Investment Company Act No. 811-08085
As filed with the Securities and Exchange Commission on January 2, 1998
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant
[x] Filed by a Party other than the Registrant
[ ] Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)) [ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
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American Skandia Advisor Funds, Inc.
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Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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<PAGE>
AMERICAN SKANDIA ADVISOR FUNDS, INC.
One Corporate Drive
P.O. Box 883
Shelton, Connecticut 06484
NOTICE OF SPECIAL MEETINGS OF SHAREHOLDERS
OF THE
ASAF FOUNDERS SMALL CAPITALIZATION FUND
AND THE
ASAF FOUNDERS INTERNATIONAL SMALL CAPITALIZATION FUND
To be held
February 24, 1998
To the Shareholders of the ASAF Founders Small Capitalization Fund and ASAF
Founders International Small Capitalization Fund of American Skandia Advisor
Funds, Inc.:
Notice is hereby given that Special Meetings of Shareholders of the
ASAF Founders Small Capitalization Fund and ASAF Founders International Small
Capitalization Fund (the "Funds") of American Skandia Advisor Funds, Inc. (the
"Company") will be held at One Corporate Drive, Shelton, Connecticut 06484 on
February 24, 1997 at 10:00 a.m. and 10:30 a.m. Eastern Time, respectively, or at
such adjourned time as may be necessary for the holders of a majority of the
outstanding shares of each Fund to vote (the "Meetings"), for the following
purposes:
I. To consider the approval of a new Sub-Advisory Agreement between American
Skandia Investment Services, Incorporated and Founders Asset Management LLC
regarding investment advice to the ASAF Founders Small Capitalization Fund.
II. To consider the approval of a new Sub-Advisory Agreement between American
Skandia Investment Services, Incorporated and Founders Asset Management LLC
regarding investment advice to the ASAF Founders International Small
Capitalization Fund.
III. To transact such other business as may properly come before the Meeting or
any adjournments thereof.
The shareholders of the ASAF Founders Small Capitalization Fund are
entitled to vote on Proposal I. The shareholders of the ASAF Founders
International Small Capitalization Fund are entitled to vote on Proposal II.
The matters referred to above in I and II are discussed in detail in
the Proxy Statement attached to this Notice. The Board of Directors has fixed
the close of business on December 29, 1997 as the record date for determining
shareholders entitled to notice of, and to vote at, the Meetings, and only
holders of record of shares at the close of business on that date are entitled
to notice of, and to vote at, the Meetings. Each share of a Fund is entitled to
one vote with respect to a proposal on which a Fund's shareholders are entitled
to vote.
You are cordially invited to attend the Meetings. If you do not expect
to attend, you are requested to complete, date and sign the enclosed form (or
forms) of proxy and return it promptly in the envelope provided for that
purpose. The proxy is being solicited on behalf of the Board of Directors.
YOUR VOTE IS IMPORTANT. IN ORDER TO AVOID THE UNNECESSARY EXPENSE OF FURTHER
SOLICITATION, WE URGE YOU TO INDICATE VOTING INSTRUCTIONS ON THE ENCLOSED PROXY
(OR PROXIES), DATE AND SIGN IT, AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED,
NO MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY BE. YOU MAY REVOKE THE PROXY AT
ANY TIME PRIOR TO ITS USE. THEREFORE, BY APPEARING AT THE MEETING, AND
REQUESTING REVOCATION PRIOR TO THE VOTING, YOU MAY REVOKE THE PROXY AND YOU CAN
THEN VOTE IN PERSON.
By order of the Board of Directors
Eric C. Freed
Secretary
American Skandia Advisor Funds, Inc.
January 19, 1998
<PAGE>
23
PROXY STATEMENT
AMERICAN SKANDIA ADVISOR FUNDS, INC.
P.O. Box 8012
Boston, Massachusetts 02266-8012
SPECIAL MEETINGS OF SHAREHOLDERS OF THE
ASAF FOUNDERS SMALL CAPITALIZATION FUND
AND THE
ASAF FOUNDERS INTERNATIONAL SMALL CAPITALIZATION FUND
To be held
February 24, 1998
This proxy statement and enclosed form of proxy are being furnished in
connection with the solicitation of proxies by the Board of Directors of
American Skandia Advisor Funds, Inc. (the "Company") for use at Special Meetings
of the Shareholders of the ASAF Founders Small Capitalization Fund (the "Small
Capitalization Fund") and the ASAF Founders International Small Capitalization
Fund (the "International Fund") (each, a "Fund" and collectively, the "Funds")
of the Company to be held at One Corporate Drive, Shelton, Connecticut 06484 on
February 24, 1998, at 10:00 a.m. and 10:30 a.m. Eastern Time, respectively (the
"Meetings"), or at any adjournments thereof, for the purposes set forth in the
accompanying Notice of Meetings (the "Notice"). The first mailing of proxies and
proxy statements to shareholders is anticipated to be on or about January 21,
1998.
Voting instructions will be solicited principally by mailing this Proxy
Statement and its enclosures, but proxies also may be solicited by telephone,
telegraph, or in person by officers or agents of the Company. The Company will
forward proxy materials to record owners for any beneficial owners that such
record owners may represent. Neither the Company nor the Funds will pay any of
the costs of the Meetings, including the costs related to the solicitation of
proxies.
The Annual Report of the Company, including audited financial
statements for the fiscal period from the Company's commencement of operations
on July 28, 1997 until October 31, 1997 (the "Report"), has been previously sent
to shareholders. The Company will furnish additional copies of the Report to a
shareholder upon request, without charge, by writing to the Company at the above
address or by calling 1-800-752-6342.
Shareholders of record at the close of business on December 29, 1997 (the
"Record Date") are entitled to notice of, and to vote at, the Meetings. Each
shareholder is entitled to one vote for each full share. As of the Record Date,
shares of capital stock of the Small Capitalization Fund were outstanding, and
shares of the International Fund were outstanding.
American Skandia Investment Services, Incorporated ("ASISI") is the
investment manager for all the Company's funds, including the Funds. ASISI is a
wholly-owned subsidiary of American Skandia Investment Holding Corporation
("ASIHC"). ASIHC is also the owner of all the outstanding shares of American
Skandia Marketing, Incorporated ("ASM"), which is the distributor of the Funds.
The principal offices of ASISI, ASIHC and ASM are located in the same building
at One Corporate Drive, Shelton, Connecticut 06484.
Under Sub-Advisory Agreements with ASISI, Founders Asset Management, Inc.
("Founders") serves as sub-advisor to the Funds and, subject to the supervision
and control of ASISI and the Board of Directors, determines the securities to be
purchased for and sold from the Funds. Founders, located at 2930 East Third
Avenue, Denver, Colorado 80206, was organized in 1938 and was reincorporated in
Delaware in 1970. Founders' Chairman, Chief Executive Officer, Chief Investment
Officer and sole director is Bjorn K. Borgen. Mr. Borgen's address is 2930 East
Third Avenue, Denver, Colorado 80206. Mr. Borgen currently owns 100% of
Founders' voting stock.
The Administrator of the Funds, and every other fund of the Company, is
PFPC Inc., a Delaware corporation located at 103 Bellevue Parkway, Wilmington,
Delaware 19809.
Shareholders of each Fund are being asked to consider and vote on a new
sub-advisory agreement for such Fund. Approval of the new sub-advisory agreement
for a Fund is not contingent upon shareholder approval of the new sub-advisory
agreement for the other Fund. As explained in more detail below, the existing
sub-advisory agreements for the Funds will terminate automatically, by operation
of law, upon the consummation of the merger (the "Merger") of Founders into a
subsidiary of Mellon Bank, N.A. ("Mellon"). The name of this subsidiary will be
Founders Asset Management LLC ("New Founders"). Shareholders are not being asked
to approve the Merger; rather, they are being asked to continue the existing
sub-advisory relationship for the Funds under new contracts (the "New Small
Capitalization Sub-Advisory Agreement," the "New International Sub-Advisory
Agreement", and collectively the "New Sub-Advisory Agreements"). The Merger and
the terms of the New Sub-Advisory Agreements are discussed below. Other than the
date of the agreements and the fact that New Founders, rather than Founders, is
the sub-advisor, the proposed New Sub-Advisory Agreements are identical in form
and terms to the present agreements.
All shares of a Fund held by a shareholder of the Fund will be voted by
the Company in accordance with voting instructions received from such
shareholder. Proxies submitted without voting instructions will be voted FOR the
proposal set forth in the Notice. The Company has fixed the close of business on
February 23, 1998 as the last day on which proxies will be accepted.
As illustrated by the following table summarizing which Fund is being
solicited for each proposal, shareholders can vote only on the New Sub-Advisory
Agreement(s) for the Fund or Funds in which they own shares. However, because
the facts involved in each Proposal do not differ materially, the Proposals are
discussed together below.
<TABLE>
<CAPTION>
Proposal Fund
<S> <C> <C>
I. Approval of New Sub-Advisory Agreement Small Capitalization Fund
Between American Skandia Investment Services,
Incorporated and Founders Asset Management
LLC with Respect to the ASAF Founders Small
Capitalization Fund
II. Approval of New Sub-Advisory Agreement International Fund
Between American Skandia Investment Services,
Incorporated and Founders Asset Management
LLC with Respect to the ASAF Founders
International Small Capitalization Fund
</TABLE>
PROPOSAL I
APPROVAL OF A NEW SUB-ADVISORY AGREEMENT BETWEEN
AMERICAN SKANDIA INVESTMENT SERVICES, INCORPORATED
AND FOUNDERS ASSET MANAGEMENT LLC IN CONNECTION WITH ADVISORY SERVICES
PROVIDED TO THE ASAF FOUNDERS SMALL CAPITALIZATION FUND
PROPOSAL II
APPROVAL OF A NEW SUB-ADVISORY AGREEMENT BETWEEN
AMERICAN SKANDIA INVESTMENT SERVICES, INCORPORATED
AND FOUNDERS ASSET MANAGEMENT LLC IN CONNECTION WITH ADVISORY SERVICES
PROVIDED TO THE ASAF FOUNDERS INTERNATIONAL SMALL CAPITALIZATION FUND
Background
Small Capitalization Fund. Since the Small Capitalization Fund
commenced operations on July 28, 1997, ASISI has served as investment adviser to
the Small Capitalization Fund pursuant to an Investment Management Agreement
(the "Small Capitalization Investment Management Agreement") with the Company.
