Exhibit (d)(2)
SUB-ADVISORY AGREEMENT
AGREEMENT, made this ___ day of __________, 199__, between Integrity Capital
Advisors, Inc. (MANAGER), a Delaware corporation, and National Asset Management
Corporation, a Kentucky corporation (SUB-ADVISER).
WHEREAS, Manager, a wholly-owned subsidiary of ARM Financial Group, Inc., is an
investment adviser registered under the Investment Advisers Act of 1940, as
amended (the ADVISERS ACT);
WHEREAS, the Sub-Adviser is an investment adviser registered under the Advisers
Act;
WHEREAS, pursuant to a Management Agreement dated __________, 1998 (the
MANAGEMENT AGREEMENT), Manager acts as Investment Manager to Select Ten Plus
Fund, LLC (the FUND), which is a mutual fund registered under the Investment
Company Act of 1940, as amended (the 1940 ACT);
WHEREAS, the Fund is authorized to subdivide into portfolios, each such
portfolio representing a separate portfolio (collectively, the PORTFOLIOS) of
securities and investments; and
WHEREAS, Manager desires to retain the Sub-Adviser to furnish investment
advisory services to the Fund, and the Sub-Adviser is willing to accept such
appointment on the terms and conditions set forth herein.
NOW, THEREFORE, based on the premises and the consideration set forth herein,
Manager and the Sub-Adviser agree as follows:
SECTION 1. INVESTMENT ADVISORY SERVICES.
Subject to the supervision of the Fund's Board of Managers and the Manager, and
in compliance with each Portfolio's investment objectives and policies, the
Sub-Adviser will provide an investment program for the Portfolios and determine
the composition of the assets of the Portfolios, including determination of the
purchase, retention or sale of the securities, cash, and other investments
contained in the Portfolio's holdings. The Sub-Adviser is hereby authorized to
execute and perform such services on behalf of the Portfolios. To the extent, if
any, permitted by the investment policies of the Portfolios, the Sub-Adviser
shall make determinations as to and execute and perform futures contracts and
options on behalf of the Portfolios. The Sub-Adviser will provide the services
under this Agreement in accordance with each Portfolio's investment objective or
objectives, policies, and restrictions as stated in the Fund's Registration
Statement filed with the Securities and Exchange Commission (SEC). Manager
agrees to supply the Sub-Adviser with a copy of the Registration Statement and
each amendment thereto (the Registration Statement as amended from time to time
hereinafter referred to as the REGISTRATION STATEMENT) and any other documents
that set forth investment policies, procedures or restrictions governing the
Portfolios and to notify the Sub-Adviser in writing of any changes in the
investment objectives, policies, procedures and restrictions governing the
Portfolios.
The Sub-Adviser further agrees as follows:
(a) The Sub-Adviser will manage the Portfolios so as to ensure compliance by the
Portfolios with the diversification requirements of Section 817(h) of the
Internal Revenue Code of 1986, as amended (the CODE) and regulations issued
thereunder. In managing the Portfolios in accordance with these requirements,
the Sub-Adviser shall be entitled to receive and act upon advice of counsel to
the Fund, counsel to Manager or counsel to the Sub-Adviser, provided the
Sub-Adviser's counsel is acceptable to Manager.
(b) In undertaking its duties under this Agreement, the Sub-Adviser will comply
with the 1940 Act and all
rules and regulations thereunder, all other applicable federal and state laws
and regulations, with any applicable procedures adopted by the Fund's Board of
Managers of which it has notice and the provisions of the Registration
Statement.
(c) On occasions when the Sub-Adviser is required pursuant to the Portfolios'
investment objectives to enter into the purchase or sale of a security and such
purchase or sale is also in the best interest of the Sub-Adviser's or the
Sub-Adviser's affiliates' other investment advisory clients, the Sub-Adviser
may, to the extent permitted by applicable laws and regulations, but shall not
be obligated to, aggregate the securities to be so sold or purchased with those
of its other clients where such aggregation is not inconsistent with the
policies set forth in the Registration Statement. In such event, the Sub-Adviser
will allocate the securities so purchased or sold, as well as the expenses
incurred in the transaction, in a manner that is fair and equitable in the
Sub-Adviser's judgment in the exercise of the Sub-Adviser's fiduciary
obligations to the Fund and to such other clients.
