UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant [X] Filed by a Party other than the Registrant [_] Check the appropriate box: [_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14A-6(E)(2)) [X] Definitive Proxy Statement [_] Definitive Additional Materials [_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12 North American Funds - -------------------------------------------------------------------------------- (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: ------------------------------------------------------------------------- (2) Form, Schedule or Registration Statement No.: ------------------------------------------------------------------------- (3) Filing Party: ------------------------------------------------------------------------- (4) Date Filed: ------------------------------------------------------------------------- Notes: NORTH AMERICAN FUNDS 286 Congress Street Boston, MA 02210 April 12, 2000 Dear North American Funds Shareholder: A Special Meeting of Shareholders of all the Funds of North American Funds (the "Trust") will be held at the Wyndham Boston Hotel, 89 Broad Street, Boston, Massachusetts 02110 on June 1, 2000, at 9:00 a.m., Eastern time, for the purpose of considering the proposals described in the enclosed Notice of Special Meeting of Shareholders and Proxy Statement. Additionally, a Special Meeting of Shareholders of the Equity-Income Fund and the Tax-Sensitive Equity Fund will be held on June 1, 2000 at 10:00 a.m., Eastern time for the purpose of considering proposals described in the additional Prospectus/Proxy Statement that will be enclosed in additional mailings sent to shareholders of those two Funds. These additional proposals relate to the proposed reorganization of the Equity-Income Fund and the Tax-Sensitive Equity Fund into the Growth & Income Fund. On March 10, 2000 CypressTree Investments, Inc. ("CypressTree") sold substantially all of its assets including all of the stock of CypressTree Asset Management Corporation, Inc. ("CAM"), the Trust's investment adviser, and all of the stock of CypressTree Funds Distributors, Inc. ("CFD"), the Trust's distributor, to American General Corporation ("American General"). The acquisition by American General of CypressTree's assets (herein "the Acquisition") took place pursuant to a Purchase Agreement dated February 25, 2000. The closing of the Acquisition on March 10, 2000 (the "Closing") constituted an assignment of the investment advisory agreement between CAM and the Trust with respect to the Funds, and of the distribution agreement between CFD and the Trust. Under the Investment Company Act of 1940, as amended (the "Investment Company Act"), these assignments operated to terminate automatically each of the investment advisory and distribution agreements. At a meeting of the Board of Trustees of the Trust (the "Board") on February 27, 2000, the Board approved an interim investment advisory agreement between CAM (operating under its new name of American General Asset Management Corp. ("AGAM")) and the Trust with respect to the Funds in order to allow AGAM to continue to serve as investment adviser after the Acquisition. Under the Investment Company Act, however, AGAM may only continue to serve as the investment adviser for each Fund beyond an interim period of 150 days if shareholders of such Fund approve a new investment advisory agreement with AGAM. The Board approved, and recommended shareholder approval of, such a new investment advisory agreement on February 27, 2000. CFD, under its new name American General Funds Distributors, Inc. ("AGFD"), has likewise continued to serve as the distributor of the Trust's shares since the Closing. The Board approved a new distribution agreement substantially similar to the Trust's previous distribution agreement with CFD on February 27, 2000 which became effective upon the Closing. American General has advised the Board that AGAM and AGFD will continue to provide the same high-quality services provided to the Trust prior to the Acquisition. The number of your shares in each Fund has not changed as a result of the Acquisition. By their terms, the subadvisory agreements between CAM and the various subadvisers to the Funds also terminated upon the Closing. On February 27, 2000, the Board appointed the following new subadvisers to manage various Funds pursuant to the Trust's Manager of Managers structure: Founders Asset Management, LLC (Large Cap Growth Fund, Global Equity Fund, International Small Cap Fund); Morgan Stanley Dean Witter Investment Management Inc. (International Equity Fund); Wellington Management Company, LLP (Growth & Income Fund, Tax-Sensitive Equity Fund, Equity-Income Fund); INVESCO Funds Group, Inc. (Mid Cap Growth Fund, Balanced Fund); Credit Suisse Asset Management, LLC (Small Cap Growth Fund). An information statement describing these changes has been enclosed in the mailings sent to shareholders of the above listed Funds. Since the Closing, American General Investment Management, L.P. ("AGIM"), an affiliate of American General, has served as the subadviser to five of the Funds (the Strategic Income Fund, the Municipal Bond Fund, the Core Bond Fund, the U.S. Government Securities Fund and the Money Market Fund), pursuant to interim subadvisory agreements approved by the Board on February 27, 2000. As an "affiliated person" of American General under the Investment Company Act, AGIM may only continue to serve as a subadviser to those five Funds beyond an interim period of 150 days pursuant to new subadvisory agreements approved by each of those Fund's shareholders. Shareholders of the Funds are therefore being asked to consider several proposals that would take effect upon shareholder approval: . Shareholders of each Fund are being asked to approve a new investment advisory agreement between the Trust and AGAM in respect of the Funds which is substantially similar to the Trust's previous investment advisory agreement with CAM. . Shareholders of the Strategic Income Fund, the Municipal Bond Fund (formerly, the National Municipal Bond Fund), the Core Bond Fund (formerly, the Investment Quality Bond Fund), the U.S. Government Securities Fund and the Money Market Fund are being asked to approve subadvisory agreements with AGIM. . Shareholders are being asked to consider the election of seven Trustees to the Board. . Shareholders of each of the Equity-Income Fund and the Tax-Sensitive Equity Fund are being asked to consider the reorganization of their Fund into the Growth & Income Fund. Your vote is important After reviewing these proposals, your Board of Trustees unanimously agreed that they are in the best interests of each Fund's shareholders and voted to approve them, as more fully described in the accompanying proxy statement and, with respect to the Fund reorganizations, the accompanying prospectus/proxy statement. Now it is your turn to review the proposals and vote. For more information about the issues requiring your vote, please refer to the accompanying documents. No matter how many shares you own, your timely vote is important. If you are not able to attend the meeting(s), then please complete, sign, date and mail the enclosed proxy promptly in order to avoid the expense of additional mailings or having our proxy solicitor, Georgeson Shareholder Communications Corporation, telephone you. Thank you in advance for your participation in this important event. Sincerely, Alice T. Kane Chairman and President North American Funds NORTH AMERICAN FUNDS 286 Congress Street Boston, MA 02210 (800) 872-8037 NOTICE OF SPECIAL MEETING OF SHAREHOLDERS To the Shareholders of North American Funds: Notice is hereby given that a Special Meeting of Shareholders of North American Funds (the "Trust") will be held on June 1, 2000 at the Wyndham Boston Hotel, 89 Broad Street, Boston, Massachusetts 02110 at 9:00 a.m., Eastern time (the "Meeting"). A Proxy Statement providing additional information about the purpose of the Meeting is included with this Notice. At the Meeting, shareholders of each series of the Trust (each, a "Fund"), unless otherwise indicated below, will consider and vote upon the following proposals: Proposal 1 Approval of an investment advisory agreement between American General Asset Management Corp. and the North American Funds with respect to each Fund. (All shareholders will vote on Proposal 1.) Proposal 2 Approval of an investment subadvisory agreement between American General Asset Management Corp. and American General Investment Management, L.P. with respect to the Strategic Income Fund. (Only shareholders of the Strategic Income Fund will vote on Proposal 2.) Proposal 3 Approval of an investment subadvisory agreement between American General Asset Management Corp. and American General Investment Management, L.P. with respect to the Municipal Bond Fund. (Only shareholders of the Municipal Bond Fund will vote on Proposal 3.) Proposal 4 Approval of an investment subadvisory agreement between American General Asset Management Corp. and American General Investment Management, L.P. with respect to the Core Bond Fund. (Only shareholders of the Core Bond Fund will vote on Proposal 4.) Proposal 5 Approval of an investment subadvisory agreement between American General Asset Management Corp. and American General Investment Management, L.P. with respect to the Money Market Fund. (Only shareholders of the Money Market Fund will vote on Proposal 5.) Proposal 6 Approval of an investment subadvisory agreement between American General Asset Management Corp. and American General Investment Management, L.P. with respect to the U.S. Government Securities Fund. (Only shareholders of the U.S. Government Securities Fund will vote on Proposal 6.) Proposal 7 Election of seven Trustees to serve as members of the Board of Trustees. (All shareholders will vote on Proposal 7.) Any other business that may properly come before the Meeting. Each shareholder of record at the close of business on April 7, 2000 is entitled to receive notice of and to vote at the Meeting and is invited to attend the Meeting in person. Whether or not you intend to be present at the Meeting, we urge you to fill in, sign, date, and promptly return the enclosed proxy card in order that the Meeting may be held and the greatest number of shares may be voted. If you attend the Meeting you may revoke your proxy and vote your shares in person if you wish. Sincerely, John I. Fitzgerald Secretary April 12, 2000 Boston, Massachusetts YOUR VOTE IS IMPORTANT PLEASE RESPOND--YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT IN THE ENCLOSED POSTAGE PREPAID ENVELOPE SO THAT YOU WILL BE REPRESENTED AT THE MEETING. NORTH AMERICAN FUNDS 286 Congress Street Boston, MA 02210 PROXY STATEMENT Special Meeting of Shareholders June 1, 2000 This proxy statement is furnished in connection with the solicitation by the Board of Trustees (the "Board") of North American Funds (the "Trust") of proxies to be used at a Special Meeting of Shareholders (the "Meeting"), to be held at the Wyndham Boston Hotel, 89 Broad Street, Boston, Massachusetts 02110 on June 1, 2000 at 9:00 a.m. Eastern time, or any adjournment or adjournments thereof. This proxy statement and the enclosed form of proxy are first being mailed to shareholders on or about April 12, 2000. The Trust currently offers fifteen series of shares of beneficial interest: the Mid Cap Growth Fund (formerly, the Small/Mid Cap Fund), the International Small Cap Fund, Large Cap Growth Fund (formerly, the Growth Equity Fund), the Tax-Sensitive Equity Fund, the Small Cap Growth Fund (formerly, the Emerging Growth Fund), the Global Equity Fund, the Equity-Income Fund, the Growth & Income Fund (formerly, the Growth and Income Fund), the International Equity Fund, the Balanced Fund, the Strategic Income Fund, the U.S. Government Securities Fund, the Core Bond Fund (formerly, the Investment Quality Bond Fund), the Municipal Bond Fund (formerly, the National Municipal Bond Fund) and the Money Market Fund. (each a "Fund" and collectively the "Funds"). The foregoing name changes to certain Funds were implemented by the Board effective February 28, 2000. Each Fund (other than the Core Bond Fund) offers four separate classes of shares, designated as Class A Shares, Class B Shares, Class C Shares, and Institutional Class I Shares. The Core Bond Fund also offers Institutional Class II Shares. None of the Funds currently have any Institutional Class I Shares or Institutional Class II Shares outstanding. For purposes of voting on each proposal at the Meeting, Class A Shares, Class B Shares and Class C Shares of each Fund will be treated as one class of shares. In order that your shares may be represented at the Meeting or any adjournment or adjournments thereof, you are requested to indicate your voting instructions on the proxy card; date and sign the proxy card; mail the proxy card promptly in the enclosed postage-paid envelope; and allow sufficient time for the proxy card to be received before the Meeting. Shares represented by timely and properly executed proxies will be voted as specified. If you return a signed proxy and no specification is made with respect to a particular matter, shares will be voted in accordance with the recommendations of the Trustees. Proxies may be revoked at any time before they are exercised by sending a written revocation which is received by the Secretary of the Trust, by properly executing a later-dated proxy or by attending the Meeting and voting in person. Attendance at the Meeting alone, however, will not serve to revoke the proxy. Only shareholders of record at of the close of business on April 7, 2000 (the "Record Date") shall be entitled to vote. Each whole share shall be entitled to one vote as to any matter on which it is entitled to vote and each fractional share shall be entitled to a proportionate fractional vote. As of the Record Date, the following number of shares of each Fund were issued and outstanding: Mid Cap Growth Fund............................................... 2,726,131 International Small Cap Fund...................................... 1,375,249 Large Cap Growth Fund............................................. 2,624,508 Tax-Sensitive Equity Fund......................................... 563,858 Small Cap Growth Fund............................................. 313,531 Global Equity Fund................................................ 4,553,025 Equity-Income Fund................................................ 6,149,666 Growth & Income Fund.............................................. 10,711,084 International Equity Fund......................................... 2,189,603 Balanced Fund..................................................... 6,226,155 Strategic Income Fund............................................. 4,957,450 Core Bond Fund.................................................... 1,045,828 U.S. Government Securities Fund................................... 5,308,172 Municipal Bond Fund............................................... 1,105,725 Money Market Fund................................................. 20,996,620 The Trust will furnish, without charge, a copy of the Trust's Annual Report for its fiscal year ended October 31, 1999 to a shareholder upon request. To obtain an Annual Report, please contact the Trust by calling (800) 872-8037 or by writing to the Trust at 286 Congress Street, Boston, Massachusetts 02210, Attn: John I. Fitzgerald. 