in person at a meeting called for
the purpose of voting on such approval.
9.2 Term. This Agreement shall have an initial term of one
year from the Effective Date and thereafter shall continue from
year to year if continuance is approved at least annually by (a)
the Fund's Board of Directors or a Majority Vote of Shareholders
and (b) the vote of a majority of the members of the Fund's Board
of Directors who are not Interested Persons of the Investment
Sub-Adviser or of the Fund cast in person at a meeting called for
the purpose of voting on such approval.
9.3 Termination. This Agreement shall automatically
terminate in the event of its assignment, within the meaning of
Section 15(a) of the Investment Company Act, unless an order of
the Commission is issued exempting such assignment. This
Agreement may be terminated at any time, on 30 days' written
notice to the Investment Sub-Adviser, without payment of any
penalty, by the Client, the Board of Directors of the Fund or by
a Majority Vote of Shareholders. If at any time the
representation contained in Section 8(a) hereof ceases to be
true, this Agreement shall terminate forthwith without penalty or
payment of any kind by the Client. The Investment Sub-Adviser
may terminate this Agreement at any time upon 30 days' prior
written notice to the Client. If this Agreement shall terminate
at any time other than at the end of a calendar quarter, the
Investment Sub-Adviser shall be entitled to receive the fee set
forth in Section 6 hereof for the portion of the quarter elapsed
prior to the date of termination, prorated on a daily basis.
9.4 Errors and Omissions Policy. The Investment Sub-
Adviser agrees that, at its sole expense, it will maintain an
errors and omissions insurance policy that covers the acts,
errors and omissions by the Investment Sub-Adviser, its employees
or agents during the term of this Agreement. Upon request of the
Client, the Investment Sub-Adviser shall provide evidence of such
insurance.
9.5 Governing Law; Severability. This Agreement and its
performance shall be governed by and construed in accordance with
the applicable laws of the United States and, to the extent
permitted by such laws, with the laws of the State of Oklahoma.
In case any provision of this Agreement shall be held illegal or
invalid for any reason, such illegality or invalidity shall not
affect the remaining provisions of the Agreement but shall be
fully severable, and the Agreement shall be construed and
enforced as if such illegal or invalid provision had not been
included herein.
9.6 Notices. Unless the parties otherwise agree, all
notices, instructions and advice with respect to matters contem-
plated by this Agreement shall be in writing and effective when
received, and delivery shall be made personally, by registered or
certified mail, return receipt requested, overnight courier or
confirmed facsimile and addressed as follows:
Client: American Fidelity Assurance Company
2000 Classen Boulevard
Oklahoman City, Oklahoma 73106
Attention: ___________________
Telephone: (405) 523-5398
Facsimile: (405) 523-5411
Investment
Sub-Adviser: Lawrence W. Kelly & Associates, Inc.
200 S. Los Robles Avenue, Suite 510
Pasadena, California 91101
Attention: Lawrence W. Kelly
Telephone: (818) 449-9500
Facsimile: (818) 449-9566
Either party may change any of the above information by providing
notice to the other party in the manner set forth above. All
reports required to be delivered by the Investment Sub-Adviser to
the Client pursuant to Section 5.1 of this Agreement shall be
delivered in the manner specified from time to time by the
Client. Any communications from the Investment Sub-Adviser of a
routine nature may be delivered by U.S. mail to the person(s)
specified by the Client.
In recognition of their acceptance of the terms and
conditions of this Agreement, the Client and the Investment Sub-
Adviser hereby execute this Agreement by their duly authorized
representatives this _____ day of ________________, 1998.
CLIENT: AMERICAN FIDELITY ASSURANCE
COMPANY
By
Name: John W. Rex
Title: President
INVESTMENT SUB-ADVISER: LAWRENCE W. KELLY & ASSOCIATES,
INC.
By
Name: Lawrence W. Kelly
Title: President
INVESTMENT SUB-ADVISORY AGREEMENT
THIS INVESTMENT SUB-ADVISORY AGREEMENT (the
"Agreement") is made and entered into on the date hereafter set
forth between AMERICAN FIDELITY ASSURANCE COMPANY (the "Client"),
which is the investment adviser to the American Fidelity Dual
Strategy Fund, Inc. (the "Fund"), and TODD INVESTMENT ADVISORS,
INC. (the "Investment Sub-Adviser").
1. APPOINTMENT OF INVESTMENT SUB-ADVISER. Effective on the
Effective Date, the Client hereby appoints Investment Sub-Adviser
to serve as investment adviser to the Client in respect of those
assets of the Fund specified in writing on or before the
Effective Date by the Client to be subject to this Agreement
(which assets, together with any assets which are added at a
subsequent date or which are received as a result of the sale,
exchange, or transfer of any of such assets are herein
collectively referred to as the "Investment Assets"). The
"Effective Date" shall be the Closing Date of the Reorganization,
as such terms are defined in that certain Agreement and Plan of
Reorganization dated _________, 1998 among the Client, the Fund
and American Fidelity Variable Annuity Fund A.
The Investment Sub-Adviser hereby accepts such appointment
and agrees to render the services and to assume the obligations
herein set forth, for the compensation herein provided.
2. THE INVESTMENT ASSETS. The Investment Assets shall consist
of such cash, stocks, bonds and other securities which, from time
to time, the Client places under the investment supervision of
the Investment Sub-Adviser and/or which shall become part of the
Investment Assets as a result of transactions therein or
otherwise. The Client may make additions to or withdrawals from
the Investment Assets in such amounts as the Client shall
determine.
3. CUSTODIANSHIP OF THE INVESTMENT ASSETS. The Investment
Assets have been deposited with Bank of Oklahoma, N.A. (the
"Custodian") and are maintained by the Custodian in safekeeping
on its premises, in a recognized clearing corporation, or in the
Federal Reserve book-entry system, in the name of the Fund, the
Custodian or the clearing corporation, or in the nominee name of
any of the foregoing. The Investment Sub-Adviser is hereby
authorized to give instructions to the Custodian with respect to
the consummation of transactions on behalf of the Client in the
Investment Assets, and the Custodian is hereby authorized to act
in response to instructions given by the Investment Sub-Adviser.
The Client agrees to take any other action and deliver any
certificates reasonably necessary to confirm the foregoing
authorization to the Custodian. The Client shall advise the
Investment Sub-Adviser if any other entity is appointed to serve
as Custodian for the Investment Assets prior to the date such
entity succeeds the Custodian. The term "Custodian" includes all
successors to the presently serving Custodian.
4. MANAGEMENT OF INVESTMENT ASSETS.
4.1 General Powers and Duties. So long as the Investment
Sub-Adviser's appointment under Section 1 hereof remains in
effect, the Investment Sub-Adviser shall, subject to the
provisions of Section 4.2 hereof, have complete discretion and
authority in the investment and reinvestment of the Investment
Assets and shall determine what securities or other property
shall be acquired, held, or disposed of and, subject to the
provisions of Section 4.4 hereof, what portion of the Investment
Assets shall be held uninvested. The Investment Sub-Adviser's
investment and reinvestment authority shall include, without
limitation, authority to purchase, sell, exchange, convert,
trade, and generally to deal in the Investment Assets. The
Investment Sub-Adviser shall have authority to direct the
Custodian with respect to the investment and management of the
Investment Assets.
The Investment Sub-Adviser's authority shall include the
exercise of all voting rights pertaining to the Investment
Assets. However, the Investment Sub-Adviser shall have no
obligation to exercise any particular voting rights unless the
Custodian or the Client shall have furnished the pertinent
proxies to the Investment Sub-Adviser a reasonable time prior to
the deadline before which such proxies are required to be
submitted. The Investment Sub-Adviser has the duty to maintain
accurate records as to any vote or action taken with respect to
any stock or other securities which are part of the Investment
Assets and to take such further action as may be necessary for
the Fund to participate fully in any transaction undertaken by
issuers of Investment Assets.
4.2 Investment Policy. Investment objectives, policies and
other guidelines for the management of Investment Assets,
including requirements as to diversification are set forth in
Exhibit A to this Agreement. The Investment Sub-Adviser shall
discharge its duties hereunder in accordance with said investment
guidelines as the same may be revised or supplemented from time
to time by the Client.
4.3 Prudence and Diversification. The Investment Sub-
Adviser shall discharge its duties hereunder at all times with
the care, skill, prudence, and diligence under the circumstances
then prevailing that a prudent person acting in a like capacity
and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims.
4.4 Minimum Liquidity Requirements. The Client shall give
the Investment Sub-Adviser reasonable advance notice of any cash
requirements from the Investment Assets, and the Investment Sub-
Adviser shall maintain in cash or cash equivalents sufficient
assets to meet such cash requirements.
4.5 Instructions to Securities Brokers and Dealers. The
Investment Sub-Adviser is hereby empowered to issue orders for
the purchase, sale or exchange of securities with respect to the
Investment Assets directly to a broker or dealer. The Investment
Sub-Adviser shall give the Custodian and the Client prompt
written notification of each such execution in accordance with
the provisions of Section 5.1 hereof, and the Investment Sub-
Adviser shall instruct the broker or dealer concerned to forward
a copy of the confirmation of the execution of such order to the
Custodian and the Client.
4.6 Selection of Securities Brokers and Dealers. The
Investment Sub-Adviser may select and employ securities brokers
and dealers to effect any securities transactions concerning the
investment management of the Investment Assets. In the selection
of such brokers and dealers by the Investment Sub-Adviser and the
placing of orders with them, the Investment Sub-Adviser shall use
its best efforts to obtain for the Investment Assets the most
favorable net price and execution available except to the extent
otherwise provided by Section 28(e) of the Securities Exchange
Act of 1934, as amended, or by other applicable law.
Notwithstanding anything in this Section 4.6 to the contrary, the
Client may instruct the Investment Sub-Adviser in writing to
engage securities brokers and dealers specified by the Client to
effect, with respect to the Investment Assets, securities
transactions, or particular securities transactions, and the
Investment Sub-Adviser shall act in accordance with such
instructions. The Investment Sub-Adviser shall not be
responsible or liable for any acts or omissions by any broker or
dealer selected pursuant to this Section 4.6 provided the
Investment Sub-Adviser has acted reasonably in the exercise of
due care in the selection of such broker or dealer and has not
otherwise participated in, directly or indirectly, such acts or
omissions by such broker or dealer.
