<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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by
Rule 14a-6(e)(2))
[X] 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
NORTH AMERICAN FUNDS
116 Huntington Avenue
Boston, MA 02116
November 13, 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 (prior to October 1,
1996, known as the Global Growth Fund), the Value Equity Fund, the Balanced Fund
(prior to October 1, 1996, known as 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 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.
<PAGE> 3
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,
/s/ Joseph Scott
-------------------------
Joseph Scott
President
North American Funds
<PAGE> 4
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:
<TABLE>
<S> <C>
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.)
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
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.)
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.
</TABLE>
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
<PAGE> 6
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,
/s/ James D. Gallagher
---------------------------
James D. Gallagher
Secretary
November 13, 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> 7
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 13, 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 known as the Global Growth Fund), the Value Equity Fund, the Growth
and Income Fund, the International Growth and Income Fund, the Balanced Fund
(formerly known as 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........................ 1,383,670.785 shares
International Small Cap Fund.............. 928,934.778 shares
Growth Equity Fund........................ 933,539.688 shares
Global Equity Fund........................ 8,123,883.297 shares
Value Equity Fund......................... 8,061,267.168 shares
Growth and Income Fund.................... 7,291,250.898 shares
International Growth and Income Fund...... 2,560,131.026 shares
Balanced Fund............................. 8,113,824.397 shares
Strategic Income Fund..................... 6,752,695.191 shares
Investment Quality Bond Fund.............. 2,060,316.281 shares
U.S. Government Securities Fund........... 11,475,569.484 shares
National Municipal Bond Fund.............. 1,987,697.908 shares
Money Market Fund......................... 19,527,440.841 shares
</TABLE>
1
<PAGE> 8
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 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 10:30 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
2
<PAGE> 9
election of Trustees, abstentions and broker non-votes do not affect the
plurality vote required for Trustees.
As used herein, a "Majority Vote" of a Portfolio or the Trust means the
affirmative vote of the lesser of (1) more than 50% of the outstanding shares of
the Portfolio or Trust, as applicable, or (2) 67% or more of the shares of the
Portfolio or Trust, as applicable, present at the Meeting or represented by
proxy if more than 50% of the outstanding shares of the Portfolio or Trust, as
applicable, are represented at the Meeting in person or by proxy.
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.
3
<PAGE> 10
SUMMARY OF PROPOSALS
<TABLE>
<CAPTION>
PROPOSAL SHAREHOLDERS OF THE TRUST WHO WILL
NUMBER PROPOSAL VOTE ON THE PROPOSAL
- ------------- ---------------------------------- ----------------------------------
<C> <S> <C>
Proposal 1 Election of six Trustees to serve All shareholders of the Trust will
as members of the Board vote on this proposal
Proposal 2 Approval of a subadvisory Shareholders of the Global Equity
agreement between the Adviser and Fund will vote on this proposal
Morgan Stanley Asset Management
Inc. with respect to the Global
Equity Fund
Proposal 3A Approval of an amended subadvisory Shareholders of the Value Equity
agreement between the Adviser and Fund will vote on this proposal
T. Rowe Price Associates, Inc.
with respect to the Value Equity
Fund
Proposal 3B Approval of an amendment to the Shareholders of the Value Equity
advisory agreement between the Fund will vote on this proposal.
Trust and the Adviser, increasing Proposal 3B will be presented for
the advisory fee with respect to action at the Meeting only if the
the Value Equity Fund subadvisory agreement proposed in
Proposal 3A is approved at the
Meeting
Proposal 4A Approval of an amended subadvisory Shareholders of the Balanced Fund
agreement between the Adviser and will vote on this proposal
Founders Asset Management, Inc.
with respect to the Balanced Fund
Proposal 4B Approval of an amendment to the Shareholders of the Balanced Fund
advisory agreement between the will vote on this proposal.
Trust and the Adviser, increasing Proposal 4B will be presented for
the advisory fee with respect to action at the Meeting only if the
the Balanced Fund subadvisory agreement proposed in
Proposal 4A is approved at the
Meeting
Proposal 5 Approval of a subadvisory Shareholders of the Money Market
agreement between the Adviser and Fund will vote on this proposal
Manufacturers Adviser Corporation
with respect to the Money Market
Fund
Proposal 6 Approval of a change to the Shareholders of the Value Equity
investment objective of the Value Fund will vote on this proposal
Equity Fund
Proposal 7 Approval of a change to the Shareholders of the Balanced Fund
investment objective of the will vote on this proposal
Balanced Fund
Proposal 8 Approval of a proposal to permit Shareholders of the Trust will
the Adviser, in the future, to vote together, and shareholders of
select and contract with each Portfolio will vote
subadvisers for the Portfolios separately, on this proposal
after obtaining the approval of
the Board but without obtaining
shareholder approval
Proposal 9 Ratification of selection of All shareholders of the Trust will
Coopers & Lybrand L.L.P. as vote on this proposal
independent accountants for the
Trust for its fiscal year ending
October 31, 1997
</TABLE>
4
<PAGE> 11
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.
