EXHIBIT 4(c)
INTERIM INVESTMENT ADVISORY AGREEMENT
This AGREEMENT made this 29th day of August, 2001, by and between THE VARIABLE
ANNUITY LIFE INSURANCE COMPANY, hereinafter referred to as the "ADVISER," and
NORTH AMERICAN FUNDS VARIABLE PRODUCT SERIES II, hereinafter referred to as
"NAFV II."
The ADVISER and NAFV II recognize the following:
(a) The ADVISER is a life insurance company organized under
Chapter 3 of the Texas Insurance Code and an investment
adviser registered under the Investment Advisers Act of 1940.
(b) NAFV II is an investment company organized under the laws of
Delaware as a business trust, as a series type of investment
company issuing separate classes (or series) of shares of
beneficial interest and is registered as an open-end,
management investment company under the Investment Company Act
of 1940 (the "1940 Act"). The 1940 Act prohibits any person
from acting as an investment adviser of a registered
investment company except pursuant to a written contract.
(c) NAFV II currently consists of fifteen portfolios ("Funds"):
North American - AG Aggressive Growth Lifestyle Fund
North American - AG Conservative Growth Lifestyle Fund
North American - AG Core Bond Fund
North American - AG High Yield Bond Fund
North American - AG Moderate Growth Lifestyle Fund
North American - AG 2 Money Market Fund
North American - AG Socially Responsible Fund
North American - AG Strategic Bond Fund
North American - Xxxxxxx Xxxxx Large Cap Growth Fund
North American International Growth Fund
North American - INVESCO MidCap Growth Fund
North American - X.X. Xxxxxx Small Cap Growth Fund
North American - Xxxxxxxxx Xxxxxx XxxXxx Value Fund
North American Small Cap Value Fund
North American - State Street Large Cap Value Fund
In accordance with NAFV II's Agreement and Declaration of
Trust (the "Declaration") and Bylaws, new Funds may be added
to NAFV II upon approval of NAFV II's Board of Trustees
without approval of NAFV II's shareholders. This Agreement
will apply only to the Funds set forth on the attached
Schedule A ("Covered Funds").
The ADVISER and NAFV II AGREE AS FOLLOWS:
1. SERVICES RENDERED AND EXPENSES PAID BY ADVISER
The ADVISER, subject to the control, direction, and supervision of NAFV
II's Board of Trustees and in conformity with the 1940 Act, all
applicable laws and regulations thereunder, all other applicable
federal and state laws and regulations, including 817(b) of the
Internal Revenue Code of 1986, as amended (the "Code"), NAFV II's
Declaration, Bylaws, registration statements, prospectus and stated
investment objectives, policies and restrictions shall:
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(a) manage the investment and reinvestment of the assets of the
Covered Funds including, for example, the evaluation of
pertinent economic, statistical, financial, and other data,
the determination of the industries and companies to be
represented in each Covered Fund's portfolio, and the
formulation and implementation of investment programs.
(b) maintain a trading desk and place all orders for the purchase
and sale of portfolio investments for each Covered Fund's
account with brokers or dealers selected by the ADVISER, or
arrange for any other entity to provide a trading desk and to
place orders with brokers and dealers selected by the ADVISER,
subject to the ADVISER's control, direction, and supervision.
(c) furnish to the Covered Funds office space, facilities,
equipment and personnel adequate to provide the services
described above and pay the compensation to NAFV II's trustees
and officers who are interested persons of the ADVISER.
In performing the services described in paragraph (b) above, the
ADVISER shall use its best efforts to obtain for the Covered Funds the
most favorable overall price and execution. Subject to prior
authorization by NAFV II's Board of Trustees of appropriate policies
and procedures, the ADVISER may cause the Covered Funds to pay to a
broker a commission, for effecting a portfolio transaction, in excess
of the commission another broker would have charged for effecting the
same transaction, if the first broker provided brokerage and/or
research services, including statistical data, to the ADVISER. The
ADVISER shall not be deemed to have acted unlawfully, or to have
breached any duty created by this Agreement, or otherwise, solely by
reason of acting according to such authorization.
The ADVISER shall maintain records adequately demonstrating compliance
with its obligations under this Agreement and report periodically to
NAFV II's Board of Trustees regarding the performance of services under
this Agreement.
