Filed On 2/26/04 9:54am ET · SEC File 811-08873 · Accession Number 1061130-4-2
As Of Filer Filing As/For/On Docs:Pgs
2/26/04 American Fidelity Dual Strat..Inc NSAR-B 12/31/03 3:25
Annual Report of a Money-Management Company · Form N-SAR
Filing Table of Contents
Document/Exhibit Description Pages Size
1: NSAR-B American Fidelity Dual Strategy Fund, Inc. 9 43K
2: EX-99.77B ACCT LTTR American Fidelity Dual Strategy Fund Acct 1 9K
Letter
3: EX-99.77C VOTES American Fidelity Dual Strategy Fund Board 15± 57K
Mtg Minutes
EX-99.77C VOTES · American Fidelity Dual Strategy Fund Board Mtg Minutes
AMERICAN FIDELITY DUAL STRATEGY FUND, INC.
MINUTES OF SPECIAL MEETING OF SHAREHOLDERS
April 11, 2003
A Special Meeting of Shareholders of American Fidelity Dual Strategy
Fund, Inc., was held at 2000 Classen Boulevard, Oklahoma City,
Oklahoma on April 11, 2003, at 9:00 a.m.
CALL TO ORDER
The meeting was called to order by Ms. Nancy Steeber, Acting Chairman.
INTRODUCTIONS
Ms. Steeber introduced herself and acknowledged certain persons who
were present. They were:
Mr. Daniel D. Adams, Jr., Vice President
Investment Department
American Fidelity Corporation
and
Secretary, Board of Directors
American Fidelity Dual Strategy Fund,
Inc.
Mr. Marvin Ewy Second Vice President
Accounting Department
American Fidelity Corporation
Ms. Cherie Horsfall Assistant Vice President
Annuity Services Department
American Fidelity Assurance Company
Mr. Dan Junkin President
Asset Services Corporation, LLC
Mr. Derrick Owens Annuity Product Manager AFES
Division
American Fidelity Assurance Company
Ms. Nancy Steeber Vice President
Annuity Services Department
American Fidelity Assurance Company
DETERMINATION OF OUORUM
At the request of Ms. Steeber, Ms. Horsfall confirmed that American
Fidelity .Assurance Company is the sole shareholder and by its
presence represented 100% of the 9,236,709.0797 units of the Dual
Strategy Fund, Inc. owned by variable annuity participants on January
31, 2003, the Record Date for this meeting, all of whom were given an
opportunity to vote by proxy or in person on the issues before this
special meeting. She further confirmed that a quorum was present.
PRESENTATION OF NOTICE OF MEETING
Mr. Adams presented and read a copy of the Notice of the Meeting,
together with Proof of Mailing of the same to each Contract Owner and
to each Participant at his address as the same appears on the books as
of January 31, 2003, the Record Date for this meeting.
READING AND APPROV AL OF MINUTES
Mr. Adams read the minutes of the Special Meeting of the Dual Strategy
Fund held on June 18, 1999, and upon motion duly made, seconded, and
unanimously carried, it was:
RESOLVED: That the Minutes of the Special Meeting held on
June 18, 1999, are hereby approved.
APPROV AL OF SUB-ADVISORY AGREEMENT WITH SENECA
WHEREAS: The sub-advisory agreement between American
Fidelity Dual Strategy Fund, Inc. (the "Fund") and Lawrence
W. Kelly and associates was terminated by the Board of
Directors of the Fund on November 6,2002.
WHEREAS: The Board of Directors of the Fund approved an
interim sub- advisory agreement with Seneca Capital
Management LLC to assist with the management of the assets
of the Fund;
THEREFORE BE IT RESOLVED: That the sub-advisory contract by
and between American Fidelity Assurance Company and Seneca
Capital Management LLC is hereby ratified by said variable
annuity participants.
Votes for 8,603,070.8368; against 302,040.3869;
abstain 331,579.8560.
The contract is approved.
APPROVAL OF AMENDED AND RESTATED ADVISORY AGREEMENT
WHEREAS: American Fidelity Assurance Company has served
continuously as .the investment manager of the Fund since
its inception in 1968;
WHEREAS: The Board of Directors of the Fund has approved an
Amended and Restated Management and Investment Advisory
Agreement subject to shareholder approval.