5
<PAGE> 12
<TABLE>
<CAPTION>
YEAR FIRST PRINCIPLE OCCUPATIONS
BECAME A AND DIRECTORSHIPS
NAME AND POSITION WITH TRUST AGE TRUSTEE DURING THE LAST FIVE YEARS
- ---------------------------- --- ----------- ---------------------------
<S> <C> <C> <C>
DON B. ALLEN, 68 1988 Mr. Allen is a Senior
Trustee and Nominee Lecturer at University of
Rochester -- William Simon
Graduate School of Business
Administration.
CHARLES L. BARDELIS, 55 1988 Mr. Bardelis is the
Trustee and Nominee President and Chief
Executive 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
Trustee and Nominee Mediator at Judicial
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.
BRIAN L. MOORE*, 52 1988 Since January 1, 1996, Mr.
Chairman of the Board of Moore has served as the
Trustees Executive Vice President,
Canadian Insurance
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
Trustee and Nominee Scudder AARP Investment
Funds and a member of the
Prospective Payment
Assessment Commission. He
is also a self-employed
actuarial consultant.
</TABLE>
6
<PAGE> 13
<TABLE>
<CAPTION>
YEAR FIRST PRINCIPLE OCCUPATIONS
BECAME A AND DIRECTORSHIPS
NAME AND POSITION WITH TRUST AGE TRUSTEE DURING THE LAST FIVE YEARS
- ---------------------------- --- ----------- ---------------------------
<S> <C> <C> <C>
JOHN D. RICHARDSON*, 58 Not Mr. Richardson is currently
Nominee Applicable the Senior Vice 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.
F. DAVID ROLWING, 62 Not Mr. Rolwing is the
Nominee Applicable President, Chairman and CEO
of Montgomery Mutual
Insurance Company. He is
also a Director of Manulife
Series Fund, Inc. an
investment company advised
by Manufacturers Adviser
Corporation, an affiliate
of NASL Financial.
</TABLE>
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.
7
<PAGE> 14
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>
PENSION OR TOTAL
AGGREGATE RETIREMENT COMPENSATION
COMPENSATION BENEFITS ESTIMATED FROM TRUST
FROM TRUST FOR ACCRUED ANNUAL COMPLEX FOR
YEAR ENDED AS PART OF BENEFITS YEAR ENDED
OCTOBER 31, TRUST UPON OCTOBER 31,
NAME OF PERSON, POSITION 1996* EXPENSES RETIREMENT 1996*#
- ------------------------------- -------------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Don B. Allen, Trustee $8,250 $0 $0 $46,750
Charles L. Bardelis, Trustee $8,250 $0 $0 $46,750
Samuel Hoar, Trustee $8,250 $0 $0 $46,750
Brian L. Moore, Trustee $ 0 $0 $0 $ 0
Robert J. Myers, Trustee $8,250 $0 $0 $46,750
John D. Richardson, Nominee $ 0 $0 $0 $ 0
F. David Rolwing, Nominee $ 0 $0 $0 $12,000
</TABLE>
- ---------------
* Compensation received for services as Trustee.
# 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.
8
<PAGE> 15
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 Subadvisory 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.
9
<PAGE> 16
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 C. 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 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, represent-
10
<PAGE> 17
ing 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.
For information on the principal executive officers and directors of Morgan
Stanley, see Exhibit A hereto.
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
Morgan Stanley manages two funds with objectives similar to the Global
Equity Fund. They are:
<TABLE>
<CAPTION>
NET ASSETS
FUND INVESTMENT OBJECTIVE ADVISORY FEE* (9/30/96)
- ---------------------- ----------------------- ------------------------- --------------
<S> <C> <C> <C>
Global Equity Long-term capital 0.80% of $ 84,850,857
Portfolio (a series appreciation by net assets
of the Morgan Stanley investing primarily in
Institutional Fund, equity securities of
Inc.) issuers throughout the
world, including U.S.
issuers
Global Equity Long-term capital 1.00% of $145,688,002
Allocation Fund (a appreciation by net assets
series of Morgan investing in equity
Stanley Fund, Inc.) securities of U.S. and
non-U.S. issuers
</TABLE>
* Morgan Stanley has agreed to waive a portion of the advisory fee payable by
the Global Equity Allocation Fund, and/or reimburse expenses of that fund to
the extent that the total operating expenses of that fund exceed 1.70% of the
average daily net assets relating to the Class A shares, and 2.45% of the
average daily net assets relating to the Class B and Class C shares of that
fund. Morgan Stanley has also agreed to waive a portion of the advisory fee
payable by the Global Equity Portfolio listed above and/or reimburse expenses
of that fund to the extent that the total operating expenses of that fund
exceed 1.00% of the average daily net assets of the Class A shares and 1.25%
of the average daily net assets of the Class B shares of that fund. For the
Global Equity Allocation Fund's and the Global Equity Portfolio's most recent
fiscal year, Morgan Stanley waived advisory fees and/or reimbursed expenses
totalling $371,000 and $109,000, respectively.
