<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14a INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
American Fidelity Variable Annuity Fund A
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
AMERICAN FIDELITY VARIABLE ANNUITY FUND A
2000 CLASSEN CENTER
OKLAHOMA CITY, OKLAHOMA 73106
Dear Account A Contract Owner or Participant:
On December 21, 1998, we will be holding the Annual Meeting for American
Fidelity Variable Annuity Fund A ("Account A") to (i) elect members of the Board
of Managers, (ii) ratify or reject the selection of KPMG Peat Marwick LLP as
independent public accountants and (iii) consider and vote on a proposal to
approve an Agreement and Plan of Reorganization whereby Account A will become a
unit investment trust and exchange its assets solely for shares of American
Fidelity Dual Strategy Fund, Inc. ("Dual Strategy Fund").
If the proposed reorganization is approved and implemented, Account A will
be converted from a separate account which is an open-end management investment
company to a separate account which is a unit investment trust. Continuing
Account A will no longer manage the investment portfolio supporting the Account
A variable annuity contracts. It will hold shares in Dual Strategy Fund which
will own and manage the assets in the investment portfolio formerly held by
Account A. The economics to the contract owners and participants will not
change.
All of the proposals have been carefully reviewed by the Board of Managers.
The managers, most of whom are not affiliated with American Fidelity, are
responsible for protecting your interests as owners and participants in Account
A variable annuity contracts. The Board of Managers believes these proposals are
in the best interest of contract owners and participants. They recommend that
you vote "For" each proposal.
You may think your vote is insignificant, but every vote is critically
important. If we do not receive sufficient proxies, we must send further
mailings to secure an adequate participation at the meeting. It only takes a few
minutes; please vote promptly.
The Questions and Answers appearing at the beginning of the enclosed proxy
statement are provided to answer many of the questions you may have about the
reorganization proposal. More complete information follows. Please take a few
moments to read all the proxy materials and then indicate your voting
instructions on the enclosed form applicable to you. Once you have indicated how
you wish to have your votes cast on the proposals, please be sure to sign your
voting instruction form or proxy, as the case may be, and return it in the
enclosed postage-paid envelope. Please feel free to call Marvin Ewy or Derrick
Owens at American Fidelity using our toll-free number (800) 654-8489 if you have
any questions.
Remember, this is your opportunity to voice your opinion on important
matters. Your participation is extremely important no matter how many or how few
votes you are entitled to cast.
We appreciate and thank you for your prompt action.
Sincerely,
/s/ JOHN W. REX
John W. Rex
Chairman
<PAGE> 3
AMERICAN FIDELITY VARIABLE ANNUITY FUND A
NOTICE OF ANNUAL MEETING OF CONTRACT OWNERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of owners of variable
annuity contracts of American Fidelity Variable Annuity Fund A ("Account A"), a
separate account of American Fidelity Assurance Company ("American Fidelity"),
will be held at the office of American Fidelity at 2000 Classen Center, Oklahoma
City, Oklahoma, at 9:00 a.m., central time on December 21, 1998, for the
following purposes:
1. To elect members of the Board of Managers of Account A to hold
office until the next annual meeting of contract owners and until their
successors are duly elected and qualified;
2. To ratify or reject the selection of KPMG Peat Marwick LLP as the
independent certified public accountants for Account A for the year ending
December 31, 1998;
3. To approve or disapprove an Agreement and Plan of Reorganization
whereby Account A (presently an open-end management investment company)
will become a unit investment trust and transfer all of its assets to
American Fidelity Dual Strategy Fund, Inc. ("Dual Strategy Fund") in
exchange for shares of Dual Strategy Fund; and
4. To consider such other business as may properly come before the
meeting.
Those persons who were owners of Account A variable annuity contracts on
October 5, 1998 are entitled to receive notice of and to vote at the meeting.
The number of votes which each owner is entitled to cast at the meeting was also
determined as of October 5, 1998.
All owners and participants in Account A variable annuity contracts as of
October 5, 1998 are invited to attend the meeting and, whether or not planning
to attend, are requested to complete the accompanying form indicating your vote
and forward it as promptly as possible in the enclosed self-addressed envelope
which requires no postage. Please be sure to date and sign your form.
By Order of the Board of Managers
/s/ JOHN W. REX
John W. Rex
Chairman
Oklahoma City, Oklahoma
October 19, 1998
<PAGE> 4
PROXY STATEMENT
AMERICAN FIDELITY VARIABLE ANNUITY FUND A
AMERICAN FIDELITY ASSURANCE COMPANY
2000 CLASSEN CENTER
OKLAHOMA CITY, OKLAHOMA 73106
TELEPHONE: (405) 523-2000
This Proxy Statement is furnished in connection with the solicitation by
the Board of Managers of American Fidelity Variable Annuity Fund A ("Account A")
of proxies for use at the Annual Meeting of Contract Owners. At the meeting
Contract Owners will be asked to (i) elect members of the Board of Managers,
(ii) ratify or reject the selection of KPMG Peat Marwick LLP as independent
public accountants and (iii) consider and vote on an Agreement and Plan of
Reorganization whereby Account A (presently an open-end management investment
company) will become a unit investment trust and transfer all of its assets to
American Fidelity Dual Strategy Fund, Inc. ("Dual Strategy Fund") in exchange
for shares of Dual Strategy Fund (the "Reorganization"). This Proxy Statement is
first being mailed on October 19, 1998.
The Board of Managers of Account A recommends a vote "For" the election of
each nominee for the Board and "For" ratification of Account A's independent
accountants. The Board has determined that the Reorganization is in the best
interest of Account A and its Contract Owners and Participants and has
unanimously approved the Reorganization. The Board recommends that the
Reorganization be approved by Contract Owners at the Annual Meeting. The
Reorganization, if approved, is expected to be consummated on January 1, 1999.
Until then, or if the Reorganization is not approved, the Board will continue to
manage Account A.
American Fidelity Assurance Company ("American Fidelity") established
Account A in 1968 as a separate account to act as a funding medium for a group
tax-deferred variable annuity contract (the "Contract"). Account A has as its
primary investment objective long-term growth of capital which Account A
endeavors to achieve through a diversified investment portfolio consisting
primarily of common stock. A secondary investment objective of Account A is the
production of income. Dual Strategy Fund, a newly formed open-end management
investment company, will have the same objectives in its management of the
assets received from Account A in the Reorganization. The value of a Contract
will not change as a result of the Reorganization, and Contract Owners will have
the same contract rights after the Reorganization as before. American Fidelity
will bear the expenses of the Reorganization, and fees and expenses charged to
Contract Owners will not increase.
This Proxy Statement sets forth concisely information which Contract Owners
and Participants should know before casting their votes.
