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SCHEDULE 14C INFORMATION
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of the Securities Exchange Act of 1934
(Amendment No. )
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[ ] Preliminary Information Statement
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14c-5(d)(2))
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American Odyssey Funds, Inc.
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AMERICAN ODYSSEY FUNDS, INC.
TWO TOWER CENTER
EAST BRUNSWICK, NEW JERSEY 08816
NOTICE OF NEW SUBADVISORY AGREEMENT
FOR THE CORE EQUITY FUND
American Odyssey Funds, Inc. ("AOF" or "we") is notifying you of a new
subadvisory agreement for the American Odyssey Core Equity Fund (the "Fund"). We
have recently approved a new subadvisory agreement adding Wellington Management
Company, LLP ("Wellington Management") as a new subadviser for the Fund.
Wellington Management replaces one of the Fund's prior subadvisers, Equinox
Capital Management, LLC ("Equinox").
WE ARE NOT ASKING YOU FOR A PROXY, AND YOU ARE REQUESTED NOT TO SEND US A
PROXY. Under an order obtained from the Securities and Exchange Commission
("SEC"), the Board of Directors is permitted to adopt, without shareholder
approval, new subadvisory agreements with advisers who are not affiliated with
AOF's overall investment manager, American Odyssey Funds Management LLC (the
"Manager"). The Board of Directors has adopted a new subadvisory agreement with
Wellington Management as a non-affiliated subadviser. In accordance with our SEC
order, we are sending you this Notice.
WE WILL FURNISH YOU A COPY OF OUR MOST RECENT ANNUAL AND SEMI-ANNUAL REPORT
ON REQUEST AND WITHOUT CHARGE. IF YOU WISH TO OBTAIN A COPY OF EITHER REPORT,
MAIL A REQUEST TO AMERICAN ODYSSEY FUNDS MANAGEMENT LLC, TWO TOWER CENTER, EAST
BRUNSWICK, NEW JERSEY 08816, OR CALL 1-800-242-7884.
The following pages provide additional information about Wellington
Management and the new subadvisory agreement.
<PAGE> 4
BACKGROUND
Prior to May 2000, Equinox was the sole subadviser to the Fund. Equinox
managed the Fund in a "value" investment style. It focused on stocks of
companies that it believed were undervalued by the market. Because of the
increasing divergence in the returns of "growth" and "value" funds over the past
several years, we determined that the overall risk profile of the Fund would
likely be reduced by diversifying the investment approaches used to manage the
Fund. Therefore, we carried out a search for firms with different investment
approaches to balance Equinox's value-oriented approach. As a result of this
process, we approved a new agreement with Equinox on April 3, 2000 and added
Putnam Investment Management, Inc. ("Putnam") and State Street Global Advisors
("SSgA") as new subadvisers to the fund as of May 1, 2000. SSgA manages its
portion of the Fund with the objective of matching the S&P 500 Index, while
Putnam uses a "growth" investment style, focusing on stocks of companies that it
expects to have above average earnings growth.
SEARCH FOR NEW SUBADVISER
Shortly after adding Putnam and SSgA as subadvisers, the Board of Directors
and the Manager determined that it would be appropriate to consider replacing
Equinox with another value-oriented subadviser based on Equinox's past
performance.
The Manager and its consultant, BARRA RogersCasey, conducted a search for a
new value-oriented subadviser for the Fund. The search was designed to identify
firms they believed would be able to provide reliable market exposure in the
large cap value segment of the U.S. equity market and had a history of
consistent returns. The Manager and BARRA RogersCasey also considered whether
the firms they surveyed would be complementary to Putnam and SSgA.
The Manager and BARRA RogersCasey reviewed information about many advisers
and selected four advisers for more detailed consideration. The Manager and
BARRA RogersCasey then analyzed the relative performances and risk exposures of
the four prospective subadvisers, of Equinox, and of the Russell 1000 Value and
S&P 500 indices. After meeting with and reviewing additional information about
the prospective advisers, the Manager determined to propose to the Board that
Wellington Management be retained as a subadviser for the Fund.