2 Solicitation of the proxies by personal interview, mail and telephone may be made by officers and Trustees of the Trust and officers and employees of American General Asset Management Corp., its affiliates and other representatives of the Trust. The Trust has retained Georgeson Shareholder Communications Corporation ("SCC"), 17 State Street, New York, New York 10004, to aid in the solicitation of proxies. The costs of retaining SCC and other expenses incurred in connection with the solicitation of proxies, and the costs of holding the Meeting, will not be borne by the Funds, but will be divided equally between American General Corporation and CypressTree Investments, Inc. ("CypressTree"). Summary of Proposals Proposal Funds Whose Shareholders Number Proposal Will Vote on the Proposal -------- -------- ------------------------- Proposal 1 Approval of an investment advisory All Funds agreement between American General Asset Management Corp. and the North American Funds with respect to each Fund. Proposal 2 Approval of an investment subadvisory Strategic Income Fund agreement between American General Asset Management Corp. and American General Investment Management, L.P. with respect to the Strategic Income Fund. Proposal 3 Approval of an investment subadvisory Municipal Bond Fund agreement between American General Asset Management Corp. and American General Investment Management, L.P. with respect to the Municipal Bond Fund. Proposal 4 Approval of an investment subadvisory Core Bond Fund agreement between American General Asset Management Corp. and American General Investment Management, L.P. with respect to the Core Bond Fund. Proposal 5 Approval of an investment subadvisory Money Market Fund agreement between American General Asset Management Corp. and American General Investment Management, L.P. with respect to the Money Market Fund. Proposal 6 Approval of an investment subadvisory U.S. Government agreement between American General Securities Fund Asset Management Corp. and American General Investment Management, L.P. with respect to the U.S. Government Securities Fund. Proposal 7 Election of seven Trustees to serve as All Funds members of the Board of Trustees. The Acquisition On March 10, 2000 CypressTree sold substantially all of its assets including all of the stock of CypressTree Asset Management Corporation, Inc. ("CAM"), the Trust's investment adviser, and all of the stock of CypressTree Funds Distributors, Inc. ("CFD"), the Trust's distributor, to American General Corporation ("American General"). The acquisition by American General of CypressTree's assets (herein "the Acquisition") took place pursuant to a Purchase Agreement dated February 25, 2000 (the "Purchase Agreement"). American General paid a purchase price of $16.5 million in cash to CypressTree, $6.75 million of which was placed in escrow pending a determination of certain adjustments to the purchase price. The closing of the Acquisition on March 10, 2000 (the "Closing") constituted an assignment of the investment advisory agreement between CAM and the Trust with respect to the Funds, and of the distribution agreement between CFD and the Trust. Under the Investment Company Act of 1940, as amended (the "Investment Company Act"), these assignments operated to terminate automatically each of the investment advisory and distribution agreements. 3 At the meeting of the Board on February 27, 2000, the Board approved an interim investment advisory agreement between CAM (operating under its new name of American General Asset Management Corp. ("AGAM")) and the Trust with respect to the Funds in order to allow AGAM to continue to serve as investment adviser after the Acquisition. Under the Investment Company Act, however, AGAM may only continue to serve as the investment adviser for each Fund beyond an interim period of 150 days if shareholders of such Fund approve a new investment advisory agreement with AGAM. You are therefore being asked in Proposal 1 to approve a new two year investment advisory agreement between AGAM and the Trust with respect to the Funds that is substantially similar to the Trust's previous investment advisory agreement with CAM. This new investment advisory agreement would be effective upon shareholder approval, and would replace the interim investment advisory agreement. The Board approved, and recommended shareholder approval of, the new investment advisory agreement on February 27, 2000. CFD, under its new name American General Funds Distributors, Inc. ("AGFD"), has likewise continued to serve as the distributor of the Trust's shares since the Closing. The Board approved a new distribution agreement substantially similar to the Trust's previous distribution agreement with CFD on February 27, 2000 that became effective upon the Closing (shareholder approval of the new distribution agreement is not required under the Investment Company Act) . American General has advised the Board that AGAM and AGFD will continue to provide the same high-quality services to the Trust that they have provided prior to and since the Closing. A number of key employees of CypressTree entered into employment agreements with American General and continue to function in positions similar to those they held prior to the Acquisition. By their terms, the subadvisory agreements between CAM and the various subadvisers to the Funds also terminated upon the Closing. On February 27, 2000, the Board appointed the following new subadvisers to manage various Funds pursuant to the Trust's Manager of Managers structure: Founders Asset Management, LLC (Large Cap Growth Fund, Global Equity Fund, International Small Cap Fund); Morgan Stanley Dean Witter Investment Management Inc. (International Equity Fund); Wellington Management Company, LLP (Growth & Income Fund, Tax- Sensitive Equity Fund, Equity-Income Fund); INVESCO Funds Group, Inc. (Mid Cap Growth Fund, Balanced Fund); Credit Suisse Asset Management, LLC (Small Cap Growth Fund). Since the Closing, American General Investment Management, L.P. ("AGIM"), an affiliate of American General, has served as the subadviser to five of the Funds (the Strategic Income Fund, the Municipal Bond Fund, the Core Bond Fund, the U.S. Government Securities Fund and the Money Market Fund), pursuant to interim subadvisory agreements approved by the Board on February 27, 2000. As an "affiliated person" of American General under the Investment Company Act, AGIM may only continue to serve as a subadviser to those five Funds pursuant to new subadvisory agreements approved by each of those Fund's shareholders. Therefore shareholders of each of the Strategic Income Fund, the Municipal Bond Fund, the Core Bond Fund, the U.S. Government Securities Fund and the Money Market Fund are being asked in Proposals 2-6 to approve new two year investment subadvisory agreements between AGAM and AGIM substantially similar to those in place with respect to such Funds prior to the Acquisition. Finally, also in connection with the Acquisition, shareholders of all the Funds are being asked in Proposal 7 to consider the election of seven Trustees to the Board. One of the seven Trustee nominees, Alice T. Kane, was appointed by the Trustees to the Board effective March 10, 2000 to replace Bradford K. Gallagher as Chairman of the Board; Ms. Kane is also the President of the Trust and Chairman and CEO of AGAM. The other six nominees would serve as new Trustees. It is anticipated that two current Trustees previously elected by shareholders will remain on the Board, resulting in a Board comprised of nine Trustees assuming shareholder approval. 4 Description of American General and Its Affiliates Members of the American General Corporation group of companies (the "American General Financial Group") operate in each of the 50 states, the District of Columbia, and Canada and collectively engage in substantially all forms of financial services. American General Corporation was incorporated as a Texas business corporation on February 26, 1980 as the successor to American General Life Insurance Company (organized in 1926) as the result of a corporate reorganization completed on July 1, 1980. The American General Financial Group has approximately $115 billion in assets and over $6 billion in stockholders' equity. American General's address is 2929 Allen Parkway, Houston, Texas 77019. Affiliates of American General currently include American General Distributors, Inc., The VALIC Annuity Marketing Company, American General Funds Distributors, Inc., and American General Financial Advisors, Inc. These entities are considered to be "Affiliated Brokers." Absent an SEC exemption or other relief, a Fund would generally be precluded from effecting principal transactions with the Affiliated Brokers, and its ability to purchase securities from underwriting syndicates including an Affiliated Broker or to utilize the Affiliated Brokers for agency transactions would be subject to restrictions. AGAM does not believe that the restrictions on transactions with the Affiliated Brokers described above will have a material adverse affect on its ability, post-closing, to provide services to the Funds, the Funds' ability to take advantage of market opportunities, or any Fund's overall performance. Interests of Certain Persons in the Acquisition Bradford K. Gallagher, the former Chairman and President of the Trust and of CAM, has entered into a consulting agreement with AGAM in connection with the Acquisition. The agreement has an initial term of six months, and may be renewed for an additional six months. Mr. Gallagher has also entered into a two-year noncompetition agreement with American General in connection with the Acquisition. As of the Closing, Mr. Gallagher owned approximately 15.6% of the outstanding equity interests of Cypress Holding Company, Inc. ("Cypress Holding"), the parent of CypressTree. Joseph T. Grause, Jr., President of AGAM and a nominee for Trustee, has entered into an employment agreement having a term of three years with AGAM in connection with the Acquisition. As of the Closing, Mr. Grause owned approximately 7.8% of the outstanding equity interests of Cypress Holding. Each of Thomas J. Brown, Treasurer and Vice President of the Trust, John I. Fitzgerald, Secretary and Vice President of the Trust, and John N. Packs, Vice President of the Trust, have entered into a three-year employment agreement with AGAM in connection with the Acquisition. As of the Closing, Mr. Packs owned approximately 1.3%of the outstanding equity interests of Cypress Holding. As of the closing, Messrs. Brown and Fitzgerald owned, in the aggregate, less that 1% of the outstanding equity interests of Cypress Holding. As a result of the foregoing arrangements and ownership interests, each of the persons identified in the foregoing paragraphs may be deemed to have a substantial interest in shareholder approval of the matters set forth in the Proxy Statement. Section 15(f) of the 1940 Act Section 15(f) provides a non-exclusive safe harbor for an investment adviser or any affiliated persons to receive any amount or benefit in connection with a change of control of the investment adviser to an investment company as long as two conditions are satisfied. First, an "unfair burden" must not be imposed on investment company clients of the adviser as a result of the transaction, or any express or implied terms, conditions or understandings applicable to the transaction. The term "unfair burden" (as defined in the Investment Company Act) includes any arrangement during the two-year period after the transaction whereby the investment adviser (or predecessor or successor adviser), or any "interested person" (as defined in the Investment Company Act) (an "Interested Person") of any such adviser, receives or is entitled to receive any 5 compensation, directly or indirectly, from such an investment company or its security holders (other than fees for bona fide investment advisory or other services) or from any other person in connection with the purchase or sale of securities or other property to, from or on behalf of such investment company. The Board has been advised that AGAM is aware of no circumstances arising from the Acquisition that might result in an unfair burden being imposed on a Fund. Moreover, American General has covenanted in the Purchase Agreement that it will use all reasonable efforts to ensure that no unfair burden will be imposed on each Fund by or as a result of the Acquisition during such two-year period. The second condition of Section 15(f) is that during the three-year period after the transaction, at least 75% of each such investment company's board of directors must not be Interested Persons of the investment adviser (or predecessor or successor adviser). American General has covenanted in the Purchase Agreement that it will use all reasonable efforts to comply with such 75% requirement during such three-year period. I. APPROVAL OR DISAPPROVAL OF THE NEW ADVISORY AGREEMENT The Board is proposing that shareholders approve a new Investment Advisory Agreement between the Trust and AGAM that will be entered into between AGAM and the Trust on behalf of each Fund upon shareholder approval (the "New Advisory Agreement"). A description of the New Advisory Agreement, the services provided thereunder, the procedure for its termination and renewal and other services provided by AGAM and its affiliates is set forth below. This description is qualified in its entirety by reference to the form of New Advisory Agreement included as Appendix A to this Proxy Statement. Additional information about AGAM is set forth below in the section entitled "Information About AGAM." The New Advisory Agreement was approved by all the Trustees, including the Independent Trustees (as defined below), at an in-person meeting held on February 27, 2000. Description of the New Advisory Agreement As discussed above, AGAM currently serves as investment adviser of the Funds pursuant to an interim advisory agreement with the Trust approved by the Board effective March 10, 2000. The New Advisory Agreement is substantially similar to the previous agreement between the Trust and CAM in effect prior to March 10, 2000 (the "Old Advisory Agreement"). The New Advisory Agreement requires that, subject to the general supervision of the Trustees, AGAM will select, contract with and compensate subadvisers to manage the investments of the Funds. and determine the composition of the assets of the portfolios of the Funds. AGAM arranges for the provision of such services in accordance with each Fund's investment objective, investment policies and investment restrictions as stated in the Trust's registration statement filed with the Securities and Exchange Commission (the "SEC"), as supplemented or amended from time to time. AGAM will monitor the compliance of each subadviser with the investment objectives and related policies stated in the Trust's registration statement, review the performance of each subadviser, and report periodically on such performance to the Board. The New Advisory Agreement provides that it will, unless sooner terminated in accordance with its terms, continue in effect with respect to a Fund for a period of two years from its effective date and thereafter on an annual basis with respect to the Fund, provided such continuance is specifically approved at least annually (a) by the vote of a majority of the Board or (b) by the vote of a majority of the outstanding voting securities of the Fund, and provided continuance is also specifically approved by the vote of a majority of the Board of Trustees of the Trust who are not parties to the Agreement or "interested persons" (as defined by the Investment Company Act) of the Trust or AGAM (the "Independent Trustees"), cast in person at a meeting called for the purpose of voting on such approval. The New Advisory Agreement provides that it terminates automatically in the event of its assignment (as defined by the Investment Company Act) by AGAM. The New Advisory Agreement provides that it may not be materially amended without a majority vote of the outstanding voting securities of the pertinent Fund or Funds. 