4.7 Other Accounts of the Investment Sub-Adviser. It is
understood that the Investment Sub-Adviser performs investment
advisory services for various clients and accounts other than the
Client. The Investment Sub-Adviser may give advice and take
action in the performance of its duties with respect to any of
such other clients or accounts which may be the same as or differ
from the timing or nature of action taken with respect to the
Investment Assets, provided that the Investment Sub-Advisor
allocates to the Investment Assets, to the extent practicable,
opportunities to acquire or dispose of investments over a period
of time on a basis no less favorable than its allocation of such
opportunities to such other clients and accounts and seeks over a
period of time to obtain comparable execution of similar
transactions among its clients. It is understood that the
Investment Sub-Adviser shall not have any obligation to purchase
or sell, or to recommend for purchase or sale, for the Fund any
security which the Investment Sub-Adviser, its principals,
affiliates or employees may purchase or sell for its or their own
accounts or for the account of any other client, if in the
opinion of the Investment Sub-Adviser such transaction or
investment appears unsuitable, impractical or undesirable for the
Fund.
4.8 Limit of Liability. The Investment Sub-Adviser shall
act in good faith and shall not be liable for any error of
judgment or loss incurred by the Fund in connection with
recommendations or investments made by the Investment Sub-Adviser
in its management of the Investment Assets.
5. INFORMATION AND REPORTS.
5.1 Reports to Client. Initially, the Investment Sub-
Adviser shall submit a daily written report to the Client
promptly following the close of regular trading on the New York
Stock Exchange detailing the actions taken by the Investment Sub-
Adviser under this Agreement during such day. The report shall
contain such information in such form as the Client has
specified, or from time to time shall specify, to the Investment
Sub-Adviser. In addition, the Investment Sub-Adviser shall
provide such other reports on the performance of the Investment
Assets at such times, for such periods and in such form as the
Client shall reasonably request, taking into account the
Investment Sub-Adviser's ability to produce such reports without
undue burden to the Investment Sub-Adviser.
5.2 Records and Accounts. The Investment Sub-Adviser shall
keep accurate and detailed records and accounts of the Investment
Assets and of all receipts, disbursements, and other transactions
hereunder affecting the Investment Assets. All such records and
accounts, and all documents relating thereto shall be open at all
reasonable times and under reasonable conditions to inspection
and audit by any person or persons designated by the Client.
5.3 Exchange of Information. The Client and the Investment
Sub-Adviser agree to provide to each other such information as
the Investment Adviser or the Client, as the case may be, may
reasonably request to enable it to carry out its duties,
obligations, and responsibilities under this Agreement or
applicable law.
5.4 Information to be Confidential. All information and
advice furnished to or obtained by the Client or the Investment
Sub-Adviser under or in connection with this Agreement shall be
treated as confidential and shall not be disclosed to third
parties except as required by law, including the disclosure
obligations of an investment company to its securities holders
under the federal securities laws.
6. FEE PAYABLE TO INVESTMENT SUB-ADVISER. For services under
this Agreement, the Investment Sub-Adviser shall be entitled to
receive from the Client a fee in an amount equal to the greater
of (a) .095% of the current value of the Investment Assets as of
the close of the last trading day of March, June, September and
December (.38% on an annual basis) or (b) $12,500 per quarter
($50,000 on an annual basis). Such fee shall be payable in
arrears as soon as practicable, but not more than 10 business
days, after the last day of each calendar quarter.
7. REPRESENTATIONS BY CLIENT. The Client hereby represents and
warrants to the Investment Sub-Adviser that:
(a) Maryland Corporation. The Fund is a corporation
formed under the Maryland General Corporation Law.
(b) Investment Company. The Fund is registered with
the Securities and Exchange Commission (the "Commission") as an
open-end diversified management investment company under the
Investment Company Act of 1940, as amended (the "Investment
Company Act").
(c) Investment Adviser. The Client has been duly
appointed to serve as the investment adviser of the Fund.
(d) Delivery of Information. The Client will deliver
to the Investment Sub-Adviser, in writing, all of the
information, documents and instruments which the Investment Sub-
Adviser may reasonably request in order that it shall be able to
perform its duties hereunder.
(e) Approval of Agreement. This Agreement has been
approved by the Investment Committee of the Client, by the Board
of Directors of the Fund, including a majority of the members of
the Fund's Board of Directors who are not Interested Persons of
the Investment Sub-Adviser or the Fund and, prior to the
Effective Date, will be approved by a Majority Vote of
Shareholders. "Majority Vote of Shareholders" means, in
accordance with Section 2(a)(42) of the Investment Company Act,
the vote, at an annual or a special meeting of shareholders of
the Fund, duly called, (a) of 67% or more of the voting
securities present at such meeting, if the holders of more than
50% of the outstanding voting securities of the Fund are present
or represented by proxy, or (b) of more than 50% of the
outstanding voting securities of the Fund, whichever is less.
"Interested Persons" are those persons defined in Section
2(a)(19) of the Investment Company Act.
(f) Owner of Investment Assets. The Fund is the owner
of all Investment Assets which are the subject of this Agreement.
(g) Receipt by Client of Part II of Form ADV. The
Client acknowledges that it has received from the Investment Sub-
Adviser prior to or contemporaneously with the Client's execution
of this Agreement a copy of Part II of the Investment Sub-
Adviser's Form ADV as currently on file with the Commission under
the Investment Advisers Act of 1940, as amended (the "Investment
Advisers Act").
8. REPRESENTATIONS BY INVESTMENT SUB-ADVISER. The Investment
Sub-Adviser hereby represents and warrants to and agrees with the
Client that:
(a) Registration as Investment Adviser. The
Investment Sub-Adviser is and will be duly registered as an
"investment adviser" in accordance with the Investment Advisers
Act and with any other regulatory authorities pursuant to any
other applicable laws. The Investment Sub-Adviser is not subject
to any order of the Commission or any other regulatory authority
restricting its activities.
(b) Affiliated Brokers. Unless authorized in writing
by the Client, neither the Investment Sub-Adviser nor any parent,
subsidiary or related firm, individual or other entity related to
the Investment Sub-Adviser shall act as a securities broker with
respect to any purchases or sales of securities which may be made
on behalf of the Fund.
(c) Meetings with Client and Fund. A representative
of the Investment Sub-Adviser shall personally meet with the
Investment Committee of the Client or its designated
representative as reasonably requested by the Client to explain
the investment and management activities of the Investment Sub-
Adviser, and any reports related thereto, at such times as may be
mutually agreed by the Investment Sub-Adviser and the Client. In
addition, a representative of the Investment Sub-Adviser shall
attend the Fund's annual Board of Directors meetings and shall be
prepared to discuss the Investment Sub-Adviser's economic
outlook, investment strategy, individual holdings included in the
Investment Assets and such other related matters as the Board of
Directors shall request.
(d) Compliance With Laws. Nothing in this Agreement
shall be deemed to authorize the Investment Sub-Adviser to effect
any transactions in contravention of its fiduciary obligations,
duties or responsibilities under the Investment Advisers Act,
this Agreement or any other applicable federal or state laws or
regulations (including all applicable securities laws and regula-
tions) or the rules of any national securities exchange. The
Investment Sub-Adviser shall at all times in the performance of
its duties hereunder comply with the Investment Advisers Act and
such other laws, regulations and rules.
(e) Indemnification. In addition to any other rights
which the Client or the Fund may have against the Investment Sub-
Adviser, the Investment Sub-Adviser shall indemnify the Client
and the Fund and hold them harmless with respect to any loss or
damage, or costs or expenses suffered by them as a result of (i)
a breach by the Investment Sub-Adviser of this Agreement, or (ii)
the willful misfeasance, bad faith or gross negligence of the
Investment Sub-Adviser or any of its employees or agents acting
under its supervision or control to perform any of its
obligations and duties, or by reason of its reckless disregard of
its obligations and duties, under this Agreement, the Investment
Advisers Act or any other applicable law or regulation; provided,
the Investment Sub-Adviser shall have no responsibility or
liability for any loss incurred by reason of any act or omission
of the Client, a custodian or any broker-dealer.
9. MISCELLANEOUS.
9.1 Amendment. This Agreement may be amended at any time
by mutual agreement of the Client and the Investment Sub-Adviser,
provided that any material amendment shall have been approved by
a Majority Vote of Shareholders, by the Fund's Board of Directors
and by the vote of a majority of the members of the Fund's Board
of Directors who are not Interested Persons of the Investment
Sub-Adviser or the Fund cast in person at a meeting called for
the purpose of voting on such approval.
9.2 Term. This Agreement shall have an initial term of one
year from the Effective Date and thereafter shall continue from
year to year if continuance is approved at least annually by (a)
the Fund's Board of Directors or a Majority Vote of Shareholders
and (b) the vote of a majority of the members of the Fund's Board
of Directors who are not Interested Persons of the Investment
Sub-Adviser or of the Fund cast in person at a meeting called for
the purpose of voting on such approval.
9.3 Termination. This Agreement shall automatically
terminate in the event of its assignment, within the meaning of
Section 15(a) of the Investment Company Act, unless an order of
the Commission is issued exempting such assignment. This
Agreement may be terminated at any time, on 30 days' written
notice to the Investment Sub-Adviser, without payment of any
penalty, by the Client, the Board of Directors of the Fund or by
a Majority Vote of Shareholders. If at any time the
representation contained in Section 8(a) hereof ceases to be
true, this Agreement shall terminate forthwith without penalty or
payment of any kind by the Client. The Investment Sub-Adviser
may terminate this Agreement at any time upon 30 days' prior
written notice to the Client. If this Agreement shall terminate
at any time other than at the end of a calendar quarter, the
Investment Sub-Adviser shall be entitled to receive the fee set
forth in Section 6 hereof for the portion of the quarter elapsed
prior to the date of termination, prorated on a daily basis.
9.4 Errors and Omissions Policy. The Investment Sub-
Adviser agrees that, at its sole expense, it will maintain an
errors and omissions insurance policy that covers the acts,
errors and omissions by the Investment Sub-Adviser, its employees
or agents during the term of this Agreement. Upon request of the
Client, the Investment Sub-Adviser shall provide evidence of such
insurance.
9.5 Governing Law; Severability. This Agreement and its
performance shall be governed by and construed in accordance with
the applicable laws of the United States and, to the extent
permitted by such laws, with the laws of the State of Oklahoma.
In case any provision of this Agreement shall be held illegal or
invalid for any reason, such illegality or invalidity shall not
affect the remaining provisions of the Agreement but shall be
fully severable, and the Agreement shall be construed and
enforced as if such illegal or invalid provision had not been
included herein.
9.6 Notices. Unless the parties otherwise agree, all
notices, instructions and advice with respect to matters contem-
plated by this Agreement shall be in writing and effective when
received, and delivery shall be made personally, by registered or
certified mail, return receipt requested, overnight courier or
confirmed facsimile and addressed as follows:
Client: American Fidelity Assurance Company
2000 Classen Boulevard
Oklahoman City, Oklahoma 73106
Attention: ___________________
Telephone: (405) 523-5398
Facsimile: (405) 523-5411
Investment
Sub-Adviser: Todd Investment Advisors, Inc.
