Execution Copy
Amended and Restated
Investment Sub-Advisory Agreement
THIS AMENDED AND RESTATED INVESTMENT SUB-ADVISORY AGREEMENT (the
"Agreement") is made and entered into on the date hereafter set forth between
AMERICAN FIDELITY DUAL STRATEGY FUND, INC., a Maryland corporation (the "Fund"),
AMERICAN FIDELITY ASSURANCE COMPANY, an insurance company organized under the
laws of Oklahoma (the "Advisor"), and XXXX INVESTMENT ADVISORS, INC. (the
"Sub-Advisor").
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 of 1940, as
amended (the "Investment Company Act").
B. The Advisor has entered into an Amended and Restated 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 Advisors Act of 1940 (the "Investment Advisors Act").
D. The Advisor and the Sub-Advisor previously obtained approval by a
Majority Vote of Shareholders (as defined in Section 2(a)(42) of the Investment
Company Act) 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 an Investment Sub-Advisory Agreement dated April 8, 1999, as amended March
30, 2001 (the "Previous Agreement").
E. The parties desire to amend and restate the Previous Agreement in order
to include certain provisions relating to, among other things, new requirements
issued by the SEC.
AGREEMENT
The parties hereby agree as follows:
1. APPOINTMENT OF INVESTMENT SUB-ADVISOR. Effective on the Effective Date, the
Advisor hereby appoints Sub-Advisor to serve as investment advisor to the
Advisor in respect of those assets of the Fund specified in writing on or before
the Effective Date by the Advisor to be subject to this Agreement (which assets,
together with any assets which are added at a subsequent date or which are
received as a result of the sale, exchange, or transfer of any of such assets
are herein collectively referred to as the "Investment Assets"). The "Effective
Date" shall be the date of this Agreement, subject to approval by the Fund's
Board of Directors.
The Sub-Advisor hereby accepts such appointment and agrees to render the
services and to assume the obligations herein set forth, for the compensation
herein provided.
2. THE INVESTMENT ASSETS. The Investment Assets shall consist of such cash,
stocks, bonds and other securities which, from time to time, the Advisor places
under the investment supervision of the Sub-Advisor and/or which shall become
part of the Investment Assets as a result of transactions therein or otherwise.
The Advisor may make additions to or withdrawals from the Investment Assets in
such amounts as the Advisor shall determine.
3. CUSTODIANSHIP OF THE INVESTMENT ASSETS. The Investment Assets have been
deposited with InvesTrust, N.A. (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 the
foregoing. 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 Custodian is hereby authorized to act
in response to instructions given by the Sub-Advisor. The Advisor agrees to take
any other action and deliver any certificates reasonably necessary to confirm
the foregoing authorization to the Custodian. The Advisor shall advise the
Sub-Advisor if any other entity is appointed to serve as Custodian for the
Investment Assets prior to the date such entity succeeds the Custodian. The term
"Custodian" includes all successors to the presently serving Custodian.
4. MANAGEMENT OF INVESTMENT ASSETS.
4.1 General Powers and Duties. So long as the Sub-Advisor's appointment
under Section 1 hereof remains in effect, the Sub-Advisor shall, subject to the
provisions of Section 4.2 hereof, have complete discretion and authority in the
investment and reinvestment of the Investment Assets and shall determine what
securities or other property shall be acquired, held, or disposed of and,
subject to the provisions of Section 4.4 hereof, what portion of the Investment
Assets shall be held uninvested. The Sub-Advisor's investment and reinvestment
authority shall include, without limitation, authority to purchase, sell,
exchange, convert, trade, and generally to deal in the Investment Assets. The
Sub-Advisor shall have authority to direct the Custodian with respect to the
investment and management of the Investment Assets.
The Sub-Advisor's authority shall include the exercise of all voting rights
pertaining to the Investment Assets. However, the Sub-Advisor shall have no
obligation to exercise any particular voting rights unless the Custodian or the
Advisor shall have furnished the pertinent proxies to the Sub-Advisor a
reasonable time prior to the deadline before which such proxies are required to
be submitted. 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.
