<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission only (as permitted by Rule
14a-6 (e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
North American Funds
(Name of Registrant as Specified in Its Charter)
North American Funds
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
/ / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) or Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
Title of each class of securities to which transaction applies:
Aggregate number of securities to which transaction applies:
Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
Proposed maximum aggregate value of transaction:
Total fee paid:
* Set forth the amount on which the filing is calculated and state
how it was determined.
/ / Fee paid previously with preliminary materials
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
Amount previously paid:
Form, Schedule or Registration Statement No.:
Filing Party:
Date Filed:
<PAGE> 2
PRELIMINARY COPY
NORTH AMERICAN FUNDS
116 HUNTINGTON AVENUE
BOSTON, MA 02116
November 8, 1996
Dear Shareholder:
A Special Meeting of Shareholders of North American Funds (the
"Trust") will be held at the offices of the Trust, 116 Huntington Avenue,
Boston, Massachusetts 02116, on December 20, 1996, at 10:30 a.m., Eastern
Standard Time, for the purpose of considering the proposals (the "Proposals")
described in the enclosed Notice of Special Meeting of Shareholders (the
"Meeting").
Shareholders of the Trust, first, are being asked to consider
the election of six Trustees to the Board of Trustees (the "Board").
In addition, shareholders of the Global Equity Fund (formerly,
the Global Growth Fund), the Value Equity Fund, the Balanced Fund (formerly, the
Asset Allocation Fund) and the Money Market Fund, respectively, are being asked
to approve new subadvisory arrangements with (i) Morgan Stanley Asset Management
as subadviser to the Global Equity Fund, (ii) T. Rowe Price Associates as
subadviser to the Value Equity Fund, (iii) Founders Asset Management, Inc. as
subadviser to the Balanced Fund and (iv) Manufacturers Adviser Corporation as
subadviser to the Money Market Fund. Shareholders of the Value Equity Fund and
the Balanced Fund also are being asked to approve related changes to the
advisory agreement between the Trust and NASL Financial Services, Inc. (the
"Adviser"). At a meeting held on September 27, 1996, the Board, including the
independent Trustees, approved these new subadvisory arrangements and amendments
to the advisory agreement. In connection with the foregoing subadvisory changes,
the Board has proposed changing the investment objectives of the Value Equity
Fund and the Balanced Fund to reflect the proposed investment strategies of the
new subadvisers.
Shareholders of each series of the Trust (the "Portfolios")
also are being asked to approve a proposal giving the Adviser the ability, in
the future, to select and contract with one or more subadvisers to the
Portfolios after obtaining the approval of the Board but without obtaining
shareholder approval. In the Board's view, the proposal would save the Trust and
the Portfolios the additional time and expense of obtaining shareholder approval
for certain changes in subadvisory arrangements.
Finally, shareholders of the Trust are being asked to ratify
the selection of independent accountants for the Trust for the fiscal year
ending October 31, 1997.
THE BOARD OF TRUSTEES OF THE TRUST HAS UNANIMOUSLY VOTED IN
FAVOR OF EACH PROPOSAL AND RECOMMENDS THAT SHAREHOLDERS VOTE FOR THEIR APPROVAL.
Enclosed you will find a Notice of Special Meeting of
Shareholders, a Proxy Statement for the Trust and a proxy card for each
Portfolio in which you held shares as of October 23, 1996, the record date for
the Meeting. The Proxy Statement provides background information and explains
the matters to be voted on at the Meeting. We urge you to read the Proxy
Statement and then complete and return each proxy card on or before December 20,
1996. YOUR VOTE IS EXTREMELY IMPORTANT AND YOUR PROMPT RESPONSE WILL HELP SAVE
THE EXPENSE OF ADDITIONAL SOLICITATION MAILINGS.
Sincerely yours,
Joseph Scott
President
North American Funds
<PAGE> 3
2
PRELIMINARY COPY
NORTH AMERICAN FUNDS
116 Huntington Avenue
Boston, MA 02116
(800) 872-8037
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of
NORTH AMERICAN FUNDS:
Notice is hereby given that a special meeting (the "Meeting") of shareholders of
North American Funds (the "Trust") will be held on December 20, 1996 at the
offices of the Trust, 116 Huntington Avenue, Boston, MA 02116, at 10:30 a.m.,
Eastern Standard Time. A Proxy Statement which provides additional information
about the purpose of the Meeting is included with this Notice. At the Meeting,
shareholders of each series of the Trust (a "Portfolio"), unless otherwise
indicated below, will consider and vote upon the following proposals:
Proposal 1 Election of six Trustees to serve as members of the Board of
Trustees of the Trust.
Proposal 2 Approval of a subadvisory agreement between NASL Financial
Services, Inc. (in such capacity, the "Adviser") and Morgan
Stanley Asset Management Inc. with respect to the Global Equity
Fund. (Only shareholders of the Global Equity Fund will vote on
Proposal 2.)
Proposal 3A Approval of an amended subadvisory agreement between the Adviser
and T. Rowe Price Associates Inc. with respect to the Value Equity
Fund. (Only shareholders of the Value Equity Fund will vote on
Proposal 3A.)
Proposal 3B Approval of an amendment to the advisory agreement between the
Trust and the Adviser, increasing the advisory fee with respect to
the Value Equity Fund. (Only shareholders of the Value Equity Fund
will vote on Proposal 3B. Proposal 3B will be presented for action
at the Meeting only if the subadvisory agreement proposed in
Proposal 3A is approved at the Meeting.)
Proposal 4A Approval of an amended subadvisory agreement between the Adviser
and Founders Asset Management, Inc. with respect to the Balanced
Fund. (Only shareholders of the Balanced Fund will vote on
Proposal 4A.)
Proposal 4B Approval of an amendment to the advisory agreement between the
Trust and the Adviser, increasing the advisory fee with respect to
the Balanced Fund. (Only shareholders of the Balanced Fund will
vote on Proposal 4B. Proposal 4B will be presented for action at
the Meeting only if the subadvisory agreement proposed in Proposal
4A is approved at the Meeting.)
Proposal 5 Approval of a subadvisory agreement between the Adviser and
Manufacturers Adviser Corporation with respect to the Money Market
Fund. (Only shareholders of the Money Market Fund will vote on
Proposal 5.)
Proposal 6 Approval of a change to the investment objective of the Value
Equity Fund. (Only shareholders of the Value Equity Fund will vote
on Proposal 6.)
Proposal 7 Approval of a change to the investment objective of the Balanced
Fund. (Only shareholders of the Balanced Fund will vote on
Proposal 7.)
<PAGE> 4
3
Proposal 8 Approval of a proposal to permit the Adviser, in the future, to
select and contract with subadvisers for the Portfolios after
obtaining the approval of the Board of Trustees but without
obtaining shareholder approval.
Proposal 9 Ratification of the selection of Coopers & Lybrand L.L.P. as the
independent accountants for the Trust for its fiscal year ending
October 31, 1997; and
Any other business that may properly come before the Meeting.
THE BOARD OF TRUSTEES OF THE TRUST UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR PROPOSALS 1 THROUGH 9.
Each shareholder of record at the close of business on October 23,
1996 is entitled to receive notice of and to vote at the Meeting and is invited
to attend the Meeting in person. Whether or not you intend to be present at the
Meeting, we urge you to fill in, sign, date, and promptly return the enclosed
proxy card in order that the Meeting may be held and a maximum number of shares
may be voted. If you attend the Meeting you may revoke your proxy and vote your
shares in person if you wish.
Sincerely,
James D. Gallagher
Secretary
November 8, 1996
Boston, Massachusetts
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWNED ON THE
RECORD DATE. PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY
CARD. DATE, SIGN AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH IS ADDRESSED FOR
YOUR CONVENIENCE AND NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. IN ORDER
TO AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION, WE ASK YOUR COOPERATION
IN MAILING YOUR PROXY CARD PROMPTLY.
<PAGE> 5
PRELIMINARY COPY
NORTH AMERICAN FUNDS
116 Huntington Avenue
Boston, MA 02116
-----------------------
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 20, 1996
-----------------------
This proxy statement is furnished in connection with the
solicitation by the Board of Trustees (the "Board") of North American Funds (the
"Trust") of proxies to be used at a special meeting (the "Meeting") of
shareholders, to be held at the offices of the Trust, 116 Huntington Avenue,
Boston, MA 02116, on December 20, 1996, at 10:30 a.m., Eastern Standard Time, or
any adjournment or adjournments thereof. This proxy statement and the enclosed
form of proxy are first being mailed on or about November 8, 1996. The Trust
currently offers thirteen series of shares of beneficial interest: the Small/Mid
Cap Fund, the International Small Cap Fund, the Growth Equity Fund, the Global
Equity Fund (formerly, the Global Growth Fund), the Value Equity Fund, the
Growth and Income Fund, the International Growth and Income Fund, the Balanced
Fund (formerly, the Asset Allocation Fund), the Strategic Income Fund, the
Investment Quality Bond Fund, the U.S. Government Securities Fund, the National
Municipal Bond Fund and the Money Market Fund. Each of the above-named series is
referred to herein as a "Portfolio" and collectively as the "Portfolios."
Pursuant to the Trust's Agreement and Declaration of Trust,
the Board has designated October 23, 1996 as the record date for determining
shareholders eligible to vote at the Meeting (the "Record Date"). All
shareholders of record at the close of business on October 23, 1996 are entitled
to one vote for each share of beneficial interest of the Trust held. As of the
Record Date, there were issued and outstanding the following number of shares of
each Portfolio:
<TABLE>
<S> <C>
Small/Mid Cap Fund _____ shares
International Small Cap Fund _____ shares
Growth Equity Fund _____ shares
Global Equity Fund _____ shares
Value Equity Fund _____ shares
Growth and Income Fund _____ shares
International Growth and Income Fund _____ shares
Balanced Fund _____ shares
Strategic Income Fund _____ shares
Investment Quality Bond Fund _____ shares
U.S. Government Securities Fund _____ shares
National Municipal Bond Fund _____ shares
Money Market Fund _____ shares
</TABLE>
Shares which represent interests in a particular Portfolio
vote separately on matters which pertain only to that Portfolio. For each of the
Proposals, shares which represent interests in a particular class of a Portfolio
will vote together with the other classes of the Portfolio. All of the Proposals
(except the election of Trustees and the ratification of the selection of
independent accountants) will be voted on separately by shareholders of the
relevant Portfolios. Proposal 8 will be voted on by shareholders of the Trust
voting together and by shareholders of each Portfolio voting separately.
If the enclosed form of proxy is properly executed and
returned, the shares represented thereby will be voted at the Meeting as
indicated thereon with respect to the Proposals stated therein. IF A PROXY CARD
IS
1
<PAGE> 6
RETURNED THAT DOES NOT SPECIFY HOW TO VOTE WITH RESPECT TO A PROPOSAL, THE
SHARES REPRESENTED BY THAT PROXY WILL BE VOTED "FOR" THAT PROPOSAL.
In order that your shares may be represented at the Meeting or
any adjournment or adjournments thereof, you are requested to indicate your
voting instructions on the proxy card; date and sign the proxy card; mail the
proxy card promptly in the enclosed postage-paid envelope; and allow sufficient
time for the proxy card to be received on or before 10:00 a.m. Eastern Standard
Time on December 20, 1996.
The proxy card confers discretionary authority upon the
persons named therein to vote on other business, not currently contemplated,
which may come before the Meeting. Under the Trust's Agreement and Declaration
of Trust, thirty percent of the shares entitled to vote on a matter shall
constitute a quorum for the transaction of business on that matter. In the event
that a quorum is not present at the Meeting or that a quorum is present at the
Meeting but sufficient votes to approve a proposal are not received, the persons
named as proxies may propose one or more adjournments of the Meeting to permit
further solicitation of proxies. Any such adjournment will require the
affirmative vote of a majority of those shares represented at the Meeting in
person or by proxy. THE PERSONS NAMED AS PROXIES WILL VOTE THOSE PROXIES WHICH
THEY ARE ENTITLED TO VOTE "FOR" OR "AGAINST" ANY SUCH PROPOSAL IN THEIR
DISCRETION. A shareholder vote may be taken on one or more of the proposals in
this proxy statement prior to any such adjournment if sufficient votes have been
received for approval. An adjourned session may be held within a reasonable time
after the adjournment and without further notice.
Abstentions and "broker non-votes" (as defined below) are
counted as shares eligible to vote at the Meeting in determining whether a
quorum is present, but do not count as votes cast with respect to any proposal.
"Broker non-votes" are shares held by a broker or nominee as to which
instructions have not been received from the beneficial owners or persons
entitled to vote and the broker or nominee does not have discretionary voting
power. Under the Investment Company Act of 1940, as amended (the "1940 Act"),
the affirmative vote necessary to approve a matter under consideration may be
determined with reference to a percentage of votes present at the Meeting, which
would have the effect of treating abstentions and broker non- votes as if they
were votes against the proposal. For purposes of the election of Trustees,
abstentions and broker non-votes do not affect the plurality vote required for
Trustees.
A proxy may be revoked at any time prior to the voting thereof
by: (i) written instructions addressed to the Secretary of the Trust at 116
Huntington Avenue, Boston, MA 02116; (ii) attendance at the Meeting and voting
in person; or (iii) signing and returning a new proxy card (if returned and
received in time to be voted).
The cost of the preparation and distribution of these proxy
materials is being borne by NASL Financial Services, Inc., investment adviser to
the Trust (in such capacity, the "Adviser" or "NASL Financial"), or certain of
its affiliates (other than the Trust). In addition to the solicitation of
proxies by the use of the mails, proxies may be solicited by officers and
employees of the Adviser or of its agents or affiliates, personally or by
telephone. Brokerage houses, banks and other fiduciaries may be requested to
forward soliciting material to their principals and to obtain authorization for
the execution of proxies. For those services, they will be reimbursed by the
Adviser or certain of its affiliates (other than the Trust) for their
out-of-pocket expenses. To assist in the solicitation of proxies, the Adviser
has retained Shareholder Communications Corporation at an estimated cost to the
Adviser of approximately $15,000, plus out-of-pocket expenses.
THE TRUST WILL FURNISH, WITHOUT CHARGE, A COPY OF THE TRUST'S
ANNUAL REPORT FOR ITS FISCAL YEAR ENDED OCTOBER 31, 1995 AND THE TRUST'S
SEMI-ANNUAL REPORT FOR THE SIX MONTH PERIOD ENDED APRIL 30, 1996 TO A
SHAREHOLDER UPON REQUEST. TO OBTAIN A REPORT, PLEASE CONTACT THE TRUST BY
CALLING (800) 872-8037 OR BY WRITING TO 116 HUNTINGTON AVENUE, BOSTON,
MASSACHUSETTS 02116, ATTN: GEORGE MACNEIL.
2
<PAGE> 7
SUMMARY OF PROPOSALS
<TABLE>
<CAPTION>
Proposal Shareholders of the Trust Who Will Vote on
-------- ------------------------------------------
Number Proposal the Proposal
------ -------- ------------
<S> <C> <C>
Proposal 1 Election of six Trustees to serve as members All shareholders of the Trust will vote on this
of the Board of Trustees of the Trust proposal
Proposal 2 Approval of a subadvisory agreement between Shareholders of the Global Equity Fund will
the Adviser and Morgan Stanley Asset vote on this proposal
Management Inc. with respect to the Global
Equity Fund
Proposal 3A Approval of an amended subadvisory Shareholders of the Value Equity Fund will
agreement between the Adviser and T. Rowe vote on this proposal
Price Associates with respect to the Value
Equity Fund
Proposal 3B Approval of an amendment to the advisory Shareholders of the Value Equity Fund will
agreement between the Trust and the Adviser, vote on this proposal. Proposal 3B will be
increasing the advisory fee with respect to the presented for action at the Meeting only if the
Value Equity Fund subadvisory agreement proposed in Proposal
3A is approved at the Meeting
Proposal 4A Approval of an amended subadvisory agreement Shareholders of the Balanced Fund will vote
between the Adviser and Founders Asset on this proposal
Management, Inc. with respect to the Balanced
Fund
Proposal 4B Approval of an amendment to the Advisory Shareholders of the Balanced Fund will vote
Agreement between the Trust and the Adviser, on this proposal. Proposal 4B will be
increasing the advisory fee with respect to the presented for action at the Meeting only if the
Balanced Fund subadvisory agreement proposed in Proposal
4A is approved at the Meeting
Proposal 5 Approval of a subadvisory agreement between Shareholders of the Money Market Fund will
the Adviser and Manufacturers Adviser vote on this proposal
Corporation with respect to the Money Market
Fund
Proposal 6 Approval of a change to the investment Shareholders of the Value Equity Fund will
objective of the Value Equity Fund vote on this proposal
Proposal 7 Approval of a change to the investment Shareholders of the Balanced Fund will vote
objective of the Balanced Fund on this proposal
Proposal 8 Approval of a proposal to permit the Adviser, Shareholders of the Trust will vote together,
in the future, to select and contract with and shareholders of each Portfolio will vote
subadvisers for the Portfolios after obtaining separately, on this proposal
the approval of the Board of Trustees but
without obtaining shareholder approval
</TABLE>
3
<PAGE> 8
<TABLE>
<S> <C> <C>
Proposal 9 Ratification of selection of Coopers & All shareholders of the Trust will vote on this
Lybrand L.L.P. as independent accountants for proposal
the Trust for its fiscal year ending October 31,
1997
</TABLE>
PROPOSAL 1
ELECTION OF TRUSTEES
Pursuant to the provisions of the Trust's Agreement and
Declaration of Trust, the Trustees have increased the size of the Board from
five to six Trustees. It is proposed that shareholders of the Trust elect each
of the individuals listed below (the "nominees") to the Board. Because the Trust
does not hold regular annual shareholder meetings, each nominee, if elected,
will hold office until his successor is elected and qualified or until he
otherwise dies, retires, resigns, is removed or becomes disqualified. All of the
nominees, other than Mr. John D. Richardson and Mr. F. David Rolwing, currently
serve as Trustees of the Trust. All of the current Trustees are nominees, other
than Mr. Moore who is not standing for reelection.
Due to an indirect change of control of NASL Financial in
January 1996, the Trust and the Board are required to comply with Section 15(f)
of the 1940 Act. The change of control occurred as result of the merger of The
Manufacturers Life Insurance Company ("Manulife") and the Adviser's then-parent,
North American Life Assurance Company ("NAL"). Section 15(f) provides a
non-exclusive safe harbor for an investment adviser or any of its affiliated
persons to receive any amount or benefit in connection with a change of control
of the investment adviser as long as certain conditions are met. Among other
things, for a period of three years after the transaction, at least 75% of the
members of the board of trustees of an investment company advised by such
investment adviser must not be "interested persons", as defined in Section
2(a)(19) of the 1940 Act (an "Interested Person"), of either the predecessor or
successor investment adviser. All of the nominees, other than Mr. Richardson,
are not Interested Persons of NASL Financial, the Trust's investment adviser and
distributor. Mr. Rolwing was selected and nominated by the Trustees who are not
such Interested Persons.
The persons named as proxies in the accompanying form of proxy
intend, in the absence of contrary instructions, to vote all proxies for the
election of the nominees. If, prior to the Meeting, any nominee becomes unable
to serve for any reason, the persons named as proxies reserve the right to
substitute another person or persons of their choice as nominee or nominees. All
of the nominees have consented to being named in this proxy statement and to
serve if elected. The Trust knows of no reason why any nominee would be unable
or unwilling to serve if elected.
The following table presents certain information regarding the
current Trustees and the nominees, including their principal occupations, which,
unless specific dates are shown, are of more than five years duration. An
asterisk beside an individual's name indicates that he is an Interested Person
of NASL Financial.
4
<PAGE> 9
<TABLE>
<CAPTION>
Name and Position with Year First
Trust Age Became a Principle Occupations and Directorships during the
Trustee Last Five Years
- ---------------------- --- ---------- --------------------------------------------------
<S> <C> <C> <C>
DON B. ALLEN, 68 1988 Mr. Allen is a Senior Lecturer at University of
Trustee and Nominee Rochester - William Simon Graduate School of
Business Administration.
CHARLES L. BARDELIS, 55 1988 Mr. Bardelis is the President and Chief Executive
Trustee and Nominee Officer at Island Commuter Corporation, a marine
transport company. He is also a Director of
Neworld Bankcorp Inc.
SAMUEL HOAR, 67 1989 Mr. Hoar has been a Senior Mediator at Judicial
Trustee and Nominee Arbitration Mediation Services ("JAMS/Endispute")
since June 1, 1994. Prior to that time, he was a
Partner at Goodwin, Proctor and Hoar, a law firm.
JOHN D. RICHARDSON*, 58 Not Mr. Richardson is currently the Senior Vice
Nominee Applicable President and General Manager of U.S. Operations
for Manulife, the ultimate parent of NASL
Financial. From 1992 to 1994, he was Senior Vice
President and General Manager of Canadian Operations
of Manulife and, prior thereto, Senior Vice President,
Financial Services for Manulife. Prior to 1992, Mr.
Richardson was a Director, Executive Vice Chairman and
Chief Financial Officer of Canada Trust Financial
Services.
BRIAN L. MOORE*, 52 1988 Since January 1, 1996, Mr. Moore has served as the
Chairman of the Board of Executive Vice President, Canadian Insurance
Trustees Operations, for Manulife. From October 1993 to
December 31, 1995, he was the Chief Executive
Officer of The North American Group, an affiliate of
NAL, and prior thereto, Mr. Moore was Executive Vice
President and Chief Financial Officer of NAL.
ROBERT J. MYERS, 84 1988 Mr. Myers is a Director of Scudder AARP
Trustee and Nominee Investment Funds and a member of the Prospective
Payment Assessment Commission. He is also a self-
employed actuarial consultant.
F. DAVID ROLWING, 62 Not Mr. Rolwing is the President, Chairman and CEO
Nominee Applicable of Montgomery Mutual Insurance Company. He is
also a Director of Manulife Series Fund, an
investment company advised by Manufacturers
Adviser Corporation, an affiliate of NASL Financial.
</TABLE>
5
<PAGE> 10
Messrs. Allen, Bardelis, Hoar, Moore and Myers are also
Trustees of NASL Series Trust, an investment company with seventeen series,
whose investment adviser is NASL Financial. Messrs. Richardson and Rolwing are
also Trustees of Manulife Series Fund, Inc., an investment company with nine
series, whose investment adviser is Manufacturers Adviser Corporation ("MAC").
MAC currently serves as subadviser to the Money Market Fund. See Proposal 5
below. The ultimate parent of MAC is Manulife.
Compensation
Effective September 27, 1996, the Trust pays each Trustee who
is not an officer of the Adviser an annual retainer of $5,000 plus $1,000 per
meeting attended and $200 for any meeting conducted by telephone, together with
such Trustee's actual out-of-pocket expenses relating to attendance at meetings.
