Exhibit d.3
Amended and Restated
Investment Sub-Advisory Agreement
This Amended and Restated Investment Sub-Advisory Agreement (the
"Sub-Advisory Agreement") is effective as of December 1, 2004, 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 Seneca Capital Management LLC
(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 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 Advisers Act.
D. The Advisor and the Fund previously obtained approval by a Majority Vote
of Shareholders 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 Amended and Restated Investment Agreement dated April 14,
2003 (the "April Sub-Advisory Agreement").
E. The parties desire to amend and restate the April Sub-Advisory 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. 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) Investment Advisers Act: The Investment Advisers Act of 1940,
as amended.
(b) 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 InvesTrust,
N.A. 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.
(c) Investment Company Act: The Investment Company Act of 1940,
as amended.
(d) 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.
(e) SEC: The Securities and Exchange Commission.
(f) Securities Act: The Securities Act of 1933, as amended.
(g) Securities Exchange Act: The Securities Exchange Act of 1934,
as amended.
(h) Shareholders: The beneficial owners of the Fund's securities.
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.
4. 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 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 Sub-Advisory 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. 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 Sub-Advisory 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. However, the
Sub-Advisor has no obligation to exercise any particular voting rights unless
the Custodian or the Advisor has furnished the pertinent proxies to the
Sub-Advisor at 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. Sub-Advisor is authorized to vote
and give proxies for the securities held in the Investment Assets and to deal
with reorganizations and exchange offers with respect to such securities in such
manner as Sub-Advisor deems advisable, unless the Advisor otherwise specifically
directs in writing. The Sub-Advisor shall also have the authority to: (i)
identify, evaluate and pursue legal claims, including commencing or defending
suits, affecting the securities held at any time in the Investment Assets,
including claims in bankruptcy, class action securities litigation and other
litigation; (ii) participate in such litigation or related proceedings with
respect to such securities as the Sub-Advisor deems appropriate to preserve or
enhance the value of the Investment Assets, including filing proofs of claim and
related documents and serving as "lead plaintiff" in class action lawsuits;
(iii) exercise generally any of the powers of an owner with respect to the
supervision and management of such rights or claims, including the power to
settle, compromise or submit to arbitration any claims, the exercise of which
the Sub-Advisor deems to be in the best interest of the Investment Assets or
required by applicable law, including ERISA; and (iv) employ suitable agents,
including legal counsel, and to pay their reasonable fees, expenses and related
costs from the 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 Sub-Advisory
Agreement. The Sub-Advisor must discharge its duties hereunder in accordance
with these guidelines as revised or supplemented or as provided in separate
written instructions from time to time by the Advisor or the Fund's Board of
Directors; provided, however, revisions or supplements to such guidelines and
any separate written instructions relating to the guidelines shall be effective
only after they are furnished to Sub-Advisor in writing by the Advisor or the
Fund.
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 Sub-Advisory 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. The Advisor has reviewed the disclosure in Sub-Advisor's
Form ADV regarding the factors Sub-Advisor will consider in selecting brokers
and dealers and the Advisor hereby represents that it understands that
disclosure. In particular, the Advisor understands that Sub-Advisor may consider
the value of "research" or other services and products a broker or dealer
provides to Sub-Advisor, which Sub-Advisor may utilize on behalf of other
clients, and that under some circumstances the broker or dealer compensation it
pays may exceed the compensation that could be obtained from another broker or
dealer, particularly if such other broker or dealer were not providing research
or other services or products. 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. 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. In many
instances, securities transactions involving the Investment Assets will also be
effected simultaneously with transactions in the same securities for other
clients or for accounts in which Sub-Advisor or an affiliate of Sub-Advisor has
a beneficial interest. Where simultaneous transaction orders cannot all be
executed at the same price, Sub-Advisor may cause the Investment Assets and all
other participating accounts to pay or receive the average of the prices at
which all simultaneous orders were executed.