October 19, 1998
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DEFINITIONS..................................... 2
QUESTIONS AND ANSWERS........................... 3
GENERAL VOTING INFORMATION...................... 4
ELECTION OF MEMBERS OF THE BOARD OF MANAGERS.... 6
RATIFICATION OR REJECTION OF SELECTION OF
ACCOUNTANTS................................... 7
THE REORGANIZATION.............................. 7
Summary....................................... 7
Purpose of the Reorganization................. 8
Principal Risk Factors........................ 8
Agreement and Plan of Reorganization.......... 9
Conditions to Closing......................... 9
Approvals of the Reorganization............... 9
Investment Management and Service
Providers................................... 10
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Distribution, Purchase, Withdrawal and
Surrender Procedures........................ 10
Voting........................................ 10
Tax Consequences of the Reorganization........ 11
Comparative Fee Table......................... 11
Capitalization................................ 12
GENERAL DESCRIPTION OF AMERICAN FIDELITY,
ACCOUNT A AND DUAL STRATEGY FUND.............. 12
American Fidelity............................. 12
Account A..................................... 12
Dual Strategy Fund............................ 13
CONTRACT OWNER PROPOSALS........................ 13
AVAILABLE INFORMATION........................... 14
OTHER BUSINESS.................................. 14
APPENDIX A: Agreement and Plan of Reorganization
</TABLE>
DEFINITIONS
As used in this Proxy Statement, the following terms have the indicated
meanings unless the context expressly or by necessary implication otherwise
dictates:
Accumulation Unit: A standard of measurement used to measure the value
of each account.
Code: The Internal Revenue Code of 1986, as amended.
Contract Owner: The entity to which a Contract is issued, which is
normally the employer of Participants or an organization representing such
employer.
1940 Act: The Investment Company Act of 1940, as amended.
Participant: A person having an interest in Account A through premium
deposits, but who has not begun to receive annuity payments.
Variable Annuity Contract: The master group contract between American
Fidelity and a Contract Owner providing for annuity payments varying in
amount in accordance with the investment experience of Account A. Also
sometimes referred to as a "Contract."
2
<PAGE> 6
QUESTIONS AND ANSWERS
Please read the complete text of this Proxy Statement. For your
convenience, we have provided a brief overview of the proposals to be voted
upon. Your vote is important. If you have any questions regarding the proposals,
please call Marvin Ewy or Derrick Owens at American Fidelity using our toll-free
number (800) 654-8489. We appreciate you investing with American Fidelity and
look forward to a continuing relationship.
Q. WHY AM I RECEIVING A PROXY STATEMENT?
A. In addition to the election of members of the Board of Managers and
ratification of accountants, the Board is seeking your approval of a
Reorganization which will result in the transfer of Account A's assets to a
newly formed open-end management investment company, Dual Strategy Fund, in
exchange for shares of Dual Strategy Fund. Account A will be converted from
a separate account classified as an open-end management investment company
to a separate account classified as a unit investment trust, and its name
will be changed to American Fidelity Separate Account A ("Continuing
Account A").
Q. WHAT ARE THE EFFECTS OF THIS REORGANIZATION?
A. While the Reorganization will result in several structural changes, there
will be no economic change to you as a Participant in an Account A Variable
Annuity Contract issued by American Fidelity. All of the assets of Account
A will be transferred to Dual Strategy Fund in return for shares of Dual
Strategy Fund, but the Account A Variable Annuity Contracts will continue
without change.
Q. WILL I HAVE MORE INVESTMENT OPTIONS AFTER THE REORGANIZATION?
A. No. Dual Strategy Fund will be the only investment option for Account A
Participants after the Reorganization. Dual Strategy Fund may, however,
become an investment option for other variable annuity programs organized
by American Fidelity, such as its Separate Account B, and potentially
increase the asset base of Dual Strategy Fund.
Q. WILL THERE BE A CHANGE IN MANAGEMENT AFTER THE REORGANIZATION?
A. No. As a unit investment trust after the Reorganization, Account A will no
longer manage the investment portfolio supporting the Account A Variable
Annuity Contracts. Continuing Account A will have no Board of Managers.
Dual Strategy Fund, however, will have a Board of Directors consisting of
the same persons who have been the members of Account A's Board of
Managers.
Q. WILL I BE ABLE TO VOTE ON MATTERS AFFECTING DUAL STRATEGY FUND AFTER THE
REORGANIZATION?
A. Yes. As a beneficial owner of Dual Strategy Fund shares, you will direct
the vote for such shares. Dual Strategy Fund will not be required to hold
an annual election of directors, however. Under the laws of Maryland, the
state of Dual Strategy Fund's incorporation, Dual Strategy Fund must hold a
meeting of shareholders to elect directors only if less than a majority of
the directors have been elected by the shareholders.
Q. WILL THERE BE DIFFERENCES IN INVESTMENT OBJECTIVES AS A RESULT OF THE
REORGANIZATION?
A. No. Dual Strategy Fund will have the same investment objectives as Account
A.
Q. WILL I BE CHARGED THE SAME FEES AND EXPENSES AFTER THE REORGANIZATION?
A. Yes.
Q. WILL THERE BE ANY CHANGE IN DISTRIBUTION, PURCHASE OR REDEMPTION PROCEDURES
AFTER THE REORGANIZATION?
A. No. You will make purchase payments in the same manner and follow the same
redemption procedures after the Reorganization.
Q. WHAT ARE THE FEDERAL TAX IMPLICATIONS OF THE REORGANIZATION?
A. The Reorganization will not be a taxable event (i.e., no gain or loss will
be recognized).
3
<PAGE> 7
Q. WHAT IMPACT WILL THE REORGANIZATION HAVE ON THE ASSETS OF ACCOUNT A?
A. The Contract Owners and Participants of Account A will indirectly own the
same proportionate interest in the assets held by Dual Strategy Fund
(through Account A's ownership of shares in Dual Strategy Fund) immediately
after the Reorganization.
Q. HOW WILL THIS AFFECT MY ACCOUNT?
A. You can expect the same level of management expertise and high-quality
shareholder service you've grown accustomed to.
Q. WHAT IF THERE ARE NOT ENOUGH VOTES TO REACH A QUORUM BY THE SCHEDULED
MEETING DATE?
A. If enough Contract Owners and Participants do not vote, we may need to
reschedule the meeting. We may contact you by mail, telephone, facsimile,
or by personal interview. Therefore, we encourage you to vote as soon as
you review the enclosed proxy materials in order to avoid additional
mailings, telephone calls or other solicitations.
Q. WHO IS PAYING FOR EXPENSES RELATED TO THE MEETING?
A. American Fidelity.
Q. HOW DO I VOTE?
A. Participants may vote by completing and signing the enclosed participant
instruction form and mailing it in the enclosed postage paid envelope.
Contract Owners will reflect their Participants' instructions in proxies
which will be voted at the meeting. If you need any assistance, or have any
questions regarding the proposals or how to vote, please call the toll-free
number shown above.
