<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
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 Section 240.14a-11(c) or Section
240.14a-2
American Odyssey Funds, Inc.
(Name of Registrant as Specified In Its Charter)
_______________________________
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of Each class of securities to which transaction
applies:
_______________________________
2) Aggregate number of securities to which transaction applies:
_______________________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
<PAGE> 2
_______________________________
4) Proposed maximum aggregate value of transaction:
_______________________________
5) Total fee paid:
_______________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
__________________________
2) Form, Schedule or Registration Statement No.:
__________________________
3) Filing Party:
__________________________
4) Date Filed:
__________________________
<PAGE> 3
AMERICAN ODYSSEY FUNDS, INC.
TWO TOWER CENTER
EAST BRUNSWICK, NJ 08816
NOTICE OF SPECIAL MEETING
OF PERSONS HAVING VOTING RIGHTS WITH RESPECT TO AMERICAN ODYSSEY FUNDS, INC.
APRIL 23, 1997
You are hereby notified that a special meeting of persons having voting
rights with respect to American Odyssey Funds, Inc. ("AOF") will be held on
April 23, 1997, at 10:00 a.m. at the offices of The Copeland Companies, Two
Tower Center, East Brunswick, New Jersey for the following purposes:
1. FOR THE EMERGING OPPORTUNITIES FUND ONLY: To approve or disapprove
certain advisory and subadvisory agreements to add Cowen Asset
Management as a second subadviser for the Emerging Opportunities Fund.
2. FOR ALL FUNDS: To approve or disapprove an arrangement, a new
investment advisory agreement, and revised subadvisory agreements that
would permit AOF to enter into new subadvisory agreements or to amend
the terms of existing subadvisory agreements without the approval of
persons having voting rights.
3. To consider and transact such other business that may properly come
before the meeting.
In accordance with the AOF By-Laws, the number of votes entitled to be cast
was determined as of February 18, 1997. Only those persons who had voting rights
with respect to AOF as of February 18, 1997 are entitled to notice of, and to
vote at, the meeting. If you plan to attend the meeting and would like
directions, you may obtain them by calling 1-800-242-7884.
YOU HAVE RECEIVED A SEPARATE PROXY CARD FOR EACH FUND IN WHICH YOU HAVE
VOTING RIGHTS. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED
TO SPECIFY YOUR CHOICES AND SIGN, DATE, AND RETURN EACH PROXY CARD IN THE
ENCLOSED SELF-ADDRESSED ENVELOPE, WHICH REQUIRES NO POSTAGE. IF YOU DO ATTEND
THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON.
By order of the Board of Directors.
Paul S. Feinberg
Senior Vice President and Secretary
March 14, 1997
<PAGE> 4
AMERICAN ODYSSEY FUNDS, INC.
SPECIAL MEETING OF PERSONS HAVING VOTING RIGHTS
WITH RESPECT TO AMERICAN ODYSSEY FUNDS, INC.
APRIL 23, 1997
PROXY STATEMENT
The Board of Directors of American Odyssey Funds, Inc. ("AOF") hereby
solicits voting instructions for a special meeting of persons having voting
rights with respect to AOF. The meeting will be held on April 23, 1997, at 10:00
a.m. at the offices of The Copeland Companies, Two Tower Center, East Brunswick,
New Jersey, and at any and all adjournments thereof. The approximate date on
which this proxy statement and the proxy card will first be sent to persons
having voting rights is March 14, 1997.
The record date for determination of persons entitled to vote for purposes
of this special meeting ("persons having voting rights") was February 18, 1997.
AOF consists of six portfolios (each a "Fund"): the International Equity Fund,
the Emerging Opportunities Fund, the Core Equity Fund, the Long-Term Bond Fund,
the Intermediate-Term Bond Fund, and the Short-Term Bond Fund. Each Fund issues
a separate class of capital stock representing an interest in that Fund, and had
the following number of shares outstanding as of the record date:
<TABLE>
<CAPTION>
EMERGING INTERMEDIATE-
INTERNATIONAL OPPORTUNITIES CORE EQUITY LONG-TERM TERM BOND SHORT-TERM
EQUITY FUND FUND FUND BOND FUND FUND BOND FUND
- -------------- -------------- -------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
13,175,374.270 14,284,916.150 19,245,732.524 17,076,787.242 9,132,761.203 5,020,167.223
</TABLE>
No person or entity beneficially owns more than 5% of the outstanding stock
of any Fund.
Each person having voting rights is entitled to have the number of shares
related to his or her interest in each Fund voted in accordance with his or her
instructions. Each full share shall have one vote, and each fractional share
shall have a proportionate fractional vote. The votes of persons who abstain are
not counted. If a person having voting rights submits a properly executed voting
instruction card but omits voting instructions with respect to any item, AOF
will vote the appropriate number of shares as if the person had given
instructions to vote for approval of the item.
More than 95% of AOF shares are held by The Travelers Insurance Company
("Travelers") in separate accounts funding variable annuity and
2
<PAGE> 5
variable life insurance contracts. Pursuant to current law, AOF anticipates that
Travelers will request voting instructions from contract holders, and will vote
the shares represented by the value of the each contract owner's contract
allocated to a particular Fund in accordance with the instructions received. For
each Fund, Travelers will vote any Fund shares held in a separate account for
which it does not receive properly executed voting instructions in the same
proportion as it votes shares of that Fund held in that separate account for
which it does receive properly executed voting instructions. With respect to AOF
shares held by qualified plans, AOF will distribute proxy materials to
shareholders of record, and will vote the shares in accordance with any
instructions received from them.
Voting instructions, in order to be effective, must be received by AOF
prior to the close of business on April 18, 1997. Such instructions may be
revoked provided written notice of revocation is received prior to the close of
business on April 18, 1997. Alternatively, persons having voting rights may
attend the meeting and vote in person, in which case any prior instructions will
be revoked. This solicitation is being made by mail, but it may also be made by
telephone, telecopier, or personal interview. AOF will bear all costs involved
in this solicitation.
PERSONS VOTING ON EACH PROPOSAL
Two proposals are scheduled to be considered at the special meeting. As
shown in the table below, the first proposal affects only the Emerging
Opportunities Fund, and will be voted upon only by persons having voting rights
with respect to that Fund, while the second proposal affects every Fund and will
be voted upon by persons having voting rights with respect to any Fund.
FUND SHARES ELIGIBLE TO VOTE ON EACH PROPOSAL
<TABLE>
<CAPTION>
PROPOSAL 2: APPROVAL OF AN
ARRANGEMENT, A NEW INVESTMENT
ADVISORY AGREEMENT, AND REVISED
SUBADVISORY AGREEMENTS THAT
PROPOSAL 1: APPROVAL OF CERTAIN WOULD PERMIT AOF TO ENTER INTO
ADVISORY AND SUBADVISORY NEW SUBADVISORY AGREEMENTS OR TO
AGREEMENTS TO ADD COWEN ASSET AMEND THE TERMS OF EXISTING
MANAGEMENT AS A SECOND SUBADVISORY AGREEMENTS WITHOUT
SUBADVISER FOR THE EMERGING THE APPROVAL OF PERSONS HAVING
OPPORTUNITIES FUND. VOTING RIGHTS.
-------------------------------- --------------------------------
<S> <C> <C>
International Equity
Fund X
Emerging Opportunities
Fund X X
Core Equity Fund X
Long-Term Bond Fund X
Intermediate-Term Bond
Fund X
Short-Term Bond Fund X
</TABLE>
3
<PAGE> 6
INVESTMENT MANAGEMENT AND ADMINISTRATION
American Odyssey Funds Management, Inc. (the "Manager"), Two Tower Center,
East Brunswick, New Jersey 08816, serves as the overall investment adviser to
AOF. The Manager is a wholly-owned, indirect subsidiary of Travelers Group Inc.
and a member of The Copeland Companies (a related group of indirect subsidiaries
of Travelers Group Inc.). Each Fund has a subadviser, who performs the actual
day-to-day investment management of the Fund. The Manager supervises the
performance of the subadvisers and recommends changes if warranted. Rogers,
Casey and Associates ("RogersCasey"), 1 Parklands Drive, Darien, Connecticut
06820, assists the Manager in monitoring the performance of the subadvisers and
comparing that performance to that of other investment managers. RogersCasey's
fees are paid by the Manager, not AOF. The current subadvisers are set forth
below:
<TABLE>
<CAPTION>
FUND SUBADVISER
- --------------------------- ------------------------------------
<S> <C>
International Equity Fund Bank of Ireland Asset Management
(U.S.) Limited, 26 Fitzwilliam
Place, Dublin 2, Ireland
Emerging Opportunities Fund Wilke/Thompson Capital Management,
Inc., 3800 Norwest Center, 90 South
7th Street, Minneapolis, Minnesota
55402
Core Equity Fund Equinox Capital Management, Inc.,
590 Madison Avenue, New York, New
York 10022
Long-Term Bond Fund Western Asset Management Company,
117 East Colorado Boulevard,
Pasadena, California 91105
Intermediate-Term Bond Fund Travelers Asset Management
International Corporation, One Tower
Square, Hartford, Connecticut 06183,
a wholly-owned indirect subsidiary
of Travelers Group Inc. and an
affiliated person (as defined in the
Investment Company Act of 1940) of
the Manager
Short-Term Bond Fund Smith Graham & Co. Asset Managers,
L.P., 6900 Texas Commerce Tower, 600
Travis Street, Houston, Texas
77002-3007
</TABLE>
4
<PAGE> 7
The Manager provides accounting services to and keeps the accounts and
records of AOF (other than those maintained by the Investors Bank and Trust
Company). The Manager also serves as transfer agent and dividend disbursing
agent. Investors Bank and Trust Company, 89 South Street, Boston, Massachusetts
02111, serves as the custodian of the assets and is also the accounting services
agent for each Fund. Copeland Equities, Inc., Two Tower Center, East Brunswick,
New Jersey 08816, a wholly-owned, indirect subsidiary of Travelers Group Inc.,
serves as principal underwriter of AOF. Coopers & Lybrand L.L.P., One Post
Office Square, Boston, Massachusetts 02109, serves as AOF's independent
accountants, providing audit services.
The following table provides the management fee schedule under the current
management agreements.
<TABLE>
<CAPTION>
TOTAL MANAGEMENT FEE, FEE PAID BY MANAGER TO MANAGER'S
FUND PAID BY FUND TO MANAGER SUBADVISER NET FEE
- -------------------- -------------------------- -------------------------- ---------
<S> <C> <C> <C>
International Equity 0.70% for first $50 0.45% for first $50 0.25% of
Fund million in assets, plus million in assets, plus assets
0.65% for next $50 million 0.40% for next $50 million
in assets, plus 0.55% for in assets, plus 0.30% for
assets over $100 million assets over $100 million
Emerging 0.65% for first $100 0.40% for first $100 0.25% of
Opportunities Fund million in assets, plus million in assets, plus assets
0.55% for assets over $100 0.30% for assets over $100
million million
Core Equity Fund 0.60% for first $100 0.35% for first $100 0.25% of
million assets, plus 0.55% million in assets, plus assets
for assets over $100 0.30% for assets over $100
million million
Long-Term Bond Fund 0.50% for first $250 0.25% for first $250 0.25% of
million of assets, plus million of assets, plus assets
0.40% for assets over $250 0.15% for assets over $250
million million
Intermediate-Term 0.50% for first $100 0.25% for first $100 0.25% of
Bond Fund million in assets, plus million in assets plus assets
0.45% for next $100 0.20% for next $100
million in assets, assets, million in assets, plus
plus 0.40% for assets over 0.15% for assets over $200
$200 million million
Short-Term Bond Fund 0.50% for first $100 0.25% for first $100 0.25% of
million in assets, plus million in assets, plus assets
0.40% for assets over $100 0.15% for assets over $100
million million
</TABLE>
Additional information about the Manager, including a description of and
information about the Management Agreement, appears in Appendix A. Additional
information about each current subadviser appears in Appendix B.
UPON REQUEST, AOF WILL FURNISH, WITHOUT CHARGE, A COPY OF THE MOST RECENT
ANNUAL REPORT TO ANY PERSON HAVING VOTING RIGHTS. IF YOU WISH TO OBTAIN A COPY
OF THIS REPORT, MAIL A REQUEST TO AMERICAN ODYSSEY FUNDS MANAGEMENT, INC., TWO
TOWER CENTER, EAST BRUNSWICK, NEW JERSEY 08816, OR CALL 1-800-242-7884.
5
<PAGE> 8
MEETING PROPOSALS
AOF must receive a proposal intended to be presented at a meeting of
persons having voting rights a reasonable time before the solicitation of
proxies is made, usually 120 days before the mailing. AOF does not ordinarily
hold annual meetings. Therefore, AOF will retain all proposals received from
persons having voting rights, which will then be eligible to be considered for
distribution with the proxy materials for the next called special meeting of
such persons.
PROPOSAL NO. 1
APPROVAL OF ADVISORY AGREEMENTS TO ADD COWEN ASSET MANAGEMENT AS A SECOND
SUBADVISER FOR THE EMERGING OPPORTUNITIES FUND
This proposal affects, and will be voted upon by, only persons having
voting rights with respect to the Emerging Opportunities Fund.
On February 13, 1997, the Board of Directors of AOF, including all
Directors who are not "interested persons" of AOF or the Manager (as defined in
the Investment Company Act of 1940, the "1940 Act"), approved a new Subadvisory
Agreement adding Cowen & Co., through its asset management division, Cowen Asset
Management ("Cowen"), as a second subadviser for the Emerging Opportunities Fund
(the "Fund"). The Board of Directors, again including all Directors who are not
"interested persons" of AOF or the Manager, approved a revised Management
Agreement between AOF and the Manager and a new Subadvisory Agreement with the
Fund's current subadviser, Wilke/Thompson Capital Management, Inc.
("Wilke/Thompson"). Those two agreements take into account the fact that there
will now be more than one subadviser for the Fund.
The Manager determined to search for a second subadviser after
Wilke/Thompson informed the Manager that it expected that it would reach its
capacity to effectively manage the Fund according to its investment objectives
and policies once the Fund reached $250 million in assets. After that time,
based on its current capacity, Wilke/Thompson believed it would be in the best
interests of the Fund if Wilke/Thompson did not receive any inflows of new
investments in the Fund (although it believed it could still effectively manage
the Fund if assets increased beyond $250 million due to investment performance).
While Wilke/Thompson's capacity may change, allowing it sometime in the future
to effectively manage more than $250 million, the Manager determined that it was
appropriate to
6
<PAGE> 9
search for a second subadviser for the Fund, especially given the rate at which
the Fund's assets were increasing.
The Manager also determined that there was another benefit to be gained by
the addition of a second subadviser -- diversification. By having some assets
managed by a second subadviser, with a different investment approach than
Wilke/Thompson, shareholders in the Fund would receive the benefits of
diversifying among investment philosophies. Wilke/Thompson employs a "growth"
approach to investing in small companies; it focuses on small companies it
believes will experience significant growth in earnings over the long term.
Wilke/Thompson does not focus primarily on short-term stock price movements;
instead it focuses on the fundamentals of the business, such as management,
products, market share, and other factors that it believes drive long-term stock
price movements. Other advisers take a so-called "value" approach, which looks
not only to earnings growth but also emphasizes smaller companies that have
fallen out of favor with, or are not well covered by, Wall Street analysts.
Thus, the Manager determined to seek a second subadviser that uses the "value"
approach. Both subadvisers, however, would of course follow the same investment
objective of the Fund, which is to seek maximum long-term total return (capital
appreciation and income) by investing primarily in common stocks of small,
rapidly growing companies.
The Manager, with the assistance of RogersCasey, conducted a search for a
second subadviser. The Manager and RogersCasey reviewed information about many
advisers, and selected six for more detailed review. After interviews with those
six advisers, the Manager determined to propose to the Board that Cowen be
retained as the second subadviser for the Fund.
After negotiations, the Manager and Cowen agreed to present to the Board a
fee structure that provided somewhat higher fees for Cowen than the fees
currently paid to Wilke/Thompson. The Manager determined it was appropriate to
propose this higher fee, primarily because of changes in the market for fund
advisers since Wilke/Thompson was retained in 1993. Although the fee is higher,
the Manager and RogersCasey believe that it is reasonable and within the range
of fees paid to subadvisers of the caliber of Cowen. More information about the
fee is set forth below.
The Board of Directors of AOF approved the arrangement with Cowen as
consistent with the best interests of investors in the Fund. More information
about the Board's considerations is set forth below.
7
<PAGE> 10
PROPOSED FEE SCHEDULE
As explained above, the proposed agreements provide a slightly higher fee
for Cowen than is currently paid to Wilke/Thompson. Because the Manager, rather
than the Fund, pays the subadvisory fees, the Manager's fee for assets allocated
to Cowen increases in parallel with the new Cowen fee. There is, however, no net
fee increase for the Manager; the Manager's net fee remains at 0.25%. No fee
increase is proposed for Wilke/Thompson. Set forth below is the fee schedule
included in the proposed agreements.
<TABLE>
<CAPTION>
SUBADVISER FEE
MANAGER (PAID BY
ASSETS FEE MANAGER)
- ---------------------------------------------- ------- --------------
<S> <C> <C>
First $100 million in assets allocated to
Wilke/Thompson.............................. 0.65% 0.40%
Assets over $100 million allocated to
Wilke/Thompson.............................. 0.55% 0.30%
First $50 million in assets allocated to
Cowen....................................... 0.75% 0.50%
Next $50 million in assets allocated to
Cowen....................................... 0.70% 0.45%
Assets over $100 million allocated to Cowen... 0.65% 0.40%
</TABLE>
Total management fees for 1996 equaled 0.60% of the Fund's average daily
net assets. Because the subadvisers have different fees, overall fees will vary
depending on the allocation of assets between the subadvisers. Thus, it is
difficult to provide an estimate of what 1996 fees would have been had the new
advisory agreements been in effect. Of course, if no assets were allocated to
Cowen, advisory fees would have been the same. If one assumes that during 1996
the Fund's assets were equally divided between the two subadvisers, total
management fees for 1996 would have equaled 0.69% of the Fund's average daily
net assets.
CURRENT AGREEMENTS
Management Agreement. The Management Agreement generally requires that the
Manager serve as overall investment adviser for all the funds of AOF. For
additional information, see Appendix A.
Subadvisory Agreement -- Wilke/Thompson. The Subadvisory Agreement with
Wilke/Thompson has been in effect since AOF commenced operations. Prior to
commencement of operations, the agreement was approved by the Fund's initial
shareholder. The agreement was most recently re-approved by the Board on May 22,
1996.
