Investment Company Act No. 811-08085
As filed with the Securities and Exchange Commission on January 13, 1999
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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] 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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[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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[ ] Fee paid previously with preliminary materials.
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<PAGE>
American Skandia
Advisor Funds, Inc.
P.O. Box 8012
Boston, MA 02266-8012
Telephone (203) 926-1888
Fax (203) 929-8071
January 15, 1999
Dear Valued Customer,
As a shareholder of the ASAF Janus Small-Cap Growth Fund (formerly, the ASAF
Founders Small Capitalization Fund) (the "Fund") of American Skandia Advisor
Funds, Inc. ("ASAF"), you are cordially invited to a special meeting of the
shareholders of the Fund to be held at the offices of American Skandia
Investment Services, Inc. ("ASISI") at One Corporate Drive, Shelton, CT, on
February 25, 1999 at 10:00 a.m.
At the special meeting, shareholders are being asked to approve or disapprove a
proposal to approve a new Sub-Advisory Agreement between American Skandia
Investment Services, Incorporated and Janus Capital Corporation regarding
investment advice to the Fund. As of January 1, 1999, the name of the Fund was
changed from the "ASAF Founders Small Capitalization Fund" to the "ASAF Janus
Small-Cap Growth Fund," and Janus Capital Corporation began providing investment
advice to the Fund under an interim Sub-Advisory Agreement. If the Proposal is
approved, the new Janus Sub-Advisory Agreement will become effective March 1,
1999.
Your vote is important no matter how large or small your holdings are. We urge
you to read the Proxy Statement thoroughly and to indicate your voting
instructions on the enclosed proxy card(s), date and sign it, and return it
promptly in the envelope provided to be received by ASAF on or before the close
of business on February 24, 1999. If we do not receive sufficient votes to
approve these proposals, we may have to send additional mailings or conduct
telephone canvassing. Therefore, if you do not return your proxy card(s), you
may receive a telephone call from our proxy solicitor D.F. King & Co., Inc.
soliciting your vote.
Any questions or concerns you may have regarding the special meetings or the
proxies can be directed to your financial representative. If you need assistance
in completing your proxy card(s), please contact D.F. King at 1-888-414-5566.
Sincerely,
/s/Gordon C. Boronow
Gordon C. Boronow
Vice President
American Skandia Advisor Funds, Inc.
<PAGE>
AMERICAN SKANDIA ADVISOR FUNDS, INC.
One Corporate Drive
P.O. Box 883
Shelton, Connecticut 06484
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
OF THE
ASAF JANUS SMALL-CAP GROWTH FUND
(FORMERLY THE ASAF FOUNDERS SMALL
CAPITALIZATION FUND)
To be held
February 25, 1999
To the Shareholders of the ASAF Janus Small-Cap Growth Fund of American Skandia
Advisor Funds, Inc.:
Notice is hereby given that a Special Meeting of Shareholders of the
ASAF Janus Small-Cap Growth Fund (the "Fund") of American Skandia Advisor Funds,
Inc. (the "Company") will be held at One Corporate Drive, Shelton, Connecticut
06484 on February 25, 1999 at 10:00 a.m. Eastern Time, or at such adjourned time
as may be necessary for the holders of a majority of the outstanding shares of
the Fund to vote (the "Meeting"), for the following purposes:
I. To consider the approval of a new Sub-Advisory Agreement between American
Skandia Investment Services, Incorporated and Janus Capital Corporation
regarding investment advice to the ASAF Janus Small-Cap Growth Fund.
II. To transact such other business as may properly come before the Meeting or
any adjournments thereof.
The matter referred to above in I is discussed in detail in the Proxy
Statement attached to this Notice. The Board of Directors has fixed the close of
business on December 31, 1998 as the record date for determining shareholders
entitled to notice of, and to vote at, the Meeting, 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 Meeting. Each share of the Fund is entitled to one vote with
respect to a proposal on which the Fund's shareholders are entitled to vote.
You are cordially invited to attend the Meeting. 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
/s/Eric C. Freed
Eric C. Freed
Secretary
American Skandia Advisor Funds, Inc.
January 15, 1999
<PAGE>
PROXY STATEMENT
AMERICAN SKANDIA ADVISOR FUNDS, INC.
One Corporate Drive
P.O. Box 883
Shelton, Connecticut 06484
SPECIAL MEETING OF SHAREHOLDERS
OF THE ASAF JANUS SMALL-CAP GROWTH FUND
(FORMERLY THE ASAF FOUNDERS SMALL
CAPITALIZATION FUND)
OF
AMERICAN SKANDIA ADVISOR FUNDS, INC.
