Second Amended and Restated Sub-Advisory Agreement
Quest Investment Management, Inc.
This Second Amended and Restated Sub-Advisory Agreement (the
"Agreement"), effective as of February 20, 2012 (the "Effective Date"),
by and among American Fidelity Dual Strategy Fund, Inc., a Maryland
corporation (the "Fund"), American Fidelity Assurance Company, an
insurance company organized under the laws of the State of Oklahoma
(the "Advisor"), and Quest Investment Management, Inc. (the
"Sub-Advisor"), amends and restates in its entirety the Amended and
Restated Sub-Advisory Agreement by and among the parties hereto dated
as of January 1, 2009 (the "Previous Agreement").
RECITALS
A. The Fund is engaged in business as an open-end, diversified management
company and is registered as such under the Investment Company Act.
B. The Advisor and the Fund are parties to a Management and Investment
Advisory Agreement dated as of May 1, 2003, as amended January 5, 2009
(the "Advisory Agreement"), pursuant to which the Advisor acts as
investment advisor to the Fund.
C. The Sub-Advisor is engaged principally in the business of rendering
investment advisory services and is registered as an investment
advisor under the Investment Advisers Act.
D. The Advisor and the Sub-Advisor previously obtained approval by a
Majority Vote of Shareholders (defined below) to retain the Sub-Advisor
to furnish investment advisory services to the Advisor with respect to
certain assets of the Fund, and the Sub-Advisor has rendered such
investment advisory services prior to the date hereof pursuant to the
Previous Agreement.
E. The parties desire to amend and restate the Previous Agreement, as set
forth herein.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS: Unless otherwise defined in this Agreement,
capitalized terms shall have the meanings commonly ascribed
to them in the federal securities laws and related rules and
regulations. In addition, the following terms shall mean:
(a) Advisor: As defined in the introductory paragraph
of this Agreement.
(b) Custodian: InvesTrust, N.A. a special purpose bank
chartered by the Office of the Comptroller of the
Currency.
(c) Fund: As defined in the introductory paragraph
of this Agreement.
(d) Investment Advisers Act: The Investment Advisers
Act of 1940, as amended.
(e) Investment Assets: Those assets of the Fund as the
Advisor and the Fund shall specify in writing, from
time to time, including cash, stocks, bonds and other
securities that the Advisor deposits with the Custodian
and places under the investment supervision of the
Sub-Advisor, together with any assets that are added at
a subsequent date or which are received as a result of
the sale, exchange or transfer of such Investment
Assets.
(f) Investment Company Act: The Investment Company Act
of 1940, as amended.
(g) Majority Vote of Shareholders: The vote, in
accordance with Section 2(a)(42) of the Investment
Company Act, at an annual or a special meeting of the
Shareholders of: (i) sixty-seven percent (67%) or more
of the voting securities present at the meeting, if the
holders of more than fifty percent (50%) of the
outstanding voting securities of the Fund are present
or represented by proxy, or (ii) more than fifty percent
(50%) of the outstanding voting securities of the Fund,
whichever is less.
(h) SEC: The Securities and Exchange Commission.
(i) Securities Act: The Securities Act of 1933, as
amended.
(j) Securities Exchange Act: The Securities Exchange
Act of 1934, as amended.
(k) Shareholders: The beneficial owners of the Fund's
securities.
(l) Sub-Advisor: As defined in the introductory
paragraph of this Agreement.
2. APPOINTMENT OF THE SUB-ADVISOR. Effective as of the date
hereof, the Advisor hereby appoints the Sub-Advisor to serve
as investment advisor to the Advisor with respect to the
Investment Assets of the Fund, and the Sub-Advisor accepts
such appointment and agrees to render the services and to
assume the obligations set forth in this Agreement.
3. THE INVESTMENT ASSETS. Subject to supervision by the
Advisor and the Fund's Board of Directors, the Sub-Advisor
shall manage the investment operations of the Investment
Assets. The Advisor may make additions to or withdrawals
from the Investment Assets in any amounts the Advisor
determines appropriate or necessary, and the Advisor will
provide notice of such additions and withdrawals to the
Sub-Advisor.
