SEMIANNUAL REPORT
American Fidelity Dual Strategy Fund, Inc.
June 30, 1999
Dear Participant:
The U.S. equity markets rallied to new record highs in the second quarter
despite continued weakness in the bond markets. American Fidelity Dual Strategy
Fund, Inc. also reported a gain for the first half. The net asset value on June
30, 1999 was up 13% from December 31, 1998.
The ongoing strength in the U.S. economy has been a major catalyst in helping to
ignite a global resurgence in economic growth. The strong economy reinforced
investor confidence in the outlook for corporate profits and continued
prosperity. However, with signs of growing momentum in U.S. economic activity,
investors became more concerned about the outlook for inflation and interest
rates. This concern was reflected in the bond market as long term U.S. Treasury
yields rose significantly during the first half of 1999.
Strong consumer spending continued to drive Real Gross Domestic Product growth
during the first half. Accelerated tax refunds, vigorous income growth and
healthy stock market gains were all contributing factors to the exceptional
levels of consumer spending the U.S. has experienced over the last few quarters.
We expect Real Gross Domestic Product growth to slow to a more moderate level in
the second half of the year.
Inflation rates, as measured by the Consumer Price Index ("CPI"), were impacted
by the sharp rise in energy costs earlier this year. Core inflation rates, which
exclude food and energy costs, remained relatively stable. Despite some isolated
inflationary pressures, the broader measures of inflation have yet to confirm
any signs of a sustained resurgence in the inflation rate. Labor costs, which
represent a key component of the price indices, have actually softened somewhat
over the past six months. However, we continue to expect a gradual upward trend
in the CPI as the global economy strengthens, the domestic labor market tightens
and commodity prices firm.
The yields on the 30-year U.S. Treasury Bond rose to an eighteen month high,
touching 6.2% late in June versus a low of 5.4% in early April. Yields ended the
second quarter at 5.99%. A sharp increase in energy prices, growing evidence of
improving economic prospects in Asia and the emerging markets, and stronger than
expected U.S. economic growth were contributing factors in pushing interest
rates higher during the first half. Increased effort by corporate borrowers to
take advantage of lower interest rates led to a flood of new bond issues, which
added further pressure to the fixed income markets. With our near term outlook
for a moderation in economic growth, we believe long-term interest rates could
decline slightly over the near term. For the longer term we would not be
surprised if interest rates come under increased pressure as the domestic and
global economies accelerate.
Looking to the longer term, we continue to believe stocks are quite attractive.
Given the strong fundamental health of the U.S. economy, low interest rates, and
ample market liquidity, we believe stocks offer further upside potential. Equity
valuations, however, leave little margin for disappointment and could quickly
push stocks into a corrective phase should economic or inflationary developments
not meet investor expectations.
If you have any questions, please let us know.
Sincerely,
JOHN W. REX
John W. Rex, President
American Fidelity Dual Strategy Fund, Inc.
JWR:jl
<PAGE>
AMERICAN FIDELITY
DUAL STRATEGY FUND, INC.
<TABLE>
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1999
<S> <C>
ASSETS:
Cash & investments at market value $213,980,671
Accrued interest and dividends 198,424
Accounts Receivable for Securities Sold 0
___________
Total Assets 214,179,095
LIABILITIES:
Accounts Receivable for Securities Purchased 0
Other accounts payable 0
Account payable-redemptions 0
___________
Total Liabilities 0
NET ASSETS $214,179,095
===========
ACCUMULATION UNITS OUTSTANDING 18,957,815
===========
NET ASSET VALUE PER UNIT 11.2977
===========
STATEMENT OF CHANGES IN NET ASSETS
June 30, 1999
Net assets, beginning of year $0
Net investment income 1,002,422
Realized gain on investments (1,759,503)
Decrease in unrealized appreciation
of investments 25,046,296
Net purchase payments received 191,770,767
Withdrawal of funds (1,880,887)
___________
Net assets at end of June $214,179,095
===========
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
June 30, 1999
<S> <C>
INVESTMENT INCOME:
Dividends $1,383,017
Interest 105,816
__________
1,488,833
EXPENSES:
Investment management fee 486,411
__________
NET INVESTMENT INCOME $1,002,422
==========
REALIZED GAIN ON INVESTMENTS: (1,759,503)
==========
UNREALIZED DEPRECIATION OF INVESTMENTS: $25,046,296
==========
</TABLE>
<TABLE>
STATEMENT OF INVESTMENTS
June 30, 1999
<CAPTION>
Shares or Market
COMMON STOCKS: Principal Value
Amount Amount
<S> <C> <C>
Chemicals & Allied Products:
Abbott Laboratories 33,600 1,528,800
American Home Products Corporation 47,000 2,702,500
Avery-Dennison Corporation 55,800 3,368,925
Bristol-Myers Squibb Company 76,800 5,409,561
Dupont 14,400 983,693
Johnson & Johnson 44,000 4,312,000
Eil Lilly and Company 12,800 916,800