To be held
February 25, 1999
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 a Special
Meeting of Shareholders of the ASAF Janus Small-Cap Growth Fund (formerly the
ASAF Founders Small Capitalization Fund) (the "Fund") of the Company to be held
at One Corporate Drive, Shelton, Connecticut 06484 on February 25, 1999 at 10:00
a.m. Eastern Time (the "Meeting"), or at any adjournment thereof, for the
purposes set forth in the accompanying Notice of Meeting ("Notice"). The first
mailing of proxies and proxy statements to shareholders is anticipated to be on
or about January 15, 1999.
All shares of the 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 February 24, 1999 as the
last day on which proxies will be accepted.
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 has
engaged D.F. King & Co., Inc. ("D.F. King") to assist in the solicitation of
proxies, for a fee that is not expected to exceed $3,000 plus reasonable charges
for mailing and telephone costs. Neither the Company nor the Fund will pay any
of the costs of the Meeting, including the costs related to the solicitation of
proxies.
You may call D. F. King toll free at 1-888-414-5566 and authorize D.F. King
to sign a proxy on your behalf. In addition, as the meeting date approaches, you
may receive a phone call from a representative of D.F. King if the Company has
not yet received your vote. D.F. King may ask you for authority, by telephone,
to permit D.F. King to sign a proxy on your behalf. D.F. King will record all
instructions it receives from shareholders by telephone, and the proxies it
signs in accordance with those instructions, in accordance with the procedures
set forth below that are intended to determine accurately the shareholder's
identity and voting instructions.
When soliciting a proxy by telephone, the D.F. King representative is
required to ask you for your full name, address, social security or employer
identification number, title (if the person giving the proxy is authorized to
act for an entity, such as a corporation), the number of shares of the Fund
owned and to confirm that you have received the proxy statement in the mail. The
D.F. King representative will then explain the voting process. D.F. King is not
permitted to recommend to you how to vote, other than to read any recommendation
included in the proxy statement. D.F. King will record your instructions and
transmit them to the official tabulator and, within 72 hours, send you a letter
or mailgram to confirm your vote. That letter will also ask you to call D.F.
King immediately if the confirmation does not reflect your instructions
correctly.
The Annual Report of the Company, including audited financial
statements for the fiscal year ended October 31, 1998 (the "Report"), has been
previously sent to shareholders. The Company will furnish an additional copy 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 31, 1998
(the "Record Date") are entitled to notice of, and to vote at, the Meeting. Each
shareholder is entitled to one vote for each full share, regardless of class. As
of the Record Date, the following number of shares of capital stock of the Fund
were outstanding: 1,450,658.
American Skandia Investment Services, Inc. ("ASISI") is the investment
manager for all the Company's funds, including the Fund. ASISI is a wholly-owned
subsidiary of American Skandia Investment Holding Corporation ("ASIHC"). ASIHC
is also the owner of American Skandia Marketing, Incorporated ("ASM"), which is
the distributor of the Fund. The principal offices of ASISI, ASIHC and ASM are
located in the same building at One Corporate Drive, Shelton, Connecticut 06484.
ASIHC is indirectly owned by Skandia Insurance Company Ltd., a Swedish company
located at Sveavagen 44, S-103, Stockholm, Sweden.
Prior to January 1, 1999, Founders Asset Management LLC ("Founders"),
2930 East Third Avenue, Denver, Colorado 80206, served as sub-advisor to the
Fund and, subject to the supervision and control of ASISI and the Board of
Directors, determined the securities to be purchased for and sold from the Fund.
Founders is a 90%-owned subsidiary of Mellon Bank, N.A., with the remaining 10%
held by certain Founders executives and portfolio managers. Mellon Bank is a
wholly owned subsidiary of Mellon Bank Corporation, a publicly owned multibank
holding company which provides a comprehensive range of financial products and
services in domestic and selected international markets.
Under a Sub-advisory Agreement with ASISI, Janus Capital Corporation
("Janus") has served as sub-advisor to the Fund since January 1, 1999, and,
subject to the supervision and control of ASISI and the Board of Directors,
determines the securities to be purchased and sold from the Fund. Janus has its
principal offices at 100 Fillmore Street, Denver, Colorado 80206-4923. Kansas
City Southern Industries, Inc. ("KCSI"), 114 West 11th Street, Kansas City,
Missouri 64105, owns approximately 83% of the outstanding voting stock of Janus.
KCSI is a publicly traded holding company whose primary subsidiaries are engaged
in transportation, information processing and financial services. Thomas H.
Bailey, President, Chief Executive Officer and Chairman of the Board of Janus,
owns approximately 12% of its voting stock and, by agreement with KCSI, selects
a majority of Janus' board. The purpose of this Meeting is to approve a
sub-advisory agreement between ASISI and Janus so that Janus can continue to
serve as sub-advisor to the Fund.
The Administrator of the Fund, and every other fund of the Company, is
PFPC Inc., a Delaware corporation located at 103 Bellevue Parkway, Wilmington,
Delaware 19809.