8
<PAGE> 11
The Subadvisory Agreement provides that the subadviser shall manage the
investment operations of the Fund and the composition of the Fund's investment
portfolio in accordance with the Fund's investment objectives and policies as
well as applicable law. The agreement requires the subadviser to keep certain of
the Fund's books and records. As required by the 1940 Act, the agreement
provides that it shall continue in effect for a period of more than two years
only so long as such continuance is specifically approved at least annually by
the Board of Directors, including a majority of directors who are not
"interested persons" of AOF (as that term is defined in the 1940 Act). AOF, the
Manager, and the subadviser each have the right to terminate the agreement with
not more than 60 days' nor less than 30 days' written notice.
PROPOSED AGREEMENTS
The proposed agreements are set forth in Appendices D and E. Set forth
below is a description of the material differences between the current
agreements and the proposed agreements.
Proposed Management Agreement. The proposed Management Agreement is in
substantially the same form as the current Management Agreement.
There are, however, two material changes. First, the proposed Management
Agreement reflects the proposed fee for assets allocated to Cowen. Accordingly,
the overall management fee is higher, since it is calculated as the subadvisory
fee plus 0.25%. Second, the proposed Management Agreement authorizes the Manager
to allocate the Fund assets among the subadvisers for any Fund with more than
one subadviser.
The Manager has not determined how assets will initially be allocated
between Wilke/Thompson and Cowen. It is expected that on May 1, 1997, the
effective date of these new agreements, Wilke/Thompson will transfer a certain
amount of Fund assets to Cowen. The amount transferred will depend on the
Manager's assessment as of that time of performance records of the two
subadvisers, their current investment strategies and the appropriate
diversification between the two styles. The Manager will also determine how
investments in the Fund after May 1, 1997 will be allocated between the two
subadvisers. The Manager will monitor the allocation between the two subadvisers
and make any changes it deems appropriate.
Proposed Subadvisory Agreement -- Wilke/Thompson. The proposed Investment
Sub-advisory Agreement with Wilke/Thompson is substantially the same as the
current Subadvisory Agreement. The proposed
9
<PAGE> 12
version is necessary only to take into account the fact that there will now be
more than one subadviser for the Fund. Thus, for example, the proposed Agreement
provides that the subadviser shall manage the assets of the Fund allocated to it
by the Manager (defined as the "Allocated Assets"), rather than the current
agreement's statement that the subadviser will manage the entire Fund. In other
respects, the proposed agreement is identical. Most importantly, the fees are
the same.
Proposed Subadvisory Agreement -- Cowen. The proposed Subadvisory
Agreement for Cowen is virtually identical to the proposed Wilke/Thompson
Subadvisory Agreement. The primary difference (other than names and addresses of
the parties) is that Cowen's fee is higher than Wilke/Thompson's fee. In
addition, the Cowen agreement does not include a provision included in the
Wilke/Thompson agreement limiting the subadviser's ability to advise certain
other funds. The other provisions, such as duties, indemnification and
termination, are the same.
INFORMATION ABOUT COWEN
Set forth below is additional information about Cowen. More information
about the Manager is included in Appendix A. More information about
Wilke/Thompson is included in Appendix B.
Cowen serves as investment adviser to one other registered investment
company with an objective similar to the Fund. Relevant information appears in
the following table.
<TABLE>
<CAPTION>
NAME OF REGISTERED SIZE AS OF
INVESTMENT COMPANY DECEMBER 31, 1996 ADVISORY FEE RATE
- ------------------------------------ ----------------- -----------------
<S> <C> <C>
Cowen Opportunity Fund, a series of Over $95 million 0.90% of average
Cowen Funds, Inc. daily net assets*
</TABLE>
- ---------------
*For 1996, Cowen voluntarily absorbed expenses equal to 0.13% of average net
assets, and anticipates that this arrangement will continue through March 31,
1997.
Cowen's principal executive officer is Joseph M. Cohen. Cowen is a limited
partnership with one general partner, Cowen Incorporated. Cowen Incorporated is
controlled by Mr. Cohen. The address for Mr. Cohen and for Cowen Incorporated is
Financial Square, 31st Floor, New York, NY 10005.
BOARD CONSIDERATION
On February 13, 1997, the full Board of Directors, including all directors
who are not "interested persons" of AOF (as that term is defined under the 1940
Act), met in person to discuss the Manager's proposal to
10
<PAGE> 13
add Cowen as a second subadviser for the Fund. The Board was given a variety of
information about Cowen, including information about the firm's history and
ownership, biographies of Cowen's key personnel, information about Cowen's
investment approach for small capitalization funds, past performance data for
small capitalization accounts managed by Cowen, and information about fees
charged by Cowen for those accounts. The Board was also given information about
fees and expenses of small capitalization funds generally.
After presentations by the Manager, the Manager's consultant, RogersCasey,
and Cowen, the Board unanimously voted to approve the proposed advisory
agreements. The Board determined that the proposed agreements were in the best
interests of investors in the Fund. In making that determination, the Board
considered a variety of factors, including those discussed below.
The Need for a Second Subadviser. As explained above, Wilke/Thompson had
informed the Manager that it believed that once the Fund reached $250 million in
assets, it would no longer be able to continue to accept new investments in the
Fund and still manage the Fund effectively. Thus, there was a need to retain a
second subadviser to handle the anticipated growth in Fund assets. Due to this
development, the Manager and RogersCasey began a process of selecting a
subadviser for recommendation to the Board. The Manager and RogersCasey had
advised the Board of this need at prior meetings and gave a summary of the
process by which the Manager settled on a recommendation of Cowen.
Diversification. Different managers often have different approaches. By
adding a second subadviser, the Fund could gain the benefits of diversification
between different investment styles. Wilke/Thompson takes what is generally
viewed as a "growth" approach. It focuses primarily on projected earnings
growth. Other managers take what is often termed a "value" approach, which
emphasizes the search for companies that are undervalued by the market. To gain
a diversification among these two approaches, the Manager and RogersCasey
focused their search on advisers that take the value approach. Cowen takes that
value approach. The Board considered materials presented by RogersCasey
comparing the portfolio composition of Wilke/Thomson and Cowen at various time
periods, which indicated that the two subadvisers tended to hold portfolios with
differing characteristics. The Board also considered Wilke/Thompson's
performance compared to benchmark indices, and determined that it would be
appropriate to seek to reduce volatility through diversification.
11
<PAGE> 14
The Nature and Quality of Cowen's Services. The Board considered Cowen's
personnel and investment approach. Cowen explained that it seeks companies that
have fallen out of favor, but are poised for resumed growth. Cowen evaluates
potential catalysts which can rejuvenate companies, such as new products, new
management, or new technologies. It also analyzes a company's fundamental
strengths, looking for strong balance sheets and cash flow, lean cost
structures, well-positioned product lines and experienced management. In
addition, Cowen focuses on valuation, considering among other factors a
company's price/earnings ratio and price/book-value ratio.
Cowen's Historical Performance. The Board considered materials presented
by RogersCasey and Cowen showing Cowen's past performance managing small
capitalization accounts. In RogersCasey's view, those returns showed strong
performance over the long-term when compared to the relevant indices and the
performance of other small capitalization managers.
Fees. The Board considered the fact that the fees proposed for Cowen are
higher than the fees currently paid to Wilke/Thompson. The Manager and
RogersCasey explained to the Board that the market for investment advisers had
changed since Wilke/Thompson was retained in 1993, and that they believed that
the Fund would not be able to retain an adviser of the quality demonstrated by
Cowen at the same price currently being paid to Wilke/Thompson. The Board also
compared the proposed Cowen fee with fees charged by other advisers to their
mutual fund or other clients. In this regard, the Board considered materials
prepared by Rogers-Casey regarding advisory fees for small capitalization funds
which, like AOF, serve as underlying funds for variable insurance contracts. The
RogersCasey study focused on funds with more than $100 million in assets with
better than median performance. The Board agreed with the Manager's conclusion
that the proposed fees for the Fund -- taking into account the Manager's fee,
Wilke/Thompson's fee and Cowen's fee -- are within the range of fees charged by
similar advisers for similar services and that the fees are reasonable.
ADDITIONAL FEE INFORMATION
A. 1996 Fee Information
The following table summarizes the expenses of the Fund during 1996. It
follows the format used in the "Summary of Expenses" section on pages 3-4 of the
prospectus. Expenses are expressed as a percentage of average net assets during
the year. If you have invested in the Fund as an
12
<PAGE> 15
investment option under a variable contract, you should note that the following
tables and examples do not include any expenses charged under the contract, such
as sales charges.
<TABLE>
<CAPTION>
EMERGING
OPPORTUNITIES
FUND
------------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load on Purchases.................................. None
Sales Load on Reinvested Dividends....................... None
Deferred Sales Load Imposed on Redemption................ None
Exchange Fees............................................ None
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fees.......................................... 0.60%
12b-1 Fees............................................... None
Other Expenses........................................... 0.12%
TOTAL FUND OPERATING EXPENSES............................ 0.72%
</TABLE>
The following example shows the total expenses that would be payable if you
redeemed your shares after having held them for one, three, five, and ten year
periods respectively. The example is based on the 1996 expenses listed in the
table above. Actual expenses may be greater or less than shown. The example
assumes a 5% annual rate of return pursuant to requirements of the Securities
and Exchange Commission. This hypothetical rate of return is not intended to be
representative of past or future performance.
<TABLE>
<CAPTION>
EMERGING
OPPORTUNITIES
FUND
-------------
<S> <C>
EXAMPLE
A shareholder would pay the following expenses on a
$1,000 investment, assuming (1) 5% annual return
and (2) redemption at end of each time period:
1 year.................................. $ 7.20
3 years................................. $ 22.53
5 years................................. $ 39.20
10 years................................. $ 87.50
</TABLE>
B. Pro Forma Fee Information
The following table shows an estimate what 1996 expenses would have been
had the proposed advisory agreements been in effect. Because subadvisers have
different fees, overall fees will vary depending on the
13
<PAGE> 16
allocation of assets between the subadvisers. The chart below assumes that
during 1996 the Fund's assets were equally divided between the subadvisers. As
in the first table, expenses are expressed as a percentage of average net assets
during the year.
<TABLE>
<CAPTION>
EMERGING
OPPORTUNITIES
FUND
-------------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load on Purchases.................................. None
Sales Load on Reinvested Dividends....................... None
Deferred Sales Load Imposed on Redemption................ None
Exchange Fees............................................ None
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fees.......................................... 0.69%
12b-1 Fees............................................... None
Other Expenses........................................... 0.12%
TOTAL FUND OPERATING EXPENSES............................ 0.81%
</TABLE>
The following example shows the total expenses that would be payable if you
redeemed your shares after having held them for one, three, five, and ten year
periods respectively. The example is based on the pro forma 1996 expenses listed
in the above table. Actual expenses may be greater or less than shown. The
example assumes a 5% annual rate of return pursuant to requirements of the
Securities and Exchange Commission. This hypothetical rate of return is not
intended to be representative of past or future performance.
<TABLE>
<CAPTION>
EMERGING
OPPORTUNITIES
FUND
-------------
<S> <C>
EXAMPLE
A shareholder would pay the following expenses on a
$1,000 investment, assuming (1) 5% annual return
and (2) redemption at end of each time period:
1 year.................................. $ 8.10
3 years................................. $ 25.33
5 years................................. $ 44.02
10 years................................. $ 98.02
</TABLE>
REQUIRED VOTE
The proposal will be adopted if approved by the vote of a majority of
outstanding Fund shares as defined in the 1940 Act, which is the lesser of
14
<PAGE> 17
(a) a vote of 67% or more of the Fund shares whose holders are present or
represented by proxy at the meeting if the holders of more than 50% of all
outstanding Fund shares are present in person or represented by proxy at the
meeting, or (b) a vote of more than 50% of all outstanding Fund shares. If
adopted, the proposed changes will be effective on May 1, 1997.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL NO. 1
15
<PAGE> 18
PROPOSAL NO. 2
APPROVAL OF AN ARRANGEMENT, A NEW MANAGEMENT AGREEMENT, AND REVISED SUBADVISORY
AGREEMENTS TO PERMIT AOF TO ENTER INTO NEW SUBADVISORY AGREEMENTS WITHOUT THE
APPROVAL OF PERSONS HAVING VOTING RIGHTS
The Board of Directors recommends the approval of a proposal that would
permit AOF to enter into new Subadvisory Agreements or amend existing
Subadvisory Agreements without obtaining the approval of persons having voting
rights that would ordinarily be required. Currently, in order to make any change
in a Fund's subadvisers or Subadvisory Agreements, AOF must prepare and
distribute proxy materials and hold a special meeting of persons having voting
rights with respect to that Fund, causing it to incur administrative costs and
delay. The Board believes that approval of the proposal is in the best interests
of AOF and its investors, because it will permit AOF to reduce these expenses
and to act without undue delay when subadvisory changes are necessary.
Under the proposal, any new or amended Subadvisory Agreements will continue
to require the approval of a majority of the Board, including a majority of the
Directors who are not "interested persons" of AOF or the Manager (as defined in
the 1940 Act). Thus, the Board could, if it determined it to be in the best
interests of AOF and its investors, terminate or replace existing subadvisers,
add additional subadvisers, or change the terms of existing Subadvisory
Agreements. AOF would not have to obtain approval of persons having voting
rights with respect to the affected Fund, who would instead receive notice of
the change, including the same information they would receive in a proxy
statement if their approval were required.
Although one purpose underlying the proposal is to decrease expenses, the
proposal permits the Board, among other things, to change the fees to be paid to
a subadviser, up to a maximum fee rate described below. As a result, the Board's
actions could increase a Fund's expenses. The Board would do so, however, only
if it determined that the payment of such fees was nonetheless in the best
interest of the Fund and its investors. Moreover, the Board could not increase
the fees to be paid to the Manager or to any affiliate of the Manager without
the approval of persons having voting rights. The proposal's effect on fees is
described in greater detail below.
On February 13, 1997, the Board met in person to consider the proposal.
After consideration of information about the proposal that was
16
<PAGE> 19
provided by the Manager, the Board concluded that the proposal is reasonable,
fair, and in the best interest of each of the Funds and the persons investing in
them. Accordingly, the Board unanimously approved the proposal and voted to
recommend its approval by persons having voting rights. The Board then took
several steps in preparation for the submission of the proposal to such persons.
First, the Board, including all Directors who are not "interested persons" of
AOF or the Manager, approved the submission of an application to the Securities
and Exchange Commission ("SEC") for an order exempting AOF from the requirement
of the Investment Company Act of 1940 (the "1940 Act") that shareholders approve
any new Subadvisory Agreements or amendments to existing Subadvisory Agreements.
A number of other mutual fund companies with a management structure similar to
AOF's structure have successfully obtained such an order. Second, the Board,
again including all Directors who are not interested persons, approved a new
Management Agreement and new Subadvisory Agreements that would implement the new
arrangement and provide some flexibility to the Board in selecting subadvisers
and setting their fees. These new agreements are described in detail below.
The Board now seeks the approval of persons having voting rights of this
proposal, which would: (i) authorize AOF to enter into Subadvisory Agreements or
amend existing Subadvisory Agreements without obtaining approval of person
having voting rights; (ii) approve the new Management Agreement between AOF and
the Manager; and (iii) approve a new Subadvisory Agreement with each subadviser
(including Cowen, if Proposal 1 is approved). AOF's use of the authority that
would be granted by this proposal is contingent upon the SEC's issuance of an
order permitting AOF to do so.
NEW MANAGEMENT AGREEMENT AND SUBADVISORY AGREEMENTS
The new Management Agreement and Subadvisory Agreements contemplated by the
proposal are set forth in Appendices F and G. These new agreements are
substantially similar to the existing agreements, except for the modifications
discussed below. The purpose of these changes is to increase the utility of the
authority provided by the proposal and to provide a structure whereby fees can
be more clearly described when there is more than one subadviser per Fund and
each subadviser receives a different fee.
First, under the new agreements, AOF will pay the Manager a flat rate of
0.25% of average daily net assets of a Fund, and will pay each subadviser its
subadvisory fee directly. In contrast, under the existing Management Agreement,
AOF pays the Manager the subadvisory fees plus 0.25% of
17
<PAGE> 20
average daily net assets, and the Manager pays the subadvisers. One disadvantage
of the current arrangement is that any new Subadvisory Agreement or amendment
that modified subadvisory compensation requires a corresponding modification of
the Management Agreement. This new Management Agreement would remedy that
problem. A new or amended Subadvisory Agreement that changed subadvisory
compensation would not require modification of the Management Agreement as long
as that compensation remained within the limits imposed by the Management
Agreement. This change, in itself, will have no effect upon aggregate advisory
fees.
Second, the agreements have been modified to reflect the fact that in the
future some Funds may have multiple subadvisers, each with some of the Fund's
assets allocated to it. This necessitates two changes. First, subadvisory fee
rates will be based upon net assets allocated to the subadviser. In contrast,
current subadvisory fee rates are based upon net assets of the Fund, since each
Fund has only one subadviser. Second, for those Funds with more than one
subadviser, the Management Agreement authorizes the Manager to allocate the
Fund's assets among those subadvisers. These changes also will have no effect in
themselves upon aggregate advisory fees.
Finally, although AOF and the Manager will enter into amended versions of
the current Subadvisory Agreements at the current fee rates, the new Management
Agreement would authorize AOF and the Manager to enter into new Subadvisory
Agreements in the future at fee rates different than the current ones, provided
that any new fee rate is less than or equal to a maximum fee rate for each Fund
described below. These limits are generally 0.10% of average daily net assets
greater than the maximum authorized under the current Subadvisory Agreements,
with the exception of the Emerging Opportunities Fund, where the limit is 0.10%
of daily net assets greater than the proposed subadvisory fee for Cowen Asset
Management discussed in Proposal 1. These limits on fee rates are higher than
the fee rates currently in effect in order to provide AOF and the Manager some
flexibility if they determine that it is in the best interests of the Fund and
its investors to hire a particular subadviser and pay it a fee slightly higher
than the fee paid to the current subadviser. This change would not result in any
current increase in subadvisory fees.
EFFECT ON FEES
If approved, the proposal would have no present effect on the amount of
investment advisory fees AOF pays. Had the proposed arrangement and
18
<PAGE> 21
proposed Management Agreement been in effect in 1996, investment advisory fees
during that year would have been no different unless the Board had determined to
enter into any new or revised Subadvisory Agreement specifying a different
subadvisory fee. In the future, new or revised Subadvisory Agreements could
result in an increase of the subadvisory fees for a Fund up to the limit
authorized by this proposal. The fees could also stay the same or decrease. The
Board will not enter into new or amended Subadvisory Agreements that would
increase subadvisory fees unless it believes that doing so would, after taking
into account the increased fees, still be in the best interests of the Fund and
its investors. Moreover, prior to entering into such an agreement, it would
consider whether the new subadvisory fee was reasonable and within the range of
fees for similar advisers for similar services.