The Small Capitalization Investment Management Agreement, effective June 1,
1997, provides, among other things, that in carrying out its responsibility to
supervise and manage all aspects of the Small Capitalization Fund's operations,
ASISI may engage, subject to the approval of the Board of Directors and, where
required, the shareholders of the Small Capitalization Fund, a sub-advisor to
provide advisory services in relation to the Small Capitalization Fund. Under
the Small Capitalization Investment Management Agreement, ASISI may delegate to
a sub-advisor the duty, among other things, to formulate and implement the Small
Capitalization Fund's investment program, including the duty to determine what
issuers and securities will be purchased for and sold from the Small
Capitalization Fund. In accordance with this provision for delegation of
authority, ASISI entered into a sub-advisory agreement (the "Existing Small
Capitalization Sub-Advisory Agreement"), effective June 1, 1997 with Founders,
pursuant to which those duties were delegated to Founders. Founders has served
as sub-advisor to the Small Capitalization Fund since it commenced operations.
The Existing Small Capitalization Sub-Advisory Agreement was approved
by the Board of Directors, including a majority of the Directors who are not
"interested persons" of the Company (as defined under the Investment Company
Act) (the "Independent Directors"), on May 16, 1997. The Existing Small
Capitalization Sub-Advisory Agreement was not, and was not required to be,
approved by the shareholders of the Small Capitalization Fund after the Fund
commenced operations.
International Fund. Since the International Fund commenced operations
on July 21, 1997, ASISI has served as investment adviser to the International
Fund pursuant to an Investment Management Agreement (the "International
Investment Management Agreement") with the Company. The International Investment
Management Agreement, effective June 1, 1997, provides, among other things, that
in carrying out its responsibility to supervise and manage all aspects of the
International Fund's operations, ASISI may engage, subject to the approval of
the Board of Directors and, where required, the shareholders of the
International Fund, a sub-advisor to provide advisory services in relation to
the International Fund. Under the International Investment Management Agreement,
ASISI may delegate to a sub-advisor the duty, among other things, to formulate
and implement the International Fund's investment program, including the duty to
determine what issuers and securities will be purchased for and sold from the
International Fund. In accordance with this provision for delegation of
authority, ASISI entered into a sub-advisory agreement (the "Existing
International Sub-Advisory Agreement"), effective June 1, 1997 with Founders,
pursuant to which those duties were delegated to Founders. Founders has served
as sub-advisor to the International Fund since it commenced operations.
The Existing International Sub-Advisory Agreement was approved by the
Board of Directors, including a majority of the Directors who are not
"interested persons" of the Company (as defined under the Investment Company
Act) (the "Independent Directors"), on May 16, 1997. The Existing International
Sub-Advisory Agreement was not, and was not required to be, approved by the
shareholders of the International Fund after the Fund commenced operations.
The Merger. On December 11, 1997, Mellon entered into an Agreement and
Plan of Reorganization (the "Merger Agreement") with New Founders, Founders, and
Bjorn K. Borgen, pursuant to which Founders would be merged into New Founders, a
newly-created subsidiary of Mellon. Upon the consummation of the Merger
(expected to occur in the first quarter of this year), Founders will cease to
exist as a separate entity, and New Founders will assume all of its assets,
liabilities, business and operations. Shareholder approval of the New
Sub-Advisory Agreements is being sought because the Merger will result in an
"assignment" (as defined by the Investment Company Act) of the Existing
Sub-Advisory Agreements, resulting in the Existing Sub-Advisory Agreements'
automatic termination.
Under the Merger Agreement, shareholders of Founders will receive a
total of $270 million in consideration for their Founders shares. The Company
has been advised by Founders that the Merger will not have any effect upon the
nature, quality and extent of services provided to ASISI and the Funds. In
addition, the portfolio manager of each of the Funds is not expected to change
as a result of the Merger, and each portfolio manager has received an employment
agreement that includes various incentives to remain with New Founders.
Mellon. Mellon is a subsidiary of Mellon Bank Corporation ("MBC"), a
publicly owned multibank holding company incorporated under Pennsylvania law in
1971 and registered under the Federal Bank Holding Company Act of 1956, as
amended. Mellon and MBC are located at One Mellon Bank Center, Pittsburgh,
Pennsylvania 15258. MBC provides a comprehensive range of financial products and
services in domestic and selected international markets. MBC's banking
subsidiaries are located in Pennsylvania, Massachusetts, Delaware, Maryland, and
New Jersey, while other subsidiaries are located in key business centers
throughout the United States and abroad. MBC currently ranks among the nation's
largest bank holding companies based on market capitalization.
MBC's principal wholly-owned subsidiaries are Mellon, The Boston
Company, Inc., Mellon Bank (DE) National Association, Mellon Bank (MD) National
Association, and a number of companies known as Mellon Financial Services
Corporation. MBC also owns a federal savings bank headquartered in Pennsylvania,
Mellon Bank, F.S.B. The Dreyfus Corporation ("Dreyfus"), one of the nation's
largest mutual fund companies, is a wholly-owned subsidiary of Mellon. MBC's
banking subsidiaries engage in retail financial services, commercial banking,
trust and investment management services, residential real estate loan
financing, mortgage servicing, equipment leasing, mutual fund activities and
various securities-related activities. Through its subsidiaries, MBC managed
more than $299 billion in assets as of September 30, 1997, including
approximately $102 billion in proprietary mutual fund assets. As of September
30, 1997, various subsidiaries of MBC provided non-investment services, such as
custodial or administration services, for approximately $1.488 trillion in
assets, including $60 billion in mutual fund assets.
Based on Securities and Exchange Commission ("SEC") filings, MBC has
informed the Company that it is not aware of any persons who, as of September
30, 1997, either individually or as a group, beneficially owned more than 10% of
MBC's outstanding voting securities.
Evaluation of the Board of Directors
At a meeting of the Board of Directors of the Company held on December
2, 1997, the Board of Directors gave approval to the New Sub-Advisory
Agreements, and authorized the officers of the Company to prepare this proxy
statement. In evaluating the New Sub-Advisory Agreements, the Board of Directors
considered the fact that the Existing Sub-Advisory Agreements are identical to
the New Sub-Advisory Agreements (except for their effective dates and that New
Founders, rather than Founders, is the sub-advisor), including the terms
relating to the services to be provided and the fees to be paid to New Founders
thereunder. The Board of Directors considered the performance of Founders to
date in providing services to the Funds, and the skills and capabilities of the
personnel of Founders.
The Board of Directors considered to be particularly important
assurances from both Founders and Mellon that the Merger would not have any
adverse effect on the nature, quality or extent of the services that Founders
provides to the Funds. The Board of Directors also considered assurances from
Founders that New Founders would operate as a separate subsidiary of Mellon, and
that it was not Mellon's intention to attempt to influence New Founders'
investment decisions. In addition, the Board of Directors considered the fact
that the senior management of Founders, including Michael K. Haines, the
portfolio manager of the Small Capitalization Fund, and Michael W. Gerding, the
portfolio manager of the International Fund, have entered into employment
agreements that include various incentives to remain with New Founders. The
Board of Directors also considered Mellon's reputation and its substantial
resources.
Based on the Board of Directors' review and their evaluation of the
materials they received, and in consideration of all factors deemed relevant to
them, the Board of Directors determined that the New Sub-Advisory Agreements are
in the best interests of the Funds and their respective shareholders.
Accordingly, the Board of Directors, including all of the Independent Directors,
voted to recommend that the Funds' shareholders vote to approve the New
Sub-Advisory Agreements.
The New and Existing Sub-Advisory Agreements
The New Small Capitalization Sub-Advisory Agreement, which is attached
to this Proxy Statement as Exhibit A, and the New International Sub-Advisory
Agreement, which is attached to this Proxy Statement as Exhibit B, will become
effective as of the consummation of the Merger, contingent upon approval by the
shareholders of the relevant Fund. If the shareholders approve the New
Sub-Advisory Agreements, they will remain in effect for an initial term of one
year from their effective dates, and may be renewed annually thereafter by
specific approval of the Board of Directors or the shareholders of the Funds. As
discussed above, all of the terms and provisions of the New Sub-Advisory
Agreements, other than their effective dates and the sub-advisor to the Funds,
are the same as those of the Existing Sub-Advisory Agreements. Those terms and
provisions are summarized below.
Under the terms of the New Sub-Advisory Agreements, as under the
Existing Sub-Advisory Agreements, New Founders will agree to furnish the
Investment Manager with investment advisory services in connection with
continuous investment programs for the Funds, which are to be managed in
accordance with their respective investment objectives, investment policies and
restrictions as set forth in the Prospectus and Statement of Additional
Information of the Company and in accordance with the Company's Articles of
Incorporation and By-laws. Subject to the supervision and control of the
Investment Manager, which in turn will be subject to the supervision and control
of the Board of Directors, New Founders, in its discretion, will determine and
select the securities to be purchased for and sold from each of the Funds and
place orders with and give instructions to brokers, dealers and others to cause
such transactions to be executed.
Under the terms of the New Sub-Advisory Agreements, as under the
Existing Sub-Advisory Agreements, sub-advisory fees are payable by ASISI, not by
the Funds or their shareholders. For its fee, New Founders will agree to furnish
at its expense all necessary investment facilities, including salaries of
personnel, required for it to execute its duties under the New Sub-Advisory
Agreements. New Founder's compensation for the services provided under the New
Sub-Advisory Agreements will be computed at an annual rate and will be payable
monthly in arrears, based on the average daily net assets of the respective Fund
for each month. For all services rendered to the Small Capitalization Fund,
ASISI will calculate and pay New Founders at the annual rate of .50% of the
portion of the Small Capitalization Fund's average daily net assets not in
excess of $250 million; plus .45% of the portion of the Small Capitalization
Fund's average daily net assets over $250 million. The aggregate fee paid by
ASISI to Founders for services rendered under the Existing Small Capitalization
Sub-Advisory Agreement for the period from July 28, 1997 (commencement of
operations) to October 31, 1997 was $ . For all services rendered to the
International Fund, ASISI will calculate and pay New Founders at the annual rate
of .60% of the portion of the International Fund's average daily net assets not
in excess of $100 million; plus .50% of the portion of the International Fund's
average daily net assets over $100 million. The aggregate fee paid by ASISI to
Founders for services rendered under the Existing International Sub-Advisory
Agreement for the period from July 28, 1997 (commencement of operations) to
October 31, 1997 was $ .
The New Sub-Advisory Agreements are renewable annually by specific
approval of the Board of Directors or by vote of a majority of the outstanding
voting securities of the respective Fund (as defined under the Investment
Company Act). Any renewal by the Board requires the approval by the vote of a
majority of the Independent Directors, cast in person at a meeting called for
the purpose of voting on such renewal. Each New Sub-Advisory Agreement may be
terminated at any time without penalty upon 60 days' written notice to the other
party to the agreement, and will automatically terminate in the event of its
"assignment" by either party (as defined under the Investment Company Act) or
(provided New Founders has received prior written notice thereof) upon
termination of the Investment Management Agreement.
