<PAGE>
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
(Amendment No.______)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Information Statement [_] CONFIDENTIAL, FOR USE OF THE
[_] Definitive Information Statement COMMISSION ONLY (AS PERMITTED BY
[_] Definitive Additional Materials RULE 14c-5(d)(2))
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:
- --------------------------------------------------------------------------------
(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:
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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:
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April 29, 1999
Dear Shareholder:
We are pleased to include materials concerning the International Equity
Fund (formerly the International Growth and Income Fund) (the "Fund").
Contained in this package are two documents for your review:
. Information Statement--J.P. Morgan Investment Management, Inc.
("J.P. Morgan") tendered its resignation as subadvisor, effective
March 31, 1999. As a result, the existing subadvisory agreement for
the Fund between CypressTree Asset Management Corporation, Inc. and
J.P. Morgan terminated, and approval of a new agreement became
necessary.
The Board of Trustees approved a new subadvisory agreement with Morgan
Stanley Dean Witter Investment Management, Inc. on substantially
identical terms to the original agreement. The advisory fees charged
to the Fund did not change as a result of this new agreement.
The Information Statement requires no action by you. It simply
provides information about the new agreement.
. Proxy Statement--The Board of Trustees approved a change in the
investment objective of the Fund to eliminate growth of income from
the investment objective, as explained in the Proxy Statement. The
proposed change is subject to shareholder approval. We urge you to
carefully read the proxy statement, fill out your proxy card and
return it to us.
Please review both documents and direct any questions you may have to
the Fund's Shareholder Services Department at 1-800-872-8037.
Sincerely,
[SIG BRADFORD K.
GALLAGHER]
Bradford K. Gallagher
Chairman
<PAGE>
NORTH AMERICAN FUNDS
INTERNATIONAL EQUITY FUND
INFORMATION STATEMENT
This Information Statement is being furnished by the Board of Trustees of
North American Funds (the "Trust") to the shareholders of the International
Equity Fund (formerly the International Growth and Income Fund) (the "Fund"),
a series of the Trust. This information statement is being mailed on or about
April 29, 1999 to all of the Fund's shareholders of record as of April 15,
1999. A copy of 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, 286 Congress Street, Boston, MA 02210
or by calling 1-800-872-8037.
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.
Introduction
Prior to April 1, 1999, J.P. Morgan Investment Management, Inc. ("J.P.
Morgan") was the subadvisor to the Fund. On February 25, 1999, J.P. Morgan
tendered its resignation, effective March 31, 1999 (the "Resignation"). As a
result of the Resignation, the existing subadvisory agreement for the Fund
between CypressTree Asset Management Corporation, Inc. ("CAM") and J.P. Morgan
(the "Previous Subadvisory Agreement") terminated, and approval of a new
agreement became necessary. Consequently, the Board of Trustees of North
American Funds approved a new subadvisory agreement with Morgan Stanley Dean
Witter Investment Management, Inc. ("MSDW Investment Management") on
substantially identical terms to the old agreement (the "New Subadvisory
Agreement"). MSDW Investment Management in certain instances does business
using the name Morgan Stanley Asset Management ("MSAM"). The New Subadvisory
Agreement became effective on April 1, 1999.
Under an order the Trust has received from the Securities and Exchange
Commission, the Trust is permitted to appoint a subadvisor pursuant to a
subadvisory agreement with the Trust's investment adviser, CAM, that has not
been approved by shareholders. The Trustees of the Trust must approve such
subadvisory agreements, and the Trust must provide notice to shareholders
within 60 days of such hiring of a new subadvisor or the implementation of any
material change in a subadvisory contract. This Information Statement is being
supplied to shareholders to fulfill the notice condition.
1
<PAGE>
The New Subadvisory Agreement is substantially identical to the Previous
Subadvisory Agreement, except for the date of execution, the name of the
subadvisor and the name of the Fund.
