<PAGE>
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
[X] Definitive Proxy Statement Commission Only (as permitted by Rule
[ ] Definitive Additional Materials 14a-6(e)(2))
[ ] Soliciting Material Pursuant to Rule
14a-11(c) or Rule 14a-12
North American Funds
------------------------------------------------
(Name of Registrant as Specified in 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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(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 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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<PAGE>
NORTH AMERICAN FUNDS
NORTH AMERICAN
EQUITY INCOME FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held
May 12, 1999
To the Shareholders of the North American Equity Income Fund:
Notice is hereby given that a Special Meeting of Shareholders of the North
American Equity Income Fund (the "Fund") will be held at the offices of
Cypress Holding Company, Inc., 125 High Street, 14th Floor, Boston,
Massachusetts 02110 on May 12, 1999 at 10:00 a.m. Eastern time, or at such
adjourned time as may be necessary for the holders of a majority of the
outstanding shares of the Fund to vote (the "Meeting"), for the following
purposes:
I. To approve or disapprove a new Sub-Advisory Agreement for the Fund
between CypressTree Asset Management Corporation, Inc. and Global Alliance
Value Investors, LTD.
II. To transact such other business as may properly come before the
Meeting.
The matter referred to above in I is discussed in detail in the Proxy
Statement attached to this Notice. The Board of Trustees has fixed the close
of business on March 15, 1999 as the record date for determining shareholders
entitled to notice of, and to vote at, the Meeting. Each share of the Fund
entitles its holder to one vote.
You are cordially invited to attend the Meeting. If you do not expect to
attend, you are requested to complete, date and sign the enclosed form of
proxy and return it promptly in the envelope provided for that purpose. The
proxy is being solicited on behalf of the Board of Trustees.
YOUR VOTE IS IMPORTANT. IN ORDER TO AVOID THE UNNECESSARY EXPENSE OF FURTHER
SOLICITATION, WE URGE YOU TO INDICATE VOTING INSTRUCTIONS ON THE ENCLOSED
PROXY, DATE AND SIGN IT, AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED, NO
MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY BE. YOU MAY REVOKE THE PROXY AT
ANY TIME PRIOR TO ITS USE. THEREFORE, BY APPEARING AT THE MEETING, AND
REQUESTING REVOCATION PRIOR TO THE VOTING, YOU MAY REVOKE THE PROXY AND YOU
CAN THEN VOTE IN PERSON.
By order of the Board of Trustees
/s/ John I. Fitzgerald
Secretary
North American Funds
March 26, 1999
<PAGE>
North American Funds
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
OF THE NORTH AMERICAN EQUITY INCOME FUND
To be held
May 12, 1999
This proxy statement and the enclosed form of proxy are being furnished in
connection with the solicitation of proxies by the Board of Trustees of North
American Funds (the "Trust") for use at a Special Meeting of Shareholders of
the North American Equity Income Fund (the "Fund") of the Trust to be held at
the offices of Cypress Holding Company, Inc. ("CHC"), 125 High Street,14th
Floor, Boston, MA 02110 on May 12, 1999 at 10:00 a.m. Eastern time, or at any
adjournment thereof (the "Meeting"), for the purposes set forth in the
accompanying Notice of Meeting (the "Notice"). The first mailing of this proxy
statement and the enclosed form of proxy to shareholders is occurring on or
about April 1, 1999.
All shares of the Fund held by a shareholder of the Fund will be voted by
the persons named as proxies in accordance with voting instructions received
from such shareholder. Proxies submitted without voting instructions will be
voted FOR the proposal set forth in the Notice (the "Proposal"), provided that
the form of proxy is properly executed and returned.
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 Proposal stated therein. If a proxy card is returned that does
not specify how to vote with respect to the Proposal, the shares represented
by that proxy will be voted "FOR" the Proposal.
In order that your shares may be represented at the Meeting, please 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 May 11, 1999.
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. If a quorum is not
present at the Meeting or a quorum is present at the Meeting but sufficient
votes to approve the 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 shares which they are
entitled to vote "FOR" or "AGAINST" any such proposed adjournment in their
discretion. An adjourned session may be held within a reasonable time after
the adjournment and without further notice.
1
<PAGE>
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 the 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 treat abstentions and broker non-votes as if they were votes
against the Proposal.