4. CUSTODIANSHIP OF THE INVESTMENT ASSETS. The Investment
Assets have been deposited with the Custodian and are
maintained by the Custodian in safekeeping on its premises,
in a recognized clearing corporation, or in the Federal
Reserve book-entry system, in the name of the Fund, the
Custodian or the clearing corporation, or in the nominee
name of any of these. The Advisor will give the Sub-Advisor
prior notice if any other entity is appointed to serve as
Custodian for the Investment Assets. The term "Custodian"
includes all successors to the presently serving Custodian.
The Sub-Advisor shall have no responsibility or liability
for custody arrangements or for the actions or omissions
of the Custodian.
5. MANAGEMENT OF INVESTMENT ASSETS.
5.1 GENERAL POWERS AND DUTIES.
(a) General. For the term of this Agreement,
the Sub-Advisor, subject to the provisions
of Sections 3, 5.1 and 5.2 of this
Sub-Advisory Agreement, has complete
discretion and authority in the investment
and reinvestment of the Investment Assets.
Subject to specific written instructions
of the Advisor, the Sub-Advisor must
determine what securities or other property
will be acquired, held, or disposed of and,
subject to the provisions of Section 5.4
of this Agreement, what portion of the
Investment Assets will be held uninvested.
The Sub-Advisor's investment and reinvestment
authority includes, without limitation,
authority to purchase, sell, exchange,
convert, trade, and generally to deal in
the Investment Assets.
(b) Instructions to Custodian. The
Sub-Advisor is hereby authorized to give
instructions to the Custodian with respect
to the consummation of transactions on behalf
of the Advisor in the Investment Assets, and
the Sub-Advisor has authority to direct the
Custodian with respect to the investment and
management of the Investment Assets. The
Custodian is hereby authorized to act in
response to instructions given by the
Sub-Advisor. The Advisor agrees to take
any action and deliver any certificates
reasonably necessary to confirm this
authorization to the Custodian.
(c) Voting Rights. The Sub-Advisor's
authority includes the exercise of all
voting rights pertaining to the Investment
Assets. The Sub-Advisor has the duty to
maintain accurate records as to any vote
or action taken with respect to any stock
or other securities which are part of the
Investment Assets and to take such further
action as may be necessary for the Fund to
participate fully in any transaction
undertaken by issuers of Investment Assets.
(d) Tax Lot Selection Methods for Sales. Unless
otherwise instructed in writing by the Advisor
or the Board of Directors of the Fund, the
Sub-Advisor will use the first in, first out
(FIFO) method as the default tax lot selection
method with regard to the Investment Assets.
5.2 INVESTMENT POLICY. Investment objectives, policies
and other restrictions for the management of the Investment
Assets, including requirements as to diversification, are
set forth in Exhibit A to this Agreement. The Sub-Advisor
must discharge its duties hereunder in accordance with
Exhibit A as revised or supplemented in separate written
instructions provided from time to time by the Advisor
or the Fund's Board of Directors.
5.3 PRUDENCE AND DIVERSIFICATION. The Sub-Advisor must
discharge its duties under this Agreement at all times
with the care, skill, prudence and diligence that a
prudent person acting in a like capacity and familiar
with such matters would use in conducting an enterprise
of a like character and with like aims.
5.4 MINIMUM LIQUIDITY REQUIREMENTS. The Advisor will
give the Sub-Advisor reasonable advance notice of any
cash requirements from the Investment Assets, and the
Sub-Advisor will maintain in cash or cash equivalents
sufficient assets to meet such cash requirements.
5.5 BROKERS AND DEALERS.
(a) Instructions. The Sub-Advisor is hereby
empowered to issue orders directly to a broker
or dealer for the purchase, sale or exchange
of securities with respect to the Investment
Assets. The Sub-Advisor must give the
Custodian and the Advisor prompt written
notification of each such execution in
accordance with the provisions of Section
6.1 of this Agreement, and the Sub-Advisor
must instruct the broker or dealer to forward
copies of the confirmation of the execution
of the order to the Custodian and the Advisor.