Delegation by the Advisor
Since October 1, 1997, CAM has served as investment advisor to the Fund
pursuant to an Investment Advisory Agreement with the Trust (the "Investment
Advisory Agreement"). CAM, located at 286 Congress Street, Boston,
Massachusetts 02210, is a wholly-owned subsidiary of CypressTree Investments,
Inc. ("CII"), an affiliate of Cypress Holding Company, Inc. ("CHC"). CHC was
founded in November 1995 to create investment management, marketing,
distribution and operations enterprises. Equity investors in CII include
Berkshire Fund IV, L.P. ("Berkshire"), Berkshire Investors, LLC ("Berkshire
Investors"), Standish, Ayer & Wood, Inc. ("Standish") and the principals and
employees of CII. Berkshire is an investment limited partnership sponsored by
Berkshire Partners, LLC ("Berkshire Partners"). Berkshire Partners is a
private equity investor based in Boston. Standish, an investment counseling
firm based in Boston, provides investment counsel to a wide range of pension,
endowment and high net worth clients.
CAM oversees the administration of all aspects of the business and affairs
of the Trust; selects, contracts with and compensates subadvisors to manage
the assets of the Funds; and reimburses the Trust if the total of certain
expenses allocated to the Fund exceeds certain limitations. CAM monitors the
subadvisor for compliance with the investment objectives and related policies
of the Fund, reviews the performance of the subadvisor and periodically
reports to the Trustees of the Trust.
In addition, the Investment Advisory Agreement provides 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 subadvisor to provide services
to the Fund. CAM may delegate to the subadvisor, 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, CAM entered into the Previous
Subadvisory Agreement with J.P. Morgan, pursuant to which the duties described
above were delegated by CAM to J.P. Morgan.
The Investment Advisory Agreement and the Previous Subadvisory 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 Previous
Subadvisory Agreement and predecessor agreements with NASL Financial, J.P.
Morgan has served as subadvisor to the Fund since the Fund's inception on
October 1, 1996.
2
<PAGE>
The Previous Subadvisory Agreement
The Previous Subadvisory Agreement required J.P. Morgan to manage the
investment and reinvestment of the assets of the Fund, subject to the
supervision of CAM. Under the terms of the Previous Subadvisory Agreement,
J.P. Morgan was authorized to effect portfolio transactions for the Fund using
its own discretion, and without prior consultation with CAM. J.P. Morgan was
also required to report periodically to CAM and the Trustees of the Trust.
Under the Previous Subadvisory Agreement, J.P. Morgan was entitled to
receive from CAM (and not from the Fund) a subadvisory fee stated as an annual
percentage of the current value of the net assets of the 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>
International Equity Fund... .500% .450% .400% .350%
</TABLE>
For the fiscal year ended October 31, 1998, the aggregate subadvisory fee
paid by CAM to J.P. Morgan under the Previous Subadvisory Agreement was
$257,885.
CAM regularly monitors the performance of the subadvisor of the Fund,
reports on and analyzes the Fund's investment performance for the Board of
Trustees and evaluates alternative investment subadvisors. The Board of
Trustees met with J.P. Morgan representatives on June 20, 1996; December 13,
1996; June 26, 1997 and March 10, 1998. In the first half of 1998, CAM became
concerned with the relative investment performance of the Fund. On January 25,
1999, CAM met with one of the Fund's portfolio managers to discuss concerns
relating to the Fund's performance, among other matters.
On February 25, 1999, J.P. Morgan tendered its resignation as subadvisor,
effective March 31, 1999. The Resignation resulted in the termination of the
Previous Subadvisory Agreement.
Proposed New Subadvisor and Evaluation of Trustees
At a meeting held on March 9, 1999, the Board received a proposal from CAM
to replace J.P. Morgan with MSAM as subadvisor to the Fund. The Board of
Trustees, including the Trustees who are not interested persons of CAM, any of
the subadvisors of the Fund or the Trust, voted to accept the resignation of
J.P. Morgan as subadvisor to the Fund effective March 31, 1999 and to approve
the New Subadvisory Agreement with MSAM effective April 1, 1999.
