<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 2000.
REGISTRATION NOS. 33-57536
811-7450
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 12
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 13
---------------------
AMERICAN ODYSSEY FUNDS, INC.
(EXACT NAME OF REGISTRANT)
TWO TOWER CENTER
EAST BRUNSWICK, NEW JERSEY 08816
(732) 514-2000
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
--------------------
PAUL S. FEINBERG, ESQ.
PRESIDENT
AMERICAN ODYSSEY FUNDS, INC.
TWO TOWER CENTER
EAST BRUNSWICK, NEW JERSEY 08816
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
CHRISTOPHER E. PALMER
SHEA & GARDNER
1800 MASSACHUSETTS AVENUE, N.W.
WASHINGTON, D.C. 20036
----------------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX):
[ ] IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (b) OF RULE 485
[X] ON MAY 1, 2000 PURSUANT TO PARAGRAPH (b) OF RULE 485
[ ] 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(1) OF RULE 485
[ ] ON MAY 1, 2000 PURSUANT TO PARAGRAPH (a)(1) OF RULE 485
[ ] 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(2) OF RULE 485
[ ] ON ________ PURSUANT TO PARAGRAPH (a)(2) OF RULE 485
IF APPROPRIATE CHECK THE FOLLOWING BOX:
[ ] THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A
PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.
<PAGE> 2
PART A
INFORMATION REQUIRED IN A PROSPECTUS
<PAGE> 3
PROSPECTUS
May 1, 2000
AMERICAN ODYSSEY
Global High-Yield Bond Fund
International Equity Fund
Emerging Opportunities Fund
Core Equity Fund
Long-Term Bond Fund
Intermediate-Term Bond Fund
You may invest in the Funds only if you have purchased a variable annuity
contract or variable life insurance contract that offers the Funds, or
participate in a qualified retirement plan (including an arrangement under
section 403(b) of the Internal Revenue Code).
__________________
As with all mutual funds, neither the Securities and Exchange Commission nor
any state securities commission has approved or disapproved of these securities
or passed upon the adequacy of this prospectus. Any representation to the
contrary is a criminal offense.
[LOGO]
AMERICAN
ODYSSEY (R)
- ---------
FUNDS
<PAGE> 4
PROSPECTUS CONTENTS
<TABLE>
<S> <C>
Summary of Investment Objectives and Strategies............. 2
Summary of Investment Risks................................. 4
Performance................................................. 6
Fees and Expenses........................................... 8
Investment Objectives, Strategies, and Risks................ 9
American Odyssey Global High-Yield Bond Fund........... 9
American Odyssey International Equity Fund............. 11
American Odyssey Emerging Opportunities Fund........... 11
American Odyssey Core Equity Fund...................... 12
American Odyssey Long-Term Bond Fund................... 12
American Odyssey Intermediate-Term Bond Fund........... 14
Temporary Defensive Positions.......................... 15
Management of the Funds..................................... 16
Pricing, Purchase, and Redemption of Shares................. 20
Pricing of Shares...................................... 20
Purchase of Shares..................................... 20
Redemption of Shares................................... 20
Distributions.......................................... 21
Other Information........................................... 21
Federal Income Taxes................................... 21
Monitoring for Possible Conflict....................... 21
Conversion of Short-Term Bond Fund to Global High-Yield
Bond Fund............................................. 21
Financial Highlights........................................ 22
</TABLE>
1
<PAGE> 5
SUMMARY OF INVESTMENT OBJECTIVES AND STRATEGIES
GLOBAL HIGH-YIELD BOND FUND
Objective:Seeks maximum long-term total return (capital appreciation and income)
by investing primarily in high-yield debt securities (which are
sometimes referred to as junk bonds and which typically are rated
below investment grade) from the United States and abroad.
Strategy: Invests (in order of importance) in:
- High-yield bonds from the United States.
- -
- High-yield bonds, commonly known as "junk bonds," pay more
interest than investment-grade bonds because of the greater
risk that the issuer will miss an interest payment or fail to
repay the principal.
- High-yield bonds from foreign countries, particularly those with
emerging or developing markets.
- Investment-grade bonds.
- -
- Investment-grade bonds are bonds that bond-rating
organizations or the Fund believe are reasonably likely to
meet their interest and principal payment obligations.
Investment-grade bonds pay less interest than high-yield
bonds.
- Stocks that pay high dividends or that resemble or are related to
bonds in some way.
Most securities in which the Fund invests have the potential to
generate relatively high income in the form of interest payments or
dividends. The Fund also considers whether a security has the potential
to increase in price.
INTERNATIONAL EQUITY FUND
Objective:
Seeks maximum long-term total return (capital appreciation and income)
by investing primarily in common stocks of established non-U.S.
companies.
Strategy:Invests in stocks of companies from at least five foreign countries.
- The companies in which the Fund invests are generally large and
well-established in their home country.
- The Fund invests primarily in countries with developed economies.
- The Fund chooses companies that it expects to increase in value
over the long-term.
EMERGING OPPORTUNITIES FUND
Objective:
Seeks maximum long-term total return (capital appreciation and income)
by investing primarily in common stocks of small, rapidly growing
companies.
Strategy:Invests in stocks of companies with a market value of less than $1
billion that the Fund expects will increase in value more quickly than
larger, well-established companies.
2
<PAGE> 6
CORE EQUITY FUND
Objective:Seeks maximum long-term total return (capital appreciation and income)
by investing primarily in common stocks of well-established companies.
Strategy: Invests in stocks of larger, well-established companies that the Fund
expects to increase in value faster than the overall market.
LONG-TERM BOND FUND
Objective:Seeks maximum long-term total return (capital appreciation and income)
by investing primarily in long-term corporate debt securities, U.S.
government securities, mortgage-related securities and asset-backed
securities, as well as money market instruments.
Strategy: Invests in bonds that will mature (i.e., repay principal) in, on
average, between eight and twenty-five years. The Fund invests
especially in the following types of bonds, which are listed in order
of importance:
- Investment-grade corporate bonds
- -
- Investment-grade bonds are bonds that bond-rating
organizations or the Fund believe are reasonably likely to
meet their interest and principal payment obligations.
- U.S. government bonds.
- Foreign government bonds.
- Mortgage-related securities.
- -
- Mortgage-related securities provide an interest in a pool of
home or commercial mortgages.
- Asset-backed securities.
- -
- Asset-backed securities provide an interest in a pool of
assets like trade receivables.
- High-yield bonds.
- -
- High-yield bonds, commonly known as "junk bonds," pay more
interest than investment-grade bonds because of the greater
risk that the issuer will miss an interest payment or fail to
repay the principal.
INTERMEDIATE-TERM BOND FUND
Objective:
Seeks maximum long-term total return (capital appreciation and income)
by investing primarily in intermediate-term corporate debt securities,
U.S. government securities, mortgage-related securities and
asset-backed securities, as well as money market instruments.
Strategy:The Fund invests in bonds that will mature (i.e., repay their
principal) in, on average, between two and seven years. The Fund
invests especially in the following types of bonds, which are listed in
order of importance:
- Investment-grade corporate bonds.
- U.S. government bonds.
- Foreign government bonds.
- Mortgage-related securities.
- Asset-backed securities.
3
<PAGE> 7
SUMMARY OF INVESTMENT RISKS
Throughout this prospectus, the Funds appear in declining order of risk.
For each of the Funds, the share price fluctuates over time. The total return of
a Fund could be negative during the period you invest in it, in which case you
would lose part of your investment when you redeemed your shares.
We describe below some of the risks specific to each Fund.
GLOBAL HIGH-YIELD BOND FUND
The Fund invests primarily in high-yield bonds, including high-yield bonds
from emerging markets.
- High-yield bonds have a greater risk of default than investment grade
bonds. Default means the bond's issuer -- the company or country that
issues the bond -- fails to make one or more interest payments, or fails
to repay the principal. If an issuer defaults on a bond held by the
Fund, the bond's value will decrease, possibly to near zero, and the
Fund's net asset value and total return will decline.
- The value of high-yield bonds may change drastically in response to
economic events or in response to the financial health of the issuer.
These price swings will affect the net asset value and total return of
the Fund.
- Prices of high-yield bonds in emerging markets can be significantly more
volatile than in more developed nations.
- Changing currency exchange rates can decrease the U.S. dollar value of
bonds from foreign countries.
INTERNATIONAL EQUITY FUND
The prices of all stocks, foreign and domestic, fluctuate depending upon
the performance of the company, the market's perception of the company, and
overall market conditions.
All other things being equal, foreign stocks tend to be more risky than the
stocks of U.S. corporations.
- Adverse political or economic events in a foreign country could cause
the price of a foreign company's stock to fall.
- Because each country has its own laws about what records a company must
maintain and what information a company must disclose, less information
may be available for some foreign companies than is available for U.S.
companies.
- Changing currency exchange rates can decrease the U.S. dollar value of
foreign stocks.
EMERGING OPPORTUNITIES FUND
The prices of all stocks fluctuate depending upon the performance of the
company, the market's perception of the company, and overall market
conditions.
- The prices of small companies tend to fluctuate more than those of
larger, more established companies.
4
<PAGE> 8
CORE EQUITY FUND
The prices of all stocks fluctuate depending upon the performance of the
company, the market's perception of the company, and overall market
conditions.
- Investing in larger, well-established companies, such as the ones the
Fund invests in, is usually less risky than investing in the stocks of
smaller companies.
LONG-TERM BOND FUND
The prices of bonds fluctuate depending upon interest rates.
- As interest rates go up, the value of bonds tends to decrease, and when
interest rates go down, the value of bonds tends to increase.
- The longer the maturity of a bond (i.e., the longer until the issuer
must repay the principal), the greater the effect of a change in
interest rates on the value of the bond.
- Because the Fund invests primarily in long-term bonds, shares of the
Fund may fluctuate a great deal in response to changes in interest
rates. In particular, the Fund's shares will decrease in value when
interest rates increase.
INTERMEDIATE-TERM BOND FUND
The prices of bonds fluctuate depending upon interest rates.
- As interest rates go up, the value of bonds tends to decrease, and when
interest rates go down, the value of bonds tends to increase. As a
result, the Fund's shares will decrease in value when interest rates
increase.
- The longer the maturity of a bond (i.e., the longer until the issuer
must repay the principal), the greater the effect of a change in
interest rates on the value of the bond.
- Because the Fund invests primarily in intermediate-term bonds, shares of
the Fund will generally fluctuate less than shares of the Long-Term Bond
Fund in response to changes in interest rates.
5
<PAGE> 9
PERFORMANCE
The bar charts and tables shown below provide an indication of the risks of
investing in each Fund by showing changes in the Fund's performance from year to
year since the Fund commenced operations and by showing how each Fund's average
annual returns for one year, five years, and the life of the Fund compare to
those of a broad-based securities market index. How each Fund has performed in
the past is not necessarily an indication of how the Fund will perform in the
future.
GLOBAL HIGH-YIELD BOND FUND
<TABLE>
<S> <C>
1994 -0.14
1995 10.86
1996 3.80
1997 6.11
1998 -3.76
1999 10.68
</TABLE>
<TABLE>
<S> <C>
Highest Quarterly
Return: 5.19% (4th quarter 1999)
Lowest Quarterly
Return: -9.68% (3rd quarter 1998)
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
(FOR THE PERIOD ENDING 12/31/99)
<TABLE>
<CAPTION>
CS FIRST LBGC
BOSTON 1-5 YEAR
HIGH YIELD BOND
THE FUND INDEX INDEX
<S> <C> <C> <C>
Past 1 Year: 10.68% 3.28% 2.10%
Past 5 Years: 5.55% 9.07% 6.83%
Life of Fund: 4.46% 8.06% 5.56%
(since 5/17/93)
Prior to May 1, 1998, the American Odyssey Global
High-Yield Bond Fund was named the American Odyssey
Short-Term Bond Fund and had a different investment
objective, strategy, subadviser, and investment
portfolio. Information about performance prior to May
1, 1998 is therefore unlikely to be helpful to you.
</TABLE>
INTERNATIONAL EQUITY FUND
<TABLE>
<S> <C>
1994 -6.98
1995 19.00
1996 21.93
1997 5.04
1998 14.91
1999 32.52
</TABLE>
<TABLE>
<S> <C>
Highest Quarterly
Return: 20.97% (4th quarter 1999)
Lowest Quarterly
Return: -16.62% (3rd quarter 1998)
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
(FOR THE PERIOD ENDING 12/31/99)
<TABLE>
<CAPTION>
MORGAN STANLEY
CAPITAL INTERNATIONAL
EUROPE, AUSTRALIA,
THE FUND FAR EAST INDEX
<S> <C> <C>
Past 1 Year: 32.52% 27.31%
Past 5 Years: 18.34% 13.15%
Life of Fund: 15.56% 12.13%
(since 5/17/93)
</TABLE>
EMERGING OPPORTUNITIES FUND
<TABLE>
<S> <C>
1994 9.68
1995 32.23
1996 -3.03
1997 6.78
1998 -8.65
1999 36.71
</TABLE>
<TABLE>
<S> <C>
Highest Quarterly
Return: 24.92% (4th quarter 1999)
Lowest Quarterly
Return: -23.16% (3rd quarter 1998)
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
(FOR THE PERIOD ENDING 12/31/99)
<TABLE>
<CAPTION>
THE FUND RUSSELL 2500 INDEX
<S> <C> <C>
Past 1 Year: 36.71% 24.15%
Past 5 Years: 11.29% 19.43%
Life of Fund: 11.47% 15.94%
(since 5/17/93)
</TABLE>
6
<PAGE> 10
If you have received this prospectus because you own or are considering the
purchase of a variable life insurance or annuity contract, you should note that
the performance shown does not include charges of the contract itself, such as
mortality and expense risk charges. The performance would be lower if it did
include these types of charges.
CORE EQUITY FUND
<TABLE>
<S> <C>
1994 -1.01
1995 38.56
1996 23.20
1997 31.67
1998 15.54
1999 -0.28
</TABLE>
<TABLE>
<S> <C> <C>
Highest Quarterly
Return: 15.31% (2nd quarter 1997)
Lowest Quarterly Return: -12.64% (3rd quarter 1998)
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
(FOR THE PERIOD ENDING 12/31/99)
<TABLE>
<CAPTION>
THE FUND S&P 500 INDEX
<S> <C> <C>
Past 1 Year: -0.28% 21.03%
Past 5 Years: 20.93% 28.55%
Life of Fund: 15.78% 22.21%
(since 5/17/93)
</TABLE>
LONG-TERM BOND FUND
<TABLE>
<S> <C>
1994 -5.79
1995 22.44
1996 1.34
1997 12.01
1998 9.04
1999 -2.74
</TABLE>
<TABLE>
<S> <C> <C>
Highest Quarterly Return: 7.34% (2nd quarter 1995)
Lowest Quarterly Return: -4.62% (1st quarter 1996)
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
(FOR THE PERIOD ENDING 12/31/99)
<TABLE>
<CAPTION>
SALOMON BROTHERS
THE FUND CORE +5 BOND INDEX
<S> <C> <C>
Past 1 Year: -2.74% -1.69%
Past 5 Years: 8.05% 8.23%
Life of Fund: 6.65% 6.40%
(since 5/17/93)
</TABLE>
INTERMEDIATE-TERM BOND FUND
<TABLE>
<S> <C>
1994 -2.85
1995 15.01
1996 3.95
1997 7.50
1998 8.48
1999 1.50
</TABLE>
<TABLE>
<S> <C> <C>
Highest Quarterly Return: 5.06% (2nd quarter 1995)
Lowest Quarterly Return: -2.13% (1st quarter 1994)
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
(FOR THE PERIOD ENDING 12/31/99)
<TABLE>
<CAPTION>
LEHMAN BROTHERS
GOV'T/CORPORATE
INTERMEDIATE
THE FUND BOND INDEX
<S> <C> <C>
Past 1 Year: 1.50% 0.39%
Past 5 Years: 7.18% 7.09%
Life of Fund: 5.63% 5.66%
(since 5/17/93)
</TABLE>
7
<PAGE> 11
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of each Fund. If you have received this prospectus because you own
or are considering the purchase of a variable life insurance or annuity
contract, you should refer instead to the corresponding table in its prospectus.
<TABLE>
<CAPTION>
GLOBAL LONG- INTERMEDIATE-
HIGH-YIELD INT'L EMERGING CORE TERM TERM
BOND EQUITY OPPORTUNITIES EQUITY BOND BOND
FUND FUND FUND FUND FUND FUND
---------- ------ ------------- ------ ----- -------------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER FEES (paid directly from your investment)
Sales Charge (Load) on Purchases None None None None None None
Deferred Sales Charge (Load) None None None None None None
Sales Charge (Load) on Reinvested Dividends None None None None None None
Redemption Fee None None None None None None
Exchange Fee None None None None None None
Account Fee None None None None None None
ANNUAL FUND OPERATING EXPENSES
(expenses deducted from Fund Assets)
Management Fees 0.67% 0.59% 0.75% 0.56% 0.50% 0.49%
Distribution (12b-1) Fees None None None None None None
Other Expenses 0.16% 0.13% 0.12% 0.08% 0.10% 0.10%
----- ----- ----- ----- ----- -----
TOTAL ANNUAL FUND OPERATING EXPENSES 0.83% 0.72% 0.87% 0.64% 0.60% 0.59%
</TABLE>
EXAMPLE
This Example is meant to help you compare the cost of investing in each Fund
with the cost of investing in other mutual funds. If you have received this
prospectus because you own or are considering the purchase of a variable annuity
contract or variable life insurance policy, this Example does not include any
expenses charged under that contract.
The Example assumes that you invest $10,000 in the Fund for the periods
indicated and then redeem all of your shares at the end of those periods. The
example assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
GLOBAL LONG- INTERMEDIATE-
HIGH-YIELD INT'L EMERGING CORE TERM TERM
BOND EQUITY OPPORTUNITIES EQUITY BOND BOND
FUND FUND FUND FUND FUND FUND
---------- ------ ------------- ------ ----- -------------
<S> <C> <C> <C> <C> <C> <C>
1 year.............................. $ 85 $ 74 $ 89 $ 65 $ 61 $ 60
3 years............................. $ 265 $230 $ 278 $205 $192 $189
5 years............................. $ 460 $401 $ 482 $357 $335 $329
10 years............................ $1,025 $894 $1,073 $798 $750 $738
</TABLE>
You would pay the same expenses if you did not redeem your shares.
8
<PAGE> 12
INVESTMENT OBJECTIVES, STRATEGIES, AND RISKS
The investment objectives, strategies, and risks for each Fund appear
below. As with all mutual funds, it is possible that a Fund could fail to
achieve its objective.
AMERICAN ODYSSEY GLOBAL HIGH-YIELD BOND FUND
Investment Objective. The Global High-Yield Bond Fund seeks maximum
long-term total return (capital appreciation and income) by investing primarily
in high-yield debt securities (which are sometimes referred to as junk bonds and
which typically are rated below investment grade) from the United States and
abroad.
Investment Strategies. To achieve its objective, the Fund generally invests
primarily in:
- High-yield bonds from the United States.
+ High-yield bonds, commonly known as "junk bonds," pay more interest
because of the greater risk that the issuer will miss an interest
payment or fail to repay the principal.
+ Bond-rating organizations rate high-yield bonds as below investment
grade.
+ Compared to investment-grade bonds, high-yield bonds are high risk
securities.
- High-yield bonds from foreign countries, particularly those with
emerging or developing markets.
+ Foreign governments and foreign companies can both issue foreign
high-yield bonds.
+ Foreign high-yield bonds may pay interest and principal in a foreign
currency or, in some cases, in U.S. dollars.
+ Emerging markets currently include all countries except Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland,
Italy, Japan, the Netherlands, New Zealand, Norway, Spain, Sweden,
Switzerland, the United Kingdom, and the United States.
- Investment-grade bonds.
+ Investment-grade bonds pay less interest than high-yield bonds. They
also have less risk that their issuers will miss an interest payment
or fail to repay the principal.
- Stocks that pay high dividends or that resemble or are related to bonds
in some way. These include:
+ Preferred or common stock that pays high dividends.
+ Securities that combine characteristics of both stocks and bonds.
+ Convertible securities, that is, bond-like securities that give the
owner the option of converting them into stock. If the Fund does
choose to convert these types of securities to stock, the Fund may
retain the stock after the conversion.
The Fund may also buy and sell foreign currency forward contracts.
- Foreign currency forward contracts provide the right to buy or sell
foreign currency at a set price some time in the future.
- The Fund can profit from buying these types of forward contracts if it
accurately predicts whether currency exchange rates will increase or
decrease.
9
<PAGE> 13
Most securities in which the Fund invests have the potential to generate
relatively high income in the form of interest payments or dividends. The Fund
also considers whether a security has the potential to increase in price. The
Fund will generally have more of its assets invested in domestic high-yield
bonds than in foreign high-yield bonds.
Investment Risks.
- High-yield bonds have a greater risk of default than investment grade
bonds. Default means the bond's issuer -- the company or country that
issues the bond -- fails to make one or more interest payments, or
fails to repay the principal. If an issuer defaults on a bond held by
the Fund, the bond's value will decrease, possibly to near zero, and
the Fund's net asset value and total return will decline.
- The value of high-yield bonds may change drastically in response to
economic events or in response to the financial health of the issuer.
These price swings will affect the net asset value and total return of
the Fund.
- When the economy is performing poorly, more high-yield bonds may
default than normal.
- High-yield bonds may not trade as often as higher quality bonds.
+ The Fund may have difficulty selling a large quantity of high-yield
bonds at once.
+ The exact price of a bond that does not trade often may be difficult
to determine.
- Prices of high-yield bonds in emerging markets can be significantly
more volatile than in more developed nations. Compared to countries
with more developed economies, countries with emerging markets may
have:
+ Unstable governments.
+ The possibility of nationalization of businesses.
+ Restrictions on foreign ownership.
+ Less protection of property rights.
+ An economy dependent on only a few industries.
+ An economy that can be greatly affected by changes in local or global
trade conditions.
+ Volatile, high debt burdens or inflation rates.
+ A local securities markets in which only a small number of securities
trade on a daily basis and which may not function if trading volume
increases.
+ Far less reporting of and information about the finances of the
government or company that issued the bonds. This makes it more
difficult to determine the underlying value of the bonds.
+ Changing currency exchange rates that can decrease (or increase) the
U.S. dollar value of foreign securities.
- Investing in foreign currency forward contracts for investment purposes
depends upon the accurate forecast of foreign exchange rates.
+ Forward contracts of this type are a speculative investment.
10
<PAGE> 14
+ If the Fund incorrectly forecasts the direction of foreign exchange
rates, the Fund's return will decline.
AMERICAN ODYSSEY INTERNATIONAL EQUITY FUND
Investment Objective. The International Equity Fund seeks maximum long-term
total return (capital appreciation and income) by investing primarily in common
stocks of established non-U.S. companies.
Investment Strategies. The Fund invests in stocks of companies from at
least five foreign countries.
- The companies in which the Fund invests are generally large and
well-established in their home country.
- The Fund invests primarily in countries with developed economies.
- The Fund chooses companies that it expects to increase in value over
the long-term.
Investment Risks.
- The prices of all stocks, foreign and domestic, fluctuate depending
upon the performance of the company, the market's perception of the
company, and overall market conditions.
- All other things being equal, foreign stocks tend to be more risky than
the stocks of U.S. corporations.
+ Adverse political or economic events in a foreign country could cause
a the price of a foreign company's stock to fall.
+ Because each country has its own laws about what records a company
must maintain and what information a company must disclose, less
information may be available for some foreign companies than is
available for U.S. companies.
+ Changing currency exchange rates can decrease (or increase) the U.S.
dollar value of foreign stocks.
AMERICAN ODYSSEY EMERGING OPPORTUNITIES FUND
Investment Objective. The Emerging Opportunities Fund seeks maximum
long-term total return (capital appreciation and income) by investing primarily
in common stocks of small, rapidly growing companies.
Investment Strategies. To achieve its objective, the Fund will invest
primarily in common stocks of companies with a market value of less than $1
billion that Fund expects will grow more rapidly than larger well-established
companies.
- The Fund uses three separate investment strategies.
+ For some of its assets, the Fund uses a "value" approach, which
emphasizes, among other things, a focus on smaller companies that
have fallen out of favor with, or are not well covered by, Wall
Street analysts.
+ For some of its assets, the Fund uses a "growth" approach, which
focuses on small companies expected to experience significant growth
in earnings over the long term.
+ For some of its assets, the Fund uses an "index" approach, with an
objective of matching the performance of the Russell 2500 Index.
11
<PAGE> 15
- The Fund invests primarily in U.S. companies, but may also invest some
of its assets in foreign companies as well.
Investment Risks.
- The prices of stocks fluctuate depending upon the performance of the
company, the market's perception of the company, and overall market
conditions.
- The stock prices of small companies tend to fluctuate more than those
of larger, more established companies.
- Foreign stocks are subject to the risks described above in connection
with the International Equity Fund.
AMERICAN ODYSSEY CORE EQUITY FUND
Investment Objective. The Core Equity Fund seeks maximum long-term total
return (capital appreciation and income) by investing primarily in common stocks
of well-established companies.
Investment Strategies. To achieve its objective, the Fund invests primarily
in the stocks of larger, well-established companies that the Fund expects to
increase in value faster than the overall market.
- The Fund uses three separate investment strategies.
+ For some of its assets, the Fund uses a "value" approach, which
focuses on stocks that the subadviser believes are undervalued by the
market.
+ For some of its assets, the Fund uses a "growth" approach, which
focuses on companies that the subadviser expects to have
above-average earnings growth.
+ For some of its assets, the Fund uses an "index" approach, with the
objective of matching the performance of the S&P 500 Index.
- The Fund invests primarily in the stocks of U.S. companies, but may
also invest some of its assets in the stocks of large, well-established
foreign companies.
Investment Risks.
- The prices of all stocks fluctuate depending upon the performance of
the company, the market's perception of the company, and overall market
conditions.
- Investing in larger, well-established companies, such as the ones the
Fund invests in, is usually less risky than investing in the stocks of
smaller companies.
- Foreign stocks are subject to the risks described above in connection
with the International Equity Fund.
AMERICAN ODYSSEY LONG-TERM BOND FUND
Investment Objective. The Long-Term Bond Fund seeks maximum long-term total
return (capital appreciation and income) by investing primarily in long-term
corporate debt securities, U.S. government securities, mortgage-related
securities, and asset-backed securities, as well as money market instruments.
12
<PAGE> 16
Investment Strategies. The Fund invests in bonds that will mature (i.e.,
repay principal) in, on average, between eight and twenty-five years. The Fund
invests primarily in the following types of bonds, which are listed in order of
importance:
- Investment-grade corporate bonds.
+ Investment-grade bonds are bonds that bond-rating organizations or
the Fund believe are reasonably likely to meet their interest and
principal payment obligations.
- U.S. government bonds, including:
+ Direct obligations of the United States Treasury (such as Treasury
bonds and Treasury bills).
+ Bonds issued by agencies of the United States that the United States
Treasury guarantees (such as bonds issued by the Farmers Home
Administration and the Export-Import Bank).
+ Bonds issued by agencies and instrumentalities of the United States
that are not guaranteed by the United States Treasury (such as bonds
issued by Federal Land Banks or the Central Bank for Cooperatives).
- Foreign government bonds.
- Mortgage-related securities (which provide an interest in a pool of
home or commercial mortgages).
- Asset-backed securities (which provide an interest in a pool of assets
like trade receivables).
- High-yield bonds (which are commonly known as "junk bonds," and which
pay more interest than investment-grade bonds because of the greater
risk that the issuer will miss an interest payment or fail to repay the
principal). The Fund may invest up to 15% of its assets in these types
of bonds.
Although the Fund invests primarily in domestic bonds, the Fund may invest
up to 25% of its assets in bonds issued by foreign companies or governments.
These bonds may pay interest and principal in a foreign currency or, in some
cases, in U.S. dollars.
Investment Risks.
- The prices of bonds fluctuate depending upon interest rates.
+ As interest rates go up, the value of bonds tends to decrease, and
when interest rates go down, the value of bonds tends to increase.
+ The longer the maturity of a bond (i.e., the longer until the issuer
must repay the principal), the greater the effect of a change in
interest rates on the value of the bond.
+ In particular, the Fund's shares will decrease in value when interest
rates increase.
+ Because the Fund invests primarily in long-term bonds, shares of the
Fund may fluctuate a great deal in response to changes in interest
rates.
+ The Long-Term Bond Fund will likely be subject to greater fluctuation
in value than the Intermediate-Term Bond Fund.
- Mortgage-related securities decrease in value when interest rates rise,
but many not increase in value as much as other types of bonds when
interest rates decline.
13
<PAGE> 17
+ Mortgage borrowers often refinance if interest rates decline, which
causes the value of the security to fall.
- High-yield bonds are subject to the risks described above in connection
with the Global High-Yield Bond Fund.
- Foreign bonds may pose greater risks than domestic bonds.
+ Adverse political or economic events in a foreign country could cause
a the price of a foreign bond to fall.
+ Because each country has its own laws about what records a company
must maintain and what information a company must disclose, less
information may be available for some foreign bonds than is available
for domestic bonds.
+ Changing currency exchange rates can decrease (or increase) the U.S.
dollar value of foreign bonds.
- The Fund generally engages in active and frequent bond trading.
Although brokerage expenses increase as turnover increases, the Fund
believes that the benefits of more active trading exceed the additional
costs.
AMERICAN ODYSSEY INTERMEDIATE-TERM BOND FUND
Investment Objective. The Intermediate-Term Bond Fund seeks maximum
long-term total return (capital appreciation and income) by investing primarily
in intermediate-term corporate debt securities, U.S. government securities,
mortgage-related securities, and asset-backed securities, as well as money
market instruments.
Investment Strategies. To achieve its objective, the Fund generally invests
its assets in bonds that will mature (i.e., repay their principal) in, on
average, between two and seven years. The Fund invests primarily in the
following types of bonds, each of which is described above in connection with
the Long-Term Bond Fund.:
- Investment-grade corporate bonds.
- U.S. government bonds.
- Foreign government bonds.
- Mortgage-related securities.
- Asset-backed securities.
- High-yield bonds, which are described above in connection with the
Global High-Yield Bond Fund. The Fund may invest up to 15% of its
assets in these types of bonds.
Although the Fund invests primarily in domestic bonds, the Fund may invest
up to 25% of its assets in bonds issued by foreign companies or governments.
These foreign bonds may pay interest and principal in a foreign currency or, in
some cases, in U.S. dollars.
14
<PAGE> 18
Investment Risks.
- The prices of bonds fluctuate depending upon interest rates.
+ As interest rates go up, the value of bonds tends to decrease, and
when interest rates go down, the value of bonds tends to increase.
+ The longer the maturity of a bond (i.e., the longer until the issuer
must repay the principal), the greater the effect of a change in
interest rates on the value of the bond.
+ In particular, the Fund's shares will decrease in value when interest
rates increase.
+ Because the Fund invests primarily in intermediate-term bonds, shares
of the Fund may fluctuate in value less than the Long-Term Bond Fund.
- Mortgage-related securities decrease in value when interest rates rise,
but many not increase in value as much as other types of bonds when
interest rates decline.
+ Mortgage borrowers often refinance if interest rates decline, which
causes the value of the security to fall.
- High-yield bonds are subject to the risks described above in connection
with the Global High-Yield Bond Fund.
- Foreign bonds may pose greater risks than domestic bonds.
+ Adverse political or economic events in a foreign country could cause
the price of a foreign bond to fall.
+ Because each country has its own laws about what records a company
must maintain and what information a company must disclose, less
information may be available for some foreign bonds than is available
for domestic bonds.
+ Changing currency exchange rates can decrease (or increase) the U.S.
dollar value of foreign bonds.
- The Fund generally engages in active and frequent bond trading.
Although brokerage expenses increase as turnover increases, the Fund
believes that the benefits of more active trading exceed the additional
costs.
TEMPORARY DEFENSIVE POSITIONS
Each Fund may, at times, adopt a temporary defensive position in which the
Fund invests a greater proportion of its assets than normal in cash or high
quality bonds. A Fund would adopt such a defensive position in response to
adverse market, economic, political, or other conditions, or to enable the Fund
to take advantage of buying opportunities. If a Fund adopts a defensive position
at an inappropriate time, the Fund's return may be lower than it otherwise would
have been.
15
<PAGE> 19
MANAGEMENT OF THE FUNDS
The Company utilizes a Manager/Subadviser structure for advisory services.
- The Manager has ultimate responsibility for all investment advisory
services and supervises the subadvisers' performance of these services.
- The subadvisers make the day-to-day investment decisions for the Funds.
- Each Fund may change or add subadvisers, or change the agreements with
its subadvisers, if it concludes that doing so is in the best interest
of the Fund's shareholders. The Fund can make these changes without
shareholder approval, but will notify you within ninety days of such a
change. The Manager monitors the subadvisers' performance and
recommends to the Funds when to make these kinds of changes.
- For each Fund with more than one subadviser, the Manager decides how to
allocate the Fund's assets among the subadvisers.
- Each Fund pays an investment advisory fee to the Manager and to the
subadviser(s).
The following chart lists each Fund's current subadviser(s), the total
investment advisory fees the Fund paid in 1999 as a percentage of the Fund's
average net assets, and the maximum advisory fees the Fund is permitted to pay,
also as a percentage of average net assets.
<TABLE>
<CAPTION>
MAXIMUM
TOTAL ADVISORY PERMISSIBLE
FUND SUBADVISER(S) FEES IN 1999 ADVISORY FEE
---- ------------- -------------- ------------
<S> <C> <C> <C>
Global High-Yield Bond Fund Credit Suisse Asset Management, LLC 0.67% 0.78%
International Equity Fund Bank of Ireland Asset Management 0.59% 0.80%
(U.S.) Limited
Emerging Opportunities Fund SG Cowen Asset Management and 0.75% 1.05%
Chartwell Investment Partners and
State Street Global Advisors
Core Equity Fund Equinox Capital Management, LLC 0.56% 0.70%
and State Street Global Advisors
Long-Term Bond Fund Western Asset Management Company 0.50% 0.60%
Intermediate-Term Bond Fund Travelers Asset Management 0.49% 0.60%
International Company LLC
</TABLE>
Information about the Manager and about each of the Subadvisers appears
below.
AMERICAN ODYSSEY FUNDS MANAGEMENT LLC (the "Manager") serves as the overall
investment adviser to the Funds. The Manager was organized at the same time as
the Funds and has managed them since their inception. The Manager is a member of
The Copeland Companies and is, like all of The Copeland Companies, an indirect
wholly-owned subsidiary of CitiStreet LLC. CitiStreet LLC is indirectly jointly
owned 50% by Citigroup Inc. and 50% by State Street Corporation. The Manager
retains consultants to assist it in monitoring and evaluating the performance of
the subadvisers. The Manager's address is Two Tower Center, P.O. Box 1063, East
Brunswick, New Jersey 08816-1063.
CREDIT SUISSE ASSET MANAGEMENT, LLC ("CSAM") serves as subadviser for the
Global High-Yield Bond Fund. Its offices are at One Citicorp Center, 153 East
53rd Street, New York, New York 10022. It is an indirect wholly-owned subsidiary
of Credit Suisse Group, a Swiss corporation. CSAM serves as an
16
<PAGE> 20
investment adviser to a variety of individual and institutional investors,
including mutual funds. As of December 31, 1999, CSAM managed more than $76
billion of assets in the United States and abroad. The following individuals are
responsible for the day-to-day management of the Global High-Yield Bond Fund:
Richard Lindquist serves as Executive Director and is a Portfolio Manager
at CSAM and heads its high-yield portfolio team. Mr. Lindquist joined CSAM
in 1995 as a result of CSAM's acquisition of CS First Boston Investment
Management. Prior to joining CS First Boston, Mr. Lindquist worked for
Prudential Insurance Company of America, where he managed high-yield
portfolios totaling approximately $1.3 billion, and T. Rowe Price
Associates, where he managed a high-yield bond mutual fund. Mr. Lindquist
has had responsibility for the Global High-Yield Bond Fund since 1998.
Gregg Diliberto serves as Managing Director and is a Portfolio Manager at
CSAM, where he is responsible for the interest rate sensitivity of all CSAM
bond assignments and the management of structured fixed income portfolios
(domestic and international) and insurance accounts. His work includes
managing interest rate futures, options, municipals, and convertibles, as
well as more conventional securities. Mr. Diliberto built CSAM's
proprietary computer models for trading, option valuation, and asset
liability modeling. Prior to joining CSAM in 1984, Mr. Diliberto spent
seven years at Buck Consultants, where he analyzed pension fund finances.
Mr. Diliberto has had responsibility for the Global High-Yield Bond Fund
since 1998.
Leland E. Crabbe serves as Director at CSAM and devises portfolio
strategies for corporate and emerging market debt securities. He joined
CSAM in 1998 from Merrill Lynch, where he traded corporate and emerging
market debt after working in fixed income syndicate and as a corporate bond
strategist. Previously, he was a corporate bond analyst with the Federal
Reserve in Washington. Mr. Crabbe has had responsibility for the Global
High-Yield Bond Fund since 1999.
BANK OF IRELAND ASSET MANAGEMENT (U.S.) LIMITED ("BIAM") serves as
subadviser for the International Equity Fund. It is an indirect wholly-owned
subsidiary of Bank of Ireland, an Irish corporation. Its head offices are at 26
Fitzwilliam Place, Dublin 2, Ireland. Its U.S. offices are at 75 Holly Hill
Lane, Greenwich, CT 06830. Bank of Ireland established its worldwide investment
management operations, BIAM, in 1966 and currently manages over $50 billion in
global securities for a variety of clients in the United States and abroad. BIAM
(U.S.) was established in 1987 to provide services to North American investors
and opened its U.S. office in 1988. As of December 31, 1999, BIAM (U.S.) has
over $25 billion under management on behalf of its U.S. and Canadian clients.
BIAM's Strategy Group makes all the investment decisions for the International
Equity Fund, and no person(s) is primarily responsible for making
recommendations to that Group.
CHARTWELL INVESTMENT PARTNERS ("Chartwell") serves as one of the
subadvisers for the Emerging Opportunities Fund. Its offices are at 1235
Westlakes Drive, Suite 330, Berwyn, PA 19312. Chartwell serves as an investment
adviser to a variety of individual and institutional investors, including mutual
funds. As of December 31, 1999, Chartwell managed approximately $3.5 billion of
assets. The following individuals are responsible for the day-to-day management
of the portion of the Emerging Opportunities Fund managed by Chartwell:
Edward N. Antoian co-founded Chartwell in 1997 and is currently a partner
there. From 1984 to 1997, Mr. Antoian was a Senior Portfolio Manager at
Delaware Investment Advisers, managing institutional assets in small and
mid-cap growth styles as well as the Trend and DelCap Funds. Prior to
joining Delaware, Mr. Antoian was employed by E.F. Hutton in the
institutional equity division.
17
<PAGE> 21
Mr. Antoian has 20 years' experience in equity investing. Mr. Antoian has
had responsibility for the Emerging Opportunities Fund since 1998.
Michael D. Jones joined Chartwell in 1998 as a Portfolio Manager on the
Small Cap Growth team. From 1995 to 1998, Mr. Jones was a Portfolio Manager
at Pilgrim Baxter and Associates, where he managed institutional, small cap
growth assets. Mr. Jones was an equity portfolio manager at The Bank of New
York from 1990 to 1995. Mr. Jones has 16 years' experience in equity
investing. Mr. Jones has had responsibility for the Emerging Opportunities
Fund since 1998.
SG COWEN ASSET MANAGEMENT, INC. ("SG Cowen") serves as one of the
subadvisers for Emerging Opportunities Fund. Its principal offices are at 560
Lexington Avenue, New York, NY 10020. SG Cowen serves as investment adviser to a
variety of individual and institutional investors, including mutual funds. As of
December 31, 1999, SG Cowen managed more than $4.2 billion of assets. The
following individual is responsible for the day-to-day management of the portion
of the Fund managed by SG Cowen:
William Church, the portfolio manager, is Managing Director and Chief
Investment Officer of SG Cowen, and has been with SG Cowen and its
predecessors since 1982. Mr. Church has had responsibility for the Emerging
Opportunities Fund since 1997.
STATE STREET GLOBAL ADVISORS ("SSgA") serves as one of the subadvisers for
both the Emerging Opportunities Fund and the Core Equity Fund. Its offices are
at One International Place, Boston, MA 02110. SSgA is a division of State Street
Bank and Trust Company, which is a wholly-owned subsidiary of State Street
Corporation. SSgA is an affiliate of the Manager. As of December 31, 1999, SSgA
managed approximately $672 billion of assets. SSgA manages a portion of the Core
Equity Fund with an objective of matching the performance of the S&P 500 Index.
SSgA manages a portion of the Emerging Opportunities Fund with an objective of
matching the performance of the Russell 2500 Index.
EQUINOX CAPITAL MANAGEMENT, LLC serves as one of the subadvisers for the
Core Equity Fund. Its corporate offices are at 590 Madison Avenue, New York, NY
10022. Equinox serves as an investment adviser to a variety of individual and
institutional investors. As of December 31, 1999, Equinox managed more than
$13.7 billion of assets. The following individuals are responsible for the
day-to-day management of the Core Equity Fund:
Ronald J. Ulrich founded Equinox in 1989 and has served as Chairman and
Chief Investment Officer since the firm's inception. He oversees the firm's
portfolio construction and stock selection committees. Prior to Equinox,
Mr. Ulrich was with Morgan Stanley Asset Management, which he co-founded.
He served as Managing Director at Morgan Stanley Group, Inc. and was
responsible for equity management in their asset management division. Mr.
Ulrich has over 29 years' experience in the investment management field.
Mr. Ulrich has had responsibility for the Core Equity Fund since 1993.
Wendy D. Lee joined Equinox in June 1992 as Director of Research. Ms. Lee,
together with Mr. Ulrich, oversees portfolio construction and stock
selection. From May 1985 through June 1992, she was a Partner and Senior
Equity Analyst at Brinson Partners. Ms. Lee has over 19 years experience in
the investment management field. Ms. Lee has had responsibility for the
Core Equity Fund since 1993.
PUTNAM INVESTMENT MANAGEMENT, INC. ("Putnam") serves as one of the
subadvisers for the Core Equity Fund. It is wholly-owned by Putnam Investments,
Inc., which is, in turn, except for a minority interest owned by employees,
wholly-owned by Marsh & McLennan Companies, Inc. Putnam's offices are at One
Post Office Square, Boston, MA 02109. As of December 31, 1999, Putnam managed
approximately
18
<PAGE> 22
$391 billion of assets. The following individuals are responsible for the
day-to-day management of the portion of the Core Equity Fund managed by Putnam:
David J. Santos is Senior Vice President and Portfolio Manager in Putnam's
Large Cap Growth Equity Group. He is also responsible for several
institutional and Taft-Hartley portfolios and is co-manager of Putnam
Growth Opportunities Fund and Putnam Balanced Fund. Mr. Santos is primarily
responsible for fundamental research coverage of the technology sector. He
joined Putnam in 1986 as Pricing Operations Manager and subsequently worked
as Manager of Statistical Analysis. In 1991, he became Asset Allocation
Analyst in the Diversified Growth Group and he joined the Growth Equity
Group in 1992. Mr. Santos has 13 years of investment experience. He has had
responsibility for the Core Equity Fund since 2000.
WESTERN ASSET MANAGEMENT COMPANY serves as subadviser for the Long-Term
Bond Fund. Its corporate offices are at 117 East Colorado Boulevard, Pasadena,
CA 91105. Western Asset Management serves as an investment adviser to a variety
of individual and institutional investors, including mutual funds. As of
December 31, 1999, Western Asset Management managed more than $55 billion of
assets. The following individual is responsible for the day-to-day management of
the Long-Term Bond Fund:
S. Kenneth Leech joined Western Asset in May 1990 and currently serves as
Director of Portfolio Management. He is responsible for overseeing the
implementation of the firm's investment strategy. Mr. Leech has 22 years
experience with fixed income investing. Mr. Leech has had responsibility
for the Long-Term Bond Fund since 1993.
TRAVELERS ASSET MANAGEMENT INTERNATIONAL COMPANY LLC ("TAMIC") serves as
subadviser for the Intermediate-Term Bond Fund. TAMIC is a wholly-owned indirect
subsidiary of Citigroup Inc. and is an affiliate of the Manager. TAMIC's
corporate offices are at One Tower Square, Hartford, CT 06183. It serves as an
investment adviser to a variety of individual and institutional investors,
including mutual funds and variable annuity portfolios. As of December 31, 1999,
TAMIC managed more than $12.5 billion of assets. The following individuals are
responsible for the day-to-day management of the Intermediate-Term Bond Fund:
F. Denney Voss joined The Travelers in 1980. Mr. Voss is an Executive Vice
President of TAMIC and Citigroup Investments. In addition to the
Intermediate-Term Bond Fund, he manages the Travelers intermediate
corporate bond portfolio, the Travelers Property/Casualty portfolio, and
the Travelers Quality Bond Fund. Mr. Voss has had responsibility for the
Intermediate-Term Bond Fund since 1995.
David A. Tyson, Ph.D., C.F.A., joined The Travelers in 1985. Mr. Tyson is
President and Chief Investment Officer of TAMIC and an Executive Vice
President of Citigroup Investments and head of its Portfolio Management
Group. He also manages the Travelers insurance convertible portfolio,
several Travelers insurance business line portfolios, and several other
TAMIC portfolios. His previous responsibilities included managing the
Travelers insurance derivatives, mortgage-backed, and quantitative
investment groups. Mr. Tyson has had responsibility for the
Intermediate-Term Bond Fund since 1995.
19
<PAGE> 23
PRICING, PURCHASE, AND REDEMPTION OF SHARES
PRICING OF SHARES
The price of one share of each Fund is equal to that Fund's "net asset
value" per share. The net asset value per share of each Fund equals:
- The sum of the value of all the securities held by that Fund.
+ We value stocks, options, and futures contracts based on market
quotations.
+ We value bonds and other debt securities with remaining maturities of
60 days or more using an independent pricing service.
+ We value bonds and other debt securities with remaining maturities of
less than 60 days based on an amortized cost basis.
+ We convert quotations of foreign securities in a foreign currency to
U.S. dollars at the current rate we obtain from a recognized bank or
dealer.
+ We value forward contracts at the current cost of covering or
offsetting the contracts.
+ We value securities or assets without readily-available market
quotations at fair value as we reasonably determine.
- Plus any cash or other assets the Fund holds.
- Minus all of the Fund's liabilities.
+ Liabilities include the Fund's expenses (such as the investment
advisory fees), which we compute daily.
- Divided by the total number of shares outstanding of the Fund.
We compute the net asset value of the shares of each Fund once daily, as of
4:15 p.m. New York City time, on each day the New York Stock Exchange is open
for business.
PURCHASE OF SHARES
We sell shares of the Funds at the first price set after we receive the
purchase order. You pay no sales charge or sales load on the purchase of any
shares.
REDEMPTION OF SHARES
We redeem shares for cash, within 7 days of receipt of proper notice of
redemption or sooner if required by law. We redeem the shares at the first price
set after we receive a proper request for redemption. You pay no redemption
charge. We may suspend the right to redeem shares or to receive payment if:
- the SEC tells us that trading on the New York Stock Exchange ("NYSE")
is restricted;
- the NYSE is closed (other than customary weekend and holiday closings);
- the SEC tells us that an emergency exists, so that we cannot readily
sell a Fund's securities or compute a Fund's net asset value; or
- the SEC orders the suspension to protect shareholders of a Fund.
20
<PAGE> 24
DISTRIBUTIONS
Each Fund distributes substantially all of its net investment income, if
any, and all of its net realized capital gains from selling securities. These
distributions are automatically reinvested in additional shares of the Fund.
OTHER INFORMATION
FEDERAL INCOME TAXES
If you own or are considering buying a variable life insurance policy or
variable annuity contract that invests in the Funds, you should consult its
prospectus for a discussion of tax consequences of investing in the Funds.
The tax laws and regulations that apply to qualified retirement plans are
complex and vary according to the type of plan and its terms and conditions. In
many cases, qualified retirement plans enjoy a tax-advantaged status, so that
participants in such a plan will not be taxed on their interests in the plan
until they receive a distribution or payment from it. If you participate in a
qualified retirement plan that invests in the Funds, you should consult a
qualified tax adviser to learn about your specific tax situation.
MONITORING FOR POSSIBLE CONFLICT
The Funds sell shares to fund variable annuity contracts, to fund variable
life insurance contracts, and to qualified retirement plans. It is possible that
the interests of variable life insurance policy owners, variable annuity
contract owners, and participants in qualified retirement plans could conflict
in a material way. The Funds will monitor the situation and, in the event that a
material conflict did develop, would determine what action to take in response.
CONVERSION OF SHORT-TERM BOND FUND TO GLOBAL HIGH-YIELD BOND FUND
Prior to May 1, 1998, the American Odyssey Global High-Yield Bond Fund was
named the American Odyssey Short-Term Bond Fund and had a different investment
objective, investment program, subadviser, investment portfolio, and asset base.
Specifically, the Short-Term Bond Fund invested in low-risk, low-yield bonds,
primarily from the United States, while the Global High-Yield Bond Fund invests
in high-risk, high-yield bonds the United States and abroad. Because of these
differences, information about the Short-Term Bond Fund's performance, expenses,
fees, asset base, net asset value, operations, distributions, investment
portfolio, and other data is unlikely to be helpful to you.
21
<PAGE> 25
FINANCIAL HIGHLIGHTS
The financial highlights table is meant to help you understand the Funds'
financial performance for the last five years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned or lost on an investment
in the Fund assuming reinvestment of all dividends and distributions. KPMG, LLP
audited the information for year ending December 31, 1999. KPMG's report, along
with the Funds' financial statements, appear in the Annual Report, which we will
send you on request. PricewaterhouseCoopers LLP audited the information for
years up to and including year-end December 31, 1998. To learn how to obtain the
Annual Report and other information about the Funds, see the back cover.
Financial Highlights
American Odyssey Funds, Inc.
<TABLE>
<CAPTION>
Global High-Yield Bond Fund
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31,
-----------------------------------------------------------
<CAPTION>
(1)
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of year.......................................... $ 9.92 $ 10.31 $ 10.24 $ 10.22 $ 9.68
------- ------- ------- ------- -------
OPERATIONS
Net investment income (2).................................. 0.96 0.66 0.55 0.37 0.51
Net realized and unrealized gain (loss) on investments..... 0.07 (1.05) 0.08 0.02 0.54
------- ------- ------- ------- -------
Total from investment operations........................... 1.03 (0.39) 0.63 0.39 1.05
------- ------- ------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income....................... (0.65) (0.00) (0.56) (0.37) (0.51)
------- ------- ------- ------- -------
Total distributions........................................ (0.65) (0.00) (0.56) (0.37) (0.51)
------- ------- ------- ------- -------
NET ASSET VALUE
End of year................................................ $ 10.30 $ 9.92 $ 10.31 $ 10.24 $ 10.22
======= ======= ======= ======= =======
TOTAL RETURN (3)............................................ 10.68% (3.76)% 6.11% 3.80% 10.86%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of year (000's omitted).................. $96,622 $82,008 $58,821 $48,673 $25,855
Ratios of expenses to average net assets:
Before repayments/reimbursements and directed brokerage
arrangements........................................... 0.83% 0.78% 0.66% 0.68% 0.76%
After repayments/reimbursements and before directed
brokerage arrangements................................. 0.83% 0.78%(5) 0.74%(5) 0.75%(5) 0.75%(5)
After repayments/reimbursements and directed brokerage
arrangements (4)....................................... 0.83% 0.78% 0.74% 0.75% 0.75%
Ratios of net investment income to average net assets:
Before repayments/reimbursements and directed brokerage
arrangements........................................... 10.25% 7.56% 5.53% 5.54% 5.77%
After repayments/reimbursements and directed brokerage
arrangements........................................... 10.25% 7.56% 5.45% 5.47% 5.78%
Portfolio turnover rate.................................... 45.15% 193.04% 200.78% 154.51% 93.37%
</TABLE>
- --------------------------------------------------------------------------------
(1) Prior to May 1, 1998, the Global High-Yield Bond Fund was named the
Short-Term Bond Fund and had a substantially different investment objective
and investment program.
(2) Net of expense reimbursements and repayments.
(3) Total return is calculated assuming an initial investment made at net asset
value at the beginning of the period, all dividends and distributions are
reinvested and redemption on the last day of the period. Total Returns do
not reflect charges attributable to separate account expenses deducted by
the insurance company for variable annuity contract shareholders. Inclusion
of these charges would reduce the total return shown.
(4) The after repayments/reimbursements and directed brokerage arrangements
figure may be greater than the before repayments/reimbursements and directed
brokerage arrangements figure because of repayments by the Fund to the
Manager once the Fund is operating below the expense limitation.
(5) Unaudited.
22
<PAGE> 26
Financial Highlights
American Odyssey Funds, Inc.
<TABLE>
<CAPTION>
International Equity Fund
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31,
---------------------------------------------------------------
<CAPTION>
1999 1998 1997 1996 1995
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of year........................................ $ 16.85 $ 15.48 $ 15.08 $ 12.68 $ 10.76
-------- -------- -------- -------- -------
OPERATIONS
Net investment income (1)................................ 0.17 0.09 0.57 0.29 0.17
Net realized and unrealized gain on investments.......... 5.31 2.21 0.19 2.48 1.87
-------- -------- -------- -------- -------
Total from investment operations......................... 5.48 2.30 0.76 2.77 2.04
-------- -------- -------- -------- -------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income..................... -- (0.31) (0.24) (0.30) (0.12)
Distributions from net realized gains on investments..... -- (0.62) (0.06) (0.07) --
Distributions in excess of net investment income or
realized
gains.................................................. -- -- (0.06) -- --
-------- -------- -------- -------- -------
Total distributions...................................... -- (0.93) (0.36) (0.37) (0.12)
-------- -------- -------- -------- -------
NET ASSET VALUE
End of year.............................................. $ 22.33 $ 16.85 $ 15.48 $ 15.08 $ 12.68
======== ======== ======== ======== =======
TOTAL RETURN (2).......................................... 32.52% 14.91% 5.04% 21.93% 19.00%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of year (000's omitted)................ $388,492 $300,072 $236,571 $187,109 $92,115
Ratios of expenses to average net assets:
Before repayments/reimbursements and directed brokerage
arrangements......................................... 0.72% 0.73% 0.79% 0.86% 1.00%
After repayments/reimbursements and before directed
brokerage arrangements............................... 0.72% 0.73%(4) 0.79%(4) 0.86%(4) 1.09%(4)
After repayments/reimbursements and directed brokerage
arrangements (3)..................................... 0.71% 0.72% 0.77% 0.83% 1.08%
Ratios of net investment income to average net assets:
Before repayments/reimbursements and directed brokerage
arrangements......................................... 0.90% 1.22% 1.61% 1.51% 1.70%
After repayments/reimbursements and directed brokerage
arrangements......................................... 0.91% 1.23% 1.63% 1.54% 1.62%
Portfolio turnover rate.................................. 18.36% 20.65% 23.08% 21.54% 31.40%
</TABLE>
- --------------------------------------------------------------------------------
(1) Net of expense reimbursements, repayments and directed brokerage
arrangements.
(2) Total return is calculated assuming an initial investment made at net asset
value at the beginning of the period, all dividends and distributions are
reinvested and redemption on the last day of the period. Total Returns do
not reflect charges attributable to separate account expenses deducted by
the insurance company for variable annuity contract shareholders. Inclusion
of these charges would reduce the total return shown.
(3) The after repayments/reimbursements and directed brokerage arrangements
figure may be greater than the before repayments/reimbursements and directed
brokerage arrangements figure because of repayments by the Fund to the
Manager once the Fund is operating below the limitation.
(4) Unaudited.
23
<PAGE> 27
Financial Highlights
American Odyssey Funds, Inc.
<TABLE>
<CAPTION>
Emerging Opportunities Fund
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31,
----------------------------------------------------------------
<CAPTION>
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of year....................................... $ 13.09 $ 14.33 $ 13.42 $ 15.02 $ 11.84
-------- -------- -------- -------- --------
OPERATIONS
Net investment loss (1)................................. (0.04) -- -- -- --
Net realized and unrealized gain (loss) on
investments........................................... 4.58 (1.24) 0.91 (0.47) 3.81
-------- -------- -------- -------- --------
Total from investment operations........................ 4.54 (1.24) 0.91 (0.47) 3.81
-------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net realized gains on investments.... (1.21) -- -- (1.13) (0.58)
Distributions in excess of net investment income or
realized gains........................................ -- -- -- -- (0.05)
-------- -------- -------- -------- --------
Total distributions..................................... (1.21) -- -- (1.13) (0.63)
-------- -------- -------- -------- --------
NET ASSET VALUE
End of year............................................. $ 16.42 $ 13.09 $ 14.33 $ 13.42 $ 15.02
======== ======== ======== ======== ========
TOTAL RETURN (2)......................................... 36.71% (8.65)% 6.78% (3.03)% 32.23%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of year (000's omitted)............... $373,638 $268,330 $258,886 $171,278 $157,193
Ratios of expenses to average net assets:
Before repayments/reimbursements and directed
brokerage arrangements.............................. 0.87% 0.87% 0.86% 0.72% 0.77%
After repayments/reimbursements and before directed
brokerage arrangements.............................. 0.87% 0.87%(4) 0.86%(4) 0.72%(4) 0.77%(4)
After repayments/reimbursements and directed brokerage
arrangements (3).................................... 0.83% 0.86% 0.86% 0.72% 0.77%
Ratios of net investment income to average net assets:
Before repayments/reimbursements and directed
brokerage arrangements.............................. (0.36)% (0.23)% (0.20)% (0.34)% (0.26)%
After repayments/reimbursements and directed brokerage
arrangements........................................ (0.32)% (0.22)% (0.20)% (0.34)% (0.26)%
Portfolio turnover rate................................. 113.01% 138.02% 80.36% 43.00% 36.02%
</TABLE>
- --------------------------------------------------------------------------------
(1) Net of expense reimbursements, repayments and directed brokerage
arrangements.
(2) Total return is calculated assuming an initial investment made at net asset
value at the beginning of the period, all dividends and distributions are
reinvested and redemption on the last day of the period. Total Returns do
not reflect charges attributable to separate account expenses deducted by
the insurance company for variable annuity contract shareholders. Inclusion
of these charges would reduce the total return shown.
(3) The after repayments/reimbursements and directed brokerage arrangements
figure may be greater than the before repayments/reimbursements and directed
brokerage arrangements figure because of repayments by the Fund to the
Manager once the Fund is operating below the expense limitation.
(4) Unaudited.
24
<PAGE> 28
Financial Highlights
American Odyssey Funds, Inc.
<TABLE>
<CAPTION>
Core Equity Fund
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31,
----------------------------------------------------------------
<CAPTION>
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of year....................................... $ 20.61 $ 19.93 $ 15.49 $ 13.32 $ 10.06
-------- -------- -------- -------- --------
OPERATIONS
Net investment income (1)............................... 0.22 0.26 0.24 0.26 0.25
Net realized and unrealized gain (loss) on
investments........................................... (0.06) 2.82 4.65 2.83 3.63
-------- -------- -------- -------- --------
Total from investment operations........................ 0.16 3.08 4.89 3.09 3.88
-------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income.................... (0.27) (0.00) (0.24) (0.27) (0.24)
Distributions from net realized gains on investments.... (2.89) (2.40) (0.21) (0.65) (0.37)
Distributions in excess of net investment income or
realized gains........................................ -- -- -- -- (0.01)
-------- -------- -------- -------- --------
Total distributions..................................... (3.16) (2.40) (0.45) (0.92) (0.62)
-------- -------- -------- -------- --------
NET ASSET VALUE
End of year............................................. $ 17.61 $ 20.61 $ 19.93 $ 15.49 $ 13.32
======== ======== ======== ======== ========
TOTAL RETURN (2)......................................... (0.28)% 15.54% 31.67% 23.20% 38.56%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of year (000's omitted)............... $470,417 $472,953 $414,698 $273,772 $183,735
Ratios of expenses to average net assets:
Before repayments/reimbursements and directed
brokerage arrangements.............................. 0.64% 0.65% 0.67% 0.68% 0.72%
After repayments/reimbursements and before directed
brokerage arrangements.............................. 0.64% 0.65%(4) 0.67%(4) 0.68%(4) 0.72%(4)
After repayments/reimbursements and directed brokerage
arrangements (3).................................... 0.62% 0.61% 0.65% 0.66% 0.70%
Ratios of net investment income to average net assets:
Before repayments/reimbursements and directed
brokerage arrangements.............................. 1.17% 1.30% 1.36% 1.93% 2.32%
After repayments/reimbursements and directed brokerage
arrangements........................................ 1.19% 1.34% 1.38% 1.95% 2.33%
Portfolio turnover rate................................. 56.15% 51.52% 45.54% 45.73% 38.44%
</TABLE>
- --------------------------------------------------------------------------------
(1) Net of expense reimbursements, repayments and directed brokerage
arrangements.
(2) Total return is calculated assuming an initial investment made at net asset
value at the beginning of the period, all dividends and distributions are
reinvested and redemption on the last day of the period. Total Returns do
not reflect charges attributable to separate account expenses deducted by
the insurance company for variable annuity contract shareholders. Inclusion
of these charges would reduce the total return shown.
(3) The after repayments/reimbursements and directed brokerage arrangements
figure may be greater than the before repayments/reimbursements and directed
brokerage arrangements figure because of repayments by the Fund to the
Manager once the Fund is operating below the expense limitation.
(4) Unaudited.
25
<PAGE> 29
Financial Highlights
American Odyssey Funds, Inc.
<TABLE>
<CAPTION>
Long-Term Bond Fund
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31,
----------------------------------------------------------------
<CAPTION>
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of year....................................... $ 11.49 $ 10.74 $ 10.15 $ 10.53 $ 9.37
-------- -------- -------- -------- --------
OPERATIONS
Net investment income (1)............................... 0.65 0.66 0.61 0.50 0.53
Net realized and unrealized gain (loss) on
investments........................................... (0.98) 0.31 0.61 (0.36) 1.57
-------- -------- -------- -------- --------
Total from investment operations........................ (0.33) 0.97 1.22 0.14 2.10
-------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income.................... (0.67) (0.01) (0.62) (0.52) (0.57)
Distributions from net realized gains on investments.... (0.31) (0.21) (0.01) -- (0.27)
Distributions in excess of net investment income or
realized gains........................................ -- -- -- -- (0.10)
-------- -------- -------- -------- --------
Total distributions..................................... (0.98) (0.22) (0.63) (0.52) (0.94)
-------- -------- -------- -------- --------
NET ASSET VALUE
End of year............................................. $ 10.18 $ 11.49 $ 10.74 $ 10.15 $ 10.53
======== ======== ======== ======== ========
TOTAL RETURN (2)......................................... (2.74)% 9.04% 12.01% 1.34% 22.44%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of year (000's omitted)............... $254,368 $254,365 $218,854 $160,695 $114,612
Ratios of expenses to average net assets:
Before repayments/reimbursements and directed
brokerage arrangements.............................. 0.60% 0.60% 0.62% 0.63% 0.66%
After repayments/reimbursements and before directed
brokerage arrangements.............................. 0.60% 0.60%(4) 0.62%(4) 0.63%(4) 0.70%(4)
After repayments/reimbursements and directed brokerage
arrangements (3).................................... 0.60% 0.60% 0.62% 0.63% 0.70%
Ratios of net investment income to average net assets:
Before repayments/reimbursements and directed
brokerage arrangements.............................. 6.41% 5.96% 6.22% 5.88% 6.67%
After repayments/reimbursements and directed brokerage
arrangements........................................ 6.41% 5.96% 6.22% 5.88% 6.63%
Portfolio turnover rate................................. 81.29% 224.48% 358.67% 369.32% 381.53%
</TABLE>
- --------------------------------------------------------------------------------
(1) Net of expense reimbursements, repayments and directed brokerage
arrangements.
(2) Total return is calculated assuming an initial investment made at net asset
value at the beginning of the period, all dividends and distributions are
reinvested and redemption on the last day of the period. Total Returns do
not reflect charges attributable to separate account expenses deducted by
the insurance company for variable annuity contract shareholders. Inclusion
of these charges would reduce the total return shown.
(3) The after repayments/reimbursements and directed brokerage arrangements
figure may be greater than the before repayments/reimbursements and directed
brokerage arrangements figure because of repayments by the Fund to the
Manager once the Fund is operating below the expense limitation.
(4) Unaudited.
26
<PAGE> 30
Financial Highlights
American Odyssey Funds, Inc.