19
<PAGE> 22
A comparison of the present fee structure with the proposed fee structure
appears in the following table:
<TABLE>
<CAPTION>
MANAGER'S
CURRENT MANAGER'S SUBADVISER'S PROPOSED
FUND NET FEE PROPOSED FEE SUBADVISER'S CURRENT FEE INITIAL FEE
- -------------- ------------ ------------- ------------------------------------- -------------------------------------
<S> <C> <C> <C> <C>
International 0.25% of 0.25% of 0.45% for first $50 million in 0.45% for first $50 million in
Equity Fund assets assets assets, plus 0.40% for next $50 assets, plus 0.40% for next $50
million in assets, plus 0.30% for million in assets, plus 0.30% for
assets over $100 million assets over $100 million
Emerging 0.25% of 0.25% of 0.40% for first $100 million in 0.40% for first $100 million in
Opportunities assets assets assets, plus 0.30% for assets over assets, plus 0.30% for assets over
Fund $100 million $100 million; if Proposal 1 is
approved, then the fee for assets
allocated to Cowen would be 0.50% for
the first $50 million in assets, plus
0.45% for the next $50 million in
assets, plus 0.40% for assets over
$100 million
Core Equity 0.25% of 0.25% of 0.35% for first $100 million in 0.35% for first $100 million in
Fund assets assets assets, plus 0.30% for assets over assets, plus 0.30% for assets over
$100 million $100 million
Long-Term Bond 0.25% of 0.25% of 0.25% for first $250 million of 0.25% for first $250 million of
Fund assets assets assets, plus 0.15% for assets over assets, plus 0.15% for assets over
$250 million $250 million
Intermediate- 0.25% of 0.25% of 0.25% for first $100 million in 0.25% for first $100 million in
Term Bond Fund assets assets assets, plus 0.20% for next $100 assets, plus 0.20% for next $100
million in assets, plus 0.15% for million in assets, plus 0.15% for
assets over $200 million assets over $200 million
Short-Term 0.25% of 0.25% of 0.25% for first $100 million in 0.25% for first $100 million in
Bond Fund assets assets assets, plus 0.15% for assets over assets, plus 0.15% for assets over
$100 million $100 million
<CAPTION>
SUBADVISER'S
PROPOSED
MAXIMUM
FUND FEE
- -------------- ------------
<S> <C>
International 0.55% of
Equity Fund assets
Emerging 0.60% of
Opportunities assets
Fund
Core Equity 0.45% of
Fund assets
Long-Term Bond 0.35% of
Fund assets
Intermediate- 0.35% of
Term Bond Fund assets
Short-Term 0.35% of
Bond Fund assets
</TABLE>
20
<PAGE> 23
BOARD CONSIDERATION
At its February 13, 1997 meeting, the Board considered various information
provided by the Manager, including a draft of the application to be submitted to
the SEC. Based on this information, the Board concluded that approval of the
proposal is in the best interests of AOF and its investors. First, the proposal
would permit AOF to avoid the costs and administrative burden a Fund would
suffer if compelled to conduct a proxy solicitation each time the Manager and
Board of Directors ascertain that the best interests of the Fund and its
investors require the Fund to obtain the services of a new subadviser or amend
an existing Subadvisory Agreement. Second, in part because of AOF's
Manager/Subadviser structure, approval of Subadvisory Agreements tends to be
less important to persons having voting rights than such approval may be to
shareholders of more typical mutual funds. Third, the proposal would maintain
important safeguards and protections for persons having voting rights. Finally,
the Board considered the reasonableness of the flexibility under the proposal to
raise subadvisory fees if the Board were to determine it to be in the best
interests of a Fund and its investors. The information presented to the Board is
discussed in greater detail below.
Administrative Costs and Burdens of the Current Arrangement. Currently, in
order to add an additional subadviser to a Fund, to substitute a new subadviser
for an existing subadviser, to amend an existing subadvisory agreement, or to
approve a new subadvisory agreement with an existing subadviser that has been
terminated as the result of an "assignment" (i.e., a change in control), AOF
must obtain the approval of those persons having voting rights with respect to
the Fund. Seeking this approval imposes certain costs and burdens on that Fund
and, indirectly, upon persons having voting rights with respect to it. Moreover,
these costs and burdens may tend to create undesirable disincentives for the
Manager and the Board, who, in order to lessen the upward pressure on Fund
expenses, might otherwise be more reluctant to institute desirable changes in
subadvisers or Subadvisory Agreements. The proposal would permit AOF to avoid
these expenses and administrative burdens.
First, under the current arrangement, the Fund must bear the cost of
holding a special meeting and conducting a proxy solicitation. As a Maryland
corporation, AOF is not required to hold annual shareholder meetings and, in
order to minimize expenses, does not intend to do so except when required by
law. Under the 1940 Act, however, a change in subadvisers or a material change
in a Subadvisory Agreement would ordinarily require that AOF hold a special
meeting -- which otherwise generally would not occur -- of persons having voting
rights with respect to
21
<PAGE> 24
the Fund. The direct expenses of holding the special meeting include: legal
expenses of preparing the proxy material; material and printing costs for the
proxy statements, proxy cards, and return envelopes; postage (including return
postage); tabulation of proxy cards; if necessary, solicitation and other
expenses incurred in order to obtain a quorum; and the costs of the meeting
itself. The Manager estimates that these costs average approximately $275,000
per special meeting, or approximately $3.50 per person having voting rights,
depending upon the number of such persons and the particular circumstances.
Approval of the proposal would permit AOF to reduce or minimize these expenses.
Second, under the current arrangement, once the Board of Directors
determines that adding a subadviser, replacing or eliminating a subadviser, or
amending a Subadvisory Agreement is in the best interest of its investors, a
delay may occur until AOF can obtain the necessary approval of persons having
voting rights. Typically, it requires approximately three months to prepare a
proxy solicitation, send it to persons having voting rights, receive and
tabulate the result, and hold the meeting. During this period, the Fund loses
the benefit of the addition or replacement of the subadviser, or the amendment
to the Subadvisory Agreement. Approval of the proposal would permit the Board
and the Manager to reduce or eliminate this delay.
AOF's Fund Structure. The information considered by the Board indicated
that, due to AOF's atypical manager/subadviser structure, the benefits of the
proposal should outweigh any potential disadvantages. First, AOF's subadvisers
play a role analogous to that of individual portfolio managers employed by a
typical mutual fund's investment adviser, making approval of Subadvisory
Agreements less important. Second, the vast majority of investors do not invest
in a single AOF Fund, but rather divide their investment among several of the
Funds as part of an asset allocation strategy, again lessening the importance of
approval of each Subadvisory Agreement.
In a conventional mutual fund, the investment adviser provides corporate
management and administrative services, along with portfolio management
services. Typically, the investment adviser chooses an individual or individuals
to perform the actual day-to-day management of the portfolio. Although the
investment adviser discloses to shareholders the individual's identity, the
company is not required to, and does not, submit approval of the choice of
individual or that individual's compensation to the shareholders. Rather,
accountability lies with the investment adviser itself, which has the
responsibility of monitoring the individual's investment performance
22
<PAGE> 25
and replacing the individual if doing so is in the best interest of
shareholders.
Subadvisers, under AOF's structure, take the place of the individual
managers in the conventional fund. The Manager has ultimate accountability for
the performance of the subadvisers. The Manager believes that persons having
voting rights expect the Manager to select and retain subadvisers who
successfully meet the Fund's objectives and policies and replace those who do
not. The Manager further believes that persons having voting rights have
determined to rely on the Manager's ability to select, monitor, and terminate
subadvisers just as shareholders of a conventionally structured investment fund
have chosen to rely upon its adviser to select individual portfolio managers and
analysts and supervise them accordingly.
The information considered by the Board included the fact that the typical
investor does not invest in a single Fund, but rather in a number of Funds as
part of a diversified asset allocation strategy, similarly minimizing any
potential disadvantages of the proposal. Persons using the Funds to diversify
their investment among asset classes do not choose the individual Funds based
upon the identity of the subadviser, but rather choose AOF as a whole as the
means to invest pursuant to their chosen asset allocation and choose among those
Funds based upon that allocation. Thus, the typical contract owner or plan
participant relies upon the Manager to choose appropriate subadvisers to carry
out the objectives appropriate for each asset class and its corresponding Fund.
In sum, according to the Manager, the proposal would permit the Manager
more efficiently to perform the functions AOF pays it to perform: selecting
subadvisers, monitoring their performance, and making whatever changes the
Manager deems appropriate, subject to the supervision and direction of the
Board.
Safeguards Preserved by the Proposal. The information considered by the
Board also showed that the proposal preserves certain protections and safeguards
for each Fund and the persons having voting rights with respect to it. For
example, although the proposal would authorize AOF to enter into new or revised
Subadvisory Agreements, any change in the Manager or the Management Agreement
would continue to require approval of persons having voting rights. Primary
responsibility for management of the Funds, including the selection and
supervision of the subadvisers, lies with the Manager, subject to the
supervision and direction of the Board. In addition, the Management Agreement
specifies the Manager's fee and also limits subadvisory fees to a maximum rate.
Thus,
23
<PAGE> 26
any change in the Manager's compensation or the maximum fee that may be paid to
a subadviser would also continue to require approval of persons having voting
rights. Moreover, AOF would continue to disclose all subadvisory fees,
consistent with the 1940 Act.
In addition, persons having voting rights will receive the same information
about subadvisers as they obtain currently. In the event the Manager, with the
approval of the Board, determines to select a new subadviser or to make a
material change in an existing Subadvisory Agreement, persons having voting
rights will receive, within ninety days of the change, the same information
about the subadviser and Subadvisory Agreement they would have received in a
proxy statement if their approval had been required. With this information,
investors can make as fully-informed a decision regarding their interests as
they would be able to do under the current arrangement. Those opposed to the
retention of a new subadviser or a material change in a Subadvisory Agreement
could redeem their shares and reallocate the value to an alternative investment
vehicle available under the insurance contract or retirement plan, without
penalty. Because shares of the Funds are held only as part of insurance separate
accounts and qualified retirement plans, redemption of shares may offer a more
viable option than it would for a mutual fund available to individual investors
directly. Unlike investors in that type of mutual fund, who under some
circumstances may want to defer realization of a capital gain if the share price
has appreciated, contract owners and plan participants generally would not risk
any adverse tax consequences by transferring to a different investment option.
The application to the SEC considered by the Board contains additional
conditions, listed in Appendix C, designed to protect the interests of AOF and
persons having voting rights.
REASONABLENESS OF FEE FLEXIBILITY
The Board considered the fact that the proposal would authorize AOF to
enter into new or revised Subadvisory Agreements with fees somewhat higher than
those specified in the current Subadvisory Agreements. The Manager explained to
the Board that in order to obtain sufficient flexibility to make use of the
arrangement contemplated by the proposal, the Board should have the option,
under appropriate circumstances, to pay a greater subadvisory fee if doing so
was in the best interests of the Fund and its investors. After consideration,
the Board determined that an additional 0.10% of average daily net assets over
the current maximums (or, for the Emerging Opportunities Fund, 0.10% greater
than the maximum rate proposed to be paid to Cowen Asset Management pursuant to
Proposal 1)
24
<PAGE> 27
provided sufficient flexibility. The Board considered RogersCasey's opinion
indicating that the maximum fees available under the proposal remained
comparable to fees charged by other mutual fund advisers for funds with similar
objectives. The Board agreed with the conclusion of the Manager and RogersCasey
that the limits on subadvisory fees under the proposal, taking into account the
Manager's fee as well, remain within the range of fees charged by similar
advisers for similar services and that the fees are reasonable. The Board
determined that it would review any future changes in subadvisory fees proposed
under the contemplated arrangement on a case-by-case basis, and that it would
only approve increased subadvisory fees that it found to be reasonable,
comparable to similar services offered by other subadvisers, justified under the
circumstances, and in the best interests of the Fund and its investors.
APPROVAL BY SEC
As noted above, the Board has approved the submission of an application to
the SEC for an order of exemption from certain requirements of the 1940 Act in
order to permit AOF to use the authority to enter into new or revised
Subadvisory Agreements as contemplated by this proposal. Any use of that
authority is contingent upon obtaining the requested order from the SEC. It is
possible that the SEC may require certain changes to the application or impose
additional conditions prior to granting the order. AOF will agree to such
changes if the Board and the Manager determine that it is in the best interests
of each Fund and the persons having voting rights to do so. It is also possible
that the SEC may refuse to grant the order entirely, although the SEC has
granted similar exemptions to other mutual fund companies under similar
circumstances in the past. In that case, the Board will take what further
actions it deems to be in the best interests of AOF and its investors.
REQUIRED VOTE
The proposal will be adopted if, for each Fund, it is approved by the vote
of a majority of outstanding Fund shares as defined in the 1940 Act, which is
the lesser of (a) a vote of 67% or more of the Fund shares whose holders are
present or represented by proxy at the meeting if the holders of more than 50%
of all outstanding Fund shares are present in person or represented by proxy at
the meeting, or (b) a vote of more than 50% of all outstanding Fund shares. If
adopted, the proposed changes will be effective on May 1, 1997.
25
<PAGE> 28
If adopted, the proposed changes cannot be effective unless and until the
SEC grants the exemptive order sought by the application filed by AOF and the
Manager. If the SEC grants the exemptive order, the proposed changes will be
effective on a date selected by the Board of Directors to coordinate with any
required updating or supplementing of AOF's prospectus.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL NO. 2
26
<PAGE> 29
APPENDIX A
ADDITIONAL INFORMATION ABOUT THE MANAGER
AND THE MANAGEMENT AGREEMENT
The Management Agreement has been in effect since AOF commenced operations.
Prior to commencement of operations, the agreement was approved by AOF's initial
shareholder. The agreement was most recently re-approved by the Board with
respect to all Funds on May 22, 1996. On February 13, 1997, the Board amended
the Management Agreement to eliminate a higher fee applicable to non-U.S. assets
in the Long-Term Bond Fund.
The Management Agreement generally requires that the Manager serve as
overall investment adviser for all the Funds of AOF. The agreement requires the
Manager to monitor the performance of each subadviser. It also requires the
Manager to meet periodically with each subadviser to review and agree upon
current investment strategies and programs in light of anticipated cash flows.
It requires the Manager to provide periodic information to the Board of
Directors. The agreement also provides that the Manager shall be responsible for
the administration of AOF. Under the agreement, AOF is responsible for the
payment of certain fees and expenses including, among others, the following: (1)
management and investment advisory fees; (2) the fees of non-interested
directors; (3) the fees of the Funds' custodian; (4) the fees of the Company's
legal counsel and independent accountants; (5) brokerage commissions incurred in
connection with fund transactions; (6) all taxes and charges of governmental
agencies; (7) the reimbursement of organizational expenses; and (8) expenses of
printing and mailing prospectuses and other expenses related to shareholder
communications. As required by the 1940 Act, the agreement provides that it
shall continue in effect for a period of more than two years only so long as
such continuance is specifically approved at least annually by the Board of
Directors, including a majority of directors who are not "interested persons" of
AOF (as that term is defined in the 1940 Act). AOF and the Manager each have the
right to terminate the agreement with not more than 60 days' nor less than 30
days' written notice.
A-1
<PAGE> 30
The chart below sets forth the name and principal occupation of the
principal executive officer and each director of AOFMI. The address for each
person is Two Tower Center, East Brunswick, NJ 08816.
<TABLE>
<CAPTION>
NAME POSITION WITH MANAGER PRINCIPAL OCCUPATION
- ------------------- ---------------------------- ----------------------------
<S> <C> <C>
Robert C. Dughi.... Chairman of the Board and Board of Directors and Chief
President Executive Officer, The
Copeland Companies and
various affiliates
Mark M. Skinner.... Director and Executive Vice Executive Vice President and
President Chief Marketing Officer, The
Copeland Companies;
President, Copeland
Equities, Inc.; Executive
Vice President, Copeland
Financial Services, Inc.
("CFS")
Paul S. Feinberg... Director, Senior Vice Senior Vice President and
President, and General General Counsel, The
Counsel Copeland Companies. Also:
Senior Vice President and
General Counsel of CFS and
Copeland Equities, Inc.
Michael R. Director, Senior Vice Senior Vice President, Chief
Zarelli.......... President, Chief Financial Financial Officer, and
Officer, and Treasurer Treasurer, The Copeland
Companies. Also: Senior Vice
President, Chief Financial
Officer, and Treasurer of
CFS and Copeland Equities,
Inc.
</TABLE>
The following chart provides information about the directors and officers
of AOF who are also directors or officers of the Manager.
<TABLE>
<CAPTION>
NAME POSITION WITH MANAGER POSITION WITH AOF
- ----------------- --------------------------- ---------------------------
<S> <C> <C>
Robert C. Dughi.. Chairman of the Board and Chairman of the Board and
President President
Mark M. Skinner.. Director and Executive Vice Director
President
Paul S. Director, Senior Vice Senior Vice President and
Feinberg....... President, General Counsel Secretary
and Secretary
Michael R. Director, Senior Vice Senior Vice President and
Zarelli........ President, Chief Financial Treasurer
Officer and Treasurer
Mark E. Vice President Vice President
Freemyer.......
</TABLE>
A-2
<PAGE> 31
The following table shows for each Fund the fee AOF paid the Manager for
services rendered in 1996 and the net amount of that fee the Manager retained
after paying that Fund's subadviser.
<TABLE>
<CAPTION>
NET FEE
MANAGEMENT RETAINED
FEE FOR BY
FUND 1996 MANAGER
- ----------------------------------------- ------------ ----------
<S> <C> <C>
International Equity Fund................ $ 823,904 $317,817
Emerging Opportunities Fund.............. $ 1,169,884 $486,311
Core Equity Fund......................... $ 1,362,268 $596,486
Long-Term Bond Fund...................... $ 718,488 $359,244
Intermediate-Term Bond Fund.............. $ 442,596 $221,298
Short-Term Bond Fund..................... $ 161,396 $ 80,698
</TABLE>
The Manager is a wholly-owned subsidiary of The Copeland Companies, Two
Tower Center, East Brunswick, NJ 08816, which is a wholly-owned subsidiary of
The Plaza Corporation, One Tower Square, Hartford, Connecticut 06183, which is a
wholly-owned subsidiary of The Travelers Insurance Company, One Tower Square,
Hartford, Connecticut 06183, which is a wholly-owned subsidiary of The Travelers
Insurance Group Inc., One Tower Square, Hartford, Connecticut 06183, which is a
wholly-owned subsidiary of PFS Services, Inc., 388 Greenwich Street, New York,
New York 10013, which is a wholly-owned subsidiary of Associated Madison
Companies, Inc., 388 Greenwich Street, New York, New York 10013, which is a
wholly-owned subsidiary of Travelers Group Inc., 388 Greenwich Street, New York,
New York 10013, a publicly-owned corporation.