(b) Selection of Securities Brokers and Dealers.
The Sub-Advisor may select and employ securities
brokers and dealers to effect any securities
transactions concerning the investment management
of the Investment Assets. In selecting brokers
and dealers and placing orders with them, the
Sub-Advisor must use its commercially reasonable
best efforts to obtain for the Investment Assets
the most favorable net price and "best execution"
available, except to the extent otherwise
provided by Section 28(e) of the Securities
Exchange Act or by other applicable law;
provided, however, in seeking the best execution
available with respect to securities transactions
involving the Investment Assets, the Sub-Advisor
shall give consideration to the overall quality
of brokerage and research services provided, it
being understood and agreed that "best execution"
is not limited to obtaining the lowest commission
for each transaction. Notwithstanding anything
in this subsection to the contrary, the Advisor
may instruct the Sub-Advisor in writing to engage
securities brokers and dealers specified by the
Advisor to effect, with respect to the Investment
Assets, securities transactions or particular
securities transactions, and the Sub-Advisor
must act in accordance with those instructions,
so long as they are reasonable. The Sub-Advisor
will not be responsible or liable for any acts or
omissions by any broker or dealer selected
pursuant to this subsection; provided that, the
Sub-Advisor has acted reasonably in the exercise
of due care in the selection of the broker or
dealer and has not otherwise directly or
indirectly participated in those acts or
omissions by the broker or dealer.
(c) Affiliated Brokers. Unless authorized in
writing by the Advisor, neither the Sub-Advisor
nor any parent, subsidiary or related firm,
individual or other entity related to the
Sub-Advisor will act as a securities
broker with respect to any purchase or
sale of securities made on behalf of the Fund.
5.6 OTHER ACCOUNTS OF THE SUB-ADVISOR. It is understood
that the Sub-Advisor performs investment advisory services
for various clients and accounts other than the Advisor.
The Sub-Advisor may give advice and take action in the
performance of its duties with respect to other clients
or accounts which may be the same as or may differ from
the timing or nature of action taken with respect to the
Investment Assets, provided that the Sub-Advisor allocates
to the Investment Assets, to the extent practicable,
opportunities to acquire or dispose of investments
over a period of time on a basis no less favorable than
its allocation of such opportunities to other clients
and accounts and seeks over a period of time to obtain
comparable execution of similar transactions among its
clients. It is understood that the Sub-Advisor will
not have any obligation to purchase or sell, or to
recommend for purchase or sale, for the Fund any
security which the Sub-Advisor, its principals,
affiliates or employees may purchase or sell for
its or their own accounts or for the account of
any other client, if in the opinion of the
Sub-Advisor such transaction or investment
appears unsuitable, impractical or undesirable
for the Fund.
5.7 LIABILITY OF SUB-ADVISOR. The Sub-Advisor shall
act in good faith in rendering services in connection
with this Agreement. Nothing contained herein shall
make the Sub-Advisor be liable for any loss incurred
by the Fund in connection with services provided by
the Sub-Advisor in accordance with this Agreement
so long as the Sub-Advisor acts in good faith and
fulfills its duties under this Agreement; provided,
however, that nothing herein shall protect the
Sub-Advisor against liability to the Fund to which
the Sub-Advisor would otherwise be subject, by reason
of its willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by
reason of its reckless disregard of its obligations
and duties under this Agreement. Nothing in this
Agreement shall protect the Sub-Advisor from any
liabilities which it may have under the Securities
Act, the Investment Company Act or the Investment
Advisers Act.
6. INFORMATION AND REPORTS.
6.1 REPORTS TO ADVISOR. The Sub-Advisor must submit
a daily written report to the Advisor promptly
following the close of regular trading on the
New York Stock Exchange detailing the actions
taken by the Sub-Advisor under this Agreement
during that day. The report must contain the
information in the form that the Advisor has
or will from time to time reasonably specify.
In addition, the Sub-Advisor must provide other
reports on the performance of the Investment
Assets at such times, for such periods and
in such form as the Advisor or the Fund's
Board of Directors reasonably request.