6 The New Advisory Agreement may be terminated at any time, without the payment of any penalty, by the Trust by vote of a majority of the Board or by vote of a majority of the outstanding voting securities of the Trust or, with respect to a particular Fund, by a vote of a majority of the outstanding voting securities of the Fund, upon 60 days' written notice to AGAM, or by AGAM upon 60 days' written notice to the Trust. The New Advisory Agreement provides that AGAM shall maintain the existence and records of the Trust; maintain the registrations and qualifications of Trust shares under federal and state law; and perform all administrative, financial, accounting, bookkeeping and recordkeeping functions of the Trust except for any such functions that may be performed by a third party pursuant to a custodian, transfer agency or service agreement executed by the Trust. The Trust shall reimburse the Adviser for its expenses associated with all such services, The advisory fee rates payable by the Funds to the Adviser under the Old Advisory Agreement are the same as those payable under the New Advisory Agreement and no change in the current fee structure is being proposed. The Old Advisory Agreement contained provisions relating to a voluntary investment fee waiver by CAM; that waiver agreement was terminated by CAM on December 15, 1999 with respect to all the Funds (except the Tax-Sensitive Equity Fund) in accordance with the notice provisions contained in the Old Advisory Agreement. No such voluntary waiver provisions are included in the New Advisory Agreement, although AGAM has continued to voluntarily waive fees with respect to the Funds (other than the Tax-Sensitive Equity Fund) in lesser amounts since December 15, 1999. AGAM has agreed to waive its fees with respect to the Tax-Sensitive Fund to the same extent it presently waives such fees. Under the New Advisory Agreement, each Fund will pay AGAM a monthly advisory fee at the following annual rates, based on the average daily net assets of the particular Fund: Between Between $50,000,000 $200,000,000 First and and Excess over Funds $50,000,000 $200,000,000 $500,000,000 $500,000,000 ----- ----------- ------------ ------------ ------------ International Small Cap Fund................... 1.050% 1.000% .900% .800% Mid Cap Growth.......... .925% .900% .875% .850% Global Equity Fund...... .900% .900% .700% .700% Large Cap Growth Fund... .900% .850% .825% .800% Tax-Sensitive Equity Fund................... .850% .800% .775% .700% Small Cap Growth Fund... .950% .950% .950% .950% International Equity Fund................... .900% .850% .825% .800% Growth & Income Fund.... .725% .675% .625% .550% Equity-Income Fund...... .750% .650% .550% .550% Balanced Fund........... .775% .725% .675% .625% Strategic Income Fund... .600% .600% .525% .475% Core Bond Fund.......... .600% .600% .525% .475% Municipal Bond Fund..... .600% .600% .600% .600% U.S. Government Securities Fund........ .600% .600% .525% .475% Money Market Fund....... .200% .200% .200% .145% 7 For the fiscal year ended October 31, 1999, the Funds paid CAM the following amounts under the Old Advisory Agreement: Net Advisory Fee After Fund Waivers ---- ---------- Mid Cap Growth Fund.............................................. $ 390,888 International Small Cap Fund..................................... 159,614 Large Cap Growth Fund............................................ 335,777 Global Equity Fund............................................... 951,657 Tax-Sensitive Equity Fund........................................ 88,103 Small Cap Growth Fund............................................ 9,513 Equity-Income Fund............................................... 1,060,879 Growth & Income Fund............................................. 1,912,464 International Equity Fund........................................ 230,737 Strategic Income Fund............................................ 498,515 Core Fund........................................................ 94,898 U.S. Government Securities Fund.................................. 411,390 Municipal Bond Fund.............................................. 89,986 Money Market Fund................................................ 44,172 Balanced Fund.................................................... 681,955 ---------- Total.......................................................... $6,960,548 ========== Information About AGAM CypressTree and its affiliates were formed in 1996 to acquire, advise and distribute mutual funds through broker-dealers and other intermediaries. CAM was CypressTree's wholly-owned advisory subsidiary and CFD was CypressTree's wholly-owned distribution subsidiary. Pursuant to its advisory agreement with the Trust, CAM oversaw the administration of all aspects of the business and affairs of the Trust, selected, contracted with and compensated subadvisers to manage the assets of the Funds. AGAM has continued to perform these functions under an interim advisory agreement approved by the Board pursuant to Rule 15a- 4 under the Investment Company Act. AGAM is located at 286 Congress Street, Boston, Massachusetts 02210. Alice T. Kane is Chairman and Chief Executive Officer of AGAM, as well as Chairman of the Board of Trustees and a Trustee and President of the Trust. Ms Kane's principal occupation is President of American General Fund Group. Her business address is 286 Congress Street, Boston, Massachusetts 02210. Information regarding the material interests of the Trustees and officers of the Trust in the Acquisition is described under "Interests of Certain Persons in the Acquisition" above. Approval of the New Advisory Agreement by the Trustees of the Trust In evaluating the New Advisory Agreement, the Trustees took into account that the New Advisory Agreement and the Old Advisory Agreement, including their terms relating to the services to be provided by AGAM, are substantially identical. The Trustees also considered the terms of the Acquisition and the possible effects of the Acquisition on AGAM's ability to provide management services to each Fund. Representatives of AGAM represented to the Trustees that the Acquisition had not resulted in any changes, other than changes in the ordinary course of business, in the management, operations, personnel or legal structure of AGAM, with the exception of the replacement of Bradford K. Gallagher by Ms. Kane. 8 After consideration of the foregoing factors and such other factors as the Trustees deemed relevant, the Trustees concluded that it was appropriate and desirable for AGAM to continue to act as investment adviser to each Fund on the same terms as were in effect before the Acquisition. Accordingly, the Trustees unanimously approved the New Advisory Agreement and recommend its approval by the shareholders. Required Vote Approval of the New Advisory Agreement with respect to a Fund will require the affirmative vote of a "majority of the outstanding voting securities" of that Fund, which means the affirmative vote of the lesser of (1) more than 50% of the outstanding shares of that Fund or (2) 67% or more of the shares of that Fund present at the Meeting if more than 50% of the outstanding shares of that Fund are represented at the meeting in person or by proxy. If the shareholders of any Fund do not approve the New Advisory Agreement, the Trustees will take such further action as they may deem to be in the best interests of the shareholders of that Fund. Also, if shareholders of any Fund that are also considering a New Subadvisory Agreement, as discussed in Part II approve the New Advisory Agreement, but not the New Subadvisory Agreement, the Trustees will take such further action as they may deem to be in the best interests of the shareholders of that Fund. The Trustees unanimously recommend that shareholders of each Fund vote FOR approval of the New Advisory Agreement for their Fund. II. APPROVAL OF THE NEW SUBADVISORY AGREEMENTS The Trustees are proposing that shareholders of each of the Strategic Income Fund, the Municipal Bond Fund, the Core Bond Fund, the U.S. Government Securities Fund and the Money Market Fund approve a New Subadvisory Agreement between AGAM and American General Investment Management, L.P. ("AGIM"). Information applicable to all of the Subadvisory Agreements is set forth under "General Information Concerning the New Subadvisory Agreements" below, and information relating to specific Funds is set forth in Parts A, B and C below. General Information Concerning the New Subadvisory Agreements Except as described below, the terms and provisions of the New Subadvisory Agreements that will be entered into between AGAM and AGIM upon shareholder approval are substantially identical to those of the relevant subadvisory agreements in effect prior to March 10, 2000, including with respect to the fees payable by AGAM to AGIM thereunder. AGIM currently serves as subadviser to each of the Strategic Income Fund, the Municipal Bond Fund, the Core Bond Fund, the U.S. Government Securities Fund and the Money Market Fund pursuant to an interim subadvisory agreement approved by the Board on February 27, 2000. The following discussion of the New Subadvisory Agreements is qualified in its entirety by reference to the forms of the New Subadvisory Agreements attached to this Proxy Statement as Appendix B. The New Subadvisory Agreements were approved by the Board of Trustees of the Trust, including the Independent Trustees, at an in-person meeting held on February 27, 2000. Each of the New Subadvisory Agreements provides that, subject to the general supervision of the Trustees and AGAM, AGIM shall provide a continuous investment program for the relevant Fund and determine the composition of the portfolios of the relevant Fund, including the determination of the purchase, retention or sale of securities, cash and other investments for the Fund. AGIM provides such services in accordance with the relevant fund's investment objective, investment policies and investment restrictions as stated in the Trust's registration statement filed with the SEC, as supplemented and amended from time to time. Each New Subadvisory Agreement provides that it will continue in effect with respect to a Fund for a period of two years from its effective date and thereafter on an annual basis with respect to such Fund, 9 provided such continuance is approved at least annually (a) by the vote of a majority of the Board of Trustees of the Trust or (b) by the vote of a majority of the outstanding voting securities of the Fund, and provided that continuance is also approved by the vote of a majority of the Trustees who are not "interested persons" (as defined by the Investment Company Act) of the Trust, AGAM or AGIM, cast in person at a meeting called for the purpose of voting on such approval. Each New Subadvisory Agreement provides that it may not be materially amended without a majority vote of the outstanding voting securities of the relevant Fund, except to the extent permitted by the terms of any exemptive relief that may be granted by the SEC, and also provides that it terminates automatically in the event of its assignment (as defined by the Investment Company Act). Each New Subadvisory Agreement may be terminated at any time, without the payment of any penalty, by (a) the Trust by vote of a majority of the Board of Trustees, or by a majority vote of the Trustees who are not "interested persons" (as defined by the Investment Company Act) of the Trust, or by vote of a majority of the outstanding voting securities of the Trust, or, with respect to a particular Fund, by vote of a majority of the outstanding voting securities of the Fund, upon 60 days' written notice to AGIM or (b) by AGAM upon 60 days' written notice to AGIM. The New Subadvisory Agreements may be terminated by AGIM upon 60 days' written notice to the Trust. Each New Subadvisory Agreement provides that, except as required by applicable law, AGIM and its affiliates and controlling persons shall not be liable for any act or omission or mistake in judgment connected with or arising out of any services rendered under the agreement, except by reason of willful misfeasance, bad faith, or gross negligence in the performance of its duties, or by reason of reckless disregard of AGIM's obligations and duties under the agreement. AGIM was formed in 1998 as a successor to the investment management division of American General Corporation, and is an indirect wholly-owned subsidiary of American General Corporation. AGIM also provides investment management and advisory services to pension and profit sharing plans, financial institutions and other investors. Accounts managed by AGIM and its affiliates had combined assets, as of January 31, 2000, of approximately $68 billion. AGIM is located at 2929 Allen Parkway, Houston, Texas 77019. Required Vote Approval of each New Subadvisory Agreement with respect to a Fund will require the affirmative vote of a "majority of the outstanding voting securities" of that Fund, which means the affirmative vote of the lesser of (1) more than 50% of the outstanding shares of that Fund or (2) 67% or more of the shares of that Fund present at the Meeting if more than 50% of the outstanding shares of that Fund are represented at the Meeting in person or by proxy. If the shareholders of any Fund do not approve the New Portfolio Management Agreement, the Trustees will take such further action as they may deem to be in the best interests of the shareholders of that Fund. The Trustees unanimously recommend that the shareholders of each of the Strategic Income Fund, the Municipal Bond Fund, the Core Bond Fund, the U.S. Government Securities Fund and the Money Market Fund vote FOR approval of the New Subadvisory Agreement for their particular Fund. A. New Subadvisory Agreements for the Strategic Income Fund, the U.S. Government Securities Fund and the Municipal Bond Fund Pursuant to a Subadvisory Agreement between CAM and Salomon Brothers Asset Management Inc. ("SBAM") dated October 1, 1997 (the "SBAM Subadvisory Agreement"), CAM delegated to SBAM its responsibility to provide portfolio management services to each of the Strategic Income Fund, the Municipal Bond Fund and the U.S. Government Securities Fund (the "SMC Funds"). The Trustees last approved the continuance of the SBAM Subadvisory Agreement for each SMC Fund on June 8, 1999. Shareholders of the SMC Funds were not required to approve the SBAM Subadvisory Agreement under the Trust's Manager of Managers structure. 10 Under the New Subadvisory Agreement between AGAM and AGIM, AGAM (not the Trust) pays AGIM a monthly fee for each SMC Fund at the following annual rates (based on the average daily net assets of the particular Fund taken separately): Strategic Income Fund Fee Fund Assets --- ----------------- .350%................................................... $0-200 million .250%................................................... $200-500 million .200%................................................... over $500 million U.S. Government Securities Fund Fee Fund Assets --- ----------------- .225%................................................... $0-200 million .150%................................................... $200-500 million .100%................................................... over $500 million Municipal Bond Fund Fee Fund Assets --- ----------------- .250%................................................... $0-200 million .200%................................................... $200-500 million .150%................................................... over $500 million The fee rates payable by CAM to SBAM under the SBAM Subadvisory Agreement were the same as those payable under the New Subadvisory Agreement for the U.S. Government Securities Fund and were higher (.250% at all asset levels) than those payable under the New Subadvisory Agreement for the Municipal Bond Fund. For the fiscal year ended October 31, 1999, CAM paid SBAM subadvisory fees of $154,269 with respect to the U.S. Government Securities Fund and $37,494 with respect to the Municipal Bond Fund. The fee rates payable by CAM to SBAM under the SBAM Subadvisory Agreement for the Strategic Income Fund were as follows: Fee Fund Assets --- ----------------- .350%................................................... $0-50 million .300%................................................... $50-200 million .250%................................................... $200-500 million .200%................................................... over $500 million Because the Strategic Income Fund has less than $50 million in assets, the fee rates payable under the New Subadvisory would not result in an increase in fees payable by AGAM to AGIM. As noted above, because subadvisory fees are paid by AGAM out of its advisory fee, which is not proposed to change, the amount of subadvisory fees payable with respect to any Fund does not, in any case, affect the expenses of such Fund. For the fiscal year ended October 31, 1999, CAM paid SBAM $227,935 in subadvisory fees with respect to the Strategic Income Fund. B. New Subadvisory Agreement for the Core Bond Fund Pursuant to a Subadvisory Agreement between CAM and Wellington Management Company, LLP ("Wellington") dated October 1, 1997 (the "Wellington Subadvisory Agreement"), CAM delegated to Wellington its responsibility to provide portfolio management services to the Core Bond Fund (the "Core Bond Fund"). The Trustees last approved the continuance of the Wellington Subadvisory Agreement on June 8, 1999. 