<TABLE>
<CAPTION>
Intermediate-Term Bond Fund
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31,
----------------------------------------------------------------
<CAPTION>
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of year....................................... $ 11.13 $ 10.31 $ 10.20 $ 10.38 $ 9.61
-------- -------- -------- -------- --------
OPERATIONS
Net investment income (1)............................... 0.59 0.58 0.59 0.61 0.54
Net realized and unrealized gain (loss) on
investments........................................... (0.44) 0.29 0.17 (0.20) 0.90
-------- -------- -------- -------- --------
Total from investment operations........................ 0.15 0.87 0.76 0.41 1.44
-------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income.................... (0.59) (0.00) (0.60) (0.59) (0.55)
Distributions from net realized gains on investments.... (0.33) (0.05) (0.05) -- (0.07)
Distributions in excess of net investment income or
realized gains........................................ -- -- -- -- (0.05)
-------- -------- -------- -------- --------
Total distributions..................................... (0.92) (0.05) (0.65) (0.59) (0.67)
-------- -------- -------- -------- --------
NET ASSET VALUE
End of year............................................. $ 10.36 $ 11.13 $ 10.31 $ 10.20 $ 10.38
======== ======== ======== ======== ========
TOTAL RETURN (2)......................................... 1.50% 8.48% 7.50% 3.95% 15.01%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of year (000's omitted)............... $131,123 $126,359 $108,596 $ 86,385 $ 73,480
Ratios of expenses to average net assets:
Before repayments/reimbursements and directed
brokerage arrangements.............................. 0.59% 0.60% 0.63% 0.66% 0.68%
After repayments/reimbursements and before directed
brokerage arrangements.............................. 0.59% 0.60%(4) 0.63%(4) 0.66%(4) 0.75%(4)
After repayments/reimbursements and directed brokerage
arrangements (3).................................... 0.59% 0.60% 0.63% 0.66% 0.75%
Ratios of net investment income to average net assets:
Before repayments/reimbursements and directed
brokerage arrangements.............................. 5.83% 5.50% 5.90% 5.77% 6.19%
After repayments/reimbursements and directed brokerage
arrangements........................................ 5.83% 5.50% 5.90% 5.77% 6.11%
Portfolio turnover rate................................. 317.23% 407.24% 215.97% 191.20% 137.14%
</TABLE>
- --------------------------------------------------------------------------------
(1) Net of expense reimbursements, repayments and directed brokerage
arrangements.
(2) Total return is calculated assuming an initial investment made at net asset
value at the beginning of the period, all dividends and distributions are
reinvested and redemption on the last day of the period. Total Returns do
not reflect charges attributable to separate account expenses deducted by
the insurance company for variable annuity contract shareholders. Inclusion
of these charges would reduce the total return shown.
(3) The after repayments/reimbursements and directed brokerage arrangements
figure may be greater than the before repayments/reimbursements and directed
brokerage arrangements figure because of repayments by the Fund to the
Manager once the Fund is operating below the expense limitation.
(4) Unaudited.
27
<PAGE> 31
WHERE TO OBTAIN ADDITIONAL INFORMATION
You can obtain additional information about American Odyssey Funds, Inc. free
upon request, including the following.
The ANNUAL REPORT TO SHAREHOLDERS AND SEMI-ANNUAL REPORT TO
SHAREHOLDERS describe the Fund's performance and list what
securities each Fund held during the last year or half year.
The Annual Report also discusses the market conditions and
investment strategies that significantly affect the Fund's
performance during the last year.
The STATEMENT OF ADDITIONAL INFORMATION contains additional
information about American Odyssey Funds, Inc. and about the
Funds' investment strategies and policies. This prospectus
incorporates the Statement of Additional Information by
reference, which means that the Statement of Additional
Information is legally considered a part of the prospectus.
To obtain these documents, or for other inquiries about American Odyssey Funds,
Inc.:
Call 1-800-242-7884.
Write to American Odyssey Funds, Inc., Two Tower Center, P.O. Box 1063,
East Brunswick, New Jersey 08816-1063.
To request other information about American Odyssey Funds, Inc., or to make
shareholder inquiries, please contact the Funds at the same address and phone
number.
In addition, you may obtain access to text-only versions of these documents
through the Securities and Exchange Commission:
You may visit the Securities and Exchange Commission's Public Reference
Room in Washington, D.C. Call 1-800-SEC-0330 for more information.
You may visit the Securities and Exchange Commission's Internet site at
http://www.sec.gov.
You may also obtain copies of these documents, upon payment of a
duplication fee, by writing the Public Reference Section of the
Securities and Exchange Commission, Washington, D.C. 20549-6009.
[LOGO]
AMERICAN
ODYSSEY (R)
---------
FUNDS
American Odyssey Funds Management, Inc.
Two Tower Center
East Brunswick, NJ 08816
1-800-242-7884
AMERICAN ODYSSEY and the Sailing Ship Logo are
registered trademarks of American Odyssey Funds Management LLC.
(C)Copyright 1993-2000 American Odyssey Funds Management LLC.
American Odyssey Funds, Inc., SEC File No. 811-07450
<PAGE> 32
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 33
A M E R I C A N O D Y S S E Y F U N D S, I N C.
AMERICAN ODYSSEY GLOBAL HIGH-YIELD BOND FUND
AMERICAN ODYSSEY INTERNATIONAL EQUITY FUND
AMERICAN ODYSSEY EMERGING OPPORTUNITIES FUND
AMERICAN ODYSSEY CORE EQUITY FUND
AMERICAN ODYSSEY LONG-TERM BOND FUND
AMERICAN ODYSSEY INTERMEDIATE-TERM BOND FUND
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2000
American Odyssey Funds, Inc. is a diversified open-end management
investment company that is currently made up of six different "series" or Funds.
Each Fund is, for investment purposes, a separate investment fund, and each
issues a separate class of capital stock representing an interest in that Fund.
Shares of American Odyssey Funds, Inc. may be sold only to: (1) life
insurance company separate accounts to serve as the underlying investment
vehicle for variable annuity and variable life insurance contracts; (2)
qualified retirement plans (including arrangements under section 403(b) of the
Internal Revenue Code), as permitted by Treasury Regulations; and (3) life
insurance companies and their affiliates.
--------------------
This statement of additional information is not a prospectus. You should
read it in conjunction with the American Odyssey Funds, Inc. prospectus dated
May 1, 2000. You may obtain the prospectus without charge by writing to American
Odyssey Funds, Inc., Two Tower Center, P.O. Box 1063, East Brunswick, New Jersey
08816-1063, or by calling 1-800-242-7884. This statement of additional
information incorporates portions of the accompanying American Odyssey Funds,
Inc. Annual Report.
--------------------
American Odyssey Funds, Inc.
Two Tower Center, P.O. Box 1063
East Brunswick, New Jersey 08816-1063
Telephone: (732) 514-2000
<PAGE> 34
===================================
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT OBJECTIVES AND PROGRAMS............................................4
Equity Securities.................................................4
Preferred Stocks, Convertible Securities, and Warrants.......4
Depository Receipts..........................................4
Debt Securities...................................................5
Mortgage-Related Securities..................................5
Asset-Backed Securities......................................6
Additional Types of High-Yield Debt Securities...............6
Options...........................................................7
Options on Equity Securities.................................8
Options on Stock Indices....................................11
Options on Debt Securities..................................14
Options on Foreign Currencies...............................16
Futures Contracts................................................17
Stock Index Futures Contracts...............................18
Interest Rate Futures Contracts.............................19
Foreign Currency Futures Contracts..........................20
Options on Futures Contracts................................20
Forward Foreign Currency Exchange Contracts......................21
Short Sales Against the Box......................................23
When-Issued and Delayed Delivery Securities......................24
Lending of Portfolio Securities..................................24
Temporary Defensive Positions....................................24
Money Market Instruments.........................................25
Ratings of Debt Securities.......................................26
Ratings of Commercial Paper......................................30
INVESTMENT RESTRICTIONS......................................................31
</TABLE>
<PAGE> 35
===================================
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
- --------------------------------------------------------------------------------
<S> <C>
MANAGEMENT OF THE FUNDS......................................................35
The Company............................................................35
Directors and Officers.................................................36
Investment Advisers....................................................39
Structure.................................................39
Control...................................................42
Fees......................................................43
Other Service Providers................................................45
Codes of Ethics........................................................46
PORTFOLIO TRANSACTIONS.......................................................47
NET ASSET VALUE OF SHARES....................................................52
PERFORMANCE INFORMATION......................................................54
TAXES........................................................................56
OWNERSHIP OF SHARES..........................................................57
FINANCIAL STATEMENTS.........................................................58
</TABLE>
<PAGE> 36
===================================
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND PROGRAMS
The investment objectives of the various Funds, their strategies for achieving
those objectives, and the associated risks are described in the prospectus. This
section supplements that description.
EQUITY SECURITIES
PREFERRED STOCKS, CONVERTIBLE SECURITIES, AND WARRANTS
Each Fund may invest in preferred stocks and convertible securities. Preferred
stocks are equity securities whose owners have a claim on a company's earnings
and assets before common stockholders but after debt holders. Convertible
securities are debt or preferred stock which are convertible into or
exchangeable for common stock. In addition, the Global High-Yield Bond Fund, the
International Equity Fund, the Emerging Opportunities Fund, and the Core Equity
Fund may invest in warrants. Warrants are options to buy a stated number of
shares of common stock at a specified price any time during the life of the
warrant (generally two or more years).
DEPOSITORY RECEIPTS
The Global High-Yield Bond Fund, the International Equity Fund, the Emerging
Opportunities Fund, and the Core Equity Fund may each invest in foreign equity
securities. In some cases, the Funds might not purchase securities on the
principal market. For example, the Funds may purchase American Depository
Receipts ("ADRs"). ADRs are registered receipts typically issued in the United
States by a bank or trust company evidencing ownership of an underlying foreign
security. The Funds may invest in ADRs which are structured by a U.S. bank
without the sponsorship of the underlying foreign issuer. In addition to the
risks of foreign investment described in the prospectus, such unsponsored ADRs
may also be subject to the risks that the foreign issuer may not be obligated to
cooperate with the U.S. bank, and may not provide additional financial and other
information to the bank or the investor, or that such information in the U.S.
market may not be current. The Funds may likewise utilize European Depository
Receipts ("EDRs"), which are similar instruments, in bearer form, designed for
use in the European securities markets.
4
<PAGE> 37
===================================
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
DEBT SECURITIES
MORTGAGE-RELATED SECURITIES
The Global High-Yield Bond Fund, the Long-Term Bond Fund, and the
Intermediate-Term Bond Fund may invest in mortgage-backed securities issued by
the Government National Mortgage Association ("GNMA"), the Federal National
Mortgage Association ("FNMA"), and the Federal Home Loan Mortgage Corporation
("FHLMC"). These securities represent an interest in a pool of mortgages, such
as 30-year and 15-year fixed mortgages and adjustable rate mortgages. For GNMA
securities, the payment of principal and interest on the underlying mortgages is
guaranteed by the full faith and credit of the U.S. government; for FNMA and
FHLMC securities the payment of principal and interest is guaranteed by the
issuing agency, but not the U.S. government. The guarantees, however, do not
extend to the securities' value or yield, which like other fixed-income
securities, are likely to fluctuate inversely with fluctuations in interest
rates. Mortgage-backed securities have an investment characteristic that is not
applicable to most other fixed-income securities. When interest rates fall
appreciably, mortgage borrowers tend to refinance and prepay their mortgages,
increasing the principal payments from the pool. The proceeds can then be
reinvested, but only at lower rates. Thus, although the value of mortgage-backed
securities will generally decrease in the same way as other bonds when interest
rates are rising, their value may not increase as much when interest rates are
falling.
The same Funds may invest in mortgage-backed securities issued by private
entities, such as commercial or mortgage banks, savings and loan associations,
or broker-dealers, that meet the quality standards set forth above for corporate
debt. The issuer's obligation may vary but often it is to "pass-through" the
payments of principal and interest upon the mortgages in the pool. In some cases
timely payment of principal and interest is guaranteed or insured by a third
party, but in all cases, like any other fixed-income security, a default by the
issuer could lead to a loss.
The same Funds may invest in collateralized mortgage obligations ("CMOs"). CMOs
are mortgage-backed securities that have been partitioned into several classes
with a ranked priority with respect to payments on the underlying mortgages. The
prepayment risks of certain CMOs are higher than that of other mortgage-backed
securities because of this partitioning. In addition, certain CMOs have
encountered liquidity problems in rising interest rate environments with
consequent adverse effects on their market values.
5
<PAGE> 38
===================================
AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES
The Global High-Yield Bond Fund, the Long-Term Bond Fund, and the
Intermediate-Term Bond Fund may invest in asset-backed securities, which
represent a participation in, or are secured by and payable from, a stream of
payments generated by particular assets, most often a pool or pools of similar
assets (e.g., trade receivables). Asset-backed commercial paper, one type of
asset-backed securities, is issued by a special purpose entity, organized solely
to issue the commercial paper and to purchase interests in the assets. The
credit quality of these securities depends primarily upon the quality of the
underlying assets and the level of credit support and/or enhancement provided.
ADDITIONAL TYPES OF HIGH-YIELD DEBT SECURITIES
In furtherance of their respective investment objectives, the Global High-Yield
Bond Fund, Long-Term Bond Fund, and Intermediate-Term Bond Fund may invest in
the following specialized types of high-yield instruments. The latter two Funds
may invest up to 15% of their assets in high-yield debt securities, which may
include those described below. The Global High-Yield Bond Fund may invest up to
100% of its assets in high-yield debt securities, but the Manager does not
anticipate that the Fund ordinarily will invest more than 15% of its assets in
the specialized instruments described below.
Zero Coupon Bonds. Zero coupon bonds do not pay interest for several years, and
then pay full coupon interest until maturity. These bonds are sold at a
substantial original issue discount equal to the missing interest payment
compounded at the coupon rate. Zero coupon bonds give the issuer the flexibility
of reduced cash interest expense for several years, while giving the purchaser
the potential advantage of compounding the coupons at a higher rate than might
otherwise be available.
Zero coupon bonds bear special risks beyond those ordinarily associated with
high-yield securities. Because the bonds' cash flows are deferred and because
the bonds often represent very subordinated debt, their prices are subject to
more volatility than most other bonds and may be more greatly affected by
interest rate changes.
Step-up Bonds. Step-up bonds are a variant of zero coupon bonds. Step-up bonds
pay a low initial interest rate for several years and then pay a higher rate
until maturity. They are
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also issued at an original issue discount, and bear similar risks to those
associated with zero coupon bonds, although generally to a lesser degree.
Pay-in-kind Bonds. Pay-in-kind ("PIK") bonds pay interest either in cash or in
additional securities at the issuer's option for a specified period. Like zero
coupon bonds, PIK bonds are designed to give the issuer flexibility in managing
cash flow. Unlike zero coupon bonds, however, PIK bonds offer the investor the
opportunity to sell the additional securities issued in lieu of interest and
thus obtain current income on the original investment. Interest rate changes
tend to affect the market prices of PIK bonds to a greater extent than
securities that pay interest in cash.
Reset Bonds. The interest rate on reset bonds is adjusted periodically to a
level which should allow the bonds to trade at a specified dollar level,
generally par or $101. The rate can usually be raised, but the bonds have a low
call premium, limiting the opportunity for capital gains by the Fund. Some
resets have a maximum rate, generally 2.5% or 3% above the initial rate.
Increasing Rate Notes. Increasing rate notes ("IRNs") have interest rates that
increase periodically (by 1/4% per quarter, for example). IRNs are generally
used as a temporary financing instrument, because the increasing rate provides
an incentive for the issuer to refinance with longer-term debt. Thus, principal
is likely to be repaid more quickly than with other types of high-yield
securities, and it may not be possible for a Fund to reinvest the proceeds at
the same rates.
OPTIONS
Each Fund may write (i.e., sell) options under certain limitations described
below. In general, (1) the Global High-Yield Bond Fund, the International Equity
Fund, the Emerging Opportunities Fund, and the Core Equity Fund may purchase and
write (i.e., sell) put and call options on stocks or stock indices that are
traded on national securities exchanges or that are listed on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ"); (2) any
Fund other than the Emerging Opportunities and the Core Equity Funds may
purchase and write (i.e., sell) put and call options on debt securities
(including U.S. government debt securities) that are traded on national
securities exchanges or that result from privately negotiated transactions with
primary U.S. government securities dealers recognized by the Federal Reserve
Bank of New York; and (3) any Fund may purchase and
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write (i.e., sell) put and call options on foreign currencies traded on U.S. or
foreign securities exchanges or boards of trade. The Funds will only write
covered options, as explained below. An option gives the owner the right to buy
or sell securities at a predetermined exercise price for a given period of time.
Although options are primarily used to minimize principal fluctuations, or to
generate additional premium income for the Funds, they do involve certain risks.
Writing covered call options involves the risk of not being able to effect
closing transactions at a favorable price or participate in the appreciation of
the underlying securities or index above the exercise price. Writing covered put
options also involves the risk of not being able to effect closing transactions
at favorable prices or losing part or all of the securities used for cover if
the price of the underlying security falls below the exercise price. Purchasing
put or call options involves the risk of losing the entire premium (i.e.,
purchase price of the option).
OPTIONS ON EQUITY SECURITIES
The Global High-Yield Bond Fund, the International Equity Fund, the Emerging
Opportunities Fund, and the Core Equity Fund may purchase and write (i.e., sell)
put and call options on equity securities that are traded on national securities
exchanges or that are listed on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"). A call option is a short-term contract
pursuant to which the purchaser or holder, in return for a premium paid, has the
right to buy the equity security underlying the option at a specified exercise
price (the strike price) at any time during the term of the option. The writer
of the call option, who received the premium, has the obligation, upon exercise
of the option, to deliver the underlying equity security against payment of the
strike price. A put option is a similar contract which gives the purchaser or
holder, in return for a premium, the right to sell the underlying equity
security at a specified exercise price (the strike price) during the term of the
option. The writer of the put, who receives the premium, has the obligation to
buy the underlying equity security at the strike price upon exercise by the
holder of the put.
A Fund will write call options on stocks only if they are covered, and such
options must remain covered so long as the Fund is obligated as a writer. A call
option is "covered" if: (1) the Fund owns the security underlying the option; or
(2) the Fund has an absolute and immediate right to acquire that security
without additional cash consideration (or for additional cash consideration held
in a segregated account) upon conversion or exchange of other securities held in
its portfolio; or (3) the Fund holds on a share-for-share basis a call on the
same security as the call written where the strike price of the call held is
equal to or less than the strike price of the call written or greater than the
strike price of the call written if the
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difference is maintained by the Fund in cash, Treasury bills or other liquid
high-grade short-term debt obligations in a segregated account.
A Fund will write put options on stocks only if they are covered, and such
options must remain covered so long as the Fund is obligated as a writer. A put
option is "covered" if: (1) the Fund holds in a segregated account cash,
Treasury bills, or other liquid high-grade short-term debt obligations of a
value equal to the strike price; or (2) the Fund holds on a share-for-share
basis a put on the same security as the put written where the strike price of
the put held is equal to or greater than the strike price of the put written or
less than the strike price of the put written if the difference is maintained by
the Fund in cash, Treasury bills, or other liquid high-grade short-term
obligations in a segregated account.
A Fund may purchase "protective puts," i.e., put options acquired for the
purpose of protecting a portfolio security from a decline in market value. In
exchange for the premium paid for the put option, the Fund acquires the right to
sell the underlying security at the strike price of the put regardless of the
extent to which the underlying security declines in value. The loss to the Fund
is limited to the premium paid for, and transaction costs in connection with,
the put plus the initial excess, if any, of the market price of the underlying
security over the strike price. However, if the market price of the security
underlying the put rises, the profit the Fund realizes on the sale of the
security will be reduced by the premium paid for the put option less any amount
(net of transaction costs) of which the put may be sold.
A Fund may purchase call options for hedging and investment purposes. No Fund
intends to invest more than 5% of its net assets at any one time in the purchase
of call options on stocks.
If the writer of an option wishes to terminate the obligation, he or she may
effect a "closing purchase transaction" by buying an option of the same series
as the option previously written. Similarly, the holder of an option may
liquidate his or her position by exercising the option or by effecting a
"closing sale transaction," i.e., selling an option of the same series as the
option previously purchased. A Fund may effect closing sale and purchase
transactions. A Fund will realize a profit from a closing transaction if the
price of the transaction is less than the premium received from writing the
option or is more than the premium paid to purchase the option. Because
increases in the market price of a call option will generally reflect increases
in the market price of the underlying security, any loss resulting from a
closing purchase transaction with respect to a call option is likely to be
offset in whole or in part by appreciation of the underlying equity security
owned by the Fund. There is no guarantee that closing purchase or closing sale
transactions can be effected.
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A Fund's use of options on equity securities is subject to certain special
risks, in addition to the risk that the market value of the security will move
adversely to the Fund's option position. An option position may be closed out
only on an exchange, board of trade or other trading facility which provides a
secondary market for an option of the same series. Although a Fund will
generally purchase or write only those options for which there appears to be an
active secondary market, there is no assurance that a liquid secondary market on
an exchange will exist for any particular option, or at any particular time, and
for some options no secondary market on an exchange or otherwise may exist. In
such event it might not be possible to effect closing transactions in particular
options, with the result that the Fund would have to exercise its options in
order to realize any profit and would incur brokerage commissions upon the
exercise of such options and upon the subsequent disposition of the underlying
securities acquired through the exercise of call options or upon the purchase of
underlying securities or the exercise of put options. If a Fund as a covered
call option writer is unable to effect a closing purchase transaction in a
secondary market, it will not be able to sell the underlying security until the
option expires or it delivers the underlying security upon exercise.
Reasons for the absence of a liquid secondary market on an exchange include the
following: (i) there may be insufficient trading interest in certain options;
(ii) restrictions imposed by an exchange on opening transactions or closing
transactions or both; (iii) trading halts, suspensions or other restrictions may
be imposed with respect to particular classes or series of options or underlying
securities; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or a clearing
corporation may not at all times be adequate to handle current trading volume;
or (vi) one or more exchanges could, for economic or other reasons, decide or be
compelled at some future date to discontinue the trading of options (or a
particular class or series of options), in which event the secondary market on
that exchange (or in the class or series of options) would cease to exist,
although outstanding options on that exchange that had been issued by a clearing
corporation as a result of trades on that exchange would continue to be
exercisable in accordance with their terms. There is no assurance that higher
than anticipated trading activity or other unforeseen events might not, at
times, render certain of the facility of any of the clearing corporations
inadequate, and thereby result in the institution by an exchange of special
procedures which may interfere with the timely execution of customers' orders.
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OPTIONS ON STOCK INDICES
The Global High-Yield Bond Fund, the International Equity Fund, the Emerging
Opportunities Fund, and the Core Equity Fund may purchase and sell (i.e., write)
put and call options on stock indices traded on national securities exchanges or
listed on NASDAQ. Options on stock indices are similar to options on stock
except that, rather than the right to take or make delivery of stock at a
specified price, an option on a stock index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level of
the stock index upon which the option is based is greater than (in the case of a
call) or less than (in the case of a put) the strike price of the option. This
amount of cash is equal to such difference between the closing price of the
index and the strike price of the option times a specified multiple (the
"multiplier"). If the option is exercised, the writer is obligated, in return
for the premium received, to make delivery of this amount. Unlike stock options,
all settlements are in cash, and gain or loss depends on price movements in the
stock market generally (or in a particular industry or segment of the market)
rather than price movements in individual stocks.
A Fund will write call options on stock indices only if they are covered, and
such options remain covered as long as the Fund is obligated as a writer. A call
option is covered if the Fund follows the segregation requirements set forth in
this paragraph. When a Fund writes a call option on a broadly based stock market
index, the Fund will segregate or pledge to a broker as collateral for the
option, cash, Treasury bills or other liquid high-grade short-term debt
obligations, or "qualified securities" (defined below) with a market value at
the time the option is written of not less than 100% of the current index value
times the multiplier times the number of contracts. A "qualified security" is an
equity security which is listed on a national securities exchange or listed on
NASDAQ against which the Fund has not written a stock call option and which has
not been hedged by the Fund by the sale of stock index futures. When a Fund
writes a call option on an industry or market segment index, it will segregate
or pledge to a broker as collateral for the option, cash, Treasury bills or
other liquid high-grade short-term debt obligations, or at least five qualified
securities, all of which are stocks of issuers in such industry or market
segment, with a market value at the time the option is written of not less than
100% of the current index value times the multiplier times the number of
contracts. Such stocks will include stocks which represent at least 50% of the
weighting of the industry or market segment index and will represent at least
50% of the Fund's holdings in that industry or market segment. No individual
security will represent more than 15% of the amount so segregated or pledged in
the case of broadly based stock market stock options or 25% of such amount in
the case of industry or market segment index
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options. If at the close of business on any day the market value of such
qualified securities so segregated or pledged falls below 100% of the current
index value times the multiplier times the number of contracts, the Fund will so
segregate or pledge an amount in cash, Treasury bills, or other liquid
high-grade short-term obligations equal in value to the difference. In addition,
when a Fund writes a call on an index which is in-the-money at the time the call
is written, it will segregate or pledge to the broker as collateral, cash or
U.S. government or other liquid high-grade short-term debt obligations equal in
value to the amount by which the call is in-the-money times the multiplier times
the number of contracts. Any amount segregated pursuant to the foregoing
sentence may be applied to the Fund's obligation to segregate additional amounts
in the event that the market value of the qualified securities falls below 100%
of the current index value times the multiplier times the number of contracts. A
call option is also covered and the Fund need not follow the segregation
requirements set forth in this paragraph if the Fund holds a call on the same
index as the call written where the strike price of the call held is equal to or
less than the strike price of the call written or greater than the strike price
of the call written if the difference is maintained by the Fund in cash,
Treasury bills or other liquid high-grade short-term obligations in a segregated
account.
A Fund will write put options on stock indices only if they are covered, and
such options must remain covered so long as the Fund is obligated as a writer. A
put option is covered if: (1) the Fund holds in a segregated account cash,
Treasury bills, or other liquid high-grade short-term debt obligations of a
value equal to the strike price times the multiplier times the number of
contracts; or (2) the Fund holds a put on the same index as the put written
where the strike price of the put held is equal to or greater than the strike
price of the put written or less than the strike price of the put written if the
difference is maintained by the Fund in cash, Treasury bills, or other liquid
high-grade short-term debt obligations in a segregated account.
A Fund may purchase put and call options for hedging and investment purposes. No
Fund intends to invest more than 5% of its net assets at any one time in the
purchase of puts and calls on stock indices. A Fund may effect closing sale and
purchase transactions, as described above in connection with options on equity
securities.
The purchase and sale of options on stock indices will be subject to the same
risks as options on equity securities, described above. In addition, the
distinctive characteristics of options on indices create certain risks that are
not present with stock options. Index prices may be distorted if trading of
certain stocks included in the index is interrupted. Trading in the index
options also may be interrupted in certain circumstances, such as if trading
were halted in a substantial number of stocks included in the index. If this
occurred, the Fund would not be
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able to close out options which it had purchased or written and, if restrictions
on exercise were imposed, may be unable to exercise an option it holds, which
could result in substantial losses to the Fund. It is the policy of each Fund to
purchase or write options only on stock indices which include a number of stocks
sufficient to minimize the likelihood of a trading halt in options on the index.
Although the markets for certain index option contracts have developed rapidly,
the markets for other index options are still relatively illiquid. The ability
to establish and close out positions on such options will be subject to the
development and maintenance of a liquid secondary market. It is not certain that
this market will develop in all index options contracts. No Fund will purchase
or sell any index option contract unless and until, in the subadviser's opinion,
the market for such options has developed sufficiently that the risk in
connection with such transactions is no greater than the risk in connection with
options on stocks.
Price movements in a Fund's equity security portfolio probably will not
correlate precisely with movements in the level of the index and, therefore, in
writing a call on a stock index a Fund bears the risk that the price of the
securities held by the Fund may not increase as much as the index. In such
event, the Fund would bear a loss on the call which is not completely offset by
movement in the price of the Fund's equity securities. It is also possible that
the index may rise when the Fund's securities do not rise in value. If this
occurred, the Fund would experience a loss on the call which is not offset by an
increase in the value of its securities portfolio and might also experience a
loss in its securities portfolio. However, because the value of a diversified
securities portfolio will, over time, tend to move in the same direction as the
market, movements in the value of the Fund's securities in the opposite
direction as the market would be likely to occur for only a short period or to a
small degree.
When a Fund has written a call, there is also a risk that the market may decline
between the time the Fund has a call exercised against it, at a price which is
fixed as of the closing level of the index on the date of exercise, and the time
the Fund is able to sell stocks in its portfolio. As with stock options, the
Fund will not learn that an index option has been exercised until the day
following the exercise date but, unlike a call on stock where the Fund would be
able to deliver the underlying securities in settlement, the Fund may have to
sell part of its stock portfolio in order to make settlement in cash, and the
price of such stocks might decline before they can be sold. This timing risk
makes certain strategies involving more than one option substantially more risky
with options in stock indices than with stock options.
There are also certain special risks involved in purchasing put and call options
on stock indices. If the Fund holds an index option and exercises it before
final determination of the
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closing index value for that day, it runs the risk that the level of the
underlying index may change before closing. If such a change causes the
exercised option to fall out-of-the-money, the Fund will be required to pay the
difference between the closing index value and the strike price of the option
(times the applicable multiplier) to the assigned writer. Although the Fund may
be able to minimize the risk by withholding exercise instructions until just
before the daily cutoff time or by selling rather than exercising an option when
the index level is close to the exercise price, it may not be possible to
eliminate this risk entirely because the cutoff times for index options may be
earlier than those fixed for other types of options and may occur before
definitive closing index values are announced.
OPTIONS ON DEBT SECURITIES
The Funds (other than the Emerging Opportunities and the Core Equity Funds) may
purchase and write (i.e., sell) put and call options on debt securities
(including U.S. government debt securities) that are traded on national
securities exchanges or that result from privately negotiated transactions with
primary U.S. government securities dealers recognized by the Federal Reserve
Bank of New York ("OTC options"). Options on debt are similar to options on
stock, except that the option holder has the right to take or make delivery of a
debt security, rather than stock.
A Fund will write options only if they are covered, and such options must remain
covered so long as the Fund is obligated as a writer. An option on debt
securities is covered in the same manner as explained in connection with options
on equity securities, except that, in the case of call options on U.S. Treasury
bills, a Fund might own U.S. Treasury bills of a different series from those
underlying the call option, but with a principal amount and value corresponding
to the option contract amount and a maturity date no later than that of the
securities deliverable under the call option. The principal reason for a Fund to
write an option on one or more of its securities is to realize through the
receipt of the premiums paid by the purchaser of the option a greater current
return than would be realized on the underlying security alone. Calls on debt
securities will not be written when, in the opinion of the subadviser, interest
rates are likely to decline significantly, because under those circumstances the
premium received by writing the call likely would not fully offset the foregone
appreciation in the value of the underlying security.
A Fund may also write straddles (i.e., a combination of a call and a put written
on the same security at the same strike price where the same issue of the
security is considered "cover" for both the put and the call). In such cases,
the Fund will also segregate or deposit for the
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benefit of the Fund's broker cash or liquid high-grade debt obligations
equivalent to the amount, if any, by which the put is in-the-money. Each Fund's
use of straddles will be limited to 5% of its net assets (meaning that the
securities used for cover or segregated as described above will not exceed 5% of
the Fund's net assets at the time the straddle is written). The writing of a
call and a put on the same security at the same strike price where the call and
the put are covered by different securities is not considered a straddle for
purposes of this limit.
A Fund may purchase "protective puts" in an effort to protect the value of a
security that they own against a substantial decline in market value. Protective
puts are described in OPTIONS ON EQUITY SECURITIES, page 8.
A Fund may also purchase call options on debt securities for hedging or
investment purposes. No Fund intends to invest more than 5% of its net assets at
any one time in the purchase of call options on debt securities.
If the writer of an exchange-traded option wishes to terminate the obligation,
he or she may effect a closing purchase or sale transaction in a manner similar
to that discussed above in connection with options on equity securities. Unlike
exchange-traded options, OTC options generally do not have a continuous liquid
market. Consequently, a Fund will generally be able to realize the value of an
OTC option it has purchased only by exercising it or reselling it to the dealer
who issued it. Similarly, when the Fund writes an OTC option, it generally will
be able to close out the OTC option prior to its expiration only by entering
into a closing purchase transaction with the dealer to which the Fund originally
wrote the OTC option. While the Funds will seek to enter into OTC options only
with dealers who agree to and which are expected to be able to be capable of
entering into closing transactions with the Fund, there can be no assurance that
the Fund will be able to liquidate an OTC option at a favorable price at any
time prior to expiration. In the event of insolvency of the other party, the
Fund may be unable to liquidate an OTC option. There is, in general, no
guarantee that closing purchase or closing sale transactions can be effected.
As explained in INVESTMENT RESTRICTIONS on page 31, no Fund other than the
Global High-Yield Bond Fund may invest more than 10% of its total assets
(determined at the time of investment) in illiquid securities, including debt
securities for which there is not an established market. The Global High-Yield
Bond Fund may invest up to 15% of its net assets (determined at the time of
investment) in such securities. The staff of the Securities and Exchange
Commission has taken the position that purchased OTC options and the assets used
as "cover" for written OTC options are illiquid securities. However, pursuant to
the terms of
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certain no-action letters issued by the staff, the securities used as cover for
written OTC options may be considered liquid provided that the Fund sells OTC
options only to qualified dealers who agree that the Fund may repurchase any OTC
option it writes for a maximum price to be calculated by a predetermined
formula. In such cases, the OTC option would be considered illiquid only to the
extent that the maximum repurchase price under the formula exceeds the intrinsic
value of the option.
The Funds' purchase and sale of exchange-traded options on debt securities will
be subject to the risks described in OPTIONS ON EQUITY SECURITIES on page 8.
OPTIONS ON FOREIGN CURRENCIES
The Funds may purchase and write put and call options on foreign currencies
traded on U.S. or foreign securities exchanges or boards of trade to hedge
against unfavorable changes in exchange rates and to facilitate transactions
involving foreign securities. Options on foreign currencies are similar to
options on stock, except that the option holder has the right to take or make
delivery of a specified amount of foreign currency, rather than stock.
A Fund may purchase and write options to hedge its securities denominated in
foreign currencies. If there is a decline in the dollar value of a foreign
currency in which a Fund's securities are denominated, the dollar value of such
securities will decline even though the foreign currency value remains the same.
To hedge against the decline of the foreign currency, a Fund may purchase put
options on such foreign currency. If the value of the foreign currency declines,
the gain realized on the put option would offset, in whole or in part, the
adverse effect such decline would have on the value of the Fund's securities.
Alternatively, a Fund may write a call option on the foreign currency. If the
foreign currency declines, the option would not be exercised and the decline in
the value of the portfolio securities denominated in such foreign currency would
be offset in part by the premium the Fund received for the option.
If, on the other hand, a subadviser anticipates purchasing a foreign security
and also anticipates a rise in such foreign currency (thereby increasing the
cost of such security), a Fund may purchase call options on the foreign
currency. The purchase of such options could offset, at least partially, the
effects of the adverse movements of the exchange rates. Alternatively, a Fund
could write a put option on the currency and, if the exchange rates move as
anticipated, the option would expire unexercised.
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A Fund's successful use of currency exchange options on foreign currencies
depends upon the subadviser's ability to predict the direction of the currency
exchange markets and political conditions, which requires different skills and
techniques than predicting changes in the securities markets generally. For
instance, if the currency being hedged has moved in a favorable direction, the
corresponding appreciation of the Fund's securities denominated in such currency
would be partially offset by the premiums paid on the options. Further, if the
currency exchange rate does not change, the Fund's net income would be less than
if the Fund had not hedged since there are costs associated with options.
The use of these options is subject to various additional risks. The correlation
between movements in the price of options and the price of the currencies being
hedged is imperfect. The use of these instruments will hedge only the currency
risks associated with investments in foreign securities, not market risks. A
Fund's ability to establish and maintain positions will depend on market
liquidity. The ability of a Fund to close out an option depends upon a liquid
secondary market. There is no assurance that liquid secondary markets will exist
for any particular option at any particular time.
FUTURES CONTRACTS
Each Fund may enter into futures contracts and options thereon under certain
limitations described below. In general, (1) the Global High-Yield Bond Fund,
the International Equity Fund, the Emerging Opportunities Fund, and the Core
Equity Fund may buy and sell stock index futures contracts traded on a
commodities exchange or board of trade and options thereon; (2) any Fund other
than the Emerging Opportunities and the Core Equity Funds may buy and sell
futures contracts on interest bearing securities (such as U.S. Treasury Bonds,
U.S. Treasury Notes, 3-month U.S. Treasury Bills, and GNMA certificates) or
interest rate indices and options thereon; and (3) any Fund may buy and sell
futures contracts on foreign currencies or groups of foreign currencies and
options thereon. The Funds use these instruments as a hedge against or to
minimize adverse principal fluctuations or as an efficient means of adjusting
their exposure to the market. The Funds do not use futures contracts or options
thereon for speculation. Each Fund limits its use of futures contracts and
options thereon so that no more than 5% of the Fund's total assets will be
committed to initial margin deposits or premiums on options. Furthermore,
immediately after entering into such contracts or purchasing such options, no
more than 30% of a Fund's total assets may be represented by such contracts and
options (other than futures contracts and options thereon relating to money
market instruments, such as Eurodollar futures and related options). These
contracts and
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options entail certain risks, including (but not limited to) the following: (1)
no assurance that futures contracts transactions can be offset at favorable
prices; (2) possible reduction of the Fund's total return due to the use of
hedging; (3) possible reduction in value of both the securities hedged and the
hedging instrument; (4) possible lack of liquidity due to daily limits on price
fluctuation or other factors; (5) an imperfect correlation between price
movements in the contract and in the securities being hedged; and (6) potential
losses in excess of the amount invested in the futures contracts themselves.
STOCK INDEX FUTURES CONTRACTS
To the extent permitted by applicable regulations, the Global High-Yield Bond
Fund, the International Equity Fund, the Emerging Opportunities Fund, and the
Core Equity Fund may buy and sell for hedging purposes stock index futures
contracts traded on a commodities exchange or board of trade. A stock index
futures contract is an agreement in which the seller of the contract agrees to
deliver to the buyer an amount of cash equal to a specific dollar amount times
the difference between the value of a specific stock index at the close of the
last trading day of the contract and the price at which the agreement is made.
No physical delivery of the underlying stocks in the index is made. When the
futures contract is entered into, each party deposits with a broker or in a
segregated custodial account approximately 5% of the contract amount, called the
"initial margin." Subsequent payments to and from the broker, called "variation
margin," will be made on a daily basis as the price of the underlying stock
index fluctuates, making the long and short positions in the futures contracts
more or less valuable, a process known as "marking to the market."
A Fund may sell stock index futures to hedge against a decline in the value of
equity securities it holds. A Fund may also buy stock index futures to hedge
against a rise in the value of equity securities it intends to acquire. To the
extent permitted by federal regulations, a Fund may also engage in other types
of hedging transactions in stock index futures that are economically appropriate
for the reduction of risks inherent in the ongoing management of the Fund's
equity securities.
A Fund's successful use of stock index futures contracts depends upon the
subadviser's ability to predict the direction of the market and is subject to
various additional risks. The correlation between movement in the price of the
stock index future and the price of the securities being hedged is imperfect and
the risk from imperfect correlation increases as the composition of the Fund's
securities portfolio diverges from the composition of the relevant index. In
addition, the ability of a Fund to close out a futures position depends on a
liquid
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secondary market. There is no assurance that liquid secondary markets will exist
for any particular stock index futures contract at any particular time.
Under regulations of the Commodity Futures Trading Commission ("CFTC"),
investment companies registered under the Investment Company Act of 1940 are
excluded from regulation as commodity pools or commodity pool operators if their
use of futures is limited in certain specified ways. The Funds will use futures
in a manner consistent with the terms of this exclusion.
INTEREST RATE FUTURES CONTRACTS
To the extent permitted by applicable regulations, the Funds (other than the
Emerging Opportunities and the Core Equity Funds) may buy and sell for hedging
purposes futures contracts on interest bearing securities (such as U.S. Treasury
Bonds, U.S. Treasury Notes, 3-month U.S. Treasury Bills, and GNMA certificates)
or interest rate indices. Futures contracts on interest bearing securities and
interest rate indices are referred to collectively as "interest rate futures
contracts." The portfolios will engage in transactions in only those futures
contracts that are traded on a commodities exchange or board of trade.
A Fund may sell an interest rate futures contract to hedge against a decline in
the market value of debt securities it owns. A Fund may purchase an interest
rate futures contract to hedge against an anticipated increase in the value of
debt securities it intends to acquire. To the extent permitted by applicable
federal regulations, a Fund may also engage in other types of transactions in
interest rate futures contracts that are economically appropriate for the
reduction of risks inherent in the ongoing management of its fixed-income
portfolio.
A Fund's successful use of interest rate futures contracts depends upon the
subadviser's ability to predict interest rate movements. Further, because there
are a limited number of types of interest rate futures contracts, it is likely
that the interest rate futures contracts available to a Fund will not exactly
match the debt securities the Fund intends to hedge or acquire. To compensate
for differences in historical volatility between securities a Fund intends to
hedge or acquire and the interest rate futures contracts available to it, a Fund
could purchase or sell futures contracts with a greater or lesser value than the
securities it wished to hedge or intended to purchase. Interest rate futures
contracts are subject to the same risks regarding closing transactions and the
CFTC limits as described in STOCK INDEX FUTURES CONTRACTS on page 18.
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FOREIGN CURRENCY FUTURES CONTRACTS
To the extent permitted by applicable regulations, a Fund may buy and sell for
hedging purposes futures contracts on foreign currencies or groups of foreign
currencies. A Fund will engage in transactions in only those futures contracts
and options thereon that are traded on a commodities exchange or a board of
trade. See STOCK INDEX FUTURES CONTRACTS on page 18 for a general description of
futures contracts. A Fund intends to engage in transactions involving futures
contracts as a hedge against changes in the value of the currencies in which
they hold investments or in which they expect to pay expenses or pay for future
purchases. To the extent permitted by federal regulations, a Fund may also
engage in such transactions when they are economically appropriate for the
reduction of risks inherent in portfolio management.
The use of these futures contracts is subject to risks similar to those involved
in the use of options on foreign currencies and the use of any futures contract.
A Fund's successful use of foreign currency futures contracts depends upon the
subadviser's ability to predict the direction of currency exchange markets and
political conditions. In addition, the correlation between movements in the
price of futures contracts and the price of currencies being hedged is
imperfect, and there is no assurance that liquid markets will exist for any
particular futures contract at any particular time. Those risks are discussed
more fully under OPTIONS ON FOREIGN CURRENCIES on page 16 and STOCK INDEX
FUTURES CONTRACTS on page 18.
OPTIONS ON FUTURES CONTRACTS
The Funds may, to the extent permitted by applicable regulations, enter into
certain transactions involving options on futures contracts. An option on a
futures contract gives the purchaser or holder the right, but not the
obligation, to assume a position in a futures contract (a long position if the
option is a call and a short position if the option is a put) at a specified
price at any time during the option exercise period. The writer of the option is
required upon exercise to assume an offsetting futures position (a short
position if the option is a call and a long position if the option is a put).
Upon exercise of the option, the assumption of offsetting futures positions by
the writer and holder of the option will be accomplished by delivery of the
accumulated balance in the writer's futures margin account which represents the
amount by which the market price of the futures contract, at exercise, exceeds,
in the case of a call, or is less than, in the case of a put, the exercise price
of the option on the futures contract. As an alternative to exercise, the holder
or writer of an option may terminate a position by selling or purchasing an
option of the same series. There is no guarantee that such closing transactions
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can be effected. The Funds intend to utilize options on futures contracts for
the same purposes that they intend to use the underlying futures contracts.
Options on futures contracts are subject to risks similar to those described
above with respect to options and futures contracts. There is also the risk of
imperfect correlation between the option and the underlying futures contract. If
there were no liquid secondary market for a particular option on a futures
contract, a Fund might have to exercise an option it held in order to realize
any profit and might continue to be obligated under an option it had written
until the option expired or was exercised. If a Fund were unable to close out an
option it had written on a futures contract, it would continue to be required to
maintain initial margin and make variation margin payments with respect to the
option position until the option expired or was exercised against the Fund.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
To facilitate the purchase and sale of foreign securities and to manage foreign
exchange risk, each of the Funds may enter into forward contracts to purchase or
sell foreign currencies. Although such instruments may reduce the risk of loss
due to a decline in the value of the currency that is sold, they also limit any
possible gain that might result should the currency increase. Similarly,
although such instruments are used primarily to protect a Fund from adverse
currency movements, they also involve the risk that anticipated currency
movements will be accurately predicted, thus adversely affecting the Fund's
total return.
The Funds may enter into forward foreign currency exchange contracts in several
circumstances. When a Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, or when a Fund anticipates the
receipt in a foreign currency of dividends or interest payments on a security
which it holds, the Fund may desire to "lock-in" the U.S. dollar price of the
security or the U.S. dollar equivalent of such dividend or interest payment, as
the case may be. By entering into a forward contract for a fixed amount of
dollars, for the purchase or sale of the amount of foreign currency involved in
the underlying transactions, the Fund will be able to protect itself against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the subject foreign currency during the period between the date
on which the security is purchased or sold, or on which the dividend or interest
payment is declared, and the date on which such payments are made or received.
As discussed in the prospectus, the Global High-Yield Bond Fund may also enter
into forward foreign currency exchange contracts for investment purposes. The
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other Funds will use forward foreign currency exchange contracts strictly for
hedging purposes and to facilitate the purchase and sale of foreign securities.
Additionally, when a subadviser believes that the currency of a particular
foreign country may suffer a substantial decline against the U.S. dollar, the
Fund may enter into a forward contract for a fixed amount of dollars, to sell
the amount of foreign currency approximating the value of some or all of the
portfolio securities denominated in such foreign currency. The precise matching
of the forward contract amounts and the value of the securities involved will
not generally be possible since the future value of securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date on which the forward contract is entered into
and the date it matures. The projection of short-term currency market movement
is extremely difficult, and the successful execution of a short-term hedging
strategy is highly uncertain. No Fund other than the Global High-Yield Bond Fund
will enter into such forward contracts or maintain a net exposure to such
contracts where the consummation of the contracts would obligate a Fund to
deliver an amount of foreign currency in excess of the value of the securities
or other assets denominated in that currency held by the Fund. Under normal
circumstances, consideration of the prospect for currency parities will be
incorporated into the long-term investment decisions made with regard to overall
diversification strategies. However, the Manager believes that it is important
that the subadvisers have the flexibility to enter into such forward contracts
when it is determined that the best interests of the Funds will thereby be
served. A Fund will place cash or liquid, high-grade equity or debt securities
into a segregated account in an amount equal to the value of the Fund's total
assets committed to the consummation of forward foreign currency exchange
contracts. If the value of the securities in the segregated account declines,
additional cash or securities will be placed in the account on a daily basis so
that the value of the account will equal the amount of the Fund's commitments
with respect to such contracts.
The Funds generally will not enter into a forward contract with a term of
greater than 1 year. At the maturity of a forward contract, a Fund may either
sell the portfolio security and make delivery of the foreign currency or it may
retain the security and terminate its contractual obligation to deliver the
foreign currency by purchasing an "offsetting" contract with the same currency
trader obligating it to purchase, on the same maturity date, the same amount of
the foreign currency.
It is impossible to forecast with absolute precision the market value of a
particular portfolio security at the expiration of the contract. Accordingly, it
may be necessary for a Fund to purchase additional foreign currency on the spot
market (and bear the expense of such
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purchase) if the market value of the security is less than the amount of foreign
currency that the Fund is obligated to deliver and if a decision is made to sell
the security and make delivery of the foreign currency.
If a Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss (as described below) to the
extent that there has been movement in forward contract prices. Should forward
prices decline during the period between the Fund's entering into a forward
contract for the sale of a foreign currency and the date it enters into an
offsetting contract for the purchase of the foreign currency, the Fund will
realize a gain to the extent that the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to purchase. Should forward
prices increase, the Fund will suffer a loss to the extent that the price of the
currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell.
The Funds' dealing in forward foreign currency exchange contracts will be
limited to the transactions described above. Of course, the Funds are not
required to enter into such transactions with regard to their foreign
currency-denominated securities. It also should be realized that this method of
protecting the value of the portfolio securities against a decline in the value
of a currency does not eliminate fluctuations in the underlying prices of the
securities which are unrelated to exchange rates. Additionally, although such
contracts tend to minimize the risk of loss due to a decline in the value of the
hedged currency, at the same time they tend to limit any potential gain which
might result should the value of such currency increase.
Although the Funds value their assets daily in terms of U.S. dollars, they do
not intend physically to convert their holdings of foreign currencies into U.S.
dollars on a daily basis. They will do so from time to time, and investors
should be aware of the costs of currency conversion. Although foreign exchange
dealers do not charge a fee for conversion, they do realize a profit based on
the difference (the "spread") between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign currency
to a Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to resell that currency to the dealer.
SHORT SALES AGAINST THE BOX
The Global High-Yield Bond Fund, the International Equity Fund, the Emerging
Opportunities Fund, and the Core Equity Fund may make short sales of securities
or maintain a short position, provided that at all times when a short position
is open the Fund owns an equal amount of such securities or securities
convertible into or exchangeable, with or without
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payment of any further consideration, for an equal amount of the securities of
the same issuer as the securities sold short (a "short sale against the box");
provided, that if further consideration is required in connection with the
conversion or exchange, cash or U.S. government securities in an amount equal to
such consideration must be put in a segregated account.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
The Funds may purchase securities on a when-issued or delayed delivery basis
(i.e., when delivery and payment take place later than the normal settlement
period after the date of the transaction). A Fund will make commitments for
when-issued transactions only with the intention of actually acquiring the
securities and, to facilitate such acquisitions, the Fund will maintain in a
segregated account cash, U.S. government securities or other high-grade debt
obligations having a value equal to or greater than such commitments. On
delivery dates for such transactions, the Fund will meet its obligations from
maturities or sales of the securities held in the segregated account and/or from
then available cash flow. If the Fund chooses to dispose of the right to acquire
a when-issued security prior to its acquisition it could, as with the
disposition of any other Fund security, incur a gain or loss due to market
fluctuations. No when-issued commitments will be made if, as a result, more than
15% of the Fund's net assets would be so committed.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, each Fund may, as a fundamental
policy, lend securities with a value of up to 33% of its total assets to
unaffiliated broker-dealers or institutional investors. Any such loan will be
continuously secured by collateral at least equal to the value of the security
loaned. Although the risks of lending portfolio securities are believed to be
slight, as with other extensions of secured credit, such lending could result in
delays in receiving additional collateral or in the recovery of the securities
or possible loss of rights in the collateral should the borrower fail
financially. Loans will only be made to firms deemed to be of good standing and
will not be made unless the consideration to be earned from such loans would
justify the risk.
TEMPORARY DEFENSIVE POSITIONS
As discussed in the prospectus, each Fund may, at times, adopt a temporary
defensive position. In such instances, the Fund may invest a greater proportion
of its assets than normal
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in money market instruments, which are described below, and in investment-grade
short-term debt instruments.
MONEY MARKET INSTRUMENTS
Bank Obligations. Bank obligations include certificates of deposit, bankers'
acceptances, and time deposits of domestic banks, foreign branches of U.S.
banks, U.S. branches of foreign banks, foreign offices of foreign banks, savings
and loan associations, or savings banks. Certificates of deposit are
certificates evidencing the indebtedness of a bank to repay funds deposited with
it for a definite period of time (usually from 14 days to 1 year). Bankers'
acceptances are credit instruments evidencing the obligation of a bank to pay a
draft which has been drawn on it by a customer. These instruments reflect the
obligation both of the bank and of the drawer to pay the face amount of the
instrument upon maturity. Time deposits are non-negotiable deposits in a bank
for a fixed period of time. Certificates of deposit include both Eurodollar
certificates of deposit, which are traded in the over-the-counter market, and
Eurodollar time deposits, for which there is generally not a market. Eurodollars
are dollars deposited in banks outside the United States.
Commercial Paper. Commercial paper is a high-quality short-term promissory note
of a large corporation issued to finance its current obligations. The Funds may
invest in commercial paper which at the time of the investment is (1) rated in
the two highest categories by Moody's (Prime-1 and Prime-2) or by S&P (A-1 and
A-2), or (2) unrated but determined by the subadviser to be of comparable
quality.
Repurchase Agreements. When a Fund purchases money market securities, it may on
occasion enter into a repurchase agreement with the seller wherein the seller
and the buyer agree at the time of sale to a repurchase of the security at a
mutually agreed upon time and price. The period of maturity is usually quite
short, possibly overnight or a few days, although it may extend over a number of
months. The resale price is in excess of the purchase price, reflecting an
agreed upon market rate effective for the period of time the Fund's money is
invested in the security, and is not related to the coupon rate of the purchase
security. Repurchase agreements may be considered loans of money to the seller
of the underlying security, which are collateralized by the securities
underlying the repurchase agreement. A Fund will not enter into repurchase
agreements unless the agreement is fully collateralized (i.e., the value of the
securities is, and during the entire term of the agreement remains, at least
equal to the amount of the loan including interest). The Fund will take
possession of the
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securities underlying the agreement and will value them daily to assure that
this condition is met. In the event that a seller defaults on a repurchase
agreement, the Fund may incur loss in the market value of the collateral, as
well as disposition costs; and, if a party with whom the Fund has entered into a
repurchase agreement becomes involved in a bankruptcy proceeding, the Fund's
ability to realize on the collateral may be limited or delayed and a loss may be
incurred if the collateral securing the repurchase agreement declines in value
during the bankruptcy proceeding.
Reverse Repurchase Agreements. The Funds may enter into reverse repurchase
agreements with banks, which agreements have the characteristics of borrowing
and involve the sale of securities held by a Fund with an agreement to
repurchase the securities at an agreed-upon price and date, which reflect a rate
of interest paid for the use of the money for the period. Generally, the effect
of such a transaction is that the Fund can recover all or most of the cash
invested in the securities involved during the term of the reverse repurchase
agreement, while in many cases it will be able to keep some of the interest
income associated with those securities. Such transactions are only advantageous
if the Fund has an opportunity to earn a greater rate of interest on the cash
derived from the transaction than the interest cost of obtaining that cash. The
Fund may be unable to realize a return from the use of the proceeds equal to or
greater than the interest required to be paid. Opportunities to achieve this
advantage may not always be available, and the Funds intend only to use the
reverse repurchase technique when it appears to be to their advantage to do so.
The use of reverse repurchase agreements may magnify any increase or decrease in
the value of a Fund's securities. The Fund will maintain in a separate account
securities of the Fund that have a value equal to or greater than the Fund's
commitments under reverse repurchase agreements. The value of the securities
subject to reverse purchase agreements will not exceed 10% of the value of the
Fund's total assets.
RATINGS OF DEBT SECURITIES
Investment-grade bonds are debt securities that have been rated investment grade
by a nationally recognized statistical rating organization ("NRSRO"), e.g.,
corporate debt rated at least Baa by Moody's Investors Service, Inc. ("Moody's")
or at least BBB by Standard & Poor's Corporation ("S&P") at the time of
purchase. Investment-grade bonds also include unrated debt securities that a
Fund's subadviser determines to be of comparable quality. High-yield debt (also
know as "junk bonds") are, in contrast, generally rated below investment grade
by NRSROs -- for example, ratings of Ba or lower by Moody's or of BB or lower by
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S&P. High-yield debt also includes unrated debt securities that a Fund's
subadvisers determines to be of comparable quality.
A description of Moody's and S&P's ratings follows.
Moody's Investors Service, Inc.
Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged."
Aa - Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high grade bonds.
A - Bonds rated A possess many favorable investment attributes and are generally
considered as upper medium grade obligations.
Baa - Bonds rated Baa are considered medium grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba - Bonds rated Ba are judged to have speculative elements; their future cannot
be considered as well-assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterize bonds in
this class.
B - Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa - Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Ca - Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
C - Bonds which are rated as C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
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Standard & Poor's Corporation
A Standard & Poor's Corporation (S&P) corporate bond rating is a current
assessment of the creditworthiness of an obligor, including obligors outside the
U.S., with respect to a specific obligation. This assessment may take into
consideration obligors such as guarantors, insurers, or lessees. Ratings of
foreign obligors do not take into account currency exchange and related
uncertainties. The ratings are based on current information furnished by the
issuer or obtained by S&P from other sources it considers reliable. The ratings
are based, in varying degrees, on the following considerations:
- Likelihood of default -- capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with
the terms of the obligation;
- Nature of and provisions of the obligation; and
- Protection afforded by and relative position of the obligation in the
event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
To provide more detailed indications of credit quality, ratings from "AA" to "A"
may be modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
Bond ratings are as follows:
AAA - Bonds rated AAA have the highest rating assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA - Bonds rated AA have a very strong capacity to pay interest and repay
principal, and differ from the highest rated issues in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB - Bonds rated BBB are regarded as having adequate capacity to pay interest
and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in the higher rated categories.
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BB, B, CCC, CC - Bonds rated BB, B, CCC, and CC are regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. As discussed in
greater detail below, while such bonds will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
BB - Bonds rated BB have less near-term vulnerability to default than other
speculative issues. However, they face major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB-rating.
B - Bonds rated B have a greater vulnerability to default but currently have the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC - Bonds rated CCC have a currently identifiable vulnerability to default,
and are dependent upon favorable business, financial and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, they are not likely to have
the capacity to pay interest and repay principal. The CCC rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.
CC - The rating CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied CCC rating.
C - The rating C typically is applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
C1 - The rating C1 is reserved for income bonds on which no interest is being
paid.
D - Bonds rated D are in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
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RATINGS OF COMMERCIAL PAPER
Moody's Investors Service, Inc.
Prime-1 is the highest commercial paper rating assigned by Moody's. Issuers
rated Prime-1 (or supporting institutions) are considered to have a superior
capacity for repayment of short-term promissory obligations. Issuers rated
Prime-2 (or supporting institutions) are considered to have a strong capacity
for repayment of short-term promissory obligations. This will normally be
evidenced by many of the characteristics of issuers rated Prime-1 but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternative liquidity is
maintained.
Standard & Poor's Corporation
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Capacity for timely
payment on commercial paper rated A-2 is strong, but the relative degree of
safety is not as high as for issues designated A-1.
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INVESTMENT RESTRICTIONS
Certain investment restrictions are fundamental to the operations of American
Odyssey Funds, Inc. and may not be changed without the approval of the holders
of a majority of the outstanding shares of the affected Fund, or if it is less,
67% of the shares represented at a meeting of shareholders at which the holders
of 50% or more of the shares are represented.
As a result of these restrictions, none of the Funds will:
1. Buy or sell real estate and mortgages, although the Funds may buy and sell
securities that are secured by real estate and securities of real estate
investment trusts and of other issuers that engage in real estate
operations.
2. Buy or sell commodities or commodity contracts, except that the Funds may
purchase and sell futures contracts and related options.
3. Buy or sell the securities of other investment companies, except by
purchases in the open market involving only customary brokerage
commissions and as a result of which not more than 5% of the Fund's total
assets (taken at current value) would be invested in such securities, or
except as part of a merger, consolidation or other acquisition.
4. Acquire securities for the purpose of exercising control or management of
any company except in connection with a merger, consolidation,
acquisition, or reorganization.
5. Make a short sale of securities or maintain a short position, except that
the International Equity Fund, the Emerging Opportunities Fund, the Core
Equity Fund, and the Global High-Yield Bond Fund may make short sales
against-the-box. Collateral arrangements entered into by the Funds with
respect to futures contracts and related options and the writing of
options are not deemed to be short sales.
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STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
6. Purchase securities on margin or otherwise borrow money or issue senior
securities except that a Fund may enter into reverse repurchase agreements
and purchase securities on a when-issued or a delayed delivery basis. A
Fund may also obtain such short-term credit as it needs for the clearance
of securities transactions and may borrow from a bank as a temporary
measure to facilitate redemptions (but not for leveraging or investment)
or to exercise an option, provided that the amount borrowed does not
exceed 5% of the value of the Fund's total assets (including the amount
owed as a result of the borrowing) at the time the borrowing is made.
Investment securities will not be purchased while borrowings are
outstanding. Interest paid on borrowings will not be available for
investment. Collateral arrangements entered into by a Fund with respect to
futures contracts and related options and the writing of options are not
deemed to be the issuance of a senior security or the purchase of a
security on margin.
7. Enter into reverse repurchase agreements if, as a result, the Fund's
obligations with respect to reverse repurchase agreements would exceed 10%
of the Fund's net assets (defined to mean total assets at market value
less liabilities other than reverse repurchase agreements).
8. Pledge or mortgage assets, except that not more than 10% of the value of
any Fund may be pledged (taken at the time the pledge is made) to secure
borrowings made in accordance with item 6 above and that a Fund may enter
into reverse repurchase agreements in accordance with item 7 above.
Collateral arrangements entered into by a Fund with respect to futures
contracts and related options and the writing of options are not deemed to
be the pledge of assets.
9. Lend money, except that loans of up to 10% of the value of each Fund
except for the Global High-Yield Bond Fund, and loans of up to 100% of the
value of the Global High-Yield Bond Fund, may be made through the purchase
of privately placed bonds, debentures, notes, and other evidences of
indebtedness of a character customarily acquired by institutional
investors that may or may not be convertible into stock or accompanied by
warrants or rights to acquire stock. Repurchase agreements and the
purchase of publicly traded debt obligations are not considered to be
"loans" for this purpose and may be entered into or purchased by a Fund in
accordance with its investment objectives and policies.
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
10. Underwrite the securities of other issuers, except where the Fund may be
deemed to be an underwriter for purposes of certain federal securities
laws in connection with the disposition of Fund securities and with loans
that a Fund may make pursuant to item 9 above.
11. Make an investment unless, when considering all its other investments, 75%
of the value of a Fund's assets would consist of cash, cash items,
obligations of the United States government, its agencies or
instrumentalities, and other securities. For purposes of this restriction,
"other securities" are limited for each issuer to not more than 5% of the
value of a Fund's assets and to not more than 10% of the issuer's
outstanding voting securities held by American Odyssey Funds, Inc. as a
whole. Some uncertainty exists as to whether certain of the types of bank
obligations in which a Fund may invest, such as certificates of deposit
and bankers' acceptances, should be classified as "cash items" rather than
"other securities" for purposes of this restriction, which is a
diversification requirement under the 1940 Act. Interpreting most bank
obligations as "other securities" limits the amount a Fund may invest in
the obligations of any one bank to 5% of its total assets. If there is an
authoritative decision that any of these obligations are not "securities"
for purposes of this diversification test, this limitation would not apply
to the purchase of such obligations.
12. Purchase securities of a company in any industry if, as a result of the
purchase, a Fund's holdings of securities issued by companies in that
industry would exceed 25% of the value of the Fund, except that this
restriction does not apply to purchases of obligations issued or
guaranteed by the U.S. government, its agencies and instrumentalities or
issued by domestic banks. For purposes of this restriction, neither
finance companies as a group nor utility companies as a group are
considered to be a single industry and will be grouped instead according
to their services; for example, gas, electric, and telephone utilities
will each be considered a separate industry.
13. Invest in illiquid securities (including repurchase agreements maturing in
more than 7 days) or in the securities of issuers (other than U.S.
government agencies or instrumentalities) having a record, together with
predecessors, of less than 3 years' continuous operation if, regarding all
such securities, more than 10% of the Fund's total assets would be
invested in them, except that this restriction shall not apply to
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
the Global High-Yield Bond Fund. For purposes of this restriction,
illiquid securities are those that are subject to legal or contractual
restrictions on resale or for which no readily available market exists.
Restricted securities that have not been registered but may be sold and
resold to institutional investors are not considered illiquid for purposes
of this restriction, provided that there is dealer or institutional
trading market in such securities.
The following restrictions are nonfundamental investment policies, which means
that the Board of Directors may change them without shareholder approval;
The Global High-Yield Bond Fund may not invest more than 15% of its net
assets in illiquid securities, i.e., securities subject to legal or
contractual restrictions on resale or for which no readily available
market exists. Restricted securities that have not been registered but may
be sold and resold to institutional investors are not considered illiquid
for purposes of this restriction, provided that there is dealer or
institutional trading market in such securities.
Neither the Long-Term Bond Fund nor the Intermediate-Term Bond Fund will
invest more than 7.5% of total assets in debt securities from emerging
markets.