For the fiscal year ended October 31, 1996, the Trustees of the Trust as a group
received fees in the amount of $35,542.
The table below sets forth the compensation received by each
of the Trust's current Trustees and by each of the nominees during the Trust's
fiscal year ended October 31, 1996.
COMPENSATION TABLE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Name of Person, Aggregate Pension or Estimated Annual Total Compensation
Position Compensation From Retirement Benefits upon from Trust
Trust for Year Ended Benefits Accrued Retirement Complex for Year
October 31, 1996* as part of Trust Ended October 31,
Expenses 1996 * #
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Don B. Allen, $8,250 $0 $0 $46,750
Trustee
Charles L. Bardelis, $8,250 $0 $0 $46,750
Trustee
Samuel Hoar, $8,250 $0 $0 $46,750
Trustee
Brian L. Moore, $ 0 $0 $0 $ 0
Trustee
Robert J. Myers, $8,250 $0 $0 $46,750
Trustee
John D. Richardson,
Nominee $ 0 $0 $0 $ 0
F. David Rolwing, $ 0 $0 $0 $12,000
Nominee
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Compensation received for services as Trustee.
6
<PAGE> 11
# Trust Complex includes all Portfolios of the Trust, as well as all
portfolios of NASL Series Trust and Manulife Series Fund, Inc.
The Board met four times during the Trust's last fiscal year.
The Board also has a standing Audit Committee composed of Messrs. Allen,
Bardelis, Hoar and Myers. The Audit Committee met two times during the Trust's
last fiscal year to review the internal and external accounting and auditing
procedures of the Trust and, among other things, to consider the selection of
independent accountants for the Trust, to approve all significant services
proposed to be performed by its independent accountants and to consider the
possible effect of such services on their independence. The Board has not
created a Compensation Committee or a Nominating Committee.
Executive Officers of the Trust
See "Additional Information--Management of the Adviser and the
Trust" below for information regarding the executive officers of the Trust.
Adviser and Principal Underwriter of the Trust
NASL Financial, located at 116 Huntington Avenue, Boston,
Massachusetts 02116, is the investment adviser and principal underwriter of the
Trust. The ultimate parent of NASL Financial is Manulife.
REQUIRED VOTE
Trustees are elected by a plurality of the votes cast by
holders of shares of the Trust present in person or represented by proxy at the
Meeting.
7
<PAGE> 12
PROPOSAL 2
APPROVAL OF A SUBADVISORY AGREEMENT BETWEEN THE ADVISER AND MORGAN
STANLEY ASSET MANAGEMENT INC. WITH RESPECT TO THE GLOBAL EQUITY FUND
The Adviser, subject to the general supervision of the Board,
oversees the administration of all aspects of the business and affairs of the
Trust and selects, contracts with and compensates subadvisers to manage the
assets of the Portfolios. At a meeting held September 27, 1996, the Board,
including the Trustees who are not Interested Persons of NASL Financial, any of
the subadvisers to the Portfolios or the Trust (the "Disinterested Trustees"),
voted to accept the resignation of Oechsle International Advisors, L.P.
("Oechsle") as subadviser to the Global Equity Fund (known as the Global Growth
Fund prior to October 1, 1996) and to approve a subadvisory agreement with
Morgan Stanley Asset Management Inc. (the "Morgan Subadvisory Agreement") with
respect to the Global Equity Fund. On October 1, 1996, Morgan Stanley Asset
Management Inc. ("Morgan Stanley") began serving as subadviser to the Global
Equity Fund in reliance on Rule 15a-4 under the 1940 Act, which permits Morgan
Stanley to serve as subadviser to the Portfolio, without shareholder approval,
for a period of up to 120 days following the termination of the subadvisory
agreement with Oechsle. Shareholders of the Global Equity Fund are now being
asked to approve the Morgan Subadvisory Agreement.
Morgan Subadvisory Agreement
The Morgan Subadvisory Agreement reduces the subadvisory fees
paid by the Adviser to the subadviser of the Global Equity Fund. See
"Subadvisory Fee" below. In addition, the effective date of the Morgan Stanley
Agreement is October 1, 1996. Otherwise, the Morgan Subadvisory Agreement is
substantially identical to the prior subadvisory agreement for the Global Equity
Fund.
Shareholder approval of the Morgan Subadvisory Agreement will
not change the advisory fee or other expenses paid by the Global Equity Fund.
However, because the Morgan Subadvisory Agreement reduces the subadvisory fees
payable by the Adviser without changing the amount of advisory fees paid by the
Portfolio, the agreement effectively increases the amount of fees retained by
the Adviser.
Under the terms of both the Morgan Subadvisory Agreement and
the prior subadvisory agreement for the Global Equity Fund, the subadviser
manages the investment and reinvestment of the assets of the Global Equity Fund,
subject to the supervision of the Board. The subadviser formulates a continuous
investment program for the Portfolio consistent with its investment objectives
and policies as outlined in the Trust's Prospectus. The subadviser implements
such programs by purchases and sales of securities and regularly reports to the
Adviser and the Board with respect to the implementation of such programs. The
subadviser, at its expense, furnishes all necessary investment and management
facilities, including salaries of personnel required for it to execute its
duties, as well as administrative facilities, including bookkeeping, clerical
personnel, and equipment necessary for the conduct of the investment affairs of
the Portfolio.
The foregoing description of the Morgan Subadvisory Agreement
is not intended to be complete and is qualified in its entirety by reference to
the text of that agreement, the form of which is attached hereto as Exhibit E.
For additional information regarding the Morgan Subadvisory Agreement, see
"Additional Information - Certain Provisions in the Advisory and Subadvisory
Agreements" below.
Subadvisory Fee
As compensation for its services, Morgan Stanley receives a
fee from the Adviser. The fee is stated as an annual percentage of the current
value of the net assets of the Global Equity Fund. The fee, which is accrued
daily and payable monthly, is calculated for each day by multiplying the
fraction of one over the
8
<PAGE> 13
number of calendar days in the year by the annual percentage prescribed for the
Portfolio, and multiplying this product by the value of the net assets of the
Global Equity Fund at the close of business on the previous business day of the
Trust.
Current Subadvisory Fees. Effective October 1, 1996, the
following are the subadvisory fees the Adviser currently is obligated (and, if
the Morgan Subadvisory Agreement is approved by shareholders, will continue to
be obligated) to pay Morgan Stanley out of the advisory fee it receives from the
Global Equity Fund:
.500% of the first $50 million of the Portfolio's average
daily net assets, .450% of the Portfolio's average daily net
assets between $50 million and $200 million, .375% of the
Portfolio's average daily net assets between $200 million and
$500 million and .325% of the Portfolio's average net assets
in excess of $500 million.
Prior Subadvisory Fees. Prior to October 1, 1996, the
following are the subadvisory fees the Adviser was required to pay the former
subadviser out of the advisory fee it received from the Global Equity Fund:
.550% of the first $200 million of the Portfolio's average
daily net assets and .400% of the Portfolio's average net
assets in excess of $200 million.
Subadvisory Fees Paid
For the fiscal year ended October 31, 1995 and the six months
ended April 30, 1996, respectively, the Adviser paid $724,749 and $367,436 in
subadvisory fees to Oechsle for management of the Global Equity Fund. If the
Morgan Subadvisory Agreement had been in effect for the fiscal year ended
October 31, 1995, and the six months ended April 30, 1996, respectively, the
Adviser would have paid $617,964 and $312,240 in subadvisory fees to Morgan
Stanley. This represents a decrease of 14.7% and 15.0%, respectively, from the
fees actually paid under the Global Equity Fund's prior subadvisory agreement
for such periods. In addition, had the Morgan Subadvisory Agreement been in
effect for the fiscal year ended October 31, 1995 and the six months ended April
30, 1996, respectively, the Adviser would have retained an additional $106,785
and $55,196 in investment advisory fees, representing a 23.2% and 23.6% increase
in advisory fees retained by the Adviser for such periods.
Management and Control of Morgan Stanley
Morgan Stanley is located at 1221 Avenue of the Americas, New
York, NY 10020 and is a wholly-owned subsidiary of Morgan Stanley Group Inc., a
corporation located at 1585 Broadway, New York, New York 10036. Morgan Stanley
conducts a worldwide portfolio management business and provides a broad range of
portfolio management services to customers in the United States and abroad. At
September 30, 1996, Morgan Stanley, together with its affiliated asset
management companies, managed investments totaling $103.5 billion, including
approximately $86.9 billion under active management and $16.6 billion as named
fiduciary or fiduciary adviser.
For information on the principal executive officers and
directors of Morgan Stanley, see Exhibit A hereto.
9
<PAGE> 14
Brokerage Transactions
A description of the brokerage transactions for the Global
Equity Fund is set forth under "Additional Information--Portfolio Brokerage"
below.
Other Investment Companies Advised by Morgan Stanley
A list of other investment companies advised by Morgan Stanley
having similar investment objectives to the Global Equity Fund is set forth in
Exhibit C.
Advisory Agreement
For more information on the advisory agreement between the
Trust and NASL Financial, see "Additional Information--Advisory Arrangements"
below.
Shareholder and Board Approval of the Subadvisory Agreements
The subadvisory agreement between Oechsle and the Adviser with
respect to the Global Equity Fund was approved by the Board on September 28,
1995 and by the shareholders of the Global Equity Fund on December 5, 1995. This
approval occurred in connection with the indirect change in control of NASL
Financial due to the merger of Manulife with NASL Financial's then-parent, NAL.
The Morgan Subadvisory Agreement was approved by the Board,
including a majority of the Disinterested Trustees, on September 27, 1996.
Pursuant to Rule 15a-4 under the 1940 Act, Morgan can act as subadviser of the
Portfolio, without shareholder approval, for up to 120 days after the
termination date of the prior subadvisory agreement if its fees during that
interim period do not exceed the prior subadvisory fees for the Portfolio. If
shareholders do not approve the Morgan Subadvisory Agreement within this 120 day
period, the Board will take such action as it deems advisable under the
circumstances.
Board Considerations
The Board considered numerous factors in connection with
accepting the resignation of Oechsle and approving the Morgan Subadvisory
Agreement, including: (i) the nature and quality of the services being provided
by Oechsle and the fees payable therefor, (ii) the nature and quality of the
services to be provided by Morgan Stanley and the fees payable therefor, (iii)
performance information regarding the Global Equity Fund relative to funds with
similar investment objectives and policies, (iv) performance information
regarding Morgan Stanley's management of portfolios with investment objectives
and policies similar to the Global Equity Fund, (v) the cost and expected
profitability to Morgan Stanley of providing portfolio management services to
the Global Equity Fund and (vi) whether the proposed advisory fees and expense
ratio of the Portfolio would be consistent with the fees and expense ratios of
other comparable portfolios. In light of these factors, the Board considered the
proposed subadvisory fee schedule to be fair and reasonable.
In evaluating the Morgan Subadvisory Agreement, the Board, in
particular, took into account the fact that the Morgan Subadvisory Agreement
will not change the overall advisory fee or other expenses paid by the Global
Equity Fund. Further, the Board focused primarily on (i) the fact that the
Portfolio had, for the prior two years, underperformed in comparison to its
peer group and (ii) the performance of similar funds managed by Morgan Stanley.
The Board also focused on the scope and quality of services to be provided by
Morgan Stanley, as well as comparative fee and expense data.
10
<PAGE> 15
The Board also was provided with an analysis of its fiduciary
obligations. At the meeting held on September 27, 1996, the Board reviewed its
fiduciary duties and discussed the information provided regarding Morgan
Stanley. A representative of Morgan Stanley gave a presentation and responded to
questions from the Trustees. There was an extended discussion of, and
questioning about, Morgan Stanley's plans for the Global Equity Fund. Throughout
the review process, the Disinterested Trustees had the assistance of legal
counsel.
REQUIRED VOTE
Approval of the Morgan Subadvisory Agreement will require the
affirmative vote of a "majority of the outstanding voting securities" of the
Global Equity Fund, which for this purpose means the affirmative vote of the
lesser of (1) more than 50% of the outstanding shares of the Portfolio or (2)
67% or more of the shares of the Portfolio present at the Meeting or represented
by proxy if more than 50% of the outstanding shares of the Portfolio are
represented at the Meeting in person or by proxy (a "Majority Vote").
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES,
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF THE GLOBAL
EQUITY FUND VOTE "FOR" PROPOSAL 2.
11
<PAGE> 16
PROPOSAL 3A
APPROVAL OF AN AMENDED SUBADVISORY AGREEMENT BETWEEN THE ADVISER AND T.
ROWE PRICE ASSOCIATES, INC. WITH RESPECT TO THE VALUE EQUITY FUND
At a meeting held September 27, 1996, the Board, including the
Disinterested Trustees, voted to accept the resignation of Goldman Sachs Asset
Management ("Goldman") as subadviser to the Value Equity Fund and to approve a
subadvisory agreement (the "Interim T. Rowe Price Agreement") between the
Adviser and T. Rowe Price Associates, Inc. ("T. Rowe Price"), with respect to
the Value Equity Fund. On October 1, 1996, T. Rowe Price began serving as
subadviser to the Value Equity Fund in reliance on Rule 15a-4 under the 1940
Act, which permits T. Rowe Price to serve as subadviser to the Portfolio,
without shareholder approval, for a period of up to 120 days following the
termination of the prior subadvisory agreement with Goldman and for a fee which
does not exceed the subadvisory fee paid under that prior subadvisory agreement.
The Board also approved an amendment to the Interim T. Rowe Price Agreement (as
so amended, the "T. Rowe Price Subadvisory Agreement") which, subject to
shareholder approval, would increase the subadvisory fees paid by the Adviser to
T. Rowe Price effective on or about January 1, 1997. Shareholders of the Value
Equity Fund now are being asked to approve the T. Rowe Price Subadvisory
Agreement.
In addition, due to the change in subadviser, on September 27,
1996, the Board unanimously approved changing the investment objective and
certain non-fundamental policies of the Portfolio so that they would reflect T.
Rowe Price's proposed investment strategies. In connection with the foregoing,
the Board also approved changing the name of the Value Equity Fund to the
Equity-Income Fund, effective on or about January 1, 1997. See Proposal 6 below
for a description of the proposed change in the Portfolio's investment
objective.
T. Rowe Price Subadvisory Agreement
The T. Rowe Price Subadvisory Agreement would increase the
subadvisory fees paid by the Adviser to the subadviser of the Value Equity Fund.
See "Subadvisory Fee" below. The proposed subadvisory fee increase would go into
effect on or about January 1, 1997. Otherwise, the T. Rowe Price Subadvisory
Agreement is substantially identical to the Portfolio's prior subadvisory
agreement with Goldman, except for the effective date which (other than with
respect to the fee increase) is October 1, 1996.
Under the terms of both the T. Rowe Price Subadvisory
Agreement and the subadvisory agreement with Goldman, the subadviser manages the
investment and reinvestment of the assets of the Value Equity Fund, subject to
the supervision of the Board. The subadviser formulates a continuous investment
program for the Portfolio consistent with its investment objectives and policies
as outlined in the Trust's Prospectus. The subadviser implements such programs
by purchases and sales of securities and regularly reports to the Adviser and
the Board with respect to the implementation of such programs. The subadviser,
at its expense, furnishes all necessary investment and management facilities,
including salaries of personnel required for it to execute its duties, as well
as administrative facilities, including bookkeeping, clerical personnel, and
equipment necessary for the conduct of the investment affairs of the Portfolio.
The foregoing description of the T. Rowe Price Subadvisory
Agreement is not intended to be complete and is qualified in its entirety by
reference to the text of that agreement, the form of which is attached hereto as
Exhibit E. For additional information regarding the T. Rowe Price Subadvisory
Agreement, see "Additional Information - Certain Provisions in the Advisory and
Subadvisory Agreements" below.
Subadvisory Fee
As compensation for its services, T. Rowe Price receives a fee
from the Adviser. The fee is stated as an annual percentage of the current value
of the net assets of the Value Equity Fund. The fee, which is accrued daily and
payable monthly, is calculated for each day by multiplying the fraction of one
over the number of calendar days in the year by the annual percentage prescribed
for the Portfolio, and multiplying this product
12
<PAGE> 17
of calendar days in the year by the annual percentage prescribed for the
Portfolio, and multiplying this product by the value of the net assets of the
Value Equity Fund at the close of business on the previous business day of the
Trust.
Proposed Subadvisory Fees. The following are the subadvisory
fees the Adviser would be obligated, if the T. Rowe Price Subadvisory Agreement
is approved by shareholders, to pay T. Rowe Price out of the advisory fee it
receives from the Portfolio:
.400% of the first $50 million of the Portfolio's average
daily net assets, .300% of the Portfolio's average daily net
assets between $50 million and $200 million and .200% of the
Portfolio's average daily net assets in excess of $200
million.
Current Subadvisory Fees. The following are the subadvisory
fees the Adviser was required to pay the former subadviser (and the fees that
the Adviser, pursuant to Rule 15a-4 and the Interim T. Rowe Price Agreement,
currently is paying T. Rowe Price) out of the advisory fee it received from the
Portfolio:
.325% of the first $50 million of the Portfolio's average
daily net assets, .275% of the Portfolio's average daily net
assets between $50 million and $200 million, .225% of the
Portfolio's average daily net assets between $200 million and
$500 million and .150% of the Portfolio's average daily net
assets in excess of $500 million.
Subadvisory Fees Paid
For the fiscal year ended October 31, 1995 and the six months
ended April 30, 1996, respectively, the Adviser paid $323,912 and $196,064 in
subadvisory fees to the prior subadviser for the Value Equity Fund for
management of the Value Equity Fund. If the T. Rowe Price Subadvisory Agreement
had been in effect for the fiscal year ended October 31, 1995 and the six moths
ended April 30, 1996, respectively, the Adviser would have paid $376,086 and
$224,606 in subadvisory fees to T. Rowe Price. This represents an increase of
16.1% and 14.6%, respectively, from the fees actually paid under the Portfolio's
prior subadvisory agreement with Goldman for such periods.
Management and Control of T. Rowe Price
T. Rowe Price, founded in 1937 by the late Thomas Rowe Price,
Jr., is located at 100 East Pratt Street, Baltimore, MD 21202. As of August 31,
1996, T. Rowe Price and its affiliates managed over $85 billion of assets for
over four million individual and institutional investor accounts.
For information on the principal executive officers and
directors of T. Rowe Price, see Exhibit A hereto.
Brokerage Transactions
A description of the brokerage transactions for the Value
Equity Fund is set forth under "Additional Information--Portfolio Brokerage"
below.
Other Investment Companies Advised by Subadvisers
A list of other investment companies advised by T. Rowe Price
having similar investment objectives to the Value Equity Fund (assuming that
Proposal 6 is approved by shareholders of the Value Equity Fund) is set forth in
Exhibit C.
13
<PAGE> 18
Advisory Agreement
For more information on the advisory agreement between the
Trust and NASL Financial, see "Additional Information--Advisory Arrangements"
below.
Shareholder and Board Approval of the Subadvisory Agreements
The subadvisory agreement between Goldman and the Adviser with
respect to the Value Equity Fund was approved by the Board on September 28, 1995
and by the shareholders the Value Equity Fund on December 5, 1995. This approval
occurred in connection with the indirect change in control of NASL Financial due
to the merger of Manulife with NASL Financial's then-parent, NAL.
The T. Rowe Price Subadvisory Agreement was approved by the
Board, including a majority of the Disinterested Trustees, on September 27,
1996. Pursuant to Rule 15a-4 under the 1940 Act, T. Rowe Price can act as
subadviser of the Portfolio, without shareholder approval, for up to 120 days
after the termination date of the prior subadvisory agreement if its fees during
that interim period do not exceed the prior subadvisory fees for the Portfolio.
If shareholders do not approve the T. Rowe Price Subadvisory Agreement within
this 120 day period, the Board will take such action as it deems advisable under
the circumstances.
Board Considerations
The Board considered numerous factors in connection with
accepting the resignation of Goldman and approving the T. Rowe Price Subadvisory
Agreement, including: (i) the nature and quality of the services provided by
Goldman and the fees payable therefor, (ii) the nature and quality of the
services to be provided by T. Rowe Price and the fees payable therefor, (iii)
performance information regarding the Value Equity Fund relative to funds with
similar investment objectives and policies, (iv) performance information
regarding T. Rowe Price's management of portfolios with investment objectives
and policies similar to the Value Equity Fund (assuming the changes described in
Proposal 6 below are approved), (v) the cost and expected profitability to T.
Rowe Price for performing portfolio management services to the Value Equity Fund
and (vi) whether the proposed advisory fees and expense ratio of the Portfolio
would be consistent with the fees and expense ratios of other comparable
portfolios. In light of these factors, the Board considered the proposed
subadvisory fee schedule to be fair and reasonable.
In evaluating the T. Rowe Price Subadvisory Agreement, the
Board focused primarily on (i) the fact that the Portfolio had, for the prior
year, underperformed in comparison to its peer group and (ii) the performance of
similar funds managed by T. Rowe Price. The Board also focused on the scope and
quality of services to be provided by T. Rowe Price, as well as comparative fee
and expense data.
The Board also was provided with an analysis of its fiduciary
obligations. At the meeting held on September 27, 1996, the Board reviewed its
fiduciary duties and discussed the information provided regarding T. Rowe Price.
A representative of T. Rowe Price gave a presentation and responded to questions
from the Trustees. There was an extended discussion of, and questioning about,
T. Rowe Price's plans for the Value Equity Fund. Throughout the review process,
the Disinterested Trustees had the assistance of legal counsel.
REQUIRED VOTE
Approval of the T. Rowe Price Subadvisory Agreement will
require a Majority Vote of the shareholders of the Value Equity Fund.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES,
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF THE VALUE
EQUITY FUND VOTE "FOR" PROPOSAL 3A.
14
<PAGE> 19
PROPOSAL 3B
APPROVAL OF AN AMENDMENT TO THE ADVISORY AGREEMENT BETWEEN THE TRUST
AND THE ADVISER, INCREASING THE ADVISORY FEE WITH RESPECT TO THE VALUE
EQUITY FUND
This proposal will be presented for action at the meeting only
if the subadvisory agreement proposed in Proposal 3A is
approved at the Meeting.
In connection with the proposed increase in subadvisory fees
payable by the Adviser to T. Rowe Price, on September 27, 1996, the Board,
including the Disinterested Trustees, approved an amendment to the Advisory
Agreement between the Trust and the Adviser (the "Advisory Agreement")
increasing the advisory fees payable with respect to the Value Equity Fund by
the same amount as the proposed subadvisory fee increase, as set forth below
(the "Value Equity Amendment"). If such an increase is approved by shareholders
of the Value Equity Fund, the amount of the advisory fee ultimately retained by
the Adviser would remain the same as under the current agreement.
If approved by shareholders of the Balanced Fund, the Value
Equity Amendment shall become effective on or about January 1, 1997.