6.2 RECORDS AND ACCOUNTS. The Sub-Advisor
must keep accurate and detailed records and
accounts of the Investment Assets and of
all receipts, disbursements and other
transactions affecting the Investment
Assets. The Sub-Advisor will make all its
records, accounts and documents relating to
the Investment Assets available at all
reasonable times and under reasonable
conditions for inspection and audit by
any person or persons designated by the
Advisor or the Fund's Board of Directors.
6.3 CODE OF ETHICS. The Sub-Advisor has
adopted a written code of ethics complying
with the requirements of Rule 17j-1 of the
Investment Company Act and Rule 204A-1 of
the Investment Advisers Act (the "Code of
Ethics") and has provided a copy of such
Code of Ethics to the Fund. The Sub-Advisor
agrees to deliver a copy of the Code of
Ethics to the Fund promptly after any
material changes are made, highlighting
or summarizing such material changes.
Upon request, the Chief Compliance Officer
of the Sub-Advisor shall certify to the Fund
that, with regard to the period identified
by the Fund in its request:
(a) The Sub-Advisor has provided to the
Fund the Sub-Advisor's Code of Ethics
that is in effect;
(b) The Sub-Advisor has complied with the
requirements of Rule 17j-1 and Rule
204A-1;
(c) The Sub-Advisor has adopted procedures
reasonably necessary to prevent its
"Access Persons" (as defined in Rule
17j-1 of the Investment Company Act)
from violating the Code of Ethics; and
(d) There have been no material violations
of the Code of Ethics or, if any
violation has occurred, the nature of
such violation and of the action taken
in response to such violation.
6.4 COMPLIANCE PROGRAM. The Sub-Advisor has
adopted written policies and procedures in
compliance with the requirements of Rule
38a-1 of the Investment Company Act and Rule
206(4)-7 of the Investment Advisers Act (the
"Compliance Procedures") and has provided a copy
of such Compliance Procedures to the Fund. The
Sub-Advisor agrees to provide a copy of the
Compliance Procedures to the Fund promptly
after any material changes are made, highlighting
or summarizing such material changes. Upon
request, the Chief Compliance Officer of the
Sub-Advisor shall certify that:
(a) The Sub-Advisor has provided to the
Fund the Sub-Advisor's Compliance
Procedures that are in effect at
that time;
(b) The Sub-Advisor has reviewed, during
the preceding 12-month period (or as
otherwise required by applicable law),
the adequacy of its Compliance Procedures
and the effectiveness of the implementation
of the Compliance Procedures;
(c) The Compliance Procedures are reasonably
designed to prevent violation, by the
Sub-Advisor and its Supervised Persons,
of the Federal Securities Laws, including
the Investment Advisers Act and related
rules issued by the SEC; and
(d) With regard to the period identified by
the Fund in its request, there have been
no material violations of the Compliance
Procedures or, if any violation has
occurred, the nature of such violation
and of the action taken in response to
such violation.
6.5 PROXY VOTING RECORDS AND POLICY.
(a) The Sub-Advisor has adopted and
implemented written policies and
procedures pursuant to Rule 206(4)-6
of the Investment Advisers Act that are
reasonably designed to ensure that the
Sub-Advisor votes client securities in
the best interest of its clients (the
"Proxy Voting Policy"), and the
Sub-Advisor has provided a copy of such
Proxy Voting Policy to the Fund. The
Sub-Advisor agrees to provide a copy of
the Proxy Voting Policy to the Fund
promptly after any material changes
are made, highlighting or summarizing
such material changes.
(b) The Sub-Advisor agrees to maintain an
accurate summary of any vote cast or
proxy granted by the Sub-Advisor on
behalf of the Fund (the "Voting
Records"), and, upon request, the
Sub-Advisor shall provide the Voting
Records in the form specified in
writing to the Sub-Advisor by the
Fund, and the Sub-Advisor's Chief
Compliance Officer shall certify
that, with regard to the period
identified by the Fund in its
request, the Voting Records
accurately reflect the votes
cast and proxies granted by the
Sub-Advisor on behalf of the Fund
during the identified period, each
of which vote or proxy was cast or
granted in compliance with the
Sub-Advisor's Proxy Voting Policy.