11
<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 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 subadvisory 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 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. In addition, the Board 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. While the reduction in subadvisory fee under the
Morgan
12
<PAGE> 19
Subadvisory Agreement effectively increases the amount of the advisory fee
retained by the Adviser, the percentage of the advisory fee retained by the
Adviser now is more consistent with the percentage retained by the Adviser for
similar services provided to other similar portfolios.
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 a Majority Vote
of the shareholders of the Global Equity Fund.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS OF THE GLOBAL EQUITY FUND VOTE "FOR" 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
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
13
<PAGE> 20
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 C. 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 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
14
<PAGE> 21
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:
.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 Goldman 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. 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.
15
<PAGE> 22
Other Investment Companies Advised by T. Rowe Price
T. Rowe Price manages two funds with objectives similar to the investment
objective of Value Equity Fund (assuming that Proposal 6 is approved by
shareholders). They are:
<TABLE>
<CAPTION>
NET ASSETS
FUND INVESTMENT OBJECTIVE ADVISORY FEE (9/30/96)
- ---------------------- ----------------------- ------------------------- --------------
<S> <C> <C> <C>
T. Rowe Price Equity Dividend income and 0.25% of $6,471,000,000
Income Fund capital growth net assets*
T. Rowe Price Equity Dividend income and 0.85% of $ 60,700,000
Income Portfolio capital growth net assets
</TABLE>
- ---------------
* For its services to 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 Fund 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.
T. Rowe Price also acts as investment subadviser to several funds
("Non-Price Funds") having similar investment objectives to the investment
objective of the Value Equity Fund (assuming that Proposal 6 is approved by
shareholders). For this purpose, the Non-Price Funds are funds that are not
sponsored by T. Rowe Price. These funds are:
<TABLE>
<CAPTION>
NET ASSETS
FUND INVESTMENT OBJECTIVE SUBADVISORY FEE (8/31/96)
- -------------------------- -------------------- ----------------------------- ------------
<S> <C> <C> <C>
Equity Income Portfolio Dividend income and .40% of net assets $ 53,000,000
(a series of the Endeavor capital growth
Series Trust)
Large Cap Value (a Dividend income and .50% of net assets $ 10,900,000
series of John Hancock capital growth
Variable Series Trust 1)
Maxim T. Rowe Price Dividend income and .50% of the first $20 million $ 33,100,000
Equity/Income (a series capital 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 .50% of the first $20 million $ 44,500,000
Series) (a series of the capital 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>
16
<PAGE> 23
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 of 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 subadvisory 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.
17
<PAGE> 24
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.
------------------------
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 Value Equity 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
18
<PAGE> 25
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 B.
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:
.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.
19
<PAGE> 26
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 ended 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 reinvest-
ment................... 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 year** 1% first year* 5% first year 1% first year**
0% after first 5% second year 0% after 0% after first 5% second year 0% after
year 4% third year first year 4% third year first year
3% fourth year year 3% fourth year
2% fifth year 2% fifth year
1% sixth year, 1% sixth year,
and 0% after and 0% after
sixth year sixth 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.
20
<PAGE> 27
<TABLE>
<CAPTION>
CURRENT PROPOSED
---------------------------------------------- ---------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
--------------- -------------- --------------- -------------- -------------- ---------------
<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.
21
<PAGE> 28
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%.
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 Adviser
The Adviser also serves as investment adviser to the Value Equity Trust, a
fund of NASL Series Trust which has an objective similar to the investment
objective of the Value Equity Fund.
<TABLE>
<CAPTION>
NET ASSETS
FUND INVESTMENT OBJECTIVE ADVISORY FEE* (9/30/96)
- ---------------------- -------------------------------- ------------------ --------------
<S> <C> <C> <C>
Value Equity Trust Long-term growth of capital, by 0.800% of average $540.2 million
investing primarily in common daily net assets
stocks and securities
convertible into or carrying the
right to buy common stocks.
</TABLE>
- ---------------
* Advisory fees for the Value Equity Trust are reduced or the Adviser reimburses
the Value Equity 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 NASL Series Trust's business) applicable to the Value
Equity Trust exceeds an annual rate of .50% of the average net asset value of
such portfolio. The expense limitations continue in effect
22
<PAGE> 29
from year to year unless otherwise terminated at any year end by the Adviser
on 30 days' notice to the NASL Series Trust. For the NASL Series Trust's most
recent fiscal year, the Adviser did not reimburse the Value Equity Trust for
any expenses since expenses were below the expense limitations.
