EXHIBIT INDEX
EXHIBIT A:
Attachment to item 77B:
Accountant's report on internal control.
EXHIBIT B:
Attachment to item 77D:
Policies with respect to security investments.
EXHIBIT C:
Attachment to item 77O:
Transactions effected pursuant to Rule 10f-3
EXHIBIT D:
Attachment to item 77Q1:
New Advisory Contracts
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EXHIBIT A:
Report of Independent Accountants
To the Board of Directors and Shareholders
of American Skandia Advisor Funds, Inc.
In planning and performing our audit of the financial statements of
American Skandia Advisor Funds, Inc. (the "Company") for the year
ended October 31, 2000, we considered its internal control, including
control activities for safeguarding securities, in order to determine
our auditing procedures for the purpose of expressing our opinion on
the financial statements and to comply with the requirements of Form
N-SAR, not to provide assurance on internal control.
The management of the Company is responsible for establishing and
maintaining internal control. In fulfilling this responsibility,
estimates and judgments by management are required to assess the
expected benefits and related costs of controls. Generally, controls
that are relevant to an audit pertain to the entity's objective of
preparing financial statements for external purposes that are fairly
presented in conformity with generally accepted accounting principles.
Those controls include the safeguarding of assets against unauthorized
acquisition, use or disposition.
Because of inherent limitations in internal control, errors or fraud
may occur and not be detected. Also, projection of any evaluation of
internal control to future periods is subject to the risk that
controls may become inadequate because of changes in conditions or
that the effectiveness of their design and operation may deteriorate.
Our consideration of internal control would not necessarily disclose
all matters in internal control that might be material weaknesses
under standards established by the American Institute of Certified
Public Accountants. A material weakness is a condition in which the
design or operation of one or more of the internal control components
does not reduce to a relatively low level the risk that misstatements
caused by error or fraud in amounts that would be material in relation
to the financial statements being audited may occur and not be
detected within a timely period by employees in the normal course of
performing their assigned functions. However, we noted no matters
involving internal control and its operation, including controls for
safeguarding securities, that we consider to be material weaknesses as
defined above as of October 31, 2000.
This report is intended solely for the information and use of the
Board of Directors, management and the Securities and Exchange
Commission and is not intended to be and should not be used by anyone
other than these specified parties.
PricewaterhouseCoopers LLP
December 15, 2000
EXHIBIT B:
Item 77D
Effective as of May 1, 2000, sub-advisory changes took place
for four Funds of the Registrant (the ASAF American Century
International Growth Fund, which formerly was named the ASAF T.
Rowe Price International Equity Fund; the ASAF Alliance Growth
Fund, which formerly was named the ASAF Oppenheimer Large-Cap
Growth Fund; the ASAF Alliance Growth and Income Fund, which
formerly was named the ASAF Lord Abbett Growth and Income Fund;
and the ASAF Sanford Bernstein Managed Index 500 Fund, which
formerly was named the ASAF Bankers Trust Managed Index 500
Fund). In connection with the new sub-advisors assuming
responsibility for the management of those Portfolios, a number
of changes were made to the investment policies of the
Portfolios. The current investment policies of the Registrant's
series are described in detail in the prospectus and Statement of
Additional Information for the Registrant included as part of
Post-Effective Amendment No. 12 to the Registrant's registration
statement filed on August 22, 2000.
In addition, effective as of September 11, 2000, a sub-
advisory change took place to one of the Funds of the Registrant
(the ASAF Gabelli Small-Cap Value Fund, which formerly was named
the ASAF T. Rowe Price Small Company Value Fund). Such sub-
advisory change and a number of changes to the investment
policies of this Fund were disclosed in a supplement to the
Registrant's prospectus dated September 11, 2000.
Disclosure was removed that permitted the ASAF MFS Growth
with Income Fund to purchase and write option on securities,
stock indices and foreign currencies. In addition, the
Registrant's prospectus was revised to indicate that the ASAF
American Century International Growth Fund may regularly have a
rate of portfolio turnover in excess of 100%.