As used herein, a "Majority Vote" of the Fund means the affirmative vote of
the lesser of (1) more than 50% of the outstanding shares of the Fund, or (2)
67% or more of the shares of the Fund present at the Meeting or represented by
proxy if more than 50% of the outstanding shares of the Fund are represented
at the Meeting in person or by proxy.
A proxy may be revoked at any time prior to the voting therefore by: (i)
written instructions addressed to the Secretary of the Trust at the address of
the Trust at 286 Congress Street, Boston, MA 02210; (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, other
solicitation costs, and the costs of the Meeting are being borne by the Fund.
CypressTree Asset Management Corporation, Inc., the adviser to the Trust
("CAM"), is located at 286 Congress Street, Boston, Massachusetts 02210. 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 the Fund for their out-of-pocket
expenses. To assist in the solicitation of proxies, the Fund has retained
Shareholder Communications Corporation at an estimated cost to the Fund of
approximately $2,000 plus reimbursement of such firm's out-of-pocket expenses.
The Trust is an open-end, management investment company organized as a
business trust under the laws of the Commonwealth of Massachusetts on
September 28, 1988. The Trust is a series type company with fifteen investment
portfolios. The Fund is one of those portfolios.
The Annual Report of the Trust, including audited financial statements for
the fiscal year ended October 31, 1998 (the "Report"), has been previously
sent to shareholders. The Trust will furnish an additional copy of the Report
without charge to a shareholder who requests it by writing to John I.
Fitzgerald, Secretary of the Trust, at 286 Congress Street, Boston, MA 02210
or by calling 1-800-872-8037.
2
<PAGE>
Shareholders of record at the close of business on March 15, 1999 (the
"Record Date") are entitled to notice of, and to vote at, the Meeting. Each
shareholder is entitled to one vote for each full share, regardless of class.
As of the Record Date, 9,931,450.25 shares of beneficial interest of the Fund
were outstanding.
CypressTree Investments, Inc. ("CII") is the parent of CAM. CHC owns 30.8%
of the stock of CII. Berkshire Fund IV, L.P. ("Berkshire") owns, directly and
indirectly through its ownership of 63.6% of the stock of CHC, approximately
71% of the stock of CII. Standish, Ayer & Wood, Inc. ("Standish") owns 15.2%
of the stock of CII. Berkshire is an investment limited partnership sponsored
by Berkshire Partners, LLC. Berkshire and its affiliated entities are located
at One Boston Place, Boston, MA 02108. Standish, an investment counseling firm
is located at One Financial Place, Boston, MA 02111.
CAM is a wholly-owned subsidiary of CII and acts as adviser to all series of
the Trust. The President and Chief Executive Officer of CAM is Bradford K.
Gallagher. Mr. Gallagher and J. Christopher Clifford are the directors of CAM.
Mr. Gallagher is also Chairman of the Board, Chief Executive Officer and a
Trustee of the Trust. Mr. Gallagher's principal occupation is President and
Chief Executive Officer of CHC located at 125 High Street, Boston,
Massachusetts 02110. Mr. Clifford's principal occupation is Managing Director,
Berkshire Partners, One Boston Place, Boston, Massachusetts 02108. CAM does
not act as investment adviser to other mutual funds that have investment
objectives and policies similar to those of the Fund.
As of the Record Date, the officers and Trustees of the Trust as a group
owned beneficially less than 1% of the outstanding shares of the Fund.
The following shareholders, as of the Record Date, were beneficial owners of
five percent or more of a class of shares of the Fund, as set forth in the
table below:
<TABLE>
<CAPTION>
Amount and
Title Nature of
of Beneficial Percent of
Class Name and Address of Beneficial Owner Ownership Class
----- --------------------------------------- -------------- ----------
<C> <S> <C> <C>
Class A Frontier Trust Co. 644,957 shares 29.73%
Trustee FBO Saia
Motor Freight Line Inc.