Q. WILL MY VOTE MAKE A DIFFERENCE?
A. Your vote is needed to ensure that the proposals can be acted upon. Your
immediate response will help save the cost of any further solicitation.
Q. HOW DO I SIGN THE PARTICIPANT INSTRUCTION FORM?
A. Voting instruction forms must be executed properly. Your name should be
signed exactly as it appears in the registration at the top of the
participant instruction form.
GENERAL VOTING INFORMATION
Contract Owner proxies and Participant voting instructions are solicited on
behalf of the Board of Managers of Account A for the Annual Meeting of Contract
Owners to be held on December 21, 1998, at 9:00 a.m., central time, and at any
adjournment thereof.
The record date for Contract Owners entitled to vote at the Annual Meeting
is the close of business on October 5, 1998, at which time there were 7,537,585
votes eligible to be cast by the owners of Variable Annuity Contracts. Each
Contract Owner on the record date is entitled to one vote for each Accumulation
Unit in force under the Contract for Participants in the Accumulation Period.
There are no retired Participants and thus there are no variable annuity units
in force. Contract Owners must vote in accordance with any instructions provided
by their respective Participants. Votes for which Participants have not
instructed a Contract Owner must be cast by the Contract Owner in the same
proportion as votes for which instructions have been received.
American Fidelity Companies Employee Savings Plan Trust, a savings plan for
the employees of American Fidelity and its affiliates ("American Fidelity
Savings Plan"), owned of record 653,103, or 8.67%, of Accumulation Units
outstanding on the record date. The address of the American Fidelity Savings
Plan is 2000 Classen Center, Oklahoma City, Oklahoma 73106. To the knowledge of
American Fidelity, no other person owned of record or beneficially more than 5%
of the Accumulation Units outstanding on that date. Members of the Board of
Managers owned, in the aggregate through their participation in the American
Fidelity Savings Plan, less than 1% of Accumulation Units of Account A
outstanding on the record date.
4
<PAGE> 8
Participants will forward their voting instructions to American Fidelity,
which will certify the votes, by Contract, to the respective Contract Owners.
This certification will occur on November 9, 1998 or on a later date if there is
additional solicitation of Participant votes. Participant instructions received
after vote certification will not be counted, so it is important for
Participants to vote promptly. A Contract Owner may cast the votes attributable
to its Contract, as certified, by signing a proxy and forwarding it to American
Fidelity or by attending and voting at the Annual Meeting.
A Participant may revoke his or her voting instruction to a Contract Owner
by written notice to the Secretary of the Board of Managers at any time before
the Participant's vote is certified in writing by the Secretary to the Contract
Owner. A Contract Owner may revoke a proxy at any time before it is voted by
filing with the Secretary of the Board of Managers a written revocation or a
duly executed proxy bearing a later date or by voting in person at the Annual
Meeting.
A majority of the votes available to Contract Owners represented in person
or by proxy will constitute a quorum for the transaction of business at the
Annual Meeting. Abstentions will be counted for purposes of determining the
presence of a quorum at the Annual Meeting but will be treated as voting against
any proposal. Account A's Rules and Regulations do not address the treatment and
effect of abstentions, nor does Oklahoma law. Because all Variable Annuity
Contracts at the record date were held directly by their owners, there can be no
broker non-votes.
All Participant voting instructions executed and received before a Contract
vote has been certified will be certified to the Contract Owner in accordance
with the instructions marked thereon. If a signed voting instruction form is
received without any instruction marked, the Participant's vote will be
certified FOR the election of all nominees as members of the Board of Managers,
FOR ratification of the independent certified public accountants and FOR the
Reorganization. All proxies executed and returned to American Fidelity will be
voted in accordance with the instructions certified thereon.
A majority of the votes available to the Contract Owners represented in
person or by proxy at the Annual Meeting is sufficient to elect members of the
Board of Managers and to ratify accountants for Account A. Approval of the
Reorganization proposal requires the affirmative vote of a majority of all the
votes available to Contract Owners on the record date.
If a sufficient number of votes is not represented at the Annual Meeting to
approve any proposal, the Annual Meeting may be adjourned for the purpose of
further proxy solicitation or for any other purpose. Unless otherwise
instructed, proxies will be voted in favor of any adjournment. At any subsequent
reconvening of the meeting, proxies will (unless previously revoked) be voted in
the same manner as they would have been voted at the original meeting.
The Board knows of no other matters which are likely to be brought before
the Annual Meeting. In the event any other matters do properly come before the
Annual Meeting, however, the persons named in the Contract Owner proxies will
vote the proxies in accordance with their best judgment.
This solicitation is being made by use of the mails, but also may be made
by telephone, facsimile transmission, telegraph, or personal interview, and the
cost will be borne by American Fidelity.
5
<PAGE> 9
ELECTION OF MEMBERS OF THE BOARD OF MANAGERS
The term of office for which each person is a nominee will expire at the
time Account A is converted to a unit investment trust pursuant to the
Reorganization or, if earlier, the next annual meeting or when his or her
successor shall have been elected and qualified. Should any nominee for the
office of manager become unavailable for any reason, the person or persons
acting under the proxy will vote for the election of such other person as
management may recommend. All nominees are currently serving as managers and
have agreed to serve if elected. Management has no reason to believe that any of
the nominees will be unable to serve if elected, and to the knowledge of
management, the nominees intend to serve the entire term for which election is
sought. Proxies solicited for the Annual Meeting may not be voted for a greater
number of persons than the number of nominees named.
The members and nominees of the Board of Managers of Account A are as
follows:
<TABLE>
<CAPTION>
DATE FIRST
BECAME
MANAGER OF PRINCIPAL OCCUPATION DURING PAST
NAME AND POSITION WITH ACCOUNT A AGE* ACCOUNT A FIVE YEARS AND DIRECTORSHIPS
-------------------------------- ---- ---------- --------------------------------
<S> <C> <C> <C>
John W. Rex** 64 1991 Director (1982 to present), President and
Chairman of Board of Managers Chief Operating Officer (1992 to present),
Executive Vice President (1990-1992) and
Treasurer (1972 to 1995) of American
Fidelity; Director (1982 to present),
Executive Vice President (1990 to present)
and Treasurer (1972 to 1995) of American
Fidelity Corporation
Daniel D. Adams, Jr.** 56 1991 Vice President and Investment Officer of
Secretary of Board of Managers American Fidelity and American Fidelity
Corporation
Jean G. Gumerson 75 1995 President and Chief Executive Officer,
Member of Board of Managers Presbyterian Health Foundation
Edward C. Joullian, III** 69 1987 Chairman of the Board and Chief Executive
Member of Board of Managers Officer, Mustang Fuel Corporation;
Director and Interim Chairman, Fleming
Companies, Inc.; Director, The LTV
Corporation; Director of American Fidelity
and American Fidelity Corporation
Gregory M. Love 36 1992 President and Chief Operating Officer
Member of Board of Managers (1995 to present), Vice President -- Real
Estate and Development (1990 to 1995) of
Love's Country Stores, Inc.; Director,
Affiliated Food Stores, Inc.