WHEREAS: The proposed Amended and Restated Agreement does
not increase the fee paid to American Fidelity Assurance
Company by the Fund;
THEREFORE BE IT RESOLVED: That the Amended and Restated
Management and Investment Advisory Agreement is hereby
ratified by said variable annuity participants.
Votes for 8,548,574.2532; against 338,063.5523;
abstain 350,071.2741.
The agreement is approved.
REVIEW OF OPERATION OF THE FUND
Mr. Ewy reported that the Dual Strategy Fund at the close of business
April 10, 2003, had assets of$155,172,975. The total variable annuity
business of American Fidelity Assurance Company on that date equaled
$196,695,226. There are over 35,000 participants in the variable
annuity product. After three years of bear market, there is .some
movement of customers toward fixed annuity products despite the low
interest rates prevalent in the current market. American Fidelity
Assurance Company has over 61,000 participants in fixed return
annuities with account balances of over $600,000,000.
Mr. Junkin indicated that Seneca Capital Management LLC is a large cap
growth manager located in San Francisco. It was selected after the
records of about twenty firms were reviewed and after the Board of
Directors interviewed three finalists. The review of potential
managers emphasizes finding firms where the investment process is
rational, produces rational results, and involves staff with
considerable tenure with the firm.
PARTICPANT OUESTION AND ANSWER PERIOD
Ms. Steeber thanked those present for assisting with the preparations
for the meeting.
ADJOURNMENT
There being no further business to transact, the meeting was
adjourned.
/S/
Daniel D. Adams, Jr.
Secretary
/S/
Nancy Steeber
Acting Chairman
AMERICAN FIDELITY DUAL STRATEGY FUND, INC.
BOARD OF DIRECTORS MEETING
FEBRUARY 19, 2003
MINUTES
A Meeting of the Board of Directors of American Fidelity Dual Strategy
Fund, Inc. ("the Fund") was convened at 3:00 p.m. on Wednesday,
February 19, 2003 in the American Fidelity Corporation Board Room,
Seventh Floor, North Building, 2000 Classen Boulevard, Oklahoma City,
Oklahoma pursuant to valid written notice thereof.
The following members of the Board of Directors were present:
Jean Gumerson
Gregory M. Love
J. Dean Robertson, DDS
John W. Rex
G. Rainey Williams, Jr.
Daniel D. Adams, Jr.
Also present by invitation of the Directors were Bill Cameron, Marvin
Ewy, Steve Garrett, Al Litchenburg, and Nancy Steeber, all officers or
employees of American Fidelity Assurance Company (" AF A"); and Andrew
Junkin and Dan Junkin, Asset Services Company (" ASC"); and Jennifer
Wheeler of McAfee & Taft.
Mr. Rex, Chairman, presided over the meeting. Mr. Adams, Secretary,
kept the Minutes. The Chairman called the meeting to order, introduced
the guests, determined that a quorum of the board members was present
and that a quorum of the non-interested members of the Board was
present, and proceeded to conduct the meeting.
INVESTMENT PORTFOLIOS
Mr. Adams presented the report on the consolidated portfolios of the
Fund and the individual fund portfolios of each Investment Sub-Advisor
as of December 31, 2002 and February 17, 2003. After discussion, upon
motion duly made, seconded and unanimously carried it was:
RESOLVED: That the Investment Portfolio Report is hereby
accepted and approved.
INVESTMENT CONSULTANT REPORT
Mr. Junkin presented the ASC Investment Consultant Report on the Fund
as of December 31 2002. After discussion, upon motion duly made,
seconded and unanimously carried it was:
RESOLVED: That the Investment Consultant Report of Asset
Services Company is hereby accepted and approved.
AMENDMENT TO THE PERFORMANCE ASSESSMENT CRITERIA OF FUND SUB-ADVISORS
Mr. Junkin presented a proposal by AF A and ASC to change certain score
definitions in the Performance Assessment Criteria of Fund Sub-Advisors
from a score of 65 or more being considered "very good-more than
passing," to a score of 65 to 79 being considered "more than passing"
and a score of80 or more being considered "a very good score." After
discussion, upon motion duly made, seconded and unanimously carried it
was:
RESOLVED: That the change in score definitions in the
Performance Assessment Criteria of Fund Sub-Advisors as
proposed is hereby accepted and approved.