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.
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.
------------------------
23
<PAGE> 30
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
24
<PAGE> 31
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 not
intended to be complete qualified in its entirety by reference to the text of
that agreement, the form of which is attached hereto as Exhibit C. For
additional 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 are 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,
25
<PAGE> 32
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.
Other Investment Companies Advised by Founders
Founders manages one other fund which has an objective similar to the
investment objective of the Balanced Fund (assuming that Proposal 7 is approved
by shareholders):
<TABLE>
<CAPTION>
NET ASSETS
FUND INVESTMENT OBJECTIVE ADVISORY FEE (9/30/96)
- -------------------------- -------------------- ----------------------------- ------------
<S> <C> <C> <C>
Founders Balanced Fund Current income and 0.65% of the first $250 $307,594,305
capital million of net assets, 0.60%
appreciation 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>
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.
26
<PAGE> 33
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 subadvisory 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 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 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.
REQUIRED VOTE
Approval of the Founders Subadvisory Agreement will require a Majority Vote
of the shareholders of the Balanced Fund.
27
<PAGE> 34
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 WITH RESPECT
TO 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 B.
28
<PAGE> 35
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 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.
29
<PAGE> 36
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
ended 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 year** 1% first year* 5% first year 1% first year**
0% after first 5% second year 0% after first 0% after first 5% second year 0% after first
year 4% third year year year 4% third year year
3% fourth year 3% fourth year
2% fifth year 2% fifth year
1% sixth year 1% sixth year
0% after sixth 0% after sixth
year year
Exchange fee.............. None None None None None None
- ---------------
* For purchases of $1 million or more made on or after May 1, 1995.
** For purchases made on or after May 1, 1995.
</TABLE>
30
<PAGE> 37
<TABLE>
<CAPTION>
CURRENT PROPOSED
--------------------------- ---------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
<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% 0.775% 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>
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
31
<PAGE> 38
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.
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 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
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<PAGE> 39
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.
------------------------
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, other than its effective date.
The effective date of the MAC Subadvisory Agreement is October 1, 1996.
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,
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<PAGE> 40
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 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 C. 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.
The foregoing subadvisory fees are identical to the fees payable under 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 had 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. MAC and Manulife are located at 200
Bloor Street East, Toronto, Ontario, Canada M4W 1E5.
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<PAGE> 41
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
MAC serves as adviser to the Money Market Fund of Manulife Series Fund,
Inc. and as subadviser to the Money Market Trust of NASL Series Trust, each of
which has investment objective similar to that of the Trust's Money Market Fund.
<TABLE>
<CAPTION>
NET ASSETS
FUND INVESTMENT OBJECTIVE ADVISORY/SUBADVISORY FEE (9/30/96)
- -------------------------- -------------------- ----------------------------- ------------
<S> <C> <C> <C>
Money Market Fund (a Maximize current Advisory fee of 0.50% of net $ 44,437,819
series of Manulife Series income consistent assets*
Fund, Inc.) with preservation
of principal and
liquidity
Money Market Trust (a Maximize current Subadvisory fee of .075% of $341,980,573
series of NASL Series income consistent the first $500 million of net
Trust) with preservation assets; .020% of net assets
of principal and above $500 million
liquidity
* MAC has agreed to pay expenses of the Money Market Fund of Manulife Series Fund, Inc., including
custody fees, registration fees, audit fees, trustees' fees, insurance fees and other
miscellaneous expenses (other than brokerage commissions on portfolio transactions and other
direct costs relating to the acquisition, disposition, lending or borrowing of portfolio
investments, taxes, interest and other costs related to borrowings, and any extraordinary or
non-recurring expenses such as legal claims and liabilities and litigation costs and any
indemnification related thereto) in excess of 0.50% of the average daily net assets of such
fund.
</TABLE>
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 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 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
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<PAGE> 42
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.
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 relative to funds with similar
investment objectives and policies, (iv) performance information regarding MAC's
management of a portfolio with investment objectives and policies similar to the
Money Market Fund, (v) the cost and expected profitability to MAC of providing
portfolio management services to the Portfolio and (vi) whether the proposed
subadvisory fees and expense ratio of the Portfolio would be consistent with the
fees and expense ratio 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 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
subadviser.
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> 43
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. If this proposed
change in investment objective is approved, the Portfolio may be a relatively
safer investment as a result, due to the fact that it will invest primarily in
common stocks of established companies paying above-average dividends. 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 or 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
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<PAGE> 44
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 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.
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<PAGE> 45
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
American Depository Receipts). Risks associated with such investments are
described in the Trust'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.
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
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<PAGE> 46
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 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. In addition, such changes modified the Portfolio's investment policies
to require it to maintain a minimum of 25% of its total assets in fixed income,
investment grade securities rated Baa or higher by Moody's or BBB or higher by
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.