11 Shareholders of the Core Bond Fund were not required to approve the Wellington Subadvisory Agreement under the Trust's Manager of Managers structure. Under the new Subadvisory Agreement between AGAM and AGIM, AGAM (not the Trust) pays AGIM a monthly fee for the Core Bond Fund at the annual rates (based on the average daily net assets of the Fund) as follows: Fee Fund Assets --- ----------------- .250%................................................... $0-200 million .200%................................................... $200-500 million .150%................................................... over $500 million The fee rates payable by CAM to Wellington under the Wellington Subadvisory Agreement were as follows: Fee Fund Assets --- ----------------- .225%................................................... $0-200 million .150%................................................... $200-500 million .100%................................................... over $500 million Although the fee rates payable under the New Subadvisory Agreement for the Core Bond Fund would result in an increase in subadvisory fees payable by AGAM to AGIM, because the subadvisory fees are paid by AGAM out of its advisory fee, which is not proposed to change, the expenses of the Fund would not increase. For the fiscal year ended October 31, 1999, CAM paid Wellington $35,587 for its portfolio management services with respect to the Core Bond Fund. C. New Subadvisory Agreement for the Money Market Fund Pursuant to a Subadvisory Agreement between CAM and Manufacturers Adviser Corporation ("MAC") dated October 1, 1997 (the "MAC Subadvisory Agreement"), CAM delegated to MAC its responsibility to provide portfolio management services to the Money Market Fund. The Trustees last approved the continuance of the MAC Subadvisory Agreement on June 8, 1999. Shareholders of the Money Market Fund were not required to approve the MAC Subadvisory Agreement under the Trust's Manager of Managers structure. Under the new Subadvisory Agreement between AGAM and AGIM, AGAM (not the Trust) pays AGIM a monthly fee for the Money Market Fund at an annual rate (based on the average daily net assets of the particular Fund taken separately) of .075% for the first $500 million of Fund assets and .020% for Fund assets over $500 million. The fee rates payable by CAM to MAC under the MAC Subadvisory Agreement were the same as those payable under the New Subadvisory Agreement. For the fiscal year ended October 31, 1999, CAM paid MAC $16,565 for its portfolio management services with respect to the Money Market Fund. III. ELECTION OF TRUSTEES The Board of Trustees of the Trust proposes that shareholders elect Alice T. Kane, Joseph T. Grause, Jr., Dr. Judith L. Craven, Dr. Timothy J. Ebner, Judge Gustavo E. Gonzales, Jr., Dr. John E. Maupin, Jr., and Ben H. Love to serve as a Trustee of the Trust (the "Nominees"). 12 Information about the Nominees Information about the Nominees is presented below. Except as shown, the Nominees' principal occupation and business experience for the last five years has been with the employer(s) indicated, although in some cases a Nominee may have held different positions with such employer(s). The business address of the Nominees is 286 Congress Street, Boston, Massachusetts 02210. Name and Age Principal Occupation(s) During the Past Five Years ------------ -------------------------------------------------- Alice T. Kane* President of American General Fund Group (1999-Present); Age: 52 Formerly, Executive Vice President, American General Investment Management, LP. (1998-1999); Formerly, Executive Vice President, (1994-1998) and General Counsel (1986-1995) New York Life Insurance Company; Chair, MainStay Mutual Funds (1994-1998). President of other investment companies advised by The Variable Annuity Life Insurance Company. Joseph T. Grause, Jr.* President, AGAM (March, 2000-Present); Executive Vice Age: 47 President of Cypress Holding Company, Inc. (1995-March, 2000); Senior Vice President of Sales and Marketing, The Shareholder Services Group, a subsidiary of First Data Corporation (1993-1995). Dr. Judith L. Craven Retired Administrator; Formerly President, United Way of the Age: 54 Texas Gulf Coast (1992-1998); Director, Compaq Computer Corporation (1998-Present), Luby's Inc. (1998-Present), A.H. Belo Corporation (journalism, TV and radio) (1993-Present) and Sysco Corporation (marketing and distribution of food) (1996-Present). Formerly, Director, Houston Branch, Federal Reserve Bank of Dallas (1992-1999), Board Member, Sisters of Charity of the Incarnate Word (1996-1999). Dr. Timothy J. Ebner Professor and Head, Department of Neuroscience and Visscher Age: 50 Chair of Physiology (1998-Present), Director, Graduate Program in Neuroscience, University of Minnesota (1991- 1999). Formerly, Consultant to EMPI, Inc. (1994-1995) and Medtronic Inc. (manufacturers of medical products) (1997- 1998). Judge Gustavo E. Gonzales, Jr. Municipal Court Judge, Dallas, Texas (1995-Present); Age: 59 Director, Downtown Dallas YMCA Board (1996-Present); Director, Dallas Easter Seals Society (1997-Present). Formerly, private attorney (litigation) (1980-1995). Dr. John E. Maupin, Jr. President, Meharry Medical College, Nashville, Tennessee Age: 53 (1994-Present); Nashville Advisory Board Member, First American National Bank (1996-Present); Director, Monarch Dental Corporation (1997-Present), LifePoint Hospitals, Inc. (1998-Present). Ben H. Love Retired. Formerly, Director, Mid-American (waste products) Age: 69 (1993-1997). Formerly, Chief Executive, Boy Scouts of America (1985-1993). - -------- * Is or will be an "interested person" of the Trust (as defined in the Investment Company Act of 1940). 13 Information regarding the material interests of any Nominee in the Acquisition is described under "Interests of Certain Persons in the Acquisition" above. The term of office of each person elected as Trustee will be until his or her successor is elected and qualified. The Nominees have agreed to serve as a Trustee if elected. If the Nominees should be unavailable for election at the time of the Meeting (which is not presently anticipated), the persons named as proxies may vote for other persons in their discretion, or the Trustees may vote to fix the number of Trustees at fewer than nine. The Trust's Amended and Restated Agreement and Declaration of Trust does not provide for the annual election of Trustees. However, in accordance with the Investment Company Act, (i) the Trust will hold a shareholders' meeting for the election of Trustees at such time as less than a majority of the Trustees holding office have been elected by shareholders, and (ii) if, as a result of a vacancy in the Board of Trustees, less than two-thirds of the Trustees holding office have been elected by the shareholders, that vacancy may only be filled by a vote of the shareholders. 14 Information about Current Trustees Currently, five persons serve as Trustees of the Trust: William F. Achtmeyer, Don B. Allen, William F. Devin, Alice T. Kane and Kenneth J. Lavery. Shareholders are not being asked to elect the current Trustees (except Ms. Kane, who was initially appointed a Trustee by the Board effective March 10, 2000), and Messrs. Devin and Lavery will continue to serve under the terms of the Trust's Amended and Restated Declaration of Trust. Messrs. Achtmeyer and Allen are expected to resign upon the election of their successors, Messrs. Ebner and Gonzales. The Trustees, their ages, their business addresses, their term as a Trustee of the Trust, their positions with the Trust, and a description of their principal occupations are shown below. Except as shown, each Trustee's principal occupation and business experience for the last five years have been with the employer(s) indicated, although in some cases the Trustee may have held different positions with such employer(s). Name, Age and Principal Occupation(s) During the Address Term as Trustee Past Five Years ------------- ----------------------------- -------------------------------------- William F. Achtmeyer Trustee since October, 1997 Co-founder, President and Chief 286 Congress Street Executive Officer of The Parthenon Boston, MA 02210 Group, a strategic advisory consulting Age 44 and investment firm. Director, North American Senior Floating Rate Fund, Inc. (February, 1998-Present) and CypressTree Senior Floating Rate Fund, Inc. (July, 1997-Present). Don B. Allen Trustee since September, 1988 Senior Lecturer, William E. Simon 286 Congress Street Graduate School of Business Boston, MA 02210 Administration., University of Age 71 Rochester. William F. Devin Trustee since October, 1997 Member of the Board of Governors of 286 Congress Street the Boston Stock Exchange. Retired Boston, MA 02210 Executive Vice President of Fidelity Age 61 Capital Markets, a division of National Financial Services Corporation in Boston. Director, North American Senior Floating Rate Fund, Inc. (February, 1998-Present) and CypressTree Senior Floating Rate Fund, Inc. (July, 1997-Present). Alice T. Kane* Trustee since March, 2000 President of American General Fund 286 Congress Street Group (1999-Present); Formerly, Boston, MA 02210 Executive Vice President, American Age 52 General Investment Management, LP. (1998-1999); Formerly, Executive Vice President, (1994-1998) and General Counsel (1986-1995) New York Life Insurance Company; Chair, MainStay Mutual Funds (1994-1998). President of other investment companies advised by The Variable Annuity Life Insurance Company. Kenneth J. Lavery Trustee since October, 1997 Vice President of Massachusetts 286 Congress Street Capital Resource Company. Director, Boston, MA 02210 North American Senior Floating Rate Age 50 Fund, Inc. (February, 1998-Present) and CypresTree Senior Floating Rate Fund, Inc. (July, 1997-Present). - -------- * Is an "interested person" of the Trust (as defined by the Investment Company Act). 15 Information regarding the material interests of the current Trustees in the Acquisition is described under "The Acquisition" above. In the fiscal year ended October 31, 1999, the Board of Trustees held four meetings. Each of the Trustees attended at least 75% of the meetings. Committees of the Board In the fiscal year ended October 31, 1999, the Administration Committee of the Board, which functions as both an audit committee and a contract committee, held four meetings. Each of Messrs. Achtmeyer, Allen, Devin and Lavery (the Administration Committee members) attended at least 75% of the meetings. Information About the Executive Officers The Executive Officers, their ages, their business addresses, their position with the Trust and a description of their principal occupations are shown below. Principal Occupation(s) Position with the Office Held During the Past Five Name, Age and Address Trust Since Years --------------------- --------------------- ------------ ------------------------ Alice T. Kane* Chairman of the March 2000 See Above. 286 Congress Street Board of Trustees, Boston, MA 02210 Trustee and President Age 52 Joseph T. Grause, Jr. Vice President March 2000 See Above 286 Congress Street Boston, MA 02210 Age 47 Thomas J. Brown Treasurer and October 1997 Chief Financial Officer 286 Congress Street Vice President and Chief Administrative Boston, MA 02210 Officer, AGAM ( March Age 53 2000-Present); Principal of Cypress Holding Company, Inc. (July 1997-March 2000); consultant to the financial services industry (October 1995- July 1997); Executive Vice President, Boston Company Advisors (August 1994-October 1995). John I. Fitzgerald Secretary and October 1997 Counsel, AGAM (April 286 Congress Street Vice President 1997-Present); Counsel, Boston, MA 02210 AGFD (April 1997- Age 52 Present); Prior to April 1997, Executive Vice President--Legal Affairs and Government Relations at the Boston Stock Exchange. John N. Packs Vice President March 2000 Director of Research, 286 Congress Street AGAM (March 2000- Boston, MA 02210 Present); Vice Age 44 President, Cypress Holding Company (November 1995-March 2000); Prior to November 1995, Investment Professional, Allmerica Financial Services. - -------- * Is an "interested person" of the Trust (as defined by the Investment Company Act). Information regarding the material interests of the Executive Officers of the Trust in the Acquisition is described under "The Acquisition" above. 16 Compensation of the Trustees and Certain Executive Officers The Trust does not pay any remuneration to its Trustees who are officers or employees of the AGAM or its affiliates. Trustees not so affiliated receive an annual retainer of $3,000, a fee of $2,625 for each meeting of the Trustees that they attend in person and a fee of $200 for each such meeting conducted by telephone. No pension or retirement benefits are paid to Trustees. Trustees are reimbursed for travel and other out-of-pocket expenses. The officers listed above are furnished to the Trust pursuant to the Advisory Agreement described below and receive no compensation from the Fund. The following table sets forth information regarding compensation received by those Trustees who are not "interested persons" (as defined by the Investment Company Act) of the Trust for the fiscal year ended October 31, 1999: COMPENSATION TABLE (3) Total Compensation (2) From the Trust Aggregate and Fund Complex (1) Compensation From Paid to the Name of Person, Position the Trust Trustees(1) ------------------------ ----------------- ------------------ William F. Achtmeyer.................. Trustee $5,450 $17,150 Don B. Allen.......................... Trustee $6,375 $ 6,375 William F. Devin...................... Trustee $6,200 $19,800 Kenneth J. Lavery..................... Trustee $6,200 $19,800 - -------- (1) The amounts listed in column (3) include total compensation paid to the Trustees for their services as Trustees of the Trust (for all Trustees) and as Directors of CypressTree Senior Floating Rate Fund, Inc. and North American Senior Floating Rate Fund, Inc. (Messrs Achtmeyer, Devin and Lavery). By virtue of having AGAM as investment adviser, the Trust, CypressTree Senior Floating Rate Fund, Inc. and North American Senior Floating Rate Fund, Inc. are considered to be part of the same "Fund Complex" for these purposes. Trustee Indemnification The Agreement and Declaration of the Trust provides that the Trust will indemnify its Trustees and officers against liabilities and expenses incurred in connection with litigation in which they may be involved because of their offices with the Trust, except if it is determined in the manner specified in the Agreement and Declaration of Trust that they have not acted in good faith in the reasonable belief that their actions were in the best interests of the Trust or that such indemnification would relieve any officer or Trustee of any liability to the Trust or its shareholders by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of his or her duties. The Trust, at its expense, provides liability insurance for the benefit of its Trustees and officers. Required Vote The election of the Trustees of the Trust will be by a plurality of the shares of the Trust (all Funds of the Trust voting together as a single class) present at the Meeting in person or by proxy. Votes cast by proxy or in person at the Meeting will be counted by persons appointed as tellers by the Trust. The Trustees unanimously recommend a vote FOR the Nominees. 