MARKETING AND OPERATIONS REPORT
Ms. Steeber presented the Marketing and Operations Reports discussing
the Fund's Summary of Asset Growth of Separate Accounts A, Band C at
December 31,2000, December 31,2001, and December 31, 2002; and a
summary of AFA Annuity Products at December 31, 2002. After discussion,
upon motion duly made, seconded and unanimously carried it was:
RESOLVED: That the Marketing and Operation Reports are hereby
accepted and approved.
MANAGEMENT FEES REPORT
Marvin Ewy presented a Report on Mutual Fund Management Fees with his
observations and a report on AF A Separate Account B Management Fees.
He noted that, of the funds available from Separate Account B, the
Fund, a large cap blend fund, has the lowest fees except for the index
fund offered by Separate Account B. The directors requested additional
information relating to mutual fund management fees; and that
information is attached to these Minutes as Exhibit A.
Mr. Ewy also advised that AF A would not propose the establishment of a
small cap fund until market conditions improve. After discussion, upon
motion duly made, seconded and unanimously carried it was:
RESOLVED: That the Report on Mutual Fund Management Fees and
AFA Separate Account B Management Fees are hereby accepted
and approved.
FORM N-IA
Ms. Wheeler presented a report on the N-IA annual registration with the
Securities and Exchange Commission, a draft of which had been delivered
to the Directors for review prior to this meeting.
Mr. Williams requested that the language describing Todd Investment
Advisors ("Todd") on page one (I) be made consistent with language
related to Seneca Capital Management ("Seneca"), and the revised
language is attached to these Minutes as Exhibit B-1. Mr. Love
requested that the language describing Seneca on page six (6) be made
consistent with that regarding Todd, and the revised language is
attached to these Minutes as Exhibit B-2. After discussion, upon
motion duly made and seconded, the following resolution was unanimously
carried:
WHEREAS, the Directors have reviewed and considered the
Registration Statement on Form N-IA to be filed with the
Securities and Exchange Commission pursuant to the Investment
Company Act of 1940 and the Securities Act of 1933;
NOW, THEREFORE, BE IT RESOLVED, that the Registration
Statement on Form N-1A is hereby accepted and approved in
substantially the form presented to the Directors with the
changes requested;
FURTHER RESOLVED, that the officers of the Fund are hereby
authorized to make such changes and take such action as may
be necessary or appropriate in connection with the
Registration Statement on Form N- IA, including, but not
limited to, filing such Registration Statement with the
Securities and Exchange Commission.
2002 ANNUAL REPORT
Ms. Wheeler presented the 2002 Annual Report of the Fund, which had
been delivered to the Directors for their review prior to this meeting.
After discussion, upon motion duly made and seconded, the following
resolution was unanimously adopted:
WHEREAS, the Directors have reviewed and considered the 2002
Annual Report of the Fund to be provided to its shareholders
pursuant to the Investment Company Act of 1940;
NOW, THEREFORE, BE IT RESOLVED, that the 2002 Annual Report
is hereby accepted and approved in substantially the form
presented to the Directors;
FURTHER RESOLVED, that the officers of the Fund are hereby
authorized to make such changes and take such action as may
be necessary or appropriate in connection with the 2002
Annual Report, including, but not limited to, delivering such
report to the Fund's shareholders and filing it with the
Securities and Exchange Commission.
NEW SEC REOUIREMENTS
Ms. Wheeler presented the February 12, 2003 McAfee & Taft memorandum
regarding New SEC Requirements. The memorandum had been delivered to
the Directors for their review prior to the meeting. After discussion,
upon motion duly made, seconded and unanimously carried it was:
RESOLVED: That the Report on the New SEC Requirements is
hereby accepted and approved.
DISCLOSURE CONTROLS AND PROCEDURES
Ms. Wheeler presented the Form of Disclosure Controls and Procedures.
After discussion, upon motion duly made and seconded, the following
motion was unanimously approved:
WHEREAS, the Directors have reviewed the Fund's Disclosure
Controls and Procedures;
WHEREAS, the Disclosure Controls and Procedures are intended
to ensure that information required to be disclosed by the
Fund in its Annual and Semi-Annual Reports to Shareholders is
accumulated, communicated and reported properly;
NOW, THEREFORE, BE IT RESOLVED, that the Disclosure Controls
and Procedures are hereby accepted and approved in
substantially the form presented to the Directors;
FURTHER RESOLVED, that the officers of the Fund are hereby
authorized to make such changes and take such action as may
be necessary or appropriate in order to implement and
maintain the Fund's Disclosure Controls and Procedures.