No Fund will purchase an issuer's securities if, as a result of that
investment, the Funds together would own more than 5% of the outstanding
voting securities of the issuer.
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
THE COMPANY
American Odyssey Funds, Inc. (the "Company") was organized as a Maryland
corporation in December 1992. It is registered under the Investment
Company Act of 1940, as amended ("1940 Act") as an open-end diversified
management investment company, commonly known as a "mutual fund." It is
currently made up of six different "series" or Funds. Each Fund is, for
investment purposes, a separate investment fund, and each issues a
separate class of capital stock: (1) American Odyssey Core Equity Fund
Stock; (2) American Odyssey Emerging Opportunities Fund Stock; (3)
American Odyssey International Equity Fund Stock; (4) American Odyssey
Long-Term Bond Fund Stock: (5) American Odyssey Intermediate-Term Bond
Fund Stock; and (6) American Odyssey Global High-Yield Bond Fund Stock.
Each share of capital stock issued with respect to a Fund has a pro-rata
interest in the assets of that Fund and has no interest in the assets of
any other Fund. Each Fund bears its own liabilities and also its
proportionate share of the general liabilities of the Company.
The shares of the Funds have equal voting rights, except that certain
issues will be voted on separately by the shareholders of each Fund.
Pursuant to current SEC requirements and staff interpretations, insurance
companies will vote Fund shares held in registered separate accounts in
accordance with voting instructions received from variable contract owners
or payees having the right to give such instructions. Fund shares for
which contract owners or payees are entitled to give voting instructions,
but as to which no voting instructions are received, and shares owned by
an insurance company in its general and unregistered separate accounts,
will be voted in proportion to the shares for which voting instructions
have been received by that company. Under state insurance law and federal
regulations, there are certain circumstances under which the insurance
companies may disregard such voting instructions. If voting instructions
are ever ignored, the insurance companies will so advise contract owners
in the next semiannual report. The Company currently does not intend to
hold annual meetings of shareholders unless required to do so under
applicable law.
The Company is responsible for the payment of certain fees and expenses
including, among others, the following: (1) management and investment
advisory and subadvisory 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
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
reimbursement of organizational expenses; and (8) expenses of printing and
mailing prospectuses and other expenses related to shareholder
communications.
Prior to May 1, 1998, the American Odyssey Global High-Yield Bond Fund was
named the American Odyssey Short-Term Bond Fund and had a different
investment objective, investment policies, investment program, investment
portfolio, subadviser, and asset base.
DIRECTORS AND OFFICERS
The affairs of the Company are managed under the direction of its Board of
Directors. The Company utilizes a Manager/Subadviser structure for
advisory services. The directors decide upon matters of general policy and
review the actions of the Company's investment manager and subadvisers.
Pursuant to an order issued by the Securities and Exchange Commission, the
Company's Board of Directors may change or add subadvisers, or amend
existing subadvisory agreements in certain respects, without shareholder
approval. For further information, see INVESTMENT ADVISERS. page 39.
The Company's Directors and principal officers, their business addresses,
and principal occupations for the past five years are set forth in the
following table.
<TABLE>
<CAPTION>
NAME, ADDRESS, POSITION WITH PRINCIPAL OCCUPATION
AND AGE THE COMPANY DURING PAST FIVE YEARS
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Robert C. Dughi* Chairman of the Chairman of the Board and Chief
Two Tower Center Board Executive Officer, Copeland
East Brunswick, NJ Holdings LLC and various
08816 affiliates. Also: Chairman of the
Age: 53 Board and President of Copeland
Financial Services, Inc. ("CFS")
and the Manager.+
Linda Walker Bynoe Director President and Chief Operating
875 N. Michigan Avenue Officer, Telemat, Ltd.
Suite 2505 (consulting).
Chicago, IL
60611
Age: 48
</TABLE>
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME, ADDRESS, POSITION WITH PRINCIPAL OCCUPATION
AND AGE THE COMPANY DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------
<S> <C> <C>
Jane DiRenzo Pigott Director Partner, Environmental Law
35 West Wacker Drive Department, Winston & Strawn
Suite 4000 (law firm).
Chicago, IL
60601
Age: 43
John G. Beam, Jr. Director Chairman of the Board, Acordia
501 South 2nd Street of Kentucky, Inc. (insurance).
Louisville, KY Prior to 1998, Chairman of the
40202 Board, Harris & Harris of
Age: 53 Kentucky, Inc. (insurance).
Nicholas D. Yatrakis Director Physician in private practice
1 Wedgewood Way
Scotch Plains, NJ
07076
Age: 53
William A. Arnold Vice President Executive Vice President, Chief
Two Tower Center and Treasurer Financial Officer, and Treasurer,
East Brunswick, NJ Copeland Holdings LLC. Also:
08816 Senior Vice President, Chief
Age: 37 Financial Officer and Treasurer
of CFS, the Manager and various
affiliates.+ Prior to January
1998, Vice President and Asst.
Financial Officer. The Travelers
Insurance Company.
Paul S. Feinberg President Senior Vice President and
Two Tower Center General Counsel, Copeland
East Brunswick, NJ Holdings LLC. Also: Senior
08816 Vice President and General
Age: 58 Counsel of CFS, the Manager
and various affiliates). +
</TABLE>
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME, ADDRESS POSITION WITH PRINCIPAL OCCUPATION
AND AGE THE COMPANY DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------
<S> <C> <C>
Steven I. Weinstein Director Deputy General Counsel, Foster
Perryville Corporate Park Wheeler Corporation; President
Clinton, NJ and Director, Foster Wheeler
08809 Real Estate Development
Age: 54 Corporation.
Lori M. Renzulli Secretary Assistant Counsel, Copeland
Two Tower Center Holdings LLC and various
East Brunswick, NJ affiliates. Prior to January
08816 1998, Legal Assistant, The
Age: 34 Copeland Companies.+
</TABLE>
* Indicates Directors who are "interested persons" (as defined in the 1940 Act)
by virtue of their affiliation with the Company.
+ Indicates positions held with affiliated persons or principal underwriters of
the Company.
COMPENSATION TABLE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TOTAL COMPENSATION FROM
AGGREGATE COMPENSATION AOF AND FUND COMPLEX
NAME OF DIRECTOR FROM AOF PAID TO DIRECTORS
- --------------------------------------------------------------------------------
<S> <C> <C>
Robert C. Dughi $0 $0
- --------------------------------------------------------------------------------
Linda Walker Bynoe $18,000 $18,000
- --------------------------------------------------------------------------------
Steven I. Weinstein $18,000 $18,000
- --------------------------------------------------------------------------------
Jane DiRenzo Pigott $16,500 $16,500
- --------------------------------------------------------------------------------
John G. Beam, Jr. $18,000 $18,000
- --------------------------------------------------------------------------------
Nicholas D. Yatrakis $18,000 $18,000
- --------------------------------------------------------------------------------
</TABLE>
Directors do not receive any form of deferred or retirement benefits. None of
the compensated directors are members of a board of any mutual fund other than
American Odyssey Funds, Inc.
As of May 1, 2000, the directors and officers owned in the aggregate less than
1% of the outstanding shares of each Fund.
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT ADVISERS
STRUCTURE
The Company utilizes a Manager/Subadviser structure for advisory services.
American Odyssey Funds Management LLC (the "Manager") serves as the overall
investment adviser to the Company. The subadvisers perform the actual day-to-day
management of the Funds. The Manager monitors the performance of the subadvisers
and will recommend changes to the Board of Directors if warranted. For those
Funds with more than one subadviser, the Manager allocates the Fund's assets
between or among the Fund's subadvisers.
The Company has obtained an order from the Securities and Exchange Commission
that permits the Board of Directors to change subadvisers, hire additional
subadvisers, or amend existing subadvisory agreements without shareholder
approval. The new or amended subadvisory agreements may have different fee
structures or rates than the current agreements, subject to the following
maximum annual rates expressed as a percentage of average daily net assets:
Global High-Yield Bond Fund, 0.525%; International Equity Fund, 0.55%; Emerging
Opportunities Fund, 0.80%; Core Equity Fund, 0.45%; Long-Term Bond Fund, 0.35%;
and Intermediate-Term Bond Fund, 0.35%. These fees are in addition to the fee
paid to the Manager, which is equal to an annual rate of 0.25% of each Fund's
average daily net assets. The Board of Directors will approve a Fund's new or
amended subadvisory agreement only if the Board determines that doing so is in
the best interests of the Fund and its shareholders. In particular, the Board
will not approve a new or amended subadvisory agreement that pays a subadvisory
fee within these maximums but higher than the Fund currently pays unless the
Board determines that the new or amended subadvisory agreement is in the best
interest of the Fund and its shareholders. Any subadvisory agreement that would
pay a subadvisory fee higher than these maximum rates would require shareholder
approval in addition to the Board's approval.
In the event the Board of Directors approves the hiring of a new subadviser for
a Fund without shareholder approval, the Company will, within ninety days of the
effective date of the subadvisory agreement, send all of that Fund's
shareholders an informational statement informing them of the changes. The
statement will include information about any changes caused by the addition of
the new subadviser, including any applicable changes in fees.
Pursuant to the order obtained from the Securities and Exchange Commission
granting the Board of Directors authority to enter into subadvisory agreements
without shareholder
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
approval, the Company and the Manager have agreed to comply with 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 with respect
to the Fund 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. In addition, any such Fund will hold itself
out to the public as employing the "manager/subadviser" structure
described in the application. The prospectus will prominently disclose
that the Manager has ultimate responsibility to oversee the subadvisers
and recommend their hiring, termination, and replacement.
3. The Manager will provide management and administrative services to the
Company and, subject to the review and approval by the Board, will: (i)
set each Fund's overall investment strategies; (ii) evaluate, select, and
recommend subadvisers to manage all or part of a Fund's assets; (iii)
allocate and, when appropriate, reallocate each Fund's assets among
subadvisers; (iv) monitor and evaluate subadviser performance; and (v)
oversee subadviser compliance with the applicable Fund's investment
objective, policies and restrictions.
4. A majority of the Board will be persons who are not "interested
persons" (as defined in section 2(a)(19) of the Investment Company Act of
1940, as amended) of the Company ("Independent Directors"), and the
nomination of new or additional Independent Directors will be placed
within the discretion of the then existing Independent Directors.
5. The Company 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 of 1940, as amended)
("Affiliated Subadviser") other than by reason of serving as subadviser to
one or more Funds without such subadvisory agreement,
40
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
including the compensation to be paid thereunder, being approved by the
persons having voting rights with respect to the applicable Fund.
6. When a subadviser change is proposed for a Fund with an Affiliated
Subadviser, the Board, 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.
7. No director, trustee, or officer of the Company 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.
8. Within 90 days of the hiring of any new subadviser, 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 the new subadviser. 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.
CONTROL
The Manager is a wholly-owned subsidiary of Copeland Holdings LLC, which is a
wholly-owned subsidiary of CitiStreet LLC, which is jointly owned, 50% by State
Street Bank and Trust Company and 50% by Keeper Holdings LLC. State Street Bank
and Trust Company is a wholly-owned subsidiary of State Street Corporation.
Keeper Holdings LLC is owned 81.1% by Plaza LLC, which is a wholly-owned
subsidiary of The Travelers Insurance Company, which is a wholly-owned
subsidiary of The Travelers Insurance Group Inc., which is a wholly-owned
subsidiary of PFS Services, Inc., which is a wholly-owned subsidiary of
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Associated Madison Companies, Inc., which is a wholly-owned subsidiary of
Citigroup Inc. The remaining 18.9% of Keeper Holdings LLC is owned by SSB Keeper
Holdings LLC, which is a wholly-owned subsidiary of Salomon Smith Barney
Holdings Inc., which is a wholly-owned subsidiary of Citigroup Inc.
Credit Suisse Asset Management LLC, the Global High-Yield Bond Fund's
subadviser, is a wholly-owned subsidiary of Credit Suisse Investment
Corporation, which is a wholly-owned subsidiary of Credit Suisse Asset
Management Holding ("CSAMHC"). Seventy percent of CSAMHC's voting shares are
held by Credit Suisse First Boston (Swiss Bank) - Credit Suisse Asset Management
Business Unit, which is a wholly-owned subsidiary of Credit Suisse Group, a
publicly-traded Swiss corporation. The remaining 30% of CSAMHC's voting shares
are held directly by Credit Suisse Group.
Bank of Ireland Asset Management (U.S.) Limited, subadviser to the International
Equity Fund, is a wholly-owned subsidiary of Bank of Ireland Group PLC, a
publicly-traded company.
Chartwell Investment Partners, one of the subadvisers to the Emerging
Opportunities Fund, is a limited partnership.
SG Cowen Asset Management, Inc., one of the subadvisers to Emerging
Opportunities Fund, is a wholly-owned subsidiary of SG Investment Management
Holding Corp., which is a wholly-owned subsidiary of Societe Generale Asset
Management SA, a wholly-owned subsidiary of Societe Generale, an international
commercial and investment bank headquartered in France.
State Street Global Advisors, one of the subadvisers for both the Emerging
Opportunities Fund and the Core Equity Fund, is the asset management division of
State Street Bank and Trust Company, which is wholly-owned by State Street
Corporation, a publicly-owned corporation.
Equinox Capital Management, LLC, one of the subadvisers to the Core Equity Fund,
is a limited liability company.
Putnam Investment Management, Inc., one of the subadvisers to the Core Equity
Fund, is a wholly-owned subsidiary of Putnam Investments, Inc., which is (except
for a minority interest owned by employees) a wholly-owned subsidiary of Marsh &
McLennan Companies, Inc.
Western Asset Management Company, the Long-Term Bond Fund's subadviser, is a
wholly-owned subsidiary of Legg Mason, Inc.
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Travelers Asset Management International Company LLC, the Intermediate-Bond
Fund's subadviser, is a wholly-owned subsidiary of Plaza LLC, which is a
wholly-owned subsidiary of The Travelers Insurance Company, which is a
wholly-owned subsidiary of The Travelers Insurance Group Inc., which is a
wholly-owned subsidiary of PFS Services, Inc., which is a wholly-owned
subsidiary of Associated Madison Companies, Inc., which is a wholly-owned
subsidiary of Citigroup Inc., a publicly-owned corporation.
FEES
Each Fund pays the Manager a fee for its services that is computed daily and
paid monthly at an annual rate of 0.25% of the Fund's average net assets. Each
Fund pays its respective subadviser(s) directly, at the rates described below.
Prior to May 1, 1998, the Manager paid each of the subadvisers out of the fees
it received from the Funds. The Manager's fees (prior to any adjustment for the
expense limitation agreement) at that time were equal to an annual rate of the
amount the Manager paid each subadviser plus 0.25% of each Fund's average daily
net assets. Thus, prior to May 1, 1998, the Manager's net fee for each Fund,
after paying the subadviser(s) for that Fund, but prior to any adjustment for
the expense limitation agreement, was 0.25% of that Fund's average net assets.
Each Fund pays its subadviser (or, for any Fund with more than one subadviser,
each of its subadvisers) a fee that is computed daily and paid monthly at the
annual rates specified below based on the value of the Fund's average daily net
assets allocated to that subadviser. Thus, for a Fund with one subadviser, the
subadviser's fee is based upon the average daily net assets of the entire Fund;
for a Fund with more than one subadviser, the subadviser's fee is based upon the
average daily net assets actually allocated to that subadviser.
<TABLE>
<CAPTION>
FUND & SUBADVISER SUBADVISER'S FEE
- ----------------- ----------------
<S> <C>
Global High-Yield Bond Fund
- Credit Suisse Asset Management, LLC 0.425% of assets
International Equity Fund
- Bank of Ireland Asset Management (U.S.) 0.45% for first $50 million in assets, plus
Limited 0.40% for next $50 million in assets, plus
0.30% for assets over $100 million
Emerging Opportunities Fund
- SG Cowen Asset Management 0.50% for first $50 million in assets, plus
0.45% for next $50 million in assets, plus
0.40% for assets over $100 million
</TABLE>
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- Chartwell Investment Partners 0.70% for first $50 million in assets, plus
0.50% for next $50 million in assets, plus
0.45% for assets over $100 million
- State Street Global Advisors 0.08% for first $50 million in assets, plus
0.06% for next $50 million in assets, plus
0.04% for assets over $100 million
(minimum $50,000 on annualized basis)
Core Equity Fund
- Equinox Capital Management, LLC 0.35% for first $100 million in assets, plus
0.30% for assets over $100 million
- Putnam Investment Management, Inc. 0.45% of assets
- State Street Global Advisors .05% for first $50 million in assets, plus
0.04% for next $50 million in assets, plus
0.03% for assets over $100 million
(minimum $50,000 on annualized basis)
Long-Term Bond Fund
- Western Asset Management Company 0.25% for first $250 million in assets, plus
0.15% for assets over $250 million
Intermediate-Term Bond Fund
- Travelers Asset Management International 0.25% for first $100 million in assets, plus
Company LLC 0.20% for next $100 million in assets, plus
0.15% for assets over $200 million
</TABLE>
For 1997, the Short-Term Bond Fund paid the Manager fees of $161,395. In 1997,
the Fund also paid the Manager $42,792, as a repayment of expenses previously
reimbursed under an expense limitation agreement. For the period January 1
through April 30, 1998, the Fund paid the Manager $99,599. On May 1, 1998, the
Fund became the Global High-Yield Bond Fund and adopted a different fee
structure. For the period May 1, 1998 through December 31, 1998, the Fund paid
the Manager and Credit Suisse Asset Management, LLC fees of $130,425 and
$221,908, respectively. For 1999, the Fund paid the Manager and Credit Suisse
Asset Management, LLC fees of $221,145 and $375,947, respectively.
For the years 1997, 1998 and 1999, the International Equity Fund paid the
Manager fees of $1,320,135, $984,501 and $810,095, respectively. For the years
1998 and 1999, the Fund paid Bank of Ireland Asset Management (U.S.) Limited
fees of $650,495 and $1,097,117, respectively.
For the years 1997, 1998 and 1999, the Emerging Opportunities Fund paid the
Manager fees of $1,405,303, $1,019,925 and $742,982, respectively. For 1998, the
Fund paid SG Cowen Asset Management and Chartwell Investment Partners fees of
$372,679 and $499,065,
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
respectively. For 1999, the Fund paid SG Cowen Asset Management and Chartwell
Investment Partners fees of $619,797 and $868,151, respectively.
For the years 1997, 1998 and 1999, the Core Equity Fund paid the Manager fees of
$2,022,000, $1,598,522 and $1,202,605, respectively. For the years 1998 and
1999, the Fund paid Equinox Capital Management, LLC fees of $954,481 and
$1,493,126, respectively.
For the years 1997, 1998 and 1999, the Long-Term Bond Fund paid the Manager fees
of $945,274, $785,689 and $621,922, respectively. For the years 1998 and 1999,
the Fund paid Western Asset Management Company fees of $412,024 and $622,283,
respectively.
For 1997, the Intermediate-Term Bond Fund paid the Manager fees of $493,298. For
1998, the Fund paid the Manager and Travelers Asset Management International
Company LLC, an affiliate of the Manager, aggregate fees of $589,370. For 1999,
the Fund paid the Manager and Travelers Asset Management International Company
LLC fees of $317,189 and $303,751, respectively.
The expense limitation agreement is no longer in effect for any of the Funds.
Each Fund has repaid the Manager for all expenses previously reimbursed.
For more information regarding investment advisers, see MANAGEMENT OF THE FUNDS
in the prospectus.
OTHER SERVICE PROVIDERS
Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116 is the
custodian of the assets and is also the accounting services agent for the Funds
of the Company. In that capacity various personnel at Investors Bank & Trust
Company provide custodial and accounting services to, and keeps the accounts and
records of, the Company. The Company pays a monthly fee based upon the total
assets of the Funds at the end of the month at an annual rate of between 0.04%
and 0.08% plus reimbursement of out-of-pocket expenses for obtaining information
from pricing services and securities transaction charges. For both U.S. and
non-U.S. assets, the annual rate is 0.08% for assets up to $250 million, 0.06%
for assets over $250 million and up to $500 million, and 0.04% for assets over
$500 million. For non-U.S. assets, the Company paid additional custodial
expenses at annual rates of 0.04% and 0.13%, based upon the country. For the
years 1997, 1998 and 1999, the Company paid $864,106, $1,012,853 and $1,150,450,
respectively, to Investors Bank & Trust Company as custodian and accounting
services agent. Investors Bank & Trust Company also assists the
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
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Manager in providing certain administrative services for the Company. For this
assistance, the Manager (not the Company) paid Investors Bank & Trust Company a
fee of $236,026 in 1997, $294,071 in 1998 and $303,956 in 1999.
American Odyssey Funds Management LLC (the "Manager"), Two Tower Center, P.O.
Box 1063, East Brunswick, NJ 08816-1063, serves as transfer agent and dividend
disbursing agent for the Company. The Company does not pay a separate fee for
this service; rather, it reimburses the Manager for reasonable out-of-pocket
expenses incurred in connection with providing the service. The Manager also
provides accounting services to and keeps the accounts and records of the
Company, other than those maintained by the custodian. It or an affiliated
company pays the salaries and expenses of all of its and the Company's personnel
except for fees and expenses of the non-interested directors. It or an
affiliated company provides necessary office space, staff assistance to the
Board, and all expenses incurred in connection with managing the ordinary course
of the Company's business, other than the fees and expenses that are paid
directly by the Company.
KPMG LLP, 99 High Street, Boston, MA 02110-2371, serves as the Company's
independent accountants, providing audit services. For 1998 and for previous
years, PricewaterhouseCoopers LLP, One Post Office Square, Boston, MA 02109, and
one of its predecessors served as independent public accountant for the Company.
CFBDS, Inc., 21 Milk Street, Boston, Massachusetts 02109, serves as principal
underwriter of the shares of the Company.
BARRA Rogers Casey, Inc. ("BARRARogersCasey"), 1 Parklands Drive, Darien, CT
06820, assists the Manager in monitoring the performance of the subadvisers and
comparing that performance to that of other investment managers. For this
assistance, the Manager (not the Company) paid BARRARogersCasey a fee of
approximately $140,000 in 1997, $147,000 in 1998 and $147,000 in 1999.
CODES OF ETHICS
The Company, the Manager, and the subadvisers have each adopted codes of ethics,
as required by Rule 17j-1 under the Investment Company Act of 1940. These codes
of ethics do not prohibit personnel subject to the codes from trading for their
personal accounts, but do impose certain restrictions on such trading.
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
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PORTFOLIO TRANSACTIONS
A subadviser may employ an affiliated broker to execute brokerage transactions
on behalf of the Fund as long as the commissions are reasonable and fair
compared to the commissions received by other brokers in connection with
comparable transactions involving similar securities being purchased or sold on
a securities exchange during a comparable period of time. The Funds may not
engage in any transaction in which a subadviser or its affiliates act as
principal, including over-the-counter purchases and negotiated trades in which
such party acts as a principal.
Each Fund's subadviser is responsible for the selection of brokers and dealers
to effect that Fund's transactions and the negotiation of brokerage commissions,
if any. Transactions on a stock exchange in equity securities will be executed
primarily through brokers who will receive a commission paid by the Fund. Fixed
income securities, as well as securities traded in the over-the-counter market,
on the other hand, will not normally involve any brokerage commissions. The
securities are generally traded on a "net" basis with the dealer acting as
principal for its own account without a stated commission, although the price of
the security usually includes a profit to the dealer. In underwritten offerings,
securities are purchased at a fixed priced that includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount. On occasion, certain of these securities may be
purchased directly from an issuer, in which case neither commissions nor
discounts are paid.
In purchasing and selling a Fund's portfolio securities, it is the subadvisers'
policy to seek quality execution at the most favorable prices through
responsible broker-dealers and, in the case of agency transactions, at
competitive commission rates. In selecting broker-dealers to execute a Fund's
portfolio transactions, the subadviser will 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 the brokerage and
research services they provide to the subadviser or the Fund.
Notwithstanding the above, under certain conditions, the Funds are authorized to
pay higher brokerage commissions in return for brokerage and research services,
although they have no current arrangement to do so. The subadvisers may cause a
Fund to pay a broker-dealer who furnishes brokerage and/or research services a
commission or price for executing a transaction that is in excess of the
commission or price another broker would have received for executing the
transaction if it is determined that such commission or price is reasonable in
relation to the
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STATEMENT OF ADDITIONAL INFORMATION
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value of the brokerage and/or research services which have been provided. In
some cases, research services are generated by third parties, but are provided
to the subadviser or through broker-dealers.
The subadvisers may receive a wide range of research services from
broker-dealers, including information on securities markets, the economy,
individual companies, statistical information, accounting and tax law
interpretations, technical market action, pricing and appraisal services, and
credit analyses. Research services are received primarily in the form of written
reports, telephone contacts, personal meetings with security analysts, corporate
and industry spokespersons, economists, academicians, and government
representatives, and access to various computer-generated data. Research
services received from broker-dealers are supplemental to each investment
adviser's own research efforts and, when utilized, are subject to internal
analysis before being incorporated into the investment process.
In allocating brokerage for the Funds, the subadvisers may annually assess the
contribution of the brokerage and research services provided by broker-dealers,
and allocate a portion of the brokerage business of its clients on the basis of
these assessments. In addition, broker-dealers sometimes suggest a level of
business they would like to receive in return for the various brokerage and
research services they provide. Actual brokerage received by any firm may be
less than the suggested allocations, but can exceed the suggestions because
total brokerage is allocated on the basis of all the considerations described
above. In no instance is a broker-dealer excluded from receiving business
because it has not been identified as providing research services.
The subadvisers cannot readily determine the extent to which net prices or
commission rates charged by broker-dealers reflect the value of their research
services. However, net prices and commissions are periodically reviewed to
determine whether they are reasonable in relation to the services provided. In
some instances, the subadvisers receive research services they might otherwise
have had to perform for themselves. The research services provided by
broker-dealers can be useful to the subadvisers, in serving the Funds, as well
as to their other clients.
A subadviser may employ an affiliated broker to execute brokerage transactions
on behalf of the Fund as long as the commissions are reasonable and fair
compared to the commissions received by other brokers in connection with
comparable transactions involving similar securities being purchased or sold on
a securities exchange during a comparable period of time. The Funds may not
engage in any transaction in which a subadviser or its affiliates act
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STATEMENT OF ADDITIONAL INFORMATION
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as principal, including over-the-counter purchases and negotiated trades in
which such party acts as a principal.
On occasion, an investment opportunity may be appropriate for more than one
entity for which a subadviser serves as investment manager or adviser. On those
occasions, one entity will not be favored over another and allocations of
investments among them will be made in an impartial manner believed to be
equitable to each entity involved. The allocations will be based on each
entities investment objectives and its current cash and investment positions.
The subadvisers may enter into certain commission recapture arrangements with
broker-dealers. Under these arrangements, the broker-dealer agrees to return a
portion of the brokerage commission for the benefit of the fund, either in the
form of a cash refund or by payment of a fund expense such as custodial
expenses. Subadvisers will execute trades under such arrangements only when it
is consistent with the policy to seek best execution.
The following charts provide the aggregate amount of brokerage commissions paid
by each Fund during the last three years.
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AMERICAN ODYSSEY FUNDS, INC.
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GLOBAL HIGH-YIELD BOND FUND
<TABLE>
<CAPTION>
% of Dollars of
Transactions through
% Paid to Brokers Brokers Providing
Year Total Commissions Providing Research Research
---- ----------------- ------------------ --------
<S> <C> <C> <C>
1997 $0 0% 0%
1998 $0 0% 0%
1999 $0 0% 0%
</TABLE>
Prior to May 1, 1998, the Global High-Yield Bond Fund was named the Short-Term
Bond Fund had a substantially different investment objective and investment
program. Information about commissions paid by the Short-Term Bond Fund is
unlikely to be helpful to investors and potential investors in the Global
High-Yield Bond Fund. For more information, see CONVERSION OF SHORT-TERM BOND
FUND TO GLOBAL HIGH-YIELD BOND FUND in the prospectus. In connection with the
conversion, the Fund purchased a new portfolio of securities, and for that
reason, 1998 commissions differed materially from the amounts paid during the
two preceding years.
INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
% of Dollars of
Transactions through
% Paid to Brokers Brokers Providing
Year Total Commissions Providing Research Research
---- ----------------- ------------------ --------
<S> <C> <C> <C>
1997 $214,573 0% 0%
1998 $226,902 0% 0%
1999 $198,396 0% 0%
</TABLE>
In 1998, the Fund paid commissions in the amount of $2,228 to Salomon Smith
Barney, Inc., an affiliate of the Manager.
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EMERGING OPPORTUNITIES FUND
<TABLE>
<CAPTION>
% of Dollars of
Transactions through
% Paid to Brokers Brokers Providing
Year Total Commissions Providing Research Research
---- ----------------- ------------------ --------
<S> <C> <C> <C>
1997 $585,591 94% 94%
1998 $810,386 76% 73%
1999 $866,738 54% 38%
</TABLE>
In 1998, the Fund paid commissions of $810 to Salomon Smith Barney Inc., an
affiliate of the Manager. In 1999, the Fund paid commissions of $558 to SG Cowen
Securities, an affiliate of one of the Funds subadvisers. In 1999, the Fund paid
0.06% of its aggregate brokerage commissions to that broker for 0.13% of
aggregate dollar amount of transactions involving the payment of commissions.
CORE EQUITY FUND
<TABLE>
<CAPTION>
% of Dollars of
Transactions through
% Paid to Brokers Brokers Providing
Year Total Commissions Providing Research Research
---- ----------------- ------------------ --------
<S> <C> <C> <C>
1997 $414,992 50% 50%
1998 $548,482 49% 49%
1999 $666,750 55% 55%
</TABLE>
In 1999, the Fund paid commissions of $4,675 to Salomon Smith Barney Inc., an
affiliate of the Manager. In 1999, the Fund paid 0.70% of its aggregate
brokerage commissions to that broker for 0.61% of its aggregate dollar amount of
transactions involving the payment of commissions.
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
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LONG-TERM BOND FUND
<TABLE>
<CAPTION>
% of Dollars of
Transactions through
% Paid to Brokers Brokers Providing
Year Total Commissions Providing Research Research
---- ----------------- ------------------ --------
<S> <C> <C> <C>
1997 $ 94,185 0% 0%
1998 $122,145 0% 0%
1999 $ 56,468 0% 0%
</TABLE>
INTERMEDIATE-TERM BOND FUND
<TABLE>
<CAPTION>
% of Dollars of
Transactions through
% Paid to Brokers Brokers Providing
Year Total Commissions Providing Research Research
---- ----------------- ------------------ --------
<S> <C> <C> <C>
1997 $0 0% 0%
1998 $0 0% 0%
1999 $0 0% 0%
</TABLE>
- ------------------
The annual portfolio turnover rate for the Global High-Yield Bond Fund,
International Equity, and Core Equity Funds are expected to be less than 100%.
The annual portfolio turnover rate for the Emerging Opportunities, Long-Term
Bond and Intermediate-Term Bond Funds are expected to be more than 100%. For a
listing of last year's portfolio turnover rates for all of the Funds, see
FINANCIAL HIGHLIGHTS in the prospectus.
NET ASSET VALUE OF SHARES
The Company sells and redeems shares of each Fund at its net asset value next
determined after receipt of the purchase or redemption order. There is no sales
charge or sales load on the purchase or redemption of shares.
The net asset value of the shares of each Fund is determined once daily, as of
4:15 p.m. New York City time, on each day during which the New York Stock
Exchange ("NYSE") is open
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for business. The NYSE is open for business Monday through Friday except for the
days on which the following holidays are observed: New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day. The net asset value per share of each Fund is computed by
adding the sum of the value of the securities held by that Fund plus any cash or
other assets it holds, subtracting all its liabilities, and dividing the result
by the total number of shares outstanding of that Fund at such time. Expenses,
including the investment management fee, are accrued daily.
Equity securities for which the primary market is on an exchange are generally
valued at the last sale price on such exchange as of the close of the NYSE
(which is currently 4:00 p.m. New York City time) or, in the absence of recorded
sales, at the mean between the most recently quoted bid and asked prices. NASDAQ
National Market System equity securities are valued at the last sale price or,
if there was no sale on such day, at the mean between the most recently quoted
bid and asked prices. Other over-the-counter equity securities are valued at the
mean between the most recently quoted bid and asked prices. Convertible debt
securities that are actively traded in the over-the-counter, including listed
securities for which the primary market is believed to be over-the-counter, are
valued at the mean between the most recently quoted bid and asked prices.
Debt obligations (other than those with remaining maturities of less than 60
days) are valued utilizing an independent pricing service to determine
valuations for normal institutional size trading units of securities. The
pricing service considers such factors as security prices, yields, maturities,
call features, ratings, and developments relating to specific securities. Debt
obligations with remaining maturities of less than 60 days will be valued at
amortized cost, which approximates market value. This means that each obligation
will be valued initially at its purchase price (or its market value as of the
60th day prior to maturity) and thereafter by amortizing any discount or premium
uniformly to maturity, unless this method does not represent fair market value.
In such cases, the security will be valued at its fair value as determined by
the Manager and/or the subadvisers under the direction of the Board of Directors
of the Company.
Options traded on national securities exchanges are valued at their last sale
price as of the close of option trading on such exchanges (which is currently
4:10 p.m. New York City time). Futures contracts are marked to market daily, and
options thereon are valued at their last sale price, as of the close of the
applicable commodities exchanges (which is currently 4:15 p.m. New York City
time). Quotations of foreign securities in a foreign currency are converted to
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
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U.S. dollar equivalents at the current rate obtained by a recognized bank or
dealer. Forward contracts are valued at the current cost of covering or
offsetting such contracts.
Securities or assets for which market quotations are not readily available will
be valued at fair value as determined by the Manager and/or the subadvisers
under the direction of the Board of Directors of the Company.
Generally, trading in foreign securities, as well as corporate bonds, U.S.
government securities, and money market instruments, is substantially completed
each day at various times prior to the close of the NYSE. The value of any such
securities are determined as of such times for purposes of computing a Fund's
net asset value. Foreign currency exchange rates are also generally determined
prior to the close of the NYSE. If an extraordinary event occurs after the close
of an exchange on which that security is traded, the security will be valued at
fair value as determined in good faith by the applicable subadviser under
procedures established by and under the general supervision of the Company's
Board of Directors.
PERFORMANCE INFORMATION
The Funds may quote their performance in various ways. All performance
information supplied by the Funds is historical and is not intended to indicate
future performance. A Fund's share prices, yields, and total returns fluctuate
in response to market conditions and other factors, and the value of Fund shares
when redeemed may be more or less than their original cost.
Performance information for a Fund includes the effect of deducting that Fund's
expenses, but does not include charges and expenses attributable to any
particular insurance product. For that reason, if you have purchased a variable
contract that offers the American Odyssey Funds as an investment option, you
should not compare the Funds' performance information with funds that offer
their shares directly to the public because the performance figures provided by
the American Odyssey Funds do not reflect charges of the insurance company
issuing the variable contract. You should therefore consult your contract
prospectus to learn more about those charges.
Yields quoted in advertising are computed by dividing that Fund's interest and
dividend income for a given 30-day period, net of expenses, by the average
number of shares entitled to
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receive dividends during the period, dividing this figure by the Fund's net
asset value per share at the end of the period and annualizing the result
(assuming compounding of income) in order to arrive at an annual percentage
rate. Income is calculated for purposes of yield quotations in accordance with
standardized methods applicable to all stock and bond funds. Dividends for
equity investments are treated as if they were accrued on a daily basis, solely
for the purposes of yield calculations. In general, interest income is reduced
with respect to bonds trading at a premium over their par value by subtracting a
portion of the premium from income on a daily basis, and is increased with
respect to bonds trading at a discount by adding a portion of the discount to
daily income. Capital gains and losses generally are excluded from the
calculation.
Income calculated for the purpose of determining the Funds' yields differs from
income as determined for other accounting purposes. Because of the different
accounting methods used, and because of the semi-annual compounding assumed in
yield calculations, the yields quoted for the Funds may differ from the income
the Funds paid over the same period or the rate of income reported in the Funds'
financial statements.
Total returns quoted in advertising reflect all aspects of a Fund's return,
including the effect of reinvesting dividends and capital gain distributions,
and any change in the Fund's net asset value per share (NAV) over the period.
Average annual total returns are calculated by determining the growth or decline
in value of a hypothetical historical investment in the Fund over a stated
period, and then calculating the annually compounded percentage rate that would
have produced the same result if the rate of growth or decline in value had been
constant over the period. For example, a total return of 100% over ten years
would require an average annual return of 7.18%, which is the steady annual rate
that would equal 100% growth on a compounded basis in ten years. While average
annual total returns are a convenient means of comparing investment
alternatives, investors should realize that a Fund's performance is not constant
over time, but changes from year to year, and that average annual total returns
represent averaged figures as opposed to the actual year-to-year performance.
In addition to average annual total returns, the Funds may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Average annual and cumulative total returns may be quoted
as a percentage or as a dollar amount, and may be calculated for a single
investment, a series of investments, and/or a series of redemptions, over any
time period. Total returns may be broken down into their components of income
and capital (including capital gains and changes in share price) in order to
illustrate the relationship of these factors and their contributions to total
return. Total
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AMERICAN ODYSSEY FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
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returns, yield and other performance information may be quoted numerically or in
a table, graph or similar illustration.
The Funds' average annual total returns were as follows for the respective
periods ending December 31, 1999:
<TABLE>
<CAPTION>
Life of Fund
1 Year 5 Year (since 5/17/93)
------ ------ ---------------
<S> <C> <C> <C>
Global High-Yield Bond Fund (1) 10.68% 5.55% 4.46%
International Equity Fund 32.52% 18.34% 15.56%
Emerging Opportunities Fund 36.71% 11.29% 11.47%
Core Equity Fund -.28% 20.93% 15.78%
Long-Term Bond Fund -2.74% 8.05% 6.65%
Intermediate-Term Bond Fund 1.50% 7.18% 5.63%
</TABLE>
(1) Prior to May 1, 1998, the Global High-Yield Bond Fund was named the
Short-Term Bond Fund and had a substantially different investment
objective and investment program. Information about the Short-Term Bond
Fund is unlikely to be helpful to investors and potential investors in the
Global High-Yield Bond Fund. See CONVERSION OF SHORT-TERM BOND FUND TO
GLOBAL HIGH-YIELD BOND FUND in the prospectus.
TAXES
The Funds intend to qualify as regulated investment companies under Subchapter M
of the Internal Revenue Code (the "Code"). Under the relevant provisions, the
Funds are not subject to federal income tax on the part of their net ordinary
income and net realized capital gains that they distribute. They intend to
distribute as dividends substantially all their net investment income, if any.
They also declare and distribute annually all their net realized capital gains.
Such dividends and distributions are automatically reinvested in additional
shares of the Funds. If the Fund does not qualify under Subchapter M, it will be
subject to federal income tax.
Section 817(h) of the Internal Revenue Code requires that assets underlying
variable life insurance and variable annuity contracts must meet certain
diversification requirements if the contracts are to qualify as life insurance
and annuity contracts. The diversification
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requirements ordinarily must be met within 1 year after contract owner funds are
first allocated to the particular Fund, and within 30 days after the end of each
calendar quarter thereafter. In order to meet the diversification requirements
set forth in Treasury Regulations issued pursuant to Section 817(h), each Fund
must meet one of two alternative tests. Under the first test, no more than 55%
of the Fund's assets can be invested in any one investment; no more than 70% of
the assets can be invested in any two investments; no more than 80% of the
assets can be invested in any three investments; and no more than 90% can be
invested in any four investments. Under the second test, the Fund must meet the
tax law diversification requirements for a regulated investment company and no
more than 55% of the value of the Fund's assets can be invested in cash, cash
items, government securities, and securities of other regulated investments.
For purposes of determining whether a variable account is adequately
diversified, each United States government agency or instrumentality is treated
as a separate issuer for purposes of determining whether a Fund is adequately
diversified. The Company's compliance with the diversification requirements will
generally limit the amount of assets that may be invested in federally insured
certificates of deposit and all types of securities issued or guaranteed by each
United States government agency or instrumentality.
The International Equity Fund may be required to pay withholding or other taxes
to foreign governments. If so, the taxes will reduce the Fund's dividends.
Foreign tax withholding from dividends and interest (if any) is typically set at
a rate between 10% and 15% if there is a treaty with the foreign government
which addresses this issue. If no such treaty exists, the foreign tax
withholding would be 30%. While contract owners will thus bear the cost of
foreign tax withholding, they will not be able to claim a foreign tax credit or
deduction for foreign taxes paid by the Fund.
OWNERSHIP OF SHARES
At December 31, 1999, Travelers Universal Annuity Fund U was the holder of
record of 89.96% of the Global High-Yield Bond Fund, 90.05% of the International
Equity Fund, 91.40% of the Emerging Opportunities Fund, 90.38% of the Core
Equity Fund, 90.03% of the Long-Term Bond Fund, and 87.77% of the
Intermediate-Term Bond Fund. The address for Travelers Fund U is One Tower
Square, Hartford, CT 06183.
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FINANCIAL STATEMENTS
The Company's financial statements and financial highlights for the fiscal year
ended December 31, 1999, and report of the independent accountants in the
Company's Annual Report and are incorporated herein by reference.
58
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PART C
OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) (1) Articles of Incorporation (14)
(2) Amendment to Articles of Incorporation (14)
(b) By-Laws (8)
(c) Not Applicable
(d) Investment Advisory Contracts
(1) Investment Management Agreement between Registrant and
American Odyssey Funds Management LLC (14)
(2) Subadvisory Agreement among Registrant, American Odyssey Funds
Management LLC and Equinox Capital Management, L.L.C. (14)
(3) Subadvisory Agreement among Registrant, American Odyssey Funds
Management LLC and Chartwell Investment Partners (14)
(4) Subadvisory Agreement among Registrant, American Odyssey Funds
Management LLC and Bank of Ireland Asset Management (U.S.)
Ltd. (14)
(5) Subadvisory Agreement among Registrant, American Odyssey Funds
Management LLC and Western Asset Management Company (14)
(6) Subadvisory Agreement among Registrant, American Odyssey Funds
Management LLC and Travelers Asset Management International
Company LLC (14)
(7) Subadvisory Agreement among Registrant, American Odyssey Funds
Management LLC and Credit Suisse Asset Management, LLC (14)
(8) Subadvisory Agreement among Registrant, American Odyssey Funds
Management LLC and SG Cowen Asset Management, Inc. (14)
(9) Subadvisory Agreement among Registrant, American Odyssey Funds
Management LLC and Putnam Investment Management, Inc. (14)
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<PAGE> 92
(10) Subadvisory Agreement among Registrant, American Odyssey Funds
Management LLC and State Street Global Advisors (14)
(11) Subadvisory Agreement among Registrant, American Odyssey Funds
Management LLC and State Street Global Advisors (14)
(e) Underwriting Contracts
(1) Form of Participation Agreement among Registrant, Copeland
Equities, Inc. and The Travelers Insurance Company (14)
(2) Amendment No. 1 to the Participation Agreement among
Registrant, Copeland Equities, Inc. and The Travelers
Insurance Company (14)
(3) Amendment No. 2 to the Participation Agreement among
Registrant, Copeland Equities, Inc. and The
Travelers Insurance Company (14)
(4) Distribution Agreement between Registrant and CFBDS, Inc. (12)
(f) Not Applicable
(g) Custodian Agreements
(1) Custodian Agreement between Registrant and Investors Bank &
Trust Company (6)
(2) Delegation Agreement between Registrant and Investors Bank &
Trust Company (12)
(h) Form of Transfer Agency Agreement between Registrant and American
Odyssey Funds Management, Inc. (14)
(i) Opinion of Counsel (5)
(j) Consents of Independent Accountants (14)
(k) Not Applicable
(l) Not Applicable
(m) Not Applicable
(n) Financial Data Schedules (14)
(o) Not Applicable
(p) Code of Ethics for:
2
<PAGE> 93
(1) American Odyssey Funds, Inc. (14)
(2) American Odyssey Funds Management LLC (14)
(3) Bank of Ireland Asset Management (U.S.) Ltd. (14)
(4) Chartwell Investment Partners (14)
(5) SG Cowen Asset Management, Inc. (14)
(6) Equinox Capital Management, LLC (14)
(7) Western Asset Management Company (14)
(8) Travelers Asset Management International Company LLC (14)
(9) Credit Suisse Asset Management, LLC (14)
(10) Putnam Investment Management, Inc. (14)
(11) State Street Global Advisors (14)
(q) Powers of Attorney
Robert C. Dughi (14)
Steven I. Weinstein (14)
William A. Arnold (10)
Linda Walker Bynoe (14)
John G. Beam, Jr. (14)
Nicholas D. Yatrakis (14)
Jane DiRenzo Pigott (14)
- -----------------------------
(1) Incorporated by reference to the initial registration statement filed
January 27, 1993.
(2) Incorporated by reference to Pre-Effective Amendment No. 1 filed April 22,
1993.
(3) Incorporated by reference to Post-Effective Amendment No. 1 filed November
24, 1993.
(4) Incorporated by reference to Post-Effective Amendment No. 2 filed March 1,
1994.
(5) Incorporated by reference to Post-Effective Amendment No. 3 filed November
24, 1993.
(6) Incorporated by reference to Post-Effective Amendment No. 4 filed April
28, 1995.
(7) Incorporated by reference to Post-Effective Amendment No. 5 filed April
29, 1996.
(8) Incorporated by reference to Post-Effective Amendment No. 6 filed February
28, 1997.
(9) Incorporated by reference to Post-Effective Amendment No. 7 filed April
30, 1997.
(10) Incorporated by reference to Post-Effective Amendment No. 8 filed March 2,
1998.
(11) Incorporated by reference to Post-Effective Amendment No. 9 filed April
24, 1998.
(12) Incorporated by reference to Post-Effective Amendment No. 10 filed
February 26, 1999
(13) Incorporated by reference to Post-Effective Amendment No. 11 filed April
30, 1999
(14) Filed herewith.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not Applicable
ITEM 25. INDEMNIFICATION.
3
<PAGE> 94
Article VII, paragraph (3) of the Registrant's Articles of Incorporation
provides: "Each director and each officer of the Corporation shall be
indemnified by the Corporation to the full extent permitted by the General Laws
of the State of Maryland and the Investment Company Act of 1940, now or
hereafter in force, including the advance of related expenses.: Article IX
provides in pertinent part: "No provision of these Articles of Incorporation
shall be effective to (i) require a waiver of compliance with any provision of
of the Securities Act of 1933, as amended, or the Investment Company Act of
1940, as amended, or of any valid rule, regulation or order of the Securities
and Exchange Commission thereunder or (ii) protect or purport to protect any
director or officer of the Corporation against any liability to the corporation
or its security holders to which he would otherwise be subject to by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office." Article II, Section 2 of
Registrant's By-Laws contain similar provisions.
The agreement between the Registrant (the "Series Fund") and American
Odyssey Funds Management, Inc. (the "Manager") provides:
"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 of 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 expenses, including reasonable expenses for legal
counsel, incurred by the Manager resulting from actions for which 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."
The agreement among the Registrant (the "Series Fund"), American Odyssey
Funds Management, Inc. (the "Manager"), and the Subadvisers provide:
"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 the 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
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
4
<PAGE> 95
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."
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
(1) AMERICAN ODYSSEY FUNDS MANAGEMENT, INC. ("AOFM")
See "Management of the Funds" both in the Prospectus constituting Part A
of this Registration Statement and in the Statement of Additional Information
constituting Part B of this Registration Statement.
The business and other connections of AOFM's directors and officers are
set forth below. Unless otherwise indicated, the address of each person is Two
Tower Center, P.O. Box 1063, East Brunswick, NJ 08816-1063.
<TABLE>
<CAPTION>
Name and Address Position with AOFM 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 and various
affiliates
Paul S. Feinberg Director, Senior Vice Senior Vice President, General
President, General Counsel Counsel and Secretary, The
and Secretary Copeland Companies and various
affiliates
</TABLE>
5
<PAGE> 96
<TABLE>
<CAPTION>
Name and Address Position with AOFM Principal Occupation
- ---------------- ------------------ --------------------
<S> <C> <C>
Peter J. Gulia Vice President, Counsel, and Vice President, Counsel, and
Assistant Secretary Assistant Secretary, The
Copeland Companies and various
affiliates
Lori M. Renzulli Assistant Secretary Assistant Counsel, The
Copeland Companies and various
affiliates
Donna S. Webber Assistant Secretary Vice President, Counsel, and
Assistant Secretary, The
Copeland Companies and various
affiliates
William A. Arnold Director, Executive Vice Senior Vice President, Chief
President, Chief Financial Financial Officer, and
Officer, and Treasurer Treasurer, The Copeland
Companies and various
affiliates
Ira M. Schwartz Director, Executive Vice Executive Vice President and
President, and Chief of Chief of Operations, The
Operations Copeland Companies and various
affiliates
</TABLE>
(2) BANK OF IRELAND ASSET MANAGEMENT (U.S.) LIMITED
See "Management of the Funds" both in the Prospectus constituting Part A
of this Registration Statement and in the Statement of Additional Information
constituting Part B of this Registration Statement.
Information as to Bank of Ireland Asset Management (U.S.) Limited's
directors and executive officers is included in its Form ADV filed with the
Securities and Exchange Commission (File No. 801-29606), as most recently
amended, the text of which is incorporated herein by reference.
(3) CHARTWELL INVESTMENT PARTNERS
See "Management of the Funds" both in the Prospectus constituting Part A
of this Registration Statement and in the Statement of Additional Information
constituting Part B of this Registration Statement.
Information as to Chartwell Investment Partners' directors and executive
officers is included in its Form ADV filed with the Securities and Exchange
Commission (File No. 801-54124), as most recently amended, the text of which is
incorporated herein by reference.
6
<PAGE> 97
(4) EQUINOX CAPITAL MANAGEMENT, LLC
See "Management of the Funds" both in the Prospectus constituting Part A
of this Registration Statement and in the Statement of Additional Information
constituting Part B of this Registration Statement.
Information as to Equinox Capital Management's directors and executive
officers is included in its Form ADV filed with the Securities and Exchange
Commission (File No. 801-34524), as most recently amended, the text of which is
incorporated herein by reference.
(5) WESTERN ASSET MANAGEMENT COMPANY
See "Management of the Funds" both in the Prospectus constituting Part A
of this Registration Statement and in the Statement of Additional Information
constituting Part B of this Registration Statement.
Information as to Western Asset Management's directors and executive
officers is included in its Form ADV filed with the Securities and Exchange
Commission (File No. 801-08162), as most recently amended, the text of which is
incorporated herein by reference.
(6) TRAVELERS ASSET MANAGEMENT INTERNATIONAL COMPANY, LLC
See "Management of the Funds" both in the Prospectus constituting Part A
of this Registration Statement and in the Statement of Additional Information
constituting Part B of this Registration Statement.
Information as to Travelers Asset Management International Company's
directors and executive officers is included in its Form ADV filed with the
Securities and Exchange Commission (File No. 801-17003), as most recently
amended, the text of which is incorporated herein by reference.
(7) CREDIT SUISSE ASSET MANAGEMENT, LLC
See "Management of the Funds" both in the Prospectus constituting Part A
of this Registration Statement and in the Statement of Additional Information
constituting Part B of this Registration Statement.
Information as to Credit Suisse Asset Management's directors and executive
officers is included in its Form ADV filed with the Securities and Exchange
Commission (File No. 801-37170), as most recently amended, the text of which is
incorporated herein by reference.
(h). SG COWEN ASSET MANAGEMENT, INC.
7
<PAGE> 98
See "Management of the Funds" both in the Prospectus constituting Part A
of this Registration Statement and in the Statement of Additional Information
constituting Part B of this Registration Statement.
Information as to SG Cowen Asset Management's directors and executive
officers is included in its Form ADV filed with the Securities and Exchange
Commission (File No. 801-56855), as most recently amended, the text of which is
incorporated herein by reference.
(i) PUTNAM INVESTMENT MANAGEMENT, INC.
See "Management of the Funds" both in the Prospectus constituting Part A
of this Registration Statement and in the Statement of Additional Information
constituting Part B of this Registration Statement.
Information as to Putnam Investment Management's directors and executive
officers is included in its Form ADV filed with the Securities and Exchange
Commission (File No. 801-7974), as most recently amended, the text of which is
incorporated herein by reference.
(j). STATE STREET GLOBAL ADVISORS
See "Management of the Funds" both in the Prospectus constituting Part A
of this Registration Statement and in the Statement of Additional Information
constituting Part B of this Registration Statement.
State Street Global Advisors is a division of State Street Bank and Trust
Company. Information as to State Street Bank and Trust Company's directors and
principal executive officers is included in the Notice of Special Meeting filed
by the Registrant on Schedule 14C on March 29, 2000, the text of which is
incorporated herein by reference.
ITEM 27. PRINCIPAL UNDERWRITERS
(a) CFBDS, Inc. acts as principal underwriter of the Funds, in addition
to the following: CitiFunds(SM) International Growth & Income Portfolio,
CitiFunds(SM) International Growth Portfolio, CitiFunds(SM) U.S. Treasury
Reserves, CitiFunds(SM) Cash Reserves, CitiFunds(SM) Premium U.S. Treasury
Reserves, CitiFunds(SM) Premium Liquid Reserves, CitiFunds(SM) Institutional
U.S. Treasury Reserves, CitiFunds(SM) Institutional Liquid Reserves,
CitiFunds(SM) Institutional Cash Reserves, CitiFunds(SM) Tax Free Reserves,
CitiFunds(SM) Institutional Tax Free Reserves, CitiFunds(SM) California Tax Free
Reserves, CitiFunds(SM) Connecticut Tax Free Reserves, CitiFunds(SM) New York
Tax Free Reserves, CitiFunds(SM) Intermediate Income Portfolio, CitiFunds(SM)
Short-Term U.S. Government Income Portfolio, CitiFunds(SM) New York Tax Free
Income Portfolio, CitiFunds(SM) National Tax Free Income Portfolio,
CitiFunds(SM) California Tax Free Income Portfolio, CitiFunds(SM) Small Cap
Value Portfolio, CitiFunds(SM) Growth & Income Portfolio, CitiFunds(SM) Large
Cap Growth Portfolio, CitiFunds(SM) Small Cap Growth Portfolio, CitiFunds(SM)
Balanced Portfolio, CitiSelect(R) VIP Folio 200
8
<PAGE> 99
Conservative, CitiSelect(R) VIP Folio 300 Balanced, CitiSelect(R) VIP Folio 400
Growth, CitiSelect(R) VIP Folio 500 Growth Plus and CitiFunds(SM) Small Cap
Growth VIP Portfolio.
CFBDS is also the placement agent for Large Cap Value Portfolio, Small Cap Value
Portfolio, International Portfolio, Foreign Bond Portfolio, Intermediate Income
Portfolio, Short-Term Portfolio, Growth & Income Portfolio, U.S. Fixed Income
Portfolio, Large Cap Growth Portfolio, Small Cap Growth Portfolio, International
Equity Portfolio, Balanced Portfolio, Government Income Portfolio, Tax Free
Reserves Portfolio, Cash Reserves Portfolio and U.S. Treasury Reserves
Portfolio.
CFBDS also serves as the distributor for the following funds: The Travelers Fund
U for Variable Annuities, The Travelers Fund VA for Variable Annuities, The
Travelers Fund BD for Variable Annuities, The Travelers Fund BD II for Variable
Annuities, The Travelers Fund BD III for Variable Annuities, The Travelers Fund
BD IV for Variable Annuities, The Travelers Fund ABD for Variable Annuities, The
Travelers Fund ABD II for Variable Annuities, The Travelers Separate Account PF
for Variable Annuities, The Travelers Separate Account PF II for Variable
Annuities, The Travelers Separate Account QP for Variable Annuities, The
Travelers Separate Account TM for Variable Annuities, The Travelers Separate
Account TM II for Variable Annuities, The Travelers Separate Account Five for
Variable Annuities, The Travelers Separate Account Six for Variable Annuities,
The Travelers Separate Account Seven for Variable Annuities, The Travelers
Separate Account Eight for Variable Annuities, The Travelers Fund UL for
Variable Annuities, The Travelers Fund UL II for Variable Annuities, The
Travelers Variable Life Insurance Separate Account One, The Travelers Variable
Life Insurance Separate Account Two, The Travelers Variable Life Insurance
Separate Account Three, The Travelers Variable Life Insurance Separate Account
Four, The Travelers Separate Account MGA, The Travelers Separate Account MGA II,
The Travelers Growth and Income Stock Account for Variable Annuities, The
Travelers Quality Bond Account for Variable Annuities, The Travelers Money
Market Account for Variable Annuities, The Travelers Timed Growth and Income
Stock Account for Variable Annuities, The Travelers Timed Short-Term Bond
Account for Variable Annuities, The Travelers Timed Aggressive Stock Account for
Variable Annuities, The Travelers Timed Bond Account for Variable Annuities,
Small Cap Fund, Government Fund, Growth Fund, Growth and Income Fund,
International Equity Fund, Mid Cap Fund, Municipal Bond Fund, Select Small Cap
Portfolio, Select Government Portfolio, Select Growth Portfolio, Select Growth
and Income Portfolio, Select Mid Cap Portfolio, Balanced Investments, Emerging
Markets Equity Investments, Government Money Investments, High Yield
Investments, Intermediate Fixed Income Investments, International Equity
Investments, International Fixed Income Investments, Large Capitalization Growth
Investments, Large Capitalization Value Equity Investments, Long-Term Bond
Investments, Mortgage Backed Investments, Municipal Bond Investments, S&P Index
Investments, Small Capitalization Growth Investments, Small Capitalization Value
Equity Investments, Multi-Sector Fixed Income Investments, Multi-Strategy Market
Neutral Investments, Appreciation Portfolio, Diversified Strategic Income
Portfolio, Emerging Growth Portfolio, Equity Income Portfolio, Equity Index
Portfolio,
9
<PAGE> 100
Growth & Income Portfolio, Intermediate High Grade Portfolio, International
Equity Portfolio, Money Market Portfolio, Total Return Portfolio, Smith Barney
Adjustable Rate Government Income Fund, Smith Barney Aggressive Growth Fund
Inc., Smith Barney Appreciation Fund Inc., Smith Barney Arizona Municipals Fund
Inc., Smith Barney California Municipals Fund Inc., Balanced Portfolio,
Conservative Portfolio, Growth Portfolio, High Growth Portfolio, Income
Portfolio, Global Portfolio, Select Balanced Portfolio, Select Conservative
Portfolio, Select Growth Portfolio, Select High Growth Portfolio, Select Income
Portfolio, Concert Social Awareness Fund, Smith Barney Large Cap Blend Fund,
Smith Barney Fundamental Value Fund Inc., Large Cap Value Fund, Short-Term High
Grade Bond Fund, U.S. Government Securities Fund, Smith Barney Balanced Fund,
Smith Barney Convertible Fund, Smith Barney Diversified Strategic Income Fund,
Smith Barney Exchange Reserve Fund, Smith Barney High Income Fund, Smith Barney
Municipal High Income Fund, Smith Barney Premium Total Return Fund, Smith Barney
Total Return Bond Fund, Cash Portfolio, Government Portfolio, Municipal
Portfolio, Concert Peachtree Growth Fund, Smith Barney Contrarian Fund, Smith
Barney Government Securities Fund, Smith Barney Hansberger Global Small Cap
Value Fund, Smith Barney Hansberger Global Value Fund, Smith Barney Investment
Grade Bond Fund, Smith Barney Premier Selections Fund, Smith Barney Small Cap
Value Fund, Smith Barney Small Cap Growth Fund, Smith Barney Intermediate
Maturity California Municipals Fund, Smith Barney Intermediate Maturity New York
Municipals Fund, Smith Barney Large Capitalization Growth Fund, Smith Barney S&P
500 Index Fund, Smith Barney Mid Cap Blend Fund, Smith Barney EAFE Index Fund,
Smith Barney US 5000 Index Fund, Smith Barney Managed Governments Fund Inc.,
Smith Barney Managed Municipals Fund Inc., Smith Barney Massachusetts Municipals
Fund, Cash Portfolio, Government Portfolio, Retirement Portfolio, California
Money Market Portfolio, Florida Portfolio, Georgia Portfolio, Limited Term
Portfolio, National Portfolio, Massachusetts Money Market Portfolio, New York
Money Market Portfolio, New York Portfolio, Pennsylvania Portfolio, Smith Barney
Municipal Money Market Fund, Inc., Smith Barney Natural Resources Fund Inc.,
Smith Barney Financial Services Fund, Smith Barney Health Sciences Fund, Smith
Barney Technology Fund, Smith Barney New Jersey Municipals Fund Inc., Smith
Barney Oregon Municipals Fund, Zeros Plus Emerging Growth Series 2000, Smith
Barney Security and Growth Fund, Smith Barney Small Cap Blend Fund, Inc., Smith
Barney Telecommunications Income Fund, Income and Growth Portfolio, Reserve
Account Portfolio, U.S. Government/High Quality Securities Portfolio, Emerging
Markets Portfolio, European Portfolio, Global Government Bond Portfolio,
International Equity Portfolio, Pacific Portfolio, AIM Capital Appreciation
Portfolio, Smith Aggressive Growth Portfolio, Smith Mid Cap Portfolio, Alliance
Growth Portfolio, INVESCO Global Strategic Income Portfolio, MFS Total Return
Portfolio, Putnam Diversified Income Portfolio, Smith Barney High Income
Portfolio, Smith Barney Large Cap Value Portfolio, Smith Barney International
Equity Portfolio, Smith Barney Large Capitalization Growth Portfolio, Smith
Barney Money Market Portfolio, Smith Barney Pacific Basin Portfolio, Travelers
Managed Income Portfolio, Van Kampen Enterprise Portfolio, Centurion U.S. Equity
Fund, Centurion International Equity Fund, Centurion U.S. Contra Fund, Centurion
International Contra Fund, Global High-Yield Bond Fund, International Equity
Fund, Emerging Opportunities Fund, Core Equity Fund, Long-Term Bond Fund, Global
Dimensions Fund L.P., Citicorp Private Equity L.P., AIM V.I. Capital
Appreciation Fund, AIM V.I. Government Series Fund, AIM V.I. Growth Fund, AIM
V.I.
10
<PAGE> 101
International Equity Fund, AIM V.I. Value Fund, Fidelity VIP Growth Portfolio,
Fidelity VIP High Income Portfolio, Fidelity VIP Equity Income Portfolio,
Fidelity VIP Overseas Portfolio, Fidelity VIP II Contrafund Portfolio, Fidelity
VIP II Index 500 Portfolio, MFS World Government Series, MFS Money Market
Series, MFS Bond Series, MFS Total Return Series, MFS Research Series, MFS
Emerging Growth Series, Salomon Brothers Institutional Money Market Fund,
Salomon Brothers Cash Management Fund, Salomon Brothers New York Municipal Money
Market Fund, Salomon Brothers National Intermediate Municipal Fund, Salomon
Brothers U.S. Government Income Fund, Salomon Brothers High Yield Bond Fund,
Salomon Brothers International Equity Fund, Salomon Brothers Strategic Bond
Fund, Salomon Brothers Large Cap Growth Fund, Salomon Brothers Balanced Fund,
Salomon Brothers Asia Growth Fund, Salomon Brothers Capital Fund Inc, Salomon
Brothers Investors Value Fund Inc, Salomon Brothers Opportunity Fund Inc,
Salomon Brothers Institutional High Yield Bond Fund, Salomon Brothers
Institutional Emerging Markets Debt Fund, Salomon Brothers Variable Investors
Fund, Salomon Brothers Variable Capital Fund, Salomon Brothers Variable Total
Return Fund, Salomon Brothers Variable High Yield Bond Fund, Salomon Brothers
Variable Strategic Bond Fund, Salomon Brothers Variable U.S. Government Income
Fund, Salomon Brothers Variable Asia Growth Fund, and Salomon Brothers Variable
Small Cap Fund.
(b) The information required by this Item 27 with respect to each
director and officer of CFBDS is incorporated by reference to Schedule A of Form
BD filed by CFBDS pursuant to the Securities and Exchange Act of 1934 (File
No.8-32417).
