EXHIBIT d.6
Sub-Advisory Agreement
Quest Investment Management, Inc.
This Sub-Advisory Agreement (the "Agreement") is effective as of May 1,
2006, 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").
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 Fund desire for the Sub-Advisor to furnish
investment advisory services to the Advisor and the Fund with respect to certain
assets of the Fund, and the Sub-Advisor is willing to render such investment
advisory services.
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 guidelines
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 these guidelines 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 Sub-Advisory 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; Sub-Advisor agrees to
provide a copy of the Code of Ethics to the Fund promptly after any material
changes are made. As soon as practicable, but no later than 40 days, after the
end of the second and fourth calendar quarters, the Chief Compliance Officer of
the Sub-Advisor shall certify to the Fund that, with regard to the two most
recently completed calendar quarters:
(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 206(4)-7 of the
Investment Advisers Act (the "Compliance Procedures") and has provided a copy of
such Compliance Procedures to the Fund; Sub-Advisor agrees to provide a copy of
the Compliance Procedures to the Fund promptly after any material changes are
made. As soon as practicable, but no later than 40 days, after the end of the
second and fourth calendar quarters, 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 two most recently completed calendar quarters,
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; Sub-Advisor agrees to provide a copy of the Proxy Voting Policy to
the Fund promptly after any material changes are made.
(b) Sub-Advisor agrees to provide to the Fund an accurate summary of
any vote cast or proxy granted by the Sub-Advisor on behalf of the Fund
(the "Voting Records"). As soon as practicable, but no later than 40 days,
after the end of the second and fourth calendar quarters, 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 two most recently completed calendar
quarters:
(c) The Voting Records accurately reflect the votes cast and proxies
granted by the Sub-Advisor on behalf of the Fund during the preceding two
quarters, each of which vote or proxy was cast or granted in compliance
with the Sub-Advisor's Proxy Voting Policy; and
(d) The Sub-Advisor has provided to the Fund the Sub-Advisor's Proxy
Voting Policy that is in effect.
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 provided under this Agreement,
the Sub-Advisor is entitled to receive from the Advisor a fee that is calculated
as a percentage of the current value of the Investment Assets, as set forth in
the Fee Schedule attached as Exhibit B. The parties agree that the Fee Schedule
can be modified from time to time in accordance with the Investment Company Act
upon approval in writing by the parties. The fee payable to the Sub-Advisor
shall be calculated as of the close of the last trading day of March, June,
September and December. 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) Effective Date. Except as set forth in sub-section (c) below, this
Agreement shall become effective upon approval by a Majority Vote of
Shareholders in accordance with the Investment Company Act (the "Effective
Date").
(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.
(c) Interim Term. This Agreement shall be effective on a temporary
interim basis from the day and year first written above until the earlier
of 150 days after such date or until it has been approved or rejected by
the Fund's shareholders in accordance with the Investment Company Act. With
regard to the provisions herein, except for this subsection 11.1, the
effective date of the interim period of this Sub-Advisory Agreement shall
have the same effect as if it were the Effective Date, as defined above.
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, Xxxxxx 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.
[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: /s/ Xxxx X. Xxx
Name: Xxxx X. Xxx
Title: President
ADVISOR: AMERICAN FIDELITY ASSURANCE COMPANY
By: /s/ Xxxx X. Xxx
Name: Xxxx X. Xxx
Title: President
SUB-ADVISOR: Quest Investment Management, Inc.
By: /s/ Xxxxxxx X. Xxxxxxx
Name: Xxxxxxx X. Xxxxxxx
Title: 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 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.
EXHIBIT B
Fee Schedule
Pursuant to Section 7 of the foregoing Investment Sub-Advisory
Agreement (the "Sub-Advisory Agreement") made as of May 1, 2006, among American
Fidelity Dual Strategy Fund (the "Fund"), American Fidelity Assurance Company
(the "Advisor") and Quest Investment Management, Inc. (the "Sub-Advisor"), the
parties thereto agree as follows:
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).
Dated as of the day and year first above written.
FUND: AMERICAN FIDELITY DUAL STRATEGY FUND, INC.
By: /s/ Xxxx X. Xxx
Name: Xxxx X. Xxx
Title: President
ADVISOR: AMERICAN FIDELITY ASSURANCE COMPANY
By: /s/ Xxxx X. Xxx
Name: Xxxx X. Xxx
Title: President
SUB-ADVISOR: Quest Investment Management, Inc.
By: /s/ Xxxxxxx X. Xxxxxxx
Name: Xxxxxxx X. Xxxxxxx
Title: Chief Executive Officer