CODE OF ETHICS FOR SENIOR OFFICERS
Ms. Wheeler presented the Fund's Code of Ethics for Senior Officers.
After discussion, upon motion duly made and seconded, the following
resolutions were unanimously approved:
WHEREAS, the Directors have reviewed the Fund's Code of
Ethics for Senior Officers;
WHEREAS, the Code of Ethics for Senior Officers is intended
to ensure that the senior financial and senior executive
officers of the Fund maintain personal and professional
conduct consistent with ethical and professional standards
set forth therein;
NOW, THEREFORE, BE IT RESOLVED, that the Code of Ethics for
Senior Officers is hereby accepted and approved in
substantially the form presented to the Directors;
FURTHER RESOLVED, that the officers of the Fund are hereby
authorized to take such action as may be necessary or
appropriate in order to implement and maintain the Code of
Ethics for Senior Officers.
ELECTION OF OFFICERS; DESIGNATION OF SIGNATORIES
Ms. Wheeler presented the following proposed resolution for the
election of officers and designation of signatories of the Fund.
[Proposed], that the following persons are hereby elected to
the offices set forth opposite their names, to serve as
officers of the Fund until the earlier of such officer's
removal or resignation:
John W. Rex President and Principal
Executive Officer
David R Carpenter Senior Vice President
and Principal Financial Officer
Kenneth D. Klehm Senior Vice President
Daniel D. Adams, Jr. Vice President and Secretary
[Proposed], that the following persons are hereby designated
as Authorized Employees and/or Authorized Signatories of the
Fund in connection with the Corporate Custodial Agreement
between InvesTrust, N.A. and the Fund:
Daniel D. Adams, Jr.
Jo Ann Anderson
David R. Carpenter
Lucy K. Fritts
Kenneth D. Klehm
After discussion, the matter of electing officers and designating
signatories of the Fund was deferred until the next meeting, it being
agreed that AF A would take the matter under advisement, at the next
meeting of the Fund's Board of Directors, and make a recommendation to
the Fund's directors as to the election of officers of the Fund.
Ms. Wheeler also presented a proposed resolution to ratify the Fund's
Corporate Custodial Agreement with InvesTrust, N.A., and provided (1)
the September 17, 1998 McAfee and Taft memorandum re: American
Fidelity Dual Strategy Fund, Inc: Corporate Custodial Agreement, and
(2) the Fund Corporate Custodial Agreement with InvesTrust, N.A. dated
September 30, 1998. Upon motion duly made and seconded, the following
resolution was unanimously
approved:
RESOLVED, that the Fund's Custodial Agreement with InvesTrust
dated September 30, 1998 is hereby confirmed and ratified,
and any amendments or subsequent custodial agreements with
InvesTrust adopted prior to the date hereof shall be
cancelled and rescinded;
RESOLVED, that Exhibit C of the Custodial Agreement shall be
amended to reflect the current Authorized Advisors of the
Fund;
RESOLVED, that the officers of the Fund are hereby authorized
to take such action as may be necessary or appropriate in
order to effectuate these resolutions.
AUTHORIZATION OF DIVIDEND DISTRIBUTION AND APPOINTMENT OF DIVIDEND
COMMITTEE
Ms. Wheeler presented a proposed resolution for the authorization of a
dividend distribution by the Fund and the appointment of a Fund
Dividend Committee. After discussion, upon motion duly made and
seconded, the following resolution was unanimously approved:
WHEREAS, the Fund's Board of Directors previously established
a Dividend Distribution Policy pursuant to the following
resolution:
"RESOLVED, that the fund (i) declare and pay dividends
from net investment income at least once a year and
automatically reinvest them in additional fund shares at
net asset value; and (ii) make distributions from net
realized securities gains, if any, at least once a year,
but on a more frequent basis if necessary to comply with
the distribution requirements of the Internal Revenue
Code, and in all events, in a manner consistent with the
provisions of the Investment Company Act; provided
however that the fund not make distributions from net
realized securities gains unless capital loss
carryovers, if any, have been utilized or have expired."
