NORTH AMERICAN FUNDS
INTERIM SUBADVISORY AGREEMENT
INTERIM AGREEMENT made as of March 10, 2000, between American General
Asset Management Corp., a Delaware corporation (the "Adviser"), and American
General Investment Management L.P., a Delaware limited partnership (the
"Subadviser"). In consideration of the mutual covenants contained herein, the
parties agree as follows:
1. APPOINTMENT OF SUBADVISER
The Subadviser undertakes to act as investment subadviser to, and,
subject to the supervision of the Trustees of North American Funds (the "Trust")
and the terms of this Agreement, to manage the investment and reinvestment of
the assets of the series of the Trust specified in Appendix A to this Agreement
as it shall be amended by the Adviser and the Subadviser from time to time (the
"Funds"). The Subadviser will be an independent contractor and will have no
authority to act for or represent the Trust or Adviser in any way except as
expressly authorized in this Agreement or another writing by the Trust and
Adviser.
2. SERVICES TO BE RENDERED BY THE SUBADVISER TO THE TRUST
a. Subject always to the direction and control of the Trustees of the
Trust, the Subadviser will manage the investments and determine the
composition of the assets of the Funds in accordance with the Funds'
registration statement, as amended. In fulfilling its obligations to
manage the investments and reinvestments of the assets of the Funds,
the Subadviser will:
i. obtain and evaluate pertinent economic, statistical, financial
and other information affecting the economy generally and
individual companies or industries the securities of which are
included in the Funds or are under consideration for inclusion
in the Funds;
ii. formulate and implement a continuous investment program for
each Fund consistent with the investment objectives and
related investment policies for each such Fund as described in
the Trust's registration statement, as amended;
iii. take whatever steps are necessary to implement these
investment programs by the purchase and sale of securities
including the placing of orders for such purchases and sales;
iv. regularly report to the Trustees of the Trust with respect to
the implementation of these investment programs;
v. provide assistance to the Trust's Custodian regarding the fair
value of securities held by the Funds for which market
quotations are not readily available for purposes of enabling
the Trust's Custodian to calculate net asset value; and
vi. vote proxies in accordance with the Proxy Voting Policy of the
Trust.
b. The Subadviser, at its expense, will furnish (i) all necessary
investment and management facilities, including salaries of personnel
required for it to execute its duties faithfully, and (ii)
administrative facilities, including bookkeeping, clerical personnel
and equipment necessary for the efficient conduct of the investment
affairs of the Funds (excluding determination of net asset value and
shareholder accounting services).
c. The Subadviser will select brokers and dealers to effect all
transactions subject to the following conditions: The Subadviser will
place all orders with brokers, dealers, or issuers, and will negotiate
brokerage commissions if applicable. The Subadviser is directed at all
times to seek to execute brokerage transactions for the Funds in
accordance with such policies or practices as may be established by the
Trustees and described in the Trust's registration statement as
amended. The Subadviser may pay a broker-dealer which
provides research and brokerage services a higher spread or commission
for a particular transaction than otherwise might have been charged by
another broker-dealer, if the Subadviser determines that the higher
spread or commission is reasonable in relation to the value of the
brokerage and research services that such broker-dealer provides,
viewed in terms of either the particular transaction or the
Subadviser's overall responsibilities with respect to accounts managed
by the Subadviser. The Subadviser may use for the benefit of the
Subadviser's other clients, or make available to companies affiliated
with the Subadviser or to its directors for the benefit of its clients,
any such brokerage and research services that the Subadviser obtains
from brokers or dealers.
d. On occasions when the Subadviser deems the purchase or sale of a
security 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 to be purchased or sold to attempt to
obtain a more favorable price or lower brokerage commissions and
efficient execution. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction,
will be made by the Subadviser in the manner the Subadviser considers
to be the most equitable and consistent with its fiduciary obligations
to the Fund and to its other clients.