Shareholders of the Fund are being asked to consider and vote on a new
sub-advisory agreement for the Fund. As explained in more detail below, the
sub-advisory agreement for the Fund with Founders has been terminated, and
shareholders are being asked to approve a new sub-advisory agreement between the
Fund and Janus. The termination of Founders and the decision to retain Janus,
along with the terms of the new sub-advisory agreement are discussed below.
PROPOSAL I
APPROVAL OF A NEW SUB-ADVISORY AGREEMENT BETWEEN
AMERICAN SKANDIA INVESTMENT SERVICES, INCORPORATED
AND JANUS CAPITAL CORPORATION.
Background
Since the Fund commenced operations on July 28, 1997, ASISI has served
as Investment Manager to the Fund pursuant to an Investment Management Agreement
with the Company (the "Present Investment Management Agreement"). The Present
Investment Management Agreement, effective June 1, 1997 and as reapproved on
April 8, 1998, provides, among other things, that in carrying out its
responsibility to supervise and manage all aspects of the Fund's operations, the
Manager may engage, subject to approval of the Board of Directors and, where
required, the shareholders of the Fund, a sub-advisor to provide advisory
services in relation to the Fund. The Manager may delegate to the sub-advisor
the duty, among other things, to formulate and implement the Fund's investment
program, including the duty to determine what issuers and securities will be
purchased for or sold from the Fund.
In accordance with this provision for delegation of authority, the
Manager entered into a sub-advisory agreement, effective April 1, 1998 with
Founders (the "Founders Sub-Advisory Agreement"), pursuant to which the above
duties were delegated by the Manager to Founders. The Founders Sub-Advisory
Agreement was approved by shareholders of the Fund on February 24, 1998. The
approval of the Founders Sub-Advisory Agreement was required as a result of the
transaction in which Founders was acquired by Mellon Bank. Under the Founders
Sub-advisory Agreement and predecessor agreements, Founders and its predecessor
company have served as sub-advisor to the Fund since the Fund commenced
operations on July 28, 1997.
The Founders Sub-Advisory Agreement, and predecessor agreements with
Founders and its predecessor have been approved annually 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"). The Founders Sub-Advisory Agreement was most recently
approved by the Board on April 8, 1998.
At a telephonic meeting held on October 12, 1998, the Board of
Directors received a proposal from ASISI to terminate the Founders Sub-Advisory
Agreement and to replace Founders with Janus as sub-advisor to the Fund. At this
meeting, the Board of Directors approved the termination of the Founders
Sub-Advisory Agreement, and gave preliminary approval to retaining Janus as
sub-advisor. At an in-person meeting held on December 16, 1998, the Board of
Directors gave formal approval to a new sub-advisory agreement with Janus (the
"New Janus Sub-Advisory Agreement"), and authorized the submission of the New
Janus Sub-Advisory Agreement for shareholder approval and the preparation of
this proxy statement. The terms and conditions of the New Janus Sub-Advisory
Agreement are identical in all material respects with those of the Founders
Sub-Advisory Agreement, with the exception of a decreased sub-advisory fee rate,
the effective date, the identity of the sub-advisor, and a change in the name of
the Fund to the "ASAF Janus Small-Cap Growth Fund." The Investment Management
Agreement, including the fee payable to the Manager thereunder, is not proposed
to be changed except to the reflect the change in the Fund's name, and
therefore, shareholder approval of the New Investment Management Agreement is
not required.
In support of its recommendation to engage Janus as sub-advisor to the
Fund pursuant to the terms of the New Janus Sub-Advisory Agreement, the Manager
informed the Board of Directors of its belief that appointment of Janus as
sub-advisor to the Fund pursuant to these terms and the implementation of
revised investment policies and restrictions would assist the Fund in efforts to
achieve its investment objective and increase its net assets.
The Founders Sub-Advisory Agreement was terminated as of the close of
business on December 31, 1998. The New Janus Sub-Advisory Agreement will not
become effective until March 1, 1999 (or, if shareholder approval of the
Proposal occurs after February 25, 1999, two business days after such approval)
(such date being hereinafter referred to as the "Effective Date"). Consequently,
Janus has served as sub-advisor to the Fund under an interim sub-advisory
agreement (the "Interim Janus Sub-Advisory Agreement") since January 1, 1999.
The Interim Janus Sub-Advisory Agreement will terminate as of the Effective
Date. If the New Janus Sub-Advisory Agreement is disapproved by shareholders, or
is not approved prior to May 1, 1999, the Interim Janus Sub-Advisory Agreement
will terminate automatically. In that event, ASISI will attempt to obtain
shareholder approval of a sub-advisory agreement with another sub-advisor, who
will provide sub-advisory services to the Fund on an "at-cost" basis until such
shareholder approval is obtained.
The Founders Sub-Advisory Agreement
The following description of the Founders Sub-Advisory Agreement is
qualified in its entirety by reference to the form of such agreement attached to
this Proxy Statement as Exhibit A-1.