J. Dean Robertson, D.D.S., M.Ed. 81 1968 Private practice in pediatric dentistry;
Member of Board of Managers Professor Emeritus, University of
Oklahoma, College of Dentistry
G. Rainey Williams, Jr. 38 1992 President, Pinnacle Asset Management, Inc.
Member of Board of Managers (1996 to present); Managing Partner, Marco
Capital Group (1988 to 1996); Director,
Mustang Fuel Corporation
</TABLE>
- ---------------
* As of September 30, 1998.
** "Interested person" as defined in Section 2(a)(19) of the Investment Company
Act of 1940 (the "1940 Act").
6
<PAGE> 10
The Board of Managers held one meeting in 1997, which was attended by all
members except Messrs. Love and Williams, and has held two meetings in 1998
through the date of this Proxy Statement. Each member attended both of the 1998
meetings except Mr. Love, who did not attend either meeting, and Mr. Joullian,
who did not attend one of the meetings. The Board of Managers has not
established any audit, nominating or compensation committee.
Members of the Board and officers of Account A who are also officers or
employees of American Fidelity are not paid any compensation by Account A for
their services to Account A. American Fidelity pays attendance fees to the other
members of the Board of Managers ($500 per meeting attended except the second
meeting in 1998, for which a fee of $250 was paid). None of the Board members
receives any pension or retirement benefits with respect to services rendered to
Account A.
THE BOARD OF MANAGERS RECOMMENDS A VOTE IN FAVOR OF EACH OF THE NOMINEES.
Each of the persons listed above is also a member of the Board of Directors
of Dual Strategy Fund. Prior to the Reorganization, if approved, American
Fidelity, in its capacity as sole shareholder of Dual Strategy Fund, will
re-elect as directors of Dual Strategy Fund the persons who were elected to
Account A's Board of Managers at the Annual Meeting.
RATIFICATION OR REJECTION OF SELECTION OF ACCOUNTANTS
Subject to ratification by Contract Owners, the firm of KPMG Peat Marwick
LLP has been selected as independent certified public accountants for Account A
for the year ending December 31, 1998. KPMG Peat Marwick LLP has performed the
audit functions for Account A for the eight years ended December 31, 1997.
KPMG Peat Marwick LLP has no direct or indirect financial interest in
Account A. Such firm is also the independent certified public accountants for
American Fidelity, and it is the belief of management that the employment of the
services of KPMG Peat Marwick LLP for the current fiscal year will be in the
best interest of Account A.
Account A anticipates that a representative of KPMG Peat Marwick LLP will
be present at the Annual Meeting with the opportunity to make a statement and be
available to respond to appropriate questions. At the present time, Account A
does not have an audit committee composed of disinterested managers nor does it
anticipate the creation of such a committee.
THE BOARD OF MANAGERS RECOMMENDS A VOTE IN FAVOR OF RATIFICATION OF THE
SELECTION OF KPMG PEAT MARWICK LLP.
Prior to the Reorganization, if approved, American Fidelity will approve
the selection of KPMG Peat Marwick LLP as independent certified public
accountants for Dual Strategy Fund if Contract Owners ratify the firm's
selection at the Annual Meeting.
THE REORGANIZATION
SUMMARY
American Fidelity, Account A and Dual Strategy Fund have agreed that,
subject to approval by Contract Owners, they will engage in certain transactions
described in the Agreement and Plan of Reorganization attached as Appendix A to
this Proxy Statement. As a result of the Reorganization, Account A will be
changed from a management investment company into a unit investment trust
(renamed Continuing Account A) which invests in Dual Strategy Fund. In the
Reorganization, all of the assets of Account A will be transferred to Dual
Strategy Fund in exchange for shares of Dual Strategy Fund. The value,
immediately after the Reorganization, of Contracts funded by Continuing Account
A will be identical to their value immediately prior to the Reorganization.
7
<PAGE> 11
At present, Account A is a separate account classified as an open-end
diversified management investment company, as defined in the 1940 Act. Account A
is supervised by a Board of Managers having a majority of members drawn from
outside American Fidelity. Account A invests directly in a diversified portfolio
of equity securities, mainly common stock, in accordance with the investment
objectives and policies outlined in its Prospectus. Account A's assets come
exclusively from Participant premium payments and accumulated values under the
Account A Variable Annuity Contracts issued by American Fidelity. Dual Strategy
Fund is an open-end diversified management investment company with substantially
the same investment objectives as Account A. It will serve as the funding
vehicle for Account A and certain other variable annuity contracts issued by
American Fidelity. Dual Strategy Fund is supervised by its Board of Directors,
which is comprised of the same persons as the members of the Board of Managers
of Account A.
Because Continuing Account A will no longer be a management investment
company after the Reorganization, the Board of Managers will no longer be
necessary and will cease to exist. Likewise, Continuing Account A will not
employ an investment adviser and therefore will incur no investment management
fees. Dual Strategy Fund, however, will incur investment management fees and the
other expenses of operating its portfolio. Dual Strategy Fund will have the same
investment adviser and sub-advisers as Account A, and Dual Strategy Fund will
operate pursuant to investment objectives and policies that are substantially
the same as those of Account A. Aggregate fees and expenses of Continuing
Account A and Dual Strategy Fund after the Reorganization will not be different
from those of Account A prior to the Reorganization. American Fidelity will pay
all costs and expenses associated with effecting the Reorganization.
After the Reorganization, Continuing Account A Contract Owners and
Participants will exercise voting rights by instructing American Fidelity with
regard to how shares of Dual Strategy Fund attributable to their Contracts
should be voted. Presently, Contracts Owners vote directly in accordance with
instructions from their respective Participants. Each Continuing Account A
Participant will have the same voting power in relation to other Continuing
Account A Participants after the Reorganization that he or she had before the
Reorganization. In each case, the person's voting power would be proportional to
his or her indirect economic interest in Dual Strategy Fund. American Fidelity
will vote Dual Strategy Fund shares held by Account A for which no voting
instructions have been received in the same proportion as those for which
instructions have been received.
The Reorganization is intended to be tax free under Section 351(a).
PURPOSE OF THE REORGANIZATION
The purpose of the Reorganization is to enable Dual Strategy Fund to act as
the underlying investment medium for Continuing Account A, as well as other
separate accounts of American Fidelity. American Fidelity intends to offer Dual
Strategy Fund as an investment option to participants in the AF Advantage
Variable Annuity offered through its Separate Account B. Adding Dual Strategy
Fund as an investment choice for participants in Separate Account B, and
possibly other separate accounts in the future, may increase the asset base of
Dual Strategy Fund which should result in economies and efficiencies that will
benefit Continuing Account A Contract Owners and Participants.