WHEREAS, the Directors desire to authorize an ordinary income
dividend distribution with respect to the year ended December
31, 2002, the amount of such dividend to be determined in
accordance with the Fund's Dividend Distribution Policy at a
time when such a determination may be made;
WHEREAS, the Directors deem it necessary and appropriate to
create a Dividend Committee;
NOW, THEREFORE, BE IT RESOLVED, that a Dividend Committee is
hereby established, which committee may take only such action
as is specifically authorized, from time to time, by the
Board of Directors;
FURTHER RESOLVED, that Daniel D. Adams, Jr. and John W. Rex
are hereby appointed to the Dividend Committee, each to serve
until the earlier of his removal or resignation;
FURTHER RESOLVED, that an ordinary income dividend
distribution is hereby authorized and declared with respect
to the year ended December 31, 2002, the amount of such
dividend to be determined in accordance with the Fund's
Dividend Distribution Policy and subject to approval of the
Dividend Committee upon completion of the Fund's tax return
for the year 2002, and subject further to ratification of the
Board of Directors as soon as practicable upon the
determination of the dividend amount;
FURTHER RESOLVED, that the members of the Dividend Committee,
acting individually or together, are hereby authorized to
approve the dividend authorized herein only upon completion
of the Fund's tax return and only in accordance with the
Fund's Dividend Distribution Policy;
FURTHER RESOLVED, that the Dividend Committee shall give
notice to the Board of Directors of the amount of the
dividend authorized herein as soon as practicable upon the
determination of the dividend amount, and such dividend shall
be ratified by the Board of Directors.
APPROVAL OF MINUTES AND RATIFICATION OF ACTIONS BY WRITTEN CONSENT
Mr. Adams presented the Minutes of the Fund's Board of Directors
Meeting held on November 6, 2002, as amended after delivery to the
Directors for review prior to this meeting. Mr. Adams also presented
the Written Consents of the Board of Directors subsequent to the
November 6, 2002 Board Meeting. After discussion, upon motion duly
made and seconded, the following resolutions were unanimously adopted:
Minutes of November 6, 2002 Board Meeting
WHEREAS, the Directors have received a copy of the Minutes of
the Fund's Board of Directors Meeting held on November 6,
2002;
WHEREAS, the Minutes are accurate and correct;
NOW, THEREFORE, BE IT RESOLVED, that the Minutes of the Board
of Directors Meeting held on November 6, 2002, as amended
hereby, are approved, ratified and confirmed.
Actions by Written Consent
WHEREAS, the Directors have taken certain actions by
unanimous written consent since the November 6, 2002 Board
meeting;
WHEREAS, the Directors desire to ratify and affirm the
actions taken by the Board of Directors pursuant to the
actions by Written Consent of Board of Directors, which have
been provided herewith;
NOW, THEREFORE, BE IT RESOLVED, that the actions by Written
Consent of the Board of Directors provided herewith are
approved, ratified and confirmed.
2003 BOARD OF DIRECTORS MEETING SCHEDULE
Mr. Rex presented the revised 2003 Board of Directors Meeting Schedule,
which had been requested by and coordinated with the Independent
Directors.
ADJOURNMENT
There being no further business to come before this meeting, it was
adjourned.
/S/
Daniel D. Adams, Jr.
Secretary
APPROVED:
/S/
John W. Rex
Chairman
Exhibit A
REPORT ON MUTUAL FUND MANAGEMENT FEES
National Association of Variable Annuities reports:
Average variable annuity sub-account charges investment advisory
fees of .82%
Lowest fee reported was Vanguard S & P 500 Index Fund at .18%
American Fidelity Assurance Company Separate Account B has selected sub-
accounts that charge management fees as follow:
American Fidelity Dual Strategy Fund .50%
American Century Variable Portfolios
VP Balanced Fund .90%
VP Capital Appreciation Fund 1.00%
VP Income and Growth Fund .70%
VP Ultra Fund 1.00%
VP International Fund 1.26%
Dreyfus Socially Responsible Growth Fund .78%
Dreyfus Stock Index Fund .26%
Dreyfus Variable Investment Fund
Growth and Income Portfolio .80%
Small Company Stock Portfolio 1.03%
International Value Portfolio 1.40%
Dreyfus Investment Portfolios
Technology Growth Portfolio .87%
Federated Insurance Series
Federated Fund for U.S. Government Securities II .74%
Federated Capital Appreciation Fund II .91%
Merrill Lynch Variable Series Funds, Inc.