101 South Fifth Street, Suite 3160
Louisville, Kentucky 40202
Attention: Robert P. Bordogna
Telephone: (502) 585-3121
Facsimile: (502) 585-4203
Either party may change any of the above information by providing
notice to the other party in the manner set forth above. All
reports required to be delivered by the Investment Sub-Adviser to
the Client pursuant to Section 5.1 of this Agreement shall be
delivered in the manner specified from time to time by the
Client. Any communications from the Investment Sub-Adviser of a
routine nature may be delivered by U.S. mail to the person(s)
specified by the Client.
In recognition of their acceptance of the terms and
conditions of this Agreement, the Client and the Investment Sub-
Adviser hereby execute this Agreement by their duly authorized
representatives this _____ day of ________________, 1998.
CLIENT: AMERICAN FIDELITY ASSURANCE
COMPANY
By
Name: John W. Rex
Title: President
INVESTMENT SUB-ADVISER: TODD INVESTMENT ADVISORS, INC.
By
Name: Robert P. Bordogna
Title: President and Chief
Executive Officer
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is made as of the ____ day of
__________, 1998, between AMERICAN FIDELITY DUAL STRATEGY FUND,
INC., an open-end management investment company organized as a
Maryland corporation (the "Fund"), and AMERICAN FIDELITY
ASSURANCE COMPANY, a life insurance company organized and
domiciled under the laws of the state of Oklahoma (the
"Company"), on its own behalf and on behalf of American Fidelity
Variable Annuity Fund A ("Account A") and each segregated asset
account of the Company which may be set forth on Schedule A as
attached hereto, as amended from time to time (the "Accounts").
W I T N E S S E T H:
WHEREAS, the Fund has filed a registration statement
with the Securities and Exchange Commission to register itself as
an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and to register
the offer and sale of its shares under the Securities Act of
1933, as amended (the "1933 Act"); and
WHEREAS, the Fund desires to act as an investment
vehicle for separate accounts established for variable annuity
contracts to be offered by insurance companies that have entered
into participation agreements with the Fund (the "Participating
Insurance Companies"); and
WHEREAS, American Fidelity Securities, Inc. (the
"Underwriter") is registered as a broker-dealer with the
Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), is
a member in good standing of the National Association of
Securities Dealers, Inc. (the "NASD") and acts as principal
underwriter of the shares of the Fund; and
WHEREAS, the Company is duly registered as an
investment adviser under the Investment Advisers Act of 1940, as
amended, and any applicable state securities law, and acts as the
Fund's investment adviser; and
WHEREAS, the Company has registered or will register
under the 1933 Act certain variable annuity contracts funded or
to be funded through one or more of the Accounts (the
"Contracts"); and
WHEREAS, the Company has registered or will register
each Account as a unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable
insurance laws and regulations, the Company intends to purchase
shares in the Fund (the "Shares") on behalf of the Accounts to
fund the Contracts, and the Fund intends to sell such Shares to
the relevant Accounts at such Shares' net asset value.
NOW, THEREFORE, in consideration of their mutual
promises, the parties agree as follows:
ARTICLE 1
SALE OF THE FUND SHARES
1.1 Subject to Section 1.3 of this Agreement, the Fund
shall cause the Underwriter to make Shares available to the
Accounts at such Shares' most recent net asset value provided to
the Company prior to receipt of such purchase order by the Fund
(or the Underwriter as its agent), in accordance with the
operational procedures mutually agreed to by the Underwriter and
the Company from time to time and the provisions of the
then-current prospectus of the Fund. Shares of the Fund shall be
ordered in such quantities and at such times as determined by the
Company to be necessary to meet the requirements of the
Contracts. The Directors of the Fund (the "Directors") may
refuse to sell Shares of the Fund to any person (including the
Company and the Accounts), or suspend or terminate the offering
of Shares if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of
the Directors acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws,
necessary in the best interests of the shareholders of the Fund.
1.2 Subject to Section 1.3 of this Agreement, the Fund
will redeem any full or fractional Shares when requested by the
Company on behalf of an Account at such Shares' most recent net
asset value provided to the Company prior to receipt by the Fund
(or the Underwriter as its agent) of the request for redemption,
as established in accordance with the operational procedures
mutually agreed to by the Underwriter and the Company from time
to time and the provisions of the then-current prospectus of the
Fund. The Fund shall make payment for such Shares in the manner
established from time to time by the Fund, but in no event shall
payment be delayed for a greater period than is permitted by the
1940 Act (including any rule or order of the SEC thereunder).
1.3 The Fund shall accept purchase and redemption
orders resulting from investment in and payments under the
Contracts on each Business Day, provided that such orders are
received prior to 9:00 a.m. on such Business Day and reflect
instructions received by the Company from Contract holders in
good order prior to the time the net asset value of the Fund is
priced in accordance with its prospectus (the "valuation time")
on the prior Business Day. Any purchase or redemption order for
Shares received, on any Business Day, after the valuation time on
such Business Day shall be deemed received prior to 9:00 a.m. on
the next succeeding Business Day. "Business Day" shall mean any
day on which the New York Stock Exchange is open for trading and
on which the Fund calculates its net asset value pursuant to the
rules of the SEC. Purchase and redemption orders shall be
provided by the Company to the Underwriter as agent for the Fund
in such written or electronic form (including facsimile) as may
be mutually acceptable to the Company and the Underwriter. The
Underwriter may reject purchase and redemption orders that are
not in proper form. In the event that the Company and the
Underwriter agree to use a form of written or electronic
communication which is not capable of recording the time, date
and recipient of any communication and confirming good
transmission, the Company agrees that it shall be responsible (i)
for confirming with the Underwriter that any communication sent
by the Company was in fact received by the Underwriter in proper
form, and (ii) for the effect of any delay in the Underwriter's
receipt of such communication in proper form. The Fund and its
agents shall be entitled to rely, and shall be fully protected
from all liability in acting, upon the instructions of the
persons named in the list of authorized individuals attached
hereto as Schedule B, or any subsequent list of authorized
individuals provided to the Fund or its agents by the Company in
such form, without being required to determine the authenticity
of the authorization or the authority of the persons named
therein.
1.4 Purchase orders that are transmitted to the Fund
in accordance with Section 1.3 of this Agreement shall be paid
for no later than 12:00 noon on the same Business Day that the
Fund receives notice of the order. Payments shall be made in
federal funds transmitted by wire and/or a credit for any Shares
purchased the same day as a redemption. In the event that the
Company shall fail to pay in a timely manner for any purchase
order validly received by the Underwriter on behalf of the Fund
pursuant to Section 1.3 of this Agreement (whether or not such
failure is the fault of the Company), the Company shall hold the
Fund harmless from any losses reasonably sustained by the Fund as
the result of acting in reliance on such purchase order.
1.5 Issuance and transfer of the Fund's Shares will be
by book entry only. Stock certificates will not be issued to the
Company or to any Account. Shares ordered from the Fund will be
recorded in the appropriate title for each Account.
1.6 The Fund shall furnish prompt notice to the
Company of any income, dividends or capital gain distribution
payable on Shares. The Company hereby elects to receive all such
income dividends and capital gain distributions as are payable on
Shares in additional Shares of the Fund. The Fund shall notify
the Company of the number of Shares so issued as payment of such
dividends and distributions.
1.7 The Fund shall make the net asset value per share
for the Fund available to the Company on a daily basis as soon as
reasonably practical after such net asset value per share is
calculated and shall use its best efforts to make such net asset
value per share available by 6:30 p.m., New York time.
1.8 The Company agrees that it will not take any
action to operate any Account as a management investment company
under the 1940 Act without the Fund's and the Underwriter's prior
written consent.
1.9 The Fund agrees that its Shares will be sold only
to Participating Insurance Companies and their separate accounts.
No Shares will be sold directly to the general public. The
Company agrees that Fund Shares will be used only for the
purposes of funding the Contracts and Accounts listed in Schedule
A, as such schedule may be amended from time to time.
1.10 The Fund agrees that all Participating Insurance
Companies shall have the obligations and responsibilities
regarding pass-through voting and conflicts of interest
corresponding to those contained in Section 2.10 and Article 4 of
this Agreement.
ARTICLE 2
OBLIGATION OF THE PARTIES
2.1 The Fund shall prepare and be responsible for
filing with the SEC and any state securities regulators requiring
such filing, all shareholder reports, notices, proxy materials
(or similar materials such as voting instruction solicitation
materials), prospectuses and statements of additional information
of the Fund. Except as the Company and the Fund have otherwise
agreed, the Fund shall bear the costs of registration and
qualification of its Shares, preparation and filing of the
documents listed in this Section 2.1 and all taxes to which an
issuer is subject on the issuance and transfer of its shares.
2.2 At least annually, the Fund or its designee shall
provide the Company, free of charge, with as many copies of the
current prospectus for the Shares as the Company may reasonably
request for distribution to existing Contract owners whose
Contracts are funded by such Shares. The Fund or its designee
shall provide the Company, at the Company's expense, with as many
copies of the current prospectus for the Shares as the Company
may reasonably request for distribution to prospective purchasers
of Contracts. If requested by the Company in lieu thereof, the
Fund or its designee shall provide such documentation (including
a "camera ready" copy of the new prospectus as set in type) and
other assistance as is reasonably necessary in order for the
parties hereto once each year (or more frequently if the
prospectus for the Shares is supplemented or amended) to have the
prospectus for the Contracts and the prospectus for the Shares
printed together in one document; the expenses of such printing
to be borne by the Company. In the event that the Company
requests that the Fund or its designee provide the Fund's
prospectus in a "camera ready" format, the Fund shall be
responsible solely for providing the prospectus in the format in
which it is accustomed to formatting prospectuses and shall bear
the expense of providing the prospectus in such format (e.g.,
typesetting expenses), and the Company shall bear the expense of
adjusting or changing the format to conform with any of its
prospectuses.
2.3 The prospectus for the Shares shall state that the
statement of additional information for the Shares is available
from the Fund or its designee. The Fund or its designee, at its
expense, shall print and provide such statement of additional
information to the Company (or a master of such statement
suitable for duplication by the Company) for distribution to any
owner of a Contract funded by the Shares. The Fund or its
designee, at the Company's expense, shall print and provide such
statement to the Company (or a master of such statement suitable
for duplication by the Company) for distribution to prospective
purchaser who requests such statement.