17 IV. OTHER INFORMATION The Trust is a diversified, open-end management investment company organized in 1988 as a business trust under the laws of Massachusetts. The Trust is a series type company with 15 investment portfolios, or Funds. The address of the Trust is 286 Congress Street, Boston, Massachusetts 02210. Brokerage and Research Services Transactions on stock exchanges and other agency transactions involve the payment by the Funds of negotiated brokerage commission. Such commissions vary among different brokers. Also, a particular broker may charge different commissions according to such factors as the difficulty and size of the transaction. When AGAM or a subadviser places orders for the purchase and sale of portfolio securities for the Funds, it is anticipated that such transactions will be affected through a number of brokers and dealers. In so doing, AGAM or Subadviser intend to use their best efforts to obtain for each Fund the most favorable price and execution available, except to the extent they may be permitted to pay higher brokerage commissions as described below. In seeking the most favorable price and execution, AGAM or Subadviser consider all factors they deem relevant, including, by way of illustration, price, the size of the transaction, the nature of the market for the security, the amount of commission, the timing of the transactions taking into account market prices and trends, the reputation, experience and financial stability of the broker- dealer involved and the quality of service rendered by the broker-dealer in other transactions. It has for many years been a common practice in the investment advisory business for advisers of investment companies and other institutional investors to receive research, statistical and quotation services from broker-dealers which execute portfolio transactions for the clients of such advisers. Consistent with this practice, AGAM or Subadviser may receive research, statistical and quotation services from many of the broker-dealers with which each Fund's portfolio transactions are placed. These services, which in some instances could also be purchased for cash, include such matters as general economic and security market reviews, industry and company reviews, evaluations of securities and recommendations as to the purchase and sale of securities. Some of these services are of value to AGAM or Subadviser in advising its other clients, although not all of these services are necessarily useful and of value in advising each Fund. The fees paid to the Adviser or Subadviser are not reduced because AGAM or Subadviser receives such services. As permitted by Section 28(e) of the Securities Exchange Act of 1934 (the "1934 Act"), under the New Advisory Agreement and the New Subadvisory Agreements, AGAM and/or a Sub-Adviser may cause each Fund to pay a broker- dealer which provides "brokerage and research services" (as defined by the 1934 Act) to AGAM or Subadviser an amount of disclosed commission for effecting a securities transaction for each Fund in excess of the commission which another broker-dealer would have charged for effecting the same transaction. The authority of AGAM or Subadviser to cause each Fund to pay any such greater commission is subject to such policies as the Trustees may adopt from time to time. During the fiscal year ended October 31, 1999, each Fund did not pay any brokerage commissions to any broker then affiliated with the Adviser or AGIM. 18 Ownership of Shares and Voting Information As of March 20, 2000, the Trust believes that the Trustees and officers of the Trust, as a group, owned less than one percent of each class of shares of each Fund and of the Trust as a whole. As of March 20, 2000, the following persons owned of record or beneficially 5% or more of the noted class of shares of the noted Fund: Fund Shareholder % of Fund Held ---- ----------- -------------- Municipal Bond Fund Class A Shares Mary W. Hamby 5% 1686 Partridge Hill Road Lancaster, SC 29720-8886 Doris McPherson & Alice McPherson 5% JTWROS TOD University of WI Med School Alice R. McPherson Retina Ins. Dr. Dan Albert, Chairman of Ophthalmology 2909 Poplar Creek Lane Pearland, TX 77584-2014 Dain Rauscher Incorporated FBO 8% Elbert J. Scribner 20403 S. Hillcrest Porter, TX 77365-3858 Janet E. Brown 6% Emmaus Court 3109 Fellowship Road Basking Ridge, NJ 07920-3904 Municipal Bond Fund Class B Shares Southwest Securities Inc. FBO 7% Hellen Bebb Trust P.O. Box 509002 Dallas, TX 75250-9002 William H. Elliot IV TTEE 5% William H. Elliot IV Family Ltd Partnership 1105 Crumbley Road McDonough, GA 30252-4426 Municipal Bond Fund Class C Shares Herbert Hartman & Janet Hartman CO/TTEES 6% UA DTD 1-8-92 Janet Hartman Trust 12850 Oak Knoll Drive Palm Beach Gardens, FL 33418-6989 Mark A. Kielar & Tammy Kielar JT/WROS 6% 1655 SW 2nd Ave. Boca Raton, FL 33432-7228 Claire Koh 21% 963C Heritage Hills Drive Somers, NY 10589-1913 19 Fund Shareholder % of Fund Held ---- ----------- -------------- U.S. Government Securities Fund Class A Shares Paine Webber For the Benefit 5% of First Federal Savings Bank Attn: Walter Manijak 633 LaSalle Street Ottawa, IL 61350-2931 U.S. Government Securities Fund Class C Shares Arlen J. DeYoung 8% Eileen G. DeYoung JT TEN 8656 Vinup Road Lynden, WA 98264-9332 Paget Partners L.P. 5% P.O. Box 5430 Incline Village, NV 89450- 5430 Core Bond Fund Class C Shares State Street Bank & Trust Co. 9% FBO Shirley Einhorn R/O IRA 10662 SW 79 Terr Miami, FL 33173-2912 Analytical Pathology Services 5% LTD PSP UA DTD 12-24-86 FBO Juan Kang PMB 104 11220 W. Florissant Ave. Florissant, MO 63033-6741 Global Equity Fund Class A Shares North American Life Assurance 22% Co. c/o Elliott & Page, Brett Hyrb 393 University Ave., Suite 2100 Toronto, Ontario Canada MSG 1E6 International Small Cap Fund Class A Shares First Union Securities, Inc. 5% A/C 7285-9625 Sitnasuak Native Corporation 111 East Kilbourn Avenue Milwaukee, WI 53202-6611 National Investor Services 6% FBO 514-90284-16 55 Water Street, 32nd Floor New York, NY 10041-3299 International Small Cap Fund Class B Shares Wexford Clearing Services 6% Corp. FBO Robert M. Freeman 14 Kanawha Road Richmond, VA 23226-3308 20 Fund Shareholder % of Fund Held ---- ----------- -------------- Large Cap Growth Fund Class A Shares Farmers State Bank Employees Pension 7% C/O Farmers State Bank Trustee U/A Carolyn Dickerson Tr. Officer Carolyn Bollman Asst. Tr. Officer P.O. Box 538 108 E. Adams Street Pittsfield, IL 62363-0538 Balanced Fund Class A Shares Farmers State Bank Employees Pension 9% C/O Farmers State Bank Trustee U/A Carolyn Dickerson Tr. Officer Carolyn Bollman Asst. Tr. Officer P.O. Box 538 108 E. Adams Street Pittsfield, IL 62363-0538 Lewco Securities Corp. 8% FBO A/C #W36-900262-1-04 34 Exchange Place, 4th Floor Jersey City, NJ 07302-3885 Mark Meyer & Michelle McGuirk Trustees 5% Meyers Campers Inc. PSP Trust 3338 State Road Caledonic, NY 14423-9757 Small Cap Growth Fund Class A Shares Phyllis Hilfiker 5% 8 Hasler Lane Little Silver, NJ 07739-1650 North Pinnellas Anesthesia Association 10% PA William N. Hartenbach MD & Marvin Sponaugle MD, TTEES 1810 Alt 19 South, Suite N Tarpon Springs, FL 34689-1954 Frances Katheryn King Eddy 8% 3 Obtuse Road South Brookfield, CT 06804-3625 Wexford Clearing Services Corp. FBO 5% Constance S. Brown 2800 Kellipe Road Glen Allen, VA 23059-4712 Small Cap Growth Fund Class C Shares First Union National Bank TTEE 9% FBO Christian Barton PSP 21 Fund Shareholder % of Fund Held ---- ----------- -------------- FBO JE Betts P/S/P U/A/D 2/1/79 A/C #5041140787 Trust Operations 1525 West WT Harris Blvd. NC 1151 Charlotte, NC 28262-8522 Tax-Sensitive Equity Fund Class A Shares Margaret M. Werner Family Trust 9% 3 Sweets View Lane Fairport, NY 14450-8423 Donaldson Lufkin Jenrette 7% Secuirities Corp. P.O. Box 2052 Jersey City, NJ 07303-2052 Wexford Clearing Services Corp. FBO 14% Eloise C. Basler 10023 Willow Cove Road, SE Huntsville, AL 35803-2623 Richard R. Irwin, Cust. 12% Jennifer Irwin UTMA--PA 1269 Barnstaple Dr. Library, PA 15129-8975 Tax-Sensitive Equity Fund Class B Shares Joanne Cichanowicz 6% 7 Bay Point Circle Rochester, NY 14622-3332 Tax-Sensitive Equity Fund Class C Shares Doris J. Hoag, TTEE 34% Robert A. Johnston Irrevocable Trust DTD 1/4/90 2988 County House Woods Road Bluff Point, NY 14478-9709 PaineWebber For the Benefit of 15% Sheri Ellen Schwartz Revocable Trust DTD 11-4-94 Managed Account Two 500 Duvall Drive Greenville, SC 29607-3629 Money Market Fund Class A Shares Wendall & Co. 62% C/O The Bank of New York P.O. Box 1066 Wall Street Station New York, NY 10268-1066 22 Certain Trustees and Officers of the Trust The following table lists the names of each Trustee and officer of the Trust who is also an officer or employee of AGAM: Name Position with the Trust Position with AGAM ---- ----------------------- ------------------ Alice T. Kane Chairman of Board of Trustees, Chairman and Chief Executive Officer; Trustee and President Director Joseph T. Grause, Jr. Vice President President; Director Thomas J. Brown Treasurer and Vice President Chief Financial Officer, Chief Administrative Officer, Assistant Treasurer John I. Fitzgerald Secretary and Vice President Counsel and Assistant Secretary John N. Packs Vice President Director of Research - -------- In the period since November 1, 1998 Ms. Kane has been granted stock and options to purchase stock of American General in connection with her employment by American General. Principal Executive Officer and Directors of the Investment Adviser The following table lists the names, addresses, and principal occupations of the principal executive officer and each director of AGAM: Name and Address Position with AGAM Principal Occupation(s) ---------------- ----------------------- ----------------------- Alice T. Kane.......... Chief Executive Officer See Above. 286 Congress Street and Chairman of the Boston, MA 02210 Board Joseph T. Grause, Jr... President and Director See Above 286 Congress Street Boston, MA 02210 John A. Graf........... Director President and Director, VALIC and 2929 Allen Parkway American General Annuity Insurance Houston, TX 77019 Company, Director, American General Series Portfolio Company. Director, USLIFE Income Fund, Inc. Trustee, American General Series Portfolio Company 3. Formerly, Vice Chairman and Chief Marketing and Administrative Officer, Western National Corporation and Senior Vice President, Conseco, Inc. Kent E. Barret......... Director Executive Vice President, American 2929 Allen Parkway General Series Portfolio Company 2. Houston, TX 77019 Executive Vice President and Chief Financial Officer, American General Retirement Services (February, 1999- Present). Formerly, Executive Vice President and Chief Financial Officer, American General Life & Accident Company. 23 Other Funds Managed by AGIM AGIM provides investment services to other funds having similar investment objectives to the Funds covered by this Proxy Statement. The Table below sets forth a list of each such other fund and states the size of each other fund and the rate of compensation paid to AGIM for the provision of investment services. Annual Portfolio Management Fee Rate (as a Approximate Net Assets (in percentage of average daily millions) as of Name of Fund net assets) March 20, 2000 - ------------ --------------------------- -------------------------- American General Series Portfolio Company 2 Core Bond Fund 0.25% on first $200 million $319 0.20% on next $300 million 0.15% over $500 million High Yield Bond Fund 0.45% on first $200 million $65 0.35% on next $300 million 0.30% over $500 million Municipal Bond Fund 0.25% on first $200 million $7 0.20% on next $300 million 0.15% over $500 million Municipal Money Market Fund 0.25% on first $200 million $7 0.20% on next $300 million 0.15% over $500 million American General Series Portfolio Company 3 Strategic Bond Fund 0.35% on first $200 million $6 0.20% on next $300 million 0.20% over $500 million Core Bond Fund 0.25% on first $200 million $5 0.20% on next $300 million 0.15% over $500 million High Yield Bond Fund 0.45% on first $200 million $6 0.35% on next $300 million 0.30% over $500 million Strategic Bond Fund 0.35% on first $200 million $5 0.25% on next $300 million 0.20% over $500 million Principal Underwriter American General Funds Distributors, Inc., whose address is 286 Congress Street, Boston, Massachusetts 02210, is the principal underwriter for the Funds. American General Funds Distributors, Inc. is an affiliate of AGAM. Quorum and Methods of Tabulation Thirty percent of the shares of each Fund entitled to vote in person or represented by proxy, shall be a quorum for the transaction of business by the shareholders of each Fund at the Meeting. Votes cast by proxy or in person at the Meeting will be counted by persons appointed by the Trust as tellers for the Meeting. The tellers will count the total number of votes cast "for" approval of each Proposal for purposes of determining whether sufficient affirmative votes have been cast. The tellers will count all shares represented by proxies that 24 reflect abstentions and "broker non-votes" (i.e., shares held by brokers or nominees as to which (a) instructions have not been received from the beneficial owners or the persons entitled to vote and (b) the broker or nominee does not have discretionary voting power on a particular matter) as shares that are present and entitled to vote for purposes of determining the presence of a quorum. Assuming the presence of a quorum, abstentions and broker non-votes have the effect of a negative vote on each Proposal. Adjournments In the event that a quorum is not present for purposes of acting on a Proposal, or if sufficient votes in favor of a Proposal are not received by the time of the Meeting, 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 plurality of the shares present in person or represented by proxy at the session of the Meeting to be adjourned. The persons named as proxies will vote in favor of such adjournment those proxies which they are entitled to vote in favor of any Proposal that has not then been adopted. They will vote against any such adjournment those proxies required to be voted against each Proposal that has not then been adopted and will not vote any proxies that direct them to abstain from voting on such Proposals. The costs of any additional Solicitation and of any adjourned session will be divided equally between CypressTree and American General. Any proposal for which sufficient favorable votes have been received by the time of the Meeting will be acted upon and such action will be final regardless of whether the Meeting is adjourned to permit additional solicitation with respect to another proposal. Shareholder Voting Telephone Voting. You may give your voting instructions over the telephone by calling 1-800-611-9049. A representative of SCC will answer your call. When receiving your instructions by telephone, the SCC representative is required to ask you for your full name, address, social security or employer identification number, title (if the person giving the proxy is authorized to act for an entity, such as a corporation), the number of shares of a Fund owned and to confirm that you have received the proxy statement in the mail. If the information you provide matches the information provided to SCC by the Adviser, then the SCC representative will explain the process. SCC is not permitted to recommend to you how to vote, other than to read any recommendation included in the proxy statement. SCC will record your instructions and transmit them to the official tabulator and send you a letter or mailgram to confirm your vote. That letter will also ask you to call SCC immediately if the confirmation does not reflect your instructions correctly. You may receive a call from a representative of SCC if the Adviser has not yet received your vote. SCC may ask you for authority, by telephone, to permit SCC to sign a proxy on your behalf. SCC will record all instructions it receives from shareholders by telephone and the proxies it signs in accordance with those instructions, in accordance with the procedures set forth above. The Trustees of the Trust believe those procedures are reasonably designed to determine accurately the shareholder's identity and voting instructions. Voting by Mail or in Person. If you wish to participate in the Meeting, but do not wish to give a proxy by telephone, you can still complete, sign and mail the proxy card received with the proxy statement or attend the Meeting in person. 