Under the terms of the Founders Sub-Advisory Agreement, Founders agreed
to furnish the Manager with investment advisory services in connection with a
continuous investment program for the Fund which was managed in accordance with
the investment objective, investment policies and restrictions of the Fund 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 Manager, which was in
turn subject to the supervision and control of the Board of Directors, Founders,
in its discretion, determined and selected the securities to be purchased for
and sold from the Fund from time to time and placed orders with and gave
instructions to brokers, dealers and others to cause such transactions to be
executed.
Under the Founders Sub-Advisory Agreement, in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations under the Founders Sub-Advisory Agreement, Founders was not liable
to the Company or its shareholders or to the Manager for any act or omission
resulting in any loss suffered in any portfolio of the Company in connection
with any service provided under the Founders Sub-Advisory Agreement.
The Manager was responsible for payment of Founders' compensation under
the Founders Sub-Advisory Agreement. Founders' compensation for the services
provided under the Founders Sub-Advisory Agreement was computed at an annual
rate and was payable monthly in arrears, based on the average daily net assets
of the Fund for each month. For all services rendered, the Manager calculated
and paid Founders at the annual rate of .50% of the average daily net assets of
the Fund not in excess of $250 million; plus .45% of the portion of the average
daily net assets over $250 million. In computing the fee to be paid to Founders,
the net asset value of the Fund was determined as set forth in the current
registration statement of the Company. Janus receives this rate of compensation
under the Interim Janus Sub-Advisory Agreement, and will do so until the New
Janus Sub-Advisory Agreement is approved and takes effect or the Interim Janus
Sub-Advisory Agreement is otherwise terminated.
The Founders Sub-Advisory Agreement provided that it shall remain in
effect for one year from the date of the agreement, and was renewable annually
thereafter by specific approval of the Board of Directors or by vote of a
majority of the outstanding voting securities of the Fund (as defined under the
Investment Company Act). In either event, such renewal was also required to be
approved by the vote of a majority of the Independent Directors. The Founders
Sub-Advisory Agreement could be terminated at any time without penalty upon 60
days' written notice to the other party to the agreement, and would
automatically terminate in the event of its "assignment" by either party (as
defined under the Investment Company Act) or (provided Founders had received
prior written notice thereof) upon termination of the Present Investment
Management Agreement.
The Founders Sub-Advisory Agreement was terminated by ASISI as of the
close of business on December 8, 1998. The termination, rather than continuance,
of the Founders Sub-Advisory Agreement reflected the determination of the
Manager and the Board of Directors that it would be in the interests of the
Fund's shareholders to enter into the New Janus Sub-Advisory Agreement described
below. Founders' compensation under the Founders Sub-Advisory Agreement was
prorated to the date of termination.
As of June 30, 1998, Founders managed assets totaling approximately
$7.5 billion.
The New Janus Sub-Advisory Agreement
The following description of the New Janus Sub-Advisory Agreement is
qualified in its entirety by reference to the form of such agreement attached to
this Proxy Statement as Exhibit A-2.
The terms and conditions of the New Janus Sub-Advisory Agreement are
the same in all material respects to those of the Founders Sub-Advisory
Agreement, with the exception of the identity of the service provider, the
decreased sub-advisory fee rate payable by the Manager, the effective date and
the name of the Fund. In addition, certain clarifying changes that are not
believed to be material have been made to the New Janus Sub-Advisory Agreement.
As compensation for the services to be rendered under the New Janus Sub-Advisory
Agreement, the Manager, and not the Company or the Fund, will pay Janus a fee at
the annual rate of .50% of the Fund's average daily net assets not in excess of
$100 million; plus .45% of the Fund's average daily net assets over $100 million
but not in excess of $500 million; plus .40% of the average daily net assets
over $500 million but not in excess of $1 billion; plus .35% of the Fund's daily
net assets in excess of $1 billion. As of the current date, Janus has agreed to
voluntarily waive a portion of the above fees equal to .05% on assets over $400
million but not in excess of $500 million and .05% on assets over $900 million
but not in excess of $1 billion. This waiver is voluntary, and may be
discontinued by Janus at any time. In computing the fee to be paid to Janus, the
net asset value of the Fund shall be determined as set forth in the then current
registration statement of the Company. If the New Janus Sub-Advisory Agreement
is terminated, the payment will be prorated to the date of termination.
For the fiscal year ended October 31, 1998, the amount of the
sub-advisory fee paid by the Manager to Founders for services rendered under the
Founders Sub-Advisory Agreement was $25,777. If the New Janus Sub-Advisory
Agreement had been in effect for this fiscal year, the amount of the
sub-advisory fee paid by the Manager to Janus for services rendered under the
New Janus Sub-Advisory Agreement would also have been $25,777.
If the New Janus Sub-Advisory Agreement is approved by the shareholders
of the Fund, it will become effective on the Effective Date. The New Janus
Sub-Advisory Agreement will remain in effect for an initial one year term and is
renewable thereafter by specific approval of the Board of Directors or by vote
of a majority of the outstanding voting securities of the Fund (as defined under
the Investment Company Act). In either event, such renewal shall also be
required to be approved by the vote of a majority of the Independent Directors.