EXHIBIT C:
Item 77O
On September 26, 2000, the ASAF American Century Strategic
Balanced Fund of the Registrant purchased 2,000 shares of
Southern Energy, Inc. common stock from Goldman Sachs in an
underwritten offering of 58,000,000 shares of such stock in which
J.P. Morgan & Co., an affiliate of the Funds' sub-advisor, was a
member of the selling syndicate. The Funds purchased the
security at the public offering price of $22.00 per share.
On September 26, 2000, the ASAF American Century Strategic
Balanced Fund of the Registrant purchased 100 shares of Southern
Energy, Inc. common stock from Lehman Brothers in an underwritten
offering of 58,000,000 shares of such stock in which J.P. Morgan
& Co., an affiliate of the Funds' sub-advisor, was a member of
the selling syndicate. The Funds purchased the security at the
public offering price of $22.00 per share.
On July 26, 2000, the ASAF Alliance Growth Fund of the
Registrant purchased 15,600 shares of TyCom Ltd. common stock
from Goldman Sachs in an underwritten offering of 61,130,000
shares of such stock in which Donaldson, Lufkin & Jenrette, an
affiliate of the Funds' sub-advisor, was a member of the selling
syndicate. The Funds purchased the security at the public
offering price of $32.00 per share.
On August 1, 2000, the ASAF Marsico Capital Growth Fund of
the Registrant purchased 223,691 shares of Goldman Sachs common
stock from Goldman Sachs in an underwritten offering of
40,000,000 shares of such stock in which BancAmerica, an
affiliate of the Funds' sub-advisor, was a member of the selling
syndicate. The Funds purchased the security at the public
offering price of $99.75 per share.
On September 26, 2000, the ASAF Marsico Capital Growth Fund
of the Registrant purchased 21,592 shares of Southern Energy,
Inc. common stock from Goldman Sachs in an underwritten offering
of 58,000,000 shares of such stock in which BancAmerica, an
affiliate of the Funds' sub-adviser, was a member of the selling
syndicate. The Funds purchased the security at the public
offering price of $22.00 per share.
At its November 30, 2000 meeting, the Registrant's Board of
Directors made the determinations required by rule 10f-3 under
the Investment Company Act of 1940 for the transactions listed
above based on information with regard to compliance with rule
10f-3 and the Registrant's rule 10f-3 procedures that was
provided to it by the Funds' Investment Manager, which in turn
had been provided to the Investment Manager by each Fund's sub-
advisor.
EXHIBIT D:
Item 77 Q. 1
Articles Supplementary of Registrant dated May 1, 2000 is
incorporated by reference to Exhibit a(9) of Post-Effective
Amendment No.12 to the Registrant's Registration Statement filed
on August 22, 2000.
The Investment Management Agreement between the Registrant and
American Skandia Investment Services, Incorporated with respect
to the ASAF Janus Mid-Cap Growth Fund is incorporated by
reference to Exhibit d(7) to Post-Effective Amendment No. 12 to
the Registrant's Registration Statement filed on August 22, 2000.
The Investment Management Agreement between the Registrant and
American Skandia Investment Services, Incorporated with respect
to the ASAF Alger All-Cap Growth Fund is incorporated by
reference to Exhibit d(10) to Post-Effective Amendment No. 12 to
the Registrant's Registration Statement filed on August 22, 2000.
The Investment Management Agreement between the Registrant and
American Skandia Investment Services, Incorporated with respect
to the ASAF Gabelli All-Cap Value Fund is incorporated by
reference to Exhibit d(11) to Post-Effective Amendment No. 12 to
the Registrant's Registration Statement filed on August 22, 2000.
The Investment Management Agreement between the Registrant and
American Skandia Investment Services, Incorporated with respect
to the ASAF INVESCO Technology Fund is incorporated by reference
to Exhibit d(12) to Post-Effective Amendment No. 12 to the
Registrant's Registration Statement filed on August 22, 2000.
The Investment Management Agreement between the Registrant and
American Skandia Investment Services, Incorporated with respect
to the ASAF Rydex Managed OTC Fund is incorporated by reference
to Exhibit d(13) to Post-Effective Amendment No. 12 to the
Registrant's Registration Statement filed on August 22, 2000.