(d) In connection with the purchase and sale of securities for the Portfolios,
the Sub-Adviser, together with Manager, will arrange for the transmission to the
custodian, transfer agent, dividend disbursing agent and recordkeeping agent for
the Fund (such custodian and agent or agents hereinafter referred to as the
AGENT), on a daily basis, such confirmation, trade tickets (which shall state
industry classifications unless the Sub-Adviser has previously furnished a list
of classifications for portfolio securities), and other documents and
information, including (but not limited to) Cusip or other numbers that identify
securities to be purchased or sold on behalf of the Portfolios as may be
reasonably necessary to enable the Agent to perform its administrative and
recordkeeping responsibilities with respect to the Portfolios. With respect to
portfolio securities to be purchased or sold through the Depository Trust
Company, the Sub-Adviser will arrange for the automatic transmission of the
confirmation of such trades to the Fund's Agent, and if requested, Manager.
(e) The Sub-Adviser will monitor on a daily basis, by review of daily pricing
reports provided by the Agent to the Sub-Adviser, the determination by the Agent
for the Fund of the valuation of portfolio securities and other investments of
the Portfolios. The Sub-Adviser shall not be obligated to independently verify
the Agent's pricing determinations, and the Agent's responsibility for accurate
pricing determinations of the value of the Portfolios' securities shall not be
reduced by the Sub-Adviser's duty to monitor such determinations. The
Sub-Adviser will assist the Agent in determining or confirming, consistent with
the procedures and policies stated in the Registration Statement, the value of
any portfolio securities or other assets of the Portfolios for which the Agent
seeks assistance from or identifies for review by the Sub-Adviser.
(f) The Sub-Adviser will make available to the Fund and Manager, promptly upon
request, all of the Portfolios' investment records and ledgers maintained by the
Sub-Adviser as are necessary to assist the Fund and Manager to comply with
requirements of the 1940 Act and the Advisers Act, as well as other applicable
laws. The Sub-Adviser will furnish to regulatory authorities having the
requisite authority any information or reports in connection with its services
which may be requested in order to ascertain whether the operations of the Fund
are being conducted in a manner consistent with applicable laws and regulations.
(g) The Sub-Adviser will provide reports, which may be prepared by the Agent, to
the Fund's Board of Managers for consideration at meetings of the Board on the
investment program for the Portfolios and the issuers and securities represented
in the Portfolios' securities holdings, including a schedule of the investments
and other assets held in the Portfolios and a statement of all purchases and
sales for the Portfolios since the last such statement, and will furnish the
Fund's Board of Managers with periodic and special reports with respect to the
Portfolios as the Board of Managers and Manager may reasonably request,
including statistical information with respect to the Portfolios' securities. In
addition, the Sub-Adviser will make available at each meeting of the Board of
Managers, either in person or by telephone conference call as instructed by
Manager on behalf of the Board of Managers of the Fund, an appropriate person to
discuss the investment performance of the Portfolios.
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(h) The Sub-Adviser will provide information and reports to Manager as Manager
shall reasonably request to enable it to review the performance of the
Sub-Adviser under this Agreement.
SECTION 2. BROKER-DEALER SELECTION.
