<PAGE>
SCHEDULE 14C
(RULE 14C-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Check the appropriate box:
[_] Preliminary information statement [_] Confidential, for use of the
Commission only (as permitted by
Rule 14c-5(d)(2))
[X] Definitive information statement
NORTH AMERICAN FUNDS
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies: _________
(2) Aggregate number of securities to which transaction applies: ____________
(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): _______________
(4) Proposed maximum aggregate value of transaction: ________________________
(5) Total fee paid: _________________________________________________________
[_] 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: _______________________________________________
(2) Form, Schedule or Registration Statement No.: _________________________
(3) Filing Party: _________________________________________________________
(4) Date Filed: ___________________________________________________________
<PAGE>
NORTH AMERICAN FUNDS
GROWTH EQUITY FUND
BALANCED FUND
INTERNATIONAL SMALL CAP FUND
INFORMATION STATEMENT
Prior to April 1, 1998, Founders Asset Management, Inc. ("Founders") was the
subadviser to the Growth Equity Fund, the Balanced Fund and the International
Small Cap Fund (the "Portfolios") of North American Funds (the "Fund"). On
April 1, 1998, Founders Asset Management LLC ("New Founders"), a 90%-owned
indirect subsidiary of Mellon Bank, N.A. ("Mellon") and surviving entity of a
merger (the "Merger") between Founders and New Founders (as described below
under "The Merger"), began managing the Portfolios pursuant to a new
subadvisory agreement between the Fund and New Founders dated April 1, 1998
(the "New Subadvisory Agreement").
Under an order the Fund has received from the Securities and Exchange
Commission, the Fund is permitted to appoint a subadviser pursuant to a
subadvisory agreement with the Fund's investment adviser, CypressTree Asset
Management Corporation, Inc. ("CAM"), that has not been approved by
shareholders. The Trustees of the Fund must approve such subadvisory
agreements, and the Fund must provide notice to shareholders within 60 days of
such hiring of a new subadviser or the implementation of any material change
in a subadvisory contract. This Information Statement is being supplied to
shareholders to fulfill the notice condition, and is being mailed on or about
May 27, 1998.
NO SHAREHOLDER VOTE WILL BE TAKEN WITH RESPECT TO THE MATTERS DESCRIBED IN
THIS INFORMATION STATEMENT. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY.
The Merger is deemed to have created an "assignment," as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), of the
subadvisory agreement between CAM and Founders (the "Previous Subadvisory
Agreement"), resulting in the termination of the agreement. Therefore, on
December 16, 1997 the Board of Trustees of the Fund approved the New
Subadvisory Agreement for the Portfolios to take effect upon consummation of
the Merger. The New Subadvisory Agreement is identical, except for the date of
execution and the name of the subadviser, and except for certain conforming
changes and other technical changes, to the Previous Subadvisory Agreement.
THE MERGER
Under an Agreement and Plan of Reorganization dated December 11, 1997, as
amended (the "Merger Agreement") by and among Mellon, New Founders, Founders
1
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and Bjorn K. Borgen, the Chairman, Chief Executive Officer, director, and
controlling shareholder of Founders, Founders agreed to merge into New
Founders, a newly-created, wholly-owned subsidiary of Mellon. On April 1,
1998, pursuant to the Merger Agreement, Founders merged into New Founders and
thereafter ceased to exist as a separate entity. New Founders, the surviving
entity, assumed all of Founder's assets, liabilities, business, personnel and
operations upon the consummation of the Merger. The shareholders of Founders
received $270 million from Mellon in consideration for their Founders shares.
Following the Merger, a group of Founders executives and portfolio managers
purchased an aggregate 10% equity interest in New Founders. Mr. Borgen is not
a shareholder, director or officer of New Founders.
The Merger did not change the management or operations of Founders, nor any
of the personnel managing the Portfolios or the other services or business
activities relating to the Portfolios. Senior members of the Founders
management team and other key Founders employees continue to be responsible
for managing the day-to-day affairs of New Founders as employees of New
Founders under written agreements. New Founders does not believe that the
Merger caused or will cause any reduction in the quality of services provided
to the Portfolios, or have any adverse effect on New Founders' ability to
fulfill its obligations relating to the Portfolios under the New Subadvisory
Agreement.