Except as otherwise agreed, or as otherwise provided herein, the
ADVISER shall bear the expense of discharging its responsibilities
hereunder and NAFV II shall pay, or arrange for others to pay, all its
expenses other than those which part 2 of this Agreement expressly
states are payable to the ADVISER. Expenses payable by NAFV II include,
but are not limited to, (i) interest and taxes; (ii) brokerage
commissions and other expenses of purchasing and selling portfolio
investments; (iii) compensation of its trustees and officers other than
those persons who are interested persons of the ADVISER; (iv) fees of
outside counsel to and of independent auditors of NAFV II selected by
the Board of Trustees; (v) fees for accounting services; (vi)
custodial, registration, and transfer agency fees; (vii) expenses
related to the repurchase or redemption of its shares including
expenses related to a program of periodic repurchases or redemptions;
(viii) expenses related to issuance of its shares against payment
therefor by, or on behalf of, the subscribers thereto; (ix) fees and
related expenses of registering and qualifying NAFV II and its shares
for distribution under state and federal securities laws; (x) expenses
of printing and mailing to existing shareholders of registration
statements, prospectuses, reports, notices and proxy solicitation
materials of NAFV II; (xi) all other expenses incidental to holding
meetings of NAFV II's shareholders including proxy solicitations
therefor; (xii) expenses for servicing shareholder accounts; (xiii)
insurance premiums for fidelity coverage and errors and omissions
insurance; (xiv) dues for NAFV II's membership in trade associations
approved by the Board of Trustees; and (xv) such non-recurring expenses
as may arise, including those associated with actions, suits, or
proceedings to which NAFV II is a party and the legal obligation which
NAFV II may have to indemnify its officers, trustees and employees with
respect thereto. NAFV II shall allocate the foregoing expenses among
the Covered Funds and, to the extent that any of the foregoing expenses
are allocated between the Covered Funds and any other Funds or
entities, such allocations shall be made pursuant to methods approved
by the Board of Trustees.
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2. COMPENSATION OF ADVISER
NAFV II shall pay to the ADVISER, as compensation for the services
rendered, facilities furnished and expenses paid by the ADVISER, a
monthly fee based on each Covered Fund's average monthly net asset
value computed for each Covered Fund as provided for in the fee
schedule attached hereto as Schedule A. Schedule A may be amended from
time to time, provided that amendments are made in conformity with
applicable laws and regulations and the Declaration and Bylaws of NAFV
II. Any change in Schedule A pertaining to any existing or new Fund
shall not be deemed to affect the interest of any other Fund and shall
not require the approval of shareholders of any other Fund.
The average monthly net asset value shall be determined by taking the
mean average of all of the determinations of net asset value, made in
the manner provided in NAFV II's Declaration, for each business day
during a given calendar month. NAFV II shall pay this fee for each
calendar month as soon as practicable after the end of that month.
The ADVISER shall promptly reduce its monthly fee by the amount of any
commissions, tender and exchange offer solicitation fees, other fees,
or similar payments received by the ADVISER, or any affiliated person
of the ADVISER, in connection with any Covered Fund's portfolio
transactions, less the amount of any direct expenses incurred by the
ADVISER, or any affiliated person of the ADVISER, in obtaining such
commissions, fees, or payments.
If the ADVISER serves for less than a whole month, the foregoing
compensation shall be prorated.
During the term of this Agreement, the following conditions apply:
(a) The fee shall be held in an interest-bearing escrow account
with State Street Bank and Trust Company;
(b) If a majority of a Covered Fund's outstanding voting
securities approve a new investment advisory agreement (the
"New Agreement") with the ADVISER within 150 days after the
date hereof, the amount in the escrow account (including
interest earned thereon) with respect to such Covered Fund
shall be paid to the ADVISER; and
(c) If a majority of a Covered Fund's outstanding voting
securities do not approve a New Agreement with the ADVISER
within such 150-day period, the ADVISER shall be paid from the
escrow account, the lesser of an amount equal to
(i) any costs incurred in performing this Agreement (plus
interest earned on that amount in the escrow
account); or
(ii) the total amount in the escrow account (plus interest
earned thereon).
3. SCOPE OF ADVISER'S DUTIES
The ADVISER, and any person controlling, controlled by or under common
control with the ADVISER, shall remain free to provide similar
investment advisory services to other persons or engage in any other
business or activity which does not impair the services which the
ADVISER renders to the Covered Funds.
Except as otherwise required by the 1940 Act, any of the shareholders,
trustees, officers and employees of NAFV II may be a shareholder,
director, officer or employee of, or be otherwise interested in, the
ADVISER, and in any person controlling, controlled by or under common
control with the ADVISER; and the ADVISER, and any person controlling,
controlled by or under common control with the ADVISER, may have an
interest in NAFV II.
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The ADVISER shall not be liable to NAFV II, or to any shareholder in
NAFV II, for any act or omission in rendering services under this
Agreement, or for any losses sustained in the purchase, holding, or
sale of any portfolio security, so long as there has been no willful
misfeasance, bad faith, negligence, or reckless disregard of
obligations or duties on the part of the ADVISER.
The ADVISER may from time to time employ or associate with itself any
person or persons believed to be particularly fitted to assist in its
performance of services under this Agreement, provided that any such
person who serves or acts as an investment adviser separate from the
ADVISER will do so pursuant to a sub-advisory agreement as provided in
the following paragraph. The compensation of any such persons will be
paid by the ADVISER, and no obligation will be incurred by, or on
behalf of, NAFV II with respect to them.
