<PAGE>
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 Section 240.14a-11(c) or Section 240.14a-12
North American Funds
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
NORTH AMERICAN FUNDS
116 Huntington Avenue
Boston, MA 02116
August 11, 1997
Dear Shareholder:
A Special Meeting of Shareholders of North American Funds (the "Trust") will
be held at the offices of the parent of the Trust's investment adviser, The
Manufacturers Life Insurance Company, 73 Tremont Street, Boston, Massachusetts
02108, on September 24, 1997, at 10:00 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").
North American Security Life Insurance Company, NASL Financial Services,
Inc. ("NASL Financial"), CypressTree Investments, Inc. ("CypressTree"),
CypressTree Asset Management Corporation, Inc. ("CAM"), CypressTree's
investment advisory subsidiary, and CypressTree Funds Distributors, Inc.
("CFD"), CypressTree's distribution subsidiary, have entered into an agreement
for CypressTree to purchase that portion of NASL Financial's business relating
to acting as investment adviser and distributor of the Trust (the
"Acquisition"). CypressTree and its affiliates were formed in 1996 to acquire,
advise and distribute mutual funds through broker-dealers, banks and other
intermediaries.
The advisory fees charged to each series of the Trust (the "Portfolios")
will not change as a result of the Acquisition. Moreover, CypressTree has
advised the Board of Trustees of the Trust (the "Board") that following the
Acquisition CAM and CFD will continue to provide the same high-quality
services currently provided to the Trust by NASL Financial, and that it does
not intend to recommend any changes in the current subadvisers to the
Portfolios, who would continue to serve as the Portfolios' subadvisers upon
completion of the Acquisition. CypressTree is acquiring a portion of NASL
Financial's business relating to the Trust, not the Trust itself, and the
number of your shares in each series of the Trust will not change as a result
of the Acquisition.
In connection with the Acquisition, shareholders are being asked to consider
the Proposals, which would take effect upon completion of the Acquisition.
First, shareholders of the Trust are being asked to consider the election of
four new Trustees to the Board.
Next, shareholders of each Portfolio are being asked to approve an
investment advisory agreement between the Trust and CAM which is substantially
similar to the Trust's existing investment advisory agreement with NASL
Financial. Similarly, shareholders of each Portfolio are being asked to
approve a subadvisory agreement between CAM and the Portfolio's current
subadviser which is substantially similar to the existing subadvisory
agreement with such subadviser.
<PAGE>
Finally, shareholders of each Portfolio are being asked to approve a
proposal giving CAM the ability, in the future, to select and contract with
subadvisers to the Portfolios after obtaining Board approval but without
obtaining shareholder approval. In the Board's view, the proposal would save
the Trust and the Portfolios the additional expense of obtaining shareholder
approval for certain changes in subadvisory arrangements. This proposal is
substantially identical to a proposal already approved by shareholders in
December 1996 (except that the current proposal would apply to CAM as
investment adviser rather than to NASL Financial).
THE BOARD HAS UNANIMOUSLY VOTED IN FAVOR OF EACH PROPOSAL AND RECOMMENDS
THAT SHAREHOLDERS VOTE FOR APPROVAL OF EACH PROPOSAL.
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 July 28, 1997, 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 September 23, 1997. YOUR VOTE IS
EXTREMELY IMPORTANT AND YOUR PROMPT RESPONSE IS APPRECIATED.
Sincerely yours,
/s/ Joseph Scott
Joseph Scott
President
North American Funds
<PAGE>
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 September
24, 1997 at the offices of the parent of the Trust's investment adviser, The
Manufacturers Life Insurance Company, 73 Tremont Street, Boston, MA 02108, at
10:00 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 (each, a "Portfolio"),
unless otherwise indicated below, will consider and vote upon the following
proposals:
<TABLE>
<CAPTION>
<C> <S>
Proposal 1 Election of four new Trustees to serve as members of the Board
of Trustees of the Trust (the "Board").
Proposal 2 Approval of an investment advisory agreement between
CypressTree Asset Management Corporation, Inc. ("CAM") and the
Trust.
Proposal 3 Approval of an investment subadvisory agreement between CAM
and Fred Alger Management, Inc. with respect to the Small/Mid
Cap Fund. (Only shareholders of the Small/Mid Cap Fund will
vote on Proposal 3.)
Proposal 4A Approval of an investment subadvisory agreement between CAM
and Founders Asset Management, Inc. ("Founders") with respect
to the Growth Equity Fund. (Only shareholders of the Growth
Equity Fund will vote on Proposal 4A.)
Proposal 4B Approval of an investment subadvisory agreement between CAM
and Founders with respect to the Balanced Fund. (Only
shareholders of the Balanced Fund will vote on Proposal 4B.)
Proposal 4C Approval of an investment subadvisory agreement between CAM
and Founders with respect to the International Small Cap Fund.
(Only shareholders of the International Small Cap Fund will
vote on Proposal 4C.)
Proposal 5A Approval of an investment subadvisory agreement between CAM
and Wellington Management Company, LLP ("Wellington
Management") with respect to the Growth and Income Fund. (Only
shareholders of the Growth and Income Fund will vote on
Proposal 5A.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
Proposal 5B Approval of an investment subadvisory agreement between CAM
and Wellington Management with respect to the Investment
Quality Bond Fund. (Only shareholders of the Investment
Quality Bond Fund will vote on Proposal 5B.)
Proposal 6A Approval of an investment subadvisory agreement between CAM
and Salomon Brothers Asset Management Inc ("SBAM") with
respect to the U.S. Government Securities Fund. (Only
shareholders of the U.S. Government Securities Fund will vote
on Proposal 6A.)
Proposal 6B Approval of an investment subadvisory agreement between CAM
and SBAM with respect to the National Municipal Bond Fund.
(Only shareholders of the National Municipal Bond Fund will
vote on Proposal 6B.)
Proposal 6C Approval of an investment subadvisory agreement between CAM
and SBAM with respect to the Strategic Income Fund. (Only
shareholders of the Strategic Income Fund will vote on
Proposal 6C.)
Proposal 6D Approval of a subadvisory consulting agreement between SBAM
and Salomon Brothers Asset Management Limited with respect to
the Strategic Income Fund. (Only shareholders of the
Strategic Income Fund will vote on Proposal 6D.)
Proposal 7 Approval of an investment subadvisory agreement between CAM
and J.P. Morgan Investment Management Inc. with respect to
the International Growth and Income Fund. (Only shareholders
of the International Growth and Income Fund will vote on
Proposal 7.)
Proposal 8 Approval of an investment subadvisory agreement between CAM
and Manufacturers Adviser Corporation with respect to the
Money Market Fund. (Only shareholders of the Money Market
Fund will vote on Proposal 8.)
Proposal 9 Approval of an investment subadvisory agreement between CAM
and Morgan Stanley Asset Management, Inc. with respect to the
Global Equity Fund. (Only shareholders of the Global Equity
Fund will vote on Proposal 9.)
Proposal 10 Approval of an investment subadvisory agreement between CAM
and T. Rowe Price Associates, Inc. with respect to the
Equity-Income Fund. (Only shareholders of the Equity-Income
Fund will vote on Proposal 10.)
Proposal 11 Approval of a proposal to permit CAM, in the future, to
select and contract with subadvisers to the Portfolios after
obtaining Board approval but without obtaining shareholder
approval.
</TABLE>
<PAGE>
Any other business that may properly come before the Meeting.
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSALS 1
THROUGH 11.
Each shareholder of record at the close of business on July 28, 1997 is
entitled to receive notice of and to vote at the Meeting and is invited to
attend the Meeting in person. Whether or not you intend to be present at the
Meeting, we urge you to fill in, sign, date, and promptly return the enclosed
proxy card in order that the Meeting may be held and a maximum number of
shares may be voted. If you attend the Meeting you may revoke your proxy and
vote your shares in person if you wish.
Sincerely,
/s/ James D. Gallagher
James D. Gallagher
Secretary
August 11, 1997
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.
PLEASE 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. WE
ASK YOUR COOPERATION IN MAILING YOUR PROXY CARD PROMPTLY.
<PAGE>
NORTH AMERICAN FUNDS
116 Huntington Avenue
Boston, MA 02116
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 24, 1997
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 parent of the Trust's investment adviser, The
Manufacturers Life Insurance Company ("Manulife"), 73 Tremont Street, Boston,
MA 02108, on September 24, 1997, at 10:00 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 August 11, 1997. 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, the Equity-Income Fund, the Growth and Income Fund,
the International Growth and Income Fund, the Balanced 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 Amended and Restated Agreement and Declaration of
Trust, the Board has designated July 28, 1997 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 the Record Date 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..................................... 1,825,006.905 shares
International Small Cap Fund........................... 1,336,126.747 shares
Growth Equity Fund..................................... 1,417,089.684 shares
Global Equity Fund..................................... 7,908,361.646 shares
Equity-Income Fund..................................... 9,683,196.081 shares
Growth and Income Fund................................. 8,348,456.256 shares
International Growth and Income Fund................... 2,874,416.683 shares
Balanced Fund.......................................... 8,105,246.721 shares
Strategic Income Fund.................................. 8,162,783.596 shares
Investment Quality Bond Fund........................... 1,714,480.759 shares
U.S. Government Securities Fund........................ 8,877,622.658 shares
National Municipal Bond Fund........................... 1,842,200.419 shares
Money Market Fund...................................... 18,658,712.970 shares
</TABLE>
Shares which represent interests in a particular Portfolio vote separately
on matters which pertain only to that Portfolio. For each of the Proposals
below (the
1
<PAGE>
"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) will be voted on separately by
shareholders of the relevant Portfolios.
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 September 23, 1997.
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 Amended and Restated 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
as to which the broker or nominee does not have discretionary voting power.
Under the Investment Company Act of 1940, as amended (the "1940 Act"), the
affirmative vote necessary to approve a matter under consideration may be
determined with reference to a percentage of votes present at the Meeting,
which would have the effect of treating abstentions and broker non-votes as if
they were votes against the Proposal. For purposes of the election of
Trustees, abstentions and broker non-votes do not affect the plurality vote
required for such election.
2
<PAGE>
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 equally by NASL Financial Services, Inc., the current investment
adviser to the Trust, and CypressTree Asset Management Corporation, Inc.
("CAM"), which would become the investment adviser to the Trust under the
agreement discussed in Proposal 2. In addition to the solicitation of proxies
by the use of the mails, proxies may be solicited by officers and employees of
the Trust 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 NASL
Financial Services, Inc. and CAM for their out-of-pocket expenses. To assist
in the solicitation of proxies, the Trust has retained Shareholder
Communications Corporation at an estimated cost to NASL Financial Services,
Inc. and CAM 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, 1996 AND ITS SEMI-ANNUAL REPORT FOR THE
SIX MONTH PERIOD ENDED APRIL 30, 1997 TO A SHAREHOLDER UPON REQUEST. TO OBTAIN
A REPORT, PLEASE CONTACT THE TRUST BY CALLING (800) 872-8037 OR BY WRITING TO
THE TRUST AT 116 HUNTINGTON AVENUE, BOSTON, MASSACHUSETTS 02116, ATTN: GEORGE
MACNEIL.
3
<PAGE>
SUMMARY OF PROPOSALS
<TABLE>
<CAPTION>
PROPOSAL SHAREHOLDERS WHO WILL
NUMBER PROPOSAL VOTE ON THE PROPOSAL
-------- -------- ------------------------
<C> <S> <C>
Proposal 1 Election of four new Trustees to serve All shareholders of the
as members of the Board. Trust will vote together
on this Proposal.
Proposal 2 Approval of an investment advisory Shareholders of each
agreement between CAM and the Trust. Portfolio will vote
separately on this
Proposal.
Proposal 3 Approval of an investment subadvisory Shareholders of the
agreement between CAM and Fred Alger Small/Mid Cap Fund will
Management, Inc. with respect to the vote on this Proposal.
Small/Mid Cap Fund.
Proposal 4A Approval of an investment subadvisory Shareholders of the
agreement between CAM and Founders Growth Equity Fund will
Asset Management, Inc. ("Founders") vote on this Proposal.
with respect to the Growth Equity Fund.
Proposal 4B Approval of an investment subadvisory Shareholders of the
agreement between CAM and Founders with Balanced Fund will vote
respect to the Balanced Fund. on this Proposal.
Proposal 4C Approval of an investment subadvisory Shareholders of the
agreement between CAM and Founders with International Small Cap
respect to the International Small Cap Fund will vote on this
Fund. Proposal.
Proposal 5A Approval of an investment subadvisory Shareholders of the
agreement between CAM and Wellington Growth and Income Fund
Management Company, LLP ("Wellington will vote on this
Management") with respect to the Growth Proposal.
and Income Fund.
Proposal 5B Approval of an investment subadvisory Shareholders of the
agreement between CAM and Wellington Investment Quality Bond
Management with respect to the Fund will vote on this
Investment Quality Bond Fund. Proposal.
Proposal 6A Approval of an investment subadvisory Shareholders of the U.S.
agreement between CAM and Salomon Government Securities
Brothers Asset Management Inc ("SBAM") Fund will vote on this
with respect to the U.S. Government Proposal.
Securities Fund.
Proposal 6B Approval of an investment subadvisory Shareholders of the
agreement between CAM and SBAM with National Municipal Bond
respect to the National Municipal Bond Fund will vote on this
Fund. Proposal.
Proposal 6C Approval of an investment subadvisory Shareholders of the
agreement between CAM and SBAM with Strategic Income Fund
respect to the Strategic Income Fund. will vote on this
Proposal.
Proposal 6D Approval of a subadvisory consulting Shareholders of the
agreement between SBAM and Salomon Strategic Income Fund
Brothers Asset Management Limited with will vote on this
respect to the Strategic Income Fund. Proposal.
Proposal 7 Approval of an investment subadvisory Shareholders of the
agreement between CAM and J.P. Morgan International Growth and
Investment Management Inc. with respect Income Fund will vote on
to the International Growth and Income this Proposal.
Fund.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PROPOSAL SHAREHOLDERS WHO WILL
NUMBER PROPOSAL VOTE ON THE PROPOSAL
-------- -------- ------------------------
<C> <S> <C>
Proposal 8 Approval of an investment subadvisory Shareholders of the
agreement between CAM and Manufacturers Money Market Fund will
Adviser Corporation with respect to the vote on this Proposal.
Money Market Fund.
Proposal 9 Approval of an investment subadvisory Shareholders of the
agreement between CAM and Morgan Stanley Global Equity Fund will
Asset Management Inc. with respect to vote on this Proposal.
the Global Equity Fund.
Proposal 10 Approval of an investment subadvisory Shareholders of the
agreement between CAM and T. Rowe Price Equity-Income Fund will
Associates, Inc. with respect to the vote on this Proposal.
Equity-Income Fund.
Proposal 11 Approval of a Proposal to permit CAM, in Shareholders of each
the future, to select and contract with Portfolio will vote
subadvisers to the Portfolios after separately on this
obtaining Board approval but without Proposal.
obtaining shareholder approval.
</TABLE>
5
<PAGE>
THE ACQUISITION
NASL Financial Services, Inc. and its parent, North American Security Life
Insurance Company ("NASL") have expressed a desire to exit their relationship
with the Trust. In doing so, they have sought a buyer that would continue the
Trust's multi-manager approach in substantially the same manner. CypressTree
Investments, Inc. ("CypressTree") fits that profile, and on July 29, 1997,
NASL, NASL Financial Services, Inc., CypressTree Asset Management Corporation,
Inc. ("CAM"), CypressTree's wholly-owned investment advisory subsidiary, and
CypressTree Funds Distributors, Inc. ("CFD"), CypressTree's wholly-owned
distribution subsidiary, entered into an agreement (the "Agreement") for
CypressTree to purchase that portion of NASL Financial Services, Inc.'s
business relating to acting as investment adviser and distributor of the Trust
(the "Acquisition"). In connection with an internal restructuring, it is
expected that, prior to consummation of the Acquisition, NASL Financial
Services, Inc. will be reconstituted as a Delaware limited liability company
(which would continue to be under the control of Manulife and would have the
same management as currently in place) (as the same may be so reconstituted,
"NASL Financial").
Upon completion of the Acquisition, it is expected that CAM will serve as
the investment adviser of the Trust and CFD will serve as the distributor of
the Trust's shares. Therefore, in connection with the Acquisition and as
required by the 1940 Act, shareholders of each Portfolio are being asked in
Proposal 2 to approve an investment advisory agreement between the Trust and
CAM, which is substantially similar to the Trust's existing investment
advisory agreement with NASL Financial, and the Board has approved a
distribution agreement between the Trust and CFD, which is substantially
similar to the Trust's distribution agreement with NASL Financial as in effect
upon completion of the Acquisition (shareholder approval of such distribution
agreement is not required under the 1940 Act). In addition, Wood Logan
Associates, Inc. ("Wood Logan"), an affiliate of NASL Financial, is expected
to continue to serve as the Trust's promotional agent upon completion of the
Acquisition. Additional information regarding distribution arrangements is set
forth below under "Additional Information--Other Payments to the Adviser and
its Affiliates." CypressTree has advised the Board that following the
Acquisition, CAM and CFD will continue to provide the same high-quality
services to the Trust currently provided by NASL Financial, and, in addition,
has agreed not to request any increases in advisory fees or expense
limitations applicable to the Portfolios for at least two years following
completion of the Acquisition.
As evidence of continuity, CypressTree has advised the Board that it does
not intend to recommend any changes in the current subadvisers to the
Portfolios upon completion of the Acquisition. Moreover, the Acquisition is
not expected to have any impact on the portfolio management teams responsible
for managing the Portfolios on a daily basis. Because under the 1940 Act, the
investment subadvisory agreements with the subadvisers of the Portfolios would
terminate automatically if they were assigned to CAM, shareholders of the
Portfolios are being asked in Proposals 3-10 to
6
<PAGE>
approve new investment subadvisory agreements between CAM and each Portfolio's
current subadviser, which in each case is similar to the existing subadvisory
agreement between NASL Financial and such subadviser (and is identical with
respect to fee levels).
Upon completion of the Acquisition, it is anticipated that all but one of
the current Trustees will resign from the Board. Therefore, in connection with
the Acquisition, shareholders of the Trust are being asked in Proposal 1 to
consider the election of four new Trustees to the Board. These resignations do
not reflect dissatisfaction with the Acquisition, and, in fact, the Board has
unanimously voted to approve each Proposal. It is anticipated that one current
Trustee will remain on the Board following completion of the Acquisition to
help provide continuity of management. The election of the four new Trustees
is contingent upon completion of the Acquisition, and, if the Acquisition is
not completed for any reason, it is anticipated that all of the current
Trustees will remain in office.
Finally, since CAM is expected to replace NASL Financial as investment
adviser of the Trust following completion of the Acquisition, shareholders of
the Trust and of each Portfolio are being asked in Proposal 11 to consider a
Proposal giving CAM the ability, in the future, to select and contract with
subadvisers to the Portfolios after obtaining Board approval but without
obtaining shareholder approval. This Proposal is substantially identical to a
proposal already approved by shareholders in December 1996 (except that the
current Proposal would apply to CAM as investment adviser rather than NASL
Financial).
The purchase price to be paid by CypressTree consists of $9 million of cash,
$8 million of which will be paid at the closing of the Acquisition (the
"Closing") and the remaining $1 million of which will be paid on the first
anniversary of the Closing, but only if net redemptions of shares of the
Portfolios are no greater than $80 million during the one year period
following the Closing, and a warrant issued to NASL, exercisable for five
years following the Closing, to purchase up to 10% of the common stock of
CypressTree outstanding at the Closing at an exercise price per share equal to
the price at which CypressTree issues common stock to fund the Acquisition.
NASL Financial will retain the right to receive certain fees paid by the Trust
with respect to shares outstanding at the Closing, as discussed below under
"Additional Information--Other Payments to the Adviser and its Affiliates."
The effectiveness of each Proposal is contingent on completion of the
Acquisition, and, if the Acquisition is not completed for any reason, the
Trust's current management arrangements will remain in effect. Completion of
the Acquisition is subject to the satisfaction of certain conditions,
including shareholder approval of the investment advisory and subadvisory
agreements discussed above and a requirement that the combined net asset
values of the Portfolios at Closing be at least $750 million. In connection
with the Acquisition, NASL and NASL Financial have agreed to cooperate with
CypressTree in seeking the replacement of the current
7
<PAGE>
officers and one trustee of the Trust who are affiliated with NASL Financial
with officers or employees of CAM or its affiliates. The Closing is expected
to occur on or before September 30, 1997.
SECTION 15(f) OF THE 1940 ACT
Section 15(f) of the 1940 Act is available to NASL Financial in connection
with the Acquisition. Section 15(f) provides in substance that when a sale of
an investment advisory business occurs, the investment adviser or its
affiliates may receive any amount or benefit in connection with the sale as
long as two conditions are satisfied. First, an "unfair burden" must not be
imposed on the investment company as a result of the transaction, or any
express or implied terms, conditions or understandings applicable to the
transaction. The term "unfair burden" (as defined in the 1940 Act) includes
any arrangement during the two-year period after the transaction whereby the
investment adviser (or predecessor or successor adviser), or any "interested
person" (as defined in the 1940 Act) (an "Interested Person") of any such
adviser, receives or is entitled to receive any compensation, directly or
indirectly, from the investment company or its security holders (other than
fees for bona fide investment advisory or other services) or from any other
person in connection with the purchase or sale of securities or other property
to, from or on behalf of the investment company. The Board is aware of no
circumstances arising from the Acquisition that might result in an unfair
burden being imposed on the Trust. Moreover, CypressTree, CAM and CFD have
agreed with NASL Financial that they will use reasonable efforts to insure
that no unfair burden will be imposed on the Trust by or as a result of the
Acquisition during such two-year period.
The second condition of Section 15(f) is that during the three-year period
after the transaction, at least 75% of the investment company's board of
trustees must not be Interested Persons of the investment adviser or
predecessor adviser. The Trustees proposed for election in Proposal 1 and the
current Trustee who is expected to remain a Trustee following the Acquisition
meet such 75% requirement. Moreover, CypressTree, CAM and CFD have agreed with
NASL and NASL Financial that they will use reasonable efforts to comply with,
and use reasonable efforts to cause the Trust to comply with, such 75%
requirement during such three-year period.
INFORMATION CONCERNING NASL FINANCIAL
NASL Financial, the Trust's current investment adviser and distributor,
currently is a Massachusetts corporation whose principal offices are located
at 116 Huntington Avenue, Boston, Massachusetts 02116. NASL, NASL Financial's
parent, is a Delaware stock life insurance company, the ultimate parent of
which is Manulife, a Canadian mutual life insurance company based in Toronto,
Canada.
Pursuant to its advisory agreement with the Trust, NASL Financial currently
oversees the administration of all aspects of the business and affairs of the
Trust, selects, contracts with and compensates subadvisers to manage the
assets of the
8
<PAGE>
Portfolios, and reimburses the Trust if the total of certain expenses
allocated to any Portfolio exceeds certain limitations. NASL Financial serves
as investment adviser to one other investment company, NASL Series Trust. NASL
Series Trust is a mutual fund that serves as the underlying investment medium
for variable annuity and variable life contracts issued by affiliates of NASL
Financial. At June 30, 1997, NASL Series Trust had assets of approximately
$8.97 billion.
None of the current Trustees of the Trust, with the exception of John D.
Richardson, are Interested Persons of NASL Financial. Mr. Richardson is
currently the Chairman of the Board and the Senior Vice President and General
Manager of U.S. Operations for Manulife.
INFORMATION CONCERNING CYPRESSTREE
CypressTree and its affiliates were formed in 1996 to acquire, advise and
distribute mutual funds through broker-dealers and other intermediaries.
CypressTree's principals and equity investors are experienced financial
services and investment professionals with a track record of building
investment and operating companies. The Acquisition is expected to be
CypressTree's first acquisition transaction.
CypressTree is an affiliate of Cypress Holding Company, Inc. ("Cypress
Holdings"). Cypress Holdings was founded in November of 1995 to acquire and
create investment management, marketing, distribution and operations
enterprises. CAM is CypressTree's wholly owned investment advisory subsidiary.
The following three paragraphs provide information about the background and
business experience of the directors, President and Vice President of CAM.
Bradford K. Gallagher is the President and Chief Executive Officer of
Cypress Holdings, the President of CypressTree and the President and a
director of CAM. Prior to founding Cypress Holdings in 1995, Mr. Gallagher, as
President, re-engineered Allmerica Financial Services ("Allmerica"), a 150-
year old mutual life insurance company (formerly SMA Life Insurance Co. of
Worcester, Massachusetts). By developing new strategies to restructure
Allmerica's distribution system, repricing its products and redirecting
Allmerica's activities, Mr. Gallagher helped return Allmerica to record
profitability. Prior to joining Allmerica in 1990, Mr. Gallagher, as Managing
Director of FMR Corp., founded the institutional business of Fidelity
Investments, which grew to have total assets under management of more than
$100 billion during his tenure at Fidelity. He was responsible for the
creation of, and served as the first president of each of, Fidelity
Investments Institutional Services Company (a money manager for many bank and
insurance companies), Fidelity Investments Retirement Services Company (one of
the nation's largest providers of full service 401(k) investment management,
record keeping and client communications services) and Fidelity Advisor Funds
(Fidelity's re-entry into the load fund business). Mr. Gallagher was also
responsible for the creation of the divisions of Fidelity Investments which
became Fidelity Investments Tax-Exempt Services Company (a provider of full
9
<PAGE>
service 403(b) investment management, record keeping and client communications
services) and Fidelity Investments Public Sector Services Company (a money
manager for state, local and municipal governments). Prior to 1979 and before
joining Fidelity Investments, Mr. Gallagher was President and founder of TAD
Depository Corporation. From 1968 to 1974, Mr. Gallagher worked for the New
York Stock Exchange and Depository Trust Company as a senior officer. Mr.
Gallagher's business address is c/o Cypress Holding Company, Inc., 125 High
Street, 14th Floor, Boston, Massachusetts 02110.
J. Christopher Clifford, a managing director of Berkshire Partners LLC, is
the other director of CAM. Mr. Clifford has over fifteen years of experience
investing in private company acquisitions. Mr. Clifford has participated as a
principal in numerous middle market company transactions assisting in such
companies' acquisition, financing and development. Earlier in his career, Mr.
Clifford was responsible for corporate finance activities in a regional
investment banking firm. Mr. Clifford's business address is c/o Berkshire
Partners, LLC, One Boston Place, Boston, Massachusetts 02108.
Joseph T. Grause, Jr. is Executive Vice President of Cypress Holdings and
Vice President and Treasurer of CypressTree. In November 1995, Mr. Grause
joined Mr. Gallagher in establishing Cypress Holdings. Prior to his
association with Cypress Holdings and its affiliates, Mr. Grause was Senior
Vice President of Sales and Marketing for The Shareholder Services Group, a
subsidiary of First Data Corporation. His responsibilities included developing
new sales strategies for the transfer agency and defined contribution
business. From 1990 to 1993 he was a Senior Vice President of Fidelity
Management Trust Company where he managed employee benefit consultant
relations, developed new products between the firm and other Fidelity
divisions, and marketed Fidelity products to the corporate and public defined
benefit plan marketplace. In 1983, he joined Fidelity Institutional Services
Company where he managed Fidelity's marketing efforts to the banking industry.
He developed Fidelity's first marketing programs for bank broker/dealers
utilizing the Plymouth (now, Advisor) Funds. He was responsible for the
creation and development of many of Fidelity's new products and marketing
programs in the early 1980's.
Equity investors in CypressTree include Berkshire Fund IV, L.P.
("Berkshire"), Berkshire Investors, LLC ("Berkshire Investors"), Standish,
Ayer & Wood, Inc. ("Standish"), and the principals and employees of
CypressTree.
Berkshire is an investment limited partnership sponsored by Berkshire
Partners, LLC ("Berkshire Partners"). Berkshire Partners is a private equity
investor based in Boston. Berkshire Partners' managing directors have worked
together since the early 1980s and have completed more than forty private
equity transactions. Its equity capital base of approximately $750 million is
provided by the firm's principals, through entities such as Berkshire
Investors, and by limited partnerships sponsored by Berkshire Partners, such
as Berkshire. Berkshire and Berkshire Investors have been investors in Cypress
Holdings for over a year and investors in CypressTree since its
10
<PAGE>
founding. Berkshire beneficially owns 52.242% of the outstanding voting
securities of CAM through ownership of the outstanding voting securities of
both CypressTree and Cypress Holdings. Berkshire Investors beneficially owns
2.433% of the outstanding voting securities of CAM.
Standish, an investment counseling firm with over $30 billion in assets
under management, provides investment counsel to a wide range of pension,
endowment and high net worth clients and manages roughly $4.5 billion in
institutional mutual funds. Standish offers investment expertise and an array
of domestic and international investment products in the equity and fixed
income arenas. Privately held by 21 employee/directors, Standish employs over
80 investment professionals with a total staff of more than 200. Standish
beneficially owns 23.226% of the outstanding voting securities of CAM.
The principals and employees of CypressTree and Cypress Holdings
beneficially own 22.099% of the outstanding voting securities of CAM through
ownership of the outstanding securities of both CypressTree and Cypress
Holdings. Cypress Holdings beneficially owns 23.226% of the outstanding voting
securities of CAM. Mr. Gallagher and Mr. Grause beneficially own 9.077% and
6.24%, respectively, of the outstanding voting securities of CAM.
Berkshire's business address is c/o Berkshire Partners LLC, One Boston
Place, Boston, Massachusetts 02108. Berkshire's sole general partner is Fourth
Berkshire Associates LLC which has a business address of c/o Berkshire
Partners LLC, One Boston Place, Boston, Massachusetts 02108. Standish's
principal offices are located at One Financial Center, Boston, Massachusetts
02111. The address of the offices of Cypress Holdings, CypressTree and CAM is
125 High Street, Boston, Massachusetts 02110.
The names, titles and principal occupations of the current directors and
executive officers of CAM are set forth in the following table.
<TABLE>
<CAPTION>
NAME TITLE OCCUPATION
- ---- ----------------------- ----------------------
<S> <C> <C>
Bradford K. Gallagher Director and President President and CEO of
Cypress Holdings
J. Christopher Clifford Director Managing Director,
Berkshire Partners LLC
Joseph T. Grause, Jr. Vice President Executive Vice
President of Cypress
Holdings
Leana D. Vacirca Secretary and Treasurer Secretary and
Treasurer
</TABLE>
11
<PAGE>
PROPOSAL 1 -- ELECTION OF TRUSTEES
- ----------------------------------
Listed below are four nominees (the "Nominees") for election to the Board of
Trustees of the Trust (the "Board") to be elected by the shareholders of the
Trust. Upon completion of the Acquisition, it is anticipated that all but one
of the current Trustees will resign, and the Nominees will take office. The
Nominees have been selected and proposed for election by the Nominating
Committee composed of the current Trustees of the Board who are not
"interested persons" (as defined in the 1940 Act) of the Trust, NASL Financial
or CypressTree (the "Disinterested Trustees"). The election of the Nominees is
contingent upon completion of the Acquisition, and, if the Acquisition is not
completed for any reason, it is anticipated that all of the current Trustees
will remain in office.
The Board has asked Don B. Allen, a Trustee since 1988, to remain on the
Board following completion of the Acquisition to help provide continuity of
management. Mr. Allen has served as a trustee of NASL Series Trust, another
mutual fund advised by NASL Financial, since 1985 and will continue in that
position. While the Board does not believe that Mr. Allen's service on both
Boards of Trustees currently poses any conflict, it is possible that a
material conflict could arise because the Trust and NASL Series Trust have
some of the same subadvisers and the same promotional agent. In the event a
material conflict should arise, Mr. Allen has informed the Board that he will
resolve it either by abstaining from voting on the issues and from
consideration of the subject involved or, if there is no other effective way
to satisfy the matter, by resigning as a Trustee of the Trust and continuing
to serve as a trustee of NASL Series Trust.
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. Because the Trust does not hold regular annual
shareholder meetings, each Nominee, if elected, will hold office for an
indefinite term until his successor is elected and qualified or until he dies,
retires, resigns, is removed or becomes disqualified.
The following table presents certain information regarding the Nominees,
including their ages and principal occupations, which, unless specific dates
are shown, are of more than five years duration.
12
<PAGE>
<TABLE>
<CAPTION>
YEAR FIRST PRINCIPAL OCCUPATIONS
BECAME A AND DIRECTORSHIPS
NAME AND POSITION WITH TRUST AGE TRUSTEE DURING THE LAST FIVE YEARS
---------------------------- --- ---------- ------------------------------------
<C> <C> <C> <S>
WILLIAM F. ACHTMEYER, 42 N/A Mr. Achtmeyer is co-founder,
Nominee President and Chief Executive
Officer of The Parthenon Group, a
strategic advisory consulting and
investment firm.
WILLIAM F. DEVIN, 58 N/A Mr. Devin is Vice Chairman of the
Nominee Boston Stock Exchange and serves on
its Board of Governors and a retired
Executive Vice President of Fidelity
Capital Markets, a division of
National Financial Services
Corporation in Boston.
BRADFORD K. GALLAGHER*, 53 N/A Mr. Gallagher is the President of
Nominee CypressTree and President and Chief
Executive Officer of Cypress
Holdings, which he founded in 1995.
Prior to that, he was President of
Allmerica Financial Services, a
mutual life insurance company.
KENNETH J. LAVERY, 47 N/A Mr. Lavery is a Vice President of
Nominee Massachusetts Capital Resource
Company, a private investment fund.
</TABLE>
- -----------
* Interested Person of CAM
13
<PAGE>
The following table presents certain information regarding the current
Trustees, including their ages and principal occupations, which, unless
specific dates are shown, are of more than five years duration.
<TABLE>
<CAPTION>
YEAR FIRST PRINCIPAL OCCUPATIONS
BECAME A AND DIRECTORSHIPS
NAME AND POSITION WITH TRUST AGE TRUSTEE DURING THE LAST FIVE YEARS
---------------------------- --- ---------- ------------------------------------
<C> <C> <C> <S>
DON B. ALLEN, 68 1988 Mr. Allen is a Senior Lecturer at
Trustee University of Rochester -- William
Simon Graduate School of Business
Administration.
CHARLES L. BARDELIS, 55 1988 Mr. Bardelis is the President and
Trustee 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 Mediator
Trustee at Judicial Arbitration Mediation
Services ("JAMS/Endispute") since
June 1, 1994. Prior to that time, he
was a Partner at Goodwin, Procter &
Hoar, a law firm.
ROBERT J. MYERS, 84 1988 Mr. Myers is a Director of Scudder
Trustee AARP Investment Funds and a member
of the Prospective Payment
Assessment Commission. He is also a
self-employed actuarial consultant.
JOHN D. RICHARDSON*, 58 1996 Mr. Richardson is currently the
Trustee 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.
F. DAVID ROLWING, 62 1996 Mr. Rolwing is the President,
Trustee Chairman and CEO of Montgomery
Mutual Insurance Company.
</TABLE>
- -----------
* Interested Person of NASL Financial
14
<PAGE>
Compensation
Effective January 1, 1997 the Trust pays each Trustee who is not an officer
of its investment adviser an annual retainer of $3,000 plus $750 per meeting
attended in person and $200 for any meeting conducted by telephone, together
with out-of-pocket expenses relating to attendance at meetings. For the
Trust's fiscal year ended October 31, 1996, the Trustees of the Trust as a
group received fees in the amount of $33,000.
The table below sets forth the compensation received by each of the trustees
of the Trust during the Trust's fiscal year ended October 31, 1996. None of
the Nominees received any compensation from the Trust Complex (as defined
below) during such period.
COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL
PENSION OR COMPENSATION
AGGREGATE RETIREMENT FROM TRUST
COMPENSATION BENEFITS ESTIMATED COMPLEX
FROM TRUST FOR ACCRUED ANNUAL FOR YEAR
YEAR ENDED AS PART OF BENEFITS ENDED
OCTOBER 31, TRUST UPON OCTOBER 31,
NAME OF PERSON, POSITION 1996 EXPENSES RETIREMENT 1996 (1)(2)
- ----------------------------- -------------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Don B. Allen,................ $8,250 $ 0 $ 0 $46,750
Trustee
Charles L. Bardelis,......... $8,250 $ 0 $ 0 $46,750
Trustee
Samuel Hoar,................. $8,250 $ 0 $ 0 $46,750
Trustee
Brian L. Moore*,............. $ 0 $ 0 $ 0 $ 0
former trustee
Robert J. Myers,............. $8,250 $ 0 $ 0 $46,750
Trustee
John D. Richardson*,......... $ 0 $ 0 $ 0 $ 0
Trustee
F. David Rolwing,............ $ 0 $ 0 $ 0 $12,000
Trustee
</TABLE>
- -----------
* Interested Person of NASL Financial.
(1) Compensation received for services as Trustee.
(2) Trust Complex includes all Portfolios of the Trust, all portfolios of NASL
Series Trust and all portfolios of Manulife Series Fund, Inc., an
investment company for which an affiliate of NASL Financial served as
investment adviser during the year ended October 31, 1996.
The Board met five times during the Trust's last fiscal year. The Board also
has a standing Audit Committee currently 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
15
<PAGE>
accountants and to consider the possible effect of such services on their
independence. In December of 1996, the Board established a Nominating
Committee composed of Trustees who are not Interested Persons. The Board has
not created a Compensation Committee.
Required Vote
Nominees 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.
16
<PAGE>
PROPOSAL 2 -- APPROVAL OF AN INVESTMENT ADVISORY AGREEMENT BETWEEN CAM AND THE
- ------------------------------------------------------------------------------
TRUST
-----
NASL Financial currently serves as investment adviser of the Trust pursuant
to an advisory agreement with the Trust (the "NASL Financial Advisory
Agreement"). As discussed above, in connection with the Acquisition, the Board
is proposing that the Trust's shareholders approve an investment advisory
agreement between the Trust and CAM (the "CAM Advisory Agreement"), pursuant
to which CAM would replace NASL Financial as the Trust's investment adviser
upon completion of the Acquisition. The CAM Advisory Agreement is
substantially similar to the NASL Financial Advisory Agreement. A description
of the CAM Advisory Agreement, including the services to be provided by CAM
thereunder, is set forth below, and is qualified in its entirety by reference
to the form of CAM Advisory Agreement attached hereto as Exhibit B.
Effectiveness of the CAM Advisory Agreement is contingent upon completion of
the Acquisition. If the Acquisition is not completed for any reason, the
current investment advisory agreement with NASL Financial will remain in place
and NASL Financial will continue to serve as the Trust's investment adviser.
Under the terms of the CAM Advisory Agreement, CAM will administer the
business and affairs of the Trust, be responsible for performing and paying
for various services for the Trust, including, subject to the Board's
approval, selecting subadvisers to manage the Portfolios and paying the
subadvisers' fees from the advisory fees it receives. CAM will monitor the
compliance of each subadviser with the investment objectives and related
policies as stated in the Trust's Prospectus, review the performance of each
subadviser and report periodically on such performance to the Board.
The CAM Advisory Agreement contains the same terms and conditions, including
advisory fee levels, as are contained in the NASL Financial Advisory
Agreement. In addition, CypressTree has agreed to use best efforts to cause
there not to be any increases in advisory fees charged to the Portfolios or
expense limitations applicable to the Portfolios for at least two years
following completion of the Acquisition, and has advised the Board that
following the Acquisition CAM will continue to provide the same high-quality
services currently provided by NASL Financial. CypressTree does not intend to
recommend any changes in the current subadvisers to the Portfolios, who would
continue to serve as the Portfolios' subadvisers upon completion of the
Acquisition pursuant to the agreements described in Proposals 3-10.
For additional information regarding the NASL Financial Advisory Agreement
and the CAM Advisory Agreement, see "Additional Information--Certain
Provisions in the Advisory and Subadvisory Agreements" below.
17
<PAGE>
Advisory Fee Rates
As compensation for its services, CAM will receive a fee from each Portfolio
at the same rate as currently in effect for the fee paid to NASL Financial.
The fee is stated as an annual percentage of the current value of the net
assets of such Portfolio. The fee, which is accrued daily and payable monthly
in arrears, 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 Portfolio at the close of business on the previous business day of the
Trust.
The following are the rates of advisory fees that the Portfolios currently
pay to NASL Financial under the NASL Financial Advisory Agreement and would
pay to CAM pursuant to the CAM Advisory Agreement:
<TABLE>
<CAPTION>
BETWEEN BETWEEN
$50,000,000 $200,000,000
FIRST AND AND EXCESS OVER EXPENSE
FUNDS $50,000,000 $200,000,000 $500,000,000 $500,000,000 LIMITATION*
- ------------------------ ----------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
International Small Cap
Fund................... 1.050 % 1.000 % .900 % .800 % 1.55 %
Small/Mid Cap Fund...... .925 % .900 % .875 % .850 % 1.325 %
Global Equity Fund...... .900 % .900 % .700 % .700 % 1.40 %
Growth Equity Fund...... .900 % .850 % .825 % .800 % 1.30 %
International Growth and
Income Fund............ .900 % .850 % .800 % .750 % 1.40 %
Growth and Income Fund.. .725 % .675 % .625 % .550 % .99 %
Equity-Income Fund...... .800 % .700 % .600 % .600 % 1.065 %
Balanced Fund........... .775 % .725 % .675 % .625 % 1.040 %
Strategic Income Fund... .750 % .700 % .650 % .600 % 1.15 %
Investment Quality Bond
Fund................... .600 % .600 % .525 % .475 % .90 %
National Municipal Bond
Fund................... .600 % .600 % .600 % .600 % .85 %
U.S. Government
Securities Fund........ .600 % .600 % .525 % .475 % .90 %
Money Market Fund....... .200 % .200 % .200 % .145 % .50 %
</TABLE>
- -----------
* Pursuant to both the CAM and NASL Financial Advisory Agreements, the
investment adviser is obligated to reduce a Portfolio's advisory fee, or, if
necessary, to reimburse the Portfolio, in order to prevent the expenses of a
Portfolio (excluding taxes, portfolio brokerage commissions, interest,
certain litigation and indemnification expenses, extraordinary expenses and
all of the Portfolio's distribution fees) from exceeding the lower of the
most restrictive expense limitation imposed by applicable state law or the
fixed expense limitation set forth in the table. As of the date of this
proxy statement, the operative limitation described in the preceding
sentence is the expense limitations set forth in the table. As provided in
both the CAM and NASL Financial Advisory Agreements, the expense limitations
may be terminated by the investment adviser at any time on 30 days' written
notice; however, as previously discussed, CypressTree has agreed to use best
efforts not to terminate such fixed expense limitations for at least two
years following completion of the Acquisition.
18
<PAGE>
Advisory Fees Paid
For the fiscal year ended October 31, 1996, the Portfolios collectively paid
NASL Financial $5,398,787 in advisory fees. The advisory fees paid by each
Portfolio for such fiscal year, and the amounts reimbursed to each Portfolio
pursuant to the expense limitation arrangement described above, are as
follows:
<TABLE>
<CAPTION>
ADVISORY AMOUNT NET
PORTFOLIO FEES PAID REIMBURSED ADVISORY FEE
--------- ---------- ---------- ------------
<S> <C> <C> <C>
Small/Mid Cap Fund........................ $ 63,467* $ 56,049* $ 7,418
International Small Cap Fund.............. 47,966* 38,967* 8,999
Growth Equity Fund........................ 40,762* 39,036* 1,726
Global Equity Fund........................ 1,174,747 85,386 1,089,361
Equity-Income Fund........................ 936,036 276,730 659,306
Growth and Income Fund.................... 784,990 230,425 554,565
International Growth and Income Fund...... 236,517 51,775 184,742
Strategic Income Fund..................... 415,019 70,527 344,492
Investment Quality Bond Fund.............. 127,602 68,038 59,564
U.S. Government Securities Fund........... 693,407 178,180 515,227
National Municipal Bond Fund.............. 121,407 62,875 58,532
Money Market Fund......................... 38,258 92,710 -54,452
Balanced Fund............................. 718,609 192,008 526,601
---------- ---------- ----------
Total.................................... $5,398,787 $1,442,706 $3,956,081
========== ========== ==========
</TABLE>
- -----------
* For the period March 4, 1996 (commencement of operations) to October 31,
1996.
For information regarding other services currently provided to the Trust by
NASL Financial and to be provided to the Trust by CAM upon completion of the
Acquisition, as well as reimbursement and compensation received for such
services, see "Additional Information -- Advisory Arrangements" and "-- Other
Payments to the Adviser and Its Affiliates."
Management and Control of CAM
For information on the principal executive officers and directors of CAM,
see "Information Concerning CypressTree" above.
Portfolio Brokerage
Information regarding brokerage transactions for the Portfolios is set forth
under "Additional Information--Portfolio Brokerage" below.
Other Investment Companies Advised by CAM
CAM does not currently serve as investment adviser to any other investment
companies.
Shareholder and Board Approval of the Advisory Agreements
The NASL Financial Advisory Agreement was initially approved by the Board on
September 28, 1995 and by the shareholders of each Portfolio on December 5,
19
<PAGE>
1995. The foregoing approvals occurred in connection with an indirect change
in control of NASL Financial due to the merger of Manulife, NASL Financial's
current parent, with NASL Financial's then-parent, North American Life
Assurance Company ("NAL"). Amendments to the NASL Financial Advisory
Agreement, increasing the advisory fees with respect to the Equity-Income Fund
and Balanced Fund (and increasing such Portfolios' expense limitations by the
same amounts), were approved by the Board on September 27, 1996 and by
shareholders of the Equity-Income Fund and Balanced Fund, respectively, on
December 20, 1996. The NASL Financial Advisory Agreement was most recently
approved by the Board on June 26, 1997.
Board Considerations
At a meeting held on June 27, 1997, the Board, including the Disinterested
Trustees, approved the CAM Advisory Agreement and recommended that
shareholders of the Trust approve such agreement.
In approving the CAM Advisory Agreement and determining to submit it to
shareholders for their approval, the Board has determined that the agreement
is in the best interests of the Trust and its shareholders. The Board believes
that the CAM Advisory Agreement will enable the Trust to obtain high-quality
services at costs which it deems appropriate and reasonable. In connection
with its review of the CAM Advisory Agreement, the Board requested and
reviewed, with the assistance of its own legal counsel, materials furnished by
CypressTree and NASL Financial, including financial and other information
regarding the personnel, operations and financial condition of CAM and its
affiliates. At its June 27, 1997 meeting, as well as a preliminary meeting
held on April 4, 1997, the Board met with representatives of CypressTree,
Berkshire and Standish to discuss the Acquisition and its consequences for the
Trust.
In approving the CAM Advisory Agreement, the Board focused primarily on the
overall experience and reputation of CypressTree's principal officers and the
reputation and experience of CypressTree's principal shareholders, Berkshire
and Standish, the fact that CypressTree does not intend to recommend any
changes in the current subadvisers to the Portfolios, who would continue to
serve as the Portfolios' subadvisers upon completion of the Acquisition, and
the fact that the NASL Financial Advisory Agreement and the CAM Advisory
Agreement, including the terms relating to the services to be performed
thereunder and the expenses and fees payable by the Trust, are substantially
similar. In connection with these considerations, the Board was provided with
information regarding fees payable by similar investment companies, as well as
services provided to such companies and their performance records, and the
Board considered the cost and expected profitability to CAM of acting as each
Portfolio's investment adviser. The Board also considered the commitment of
CypressTree to maintain and enhance the advisory and distribution services
currently provided to the Trust, and, in particular, its current intentions
with respect to the Trust following the Acquisition. The Board also considered
the likelihood of CAM's continued financial stability following completion of
the Acquisition, and whether
20
<PAGE>
there are aspects of the Acquisition likely to affect the ability of CAM to
retain and attract qualified personnel. In connection with these
considerations, the Board considered possible alternatives to approval of the
CAM Advisory Agreement.
Based upon its review of the above factors, the Board concluded that the CAM
Advisory Agreement is in the best interests of each Portfolio and its
shareholders.
Certain officers of the Trust and one Trustee who is an Interested Person of
NASL Financial may have a substantial interest in the approval of the CAM
Advisory Agreement as a result of their positions with NASL Financial and its
affiliates, as described above under "Information Concerning NASL Financial."
Required Vote
Approval of the CAM Advisory Agreement with respect to a Portfolio will
require a Majority Vote of the shareholders of such Portfolio.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS OF THE TRUST VOTE "FOR" PROPOSAL 2.
21
<PAGE>
PROPOSAL 3 -- APPROVAL OF AN INVESTMENT SUBADVISORY AGREEMENT BETWEEN CAM AND
- -----------------------------------------------------------------------------
FRED ALGER MANAGEMENT, INC. WITH RESPECT TO THE SMALL/MID CAP
-------------------------------------------------------------
FUND
----
Fred Alger Management, Inc. ("Alger") currently serves as the investment
subadviser of the Small/Mid Cap Fund pursuant to an investment subadvisory
agreement with NASL Financial (the "Existing Alger Agreement"). In connection
with the Acquisition, the Board is proposing that shareholders of the
Portfolio approve an investment subadvisory agreement between CAM, which will
serve as the Trust's investment adviser following the Acquisition, and Alger,
pursuant to which Alger will continue to serve as the Portfolio's investment
subadviser following the Acquisition (the "New Alger Agreement"). The New
Alger Agreement is substantially similar to the Existing Alger Agreement. A
description of the New Alger Agreement, including the services to be provided
by Alger thereunder, is set forth below, and is qualified in its entirety by
reference to the form of agreement attached hereto as Exhibit C.
Effectiveness of the New Alger Agreement is contingent upon completion of
the Acquisition. If the Acquisition is not completed for any reason, the
Existing Alger Agreement with NASL Financial will remain in effect.
Under the terms of the New Alger Agreement, Alger will continue to manage
the investment and reinvestment of the assets of the Small/Mid Cap Fund,
subject to the supervision of the adviser and 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 New Alger
Agreement contains similar terms and conditions, including identical
subadvisory fee levels, as the Existing Alger Agreement.
For additional information regarding the Existing Alger Agreement and New
Alger Agreement, see "Additional Information--Certain Provisions in the
Advisory and Subadvisory Agreements" below.
Subadvisory Fee Rates
As compensation for its services, Alger receives a fee from NASL Financial
under the Existing Alger Agreement and would receive a fee from CAM under the
New Alger Agreement at the same rates. The fee is stated as an annual
percentage of the current value of the net assets of the Small/Mid Cap Fund.
The fee, which is accrued daily and payable monthly in arrears, is calculated
for each day by multiplying the fraction of one over the number of calendar
days in the year by the
22
<PAGE>
annual percentage prescribed for the Portfolio, and multiplying this product
by the value of the net assets of the Small/Mid Cap Fund at the close of
business on the previous business day of the Trust.
Under the Existing and New Alger Agreements, Alger is entitled to receive a
fee equal to .525% of the first $50 million of the Portfolio's average daily
net assets, .500% of the Portfolio's average daily net assets between $50
million and $200 million, .475% of the Portfolio's average daily net assets
between $200 million and $500 million and .450% of the Portfolio's average
daily net assets in excess of $500 million.
Subadvisory Fees Paid
For the fiscal year ended October 31, 1996 (beginning from March 4, 1996,
when the Portfolio commenced operations), NASL Financial paid $36,022 in
subadvisory fees to Alger for management of the Small/Mid Cap Fund.
Management and Control of Alger
Alger is located at 75 Maiden Lane, New York, New York 10038 and is a
wholly-owned subsidiary of Fred Alger & Company, Incorporated, which in turn
is wholly owned by Alger Associates, Inc, a financial services holding
company. For information on the principal executive officers and directors of
Alger, see Exhibit A hereto.
Portfolio Brokerage
Information regarding brokerage transactions for the Small/Mid Cap Fund is
set forth under "Additional Information--Portfolio Brokerage" below.
Other Investment Companies Advised by Alger
Alger manages one fund with investment objectives similar to the Small/Mid
Cap Fund, as follows:
<TABLE>
<CAPTION>
NET ASSETS
FUND INVESTMENT OBJECTIVE SUBADVISORY FEE (10/31/96)
---- ------------------------- ---------------- ------------
<C> <S> <C> <C>
NASL Series Trust Long term capital .525% on the $131,464,266
Small/Mid Cap Trust appreciation by primarily first $50
investing in companies million of net
with market assets; .500% on
capitalization between the next $150
$500 million & $5 billion million of net
assets; .475% on
the next $300
million in net
assets; and
.450% on all
assets over $500
million
</TABLE>
23
<PAGE>
Shareholder and Board Approval of the Existing Alger Agreement
The Existing Alger Agreement was initially approved by the Board on December
15, 1995 and by the sole shareholder of the Small/Mid Cap Fund on March 1,
1996. The foregoing approval occurred in connection with the establishment of
the Portfolio and the appointment of Alger as its subadviser. The Existing
Alger Agreement was most recently approved by the Board on June 26, 1997.
Board Considerations
At a meeting held on June 27, 1997, the Board, including the Disinterested
Trustees, approved the New Alger Agreement and recommended that shareholders
of the Portfolio approve such agreement.
In approving the New Alger Agreement and determining to submit it to
shareholders for their approval, the Board has determined that the agreement
is in the best interests of the Portfolio and its shareholders. The Board
believes that the New Alger Agreement will enable the Portfolio to obtain
high-quality services at costs which it deems appropriate and reasonable. In
connection with its review of the New Alger Agreement, the Board requested and
reviewed, with the assistance of its own legal counsel, materials furnished by
Alger, including information regarding the personnel, operations and financial
condition of Alger.
In approving the New Alger Agreement, the Board focused primarily on the
nature and quality of the services to date provided by Alger to the Portfolio,
which are expected to continue to be provided following completion of the
Acquisition, and the fact that the terms and conditions of the Existing Alger
Agreement and the New Alger Agreement, including the terms relating to the
services to be performed thereunder and the expenses and fees payable
therefor, are substantially similar. In this regard, the Board placed emphasis
on the continuity provided by maintaining the same investment subadviser for
the Portfolio following the Acquisition. The Board also considered the overall
experience and reputation of Alger, as well as the cost and profitability to
Alger of acting as subadviser to the Portfolio. In connection with these
considerations, the Board was provided with information regarding fees payable
by similar investment companies, as well as services provided to such
companies and their performance records, and information regarding Alger's
management of investment companies with objectives and policies similar to the
Portfolio and the fees payable therefor. In connection with these
considerations, the Board considered possible alternatives to approval of the
New Alger Agreement.
Based upon its review of the above factors, the Board concluded that the New
Alger Agreement is in the best interests of the Portfolio and its
shareholders.
Certain officers of the Trust and one Trustee who is an Interested Person of
NASL Financial may have a substantial interest in the approval of the New
Alger Agreement as a result of their positions with NASL Financial and its
affiliates, as described above under "Information Concerning NASL Financial."
24
<PAGE>
Required Vote
Approval of the New Alger Agreement will require a Majority Vote of the
shareholders of the Small/Mid Cap Fund.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS OF THE SMALL/MID CAP FUND VOTE "FOR" PROPOSAL 3.
25
<PAGE>
PROPOSAL 4A -- APPROVAL OF AN INVESTMENT SUBADVISORY AGREEMENT BETWEEN CAM AND
- ------------------------------------------------------------------------------
FOUNDERS ASSET MANAGEMENT, INC. WITH RESPECT TO THE GROWTH
----------------------------------------------------------
EQUITY FUND
-----------
Founders Asset Management, Inc. ("Founders") currently serves as the
investment subadviser of the Growth Equity Fund pursuant to an investment
subadvisory agreement with NASL Financial (the "Existing Founders (Growth
Equity) Agreement"). In connection with the Acquisition, the Board is
proposing that shareholders of the Portfolio approve an investment subadvisory
agreement between CAM, which will serve as the Trust's investment adviser
following the Acquisition, and Founders, pursuant to which Founders will
continue to serve as the Portfolio's investment subadviser following the
Acquisition (the "New Founders (Growth Equity) Agreement"). The New Founders
(Growth Equity) Agreement is substantially similar to the Existing Founders
(Growth Equity) Agreement. A description of the New Founders (Growth Equity)
Agreement, including the services to be provided by Founders thereunder, is
set forth below, and is qualified in its entirety by reference to the form of
agreement attached hereto as Exhibit D.
Effectiveness of the New Founders (Growth Equity) Agreement is contingent
upon completion of the Acquisition. If the Acquisition is not completed for
any reason, the Existing Founders (Growth Equity) Agreement with NASL
Financial will remain in effect.
Under the terms of the New Founders (Growth Equity) Agreement, Founders will
continue to manage the investment and reinvestment of the assets of the Growth
Equity Fund, subject to the supervision of the adviser and 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 New Founders (Growth Equity) Agreement contains similar terms
and conditions, including identical subadvisory fee levels, as the Existing
Founders (Growth Equity) Agreement.
For additional information regarding the Existing Founders (Growth Equity)
Agreement and New Founders (Growth Equity) Agreement, see "Additional
Information -- Certain Provisions in the Advisory and Subadvisory Agreements"
below.
26
<PAGE>
Subadvisory Fee Rates
As compensation for its services, Founders receives a fee from NASL
Financial under the Existing Founders (Growth Equity) Agreement and would
receive a fee from CAM under the New Founders (Growth Equity) Agreement at the
same rates. The fee is stated as an annual percentage of the current value of
the net assets of the Growth Equity Fund. The fee, which is accrued daily and
payable monthly in arrears, 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 Growth Equity Fund at the close of business on
the previous business day of the Trust.
Under the Existing and New Founders (Growth Equity) Agreements, Founders is
entitled to receive a fee equal to .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, .425% of the Portfolio's
average daily net assets between $200 million and $500 million and .400% of
the Portfolio's average daily net assets in excess of $500 million.
Subadvisory Fees Paid
For the fiscal year ended October 31, 1996 (beginning from March 4, 1996,
when the Portfolio commenced operations), NASL Financial paid $22,646 in
subadvisory fees to Founders for management of the Growth Equity Fund.
Management and Control of Founders
Founders is located at 2930 East Third Avenue, Denver, Colorado 80206. 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 hereto.
Portfolio Brokerage
Information regarding brokerage transactions for the Growth Equity Fund is
set forth under "Additional Information -- Portfolio Brokerage" below.
27
<PAGE>
Other Investment Companies Advised by Founders
Founders manages three funds with investment objectives similar to the
Growth Equity Fund. They are:
<TABLE>
<CAPTION>
NET ASSETS
FUND INVESTMENT OBJECTIVE ADVISORY/SUBADVISORY FEE (10/31/96)
---- --------------------------- ------------------------ ------------
<C> <C> <S> <C>
Founders Growth Fund Long-term growth of capital Advisory fee of 1.00% on $917,525,536
the first $30 million of
net assets, 0.75% on the
next $270 million of net
assets, 0.70% on the
next $200 million of net
assets, and 0.65% on all
assets over $500 million
NASL Series Trust -- Long-term growth of capital Subadvisory fee of 0.45% $ 36,699,752
Growth Trust on the first $50 million
of net assets, 0.45% on
the next $150 million of
net assets, 0.35% on the
next $300 million of net
assets, and 0.30% on all
assets over $500 million
New England Star Long-term growth of capital Subadvisory fee of 0.55% $193,742,354
Advisers Fund(1) on the first $50 million
of net assets and 0.50%
on all assets over $50
million
</TABLE>
- -----------
(1) This fund has four subadvisers, each managing a different segment of the
fund's portfolio. Founders receives a subadvisory fee only with respect to
the segment of the fund it manages. The net asset amount shown for this
fund reflects only Founders' segment.
Shareholder and Board Approval of the Existing Founders (Growth Equity)
Agreement
The Existing Founders (Growth Equity) Agreement was initially approved by
the Board on December 15, 1995 and by the sole shareholder of the Growth
Equity Fund on March 1, 1996. The foregoing approval occurred in connection
with the establishment of the Portfolio and the appointment of Founders as its
subadviser. The Existing Founders (Growth Equity) Agreement was most recently
approved by the Board on June 26, 1997.
Board Considerations
At a meeting held on June 27, 1997, the Board, including the Disinterested
Trustees, approved the New Founders (Growth Equity) Agreement and recommended
that shareholders of the Portfolio approve such agreement.
In approving the New Founders (Growth Equity) Agreement and determining to
submit it to shareholders for their approval, the Board has determined that
the agreement is in the best interests of the Portfolio and its shareholders.
The Board believes that the New Founders (Growth Equity) Agreement will enable
the Portfolio
28
<PAGE>
to obtain high-quality services at costs which it deems appropriate and
reasonable. In connection with its review of the New Founders (Growth Equity)
Agreement, the Board requested and reviewed, with the assistance of its own
legal counsel, materials furnished by Founders, including information
regarding the personnel, operations and financial condition of Founders.
In approving the New Founders (Growth Equity) Agreement, the Board focused
primarily on the nature and quality of the services to date provided by
Founders to the Portfolio, which are expected to continue to be provided
following completion of the Acquisition, and the fact that the terms and
conditions of the Existing Founders (Growth Equity) Agreement and the New
Founders (Growth Equity) Agreement, including the terms relating to the
services to be performed thereunder and the expenses and fees payable
therefor, are substantially similar. In this regard, the Board placed emphasis
on the continuity provided by maintaining the same investment subadviser for
the Portfolio following the Acquisition. The Board also considered the overall
experience and reputation of Founders, as well as the cost and profitability
to Founders of acting as subadviser to the Portfolio. In connection with these
considerations, the Board was provided with information regarding fees payable
by similar investment companies, as well as services provided to such
companies and their performance records, and information regarding Founders'
management of investment companies with objectives and policies similar to the
Portfolio and the fees payable therefor. In connection with these
considerations, the Board considered possible alternatives to approval of the
New Founders (Growth Equity) Agreement.
Based upon its review of the above factors, the Board concluded that the New
Founders (Growth Equity) Agreement is in the best interests of the Portfolio
and its shareholders.
Certain officers of the Trust and one Trustee who is an Interested Person of
NASL Financial may have a substantial interest in the approval of the New
Founders (Growth Equity) Agreement as a result of their positions with NASL
Financial and its affiliates, as described above under "Information Concerning
NASL Financial."
Required Vote
Approval of the New Founders (Growth Equity) Agreement will require a
Majority Vote of the shareholders of the Growth Equity Fund.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS OF THE GROWTH EQUITY FUND VOTE "FOR" PROPOSAL 4A.
29
<PAGE>
PROPOSAL 4B -- APPROVAL OF AN INVESTMENT SUBADVISORY AGREEMENT BETWEEN CAM AND
- ------------------------------------------------------------------------------
FOUNDERS ASSET MANAGEMENT, INC. WITH RESPECT TO THE BALANCED
------------------------------------------------------------
FUND
----
Founders Asset Management, Inc. ("Founders") currently serves as the
investment subadviser of the Balanced Fund pursuant to an investment
subadvisory agreement with NASL Financial (the "Existing Founders (Balanced)
Agreement"). In connection with the Acquisition, the Board is proposing that
shareholders of the Portfolio approve an investment subadvisory agreement
between CAM, which will serve as the Trust's investment adviser following the
Acquisition, and Founders, pursuant to which Founders will continue to serve
as the Portfolio's investment subadviser following the Acquisition (the "New
Founders (Balanced) Agreement"). The New Founders (Balanced) Agreement is
substantially similar to the Existing Founders (Balanced) Agreement. A
description of the New Founders (Balanced) Agreement, including the services
to be provided by Founders thereunder, is set forth below, and is qualified in
its entirety by reference to the form of agreement attached hereto as Exhibit
D.
Effectiveness of the New Founders (Balanced) Agreement is contingent upon
completion of the Acquisition. If the Acquisition is not completed for any
reason, the Existing Founders (Balanced) Agreement with NASL Financial will
remain in effect.
Under the terms of the New Founders (Balanced) Agreement, Founders will
continue to manage the investment and reinvestment of the assets of the
Balanced Fund, subject to the supervision of the adviser and 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 New Founders (Balanced) Agreement contains similar terms and
conditions, including identical subadvisory fee levels, as the Existing
Founders (Balanced) Agreement.
For additional information regarding the Existing Founders (Balanced)
Agreement and New Founders (Balanced) Agreement, see "Additional Information--
Certain Provisions in the Advisory and Subadvisory Agreements" below.
Subadvisory Fee Rates
As compensation for its services, Founders receives a fee from NASL
Financial under the Existing Founders (Balanced) Agreement and would receive a
fee from CAM under the New Founders (Balanced) Agreement at the same rates.
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 in arrears, is calculated
30
<PAGE>
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.
Under the Existing and New Founders (Balanced) Agreements, Founders is
entitled to receive a fee equal to .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.
Subadvisory Fees Paid
For the fiscal year ended October 31, 1996, NASL Financial paid $307,622 in
subadvisory fees to the subadviser of the Balanced Fund, of which $25,402 was
paid to Founders (and the balance of which was paid to a prior subadviser) for
management of the Balanced Fund.
Management and Control of Founders
Founders is located at 2930 East Third Avenue, Denver, Colorado 80206. 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 hereto.
Portfolio Brokerage
Information regarding brokerage transactions for the Balanced Fund is set
forth under "Additional Information--Portfolio Brokerage" below.
Other Investment Companies Advised by Founders
Founders manages two funds with investment objectives similar to the
Balanced Fund. They are:
<TABLE>
<CAPTION>
NET ASSETS
FUND INVESTMENT OBJECTIVE ADVISORY/SUBADVISORY FEE (10/31/96)
---- -------------------- ------------------------ ------------
<C> <C> <S> <C>
Founders Balanced Fund Current income and Advisory fee of 0.65% on $359,449,989
capital appreciation the first $250 million
of net assets, 0.60% on
the next $250 million of
net assets, 0.55% on the
next $250 million of net
assets, and 0.50% on all
assets over $750 million
NASL Series Trust -- Current income and Subadvisory fee of $131,700,853
Balanced Trust capital appreciation 0.375% on the first $50
million of net assets,
0.325% on the next $150
million of net assets,
0.275% on the next $300
million of net assets,
and 0.225% on all assets
over $500 million
</TABLE>
31
<PAGE>
Shareholder and Board Approval of the Existing Founders (Balanced) Agreement
The Existing Founders (Balanced) Agreement was initially approved by the
Board on September 27, 1996 and by the shareholders of the Balanced Fund on
December 20, 1996. The foregoing approval occurred in connection with a change
of subadviser to the Portfolio. The Existing Founders (Balanced) Agreement was
most recently approved by the Board on June 26, 1997.
Board Considerations
At a meeting held on June 27, 1997, the Board, including the Disinterested
Trustees, approved the New Founders (Balanced) Agreement and recommended that
shareholders of the Portfolio approve such agreement.
In approving the New Founders (Balanced) Agreement and determining to submit
it to shareholders for their approval, the Board has determined that the
agreement is in the best interests of the Portfolio and its shareholders. The
Board believes that the New Founders (Balanced) Agreement will enable the
Portfolio to obtain high-quality services at costs which it deems appropriate
and reasonable. In connection with its review of the New Founders (Balanced)
Agreement, the Board requested and reviewed, with the assistance of its own
legal counsel, materials furnished by Founders, including information
regarding the personnel, operations and financial condition of Founders.
In approving the New Founders (Balanced) Agreement, the Board focused
primarily on the nature and quality of the services to date provided by
Founders to the Portfolio, which are expected to continue to be provided
following completion of the Acquisition, and the fact that the terms and
conditions of the Existing Founders (Balanced) Agreement and the New Founders
(Balanced) Agreement, including the terms relating to the services to be
performed thereunder and the expenses and fees payable therefor, are
substantially similar. In this regard, the Board placed emphasis on the
continuity provided by maintaining the same investment subadviser for the
Portfolio following the Acquisition. The Board also considered the overall
experience and reputation of Founders, as well as the cost and profitability
to Founders of acting as subadviser to the Portfolio. In connection with these
considerations, the Board was provided with information regarding fees payable
by similar investment companies, as well as services provided to such
companies and their performance records, and information regarding Founders'
management of investment companies with objectives and policies similar to the
Portfolio and the fees payable therefor. In connection with these
considerations, the Board considered possible alternatives to approval of the
New Founders (Balanced) Agreement.
Based upon its review of the above factors, the Board concluded that the New
Founders (Balanced) Agreement is in the best interests of the Portfolio and
its shareholders.
Certain officers of the Trust and one Trustee who is an Interested Person of
NASL Financial may have a substantial interest in the approval of the New
Founders
32
<PAGE>
(Balanced) Agreement as a result of their positions with NASL Financial and
its affiliates, as described above under "Information Concerning NASL
Financial."
Required Vote
Approval of the New Founders (Balanced) Agreement will require a Majority
Vote of the shareholders of the Balanced Fund.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS OF THE BALANCED FUND VOTE "FOR" PROPOSAL 4B.
33
<PAGE>
PROPOSAL 4C -- APPROVAL OF AN INVESTMENT SUBADVISORY AGREEMENT BETWEEN CAM AND
- ------------------------------------------------------------------------------
FOUNDERS ASSET MANAGEMENT, INC. WITH RESPECT TO THE
---------------------------------------------------
INTERNATIONAL SMALL CAP FUND
----------------------------
Founders Asset Management, Inc. ("Founders") currently serves as the
investment subadviser of the International Small Cap Fund pursuant to an
investment subadvisory agreement with NASL Financial (the "Existing Founders
(International Small Cap) Agreement"). In connection with the Acquisition, the
Board is proposing that shareholders of the Portfolio approve an investment
subadvisory agreement between CAM, which will serve as the Trust's investment
adviser following the Acquisition, and Founders, pursuant to which Founders
will continue to serve as the Portfolio's investment subadviser following the
Acquisition (the "New Founders (International Small Cap) Agreement"). The New
Founders (International Small Cap) Agreement is substantially similar to the
Existing Founders (International Small Cap) Agreement. A description of the
New Founders (International Small Cap) Agreement, including the services to be
provided by Founders thereunder, is set forth below, and is qualified in its
entirety by reference to the form of agreement attached hereto as Exhibit D.
Effectiveness of the New Founders (International Small Cap) Agreement is
contingent upon completion of the Acquisition. If the Acquisition is not
completed for any reason, the Existing Founders (International Small Cap)
Agreement with NASL Financial will remain in effect.
Under the terms of the New Founders (International Small Cap) Agreement,
Founders will continue to manage the investment and reinvestment of the assets
of the International Small Cap Fund, subject to the supervision of the adviser
and 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 New Founders (International Small Cap) Agreement contains
similar terms and conditions, including identical subadvisory fee levels, as
the Existing Founders (International Small Cap) Agreement.
For additional information regarding the Existing Founders (International
Small Cap) Agreement and New Founders (International Small Cap) Agreement, see
"Additional Information -- Certain Provisions in the Advisory and Subadvisory
Agreements" below.
34
<PAGE>
Subadvisory Fee Rates
As compensation for its services, Founders receives a fee from NASL
Financial under the Existing Founders (International Small Cap) Agreement and
would receive a fee from CAM under the New Founders (International Small Cap)
Agreement at the same rates. The fee is stated as an annual percentage of the
current value of the net assets of the International Small Cap Fund. The fee,
which is accrued daily and payable monthly in arrears, 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 International Small Cap
Fund at the close of business on the previous business day of the Trust.
Under the Existing and New Founders (International Small Cap) Agreements,
Founders is entitled to receive a fee equal to .650% of the first $50 million
of the Portfolio's average daily net assets, .600% of the Portfolio's average
daily net assets between $50 million and $200 million, .500% of the
Portfolio's average daily net assets between $200 million and $500 million and
.400% of the Portfolio's average daily net assets in excess of $500 million.