THE ADVISER
Pursuant to its Advisory Agreement with the Fund, CAM is the investment
adviser for the Portfolios and each of the other portfolios of the Fund. CAM
oversees the administration of all aspects of the business and affairs of the
Fund; selects, contracts with and compensates subadvisers to manage the assets
of the Portfolios; and reimburses the Fund if the total of certain expenses
allocated to any Portfolio exceeds certain limitations. CAM monitors the
Portfolios' subadvisers for compliance with the investment objectives and
related policies of each Portfolio, reviews the performance of the
subadvisers, and periodically reports to the Trustees of the Fund.
CAM, located at 286 Congress Street, Boston, Massachusetts 02210, is a
wholly-owned subsidiary of CypressTree Investments, Inc., an affiliate of
Cypress Holding Company, Inc., which is controlled by its management and
Berkshire Partners IV, L.P.
PREVIOUS SUBADVISORY AGREEMENT
Prior to April 1, 1998, CAM delegated its responsibility under the Fund's
Advisory Agreement for managing the assets of each Portfolio pursuant to the
Previous Subadvisory Agreement. The Previous Subadvisory Agreement required
Founders to manage the investment and reinvestment of the assets of each
Portfolio, subject to the supervision of CAM. Under the terms of the Previous
Subadvisory Agreement, Founders was authorized to effect portfolio
transactions for the Portfolios using its own discretion, and without prior
consultation with CAM. Founders was also required to report periodically to
CAM and the Trustees of the Fund.
2
<PAGE>
The Previous Subadvisory Agreement was approved by shareholders of the
Portfolios on September 24, 1997 and was dated October 1, 1997. The Previous
Subadvisory Agreement was submitted for shareholder approval at that time for
its initial approval upon CAM's becoming the Fund's investment adviser.
Under the Previous Subadvisory Agreement, Founders was entitled to receive
from CAM (and not from the Portfolios) a subadvisory fee stated as an annual
percentage of the current value of the net assets of each Fund as set out
below:
<TABLE>
<CAPTION>
BETWEEN BETWEEN
$50 MILLION $200 MILLION
FIRST AND AND EXCESS OVER
PORTFOLIO $50 MILLION $200 MILLION $500 MILLION $500 MILLION
- --------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Growth Equity Fund .500% .450% .425% .400%
Balanced Fund .375% .325% .275% .225%
International Small Cap Fund .650% .600% .500% .400%
</TABLE>
For the fiscal year ended October 31, 1997, the aggregate subadvisory fees
paid to Founders under the Previous Subadvisory Agreement and a predecessor
subadvisory agreement between Founders and the Fund's former investment
adviser was $99,355 for the Growth Equity Fund, $339,031 for the Balanced
Fund, and $108,728 for the International Small Cap Fund.
NEW SUBADVISORY AGREEMENT
As in the Previous Subadvisory Agreement with Founders, the New Subadvisory
Agreement with New Founders requires New Founders to manage the investment and
reinvestment of the assets of the Portfolios, subject to the supervision of
CAM. Likewise, New Founders is authorized to effect portfolio transactions for
the Portfolios using its own discretion, and without prior consultation with
CAM, and is required to report periodically to CAM and the Trustees of the
Fund.
The New Subadvisory Agreement provides that it will continue in effect for
two years from its date of execution and thereafter from year to year if its
continuance is approved at least annually (i) by the Board of Trustees of the
Fund or by vote of a majority of the outstanding voting securities of the
relevant Portfolio, and (ii) by vote of a majority of the Trustees who are not
"interested persons," as that term is defined in the 1940 Act, of the Fund,
CAM or New Founders, cast in person at a meeting called for the purpose of
voting on such approval. Any amendment to the New Subadvisory Agreement must
be approved by CAM and New Founders, and by vote of a majority of Trustees of
the Fund who are not such interested persons, cast in person at a meeting
called for the purpose of voting on such approval. The Previous Subadvisory
Agreement, by contrast, also required the approval of a majority of the
outstanding securities affected by any amendment.