A-3
<PAGE> 32
(This page intentionally left blank)
<PAGE> 33
APPENDIX B
ADDITIONAL INFORMATION ABOUT SUBADVISERS AND SUBADVISORY AGREEMENTS
The Investment Subadvisory Agreements for the Funds other than the
Long-Term Bond Fund have been in effect since AOF commenced operations. Prior to
commencement of operations, these agreements were approved by the relevant
Fund's initial shareholder. Each agreement was most recently re-approved by the
Board on May 22, 1996. A revised version of the Investment Subadvisory Agreement
for the Long-Term Bond Fund was approved by the Board of Directors on February
13, 1997. That revised version eliminated WLO Global Management as a listed
subadviser and eliminated a higher fee applicable to non-U.S. assets.
Each Subadvisory Agreement provides that the subadviser shall manage the
investment operations of the particular Fund and the composition of its
investment portfolio in accordance with the Fund's investment objectives and
policies as well as applicable law. The agreement requires the subadviser to
keep certain of the Fund's books and records. As required by the 1940 Act, the
agreement provides that it shall continue in effect for a period of more than
two years only so long as such continuance is specifically approved at least
annually by the Board of Directors, including a majority of directors who are
not "interested persons" of AOF (as that term is defined in the 1940 Act). AOF,
the Manager and the subadviser each have the right to terminate the agreement
with not more than 60 days' nor less than 30 days' written notice.
Bank of Ireland Asset Management (U.S.) Limited
(International Equity Fund)
The chart below sets forth the name and principal occupation of the
principal executive officer and directors of Bank of Ireland Asset Manage-
B-1
<PAGE> 34
ment (U.S.) Limited ("BIAM"). The address for each person is 26 Fitzwilliam
Place, Dublin 2, Ireland.
<TABLE>
<CAPTION>
POSITION WITH
NAME BIAM PRINCIPAL OCCUPATION
- --------------------- --------------------- ---------------------------------
<S> <C> <C>
William R. Cotter.... Chief Executive Chief Executive Officer, BIAM
Officer and Director
Denis Donovan........ Director Chief Operating Officer, BIAM
Christopher Reilly... Director Chief Investment Officer, BIAM
Denis Curran......... President and President, BIAM
Director
Gerald Colleary...... Director Senior Vice President Client
Servicing, BIAM
Thomas Finlay........ Director Chief Operating Officer, Bank of
Ireland Asset Management Limited
</TABLE>
BIAM received subadvisory fees totaling $506,087 for advisory services
provided to the International Equity Fund in 1996.
BIAM serves as investment adviser to three other registered investment
companies with an objective similar to the International Equity Fund. The
following chart provides relevant information.
<TABLE>
<CAPTION>
SIZE AS OF
NAME OF REGISTERED DECEMBER 31,
INVESTMENT COMPANY 1996 ADVISORY FEE RATE
- ------------------------- --------------- ---------------------------------------
<S> <C> <C>
SAFECO International
Equity Fund............ $11.5 million 0.60% for first $50 million in assets,
plus 0.50% for next $50 million in
assets, plus 0.40% for assets over $100
million
Allmerica International
Equity Fund............ $245.4 million 0.45% for first $50 million in assets,
plus 0.40% for next $50 million in
assets, plus 0.30% for assets over $100
million
Berger/BIAM International
Fund................... $38.4 million 0.45% of assets*
</TABLE>
- ---------------
* For 1996, BIAM voluntarily waived a portion of this fee.
BIAM is a wholly-owned subsidiary of Bank of Ireland Asset Management
Limited, 26 Fitzwilliam Place, Dublin 2, Ireland, which is a wholly-owned
subsidiary of Investment Bank of Ireland Limited, 26 Fitzwilliam Place, Dublin
2, Ireland, which is a wholly-owned subsidiary of Bank of Ireland Group, Lr.
Baggot Street, Dublin 2, Ireland.
B-2
<PAGE> 35
Wilke/Thompson Capital Management, Inc.
(Emerging Opportunities Fund)
The chart below sets forth the name and principal occupation of the
principal executive officer and directors of Wilke/Thompson Capital Management,
Inc. ("Wilke/Thompson"). The address for each person is 3800 Norwest Center, 90
South 7th Street, Minneapolis, MN 55402.
<TABLE>
<CAPTION>
POSITION WITH
NAME WILKE/THOMPSON PRINCIPAL OCCUPATION
- ---------------------------- --------------- ------------------------------
<S> <C> <C>
Paul L. Hayne............... President and President and Chief Executive
Director Officer, Wilke/Thompson
Mark A. Thompson............ Director Chief Investment Officer,
Wilke/Thompson
</TABLE>
During 1996, Wilke/Thompson paid $273 in brokerage commissions to The
Robinson Humphrey Company, Inc., which is considered an affiliated broker
because it is an affiliate of the Manager. Those commissions represented 0.303%
of the Emerging Opportunities Fund's total brokerage commissions paid in 1996.
Wilke/Thompson received subadvisory fees totaling $683,573 for advisory
services provided to the Emerging Opportunities Fund in 1996.
Equinox Capital Management, Inc.
(Core Equity Fund)
The chart below sets forth the name and principal occupation of the
principal executive officer and directors of Equinox Capital Management, Inc.
("Equinox"). The address for each person is 590 Madison Avenue, New York, New
York 10022.
<TABLE>
<CAPTION>
POSITION WITH
NAME EQUINOX PRINCIPAL OCCUPATION
- ---------------------- ----------------------- -------------------------------
<S> <C> <C>
Ronald J. Ulrich...... Director and President President, Equinox
Wendy D. Lee.......... Managing Director Director of Research, Equinox
David E. Walker....... Principal Research Analyst, Equinox
Laura Starr........... Vice President Research Analyst, Equinox
Jacqueline A.
Williams............ Vice President Research Analyst, Equinox
Mark W. Watson........ Vice President Research Analyst, Equinox
Kenneth S. Doerr...... Vice President Quantitative Research Analyst,
Equinox
</TABLE>
In addition, the following persons not listed above own 10% or more of
Equinox: Benner Ulrich, Adrian Ulrich, and Collier Ulrich. The address for each
of these individuals is 329 Dans Highway, New Canaan, CT 06840.
B-3
<PAGE> 36
During 1996, Equinox paid $186 in brokerage commissions to Smith Barney,
Inc., which is considered an affiliated broker because it is an affiliate of the
Manager. Those commissions represented 0.055% of the Core Equity Fund's total
brokerage commissions paid in 1996.
Equinox received subadvisory fees totaling $765,782 for advisory services
provided to the Core Equity Fund in 1996.
Equinox serves as investment adviser to one other registered investment
company with an objective similar to the Core Equity Fund. The following chart
provides relevant information.
<TABLE>
<CAPTION>
SIZE AS OF
NAME OF REGISTERED DECEMBER 31,
INVESTMENT COMPANY 1996 ADVISORY FEE RATE
- ------------------------------------------- -------------- ------------------
<S> <C> <C>
EAI Select Managers Equity Fund............ $16.2 million 0.375% of assets
</TABLE>
Western Asset Management Company
(Long-Term Bond Fund)
The chart below sets forth the name and principal occupation of the
principal executive officer and directors of Western Asset Management Company
("Western"). The address for each person is 117 East Colorado Boulevard,
Pasadena, California 91105.
<TABLE>
<CAPTION>
POSITION WITH
NAME WESTERN PRINCIPAL OCCUPATION
- ----------------------- -------------- ----------------------------------------
<S> <C> <C>
W. Curtis Livingston... Chairman of Chief Executive Officer, Western
the Board
Kent S. Engel.......... Director Chief Investment Officer, Western
Raymond A. Mason....... Director Chairman, President and Chief Executive
Officer, Legg Mason, Inc.
Edward A. Taber........ Director Senior Executive Vice President, Legg
Mason, Inc.
Elisabeth A. Spector... Director Senior Vice President, Legg Mason, Inc.
</TABLE>
Western received subadvisory fees totaling $359,244 for advisory services
provided to the Long-Term Bond Fund in 1996.
Western is a wholly-owned subsidiary of Legg Mason, Inc., 111 S. Calvert,
Baltimore, MD 21202.
Travelers Asset Management International Corporation
(Intermediate-Term Bond Fund)
The chart below sets forth the name and principal occupation of the
principal executive officer and directors of Travelers Asset Management
B-4
<PAGE> 37
International Corporation ("TAMIC"). The address for each person is One Tower
Square, Hartford, Connecticut 06183.
<TABLE>
<CAPTION>
POSITION WITH
NAME TAMIC PRINCIPAL OCCUPATION
- ------------------- ---------------------------- -----------------------------
<S> <C> <C>
Marc P. Weill...... Chairman of the Board of Chief Investment Officer, The
Directors Travelers Group
David A. Tyson..... Director, President, and Senior Vice President, The
Chief Investment Officer Travelers Group
John R. Britt...... Director and Secretary Counsel, The Travelers Group
Joseph E. Rueli.... Director, Vice President, Vice President, The Travelers
and Chief Financial Officer Group
F. Denney Voss..... Director, Senior Vice Senior Vice President, The
President Travelers Group
</TABLE>
TAMIC received subadvisory fees totaling $221,298 for advisory services
provided to the Intermediate-Term Bond Fund in 1996.
TAMIC serves as investment adviser to two other registered investment
companies with an objective similar to the Intermediate-Term Bond Fund. The
following chart provides relevant information.
<TABLE>
<CAPTION>
SIZE AS OF
NAME OF REGISTERED DECEMBER 31,
INVESTMENT COMPANY 1996 ADVISORY FEE RATE
- ------------------------------------------ --------------- ------------------
<S> <C> <C>
Travelers Quality Bond Account for
Variable Annuities...................... $169.1 million 0.3233% of assets
Travelers Quality Bond Portfolio.......... $5.2 million 0.3233% of assets
</TABLE>
TAMIC is a wholly-owned subsidiary of The Plaza Corporation, an indirect
parent of the Manager. As a result, TAMIC is an "affiliated person" (as that
term is defined in the 1940 Act) of the Manager. The address and corporate
parents of The Plaza Corporation are listed in Appendix A above.
Smith Graham & Co. Asset Managers, L.P.
(Short-Term Bond Fund)
The chart below sets forth the name and principal occupation of the
principal executive officers of Smith Graham & Co. Asset Managers, L.P.
B-5
<PAGE> 38
("Smith Graham"). The address for each person is 6900 Texas Commerce Tower, 600
Travis Street, Houston, Texas 77002-3007.
<TABLE>
<CAPTION>
POSITION WITH
NAME SMITH GRAHAM PRINCIPAL OCCUPATION
- -------------------------- ----------------- ----------------------------
<S> <C> <C>
Gerald B. Smith........... Chairman & Chief Chairman & Chief Executive
Executive Officer Officer, Smith Graham &
Company
Ladell Graham............. President & Chief Chairman & Chief Investment
Investment Officer, Smith Graham &
Officer Company
</TABLE>
Smith Graham received subadvisory fees totaling $80,698 for advisory
services provided to the Short-Term Bond Fund in 1996.
Smith Graham is organized as a limited partnership and is owned by Smith,
Graham & Company, 6900 Texas Commerce Tower, 600 Travis Street, Houston, Texas
77002, the only general partner, and Robeco Texas, Coolsingel 120, Postbus 973,
N.L. 3000 AZ, Rotterdam, The Netherlands, the only limited partner. The
principal shareholders of Smith, Graham & Company are Gerald B. Smith and Ladell
Graham, whose address is listed above. Robeco Texas is a wholly-owned subsidiary
of the Robeco Group, Coolsingel 120, NL 3011 AG, Rotterdam, The Netherlands,
which is a Netherlands corporation.
B-6
<PAGE> 39
APPENDIX C
CONDITIONS PROPOSED BY AOF AND
THE MANAGER TO THE SEC AS PART
OF THEIR APPLICATION FOR EXEMPTIVE RELIEF
As described in Proposal 2, AOF and the Manager have applied to the SEC for
an order exempting them from certain provisions of the 1940 Act in order to
permit AOF to use the authority discussed in Proposal 2. As part of that
application, AOF and the Manager have agreed to the following conditions:
1. Before any Fund may rely on the Order requested in [the] Application,
the operation of the Fund in the manner described in the Application will be
approved by a majority vote of persons having voting rights in respect of the
Fund, as defined in the 1940 Act, or, in the case of a new Fund whose prospectus
contains the disclosure contemplated by condition 2 below, by the sole initial
shareholder(s) before offering shares of such Fund to the public.
2. Any Fund relying on the requested relief will disclose in its prospectus
the existence, substance, and effect of any Order granted pursuant to the
Application.
3. The Manager will provide management and administrative services to AOF
and, subject to the review and approval by AOF's Board of Directors, will: (i)
set each Fund's overall investment strategies; (ii) evaluate, select, and
recommend subadvisers to manage all or part of a Funds's assets; (iii) allocate
and, when appropriate, reallocate each Fund's assets among subadvisers; (iv)
monitor and evaluate subadviser performance; and (vi) oversee subadviser
compliance with the applicable Fund's investment objective, policies and
restrictions.
4. A majority of the AOF Board of Directors will be persons who are not
"interested persons" (as defined in section 2(a)(19) of the 1940 Act) of AOF
("Independent Directors"), except that if this condition is not met by reason of
the death, disqualification, or bona fide resignation of any director or
directors, then the operation of this condition shall be suspended: (a) for a
period of 45 days if the vacancy or vacancies may be filled by the remaining
directors; (b) for a period of 60 days if a vote of persons having voting rights
is required to fill the vacancy or vacancies; or (c) for such longer period as
the Commission may prescribe by order upon application. In addition, the
nomination of new or additional Independent Directors will be placed within the
discretion of the then existing Independent Directors.
C-1
<PAGE> 40
5. AOF will not enter into a Subadvisory Agreement with any subadviser that
is an "affiliated person" of the Fund (as defined in section 2(a)(3) of the
Investment Company Act) ("Affiliated Subadviser") other than by reason of
serving as subadviser to one or more Funds without such Subadvisory Agreement,
including the compensation to be paid thereunder, being approved by the persons
having voting rights with respect to the applicable Fund.
6. No new Subadvisory Agreement, or modification of an existing Subadvisory
Agreement, will increase the subadviser's fee beyond the maximum fee approved by
persons having voting rights with respect to the applicable Fund, without such
agreement, including the compensation to be paid thereunder, being approved by
the persons having voting rights with respect to the applicable Fund.
7. When a subadviser change is proposed for a Fund with an Affiliated
Subadviser, the AOF Board of Directors, including a majority of the Independent
Directors, will make a separate finding, reflected in the board minutes, that
such change is in the best interests of the applicable Fund and persons having
voting rights with respect to that Fund and that such change does not involve a
conflict of interest from which the Manager or the Affiliated Subadviser derives
an inappropriate advantage.
8. No director, trustee or officer of AOF or the Manager will own directly
or indirectly (other than through a pooled investment vehicle that is not
controlled by any such director, trustee or officer) any interest in a
subadviser except for ownership of (i) interests in the Manager or any entity
that controls, is controlled by, or is under common control with the Manager, or
(ii) less than 1% of the outstanding securities of any class of equity or debt
of a publicly-traded company that is either a subadviser or an entity that
controls, is controlled by, or is under common control with a subadviser.
9. Within 90 days of the hiring of any new subadviser or the implementation
of any proposed material change in a Subadvisory Agreement, the Manager will
furnish persons having voting rights with respect to the appropriate Fund with
all information about the new subadviser or Subadvisory Agreement that would be
included in a proxy statement. Such information will include any changes caused
by the addition of a new subadviser or any proposed material change in a
Subadvisory Agreement. To meet this condition, the Manager will provide persons
having voting rights with an information statement meeting the requirements of
Regulation 14C, Schedule 14C, and Item 22 of Schedule 14A under the Securities
Exchange Act of 1934.
C-2
<PAGE> 41
APPENDIX D
The following proposed Management Agreement relates to Proposal 1.
INVESTMENT MANAGEMENT AGREEMENT
Agreement, made this 23rd day of February, 1993 between American Odyssey
Funds, Inc., a Maryland corporation (the "Series Fund"), and American Odyssey
Funds Management, Inc., a New Jersey corporation (the "Manager") and amended
effective May 1, 1997.
WHEREAS, the Series Fund is a diversified, open-end management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Series Fund is currently divided into six separate series
(each a "Fund"), each of which is established pursuant to a resolution of the
Board of Directors of the Series Fund, and the Series Fund may in the future add
additional Funds; and
WHEREAS, the Series Fund desires to retain the Manager to render, or
contract to obtain as hereinafter provided, investment advisory services to the
Series Fund and also to avail itself of the facilities available to the Manager
with respect to the administration of the Series Fund's day to day business
affairs; and
WHEREAS, the Manager is willing to render such investment advisory and
administrative services;
NOW, THEREFORE, the parties agree as follows:
1. The Series Fund hereby appoints the Manager to act as manager of the
Series Fund and administrator of its business affairs for the period and on the
terms set forth in this Agreement. The Manager accepts such appointment and
agrees to render the services described below for the compensation provided in
paragraph 9. The Manager is authorized to enter into Subadvisory agreements for
investment advisory services in connection with the management of each of the
Funds of the Series Fund (the "Subadvisory agreements"), provided that no such
contract shall be made until it has been approved by the Board of Directors of
the Series Fund and, to the extent required by the 1940 Act, ratified by the
shareholders of the Series Fund. The Series Fund shall be a party to each such
agreement. Any such agreement may be entered into by the Manager on such terms
and in such manner as may be permitted by the 1940 Act and the rules thereunder.
The Manager will continue to have supervisory responsibility for all
D-1
<PAGE> 42
investment advisory services furnished pursuant to any such Subadvisory
agreements. The Manager will review the performance of all Subadvisers,
determine the allocation of assets among the Subadvisers, and make
recommendations to the Board of Directors with respect to the retention and
renewal of such Subadvisory agreements.
2. Subject to the supervision of the Board of Directors and, subject to
paragraph 1 hereof, the Manager shall manage the operations of the Series Fund
and each Fund thereof. More particularly:
(a) The Manager, in the performance of its duties and obligations
under this Agreement, shall act in conformity with the Articles of
Incorporation, By-Laws, Prospectus, and Statement of Additional Information
of the Series Fund and with the instructions and directions of the Board of
Directors of the Series Fund and will conform to and comply with the
requirements of the 1940 Act and all other applicable federal and state
laws and regulations.