Like the Founders Sub-Advisory Agreement, the New Janus 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 Janus has received prior written notice thereof) upon
termination of the New Investment Management Agreement.
As discussed in more detail below, the Board of Directors and the
Manager believe that approval of the New Janus Sub-Advisory Agreement is in the
best interests of the Fund and its shareholders because of the high quality of
the services expected to be provided under the New Janus Sub-Advisory Agreement.
In addition, the New Janus Sub-Advisory Agreement could facilitate efforts to
increase the Fund's assets, which may have beneficial effects on Fund and
Company expenses.
The Proposed Sub-Advisor
Janus serves as investment advisor to the Janus Funds, as well as
advisor or sub-advisor to several other mutual funds and individual, corporate,
charitable and retirement accounts. Janus has its principal offices at 100
Fillmore Street, Denver, Colorado 80206-4923. Kansas City Southern Industries,
Inc. ("KCSI"), 114 West 11th Street, Kansas City, Missouri 64105, owns
approximately 83% of the outstanding voting stock of Janus. KCSI is a publicly
traded holding company whose primary subsidiaries are engaged in transportation,
information processing and financial services. Thomas H. Bailey, President,
Chief Executive Officer and Chairman of the Board of Janus, owns approximately
12% of its voting stock and, by agreement with KCSI, selects a majority of
Janus' board.
In addition to Mr. Bailey, the other directors of Janus are: James P.
Craig, Vice Chairman and Chief Investment Officer of Janus; Michael E. Herman,
President, Kansas City Royals Baseball Team and Finance Committee Chairman,
Ewing Marion Kauffman Foundation; Thomas A. McDonnell, President, DST
Technologies, Inc. and President, Chief Executive Officer and Director, DST
Systems, Inc.; Landon H. Rowland, President and Chief Executive Officer of KCSI;
and Michael Stolper, President, Stolper & Co., Inc. Each of the directors may be
reached through Janus at the above address.
Janus acts as an investment adviser or sub-advisor to various other
investment companies, some series of which have investment objectives and
programs similar to the investment objective and proposed investment program for
the Fund, as described in more detail below (collectively, the "Comparable Janus
Funds"). As investment adviser to the Janus Venture Fund, Janus performs certain
administrative and other duties, which it will not be required to perform for
the Fund under the New Janus Sub-Advisory Agreement. For each Comparable Janus
Fund, the following chart lists the total assets at December 31, 1998, as well
as the current advisory or sub-advisory fee rate payable to Janus.
- ----------------- ----------- ---------------- ------------------------------
Total Net
Assets
at
Advisor December 31,
Comparable or 1998
Janus Fund Sub-Advisor (in millions) Fee Rate
- ----------------- ----------- ---------------- ------------------------------
- ----------------- ----------- ---------------- ------------------------------
Janus Advisor $1,246.0 .75% of the first $300 million
Investment Fund of the fund's average daily
- - Janus Venture net assets, .70% of the next
Fund $200 million, and .65% of the
average daily net assets in
excess of $500 million.
- ----------------- ----------- ---------------- ------------------------------
- ----------------- ----------- ---------------- ------------------------------
AST Janus Sub-Advisor $284.9 .50% of the first $100 million
Small-Cap of the fund's average daily
Growth Portfolio net assets, .45% of the
next $400 million, .40% of the
next $500 million, and .35% of
the average daily net assets in
excess of $1 billion.1
- ----------------- ----------- ---------------- ------------------------------
1 Janus has agreed to voluntarily waive a portion of the above fees equal to
.05% on assets over $400 million but not in excess of $500 million and .05%
on assets over $900 million but not in excess of $1 billion. This waiver is
voluntary, and may be discontinued by Janus at any time.
The Evaluation by the Board of Directors
In evaluating the New Janus Sub-Advisory Agreement, the Board of
Directors received information and reviewed materials furnished by the Manager,
including information about Founders' operations and management of the Fund and
Janus' personnel, operations and anticipated management of the Fund.
Consideration was given to the decreased fee rate payable by the Manager under
the New Janus Sub-Advisory Agreement, and the fact that the Investment
Management fees payable by the Fund will remain the same. Therefore, although
the Manager's net compensation will increase, the Fund's shareholders will not
pay any additional fees as a result of the change in sub-advisors.