2.4 The Fund or its designee shall provide the Company
free of charge copies, if and to the extent applicable to the
Shares, of the Fund's proxy materials, reports to shareholders
and other communications to shareholders in such quantity as the
Company shall reasonably require for distribution to Contract
owners.
2.5 The Company shall furnish, or cause to be
furnished, to the Fund or its designee, a copy of each prospectus
for the Contracts or statement of additional information for the
Contracts in which the Fund or its investment adviser is named
prior to the filing of such document with the SEC. The Company
shall furnish, or shall cause to be furnished, to the Fund or its
designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser is named, at
least five Business days prior to its use. No such prospectus,
statement of additional information or material shall be used if
the Fund or its designee reasonably objects to such use within
five Business Days after receipt of such material.
2.6 The Company shall not give any information or make
any representations or statements on behalf of the Fund or
concerning the Fund or its investment adviser in connection with
the sale of the Contracts other than information or
representations contained in and accurately derived from the
registration statement or prospectus for the Fund Shares (as such
registration statement and prospectus may be amended or
supplemented from time to time), reports of the Fund,
Fund-sponsored proxy statement, or in sales literature or other
promotional material approved by the Fund or its designee, except
with the written permission of the Fund or its designee.
2.7 The Fund shall not give any information or make
any representations or statements on behalf of the Company or
concerning the Company, the Accounts or the Contracts other than
information or representations contained in and accurately
derived from the registration statement or prospectus for the
Contracts (as such registration statement and prospectus may by
amended or supplemented from time to time), or in materials
approved by the Company for distribution including sales
literature or other promotional materials, except with the
written permission of the Company.
2.8 The Company shall amend the registration statement
of the Contracts under the 1933 Act and registration statement
for each Account under the 1940 Act from time to time as required
in order to effect the continuous offering of the Contracts or as
may otherwise be required by applicable law. The Company shall
register and qualify the Contracts for sale to the extent
required by applicable securities laws and insurance laws of the
various states.
2.9 Solely with respect to Contracts and Accounts that
are subject to the 1940 Act, so long as, and to the extent that,
the SEC interprets the 1940 Act to require pass-through voting
privileges: (a) the Company will provide pass-through voting
privileges to owners of Contracts, through the Accounts, in
Shares of the Fund; (b) the Fund shall require all Participating
Insurance Companies to calculate voting privileges in the same
manner and the Company shall be responsible for assuring that the
Accounts calculate voting privileges in the manner established by
the Fund; (c) with respect to each Account, the Company will vote
Shares of the Fund held by the Account and for which no timely
voting instructions from Contract owners are received, as well as
Shares held by the Account that are owned by the Company for its
general account, in the same proportion as the Company votes
Shares held by the Account for which timely voting instructions
are received from Contract owners; and (d) the Company and its
agents will in no way recommend or oppose or interfere with the
solicitation of proxies for Fund Shares held by Contract owners
without the prior written consent of the Fund, which consent may
be withheld in the Fund's sole discretion.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 The Company represents and warrants that it is an
insurance company duly organized and in good standing under the
laws of the State of Oklahoma and has established each Account as
a segregated asset account under such law.
3.2 The Company represents and warrants that it has
registered or, prior to any issuance or sale of the Contracts,
will register each Account as a unit investment trust in
accordance with the provisions of the 1940 Act to serve as a
segregated investment account for the Contracts.
3.3 The Company represents and warrants that the
issuance of the Contracts will be registered under the 1933 Act
prior to any issuance or sale of the Contracts; the Contracts
will be issued and sold in compliance in all material respects
with all applicable federal and state laws; and the sale of the
Contracts shall comply in all material respects with state
insurance suitability requirements.
3.4 The Company represents and warrants that the
Contracts are currently and at the time of issuance will be
treated as annuity contracts under applicable provisions of the
Code. The Company shall make every effort to maintain such
treatment and shall notify the Fund and the Underwriter
immediately upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not be
so treated in the future.
3.5 The Fund represents and warrants that it is duly
organized and validly existing under the laws of the State of
Maryland.
3.6 The Fund represents and warrants that the sale of
the Fund Shares offered and sold pursuant to this Agreement will
be registered under the 1933 Act and that the Fund is registered
under the 1940 Act. The Fund shall use its best efforts to amend
its registration statement under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous
offering of its shares. The Company shall advise the Fund of any
state requirements to register Shares for sale in such states.
If the Fund determines registration is appropriate, the Fund
shall use its best efforts to register and qualify its Shares for
sale in accordance with the laws of all fifty states, the
District of Columbia, Virgin Islands and Puerto Rico and such
other jurisdictions reasonably requested by the Company.
3.7 The Fund represents and warrants that the
investments of each Portfolio will comply with the
diversification requirements set forth in section 817(h) of the
Code and the rules and regulations thereunder.
ARTICLE 4
POTENTIAL CONFLICTS
4.1 The parties acknowledge that the Fund's Shares may
be made available for investment to other Participating Insurance
Companies. In such event, the Directors will monitor the Fund
for the existence of any material irreconcilable conflict between
the interests of the contract owners of all Participating
Insurance Companies. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any
state insurance regulatory authority; (b) a change in applicable
federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action
or interpretative letter, or any similar action by insurance,
tax, or securities decision in any relevant proceeding; (c) an
administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of the Fund are being
managed; (e) a difference in voting instructions given by
variable annuity contract; or (f) a decision by an insurer to
disregard the voting instructions of contract owners. The
Directors shall promptly inform the Company if they determine
that an irreconcilable material conflict exists and the
implications thereof.
4.2 The Company agrees to promptly report any
potential or existing conflicts of which it is aware to the
Directors. The Company will assist the Directors in carrying out
their responsibilities by providing the Directors with all
information reasonably necessary for the Directors to consider
any issues raised including, but not limited to, information as
to a decision by the Company to disregard Contract owner voting
instructions.
4.3 If it is determined by a majority of the
Directors, or a majority of the Fund's Directors who are not
affiliated with the Company or the Underwriter (the
"Disinterested Directors"), that a material irreconcilable
conflict exists that affects the interests of Contract owners,
the Company shall, in cooperation with other Participating
Insurance Companies whose contract owners are also affected, at
its expense and to the extent reasonably practicable (as
determined by the Directors) take whatever steps are necessary to
remedy or eliminate the irreconcilable material conflict, which
steps could include: (a) withdrawing the assets allocable to
some or all of the Accounts from the Fund and reinvesting such
assets in a different investment medium, or submitting the
question of whether or not such segregation should be implemented
to a vote of all affected Contract owners and, as appropriate,
segregating the assets of any appropriate group (i.e., annuity
contract owners or variable contract owners of one or more
Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Contract owners the
option of making such a change; and (b) establishing a new
registered management investment company or managed separate
account.
4.4 If a material irreconcilable conflict arises
because of a decision by the Company to disregard Contract owner
voting instructions and that decision represents a minority
position or would preclude a majority vote, the Company may be
required, at the Fund's election, to withdraw the affected
Account's (or Accounts') investment in the Fund and terminate
this Agreement with respect to such Account(s); provided,
however, that such withdrawal and termination shall be limited to
the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the Disinterested
Directors. Any such withdrawal and termination must take place
within 30 days after the Fund gives written notice that this
provision is being implemented. Until the end of such 30
day-period, the Fund shall continue to accept and implement
orders by the Company for the purchase and redemption of Shares
of the Fund.
4.5 If a material irreconcilable conflict arises
because a particular state insurance regulator's decision
applicable to the Company conflicts with the majority of other
state regulators, then the Company will withdraw the affected
Account's (or Accounts') investment in the Fund and terminate
this Agreement with respect to such Account(s) within 30 days
after the Fund informs the Company in writing that it has
determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a
majority of the Disinterested Directors. Until the end of such
30-day period, the Fund shall continue to accept and implement
orders by the Company for the purchase and redemption of Shares
of the Fund.
4.6 For purposes of Sections 4.3 through 4.6 of this
Agreement, a majority of the Disinterested Directors shall
determine whether any proposed action adequately remedies any
irreconcilable material conflict, but in no event will the
Company be required to establish a new funding medium for the
Contracts if an offer to do so has been declined by vote of a
majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the
Directors determine that any proposed action does not adequately
remedy any irreconcilable material conflict, then the Company
will withdraw the affected Account's (or Accounts') investment in
the Fund and terminate this Agreement with respect to such
Account(s) within 30 days after the Directors inform the Company
in writing of the foregoing determination; provided, however,
that such withdrawal and termination shall be limited to the
extent required by any such material irreconcilable conflict as
determined by a majority of the Disinterested Directors.
ARTICLE 5
INDEMNIFICATION
5.1 Indemnification by the Company. The Company
agrees to indemnify and hold harmless the Fund and each of its
Directors, officers, employees and agents and each person, if
any, who controls the Fund within the meaning of Section 15 of
the 1933 Act (collectively the "Indemnified Parties" for purposes
of this Article 5) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the
written consent of the Company) or expenses (including the
reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel
fees incurred in connection therewith) (collectively, "Losses"),
to which such Indemnified Parties may become subject under any
statute or regulation, or common law or otherwise, insofar as
such Losses:
(a) arise out of or are based upon any untrue
statements or alleged untrue statements of any material
fact contained in a registration statement or
prospectus for the Contracts or in the Contracts
themselves or in sales literature generated or approved
by the Company on behalf of the Contracts or Accounts
(or any amendment or supplement to any of the
foregoing) (collectively, "Company Documents" for the
purposes of this Article 5), or arise out of or are
based upon the omission or the alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this indemnity shall not
apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made
in reliance upon and was accurately derived from
written information furnished to the Company by or on
behalf of the Fund for use in Company Documents or
otherwise for use in connection with the sale of the
Contracts or Shares; or
(b) arise out of or result from statements or
representations (other than statements or
representations contained in and accurately derived
from Fund Documents (as defined in Section 5.2(a)
below) or wrongful conduct of the Company or persons
under its control, with respect to the sale or
acquisition of the Contracts or Shares; or
(c) arise out of or result from any untrue
statement or alleged untrue statement of a material
fact contained in Fund Documents or the omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading if such statement or
omission was made in reliance upon and accurately
derived from written information furnished to the Fund
by or on behalf of the Company;
(d) arise out of or result from any failure by
the Company to provide the services or furnish the
materials required under the terms of this Agreement;
or
(e) arise out of or result from any material
breach of any representation and/or warranty made by
the Company in this Agreement or arise out of or result
from any other material breach of this Agreement by the
Company.