PRINCIPAL RISK FACTORS
The principal risk factors involved in investing in Continuing Account A
and Dual Strategy Fund will be substantially similar to the principal risk
factors currently associated with investing in Account A. Those risk factors are
that the investments made by Dual Strategy Fund may not appreciate in value or
will, in fact, lose value. Specifically, the principal investment risk
applicable to both Account A and Dual Strategy Fund is "market risk," which
refers to the degree to which the price of a security will react to changes in
conditions in the securities markets, changes in an issuer's situation and
changes in overall level of interest rates. There is also "financial risk,"
which refers to the ability of the issuer of a security to pay principal and
interest when due or to maintain or increase dividends; and "current income
volatility," which refers to the degree to which
8
<PAGE> 12
and the timing by which changes in the overall level of interest rates or other
underlying economic variables or indices affect the current income from an
investment.
AGREEMENT AND PLAN OF REORGANIZATION
The Agreement and Plan of Reorganization provides that on the closing date
of the Reorganization (the "Closing Date"), Account A will transfer all
portfolio assets and related liabilities of Account A in return for shares of
Dual Strategy Fund of equal value. The Closing Date is presently expected to be
January 1, 1999. American Fidelity will record shares issued by Dual Strategy
Fund as assets of Continuing Account A. The Account A assets include cash,
securities and other investments held or in transit, accounts receivable for
sold investments, and dividends and interest receivable. The number of shares of
Dual Strategy Fund to be issued in exchange will 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 per share
value of the Dual Strategy Fund shares. The shares of Dual Strategy Fund, when
issued, will be fully paid and non-assessable and have no preemptive or
conversion rights.
As of the Closing Date, American Fidelity will cause the shares of Dual
Strategy Fund it receives pursuant to the Reorganization 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 exactly equal to their former interests in Account A. American
Fidelity will take all action necessary to ensure that such interests in
Continuing Account A, immediately following the Closing Date, are duly and
validly recorded on the Contract Owners' and Participants' individual account
records.
CONDITIONS TO CLOSING
The Agreement and Plan of Reorganization contains several conditions that
must be satisfied before the Reorganization can be completed. The primary
conditions that remain to be fulfilled are the approval of the Reorganization by
Contract Owners and Participants and the issuance of an order by the Securities
and Exchange Commission that provides exemptive relief and approval necessary to
effect the Reorganization. If issued, that order will be based, in part, upon a
finding that the terms of the Reorganization, including the terms of the
exchange of Account A assets for Dual Strategy Fund shares, are fair, reasonable
and free from overreaching. The order will not constitute a finding that
Contract Owners and Participants should or should not approve the
Reorganization. Rather, the order would find that if such approval is given,
permitting the Reorganization to take place would be in the public interest and
consistent with the protection of investors.
Certain other conditions in the Agreement and Plan of Reorganization deal
with the obligations of the parties to the Agreement to make all necessary state
and federal disclosure and regulatory filings, to obtain all necessary state and
federal regulatory approvals, and to obtain opinions of counsel regarding legal
and tax consequences of the Reorganization. The Reorganization's closing also
would not take place if the Securities and Exchange Commission were to issue an
unfavorable advisory report regarding the Reorganization or to institute any
proceeding seeking to enjoin the Reorganization. No such report or proceeding is
anticipated.
APPROVALS OF THE REORGANIZATION
The Board of Managers of Account A, including those members who are not
"interested persons" of Account A or of American Fidelity, unanimously approved
the Reorganization and the participation of Account A in it. Their approval was
based upon their findings that the Reorganization would be in the best interest
of Account A and that Contract Owners and Participants would not suffer any
dilution of their interests as a result of the exchange of Account A assets for
shares of Dual Strategy Fund. THE BOARD OF MANAGERS RECOMMENDS A VOTE IN FAVOR
OF THE REORGANIZATION.
The Board of Directors of Dual Strategy Fund, including those directors who
are not "interested persons" of Dual Strategy Fund or of American Fidelity,
unanimously approved the Agreement and Plan of Reorganization and Dual Strategy
Fund's participation in it. Their approval also was based upon their findings
that the Reorganization would be in the best interests of Dual Strategy Fund and
that no participant or owner
9
<PAGE> 13
of a variable annuity funded by Dual Strategy Fund would suffer any dilution of
his or her interest as a result of the Reorganization.
INVESTMENT MANAGEMENT AND SERVICE PROVIDERS
Dual Strategy Fund has the same management as Account A, the same
investment adviser and sub-advisers, custodian and independent accountants.
Account A is managed by its Board of Managers. The affairs of Account A are
conducted in accordance with Rules and Regulations adopted by the Board of
Managers of Account A and the Board of Directors of American Fidelity.
American Fidelity serves as the investment adviser to Account A and
develops and implements an investment program subject to the supervision of the
Board of Managers. American Fidelity has contracted with two sub-advisers,
Lawrence W. Kelly & Associates, Inc. and Todd Investment Advisors, Inc., to
render investment advisory services to Account A. The sub-advisers have provided
such services since 1995. These services include providing recommendations on
management of assets, providing research reports and information, determining
those securities to be bought or sold and placing orders for the purchase or
sale of securities. Investment decisions regarding Account A's portfolio are
subject to the control of the Board of Managers. Kelly's address is 200 South
Los Robles Avenue, Suite 510, Pasadena, California 91101 and Todd Investments'
address is 101 South Fifth Street, Suite 3160, Louisville, Kentucky 40202.
American Fidelity and both sub-advisers are registered with the SEC under the
Investment Advisers Act of 1940.
Dual Strategy Fund is managed by its Board of Directors, which is comprised
of the same persons who serve on Account A's Board of Managers. American
Fidelity also serves as investment adviser to Dual Strategy Fund and conducts
its business and affairs. American Fidelity has also engaged Kelly and Todd
Investments to act as Dual Strategy Fund's sub-advisers to provide the
day-to-day portfolio management for Dual Strategy Fund. The Board of Directors
is responsible for deciding matters of general policy and reviewing the actions
of American Fidelity and the sub-advisers, the custodian and other providers of
services to Dual Strategy Fund. The investment advisory, sub-advisory and
custodial agreements of Account A and Dual Strategy Fund are substantially
identical.
American Fidelity Securities, Inc., 2000 Classen Center, Oklahoma City,
Oklahoma 73106, will continue to serve as the principal underwriter for the
Contracts, and InvestTrust, N.A., Account A's recently appointed custodian, is
the custodian for Dual Strategy Fund. KPMG Peat Marwick LLP is the independent
accountant for Account A and will also serve as the independent accountant for
Dual Strategy Fund.