6.6 PAY TO PLAY POLICY. The Sub-Advisor has adopted
a "Pay to Play Policy" complying with the
requirements of Rule 206(4)-5 of the Investment
Advisers Act (the "Pay to Play Rule") and has
provided a copy of such Pay to Play Policy to
the Fund. The Sub-Advisor understands that the
Fund is a "Covered Investment Pool", as defined
in the Pay to Play Rule, and the Fund agrees to
deliver to the Sub-Advisor such information as
the Sub-Advisor may request to ensure the
Sub-Advisor's compliance with the Pay to Play
Rule.
6.7 FORM ADV. The Sub-Advisor agrees to provide
a copy of its current Form ADV (Parts I and II)
to the Fund within 90 days of the end of the
calendar year.
6.8 EXCHANGE OF INFORMATION. The Advisor and the
Sub-Advisor agree to provide the information that
the Sub-Advisor or the Advisor, as the case may
be, reasonably requests to enable it to carry out
its duties, obligations and responsibilities under
this Agreement or applicable law.
6.9 INFORMATION TO BE CONFIDENTIAL. All
information and advice furnished to or obtained
by any party under or in connection with this
Agreement will be treated as confidential and
will not be used or disclosed to third parties
except as required by law. This provision must
not be construed to limit the Advisor's or the
Fund's ability to comply with the disclosure
obligations of an investment company to its
securities holders under the federal securities
laws.
7. FEE PAYABLE TO SUB-ADVISOR. For services under the
Sub-Advisory Agreement, the Sub-Advisor shall be entitled
to receive from the Advisor a quarterly fee in an amount
equal to 0.10625% of the current value of the sub-advised
Investment Assets under $100,000,000 and 0.075% of the
current value of the sub-advised Investment Assets over
$100,000,000 as of the close of the last trading day of
March, June, September and December (0.425% of assets
under $100,000,000 and 0.30% of assets over $100,000,000
on an annual basis). This fee is payable in arrears as
soon as practicable, but not more than ten business days,
after the last day of each calendar quarter.
8. MEETINGS WITH ADVISOR AND FUND. A representative of
the Sub-Advisor will personally meet with the Investment
Committee of the Advisor or its designated representative
as reasonably requested by the Advisor to explain the
investment and management activities of the Sub-Advisor
and any reports related thereto, at such times as may
be mutually agreed upon by the Sub-Advisor and the Advisor.
In addition, upon reasonable request, each year, a
representative of the Sub-Advisor will attend one or more
of the meetings of the Fund's Board of Directors and will
be prepared to discuss the Sub-Advisor's economic outlook,
investment strategy, individual holdings included in the
Investment Assets and such other related matters as the
Board of Directors reasonably requests.
9. INDEMNIFICATION. In addition to any other rights the
Advisor or the Fund may have against the Sub-Advisor, the
Sub-Advisor will indemnify the Advisor and the Fund and
hold them harmless with respect to any loss or damage,
or costs or expenses suffered by them as a result of (i)
a breach by the Sub-Advisor of this Agreement, or (ii)
the willful misfeasance, bad faith or gross negligence
of the Sub-Advisor, or (iii) the willful misfeasance,
bad faith or gross negligence of any of the Sub-Advisor's
employees, or agents acting under its supervision or
control performing any of its obligations and duties or
(iv) by reason of the Sub-Advisor's reckless disregard
of its obligations and duties under this Agreement,
the Investment Advisers Act or any other applicable
law or regulation; provided, the Sub-Advisor shall have
no responsibility or liability for any loss incurred by
reason of any act or omission of the Advisor or the
Custodian. The Advisor will indemnify the Sub-Advisor
and hold it harmless with respect to any loss or damage,
or costs or expenses suffered by it as a result of
(i) the Sub-Advisor's failure to provide notice within
one day to the Advisor or the Fund of any trade, transfer,
exchange, redemption or other corporate action that occurs
with regard to a portfolio security held by the Fund, or
(ii) a breach by the Advisor of this Agreement, or (iii)
the willful misfeasance, bad faith or gross negligence of
the Advisor, or (iv) the willful misfeasance, bad faith
or gross negligence of any of the Advisor's employees,
or agents acting under its supervision or control
performing any of its obligations and duties or (v) by
reason of the Advisor's reckless disregard of its
obligations and duties under this Agreement, the
Investment Advisers Act, the Investment Company Act or
any other applicable law or regulation; provided, the
Advisor shall have no responsibility or liability for
any loss incurred by reason of any act or omission of
the Sub-Advisor or the Custodian.