The Sub-advisory Agreement between American Skandia Investment
Services, Incorporated and Janus Capital Corporation with respect
to the ASAF Janus Mid-Cap Growth Fund is incorporated by
reference to Exhibit d(27) to Post-Effective Amendment No. 12 to
the Registrant's Registration Statement filed on August 22, 2000.
The Sub-advisory Agreement between American Skandia Investment
Services, Incorporated and Fred Alger Management, Inc. with
respect to the ASAF Alger All-Cap Growth Fund is incorporated by
reference to Exhibit d(30) to Post-Effective Amendment No. 12 to
the Registrant's Registration Statement filed on August 22, 2000.
The Sub-advisory Agreement between American Skandia Investment
Services, Incorporated and GAMCO Investors, Inc. with respect to
the ASAF Gabelli All-Cap Value Fund is incorporated by reference
to Exhibit d(31) to Post-Effective Amendment No. 12 to the
Registrant's Registration Statement filed on August 22, 2000.
The Sub-advisory Agreement between American Skandia Investment
Services, Incorporated and INVESCO Funds Group, Inc. with respect
to the ASAF INVESCO Technology Fund is incorporated by reference
to Exhibit d(32) to Post-Effective Amendment No. 12 to the
Registrant's Registration Statement filed on August 22, 2000.
The Sub-advisory Agreement between American Skandia Investment
Services, Incorporated and Rydex Global Advisors with respect to
the ASAF Rydex Managed OTC Fund is incorporated by reference to
Exhibit d(27) to Post-Effective Amendment No. 12 to the
Registrant's Registration Statement filed on August 22, 2000.
Attached hereto is the Investment Management Agreement between
the Registrant and American Skandia Investment Services,
Incorporated with respect to the ASAF Gabelli Small-Cap Value
Fund.
AMERICAN SKANDIA ADVISOR FUNDS, INC.
INVESTMENT MANAGEMENT AGREEMENT
THIS AGREEMENT is made this 11th day of September, 2000 by and
between American Skandia Advisor Funds, Inc., a Maryland
corporation (the "Company"), and American Skandia Investment
Services, Incorporated, a Connecticut corporation (the
"Investment Manager").
W I T N E S S E T H
WHEREAS, the Company is registered as an open-end management
investment company under the Investment Company Act of 1940, as
amended (the "ICA"), and the rules and regulations promulgated
thereunder; and
WHEREAS, the Investment Manager is an investment adviser
registered under the Investment Advisers Act of 1940, as amended
(the "Advisers Act"); and
WHEREAS, the Company and the Investment Manager desire to enter
into an agreement to provide for the management of the assets of
the ASAF Gabelli Small-Cap Value Fund (the "Fund") on the terms
and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt
whereof is hereby acknowledged, the parties hereto agree as
follows:
1. Management. The Investment Manager shall act as investment
manager for the Fund and shall, in such capacity, manage the
investment operations of the Fund, including the purchase,
retention, disposition and lending of securities, subject at all
times to the policies and control of the Board of Directors of
the Company (the "Directors"). The Investment Manager shall give
the Fund the benefit of its best judgments, efforts and
facilities in rendering its services as investment manager.
2. Duties of Investment Manager. In carrying out its
obligation under paragraph 1 hereof, the Investment Manager
shall:
(a) supervise and manage all aspects of the Fund's
operations:
(b) provide the Fund or obtain for it, and thereafter
supervise, such executive, administrative, clerical and
shareholder servicing services as are deemed advisable by the
Directors;
(c) arrange, but not pay for, the periodic updating of
prospectuses and supplements thereto, proxy material, tax
returns, reports to the Fund's shareholders, reports to and
filings with the Securities and Exchange Commission, state Blue
Sky authorities and other applicable regulatory authorities;
(d) provide to the Directors on a regular basis, written
financial reports and analyses on the Fund's securities
transactions and the operations of comparable investment
companies;
(e) determine what issuers and securities shall be
represented in the Fund's portfolio and regularly report them in
writing to the Directors;
(f) formulate and implement continuing programs for the
purchases and sales of the securities of such issuers and
regularly report in writing thereon to the Directors; and
(g) take, on behalf of the Fund, all actions which appear
to the Company necessary to carry into effect such purchase and
sale programs and supervisory functions as aforesaid, including
the placing of orders for the purchase and sale of portfolio
securities.