Under the terms of the New Sub-Advisory Agreements, as under the
Existing Sub-Advisory Agreements, in the absence of willful misconduct, bad
faith, gross negligence or reckless disregard by New Founders of its obligations
under the New Sub-Advisory Agreements, New Founders shall not be liable to the
Company, the Funds, the Funds' shareholders or ASISI for any loss suffered by
such persons in connection with the services provided under the New Sub-Advisory
Agreement. The New Sub-Advisory Agreements provide, however, that the foregoing
provision does not constitute a waiver of any rights that the Company, the
Funds, or ASISI may have under applicable law.
Information Concerning Founders
Founders served as advisor or sub-advisor to 26 investment company
portfolios as of November 28, 1997, including the Small Capitalization Fund and
the International Fund. These 26 portfolios had aggregate assets of
approximately $6.1 billion as of November 28, 1997. In addition, Founders
provides investment management services to private institutional clients.
The following table lists other investment companies or investment
company portfolios for which Founders acts as investment advisor or sub-advisor
that have similar investment objectives as the Small Capitalization Fund, as
well as the rate of advisory or sub-advisory compensation payable to Founders
and the net assets of the fund or portfolio.
<TABLE>
<CAPTION>
- --------------------------------- ------------------ ----------------------- ------------------------ ------------------------
FUND OBJECTIVE INVESTMENT ADVISER FEE RATE NET ASSETS AS OF
OR NOVEMBER 28, 1997
SUB-ADVISOR
- --------------------------------- ------------------ ----------------------- ------------------------ ------------------------
- --------------------------------- ------------------ ----------------------- ------------------------ ------------------------
<S> <C> <C> <C> <C>
Founders Discovery Fund Capital Investment Adviser 1.00% to $250smillion $254,447,339
Appreciation 0.80% next $250 million
0.70% thereafter
- --------------------------------- ------------------ ----------------------- ------------------------ ------------------------
- --------------------------------- ------------------ ----------------------- ------------------------ ------------------------
Founders Frontier Fund Capital Investment Adviser 1.00% to $250 million $231,398,946
Appreciation 0.80% next $250 million
0.70% thereafter
- --------------------------------- ------------------ ----------------------- ------------------------ ------------------------
- --------------------------------- ------------------ ----------------------- ------------------------ ------------------------
American Skandia Trust - Capital Sub-Advisor 0.65% to $75 million $267,418,044
Founders Capital Appreciation Appreciation 0.60% next $75 million
Portfolio 0.55% thereafter
- --------------------------------- ------------------ ----------------------- ------------------------ ------------------------
- --------------------------------- ------------------ ----------------------- ------------------------ ------------------------
Ohio National Fund, Inc.- Small Maximum Sub-Advisor 0.65% to $75 million $55,759,292
Cap Portfolio Capital 0.60% next $75 million
Growth 0.55% thereafter
- --------------------------------- ------------------ ----------------------- ------------------------ ------------------------
</TABLE>
The following table lists other investment companies or investment
company portfolios for which Founders acts as investment advisor or sub-advisor
that have similar investment objectives as the International Fund, as well as
the rate of sub-advisory compensation payable to Founders and the net assets of
the fund or portfolio.
<TABLE>
<CAPTION>
- --------------------------------- ------------------ ----------------------- ------------------------ ------------------------
FUND OBJECTIVE INVESTMENT ADVISER FEE RATE NET ASSETS AS OF
OR NOVEMBER 30, 1997
SUB-ADVISER
- --------------------------------- ------------------ ----------------------- ------------------------ ------------------------
- --------------------------------- ------------------ ----------------------- ------------------------ ------------------------
<S> <C> <C> <C> <C>
Founders Passport Fund Capital Investment Adviser 1.00% to $250 million $132,434,590
appreciation 0.80% next $250 million
0.70% thereafter
- --------------------------------- ------------------ ----------------------- ------------------------ ------------------------
- --------------------------------- ------------------ ----------------------- ------------------------ ------------------------
Manufacturers Investment Trust- Long-term Sub-adviser 0.65% to $50 million $128,394,424
International Small Cap Trust capital 0.60% next $150 million
appreciation 0.50% next $300 million
0.40% thereafter
- --------------------------------- ------------------ ----------------------- ------------------------ ------------------------
- --------------------------------- ------------------ ----------------------- ------------------------ ------------------------
American Skandia Advisor Trust Capital growth Sub-advisor 0.60% to $100 million $120,688,264
- - Founders Passport Portfolio 0.50% thereafter
- --------------------------------- ------------------ ----------------------- ------------------------ ------------------------
- --------------------------------- ------------------ ----------------------- ------------------------ ------------------------
North American Funds - Long-term Sub-adviser 0.65% to $50 million $17,780,545
International Small Cap Fund capital 0.60% next $150 million
appreciation 0.50% next $300 million
0.40% thereafter
- --------------------------------- ------------------ ----------------------- ------------------------ ------------------------
</TABLE>
Mr. Bjorn K. Borgen is the Chairman, Chief Executive Officer, Chief
Investment Officer and sole director of Founders. Mr. Borgen is also the
President and a director of Founders Funds, Inc. New Founders was organized as a
Delaware limited liability company on November 26, 1997. The management board of
New Founders currently consists of: Christopher M. Condron, Chairman, who is
also Vice Chairman of MBC and President, Chief Executive Officer and Chief
Operating Officer of Dreyfus, 200 Park Avenue, New York, New York 10166;
Jonathan F. Zeschin, currently President and Chief Operating Officer of
Founders, 2930 East Third Avenue, Denver, Colorado 80206; Gregory P. Contillo,
currently Senior Vice President - Institutional Marketing of Founders; Stephen
E. Canter, Vice Chairman and Chief Investment Officer of Dreyfus; and Lawrence
S. Kash, Vice Chairman - Distribution of Dreyfus. Mr. Zeschin also is the Chief
Executive Officer of New Founders, and Mr. Contillo also is the Senior Vice
President - Institutional Marketing of New Founders. Two additional members will
be added to the management board of New Founders, one qualified person from each
of New Founders and another Mellon affiliate.
Founders has advised the Company and ASISI that the staff of the
Securities and Exchange Commission has been conducting an investigation
concerning possible violations of the federal securities laws in connection with
brokerage transactions Founders effected for certain of its private account
clients during the period 1992 through mid-1995. The Commission has not yet made
any determination as to whether any violations have occurred and, if so, whether
any action is appropriate. Founders currently is engaged in discussions with the
staff concerning the staff's possible recommendations to the Commission.
Section 15(f). The Company has been informed by Founders and Mellon
that they intend to comply with Section 15(f) of the Investment Company Act.
Section 15(f) provides a non-exclusive "safe harbor" for an investment adviser
or any of its affiliated persons to receive any amount or benefit in connection
with a change in control of the investment advisor as long as two conditions are
met. First, for a period of three years after the change of control, at least
75% of the board members of the investment company must not be "interested
persons" of the adviser or the predecessor advisor. Second, an "unfair burden"
must not be imposed on the investment company as a result of the transaction or
any express or implied terms, conditions, or understandings applicable thereto.
The term "unfair burden" is defined in Section 15(f) to include any arrangement
during the two-year period after the transaction whereby the investment advisor,
or any interested person of any such advisor, receives or is entitled to receive
any compensation, directly or indirectly, from the investment company or its
security holders (other than fees for bona fide investment advisory or other
services) or from any person in connection with the purchase or sale of
securities or other property to, from, or on behalf of the investment company
(other than bona fide ordinary compensation as principal underwriter for such
investment company). None of the Company's Board of Directors are interested
persons of Founders or Mellon. In addition, the Company has been advised that
neither Mellon, Founders, or Mr. Borgen, will take any action, either before or
for a period of three years after the Merger, that would have the effect of
imposing an "unfair burden" on the Company as a result of the Merger. Founders
has undertaken to pay all costs and expenses of the Meeting.
Other Matters and Shareholder Proposals
<TABLE>
<CAPTION>
The following table sets forth, as of January , 1998, each shareholder who owns more than 5% of any class of the
Company's shares.
<S> <C> <C> <C>
Name and Address of Number of Shares Percent of
Class Beneficial Owner Beneficially Owned* Class
</TABLE>
<TABLE>
<CAPTION>
The following table sets forth, as of January , 1998, the ownership of
each class of the Company's shares by the Directors of the Company individually
and of the directors and officers as a group.
<S> <C> <C> <C>
Name of Number of Shares Percent of
Class Beneficial Owner Beneficially Owned* Class
</TABLE>
*As defined by the Securities and Exchange Commission, a security is
beneficially owned by a person if that person has or shares voting power or
investment power with respect to the security.
Prior to the public offering of the Company's shares, ASISI owned all
of the outstanding shares of the Funds and the other investment portfolios of
the Company. As a result of such public offering, which commenced on July 28,
1997, ASISI may be deemed to have ceased to control the Company.
The Board of Directors intends to bring before the Meetings the two
Proposals set forth herein and in the foregoing Notice. The Directors do not
expect any other business to be brought before the Meetings. If, however, any
other matters are properly presented to the Meetings for action, it is intended
that the persons named in the enclosed proxy will vote in accordance with their
judgment. A shareholder executing and returning a proxy may revoke it at any
time prior to its exercise by written notice of such revocation to the Secretary
of the Company, by execution of a subsequent proxy, or by voting in person at
the Meetings.
The presence in person or by proxy of the holders of a majority of the
outstanding shares is required to constitute a quorum at the Meetings. Shares
beneficially held by shareholders present in person or represented by proxy at
the Meetings will be counted for the purpose of calculating the votes cast on
the issues before the Meetings. Approval of the proposal requires the vote of a
"majority of the outstanding voting securities," as defined in the Investment
Company Act, of the Funds, which means the vote of 67% or more of the shares of
each Fund present at the Meeting, if the holders of more than 50% of the
outstanding shares of the respective Fund are present or represented by proxy,
or the vote of more than 50% of the outstanding shares of each Fund, whichever
is less.
Shares held by shareholders present in person or represented by proxy
at a Meeting will be counted both for the purposes of determining the presence
of a quorum and for calculating the votes cast on the issues before the Meeting.
An abstention by a shareholder, either by proxy or by vote in person at a
Meeting, has the same effect as a negative vote. Shares held by a broker or
other fiduciary as record owner for the account of the beneficial owner are
counted toward the required quorum and in calculating the votes cast at a
Meeting if the beneficial owner has executed and timely delivered the necessary
instructions for the broker to vote the shares, or if the broker has and
exercises discretionary voting power.
In order to reduce costs, notices to shareholders having more than one
account in the Funds listed under the same Social Security number and zip code
have been combined. However, shareholders will receive a separate proxy card for
each account they own. Therefore, it is important to mark, sign, date, and
return all proxy cards included in your package.
In the event that sufficient votes to approve the proposal are not
received, the persons named as proxies may propose one or more adjournments of
the Meetings to permit further solicitation of proxies. Any such adjournment
will require the affirmative vote of a majority of those shares represented at
the Meetings in person or by proxy. The persons named as proxies will vote those
proxies that they are entitled to vote FOR or AGAINST any such adjournment
proposal in their discretion.