Value Equity Amendment
The Value Equity Amendment affects the amount of advisory fee
payable with respect to the Value Equity Fund and does not change any of the
other terms of the Advisory Agreement. Under the terms of the Advisory
Agreement, the Adviser administers the business and affairs of the Portfolio.
The Adviser is responsible for performing and paying for various services for
the Trust, including selecting a subadviser to manage the Portfolio and paying
the subadviser's fees from the advisory fees it receives. The Adviser monitors
the compliance of the subadviser with the investment objectives and related
policies as stated in the Trust's Prospectus, reviews the performance of the
subadviser and reports periodically on such performance to the Board. The
proposed increase in advisory fees for the Value Equity Fund is a direct result
of the proposed increase in subadvisory fees payable by the Adviser to T. Rowe
Price (see Proposal 3A). The amount of the advisory fee increase is equivalent
to the proposed subadvisory fee increase.
For additional information regarding the Advisory Agreement
and the subadvisory agreements, see "Additional Information" below. The
foregoing description of the Advisory Agreement and the Value Equity Amendment
is not intended to be complete and is qualified in its entirety by reference to
the Advisory Agreement and the Value Equity Amendment, the forms of which are
attached hereto as Exhibit D.
Advisory Fee
As compensation for its services, the Adviser receives a fee
from the Value Equity Fund. The fee is stated as an annual percentage of the
current value of the net assets of the Value Equity Fund. The fee, which is
accrued daily and payable monthly, is calculated for each day by multiplying the
fraction of one over the number of calendar days in the year by the annual
percentage prescribed for the Portfolio, and multiplying this product by the
value of the net assets of the Value Equity Fund at the close of business on the
previous business day of the Trust.
Proposed Advisory Fees. The following are the advisory fees
the Portfolio will be obligated, upon the effectiveness of the Value Equity
Amendment, to pay the Adviser:
.800% of the first $50 million of the Portfolio's average
daily net assets, .700% of the Portfolio's average daily net
assets between $50 million and $200 million and .600% of the
Portfolio's average daily net assets in excess of $200
million.
Current Advisory Fees. The following are the advisory fees
the Value Equity Fund currently pays to the Adviser:
15
<PAGE> 20
.725% of the first $50 million of the Portfolio's average
daily net assets, .675% of the Portfolio's average daily net
assets between $50 million and $200 million, .625% of the
Portfolio's average daily net assets between $200 million and
$500 million and .550% of the Portfolio's average daily net
assets in excess of $500 million.
Advisory Fees Paid
For the fiscal year ended October 31, 1995 and the six months
ended April 30, 1996, respectively, the Value Equity Portfolio paid the Adviser
$758,694 and $463,116 in advisory fees. If the Value Equity Amendment had been
in effect for the fiscal year ended October 31, 1995 and the six months ended
April 30, 1996, respectively, the Portfolio would have paid $810,868 and
$490,928 in advisory fees to the Adviser, which represents an increase of 6.9%
and 6.0% from the fees actually paid under the Advisory Agreement for such
periods.
Current and Pro Forma Fees and Expenses
The following expense table and example compares the fees and
expenses that an investor would incur either directly or indirectly as a holder
of Class A, Class B or Class C shares of the Value Equity Fund under the current
Advisory Agreement and the proposed Value Equity Amendment. The percentages
shown below expressing existing annual fund operating expenses are based on the
actual expenses of each class of the Value Equity Fund for the fiscal year ended
October 31, 1995 and the pro forma expenses of each class of the Value Equity
Fund as if the Value Equity Amendment had been in effect at the commencement of
the Portfolio's fiscal year ending October 31, 1995.
<TABLE>
<CAPTION>
CURRENT PROPOSED
------------------------------------- --------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)........... 4.750% None None 4.750% None None
Sales charge imposed on dividend reinvestment. None None None None None None
Contingent Deferred Sales Charge
(as a percentage of original purchase price or
redemption price, whichever is lower)......... 1% first year* 5% first year 1% first 1% first year* 5% first year 1% first
0% after first 5% second year** 0% after first 5% second year**
year year 0% after first year year 0% after
4% third year year 4% third year first
3% fourth 3% fourth year
year year
2% fifth year 2% fifth year
1% sixth year, 1% sixth year,
and and
0% after sixth 0% after sixth
year year
Exchange Fee.................................. None None None None None None
</TABLE>
* For purchases of $1 million or more made on or after May 1, 1995.
** For purchases made on or after May 1, 1995.
16
<PAGE> 21
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets
after fee waivers and expense reimbursement in
certain cases)
Management fees............................... 0.725% 0.725% 0.725% 0.800% 0.800% 0.800%
Rule 12b-1 fees............................... 0.350% 1.000% 1.000% 0.350% 1.000% 1.000%
Other expenses* (after fee waiver)............ 0.265% 0.265% 0.265% 0.265% 0.265% 0.265%
----- ----- ----- ----- ----- -----
Total fund operating expenses*
(after fee waiver)............................ 1.340% 1.990% 1.990% 1.415% 2.065% 2.065%
</TABLE>
*Amounts listed under "Other expenses" and "Total fund operating expenses" in
the table above for each class of the Value Equity Fund are based on the
application of expense limitations (i) which were applicable during the
fiscal year ended October 31, 1995, in the case of the current annual
operating expenses, and (ii) which will be applicable, in the case of the
proposed annual operating expenses. See "Additional Information--Advisory
Arrangements" below. To the extent that actual expenses are lower than the
expense limitations, "Other expenses" may vary as between classes of the
Value Equity Fund as a result of certain class-specific incremental expenses
being allocated to a particular class of shares. The Advisory Agreement and
distribution plans applicable to the Portfolio operate to limit the "Total
fund operating expenses" to the amounts listed in the fee table. Such
contractual expense limits shall remain in effect unless the Adviser notifies
the Trust (with 30 days notice) that it will not continue the limits.
EXAMPLE
You would pay the following expenses on a $1,000 investment assuming a
5% annual return and redemption at the end of each time period:
<TABLE>
<CAPTION>
CURRENT PROPOSED
------------------------------------ ------------------------------------
CLASS A CLASS B+ CLASS C CLASS A CLASS B+ CLASS C
<S> <C> <C> <C> <C> <C> <C>
1 Year........................................ $ 60 $ 70 $ 30 $ 61 $ 71 $ 31
3 Years....................................... $ 88 $102 $ 62 $ 90 $105 $ 65
5 Years....................................... $117 $127 $107 $121 $131 $111
10 Years...................................... $201 $200 * $232 $209 $208 $239
</TABLE>
You would pay the following expenses on a $1,000 investment assuming a
5% annual return and no redemption:
<TABLE>
<CAPTION>
CURRENT PROPOSED
------------------------------------ ------------------------------------
CLASS A CLASS B+ CLASS C CLASS A CLASS B+ CLASS C
<S> <C> <C> <C> <C> <C> <C>
1 Year........................................ $ 60 $ 20 $ 20 $61 $ 21 $ 21
3 Years....................................... $ 88 $ 62 $ 62 $90 $ 65 $ 65
5 Years....................................... $117 $107 $107 $121 $111 $111
10 Years...................................... $201 $200* $232 $209 $208 $239
</TABLE>
+Reflects the conversion to Class A shares six years after purchase and,
therefore, years seven through ten reflect Class A expenses.
The purpose of the foregoing table and example is to assist investors
in understanding the various costs and expenses that an investor in the Value
Equity Fund would bear either directly or indirectly under the current Advisory
Agreement and the proposed Value Equity Amendment. The payment of such costs and
expenses will reduce the investment return on an annual basis. Except where
noted, the information in the foregoing table does not reflect any fee waivers
or expense reimbursement arrangements that may be in effect. THE EXAMPLE SHOULD
NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES, AND ACTUAL EXPENSES MAY
BE GREATER OR LESS THAN THOSE SHOWN. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5%
ANNUAL RETURN, THE PORTFOLIO'S PERFORMANCE WILL VARY AND MAY RESULT IN A RETURN
GREATER OR LESS THAN 5%.
17
<PAGE> 22
Management and Control of the Adviser
The Adviser is located at 116 Huntington Avenue, Boston,
Massachusetts 02116 and is a wholly-owned subsidiary of North American Life
Insurance Company ("Security Life"), a Delaware stock life insurance company,
the controlling ultimate parent of which is Manulife, a Canadian mutual life
insurance company based in Toronto, Canada. Prior to January 1, 1996. Security
Life was a wholly-owned subsidiary of NAL, a Canadian mutual life insurance
company. On January 1, 1996, NAL and Manulife merged, with the combined company
retaining the name Manulife.
For information on the principal executive officers and
directors of the Adviser, see "Additional Information---Management and Control
of the Adviser" below.
Brokerage Transactions
A description of the brokerage transactions for the Value
Equity Fund is set forth under "Additional Information--Portfolio Brokerage"
below.
Other Investment Companies Advised by Advisor
A list of other investment companies advised by the Adviser
having similar investment objectives to the Value Equity Fund is set forth in
Exhibit B.
Shareholder and Board Approval of the Advisory Agreement
The Advisory Agreement was approved by the Board on September
28, 1995 and by the shareholders of the Value Equity Fund on December 5, 1995.
The foregoing approval occurred in connection with the indirect change in
control of NASL Financial due to the merger of Manulife with NASL Financial's
then-parent, NAL.
The Value Equity Amendment was approved by the Board on
September 27, 1996.
Board Considerations
In considering the Value Equity Amendment and the Value Equity
Fund's new fee schedule, the Board considered numerous factors including: (i)
the nature and quality of the services provided by the Adviser and the fees
payable therefor, (ii) the cost and expected profitability to the Adviser for
performing portfolio management services to the Value Equity Fund and (iii)
whether the proposed advisory fees and expense ratio of the Portfolio would be
consistent with the fees and expense ratios of other comparable portfolios. In
light of these factors, the Board considered the proposed advisory fee schedule
to be fair and reasonable.
Most importantly, the Board considered the fact that the new
fee schedule would not increase the amount retained by the Adviser; rather, the
entire amount of the increased advisory fee would be used to pay the increased
subadvisory fees described in Proposal 3A. The Board's consideration of the
increased subadvisory fee is described in "Proposal 3A---Board Considerations"
above.
The Board also was provided with an analysis of its fiduciary
obligations. At the meeting held on September 27, 1996, the Board reviewed its
fiduciary duties and discussed the information provided regarding the Adviser. A
representative of the Adviser gave a presentation and responded to questions
from the Trustees. There was an extended discussion of, and questioning about,
the Adviser's plans for the Value Equity Fund. Throughout the review process,
the Disinterested Trustees had the assistance of legal counsel.
18
<PAGE> 23
REQUIRED VOTE
Approval of the Value Equity Amendment will require a Majority
Vote of the shareholders of Value Equity Fund.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES,
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF THE VALUE
EQUITY FUND VOTE "FOR" PROPOSAL 3B.
PROPOSAL 4A
APPROVAL OF AN AMENDED SUBADVISORY AGREEMENT BETWEEN THE ADVISER AND
FOUNDERS ASSET MANAGEMENT, INC. WITH RESPECT TO THE BALANCED FUND
At a meeting held September 27, 1996, the Board, including the
Disinterested Trustees, voted to accept the resignation of Goldman as subadviser
to the Balanced Fund (known as the Asset Allocation Fund prior to October 1,
1996) and to approve a subadvisory agreement (the "Interim Founders Agreement")
between the Adviser and Founders Asset Management, Inc. ("Founders") with
respect to the Balanced Fund. On October 1, 1996, Founders began serving as
subadviser to the Balanced Fund in reliance on Rule 15a-4 under the 1940 Act,
which permits Founders to serve as subadviser to the Portfolio, without
shareholder approval, for a period of up to 120 days following the termination
of the prior subadvisory agreement with Goldman and for a fee which does not
exceed the subadvisory fee paid under that prior subadvisory agreement. The
Board also approved an amendment to the Interim Founders Agreement (as so
amended, the "Founders Subadvisory Agreement") which, subject to shareholder
approval, would increase the subadvisory fee paid by the Adviser to Founders
effective on or about January 1, 1997. Shareholders of the Balanced Fund now are
being asked to approve the Founders Subadvisory Agreement.
In addition, due to the change in subadviser, on September 27,
1996, the Board unanimously approved changing the investment objective and
certain non-fundamental policies of the Portfolio so that they would reflect
Founders' investment strategies. In connection with the foregoing, the Board
also approved changing the name of the Asset Allocation Fund to the Balanced
Fund, effective October 1, 1996. See Proposal 7 hereto for a description of the
proposed change in the Balanced Fund's investment objective.
Founders Subadvisory Agreement
The Founders Subadvisory Agreement would increase the
subadvisory fees paid by the Adviser to the subadviser of the Balanced Fund. See
"Subadvisory Fee" below. The proposed subadvisory fee increase would go into
effect on or about January 1, 1997. Otherwise, the Founders Subadvisory
Agreement is substantially identical to the Portfolio's prior subadvisory
agreement with Goldman, except for the effective date which (other than with
respect to the fee increase) is October 1, 1996.
Under the terms of both the Founders Subadvisory Agreement and
the prior subadvisory agreement with Goldman, the subadviser manages the
investment and reinvestment of the assets of the Balanced Fund, subject to the
supervision of the Board. The subadviser formulates a continuous investment
program for the Portfolio consistent with its investment objectives and policies
as outlined in the Trust's Prospectus. The subadviser implements such programs
by purchases and sales of securities and regularly reports to the Adviser and
the Board with respect to the implementation of such programs. The subadviser,
at its expense, furnishes all necessary investment and management facilities,
including salaries of personnel required for it to execute its duties, as well
as administrative facilities, including bookkeeping, clerical personnel, and
equipment necessary for the conduct of the investment affairs of the Portfolio.
The foregoing description of the Founders Subadvisory
Agreement is qualified in its entirety by reference to the text of that
agreement, the form of which is attached hereto as Exhibit E. For additional
19
<PAGE> 24
information regarding the Founders Subadvisory Agreement, see "Additional
Information - Certain Provisions in the Advisory and Subadvisory Agreements"
below.
Subadvisory Fee
As compensation for its services, Founders receives a fee from
the Adviser. The fee is stated as an annual percentage of the current value of
the net assets of the Balanced Fund. The fee, which is accrued daily and payable
monthly, is calculated for each day by multiplying the fraction of one over the
number of calendar days in the year by the annual percentage prescribed for the
Portfolio, and multiplying this product by the value of the net assets of the
Balanced Fund at the close of business on the previous business day of the
Trust.
Proposed Subadvisory Fees. The following are the subadvisory
fees the Adviser would be obligated, if the Founders Subadvisory Agreement is
approved by shareholders, to pay Founders out of the advisory fee it receives
from the Portfolio:
.375% of the first $50 million of the Portfolio's average
daily net assets, .325% of the Portfolio's average daily net
assets between $50 million and $200 million, .275% of the
Portfolio's average daily net assets between $200 million and
$500 million and .225% of the Portfolio's average daily net
assets in excess of $500 million.
Current Subadvisory Fees. The following is a schedule of the
subadvisory fees the Adviser, pursuant to the prior subadvisory agreement with
Goldman, was required to pay the former subadviser (and, pursuant to Rule 15a-4
and the Interim Founders Agreement, currently is paying Founders) out of the
advisory fee:
.325% of the first $50 million of the Portfolio's average
daily net assets, .275% of the Portfolio's average daily net
assets between $50 million and $200 million, .225% of the
Portfolio's average daily net assets between $200 million and
$500 million and .150% of the Portfolio's average daily net
assets in excess of $500 million.
Subadvisory Fees Paid
For the fiscal year ended October 31, 1995 and the six months
ended April 30, 1996, the Adviser paid $294,932 and $155,481 in subadvisory fees
to the prior subadviser for the Balanced Fund for management of the Portfolio.
If the Founders Subadvisory Agreement had been in effect for the fiscal year
ended October 31, 1995 and April 30, 1996, the Adviser would have paid $344,011
and $180,988 in subadvisory fees to Founders. This would have represented an
increase of 16.6% and 16.4% from the fees actually paid under the Portfolio's
prior subadvisory agreement with Goldman for such periods.
Management and Control of Founders
Founders, located at 2930 East Third Avenue, Denver, Colorado
80206, is a registered investment adviser first established as an asset manager
in 1938. Bjorn K. Borgen, Chairman, Chief Executive Officer and Chief Investment
Officer of Founders, owns 100% of the voting stock of Founders.
For information on the principal executive officers and
directors of Founders, see Exhibit A.
Brokerage Transactions
A description of the brokerage transactions for the Balanced
Fund is set forth under "Additional Information--Portfolio Brokerage" below.
20
<PAGE> 25
Other Investment Companies Advised by Subadvisers
A list of other investment companies advised by Founders
having similar investment objectives to the Balanced Fund (assuming that
Proposal 7 is approved by shareholders of the Balanced Fund) is set forth in
Exhibit C.
Advisory Agreement
For more information on the advisory agreement between the
Trust and NASL Financial, see "Additional Information--Advisory Arrangements"
below.
Shareholder and Board Approval of the Subadvisory Agreements
The subadvisory agreement between Goldman and the Adviser with
respect to the Balanced Fund was approved by the Board on September 28, 1995 and
by the shareholders of the Balanced Fund on December 5, 1995. The foregoing
approvals occurred in connection with the indirect change in control of NASL
Financial due to the merger of Manulife with NASL Financial's then-parent, NAL.
The Founders Subadvisory Agreement was approved by the Board,
including a majority of the Disinterested Trustees, on September 27, 1996.
Pursuant to Rule 15a-4 under the 1940 Act, Founders can act as subadviser of the
Portfolio, without shareholder approval, for up to 120 days after the
termination date of the prior subadvisory agreement if its fees during that
interim period do not exceed the prior subadvisory fees for the Portfolio. If
shareholders do not approve the Founders Subadvisory Agreement within this 120
days period, the Board will take such action as it deems advisable under the
circumstances.
Board Considerations
The Board considered numerous factors in connection with
accepting the resignation of Goldman as subadviser to the Balanced Fund and
approving the Founders Subadvisory Agreement, including: (i) the nature and
quality of the services provided by Goldman and the fees payable therefor, (ii)
the nature and quality of the services to be provided by Founders and the fees
payable therefor, (iii) performance information regarding the Balanced Fund
relative to funds with similar investment objectives and policies, (iv)
performance information regarding Founders' management of portfolios with
investment objectives and policies similar to the Balanced Fund (assuming the
changes described in Proposal 7 below are approved), (v) the cost and expected
profitability to Founders for performing portfolio management services to the
Balanced Fund and (vi) whether the proposed advisory fees and expense ratio of
the Portfolio would be consistent with the fees and expense ratios of other
comparable portfolios. In light of these factors, the Board considered the
proposed subadvisory fee schedule to be fair and reasonable.
In evaluating the Founders Subadvisory Agreement, the Board
focused primarily (i) on the fact that the Portfolio had, for the prior year,
underperformed in comparison to its peer group and (ii) the performance of
similar funds managed by Founders. The Board also focused on the scope and
quality of services provided by Founders as well as comparative fee and
expense data.
The Board also was provided with an analysis of its fiduciary
obligations. At the meeting held on September 27, 1996, the Board reviewed its
fiduciary duties and discussed the information provided regarding Founders. A
representative of Founders gave a presentation and responded to questions from
the Trustees. There was an extended discussion of, and questioning about,
Founders' plans for the Balanced Fund. Throughout the review process, the
Disinterested Trustees had the assistance of legal counsel.
21
<PAGE> 26
REQUIRED VOTE
Approval of the Founders Subadvisory Agreement will require a
Majority Vote of the shareholders of the Balanced Fund.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES,
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF THE
BALANCED FUND VOTE "FOR" PROPOSAL 4A.
PROPOSAL 4B
APPROVAL OF AN AMENDMENT TO THE ADVISORY AGREEMENT BETWEEN THE TRUST
AND THE ADVISER INCREASING THE ADVISORY FEE FOR THE BALANCED FUND
This proposal will be presented for action at the meeting
only if the subadvisory agreement proposed in Proposal 4A
is approved at the Meeting.
In connection with the proposed increase in subadvisory fees
payable by the Adviser to Founders, on September 27, 1996, the Board, including
the Disinterested Trustees, approved an amendment to the Advisory Agreement,
increasing the advisory fees payable with respect to the Balanced Fund by the
same amount as the proposed subadvisory increase, as set forth below (the
"Balanced Fund Amendment" and, together with the Value Equity Amendment, the
"Advisory Agreement Amendments"). If such an increase is approved by
shareholders of the Balanced Fund, the amount of the advisory fee ultimately
retained by the Adviser would remain the same as under the current agreement.
If approved by shareholders of the Balanced Fund, the Balanced
Fund Amendment shall become effective on or about January 1, 1997.
Balanced Fund Amendment
The Balanced Fund Amendment affects the amount of the advisory
fee payable with respect to the Balanced Fund and does not change any other
terms of the Advisory Agreement. Under the terms of the Advisory Agreement, the
Adviser administers the business and affairs of the Portfolio. The Adviser is
responsible for performing and paying for various services for the Trust,
including selecting a subadviser to manage the Portfolio and paying the
subadviser's fees from the advisory fees it receives. The Adviser monitors the
compliance of such subadviser with the investment objectives and related
policies as stated in the Trust's Prospectus and reviews the performance of such
subadviser and reports periodically on such performance to the Board. The
proposed increase in advisory fees is a direct result of the proposed increase
in subadvisory fees payable by the Adviser to Founders (see Proposal 4A). The
amount of the advisory fee increase is equivalent to the proposed subadvisory
fee increase.
For additional information regarding the Advisory Agreement
and the subadvisory agreements, see "Additional Information" below. The
foregoing description of the Advisory Agreement and the Balanced Fund Amendment
is not intended to be complete and is qualified in its entirety by reference to
the text of the Advisory Agreement and the Balanced Fund Amendment, the forms of
which are attached hereto as Exhibit D.
Advisory Fee
As compensation for its services, the Adviser receives a fee
from the Balanced Fund. The fee is stated as an annual percentage of the current
value of the net assets of the Balanced Fund. The fee, which is accrued daily
and payable monthly, is calculated for each day by multiplying the fraction of
one over the number
22
<PAGE> 27
of calendar days in the year by the annual percentage prescribed for the
Portfolio, and multiplying this product by the value of the net assets of the
Balanced Fund at the close of business on the previous business day of the
Trust.
Proposed Advisory Fees. The following are the advisory fees
the Balanced Fund will be obligated, upon the effectiveness of the Balanced Fund
Amendment, to pay the Adviser:
.775% of the first $50 million of the Portfolio's average
daily net assets, .725% of the Portfolio's average daily net
assets between $50 million and $200 million, .675% of the
Portfolio's average daily net assets between $200 million and
$500 million and .625% of the Portfolio's average daily net
assets in excess of $500 million.