DISTRIBUTION, PURCHASE, WITHDRAWAL AND SURRENDER PROCEDURES
The distribution, purchase, withdrawal and surrender procedures provided
for in the Account A Variable Annuity Contracts will not be altered as a result
of the Reorganization.
VOTING
Each share of Dual Strategy Fund outstanding is entitled to one vote on all
matters submitted to a vote of shareholders. The shares have noncumulative
voting rights. American Fidelity will be the legal owner of the Dual Strategy
Fund shares beneficially owned by Continuing Account A Participants. However,
when Dual Strategy Fund solicits proxies in conjunction with a shareholder vote,
American Fidelity will obtain from Contract Owners and Participants instructions
as to how to vote those shares. American Fidelity will vote the Dual Strategy
Fund shares in proportion to those instructions. American Fidelity believes that
these procedures will not result in any diminution of the voting power of
Contract Owners and Participants. The only difference in voting power before and
after the Reorganization results from the fact that Account A may not be the
only separate account with money invested in Dual Strategy Fund. Thus, other
separate accounts' contract owners and participants would also instruct American
Fidelity with regard to Dual Strategy Fund shares in proportion to their
indirect economic interests.
10
<PAGE> 14
TAX CONSEQUENCES OF THE REORGANIZATION
American Fidelity believes, based on its review of existing Federal income
tax laws and regulations, that the transfer of portfolio assets from Account A
to Dual Strategy Fund in exchange for the issuance of shares of Dual Strategy
Fund will be a tax-free event. Neither Account A, Dual Strategy Fund nor
Continuing Account A will realize any gain or loss on the asset transfer, and
Dual Strategy Fund will succeed to the same adjusted basis of the portfolio
assets as such assets had prior to the transfer. American Fidelity has received
an opinion of counsel confirming the tax-free nature of the Reorganization.
However, to the extent any tax liability arises out of this transfer, American
Fidelity will bear the liability.
COMPARATIVE FEE TABLE
After the Reorganization, Continuing Account A, as a unit investment trust,
will have no investment management fee. However, its assets will be invested in
shares of Dual Strategy Fund that bear the advisory and operating expenses. The
following comparative fee table and examples illustrate the charges and
deductions currently applicable to Account A and the charges and deductions that
will be applicable to Continuing Account A after the Reorganization, including
the fees and expenses of Dual Strategy Fund.
BEFORE REORGANIZATION
<TABLE>
<S> <C>
Contract Owner Transaction Expenses (as a percentage of
purchase payments)
Sales Load Imposed on Purchases........................... 3.00%
Administrative Expense.................................... 0.25%
Minimum Death Benefit Expense............................. 0.75%
Deferred Sales Load....................................... None
Surrender Fees............................................ None
Exchange Fee.............................................. None
Per Payment Charge.......................................... $ 0.50
One-time Contract Fee....................................... $ 15.00
Annual Expenses (as a percentage of average net assets)
Management Fee............................................ .50000%
Mortality and Expense Risk Fees........................... .96025%
---------
Total Annual Expenses............................. 1.46025%
=========
</TABLE>
AFTER REORGANIZATION
<TABLE>
<S> <C>
Contract Owner Transaction Expenses (as a percentage of
purchase payments)
Sales Load Imposed on Purchases........................... 3.00%
Administrative Expense.................................... 0.25%
Minimum Death Benefit Expense............................. 0.75%
Deferred Sales Load....................................... None
Surrender Fees............................................ None
Exchange Fee.............................................. None
Per Payment Charge.......................................... $ 0.50
One-time Contract Fee....................................... $ 15.00
Account A Annual Expenses (as a percentage of average net
assets)
Mortality and Expense Risk Fees........................... .96025%
Dual Strategy Fund Expenses (as a percentage of average net
assets)
Management Fee............................................ .50000%
---------
Total Account A and Dual Strategy Fund Annual
Expenses......................................... 1.46025%
=========
</TABLE>
In addition to the fees shown, premium taxes may be charged by some states
on purchase payments or amounts annuitized.
11
<PAGE> 15
If you surrender your Contract or annuitize at the end of the applicable
time period, you would pay the following expenses on a $1,000 investment,
assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Account A.................................... $69 $99 $131 $221
Continuing Account A......................... $69 $99 $131 $221
</TABLE>
This example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown above.
Similarly, the 5% annual rate of return assumed in the example is not an
estimate or guarantee of future performance. Under Federal income tax laws, a
penalty tax may be assessed upon withdrawal or amounts accumulated under any
Variable Annuity Contract.
CAPITALIZATION
The following table sets forth the capitalization of Account A and Dual
Strategy Fund as of June 30, 1998 and the pro forma capitalization of Continuing
Account A and Dual Strategy Fund as if the Reorganization had occurred on that
date. The Reorganization will be accounted for as a purchase of net assets by
Dual Strategy Fund from Account A. The cost basis of the assets acquired by Dual
Strategy Fund will be restated to value on the date of the Reorganization. The
table reflects that one share of Dual Strategy Fund would be issued to
Continuing Account A for every $22.694 of net assets transferred to Dual
Strategy Fund, a figure representing the net asset value per share of Dual
Strategy Fund on June 30, 1998.
<TABLE>
<CAPTION>
JUNE 30, 1998 (UNAUDITED)
------------------------------------------------------------------
NET ASSET
VALUE PER NET ASSET ACCUMULATION
NET ASSETS ACCUMULATION VALUE PER UNITS SHARES
(IN 000'S) UNIT SHARE OUTSTANDING OUTSTANDING
---------- ------------ --------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Account A........................... $167,786 $22.694 N/A 7,393,375 N/A
Pro Forma Continuing Account A...... 167,786 22.694 N/A 7,393,375 N/A
Dual Strategy Fund.................. -0- N/A -0- N/A -0-
Pro Forma Dual Strategy Fund........ 167,786 N/A $22.694 N/A 7,393,375
</TABLE>
GENERAL DESCRIPTION OF AMERICAN FIDELITY,
ACCOUNT A AND DUAL STRATEGY FUND
AMERICAN FIDELITY
American Fidelity is an Oklahoma stock life insurance company organized in
1960. Its principal executive offices are located at 2000 Classen Center,
Oklahoma City, Oklahoma 73106, telephone number (405) 523-2000. American
Fidelity is licensed to conduct life, annuity and accident and health insurance
business in 49 states and the District of Columbia.
American Fidelity has been a wholly owned subsidiary of American Fidelity
Corporation since 1974. The stock of American Fidelity Corporation is controlled
by a family investment partnership, Cameron Enterprises, A Limited Partnership,
whose managing general partners are William M. Cameron, William E. Durrett,
Edward C. Joullian, III, John W. Rex and Theodore M. Elam. The address of both
American Fidelity Corporation and Cameron Enterprises, A Limited Partnership is
2000 Classen Center, Oklahoma City, Oklahoma 73106. American Fidelity has served
as the investment adviser to Account A since 1968. American Fidelity does not
serve as investment adviser to any other variable annuity, mutual fund or other
company.