4.2 Investment Policy. Investment objectives, policies and other guidelines
for the management of Investment Assets, including requirements as to
diversification are set forth in Exhibit A to this Agreement. The Sub-Advisor
shall discharge its duties hereunder in accordance with said investment
guidelines as the same may be revised or supplemented from time to time by the
Advisor.
4.3 Prudence and Diversification. The Sub-Advisor shall discharge its
duties hereunder at all times with the care, skill, prudence, and diligence
under the circumstances then prevailing that a prudent person acting in a like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims.
4.4 Minimum Liquidity Requirements. The Advisor shall give the Sub-Advisor
reasonable advance notice of any cash requirements from the Investment Assets,
and the Sub-Advisor shall maintain in cash or cash equivalents sufficient assets
to meet such cash requirements.
4.5 Instructions to Securities Brokers and Dealers. The Sub-Advisor is
hereby empowered to issue orders for the purchase, sale or exchange of
securities with respect to the Investment Assets directly to a broker or dealer.
The Sub-Advisor shall give the Custodian and the Advisor prompt written
notification of each such execution in accordance with the provisions of Section
5.1 hereof, and the Sub-Advisor shall instruct the broker or dealer concerned to
forward a copy of the confirmation of the execution of such order to the
Custodian and the Advisor.
4.6 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 the selection
of such brokers and dealers by the Sub-Advisor and the placing of orders with
them, the Sub-Advisor shall use its best efforts to obtain for the Investment
Assets the most favorable net price and execution available except to the extent
otherwise provided by Section 28(e) of the Securities Exchange Act of 1934, as
amended, or by other applicable law. Notwithstanding anything in this Section
4.6 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 shall act in accordance with such
instructions. The Sub-Advisor shall not be responsible or liable for any acts or
omissions by any broker or dealer selected pursuant to this Section 4.6 provided
the Sub-Advisor has acted reasonably in the exercise of due care in the
selection of such broker or dealer and has not otherwise participated in,
directly or indirectly, such acts or omissions by such broker or dealer.
4.7 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 any of such other clients or
accounts which may be the same as or 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 such 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
shall 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.
4.8 Limit of Liability. The Sub-Advisor shall act in good faith and shall
not be liable for any error of judgment or loss incurred by the Fund in
connection with recommendations or investments made by the Investment
Sub-Advisor in its management of the Investment Assets.
5. INFORMATION AND REPORTS.
5.1 Reports to Advisor. The Sub-Advisor shall 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 such day. The report shall contain such information in such
form as the Advisor has specified, or from time to time shall specify, to the
Sub-Advisor. In addition, the Sub-Advisor shall provide such other reports on
the performance of the Investment Assets at such times, for such periods and in
such form as the Advisor shall reasonably request, taking into account the
Sub-Advisor's ability to produce such reports without undue burden to the
Sub-Advisor.
5.2 Records and Accounts. The Sub-Advisor shall keep accurate and detailed
records and accounts of the Investment Assets and of all receipts,
disbursements, and other transactions hereunder affecting the Investment Assets.
All such records and accounts, and all documents relating thereto shall be open
at all reasonable times and under reasonable conditions to inspection and audit
by any person or persons designated by the Advisor.
NOTE: When new sub-advisor agreements are drafted, need to re-work the
certification requirements. Quarterly certifications and accompanying updated
policies etc. are too hard to keep track of. Need to figure out something else
that works. Need to know that info is current (1) for registration statement,
and (2) for CCO checklist.
5.3 Code of Ethics. The Sub-Advisor has adopted or will adopt 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 Advisors Act (the "Code of
Ethics") and agrees to provide a copy of the Code of Ethics, as amended from
time to time, to the Advisor and the Fund. Within 20 days of the end of each
calendar quarter, the Chief Compliance Officer of the Sub-Advisor shall certify
that:
(a) The Sub-Advisor has provided to the Fund the Sub-Advisor's Code of
Ethics that is in effect at that time;
(b) The Sub-Advisor has complied with the requirements of Rule 17j-1
and Rule 204A-1 during the previous quarter;
(c) The Sub-Advisor has adopted procedures reasonably necessary to
prevent its Access Persons 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.