3. Broker-Dealer Relationships. The Investment Manager is
responsible for decisions to buy and sell securities for the
Fund, broker-dealer selection, and negotiation of the Fund's
brokerage commission rates. The Investment Manager shall
determine the securities to be purchased or sold by the Fund
pursuant to its determinations with or through such persons,
brokers or dealers, in conformity with the policy with respect to
brokerage as set forth in the Company's Prospectus and Statement
of Additional Information as in effect from time to time
(together, the "Registration Statement"), or as the Directors may
determine from time to time. Generally, the Investment Manager's
primary consideration in placing Fund securities transactions
with broker-dealers for execution will be to obtain, and maintain
the availability of, best execution at the best available price.
The Investment Manager may consider sale of the shares of the
Fund in allocating Fund securities transactions, subject to the
requirements of best net price available and most favorable
execution.
Consistent with this policy, the Investment Manager, in
allocating Fund securities transactions, 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 Investment Manager 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 Investment Manager 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 Investment Manager's overall
responsibilities with respect to the Fund and other accounts as
to which the Investment Manager 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
Investment Manager shall determine in good faith in conformity
with its responsibilities under applicable laws, rules and
regulations. The Investment Manager will report on such
allocations to the Directors regularly as requested by the
Directors, indicating the broker-dealers to whom such allocations
have been made and the basis therefor.
4. Control by the Directors. Any investment program undertaken
by the Investment Manager pursuant to this Agreement, as well as
any other activities undertaken by the Investment Manager on
behalf of the Company pursuant hereto, shall at all times be
subject to any directives of the Directors.
5. Compliance with Applicable Requirements. In carrying out
its obligations under this Agreement, the Investment Manager
shall at all times conform to:
(a) all applicable provisions of the ICA and the Advisers
Act and any rules and regulations adopted thereunder; and
(b) the provisions of the Registration Statement, including
the investment objectives, policies and restrictions, and
permissible investments specified therein; and
(c) the provisions of the Articles of Incorporation of the
Company, as amended; and
(d) the provisions of the By-laws of the Company, as
amended; and
(e) any other applicable provisions of state and federal
law.
6. Expenses. The expenses connected with the Company shall be
allocable between the Company and the Investment Manager as
follows:
(a) The Investment Manager shall furnish, at its expense
and without cost to the Company, the services of a President,
Secretary, and one or more Vice Presidents of the Company, to the
extent that such additional officers may be required by the
Company for the proper conduct of its affairs.
(b) The Investment Manager shall further maintain, at its
expense and without cost to the Company, a trading function in
order to carry out its obligations under subparagraphs (e), (f)
and (g) of paragraph 2 hereof to place orders for the purchase
and sale of portfolio securities for the Fund.
(c) Nothing in subparagraph (a) hereof shall be construed
to require the Investment Manager to bear:
(i) any of the costs (including applicable office
space, facilities and equipment) of the services of a
principal financial officer of the Company whose
normal duties consist of maintaining the financial
accounts and books and records of the Company,
including the reviewing of calculations of net asset
value and preparing tax returns; or
(ii) any of the costs (including applicable office
space, facilities and equipment) of the services of
any of the personnel operating under the direction of
such principal financial officer.
Notwithstanding the obligation of the Company to bear the
expense of the functions referred to in clauses (i) and (ii) of
this subparagraph (c), the Investment Manager may pay the
salaries, including any applicable employment or payroll taxes
and other salary costs, of the principal financial officer and
other personnel carrying out such functions, and the Company
shall reimburse the Investment Manager therefor upon proper
accounting.
(d) All of the ordinary business expenses incurred in the
operations of the Company and the offering of its shares shall be
borne by the Company unless specifically provided otherwise in
this paragraph 6. These expenses include, but are not limited
to: (i) brokerage commissions, legal, auditing, taxes or
governmental fees; (ii) the cost of preparing share certificates;
(iii) custodian, depository, transfer and shareholder service
agent costs; (iv) expenses of issue, sale, redemption and
repurchase of shares; (v) expenses of registering and qualifying
shares for sale; (vi) insurance premiums on property or personnel
(including officers and directors if available) of the Company
which inure to the Company's benefit; (vii) expenses relating to
director and shareholder meetings; (viii) the cost of preparing
and distributing reports and notices to shareholders; (ix) the
fees and other expenses incurred by the Company in connection
with membership in investment company organizations; and (x) and
the cost of printing copies of prospectuses and statements of
additional information, as well as any supplements thereto,
distributed to shareholders.