ACCOUNT A
Since 1968, American Fidelity has maintained Account A as a separate
account under Oklahoma insurance law. Account A is registered with the
Securities and Exchange Commission as an open-end diversified management
investment company under the 1940 Act, which means that at least 75% of the
value
12
<PAGE> 16
of the total assets of Account A is represented by cash and cash items,
government securities, securities of other investment companies and other
securities, limited in respect of any one issuer to an amount not greater than
5% of the value of the total assets of Account A and to not more than 10% of the
outstanding voting securities of such issuer. Account A has no subaccounts.
The assets of Account A are segregated from the assets of American Fidelity
and, under Oklahoma law, may not be charged with the liabilities arising out of
other business activities of American Fidelity. Account A income, gains or
losses, realized or unrealized, are credited to or charged against Account A
without regard to income, gains or losses of American Fidelity. The obligations
arising under the Variable Annuity Contracts are not obligations of American
Fidelity. Account A has no sub-accounts.
As of the record date, no single Variable Annuity Contract accounted for
more than 10% of the assets of Account A.
DUAL STRATEGY FUND
Dual Strategy Fund is an open-end, diversified management investment
company incorporated under the laws of Maryland on March 18, 1998 to be the
successor to Account A. An investor in Dual Strategy Fund is entitled to a pro
rata share of all dividends and distributions arising from the net income and
capital gains on its investments. Likewise, an investor shares pro rata in any
losses of Dual Strategy Fund.
Dual Strategy Fund will initially offer its shares solely to Continuing
Account A as the funding vehicle for the Contracts. American Fidelity intends,
in the near future, to add Dual Strategy Fund as an investment option for
participants in American Fidelity's Separate Account B. Dual Strategy Fund
shares are not offered directly to the general public. American Fidelity will
hold all shares of Dual Strategy Fund attributable to American Fidelity separate
accounts. Thus American Fidelity may be deemed a controlling person of Dual
Strategy Fund, as that term is defined in the 1940 Act. Dual Strategy Fund may
offer its shares to other insurance company separate accounts supporting other
variable annuity contracts, although it has no present plans to do so.
CONTRACT OWNER PROPOSALS
Under the regulations of the Securities and Exchange Commission, a Contract
Owner proposal intended for presentation at an annual meeting must be received
at Account A's principal executive offices not less than 120 days in advance of
the date of Account A's proxy statement released to Contract Owners in
connection with the previous year's annual meeting of Contract Owners. Account A
will not have an annual meeting in 1999 if the Reorganization is approved and
implemented. Absent the Reorganization, Account A will announce the date of its
1999 annual meeting sufficiently in advance to provide Contract Owners a
reasonable time to submit proposals.
13
<PAGE> 17
AVAILABLE INFORMATION
Account A will furnish, without charge, a copy of its 1997 annual report
and its June 30, 1998 semi-annual report to any Contract Owner or Participant
upon request. To obtain these reports, you may write to American Fidelity at
P.O. Box 25523, Oklahoma City, Oklahoma 73125-0523 or call our toll-free number
(800) 654-8489.
Account A and Dual Strategy Fund are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended, and the 1940
Act. This information, including proxy and information statements, may be
inspected and copied at the public reference facilities maintained by the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549 and its regional offices at 7
World Trade Center, Suite 1300, New York, New York 10048 and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of the material may also be
obtained from the Public Reference Branch, Office of Consumer Affairs and
Information Services of the SEC at prescribed rates. In addition, the SEC
maintains a Web site (http://www.sec.gov) that contains information filed by
Account A and Dual Strategy Fund, each of which files such information
electronically with the SEC.
OTHER BUSINESS
The Board of Managers knows of no other business which will be presented
for action at the meeting. If any other matter should properly come before the
meeting, it is the intention of the persons named in the form of proxy sent to
Contract Owners to vote the same in accordance with their best judgment.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE SIGN
AND PROMPTLY RETURN THE ENCLOSED VOTING INSTRUCTIONS OR PROXY, AS APPLICABLE.
BY ORDER OF THE BOARD OF MANAGERS
14
<PAGE> 18
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is entered into
this 13th day of October, 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 adviser 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 membership, 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;
<PAGE> 19
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 January 1, 1999, 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, including obligations 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' and
participants' 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
A-2
<PAGE> 20
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;
A-3
<PAGE> 21
(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; provided, however, such
filing shall not be required if counsel to Account A and the Fund
determines that registration on Form N-14 is not necessary in accordance
with advice of the staff of the Commission with respect to conversion
transactions similar to 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;
(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
Lawrence W. Kelly & Associates, Inc. and Todd Investment Advisors, Inc.
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;
A-4
<PAGE> 22
(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
March 31, 1999, and no subsequent date can be mutually agreed upon.
A-5
<PAGE> 23
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.
<TABLE>
<S> <C>
ATTEST: AMERICAN FIDELITY ASSURANCE COMPANY
By: /s/ STEPHEN P. GARRETT By: /s/ JOHN W. REX
---------------------------------------- ----------------------------------------
Stephen P. Garrett, Secretary John W. Rex, President
ATTEST: AMERICAN FIDELITY VARIABLE ANNUITY FUND A
By: /s/ DANIEL D. ADAMS, JR. By: /s/ JOHN W. REX
---------------------------------------- ----------------------------------------
Daniel D. Adams, Jr., Secretary John W. Rex, Chairman
ATTEST: AMERICAN FIDELITY DUAL STRATEGY FUND, INC.
By: /s/ DANIEL D. ADAMS, JR. By: /s/ JOHN W. REX
---------------------------------------- ----------------------------------------
Daniel D. Adams, Jr., Secretary John W. Rex, President
</TABLE>
A-6
<PAGE> 24
URGENT
IN ORDER FOR YOUR VOTE TO BE CERTIFIED AND RETURNED TO US IN TIME FOR THE ANNUAL
MEETING, WE URGE YOU TO DROP IT IN THE MAIL TODAY. A POSTAGE-PAID ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE.
<PAGE> 25
INSTRUCTIONS OF PARTICIPANT UNDER
GROUP VARIABLE ANNUITY CONTRACT CONCERNING
MATTERS TO BE VOTED UPON AT THE
ANNUAL MEETING OF VARIABLE ANNUITY CONTRACT OWNERS
Name Billing Number ____________________
Number of Votes Attributable to Participant's Individual Account
____________________
The undersigned participant under a group variable annuity contract of
American Fidelity Variable Annuity Fund A ("Account A") hereby notifies the
owner of such contract of his or her instructions relative to the casting of
votes attributable to the participant's individual account upon the matters to
be voted upon at the Annual Meeting of Variable Annuity Contract Owners to be
held on December 21, 1998, or any adjournment thereof.