The Company is not required to hold and will not ordinarily hold annual
shareholders' meetings. The Board of Directors may call special meetings of the
shareholders for action by shareholder vote as required by the Investment
Company Act or the Company's Articles of Incorporation and By-laws.
Pursuant to rules adopted by the Commission, a shareholder may include
in proxy statements relating to annual and other meetings of the shareholders of
the Company certain proposals for shareholder action which he or she intends to
introduce at such meetings; provided, among other things, that such proposal
must be received by the Company a reasonable time before a solicitation of
proxies is made for such meeting. Timely submission of a proposal does not
necessarily mean that the proposal will be included.
By order of the Board of Directors
Eric C. Freed
Secretary
American Skandia Advisor Funds, Inc.
<PAGE>
<TABLE>
<CAPTION>
LIST OF EXHIBITS
<S> <C>
EXHIBIT A Form of New Sub-Advisory Agreement for the Small Capitalization Fund
EXHIBIT B Form of New Sub-Advisory Agreement for the International Fund
</TABLE>
<PAGE>
EXHIBIT A
AMERICAN SKANDIA ADVISOR FUNDS, INC.
SUB-ADVISORY AGREEMENT
THIS AGREEMENT is between American Skandia Investment Services, Incorporated
(the "Investment Manager") and Founders Asset Management LLC (the
"Sub-Adviser").
W I T N E S S E T H
WHEREAS, American Skandia Advisor Funds, Inc. (the "Company") is a Maryland
corporation organized with one or more series of shares and is registered as an
open-end management investment company under the Investment Company Act of 1940,
as amended (the "ICA"); and
WHEREAS, the Investment Manager and the Sub-Adviser each is an investment
adviser registered under the Investment Advisers Act of 1940, as amended (the
"Advisers Act"); and
WHEREAS, the Board of Directors of the Company (the "Directors") have engaged
the Investment Manager to act as investment manager for the ASAF Founders Small
Capitalization Fund (the "Fund"), one series of the Company, under the terms of
a management agreement, dated June 1, 1997, with the Company (the "Management
Agreement"); and
WHEREAS, the Investment Manager, acting pursuant to the Management Agreement,
wishes to engage the Sub-Adviser, and the Directors have approved the engagement
of the Sub-Adviser, to provide investment advice and other investment services
set forth below.
NOW, THEREFORE, the Investment Manager and the Sub-Adviser agree as follows:
1. Investment Services. The Sub-Adviser will formulate and implement a
continuous investment program for the Fund conforming to the investment
objective, investment policies and restrictions of the Fund as set forth in the
Prospectus and Statement of Additional Information of the Company as in effect
from time to time (together, the "Registration Statement"), the Articles of
Incorporation and By-laws of the Company, and any investment guidelines or other
instructions received by the Sub-Adviser in writing from the Investment Manager
from time to time. Any amendments to the foregoing documents will not be deemed
effective with respect to the Sub-Adviser until the Sub-Adviser's receipt
thereof. The appropriate officers and employees of the Sub-Adviser will be
available to consult with the Investment Manager, the Company and the Directors
at reasonable times and upon reasonable notice concerning the business of the
Company, including valuations of securities which are not registered for public
sale, not traded on any securities market or otherwise may be deemed illiquid
for purposes of the ICA; provided it is understood that the Sub-Adviser is not
responsible for daily pricing of the Fund's assets.
Subject to the supervision and control of the Investment Manager, which
in turn is subject to the supervision and control of the Directors, the
Sub-Adviser in its discretion will determine which issuers and securities will
be purchased, held, sold or exchanged by the Fund or otherwise represented in
the Fund's investment portfolio from time to time and, subject to the provisions
of paragraph 3 of this Agreement, will place orders with and give instructions
to brokers, dealers and others for all such transactions and cause such
transactions to be executed. Custody of the Fund will be maintained by a
custodian bank (the "Custodian") and the Investment Manager will authorize the
Custodian to honor orders and instructions by employees of the Sub-Adviser
designated by the Sub-Adviser to settle transactions in respect of the Fund. No
assets may be withdrawn from the Fund other than for settlement of transactions
on behalf of the Fund except upon the written authorization of appropriate
officers of the Company who shall have been certified as such by proper
authorities of the Company prior to the withdrawal.
The Sub-Adviser will not be responsible for the provision of
administrative, bookkeeping or accounting services to the Fund except as
specifically provided herein, as required by the ICA or the Advisers Act or as
may be necessary for the Sub-Adviser to supply to the Investment Manager, the
Fund or the Fund's shareholders the information required to be provided by the
Sub-Adviser hereunder. Any records maintained hereunder shall be the property of
the Fund and surrendered promptly upon request.
In furnishing the services under this Agreement, the Sub-Adviser will
comply with and use its best efforts to enable the Fund to conform to the
requirements of: (i) the ICA and the regulations promulgated thereunder; (ii)
Subchapter M of the Internal Revenue Code and the regulations promulgated
thereunder; (iii) other applicable provisions of state or federal law; (iv) the
Articles of Incorporation and By-laws of the Company; (v) policies and
determinations of the Company and the Investment Manager provided to the
Sub-Adviser in writing; (vi) the fundamental and non-fundamental investment
policies and restrictions applicable to the Fund, as set out in the Registration
Statement of the Company in effect, or as such investment policies and
restrictions from time to time may be amended by the Fund's shareholders or the
Directors and communicated to the Sub-Adviser in writing; (vii) the Registration
Statement; and (viii) investment guidelines or other instructions received in
writing from the Investment Manager. Notwithstanding the foregoing, the
Sub-Adviser shall have no responsibility to monitor compliance with limitations
or restrictions for which information from the Investment Manager or its
authorized agents is required to enable the Sub-Adviser to monitor compliance
with such limitations or restrictions unless such information is provided to the
Sub-adviser in writing. The Sub-Adviser shall supervise and monitor the
activities of its representatives, personnel and agents in connection with the
investment program of the Fund.
Nothing in this Agreement shall be implied to prevent the Investment
Manager from engaging other sub-advisers to provide investment advice and other
services to the Fund or to series or portfolios of the Company for which the
Sub-Adviser does not provide such services, or to prevent the Investment Manager
from providing such services itself in relation to the Fund or such other series
or portfolios.
The Sub-Adviser shall be responsible for the preparation and filing of
Schedule 13-G and Form 13-F on behalf of the Fund. The Sub-Adviser shall not be
responsible for the preparation or filing of any other reports required of the
Fund by any governmental or regulatory agency, except as expressly agreed in
writing.
2. Investment Advisory Facilities. The Sub-Adviser, at its expense, will furnish
all necessary investment facilities, including salaries of personnel, required
for it to execute its duties hereunder.
3. Execution of Fund Transactions. In connection with the investment and
reinvestment of the assets of the Fund, the Sub-Adviser is responsible for the
selection of broker-dealers to execute purchase and sale transactions for the
Fund in conformity with the policy regarding brokerage as set forth in the
Registration Statement, or as the Directors may determine from time to time, as
well as the negotiation of brokerage commission rates with such executing
broker-dealers. Generally, the Sub-Adviser's primary consideration in placing
Fund investment transactions with broker-dealers for execution will be to
obtain, and maintain the availability of, best execution at the best available
price.
Consistent with this policy, the Sub-Adviser, in selecting
broker-dealers and negotiating brokerage commission rates, will take all
relevant factors into consideration, including, but not limited to: the best
price available; the reliability, integrity and financial condition of the
broker-dealer; the size of and difficulty in executing the order; and the value
of the expected contribution of the broker-dealer to the investment performance
of the Fund on a continuing basis. Subject to such policies and procedures as
the Directors may determine, the Sub-Adviser shall have discretion to effect
investment transactions for the Fund through broker-dealers (including, to the
extent permissible under applicable law, broker-dealers affiliated with the
Sub-Adviser) qualified to obtain best execution of such transactions who provide
brokerage and/or research services, as such services are defined in section
28(e) of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and
to cause the Fund to pay any such broker-dealers an amount of commission for
effecting a portfolio investment transaction in excess of the amount of
commission another broker-dealer would have charged for effecting that
transaction, if the Sub-Adviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage or research
services provided by such broker-dealer, viewed in terms of either that
particular investment transaction or the Sub-Adviser's overall responsibilities
with respect to the Fund and other accounts as to which the Sub-Adviser
exercises investment discretion (as such term is defined in section 3(a)(35) of
the 1934 Act). Such allocation shall be in such amounts and proportions as the
Sub-Adviser shall determine in good faith in conformity with its
responsibilities under applicable laws, rules and regulations. The Sub-Adviser
will submit reports on such allocations to the Investment Manager regularly as
requested by the Investment Manager, in such form as may be mutually agreed to
by the parties hereto, indicating the broker-dealers to whom such allocations
have been made and the basis therefor.
Subject to the foregoing provisions of this paragraph 3, the
Sub-Adviser may also consider sales of shares in the Fund and recommendations by
the Investment Manager in the selection of broker-dealers to effect the Fund's
investment transactions. Notwithstanding the above, nothing shall require the
Sub-Adviser to use a broker-dealer which provides research services or to use a
particular broker-dealer which the Investment Manager has recommended.
4. Reports by the Sub-Adviser. The Sub-Adviser shall furnish the Investment
Manager monthly, quarterly and annual reports, in such form as may be mutually
agreed to by the parties hereto, concerning transactions and performance of the
Fund, including information required in the Registration Statement or
information necessary for the Investment Manager to review the Fund or discuss
the management of it. The Sub-Adviser shall permit the books and records
maintained with respect to the Fund to be inspected and audited by the Company,
the Investment Manager or their respective agents at all reasonable times during
normal business hours upon reasonable notice. The Sub-Adviser shall immediately
notify both the Investment Manager and the Company of any legal process served
upon it in connection with its activities hereunder, including any legal process
served upon it on behalf of the Investment Manager, the Fund or the Company. The
Sub-Adviser shall promptly notify the Investment Manager of any changes in any
information regarding the Sub-Adviser or the investment program for the Fund as
described in Section 9 of this Agreement.
5. Compensation of the Sub-Adviser. The amount of the compensation to the
Sub-Adviser is computed at an annual rate. The fee shall be payable monthly in
arrears, based on the average daily net assets of the Fund for each month, at
the annual rate set forth in Exhibit A to this Agreement.
In computing the fee to be paid to the Sub-Adviser, the net asset value
of the Fund shall be valued as set forth in the Registration Statement. If this
Agreement is terminated, the payment described herein shall be prorated to the
date of termination.
The Investment Manager and the Sub-Adviser shall not be considered as
partners or participants in a joint venture. The Sub-Adviser will pay its own
expenses for the services to be provided pursuant to this Agreement and will not
be obligated to pay any expenses of the Investment Manager, the Fund or the
Company. Except as otherwise specifically provided herein, the Investment
Manager, the Fund and the Company will not be obligated to pay any expenses of
the Sub-Adviser.