7. Delegation of Responsibilities. Upon the request of the
Directors, the Investment Manager may perform services on behalf
of the Company which are not required by this Agreement. Such
services will be performed on behalf of the Company and the
Investment Manager's cost in rendering such services may be
billed monthly to the Company, subject to examination by the
Company's independent accountants. Payment or assumption by the
Investment Manager of any Company expense that the Investment
Manager is not required to pay or assume under this Agreement
shall not relieve the Investment Manager of any of its
obligations to the Company nor obligate the Investment Manager to
pay or assume any similar Company expense on any subsequent
occasion.
8. Engagement of Sub-Advisers and Broker-Dealers. The
Investment Manager may engage, subject to approval of the
Directors and where required, the shareholders of the Fund, a
sub-adviser to provide advisory services in relation to the Fund.
Under such sub-advisory agreement, the Investment Manager may
delegate to the sub-adviser the duties outlined in subparagraphs
(e), (f) and (g) of paragraph 2 hereof.
9. Compensation. The Company shall pay the Investment Manager
in full compensation for services rendered hereunder an annual
investment advisory fee. 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.
10. Non-Exclusivity. The services of the Investment Manager to
the Fund are not to be deemed to be exclusive, and the Investment
Manager shall be free to render investment advisory and corporate
administrative or other services to others (including other
investment companies) and to engage in other activities. It is
understood and agreed that officers or directors of the
Investment Manager may serve as officers or directors of the
Company, and that officers or directors of the Company may serve
as officers or directors of the Investment Manager to the extent
permitted by law; and that the officers and directors of the
Investment Manager are not prohibited from engaging in any other
business activity or from rendering services to any other person,
or from serving as partners, officers or directors of any other
firm or corporation, including other investment companies.
11. Term and Approval. This Agreement shall become effective on
September 11, 2000 and by shall continue in force and effect from
year to year, provided that such continuance is specifically
approved at least annually by:
(a) the Directors or the vote of a majority of the Fund's
outstanding voting securities (as defined in Section 2(a)(42) of
the ICA); and
(b) the affirmative vote of a majority of the Directors who
are not parties to this Agreement or interested persons of a
party to this Agreement (other than as Company directors), by
votes cast in person at a meeting specifically called for such
purpose.
12. Termination. This Agreement may be terminated at any time
without the payment of any penalty or prejudice to the completion
of any transactions already initiated on behalf of the Fund, by
vote of the Directors or by vote of a majority of the Fund's
outstanding voting securities, or by the Investment Manager, on
sixty (60) days' written notice to the other party. The notice
provided for herein may be waived by either party. This
Agreement automatically terminates in the event of its
"assignment," as such term is defined in the ICA.
13. Liability of Investment Manager and Indemnification. In the
absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties hereunder on the part
of the Investment Manager or any of its officers, directors or
employees, it shall not be subject to liability to the Company or
to any shareholder of the Fund for any act or omission in the
course of, or connected with, rendering services hereunder or for
any losses that may be sustained in the purchase, holding or sale
of any security.
14. Liability of the Directors and Shareholders. A copy of the
Articles of Incorporation of the Company is on file with the
Secretary of the State of Maryland, and notice is hereby given
that this instrument is executed on behalf of the Directors as
directors and not individually and that the obligations of this
instrument are not binding upon any of the Directors or
shareholders individually but are binding only upon the assets
and property of the Company. Federal and state laws impose
responsibilities under certain circumstances on persons who act
in good faith, and therefore, nothing herein shall in any way
constitute a waiver of limitation of any rights which the Company
or the Investment Manager may have under applicable law.
15. Notices. Any notices under this Agreement shall be in
writing, addressed and delivered or mailed postage paid to the
other party at such address as such other party may designate for
the receipt of such notice. Until further notice, it is agreed
that the address of the Company shall be [INSERT] and the address
of the Investment Manager shall be One Corporate Drive, Shelton,
Connecticut 06484.