5.2 Indemnification by the Fund. The Fund agrees to
indemnify and hold harmless the Company and each of its
directors, officers, employees and agents and each person, if
any, who controls the Company within the meaning of Section 15 of
the 1933 Act (collectively, the "Indemnified Parties" for
purposes of this Article 5) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or expenses (including the
reasonable Costs of investigating or defending any alleged loss,
claim, damage liability or expense and reasonable legal counsel
fees incurred in connection therewith) (collectively, "Losses"),
to which such Indemnified Parties may become subject under any
statute or regulation, or at common law or otherwise, insofar as
such Losses:
(a) arise out of or are based upon any untrue
statements or alleged untrue statement of any material
fact contained in the registration statement or
prospectus for the Fund (or any amendment or supplement
thereto) or in sales literature approved by the Fund
(but solely with respect to statements regarding the
Fund), (collectively, "Fund Documents" for the purposes
of this Article 5), or arise out of or are based upon
the omission or the alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading, provided that this indemnity shall not
apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made
in reliance upon and was accurately derived from
written information furnished to the Fund by or on
behalf of the Company for use in Fund Documents or
otherwise for use in connection with the sale of the
Contracts or Shares; or
(b) arise out of or result from statement or
representations (other than statements or
representations contained in and accurately derived
from Company Documents) or wrongful conduct of the Fund
or persons under its control, with respect to the sale
or acquisition of the Contracts or Shares; or
(c) arise out of or result from any untrue
statement or alleged untrue statement of a material
fact contained in Company Documents or the omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading if such statement or
omission was made in reliance upon and accurately
derived from written information furnished to the
Company by or on behalf of the Fund; or
(d) arise out of or result from any failure by
the Fund to provide the services or furnish the
materials required under the terms of this Agreement;
or
(e) arise out of or result from any material
breach of any representation and/or warranty made by
the Fund in this Agreement or arise out of or result
from any other material breach of this Agreement by the
Fund.
5.3 Neither the Company nor the Fund shall be liable
under the indemnification provisions of Section 5.1 or 5.2, as
applicable, with respect to any Losses incurred or assessed
against any Indemnified Party to the extent such Losses arise out
of or result from such Indemnified Party's willful misfeasance,
bad faith or negligence in the performance of such Indemnified
Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations or duties under this Agreement.
5.4 Neither the Company nor the Fund shall be liable
under the indemnification provisions of Section 5.1 or 5.2, as
applicable, with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the party
against whom indemnification is sought in writing within five
business days after the summons, or other first written
notification, giving information of the nature of the claim shall
have been served upon or otherwise received by such Indemnified
Party (or after such Indemnified Party shall have received notice
of service upon or other notification to any designated agent),
but failure to notify the party against whom indemnification is
sought of any such claim or shall not relieve that party from any
liability that it may have to the Indemnified Party in the
absence of Sections 5.1 and 5.2.
5.5 In case any such action is brought against the
Indemnified Parties, the indemnifying party shall be entitled to
participate, at its own expense, in the defense of such action.
The indemnifying party also shall be entitled to assume the
defense thereof, with counsel reasonably satisfactory to the
party named in the action. After notice from the indemnifying
party to the Indemnified Party of an election to assume such
defense, the Indemnified Party shall bear the fees and expenses
of any additional counsel retained by it, and the indemnifying
party will not be liable to the Indemnified Party under this
Agreement for any legal or other expenses subsequently incurred
by such Indemnified Party independently in connection with the
defense thereof other than reasonable costs of investigation.
ARTICLE 6
TERMINATION
6.1 This Agreement may be terminated by either party
for any reason by six (6) months' advance written notice to the
other party, and may be terminated by the Fund pursuant to
Sections 6.2 through 6.4 below upon written notice to the
Company.
6.2 This Agreement may be terminated at the option of
the Fund upon any finding or ruling against the Company by a
court or the NASD, the SEC, the insurance department of any
state, or any other regulatory body regarding the Company's
duties under this Agreement or related to the sale of the
Contracts, the operation of the Account, the administration of
the Contracts or the purchase of the Shares, or any settlement of
any proceedings or undertaking to any regulatory body that would,
in the Fund's reasonable judgment, materially impair the
Company's ability to meet and perform the Company's obligations
and duties hereunder.
6.3 This Agreement may be terminated at the option of
the Fund if the Contracts cease to qualify as annuity contracts
under the Code, or if the Fund reasonably believes that the
Contracts may fail to so qualify.
6.4 This Agreement may be terminated by the Fund, at
its option, if the Fund shall reasonably determine, in its sole
judgment exercised in good faith, that either (1) the Company
shall have suffered a material adverse change in its business or
financial condition or (2) the Company shall have been the
subject of material adverse publicity that is likely to have a
material adverse impact upon the business and operations of
either the Fund or the Underwriter.
6.5 This Agreement may be terminated at the option of
the Company if (A) the Internal Revenue Service determines that
the Fund fails to qualify as a "Regulated Investment Company"
under the Code or fails to comply with the diversification
requirements of Section 817(h) of the Code, or (B) the Company
shall reasonably determine, in its sole judgment exercised in
good faith, that either (1) the Fund or the Underwriter shall
have been the subject of material adverse publicity which is
likely to have a material adverse impact upon the business and
operations of the Company, or (2) the Fund breaches any
obligation under this Agreement in a material respect and such
breach shall continue unremedied for thirty (30) days after
receipt of notice from the Company of such breach.
6.6 Notwithstanding any termination of this Agreement
pursuant to this Article 6, the Fund and the Underwriter may, at
the option of the Fund, continue to make available additional
Fund Shares for so long after the termination of this Agreement
as the Fund desires pursuant to the terms and conditions of this
Agreement as provided in Section 6.7 below, for all Contracts in
effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts"). Specifically,
without limitation, if the Fund or Underwriter so elects to make
additional Shares available, the owners of the Existing Contracts
or the Company, whichever shall have legal authority to do so,
shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making
of additional purchase payments under the Existing Contracts.
6.7 In the event of a termination of this Agreement
pursuant to this Article 6, the Fund and the Underwriter shall
promptly notify the Company whether the Underwriter and the Fund
will continue to make Shares available after such termination; if
the Underwriter and the Fund will continue to make Shares so
available, the provisions of this Agreement shall remain in
effect except for Section 6.1 hereof and thereafter either the
Fund or the Company may terminate the Agreement, as so continued
pursuant to this Section 6.7, upon prior written notice to the
other party, such notice to be for a period that is reasonable
under the circumstances but, if given by the Fund, need not be
greater than six months.
6.8 The provisions of Article 5 shall survive the
termination of this Agreement, and the provisions of Article 4
and Sections 2.4 and 2.9 shall survive the termination of this
Agreement so long as Shares of the Fund are held on behalf of
Contract owners in accordance with Section 6.6.
ARTICLE 7
NOTICES
Any notice shall be sufficiently given when sent by
registered or certified mail to the other party at the address of
such party set forth below or at such other address as such party
may from time to time specify in writing to the other party.
If to the Fund:
American Fidelity Dual Strategy Fund, Inc.
2000 Classen Center
Oklahoma City, Oklahoma 73106
Attention: Stephen P. Garrett, Senior Vice President,
Law and Government Affairs
If to the Company:
American Fidelity Assurance Company
2000 Classen Boulevard, 5 North
Oklahoma City, Oklahoma 73106-6092
Attention: Marketing Director
American Fidelity Educational Services Division
ARTICLE 8
MISCELLANEOUS
8.1 The captions in this Agreement are included for
convenience of reference only and in no way define or delineate
any of the provisions hereof or otherwise affect their
construction or effect.
8.2 This Agreement may be executed simultaneously in
two or more counterparts, each of which taken together shall
constitute one and the same instrument.
8.3 If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise,
the remainder of the Agreement shall not be affected thereby.
8.4 This Agreement shall be construed and the
provisions hereof interpreted under and in accordance with the
laws of the State of Oklahoma, shall be subject to the provisions
of the 1933, 1934, and 1940 Acts, and the rules, regulations and
rulings thereunder, including such exemptions from those
statutes, rules and regulations as the SEC may grant and the
terms hereof shall be interpreted and construed in accordance
therewith.
8.5 The parties to this Agreement acknowledge and
agree that all liabilities of the Fund arising, directly or
indirectly, under this Agreement, of any and every nature
whatsoever, shall be satisfied solely out of the assets of the
Fund and that no Director, officer, agent, or holder of shares of
beneficial interest of the Fund shall be personally liable for
any such liabilities.
8.6 Each party shall cooperate with each other party
and all appropriate governmental authorities (including without
limitation the SEC, the NASD, and state insurance regulators) and
shall permit such authorities reasonable access to its books and
records in connection with any investigation or inquiry relating
to this Agreement or the transactions contemplated hereby. Each
party shall use its best efforts to provide the other party with
reasonable notice of any governmental investigation or inquiry
relating to this Agreement or the transactions contemplated
hereby of which it has knowledge.
8.7 The rights, remedies and obligations contained in
this Agreement are cumulative and are in addition to any and all
rights, remedies and obligations, at law or in equity, which the
parties hereto are entitled to under state and federal laws.
8.8 The parties to this Agreement acknowledge and
agree that this Agreement shall not be exclusive in any respect.
8.9 Neither this Agreement nor any rights or
obligations hereunder may be assigned by either party without the
prior written approval of the other party.
8.10 No provisions of this Agreement may be amended or
modified in any manner except by a written agreement properly
authorized and executed by both parties.
8.11 No failure or delay by a party in exercising any
right or remedy under this Agreement will operate as a waiver
thereof and no single or partial exercise of rights shall
preclude a further or subsequent exercise. The rights and
remedies provided in this Agreement are cumulative and not
exclusive of any rights or remedies provided by law.
IN WITNESS WHEREOF, the parties have caused their duly
authorized officers to execute this Fund Participation Agreement
as of the date and year first above
AMERICAN FIDELITY ASSURANCE COMPANY
By:
Name: John W. Rex
Title: President
AMERICAN FIDELITY DUAL STRATEGY FUND, INC.
By:
Name: John W. Rex
Title: Chairman of the Board and President
<PAGE>
SCHEDULE A
Segregated Accounts of American Fidelity Assurance Company
Participating in American Fidelity Dual Strategy Fund, Inc.
Name of Separate Account Date Established
Separate Account A May 11, 1968
<PAGE>
SCHEDULE B
Persons Authorized to Act on Behalf of American Fidelity
Assurance Company
The Fund, the Underwriter and their respective agents
are authorized to rely on instructions from the following
individuals on behalf of American Fidelity Assurance Company on
its own behalf and on behalf of each Account:
Name Signature
AMERICAN FIDELITY DUAL STRATEGY FUND, INC.