The New Subadvisory Agreement may be terminated without penalty by vote of
the Board of Trustees of the Fund or by vote of a majority of the outstanding
voting
3
<PAGE>
securities of the relevant Portfolio, upon sixty days' written notice, or by
New Founders or CAM upon sixty days' written notice, and it will terminate
automatically in the event of its assignment. The New Subadvisory Agreement
will automatically terminate if the Advisory Agreement for the relevant
Portfolio is terminated. Like the Previous Subadvisory Agreement with
Founders, the New Subadvisory Agreement provides that New Founders will not be
subject to any liability for any error of judgment, any mistake of law or any
loss arising out of any investment or other act or omission in the course of,
connection with, or arising out of any service to be rendered under the New
Subadvisory Agreement, except by reason of New Founders' willful misfeasance,
bad faith or gross negligence in the performance of its duties or by reason of
reckless disregard by New Founders of its obligations and duties.
As compensation for its services under the New Subadvisory Agreement, New
Founders is entitled to receive from CAM subadvisory fees calculated at the
same rate as those payable to Founders under the Previous Subadvisory
Agreement described above.
The Trustees of the Fund believe that the terms of the New Subadvisory
Agreement are fair to, and in the best interest of, each Portfolio and its
shareholders.
In evaluating the New Subadvisory Agreement, the Trustees of the Fund
considered the fact that the Previous Subadvisory Agreement and the New
Subadvisory Agreement are substantially identical to each other, including the
terms relating to the services to be provided and the fees payable by CAM to
Founders or New Founders thereunder. The Trustees considered the performance
of Founders in providing services to the Portfolios, and the skills and
capabilities of the personnel of Founders.
The Trustees of the Fund reviewed material furnished by Founders and Mellon.
Those materials include information regarding Founders, New Founders, Mellon,
their respective affiliates and their personnel, operations and financial
condition and the terms of the Merger and the possible effects of the Merger
on the Portfolios and the shareholders of the Portfolios. It was represented
to the Trustees that Founders and Mellon believed that the operations of the
Portfolios and the capability of New Founders to provide services to the
Portfolios would not be adversely affected by the Merger and could be enhanced
from the resources of Mellon, although there could be no assurance as to any
particular benefits that may result.
In approving the New Subadvisory Agreement, the Trustees of the Fund
carefully evaluated the experience of Founders' key personnel in portfolio
management (all of whom continue to be employed by New Founders following the
consummation of the Merger), the arrangements made to secure the continued
service of the key personnel in portfolio management and the high quality of
services New Founders is expected to continue to provide to the Portfolios,
and gave careful consideration to all factors deemed to be relevant to the
Portfolios, including, but not limited to: (1) the
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<PAGE>
performance of the Portfolios since the Portfolios' commencement of
operations; (2) the research-intensive nature and quality of the services
rendered to the Portfolios; (3) the importance of such research and services
to the fulfillment of the particular investment objective of the Portfolios
and the investment policies of the Portfolios; (4) that the compensation
payable to New Founders by CAM under the New Subadvisory Agreement is at the
same rate as the compensation payable by CAM to Founders under the Previous
Subadvisory Agreement; (5) that the material terms of the New Subadvisory
Agreements are unchanged from the terms of the Previous Subadvisory Agreement;
(6) the reputation, qualification and background of Founders (now New
Founders) and Mellon and their respective financial conditions; (7) the
commitment of New Founders to pay or reimburse the Portfolios for the expenses
incurred in connection with the Merger so that shareholders of the Portfolios
would not bear those expenses; (8) the benefits expected to be realized as a
result of New Founders' affiliation with Mellon, including the resources of
Mellon that could be available to New Founders; (9) Founders' brokerage
policies and practices, as described below (all of which have been adopted by
New Founders); and (10) other factors they deemed relevant.
Founders and Mellon both advised the Trustees of the Fund that they expect
that there will be no diminution in the scope and quality of subadvisory
services provided to the Portfolios as a result of the Merger. Accordingly,
the Trustees of the Fund believe that the Portfolios should continue to
receive services under the New Subadvisory Agreement comparable to those they
received under the Previous Subadvisory Agreement.
BROKERAGE POLICIES
It is the policy of New Founders, in effecting transactions in securities
for the Portfolios, to seek the best execution of orders at the most favorable
prices. The determination of what may constitute best execution in a
securities transaction involves a number of judgmental considerations,
including, without limitation, the overall direct net economic result to the
Portfolios (involving both price paid or received and any commissions and
other costs), the efficiency with which the transaction is effected, the
ability to effect the transaction at all where a large block is involved, the
availability of the broker to stand ready to execute possibly difficult
transactions for the Fund in the future, and the financial strength and
stability of the broker.