Consideration was given to the Manager's report of the Fund's
under-performance since its inception in July of 1997 to the Russell 2000 Growth
Index and other mutual funds with similar investment objectives, and to the
Manager's belief that such under-performance was not accompanied by any
reduction in risk relative to such index and the other mutual funds. The Board
also considered the under-performance and risk characteristics of a
similarly-managed investment company portfolio for which ASISI served as
investment manager and Founders served as sub-advisor since the portfolio
commenced operations on January 4, 1994. Consideration was also given to recent
organizational and management changes at Founders. The Manager provided its
assessment that replacement of the Sub-advisor for the Fund and approval of the
New Janus Sub-advisory Agreement could improve the Fund's performance. The
Manager's recommendation of Janus was based, among other factors, on (1) the
performance of other funds with similar investment objectives and investment
styles that are managed by Janus, (2) the Janus personnel who will be involved
in the management of the Fund, including the fact that the head of the team
responsible for managing the Fund will be the Chief Investment Officer of Janus,
and (3) the experience of the Company and the Manager with the sub-advisory
services provided by Janus, including the high-quality services provided by
Janus for two other portfolios of the Company and for other investment company
portfolios for which the Manager serves as Investment Manager.
The Board of Directors also considered that (1) the overall reputation
and standing of Janus in the U.S. mutual fund industry is excellent, and (2) the
terms of the New Janus Sub-advisory Agreement will remain materially unchanged
from those of the Founders Sub-Advisory Agreement, except for the identity of
the sub-advisor, the effective date, the name of the Fund, and the sub-advisory
fee rate. In addition to considering the investment advisory capabilities of
Janus in terms of potential benefits in the investment performance of the Fund,
the Board of Directors also considered that the capabilities and reputation of
Janus will facilitate efforts to increase the Fund's assets, with possible
beneficial effects on Fund and Company expenses.
Based upon its evaluation, the Board of Directors concluded that the
Manager's engagement of Janus as Sub-advisor to the Fund likely would offer the
Fund access to highly effective management and advisory services and
capabilities. The Board of Directors concluded further that the terms of the New
Janus Sub-Advisory Agreement, including the fees contemplated thereby, are fair
and reasonable and in the best interests of the Fund and its shareholders.
In order to provide for the services described in the New Janus
Sub-Advisory Agreement, the shareholders are being asked to approve the New
Janus Sub-Advisory Agreement.
THE DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS,
RECOMMEND THAT THE SHAREHOLDERS VOTE "FOR" PROPOSAL I.
ANY UNMARKED PROXIES THAT ARE RETURNED ON A TIMELY BASIS
WILL BE SO VOTED.
Change in Fund Name
As of December 31, 1998, the name of the Fund was changed from the
"ASAF Founders Small Capitalization Fund" to the "ASAF Janus Small-Cap Growth
Fund." If the Proposal is approved, the New Investment Management Agreement and
the New Janus Sub-Advisory Agreement will become effective.
Changes in Non-Fundamental Investment Policies
As discussed above, the Fund's investment objective of seeking capital
appreciation will not be changed as a result of approval of the Proposal.
However, in order to conform the investment policies of the Fund to the
investment program that has been formulated by Janus, a number of changes to the
non-fundamental investment policies of the Fund will be implemented if the New
Janus Sub-Advisory Agreement is approved. The following description outlines the
investment policies of the Fund as it is currently managed, and compares such
policies to those under which the Fund would be managed under the New Janus
Sub-Advisory Agreement. Shareholder approval of these changes is not required;
the following description is being provided solely for the information of the
Fund's shareholders.
In general, investment decisions for the Fund currently are based on an
approach which normally will have the Fund's total assets invested at least 65%
in common stocks of U.S. companies with market capitalizations or annual
revenues of $1.5 billion or less. In selecting the small and medium-sized
companies in which the Fund will invest, Founders attempts to identify companies
with capable management and fertile operating areas, as well as sound financial
and accounting policies, effective research and successful product development
and marketing, efficient service, and pricing flexibility. The Fund attempts to
avoid investing in companies where operating results may be affected adversely
by excessive competition, severe government regulation, or unsatisfactory
productivity.
The Fund's primary emphasis on small and medium-sized companies may
involve greater risk and fluctuations in value than is customarily associated
with an emphasis on more established companies. While common stocks usually
constitute a large majority of the Fund's holdings, the Fund remains free to
invest in securities other than common stocks, and may do so when deemed
appropriate by the Fund's sub-advisor. The Fund may, from time to time, take
positions in, among other things, securities convertible into common stock,
preferred stocks, bonds, debentures, and other corporate obligations if the
sub-advisor believes that these investments offer opportunities to help achieve
the Fund's objective of capital appreciation. In addition, the Fund may purchase
securities of foreign issuers (and use forward foreign currency exchange
contracts in connection with its foreign investments), may enter into options
and futures contracts for hedging purposes, may invest in illiquid securities,
and may make temporary investments in cash or cash equivalents if Founders
determines it to be appropriate for purposes of enhancing liquidity or
preserving capital in light of prevailing market or economic conditions.