Basic Value V.I. Fund I .68%
Small Cap Value V.I. Fund .83%
Neuberger Berman Advisers Management Trust
AMT Balanced Portfolio 1.07%
AMT Growth Portfolio .89%
Generalizations about mutual fund management fees:
(1) Variable annuity sub-account fees tend to be lower
than the fees for corresponding retail mutual funds in
the same fund family.
(2) Funds not under active management (index funds)
tend to charge the very lowest fees.
(3) Large cap growth funds tend to fall in the middle
of the fee range.
(4) Small cap fees are usually greater than large cap
fund fees.
(5) International funds and intensely managed funds
tend to be highest.
(6) While it may not be relevant to variable annuities,
in the fund market in general the highest fees are
levied by hedge funds.
(7) Fund families with greater dollar amounts under
management tend to charge lower fees than smaller fund
families.
Exhibit B-1
Dual Investment Strategies
The fund invests primarily in common stocks of U.S. companies. The
fund's two sub-advisors independently manage a portion of the fund's
portfolio using different investment strategies. One sub-advisor's
equity approach is growth oriented and exploits the correlation between
increasing company earnings and increasing stock price in stocks with
large capitalizations. The other sub- advisor focuses on undervalued,
high quality equity securities with large capitalizations.
Exhibit B-2
Investment Goals and Strategies
Seneca Capital Management LLC is a growth-oriented manager. To achieve
the goal of growth, Seneca blends two types of large capitalization
growth stocks. First, it invests in stocks that have I produced long
records of financial success through varying economic cycles. These
stocks provide earnings stability and diversification. Second, Seneca
invests in stocks for which it forecasts major near-term earnings
acceleration. By investing in this combination of stocks, Seneca
attempts to produce a portfolio that grows at a rate consistent with
the growth style, but is anchored in a foundation of solid, dependable
companies.
Todd Investment Advisers, Inc. is a value-oriented manager. It
emphasizes high-quality, large capitalization companies that are
undervalued. Todd Investment attempts to achieve average- market
returns in an up market and above-market returns in a down market. A
dividend discount model is used to identify companies with the greatest
potential for price appreciation, and then fundamental analysis is used
to determine which companies have a catalyst for price appreciation. A
stock is considered for sale when either its price/value ratio rises
above the median for large capitalization stocks or the company's
fundamentals weaken. The portion of the funds portfolio managed by
Todd Investment typically holds 40 to 50 issues, and the average annual
turnover is usually 20 to 40%.
WRITTEN CONSENT
OF
BOARD OF DIRECTORS
OF
AMERICAN FIDELITY DUAL STRATEGY FUND, INC.
Pursuant to Section 2-408 of the Maryland General Corporation Law which
provides that any action required or permitted to be taken at a meeting
of the board of directors may be taken without a meeting if a consent
thereto of all the members of the board of directors is filed with the
minutes of the proceedings of the board, the undersigned, being all of
the directors of American Fidelity Dual Strategy Fund, Inc., a Maryland
corporation (the "Fund"), did, as of the 29th day of January, 2003
adopt and consent to the following resolutions:
Amended and Restated Management and Investment Advisory Agreement
WHEREAS, the Fund is a party to that certain Management and
Investment Advisory Agreement, dated December 22, 1998, as
amended as of August 1, 2002 (the "Advisory Agreement"),
entered into by and between the Fund and its investment
advisor, American Fidelity Assurance Company (the "Advisor"),
pursuant to which the Fund retained the Advisor as its
manager and investment advisor, and the Advisor agreed to
assume certain obligations of the Fund in connection
therewith;
WHEREAS, certain terms of the Advisory Agreement do not
reflect the current practices of the Fund and the Advisor
with regard to payment of certain fees and expenses of the
Fund;
WHEREAS, the Board of Directors deems it necessary and
appropriate to amend and restate the Advisory Agreement to
reflect the current practice of the Advisor to compensate the
Fund's personnel, officers and directors, regardless of
whether such persons are employees of the Advisor, and to set
forth the remaining terms of the Advisory Agreement,
including the August 1,2002 amendment;
WHEREAS, in approving the Amended and Restated Management and
Investment Advisory Agreement, the Board of Directors took
into consideration the following factors:
* the current practice of American Fidelity Assurance Company to pay
the Fund's personnel, officers and directors, regardless of whether
those people are also employees of American Fidelity Assurance Company,
and despite the fact that the original Advisory Agreement does not
require such actions;
* the fact that the amendments to the original Advisory Agreement do
not result in an increase in the Fund's fees;
* the fact that all other material provisions of the Advisory
Agreement, as amended as of August I, 2002, remain unchanged; and
* the independence of the Fund's directors who are not "interested
persons" of the Fund or American Fidelity Assurance Company, and the
ability of the non-interested directors to maintain their independence
from the Fund and American Fidelity Assurance Company.