The terms and conditions of the New Subadvisory Agreement are
substantially identical in all material respects with those of the Previous
Subadvisory Agreement with the exception of the date of execution, the name of
the subadvisor and the name of the Fund.
3
<PAGE>
In support of its recommendation to engage MSAM as subadvisor to the Fund
pursuant to the terms of the New Subadvisory Agreement, CAM informed the Board
of Trustees of its belief that appointment of MSAM as subadvisor to the Fund
would benefit shareholders. In evaluating the proposed New Subadvisory
Agreement, the Trustees received information and reviewed materials furnished
by CAM and MSAM, including information about MSAM personnel, operations and
anticipated management of the Fund as well as possible other subadvisors for
the Fund. The Trustees also considered MSAM's performance as subadvisor to the
Global Equity Fund, another fund in the Trust.
CAM's recommendation of MSAM was based, among other factors, on (1) the
performance of other accounts which have in the past been managed by MSAM
professionals which have substantially similar investment objectives to the
Fund, (2) the MSAM personnel who will be involved in the management of the
Fund, and (3) the substantially identical terms of the Previous Subadvisory
Agreement and the New Subadvisory Agreement, including the terms relating to
the services to be provided and the fees payable by CAM to the subadvisor.
New Subadvisory Agreement
As in the Previous Subadvisory Agreement with J.P. Morgan, the New
Subadvisory Agreement with MSAM requires MSAM to manage the investment and
reinvestment of the assets of the Fund, subject to the supervision of CAM.
Likewise, MSAM is authorized to effect portfolio transactions for the Fund
using its own discretion, and without prior consultation with CAM and is
required to report periodically to CAM and the Trustees of the Trust.
As compensation for its services under the New Subadvisory Agreement, MSAM
is entitled to receive from CAM subadvisory fees calculated at the same rate
as those payable to J.P. Morgan under the Previous Subadvisory Agreement
described above.
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
Trust or by vote of a majority of the outstanding voting securities of the
Fund 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 MSAM,
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
MSAM and, if required by law, by vote of a majority of the outstanding voting
securities of the Fund and by vote of a majority of Trustees of the Trust who
are not such interested persons, cast in person at a meeting called for the
purpose of voting on such approval.
The New Subadvisory Agreement may be terminated without penalty by vote of
the Board of Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Fund, upon sixty days' written notice, or by MSAM or
CAM upon
4
<PAGE>
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 Fund is terminated.
Like the Previous Subadvisory Agreement, the New Subadvisory Agreement
provides that MSAM will not be subject to any liability for any error of
judgment made in the good faith exercise of the Subadvisor's investment
discretion in connection with selecting Fund investments except for losses
resulting from willful misfeasance, bad faith or gross negligence of, or from
reckless disregard of, the duties of MSAM. Both the Previous Subadvisory
Agreement and the New Subadvisory Agreement contain indemnification provisions
in which J.P. Morgan and MSAM, respectively, agree to indemnify CAM for
certain losses. In the Previous Subadvisory Agreement, J.P. Morgan agreed to
indemnify CAM for losses arising from or in connection with the Previous
Subadvisory Agreement or J.P. Morgan's performance of its duties thereunder.
In the New Subadvisory Agreement, MSAM agrees to indemnify CAM for losses
arising from MSAM's willful malfeasance, bad faith, gross negligence or
reckless disregard in connection with the New Subadvisory Agreement. The other
limitations for indemnification are the same for both agreements.
The Trustees of the Trust believe that the terms of the New Subadvisory
Agreement are fair to, and in the best interest of, the Fund and its
shareholders.
Brokerage Policies
It is the policy of MSAM, in effecting transactions in securities for the
Fund, 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 Fund (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, MSAM may execute transactions with brokerage firms which
provide research services and products to MSAM. 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 and electronic access
equipment, software programs and other information and accessories that may
assist MSAM in furtherance of its investment advisory responsibilities to its
advisory clients. Such services and products permit MSAM to
5
<PAGE>
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. MSAM 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 Fund. If MSAM 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, MSAM will allocate in
good faith the cost of such service or product accordingly. The portion of the
product or service that MSAM 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 MSAM. Any such
allocation may create a conflict of interest for MSAM.