10. AMENDMENT. This Agreement may be amended at any
time by written agreement of the parties, provided
that any material amendment will not be effective
unless approved in accordance with the Investment
Company Act.
11. TERM AND TERMINATION.
11.1 TERM.
(a) Term. This Agreement shall have an
initial term of one year from the
Effective Date and thereafter shall
continue from year to year if
continuance is approved at least
annually by (a) the Fund's Board
of Directors or a Majority Vote
of Shareholders and (b) the vote
of a majority of the members of
the Fund's Board of Directors who
are not Interested Persons of the
Sub-Advisor or of the Fund cast in
person at a meeting called for the
purpose of voting on such approval.
(b) Duration. Unless sooner
terminated as provided herein, this
Agreement shall continue in effect
for an initial period of one year
from the Effective Date, and it
shall continue in effect from year
to year, but only so long as such
continuance is specifically approved
at least annually in accordance
with the Investment Company Act.
11.2 TERMINATION.
(a) Automatic Termination. This
Agreement shall automatically
terminate in the event of its
assignment, within the meaning
of Section 15(a) of the Investment
Company Act, unless an order of
the SEC is issued exempting such
assignment. If at any time the
Sub-Advisor ceases to be an
"investment advisor" in accordance
with the Investment Advisers Act,
this Agreement will automatically
terminate. No penalty or payment
of any kind by the Advisor will
be due upon an automatic termination
(b) Termination by Advisor, Board of
Directors of the Fund or Shareholders
of the Fund. This Agreement may
be terminated at any time, upon
written notice to the Sub-Advisor,
without payment of any penalty, by
the Advisor, the Board of Directors
of the Fund or by a Majority Vote
of Shareholders. Notwithstanding
that the effective date of any
such termination may be fewer than
30 days after the date of notice
of termination, the Sub-Advisor
shall be compensated for 30 days
after the date of notice of
termination, and such compensation
shall not constitute payment of a
penalty in connection with such
termination. Any compensation
paid pursuant to this subsection
11.2(b) shall be calculated based
on the Investment Assets as of the
effective date of the termination.
(c) Termination By Sub-Advisor.
The Sub-Advisor may terminate this
Agreement at any time upon 30 days'
prior written notice to the Advisor
and the Fund.
(d) Prorated Fee. If this
Sub-Advisory Agreement shall
terminate at any time other than
at the end of a calendar quarter,
the Sub-Advisor shall be entitled
to receive the fee set forth in
Section 7 hereof for the portion
of the quarter elapsed prior to
the date of termination, prorated
on a daily basis.
12. MISCELLANEOUS.
12.1 ERRORS AND OMISSIONS POLICY. The
Sub-Advisor agrees that, at its sole expense,
it will maintain an errors and omissions
insurance policy that covers the acts, errors
and omissions by the Sub-Advisor and its
employees and agents during the term of this
Agreement. Upon request of the Advisor, the
Sub-Advisor will promptly provide evidence
of such insurance.
12.2 GOVERNING LAW; SEVERABILITY. This Agreement
and its performance shall be governed by and
construed in accordance with the applicable
laws of the United States and, to the extent
permitted by such laws, with the laws of the
State of Oklahoma. In case any provision of
this Agreement is held illegal or invalid for
any reason, that illegality or invalidity
will not affect the remaining provisions of
this Agreement but will be fully severable,
and this Agreement will be construed and
enforced as if the illegal or invalid
provision had not been included herein.