401k Plan c/o Barclay Group Springhouse
Corp Center II
323 Norristown Road
Ambler, PA 19002
Class A NALACO Pension Plan 370,265 shares 17.07%
for U.S. Members
c/o Jim Crysdale at Elliott Page
393 University Ave. #2100
Toronto, Ontario M5G 1E6
</TABLE>
3
<PAGE>
The following persons are both officers of the Trust and officers or
directors of CAM: Bradford K. Gallagher (also a Trustee of the Trust), Joseph
T. Grause, Jr., Paul F. Foley, Thomas J. Brown and John I. Fitzgerald.
Until March 31, 1999, T. Rowe Price Associates, Inc. ("TRP") will serve as
sub-advisor to the Fund and, subject to the supervision and control of CAM and
the Board of Trustees, will determine the securities to be purchased for and
sold by the Fund. On February 26, 1999 TRP advised the Fund that it intended
to resign as sub-advisor of the Fund effective at the close of business on
March 31, 1999.
Under an interim Sub-Advisory Agreement (the "Interim GAVIL Sub-Advisory
Agreement") by and between CAM and Global Alliance Value Investors, Ltd.
("GAVIL"), GAVIL will serve as sub-advisor to the Fund beginning April 1,
1999, and, subject to the supervision and control of CAM and the Board of
Trustees, will determine the securities to be purchased for and sold by the
Fund. GAVIL's principal offices are at 985 Moraga Road, Lafayette, California
94549. CHC, an affiliate of CAM, owns approximately 80% of the outstanding
voting stock of GAVIL. The purpose of this Meeting is to approve the New GAVIL
Sub-Advisory Agreement (as defined below) so that GAVIL can continue to serve
as sub-advisor to the Fund.
The administrator and principal underwriter of the Fund is CypressTree Funds
Distributors, Inc. ("CFD"), located at 286 Congress Street, Boston, MA 02210.
As explained in more detail below, the sub-advisory agreement for the Fund
with TRP will be terminated, and shareholders are being asked to approve a New
Sub-Advisory Agreement between the Fund and GAVIL (the "New GAVIL Sub-Advisory
Agreement"). The termination of TRP and the decision to retain GAVIL, along
with the terms of the New GAVIL Sub-Advisory Agreement, are discussed below.
4
<PAGE>
PROPOSAL I
APPROVAL OF A NEW SUB-ADVISORY AGREEMENT BETWEEN
CYPRESSTREE ASSET MANAGEMENT CORPORATION, INC.
AND GLOBAL ALLIANCE VALUE INVESTORS, LTD.
Background
Since October 1, 1997, CAM has served as investment advisor to the Fund
pursuant to an Investment Advisory Agreement with the Trust dated October 1,
1997 (the "Investment Advisory Agreement"). The Investment Advisory Agreement
provides, among other things, that in carrying out its responsibility to
supervise and manage all aspects of the Fund's operations, CAM may engage,
subject to approval of the Board of Trustees and, where required, the
shareholders of the Fund, a sub-advisor to provide advisory services to the
Fund. CAM may delegate to the sub-advisor, among other things, the duty to
formulate and implement the Fund's investment program, including the duty to
determine what issuers and securities will be purchased for or sold by the
Fund.
In accordance with this provision for delegation of authority, CAM entered
into a sub-advisory agreement, dated October 1, 1997, with TRP (the "TRP Sub-
Advisory Agreement"), pursuant to which the duties described above were
delegated by CAM to TRP. The Investment Advisory Agreement and the TRP Sub-
Advisory Agreement were approved by shareholders of the Fund on September 25,
1997. Shareholder approval was required under the 1940 Act because these
agreements were taking effect for the first time. Prior to October 1, 1997,
NASL Financial Services, Inc. ("NASL Financial") served as adviser to the
Fund. Under the TRP Sub-Advisory Agreement and predecessor agreements with
NASL Financial, TRP has served as sub-advisor to the Fund since the Fund's
inception on October 1, 1996.
As adviser, CAM regularly monitors the performance of any sub-advisor of
the Fund, reports on and analyzes the Fund's investment performance for the
Board of Trustees and evaluates alternative investment sub-advisors. The Board
of Trustees had met with representatives of TRP on September 25, 1996, April
3, 1997 and September 25, 1997. In the first half of 1998, CAM became
concerned with the relative investment performance of the Fund. On December
15, 1998, the Board of Trustees met with the Fund's portfolio manager to
discuss the Trustees' concerns relating to the Fund's performance, among other
matters.