Subject to the policy of seeking best execution of orders at the most
favorable prices, New Founders may execute transactions with brokerage firms
which provide research services and products to New Founders. The phrase
"research services and products" includes advice as to the value of
securities, the advisability of investing in, purchasing or selling
securities, the availability of securities or purchasers or sellers of
securities, the furnishing of analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio strategy and
the performance of accounts and the obtainment of products such as third-party
publications, computer
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<PAGE>
and electronic access equipment, software programs and other information and
accessories that may assist New Founders in furtherance of its investment
advisory responsibilities to its advisory clients. Such services and products
permit New Founders to supplement its own research and analysis activities,
and provide it with information from individuals and research staffs of many
securities firms. Generally, it is not possible to place a dollar value on the
benefits derived from specific research services and products. New Founders
may receive a benefit from these research services and products which is not
passed on, in the form of a direct monetary benefit, to the Portfolios. If New
Founders determines that any research product or service has a mixed use, such
that it also serves functions that do not assist in the investment decision-
making process, New Founders will allocate in good faith the cost of such
service or product accordingly. The portion of the product or service that New
Founders determines will assist it in the investment decision-making process
may be paid for in brokerage commission dollars. The non-research part must be
paid for in hard dollars from New Founders. Any such allocation may create a
conflict of interest for New Founders.
The amount of brokerage given to a particular broker-dealer is not made
pursuant to any agreement or commitment with any of the selected broker-
dealers that would bind New Founders to compensate the selected broker-dealer
for research provided. However, New Founders maintains an internal allocation
procedure to identify those broker-dealers which have provided it with
research and endeavors to direct sufficient commissions to them to ensure
continued receipt of research New Founders believes is useful.
Research services and products obtained by New Founders from brokers who
execute portfolio transactions for the Portfolios may be useful to New
Founders in providing investment advice to any of the funds or clients it
advises. Likewise, information made available to New Founders from brokers
effecting securities transactions for such other funds and clients may be
utilized on behalf of the Portfolios. Thus, there may be no correlation
between the amount of brokerage commissions generated by a particular fund or
client and the indirect benefits received by that fund or client.
Subject to the policy of seeking the best execution of orders at the most
favorable prices and to such policies as the Board of Trustees of the Fund may
establish from time to time, sales of shares of the Portfolios may also be
considered as a factor in the selection of brokerage firms to execute
portfolio transactions for the Portfolios.
Because selection of executing brokers is not based solely on net
commissions, the Portfolios may pay an executing broker a commission higher
than that which might have been charged by another broker for that
transaction. New Founders will not knowingly pay higher mark-ups on principal
transactions to brokerage firms as consideration for receipt of research
services or products. While it is not practicable for New Founders to solicit
competitive bids for commissions on each portfolio transaction, consideration
is regularly given to available information concerning the
6
<PAGE>
level of commissions charged in comparable transactions by various brokers.
Transactions in over-the-counter securities are normally placed with principal
market makers, except in circumstances where, in the opinion of New Founders,
better prices and execution are available elsewhere.
Subject to the overriding objective of obtaining the best possible execution
of orders, New Founders may allocate brokerage transactions to affiliated
brokers. In order for the affiliated broker to effect portfolio transactions
for the Portfolios, the commissions, fees or other remuneration received by
the affiliated broker must be reasonable and fair compared to the commissions,
fees and other remuneration paid to other brokers in connection with
comparable transactions involving similar securities being purchased or sold
on a securities exchange during a comparable period. Furthermore, the Trustees
of the Fund, including a majority of those Trustees who are not "interested
persons" of the Fund as defined in the 1940 Act, have adopted procedures which
are reasonably designed to provide that any commissions, fees or other
remuneration paid to an affiliated broker are consistent with the foregoing
standard.
INFORMATION ABOUT THE FUND
The Fund is a diversified, open-end management investment company organized
in 1988 as a business trust under the laws of Massachusetts, and is a series
type company with fifteen investment portfolios. The Portfolios are three of
those portfolios. The address of the Fund is 286 Congress Street, Boston,
Massachusetts 02210.