6. Delivery of Documents to the Sub-Adviser. The Investment Manager has
furnished the Sub-Adviser with true, correct and complete copies of each of the
following documents:
(a) The Articles of Incorporation of the Company, as in effect on the date
hereof;
(b) The By-laws of the Company, as in effect on the date hereof;
(c) The resolutions of the Directors approving the engagement of
the Sub-Adviser as portfolio manager of the Fund and approving
the form of this Agreement;
(d) The resolutions of the Directors selecting the Investment
Manager as investment manager to the Fund and approving the
form of the Management Agreement;
(e) The Management Agreement;
(f) The Code of Ethics of the Company and of the Investment Manager, as
in effect on the date hereof; and
(g) A list of companies the securities of which are not to be bought or
sold for the Fund.
The Investment Manager will furnish the Sub-Adviser from time to time
with copies, properly certified or otherwise authenticated, of all amendments of
or supplements to the foregoing, if any. Such amendments or supplements as to
items (a) through (f) above will be provided within 30 days of the time such
materials become available to the Investment Manager. Such amendments or
supplements as to item (g) above will be provided not later than the end of the
business day next following the date such amendments or supplements become known
to the Investment Manager. Any amendments or supplements to the foregoing will
not be deemed effective with respect to the Sub-Adviser until the Sub-Adviser's
receipt thereof. The Investment Manager will provide such additional information
as the Sub-Adviser may reasonably request in connection with the performance of
its duties hereunder.
7. Delivery of Documents to the Investment Manager. The Sub-Adviser has
furnished the Investment Manager with true, correct and complete copies of each
of the following documents:
(a) The Sub-Adviser's Form ADV as filed with the Securities and Exchange
Commission as of the date hereof;
(b) The Sub-Adviser's most recent balance sheet;
(c) Separate lists of persons who the Sub-Adviser wishes to have
authorized to give written and/or oral instructions to
Custodians of Company assets for the Fund; and
(d) The Code of Ethics of the Sub-Adviser, as in effect on the date
hereof.
The Sub-Adviser will furnish the Investment Manager from time to time
with copies, properly certified or otherwise authenticated, of all amendments of
or supplements to the foregoing, if any. Such amendments or supplements will be
provided within 30 days of the time such materials become available to the
Sub-Adviser. Any amendments or supplements to the foregoing will not be deemed
effective with respect to the Investment Manager until the Investment Manager's
receipt thereof. The Sub-Adviser will provide additional information as the
Investment Manager may reasonably request in connection with the Sub-Adviser's
performance of its duties under this Agreement.
8. Confidential Treatment. The parties hereto understand that any information or
recommendation supplied by the Sub-Adviser in connection with the performance of
its obligations hereunder is to be regarded as confidential and for use only by
the Investment Manager, the Company or such persons the Investment Manager may
designate in connection with the Fund. The parties also understand that any
information supplied to the Sub-Adviser in connection with the performance of
its obligations hereunder, particularly, but not limited to, any list of
securities which may not be bought or sold for the Fund, is to be regarded as
confidential and for use only by the Sub-Adviser in connection with its
obligation to provide investment advice and other services to the Fund.
9. Representations of the Parties. Each party hereto hereby further represents
and warrants to the other that: (i) it is registered as an investment adviser
under the Advisers Act and is registered or licensed as an investment adviser
under the laws of all jurisdictions in which its activities require it to be so
registered or licensed; and (ii) it will use its reasonable best efforts to
maintain each such registration or license in effect at all times during the
term of this Agreement; and (iii) it will promptly notify the other if it ceases
to be so registered, if its registration is suspended for any reason, or if it
is notified by any regulatory organization or court of competent jurisdiction
that it should show cause why its registration should not be suspended or
terminated; and (iv) it is duly authorized to enter into this Agreement and to
perform its obligations hereunder.
The Sub-Adviser further represents that it has adopted a written Code
of Ethics in compliance with Rule 17j-1(b) of the ICA. The Sub-Adviser shall be
subject to such Code of Ethics and shall not be subject to any other Code of
Ethics, including the Investment Manager's Code of Ethics, unless specifically
adopted by the Sub-Adviser. The Investment Manager further represents and
warrants to the Sub-Adviser that (i) the appointment of the Sub-Adviser by the
Investment Manager has been duly authorized and (ii) it has acted and will
continue to act in connection with the transactions contemplated hereby, and the
transactions contemplated hereby are, in conformity with the ICA, the Company's
governing documents and other applicable law.
10. Liability. In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard for its obligations hereunder, the Sub-Adviser
shall not be liable to the Company, the Fund, the Fund's shareholders or the
Investment Manager for any act or omission resulting in any loss suffered by the
Company, the Fund, the Fund's shareholders or the Investment Manager in
connection with any service to be provided herein. The Federal laws impose
responsibilities under certain circumstances on persons who act in good faith,
and therefore, nothing herein shall in any way constitute a waiver or limitation
of any rights which the Company, the Fund or the Investment Manager may have
under applicable law.
11. Other Activities of the Sub-Adviser. The Investment Manager agrees that the
Sub-Adviser and any of its partners or employees, and persons affiliated with
the Sub-Adviser or with any such partner or employee, may render investment
management or advisory services to other investors and institutions, and that
such investors and institutions may own, purchase or sell, securities or other
interests in property that are the same as, similar to, or different from those
which are selected for purchase, holding or sale for the Fund. The Investment
Manager further acknowledges that the Sub-Adviser shall be in all respects free
to take action with respect to investments in securities or other interests in
property that are the same as, similar to, or different from those selected for
purchase, holding or sale for the Fund. Purchases and sales of individual
securities on behalf of the Fund and other series or portfolios of the Company
or other accounts for investors or institutions as to which the Sub-Adviser
exercises investment discretion will be made on a basis that is equitable and
consistent with its fiduciary obligations to the Fund and such other accounts.
Nothing in this Agreement shall impose upon the Sub-Adviser any obligation to
purchase or sell, or recommend for purchase or sale, for the Fund any security
which the Sub-Adviser, its partners, affiliates or employees may purchase or
sell for the Sub-Adviser or such partner's, affiliate's or employee's own
accounts or for the account of any other client of the Sub-Adviser, advisory or
otherwise.
12. Continuance and Termination. This Agreement shall remain in full force and
effect for one year from the date hereof, and is renewable annually thereafter
by specific approval of the Directors or by vote of a majority of the
outstanding voting securities of the Fund. Any such renewal shall be approved by
the vote of a majority of the Directors who are not interested persons under the
ICA, cast in person at a meeting called for the purpose of voting on such
renewal. This Agreement may be terminated without penalty at any time by the
Investment Manager or the Sub-Adviser upon 60 days written notice, and will
automatically terminate in the event of (i) its "assignment" by either party to
this Agreement, as such term is defined in the ICA, subject to such exemptions
as may be granted by the Securities and Exchange Commission by rule, regulation
or order, or (ii) upon termination of the Management Agreement, provided the
Sub-Adviser has received prior written notice thereof.
13. Notification. The Sub-Adviser will notify the Investment Manager within a
reasonable time of any change in the personnel of the Sub-Adviser with
responsibility for making investment decisions in relation to the Fund (the
"Portfolio Manager(s)") or who have been authorized to give instructions to the
Custodian. The Sub-adviser shall be responsible for reasonable out-of-pocket
costs and expenses incurred by the Investment Manager, the Fund or the Company
to amend or supplement the Company's prospectus to reflect a change in Portfolio
Manager(s) or otherwise to comply with the ICA, the Securities Act of 1933, as
amended (the "1933 Act") or any other applicable statute, law, rule or
regulation, as a result of such change; provided, however, that the Sub-Adviser
shall not be responsible for such costs and expenses where the change in
Portfolio Manager(s) reflects the termination of employment of the Portfolio
Manager(s) with the Sub-Adviser and its affiliates or is the result of a request
by the Investment Manager.
Any notice, instruction or other communication required or contemplated
by this Agreement shall be in writing. All such communications shall be
addressed to the recipient at the address set forth below, provided that either
party may, by notice, designate a different recipient and/or address for such
party.
Investment Manager: American Skandia Investment Services, Incorporated
One Corporate Drive
Shelton, Connecticut 06484
Attention: Thomas M. Mazzaferro
President & Chief Operating Officer
Sub-Adviser: Founders Asset Management LLC
Founders Financial Center
2930 East Third Avenue
Denver, Colorado 80206
Attention: [INSERT]
Company: American Skandia Advisor Funds, Inc.
One Corporate Drive
Shelton, Connecticut 06484
Attention: Eric C. Freed, Esq.
14. Indemnification. The Sub-Adviser agrees to indemnify and hold harmless the
Investment Manager, any affiliated person within the meaning of Section 2(a)(3)
of the ICA ("affiliated person") of the Investment Manager and each person, if
any who, within the meaning of Section 15 of the 1933 Act, controls
("controlling person") the Investment Manager, against any and all losses,
claims, damages, liabilities or litigation (including reasonable legal and other
expenses), to which the Investment Manager or such affiliated person or
controlling person of the Investment Manager may become subject under the 1933
Act, the ICA, the Advisers Act, under any other statute, law, rule or regulation
at common law or otherwise, arising out of the Sub-Adviser's responsibilities
hereunder (1) to the extent of and as a result of the willful misconduct, bad
faith, or gross negligence by the Sub-Adviser, any of the Sub-Adviser's
employees or representatives or any affiliate of or any person acting on behalf
of the Sub-Adviser, or (2) as a result of any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, including
any amendment thereof or any supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading, if such a statement or
omission was made in reliance upon and in conformity with written information
furnished by the Sub-Adviser to the Investment Manager, the Fund, the Company or
any affiliated person of the Investment Manager, the Fund or the Company or upon
verbal information confirmed by the Sub-Adviser in writing, or (3) to the extent
of, and as a result of, the failure of the Sub-Adviser to execute, or cause to
be executed, portfolio investment transactions according to the requirements of
the ICA; provided, however, that in no case is the Sub-Adviser's indemnity in
favor of the Investment Manager or any affiliated person or controlling person
of the Investment Manager deemed to protect such person against any liability to
which any such person would otherwise be subject by reason of willful
misconduct, 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.