On February 26, 1999, TRP advised the Fund, CAM and the Trustees that it
intended to resign as sub-advisor of the Fund effective March 31, 1999. At a
meeting held on March 9, 1999, the Trustees voted to approve the appointment
by CAM of GAVIL, effective April 1, 1999 (see "Proposed New Sub-Advisor and
Evaluation of Trustees" below).
5
<PAGE>
In its on-going consideration of possible alternative sub-advisors for the
various investment portfolios of the Trust, CAM has reviewed the investment
performance of a number of investment advisers, including GAVIL. GAVIL's Chief
Investment Officer, Nancy Tengler, since 1984 has managed assets in a style
substantially similar to the Fund's investment objective and strategies. CAM
has been impressed with the investment performance of Ms. Tengler and GAVIL's
senior portfolio manager, Noel DeDora, in following a relative dividend yield
valuation approach and a fundamental research technique known as "Value 30".
Ms. Tengler's investment record was produced during employment at UBS Asset
Management (New York) Inc. (a subsidiary of Union Bank of Switzerland) during
1994-1997; Spare, Tengler, Kaplan and Bischel during September 1989 through
September 1994; and a subsidiary of Bank of California during 1984 through
August 1989. In each of those investment management positions, Ms. Tengler had
principal investment responsibility for assets managed in the relative
dividend yield discipline, and had ultimate decision making authority over
management of certain assets since 1993. For the period of 1993 through 1998,
accounts using a relative dividend yield strategy and the "Value 30"
investment philosophy with a select group of stocks managed by Ms. Tengler
(i.e., limited to approximately thirty stocks), showed the following average
annualized returns* adjusted to reflect the Fund's total expense ratio
incurred in its most recent fiscal years:
<TABLE>
<CAPTION>
1 Year 2 Years 3 Years 5 Years 6 Years
ended ended ended ended ended
December December December December December
31, 1998 31, 1998 31, 1998 31, 1998 31, 1998
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Tengler Accounts 17.58% 23.34% 20.05% 18.92% 17.80%
Lipper Equity Income Average 10.89% 18.80% 18.96% 16.66% 16.21%
</TABLE>
- -----------
* The returns for 1993 and 1994 represent the equity portion of balanced
accounts managed solely by Ms. Tengler at Spare, Tengler, Kaplan and
Bischel; the returns for 1995, 1996 and through June 30, 1997 represent the
composite of all fully-discretionary accounts following the Value 30
strategy managed by Ms. Tengler and the Value Equities Group at UBS Asset
Management. Returns for July 1, 1997 through December 31, 1998 represent the
Value 30 composite at GAVIL which on December 31, 1998 consisted of four
fully discretionary accounts following this strategy. The performance of the
Tengler Accounts may not have been subject to the diversification
requirements, investment limitations and other restrictions imposed on the
Fund by the 1940 Act and the Internal Revenue Code, and may have been lower
had the Tengler Accounts been subject to such restrictions. Historic
performance of the Tengler Accounts is not indicative of performance
expected of the Fund. The returns for 1993 through 1994 were calculated on a
cash rather than accrual basis and therefore do not comply with the
guidelines and requirements of the Association for Investment Management and
Research ("AIMR"). The returns for 1995 through 1998 comply with the AIMR
guidelines and requirements.
GAVIL is an investment adviser and a corporation chartered under the laws of
the State of Delaware and has its principal place of business at 985 Moraga
Road,
6
<PAGE>
Lafayette, California 94549. GAVIL'S President and Chief Executive Officer is
Nancy Tengler. The Executive Vice President of GAVIL is Noel F. DeDora. Ms.
Tengler, Bradford K. Gallagher, Arthur S. Loring, Harry Georgieff and Jeffrey
S. Garner are the directors of GAVIL. The following persons are both officers
of the Trust and officers and directors of GAVIL: Mr. Gallagher (also a
Trustee of the Trust and Chairman of the Board of GAVIL), Joseph T. Grause,
Jr., Paul F. Foley, Thomas J. Brown and John I. Fitzgerald. The principal
occupation of Ms. Tengler and Mr. DeDora is the management of GAVIL.