12.3 NOTICES. Unless the parties otherwise
agree, all notices, instructions and advice
with respect to matters contemplated by this
Agreement must be in writing and are effective
when received. Delivery must be made personally,
by registered or certified mail, return receipt
requested, overnight courier or confirmed
facsimile and addressed as follows:
Advisor: American Fidelity Assurance Company
X.X. Xxx 00000
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Investment Department
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Fund:
American Fidelity Dual Strategy Fund, Inc.
0000 Xxxxxxx Xxxxxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Chief Compliance Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With copies to:
Xxxxxxxx Xxxxxxx
McAfee & Xxxx A Professional Corporation
Two Leadership Square
000 Xxxxx Xxxxxxxx, 00xx Xxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Email: xxxxxxxx.xxxxxxx@xxxxxxxxxx.xxx
Sub-Advisor:Quest Investment Management, Inc.
Xxx XX Xxxxxxxx
Xxxxx 0000
Xxxxxxxx, XX 00000
Attention: Xxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Any party may change any of the above information by providing notice to
the other parties in the manner set forth above. All reports required to
be delivered by the Sub-Advisor to the Advisor pursuant to Section 6.1 of
this Agreement must be delivered in the manner specified from time to
time by the Advisor.
12.4 COMPLIANCE WITH LAWS. Nothing in this Agreement
shall be deemed to authorize the Sub-Advisor to effect any transactions
in contravention of its fiduciary obligations, duties or responsibilities
under the Investment Advisers Act, this Agreement or any other applicable
federal or state laws or regulations (including all applicable securities
laws and regulations) or the rules of any national securities exchange.
Each party will at all times comply with the Investment Advisers Act and
other applicable laws, regulations and rules in performing its duties under
this Agreement.
12.5 COUNTERPARTS. This Agreement may be executed
in one or more separate counterparts, each of which shall be deemed to be
an original, and all of which taken together shall be deemed to c
onstitute one and the same instrument.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have caused this
Sub-Advisory Agreement to be executed as of the day and year first above
written.
FUND: AMERICAN FIDELITY DUAL STRATEGY FUND, INC.
By: ____________________________
Name: Xxxxx X. Xxxxxxxxx
Title: President ADVISOR: AMERICAN FIDELITY ASSURANCE COMPANY
By: ____________________________
Name: Xxxxxx X. Xxxxxxxx
Title: Executive Vice President SUB-ADVISOR: QUEST INVESTMENT
MANAGEMENT, INC.
By: ____________________________
Name: Xxxxxxx X. Xxxxxxx
Title: Chief Executive Officer
EXHIBIT A
American Fidelity Assurance Company
American Fidelity Dual Strategy Fund
Investment Objectives, Policies and Other Restrictions
I. INVESTMENT OBJECTIVES:
The Fund's investment objectives are, primarily, long-term growth of
capital and, secondarily, the production of income. Such objectives do
not preclude infrequent investments for short term capital appreciation.
The Fund normally invests in a diversified portfolio consisting primarily
of common stocks based upon an assessment of particular industries or
companies. The Fund attempts to maintain sufficient cash balances to meet
variable annuity contract payments. The Fund's assets may be held in cash
or cash equivalents or in United States Government securities for this
purpose. The Fund does not engage in the purchase or sale of puts, calls
or other options or in writing such options.
The Sub-Advisor, after consulting with the Advisor and obtaining Advisor
approval, may determine that prevailing market and economic conditions
indicate that investments other than common stocks may be advantageous,
in which event investments may be made on a short term basis in United
States Government securities, bonds, notes or other evidences of
indebtedness, issued publicly, of a type customarily purchased for
investment by institutional investors.
II. FUNDAMENTAL INVESTMENT POLICIES:
The Sub-Advisor must comply with the following:
A. Not purchase securities that would cause more than five percent
(5%) of the value of the Investment Assets placed with the
Sub-Advisor to be invested in securities of any one issuer,
except obligations of the United States Government and
instrumentalities thereof.