The Investment Manager agrees to indemnify and hold harmless the
Sub-Adviser, any affiliated person of the Sub-Adviser and each controlling
person of the Sub-Adviser, if any, against any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses), to
which the Sub-Adviser or such affiliated person or controlling person of the
Sub-Adviser may become subject under the 1933 Act, the ICA, the Advisers Act,
under any other statute, law, rule or regulation, at common law or otherwise,
arising out of the Investment Manager's responsibilities as investment manager
of the Fund (1) to the extent of and as a result of the willful misconduct, bad
faith, or gross negligence by the Investment Manager, any of the Investment
Manager's employees or representatives or any affiliate of or any person acting
on behalf of the Investment Manager, or (2) as a result of any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement, including any amendment thereof or any supplement thereto or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement therein not misleading, if
such a statement or omission was made other than in reliance upon and in
conformity with written information furnished by the Sub-Adviser, or any
affiliated person of the Sub-Adviser or other than upon verbal information
confirmed by the Sub-Adviser in writing; provided, however, that in no case is
the Investment Manager's indemnity in favor of the Sub-Adviser or any affiliated
person or controlling person of the Sub-Adviser deemed to protect such person
against any liability to which any such person would otherwise be subject by
reason of willful misconduct, 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. It is agreed that the Investment Manager's
indemnification obligations under this Section 14 will extend to expenses and
costs (including reasonable attorneys fees) incurred by the Sub-Adviser as a
result of any litigation brought by the Investment Manager alleging the
Sub-Adviser's failure to perform its obligations and duties in the manner
required under this Agreement unless judgment is rendered for the Investment
Manager.
15. Conflict of Laws. The provisions of this Agreement shall be subject to all
applicable statutes, laws, rules and regulations, including, without limitation,
the applicable provisions of the ICA and rules and regulations promulgated
thereunder. To the extent that any provision contained herein conflicts with any
such applicable provision of law or regulation, the latter shall control. The
terms and provisions of this Agreement shall be interpreted and defined in a
manner consistent with the provisions and definitions of the ICA. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall continue in
full force and effect and shall not be affected by such invalidity.
16. Amendments, Waivers, etc. Provisions of this Agreement may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of the change, waiver, discharge or termination
is sought. This Agreement (including Exhibit A hereto) may be amended at any
time by written mutual consent of the parties, subject to the requirements of
the ICA and rules and regulations promulgated and orders granted thereunder.
17. Governing State Law. This Agreement is made under, and shall be governed by
and construed in accordance with, the laws of the State of Connecticut.
18. Severability. Each provision of this Agreement is intended to be severable.
If any provision of this Agreement is held to be illegal or made invalid by
court decision, statute, rule or otherwise, such illegality or invalidity will
not affect the validity or enforceability of the remainder of this Agreement.
The effective date of this agreement is February ___, 1998.
FOR THE INVESTMENT MANAGER: FOR THE SUB-ADVISER:
___________________________________ ___________________________________
Thomas M. Mazzaferro
President & Chief Financial Officer
Date: ____________________________ Date: ____________________________
Attest: ____________________________ Attest: ____________________________
<PAGE>
American Skandia Advisor Funds, Inc.
ASAF Founders Small Capitalization Fund
Sub-Advisory Agreement
EXHIBIT A
An annual rate of .50% of the portion of the average daily nets assets
of the Fund not in excess of $250 million; plus .45% of the portion over $250
million.
<PAGE>
EXHIBIT B
AMERICAN SKANDIA ADVISOR FUNDS, INC.
SUB-ADVISORY AGREEMENT
THIS AGREEMENT is between American Skandia Investment Services, Incorporated
(the "Investment Manager") and Founders Asset Management LLC (the
"Sub-Adviser").
W I T N E S S E T H
WHEREAS, American Skandia Advisor Funds, Inc. (the "Company") is a Maryland
corporation organized with one or more series of shares and is registered as an
open-end management investment company under the Investment Company Act of 1940,
as amended (the "ICA"); and
WHEREAS, the Investment Manager and the Sub-Adviser each is an investment
adviser registered under the Investment Advisers Act of 1940, as amended (the
"Advisers Act"); and
WHEREAS, the Board of Directors of the Company (the "Directors") have engaged
the Investment Manager to act as investment manager for the ASAF Founders
International Small Capitalization Fund (the "Fund"), one series of the Company,
under the terms of a management agreement, dated June 1, 1997, with the Company
(the "Management Agreement"); and
WHEREAS, the Investment Manager, acting pursuant to the Management Agreement,
wishes to engage the Sub-Adviser, and the Directors have approved the engagement
of the Sub-Adviser, to provide investment advice and other investment services
set forth below.
NOW, THEREFORE, the Investment Manager and the Sub-Adviser agree as follows:
1. Investment Services. The Sub-Adviser will formulate and implement a
continuous investment program for the Fund conforming to the investment
objective, investment policies and restrictions of the Fund as set forth in the
Prospectus and Statement of Additional Information of the Company as in effect
from time to time (together, the "Registration Statement"), the Articles of
Incorporation and By-laws of the Company, and any investment guidelines or other
instructions received by the Sub-Adviser in writing from the Investment Manager
from time to time. Any amendments to the foregoing documents will not be deemed
effective with respect to the Sub-Adviser until the Sub-Adviser's receipt
thereof. The appropriate officers and employees of the Sub-Adviser will be
available to consult with the Investment Manager, the Company and the Directors
at reasonable times and upon reasonable notice concerning the business of the
Company, including valuations of securities which are not registered for public
sale, not traded on any securities market or otherwise may be deemed illiquid
for purposes of the ICA; provided it is understood that the Sub-Adviser is not
responsible for daily pricing of the Fund's assets.
Subject to the supervision and control of the Investment Manager, which
in turn is subject to the supervision and control of the Directors, the
Sub-Adviser in its discretion will determine which issuers and securities will
be purchased, held, sold or exchanged by the Fund or otherwise represented in
the Fund's investment portfolio from time to time and, subject to the provisions
of paragraph 3 of this Agreement, will place orders with and give instructions
to brokers, dealers and others for all such transactions and cause such
transactions to be executed. Custody of the Fund will be maintained by a
custodian bank (the "Custodian") and the Investment Manager will authorize the
Custodian to honor orders and instructions by employees of the Sub-Adviser
designated by the Sub-Adviser to settle transactions in respect of the Fund. No
assets may be withdrawn from the Fund other than for settlement of transactions
on behalf of the Fund except upon the written authorization of appropriate
officers of the Company who shall have been certified as such by proper
authorities of the Company prior to the withdrawal.
The Sub-Adviser will not be responsible for the provision of
administrative, bookkeeping or accounting services to the Fund except as
specifically provided herein, as required by the ICA or the Advisers Act or as
may be necessary for the Sub-Adviser to supply to the Investment Manager, the
Fund or the Fund's shareholders the information required to be provided by the
Sub-Adviser hereunder. Any records maintained hereunder shall be the property of
the Fund and surrendered promptly upon request.
In furnishing the services under this Agreement, the Sub-Adviser will
comply with and use its best efforts to enable the Fund to conform to the
requirements of: (i) the ICA and the regulations promulgated thereunder; (ii)
Subchapter M of the Internal Revenue Code and the regulations promulgated
thereunder; (iii) other applicable provisions of state or federal law; (iv) the
Articles of Incorporation and By-laws of the Company; (v) policies and
determinations of the Company and the Investment Manager provided to the
Sub-Adviser in writing; (vi) the fundamental and non-fundamental investment
policies and restrictions applicable to the Fund, as set out in the Registration
Statement of the Company in effect, or as such investment policies and
restrictions from time to time may be amended by the Fund's shareholders or the
Directors and communicated to the Sub-Adviser in writing; (vii) the Registration
Statement; and (viii) investment guidelines or other instructions received in
writing from the Investment Manager. Notwithstanding the foregoing, the
Sub-Adviser shall have no responsibility to monitor compliance with limitations
or restrictions for which information from the Investment Manager or its
authorized agents is required to enable the Sub-Adviser to monitor compliance
with such limitations or restrictions unless such information is provided to the
Sub-adviser in writing. The Sub-Adviser shall supervise and monitor the
activities of its representatives, personnel and agents in connection with the
investment program of the Fund.
Nothing in this Agreement shall be implied to prevent the Investment
Manager from engaging other sub-advisers to provide investment advice and other
services to the Fund or to series or portfolios of the Company for which the
Sub-Adviser does not provide such services, or to prevent the Investment Manager
from providing such services itself in relation to the Fund or such other series
or portfolios.
The Sub-Adviser shall be responsible for the preparation and filing of
Schedule 13-G and Form 13-F on behalf of the Fund. The Sub-Adviser shall not be
responsible for the preparation or filing of any other reports required of the
Fund by any governmental or regulatory agency, except as expressly agreed in
writing.
2. Investment Advisory Facilities. The Sub-Adviser, at its expense, will furnish
all necessary investment facilities, including salaries of personnel, required
for it to execute its duties hereunder.
3. Execution of Fund Transactions. In connection with the investment and
reinvestment of the assets of the Fund, the Sub-Adviser is responsible for the
selection of broker-dealers to execute purchase and sale transactions for the
Fund in conformity with the policy regarding brokerage as set forth in the
Registration Statement, or as the Directors may determine from time to time, as
well as the negotiation of brokerage commission rates with such executing
broker-dealers. Generally, the Sub-Adviser's primary consideration in placing
Fund investment transactions with broker-dealers for execution will be to
obtain, and maintain the availability of, best execution at the best available
price.
Consistent with this policy, the Sub-Adviser, in selecting
broker-dealers and negotiating brokerage commission rates, will take all
relevant factors into consideration, including, but not limited to: the best
price available; the reliability, integrity and financial condition of the
broker-dealer; the size of and difficulty in executing the order; and the value
of the expected contribution of the broker-dealer to the investment performance
of the Fund on a continuing basis. Subject to such policies and procedures as
the Directors may determine, the Sub-Adviser shall have discretion to effect
investment transactions for the Fund through broker-dealers (including, to the
extent permissible under applicable law, broker-dealers affiliated with the
Sub-Adviser) qualified to obtain best execution of such transactions who provide
brokerage and/or research services, as such services are defined in section
28(e) of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and
to cause the Fund to pay any such broker-dealers an amount of commission for
effecting a portfolio investment transaction in excess of the amount of
commission another broker-dealer would have charged for effecting that
transaction, if the Sub-Adviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage or research
services provided by such broker-dealer, viewed in terms of either that
particular investment transaction or the Sub-Adviser's overall responsibilities
with respect to the Fund and other accounts as to which the Sub-Adviser
exercises investment discretion (as such term is defined in section 3(a)(35) of
the 1934 Act). Such allocation shall be in such amounts and proportions as the
Sub-Adviser shall determine in good faith in conformity with its
responsibilities under applicable laws, rules and regulations. The Sub-Adviser
will submit reports on such allocations to the Investment Manager regularly as
requested by the Investment Manager, in such form as may be mutually agreed to
by the parties hereto, indicating the broker-dealers to whom such allocations
have been made and the basis therefor.
Subject to the foregoing provisions of this paragraph 3, the
Sub-Adviser may also consider sales of shares in the Fund and recommendations by
the Investment Manager in the selection of broker-dealers to effect the Fund's
investment transactions. Notwithstanding the above, nothing shall require the
Sub-Adviser to use a broker-dealer which provides research services or to use a
particular broker-dealer which the Investment Manager has recommended.