Current Advisory Fees. The following are the advisory fees the
Balanced Fund currently pays to the Adviser:
.725% of the first $50 million of the Portfolio's average
daily net assets, .675% of the Portfolio's average daily net
assets between $50 million and $200 million, .625% of the
Portfolio's average daily net assets between $200 million and
$500 million and .550% of the Portfolio's average daily net
assets in excess of $500 million.
Advisory Fees Paid
For the fiscal year ended October 31, 1995 and the six months
ended April 30, 1996, respectively, the Balanced Fund paid the Adviser $687,562
and $363,502 in advisory fees. If the Balanced Fund Amendment had been in effect
for the fiscal year ended October 31, 1995 and the six months ended April 30,
1996, respectively, the Portfolio would have paid $736,640 and $388,441 in
advisory fees to the Adviser. This would have represented an increase of 7.1%
and 6.9%, respectively, from the fees actually paid under the Advisory Agreement
for the prior periods.
Current and Pro Forma Fees and Expenses
The following expense table compares the fees and expenses
that an investor would incur either directly or indirectly as a holder of Class
A, Class B or Class C shares of the Balanced Fund under the current Advisory
Agreement and the proposed Balanced Fund Amendment. The percentages shown below
expressing existing annual fund operating expenses are based on the actual
expenses of each class of the Balanced Fund for the fiscal year ended October
31, 1995 and the pro forma expenses of each class of the Balanced Fund as if the
Balanced Fund Amendment had been in effect at the commencement of the
Portfolio's fiscal year ending October 31, 1995.
<TABLE>
<CAPTION>
CURRENT PROPOSED
------------------------------------ ------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)........... 4.750% None None 4.750% None None
Sales charge imposed on dividend reinvestment. None None None None None None
</TABLE>
23
<PAGE> 28
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Contingent Deferred Sales Charge
(as a percentage of original purchase price or
redemption price, whichever is lower)......... 1% first year* 5% first year 1% first 1% first year* 5% first year 1% first
0% after first 5% second year** 0% after first 5% second year**
year year 0% after first year year 0% after
4% third year year 4% third year first
3% fourth 3% fourth year
year year
2% fifth year 2% fifth year
1% sixth year, 1% sixth year,
and and
0% after sixth 0% after sixth
year year
Exchange Fee.................................. None None None None None None
</TABLE>
* For purchases of $1 million or more made on or after May 1, 1995.
** For purchases made on or after May 1, 1995.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets after fee
waivers and expense reimbursement in certain cases)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Management fees............................... 0.725% 0.725% 0.725% 0.775% 0.775% 0.775%
Rule 12b-1 fees............................... 0.350% 1.000% 1.000% 0.350% 1.000% 1.000%
Other expenses* (after fee waiver)............ 0.265% 0.265% 0.265% 0.265% 0.265% 0.265%
----- ----- ----- ----- ----- -----
Total fund operating expenses*
(after fee waiver)............................ 1.340% 1.990% 1.990% 1.390% 2.040% 2.040%
</TABLE>
*Amounts listed under "Other expenses" and "Total fund operating expenses" in
the table above for each class of the Balanced Fund are based on the
application of expense limitations (i) which were applicable during the
fiscal year ended October 31, 1995, in the case of the current annual
operating expenses, and (ii) which will be applicable, in the case of the
proposed annual operating expenses. See "Additional Information--Advisory
Arrangements" below. To the extent that actual expenses are lower than the
expense limitations, "Other expenses" may vary as between classes of the
Balanced Fund as a result of certain class-specific incremental expenses
being allocated to a particular class of shares. The Advisory Agreement and
the distribution plans applicable to the Portfolio operate to limit the
"Total fund operating expenses" to the amounts listed in the fee table. See
"Additional Information" below. Such contractual expense limits shall remain
in effect unless the Adviser notifies the Trust (with 30 days notice) that it
will not continue the limits.
EXAMPLE
You would pay the following expenses on a $1,000 investment assuming a
5% annual return and redemption at the end of each time period:
<TABLE>
<CAPTION>
CURRENT PROPOSED
------------------------------------ ------------------------------------
CLASS A CLASS B+ CLASS C CLASS A CLASS B+ CLASS C
<S> <C> <C> <C> <C> <C> <C>
1 Year........................................ $ 60 $ 70 $ 30 $ 61 $ 71 $ 21
3 Years....................................... $ 88 $102 $ 62 $ 89 $ 104 $ 64
5 Years....................................... $117 $127 $107 $120 $130 $110
10 Years...................................... $201 $200 * $232 $206 $205 $237
</TABLE>
24
<PAGE> 29
You would pay the following expenses on a $1,000 investment assuming a
5% annual return and no redemption:
<TABLE>
<CAPTION>
CURRENT PROPOSED
------------------------------------ ------------------------------------
CLASS A CLASS B+ CLASS C CLASS A CLASS B+ CLASS C
<S> <C> <C> <C> <C> <C> <C>
1 Year........................................ $ 60 $ 20 $ 20 $ 61 $ 21 $ 31
3 Years....................................... $ 88 $ 62 $ 62 $ 89 $ 64 $ 64
5 Years....................................... $117 $107 $107 $120 $110 $110
10 Years...................................... $201 $200 * $232 $206 $205 $237
</TABLE>
+Reflects the conversion to Class A shares six years after purchase and,
therefore, years seven through ten reflect Class A expenses.
The purpose of the foregoing table and example is to assist
investors in understanding the various costs and expenses that an investor in
the Balanced Fund would bear either directly or indirectly under the current
Advisory Agreement and the proposed Balanced Fund Amendment. The payment of such
costs and expenses will reduce the investment return on an annual basis. Except
where noted, the information in the foregoing table does not reflect any fee
waivers or expense reimbursement arrangements that may be in effect. THE EXAMPLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES, AND ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. MOREOVER, WHILE THE EXAMPLE
ASSUMES A 5% ANNUAL RETURN, THE PORTFOLIO'S PERFORMANCE WILL VARY AND MAY RESULT
IN A RETURN GREATER OR LESS THAN 5%.
Management and Control of the Adviser
The Adviser is located at 116 Huntington Avenue, Boston,
Massachusetts 02116. For information on the direct and indirect parents, and the
principal executive directors and officers of the Adviser, see "Proposal
3B--Management and Control of the Adviser."
Brokerage Transactions
A description of the brokerage transactions for the Balanced
Fund is set forth under "Additional Information--Portfolio Brokerage" below.
Other Investment Companies Advised by the Adviser
A list of other investment companies advised by the Adviser
having similar investment objectives to the Balanced Fund is set forth in
Exhibit B.
Shareholder and Board Approval of the Advisory Agreement
The Advisory Agreement was approved by the Board on September
28, 1995 and by the shareholders of the Balanced Fund on December 5, 1995. The
foregoing approvals occurred in connection with the indirect change in control
of NASL Financial due to the merger of Manulife with NASL Financial's then-
parent, NAL.
The Balanced Fund Amendment was approved by the Board on
September 27, 1996.
Board Considerations
In considering the Balanced Fund Amendment and the Balanced
Fund's new fee schedule, the Board considered numerous factors including: (i)
the nature and quality of the services provided by the Adviser and the fees
payable therefor, (ii) the cost and expected profitability to the Adviser for
performing portfolio management services to the Balanced Fund and (iii) whether
the proposed advisory fees and expense ratio of the
25
<PAGE> 30
Portfolio would be consistent with the fees and expense ratios of other
comparable portfolios. In light of these factors, the Board considered the
proposed advisory fee schedule to be fair and reasonable.
Most importantly, the Board considered the fact that the new
fee schedule would not increase the amount retained by the Adviser; rather, the
entire amount of the increased advisory fee would be used to pay the increased
subadvisory fees described in Proposal 4A. The Board's consideration of the
increased subadvisory fee is described in "Proposal 4A---Board Considerations"
above.
The Board also was provided with an analysis of its fiduciary
obligations. At the meeting held on September 27, 1996, the Board reviewed its
fiduciary duties and discussed the information provided regarding the Adviser. A
representative of the Adviser gave a presentation and responded to questions
from the Trustees. There was an extended discussion of, and questioning about,
the Adviser's plans for the Balanced Fund. Throughout the review process, the
Disinterested Trustees had the assistance of legal counsel.
REQUIRED VOTE
Approval of the Balanced Fund Amendment will require a
Majority Vote of the shareholders of the Balanced Fund.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES,
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF THE
BALANCED FUND VOTE "FOR" PROPOSAL 4B.
26
<PAGE> 31
PROPOSAL 5
APPROVAL OF A SUBADVISORY AGREEMENT BETWEEN THE ADVISER AND
MANUFACTURERS ADVISER CORPORATION WITH RESPECT TO THE MONEY MARKET FUND
At a meeting held September 27, 1996, the Board, including the
Disinterested Trustees, voted to accept the resignation of Wellington Management
Company ("Wellington") as subadviser to the Money Market Fund and to approve a
subadvisory agreement with MAC with respect to the Money Market Fund (the "MAC
Subadvisory Agreement"). On October 1, 1996, MAC began serving as subadviser to
the Money Market Fund in reliance on Rule 15a-4 under the 1940 Act, which
permits MAC to serve as subadviser to the Portfolio, without shareholder
approval, for a period of up to 120 days following the termination of the prior
subadvisory agreement with Wellington. Shareholders of the Money Market Fund are
now being asked to approve the MAC Subadvisory Agreement.
Subadvisory Agreement
The MAC Subadvisory Agreement is substantially identical to
the prior subadvisory agreement for the Money Market Fund. The effective date of
the MAC Subadvisory Agreement is October 1, 1996. SHAREHOLDER APPROVAL OF THE
MAC SUBADVISORY AGREEMENT WILL NOT CHANGE THE SUBADVISORY FEE PAID BY THE
ADVISER OR THE ADVISORY FEE OR OTHER EXPENSES PAID BY THE MONEY MARKET FUND. SEE
"SUBADVISORY FEE" BELOW.
Under the terms of both the MAC Subadvisory Agreement and the
prior subadvisory agreement for the Money Market Fund, the subadviser manages
the investment and reinvestment of the assets of the Money Market Fund, subject
to the supervision of the Board. The subadviser formulates a continuous
investment program for the Portfolio consistent with its investment objectives
and policies outlined in the Trust's Prospectus. The subadviser implements such
programs by purchases and sales of securities and regularly reports to the
Adviser and the Board with respect to the implementation of such programs. The
subadviser, at its expense, furnishes all necessary investment and management
facilities, including salaries of personnel required for it to execute its
duties, as well as administrative facilities, including bookkeeping, clerical
personnel, and equipment necessary for the conduct of the investment affairs of
the Portfolio.
The foregoing description of the MAC Subadvisory Agreement is
qualified in its entirety by reference to the text of that agreement, the form
of which is attached hereto as Exhibit E. For additional information regarding
the MAC Subadvisory Agreement, see "Additional Information - Certain Provisions
in the Advisory and Subadvisory Agreements" below.
Subadvisory Fee
As compensation for its services, MAC receives a fee from the
Adviser. The fee is stated as an annual percentage of the current value of the
net assets of the Money Market Fund. The fee, which is accrued daily and payable
monthly, is calculated for each day by multiplying the fraction of one over the
number of calendar days in the year by the annual percentage prescribed for the
Portfolio, and multiplying this product by the value of the net assets of the
Money Market Fund at the close of business on the previous business day of the
Trust.
The following are the subadvisory fees the Adviser currently
is obligated (and, if the MAC Subadvisory Agreement is approved by shareholders,
will continue to be obligated) to pay MAC out of the advisory fee it receives
from the Money Market Fund:
.075% of the first $500 million of the Portfolio's average
daily net assets and .020% of the Portfolio's average daily
net assets in excess of $500 million.
27
<PAGE> 32
The foregoing subadvisory fees are identical to the fees the
prior subadvisory agreement for the Money Market Fund, which has been terminated
as noted above.
Subadvisory Fees Paid
For the fiscal year ended October 31, 1995 and for the six
months ended April 30, 1996, respectively, the Adviser paid $16,615 and $6,806
in subadvisory fees to Wellington for management of the Money Market Fund. The
Adviser would have paid the same amount to MAC if the MAC Subadvisory Agreement
been effective for such periods because the subadvisory fees under the MAC
Subadvisory Agreement are identical to the subadvisory fees under the prior
subadvisory agreement for the Money Market Fund.
Management and Control of MAC
MAC, founded in 1970, is an indirect wholly-owned subsidiary
of Manulife, the ultimate parent of the Adviser. As a result, MAC is an
"affiliated person" (as defined in the 1940 Act) of the Adviser. Both companies
are located at 200 Bloor Street East, Toronto, Ontario, Canada M4W 1E5.
For information on the principal executive officers and
directors of MAC, see Exhibit A hereto.
Brokerage Transactions
A description of the brokerage transactions for the Money
Market Fund is set forth under "Additional Information--Portfolio Brokerage"
below.
Other Investment Companies Advised by Subadviser
A list of other investment companies advised by MAC having
similar investment objectives to the Money Market Fund is set forth in Exhibit
C.
Advisory Agreement
For more information on the advisory agreement between the
Trust and NASL Financial, see "Additional Information--Advisory Arrangements"
below.
Shareholder and Board Approval of the Subadvisory Agreements
The prior subadvisory agreement for the Money Market Fund was
approved by the Board on September 28, 1995 and by the shareholders of the Money
Market Fund on December 5, 1995. These approval occurred in connection with the
indirect change in control of NASL Financial due to the merger of Manulife with
NASL Financial's then-parent, NAL.
The MAC Subadvisory Agreement was approved by the Board,
including a majority of the Disinterested Trustees, on September 27, 1996.
Pursuant to Rule 15a-4 under the 1940 Act, MAC may act as subadviser to the
Portfolio, without shareholder approval, for up to 120 days after the
termination date of the prior subadvisory agreement for the Portfolio. If
shareholders do not approve the MAC Subadvisory Agreement within this 120 day
period, the Board will take such action as it deems advisable under the
circumstances.
28
<PAGE> 33
Board Considerations
The Board considered numerous factors in connection with
accepting the resignation of Wellington and the approval of the MAC Subadvisory
Agreement, including: (i) the nature and quality of the services being provided
by Wellington and the fees payable therefor, (ii) the nature and quality of the
services to be provided by MAC and the fees payable therefor, (iii) performance
information regarding the Money Market Fund, (iv) performance information
regarding MAC's management of portfolios with investment objectives and policies
similar to the Money Market Fund and (v) the cost and expected profitability to
MAC of providing portfolio management services to the Portfolio. In light of
these factors, the Board considered the proposed subadvisory fee schedule to be
fair and reasonable.
In evaluating the MAC Subadvisory Agreement, the Board, in
particular, focused on the scope and quality of services to be provided by MAC,
as well as comparative fee and expense data. In addition, the Board also took
into account the fact that the MAC Subadvisory Agreement will not change the
advisory fee or other expenses paid by the Money Market Fund or the subadvisory
fee paid to the subadvisor.
The Board was also provided with an analysis of the Board's
fiduciary obligations. At the meeting held on September 27, 1996, the Board
reviewed its fiduciary duties and discussed the information provided regarding
MAC. A representative of MAC gave a presentation and responded to questions from
the Trustees. There was an extended discussion of, and questioning about, MAC's
plans for the Money Market Fund. Throughout the review process, the
Disinterested Trustees had the assistance of legal counsel.
REQUIRED VOTE
Approval of the MAC Subadvisory Agreement will require a
Majority Vote of shareholders of the Money Market Fund.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS OF THE MONEY MARKET FUND VOTE "FOR" PROPOSAL 5.
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<PAGE> 34
PROPOSAL 6
APPROVAL OF A CHANGE TO THE INVESTMENT OBJECTIVE
OF THE VALUE EQUITY FUND
As described in Proposal 3A, effective October 1, 1996, T.
Rowe Price replaced Goldman as subadviser to the Value Equity Fund pursuant to
Rule 15a-4 under the 1940 Act. Due to the change in subadviser, the Board,
including each of the Disinterested Trustees, has considered and unanimously
approved (on the recommendation of the Adviser) changing the investment
objective and certain non-fundamental policies of the Portfolio to reflect the
proposed investment strategy of T. Rowe Price.
The current investment objective of the Value Equity Fund is
to seek long-term growth of capital. If shareholders approve this Proposal, the
Portfolio's investment objective instead will be to seek to provide substantial
dividend income as well as long-term capital appreciation. There can be no
assurance that the Portfolio will attain its investment objective. In connection
with this change, the Board has approved changing the name of the Portfolio to
the Equity-Income Fund, effective on our about January 1, 1997. The investment
objective of the Portfolio is a fundamental policy, which means that, under the
1940 Act, it may not be changed without the approval of shareholders of the
Portfolio.
The changes to the Portfolio's non-fundamental investment
policies do not require shareholder approval. Such changes will be implemented
upon the effectiveness of the change to the Portfolio's fundamental investment
objective proposed above. Upon implementation of such changes, T. Rowe Price
will seek to attain the Portfolio's investment objective by investing primarily
in dividend-paying common stocks, particularly of established companies with
favorable prospects for both increasing dividends and capital appreciation.
Under normal circumstances, the Portfolio will invest at least 65% of total
assets in the common stocks of established companies paying above-average
dividends. The Portfolio will generally consider companies with the following
characteristics: (i) established operating histories; (ii) above-average current
dividend yield relative to the average yield of the S&P 500; (iii) low
price/earnings ratios relative to the S&P 500; (iv) sound balance sheets and
other financial characteristics; and (v) low stock price relative to a company's
underlying value as measured by assets, earnings, cash flow, or business
franchises.
The Portfolio will tend to take a "value" approach and invest
in stocks and other securities that appear to be temporarily undervalued by
various measures, such as price/earnings ratios. Value investors seek to buy a
stock (or other security) when its price is low in relation to what they believe
to be its real worth or future prospects. By identifying companies whose stocks
are currently out of favor, value investors hope to realize significant
appreciation as other investors recognize the stock's intrinsic value and the
price rises accordingly. Finding undervalued stocks requires considerable
research to identify the particular stock, to analyze the company's underlying
financial condition and prospects, and to assess the likelihood that the stock's
underlying value will be recognized by the market and reflected in its price.
The Portfolio also will be able to purchase other types of
securities, for example, foreign securities, preferred stocks, convertible
stocks and bonds, and warrants, when considered consistent with the Portfolio's
investment objective and program. The Portfolio will hold a certain portion of
its assets in U.S. and foreign dollar-denominated money market securities,
including repurchase agreements, in the two highest rating categories, maturing
in one year or less. For temporary, defensive purposes, the Portfolio will be
able to invest without limitation in such securities. This reserve position
provides flexibility in meeting redemptions, expenses and the timing of new
investments and serves as a short-term defense during periods of unusual market
volatility.
The Portfolio also will be able to invest in debt securities
of any type including municipal securities without regard to quality or rating.
The total return and yield of lower-quality (high-yield/high-risk) bonds,
commonly referred to as "junk" bonds, can be expected to fluctuate more than the
total return and yield of higher-quality, shorter-term bonds, but not as much as
common stocks. Junk bonds (those rated below BBB or in default) are regarded as
predominantly speculative with respect to the issuer's continuing ability to
meet principal and interest payments. The Portfolio will not purchase a
noninvestment-grade debt security (or junk
30
<PAGE> 35
bond) if immediately after such purchase the Portfolio would have more than 10%
of its total assets invested in such securities.
The Portfolio also will be able to engage in a variety of
investment management practices, such as buying and selling futures and options.
Risks associated with these investment management practices are described in the
Trust's current Prospectus. The Portfolio also will be able to invest up to 10%
of its total assets in hybrid instruments, which are a type of high-risk
derivative which can combine the characteristics of securities, futures and
options. For example, the principal amount, redemption or conversion terms of a
security could be related to the market price of some commodity, currency or
securities index. Such securities may bear interest or pay dividends at below
market (or even relatively nominal) rates. The risks of investing in such hybrid
instruments reflect a combination of the risks of investing in securities,
options, futures and currencies. Reference is made to the Trust's current
Prospectus for a description of such risks. Hybrid instruments are potentially
more volatile and carry greater market risks than traditional debt instruments.
Hybrid instruments may also carry greater liquidity risks because the
instruments are often "customized" to meet the portfolio needs of a particular
investor and, therefore, the number of investors that are willing to buy such
instruments in the secondary market may be smaller than for more traditional
debt securities. The various risks described above, particularly the market risk
of such instruments, may in turn cause significant fluctuations in the net asset
value of the Portfolio.
The Portfolio will be subject to special risks as a result of
its ability to invest up to 25% of its total assets in foreign securities. These
include nondollar-denominated securities traded outside of the U.S. and
dollar-denominated securities of foreign issuers traded in the U.S. (such as
ADRs). Risks associated with such investments are described in the Portfolio's
current Prospectus. The Portfolio will also be authorized to use all of the
various investment strategies referred to under "Hedging and Strategic
Transactions" in the Trust's current Prospectus. The Trust's current Statement
of Additional Information contains a description of these strategies and of
certain risks associated therewith.
REQUIRED VOTE
Approval of the proposal to change the Portfolio's investment
objective will require a Majority Vote of the shareholders of the Portfolio.
If shareholders approve the proposed change to the Portfolio's
investment objective, such change will become effective on or about January 1,
1997.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS OF THE VALUE EQUITY FUND VOTE "FOR" PROPOSAL 6.
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<PAGE> 36
PROPOSAL 7
APPROVAL OF A CHANGE TO THE
INVESTMENT OBJECTIVE OF THE BALANCED FUND
As described in Proposal 4A, effective October 1, 1996,
Founders replaced Goldman as subadviser to the Balanced Fund (which was known as
the Asset Allocation Fund prior to that date) pursuant to Rule 15a-4 under the
1940 Act. Due to the change in subadviser, the Board, including the
Disinterested Trustees, has considered and unanimously approved (on the
recommendation of the Adviser) changing the investment objective and certain
non-fundamental policies of the Portfolio to reflect the investment strategies
of Founders. In connection with the foregoing, the Board changed the name of the
Portfolio to the Balanced Fund, effective October 1, 1996.
The current investment objective of the Balanced Fund is to
obtain the highest total return consistent with a moderate level of risk
tolerance. As part of its investment objective, the Portfolio currently attempts
to limit declines in the value of its portfolio in very adverse market
conditions to 10% over any twelve month period. If shareholders approve this
Proposal, the Portfolio's investment objective instead will be to seek current
income and capital appreciation, and the Portfolio no longer will be required to
attempt to comply with the foregoing 10% limit on declines in portfolio value.
As a result, if this Proposal is approved, the Portfolio will have greater
flexibility to pursue capital appreciation, although shareholders will be
subject to a potentially greater risk of declines in portfolio value when
investing in the Portfolio, especially during adverse market conditions. There
can be no assurance that the Portfolio will attain its investment objective.