(b) The Manager will monitor the performance of each of the
Subadvisers and will be generally responsible for their activities. The
Manager shall meet periodically with each Subadviser to review and agree
upon its current investment strategies and programs in the light of
anticipated cash flows. The Manager shall periodically provide the Board of
Directors with evaluations of the performance of the Subadvisers and shall
make recommendations concerning the renewal or termination of the
Subadvisory contracts.
(c) For any Fund with more than one Subadviser, the Manager is
authorized to determine the allocation of Fund assets among the
Subadvisers.
(d) The Manager shall provide the Board of Directors of the Series
Fund such periodic and special reports as the Board may reasonably request.
(e) The Manager shall be responsible for the financial and accounting
records maintained by the Series Fund, other than those being maintained by
the Series Fund's custodian or accounting services agent.
(f) The Manager shall provide, or cause to be provided, to the Series
Fund's custodian on each business day all information relating to the
transactions in the securities owned, purchased, or sold by each Fund.
D-2
<PAGE> 43
(g) The Manager shall provide such staff assistance as the Board of
Directors of the Series Fund shall reasonably request in connection with
the conduct of meetings of the Board and otherwise.
(h) The investment management services of the Manager to the Series
Fund under this Agreement are not to be deemed exclusive, and the Manager
shall be free to render investment advisory services to others.
3. The Series Fund has delivered to the Manager copies of each of the
following documents and will deliver to it all future amendments and
supplements, if any:
(a) The Articles of Incorporation of the Series Fund, as filed with
the Secretary of State of Maryland;
(b) The By-Laws of the Series Fund;
(c) Certified resolutions of the Board of Directors of the Series Fund
authorizing the appointment of the Manager and approving the form of this
Agreement;
(d) The Notification of Registration of the Series Fund under the 1940
Act on Form N-8A as filed with the Securities and Exchange Commission (the
"Commission");
(e) The Registration Statement under the 1940 Act and the Securities
Act of 1933, as amended, on Form N-1A (the "Registration Statement"), as
filed with the Commission relating to the Series Fund and shares of the
Series Fund and all amendments thereto; and
(f) The Prospectus and Statement of Additional Information of the
Series Fund as currently in effect and as amended or supplemented from time
to time.
4. The Manager shall authorize and permit any of its directors, officers,
and employees who may be elected as members of the Board of Directors or
officers of the Series Fund to serve in the capacities in which they are
elected. All services to be furnished by the Manager under this Agreement may be
furnished through the medium of any such directors, officers, or employees of
the Manager.
5. The Manager shall keep the Series Fund's books and records required to
be maintained by it pursuant to paragraph 2 hereof. The Manager agrees that all
records which it maintains for the Series Fund are the property of the Series
Fund and it will surrender promptly to the
D-3
<PAGE> 44
Series Fund any such records upon the Series Fund's request, provided however
that the Manager may retain a copy of such records. The Manager further agrees
to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act (or any
successor provision) any such records as are required to be maintained by the
Manager pursuant to paragraph 2 hereof.
6. During the term of this Agreement, the Manager shall pay the following
expenses:
(i) the salaries and expenses of all personnel of the Series Fund and
the Manager except the fees and expenses of members of the Board of
Directors who are not interested persons of the Series Fund, as that term
is defined in the 1940 Act;
(ii) all expenses incurred by the Manager or by the Series Fund in
connection with managing the ordinary course of the Series Fund's business,
other than those stated below that will be paid by the Series Fund;
(iii) the costs and expenses payable pursuant to any Subadvisory
agreements; and
(iv) expenses incurred in connection with meetings of the Board of
Directors of the Series Fund, including such staff assistance as the Board
shall reasonably request, but not including the fees and expenses of
directors of the Series Fund who are not interested persons of the Series
Fund, as that term is defined in the 1940 Act.
7. The Fund will pay the expenses described below:
(a) the fees and expenses incurred by the Series Fund in connection
with the management of the investment and reinvestment of each Fund's
assets;
(b) brokers' commissions and any issue or transfer taxes chargeable to
the Series Fund in connection with its securities, options, and futures
transactions;
(c) the fees and expenses of directors of the Series Fund who are not
interested persons of the Series Fund, as that term is defined in the 1940
Act;
(d) the fees and expenses of the Series Fund's custodian(s) or
accounting services agent(s) that relate to (i) the custodial function and
the recordkeeping connected therewith, (ii) preparing and maintaining the
general accounting records of the Series Fund (other than those relating to
the shares and shareholder accounts of the
D-4
<PAGE> 45
Series Fund) and the providing of any such records to the Manager useful to
the Manager in connection with the Manager's responsibility for the
accounting records of the Series Fund pursuant to Section 31 of the 1940
Act and the rules promulgated thereunder, and (iii) the pricing of the
shares of the Series Fund, including the cost of any pricing service or
services which may be retained pursuant to the authorization of the
directors of the Series Fund;
(e) the charges and expenses of legal counsel and independent
accountants for the Series Fund;
(f) all taxes and corporate fees payable by the Series Fund to
federal, state, and other governmental agencies;
(g) the fees of any trade associations of which the Series Fund may be
a member;
(h) the cost of fidelity, directors and officers, and errors and
omissions insurance;
(i) the fees and expenses involved in registering and maintaining
registration of the Series Fund and of its shares with the Commission, and
qualifying its shares, to the extent required, under state securities laws,
including the preparation and printing of the Series Fund's registration
statements, prospectuses and statements of additional information for
filing under federal and state securities laws;
(j) communications expenses with respect to investor services and
expenses of preparing, printing, and mailing reports to shareholders in the
amount necessary for distribution to the shareholders;
(k) all expenses incurred in connection with the holding of
shareholder meetings; and
(l) litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of the Series Fund's business.
8. In the event the expenses of the Series Fund for any fiscal year
(including the fees payable to the Manager but excluding interest, taxes,
brokerage commissions and litigation and indemnification expenses and other
extraordinary expenses not incurred in the ordinary course of the Series Fund's
business) exceed the lowest applicable annual expense limitation established and
enforced pursuant to the statute or regulations of any jurisdictions in which
shares of the Series Fund are then qualified for offer and sale, the
compensation due the Manager will be reduced by the
D-5
<PAGE> 46
amount of such excess, and, if such reduction exceeds the compensation payable
to the Manager, the Manager will pay to the Series Fund the amount of such
reduction which exceeds the amount of such compensation.
9. For the services provided and the expenses assumed pursuant to this
Agreement, the Series Fund will pay to the Manager as full compensation therefor
a fee at the annual rate or rates of each Fund's average daily net assets set
forth below. This fee will be computed daily and will be paid to the Manager
monthly as of the first business day of the next succeeding calendar month. Any
reduction in the fee payable and any payment by the Manager to the Fund pursuant
to paragraph 8 shall be made monthly. Any such reductions or payments are
subject to readjustment during the year.
<TABLE>
<CAPTION>
ANNUAL RATE AS A
PERCENTAGE OF ANNUAL RATE AS A
AVERAGE DAILY PERCENTAGE OF
NET ASSETS UP TO AVERAGE DAILY
AND INCLUDING NET ASSETS OVER
FUND $100 MILLION $100 MILLION
- --------------------------------------- ---------------- ----------------
<S> <C> <C>
American Odyssey Core Equity Fund...... 0.60% 0.55%
American Odyssey Short-Term Bond
Fund................................. 0.50% 0.40%
</TABLE>
* * * *
<TABLE>
<S> <C> <C>
American Odyssey Emerging
Opportunities Fund: -- annual rate of 0.75% as a percentage
of average daily net assets allocated
to Cowen & Co. up to and including
$50 million; plus
-- annual rate of 0.70% as a percentage
of average daily net assets allocated
to Cowen & Co. over $50 million and
up to and including $100 million;
plus
-- annual rate of 0.65% as a percentage
of average daily net assets allocated
to Cowen & Co. over $100 million;
plus
-- annual rate of 0.65% as a percentage
of average daily net assets allocated
to Wilke/Thompson Capital Management,
Inc. ("Wilke/Thompson") up to and
including $100 million; plus
-- annual rate of 0.55% as a percentage
of average daily net assets allocated
to Wilke/Thompson over $100 million.
American Odyssey
International Equity Fund: -- annual rate of 0.70% as a percentage
of average daily net assets up to and
including $50 million; plus
</TABLE>
D-6
<PAGE> 47
<TABLE>
<S> <C> <C>
-- annual rate of 0.65% as a percentage
of average daily net assets over $50
million and up to and including $100
million; plus
-- annual rate of 0.55% as a percentage
of daily net assets over $100
million.
American Odyssey Long-Term
Bond Fund: -- annual rate of 0.50% as a percentage
of average daily net assets up to and
including $250 million; plus
-- annual rate of 0.40% as a percentage
of average daily net assets over $250
million.
American Odyssey
Intermediate-Term Bond Fund -- annual rate of 0.50% as a percentage
of average daily net assets up to and
including $100 million; plus
-- annual rate of 0.45% as a percentage
of average daily net assets over $100
million and up to and including $200
million; plus
-- annual rate of 0.40% as a percentage
of average daily net assets over $200
million.
</TABLE>
10. The Manager shall not be liable for any loss suffered by the Series
Fund as the result of any negligent act or error of judgment of the Manager in
connection with the matters to which this Agreement relates, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages shall be limited
to the period and the amount set forth in Section 36(b)(3) of the 1940 Act) or
loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. The Series Fund shall indemnify the
Manager and hold it harmless from all cost, damage and expense, including
reasonable expenses for legal counsel, incurred by the Manager resulting from
actions for which it is relieved of responsibility by this paragraph. The
Manager shall indemnify the Series Fund and hold it harmless from all cost,
damage and expense, including reasonable expenses for legal counsel, incurred by
the Series Fund resulting from actions for which the Manager is not relieved of
responsibility by this paragraph.
11. The words "American Odyssey" and the design set forth in Appendix A
hereto (the "Design") are service marks of the Manager. The Manager hereby
grants to the Series Fund a license to use the words "American Odyssey" in the
Series Fund's corporate name, "American Odyssey Funds, Inc.," and a license to
use the words "American Odyssey" and the Design in connection with the Series
Fund's operations as an
D-7
<PAGE> 48
investment company. This license is granted on a royalty-free basis. The Manager
retains the right to use, or license the use of, the words "American Odyssey"
and any derivative thereof, as well as the Design, in connection with any other
business enterprise. If the holders of the outstanding voting securities of any
Fund fail to approve this Agreement, or if at any time after such approval the
Manager ceases to be investment manager of any Fund, the Manager shall have the
absolute right to terminate the license herein granted forthwith upon written
notice to the Series Fund. Upon termination of the license herein granted, the
Series Fund shall immediately change its corporate name to one which does not
include the words "American Odyssey" or any derivative thereof, and will
discontinue all use by it of the words "American Odyssey," the Design or
anything resembling the Design, in connection with its business. The terms of
the license herein granted shall inure to the benefit of and be binding upon any
successors or assigns of the Series Fund or the Manager.
12. This Agreement shall continue in effect for a period of more than two
years from the date hereof only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the 1940 Act;
provided, however, that this Agreement may be terminated by the Series Fund
without the payment of any penalty, by the Board of Directors of the Series Fund
or by vote of a majority of the Series Fund's outstanding voting securities (as
defined in the 1940 Act), or by the Manager at any time, without the payment of
any penalty, on not more than 60 days' nor less than 30 days' written notice to
the other party. This Agreement shall terminate automatically in the event of
its assignment (as defined in the 1940 Act).
13. Nothing in this Agreement shall limit or restrict the right of any
director, officer, or employee of the Manager who may also be a director,
officer, or employee of the Series Fund to engage in any other business or to
devote his or her time and attention in part to the management or other aspects
of any business, whether of a similar or dissimilar nature, nor limit or
restrict the right of the Manager to engage in any other business or to render
services of any kind to any other corporation, firm, individual, or association.
14. Except as otherwise provided herein or authorized by the Board of
Directors of the Series Fund from time to time, the Manager shall for all
purposes herein be deemed to be an independent contractor and shall have no
authority to act for or represent the Series Fund in any way or otherwise be
deemed an agent of the Series Fund.
D-8
<PAGE> 49
15. During the term of this Agreement, the Series Fund agrees to furnish
the Manager at its principal office all prospectuses, proxy statements, reports
to shareholders, sales literature, or other material prepared for distribution
to shareholders of the Series Fund or the public, which refer in any way to the
Manager, prior to use thereof and not to use such material if the Manager
reasonably objects in writing within five business days (or such other time as
may be mutually agreed) after receipt thereof. In the event of termination of
this Agreement, the Series Fund will continue to furnish to the Manager copies
of any of the above mentioned materials which refer in any way to the Manager.
Sales literature may be furnished to the Manager hereunder by first class mail,
overnight delivery service, facsimile transmission equipment, or hand delivery.
The Series Fund shall furnish or otherwise make available to the Manager such
other information relating to the business affairs of the Series Fund as the
Manager at any time, or from time to time, reasonably requests in order to
discharge its obligations hereunder.
16. This Agreement may be amended by mutual consent, but the consent of the
Series Fund must be obtained in conformity with the requirements of the 1940
Act.
17. Any notice or other communication required to be given pursuant to this
Agreement shall be deemed duly given if delivered or mailed by certified or
registered mail, return receipt requested and postage prepaid, (1) to American
Odyssey Funds Management, Inc. at Two Tower Center, East Brunswick, NJ 08816,
Attention: Secretary; or (2) to American Odyssey Funds, Inc. at Two Tower
Center, East Brunswick, NJ 08816, Attention: President.
18. This Agreement shall be governed by and construed in accordance with
the laws of the State of New Jersey.
19. This Agreement may be executed in two or more counterparts, which taken
together shall constitute one and the same instrument.
D-9
<PAGE> 50
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
<TABLE>
<S> <C> <C>
AMERICAN ODYSSEY FUNDS, INC.
- ---------------------------- By: ----------------------------
Witness
AMERICAN ODYSSEY FUNDS
MANAGEMENT, INC.
- ---------------------------- By: ----------------------------
Witness
</TABLE>
D-10
<PAGE> 51
APPENDIX E
The following proposed Subadvisory Agreements relate to Proposal 1.
INVESTMENT SUBADVISORY AGREEMENT
[Bracketed material appears in Cowen Agreement.]
Underlined material appears in Wilke/Thompson Agreement.
Agreement made as of this 1st day of May, 1997, between American Odyssey
Funds, Inc., a Maryland corporation (the "Series Fund"), American Odyssey Funds
Management, Inc., a New Jersey corporation (the "Manager"), and [Cowen & Co, a
partnership, doing business as Cowen Asset Management] Wilke/Thompson Capital
Management, Inc., a Minnesota corporation (the "Subadviser"). This Agreement
supersedes the Investment Subadvisory Agreement among the parties dated February
23, 1993.
WHEREAS, American Odyssey Funds Management, Inc. has entered into a
management agreement (the "Management Agreement") with the Series Fund, a
diversified open-end management investment company registered under the
Investment Company Act of 1940 (the "1940 Act"), pursuant to which American
Odyssey Funds Management, Inc. will act as Manager of the Series Fund.
WHEREAS, the Series Fund is currently divided into six separate series or
funds, each of which is established pursuant to a resolution of the Board of
Directors of the Series Fund, and the Series Fund may in the future add
additional Funds; and
WHEREAS, the Manager has the responsibility of evaluating, recommending,
supervising, and compensating investment advisers to each Fund and desires to
retain the Subadviser to provide investment advisory services to the Odyssey
Emerging Opportunities Fund (the "Fund") in connection with its management and
the Subadviser is willing to render such investment advisory services.
NOW, THEREFORE, the parties agree as follows:
1. (a) The Subadviser shall manage the investment operations of the assets
of the Fund allocated by the Manager to the Subadviser (such assets referred to
as the "Allocated Assets"), including the purchase, retention and disposition of
portfolio investments, in accordance with (A) the Fund's investment objectives,
policies, and restrictions, as set forth in the Fund's Articles of
Incorporation, Bylaws, Registration Statement, Prospectus and
E-1
<PAGE> 52
Statement of Additional Information (as the same may from time to time be
amended or supplemented) (collectively, the "Investment Policies"), and (B) any
investment procedures and policies adopted from time to time by the Series
Fund's Board of Directors, including, but not limited to, procedures and
policies designed to ensure compliance with Rules 10f-3 and 17e-1 under the 1940
Act, a code of ethics pursuant to Rule 17j-1 under the 1940 Act, and guidelines
governing repurchase agreements, securities lending and valuation of illiquid
securities, all as the same may be in effect from time to time (collectively,
the "Procedures"); provided, however, that the Subadviser shall not be
responsible for complying with any Investment Policies or Procedures, or any
amendments thereto, that the Manager did not provide in writing to the
Subadviser. Additionally, the Subadviser and the Manager agree to exercise their
respective best efforts to cooperate with each other to identify all other laws,
rules and regulations applicable to the Fund (including, to the extent not
covered in clauses (A) and (B) of this paragraph, provisions and requirements of
the 1940 Act, the Internal Revenue Code of 1986 and other applicable federal and
state laws and regulations) ("Rules and Regulations"), and the Subadviser shall
manage the investment operations of the Allocated Assets in accordance with any
of such identified Rules and Regulations. The Subadviser's duties and
responsibilities under this Agreement shall be further subject to the following
understandings:
(i) The Subadviser shall meet periodically with the Manager and shall
agree upon the current investment strategy for the Allocated Assets in the
light of anticipated cash flows.
(ii) The Subadviser shall provide supervision of the Allocated Asset's
investments and determine from time to time what securities, options,
futures contracts, and other investments included in the Allocated Assets
will be purchased, retained, sold, or loaned by the Fund, and what portion
of the Allocated Assets will be invested or held uninvested as cash.
(iii) In the performance of its duties and obligations under this
Agreement, the Subadviser shall act in conformity with any written
instructions and directions of the Manager and of the Board of Directors of
the Series Fund.