4. Reports by the Sub-Adviser. The Sub-Adviser shall furnish the Investment
Manager monthly, quarterly and annual reports, in such form as may be mutually
agreed to by the parties hereto, concerning transactions and performance of the
Fund, including information required in the Registration Statement or
information necessary for the Investment Manager to review the Fund or discuss
the management of it. The Sub-Adviser shall permit the books and records
maintained with respect to the Fund to be inspected and audited by the Company,
the Investment Manager or their respective agents at all reasonable times during
normal business hours upon reasonable notice. The Sub-Adviser shall immediately
notify both the Investment Manager and the Company of any legal process served
upon it in connection with its activities hereunder, including any legal process
served upon it on behalf of the Investment Manager, the Fund or the Company. The
Sub-Adviser shall promptly notify the Investment Manager of any changes in any
information regarding the Sub-Adviser or the investment program for the Fund as
described in Section 9 of this Agreement.
5. Compensation of the Sub-Adviser. The amount of the compensation to the
Sub-Adviser is computed at an annual rate. The fee shall be payable monthly in
arrears, based on the average daily net assets of the Fund for each month, at
the annual rate set forth in Exhibit A to this Agreement.
In computing the fee to be paid to the Sub-Adviser, the net asset value
of the Fund shall be valued as set forth in the Registration Statement. If this
Agreement is terminated, the payment described herein shall be prorated to the
date of termination.
The Investment Manager and the Sub-Adviser shall not be considered as
partners or participants in a joint venture. The Sub-Adviser will pay its own
expenses for the services to be provided pursuant to this Agreement and will not
be obligated to pay any expenses of the Investment Manager, the Fund or the
Company. Except as otherwise specifically provided herein, the Investment
Manager, the Fund and the Company will not be obligated to pay any expenses of
the Sub-Adviser.
6. Delivery of Documents to the Sub-Adviser. The Investment Manager has
furnished the Sub-Adviser with true, correct and complete copies of each of the
following documents:
(a) The Articles of Incorporation of the Company, as in effect on the date
hereof;
(b) The By-laws of the Company, as in effect on the date hereof;
(c) The resolutions of the Directors approving the engagement of
the Sub-Adviser as portfolio manager of the Fund and approving
the form of this Agreement;
(d) The resolutions of the Directors selecting the Investment
Manager as investment manager to the Fund and approving the
form of the Management Agreement;
(e) The Management Agreement;
(f) The Code of Ethics of the Company and of the Investment Manager, as
in effect on the date hereof; and
(g) A list of companies the securities of which are not to be bought or
sold for the Fund.
The Investment Manager will furnish the Sub-Adviser from time to time
with copies, properly certified or otherwise authenticated, of all amendments of
or supplements to the foregoing, if any. Such amendments or supplements as to
items (a) through (f) above will be provided within 30 days of the time such
materials become available to the Investment Manager. Such amendments or
supplements as to item (g) above will be provided not later than the end of the
business day next following the date such amendments or supplements become known
to the Investment Manager. Any amendments or supplements to the foregoing will
not be deemed effective with respect to the Sub-Adviser until the Sub-Adviser's
receipt thereof. The Investment Manager will provide such additional information
as the Sub-Adviser may reasonably request in connection with the performance of
its duties hereunder.
7. Delivery of Documents to the Investment Manager. The Sub-Adviser has
furnished the Investment Manager with true, correct and complete copies of each
of the following documents:
(a) The Sub-Adviser's Form ADV as filed with the Securities and Exchange
Commission as of the date hereof;
(b) The Sub-Adviser's most recent balance sheet;
(c) Separate lists of persons who the Sub-Adviser wishes to have
authorized to give written and/or oral instructions to
Custodians of Company assets for the Fund; and
(d) The Code of Ethics of the Sub-Adviser, as in effect on the date
hereof.
The Sub-Adviser will furnish the Investment Manager from time to time
with copies, properly certified or otherwise authenticated, of all amendments of
or supplements to the foregoing, if any. Such amendments or supplements will be
provided within 30 days of the time such materials become available to the
Sub-Adviser. Any amendments or supplements to the foregoing will not be deemed
effective with respect to the Investment Manager until the Investment Manager's
receipt thereof. The Sub-Adviser will provide additional information as the
Investment Manager may reasonably request in connection with the Sub-Adviser's
performance of its duties under this Agreement.
8. Confidential Treatment. The parties hereto understand that any information or
recommendation supplied by the Sub-Adviser in connection with the performance of
its obligations hereunder is to be regarded as confidential and for use only by
the Investment Manager, the Company or such persons the Investment Manager may
designate in connection with the Fund. The parties also understand that any
information supplied to the Sub-Adviser in connection with the performance of
its obligations hereunder, particularly, but not limited to, any list of
securities which may not be bought or sold for the Fund, is to be regarded as
confidential and for use only by the Sub-Adviser in connection with its
obligation to provide investment advice and other services to the Fund.
9. Representations of the Parties. Each party hereto hereby further represents
and warrants to the other that: (i) it is registered as an investment adviser
under the Advisers Act and is registered or licensed as an investment adviser
under the laws of all jurisdictions in which its activities require it to be so
registered or licensed; and (ii) it will use its reasonable best efforts to
maintain each such registration or license in effect at all times during the
term of this Agreement; and (iii) it will promptly notify the other if it ceases
to be so registered, if its registration is suspended for any reason, or if it
is notified by any regulatory organization or court of competent jurisdiction
that it should show cause why its registration should not be suspended or
terminated; and (iv) it is duly authorized to enter into this Agreement and to
perform its obligations hereunder.
The Sub-Adviser further represents that it has adopted a written Code
of Ethics in compliance with Rule 17j-1(b) of the ICA. The Sub-Adviser shall be
subject to such Code of Ethics and shall not be subject to any other Code of
Ethics, including the Investment Manager's Code of Ethics, unless specifically
adopted by the Sub-Adviser. The Investment Manager further represents and
warrants to the Sub-Adviser that (i) the appointment of the Sub-Adviser by the
Investment Manager has been duly authorized and (ii) it has acted and will
continue to act in connection with the transactions contemplated hereby, and the
transactions contemplated hereby are, in conformity with the ICA, the Company's
governing documents and other applicable law.
10. Liability. In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard for its obligations hereunder, the Sub-Adviser
shall not be liable to the Company, the Fund, the Fund's shareholders or the
Investment Manager for any act or omission resulting in any loss suffered by the
Company, the Fund, the Fund's shareholders or the Investment Manager in
connection with any service to be provided herein. The Federal laws impose
responsibilities under certain circumstances on persons who act in good faith,
and therefore, nothing herein shall in any way constitute a waiver or limitation
of any rights which the Company, the Fund or the Investment Manager may have
under applicable law.
11. Other Activities of the Sub-Adviser. The Investment Manager agrees that the
Sub-Adviser and any of its partners or employees, and persons affiliated with
the Sub-Adviser or with any such partner or employee, may render investment
management or advisory services to other investors and institutions, and that
such investors and institutions may own, purchase or sell, securities or other
interests in property that are the same as, similar to, or different from those
which are selected for purchase, holding or sale for the Fund. The Investment
Manager further acknowledges that the Sub-Adviser shall be in all respects free
to take action with respect to investments in securities or other interests in
property that are the same as, similar to, or different from those selected for
purchase, holding or sale for the Fund. Purchases and sales of individual
securities on behalf of the Fund and other series or portfolios of the Company
or other accounts for investors or institutions as to which the Sub-Adviser
exercises investment discretion will be made on a basis that is equitable and
consistent with its fiduciary obligations to the Fund and such other accounts.
Nothing in this Agreement shall impose upon the Sub-Adviser any obligation to
purchase or sell, or recommend for purchase or sale, for the Fund any security
which the Sub-Adviser, its partners, affiliates or employees may purchase or
sell for the Sub-Adviser or such partner's, affiliate's or employee's own
accounts or for the account of any other client of the Sub-Adviser, advisory or
otherwise.
12. Continuance and Termination. This Agreement shall remain in full force and
effect for one year from the date hereof, and is renewable annually thereafter
by specific approval of the Directors or by vote of a majority of the
outstanding voting securities of the Fund. Any such renewal shall be approved by
the vote of a majority of the Directors who are not interested persons under the
ICA, cast in person at a meeting called for the purpose of voting on such
renewal. This Agreement may be terminated without penalty at any time by the
Investment Manager or the Sub-Adviser upon 60 days written notice, and will
automatically terminate in the event of (i) its "assignment" by either party to
this Agreement, as such term is defined in the ICA, subject to such exemptions
as may be granted by the Securities and Exchange Commission by rule, regulation
or order, or (ii) upon termination of the Management Agreement, provided the
Sub-Adviser has received prior written notice thereof.
13. Notification. The Sub-Adviser will notify the Investment Manager within a
reasonable time of any change in the personnel of the Sub-Adviser with
responsibility for making investment decisions in relation to the Fund (the
"Portfolio Manager(s)") or who have been authorized to give instructions to the
Custodian. The Sub-adviser shall be responsible for reasonable out-of-pocket
costs and expenses incurred by the Investment Manager, the Fund or the Company
to amend or supplement the Company's prospectus to reflect a change in Portfolio
Manager(s) or otherwise to comply with the ICA, the Securities Act of 1933, as
amended (the "1933 Act") or any other applicable statute, law, rule or
regulation, as a result of such change; provided, however, that the Sub-Adviser
shall not be responsible for such costs and expenses where the change in
Portfolio Manager(s) reflects the termination of employment of the Portfolio
Manager(s) with the Sub-Adviser and its affiliates or is the result of a request
by the Investment Manager.
Any notice, instruction or other communication required or contemplated
by this Agreement shall be in writing. All such communications shall be
addressed to the recipient at the address set forth below, provided that either
party may, by notice, designate a different recipient and/or address for such
party.
Investment Manager: American Skandia Investment Services, Incorporated
One Corporate Drive
Shelton, Connecticut 06484
Attention: Thomas M. Mazzaferro
President & Chief Operating Officer
Sub-Adviser: Founders Asset Management LLC
Founders Financial Center
2930 East Third Avenue
Denver, Colorado 80206
Attention: [INSERT]
Company: American Skandia Advisor Funds, Inc.
One Corporate Drive
Shelton, Connecticut 06484
Attention: Eric C. Freed, Esq.