Subadvisory Fees Paid
For the fiscal year ended October 31, 1996 (beginning from March 4, 1996,
when the Portfolio commenced operations), NASL Financial paid $29,693 in
subadvisory fees to Founders for management of the International Small Cap
Fund.
Management and Control of Founders
Founders is located at 2930 East Third Avenue, Denver, Colorado 80206. 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 hereto.
Portfolio Brokerage
Information regarding brokerage transactions for the International Small Cap
Fund is set forth under "Additional Information -- Portfolio Brokerage" below.
35
<PAGE>
Other Investment Companies Advised by Founders
Founders manages three funds with investment objectives similar to the
International Small Cap Fund. They are:
<TABLE>
<CAPTION>
NET ASSET
FUND INVESTMENT OBJECTIVE ADVISORY/SUBADVISORY FEE (10/31/96)
---- -------------------- ------------------------ ------------
<C> <C> <S> <C>
Founders Passport Fund Capital appreciation Advisory fee of 1.00% on $166,558,189
the first $250 million
of net assets, 0.80% on
the next $250 million of
net assets, and 0.70% on
all assets over $500
million
NASL Series Trust -- Long-term capital Subadvisory fee of 0.65% $ 84,577,790
International Small Cap Trust appreciation on the first $50 million
of net assets, 0.60% on
the next $150 million of
net assets, 0.50% on the
next $300 million of net
assets, and 0.40% on all
assets over $500 million
American Skandia Trust -- Capital appreciation Subadvisory fee of 0.60% $106,217,640
Founders Passport Portfolio on the first $100
million of net assets,
and 0.50% on all assets
over $100 million
</TABLE>
Shareholder and Board Approval of the Existing Founders (International Small
Cap) Agreement
The Existing Founders (International Small Cap) Agreement was initially
approved by the Board on December 15, 1995 and by the sole shareholder of the
International Small Cap Fund on March 1, 1996. The foregoing approval occurred
in connection with the establishment of the Portfolio and the appointment of
Founders as its subadviser. The Existing Founders (International Small Cap)
Agreement was most recently approved by the Board on June 26, 1997.
Board Considerations
At a meeting held on June 27, 1997, the Board, including the Disinterested
Trustees, approved the New Founders (International Small Cap) Agreement and
recommended that shareholders of the Portfolio approve such agreement.
In approving the New Founders (International Small Cap) Agreement and
determining to submit it to shareholders for their approval, the Board has
determined that the agreement is in the best interests of the Portfolio and
its shareholders. The Board believes that the New Founders (International
Small Cap) Agreement will enable the Portfolio to obtain high-quality services
at costs which it deems appropriate and reasonable. In connection with its
review of the New Founders (International Small Cap) Agreement, the Board
requested and reviewed, with the assistance of its own legal counsel,
materials furnished by Founders, including information regarding the
personnel, operations and financial condition of Founders.
36
<PAGE>
In approving the New Founders (International Small Cap) Agreement, the Board
focused primarily on the nature and quality of the services to date provided
by Founders to the Portfolio, which are expected to continue to be provided
following completion of the Acquisition, and the fact that the terms and
conditions of the Existing Founders (International Small Cap) Agreement and
the New Founders (International Small Cap) Agreement, including the terms
relating to the services to be performed thereunder and the expenses and fees
payable therefor, are substantially similar. In this regard, the Board placed
emphasis on the continuity provided by maintaining the same investment
subadviser for the Portfolio following the Acquisition. The Board also
considered the overall experience and reputation of Founders, as well as the
cost and profitability to Founders of acting as subadviser to the Portfolio.
In connection with these considerations, the Board was provided with
information regarding fees payable by similar investment companies, as well as
services provided to such companies and their performance records, and
information regarding Founders' management of investment companies with
objectives and policies similar to the Portfolio and the fees payable
therefor. In connection with these considerations, the Board considered
possible alternatives to approval of the New Founders (International Small
Cap) Agreement.
Based upon its review of the above factors, the Board concluded that the New
Founders (International Small Cap) Agreement is in the best interests of the
Portfolio and its shareholders.
Certain officers of the Trust and one Trustee who is an Interested Person of
NASL Financial may have a substantial interest in the approval of the New
Founders (International Small Cap) Agreement as a result of their positions
with NASL Financial and its affiliates, as described above under "Information
Concerning NASL Financial."
Required Vote
Approval of the New Founders (International Small Cap) Agreement will
require a Majority Vote of the shareholders of the International Small Cap
Fund.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS OF THE INTERNATIONAL SMALL CAP FUND VOTE "FOR" PROPOSAL 4C.
37
<PAGE>
PROPOSAL 5A -- APPROVAL OF AN INVESTMENT SUBADVISORY AGREEMENT BETWEEN CAM AND
- ------------------------------------------------------------------------------
WELLINGTON MANAGEMENT COMPANY, LLP WITH RESPECT TO THE GROWTH
-------------------------------------------------------------
AND INCOME FUND
---------------
Wellington Management Company, LLP ("Wellington Management") currently
serves as the investment subadviser of the Growth and Income Fund pursuant to
an investment subadvisory agreement with NASL Financial (the "Existing
Wellington (Growth and Income) Agreement"). In connection with the
Acquisition, the Board is proposing that shareholders of the Portfolio approve
an investment subadvisory agreement between CAM, which will serve as the
Trust's investment adviser following the Acquisition, and Wellington
Management, pursuant to which Wellington Management will continue to serve as
the Portfolio's investment subadviser following the Acquisition (the "New
Wellington (Growth and Income) Agreement"). The New Wellington (Growth and
Income) Agreement is substantially similar to the Existing Wellington (Growth
and Income) Agreement. A description of the New Wellington (Growth and Income)
Agreement, including the services to be provided by Wellington Management
thereunder, is set forth below, and is qualified in its entirety by reference
to the form of agreement attached hereto as Exhibit E.
Effectiveness of the New Wellington (Growth and Income) Agreement is
contingent upon completion of the Acquisition. If the Acquisition is not
completed for any reason, the Existing Wellington (Growth and Income)
Agreement with NASL Financial will remain in effect.
Under the terms of the New Wellington (Growth and Income) Agreement,
Wellington Management will continue to manage the investment and reinvestment
of the assets of the Growth and Income Fund, subject to the supervision of the
adviser and 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 New Wellington (Growth and Income) Agreement contains
similar terms and conditions, including identical subadvisory fee levels, as
the Existing Wellington (Growth and Income) Agreement.
For additional information regarding the Existing Wellington (Growth and
Income) Agreement and New Wellington (Growth and Income) Agreement, see
"Additional Information--Certain Provisions in the Advisory and Subadvisory
Agreements" below.
38
<PAGE>
Subadvisory Fee Rates
As compensation for its services, Wellington Management receives a fee from
NASL Financial under the Existing Wellington (Growth and Income) Agreement and
would receive a fee from CAM under the New Wellington (Growth and Income)
Agreement at the same rates. The fee is stated as an annual percentage of the
current value of the net assets of the Growth and Income Fund. The fee, which
is accrued daily and payable monthly in arrears, 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 Growth and Income Fund at the
close of business on the previous business day of the Trust.
Under the Existing and New Wellington (Growth and Income) Agreements,
Wellington Management is entitled to receive a fee equal to .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, 1996, NASL Financial paid $334,666 in
subadvisory fees to Wellington Management for management of the Growth and
Income Fund.
Management and Control of Wellington Management
Wellington Management is a Massachusetts limited liability partnership with
principal offices at 75 State Street, Boston, Massachusetts 02109. Wellington
Management is managed by its active partners. The managing partners of
Wellington Management as of March 31, 1997 were Robert W. Doran, Duncan M.
McFarland and John R. Ryan. Exhibit A identifies the individuals who are
general partners of Wellington Management.
Portfolio Brokerage
Information regarding brokerage transactions for the Growth and Income Fund
is set forth under "Additional Information--Portfolio Brokerage" below.
39
<PAGE>
Other Investment Companies Advised by Wellington Management
Wellington Management serves as subadviser to four funds with investment
objectives similar to the Growth and Income Fund. They are:
<TABLE>
<CAPTION>
NET ASSETS
FUND INVESTMENT OBJECTIVE SUBADVISORY FEE (10/31/96)
---- -------------------- ----------------------- ------------
<C> <C> <S> <C>
Anchor Series Growth & Long-term growth .325% on the first $50 $ 31,686,877
Income Portfolio of capital and million of net assets;
income .225% on the next $100
consistent with million of net assets;
prudent .200% on the next $350
investment risk. million of net assets;
and .150% on all assets
over $500 million
First Investors Growth & Long-term growth .325% on the first $50 $123,322,442
Income Portfolio of capital and million of net assets;
income .275% on the next $100
consistent with million of net assets;
prudent .225% on the next $350
investment risk. million; and .200% on
all assets over $500
million
Cornerstone U.S. Equity Long-term growth .325% on the first $50 $ 24,961,769
of capital and million of net assets;
income .275% on the next $100
consistent with million of net assets;
prudent .225% on the next $350
investment risk. million of net assets;
and .150% on all assets
over $500 million
NASL Series Trust -- Long-term growth .325% on the first $50 $953,206,372
Growth and Income Trust of capital and million of net assets;
income .275% on the next $150
consistent with million of net assets;
prudent .225% on the next $300
investment risk. million of net assets;
and .150% on all assets
over $500 million
</TABLE>
Shareholder and Board Approval of the Existing Wellington (Growth and Income)
Agreement
The Existing Wellington (Growth and Income) Agreement was approved by the
Board on September 28, 1995 and by the shareholders of the Growth and Income
Fund on December 5, 1995. The foregoing approval occurred in connection with
an indirect change in control of NASL Financial due to the merger of Manulife,
NASL Financial's current parent, with NASL Financial's then-parent, NAL.
Board Considerations
At a meeting held on June 27, 1997, the Board, including the Disinterested
Trustees, approved the New Wellington (Growth and Income) Agreement and
recommended that shareholders of the Portfolio approve such agreement.
In approving the New Wellington (Growth and Income) Agreement and
determining to submit it to shareholders for their approval, the Board has
determined that the agreement is in the best interests of the Portfolio and
its shareholders. The
40
<PAGE>
Board believes that the New Wellington (Growth and Income) Agreement will
enable the Portfolio to obtain high-quality services at costs which it deems
appropriate and reasonable. In connection with its review of the New
Wellington (Growth and Income) Agreement, the Board requested and reviewed,
with the assistance of its own legal counsel, materials furnished by
Wellington Management, including information regarding the personnel,
operations and financial condition of Wellington Management.
In approving the New Wellington (Growth and Income) Agreement, the Board
focused primarily on the nature and quality of the services to date provided
by Wellington Management to the Portfolio, which are expected to continue to
be provided following completion of the Acquisition, and the fact that the
terms and conditions of the Existing Wellington (Growth and Income) Agreement
and the New Wellington (Growth and Income) Agreement, including the terms
relating to the services to be performed thereunder and the expenses and fees
payable therefor, are substantially similar. In this regard, the Board placed
emphasis on the continuity provided by maintaining the same investment
subadviser for the Portfolio following the Acquisition. The Board also
considered the overall experience and reputation of Wellington Management, as
well as the cost and profitability to Wellington Management of acting as
subadviser to the Portfolio. In connection with these considerations, the
Board was provided with information regarding fees payable by similar
investment companies, as well as services provided to such companies and their
performance records, and information regarding Wellington Management's
management of investment companies with objectives and policies similar to the
Portfolio and the fees payable therefor. In connection with these
considerations, the Board considered possible alternatives to approval of the
New Wellington (Growth and Income) Agreement.
Based upon its review of the above factors, the Board concluded that the New
Wellington (Growth and Income) Agreement is in the best interests of the
Portfolio and its shareholders.
Certain officers of the Trust and one Trustee who is an Interested Person of
NASL Financial may have a substantial interest in the approval of the New
Wellington (Growth and Income) Agreement as a result of their positions with
NASL Financial and its affiliates, as described above under "Information
Concerning NASL Financial."
Required Vote
Approval of the New Wellington (Growth and Income) Agreement will require a
Majority Vote of the shareholders of the Growth and Income Fund.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS OF THE GROWTH AND INCOME FUND VOTE "FOR" PROPOSAL 5A.
41
<PAGE>
PROPOSAL 5B -- APPROVAL OF AN INVESTMENT SUBADVISORY AGREEMENT BETWEEN CAM AND
- ------------------------------------------------------------------------------
WELLINGTON MANAGEMENT COMPANY, LLP WITH RESPECT TO THE
------------------------------------------------------
INVESTMENT QUALITY BOND FUND
----------------------------
Wellington Management Company, LLP ("Wellington Management") currently
serves as the investment subadviser of the Investment Quality Bond Fund
pursuant to an investment subadvisory agreement with NASL Financial (the
"Existing Wellington (Investment Quality Bond) Agreement"). In connection with
the Acquisition, the Board is proposing that shareholders of the Portfolio
approve an investment subadvisory agreement between CAM, which will serve as
the Trust's investment adviser following the Acquisition, and Wellington
Management, pursuant to which Wellington Management will continue to serve as
the Portfolio's investment subadviser following the Acquisition (the "New
Wellington (Investment Quality Bond) Agreement"). The New Wellington
(Investment Quality Bond) Agreement is substantially similar to the Existing
Wellington (Investment Quality Bond) Agreement. A description of the New
Wellington (Investment Quality Bond) Agreement, including the services to be
provided by Wellington Management thereunder, is set forth below, and is
qualified in its entirety by reference to the form of agreement attached
hereto as Exhibit E.
Effectiveness of the New Wellington (Investment Quality Bond) Agreement is
contingent upon completion of the Acquisition. If the Acquisition is not
completed for any reason, the Existing Wellington (Investment Quality Bond)
Agreement with NASL Financial will remain in effect.
Under the terms of the New Wellington (Investment Quality Bond) Agreement,
Wellington Management will continue to manage the investment and reinvestment
of the assets of the Investment Quality Bond Fund, subject to the supervision
of the adviser and 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 New Wellington (Investment
Quality Bond) Agreement contains similar terms and conditions, including
identical subadvisory fee levels, as the Existing Wellington (Investment
Quality Bond) Agreement.
For additional information regarding the Existing Wellington (Investment
Quality Bond) Agreement and New Wellington (Investment Quality Bond)
Agreement, see "Additional Information -- Certain Provisions in the Advisory
and Subadvisory Agreements" below.
42
<PAGE>
Subadvisory Fee Rates
As compensation for its services, Wellington Management receives a fee from
NASL Financial under the Existing Wellington (Investment Quality Bond)
Agreement and would receive a fee from CAM under the New Wellington
(Investment Quality Bond) Agreement at the same rates. The fee is stated as an
annual percentage of the current value of the net assets of the Investment
Quality Bond Fund. The fee, which is accrued daily and payable monthly in
arrears, 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 Investment Quality Bond Fund at the close of business on the previous
business day of the Trust.
Under the Existing and New Wellington (Investment Quality Bond) Agreements,
Wellington Management is entitled to receive a fee equal to .225% of the first
$200 million of the Portfolio's average daily net assets, .150% of the
Portfolio's average daily net assets between $200 million and $500 million and
.100% of the Portfolio's average daily net assets in excess of $500 million.
Subadvisory Fees Paid
For the fiscal year ended October 31, 1996, NASL Financial paid $47,851 in
subadvisory fees to Wellington Management for management of the Investment
Quality Bond Fund.
Management and Control of Wellington Management
Wellington Management is a Massachusetts limited liability partnership with
principal offices at 75 State Street, Boston, Massachusetts 02109. Wellington
Management is managed by its active partners. The managing partners of
Wellington Management as of March 31, 1997 were Robert W. Doran, Duncan M.
McFarland and John R. Ryan. Exhibit A identifies the individuals who are
general partners of Wellington Management.
Portfolio Brokerage
Information regarding brokerage transactions for the Investment Quality Bond
Fund is set forth under "Additional Information -- Portfolio Brokerage" below.
43
<PAGE>
Other Investment Companies Advised by Wellington Management
Wellington Management also serves as subadviser to two funds with investment
objectives similar to the Investment Quality Bond Fund. They are:
<TABLE>
<CAPTION>
NET ASSETS
FUND INVESTMENT OBJECTIVE SUBADVISORY FEE (10/31/96)
---- -------------------- ----------------------- ------------
<C> <C> <S> <C>
Anchor Series Fixed High level of .225% on the first $50 $ 22,752,324
Income Portfolio current income million of net assets;
consistent with the .125% on the next $50
maintenance of million of net assets;
principal and and .100% on all assets
liquidity. over $100 million
NASL Series High level of .225% on the first $200 $151,480,645
Trust -- Investment current income million of net assets;
Quality Bond Trust consistent with the .150% on the next $300
maintenance of million of net assets;
principal and and .100% on all assets
liquidity. over $500 million
</TABLE>
Shareholder and Board Approval of the Existing Wellington (Investment Quality
Bond) Agreement
The Existing Wellington (Investment Quality Bond) Agreement was approved by
the Board on September 28, 1995 and by the shareholders of the Investment
Quality Bond Fund on December 5, 1995. The foregoing approval occurred in
connection with an indirect change in control of NASL Financial due to the
merger of Manulife, NASL Financial's current parent, with NASL Financial's
then-parent, NAL.
Board Considerations
At a meeting held on June 27, 1997, the Board, including the Disinterested
Trustees, approved the New Wellington (Investment Quality Bond) Agreement and
recommended that shareholders of the Portfolio approve such agreement.
In approving the New Wellington (Investment Quality Bond) Agreement and
determining to submit it to shareholders for their approval, the Board has
determined that the agreement is in the best interests of the Portfolio and
its shareholders. The Board believes that the New Wellington (Investment
Quality Bond) Agreement will enable the Portfolio to obtain high-quality
services at costs which it deems appropriate and reasonable. In connection
with its review of the New Wellington (Investment Quality Bond) Agreement, the
Board requested and reviewed, with the assistance of its own legal counsel,
materials furnished by Wellington Management, including information regarding
the personnel, operations and financial condition of Wellington Management.
In approving the New Wellington (Investment Quality Bond) Agreement, the
Board focused primarily on the nature and quality of the services to date
provided by Wellington Management to the Portfolio, which are expected to
continue to be provided following completion of the Acquisition, and the fact
that the terms and conditions of the Existing Wellington (Investment Quality
Bond) Agreement and the New Wellington (Investment Quality Bond) Agreement,
including the terms relating
44
<PAGE>
to the services to be performed thereunder and the expenses and fees payable
therefor, are substantially similar. In this regard, the Board placed emphasis
on the continuity provided by maintaining the same investment subadviser for
the Portfolio following the Acquisition. The Board also considered the overall
experience and reputation of Wellington Management, as well as the cost and
profitability to Wellington Management of acting as subadviser to the
Portfolio. In connection with these considerations, the Board was provided
with information regarding fees payable by similar investment companies, as
well as services provided to such companies and their performance records, and
information regarding Wellington Management's management of investment
companies with objectives and policies similar to the Portfolio and the fees
payable therefor. In connection with these considerations, the Board
considered possible alternatives to approval of the New Wellington (Investment
Quality Bond) Agreement.
Based upon its review of the above factors, the Board concluded that the New
Wellington (Investment Quality Bond) Agreement is in the best interests of the
Portfolio and its shareholders.
Certain officers of the Trust and one Trustee who is an Interested Person of
NASL Financial may have a substantial interest in the approval of the New
Wellington (Investment Quality Bond) Agreement as a result of their positions
with NASL Financial and its affiliates, as described above under "Information
Concerning NASL Financial."
Required Vote
Approval of the New Wellington (Investment Quality Bond) Agreement will
require a Majority Vote of the shareholders of the Investment Quality Bond
Fund.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS OF THE INVESTMENT QUALITY BOND FUND VOTE "FOR" PROPOSAL 5B.
45
<PAGE>
PROPOSAL 6A -- APPROVAL OF AN INVESTMENT SUBADVISORY AGREEMENT BETWEEN CAM AND
- ------------------------------------------------------------------------------
SALOMON BROTHERS ASSET MANAGEMENT INC WITH RESPECT TO THE U.S.
--------------------------------------------------------------
GOVERNMENT SECURITIES FUND
--------------------------
Salomon Brothers Asset Management Inc ("SBAM") currently serves as the
investment subadviser of the U.S. Government Securities Fund pursuant to an
investment subadvisory agreement with NASL Financial (the "Existing SBAM (U.S.
Government Securities) Agreement"). In connection with the Acquisition, the
Board is proposing that shareholders of the Portfolio approve an investment
subadvisory agreement between CAM, which will serve as the Trust's investment
adviser following the Acquisition, and SBAM, pursuant to which SBAM will
continue to serve as the Portfolio's investment subadviser following the
Acquisition (the "New SBAM (U.S. Government Securities) Agreement"). The New
SBAM (U.S. Government Securities) Agreement is substantially similar to the
Existing SBAM (U.S. Government Securities) Agreement. A description of the New
SBAM (U.S. Government Securities) Agreement, including the services to be
provided by SBAM thereunder, is set forth below, and is qualified in its
entirety by reference to the form of agreement attached hereto as Exhibit F.
Effectiveness of the New SBAM (U.S. Government Securities) Agreement is
contingent upon completion of the Acquisition. If the Acquisition is not
completed for any reason, the Existing SBAM (U.S. Government Securities)
Agreement with NASL Financial will remain in effect.
Under the terms of the New SBAM (U.S. Government Securities) Agreement, SBAM
will continue to manage the investment and reinvestment of the assets of the
U.S. Government Securities Fund, subject to the supervision of the adviser and
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 New SBAM (U.S. Government Securities) Agreement contains
similar terms and conditions, including identical subadvisory fee levels, as
the Existing SBAM (U.S. Government Securities) Agreement.
For additional information regarding the Existing SBAM (U.S. Government
Securities) Agreement and New SBAM (U.S. Government Securities) Agreement, see
"Additional Information -- Certain Provisions in the Advisory and Subadvisory
Agreements" below.
46
<PAGE>
Subadvisory Fee Rates
As compensation for its services, SBAM receives a fee from NASL Financial
under the Existing SBAM (U.S. Government Securities) Agreement and would
receive a fee from CAM under the New SBAM (U.S. Government Securities)
Agreement at the same rates. The fee is stated as an annual percentage of the
current value of the net assets of the U.S. Government Securities Fund. The
fee, which is accrued daily and payable monthly in arrears, 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 U.S. Government
Securities Fund at the close of business on the previous business day of the
Trust.
Under the Existing and New SBAM (U.S. Government Securities) Agreements,
SBAM is entitled to receive a fee equal to .225% of the first $200 million of
the Portfolio's average daily net assets, .150% of the Portfolio's average
daily net assets between $200 million and $500 million and .100% of the
Portfolio's average daily net assets in excess of $500 million.
Subadvisory Fees Paid
For the fiscal year ended October 31, 1996, NASL Financial paid $260,027 in
subadvisory fees to SBAM for management of the U.S. Government Securities
Fund.
Management and Control of SBAM
SBAM is located at 7 World Trade Center, New York, New York 10048. SBAM is a
wholly-owned subsidiary of Salomon Brothers Holding Company Inc, which is in
turn wholly-owned by Salomon Inc. For information on the principal executive
officers and directors of SBAM, see Exhibit A hereto.
Portfolio Brokerage
Information regarding brokerage transactions for the U.S. Government
Securities Fund is set forth under "Additional Information -- Portfolio
Brokerage" below.
47
<PAGE>
Other Investment Companies Advised by SBAM
SBAM manages three funds with investment objectives similar to the U.S.
Government Securities Fund. They are:
<TABLE>
<CAPTION>
ADVISORY/ NET ASSETS
FUND INVESTMENT OBJECTIVE SUBADVISORY FEE (10/31/96)
- ---- -------------------- ------------------ ------------
<S> <C> <C> <C>
Salomon Brothers Seeks a high level Advisory fee of $ 11,725,798
U.S. Government of current income .60% of average
Income Fund daily net assets
Salomon Brothers Provide a high Subadvisory fee of $ 13,623,071
U.S. Government level of current .55% of all
Series (Advised by income consistent assets*
TNE Advisers, with preservation
subadvised by of capital and
SBAM) maintenance of
liquidity
NASL Series Seeks a high level Subadvisory fee of $210,754,755
Trust -- U.S. of current income .225% on the first
Government consistent with $200 million of
Securities Trust preservation of net assets; .15%
capital and on the next $300
maintenance of million of net
liquidity assets; and .10%
on all assets over
$500 million
</TABLE>
- -----------
* Expense cap of .70%.
Shareholder and Board Approval of the Existing SBAM (U.S. Government
Securities) Agreement
The Existing SBAM (U.S. Government Securities) Agreement was initially
approved by the Board on September 28, 1995 and by the shareholders of the
U.S. Government Securities Fund on December 5, 1995. The foregoing approval
occurred in connection with an indirect change in control of NASL Financial
due to the merger of Manulife, NASL Financial's current parent, with NASL
Financial's then-parent, NAL. The Existing SBAM (U.S. Government Securities)
Agreement was most recently approved by the Board on June 26, 1997.
Board Considerations
At a meeting held on June 27, 1997, the Board, including the Disinterested
Trustees, approved the New SBAM (U.S. Government Securities) Agreement and
recommended that shareholders of the Portfolio approve such agreement.
In approving the New SBAM (U.S. Government Securities) Agreement and
determining to submit it to shareholders for their approval, the Board has
determined that the agreement is in the best interests of the Portfolio and
its shareholders. The Board believes that the New SBAM (U.S. Government
Securities) Agreement will enable the Portfolio to obtain high-quality
services at costs which it deems appropriate and reasonable. In connection
with its review of the New SBAM (U.S. Government Securities) Agreement, the
Board requested and reviewed, with the assistance of its own legal counsel,
materials furnished by SBAM, including information regarding the personnel,
operations and financial condition of SBAM.
48
<PAGE>
In approving the New SBAM (U.S. Government Securities) Agreement, the Board
focused primarily on the nature and quality of the services to date provided
by SBAM to the Portfolio, which are expected to continue to be provided
following completion of the Acquisition, and the fact that the terms and
conditions of the Existing SBAM (U.S. Government Securities) Agreement and the
New SBAM (U.S. Government Securities) Agreement, including the terms relating
to the services to be performed thereunder and the expenses and fees payable
therefor, are substantially similar. In this regard, the Board placed emphasis
on the continuity provided by maintaining the same investment subadviser for
the Portfolio following the Acquisition. The Board also considered the overall
experience and reputation of SBAM, as well as the cost and profitability to
SBAM of acting as subadviser to the Portfolio. In connection with these
considerations, the Board was provided with information regarding fees payable
by similar investment companies, as well as services provided to such
companies and their performance records, and information regarding SBAM's
management of investment companies with objectives and policies similar to the
Portfolio and the fees payable therefor. In connection with these
considerations, the Board considered possible alternatives to approval of the
New SBAM (U.S. Government Securities) Agreement.
Based upon its review of the above factors, the Board concluded that the New
SBAM (U.S. Government Securities) Agreement is in the best interests of the
Portfolio and its shareholders.
Certain officers of the Trust and one Trustee who is an Interested Person of
NASL Financial may have a substantial interest in the approval of the New SBAM
(U.S. Government Securities) Agreement as a result of their positions with
NASL Financial and its affiliates, as described above under "Information
Concerning NASL Financial."
Required Vote
Approval of the New SBAM (U.S. Government Securities) Agreement will require
a Majority Vote of the shareholders of the U.S. Government Securities Fund.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS OF THE U.S. GOVERNMENT SECURITIES FUND VOTE "FOR" PROPOSAL 6A.
49
<PAGE>
PROPOSAL 6B -- APPROVAL OF AN INVESTMENT SUBADVISORY AGREEMENT BETWEEN CAM AND
- ------------------------------------------------------------------------------
SALOMON BROTHERS ASSET MANAGEMENT INC WITH RESPECT TO THE
---------------------------------------------------------
NATIONAL MUNICIPAL BOND FUND
----------------------------
Salomon Brothers Asset Management Inc ("SBAM") currently serves as the
investment subadviser of the National Municipal Bond Fund pursuant to an
investment subadvisory agreement with NASL Financial (the "Existing SBAM
(National Municipal Bond) Agreement"). In connection with the Acquisition, the
Board is proposing that shareholders of the Portfolio approve an investment
subadvisory agreement between CAM, which will serve as the Trust's investment
adviser following the Acquisition, and SBAM, pursuant to which SBAM will
continue to serve as the Portfolio's investment subadviser following the
Acquisition (the "New SBAM (National Municipal Bond) Agreement"). The New SBAM
(National Municipal Bond) Agreement is substantially similar to the Existing
SBAM (National Municipal Bond) Agreement. A description of the New SBAM
(National Municipal Bond) Agreement, including the services to be provided by
SBAM thereunder, is set forth below, and is qualified in its entirety by
reference to the form of agreement attached hereto as Exhibit F.
Effectiveness of the New SBAM (National Municipal Bond) Agreement is
contingent upon completion of the Acquisition. If the Acquisition is not
completed for any reason, the Existing SBAM (National Municipal Bond)
Agreement with NASL Financial will remain in effect.
Under the terms of the New SBAM (National Municipal Bond) Agreement, SBAM
will continue to manage the investment and reinvestment of the assets of the
National Municipal Bond Fund, subject to the supervision of the adviser and
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 New SBAM (National Municipal Bond) Agreement contains similar
terms and conditions, including identical subadvisory fee levels, as the
Existing SBAM (National Municipal Bond) Agreement.
For additional information regarding the Existing SBAM (National Municipal
Bond) Agreement and New SBAM (National Municipal Bond) Agreement, see
"Additional Information -- Certain Provisions in the Advisory and Subadvisory
Agreements" below.
50
<PAGE>
Subadvisory Fee Rates
As compensation for its services, SBAM receives a fee from NASL Financial
under the Existing SBAM (National Municipal Bond) Agreement and would receive
a fee from CAM under the New SBAM (National Municipal Bond) Agreement at the
same rates. The fee is stated as an annual percentage of the current value of
the net assets of the National Municipal Bond Fund. The fee, which is accrued
daily and payable monthly in arrears, 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 National Municipal Bond Fund at
the close of business on the previous business day of the Trust.
Under the Existing and New SBAM (National Municipal Bond) Agreements, SBAM
is entitled to receive a fee equal to .250% of the Portfolio's average daily
net assets.
Subadvisory Fees Paid
For the fiscal year ended October 31, 1996, NASL Financial paid $50,586 in
subadvisory fees to SBAM for management of the National Municipal Bond Fund.
Management and Control of SBAM
SBAM is located at 7 World Trade Center, New York, New York 10048. SBAM is a
wholly-owned subsidiary of Salomon Brothers Holding Company Inc, which is in
turn wholly-owned by Salomon Inc. For information on the principal executive
officers and directors of SBAM, see Exhibit A hereto.
Portfolio Brokerage
Information regarding brokerage transactions for the National Municipal Bond
Fund is set forth under "Additional Information -- Portfolio Brokerage" below.
Other Investment Companies Advised by SBAM
SBAM manages one fund with investment objectives similar to the National
Municipal Bond Fund as follows:
<TABLE>
<CAPTION>
NET ASSETS
FUND INVESTMENT OBJECTIVE ADVISORY FEE (10/31/96)
- ---- -------------------- ---------------- -----------
<S> <C> <C> <C>
Salomon Brothers Achieve a high .50% of average $11,512,857
National level of daily net assets
Intermediate current income
Municipal Fund which is exempt
from regular
federal income
taxes
</TABLE>
51
<PAGE>
Shareholder and Board Approval of the Existing SBAM (National Municipal
Bond) Agreement
The Existing SBAM (National Municipal Bond) Agreement was initially approved
by the Board on September 28, 1995 and by the shareholders of the National
Municipal Bond Fund on December 5, 1995. The foregoing approval occurred in
connection with an indirect change in control of NASL Financial due to the
merger of Manulife, NASL Financial's current parent, with NASL Financial's
then-parent, NAL. The Existing SBAM (National Municipal Bond) Agreement was
most recently approved by the Board on June 26, 1997.
Board Considerations
At a meeting held on June 27, 1997, the Board, including the Disinterested
Trustees, approved the New SBAM (National Municipal Bond) Agreement and
recommended that shareholders of the Portfolio approve such agreement.
In approving the New SBAM (National Municipal Bond) Agreement and
determining to submit it to shareholders for their approval, the Board has
determined that the agreement is in the best interests of the Portfolio and
its shareholders. The Board believes that the New SBAM (National Municipal
Bond) Agreement will enable the Portfolio to obtain high-quality services at
costs which it deems appropriate and reasonable. In connection with its review
of the New SBAM (National Municipal Bond) Agreement, the Board requested and
reviewed, with the assistance of its own legal counsel, materials furnished by
SBAM, including information regarding the personnel, operations and financial
condition of SBAM.
In approving the New SBAM (National Municipal Bond) Agreement, the Board
focused primarily on the nature and quality of the services to date provided
by SBAM to the Portfolio, which are expected to continue to be provided
following completion of the Acquisition, and the fact that the terms and
conditions of the Existing SBAM (National Municipal Bond) Agreement and the
New SBAM (National Municipal Bond) Agreement, including the terms relating to
the services to be performed thereunder and the expenses and fees payable
therefor, are substantially similar. In this regard, the Board placed emphasis
on the continuity provided by maintaining the same investment subadviser for
the Portfolio following the Acquisition. The Board also considered the overall
experience and reputation of SBAM, as well as the cost and profitability to
SBAM of acting as subadviser to the Portfolio. In connection with these
considerations, the Board was provided with information regarding fees payable
by similar investment companies, as well as services provided to such
companies and their performance records, and information regarding SBAM's
management of investment companies with objectives and policies similar to the
Portfolio and the fees payable therefor. In connection with these
considerations, the Board considered possible alternatives to approval of the
New SBAM (National Municipal Bond) Agreement.
52
<PAGE>
Based upon its review of the above factors, the Board concluded that the New
SBAM (National Municipal Bond) Agreement is in the best interests of the
Portfolio and its shareholders.
Certain officers of the Trust and one Trustee who is an Interested Person of
NASL Financial may have a substantial interest in the approval of the New SBAM
(National Municipal Bond) Agreement as a result of their positions with NASL
Financial and its affiliates, as described above under "Information Concerning
NASL Financial."
Required Vote
Approval of the New SBAM (National Municipal Bond) Agreement will require a
Majority Vote of the shareholders of the National Municipal Bond Fund.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS OF THE NATIONAL MUNICIPAL BOND FUND VOTE "FOR" PROPOSAL 6B.
53
<PAGE>
PROPOSAL 6C -- APPROVAL OF AN INVESTMENT SUBADVISORY AGREEMENT BETWEEN CAM AND
- ------------------------------------------------------------------------------
SALOMON BROTHERS ASSET MANAGEMENT INC WITH RESPECT TO THE
---------------------------------------------------------
STRATEGIC INCOME FUND
---------------------
Salomon Brothers Asset Management Inc ("SBAM") currently serves as the
investment subadviser of the Strategic Income Fund pursuant to an investment
subadvisory agreement with NASL Financial (the "Existing SBAM (Strategic
Income) Agreement"). In connection with the Acquisition, the Board is
proposing that shareholders of the Portfolio approve an investment subadvisory
agreement between CAM, which will serve as the Trust's investment adviser
following the Acquisition, and SBAM, pursuant to which SBAM will continue to
serve as the Portfolio's investment subadviser following the Acquisition (the
"New SBAM (Strategic Income) Agreement"). The New SBAM (Strategic Income)
Agreement is substantially similar to the Existing SBAM (Strategic Income)
Agreement. A description of the New SBAM (Strategic Income) Agreement,
including the services to be provided by SBAM thereunder, is set forth below,
and is qualified in its entirety by reference to the form of agreement
attached hereto as Exhibit F.