5.4 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 Advisors Act (the "Compliance
Procedures") and agrees to provide a copy of the Compliance Procedures, as
amended from time to time, to the Advisor and the Fund. Within 20 days of the
end of each calendar quarter, 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, 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 Advisors Act and related rules
issued by the SEC; and
(d) 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.
5.5 Proxy Voting Records and Policies. The Sub-Advisor agrees to provide to
the Advisor and the Fund an accurate summary of any vote cast or proxy granted
by the Sub-Advisor on behalf of the Fund (the "Voting Records"). Within 20 days
of the end of each calendar quarter, the Sub-Advisor shall provide the Voting
Records in the form specified by the Advisor or the Fund, and the Sub-Advisor's
Chief Compliance Officer shall certify that:
(a) The Sub-Advisor has adopted and implemented written policies and
procedures pursuant to Rule 206(4)-6 of the Investment Advisors Act that
are reasonably designed to ensure that the Sub-Advisor votes client
securities in the best interest of its clients (the "Proxy Voting
Policies");
(b) The Sub-Advisor has provided to the Fund the Sub-Advisor's Proxy
Voting Policies that are in effect at that time; and
(c) The Voting Records accurately reflect the votes cast and proxies
granted by the Sub-Advisor on behalf of the Fund during the preceding
quarter, each of which vote or proxy was cast or granted in compliance with
the Sub-Advisor's Proxy Voting Policies.
5.6 Exchange of Information. The Advisor and the Sub-Advisor agree to
provide to each other such information as the Advisor or the Sub-Advisor, as the
case may be, may reasonably request to enable it to carry out its duties,
obligations, and responsibilities under this Agreement or applicable law.
5.7 Information to be Confidential. All information and advice furnished to
or obtained by the Advisor or the Sub-Advisor under or in connection with this
Agreement shall be treated as confidential and shall not be disclosed to third
parties except as required by law, including the disclosure obligations of an
investment company to its securities holders under the federal securities laws.
6. FEE PAYABLE TO SUB-ADVISOR. For services under this Agreement, the
Sub-Advisor shall be entitled to receive from the Advisor a fee in an amount
equal to the greater of (a) 0.095% of the current value of the Investment Assets
as of the close of the last trading day of March, June, September and December
(0.38% on an annual basis) up to and including $100,000,000, and 0.75% of the
current value of the Investment Assets on those days (0.30% on an annual basis)
above $100,000,000, or (b) $12,500 per quarter ($50,000 on an annual basis).
Such fee shall be payable in arrears as soon as practicable, but not more than
10 business days, after the last day of each calendar quarter.
7. MEETINGS WITH CLIENT AND FUND. A representative of the Sub-Advisor shall
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 by the Sub-Advisor and the Advisor. In
addition, upon request, each year, a representative of the Sub-Advisor shall
attend one or more of the Fund's Board of Directors meetings and shall 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 shall request.
8. INDEMNIFICATION. In addition to any other rights which the Advisor or the
Fund may have against the Sub-Advisor, the Sub-Advisor shall 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) the Sub-Advisor's
failure to provide notice within one day of its receipt of notification of any
transfer, exchange, redemption or other corporate action that occurs with regard
to a portfolio security held by the Fundor any trade placed by the Sub-Advisor
on behalf of the Advisor or the Fund, or (ii) a breach by the Sub-Advisor of
this Agreement, or (iii) the willful misfeasance, bad faith or gross negligence
of the Sub-Advisor or any of its employees or agents acting under its
supervision or control to perform any of its obligations and duties, or by
reason of its reckless disregard of its obligations and duties, under this
Agreement, the Investment Advisors 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, a
custodian or any broker-dealer.