The investment objective of the Portfolio is a fundamental policy, which means
that, under the not be changed without the approval of shareholders of the
Portfolio.
The changes to the Portfolio's non-fundamental investment
policies did not require shareholder approval, and became effective on October
1, 1996. Among other things, such changes modified the Portfolio's investment
policies to permit it to invest up to 5% of its total assets in non-investment
grade securities (i.e. rated Ba or lower by Moody's Investors Service
("Moody's") or BB or lower by Standard & Poor's ("S&P")) and to invest up to
30%, rather than 20%, of its total assets in the securities of foreign issuers.
The Portfolio currently does not intend to invest in securities rated lower than
B by Moody's or S&P. The changes made to the Portfolio's non-fundamental
investment policies, and risks associated therewith, are fully set forth in the
Trust's current Prospectus, as supplemented by a prospectus supplement dated
October 1, 1996.
REQUIRED VOTE
Approval of the proposed change to the Portfolio's investment
objective will require a Majority Vote of the shareholders of the Portfolio.
If shareholders approve the proposed change to the Portfolio's
investment objective, such change will become effective on or about January 1,
1997.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS OF THE BALANCED FUND VOTE "FOR" PROPOSAL 7.
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<PAGE> 37
PROPOSAL 8
APPROVAL OF A PROPOSAL TO PERMIT THE ADVISER, IN THE FUTURE, TO SELECT AND
CONTRACT WITH SUBADVISERS FOR THE PORTFOLIOS WITHOUT OBTAINING
SHAREHOLDER APPROVAL
On August 29, 1996, the Trust and the Adviser filed an
exemptive application with the Securities and Exchange Commission ("SEC")
requesting relief from the requirement of Section 15 of the 1940 Act that any
subadviser to a Portfolio that is party to a contract with the Adviser may serve
only pursuant to a written contract approved by the shareholders of such
Portfolio. If the requested relief is granted, a subadviser to a Portfolio may
serve as subadviser to such Portfolio pursuant to a written contract with the
Adviser that has not been approved by shareholders of such Portfolio. The
requested relief also would apply where a subadviser to a Portfolio is serving
pursuant to a contract that is terminated as a result of an assignment of the
contract due to a change of control of the subadviser. In such case, the
subadviser could continue to act as subadviser to such Portfolio under a new
agreement that had not been approved by shareholders of the Portfolio. The
Board, including the Disinterested Trustees, will continue to approve new
contracts between the Adviser and a subadviser as well as changes to existing
contracts. The requested relief will not apply to the advisory agreement between
the Adviser and the Trust, and changes to that agreement will continue to
require approval of shareholders.
If the requested relief is granted, the Trust also would be
permitted in a situation where there is more than one subadviser to a Portfolio
to disclose in its Prospectus, financial statements and certain other documents
only (i) fees paid to the Adviser by that Portfolio, (ii) aggregate fees paid by
the Adviser to subadvisers to that Portfolio, (iii) net advisory fees retained
by the Adviser with respect to that Portfolio after payment of subadvisory fees
and (iv) fees paid by the Adviser to any "affiliated person" (as defined below)
serving as subadviser to that Portfolio. Therefore, the Trust would not have to
disclose separately the fees paid by the Adviser to a particular subadviser.
The application currently is pending at the SEC. While there
can be no assurance that the SEC will grant the requested relief, if the SEC
grants the requested relief, one of the conditions to such relief is expected to
be that this change also be approved by shareholders of the Trust and of each
Portfolio prior to being effective for such Portfolio. Therefore, shareholders
of each Portfolio are being asked to vote on this proposal. If the requested
relief is granted and shareholder approval is obtained, the Trust and the
Adviser will be required to agree to certain conditions imposed by the SEC in
connection with the relief, which are expected to include the following
requirements:
(i) Before a Portfolio may rely on the requested relief, this proposal
will be approved by a Majority Vote of the shareholders of the Trust
and of such Portfolio or, in the case of a new Portfolio whose public
shareholders purchase shares on the basis of a prospectus containing
the disclosure contemplated by condition (ii) below, by the sole
initial shareholders(s) before shares of such Portfolio are offered to
the public;
(ii) Any Portfolio relying on the requested relief will disclose in the
Trust's Prospectus the existence, substance and effect of the SEC order
granting such relief;
(iii) The Adviser will provide management and administrative services
to the Portfolios and, subject to review and approval of the Board,
will (a) set the Portfolios' overall investment strategies, (b) select
subadvisers, (c) when appropriate, allocate and reallocate a
Portfolio's assets among multiple subadvisers, (d) monitor and evaluate
the investment performance of the subadvisers and (e) ensure that the
subadvisers comply with the Portfolios' investment objectives, policies
and restrictions;
(iv) The Adviser will not enter into subadvisory contracts with any
subadviser that is an "affiliated person" (as defined in the 1940 Act)
of the Trust or the Adviser (other than by reason of serving as a
33
<PAGE> 38
subadviser to one or more of the Portfolios or any other portfolio
managed by the Adviser or any of its affiliates) without such agreement
being approved by the shareholders of the applicable Portfolio(s); and
(v) Within 60 days of the hiring of any new subadviser or the
implementation of any material change in a subadvisory contract, the
Trust will furnish to the shareholders of the affected Portfolio(s) all
information about the new subadviser and/or material change that would
be included in a proxy statement, except that the fee disclosure will
be as noted above in the case of Portfolios with more than one
subadviser. Such information will include any change in such disclosure
caused by the addition of a new subadviser and any material change in
the subadvisory contract.
If the requested relief is granted by the SEC and shareholders
of the Portfolios approve this proposal, the Adviser will have the ability,
subject to the approval of the Board, to hire and terminate subadvisers to the
Portfolios and to change materially the terms of the subadvisory contracts,
including the compensation paid to the subadvisers, without the approval of the
shareholders of the Portfolios. SUCH CHANGES IN SUBADVISORY ARRANGEMENTS WOULD
NOT INCREASE THE FEES PAID BY A PORTFOLIO FOR INVESTMENT ADVISORY SERVICES SINCE
SUBADVISORY FEES ARE PAID BY THE ADVISER OUT OF ITS ADVISORY FEE AND ARE NOT
ADDITIONAL CHARGES TO A PORTFOLIO. This proposal will, however, eliminate the
expense and delay of convening a meeting of shareholders to approve certain
subadvisory changes.
While the Adviser expects its relationship with the
subadvisers to the Portfolios to be long-term and stable over time, approval of
this proposal will permit the Adviser to act quickly in situations where the
Adviser and the Board believe that a change in subadvisers or to a subadvisory
agreement, including any fee paid to a subadviser, is warranted.
The Board, including the Disinterested Trustees, has
unanimously approved the proposal one has concluded that the proposal is in the
best interests of shareholders.
REQUIRED VOTE
Approval of this proposal will require (i) a Majority Vote of
the Trust and (ii) with respect to each Portfolio, a Majority Vote of that
Portfolio.
This proposal will become effective with respect to a
Portfolio upon the later to occur of: (i) approval of the proposal by a Majority
Vote of the Trust and a Majority Vote of the shareholders of such Portfolio,
(ii) receipt by the Adviser and the Trust of the exemptive order described above
and (iii) disclosure in the Trust's Prospectus of the existence, substance and
effect of the exemptive order.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS OF EACH PORTFOLIO VOTE "FOR" PROPOSAL 8.
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<PAGE> 39
PROPOSAL 9
RATIFICATION OF COOPERS & LYBRAND L.L.P. AS THE INDEPENDENT ACCOUNTANTS FOR
THE TRUST FOR ITS FISCAL YEAR ENDING OCTOBER 31, 1997
The Board, including each of the Disinterested Trustees, has
selected Coopers & Lybrand L.L.P. to serve as the independent accountants for
the Trust for the Trust's fiscal year ending October 31, 1997, subject to the
right of the Trust to terminate such employment immediately without penalty by
vote of a majority of the outstanding voting securities of the Trust at any
meeting called for such purpose. Proxies not limited to the contrary will be
voted in favor of ratifying the selection of Coopers & Lybrand L.L.P., under
Section 32(a) of the 1940 Act, as the independent accountants for the Trust.
Coopers & Lybrand L.L.P. served as the independent accountants
for the Trust during its most recent fiscal year ended October 31, 1996. Apart
from its fees received for its services as the Trust's independent accountants,
Coopers & Lybrand L.L.P. has no direct or material indirect interest in the
Trust. A representative of Coopers & Lybrand L.L.P. is expected to be present at
the Meeting (or available at the Meeting via telephone), and will have an
opportunity to make a statement if he or she desires to do so. Such
representative is also expected to be available to respond to appropriate
questions.
REQUIRED VOTE
Ratification of the selection of Coopers & Lybrand L.L.P. as
the independent accountants for the Trust requires the affirmative vote of a
majority of the outstanding shares of the Trust present in person or represented
by proxy at the Meeting, assuming that a quorum is present.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 9.
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<PAGE> 40
****************
ADDITIONAL INFORMATION
ADVISORY ARRANGEMENTS
Pursuant to the terms of the Advisory Agreement, the Adviser
oversees the administration of all aspects of the business and affairs of the
Trust. Among other things, as described above, the Adviser selects, contracts
with and compensates subadvisers to manage the investment and reinvestment of
the assets of the Portfolios. The Adviser monitors the compliance of such
subadvisers with the investment objectives and related policies of each
Portfolio and reviews the performance of such subadvisers and reports
periodically on such performance to the Board. The Adviser serves as investment
adviser to one other investment company, NASL Series Trust, the underlying
investment medium for insurance products sponsored by the parent of the Adviser,
North American Security Life Insurance Company ("NASL") and affiliates of NASL.
The Adviser oversees all aspects of the Trust's business and
affairs. In that connection, the Adviser permits its directors, officers and
employees to serve as Trustees or President, Vice President, Treasurer or
Secretary of the Trust, without cost to the Trust. The Adviser also provides
certain services, and the personnel to perform such services, to the Trust for
which the Trust reimburses the Adviser's costs of providing such services and
personnel. Such services include maintaining certain records of the Trust and
performing all administrative, financial, accounting, bookkeeping and
recordkeeping functions of the Trust, except for any of those functions
performed by the Trust's custodian or transfer and shareholder servicing agents.
The reimbursement paid by the Trust to the Adviser for personnel costs includes
employee compensation and allocated portions of the Adviser's related personnel
expenses of office space, utilities, office equipment and miscellaneous office
expenses. For the fiscal year ended October 31, 1995, the Trust reimbursed the
Adviser $903,189 and for the six months ended April 30, 1996 the Trust
reimbursed the Adviser $604,233.
Pursuant to the Advisory Agreement, the Adviser has agreed to
reduce a Portfolio's advisory fee, or if necessary to reimburse the Trust, in
order to prevent the expenses of a Portfolio from exceeding either the most
restrictive expense limitation imposed by applicable state law or a fixed
expense limitation contained in the Advisory Agreement, whichever results in the
lowest expenses to such Portfolio. The fixed limitation may be terminated by the
Adviser at any time on 30 days' written notice. With respect to the Global
Equity Fund, Value Equity Fund, Balanced Fund and Money Market Fund, the fixed
limitation contained in the Advisory Agreement, and as of the date of this proxy
statement the operative limitation on the Portfolios' expenses, limits the
Portfolios' annual expenses, excluding taxes, portfolio brokerage commissions,
interest, certain litigation and indemnification expenses, extraordinary
expenses and all of the Portfolio's distribution fees, as a percentage of
average net assets, to 1.40% for the Global Equity Fund, .99% for the Value
Equity and Balanced Funds, and .50% for the Money Market Fund. If the Advisory
Agreement Amendments discussed in Proposals 3B and 4B are approved, such expense
limitations shall be 1.04% for the Balanced Fund and 1.065% for the Value Equity
Fund, which represents an increase equal in amount to the proposed increase in
advisory fees for those Portfolios.
CERTAIN PROVISIONS IN THE ADVISORY AND SUBADVISORY AGREEMENTS
The Advisory Agreement and the subadvisory agreements
discussed in Proposals 2 through 5 of this proxy statement (the "Subadvisory
Agreements," and together with the Advisory Agreement, the "Agreements")
continue in effect as to a Portfolio for a period of no more than two years from
the date of execution only so long as such continuance is specifically approved
at least annually either by the Board or by the vote of a majority of the
outstanding voting securities of each of the related Portfolios, provided that
in either event such continuance shall also be approved by the vote of the
majority of the Trustees who are not interested persons of any party to the
applicable Agreement, cast in person at a meeting called for the purpose of
voting on such approval. Shareholder approval of any continuance of any of the
Agreements shall be effective with respect
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<PAGE> 41
respect to any Portfolio if a there is a Majority Vote of that Portfolio vote to
approve such continuance, notwithstanding that such continuance may not have
been approved by a Majority Vote of the Trust.
If the shareholders of any Portfolio fail to approve any
continuance of any Agreement, the Adviser or subadviser, as applicable, will
continue to act as such with respect to such Portfolio pending the required
approval of the continuance of such Agreement, of a new contract with the
Adviser or subadviser (as applicable) or different investment adviser or
subadviser, or other definitive action.
Each of the Agreements provides that it may be terminated at
any time, without the payment of penalty, by the Board, or with respect to any
Portfolio, by the vote of a majority of the outstanding voting securities of
such Portfolio, or by the Adviser or applicable subadviser on 60 days' written
notice to the other party or parties to the Agreement and, in the case of
termination of a subadvisory agreement, to the Trust. As required by Section 15
of the 1940 Act, each of the Agreements provides that it will automatically
terminate in the event of its assignment.
Each of the Agreements may be amended by the parties thereto
provided that such amendment is specifically approved by the vote of a majority
of the outstanding voting securities of the Trust or applicable Portfolio(s), as
the case may be, and by the vote of a majority of the Board members who are not
interested persons of the Trust, of the Adviser or of the applicable subadviser,
cast in person at a meeting called for the purpose of voting upon such approval.
Shareholder approval of any amendment shall be effective with respect to any
Portfolio if a majority of the outstanding voting securities of that Portfolio
vote to approve the amendment, notwithstanding that the amendment may not be
approved by a majority of the outstanding voting securities of (i) any other
Portfolio affected by the amendment or (ii) all the Portfolios. If Proposal 8 is
approved by shareholders of the Portfolios, the Adviser will not need
shareholder approval, but will continue to need Board approval, for certain
subadvisory changes. See Proposal 8.
Each Subadvisory Agreement provides that the subadviser will
not be liable to the Trust or the Adviser for any losses resulting from matters
to which the agreement relates other than losses resulting from the subadviser's
willful misfeasance, bad faith or gross negligence in the performance of, or
from reckless disregard of, its duties.
ADVISORY FEE SCHEDULE
As compensation for its services, the Adviser receives a fee
from the Trust computed separately for each Portfolio. The fee for each
Portfolio is stated as an annual percentage of the current value of the net
assets of the Portfolio. The fee, which is accrued daily and payable monthly, is
calculated for each day by multiplying the fraction of one over the number of
calendar days in the year by the annual percentage prescribed for a Portfolio,
and multiplying this product by the value of the net assets of the Portfolio at
the close of business on the previous business day of the Trust. The following
is a schedule of the fees the specified Portfolios currently are obligated to
pay the Adviser under the current Advisory Agreement (prior to the application
of any fee waivers):
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<PAGE> 42
<TABLE>
<CAPTION>
Between Between
$50,000,000 $200,000,000 Excess
First and and over
Fund $50,000,000 $200,000,000 $500,000,000 $500,000,000
- ---- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Global Equity .900% .900% .700% .700%
Fund
Value Equity .725% .675% .625% .550%
Fund
Balanced Fund .725% .675% .625% .550%
Money Market .200% .200% .200% .145%
Fund
</TABLE>
CERTAIN ADVISORY FEES PAID
For the period November 1, 1994 to October 31, 1995 and for
the six month period November 1, 1995 to April 30, 1996, the Global Equity Fund,
Value Equity Fund, Money Market Fund and Balanced Fund paid total advisory fees
to the Adviser as follows:
<TABLE>
<CAPTION>
Before After Before After
Expense Expense Expense Expense
Reimbursement Reimbursement Reimbursement Reimbursement
Portfolio 11/1/95-4/30/96 11/1/95-4/30/96 11/1/94-10/31/95 11/1/94-10/31/95
--------- --------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Global Equity $601,259 $541,174 $1,185,949 $1,000,090
Value Equity $463,116 $315,680 $ 758,694 $ 478,485
Money Market $ 18,149 $ 0 $ 44,306 $ 0
Balanced $363,502 $256,736 $ 687,562 $ 422,765
</TABLE>
For information concerning waivers of advisory fees and
expense reimbursements, see "Advisory Arrangements" above.
MANAGEMENT OF THE ADVISER AND OF THE TRUST
The table below provides information regarding the directors
and executive officers of the Trust and the Adviser.
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<PAGE> 43
<TABLE>
<CAPTION>
Position with
Trust and Year of
Election or Position with Business
Name, Address and Age Appointment* NASL Financial* Experience
- --------------------- ------------ --------------- ----------
<S> <C> <C> <C>
Brian L. Moore Chairman Director and Executive Vice President,
200 Bloor Street 1989 Chairman Canadian Insurance Operations, of
11th Floor Manulife, January 1, 1996 to date;
North Tower Chief Executive Officer, North
Toronto, Ontario American Life Assurance
Canada M4W-1E5 Company, October 1993 to
Age: 52 December 1995; Executive Vice
President and Chief Financial
Officer, North American Life
Assurance Company, September
1988 to October 1993.
Joe Scott President Not Applicable President, North American Funds,
116 Huntington Avenue 1996 September 25, 1996 to the
Boston, MA 02116 present; Vice President, Business
Age: 47 Development and Marketing of
North American Funds, January 1,
1996 to September 25, 1996;
Annuities Vice President, U.S.
Savings and Retirement Services
Division, of Manulife, January 1,
1995 to December 31, 1995;
Distribution Vice President, U.S.
Group and Pension Division of
Manulife, January 1, 1990 to
December 31, 1994.
John D. DesPrez III Not Applicable Director Vice President, Annuities, of
116 Huntington Avenue Manulife, September 1996 to
Boston, MA 02116 present; President and Director,
Age: 39 North American Security Life
Insurance Company, September 1996
to present; President, North
American Funds, March 1993 to
September 1996; Vice President and
General Counsel, North American
Security Life Insurance Company,
1991 to 1994.
John G. Vyrsen Vice President Vice President Vice President, Chief Financial
116 Huntington Avenue 1988 Officer, U.S. Operations, of
Boston, MA 02116 Manulife, January 1, 1996 to date;
Age: 41 Vice President and Chief Actuary,
NASL.
</TABLE>
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<PAGE> 44
<TABLE>
<CAPTION>
Position with
Trust and Year of
Election or Position with Business
Name, Address and Age Appointment* NASL Financial* Experience
- --------------------- ------------ --------------- ----------
<S> <C> <C> <C>
James D. Gallagher Secretary Not Applicable Vice President, Legal Services, of
116 Huntington Avenue Manulife, January 1, 1996 to date;
Boston, MA 02116 Vice President and General
Age: 42 Counsel, June 1994 to date,
NASL; Vice President and Associate
General Counsel, 1990- 1994, The
Prudential Insurance Company of
America.
Richard C. Hirtle Treasurer Vice President and Vice President, Chief Financial
116 Huntington Avenue Treasurer Officer, Annuities and Mutual
Boston, MA 02116 Funds, of Manulife, January 1,
Age: 40 1996 to date; Vice President,
Treasurer and Chief Financial
Officer, NASL
</TABLE>
* Each officer of the Trust and the Adviser serves until his successor
is chosen and qualified or until he sooner dies, resigns, is removed or
becomes disqualified.
PORTFOLIO BROKERAGE
Pursuant to the Subadvisory Agreements, the subadvisers are
responsible for placing all orders for the purchase and sale of portfolio
securities of the Trust. The subadvisers have no formula for the distribution of
the Trust's brokerage business, their intention being to place orders for the
purchase and sale of securities with the primary objective of obtaining the most
favorable overall results for the Trust.
In selecting brokers or dealers through whom to effect
transactions, the subadvisers will give consideration to a number of factors,
including price, dealer spread or commission, if any, the reliability, integrity
and financial condition of the broker-dealer, size of the transaction and
difficulty of execution. In selecting brokers and dealers, the subadvisers will
also give consideration to the value and quality of any research, statistical,
quotation or valuation services provided by the broker or dealer. In placing a
purchase or sale order, a subadviser may use a broker whose commission in
effecting the transaction is higher than that of some other broker if the
subadviser determines in good faith that the amount of the higher commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker, viewed in terms of either the particular transaction or
the subadviser's overall responsibilities with respect to the Trust and any
other accounts managed by the subadviser.
To the extent research services are used by the subadvisers in
rendering investment advice to the Trust, such services would tend to reduce the
subadvisers' expenses. However, the subadvisers do not believe that an exact
dollar value can be assigned to these services. Research services received by
the subadvisers from brokers or dealers executing transactions for the Trust
will be available also for the benefit of other portfolios managed by the
subadvisers.
For the period November 1, 1994 to October 31, 1995, the Trust
paid brokerage commissions in connection with portfolio transactions of
$1,039,631. For the six month period November 1, 1995 to April 30, 1996, the
Trust paid brokerage commission in connection with portfolio transactions of
$589,074. The amounts represented by the Global Equity Fund, Value Equity Fund,
Balanced Fund and Money Market Fund are as follows:
40
<PAGE> 45
<TABLE>
<CAPTION>
PORTFOLIO 11/1/95 TO 4/30/96 11/1/94 TO 10/31/95
- --------- ------------------ -------------------
<S> <C> <C>
Global Equity $236,531 $509,668
Value Equity $180,256 $211,194
Balanced $ 43,399 $208,375
(formerly Asset Allocation)
Money Market $ 0 $ 0
</TABLE>
Prior to October 1, 1996, Goldman Sachs & Co. ("Goldman
Sachs") may be deemed to have been an affiliated broker of the Value Equity Fund
and the Balanced Fund due to the position of Goldman as subadviser to those
Portfolios. In addition, Dresdner Bank may be deemed to have been an affiliated
broker of the Global Equity Fund due to the position of Oechsle as subadviser to
that Portfolio. As described above in Proposals 3A and 4A, Goldman has resigned
as subadviser to the Value Equity Fund and the Balanced Fund, effective October
1, 1996 and, as described above in Proposal 2, Oechsle has resigned as
subadviser to the Global Equity Fund, effective October 1, 1996. Following
October 1, 1996, affiliates of T. Rowe Price may be deemed to be affiliated
brokers of the Value Equity Fund and the Balanced Fund due to the position of
T. Rowe Price as subadviser to those Portfolios and affiliates of Morgan
Stanley may be deemed to be affiliated brokers of the Global Equity Fund due
to the position of Morgan Stanley as subadviser to that Portfolio.