The Sub-Adviser is responsible for decisions to buy and sell securities and
other investments for the Portfolio's, broker-dealer and futures commission
merchant selection, and negotiation of brokerage commission and futures
commission merchants' rates. As a general matter, in executing portfolio
transactions the Sub-Adviser may employ or deal with such broker-dealers or
futures commission merchants as may, in the Sub-Adviser's best judgment, provide
prompt and reliable execution of the transactions at favorable prices and
reasonable commission rates. In selecting such broker-dealers or futures
commission merchants, the Sub-Adviser shall consider all relevant factors,
including price (including the applicable brokerage commission, dealer spread or
futures commission merchant rate), the size of the order, the nature of the
market for the security or other investment, the timing of the transaction, the
reputation, experience and financial stability of the broker-dealer or futures
commission merchant involved, the quality of the service, the difficulty of
execution, and the execution capabilities and operational facilities of the firm
involved, and, in the case of securities, the firm's risk in positioning a block
of securities. Subject to such policies as the Board of Managers may determine
and consistent with Section 28(e) of the Securities Exchange Act of 1934, as
amended (the 1934 ACT), the Sub-Adviser shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of the Sub-Adviser's having caused the Portfolios to pay a
member of an exchange, broker or dealer an amount of commission for effecting a
securities transaction in excess of the amount of commission another member of
an exchange, broker or dealer would have charged for effecting that transaction,
if the Sub-Adviser determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such member of an exchange, broker or dealer, viewed in terms of
either that particular transaction or the Sub-Adviser's overall responsibilities
with respect to the Portfolios and to the Sub-Adviser's other clients as to
which the Sub-Adviser exercises investment discretion. In accordance with
Section 11(a) of the 1934 Act and Rule 11a2-2(T) thereunder, and subject to any
other applicable laws and regulations including Section 17(e) of the 1940 Act
and Rule 17e-1 thereunder, the Sub-Adviser may engage its affiliates, Manager
and its affiliates or any other sub-adviser to the Fund and its respective
affiliates as broker-dealers or futures commission merchants to effect portfolio
transactions in securities and other investments for the Portfolios.
SECTION 3. RECORDS, REPORTS, ETC.
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
Sub-Adviser hereby agrees that all records which the Sub-Adviser maintains for
the Portfolios are the property of the Fund and further agrees to surrender
promptly to the Fund any of such records upon the Portfolio's or Manager's
request or upon termination of this Agreement, although the Sub-Adviser may, at
the Sub-Adviser's own expense, make and retain a copy of such records. The
Sub-Adviser further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act the records required to be maintained by Rule 31a-1 under the
1940 Act and to preserve the records required by the Rule 204-2 under the
Advisers Act for the period specified in the Rule.
SECTION 4. PAYMENT OF EXPENSES.
The Sub-Adviser shall assume and pay all of the costs and expenses of performing
its obligations under this Agreement.
SECTION 5. COMPENSATION FOR SERVICES.
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Manager will pay to the Sub-Adviser a monthly sub-advisory fee (adjusted pro
rata for any shorter applicable period) at an annual rate of .10% of the first
$100 million of average daily net assets of the Portfolios from the management
fee actually received by Manager from the Fund; and at an annual rate of .05% of
average daily net assets above $100 million of the Portfolios from the
management fee actually received by Manager from the Portfolio; provided,
however, the Sub-Adviser is guaranteed a minimum sub-advisory fee of $25,000
during its first year of operations; and provided further, that the sub-advisory
fee shall be reduced proportionately if the management fee actually paid to
Manager by the Portfolios shall have been reduced as a result of applicable
state expense limitations or fee waivers agreed to in writing by the
Sub-Adviser. The sub-advisory fee shall be computed, accrue and be payable in
the same manner as the management fee which is payable by the Fund to Manager
pursuant to the Management Agreement and as specified in the Fund's Registration
Statement.
SECTION 6. LIABILITY FOR SERVICES.
Except as may otherwise be required by the 1940 Act or the rules thereunder or
other applicable law, and except as set forth in the next paragraph, the Fund
and Manager agree that the Sub-Adviser, any of its affiliated persons, and each
person, if any, who, within the meaning of Section 15 of the Securities Act of
1933, as amended, controls the Sub-Adviser, shall not be liable for, or subject
to any damages, expenses, or losses in connection with, any act or omission
connected with or arising out of any services rendered under this Agreement,
except by reason of willful misfeasance, bad faith, or gross negligence in the
performance of the Sub-Adviser's duties, or by reason of reckless disregard of
the Sub-Adviser's obligations and duties under this Agreement.
SECTION 7. INDEMNIFICATION BY SUB-ADVISER.