Effectiveness of the New SBAM (Strategic Income) Agreement is contingent
upon completion of the Acquisition. If the Acquisition is not completed for
any reason, the Existing SBAM (Strategic Income) Agreement with NASL Financial
will remain in effect.
Under the terms of the New SBAM (Strategic Income) Agreement, SBAM will
continue to manage the investment and reinvestment of the assets of the
Strategic Income Fund, subject to the supervision of the adviser and 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 New SBAM (Strategic Income) Agreement contains similar terms
and conditions, including identical subadvisory fee levels, as the Existing
SBAM (Strategic Income) Agreement.
For additional information regarding the Existing SBAM (Strategic Income)
Agreement and New SBAM (Strategic Income) Agreement, see "Additional
Information -- Certain Provisions in the Advisory and Subadvisory Agreements"
below.
54
<PAGE>
Subadvisory Fee Rates
As compensation for its services, SBAM receives a fee from NASL Financial
under the Existing SBAM (Strategic Income) Agreement and would receive a fee
from CAM under the New SBAM (Strategic Income) Agreement at the same rates.
The fee is stated as an annual percentage of the current value of the net
assets of the Strategic Income Fund. The fee, which is accrued daily and
payable monthly in arrears, 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 Strategic Income Fund at the close of business
on the previous business day of the Trust.
Under the Existing and New SBAM (Strategic Income) Agreements, SBAM is
entitled to receive a fee equal to .350% 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, .250% of the Portfolio's
average daily net assets between $200 million and $500 million and .200% of
the Portfolio's average daily net assets in excess of $500 million.
Subadvisory Fees Paid
For the fiscal year ended October 31, 1996, NASL Financial paid $192,079 in
subadvisory fees to SBAM for management of the Strategic Income Fund. A
portion of this amount was paid by SBAM to Salomon Brothers Asset Management
Limited, as described in Proposal 6D below.
Management and Control of SBAM
SBAM is located at 7 World Trade Center, New York, New York 10048. SBAM is a
wholly-owned subsidiary of Salomon Brothers Holding Company Inc, which is in
turn wholly-owned by Salomon Inc. For information on the principal executive
officers and directors of SBAM, see Exhibit A hereto.
Portfolio Brokerage
Information regarding brokerage transactions for the Strategic Income Fund
is set forth under "Additional Information--Portfolio Brokerage" below.
55
<PAGE>
Other Investment Companies Advised by SBAM
SBAM manages four funds with investment objectives similar to the Strategic
Income Fund. They are:
<TABLE>
<CAPTION>
NET ASSETS
FUND INVESTMENT OBJECTIVE ADVISORY/SUBADVISORY FEE (10/31/96)
- ---- -------------------- ------------------------ ------------
<S> <C> <C> <C>
Salomon Brothers Seeks a high level Advisory fee of $ 23,684,836
Strategic Bond of current income .75% of average
Fund daily net assets
Salomon Brothers Seeks a high level Advisory fee of $ 29,636,821
Strategic Bond of total return .65% of all assets
Opportunities consistent with
Series the preservation
of capital
Salomon Obtain a high Subadvisory fee of $ 13,608,308
Brothers/JNL: level of current .375% on the first
Global Bond Series income $50 million of net
(Advised by JNFSI, assets; .35% on
subadvised by the next $100
SBAM) million of net
assets; .30% on of
the next $350
million of net
assets; and .25%
on all assets over
$500 million*
NASL Series Seeks a high level Subadvisory fee of $199,020,718
Trust -- Strategic of total return .35% on the first
Bond Trust consistent with $50 million of net
preservation of assets; .30% on
capital the next $150
million of net
assets; .25% on
the next $300
million of net
assets; and .20%
on all assets over
$500 million
</TABLE>
- -----------
*All expenses (other than management fees) in excess of .15% are reimbursed
Shareholder and Board Approval of the Existing SBAM (Strategic Income)
Agreement
The Existing SBAM (Strategic Income) Agreement was initially approved by the
Board on September 28, 1995 and by the shareholders of the Strategic Income
Fund on December 5, 1995. The foregoing approval occurred in connection with
an indirect change in control of NASL Financial due to the merger of Manulife,
NASL's current parent, with NASL Financial's then-parent, NAL. The Existing
SBAM (Strategic Income) Agreement was most recently approved by the Board on
June 26, 1997.
Board Considerations
At a meeting held on June 27, 1997, the Board, including the Disinterested
Trustees, approved the New SBAM (Strategic Income) Agreement and recommended
that shareholders of the Portfolio approve such agreement.
In approving the New SBAM (Strategic Income) Agreement and determining to
submit it to shareholders for their approval, the Board has determined that
the
56
<PAGE>
agreement is in the best interests of the Portfolio and its shareholders. The
Board believes that the New SBAM (Strategic Income) Agreement will enable the
Portfolio to obtain high-quality services at costs which it deems appropriate
and reasonable. In connection with its review of the New SBAM (Strategic
Income) Agreement, the Board requested and reviewed, with the assistance of
its own legal counsel, materials furnished by SBAM, including information
regarding the personnel, operations and financial condition of SBAM.
In approving the New SBAM (Strategic Income) Agreement, the Board focused
primarily on the nature and quality of the services to date provided by SBAM
to the Portfolio, which are expected to continue to be provided following
completion of the Acquisition, and the fact that the terms and conditions of
the Existing SBAM (Strategic Income) Agreement and the New SBAM (Strategic
Income) Agreement, including the terms relating to the services to be
performed thereunder and the expenses and fees payable therefor, are
substantially similar. In this regard, the Board placed emphasis on the
continuity provided by maintaining the same investment subadviser for the
Portfolio following the Acquisition. The Board also considered the overall
experience and reputation of SBAM, as well as the cost and profitability to
SBAM of acting as subadviser to the Portfolio. In connection with these
considerations, the Board was provided with information regarding fees payable
by similar investment companies, as well as services provided to such
companies and their performance records, and information regarding SBAM's
management of investment companies with objectives and policies similar to the
Portfolio and the fees payable therefor. In connection with these
considerations, the Board considered possible alternatives to approval of the
New SBAM (Strategic Income) Agreement.
Based upon its review of the above factors, the Board concluded that the New
SBAM (Strategic Income) Agreement is in the best interests of the Portfolio
and its shareholders.
Certain officers of the Trust and one Trustee who is an Interested Person of
NASL Financial may have a substantial interest in the approval of the New SBAM
(Strategic Income) Agreement as a result of their positions with NASL
Financial and its affiliates, as described above under "Information Concerning
NASL Financial."
Required Vote
Approval of the New SBAM (Strategic Income) Agreement will require a
Majority Vote of the shareholders of the Strategic Income Fund.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS OF THE STRATEGIC INCOME FUND VOTE "FOR" PROPOSAL 6C.
57
<PAGE>
PROPOSAL 6D -- APPROVAL OF A SUBADVISORY CONSULTING AGREEMENT BETWEEN SALOMON
- -----------------------------------------------------------------------------
BROTHERS ASSET MANAGEMENT INC AND SALOMON BROTHERS ASSET
--------------------------------------------------------
MANAGEMENT LIMITED WITH RESPECT TO THE STRATEGIC INCOME FUND
------------------------------------------------------------
Salomon Brothers Asset Management Inc. ("SBAM") currently serves as the
investment subadviser of the Strategic Income Fund pursuant to an investment
subadvisory agreement with NASL Financial. In connection with SBAM's service
as subadviser to the Strategic Income Fund, SBAM's London-based affiliate,
Salomon Brothers Asset Management Limited ("SBAM Limited") provides certain
subadvisory consulting services to SBAM with regard to currency transactions
and investments in non-dollar denominated debt securities ("Foreign
Securities") for the benefit of the Strategic Income Fund. These services are
provided pursuant to a subadvisory consulting agreement between SBAM and SBAM
Limited (the "Existing Consulting Agreement"), and SBAM Limited is compensated
by SBAM at no additional expense to the Strategic Income Fund. The Existing
Consulting Agreement provides for its termination upon termination of the
existing investment advisory agreement between NASL Financial and the Trust.
As a result, the Board is proposing that shareholders of the Portfolio approve
a new subadvisory consulting agreement between SBAM and SBAM Limited (the "New
Consulting Agreement") to become effective upon completion of the Acquisition.
The New Consulting Agreement is substantially similar to the Existing
Consulting Agreement. A description of the New Consulting Agreement, including
the services to be provided by SBAM Limited thereunder, is set forth below,
and is qualified in its entirety by reference to the form of agreement
attached hereto as Exhibit G.
Effectiveness of the New Consulting Agreement is contingent upon completion
of the Acquisition. If the Acquisition is not completed for any reason, the
Existing SBAM Consulting Agreement with NASL Financial will remain in effect.
Under the terms of the New Consulting Agreement, SBAM Limited will continue
to provide advisory services to SBAM with regard to currency transactions and
investments in Foreign Securities for the Portfolio. The New Consulting
Agreement contains similar terms and conditions, including identical fee
levels, as the Existing Consulting Agreement.
For additional information regarding the Existing Consulting Agreement and
New Consulting Agreement, see "Additional Information -- Certain Provisions in
the Advisory and Subadvisory Agreements" below.
Fee Rates
As full compensation for all services provided by SBAM Limited under the
Existing Consulting Agreement, SBAM pays SBAM Limited a portion of its
subadvisory fee, and would continue to pay SBAM Limited at the same rate under
the New Consulting Agreement. Such amount is equal to the fee payable under
SBAM's subadvisory agreement with respect to the Portfolio (as discussed in
Proposal 6C above) multiplied by the percentage of the Strategic Income Fund's
assets that SBAM
58
<PAGE>
Limited has been delegated to manage divided by the current value of the net
assets of the Portfolio.
Fees Paid
For the fiscal year ended October 31, 1996, SBAM paid $48,020 to SBAM
Limited under the Existing Consulting Agreement for subadvisory consulting
services rendered in connection with the Strategic Income Fund.
Management and Control of SBAM Limited
SBAM Limited is located at Victoria Plaza, 111 Buckingham Palace Road,
London SW1W OSB, England. SBAM Limited is a wholly-owned subsidiary of Salomon
Brothers Holding Company, Inc. For information on the principal executive
officers and directors of SBAM Limited, see Exhibit A hereto.
Portfolio Brokerage
Information regarding brokerage transactions for the Strategic Income Fund
is set forth under "Additional Information -- Portfolio Brokerage" below.
Other Investment Companies Advised by SBAM Limited
SBAM Limited provides advisory services to four funds with investment
objectives similar to the Strategic Income Fund. They are:
<TABLE>
<CAPTION>
NET ASSETS
FUND INVESTMENT OBJECTIVE ADVISORY/SUBADVISORY FEE (10/31/96)
- ---- -------------------- ------------------------ ------------
<S> <C> <C> <C>
Salomon Brothers Seeks a high level Advisory fee of $ 23,684,836
Strategic Bond of current income .75% of average
Fund daily net assets
Salomon Brothers Seeks a high level Advisory fee of $ 29,636,821
Strategic Bond of total return .65% of all assets
Opportunities consistent with
Series the preservation
of capital
Salomon Obtain a high Subadvisory fee of $ 13,608,308
Brothers/JNL: level of current .375% on the first
Global Bond Series income $50 million of net
(Advised by JNFSI, assets; .35% on
subadvised by the next $100
SBAM) million of net
assets; .30% on
the next $350
million of net
assets; and .25%
on all assets over
$500 million*
NASL Series Seeks a high level Subadvisory fee of $199,020,718
Trust--Strategic of total return .35% on the first
Bond Trust consistent with $50 million of net
preservation of assets; .30% on
capital the next $150
million of net
assets; .25% on
the next $300
million of net
assets; and .20%
on all assets over
$500 million
</TABLE>
- -----------
* All expenses (other than management fees) in excess of .15% are reimbursed
59
<PAGE>
Shareholder and Board Approval of the Existing Consulting Agreement
The Existing Consulting Agreement was initially approved by the Board on
September 28, 1995 and by the shareholders of the Strategic Income Fund on
December 5, 1995. The foregoing approval occurred in connection with an
indirect change in control of NASL Financial due to the merger of Manulife,
NASL Financial's current parent, with NASL Financial's then-parent, NAL. The
Existing Consulting Agreement was most recently approved by the Board on June
26, 1997.
Board Considerations
At a meeting held on June 27, 1997, the Board, including the Disinterested
Trustees, approved the New Consulting Agreement and recommended that
shareholders of the Portfolio approve such agreement.
In approving the New Consulting Agreement and determining to submit it to
shareholders for their approval, the Board has determined that the agreement
is in the best interests of the Portfolio and its shareholders. The Board
believes that the New Consulting Agreement will enable the Portfolio to obtain
high-quality services at costs which it deems appropriate and reasonable. In
connection with its review of the New Consulting Agreement, the Board
requested and reviewed, with the assistance of its own legal counsel,
materials furnished by SBAM Limited, including information regarding the
personnel, operations and financial condition of SBAM Limited.
In approving the New Consulting Agreement, the Board focused primarily on
the nature and quality of the services to date provided by SBAM Limited, which
are expected to continue to be provided following completion of the
Acquisition, and the fact that the terms and conditions of the Existing
Consulting Agreement and the New Consulting Agreement, including the terms
relating to the services to be performed thereunder and the expenses and fees
payable therefor, are substantially similar. In this regard, the Board placed
emphasis on the continuity provided by maintaining the same subadvisory
consultant for the Portfolio following the Acquisition. The Board also
considered the overall experience and reputation of SBAM Limited, as well as
the cost and profitability to SBAM Limited of acting as subadvisory consultant
to the Portfolio. In connection with these considerations, the Board was
provided with information regarding fees payable by similar investment
companies, as well as services provided to such companies and their
performance records, and information regarding SBAM Limited's management of
investment companies with objectives and policies similar to the Portfolio and
the fees payable therefor. In connection with these considerations, the Board
considered possible alternatives to approval of the New Consulting Agreement.
Based upon its review of the above factors, the Board concluded that the New
Consulting Agreement is in the best interests of the Portfolio and its
shareholders.
60
<PAGE>
Certain officers of the Trust and one Trustee who is an Interested Person of
NASL Financial may have a substantial interest in the approval of the New
Consulting Agreement as a result of their positions with NASL Financial and
its affiliates, as described above under "Information Concerning NASL
Financial."
Required Vote
Approval of the New Consulting Agreement will require a Majority Vote of the
shareholders of the Strategic Income Fund.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS OF THE STRATEGIC INCOME FUND VOTE "FOR" PROPOSAL 6D.
61
<PAGE>
PROPOSAL 7 -- APPROVAL OF AN INVESTMENT SUBADVISORY AGREEMENT BETWEEN CAM AND
- -----------------------------------------------------------------------------
J.P. MORGAN INVESTMENT MANAGEMENT INC. WITH RESPECT TO THE
----------------------------------------------------------
INTERNATIONAL GROWTH AND INCOME FUND
------------------------------------
J.P. Morgan Investment Management Inc. ("J.P. Morgan") currently serves as
the investment subadviser of the International Growth and Income Fund pursuant
to an investment subadvisory agreement with NASL Financial (the "Existing J.P.
Morgan Agreement"). In connection with the Acquisition, the Board is proposing
that shareholders of the Portfolio approve an investment subadvisory agreement
between CAM, which will serve as the Trust's investment adviser following the
Acquisition, and J.P. Morgan, pursuant to which J.P. Morgan will continue to
serve as the Portfolio's investment subadviser following the Acquisition (the
"New J.P. Morgan Agreement"). The New J.P. Morgan Agreement is substantially
similar to the Existing J.P. Morgan Agreement. A description of the New J.P.
Morgan Agreement, including the services to be provided by J.P. Morgan
thereunder, is set forth below, and is qualified in its entirety by reference
to the form of agreement attached hereto as Exhibit H.
Effectiveness of the New J.P. Morgan Agreement is contingent upon completion
of the Acquisition. If the Acquisition is not completed for any reason, the
Existing J.P. Morgan Agreement with NASL Financial will remain in effect.
Under the terms of the New J.P. Morgan Agreement, J.P. Morgan will continue
to manage the investment and reinvestment of the assets of the International
Growth and Income Fund, subject to the supervision of the adviser and 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 New J.P. Morgan Agreement contains similar terms and
conditions, including identical subadvisory fee levels, as the Existing J.P.
Morgan Agreement.
For additional information regarding the Existing J.P. Morgan Agreement and
New J.P. Morgan Agreement, see "Additional Information -- Certain Provisions
in the Advisory and Subadvisory Agreements" below.
62
<PAGE>
Subadvisory Fee Rates
As compensation for its services, J.P. Morgan receives a fee from NASL
Financial under the Existing J.P. Morgan Agreement and would receive a fee
from CAM under the New J.P. Morgan Agreement at the same rates. The fee is
stated as an annual percentage of the current value of the net assets of the
International Growth and Income Fund. The fee, which is accrued daily and
payable monthly in arrears, 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 International Growth and Income Fund at the
close of business on the previous business day of the Trust.
Under the Existing and New J.P. Morgan Agreements, J.P. Morgan is entitled
to receive a fee equal to .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, .400% of the Portfolio's average daily
net assets between $200 million and $500 million and .350% of the Portfolio's
average daily net assets in excess of $500 million.
Subadvisory Fees Paid
For the fiscal year ended October 31, 1996, NASL Financial paid $131,398 in
subadvisory fees to J.P. Morgan for management of the International Growth and
Income Fund.
Management and Control of J.P. Morgan
J.P. Morgan is located at 522 Fifth Avenue, New York, New York 10036, and is
a wholly-owned subsidiary of J.P. Morgan & Co. Incorporated, a bank holding
company. For information on the principal executive officers and directors of
J.P. Morgan, see Exhibit A hereto.
Portfolio Brokerage
Information regarding brokerage transactions for the International Growth
and Income Fund is set forth under "Additional Information -- Portfolio
Brokerage" below.
63
<PAGE>
Other Investment Companies Advised by J.P. Morgan
J.P. Morgan manages four funds with investment objectives similar to the
International Growth and Income Fund. They are:
<TABLE>
<CAPTION>
NET ASSETS
FUND INVESTMENT OBJECTIVE SUBADVISORY FEE (10/31/96)
- ---- -------------------- ------------------ ------------
<S> <C> <C> <C>
COVA Series Trust Seeks to provide a .60% on the first $ 10,827,460
- -- International consistent high $50 million of net
Equity Portfolio total return from assets; .50% on
a portfolio of all assets over
international $50 million
equity securities
Frank Russell Seeks to provide .50% on the first $257,341,830
Investment favorable total $100 million of
Management Co. -- return and net assets; .40%
International Fund additional on the next $250
diversification million of net
for U.S. investors assets; and .35%
by investing on all assets over
primarily in $350 million
equity and fixed
income securities
of non-U.S.
companies and
securities issued
by non-U.S.
governments
Frank Russell Seeks to provide .50% on the first $200,231,520
Investment favorable total $100 million of
Management Co. -- return and net assets; .40%
International additional on the next $250
Securities Fund diversification million of net
for U.S. investors assets; and .35%
by investing on all assets over
primarily in $350 million
equity and fixed
income securities
of non-U.S.
companies and
securities issued
by non-U.S.
governments
NASL Series Trust Seeks long-term .50% on the first $166,009,861
- -- International growth of capital $50 million of net
Growth and Income and income assets; .45% on
Trust the next $150
million of net
assets; .40%
on the next $300
million of net
assets; and .35%
on all assets over
$500 million
</TABLE>
Shareholder and Board Approval of the Existing J.P. Morgan Agreement
The Existing J.P. Morgan Agreement was initially approved by the Board on
September 28, 1995 and by the shareholders of the International Growth and
Income Fund on December 5, 1995. The foregoing approval occurred in connection
with an indirect change in control of NASL Financial due to the merger of
Manulife, NASL Financial's current parent, with NASL Financial's then-parent,
NAL. The Existing J.P. Morgan Agreement was most recently approved by the
Board on June 26, 1997.
Board Considerations
At a meeting held on June 27, 1997, the Board, including the Disinterested
Trustees, approved the New J.P. Morgan Agreement and recommended that
shareholders of the Portfolio approve such agreement.
64
<PAGE>
In approving the New J.P. Morgan Agreement and determining to submit it to
shareholders for their approval, the Board has determined that the agreement
is in the best interests of the Portfolio and its shareholders. The Board
believes that the New J.P. Morgan Agreement will enable the Portfolio to
obtain high-quality services at costs which it deems appropriate and
reasonable. In connection with its review of the New J.P. Morgan Agreement,
the Board requested and reviewed, with the assistance of its own legal
counsel, materials furnished by J.P. Morgan, including information regarding
the personnel, operations and financial condition of J.P. Morgan.
In approving the New J.P. Morgan Agreement, the Board focused primarily on
the nature and quality of the services to date provided by J.P. Morgan to the
Portfolio, which are expected to continue to be provided following completion
of the Acquisition, and the fact that the terms and conditions of the Existing
J.P. Morgan Agreement and the New J.P. Morgan Agreement, including the terms
relating to the services to be performed thereunder, are similar (and the
expenses and fees identical). In this regard, the Board placed emphasis on the
continuity provided by maintaining the same subadviser for the Portfolio
following the Acquisition. The Board also considered the overall experience
and reputation of J.P. Morgan, as well as the cost and profitability to J.P.
Morgan of acting as subadviser to the Portfolio. In connection with these
considerations, the Board was provided with information regarding fees payable
by similar investment companies, as well as services provided to such
companies and their performance records, and information regarding J.P.
Morgan's management of investment companies with objectives and policies
similar to the Portfolio and the fees payable therefor. In connection with
these considerations, the Board considered possible alternatives to approval
of the New J.P. Morgan Agreement.
Based upon its review of the above factors, the Board concluded that the New
J.P. Morgan Agreement is in the best interests of the Portfolio and its
shareholders.
Certain officers of the Trust and one Trustee who is an Interested Person of
NASL Financial may have a substantial interest in the approval of the New J.P.
Morgan Agreement as a result of their positions with NASL Financial and its
affiliates, as described above under "Information Concerning NASL Financial."
Required Vote
Approval of the New J.P. Morgan Agreement will require a Majority Vote of
the shareholders of the International Growth and Income Fund.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS OF THE INTERNATIONAL GROWTH AND INCOME FUND VOTE "FOR" PROPOSAL
7.
65
<PAGE>
PROPOSAL 8 -- APPROVAL OF AN INVESTMENT SUBADVISORY AGREEMENT BETWEEN CAM AND
MANUFACTURERS ADVISER CORPORATION WITH RESPECT TO THE MONEY
MARKET FUND
Manufacturers Adviser Corporation ("MAC") currently serves as the investment
subadviser of the Money Market Fund pursuant to an investment subadvisory
agreement with NASL Financial (the "Existing MAC Agreement"). In connection
with the Acquisition, the Board is proposing that shareholders of the
Portfolio approve an investment subadvisory agreement between CAM, which will
serve as the Trust's investment adviser following the Acquisition, and MAC,
pursuant to which MAC will continue to serve as the Portfolio's investment
subadviser following the Acquisition (the "New MAC Agreement"). The New MAC
Agreement is substantially similar to the Existing MAC Agreement. A
description of the New MAC Agreement, including the services to be provided by
MAC thereunder, is set forth below, and is qualified in its entirety by
reference to the form of agreement attached hereto as Exhibit I.
Effectiveness of the New MAC Agreement is contingent upon completion of the
Acquisition. If the Acquisition is not completed for any reason, the Existing
MAC Agreement with NASL Financial will remain in effect.
Under the terms of the New MAC Agreement, MAC will continue to manage the
investment and reinvestment of the assets of the Money Market Fund, subject to
the supervision of the adviser and 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 New MAC Agreement contains
similar terms and conditions, including identical subadvisory fee levels, as
the Existing MAC Agreement.
For additional information regarding the Existing MAC Agreement and New MAC
Agreement, see "Additional Information -- Certain Provisions in the Advisory
and Subadvisory Agreements" below.
Subadvisory Fee Rates
As compensation for its services, MAC receives a fee from NASL Financial
under the Existing MAC Agreement and would receive a fee from CAM under the
New MAC Agreement at the same rates. 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 in arrears, is calculated for each
day by multiplying the fraction of one over the number of calendar days in the
year by the
66
<PAGE>
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.
Under the Existing and New MAC Agreements, MAC is entitled to receive a fee
equal to .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.
Subadvisory Fees Paid
For the fiscal year ended October 31, 1996, NASL Financial paid $14,347 in
subadvisory fees to the subadviser of the Money Market Fund, of which $1,254
was paid to MAC (and the balance of which was paid to a prior subadviser) for
management of the Money Market Fund.
Management and Control of MAC
MAC is located at 200 Bloor Street East, Toronto, Ontario, Canada and is a
wholly-owned subsidiary of Manulife, the ultimate parent of NASL Financial.
For information on the principal executive officers and directors of MAC, see
Exhibit A hereto.
Portfolio Brokerage
Information regarding brokerage transactions for the Money Market Fund is
set forth under "Additional Information -- Portfolio Brokerage" below.
Other Investment Companies Advised by MAC
MAC manages one fund with investment objectives similar to the Money Market
Fund, as follows:
<TABLE>
<CAPTION>
NET ASSETS
FUND INVESTMENT OBJECTIVE SUBADVISORY FEE (10/31/96)
- ---- -------------------- ------------------ ------------
<S> <C> <C> <C>
NASL Series Trust Maximize current .75% on the first $358,398,681
- -- Money Market income consistent $500 million of
Trust with preservation net assets; .20%
of principal and on all assets over
liquidity $500 million
</TABLE>
Shareholder and Board Approval of the Existing MAC Agreement
The Existing MAC Agreement was approved by the Board on September 27, 1996
and by the shareholders of the Money Market Fund on December 20, 1996. The
foregoing approval occurred in connection with a change of subadviser to the
Portfolio.
67
<PAGE>
Board Considerations
At a meeting held on June 27, 1997, the Board, including the Disinterested
Trustees, approved the New MAC Agreement and recommended that shareholders of
the Portfolio approve such agreement.
In approving the New MAC Agreement and determining to submit it to
shareholders for their approval, the Board has determined that the agreement
is in the best interests of the Portfolio and its shareholders. The Board
believes that the New MAC Agreement will enable the Portfolio to obtain high-
quality services at costs which it deems appropriate and reasonable. In
connection with its review of the New MAC Agreement, the Board requested and
reviewed, with the assistance of its own legal counsel, materials furnished by
MAC, including information regarding the personnel, operations and financial
condition of MAC.
In approving the New MAC Agreement, the Board focused primarily on the
nature and quality of the services to date provided by MAC to the Portfolio,
which are expected to continue to be provided following completion of the
Acquisition, and the fact that the terms and conditions of the Existing MAC
Agreement and the New MAC Agreement, including the terms relating to the
services to be performed thereunder and the expenses and fees payable
therefor, are substantially similar. In this regard, the Board placed emphasis
on the continuity provided by maintaining the same investment subadviser for
the Portfolio following the Acquisition. The Board also considered the overall
experience and reputation of MAC, as well as the cost and profitability to MAC
of acting as subadviser to the Portfolio. In connection with these
considerations, the Board was provided with information regarding fees payable
by similar investment companies, as well as services provided to such
companies and their performance records, and information regarding MAC's
management of investment companies with objectives and policies similar to the
Portfolio and the fees payable therefor. In connection with these
considerations, the Board considered possible alternatives to approval of the
New MAC Agreement.
Based upon its review of the above factors, the Board concluded that the New
MAC Agreement is in the best interests of the Portfolio and its shareholders.
Certain officers of the Trust and one Trustee who is an Interested Person of
NASL Financial may have a substantial interest in the approval of the New MAC
Agreement as a result of their positions with NASL Financial and its
affiliates, as described above under "Information Concerning NASL Financial."
Required Vote
Approval of the New MAC Agreement will require a Majority Vote of the
shareholders of the Money Market Fund.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS OF THE MONEY MARKET FUND VOTE "FOR" PROPOSAL 8.
68
<PAGE>
PROPOSAL 9 -- APPROVAL OF AN INVESTMENT SUBADVISORY AGREEMENT BETWEEN CAM AND
- -----------------------------------------------------------------------------
MORGAN STANLEY ASSET MANAGEMENT INC. WITH RESPECT TO THE GLOBAL
---------------------------------------------------------------
EQUITY FUND
-----------
Morgan Stanley Asset Management Inc. ("Morgan Stanley") currently serves as
the investment subadviser of the Global Equity Fund pursuant to an investment
subadvisory agreement with NASL Financial (the "Existing Morgan Stanley
Agreement"). In connection with the Acquisition, the Board is proposing that
the shareholders approve an investment subadvisory agreement between CAM,
which will serve as the Trust's investment adviser following the Acquisition,
and Morgan Stanley, pursuant to which Morgan Stanley will continue to serve as
the Portfolio's investment subadviser following the Acquisition (the "New
Morgan Stanley Agreement"). The New Morgan Stanley Agreement is substantially
similar to the Existing Morgan Stanley Agreement. A description of the New
Morgan Stanley Agreement, including the services to be provided by Morgan
Stanley thereunder, is set forth below, and is qualified in its entirety by
reference to the form of agreement attached hereto as Exhibit J.
Effectiveness of the New Morgan Stanley Agreement is contingent upon
completion of the Acquisition. If the Acquisition is not completed for any
reason, the Existing Morgan Stanley Agreement with NASL Financial will remain
in effect.
Under the terms of the New Morgan Stanley Agreement, Morgan Stanley will
continue to manage the investment and reinvestment of the assets of the Global
Equity Fund, subject to the supervision of the adviser and 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 New Morgan Stanley Agreement contains similar terms and
conditions, including identical subadvisory fee levels, as the Existing Morgan
Stanley Agreement.
For additional information regarding the Existing Morgan Stanley Agreement
and New Morgan Stanley Agreement, see "Additional Information -- Certain
Provisions in the Advisory and Subadvisory Agreements" below.
69
<PAGE>
Subadvisory Fee Rates
As compensation for its services, Morgan Stanley receives a fee from NASL
Financial under the Existing Morgan Stanley Agreement and would receive a fee
from CAM under the New Morgan Stanley Agreement at the same rates. 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 in
arrears, 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.
Under the Existing and New Morgan Stanley Agreements, Morgan Stanley is
entitled to receive a fee equal to .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 daily net assets in excess of $500 million.
Subadvisory Fees Paid
For the fiscal year ended October 31, 1996, NASL Financial paid $709,960 in
subadvisory fees to the subadviser of the Global Equity Fund, of which $47,410
was paid to Morgan Stanley (and the balance of which was paid to a prior
subadviser) for management of the Global Equity Fund.
Management and Control of Morgan Stanley
Morgan Stanley is located at 1221 Avenue of the Americas, New York, New York
10020, and is a wholly-owned subsidiary of Morgan Stanley Group, Inc. For
information on the principal executive officers and directors of Morgan
Stanley, see Exhibit A hereto.
Portfolio Brokerage
Information regarding brokerage transactions for the Global Equity Fund is
set forth under "Additional Information -- Portfolio Brokerage" below.
70
<PAGE>
Other Investment Companies Advised by Morgan Stanley
Morgan Stanley manages seven funds with investment objectives similar to the
Global Equity Fund. They are:
<TABLE>
<CAPTION>
NET ASSETS
FUND INVESTMENT OBJECTIVE ADVISORY/SUBADVISORY FEE (10/31/96)
- ---- -------------------- ------------------------ ------------
<S> <C> <C> <C>
Morgan Stanley Seeks long-term Advisory fee of $ 88,982,712
Institutional capital .80% of average
Fund, Inc. -- appreciation by daily net
Global Equity investing assets(1)
Portfolio primarily in
equity securities
of issuers
throughout the
world, including
U.S. issuers.
Morgan Stanley Seeks long-term Advisory fee of $ 0(3)
Fund, Inc.-- capital 1.00% of average
Global Equity Fund appreciation by daily net
investing assets(2)
primarily in
equity securities
of issuers
throughout the
world, including
U.S. issuers.
Morgan Stanley Seeks long-term Advisory fee of $164,229,248
Fund, Inc.-- capital 1.00% of average
Global Equity appreciation by daily net
Allocation investing in assets(4)
equity securities
of U.S. and non-
U.S. issuers in
accordance with
country weightings
determined by
Morgan Stanley and
with stock
selection within
each country
designed to
replicate a broad
market index.
Morgan Stanley Seeks long-term Advisory fee of $ 5,451,646
Universal Funds, capital .80% on the first
Inc. -- Global appreciation by $500 million of
Equity Portfolio investing net assets; .75%
primarily in on the next $500
equity securities million of net
of issuers assets; .70% on
throughout the all assets over $1
world, including billion(5)
U.S. issuers.
NASL Series Seeks long-term Subadvisory fee of $738,172,240
Trust -- Global capital .500% on first $50
Equity Trust appreciation by million of net
investing assets; .450% on
primarily in a next $150 of net
globally assets; .375% on
diversified next $300 million
portfolio of of net assets; and
common stocks and .325% on all
securities assets over $500
convertible into million
or exercisable for
common stocks.
Van Kampen Seeks long-term Subadvisory fee of $258,554,953
American growth of capital 50% of
Capital -- Global by investing in an compensation
Equity Fund internationally actually received
diversified by Van Kampen
portfolio of American Capital
equity securities (VKAC). VKAC
of companies charges an
located in any advisory fee of
nation, including 1.00% of average
the U.S. daily net
assets(6)
</TABLE>
71
<PAGE>
<TABLE>
<CAPTION>
FUND INVESTMENT OBJECTIVE ADVISORY/SUBADVISORY FEE NET ASSETS
- ---- -------------------- ------------------------ ----------
<S> <C> <C> <C>
Van Kampen Seeks long-term Subadvisory fee of $2,932,623
American Capital growth of capital 50% of
Life Investment through compensation
Trust -- Global investments in an actually received
Equity Fund internationally by VKAC. VKAC
diversified charges an
portfolio of advisory fee of
equity securities 1.00% of average
of companies of daily net
any nation, assets(7)
including the U.S.
</TABLE>
- -----------
(1) Morgan Stanley has agreed to waive its advisory fees and/or to reimburse
this fund, if necessary, if such fees would cause the fund's total annual
operating expenses, as a percentage of average daily net assets, to exceed
1.00% of Class A shares and 1.25% of Class B shares.
(2) Morgan Stanley has agreed to waive its advisory fees and/or to reimburse
this fund, if necessary, if such fees would cause the fund's total annual
operating expenses, as a percentage of average daily net assets, to exceed
1.80% of Class A shares, 2.55% of Class B shares and 2.55% of Class C
shares.
(3) Fund has not yet commenced operations.
(4) Morgan Stanley has agreed to waive its advisory fees and/or to reimburse
this fund, if necessary, if such fees would cause the fund's total annual
operating expenses, as a percentage of average daily net assets, to exceed
2.06% of Class A shares, 2.81% of Class B shares and 2.81% of Class C
shares.
(5) Morgan Stanley has agreed to waive its advisory fees and agreed to
reimburse the Portfolio, if necessary, if such fees would cause the total
annual operating expenses of the Portfolio, as a percentage of average
daily net assets, to exceed 1.15%.
(6) VKAC may voluntarily undertake to reduce this fund's expenses by reducing
the fees payable to it to the extent of, or bearing expenses in excess of,
such limitations as it may establish.
(7) VKAC may, from time to time, agree to waive its fee or any portion thereof
or elect to reimburse this fund for ordinary business expenses in excess
of an agreed upon amount.
Shareholder and Board Approval of the Existing Morgan Stanley Agreement
The Existing Morgan Stanley Agreement was approved by the Board on September
27, 1996 and by the shareholders of the Global Equity Fund on December 20,
1996. The foregoing approval occurred in connection with a change of
subadviser to the Portfolio.
Board Considerations
At a meeting held on June 27, 1997, the Board, including the Disinterested
Trustees, approved the New Morgan Stanley Agreement and recommended that
shareholders of the Portfolio approve such agreement.