From November 1, 1994 to October 31, 1995, brokerage
commissions were paid to Goldman Sachs as follows:
<TABLE>
<CAPTION>
PERCENT OF PORTFOLIO'S PERCENT OF
BROKERAGE AGGREGATE
COMMISSIONS $ AMOUNT OF
11/1/94 TO REPRESENTED TRANSACTIONS
PORTFOLIO 10/31/95 FOR THE PERIOD FOR THE PERIOD
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Equity $ 4,137 0.81% 0.67%
Value Equity $23,638 11.19% 0.27%
Balanced $16,464 7.90% 0.26%
Money Market $ 0 0% 0%
</TABLE>
From November 1, 1995 to April 30, 1996, brokerage commissions
were paid to Goldman Sachs as follows:
<TABLE>
<CAPTION>
PERCENT OF PORTFOLIO'S
BROKERAGE PERCENT OF AGGREGATE
COMMISSIONS DOLLAR AMOUNT OF
11/1/95 TO REPRESENTED TRANSACTIONS
PORTFOLIO 4/30/96 FOR THE PERIOD FOR THE PERIOD
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Equity $ 3,128 1.32% 2.95%
Value Equity $26,846 14.89% 0.96%
Balanced $ 1,350 3.11% 0.06%
Money Market $ 0 0% 0%
</TABLE>
41
<PAGE> 46
From November 1, 1994 to October 31, 1995 and from November 1,
1995 to April 30, 1996, there were no brokerage commissions paid to Dresdner
Bank.
OTHER PAYMENTS TO THE ADVISER AND ITS AFFILIATES
NASL Financial serves as the distributor of the Trust's shares
(in such capacity, the "Distributor"). Each class of shares of each Portfolio is
authorized under the plan of distribution applicable to that class of shares
(the "Class A Plan," the "Class B Plan" and the "Class C Plan;" collectively,
the "Plans") adopted pursuant to Rule 12b-1 under the 1940 Act, to use the
assets attributable to such class of shares of such Portfolio to finance certain
activities relating to the distribution of shares to investors. The Plans
provide for the payment by each class of shares of each Portfolio of the Trust,
other than the Money Market Fund, of a monthly distribution and service fee to
the Distributor, as principal underwriter for the Trust. Portions of the fees
prescribed below are used to provide payments to the Distributor, to promotional
agents, to brokers, dealers or financial institutions (collectively, "Selling
Agents") for ongoing account services to shareholders and are deemed to be
"service fees" as defined in paragraph (b)(9) of Section 26 of the Rules of Fair
Practice of the NASD.
Under the Class A Plan, Class A shares of each Portfolio
(except as described in the next sentence) are subject to a fee of up to .35% of
their respective average annual net assets, five-sevenths of which (.25%)
constitutes a "service fee." Class A shares of the Money Market Fund bear no
such fees and Class A shares of the National Municipal Bond Fund are subject to
a fee of up to .15% of Class A average annual net assets, the entire amount of
which constitutes a "service fee." Under the Class B Plan, Class B shares of
each Portfolio (with the exception of the Money Market Fund) are subject to a
fee of up to 1.00% of their respective average annual net assets, one-fourth
(.25%) of which constitutes a "service fee." Under the Class C Plan, Class C
shares of each Portfolio (with the exception of the Money Market Fund) are
subject to a fee of up to 1.00% of their respective average annual net assets,
one-fourth (.25%) of which constitutes a "service fee."
Payments under the Plans are used primarily to compensate the
Distributor for distribution services provided by it in connection with the
offering and sale of the applicable class of shares, and related expenses
incurred, including payments by the Distributor to compensate or reimburse
Selling Agents for sales support services provided and related expenses incurred
by such Selling Agents. Such services and expenses may include the development,
formulation and implementation of marketing and promotional activities, the
preparation, printing and distribution of prospectuses and reports to recipients
other than existing shareholders, the preparation, printing and distribution of
sales literature, expenditures for support services such as telephone facilities
and expenses and shareholder services as the Trust may reasonably request,
provision to the Trust of such information, analyses and opinions with respect
to marketing and promotional activities as the Trust may, from time to time,
reasonably request, commissions, incentive compensation or other compensation
to, and expenses of, account executives or other employees of the Distributor or
Selling Agents, attributable to distribution or sales support activities,
respectively, overhead and other office expenses of the Distributor or Selling
Agents, attributable to distribution or sales support activities, respectively,
and any other costs and expenses relating to distribution or sales support
activities. The Distributor may pay directly Selling Agents and may provide
directly the distribution services described above, or it may arrange for such
payment or the performance of some or all of such services by Wood Logan
Distributors, Inc., the Trust's promotional agent, at such level of compensation
as may be agreed to by the Distributor and Wood Logan Distributors, Inc.
The Distributor is authorized by each Plan to retain any
excess of the fees it receives thereunder over its payments to selected dealers
or Wood Logan Distributors, Inc. and its expenses incurred in connection with
providing distribution services. Thus, payments under a Plan may result in a
profit to the Distributor. The foregoing services will continue to be provided
after the proposed Agreements are approved by shareholders.
Class A Plan. For the period November 1, 1994 to October 31,
1995, the Trust paid distribution and service fees pursuant to the Class A Plan
to the Distributor of $612,357 including:
$73,632 from the Global Equity Fund,
42
<PAGE> 47
$67,055 from the Value Equity Fund,
$29,493 from the Balanced Fund,
$ 0 from the Money Market Fund
Of the total, $71,662 was paid by the Distributor to Wood
Logan for providing promotional and shareholder services. Of this latter amount,
approximately 81% was spent for sales literature and printing prospectuses for
other than current shareholders, 6% represented allocated overhead expenses of
Wood Logan and 13% represented allocated compensation of personnel of Wood
Logan. The balance of the fees were, in accordance with the Class A Plan,
retained by the Distributor and used to fund shareholder servicing, promotional
activities and expenses. In addition, $450,737 of the total distribution fees
for Class A were paid to securities dealers, including:
$33,908 from the Global Equity Fund,
$34,277 from the Value Equity Fund,
$20,724 from the Balanced Fund,
$ 0 from the Money Market Fund
For the period November 1, 1995 to April 30, 1996, the Trust
paid distribution and service fees pursuant to the Class A Plan to the
Distributor of $325,358 including:
$45,696 from the Global Equity Fund,
$44,133 from the Value Equity Fund,
$18,749 from the Balanced Fund,
$ 0 from the Money Market Fund
Of the total, $27,712 was paid by the Distributor to Wood
Logan for providing promotional and shareholder services. Of this latter amount,
approximately 81% was spent for sales literature and printing prospectuses for
other than current shareholders, 6% represented allocated overhead expenses of
Wood Logan and 13% represented allocated compensation of personnel of Wood
Logan. The balance of the fees were, in accordance with the Class A Plan,
retained by the Distributor and used to fund shareholder servicing, promotional
activities and expenses. In addition, $231,981 of the total distribution fees
for Class A were paid to securities dealers, including:
$21,144 from the Global Equity Fund,
$22,529 from the Value Equity Fund,
$13,035 from the Balanced Fund,
$ 0 from the Money Market Fund
Class B Plan. For the period November 1, 1994 to October 31,
1995, the Trust paid distribution and service fees pursuant to the Class B Plan
to the Distributor of $784,557 including:
$190,546 from the Global Equity Fund,
$116,729 from the Value Equity Fund,
$73,078 from the Balanced Fund,
$ 0 from the Money Market Fund
Of the total, $0 was paid by the Distributor to Wood Logan for
providing promotional and shareholder services. The balance of the fees were, in
accordance with the Class B Plan, retained by the Distributor and used to fund
shareholder servicing, promotional activities and expenses. In addition,
$166,103 of the total distribution fees for Class B were paid to securities
dealers, including:
$43,740 from the Global Equity Fund,
$25,606 from the Value Equity Fund,
$16,252 from the Balanced Fund,
43
<PAGE> 48
$ 0 from the Money Market Fund
For the period November 1, 1995 to April 30, 1996, the Trust
paid distribution and service fees pursuant to the Class B Plan to the
Distributor of $746,687 including:
$128,307 from the Global Equity Fund,
$113,576 from the Value Equity Fund,
$ 59,790 from the Balanced Fund,
$ 0 from the Money Market Fund
Of the total, $0 was paid by the Distributor to Wood Logan for
providing promotional and shareholder services. The balance of the fees were, in
accordance with the Class B Plan, retained by the Distributor and used to fund
shareholder servicing, promotional activities and expenses. In addition, $97,981
of the total distribution fees for Class B were paid to securities dealers,
including:
$21,779 from the Global Equity Fund,
$16,497 from the Value Equity Fund,
$ 8,687 from the Balanced Fund,
$ 0 from the Money Market Fund
Class C Plan. For the period November 1, 1994 to October 31,
1995, the Trust paid distribution and service fees pursuant to the Class C Plan
to the Distributor of $3,350,140 including:
$916,825 from the Global Equity Fund,
$778,650 from the Value Equity Fund,
$824,231 from the Balanced Fund,
$ 0 from the Money Market Fund
Of the total, $446,724 was paid by the Distributor to Wood
Logan for providing promotional and shareholder services. Of this latter amount,
approximately 81% was spent for sales literature and printing prospectuses for
other than current shareholders, 6% represented allocated overhead expenses of
Wood Logan and 13% represented allocated compensation of personnel of Wood
Logan. The balance of the fees were, in accordance with the Class C Plan,
retained by the Distributor and used to fund shareholder servicing, promotional
activities and expenses. In addition, $3,022,349 of the total distribution fees
for Class C were paid to securities dealers, comprised of:
$813,227 from the Global Equity Fund,
$691,340 from the Value Equity Fund,
$726,061 from the Balanced Fund,
$ 0 from the Money Market Fund
For the period November 1, 1995 to April 30, 1996, the Trust
paid distribution and service fees pursuant to the Class C Plan to the
Distributor of $1,886,357 including:
$421,528 from the Global Equity Fund,
$427,960 from the Value Equity Fund,
$406,698 from the Balanced Fund,
$ 0 from the Money Market Fund
Of the total, $211,222 was paid by the Distributor to Wood
Logan for providing promotional and shareholder services. Of this latter amount,
approximately 81% was spent for sales literature and printing prospectuses for
other than current shareholders, 6% represented allocated overhead expenses of
Wood Logan and 13% represented allocated compensation of personnel of Wood
Logan. The balance of the fees were, in accordance with the Class C Plan,
retained by the Distributor and used to fund shareholder servicing,
44
<PAGE> 49
promotional activities and expenses. In addition, $1,422,955 of the total
distribution fees for Class C were paid to securities dealers, comprised of:
$334,426 from the Global Equity Fund,
$341,482 from the Value Equity Fund,
$338,589 from the Balanced Fund,
$ 0 from the Money Market Fund
Underwriting Commissions. During the period November 1, 1994
to October 31, 1995 the Distributor received underwriting commissions of
$960,690 in connection with sales of Trust shares. The amounts were comprised as
reflected below, with respect to shares of the following Portfolios:
$172,487 from the Global Equity Fund,
$138,334 from the Value Equity Fund,
$ 84,841 from the Balanced Fund,
$ 0 from the Money Market Fund
During the period November 1, 1995 to April 30, 1996 the
Distributor received underwriting commissions of $439,507 in connection with
sales of Trust shares. The amounts were comprised as reflected below, with
respect to shares of the following Portfolios:
$49,274 from the Global Equity Fund,
$68,320 from the Value Equity Fund,
$21,803 from the Balanced Fund,
$ 0 from the Money Market Fund
OTHER INFORMATION
As of October 11, 1996, (i) Frontier Trust Company, Trustee
FBO Saia Motor Freight Line Incorporated 401k Plan, Springhouse Corporate Center
II, 323 Norristown Road, Ambler, Pennsylvania 192202-2756 owned (a)
1,589,162.288 shares (8.09% of the outstanding shares) of the Money Market Fund,
(b) 415,482.344 shares (5.02% of the outstanding shares) of the Global Equity
Fund, (c) 156,189.714 shares (7.47% of the outstanding shares) of the Investment
Quality Bond Fund and (d) 365,008.116 shares (5.02% of the outstanding shares)
of the Growth & Income Fund, (ii) Nalaco Pension Plan for U.S. Members, Elliot &
Page, 120 Adelaide Street West 1120, Toronto, Ontario MSH1V1 owned 501,980.183
shares (6.15% of the outstanding shares) of the Global Equity Fund and (iii)
State Street Bank & Trust Co, Custodian for the IRA of A.R. Whittemore, 111
Golden Ridge Rd., Danville, California 94526-5712 owned 991,734.810 shares
(5.05% of the outstanding shares) of the Money Market Fund. As of such date, no
other shareholder owned of record or, to the knowledge of the Trust,
beneficially owned more than 5% of the outstanding shares of any Portfolio. The
officers and Trustees of the Trust own, in the aggregate, less than 1% of the
outstanding shares of each Portfolio.
OTHER MATTERS
The Board does not know of any matters to be presented at the
Meeting other than those mentioned in this Proxy Statement. If any other matters
properly come before the Meeting, the shares represented by proxies will be
voted with respect thereto in accordance with the best judgment of the person or
persons voting the proxies.
45
<PAGE> 50
Shareholder proposals to be presented at any future meeting of
shareholders of the Trust must be received by the Trust a reasonable time before
the Trust's solicitation of proxies for that meeting in order for such proposals
to be considered for inclusion in the proxy materials related to that meeting.
BY ORDER OF THE BOARD OF TRUSTEES
November 8, 1996
Boston, Massachusetts
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, SHAREHOLDERS WHO
DO NOT EXPECT TO ATTEND THE MEETING IN PERSON ARE URGED TO COMPLETE, SIGN, DATE
AND RETURN THE PROXY CARD IN THE ENCLOSED ENVELOPE.
46
<PAGE> 51
EXHIBIT A
EXECUTIVE OFFICERS AND DIRECTORS OF SUBADVISERS
MORGAN STANLEY ASSET MANAGEMENT INC.
The principal executive officers and Directors of Morgan
Stanley Asset Management Inc. and their principal occupations are set forth
below. The business address of each such person is 1221 Avenue of the Americas,
New York, New York 10020.
<TABLE>
<CAPTION>
Principal
Names and Address Positions with MSAM Occupation
- ----------------- ------------------- -----------------
<S> <C> <C>
Barton M. Biggs Chairman, Director and Managing Managing Director of Morgan Stanley & Co.
Director Incorporated; Chairman of Morgan Stanley
Asset Management Limited
Peter A. Nadosy Vice Chairman, Director and Managing Director of Morgan Stanley & Co.
Managing Director Incorporated; Director of Morgan Stanley
Asset Management Limited
James M. Allwin President, Director and Managing Managing Director of Morgan Stanley & Co.
Director Incorporated; President of Morgan Stanley
Realty Inc.
Gordon S. Gray Director and Managing Director Managing Director of Morgan Stanley & Co.
Incorporated; Director of Morgan Stanley
Asset Management Limited
Dennis G. Sherva Director and Managing Director Managing Director of Morgan Stanley & Co.
Incorporated
</TABLE>
T. ROWE PRICE ASSOCIATES, INC.
The principal executive officers and directors of T. Rowe
Price Associates, Inc. and their principal occupations are shown below. The
business address of each such person, unless otherwise indicated, is 100 East
Pratt Street, Baltimore, Maryland 21202.
<TABLE>
<CAPTION>
Position with T. Rowe Principal
Name Price Occupation
- ---- --------------------- ----------
<S> <C> <C>
George J. Collins Chief Executive Officer, President Director of Rowe Price-Fleming
and Managing Director International, Inc. ("Price-Fleming")
James E. Halbkat, Jr. Director President of U.S. Monitor Corp.
P.O. Box 23109
Hilton Head Island, SC 29925
Richard L. Menschel Director Limited Partner of Goldman Sachs Group
85 Broad St., 2nd Floor L.P.
New York, NY 10004
John W. Rosenblum Director Tayloe Murphy Professor of the University
P.O. Box 6550 of Virginia; Director of: Chesapeake
Charlottesville, VA 22906 Corporation, Camdus Communications
Corp., Comdial Corp. and Cone Mills Corp.
</TABLE>
47
<PAGE> 52
<TABLE>
<CAPTION>
Position with T. Rowe Principal
Name Price Occupation
- ---- --------------------- ----------
<S> <C> <C>
Robert L. Strickland Director Chairman of Loew's Companies, Inc.;
604 Two Piedmont Plaza Bldg. Director of Hannaford Bros., Co.
Winston-Salem, NC 27104
Phillip C. Walsh Director Consultant to Cyprus Annex Minerals
200 East 66th Street, Company; Director of Piedmont Mining
Apt. A-1005 Company, Inc.
New York, NY 10021
Anne Marie Director Partner of the law firm of McGuire, Woods,
Whittemore One James Center Battle & Booth; Director of Owens and
Richmond, VA 23219 Minor, Inc., USF&G Corp. and James River
Corp.
George A. Roche Chief Financial Officer and Vice President and Director of Price-Fleming
Managing Director
M. David Testa Managing Director Chairman of the Board of Price-Fleming
Carter O. Hoffman Managing Director Director of TRP Finance, Inc.
Henry H. Hopkins Managing Director Vice President of Price-Fleming
Charles P. Smith Managing Director Vice President of Price-Fleming
Peter Van Dyke Managing Director Vice President of Price-Fleming
Alvin M. Younger, Jr. Managing Director Secretary and Treasurer of Price-Fleming
Secretary and Treasurer
</TABLE>
FOUNDERS ASSET MANAGEMENT, INC.
The principal executive officers and directors of Founders
Asset Management, Inc. and their principal occupations are shown below. The
business address of each such person, unless otherwise indicated, is 2930 East
Third Avenue, Denver, Colorado 80206.
<TABLE>
<CAPTION>
Principal
Name Position with Founders Occupation
- ---- ---------------------- ----------
<S> <C> <C>
Bjorn K. Borgen Director, Chairman, Chief Chief Executive Officer and Chief
Executive Officer, Chief Investment Officer of Founders
Investment Officer and Secretary
Jonathan F. Zeschin President and Chief Operating President and Chief Operating Officer of
Officer Founders
David L. Ray Vice President, Treasurer, Chief Vice President, Treasurer and Chief
Financial Officer and Assistant Financial Officer of Founders
Secretary
Michael K. Haines Senior Vice President - Senior Vice President - Investments and
Investments Portfolio Manager of Founders
Michael W. Gerding Vice President - Investments Vice President - Investments and Portfolio
Manager of Founders
</TABLE>
48
<PAGE> 53
<TABLE>
<CAPTION>
Principal
Name Position with Founders Occupation
- ---- ---------------------- ----------
<S> <C> <C>
Edward F. Keely Vice President - Investments Vice President - Investments and Portfolio
Manager of Founders
Gregory P. Contillo Senior Vice President - Institutional Senior Vice President - Institutional
Marketing Marketing of Founders
James P. Rankin Vice President - Investor Vice President - Investor Services of
Services Founders
Kenneth R. Vice President and General Vice President and General Counsel of
Christoffersen Counsel Founders
</TABLE>
MANUFACTURERS ADVISER CORP.
The principal executive officers and directors of
Manufacturers Adviser Corporation and their principal occupations are shown
below. The business address of each such person, unless otherwise indicated, is
200 Bloor Street East, Toronto, Ontario, Canada, M4W 1E5.
<TABLE>
<CAPTION>
Position with Manufacturers Principal
Name Adviser Corp. Occupation
- ---- --------------------------- ----------
<S> <C> <C>
George Corey Director President, Exxel Management and Marketing
Corp., Flemington, NJ since 1983
Bernadette B. Murphy Director Executive Director, Strategies and Selections,
M. Kimelan & Co., New York, NY
George Slye Director Founding Partner, Vice Chairman and part
owner, Spaulding and Slye Corp.,
Burlington, MA; Director, Hill Development
Corp., Middletown, CT
Richard R. Schmaltz Director Director of Research, Neuberger & Berman,
New York, NY, 1992 to present
Joseph B. Mounsey President Senior Vice President, Investments,
Manufacturers Life Insurance Co., Toronto,
CA, 1994-present
Robert Laughton Vice President Investment Management, U.S. Fixed Income,
Manufacturers Life Insurance Co., Toronto,
CA
Mark A. Schmeer Vice President Investment Management, U.S. Equities,
Manufacturers Life Insurance Co., 1995-
present
Douglas H. Myers Vice President, Compliance; Vice Assistant Vice President and Controller, U.S.
President, Finance; Treasurer Individual, 1988-present; Vice President, Sun
Life Investment Management, 1993-1995
David Chia Vice President, Compliance Compliance Audit Officer, Manufacturers
(London Branch) Life Insurance Co., 1993-present
</TABLE>
49
<PAGE> 54
<TABLE>
<CAPTION>
Position with Manufacturers Principal
Name Adviser Corp. Occupation
- ---- --------------------------- ----------
<S> <C> <C>
Catherine Addison Vice President Investment Management, Manufacturers Life
Insurance Co.
Stephen Hill Vice President Investment Management, Manufacturers Life
Insurance Co. (London), 1995-present;
Director, Invesco Asset Management, 1993-
1994
Emilia Pandero Perez Vice President Investment Management, Manufacturers Life
Insurance Co. (London)
Robert Lutzko Vice President Investment Management, U.S. Equities,
Manufacturers Life Insurance Co., 1995-
present; U.S. Investment Manager, Workers
Compensation Board, Toronto, 1994-1995
Ronald R. Otsuki Vice President Investment Management, Capital Markets,
Manufacturers Life Insurance Co., 1995-
present; Executive Director, Capital Markets
Division, Toronto, 1994-1995
David Howarth Vice President Assistant Vice President, Capital Markets,
Manufacturers Life Insurance Co., 1996-
present; Director Risk Control, Toronto,
1994-1995
Mark Andrew Hirst Vice President Investment Management, Manufacturers Life
Insurance Co. (London)
Richard James Crook Vice President Investment Management, Manufacturers Life
Insurance Co. (London)
Leslie Grober Vice President Investment Management, U.S. Equities,
Manufacturers Life Insurance Co., Toronto,
1994-present; Investment Representative,
Toronto-Dominion Bank, 1991-1993
Rhonda Chang Vice President Investment Management, Manufacturers Life
Insurance Co., Toronto, 1994-present;
Investment Analyst, American International
Group, 1990-1994
Sheri L. Kocen Secretary and General Counsel Senior Counsel, 1990-present, Manufacturers
Life Insurance Co., Toronto
</TABLE>
50
<PAGE> 55
EXHIBIT B
FUNDS ADVISED BY NASL FINANCIAL HAVING SIMILAR
INVESTMENT OBJECTIVES TO GLOBAL EQUITY, VALUE EQUITY, BALANCED,
AND MONEY MARKET FUNDS
<TABLE>
<CAPTION>
NET ASSETS TRUST PORTFOLIO
NASL SERIES AS OF WITH SIMILAR
TRUST INVESTMENT 9/30/96 ADVISORY INVESTMENT
PORTFOLIO OBJECTIVE ($mm) FEE* OBJECTIVE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Global Equity Trust Seeks long-term capital $677.4 0.900% Global Equity
appreciation, by investing Fund
primarily in equity
securities of issuers
throughout the world,
including U.S. issuers.