(c) CFBDS, Inc., who is not an affiliated person of the Registrant,
receives no commission or compensation, directly or indirectly, from the
Registrant.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act and the Rules thereunder are
maintained at the offices of (1) the Registrant and American Odyssey Funds
Management LLC, Two Tower Center, P.O. Box 1063, East Brunswick, NJ 08816-1063;
(2) Bank of Ireland Asset Management (U.S.) Limited, 26 Fitzwilliam Place,
Dublin 2, Ireland and 75 Holly Hill Lane, Greenwich, CT 06830; (3) Chartwell
Investment Partners, 1235 Westlakes Drive, Suite 330, Berwyn, PA 19312; (4)
Equinox Capital Management, L.L.C., 590 Madison Avenue, New York, NY 10022; (5)
Western Asset Management Company, 117 East Colorado Boulevard, Pasadena, CA
91105; (6) Travelers Asset Management International Company, LLC, One Tower
Square, Hartford, CT 06183; (7) Credit Suisse Asset Management, LLC, One
Citicorp Center, 153 East 53rd Street, New York, NY 10022; (8) SG Cowen Asset
Management, Inc., Financial Square, New York, NY 10005; (9) Putnam Investment
Management, Inc., One Post Office Square, Boston, MA 02109; (10) State Street
Global Advisors, One International Place, Boston, MA 02110; and (11) Investors
Bank and Trust Company, 200 Clarendon Street, Boston, MA 02116.
ITEM 29. MANAGEMENT SERVICES
11
<PAGE> 102
Not Applicable
ITEM 32. UNDERTAKINGS
Not Applicable
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement under Rule
485(b) under the Securities Act and has duly caused this Registration Statement
to be signed on its behalf by the undersigned, duly authorized, in the City of
East Brunswick, and the State of New Jersey on the 28th day of April 2000.
AMERICAN ODYSSEY FUNDS, INC.
/s/ Robert C. Dughi By: /s/ Paul S. Feinberg
- --------------------- --------------------
Robert C. Dughi Paul S. Feinberg
Chairman of the Board Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on April 28, 2000.
Signature and Title
/s/ Robert C. Dughi By: /s/ Paul S. Feinberg
- ------------------- --------------------
Robert C. Dughi Paul S. Feinberg
Chairman of the Board of Directors (Attorney-in-Fact)
/s/ John G. Beam, Jr. By: /s/ Paul S. Feinberg
- --------------------- --------------------
John G. Beam, Jr. Paul S. Feinberg
Director (Attorney-in-Fact)
/s/ Linda Walker Bynoe By: /s/ Paul S. Feinberg
- ---------------------- --------------------
Linda Walker Bynoe Paul S. Feinberg
Director (Attorney-in-Fact)
/s/ Jane DiRenzo Pigott By: /s/ Paul S. Feinberg
- ----------------------- --------------------
Jane DiRenzo Pigott Paul S. Feinberg
Director (Attorney-in-Fact)
/s/ Nicholas D. Yatrakis By: /s/ Paul S. Feinberg
- ------------------------ --------------------
Nicholas D. Yatrakis Paul S. Feinberg
12
<PAGE> 103
Director (Attorney-in-Fact)
/s/ Steven I. Weinstein By: /s/ Paul S. Feinberg
- ----------------------- --------------------
Steven I. Weinstein Paul S. Feinberg
Director (Attorney-in-Fact)
/s/ William A. Arnold By: /s/ Paul S. Feinberg
- --------------------- --------------------
William A. Arnold Paul S. Feinberg
Senior Vice President and Treasurer; (Attorney-in-Fact)
Principal Financial Officer;
Principal Accounting Officer
13
<PAGE> 104
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION PAGE NUMBERS
-------------- ----------- ------------
<S> <C> <C>
23(a)(1) Articles of Incorporation
23(a)(2) Amendment to Articles of Incorporation
23(d)(1) Investment Management Agreement between Registrant
and American Odyssey Funds Management LLC
23(d)(2) Subadvisory Agreement among Registrant, American
Odyssey Funds Management LLC and Equinox Capital
Management, L.L.C.
23(d)(3) Subadvisory Agreement among Registrant, American
Odyssey Funds Management LLC and Chartwell
Investment Partners
23(d)(4) Subadvisory Agreement among Registrant, American
Odyssey Funds Management LLC and Bank of Ireland
Asset Management (U.S.) Ltd.
23(d)(5) Subadvisory Agreement among Registrant, American
Odyssey Funds Management LLC and Western Asset
Management Company
23(d)(6) Subadvisory Agreement among Registrant, American
Odyssey Funds Management LLC and Travelers Asset
Management International Company, LLC
</TABLE>
14
<PAGE> 105
<TABLE>
<S> <C>
23(d)(7) Subadvisory Agreement among Registrant, American
Odyssey Funds Management LLC and Credit Suisse Asset
Management, LLC
23(d)(8) Subadvisory Agreement among Registrant, American
Odyssey Funds Management LLC and SG Cowen Asset
Management, Inc.
23(d)(9) Subadvisory Agreement among Registrant, American
Odyssey Funds Management LLC and Putnam Investment
Management, Inc.
23(d)(10) Subadvisory Agreement among Registrant, American
Odyssey Funds Management LLC and State Street Global
Advisors
23(d)(11) Subadvisory Agreement among Registrant, American
Odyssey Funds Management LLC and State Street Global
Advisors
23(e)(1) Participation Agreement among Registrant, Copeland
Equities, Inc. and The Travelers Insurance Company
23(e)(2) Amendment No. 1 to Participation Agreement among
Registrant, Copeland Equities, Inc. and The
Travelers Insurance Company
23(e)(3) Amendment No. 2 to Participation Agreement among
Registrant, Copeland Equities, Inc. and The
Travelers Insurance Company
</TABLE>
15
<PAGE> 106
<TABLE>
<S> <C>
23(h) Transfer Agency Agreement between Registrant and
American Odyssey Funds Management, Inc.
23(j) Consent of Independent Accountants
23(n) Financial Data Schedules
23(p)(1) Code of Ethics for American Odyssey Funds, Inc.
23(p)(2) Code of Ethics for American Odyssey Funds Management
LLC
23(p)(3) Code of Ethics for Bank of Ireland Asset Management
(U.S.) Ltd.
23(p)(4) Code of Ethics for Chartwell Investment Partners
23(p)(5) Code of Ethics for SG Cowen Asset Management, Inc.
23(p)(6) Code of Ethics for Equinox Capital Management, LLC
23(p)(7) Code of Ethics for Western Asset Management Company
23(p)(8) Code of Ethics for Travelers Asset Management
International Company, LLC
23(p)(9) Code of Ethics for Credit Suisse Asset Management,
LLC
23(p)(10) Code of Ethics for Putnam Investment Management,
Inc.
23(p)(11) Code of Ethics for State Street Global Advisors
23(q) Power of Attorney for Robert C. Dughi
23(q) Power of Attorney for
</TABLE>
16
<PAGE> 107
<TABLE>
<S> <C>
Steven I. Weinstein
23(q) Power of Attorney for Linda Walker Bynoe
23(q) Power of Attorney for John G. Beam
23(q) Power of Attorney for Nicholas D. Yatrakis
23(q) Power of Attorney for Jane DiRenzo Pigott
</TABLE>
17
<PAGE> 1
ARTICLES OF INCORPORATION
OF
ODYSSEY FUNDS, INC.
* * * *
ARTICLE I
THE UNDERSIGNED, Paul S. Feinberg, whose post office address is Two Tower
Center, East Brunswick, New Jersey 08816, being at least eighteen years of age,
does hereby act as an incorporator, under and by virtue of the General Laws of
the State of Maryland authorizing the formation of corporations and with the
intention of forming a corporation.
ARTICLE II
The name of the Corporation is:
ODYSSEY FUNDS, INC.
ARTICLE III
The purpose for which the Corporation is formed is to act as an open-end
diversified management investment company under the Investment Company Act of
1940, as amended.
ARTICLE IV
The Corporation is expressly empowered as follows:
(1) To hold, invest and reinvest its assets in securities and other
investments or to hold part or all of its assets in cash.
(2) To issue and sell shares of its capital stock in such amounts and on
such terms and conditions and for such purposes and for such amount or kind of
consideration as may now or hereafter be permitted by law.
(3) To redeem, purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue or cancel (all without the vote or consent of the stockholders
of the Corporation) shares of its capital stock, in any manner and to the extent
now or hereafter permitted by law and by these Articles of Incorporation.
<PAGE> 2
(4) To enter into a written contract or contracts with any person or
persons providing for a delegation of the management of all or part of this
Corporation's securities portfolio(s) and also for the delegation of the
performance of various administrative or corporate functions, subject to the
direction of the Board of Directors. Any such contract or contracts may be made
with any person even though such person may be an officer, other employee,
director or stockholder of this Corporation or a corporation, partnership, trust
or association in which any such officer, other employee, director or
stockholder may be interested.
(5) To enter into a written contract or contracts appointing one or more
distributors or agents or both for the sale of the shares of the Corporation on
such terms and conditions as the Board of Directors of this Corporation may deem
reasonable and proper, and to allow such person or persons a commission on the
sale of such shares. Any such contract or contracts may be made with any person
even though such person may be an officer, other employee, director or
stockholder of this Corporation or a corporation, partnership, trust or
association in which any such officer, other employee, director or stockholder
may be interested.
(6) To enter into a written contract or contracts employing such
custodian or custodians for the safekeeping of the property of the Corporation
and of its shares, such accounting services agent or agents, such dividend
disbursing agent or agents, and such transfer agent or agents and registrar or
registrars for its shares, on such terms and conditions as the Board of
Directors of this Corporation may deem reasonable and proper for the conduct of
the affairs of the Corporation, and to pay the fees and disbursements of such
custodians, accounting services agents, dividend disbursing agents, transfer
agents, and registrars out of the income and/or any other property of the
Corporation. Notwithstanding any other provisions of these Articles of
Incorporation or the By-laws of the Corporation, the Board of Directors may
cause any or all of the property of the Corporation to be transferred to, or to
be acquired and held in the name of, a custodian so appointed or any nominee or
nominees of this Corporation or nominee or nominees of such custodian
satisfactory to the Board of Directors.
(7) To employ the same person, partnership (general or limited),
association, trust or corporation in any multiple capacity under Sections (4),
(5) and (6) of this Article, who may receive compensation from the Corporation
in as many capacities in which such person, partnership (general or limited),
association, trust or corporation shall serve the corporation.
(8) To do any and all such further acts or things and to exercise any
and all such further powers or rights as may be necessary, incidental, relative,
conducive, appropriate or desirable for the accomplishment, carrying out or
attainment of the purposes stated in Article III hereof.
The Corporation shall be authorized to exercise and enjoy all of the
powers, rights and privileges granted to, or conferred upon, corporations by the
General Laws of the State of Maryland now or hereafter in force, and the
enumeration of the foregoing shall not be deemed to exclude any powers, rights
or privileges so granted or conferred.
ARTICLE V
<PAGE> 3
The post office address of the principal office of the Corporation in the
State of Maryland is c/o The Corporation Trust Incorporated, First Maryland
Building, 25 South Charles Street, Baltimore, Maryland 21201. The name of the
resident agent of the Corporation in this State is The Corporation Trust
Incorporated, a corporation of this State, and the post office address of the
resident agent is First Maryland Building, 25 South Charles Street, Baltimore,
Maryland 21201.
ARTICLE VI
(1) The total number of shares of capital stock which the Corporation
shall have authority to issue is Two Billion (2,000,000,000) shares, of the par
value of One Cent ($0.01) per share and of the aggregate par value of Twenty
Million Dollars ($20,000,000). The shares shall be divided into twenty classes
of Common Stock, each of which is to consist of One Hundred Million
(100,000,000) shares. The Board of Directors may designate the name of each such
class. The Board of Directors, without shareholder approval, may increase or
decrease the aggregate number of shares of stock of any class as permitted by
Maryland law.
(2) Any fractional share shall carry proportionately all the rights of a
whole share, excepting any right to receive a certificate evidencing such
fractional share, but including, without limitation, the right to vote and the
right to receive dividends.
(3) All persons who shall acquire stock in the corporation shall acquire
the same subject to the provisions of these Articles of Incorporation and the
By-laws of the corporation.
(4) Unless otherwise provided by the Board of Directors pursuant to
Section (6) of this Article VI, the stockholders of the Corporation shall be
entitled to one vote for each share of stock of the Corporation, irrespective of
the class, then standing in his name on the books of the Corporation and on any
matter submitted to a vote of stockholders, all shares of the Corporation then
issued and outstanding and entitled to vote shall be voted in the aggregate and
not by class except that: (i) when expressly required by law, shares shall be
voted by individual class and (ii) only shares of the respective classes
affected by a matter shall be entitled to vote on any such matter.
(5) Unless otherwise provided by the Board of Directors pursuant to
Section (6) of this Article VI or unless otherwise provided by these Articles of
Incorporation, each class of stock of the Corporation shall have the following
powers, preferences or other special rights, and the qualifications,
restrictions, and limitations thereof shall be as follows:
(i) the shares of each class shall have no preference, preemptive,
conversion, exchange or similar rights and shall be freely transferable.
(ii) the Board of Directors may from time to time declare and pay
dividends or distributions, in stock or in cash, on any or all classes of stock,
the amount of such dividends and distributions and the payment thereof shall be
wholly in the discretion of the Board of Directors.
<PAGE> 4
Dividends or distributions on shares of any class of stock shall be paid only
out of the earned surplus or other lawfully available assets belonging to such
class.
(6) The Board of Directors shall have authority by resolution to
reclassify any authorized but unissued shares of capital stock from time to time
by setting or changing in any one or more respects the preferences, conversion
or other rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms or conditions of redemption of the capital stock.
Subject to the provisions of Sections (7), (8), and (9) of this Article VI and
applicable law, the power of the Board of Directors to reclassify any of the
shares of capital stock shall include, without limitation, authority to
reclassify any such stock into a class or classes of capital stock and to divide
and classify shares of any class into one or more series of such class, by
determining, fixing or altering one or more of the following:
(i) The distinctive designation of such class or series; provided
that, unless otherwise prohibited by the terms of such class or series, the
number of shares of any class or series may be decreased by the Board of
Directors in connection with any reclassification of unissued shares and the
number of shares of such class or series may be increased by the Board of
Directors in connection with any such reclassification, and any shares of any
class or series which have been redeemed, purchased or otherwise acquired by the
Corporation shall remain part of the authorized capital stock and be subject to
reclassification as provided herein.
(ii) Whether or not and, if so, the rates, amounts and times at
which, and the conditions under which, dividends shall be payable on shares of
such class or series.
(iii) Whether or not shares of such class or series shall have
voting rights, in addition to any voting rights provided by law and, if so, the
terms of such voting rights.
(iv) The rights of the holders of shares of such class or series
upon the liquidation, dissolution or winding up of the affairs of, or upon any
distribution of the assets of, the Corporation.
(v) Any other rights, restrictions, including restrictions on
transferability, and qualifications of shares of such class or series, not
inconsistent with law and these Articles of Incorporation.
(7) All consideration received by the Corporation for the issue or sale
of stock of any class, together with all income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale, exchange or liquidation
thereof, and any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, shall irrevocably belong to the class
of shares of stock with respect to which such assets, payments or funds were
received by the Corporation for all purposes, subject only to the rights of
creditors, and shall be so handled upon the books of account of the Corporation.
Such assets, income, earnings, profits and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation thereof, and any assets
derived from any reinvestment of such proceeds in whatever form, are herein
referred to as "assets belonging to" such class.
<PAGE> 5
(8) In the event of the liquidation or dissolution of the Corporation,
shareholders of each class shall be entitled to receive, as a class, out of the
assets of the Corporation available for distribution to shareholders, but other
than general assets not belonging to any particular class of stock, the assets
belonging to such class; and the assets so distributable to the stockholders of
any class shall be distributed among such stockholders in proportion to the
number of shares of such class held by them and recorded on the books of the
Corporation. In the event that there are any general assets not belonging to any
particular class of stock and available for distribution, such distribution
shall be made to the holders of stock of all classes in proportion to the asset
value of the respective classes determined as hereinafter provided.
(9) The assets belonging to any class of stock shall be charged with the
liabilities in respect to such class, and shall also be charged with such
class's share of the general liabilities of the Corporation, in proportion to
the asset value of the respective classes determined as hereinafter provided.
The determination of the Board of Directors shall be conclusive as to the amount
of such liabilities, including the amount of accrued expenses and reserves; as
to any allocation of the same to a given class; and as to whether the same, or
general assets of the Corporation, are allocable to one or more classes. The
liabilities so allocated to a class are herein referred to as "liabilities
belonging to" such class.
ARTICLE VII
(1) The number of directors of the Corporation shall be five (5), which
number may be increased or decreased pursuant to the By-laws of the Corporation
but shall never be less than three (3). The names of the directors who shall act
until the first annual meeting of stockholders and until their successors are
duly elected and qualify are:
Linda Walker Bynoe;
Robert C. Dughi;
Kent A. Kelley;
George Vlaisavljevich; and
Steven I. Weinstein.
(2) No holder of stock of the Corporation shall, as such holder, have
any right to purchase or subscribe for any shares of the capital stock of the
Corporation or any other security of the Corporation which it may issue or sell
(whether out of the number of shares authorized by these Articles of
Incorporation, or out of any shares of the capital stock of the Corporation
acquired by it after the issue thereof, or otherwise) other than such right, if
any, as the Board of Directors, in its discretion, may determine.
(3) Each director and each officer of the Corporation shall be
indemnified by the Corporation to the full extent permitted by the General Laws
of the State of Maryland and the
<PAGE> 6
Investment Company Act of 1940, now or hereafter in force, including the advance
of related expenses.
ARTICLE VIII
(1) To the extent the Corporation has funds or other property legally
available therefor, each holder of shares of capital stock of the Corporation
shall be entitled to require the Corporation to redeem all or any part of the
shares of capital stock of the Corporation standing in the name of such holder
on the books of the Corporation, and all shares of capital stock issued by the
Corporation shall be subject to redemption by the Corporation, at the redemption
price of such shares as in effect from time to time as may be determined by the
Board of Directors of the Corporation in accordance with the provisions hereof,
subject to the right of the Board of Directors of the Corporation to suspend the
right of redemption of shares of capital stock of the Corporation or postpone
the date of payment of such redemption price in accordance with provisions of
applicable law. Without limiting the generality of the foregoing, the
Corporation shall, to the extent permitted by applicable law, have the right at
any time to redeem the shares owned by any holder of capital stock of the
Corporation (i) if such redemption is, in the opinion of the Board of Directors
of the Corporation, desirable in order to prevent the Corporation from being
deemed a "personal holding company" within the meaning of the Internal Revenue
Code of 1954, as amended, (ii) if the value of such shares in the account
maintained by the Corporation or its transfer agent for any class of stock is
less than $1,000.00 (One Thousand Dollars); provided, however, that each
shareholder shall be notified that the value of his account is less than
$1,000.00 and allowed sixty days to make additional purchases of shares before
such redemption is processed by the Corporation, or (iii) if the net income for
dividend purposes with respect to any particular class of shares should be
negative or it should otherwise be appropriate to carry out the Corporation's
responsibilities under the Investment Company Act of 1940, in each case subject
to such further terms and conditions as the Board of Directors of the
Corporation may from time to time adopt. The redemption price of shares of
capital stock of the Corporation shall, except as otherwise provided in this
section, be the net asset value thereof as determined by the Board of Directors
of the Corporation from time to time in accordance with the provisions of
applicable law, less such redemption fee or other charge, if any, as may be
fixed by resolution of the Board of Directors of the Corporation. Payment of the
redemption price shall be made in cash by the Corporation at such time and in
such manner as may be determined from time to time by the Board of Directors of
the Corporation unless, in the opinion of the Board of Directors, which shall be
conclusive, conditions exist which make payment wholly in cash unwise or
undesirable; in such event the Corporation may make payment wholly or partly in
securities or other property included in the assets belonging or allocable to
the class of the shares redemption of which is being sought, the value of which
shall be determined as provided herein. When the net income for dividend
purposes with respect to any particular class of shares is negative or whenever
deemed appropriate by the Board of Directors in order to carry out the
Corporation's responsibilities under the Investment Company Act of 1940, the
Corporation may, without payment of monetary compensation but in consideration
of the interest of the Corporation and the shareholders in maintaining a
constant net asset value per share of such class, redeem pro rata from each
shareholder of record on such day, such number of full and fractional shares of
the
<PAGE> 7
Corporation's common stock of such class, as may be necessary to reduce the
aggregate number of outstanding shares in order to permit the net asset value
thereof to remain constant.
(2) Each holder of any class of stock of the Corporation, who surrenders
his certificate in good delivery form to the Corporation or, if the shares in
question are not represented by certificates, who delivers to the Corporation a
written request in good order signed by the stockholder, shall, to the extent
permitted by the By-laws or by resolution of the Board of Directors, be entitled
to convert the shares in question on the basis hereinafter set forth, into
shares of stock of any other class of the Corporation. The Corporation shall
determine the net asset value, as provided herein, of the shares to be converted
and may deduct therefrom a conversion cost, in an amount determined within the
discretion Of the Board of Directors. Within five (5) business days after such
surrender and payment of any conversion cost, the corporation shall issue to the
shareholder such number of shares of stock of the class desired as, taken at the
net asset value thereof determined as provided herein in the same manner and at
the same time as that of the shares surrendered, shall equal the net asset value
of the shares surrendered, less any conversion cost as aforesaid. Any amount
representing a fraction of a share may be paid in cash at the option of the
Corporation. Any conversion cost may be paid and/or assigned by the Corporation
to the underwriter and/or to any other agency, as it may elect.
ARTICLE IX
Any determination made in good faith, so far as accounting matters are
involved, in accordance with accepted accounting practices by or pursuant to the
direction of the Board of Directors, as to the amount of assets, obligations or
liabilities of the Corporation, as to the amount of net income of the
Corporation from dividends and interest for any period or amounts at any time
legally available for the payment of dividends, as to the amount of any reserves
or charges set up and the propriety thereof, as to the time of or purpose for
creating reserves or as to the use, alteration or cancellation of any reserves
or charges (whether or not any obligation or liability for which such reserves
or charges shall have been created shall have been paid or discharged or shall
be then or thereafter required to be paid or discharged), as to the value of any
security owned by the Corporation or as to any other matters relating to the
issuance, sale, redemption or other acquisition or disposition of securities or
shares of capital stock of the Corporation, and any reasonable determination
made in good faith by the Board of Directors as to whether any transaction
constitutes a purchase of securities on "margin," a sale of securities "short,"
or an underwriting of the sale of, or a participation in any underwriting or
selling group in connection with the public distribution of, any securities,
shall be final and conclusive, and shall be binding upon the Corporation and all
holders of its capital stock, past, present and future, and shares of the
capital stock of the corporation are issued and sold on the condition and
understanding, evidenced by the purchase of shares of capital stock or
acceptance of share certificates, that any and all such determinations shall be
binding as aforesaid. No provision of these Articles of Incorporation shall be
effective to (i) require a waiver of compliance with any provision of the
Securities Act of 1933, as amended, or the Investment Company Act of 1940, as
amended, or of any valid rule, regulation or order of the Securities and
Exchange commission thereunder or (ii) protect or purport to protect any
director or officer of the Corporation against any liability to the Corporation
or its security holders to which he would otherwise be subject by
<PAGE> 8
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office.
ARTICLE X
The duration of the Corporation shall be perpetual.
ARTICLE XI
(1) The Corporation reserves the right from time to time to make any
amendments to these Articles of Incorporation which may now or hereafter be
authorized by law, including any amendments changing the terms or contract
rights, as expressly set forth in these Articles of Incorporation, of any of its
outstanding stock by classification, reclassification or otherwise, but no such
amendment which changes such terms or contract rights of any of its outstanding
stock shall be valid unless such amendment shall have been authorized by not
less than a majority of the aggregate number of the votes entitled to be cast
thereon by a vote at a meeting.
(2) Notwithstanding any provision of the General Laws of the State of
Maryland requiring any action to be taken or authorized by the affirmative vote
of the holders of a designated proportion of the votes of all classes or of any
class of stock of the Corporation, such action shall be effective and valid if
taken or authorized by the affirmative vote of the holders of a majority of the
total number of shares outstanding and entitled to vote thereon, except as
otherwise provided herein.
(3) So long as permitted by Maryland law, the books of the Corporation
may be kept outside the State of Maryland at such place or places as may be
designated from time to time by the Board of Directors or in the By-laws of the
Corporation.
(4) In furtherance, and not in limitation, of the powers conferred by
the laws of the State of Maryland, the Board of Directors is expressly
authorized:
(i) To make, alter or repeal the By-laws of the Corporation,
except where such power is reserved by the By-laws to the stockholders, and
except as otherwise required by the Investment Company Act of 1940.
(ii) From time to time to determine whether and to what extent and
at what times and places and under what conditions and regulations the books and
accounts of the corporation, or any of them other than the stock ledger, shall
be open to the inspection of the stockholders, and no stockholder shall have any
right to inspect any account or book or document of the Corporation, except as
conferred by law or authorized by resolution of the Board of Directors or of the
stockholders.
(iii) Without the assent or vote of the stockholders, to authorize
the issuance from time to time of shares of the stock of any class of the
Corporation, whether now or hereafter
<PAGE> 9
authorized, and securities convertible into shares of its stock of any class or
classes, whether now or hereafter authorized, for such consideration as the
Board of Directors may deem advisable.
(iv) Without the assent or vote of the stockholders, to authorize
and issue obligations of the corporation, secured and unsecured, as the Board of
Directors may determine, and to authorize and cause to be executed mortgages and
liens upon the property of the Corporation, real or personal.
(v) Notwithstanding anything in these Articles of Incorporation to
the contrary, to establish in its absolute discretion the basis or method for
determining the value of the assets belonging to any class, the value of the
liabilities belonging to any class, and the net asset value of each share of any
class of the Corporation for purposes of sales, redemptions, repurchases of
shares or otherwise.
(vi) To determine in accordance with generally accepted accounting
principles and practices what constitutes net profits, earnings, surplus or net
assets in excess of capital, and to determine what accounting periods shall be
used by the Corporation for any purpose, whether annual or any other period,
including daily; to set apart out of any funds of the Corporation such reserves
for such purposes as it shall determine and to abolish the same; to declare and
pay any dividends and distributions in cash, securities or other property from
surplus or any funds legally available therefor, at such intervals (which may be
as frequently as daily) or on such other periodic basis, as it shall determine;
to declare such dividends or distributions by means of a formula or other method
of determination, at meetings held less frequently than the frequency of the
effectiveness of such declarations; to establish payment dates for dividends or
any other distributions on any basis, including dates occurring less frequently
than the effectiveness of declarations thereof; and to provide for the payment
of declared dividends on a date earlier or later than the specified payment date
in the case of stockholders of the Corporation redeeming their entire ownership
of shares of any class of the corporation.
(vii) In addition to the powers and authorities granted herein and
by statute expressly conferred Upon it, the Board of Directors is authorized to
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation, subject, nevertheless, to the provisions of Maryland
law, these Articles of incorporation, and the By-laws of the Corporation.
IN WITNESS WHEREOF, the undersigned incorporator of ODYSSEY FUNDS, INC.,
hereby executes the foregoing Articles of Incorporation and acknowledges the
same to be his act and further acknowledges that, to the best of his knowledge,
the matters and facts set forth therein are true in all material respects under
the penalties of perjury.
Dated the 21st day of December, 1992.
-------------------------------
Paul S. Feinberg
<PAGE> 10
WITNESS:
- --------------------
<PAGE> 1
ODYSSEY FUNDS, INC.
(NOW RENAMED AMERICAN ODYSSEY FUNDS, INC.)
ARTICLES OF AMENDMENT
THIS IS TO CERTIFY THAT:
FIRST: The charter of Odyssey Funds, Inc., a Maryland corporation
(the "Corporation"), is hereby amended by deleting existing Article II in its
entirety and adding a new article to read as follows:
ARTICLE II
The name of the Corporation is:
AMERICAN ODYSSEY FUNDS, INC.
SECOND: The amendment to the charter of the Corporation as set forth
above has been duly advised by the board of directors and approved by the
stockholders of the Corporation as required by law.
THIRD: The undersigned chairman of the board acknowledges these
Articles of Amendment to be the corporate act of the Corporation and as to all
matters or facts required to be verified under oath, the undersigned chairman of
the board acknowledges that to the best of his knowledge, information and
belief, these matters and facts are true in all material respects and that this
statement is made under the penalties for perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles to be
signed in its name and on its behalf by its chairman of the board and attested
to by its secretary on this 12th day of May, 1993.
ATTEST: AMERICAN ODYSSEY FUNDS, INC.
(FORMERLY ODYSSEY FUNDS, INC.)
- -------------------------- -------------------------------
Paul S. Feinberg Robert C. Dughi
Secretary Chairman of the Board
<PAGE> 1
INVESTMENT MANAGEMENT AGREEMENT
Agreement, made this 1st day of May, 2000, between American Odyssey
Funds, Inc., a Maryland corporation (the "Series Fund"), and American Odyssey
Funds Management LLC, a New Jersey limited liability company (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 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:
1
<PAGE> 2
(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.
(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;
2
<PAGE> 3
(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 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.
3
<PAGE> 4
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 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;
4
<PAGE> 5
(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 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 subadviser
---------------------------
Fund
- ----
<S> <C>
American Odyssey Core Equity Fund 0.45%
American Odyssey Emerging Opportunities Fund 0.80%
</TABLE>
5
<PAGE> 6
<TABLE>
<S> <C>
American Odyssey International Equity Fund 0.55%
American Odyssey Global High-Yield Bond Fund 0.525%
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 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.
6
<PAGE> 7
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.
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 LLC 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.
7
<PAGE> 8
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.
8
<PAGE> 9
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.
AMERICAN ODYSSEY FUNDS, INC.
By:
- ---------------------------- ---------------------------------
Witness: Lori M. Renzulli Paul S. Feinberg
Secretary President
AMERICAN ODYSSEY FUNDS
MANAGEMENT LLC
By:
- ---------------------------- ---------------------------------
Witness: Lori M. Renzulli Paul S. Feinberg
Assistant Secretary Senior Vice President
9
<PAGE> 1
INVESTMENT SUBADVISORY AGREEMENT
Agreement made as of this 3rd day of April, 2000, among American Odyssey
Funds, Inc., a Maryland corporation (the "Series Fund"), American Odyssey Funds
Management LLC, a New Jersey limited liability company (the "Manager"), and
Equinox Capital Management, LLC, a limited liability company organized under the
laws of New York (the "Subadviser").
WHEREAS, American Odyssey Funds Management LLC 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 LLC 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
American Odyssey Core Equity 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 of the Fund (such
Prospectus and Statement of Additional Information as currently in effect
and as amended or supplemented from 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 Assets' investments and determine from time to time what
securities, options, futures contracts, and other investments
included in the Allocated Assets will be
1
<PAGE> 2
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
or Subadviser) 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 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.
2
<PAGE> 3
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 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.
(viii) Absent specific instructions to the contrary
provided to it by the
3
<PAGE> 4
Manager, and subject to the Subadviser's receipt of all necessary
voting materials, the Subadviser shall vote all proxies with
respect to investments of the allocated assets in accordance with
the Subadviser's proxy voting policy as most recently provided to
the Manager.
(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.
(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 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 0.35% of the average daily Net Allocated Assets up to and
including $100 million, plus a fee at an annual
4
<PAGE> 5
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 act or omission 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 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
5
<PAGE> 6
mail, overnight delivery service, facsimile transmission equipment, or hand
delivery.
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, New Jersey 08816, Attention:
President; (2) to American Odyssey Funds Management LLC at Two Tower Center,
East Brunswick, New Jersey 08816, Attention: Secretary; or (3) to Equinox
Capital Management, LLC at 590 Madison Avenue, New York, NY 10022, 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.
6
<PAGE> 7
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.
AMERICAN ODYSSEY FUNDS, INC.
By:
- ---------------------------- -----------------------------
Witness: Lori M. Renzulli Paul S. Feinberg
Secretary President
AMERICAN ODYSSEY FUNDS
MANAGEMENT LLC
By:
- ---------------------------- -----------------------------
Witness: Lori M. Renzulli Paul S. Feinberg
Assistant Secretary Senior Vice President
EQUINOX CAPITAL
MANAGEMENT, LLC
By:
- ---------------------------- -----------------------------
Witness: Name:
Title:
7
<PAGE> 1
INVESTMENT SUBADVISORY AGREEMENT
Agreement made as of this 3rd day of April, 2000, among American Odyssey
Funds, Inc., a Maryland corporation (the "Series Fund"), American Odyssey Funds
Management LLC, a New Jersey limited liability company (the "Manager"), and
Chartwell Investment Partners, a limited partnership organized under the laws of
the Commonwealth of Pennsylvania (the "Subadviser").
WHEREAS, American Odyssey Funds Management LLC 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 LLC 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
American Odyssey Emerging Opportunities 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 of the Fund (such
Prospectus and Statement of Additional Information as currently in effect
and as amended or supplemented from 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 Assets' investments and determine from time to time what
securities, options, futures
1
<PAGE> 2
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
or Subadviser) 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 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
2
<PAGE> 3
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 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 meets the following conditions: (1) at least 25% of the
shares of the investment company (or in the case of a series
investment company, at least 25% of the shares of the series of
that investment company to which the Subadviser would provide
services) are owned by one or more separate accounts that fund
individual or group variable annuity contracts, and (2) the owners
of (or, for a group variable annuity contract, the participants
in) one or more of the variable annuity contracts funded by the
investment company (or series thereof) are eligible to participate
in a fee-based investment advisory asset allocation program
associated with that variable annuity contract; provided, however,
that the foregoing restriction shall not apply to any services
provided to the Financial
3
<PAGE> 4
Services Department, or any other unit, of The Travelers Insurance
Company.
(viii) Absent specific instructions to the contrary
provided to it by the Manager, and subject to the Subadviser's
receipt of all necessary voting materials, the Subadviser shall
vote all proxies with respect to investments of the allocated
assets in accordance with the Subadviser's proxy voting policy as
most recently provided to the Manager.
(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.
(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.
4
<PAGE> 5
3. 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 0.70% of the average daily Net Allocated Assets up to and
including $50 million, plus a fee at an annual rate of 0.50% 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.
4. The Subadviser shall not be liable for any loss suffered by the
Series Fund or the Manager as a result of any act or omission 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 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
5
<PAGE> 6
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.
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, New Jersey 08816, Attention:
President; (2) to American Odyssey Funds Management LLC at Two Tower Center,
East Brunswick, New Jersey 08816, Attention: Secretary; or (3) to Chartwell
Investment Partners at 1235 Westlakes Drive, Suite 330, Berwyn, Pennsylvania
19312, Attention: Chief Operating Officer.
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.
6
<PAGE> 7
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.
AMERICAN ODYSSEY FUNDS, INC.
By:
- ---------------------------- -----------------------------
Witness: Lori M. Renzulli Paul S. Feinberg
Secretary President
AMERICAN ODYSSEY FUNDS
MANAGEMENT LLC
By:
- ---------------------------- -----------------------------
Witness: Lori M. Renzulli Paul S. Feinberg
Assistant Secretary Senior Vice President
CHARTWELL INVESTMENT
PARTNERS
By:
- ---------------------------- -----------------------------
Witness: Name:
Title:
7
<PAGE> 1
INVESTMENT SUBADVISORY AGREEMENT
Agreement made as of this 3rd day of April, 2000, among American Odyssey
Funds, Inc., a Maryland corporation (the "Series Fund"), American Odyssey Funds
Management LLC, a New Jersey limited liability company (the "Manager"), and Bank
of Ireland Asset Management (U.S.) Limited, a Republic of Ireland corporation
(the "Subadviser").
WHEREAS, American Odyssey Funds Management LLC 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 LLC 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
American Odyssey International Equity 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 of the Fund (such
Prospectus and Statement of Additional Information as currently in effect
and as amended or supplemented from 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 Assets' investments and determine from time to time what
securities, options, futures contracts, and other investments
included in the Allocated Assets will be
1
<PAGE> 2
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
or Subadviser) 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 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.
2
<PAGE> 3
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 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 LLC, 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.
(viii) Absent specific instructions to the contrary
provided to it by the
3
<PAGE> 4
Manager, and subject to the Subadviser's receipt of all necessary
voting materials, the Subadviser shall vote all proxies with
respect to investments of the allocated assets in accordance with
the Subadviser's proxy voting policy as most recently provided to
the Manager.
(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.
(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 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
4
<PAGE> 5
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.
4. The Subadviser shall not be liable for any loss suffered by the
Series Fund or the Manager as a result of any act or omission 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 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)
5
<PAGE> 6
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.
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, New Jersey 08816, Attention:
President; (2) to American Odyssey Funds Management LLC at Two Tower Center,
East Brunswick, New Jersey 08816, Attention: Secretary; or (3) to Bank of
Ireland Asset Management (U.S.) Limited at 75 Holly Hill Lane, Greenwich, CT
06830, 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.
6
<PAGE> 7
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.
AMERICAN ODYSSEY FUNDS, INC.
By:
- ---------------------------- -----------------------------
Witness: Lori M. Renzulli Paul S. Feinberg
Secretary President
AMERICAN ODYSSEY FUNDS
MANAGEMENT LLC
By:
- ---------------------------- -----------------------------
Witness: Lori M. Renzulli Paul S. Feinberg
Assistant Secretary Senior Vice President
BANK OF IRELAND ASSET
MANAGEMENT (U.S.) LIMITED
By:
- ---------------------------- -----------------------------
Witness: Name:
Title:
7
<PAGE> 1
INVESTMENT SUBADVISORY AGREEMENT
Agreement made as of this 3rd day of April, 2000, among American Odyssey
Funds, Inc., a Maryland corporation (the "Series Fund"), American Odyssey Funds
Management LLC, a New Jersey limited liability company (the "Manager"), and
Western Asset Management Company, a California corporation (the "Subadviser").
WHEREAS, American Odyssey Funds Management LLC 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 LLC 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
American Odyssey Long-Term Bond 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 of the Fund (such
Prospectus and Statement of Additional Information as currently in effect
and as amended or supplemented from 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 Assets' investments and determine from time to time what
securities, options, futures contracts, and other investments
included in the Allocated Assets will be
1
<PAGE> 2
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
or Subadviser) 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 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.
2
<PAGE> 3
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.
(viii) Absent specific instructions to the contrary
provided to it by the Manager, and subject to the Subadviser's
receipt of all necessary voting materials, the Subadviser shall
vote all proxies with respect to investments of the allocated
assets in accordance with the Subadviser's proxy voting policy as
most recently provided to the Manager.
(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
3
<PAGE> 4
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.
(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 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 0.15% 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.
4. The Subadviser shall not be liable for any loss suffered by the
Series Fund or the Manager as a result of any act or omission 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 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
4
<PAGE> 5
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.
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.
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, New Jersey 08816, Attention:
President; (2) to American Odyssey Funds Management LLC at Two Tower Center,
East Brunswick, New Jersey 08816, Attention: Secretary; or (3) to Western Asset
Management Company at 117 East Colorado Boulevard, Pasadena, CA 91105,
Attention: President.
5
<PAGE> 6
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.
6
<PAGE> 7
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.
AMERICAN ODYSSEY FUNDS, INC.
By:
- ---------------------------- -----------------------------
Witness: Lori M. Renzulli Paul S. Feinberg
Secretary President
AMERICAN ODYSSEY FUNDS
MANAGEMENT LLC
By:
- ---------------------------- -----------------------------
Witness: Lori M. Renzulli Paul S. Feinberg
Assistant Secretary Senior Vice President
WESTERN ASSET MANAGEMENT
COMPANY
By:
- ---------------------------- -----------------------------
Witness: Name:
Title:
7
<PAGE> 1
INVESTMENT SUBADVISORY AGREEMENT
Agreement made as of this 1st day of May, 2000, among American Odyssey
Funds, Inc., a Maryland corporation (the "Series Fund"), American Odyssey Funds
Management LLC, a New Jersey limited liability company (the "Manager"), and
Travelers Asset Management International Company LLC, a New York limited
liability company (the "Subadviser").
WHEREAS, American Odyssey Funds Management LLC 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 LLC 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
American Odyssey Intermediate-Term Bond 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 of the Fund (such
Prospectus and Statement of Additional Information as currently in effect
and as amended or supplemented from 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 Assets' 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.
1
<PAGE> 2
(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
or Subadviser) 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 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,
2
<PAGE> 3
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 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, 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.
(viii) Absent specific instructions to the contrary
provided to it by the Manager, and subject to the Subadviser's
receipt of all necessary voting materials, the Subadviser shall
vote all proxies with respect to investments of the allocated
3
<PAGE> 4
assets in accordance with the Subadviser's proxy voting policy as
most recently provided to the Manager.
(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.
(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 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
4
<PAGE> 5
$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.
4. The Subadviser shall not be liable for any loss suffered by the
Series Fund or the Manager as a result of any act or omission 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 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.
5
<PAGE> 6
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, New Jersey 08816, Attention:
President; (2) to American Odyssey Funds Management LLC at Two Tower Center,
East Brunswick, New Jersey 08816, Attention: Secretary; or (3) to Travelers
Asset Management International Company LLC at One Tower Square, Hartford, CT
06183, 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.
6
<PAGE> 7
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.
AMERICAN ODYSSEY FUNDS, INC.
By:
- ---------------------------- -----------------------------
Witness: Lori M. Renzulli Paul S. Feinberg
Secretary President
AMERICAN ODYSSEY FUNDS
MANAGEMENT LLC
By:
- ---------------------------- -----------------------------
Witness: Lori M. Renzulli Paul S. Feinberg
Assistant Secretary Senior Vice President
TRAVELERS ASSET MANAGEMENT
INTERNATIONAL COMPANY LLC
By:
- ---------------------------- -----------------------------
Witness: Name:
Title:
7
<PAGE> 1
INVESTMENT SUBADVISORY AGREEMENT
Agreement made as of this 3rd day of April, 2000, among American Odyssey
Funds, Inc., a Maryland corporation (the "Series Fund"), American Odyssey Funds
Management LLC, a New Jersey limited liability company (the "Manager"), and
Credit Suisse Asset Management, LLC, a Delaware limited liability corporation
(the "Subadviser").
WHEREAS, American Odyssey Funds Management LLC 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 LLC 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
American Odyssey Global High-Yield Bond 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 of the Fund (such
Prospectus and Statement of Additional Information as currently in effect
and as amended or supplemented from 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 Assets' investments and determine from time to time what
securities, options, futures contracts, and other investments
included in the Allocated Assets will be
1
<PAGE> 2
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
or Subadviser) 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 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.
2
<PAGE> 3
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.
(viii) Absent specific instructions to the contrary
provided to it by the Manager, and subject to the Subadviser's
receipt of all necessary voting materials, the Subadviser shall
vote all proxies with respect to investments of the allocated
assets in accordance with the Subadviser's proxy voting policy as
most recently provided to the Manager.
(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
3
<PAGE> 4
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.
(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 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 0.425% of the average daily Net Allocated Assets. 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 act or omission 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 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
4
<PAGE> 5
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.
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.
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, New Jersey 08816, Attention:
President; (2) to American Odyssey Funds Management LLC at Two Tower Center,
East Brunswick, New Jersey 08816, Attention: Secretary; or (3) to Credit Suisse
Asset Management, LLC at One Citicorp Center, 153 East 53rd Street, New York, NY
10022, Attention: General Counsel.
10. This Agreement shall be governed by the laws of the State of New
Jersey.
5
<PAGE> 6
11. This Agreement may be executed in two or more counterparts, which
taken together shall constitute one and the same instrument.
6
<PAGE> 7
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.
AMERICAN ODYSSEY FUNDS, INC.
By:
- ---------------------------- -----------------------------
Witness: Lori M. Renzulli Paul S. Feinberg
Secretary President
AMERICAN ODYSSEY FUNDS
MANAGEMENT LLC
By:
- ---------------------------- -----------------------------
Witness: Lori M. Renzulli Paul S. Feinberg
Assistant Secretary Senior Vice President
CREDIT SUISSE ASSET
MANAGEMENT LLC
By:
- ---------------------------- -----------------------------
Witness: Name:
Title:
7
<PAGE> 1
INVESTMENT SUBADVISORY AGREEMENT
Agreement made as of this 3rd day of April, 2000, among American Odyssey
Funds, Inc., a Maryland corporation (the "Series Fund"), American Odyssey Funds
Management LLC, a New Jersey limited liability company (the "Manager"), and SG
Cowen Asset Management, Inc., a New York corporation (the "Subadviser").
WHEREAS, American Odyssey Funds Management LLC 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 LLC 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
American Odyssey Emerging Opportunities 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 of the Fund (such
Prospectus and Statement of Additional Information as currently in effect
and as amended or supplemented from 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 Assets' investments and determine from time to time what
securities, options, futures
1
<PAGE> 2
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
or Subadviser) 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 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
2
<PAGE> 3
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.
(viii) Absent specific instructions to the contrary
provided to it by the Manager, and subject to the Subadviser's
receipt of all necessary voting materials, the Subadviser shall
vote all proxies with respect to investments of the allocated
assets in accordance with the Subadviser's proxy voting policy as
most recently provided to the Manager.
(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
3
<PAGE> 4
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.
(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 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.
4. The Subadviser shall not be liable for any loss suffered by the
Series Fund or the Manager as a result of any act or omission 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 performance of its duties or from its reckless
disregard of its obligations and duties under this Agreement. The
4
<PAGE> 5
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.
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.
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, New Jersey 08816, Attention:
President; (2) to American Odyssey Funds Management LLC at Two Tower Center,
East Brunswick, New Jersey 08816, Attention: Secretary; or (3) to SG Cowen Asset
Management, Inc. at 560 Lexington Avenue, New York, NY 10020, Attention:
President.
5
<PAGE> 6
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.
6
<PAGE> 7
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.
AMERICAN ODYSSEY FUNDS, INC.
By:
- ---------------------------- -----------------------------
Witness: Lori M. Renzulli Paul S. Feinberg
Secretary President
AMERICAN ODYSSEY FUNDS
MANAGEMENT LLC
By:
- ---------------------------- -----------------------------
Witness: Lori M. Renzulli Paul S. Feinberg
Assistant Secretary Senior Vice President
SG COWEN ASSET
MANAGEMENT, INC.
By:
- ---------------------------- -----------------------------
Witness: Name:
Title:
7
<PAGE> 1
INVESTMENT SUBADVISORY AGREEMENT
Agreement made as of this 1st day of May, 2000, among American Odyssey
Funds, Inc., a Maryland corporation (the "Series Fund"), American Odyssey Funds
Management LLC, a New Jersey limited liability company (the "Manager"), and
Putnam Investment Management, Inc., a _______________ corporation (the
"Subadviser").
WHEREAS, American Odyssey Funds Management LLC 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 LLC 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
American Odyssey Core Equity 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 of the Fund (such
Prospectus and Statement of Additional Information as currently in effect
and as amended or supplemented from 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 Assets' 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.
1
<PAGE> 2
(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
or Subadviser) 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 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,
2
<PAGE> 3
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.
(viii) Absent specific instructions to the contrary
provided to it by the Manager, and subject to the Subadviser's
receipt of all necessary voting materials, the Subadviser shall
vote all proxies with respect to investments of the allocated
assets in accordance with the Subadviser's proxy voting policy as
most recently provided to the Manager.
(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
3
<PAGE> 4
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.
(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 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. 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 act or omission 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 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
4
<PAGE> 5
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.
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.
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, New Jersey 08816, Attention:
President; (2) to American Odyssey Funds Management LLC at Two Tower Center,
East Brunswick, New Jersey 08816, Attention: Secretary; or (3) to Putnam
Investment Management, Inc. at One Post Office Square, Boston, MA 02109,
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.
5
<PAGE> 6
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.
AMERICAN ODYSSEY FUNDS, INC.
By:
- ---------------------------- -----------------------------
Witness: Lori M. Renzulli Paul S. Feinberg
Secretary President
AMERICAN ODYSSEY FUNDS
MANAGEMENT LLC
By:
- ---------------------------- -----------------------------
Witness: Lori M. Renzulli Paul S. Feinberg
Assistant Secretary Senior Vice President
PUTNAM INVESTMENT
MANAGEMENT, INC.
By:
- ---------------------------- -----------------------------
Witness: Name:
Title:
6
<PAGE> 1
INVESTMENT SUBADVISORY AGREEMENT
Agreement made as of this 1st day of May, 2000, among American Odyssey
Funds, Inc., a Maryland corporation (the "Series Fund"), American Odyssey Funds
Management LLC, a New Jersey limited liability company (the "Manager"), and
State Street Global Advisors, a division of State Street Bank and Trust Company,
a Massachusetts trust company (the "Subadviser").
WHEREAS, American Odyssey Funds Management LLC 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 LLC 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
American Odyssey Core Equity 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 of the Fund (such
Prospectus and Statement of Additional Information as currently in effect
and as amended or supplemented from 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 Assets' 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.
1
<PAGE> 2
(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
or Subadviser) 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 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,
2
<PAGE> 3
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.
(viii) Absent specific instructions to the contrary
provided to it by the Manager, and subject to the Subadviser's
receipt of all necessary voting materials, the Subadviser shall
vote all proxies with respect to investments of the allocated
assets in accordance with the Subadviser's proxy voting policy as
most recently provided to the Manager.
(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
3
<PAGE> 4
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, 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.
(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 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 0.05% of the average daily Net Allocated Assets up to and
including $50 million, plus a fee at an annual rate of 0.04% 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 0.02% of the average daily Net
Allocated Assets over $100 million; provided, however, that the fee shall not be
less than the lesser of (i) $50,000 on an annualized basis or (ii) the maximum
subadvisory rate for the Core Equity Fund of 0.45% of the average daily Net
Allocated Assets on an annualized basis. 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 act or omission 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 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
4
<PAGE> 5
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.
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.
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, New Jersey 08816, Attention:
President; (2) to American Odyssey Funds Management LLC at Two Tower Center,
East Brunswick, New Jersey 08816, Attention: Secretary; or (3) to State Street
Global Advisors at One International Place, Boston, MA 02110, Attention:
President.
5
<PAGE> 6
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.
6
<PAGE> 7
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.
AMERICAN ODYSSEY FUNDS, INC.
By:
- ---------------------------- -----------------------------
Witness: Lori M. Renzulli Paul S. Feinberg
Secretary President
AMERICAN ODYSSEY FUNDS
MANAGEMENT LLC
By:
- ---------------------------- -----------------------------
Witness: Lori M. Renzulli Paul S. Feinberg
Assistant Secretary Senior Vice President
STATE STREET GLOBAL ADVISORS,
a division of STATE STREET BANK
AND TRUST COMPANY
By:
- ---------------------------- -----------------------------
Witness: Name:
Title:
7
<PAGE> 1
INVESTMENT SUBADVISORY AGREEMENT
Agreement made as of this 1st day of May, 2000, among American Odyssey
Funds, Inc., a Maryland corporation (the "Series Fund"), American Odyssey Funds
Management LLC, a New Jersey limited liability company (the "Manager"), and
State Street Global Advisors, a division of State Street Bank and Trust Company,
a Massachusetts trust company (the "Subadviser").
WHEREAS, American Odyssey Funds Management LLC 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 LLC 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 American Odyssey Emerging Opportunities 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 of
the Fund (such Prospectus and Statement of Additional Information as
currently in effect and as amended or supplemented from 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 Assets' investments and determine from time to time
what securities, options, futures contracts, and other
investments included in the Allocated Assets will be
<PAGE> 2
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 or Subadviser) 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 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,
<PAGE> 3
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.
(viii) Absent specific instructions to the contrary
provided to it by the Manager, and subject to the Subadviser's
receipt of all necessary voting materials, the Subadviser
shall vote all proxies with respect to investments of the
allocated assets in accordance with the Subadviser's proxy
voting policy as most recently provided to the Manager.
(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
<PAGE> 4
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, 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.
(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 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 0.08% of the average daily Net Allocated Assets up to and
including $50 million, plus a fee at an annual rate of 0.06% 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 0.04% of the average daily Net
Allocated Assets over $100 million; provided, however, that the fee shall not be
less than the lesser of (i) $50,000 on an annualized basis or (ii) the maximum
subadvisory rate for the Emerging Opportunities Fund of 0.80% of the average
daily Net Allocated Assets on an annualized basis. 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 act or omission 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 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
<PAGE> 5
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.
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.
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, New Jersey 08816, Attention:
President; (2) to American Odyssey Funds Management LLC at Two Tower Center,
East Brunswick, New Jersey 08816, Attention: Secretary; or (3) to State Street
Global Advisors at One International Place, Boston, MA 02110, 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.
<PAGE> 6
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.
AMERICAN ODYSSEY FUNDS, INC.
______________________ By: ____________________________
Witness: Lori M. Renzulli Paul S. Feinberg
Secretary President
AMERICAN ODYSSEY FUNDS
MANAGEMENT LLC
_______________________ By: ____________________________
Witness: Lori M. Renzulli Paul S. Feinberg
Assistant Secretary Senior Vice President
STATE STREET GLOBAL ADVISORS,
a division of STATE STREET BANK
AND TRUST COMPANY
_______________________ By: ____________________________
Witness: Name:
Title:
<PAGE> 1
FUND PARTICIPATION AGREEMENT
AGREEMENT, made and entered into this _____ day of _____________ 1993 by
and among THE TRAVELERS INSURANCE COMPANY (the "Company"), a Connecticut
corporation, on its own behalf and on behalf of each segregated asset account
set forth on Schedule A hereto as amended from time to time (each such account
hereinafter referred to as the "Account"), ODYSSEY FUNDS, INC. (the "Series
Fund"), a Maryland corporation, and COPELAND EQUITIES, INC. (the "Underwriter"),
a New Jersey corporation.
WHEREAS, the Series Fund is a diversified, open-end management investment
company registered with the Securities and Exchange Commission (the "SEC") under
the Investment Company Act of 1940, as amended (the "1940 Act"), and has or will
register its shares under the Securities Act of 1933, as amended (the 111933
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 (the "Board"), and. the Series Fund may in
the future add additional Funds; and
WHEREAS, the Underwriter is registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended (the 111934 Act"), and is a member
in good standing of the National Association of Securities Dealers, Inc. (the
"NASD"); and
WHEREAS, the Series Fund is available to act as the investment vehicle
for separate accounts established for variable life insurance policies and
variable annuity contracts (collectively, the "Variable Insurance Products") to
be offered by insurance companies which have entered into participation
agreements with the Series Fund and the Underwriter (the "Participating
Insurance Companies"); and
WHEREAS, the Account is a unit investment trust registered under the 1940
Act and invests in investment company shares as an investment option under
certain variable annuity or variable life insurance contracts issued by the
Company and registered under the 1933 Act (the "Contracts"); and
WHEREAS, the parties desire to provide Series Fund shares as an
investment option under the Contracts.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I. SALE OF SERIES FUND SHARES
1.1. The Underwriter agrees to sell to the Company those shares of the
Series Fund which the Account orders, executing such orders on a daily basis at
the net asset value next computed after receipt by the Series Fund or its
designee of the order. For purposes of this Section 1.1, the Company shall be
the designee of the Series Fund for receipt of such orders from the Account and
receipt by such designee shall constitute receipt by the Series Fund; provided
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<PAGE> 2
that the Series Fund receives notice of such order by 9:30 a.m. Eastern time on
the next following Business Day. "Business Day" shall mean any day on which the
New York Stock Exchange is open for trading and on which the Series Fund
calculates its net asset value pursuant to SEC rules.
1.2. The Series Fund agrees to make its shares available indefinitely
for purchase by the Company and the Account at the applicable net asset value
per share on those days on which the Series Fund calculates its net asset value
pursuant to SEC rules. The Series Fund shall use reasonable efforts to calculate
such net asset value on each day which the New York Stock Exchange is open for
trading. Notwithstanding the foregoing, the Board may refuse to sell shares of
any Fund to any person, or suspend or terminate the offering of shares of any
Fund if such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Board acting in good faith and
in light of their fiduciary duties under federal and any applicable state laws,
necessary in the best interests of the shareholders of such Fund.
1.3. The Series Fund and the Underwriter agree that shares of the
Series Fund will be sold only to Participating Insurance Companies, their
affiliates, and their separate accounts. No shares of any Fund will be sold to
the general public.
1.4. The Company and the Account shall pay for Series Fund shares on
the next Business Day after an order to purchase Series Fund shares is made.
Payment shall be in federal funds transmitted by wire.
1.5. The Series Fund agrees to redeem for cash, on the Company's
request, any full or fractional shares of the Series Fund held by the Company or
the Account, executing such requests on a daily basis at the net asset value
next computed after receipt by the Series Fund or its designee of the request
for redemption. For purposes of this Section 1.4, the Company shall be the
designee of the Series Fund for receipt of requests for redemption from the
Account and receipt by such designee shall constitute receipt by the Series
Fund; provided that the Series Fund receives notice of such request for
redemption by 9:30 a.m. Eastern time on the next following Business Day.
1.6. Issuance and transfer of the Series Fund's shares will be by book
entry only. Stock certificates will not be issued to the Company or the Account.
Shares ordered from the Series Fund will be recorded in an appropriate title for
the Account or the appropriate subaccount of the Account.
1.7. The Series Fund shall furnish same day notice (by wire or
telephone, followed by written confirmation) to the Company of any income,
dividends or capital gain distributions payable on the Series Fund's shares. The
Company hereby elects to receive all such income, dividends and capital gain
distributions of a Fund in the form of additional shares of that Fund. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Series Fund shall
notify the Company of the number of shares so issued as payment of such
dividends and distributions.
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<PAGE> 3
1.8. The Series Fund shall make the net asset value per share for each
Fund available to the Company on a daily basis as soon as reasonably practical
after those figures are calculated. The Series Fund shall use its best efforts
to make such net asset value per share information available by 7 p.m. Eastern
time.
1.9. The Company agrees to purchase and redeem the shares of each Fund
offered by the then current prospectus of the Series Fund and in accordance with
the provisions of such prospectus. The Company agrees that all net amounts
available under the Contracts shall be invested in the Series Fund, or in the
Company's general account; provided, however, that such amounts may also be
invested in an investment company other than the Series Fund if (a) such other
investment company, or series thereof, has investment objectives or policies
that are substantially different from the investment objectives and policies of
all the Funds; or (b) the Company gives the Series Fund and the Underwriter 45
days written notice of its intention to make such other investment company
available as a funding vehicle for the Contracts; or (c) such other investment
company was available as a funding vehicle for the Contracts prior to the date
of this Agreement; or (d) the Series Fund or the Underwriter consents to the use
of such other investment company.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that it is an insurance
company duly organized and in good standing under applicable law and that it has
legally and validly established the Account as a segregated asset account under
Section 38a-433 of the Connecticut Insurance Code and has registered the Account
as a unit investment trust under the 1940 Act.
2.2. The Company represents and warrants that the Contracts are or will
be registered under the 1933 Act, that the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws,
and that the sale of the Contracts shall comply in all material respects with
state insurance suitability requirements.
2.3. The Series Fund represents and warrants that it is lawfully
organized and validly existing Maryland Corporation, that it is registered as a
diversified, open-end management investment company under the 1940 Act, and that
it does and will comply in all materials respects with the 1940 Act.
2.4. The Series Fund represents and warrants that Series Fund shares
sold pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with the laws of the State of
Maryland and all applicable federal and state securities laws. The Series Fund
shall amend the Registration Statement for its shares under the 1933 Act and the
1940 Act from time to time as required in order to effect the continuous
offering of its shares.
2.5. The Series Fund represents and warrants that it is currently
qualified as a Regulated Investment Company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code") and that it will make every effort
to maintain such qualification (under
3
<PAGE> 4
Subchapter M or any successor or similar provision) and that it will notify the
Company immediately upon having a reasonable basis for believing that it has
ceased to so qualify or that it might not so qualify in the future.
2.6. The Series Fund represents and warrants that each Fund will comply
with Section 817(h) of the Code, all regulations issued thereunder and all
amendments or modifications to such Section or regulations, and that it will
notify the Company immediately upon having a reasonable basis for believing that
it has ceased to comply or that it might not comply in the future.
2.7. The Company represents and warrants that the contracts are
currently treated as endowment, annuity or life insurance contracts, under
applicable provisions of the Code and that it will make every effort to maintain
such treatment and that it will notify the Series Fund and the Underwriter
immediately upon having a reasonable basis for believing that the Contracts have
ceased to be so treated or that they might not be so treated in the future.
2.8. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered with the SEC as a broker-dealer. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of New Jersey and all applicable state
and federal securities laws.
2.9. The Series Fund and the Underwriter represent and warrant that all
of their directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Series Fund
are and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Series Fund (the "Bond") in an amount
not less than the minimal coverage as required currently by Rule 17g-1 of the
1940 Act or related provisions as may be promulgated from time to time. The Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.10. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Series Fund are and shall continue to be
at all times covered by a blanket fidelity bond or similar coverage for the
benefit of the Series Fund (the "Bond") in an amount not less than the minimal
coverage as required currently by entities subject to the requirements of Rule
17g-1 of the 1940 Act or related provisions as may be promulgated from time to
time. The Bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Underwriter shall provide the Company (at the Company's
expense) with as many copies of the Series Fund's current prospectus as the
Company may reasonably request. If requested by the Company in lieu thereof, the
Series Fund shall provide such documentation (including a final copy of the new
prospectus as set in type at the Series Fund's expense) and other assistance as
is reasonably necessary in order for the Company once each year (or more
4
<PAGE> 5
frequently if the prospectus for the Series Fund is amended) to have the
prospectus for the Contracts and the Series Fund's prospectus printed together
in one document (such printing to be at the Company's expense).
3.2. The Underwriter or the Series Fund (at their expense) shall print
and provide a copy of the Series Fund current Statement of Additional
Information ("SAI") to the Company and to any owner of a Contract or prospective
owner who requests it. The Company may order additional copies of the SAI at its
expense.
3.3. The Series Fund, at its expense, shall provide the Company with
copies of its proxy materials, reports to stockholders, and other communications
to stockholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.4. If and to the extent required by law, the Company shall: (i)
solicit voting instructions from Contract owners; (ii) vote the Series Fund
shares in accordance with instructions received from Contract owners; and (iii)
vote Series Fund shares for which no instructions have been received in the same
proportion as Series Fund shares of such Fund for which instructions have been
received; all so long as and to the extent that the SEC continues to interpret
the 1940 Act to require passthrough voting privileges for variable contract
owners. The Company reserves the right to vote Series Fund shares held in any
segregated asset account in its own right, to the extent permitted by law.
3.5. The Series Fund shall comply with 1940 Act's requirements
concerning shareholder meetings.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Series Fund or its designee, each piece of sales literature or other promotional
material in which the Series Fund or its investment adviser or the Underwriter
is named, at least fifteen Business Days prior to its use. No such material
shall be used if the Series Fund or its designee object to such use within
fifteen Business Days after receipt of such material.
4.2. The company shall not give any information or make any
representations or statements on behalf of the Series Fund or concerning the
Series Fund in connection with the sale of the Contracts other than the
information or representations contained in the registration statement,
prospectus, or SAI for the Series Fund shares, as such registration statement,
prospectus, and SAI may be amended or supplemented from time to time, or in
reports or proxy statements for the Series Fund, or in sales literature or other
promotional material approved by the Series Fund or its designee or by the
Underwriter, except with the permission of the Series Fund or the Underwriter or
the designee of either.
4.3. The Series Fund, the Underwriter, or their designee shall furnish,
or shall cause to be furnished, to the Company or its designee, each piece of
sales literature or other promotional material in which the Company and/or its
separate account(s), is named, at least fifteen Business
5
<PAGE> 6
Days prior to its use. No such material shall be used if the Company or its
designee object to such use within fifteen Business Days after receipt of such
material.
4.4. The Series Fund and the Underwriter shall not give any information
or make any representations on behalf of the Company or concerning the Company,
the Account, or the Contracts other than the information or representations
contained in the registration statement, prospectus, and SAI for the Contracts,
as such registration statement, prospectus, or SAI may be amended or
supplemented from time to time, or in published reports for the Account which
are in the public domain or approved by the Company for distribution to Contract
owners, or in sales literature or other promotional material approved by the
Company or its designee, except with the permission of the Company.
4.5. The Series Fund will provide to the Company at least one complete
copy of all registration statements, prospectuses, SAIs, reports, proxy
statements, sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any of the
above, that relate to the Series Fund or its shares, as soon as reasonably
practicable after the filing of such document with the SEC or other regulatory
authorities.
4.6. The Company will provide to the Series Fund at least one complete
copy of all registration statements, prospectuses, SAIs, reports, solicitations
for voting instructions, sales literature and other promotional materials,
applications for exemptions, requests for no action letters, and all amendments
to any of the above, that relate to the contracts or the Account, as soon as
reasonably practicable after the filing of such document with the SEC.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and the Underwriter shall pay no fee or other
compensation to the Company under this Agreement.