During its review, CAM found the investment capabilities and performance
record of Ms. Tengler and Mr. DeDora to be impressive (see above). Her "Value
Plus" approach calls for investing in undervalued stocks having above market
dividend yields for long-term earnings growth and increasing dividend
payments. Effective December 31, 1998, CHC, the indirect parent company of
CAM, acquired 80% of the common stock of GAVIL.
Proposed New Sub-Advisor and Evaluation of Trustees.
At a meeting held on March 9, 1999, the Board received a proposal from CAM
to replace TRP with GAVIL as sub-advisor to the Fund. The Board of Trustees,
including the Trustees who are not interested persons of CAM, any of the sub-
advisors of the Portfolios or the Trust, voted to accept the resignation of
TRP as sub-advisor to the Fund effective March 31, 1999 and to approve the
Interim Sub-Advisory Agreement with GAVIL with respect to the Fund and the New
GAVIL Sub-Advisory Agreement between CAM and GAVIL effective upon approval by
the Fund's shareholders. On April 1, 1999 GAVIL will begin serving as interim
sub-advisor to the Fund in reliance on Rule 15a-4 under the 1940 Act, which
permits GAVIL to serve as sub-advisor to the Fund, without shareholder
approval, for a period of up to 120 days following the termination of the TRP
Sub-Advisory Agreement. Under an order that North American Funds and CAM have
received from the Securities and Exchange Commission, CAM is permitted to
appoint, in certain instances, a sub-advisor pursuant to a sub-advisory
agreement for a portfolio of the Trust without approval by shareholders (and
not in reliance on Rule 15a-4). However, where an affiliate is proposed as a
sub-advisor by CAM, shareholder approval is required. Because GAVIL is an
affiliate of CAM under the 1940 Act, shareholder approval is required.
Shareholders of the Fund are now being requested to approve the New GAVIL Sub-
Advisory Agreement, which contains a reduced sub-advisory fee.
The terms and conditions of the New GAVIL Sub-Advisory Agreement are
identical in all material respects with those of the TRP Sub-Advisory
Agreement with the exception of the effective date, the reduced sub-advisory
fee and the identity of the sub-advisor. Subject to shareholder approval of
the New GAVIL Sub-Advisor Agreement, the Board of Trustees has approved a
proposal by CAM to amend the Investment Advisory Agreement to reduce the
management fee paid by the Fund thereunder, as discussed below.
7
<PAGE>
In support of its recommendation to engage GAVIL as sub-advisor to the Fund
pursuant to the terms of the New GAVIL Sub-Advisory Agreement, CAM informed
the Board of Trustees of its belief that appointment of GAVIL as sub-advisor
to the Fund would assist the Fund's efforts to achieve its investment
objective.
In evaluating the proposed New GAVIL Sub-Advisory Agreement, the Board of
Trustees received information and reviewed materials furnished by CAM and
GAVIL, including information about GAVIL's personnel, operations and
anticipated management of the Fund as well as possible other sub-advisors for
the Fund. Consideration was also given to the decreased fee rate to be payable
to CAM by the Fund under the proposed arrangement.
CAM's recommendation of GAVIL was based, among other factors, on (1) the
performance of other accounts which have in the past been managed by GAVIL's
investment professionals which have similar investment objectives to the Fund,
(2) the GAVIL personnel who will be involved in the management of the Fund,
including the fact that the Chief Investment Officer of GAVIL will be head of
the team responsible for managing the Fund, and (3) the reduced management fee
which will be paid by the Fund under the Investment Advisory Agreement.
The Investment Advisory Agreement currently provides for a fee payable by
the Fund to CAM at an annual rate of .80% of the first $50 million of the
Fund's average daily net assets; .70% of the amount of such assets between $50
million and $200 million; .60% of the amount of such assets between $200
million and $500 million; and .60% of the excess above $500 million. Given the
greater efficiency to CAM in monitoring and supervising a sub-advisor that is
a majority-owned subsidiary of its parent company, CAM proposes to reduce the
investment management fee by .05% at each asset level if the New GAVIL Sub-
Advisory Agreement with GAVIL is approved. If this reduction had been in
effect during the fiscal year ended October 31, 1998, the Fund would have paid
$1,211,960 in management fees, which represents a 6.83% decrease in the amount
of fees actually paid, $1,300,804.
