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SUB-INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this __ day of __________, 1998, between AMERICAN
DIVERSIFIED ASSET MANAGEMENT, INC. (the "Adviser") and LADAS & XXXXXXX, INC.
(the "Subadviser").
WHEREAS, American Diversified Funds, Inc. (the "Company") is registered
as an open-end, management investment company under the Investment Company Act
of 1940, as amended (the "1940 Act"); and
WHEREAS, American Diversified International Value Fund (the "Fund") is
a separate investment series of the Company; and
WHEREAS, the Adviser has been appointed investment adviser to the Fund;
and
WHEREAS, the Adviser desires to retain the Subadviser to assist it in
the provision of a continuous investment program for the Fund and the Subadviser
is willing to do so upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Adviser hereby appoints the Subadviser to act as
subadviser to the Fund as permitted by the Adviser's Investment Advisory
Agreement with the Company pertaining to the Fund. Intending to be legally
bound, the Subadviser accepts such appointment and agrees to render the services
herein set forth for the compensation herein provided.
2. Sub-Advisory Services. Subject to the supervision of the Board of
Directors, the Subadviser shall assist the Adviser in providing a continuous
investment program with respect to the Fund's portfolio, including without
limitation investment research and management with respect to all securities and
investments and cash equivalents in the Fund. The Subadviser may, subject to the
Adviser's review, determine the securities and investments to be purchased, sold
or retained by the Fund, and the Subadviser may place orders directly with the
issuer or any broker or dealer for such securities and investments. The Adviser
will provide services under this Agreement in accordance with the Fund's
investment objective, policies and restrictions as stated in the Fund's
prospectus and Statement of Additional Information, which shall be forwarded to
the Subadviser by the Adviser from time to time, and resolutions of the Board of
Directors applicable to the Fund provided those resolutions are communicated to
the Subadviser and a reasonable amount of time is provided in order for it to
comply.
Without limiting the generality of the foregoing, the Subadviser
further agrees that it:
(a) will use the same skill and care in providing such
services as it uses in providing services to fiduciary accounts for which it has
investment responsibilities;
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(b) will conform with all applicable Rules and Regulations of
the Securities and Exchange Commission under the 1940 Act applicable to
investment advisers to registered investment companies and in addition will
conduct its activities under this Agreement in accordance with any applicable
regulations of any governmental authority pertaining to the investment advisory
activities of the Subadviser;
(c) will place or cause to be placed orders for the Fund
either directly with the issuer or with any broker or dealer. In placing orders
with brokers and dealers, the Subadviser will attempt to obtain prompt execution
of orders in an effective manner at the most favorable price. Consistent with
this obligation and to the extent permitted by the 1940 Act, when the execution
and price offered by two or more brokers or dealers are comparable, the Adviser
may, in its discretion, purchase and sell portfolio securities to and from
brokers and dealers who provide the Adviser with research advice and other
services;
(d) will maintain or cause to be maintained all books and
records with respect to the securities transactions of the Fund and will furnish
the Board of Directors with such periodic and special reports as the Board may
request; and
(e) will treat confidentially and as proprietary information
of the Company all records and other information relative to the Company and the
Fund and prior, present, or potential shareholders, and will not use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder.
3. Services Not Exclusive. Except as provided herein, the services
furnished by the Subadviser hereunder are deemed not to be exclusive, and the
Adviser shall be free to furnish similar services to others so long as its
services under this Agreement are not impaired thereby.
4. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Subadviser hereby agrees that all records which it
maintains for the Company are the property of the Company and further agrees to
surrender promptly to the Company any of such records upon the Company's
request. The Subadviser further agrees to preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act the records required to be maintained by Rule
31a-1 under the 1940 Act.
5. Expenses. During the term of this Agreement, the Subadviser will pay
all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities, commodities and other investments
(including without limitation brokerage commissions and other transaction
charges, if any) purchased for the Fund.
6. Compensation. For the services provided and the expenses assumed
with respect to the Fund pursuant to this Agreement, the Subadviser will be
entitled to a fee of 1/12th of .50% monthly (equivalent to .50% annually) on the
first $100,000,000 of the net assets of the Fund as of the close of business on
the last business day of each calendar month during the Fund's fiscal year,
reduced to 1/12th of .375% monthly (equivalent to .375% annually) of such
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net assets in excess of $100,000,000 up to $250,000,000, and reduced to 1/12th
of .25% monthly (equivalent to .25% annually) of such net assets in excess of
$250,000,000.
7. Limitation of Liability. The Subadviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the performance of this Agreement, except a loss resulting from
a breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Subadviser in the performance of its duties or
from reckless disregard by it of its obligations and duties under this
Agreement. Notwithstanding the foregoing or any other provision of this
Agreement, nothing herein shall in any way constitute a waiver or limitation of
any rights that the Company, the Fund or the Adviser may have under the United
States federal or State securities laws, which may impose liability on persons
who act in good faith.
8. Duration and Termination. Unless sooner terminated, this Agreement
shall continue in full force and effect until two years from the date hereof,
and thereafter shall continue automatically for successive annual periods,
provided such continuance is specifically approved at least annually by the
Company's Board of Directors or vote of the lesser of (a) 67% of the shares of
the Fund represented at a meeting if holders of more than 50 % of the
outstanding shares of the Fund are present in person or by proxy or (b) more
than 50 % of the outstanding shares of the Fund, provided that in either event
its continuance also is approved by a majority of the Directors who are not
"interested persons" (as defined in the 0000 Xxx) of any party to this Agreement
(the "Independent Directors"), by vote cast in person at a meeting called for
the purpose of voting on such approval. This Agreement is terminable at any time
without penalty, on 60 days' notice, by the Adviser, the Subadviser or by the
Board of Directors or by vote of the lesser of (a) 67% of the shares of the Fund
represented at a meeting if holders of more than 50 % of the outstanding shares
of the Fund are present in person or by proxy or (b) more than 50 % of the
outstanding shares of the Fund. This Agreement will terminate automatically in
the event of its assignment (as defined in the 1940 Act).
9. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
10. Governing Law. This Agreement shall be governed by and its
provisions shall be construed in accordance with the laws of the State of
California as applied to agreements between California residents entered into
and performed entirely within the State of California.
11. Possession of Fund Assets. At all times the assets of the Fund
(consisting of all cash, securities and other instruments held by the Fund)
shall remain exclusively under the
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management and control of the Fund's custodian. At no time will the Subadviser
have custody or possession of any such assets of the Fund.
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 DIVERSIFIED ASSET MANAGEMENT, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
LADAS & XXXXXXX, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
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