NOW, THEREFORE, BE IT RESOLVED, that the Advisory Agreement
be amended to reflect the current practice of the Advisor to
compensate the Fund's personnel, officers and directors,
regardless of whether such persons are employees of the
Advisor;
FURTHER RESOLVED, that, in addition to the amendment
described above, the remaining terms of the Advisory
Agreement, including the amendment adopted by the Board of
Directors as of August 1, 2002 requiring the Advisor to
reimburse the Fund for expenses incurred by the Fund in
connection with its indemnification agreements with its
directors, be set forth in an Amended and Restated Management
and Investment Advisory Agreement, in substantially the same
form as provided herewith;
FURTHER RESOLVED, that the officers of the Fund be, and each
of them hereby is, authorized and directed to take such
actions as may be necessary or appropriate to effectuate
these resolutions, including submitting the Amended and
Restated Management and Investment Advisory Agreement to the
Fund's shareholders, if such action be necessary or
appropriate.
Approval of Sub-Advisory Agreement
WHEREAS, the Fund's Board of Directors previously approved an
Investment Sub-Advisory Agreement (the "Sub-Advisory
Agreement") with Seneca Capital Management LLC (the "New Sub-
Advisor"), pursuant to which the New Sub-Advisor agreed to
serve as sub-advisor of the Fund with regard to certain
designated assets and to assume specified obligations and
responsibilities in connection therewith;
WHEREAS, pursuant to the Investment Company Act of 1940, the
initial term of the Sub-Advisory Agreement cannot exceed 150
days from November 14, 2002 (the "Interim Period"), during
which period the Fund must obtain shareholder approval of the
Sub-Advisory Agreement with the New Sub-Advisor;
NOW, THEREFORE, BE IT RESOLVED, that a special meeting of
shareholders of the Fund be called and held for the purpose
of approving the Sub-Advisory Agreement with the New Sub-
Advisor.
Special Shareholders Meeting
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors
does hereby call a special meeting of shareholders of the
Fund for the purpose of obtaining shareholder approval of the
Amended and Restated Advisory Agreement and the Sub-Advisory
Agreement with the New Sub- Advisor, as well as any other
matters that are approved by the Special Proxy Committee (as
defined below);
FURTHER RESOLVED, that the Board of Directors directs that
such Special Meeting of Shareholders of the Fund shall be
held on April 11, 2003, unless another date shall be
determined by the Special Proxy Committee;
FURTHER RESOLVED, that the record date of such Special
Meeting shall be January 31, 2003, unless another date shall
be determined by the Special Proxy Committee;
FURTHER RESOLVED, that the officers of the Fund be, and each
of .them hereby is, authorized and directed to finalize the
Proxy Statement that has been presented to the Board of
Directors and any necessary related proxy materials and to
file the same with the Securities and Exchange Commission and
mail such Proxy Statement and related materials to
shareholders of the Fund in accordance with applicable laws;
FURTHER RESOLVED, that Daniel D. Adams, Jr. and John W. Rex
are hereby appointed as members of a newly-created Special
Proxy Committee of the Board of Directors with regard solely
to the Proxy Statement authorized herein, and such Special
Proxy Committee is authorized and directed to take such
actions as may be necessary to address any matters relating
to the Special Shareholders Meeting that may arise in the
course of preparing for the meeting.
FURTHER RESOLVED, that this Consent be filed with the
proceedings of the Board of Directors.
Dated the day and year first above mentioned.
/S/
John W. Rex
/S/
Daniel D. Adams, Jr.
/S/
Jean G. Gumerson
/S/
Gregory M. Love
/S/
J. Dean Robertson, DDS
/S/
G. Rainey Williams, Jr.
Dates Referenced Herein and Documents Incorporated By Reference
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