e. The Subadviser will maintain all accounts, books and records with
respect to the Funds as are required of an investment adviser of a
registered investment company pursuant to the Investment Company Act of
1940, as amended (the "Investment Company Act") and Investment Advisers
Act of 1940, as amended (the "Investment Advisers Act") and the rules
thereunder.
f. The Subadviser agrees to comply with Rule 17j-1 under the Investment
Company Act. On a quarterly basis, the Subadviser will either (i)
certify to the Adviser that the Subadviser and its Access Persons have
complied with the Subadviser's Code of Ethics with respect to the Fund
or (ii) identify any material violations which have occurred with
respect to the Fund. In addition, the Subadviser will report at least
annually to the Adviser concerning any other violations of the
Subadviser's Code of Ethics which required significant remedial action
and which were not previously reported.
3. COMPENSATION OF SUBADVISER
The Adviser will pay the Subadviser with respect to each Fund the
compensation specified in Appendix A to this Agreement (the "Compensation").
Further:
(a) The Compensation shall be held in an interest-bearing escrow account
with State Street Bank and Trust Company pursuant to an Escrow
Agreement substantially in the form attached hereto;
(b) If a majority of a Fund's outstanding voting securities approve a
Subadvisory Agreement with the Subadviser before 150 days after March
1, 2000, the amount in the escrow account (including interest earned
thereon) with respect to such Fund shall be paid to the Subadviser;
and
(c) If a majority of a Fund's outstanding voting securities do not
approve a new Subadvisory Agreement with the Subadviser, the
Subadviser shall be paid from the escrow account, the lesser of an
amount equal to:
(1) any costs incurred in performing this Agreement (plus interest
earned on that amount in the escrow account); or
(2) the total amount in the escrow account (plus interest earned
thereon).
4. LIABILITY OF SUBADVISER
Neither the Subadviser nor any of its employees shall be liable to the
Adviser or Trust for any loss suffered
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by the Adviser or Trust resulting from any error of judgment made in the good
faith exercise of the Subadviser's investment discretion in connection with
selecting Fund investments except for losses resulting from willful misfeasance,
bad faith or gross negligence of, or from reckless disregard of, the duties of
the Subadviser or any of its partners or employees; and neither the Subadviser
nor any of its employees shall be liable to the Adviser or Trust for any loss
suffered by the Adviser or Trust resulting from any other matters to which this
Agreement relates (i.e., those other matters specified in Sections 2 and 8 of
this Agreement), except for losses resulting from willful misfeasance, bad
faith, or gross negligence in the performance of, or from disregard of, the
duties of the Subadviser or any of its partners or employees.
5. SUPPLEMENTAL ARRANGEMENTS
The Subadviser may enter into arrangements with other persons
affiliated with the Subadviser to better enable it to fulfill its obligations
under this Agreement for the provision of certain personnel and facilities to
the Subadviser.
6. CONFLICTS OF INTEREST
It is understood that trustees, officers, agents and shareholders of
the Trust are or may be interested in the Subadviser as trustees, officers,
partners or otherwise; that directors, officers, agents and partners of the
Subadviser are or may be interested in the Trust as trustees, officers,
shareholders or otherwise; that the Subadviser may be interested in the Trust;
and that the existence of any such dual interest shall not affect the validity
hereof or of any transactions hereunder except as otherwise provided in the
Agreement and Declaration of Trust of the Trust and the Certificate of
Incorporation of the Subadviser, respectively, or by specific provision of
applicable law.
7. REGULATION
The Subadviser shall submit to all regulatory and administrative bodies
having jurisdiction over the services provided pursuant to this Agreement any
information, reports or other material which any such body by reason of this
Agreement may request or require pursuant to applicable laws and regulations.
8. DURATION AND TERMINATION OF AGREEMENT
This Agreement shall become effective on March ___, 2000 with respect
to each Fund and continue in effect until a new Sub-Advisory Agreement between
Adviser and Subadviser is approved by shareholders of each of the Funds, or for
150 days, whichever is less.