BOARD CONSIDERATION
On August 10, 2000, the full AOF Board of Directors, including all
directors who are not "interested persons" of AOF as that term is defined in the
federal securities laws ("independent directors"), met in person to discuss the
proposed subadvisory agreement with Wellington Management. The Board received a
variety of information about Wellington Management, including information about
the firm's organization and key personnel, the firm's investment experience,
investment philosophy and process, its past performance in managing other value
funds and accounts, and its plan for staffing and managing its portion of the
Fund using a value approach.
After presentations by the Manager, the Manager's consultant, BARRA
RogersCasey, and Wellington Management, the Board unanimously voted to approve
the proposed subadvisory agreement with Wellington Management as of August 21,
2000 and to terminate its prior agreement with Equinox. The Board determined
that the proposed agreement was in the best interests of investors in the Fund.
In making that determination, the Board considered a variety of factors,
including those discussed below.
Nature and Quality of Wellington Management's Services. The Board
considered Wellington Management's personnel, resources and experience.
Wellington Management has over 70 years of experience in
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managing assets and currently manages approximately $266 billion in
institutional and subadvisory assets (as of September 30, 2000). The firm has
over 240 investment and research professionals with an average of 13 years of
investment experience, and it has substantial experience in large cap research
value investing. Wellington Management commits considerable resources to its
large cap research value strategy, including a central research staff currently
consisting of 27 global industry analysts with an average of 16 years of
investment experience. The Board reviewed Wellington Management's code of
ethics, compliance practices, and other client-related policies.
Wellington Management's Historical Performance. The Board considered
materials showing the investment performance of Wellington Management's large
cap research value strategy. Since inception in July 1995, this strategy has
performed favorably compared with the Russell 1000 Value Index and compared with
other large cap value managers.
Wellington Management's Approach to Value Management. The Board also
considered Wellington Management's investment approach. Wellington Management
maintains a diversified portfolio for its large cap research value funds. It is
committed to fundamental research.
Fees. The Board considered Wellington Management's proposed fee of 0.45%.
The Board compared this proposed fee with the fees charged by other value
advisers to mutual funds or other clients and with the fees charged by the
Fund's other subadvisers. Wellington Management's fee is the same as the fee
currently paid to Putnam, the other active manager for the Fund. (SSgA's fee is
lower, but index fees are generally lower than active management fees.) Although
Wellington Management's fee is higher than the fee previously paid to Equinox,
the Board agreed with the conclusion of the Manager and BARRA RogersCasey that
the proposed fee is within the range of fees currently charged by similar
advisers for similar services. The Board also considered that the proposed fee
for Wellington Management was the same as the proposed fee for the other three
subadvisers that received final consideration by the Manager and BARRA
RogersCasey.
WELLINGTON MANAGEMENT
Wellington Management is one of the nation's oldest and largest investment
management firms. Tracing its origins back to 1928, the firm's client assets
under management as of September 30, 2000 were approximately $266 billion.
Wellington Management's client list includes major corporate retirement plans,
endowments, foundations, mutual fund sponsors, and public retirement plans.
Based in Boston, Massachusetts, the firm and its affiliates have offices in
Radnor (PA), Atlanta, San Francisco, London, Singapore, Sydney and Tokyo.
Wellington Management is a Massachusetts limited liability partnership, of
which the following persons are managing partners: Laurie A. Gabriel, Duncan M.
McFarland and John R. Ryan. Doris Dwyer Chu, a Vice President of Wellington
Management, has primary management responsibility for the Fund. Laurie Gabriel,
one of the managing partners, serves as secondary manager for the Fund. The
address for Wellington Management and each of these persons is 75 State Street,
Boston, Massachusetts 02109.
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Wellington Management provides advice for the following registered
investment companies with a objective similar to the objective used by
Wellington Management in managing the portion of the Fund allocated to it:
<TABLE>
<CAPTION>
NAME OF REGISTERED
INVESTMENT COMPANY SIZE AS OF 9/30/00 ADVISORY FEE RATE
------------------ ------------------ ----------------------------
<S> <C> <C>
J Hancock Large/Mid Cap $ 11,351,418 First $25 million 0.600%;
Value Fund Next $25 million 0.500%;
Next $50 million 0.400%;
Over $100 million 0.300%.
Activa Value Fund $172,402,385 First $350 million 0.300%;
Over $350 million 0.250%.
Minimum annual fee: $350,000
</TABLE>
SUBADVISORY AGREEMENT
The new subadvisory agreement provides that the Fund will pay Wellington
Management a fee based on the annual rate of 0.45% of average daily net assets.