The Board of Trustees, based on the factors discussed above, recommend that
GAVIL be approved as the sub-advisor of the Fund. The Board of Trustees
believe that the appointment of GAVIL as sub-advisor would be in the best
interest of the Fund and its shareholders. This belief is based on their
consideration of the following: (i) the experience of and investment record
compiled by GAVIL investment principals; (ii) the operational and management
support which will be provided to GAVIL by CAM; and (iii) the proposed
reduction in the management fee.
The TRP Sub-Advisory Agreement
The TRP Sub-Advisory Agreement was approved by the Trust's Board of
Trustees, including a majority of the Trustees who were not "interested
persons" of the Trust, as that term is defined in the 1940 Act (the
"Independent Trustees"), on June 27, 1997.
8
<PAGE>
Under the terms of the TRP Sub-Advisory Agreement, TRP agreed to act as
investment sub-advisor to the Fund, to manage the investment and to reinvest
all assets of the Fund in accordance with the investment objective, investment
policies and restrictions of the Fund (as set forth in the Fund's Prospectus
and Statement of Additional Information). Subject to the supervision and
control of CAM, which was in turn subject to the supervision and control of
the Board of Trustees, TRP, in its discretion, determined and selected the
securities to be purchased for and sold by the Fund from time to time and
placed orders with and gave instructions to brokers, dealers and others to
cause such transactions to be executed.
Under the TRP Sub-Advisory Agreement, in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations under the
TRP Sub-Advisory Agreement, TRP was not liable to the Trust, its shareholders
or CAM for any act or omission resulting in any loss suffered in any portfolio
of the Trust in connection with any service provided under the TRP Sub-
Advisory Agreement. The TRP Sub-Advisory Agreement provided that it would
remain in effect for two years from the date of the agreement, and was
renewable annually thereafter by specific approval of the Board of Trustees or
by Majority Vote. In either event, such renewal was also required to be
approved by the vote of a majority of the Independent Trustees. The TRP Sub-
Advisory Agreement could be terminated at any time without penalty upon 60
days' written notice by either party and would automatically terminate in the
event of the "assignment" by either party (as defined under the 1940 Act) or
provided TRP had received prior written notice thereof, upon termination of
the Investment Advisory Agreement.
CAM was responsible for paying TRP's compensation for services provided
under the TRP Sub-Advisory Agreement, which compensation was computed at an
annual rate and was payable monthly in arrears, based on the average daily net
assets of the Fund. For all services rendered, CAM, until May 1, 1998, paid
TRP at the annual rate of .40% of the average daily net assets of the Fund not
in excess of $50 million; plus .30% of the portion of such assets between $50
million and $200 million; .20% of the portion of such assets between $200
million and $500 million; and .20% of such assets in excess of $500 million.
Since May 1, 1998, CAM has paid TRP at the annual rate of .40% of the Fund's
average daily assets. GAVIL receives this rate of compensation under the
Interim GAVIL Sub-Advisory Agreement, and will do so until the New GAVIL Sub-
Advisory Agreement is approved and takes effect or the Interim GAVIL Sub-
Advisory Agreement is otherwise terminated. Upon approval by shareholders of
the New GAVIL Sub-Advisory Agreement, CAM's investment management fee will be
reduced by .05% at each fee level.
As a result of TRP's notice of resignation and the Trustee's acceptance
thereof, the TRP Sub-Advisory Agreement will be terminated by CAM as of the
close of business on March 31, 1999.
9
<PAGE>
The New GAVIL Sub-Advisory Agreement
The terms and conditions of the New GAVIL Sub-Advisory Agreement are the
same in all material respects as those of the TRP Sub-Advisory Agreement, with
the exception of the identity of the sub-advisor, the reduced sub-advisory fee
rate and the effective date. In addition, certain non-material clarifying
changes have been made to the New GAVIL Sub-Advisory Agreement. The Investment
Advisory Agreement will be amended to reduce CAM's fee for advising the Fund
upon shareholder approval of the New GAVIL Sub-Advisory Agreement (the "New
Investment Advisory Agreement"). As compensation for the services to be
rendered under the New GAVIL Sub-Advisory Agreement, CAM, and not the Trust or
the Fund, will pay GAVIL a fee at the annual rate of .375% of the average net
assets of the Fund not in excess of $50 million; plus .325% of such assets
between $50 million and $200 million; .275% of such assets between $200
million and $500 million; and .275% of such assets in excess of $500 million.