------------------------
PROPOSAL 8 -- APPROVAL OF A PROPOSAL TO PERMIT THE ADVISER, IN THE FUTURE, TO
SELECT AND CONTRACT WITH SUBADVISERS FOR THE PORTFOLIOS AFTER
OBTAINING BOARD APPROVAL BUT 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
40
<PAGE> 47
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
(both as a dollar amount and as a percentage of the Portfolio's net assets) 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, in such a situation, 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. Such conditions are expected to include, but may not be limited to,
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, including overall supervisory responsibility for the
general management and investment of each Portfolio's securities portfolio,
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
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<PAGE> 48
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 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.
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. This proposal will eliminate the
delay of convening a meeting of shareholders to approve certain subadvisory
changes.
The Board, including the Disinterested Trustees, has unanimously approved
the proposal.
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 relief described above and (iii)
disclosure in the Trust's Prospectus of the existence, substance and effect of
the exemptive relief.
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<PAGE> 49
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS OF EACH PORTFOLIO VOTE "FOR" PROPOSAL 8.
------------------------
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.
*** *** *** ***
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
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<PAGE> 50
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 NASL, the parent of the Adviser, 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
44
<PAGE> 51
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 to any Portfolio if there is a Majority Vote of that
Portfolio to approve such continuance, notwithstanding that such continuance may
not have been approved by (i) any other Portfolio affected by the Agreement or
(ii) all of the Portfolios.
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 a Majority Vote 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 a Majority Vote 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 there is a Majority Vote 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.
45
<PAGE> 52
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):
<TABLE>
<CAPTION>
BETWEEN BETWEEN
$50,000,000 $200,000,000
FIRST AND AND EXCESS OVER
FUND $50,000,000 $200,000,000 $500,000,000 $500,000,000
- -------------------------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Global Equity Fund........ .900% .900% .700% .700%
Value Equity Fund......... .725% .675% .625% .550%
Balanced Fund............. .725% .675% .625% .550%
Money Market Fund......... .200% .200% .200% .145%
</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.
46
<PAGE> 53
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.
<TABLE>
<CAPTION>
POSITION WITH
TRUST AND YEAR OF
ELECTION OR POSITION WITH
NAME, ADDRESS AND AGE APPOINTMENT* NASL FINANCIAL* BUSINESS EXPERIENCE
- ----------------------- ------------------- ------------------ -------------------------
<S> <C> <C> <C>
Brian L. Moore Chairman Director and Executive Vice President,
200 Bloor Street 1989 Chairman Canadian Insurance
11th Floor Operations, of Manulife,
North Tower January 1, 1996 to date;
Toronto, Ontario Chief Executive Officer,
Canada M4W-1E5 North American Life
Age: 52 Assurance Company,
October 1993 to 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
116 Huntington Avenue 1996 Funds, September 25, 1996
Boston, MA 02116 to the present; Vice
Age: 47 President, Business
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,
116 Huntington Avenue Annuities, of Manulife,
Boston, MA 02116 September 1996 to
Age: 39 present; President and
Director, 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.
</TABLE>
47
<PAGE> 54
<TABLE>
<CAPTION>
POSITION WITH
TRUST AND YEAR OF
ELECTION OR POSITION WITH
NAME, ADDRESS AND AGE APPOINTMENT* NASL FINANCIAL* BUSINESS EXPERIENCE
- ----------------------- ------------------- ------------------ -------------------------
<S> <C> <C> <C>
John G. Vyrsen Vice President Vice President Vice President, Chief
116 Huntington Avenue 1988 Financial Officer, U.S.
Boston, MA 02116 Operations, of Manulife,
Age: 41 January 1, 1996 to date;
Vice President and Chief
Actuary, NASL.
James D. Gallagher Secretary Not Applicable Vice President, Legal
116 Huntington Avenue Services, of Manulife,
Boston, MA 02116 January 1, 1996 to date;
Age: 41 Vice President and
General 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 Vice President, Chief
116 Huntington Avenue and Treasurer Financial Officer,
Boston, MA 02116 Annuities and Mutual
Age: 40 Funds, of Manulife,
January 1, 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.
48
<PAGE> 55
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:
<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
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 Trust due to the position of
Goldman Sachs as subadviser to the Value Equity Fund and Balanced Fund. In
addition, Dresdner Bank may be deemed to have been an affiliated broker of the
Trust due to the position of Oechsle as subadviser to the Global Equity Fund. 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 Trust due to the
position of T. Rowe Price as subadviser to the Value Equity Fund and the
Balanced Fund and affiliates of Morgan Stanley may be deemed to be affiliated
brokers of the Trust due to the position of Morgan Stanley as subadviser to the
Global Equity Fund. Salomon Brothers Inc ("Salomon") and J.P. Morgan Securities
Inc and J.P. Morgan Securities Ltd. ("J.P. Morgan") may also be deemed to be
affiliated brokers of the Trust due to the positions of their affiliates as
subadvisers to certain Portfolios.