This is the same fee rate that is paid to Putnam, the Fund's other subadviser
using an active management approach. SSgA, the index subadviser, receives a
lower fee (0.05% for the first $50 million is assets, 0.04% for the next $50
million in assets, and 0.02% for assets over $100 million, with a minimum fee of
$50,000 on an annualized basis). Equinox was paid 0.35% for the first $100
million in assets and 0.30% for assets over $100 million.
Other than fees, the new subadvisory agreement with Wellington Management
is substantially the same as the prior agreement with Equinox. Other material
provisions, such as duties, indemnification and termination, are essentially the
same. (Of course, there are differences in the names and addresses of the
parties, the effective dates and terms of the agreements and other minor
differences, such as in the rights of the subadviser to engage in related
investment management activities.) The Appendix contains the full text of the
subadvisory agreement itself.
Under the new subadvisory agreement, Wellington Management's
responsibilities for the Fund include:
- managing its portion of the Fund's investment operations in accord with
the Fund's investment objectives;
- consulting with the Manager to set investment strategies;
- supervising investments;
- placing orders to purchase and sell investments;
- maintaining books and records on portfolio transactions;
- providing transactional information to the Fund's custodian;
- and providing records and other information to the Manager as necessary.
The subadvisory agreement also sets Wellington Management's liability for
losses by the Fund or the Manager, and the obligations of the Manager toward
Wellington Management. The agreement permits Wellington Management's directors,
officers and employees to engage in other businesses and advisory activities.
The subadvisory agreement may be amended by mutual consent. The subadvisory
agreement may
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continue for more than two years only if it is annually re-approved by the
Board. The Manager, Wellington Management, or the Board may each terminate the
subadvisory agreement on 30 to 60 days' notice.
ADDITIONAL FEE INFORMATION
A. 1999 FEE INFORMATION
The following table summarizes the expenses of the Fund during 1999. It
follows the format used in the prospectus. Expenses are expressed as a
percentage of average net assets during the year. These tables and examples do
not include any expenses charged under any variable contract, such as sales
charges or mortality and expense risk charges.
<TABLE>
<CAPTION>
CORE
EQUITY
FUND
------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Charge (Load) on Purchases............................ None
Deferred Sales Charge (Load)................................ None
Redemption Fee.............................................. None
Exchange Fee................................................ None
Account Fee................................................. None
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fees............................................. 0.56%
Distribution (12b-1 Fees)................................... None
Other Expenses.............................................. 0.08%
TOTAL ANNUAL FUND OPERATING EXPENSES........................ 0.64%
</TABLE>
The following example shows the total expenses that would be payable if a
shareholder redeemed his or her shares after having held them for one, three,
five, and ten year periods respectively. The example is based on the 1999
expenses listed in the table above. Actual expenses may be greater or less than
shown. The example assumes a 5% annual rate of return pursuant to requirements
of the Securities and Exchange Commission. This hypothetical rate of return is
not intended to be representative of past or future performance.
<TABLE>
<CAPTION>
CORE
EQUITY
FUND
------
<S> <C>
EXAMPLE
A shareholder would pay the following expenses on a $10,000
investment, assuming (1) 5% annual return and (2)
redemption at end of each time period:
1 year.................................................... $ 65
3 years................................................... $205
5 years................................................... $357
10 years.................................................. $798
</TABLE>
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B. PRO FORMA FEE INFORMATION
The following table shows an estimate of what 1999 expenses would have been
if Wellington Management had served as a subadviser for the Fund under the new
subadvisory agreement in addition to Putnam and SSgA. This reflects the Putnam
and Wellington Management fees, which are the same, and the SSgA fees, which are
lower than the Putnam and Wellington Management fees. Because the subadvisers
have different fees, overall fees will vary depending on the allocation of
assets between the subadvisers. The chart below assumes that during 1999 the
Fund's assets were equally divided among the subadvisers. As in the first table,
expenses are expressed as a percentage of average net assets during the year. In
addition, these tables and examples do not include any expenses charged under
any variable contract, such as sales charges or mortality and expense risk
charges.