In approving the New Morgan Stanley Agreement and determining to submit it
to shareholders for their approval, the Board has determined that the
agreement is in the best interests of the Portfolio and its shareholders. The
Board believes that the New Morgan Stanley Agreement will enable the Portfolio
to obtain high-quality services at costs which it deems appropriate and
reasonable. In connection with its review of the New Morgan Stanley Agreement,
the Board requested and reviewed, with the assistance of its own legal
counsel, materials furnished by Morgan Stanley, including information
regarding the personnel, operations and financial condition of Morgan Stanley.
72
<PAGE>
In approving the New Morgan Stanley Agreement, the Board focused primarily
on the nature and quality of the services to date provided by Morgan Stanley
to the Portfolio, which are expected to continue to be provided following
completion of the Acquisition, and the fact that the terms and conditions of
the Existing Morgan Stanley Agreement and the New Morgan Stanley Agreement,
including the terms relating to the services to be performed thereunder, are
similar (and the expenses and fees identical). In this regard, the Board
placed emphasis on the continuity provided by maintaining the same investment
subadviser for the Portfolio following the Acquisition. The Board also
considered the overall experience and reputation of Morgan Stanley, as well as
the cost and profitability to Morgan Stanley of acting as subadviser to the
Portfolio. In connection with these considerations, the Board was provided
with information regarding fees payable by similar investment companies, as
well as services provided to such companies and their performance records, and
information regarding Morgan Stanley's management of investment companies with
objectives and policies similar to the Portfolio and the fees payable
therefor. In connection with these considerations, the Board considered
possible alternatives to approval of the New Morgan Stanley Agreement.
In connection with the approval of the New Morgan Stanley Agreement, Morgan
Stanley has indicated a desire to renegotiate the level of the fee it receives
from the Portfolio's adviser for serving as subadviser. Morgan Stanley has
agreed to continue serving as the Portfolio's subadviser at the current
subadvisory fee level until October of 1998; however, at that time, Morgan
Stanley has indicated that it will insist upon a subadvisory fee increase to
.550% of the first $50 million of the Portfolio's average daily net assets,
.500% of the Portfolio's average daily net assets between $50 million and $200
million, .400% of the Portfolio's average daily net assets between $200
million and $500 million and .350% of the Portfolio's average daily net assets
in excess of $500 million or resign as the Portfolio's subadviser. Any such
change in subadvisory fee level would require the approval of the Board and,
in the event that either Proposal 11 is not approved by shareholders or the
exemptive relief described therein is not obtained, also the approval of
shareholders of the Portfolio. Assuming that the Acquisition is completed and
Morgan Stanley requests such subadvisory fee increase, CAM has agreed to
recommend such subadvisory fee increase to the Board. However, because
subadvisory fees are paid by the Portfolio's adviser out of the advisory fee
it receives from the Portfolio, any such subadvisory fee increase would be
paid by CAM and not by the shareholders of the Portfolio. If Morgan Stanley
were to resign as the Portfolio's subadviser, the adviser and the Board would
take such action as they deemed to be appropriate under the circumstances.
Based upon its review of the above factors, the Board concluded that the New
Morgan Stanley Agreement is in the best interests of the Portfolio and its
shareholders.
Certain officers of the Trust and one Trustee who is an Interested Person of
NASL Financial may have a substantial interest in the approval of the New
Morgan Stanley Agreement as a result of their positions with NASL Financial
and its affiliates, as described above under "Information Concerning NASL
Financial."
73
<PAGE>
Required Vote
Approval of the New Morgan Stanley 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 9.
74
<PAGE>
PROPOSAL 10 -- APPROVAL OF AN INVESTMENT SUBADVISORY AGREEMENT BETWEEN CAM AND
- ------------------------------------------------------------------------------
T. ROWE PRICE ASSOCIATES, INC. WITH RESPECT TO THE EQUITY-
----------------------------------------------------------
INCOME FUND
-----------
T. Rowe Price Associates, Inc. ("T. Rowe Price") currently serves as the
investment subadviser of the Equity-Income Fund pursuant to an investment
subadvisory agreement with NASL Financial (the "Existing T. Rowe Price
Agreement"). In connection with the Acquisition, the Board is proposing that
shareholders of the Portfolio approve an investment subadvisory agreement
between CAM, which will serve as the Trust's investment adviser following the
Acquisition, and T. Rowe Price, pursuant to which T. Rowe Price will continue
to serve as the Portfolio's investment subadviser following the Acquisition
(the "New T. Rowe Price Agreement"). The New T. Rowe Price Agreement is
substantially similar to the Existing T. Rowe Price Agreement. A description
of the New T. Rowe Price Agreement, including the services to be provided by
T. Rowe Price thereunder, is set forth below, and is qualified in its entirety
by reference to the form of agreement attached hereto as Exhibit K.
Effectiveness of the New T. Rowe Price Agreement is contingent upon
completion of the Acquisition. If the Acquisition is not completed for any
reason, the Existing T. Rowe Price Agreement with NASL Financial will remain
in effect.
Under the terms of the New T. Rowe Price Agreement, T. Rowe Price will
continue to manage the investment and reinvestment of the assets of the
Equity-Income Fund, subject to the supervision of the adviser and 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 New T. Rowe Price Agreement contains similar terms and
conditions, including identical subadvisory fee levels, as the Existing T.
Rowe Price Agreement.
For additional information regarding the Existing T. Rowe Price Agreement
and New T. Rowe Price Agreement, see "Additional Information -- Certain
Provisions in the Advisory and Subadvisory Agreements" below.
Subadvisory Fee Rates
As compensation for its services, T. Rowe Price receives a fee from NASL
Financial under the Existing T. Rowe Price Agreement and would receive a fee
from CAM under the New T. Rowe Price Agreement at the same rates. The fee is
stated as an annual percentage of the current value of the net assets of the
Equity-Income Fund.
75
<PAGE>
The fee, which is accrued daily and payable monthly in arrears, 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 Equity-Income
Fund at the close of business on the previous business day of the Trust.
Under the Existing and New T. Rowe Price Agreements, T. Rowe Price is
entitled to receive a fee equal to .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.
Subadvisory Fees Paid
For the fiscal year ended October 31, 1996, NASL Financial paid $396,204 in
subadvisory fees to the subadviser of the Equity-Income Fund, of which $34,497
was paid to T. Rowe Price (and the balance of which was paid to a prior
subadviser) for management of the Equity-Income Fund.
Management and Control of T. Rowe Price
T. Rowe Price is located at 100 East Pratt Street, Baltimore, Maryland
21202. For information on the principal executive officers and directors of T.
Rowe Price, see Exhibit A hereto.
Portfolio Brokerage
Information regarding brokerage transactions for the Equity-Income Fund is
set forth under "Additional Information -- Portfolio Brokerage" below.
Other Investment Companies Advised by T. Rowe Price
T. Rowe Price manages nine funds with investment objectives similar to the
Equity-Income Fund. They are:
<TABLE>
<CAPTION>
NET ASSETS
FUND INVESTMENT OBJECTIVE ADVISORY/SUBSIDIARY FEE (10/31/96)
- ---- -------------------- ----------------------- --------------
<S> <C> <C> <C>
T. Rowe Price Dividend income Advisory fee of $7,208,097,740
Equity Income Fund and capital growth .25% of net assets
T. Rowe Price Dividend income Advisory fee of $ 77,979,830
Equity Income and capital growth .85% of net assets
Portfolio (Covers investment
management and
operation expenses)
Endeavor Series Dividend income Subadvisory fee of $ 63,800,000
Trust -- Equity and capital growth .40% of net assets
Income Portfolio
EQ Advisors Trust Dividend income Subadvisory fee of Not applicable(1)
- -- T. Rowe Price and capital growth .40% of net assets
Equity Income
Portfolio
</TABLE>
76
<PAGE>
<TABLE>
<CAPTION>
FUND INVESTMENT OBJECTIVE ADVISORY/SUBSIDIARY FEE NET ASSETS
- ---- -------------------- ----------------------- ------------
<S> <C> <C> <C>
John Hancock Dividend income Subadvisory fee of $ 13,800,000
Variable Series and capital growth .50% of net assets
Trust I: Large Cap
Value Portfolio
Maxim Series Dividend income Subadvisory fee of $ 42,300,000
Trust -- Maxim T. and capital growth .50% on first $20
Rowe Price million of net
Equity/Income assets; .40% on
next $30 million
of net assets;
.40% on all assets
over $50 million
NASL Series Dividend income Subadvisory fee of $555,800,000
Trust -- Equity- and capital growth .400% on first $50
Income Trust million of net
assets; .300% on
next $150 million
of net assets;
.200% on next $300
million of net
assets; .200% on
all assets over
$500 million
SBL Fund -- Series Dividend income Subadvisory fee of $ 53,500,000
O (Equity Income and capital growth .50% on first $20
Series) million of net
assets .40% on
next $30 million
of net assets;
.40% on all assets
over $50 million
Security First Growth and income Subadvisory fee of $128,700,000
Trust -- Growth .35% of net assets
and Income Series
</TABLE>
- -----------
(1) Date of inception was April 1, 1997.
Shareholder and Board Approval of the Existing T. Rowe Price Agreement
The Existing T. Rowe Price Agreement was approved by the Board on September
27, 1996 and by the shareholders of the Equity-Income Fund on December 20,
1996. The foregoing approval occurred in connection with a change of
subadviser to the Portfolio.
Board Considerations
At a meeting held on June 27, 1997, the Board, including the Disinterested
Trustees, approved the New T. Rowe Price Agreement and recommended that
shareholders of the Portfolio approve such agreement.
In approving the New T. Rowe Price Agreement and determining to submit it to
shareholders for their approval, the Board has determined that the agreement
is in the best interests of the Portfolio and its shareholders. The Board
believes that the New T. Rowe Price Agreement will enable the Portfolio to
obtain high-quality services at costs which it deems appropriate and
reasonable. In connection with its review of the New T. Rowe Price Agreement,
the Board requested and reviewed, with the assistance of its own legal
counsel, materials furnished by T. Rowe Price, including information regarding
the personnel, operations and financial condition of T. Rowe Price.
77
<PAGE>
In approving the New T. Rowe Price Agreement, the Board focused primarily on
the nature and quality of the services to date provided by T. Rowe Price to
the Portfolio, which are expected to continue to be provided following
completion of the Acquisition, and the fact that the terms and conditions of
the Existing T. Rowe Price Agreement and the New T. Rowe Price Agreement,
including the terms relating to the services to be performed thereunder and
the expenses and fees payable therefor, are substantially similar. In this
regard, the Board placed emphasis on the continuity provided by maintaining
the same investment subadviser for the Portfolio following the Acquisition.
The Board also considered the overall experience and reputation of T. Rowe
Price, as well as the cost and profitability to T. Rowe Price of acting as
subadviser to the Portfolio. In connection with these considerations, the
Board was provided with information regarding fees payable by similar
investment companies, as well as services provided to such companies and their
performance records, and information regarding T. Rowe Price's management of
investment companies with objectives and policies similar to the Portfolio and
the fees payable therefor. In connection with these considerations, the Board
considered possible alternatives to approval of the New T. Rowe Price
Agreement.
In connection with the approval of the New T. Rowe Price Agreement, T. Rowe
Price has indicated a desire to renegotiate the level of the fee it receives
from the Portfolio's adviser for serving as subadviser. T. Rowe Price has
agreed to continue serving as the Portfolio's subadviser at the current
subadvisory fee level until May of 1998; however, at that time, T. Rowe Price
has indicated that it will insist upon a subadvisory fee increase to .400% of
all of the Portfolio's average daily net assets (thereby increasing
subadvisory fees payable with respect to the Portfolio's average daily net
assets in excess of $50 million) or else it will resign as the Portfolio's
subadviser. Any such change in subadvisory fee level would require the
approval of the Board and, in the event that either Proposal 11 is not
approved by shareholders or the exemptive relief described therein is not
obtained, also the approval of shareholders of the Portfolio. Assuming that
the Acquisition is completed, and T. Rowe Price requests such subadvisory fee
increase, CAM has agreed to recommend such subadvisory fee increase to the
Board. However, because subadvisory fees are paid by the Portfolio's adviser
out of the advisory fee it receives from the Portfolio, any such subadvisory
fee increase would be paid by CAM and not by the shareholders of the
Portfolio. If T. Rowe Price were to resign as the Portfolio's subadviser, the
adviser and the Board would take such action as they deemed to be appropriate
under the circumstances.
Based upon its review of the above factors, the Board concluded that the New
T. Rowe Price Agreement is in the best interests of the Portfolio and its
shareholders.
Certain officers of the Trust and one Trustee who is an Interested Person of
NASL Financial may have a substantial interest in the approval of the New T.
Rowe Price Agreement as a result of their positions with NASL Financial and
its affiliates, as described above under "Information Concerning NASL
Financial."
78
<PAGE>
Required Vote
Approval of the New T. Rowe Price Agreement will require a Majority Vote of
the shareholders of the Equity-Income Fund.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS OF THE EQUITY-INCOME FUND VOTE "FOR" PROPOSAL 10.
79
<PAGE>
PROPOSAL 11 -- APPROVAL OF A PROPOSAL TO PERMIT CAM, IN THE FUTURE, TO SELECT
- -----------------------------------------------------------------------------
AND CONTRACT WITH SUBADVISERS FOR THE PORTFOLIOS WITHOUT
--------------------------------------------------------
OBTAINING SHAREHOLDER APPROVAL
------------------------------
Pursuant to shareholder approval obtained on December 20, 1996, and an
exemptive order issued by the Securities and Exchange Commission (the "SEC")
on December 31, 1996, the Trust and NASL Financial obtained relief from the
requirement of Section 15 of the 1940 Act that any subadviser to a Portfolio
serve only pursuant to a written contract approved by the shareholders of such
Portfolio. This relief permits a subadviser to a Portfolio to serve pursuant
to a contract with NASL Financial that has not been approved by shareholders
of such Portfolio. Because CAM is expected to become the new investment
adviser to the Trust upon completion of the Acquisition, shareholders of the
Trust are being asked to approve a substantially similar Proposal with respect
to CAM. The Trust and CAM have applied to the SEC for an exemptive order
substantially identical to the order issued on December 31, 1996.
The requested relief, if obtained, would also apply where a subadviser to a
Portfolio is serving pursuant to a contract that is terminated as a result of
an assignment of the contract due to a change of control of the subadviser. In
such case, the subadviser could continue to act as subadviser to such
Portfolio under a new agreement that had not been approved by shareholders of
the Portfolio. The Board, including the trustees who are not Interested
Persons of the Trust, its investment adviser or subadvisers, will continue to
approve new contracts between the Trust's investment adviser and a subadviser,
as well as changes to existing contracts. The requested relief will not apply
to the advisory agreement between the Trust's investment adviser and the
Trust, and changes to that agreement will continue to require approval of
shareholders.
While CAM expects its relationship with the subadvisers to the Portfolios to
be long-term and stable over time, approval of this Proposal will permit CAM
to act quickly in situations where CAM 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 and expense
of convening a meeting of shareholders to approve certain subadvisory changes.
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 Trust's investment adviser by that Portfolio, (ii) aggregate fees
paid by the Trust's investment adviser to subadvisers to that Portfolio, (iii)
net advisory fees retained by the Trust's investment adviser with respect to
that Portfolio after payment of subadvisory fees and (iv) fees paid by the
Trust's investment 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 Trust's
investment adviser to a particular subadviser.
80
<PAGE>
The application submitted by the Trust and CAM is currently 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 such relief also be approved by shareholders 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 CAM will be required to agree to 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 (which are substantially similar
to the conditions imposed in connection with the Trust's existing exemptive
order):
(i) Before a Portfolio may rely on the requested relief, this Proposal
will be approved by a Majority Vote of the shareholders 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) CAM 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 investment performance of the
subadvisers and (e) ensure that the subadvisers comply with the
Portfolios' investment objectives, policies and restrictions;
(iv) CAM will not enter into subadvisory contracts with any subadviser
that is an "affiliated person" (as defined in the 1940 Act) (an
"Affiliated Subadviser") of the Trust or CAM (other than by reason of
serving as a subadviser to one or more of the Portfolios or any other
portfolio managed by CAM or any of its affiliates) without such agreement
being approved by the shareholders of the applicable Portfolio(s);
(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;
81
<PAGE>
(vi) Any Portfolio relying on the requested relief will disclose in its
registration statement (a) fees to CAM by the Portfolio; (b) aggregate
fees paid by CAM to subadvisers of that Portfolio; (c) net advisory fees
retained by CAM with respect to the Portfolio after payment of subadvisory
fees; and (d) fees paid by CAM to any Affiliated Subadviser;
(vii) At all times, a majority of the Board will continue to be
Disinterested Trustees, and the nomination of new or additional
Disinterested Trustees will be placed within the discretion of the then
existing Disinterested Trustees;
(viii) Independent counsel knowledgeable about the 1940 Act and the
duties of Disinterested Trustees will be engaged to represent the
Disinterested Trustees of the Trust. The selection of independent counsel
will be placed within the discretion of the Disinterested Trustees;
(ix) CAM will provide the Board, no less frequently than quarterly, with
information about CAM's profitability on a per-Portfolio basis. The
information will reflect the impact on profitability of the hiring or
termination of any subadvisers during the applicable quarter;
(x) Whenever a subadviser is hired or terminated, CAM will provide the
Board with information showing the expected impact on CAM's profitability;
(xi) When a subadviser change is proposed for a Portfolio with an
Affiliated Subadviser, the Trustees, including a majority of the
Disinterested Trustees, will make a separate finding, reflected in the
Board minutes, that the change is in the best interests of the Portfolio
and its shareholders and does not involve a conflict of interest from
which CAM or the Affiliated Subadviser derives an inappropriate advantage;
(xii) No Trustee or officer of the Trust or director or officer of CAM
will own directly or indirectly (other than through a pooled investment
vehicle over which such person does not have control) any interest in a
subadviser except for (a) ownership of interests in CAM or any entity that
controls, is controlled by or is under common control with CAM; or (b)
ownership of less than 1% of the outstanding securities of any class of
equity or debt of a publicly-traded company that is either a subadviser or
an entity that controls, is controlled by or is under common control with
a subadviser.
If the requested relief is granted by the SEC and shareholders of the
Portfolios approve this Proposal, CAM 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 WILL BE PAID BY CAM OUT OF ITS ADVISORY FEE AND ARE NOT
ADDITIONAL CHARGES TO A PORTFOLIO.
The Board, including the Disinterested Trustees, has unanimously approved
the Proposal.
82
<PAGE>
Required Vote
Approval of this Proposal with respect to each Portfolio will require 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
shareholders of such Portfolio, (ii) receipt by CAM and the Trust of the
exemptive relief described above, (iii) disclosure in the Trust's Prospectus
of the existence, substance and effect of the exemptive relief and (iv)
completion of the Acquisition.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS OF EACH PORTFOLIO VOTE "FOR" PROPOSAL 11.
83
<PAGE>
****************
ADDITIONAL INFORMATION
ADVISORY ARRANGEMENTS
Pursuant to the terms of the CAM Advisory Agreement and NASL Financial
Advisory Agreement, the investment adviser (the "Adviser") oversees the
administration of all aspects of the business and affairs of the Trust. 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. The Trust reimburses
the Adviser for the 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, 1996, the Trust reimbursed NASL Financial
$2,865,685.
CERTAIN PROVISIONS IN THE ADVISORY AND SUBADVISORY AGREEMENTS
The CAM Advisory Agreement discussed in Proposal 2 and the subadvisory
agreements discussed in Proposals 3 through 10, including the SBAM Limited
subadvisory consulting agreement discussed in Proposal 6D (the "Subadvisory
Agreements," and together with the CAM Advisory Agreement, the "Agreements"),
will continue in effect as to a Portfolio for a period of 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 relevant Portfolios, provided
that in either event such continuance shall also be approved by the vote of a
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.
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.
84
<PAGE>
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 applicable Portfolio(s), 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 or of SBAM Limited, 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 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 11 is approved by shareholders and the exemptive relief described
therein is granted by the SEC, CAM will not need shareholder approval, but
will continue to need Board approval, to effect certain subadvisory changes
and amendments to agreements described in Proposal 11 (as is currently the
case with respect to NASL Financial, as described in Proposal 11).
Each Subadvisory Agreement, except the SBAM Limited subadvisory consulting
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.
MANAGEMENT OF THE TRUST
The table below provides information regarding the current executive
officers of the Trust.
<TABLE>
<CAPTION>
POSITION
WITH TRUST
AND YEAR OF
NAME, ELECTION OR POSITION WITH
ADDRESS AND AGE APPOINTMENT NASL FINANCIAL BUSINESS EXPERIENCE
- ----------------- ----------- -------------- ----------------------
<S> <C> <C> <C>
John Richardson Chairman Not Applicable Senior Vice President
200 Bloor Street 1996 and General Manager,
11th Floor U.S. Operations of
North Tower Manulife, 1995 to
Toronto, Ontario date; Senior Vice
Canada M4W-1E5 President and General
Age: 58 Manager, Canadian
Operations of
Manulife, 1992 to
1994; Senior Vice
President, Financial
Services of Manulife,
1992.
Joe Scott President Not Applicable President, North
73 Tremont Street 1996 American Funds, 1996
Boston, MA 02108 to date; Vice
Age: 47 President, Business
Development and
Marketing of North
American Funds, 1996;
Annuities Vice
President, U.S.
Savings and Retirement
Services Division, of
Manulife, 1995;
Distribution Vice
President, U.S. Group
and Pension Division
of Manulife, 1990 to
1994.
</TABLE>
85
<PAGE>
<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. Vrysen Vice Vice President Vice President, Chief
73 Tremont Street President and Treasurer Financial Officer,
Boston, MA 02108 1988 of NASL U.S. Operations, of
Age: 41 Financial Manulife, 1996 to
date; Vice President
and Chief Actuary,
NASL.
James D. Gallagher Secretary Vice President Vice President, Legal
73 Tremont Street and General Services, of Manulife,
Boston, MA 02108 Counsel for 1996 to date; Vice
Age: 42 NASL Financial 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 President of Vice President, Chief
73 Tremont Street NASL Financial Financial Officer,
Boston, MA 02108 Annuities and Mutual
Age: 40 Funds, of Manulife,
January 1, 1996 to
date; Vice President,
Treasurer and Chief
Financial Officer,
NASL
The Table below provides information regarding the persons expected to serve
as executive officers of the Trust upon completion of the Acquisition.
<CAPTION>
EXPECTED
POSITION
WITH TRUST
AND YEAR OF
ELECTION OR POSITION WITH
NAME, ADDRESS AND AGE APPOINTMENT CAM BUSINESS EXPERIENCE
- --------------------- ------------ -------------- ----------------------
<S> <C> <C> <C>
Bradford K. Gallagher President President of President and Chief
c/o Cypress Holding 1997 CAM Executive Officer of
Company, Inc. (anticipated) Cypress Holding
125 High Street Company, Inc.
Boston, MA 02110 ("Cypress Holdings")
Age: 53 which he founded in
November of 1995.
Prior to founding
Cypress Holdings, Mr.
Gallagher was
President of Allmerica
Financial Services, a
mutual life insurance
company, from April
1990 through September
1995; Mr. Gallagher
was a Member of the
Operating Committee
and the
Founder/President of
Fidelity Investments
Institutional Services
Company from January,
1981 through March
1990.
</TABLE>
86
<PAGE>
<TABLE>
<CAPTION>
EXPECTED
POSITION
WITH TRUST
AND YEAR OF
ELECTION OR POSITION WITH
NAME, ADDRESS AND AGE APPOINTMENT CAM BUSINESS EXPERIENCE
- --------------------- ------------ -------------- ----------------------
<S> <C> <C> <C>
Joseph T. Grause, Jr. Vice Vice President Executive Vice
c/o Cypress Holding President of CAM President of Cypress
Company, Inc. and Holdings, November
125 High Street Treasurer 1995 to date; Senior
Boston, MA 02110 1997 Vice President of
Age: 45 (anticipated) Sales and Marketing,
The Shareholder
Services Group, a
subsidiary of First
Data Corporation, May
1993 to November 1995;
Prior to joining First
Data, Mr. Grause was
associated with
Fidelity Institutional
Services Company from
June 1976 through May
1993 where he attained
the position of Senior
Vice President
John I. Fitzgerald Secretary Counsel Counsel to CypressTree
c/o Cypress Holding 1997 Funds Distributors,
Company, Inc. (anticipated) Inc., ("CFD") April,
125 High Street 1997 to date; Prior to
Boston, MA 02110 joining CFD, Mr.
Age: 49 Fitzgerald was
Executive Vice
President--Legal
Affairs and Government
Relations at the
Boston Stock Exchange
Paul Foley Assistant Vice President Principal of Cypress
c/o Cypress Holding Secretary Holding, July 1996 to
Company, Inc. 1997 date; Financial
125 High Street (anticipated) Analyst with the Fleet
Boston, MA 02110 Group, June 1995 to
Age: 34 July 1996; Financial
Analyst with Allmerica
Financial Services,
April 1987 to June
1995
</TABLE>
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
Portfolios. The subadvisers have no formula for the distribution of the
Portfolios' 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 Portfolios.
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
87
<PAGE>
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 Portfolio and
any other accounts managed by the subadviser.
To the extent research services are used by the subadvisers in rendering
investment advice to the Portfolios, 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
Portfolios will be available also for the benefit of other portfolios managed
by the subadvisers.
For the period November 1, 1995 to October 31, 1996, the following
Portfolios paid brokerage commissions in connection with portfolio
transactions of $1,768,058. The amounts represented by the Portfolios are as
follows:
<TABLE>
<CAPTION>
PORTFOLIO 11/1/95 TO 10/31/96
- --------- -------------------
<S> <C>
Small/Mid Cap............................................... *$24,367
International Small Cap..................................... *$47,513
Growth Equity............................................... *$65,354
Global Equity............................................... $542,895
Equity-Income............................................... $605,408
Growth and Income........................................... $141,134
International Growth and Income............................. $173,403
Balanced.................................................... $167,984
</TABLE>
- -----------
*For the period March 4, 1996 (commencement of operations) to October 31,
1996.
Prior to October 1, 1996, Goldman, Sachs & Co. ("Goldman") and Dresdner Bank
were affiliated brokers of the Trust due to the positions of Goldman as
subadviser to the Equity-Income Fund and Oechsle International Advisors, L.P.
as subadviser to the Global Equity Fund. Salomon Brothers Inc, J.P. Morgan
Securities Inc., J.P. Morgan Securities Ltd., Morgan Stanley & Co., Morgan
Stanley International and Fred Alger & Company are affiliated brokers of the
Trust due to the positions of SBAM, J.P. Morgan, Morgan Stanley and Alger,
respectively, as subadvisers to Portfolios. SBAM serves as subadviser to the
U.S. Government Securities Fund, the Strategic Income Fund and the National
Municipal Bond Fund, as described in Proposals 6A to 6C; J.P. Morgan serves as
subadviser to the International Growth and Income Fund, as described in
Proposal 7; and Morgan Stanley serves as subadviser to the Global Equity Fund,
as described in Proposal 9.
88
<PAGE>
From November 1, 1995 to October 31, 1996, brokerage commissions were paid
to Goldman, Sachs & Co. as follows:
<TABLE>
<CAPTION>
% OF
PORTFOLIO'S
BROKERAGE % OF AGGREGATE
COMMISSIONS $ AMOUNT OF
11/1/95 REPRESENTED TRANSACTIONS
PORTFOLIO TO 10/31/96 FOR THE PERIOD FOR THE PERIOD
--------- ----------- -------------- --------------
<S> <C> <C> <C>
International Small Cap.............. $ 9,019 18.98% 0.77%
Growth Equity........................ $ 1,259 1.93% 0.74%
Global Equity........................ $49,434 9.11% 1.87%
Equity-Income........................ $32,267 5.33% 2.15%
Growth and Income.................... $ 5,892 4.17% 1.03%
International Growth and Income...... $ 1,744 1.01% 1.79%
Balanced............................. $ 9,195 5.47% 0.28%
From November 1, 1995 to October 31, 1996, brokerage commissions were paid
to Salomon Brothers Inc as follows:
<CAPTION>
% OF
PORTFOLIO'S
BROKERAGE % OF AGGREGATE
COMMISSIONS $ AMOUNT OF
11/1/95 REPRESENTED TRANSACTIONS
PORTFOLIO TO 10/31/96 FOR THE PERIOD FOR THE PERIOD
--------- ----------- -------------- --------------
<S> <C> <C> <C>
International Small Cap.............. $ 1,747 3.68% 0.13%
Growth Equity........................ $ 978 1.50% 0.32%
Global Equity........................ $ 1,996 0.37% 0.11%
Equity-Income........................ $17,942 2.96% 0.41%
Growth and Income.................... $ 8,968 6.35% 1.20%
International Growth and Income...... $ 846 0.49% 0.42%
Balanced............................. $ 7,604 4.53% 2.00%
From November 1, 1995 to October 31, 1996, brokerage commissions were paid
to J.P. Morgan Securities Inc. as follows:
<CAPTION>
% OF
PORTFOLIO'S
BROKERAGE % OF AGGREGATE
COMMISSIONS $ AMOUNT OF
11/1/95 REPRESENTED TRANSACTIONS
PORTFOLIO TO 10/31/96 FOR THE PERIOD FOR THE PERIOD
--------- ----------- -------------- --------------
<S> <C> <C> <C>
Global Equity........................ $ 3,108 0.57% 0.11%
Equity-Income........................ $26,767 4.42% 0.89%
Growth and Income.................... $ 3,804 2.70% 0.52%
Balanced............................. $ 4,691 2.79% 0.20%
</TABLE>
89
<PAGE>
From November 1, 1995 to October 31, 1996, brokerage commissions were paid
to Morgan Stanley & Co. as follows:
<TABLE>
<CAPTION>
% OF
PORTFOLIO'S
BROKERAGE % OF AGGREGATE
COMMISSIONS $ AMOUNT OF
11/1/95 REPRESENTED TRANSACTIONS
PORTFOLIO TO 10/31/96 FOR THE PERIOD FOR THE PERIOD
--------- ----------- -------------- --------------
<S> <C> <C> <C>
International Small Cap.............. $ 1,689 3.55% 0.21%
Global Equity........................ $91,029 16.77% 21.92%
Equity-Income........................ $27,173 4.49% 1.02%
Growth and Income.................... $34,889 3.46% 0.87%
International Growth and Income...... $ 1,514 0.87% 1.06%
Balanced............................. $ 5,712 3.40% 2.17%
Growth Equity........................ $ 625 0.96% 0.41%
</TABLE>
From March 4, 1996 (commencement of operations of the Small/Mid Cap
Portfolio) to October 31, 1996, brokerage commissions were paid to Fred Alger
& Company as follows:
<TABLE>
<CAPTION>
% OF
PORTFOLIO'S
BROKERAGE % OF AGGREGATE
3/4/96 COMMISSIONS $ AMOUNT OF
TO REPRESENTED TRANSACTIONS
PORTFOLIO 10/31/96 FOR THE PERIOD FOR THE PERIOD
--------- -------- -------------- --------------
<S> <C> <C> <C>
Small/Mid Cap............................ $22,547 92.53% 0.22%
</TABLE>
From November 1, 1995 to October 31, 1996, there were no brokerage
commissions paid to Dresdner Bank.
OTHER PAYMENTS TO THE ADVISER AND ITS AFFILIATES
Currently, NASL Financial serves as the distributor of the Trust's shares,
and upon completion of the Acquisition, CFD will serve as the Trust's
distributor (in each case, in such capacity, the "Distributor"). Each class of
shares of each Portfolio is authorized under a plan of distribution applicable
to that class of shares (the "Class A Plan," the "Class B Plan" and the "Class
C Plan" and, collectively, the "Plans") adopted pursuant to Rule 12b-1 under
the 1940 Act, to use 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. 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 Rule 2830 of the Conduct Rules 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
90
<PAGE>
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 Portfolios
may reasonably request, provision to the Portfolios of such information,
analyses and opinions with respect to marketing and promotional activities as
the Portfolios 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, the
Trust's promotional agent, at such level of compensation as may be agreed to
by the Distributor and Wood Logan.
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 and
its expenses incurred in connection with providing distribution services.
Thus, payments under a Plan may result in a profit to the Distributor.
Following completion of the Acquisition, pursuant to an amendment to NASL
Financial's existing distribution agreement with the Trust expected to become
effective upon completion of the Acquisition, NASL Financial (or its assignee)
will continue to receive all payments under the Plans with respect to assets
attributable to shares of the Portfolio outstanding as of the consummation of
the Acquisition.
91
<PAGE>
Class A Plan. For the period November 1, 1995 to October 31, 1996, the
Portfolios paid distribution and service fees pursuant to the Class A Plan to
NASL Financial of $659,514 comprised of:
$ 4,983 from the Small/Mid Cap Fund*,
$ 3,424 from the International Small Cap Fund*,
$ 4,389 from the Growth Equity Fund*,
$ 92,464 from the Global Equity Fund,
$ 90,494 from the Equity-Income Fund,
$ 52,788 from the Growth and Income Fund,
$ 39,989 from the Strategic Income Fund,
$ 37,745 from the Balanced Fund,
$ 34,097 from the Investment Quality Bond Fund,
$268,716 from the U.S. Government Securities Fund,
$ 18,795 from the International Growth and Income Fund, and
$ 11,630 from the National Municipal Bond Fund.
- -----------
* For the period March 4, 1996 to October 31, 1996.
Of the total, $51,507 was paid by NASL Financial 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
NASL Financial and used to fund shareholder servicing, promotional activities
and expenses. In addition, $468,970 of the total distribution fees for Class A
were paid to securities dealers, comprised of:
$ 2,397 from the Small/Mid Cap Fund*,
$ 1,454 from the International Small Cap Fund*,
$ 2,106 from the Growth Equity Fund*,
$ 42,588 from the Global Equity Fund,
$ 48,274 from the Equity-Income Fund,
$ 35,897 from the Growth and Income Fund,
$ 31,240 from the Strategic Income Fund,
$ 26,197 from the Balanced Fund,
$ 27,218 from the Investment Quality Bond Fund,
$230,796 from the U.S. Government Securities Fund,
$ 9,335 from the International Growth and Income Fund and
$ 11,468 from the National Municipal Bond Fund.
- -----------
* For the period March 4, 1996 to October 31, 1996.
92
<PAGE>
Class B Plan. For the period November 1, 1995 to October 31, 1996, the
Portfolios paid distribution and service fees pursuant to the Class B Plan to
NASL Financial of $1,665,286 comprised of:
$ 26,559 from the Small/Mid Cap Fund*,
$ 17,637 from the International Small Cap Fund*,
$ 15,448 from the Growth Equity Fund*,
$264,579 from the Global Equity Fund,
$243,764 from the Equity-Income Fund,
$280,833 from the Growth and Income Fund,
$263,337 from the Strategic Income Fund,
$132,045 from the Balanced Fund,
$ 44,719 from the Investment Quality Bond Fund,
$186,538 from the U.S. Government Securities Fund,
$128,705 from the International Growth and Income Fund and
$ 61,122 from the National Municipal Bond Fund.
- -----------
* For the period March 4, 1996 to October 31, 1996.
Of the total, $0 was paid by NASL Financial to Wood Logan for providing
promotional and shareholder services. The fees were, in accordance with the
Class B Plan, retained by NASL Financial and used to fund shareholder
servicing, promotional activities and expenses. In addition, $218,442 of the
total distribution fees for Class B were paid to securities dealers, comprised
of:
$ 472 from the Small/Mid Cap Fund*,
$ 636 from the International Small Cap Fund*,
$ 359 from the Growth Equity Fund*,
$45,225 from the Global Equity Fund,
$36,251 from the Equity-Income Fund,
$34,620 from the Growth and Income Fund,
$39,902 from the Strategic Income Fund,
$18,975 from the Balanced Fund,
$ 5,364 from the Investment Quality Bond Fund,
$17,231 from the U.S. Government Securities Fund,
$13,165 from the International Growth and Income Fund and
$ 6,242 from the National Municipal Bond Fund.