49
<PAGE> 56
From November 1, 1994 to October 31, 1995, brokerage commissions were paid
by the Global Equity Fund, Value Equity Fund, Balanced Fund and Money Market
Fund to Goldman Sachs as follows:
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
PORTFOLIO'S AGGREGATE
BROKERAGE COMMISSIONS DOLLAR AMOUNT
11/1/94 TO REPRESENTED FOR THE OF TRANSACTIONS
PORTFOLIO 10/31/95 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 by
the Global Equity Fund, Value Equity Fund, Balanced Fund and Money Market Fund
to Goldman Sachs as follows:
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
PORTFOLIO'S AGGREGATE
BROKERAGE COMMISSIONS DOLLAR AMOUNT
11/1/95 TO REPRESENTED FOR THE OF TRANSACTIONS
PORTFOLIO 4/30/96 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>
From November 1, 1994 to October 31, 1995 and from November 1, 1995 to
April 30, 1996, there were no brokerage commissions paid by the Global Equity
Fund, Value Equity Fund, Balanced Fund and Money Market Fund to Dresdner Bank.
From November 1, 1994 to October 31, 1995, brokerage commissions were paid
by the Global Equity Fund, Value Equity Fund, Balanced Fund and Money Market
Fund to Salomon as follows:
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
PORTFOLIO'S AGGREGATE
BROKERAGE COMMISSIONS DOLLAR AMOUNT
11/1/94 TO REPRESENTED FOR THE OF TRANSACTIONS
PORTFOLIO 10/31/95 PERIOD FOR THE PERIOD
- --------- ----------- --------------------- ---------------
<S> <C> <C> <C>
Global Equity............... $6,414 1.26% 0.86%
Value Equity................ $8,760 4.15% 0.16%
Balanced.................... $8,117 3.90% 2.71%
Money Market................ $ 0 0% 0%
</TABLE>
50
<PAGE> 57
From November 1, 1995 to April 30, 1996, brokerage commissions were paid by
the Global Equity Fund, Value Equity Fund, Balanced Fund and Money Market Fund
to Salomon as follows:
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
PORTFOLIO'S AGGREGATE
BROKERAGE COMMISSIONS DOLLAR AMOUNT
11/1/95 TO REPRESENTED FOR THE OF TRANSACTIONS
PORTFOLIO 4/30/96 PERIOD FOR THE PERIOD
- --------- ----------- --------------------- ---------------
<S> <C> <C> <C>
Global Equity............... $1,784 0.75% 0.31%
Value Equity................ $7,211 4.00% 0.23%
Balanced.................... $ 874 2.01% 2.77%
Money Market................ $ 0 0% 0%
</TABLE>
From November 1, 1994 to October 31, 1995, brokerage commissions were paid
by the Global Equity Fund, Value Equity Fund, Balanced Fund and Money Market
Fund to J.P. Morgan as follows:
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
PORTFOLIO'S AGGREGATE
BROKERAGE COMMISSIONS DOLLAR AMOUNT
11/1/94 TO REPRESENTED FOR THE OF TRANSACTIONS
PORTFOLIO 10/31/95 PERIOD FOR THE PERIOD
- --------- ----------- --------------------- ---------------
<S> <C> <C> <C>
Global Equity............... $ 3,265 0.64% 0.48%
Value Equity................ $13,056 6.18% 0.21%
Balanced.................... $13,735 6.59% 0.88%
Money Market................ $ 0 0% 0%
</TABLE>
From November 1, 1995 to April 30, 1996, brokerage commissions were paid by
the Global Equity Fund, Value Equity Fund, Balanced Fund and Money Market Fund
to J.P. Morgan as follows:
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
PORTFOLIO'S AGGREGATE
BROKERAGE COMMISSIONS DOLLAR AMOUNT
11/1/95 TO REPRESENTED FOR THE OF TRANSACTIONS
PORTFOLIO 4/30/96 PERIOD FOR THE PERIOD
- --------- ----------- --------------------- ---------------
<S> <C> <C> <C>
Global Equity............... $ 0 0% 0%
Value Equity................ $14,759 8.19% 0.67%
Balanced.................... $ 1,655 3.81% 0.22%
Money Market................ $ 0 0% 0%
</TABLE>
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
51
<PAGE> 58
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, 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
52
<PAGE> 59
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,
$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
53
<PAGE> 60
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,
$ 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
54
<PAGE> 61
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, including:
$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, promotional
activities and expenses. In addition, $1,422,955 of the total distribution fees
for Class C were paid to securities dealers, including:
$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
55
<PAGE> 62
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
56
<PAGE> 63
thereto in accordance with the best judgment of the person or persons voting the
proxies.
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 13, 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.