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 meeting of shareholders of the Trust must be received by the Trust a reasonable time before that meeting in order for such proposals to be considered for inclusion in the proxy materials relating to that meeting. 25 APPENDIX A INVESTMENT ADVISORY AGREEMENT Agreement made this day of June, 2000, between North American Funds, a Massachusetts business trust (the "Trust"), and American General Asset Management Corp., a Delaware corporation (the "Adviser"). In consideration of the mutual covenants contained herein, the parties agree as follows: 1.APPOINTMENT OF ADVISER The Trust hereby appoints the Adviser, subject to the supervision of the Trustees of the Trust and the terms of this Agreement, as the investment adviser for each of the portfolios of the Trust specified in Appendix A to this Agreement as it shall be amended by the Adviser and the Trust from time to time (the "Funds"). The Adviser accepts such appointment and agrees to render the services and to assume the obligations set forth in this Agreement commencing on its effective date. The Adviser will be an independent contractor and will have no authority to act for or represent the Trust in any way or otherwise be deemed an agent unless expressly authorized in this Agreement or another writing by the Trust and Adviser. 2.DUTIES OF THE ADVISER a. Subject to the general supervision of the Trustees of the Trust and the terms of this Agreement, the Adviser will at its own expense select, contract with, and compensate investment subadvisers ("Subadvisers") to manage the investments and determine the composition of the assets of the Funds; provided, that any contract with a Subadviser (the "Subadvisory Agreement") shall be in compliance with and approved as required by the Investment Company Act of 1940, as amended ("Investment Company Act"). Subject always to the direction and control of the Trustees of the Trust, the Adviser will monitor compliance of each Subadviser with the investment objectives and related investment policies, as set forth in the Trust's registration statement as filed with the Securities and Exchange Commission, of any Fund or Funds under the management of such Subadviser, and review and report to the Trustees of the Trust on the performance of such Subadviser. b. The Adviser will oversee the administration of all aspects of the Trust's business and affairs and in that connection will furnish to the Trust the following services: (1) Office and Other Facilities. The Adviser shall furnish to the Trust office space in the offices of the Adviser or in such other place as may be agreed upon by the parties hereto from time to time and such other office facilities, utilities and office equipment as are necessary for the Trust's operations. (2) Trustees and Officers. The Adviser agrees to permit individuals who are directors, officers or employees of the Adviser to serve (if duly elected or appointed) as Trustees or President, Vice President, Treasurer or Secretary of the Trust, without remuneration from or other cost to the Trust. (3) Other Personnel. The Adviser shall furnish to the Trust, at the Trust's expense, any other personnel necessary for the operations of the Trust. (4) Financial, Accounting, and Administrative Services. The Adviser shall maintain the existence and records of the Trust; maintain the registrations and qualifications of Trust shares under federal and state law; and perform all administrative, financial, accounting, bookkeeping and recordkeeping functions of the Trust except for any such functions that may be performed by a third party pursuant to a custodian, transfer agency or service agreement executed by the Trust. The Trust shall reimburse the Adviser for its expenses associated with all such services, including the compensation and related personnel expenses and expenses of office space, office equipment, utilities and miscellaneous office expenses, except any such expenses directly attributable to officers or employees of the Adviser who are serving as President, Vice President, Treasurer or Secretary of the Trust. The Adviser shall A-1 determine the expenses to be reimbursed by the Trust pursuant to expense allocation procedures established by the Adviser in accordance with generally accepted accounting principles. (5) Liaisons with Agents. The Adviser, at its own expense, shall maintain liaison with the various agents and other persons employed by the Trust (including the Trust's transfer agent, custodian, independent accountants and legal counsel) and assist in the coordination of their activities on behalf of the Trust. Fees and expenses of such agents and other persons will be paid by the Trust. (6) Reports to Trust. The Adviser shall furnish to or place at the disposal of the Trust such information, reports, valuations, analyses and opinions as the Trust may, at any time or from time to time, reasonably request or as the Adviser may deem helpful to the Trust, provided that the expenses associated with any such materials furnished by the Adviser at the request of the Trust shall be borne by the Trust. (7) Reports and Other Communications to Trust Shareholders. The Adviser shall assist the Trust in developing (but not pay for) all general shareholder communications including regular shareholder reports. 3.EXPENSES ASSUMED BY THE TRUST In addition to paying the advisory fee provided for in Section 4, the Trust will pay all expenses of its organization, operations and business not specifically assumed or agreed to be paid by the Adviser as provided in this Agreement, by a Subadviser as provided in a Subadvisory Agreement, or by the Distributor as provided in the Distribution Agreement. Without limiting the generality of the foregoing, the Trust, in addition to certain expenses described in Section 2 above, shall pay or arrange for the payment of the following: a. Custody and Accounting Services. All expenses of the transfer, receipt, safekeeping, servicing and accounting for the Trust's cash, securities, and other property, including all charges of depositories, custodians and other agents, if any; b. Shareholder Servicing. All expenses of maintaining and servicing shareholder accounts, including all charges of the Trust's transfer, shareholder recordkeeping, dividend disbursing, redemption, and other agents, if any; c. Shareholder Communications. All expenses of preparing, setting in type, printing, and distributing reports and other communications to shareholders; d. Shareholder Meetings. All expenses incidental to holding meetings of Trust shareholders, including the printing of notices and proxy material, and proxy solicitation therefor; e. Prospectuses. All expenses of preparing, setting in type, and printing of annual or more frequent revisions of the Trust's prospectus and statement of additional information and any supplements thereto and of mailing them to shareholders; f. Pricing. All expenses of computing the net asset value per share for each of the Funds, including the cost of any equipment or services used for obtaining price quotations and valuing its investment portfolio; g. Communication Equipment. All charges for equipment or services used for communication between the Adviser or the Trust and the custodian, transfer agent or any other agent selected by the Trust; h. Legal and Accounting Fees and Expenses. All charges for services and expenses of the Trust's legal counsel and independent auditors; i. Trustees and Officers. Except as expressly provided otherwise in paragraph 2.b.(2), all compensation of Trustees and officers, all expenses incurred in connection with the service of Trustees and officers, and all expenses of meetings of the Trustees and Committees of Trustees; A-2 j. Federal Registration Fees. All fees and expenses of registering and maintaining the registration of the Trust under the Investment Company Act and the registration of the Trust's shares under the Securities Act of 1933, as amended (the "1933 Act"), including all fees and expenses incurred in connection with the preparation, setting in type, printing and filing of any registration statement and prospectus under the 1933 Act or the Investment Company Act, and any amendments or supplements that may be made from time to time; k. State Registration Fees. All fees and expenses of qualifying and maintaining qualification of the Trust and of the Trust's shares for sale under securities laws of various states or jurisdictions, and of registration and qualification of the Trust under all other laws applicable to the Trust or its business activities (including registering the Trust as a broker-dealer, or any officer of the Trust or any person as agent or salesman of the Trust in any state); l. Issue and Redemption of Trust Shares. All expenses incurred in connection with the issue, redemption, and transfer of Trust shares, including the expense of confirming all share transactions, and of preparing and transmitting certificates for shares of beneficial interest in the Trust; m. Bonding and Insurance. All expenses of bond, liability and other insurance coverage required by law or regulation or deemed advisable by the Trust's Trustees including, without limitation, such bond, liability and other insurance expense that may from time to time be allocated to the Trust in a manner approved by its Trustees; n. Brokerage Commissions. All brokers' commissions and other charges incident to the purchase, sale, or lending of the Trust's portfolio securities; o. Taxes. All taxes or governmental fees payable by or with respect to the Trust to federal, state, or other governmental agencies, domestic or foreign, including stamp or other transfer taxes, and all expenses incurred in the preparation of tax returns; p. Trade Association Fees. All fees, dues, and other expenses incurred in connection with the Trust's membership in any trade association or other investment organization; and q. Nonrecurring and Extraordinary Expenses. Such nonrecurring expenses as may arise, including the costs of actions, suits, or proceedings to which the Trust is, or is threatened to be made, a party and the expenses the Trust may incur as a result of its legal obligation to provide indemnification to its Trustees, officers, agents and shareholders. 4.COMPENSATION OF ADVISER For the services provided, the Trust will pay the Adviser with respect to each Fund the compensation specified in Appendix A of this Agreement. 5.NON-EXCLUSIVITY The services of the Adviser to the Trust are not to be deemed to be exclusive, and the Adviser shall be free to render investment advisory or other services to others (including other investment companies) and to engage in other activities. It is understood and agreed that the directors, officers, and employees of the Adviser are not prohibited from engaging in any other business activity or from rendering services to any other person, or from serving as partners, officers, directors, trustees or employees of any other firm or corporation, including other investment companies. 6.SUPPLEMENTAL ARRANGEMENTS The Adviser may enter into arrangements with other persons affiliated with the Adviser to better enable it to fulfill its obligations under this Agreement for the provision of certain personnel and facilities to the Adviser. A-3 7.CONFLICTS OF INTEREST It is understood that Trustees, officers, agents and shareholders of the Trust are or may be interested in the Adviser as directors, officers, stockholders, or otherwise; that directors, officers, agents and stockholders of the Adviser are or may be interested in the Trust as Trustees, officers, shareholders or otherwise; that the Adviser may be interested in the Trust; and that the existence of any such dual interest shall not affect the validity hereof or of any transactions hereunder except as otherwise provided in the Agreement and Declaration of Trust of the Trust and the Articles of Incorporation of the Adviser, respectively, or by specific provision of applicable law. 8.REGULATION The Adviser shall submit to all regulatory and administrative bodies having jurisdiction over the services provided pursuant to this Agreement any information, reports or other material which any such body by reason of this Agreement may request or require pursuant to applicable laws and regulations. The Adviser will comply in all material respects with Rule 17j-1 under the Investment Company Act. 9.DURATION AND TERMINATION OF AGREEMENT This Agreement shall become effective on the later of (i) its execution and (ii) date of the meeting of the shareholders of the Trust, at which meeting this New Advisory Agreement is approved by the vote of a majority of the outstanding voting securities (as defined in the Investment Company Act) of each of the Funds. The Agreement will continue in effect for a period more than two years from the date of its execution only so long as such continuance is specifically approved at least annually either by the Trustees of the Trust or by the vote of a majority of the outstanding voting securities of each of the Funds, provided that in either event such continuance shall also be approved by the vote of a majority of the Trustees of the Trust who are not interested persons (as defined in the Investment Company Act) of any party to this Agreement cast in person at a meeting called for the purpose of voting on such approval. The required shareholder approval of the Agreement or of any continuance of the Agreement shall be effective with respect to any Fund if a majority of the outstanding voting securities of the series (as defined in Rule 18f-2(h) under the Investment Company Act) of shares of that Fund votes to approve the Agreement or its continuance, notwithstanding that the Agreement or its continuance may not have been approved by a majority of the outstanding voting securities of (a) any other Fund affected by the Agreement or (b) all the Funds of the Trust. If the shareholders of any Fund fail to approve the Agreement or any continuance of the Agreement, the Adviser will continue to act as investment adviser with respect to such Fund pending the required approval of the Agreement or its continuance or of a new contract with the Adviser or a different adviser or other definitive action; provided, that the compensation received by the Adviser in respect of such Fund during such period is in compliance with Rule 15a-4 under the Investment Company Act. This Agreement may be terminated at any time, without the payment of any penalty, by the Trustees of the Trust, by the vote of a majority of the outstanding voting securities of the Trust, or with respect to any Fund by the vote of a majority of the outstanding voting securities of such Fund, on sixty days' written notice to the Adviser, or by the Adviser on sixty days' written notice to the Trust. This Agreement will automatically terminate, without the payment of any penalty, in the event of its assignment (as defined in the Investment Company Act). 