- -----------
* For the period March 4, 1996 to October 31, 1996.
93
<PAGE>
Class C Plan. For the period November 1, 1995 to October 31, 1996, the
Portfolios paid distribution and service fees pursuant to the Class C Plan to
NASL Financial of $3,776,973, comprised of:
$ 27,814 from the Small/Mid Cap Fund*,
$ 18,264 from the International Small Cap Fund*,
$ 17,304 from the Growth Equity Fund*,
$788,845 from the Global Equity Fund,
$847,265 from the Equity-Income Fund,
$694,154 from the Growth and Income Fund,
$179,767 from the Strategic Income Fund,
$787,578 from the Balanced Fund,
$ 70,532 from the Investment Quality Bond Fund,
$201,380 from the U.S. Government Securities Fund,
$ 80,388 from the International Growth and Income Fund and
$ 63,682 from the National Municipal Bond Fund.
- -----------
* For the period March 4, 1996 to October 31, 1996.
Of the total, $404,803 was paid by NASL Financial 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 NASL Financial and used to fund shareholder servicing, promotional
activities and expenses. In addition, $2,835,633 of the total distribution
fees for Class C were paid to securities dealers, comprised of:
$ 6,181 from the Small/Mid Cap Fund*,
$ 4,714 from the International Small Cap Fund*,
$ 5,871 from the Growth Equity Fund*,
$634,944 from the Global Equity Fund,
$682,211 from the Equity-Income Fund,
$521,558 from the Growth and Income Fund,
$112,120 from the Strategic Income Fund,
$655,538 from the Balanced Fund,
$ 37,808 from the Investment Quality Bond Fund,
$108,515 from the U.S. Government Securities Fund,
$ 37,814 from the International Growth and Income Fund and
$ 28,359 from the National Municipal Bond Fund.
- -----------
* For the period March 4, 1996 to October 31, 1996.
94
<PAGE>
Underwriting Commissions. For the period November 1, 1995 to October 31,
1996, NASL Financial received underwriting commissions, in the form of sales
charges, of $1,046,375. The amounts were comprised as reflected below, with
respect to shares of the following Portfolios:
<TABLE>
<CAPTION>
PORTFOLIO 11/1/95 TO 10/31/96
- --------- -------------------
<S> <C>
Small/Mid Cap............................................... $ 77,609*
International Small Cap..................................... $ 47,504*
Growth Equity............................................... $ 51,483*
Global Equity............................................... $ 93,621
Equity-Income............................................... $137,617
Growth and Income........................................... $141,037
International Growth and Income............................. $ 64,345
Strategic Income............................................ $114,585
Investment Quality Bond..................................... $ 23,097
U.S. Government Securities.................................. $218,181
National Municipal Bond..................................... $ 32,640
Balanced.................................................... $ 44,656
</TABLE>
- -----------
* For the period March 4, 1996 (commencement of operations) to October 31,
1996.
Of the total underwriting commissions received during the last fiscal year,
none were retained by NASL Financial. Such commissions were paid to securities
dealers and the promotional agent. During such period NASL Financial did not
receive directly or indirectly from the Portfolios any compensation on the
redemption or repurchase of Portfolio shares, brokerage commissions or other
underwriting compensation. Following completion of the Acquisition, NASL
Financial (or its assignee) will continue to be entitled to receive all sales
charges with respect to shares of the Portfolios sold prior to consummation of
the Acquisition.
OTHER INFORMATION
As of the Record Date, (i) Frontier Trust Company, Trustee FBO Saia Motor
Freight Line Incorporated 401K Plan, Springhouse Corporate Center II, 323
Norristown Road, Ambler, Pennsylvania 19002-2756 owned (a) 1,554,017.793
shares (8.34% of the outstanding shares) of the Money Market Fund, (b)
501,415.493 shares (5.17% of the outstanding shares) of the Equity-Income Fund
and (c) 476,643.699 shares (5.88% of the outstanding shares) of the Balanced
Fund and (ii) Concord-Diablo Federal Credit Union, 1855 Second Street,
Concord, California 94519-2623 owned 1,065,717.57 shares (5.72% of the
outstanding shares) of the Money Market Fund. As of such date, no other
shareholder owned 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.
95
<PAGE>
OTHER MATTERS
The Board does not know of any matters to be presented at the Meeting other
than those described in this Proxy Statement. If any other matters properly
come before the Meeting, the shares represented by proxies will be voted with
respect thereto in accordance with the best judgment of the person or persons
voting the proxies.
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
August 11, 1997
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.
96
<PAGE>
EXHIBIT A
EXECUTIVE OFFICERS AND DIRECTORS OF SUBADVISERS
The principal executive officers and Directors of Fred Alger Management,
Inc. ("Alger") and their principal occupations are set forth below. The
business address of each such person is 75 Maiden Lane, New York, New York
10038.
<TABLE>
<CAPTION>
NAME POSITION WITH ALGER PRINCIPAL OCCUPATION
---- ------------------- --------------------
<C> <S> <C>
Fred M. Alger III Chairman of the Board Chairman of Alger
David Alger Director and President President of Alger
Gregory S. Duch Director and Executive Executive Vice President
Vice President of Alger
Ray Pfeister Executive Vice President Executive Vice President
of Alger
Mary Marsden-Cochran Secretary Secretary of Alger
Frederick A. Blum, CPA Senior Vice President -- Senior Vice President --
Finance Finance
of Alger
Michael F. DiMeglio Senior Vice President -- Senior Vice President --
Account Administration Account Administration of
Alger
James P. Connelly, Jr. Senior Vice President -- Senior Vice President --
Mutual Funds Mutual Funds of Alger
Ronald Tararo, CPA Senior Vice President -- Senior Vice President --
Portfolio Manager Portfolio Manager of
Alger
Seilai Khoo, CPA Senior Vice President -- Senior Vice President --
Portfolio Manager Portfolio Manager of
Alger
Joseph Maida Senior Vice President -- Senior Vice President --
Director of Equity Director of Equity
Trading Trading of Alger
The principal executive officers and directors of Founders Asset Management,
Inc. ("Founders") and their principal occupations are shown below. The
business address of each such person is 2930 East Third Avenue, Denver,
Colorado 80206.
<CAPTION>
NAME POSITION WITH FOUNDERS PRINCIPAL OCCUPATION
---- ---------------------- --------------------
<C> <S> <C>
Bjorn K. Borgen Director, Chairman, Chief Chief Executive Officer
Executive Officer, Chief and Chief
Investment Officer and Investment Officer of
Secretary Founders
Jonathan F. Zeschin President and Chief President and Chief
Operating Officer Operating Officer
of Founders
David L. Ray Vice President, Treasurer, Vice President, Treasurer
Chief Financial Officer and Chief Financial
and Assistant Secretary Officer of Founders
Michael K. Haines Senior Vice President -- Senior Vice President --
Investments Investments and Portfolio
Manager of Founders
Michael W. Gerding Vice President -- Vice President --
Investments Investments and Portfolio
Manager of Founders
Edward F. Keely Vice President -- Vice President --
Investments Investments and Portfolio
Manager of Founders
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
NAME POSITION WITH FOUNDERS PRINCIPAL OCCUPATION
---- ---------------------- --------------------
<C> <S> <C>
Brian F. Kelly Vice President -- Vice President --
Investments Investments and
Portfolio Manager of
Founders
Linda M. Ripley Vice President -- Vice President --
Investments Investments and Head
Trader of Founders
Gregory P. Contillo Senior Vice President -- Senior Vice President --
Institutional Marketing Institutional Marketing
of Founders
James P. Rankin Vice President -- Investor Vice President --
Services Investor Services of
Founders
Kenneth R. Christoffersen Vice President and General Vice President and
Counsel General Counsel of
Founders
</TABLE>
The active partners of Wellington Management Company, LLP ("Wellington
Management") are set forth below. Wellington Management does not have a Board
of Directors. The business address of each such person is 75 State Street,
Boston, Massachusetts 02109.
<TABLE>
<S> <C> <C>
Kenneth L. Abrams Paul D. Kaplan Robert D. Rands
Nicholas C. Adams John C. Keogh Eugene E. Record, Jr.
Rand L. Alexander Mark T. Lynch John R. Ryan
Deborah L. Allinson Nancy T. Lukitsh Joseph H. Schwartz
Nancy T. August Christine S. Manfredi David W. Scudder
James H. Averill Patrick J. McCloskey Binkley C. Shorts
Marie-Claude Bernal Earl E. McEvoy Trond Skramstad
William N. Booth Duncan M. McFarland Catherine A. Smith
Paul Braverman Paul M. Mecray, III Stephen A. Soderberg
William D. DiIanni Mathew E. Megargel Harriett Tee Taggart
Pamela Dippel James N. Mordy Perry M. Traquina
Robert W. Doran Diane C. Nordin Gene R. Tremblay
Charles T. Freeman Edward P. Owens Mary Ann Tynan
Laurie A. Gabriel Saul J. Pannell Ernst H. von Metzsch
Frank J. Gilday Thomas L. Pappas Clare Villari
John H. Gooch David M. Parker James L. Walters
Nicholas P. Greville Jonathan M. Payson Kim Williams
William C. S. Hicks Stephen M. Pazuk Frank V. Wisneski
</TABLE>
The principal executive officers and directors of Salomon Brothers Asset
Management Inc ("SBAM") and Salomon Brothers Asset Management Limited ("SBAM
Limited"), and their respective principal occupations, are set forth below.
The business address of each SBAM officer and director is 7 World Trade
Center, New York, New York 10048, except for Vilas V. Gadkari, whose business
address is 111 Buckingham Palace Road, London, and the business address of
each SBAM Limited officer and director is 111 Buckingham Palace Road, London,
except for Michael Hyland, whose business address is 7 World Trade Center, New
York, New York 10048.
<TABLE>
<CAPTION>
NAME POSITION WITH SBAM* PRINCIPAL OCCUPATION
---- ------------------- --------------------
<C> <S> <C>
Thomas W. Brock Chairman, Chief Executive Chairman, Chief Executive
Officer and Managing Officer and Managing
Director Director of SBAM and
Managing Director and
Trustee of Salomon
Brothers Inc
Michael S. Hyland President, Managing President and Managing
Director and Trustee Director of SBAM and
Managing Director of
Salomon Brothers Inc
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
NAME POSITION WITH SBAM* PRINCIPAL OCCUPATION
- ---- ------------------- --------------------
<S> <C> <C>
Vilas V. Gadkari Vice President and Trustee Managing Director and Chief
Investment Officer of SBAM
Limited
Zachary Snow Secretary Managing Director of Salomon
Brothers Inc
Lawrence H. Kaplan Vice President and Chief Vice President and Chief
Counsel Counsel of SBAM
Rodney B. Berens Managing Director and Managing Director and Trustee
Trustee of Salomon Brothers Inc
<CAPTION>
NAME POSITION WITH SBAM LIMITED* PRINCIPAL OCCUPATION
- ---- --------------------------- --------------------
<S> <C> <C>
Michael S. Hyland Chairman and Director President and Managing
Director of SBAM and
Managing Director of
Salomon Brothers Inc
Vilas V. Gadkari Managing Director, Chief Managing Director and
Investment Officer and Chief Investment Officer
Trustee of SBAM Limited
Joseph V. McDevita Director, Chief Operating Director and Chief
Officer and Trustee Operating Officer of SBAM
Limited
Andrew T. Beagley Compliance Officer Compliance Officer of SBAM
Limited
Beatrice Joyce Doran Vice President and Counsel Vice President and Counsel
of SBAM Limited
Susan H. Dean Finance Officer Finance Officer of SBAM
Limited
</TABLE>
- -----------
* Managing Director and Director are officers' titles, and those who hold it
are not necessarily on the board of directors of SBAM or SBAM Limited. Board
members are indicated by the title Chairman or Trustee.
The principal executive officers and Directors of J.P. Morgan Investment
Management Inc. ("J.P. Morgan") and their principal occupations are set forth
below. The business address of each such person is 522 Fifth Avenue, New York,
New York 10036.
<TABLE>
<CAPTION>
NAME POSITION WITH J.P. MORGAN PRINCIPAL OCCUPATION*
- ---- ------------------------- ---------------------
<S> <C> <C>
C. Nicholas Potter Chairman of the Board Retired Managing Director
of J. P. Morgan
Keith M. Schappert President; Director Managing Director of J. P.
Morgan
William L. Cobb, Jr. Vice Chairman; Director Managing Director of J. P.
Morgan
David L. Brigham Director Retired Managing Director
of J. P. Morgan
Thomas M. Luddy Director Managing Director of J. P.
Morgan
Michael R. Granito Director Managing Director of J. P.
Morgan
M. Steven Soltis Director Managing Director of J. P.
Morgan
Kenneth W. Anderson Director Managing Director of J. P.
Morgan
Robert A. Anselmi Director Managing Director; Secretary of
J. P. Morgan
Jean L.P. Brunel Director Managing Director of J. P.
Morgan
Michael E. Patterson Director Vice Chairman of the Board
of J. P. Morgan & Co., Inc.
John R. Thomas Director Managing Director and
President of J. P. Morgan
Trust Bank Ltd.
</TABLE>
- -----------
* Managing Director is an officer's title, and those who hold it are not
necessarily directors of J.P. Morgan.
A-3
<PAGE>
The principal executive officers and directors of Manufacturers Adviser
Corporation ("MAC") and their principal occupations are shown below. The
business address of each such person is 200 Bloor Street East, Toronto,
Ontario, Canada, M4W 1E5.
<TABLE>
<CAPTION>
NAME POSITION WITH MAC PRINCIPAL OCCUPATION
- ---- ----------------- --------------------
<S> <C> <C>
Joseph B. Mounsey President Senior Vice President,
Investments, Manufacturers
Life Insurance Co.,
Toronto, 1994 -- present
Robert Laughton Vice President Vice President, U.S. Fixed
Income, Investments,
Manufacturers Life
Insurance Co., Toronto,
1989 -- present
Mark Schmeer Vice President Vice President, U.S.
Equities, Investments,
Manufacturers Life
Insurance Co., Toronto,
1995 -- present
Catherine Addison Vice President Senior Portfolio Manager,
U.S. Fixed Income,
Investments, Manufacturers
Life Insurance Co.,
Toronto, 1994 -- present
Stephen Hill Vice President Senior Portfolio Manager,
International Investments,
Manufacturers Life
Insurance Co., London,
1995 -- present
Emilia Pandero Perez Vice President Portfolio Manager,
International Investments,
Manufacturers Life Insurance
Co., London 1993 -- present
Robert Lutzko Vice President Portfolio Manager, U.S.
Equities, Investments,
Manufacturers Life
Insurance Co., Toronto,
1994 -- present
Ronald R. Otsuki Vice President Vice President, Capital
Markets, Investments,
Manufacturers Life
Insurance Co., 1995 --
present
David Howarth Vice President Assistant Vice President,
Capital Markets
Investments, Manufacturers
Life Insurance Co.,
Toronto, 1996 -- present
Richard J. Crook Vice President Vice President,
International Investments,
Manufacturers Life
Insurance Co., London
Leslie Grober Vice President Investment Analyst, U.S.
Equities, Investments,
Manufacturers Life
Insurance Co., 1994 --
present
Rhonda Chang Vice President Portfolio Manager, U.S.
Equities, Investments,
Manufacturers Life
Insurance Co., Toronto,
1994 -- present
Martin Gamble Vice President Senior Portfolio Manager,
International Investments,
Manufacturers Life
Insurance Co., London,
1996 -- present
</TABLE>
A-4
<PAGE>
<TABLE>
<CAPTION>
NAME POSITION WITH MAC PRINCIPAL OCCUPATION
- ---- ----------------- --------------------
<S> <C> <C>
Munsoor Khan Vice President Senior Portfolio Manager,
International Investments,
Manufacturers Life
Insurance Co., London,
1995 -- present
James Gallagher General Counsel & Vice President, U.S. Law,
Secretary Manufacturers Life
Insurance Co., Boston
Stephen Lewis Vice President Assistant Vice President,
Investment Development &
Marketing, Investments,
Manufacturers Life
Insurance Co., Toronto
1996 -- present
Douglas H. Myers Vice President, Assistant Vice President
Compliance; Vice and Controller, U.S.
President, Finance; Individual, Manufacturers
Treasurer Life Insurance Co.,
Toronto, 1988 -- present
David Chia Vice President, Compliance Compliance Audit Officer,
(London Branch) Manufacturers Life
Insurance Co., London,
1993 -- present
Susan Isetts Vice President Manager, Investment
Services & Support,
International Investments,
Manufacturers Life
Insurance Co., London
</TABLE>
The principal executive officers and Directors of Morgan Stanley Asset
Management Inc. ("Morgan Stanley") 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>
NAMES AND ADDRESS POSITIONS WITH MORGAN STANLEY PRINCIPAL OCCUPATION
- ----------------- ----------------------------- --------------------
<S> <C> <C>
Barton M. Biggs Chairman, Director and Managing Director of
Managing Director Morgan Stanley & Co.
Incorporated; Chairman of
Morgan Stanley Asset
Management Limited
Peter A. Nadosy Vice Chairman, Director Managing Director of
and Managing Director Morgan Stanley & Co.
Incorporated; Director of
Morgan Stanley Asset
Management Limited
James M. Allwin President, Director and Managing Director of
Managing Director Morgan Stanley & Co.
Incorporated; President of
Morgan Stanley Realty Inc.
Gordon S. Gray Director and Managing Managing Director of
Director Morgan Stanley & Co.
Incorporated; Director of
Morgan Stanley Asset
Management Limited
Dennis G. Sherva Director and Managing Managing Director of
Director Morgan Stanley & Co.
Incorporated
</TABLE>
A-5
<PAGE>
The principal executive officers and directors of T. Rowe Price Associates,
Inc. ("T. Rowe Price") 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>
NAME POSITION WITH T. ROWE PRICE PRINCIPAL OCCUPATION
- ---- --------------------------- --------------------
<S> <C> <C>
George J. Collins Chief Executive Officer, Director of Rowe Price-
President Fleming International,
and Managing Director Inc. ("Price-Fleming")
James E. Halbkat, Jr. Director President of U.S. Monitor
P.O. Box 23109 Corp.
Hilton Head Island, SC
29925
Richard L. Menschel Director Limited Partner of Goldman
85 Broad St., 2nd Floor Sachs Group L.P.
New York, NY 10004
John W. Rosenblum Director Tayloe Murphy Professor of
P.O. Box 6550 the University of
Charlottesville, VA 22906 Virginia; Director of:
Chesapeake Corporation,
Camdus Communications
Corp., Comdial Corp. and
Cone Mills Corp.
Robert L. Strickland Director Chairman of Loew's
604 Two Piedmont Companies, Inc.; Director
Plaza Bldg. of Hannaford Bros., Co.
Winston-Salem, NC 27104
Phillip C. Walsh Director Consultant to Cyprus Annex
200 East 66th Street, Minerals Company; Director
Apt. A-1005 of Piedmont Mining
New York, NY 10021 Company, Inc.
Anne Marie Whittemore Director Partner of the law firm of
One James Center McGuire, Woods, Battle &
Richmond, VA 23219 Booth; Director of Owens
and Minor, Inc., USF&G
Corp. and James River Corp.
George A. Roche Chief Financial Officer Vice President and
and Managing Director Director of 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, Jr. Managing Director, Secretary and Treasurer of
Secretary and Treasurer Price-Fleming
</TABLE>
A-6
<PAGE>
EXHIBIT B
FORM OF ADVISORY AGREEMENT
AGREEMENT made this day of , 1997(/1/), between North American Funds,
a Massachusetts business trust (the "Trust"), and CypressTree Asset Management
Corporation, Inc., a Delaware corporation ("Cypress" or the "Adviser"). In
consideration of the mutual covenants contained herein, the parties agree as
follows:
1. APPOINTMENT OF ADVISER
The Trust hereby appoints Cypress, 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 venting 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.
- -----------
(1) As previously discussed, the CAM Advisory Agreement will become effective
only upon completion of the Acquisition.
B-1
<PAGE>
(2) Trustees and Officers. The Adviser agrees to permit individuals who
are directors, officers or employees of the Adviser to serve (if duly
elected or appointed) as Trustees or President, Vice President, Treasurer
or Secretary of the Trust, without remuneration from or other cost to the
Trust.
(3) Other Personnel. The Adviser shall furnish to the Trust, at the
Trust's expense, any other personnel necessary for the operations of the
Trust.
(4) Financial, Accounting, and Administrative Services. The Adviser
shall maintain the existence and records of the Trust; maintain the
registrations and qualifications of Trust shares under federal and state
law; and perform all administrative, financial, accounting, bookkeeping
and recordkeeping functions of the Trust except for any such functions
that may be performed by a third party pursuant to a custodian, transfer
agency or service agreement executed by the Trust. The Trust shall
reimburse the Adviser for its expenses associated with all such services,
including the compensation and related personnel expenses and expenses of
office space, office equipment, utilities and miscellaneous office
expenses, except any such expenses directly attributable to officers or
employees of the Adviser who are serving as President, Vice President,
Treasurer or Secretary of the Trust. The Adviser shall determine the
expenses to be reimbursed by the Trust pursuant to expense allocation
procedures established by the Adviser in accordance with generally
accepted accounting principles.
(5) Liaisons with Agents. The Adviser, at its own expense, shall
maintain liaison with the various agents and other persons employed by the
Trust (including the Trust's transfer agent, custodian, independent
accountants and legal counsel) and assist in the coordination of their
activities on behalf of the Trust. Fees and expenses of such agents and
other persons will be paid by the Trust.
(6) Reports to Trust. The Adviser shall furnish to or place at the
disposal of the Trust such information, reports, valuations, analyses and
opinions as the Trust may, at any time or from time to time, reasonably
request or as the Adviser may deem helpful to the Trust, provided that the
expenses associated with any such materials furnished by the Adviser at
the request of the Trust shall be borne by the Trust.
(7) Reports and Other Communications to Trust Shareholders. The Adviser
shall assist the Trust in developing (but not pay for) all general
shareholder communications including regular shareholder reports.
3. EXPENSES ASSUMED BY THE TRUST
In addition to paying the advisory fee provided for in Section 5., the Trust
will pay all expenses of its organization, operations and business not
specifically assumed or agreed to be paid by the Adviser as provided in this
Agreement, by a Subadviser as provided in a Subadvisory Agreement, or by the
Distributor as provided in the Distribution Agreement. Without limiting the
generality of the foregoing, the Trust, in addition to certain expenses
described in Section 2. above, shall pay or arrange for the payment of the
following:
B-2
<PAGE>
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, 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 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);
B-3
<PAGE>
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 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.
B-4
<PAGE>
(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 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
B-5
<PAGE>
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
preciously incurred pursuant to Section 4. of this Agreement, with the
Computation Period ending on the effective date of such termination being
deemed to be a fiscal year for purposes of paragraphs b and c (iii) of Section
4. For purposes of this provision, a termination shall not be deemed to have
occurred with respect to a Portfolio if the termination of a Subadvisory
Agreement is conditioned upon the effectiveness of another Subadvisory
Agreement with respect to the same Portfolio.
5. COMPENSATION OF ADVISER
Subject to the provisions of Section 4. of this Agreement, the Trust will
pay the Adviser with respect to each Portfolio the compensation specified in
Appendix A of this Agreement.
6. NON-EXCLUSIVITY
The services of the Adviser to the Trust are not to be deemed to be
exclusive, and the Adviser shall be free to render investment advisory or
other services to others (including other investment companies) and to engage
in other activities. It is understood and agreed that the directors, officers,
and employees of the Adviser are not prohibited from engaging in any other
business activity or from rendering services to any other person, or from
seeing as partners, officers, directors, trustees or employees of any other
firm or corporation, including other investment companies.
B-6
<PAGE>
7. SUPPLEMENTAL ARRANGEMENTS
The Adviser may enter into arrangements with other persons affiliated with
the Adviser to better enable it to fulfill its obligations under this
Agreement for the provision of certain personnel and facilities to the
Adviser.
8. CONFLICTS OF INTEREST
It is understood that Trustees, officers, agents and shareholders of the
Trust are or may be interested in the Adviser as directors, officers,
stockholders, or otherwise; that directors, officers, agents and stockholders
of the Adviser are or may be interested in the Trust as Trustees, officers,
shareholders or otherwise; that the Adviser may be interested in the Trust;
and that the existence of any such dual interest shall not affect the validity
hereof or of any transactions hereunder except as otherwise provided in the
Agreement and Declaration of Trust of the Trust and the Articles of
Incorporation of the Adviser, respectively, or by specific provision of
applicable law.
9. REGULATION
The Adviser shall submit to all regulatory and administrative bodies having
jurisdiction over the services provided pursuant to this Agreement any
information, reports or other material which any such body by reason of this
Agreement may request or require pursuant to applicable laws and regulations.
10. DURATION AND TERMINATION OF AGREEMENT
This Agreement shall become effective on the later of its execution, the
effective date of the Trust's registration statement under the Securities Act
of 1933 or the date of the meeting of the shareholders of the Trust, at which
meeting this Agreement is approved by the vote of a majority of the
outstanding voting securities (as defined in the Investment Company Act) of
each of the Portfolios. The Agreement will continue in effect for a period
more than two years from the date of its execution only so long as such
continuance is specifically approved at least annually either by the Trustees
of the Trust or by the vote of a majority of the outstanding voting securities
of each of the Portfolios, provided that in either event such continuance
shall also be approved by the vote of a majority of the Trustees of the Trust
who are not interested persons (as defined in the Investment Company Act) of
any party to this Agreement cast in person at a meeting called for the purpose
of 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.
B-7
<PAGE>
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 could have received
under the Agreement in respect of such Portfolio, whichever is less.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Trustees of the Trust, by the vote of a majority of the
outstanding voting securities of the Trust, or with respect to any Portfolio
by the vote of a majority of the outstanding voting securities of such
Portfolio, on sixty days' written notice to the Adviser, or by the Adviser on
sixty days' written notice to the Trust. This Agreement will automatically
terminate, without the payment of any penalty, in the event of its assignment
(as defined in the Investment Company Act).
11. PROVISION OF CERTAIN INFORMATION BY ADVISER
The Adviser will promptly notify the Trust in writing of the occurrence of
any of the following events:
a. the Adviser fails to be registered as an investment adviser under the
Investment Advisers Act or under the laws of any jurisdiction in which the
Adviser is required to be registered as an investment adviser in order to
perform its obligations under this Agreement;
b. the Adviser is served or otherwise receives notice of any action,
suit, proceeding, inquiry or investigation, at law or in equity, before or
by any court, public board or body, involving the affairs of the Trust;
and
c. the chief executive officer or controlling stockholder of the Adviser
or the portfolio manager of any Portfolio changes.
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.
B-8
<PAGE>
13. ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement of the
parties.
14. HEADINGS
The headings in the sections of this Agreement are inserted for convenience
of reference only and shall not constitute a part hereof.
15. NOTICES
All notices required to be given pursuant to this Agreement shall be
delivered or mailed to the last known business address of the Trust or Adviser
in person or by registered mail or a private mail or delivery service
providing the sender with notice of receipt. Notice shall be deemed given on
the date delivered or mailed in accordance with this section.
16. SEVERABILITY
Should any portion of this Agreement for any reason be held to be void in
law or in equity, the Agreement shall be construed, insofar as is possible, as
if such portion had never been contained herein.
17. GOVERNING LAW
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of The Commonwealth of Massachusetts, or any of the
applicable provisions of the Investment Company Act. To the extent that the
laws of The Commonwealth of Massachusetts, or any of the provisions in this
Agreement, conflict with applicable provisions of the Investment Company Act,
the latter shall control.
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 obliges or claimant dealt, shall be liable.
B-9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers as of the date first
mentioned above.
[SEAL] NORTH AMERICAN FUNDS
By:
-----------------------------------
[SEAL] CYPRESSTREE ASSET MANAGEMENT
CORPORATION, INC.
By:
-----------------------------------
B-10
<PAGE>
APPENDIX A
1. Equity-Income Fund: .800% of the first $50,000,000, .700% between
$50,000,000 and $200,000,000, .600% between $200,000,000 and $500,000,000 and
.600% on the excess over $500,000,000 of the current net assets of the
Portfolio.
2. Growth and Income 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. Balanced 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.
4. U.S. Government Securities Fund: .60% of the first $50 million, .60%
between $50,000,000 and $200,000,000, .525% between $200,000,000 and
$500,000,000 and .475% on the excess over $500,000,000 of the current net
assets of the Portfolio.
5. Investment Quality Bond Fund: .60% of the first $50 million, .60% between
$50,000,000 and $200,000,000, .525% between $200,000,000 and $500,000,000 and
.475% on the excess over $500,000,000 of the current net assets of the
Portfolio.
6. 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.
7. Global Equity 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.
8. National Municipal Bond Fund: .60% of the first $50 million, .60% between
$50,000,000 and $200,000,000, .60% between $200,000,000 and $500,000,000 and
.60% on the excess over $500,000,000 of the current net assets of the
Portfolio.
9. Strategic Income Fund: .75% of the first $50 million, .70% between
$50,000,000 and $200,000,000, .65% between $200,000,000 and $500,000,000 and
.60% on the excess over $500,000,000 of the current net assets of the
Portfolio.
10. International Growth and Income Fund: .90% of the first $50 million,
.85% between $50,000,000 and $200,000,000, .80% between $200,000,000 and
$500,000,000 and .75% on the excess over $500,000,000 of the current net
assets of the Portfolio.
11. Small/Mid Cap Fund: .925% of the first $50,000,000, .900% between
$50,000,000 and $200,000,000, .875% between $200,000,000 and $500,000,000 and
.850% on the excess over $500,000,000 of the current value of the net assets
of the Portfolio.
B-11
<PAGE>
12 .International Small Cap Fund: 1.05% of the first $50,000,000, 1.0%
between $50,000,000 and $200,000,000, .900% between $200,000,000 and
$500,000,000 and .800% on the excess over $500,000,000 of the average daily
value of the net assets of the Portfolio.
13. Growth Equity Fund: .900% of the first $50,000,000, .850% between
$50,000,000 and $200,000,000, .825% between $200,000,000 and $500,000,000 and
.800% on the excess over $500,000,000 of the average daily value of the net
assets of the Portfolio.
The Percentage Fee for each Portfolio shall be accrued for each calendar 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.
B-12
<PAGE>
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%
Investment Quality Bond Fund............................................ .90%
U.S. Government Securities Fund......................................... .90%
Equity-Income Fund...................................................... 1.065%
Growth and Income Fund.................................................. .99%
Balanced Fund........................................................... 1.040%
Global Equity Fund...................................................... 1.40%
National Municipal Bond Fund............................................ .85%
Strategic Income Fund................................................... 1.15%
International Growth and Income Fund.................................... 1.40%
Small/Mid Cap Fund...................................................... 1.325%
International Small Cap Fund............................................ 1.55%
Growth Equity Fund...................................................... 1.30%
</TABLE>
B-13
<PAGE>
EXHIBIT C
NORTH AMERICAN FUNDS
SUBADVISORY AGREEMENT
AGREEMENT made this day of , 1997, between CypressTree Asset
Management Corporation, Inc., a Delaware corporation ("Cypress" or the
"Adviser"), and Fred Alger Management Inc., a Delaware Corporation (the
"Subadviser"). In consideration of the mutual covenants contained herein, the
parties agree as follows:
1. APPOINTMENT OF SUBADVISER
The Subadviser undertakes to act as investment subadviser to, and, subject
to the supervision of the Trustees of North American Funds (the "Trust") and
the terms of this Agreement, to manage the investment and reinvestment of the
assets of the 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 individual companies
or industries the securities of which are included in the Portfolios or
are under consideration for inclusion in the Portfolios;
ii. formulate and implement a continuous investment program for each
Portfolio consistent with the investment objectives and related investment
policies for each such Portfolio as described in the Trust's registration
statement, as amended;
iii. take whatever steps are necessary to implement these investment
programs by the purchase and sale of securities including the placing of
orders for such purchases and sales;
iv. regularly report to the Trustees of the Trust with respect to the
implementation of these investment programs; and
v. provide determinations, in accordance with procedures and methods
established by the Trustees of the Trust, of the fair value of securities
held by the
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Portfolios for which market quotations are not readily available for
purposes of enabling the Trust's Custodian to calculate net asset value.
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, including Fred Alger &
Company, Incorporated, an affiliate of the Subadviser, 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 services a higher spread
or commission for a particular transaction than otherwise might have been
charged by another broker-dealer, if the Subadviser determines that the higher
spread or commission is reasonable in relation to the value of the brokerage
and research services that such broker-dealer provides, viewed in terms of
either the particular transaction or the Subadviser's overall responsibilities
with respect to accounts managed by the Subadviser. The Subadviser may use for
the benefit of the Subadviser's other clients, or make available to companies
affiliated with the Subadviser or to its directors for the benefit of its
clients, any such brokerage and research services that the Subadviser obtains
from brokers or dealers.
d. The Subadviser will maintain all accounts, books and records with respect
to the Portfolios 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 partners or employees shall be liable
to the Adviser or Trust for any loss suffered by the Adviser or Trust
resulting from any error of judgment made in the good faith exercise of the
Subadviser's investment discretion in connection with selecting Portfolio
investments except for losses resulting from willful misfeasance, bad faith or
gross negligence of, or from reckless disregard of,
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the duties of the Subadviser or any of its partners or employees; and neither
the Subadviser nor any of its partners or employees shall be liable to the
Adviser or Trust for any loss suffered by the Adviser or Trust resulting from
any other matters to which this Agreement relates (i.e., those other matters
specified in Sections 2 and 8 of this Agreement), except for losses resulting
from willful misfeasance, bad faith, or negligence in the performance of, or
from disregard of, the duties of the Subadviser or any of its partners or
employees.
5. SUPPLEMENTAL ARRANGEMENTS
The Subadviser may enter into arrangements with other persons affiliated
with the Subadviser to better enable it to fulfill its obligations under this
Agreement for the provision of certain personnel and facilities to the
Subadviser.
6. CONFLICTS OF INTEREST
It is understood that trustees, officers, agents and shareholders of the
Trust are or may be interested in the Subadviser as trustees, officers,
partners or otherwise; that directors, officers, agents and partners of the
Subadviser are or may be interested in the Trust as trustees, officers,
shareholders or otherwise; that the Subadviser may be interested in the Trust;
and that the existence of any such dual interest shall not affect the validity
hereof or of any transactions hereunder except as otherwise provided in the
Agreement and Declaration of Trust of the Trust and the Certificate of
Incorporation of the Subadviser, respectively, or by specific provision of
applicable law.
7. REGULATION
The Subadviser shall submit to all regulatory and administrative bodies
having jurisdiction over the services provided pursuant to this Agreement any
information, reports or other material which any such body by reason of this
Agreement may request or require pursuant to applicable laws and regulations.
8. DURATION AND TERMINATION OF AGREEMENT
This Agreement shall become effective with respect to each Portfolio on the
later of its execution, the effective date of the registration statement of
the Portfolio and the date of the meeting of the shareholders of the
Portfolio, at which meeting this Agreement is approved by the vote of a
majority of the outstanding voting securities (as defined in the Investment
Company Act) of the Portfolio. The Agreement will continue in effect for a
period more than two years from the date of its execution only so long as such
continuance is specifically approved at least annually either by the Trustees
of the Trust or by a majority of the outstanding voting securities of each of
the Portfolios, provided that in either event such continuance shall also be
approved by the vote of a majority of the Trustees of the Trust who are not
interested persons (as defined in the Investment Company Act) of any party to
this Agreement cast in
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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 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
c. the managing general partner or controlling partner of the Subadviser or
the portfolio manager of any Portfolio changes.