5.2. All expenses incident to performance by the Series Fund under this
Agreement shall be paid by the Series Fund. The Series Fund shall bear the
expenses for the cost of registration and qualification of the Series Fund's
shares, preparation and filing of the Series Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, printing
and providing the Company with a sufficient quantity of the Series Fund's
prospectus for the Company to distribute to all existing owners of Contracts,
setting in type and printing the proxy materials and reports to shareholders
(including the costs of printing a prospectus that constitutes an annual
report), the preparation of all statements and notices required by any federal
or state law, all taxes on the issuance or transfer of the Series Fund's shares.
5.3. The Company shall bear the expenses of printing and distributing
the Series Fund's prospectus to prospective owners of Contracts and of
distributing the Series Fund's proxy materials and reports to existing Contract
owners.
6
<PAGE> 7
ARTICLE VI. POTENTIAL CONFLICTS
6.1. The Board will monitor the Series Fund for the existence of any
material irreconcilable conflict between the interests of the contract owners of
all separate accounts investing in the Series Fund. A material irreconcilable
conflict may arise for a variety of reasons, including: (a) an action by any
state insurance regulatory authority; (b) a change in applicable federal or
state insurance, tax, or securities laws or regulations, or a public ruling,
private letter ruling, no-action or interpretative letter, or any similar action
by insurance, tax, or securities regulatory authorities; (c) an administrative
or judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Fund are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Board shall promptly inform the Company if
it determines that a material irreconcilable conflict exists and the
implications thereof.
6.2. The Company will report to the Board any potential or existing
conflicts of which it is aware. The Company will assist the Board in carrying
out its responsibilities under any exemptive order issued by the SEC permitting
shared funding by providing the Board with all information reasonably necessary
for the Board to consider any issues raised. This includes, but is not limited
to, an obligation by the Company to inform the Board whenever contract owner
voting instructions are disregarded.
6.3. If it is determined by a majority of the Board, or a majority of
its disinterested directors, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested directors), take whatever steps are necessary to remedy or
eliminate the material irreconcilable conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Series Fund or any Fund thereof and reinvesting such assets in a different
investment medium, including (but not limited to) another Fund of the Series
Fund, or submitting the question whether such segregation should be implemented
to a vote of all affected contract owners and, as appropriate, segregating the
assets of any appropriate group (i.e., annuity contract owners, life insurance
contract owners, or variable contract owners of one or more Participating
Insurance Companies) that votes in favor of such segregation, or offering to the
affected contract owners the option of making such a change; and (2)
establishing a new registered management investment company or managed separate
account.
6.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Series Fund's election, to withdraw the affected
account's investment in the Series Fund and terminate this Agreement with
respect to such account; provided, however that such withdrawal and termination
shall be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Any such withdrawal and termination must take place within six months after the
Series Fund gives written notice that this provision is being implemented, and
until the end of that six-month period the Underwriter and the Series Fund
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<PAGE> 8
shall continue to accept and implement orders by the Company for the purchase
(and redemption) of shares of the Series Fund.
6.5. If a material irreconcilable conflict arises because a decision of
a particular state insurance regulator applicable to the Company conflicts with
the position of the majority of other state regulators, then the Company will
withdraw the affected account's investment in the Series Fund and terminate this
Agreement with respect to such account within six months after the Board informs
the Company in writing that it has determined that such decision has created a
material irreconcilable conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board. Until the end of the foregoing six-month period, the Underwriter
and the Series Fund shall continue to accept and implement orders by the Company
for the purchase (and redemption) of shares of the Series Fund.
6.6. For purposes of Sections 6.3 through 6.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any material irreconcilable conflict, but in
no event will the Series Fund be required to establish a new funding medium for
the Contracts. The Company shall not be required by Section 6.3 to establish a
new funding medium for the Contracts if an offer to do so has been declined by
vote of a majority of Contract owners materially adversely affected by the
material irreconcilable conflict. In the event that the Board determines that
any proposed action does not adequately remedy any material irreconcilable
conflict, then the Company will withdraw the account's investment in the Series
Fund and terminate this Agreement within six months after the Board informs the
Company in writing of the foregoing determination; provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
6.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding on terms and conditions materially different from those contained in any
exemptive order issued by the SEC permitting mixed or shared funding, then (a)
the Series Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 6.1, 6.2, 6.3, 6.4, and 6.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VII. INDEMNIFICATION
7.1. Indemnification By The Company
7.1.(a) The Company agrees to indemnify and hold harmless the
Series Fund and each director of the Board and officers and each person, if any,
who controls the Series Fund within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for
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<PAGE> 9
purposes of this Section 7.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Company) or litigation (including legal and other expenses), to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to the sale
or acquisition of the Series Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
Registration Statement or prospectus for the Contracts or
contained in the Contracts or sales literature for the Contracts
(or any amendment or supplement to any of the foregoing), or arise
out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided
that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity
with information furnished to the Company by or on behalf of the
Series Fund for use in the Registration Statement or prospectus
for the Contracts or in the Contracts or sales literature (or any
amendment or supplement) or otherwise for use in connection with
the sale of the Contracts or Series Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the Registration Statement, prospectus or sales
literature of the Series Fund not supplied by the Company or
persons under its control) or wrongful conduct of the Company or
persons under its control, with respect to the sale or
distribution of the Contracts or Series Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, or sales literature of the Series Fund or
any amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading if such a statement or omission was made in reliance
upon information furnished to the Series Fund by or on behalf of
the Company; or
(iv) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material breach
of this Agreement by the Company, as limited by and in accordance
with the provisions of Sections 7.1(b) and 7.1(c) hereof.
7.1.(b) The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities, or
litigation incurred or assessed against an
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<PAGE> 10
Indemnified Party as such may arise from such Indemnified Party's willful
misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations or duties under this Agreement or to the Series Fund,
whichever is applicable.
7.1.(c) The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
7.1.(d) The Indemnified Parties will promptly notify the Company
of the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Series Fund shares or the Contracts or the
operation of the Series Fund.
7.2. Indemnification by the Underwriter
7.2.(a) The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 7.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities, or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Series Fund's shares
or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
Registration Statement or prospectus or sales literature of the
Series Fund (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reliance
10
<PAGE> 11
upon and in conformity with information furnished to the
Underwriter or the Series Fund by or on behalf of the Company for
use in the Registration Statement or prospectus for the Series
Fund or in sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or
Series Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the Registration Statement, prospectus, or sales
literature for the Contracts not supplied by the Underwriter or
persons under its control) or wrongful conduct of the Series Fund
or Underwriter or persons under their control, with respect to the
sale or distribution of the Contracts or Series Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, or sales literature covering the Contracts,
or any amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, if such a statement or omission was made in reliance
upon information furnished to the Company by or on behalf of the
Series Fund; or
(iv) arise as a result of any failure by the Series Fund to
provide the services and furnish the materials under the terms of
this Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification
requirements specified in Section 2.6 of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material breach
of this Agreement by the Underwriter, as limited by and in
accordance with the provisions of Sections 7.2(b) and 7.2(c)
hereof.
7.2.(b) The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities, or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company or the Account, whichever is applicable.
7.2.(c) The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any
11
<PAGE> 12
such action is brought against the Indemnified Parties, the Underwriter will be
entitled to participate, at its own expense, in the defense of such action. The
Underwriter also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the Underwriter
to such party of the Underwriter's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Underwriter will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
7.2.(d) The Company agrees promptly to notify the Underwriter of
the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Contracts
or the operation of the Account.
7.3. Indemnification By the Series Fund
7.3.(a) The Series Fund agrees to indemnify and hold harmless the
Company, and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 7.3)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Series Fund) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities, or expenses (or actions in respect thereof) or
settlements result from the gross negligence, bad faith, or willful misconduct
of the Board or any member thereof, are related to the operations of the Series
Fund and:
(i) arise as a result of any failure by the Series Fund to
provide the services and furnish the materials under the terms of
this Agreement (including a failure to comply with the
diversification requirements specified in Section 2.6 of this
Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Series Fund in this
Agreement or arise out of or result from any other material breach
of this Agreement by the Series Fund;
as limited by and in accordance with the provisions of Sections 7.3(b) and
7.3(c) hereof.
7.3.(b) The Series Fund shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities, or litigation incurred or assessed against an Indemnified Party as
such may arise from such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company, the Series Fund, the Underwriter, or the
Account, whichever is applicable.
7.3.(c) The Series Fund shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Series Fund in
writing within a reasonable time after the summons or other first
12
<PAGE> 13
legal process giving information of the nature of the claim shall have been
served upon such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but failure to notify
the Series Fund of any such claim shall not relieve the Series Fund from any
liability which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the Series Fund will be
entitled to participate, at its own expense, in the defense of such action. The
Series Fund also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the Series Fund
to such party of the Series Fund's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Series Fund will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
7.3.(d) The Company agrees promptly to notify the Series Fund of
the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with this Agreement, the issuance or sale of
the Contracts, with respect to the operation of the Account, or the sale or
acquisition of shares of the Series Fund.
ARTICLE VIII. APPLICABLE LAW
8.1. This Agreement shall be governed and construed in accordance with
the laws of the State of New Jersey.
8.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules, and regulations as the SEC
may grant, and the terms of this Agreement shall be interpreted and construed in
accordance therewith.
ARTICLE IX. TERMINATION
9.1. This Agreement shall terminate:
(a) at the option of any party upon one year advance written
notice to the other parties; or
(b) at the option of the Company to the extent that shares of
the Funds are not reasonably available to meet the requirements of
the Contracts as determined by the Company; provided, however,
that such termination shall apply only to the Fund(s) not
reasonably available. Prompt notice of the election to terminate
for such cause shall be furnished by the Company; or
(c) at the option of the Series Fund in the event that formal
administrative proceedings are instituted against the Company by
the NASD, the SEC, the
13
<PAGE> 14
Insurance Commissioner, or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of
the Contracts, with respect to the operation of the Account, or
the purchase of the Series Fund shares; provided, however, that
the Series Fund determines in its sole judgment exercised in good
faith that any such administrative proceedings will have a
material adverse effect upon the ability of the Company to perform
its obligations under this Agreement; or
(d) at the option of the Company in the event that formal
administrative proceedings are instituted against the Series Fund
or the Underwriter by the NASD, the SEC, or any state securities
or insurance department, or any other regulatory body; provided,
however, that the Company determines in its sole judgment
exercised in good faith that any such administrative proceedings
will have a material adverse effect upon the ability of the Series
Fund or the Underwriter to perform their obligations under this
Agreement; or
(e) with respect to the Account, upon requisite vote of the
Contract owners having an interest in such Account (or any
subaccount) to substitute the shares of another investment company
for Series Fund shares. The Company will give 30 days' prior
written notice to the Series Fund of the date of any proposed vote
to replace the Series Fund's shares; or
(f) at the option of the Company, in the event any of the
Series Fund's shares are not registered, issued, or sold in
accordance with applicable state and/or federal law or such law
precludes the use of such shares as the underlying investment
media of the Contracts; or
(g) at the option of the Company, if the Series Fund ceases to
qualify as a Regulated Investment Company under Subchapter M of
the Code or under any successor or similar provision, or if the
Company reasonably believes that the Series Fund may fail to so
qualify; or
(h) at the option of the Company, if the Series Fund fails to
meet the diversification requirements of the Code; or
(i) at the option of either the Series Fund or the Underwriter,
if (1) the Series Fund or the Underwriter, respectively, shall
determine, in their sole judgment reasonably exercised in good
faith, that the Company has suffered a material adverse change in
its business or financial condition or is the subject of material
adverse publicity and such material adverse change or material
adverse publicity will have a material adverse impact upon the
business and operations of either the Series Fund or the
Underwriter, (2) the Series Fund or the Underwriter shall notify
the Company in writing of such determination and its intent to
terminate this Agreement, and (3) after considering the actions
taken by the Company and any other changes in circumstances since
the giving of such notice, such determination of the Series Fund
or the Underwriter shall continue to apply on the sixtieth (60th)
14
<PAGE> 15
day following the giving of such notice, which sixtieth day shall
be the effective date of termination; or
(j) at the option of the Company, if (1) the Company shall
determine, in its sole judgment reasonably exercised in good
faith, that either the Series Fund or the Underwriter has suffered
a material adverse change in its business or financial condition
or is the subject of material adverse publicity and such material
adverse change or material adverse publicity will have a material
adverse impact upon the business and operations of the Company,
(2) the Company shall notify the Series Fund and the Underwriter
in writing of such determination and its intent to terminate the
Agreement, and (3) after considering the actions taken by the
Series Fund and/or the Underwriter and any other changes in
circumstances since the giving of such notice, such determination
shall continue to apply on the sixtieth (60th) day following the
giving of such notice, which sixtieth day shall be the effective
date of termination; or
(k) at the option of either the Series Fund or the Underwriter,
if the Company gives the Series Fund and the Underwriter the
written notice specified in Section 1.9(b) hereof and at the time
such notice was given there was no notice of termination
outstanding under any other provision of this Agreement; provided,
however, any termination under this Section 10.1(k) shall be
effective forty-five (45) days after the notice specified in
Section 1.9(b) was given.
9.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 9.1(a) may be exercised for any
reason or for no reason.
9.3. Notice Requirement. No termination of this Agreement shall be
effective unless and until the party terminating this Agreement gives prior
written notice to all other parties to this Agreement of its intent to terminate
which notice shall set forth the basis for such termination. Furthermore,
(a) in the event that any termination is based upon the
provisions of Article VI, or the provision of Section 9.1(a),
9.1(i), 9.1(j) or 9.1(k) of this Agreement, such prior written
notice shall be given in advance of the effective date of
termination as required by such provisions; and
(b) in the event that any termination is based upon the
provisions of Section 9.1(c) or 9.1(d) of this Agreement, such
prior written notice shall be given at least ninety (90) days
before the effective date of termination.
9.4. Effect of Termination. Notwithstanding any termination of this
Agreement, the Series Fund and the Underwriter shall, at the option of the
Company, continue to make available additional shares of the Series Fund
pursuant to the terms and conditions of this Agreement, for all Contracts in
effect on the effective date of termination of this Agreement (the "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Series Fund,
redeem investments in the Series Fund,
15
<PAGE> 16
and/or invest in the Series Fund upon the making of additional purchase payments
under the Existing Contracts. The parties agree that this Section 9.4 shall not
apply to any terminations under Article VI and the effect of such Article VI
terminations shall be governed by Article VI of this Agreement.
9.5. The Company shall not redeem Series Fund shares attributable to
the Contracts (as opposed to Series Fund shares purchased directly by the
Company to provide seed money and Series Fund shares attributable to the
Company's assets held in the Account) except (i) as necessary to implement
Contract owner initiated transactions, or (ii) as required by state and/or
federal laws or regulations or judicial or other legal precedent of general
application (a "Legally Required Redemption"). Upon request, the Company will
promptly furnish to the Series Fund and the Underwriter the opinion of counsel
for the Company (which counsel shall be reasonably satisfactory to the Series
Fund and the Underwriter) to the effect that any redemption pursuant to clause
(ii) above is a Legally Required Redemption. Furthermore, except in cases where
permitted under the terms of the Contracts, the Company shall not prevent
Contract owners from allocating payments to a Fund that was otherwise available
under the Contracts without first giving the Series Fund or the Underwriter 90
days notice of its intention to do so.
ARTICLE X. NOTICES
10.1. Any notice shall be sufficiently given when sent by registered or
certified mail (return receipt requested) to the other party at the address of
such party set forth below or at such other address as such party may from time
to time specify in writing to the other party.
If to the Series Fund:
Odyssey Funds, Inc.
Two Tower Center
East Brunswick, NJ 08816
Attention: Secretary
If to the Company:
The Travelers Insurance Company
One Tower Square
Hartford, CT 06183
Attention: Ronald R. Gendreau, Annuity Division
If to the Underwriter:
Copeland Equities, Inc.
Two Tower Center
East Brunswick, NJ 08816
Attention: Secretary
16
<PAGE> 17
ARTICLE XI. MISCELLANEOUS
11.1. All persons dealing with the Series Fund must look solely to the
property of the Series Fund for the enforcement of any claims against the Series
Fund as neither the Board, officers, agents, or shareholders assume any personal
liability for obligations entered into on behalf of the Series Fund.
11.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate, or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
11.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
11.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one instrument.
11.5. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule, or otherwise, the remainder of the Agreement
shall not be affected thereby.
11.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
11.7. The rights, remedies, and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies, and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
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.
ODYSSEY FUNDS, INC.
By:
- ----------------------------- -------------------------------
Witness
Title:
----------------------------
17
<PAGE> 18
THE TRAVELERS INSURANCE COMPANY
By:
- ----------------------------- -------------------------------
Witness
Title:
----------------------------
COPELAND EQUITIES, INC.
By:
- ----------------------------- -------------------------------
Witness
Title:
----------------------------
18
<PAGE> 19
SCHEDULE A
The Travelers Fund U for Variable Annuities, established May 7, 1982.
19
<PAGE> 1
AMENDMENT NO. 1
Amendment to the Participation Agreement among The Travelers Insurance Company
(the "Company"), American Odyssey Funds, Inc. (the "Series Fund") and Copeland
Equities, Inc. (the "Underwriter") dated February 23, 1993.
WHEREAS each of the parties desires to expand the Accounts of the Company which
invest in shares of the Series Fund. The Company, the Series Fund and the
Underwriter hereby agree to amend Schedule A of the Agreement by adding the
following to the existing language on Schedule A:
The Travelers Fund UL for Variable Life Insurance, established November 4, 1983.
IN WITNESS WHEREOF, of each of the parties hereto has caused this Amendment to
be executed in its name and on its behalf by its duly authorized representative
as of __________ ,1994.
THE TRAVELERS INSURANCE COMPANY
By its authorized officer
By:
-----------------------------
Title:
-----------------------------
Date:
-----------------------------
AMERICAN ODYSSEY FUNDS, INC.
By its authorized officer
By:
-----------------------------
Title:
-----------------------------
Date:
-----------------------------
COPELAND EQUITIES, INC.
By its authorized officer
By:
-----------------------------
Title:
-----------------------------
Date:
-----------------------------
<PAGE> 2
Schedule A
The Travelers Fund U for Variable Annuities, established May 7, 1982.
The Travelers Fund UL for Variable Life Insurance, established November 4, 1983.
7
<PAGE> 1
AMENDMENT NO. 2
Amendment to the Participation Agreement among The Travelers Insurance Company
(the "Company"), American Odyssey Funds, Inc. (the "Series Fund"), and Copeland
Equities, Inc. (the "Underwriter") dated February 23, 1993 and amended May 1,
1994.
WHEREAS each of the parties desires to expand the Accounts of the Company which
invest in shares of the Series Fund. The Company, the Series Fund, and the
Underwriter hereby agree to amend Schedule A of the Agreement by adding the
following to the existing language, as previously amended, on Schedule A:
The Travelers Separate Account Fund QP for Variable Annuities,
established December 26, 1995.
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment No. 2
to be executed in its name and on its behalf by its duly authorized
representative as of October 1, 1996.
THE TRAVELERS INSURANCE COMPANY
By its authorized officer
By:
-------------------------------
Title:
-------------------------------
Date:
-------------------------------
AMERICAN ODYSSEY FUNDS, INC.
By its authorized officer
By:
-------------------------------
Title:
-----------------------------
Date:
-----------------------------
COPELAND EQUITIES, INC.
By its authorized officer
By:
-----------------------------
Title:
-----------------------------
Date:
-----------------------------
<PAGE> 1
TRANSFER AGENCY AGREEMENT
Agreement, made this 23rd day of February, 1993 between Odyssey Funds,
Inc., a Maryland corporation (the "Series Fund"), and 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 by separate agreement has or will retain the
Manager to render, or contract to obtain, investment advisory and administrative
services to the Series Fund; and
WHEREAS, the Series Fund desires that the Manager serve as the transfer
agent and dividend disbursing agent of the Series Fund, and the Manager is
willing to provide those services;
NOW, THEREFORE, the parties agree as follows:
1. Appointment. The Series Fund hereby appoints the Manager to act as
transfer agent and dividend disbursing agent of the Series Fund on the terms set
forth in this Agreement. The Manager accepts such appointment and agrees to
maintain the shareholder records of the Series Fund in accordance with
procedures established from time to time by agreement between the Series Fund
and the Manager.
2. Service Providers. All services to be furnished by the Manager
under this Agreement may be furnished through the medium of any of the Manager's
directors, officers, or employees. In addition, the Manger may at any time in
its discretion appoint or hire (and may at any time remove) one or more other
parties to perform any and all of the services called for by this Agreement.
3. Records. The Series Fund agrees to provide the Manager with any
documents that the Manager reasonably deems appropriate or necessary to perform
its duties under this Agreement. To the extent required by Section 31 of the
1940 Act and the rules thereunder, the Manager agrees that all records which it
maintains for the Series Fund are the property of the Series Fund and will be
preserved, maintained, and made available in accordance with Section 31 of the
1940 Act and the rules thereunder, and the Manager will surrender promptly to
the Series Fund any such records upon the Series Fund's request (provided
however that the Manager may retain a copy of such records).
1
<PAGE> 2
4. Fees and Expenses. The Series Fund will reimburse the Manager for
any reasonable out-of-pocket expenses incurred in connection with providing the
transfer agency and dividend disbursing services called for by this Agreement,
including the fees and charges of any party or parties hired by the Manager
pursuant to paragraph 2 to perform any and all of the services called for by
this Agreement. The Manager shall provide the Series Fund, not more often than
monthly, with a statement of expenses subject to reimbursement under this
paragraph, and the Series Fund shall promptly pay the Manager. The Series Fund
will not pay, and the Manager will not receive, any fee other than the fee
provided by the Investment Management Agreement between the Series Fund and the
Manager.
5. Indemnification. 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 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.
6. Termination This Agreement shall continue in effect until
terminated. It 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.
7. Affiliations. 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.
8. Status. 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.
9. Notice. 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 Odyssey Funds Management, Inc. at Two Tower Center, East Brunswick, NJ 08816,
Attention: Secretary; or (2) to Odyssey Funds, Inc. at Two Tower Center, East
Brunswick, NJ 08816, Attention: President.
2
<PAGE> 3
10. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New Jersey.
11. Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
12. Counterparts. 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.
ODYSSEY FUNDS, INC.
- ------------------------- -------------------------------
Witness Paul S. Feinberg
Lori M. Renzulli Senior Vice President
Assistant Secretary
ODYSSEY FUNDS' MANAGEMENT, INC.
- ------------------------ -------------------------------
Witness David E. Demarest
Lori M. Renzulli Vice President
Assistant Secretary
3
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
American Odyssey Funds, Inc.:
We consent to the use of our report, dated February 4, 2000, incorporated herein
by reference and to the references to our firm under the captions "Financial
Highlights" in the prospectus and "Other Service Providers" in the statement of
additional information.
KPMG LLP
Boston, Massachusetts
April 24, 2000
<PAGE> 2
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
American Odyssey Funds, Inc.:
We consent to the inclusion in Amendment No. 13 to the Registration Statement of
the American Odyssey Funds, Inc., comprising, respectively, the International
Equity Fund, Emerging Opportunities Fund, Core Equity Fund, Long-Term Bond Fund,
Intermediate-Term Bond Fund, and Global High-Yield Bond Fund, (the "Funds"), on
Form N-1A (File No. 811-7450) under the Investment Company Act of 1940, as
amended, and Post-Effective Amendment No. 12 to the Registration Statement on
Form N-1A (File No. 33-57536) under the Securities Act of 1933, as amended, of
our report dated February 5, 1999, on our audits of the financial statements and
financial highlights of the Funds, which report is incorporated by reference in
the Amendment and Post-Effective Amendment to the Registration Statement.
We also consent to the reference to our Firm in the Prospectus under the
caption, "Financial Highlights" and in the Statement of Additional Information
under the caption, "Other Service Providers".
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 26, 2000
<PAGE> 1
CODE OF ETHICS
AMERICAN ODYSSEY FUNDS, INC.
This Code of Ethics covers access persons of American Odyssey Funds,
Inc. ("AOF") who are not covered by a code of ethics of American Odyssey Funds
Management LLC or a subadviser. It is expected that the only persons covered by
this Code will be AOF's independent directors.
1 Definitions
1.1 "Access Person" means any director or officer of AOF or any
Advisory Person (as defined below).
1.2 "AOF" means American Odyssey Funds, Inc.
1.3 "AOF Compliance Officer" means the person designated by AOF to
receive reports and fulfill the other responsibilities
required by this Code.
1.4 "Advisory Person" means (a) any director or officer of AOF who
is an "interested person" of AOF, as that term is defined in
the Investment Company Act of 1940; and (b) any employee of
AOF who, in connection with his or her regular functions or
duties, makes, participates in, or obtains information
regarding the purchase or sale of a Covered Security by a
Fund, or whose functions relate to the making of any
recommendations with respect to such purchases or sales; and
(d) any natural person in a control relationship to AOF who
obtains information concerning recommendations made to a Fund
with regard to the purchase or sale of a Covered Security by a
Fund.
1.5 "Beneficial ownership" is to be interpreted in the same manner
as it would be under Rule 16a-1(a)(2) under the Securities
Exchange Act of 1934. Any report submitted under this Code may
contain a statement declaring that the report will not be
construed as an admission that the person making the report
has any direct or indirect beneficial ownership in the Covered
Security to which the report relates. A person need not make a
report under this Code with respect to transactions effected
for, and Covered Securities held in, any account over which
the person has no direct or indirect influence or control.
1.6 "Covered Security" means any security (as that term is defined
under the Investment Company Act of 1940) and any financial
instrument related to a security, including options on
securities, future contracts, options on future contracts and
any other derivative; except that "Covered Security" does not
include: direct obligations of the Government of the United
States; bankers' acceptances; bank certificates of deposit;
commercial paper; high-quality short-term debt instruments,
including repurchase agreements; and shares issued
<PAGE> 2
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by registered open-end investment companies.
1.7 "Fund" means a fund of American Odyssey Funds, Inc.
1.8 "Independent Director" means a director of AOF who is not an
interested person of AOF as defined in the Investment Company
Act of 1940.
1.9 "Investment Person" means (a) any employee of AOF (or of any
company in a control relationship to AOF) who, in connection
with his or her regular functions or duties, makes or
participates in making recommendations regarding the purchase
or sale of securities by the Fund; and (b) any natural person
who controls AOF and who obtains information concerning
recommendations made to a Fund regarding the purchase or sale
of securities by the Fund.
1.10 A "personal securities transaction" is a transaction involving
a Covered Security in which the Access Person has or acquires
any direct or indirect beneficial ownership in the Covered
Security.
1.11 "Private Placement" means an offering that is exempt from
registration pursuant to Section 4(2) or Section 4(6) of the
Securities Act of 1933 or pursuant to Rule 504, Rule 505 or
Rule 506 under the Securities Act of 1933.
1.12 A "purchase or sale for his or her own account" is a purchase
or sale in which the person has or acquires any direct or
indirect beneficial ownership in the Covered Security, and
includes, among other things, the writing of an option to
purchase or sell a Covered Security.
2 Statement of General Principles
2.1 All Access Persons owe a fiduciary duty to AOF and its
shareholders. Accordingly, Access Persons shall place the
interests of AOF shareholders first.
2.2 Each Access Person shall handle his or her personal securities
transactions in such a manner as to avoid any actual or
potential conflict of interest or any abuse of his or her
position of trust and responsibility. No Access Person shall
take inappropriate advantage of his or her position.
2.3 All Access Persons shall act in accordance with both the
letter and the spirit of this Code.
2.4 It will be considered a violation of this Code to do
indirectly that which is prohibited directly. For example, it
will be considered a violation of this Code to do indirectly
through options, futures or other derivatives that which is
prohibited directly through transactions in securities
themselves.
<PAGE> 3
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2.5 This Code is to be interpreted consistent with the Securities
and Exchange Commission's rules governing codes of ethics.
3 Initial Public Offerings
3.1 Investment Persons shall not acquire any securities in any
initial public offering (i.e., an offering of securities
registered under the Securities Act of 1933, the issuer of
which, immediately before the registration, was not subject to
the reporting requirements of Sections 13 or 15(d) of the
Securities Exchange Act of 1934).
4 Private Placements
4.1 An Investment Person shall not acquire any securities in a
Private Placement without written prior approval from the AOF
Compliance Officer. This prior approval shall take into
account, among other factors, whether the investment
opportunity should be reserved for the Funds, and whether the
opportunity is being offered to the Investment Person by
virtue of his or her relationship with AOF.
4.2 An Investment Person who has been authorized to acquire
securities in a Private Placement shall disclose that
investment when he or she plays a part in any subsequent
consideration by the Fund of an investment in the issuer. In
such circumstances, the Fund's decision to purchase securities
of the issuer shall be subject to an independent review by
persons with no personal interest in the issuer.
5 Gifts
5.1 An Investment Person shall not receive any gift or other thing
of more than de minimis value from any person or entity that
does business with or on behalf of any Fund.
6 Service as a Director
6.1 An Investment Person shall not serve on the board of directors
of any publicly traded company, without prior written
authorization from the AOF Compliance Officer. The AOF
Compliance Officer shall authorize such board service only if
he or she determines that such board service is consistent
with the interests of AOF and its shareholders.
7 One-Day Blackout Period
7.1 Advisory Persons shall not execute a personal securities
transaction in a security
<PAGE> 4
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on any day during which any Fund has a pending "buy" or "sell"
order on that same security. Advisory Persons may execute a
personal securities transaction in such a security the day
after the Funds have executed or withdrawn that order.
7.2 The following transactions are not subject to the restrictions
of Section 7.1 above:
(a) purchases effected upon exercise of rights (e.g.,
automatic reinvestment of dividends) provided by an
issuer pro rata to all holders of a class of its
securities to the extent such rights were acquired
from such issuer, and sales of such rights so
acquired;
(b) purchases, through a payroll deduction plan, of
securities issued by the Access Person's employer or
an affiliate;
(c) sales to raise cash in an emergency, provided that
prior to the sale the AOF Compliance Officer finds
(1) that the Access Person has a bona fide emergency
need for the proceeds from the proposed sale, and (2)
considering the size and nature of the market for the
security at issue, the size of the Access Person's
proposed trade, and whether the security is being
considered for purchase or sale by the Funds, that
there is no danger that the Funds will be harmed;
(d) purchases and sales of equity securities of companies
listed on the most recent quarterly report
distributed by AOF listing companies with market
capitalizations of $2 billion and more.
8 Preclearance
8.1 No Advisory Person shall execute a personal securities
transaction until that transaction has been approved (i.e.,
precleared) by the AOF Compliance Officer pursuant to
established procedures. The AOF Compliance Officer may
preclear only those transactions that he or she reasonably
believes do not violate this Code.
8.2 The preclearance requirement of paragraph 8.1 shall not apply
to personal securities transactions described in paragraphs
7.2(a), 7.2(b) and 7.2(d).
9 Initial Holdings Report
9.1 Each person who becomes an Access Person (other than
Independent Directors) on or after March 1, 2000 shall submit
to the AOF Compliance Officer not later than 10 days after the
person becomes an Access Person an initial holdings report
containing the following information: (a) the title, number of
shares and principal amount of each Covered Security in which
the Access Person had any direct or
<PAGE> 5
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indirect beneficial ownership when the person became an Access
Person; (b) the name of any broker, dealer or bank with whom
the Access Person maintained an account in which any
securities were held for the direct or indirect benefit of the
Access Person as of the date the person became an Access
Person; and (c) the date that the report is submitted by the
Access Person.
10 Annual Holdings Report
10.1 On or before January 30 of each year, each Access Person
(other than Independent Directors) shall submit an annual
holdings report with the following information (as of December
31 of the previous year): (a) the title, number of shares and
principal amount of each Covered Security in which the Access
Person had any direct or indirect beneficial ownership; (b)
the name of any broker, dealer, or bank with whom the Access
Person maintains an account in which any securities are held
for the direct or indirect benefit of the Access Person; and
(c) the date that the report is submitted by the Access
Person. The first annual holdings report shall be submitted on
or before January 30, 2001 and shall provide information as of
December 31, 2000.
11 Quarterly Reports
11.1 Each Access Person (other than Independent Directors) shall
submit to the AOF Compliance Officer a quarterly report of all
personal securities transactions during the previous calendar
quarter. Each quarterly report shall contain the following
information:
(a) with respect to any transaction during the quarter in a
Covered Security in which the Access Person had any direct or
indirect beneficial ownership: (1) the date of the
transaction, the title, the interest rate and maturity date
(if applicable), the number of shares and the principal amount
of each Covered Security involved; (2) the nature of the
transaction (i.e., purchase, sale or any other type of
acquisition or disposition); (3) the price of the Covered
Security at which the transaction was effected; (4) the name
of the broker, dealer or bank with or through which the
transaction was effected; and (5) the date that the report is
submitted by the Access Person; and
(b) with respect to any account established by the Access
Person in which any securities were held during the quarter
for the direct or indirect benefit of the Access Person: (1)
the name of the broker, dealer or bank with whom the Access
Person established the account; (2) the date the account was
established; and (3) the date that the report is submitted by
the Access Person.
11.2 An Independent Director shall submit to the AOF Compliance
Officer a report
<PAGE> 6
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regarding personal securities transactions where the
Independent Director knew or, in the ordinary course of
fulfilling his or her official duties as an AOF director,
should have known that during the 15-day period immediately
preceding or after the date of the personal securities
transaction, such security is or was purchased or sold by a
Fund or such purchase or sale is or was considered by a Fund
or any of its investment advisers or subadvisers.
12 Records of Securities Transactions
12.1 Each Advisory Person shall direct his or her brokers to supply
the AOF Compliance Officer, on a timely basis, with duplicate
copies of confirmations of all personal securities
transactions and duplicate copies of periodic statements for
all securities accounts.
13 Certification of Compliance
13.1 All Access Persons shall certify annually that they have read
and understand this Code and recognize that they are subject
to it.
13.2 All Access Persons shall certify annually that they have
complied with the requirements of this Code and that they have
disclosed or reported all personal securities transactions
required to be disclosed or reported pursuant to the
requirements of this Code.
14 Post-Trade Monitoring
14.1 The AOF Compliance Officer shall promptly review the submitted
reports for compliance with this Code and for any apparent
trading irregularities. That review shall include comparing
the personal securities transactions with the transactions of
the Funds.
14.2 Should the AOF Compliance Officer detect a potential violation
of this Code or any apparent trading irregularity, he or she
shall take whatever steps he or she deems appropriate under
the circumstances to investigate the potential violation or
trading irregularity. All Access Persons shall cooperate with
any such investigation.
14.3 For any violation of this Code, AOF may impose such sanctions
as it deems appropriate in the circumstances. Sanctions may
include a requirement that the person disgorge any profits on
a trade determined to be in violation of this Code.
<PAGE> 1
CODE OF ETHICS
AMERICAN ODYSSEY FUNDS MANAGEMENT LLC
1 Definitions
1.1 "Access Person" means any director or officer of AOFM or any
Advisory Person (as defined below).
1.2 "AOF" means American Odyssey Funds, Inc.
1.3 "AOFM" means American Odyssey Funds Management LLC
1.4 "AOFM Compliance Officer" means the person designated by AOFM
to receive reports and fulfill the other responsibilities
required by this Code.
1.5 "Advisory Person" means (a) any director or officer of AOF who
is an "interested person" of AOF, as that term is defined in
the Investment Company Act of 1940; and (b) any employee of
AOFM who, in connection with his or her regular functions or
duties, makes, participates in, or obtains information
regarding the purchase or sale of a Covered Security by a
Fund, or whose functions relate to the making of any
recommendations with respect to such purchases or sales; and
(d) any natural person in a control relationship to AOF or
AOFM who obtains information concerning recommendations made
to a Fund with regard to the purchase or sale of a Covered
Security by a Fund.
1.6 "Beneficial ownership" is to be interpreted in the same manner
as it would be under Rule 16a-1(a)(2) under the Securities
Exchange Act of 1934. Any report submitted under this Code may
contain a statement declaring that the report will not be
construed as an admission that the person making the report
has any direct or indirect beneficial ownership in the Covered
Security to which the report relates. A person need not make a
report under this Code with respect to transactions effected
for, and Covered Securities held in, any account over which
the person has no direct or indirect influence or control.
1.7 "Covered Security" means any security (as that term is defined
under the Investment Company Act of 1940) and any financial
instrument related to a security, including options on
securities, future contracts, options on future contracts and
any other derivative; except that "Covered Security" does not
include: direct obligations of the Government of the United
States; bankers' acceptances; bank certificates of deposit;
commercial paper; high-quality short-term debt instruments,
including repurchase agreements; and shares issued by
registered open-end investment companies.
<PAGE> 2
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1.8 "Fund" means a fund of American Odyssey Funds, Inc.
1.9 "Investment Person" means (a) any employee of AOFM (or of any
company in a control relationship to AOF or AOFM) who, in
connection with his or her regular functions or duties, makes
or participates in making recommendations regarding the
purchase or sale of securities by the Fund; and (b) any
natural person who controls AOF or AOFM and who obtains
information concerning recommendations made to a Fund
regarding the purchase or sale of securities by the Fund. It
is not anticipated that AOFM will have any Investment Persons
because each Fund has one or more subadvisers handling the
day-to-day investment management decisions.
1.10 A "personal securities transaction" is a transaction involving
a Covered Security in which the Access Person has or acquires
any direct or indirect beneficial ownership in the Covered
Security.
1.11 "Private Placement" means an offering that is exempt from
registration pursuant to Section 4(2) or Section 4(6) of the
Securities Act of 1933 or pursuant to Rule 504, Rule 505 or
Rule 506 under the Securities Act of 1933.
1.12 A "purchase or sale for his or her own account" is a purchase
or sale in which the person has or acquires any direct or
indirect beneficial ownership in the Covered Security, and
includes, among other things, the writing of an option to
purchase or sell a Covered Security.
2 Statement of General Principles
2.1 All Access Persons owe a fiduciary duty to AOF and its
shareholders. Accordingly, Access Persons shall place the
interests of AOF shareholders first.
2.2 Each Access Person shall handle his or her personal securities
transactions in such a manner as to avoid any actual or
potential conflict of interest or any abuse of his or her
position of trust and responsibility. No Access Person shall
take inappropriate advantage of his or her position.
2.3 All Access Persons shall act in accordance with both the
letter and the spirit of this Code.
2.4 It will be considered a violation of this Code to do
indirectly that which is prohibited directly. For example, it
will be considered a violation of this Code to do indirectly
through options, futures or other derivatives that which is
prohibited directly through transactions in securities
themselves.
2.5 This Code is to be interpreted consistent with the Securities
and Exchange
<PAGE> 3
- 3 -
Commission's rules governing codes of ethics.
3 Initial Public Offerings
3.1 Investment Persons shall not acquire any securities in any
initial public offering (i.e., an offering of securities
registered under the Securities Act of 1933, the issuer of
which, immediately before the registration, was not subject to
the reporting requirements of Sections 13 or 15(d) of the
Securities Exchange Act of 1934).
4 Private Placements
4.1 An Investment Person shall not acquire any securities in a
Private Placement without written prior approval from the AOFM
Compliance Officer. This prior approval shall take into
account, among other factors, whether the investment
opportunity should be reserved for the Funds, and whether the
opportunity is being offered to the Investment Person by
virtue of his or her relationship with AOF.
4.2 An Investment Person who has been authorized to acquire
securities in a Private Placement shall disclose that
investment when he or she plays a part in any subsequent
consideration by the Fund of an investment in the issuer. In
such circumstances, the Fund's decision to purchase securities
of the issuer shall be subject to an independent review by
persons with no personal interest in the issuer.
5 Gifts
5.1 An Investment Person shall not receive any gift or other thing
of more than de minimis value from any person or entity that
does business with or on behalf of any Fund.
6 Service as a Director
6.1 An Investment Person shall not serve on the board of directors
of any publicly traded company, without prior written
authorization from the AOFM Compliance Officer. The AOFM
Compliance Officer shall authorize such board service only if
he or she determines that such board service is consistent
with the interests of AOF and its shareholders.
7 One-Day Blackout Period
7.1 Advisory Persons shall not execute a personal securities
transaction in a security on any day during which any Fund has
a pending "buy" or "sell" order on that
<PAGE> 4
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same security. Advisory Persons may execute a personal
securities transaction in such a security the day after the
Funds have executed or withdrawn that order.
7.2 The following transactions are not subject to the restrictions
of Section 7.1 above:
(a) purchases effected upon exercise of rights (e.g.,
automatic reinvestment of dividends) provided by an
issuer pro rata to all holders of a class of its
securities to the extent such rights were acquired
from such issuer, and sales of such rights so
acquired;
(b) purchases, through a payroll deduction plan, of
securities issued by the Access Person's employer or
an affiliate;
(c) sales to raise cash in an emergency, provided that
prior to the sale the AOFM Compliance Officer finds
(1) that the Access Person has a bona fide emergency
need for the proceeds from the proposed sale, and (2)
considering the size and nature of the market for the
security at issue, the size of the Access Person's
proposed trade, and whether the security is being
considered for purchase or sale by the Funds, that
there is no danger that the Funds will be harmed;
(d) purchases and sales of equity securities of companies
listed on the most recent quarterly report
distributed by AOFM listing companies with market
capitalizations of $2 billion and more.
8 Preclearance
8.1 No Advisory Person shall execute a personal securities
transaction until that transaction has been approved (i.e.,
precleared) by the AOFM Compliance Officer pursuant to
established procedures. The AOFM Compliance Officer may
preclear only those transactions that he or she reasonably
believes do not violate this Code.
8.2 The preclearance requirement of paragraph 8.1 shall not apply
to personal securities transactions described in paragraphs
7.2(a), 7.2(b) and 7.2(d).
9 Initial Holdings Report
9.1 Each person who becomes an Access Person on or after March 1,
2000 shall submit to the AOFM Compliance Officer not later
than 10 days after the person becomes an Access Person an
initial holdings report containing the following information:
(a) the title, number of shares and principal amount of each
Covered Security in which the Access Person had any direct or
indirect beneficial ownership when the person became an Access
Person; (b) the name of any broker,
<PAGE> 5
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dealer or bank with whom the Access Person maintained an
account in which any securities were held for the direct or
indirect benefit of the Access Person as of the date the
person became an Access Person; and (c) the date that the
report is submitted by the Access Person.
9.2 Access Persons shall use the form attached hereto or a form
agreed to by the AOFM Compliance Officer.
10 Annual Holdings Report
10.1 On or before January 30 of each year, each Access Person shall
submit an annual holdings report with the following
information (as of December 31 of the previous year): (a) the
title, number of shares and principal amount of each Covered
Security in which the Access Person had any direct or indirect
beneficial ownership; (b) the name of any broker, dealer, or
bank with whom the Access Person maintains an account in which
any securities are held for the direct or indirect benefit of
the Access Person; and (c) the date that the report is
submitted by the Access Person. The first annual holdings
report shall be submitted on or before January 30, 2001 and
shall provide information as of December 31, 2000.
10.2 Access Persons shall use the form attached hereto or a form
agreed to by the AOFM Compliance Officer.
11 Quarterly Reports
11.1 Each Access Person shall submit to the AOFM Compliance Officer
a quarterly report of all personal securities transactions
during the previous calendar quarter. Each quarterly report
shall contain the following information:
(a) with respect to any transaction during the quarter in a
Covered Security in which the Access Person had any direct or
indirect beneficial ownership: (1) the date of the
transaction, the title, the interest rate and maturity date
(if applicable), the number of shares and the principal amount
of each Covered Security involved; (2) the nature of the
transaction (i.e., purchase, sale or any other type of
acquisition or disposition); (3) the price of the Covered
Security at which the transaction was effected; (4) the name
of the broker, dealer or bank with or through which the
transaction was effected; and (5) the date that the report is
submitted by the Access Person; and
(b) with respect to any account established by the Access
Person in which any securities were held during the quarter
for the direct or indirect benefit of the Access Person: (1)
the name of the broker, dealer or bank with whom the Access
<PAGE> 6
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Person established the account; (2) the date the account was
established; and (3) the date that the report is submitted by
the Access Person.
11.2 Access Persons shall use the form attached hereto or a form
agreed to by the AOFM Compliance Officer. The quarterly
reports shall be submitted no later than 10 days after the end
of the calendar quarter.
12 Records of Securities Transactions
12.1 Each Advisory Person shall direct his or her brokers to supply
the AOFM Compliance Officer, on a timely basis, with duplicate
copies of confirmations of all personal securities
transactions and duplicate copies of periodic statements for
all securities accounts.
13 Certification of Compliance
13.1 All Access Persons shall certify annually that they have read
and understand this Code and recognize that they are subject
to it.
13.2 All Access Persons shall certify annually that they have
complied with the requirements of this Code and that they have
disclosed or reported all personal securities transactions
required to be disclosed or reported pursuant to the
requirements of this Code.
14 Post-Trade Monitoring
14.1 The AOFM Compliance Officer shall promptly review the
submitted reports for compliance with this Code and for any
apparent trading irregularities. That review shall include
comparing the personal securities transactions with the
transactions of the Funds.
14.2 Should the AOFM Compliance Officer detect a potential
violation of this Code or any apparent trading irregularity,
he or she shall take whatever steps he or she deems
appropriate under the circumstances to investigate the
potential violation or trading irregularity. All Access
Persons shall cooperate with any such investigation.
14.3 For any violation of this Code, AOFM may impose such sanctions
as it deems appropriate in the circumstances. In addition,
sanctions may be imposed by the AOF Board. Sanctions may
include a requirement that the person disgorge any profits on
a trade determined to be in violation of this Code.
Adopted: ___________________, 2000
<PAGE> 1
BANK OF IRELAND ASSET MANAGEMENT (U.S.) LIMITED
CODE OF ETHICS
1. INTRODUCTION
Bank of Ireland Asset Management (U.S) Limited (BIAM (U.S.)) has adopted
a Code of Ethics, designed to reduce the risk of actual or potential
conflicts of interest with dealings on behalf of clients. The code
applies to all employees, officers and directors of BIAM (U.S.)
(including 'dual employees' as defined in the ADV). More stringent rules
are applied to persons who are deemed to be 'Access Persons'.
2. WHO ARE ACCESS PEOPLE
For the purpose of this code, an Access Person is;
- An officer or director of BIAM (U.S.); or
- Any BIAM (U.S.) employee who makes or participates in decisions
regarding the recommendation to purchase or sell securities on
behalf of clients, or who has access to such information;or
- Any BIAM (U.S.) employee who executes client trades.
All Access People will be notified by the Compliance Unit if they have
been classified as an Access Person.
3. WHAT TYPES OF SECURITIES TRANSACTIONS ARE COVERED BY THE CODE
The Code of Ethics applies to personal dealing in all securities. Certain
securities transactions are exempt from the pre-approval and / or the
reporting requirements.
4. EXAMPLES OF THE PERSONAL SECURITIES TRANSACTIONS THAT REQUIRE
PRE-APPROVAL
The following are examples of the types of securities that require
pre-approval (covered securities). If any employee is in doubt whether or
not a particular type of trade requires approval, they should consult the
Compliance Unit.
- Equities, futures contracts, options, warrants,
- Participation in any IPO's (generally not granted)
<PAGE> 2
- Any private placements, any investment in a private company
(generally not granted)
- Participation in investment clubs
- Spread betting on any of the above securities
5. WHAT TYPES OF SECURITIES DEALING DO NOT REQUIRE PRE-APPROVAL
Pre-approval is not required for personal dealing in the following
securities;
- Investment in mutual funds, unit trusts or similar collective
investment schemes
- Money market instruments or fixed interest securities
- Direct investment in property
However, for access persons, there are reporting requirements for trading
in some of these investment instruments (see section on requirements for
access persons below).
6. RULES FOR ALL EMPLOYEES (INCLUDING ACCESS PERSONS)
1. ALL personal securities transactions (except those listed in point
5 above) must be pre-approved by the Compliance Unit.
2. All transactions must be conducted through the BIAM dealing room, unless
permission is granted by the Compliance Unit to deal through a particular
broker. Such approval is normally only granted if dealing through a local
broker is more efficient, or if the deal requested is of a small size
(ie: less than $1,500 or equivalent)
3. Approval to deal through an outside broker will have an expiration time
which is generally 24 hours
4. A copy of all contract notes must be submitted to the Compliance Unit
directly from the executing broker.
5. Approval is generally not granted for investment in any IPO or Private
Placement.
6. All trades in Irish securities require approval by IBI Corporate
Finance.
7. A blackout period applies to personal securities transactions
(subject to a de-minimus size of $5,000 or equivalent). Permission will
generally be refused if we have executed, or intend to execute a trade in
the same security, on the same day for clients.
8. Employees and Access Persons may not benefit from short term trading in
securities. Short term trading is defined as buying and selling (or vice
versa) the same security within a 60 day period. Bed & Breakfast (B&B)
transactions to realise a profit are exempt from this rule, but all B&B
transactions must be pre-approved.
<PAGE> 3
9. If an employee or Access Person receives free shares they must notify the
Compliance Unit of the details eg: gift from relative, or shares received
through a flotation of a public company.
10. Transfers of shares out of an employees / access persons name must be
pre-approved eg: transferring to partner or spouse, or giving shares as a
gift.
11. The above procedures also apply to dealing in Bank of Ireland
Stock/Bristol & West securities, except in a 'close period.' A 'close
period' is defined as the period from:
- 31 March until the preliminary announcement of the annual results
(mid-May)
- 30 September until the announcement of the interim results
(mid-November)
During these 'close periods' trading in these stocks is prohibited.
All the above rules also apply to personal securities trading of any
third party (eg: spouse, children, relative, friend etc.) where a BIAM
employee:
- is involved in the decision to trade; or
- is funding the transaction.
7. ADDITIONAL RULES FOR ACCESS PERSONS:
In addition to the above rules, the following rules also apply to Access
Persons;
- Access Persons will be required to provide a statement of all
securities holdings within 10 days of commencement of employment,
including holdings in private companies, unit trusts (or any
similar collective investment scheme), fixed income securities and
money market instruments. Access Persons will also be required to
submit an annual holdings report in all securities, within 10 days
of request from the Compliance Unit. Access Persons must also
ensure a copy contract note is promptly forwarded to the
Compliance Unit for dealing in all securities, including those
which do not require pre-approval (eg: mutual funds & fixed income
securities)
The only securities exempt from these reporting requirements are;
- U.S. registered open ended investment funds (funds must be
registered as investment companies under the U.S. Investment
Companies Act 1940)
- Direct obligations of the U.S. Government (eg: U.S. Treasury
Bills) - U.S. bank certificates of deposit, U.S. commercial paper
and U.S. short term debt instruments
<PAGE> 4
(less than 365 days).
- The blackout period is extended from the same day as a client
trade, to 7 days before or after a client trade.
- No de-minimus applies to the black-out period.
- Access Persons will be required to ensure that the Compliance Unit
receive a copy contract note, direct from the executing broker,
for any securities transaction executed by their spouse, partner,
or minor children, living in the same household. This is required
even if the Access Person has no involvement in the investment
decision, and prior approval was not required.
ANY BREACHES OF THESE RULES WILL BE VIEWED AS VERY SERIOUS AND MAY RESULT IN
DISCIPLINARY ACTION UP TO AND INCLUDING DISMISSAL. ALL EMPLOYEES ARE RESPONSIBLE
FOR ENSURE THEY COMPLY WITH THESE RULES. IF IN DOUBT, OR HAVE ANY QUESTIONS ON
THE ABOVE, PLEASE CONTACT THE COMPLIANCE UNIT.
<PAGE> 1
CODE OF ETHICS FOR EMPLOYEES OF
CHARTWELL INVESTMENT PARTNERS, L.P.
The following Code of Ethics shall apply to all employees of Chartwell
Investment Partners, L.P. This Code of Ethics is based on the principle that all
Chartwell employees owe a fiduciary duty to the firm's clients to conduct their
affairs, including their personal securities transactions, in such a manner as
to avoid: (i) serving their own personal interests ahead of clients; (ii) taking
advantage of their position; and (iii) any actual or potential conflicts of
interest.
The effective date of the Code of Ethics is June 24, 1997. Please direct
any questions to the Board of Directors of Chartwell.
I. CODE OF CONDUCT GOVERNING PERSONAL SECURITIES TRANSACTIONS
The personal investing activities of all Chartwell personnel must be
conducted in a manner to avoid actual or potential conflicts of interest with
Chartwell's clients. No employee of Chartwell may use his or her position with
Chartwell or any investment opportunities they learn of because of his or her
position with Chartwell, to the detriment of Chartwell's clients.
A. Who Is Governed By These Requirements?
All officers, directors and employees of Chartwell and members of their
immediate family who reside in their household are subject to Chartwell's
policies and procedures governing personal securities transactions.
B. What Accounts and Transactions Are Covered?
Subject to the last sentence of this paragraph, the policies and
procedures cover (1) all personal securities accounts and transactions of each
Chartwell officer, director or employee, and (2) all securities and accounts in
which a Chartwell officer, director or employee has a "beneficial ownership".
For purposes of these requirements, "beneficial ownership" has the same meaning
as in Securities Exchange Act Rule 16a-1(a)(2). Generally, a person has
beneficial ownership of a security if he or she, directly or indirectly, through
any contract, arrangement, understanding, relationship or otherwise, has or
shares direct or indirect interest in the security. A transaction by or for the
account of a spouse or other immediate family member living in the same home
with an employee of Chartwell is considered the same as a transaction by the
employee. These policies and procedures do not cover any securities accounts
and/or transactions relating to any pooled investment product (including without
limitation, private investment partnerships): (i) managed by Chartwell or an
affiliate of Chartwell; and (ii) in which there is significant beneficial
ownership by persons other than (a) officers, directors or employees of
Chartwell and (b) spouses or other immediate family members living in the same
home with such an employee or director.
<PAGE> 2
C. What Securities Are Covered By These Requirements?
All securities (and derivative forms thereof including options and
futures contracts) are covered by these requirements except (1) securities which
are direct obligations of the United States, such as Treasury bills, notes and
bonds and derivatives thereof, and (2) shares of open-end mutual funds. Please
note that shares of closed-end funds and unit investment trusts are covered.
D. What Transactions Are Prohibited By These Requirements?
The following prohibitions apply to all Chartwell employees:
1. Chartwell employees are not permitted to front-run any securities
transaction of a client, or to scalp by making recommendations for
clients with the intent of personally profiting from personal
holdings of transactions in the same or related securities.
2. Chartwell employees may not purchase or sell directly or
indirectly, any security within seven calendar days before or
after the time that the same security is being purchase or sold
for a Chartwell client. Any profits or trades within the
proscribed period will be disgorged.
3. Chartwell employees who purchase a security within seven calendar
days before a Chartwell client trades such security, shall be
prohibited from selling that security for a period of six months
from the date of the trade. Any profits realized from a sale of
such security within the proscribed six month period, shall be
disgorged.
4. Chartwell employees who sell a security within seven calendar days
before a Chartwell client sells such security, shall disgorge any
profits realized on such transaction equal to the difference
between the Chartwell employee's sale price and the Chartwell
client's sale price.
5. Chartwell employees may not profit from the purchase and sale or
sale and purchase of the same security within a 60 day period.
Profits due to any such short-term trades will be disgorged.
Exceptions to this policy are permitted only with the written
approval of Chartwell's Compliance Officer, and then only in the
case of an emergency or extraordinary circumstances.
6. No Chartwell employee may sell short any security held in a client's
account managed by Chartwell.
7. Chartwell employees may not purchase any securities in a private
placement, without the prior written approval of Chartwell's
Compliance Officer.
<PAGE> 3
8. Chartwell employees may not serve on the board of directors of any
publicly traded company without the prior written approval of the
Compliance Officer.
9. Chartwell employees may not buy or sell any security if he or she
has material, non-public information about the security or the
market for the security, obtained in the course of his or her
employment with Chartwell or otherwise.
10. Chartwell employees are not permitted to acquire any securities in
an initial public offering.
11. Chartwell employees are not permitted to accept anything of value,
either directly or indirectly, from broker-dealers or other
persons providing services to the firm because of that person's
association with the firm.
For the purpose of this provision, the following gifts from
broker-dealers or other persons providing services to the firm
will not be considered to be in violation of this section:
(i) an occasional meal;
(ii) an occasional ticket to a sporting event, the theater, or
comparable entertainment;
(iii) a holiday gift of fruit or other goods, provided however,
that such gift is made available to all Chartwell employees.
E. Pre-Clearance of Personal Transactions
A. Chartwell employees must pre-clear personal securities
transactions with the trading department. Pre-clearance of
a securities transaction is valid for 48 hours.
1. Pre-clearance forms, included as Attachment 1, must be
signed by the employee and a Chartwell trader. Forms must
then be given to the Compliance Officer.
B. Pre-clearance is not necessary for the following
transactions:
(1) Purchases or sales over which the employee has no
direct or indirect influence or control.
(2) Purchases that are part of an automatic dividend
reinvestment plan.
<PAGE> 4
II. REPORTS OF SECURITIES HOLDINGS AND IDENTIFICATION OF SECURITIES ACCOUNTS.
1. Every partner, portfolio manager, trader and analyst of Chartwell
(hereinafter referred to as an "Advisory Person") shall disclose
to the Compliance Officer all personal securities holdings upon
commencement of employment and thereafter on an annual basis as of
December 31st. This annual report shall include a listing of owned
securities and either the market value or the number of shares
owned for each security.
2. Every Advisory Person shall direct their brokers to supply to the
Compliance Officer, on a timely basis, duplicate copies of the
confirmation of all personal securities transactions.
3. Every Chartwell employee shall certify annually that:
(i) they have read and understand the Code of Ethics; and that
they are subject thereto;
(ii) they have complied with the requirements of the Code of
Ethics; and
(iii) they have reported all personal securities transactions
required to be reported by the Code of Ethics.
4. Every Chartwell employee is required to file reports to the
Compliance Officer no later than 10 days after the end of each
calendar quarter, describing each personal securities transaction
effected during the quarter. The report must be signed and dated
by the reporting person and include a complete response to each
item of information sought on the Personal Securities Transaction
Report (Form C) found at Attachment 2.
If an employee has not transactions to report in a calendar quarter,
he or she must check the "no transactions to report" box on the
Report Form, sign and date the Report and return it to the
Compliance Officer by the reporting deadline.
The Compliance Officer shall be responsible for distributing
Personal Securities Transaction Report forms to each Chartwell
employee at the end of each calendar quarter and for ensuring that
all officers, directors and employees have filed the required
reports on a timely basis. Late filings are not acceptable and can
lead to disciplinary action against an officer or director,
including possible termination. REPORTING OF ALL PERSONAL SECURITIES
TRANSACTIONS IS REQUIRED BY SEC RULE, AND VIOLATION OF THIS RULE
CANNOT AND WILL NOT BE TOLERATED BY CHARTWELL.
<PAGE> 5
III. PROTECTION OF CONFIDENTIAL INFORMATION CONCERNING CLIENT RECOMMENDATIONS :
OR ADVICE
The Firm has adopted the following policies and procedures to limit
access to information relating to decisions as to what advice or recommendations
should be given to clients ("Advisory Information") to those of the Firm's
officers, directors and employees who have a legitimate need to know that
information:
A. Designation of Advisory Persons. The President shall designate as
"Advisory Persons" those of the Firm's employees who make or
participate in decisions as to what advice or recommendations
should be given to clients whose duties or functions relate to the
making of such recommendations or who otherwise have a legitimate
need to know information concerning such matters.
B. Obligations of Advisory Persons. In the handling of Advisory
Information, Advisory Persons shall take appropriate measures to
protect the confidentiality of such information. Specifically,
Advisory Persons shall refrain from:
- Disclosing Advisory Information to anyone other than another
Advisory Person, inside or outside of the Firm (including
any employee of an affiliate); except on a strict
need-to-know basis and under circumstances that make it
reasonable to believe that the information will not be
misused or improperly disclosed by the recipient; and
- Engaging in transactions--or recommending or suggesting that
any person (other than a Firm client) engage in transactions
-in any security to which the Advisory Information relates.
C. General Policy Concerning Non-Advisory Persons. As a general
matter, no employee of the Firm (other than those employees who
are designated as Advisory Persons) or any employee of an
affiliate of the Firm should seek or obtain access to Advisory
Information. In the event that an employee of the Firm (other than
an employee who is designated as an Advisory Person) should come
into possession of Advisory Information, he or she should refrain
from either disclosing the information to others or engaging in
transactions (or recommending or suggesting that any person engage
in transactions) in the securities to which such information
relates.
<PAGE> 6
VI. MONITORING COMPLIANCE WITH INSIDER TRADING AND TIPPING POLICIES
AND PROCEDURES.
The Compliance Officer or employee designated to assist the Compliance
Officer shall review duplicate confirmations and periodic account statements for
officer and director accounts. This review is designed to (i) ensure the
propriety of the officer or director's trading activity; (ii) avoid possible
conflict situations; and (iii) identify transactions that may violate the
prohibitions regarding insider trading and manipulative and deceptive devices
contained in the federal and state securities laws and SEC rules.
The compliance Officer shall report immediately to the Board of Directors
of Chartwell, G.P., the Firm's corporate general partner, any findings of
possible irregularity or impropriety.
<PAGE> 7
ATTACHMENT 1
PERSONAL SECURITIES TRANSACTION
PRE-CLEARANCE FORM
I certify that the securities listed on this form have not been traded by
Chartwell Investment Partners for at least (7) calendar days.
<TABLE>
<CAPTION>
Security Buy/Sell Shares Executing Broker
---------- ---------- ------- -----------------
<S> <C> <C> <C>
1. ---------- ---------- ------- -----------------
2. ---------- ---------- ------- -----------------
3. ---------- ---------- ------- -----------------
4. ---------- ---------- ------- -----------------
5. ---------- ---------- ------- -----------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
- --------------------------- ---------------------------
Chartwell Employee/Date Trading Dept./Date
</TABLE>
Note: This form is valid for 48 hours.
<PAGE> 8
ATTACHMENT 2
------------
FORM C: PERSONAL SECURITIES TRANSACTIONS REPORT COMPLIANCE REVIEW:
BY:
---------------
DATE:
--------------
This report of personal securities transactions is required by Investment
Advisers Act Rule 204-2(a) and must be completed and submitted to the Compliance
Officer no later than 10 days after the end of each calendar quarter. Refer to
the Compliance Manual for further instructions.
<TABLE>
<CAPTION>
BUY,
TRADE SELL OR SECURITY NAME, DESCRIPTION AND TYPE PRINCIPAL
DATE OTHER (COMMON STOCK, BOND,OPTION, ETC.) QUANTITY PRICE AMOUNT
<S> <C> <C> <C> <C> <C>
- ---- ----------- ------------------------------------------------ -------------- ------------- --------------------
- ---- ----------- ------------------------------------------------ -------------- ------------- --------------------
- ---- ----------- ------------------------------------------------ -------------- ------------- --------------------
- ---- ----------- ------------------------------------------------ -------------- ------------- --------------------
- ---- ----------- ------------------------------------------------ -------------- ------------- --------------------
- ---- ----------- ------------------------------------------------ -------------- ------------- --------------------
- ---- ----------- ------------------------------------------------ -------------- ------------- --------------------
- ---- ----------- ------------------------------------------------ -------------- ------------- --------------------
- ---- ----------- ------------------------------------------------ -------------- ------------- --------------------
</TABLE>
<TABLE>
<CAPTION>
PRE-CLEARED BY
COMPLIANCE OFFICER
BROKER-DEALER OR BANK (DATE OR N/A)
<S> <C>
----------------------------- -------------------------
----------------------------- -------------------------
----------------------------- -------------------------
----------------------------- -------------------------
----------------------------- -------------------------
----------------------------- -------------------------
----------------------------- -------------------------
----------------------------- -------------------------
----------------------------- -------------------------
</TABLE>
[ ] I HAD NO PERSONAL SECURITIES TRANSACTIONS DURING THE PRECEDING
CALENDAR QUARTER THAT WERE REQUIRED TO BE REPORTED ON SCHEDULE C.
THE REPORT OR RECORDING OF ANY TRANSACTION ABOVE SHALL NOT BE CONSTRUED AS AN
ADMISSION THAT I HAVE ANY DIRECT OR INDIRECT OWNERSHIP IN THE SECURITIES.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- --------------------------- ----------------------------- --------------- ---------------------
(Printed Name) (Signature) (Date) (Quarter Ended)
</TABLE>
RETURN TO: COMPLIANCE OFFICER, CHARTWELL INVESTMENT PARTNERS, L.P.
1235 Westlakes Drive, Suite 330, Berwyn, Pennsylvania, PA 19312-2412
<PAGE> 1
SG COWEN ASSET MANAGEMENT, INC.