10.PROVISION OF CERTAIN INFORMATION BY ADVISER The Adviser will promptly notify the Trust in writing of the occurrence of any of the following events: a. the Adviser fails to be registered as an investment adviser under the Investment Advisers Act or under the laws of any jurisdiction in which the Adviser is required to be registered as an investment adviser in order to perform its obligations under this Agreement; A-4 b. the Adviser is served or otherwise receives notice of any action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, involving the affairs of the Trust; and c. the chief executive officer or controlling stockholder of the Adviser or the Fund manager of any Fund changes. 11.AMENDMENTS TO THE AGREEMENT This Agreement may be amended by the parties only if such amendment is specifically approved by the vote of a majority of the outstanding voting securities of each of the Funds affected by the amendment and by the vote of a majority of the Trustees of the Trust who are not interested persons of any party to this Agreement cast in person at a meeting called for the purpose of voting on such approval. The required shareholder approval shall be effective with respect to any Fund if a majority of the outstanding voting securities of the series of shares of that Fund vote to approve the amendment, notwithstanding that the amendment may not have been approved by a majority of the outstanding voting securities of (a) any other Fund affected by the amendment or (b) all the Funds of the Trust. 12.ENTIRE AGREEMENT This Agreement contains the entire understanding and agreement of the parties. 13.HEADINGS The headings in the sections of this Agreement are inserted for convenience of reference only and shall not constitute a part hereof. 14.NOTICES All notices required to be given pursuant to this Agreement shall be delivered or mailed to the last known business address of the Trust or Adviser in person or by registered mail or a private mail or delivery service providing the sender with notice of receipt. Notice shall be deemed given on the date delivered or mailed in accordance with this section. 15.SEVERABILITY Should any portion of this Agreement for any reason be held to be void in law or in equity, the Agreement shall be construed, insofar as is possible, as if such portion had never been contained herein. 16.GOVERNING LAW The provisions of this Agreement shall be construed and interpreted in accordance with the laws of The Commonwealth of Massachusetts, or any of the applicable provisions of the Investment Company Act. To the extent that the laws of The Commonwealth of Massachusetts, or any of the provisions in this Agreement, conflict with applicable provisions of the Investment Company Act, the latter shall control. 17.LIMITATION OF LIABILITY The Declaration of Trust establishing the Trust, dated September 29, 1988, as amended and restated February 18, 1994, a copy of which, together with all amendments thereto (the "Declaration"), is on file in the office of the Secretary of The Commonwealth of Massachusetts, provides that the name "North American Funds" refers to the Trustees under the Declaration collectively as Trustees, but not as individuals or personally; and no Trustee, shareholder, officer, employee or agent of the Trust shall be held to any personal liability, nor shall resort be had to their private property, for the satisfaction of any obligation or claim, in connection with the affairs of the Trust or any Portfolio thereof, but only the assets belonging to the Trust, or to the particular Portfolio with which the obligee or claimant dealt, shall be liable. A-5 In Witness Whereof, the parties hereto have caused this Agreement to be executed under seal by their duly authorized officers as of the date first mentioned above. North American Funds By: _________________________________ American General Asset Management Corp. By: _________________________________ A-6 APPENDIX A 1. Growth & Income Fund: .725% of the first $50,000,000, .675% between $50,000,000 and $200,000,000, .625% between $200,000,000 and $500,000,000 and .550% on the excess over $500,000,000 of the average net assets of the Fund. 2. Balanced Fund: .775% of the first $200,000,000, .675% between $200,000,000 and $500,000,000 and .625% on the excess over $500,000,000 of the average net assets of the Fund. 3. U.S. Government Securities Fund: .600% of the first $200,000,000, .525% between $200,000,000 and $500,000,000 and .475% on the excess over $500,000,000 of the average net assets of the Fund. 4. Core Bond Fund: .600% of the first $200,000,000, .525% between $200,000,000 and $500,000,000 and .475% on the excess over $500,000,000 of the average net assets of the Fund. 5. Money Market Fund: .200% of the first $500,000,000 and .145% on the excess over $500,000,000 of the average net assets of the Fund. 6. Global Equity Fund: .900% of the first $500,000,000, and .700% on the excess over $500,000,000 of the average net assets of the Fund. 7. Municipal Bond Fund: .600% of the net assets of the Fund. 8. Strategic Income Fund: .750% of the first $50 million, .700% between $50,000,000 and $200,000,000, .650% between $200,000,000 and $500,000,000 and .600% on the excess over $500,000,000 of the average net assets of the Fund. 9. International Equity Fund: .900% of the first $50 million, .850% between $50,000,000 and $200,000,000, .800% between $200,000,000 and $500,000,000 and .750% on the excess over $500,000,000 of the average net assets of the Fund. 10. Mid Cap Growth Fund: .925% of the first $50,000,000, .900% between $50,000,000 and $200,000,000, .875% between $200,000,000 and $500,000,000 and .850% on the excess over $500,000,000 of the average net assets of the Fund. 11. International Small Cap Fund: 1.05% of the first $50,000,000, 1.00% between $50,000,000 and $200,000,000, .900% between $200,000,000 and $500,000,000 and .800% on the excess over $500,000,000 of the average net assets of the Fund. 12. Large Cap Growth Fund: .900% of the first $50,000,000, .850% between $50,000,000 and $200,000,000, .825% between $200,000,000 and $500,000,000 and .800% on the excess over $500,000,000 of the average net assets of the Fund. 13. Small Cap Growth Fund: 950% of the average net assets of the Fund. 14. Mid Cap Value Fund: .900% of the first $100,000,000, .875% between $100,000,000 and $250,000,000, .850% between $250,000,000 and $500,000,000, .825% between $500,000,000 and $750,000,000 and .800% on the excess over $750,000,000 of the average net assets of the Fund. 15. Stock Index Fund: .270% of the first $500,000,000 and .260% on the excess over $500,000,000 of the average net assets of the Fund. 16. Small Cap Index Fund: .280% of the first $500,000,000 and .270% on the excess over $500,000,000 of the average net assets of the Fund. A-7 17. Socially Responsible Fund: .650% of the average net assets of the Fund. 18. High Yield Bond Fund: .825% of the first $200,000,000, .725% between $200,000,000 and $500,000,000, and .675% on the excess over $500,000,000 of the average net assets of the Fund. 19. Aggressive Growth Lifestyle Fund: .100% of the average net assets of the Fund. 20. Moderate Growth Lifestyle Fund: .100% of the average net assets of the Fund. 21. Conservative Growth Lifestyle Fund: .100% of the average net assets of the Fund. 22. Municipal Money Market Fund: .350% of the average net assets of the Fund. 23. Science & Technology Fund: .900% of the average net assets of the Fund. 24. Capital Appreciation Fund: .900% of the first $50,000,000, .850% between $50,000,000 and $200,000,000, .825% between $200,000,000 and $500,000,000 and .800% on the excess over $500,000,000 of the average net assets of the Fund. 25. Tax-Sensitive Equity Fund: .850% of the first $50 million, .800% between $50,000,000 and $200,000,000, .775% between $200,000,000 and $500,000,000 and .700% on the excess over $500,000,000 of the average net assets of the Fund. 26. Equity-Income Fund: .750% of the first $50 million, .650% between $50,000,000 and $200,000,000, .550% on the excess over $200,000,000 of the average net assets of the Fund. The Percentage Fee for each Fund shall be accrued for each calendar day and the sum of the daily fee accruals shall be payable monthly to the Adviser. The daily fee accruals will be computed by multiplying the fraction of one over the number of calendar days in the year by the applicable annual rate described in the preceding paragraph, and multiplying this product by the net assets of the Fund as determined in accordance with the Fund's prospectus and statement of additional information as of the close of business on the previous business day on which the Fund was open for business. If this Agreement becomes effective or terminates before the end of any month, the fee for the period from the effective date to the end of such month or from the beginning of such month to the date of termination, as the case may be, shall be prorated according to the proportion which such period bears to the full month in which such effectiveness or termination occurs. A-8 APPENDIX B NORTH AMERICAN FUNDS SUBADVISORY AGREEMENT Agreement made as of June , 2000, between American General Asset Management Corp., a Delaware corporation (the "Adviser"), and American General Investment Management L.P., a Delaware limited partnership (the "Subadviser"). In consideration of the mutual covenants contained herein, the parties agree as follows: 1.APPOINTMENT OF SUBADVISER The Subadviser undertakes to act as investment subadviser to, and, subject to the supervision of the Trustees of North American Funds (the "Trust") and the terms of this Agreement, to manage the investment and reinvestment of the assets of the series of the Trust specified in Appendix A to this Agreement as it shall be amended by the Adviser and the Subadviser from time to time (the "Funds"). The Subadviser will be an independent contractor and will have no authority to act for or represent the Trust or Adviser in any way except as expressly authorized in this Agreement or another writing by the Trust and Adviser. 2.SERVICES TO BE RENDERED BY THE SUBADVISER TO THE TRUST a. Subject always to the direction and control of the Trustees of the Trust, the Subadviser will manage the investments and determine the composition of the assets of the Funds in accordance with the Funds' registration statement, as amended. In fulfilling its obligations to manage the investments and reinvestments of the assets of the Funds, the Subadviser will: i. obtain and evaluate pertinent economic, statistical, financial and other information affecting the economy generally and individual companies or industries the securities of which are included in the Funds or are under consideration for inclusion in the Funds; ii. formulate and implement a continuous investment program for each Fund consistent with the investment objectives and related investment policies for each such Fund as described in the Trust's registration statement, as amended; iii. take whatever steps are necessary to implement these investment programs by the purchase and sale of securities including the placing of orders for such purchases and sales; iv. regularly report to the Trustees of the Trust with respect to the implementation of these investment programs; v. provide assistance to the Trust's Custodian regarding the fair value of securities held by the Funds for which market quotations are not readily available for purposes of enabling the Trust's Custodian to calculate net asset value; and vi. vote proxies in accordance with the Proxy Voting Policy of the Trust. b. The Subadviser, at its expense, will furnish (i) all necessary investment and management facilities, including salaries of personnel required for it to execute its duties faithfully, and (ii) administrative facilities, including bookkeeping, clerical personnel and equipment necessary for the efficient conduct of the investment affairs of the Funds (excluding determination of net asset value and shareholder accounting services). c. The Subadviser will select brokers and dealers to effect all transactions subject to the following conditions: The Subadviser will place all orders with brokers, dealers, or issuers, and will negotiate brokerage commissions if applicable. The Subadviser is directed at all times to seek to execute brokerage transactions for the Funds in accordance with such policies or practices as may be established by the Trustees and described in the Trust's registration statement as amended. The Subadviser may pay a broker-dealer which provides research and brokerage services a higher spread or commission for a particular B-1 transaction than otherwise might have been charged by another broker- dealer, if the Subadviser determines that the higher spread or commission is reasonable in relation to the value of the brokerage and research services that such broker-dealer provides, viewed in terms of either the particular transaction or the Subadviser's overall responsibilities with respect to accounts managed by the Subadviser. The Subadviser may use for the benefit of the Subadviser's other clients, or make available to companies affiliated with the Subadviser or to its directors for the benefit of its clients, any such brokerage and research services that the Subadviser obtains from brokers or dealers. d. On occasions when the Subadviser deems the purchase or sale of a security to be in the best interest of the Fund as well as other clients of the Subadviser, the Subadviser to the extent permitted by applicable laws and regulations, may, but shall be under no obligation to, aggregate the securities to be purchased or sold to attempt to obtain a more favorable price or lower brokerage commissions and efficient execution. In such event, allocation of the securities so purchased or sold, as well as the expenses incurred in the transaction, will be made by the Subadviser in the manner the Subadviser considers to be the most equitable and consistent with its fiduciary obligations to the Fund and to its other clients. e. The Subadviser will maintain all accounts, books and records with respect to the Funds as are required of an investment adviser of a registered investment company under the Investment Company Act of 1940, as amended (the "Investment Company Act") and Investment Advisers Act of 1940, as amended (the "Investment Advisers Act") and the rules thereunder. f. The Subadviser agrees to observe and comply with Rule 17j-1under the Investment Company Act and its Code of Ethics (which shall comply in all material respects with Rule 17j-1, as the same may be amended from time to time). On a quarterly basis, the Subadviser will either (i) certify to the Adviser that the Subadviser and its Access Persons have complied with the Subadviser's Code of Ethics with respect to the Fund or (ii) identify any material violations which have occurred with respect to the Fund. In addition, the Subadviser will report at least annually to the Adviser concerning any other violations of the Subadviser's Code of Ethics which required significant remedial action and which were not previously reported. 3.COMPENSATION OF SUBADVISER The Adviser will pay the Subadviser with respect to each Fund the compensation specified in Appendix A to this Agreement. 