B. Not more than ten percent (10%) of the voting securities of
any one issuer will be acquired.
C. Not more than twenty-five (25%) of the value of the Investment
Assets placed with the Sub-Advisor will be invested in any one
industry.
D. No borrowings will be made.
E. The Sub-Advisor will ensure that the Fund does not act as an
underwriter of securities of other issuers.
F. Investment in real estate will be limited to shares of real
estate investment trusts investing in equity real estate,
up to ten percent (10.0%) of Investment Assets placed with
the Sub-Advisor. Investment in private placements and other
illiquid assets will not be made.
G. No purchase of commodities or commodity contracts will be
effected.
H. Puts, calls or other options will not be purchased.
I. Loans will not be made except through the acquisition of
publicly traded bonds, debentures or other evidences of
indebtedness of a type customarily purchased by institutional
investors.
J. Investment will not be made in the securities of a company
for the purpose of exercising management or control.
K. Investment in securities of other investment companies will
not be made except for money market funds. Up to ten percent
(10%) of Investment Assets placed with the Sub-Advisor may
be invested in money market funds, provided that not more
than three percent (3%) of the total outstanding voting
stock of any one investment company may be held.
L. Investments in repurchase agreements will be limited to
the top thirty-five (35) U.S. banks, by deposits, that are
rated at least "B/C" by Xxxxx, Bruyette, Woods, a national
bank rating agency or a comparable rating from a similar
bank rating service. Additionally, there must be an
appropriate amount of excess collateralization depending
upon the length of the agreement, to protect against
downward market fluctuation and the Fund must take
delivery of the collateral. The market value of the
securities held as collateral will be valued daily. In
the event the market value of the collateral falls below
the repurchase price, the bank issuing the repurchase
agreement will be required to provide additional
collateral sufficient to cover the repurchase price.
M. Short sales of securities will not be made.
N. Purchases will not be made on margin, except for such
short-term credits necessary for the clearance of
transactions.
O. Investments in high-yield or non-investment grade bonds
will not be made.
P. Investments in the equity securities of foreign
corporations will be limited to American Depositary
Receipts ("ADRs"), other depositary receipts and ordinary
shares which are denominated in U.S. dollars and publicly
traded in the United States. Not more than thirty-five
percent (35%) of the Investment Assets placed with the
Sub-Advisor will be invested in foreign issuers. In
addition, not more than twenty percent (20%) of the
Investment Assets placed with the Sub-Advisor will be
invested in issuers from any one foreign country.
III. ADDITIONAL INVESTMENT RESTRICTIONS:
The Sub-Advisor must comply with the Additional Investment
Restrictions set forth below. To the extent that these
Additional Investment Restrictions conflict with the
Fundamental Investment Policies, the Additional Investment
Restrictions shall govern.
A. The Sub-Advisor shall conform to the following issuer
guidelines at the time of purchase:
1. A minimum market capitalization of one billion
dollars ($1,000,000,000).
2. Audited financial statements for at least three
(3) years of operation.
3. Fifty million dollars ($50,000,000) or more in
stockholders equity.
B. Lending of securities will not be permitted.
C. The Fund will not invest in the securities of
tobacco-producing companies.
D. InvesTrust, N.A., or another custodian chosen by the
Advisor, shall be the Custodian of all Investment Assets
placed with the Sub-Advisor. The Sub-Advisor must ensure that
duplicate brokerage confirmations of all transactions are
sent to the Custodian and the Advisor.
E. All money market funds used by the Sub-Advisor for a portion
of Investment Assets placed with the Sub-Advisor must be
approved in advance by the Advisor.
F. The money market funds (cash) used by the Sub-Advisor for a
portion of Investment Assets must have a balance at all times
equal to at least one percent (1.0%), but not more than three
percent (3.0%), of the market value of Investment Assets
placed with the Sub-Advisor.
G. All brokers used by the Sub-Advisor to execute transactions
for the Fund must have a commercial paper rating of A1/P1 by
Moody's and Standard & Poor's unless approved in advance by
the Advisor.
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