16. Questions of Interpretation. Any question of interpretation
of any term or provision of this Agreement having a counterpart
in or otherwise derived from a term or provision of the ICA,
shall be resolved by reference to such term or provision of the
ICA and to interpretations thereof, if any, by the United States
courts or, in the absence of any controlling decision of any such
court, by rules, regulations or orders of the Securities and
Exchange Commission issued pursuant to the ICA. In addition,
where the effect of a requirement of the ICA, reflected in any
provision of this Agreement, is released by rules, regulation or
order of the Securities and Exchange Commission, such provision
shall be deemed to incorporate the effect of such rule,
regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in duplicate by their respective
officers on the day and year first above written.
AMERICAN SKANDIA ADVISOR FUNDS, INC.
Attest:
_____________________
By:
_____________________
Gordon C. Boronow
Vice President
AMERICAN SKANDIA INVESTMENT SERVICES, INCORPORATED
Attest:
______________________
By:
_____________________________
John Birch
Senior Vice President & Chief Operating Officer
American Skandia Advisor Funds, Inc.
ASAF Gabelli Small-Cap Value Fund
Investment Management Agreement
EXHIBIT A
An annual rate of 1.00% of the average daily net assets of the Fund.
Attached hereto is the Sub-advisory Agreement between American
Skandia Investment Services, Incorporated and GAMCO Investors,
Inc. with respect to the ASAF Gabelli Small-Cap Value Fund,
AMERICAN SKANDIA ADVISOR FUNDS, INC.
SUB-ADVISORY AGREEMENT
THIS AGREEMENT is between American Skandia Investment Services,
Incorporated (the "Investment Manager") and GAMCO Investors, Inc.
(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 Gabelli Small-Cap Value Fund (the "Fund"), one
series of the Company, under the terms of a management agreement,
dated September 11, 2000, 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 reasonable 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 any required Schedule 13G or Schedule 13D and Form 13-F
with respect to securities held by 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 year-end 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.
The Sub-Adviser represents, and the Investment Manager
hereby agrees, that the word "Gabelli" is the property of the
Sub-Adviser for copyright and other purposes. The Investment
Manager further agrees that the word "Gabelli" in the name of
the Fund is derived from the name of Mario J. Gabelli and such
name may freely be used by the Sub-Adviser for other investment
companies, entities or products. The Investment Manager further
agrees that, in the event that the Sub-Adviser shall cease to
provide sub-advisory services to the Fund under this Agreement or
any successor agreement, the Investment Manager shall use its
best efforts to cause the Company to change the name of the Fund
to one that does not include the word "Gabelli." Sub-Adviser
acknowledges and agrees that it will not use any designation
comprised in whole or in part of the names "American Skandia
Advisor Funds, Inc." or "American Skandia Investment Services,
Incorporated" on its own behalf, or in relation to any
investment company for which Sub-Adviser or its successors and
any subsidiary or affiliate thereof acts as investment adviser,
without the express written permission of the Company and the
Investment Manager, respectively, except that Sub-Adviser may
state that it acts as a sub-adviser to the Company and the
Investment Manager.
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: GAMCO Investors, Inc.
One Corporate Center
Rye, New York 10580-1434
Attention: Douglas R. Jamieson
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 September 11, 2000.
FOR THE INVESTMENT MANAGER: FOR THE SUB-ADVISER:
___________________________________ __________________________
John Birch
Senior Vice President &
Chief Operating Officer
Date: ____________________________ Date: ____________________
Attest: __________________________ Attest:____________________
American Skandia Advisor Funds, Inc.
ASAF Gabelli Small-Cap Value Fund
Sub-Advisory Agreement
EXHIBIT A
An annual rate equal to the following percentages of the
combined average daily net assets of the Fund and the series of
American Skandia Trust that is managed by the Sub-Advisor and
identified by the Sub-advisor and the Investment Manager as being
similar to the Fund: .40% of the portion of the combined average
daily net assets not in excess of $1 billion; plus .30% of the
portion in excess of $1 billion.
