EXHIBIT (d)(2)
NORTH AMERICAN FUNDS
SUBADVISORY AGREEMENT
AGREEMENT made as of June 1/st/ 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 under 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 observe and comply with Rule 17j-1 under the
Investment Company Act and its Code of Ethics (which shall comply in all
material respects with Rule 17j-1, as the same may be amended from time to
time). 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.
4. LIABILITY OF SUBADVISER
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 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
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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
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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 with respect to each Fund on the
later of (i) its execution, and (ii) the date of the meeting of the
shareholders of the Fund, at which meeting this Agreement is approved by the
vote of a majority of the outstanding voting securities (as defined in the
Investment Company Act) of the Fund. The Agreement will continue in effect for
a period more than two years from the date of its execution only so long as such
continuance is specifically approved at least annually either by the Trustees of
the Trust or by a majority of the outstanding voting securities of each of the
Funds, provided that in either event such continuance shall also be approved by
the vote of a majority of the Trustees of the Trust who are not interested
persons (as defined in the Investment Company Act) 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 of the Agreement or of any
continuance of the Agreement shall be effective with respect to any Fund if a
majority of the outstanding voting securities of the series (as defined in Rule
18f-2(h) under the Investment Company Act) of shares of that Fund votes to
approve the Agreement or its continuance, notwithstanding that the Agreement or
its continuance may not have been approved by a majority of the outstanding
voting securities of (a) any other Fund affected by the Agreement or (b) all the
series of the Trust.
If the shareholders of any Fund fail to approve the New Sub-Advisory
Agreement the Subadviser will continue to act as investment subadviser with
respect to such Fund pending the required approval of the Agreement or its
continuance or of any contract with the Subadviser or a different adviser or
subadviser or other definitive action; provided, that the compensation received
by the Subadviser in respect of such Fund during such period is in compliance
with Rule 15a-4 under the Investment Company Act.
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 sixty
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
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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;
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 Portfolio 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
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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 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: /s/
____________________________
AMERICAN GENERAL INVESTMENT
MANAGEMENT, L.P.
by: /s/
_______________________
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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 $200,000,000, .20% between
$200,000,000 and $500,000,000 and .15% on the excess over $500,000,000
of the average net assets of the Fund.
3. Strategic Income Fund: .35% of the first $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: .25% of the first $200,000,000, .20% between
$200,000,000 and $500,000,000 and .15% 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. 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 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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