(iv) The Subadviser shall determine each day the securities, options,
futures contracts, and other investments to be purchased or sold as part of
the Allocated Assets, and the Subadviser will place orders with or through
such persons, brokers, dealers, or futures commission merchants (including
but not limited to persons affiliated
E-2
<PAGE> 53
with the Manager) to carry out the Fund's Investment Policies and
Procedures with respect to brokerage. In providing the Fund with investment
advice and management, the Subadviser will give primary consideration to
securing the most favorable price and efficient execution. Within the
framework of this policy, the Subadviser may consider such factors as the
price of the security, the rate of the commission, the size and difficulty
of the order, the reliability, integrity, financial condition, general
execution and operational capabilities of competing broker-dealers and
futures commission merchants, and the brokerage and research services they
provide to the Subadviser or the Fund. The parties agree that it is
desirable for the Fund that the Subadviser have access to supplemental
investment and market research and security and economic analysis that
certain brokers or futures commission merchants are able to provide and
that such brokers and futures commission merchants may occasionally execute
brokerage transactions at a higher cost to the Fund than would result if
orders to execute such transactions had been placed with other brokers on
the sole basis of ability to obtain the most favorable price and efficient
execution. Therefore, the Subadviser is authorized to place orders for the
purchase and sale of securities, options, futures contracts, and other
investments for the Fund with such brokers or futures commission merchants,
subject to review by the Manager and the Series Fund's Board of Directors
from time to time with respect to the extent and continuation of this
practice. The Series Fund acknowledges that the services provided by such
brokers or futures commission merchants may be useful to the Subadviser in
connection with the Subadviser's services to other clients.
When the Subadviser deems the purchase or sale of a security, option,
futures contract, or other investment to be in the best interest of the
Fund as well as other clients of the Subadviser, the Subadviser, to the
extent permitted by applicable laws and regulations, may, but shall be
under no obligation to, aggregate the securities, options, futures
contracts, or other investments to be sold or purchased in order to obtain
the most favorable price or lower brokerage commissions and efficient
execution and to allocate the shares purchased or sold among the Series
Fund and the Subadviser's other clients on a fair and nondiscriminatory
basis, in a manner consistent with the Subadviser's fiduciary obligations
to the Fund and to such other clients.
(v) The Subadviser shall maintain all books and records with respect
to the portfolio transactions of the Allocated Assets required by
subparagraphs (b)(5), (6), (7), (9), (10) and (11) and para-
E-3
<PAGE> 54
graph (f) of Rule 31a-1 under the 1940 Act and by Rule 17e-1(c)(2) under
the 1940 Act (or successor provisions) and shall render to the Series Fund
such periodic and special reports as its Board of Directors or the Manager
may reasonably request.
(vi) The Subadviser shall provide the Series Fund's custodian on each
business day with information relating to all transactions concerning the
Allocated Assets and shall provide the Manager with such information upon
request of the Manager.
(vii) The investment management services provided by the Subadviser
hereunder are not exclusive, and the Subadviser shall be free to render
similar services to others; provided, however, that the Subadviser agrees
that neither it nor any of its affiliated persons (as defined in the 1940
Act) shall serve or accept retention as investment adviser, investment
manager, or similar service provider during the term of this Agreement and,
if this Agreement is terminated by the Subadviser, for the period of one
year after the termination of this Agreement, with or for the benefit of
any investment company registered under the 1940 Act that seeks as a
primary purchaser of its shares, either by direct purchase of its shares or
by indirect purchase of its shares through sales of variable contracts,
persons who are eligible to participate in an investment advisory asset
allocation program similar in nature to that offered by the Manager's
affiliated company, Copeland Financial Services, Inc., it being understood
and agreed that an investment company with asset allocation as its own
investment objective (commonly called a balanced fund) shall not be subject
to the foregoing restriction.
(b) Services to be furnished by the Subadviser under this Agreement may be
furnished through the medium of any of its directors, officers, or employees.
(c) The Subadviser shall keep the books and records with respect to the
Allocated Assets required to be maintained by the Subadviser pursuant to
paragraph 1(a)(v) hereof and shall timely furnish to the Manager or the Series
Fund's custodian all information relating to the Subadviser's services hereunder
needed to keep the other books and records of the Fund required by Rules
17e-1(c)(2) and 31a-1 under the 1940 Act (or successor provisions). The
Subadviser agrees that all records which it maintains for the Fund are the
property of the Fund and the Subadviser will surrender promptly to the Fund any
of such records upon the Fund's request, provided however that the Subadviser
may retain a copy of such records. The Subadviser further agrees to preserve for
the periods prescribed by
E-4
<PAGE> 55
Rules 17e-1(c)(2) and 31a-2 under the 1940 Act (or successor provisions) any
such records as are required to be maintained by it pursuant to paragraph
1(a) hereof.
(d) The Subadviser agrees to maintain adequate compliance procedures to
ensure its compliance with the 1940 Act, the Investment Advisers Act of 1940
(the "Advisers Act"), and other applicable state and federal laws and
regulations.
(e) The Subadviser shall furnish to the Manager copies of all records
prepared in connection with (i) the performance of this Agreement and (ii) the
maintenance of compliance procedures pursuant to paragraph 1(d) hereof as the
Manager may reasonably request.
(f) The Subadviser agrees to provide upon reasonable request of the Manager
or the Series Fund, information regarding the Subadviser, including but not
limited to background information about the Subadviser and its personnel and
performance data, for use in connection with efforts to promote the Series Fund
and the sale of its shares.
2. The Manager shall continue to have responsibility for all services to be
provided to the Fund pursuant to the Management Agreement and shall oversee and
review the Subadviser's performance of its duties under this Agreement.
3. The Manager shall compensate the Subadviser, for the services provided
and the expenses assumed pursuant to this Subadvisory Agreement, a fee at an
annual rate of [0.50% of the average daily Net Allocated Assets up to and
including $50 million, plus a fee at an annual rate of 0.45% of the average
daily Net Allocated Assets over $50 million and up to and including $100
million, plus a fee at an annual rate of 0.40% of the average daily Net
Allocated Assets over $100 million.] 0.40% of the average daily Net Allocated
Assets up to and including $100 million, plus a fee at an annual rate of 0.30%
of the average daily Net Allocated Assets over $100 million. The term "Net
Allocated Assets" means the Allocated Assets less related liabilities as
determined by the Manager or its designee. This fee will be computed daily and
paid monthly.
4. The Subadviser shall not be liable for any loss suffered by the Series
Fund or the Manager as a result of any negligent act or error of judgment of the
Subadviser in connection with the matters to which this Agreement relates,
except a loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services (in which case any award of damages shall
be limited to the period and the amount set forth in Section 36(b)(3) of the
1940 Act) or loss resulting from willful misfea-
E-5
<PAGE> 56
sance, bad faith or gross negligence on the Subadviser's part in the performance
of its duties or from its reckless disregard of its obligations and duties under
this Agreement. The Series Fund shall indemnify the Subadviser and hold it
harmless from all cost, damage and expense, including reasonable expenses for
legal counsel, incurred by the Subadviser resulting from actions from which it
is relieved of responsibility by this paragraph. The Subadviser shall indemnify
the Series Fund and the Manager and hold them harmless from all cost, damage and
expense, including reasonable expenses for legal counsel, incurred by the Series
Fund and the Manager resulting from actions from which the Subadviser is not
relieved of responsibility by this paragraph.
5. This Agreement shall continue in effect for a period of more than two
years from the date hereof only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the 1940 Act;
provided, however, that this Agreement may be terminated by the Fund at any
time, without the payment of any penalty, by the Board of Directors of the
Series Fund or by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund, or by the Manager or the Subadviser at any
time, without the payment of any penalty, on not more than 60 days' nor less
than 30 days' written notice to the other party. This Agreement shall terminate
automatically in the event of its assignment (as defined in the 1940 Act) or
upon the termination of the Management Agreement.
6. Nothing in this Agreement shall limit or restrict the right of any of
the Subadviser's directors, officers, or employees to engage in any other
business or to devote his or her time and attention in part to the management or
other aspects of any business, whether of a similar or dissimilar nature, nor
limit the Subadviser's right to engage in any other business or to render
services of any kind to any other corporation, firm, individual, or association,
except as described in Paragraph 1(a)(vii) above.
7. During the term of this Agreement, the Manager agrees to furnish the
Subadviser at its principal office all prospectuses, proxy statements, reports
to shareholders, sales literature or other material prepared for distribution to
shareholders of the Fund or the public, which refer to the Subadviser in any
way, prior to use thereof and not to use material if the Subadviser reasonably
objects in writing five business days (or such other time as may be mutually
agreed) after receipt thereof. Sales literature may be furnished to the
Subadviser hereunder by first class mail, overnight delivery service, facsimile
transmission equipment, or hand delivery.
E-6
<PAGE> 57
8. This Agreement may be amended by mutual consent, but the consent of the
Series Fund must be obtained in conformity with the requirements of the 1940
Act.
9. Any notice or other communication required to be given pursuant to this
Agreement shall be deemed duly given if delivered or mailed by certified or
registered mail, return receipt requested and postage prepaid, (1) to the
American Odyssey Funds, Inc. at Two Tower Center, East Brunswick, NJ 08816,
Attention: President; (2) to American Odyssey Funds Management, Inc. at Two
Tower Center, East Brunswick, NJ 08816, Attention: Secretary; or (3) to [Cowen &
Co. at Financial Square, New York, New York 10005,] Wilke/Thompson Capital
Management, Inc. at 3800 Norwest Center, 90 South 7th Street, Minneapolis,
Minnesota 55402, Attention: President.
10. This Agreement shall be governed by the laws of the State of New
Jersey.
11. This Agreement may be executed in two or more counterparts, which taken
together shall constitute one and the same instrument.
E-7
<PAGE> 58
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
<TABLE>
<S> <C> <C>
AMERICAN ODYSSEY FUNDS, INC.
- ----------------------------- By: -----------------------------
Witness
AMERICAN ODYSSEY FUNDS
MANAGEMENT, INC.
- ----------------------------- By: -----------------------------
Witness
[COWEN & CO.]
WILKE/THOMPSON CAPITAL
MANAGEMENT, INC.
- ----------------------------- By: -----------------------------
Witness
</TABLE>
E-8
<PAGE> 59
APPENDIX F
The following proposed Management Agreement relates to Proposal 2.
INVESTMENT MANAGEMENT AGREEMENT
Agreement, made this day of , 1997 between American Odyssey
Funds, Inc., a Maryland corporation (the "Series Fund"), and American Odyssey
Funds Management, Inc., a New Jersey corporation (the "Manager").
WHEREAS, the Series Fund is a diversified, open-end management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Series Fund is currently divided into six separate series
(each a "Fund"), each of which is established pursuant to a resolution of the
Board of Directors of the Series Fund, and the Series Fund may in the future add
additional Funds; and
WHEREAS, the Series Fund desires to retain the Manager to render, or
contract to obtain as hereinafter provided, investment advisory services to the
Series Fund and also to avail itself of the facilities available to the Manager
with respect to the administration of the Series Fund's day to day business
affairs; and
WHEREAS, the Manager is willing to render such investment advisory and
administrative services;
NOW, THEREFORE, the parties agree as follows:
1. The Series Fund hereby appoints the Manager to act as manager of the
Series Fund and administrator of its business affairs for the period and on the
terms set forth in this Agreement. The Manager accepts such appointment and
agrees to render the services described below for the compensation provided in
paragraph 9. The Manager is authorized to enter into Subadvisory agreements for
investment advisory services in connection with the management of each of the
Funds of the Series Fund (the "Subadvisory agreements"), provided that no such
contract shall be made until it has been approved by the Board of Directors of
the Series Fund. The Series Fund shall be a party to each such agreement. Any
such agreement may be entered into by the Manager on such terms and in such
manner as may be permitted by paragraph 9(b) and by the 1940 Act and the rules
thereunder (subject to any applicable exemptions). The Manager will continue to
have supervisory responsibility for all investment advisory
F-1
<PAGE> 60
services furnished pursuant to any such Subadvisory agreements. The
Manager will review the performance of all Subadvisers, determine the allocation
of assets among the Subadvisers, and make recommendations to the Board of
Directors with respect to the retention and renewal of such Subadvisory
agreements.
2. Subject to the supervision of the Board of Directors and, subject to
paragraph 1 hereof, the Manager shall manage the operations of the Series Fund
and each Fund thereof. More particularly:
(a) The Manager, in the performance of its duties and obligations
under this Agreement, shall act in conformity with the Articles of
Incorporation, By-Laws, Prospectus, and Statement of Additional Information
of the Series Fund and with the instructions and directions of the Board of
Directors of the Series Fund and will conform to and comply with the
requirements of the 1940 Act and all other applicable federal and state
laws and regulations.
(b) The Manager will monitor the performance of each of the
Subadvisers and will be generally responsible for their activities. The
Manager shall meet periodically with each Subadviser to review and agree
upon its current investment strategies and programs in the light of
anticipated cash flows. The Manager shall periodically provide the Board of
Directors with evaluations of the performance of the Subadvisers and shall
make recommendations concerning the renewal or termination of the
Subadvisory contracts.
(c) For any Fund with more than one Subadviser, the Manager is
authorized to determine the allocation of Fund assets among the
Subadvisers.
(d) The Manager shall provide the Board of Directors of the Series
Fund such periodic and special reports as the Board may reasonably request.
(e) The Manager shall be responsible for the financial and accounting
records maintained by the Series Fund, other than those being maintained by
the Series Fund's custodian or accounting services agent.
(f) The Manager shall provide, or cause to be provided, to the Series
Fund's custodian on each business day all information relating to the
transactions in the securities owned, purchased, or sold by each Fund.
F-2
<PAGE> 61
(g) The Manager shall provide such staff assistance as the Board of
Directors of the Series Fund shall reasonably request in connection with
the conduct of meetings of the Board and otherwise.
(h) The investment management services of the Manager to the Series
Fund under this Agreement are not to be deemed exclusive, and the Manager
shall be free to render investment advisory services to others.
3. The Series Fund has delivered to the Manager copies of each of the
following documents and will deliver to it all future amendments and
supplements, if any:
(a) The Articles of Incorporation of the Series Fund, as filed with
the Secretary of State of Maryland;
(b) The By-Laws of the Series Fund;
(c) Certified resolutions of the Board of Directors of the Series Fund
authorizing the appointment of the Manager and approving the form of this
Agreement;
(d) The Notification of Registration of the Series Fund under the 1940
Act on Form N-8A as filed with the Securities and Exchange Commission (the
"Commission");
(e) The Registration Statement under the 1940 Act and the Securities
Act of 1933, as amended, on Form N-1A (the "Registration Statement"), as
filed with the Commission relating to the Series Fund and shares of the
Series Fund and all amendments thereto; and
(f) The Prospectus and Statement of Additional Information of the
Series Fund as currently in effect and as amended or supplemented from time
to time.
4. The Manager shall authorize and permit any of its directors, officers,
and employees who may be elected as members of the Board of Directors or
officers of the Series Fund to serve in the capacities in which they are
elected. All services to be furnished by the Manager under this Agreement may be
furnished through the medium of any such directors, officers, or employees of
the Manager.
5. The Manager shall keep the Series Fund's books and records required to
be maintained by it pursuant to paragraph 2 hereof. The Manager agrees that all
records which it maintains for the Series Fund are the property of the Series
Fund and it will surrender promptly to the
F-3
<PAGE> 62
Series Fund any such records upon the Series Fund's request, provided however
that the Manager may retain a copy of such records. The Manager further agrees
to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act (or any
successor provision) any such records as are required to be maintained by the
Manager pursuant to paragraph 2 hereof.
6. During the term of this Agreement, the Manager shall pay the following
expenses:
(i) the salaries and expenses of all personnel of the Series Fund and
the Manager except the fees and expenses of members of the Board of
Directors who are not interested persons of the Series Fund, as that term
is defined in the 1940 Act;
(ii) all expenses incurred by the Manager or by the Series Fund in
connection with managing the ordinary course of the Series Fund's business,
other than those stated below that will be paid by the Series Fund; and
(iii) expenses incurred in connection with meetings of the Board of
Directors of the Series Fund, including such staff assistance as the Board
shall reasonably request, but not including the fees and expenses of
directors of the Series Fund who are not interested persons of the Series
Fund, as that term is defined in the 1940 Act.
7. The Series Fund will pay the expenses described below:
(a) the fees and expenses incurred by the Series Fund in connection
with the management of the investment and reinvestment of each Fund's
assets, including the fees described in paragraph 9;
(b) brokers' commissions and any issue or transfer taxes chargeable to
the Series Fund in connection with its securities, options, and futures
transactions;
(c) the fees and expenses of directors of the Series Fund who are not
interested persons of the Series Fund, as that term is defined in the 1940
Act;
(d) the fees and expenses of the Series Fund's custodian(s) or
accounting services agent(s) that relate to (i) the custodial function and
the recordkeeping connected therewith, (ii) preparing and maintaining the
general accounting records of the Series Fund (other than those relating to
the shares and shareholder accounts of the Series Fund) and the providing
of any such records to the Manager useful to the Manager in connection with
the Manager's responsibility
F-4
<PAGE> 63
for the accounting records of the Series Fund pursuant to Section 31 of the
1940 Act and the rules promulgated thereunder, and (iii) the pricing of the
shares of the Series Fund, including the cost of any pricing service or
services which may be retained pursuant to the authorization of the
directors of the Series Fund;
(e) the charges and expenses of legal counsel and independent
accountants for the Series Fund;
(f) all taxes and corporate fees payable by the Series Fund to
federal, state, and other governmental agencies;
(g) the fees of any trade associations of which the Series Fund may be
a member;
(h) the cost of fidelity, directors and officers, and errors and
omissions insurance;
(i) the fees and expenses involved in registering and maintaining
registration of the Series Fund and of its shares with the Commission, and
qualifying its shares, to the extent required, under state securities laws,
including the preparation and printing of the Series Fund's registration
statements, prospectuses and statements of additional information for
filing under federal and state securities laws;
(j) communications expenses with respect to investor services and
expenses of preparing, printing, and mailing reports to shareholders in the
amount necessary for distribution to the shareholders;
(k) all expenses incurred in connection with the holding of
shareholder meetings; and
(l) litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of the Series Fund's business.
8. In the event the expenses of the Series Fund for any fiscal year
(including the fees payable to the Manager but excluding interest, taxes,
brokerage commissions and litigation and indemnification expenses and other
extraordinary expenses not incurred in the ordinary course of the Series Fund's
business) exceed the lowest applicable annual expense limitation established and
enforced pursuant to the statute or regulations of any jurisdictions in which
shares of the Series Fund are then qualified for offer and sale, the
compensation due the Manager will be reduced by the amount of such excess, and,
if such reduction exceeds the compensation
F-5
<PAGE> 64
payable to the Manager, the Manager will pay to the Series Fund the amount of
such reduction which exceeds the amount of such compensation.