57
<PAGE> 64
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>
NAME POSITIONS WITH MSAM PRINCIPAL OCCUPATION
- ---- ------------------------- --------------------------------
<S> <C> <C>
Barton M. Biggs Chairman, Director and Managing Director of Morgan
Managing Director Stanley & Co. Incorporated;
Chairman of Morgan Stanley Asset
Management Limited
Peter A. Nadosy Vice Chairman, Director Managing Director of Morgan
and Managing Director Stanley & Co. Incorporated;
Director of Morgan Stanley Asset
Management Limited
James M. Allwin President, Director and Managing Director of Morgan
Managing Director Stanley & Co. Incorporated;
President of Morgan Stanley
Realty Inc.
Gordon S. Gray Director and Managing Managing Director of Morgan
Director Stanley & Co. Incorporated;
Director of Morgan Stanley Asset
Management Limited
Dennis G. Sherva Director and Managing Managing Director of Morgan
Director 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
NAME PRICE PRINCIPAL OCCUPATION
- ---- ------------------------- --------------------------------
<S> <C> <C>
George J. Collins Chief Executive Officer, Director of Rowe Price-Fleming
President and Managing International, Inc.
Director ("Price-Fleming")
James E. Halbkat, Director President of U.S. Monitor Corp.
Jr.
P.O. Box 23109
Hilton Head Island, SC
29925
Richard L. Menschel Director Limited Partner of Goldman Sachs
95 Broad St., 2nd Floor Group L.P.
New York, NY 10004
</TABLE>
A-1
<PAGE> 65
<TABLE>
<CAPTION>
POSITION WITH T. ROWE
NAME PRICE PRINCIPAL OCCUPATION
- -------------------- ------------------------- --------------------------------
<S> <C> <C>
John W. Rosenblum Director Tayloe Murphy Professor of the
P.O. Box 6550 University of Virginia; Director
Charlottesville, VA 22906 of: Chesapeake Corporation,
Camdus Communications Corp.,
Comdial Corp. and Cone Mills
Corp.
Robert L. Strickland Director Chairman of Loew's Companies,
604 Two Piedmont Plaza Inc.; Director of Hannaford
Bldg. Bros., Co.
Winston-Salem, NC 27104
Phillip C. Walsh Director Consultant to Cyprus Annex
200 East 66th Street, Minerals Company; Director of
Apt. A-1005 Piedmont Mining Company, Inc.
New York, NY 10021
Anne Marie Director Partner of the law firm of
Whittemore One James Center McGuire, Woods, Battle & Booth;
Richmond, VA 23219 Director of Owens and Minor,
Inc., USF&G Corp. and James
River Corp.
George A. Roche Chief Financial Officer Vice President and Director of
and Managing Director Price-Fleming
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, Managing Director Secretary and Treasurer of
Jr. Secretary and Treasurer Price-Fleming
</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 is 2930 East Third Avenue, Denver, Colorado 80206.
<TABLE>
<CAPTION>
NAME POSITION WITH FOUNDERS PRINCIPAL OCCUPATION
- -------------------- ------------------------- --------------------------------
<S> <C> <C>
Bjorn K. Borgen Director, Chairman, Chief Chief Executive Officer and
Executive Officer, Chief Chief Investment Officer of
Investment Officer and Founders
Secretary
Jonathan F. Zeschin President and Chief President and Chief Operating
Operating Officer Officer of Founders
David L. Ray Vice President, Vice President, Treasurer and
Treasurer, Chief Chief Financial Officer of
Financial Officer and Founders
Assistant Secretary
Michael K. Haines Senior Vice President - Senior Vice
Investments President - Investments and
Portfolio Manager of Founders
</TABLE>
A-2
<PAGE> 66
<TABLE>
<CAPTION>
NAME POSITION WITH FOUNDERS PRINCIPAL OCCUPATION
- -------------------- ------------------------- --------------------------------
<S> <C> <C>
Michael W. Gerding Vice President - Vice President - Investments and
Investments Portfolio Manager of Founders
Edward F. Keely Vice President - Vice President - Investments and
Investments Portfolio Manager of Founders
Gregory P. Contillo Senior Vice President - Senior Vice
Institutional Marketing President - Institutional
Marketing of Founders
James P. Rankin Vice President - Investor Vice President - Investor
Services Services of Founders
Kenneth R. Vice President and Vice President and General
Christoffersen General Counsel Counsel of Founders
</TABLE>
MANUFACTURERS ADVISER CORPORATION
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
NAME ADVISER CORP. PRINCIPAL OCCUPATION
- -------------------- ------------------------- --------------------------------
<S> <C> <C>
George Corey Director President, Exxel Management and
Marketing Corp., Flemington, NJ
since 1983
Bernadette B. Director Executive Director, Strategies
Murphy 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, Assistant Vice President and
Compliance; Vice Controller, U.S. Individual,
President, Finance; 1988-present; Vice President,
Treasurer Sun Life Investment Management,
1993-1995
David Chia Vice President, Compliance Audit Officer,
Compliance (London Manufacturers Life Insurance
Branch) Co., 1993-present
</TABLE>
A-3
<PAGE> 67
<TABLE>
<CAPTION>
POSITION WITH
MANUFACTURERS
NAME ADVISER CORP. PRINCIPAL 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 Senior Counsel, 1990-present,
Counsel Manufacturers Life Insurance
Co., Toronto
</TABLE>
A-4
<PAGE> 68
EXHIBIT B
FORM OF AMENDMENT TO ADVISORY AGREEMENT
AMENDMENT made this 31st day of December, 1996, 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:__________________________
B-1
<PAGE> 69
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.