<TABLE>
<CAPTION>
CORE
EQUITY
FUND
------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Charge (Load) on Purchases............................ None
Deferred Sales Charge (Load)................................ None
Redemption Fee.............................................. None
Exchange Fee................................................ None
Account Fee................................................. None
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fees............................................. 0.56%
Distribution (12b-1) Fees................................... None
Other Expenses.............................................. 0.08%
TOTAL ANNUAL FUND OPERATING EXPENSES........................ 0.64%
</TABLE>
The following example shows the total expenses that would be payable if a
shareholder redeemed his or her shares after having held them for one, three,
five, and ten year periods respectively. The example is based on the pro forma
1999 expenses listed in the above table. Actual expenses may be greater or less
than shown. The example assumes a 5% annual rate of return pursuant to
requirements of the Securities and Exchange Commission. This hypothetical rate
of return is not intended to be representative of past or future performance.
<TABLE>
<CAPTION>
CORE
EQUITY
FUND
------
<S> <C>
EXAMPLE
A shareholder would pay the following expenses on a $10,000
investment, assuming (1) 5% annual return and (2)
redemption at end of each time period:
1 year.................................................... $ 65
3 years................................................... $205
5 years................................................... $357
10 years.................................................. $798
</TABLE>
6
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ADDITIONAL INFORMATION ABOUT THE FUND
The Manager is located at Two Tower Center, East Brunswick, New Jersey
08816. BARRA Rogers Casey, 1 Parklands Drive, Darien, Connecticut 06820, assists
the Manager in monitoring the performance of the subadvisers and comparing that
performance to that of other investment managers. The Manager pays BARRA
RogersCasey's fees; BARRA RogersCasey does not receive a fee from the Fund.
The Manager provides accounting services to the Fund and keeps the Fund's
accounts and records (other than those maintained by the Investors Bank & Trust
Company). The Manager also serves as transfer agent and dividend disbursing
agent of the Fund. Investors Bank & Trust Company, 200 Clarendon Street, Boston,
Massachusetts 02116, serves as the custodian of our assets and is also the
accounting services agent for each Fund. The Fund pays the fees for those
services. Investors Bank & Trust Company also assists the Manager in providing
certain administrative services, and the Manager pays the fees for these
administrative services. CFBDS, Inc., 21 Milk Street, Boston, MA 02109,
currently serves as our principal underwriter. The Board has approved a new
agreement under which CitiStreet Equities LLC, an affiliate of the Manager, will
replace CFBDS as the principal underwriter. Neither CFBDS nor CitiStreet
Equities LLC receives compensation from the Fund. KPMG LLP, 99 High Street,
Boston, Massachusetts, 02110-2371, serves as the Fund's independent accountant,
providing audit services.
In 1999, the Fund paid commissions of $4,675 to Salomon Smith Barney, an
affiliate of the Manager. This amount represented 0.70% of the aggregate
commissions paid to brokers by the Fund in 1999, and Salomon Smith Barney
effected 0.61% of Fund transactions involving the payment of commissions
(calculated based on the dollar amount of those transactions).
The aggregate fee paid to Equinox in 1999 was $1,493,126. If the new
agreements with Wellington Management, SSgA and Equinox had been in effect, and
if the Fund's assets had been equally divided between the three subadvisers, the
aggregate fee paid by the Core Equity Fund would have been $1,500,196, which
would have constituted an increase of 0.47%.
The Fund's agreement with Equinox was terminated as of August 25, 2000.
THIS NOTICE AND ITS COSTS
We began mailing this Notice on or about November 20, 2000. The Fund will
bear the costs of this Notice.
FUTURE PROPOSALS
We do not ordinarily hold annual meetings, so proposals are presented only
when a special meeting of persons having voting rights is held. For a proposal
to be presented at a special meeting, we must receive the proposal a reasonable
time before the solicitation of proxies is made. Usually, the proposal must
arrive 120 days before the mailing. We will retain all proposals received from
persons with voting rights. Those proposals will then be eligible to be
considered for distribution with the proxy materials for the next special
meeting.
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APPENDIX
INVESTMENT SUBADVISORY AGREEMENT
Agreement made as of this 21st day of August, 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
Wellington Management Company, LLP, a Massachusetts limited liability
partnership (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 (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
Asset's investments and determine from time to time what securities,
options, futures contracts, and other investments included in the
Allocated Assets will be purchased, retained, sold, or loaned by the
Fund, and what portion of the Allocated Assets will be invested or held
uninvested as cash.