CORPORATE CUSTODIAL AGREEMENT
________________________________________________________
ARTICLE I
Creation of Custodial Relationship
1.01 AMERICAN FIDELITY DUAL STRATEGY FUND, INC.
(hereinafter referred to as "Principal"), wishes to provide for
the safekeeping of certain assets of Principal, including
certificated securities and uncertificated securities as defined
in paragraphs (4) and (18) of subsection (a) of 12A O.S. Section
8-102 and by federal laws and regulations (hereinafter collectively
referred to as "Securities"), cash and short-term liquid
investments, and other assets (hereinafter referred to as the
"Account"). Principal hereby appoints BANK OF OKLAHOMA, N.A.,
custodian (hereinafter referred to as "Custodian") of the
Account.
ARTICLE II
Authorized Persons of Principal
2.01 Principal shall, from time to time, authorize
and terminate the authority of individuals empowered to act on
behalf of Principal with respect to the Account by appropriate
resolutions of Principal's Board of Directors or by other forms
of authorization acceptable to Custodian. Principal shall
designate such individuals as "Authorized Employees" or
"Authorized Signatories" for the purposes specified herein.
Principal hereby warrants that all persons so designated shall
have authority to act for Principal as further provided in this
Agreement. Attached hereto as Exhibit "A" and Exhibit "B" of
this Agreement are individuals currently designated as Authorized
Employees and Authorized Signatories, respectively.
2.02 Principal may, from time to time, authorize and
terminate the authority of advisors or sub-advisors empowered to
act on behalf of Principal with respect to buy and sell decisions
from and to the Account by appropriate resolutions of Principal's
Board of Directors or by other forms of authorization acceptable
to Custodian. Principal shall designate such advisors or
subadvisors as "Authorized Advisors" for the purposes specified
herein. Principal hereby warrants that all persons so designated
shall have authority to act for Principal in buy and sell
decisions, subject to limitations provided in Paragraph 7.03 of
this Agreement. Attached hereof as Exhibit "C" of this Agreement
are entities currently designated as Authorized Advisors.
ARTICLE III
Safekeeping of Securities
3.01 Custodian shall in all instances maintain the
Securities in accordance with governing law. Custodian, in its
discretion, shall maintain Securities in safe-keeping on
Custodian's premises, or in a recognized clearing corporation, or
in the Federal Reserve book-entry system subject to the following
provisions:
A. Certified Securities held by the Custodian shall
be held either separate from the Securities of
the Custodian and of all of its other customers
or in a fungible bulk of Securities as part of a
Filing of Securities by Issue (FOSBI)
arrangement;
B. Securities held in a fungible bulk by the
Custodian and Securities in a clearing
corporation or in the Federal Reserve book-entry
system shall be separately identified on the
Custodian's official records as being owned by
the Principal. Said records shall identify
which Securities are held by the Custodian or by
its agent and which Securities are in a clearing
corporation or in the Federal Reserve book-entry
system. If the Securities are in a clearing
corporation or in the Federal Reserve book-entry
system, said records shall also identify where
the Securities are and, if in a clearing
corporation, the name of the clearing
corporation and, if through an agent, the name
of the agent;
C. All Securities that are registered shall be
registered in the name of the Principal or in
the name of a nominee of the Principal or in the
name of the Custodian or its nominee or, if in a
clearing corporation, in the name of the
clearing corporation or its nominee.
ARTICLE IV
Account Cash and Short-term Investments
4.01 Custodian shall establish for Principal separate
income and Principal cash accounts which shall be invested in
such short-term investment media (such as money market funds,
Custodian's deposit accounts, master notes, registered mutual
funds and the like) as agreed to from time to time by Principal
and Custodian. In the event that cash available in such cash
accounts is insufficient to enable Custodian to execute any
instruction made by Principal under this Agreement, Custodian in
its sole discretion may treat the instruction as null and void
without any liability for doing so; provided, however, that
Custodian shall promptly orally notify Principal of such
insufficiency and shall confirm such notification by writing
mailed within five (5) business days.
ARTICLE V
Safekeeping of Other Assets
5.01 Custodian shall maintain assets of the Account
other than Securities, cash and short-term investments in
safekeeping on Custodian's premises subject to such additional
agreements as Principal and Custodian shall make from time to
time.
ARTICLE VI
Access to Account by Principal
and Persons Authorized by Principal
6.01 Custodian shall permit access, during
Custodian's regular business hours, to assets of the Account held
on Custodian's premises and to Custodian's official records
regarding the Account, by persons authorized by Principal as
further provided herein. Access shall be granted only to persons
authorized in writing by two (2) Authorized Signatories of
Principal. Access shall be granted only to two (2) or more
persons so authorized, who shall be accompanied by an employee of
Custodian during the period of access.
ARTICLE VII
Deposits and Withdrawals
7.01 Written Instruction of Principal. Principal
may, from time to time, instruct Custodian to effect deposits of
assets to the Account and withdrawals of assets from the Account
(including transfers to third persons), by written instructions
signed by at least two (2) Authorized Signatories. Such
instructions, at the minimum, shall state (a) the date of the
deposit or withdrawal; (b) the description or amount of the
assets to be deposited or withdrawn; and (c) the identity of the
person to whom the assets are to be transferred, or from whom
they are to be received, as the case may be. Such instructions
shall be presented in duplicate to the Custodian, who shall note
thereon the time of receipt and shall mail one (1) copy to
Principal within two (2) business days, to serve as a
confirmation of receipt of such instructions. Custodian shall
preserve the other copy (in the original or by microfilm) for not
less than five (5) years.
7.02 Oral Instruction of Principal. Principal may,
from time to time, instruct Custodian to effect a deposit of
assets to the Account, or a withdrawal of assets from the Account
for transfer (including purchase, sale, or exchange transactions)
solely to or for Principal's account at a federally insured
depository institution or a recognized securities broker, upon
oral instructions of any Authorized Employee. Principal shall
confirm such deposit or withdrawal by written confirmation mailed
to Custodian within two (2) business days of the withdrawal.
Custodian shall preserve a copy of such confirmation (in the
original or by microfilm) for not less than five (5) years.
7.03 Instructions From Authorized Advisor. Custodian
shall be authorized to act in response to instructions given by
any Authorized Advisor as to buy/sell decisions regarding the
Account, provided that, in connection with any buy/sell
transaction, Custodian shall release cash from the Account only
upon receipt of purchased securities, and shall release
securities only upon receipt of funds in payment.
7.04 Non-discretionary Deposits and
Withdrawals. Custodian is authorized, as provided further
herein, to effect deposits of assets to the Account, and
withdrawals of assets from the Account (including transfers to
third persons) which are of a routine or ministerial nature not
requiring the exercise of discretion, as further described
herein. Custodian shall notify Principal of any such deposit or
withdrawal by written notification or account statement.
A. Income, Interest, Dividends, etc. Custodian
shall deposit to the Account any assets (such as
stock dividends) received as income, interest,
dividends, distributions and the like,
respecting assets held in the Account.
Custodian shall promptly notify principal of any
such amounts due but not paid and on or before
the "Ex" date of stocks. In addition, Custodian
or its agent shall timely file all the necessary
forms with the appropriate foreign governments,
or agencies thereof, in order to minimize the
taxes or withholding taxes on dividend, interest
or other income from Principal's investment in
foreign issues of stock or bonds held by
Custodian or agent thereof. Custodian or its
agent shall also timely file the necessary forms
with the appropriate foreign governments, or
agencies thereof in order to obtain all dividend
withholding tax rebates allowable under the
current tax treaties with the United States, or
in the absence of a tax treaty, the minimum
permitted by the laws of the respective foreign
government of the issuer.
B. Expenses. Custodian shall charge the Account
for all expenses incurred in carrying out
Principal's instructions (including, but not
limited to, brokerage commissions, wire charges,
postage, etc.) and for Custodian's fees.
C. Maturity, Calls, Mandatory Redemptions and
Exchanges, etc. Custodian is authorized to
surrender assets upon maturity and in other
situations where such transfer is mandatory.
Should any Securities held in any central
depository or in bulk by Custodian be called for
partial redemption by the issuer, Custodian is
authorized in its sole discretion to allot (or
consent to the allotment of) the called portion
to the respective holders in any manner deemed
by the Custodian to be fair and equitable.
Custodian shall deposit the proceeds of any such
transaction to the Account.
D. Fractional Shares. Custodian is authorized to
sell any fractional shares received as a result
of a stock split or stock dividend affecting
Securities. Custodian shall deposit the
proceeds of any such transaction to the Account.
7.05 Custodian's Confirmation of Deposits and
Withdrawals. Custodian shall send written confirmation to
Principal of all deposits of assets to the Account and all
withdrawals of assets from the Account (including purchase, sale
or exchange transactions) within two (2) business days of each
respective deposit or withdrawal.
7.06 Withdrawals Requiring Insurance Commissioner
Approval. Securities used to meet the deposit requirements set
forth in the Oklahoma Insurance Code (36 O.S. Section 101 et seq.)
(the "Code") shall, to the extent required by the Code, be under the
control of the Insurance Commissioner of the State of Oklahoma or
his authorized representative (hereinafter collectively referred
to as the "Commissioner"), and shall not be withdrawn by the
Principal without the approval of the Commissioner.
ARTICLE VIII
Custodian's Duties
8.01 Custodian's duties with respect to the Account
are intended to be ministerial only, and Custodian may rely upon,
and shall not be liable for the propriety, prudence, or
correctness of, any instruction made by Principal in accordance
with this Agreement. Custodian further agrees that it shall have
no ownership interest in the Account or any assets or Securities
or funds which comprise the Account, or earnings received by it
from any Securities or assets held in the Account, nor does the
Custodian have any right of offset or other means of exercising
any ownership interest over the Account and Securities, except
and only in its capacity as Custodian and a Bailee for the
benefit of the Principal. Custodian shall forward to Principal
or Authorized Advisor if applicable all prospectuses, proxies,
official reports, notices and other materials concerning
discretionary management of assets which are received by
Custodian as holder of such assets. Custodian shall not vote
proxies, act on tender offers, or perform other discretionary
acts not specifically authorized by this Agreement without
specific instructions from Principal or Authorized Advisor.
Custodian shall be entitled to request instructions from
Principal concerning any matter involving the Account, and
Principal agrees to promptly respond to any such request.
ARTICLE IX
Record Keeping
9.01 Custodian agrees to cooperate with Principal in
maintaining records and supplying reports to Principal, as
reasonably needed by Principal in order to meet Principal's
accounting, reporting and regulatory obligations, including the
following obligations:
A. The Custodian and its agents shall be required
to send to the Principal:
(1) On the first business day of each month a report
of all the transactions in the Account during the
preceding month and the listing of all assets held
in the Account at the end of the preceding month.