Merck & Company, Inc. 23,400 1,731,600
Pfizer, Inc. 35,800 3,929,050
24,882,929
Electronic & Other Electric Equipment:
General Electric Company 61,600 6,960,800
Intel Corporation 90,400 5,378,800
Koninklijke Phillips Electronics ** 34,040 3,433,785
Lucent Technologies 70,000 4,720,590
20,493,975
Business Services:
Automatic Data Processing 68,000 2,992,000
Computer Associates International 25,800 1,419,000
Computer Sciences Corporation 36,000 2,490,732
Interpublic Group of Companies 25,500 2,208,938
Microsoft Corporation * 82,800 7,467,483
WPP Group PLC ** 39,000 3,344,250
19,922,403
Industrial Machinery & Equipment:
Cisco Systems, Inc. * 146,500 9,449,250
Hewlett-Packard Company 16,400 1,648,200
IBM Corporation 31,000 4,006,750
United Technologies 65,000 4,659,655
19,763,855
Petroleum Refining & Related Industries:
Atlantic Richfield Company 13,000 1,086,306
Chevron Corporation 31,600 3,007,909
Mobil Corporation 21,000 2,079,000
Royal Dutch Petroleum ** 75,200 4,530,800
Texaco, Inc. 61,200 3,825,000
14,529,015
</TABLE>
<TABLE>
<CAPTION>
Shares or Market
Principal Value
Amount Amount
<S> <C> <C>
Depository Institutions:
Bank of America Corporation 42,032 3,081,450
Chase Manhattan Bank 36,300 3,144,487
First Union Corporation 29,484 1,385,748
MBNA 87,750 2,687,344
J.P. Morgan & Company 10,000 1,405,000
Regions Financial Corporation 17,600 676,491
Wachovia Corporation 20,000 1,711,240
14,091,760
Communications:
Ameritech 33,400 2,454,900
Bell Atlantic Corproration 31,792 2,078,402
Bellsouth Corporation 30,000 1,406,250
MCI Worldcom, Inc. * 30,000 2,581,860
SBC Communications, Inc. 37,600 2,180,800
10,702,212
Insurance Carriers:
AFLAC, Inc. 70,200 3,360,825
American International Group 29,250 3,424,064
MGIC 43,000 2,090,875
8,875,764
Food & Kindred Products:
Anheuser-Busch Companies, Inc. 31,000 2,199,047
The Coca-Cola Company 53,600 3,350,000
Pepsico, Inc. 73,000 2,824,151
8,373,198
Food Stores:
Albertson's, Inc. 56,600 2,918,409
Safeway, Inc. * 97,700 4,836,150
7,754,559
Electric, Gas & Sanitary Services:
Duke Energy Company 16,000 870,000
GTE 34,800 2,636,100
Northern States Power Company 38,000 919,106
Teco Energy, Inc. 55,500 1,262,625
Texas Utilities 34,500 1,423,125
7,110,956
Home Furniture & Equipment Store:
Circuit City Stores 53,000 4,929,000
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (Continued) Shares or Market
Principal Value
Amount Amount
<S> <C> <C>
Non-Depository Institutions:
American Express Company 19,600 2,550,450
Federal National Mortgage Association 34,400 2,352,100
4,902,550
Miscellaneous Manufacturing Industries:
Tiffany & Company 47,200 4,554,800
Paper & Allied Products:
Kimberly Clark 41,000 2,337,000
Willamette Industries 47,000 2,164,914
4,501,914
Transportation by Air:
Delta Airlines, Inc. 24,000 1,383,000
FDX Corporation * 50,000 2,712,500
4,095,500
General Merchandise:
Dollar General 37,500 1,087,500
Wal-Mart Corporation 59,400 2,866,050
3,953,550
Holding & Other Investment Offices:
Felcor Lodging Trust, Inc. 33,300 690,975
First Industrial Realty Trust 35,000 960,295
Mack-Cali Realty Corporation 31,400 971,422
Simon Property Group, Inc. 30,000 761,250
Spieker Properties, Inc. 12,000 466,500
3,850,442
Instruments & Other Investment Offices:
Raytheon Company - A 37,500 2,582,813
Raytheon Company - B 16,000 1,126,000
3,708,813
Transportation Equipment:
Allied Signal, Inc. 30,000 1,890,000
Ford Motor Company 28,000 1,580,236
3,470,236
</TABLE>
<TABLE>
<CAPTION>
Shares or Market
Principal Value
Amount Amount
<S> <C> <C>
Miscellaneous Retail:
Costco Company, Inc. * 40,500 3,242,511
Security & Commodity Brokers:
Charles Schwab Corporation 29,500 3,241,313
Building Materials & Gardening Supplies:
Home Depot, Inc. 46,000 2,964,102
Personal Services:
H & R Block 39,300 1,965,000
Eating & Drinking Places:
McDonald's Corporation 32,000 1,321,984
Primary Metal Industries:
Englehard Corporation 58,000 1,312,250
Health Services:
HCR Manor Care * 35,000 846,545
Total Common Stocks (Cost $184,314,840) 209,361,136
</TABLE>
<TABLE>
SHORT-TERM INVESTMENTS:
<S> <C> <C>
Associates Corporation of North America
Master Note Fltg (4.71% at 6/30/99) 4,517,840 $4,517,840
Total Short-Term Investments $4,517,840
Total Investments: $213,878,976
</TABLE>
* Presently not producing dividend income
** Foreign Investments
SAFEKEEPING OF SECURITIES
InvesTrust
Oklahoma City, OK
INVESTMENT ADVISER
American Fidelity Assurance Company
Oklahoma City, OK
INVESTMENT SUB ADVISER
Lawrence Kelly & Associates, Inc. Todd Investment Advisors
Los Angeles, CA Louisville, KY
For more information
To obtain information:
By telephone
Call 1-800-662-1106
By mail Write to:
American Fidelity
Dual Strategy Fund, Inc.
P.O. Box 25520
Oklahoma City, OK 73125-0520
By E-mail Send your request to:
[email protected]
On the Internet Text-only versions of fund documents can be viewed online or
downloaded from the SEC's web site: //www.sec.gov
You may also obtain copies of fund documents by visiting the SEC's Public
Reference Room in Washington, DC (phone 1-800-SEC-0330) or by sending your
request and a duplicating fee to the SEC's Public Reference Section, Washington,
DC 20549-6009.
GVA-276 (9/99)