5.7 LIABILITY OF SUB-ADVISOR. The Sub-Advisor shall act in good
faith in rendering services in connection with this Sub-Advisor 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 Sub-Advisory Agreement so long as the Sub-Advisor acts in
good faith and fulfills its duties under this Sub-Advisory 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 the Sub-Advisory Agreement. Nothing in this Agreement shall protect the
Sub-Advisor from any liabilities which it may have under the Securities Act or
the Investment Company 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 Sub-Advisory Agreement during that day. The report must contain the
information in the form that the Advisor has or will from time to time 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 requests.
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 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 Advisers 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" (as defined in Rule 17j-1 of the
Investment Company Act) from violating the Code of Ethics; and
(d) There have been no 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 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 Advisers Act and related rules issued
by the SEC; and
(d) There have been no 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 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 in writing to the Sub-Advisor
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 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 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.
6.6 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 Sub-Advisory Agreement or
applicable law.
6.7 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 Sub-Advisory Agreement will be treated as confidential and
will not be disclosed to third parties except as required by law, except that
Sub-Advisor may (i) disclose in marketing materials and similar communications
that the Advisor has engaged Sub-Advisor pursuant to this Sub-Advisory Agreement
and (ii) include performance statistics regarding the Investment Assets in
composite performance statistics regarding one or more groups of Sub-Advisor's
clients published or included in any of the foregoing communications, provided
Sub-Advisor does not identify any performance statistics as relating
specifically to the Investment Assets. 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
Sub-Advisory 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 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 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) 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
Sub-Advisor of this Sub-Advisory Agreement, or (iii) the willful misfeasance,
bad faith or gross negligence of the Sub-Advisor, or (iv) 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 (v) by reason of the Sub-Advisor's reckless
disregard of its obligations and duties under this Sub-Advisory 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, the Custodian, or any broker or
dealer selected in accordance with Section 5.5(b) hereof, provided that the
Sub-Advisor has acted reasonably in the exercise of due care in selecting such
broker or dealer.
10. AMENDMENT. This Sub-Advisory 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. This Sub-Advisory Agreement is effective
as of the date set forth above (the "Effective Date"), subject to the approval
of the Fund's Board of Directors.
(b) Duration. Unless sooner terminated as provided herein,
this Sub-Advisory 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 Sub-Advisory 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
Sub-Advisory 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 Sub-Advisory 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 Sub-Advisory 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 Sub-Advisory Agreement. Upon request of the
Advisor, the Sub-Advisor will promptly provide evidence of such insurance.
12.2 GOVERNING LAW; SEVERABILITY. This Sub-Advisory 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
Sub-Advisory Agreement is held illegal or invalid for any reason, that
illegality or invalidity will not affect the remaining provisions of the
Sub-Advisory Agreement but will be fully severable, and the Sub-Advisory
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
Sub-Advisory 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: (405) 523-xxxx
Facsimile: (405) 523-xxxx
Fund: American Fidelity Dual Strategy Fund, Inc.
0000 Xxxxxxx Xxxxxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxx
Telephone: (405) 523-xxxx
Facsimile: (405) 523-xxxx
Sub-Advisor: Seneca Capital Management LLC
000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Attention: Chief Operating Officer
Telephone: (415) 486-xxxx
Facsimile: (415) 486-xxxx
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
Sub-Advisory Agreement must be delivered in the manner specified from time to
time by the Advisor.
12.4 COMPLIANCE WITH LAWS. Nothing in this Sub-Advisory 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 Sub-Advisory 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 will at all times comply with the Investment Advisers Act and other
applicable laws, regulations and rules in performing its duties under this
Sub-Advisory 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: XXXX X. XXX
Name: Xxxx X. Xxx
Title: President
ADVISOR: AMERICAN FIDELITY ASSURANCE COMPANY
By: XXXX X. XXX
Name: Xxxx X. Xxx
Title: President
SUB-ADVISOR: Seneca Capital Management LLC
By: XXXXXX XXXXXXXXXX
Name: Xxxxxx Xxxxxxxxxx
Title: C.O.O.
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
For services under the Sub-Advisory Agreement, the Sub-Advisor shall be
entitled to receive from the Advisor a fee in an amount equal to 0.105% of the
current value of the Investment Assets as of the close of the last trading day
of March, June, September and December (0.42% on an annual basis).