CODE OF ETHICS
The following standards and procedures shall govern the personal investing
activities of SG Cowen Asset Management, Inc. personnel ("SGCAM"):
This Code of Ethics is based on the following principles: (1) the duty at all
times to place the interest of investment advisory clients or investment company
shareholders first; (2) that all personal securities transactions be conducted
consistent with the Code and in such a manner as to avoid any actual or
potential conflict of interest or any abuse of an individual's position of trust
and responsibility; and (3) that personnel should not take inappropriate
advantage of their positions.
I. ACCESS PERSONS
Access persons includes all SGCAM personnel. A list of access persons
as of March 1, 2000 is attached. In addition to applying to an employee's
personal account, this Code of Ethics will apply to the following accounts with
respect to an employee: (i) accounts of an employee's spouse (including IRA and
Keogh accounts), (ii) accounts of an employee's children and children's spouses
provided that such persons live in the employee's home or are financially
dependent upon the employee, (iii) accounts of any other relative who lives in
the employees home or over whose account the employee has control, (iv) accounts
of a trust of which the employee is a trustee or the beneficiary or as to which
the employee otherwise could be expected to control or influence and (v)
accounts of a partnership or corporation whose accounts the employee could be
expected to control.
II. POLICIES AND RESTRICTIONS
A. Initial Public Offerings - Access persons are prohibited from
acquiring any securities in an initial public offering, in order to preclude any
possibility of their profiting improperly from their positions on behalf of any
investment advisory account.
B. Private Placements - Prior approval of any acquisitions
of securities by access persons in a private placement is required. This prior
approval will take into account, among other factors, whether the investment
opportunity should be reserved for an investment advisory account and whether
the opportunity is being offered to an individual by virtue of his or her
position with the investment advisor; (2) access persons who have been
authorized to acquire securities in a private placement must disclose that
investment when they play a part in any subsequent consideration of any
investment in the issuer; (3) in such circumstances, the investment advisory
account's decisions to purchase securities of the issuer will be subject to an
independent review by investment personnel with no personal interest in the
issuer.
<PAGE> 2
C. Blackout Periods - an access person is prohibited from
executing a personal securities transaction on a day during which any investment
advisory account has a pending "buy" or "sell" order in that same security until
that order is executed or withdrawn. Any profits realized on trades within the
prescribed period must be disgorged.
D. Gifts - access persons are prohibited from receiving any gift
or other thing of more than de minimis value from any person or entity that does
business with or on behalf of investment advisory accounts.
E Service as a Director - prior authorization is required for access
persons to serve on the boards of directors of publicly traded companies.
III. COMPLIANCE PROCEDURES
A. Pre-Clearance - All personnel securities transactions by
access persons must be effected through a SG Cowen Securities Corporation ("SG
Cowen") registered representative, the SG Cowen employee trading desk or the
Qualified Brokers listed in the attachments. Access persons are responsible for
obtaining pre-clearance authorization of each transaction. Pre-clearance is not
required for transactions in mutual funds, government securities, money market
instruments and index options.
William Romer will review and approve all transactions prior to their
execution. In his absence, pre-clearance authorization can be given by either
William Church, Philip Bafundo or Rodd Baxter. These people cannot pre-clear
their own transactions.
B. Records of Pre-Clearance and Securities Transactions -
Pre-clearance authorizations and duplicate copies of confirmations of all
personal securities transactions and copies of periodic statements for all
securities accounts should be sent to SG Cowen's Legal Department at 1221 Avenue
of the Americas, 8th Floor, New York, NY 10020, Attention of Cathy
Smith-Iadicicco.
C. Post-Trade Monitoring - SG Cowen's legal department will monitor all
personal investment activity by reviewing confirmations and statements.
D. Disclosure of Personal Holdings - All access persons employed after
March 1, 2000 must disclose to SG Cowen's legal department all personal holdings
upon commencement of their employment. All current access persons must submit
their personal holdings by January 1, 2001. Thereafter all access persons must
submit their personal holdings on an annual basis.
E. Certification of Compliance - All access persons shall certify
annually to SG Cowen's Legal Department that they have read and understand the
Code of Ethics and recognize that they are subject thereto.
<PAGE> 3
SG COWEN ASSET MANAGEMENT, INC.
CODE OF ETHICS
CERTIFICATION FORM
I, _________________________________(print name), hereby certify that I have
read and understand the SG Cowen Asset Management, Inc. Code of Ethics and
understand that I am subject to its terms and conditions.
----------------------------
Signature
Date:
-----------------
<PAGE> 4
SG COWEN ASSET MANAGEMENT
PERSONAL SECURITIES TRANSACTION AUTHORIZATION FORM
EMPLOYEE NAME:
--------------------------------------------
SECURITY:
--------------------------------------------
CIRCLE ONE: PURCHASE OR SALE
AUTHORIZED BY:
--------------------------------------------
DATE:
--------------------------------------------
<PAGE> 1
EQUINOX CAPITAL MANAGEMENT
CODE OF ETHICS
All employees, Directors and Officers will be required to follow the regulations
stated below as they pertain to employee and employee-related trading. This type
of trading should include ACTIVITY FOR YOURSELF, AS WELL AS FOR YOUR SPOUSE,
MINOR CHILDREN, OR ANY PERSON WHO LIVES WITH YOU, AS WELL AS ANY OTHER ACCOUNT
WHICH YOU HAVE ANY DIRECT OR INDIRECT BENEFICIAL OWNERSHIP:
- All employees will be restricted from trading in any security
traded for ECM clients for the time frame detailed below.
Specifically, once a stock is recommended for purchase or sale, it
will be restricted for trade by ECM employees. It will be
restricted until the buy/sell program has been completed for all
ECM clients. A SEVEN-DAY black-out period between the completion
of the trading program for ECM clients and the beginning of the
employee program will be in effect. The same practice applies to a
stock that is being reweighted in client portfolios, whether it is
from a cash addition or withdrawal. If an employee has executed an
order within the 7-day black-out period, in front of or behind the
trade, prior to their knowledge of a client cash
addition/withdrawal, the employee execution will stand as long as
the client receives the better execution price. If the employee
has received a better price, he will need to disgorge the
difference to a charity. In short, with limited exceptions,
employees may not trade in client names within seven days front
and back of client activity in that name.
- All employee trading must be approved PRIOR to execution. Trades
should be written up on a pre-printed trade ticket, then signed
off by Wendy Lee. If Wendy is not available, Ron Ulrich should
sign the ticket. If Ron or Wendy are not available, then Laurie
Vicari should sign the ticket. The ticket will then be
time-stamped and returned to you. You will not be able to execute
your trade until you have received a time-stamped trade ticket
signifying approval. The signed and time-stamped trade ticket
completed with execution price should be given back to Laurie
Vicari for inclusion in employee trading files. If trades have
been entered at a limit and are not executed on the day you
received approval, the above procedure will need to be repeated
the following day. If the procedure is not repeated and the trade
has not been approved, you should cancel the standing order. WHEN
SEEKING APPROVAL FOR A SELL ORDER, THE CORRESPONDING BUY
DOCUMENTATION MUST BE HANDED IN AT THE SAME TIME FOR INCLUSION
WITH THE ORDER MEMORANDA. When trading while on the road, you will
need to fax or email the individuals above, in the order above,
with the details of your trade PRIOR TO EXECUTION. If doing a
sell, you will need to fax the corresponding buy info in order to
receive approval. YOU MAY NOT EXECUTE THE TRADE UNTIL YOU HAVE
HEARD BACK VIA EMAIL OR FAX FROM THE DESIGNATED PARTIES THAT YOUR
TRADE HAS BEEN APPROVED. You should then fax or email Laurie
Vicari with the execution price that day. You will be responsible
for writing up a formal trade ticket upon your arrival back to the
office to which the fax or email will be attached to. You will not
receive approval for new trades if "on the road" trade tickets
have not been completed. Please note that again, if entering a
limit order, the same rules as above apply with regard to
re-entering trade information if the trade is not executed the
same day.
<PAGE> 2
ERROR! STYLE NOT DEFINED. 04/28/00 PAGE 2
- ECM Compliance must receive copies of all security transaction
confirmations and monthly brokerage statements for all employee
and EMPLOYEE-RELATED accounts on a timely basis. These documents
will then be reviewed and approved by Ron Ulrich. Mutual fund
activity need not be disclosed, but ANY self-directed trading
activity in any other type of investment MUST be disclosed,
including bond activity for both employee and related accounts.
Annual brokerage statements must be received for accounts that
have not had any activity during the year and therefore would not
generate interim statements. Within 10 days of employment
inception, each person shall provide the Compliance Department
with a list of security holdings as of the most recent month end
for the accounts that they are required to report.
- Employees and related accounts are prohibited from profiting in
the purchase and sale, or sale and purchase, of the same
securities, options or any other product within 60 calendar days.
Any profits realized on such short-term trades will be subject to
disgorgement.
- Employees and related accounts are prohibited from participating
in private placement deals and IPO's.
- Employees are restricted from serving on the Board of Directors of
any company that is publicly traded.
- Employees are prohibited from accepting gifts having a monetary
value over $25, but are allowed to accept gifts such as tickets to
sporting events and theater events on an occasional basis, and may
accept food gifts as long as they are shared with staff.
Please note that in addition to filling out quarterly 17-j-1 Forms, you
will also be required to sign a yearly attestion letter affirming your knowledge
and compliance with the Company's Code of Ethics.
The above regulations will be strictly enforced, and failure to follow
the Code will result in disciplinary action.
<PAGE> 1
CODE OF ETHICS
ARROYO SECO, INC.
PACIFIC AMERICAN INCOME SHARES
WESTERN ASSET MANAGEMENT COMPANY
LM INSTITUTIONAL FUND ADVISORS I
A. STATEMENT OF GENERAL PRINCIPLES
1. All Access Persons that are affiliated with Western Asset are fiduciaries
to the Accounts and Funds managed by the Companies. All Access Persons
are also fiduciaries to Fund shareholders. Accordingly, Access Persons
shall place the interests of the Accounts and Funds first.
2. Access Persons must scrupulously avoid serving their personal interests
ahead of the interests of the Accounts and Funds. Each Access Person
shall handle his or her activities and personal securities transactions
in such a manner as to avoid any actual or potential conflict of interest
or any abuse of his or her position of trust and responsibility. No
Access Person shall take inappropriate advantage of his or her position.
3. All Access Persons shall act in accordance with both the letter and the
spirit of this Code. Technical compliance with the Code's procedures will
not automatically insulate from scrutiny activity that may indicate an
abuse of fiduciary duties.
4. It will be considered a violation of this Code to do indirectly that
which is prohibited directly. For example, it will be considered a
violation of this Code to do indirectly through options, futures or other
derivatives that which is prohibited directly through transactions in
securities themselves.
5. This Code is to be interpreted consistent with the Securities and
Exchange Commission's rules governing codes of ethics.
6. Directors of the Funds (who are not employees of Western Asset) will be
subject to the Reporting requirements outlined in Section D.5., but will
not be subject to the Pre-Clearance requirements of Section B or the
Prohibited Transaction requirements of Section C.
Page 1
<PAGE> 2
B. PRE-CLEARANCE
1. Except for the transactions set forth in Section D below, any Securities
Transaction which an Access Person has a direct or indirect Beneficial
Interest must be pre-cleared with a Pre-Clearance Officer.
2. Pre-Clearance Procedures - Prior to entering an order for a Securities
Transaction that requires pre-clearance, the Access Person must complete,
in writing, a Trade Authorization Request form and submit the completed
form to a Pre-Clearance Officer. Proposed Securities Transactions of a
Pre-Clearance Officer that require pre-clearance must be submitted to
another Pre-Clearance Officer. In the event an Access Person is unable to
complete a Trade Authorization Request form, the Access Person requesting
Pre-Clearance may designate someone else to complete the Form on his or
her behalf in order to obtain proper authorization.
3. Length of Trade Authorization Approval - The authorization provided by
the Pre-Clearance Officer is effective until the earlier of (1) its
revocation, (2) the close of business on the trading day after the
authorization is granted, or (3) the Access Person learns that the
information in the Trade Authorization Request Form is not accurate. If
the order for the Securities Transaction is not placed within that
period, a new authorization must be obtained before the Securities
Transaction is placed. If a Securities Transaction is placed but has not
been executed before the authorization expires (e.g. a limit order), no
new authorization is necessary unless the person placing the order amends
it in any way.
C. PROHIBITED TRANSACTIONS
1. Always Prohibited Securities Transactions - The following Securities
Transactions are prohibited and will not be authorized under any
circumstances:
a. Inside Information - Any transaction in a Security by an
individual who possesses material nonpublic information
regarding the Security or the issuer of the Security;
b. Market Manipulation - Transactions intended to raise, lower,
or maintain the price of any Security or to create a false
appearance of active trading;
PAGE 2
<PAGE> 3
c. Others - Any other transaction deemed by the Pre-Clearance
Officer to involve a conflict of interest, possible diversions
of corporate opportunity, or an appearance of impropriety.
2. Generally Prohibited Securities Transactions - Unless exempted by
Section D, the following Securities Transactions are prohibited and
will not be authorized by the Pre-Clearance Officer absent exceptional
circumstances. The prohibitions apply only to the categories of Access
Persons specified.
a. Initial Public Offerings (Investment Persons Only) -
Investment Persons shall not acquire any securities in an
initial public offering.
b. Private Placements (Investment Persons Only) - Investment
Persons shall not acquire any securities in a private
placement without written prior approval from the Code of
Ethics Committee. This prior approval shall take into
account among other factors, whether the investment
opportunity should be reserved for the Funds or Accounts,
and whether the opportunity is being offered to the
Investment Person by virtue of his or relationship with the
Companies. An Investment Person who has been authorized to
acquire securities in a private placement shall disclose
that investment when he or she plays a part in any
subsequent consideration by the Fund, Accounts or the
Adviser of an investment in the issuer. In such
circumstances, the decision to purchase securities of the
issuer shall be subject to an independent review by persons
with no personal interest in the issuer.
c. One-Day Blackout Period - No Access Person shall execute a
personal securities transaction in a security on any day
during which an Account or Fund has placed or executed a
purchase or sell order on the same security.
d. Seven-Day Blackout Period (Portfolio Managers Only) -
Portfolio Managers may not purchase or sell securities for
their own account within seven calendar days of a purchase or
sale of the same Securities (or Equivalent Securities) by an
Account or Fund managed by that Portfolio Manager.
e. 60-Day Blackout Period (Investment Persons Only) - Investment
Personnel may not (for their own beneficial interest) purchase
a Security within 60 days of the sale of the same Security;
nor may
PAGE 3
<PAGE> 4
an Investment Person sell a Security within 60 days of
a purchase of the same Security if at any time during the 60
days the security was held by an Account or Fund managed by
the Companies.
D. EXEMPTIONS
1. Exemption from Pre-Clearance and Treatment as a Prohibited Transaction -
The following Securities Transactions are exempt from the pre-clearance
requirements of Section B and the prohibited transaction restrictions of
Section C.
a. Mutual Funds - Any purchase or sale of a Security issued by
any registered open-end investment company;
b. No Knowledge - Securities Transactions where the Access Person
has no knowledge of the transaction before it is completed
(for example a transaction effected by a Trustee of a blind
trust ordiscretionary trades involving an investment
partnership orinvestment club, in connection with which the
Access Person isneither consulted nor advised of the trade
before it is executed);
c. Certain Corporate Actions - Any acquisition of Securities,
through stock dividends, dividend reinvestments, stock
splits, reverse stock splits, mergers, consolidations,
spin-offs, exercise of rights or other similar corporate
reorganizations or distributions generally applicable to
all holders of the same class of Securities;
d. Options-Related Activity - Any acquisition or disposition of a
security in connection with an option-related Securities
Transaction that has been previously approved. For example, if
an Access Person receives approval to write a covered call,
and the call is later exercised, the provisions of
Section B and C are not applicable to the sale of the .
underlying security
e. Commodities, Futures and Options on Futures - Any Securities
Transaction involving commodities, futures (including currency
futures and futures on securities comprising part of a
broad-based, publicly traded market based index of stocks) and
options on futures.
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f. Miscellaneous - Any transaction in the following:
- Bankers Acceptances,
- Bank Certificates of Deposit,
- Commercial Paper,
- Repurchase Agreements,
- Securities that are direct obligations of the U.S.
Government,
- Other securities as may from time to time be designated in
writing by the Code of Ethics Committee on the grounds that
the risk of abuse is minimal or non-existent.
The Securities listed above are not exempt from the reporting
requirements set forth in Section E.
2. Exemption from Treatment as a Prohibited Transaction - The following
Securities Transactions are exempt from the prohibited transaction
restrictions of Section C.
a. Options on Broad-Based Indices - The prohibitions in Section C are
not applicable to any Securities Transaction involving options on
certain broad-based indices designated by the Code of Ethics
Committee. The broad-based indices designated may be chanaged from
time-to-time and presently consist of the S&P 500, the S&P 100,
NASDAQ 100, Nikkei 300, NYSE Composite and Wilshire Small Cap
indices.
b. Sovereign debt of Non-U.S. Governments - The prohibitions in
Section C are not applicable to any Securities Transactions
involving Sovereign debt of Non-U.S. governments with an issue
size greater than $1 billion and issued in either the home
currency or U.S. dollars.
E. REPORTING
1. Initial Reports - All Access Persons (except Disinterested Fund
Directors), within ten (10) days of being designated an Access Person,
must disclose all Covered Securities in which they have a direct or
indirect Beneficial Interest. Such report must include the title, number
of shares and principal amount of each Covered Security. Access Persons
must also report all brokerage accounts in which they have a direct or
indirect Beneficial Interest. Initial reports must be signed and dated by
the Access Person.
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2. Monthly Reports - All employees of the companies shall submit to the
Compliance Department, within 10 days after month end, a report of all
Securities Transactions during the previous month. The report shall state
the title and number of shares, the principal amount of the security
involved, the interest rate and maturity date if applicable, the date and
nature of the transaction, the price at which the transaction was
effected and the name of the broker, dealer or bank with or through whom
the transaction was effected. The report shall also include the date it
was submitted by the employee. Access Persons who have reported
Securities Transactions through duplicate copies of broker confirmations
and statements are not required to file a monthly report. In addition,
all employees of the companies shall submit a report of any securities
account established during the month for the direct or indirect benefit
of the employee. The report shall include the name of the broker, dealer
or bank with whom the employee established the account, the date the
account was established and the date the report was submitted to the
Compliance Department.
3. Annual Reports - All Access Person shall provide annually a list of all
Covered Securities in which they have a direct or indirect Beneficial
Interest. The list shall include the title, number of shares and
principal amount of each Covered Security. In addition, each Access
Person must report to the Compliance Department the account number,
account name and brokerage firm of each Securities account in which the
Access Person has a direct or indirect Beneficial Interest. The
information in the annual report must be current as of a date no more
than 30 days before the report is submitted. Annually all Access Persons
shall certify that they have complied with the requirements of this Code
and that they have disclosed or reported all Securities Transactions
required to be disclosed or reported pursuant to the requirements of this
Code.
4. Confirmations and Statements - All Access Persons must arrange for the
Compliance Department to receive directly from any broker, dealer or bank
duplicate copies of confirmations for Securities Transactions and
periodic statements for each brokerage account in which the Access Person
has a direct or indirect Beneficial Interest. The foregoing does not
apply to transactions and holdings in registered open-end investment
companies.
5. Directors Reports (for Directors of Pacific American Income Shares and LM
Institutional Fund Advisors I):
a. Disinterested Directors - Access Persons who are Disinterested
Directors are not required to make a report regarding
Securities
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Transactions except where such director knew or, in
the ordinary course of fulfilling his or her official duties
as a director of Pacific American Income Shares or LM
Institutional Fund Advisors I, should have known that during
the 15-day period immediately preceding or after the date of
the transaction in a security by the director, such security
is or was purchased or sold by the relevant Fund or such
purchase or sale is or was considered by the relevant Fund or
its Advisers.
b. Interested Directors - Access Persons who are Interested
Directors are required to make the following reports:
i. Initial Reports (See Paragraph E.1.)
ii. Quarterly Reports:: No later than 10 days after the end
of each calendar quarter the folllowing information
must be reported:
- Transaction Report for Covered Securities
including: Date of each transaction, full
security description, number of shares and
principal amount, nature of transaction, price at
which transaction effected, broker, dealer or
bank through which transaction affected, date
report is submitted.
- Account Report including: Any new account
established by the Director in which any
securities were held during the quarter for the
direct or indirect benefit of the Director. Such
report to also include the name of the broker,
dealer or bank with whom the Director established
the account, the date the account was established
and the date the report is submitted.
iii. Annual Reports (See Paragraph E.3.)
F. FIDUCIARY DUTIES
1. Confidentiality - Access Persons are prohibited from revealing
information relating to the investment intentions, activities or
portfolios of the Accounts or Funds, except to persons whose
responsibilities require knowledge of the information.
2. Gifts: On occasion, because of their position with Western Asset, Access
Persons may be offered, or may receive without notice, gifts from
clients, vendors or other persons not affiliated with the firm.
Acceptance of extraordinary or extravagant gifts is not permissible. Any
such gifts must be declined or returned in order to protect the
reputation of the firm. Gifts of
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nominal value(i.e., gifts whose reasonable value is no more than $100 per
year), and customary business meals, entertainment (e.g. sporting
events), and promotional items (e.g. pens, mugs, T-shirts) may be
accepted. If an Access Person receives any gift that might be prohibited
under this Code, the Access Person must immediately inform the Compliance
Department. An Access Person may not personally give any gift with a
value in excess of $100 per year to persons associated with securities or
financial organizations, including clients of the firm.
3. Service as a Director: No Investment Person may serve on the board of
directors of any publicly traded company without prior written
authorization from the Code of Ethics Committee. If the Committee
authorizes board service, it shall do so subject to appropriate
safeguards, including in most cases "Chinese Walls" or other procedures
to isolate the Investment Person from the making of investment decisions
related to the company on whose board the Investment Person serves.
3. Remedies and Sanctions: If the Code of Ethics Committee determines that
an employee of the Companies has committed a violation of the Code, the
Committee may impose sanctions and take other actions as it deems
appropriate.
G. DEFINITIONS
1. "Access Persons" means (a) all interested directors and officers of
Arroyo Seco, Inc., Pacific American Income Shares, Western Asset
Management Company and LM Institutional Fund Advisors I (the Companies);
(b) all employees of the Companies who, in connection with their regular
functions or duties, make, participate in, or obtain information,
regarding the purchase or sale of a security by an Account or Fund; (c)
any natural person in a control relationship to the Companies who obtains
information concerning recommendations made to an Account or Fund with
regard to the purchase or sale of a security and such other persons as
the Compliance Department shall designate.
2. "Account" means any portfolio managed by Western Asset Management
Company.
3. "Beneficial Interest" means the opportunity, directly or indirectly,
through any contract, arrangement, understanding, relationship or
otherwise, to profit, or share in any profit derived from, a transaction
in the subject
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Securities. An Access Person is deemed to have a Beneficial Interest in
the following:
a. any Security owned individually by the Access Person;
b. any Security owned jointly by the Access Person with others (for
example, joint accounts, spousal accounts, UTMA accounts,
partnerships, trusts and controlling interests in corporations); and
c. any Security in which a member of the Access Person's Immediate
Family has a Beneficial Interest if the Security is held in an
account over which the Access Person has decision making authority
(for example, the Access Person acts as trustee, executor, or
guardian). In addition, an Access Person is presumed to have a
Beneficial Interest in any Security in which a member of the
Access Person's Immediate Family has a Beneficial Interest if the
Immediate Family member resides in the same household as the
Access Person. This presumption may be rebutted if the Access
Person is able to provide the Compliance Department with
satisfactory assurances that the Access Person has no material
Beneficial Interest in the Security and exercises no control over
investment decisions made regarding the Security. Access Persons
may use the form attached (Certification of No Beneficial
Interest) in connection with such requests
4. "Companies" means Arroyo Seco Inc., Pacific American Income Shares,
Western Asset Management Company and LM Institutional Fund Advisors I.
5. "Covered Security" means any security defined below except covered
security does not include direct obligations of the U.S. Government,
bankers acceptances, bank certificates of deposit, commercial paper and
high quality short-term debt instruments including repurchase agreements
and shares issued by open-end Funds.
6. "Fund" means any investment company registered under the Investment
Company Act of 1940 managed by Western Asset Management Company.
7. "Immediate Family" of an Access Person means any of the following persons
who reside in the same household as the Access Person:
child grandparent son-in-law
stepchild spouse daughter-in-law
grandchild sibling brother-in-law
parent mother-in-law sister-in-law
stepparent father-in-law
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8. "Director" means a director of Pacific American Income Shares or LM
Institutional Fund Advisors I.
9. "Investment Person" means each Portfolio Manager (as defined below) and
any Access Person who, in connection with his or her regular functions or
duties provides information and advice to a Portfolio Manager or who
helps execute a Portfolio Manager's decisions.
10. "Portfolio Manager" means a person who has or shares principal day-to-day
responsibility for managing an Account or Fund.
11. "Pre-Clearance Officer" means the persons designated as Pre-Clearance
Officers by the Code of Ethics Committee.
12. "Security" means any security (as that term is defined under the
Investment Company Act of 1940) and any financial instrument related to a
security, including options on securities, futures contracts, options on
futures contracts and any other derivative.
13. "Securities Transaction" means a purchase or sale of Securities in which
an Access Person or a member of his or her Immediate Family has or
acquires a Beneficial Interest.
14. "Western Asset Code of Ethics Committee" ("Code of Ethics Committee")
Members of the Western Asset Code of Ethics Committee shall be designated
by the Western Asset Executive Committee.
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March 2000
================================================================================
TRAVELERS ASSET MANAGEMENT
INTERNATIONAL COMPANY LLC
CODE OF CONDUCT
================================================================================
The Travelers Asset Management International Company LLC ("TAMIC") is
committed to the highest standards of professional excellence and ethics. The
interests of TAMIC's clients are paramount and must be placed at all times ahead
of the personal interests of TAMIC personnel. It is critical that there be no
actual or potential conflict of interest or the appearance of such a conflict.
In addition, TAMIC personnel should not take advantage of their position in the
firm to obtain a benefit that would not be generally available. The actual or
apparent conflict of interest from such actions would be extremely harmful to
TAMIC's reputation and client relationships.
This Code of Conduct (the "TAMIC Code") is intended to be a general
guideline and cannot address every specific situation which may arise. Specific
situations should be discussed with the Compliance Officer. In addition to the
TAMIC Code, TAMIC personnel should familiarize themselves with the Travelers
Investment Group Inc. Statement of Business Practices which is applicable to all
Travelers employees and TAMIC personnel who are members of the Investment Group
should familiarize themselves with the Travelers Investment Group Inc.
Securities Trading Activity Code of Conduct (the "Travelers Code") which also
applies to such personnel.
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I. DEFINITIONS
A. "Adviser" means TAMIC
B. The "Act" means the Investment Company Act of 1940.
C. "Account" means any portfolio with respect to which TAMIC is
the investment adviser.
D. "Access Person" means any director, officer, or Advisory
Person of the Adviser.
E. "Advisory Person" means (i) any officer or employee of the
Adviser, or any other person who, in
connection with his or her regular functions or duties, makes,
participates in, or obtains information regarding the purchase
or sale of a security by the Adviser on behalf of an Account
or whose functions relate to the making of any recommendations
with respect to such purchases or sales; and (ii) any natural
person in a control relationship to the Adviser who obtains
information concerning recommendations made to the Adviser
with regard to the purchase or sale of a security by the
Adviser on behalf of an Account.
F. A security is "being considered for purchase or sale" when,
within the most recent seven (7) days, a recommendation to
purchase or sell a security has been made and communicated,
either orally or in writing, and, with respect to the person
making the recommendation, when such person seriously
considers making such a recommendation.
G. "Beneficial Ownership" shall be interpreted in the same manner
as it would be in determining whether a person is subject to
the provisions of Section 16 of the
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Securities Exchange Act of 1934 and the rules and regulations
thereunder, except that the determination of direct or
indirect beneficial ownership shall apply to all securities
which the access person has or acquires.
H. For purposes of the limits on Personal Trading, "Control",
with respect to an account, means that a person makes or
directs trades or makes decisions on trading which are
communicated to a person who executes the trade. For all other
purposes, "Control" shall have the same meaning as set forth
in Section 2(a)(9) of the Act.
I. "Investment Person" means (i) any "Portfolio Manager" and
(ii) any analyst or trader who provides information and advice
to a "Portfolio Manager" or helps to execute decisions made by
a "Portfolio Manager."
J. Purchase of Sale of a Security", includes, inter alia, the
writing of an option to purchase or sell a Security.
K. "Security" includes public and privately traded stocks, bonds,
debentures, options, warrants and other derivative securities.
It excludes U.S. government and agency obligations, short-term
money market instruments, certificates of deposit, mutual
funds, futures, options on futures and options on broad-based
indices.
L. "Portfolio Manager" means a person who develops investment
strategy or makes recommendations with respect to the purchase
and sale of Securities.
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II. PERSONAL TRADING
A. PRE-CLEARANCE
No Access Person shall purchase or sell a Security without obtaining
approval in advance. Such approval shall be obtained in advance in the manner
set forth in the Travelers Code. Approval for the purchase or sale of a Security
is only valid for the day on which it is given. Notwithstanding this general
preclearance requirement:
1. Access Persons are not required to obtain preclearance for
transactions in dividend reinvestment programs, company sponsored stock purchase
programs, rights offerings, and involuntary situations (such as mergers);
2. Access Persons, other than Portfolio Managers, are not
required to obtain preclearance for transactions in the common stock of major
corporations with a market capitalization in excess of $10 billion. Market
capitalization information is available from Bloomberg, other market information
vendors, or TAMIC's Compliance Officer).
B. PRIVATE PLACEMENTS
No Investment Person shall acquire Securities in a private placement
transaction without prior approval. If a Security is acquired in a private
placement transaction, the Investment Person must disclose such ownership in any
future discussions or decision making process concerning the issuer of such
Security and any subsequent decision to acquire a Security issued by such issuer
can only be made with the concurrence of a TAMIC Portfolio Manager other than
such Investment Person.
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C. INITIAL PUBLIC OFFERINGS
The acquisition of Securities in an initial public offering is
discouraged, but may be made if prior approval is obtained in the manner set
forth in the Travelers Code.
D. BLACKOUT PERIODS
No Access Person may buy or sell a Security if TAMIC is buying or
selling such Security (or a related Security) for an Account for one business
day before or after the Account's transactions are executed or withdrawn. No
Portfolio Manager may purchase or sell a security within seven (7) calendar days
before or after a day on which an Account which he or she manages has traded in
such Security (or a related Security). Any profits realized on such a trade must
be disgorged. Notwithstanding this general blackout requirement, transactions
exempt from preclearance under items II.A.(1) and (2) also are exempt from this
blackout requirement.
E. BAN ON CERTAIN TRADING
1. No Access Person shall purchase or sell, directly or
indirectly, any Security which he or she knows, or should have known, at the
time of such purchase or sale is being considered for purchase or sale by an
Account or is being purchased or sold by an Account.
2. No Access Person shall cause an Account to take action, or
to fail to take action, for the purpose of achieving a personal benefit.
Examples of this conduct include causing an Account to purchase a Security owned
by the Access Person for the purpose of supporting or driving up the price of
the Security, and causing an Account to refrain from selling a Security in an
attempt to protect the value of the Access Person's investment.
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3. No Access Person shall use knowledge of a transaction for
an Account to profit by the market effect of such transaction.
4. Investment Persons shall not engage in the trading of
Securities on a short-term basis. No Investment Person shall be allowed to
profit from the purchase and sale or the sale and purchase of the same or
equivalent Securities within a sixty (60) calendar day period. Any profit
realized on such a short-term trade must be disgorged. If unforeseen
circumstances require the sale of a Security within such sixty (60) calendar day
period, exceptions to the prohibition on sale may be requested from TAMIC's
Compliance Officer or his or her designate.
5. The sale of a put or a call on an individual stock that you
do not own (i.e., a short put or call) is prohibited, as is the sale of a
narrow-based stock index option. Subject to the sixty (60) day holding period,
the purchase of such a put or call option (i.e., a long put or call) is
permitted, as is the sale of a call or the purchase of a put on an individual
stock to hedge a long stock position (i.e., a covered call or put). Special
rules under the Travelers Code apply to options on the stock of Citigroup and
its affiliates.
6. No Access Person may purchase or sell a Security if the
Access Person has any material nonpublic information regarding the issuer or an
affiliated issuer.
F. RECORDS OF SECURITIES TRANSACTIONS
All Access Persons who are members of the Investment Group must
instruct their brokers to provide a duplicate copy of trade confirmations and
account statements in accordance with the Travelers Code. All other Access
Persons must instruct their brokers to provide a duplicate copy of trade
confirmations and account statements to TAMIC's Compliance Officer or designate.
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G. LOCATION OF TRADING ACCOUNTS
Access Persons generally are encouraged to maintain their securities
trading accounts at subsidiaries of Citigroup. However, an Access Person may
maintain a trading account elsewhere if the Access Person gives prior written
notice to the Compliance Officer or designate and the third party specifically
agrees to provide the Compliance Officer with copies of trade confirmations and
account statements at the same time as they are sent to the employee.
H. APPLICABLE ACCOUNTS
The restrictions in II(A)-(G) above apply to accounts in which an
Access Person, Investment Person, Portfolio Manager and members of their
immediate family have an ownership interest and/or over which they have control.
III. REPORTING
Upon employment, each Access Person shall provide a listing of all
Securities held by or for such person. Within fifteen days of the end of each
calendar year, each Access Person shall provide a listing of all Securities held
by or for such person. In addition, within ten days after the end of each
calendar quarter, each Access Person shall furnish a report of all Securities
transactions in which such Access Person has, or by reason of such transaction
acquires, any direct or indirect beneficial ownership in the Security in such
quarter. This report shall contain the following information:
(a) The date of the transaction and the issuer and the principal amount
of each Security involved;
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(b) The nature of the transaction (purchase, sale or other type of
acquisition or divestiture);
(c) The price at which the transaction was effected; and
(d) The name of the broker, dealer or bank involved.
The delivery of copies of brokerage statements and confirmations in
accordance with the Travelers Code shall satisfy the reporting
requirement of this Section III.
IV. GIFTS AND ENTERTAINMENT
Access Persons and close family members are not permitted to accept
gifts, loans or preferential treatment from any person doing business with or on
behalf of TAMIC. This prohibition does not include occasional business meals
which can be reciprocated or gifts of purely nominal value. In this regard,
Access Persons who are members of the Investment Group should conduct themselves
in accordance with the guidelines set forth in the Travelers Investment Group
Gifts and Entertainment Policy.
V. SERVICE ON BOARDS OF DIRECTORS
No Access Person shall serve on the board of directors of a publicly
traded company without compliance with all applicable Travelers policies and the
obtaining of all required approvals.
VI. ANNUAL CERTIFICATION
Each Access Person must certify in writing on an annual basis that he
or she has received TAMIC's Code of Conduct, understands its provisions and
agrees to be bound by its terms. Each
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Access Person must certify annually that he or she has complied with
the requirements of the Code of Conduct and has disclosed or reported all
personal securities transactions required to be disclosed or reported pursuant
to the requirements of the Code.
VII. SANCTIONS
Violations of the Code will be scrutinized carefully by TAMIC. The
penalty for violation can include dismissal from TAMIC and its affiliates.
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<PAGE> 1
CREDIT SUISSE ASSET MANAGEMENT, LLC
WARBURG PINCUS FUNDS/CSAM CLOSED-END FUNDS
CODE OF ETHICS
I. APPLICABILITY
This Code of Ethics establishes rules of conduct for "Access Persons" (as
defined below) of Credit Suisse Asset Management, LLC, its subsidiaries and
Credit Suisse Asset Management Securities, Inc. (collectively referred to as
"CSAM") and each U.S. registered investment company that adopts this Code
("Covered Fund") (CSAM and the Covered Funds are collectively referred to as the
"Covered Companies"). For purposes of this Code, "Access Person" shall mean:
- any "Advisory Person" -- any employee or officer of CSAM and any
natural person in a control relationship to a Covered Company
(except for a natural person who, but for his or her holdings in a
Covered Fund, would not be considered an Advisory Person, unless
he or she obtains information concerning recommendations made to
the Covered Fund with regard to the purchase or sale of securities
by the Covered Fund, in which case such person shall be considered
an Advisory Person only with respect to the Covered Fund); or
- any director, trustee or officer of a Covered Fund, whether or not
such person is an Advisory Person, in which case such person shall
be considered an Access Person only with respect to the Covered
Fund.
For purposes of this Code:
- the term "security" shall include any option to purchase or sell,
any security that is convertible or exchangeable for, and any
other derivative interest relating to the security;
- the terms "purchase" and "sale" of a security shall include, among
other things, the writing of an option to purchase or sell a
security; and
- all other terms shall have the same meanings as under the
Investment Company Act of 1940 ("1940 Act"), unless indicated
otherwise.
II. STATEMENT OF GENERAL PRINCIPLES
In conducting personal investment activities, all Access Persons are required to
act consistent with the following general fiduciary principles:
- the interests of CSAM clients, including Covered Funds, must
always be placed first, provided, however, that persons who are
Access Persons only with respect to certain Covered Funds shall
place the interests of such Covered Funds first;
- all personal securities transactions must be conducted in such a
manner as to avoid any actual or potential conflict of interest or
any abuse of an individual's position of trust and responsibility;
and
<PAGE> 2
- Access Persons must not take inappropriate advantage of their
positions.
CSAM has a separate policy and procedures designed to detect and prevent insider
trading, which should be read together with this Code. Nothing contained in this
Code should be interpreted as relieving any Access Person from the obligation to
act in accordance with any applicable law, rule or regulation or any other
statement of policy or procedure adopted by any Covered Company.
III. PROHIBITIONS
The following prohibitions and related requirements apply to Advisory Persons
and/or Access Persons (as stated) and accounts in which they have "Beneficial
Ownership" (as defined in Exhibit 1).
A. Short Term Trading. CSAM discourages Advisory Persons from short-term trading
(i.e., purchases and sales within a 60 day period), as such activity could be
viewed as being in conflict with CSAM's general fiduciary principles. In no
event, however, may an Advisory Person make a purchase and sale (or sale and
purchase) of a security, including shares of Covered Funds and other U.S.
registered investment companies (other than money market funds), within five
"Business Days" (meaning days on which the New York Stock Exchange is open for
trading). CSAM reserves the right to extend this prohibition period for the
short-term trading activities of any or all Advisory Persons if CSAM determines
that such activities are being conducted in a manner that may be perceived to be
in conflict with CSAM's general fiduciary principles.
B. Side-by-Side Trading. No Access Person may purchase or sell (directly or
indirectly) any security for which there is a "buy" or "sell" order pending for
a CSAM client (except that this restriction does not apply to any Access Person
who is neither an Advisory Person nor an officer of a Covered Fund, unless he or
she knows, or in the ordinary course of fulfilling official duties with a
Covered Fund should know, that there is a "buy" or "sell" order pending with
respect to such security for a CSAM client), or that such Access Person knows
(or should know) at the time of such purchase or sale:
- is being considered for purchase or sale by or for any CSAM
client; or
- is being purchased or sold by or for any CSAM client.
C. Blackout Periods. No Advisory Person may execute a securities transaction
within five Business Days before and one Business Day after a transaction in
that security for a CSAM client.
D. Public Offerings. No Advisory Person may directly or indirectly acquire
Beneficial Ownership in any security in a public offering in the primary
securities market.
E. Private Placements. No Advisory Person may directly or indirectly acquire or
dispose of any Beneficial Ownership in any privately placed security without the
express prior written approval of a supervisory person designated in Section IX
of this Code ("Designated Supervisory Person"). Approval will take into account,
among other factors, whether the investment opportunity should be reserved for a
CSAM client, whether the opportunity is being offered to the Advisory Person
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because of his or her position with CSAM or as a reward for past transactions
and whether the investment creates or may in the future create a conflict of
interest.
F. Short Selling. Advisory Persons are only permitted to engage in short selling
for hedging purposes. No Advisory Person may engage in any transaction that has
the effect of creating any net "short exposure" in an individual security.
G. Futures Contracts. No Advisory Person may invest in futures contracts, except
through the purchase of options on futures contracts.
H. Options. No Advisory Person may write (i.e., sell) any options except for
hedging purposes and only if the option is fully covered.
I. Trading, Hedging and Speculation in Credit Suisse Group Securities.
Transactions by employees, officers and directors of CSAM in securities of
Credit Suisse Group ("CSG") are prohibited for each period beginning 15 calendar
days before announcement of CSG yearly or half-yearly results and ending two
Business Days after the announcement. Employees, officers and directors of CSAM
may only hedge vested positions in CSG stock through short sales or derivative
instruments. Uncovered short exposure, through short sales or otherwise, is not
permitted without the express prior written approval of a Designated Supervisory
Person.
J. Investment Clubs. No Advisory Person may participate in an
"investment club" or similar activity.
K. Disclosure of Interest. No Advisory Person may recommend to or effect for any
CSAM client any securities transaction without having disclosed his or her
personal interest (actual or potential), if any, in the issuer of the
securities, including without limitation:
- any ownership or contemplated ownership of any privately placed
securities of the issuer or any of its affiliates;
- any employment, management or official position with the issuer or
any of its affiliates;
- any present or proposed business relationship between the Advisory
Person and the issuer or any of its affiliates; and
- any additional factors that may be relevant to a conflict of
interest analysis.
Where the Advisory Person has a personal interest in an issuer, a decision to
purchase or sell securities of the issuer or any of its affiliates by or for a
CSAM client shall be subject to an independent review by a Designated
Supervisory Person.
L. Gifts. No Advisory Person may seek or accept any gift of more than a de
minimis value (approximately $250 per year) from any person or entity that does
business with or on behalf of a CSAM client, other than reasonable,
business-related meals and tickets to sporting events, theater and similar
activities. If any Advisory Person is unsure of the appropriateness of any gift,
a Designated Supervisory Person should be consulted.
3
<PAGE> 4
M. Directorships and Other Outside Business Activities. No Advisory Person may
serve on the board of directors/trustees of any issuer without the express prior
written approval of a Designated Supervisory Person. Approval will be based upon
a determination that the board service would be consistent with the interests of
CSAM clients. Where board service is authorized, Advisory Persons serving as
directors will be isolated from those making investment decisions regarding the
securities of that issuer through "informational barrier" or other procedures
specified by a Designated Supervisory Person.
No Advisory Person may be employed (either for compensation or in a voluntary
capacity) outside his or her regular position with CSAM or its affiliated
companies without the written approval of a Designated Supervisory Person.
IV. EXEMPT TRANSACTIONS
A. Exemptions from Prohibitions.
1. Purchases and sales of securities issued or guaranteed by
the U.S. government or any agencies or instrumentalities of the U.S.
government, municipal securities, and other non-convertible fixed
income securities, which are in each case rated investment grade, are
exempt from the prohibitions described in paragraphs C and D of Section
III if such transactions are made in compliance with the preclearance
requirements of Section V(B) below.
2. Any securities transaction, or series of related
transactions, involving 500 shares or less of an issuer having a market
capitalization (outstanding shares multiplied by the current market
price per share) greater than $2.5 billion is exempt from the
prohibition described in paragraph C of Section III if such transaction
is made in compliance with the preclearance requirements of Section
V(B) below.
B. Exemptions from Prohibitions and Preclearance. The prohibitions described in
paragraphs B through E of Section III and the preclearance requirements of
Section V(B) shall not apply to:
- purchases and sales of securities that are direct obligations of
the U.S. government;
- purchases and sales of securities of U.S. registered open-end
investment companies;
- purchases and sales of bankers' acceptances, bank certificates of
deposit, and commercial paper;
- purchases that are part of an automatic dividend reinvestment
plan;
- purchases and sales that are non-volitional on the part of either
the Access Person or the CSAM client;
- purchases and sales in any account maintained with a party that
has no affiliation with the Covered Companies and over which no
Advisory Person has, in the judgment of a Designated Supervisory
Person after reviewing the terms and circumstances, direct or
indirect influence or control over the investment or trading of
the account; and
4
<PAGE> 5
- purchases by the exercise of rights offered by an issuer pro rata
to all holders of a class of its securities, to the extent that
such rights were acquired from the issuer.
C. Further Exemptions. Express prior written approval may be granted by a
Designated Supervisory Person if a purchase or sale of securities or other
outside activity is consistent with the purposes of this Code and Section 17(j)
of the 1940 Act and rules thereunder (attached as Attachment A is a form to
request such approval). For example, a purchase or sale may be considered
consistent with those purposes if the purchase or sale is not harmful to a CSAM
client because such purchase or sale would be unlikely to affect a highly
institutional market, or because such purchase or sale is clearly not related
economically to the securities held, purchased or sold by the CSAM client.
V. TRADING, PRECLEARANCE, REPORTING AND OTHER COMPLIANCE PROCEDURES
A. Trading Through CSAM. No Advisory Person shall purchase or sell securities
for an account in which he or she has Beneficial Ownership other than through
the CSAM trading desk persons designated by a Designated Supervisory Person,
unless express prior written approval is granted by a Designated Supervisory
Person.
B. Preclearance. Except as provided in Section IV, before any Advisory Person
purchases or sells any security for any account in which he or she has
Beneficial Ownership, preclearance shall be obtained in writing from a
Designated Supervisory Person (attached as Attachment B is a form to request
such approval). If clearance is given for a purchase or sale and the transaction
is not effected on that Business Day, a new preclearance request must be made.
C. Reporting.
1. Initial Certification. Within 10 days after the commencement of his or her
employment with CSAM or his or her affiliation with any Covered Fund, each
Access Person shall submit to a Designated Supervisory Person an initial
certification in the form of Attachment C to certify that:
- he or she has read and understood this Code of Ethics and
recognizes that he or she is subject to its requirements; and
- he or she has disclosed or reported all personal securities
holdings in which he or she has any direct or indirect Beneficial
Ownership and all accounts in which any securities are held for
his or her direct or indirect benefit.
2. Annual Certification. In addition, each Access Person shall submit to a
Designated Supervisory Person an annual certification in the form of Attachment
D to certify that:
- he or she has read and understood this Code of Ethics and
recognizes that he or she is subject to its requirements;
- he or she has complied with all requirements of this Code of
Ethics; and
5
<PAGE> 6
- he or she has disclosed or reported (a) all personal securities
transactions for the previous year and (b) all personal securities
holdings in which he or she has any direct or indirect Beneficial
Ownership and accounts in which any securities are held for his or
her direct or indirect benefit as of a date no more than 30 days
before the annual certification is submitted.
Access Persons may comply with the initial and annual reporting requirements by
submitting account statements and/or Attachment E to a Designated Supervisory
Person within the prescribed periods. An Access Person who is not an Advisory
Person is not required to submit initial or annual certifications, unless such
Access Person is an officer of a Covered Fund.
Each Advisory Person shall annually disclose all directorships and outside
business activities (attached as Attachment F is a form for such disclosure).
3. Quarterly Reporting. All Advisory Persons and each Access Person who is an
officer of a Covered Fund shall also supply a Designated Supervisory Person, on
a timely basis, with duplicate copies of confirmations of all personal
securities transactions and copies of periodic statements for all securities
accounts, including confirmations and statements for transactions and accounts
described in Section IV(B) above (exempt from prohibitions and preclearance).
This information must be supplied at least once per calendar quarter, within 10
days after the end of the calendar quarter.
Each Access Person who is neither an Advisory Person nor an officer of a Covered
Fund is required to report a transaction only if he or she, at the time of that
transaction, knew (or in the ordinary course of fulfilling official duties with
a Covered Fund should have known) that during the 15-day period immediately
before or after the date of the transaction the security such person purchased
or sold was purchased or sold by the Covered Fund or was being considered for
purchase or sale by the Covered Fund.
VI. COMPLIANCE MONITORING AND SUPERVISORY REVIEW
A Designated Supervisory Person will periodically review reports from the CSAM
trading desk (or, if applicable, confirmations from brokers) to assure that all
transactions effected by Access Persons for accounts in which they have
Beneficial Ownership are in compliance with this Code and Rule 17j-1 under the
1940 Act.
Material violations of this Code and any sanctions imposed shall be reported not
less frequently than quarterly to the board of directors of each relevant
Covered Fund and to the senior management of CSAM. At least annually, each
Covered Company shall prepare a written report to the board of
directors/trustees of each Covered Fund, and to the senior management of CSAM,
that:
- describes issues that have arisen under the Code since the last
report, including, but not limited to, material violations of the
Code or procedures that implement the Code and any sanctions
imposed in response to those violations; and
- certifies that each Covered Company has adopted procedures
reasonably necessary to prevent Access Persons from violating the
Code.
6
<PAGE> 7
Material changes to this Code of Ethics must be approved by the Board of
Directors of each Covered Fund no later than six months after the change is
adopted. That approval must be based on a determination that the changes are
reasonably necessary to prevent Access Persons from engaging in any conduct
prohibited by the Code and Rule 17j-1 under the 1940 Act. Board approval must
include a separate vote of a majority of the independent directors.
VII. SANCTIONS
Upon discovering that an Access Person has not complied with the requirements of
this Code, the senior management of the relevant Covered Company may impose on
that person whatever sanctions are deemed appropriate, including censure; fine;
reversal of transactions and disgorgement of profits; suspension; or termination
of employment.
VIII. CONFIDENTIALITY
All information obtained from any Access Person under this Code shall be kept in
strict confidence, except that reports of transactions will be made available to
the Securities and Exchange Commission or any other regulatory or
self-regulatory organization to the extent required by law or regulation.
IX. FURTHER INFORMATION
The Designated Supervisory Persons are Hal Liebes and James W. Bernaiche or
their designees in CSAM's legal and compliance department. Any questions
regarding the Code of Ethics should be directed to a Designated Supervisory
Person.
Dated: March 1, 2000
7
<PAGE> 8
EXHIBIT 1
CREDIT SUISSE ASSET MANAGEMENT, LLC
WARBURG PINCUS FUNDS
CODE OF ETHICS
DEFINITION OF BENEFICIAL OWNERSHIP
The term "Beneficial Ownership" as used in the attached Code of Ethics is to be
interpreted by reference to Rule 16a-1(a)(2) under the Securities Exchange Act
of 1934 ("Rule"). Under the Rule, a person is generally deemed to have
Beneficial Ownership of securities if the person (directly or indirectly),
through any contract, arrangement, understanding, relationship or otherwise, has
or shares a direct or indirect pecuniary interest in the securities.
The term "pecuniary interest" is generally defined in the Rule to mean the
opportunity (directly or indirectly) to profit or share in any profit derived
from a transaction in the securities. A person is deemed to have an "indirect
pecuniary interest" within the meaning of the Rule:
- in any securities held by members of the person's immediate family
sharing the same household; the term "immediate family" includes
any child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law or sister-in-law, as well as
adoptive relationships;
- a general partner's proportionate interest in the portfolio
securities held by a general or limited partnership;
- a person's right to dividends that is separated or separable from
the underlying securities;
- a person's interest in certain trusts; and
- a person's right to acquire equity securities through the exercise
or conversion of any derivative security, whether or not presently
exercisable.(1)
For purposes of the Rule, a person who is a shareholder of a corporation or
similar entity is not deemed to have a pecuniary interest in portfolio
securities held by the corporation or entity, so long as the shareholder is not
a controlling shareholder of the corporation or the entity and does not have or
share investment control over the corporation's or the entity's portfolio. The
term "control" means the power to exercise a controlling influence over
management or policies, unless the power is solely the result of an official
position with the company.
- -----------------------------
(1) The term "derivative security" is defined as any option, warrant,
convertible security, stock appreciation right or similar right with an exercise
or conversion privilege at a price related to an equity security (or similar
securities) with a value derived from the value of an equity security.
<PAGE> 9
ATTACHMENT A
CREDIT SUISSE ASSET MANAGEMENT, LLC
WARBURG PINCUS FUNDS/CSAM CLOSED-END FUNDS
CODE OF ETHICS -- SPECIAL APPROVAL FORM
1. The following is a private placement of securities or other investment
requiring special approval in which I want to acquire or dispose of
Beneficial Ownership:
<TABLE>
<CAPTION>
NAME OF PRIVATE
---------------
SECURITY OR OTHER DATE TO BE AMOUNT TO RECORD PURCHASE HOW ACQUIRED
------------------ ----------- ------------- ------ -------- ------------
INVESTMENT ACQUIRED BE HELD OWNER PRICE (BROKER/ISSUER)
- ------------------------- ----------------- ----------------- ------------------- ----------------- ----------------------
<S> <C> <C> <C> <C> <C>
- ------------------------- ----------------- ----------------- ------------------- ----------------- ----------------------
- ------------------------- ----------------- ----------------- ------------------- ----------------- ----------------------
- ------------------------- ----------------- ----------------- ------------------- ----------------- ----------------------
- ------------------------- ----------------- ----------------- ------------------- ----------------- ----------------------
- ------------------------- ----------------- ----------------- ------------------- ----------------- ----------------------
- ------------------------- ----------------- ----------------- ------------------- ----------------- ----------------------
</TABLE>
Would this investment opportunity be appropriate for a CSAM client?
Yes No
--- ---
2. I want to engage in the following outside business activity:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
3. I want special approval to place personal securities trades other than
through the CSAM trading desk (please describe):
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
I certify, as applicable, that I (a) am not aware of any non-public information
about the issuer, (b) have made all disclosures required by the Code of Ethics
and (c) will comply with all reporting requirements of the Code.
- -------------------------------- -------------------------------
Signature Date
- --------------------------------
Print Name
Approved
- ---
Not Approved
- ---
- ------------------------------- ------------------------------
Designated Supervisory Person Date
<PAGE> 10
ATTACHMENT B
CREDIT SUISSE ASSET MANAGEMENT, LLC
WARBURG PINCUS FUNDS/CSAM CLOSED-END FUNDS
CODE OF ETHICS -- PERSONAL TRADING PRECLEARANCE FORM
This form should be filled out completely to expedite approval.
1. Security:
------------------------------------------
Ticker:
------------------------------------------
Purchase Sale
---- ----
2. Number of shares/bonds/units/contracts:
-----------------------------
3. Account Name/Shortname:
--------------------------------------------
4. Brokerage Firm and Account Number:
-----------------------------------
5. Why do you want to purchase or sell? Is this an opportunity appropriate
for CSAM clients?
-----------------------------------------------------------------------
6. Are you aware of a CSAM Advisory Person who is buying or selling or who
plans to buy or sell this security for his or her personal accounts or
CSAM clients?
Yes No
--- ----
If yes, who?
-----------------------------------------------------------------------
7. If the amount is less than 500 shares, is the issuer market
capitalization greater than $2.5 billion?
Yes No
---- -----
I certify that I (a) am not aware of any non-public information about the
issuer, (b) have made all disclosures required by the Code of Ethics and this
trade otherwise complies with the Code, including the prohibition on investments
in initial public offerings, and (c) will comply with all reporting requirements
of the Code.
- ---------------------------------- --------------------------------
Signature of Advisory Person Date
- ----------------------------------
Print Name
Approved
- ---
Not Approved
- ---
- ---------------------------------- -------------------------------------
Designated Supervisory Person Date - VALID THIS BUSINESS DAY ONLY.
<PAGE> 11
ATTACHMENT C
CREDIT SUISSE ASSET MANAGEMENT, LLC
WARBURG PINCUS FUNDS/CSAM CLOSED-END FUNDS
CODE OF ETHICS
INITIAL CERTIFICATION
I certify that I:
have read and understood the Code of Ethics for Credit Suisse Asset
Management, LLC, the Warburg Pincus Funds and the CSAM Closed-End Funds
and recognize that I am subject to its requirements; and
have disclosed or reported all personal securities holdings in which I
had any direct or indirect Beneficial Ownership and accounts in which any
securities were held for my direct or indirect benefit as of the date I
commenced employment with CSAM or the date I became affiliated with a
Covered Fund.
- -------------------------------- -------------------------------
Signature of Access Person Date
- --------------------------------
Print Name
<PAGE> 12
ATTACHMENT D
CREDIT SUISSE ASSET MANAGEMENT, LLC
WARBURG PINCUS FUNDS/CSAM CLOSED-END FUNDS
CODE OF ETHICS
ANNUAL CERTIFICATION
I certify that I:
- have read and understood the Code of Ethics for Credit Suisse
Asset Management, LLC, the Warburg Pincus Funds and the CSAM
Closed-End Funds and recognize that I am subject to its
requirements;
- have complied with all requirements of the Code of Ethics and
Policy and Procedures Designed to Detect and Prevent Insider
Trading in effect during the year ended December 31, 1999; and
- have disclosed or reported all personal securities transactions
for the year ended December 31, 1999 and all personal securities
holdings in which I had any direct or indirect Beneficial
Ownership and all accounts in which any securities were held for
my direct or indirect benefit as of December 31, 1999.
- -------------------------------- -------------------------------
Signature of Access Person Date
- --------------------------------
Print Name
<PAGE> 13
ATTACHMENT E
CREDIT SUISSE ASSET MANAGEMENT, LLC
WARBURG PINCUS FUNDS/CSAM CLOSED-END FUNDS
CODE OF ETHICS - PERSONAL SECURITIES ACCOUNT DECLARATION
ALL ACCESS PERSONS MUST COMPLETE EACH APPLICABLE ITEM (1, 2, 3 OR 4) AND SIGN
BELOW.
1. The following is a list of securities/commodities accounts in which I have
Beneficial Ownership:
<TABLE>
<CAPTION>
BROKER/DEALER ACCOUNT TITLE AND NUMBER
<S> <C>
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
</TABLE>
2. The following is a list of securities/commodities accounts in which I had
Beneficial Ownership that have been opened or closed in the past year:
<TABLE>
<CAPTION>
BROKER/DEALER ACCOUNT TITLE AND NUMBER
<S> <C>
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
</TABLE>
3. The following is a list of any other securities or other investment
holdings in which I have Beneficial Ownership (for securities held in
accounts other than those disclosed in response to items 1 and 2):
<TABLE>
<CAPTION>
NAME OF PRIVATE
---------------
SECURITY OR OTHER DATE AMOUNT RECORD PURCHASE HOW ACQUIRED
----------------- ------ ------- ------ -------- ----------------
INVESTMENT ACQUIRED HELD OWNER PRICE (BROKER/ISSUER)
- ------------------------- ----------------- ----------------- ------------------- ----------------- ----------------------
<S> <C> <C> <C> <C> <C>
- ------------------------- ----------------- ----------------- ------------------- ----------------- ----------------------
- ------------------------- ----------------- ----------------- ------------------- ----------------- ----------------------
- ------------------------- ----------------- ----------------- ------------------- ----------------- ----------------------
- ------------------------- ----------------- ----------------- ------------------- ----------------- ----------------------
</TABLE>
4. I do not have Beneficial Ownership in any securities/commodities accounts or
otherwise have Beneficial Ownership of any securities or other instruments
subject to the Code of Ethics. (Please initial.)
-------------
Initials
I declare that the information given above is true and accurate:
- -------------------------------- -------------------------------
Signature of Access Person Date
- -------------------------------
Print Name
<PAGE> 14
ATTACHMENT F
CREDIT SUISSE ASSET MANAGEMENT, LLC
WARBURG PINCUS FUNDS/CSAM CLOSED-END FUNDS
CODE OF ETHICS
OUTSIDE BUSINESS ACTIVITIES
Outside business activities include, but are not limited to, the following:
- self-employment;
- receiving compensation from another person or company;
- serving as an officer, director, partner, or consultant of another
business organization (including a family owned company); and
- becoming a general or limited partner in a partnership or owning
any stock in a business, unless the stock is publicly traded and
no control relationship exists.
Outside business activities include serving with a governmental (federal, state
or local) or charitable organization whether or not for compensation.
ALL ADVISORY PERSONS MUST COMPLETE AT LEAST ONE CHOICE (1 OR 2) AND SIGN BELOW.
1. The following are my outside business activities:
<TABLE>
<CAPTION>
APPROVED BY DESIGNATED
OUTSIDE BUSINESS DESCRIPTION OF SUPERVISORY PERSON (YES/NO)
ACTIVITY ACTIVITY
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
2. I am not involved in any outside business activities. (Please initial)
------------
Initials
I declare that the information given above is true and accurate:
- -------------------------------- -------------------------------
Signature of Advisory Person Date
- --------------------------------
Print Name
<PAGE> 1
Code of Ethics
piv
s
It is the personal responsibility of every Putnam employee to avoid any conduct
that could create a conflict, or even the appearance of a conflict, with our
clients, or to do anything that could damage or erode the trust our clients
place in Putnam and its employees.
44156 4/2000
<PAGE> 2
Patnam Investment Management, Inc. Code of Ethics
<TABLE>
<S> <C> <C>
A Table of Contents
Overview .........................................................................................iii
Preamble .........................................................................................vii
Definitions: Code of Ethics............................................................................ix
Section I. Personal Securities Rules for All Employees................................................1
A. Restricted List.................................................1
B. Prohibited Purchases and Sales..................................6
C. Discouraged Transactions........................................9
D. Exempted Transactions..........................................10
Section II. Additional Special Rules for Personal Securities Transactions of Access
Persons and Certain Investment Professionals..............................................13
Section III. Prohibited Conduct for All Employees......................................................18
Section IV. Special Rules for Officers and Employees of Putnam Europe Ltd.............................27
Section V. Reporting Requirements for All Employees..................................................29
Section VI. Education Requirements....................................................................33
Section VII. Compliance and Appeal Procedures..........................................................35
Appendix A ..........................................................................................37
Preamble ...............................................................39
Definitions: Insider Trading................................................41
Section 1. Rules Concerning Inside Information............................43
Section 2. Overview of Insider Trading....................................47
Appendix B. Policy Statement Regarding Employee Trades in Shares of Putnam Closed-End Funds...........53
Appendix C. Clearance Form for Portfolio Manager Sales Out of Personal Account of
Securities Also Held by Fund (For compliance with "Contra-Trading" Rule)..................55
Appendix D. Procedures for Approval of New Financial Instruments......................................57
Index ..........................................................................................59
</TABLE>
s i
<PAGE> 3
A Overview
Every Putnam employee is required, as a condition of continued
employment, to read, understand, and comply with the entire Code of
Ethics. This Overview is provided only as a convenience and is not
intended to substitute for a careful reading of the complete document.
It is the personal responsibility of every Putnam employee to avoid any
conduct that could create a conflict, or even the appearance of a
conflict, with our clients, or do anything that could damage or erode the
trust our clients place in Putnam and its employees. This is the spirit
of the Code of Ethics. In accepting employment at Putnam, every employee
accepts the absolute obligation to comply with the letter and the spirit
of the Code of Ethics. Failure to comply with the spirit of the Code of
Ethics is just as much a violation of the Code as failure to comply with
the written rules of the Code.
The rules of the Code cover activities, including personal securities
transactions, of Putnam employees, certain family members of employees,
and entities (such as corporations, trusts, or partnerships) that
employees may be deemed to control or influence.
Sanctions will be imposed for violations of the Code of Ethics. Sanctions
may include bans on personal trading, reductions in salary increases or
bonuses, disgorgement of trading profits, suspension of employment, and
termination of employment.
-- Insider trading:
Putnam employees are forbidden to buy or sell any security while
either Putnam or the employee is in possession of non-public
information ("inside information") concerning the security or the
issuer. A violation of Putnam's insider trading policies may result
in criminal and civil penalties, including imprisonment and
substantial fines.
-- Conflicts of interest:
The Code of Ethics imposes limits on activities of Putnam employees
where the activity may conflict with the interests of Putnam or its
clients. These include limits on the receipt and solicitation of
gifts and on service as a fiduciary for a person or entity outside of
Putnam.
For example, Putnam employees generally may not accept gifts over $50
in total value in a calendar year from any entity or any supplier of
goods or services to Putnam. In addition, a Putnam employee may not
serve as a director of any corporation without prior approval of the
Code of Ethics Officer, and Putnam employees may not be members of
investment clubs.
-- Confidentiality:
Information about Putnam clients and Putnam investment activity and
research is proprietary and confidential and may not be disclosed or
used by any Putnam employee outside Putnam without a valid business
purpose.
s iii
<PAGE> 4
-- Personal securities trading:
Putnam employees may not buy or sell any security for their own
account without clearing the proposed transaction in advance with the
Code of Ethics Administrator.
Certain securities are excepted from this requirement (e.g., Marsh &
McLennan stock and shares of open-end (not closed-end) Putnam Funds).
The Code of Ethics Officer will permit employees to purchase or sell
up to 1,000 shares of stock of an issuer whose capitalization exceeds
$5 billion, but such purchases or sales must still be cleared.
Clearance must be obtained in advance, between 11:30 a.m. and 4:00
p.m. EST on the day of the trade. Clearance may be obtained between
9:00 a.m. and 4:00 p.m. on the day of the trade for up to 1,000
shares of stock of an issuer whose capitalization exceeds $5 billion.