The Sub-Adviser agrees to indemnify and hold harmless Manager against any
losses, expenses, claims, damages or liabilities (or actions or proceedings in
respect thereof), to which Manager may become subject arising out of or based on
the breach or alleged breach by the Sub-Adviser of any provisions of this
Agreement; provided, however, that the Sub-Adviser shall not be liable under
this paragraph in respect of any loss, expense, claim, damage or liability to
the extent that a court having jurisdiction shall have determined by a final
judgment, or independent counsel agreed upon by Manager and the Sub-Adviser
shall have concluded in a written opinion, that such loss, expense, claim,
damage or liability resulted primarily from Manager's willful misfeasance, bad
faith or gross negligence or by reason of the reckless disregard by Manager of
its duties. The foregoing indemnification shall be in addition to any rights
that Manager may have at common law or otherwise. The Sub-Adviser's agreements
in this paragraph shall, upon the same terms and conditions, extend to and inure
to the benefit of each person who may be deemed to control Manager, be
controlled by Manager or be under common control with Manager and its
affiliates, directors, officers, employees and agents. The Sub-Adviser's
agreements in this paragraph shall also extend to any of Manager's successors or
the successors of the aforementioned affiliates, directors, officers, employees
or agents.
SECTION 8. INDEMNIFICATION BY MANAGER.
Manager agrees to indemnify and hold harmless the Sub-Adviser against any
losses, expenses, claims, damages or liabilities (or actions or proceedings in
respect thereof), to which the Sub-Adviser may become subject arising out of or
based on the breach or alleged breach by Manager of any provisions of this
Agreement or the Management Agreement, or any wrongful action or alleged
wrongful action by Manager or its affiliates in the distribution of the Fund's
units, or any wrongful action or alleged wrongful action by the Fund other than
wrongful action or alleged wrongful action that was caused by the breach by the
Sub-Adviser
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of the provisions of this Agreement; provided, however, that Manager shall not
be liable under this paragraph in respect of any loss, expense, claim, damage or
liability to the extent that a court having jurisdiction shall have determined
by a final judgment, or independent counsel agreed upon by Manager and the
Sub-Adviser shall have concluded in a written opinion, that such loss, expense,
claim, damage or liability resulted primarily from the Sub-Adviser's willful
misfeasance, bad faith or gross negligence or by reason of the reckless
disregard by the Sub-Adviser of its duties. The foregoing indemnification shall
be in addition to any rights that the Sub-Adviser may have at common law or
otherwise. Manager's agreements in this paragraph shall, upon the same terms and
conditions, extend to and inure to the benefit of each person who may be deemed
to control the Sub-Adviser, be controlled by the Sub-Adviser or be under common
control with the Sub-Adviser and to each of the Sub-Adviser's and each such
person's respective affiliates, directors, officers, employees and agents.
Manager's agreements in this paragraph shall also extend to any of the
Sub-Adviser's successors or the successors of the aforementioned affiliates,
directors, officers, employees or agents.
SECTION 9. NOTICE AND DEFENSE OR PROCEEDINGS, ETC.
Promptly after receipt by a party indemnified under paragraph 7 or 8 above of
notice of the commencement of any action, proceeding or investigation for which
indemnification will be sought, such indemnified party shall promptly notify the
indemnifying party in writing; but the omission so to notify the indemnifying
party shall not relieve it from any liability which it may otherwise have to any
indemnified party unless such omission results in actual material prejudice to
the indemnifying party. In case any action or proceeding shall be brought
against any indemnified party, and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, individually or jointly with any other indemnifying party, to assume the
defense thereof with counsel reasonably satisfactory to the indemnified party.
After notice from the indemnifying party to the indemnified party of its
election to assume the defense of any action or proceeding, the indemnifying
party shall not be liable to the indemnified party for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of investigation. If the
indemnifying party does not elect to assume the defense of any action or
proceeding, the indemnifying party on a monthly basis shall reimburse the
indemnified party for the legal fees and expenses incurred by the indemnified
party for continuing its defense thereof. Regardless of whether or not the
indemnifying party shall have assumed the defense of any action or proceeding,
the indemnified party shall not settle or compromise the action or proceeding
without the prior written consent of the indemnifying party.