(2) all reports which they receive from a clearing
corporation or the Federal Reserve book-entry
system on their respective systems of internal
accounting control; and
(3) any reports prepared by outside auditors on the
Custodian's or its agents' internal accounting
control of Securities that the Principal may
reasonably request.
B. The Custodian shall maintain records sufficient
to determine and verify information relating to
Securities that may be reported in the
Principal's annual statement and supporting
schedules and information required in any audit
of the financial statements of the Principal.
C. The Custodian shall provide, upon written
request from any of the Authorized Signatories
of the Principal, the appropriate affidavits,
substantially in the form provided in Exhibits
"D", "E" and "F", attached hereto, and made a
part hereof, with respect to the Securities.
ARTICLE X
Liability for Safekeeping
10.01 Custodian shall be responsible only for assets
actually received by it hereunder. Custodian shall indemnify
Principal for any loss of Securities occasioned by the negligence
or dishonesty of the Custodian's officers and employees, or
burglary, robbery, holdup, theft or mysterious disappearance,
including any loss by damage or destruction. Custodian shall not
be liable in any manner for loss occasioned by failure of
Principal or its officers or employees to comply with this
Agreement, by negligence or dishonesty of Principal or its
officers or employees. Custodian will not be liable for any
failure to take any action required to be taken under the
Agreement in the event and to the extent that the taking of such
action is prevented or delayed by war (whether declared or not
and including existing wars), revolution, insurrection, riot,
civil commotion, or act of God, accident, fire, explosion,
stoppage of labor, strikes or other differences with employees,
laws, regulations, orders or other acts of any governmental
authority or any other cause whatever beyond its reasonable
control. In the event that there is a loss of Securities,
Custodian shall promptly replace the Securities or the value
thereof, and the value of any loss of rights or privileges
resulting from said loss of Securities. In the event that
Custodian obtains entry in a clearing corporation or in the
Federal Reserve book-entry system through an agent, Custodian
shall agree with such agent that the agent shall be subject to
the same liability for loss of Securities as Custodian.
Custodian's responsibility for any asset shall be terminated upon
compliance with Principal's instructions regarding withdrawal, in
compliance with procedures established under this Agreement.
ARTICLE XI
Miscellaneous
11.01 Warranty. Principal warrants that it has
authority to enter into this Agreement and that it has title to
and authority to deliver any property which will be delivered to
Custodian, and that all instructions provided to Custodian
hereunder will be within Principal's authority.
11.02 Fees. Custodian's charges for services provided
hereunder shall be such reasonable compensation as is mutually
agreed upon from time to time by Principal and Custodian.
11.03 Governing Law - Termination. This Agreement
shall be governed by the laws of the State of Oklahoma and may be
terminated by either party upon sixty (60) days written notice.
Custodian's fees shall be prorated to the termination date.
11.04 Severability. In the event that any provision
of this Agreement is held invalid or unenforceable, the remaining
provisions shall be construed to be valid and enforceable
nonetheless.
11.05 Captions. Captions employed in this Agreement
are for ease of reference only and shall not be employed in
determining the meaning of any provision.
11.06 Notice. Except where otherwise more
specifically provided herein, notice shall be made in writing by
delivery or mail as follows:
If to Principal:
American Fidelity Dual Strategy Fund, Inc.
Attention: Investment Department
2000 Classen Center
P.O. Box 25523
Oklahoma City, Oklahoma 73125
If to Custodian:
Attention: Ellen D. Fleming
Bank of Oklahoma, N.A.
6307 Waterford Boulevard, Suite 100
Oklahoma City, Oklahoma 73118
IN WITNESS WHEREOF, the parties hereby cause their
names to be signed herein and their seals to be affixed and duly
attested by their duly authorized officers, this ____ day of
__________, 1998.
"PRINCIPAL"
AMERICAN FIDELITY DUAL STRATEGY
FUND, INC.
ATTEST: By: American Fidelity Assurance
Company
By:
Daniel D. Adams, Jr., Secretary John W. Rex, President
"CUSTODIAN"
ATTEST: BANK OF OKLAHOMA, N.A.
By:
Assistant Cashier Ellen D. Fleming, Senior Vice
President & Senior Trust Officer
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement")
is entered into this ______ day of __________________, 1998, by
and among American Fidelity Assurance Company ("American
Fidelity"), a stock life insurance company organized and existing
under the laws of the State of Oklahoma, American Fidelity
Variable Annuity Fund A ("Account A"), a managed separate account
organized under the insurance laws of the State of Oklahoma, and
American Fidelity Dual Strategy Fund, Inc. (the "Fund"), a
corporation organized and existing under the laws of the State of
Maryland.
WHEREAS, Account A is registered with the Securities and
Exchange Commission (the "Commission") as an open-end diversified
management investment company under the Investment Company Act of
1940, as amended (the "1940 Act");
WHEREAS, Account A is managed by a Board of Managers and has
the primary investment objective of long-term capital growth;
WHEREAS, Account A currently funds group variable annuity
contracts ("Contracts") issued by American Fidelity;
WHEREAS, Account A has offered and sold Contracts and
accepted premium payments with respect to outstanding Contracts
pursuant to a registration statement on Form N-3 filed under the
1940 Act and the Securities Act of 1933, as amended (the "1933
Act");
WHEREAS, American Fidelity is the investment advisor to
Account A;
WHEREAS, the Fund is a newly formed Maryland corporation and
is in registration with the Commission as an open-end diversified
management investment company under the 1940 Act;
WHEREAS, the Fund, to the extent permitted by the 1940 Act,
will serve as an investment vehicle for variable annuities issued
by American Fidelity;
WHEREAS, pursuant to this Agreement, Account A will transfer
its portfolio assets to the Fund and be converted into a unit
investment trust ("Continuing Account A") (the "Reorganization");
WHEREAS, following the Reorganization, Continuing Account A
will be a passive investment vehicle with no Board of Managers,
no investment adviser and no active portfolio of investments, but
will invest exclusively in shares of the Fund;
WHEREAS, following the Reorganization, the Fund will have
the same investment objectives, substantially the same investment
policies and restrictions, the same Board of Directors, and the
same investment adviser and sub-advisers as Account A had prior
to the Reorganization;
WHEREAS, the Board of Managers of Account A (the "Board"),
including those members who are not "interested persons" within
the meaning of Section 2(a)(19) of the 1940 Act, has considered
and approved the participation of Account A in the Reorganization
contemplated by this Agreement, based on its finding that such
participation would be in the best interests of Account A and
would not result in the dilution of the interests of owners of
Contracts ("Contract Owners");
WHEREAS, the Board of Directors of the Fund, including those
directors who are not "interested persons" within the meaning of
Section 2(a)(19) of the 1940 Act, has considered and approved the
participation of the Fund in the Reorganization, based on its
finding that such participation would be in the best interests of
the Fund and would not result in the dilution of the interests of
any Contract Owners; and
WHEREAS, this Agreement is conditioned upon approval of the
Reorganization by majority vote, as defined in the 1940 Act and
rules thereunder, of the Contract Owners of Account A at a
meeting called for that purpose, or any adjournments thereof;
NOW, THEREFORE, in consideration of the mutual promises made
herein, the parties hereto agree as follows:
ARTICLE I
Closing Date
Section 1.01 The Reorganization shall be effective on
November 2, 1998, or at such other date as may be mutually agreed
upon by all parties to this Agreement (the "Closing Date"). The
time on the Closing Date as of which the Reorganization is
consummated is referred to hereinafter as the "Effective Time."
Section 1.02 The parties agree to use their best efforts to
obtain all regulatory and Contract Owner approvals and perform
all other acts necessary or desirable to complete the
Reorganization as of the Closing Date.
ARTICLE II
Reorganization Transactions
Section 2.01 As of the Effective Time, American Fidelity,
on behalf of Account A, will sell, assign and transfer all cash,
securities and other investments held or in transit, receivables
for sold investments and dividend and interest receivables
("portfolio assets") of Account A to the Fund, the portfolio
assets to be held as the property of the Fund.
Section 2.02 In exchange for the portfolio assets of
Account A, the Fund will issue shares to American Fidelity for
the account of Continuing Account A and will assume any
unsatisfied liabilities incurred by Account A before the
Effective Time to pay for securities or other investments
purchased and to pay accrued management and investment advisory
fees. The number of full and fractional shares of the Fund to be
issued in the exchange shall be determined by dividing the value
of the net assets of Account A to be transferred, as of the close
of trading on the first business day preceding the Closing Date,
by the initial share value assigned to the shares of the Fund.
Section 2.03 As of the Effective Time, American Fidelity
shall cause the shares it receives from the Fund, pursuant to
Section 2.02 above, to be duly and validly recorded and held on
its records as assets of Continuing Account A, such that the
Contract Owners' interests in Continuing Account A after the
Closing Date will then be equivalent to their interests in
Account A immediately prior to the Reorganization. American
Fidelity shall take all action necessary to ensure such interests
in Continuing Account A, immediately following the Effective
Time, are duly and validly recorded on the Contract Owners'
individual account records.
Section 2.04 The Fund shares to be issued hereunder shall
be issued in open account form by book entry without the issuance
of certificates. Each share that is issued pursuant to Section
2.02 above will be issued for a consideration equal to the
initial value of Fund shares.
Section 2.05 If, at any time after the Closing Date,
Continuing Account A, the Fund or American Fidelity shall
determine that any further conveyance, assignment, documentation
or action is necessary or desirable to complete the
Reorganization contemplated by this Agreement or to confirm full
title to the assets transferred, the appropriate party or parties
shall execute and deliver all such instruments and take all such
actions.
Section 2.06 Following the Closing Date, American Fidelity
shall make available to the Account A Contract Owners a contract
endorsement which shall provide for investments in the Fund.
This endorsement shall be made available to Contract Owners as
regulatory authority is obtained.
Section 2.07 Following the Closing Date, American Fidelity
shall reimburse Contract Owners to the extent that they are
charged indirectly Fund expenses (investment management fees plus
other operating expenses) at a rate that exceeds the rate at
which such expenses would have been charged to them by Account A
had there been no Reorganization. Such reimbursement shall not
apply to any federal income tax if the Fund fails to qualify as a
"regulated investment company" under the applicable provisions of
the Internal Revenue Code, or to any charge for American
Fidelity's federal income taxes attributable to the Contracts,
provided American Fidelity has reserved in the Contracts the
right to charge Contract Owners for such taxes.
