<PAGE> 1
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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
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<PAGE> 5
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 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 the other active manager for the Fund, Putnam. (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
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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.
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 the Fund's other
subadviser using an active management approach, Putnam. 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% 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.
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<PAGE> 7
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 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 agreements 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
</TABLE>
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<PAGE> 8
<TABLE>
<S> <C>
Redemption Fee .......................................................None
Exchange Fee ........................................................None
Account Fee ..........................................................None
</TABLE>
<TABLE>
<S> <C>
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
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:
<S> <C>
1 year ................................... $65
3 years .................................. $205
5 years .................................. $357
10 years ................................. $798
</TABLE>
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
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<PAGE> 9
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
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:
<S> <C>
1 year ............................. $65
3 years ............................ $205
5 years ............................ $357
10 years ........................... $798
</TABLE>
7
<PAGE> 10
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
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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
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<PAGE> 13
contracts, and other investments included in the Allocated
Assets will be purchased, retained, sold, or loaned by the Fund,
and what portion of the Allocated Assets will be invested or
held uninvested as cash.
(iii) In the performance of its duties and obligations
under this Agreement, the Subadviser shall act in conformity
with the Articles of Incorporation, By-Laws, and Prospectus of
the Series Fund and with the instructions and directions of the
Manager and of the Board of Directors of the Series Fund and
will conform to and comply with the requirements of the 1940
Act, the Internal Revenue Code of 1986, and all other applicable
federal and state laws and regulations.
(iv) The Subadviser will place orders for the securities,
options, futures contracts, and other investments to be
purchased or sold as part of the Allocated Assets with or
through such persons, brokers, dealers, or futures commission
merchants (including but not limited to persons affiliated with
the Manager) as the Subadviser may select in order to carry out
the policy with respect to brokerage set forth in the Series
Fund's Registration Statement and Prospectus or as the Board of
Directors may direct from time to time. In providing the Fund
with investment advice and management, the Subadviser will give
primary consideration to securing the most favorable price and
efficient execution. Within the framework of this policy, the
Subadviser may consider such factors as the price of the
security, the rate of the commission, the size and difficulty of
the order, the reliability, integrity, financial condition,
general execution and operational capabilities of competing
broker-dealers and futures commission merchants, and the
brokerage and research services they provide to the Subadviser
or the Fund. The parties agree that it is desirable for the Fund
that the Subadviser have access to supplemental investment and
market research and security and economic analysis that certain
brokers or futures commission merchants are able to provide. The
parties further agree that brokers and futures commission
merchants that provide such research and analysis may execute
brokerage transactions at a higher cost to the 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.
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<PAGE> 14
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 the
other books and records of the Fund required by Rules 17e-1(c)(2) and
31a-1 under
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<PAGE> 15
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
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<PAGE> 16
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
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.
14
<PAGE> 17
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
AMERICAN ODYSSEY FUNDS
MANAGEMENT LLC
____________________________ By: ____________________________
Witness
WELLINGTON MANAGEMENT
COMPANY, LLP
____________________________ By: ____________________________
Witness
15