Value Equity Trust Seeks long-term growth of $540.2 0.800% Value Equity Fund
capital, by investing
primarily in common stocks
and securities convertible
into or carrying the right to
buy common stocks.
Money Market Seeks maximum current $342.0 0.500% Money Market
Trust income consistent with Fund
preservation of principal and
liquidity, by investing in high
quality money market instruments
with maturities of thirteen months
or less issued primarily by United
States entities.
Moderate Asset Seeks the highest total $627.7 0.750% Balanced Fund
Allocation Trust return consistent with a
moderate level of risk tolerance. This
Trust attempts to limit the decline in
portfolio value in very adverse market
conditions to 15% over any twelve month
period.
</TABLE>
51
<PAGE> 56
*Advisory fees for NASL Series Trust (the "NASL Trust") are reduced or
the Adviser reimburses the NASL Trust if the total of all expenses (excluding
advisory fees, taxes, portfolio brokerage commissions, interest, litigation and
indemnification expenses and other extraordinary expenses not incurred in the
ordinary course of the Trust's business) applicable to a portfolio exceeds an
annual rate of .75% in the case of the Global Equity Trust or .50% in the case
of all other portfolios of the average net asset value of such portfolio. The
expense limitations will continue in effect from year to year unless otherwise
terminated at any year end by the Adviser on 30 days' notice to the NASL Trust.
For the NASL Trust's most recent fiscal year, the Adviser did not reimburse the
NASL Trust for any expenses since expenses were below the expense limitations.
52
<PAGE> 57
EXHIBIT C
FUNDS ADVISED BY A SUBADVISER HAVING SIMILAR
INVESTMENT OBJECTIVES TO THE GLOBAL EQUITY, VALUE EQUITY, BALANCED
AND MONEY MARKET FUNDS
Morgan Stanley Asset Management
Morgan Stanley Asset Management manages two investment company
funds with objectives similar to the Global Equity Fund. They are:
<TABLE>
<CAPTION>
==========================================================================================================
Fund Investment Objective Advisory Net Assets
Fee (9/30/96)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Equity Portfolio (a Long-term capital appreciation 0.80% of $ 84,850,857
series of the Morgan Stanley by investing primarily in equity net assets
Institutional Fund, Inc.) securities of issuers throughout
the world, including U.S. issuers
- ----------------------------------------------------------------------------------------------------------
Global Equity Allocation Long-term capital appreciation 1.00% of $145,688,002
Fund (a series of Morgan by investing in equity securities net assets
Stanley Fund, Inc.) of U.S. and non-U.S. issuers
==========================================================================================================
</TABLE>
T. Rowe Price Associates, Inc.
T. Rowe Price Associates, Inc. manages several investment
company funds with objectives similar to proposed investment objective of Value
Equity Fund. They are:
<TABLE>
<CAPTION>
===============================================================================================================
Fund Investment objective Advisory Net Assets (8/31/96)
Fee
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
T. Rowe Price Equity Dividend income and capital 0.25% of net $6,471,000,000
Income Fund growth assets*
- ---------------------------------------------------------------------------------------------------------------
T. Rowe Price Equity Dividend income and capital 0.85% of net $ 60,700,000
Income Portfolio growth assets*
===============================================================================================================
</TABLE>
* For its services to each such investment company, T. Rowe Price is paid a
management fee consisting of two elements: a "group" fee and an "individual"
fund fee. The "group" fee varies based on the combined net assets of certain
funds distributed by T. Rowe Price Investment Services, Inc. or by Rowe Price
Fleming International, Inc. (the "Combined Price Funds"). Each such investment
company pays, as a portion of the "group" fee, an amount equal to the ratio of
its daily net assets to the daily net assets of all the Combined Price Funds.
Each investment company pays a flat "individual" fund fee based on its net
assets. The current "group" fee rate at various asset levels of the Combined
Price Funds is: .480% first $1 billion; .450% next $1 billion; .420% next $1
billion; .390% next $1 billion; .370% next $1 billion; .360% next $2 billion;
.350% next $2 billion; .340% next $5 billion; .330% next $10 billion; .320% next
$10 billion; .310% next $16 billion; and .305% thereafter.
53
<PAGE> 58
T. Rowe Price also acts as investment sub-advisor to several
registered investment companies ("Non-Price Funds") having similar investment
objectives to the proposed investment objectives of the Value Equity Fund. For
this purpose, the Non-Price Funds are mutual funds that are not sponsored by T.
Rowe Price. These investment company funds are:
<TABLE>
<CAPTION>
=====================================================================================================================
Fund Investment Objective Subadvisory Fee Net assets
(8/31/96)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Income Portfolio Dividend income and capital .40% of net assets $ 53,000,000
(a series of the growth
Endeavor Series Trust)
- ---------------------------------------------------------------------------------------------------------------------
Large Cap Value (a Dividend income and capital .50% of net assets $ 10,900,000
series of John Hancock growth
Variable Series Trust 1)
- ---------------------------------------------------------------------------------------------------------------------
Maxim T. Rowe Price Dividend income and capital .50% of the first $20 million $ 33,100,000
Equity/Income (a series growth of net assets, .40% on the
of the Maxim Series next $80 million of net
Trust) assets, .40% on all assets
over $100 million
- ---------------------------------------------------------------------------------------------------------------------
Series O (Equity Income Dividend income and capital .50% of the first $20 million $ 44,500,000
Series) (a series of the growth of net assets, .40% on the
SBL Fund) next $30 million of net
assets, .40% on all assets
over $50 million
- ---------------------------------------------------------------------------------------------------------------------
Growth and Income Growth and income .35% of net assets $116,800,000
Series (a series of the
Security First Trust)
=====================================================================================================================
</TABLE>
Founders Asset Management, Inc.
Founders manages the Founders Balanced Fund, which has an
objective similar to the proposed objective of the Balanced Fund:
<TABLE>
<CAPTION>
==================================================================================================================
Fund Investment objective Advisory Fee Net Assets
(9/30/96)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Founders Balanced Fund Current income and 0.65% of the first $250 million $307,594,305
capital appreciation of net assets, 0.60% on the next
$250 million of net assets;
0.55% of the next $250 million
of net assets; and 0.50% of all
assets over $750 million
==================================================================================================================
</TABLE>
54
<PAGE> 59
Manufacturers Adviser Corp.
Manufacturers Adviser Corp. serves as adviser to the Money
Market Fund of the Manulife Series Fund, Inc. and as subadviser to the Money
Market Trust of the NASL Series Trust, both of which have investment objectives
similar to that of the Trust's Money Market Fund.
<TABLE>
<CAPTION>
===============================================================================================================
Fund Investment Objective Advisory/ Subadvisory Fee Net Assets (9/30/96)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Maximize current income Advisory fee of 0.50% of $44,437,819
Market Fund consistent with preservation net assets
(a series of of principal and liquidity
Manulife
Series Fund,
Inc.)
- ---------------------------------------------------------------------------------------------------------------
Money Maximize current income Subadvisory fee of .075% $341,980,573
Market Trust consistent with preservation of the first $500 million of
(a series of of principal and liquidity net assets; .020% of net
NASL Series assets above $500 million
Trust)
===============================================================================================================
</TABLE>
55
<PAGE> 60
FORM OF PROXY CARD
[NAME OF PORTFOLIO]
North American Funds
116 Huntington Avenue
Boston, MA 02116
This proxy is solicited on behalf of the Board of Trustees of
the North American Funds for the Special Meeting of Shareholders (the "Meeting")
to be held on December 20, 1996. The undersigned hereby appoints James R. Boyle,
John D. DesPrez III, James D. Gallagher, Richard C. Hirtle, Betsy Anne Seel and
Kimberly Ciccarelli, and each of them, attorneys and proxies for the
undersigned, with full power of substitution and revocation to represent the
undersigned and to vote on behalf of the undersigned all shares of the [NAME OF
PORTFOLIO] which the undersigned is entitled to vote at the Meeting to be held
at the offices of North American Funds (116 Huntington Avenue, Boston, MA
02116), on December 20, 1996, at 10:30 a.m., Eastern Standard Time, and at any
adjournments thereof. The undersigned hereby acknowledges receipt of the Notice
of the Special Meeting of Shareholders and accompanying Proxy Statement and
hereby instructs said attorneys and proxies to vote said shares as indicated
hereon. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting. A majority of the proxies
present and acting at the Meeting in person or by substitute (or, if only one
shall be so present, then that one) shall have and may exercise all of the power
and authority of said proxies hereunder. The undersigned hereby revokes any
proxy previously given.
PROPOSAL(S)
Proposal 1 Election of Don B. Allen, Charles L. Bardelis, Samuel Hoar,
Robert J. Myers, John D. Richardson and F. David Rolwing to
serve as members of the Board of Trustees of the Trust.
-INSTRUCTION: To withhold authority to vote for any
individual nominee's name above, strike a line through
the nominee's name.
Proposal 2 Approval of a subadvisory agreement between NASL Financial
Services, Inc. (in such capacity, the "Adviser") and Morgan
Stanley Asset Management Inc. with respect to the Global
Equity Fund. (Only shareholders of the Global Equity Fund will
vote on Proposal 2.)
-A vote "FOR" is a vote for approval
Proposal 3A Approval of an amended subadvisory agreement between the
Adviser and T. Rowe Price Associates Inc. with respect to the
Value Equity Fund. (Only shareholders of the Value Equity Fund
will vote on Proposal 3A.)
-A vote "FOR" is a vote for approval
Proposal 3B Approval of an amendment to the advisory agreement between the
Trust and the Adviser, increasing the advisory fee with
respect to the Value Equity Fund. (Only shareholders of the
Value Equity Fund will vote on Proposal 3B. Proposal 3B will
be presented for action at the Meeting only if the subadvisory
agreement proposed in Proposal 3A is approved at the Meeting.)
-A vote "FOR" is a vote for approval
Proposal 4A Approval of an amended subadvisory agreement between the
Adviser and Founders Asset Management, Inc. with respect to
the Balanced Fund. (Only shareholders of the Balanced Fund
will vote on Proposal 4A.)
-A vote "FOR" is a vote for approval
Proposal 4B Approval of an amendment to the advisory agreement between the
Trust and the Adviser, increasing the advisory fee with
respect to the Balanced Fund. (Only shareholders of the
Balanced Fund will vote on Proposal 4B. Proposal 4B will be
presented for action at the
56
<PAGE> 61
Meeting only if the subadvisory agreement proposed in Proposal
4A is approved at the Meeting.)
-A vote "FOR" is a vote for approval
Proposal 5 Approval of a subadvisory agreement between the Adviser and
Manufacturers Adviser Corporation with respect to the Money
Market Fund. (Only shareholders of the Money Market Fund will
vote on Proposal 5.)
-A vote "FOR" is a vote for approval
Proposal 6 Approval of a change to the investment objective of the Value
Equity Fund. (Only shareholders of the Value Equity Fund will
vote on Proposal 6.)
-A vote "FOR" is a vote for approval
Proposal 7 Approval of a change to the investment objective of the
Balanced Fund. (Only shareholders of the Balanced Fund will
vote on Proposal 7.)
-A vote "FOR" is a vote for approval
Proposal 8 Approval of a proposal to permit the Adviser, in the future,
to select and contract with subadvisers for the Portfolios
after obtaining the approval of the Board of Trustees but
without obtaining shareholder approval.
-A vote "FOR" is a vote for approval
Proposal 9 Ratification of the selection of Coopers & Lybrand L.L.P. as
the independent accountants for the Trust for its fiscal year
ending October 31, 1997.
-A vote "FOR" is a vote for approval
Please indicate your vote by an "X" in the appropriate box
below. This proxy, if properly executed, will be voted in the manner directed by
the shareholder. If no direction is made, this proxy will be voted FOR all
Proposals. Please refer to the Proxy Statement for a discussion of the
Proposals.
- --------------------------------------------------------------------------------
PLEASE SIGN AND DATE THE PROXY CARD, RETURN THE BOTTOM PORTION WITH YOUR VOTE IN
THE ENCLOSED ENVELOPE AND RETAIN THE TOP PORTION. Place the ballot so that the
return address, located on the reverse side of the mail-in-stub, appears through
the window of the envelope.
- --------------------------------------------------------------------------------
[NAME OF PORTFOLIO]
RECORD DATE SHARES ______
Please sign exactly as your name appears on this proxy. If joint owners, EITHER
may sign this proxy. When signing as attorney, executor, administrator, trustee,
guardian or corporate officer, please give your full title.
PROPOSAL(S)
1) ____ FOR ___WITHHELD
2) ____ FOR ___AGAINST _____ABSTAIN
3) ____ FOR ___AGAINST _____ABSTAIN
4) ____ FOR ___AGAINST _____ABSTAIN
5) ____ FOR ___AGAINST _____ABSTAIN
57
<PAGE> 62
6) ____ FOR ___ AGAINST ____ ABSTAIN
7) ____ FOR ___ AGAINST ____ ABSTAIN
8) ____ FOR ___ AGAINST ____ ABSTAIN
9) ____ FOR ___ AGAINST ____ ABSTAIN
Dated::_____________________, 19__
__________________________________
__________________________________
Signature(s) of Shareholders(s)
58
<PAGE> 63
EXHIBIT D
FORM OF ADVISORY AGREEMENT
AGREEMENT made this 1st day of January, 1996, between North American
Funds, a Massachusetts business trust (the "Trust"), and NASL Financial
Services, Inc., a Massachusetts corporation ("NASL Financial" or the "Adviser").
In consideration of the mutual covenants contained herein, the parties agree as
follows:
1. APPOINTMENT OF ADVISER
The Trust hereby appoints NASL Financial, subject to the
supervision of the Trustees of the Trust and the terms of this Agreement, as the
investment adviser for each of the portfolios of the Trust specified in Appendix
A to this Agreement as it shall be amended by the Adviser and the Trust from
time to time (the "Portfolios"). The Adviser accepts such appointment and agrees
to render the services and to assume the obligations set forth in this Agreement
commencing on its effective date. The Adviser will be an independent contractor
and will have no authority to act for or represent the Trust in any way or
otherwise be deemed an agent unless expressly authorized in this Agreement or
another writing by the Trust and Adviser.
2. DUTIES OF THE ADVISER
a. Subject to the general supervision of the Trustees of the
Trust and the terms of this Agreement, the Adviser will at
its own expense select, contract with, and compensate
investment subadvisers ("Subadvisers") to manage the
investments and determine the composition of the assets of
the Portfolios; provided, that any contract with a
Subadviser (the "Subadvisory Agreement") shall be in
compliance with and approved as required by the Investment
Company Act of 1940, as amended ("Investment Company Act").
Subject always to the direction and control of the Trustees
of the Trust, the Adviser will monitor compliance of each
Subadviser with the investment objectives and related
investment policies, as set forth in the Trust's
registration statement as filed with the Securities and
Exchange Commission, of any Portfolio or Portfolios under
the management of such Subadviser, and review and report to
the Trustees of the Trust on the performance of such
Subadviser.
b. The Adviser will oversee the administration of all aspects
of the Trust's business and affairs and in that connection
will furnish to the Trust the following services:
2
<PAGE> 64
(1) Office and Other Facilities. The Adviser shall furnish to the
Trust office space in the offices of the Adviser or in such other
place as may be agreed upon by the parties hereto from time to
time and such other office facilities, utilities and office
equipment as are necessary for the Trust's operations.
(2) Trustees and Officers. The Adviser agrees to permit individuals
who are directors, officers or employees of the Adviser to serve
(if duly elected or appointed) as Trustees or President, Vice
President, Treasurer or Secretary of the Trust, without
remuneration from or other cost to the Trust.
(3) Other Personnel. The Adviser shall furnish to the Trust, at the
Trust's expense, any other personnel necessary for the operations
of the Trust.
(4) Financial, Accounting, and Administrative Services. The Adviser
shall maintain the existence and records of the Trust; maintain
the registrations and qualifications of Trust shares under federal
and state law; and perform all administrative, financial,
accounting, bookkeeping and recordkeeping functions of the Trust
except for any such functions that may be performed by a third
party pursuant to a custodian, transfer agency or service
agreement executed by the Trust. The Trust shall reimburse the
Adviser for its expenses associated with all such services,
including the compensation and related personnel expenses and
expenses of office space, office equipment, utilities and
miscellaneous office expenses, except any such expenses directly
attributable to officers or employees of the Adviser who are
serving as President, Vice President, Treasurer or Secretary of
the Trust. The Adviser shall determine the expenses to be
reimbursed by the Trust pursuant to expense allocation procedures
established by the Adviser in accordance with generally accepted
accounting principles.
(5) Liaisons with Agents. The Adviser, at its own expense, shall
maintain liaison with the various agents and other persons
employed by the Trust (including the Trust's transfer agent,
custodian, independent accountants and legal counsel) and assist
in the coordination of their activities on behalf of the Trust.
Fees and expenses of such agents and other persons will be paid by
the Trust.
(6) Reports to Trust. The Adviser shall furnish to or place at the
disposal of the Trust such information, reports, valuations,
analyses and opinions as the Trust may, at any time or from time
to time, reasonably request or as the Adviser may deem helpful to
the
<PAGE> 65
3
Trust, provided that the expenses associated with any such
materials furnished by the Adviser at the request of the Trust
shall be borne by the Trust.
(7) Reports and Other Communications to Trust Shareholders.
The Adviser shall assist the Trust in developing (but
not pay for) all general shareholder communications
including regular shareholder reports.
3. EXPENSES ASSUMED BY THE TRUST
In addition to paying the advisory fee provided for in Section
5., the Trust will pay all expenses of its organization, operations and business
not specifically assumed or agreed to be paid by the Adviser as provided in this
Agreement, by a Subadviser as provided in a Subadvisory Agreement, or by the
Distributor as provided in the Distribution Agreement. Without limiting the
generality of the foregoing, the Trust, in addition to certain expenses
described in Section 2. above, shall pay or arrange for the payment of the
following:
a. Custody and Accounting Services. All expenses of the transfer, receipt,
safekeeping, servicing and accounting for the Trust's cash, securities,
and other property, including all charges of depositories, custodians
and other agents, if any;
b. Shareholder Servicing. All expenses of maintaining and servicing
shareholder accounts, including all charges of the Trust's transfer,
shareholder recordkeeping, dividend disbursing, redemption, and other
agents, if any;
c. Shareholder Communications. All expenses of preparing, setting in type,
printing, and distributing reports and other communications to
shareholders;
d. Shareholder Meetings. All expenses incidental to holding meetings of
Trust shareholders, including the printing of notices and proxy
material, and proxy solicitation therefor;
e. Prospectuses. All expenses of preparing, setting in type, and printing
of annual or more frequent revisions of the Trust's prospectus and
statement of additional information and any supplements thereto and of
mailing them to shareholders;
f. Pricing. All expenses of computing the net asset value per share for
each of the Portfolios, including the cost of any equipment or services
used for obtaining price quotations and valuing its investment
portfolio;
g. Communication Equipment. All charges for equipment or services used for
communication between the Adviser or the
<PAGE> 66
4
Trust and the custodian, transfer agent or any other agent
selected by the Trust;
h. Legal and Accounting Fees and Expenses. All charges for services and
expenses of the Trust's legal counsel and independent auditors;
i. Trustees and Officers. Except as expressly provided otherwise in
paragraph 2.b.(2), all compensation of Trustees and officers, all
expenses incurred in connection with the service of Trustees and
officers, and all expenses of meetings of the Trustees and Committees
of Trustees;
j. Federal Registration Fees. All fees and expenses of registering and
maintaining the registration of the Trust under the Investment Company
Act and the registration of the Trust's shares under the Securities Act
of 1933, as amended (the "1933 Act"), including all fees and expenses
incurred in connection with the preparation, setting in type, printing
and filing of any registration statement and prospectus under the 1933
Act or the Investment Company Act, and any amendments or supplements
that may be made from time to time;
k. State Registration Fees. All fees and expenses of qualifying and
maintaining qualification of the Trust and of the Trust's shares for
sale under securities laws of various states or jurisdictions, and of
registration and qualification of the Trust under all other laws
applicable to the Trust or its business activities (including
registering the Trust as a broker-dealer, or any officer of the Trust
or any person as agent or salesman of the Trust in any state);
l. Issue and Redemption of Trust Shares. All expenses incurred in
connection with the issue, redemption, and transfer of Trust shares,
including the expense of confirming all share transactions, and of
preparing and transmitting certificates for shares of beneficial
interest in the Trust;
m. Bonding and Insurance. All expenses of bond, liability and other
insurance coverage required by law or regulation or deemed advisable by
the Trust's Trustees including, without limitation, such bond,
liability and other insurance expense that may from time to time be
allocated to the Trust in a manner approved by its Trustees;
n. Brokerage Commissions. All brokers' commissions and other charges
incident to the purchase, sale, or lending of the Trust's portfolio
securities;
o. Taxes. All taxes or governmental fees payable by or with respect to the
Trust to federal, state, or other governmental agencies, domestic or
foreign, including stamp
<PAGE> 67
5
or other transfer taxes, and all expenses incurred in the
preparation of tax returns;
p. Trade Association Fees. All fees, dues, and other expenses incurred in
connection with the Trust's membership in any trade association or
other investment organization; and
q. Nonrecurring and Extraordinary Expenses. Such nonrecurring expenses as
may arise, including the costs of actions, suits, or proceedings to
which the Trust is, or is threatened to be made, a party and the
expenses the Trust may incur as a result of its legal obligation to
provide indemnification to its Trustees, officers, agents and
shareholders.
4. EXPENSE LIMITATION
a. For purposes of this section the following definitions shall apply:
(1) "Computation Period" means the portion of the current fiscal year
ended on the date as of which a determination is being made
whether the Adviser's compensation should be reduced or it should
reimburse the Trust because of the Limitation Expenses of a
Portfolio.
(2) "Regulatory Limit" means the limitation on investment company
expenses during a Computation Period imposed by any statute or
regulatory authority of any jurisdiction in which shares of a
Portfolio are qualified for offer and sale.
(3) "Fixed Limit" means the percent, specified in Appendix B to this
Agreement, on an annualized basis of the average net asset value
of a portfolio during a Computation Period.
(4) "Expense Limit" means either the Regulatory Limit or Fixed Limit
or both, as applicable.
(5) "Limitation Expenses," with respect to the Regulatory Limit, means
all the expenses of a Portfolio incurred during a Computation
Period excluding all expenses the exclusion of which may be
permitted by the Regulatory Limit and, with respect to the Fixed
Limit, means all the expenses of a Portfolio incurred during a
Computation Period excluding: (i) taxes, (ii) portfolio brokerage
commissions, (iii) interest, (iv) distribution expenses, and (v)
litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of the Trust's
business.