Notwithstanding any other provision of this Agreement, NAFV II hereby
authorizes the ADVISER to employ an investment sub-adviser for any one
or more of the Covered Funds for the purpose of providing investment
management services with respect to such Covered Funds, provided that
(a) the compensation to be paid to such investment sub-adviser shall be
the sole responsibility of the ADVISER, (b) the duties and
responsibilities of the investment sub-adviser shall be as set forth in
a sub-advisory agreement including the ADVISER and the investment
sub-adviser as parties, (c) such sub-advisory agreement shall be
adopted and approved in conformity with applicable laws and
regulations, and (d) such sub-advisory agreement may be terminated at
any time, on not more than 60 days' written notice, by the ADVISER on
notice to the sub-adviser and NAFV II, by the sub-adviser on notice to
the ADVISER and NAFV II, and by NAFV II's Board of Trustees or by a
majority vote of the Covered Fund's outstanding voting securities on
notice to the sub-adviser and the ADVISER.
4. DURATION OF AGREEMENT
This Agreement shall become effective as to the Covered Funds as of the
date hereof and will continue in effect as to a Covered Fund until a
New Agreement is approved by shareholders of such Covered Fund or for
150 days, whichever is less.
This Agreement shall automatically terminate in the event of its
assignment. This Agreement may be terminated, without the payment of
any penalty, as to any Covered Fund at any time by NAFV II's Board of
Trustees or by vote of a majority of that Covered Fund's outstanding
voting securities, on not more than ten calendar days' written notice
to the ADVISER, or by the ADVISER, on not more than 60 days' nor less
than 30 days' written notice, or upon such shorter notice as may be
mutually agreed upon.
5. APPLICABILITY OF FEDERAL SECURITIES LAWS
This Agreement shall be interpreted in accordance with applicable
federal securities laws and regulations, including definitions therein
and such exemptions as may be granted to the ADVISER or NAFV II by the
Securities and Exchange Commission (the "Commission") or such
interpretive positions as may be taken by the Commission or its staff.
To the extent that the applicable law of the State of Texas, or any of
the provisions herein, conflict with applicable provisions of the
federal securities laws, the latter shall control.
6. MISCELLANEOUS PROVISIONS
For the purposes of this Agreement, the terms "affiliated person,"
"assignment," "interested person," and "majority of outstanding voting
securities" shall have their respective meanings defined in the 1940
Act and the Rules and Regulations thereunder, subject, however, to such
exemptions as may be granted to either the ADVISER or NAFV II by the
Commission, or such interpretive positions as may be taken by the
Commission or its staff, under the 1940 Act, and the term "brokerage
and research services" shall have the meaning given in the Securities
Exchange Act of 1934 and the Rules and Regulations thereunder.
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The parties hereto have each caused this Agreement to be signed in duplicate on
its behalf by its duly authorized officer on the above date.
NORTH AMERICAN FUNDS VARIABLE PRODUCT SERIES II
By:
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Name:
Title:
ATTEST:
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Secretary
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
By:
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Name:
Title:
ATTEST:
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Secretary
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SCHEDULE A
to Investment Advisory Agreement
(Effective August 29, 2001)
Annual Fee computed at the following annual rate, based on average monthly net
asset value and payable monthly:
North American International 0.90% on the first $100 million
Growth Fund 0.80% over $100 million
North American - State Street 0.50%
Large Cap Value Fund
North American - Xxxxxxx Sachs 0.55%
Large Cap Growth Fund
North American - Neuberger 0.75% on the first $100 million Xxxxxx
MidCap Value Fund 0.725% on the next $150 million
0.70% on the next $250 million
0.675% on the next $250 million
0.65% over $750 million
North American - INVESCO 0.65% on the first $25 million
MidCap Growth Fund 0.55% on the next $25 million
0.45% over $50 million
North American Small Cap 0.75% on the first $50 million
Value Fund 0.65% over $50 million
North American - X.X. Xxxxxx 0.85%
Small Cap Growth Fund
North American - AG Socially 0.25%
Responsible Fund
North American - AG 2 Money 0.25%
Market Fund
North American - AG Conservative 0.10%
Growth Lifestyle Fund
North American - AG Moderate 0.10%
Growth Lifestyle Fund
North American - AG Aggressive 0.10%
Growth Lifestyle Fund
North American - AG Core 0.50% on first $200 million
Bond Fund 0.45% on next $300 million
0.40% over $500 million
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North American - AG Strategic 0.60% on first $200 million
Bond Fund 0.50% on next $300 million
0.45% over $500 million
North American - AG High 0.70% on first $200 million
Yield Bond Fund 0.60% on next $300 million
0.55% over $500 million
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