INFORMATION ABOUT MELLON
Mellon is a subsidiary of Mellon Bank Corporation ("MBC"), a publicly owned
multibank holding company incorporated under Pennsylvania law in 1971 and
registered under the Bank Holding Company Act of 1956, as amended. Mellon and
MBC are located at One Mellon Bank Center, Pittsburgh, Pennsylvania 15258. MBC
provides a comprehensive range of financial products and services in domestic
and selected international markets. MBC's banking subsidiaries are located in
Pennsylvania, Massachusetts, Delaware, Maryland, New Jersey and Florida, while
other subsidiaries are located in key business centers throughout the United
States and abroad. MBC currently ranks among the nation's largest bank holding
companies based on market capitalization.
MBC's principal wholly-owned subsidiaries are Mellon, The Boston Company,
Inc., Mellon Bank (DE) National Association, Mellon Bank (MD) National
Association, and a number of companies known as Mellon Financial Services
Corporation. MBC also owns a federal savings bank headquartered in
Pennsylvania, Mellon Bank, F.S.B. The Dreyfus Corporation ("Dreyfus"), one of
the nation's largest mutual fund companies, is a wholly-owned subsidiary of
Mellon. MBC's banking subsidiaries engage in retail financial services,
commercial banking, trust and
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investment management services, residential real estate loan financing,
mortgage servicing, equipment leasing, mutual fund activities and various
securities-related activities. Through its subsidiaries, MBC managed more than
$300 billion in assets as of December 31, 1997. As of that date, various
subsidiaries of MBC provided non-investment services, such as custodial or
administration services, for approximately $1.5 trillion in assets.
INFORMATION ABOUT NEW FOUNDERS
New Founders was organized as a Delaware limited liability company on
November 26, 1997. The management board of New Founders consists of:
Christopher M. Condron, Chairman, who is also Vice Chairman and Chief
Operating Officer of MBC and President, Chief Executive Officer and Chief
Operating Officer of Dreyfus; Jonathan F. Zeschin, who was President and Chief
Operating Officer of Founders prior to the Merger and is now President and
Chief Executive Officer of New Founders; Gregory P. Contillo, who was Senior
Vice President-Institutional Marketing of Founders and now is Senior Vice
President and Chief Marketing Officer of New Founders; Michael W. Gerding, who
was Vice President-Investments of Founders, and is now Senior Vice President-
Investments of New Founders; Stephen E. Canter, Vice Chairman and Chief
Investment Officer of Dreyfus; Lawrence S. Kash, Vice Chairman-Distribution of
Dreyfus; and W. Keith Smith, Senior Vice Chairman of MBC and Mellon, and
Chairman of Dreyfus and The Boston Company.
The address of Dreyfus is 200 Park Avenue, New York, New York 10166. The
address of New Founders is 2930 East Third Avenue, Denver, Colorado 80206.
New Founders acts as investment adviser (or, where indicated, as subadviser)
to the following other mutual funds which have a similar objective to that of
the Growth Fund:
<TABLE>
<CAPTION>
ANNUAL MANAGEMENT APPROXIMATE
(OR SUBADVISORY) NET ASSETS AS OF
FEE RATE (AS A % OF APRIL 30, 1998
FUND NET ASSETS) ($ MILLIONS)
---- ----------------------------------- ----------------
<S> <C> <C>
Founders Growth Fund 1.00% to $30 million; $2,181
0.75% next $270 million; 0.70%
next $200 million; 0.65% thereafter
Manufacturers Investment 0.45% to $200 million; $ 219
Trust--Growth Trust(1) 0.35% next $300 million; 0.30%
thereafter
New England Star 0.55% to $50 million $ 306
Advisers Fund(1)(2) 0.50% next $200 million
0.475% thereafter
</TABLE>
- -----------
(1) With respect to these funds, for which New Founders acts as subadviser,
the subadvisory fee is paid by the fund's investment adviser out of its
management fee, not by the fund directly.
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<PAGE>
(2) This fund has four subadvisers, each managing a different segment of the
fund's portfolio. New Founders receives a subadvisory fee only with respect to
the segment of the fund it manages. The net asset amount shown for this fund
reflects only New Founders' segment.
New Founders acts as investment adviser or subadviser to the following other
mutual funds which have a similar objective to that of the Balanced Fund:
<TABLE>
<CAPTION>
ANNUAL MANAGEMENT APPROXIMATE
(OR SUBADVISORY) NET ASSETS AS OF
FEE RATE (AS A % OF APRIL 30, 1998
FUND NET ASSETS) ($ MILLIONS)
---- ------------------------- ----------------
<S> <C> <C>
Founders Balanced Fund 0.65% to $250 million $1,122
0.60% next $250 million
0.55% next $250 million
0.50% thereafter
Manufacturers Investment 0.375% to $50 million; $ 207
Trust--Balanced Trust(1) 0.325% next $150 million;
0.275% next $300 million;
0.225% thereafter
</TABLE>
- -----------
(1) With respect to these funds, for which New Founders acts as subadviser,
the subadvisory fee is paid by the fund's investment adviser out of its
management fee, not by the fund directly.