(iii) In the performance of its duties and obligations under this
Agreement, the Subadviser shall act in conformity with the Articles of
Incorporation, By-Laws, and Prospectus of the Series Fund and with the
instructions and directions of the Manager and of the Board of Directors
of the Series Fund and will conform to and comply with the requirements
of the 1940 Act, the Internal Revenue Code of 1986, and all other
applicable federal and state laws and regulations.
(iv) The Subadviser will place orders for the securities, options,
futures contracts, and other investments to be purchased or sold as part
of the Allocated Assets with or through such persons, brokers, dealers,
or futures commission merchants (including but not limited to persons
affiliated
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<PAGE> 11
with the Manager) as the Subadviser may select in order to carry out the
policy with respect to brokerage set forth in the Series Fund's
Registration Statement and Prospectus or as the Board of Directors may
direct from time to time. In providing the Fund with investment advice
and management, the Subadviser will give primary consideration to
securing the most favorable price and efficient execution. Within the
framework of this policy, the Subadviser may consider such factors as
the price of the security, the rate of the commission, the size and
difficulty of the order, the reliability, integrity, financial
condition, general execution and operational capabilities of competing
broker-dealers and futures commission merchants, and the brokerage and
research services they provide to the Subadviser or the Fund. The
parties agree that it is desirable for the Fund that the Subadviser have
access to supplemental investment and market research and security and
economic analysis that certain brokers or futures commission merchants
are able to provide. The parties further agree that brokers and futures
commission merchants that provide such research and analysis may execute
brokerage transactions at a higher cost to the Fund than would result if
orders to execute such transactions had been placed with other brokers
on the sole basis of ability to obtain the most favorable price and
efficient execution. Therefore, notwithstanding the second sentence of
this paragraph 1(a)(iv), the Subadviser is authorized to place orders
for the purchase and sale of securities, options, futures contracts, and
other investments for the Fund with brokers or futures commission
merchants who provide the Subadviser with such research and analysis,
subject to review by the Manager and the Series Fund's Board of
Directors from time to time with respect to the extent and continuation
of this practice. The Series Fund and the Manager acknowledge that the
services provided by such brokers or futures commission merchants may be
useful to the Subadviser in connection with the Subadviser's services to
other clients.
When the Subadviser deems the purchase or sale of a security,
option, futures contract, or other investment to be in the best interest
of the Fund as well as other clients of the Subadviser, the Subadviser,
to the extent permitted by applicable laws and regulations, may, but
shall be under no obligation to, aggregate the securities, options,
futures contracts, or other investments to be sold or purchased in order
to obtain the most favorable price or lower brokerage commissions and
efficient execution and to allocate the shares purchased or sold among
the Series Fund and the Subadviser's other clients on a fair and
nondiscriminatory basis, in a manner consistent with the Subadviser's
fiduciary obligations to the Fund and to such other clients.
(v) The Subadviser shall maintain all books and records with
respect to the portfolio transactions of the Allocated Assets required
by subparagraphs (b)(5), (6), (7), (9), (10) and (11) and paragraph (f)
of Rule 31a-1 under the 1940 Act and by Rule 17e-1(c)(2) under the 1940
Act and shall render to the Series Fund such periodic and special
reports as its Board of Directors or the Manager may reasonably request.
(vi) The Subadviser shall provide the Series Fund's custodian on
each business day with information relating to all transactions
concerning the Allocated Assets and shall provide the Manager with such
information upon request of the Manager.
(vii) The investment management services provided by the Subadviser
hereunder are not exclusive, and the Subadviser shall be free to render
similar services to others.
(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.
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<PAGE> 12
(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. 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
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<PAGE> 13
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 Wellington Management Company,
LLP, at 75 State Street, Boston, Massachusetts 02109, Attention: General
Counsel.
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.
11
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
<TABLE>
<S> <C>
AMERICAN ODYSSEY FUNDS, INC.
------------------------------- By: -------------------------------
Witness
AMERICAN ODYSSEY FUNDS
MANAGEMENT LLC
------------------------------- By: -------------------------------
Witness
WELLINGTON MANAGEMENT
COMPANY, LLP
------------------------------- By: -------------------------------
Witness
</TABLE>
12