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10. SERVICES TO OTHERS
The Adviser understands, and has advised the Trust's Board of Trustees, that
the Subadviser now acts, or may in the future act, as an investment adviser to
fiduciary and other managed accounts, and as investment adviser or subadviser
to other investment companies. The Adviser has no objection to the Subadviser
acting in such capacities, provided that whenever the Portfolios and one or
more other investment advisory clients of the Subadviser have available funds
for investment, investments suitable and appropriate for each will be
allocated in a manner believed by the Subadviser to be equitable to each. The
Adviser recognizes, and has advised the Trust's Board of Trustees, that in
some cases this procedure may adversely affect the size of the position that
the participating Portfolio(s) may obtain in a particular security. In
addition, the Adviser understands, and has advised the Trust's Board of
Trustees, that the persons employed by the Subadviser to assist in the
Subadviser's duties under this Agreement will not devote their full time to
such service and nothing contained in this Agreement will be deemed to limit
or restrict the right of the Subadviser or any of its affiliates to engage in
and devote time and attention to other businesses or to render services of
whatever kind or nature.
11. AMENDMENTS TO THE AGREEMENT
This Agreement may be amended by the parties only if such amendment is
specifically approved by the vote of a majority of the outstanding voting
securities of each of the Portfolios affected by the amendment and by the vote
of a majority of the Trustees of the Trust who are not interested persons of
any party to this Agreement cast in person at a meeting called for the purpose
of voting on such approval. The required shareholder approval shall be
effective with respect to any Portfolio if a majority of the outstanding
voting securities of that Portfolio vote to approve the amendment,
notwithstanding that the amendment may not have been approved by a majority of
the outstanding voting securities of (a) any other Portfolio affected by the
amendment or (b) all the portfolios of the Trust.
12. ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement of the
parties.
13. HEADINGS
The headings in the sections of this Agreement are inserted for convenience
of reference only and shall not constitute a part hereof.
14. 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
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notice of receipt. Notice shall be deemed given on the date delivered or
mailed in accordance with this paragraph.
15. 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.
16. 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.
17. LIMITATION OF LIABILITY
The Amended and Restated Agreement and Declaration of Trust of the Trust
dated February 18, 1994, a copy of which, together with all amendments thereto
(the "Declaration"), is on file in the office of the Secretary of The
Commonwealth of Massachusetts, provides that the name "North American Funds"
refers to the Trustees under the Declaration collectively as Trustees, but not
as individuals or personally; and no Trustee, shareholder, officer, employee
or agent of the Trust shall be held to any personal liability, nor shall
resort be had to their private property, for the satisfaction of any
obligation or claim, in connection with the affairs of the Trust or any
portfolio thereof, but only the assets belonging to the Trust, or to the
particular portfolio with which the obligee or claimant dealt, shall be
liable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers as of the date first
mentioned above.
[SEAL] CYPRESSTREE ASSET MANAGEMENT
CORPORATION, INC.
By:
------------------------------------
[SEAL] FRED ALGER MANAGEMENT, INC.
By:
------------------------------------
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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"):
Small/Mid Cap Fund: .525% of the first $50,000,000, .500% between
$50,000,000 and $200,000,000, .475% between $200,000,000 and $500,000,000
and .450% 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.
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EXHIBIT D
NORTH AMERICAN FUNDS
SUBADVISORY AGREEMENT
AGREEMENT made this day of , 1997, between CypressTree Asset
Management Corporation, Inc., a Delaware corporation ("Cypress" or the
"Adviser"), and Founders Asset Management, Inc., a Delaware Corporation (the
"Subadviser"). In consideration of the mutual covenants contained herein, the
parties agree as follows:
1. APPOINTMENT OF SUBADVISER
The Subadviser undertakes to act as investment subadviser to, and, subject
to the supervision of the Trustees of North American Funds (the "Trust") and
the terms of this Agreement, to manage the investment and reinvestment of the
assets of the 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 individual companies or industries the
securities of which are included in the Portfolios or are under
consideration for inclusion in the Portfolios;
ii. formulate and implement a continuous investment program for each
Portfolio consistent with the investment objectives and related investment
policies for each such Portfolio as described in the Trust's registration
statement, as amended;
iii. take whatever steps are necessary to implement these investment
programs by the purchase and sale of securities including the placing of
orders for such purchases and sales;
iv. regularly report to the Trustees of the Trust with respect to the
implementation of these investment programs; and
v. provide recommendations, in accordance with procedures and methods
established by the Trustees of the Trust, of the fair value of securities
held by the
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Portfolios for which market quotations are not readily available for
purposes of enabling the Trust's Custodian to calculate net asset value.
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 services a higher spread or commission
for a particular transaction than otherwise might have been charged by another
broker-dealer, if the Subadviser determines that the higher spread or
commission is reasonable in relation to the value of the brokerage and
research services that such broker-dealer provides, viewed in terms of either
the particular transaction or the Subadviser's overall responsibilities with
respect to accounts managed by the Subadviser. The Subadviser may use for the
benefit of the Subadviser's other clients, or make available to companies
affiliated with the Subadviser or to its directors for the benefit of its
clients, any such brokerage and research services that the Subadviser obtains
from brokers or dealers.
d. The Subadviser will maintain all accounts, books and records with respect
to the Portfolios in connection with the Subadviser's provision of services
under this Agreement 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 partners or employees shall be liable
to the Adviser or Trust for any loss suffered by the Adviser or Trust
resulting from any error of judgment made in the good faith exercise of the
Subadviser's investment discretion in connection with selecting Portfolio
investments except for losses resulting from willful misfeasance, bad faith or
gross negligence of, or from reckless disregard of,
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the duties of the Subadviser or any of its partners or employees; and neither
the Subadviser nor any of its partners or employees shall be liable to the
Adviser or Trust for any loss suffered by the Adviser or Trust resulting from
any other matters to which this Agreement relates (i.e., those other matters
specified in Sections 2 and 8 of this Agreement), except for losses resulting
from willful misfeasance, bad faith, or negligence in the performance of, or
from disregard of, the duties of the Subadviser or any of its partners or
employees.
5. SUPPLEMENTAL AND OTHER 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.
6. CONFLICTS OF INTEREST
It is understood that trustees, officers, agents and shareholders of the
Trust are or may be interested in the Subadviser as trustees, officers,
partners or otherwise, that directors, officers, agents and partners of the
Subadviser are or may be interested in the Trust as trustees, officers,
shareholders or otherwise; that the Subadviser may be interested in the Trust,
and that the existence of any such dual interest shall not affect the validity
hereof or of any transactions hereunder except as otherwise provided in the
Agreement and Declaration of Trust of the Trust and the Certificate of
Incorporation of the Subadviser, respectively, or by specific provision of
applicable law.
7. REGULATION
The Subadviser shall submit to all regulatory and administrative bodies
having jurisdiction over the services provided pursuant to this Agreement any
information, reports or other material which any such body by reason of this
Agreement may request or require pursuant to applicable laws and regulations.
8. DURATION AND TERMINATION OF AGREEMENT
This Agreement shall become effective with respect to each Portfolio on the
later of its execution, the effective date of the registration statement of
the Portfolio and 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
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so long as such continuance is specifically approved at least annually either
by the Trustees of the Trust or by a majority of the outstanding voting
securities of each of the Portfolios, provided that in either event such
continuance shall also be approved by the vote of a majority of the Trustees
of the Trust who are not interested persons (as defined in the Investment
Company Act) of any party to this Agreement cast in person at a meeting called
for the purpose of voting on such approval. The required shareholder approval
of the Agreement or of any continuance of the Agreement shall be effective
with respect to any Portfolio if a majority of the outstanding voting
securities of the series (as defined in Rule 1 8f-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 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
c. the managing general partner or controlling partner of the Subadviser
or the portfolio manager of any Portfolio changes.
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10. AMENDMENTS TO THE AGREEMENT
This Agreement may be amended by the parties only if such amendment is
specifically approved by the vote of a majority of the outstanding voting
securities of each of the Portfolios affected by the amendment and by the vote
of a majority of the Trustees of the Trust who are not interested persons of
any party to this Agreement cast in person at a meeting called for the purpose
of voting on such approval. The required shareholder approval shall be
effective with respect to any Portfolio if a majority of the outstanding
voting securities of that Portfolio vote to approve the amendment,
notwithstanding that the amendment may not have been approved by a majority of
the outstanding voting securities of (a) any other Portfolio affected by the
amendment or (b) all the portfolios of the Trust.
11. ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement of the
parties.
12. HEADINGS
The headings in the sections of this Agreement are inserted for convenience
of reference only and shall not constitute a part hereof.
13. NOTICES
All notices required to be given pursuant to this Agreement shall be
delivered or mailed to the last known business address of the Trust or
applicable party in person or by registered mail or a private mail or delivery
service providing the sender with notice of receipt. Notice shall be deemed
given on the date delivered or mailed in accordance with this paragraph.
14. SEVERABILITY
Should any portion of this Agreement for any reason be held to be void in
law or in equity, the Agreement shall be construed, insofar as is possible, as
if such portion had never been contained herein.
15. GOVERNING LAW
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of The Commonwealth of Massachusetts, or any of the
applicable provisions of the Investment Company Act. To the extent that the
laws of The Commonwealth of Massachusetts, or any of the provisions in this
Agreement, conflict with applicable provisions of the Investment Company Act,
the latter shall control.
16. LIMITATION OF LIABILITY
The Amended and Restated Agreement and Declaration of Trust of the Trust
dated February 18, 1994, a copy of which, together with all amendments thereto
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(the "Declaration"), is on file in the office of the Secretary of The
Commonwealth of Massachusetts, provides that the name "North American Funds"
refers to the Trustees under the Declaration collectively as Trustees, but not
as individuals or personally; and no Trustee, shareholder, officer, employee
or agent of the Trust shall be held to any personal liability, nor shall
resort be had to their private property, for the satisfaction of any
obligation or claim, in connection with the affairs of the Trust or any
portfolio thereof, but only the assets belonging to the Trust, or to the
particular portfolio with which the obligee or claimant dealt, shall be
liable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers as of the date first
mentioned above.
[SEAL] CYPRESSTREE ASSET MANAGEMENT
CORPORATION, INC.
By:
--------------------------------
[SEAL] FOUNDERS ASSET MANAGEMENT, INC.
By:
--------------------------------
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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"):
International Small Cap Fund: .650% of the first $50,000,000, .600%
between $50,000,000 and $200,000,000, .500% between $200,000,000 and
$500,000,000 and .400% on the excess over $500,000,000 of the average
daily value of the net assets of the Portfolio;
Growth Equity Fund: .500% of the first $50,000,000, .450% between
$50,000,000 and $200,000,000, .425% between $200,000,000 and $500,000,000
and .400% on the excess over $500,000,000 of the average daily value of
the net assets of the Portfolio;
Balanced Fund: .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;
The Subadviser Percentage Fee for each Portfolio shall be accrued for each
calendar day this Agreement is in force 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.
D-7
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EXHIBIT E
NORTH AMERICAN FUNDS
SUBADVISORY AGREEMENT
AGREEMENT made this day of , between CypressTree Asset Management
Corporation, Inc., a Delaware corporation ("Cypress" or the "Adviser"), and
Wellington Management Company, LLP, a Massachusetts limited liability
partnership (the "Subadviser"). In consideration of the mutual covenants
contained herein, the parties agree as follows:
1. APPOINTMENT OF SUBADVISER
The Subadviser undertakes to act as investment subadviser to, and, subject
to the supervision of the Trustees of North American Funds (the "Trust") and
the terms of this Agreement, to manage the investment and reinvestment of the
assets of each of the portfolios of the Trust specified in Appendix A to this
Agreement as it shall be amended by the Adviser and the Subadviser from time
to time (the "Portfolio" or "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 or otherwise be deemed an agent unless 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 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 individual companies
or industries the securities of which are included in the Portfolios or
are under consideration for inclusion in the Portfolios;
ii. formulate and implement a continuous investment program for each
Portfolio consistent with the investment objectives and related investment
policies for each such Portfolio as described in the Trust's registration
statement, as amended;
iii. take whatever steps are necessary to implement these investment
programs by the purchase and sale of securities including the placing of
orders for such purchases and sales;
iv. regularly report to the Trustees of the Trust with respect to the
implementation of these investment programs;
v. provide determinations, in accordance with procedures and methods
established by the Trustees of the Trust, of the fair value of securities
held by the
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Portfolios for which market quotations are not readily available for
purposes of enabling the Trust's Custodian to calculate net asset value;
and
vi. comply with the procedures adopted by the Trustees of the Trust for
stabilizing the net asset value per share of the Money Market Trust and
regularly report to the Trustees in accordance with these procedures.
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 services a higher spread or commission
for a particular transaction than otherwise might have been charged by another
broker-dealer, if the Subadviser determines that the higher spread or
commission is reasonable in relation to the value of the brokerage and
research services that such broker-dealer provides, viewed in terms of either
the particular transaction or the Subadviser's overall responsibilities with
respect to accounts managed by the Subadviser. The Subadviser may use for the
benefit of the Subadviser's other clients, or make available to companies
affiliated with the Subadviser or to its directors for the benefit of its
clients, any such brokerage and research services that the Subadviser obtains
from brokers or dealers.
d. The Subadviser will maintain all accounts, books and records with respect
to the Portfolios 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 partners or employees shall be liable
to the Adviser or Trust for any loss suffered by the Adviser or Trust
resulting from its acts or omissions as Subadviser to the Portfolios, except
for losses resulting from willful
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misfeasance, bad faith, or gross negligence in the performance of, or from
reckless disregard of, the duties of the Subadviser or any of its partners or
employees.
5. SUPPLEMENTAL ARRANGEMENTS
The Subadviser may enter into arrangements with other persons affiliated
with the Subadviser to better enable it to fulfill its obligations under this
Agreement for the provision of certain personnel and facilities to the
Subadviser.
6. 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.
7. DURATION AND TERMINATION OF AGREEMENT
This Agreement shall become effective with respect to each Portfolio on the
later of its execution, the effective date of the registration statement of
the Portfolio and the date of the meeting of the shareholders of the
Portfolio, at which meeting this Agreement is approved by the vote of a
majority of the outstanding voting securities (as defined in the Investment
Company Act) of the Portfolio. The Agreement will continue in effect for a
period more than two years from the date of its execution only so long as such
continuance is specifically approved at least annually either by the Trustees
of the Trust or by a majority of the outstanding voting securities of each of
the Portfolios, provided that in either event such continuance shall also be
approved by the vote of a majority of the Trustees of the Trust who are not
interested persons (as defined in the Investment Company Act) of any party to
this Agreement cast in person at a meeting called for the purpose of voting on
such approval. The required shareholder approval of the Agreement or of any
continuance of the Agreement shall be effective with respect to any Portfolio
if a majority of the outstanding voting securities of the series (as defined
in Rule 18f-2(h) under the Investment Company Act) of shares of that Portfolio
votes to approve the Agreement or its continuance, notwithstanding that the
Agreement or its continuance may not have been approved by a majority of the
outstanding voting securities of (a) any other Portfolio affected by the
Agreement or (b) all the portfolios of the Trust.
If the shareholders of any Portfolio fail to approve the Agreement or any
continuance of the Agreement, 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.
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<PAGE>
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.
8. 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
c. the managing general partner or controlling partner of the Subadviser or
the portfolio manager of any Portfolio changes.
9. SALES LITERATURE
The Adviser will not use the Subadviser's name in Trust literature without
prior review and approval by the Subadviser, which will not be unreasonably
withheld or delayed.
10. AMENDMENTS TO THE AGREEMENT
This Agreement may be amended by the parties only if such amendment is
specifically approved by the vote of a majority of the outstanding voting
securities of each of the Portfolios affected by the amendment and by the vote
of a majority of the Trustees of the Trust who are not interested persons of
any party to this Agreement cast in person at a meeting called for the purpose
of voting on such approval. The required shareholder approval shall be
effective with respect to any Portfolio if a majority of the outstanding
voting securities of that Portfolio vote to approve the amendment,
notwithstanding that the amendment may not have been approved by a majority of
the outstanding voting securities of (a) any other Portfolio affected by the
amendment or (b) all the portfolios of the Trust.
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<PAGE>
11. ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement of the
parties with respect to the Portfolios listed in Appendix A.
12. HEADINGS
The headings in the sections of this Agreement are inserted for convenience
of reference only and shall not constitute a part hereof.
13. NOTICES
All notices required to be given pursuant to this Agreement shall be
delivered or mailed to the last known business address of the Trust or
applicable party in person or by registered mail or a private mail or delivery
service providing the sender with notice of receipt. Notice shall be deemed
given on the date delivered or mailed in accordance with this paragraph.
14. SEVERABILITY
Should any portion of this Agreement for any reason be held to be void in
law or in equity, the Agreement shall be construed, insofar as is possible, as
if such portion had never been contained herein.
15. GOVERNING LAW
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of The Commonwealth of Massachusetts, or any of the
applicable provisions of the Investment Company Act. To the extent that the
laws of The Commonwealth of Massachusetts, or any of the provisions in this
Agreement, conflict with applicable provisions of the Investment Company Act,
the latter shall control.
16. LIMITATION OF LIABILITY
The Agreement and Declaration of Trust establishing the Trust, dated
September 28, 1988, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of The Commonwealth
of Massachusetts, provides that the name "North American Funds" refers to the
Trustees under the Declaration collectively as Trustees, but not as
individuals or personally; and no Trustee, shareholder, officer, employee or
agent of the Trust shall be held to any personal liability, nor shall resort
be had to their private property, for the satisfaction of any obligation or
claim, in connection with the affairs of the Trust or any portfolio thereof,
but only the assets belonging to the Trust, or to the particular portfolio
with which the obligee or claimant dealt, shall be liable.
E-5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers as of the date first
mentioned above.
[SEAL] CYPRESSTREE ASSET MANAGEMENT
CORPORATION, INC.
By:
-----------------------------------
[SEAL] WELLINGTON MANAGEMENT COMPANY, LLP
By:
-----------------------------------
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<PAGE>
APPENDIX A
The Subadviser shall serve as investment subadviser for each of the
following portfolios 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"):
1. Growth and Income Fund--.325% for the first $50,000,000, .275%
between $50,000,000 and $200,000,000, .225% between $200,000,000 and
$500,000,000 and .15% on the excess over $500,000,000 of the current value
of the net assets of the Growth and Income Fund.
2. Investment Quality Bond Fund--.225% for the first $200,000,000, .15%
between $200,000,000 and $500,000,000 and .10% on the excess over
$500,000,000 of the current value of the net assets of the Investment
Quality Bond Fund.
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.
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<PAGE>
EXHIBIT F
NORTH AMERICAN FUNDS
SUBADVISORY AGREEMENT
AGREEMENT made this day of 1997, between CypressTree Asset
Management Corporation, Inc. a Delaware corporation ("Cypress" or the
"Adviser"), and Salomon Brothers Asset Management Inc, a Delaware corporation
(the "Subadviser"). In consideration of the mutual covenants contained herein,
the parties agree as follows:
1. APPOINTMENT OF SUBADVISER
The Subadviser undertakes to act as investment subadviser to, and, subject
to the supervision of the Trustees of North American Funds (the "Trust") and
the terms of this Agreement, to manage the investment and reinvestment of the
assets of the portfolios of the Trust specified in Appendix A to this
Agreement as it shall be amended by the Adviser and the Subadviser from time
to time (the "Portfolio" or "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 or otherwise be deemed an agent unless 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 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 individual companies
or industries the securities of which are included in the Portfolios or
are under consideration for inclusion in the Portfolios;
ii. formulate and implement a continuous investment program for each
Portfolio consistent with the investment objectives and related investment
policies for each such portfolio as described in the Trust's registration
statement, as amended;
iii. take whatever steps are necessary to implement these investment
programs by the purchase and sale of securities including the placing of
orders for such purchases and sales;
iv. regularly report to the Trustees of the Trust with respect to the
implementation of these investment programs; and
v. provide determinations of the fair value of certain securities when
market quotations are not readily available for purposes of calculating
net asset value for
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<PAGE>
the Trust's Custodian in accordance with procedures and methods
established by the Trustees of the Trust.
b. The Subadviser, at its expense, will furnish (i) all necessary investment
and management facilities, including salaries of personnel required for it to
execute its duties faithfully, and (ii) administrative facilities, including
bookkeeping, clerical personnel and equipment necessary for the efficient
conduct of the investment affairs of the 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 necessary
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 services a higher
commission for a particular transaction than otherwise might have been charged
by another broker-dealer, if the Subadviser determines that the higher
commission is reasonable in relation to the value of the brokerage and
research services that such broker-dealer provides, viewed in terms of either
the particular transaction or the Subadviser's overall responsibilities with
respect to accounts managed by the Subadviser. The Subadviser may use for the
benefit of the Subadviser's other clients, or make available to companies
affiliated with the Subadviser or to its directors for the benefit of its
clients, any such brokerage and research services that the Subadviser obtains
from brokers or dealers.
d. The Subadviser will maintain all accounts, books and records with respect
to the Portfolios as are required of an investment adviser of a registered
investment company pursuant to the Investment Company Act of 1940, as amended
(the "Investment Company Act"), and Investment Advisers Act of 1940, as
amended (the "Investment Advisers Act"), and the rules thereunder.
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 directors, officers or employees shall
be liable to the Adviser or Trust for any loss suffered by the Adviser or
Trust resulting from its acts or omissions as Subadviser to the Portfolios,
except for losses resulting from willful misfeasance, bad faith, or gross
negligence in the performance of, or from reckless disregard of, the duties of
the Subadviser or any of its directors, officers or employees.
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<PAGE>
5. SUPPLEMENTAL ARRANGEMENTS
The Subadviser may enter into arrangements with other persons affiliated
with the Subadviser to better enable it to fulfill its obligations under this
Agreement for the provision of certain personnel and facilities to the
Subadviser.
6. CONFLICTS OF INTEREST
It is understood that trustees, officers, agents and shareholders of the
Trust are or may be interested in the Subadviser as trustees, officers,
stockholders or otherwise; that directors, officers, agents and stockholders
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
Trust's Agreement and Declaration of Trust and the Articles 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 its execution, the effective date of the registration statement of
the Portfolio and the date of the meeting of the shareholders of the
Portfolio, at which meeting this Agreement is approved by the vote of a
majority of the outstanding voting securities (as defined in the Investment
Company Act) of the Portfolio. The Agreement will continue in effect for a
period more than two years from the date of its execution only so long as such
continuance is specifically approved at least annually either by the Trustees
of the Trust or by a majority of the outstanding voting securities of each of
the Portfolios, provided that in either event such continuance shall also be
approved by the vote of a majority of the Trustees of the Trust who are not
interested persons (as defined in the Investment Company Act) of any party to
this Agreement cast in person at a meeting called for the specific 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.
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<PAGE>
If the shareholders of any Portfolio fail to approve the Agreement or any
continuance of the Agreement, 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 contact 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 promulgated
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
c. the chief executive officer or controlling stockholder of the
Subadviser or the portfolio manager of any Portfolio changes.
10. 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
specific purpose of voting on such approval. The required shareholder approval
shall be effective with respect to any Portfolio if a majority of the
outstanding voting securities of that Portfolio vote to approve the amendment,
notwithstanding that the amendment may not have been approved by a majority of
the outstanding voting securities of (a) any other Portfolio affected by the
amendment or (b) all the Portfolios of the Trust.
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<PAGE>
11. ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement of the
parties with respect to the Portfolios listed in Appendix A.
12. HEADINGS
The headings in the sections of this Agreement are inserted for convenience
of reference only and shall not constitute a part hereof.
13. NOTICES
All notices required to be given pursuant to this Agreement shall be
delivered or mailed to the last known business address of the Trust or
applicable party in person or by registered mail or a private mail or delivery
service providing the sender with notice of receipt. Notice shall be deemed
given on the date delivered or mailed in accordance with this paragraph.
14. SEVERABILITY
Should any portion of this Agreement for any reason be held to 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 Declaration of Trust establishing the Trust, dated September 28, 1988, a
copy of which, together with all amendments thereto (the "Declaration"), is on
file in the office of the Secretary of The Commonwealth of Massachusetts,
provides that the name "North American Funds" refers to the Trustees under the
declaration collectively as Trustees, but not as individuals or personally;
and no Trustee, shareholder, officer, employee or agent of the Trust shall be
held to any personal liability, nor shall resort be had to their private
property, for the satisfaction of any obligation or claim, in connection with
the affairs of the Trust or any Portfolio thereof, but only the assets
belonging to the Trust, or to the particular portfolio with which the obligee
or claimant dealt, shall be liable.
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<PAGE>
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
written above.
[SEAL] CYPRESSTREE ASSET MANAGEMENT
CORPORATION, INC.
By:
------------------------------------
[SEAL] SALOMON BROTHERS ASSET MANAGEMENT INC
By:
------------------------------------
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<PAGE>
APPENDIX A
The Subadviser shall serve as investment adviser for each of the following
portfolios 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"):
U.S. Government Securities Fund: .225% of the first $200,000,000, .15%
between $200,000,000 and $500,000,000 and .10% on the excess over
$500,000,000 of the current value of the net assets of the Portfolio.
National Municipal Bond Fund: .25% of the first $50,000,000, .25% between
$50,000,000 and $200,000,000, .25% between $200,000,000 and $500,000,000
and .25% on the excess over $500,000,000 of the current net assets of the
portfolio.
Strategic Income Fund: .35% of the first $50,000,000, .30% between
$50,000,000 and $200,000,000, .25% between $200,000,000 and $500,000,000
and .20% on the excess over $500,000,000 of the current 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 currently effective 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 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.
F-7
<PAGE>
EXHIBIT G
SUBADVISORY CONSULTING AGREEMENT
STRATEGIC INCOME PORTFOLIO
NORTH AMERICAN FUNDS
SUBADVISORY CONSULTING AGREEMENT made this day of , 1997, between
Salomon Brothers Asset Management Inc, a Delaware corporation ("SBAM"), and
Salomon Brothers Asset Management Limited, a company incorporated under the
laws of England ("SBAM Limited").
In consideration of the mutual covenants contained herein, with effect on
and from the Effective Date (as defined in paragraph 5 of this Subadvisory
Consulting Agreement) the parties agree as follows:
1. APPOINTMENT OF SUBADVISORY CONSULTANT
Pursuant to paragraph 5 of the Subadvisory Agreement between CypressTree
Asset Management Corporation, Inc. a Delaware corporation (the "Adviser"), and
SBAM dated ("Agreement"), SBAM Limited undertakes to act as a subadviser
and manage the investment and reinvestment of the assets or such part of the
assets of the Strategic Income Fund (the "Portfolio") of North American Funds
(the "Fund") (previously known as "North American Security Trust") as may be
agreed between SBAM and SBAM Limited from time to time (the "Delegated
Assets"), subject to the supervision of SBAM and the Trustees of the Fund and
to the terms of this Subadvisory Consulting Agreement. SBAM Limited will be an
independent contractor and will have no authority to act for or represent the
Fund or the Adviser in any way or otherwise be deemed an agent unless
expressly authorized in this Subadvisory Consulting Agreement or another
writing by the Fund and the Adviser.
SBAM Limited is a member of the Investment Management Regulatory
Organization Limited ("IMRO") and is regulated in its conduct of Investment
Business (as defined in IMRO's rules) by IMRO and each of the Fund and SBAM
will be a Non-private Customer (as defined in IMRO's rules) of SBAM Limited.
2. SERVICES TO BE RENDERED BY THE SUBADVISORY CONSULTANT TO THE PORTFOLIO
Subject always to the direction and control of the Trustees of the Fund and
SBAM, SBAM Limited will manage the investments and determine the composition
of the Delegated Assets in accordance with the investment objectives, policies
and restrictions contained in the Fund's currently effective prospectus and
Statement of Additional Information in so far as they relate to the Portfolio
(both as amended from time to time) and in compliance with the provisions of
the Investment Company Act of 1940, as amended (the "Investment Company Act")
and the rules promulgated
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thereunder and, so far as permitted thereby, is hereby authorized to borrow
money and to effect transactions on or off any exchange on behalf of the
Portfolio.
3. COMPENSATION OF SUBADVISER
SBAM will pay SBAM Limited such compensation as specified in Appendix A to
this Subadvisory Consulting Agreement.
4. APPLICABILITY OF PROVISIONS OF THE AGREEMENT
The provisions of paragraphs 2.c, 4, 7 and 9 of the Agreement are hereby
incorporated into this Subadvisory Consulting Agreement and shall be read
herein as if references to "the Subadviser" were references to SBAM Limited.
For this purpose, the following further modifications shall be deemed to be
made to paragraph 4 of the Agreement. In that paragraph, references to "the
Adviser" shall be deemed to include references to SBAM, the number "(i)" shall
be deemed to be inserted between "resulting from" and "its acts" and at the
end of that paragraph the words "or (ii) any breach by SBAM Limited or any of
its directors, officers or employees of its duties or obligations under the
Financial Services Act of 1986 of the United Kingdom or under the regulatory
system (as defined in IMRO's rules)" shall be deemed to be inserted between
"employees" and ".".
5. DURATION AND TERMINATION OF SUBADVISORY CONSULTING AGREEMENT
This Subadvisory Consulting Agreement shall become effective on the later
of:
(i) the date of its execution,
(ii) the effective date of the registration statement of the Portfolio,
(iii) the date this Subadvisory Consulting Agreement is approved by the
Trustees of the Fund in accordance with the Investment Company Act,
(iv) the date of the meeting of the shareholders of the Portfolio, at
which meeting this Subadvisory Consulting Agreement is approved by the
vote of a majority of the outstanding voting securities (as defined in the
Investment Company Act) of the Portfolio, and
such date being referred to in this Subadvisory Consulting Agreement as the
"Effective Date".
The Subadvisory Consulting 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 Fund or by a majority of the outstanding voting securities of the
Portfolio, provided that in either
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event such continuance shall also be approved by the vote of a majority of the
Trustees of the Fund who are not interested persons (as defined in the
Investment Company Act) of any party to this Subadvisory Consulting Agreement
cast in person at a meeting called for the purpose of voting on such approval.
The required shareholder approval of this Subadvisory Consulting Agreement or
of any continuance of this Subadvisory Consulting Agreement shall be effective
with respect to the 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 the Portfolio votes to approve this Subadvisory
Consulting Agreement its continuance, notwithstanding that the Subadvisory
Consulting Agreement or its continuance may not have been approved by a
majority of the outstanding voting securities of (a) any other portfolio of
the Fund or (b) all the portfolios of the Fund.
This Subadvisory Consulting Agreement may be terminated at any time, without
the payment of any penalty, by the Trustees of the Fund, or by the vote of a
majority of the outstanding voting securities of the Portfolio, on sixty days'
written notice to SBAM and SBAM Limited or by SBAM or SBAM Limited on sixty
days' written notice to the Fund and the other party. This Subadvisory
Consulting Agreement will automatically terminate, without the payment of any
penalty, in the event of its assignment (as defined in the Investment Company
Act), in the event the Advisory Agreement between the Adviser and the Fund
terminates for any reason or in the event the shareholders of the Portfolio
fail to approve any continuance of the Agreement or the Agreement terminates
for any reason.
6. AMENDMENTS TO THE SUBADVISORY CONSULTING AGREEMENT
This Subadvisory Consulting 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 the Portfolio and by the vote of a majority
of the Trustees of the Fund who are not interested persons of any party to
this Subadvisory Consulting 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 the Portfolio if a majority of the
outstanding voting securities of the 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 of the Fund or
(b) all the portfolios of the Fund.
7. COMPLAINTS
All formal complaints by SBAM or the Fund should in the first instance be
made in writing to the Compliance Officer of SBAM Limited in accordance with
paragraph 10 of this Subadvisory Consulting Agreement. In addition, SBAM and
the Fund have the right to complain directly to IMRO.
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8. ENTIRE AGREEMENT
This Subadvisory Consulting Agreement contains the entire understanding and
agreement of the parties with respect to the Portfolio.
9. HEADINGS
The headings in the sections of this Subadvisory Consulting Agreement are
inserted for convenience of reference only and shall not constitute a part
hereof.
10. NOTICES
All notices required to be given pursuant to this Subadvisory Consulting
Agreement shall be delivered or mailed to the last known business address of
the Fund 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.
11. SEVERABILITY
Should any portion of this Subadvisory Consulting Agreement for any reason
be held to be void in law or in equity, the Subadvisory Consulting Agreement
shall be construed insofar as is possible as if such portion had never been
contained herein.
12. GOVERNING LAW
The provisions of this Subadvisory Consulting 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 Subadvisory Consulting Agreement, conflict with
applicable provisions of the Investment Company Act, the latter shall control.
13. LIMITATION OF LIABILITY
The Amended and Restated Declaration of Trust of the Fund, 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 Security Trust" (now
referred to as "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 Fund 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 Fund or any portfolio thereof, but only the assets
belonging to the Fund, or to the particular portfolio with which the obligee
or claimant dealt, shall be liable.
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IN WITNESS WHEREOF, the parties hereto have caused this Subadvisory
Consulting Agreement to be executed by their duly authorized officers as of
the date first written above.
SALOMON BROTHERS ASSET MANAGEMENT INC
By:
------------------------------------
SALOMON BROTHERS ASSET MANAGEMENT
LIMITED
By:
------------------------------------
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APPENDIX A
SBAM will pay SBAM Limited, as full compensation for services provided under
this Subadvisory Consulting Agreement, a portion of the fee (such portion
herein referred to as the "Subadvisory Consulting Fee") payable to SBAM under
the Agreement being an amount equal to the fee payable under the Agreement
multiplied by the current value of the net assets of the Delegated Assets and
divided by the current value of the net assets of the Portfolio.
The Subadvisory Consulting Fee shall be accrued for each calendar day in the
period commencing with the Effective Date and ending on the date on which this
Subadvisory Consulting Agreement terminates in accordance with its paragraph 5
and the sum of the daily fee accruals shall be paid to SBAM Limited by SBAM at
such times and for such periods as SBAM and SBAM Limited shall agree.
The Subadvisory Consulting Fee will be paid by SBAM out of its fee paid
pursuant to its Subadvisory Agreement with the Adviser.
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EXHIBIT H
NORTH AMERICAN FUNDS
SUBADVISORY AGREEMENT
AGREEMENT made this day of , 1997, between CypressTree Asset
Management Corporation, Inc., a Delaware corporation ("Cypress" or the
"Adviser"), and J.P. Morgan Investment Management Inc., a Delaware corporation
(the "Subadviser"). In consideration of the mutual covenants contained herein,
the parties agree as follows:
1. APPOINTMENT OF SUBADVISER
The Subadviser undertakes to act as investment subadviser to, and, subject
to the supervision of the Trustees of North American Funds (the "Trust") and
the terms of this Agreement, to manage the investment and reinvestment of the
assets of the 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 individual companies
or industries the securities of which are included in the Portfolios or
are under consideration for inclusion in the Portfolios;
ii. formulate and implement a continuous investment program for each
Portfolio consistent with the investment objectives and related investment
policies for each such Portfolio as described in the Trust's registration
statement, as amended;
iii. take whatever steps are necessary to implement these investment
programs by the purchase and sale of securities including the placing of
orders for such purchases and sales;
iv. regularly report to the Trustees of the Trust with respect to the
implementation of these investment programs; and
v. assist in determinations, in accordance with procedures and methods
established by the Trustees of the Trust, of the fair value of securities
held by the
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Portfolios for which market quotations are not readily available for
purposes of enabling the Trust's Custodian to calculate net asset value.