9. (a) For the services provided and the expenses assumed pursuant to this
Agreement, the Series Fund shall pay to the Manager as full compensation
therefor a fee at an annual rate of 0.25% of each Fund's average daily net
assets. The fee shall be computed daily and shall be paid to the Manager monthly
as of the first business day of the next succeeding calendar month. Any
reduction in the fee payable and any payment by the Manager to the Fund pursuant
to paragraph 8 shall be made monthly. Any such reductions or payments are
subject to readjustment during the year. The Series Fund shall pay the fee
described in this subparagraph (a) in addition to the subadvisory fees the
Series Fund pays pursuant to subparagraph (b).
(b) The Series Fund shall pay to each subadviser the fee set forth in the
respective subadvisory agreement, which shall specify a fee rate or rates based
upon the average daily net assets allocated to that subadviser; provided,
however, that the annual fee rate for a subadviser shall not exceed the maximum
annual fee rates specified below:
<TABLE>
<CAPTION>
MAXIMUM ANNUAL SUBADVISER
FEE RATE AS A PERCENTAGE
OF AVERAGE DAILY NET
ASSETS ALLOCATED TO THE
FUND SUBADVISER
- ----------------------------------------- -------------------------
<S> <C>
American Odyssey Core Equity Fund........ 0.45%
American Odyssey Emerging
Opportunities Fund..................... 0.60%
American Odyssey Short-Term Bond Fund.... 0.35%
American Odyssey International Equity
Fund................................... 0.55%
American Odyssey Long-Term Bond Fund..... 0.35%
American Odyssey Intermediate-Term Bond
Fund................................... 0.35%
</TABLE>
10. The Manager shall not be liable for any loss suffered by the Series
Fund as the result of any negligent act or error of judgment of the Manager in
connection with the matters to which this Agreement relates, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages shall be limited
to the period and the amount set forth in Section 36(b)(3) of the 1940 Act) or
loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. The Series Fund shall indemnify the
Manager and hold it harmless from all
F-6
<PAGE> 65
cost, damage and expense, including reasonable expenses for legal counsel,
incurred by the Manager resulting from actions for which it is relieved of
responsibility by this paragraph. The Manager shall indemnify the Series Fund
and hold it harmless from all cost, damage and expense, including reasonable
expenses for legal counsel, incurred by the Series Fund resulting from actions
for which the Manager is not relieved of responsibility by this paragraph.
11. The words "American Odyssey" and the design set forth in Appendix A
hereto (the "Design") are service marks of the Manager. The Manager hereby
grants to the Series Fund a license to use the words "American Odyssey" in the
Series Fund's corporate name, "American Odyssey Funds, Inc.," and a license to
use the words "American Odyssey" and the Design in connection with the Series
Fund's operations as an investment company. This license is granted on a
royalty-free basis. The Manager retains the right to use, or license the use of,
the words "American Odyssey" and any derivative thereof, as well as the Design,
in connection with any other business enterprise. If the holders of the
outstanding voting securities of any Fund fail to approve this Agreement, or if
at any time after such approval the Manager ceases to be investment manager of
any Fund, the Manager shall have the absolute right to terminate the license
herein granted forthwith upon written notice to the Series Fund. Upon
termination of the license herein granted, the Series Fund shall immediately
change its corporate name to one which does not include the words "American
Odyssey" or any derivative thereof, and will discontinue all use by it of the
words "American Odyssey," the Design or anything resembling the Design, in
connection with its business. The terms of the license herein granted shall
inure to the benefit of and be binding upon any successors or assigns of the
Series Fund or the Manager.
12. This Agreement shall continue in effect for a period of more than two
years from the date hereof only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the 1940 Act;
provided, however, that this Agreement may be terminated by the Series Fund
without the payment of any penalty, by the Board of Directors of the Series Fund
or by vote of a majority of the Series Fund's outstanding voting securities (as
defined in the 1940 Act), or by the Manager at any time, without the payment of
any penalty, on not more than 60 days' nor less than 30 days' written notice to
the other party. This Agreement shall terminate automatically in the event of
its assignment (as defined in the 1940 Act).
F-7
<PAGE> 66
13. Nothing in this Agreement shall limit or restrict the right of any
director, officer, or employee of the Manager who may also be a director,
officer, or employee of the Series Fund to engage in any other business or to
devote his or her time and attention in part to the management or other aspects
of any business, whether of a similar or dissimilar nature, nor limit or
restrict the right of the Manager to engage in any other business or to render
services of any kind to any other corporation, firm, individual, or association.
14. Except as otherwise provided herein or authorized by the Board of
Directors of the Series Fund from time to time, the Manager shall for all
purposes herein be deemed to be an independent contractor and shall have no
authority to act for or represent the Series Fund in any way or otherwise be
deemed an agent of the Series Fund.
15. During the term of this Agreement, the Series Fund agrees to furnish
the Manager at its principal office all prospectuses, proxy statements, reports
to shareholders, sales literature, or other material prepared for distribution
to shareholders of the Series Fund or the public, which refer in any way to the
Manager, prior to use thereof and not to use such material if the Manager
reasonably objects in writing within five business days (or such other time as
may be mutually agreed) after receipt thereof. In the event of termination of
this Agreement, the Series Fund will continue to furnish to the Manager copies
of any of the above mentioned materials which refer in any way to the Manager.
Sales literature may be furnished to the Manager hereunder by first class mail,
overnight delivery service, facsimile transmission equipment, or hand delivery.
The Series Fund shall furnish or otherwise make available to the Manager such
other information relating to the business affairs of the Series Fund as the
Manager at any time, or from time to time, reasonably requests in order to
discharge its obligations hereunder.
16. This Agreement may be amended by mutual consent, but the consent of the
Series Fund must be obtained in conformity with the requirements of the 1940
Act.
17. Any notice or other communication required to be given pursuant to this
Agreement shall be deemed duly given if delivered or mailed by certified or
registered mail, return receipt requested and postage prepaid, (1) to American
Odyssey Funds Management, Inc. at Two Tower Center, East Brunswick, NJ 08816,
Attention: Secretary; or (2) to American Odyssey Funds, Inc. at Two Tower
Center, East Brunswick, NJ 08816, Attention: President.
F-8
<PAGE> 67
18. This Agreement shall be governed by and construed in accordance with
the laws of the State of New Jersey.
19. This Agreement may be executed in two or more counterparts, which taken
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
<TABLE>
<S> <C> <C>
AMERICAN ODYSSEY FUNDS, INC.
- ---------------------------- By: ----------------------------
Witness
AMERICAN ODYSSEY FUNDS
MANAGEMENT, INC.
- ---------------------------- By: ----------------------------
Witness
</TABLE>
F-9
<PAGE> 68
(This page intentionally left blank)
<PAGE> 69
APPENDIX G
The following proposed Subadvisory Agreements relate to Proposal 2.
Identifying information specific to each subadviser has been omitted.
INVESTMENT SUBADVISORY AGREEMENT
Agreement made as of this day of , 199 , among American Odyssey
Funds, Inc., a Maryland corporation (the "Series Fund"), American Odyssey Funds
Management, Inc., a New Jersey corporation (the "Manager"), and ,
a corporation (the "Subadviser"). This Agreement supersedes the
Investment Subadvisory Agreement among the parties dated February 23, 1993.
WHEREAS, American Odyssey Funds Management, Inc. has entered into a
management agreement (the "Management Agreement") with the Series Fund, a
diversified open-end management investment company registered under the
Investment Company Act of 1940 (the "1940 Act"), pursuant to which American
Odyssey Funds Management, Inc. will act as Manager of the Series Fund.
WHEREAS, the Series Fund is currently divided into six separate series or
Funds, each of which is established pursuant to a resolution of the Board of
Directors of the Series Fund, and the Series Fund may in the future add
additional Funds; and
WHEREAS, the Manager has the responsibility of evaluating, recommending,
and supervising investment advisers to each Fund and, in connection therewith,
desires to retain the Subadviser to provide investment advisory services to the
Fund (the "Fund"), the Series Fund has the responsibility of compensating
the investment advisers to each Fund and desires to retain the Subadviser to
provide investment advisory services to the Fund, and the Subadviser is willing
to render such investment advisory services.
NOW, THEREFORE, the parties agree as follows:
1. (a) Subject to the supervision of the Manager and of the Board of
Directors of the Series Fund, the Subadviser shall manage the investment
operations of the assets of the Fund allocated by the Manager to the Subadviser
(such assets referred to as the "Allocated Assets"), including the purchase,
retention and disposition of portfolio investments, in accordance with the
Fund's investment objectives, policies and restrictions as stated in the
Prospectus (such Prospectus and Statement of Additional Information as currently
in effect and as amended or supplemented from
G-1
<PAGE> 70
time to time, being herein called the "Prospectus") and subject to the following
understandings:
(i) The Subadviser shall consult periodically with the Manager and
they shall agree upon the current investment strategy for the Allocated
Assets in the light of anticipated cash flows.
(ii) The Subadviser shall provide supervision of the Allocated Asset's
investments and determine from time to time what securities, options,
futures contracts, and other investments included in the Allocated Assets
will be purchased, retained, sold, or loaned by the Fund, and what portion
of the Allocated Assets will be invested or held uninvested as cash.
(iii) In the performance of its duties and obligations under this
Agreement, the Subadviser shall act in conformity with the Articles of
Incorporation, By-Laws, and Prospectus of the Series Fund and with the
instructions and directions of the Manager and of the Board of Directors of
the Series Fund and will conform to and comply with the requirements of the
1940 Act, the Internal Revenue Code of 1986, and all other applicable
federal and state laws and regulations.
(iv) The Subadviser will place orders for the securities, options,
futures contracts, and other investments to be purchased or sold as part of
the Allocated Assets with or through such persons, brokers, dealers, or
futures commission merchants (including but not limited to persons
affiliated with the Manager) as the Subadviser may select in order to carry
out the policy with respect to brokerage set forth in the Series Fund's
Registration Statement and Prospectus or as the Board of Directors may
direct from time to time. In providing the Fund with investment advice and
management, the Subadviser will give primary consideration to securing the
most favorable price and efficient execution. Within the framework of this
policy, the Subadviser may consider such factors as the price of the
security, the rate of the commission, the size and difficulty of the order,
the reliability, integrity, financial condition, general execution and
operational capabilities of competing broker-dealers and futures commission
merchants, and the brokerage and research services they provide to the
Subadviser or the Fund. The parties agree that it is desirable for the Fund
that the Subadviser have access to supplemental investment and market
research and security and economic analysis that certain brokers or futures
commission merchants are able to provide. The parties further agree that
brokers and futures commission merchants that provide such research and
analysis may execute brokerage transactions at a higher cost to the
G-2
<PAGE> 71
Fund than would result if orders to execute such transactions had been
placed with other brokers on the sole basis of ability to obtain the most
favorable price and efficient execution. Therefore, notwithstanding the
second sentence of this paragraph 1(a)(iv), the Subadviser is authorized to
place orders for the purchase and sale of securities, options, futures
contracts, and other investments for the Fund with brokers or futures
commission merchants who provide the Subadviser with such research and
analysis, subject to review by the Manager and the Series Fund's Board of
Directors from time to time with respect to the extent and continuation of
this practice. The Series Fund and the Manager acknowledge that the
services provided by such brokers or futures commission merchants may be
useful to the Subadviser in connection with the Subadviser's services to
other clients.
When the Subadviser deems the purchase or sale of a security, option,
futures contract, or other investment to be in the best interest of the
Fund as well as other clients of the Subadviser, the Subadviser, to the
extent permitted by applicable laws and regulations, may, but shall be
under no obligation to, aggregate the securities, options, futures
contracts, or other investments to be sold or purchased in order to obtain
the most favorable price or lower brokerage commissions and efficient
execution and to allocate the shares purchased or sold among the Series
Fund and the Subadviser's other clients on a fair and nondiscriminatory
basis, in a manner consistent with the Subadviser's fiduciary obligations
to the Fund and to such other clients.
(v) The Subadviser shall maintain all books and records with respect
to the portfolio transactions of the Allocated Assets required by
subparagraphs (b)(5), (6), (7), (9), (10) and (11) and paragraph (f) of
Rule 31a-1 under the 1940 Act and by Rule 17e-1(c)(2) under the 1940 Act
and shall render to the Series Fund such periodic and special reports as
its Board of Directors or the Manager may reasonably request.
(vi) The Subadviser shall provide the Series Fund's custodian on each
business day with information relating to all transactions concerning the
Allocated Assets and shall provide the Manager with such information upon
request of the Manager.
(vii) The investment management services provided by the Subadviser
hereunder are not exclusive, and the Subadviser shall be free to render
similar services to others; [provided, however, that the Subadviser agrees
that it shall not serve or accept retention as investment adviser,
investment manager, or similar service provider
G-3
<PAGE> 72
during the term of this Agreement and, if this Agreement is terminated by
the Subadviser, for the period of one year after the termination of this
Agreement, with or for the benefit of any investment company registered
under the 1940 Act that seeks as a primary purchaser of its shares,
directly or indirectly through sales of variable contracts, persons who are
eligible to participate in an investment advisory asset allocation program
similar in nature to that offered by the Manager's affiliated company,
Copeland Financial Services, Inc., it being understood and agreed that the
foregoing restriction shall not apply to any services provided to the
Financial Services Department, or any other unit, of The Travelers
Insurance Company, it being further understood and agreed that an
investment company with asset allocation as its own investment objective
(commonly called a balanced fund) shall not be subject to the foregoing
restriction.] [The bracketed language does not apply to the Cowen and
Western agreements.]
(b) Services to be furnished by the Subadviser under this Agreement may be
furnished through the medium of any directors, officers, or employees of the
Subadviser or its affiliates.
(c) The Subadviser shall keep the books and records with respect to the
Allocated Assets required to be maintained by the Subadviser pursuant to
paragraph 1(a)(v) hereof and shall timely furnish to the Manager or the Series
Fund's custodian all information relating to the Subadviser's services hereunder
needed to keep the other books and records of the Fund required by Rules
17e-1(c)(2) and 31a-1 under the 1940 Act. The Subadviser agrees that all records
which it maintains for the Fund are the property of the Fund and the Subadviser
will surrender promptly to the Fund any of such records upon the Fund's request,
provided however that the Subadviser may retain a copy of such records. The
Subadviser further agrees to preserve for the periods prescribed by Rules
17e-1(c)(2) and 31a-2 under the 1940 Act any such records as are required to be
maintained by it pursuant to paragraph 1(a)(v) hereof.
(d) The Subadviser agrees to maintain procedures adequate to ensure its
compliance with the 1940 Act, the Investment Advisers Act of 1940 (the "Advisers
Act"), and other applicable state and federal laws and regulations.
(e) The Subadviser shall furnish to the Manager, upon the Manager's
reasonable request, copies of all records prepared in connection with (i) the
performance of this Agreement and (ii) the maintenance of compliance procedures
pursuant to paragraph 1(d) hereof.
G-4
<PAGE> 73
(f) The Subadviser agrees to provide upon reasonable request of the Manager
or the Series Fund, information regarding the Subadviser, including but not
limited to background information about the Subadviser and its personnel and
performance data, for use in connection with efforts to promote the Series Fund
and the sale of its shares.
2. The Manager shall continue to have responsibility for all services to be
provided to the Fund pursuant to the Management Agreement and shall oversee and
review the Subadviser's performance of its duties under this Agreement.
3. [For BIAM: The Series Fund shall pay the Subadviser, for the services
provided and the expenses assumed pursuant to this Subadvisory Agreement, a fee
at an annual rate of 0.45% of the average daily Net Allocated Assets up to and
including $50 million, plus a fee at an annual rate of 0.40% of the average
daily Net Allocated Assets over $50 million and up to and including $100
million, plus a fee at an annual rate of 0.30% of the average daily Net
Allocated Assets over $100 million. The term "Net Allocated Assets" means the
Allocated Assets less related liabilities as determined by the Manager or its
designee. This fee will be computed daily and paid monthly.]
[For Wilke Thompson: The Series Fund shall pay the Subadviser, for the
services provided and the expenses assumed pursuant to this Subadvisory
Agreement, a fee at an annual rate of 0.40% of the average daily Net Allocated
Assets up to and including $100 million, plus a fee at an annual rate of 0.30%
of the average daily Net Allocated Assets over $100 million. The term "Net
Allocated Assets" means the Allocated Assets less related liabilities as
determined by the Manager or its designee. This fee will be computed daily and
paid monthly.]
[For Cowen: The Series Fund shall pay the Subadviser, for the services
provided and the expenses assumed pursuant to this Subadvisory Agreement, a fee
at an annual rate of 0.50% of the average daily Net Allocated Assets up to and
including $50 million, plus a fee at an annual rate of 0.45% of the average
daily Net Allocated Assets over $50 million and up to and including $100
million, plus a fee at an annual rate of 0.40% of the average daily Net
Allocated Assets over $100 million. The term "Net Allocated Assets" means the
Allocated Assets less related liabilities as determined by the Manager or its
designee. This fee will be computed daily and paid monthly.]
[For Equinox: The Series Fund shall pay the Subadviser, for the services
provided and the expenses assumed pursuant to this Subadvisory
G-5
<PAGE> 74
Agreement, a fee at an annual rate of 0.35% of the average daily Net Allocated
Assets up to and including $100 million, plus a fee at an annual rate of 30% of
the average daily Net Allocated Assets over $100 million. The term "Net
Allocated Assets" means the Allocated Assets less related liabilities as
determined by the Manager or its designee. This fee will be computed daily and
paid monthly.]
[For Western: The Series Fund shall pay the Subadviser, for the services
provided and the expenses assumed pursuant to this Subadvisory Agreement, a fee
at an annual rate of 0.25% of the average daily Net Allocated Assets up to and
including $250 million, plus a fee at an annual rate of 15% of the average daily
Net Allocated Assets over $250 million. The term "Net Allocated Assets" means
the Allocated Assets less related liabilities as determined by the Manager or
its designee. This fee will be computed daily and paid monthly.]
[For TAMIC: The Series Fund shall pay the Subadviser, for the services
provided and the expenses assumed pursuant to this Subadvisory Agreement, a fee
at an annual rate of 0.25% of the average daily Net Allocated Assets up to and
including $100 million, plus a fee at an annual rate of 0.20% of the average
daily Net Allocated Assets over $100 million and up to and including $200
million, plus a fee at an annual rate of 0.15% of the average daily Net
Allocated Assets over $200 million. The term "Net Allocated Assets" means the
Allocated Assets less related liabilities as determined by the Manager or its
designee. This fee will be computed daily and paid monthly.]
[For Smith Graham: The Series Fund shall pay the Subadviser, for the
services provided and the expenses assumed pursuant to this Subadvisory
Agreement, a fee at an annual rate of 0.25% of the average daily Net Allocated
Assets up to and including $100 million, plus a fee at an annual rate of 0.15%
of the average daily Net Allocated Assets over $100 million. The term "Net
Allocated Assets" means the Allocated Assets less related liabilities as
determined by the Manager or its designee. This fee will be computed daily and
paid monthly.]