A clearance is valid only for the day it is obtained. The Code also
strongly discourages excessive trading by employees for their own
account (i.e., more than 10 trades in any calendar quarter). Trading
in excess of this level will be reviewed with the Code of Ethics
Oversight Committee.
-- Short Selling:
Putnam employees are prohibited from short selling any security,
whether or not it is held in a Putnam client portfolio, except that
short selling against the S&P 100 and 500 indexes and "against the
box" are permitted.
-- Confirmations of trading and periodic account statements:
All Putnam employees must have their brokers send confirmations of
personal securities transactions, including transactions of immediate
family members and accounts over which the employee has investment
discretion, to the Code of Ethics Officer. Employees must contact the
Code of Ethics Administrator to obtain an authorization letter from
Putnam for setting up a personal brokerage account.
-- Quarterly and annual reporting:
Certain Putnam employees (so-called "Access Persons" as defined by
the SEC and in the Code of Ethics) must report all their securities
transactions in each calendar quarter to the Code of Ethics Officer
within 10 days after the end of the quarter. All Access Persons must
disclose all personal securities holdings upon commencement of
employment and thereafter on an annual basis. You will be notified if
these requirements apply to you. If these requirements apply to you
and you fail to report as required, salary increases and bonuses will
be reduced.
iv s
<PAGE> 5
-- IPOs and private placements:
Putnam employees may not buy any securities in an initial public
offering or in a private placement, except in limited circumstances
when prior written authorization is obtained.
-- Procedures for Approval of New Financial Instruments:
No new types of securities or instruments may be purchased for any
Putnam fund or other client account without the prior approval of the
Risk Management Committee.
-- Personal securities transactions by Access Persons and certain
investment professionals:
The Code imposes several special restrictions on personal securities
transactions by Access Persons and certain investment professionals,
which are summarized as follows:
-- "60-Day Holding Period". No Access Person shall profit from
the purchase and sale, or sale and purchase, of any security
or related derivative security within 60 calendar days.
-- "7-Day" Rule. Before a portfolio manager places an order to
buy a security for any portfolio he manages, he must sell from
his personal account any such security or related derivative
security purchased within the preceding 7 calendar days and
disgorge any profit from the sale.
-- "Blackout" Rules. No portfolio manager may sell any security
or related derivative security for her personal account until
7 calendar days have passed since the most recent purchase of
that security or related derivative security by any portfolio
she manages. No portfolio manager may buy any security or
related derivative security for his personal account until 7
calendar days have passed since the most recent sale of that
security or related derivative security by any portfolio he
manages.
-- "Contra-Trading" Rule. No portfolio manager may sell out of
her personal account any security or related derivative
security that is held in any portfolio she manages unless she
has received the written approval of a CIO and the Code of
Ethics Officer.
-- No manager may cause a Putnam client to take action for the
manager's own personal benefit.
-- SIMILAR RULES LIMIT PERSONAL SECURITIES TRANSACTIONS BY
ANALYSTS, CO-MANAGERS, AND CHIEF INVESTMENT OFFICERS. PLEASE
READ THESE RULES CAREFULLY. YOU ARE RESPONSIBLE FOR
UNDERSTANDING THE RESTRICTIONS.
This Overview is qualified in its entirety by the provisions of the Code
of Ethics. The Code requires that all Putnam employees read, understand,
and comply with the entire Code of Ethics.
s v
<PAGE> 6
A Preamble
It is the personal responsibility of every Putnam employee to avoid any
conduct that would create a conflict, or even the appearance of a
conflict, with our clients, or embarrass Putnam in any way. This is the
spirit of the Code of Ethics. In accepting employment at Putnam, every
employee also accepts the absolute obligation to comply with the letter
and the spirit of the Code of Ethics. Failure to comply with the spirit
of the Code of Ethics is just as much a violation of the Code as failure
to comply with the written rules of the Code.
Sanctions will be imposed for violations of the Code of Ethics,
including the Code's reporting requirements. Sanctions may include bans
on personal trading, reductions in salary increases or bonuses,
disgorgement of trading profits, suspension of employment and
termination of employment.
Putnam Investments is required by law to adopt a Code of Ethics. The
purpose of the law is to prevent abuses in the investment advisory
business that can arise when conflicts of interest exist between the
employees of an investment adviser and its clients. Having an effective
Code of Ethics is good business practice, as well. By adopting and
enforcing a Code of Ethics, we strengthen the trust and confidence
reposed in us by demonstrating that, at Putnam, client interests come
before personal interests.
Putnam has had a Code of Ethics for many years. The first Putnam Code
was written more than 30 years ago by George Putnam. It has been revised
periodically, and was re-drafted in its entirety in 1989 to take account
of legal and regulatory developments in the investment advisory
business. Since 1989, the Code has been revised regularly to reflect
developments in our business.
The Code that follows represents a balancing of important interests. On
the one hand, as a registered investment adviser, Putnam owes a duty of
undivided loyalty to its clients, and must avoid even the appearance of
a conflict that might be perceived as abusing the trust they have placed
in Putnam. On the other hand, Putnam does not want to prevent
conscientious professionals from investing for their own account where
conflicts do not exist or are so attenuated as to be immaterial to
investment decisions affecting Putnam clients.
When conflicting interests cannot be reconciled, the Code makes clear
that, first and foremost, Putnam employees owe a fiduciary duty to
Putnam clients. In most cases, this means that the affected employee
will be required to forego conflicting personal securities transactions.
In some cases, personal investments will be permitted, but only in a
manner which, because of the circumstances and applicable controls,
cannot reasonably be perceived as adversely affecting Putnam client
portfolios or taking unfair advantage of the relationship Putnam
employees have to Putnam clients.
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The Code contains specific rules prohibiting defined types of conflicts.
Because every potential conflict cannot be anticipated in advance, the
Code also contains certain general provisions prohibiting conflict
situations. In view of these general provisions, it is critical that any
individual who is in doubt about the applicability of the Code in a
given situation seek a determination from the Code of Ethics Officer
about the propriety of the conduct in advance. The procedures for
obtaining such a determination are described in Section VII of the Code.
It is critical that the Code be strictly observed. Not only will
adherence to the Code ensure that Putnam renders the best possible
service to its clients, it will ensure that no individual is liable for
violations of law.
It should be emphasized that adherence to this policy is a fundamental
condition of employment at Putnam. Every employee is expected to adhere
to the requirements of this Code of Ethics despite any inconvenience
that may be involved. Any employee failing to do so may be subject to
such disciplinary action, including financial penalties and termination
of employment, as determined by the Code of Ethics Oversight Committee
or the Chief Executive Officer of Putnam Investments.
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<PAGE> 8
A Definitions: Code of Ethics
The words given below are defined specifically for the purposes of
Putnam's Code of Ethics.
Gender references in the Code of Ethics alternate.
Rule of construction regarding time periods. Unless the context
indicates otherwise, time periods used in the Code of Ethics shall be
measured inclusively, i.e., including the dates from and to which the
measurement is made.
Access Persons. Access Persons are (i) all officers of Putnam Investment
Management, Inc. (the investment manager of Putnam's mutual funds),
(ii) all employees within Putnam's Investment Division, and (iii) all
other employees of Putnam who, in connection with their regular
duties, have access to information regarding purchases or sales of
portfolio securities by a Putnam mutual fund, or who have access to
information regarding recommendations with respect to such purchases
or sales.
Code of Ethics Administrator. The individual designated by the Code of
Ethics Officer to assume responsibility for day-to-day,
non-discretionary administration of this Code. The current Code of
Ethics Administrator is Laura Rose, who can be reached at extension
11104.
Code of Ethics Officer. The Putnam officer who has been assigned the
responsibility of enforcing and interpreting this Code. The Code of
Ethics Officer shall be the General Counsel or such other person as
is designated by the President of Putnam Investments. If the Code of
Ethics Officer is unavailable, the Deputy Code of Ethics Officer (to
be appointed by the Code of Ethics Officer) shall act in his stead.
Code of Ethics Oversight Committee. Has oversight responsibility for
administering the Code of Ethics. Members include the Code of Ethics
Officer, the Head of Investments, and other members of Putnam's
senior management approved by the Chief Executive Officer of Putnam.
Immediate family. Spouse, minor children, or other relatives living in
the same household as the Putnam employee.
Policy Statements. The Policy Statement Concerning Insider Trading
Prohibitions attached to the Code as Appendix A and the Policy
Statement Regarding Employee Trades in Shares of Putnam Closed-End
Funds attached to the Code as Appendix B.
Private placement. Any offering of a security not to the public, but to
sophisticated investors who have access to the kind of information
which would be contained in a prospectus, and which does not require
registration with the relevant securities authorities.
Purchase or sale of a security. Any acquisition or transfer of any
interest in the security for direct or indirect consideration, and
includes the writing of an option.
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Putnam. Any or all of Putnam Investments, Inc., and its subsidiaries,
any one of which shall be a "Putnam company."
Putnam client. Any of the Putnam Funds, or any advisory, trust, or other
client of Putnam.
Putnam employee (or "employee"). Any employee of Putnam.
Restricted List. The list established in accordance with Rule 1 of
Section I.A.
Security. Any type or class of equity or debt security and any rights
relating to a security, such as put and call options, warrants, and
convertible securities. Unless otherwise noted, the term "security"
does not include: currencies, direct and indirect obligations of the
U.S. government and its agencies, commercial paper, certificates of
deposit, repurchase agreements, bankers' acceptances, any other money
market instruments, shares of open-end mutual funds (including Putnam
open-end mutual funds), securities of The Marsh & McLennan Companies,
Inc., commodities, and any option on a broad-based market index or an
exchange-traded futures contract or option thereon.
Transaction for a personal account (or "personal securities
transaction"). Securities transactions: (a) for the personal account
of any employee; (b) for the account of a member of the immediate
family of any employee; (c) for the account of a partnership in which
a Putnam employee or immediate family member is a general partner or
a partner with investment discretion; (d) for the account of a trust
in which a Putnam employee or immediate family member is a trustee
with investment discretion; (e) for the account of a closely-held
corporation in which a Putnam employee or immediate family member
holds shares and for which he has investment discretion; and (f) for
any account other than a Putnam client account which receives
investment advice of any sort from the employee or immediate family
member, or as to which the employee or immediate family member has
investment discretion.
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A Section 1. Personal Securities Rules for All Employees
A. Restricted List
RULE 1
No Putnam employee shall purchase or sell for his personal account
any security without prior clearance obtained through Putnam's
Intranet pre-clearance system or from the Code of Ethics
Administrator. No clearance will be granted for securities appearing
on the Restricted List. Securities shall be placed on the Restricted
List in the following circumstances:
(a) when orders to purchase or sell such security have been
entered for any Putnam client, or the security is being
actively considered for purchase or sale for any Putnam
client;
(b) with respect to voting securities of corporations in the
banking, savings and loan, communications, or gaming (i.e.,
casinos) industries, when holdings of Putnam clients exceed
7% (for public utilities, the threshold is 4%);
(c) when, in the judgment of the Code of Ethics Officer, other
circumstances warrant restricting personal transactions of
Putnam employees in a particular security;
(d) the circumstances described in the Policy Statement
Concerning Insider Trading Prohibitions, attached as
Appendix A.
Reminder: Securities for an employee's "personal account" include
securities owned by certain family members of a Putnam employee.
Thus, this Rule prohibits certain trades by family members of Putnam
employees. See Definitions.
Compliance with this rule does not exempt an employee from complying
with any other applicable rules of the Code, such as those described
in Section III. In particular, Access Persons and certain investment
professionals must comply with the special rules set forth in Section
II.
EXCEPTIONS
A. "Large Cap" Exception. If a security appearing on the
Restricted List is an equity security for which the issuer
has a market capitalization (defined as outstanding shares
multiplied by current price per share) of over $5 billion,
then a Putnam employee may purchase or sell up to 1,000
shares of the security per day for his personal account.
This exception does not apply if the security appears on the
Restricted List in the circumstances described in subpart
(b), (c), or (d) of Rule 1.
B. Investment Grade Or Higher Fixed-Income Exception. If a
security being traded or considered for trade for a Putnam
client is a non-convertible fixed-income security which
bears a rating of BBB (Standard & Poor's) or Baa (Moody's)
or any comparable rating or
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<PAGE> 11
higher, then a Putnam employee may purchase or sell that
security for his personal account without regard to the
activity of Putnam clients. This exception does not apply if
the security has been placed on the Restricted List in the
circumstances described in subpart (b), (c), or (d) of Rule
1.
C. Pre-Clearing Transactions Effected by Share Subscription.
The purchase and sale of securities made by subscription
rather than on an exchange are limited to issuers having a
market capitalization of $5 billion or more and are subject
to a 1,000 share limit. The following are procedures to
comply with Rule 1 when effecting a purchase or sale of
shares by subscription:
(a) The Putnam employee must pre-clear the trade on the
day he or she submits a subscription to the issuer,
rather than on the actual day of the trade since the
actual day of the trade typically will not be known
to the employee who submits the subscription. At the
time of pre-clearance, the employee will be told
whether the purchase is permitted (in the case of a
corporation having a market capitalization of $5
billion or more), or not permitted (in the case of a
smaller capitalization issuer).
(b) The subscription for any purchase or sale of shares
must be reported on the employee's quarterly personal
securities transaction report, noting the trade was
accomplished by subscription.
(c) As no brokers are involved in the transaction, the
confirmation requirement will be waived for these
transactions, although the Putnam employee must
provide the Legal and Compliance Department with any
transaction summaries or statements sent by the
issuer.
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<PAGE> 12
SANCTION GUIDELINES
A. Failure to Pre-Clear a Personal Trade
1. First violation: One month trading ban with written warning that
a future violation will result in a longer trading ban.
2. Second violation: Three month trading ban and written notice to
Managing Director of the employee's division.
3. Third violation: Six month trading ban with possible longer or
permanent trading ban based upon review by Code of Ethics
Oversight Committee.
B. Failure to Pre-Clear Securities on the Restricted List
1. First violation: Disgorgement of any profit from the transaction,
one month trading ban, and written warning that a future
violation will result in a longer trading ban.
2. Second violation: Disgorgement of any profit from the
transaction, three month trading ban, and written notice to
Managing Director of the employee's division.
3. Third violation: Disgorgement of any profit from the transaction,
and six month trading ban with possible longer or permanent
trading ban based upon review by Code of Ethics Oversight
Committee.
NOTE: These are the sanction guidelines for successive failures to
pre-clear personal trades within a 2-year period. The Code of Ethics
Oversight Committee retains the right to increase or decrease the
sanction for a particular violation in light of the circumstances.
The Committee's belief that an employee intentionally has violated
the Code of Ethics will result in more severe sanctions than
outlined in the guidelines above. The sanctions described in
Paragraph B apply to Restricted List securities that are: (i) small
cap stocks (i.e., stocks not entitled to the "Large Cap" exception)
and (ii) large cap stocks that exceed the daily 1,000 share maximum
permitted under the "Large Cap" exception. Failure to pre-clear an
otherwise permitted trade of up to 1,000 shares of a large cap
security is subject to the sanctions described above in Paragraph A.
IMPLEMENTATION
A. Maintenance of Restricted List. The Restricted List shall be
maintained by the Code of Ethics Administrator.
B. Consulting Restricted List. An employee wishing to trade any
security for his personal account shall first obtain clearance
through Putnam's Intranet pre-clearance system. The system may be
accessed from your desktop computer through Internet access software
and following the directions provided in the system. The current
address of the
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<PAGE> 13
Intranet pre-clearance system can be obtained from the Code of
Ethics Administrator. Employees may pre-clear all securities between
11:30 a.m. and 4:00 p.m. EST, and may pre-clear purchases or sales
of up to 1,000 shares of issuers having a market capitalization of
more than $5 billion between 9:00 a.m. and 4:00 p.m. EST. Requests
to make personal securities transactions may not be made using the
system or presented to the Code of Ethics Administrator after 4:00
p.m.
The pre-clearance system will inform the employee whether the
security may be traded and whether trading in the security is
subject to the "Large Cap" limitation. The response of the
pre-clearance system as to whether a security appears on the
Restricted List and, if so, whether it is eligible for the
exceptions set forth after this Rule shall be final, unless the
employee appeals to the Code of Ethics Officer, using the procedure
described in Section VII, regarding the request to trade a
particular security.
A CLEARANCE IS ONLY VALID FOR TRADING ON THE DAY IT IS OBTAINED.
Trades in securities listed on Asian or European stock exchanges,
however, may be executed WITHIN ONE BUSINESS DAY AFTER PRE-CLEARANCE
IS OBTAINED.
If a security is not on the Restricted List, other classes of
securities of the same issuer (e.g., preferred or convertible
preferred stock) may be on the Restricted List. It is the employee's
responsibility to identify with particularity the class of
securities for which permission is being sought for a personal
investment.
If the Intranet pre-clearance system does not recognize a security,
or if an employee is unable to use the system or has any questions
with respect to the system or pre-clearance, the employee may
consult the Code of Ethics Administrator. The Code of Ethics
Administrator shall not have authority to answer any questions about
a security other than whether trading is permitted. The response of
the Code of Ethics Administrator as to whether a security appears on
the Restricted List and, if so, whether it is eligible for the
exceptions set forth after this Rule shall be final, unless the
employee appeals to the Code of Ethics Officer, using the procedure
described in Section VII, regarding the request to trade a
particular security.
C. Removal of Securities from Restricted List. Securities shall be
removed from the Restricted List when: (a) in the case of securities
on the Restricted List pursuant to Rule 1(a), they are no longer
being purchased or sold for a Putnam client or actively considered
for purchase or sale for a Putnam client; (b) in the case of
securities on the Restricted List pursuant to Rule 1(b), the
holdings of Putnam clients fall below the applicable threshold
designated in that Rule, or at such earlier time as the Code of
Ethics Officer deems appropriate; or (c) in the case of securities
on the Restricted List pursuant
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<PAGE> 14
to Rule 1(c) or 1(d), when circumstances no longer warrant
restrictions on personal trading.
COMMENTS
1. Pre-Clearance. Subpart (a) of this Rule is designed to avoid the
conflict of interest that might occur when an employee trades for
his personal account a security that currently is being traded or is
likely to be traded for a Putnam client. Such conflicts arise, for
example, when the trades of an employee might have an impact on the
price or availability of a particular security, or when the trades
of the client might have an impact on price to the benefit of the
employee. Thus, exceptions involve situations where the trade of a
Putnam employee is unlikely to have an impact on the market.
2. Regulatory Limits. Owing to a variety of federal statutes and
regulations in the banking, savings and loan, communications, and
gaming industries, it is critical that accounts of Putnam clients
not hold more than 10% of the voting securities of any issuer (5%
for public utilities). Because of the risk that the personal
holdings of Putnam employees may be aggregated with Putnam holdings
for these purposes, subpart (b) of this Rule limits personal trades
in these areas. The 7% limit (4% for public utilities) will allow
the regulatory limits to be observed.
3. Options. For the purposes of this Code, options are treated like the
underlying security. See Definitions. Thus, an employee may not
purchase, sell, or "write" option contracts for a security that is
on the Restricted List. A securities index will not be put on the
Restricted List simply because one or more of its underlying
securities have been put on the Restricted List. The exercise of an
options contract (the purchase or writing of which was previously
pre-cleared) does not have to be pre-cleared. Note, however, that
the sale of securities obtained through the exercise of options must
be pre-cleared.
4. Involuntary Transactions. "Involuntary" personal securities
transactions are exempted from the Code. Special attention should be
paid to this exemption. (See Section I.D.)
5. Tender Offers. This Rule does not prohibit an employee from
tendering securities from his personal account in response to an
any-and-all tender offer, even if Putnam clients are also tendering
securities. A Putnam employee is, however, prohibited from tendering
securities from his personal account in response to a partial tender
offer, if Putnam clients are also tendering securities.
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<PAGE> 15
B. Prohibited Purchases and Sales
RULE 1
Putnam employees are prohibited from short selling any security,
whether or not the security is held in a Putnam client portfolio.
EXCEPTIONS
Short selling against the S&P 100 and 500 indexes and "against the
box" are permitted.
RULE 2
No Putnam employee shall purchase any security for her personal
account in an initial public offering.
EXCEPTION
Pre-existing Status Exception. A Putnam employee shall not be barred
by this Rule or by Rule 1(a) of Section I.A. from purchasing
securities for her personal account in connection with an initial
public offering of securities by a bank or insurance company when
the employee's status as a policyholder or depositor entitles her to
purchase securities on terms more favorable than those available to
the general public, in connection with the bank's conversion from
mutual or cooperative form to stock form, or the insurance company's
conversion from mutual to stock form, provided that the employee has
had the status entitling her to purchase on favorable terms for at
least two years. This exception is only available with respect to
the value of bank deposits or insurance policies that an employee
owns before the announcement of the initial public offering. This
exception does not apply, however, if the security appears on the
Restricted List in the circumstances set forth in subparts (b), (c),
or (d) of Section I.A., Rule 1.
IMPLEMENTATION
A. General Implementation. An employee shall inquire, before any
purchase of a security for her personal account, whether the
security to be purchased is being offered pursuant to an initial
public offering. If the security is offered through an initial
public offering, the employee shall refrain from purchasing that
security for her personal account unless the exception applies.
B. Administration of Exception. If the employee believes the
exception applies, she shall consult the Code of Ethics
Administrator concerning whether the security appears on the
Restricted List and if so, whether it is eligible for this
exception.
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COMMENTS
1. The purpose of this rule is twofold. First, it is designed to
prevent a conflict of interest between Putnam employees and
Putnam clients who might be in competition for the same
securities in a limited public offering. Second, the rule is
designed to prevent Putnam employees from being subject to undue
influence as a result of receiving "favors" in the form of
special allocations of securities in a public offering from
broker-dealers who seek to do business with Putnam.
2. Purchases of securities in the immediate after-market of an
initial public offering are not prohibited, provided they do not
constitute violations of other portions of the Code of Ethics.
For example, participation in the immediate after-market as a
result of a special allocation from an underwriting group would
be prohibited by Section III, Rule 3 concerning gifts and other
"favors."
3. Public offerings subsequent to initial public offerings are not
deemed to create the same potential for competition between
Putnam employees and Putnam clients because of the pre-existence
of a market for the securities.
RULE 3
No Putnam employee shall purchase any security for his personal
account in a limited private offering or private placement.
COMMENTS
1. The purpose of this Rule is to prevent a Putnam employee from
investing in securities for his own account pursuant to a limited
private offering that could compete with or disadvantage Putnam
clients, and to prevent Putnam employees from being subject to
efforts to curry favor by those who seek to do business with
Putnam.
2. Exemptions to the prohibition will generally not be granted where
the proposed investment relates directly or indirectly to
investments by a Putnam client, or where individuals involved in
the offering (including the issuers, broker, underwriter,
placement agent, promoter, fellow investors and affiliates of the
foregoing) have any prior or existing business relationship with
Putnam or a Putnam employee, or where the Putnam employee
believes that such individuals may expect to have a future
business relationship with Putnam or a Putnam employee.
3. An exemption may be granted, subject to reviewing all the facts
and circumstances, for investments in:
(a) Pooled investment funds, including hedge funds, subject to
the condition that an employee investing in a pooled
investment fund would have no involvement in the
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<PAGE> 17
activities or decision-making process of the fund except
for financial reports made in the ordinary course of the
fund's business.
(b) Private placements where the investment cannot relate, or
be expected to relate, directly or indirectly to Putnam or
investments by a Putnam client.
4. Employees who apply for an exemption will be expected to disclose
to the Code of Ethics Officer in writing all facts and
relationships relating to the proposed investment.
5. Limited partnership interests are frequently sold in private
placements. An employee should assume that investment in a
limited partnership is barred by these rules, unless the employee
has obtained, in advance of purchase, a written exemption under
the ad hoc exemption set forth in Section I.D., Rule 2. The
procedure for obtaining an ad hoc exemption is described in
Section VII, Part 4.
6. Applications to invest in private placements will be reviewed by
the Code of Ethics Oversight Committee. This review will take
into account, among other factors, the considerations described
in the preceding comments.
RULE 4
No Putnam employee shall purchase or sell any security for her
personal account or for any Putnam client account while in
possession of material, nonpublic information concerning the
security or the issuer.
EXCEPTIONS
NONE. Please read Appendix A, Policy Statement Concerning Insider
Trading Prohibitions.
RULE 5
No Putnam employee shall purchase from or sell to a Putnam client
any securities or other property for his personal account, nor
engage in any personal transaction to which a Putnam client is known
to be a party, or which transaction may have a significant
relationship to any action taken by a Putnam client.
EXCEPTIONS
None.
IMPLEMENTATION
It shall be the responsibility of every Putnam employee to make
inquiry prior to any personal transaction sufficient to satisfy
himself that the requirements of this Rule have been met.
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COMMENT
This rule is required by federal law. It does not prohibit a Putnam
employee from purchasing any shares of an open-end Putnam fund. The
policy with respect to employee trading in closed-end Putnam funds
is attached as Appendix B.
C. Discouraged Transactions
RULE 1
Putnam employees are strongly discouraged from engaging in naked
option transactions for their personal accounts.
EXCEPTIONS
None.
COMMENT
Naked option transactions are particularly dangerous, because a
Putnam employee may be prevented by the restrictions in this Code of
Ethics from "covering" the naked option at the appropriate time. All
employees should keep in mind the limitations on their personal
securities trading imposed by this Code when contemplating such an
investment strategy. Engaging in naked options transactions on the
basis of material, nonpublic information is prohibited. See Appendix
A, Policy Statement Concerning Insider Trading Prohibitions.
RULE 2
Putnam employees are strongly discouraged from engaging in excessive
trading for their personal accounts.
EXCEPTIONS
None.
COMMENTS
1. Although a Putnam employee's excessive trading may not itself
constitute a conflict of interest with Putnam clients, Putnam
believes that its clients' confidence in Putnam will be enhanced
and the likelihood of Putnam achieving better investment results
for its clients over the long term will be increased if Putnam
employees rely on their investment -- as opposed to trading --
skills in transactions for their own account. Moreover, excessive
trading by a Putnam employee for his or her own account diverts
an employee's attention from the responsibility of servicing
Putnam clients, and increases the possibilities for transactions
that are in actual or apparent conflict with Putnam client
transactions.
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2. Although this Rule does not define excessive trading, employees
should be aware that if their trades exceed 10 trades per quarter
the trading activity will be reviewed by the Code of Ethics
Oversight Committee.
D. Exempted Transactions
RULE 1
Transactions which are involuntary on the part of a Putnam employee
are exempt from the prohibitions set forth in Sections I.A., I.B.,
and I.C.
EXCEPTIONS
None.
COMMENTS
1. This exemption is based on categories of conduct that the
Securities and Exchange Commission does not consider "abusive."
2. Examples of involuntary personal securities transactions include:
(a) sales out of the brokerage account of a Putnam employee
as a result of bona fide margin call, provided that
withdrawal of collateral by the Putnam employee within
the ten days previous to the margin call was not a
contributing factor to the margin call;
(b) purchases arising out of an automatic dividend
reinvestment program o f an issuer of a publicly traded
security.
3. Transactions by a trust in which the Putnam employee (or a member
of his immediate family) holds a beneficial interest, but for
which the employee has no direct or indirect influence or control
with respect to the selection of investments, are involuntary
transactions. In addition, these transactions do not fall within
the definition of "personal securities transactions." See
Definitions.
4. A good-faith belief on the part of the employee that a
transaction was involuntary will not be a defense to a violation
of the Code of Ethics. In the event of confusion as to whether a
particular transaction is involuntary, the burden is on the
employee to seek a prior written determination of the
applicability of this exemption. The procedures for obtaining
such a determination appear in Section VII, Part 3.
RULE 2
Transactions which have been determined in writing by the Code of
Ethics Officer before the transaction occurs to be no more than
remotely potentially harmful to Putnam clients because
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<PAGE> 20
the transaction would be very unlikely to affect a highly
institutional market, or because the transaction is clearly not
related economically to the securities to be purchased, sold, or
held by a Putnam client, are exempt from the prohibitions set forth
in Sections I.A., I.B., and I.C.
EXCEPTIONS
N.A.
IMPLEMENTATION
An employee may seek an ad hoc exemption under this Rule by
following the proce dures in Section VII, Part 4.
COMMENTS
1. This exemption is also based upon categories of conduct that the
Securities and Exchange Commission does not consider "abuve."
2. The burden is on the employee to seek a prior written
determination that the proposed transaction meets the standards
for an ad hoc exemption set forth in this Rule.
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A Section II. Additional Special Rules for Personal Securities
Transactions of Access Persons and Certain Investment
Professionals
Access Persons (including all Investment Professionals and other
employees as defined on page ix)
RULE 1 ("60-DAY" RULE)
No Access Person shall profit from the purchase and sale, or sale and
purchase, of any security or related derivative security within 60
calendar days.
EXCEPTIONS
None, unless prior written approval from the Code of Ethics Officer is
obtained. Exceptions may be granted on a case-by-case basis when no
abuse is involved and the equities of the situation support an
exemption. For example, although an Access Person may buy a stock as a
long-term investment, that stock may have to be sold involuntarily due
to unforeseen activity such as a merger.
IMPLEMENTATION
1. The 60-Day Rule applies to all Access Persons, as defined in the
Definitions section of the Code.
2. Calculation of whether there has been a profit is based upon the
market prices of the securities. THE CALCULATION IS NOT NET OF
COMMISSIONS OR OTHER SALES CHARGES.
3. As an example, an Access Person would not be permitted to sell a
security at $12 that he purchased within the prior 60 days for $10.
Similarly, an Access Person would not be permitted to purchase a
security at $10 that she had sold within the prior 60 days for $12.
If the proposed transaction would be made at a loss, it would be
permitted if the pre-clearance requirements are met. See, Section I,
Rule 1.
COMMENTS
1. The prohibition against short-term trading profits by Access Persons
is designed to minimize the possibility that they will capitalize
inappropriately on the market impact of trades involving a client
portfolio about which they might possibly have information.
2. Although Chief Investment Officers, Portfolio Managers, and Analysts
may sell securities at a profit within 60 days of purchase in order
to comply with the requirements of the 7-Day Rule applicable to them
(described below), the profit will have to be disgorged to charity
under the terms of the 7-Day Rule.
3. Access Persons occasionally make a series of transactions in
securities over extended periods of time. For example, an Access
Person bought 100 shares of Stock X on Day 1 at $100 per
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<PAGE> 22
share and then bought 50 additional shares on Day 45 at $95 per
share. On Day 75, the Access Person sold 20 shares at $105 per
share. The question arises whether the Access Person violated the
60-Day Rule. The characterization of the employee's tax basis in the
shares sold determines the analysis. If, for personal income tax
purposes, the Access Person characterizes the shares sold as having
a basis of $100 per share (i.e., shares purchased on Day 1), the
transaction would be consistent with the 60-Day Rule. However, if
the tax basis in the shares is $95 per share (i.e., shares purchased
on Day 45), the transaction would violate the 60-Day Rule.
Certain Investment Professionals
RULE 2 ("7-DAY" RULE)
(a) Portfolio Managers: Before a portfolio manager places an order to
buy a security for any Putnam client portfolio that he manages, he shall
sell any such security or related derivative security purchased in a
transaction for his personal account within the preceding seven calendar
days.
(b) Co-Managers: Before a portfolio manager places an order to buy a
security for any Putnam client he manages, his co-manager shall sell any
such security or related derivative security purchased in transaction
for his personal account within the preceding seven calendar days.
(c) Analysts: Before an analyst makes a buy recommendation for a
security, he shall sell any such security or related derivative security
purchased in a transaction for his personal account within the preceding
seven calendar days.
(d) Chief Investment Officers: The Chief Investment Officer of an
investment group must sell any security or related derivative security
purchased in a transaction for his personal account within the preceding
seven calendar days before any portfolio manager in the CIO's investment
group places an order to buy such security for any Putnam client account
he manages.
EXCEPTIONS
None.
COMMENTS
1. This Rule applies to portfolio managers and Chief Investment
Officers with respect to any purchase (no matter how small) in any
client account managed or overseen by that portfolio manager or CIO
(even so-called "clone accounts"). In particular, it should be noted
that the requirements of this rule also apply with respect to
purchases in client accounts, including "clone accounts," resulting
from "cash flows." To comply with the requirements of this rule, it
is the responsibility of each portfolio manager and CIO to be aware
of the placement of all orders for purchases of a security by client
accounts that he or she manages or oversees for 7 days following the
purchase of that security for his or her personal account.
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2. An investment professional who must sell securities to be in
compliance with the 7-Day Rule must absorb any loss and disgorge
to charity any profit resulting from the sale.
3. This Rule is designed to avoid even the appearance of a conflict of
interest between an investment professional and a Putnam client. A
more stringent rule is warranted because, with their greater
knowledge and control, these investment professionals are in a
better position than other employees to create an appearance of
manipulation of Putnam client accounts for personal benefit.
4. "Portfolio manager" is used in this Section as a functional label,
and is intended to cover any employee with authority to authorize a
trade on behalf of a Putnam client, whether or not such employee
bears the title "portfolio manager." "Analyst" is also used in this
Section as a functional label, and is intended to cover any employee
who is not a portfolio manager but who may make recommendations
regarding investments for Putnam clients.
RULE 3 ("BLACKOUT RULE")
(a) Portfolio Managers: No portfolio manager shall: (i) sell any
security or related derivative security for her personal account until
seven calendar days have elapsed since the most recent purchase of that
security or related derivative security by any Putnam client portfolio
she manages or co-manages; or (ii) purchase any security or related
derivative security for her personal account until seven calendar days
have elapsed since the most recent sale of that security or related
derivative security from any Putnam client portfolio that she manages or
co-manages.
(b) Analysts: No analyst shall: (i) sell any security or related
derivative security for his personal account until seven calendar days
have elapsed since his most recent buy recommendation for that security
or related derivative security; or (ii) purchase any security or related
derivative security for his personal account until seven calendar days
have elapsed since his most recent sell recommendation for that security
or related derivative security.
(c) Chief Investment Officers: No Chief Investment Officer shall: (i)
sell any security or related derivative security for his personal
account until seven calendar days have elapsed since the most recent
purchase of that security or related derivative security by a portfolio
manager in his investment group; or (ii) purchase any security or
related derivative security for his personal account until seven
calendar days have elapsed since the most recent sale of that security
or related derivative security from any Putnam client portfolio managed
in his investment group.
EXCEPTIONS
None.
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COMMENTS
1. This Rule applies to portfolio managers and Chief Investment
Officers with respect to any transaction (no matter how small) in
any client account managed or overseen by that portfolio manager or
CIO (even so-called "clone accounts"). In particular, it should be
noted that the requirements of this rule also apply with respect to
transactions in client accounts, including "clone accounts,"
resulting from "cash flows." In order to comply with the
requirements of this rule, it is the responsibility of each
portfolio manager and CIO to be aware of all transactions in a
security by client accounts that he or she manages or oversees that
took place within the 7 days preceding a transaction in that
security for his or her personal account.
2. This Rule is designed to prevent a Putnam portfolio manager or
analyst from engaging in personal investment conduct that appears to
be counter to the investment strategy she is pursuing or
recommending on behalf of a Putnam client.
3. Trades by a Putnam portfolio manager for her personal account in the
"same direction" as the Putnam client portfolio she manages, and
trades by an analyst for his personal account in the "same
direction" as his recommendation, do not present the same danger, so
long as any "same direction" trades do not violate other provisions
of the Code or the Policy Statements.
RULE 4 ("CONTRA TRADING" RULE)
(a) Portfolio Managers: No portfolio manager shall, without prior
clearance, sell out of his personal account securities or related
derivative securities held in any Putnam client portfolio that he
manages or co-manages.
(b) Chief Investment Officers: No Chief Investment Officer shall,
without prior clearance, sell out of his personal account securities or
related derivative securities held in any Putnam client portfolio
managed in his investment group.
EXCEPTIONS
None, unless prior clearance is given.
IMPLEMENTATION
A. Individuals Authorized to Give Approval. Prior to engaging in any
such sale, a portfolio manager shall seek approval, in writing, of
the proposed sale. In the case of a portfolio manager or director,
prior written approval of the proposed sale shall be obtained from a
chief investment officer to whom he reports or, in his absence,
another chief investment officer. In the case of a chief investment
officer, prior written approval of the proposed sale shall be
obtained from another chief investment officer. In addition to the
foregoing, prior written approval must also be obtained from the
Code of Ethics Officer.
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B. Contents of Written Approval. In every instance, the written
approval form attached as Appendix C (or such other form as the Code
of Ethics Officer shall designate) shall be used. The written
approval should be signed by the chief investment officer giving
approval and dated the date such approval was given, and shall
state, briefly, the reasons why the trade was allowed and why the
investment conduct pursued by the portfolio manager, director, or
chief investment officer was deemed inappropriate for the Putnam
client account controlled by the individual seeking to engage in the
transaction for his personal account. Such written approval shall be
sent by the chief investment officer approving the transaction to
the Code of Ethics Officer within twenty-four hours or as promptly
as circumstances permit. Approvals obtained after a transaction has
been completed or while it is in process will not satisfy the
requirements of this Rule.
COMMENT
This Rule, like Rule 3 of this Section, is designed to prevent a Putnam
portfolio manager from engaging in personal investment conduct that
appears to be counter to the investment strategy that he is pursuing on
behalf of a Putnam client.
RULE 5
No portfolio manager shall cause, and no analyst shall recommend, a
Putnam client to take action for the portfolio manager's or analyst's
own personal benefit.
EXCEPTIONS
None.
COMMENTS
1. A portfolio manager who trades in, or an analyst who recommends,
particular securities for a Putnam client account in order to
support the price of securities in his personal account, or who
"front runs" a Putnam client order is in violation of this Rule.
Portfolio managers and analysts should be aware that this Rule is
not limited to personal transactions in securities (as that word is
defined in "Definitions"). Thus, a portfolio manager or analyst who
"front runs" a Putnam client purchase or sale of obligations of the
U.S. government is in violation of this Rule, although U.S.
government obligations are excluded from the definition of
"security."
2. This Rule is not limited to instances when a portfolio manager or
analyst has malicious intent. It also prohibits conduct that creates
an appearance of impropriety. Portfolio managers and analysts who
have questions about whether proposed conduct creates an appearance
of impropriety should seek a prior written determination from the
Code of Ethics Officer, using the procedures described in Section
VII, Part 3.
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A Section III. Prohibited Conduct for All Employees
RULE 1
All employees must comply with applicable laws and regulations as well
as company policies. This includes tax, antitrust, political
contribution, and international boycott laws. In addition, no employee
at Putnam may engage in fraudulent conduct of any kind.
EXCEPTIONS
None.
COMMENTS
1. Putnam may report to the appropriate legal authorities conduct by
Putnam employees that violates this rule.
2. It should also be noted that the U.S. Foreign Corrupt Practices Act
makes it a criminal offense to make a payment or offer of payment to
any non-U.S. governmental official, political party, or candidate to
induce that person to affect any governmental act or decision, or to
assist Putnam's obtaining or retaining business.
RULE 2
No Putnam employee shall conduct herself in a manner which is contrary
to the interests of, or in competition with, Putnam or a Putnam client,
or which creates an actual or apparent conflict of interest with a
Putnam client.
EXCEPTIONS
None.
COMMENTS
1. This Rule is designed to recognize the fundamental principle that
Putnam employees owe their chief duty and loyalty to Putnam and
Putnam clients.
2. It is expected that a Putnam employee who becomes aware of an
investment opportunity that she believes is suitable for a Putnam
client who she services will present it to the appropriate portfolio
manager, prior to taking advantage of the opportunity herself.
RULE 3
No Putnam employee shall seek or accept gifts, favors, preferential
treatment, or special arrangements of material value from any
broker-dealer, investment adviser, financial institution, corporation,
or other entity, or from any existing or prospective supplier of goods
or services to Putnam or Putnam Funds. Specifically, any gift over $50
in value, or any accumulation of gifts which in aggregate exceeds $50 in
value from one source in one calendar year, is prohibited. Any Putnam
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employee who is offered or receives an item prohibited by this Rule must
report the details in writing to the Code of Ethics Officer.
EXCEPTIONS
None.
COMMENTS
1. This rule is intended to permit only proper types of customary
business amenities. Listed below are examples of items that would be
permitted under proper circumstances and of items that are
prohibited under this rule. These examples are illustrative and not
all-inclusive. Notwithstanding these examples, a Putnam employee may
not, under any circumstances, accept anything that could create the
appearance of any kind of conflict of interest. For example,
acceptance of any consideration is prohibited if it would create the
appearance of a "reward" or inducement for conducting Putnam
business either with the person providing the gift or his employer.
2. This rule also applies to gifts or "favors" of material value that
an investment professional may receive from a company or other
entity being researched or considered as a possible investment for a
Putnam client account.
3. Among items not considered of "material value" which, under proper
circumstances, would be considered permissible are:
(a) Occasional lunches or dinners conducted for business purposes;
(b) Occasional cocktail parties or similar social gatherings
conducted for business purposes;
(c) Occasional attendance at theater, sporting or other
entertainment events conducted for business purposes; and
(d) Small gifts, usually in the nature of reminder advertising,
such as pens, calendars, etc., with a value of no more than
$50.
4. Among items which are considered of "material value" and which are
prohibited are:
(a) Entertainment of a recurring nature such as sporting events,
theater, golf games, etc.;
(b) The cost of transportation to a locality outside the Boston
metropolitan area, and lodging while in another locality,
unless such attendance and reimbursement arrangements have
received advance written approval of the Code of Ethics
Officer;
(c) Personal loans to a Putnam employee on terms more favorable
than those generally available for comparable credit standing
and collateral; and
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(d) Preferential brokerage or underwriting commissions or spreads
or allocations of shares or interests in an investment for the
personal account of a Putnam employee.
5. As with any of the provisions of the Code of Ethics, a sincere
belief by the employee that he was acting in accordance with the
requirements of this Rule will not satisfy his obligations under the
Rule. Therefore, an employee who is in doubt concerning the
propriety of any gift or "favor" should seek a prior written
determination from the Code of Ethics Officer, as provided in Part 3
of Section VII.
RULE 4
No Putnam employee may pay, offer, or commit to pay any amount of
consideration which might be or appear to be a bribe or kickback in
connection with Putnam's business.
EXCEPTIONS
None.
COMMENT
Although the rule does not specifically address political contributions,
Putnam employees should be aware that it is against corporate policy to
use company assets to fund political contributions of any sort, even
where such contributions may be legal. No Putnam employee should offer
or agree to make any political contributions (including political
dinners and similar fund-raisers) on behalf of Putnam, and no employee
will be reimbursed by Putnam for such contributions made by the employee
personally.
RULE 5
No contributions may be made with corporate funds to any political party
or campaign, whether directly or by reimbursement to an employee for the
expense of such a contribution. No Putnam employee shall solicit any
charitable, political or other contributions using Putnam letterhead or
making reference to Putnam in the solicitation. No Putnam employee shall
personally solicit any such contribution while on Putnam business.
EXCEPTIONS
None.
COMMENT
1. Putnam has established a political action committee (PAC) that
contributes to worthy candidates for political office. Any request
received by a Putnam employee for a political contribution must be
directed to Putnam's Legal and Compliance Department.
2. This rule does not prohibit solicitation on personal letterhead by
Putnam employees. Nonetheless, Putnam employees should use
discretion in soliciting contributions from
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<PAGE> 29
individuals or entities who provide services to Putnam. There should
never be a suggestion that any service provider must contribute to
keep Putnam's business.
RULE 6
No unauthorized disclosure may be made by any employee or former
employee of any trade secrets or proprietary information of Putnam or of
any confidential information. No information regarding any Putnam client
portfolio, actual or proposed securities trading activities of any
Putnam client, or Putnam research shall be disclosed outside the Putnam
organization without a valid business purpose.
EXCEPTIONS
None.
COMMENT
All information about Putnam and Putnam clients is strictly
confidential. Putnam research information should not be disclosed
unnecessarily and never for personal gain.
RULE 7
No Putnam employee shall serve as officer, employee, director, trustee
or general partner of a corporation or entity other than Putnam, without
prior approval of the Code of Ethics Officer.
EXCEPTION
Charitable or Non-profit Exception. This Rule shall not prevent any
Putnam employee from serving as officer, director, or trustee of a
charitable or not-for-profit institution, provided that the employee
abides by the spirit of the Code of Ethics and the Policy Statements
with respect to any investment activity for which she has any discretion
or input as officer, director, or trustee. The pre-clearance and
reporting requirements of the Code of Ethics do not apply to the trading
activities of such charitable or not-for-profit institutions for which
an employee serves as an officer, director, or trustee.
COMMENTS
1. This Rule is designed to ensure that Putnam cannot be deemed an
affiliate of any issuer of securities by virtue of service by one of
its officers or employees as director or trustee.
2. Certain charitable or not-for-profit institutions have assets (such
as endowment funds or employee benefit plans) which require prudent
investment. To the extent that a Putnam employee (because of her
position as officer, director, or trustee of an outside entity) is
charged with responsibility to invest such assets prudently, she may
not be able to discharge that duty while simultaneously abiding by
the spirit of the Code of Ethics and the Policy Statements.
Employees are cautioned that they should not accept service as an
officer, director, or trustee of an outside charitable or
not-for-profit entity where such investment responsibility is
involved,
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without seriously considering their ability to discharge their
fiduciary duties with respect to such investments.
RULE 8
No Putnam employee shall serve as a trustee, executor, custodian, any
other fiduciary, or as an investment adviser or counselor for any
account outside Putnam.
EXCEPTIONS
Charitable or Religious Exception. This Rule shall not prevent any
Putnam employee from serving as fiduciary with respect to a religious or
charitable trust or foundation, so long as the employee abides by the
spirit of the Code of Ethics and the Policy Statements with respect to
any investment activity over which he has any discretion or input. The
pre-clearance and reporting requirements of the Code of Ethics do not
apply to the trading activities of such a religious or charitable trust
or foundation.
Family Trust or Estate Exception. This Rule shall not prevent any Putnam
employee from serving as fiduciary with respect to a family trust or
estate, so long as the employee abides by all of the Rules of the Code
of Ethics with respect to any investment activity over which he has any
discretion.
COMMENT
The roles permissible under this Rule may carry with them the obligation
to invest assets prudently. Once again, Putnam employees are cautioned
that they may not be able to fulfill their duties in that respect while
abiding by the Code of Ethics and the Policy Statements.
RULE 9
No Putnam employee may be a member of any investment club.
EXCEPTIONS
None.
COMMENT
This Rule guards against the danger that a Putnam employee may be in
violation of the Code of Ethics and the Policy Statements by virtue of
his personal securities transactions in or through an entity that is not
bound by the restrictions imposed by this Code of Ethics and the Policy
Statements. Please note that this restriction also applies to the spouse
of a Putnam employee and any relatives of a Putnam employee living in
the same household as the employee, as their transactions are covered by
the Code of Ethics (see page x).
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RULE 10
No Putnam employee may become involved in a personal capacity in
consultations or negotiations for corporate financing, acquisitions or
other transactions for outside companies (whether or not held by any
Putnam client), nor negotiate nor accept a fee in connection with these
activities without obtaining the prior written permission of the
president of Putnam Investments.
EXCEPTIONS
None.
RULE 11
No new types of securities or instruments may be purchased for a Putnam
fund or other client account without following the procedures set forth
in Appendix D.
EXCEPTIONS
None.
COMMENT
See Appendix D.
RULE 12
No employee may create or participate in the creation of any record that
is intended to mislead anyone or to conceal anything that is improper.
EXCEPTIONS
None.
COMMENT
In many cases, this is not only a matter of company policy and ethical
behavior but also required by law. Our books and records must accurately
reflect the transactions represented and their true nature. For example,
records must be accurate as to the recipient of all payments; expense
items, including personal expense reports, must accurately reflect the
true nature of the expense. No unrecorded fund or asset shall be
established or maintained for any reason.
RULE 13
No employee should have any direct or indirect (including by a family
member or close relative) personal financial interest (other than normal
investments not material to the employee in the entity's publicly traded
securities) in any business, with which Putnam has dealings unless such
interest is disclosed and approved by the Code of Ethics Officer.
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RULE 14
No employee shall, with respect to any affiliate of Putnam that provides
investment advisory services and is listed below in Comment 4 to this
Rule, as revised from time to time (each an "NPA"),
(a) directly or indirectly seek to influence the purchase, retention,
or disposition of, or exercise of voting, consent, approval or similar
rights with respect to, any portfolio security in any account or fund
advised by the NPA and not by Putnam,
(b) transmit any information regarding the purchase, retention or
disposition of, or exercise of voting, consent, approval or similar
rights with respect to, any portfolio security held in a Putnam or NPA
client account to any personnel of the NPA,
(c) transmit any trade secrets, proprietary information, or
confidential information of Putnam to the NPA without a valid business
purpose,
(d) use confidential information or trade secrets of the NPA for the
benefit of the employee, Putnam, or any other NPA, or
(e) breach any duty of loyalty to the NPA by virtue of service as a
director or officer of the NPA.
COMMENT
1. Sections (a) and (b) of the Rule are designed to help ensure that
the portfolio holdings of Putnam clients and clients of the NPA need
not be aggregated for purposes of determining beneficial ownership
under Section 13(d) of the Securities Exchange Act or applicable
regulatory or contractual investment restrictions that incorporate
such definition of beneficial ownership. Persons who serve as
directors or officers of both Putnam and an NPA would take care to
avoid even inadvertent violations of Section (b). Section (a) does
not prohibit a Putnam employee who serves as a director or officer
of the NPA from seeking to influence the modification or termination
of a particular investment product or strategy in a manner that is
not directed at any specific securities. Sections (a) and (b) do not
apply when a Putnam affiliate serves as an adviser or subadviser to
the NPA or one of its products, in which case normal Putnam
aggregation rules apply.
2. As a separate entity, any NPA may have trade secrets or confidential
information that it would not choose to share with Putnam. This
choice must be respected.
3. When Putnam employees serve as directors or officers of an NPA, they
are subject to common law duties of loyalty to the NPA, despite
their Putnam employment. In general, this means that when performing
their duties as NPA directors or officers, they must act in the best
interest of the NPA and its shareholders. Putnam's Legal and
Compliance Department will assist any
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Putnam employee who is a director or officer of an NPA and has
questions about the scope of his or her responsibilities to the NPA.
4. Entities that are currently non-Putnam affiliates within the scope
of this Rule are: Cisalpina Gestioni, S.p.A., PanAgora Asset
Management Inc., PanAgora Asset Management Ltd., Nissay Asset
Management Co., Ltd., and Thomas H. Lee Partners, L.P.
RULE 15
No employee shall use computer hardware, software, data, Internet,
electronic mail, voice mail, electronic messaging ("e-mail" or "cc:
Mail"), or telephone communications systems in a manner that is
inconsistent with their use as set forth in policy statements governing
their use that are adopted from time to time by Putnam. No employee
shall introduce a computer "virus" or computer code that may result in
damage to Putnam's information or computer systems.
EXCEPTIONS
None.
COMMENT
1. Internet and Electronic Messaging Policies. As more and more
employees of Putnam Investments use the Internet to connect with
Putnam's customers, vendors, suppliers and other key organizations,
it is important that all Putnam employees understand the appropriate
use guidelines and how to protect assets of Putnam and its clients
whenever using the Internet. Internet access is provided to
designated employees to connect with worldwide information resources
for the benefit of the company and its clients. Such access is not
intended for personal use. Employees using the Internet or any
electronic messaging system must do so in a responsible, ethical and
lawful manner.
- Putnam has adopted a Policy and Guidelines on Internet Use. A copy
of this policy statement is included in the Putnam Employee Handbook
and is available online (you may contact Putnam's Human Resources
Department for the on-line address). Failure to comply with this
policy statement is a violation of Putnam's Code of Ethics.
2. System Security Policy Statement. It is the policy of Putnam
Investments to secure its computer hardware, software, data,
electronic mail, voice mail and Internet access by placing strict
controls and restrictions on their access and use.
- Putnam has adopted a System Security Policy Statement. This policy
statement governs the use of computer hardware and software, data,
electronic mail, voice mail, Internet and commercial online
services, computer passwords and logon Ids, and workstation
security. A copy of this policy statement is included in the Putnam
Employee Handbook and is available
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<PAGE> 34
online (you may contact Putnam's Human Resources Department for the
on-line address). Failure to comply with this policy statement is a
violation of Putnam's Code of Ethics.
3. Computer Virus Policy and Procedure. Putnam has adopted a Computer
Virus Policy and Procedure. This policy sets forth guidelines to
prevent computer viruses, procedures to be followed in the event a
computer may be infected with a virus, and a description of virus
symptoms. A copy of this policy statement is included in the Putnam
Employee Handbook and is available online (you may contact Putnam's
Human Resources Department for the on-line address). Failure to
comply with this policy statement is a violation of Putnam's Code of
Ethics.
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A Section IV. Special Rules for Officers and Employees of Putnam Europe
Ltd.
RULE 1
In situations subject to Section I.A., Rule 1 (Restricted List Personal
Securities Transactions), the Putnam Europe Ltd. ("PEL") employee must
obtain clearance not only as provided in that rule, but also from PEL's
Compliance Officer or her designee, who must approve the transaction
before any trade is placed and record the approval.
EXCEPTIONS
None.
IMPLEMENTATION
Putnam's Code of Ethics Administrator in Boston (the "Boston
Administrator") has also been designated the Assistant Compliance
Officer of PEL and has been delegated the right to approve or disapprove
personal securities transactions in accordance with the foregoing
requirement. Therefore, approval from the Code of Ethics Administrator
for PEL employees to make personal securities investments constitutes
approval under the Code of Ethics and also for purposes of compliance
with IMRO, the U.K. self-regulatory organization that regulates PEL.
The position of London Code of Ethics Administrator (the "London
Administrator") has also been created (Jane Barlow is the current London
Administrator). All requests for clearances must be made by e-mail to
the Boston Administrator copying the London Administrator. The e-mail
must include the number of shares to be bought or sold and the name of
the broker(s) involved. Where time is of the essence clearances can be
made by telephone to the Boston Administrator but they must be followed
up by e-mail.
Both the Boston and London Administrators will maintain copies of all
clearances for inspection by senior management and regulators.
RULE 2
No PEL employee may trade with any broker or dealer unless that broker
or dealer has sent a letter to the London Administrator agreeing to
deliver copies of trade confirmations to PEL. No PEL employee may enter
into any margin or any other special dealing arrangement with any
broker-dealer without the prior written consent of the PEL Compliance
Officer.
EXCEPTIONS
None.
IMPLEMENTATION
PEL employees will be notified separately of this requirement once a
year by the PEL Compliance Officer, and are required to provide an
annual certification of compliance with the Rule.
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All PEL employees must inform the London Administrator of the names of
all brokers and dealers with whom they trade prior to trading. The
London Administrator will send a letter to the broker(s) in question
requesting them to agree to deliver copies of confirms to PEL. The
London Administrator will forward copies of the confirms to the Boston
Administrator. PEL employees may trade with a broker only when the
London Administrator has received the signed agreement from that broker.
RULE 3
For purposes of the Code of Ethics, including Putnam's Policy Statement
on Insider Trading Prohibitions, PEL employees must also comply with
Part V of the Criminal Justice Act 1993 on insider dealing.
EXCEPTIONS
None.
IMPLEMENTATION
To ensure compliance with U.K. insider dealing legislation, PEL
employees must observe the relevant procedures set forth in PEL's
Compliance Manual, a copy of which is sent to each PEL employee, and
sign an annual certification as to compliance.
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A Section V. Reporting Requirements for All Employees
Reporting of Personal Securities Transactions
RULE 1
Each Putnam employee shall ensure that broker-dealers send all
confirmations of securities transactions for his personal accounts to
the Code of Ethics Officer. (For the purpose of this Rule, "securities"
shall include securities of The Marsh & McLennan Companies, Inc., and
any option on a security or securities index, including broad-based
market indexes.)
EXCEPTIONS
None.
IMPLEMENTATION
1. Putnam employees must instruct their broker-dealers to send
confirmations to Putnam and must follow up with the broker-dealer on
a reasonable basis to ensure that the instructions are being
followed. Putnam employees should contact the Code of Ethics
Administrator to obtain a letter from Putnam authorizing the setting
up of a personal brokerage account. Confirmations should be
submitted to the Code of Ethics Administrator. (Specific procedures
apply to employees of Putnam Europe Ltd. ("PEL"). Employees of PEL
should contact the London Code of Ethics Administrator.) Failure of
a broker-dealer to comply with the instructions of a Putnam employee
to send confirmations shall be a violation by the Putnam employee of
this Rule.
COMMENTS
1. "Transactions for personal accounts" is defined broadly to include
more than transaction in accounts under an employee's own name. See
Definitions.
2. A confirmation is required for all personal securities transactions,
whether or not exempted or excepted by this Code.
3. To the extent that a Putnam employee has investment authority over
securities transactions of a family trust or estate, confirmations
of those transactions must also be made, unless the employee has
received a prior written exception from the Code of Ethics Officer.
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RULE 2
Every Access Person shall file a quarterly report, within ten calendar
days of the end of each quarter, recording all purchases and sales of
any securities for personal accounts as defined in the Definitions. (For
the purpose of this Rule, "securities" shall include securities of The
Marsh & McLennan Companies, Inc., and any option on a security or
securities index, including broad-based market indexes.)
EXCEPTIONS
None.
IMPLEMENTATION
All employees required to file such a report will receive a blank form
at the end of the quarter from the Code of Ethics Administrator. The
form will specify the information to be reported. The form shall also
contain a representation that employees have complied fully with all
provisions of the Code of Ethics.
COMMENT
1. The date for each transaction required to be disclosed in the
quarterly report is the trade date for the transaction, not the
settlement date.
2. If the requirement to file a quarterly report applies to you and you
fail to report within the required 10-day period, salary increases
and bonuses will be reduced in accordance with guidelines stated in
the form.
Reporting of Personal Securities Holdings
RULE 3
Access Persons must disclose all personal securities holdings to the
Code of Ethics Officer upon commencement of employment and thereafter on
an annual basis.
EXCEPTIONS
None.
COMMENT
These requirements are mandated by SEC regulations and are designed to
facilitate the monitoring of personal securities transactions. Putnam's
Code of Ethics Administrator will provide Access Persons with the form
for making these reports and the specific information that must be
disclosed at the time that the disclosure is required.
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Other Reporting Policies
The following rules are designed to ensure that Putnam's internal
Control and Reporting professionals are aware of all items that might
need to be addressed by Putnam or reported to appropriate entities.
RULE 4
If a Putnam employee suspects that fraudulent or other irregular
activity might be occurring at Putnam, the activity must be reported
immediately to the Managing Director in charge of that employee's
business unit. Managing Directors who are notified of any such activity
must immediately report it in writing to Putnam's Chief Financial
Officer or Putnam's General Counsel.
RULE 5
Putnam employees must report all communications from regulatory or
government agencies (federal, state, or local) to the Managing Director
in charge of their business unit. Managing Directors who are notified of
any such communication must immediately report it in writing to Putnam's
Chief Financial Officer or Putnam's General Counsel.
RULE 6
All claims, circumstances or situations that come to the attention of a
Putnam employee must be reported through the employee's management
structure up to the Managing Director in charge of the employee's
business unit. Managing Directors who are notified of any such claim,
circumstance or situation that might give rise to a claim against Putnam
for more than $100,000 must immediately report in writing it to Putnam's
Chief Financial Officer or Putnam's General Counsel.
RULE 7
All possible violations of law or regulations at Putnam that come to the
attention of a Putnam employee must be reported immediately to the
Managing Director in charge of the employee's business unit. Managing
Directors who are notified of any such activity must immediately report
it in writing to Putnam's Chief Financial Officer or Putnam's General
Counsel.
RULE 8
Putnam employees must report all requests by anyone for Putnam to
participate in or cooperate with an international boycott to the
Managing Director in charge of their business unit. Managing Directors
who are notified of any such request must immediately report it in
writing to Putnam's Chief Financial Officer or Putnam's General Counsel.
s 31
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A Section VI. Education Requirements
Every Putnam employee has an obligation to fully understand the
requirements of the Code of Ethics. The Rules set forth below are
designed to enhance this understanding.
RULE 1
A copy of the Code of Ethics will be distributed to every Putnam
employee periodically. All Access Persons will be required to certify
periodically that they have read, understood, and will comply with the
provisions of the Code of Ethics, including the Code's Policy Statement
Concerning Insider Trading Prohibitions.
RULE 2
Every investment professional will attend a meeting periodically at
which the Code of Ethics will be reviewed.
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A Section VII. Compliance and Appeal Procedures
1. Assembly of Restricted List. The Code of Ethics Administrator will
coordinate the assembly and maintenance of the Restricted List. The
list will be assembled each day by 11:30 a.m. EST. No employee may
engage in a personal securities transaction without prior clearance
on any day, even if the employee believes that the trade will be
subject to an exception. Note that pre-clearance may be obtained
after 9:00 a.m. for purchases or sales of up to 1,000 shares of
issuers having a market capitalization in excess of $5 billion.
2. Consultation of Restricted List. It is the responsibility of each
employee to pre-clear through the Intranet pre-clearance system or
consult with the Code of Ethics Administrator prior to engaging in a
personal securities transaction, to determine if the security he
proposes to trade is on the Restricted List and, if so, whether it
is subject to the "Large Cap" limitation. The Intranet pre-clearance
system and the Code of Ethics Administrator will be able to tell an
employee whether a security is on the Restricted List. No other
information about the Restricted List is available through the
Intranet pre-clearance system. The Code of Ethics Administrator
shall not be authorized to answer any questions about the Restricted
List, or to render an opinion about the propriety of a particular
personal securities transaction. Any such questions shall be
directed to the Code of Ethics Officer.
3. Request for Determination. An employee who has a question concerning
the applicability of the Code of Ethics to a particular situation
shall request a determination from the Code of Ethics Officer before
engaging in the conduct or personal securities transaction about
which he has a question.
If the question pertains to a personal securities transaction, the
request shall state for whose account the transaction is proposed,
the relationship of that account to the employee, the security
proposed to be traded, the proposed price and quantity, the entity
with whom the transaction will take place (if known), and any other
information or circumstances of the trade that could have a bearing
on the Code of Ethics Officer's determination. If the question
pertains to other conduct, the request for determination shall give
sufficient information about the proposed conduct to assist the Code
of Ethics Officer in ascertaining the applicability of the Code. In
every instance, the Code of Ethics Officer may request additional
information, and may decline to render a determination if the
information provided is insufficient.
The Code of Ethics Officer shall make every effort to render a
determination promptly.
No perceived ambiguity in the Code of Ethics shall excuse any
violation. Any person who believes the Code to be ambiguous in a
particular situation shall request a determination from the Code of
Ethics Officer.
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4. Request for Ad Hoc Exemption. Any employee who wishes to obtain an
ad hoc exemption under Section I.D., Rule 2, shall request from the
Code of Ethics Officer an exemption in writing in advance of the
conduct or transaction sought to be exempted. In the case of a
personal securities transaction, the request for an ad hoc exemption
shall give the same information about the transaction required in a
request for determination under Part 3 of this Section, and shall
state why the proposed personal securities transaction would be
unlikely to affect a highly institutional market, or is unrelated
economically to securities to be purchased, sold, or held by any
Putnam client. In the case of other conduct, the request shall give
information sufficient for the Code of Ethics Officer to ascertain
whether the conduct raises questions of propriety or conflict of
interest (real or apparent).
The Code of Ethics Officer shall make every effort to promptly
render a written determination concerning the request for an ad hoc
exemption.
5. Appeal to Code of Ethics Officer with Respect to Restricted List. If
an employee ascertains that a security that he wishes to trade for
his personal account appears on the Restricted List, and thus the
transaction is prohibited, he may appeal the prohibition to the Code
of Ethics Officer by submitting a written memorandum containing the
same information as would be required in a request for a
determination. The Code of Ethics Officer shall make every effort to
respond to the appeal promptly.
6. Information Concerning Identity of Compliance Personnel. The names
of Code of Ethics personnel are available by contacting the Legal
and Compliance Department.
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Appendix A
Policy Statement Concerning
Insider Trading Prohibitions
piv
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<PAGE> 44
A Preamble
Putnam has always forbidden trading on material nonpublic information
("inside information") by its employees. Tougher federal laws make it
important for Putnam to restate that prohibition in the strongest
possible terms, and to establish, maintain, and enforce written policies
and procedures to prevent the misuse of material nonpublic information.