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 services a higher spread or commission
for a particular transaction than otherwise might have been charged by another
broker-dealer, if the Subadviser determines that the higher spread or
commission is reasonable in relation to the value of the brokerage and
research services that such broker-dealer provides, viewed in terms of either
the particular transaction or the Subadviser's overall responsibilities with
respect to accounts managed by the Subadviser. The Subadviser may use for the
benefit of the Subadviser's other clients, or make available to companies
affiliated with the Subadviser or to its directors for the benefit of its
clients, any such brokerage and research services that the Subadviser obtains
from brokers or dealers.
d. The Subadviser will maintain all accounts, books and records with respect
to the Portfolios 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 partners or employees shall be liable
to the Adviser or Trust for any loss suffered by the Adviser or Trust
resulting from any error of judgment made in the good faith exercise of the
Subadviser's investment discretion in connection with selecting 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 partners or employees; and neither the
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Subadviser nor any of its partners or employees shall be liable to the Adviser
or Trust for any loss suffered by the Adviser or Trust resulting from any
other matters to which this Agreement relates (i.e., those other matters
specified in Sections 2 and 8 of this Agreement), except for losses resulting
from willful misfeasance, bad faith, or negligence in the performance of, or
from disregard of, the duties of the Subadviser or any of its partners or
employees.
Promptly following execution of this Agreement, the Adviser will provide the
Subadviser with a Guideline specifying the requirements of Subsection
851(b)(3) of the Internal Revenue Code (the "Code") as it pertains to the
Portfolios. With respect to the short-term limitations imposed under
Subsection 851(b)(3) of the Code, the Adviser will provide within fifteen days
of the end of each month a written Report dated the end of the previous month
with respect to each Portfolio's compliance for its current fiscal year with
those limitations. The Reports will include each Portfolio's gross income from
the beginning of the current fiscal year to the date of the Report and its
cumulative income and gains described in Subsection 851(b)(3) of the Code for
such period. While the Subadviser is responsible for investing the Portfolio's
assets in accordance with the Portfolio's registration statement, including
the limitations imposed under Subsection 851(b)(3) of the Code, the Adviser
agrees that the Subadviser may rely on, and will not be liable for failures
attributable to, information contained in the most recent Guideline and the
Reports.
5. SUPPLEMENTAL ARRANGEMENTS
The Subadviser may enter into arrangements with other persons affiliated
with the Subadviser to better enable it to fulfill its obligations under this
Agreement for the provision of certain personnel and facilities to the
Subadviser.
6. CONFLICTS OF INTEREST
It is understood that trustees, officers, agents and shareholders of the
Trust are or may be interested in the Subadviser as trustees, officers,
partners or otherwise; that directors, officers, agents and partners of the
Subadviser are or may be interested in the Trust as trustees, officers,
shareholders or otherwise; that the Subadviser may be interested in the Trust;
and that the existence of any such dual interest shall not affect the validity
hereof or of any transactions hereunder except as otherwise provided in the
Agreement and Declaration of Trust of the Trust and the Certificate of
Incorporation of the Subadviser, respectively, or by specific provision of
applicable law.
7. REGULATION
The Subadviser shall submit to all regulatory and administrative bodies
having jurisdiction over the services provided pursuant to this Agreement any
information, reports or other material which any such body by reason of this
Agreement may request or require pursuant to applicable laws and regulations.
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<PAGE>
8. DURATION AND TERMINATION OF AGREEMENT
This Agreement shall become effective with respect to each Portfolio on the
later of its execution, the effective date of the registration statement of
the Portfolio and the date of the meeting of the shareholders of the
Portfolio, at which meeting this Agreement is approved by the vote of a
majority of the outstanding voting securities (as defined in the Investment
Company Act) of the Portfolio. The Agreement will continue in effect for a
period more than two years from the date of its execution only so long as such
continuance is specifically approved at least annually either by the Trustees
of the Trust or by a majority of the outstanding voting securities of each of
the Portfolios, provided that in either event such continuance shall also be
approved by the vote of a majority of the Trustees of the Trust who are not
interested persons (as defined in the Investment Company Act) of any party to
this Agreement cast in person at a meeting called for the purpose of voting on
such approval. The required shareholder approval of the Agreement or of any
continuance of the Agreement shall be effective with respect to any Portfolio
if a majority of the outstanding voting securities of the series (as defined
in Rule 18f-2(h) under the Investment Company Act) of shares of that Portfolio
votes to approve the Agreement or its continuance, notwithstanding that the
Agreement or its continuance may not have been approved by a majority of the
outstanding voting securities of (a) any other Portfolio affected by the
Agreement or (b) all the portfolios of the Trust.
If the shareholders of any Portfolio fail to approve the Agreement or any
continuance of the Agreement, 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. Without limiting in any way
the requirements of the foregoing provisions, the Adviser will provide the
Subadviser 5 (five) days written notice in the event the Advisory Agreement
between the Adviser and the Trust will be terminated.
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<PAGE>
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
c. the managing general partner or controlling partner of the Subadviser
or the portfolio manager of any Portfolio changes.
10. INDEMNIFICATION
a. The Adviser agrees to indemnify and hold harmless the Subadviser from and
against any and all claims, losses, liabilities or damages (including
reasonable attorneys' fees and other related expenses) ("Losses") arising from
or in connection with this Agreement or the performance by the Subadviser of
its duties hereunder; provided, however, that the Subadviser shall not be
indemnified hereunder for Losses arising from or in connection with this
Agreement or the performance by the Subadviser of its duties hereunder
resulting from the Subadviser's or any of its employees' willful misfeasance,
bad faith, gross negligence or reckless disregard.
b. The Subadviser agrees to indemnify and hold harmless the Adviser from and
against any and all Losses arising from or in connection with this Agreement
or the performance by the Adviser of its duties hereunder; provided, however,
that the Adviser shall not be indemnified hereunder for Losses arising from or
in connection with this Agreement or the performance by the Adviser of its
duties hereunder resulting from the Adviser's or any of its employees' willful
misfeasance, bad faith, gross negligence, or reckless disregard.
11. DISCLOSURE
Except as otherwise required by applicable law or this Agreement, neither
the Trust nor the Adviser shall, without the prior written consent of the
Subadviser (such consent not to be unreasonably withheld or delayed), make
available to the general public any representations regarding or references to
the Subadviser or any of its affiliates (in each case, "Disclosure") in any
disclosure document; provided, however, that the Subadviser shall be deemed to
have consented to the use of any Disclosure if (i) the Advisor has submitted
such Disclosure to the Subadviser for its approval a reasonable period of time
prior to any regulatory filing date or other deadline for the use of the
Disclosure and (ii) the Subadviser does not, within three (3) business days of
the Subadviser's receipt of such Disclosure (or such other period of time as
agreed
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to by the Adviser and the Subadviser), provide the Adviser with (a) notice of
its disapproval of such Disclosure and (b) revised Disclosure, reasonably
acceptable to the Adviser, to be used in the place of such disapproved
Disclosure. Notwithstanding the preceding sentence, the Adviser shall not be
required to obtain the Subadviser's approval of any Disclosure if obtaining
such approval by the process described in the preceding sentence would cause
the Trust or the Adviser to violate any applicable law, rule or regulation as
reasonably determined by the Adviser or the Trustees of the Trust. For the
purposes of this Section 11, the term "affiliate" shall mean any person
controlling, controlled by or under common control with the Subadviser.
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 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
applicable party in person or by registered mail or a private mail or delivery
service providing the sender with notice of receipt. Notice shall be deemed
given on the date delivered or mailed in accordance with this paragraph.
16. SEVERABILITY
Should any portion of this Agreement for any reason be held to be void in
law or in equity, the Agreement 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 Agreement and Declaration of Trust establishing the Trust, dated
September 28, 1988, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of The Commonwealth
of Massachusetts, provides that the name "North American Funds" refers to the
Trustees under the Declaration collectively as Trustees, but not as
individuals or personally; and no Trustee, shareholder, officer, employee or
agent of the Trust shall be held to any personal liability, nor shall resort
be had to their private property, for the satisfaction of any obligation or
claim, in connection with the affairs of the Trust or any portfolio thereof,
but only the assets belonging to the Trust, or to the particular portfolio
with which the obligee or claimant dealt, shall be liable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers as of the date first
mentioned above.
[SEAL] CYPRESSTREE ASSET MANAGEMENT
CORPORATION, INC.
By:
------------------------------------
[SEAL] J.P. MORGAN INVESTMENT MANAGEMENT
INC.
By:
------------------------------------
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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"):
International Growth and Income Fund: .50% of the first $50,000,000, .45%
between $50,000,000 and $200,000,000, .40% between $200,000,000 and
$500,000,000 and .35% 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.
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EXHIBIT I
NORTH AMERICAN FUNDS
SUBADVISORY AGREEMENT
AGREEMENT made this day of , 1997, between Cypress Asset Management
Corporation, Inc., a Delaware corporation ("Cypress" or the "Adviser"), and
Manufacturers Adviser Corporation, a Colorado Corporation (the "Subadviser").
In consideration of the mutual covenants contained herein, the parties agree
as follows:
1. APPOINTMENT OF SUBADVISER
The Subadviser undertakes to act as investment subadviser to, and, subject
to the supervision of the Trustees of North American Funds (the "Trust") and
the terms of this Agreement, to manage the investment and reinvestment of the
assets of the 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 individual companies
or industries the securities of which are included in the Portfolios or
are under consideration for inclusion in the Portfolios;
ii. formulate and implement a continuous investment program for each
Portfolio consistent with the investment objectives and related investment
policies for each such Portfolio as described in the Trust's registration
statement, as amended;
iii. take whatever steps are necessary to implement these investment
programs by the purchase and sale of securities including the placing of
orders for such purchases and sales;
iv. regularly report to the Trustees of the Trust with respect to the
implementation of these investment programs; and
v. provide determinations, in accordance with procedures and methods
established by the Trustees of the Trust, of the fair value of securities
held by the
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Portfolios for which market quotations are not readily available for
purposes of enabling the Trust's Custodian to calculate net asset value.
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 services a higher spread or commission
for a particular transaction than otherwise might have been charged by another
broker-dealer, if the Subadviser determines that the higher spread or
commission is reasonable in relation to the value of the brokerage and
research services that such broker-dealer provides, viewed in terms of either
the particular transaction or the Subadviser's overall responsibilities with
respect to accounts managed by the Subadviser. The Subadviser may use for the
benefit of the Subadviser's other clients, or make available to companies
affiliated with the Subadviser or to its directors for the benefit of its
clients, any such brokerage and research services that the Subadviser obtains
from brokers or dealers.
d. The Subadviser will maintain all accounts, books and records with respect
to the Portfolios 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 officers or employees shall be liable
to the Adviser or Trust for any loss suffered by the Adviser or Trust
resulting from any error of judgment made in the good faith exercise of the
Subadviser's investment discretion in connection with selecting 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 partners or employees; and neither the
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<PAGE>
Subadviser nor any of its officers or employees shall be liable to the Adviser
or Trust for any loss suffered by the Adviser or Trust resulting from any
other matters to which this Agreement relates (i.e., those other matters
specified in Sections 2 and 8 of this Agreement), except for losses resulting
from willful misfeasance, bad faith, or gross negligence in the performance
of, or from disregard of, the duties of the Subadviser or any of its officers
or employees.
5. SUPPLEMENTAL ARRANGEMENTS
The Subadviser may enter into arrangements with other persons affiliated
with the Subadviser to better enable it to fulfill its obligations under this
Agreement for the provision of certain personnel and facilities to the
Subadviser.
6. CONFLICTS OF INTEREST
It is understood that trustees, officers, agents and shareholders of the
Trust are or may be interested in the Subadviser as trustees, officers 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) its execution, (ii) the effective date of the registration
statement of the Portfolio and (iii) the date of the meeting of the
shareholders of the Portfolio, at which meeting this Agreement is approved by
the vote of a majority of the outstanding voting securities (as defined in the
Investment Company Act) of the Portfolio. The Agreement will continue in
effect for a period more than two years from the date of its execution only so
long as such continuance is specifically approved at least annually either by
the Trustees of the Trust or by a majority of the outstanding voting
securities of each of the Portfolios, provided that in either event such
continuance shall also be approved by the vote of a majority of the Trustees
of the Trust who are not interested persons (as defined in the Investment
Company Act) of any party to this Agreement cast in person at a meeting called
for the purpose of voting on such approval. The required shareholder approval
of the Agreement or of any continuance
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<PAGE>
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 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
c. any change in actual control or management of the Subadviser or the
portfolio manager of any Portfolio.
10. 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
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<PAGE>
Trustees of the Trust who are not interested persons of any party to this
Agreement cast in person at a meeting called for the purpose of voting on such
approval. The required shareholder approval shall be effective with respect to
any Portfolio if a majority of the outstanding voting securities of that
Portfolio vote to approve the amendment, notwithstanding that the amendment
may not have been approved by a majority of the outstanding voting securities
of (a) any other Portfolio affected by the amendment or (b) all the portfolios
of the Trust.
11. ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement of the
parties.
12. HEADINGS
The headings in the sections of this Agreement are inserted for convenience
of reference only and shall not constitute a part hereof.
13. NOTICES
All notices required to be given pursuant to this Agreement shall be
delivered or mailed to the last known business address of the Trust or
applicable party in person or by registered mail or a private mail or delivery
service providing the sender with notice of receipt. Notice shall be deemed
given on the date delivered or mailed in accordance with this paragraph.
14. SEVERABILITY
Should any portion of this Agreement for any reason be held to be void in
law or in equity, the Agreement shall be construed, insofar as is possible, as
if such portion had never been contained herein.
15. GOVERNING LAW
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of The Commonwealth of Massachusetts, or any of the
applicable provisions of the Investment Company Act. To the extent that the
laws of The Commonwealth of Massachusetts, or any of the provisions in this
Agreement, conflict with applicable provisions of the Investment Company Act,
the latter shall control.
16. LIMITATION OF LIABILITY
The Amended and Restated Agreement and Declaration of Trust of the Trust
dated February 18, 1994, a copy of which, together with all amendments thereto
(the "Declaration"), is on file in the office of the Secretary of The
Commonwealth of Massachusetts, provides that the name "North American Funds"
refers to the Trustees under the Declaration collectively as Trustees, but not
as individuals or personally; and no Trustee, shareholder, officer, employee
or agent of the Trust shall
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<PAGE>
be held to any personal liability, nor shall resort be had to their private
property, for the satisfaction of any obligation or claim, in connection with
the affairs of the Trust or any portfolio thereof, but only the assets
belonging to the Trust, or to the particular portfolio with which the obligee
or claimant dealt, shall be liable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers as of the date first
mentioned above.
[SEAL] CYPRESSTREE ASSET MANAGEMENT
CORPORATION, INC.
By:
------------------------------------
[SEAL] MANUFACTURERS ADVISER CORPORATION
By:
------------------------------------
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<PAGE>
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"):
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.
I-7
<PAGE>
EXHIBIT J
NORTH AMERICAN FUNDS
SUBADVISORY AGREEMENT
AGREEMENT made this day of , 1997, between CypressTree Asset
Management Corporation, Inc., a Delaware corporation ("Cypress" or the
"Adviser"), and Morgan Stanley Asset Management Inc., a Delaware Corporation
(the "Subadviser"). In consideration of the mutual covenants contained herein,
the parties agree as follows:
1. APPOINTMENT OF SUBADVISER
The Subadviser undertakes to act as investment subadviser to, and, subject
to the supervision of the Trustees of North American Funds (the "Trust") and
the terms of this Agreement, to manage the investment and reinvestment of the
assets of the 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 reinvestment 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 individual companies
or industries the securities of which are included in the Portfolios or
are under consideration for inclusion in the Portfolios;
ii. formulate and implement a continuous investment program for each
Portfolio consistent with the investment objectives and related investment
policies for each such Portfolio as described in the Trust's registration
statement, as amended;
iii. take whatever steps are necessary to implement these investment
programs by the purchase and sale of securities including the placing of
orders for such purchases and sales;
iv. regularly report to the Trustees of the Trust with respect to the
implementation of these investment programs; and
v. provide determinations, in accordance with procedures and methods
established by the Trustees of the Trust, of the fair value of securities
held by the
J-1
<PAGE>
Portfolios for which market quotations are not readily available for
purposes of enabling the Trust's Custodian to calculate net asset value.
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 services a higher spread or commission
for a particular transaction than otherwise might have been charged by another
broker-dealer, if the Subadviser determines that the higher spread or
commission is reasonable in relation to the value of the brokerage and
research services that such broker-dealer provides, viewed in terms of either
the particular transaction or the Subadviser's overall responsibilities with
respect to accounts managed by the Subadviser. The Subadviser may use for the
benefit of the Subadviser's other clients, or make available to companies
affiliated with the Subadviser or to its directors for the benefit of its
clients, any such brokerage and research services that the Subadviser obtains
from brokers or dealers. In accordance with Section 11(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 and Rule 17e-1 thereunder, the Subadviser may
engage its affiliates as broker-dealers to effect portfolio transactions in
securities for the Portfolios.
d. The Subadviser will maintain all accounts, books and records with respect
to the Portfolios 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.
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<PAGE>
4. LIABILITY OF SUBADVISER
Neither the Subadviser nor any of its affiliates, officers, partners or
employees nor anyone who controls the Subadviser (or any of its affiliates,
officers, partners or employees) within the meaning of Section 15 of the
Securities Act of 1933 (the "1933 Act") 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, partners or employees; and neither the Subadviser nor any of its
affiliates, officers, partners or 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 shall be liable to the Adviser or
Trust for any loss suffered by the Adviser or Trust resulting from any other
matters to which this Agreement relates (i.e., those other matters specified
in Sections 2 and 8 of this Agreement), except for losses resulting from
willful misfeasance, bad faith, or gross negligence in the performance of, or
from disregard of, the duties of the Subadviser or any of its affiliates,
partners or employees.
5. SUPPLEMENTAL ARRANGEMENTS
The Subadviser may enter into arrangements with other persons affiliated
with the Subadviser, including, but not limited to, Morgan Stanley Asset
Management Limited, to better enable it to fulfill its obligations under this
Agreement for the provision of certain personnel and facilities to the
Subadviser.
6. CONFLICTS OF INTEREST
It is understood that trustees, officers, agents and shareholders of the
Trust are or may be interested in the Subadviser as trustees, officers,
partners or otherwise; that directors, officers, agents and partners of the
Subadviser are or may be interested in the Trust as trustees, officers,
shareholders or otherwise; that the Subadviser may be interested in the Trust;
and that the existence of any such dual interest shall not affect the validity
hereof or of any transactions hereunder except as otherwise provided in the
Agreement and Declaration of Trust of the Trust and the Certificate of
Incorporation of the Subadviser, respectively, or by specific provision of
applicable law.
7. REGULATION
The Subadviser shall submit to all regulatory and administrative bodies
having jurisdiction over the services provided pursuant to this Agreement any
information, reports or other material which any such body by reason of this
Agreement may request or require pursuant to applicable laws and regulations.
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<PAGE>
8. DURATION AND TERMINATION OF AGREEMENT
This Agreement shall become effective with respect to each Portfolio on the
later of (i) its execution, (ii) the effective date of the registration
statement of the Portfolio and (iii) the date of the meeting of the
shareholders of the Portfolio, at which meeting this Agreement is approved by
the vote of a majority of the outstanding voting securities (as defined in the
Investment Company Act) of the Portfolio. The Agreement will continue in
effect for a period more than two years from the date of its execution only so
long as such continuance is specifically approved at least annually either by
the Trustees of the Trust or by a majority of the outstanding voting
securities of each of the Portfolios, provided that in either event such
continuance shall also be approved by the vote of a majority of the Trustees
of the Trust who are not interested persons (as defined in the Investment
Company Act) of any party to this Agreement cast in person at a meeting called
for the purpose of voting on such approval. The required shareholder approval
of the Agreement or of any continuance of the Agreement shall be effective
with respect to any Portfolio if a majority of the outstanding voting
securities of the series (as defined in Rule 18f-2(h) under the Investment
Company Act) of shares of that Portfolio votes to approve the Agreement or its
continuance, notwithstanding that the Agreement or its continuance may not
have been approved by a majority of the outstanding voting securities of (a)
any other Portfolio affected by the Agreement or (b) all the portfolios of the
Trust.
If the shareholders of any Portfolio fail to approve the Agreement or any
continuance of the Agreement that is submitted to shareholders for approval,
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.
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<PAGE>
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;
c. there is a change of control of the Subadviser which constitutes an
assignment of this Agreement under the Investment Company Act:
d. the portfolio manager of any Portfolio changes.
10.
The Adviser represents that the Trustees of the Trust have adopted
procedures pursuant to Rules 17a-7 and 17e-1 of the Investment Company Act
which comply with those rules.
11.
The Adviser acknowledges receipt of (i) the most current Form ADV of the
Subadviser and (ii) the most current Form ADV and the most current IMRO terms
of business letter of the Subadviser's affiliate, Morgan Stanley Asset
Management Limited.
12.
The Adviser shall be responsible for voting all proxies received by the
Trust in connection with any of the securities held in the Portfolios managed
by the Subadviser.
13. AMENDMENTS TO THE AGREEMENT
This Agreement may be amended by the parties only if such amendment is
specifically approved by the vote of a majority of the outstanding voting
securities of each of the Portfolios affected by the amendment and by the vote
of a majority of the Trustees of the Trust who are not interested persons of
any party to this Agreement cast in person at a meeting called for the purpose
of voting on such approval. The required shareholder approval shall be
effective with respect to any Portfolio if a majority of the outstanding
voting securities of that Portfolio vote to approve the amendment,
notwithstanding that the amendment may not have been approved by a majority of
the outstanding voting securities of (a) any other Portfolio affected by the
amendment or (b) all the portfolios of the Trust.
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<PAGE>
14. HEADINGS
The headings in the sections of this Agreement are inserted for convenience
of reference only and shall not constitute a part hereof.
15. NOTICES
All notices required to be given pursuant to this Agreement shall be
delivered or mailed to the last known business address of the Trust or
applicable party in person or by registered mail or a private mail or delivery
service providing the sender with notice of receipt. Notice shall be deemed
given on the date delivered or mailed in accordance with this paragraph.
16. SEVERABILITY
Should any portion of this Agreement for any reason be held to be void in
law or in equity, the Agreement shall be construed, insofar as is possible, as
if such portion had never been contained herein.
17. GOVERNING LAW
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of The Commonwealth of Massachusetts, or any of the
applicable provisions of the Investment Company Act. To the extent that the
laws of The Commonwealth of Massachusetts, or any of the provisions in this
Agreement, conflict with applicable provisions of the Investment Company Act,
the latter shall control.
18. LIMITATION OF LIABILITY
The Amended and Restated Agreement and Declaration of Trust of the Trust
dated February 18, 1994, a copy of which, together with all amendments thereto
(the "Declaration"), is on file in the office of the Secretary of The
Commonwealth of Massachusetts, provides that the name "North American Funds"
refers to the Trustees under the Declaration collectively as Trustees, but not
as individuals or personally; and no Trustee, shareholder, officer, employee
or agent of the Trust shall be held to any personal liability, nor shall
resort be had to their private property, for the satisfaction of any
obligation or claim, in connection with the affairs of the Trust or any
portfolio thereof, but only the assets belonging to the Trust, or to the
particular portfolio with which the obligee or claimant dealt, shall be
liable.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers as of the date first
mentioned above.
[SEAL] CYPRESSTREE ASSET MANAGEMENT
CORPORATION, INC.
By:
------------------------------------
[SEAL] MORGAN STANLEY ASSET MANAGEMENT INC.
By:
------------------------------------
J-7
<PAGE>
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"):
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;
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.
J-8
<PAGE>
EXHIBIT K
NORTH AMERICAN FUNDS
SUBADVISORY AGREEMENT
AGREEMENT made this day of , 1997, between CypressTree Asset
Management Corporation, Inc., a Delaware corporation ("Cypress" or the
"Adviser"), and T. Rowe Price Associates, Inc., a Maryland corporation (the
"Subadviser"). In consideration of the mutual covenants contained herein, the
parties agree as follows:
1. APPOINTMENT OF SUBADVISER
The Subadviser undertakes to act as investment subadviser to, and, subject
to the supervision of the Trustees of North American Funds (the "Trust") and
the terms of this Agreement, to manage the investment and reinvestment of the
assets of the 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 individual companies
or industries the securities of which are included in the Portfolios or
are under consideration for inclusion in the Portfolios;
ii. formulate and implement a continuous investment program for each
Portfolio consistent with the investment objectives and related investment
policies for each such Portfolio as described in the Trust's registration
statement, as amended;
iii. take whatever steps are necessary to implement these investment
programs by the purchase and sale of securities including the placing of
orders for such purchases and sales;
iv. regularly report to the Trustees of the Trust with respect to the
implementation of these investment programs; and
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<PAGE>
v. provide assistance to the Trust's Custodian regarding the fair value
of securities held by the Portfolios for which market quotations are not
readily available.
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 services a higher spread or commission
for a particular transaction than otherwise might have been charged by another
broker-dealer, if the Subadviser determines that the higher spread or
commission is reasonable in relation to the value of the brokerage and
research services that such broker-dealer provides, viewed in terms of either
the particular transaction or the Subadviser's overall responsibilities with
respect to accounts managed by the Subadviser. The Subadviser may use for the
benefit of the Subadviser's other clients, or make available to companies
affiliated with the Subadviser or to its directors for the benefit of its
clients, any such brokerage and research services that the Subadviser obtains
from brokers or dealers.
d. On occasions when the Subadviser deems the purchase or sale of a security
to be in the best interest of the 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 lower brokerage commissions and efficient execution. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Subadviser in the manner the
Subadviser considers to be the most equitable and consistent with its
fiduciary obligations to the Portfolio and to its other clients.
e. The Subadviser will maintain all accounts, books and records with respect
to the Portfolios 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.
K-2
<PAGE>
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 employees shall be liable to the
Adviser or Trust for any loss suffered by the Adviser or Trust resulting from
any error of judgment made in the good faith exercise of the Subadviser's
investment discretion in connection with selecting 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 partners or employees; and neither the Subadviser nor any of its
employees shall be liable to the Adviser or Trust for any loss suffered by the
Adviser or Trust resulting from any other matters to which this Agreement
relates (i.e., those other matters specified in Sections 2 and 8 of this
Agreement), except for losses resulting from willful misfeasance, bad faith,
or gross negligence in the performance of, or from disregard of, the duties of
the Subadviser or any of its partners or employees.
5. SUPPLEMENTAL ARRANGEMENTS
The Subadviser may enter into arrangements with other persons affiliated
with the Subadviser to better enable it to fulfill its obligations under this
Agreement for the provision of certain personnel and facilities to the
Subadviser.
6. CONFLICTS OF INTEREST
It is understood that trustees, officers, agents and shareholders of the
Trust are or may be interested in the Subadviser as trustees, officers,
partners or otherwise; that directors, officers, agents and partners of the
Subadviser are or may be interested in the Trust as trustees, officers,
shareholders or otherwise; that the Subadviser may be interested in the Trust;
and that the existence of any such dual interest shall not affect the validity
hereof or of any transactions hereunder except as otherwise provided in the
Agreement and Declaration of Trust of the Trust and the Certificate of
Incorporation of the Subadviser, respectively, or by specific provision of
applicable law.
7. REGULATION
The Subadviser shall submit to all regulatory and administrative bodies
having jurisdiction over the services provided pursuant to this Agreement any
information, reports or other material which any such body by reason of this
Agreement may request or require pursuant to applicable laws and regulations.
K-3
<PAGE>
8. DURATION AND TERMINATION OF AGREEMENT
This Agreement shall become effective with respect to each Portfolio on the
later of (i) its execution, (ii) the effective date of the registration
statement of the Portfolio and (iii) the date of the meeting of the
shareholders of the Portfolio, at which meeting this Agreement is approved by
the vote of a majority of the outstanding voting securities (as defined in the
Investment Company Act) of the Portfolio. The Agreement will continue in
effect for a period more than two years from the date of its execution only so
long as such continuance is specifically approved at least annually either by
the Trustees of the Trust or by a majority of the outstanding voting
securities of each of the Portfolios, provided that in either event such
continuance shall also be approved by the vote of a majority of the Trustees
of the Trust who are not interested persons (as defined in the Investment
Company Act) of any party to this Agreement cast in person at a meeting called
for the purpose of voting on such approval. The required shareholder approval
of the Agreement or of any continuance of the Agreement shall be effective
with respect to any Portfolio if a majority of the outstanding voting
securities of the series (as defined in Rule 18f-2(h) under the Investment
Company Act) of shares of that Portfolio votes to approve the Agreement or its
continuance, notwithstanding that the Agreement or its continuance may not
have been approved by a majority of the outstanding voting securities of (a)
any other Portfolio affected by the Agreement or (b) all the portfolios of the
Trust.
If the shareholders of any Portfolio fail to approve the Agreement or any
continuance of the Agreement, 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
K-4
<PAGE>
Subadviser is required to be registered as an investment adviser in order
to perform its obligations under this Agreement;
b. the Subadviser is served or otherwise receives notice of any action,
suit, proceeding, inquiry or investigation, at law or in equity, before or
by any court, public board or body, involving the affairs of the Trust;
and
c. any change in actual control or management of the Subadviser or the
portfolio manager of any Portfolio.
10. PROVISION OF CERTAIN INFORMATION BY THE ADVISER
The Adviser shall furnish the Subadviser with copies of the Trust's
Prospectus and Statement of Additional Information, and any reports made by
the Trust to its shareholders, as soon as practicable after such documents
become available. The Adviser shall furnish the Subadviser with any further
documents, materials or information that the Subadviser may reasonably request
to enable it to perform its duties pursuant to this Agreement.
11. SERVICES TO OTHER CLIENTS
The Adviser understands, and has advised the Trust's Board of Trustees, that
the Subadviser now acts, or may in the future act, as an investment adviser to
fiduciary and other managed accounts and as investment adviser or subadviser
to other investment companies. Further, the Adviser understands, and has
advised the Trust's Board of Trustees that the Subadviser and its affiliates
may give advice and take action for its accounts, including investment
companies, which differs from advice given on the timing or nature of action
taken for the 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.
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 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.
K-5
<PAGE>
14. HEADINGS
The headings in the sections of this Agreement are inserted for convenience
of reference only and shall not constitute a part hereof.
15. NOTICES
All notices required to be given pursuant to this Agreement shall be
delivered or mailed to the last known business address of the Trust or
applicable party in person or by registered mail or a private mail or delivery
service providing the sender with notice of receipt. Notice shall be deemed
given on the date delivered or mailed in accordance with this paragraph.
16. SEVERABILITY
Should any portion of this Agreement for any reason be held to be void in
law or in equity, the Agreement shall be construed, insofar as is possible, as
if such portion had never been contained herein.
17. GOVERNING LAW
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of The Commonwealth of Massachusetts, or any of the
applicable provisions of the Investment Company Act. To the extent that the
laws of The Commonwealth of Massachusetts, or any of the provisions in this
Agreement, conflict with applicable provisions of the Investment Company Act,
the latter shall control.
18. LIMITATION OF LIABILITY
The Amended and Restated Agreement and Declaration of Trust of the Trust
dated February 18, 1994, a copy of which, together with all amendments thereto
(the "Declaration"), is on file in the office of the Secretary of The
Commonwealth of Massachusetts, provides that the name "North American Funds"
refers to the Trustees under the Declaration collectively as Trustees, but not
as individuals or personally; and no Trustee, shareholder, officer, employee
or agent of the Trust shall be held to any personal liability, nor shall
resort be had to their private property, for the satisfaction of any
obligation or claim, in connection with the affairs of the Trust or any
portfolio thereof, but only the assets belonging to the Trust, or to the
particular portfolio with which the obligee or claimant dealt, shall be
liable.
K-6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers as of the date first
mentioned above.
[SEAL] CYPRESSTREE ASSET MANAGEMENT
CORPORATION, INC.
By:
------------------------------------
[SEAL] T. ROWE PRICE ASSOCIATES, INC.
By:
------------------------------------
K-7
<PAGE>
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"):
Equity-Income 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;
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.
K-8
<PAGE>
FORM OF PROXY CARD
NORTH AMERICAN FUNDS
North American Funds, 116 Huntington Avenue, Boston, Massachusetts 02116
This proxy is solicited on behalf of the Board of Trustees of North American
Funds (the "Trust") for the Special Meeting of Shareholders (the "Meeting") to
be held on September 24, 1997. The undersigned hereby appoints Joseph Scott,
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 which the
undersigned is entitled to vote at the Meeting to be held at the offices of the
parent of the Trust's investment adviser. The Manufacturers Life Insurance
Company, 73 Tremont Street, Boston, Massachusetts 02108, on September 24, 1997,
at 10:00 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.
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PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
POSTAGE PAID ENVELOPE.
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HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
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<PAGE>
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
Please indicate your vote by marking 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 VOTE ONLY ON THE PROPOSALS PERTAINING TO THE FUND TO WHICH YOUR SHARES
ARE ALLOCATED (as indicated on the reverse side).
- --------------------------------------------------------------------------------
For With- For All
All hold Except
1. Election of four new Trustees to serve as members of
the Board of Trustees of the Trust (the "Board").
William P. Achimeyer Bradford K. Gallagher [_] [_] [_]
William F. Devin Kenneth J. Lavery
NOTE: If you do not wish your shares voted "For" a particular nominee, mark
the "For All Except" box and strike a line through the name(s) of the
nominee(s).
For Against Abstain
2. Approval of an investment advisory agreement between
CypressTree Asset Management Corporation, Inc. ("CAM") [_] [_] [_]
and the Trust.
3. Approval of an investment subadvisory agreement between
CAM and Fred Algar Management Inc. with respect to [_] [_] [_]
the Small/Mid Cap Fund.
4A. Approval of an investment subadvisory agreement between
CAM and Founders Asset Management, Inc. ("Founders") [_] [_] [_]
with respect to the Growth Equity Fund.
4B. Approval of an investment subadvisory agreement between
CAM and Founders with respect to the Balanced Fund. [_] [_] [_]
4C. Approval of an investment subadvisory agreement between
CAM and Founders with respect to the International [_] [_] [_]
Small Cap Fund.
5A. Approval of an investment subadvisory agreement between
CAM and Wellington Management Company, LLP ("Wellington [_] [_] [_]
Management") with respect to the Growth and Income Fund.
5B. Approval of an investment subadvisory agreement between
CAM and Wellington Management with respect to the [_] [_] [_]
investment Quality Bond Fund.
6A. Approval of an investment subadvisory agreement
between CAM and Salomon Brothers Asset Management Inc. [_] [_] [_]
("SBAM") with respect to the U.S. Governemnt
Securities Fund.
6B. Approval of an investment subadvisory agreement between
CAM and SBAM with respect to the National Municipal [_] [_] [_]
Bond Fund.
6C. Approval of an investment subadvisory agreement between
CAM and SBM with respect to the Strategic Income Fund. [_] [_] [_]
6D. Approval of a subadvisory consulting agreement between
SBAM and Salomon Brothers Asset Management Limited with [_] [_] [_]
respect to the Strategic Income Fund.
7. Approval of an investment subadvisory agreement between
CAM and J.P. Morgan Investment Management Inc. with [_] [_] [_]
respect to the International Growth and Income Fund.
8. Approval of an investment subadvisory agreement between
CAM and Manufacturers Adviser Corporation with respect [_] [_] [_]
to the Money Market Fund.
9. Approval of an investment subadvisory agreement between
CAM and Morgan Stanley Asset Management, Inc. with [_] [_] [_]
respect to the Global Equity Fund.
10. Approval of an investment subadvisory agreement between
CAM and T. Rowe Price Associates, Inc. with respect to [_] [_] [_]
the Equity-Income Fund.
11. Approval of a proposal to permit CAM in the future, to
select and contract with subadvisors to the Portfolios [_] [_] [_]
after obtaining Board approval but without obtaining
shareholder approval.
Any other business that may properly come before the
Meeting.
--------------------------
Date
Please be sure to sign and date this Proxy.
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- ----------Shareholder sign here--------------------Co-owner sign here----------
Mark box at right if an address change or comment has been noted on the
reverse side of this card. [_]
The Board unanimously recommends that shareholders vote FOR all Proposals.