If the New Janus Sub-advisory Agreement is approved, investment
decisions for the Fund will similarly be based on an approach which normally
will have the Fund's total assets invested at least 65% in common stocks of
companies with market capitalizations of less than $1.5 billion or annual gross
revenues of less than $500 million. Janus will generally take a "bottom-up"
approach to building the Fund, in which it seeks to identify individual
companies with earnings growth potential that may not be recognized by the
market at large. Securities generally will be selected without regard to any
defined industry sector or similarly defined selection procedure, and
realization of income will not be a significant investment consideration.
As under the Founders Sub-advisory Agreement, the smaller or newer
issuers that the Fund will tend to invest in are more likely to realize
substantial growth as well as suffer more significant losses than larger or more
established issuers. While Janus will invest substantially all of the Fund's
assets in common stocks to the extent it believes that the relevant market
environment favors profitable investing in those securities, the Fund may also
invest to a lesser degree in other types of securities, including certain types
of securities in which the Fund may not currently invest. The other types of
securities in which the Fund may invest include preferred stocks, warrants,
convertible securities, debt securities (including high-yield bonds), mortgage-
and asset-backed securities, zero coupon, pay-in-kind and step coupon
securities. In addition, the Fund may enter into futures contracts, options and
other derivative securities for hedging purposes or, to a limited extent, to
enhance return, and may sell securities short "against-the-box."
Other Matters and Shareholder Proposals
The following table sets forth, as of December 3, 1998, each shareholder
who owns more than 5% of any class of the Fund's shares.
- ------------ ---------------------------- -------------------------- -----------
Name and Address of Number of Shares Percent of
Class Beneficial Owner Beneficially Owned* Class
- ------------ ---------------------------- -------------------------- -----------
- ------------ ---------------------------- -------------------------- -----------
A Delaware Charter Gty & 16,671.939 7.72%
Trust Co FBO Petroleum
Financial Inc. 401(k)
- ------------ ---------------------------- -------------------------- -----------
*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.
The Directors and Officers of the Company as a group owned less than 1%
of the shares of each class of the Fund.
The Board of Directors intends to bring before the Meeting the matter
set forth in the Proposal of the foregoing Notice. The Directors do not expect
any other business to be brought before the Meeting. If, however, any other
matters are properly presented to the Meeting 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 Meeting.
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 Meeting. 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 Meeting. Approval of each Proposal requires the vote of a
"majority of the outstanding voting securities" of the Fund, as defined in the
Investment Company Act, which means the vote of 67% or more of the shares of the
Fund present at the Meeting, if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy, or the vote of more than
50% of the outstanding shares of the 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. The Company will forward proxy materials
to record owners for any beneficial owners that such record owners may
represent.
Shareholders having more than one account in the Fund may receive
separate mailings for each account containing this proxy statement and a proxy
card. It is important to mark, sign, date and return all proxy cards received.
In the event that sufficient votes to approve any Proposal are not
received, the persons named as proxies may propose one or more adjournments of
the Meeting to permit further solicitation of proxies. Any such adjournment will
require the affirmative vote of a majority of those shares represented at the
Meeting 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 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.
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 special meetings; provided, among other things, that such
proposal is 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
/s/Eric C. Freed
Eric C. Freed
Secretary
American Skandia Advisor Funds, Inc.
<PAGE>
Exhibit A-1
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: John Birch
Senior Vice President & Chief Operating Officer
Sub-Adviser: Founders Asset Management LLC
Founders Financial Center
2930 East Third Avenue
Denver, Colorado 80206
Attention: General Counsel
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 April 1, 1998.
FOR THE INVESTMENT MANAGER: FOR THE SUB-ADVISER:
- ------------------------------- -------------------------
John Birch
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 A-2
AMERICAN SKANDIA ADVISOR FUNDS, INC.
SUB-ADVISORY AGREEMENT
THIS AGREEMENT is between American Skandia Investment Services, Incorporated
(the "Investment Manager") and Janus Capital Corporation (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 Janus Small-Cap
Growth Fund (the "Fund"), one series of the Company, under the terms of a
management agreement, dated March 1, 1999, 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 13G 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, including, to the extent permissible under
applicable law, brokers or dealers affiliated with the Sub-Adviser, 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. The Investment
Manager shall, to the extent necessary and within its control, assist in the
establishment and maintenance of brokerage accounts and other accounts the
Sub-Adviser deems advisable to allow for the purchase or sale of securities for
the Fund pursuant to this Agreement. 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). Allocation of orders placed by the Sub-Adviser on behalf of the
Fund to such broker-dealers 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. Purchase or sell orders for the Fund may
be aggregated with contemporaneous purchase or sell orders of other clients of
the Sub-Adviser to the extent permissible under applicable law.
Subject to the foregoing provisions of this paragraph 3, the
Sub-Adviser may also consider sales of shares in the Fund, or may consider or
follow recommendations of the Investment Manager that take such sales into
account, as factors 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.
The Sub-Adviser shall have no liability for the acts or omissions of
any custodian of the Fund's assets. The Sub-Adviser shall have no responsibility
for the segregation requirement of the ICA or other applicable law other than to
provide notice to the Custodian of any positions requiring segregation and the
Fund's assets that may be segregated.