1. Election of Managers:
[ ] FOR ALL NOMINEES LISTED BELOW [ ] WITHHOLD AUTHORITY to
(Except as marked to the vote for all nominees listed
below
contrary)
John W. Rex, Daniel D. Adams, Jr., Jean G. Gumerson, Edward C. Joullian, III,
Gregory M. Love, J. Dean Robertson, G. Rainey Williams, Jr.
INSTRUCTIONS: To withhold authority to vote for an individual nominee write the
nominee's name on the space provided:
- --------------------------------------------------------------------------------
2. Proposal to ratify the appointment of KPMG Peat Marwick LLP as Account
A's independent certified public accountants for 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To approve an Agreement and Plan of Reorganization whereby Account A
(presently an open-end management investment company) will become a unit
investment trust and transfer all of its assets to American Fidelity
Dual Strategy Fund, Inc. ("Dual Strategy Fund") in exchange for shares
of Dual Strategy Fund.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, upon such other business as may properly come
before the meeting or any adjournment thereof.
Please complete this form and forward it, as promptly as possible, in the
enclosed self-addressed envelope which requires no postage. To ensure that your
vote is counted, you should send it early enough to be received by November 9,
1998.
THE BOARD OF MANAGERS RECOMMENDS A VOTE "FOR" THE NOMINEES, THE RATIFICATION OF
ACCOUNTANTS AND THE REORGANIZATION. UNLESS CONTRARY INSTRUCTIONS ARE GIVEN
ABOVE, THE PARTICIPANT'S VOTE WILL BE CAST FOR ALL NOMINEES AND FOR ALL
PROPOSALS.
DATE ____________________ SIGNATURE
<PAGE> 26
URGENT
IN ORDER FOR YOUR VARIABLE ANNUITY PARTICIPANTS' VOTES TO BE COUNTED AT THE
ANNUAL MEETING, WE WILL NEED THE ENCLOSED PROXY. WE URGE YOU TO SIGN IT AND DROP
IT IN THE MAIL TODAY SO WE WILL RECEIVE IT IN TIME TO BE COUNTED. A POSTAGE-PAID
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
<PAGE> 27
PROXY
The undersigned Contract Owner of American Fidelity Variable Annuity Fund A
("Account A") does hereby constitute and appoint JOHN W. REX and DANIEL D.
ADAMS, JR., or either of them (with full power to act alone), as attorneys and
agents for the undersigned, to vote as proxies for the undersigned and with full
power of substitution to attend and represent the undersigned at the Annual
Meeting of Variable Annuity Contract Owners of Account A, to be held at the
office of American Fidelity Assurance Company, 2000 Classen Center, Oklahoma
City, Oklahoma, on December 21, 1998, at 9:00 A.M., Central Time, and at any
adjournments thereof, and for or on behalf of the undersigned to vote upon
propositions described below and upon any related or other business which may
properly come before the meeting according to the number of votes attributable
to the group contract owned by the undersigned, which the undersigned would be
entitled to vote if personally present, hereby revoking any proxy or proxies
heretofore given by the undersigned.
1. Election of Managers:
John W. Rex, Daniel D. Adams, Jr., Jean G. Gumerson, Edward C. Joullian, III,
Gregory M. Love, J. Dean Robertson, G. Rainey Williams, Jr.
2. Proposal to ratify the appointment of KPMG Peat Marwick LLP as Account A's
independent certified public accountants for 1998.
3. To approve an Agreement and Plan of Reorganization whereby Account A
(presently an open-end management investment company) will become a unit
investment trust and transfer all of its assets to American Fidelity Dual
Strategy Fund, Inc. ("Dual Strategy Fund") in exchange for shares of Dual
Strategy Fund.
4. In their discretion, upon such other business as may properly come before the
meeting or any adjournment thereof.
THE BOARD OF MANAGERS RECOMMENDS A VOTE "FOR" THE NOMINEES, THE
RATIFICATION OF ACCOUNTANTS AND THE REORGANIZATION. THIS PROXY IS SOLICITED ON
BEHALF OF THE BOARD OF MANAGERS AND MAY BE REVOKED PRIOR TO ITS EXERCISE.
Dated ____________________________ , 1998
___________________________________________
Contract
Owner
By
Name
Title
PLEASE SIGN THIS FORM AND FORWARD IT, NO LATER THAN DECEMBER 17, 1998, IN THE
ENCLOSED STAMPED, SELF-ADDRESSED ENVELOPE. THE ABSENCE OF A QUORUM WOULD REQUIRE
THE SCHEDULING OF ANOTHER MEETING.
CONTRACT NUMBER
- -------------------------
<PAGE> 28
AMERICAN FIDELITY VARIABLE ANNUITY FUND A
("ACCOUNT A")
THIS PROXY IS BEING SOLICITED BY THE BOARD OF MANAGERS
VOTE CERTIFICATION
Except as noted below, votes attributable to your group contract must be
cast in accordance with the instructions of Participants. As of ,
1998, Participants under your contract have instructed you that the votes
attributable to their accounts be cast as follows:
1. Election of Managers:
<TABLE>
<S> <C> <C> <C> <C>
John W. Rex FOR WITHHOLD AUTHORITY
--------------------------- ---------------------------
Daniel D. Adams, Jr. FOR WITHHOLD AUTHORITY
--------------------------- ---------------------------
Jean G. Gumerson FOR WITHHOLD AUTHORITY
--------------------------- ---------------------------
Edward C. Joullian, III FOR WITHHOLD AUTHORITY
--------------------------- ---------------------------
Gregory M. Love FOR WITHHOLD AUTHORITY
--------------------------- ---------------------------
J. Dean Robertson FOR WITHHOLD AUTHORITY
--------------------------- ---------------------------
G. Rainey Williams, Jr. FOR WITHHOLD AUTHORITY
--------------------------- ---------------------------
</TABLE>
2. Proposal to ratify the appointment of KPMG Peat Marwick LLP as Account A's
independent certified public accountants for 1998.
---------------------------- FOR
---------------------------- AGAINST
---------------------------- ABSTAIN
3. Proposal to approve an Agreement and Plan of Reorganization whereby Account A
(presently an open-end management investment company) will become a unit
investment trust and transfer all of its assets to American Fidelity Dual
Strategy Fund, Inc. ("Dual Strategy Fund") in exchange for shares of Dual
Strategy Fund.
---------------------------- FOR
---------------------------- AGAINST
---------------------------- ABSTAIN
Instructions were NOT received for
----------------------------------- votes. Under Rules and Regulations of
Account A, these votes must be cast in the same proportions as those for which
instructions were received.
I hereby certify that the totals stated herein are true to the best of my
knowledge and belief.
- --------------------------------------
Daniel D. Adams, Jr.,
Secretary of the Board of Managers