Neither the research services nor the amount of brokerage given to a
particular broker-dealer are made pursuant to any agreement or commitment with
any of the selected broker-dealers that would bind MSAM to compensate the
selected broker-dealer for research provided. MSAM 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 MSAM believes is useful.
Research services and products obtained by MSAM from brokers who execute
portfolio transactions for the Fund may be useful to MSAM in providing
investment advice to any of the funds or clients it advises. Likewise,
information made available to MSAM from brokers effecting securities
transactions for such other funds and clients may be utilized on behalf of the
Fund. 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 Trust
may establish from time to time, sales of shares of the Fund may also be
considered as a factor in the selection of brokerage firms to execute
portfolio transactions for the Fund.
Because selection of executing brokers is not based solely on net
commissions, the Fund may pay an executing broker a commission higher than
that which might have been charged by another broker for that transaction.
MSAM 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 MSAM to solicit competitive bids for
commissions on each portfolio transaction, consideration is regularly given to
available information concerning the 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 MSAM, better prices and execution are
available elsewhere.
6
<PAGE>
Subject to the overriding objective of obtaining the best possible
execution of orders, MSAM may allocate brokerage transactions to affiliated
brokers. In order for the affiliated broker to effect portfolio transactions
for the Fund, 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 Trust, including a majority of those Trustees who are not "interested
persons" of the Trust 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 Trust
The Trust 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 International
Equity Fund is one of those portfolios. The address of the Trust is 286
Congress Street, Boston, Massachusetts 02210.
Information about MSAM
MSAM is a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co.
("MSDW & Co."). The principal offices of MSDW & Co. are located at 1585
Broadway, New York, NY 10036, and the principal offices of MSAM are located at
1221 Avenue of the Americas, New York, NY 10020. MSDW & Co. is a preeminent
global financial services firm that maintains leading market positions in each
of its three primary businesses--securities, asset management and credit
services.
MSDW & Co.'s principal wholly-owned subsidiaries are MSAM and Morgan
Stanley & Co. Incorporated ("MSCI"). At December 31, 1998, MSAM, together with
its affiliated institutional asset management companies, managed assets of
approximately $163.4 billion, including assets under fiduciary advice.
MSAM conducts a worldwide portfolio management business and provides a
broad range of portfolio management services to customers in the United States
and abroad. The management board of MSAM includes Ann D. Thivierge and Barton
M. Biggs. Ms. Thivierge is a Managing Director of MSAM and MSCI. She is a
member of MSAM's asset allocation committee, primarily representing the Total
Fund Management team since its inception in 1991. Ms. Thivierge joined MSAM in
1986 and holds a B.A. in International Relations from James Madison College,
Michigan State University, and an M.B.A. in Finance from New York University.
Mr. Biggs has been Chairman and a director of MSAM since 1980 and a Managing
Director of MSCI since 1975. He is also a director and chairman of various
registered investment companies to which MSAM and certain of its affiliates
provide investment advisory services. Mr. Biggs holds a B.A. from Yale
University and an M.B.A. from New York University.
7
<PAGE>
MSAM acts as investment adviser (or, where indicated, as subadvisor) to
the following other mutual funds which have a similar objective to that of the
Fund:
<TABLE>
<CAPTION>
Approximate
Annual Management Net Assets
(or Subadvisory) as of
Fee Rate (as a % April 30,
of 1999
Fund net assets) ($ millions)
- ---- ----------------- ------------
<S> <C> <C>
</TABLE>
Other Information
As of April 15, 1999, to the Fund's knowledge, no persons owned of record
or beneficially more than 5% of the outstanding shares of the indicated class
of the International Equity Fund.
As of April 15, 1999, the officers and Trustees of the Fund as a group
owned less than 1% of the outstanding shares of the Fund.
8