Unlawful trading while in possession of inside information can be a
crime. Today, federal law provides that an individual convicted of
trading on inside information go to jail for some period of time. There
is also significant monetary liability for an inside trader; the
Securities and Exchange Commission can seek a court order requiring a
violator to pay back profits and penalties of up to three times those
profits. In addition, private plaintiffs can seek recovery for harm
suffered by them. The inside trader is not the only one subject to
liability. In certain cases, "controlling persons" of inside traders
(including supervisors of inside traders or Putnam itself) can be liable
for large penalties.
Section 1 of this Policy Statement contains rules concerning inside
information. Section 2 contains a discussion of what constitutes
unlawful insider trading.
Neither material nonpublic information nor unlawful insider trading is
easy to define. Section 2 of this Policy Statement gives a general
overview of the law in this area. However, the legal issues are complex
and must be resolved by the Code of Ethics Officer. If an employee has
any doubt as to whether she has received material nonpublic information,
she must consult with the Code of Ethics Officer prior to using that
information in connection with the purchase or sale of a security for
his own account or the account of any Putnam client, or communicating
the information to others. A simple rule of thumb is if you think the
information is not available to the public at large, don't disclose it
to others and don't trade securities to which the inside information
relates. If an employee has failed to consult the Code of Ethics
Officer, Putnam will not excuse employee misuse of inside information on
the ground that the employee claims to have been confused about this
Policy Statement or the nature of the information in his possession.
If Putnam determines, in its sole discretion, that an employee has
failed to abide by this Policy Statement, or has engaged in conduct that
raises a significant question concerning insider trading, he will be
subject to disciplinary action, including termination of employment.
THERE ARE NO EXCEPTIONS TO THIS POLICY STATEMENT AND NO ONE IS EXEMPT.
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A Definitions: Insider Trading
Gender references in Appendix A alternate.
Code of Ethics Administrator. The individual designated by the Code of
Ethics Officer to assume responsibility for day-to-day,
non-discretionary administration of this Policy Statement.
Code of Ethics Officer. The Putnam officer who has been assigned the
responsibility of enforcing and interpreting this Policy Statement.
The Code of Ethics Officer shall be the General Counsel or such other
person as is designated by the President of Putnam Investments. If he
is unavailable, the Deputy Code of Ethics Officer (to be appointed by
the Code of Ethics Officer) shall act in his stead.
Immediate family. Spouse, minor children or other relatives living in
the same household as the Putnam employee.
Purchaseor sale of a security. Any acquisition or transfer of any
interest in the security for direct or indirect consideration,
including the writing of an option.
Putnam. Any or all of Putnam Investments, Inc., and its subsidiaries,
any one of which shall be a "Putnam company."
Putnam client. Any of the Putnam Funds, or any advisory or trust client
of Putnam.
Putnam employee (or "employee"). Any employee of Putnam.
Security. Anything defined as a security under federal law. The term
includes any type of equity or debt security, any interest in a
business trust or partnership, and any rights relating to a
security, such as put and call options, warrants, convertible
securities, and securities indices. (Note: The definition of
"security" in this Policy Statement varies significantly from that
in the Code of Ethics. For example, the definition in this Policy
Statement specifically includes securities of The Marsh & McLennan
Companies, Inc.)
Transaction for a personal account (or "personal securities
transaction"). Securities transactions: (a) for the personal account
of any employee; (b) for the account of a member of the immediate
family of any employee; (c) for the account of a partnership in which
a Putnam employee or immediate family member is a partner with
investment discretion; (d) for the account of a trust in which a
Putnam employee or immediate family member is a trustee with
investment discretion; (e) for the account of a closely-held
corporation in which a Putnam employee or immediate family member
holds shares and for which he has investment discretion; and (f) for
any account other than a Putnam client account which receives
investment advice of any sort from the employee or immediate family
member, or as to which the employee or immediate family member has
investment discretion.
s 41
<PAGE> 46
Officers and employees of Putnam Europe Ltd. ("PEL") must also consult
the relevant procedures on compliance with U.K. insider dealing
legislation set forth in PEL's Compliance Manual (see Rule 3 of Section
IV of the Code of Ethics).
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<PAGE> 47
A Section 1. Rules Concerning Inside Information
RULE 1
No Putnam employee shall purchase or sell any security listed on the
Inside Information List (the "Red List") either for his personal account
or for a Putnam client.
IMPLEMENTATION
When an employee contacts the Code of Ethics Administrator seeking
clearance for a personal securities transaction, the Code of Ethics
Administrator's response as to whether a security appears on the
Restricted List will include securities on the Red List.
COMMENT
This Rule is designed to prohibit any employee from trading a security
while Putnam may have inside information concerning that security or the
issuer. Every trade, whether for a personal account or for a Putnam
client, is subject to this Rule.
RULE 2
No Putnam employee shall purchase or sell any security, either for a
personal account or for the account of a Putnam client, while in
possession of material, nonpublic information concerning that security
or the issuer, without the prior written approval of the Code of Ethics
Officer.
IMPLEMENTATION
In order to obtain prior written approval of the Code of Ethics Officer,
a Putnam employee should follow the reporting steps prescribed in Rule
3.
COMMENTS
1. Rule 1 concerns the conduct of an employee when Putnam possesses
material nonpublic information. Rule 2 concerns the conduct of an
employee who herself possesses material, nonpublic information about
a security that is not yet on the Red List.
2. If an employee has any question as to whether information she
possesses is material and/or nonpublic information, she must contact
the Code of Ethics Officer in accordance with Rule 3 prior to
purchasing or selling any security related to the information or
communicating the information to others. The Code of Ethics Officer
shall have the sole authority to determine what constitutes
material, nonpublic information for the purposes of this Policy
Statement. An employee's mistaken belief that the information was
not material nonpublic information will not excuse a violation of
this Policy Statement.
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RULE 3
Any Putnam employee who believes he may have received material,
nonpublic information concerning a security or the issuer shall
immediately report the information to the Code of Ethics Officer and to
no one else. After reporting the information, the Putnam employee shall
comply strictly with Rule 2 by not trading in the security without the
prior written approval of the Code of Ethics Officer and shall: (a) take
precautions to ensure the continued confidentiality of the information;
and (b) refrain from communicating the information in question to any
person.
EXCEPTION
This rule shall not apply to material, nonpublic information obtained by
Putnam employees who are directors or trustees of publicly traded
companies, to the extent that such information is received in their
capacities as directors or trustees, and then only to the extent such
information is not communicated to anyone else within the Putnam
organization.
IMPLEMENTATION
1. In order to make any use of potential material, nonpublic
information, including purchasing or selling a security or
communicating the information to others, an employee must
communicate that information to the Code of Ethics Officer in a way
designed to prevent the spread of such information. Once the
employee has reported potential material, nonpublic information to
the Code of Ethics Officer, the Code of Ethics Officer will evaluate
whether information constitutes material, nonpublic information, and
whether a duty exists that makes use of such information improper.
If the Code of Ethics Officer determines either (a) that the
information is not material or is public, or (b) that use of the
information is proper, he will issue a written approval to the
employee specifically authorizing trading while in possession of the
information, if the employee so requests. If the Code of Ethics
Officer determines (a) that the information may be nonpublic and
material, and (b) that use of such information may be improper, he
will place the security that is the subject of such information on
the Red List.
2. An employee who reports potential inside information to the Code of
Ethics Officer should expect that the Code of Ethics Officer will
need significant information to make the evaluation described in the
foregoing paragraph, including information about (a) the manner in
which the employee acquired the information, and (b) the identity of
individuals to whom the employee has revealed the information, or
who have otherwise learned the information. The Code of Ethics
Officer may place the affected security or securities on the Red
List pending the completion of his evaluation.
3. If an employee possesses documents, disks, or other materials
containing the potential inside information, an employee must take
precautions to ensure the confidentiality of the information in
question. Those precautions include (a) putting documents containing
such information out
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<PAGE> 49
of the view of a casual observer, and (b) securing files containing
such documents or ensuring that computer files reflecting such
information are secure from viewing by others.
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A Section 2. Overview of Insider Trading
A. Introduction
This section of the Policy Statement provides guidelines for
employees as to what may constitute inside information. It is
possible that in the course of her employment, an employee may
receive inside information. No employee should misuse that
information, either by trading for her own account or by
communicating the information to others.
B. What constitutes unlawful insider trading?
The basic definition of unlawful insider trading is trading on
material, nonpublic information (also called "inside information")
by an individual who has a duty not to "take advantage" of the
information. What does this definition mean? The following sections
help explain the definition.
1. WHAT IS MATERIAL INFORMATION?
Trading on inside information is not a basis for liability unless
the information is material. Information is "material" if a
reasonable person would attach importance to the information in
determining his course of action with respect to a security.
Information which is reasonably likely to affect the price of a
company's securities is "material," but effect on price is not
the sole criterion for determining materiality. Information that
employees should consider material includes but is not limited
to: dividend changes, earnings estimates, changes in previously
released earnings estimates, reorganization, recapitalization,
asset sales, plans to commence a tender offer, merger or
acquisition proposals or agreements, major litigation, liquidity
problems, significant contracts, and extraordinary management
developments.
Material information does not have to relate to a company's
business. For example, a court considered as material certain
information about the contents of a forthcoming newspaper column
that was expected to affect the market price of a security. In
that case, a reporter for The Wall Street Journal was found
criminally liable for disclosing to others the dates that reports
on various companies would appear in the Journal's "Heard on the
Street" column and whether those reports would be favorable or
not.
2. WHAT IS NONPUBLIC INFORMATION?
Information is nonpublic until it has been effectively
communicated to, and sufficient opportunity has existed for it to
be absorbed by, the marketplace. One must be able to point to
some fact to show that the information is generally public. For
example, information found in a report filed with the Securities
and Exchange Commission, or
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<PAGE> 51
appearing in Dow Jones, Reuters
Economic Services, The Wall Street Journal, or other publications
of general circulation would be considered public.
3. WHO HAS A DUTY NOT TO "TAKE ADVANTAGE" OF INSIDE INFORMATION?
Unlawful insider trading occurs only if there is a duty not to
"take advantage" of material nonpublic information. When there is
no such duty, it is permissible to trade while in possession of
such information. Questions as to whether a duty exists are
complex, fact-specific, and must be answered by a lawyer.
a. Insiders and Temporary Insiders. Corporate "insiders" have a
duty not to take advantage of inside information. The concept
of "insider" is broad. It includes officers, directors, and
employees of a corporation. In addition, a person can be a
"temporary insider" if she enters into a special confidential
relationship with a corporation and as a result is given
access to information concerning the corporation's affairs. A
temporary insider can include, among others, accounting firms,
consulting firms, law firms, banks and the employees of such
organizations. Putnam would generally be a temporary insider
of a corporation it advises or for which it performs other
services, because typically Putnam clients expect Putnam to
keep any information disclosed to it confidential.
EXAMPLE
An investment adviser to the pension fund of a large
publicly-traded corporation, Acme, Inc., learns from an Acme
employee that Acme will not be making the minimum required
annual contribution to the pension fund because of a serious
downturn in Acme's financial situation. The information
conveyed is material and nonpublic.
COMMENT
Neither the investment adviser, its employees, nor clients can
trade on the basis of that information, because the investment
adviser and its employees could be considered "temporary
insiders" of Acme.
b. Misappropriators. Certain people who are not insiders (or
temporary insiders) also have a duty not to deceptively take
advantage of inside information. Included in this category is
an individual who "misappropriates" (or takes for his own use)
material, nonpublic information in violation of a duty owed
either to the corporation that is the subject of inside
information or some other entity. Such a misappropriator can
be held liable if he trades while in possession of that
material, nonpublic information.
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EXAMPLE
The chief financial officer of Acme, Inc., is aware of Acme's
plans to engage in a hostile takeover of Profit, Inc. The
proposed hostile takeover is material and nonpublic.
COMMENT
The chief financial officer of Acme cannot trade in Profit,
Inc.'s stock for his own account. Even though he owes no duty
to Profit, Inc., or its shareholders, he owes a duty to Acme
not to "take advantage" of the information about the proposed
hostile takeover by using it for his personal benefit.
c. Tippers and Tippees. A person (the "tippee") who receives
material, nonpublic information from an insider or
misappropriator (the "tipper") has a duty not to trade while
in possession of that information if he knew or should have
known that the information was provided by the tipper for an
improper purpose and in breach of a duty owed by the tipper.
In this context, it is an improper purpose for a person to
provide such information for personal benefit, such as money,
affection, or friendship.
EXAMPLE
The chief executive officer of Acme, Inc., tells his daughter
that negotiations concerning a previously-announced
acquisition of Acme have been terminated. This news is
material and, at the time the father tells his daughter,
nonpublic. The daughter sells her shares of Acme.
COMMENT
The father is a tipper because he has a duty to Acme and its
shareholders not to "take advantage" of the information
concerning the breakdown of negotiations, and he has conveyed
the information for an "improper" purpose (here, out of love
and affection for his daughter). The daughter is a "tippee"
and is liable for trading on inside information because she
knew or should have known that her father was conveying the
information to her for his personal benefit, and that her
father had a duty not to "take advantage" of Acme information.
A person can be a tippee even if he did not learn the
information directly from the tipper, but learned it from a
previous tippee.
EXAMPLE
An employee of a law firm which works on mergers and
acquisitions learns at work about impending acquisitions. She
tells her friend and her friend's stockbroker about
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<PAGE> 53
the upcoming acquisitions on a regular basis. The stockbroker
tells the brother of a client on a regular basis, who in turn
tells two friends, A and B. A and B buy shares of the
companies being acquired before public announcement of the
acquisition, and regularly profit from such purchases. A and B
do not know the employee of the law firm. They do not,
however, ask about the source of the information.
COMMENT
A and B, although they have never heard of the tipper, are
tippees because they did not ask about the source of the
information, even though they were experienced investors, and
were aware that the "tips" they received from this particular
source were always right.
C. Who can be liable for insider trading?
The categories of individuals discussed above (insiders, temporary
insiders, misappropriators or tippees) can be liable if they trade
while in possession of material nonpublic information.
In addition, individuals other than those who actually trade on
inside information can be liable for trades of others. A tipper can
be liable if (a) he provided the information in exchange for a
personal benefit in breach of a duty and (b) the recipient of the
information (the "tippee") traded while in possession of the
information.
Most importantly, a controlling person can be liable if the
controlling person "knew or recklessly disregarded" the fact that
the controlled person was likely to engage in misuse of inside
information and failed to take appropriate steps to prevent it.
Putnam is a "controlling person" of its employees. In addition,
certain supervisors may be "controlling persons" of those employees
they supervise.
EXAMPLE
A supervisor of an analyst learns that the analyst has, over a long
period of time, secretly received material inside information from
Acme, Inc.'s chief financial officer. The supervisor learns that the
analyst has engaged in a number of trades for his personal account
on the basis of the inside information. The supervisor takes no
action.
COMMENT
Even if he is not liable to a private plaintiff, the supervisor can
be liable to the Securities and Exchange Commission for a civil
penalty of up to three times the amount of the analyst's profit.
(Penalties are discussed in the following section.)
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D. Penalties for Insider Trading
Penalties for misuse of inside information are severe, both for
individuals involved in such unlawful conduct and their employers. A
person who violates the insider trading laws can be subject to some
or all of the penalties below, even if he does not personally
benefit from the violation. Penalties include:
-- jail sentences (of which at least one to three years must be
served)
-- criminal penalties for individuals of up to $1,000,000, and for
corporations of up to $2,500,000
-- injunctions permanently preventing an individual from working in
the securities industry
-- injunctions ordering an individual to pay over profits obtained
from unlawful insider trading
-- civil penalties of up to three times the profit gained or loss
avoided by the trader, even if the individual paying the penalty
did not trade or did not benefit personally
-- civil penalties for the employer or other controlling person of
up to the greater of $1,000,000 or three times the amount of
profit gained or loss avoided
-- damages in the amount of actual losses suffered by other
participants in the market for the security at issue.
Regardless of whether penalties or money damages are sought by others,
Putnam will take whatever action it deems appropriate (including
dismissal) if Putnam determines, in its sole discretion, that an
employee appears to have committed any violation of this Policy
Statement, or to have engaged in any conduct which raises significant
questions about whether an insider trading violation has occurred.
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A Appendix B. Policy Statement Regarding Employee Trades in Shares of
Putnam Closed-End Funds
1. Pre-clearance for all employees
Any purchase or sale of Putnam closed-end fund shares by a Putnam
employee must be pre-cleared by the Code of Ethics Officer or, in his
absence, the Deputy Code of Ethics Officer. A list of the closed-end
funds can be obtained from the Code of Ethics Administrator. Trading in
shares of closed-end funds is subject to all the rules of the Code of
Ethics.
2. Special Rules Applicable to Managing Directors of Putnam Investment
Management, Inc. and officers of the Putnam Funds
Please be aware that any employee who is a Managing Director of Putnam
Investment Management, Inc. (the investment manager of the Putnam mutual
funds) and officers of the Putnam Funds will not receive clearance to
engage in any combination of purchase and sale or sale and purchase of
the shares of a given closed-end fund within six months of each other.
Therefore, purchases should be made only if you intend to hold the
shares more than six months; no sales of fund shares should be made if
you intend to purchase additional shares of that same fund within six
months.
You are also required to file certain forms with the Securities and
Exchange Commission in connection with purchases and sales of Putnam
closed-end funds. Please contact the Code of Ethics Officer or Deputy
Code of Ethics Officer for further information.
3. Reporting by all employees
As with any purchase or sale of a security, duplicate confirmations of
all such purchases and sales must be forwarded to the Code of Ethics
Officer by the broker-dealer utilized by an employee. If you are
required to file a quarterly report of all personal securities
transactions, this report should include all purchases and sales of
closed-end fund shares.
Please contact the Code of Ethics Officer or Deputy Code of Ethics
Officer if there are any questions regarding these matters.
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A Appendix C. Clearance Form for Portfolio Manager Sales Out of Personal
Account of Securities Also Held by Fund (For compliance
with "Contra-Trading" Rule)
TO: Code of Ethics Officer
FROM:
-----------------------------------------------
DATE:
-----------------------------------------------
RE: Personal Securities Transaction of
-------------------------
This serves as prior written approval of the personal securities
transaction described below:
NAME OF PORTFOLIO MANAGER CONTEMPLATING PERSONAL TRADE:
------------------------------------------------------------------------
SECURITY TO BE TRADED:
------------------------------------------------------------------------
AMOUNT TO BE TRADED:
----------------------------------------------------
FUND HOLDING SECURITIES:
------------------------------------------------
AMOUNT HELD BY FUND:
----------------------------------------------------
REASON FOR PERSONAL TRADE:
----------------------------------------------
SPECIFIC REASON SALE OF SECURITIES IS INAPPROPRIATE FOR FUND:
------------------------------------------------------------------------
------------------------------------------------------------------------
(Please attach additional sheets if necessary.)
CIO APPROVAL: DATE:
---------------------------- -------------------------
LEGAL/COMPLIANCE APPROVAL: DATE:
------------------ -----------------------
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A Appendix D. Procedures for Approval of New Financial Instruments
1. Summary
a. Putnam has adopted procedures for the introduction of new
instruments and securities, focusing on, but not limited to,
derivatives.
b. No new types of securities or instruments may be purchased for
any Putnam fund or other client account without the approval
of Putnam's New Securities Review Committee ("NSRC").
c. Putnam publishes from time to time a list of approved
derivatives. The purchase of any derivative not listed is
prohibited without specific authorization from the NSRC.
2. Procedures
a. Introduction. The purchase and sale of financial instruments
that have not been used previously at Putnam raise significant
investment, business, operational, and compliance issues. In
order to address these issues in a comprehensive manner,
Putnam has adopted the following procedures for obtaining
approval of the use of new instruments or investments. In
addition, to provide guidance regarding the purchase of
derivatives, Putnam publishes from time to time a list of
approved derivatives. Only derivatives listed may be used for
Putnam funds or accounts unless specifically authorized by the
NSRC.
b. Process of approval. An investment professional wishing to
purchase a new type of investment should discuss it with the
Investment Division's Administrative office (the current
contact is Julie Malloy). Investment Division Administration
will coordinate a review of a new instrument by appropriate
NSRC members from an investment, operational and compliance
perspective, including the review of instruments by the
Administrative Services Division of PFTC. Based on this
review, the NSRC will then approve or disapprove the proposed
new investment. Investment professionals must build in
adequate time for this review before planned use of a new
instrument. Further, the approval of the NSRC is only a
general one. Individual fund and account guidelines must be
reviewed in accordance with standard compliance procedures to
determine whether purchase is permitted. In addition, if the
instrument involves legal documentation, that documentation
must be reviewed and be completed before trading. The NSRC may
prepare a compliance and operational manual for the new
derivative.
3. Violations
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<PAGE> 58
a. Putnam's Operating Committee has determined that adherence to
rigorous internal controls and procedures for novel securities
and instruments is necessary to protect Putnam's business
standing and reputation. Violation of these procedures will be
treated as violation of both compliance guidelines and
Putnam's Code of Ethics. Putnam encourages questions and
expects that these guidelines will be interpreted
conservatively.
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<PAGE> 59
A Index
"7-Day Rule"
for transactions by managers, analysts and CIOs, 14
"60-Day Rule", 13
Access Persons
definition, ix
special rules on trading, 13, 32
Analysts
special rules on trading by, 13
Appeals
Procedures, 37
Bankers' acceptances
excluded from securities, x
Blackout rule
on trading by portfolio managers, analysts and CIOs, 15
Boycotts
reporting of requests to participate, 33
Bribes, 21
CDs
excluded from securities, x
Claims against Putnam
reporting of, 33
Clearance
how long pre-clearance is valid, 4
required for personal securities transactions, 1
Closed-end funds
rules on trading, 55
Commercial paper
excluded from securities, x
Commodities (other than securities indices)
excluded from securities, x
Computer use
compliance with corporate policies required, 27
Confidentiality
required of all employees, 22
Confirmations
of personal transactions required, 31
Conflicts of interest
with Putnam and Putnam clients prohibited, 19
Contra-trading rule
transactions by managers and CIOs, 17
Convertible securities
defined as securities, x
Currencies
excluded as securities, x
Director
serving as for another entity prohibited, 23
Employee
serving as for another entity prohibited, 23
Excessive trading (over 10 trades)
by employees strongly discouraged, 10
Exemptions
basis for, 10
Family members
covered in personal securities transactions, x, 43
Fiduciary
serving as for another entity prohibited, 23
Fraudulent or irregular activities
reporting of, 33
Gifts
restrictions on receipt of by employees, 19
Government or regulatory agencies
reporting of communications from, 33
Holdings
disclosure of by Access Persons, 32
Initial public offerings/IPOs
purchases in prohibited, 6
Insider trading
policy statement and explanations, 39
prohibited, 9
Investment clubs
prohibited, 24
Investment Grade Exception
for clearance of fixed income securities on Restricted List, 2
Involuntary personal securities transactions
exempted, 10
exemption defined, 6
Large Cap Exception
for clearance of securities on Restricted List, 1
Marsh & McLennan Companies stock
excluded from securities, x
Money market instruments
excluded from securities, x
Mutual fund shares (open end)
excluded from securities, x
Naked options
by employees discouraged, 9
New financial instruments
procedures for approval, 59
Non-Putnam affiliates (NPAs)
transactions and relationships with, 25
Officer
serving as for another entity prohibited, 23
s 59
<PAGE> 60
Options
defined as securities, x
relationship to securities on Restricted or Red Lists, 5
Partner
serving as general partner of another entity prohibited, 23
Partnerships
covered in personal securities transactions, x, 43
Personal securities transaction
defined, x, 43
Pink sheet reports
quarterly reporting requirements, 32
Political contributions, 22
Portfolio managers
special rules on trading by, 13
Private offerings or placements
purchases of prohibited, 7
Putnam Europe Ltd.
special rules for, 29
Repurchase agreements
excluded from securities, x
Sale
defined, x, 43
Sanctions, vii
for failure to pre-clear properly, 3
Shares by subscription
procedures to preclear the purchase and sales of Shares by
Subscription, 2
Short sales
by employees prohibited conduct, 6
Solicitations
by Putnam employees restricted, 21
Tender offers
partial exemption from clearance rules, 6
Trustee
serving as for another entity prohibited, 23
Trusts
covered in personal securities transactions, x, 43
U.S. government obligations
excluded from securities, x
Violations of Law
reporting of, 33
Warrants
defined as securities, x
s
<PAGE> 1
CODE OF ETHICS
March, 2000
[SSGA LOGO]
<PAGE> 2
<TABLE>
<CAPTION>
CODE OF ETHICS - TABLE OF CONTENTS
<S> <C>
Statement of General Principles......................................................................1
Applicability of Code to Employees of Non-US Offices.................................................1
What is the Code of Ethics...........................................................................2
Section 1 - Definitions..............................................................................2
Section 2 - Exempted Transactions....................................................................6
Section 3 - Prohibitions
A. Prohibited Purchases and Sales:
Portfolio Managers...................................................................6
Investment Persons and Reporting Associates..........................................8
Approved Lists.......................................................................9
B. Additional Prohibited Activities.....................................................9
Section 4 - Preclearance
A. Preclearance of Securities Transactions.............................................13
B. Short-term Trading..................................................................13
Section 5 - Reporting...............................................................................14
Section 6 - Annual Certification....................................................................15
Section 7 - Exemptive Relief........................................................................15
Section 8 - Violations and Sanctions................................................................15
Section 9 - Issues Forum............................................................................16
Disclosure of Securities Holdings (Upon Employment & Annually)..............................Appendix A
Form Letter to Broker (Duplicate Confirms and Account Statements)...........................Appendix B
Access Person - Proposed Transaction Form (Preclearance Form)...............................Appendix C
Sample Quarterly Transaction Form...........................................................Appendix D
Request for Approval of Privately Offered Security Transaction..............................Appendix E
Frequently Asked Questions and Answers......................................................Appendix F
Preclearance of Fixed Income Trades by Access Persons.......................................Appendix G
List of Local Compliance Officers...........................................................Appendix H
Code of Ethics Quick Reference Tool.........................................................Appendix I
</TABLE>
<PAGE> 3
CODE OF ETHICS
STATE STREET GLOBAL ADVISORS
("SSGA")
Statement of General Principles
In addition to any particular duties or restrictions set forth in the
SSgA Code of Ethics (the "Code"), every employee of the Adviser must
adhere to the following general principles:
I. Since our clients have entrusted us with their assets, we must,
at all times, place the interests of these clients first. These
clients include shareholders in mutual funds which we advise,
participants in the State Street Bank and Trust Company
collective investment vehicles and those clients for whom we
manage discretionary accounts.
II. Transactions executed for the employee's personal account must
be conducted in a manner consistent with this Code and in such a
manner as to avoid any actual or perceived conflict of interest
or any abuse of the employee's position of trust and
responsibility.
III. Employees are encouraged to make investment decisions regarding
their personal accounts with a long term view. Short-term
trading is strongly discouraged.
IV. Employees must not take inappropriate advantage of their
position.
Applicability of Code to Employees of Non-US Offices
Employees of the Adviser's Non-US offices are subject to the terms of
the Code. In addition, however, such employees remain subject to any
local laws and regulations affecting personal investments, investments
on behalf of customers and other activities governed by the Code. It is
the responsibility of each employee to adhere to such regulations. In
the event of any inconsistency between local law or regulation and the
terms of this Code, the employee must adhere to the highest applicable
standard.
<PAGE> 4
What is the Code of Ethics?
The Code of Ethics, hereafter referred to as the "Code", is the policy
statement that State Street Global Advisors has adopted which primarily
governs personal securities transactions of its employees. It is
designed to ensure that employees conduct their personal securities
transactions in a manner which does not create an actual or potential
conflict of interest to the bank's business or fiduciary
responsibilities. In addition, the Code establishes standards that
prohibit the trading in or recommending of securities based upon
material, non-public information or the tipping of such information to
others.
The SSgA Risk Management and Compliance Department oversees overall
compliance with the Code. Failure to comply with the Code could result
in company imposed sanctions, and possible criminal and civil
liability, depending on the circumstances.
SECTION 1 - DEFINITIONS
A. "Access Person" or " Investment Personnel" as defined by SEC
Rule 17j-1 means "any Portfolio Manager, Investment Person or
Reporting Associate of State Street Global Advisors or of such
other divisions as determined by the Adviser from time to time,
and any other employee of the Adviser designated as an Access
Person by the Compliance Officer by virtue of his or her stature
within the organization."
The following Access Person levels have been established by the
SSgA Boston office. The levels reflect the minimum requirements
of the Code of Ethics. The local Compliance Officer, at his or
her discretion, can impose higher standards in their local
environment.
1. " Portfolio Manager" (Level 1) means "the persons
identified by the Adviser, as the portfolio manager or
back-up portfolio manager of a Fund."
2. "Investment Person" (Level 2) means "any director, officer
or employee of the Adviser who, in connection with his or
her regular functions or duties, makes, participates in, or
obtains information regarding the purchase or sale of a
Security by a Fund prior to or
-2-
<PAGE> 5
contemporaneous with such purchase or sale, or whose
functions relate to the making of any recommendations with
respect to such purchase or sale."
3. "Reporting Associate" (Level 3) means "any director,
officer or employee of the Adviser who, in connection with
his or her regular functions or duties, obtains information
regarding the purchases or sales of Securities made by a
Fund, either prior to or subsequent to any such purchases
or sales."
4. "Level 4 Person" (Level 4) means any individual who has no
contact with information regarding purchases or sales of
Securities made by a Fund in his or her regular functions
or duties. However, such individual is subject to the
Statement of General Principles and the antifraud
provisions (Section 3B(1)) of the Code.
B. "Adviser" means "State Street Global Advisors" and any other
investment advisory division of State Street Bank and Trust
Company, "State Street Global Advisors, Inc." and any
subsidiary thereof, "State Street Brokerage" and "State Street
Banque, S.A." and such other entities as from time to time
designated by the Compliance Officer.
C. "Associated Portfolio" means with respect to an Access Person
any Portfolio in the fund group for which such person acts as a
Portfolio Manager, Investment Person or Reporting Associate
(e.g., accounts for which the Access Person is Portfolio
Manager, designated Back-up Portfolio Manager).
D. "Beneficial Ownership" shall be interpreted in the same manner
as it would be in determining whether a person is subject to the
provisions of Section 16 of the Securities Exchange Act of 1934
and the rules and regulations thereunder, except that the
determination of direct or indirect Beneficial Ownership shall
apply to all Securities which an Access Person has or acquires
other than those Securities which are acquired through dividend
reinvestment.
Beneficial Ownership generally extends to accounts in the name
of:
- the Access Person;
- the Access Person's spouse;
-3-
<PAGE> 6
- the Access Person's minor children;
- the Access Person's adult children living in the Access
Person's home; and
- any other relative whose investments the Access Person
directs (regardless of whether he or she resides in the
Access Person's home).
Beneficial Ownership also includes accounts of another person or
entity if by reason of any contract, understanding,
relationship, agreement or other arrangement the Access Person
obtains therefrom benefits substantially equivalent to those of
ownership. Access Persons should contact the local Compliance
Officer regarding any questions they may have concerning
Beneficial Ownership.
E. "Compliance Officer" shall mean "the person identified by the
State Street Global Advisors division of the Adviser, from time
to time, as the local Compliance Officer of SSgA."
F. "Control" means the power to exercise a controlling influence
over an account.
G. "Fund" or "Funds" means "any mutual fund, bank collective fund,
common trust fund, separate account or other type of account
advised or sub-advised by the Adviser."
H. "Portfolio" means "any investment portfolio of a Fund."
I. "Purchase or sale of a Security" includes, among other things,
the writing of an option to purchase or sell a Security.
J. "Security" shall have the meaning set forth in Section 2(a)(36)
of the 1940 Act. This definition of "Security" includes, but is
not limited to: any note, stock, treasury stock, bond,
debenture, evidence of indebtedness, certificate of interest or
participation in any profit-sharing agreement, any put, call,
straddle, option or privilege on any Security or on any group or
index of Securities, or any put, call, straddle, option or
privilege entered into on a national securities exchange
relating to foreign currency.
Further, for the purpose of this Code, "Security" shall include
any commodities contracts as defined in Section 2(a)(1)(A) of
the Commodity Exchange Act. This definition includes but is not
limited to futures contracts on equity indexes.
-4-
<PAGE> 7
"Security" shall NOT include securities issued by the government
of the United States, or, with respect to Access Persons
employed in the Non-US offices, the government of the country in
which such office is located, bankers' acceptances, bank
certificates of deposit, commercial paper and shares of
registered open-end investment companies (e.g., open-end mutual
funds, or the equivalent such as SICAVs). Any question as to
whether a particular investment constitutes a "Security" should
be referred to the local Compliance Officer.
K. "Seven Day Blackout"
- Portfolio Manager - The Code prohibits a portfolio manager
from buying or selling a security within seven calendar days
after it is traded in a portfolio he or she manages.
- Access Person - who has access to the fundamental research
in his or her area, is also restricted from buying or
selling a security that is added to, removed from, or has
had a rating change to an approved stock list.
(See Section 3 - "Approved Lists" for additional detail.)
L. "Short-term Trading" means buying and selling or selling and
buying the same security within a 60 day period.
-5-
<PAGE> 8
SECTION 2 - EXEMPTED TRANSACTIONS
The prohibitions of Section 3A of this Code shall not apply to:
A. Purchases or sales effected in any account over which the Access
Person has no direct or indirect influence or control (e.g.,
assignment of management discretion in writing to another
party). If management authority is ceded to a person in the same
household (spouse, dependent children or other individual living
in the same household as the Access Person, then preclearance
requirements still have to be met.)
B. Purchases or sales which receive the prior approval of counsel
to the Adviser or the Compliance Officer.
C. Purchases or sales by an Access Person other than a Portfolio
Manager which are categorized as de minimis through the
Preclearance Procedure described in Section 3A(1).
D. Acquisition of a Security due to dividend reinvestment or
similar automatic periodic investment process or through the
exercise of rights, warrants or tender offers. However, these
transactions should be reported by Level 1-3 Access Persons in
their quarterly reporting once acknowledgement of the
transaction is received.
SECTION 3 - PROHIBITIONS
A. PROHIBITED PURCHASES AND SALES
PORTFOLIO MANAGERS: (LEVEL 1) ACCESS PERSONS
1. Portfolio Manager shall not, for his or her own personal
account (or for an account in which he or she has
Beneficial Ownership1):
a. purchase a Security that is being purchased or sold
or is being considered for purchase
or sale in any Associated Portfolio; or
- ------------
(1) Please see Section 1D of the Code for definition of "Beneficial Ownership."
-6-
<PAGE> 9
b. sell a Security that is being purchased or sold or
is being considered for purchase or sale in any
Associated Portfolio.(2)
A Security is "being considered for purchase or sale" when
a recommendation to purchase or sell a Security has been
made and communicated and, with respect to the person
making the recommendation, when such person seriously
considers making such a recommendation.
Here is an example of this prohibition:
This morning, Access Person "A" overhears Portfolio Manager
"B" planning to purchase shares of XYZ for the stock Fund
which he manages. "A" hastily purchases shares of XYZ for
her personal account. Portfolio Manager "B" places the buy
order for the stock in the afternoon. "A" would be
front-running the Fund, and would be subjected to sanctions
and criminal penalties.
2. No Portfolio Manager shall, for his or her own personal
account (or for an account in which he or she has
Beneficial Ownership):
a. sell any Security until seven (7) full calendar days
have elapsed since the most recent purchase or sale
of that Security by any Associated Portfolio; or
b. purchase any Security until seven (7) full calendar
days have elapsed since the most recent purchase or
sale of that Security from any Associated Portfolio.
(3)
Here is an example of this prohibition:
- ----------
(2) This "front-running" prevention rule is designed to prevent
personal gain based upon the investment activities or recommended investment
activities of any of the Associated Portfolios.
(3) This black-out requirement is designed to prevent personal gain based upon
the investment activities of any of the Associated Portfolios. A Portfolio
Manager may not trade the same security as an Associated Portfolio until seven
full calendar days have elapsed since the Portfolio trade (the seven days do not
include the day of the Portfolio trade).
-7-
<PAGE> 10
Yesterday, Portfolio Manager "A" sold 100 shares of XYZ
from the Fund which he manages. Today, back-up Portfolio
Manager "B", who manages a different Fund within the same
investment group, decides to purchase 50 shares of XYZ for
his own personal account. Because trading occurred within 7
days of the most recent fund transaction it is a direct
violation of the black-out requirement, therefore,
subjecting the manager to sanctions.
INVESTMENT PERSONS AND REPORTING ASSOCIATES: (LEVEL 2 & 3) ACCESS
PERSONS
1. No Access Person (other than Portfolio Managers) shall, for
his or her own personal account or for an account in which
he or she has Beneficial Ownership(4):
a. purchase a Security that is being purchased or sold
or is being considered for purchase or sale in any
Fund unless the transaction is considered de minimis
as noted above in Section 2C Exempted Transactions;
or
b. sell a Security that is being purchased or sold or
is being considered for purchase or sale in any Fund
unless the transaction is considered de minimis as
noted above in Section 2C Exempted Transactions.(5)
A Security is "being considered for purchase or sale" when
a recommendation to purchase or sell a Security has been
made and communicated and, with respect to the person
making the recommendation, when such person seriously
considers making such a recommendation.
- ------------
(4) Please see Section 1D of the Code for definition of "Beneficial
Ownership."
(5) This "front-running" prevention rule is designed to prevent personal gain
based upon the investment activities or recommended investment activities of
any of the Associated Portfolios.
-8-
<PAGE> 11
Approved Lists
Personal securities transactions in a security that is
added to or removed from an approved stock list are
prohibited for a period of seven days after the addition,
removal or change in rating of the security. The same seven
day restriction applies following any change to the short
or long term investment rating. Furthermore, the Access
Person is restricted from sharing this information with
others who do not have the same access levels.
(Currently, this list is maintained by the Global
Fundamental Research Group. There may be other lists or
groups that this restriction applies. See your local
Compliance Officer for additional information.)
B. ADDITIONAL PROHIBITED ACTIVITIES
1. Neither an employee of the Adviser nor any Access Person
shall, in connection with the purchase or sale (directly or
indirectly) by the Adviser, of a Security held or to be
acquired by a Fund:
a. employ any device, scheme or artifice to defraud a
Fund;
b. make any material misstatement to a Fund or omit any
material fact in any statement to a Fund where such
omission would tend to make the statement misleading;
c. engage in any act, practice, or course of business
which operates or would operate as a fraud or deceit
upon a Fund; or
d. engage in any manipulative practice with respect to a
Fund.
-9-
<PAGE> 12
The above prohibited activities shall at all times include,
but shall not be limited to, the following:
(i) purchasing or selling securities on the basis
of material(6) non-public(7) information;
(ii) purchasing or selling, knowingly, directly or
indirectly, securities in such a way as to
compete personally in the market with a Fund,
or acting personally in such a way as to injure
a Fund's transactions;
(iii) using knowledge of securities transactions by
a Fund, including securities being considered
for purchase or sale, to profit personally,
directly or indirectly, by the market effect
of such transactions.
(iv) engaging in short selling and options trading
of State Street securities (except to the
extent such options are issued by the
Corporation as part of an employee's
compensation.)
2. Each of the following activities by an Access Person or
Investment Personnel Level 1-4 shall be prohibited:
a. purchasing Securities in an initial public offering
unless:
(i) the Access Person has a right to purchase the
Security due to the Access Person's
pre-existing status as a policy holder or
depositor
- -----------
(6) Material Information: information the dissemination of which would have a
substantial impact on the market price of the company's securities, or is likely
to be considered important by reasonable investors in determining whether to
trade in such securities. Examples of the type of information that might be
"material" would include the following: earnings estimates or changes in
previously released earnings estimates, merger or acquisition proposals, major
litigation, significant contracts, dividend changes, extraordinary management
developments.
(7) Non-public Information: information that has not been generally disclosed to
the investing public. Information found in a report filed with a local
regulatory agency, such as the SEC, or appearing in publications of wide
circulation would be considered public.
-10-
<PAGE> 13
with respect to such Security or as a
shareholder of a related company; or,
(ii) the right to purchase is awarded by lottery or
other non-discretionary method by the issuer.
b. participation in a private offering (e.g., offerings
of securities not registered with a local regulatory
agency, such as the SEC, stocks of privately held
companies, private placements and non-publicly traded
limited partnerships) without prior written consent
from an SSgA Compliance Officer by use of the form
attached here as Appendix E;
c. participation in a private offering and failing to
disclose any subsequent conflicts of interests to the
Compliance Officer. An example of this would be a
portfolio manager purchasing a private offering (with
approval as detailed in 2(b) above) and then causing a
portfolio which he or she manages to purchase the same
private offering without disclosing this conflict of
interest.
d. using any derivative, or using any evasive tactic,
to avoid the restrictions of this Code;
e. serving as a director of the following without prior
written consent of State Street Global Advisors' Area
Executive AND notice to the Compliance Officer:
- a publicly traded company other than State Street
Corporation or its subsidiaries or its affiliates; or
- any company the Securities of which are owned by a
Fund,
f. accepting or receiving, either directly or indirectly,
from any organization or employee thereof with which
we conduct a business relationship (e.g.,
-11-
<PAGE> 14
customers or vendors) a gratuity or anything of value
in excess of one hundred (US $100) dollars per
individual per calendar year. A gratuity includes a
gift of any type.
The purpose of this gratuity restriction is to allow only
proper and customary business amenities. Amenities
considered permissible include the following:
- occasional meals, social gatherings or meetings
conducted for business purposes; or
- gifts in the nature of promotional materials, such as a
pen, calendar, umbrella or the like, which are inscribed
with the giver's name or a business message.
Amenities considered NOT to be permissible include, but are
not limited to, the following:
- transportation expenditures, such as airfare or rental
car; or
- hotel or other lodging accommodation expenditures
-12-
<PAGE> 15
SECTION 4 - PRECLEARANCE
A. PRECLEARANCE OF SECURITIES TRANSACTIONS
In order to monitor this Section 4A, Adviser requires each Access
Person to comply with the Personal Securities Transaction
Preclearance Procedure(8) attached hereto as Appendix C.
- Preclearance must be obtained after 10:00 a.m. EST (or
at such local time as is designated by each Non-US
office) of the day on which the Access Person proposes
to trade.
- Such preclearance is good until midnight of the day it
is granted in the location of the primary exchange
where the security is traded. It is also allowable to
order a market trade electronically up to this time
deadline. Any order not executed on the day of
preclearance must be re-submitted for preclearance
before being executed on a subsequent day (e.g.,
"good-'til-canceled" or "limit" orders must receive
preclearance every day that the order is open).
- Preclearance of any registered open-end investment
company is not required.
- The Lotus Notes preclearance process must be used in
sites where available consistent with policies
established from time to time by Risk Management and
Compliance.
B. SHORT-TERM TRADING
In order to monitor short-term trading activity, each Access Person is
required to identify on Appendix C whether he or she has traded in the
proposed security within the past 60 days. Short -term trades will be
monitored and reported to management to ensure that Access Persons are
adhering to SSgA's long- term investment philosophy generally.
- ------------
(8) See Appendix F for additional information on preclearance.
-13-
<PAGE> 16
SECTION 5 - REPORTING
A. Every Access Person who is identified and notified by the
Compliance Officer as having to comply with this Section shall:
1. upon such notification, provide the Compliance Officer with
disclosure of all personal Securities holdings as described
in Appendix A within 10 calendar days of employment and
annually) thereafter, except that the requirement of this
Section 5A(1) shall only apply to Portfolio Managers and
Investment Persons (Access Person Level 1 and 2); and
2. report to the Compliance Officer the information described
in Section 5C with respect to transactions in any Security
(9) in which such Access Person has, or by reason of such
transaction acquires, any direct or indirect Beneficial
Ownership in the Security.
B. Quarterly reports required under this Section shall be made not
later than nine (9) days after the end of each calendar quarter
(calendar quarters are March 31, June 30, September 30 and
December 31).
Access Persons will be reminded quarterly of this obligation by
a notice, but IT IS INCUMBENT UPON EACH ACCESS PERSON TO REPORT
TO THE COMPLIANCE OFFICER WITHIN THE NINE-DAY (9-DAY) REPORTING
PERIOD WHETHER HE OR SHE DID OR DID NOT EFFECT SUCH
TRANSACTIONS.
C. Access Persons are required to notify any brokers, dealers,
investment advisers, banks and other financial institutions with
whom they have their securities trading accounts to forward
duplicate confirms of any and all of their trades and periodic
account statements containing trading activity to the Compliance
Officer and may use the form letter attached as Appendix B to
notify such financial institutions.
D. Any such report may contain a statement that the report shall
not be construed as an admission by the person making such
report that he or she has any direct or indirect Beneficial
Ownership in the Security to which the report relates.
- ---------
(9) See definition of "Security" and "Beneficial Ownership" for additional
information.
-14-
<PAGE> 17
E. Access Persons transacting in Securities, as defined in Section
1J. of the Code, contained in self directed pension brokerage
accounts, self managed brokerage accounts (SMBA) or 401(k)
retirement accounts are included in any reporting or
preclearance requirements.
F. Investment in the State Street Stock Fund through the State
Street 401k plan do not require regular preclearance or
reporting. Although transactions in the State Street Stock Fund
do not need to be reported, as they are not defined as a
Security, employees trading in the State Street Stock Fund
should be aware that these transactions are subject to the
insider trading restrictions contained in the Code of Ethics and
State Street's Standard of Conduct.
G. Access Persons are prohibited from engaging in short selling and
options trading of State Street securities (except to the extent
such options are issued by the Corporation as part of an
employee's compensation).
H. State Street options granted in conjunction with an employee's
compensation do not need to be precleared or reported if
exercised at first opportunity as dictated by Global Human
Resources. Options exercised on any other date are subject to
preclearance and reporting requirements.
SECTION 6 - ANNUAL CERTIFICATION
All Access Persons and Non Access Persons must certify annually that he
or she has read, understands and recognizes that he or she is subject
to the Code. In addition, all Access Persons and Non Access Persons
must certify annually that he or she has complied with the Code and has
disclosed and reported all personal securities transactions required to
be disclosed or reported.
SECTION 7 - EXEMPTIVE RELIEF
An Access Person who believes that aspects of the Code impose a
particular hardship or unfairness upon them with respect to a
particular transaction or situation, without conferring a corresponding
benefit toward the goals of the Code, may appeal to the Compliance
Officer for relief from Code provision(s) relating to a particular
transaction or ongoing activity or reporting requirement.
-15-
<PAGE> 18
If relief is granted, the Compliance Officer may impose alternative
controls or requirements. Any relief granted in this regard shall apply
only to the Access Person who had sought relief and no other Access
Person may rely on such individual relief unless specifically
authorized by their local Compliance Officer. If circumstances warrant,
the Compliance Officer may submit the anonymous request to the Code of
Ethics Committee for input.
SECTION 8 - VIOLATIONS AND SANCTIONS
The Code of Ethics Committee is presented with the facts and
circumstances of a violation on an anonymous basis by the Compliance
Officer on a quarterly basis. The Code of Ethics Committee is charged
with reviewing violations of the Code and imposing sanctions by a
majority vote.
Upon discovering a violation of this Code, its policies or procedures,
the directors of a Fund, the Adviser, or the Committee may impose such
sanctions as it deems appropriate, including, among other things, the
following:
- a letter of censure to the violator;
- a monetary fine levied on the violator;
- suspension of the employment of the violator;
- termination of the employment of the violator;
- civil referral to the SEC or other civil regulatory authorities
determined by the Board of the Fund, the Adviser or other
appropriate entity; or
- criminal referral -- determined by the Board of the Fund, the
Adviser or other appropriate entity.
The Access Person is given an opportunity to appeal a Committee decision if
he/she is believes there are extenuating facts and circumstances of which
the Committee and Compliance were unaware.
-16-
<PAGE> 19
SECTION 9 - ISSUES FORUM
If you have a concern or question, you can voice this concern, i.e., issue or
personal complaint on an anonymous basis by submitting it in writing to:
State Street Global Advisors
Attention: Compliance Officer
P.O. Box 9185
Boston, MA 02209
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS:
That I, Robert C. Dughi, of Scotch Plains, New Jersey, as a director of
ODYSSEY FUNDS, INC., do hereby make, constitute and appoint as my true and
lawful attorneys in fact George Vlaisavljevich, Paul S. Feinberg, and David E.
Demarest, or any of them severally for me and in my name, place and stead to
sign registration statements under the Securities Act of 1933 and/or the
Investment Company Act of 1940 and any and all amendments thereto executed on
behalf of ODYSSEY FUNDS, INC., and filed with the Securities and Exchange
Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of
January, 1993.
---------------------
Signature
STATE OF NEW JERSEY )
) SS
COUNTY OF MIDDLESEX )
On this 21st day of January, 1993, before me personally appeared Robert
C. Dughi, to me known and known to me to be the person mentioned and described
in and who executed the foregoing instrument and he duly acknowledged to me
that he executed the same.
---------------------
Notary Public
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS:
That I, Steven I. Weinstein, of Randolph, New Jersey, as a director of
ODYSSEY FUNDS, INC., do hereby make, constitute and appoint as my true and
lawful attorneys in fact George Vlaisavljevich, Paul S. Feinberg, and David E.
Demarest, or any of them severally for me and in my name, place and stead to
sign registration statements under the Securities Act of 1933 and/or the
Investment Company Act of 1940 and any and all amendments thereto executed on
behalf of ODYSSEY FUNDS, INC., and filed with the Securities and Exchange
Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 22nd day of
January, 1993.
---------------------
Signature
STATE OF NEW JERSEY )
) SS
COUNTY OF HUNTERDON )
On this 22nd day of January, 1993, before me personally appeared Steven
I. Weinstein, to me known and known to me to be the person mentioned and
described in and who executed the foregoing instrument and he duly acknowledged
to me that he executed the same.
---------------------
Notary Public
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS:
That I, Linda Walker Bynoe, of Chicago, Illinois, as a director of
ODYSSEY FUNDS, INC., do hereby make, constitute and appoint as my true and
lawful attorneys in fact George Vlaisavljevich, Paul S. Feinberg, and David E.
Demarest, or any of them severally for me and in my name, place and stead to
sign registration statements under the Securities Act of 1933 and/or the
Investment Company Act of 1940 and any and all amendments thereto executed on
behalf of ODYSSEY FUNDS, INC., and filed with the Securities and Exchange
commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 28th day of
January, 1993.
---------------------
Signature
STATE OF COLORADO )
) SS
COUNTY OF SAN MIGUEL )
On this 28th day of January, 1993, before me personally appeared Linda
Walker Bynoe, to me known and known to me to be the person mentioned and
described in and who executed the foregoing instrument and she duly
acknowledged to me that she executed the same.
---------------------
Notary Public
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS:
That 1, John G. Beam, Jr., of Louisville, Kentucky, as a director of
ODYSSEY FUNDS, INC., do hereby make, constitute and appoint as my true and
lawful attorneys in fact George Vlaisavljevich, Paul S. Feinberg, and David E.
Demarest, or any of them severally for me and in my name, place and stead to
sign registration statements under the Securities Act of 1933 and/or the
Investment Company Act of 1940 and any and all amendments thereto executed on
behalf of ODYSSEY FUNDS, INC., and filed with the Securities and Exchange
Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 12th day of March,
1993.
---------------------
Signature
COMMONWEALTH. OF KENTUCKY )
) SS
COUNTY OF JEFFERSON )
On this 12th day of March, 1993, before me personally appeared John G. Beam,
Jr., to me known and known to me to be the person mentioned and described
in and who executed the foregoing instrument and he duly acknowledged to me
that he executed the same.
---------------------
Notary Public
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS:
That I, Dr. Nicholas D. Yatrakis, of Scotch Plains, New Jersey, as a
director of ODYSSEY FUNDS, INC., do hereby make, constitute and appoint as my
true and lawful attorneys in fact George VlaisavIjevich, Paul S. Feinberg, and
David E. Demarest, or any of them severally for me and in my name, place and
stead to sign registration statements under the Securities Act of 1933 and/or
the Investment Company Act of 1940 and any and all amendments thereto executed
on behalf of ODYSSEY FUNDS, INC., and filed with the Securities and Exchange
Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 11th day of March, 1993.
---------------------
Signature
STATE OF NEW JERSEY )
) SS
COUNTY OF UNION )
On this 11th day of March, 1993, before me personally appeared Dr. Nicholas D.
Yatrakis, to me known and known to me to be the person mentioned and described
in and who executed the foregoing instrument and he duly acknowledged to me
that he executed the same.
---------------------
Notary Public
<PAGE> 1
POWER OF AT7RORNEY
KNOW ALL BY THESE PRESENTS:
That I, Jane DiRenzo Pigott, of , Illinois, as a director of ODYSSEY
FUNDS, INC., do hereby make, constitute and appoint as my true and lawful
attorneys in fact George Vlaisavljevich, Paul S. Feinberg, and David E.
Demarest, or any of them severally for me and in my name, place and stead to
sign registration statements under the Securities Act of 1933 and/or the
Investment Company Act of 1940 and any and all amendments thereto executed on
behalf of ODYSSEY FUNDS, INC., and filed with the Securities and Exchange
Commission.
IN WITNESS WHEREOF, I have hereunto set my hand this 28th day of
April, 1993.
---------------------
Signature
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 28th day of April, 1993, before me personally appeared Jane
DiRenzo Pigott, to me known and known to me to be the person mentioned and
described in and who executed the foregoing instrument and she duly
acknowledged to me that she executed the same.
---------------------
Notary Public
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AMERICIAN
ODYSSEY FUNDS, INC. FORM N-SAR FOR THE PERIOD ENDED DECEMBER 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> AMERICAN ODYSSEY INTERNATIONAL EQUITY FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 242,368,404
<INVESTMENTS-AT-VALUE> 382,674,318
<RECEIVABLES> 544,284
<ASSETS-OTHER> 6,294,530
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 389,513,132
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,020,810
<TOTAL-LIABILITIES> 1,020,810
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 231,701,610
<SHARES-COMMON-STOCK> 17,396,094
<SHARES-COMMON-PRIOR> 17,809,092
<ACCUMULATED-NII-CURRENT> 3,371,638
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 14,098,563
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 139,320,511
<NET-ASSETS> 388,492,322
<DIVIDEND-INCOME> 5,044,573
<INTEREST-INCOME> 206,432
<OTHER-INCOME> 0
<EXPENSES-NET> 2,312,122
<NET-INVESTMENT-INCOME> 2,938,883
<REALIZED-GAINS-CURRENT> 19,987,247
<APPREC-INCREASE-CURRENT> 73,581,147
<NET-CHANGE-FROM-OPS> 96,507,277
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,008,249
<NUMBER-OF-SHARES-REDEEMED> 2,421,247
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 17,396,094
<ACCUMULATED-NII-PRIOR> 797,921
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 6,253,851
<GROSS-ADVISORY-FEES> 1,907,212
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,344,065
<AVERAGE-NET-ASSETS> 324,038,163
<PER-SHARE-NAV-BEGIN> 16.85
<PER-SHARE-NII> 0.17
<PER-SHARE-GAIN-APPREC> 5.31
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 22.33
<EXPENSE-RATIO> 0.71
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AMERICAN
ODYSSEY FUNDS, INC. FORM N-SAR FOR THE PERIOD ENDED DECEMBER 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> AMERICAN ODYSSEY EMERGING OPPORTUNITIES FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 297,137,847
<INVESTMENTS-AT-VALUE> 369,840,596
<RECEIVABLES> 4,586,774
<ASSETS-OTHER> 8,069,976
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 382,497,346
<PAYABLE-FOR-SECURITIES> 8,173,484
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 685,534
<TOTAL-LIABILITIES> 8,859,018
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 286,449,376
<SHARES-COMMON-STOCK> 227,587,014
<SHARES-COMMON-PRIOR> 20,493,456
<ACCUMULATED-NII-CURRENT> 55,097
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 14,431,106
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 72,702,749
<NET-ASSETS> 373,638,328
<DIVIDEND-INCOME> 1,175,460
<INTEREST-INCOME> 350,830
<OTHER-INCOME> 0
<EXPENSES-NET> 2,466,322
<NET-INVESTMENT-INCOME> (940,032)
<REALIZED-GAINS-CURRENT> 17,511,829
<APPREC-INCREASE-CURRENT> 84,620,566
<NET-CHANGE-FROM-OPS> 101,192,363
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 25,671,500
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,777,931
<NUMBER-OF-SHARES-REDEEMED> 2,415,685
<SHARES-REINVESTED> 1,903,002
<NET-CHANGE-IN-ASSETS> 105,308,523
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 23,585,907
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,230,930
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,566,815
<AVERAGE-NET-ASSETS> 296,290,274
<PER-SHARE-NAV-BEGIN> 13.09
<PER-SHARE-NII> (0.04)
<PER-SHARE-GAIN-APPREC> 4.58
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 1.21
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.42
<EXPENSE-RATIO> 0.83
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AMERICAN
ODYSSEY FUNDS, INC. FORM N-SAR FOR THE PERIOD ENDED DECEMBER 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 3
<NAME> AMERICAN ODYSSEY CORE EQUITY FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 378,516,923
<INVESTMENTS-AT-VALUE> 455,017,013
<RECEIVABLES> 1,085,991
<ASSETS-OTHER> 16,169,880
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 472,272,884
<PAYABLE-FOR-SECURITIES> 1,164,664
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 690,855
<TOTAL-LIABILITIES> 1,855,519
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 367,008,139
<SHARES-COMMON-STOCK> 26,709,805
<SHARES-COMMON-PRIOR> 22,953,325
<ACCUMULATED-NII-CURRENT> 5,738,472
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 21,170,664
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 76,500,090
<NET-ASSETS> 470,417,365
<DIVIDEND-INCOME> 8,440,784
<INTEREST-INCOME> 273,015
<OTHER-INCOME> 0
<EXPENSES-NET> 2,974,050
<NET-INVESTMENT-INCOME> 5,739,749
<REALIZED-GAINS-CURRENT> 21,659,887
<APPREC-INCREASE-CURRENT> (27,761,775)
<NET-CHANGE-FROM-OPS> (362,139)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6,078,603
<DISTRIBUTIONS-OF-GAINS> 65,203,555
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,346,314
<NUMBER-OF-SHARES-REDEEMED> 2,355,400
<SHARES-REINVESTED> 3,765,566
<NET-CHANGE-IN-ASSETS> (2,535,897)
<ACCUMULATED-NII-PRIOR> 6,077,106
<ACCUMULATED-GAINS-PRIOR> 64,714,251
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,695,731
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,091,237
<AVERAGE-NET-ASSETS> 481,042,123
<PER-SHARE-NAV-BEGIN> 20.61
<PER-SHARE-NII> 0.22
<PER-SHARE-GAIN-APPREC> (0.06)
<PER-SHARE-DIVIDEND> 0.27
<PER-SHARE-DISTRIBUTIONS> 2.89
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.61
<EXPENSE-RATIO> 0.62
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AMERICAN
ODYSSEY FUNDS, INC. FORM N-SAR FOR THE PERIOD ENDED DECEMBER 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 4
<NAME> AMERICAN ODYSSEY LONG-TERM BOND FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 250,106,091
<INVESTMENTS-AT-VALUE> 239,132,697
<RECEIVABLES> 2,749,207
<ASSETS-OTHER> 17,710,386
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 259,592,290
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,224,702
<TOTAL-LIABILITIES> 5,224,702
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 256,701,154
<SHARES-COMMON-STOCK> 24,991,095
<SHARES-COMMON-PRIOR> 22,145,289
<ACCUMULATED-NII-CURRENT> 16,204,242
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 7,349,889
<ACCUM-APPREC-OR-DEPREC> (11,187,937)
<NET-ASSETS> 254,367,570
<DIVIDEND-INCOME> 35,000
<INTEREST-INCOME> 17,419,117
<OTHER-INCOME> 0
<EXPENSES-NET> 1,488,286
<NET-INVESTMENT-INCOME> 15,965,831
<REALIZED-GAINS-CURRENT> (7,494,141)
<APPREC-INCREASE-CURRENT> (15,331,895)
<NET-CHANGE-FROM-OPS> (6,860,205)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 14,567,381
<DISTRIBUTIONS-OF-GAINS> 6,872,189
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,132,985
<NUMBER-OF-SHARES-REDEEMED> 2,420,469
<SHARES-REINVESTED> 2,133,290
<NET-CHANGE-IN-ASSETS> (11,520,037)
<ACCUMULATED-NII-PRIOR> 14,565,934
<ACCUMULATED-GAINS-PRIOR> 7,256,299
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,244,205
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,488,286
<AVERAGE-NET-ASSETS> 248,913,084
<PER-SHARE-NAV-BEGIN> 11.49
<PER-SHARE-NII> 0.65
<PER-SHARE-GAIN-APPREC> (0.98)
<PER-SHARE-DIVIDEND> 0.67
<PER-SHARE-DISTRIBUTIONS> 0.31
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.18
<EXPENSE-RATIO> 0.60
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AMERICAN
ODYSSEY FUNDS, INC. FORM N-SAR FOR THE PERIOD ENDED DECEMBER 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 5
<NAME> AMERICAN ODYSSEY INTERMEDIATE TERM BOND FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 131,342,510
<INVESTMENTS-AT-VALUE> 128,916,305
<RECEIVABLES> 2,358,718
<ASSETS-OTHER> 1,538
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 131,276,606
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 153,329
<TOTAL-LIABILITIES> 153,329
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 129,218,877
<SHARES-COMMON-STOCK> 12,658,199
<SHARES-COMMON-PRIOR> 11,356,645
<ACCUMULATED-NII-CURRENT> 7,390,343
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 3,059,738
<ACCUM-APPREC-OR-DEPREC> (2,426,205)
<NET-ASSETS> 131,123,277
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8,138,446
<OTHER-INCOME> 0
<EXPENSES-NET> 747,375
<NET-INVESTMENT-INCOME> 7,391,071
<REALIZED-GAINS-CURRENT> (3,059,738)
<APPREC-INCREASE-CURRENT> (2,404,548)
<NET-CHANGE-FROM-OPS> 1,926,785
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6,579,835
<DISTRIBUTIONS-OF-GAINS> 3,746,306
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,678,567
<NUMBER-OF-SHARES-REDEEMED> 1,389,380
<SHARES-REINVESTED> 1,012,367
<NET-CHANGE-IN-ASSETS> 4,764,754
<ACCUMULATED-NII-PRIOR> 6,579,802
<ACCUMULATED-GAINS-PRIOR> 3,745,610
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 620,940
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 747,375
<AVERAGE-NET-ASSETS> 126,875,693
<PER-SHARE-NAV-BEGIN> 11.13
<PER-SHARE-NII> 0.59
<PER-SHARE-GAIN-APPREC> (0.44)
<PER-SHARE-DIVIDEND> 0.59
<PER-SHARE-DISTRIBUTIONS> 0.33
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.36
<EXPENSE-RATIO> 0.59
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AMERICAN
ODYSSEY FUNDS, INC. FORM N-SAR FOR THE PERIOD ENDED DECEMBER 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 6
<NAME> AMERICAN ODYSSEY GLOBAL HIGH-YIELD BOND FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 96,722,187
<INVESTMENTS-AT-VALUE> 92,774,210
<RECEIVABLES> 2,173,777
<ASSETS-OTHER> 1,869,566
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 96,817,553
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 195,889
<TOTAL-LIABILITIES> 195,889
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 96,805,934
<SHARES-COMMON-STOCK> 9,382,126
<SHARES-COMMON-PRIOR> 8,265,528
<ACCUMULATED-NII-CURRENT> 9,124,401
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 5,360,694
<ACCUM-APPREC-OR-DEPREC> (3,947,977)
<NET-ASSETS> 96,621,644
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9,803,352
<OTHER-INCOME> 0
<EXPENSES-NET> 733,709
<NET-INVESTMENT-INCOME> 9,069,643
<REALIZED-GAINS-CURRENT> (161,844)
<APPREC-INCREASE-CURRENT> 137,045
<NET-CHANGE-FROM-OPS> 9,044,844
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,442,107
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,172,084
<NUMBER-OF-SHARES-REDEEMED> 610,237
<SHARES-REINVESTED> 554,751
<NET-CHANGE-IN-ASSETS> 14,613,592
<ACCUMULATED-NII-PRIOR> 5,442,468
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 5,117,260
<GROSS-ADVISORY-FEES> 597,092
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 733,709
<AVERAGE-NET-ASSETS> 88,458,113
<PER-SHARE-NAV-BEGIN> 9.92
<PER-SHARE-NII> 0.96
<PER-SHARE-GAIN-APPREC> 0.07
<PER-SHARE-DIVIDEND> 0.65
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.30
<EXPENSE-RATIO> 0.83
</TABLE>