If the New GAVIL Sub-Advisory Agreement had been in effect during the fiscal
year ended October 31, 1998, CAM would have paid GAVIL $605,980 in sub-
advisory fees, which represents a 6.73% decrease in the amount of sub-advisory
fees paid by CAM to GAVIL, $649,730.
Portfolio Transactions and Brokerage
If the New GAVIL Sub-Advisory Agreement is approved, GAVIL would expect to
follow the practices described below with respect to the portfolio
transactions of the Fund.
GAVIL places orders with broker-dealers for securities to be purchased by
the Fund. The primary objective of GAVIL in choosing brokers for the purchase
and sale of securities for the Fund's portfolio is to obtain the most
favorable net results, taking into account such factors as price, commission,
size of order, difficulty of execution and the degree of skill required of the
broker-dealer. The capability and financial condition of the broker may also
be criteria for choice of that broker. The placing and execution of orders for
the Fund is also subject to restrictions under U.S. securities laws, including
certain prohibitions against trading among the Fund and its affiliates
(including GAVIL and its affiliates). The Fund may utilize affiliates of the
Fund or GAVIL in connection with the purchase or sale of securities in
accordance with rules or exemptive orders adopted by the Securities and
Exchange Commission ("SEC") when GAVIL believes that the charge for the
transaction does not exceed usual and customary levels. In addition, the Fund
may purchase securities in a placement for which affiliates of the Fund or
GAVIL have acted as agent to or for the issuers, consistent with applicable
rules adopted by the SEC or regulatory authorization, if necessary. The Fund
will not purchase securities from or sell securities to any affiliate of GAVIL
acting as principal.
GAVIL on behalf of the Fund may place brokerage transactions through brokers
who provide GAVIL with investment research services, including market and
10
<PAGE>
statistical information and quotations for portfolio valuation purposes. The
terms "investment research" and "market and statistical information and
quotations" include advice as to the value of securities, the advisability of
investing in, purchasing or selling securities and the availability of
securities and potential buyers or sellers of securities, as well as the
furnishing of analyses and reports concerning issuers, industries, securities,
economic factors and trends and portfolio strategy, each and all as consistent
with those services mentioned in Section 28(e) of the Securities Exchange Act
of 1934, as amended.
Research provided to GAVIL in advising the Fund is in addition to and not in
lieu of the services required to be performed by GAVIL itself, and GAVIL's
fees will not be reduced as a result of the receipt of such supplemental
information. It is the opinion of management of GAVIL that such information is
only supplementary to GAVIL's own research efforts, since the information must
still be analyzed, weighed and reviewed by GAVIL's staff. Such information may
be useful to GAVIL in providing services to clients other than the Fund, and
not all such information is necessarily used by GAVIL in connection with the
Fund. Conversely, information provided to GAVIL by brokers and dealers through
whom other clients of GAVIL effect securities transactions may prove useful to
GAVIL in providing services to the Fund.
Brokerage Transactions with Affiliates
GAVIL may, if the New Sub-Advisory Agreement is approved, cause the Fund to
pay brokerage commissions to an affiliated broker for acting as agent on
purchases and sales of securities for the portfolio of the Fund. SEC rules
require that commissions paid to an affiliated broker of an adviser or sub-
adviser to a mutual fund for portfolio transactions not exceed "usual and
customary" brokerage commissions. The rules define "usual and customary"
commissions to include amounts which are "reasonable and fair compared to the
commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions involving similar
securities being purchased or sold on a securities exchange during a
comparable period of time." The Trustees, including the Independent Trustees,
have adopted procedures for evaluating the reasonableness of commissions paid
to affiliated brokers and will review these procedures periodically.
Currently, GAVIL does not propose to utilize an affiliated broker-dealer to
execute Fund transactions.