4. The Subadviser shall not be liable for any loss suffered by the Series
Fund or the Manager as a result of any negligent act or error of judgment of the
Subadviser in connection with the matters to which this Agreement relates,
except a loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services (in which case any award of damages shall
be limited to the period and the amount set forth in Section 36(b)(3) of the
1940 Act) or loss resulting from willful misfeasance, bad faith or gross
negligence on the Subadviser's part in the
G-6
<PAGE> 75
performance of its duties or from its reckless disregard of its obligations and
duties under this Agreement. The Series Fund shall indemnify the Subadviser and
hold it harmless from all loss, cost, damage and expense, including reasonable
expenses for legal counsel, incurred by the Subadviser resulting from actions
from which it is relieved of responsibility by this paragraph. The Subadviser
shall indemnify the Series Fund and the Manager and hold them harmless from all
loss, cost, damage and expense, including reasonable expenses for legal counsel,
incurred by the Series Fund and the Manager resulting from actions from which
the Subadviser is not relieved of responsibility by this paragraph.
5. This Agreement shall continue in effect for a period of more than two
years from the date hereof only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the 1940 Act;
provided, however, that this Agreement may be terminated by the Fund at any
time, without the payment of any penalty, by the Board of Directors of the
Series Fund or by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund, or by the Manager or the Subadviser at any
time, without the payment of any penalty, on not more than 60 days' nor less
than 30 days' written notice to the other party. This Agreement shall terminate
automatically in the event of its assignment (as defined in the 1940 Act) or
upon the termination of the Management Agreement.
6. Nothing in this Agreement shall limit or restrict the right of any of
the Subadviser's directors, officers, or employees to engage in any other
business or to devote his or her time and attention in part to the management or
other aspects of any business, whether of a similar or dissimilar nature, nor
limit the Subadviser's right to engage in any other business or to render
services of any kind to any other corporation, firm, individual, or association,
except as described in Paragraph 1(a)(vii) above.
7. During the term of this Agreement, the Manager agrees to furnish the
Subadviser at its principal office all prospectuses, proxy statements, reports
to shareholders, sales literature or other material prepared for distribution to
shareholders of the Fund or the public, which refer to the Subadviser in any
way, prior to use thereof and not to use material if the Subadviser reasonably
objects in writing five business days (or such other time as may be mutually
agreed) after receipt thereof. Such materials may be furnished to the Subadviser
hereunder by first class mail, overnight delivery service, facsimile
transmission equipment, or hand delivery.
G-7
<PAGE> 76
8. This Agreement may be amended by mutual consent, but the consent of the
Series Fund must be obtained in conformity with the requirements of the 1940
Act.
9. Except as otherwise specifically provided in this Agreement, any notice
or other communication required to be given pursuant to this Agreement shall be
deemed duly given if delivered or mailed by certified or registered mail, return
receipt requested and postage prepaid, (1) to the American Odyssey Funds, Inc.
at Two Tower Center, East Brunswick, NJ 08816, Attention: President; (2) to
American Odyssey Funds Management, Inc. at Two Tower Center, East Brunswick, NJ
08816, Attention: Secretary; or (3) to , Attention: President.
10. This Agreement shall be governed by the laws of the State of New
Jersey.
11. This Agreement may be executed in two or more counterparts, which taken
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
<TABLE>
<S> <C> <C>
AMERICAN ODYSSEY FUNDS, INC.
- ---------------------------- By: ----------------------------
Witness
AMERICAN ODYSSEY FUNDS
MANAGEMENT, INC.
- ---------------------------- By: ----------------------------
Witness
[SUBADVISER]
- ---------------------------- By: ----------------------------
Witness
</TABLE>
G-8
<PAGE> 77
[FRONT]
<TABLE>
<S> <C>
AMERICAN ODYSSEY EMERGING OPPORTUNITIES THIS PROXY CARD IS SOLICITED ON BEHALF OF THE BOARD OF
FUND DIRECTORS OF AMERICAN ODYSSEY FUNDS, INC.
</TABLE>
Special Meeting of Persons Having Voting Rights April 23, 1997
To persons having voting rights with respect to the above-referenced fund:
The Board of Directors of American Odyssey Funds, Inc. ("AOF")
solicits your proxy and recommends votes "FOR" the following items. AOF will
vote the appropriate number of shares pursuant to the instructions given.
The officers of AOF - for the purpose of voting on the items in the
agenda set forth in the Notice of Special Meeting of Persons Having Voting
Rights with Respect to American Odyssey Funds, Inc. at such special meeting to
be held on April 23, 1997, at 10 A.M. at the offices of The Copeland Companies,
Two Tower Center, East Brunswick , New Jersey - are hereby instructed to vote
the shares of the above-referenced fund for the following purposes listed on
the reverse side.
Date: _______________________, 1997
PLEASE SIGN IN BOX BELOW
SIGNATURE(S)
(Please sign exactly as your name
appears at the left of this proxy card)
<PAGE> 78
[BACK]
YOUR VOTE IS IMPORTANT. Please read carefully, specify your choices, sign,
date, and mail this and all other proxy cards you have received as soon as
possible.
If no choice is made as to any item, the officers of AOF will vote "FOR". With
respect to any other business that may properly come before the meeting, the
officers of AOF will vote in accordance with their best judgment.
You have received a separate proxy card for each AOF Fund in which you have
voting rights. This card provides voting instructions with respect to your
interest in the fund referenced on the reverse side.
Please vote by filling in the appropriate box below, as shown, using blue or
black ink or dark pencil. Do not use red ink.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
Proposal 1: To approve certain advisory and subadvisory
agreements to add Cowen Asset Management as a second
subadviser for the Emerging Opportunities Fund.
Proposal 2: To approve an arrangement, a new investment
advisory agreement, and revised investment subadvisory
agreements that would permit AOF to enter into new
subadvisory agreements or to amend the terms of existing
subadvisory agreements without the approval of persons having
voting rights.
</TABLE>
IF NO CONTRARY SPECIFICATIONS ARE MADE, THIS PROXY CARD WILL BE VOTED "FOR"
EACH ITEM. IF YOU ATTEND THE MEETING, YOU MAY REVOKE THESE INSTRUCTIONS AND
VOTE IN PERSON.
<PAGE> 79
[FRONT]
<TABLE>
<S> <C>
AMERICAN ODYSSEY THIS PROXY CARD IS SOLICITED ON BEHALF OF THE BOARD OF
CORE EQUITY FUND DIRECTORS OF AMERICAN ODYSSEY FUNDS, INC.
</TABLE>
Special Meeting of Persons Having Voting Rights April 23, 1997
To persons having voting rights with respect to the above-referenced fund:
The Board of Directors of American Odyssey Funds, Inc. ("AOF")
solicits your proxy and recommends votes "FOR" the following items. AOF will
vote the appropriate number of shares pursuant to the instructions given.
The officers of AOF - for the purpose of voting on the items in the
agenda set forth in the Notice of Special Meeting of Persons Having Voting
Rights with Respect to American Odyssey Funds, Inc. at such special meeting to
be held on April 23, 1997, at 10 A.M. at the offices of The Copeland Companies,
Two Tower Center, East Brunswick , New Jersey - are hereby instructed to vote
the shares of the above-referenced fund for the following purposes listed on
the reverse side.
Date: _______________________, 1997
PLEASE SIGN IN BOX BELOW
SIGNATURE(S)
(Please sign exactly as your name
appears at the left of this proxy card)
<PAGE> 80
[BACK]
YOUR VOTE IS IMPORTANT. Please read carefully, specify your choices, sign,
date, and mail this and all other proxy cards you have received as soon as
possible.
If no choice is made as to any item, the officers of AOF will vote "FOR". With
respect to any other business that may properly come before the meeting, the
officers of AOF will vote in accordance with their best judgment.
Your proxy is solicited only with respect to Proposal 2. Proposal 1 affects
only the Emerging Opportunities Fund. You have received a separate proxy card
for each AOF Fund in which you have voting rights. This card provides voting
instructions with respect to your interest in the fund referenced on the
reverse side.
Please vote by filling in the appropriate box below, as shown, using blue or
black ink or dark pencil. Do not use red ink.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
Proposal 2: To approve an arrangement, a new investment
advisory agreement, and revised investment subadvisory
agreements that would permit AOF to enter into new
subadvisory agreements or to amend the terms of existing
subadvisory agreements without the approval of persons having
voting rights.
</TABLE>
IF NO CONTRARY SPECIFICATIONS ARE MADE, THIS PROXY CARD WILL BE VOTED "FOR"
EACH ITEM. IF YOU ATTEND THE MEETING, YOU MAY REVOKE THESE INSTRUCTIONS AND
VOTE IN PERSON.
<PAGE> 81
[FRONT]
<TABLE>
<S> <C>
AMERICAN ODYSSEY INTERNATIONAL EQUITY THIS PROXY CARD IS SOLICITED ON BEHALF OF THE BOARD OF
FUND DIRECTORS OF AMERICAN ODYSSEY FUNDS, INC.
</TABLE>
Special Meeting of Persons Having Voting Rights April 23, 1997
To persons having voting rights with respect to the above-referenced fund:
The Board of Directors of American Odyssey Funds, Inc. ("AOF")
solicits your proxy and recommends votes "FOR" the following items. AOF will
vote the appropriate number of shares pursuant to the instructions given.
The officers of AOF - for the purpose of voting on the items in the
agenda set forth in the Notice of Special Meeting of Persons Having Voting
Rights with Respect to American Odyssey Funds, Inc. at such special meeting to
be held on April 23, 1997, at 10 A.M. at the offices of The Copeland Companies,
Two Tower Center, East Brunswick , New Jersey - are hereby instructed to vote
the shares of the above-referenced fund for the following purposes listed on
the reverse side.
Date: _______________________, 1997
PLEASE SIGN IN BOX BELOW
SIGNATURE(S)
(Please sign exactly as your name
appears at the left of this proxy card)
<PAGE> 82
[BACK]
YOUR VOTE IS IMPORTANT. Please read carefully, specify your choices, sign,
date, and mail this and all other proxy cards you have received as soon as
possible.
If no choice is made as to any item, the officers of AOF will vote "FOR". With
respect to any other business that may properly come before the meeting, the
officers of AOF will vote in accordance with their best judgment.
Your proxy is solicited only with respect to Proposal 2. Proposal 1 affects
only the Emerging Opportunities Fund. You have received a separate proxy card
for each AOF Fund in which you have voting rights. This card provides voting
instructions with respect to your interest in the fund referenced on the
reverse side.
Please vote by filling in the appropriate box below, as shown, using blue or
black ink or dark pencil. Do not use red ink.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
Proposal 2: To approve an arrangement, a new investment
advisory agreement, and revised investment subadvisory
agreements that would permit AOF to enter into new
subadvisory agreements or to amend the terms of existing
subadvisory agreements without the approval of persons having
voting rights.
</TABLE>
IF NO CONTRARY SPECIFICATIONS ARE MADE, THIS PROXY CARD WILL BE VOTED "FOR"
EACH ITEM. IF YOU ATTEND THE MEETING, YOU MAY REVOKE THESE INSTRUCTIONS AND
VOTE IN PERSON.
<PAGE> 83
[FRONT]
<TABLE>
<S> <C>
AMERICAN ODYSSEY THIS PROXY CARD IS SOLICITED ON BEHALF OF THE BOARD OF
LONG-TERM BOND FUND DIRECTORS OF AMERICAN ODYSSEY FUNDS, INC.
</TABLE>
Special Meeting of Persons Having Voting Rights April 23, 1997
To persons having voting rights with respect to the above-referenced fund:
The Board of Directors of American Odyssey Funds, Inc. ("AOF")
solicits your proxy and recommends votes "FOR" the following items. AOF will
vote the appropriate number of shares pursuant to the instructions given.
The officers of AOF - for the purpose of voting on the items in the
agenda set forth in the Notice of Special Meeting of Persons Having Voting
Rights with Respect to American Odyssey Funds, Inc. at such special meeting to
be held on April 23, 1997, at 10 A.M. at the offices of The Copeland Companies,
Two Tower Center, East Brunswick , New Jersey - are hereby instructed to vote
the shares of the above-referenced fund for the following purposes listed on
the reverse side.
Date: _______________________, 1997
PLEASE SIGN IN BOX BELOW
SIGNATURE(S)
(Please sign exactly as your name
appears at the left of this proxy card)
<PAGE> 84
[BACK]
YOUR VOTE IS IMPORTANT. Please read carefully, specify your choices, sign,
date, and mail this and all other proxy cards you have received as soon as
possible.
If no choice is made as to any item, the officers of AOF will vote "FOR". With
respect to any other business that may properly come before the meeting, the
officers of AOF will vote in accordance with their best judgment.
Your proxy is solicited only with respect to Proposal 2. Proposal 1 affects
only the Emerging Opportunities Fund. You have received a separate proxy card
for each AOF Fund in which you have voting rights. This card provides voting
instructions with respect to your interest in the fund referenced on the
reverse side.
Please vote by filling in the appropriate box below, as shown, using blue or
black ink or dark pencil. Do not use red ink.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
Proposal 2: To approve an arrangement, a new investment
advisory agreement, and revised investment subadvisory
agreements that would permit AOF to enter into new
subadvisory agreements or to amend the terms of existing
subadvisory agreements without the approval of persons having
voting rights.
</TABLE>
IF NO CONTRARY SPECIFICATIONS ARE MADE, THIS PROXY CARD WILL BE VOTED "FOR"
EACH ITEM. IF YOU ATTEND THE MEETING, YOU MAY REVOKE THESE INSTRUCTIONS AND
VOTE IN PERSON.
<PAGE> 85
[FRONT]
<TABLE>
<S> <C>
AMERICAN ODYSSEY INTERMEDIATE-TERM BOND THIS PROXY CARD IS SOLICITED ON BEHALF OF THE BOARD OF
FUND DIRECTORS OF AMERICAN ODYSSEY FUNDS, INC.
</TABLE>
Special Meeting of Persons Having Voting Rights April 23, 1997
To persons having voting rights with respect to the above-referenced fund:
The Board of Directors of American Odyssey Funds, Inc. ("AOF")
solicits your proxy and recommends votes "FOR" the following items. AOF will
vote the appropriate number of shares pursuant to the instructions given.
The officers of AOF - for the purpose of voting on the items in the
agenda set forth in the Notice of Special Meeting of Persons Having Voting
Rights with Respect to American Odyssey Funds, Inc. at such special meeting to
be held on April 23, 1997, at 10 A.M. at the offices of The Copeland Companies,
Two Tower Center, East Brunswick , New Jersey - are hereby instructed to vote
the shares of the above-referenced fund for the following purposes listed on
the reverse side.
Date: _______________________, 1997
PLEASE SIGN IN BOX BELOW
SIGNATURE(S)
(Please sign exactly as your name
appears at the left of this proxy card)
<PAGE> 86
[BACK]
YOUR VOTE IS IMPORTANT. Please read carefully, specify your choices, sign,
date, and mail this and all other proxy cards you have received as soon as
possible.
If no choice is made as to any item, the officers of AOF will vote "FOR". With
respect to any other business that may properly come before the meeting, the
officers of AOF will vote in accordance with their best judgment.
Your proxy is solicited only with respect to Proposal 2. Proposal 1 affects
only the Emerging Opportunities Fund. You have received a separate proxy card
for each AOF Fund in which you have voting rights. This card provides voting
instructions with respect to your interest in the fund referenced on the
reverse side.
Please vote by filling in the appropriate box below, as shown, using blue or
black ink or dark pencil. Do not use red ink.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
Proposal 2: To approve an arrangement, a new investment
advisory agreement, and revised investment subadvisory
agreements that would permit AOF to enter into new
subadvisory agreements or to amend the terms of existing
subadvisory agreements without the approval of persons having
voting rights.
</TABLE>
IF NO CONTRARY SPECIFICATIONS ARE MADE, THIS PROXY CARD WILL BE VOTED "FOR"
EACH ITEM. IF YOU ATTEND THE MEETING, YOU MAY REVOKE THESE INSTRUCTIONS AND
VOTE IN PERSON.
<PAGE> 87
[FRONT]
<TABLE>
<S> <C>
AMERICAN ODYSSEY THIS PROXY CARD IS SOLICITED ON BEHALF OF THE BOARD OF
SHORT-TERM BOND FUND DIRECTORS OF AMERICAN ODYSSEY FUNDS, INC.
</TABLE>
Special Meeting of Persons Having Voting Rights April 23, 1997
To persons having voting rights with respect to the above-referenced fund:
The Board of Directors of American Odyssey Funds, Inc. ("AOF")
solicits your proxy and recommends votes "FOR" the following items. AOF will
vote the appropriate number of shares pursuant to the instructions given.
The officers of AOF - for the purpose of voting on the items in the
agenda set forth in the Notice of Special Meeting of Persons Having Voting
Rights with Respect to American Odyssey Funds, Inc. at such special meeting to
be held on April 23, 1997, at 10 A.M. at the offices of The Copeland Companies,
Two Tower Center, East Brunswick , New Jersey - are hereby instructed to vote
the shares of the above-referenced fund for the following purposes listed on
the reverse side.
Date: _______________________, 1997
PLEASE SIGN IN BOX BELOW
SIGNATURE(S)
(Please sign exactly as your name
appears at the left of this proxy card)
<PAGE> 88
[BACK]
YOUR VOTE IS IMPORTANT. Please read carefully, specify your choices, sign,
date, and mail this and all other proxy cards you have received as soon as
possible.
If no choice is made as to any item, the officers of AOF will vote "FOR". With
respect to any other business that may properly come before the meeting, the
officers of AOF will vote in accordance with their best judgment.
Your proxy is solicited only with respect to Proposal 2. Proposal 1 affects
only the Emerging Opportunities Fund. You have received a separate proxy card
for each AOF Fund in which you have voting rights. This card provides voting
instructions with respect to your interest in the fund referenced on the
reverse side.
Please vote by filling in the appropriate box below, as shown, using blue or
black ink or dark pencil. Do not use red ink.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
Proposal 2: To approve an arrangement, a new investment
advisory agreement, and revised investment subadvisory
agreements that would permit AOF to enter into new
subadvisory agreements or to amend the terms of existing
subadvisory agreements without the approval of persons having
voting rights.
</TABLE>
IF NO CONTRARY SPECIFICATIONS ARE MADE, THIS PROXY CARD WILL BE VOTED "FOR"
EACH ITEM. IF YOU ATTEND THE MEETING, YOU MAY REVOKE THESE INSTRUCTIONS AND
VOTE IN PERSON.