New Founders acts as investment adviser or subadviser to the following other
mutual funds which have a similar objective to that of the International Small
Cap Fund:
<TABLE>
<CAPTION>
ANNUAL MANAGEMENT APPROXIMATE
(OR SUBADVISORY) NET ASSETS AS OF
FEE RATE (AS A % OF APRIL 30, 1998
FUND NET ASSETS) ($ MILLIONS)
---- ----------------------- ----------------
<S> <C> <C>
Founders Passport Fund(1) 1.00% to $250 million $143
0.80% next $250 million
0.70% thereafter
Manufacturers Investment 0.65% to $50 million $150
Trust--International Small 0.60% next $150 million
Cap Trust(1) 0.50% next $300 million
0.40% thereafter
American Skandia Trust-- 0.60% to $100 million $131
Founders Passport Portfolio(1) 0.50% thereafter
American Skandia Advisors 0.60% to $100 million $ 3
Funds, Inc.--ASAF Founders 0.50% thereafter
International Small
Capitalization Fund(1)
</TABLE>
- -----------
(1) With respect to these funds, for which New Founders acts as subadviser,
the subadvisory fee is paid by the fund's investment adviser out of its
management fee, not by the fund directly.
9
<PAGE>
OTHER INFORMATION
As of May 5, 1998, to the Fund's knowledge, the following persons owned of
record or beneficially more than 5% of the outstanding shares of the indicated
class of the Growth Equity Fund:
<TABLE>
<CAPTION>
NUMBER OF
CLASS SHAREHOLDER SHARES PERCENT
- ----- ------------------ ---------- -------
<S> <C> <C> <C>
A Farmers State Bank 14,682.453 6.84%
Employees Pension
</TABLE>
As of May 5, 1998, to the Fund's knowledge, the following persons owned of
record or beneficially more than 5% of the outstanding shares of the indicated
class of the Balanced Fund:
<TABLE>
<CAPTION>
NUMBER OF
CLASS SHAREHOLDER SHARES PERCENT
- ----- ------------------ ----------- -------
<S> <C> <C> <C>
A Frontier Trust FBO 605,050.418 49.19%
SAIA Motor Freight
</TABLE>
As of May 5, 1998, to the Fund's knowledge, the following persons owned of
record or beneficially more than 5% of the outstanding shares of the indicated
class of the International Small Cap Fund:
<TABLE>
<CAPTION>
NUMBER OF
CLASS SHAREHOLDER SHARES PERCENT
- ----- ----------------------- --------- -------
<S> <C> <C> <C>
A Evereren Clearing Corp. 9,299.448 6.11%
Sitnasuak Native Corp.
</TABLE>
As of May 14, 1998, the officers and Trustees of the Fund as a group owned
less than 1% of the outstanding shares of the each Portfolio.
May 27, 1998:
10
<PAGE>
May 27, 1998
Dear Shareholder:
We are pleased to enclose an Information Statement regarding Founders Asset
Management, Inc. ("Founders"), the former subadviser to the Growth Equity
Fund, the Balanced Fund and the International Small Cap Fund (the
"Portfolios"), and Founders Asset Management LLC, the successor subadviser to
the Portfolios.
On April 1, 1998, Founders merged with and into Founders Asset Management
LLC, a subsidiary of Mellon Bank, N.A. As a result of the merger, the existing
Founders subadvisory agreement for the Portfolios between CypressTree Asset
Management, Inc. and Founders terminated, and approval of a new agreement
became necessary. Consequently, the Board of Trustees of North American Funds
approved a new agreement with Founders Asset Management LLC on substantially
identical terms to the old agreements.
The advisory or consulting fees charged to each Fund did not change as a
result of the merger.
This action by the Board of Trustees will not require you to send a proxy
and we are not asking you for a proxy. As always, please direct any inquiries
to the Shareholder Services Department at 1-800-872-8037.
Sincerely,
Bradford K. Gallagher
Chairman
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