ARTICLE III
Warranties and Conditions
Section 3.01 Account A, American Fidelity and the Fund, as
appropriate, make the following representations and warranties,
which shall survive the Closing Date and bind their respective
successors and assigns, including Continuing Account A:
(a) There are no suits, actions or proceedings
pending or threatened against any party to this
Agreement which, to its knowledge, if adversely
determined, would materially and adversely affect its
financial condition, the conduct of its business or its
ability to carry out its obligations hereunder;
(b) There are no investigations or administrative
proceedings by the Commission or by any insurance or
securities regulatory body of any state, territory or
the District of Columbia pending against any party to
this Agreement which, to its knowledge, would lead to
any suit, action or proceeding that would materially
and adversely affect its financial condition, the
conduct of its business or its ability to carry out its
obligations hereunder;
(c) Should any party to this Agreement become
aware, prior to the Effective Time, of any suit, action
or proceeding, of the types described in paragraph (a)
or (b) above, instituted or commenced against it, it
shall immediately notify and advise all other parties
to this Agreement;
(d) Immediately prior to the Effective Time,
American Fidelity, on behalf of Account A, shall have
valid and unencumbered title to the portfolio assets of
Account A, except with respect to those assets for
which payment has not yet been made;
(e) Each party shall make available all
information concerning itself which may be required in
any application, registration statement or other filing
with a governmental body to be made by the Fund,
American Fidelity or Account A, or any or all of them,
in connection with any of the transactions contemplated
by this Agreement and shall join in all such
applications or filings, subject to reasonable approval
of their counsel. Each party represents and warrants
that all of such information so furnished shall be
correct in all material respects and that it shall not
omit any material fact required to be stated therein or
necessary in order to make the statements therein not
misleading; and
(f) Other than with respect to contracts entered
into in connection with the portfolio management of
Account A which shall terminate on or prior to the
Closing Date, no party is currently engaged, and the
execution, delivery and performance of this Agreement
by each party will not result, in a material violation
of any such party's charter, by-laws, or any material
agreement, indenture, instrument, contract, lease or
other undertaking to which such party is bound, and to
such party's knowledge, the execution, delivery and
performance of this Agreement will not result in the
acceleration of any obligation, or the imposition of
any penalty, under any material agreement, indenture,
instrument, contract, lease, judgment or decree to
which any such party may be a party or to which it is
bound.
Section 3.02 The obligations of the parties hereunder shall
be subject to satisfaction of each of the following conditions:
(a) The representations contained herein shall be
true as of and at the Effective Time with the same
effect as though made at such time, and such parties
shall have performed all obligations required by this
Agreement to be performed by each of them prior to such
time;
(b) The Commission shall not have issued an
unfavorable advisory report under Section 25(b) of the
1940 Act nor instituted any proceeding seeking to
enjoin consummation of the Reorganization contemplated
hereby;
(c) The appropriate parties shall have received
orders from the Commission providing such exemptions
and approvals as they and their counsel reasonably deem
necessary, including an order pursuant to Section 17(b)
of the 1940 Act, and shall have made all necessary
filings, if any, with, and received all necessary
approvals from, state securities or insurance
authorities;
(d) Account A and the Fund shall have filed with
the Commission a registration statement on Form N-14
under the 1933 Act, and such amendments thereto as may
be necessary or desirable for the registration of the
shares issued by the Fund to Continuing Account A in
exchange for Account A's investment portfolio and for
the registration of the separate account interests in
Continuing Account A to Contract Owners in exchange for
the outstanding securities of Account A held by the
Contract Owners, thereby effecting the purposes of the
Reorganization;
(e) The Fund shall have filed a notification of
registration on Form N-8A under the 1940 Act, a
registration statement on Form N-1A under the 1933 Act
and the 1940 Act, and such amendments thereto as may be
necessary or desirable to effect the purposes of the
Reorganization;
(f) On behalf of Account A, American Fidelity
shall have filed on Form N-4 a post-effective amendment
to the registration statement of Account A under the
1933 Act and the 1940 Act, and such amendments thereto
as may be necessary or desirable to effect the purposes
of the Reorganization;
(g) The appropriate parties shall have taken all
actions necessary for the filings required by
paragraphs 3.02(d) through (f) to become effective, and
no reason shall be known by the parties which would
prevent such filings from becoming effective in a
timely manner;
(h) At a Contract Owners' meeting called for such
purpose (or any adjournments thereof), a majority of
the outstanding voting securities (as defined in the
1940 Act and the rules thereunder) of Account A shall
have voted in favor of approving this Agreement and the
Reorganization, and shall also have voted to direct
American Fidelity to:
(1) elect a Board of Directors of the
Fund;
(2) approve the investment advisory
agreement between the Fund and American
Fidelity; and
(3) approve the investment sub-advisory
agreements with each of Lawrence W. Kelly &
Associates, Inc. and Todd Investment
Advisors, Inc. (the "Sub-Advisors") with
respect to sub-advisory services for the
Fund;
(i) The Board of Directors of the Fund shall have
taken the following actions:
(1) approve this Agreement and the
Reorganization;
(2) approve the investment advisory
agreement between the Fund and American
Fidelity;
(3) approve the investment sub-advisory
agreements with each of the Sub-Advisors with
respect to sub-advisory services for the
Fund;
(4) approve investment objectives,
policies and restrictions for the Fund that
are substantially identical to the investment
objectives, policies and restrictions of
Account A as in effect immediately prior to
the Reorganization (which may include changes
approved at the Contract Owners' meeting
referred to above); and
(5) authorize the issuance on the
Closing Date by the Fund of its shares at the
initial net asset value per share in exchange
for the portfolio assets of Account A, as
contemplated by this Agreement;
(j) American Fidelity and Account A shall have
received an opinion of counsel to the Fund (who may be
the same as counsel to American Fidelity and Account A)
in form and substance reasonably satisfactory to them
to the effect that, as of the Closing Date:
(1) the Fund is duly incorporated and
in good standing under the laws of the State
of Maryland;
(2) the Fund is authorized to issue
shares for the purposes contemplated by this
Agreement and is duly registered as an
investment company under the 1940 Act;
(3) the shares of the Fund to be issued
pursuant to the terms of this Agreement have
been duly authorized and, when issued and
delivered as provided herein, will be validly
issued, fully paid and non-assessable;
(4) all corporate and other proceedings
necessary and required to be taken by or on
the part of the Fund to authorize and carry
out this Agreement and effect the
Reorganization have been duly and properly
taken; and
(5) this Agreement is a valid
obligation of the Fund and legally binding
upon it in accordance with its terms;
(k) The Fund and Account A shall have received an
opinion from counsel to American Fidelity (who may be
the same as counsel to the Fund and Account A) in form
and substance reasonably satisfactory to them to the
effect that, as of the Closing Date:
(1) American Fidelity is duly
incorporated and in good standing under the
laws of the State of Oklahoma and is fully
empowered and qualified to carry out its
business in all jurisdictions where it does
so, including to enter into this Agreement
and effect the transactions contemplated
hereby;
(2) all corporate and other proceedings
necessary and required to be taken by or on
the part of Account A and American Fidelity
to authorize and carry out this Agreement and
to effect the Reorganization have been duly
and properly taken; and
(3) this Agreement is a valid
obligation of American Fidelity and Account A
and legally binding upon them in accordance
with its terms;
(l) American Fidelity shall have received an
opinion of counsel that the Reorganization will have no
adverse tax consequences on any of the parties or on
Contract Owners; and
(m) Each party shall have furnished as reasonably
requested by any other party, other legal opinions,
officers' certificates, incumbency certificates,
certified copies of board and committee resolutions,
good standing certificates, and other closing
documentation as may be appropriate for a transaction
of this type.
ARTICLE IV
Costs
Section 4.01 American Fidelity shall bear all expenses in
connection with effecting the Reorganization contemplated by this
Agreement, including, without limitation, preparation and filing
of registration statements and applications and amendments on
behalf of any and all parties hereto, and all legal, accounting
and data processing services necessary to effect the
Reorganization.
ARTICLE V
Termination
Section 5.01 This Agreement may be terminated and the
Reorganization abandoned at any time prior to the Effective Time,
notwithstanding approval by Contract Owners,
(a) by mutual consent of the parties hereto;
(b) by any of the parties if any condition set
forth in Section 3.02 has not been fulfilled by the
other parties; and
(c) by any of the parties if the Reorganization
does not occur as of December 31, 1998, and no
subsequent date can be mutually agreed upon.
Section 5.02 At any time prior to the Effective Time, any
of the terms or conditions of this Agreement may be waived by the
party or parties entitled to the benefit thereof if such waiver
will not have a material adverse effect on the interests of the
Contract Owners.
IN WITNESS WHEREOF, as of the day and year first above
written, each of the parties has caused this Agreement to be
executed on its behalf by its President or Chairman and attested
by its Secretary, all thereunto duly authorized.
ATTEST: AMERICAN FIDELITY ASSURANCE
COMPANY
By____________________________ By____________________________
Stephen P. Garrett, Secretary John W. Rex, President
ATTEST: AMERICAN FIDELITY VARIABLE
ANNUITY FUND A
By___________________________ By___________________________
Daniel D. Adams, Jr., Secretary John W. Rex, Chairman
ATTEST: AMERICAN FIDELITY DUAL
STRATEGY FUND, INC.
By___________________________ By___________________________
Daniel D. Adams, Jr., Secretary John W. Rex, President
POWER OF ATTORNEY
We, the undersigned officers and members of the board
of managers of American Fidelity Dual Strategy Fund, Inc.
(herein-after, the "Fund"), hereby severally constitute John W.
Rex and Daniel D. Adams, Jr., and each of them, severally, our
true and lawful attorneys-in-fact with full power to act without
the other and with full power of substitution and resubstitution
to sign, execute and file with the Securities and Exchange
Commission and any state securities regulatory board or
commission any documents relating to the proposed issuance and
registration of the securities offered pursuant to this
Registration Statement on Form N-1A, including any and all
amendments (including post-effective amendments) to this
Registration Statement on Form N-1A, granting unto said
attorneys-in-fact and agents, and each of them, full power and
authority to do and to perform each and every act and thing
requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-
in-fact and agents, or any of them, may lawfully do or cause to
be done by virtue hereof.
DATED this 1st day of July, 1998.
JOHN W. REX
John W. Rex, Chairman of the
Board, President and Treasurer
DANIEL D. ADAMS, JR.
Daniel D. Adams, Jr., Director and Secretary
JEAN G. GUMERSON
Jean G. Gumerson, Director
EDWARD C. JOULLIAN, III
Edward C. Joullian, III,
Director
GREGORY M. LOVE
Gregory M. Love, Director
J. DEAN ROBERTSON
J. Dean Robertson, Director
G. RAINEY WILLIAMS, JR.
G. Rainey Williams, Jr.,
Director