SECTION 10. REPRESENTATIONS AND WARRANTIES; COVENANTS.
(a) The Sub-Adviser hereby represents and warrants as follows:
(i) The Sub-Adviser is registered with the SEC as an investment adviser under
the Advisers Act, and such registration is current, complete and in full
compliance with all material applicable provisions of the Advisers Act and the
rules and regulations thereunder;
(ii) The Sub-Adviser has all requisite authority to enter into, execute, deliver
and perform the Sub-Adviser's obligations under this Agreement;
(iii) The Sub-Adviser's performance of its obligations under this Agreement does
not conflict with any law, regulation or order to which the Sub-Adviser is
subject; and
(iv) The Sub-Adviser has reviewed the Registration Statement for the Fund filed
with the SEC, and with respect to the disclosure about the Sub-Adviser and the
Portfolios or information relating, directly or indirectly, to the Sub-Adviser
or the Portfolios which was made in reliance upon and in conformity with
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written information provided by the Sub-Adviser to the Fund specifically for use
therein or, if written information was not provided, which the Sub-Adviser had
the opportunity to review prior to filing with the SEC, such Registration
Statement contains, as of its date, no untrue statement of any material fact and
does not omit any statement of a material fact which was required to be stated
therein or necessary to make the statements contained therein not misleading.
(b) The Sub-Adviser hereby covenants and agrees that, so long as this Agreement
shall remain in effect:
(i) The Sub-Adviser shall maintain the Sub-Adviser's registration as an
investment adviser under the Advisers Act, and such registration shall at all
times remain current, complete and in full compliance with all material
applicable provisions of the Advisers Act and the rules and regulations
thereunder;
(ii) The Sub-Adviser's performance of its obligations under this Agreement shall
not conflict with any law, regulation or order to which the Sub-Adviser is then
subject;
(iii) The Sub-Adviser shall at all times fully comply with the Advisers Act, the
1940 Act, all applicable rules and regulations under such Acts and all other
applicable law;
(iv) The Sub-Adviser shall promptly notify Manager and the Fund upon the
occurrence of any event that might disqualify or prevent the Sub-Adviser from
performing its duties under this Agreement. The Sub-Adviser further agrees to
notify Manager and the Fund promptly with respect to written material that has
been provided to the Fund or Manager by the Sub-Adviser for inclusion in the
Registration Statement or prospectus for the Fund or any supplement or amendment
thereto, or, if written material has not been provided, with respect to the
information in the Registration Statement or Prospectus, or any amendment or
supplement thereto, reviewed by the Sub-Adviser, in either case of any untrue
statement of a material fact or of any omission of any statement of a material
fact which is required to be stated therein or is necessary to make the
statements contained therein not misleading; and
SECTION 11. EXCLUSIVITY OF USE OF NAMES.
The Sub-Adviser acknowledges and agrees that the name SELECT TEN PLUS FUND, and
abbreviations or logos associated with that name, are the valuable property of
Manager and its affiliates; that the Fund, Manager and its affiliates have the
sole right to use such names, abbreviations and logos; and that the Sub-Adviser
shall use the name SELECT TEN PLUS, and associated abbreviations and logos, only
in connection with the Sub-Adviser's performance of its duties hereunder.
Manager acknowledges that "National Asset Management Corporation" (the
SUB-ADVISER'S NAME) is distinctive in connection with investment advisory and
related services provided by the Sub-Adviser, the Sub-Adviser's name is a
property right of the Sub-Adviser, and the Sub-Adviser's name in connection with
the Portfolios is understood to be used by the Fund with the Sub-Adviser's
consent. The Sub-Adviser hereby grants to the Fund a non-exclusive license to
use the Sub-Adviser's name in the name of the Portfolios upon the conditions
hereinafter set forth; provided that the Fund may use such name only so long as
the Sub-Adviser shall be retained as the investment sub-adviser of the
Portfolios pursuant to the terms of this Agreement. Any such use by the Fund
shall in no way prevent the Sub-Adviser or any of its successors or assigns from
using or permitting the use of the Sub-Adviser's name along with any other word
or words, for, by or in connection with any other entity or business, other than
the Fund or its business, whether or not the same directly competes or conflicts
with the Fund or its business in any manner.