This Agreement may be terminated at any time, without the payment of
any penalty, by the Trustees of the Trust, by the vote of a majority of the
outstanding voting securities of the Trust, or with respect to any Fund by the
vote of a majority of the outstanding voting securities of such Fund, on ten
days' written notice to the Adviser and the Subadviser, or by the Adviser or
Subadviser on sixty days' written notice to the Trust and the other party. This
agreement will automatically terminate, without the payment of any penalty, in
the event of its assignment (as defined in the Investment Company Act) or in the
event the Advisory Agreement between the Adviser and the Trust terminates for
any reason.
9. PROVISION OF CERTAIN INFORMATION BY SUBADVISER
The Subadviser will promptly notify the Adviser in writing of the
occurrence of any of the following events:
a. the Subadviser fails to be registered as an investment adviser under
the Investment Advisers Act or under the laws of any jurisdiction in
which the Subadviser is required to be registered as an investment
adviser in order to perform its obligations under this Agreement;
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b. the Subadviser is served or otherwise receives notice of any action,
suit, proceeding, inquiry or investigation, at law or in equity, before
or by any court, public board or body, involving the affairs of the
Trust; and
c. any change in actual control or management of the Subadviser or the
portfolio manager of any Fund.
10. PROVISION OF CERTAIN INFORMATION BY THE ADVISER
The Adviser shall furnish the Subadviser with copies of the Trust's
Prospectus and Statement of Additional Information, and any reports made by the
Trust to its shareholders, as soon as practicable after such documents become
available. The Adviser shall furnish the Subadviser with any further documents,
materials or information that the Subadviser may reasonably request to enable it
to perform its duties pursuant to this Agreement.
11. SERVICES TO OTHER CLIENTS
The Adviser understands, and has advised the Trust's Board of Trustees,
that the Subadviser now acts, or may in the future act, as an investment adviser
to fiduciary and other managed accounts and as investment adviser or subadviser
to other investment companies. Further, the Adviser understands, and has advised
the Trust's Board of Trustees that the Subadviser and its affiliates may give
advice and take action for its accounts, including investment companies, which
differs from advice given on the timing or nature of action taken for the Fund.
The Subadviser is not obligated to initiate transaction for the Fund in any
security which the Subadviser, its principals, affiliates or employees may
purchase or sell for their own accounts or other clients.
12. AMENDMENTS TO THE AGREEMENT
This Agreement may be amended by the parties only if such amendment is
specifically approved by the vote of a majority of the outstanding voting
securities of each of the Funds affected by the amendment and by the vote of a
majority of the Trustees of the Trust who are not interested persons of any
party to this Agreement cast in person at a meeting called for the purpose of
voting on such approval. The required shareholder approval shall be effective
with respect to any Fund if a majority of the outstanding voting securities of
that Fund vote to approve the amendment, notwithstanding that the amendment may
not have been approved by a majority of the outstanding voting securities of (a)
any other Fund affected by the amendment or (b) all the series of the Trust.
13. ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement of the
parties.
14. HEADINGS
The headings in the sections of this Agreement are inserted for
convenience of reference only and shall not constitute a part hereof.
15. NOTICES
All notices required to be given pursuant to this Agreement shall be
delivered or mailed to the last known business address of the Trust or
applicable party in person or by registered mail or a private mail or delivery
service providing the sender with notice of receipt. Notice shall be deemed
given on the date delivered or mailed in accordance with this paragraph.
16. SEVERABILITY
Should any portion of this Agreement for any reason be held to be void
in law or in equity, the Agreement
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shall be construed, insofar as is possible, as if such portion had never been
contained herein.
17. GOVERNING LAW
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of The Commonwealth of Massachusetts, or any of the
applicable provisions of the Investment Company Act. To the extent that the laws
of The Commonwealth of Massachusetts, or any of the provisions in this
Agreement, conflict with applicable provisions of the Investment Company Act,
the latter shall control.
