Amended and Restated Sub-Advisory Agreement
Quest Investment Management, Inc.
This Sub-Advisory Agreement (the "Agreement") effective as of January 1,
2009 (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 Sub-Advisory Agreement by and among the
parties hereto dated as of May 1, 2006 (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 has entered into Management and Investment Advisory
Agreement dated as of May 1, 2003 with the Fund (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 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.
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 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.
6.7 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.
6.8 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 constitute 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 more than five percent (5%) of the value of the Investment Assets
placed with the Sub-Advisor will 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 following Additional Investment
Restrictions unless it requests an exception and receives written consent from
the Advisor or the Board of Directors of the Fund. To the extent that these
Additional Investment Restrictions conflict with the Fundamental Investment
Policies, the Additional Investment Restrictions shall govern.
A. The Sub-Advisor should generally conform to these issuer guidelines
with exceptions noted at the time of purchase and variances reviewed
annually with the Board of Directors of the Fund.
1. A minimum market capitalization of one billion dollars
($1,000,000,000) at the time of purchase.
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.