Manager acknowledges that the Fund shall use the Sub-Adviser's name in
connection with the Portfolios for the period set forth herein in a manner not
inconsistent with the interests of the Sub-Adviser and that the
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Fund's rights in the Sub-Adviser's name are limited to its use as a component of
the Portfolio's name and in connection with accurately describing the activities
of the Portfolios. In the event that the Sub-Adviser shall cease to be the
investment sub-adviser of the Portfolios, then the Fund at its own expense, upon
the Sub-Adviser's written request:
(i) shall cease to use the Sub-Adviser's name, or any combination thereof for
any other commercial purpose (other than the right to refer to the Portfolios'
former Sub-Adviser's name in the Fund's Registration Statement, proxy materials
and other Fund documents to the extent required under the 1940 Act);
(ii) shall use its best efforts to cause the Fund's officers and Board of
Managers to take any all actions which may be necessary or desirable to effect
the foregoing and to reconvey to the Sub-Adviser all rights which the Fund may
have to such name. Manager agrees to take any all actions as may be necessary or
desirable to effect the foregoing.
The Sub-Adviser hereby agrees and consents to the use of the Sub-Adviser's name
upon the foregoing terms and conditions.
SECTION 12. ENTIRE AGREEMENT; AMENDMENT, WAIVER.
This Agreement supersedes all prior agreements between the parties and
constitutes the entire agreement by the parties. No provision of this Agreement
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought, and no amendment of this
Agreement shall be effective with respect to the Portfolios until approved as
required by the 1940 Act.
SECTION 13. EFFECTIVENESS AND DURATION OF AGREEMENT.
Unless sooner terminated, this Agreement shall continue in effect for two years
and thereafter for successive one year periods, provided that continuation of
this Agreement and the terms thereof are specifically approved annually in
accordance with the requirements of the 1940 Act by a majority of the Managers
of the Fund, including a majority of the Managers who are not interested persons
of the Sub-Adviser, Manager or the Fund, cast in person at a meeting called for
the purpose of voting on such approval.
SECTION 14. TERMINATION OF AGREEMENT, ASSIGNMENT.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Sub-Adviser or by Manager, upon sixty (60) days' written notice
from the terminating party to the other party and to the Fund, or by the Fund,
upon sixty (60) days written notice to the Sub-Adviser and Manager, acting
pursuant to a resolution adopted by a majority of the members of the Board of
Managers who are not interested persons.
This Agreement shall automatically terminate in the event of its assignment or
the termination of the Management Agreement pertaining to the Portfolios.
Termination of this Agreement shall not affect rights of the parties which have
accrued prior thereto.
The provisions of paragraphs 6, 7, 8, 9 and 11 shall survive the termination of
this Agreement, except that if Manager or the Fund terminates the Agreement, the
first paragraph of Section 11 shall not survive termination.
SECTION 15. DEFINITIONS.
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The terms ASSIGNMENT and INTERESTED PERSON when used in this Agreement shall
have the meanings given such terms in the 1940 Act and the rules and regulations
thereunder.
SECTION 16. CONCERNING APPLICABLE PROVISIONS OF LAW.
This Agreement shall be subject to all applicable provisions of law, including,
without limitation, the applicable provisions of the 1940 Act, and to the extent
that any provisions herein contained conflict with any such applicable
provisions of law, the latter shall control. This Agreement shall be governed
by the laws of the State of Kentucky, without reference to principles of
conflicts of law.
SECTION 17. COUNTERPARTS.
This Agreement may be executed in counterparts, and each counterpart shall for
all purposes be deemed an original and all such counterparts shall together
constitute one and the same instrument.
IN WITNESS WHEREOF, authorized officers of Manager and the Sub-Adviser have
executed this Agreement as of the day and year first written above.
INTEGRITY CAPITAL ADVISORS, INC.
By:
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Attest:
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NATIONAL ASSET MANAGEMENT CORPORATION
By:
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Attest:
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