If the New GAVIL Sub-Advisory Agreement is approved by the shareholders of
the Fund, it will become effective on or about May 13, 1999. The New GAVIL
Sub-Advisory Agreement will remain in effect for an initial two year term and
is renewable thereafter by specific approval of the Board of Trustees or by
vote of a Majority Vote of the Fund's shareholders. In either event, such
renewal shall also be required to be approved by the vote of a majority of the
Independent Trustees. Like the TRP Sub-Advisory Agreement, the New GAVIL Sub-
Advisory Agreement may be terminated
11
<PAGE>
at any time without penalty upon 60 days' written notice to the other party to
the agreement, and will automatically terminate in the event of its
"assignment" by either party (as defined under the 1940 Act) or upon
termination of the New Investment Advisory Management Agreement provided GAVIL
has received prior written notice thereof. If the New GAVIL Sub-Advisory
Agreement is not approved by shareholders at the Meeting, then the Interim
GAVIL Sub-Advisory Agreement will be terminated no later than 120 days after
April 1, 1999 and the Board of Trustees will consider such other actions,
including the appointment of a new sub-advisor, as may be in the best
interests of the Fund and its shareholders.
As discussed above, the Board of Trustees and CAM believe that approval of
the New GAVIL Sub-Advisory Agreement is in the best interest of the Fund and
its shareholders.
Based upon its evaluation, the Board of Trustees has concluded that CAM's
engagement of GAVIL as sub-advisor to the Fund likely would offer the Fund
access to highly effective management and advisory services and capabilities.
The Board of Trustees concluded further that the terms of the New Investment
Advisory Agreement and the New GAVIL Sub-Advisory Agreement, including the
reduced fees contemplated thereby, are fair and reasonable and in the best
interests of the Fund and its shareholders.
In order to provide for the services described in the New GAVIL Sub-Advisory
Agreement, the shareholders are being asked to approve the New GAVIL Sub-
Advisory Agreement. Since GAVIL is an affiliated company of CAM, shareholder's
approval of the New GAVIL Sub-Advisory Agreement is required.
Approval of the New GAVIL Sub-Advisory Agreement will require a Majority
Vote of the shareholders of the Fund.
Shareholder Proposals at Future Meetings
The Trust does not hold annual or other regular meetings of shareholders.
Shareholder proposals to be presented at any future meetings of shareholders
of the Trust must be received by the Trust at 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 relating to that
meeting.
THE TRUSTEES, INCLUDING THE DISINTERESTED TRUSTEES,
UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS VOTE
"FOR" PROPOSAL I. ANY UNMARKED PROXIES THAT ARE
RETURNED ON A TIMELY BASIS WILL BE SO VOTED.
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<PAGE>
NORTH AMERICAN FUNDS
North American Funds, 286 Congress Street, Boston, Massachusetts 02210
This proxy is solicited on behalf of the Board of Trustees of the North American
Funds (the "Trust") for the Special Meeting of Shareholders of the North
American Equity-Income Fund (the "Fund") to be held on May 12, 1999 (the
"Meeting"). The undersigned hereby appoints Joseph T. Grause, Jr., John I.
Fitzgerald, Thomas J. Brown and Leana D. Vacirca, and each of them, attorneys
and proxies for the undersigned, with full power of substitution to represent
the undersigned and 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
Cypress Holding Company, Inc., 125 High Street, 14th Floor, Boston,
Massachusetts 02110 on May 12, 1999 at 10:00 a.m., Eastern 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 such shares as indicated
hereon. A majority of the proxies present and acting at the Meeting in person or
by substitutes (or, if only one shall be 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.
- ------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN BELOW AND RETURN PROMPTLY IN THE ENCLOSED POSTAGE
PAID ENVELOPE.
- ------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
__________________________ ________________________________
__________________________ ________________________________
__________________________ ________________________________
[X] PLEASE MARK VOTE
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 the
proposal. Please refer to the Proxy Statement for a discussion of the
proposal.
1. Approval of a new subadvisory agreement For Against Abstain
between CypressTree Asset Management
Corporation, Inc. and Global Alliance [_] [_] [_]
Value Investors, Ltd. with respect to the
North American Equity Income Fund.
<TABLE>
<S> <C> <C>
--------------
Date
Please be sure to sign and date this Proxy. Mark box at right if an address change or comment
- --------------------------------------------------------- has been noted on this card. [_]
The Board of Trustees unanimously recommends that shareholders
Shareholder sign here Co-owner sign here vote FOR the Proposal.
- ---------------------------------------------------------
</TABLE>
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