14. Indemnification. The Sub-Adviser agrees to indemnify and hold harmless the
Investment Manager, any affiliated person within the meaning of Section 2(a)(3)
of the ICA ("affiliated person") of the Investment Manager and each person, if
any who, within the meaning of Section 15 of the 1933 Act, controls
("controlling person") the Investment Manager, against any and all losses,
claims, damages, liabilities or litigation (including reasonable legal and other
expenses), to which the Investment Manager or such affiliated person or
controlling person of the Investment Manager may become subject under the 1933
Act, the ICA, the Advisers Act, under any other statute, law, rule or regulation
at common law or otherwise, arising out of the Sub-Adviser's responsibilities
hereunder (1) to the extent of and as a result of the willful misconduct, bad
faith, or gross negligence by the Sub-Adviser, any of the Sub-Adviser's
employees or representatives or any affiliate of or any person acting on behalf
of the Sub-Adviser, or (2) as a result of any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, including
any amendment thereof or any supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading, if such a statement or
omission was made in reliance upon and in conformity with written information
furnished by the Sub-Adviser to the Investment Manager, the Fund, the Company or
any affiliated person of the Investment Manager, the Fund or the Company or upon
verbal information confirmed by the Sub-Adviser in writing, or (3) to the extent
of, and as a result of, the failure of the Sub-Adviser to execute, or cause to
be executed, portfolio investment transactions according to the requirements of
the ICA; provided, however, that in no case is the Sub-Adviser's indemnity in
favor of the Investment Manager or any affiliated person or controlling person
of the Investment Manager deemed to protect such person against any liability to
which any such person would otherwise be subject by reason of willful
misconduct, 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.
The Investment Manager agrees to indemnify and hold harmless the
Sub-Adviser, any affiliated person of the Sub-Adviser and each controlling
person of the Sub-Adviser, if any, against any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses), to
which the Sub-Adviser or such affiliated person or controlling person of the
Sub-Adviser may become subject under the 1933 Act, the ICA, the Advisers Act,
under any other statute, law, rule or regulation, at common law or otherwise,
arising out of the Investment Manager's responsibilities as investment manager
of the Fund (1) to the extent of and as a result of the willful misconduct, bad
faith, or gross negligence by the Investment Manager, any of the Investment
Manager's employees or representatives or any affiliate of or any person acting
on behalf of the Investment Manager, or (2) as a result of any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement, including any amendment thereof or any supplement thereto or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement therein not misleading, if
such a statement or omission was made other than in reliance upon and in
conformity with written information furnished by the Sub-Adviser, or any
affiliated person of the Sub-Adviser or other than upon verbal information
confirmed by the Sub-Adviser in writing; provided, however, that in no case is
the Investment Manager's indemnity in favor of the Sub-Adviser or any affiliated
person or controlling person of the Sub-Adviser deemed to protect such person
against any liability to which any such person would otherwise be subject by
reason of willful misconduct, 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. It is agreed that the Investment Manager's
indemnification obligations under this Section 14 will extend to expenses and
costs (including reasonable attorneys fees) incurred by the Sub-Adviser as a
result of any litigation brought by the Investment Manager alleging the
Sub-Adviser's failure to perform its obligations and duties in the manner
required under this Agreement unless judgment is rendered for the Investment
Manager.
15. Conflict of Laws. The provisions of this Agreement shall be subject to all
applicable statutes, laws, rules and regulations, including, without limitation,
the applicable provisions of the ICA and rules and regulations promulgated
thereunder. To the extent that any provision contained herein conflicts with any
such applicable provision of law or regulation, the latter shall control. The
terms and provisions of this Agreement shall be interpreted and defined in a
manner consistent with the provisions and definitions of the ICA. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall continue in
full force and effect and shall not be affected by such invalidity.
16. Amendments, Waivers, etc. Provisions of this Agreement may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of the change, waiver, discharge or termination
is sought. This Agreement (including Exhibit A hereto) may be amended at any
time by written mutual consent of the parties, subject to the requirements of
the ICA and rules and regulations promulgated and orders granted thereunder.
17. Governing State Law. This Agreement is made under, and shall be governed by
and construed in accordance with, the laws of the State of Connecticut.
18. Severability. Each provision of this Agreement is intended to be severable.
If any provision of this Agreement is held to be illegal or made invalid by
court decision, statute, rule or otherwise, such illegality or invalidity will
not affect the validity or enforceability of the remainder of this Agreement.
The effective date of this agreement is February ___, 1998.
FOR THE INVESTMENT MANAGER: FOR THE SUB-ADVISER:
___________________________________ ___________________________________
Thomas M. Mazzaferro
President & Chief Financial Officer
Date: ____________________________ Date: ____________________________
Attest: ____________________________ Attest: ____________________________
<PAGE>
American Skandia Advisor Funds, Inc.
ASAF Founders International Small Capitalization Fund
Sub-Advisory Agreement
EXHIBIT A
An annual rate of .60% of the portion of the average daily nets assets
of the Fund not in excess of $100 million; plus .50% of the portion over $100
million.
<PAGE>
AMERICAN SKANDIA ADVISOR FUNDS, INC.
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS OF THE
ASAF FOUNDERS SMALL CAPITALIZATION FUND
TO BE HELD ON FEBRUARY 24, 1998
The undersigned hereby appoints Lucinda Ciccarello and Meg Burdick and
each of them as the proxy or proxies of the undersigned, with full power of
substitution, to vote on behalf of the undersigned all shares of beneficial
interest of the above stated Fund of American Skandia Advisor Funds, Inc. (the
"Company") that the undersigned is entitled to vote at a Special Meeting of the
Shareholders of the Fund to be held at 10:00 a.m., Eastern Time, on February 24,
1998, at the offices of American Skandia Investment Services, Inc. at One
Corporate Drive, 10th Floor, Shelton, Connecticut and at any adjournments
thereof, upon the matters described in the accompanying Proxy Statement and upon
any other business that may properly come before the meeting or any adjournment
thereof. Said proxies are directed to vote or to refrain from voting as checked
below. If any other matters are properly presented to the meeting for action, it
is intended that the proxies will vote in accordance with their judgment.
PLEASE SIGN ON THE OTHER SIDE AND RETURN PROMPTLY IN THE
ENCLOSED POSTAGE PAID ENVELOPE.
The undersigned acknowledges receipt with this proxy of a copy of the
Combined Notice of Special Meeting of Shareholders and the Proxy Statement of
the ASAF Founders Small Capitalization Fund of the Company. If the shares are
jointly held, each shareholder named should sign. If only one signs, his or her
signature will be binding. If the shareholder is a trust, custodial account or
other entity, the name of the trust or the custodial account should be entered
and the trustee, custodian, etc. should sign in his or her own name, indicating
that he or she is "Trustee," "Custodian," or other applicable designation. If
the shareholder is a partnership, the partnership should be entered and the
partner should sign in his or her own name, indicating that he or she is a
"Partner."
HAS YOUR ADDRESS CHANGED?
=========================================
- -----------------------------------------
|X| PLEASE MARK VOTES AS IN THIS EXAMPLE
<TABLE>
<CAPTION>
AMERICAN SKANDIA ADVISOR FUNDS, INC. THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ASAF FOUNDERS SMALL CAPITALIZATION FUND OF THE COMPANY
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS VOTING FOR THE FOLLOWING
PROPOSAL:
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS
INDICATED OR FOR THE PROPOSAL IF NO CHOICE IS
INDICATED.
<S> <C> <C> <C>
For Against Abstain
PROPOSAL TO APPROVE A NEW
SUB-ADVISORY AGREEMENT BETWEEN [] [] []
AMERICAN SKANDIA INVESTMENT
SERVICES, INCORPORATED AND
FOUNDERS ASSET MANAGEMENT LLC
REGARDING INVESTMENT ADVICE
TO THE ASAF FOUNDERS SMALL
CAPITALIZATION FUND.
</TABLE>
Please be sure to sign and date this Proxy Date ___________
Mark box at right if an address change
or comment has been noted on the reverse side of this card.
- --------------------------------------------------------------------------------
Shareholder sign here Co-owner sign here RECORD DATE SHARES:
- --------------------------------------------------------------------------------
<PAGE>
AMERICAN SKANDIA ADVISOR FUNDS, INC.
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS OF THE
ASAF FOUNDERS INTERNATIONAL SMALL CAPITALIZATION FUND
TO BE HELD ON FEBRUARY 24, 1998
The undersigned hereby appoints Lucinda Ciccarello and Meg Burdick and
each of them as the proxy or proxies of the undersigned, with full power of
substitution, to vote on behalf of the undersigned all shares of beneficial
interest of the above stated Fund of American Skandia Advisor Funds, Inc. (the
"Company") that the undersigned is entitled to vote at a Special Meeting of the
Shareholders of the Fund to be held at 10:30 a.m., Eastern Time, on February 24,
1998, at the offices of American Skandia Investment Services, Inc. at One
Corporate Drive, 10th Floor, Shelton, Connecticut and at any adjournments
thereof, upon the matters described in the accompanying Proxy Statement and upon
any other business that may properly come before the meeting or any adjournment
thereof. Said proxies are directed to vote or to refrain from voting as checked
below. If any other matters are properly presented to the meeting for action, it
is intended that the proxies will vote in accordance with their judgment.
PLEASE SIGN ON THE OTHER SIDE AND RETURN PROMPTLY IN THE
ENCLOSED POSTAGE PAID ENVELOPE.
The undersigned acknowledges receipt with this proxy of a copy of the
Combined Notice of Special Meeting of Shareholders and the Proxy Statement of
the ASAF Founders International Small Capitalization Fund of the Company. If the
shares are jointly held, each shareholder named should sign. If only one signs,
his or her signature will be binding. If the shareholder is a trust, custodial
account or other entity, the name of the trust or the custodial account should
be entered and the trustee, custodian, etc. should sign in his or her own name,
indicating that he or she is "Trustee," "Custodian," or other applicable
designation. If the shareholder is a partnership, the partnership should be
entered and the partner should sign in his or her own name, indicating that he
or she is a "Partner."
HAS YOUR ADDRESS CHANGED?
=========================================
- -----------------------------------------
|X| PLEASE MARK VOTES AS IN THIS EXAMPLE
<TABLE>
<CAPTION>
AMERICAN SKANDIA ADVISOR FUNDS, INC. THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ASAF FOUNDERS INTERNATIONAL OF THE COMPANY
SMALL CAPITALIZATION FUND
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS VOTING FOR THE
FOLLOWING PROPOSAL:
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS INDICATED
OR FOR THE PROPOSAL IF NO CHOICE IS INDICATED.
<S> <C> <C> <C>
For Against Abstain
PROPOSAL TO APPROVE A NEW SUB-ADVISORY [] [] []
AGREEMENT BETWEEN AMERICAN SKANDIA INVESTMENT
SERVICES, INCORPORATED AND FOUNDERS ASSET
MANAGEMENT LLC REGARDING INVESTMENT ADVICE TO
THE ASAF FOUNDERS INTERNATIONAL SMALL
CAPITALIZATION FUND.
</TABLE>
Please be sure to sign and date this Proxy Date ___________
change or comment has been noted on Mark box at right if an address
the reverse side of this card.
|--|
- ---------------------------------------------------------
Shareholder sign here Co-owner sign here RECORD DATE SHARES:
- -------------------------------------------------------------------------------