APPENDIX B
The Fixed Limit for each Portfolio for purposes of paragraph 4.a.(3) shall
be:
<TABLE>
<CAPTION>
PORTFOLIO PERCENT
--------- -------
<S> <C>
1. Equity-Income Fund.................................. 1.065%
(formerly Value Equity Fund)
2. Balanced Fund....................................... 1.040%
(formerly the Asset Allocation Fund)
</TABLE>
B-2
<PAGE> 70
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:
(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
B-3
<PAGE> 71
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
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.
B-4
<PAGE> 72
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 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
B-5
<PAGE> 73
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 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
B-6
<PAGE> 74
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.
(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
B-7
<PAGE> 75
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 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.
B-8
<PAGE> 76
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 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
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(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 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;
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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.
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.
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17. GOVERNING LAW
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of The Commonwealth of Massachusetts, or any of the
applicable provisions of the Investment Company Act. To the extent that the laws
of The Commonwealth of Massachusetts, or any of the provisions in this
Agreement, conflict with applicable provisions of the Investment Company Act,
the latter shall control.
18. LIMITATION OF LIABILITY
The 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.
NORTH AMERICAN FUNDS
[SEAL]
By: /s/ John D. DesPrez, III
-----------------------------------------
John D. DesPrez, III, President
NASL FINANCIAL SERVICES
[SEAL]
By: /s/ William J. Atherton
-----------------------------------------
William J. Atherton, President
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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.
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APPENDIX B
The Fixed Limit for each Portfolio for purposes of paragraph 4.a.(3) shall
be:
<TABLE>
<CAPTION>
PORTFOLIO PERCENT
- ----------- -------
<S> <C>
Money Market Fund...................................... .50%
Value Equity Fund...................................... .99%
Asset Allocation Fund.................................. .99%
Global Growth Fund..................................... 1.40%
</TABLE>
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<PAGE> 82
EXHIBIT C
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:
i. obtain and evaluate pertinent economic, statistical, financial and
other information affecting the [economy generally and](5)
individual compa-
- ---------------
(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.
(5) Founders agreement omits the bracketed clause.
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<PAGE> 83
nies 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 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
- ---------------
(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.
(8) T. Rowe Price, Founders, and MAC agreements add "services" where indicated.
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<PAGE> 84
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)
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,
- ---------------
(9) Bracketed sentence contained only in Morgan Stanley agreement.
(10) Bracketed paragraph contained only in T. Rowe Price agreement.
(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".
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<PAGE> 85
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 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)
- ---------------
(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.
(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.
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<PAGE> 86
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.
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)
- ---------------
(21) MAC agreement omits bracketed clause.
(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.
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<PAGE> 87
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 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)
- ---------------
(27) T. Rowe Price, Founders, and MAC agreements omit the bracketed clause.
(28) Morgan Stanley agreement omits the bracketed clause.
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<PAGE> 88
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
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
- ---------------
(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.
(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.
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<PAGE> 89
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
This Agreement contains the entire understanding and agreement of the
parties.](33)
12. HEADINGS(34)
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
- ---------------
(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.
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<PAGE> 90
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.
NASL FINANCIAL SERVICES, INC.
[SEAL]
By:
---------------------------------
[SUBADVISER](35)
[SEAL]
By:
---------------------------------
- ---------------
(35) Morgan Stanley Asset Management Inc.;
T. Rowe Price Associates, Inc.;
Founders Asset Management, Inc.; or
Manufacturers Adviser Corporation.
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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.
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.
C-10
<PAGE> 92
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)
<TABLE>
<S> <C>
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
</TABLE>
<PAGE> 93
<TABLE>
<S> <C>
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
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
</TABLE>
<PAGE> 94
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
6) ________FOR ________AGAINST ________ABSTAIN
7) ________FOR ________AGAINST ________ABSTAIN
8) ________FOR ________AGAINST ________ABSTAIN
9) ________FOR ________AGAINST ________ABSTAIN
Dated:______________________________________, 19___
___________________________________________________
___________________________________________________
Signature(s) of Shareholders(s)