18. LIMITATION OF LIABILITY
The Amended and Restated Agreement and Declaration of Trust dated
February 18, 1994, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of The Commonwealth of
Massachusetts, provides that the name "North American Funds" refers to the
Trustees under the Declaration collectively as Trustees, but not as individuals
or personally; and no Trustee, shareholder, officer, employee or agent of the
Trust shall be held to any personal liability, nor shall resort be had to their
private property, for the satisfaction of any obligation or claim, in connection
with the affairs of the Trust or any portfolio thereof, but only the assets
belonging to the Trust, or to the particular portfolio with which the obligee or
claimant dealt, shall be liable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers as of the date first
mentioned above.
American General Asset Management Corp.
by:
-----------------------------
American General Investment Management, L.P.
by:
-----------------------------
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APPENDIX A
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The Subadviser shall serve as investment subadviser for the following
Funds of the Trust. The Adviser will pay the Subadviser, as full compensation
for all services provided under this Agreement, the fee computed separately for
each such Fund at an annual rate as follows (the "Subadviser Percentage Fee"):
1. U.S. Government Securities Fund: .225% of the first
$200,000,000, .15% between $200,000,000 and $500,000,000 and
.10% on the excess over $500,000,000 of the average net assets
of the Fund.
2. Municipal Bond Fund: .25% of the first $50,000,000, .25%
between $50,000,000 and $200,000,000, .25% between
$200,000,000 and $500,000,000 and .25% on the excess over
$500,000,000 of the average net assets of the Fund.
3. Strategic Income Fund: .35% of the first $50 million, .30%
between $50,000,000 and $200,000,000, .25% between
$200,000,000 and $500,000,000 and .20% on the excess over
$500,000,000 of the average net assets of the Fund.
4. Money Market Fund: .075% of the first $500,000,000 and .020%
on the excess over $500,000,000 of the average net assets of
the Fund.
5. Core Bond Fund: .225% of the first $200,000,000, .15% between
$200,000,000 and $500,000,000 and .10% on the excess over
$500,000,000 of the average net assets of the Fund.
6. High Yield Bond Fund: .450% of the first $200,000,000; .350%
between $200,000,000 and $500,000,000 and.300% on the excess
over $500,000,000 of the average net assets of the Fund.
7. Municipal Money Market Fund: .250% of the first $200,000,000;
.200% between $200,000,000 and $500,000,000 and .150% on the
excess over $500,000,000 of the average net assets of the
Fund.
8. Stock Index Fund: .020% of the first $2 billion and .010% on
the excess over $2 billion of the average net assets of the
Fund.
9. Small Cap Index Fund: .030% of the first $150,000,000 and
.020% on the excess over $150,000,000 of the average net
assets of the Fund.
10. Socially Responsible Fund: .250% of the Fund's average daily
assets.
11. Aggressive Growth Lifestyle Fund: .100% of the Fund's average
daily assets.
12. Moderate Growth Lifestyle Fund: .100% of the Fund's average
daily assets.
13. Conservative Growth Lifestyle Fund: .100% of the Fund's
average daily assets.
The Subadviser Percentage Fee for each Fund shall be accrued for each
calendar day and the sum of the daily fee accruals shall be paid monthly to the
Subadviser. The daily fee accruals will be computed by multiplying the fraction
of one over the number of calendar days in the year by the applicable annual
rate described in the preceding paragraph, and multiplying this product by the
net assets of the Fund as determined in accordance with the Trust's prospectus
and statement of additional information as of the close of business on the
previous business day on which the Trust was open for business.
If this Agreement becomes effective or terminates before the end of any
month, the fee (if any) for the period from the effective date to the end of
such month or from the beginning of such month to the date of
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termination, as the case may be, shall be prorated according to the proportion
which such period bears to the full month in which such effectiveness or
termination occurs.
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