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 the Registration Statement relating to the Sub-Adviser's activities
in connection with the investment program for the Fund. Notwithstanding the
foregoing, the Sub-Adviser is not required to provide proprietary information to
the Investment Manager not otherwise required for the Sub-Adviser to perform its
responsibilities pursuant to this Agreement; nor is the Sub-Adviser responsible
for the Fund accounting or required to generate information derived from Fund
accounting data.
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. Any reimbursement of management fees required by any expense
limitation provision or in connection with any liability arising out of its
violation of Section 36(b) of the ICA shall be the sole responsibility of the
Investment Manager.
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 shall promptly furnish the Sub-Adviser
with additional information as may be reasonably necessary for, or reasonably
requested by, the Sub-Adviser to perform its responsibilities pursuant to this
Agreement.
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; (iv) it is duly authorized to enter into this Agreement and to
perform its obligations hereunder; and (v) it has been duly incorporated and is
validly existing and in good standing as a corporation under the laws of its
state of incorporation.
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.
The Investment Manager acknowledges and agrees that the Sub-Adviser
makes no representation or warranty, express or implied, that any level of
performance or investment results will be achieved by the Fund or that the Fund
will perform comparably with any standard or index, including other clients of
the Sub-Adviser, whether public or private.
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. The Investment Manager understands that
the Sub-Adviser shall not favor or disfavor any of the Sub-Adviser's clients or
class of clients in the allocation of investment opportunities, so that to the
extent practical, such opportunities will be allocated among the Sub-Adviser's
clients over a period of time on a fair and equitable basis. Nothing in this
Agreement shall impose upon the Sub-Adviser any obligation (i) 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, or (ii)
to abstain from the purchase or sale of any security for the Sub-Adviser's other
clients, advisory or otherwise, which the Investment Manager has placed on the
list provided pursuant to paragraph 6(g) of this Agreement.
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 or is due to other circumstances beyond the
Sub-Adviser's control.
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: John Birch
Senior Vice President & Chief Operating Officer
Sub-Adviser: Janus Capital Corporation
100 Fillmore Street
Denver, Colorado 80206-4923
Attention: General Counsel
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 March 1, 1999.
FOR THE INVESTMENT MANAGER: FOR THE SUB-ADVISER:
- ------------------------------- -------------------------
John Birch
Chief Financial Officer
Date: ________________________ Date:_____________________
Attest: _________________________ Attest:____________________
<PAGE>
American Skandia Advisor Funds, Inc.
ASAF Janus Small-Cap Growth Fund
Sub-Advisory Agreement
EXHIBIT A
An annual rate of .50% of the portion of the average daily net assets of the
Fund less than $100 million; plus .45% of the portion over $100 million but not
in excess of $500 million; plus .40% of the portion over $500 million but not in
excess of $1 billion; plus .35% of the portion in excess of $1 billion.
<PAGE>
AMERICAN SKANDIA ADVISOR FUNDS, INC,
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS OF THE
ASAF JANUS SMALL-CAP GROWTH FUND
(FORMERLY THE ASAF FOUNDERS SMALL CAPITALIZATION FUND)
TO BE HELD ON FEBRUARY 25, 1999
The undersigned hereby appoints Lucinda Cicarello and Andrea Hinks 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. (or
"Company") that the undersigned is entitled to vote at a Special Meeting of the
Shareholders of the ASAF Janus Small-Cap Growth Fund to be held at 10:00 a.m.,
Eastern Time, on February 25, 1999 at the offices of the Company at One
Corporate Drive, 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 VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
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 Company. If a contract is jointly held, each contract owner named should
sign. If only one signs, his or her signature will be binding. If the contract
owner 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 contract owner 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?
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[] PLEASE MARK VOTES
AS IN THIS EXAMPLE
<TABLE>
<CAPTION>
- --------------------------------------------------
AMERICAN SKANDIA ADVISOR FUNDS, INC. THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS VOTING FOR THE FOLLOWING
PROPOSALS:
- --------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASAF JANUS SMALL-CAP GROWTH FUND
For Against Abstain
I. TO APPROVE A NEW SUB-ADVISORY
AGREEMENT BETWEEN AMERICAN SKANDIA
INVESTMENT SERVICES, INCORPORATED AND
JANUS CAPITAL CORPORATION
REGARDING INVESTMENT ADVICE
TO THE ASAF JANUS SMALL-CAP GROWTH
FUND.
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS INDICATED OR FOR THE
PROPOSALS IF NO CHOICE IS INDICATED.
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY.
Please be sure to sign and date this Proxy Date: _______________
Mark box at right if an address change has been
noted on the reverse side of this card. []
__________________________________________________________
Shareholder sign here Co-owner sign here RECORD DATE SHARES:
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</TABLE>