9. MISCELLANEOUS.
9.1 Amendment. This Agreement may be amended at any time by mutual
agreement of the Fund, the Advisor and the Sub-Advisor, provided that any
material amendment shall have been approved by a Majority Vote of Shareholders,
by the Fund's Board of Directors and by 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 the Fund cast in person at a meeting called for the purpose of voting on such
approval.
9.2 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.
9.3 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 Commission is issued exempting such assignment. This
Agreement may be terminated at any time, on 30 days' 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. If at any time the
Sub-Advisor ceases to be an "investment advisor" in accordance with the
Investment Advisors Act, this Agreement shall terminate forthwith without
penalty or payment of any kind by the Advisor. The Sub-Advisor may terminate
this Agreement at any time upon 30 days' prior written notice to the Advisor. If
this 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 6 hereof for the portion of the quarter elapsed prior to the date of
termination, prorated on a daily basis.
9.4 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, its employees or agents
during the term of this Agreement. Upon request of the Advisor, the Sub-Advisor
shall provide evidence of such insurance.
9.5 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 shall be held illegal
or invalid for any reason, such illegality or invalidity shall not affect the
remaining provisions of the Agreement but shall be fully severable, and the
Agreement shall be construed and enforced as if such illegal or invalid
provision had not been included herein.
9.6 Notices. Unless the parties otherwise agree, all notices, instructions
and advice with respect to matters contemplated by this Agreement shall be in
writing and effective when received, and delivery shall 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
0000 Xxxxxxx Xxxxxxxxx
Xxxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Investment Department
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Sub-Advisor: Xxxx Investment Advisors, Inc.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Either party may change any of the above information by providing notice to the
other party in the manner set forth above. All reports required to be delivered
by the Sub-Advisor to the Advisor pursuant to Section 5.1 of this Agreement
shall be delivered in the manner specified from time to time by the Advisor. Any
communications from the Sub-Advisor of a routine nature may be delivered by U.S.
mail to the person(s) specified by the Advisor.
9.7 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 Advisors
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. The Sub-Advisor shall at all times in the
performance of its duties hereunder comply with the Investment Advisors Act and
such other laws, regulations and rules.
In recognition of their acceptance of the terms and conditions of this
Agreement, the Advisor and the Sub-Advisor hereby execute this Agreement by
their duly authorized representatives to be effective as of December 1, 2004.
ADVISOR: AMERICAN FIDELITY ASSURANCE COMPANY
By /s/ Xxxx X. Xxx
Name: Xxxx X. Xxx
Title: President
FUND: AMERICAN FIDELITY DUAL STRATEGY
FUND, INC.
By /s/ Xxxx X. Xxx
Name: Xxxx X. Xxx
Title: President
SUB-ADVISOR: XXXX INVESTMENT ADVISORS, INC.
By /s/ Xxxxxx X. Xxxxxxxx
Name: Xxxxxx X. Xxxxxxxx
Title: President and Chief Executive Officer
EXHIBIT A
American Fidelity Assurance Company
American Fidelity Dual Strategy Fund
Investment Guidelines
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 POLICIES:
The Sub-Advisor must comply with the following Investment Guidelines:
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 seven percent
(7.0%) 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. The Fund will not engage in the purchase or sale of puts, calls or
other options or in writing such options.
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. Although the Fund does not intend to engage to a large extent in
short-term trading, the Sub-Advisor may make investments for the
purpose of seeking short-term capital appreciation.
M. 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.
N. Short sales of securities will not be made.
O. Purchases will not be made on margin, except for such short-term
credits necessary for the clearance of transactions.
P. Investments in high-yield or non-investment grade bonds will not be
made.
Q. 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. ADRs or
other depositary receipts must be issued by the Bank of New York,
Morgan Guaranty or Citibank. Depositary receipts issued by other
institutions must be approved in advance by the Advisor.
III. OTHER INVESTMENT GUIDELINES:
The following Guidelines are additional rules that the Sub-Advisor must
follow:
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.
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.
