1
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the ___ day of ________, 1998, between AMERICAN
DIVERSIFIED FUNDS, INC. (hereinafter referred to as the "Fund") and AMERICAN
DIVERSIFIED ASSET MANAGEMENT, INC., a corporation organized under the laws of
the State of Nevada (hereinafter referred to as the "Adviser").
1. Management of Fund. The Adviser agrees, during the life of this
Agreement, to (i) furnish the Fund with investment research, advice and
supervision and (ii) continuously furnish the Fund with an investment program
for the assets of the Fund consistent with the provisions of the Articles of
Incorporation of the Fund and the investment policies adopted and declared by
its Board of Directors. The Adviser is not required to furnish any overhead
items or facilities for the Fund, including without limitation trading desk
facilities or daily pricing.
2. Service Providers. In rendering its advisory services to the Fund
pursuant to this Agreement, the Adviser may employ, retain or otherwise avail
itself of the services or facilities of other persons or organizations for the
purpose of providing itself or the Fund with such statistical and other factual
information, such advice regarding economic factors and trends, such advice as
to occasional transactions in specific securities and other properties and
assets, or such other information, advice or assistance as the Adviser may deem
necessary, appropriate or convenient for the discharge of its overall
responsibilities with respect to the Fund and the other accounts which it or its
affiliates serve as investment adviser.
3. Brokers and Dealers. In addition to being responsible for supplying
recommendations regarding the purchase and sale of securities by the Fund, the
Adviser shall recommend brokers and dealers for execution of the Fund's
portfolio transactions. The foremost consideration in making such
recommendations will be the Fund's obtaining best price and execution.
Secondarily, the Adviser may take into account certain additional services
provided by broker-dealers to the Fund. The Adviser and any person performing
executive, administrative or trading functions for the Fund, whose services are
made available to the Fund by the Adviser, are specifically authorized to
recommend to the Fund that it allocate brokerage and principal business to firms
that provide such services or facilities which, if accepted, might cause the
Fund to pay a member of a securities exchange or any other securities broker or
dealer an amount of commission or "xxxx-up" for effecting the securities
transaction in excess of the amount of commission, or at a less advantageous
price another member of the exchange, broker or dealer would have charged for
effecting that transaction, if the Adviser or such person determine in good
faith that such amount of commission, or "xxxx-up", as the case may be, is
reasonable in relation to the value of the brokerage and research (as such
services are defined in Section 28(e) of the securities and Exchange Act of
1934) provided by such member, broker or dealer, viewed in terms of either that
particular transaction or the Adviser's evaluation of such person's overall
responsibilities with respect to accounts as to which the Adviser or such person
exercise
2
investment discretion (as that term is defined in Section 3(a)(35) of the
Securities Exchange Act of 1934).
4. Purchases and Sales of Fund Securities. The Adviser, its affiliates
or other its investment advisory clients may purchase and/or sell many
securities which are also purchased or sold by the Fund. The orders for all such
securities transactions will be placed for execution by methods so as to be
impartial and fair for all parties and in compliance with all applicable, rules
and regulations.
5. Liability. In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Adviser, or of reckless disregard of its
obligations hereunder, the Adviser shall have no liability to the Fund or any
shareholder of the Fund for any error of judgment, mistake of law, or any loss
arising out of any investment or for any other act or omission in the
performance by the Adviser of its duties under this Agreement.
6. Compensation. The Fund agrees, during the life of this Agreement, to
pay to the investment Adviser as compensation for such services a fee of 1/12th
of 1% monthly (equivalent to 1% 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 .75% monthly
(equivalent to .75% annually) of such net assets in excess of $100,000,000 up to
$250,000,000, and reduced to 1/12th of .5% monthly (equivalent to .5% annually)
of such net assets in excess of $250,000,000.
7. Term. This Agreement shall remain in full force and effect until two
years from the date hereof and thereafter from year to year to the extent such
continuance is approved annually by the Board of Directors of the Fund or by
vote of a majority of the outstanding voting securities of the Fund (as defined
by the Investment Company Act of 1940, as amended (the "1940 Act")) and also, in
either event, approval by a majority of those Directors who are not parties to
the Contract or interested persons of any such party.
8. Termination. This Agreement may be terminated by the Fund or the
Adviser at any time on sixty (60) day's written notice without payment of
penalty, provided that such termination by the Fund shall be directed or
approved by the vote of a majority of the Directors of the Fund in office at the
time or by the vote of a majority of the outstanding voting securities of the
Fund (as defined by the 1940 Act).
9. Assignment. This Agreement shall automatically and immediately
terminate in the event of its assignment (as defined by the 1940 Act).
3
10. Books and Records. The Adviser will maintain its books and records
or duplicate copies thereof relating to the Fund and will comply with Section 31
of the 1940 Act and the rules thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers and attested as of the date
first above written.
AMERICAN DIVERSIFIED FUNDS, INC.,
on behalf of American Diversified
International Value Fund
By______________________________________
Xxxxx X. Xxx, Xx., President
ATTEST:
___________________________________
(Secretary)
AMERICAN DIVERSIFIED ASSET
MANAGEMENT, INC.
By______________________________________
Xxxxx X. Xxx, Xx., President
ATTEST:
___________________________________
(Secretary)