<PAGE> 68
6
(6) "Excess Amount" means the amount, if any by which a Portfolio's
Limitation Expenses for a specified period exceed the amount of
the applicable Expense Limit for the same period. Where there is
an Excess Amount with respect to both the Regulatory Limit and the
Fixed Limit, Excess Amount means the greater of the two.
(7) "Maximum Advisory Compensation" means the total amount of the
compensation payable pursuant to section 5. of this Agreement to
the Adviser with respect to a Portfolio for a specified period
without any adjustment for an Excess Amount.
(8) "Current Advisory Compensation" means the amount of the
compensation payable pursuant to section 5. of this Agreement to
the Adviser with respect to a Portfolio for the last calendar
month of a Computation Period without any adjustment for an Excess
Amount.
b. If in any fiscal year there is an Excess Amount with respect to a
Portfolio, the Maximum Advisory Compensation due the Adviser under this
Agreement with respect to that Portfolio shall be reduced by such
Excess Amount, and the Adviser shall reimburse the Trust for any
portion of the Excess Amount that exceeds the Maximum Advisory
Compensation.
c. The amount of the reduction and reimbursement referred to in paragraph
b. shall be determined as follows:
(i) For each calendar day, each Portfolio shall adjust the amount of
its daily accrual for the Maximum Advisory Compensation to make
the net amount of the compensation actually paid and accrued for
payment by the Trust to the Adviser with respect to the Portfolio
for the Computation Period then ended equal to the amount
determined by subtracting the Excess Amount for the Computation
Period from the Maximum Advisory Compensation for the Computation
Period, or if such Excess Amount exceeds such Maximum Advisory
Compensation, to make the net amount of the reimbursement actually
paid and accrued for payment by the Adviser to the Trust equal to
the amount of such excess.
(ii) Each month, the Trust shall reduce the amount of the Current
Advisory Compensation, or it shall accompany the payment of the
Current Advisory Compensation with an additional payment, or the
Adviser shall remit an amount to the Trust, which reduction,
additional payment or remittance shall be sufficient in amount, to
make the net amount of the compensation actually paid by the Trust
to the Adviser with respect to the
<PAGE> 69
7
Portfolio for the Computation Period ended as of the last day of
such month equal to the amount determined by subtracting the
Excess Amount for the Computation Period from the Maximum
Advisory Compensation for the Computation Period, or if such
Excess Amount exceeds such Maximum Advisory Compensation, to make
the net amount of the reimbursement actually paid by the Adviser
to the Trust equal to the amount of such excess.
(iii) If the Excess Amount for a fiscal year should exceed the amount
of the Maximum Advisory Compensation for the fiscal year, the
excess shall be treated as a contribution to the capital of the
Trust by the Adviser to the extent necessary to permit the
Portfolio to maintain its status as a regulated investment
company under Subchapter M of the Internal Revenue Code.
d. The provisions of section 4 of the Agreement shall continue in effect
unless terminated by the Adviser on 30 days' written notice; provided
that if the Advisory Agreement or a Subadvisory Agreement with respect
to a portfolio is earlier terminated, the provisions of section 4 shall
terminate on the effective date of such termination, but only with
respect to the Portfolio or Portfolios as to which the Advisory
Agreement or Subadvisory Agreement is terminated. Any termination shall
be subject to the settlement of obligations previously incurred
pursuant to section 4 of this Agreement, with the Computation Period
ending on the effective date of such termination being deemed to be a
fiscal year for purposes of paragraphs b and c (iii) of section 4. For
purposes of this provision, a termination shall not be deemed to have
occurred with respect to a Portfolio if the termination of a
Subadvisory Agreement is conditioned upon the effectiveness of another
Subadvisory Agreement with respect to the same Portfolio.
5. COMPENSATION OF ADVISER
Subject to the provisions of section 4. of this Agreement, the Trust
will pay the Adviser with respect to each Portfolio the compensation specified
in Appendix A of this Agreement.
6. NON-EXCLUSIVITY
The services of the Adviser to the Trust are not to be deemed to be
exclusive, and the Adviser shall be free to render investment advisory or other
services to others (including other investment companies) and to engage in other
activities. It is understood and agreed that the directors, officers, and
employees of the Adviser are not prohibited from engaging in any other
<PAGE> 70
8
business activity or from rendering services to any other person, or from
serving as partners, officers, directors, trustees or employees of any other
firm or corporation, including other investment companies.
7. SUPPLEMENTAL ARRANGEMENTS
The Adviser may enter into arrangements with other persons
affiliated with the Adviser to better enable it to fulfill its obligations under
this Agreement for the provision of certain personnel and facilities to the
Adviser.
8. CONFLICTS OF INTEREST
It is understood that Trustees, officers, agents and
shareholders of the Trust are or may be interested in the Adviser as directors,
officers, stockholders, or otherwise; that directors, officers, agents and
stockholders of the Adviser are or may be interested in the Trust as Trustees,
officers, shareholders or otherwise; that the Adviser 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 Articles of
Incorporation of the Adviser, respectively, or by specific provision of
applicable law.
9. REGULATION
The Adviser 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.
10. DURATION AND TERMINATION OF AGREEMENT
This Agreement shall become effective on the later of its
execution, the effective date of the Trust's registration statement under the
Securities Act of 1933 or the date of the meeting of the shareholders of the
Trust, 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
each of the Portfolios. 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 the vote of a majority of the outstanding voting securities of each of the
Portfolios, 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
<PAGE> 71
9
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
Portfolio 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
Portfolio 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 Portfolio affected by the
Agreement or (b) all the Portfolios of the Trust.
If the shareholders of any Portfolio fail to approve the
Agreement or any continuance of the Agreement, the Adviser will continue to act
as investment adviser with respect to such Portfolio pending the required
approval of the Agreement or its continuance or of a new contract with the
Adviser or a different adviser or other definitive action; provided, that the
compensation received by the Adviser in respect of such Portfolio during such
period will be no more than its actual costs incurred in furnishing investment
advisory and management services to such Portfolio or the amount it would have
received under the Agreement in respect of such Portfolio, 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
Portfolio by the vote of a majority of the outstanding voting securities of such
Portfolio, on sixty days' written notice to the Adviser, or by the Adviser on
sixty days' written notice to the Trust. This Agreement will automatically
terminate, without the payment of any penalty, in the event of its assignment
(as defined in the Investment Company Act).
11. PROVISION OF CERTAIN INFORMATION BY ADVISER
The Adviser will promptly notify the Trust in writing of the
occurrence of any of the following events:
a. the Adviser fails to be registered as an investment
adviser under the Investment Advisers Act or under the
laws of any jurisdiction in which the Adviser is
required to be registered as an investment adviser in
order to perform its obligations under this Agreement;
b. the Adviser 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. the chief executive officer or controlling stockholder
of the Adviser or the portfolio manager of any
Portfolio changes.
<PAGE> 72
10
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 Portfolios 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 Portfolio if a majority of the outstanding voting
securities of the series of shares of that Portfolio 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 Portfolio
affected by the amendment or (b) all the Portfolios 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
Adviser 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 section.
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.
<PAGE> 73
11
18. LIMITATION OF LIABILITY
The Declaration of Trust establishing the Trust, dated
September 29, 1988, as amended and restated 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 Security Trust" [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.
[SEAL] North American Funds
By:________________________________
Joseph Scott, President
[SEAL] NASL Financial Services, Inc.
By:________________________________
<PAGE> 74
12
APPENDIX A
1. Value Equity Fund: .725% of the first $50,000,000, .675% between
$50,000,000 and $200,000,000, .625% between $200,000,000 and $500,000,000
and .55% on the excess over $500,000,000 of the current net assets of the
Portfolio.
2. Asset Allocation Fund: .725% of the first $50,000,000, .675% between
$50,000,000 and $200,000,000, .625% between $200,000,000 and $500,000,000
and .55% on the excess over $500,000,000 of the current net assets of the
Portfolio.
3. Money Market Fund: .20% of the first $50 million, .20% between $50,000,000
and $200,000,000, .20% between $200,000,000 and $500,000,000 and .145% on
the excess over $500,000,000 of the current net assets of the Portfolio.
4. Global Growth Fund: .90% of the first $50 million, .90% between
$50,000,000 and $200,000,000, .70% between $200,000,000 and $500,000,000
and .70% on the excess over $500,000,000 of the current net assets of the
Portfolio.
The Percentage Fee for each Portfolio shall be accrued for
each calendar day and the sum of the daily fee accruals shall be payable monthly
to the Adviser. 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 Portfolio as determined in accordance with the Fund's
prospectus and statement of additional information as of the close of business
on the previous business day on which the Fund was open for business.
If this Agreement becomes effective or terminates before the
end of any month, the fee 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.
<PAGE> 75
13
APPENDIX B
The Fixed Limit for each Portfolio for purposes of paragraph
4.a.(3) shall be:
PORTFOLIO PERCENT
- --------- -------
Money Market Fund .50%
Value Equity Fund .99%
Asset Allocation Fund .99%
Global Growth Fund 1.40%
<PAGE> 76
14
FORM OF AMENDMENT TO ADVISORY AGREEMENT
AMENDMENT made this 1st day of January, 1997, to the Advisory
Agreement dated January 1, 1996 between The North American Funds, a
Massachusetts business trust (the "Trust") and NASL Financial Services, Inc., a
Massachusetts corporation ("NASL Financial" or the "Adviser"). In consideration
of the mutual covenants contained herein, the parties agree as follows:
1. CHANGE IN APPENDIX A
Appendix A to this Agreement is revised to reflect the amended advisory
fees of NASL Financial for the portfolios (the "Portfolios") set forth
in Appendix A to this Amendment.
2. CHANGE IN APPENDIX B
Appendix B to this Agreement is revised to reflect the amended Fixed
Limits for the Portfolios set forth in Appendix B to this Amendment.
3. EFFECTIVE DATE
This Amendment shall become effective with respect to each Portfolio on
the later of (i) the date of its execution, (ii) the effective date of
the post-effective amendment to the registration statement of the North
American Funds under the Securities Act of 1933 that incorporates with
respect to the Portfolio the terms of the Agreement as amended herein
and (iii) the date of the meeting of shareholders (or sole shareholder
if applicable) of the Portfolio called for the purpose of voting on
this Amendment, at which meeting this Amendment shall have been
approved by the vote of a majority of the outstanding voting securities
(as defined in the Investment Company Act of 1940, as amended) of the
Portfolio.
North American Funds
BY:_________________________
NASL Financial Services, Inc.
BY:_________________________
<PAGE> 77
15
APPENDIX A
1. Equity-Income Fund (formerly the Value Equity Fund): .800% of the first
$50,000,000 .700% between $50,000,000 and $200,000,000 and .600%
between $200,000,000 and $500,000,000 and .600% of the excess over
$500,000,000 of the current net assets of the Portfolio.
2. Balanced Fund (formerly the Asset Allocation Fund): .775% of
the first $50,000,000, .725% between $50,000,000 and
$200,000,000, .675% between $200,000,000 and $500,000,000
and .625% on the excess over $500,000,000 of the current net
assets of the Portfolio.
The Percentage Fee for each Portfolio shall be accrued for
each calendar day and the sum of the daily fee accruals shall be payable monthly
to the Adviser. The daily fee access 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 Portfolio as determined in accordance with the Fund's
prospectus and statement of additional information as of the close of business
on the previous business day on which the Fund was open for business.
If this Agreement becomes effective or terminates before the
end of any month, the fee 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.
<PAGE> 78
16
APPENDIX B
The Fixed Limit for each Portfolio for purposes of paragraph 4.a.(3)
shall be:
Portfolio Percent
- --------- -------
1. Equity-Income Fund 1.065%
(formerly Value Equity Fund)
2. Balanced Fund 1.040%
(formerly the Asset Allocation Fund)
<PAGE> 79
EXHIBIT E
FORM OF SUBADVISORY AGREEMENT(1)
AGREEMENT made this 1st day of October, 1996,(2) [as amended
January 1, 1997,](3) between NASL Financial Services, Inc., a Massachusetts
corporation ("NASL Financial" or the "Adviser"), and _______________________
(the "Subadviser")(4). 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 Portfolios specified in Appendix A to this
Agreement as it shall be amended by the Adviser and the Subadviser from time to
time (the "Portfolios"). 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 Portfolios in accordance with the
Portfolios' registration statement, as amended. In fulfilling its
obligations to manage the investments and reinvestments of the assets
of the Portfolios, the Subadviser will:
- --------
(1) This form of subadvisory agreement is a composite of four separate
subadvisory agreements which have been combined for purposes of presentation.
(2) A Subadvisory Agreement between the Adviser and Founders Asset Management,
Inc. ("Founders") was originally executed on January 4, 1996. It was amended on
October 1, 1996 to include management of the Balanced Fund. This Form reflects
that Agreement as so amended.
(3) Bracketed clause applies for T. Rowe Price Associates, Inc. ("T. Rowe
Price") and Founders agreements only.
(4) Morgan Stanley Asset Management Inc. ("Morgan Stanley"), a Delaware
Corporation; T. Rowe Price Associates, Inc., a Maryland Corporation; Founders, a
Delaware Corporation; or Manufacturers Adviser Corp. ("MAC"), a Colorado
Corporation.
<PAGE> 80
2
i. obtain and evaluate pertinent economic, statistical, financial
and other information affecting the [economy generally and](5)
individual companies or industries the securities of which are
included in the Portfolios or are under consideration for
inclusion in the Portfolios;
ii. formulate and implement a continuous investment program for
each Portfolio consistent with the investment objectives and
related investment policies for each such Portfolio 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; and
v. provide [determinations, in accordance with procedures and
methods established by the Trustees of the Trust, of](6) the
fair value of securities held by the Portfolios for which
market quotations are not readily available [for purposes of
enabling the Trust's Custodian to calculate net asset value]
(7).
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 Portfolios (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
- --------
(5) Founders agreement omits the bracketed clause.
(6) T. Rowe Price agreement substitutes "assistance to the Trust's Custodian
regarding" for the bracketed clause; Founders agreement replaces first word in
brackets with "recommendations".
(7) T. Rowe Price agreement omits the bracketed clause.
<PAGE> 81
3
applicable. The Subadviser is directed at all times to seek to execute
brokerage transactions for the Portfolios 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(8) 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.
[In accordance with Section II (a) of the Securities Exchange Act of
1934, as amended and Rule 11a2-2(T) thereunder, and subject to any
other applicable laws and regulations including Section 17(e) of the
Investment Company Act of 1940 (the "1940 Act") and Rule 17e-1
thereunder, the Subadviser may engage its affiliates as broker-dealers
to effect portfolio transactions in securities for the Portfolios.](9)
[d. On occasions when the Subadviser deems the purchase or sale of a
security to be in the best interest of the Portfolio 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 brokerage commissions and efficient
execution. In such event, allocation of the securities so purchased and
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
Portfolio and to its other clients.](10)
- --------
(8) T. Rowe Price, Founders, and MAC agreements add "services" where indicated.
(9) Bracketed sentence contained only in Morgan Stanley agreement.
(10) Bracketed paragraph contained only in T. Rowe Price agreement.
<PAGE> 82
4
d. The Subadviser will maintain all accounts, books and records with
respect to the Portfolios(11) as are required of an investment adviser
of a registered investment company pursuant to the Investment Company
Act of 1940 (the "Investment Company Act") and Investment Advisers Act
of 1940 (the "Investment Advisers Act") and the rules thereunder.
3. COMPENSATION OF SUBADVISER
The Adviser will pay the Subadviser with respect to each
Portfolio the compensation specified in Appendix A to this Agreement.
4. LIABILITY OF SUBADVISER
Neither the Subadviser nor any of its [affiliates, officers,
partners or](12) employees [nor anyone who controls the Subadviser (or any of
its affiliates, officers, partners or employees) within the meaning of Section
15 of the Securities Act of 1933 (the "1933 Act")](13) 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 Portfolio 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
[affiliates,](14) partners or employees; and neither the Subadviser nor any of
its [affiliates, officers, partners or](15) employees[, nor anyone who controls
the Subadviser (or any of its affiliates, officers, partners or employees)
within the meaning of Section 15 of the 1933 Act](16) 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
- --------
(11) Founders agreements adds "in connection with the Subadviser's provision of
services under this Agreement" where indicated.
(12) T. Rowe Price agreement omits the bracketed clause; Founders agreement
omits "affiliates" and "officers"; MAC agreement omits "affiliates" and
"partners".
(13) Bracketed clause contained only in Morgan Stanley agreement.
(14) T. Rowe Price, Founders, and MAC agreements omit bracketed clause.
(15) T. Rowe Price agreement omits bracketed clause; Founders agreement omits
"affiliates" and "officers"; MAC agreement omits "affiliates" and "partners".
(16) Bracketed clause contained only in Morgan Stanley agreement.
<PAGE> 83
5
Agreement), except for losses resulting from willful misfeasance, bad faith, or
[gross](17) negligence in the performance of, or from disregard of, the duties
of the Subadviser or any of its [affiliates, partners](18) or employees.
5. SUPPLEMENTAL(19) 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.
[The services of the Subadviser to the Trust are not to be
deemed to be exclusive, the Subadviser and any person controlled by or under
common control with the Subadviser being free to render investment advisory and
other services to any other person or entity.](20)
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](21) 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.
- --------
(17) Founders agreement omits bracketed clause.
(18) T. Rowe Price and Founders agreements omit "affiliates"; MAC agreement
substitutes "officers" for the bracketed clause.
(19) Founders agreement adds "AND OTHER" where indicated.
(20) Bracketed paragraph contained only in Founders agreement.
(21) MAC agreement omits bracketed clause.
<PAGE> 84
6
8. DURATION AND TERMINATION OF AGREEMENT
This Agreement shall become effective with respect to each
Portfolio on the later of [(i)](22) its execution, [(ii)](23) the effective date
of the registration statement of the Portfolio and [(iii) with respect to each
Portfolio except the ________(24) Portfolio(25),](26) the date of the meeting of
the shareholders of the Portfolio, 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 Portfolio. 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 Portfolios, 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 Portfolio 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 Portfolio
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 Portfolio affected by the
Agreement or (b) all the portfolios of the Trust.
If the shareholders of any Portfolio fail to approve the
Agreement or any continuance of the Agreement [that is submitted to shareholders
for approval](27), the Subadviser will continue to act as investment subadviser
with respect to such Portfolio pending the required approval of the Agreement or
its continuance or of any contract with the Subadviser or a different
- --------
(22) Founders agreement omits the bracketed clause.
(23) Founders agreement omits the bracketed clause.
(24) Morgan Stanley agreement adds "Global Equity" where indicated; T. Rowe
Price agreement adds "Value Equity" where indicated; MAC agreement adds "Money
Market" where indicated.
(25) Morgan Stanley agreement adds "(formerly the Global Growth Portfolio)"
where indicated.
(26) Founders agreement omits the bracketed clause.
(27) T. Rowe Price, Founders, and MAC agreements omit the bracketed clause.
<PAGE> 85
7
adviser or subadviser or other definitive action; provided, that the
compensation received by the Subadviser in respect of such Portfolio 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
Portfolio by the vote of a majority of the outstanding voting securities of such
Portfolio, 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 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](28)
c. [any change in actual control or management of the
Subadviser or](29) the portfolio manager of any
Portfolio(30).
[10. PROVISION OF CERTAIN INFORMATION BY THE ADVISER
- --------
(28) Morgan Stanley agreement omits the bracketed clause.
(29) Morgan Stanley agreement substitutes "there is a change of control of the
Subadviser which constitutes an assignment of this Agreement under the 1940 Act;
d." for the bracketed clause; Founders agreement substitutes "the managing
general partner or controlling partner of the Subadviser or" for the bracketed
clause.
(30) Morgan Stanley and Founders agreements add "changes" where indicated.
<PAGE> 86
8
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 understand, 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 Portfolio. 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."](31)
10.(32) 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 Portfolios 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 Portfolio if a majority of the outstanding voting
securities of that Portfolio 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 Portfolio affected by the amendment or (b) all the
portfolios of the Trust.
[11. ENTIRE AGREEMENT
- --------
(31) Bracketed paragraphs contained only in T. Rowe Price agreement.
(32) Note: for T. Rowe Price agreement, paragraphs 10 to 16 are renumbered 12 to
18 due to the insertion of the two additional paragraphs above.
<PAGE> 87
9
This Agreement contains the entire understanding and
agreement of the parties.](33)
12.(34) HEADINGS
The headings in the sections of this Agreement are inserted
for convenience of reference only and shall not constitute a part hereof.
13. 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.
14. 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.
15. 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.
16. 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
- --------
(33) Morgan Stanley agreement omits the bracketed clause.
(34) Note: for Morgan Stanley agreement, paragraphs 12 to 16 are numbered 11 to
15 due to the deletion of previous paragraph.
<PAGE> 88
10
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.
[SEAL] NASL Financial Services, Inc.
by:________________________________
[SEAL] [Subadviser](35)
by:________________________________
- --------
(35) Morgan Stanley Asset Management Inc.;
T. Rowe Price Associates, Inc.;
Founders Asset Management, Inc.;
or Manufacturers Adviser Corporation.
<PAGE> 89
11
APPENDIX A
The Subadviser shall serve as investment subadviser for the
following portfolio 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 Portfolio at an annual rate as follows (the "Subadviser
Percentage Fee"):
MORGAN STANLEY ASSET MANAGEMENT INC.;
Global Equity Portfolio: .500% of the first $50,000,000, .450%
between $50,000,000 and $200,000,000, .375% between
$200,000,000 and $500,000,000 and .325% on the excess over
$500,000,000 of the current value of the net assets of the
Portfolio;
T. ROWE PRICE ASSOCIATES, INC.;
Equity-Income Portfolio (formerly the Value Equity Portfolio):
.400% of the first $50,000,000, .300% between $50,000,000 and
$200,000,000, .200% between $200,000,000 and $500,000,000 and
.200% on the excess over $500,000,000 of the current value of
the net assets of the Portfolio;
FOUNDERS ASSET MANAGEMENT, INC.; OR
Balanced Portfolio: .375% of the first $50,000,000, .325%
between $50,000,000 and $200,000,000, .275% between
$200,000,000 and $500,000,000 and .225% on the excess over
$500,000,000 of the average daily value of the net assets of
the Portfolio.
MANUFACTURERS ADVISER CORPORATION
Money Market Portfolio: .075% of the first $50,000,000, .075%
between $50,000,000 and $200,000,000, .075% between
$200,000,000 and $500,000,000 and .020% on the excess over
$500,000,000 of the current value of the net assets of the
Portfolio;
The Subadviser Percentage Fee for each Portfolio 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 Portfolio 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.
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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.