4.LIABILITY OF SUBADVISER Neither the Subadviser nor any of its employees shall be liable to the Adviser or Trust for any loss suffered by the Adviser or Trust resulting from any error of judgment made in the good faith exercise of the Subadviser's investment discretion in connection with selecting Fund investments except for losses resulting from willful misfeasance, bad faith or gross negligence of, or from reckless disregard of, the duties of the Subadviser or any of its partners or employees; and neither the Subadviser nor any of its employees shall be liable to the Adviser or Trust for any loss suffered by the Adviser or Trust resulting from any other matters to which this Agreement relates (i.e., those other matters specified in Sections 2 and 8 of this Agreement), except for losses resulting from willful misfeasance, bad faith, or gross negligence in the performance of, or from disregard of, the duties of the Subadviser or any of its partners or employees. 5.SUPPLEMENTAL ARRANGEMENTS The Subadviser may enter into arrangements with other persons affiliated with the Subadviser to better enable it to fulfill its obligations under this Agreement for the provision of certain personnel and facilities to the Subadviser. B-2 6.CONFLICTS OF INTEREST It is understood that trustees, officers, agents and shareholders of the Trust are or may be interested in the Subadviser as trustees, officers, partners or otherwise; that directors, officers, agents and partners of the Subadviser are or may be interested in the Trust as trustees, officers, shareholders or otherwise; that the Subadviser may be interested in the Trust; and that the existence of any such dual interest shall not affect the validity hereof or of any transactions hereunder except as otherwise provided in the Agreement and Declaration of Trust of the Trust and the Certificate of Incorporation of the Subadviser, respectively, or by specific provision of applicable law. 7.REGULATION The Subadviser shall submit to all regulatory and administrative bodies having jurisdiction over the services provided pursuant to this Agreement any information, reports or other material which any such body by reason of this Agreement may request or require pursuant to applicable laws and regulations. 8.DURATION AND TERMINATION OF AGREEMENT This Agreement shall become effective with respect to each Fund on the later of (i) its execution, and (ii) the date of the meeting of the shareholders of the Fund, at which meeting this Agreement is approved by the vote of a majority of the outstanding voting securities (as defined in the Investment Company Act) of the Fund. The Agreement will continue in effect for a period more than two years from the date of its execution only so long as such continuance is specifically approved at least annually either by the Trustees of the Trust or by a majority of the outstanding voting securities of each of the Funds, provided that in either event such continuance shall also be approved by the vote of a majority of the Trustees of the Trust who are not interested persons (as defined in the Investment Company Act) of any party to this Agreement cast in person at a meeting called for the purpose of voting on such approval. The required shareholder approval of the Agreement or of any continuance of the Agreement shall be effective with respect to any Fund if a majority of the outstanding voting securities of the series (as defined in Rule 18f-2(h) under the Investment Company Act) of shares of that Fund votes to approve the Agreement or its continuance, notwithstanding that the Agreement or its continuance may not have been approved by a majority of the outstanding voting securities of (a) any other Fund affected by the Agreement or (b) all the series of the Trust. If the shareholders of any Fund fail to approve the New Sub-Advisory Agreement the Subadviser will continue to act as investment subadviser with respect to such Fund pending the required approval of the Agreement or its continuance or of any contract with the Subadviser or a different adviser or subadviser or other definitive action; provided, that the compensation received by the Subadviser in respect of such Fund during such period is in compliance with Rule 15a-4 under the Investment Company Act. This Agreement may be terminated at any time, without the payment of any penalty, by the Trustees of the Trust, by the vote of a majority of the outstanding voting securities of the Trust, or with respect to any Fund by the vote of a majority of the outstanding voting securities of such Fund, on sixty days' written notice to the Adviser and the Subadviser, or by the Adviser or Subadviser on sixty days' written notice to the Trust and the other party. This agreement will automatically terminate, without the payment of any penalty, in the event of its assignment (as defined in the Investment Company Act) or in the event the Advisory Agreement between the Adviser and the Trust terminates for any reason. 9.PROVISION OF CERTAIN INFORMATION BY SUBADVISER The Subadviser will promptly notify the Adviser in writing of the occurrence of any of the following events: a. the Subadviser fails to be registered as an investment adviser under the Investment Advisers Act or under the laws of any jurisdiction in which the Subadviser is required to be registered as an investment adviser in order to perform its obligations under this Agreement; B-3 b. the Subadviser is served or otherwise receives notice of any action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, involving the affairs of the Trust; and c. any change in actual control or management of the Subadviser or the portfolio manager of any Fund. 10.PROVISION OF CERTAIN INFORMATION BY THE ADVISER The Adviser shall furnish the Subadviser with copies of the Trust's Prospectus and Statement of Additional Information, and any reports made by the Trust to its shareholders, as soon as practicable after such documents become available. The Adviser shall furnish the Subadviser with any further documents, materials or information that the Subadviser may reasonably request to enable it to perform its duties pursuant to this Agreement. 11.SERVICES TO OTHER CLIENTS The Adviser understand, and has advised the Trust's Board of Trustees, that the Subadviser now acts, or may in the future act, as an investment adviser to fiduciary and other managed accounts and as investment adviser or subadviser to other investment companies. Further, the Adviser understands, and has advised the Trust's Board of Trustees that the Subadviser and its affiliates may give advice and take action for its accounts, including investment companies, which differs from advice given on the timing or nature of action taken for the Fund. The Subadviser is not obligated to initiate transaction for the Portfolio in any security which the Subadviser, its principals, affiliates or employees may purchase or sell for their own accounts or other clients. 12.AMENDMENTS TO THE AGREEMENT This Agreement may be amended by the parties only if such amendment is specifically approved by the vote of a majority of the outstanding voting securities of each of the Funds affected by the amendment and by the vote of a majority of the Trustees of the Trust who are not interested persons of any party to this Agreement cast in person at a meeting called for the purpose of voting on such approval. The required shareholder approval shall be effective with respect to any Fund if a majority of the outstanding voting securities of that Fund vote to approve the amendment, notwithstanding that the amendment may not have been approved by a majority of the outstanding voting securities of (a) any other Fund affected by the amendment or (b) all the series of the Trust. 13.ENTIRE AGREEMENT This Agreement contains the entire understanding and agreement of the parties. 14.HEADINGS The headings in the sections of this Agreement are inserted for convenience of reference only and shall not constitute a part hereof. 15.NOTICES All notices required to be given pursuant to this Agreement shall be delivered or mailed to the last known business address of the Trust or applicable party in person or by registered mail or a private mail or delivery service providing the sender with notice of receipt. Notice shall be deemed given on the date delivered or mailed in accordance with this paragraph. B-4 16.SEVERABILITY Should any portion of this Agreement for any reason be held to be void in law or in equity, the Agreement shall be construed, insofar as is possible, as if such portion had never been contained herein. 17.GOVERNING LAW The provisions of this Agreement shall be construed and interpreted in accordance with the laws of The Commonwealth of Massachusetts, or any of the applicable provisions of the Investment Company Act. To the extent that the laws of The Commonwealth of Massachusetts, or any of the provisions in this Agreement, conflict with applicable provisions of the Investment Company Act, the latter shall control. 18.LIMITATION OF LIABILITY The Amended and Restated Agreement and Declaration of Trust dated February 18, 1994, a copy of which, together with all amendments thereto (the "Declaration"), is on file in the office of the Secretary of The Commonwealth of Massachusetts, provides that the name "North American Funds" refers to the Trustees under the Declaration collectively as Trustees, but not as individuals or personally; and no Trustee, shareholder, officer, employee or agent of the Trust shall be held to any personal liability, nor shall resort be had to their private property, for the satisfaction of any obligation or claim, in connection with the affairs of the Trust or any portfolio thereof, but only the assets belonging to the Trust, or to the particular portfolio with which the obligee or claimant dealt, shall be liable. In Witness Whereof, the parties hereto have caused this Agreement to be executed under seal by their duly authorized officers as of the date first mentioned above. American General Asset Management Corp. By: _________________________________ American General Investment Management, L.P. By: _________________________________ B-5 APPENDIX A The Subadviser shall serve as investment subadviser for the following Funds of the Trust. The Adviser will pay the Subadviser, as full compensation for all services provided under this Agreement, the fee computed separately for each such Fund at an annual rate as follows (the "Subadviser Percentage Fee"): 1. U.S. Government Securities Fund: .225% of the first $200,000,000, .15% between $200,000,000 and $500,000,000 and .10% on the excess over $500,000,000 of the average net assets of the Fund. 2. Municipal Bond Fund: .25% of the first $200,000,000, .20% between $200,000,000 and $500,000,000 and .15% on the excess over $500,000,000 of the average net assets of the Fund. 3. Strategic Income Fund: .35% of the first $200,000,000, .25% between $200,000,000 and $500,000,000 and .20% on the excess over $500,000,000 of the average net assets of the Fund. 4. Money Market Fund: .075% of the first $500,000,000 and .020% on the excess over $500,000,000 of the average net assets of the Fund. 5. Core Bond Fund: .25% of the first $200,000,000, .20% between $200,000,000 and $500,000,000 and .15% on the excess over $500,000,000 of the average net assets of the Fund. 6. High Yield Bond Fund: .450% of the first $200,000,000; .350% between $200,000,000 and $500,000,000 and .300% on the excess over $500,000,000 of the average net assets of the Fund. 7. Municipal Money Market Fund: .250% of the first $200,000,000; .200% between $200,000,000 and $500,000,000 and .150% on the excess over $500,000,000 of the average net assets of the Fund. 8. Stock Index Fund: .020% of the first $2 billion and .010% on the excess over $2 billion of the average net assets of the Fund. 9. Small Cap Index Fund: .030% of the first $150,000,000 and .020% on the excess over $150,000,000 of the average net assets of the Fund. 10. Socially Responsible Fund: .250% of the Fund's average daily assets. 11. Aggressive Growth Lifestyle Fund: .100% of the Fund's average daily assets. 12. Moderate Growth Lifestyle Fund: .100% of the Fund's average daily assets. 13. Conservative Growth Lifestyle Fund: .100% of the Fund's average daily assets. The Subadviser Percentage Fee for each Fund shall be accrued for each calendar day and the sum of the daily fee accruals shall be paid monthly to the Subadviser. The daily fee accruals will be computed by multiplying the fraction of one over the number of calendar days in the year by the applicable annual rate described in the preceding paragraph, and multiplying this product by the net assets of the Fund as determined in accordance with the Trust's prospectus and statement of additional information as of the close of business on the previous business day on which the Trust was open for business. If this Agreement becomes effective or terminates before the end of any month, the fee (if any) for the period from the effective date to the end of such month or from the beginning of such month to the date of termination, as the case may be, shall be prorated according to the proportion which such period bears to the full month in which such effectiveness or termination occurs. NOTH1 B-6 [X] PLEASE MARK VOTES AS IN THIS EXAMPLE - -------------------------------------------------------------------------------- NORTH AMERICAN FUNDS - -------------------------------------------------------------------------------- MONEY MARKET FUND Mark box at right if an address change [ ] or comment has been noted on the reverse side of this card. CONTROL NUMBER: -------------------------------- Please be sure to sign and date this Proxy. Date - -------------------------------------------------------------------------------- - ---------Shareholder sign here----------------Co-owner sign here---------------- THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR EACH PROPOSAL. 1. To approve the Investment Advisory Agreement For Against Abstain between American General Asset Management [ ] [ ] [ ] Corp. and the Trust. 5. To approve a New Subadvisory Agreement For Against Abstain with respect to the Money Market Fund [ ] [ ] [ ] between American General Asset Management Corp. and American General Investment Management, L.P. 7. To elect Trustees. For All With- For All (01) Alice T. Kane Nominees hold Except (02) Joseph T. Grause, Jr. [ ] [ ] [ ] (03) Dr. Judith L. Craven (04) Dr. Timothy J. Ebner (05) Judge Gustavo E. Gonzales, Jr. (06) Dr. John E. Maupin, Jr. (07) Ben H. Love NOTE: If you do not wish your shares voted "For" a particular nominee, mark the "For All Except" box and strike a line through the name(s) of the nominee(s). Your shares will be voted for the remaining nominee(s). RECORD DATE SHARES: - -------------------------------------------------------------------------------- NORTH AMERICAN FUNDS PROXY SOLICITED BY THE BOARD OF TRUSTEES PROXY FOR SPECIAL MEETING OF SHAREHOLDERS ON JUNE 1, 2000 The undersigned hereby appoints John I. Fitzgerald, John N. Packs and Cathy Z. Angellis, and each of them separately, proxies with power of substitution to each, and hereby authorizes them to represent and to vote, as designated hereon, at the Special Meeting of Shareholders of North American Funds (the "Trust"), on June 1, 2000 at 9:00 Eastern time, and any adjournments thereof, all of the shares of each Fund of the Trust which the undersigned would be entitled to vote if personally present. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Meeting. The Trustees recommend a vote FOR Proposals 1, 5 and 7. - -------------------------------------------------------------------------------- PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NOTE: Please sign exactly as your name appears on this proxy card. All joint owners should sign. When signing as executor, administrator, attorney, trustee or guardian or as custodian for a minor, please give full title as such. If a corporation, please sign in full corporate name and indicate the signer's office. If a partner, sign in the partnership name. - -------------------------------------------------------------------------------- HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS? - -------------------------------------- ---------------------------------------- - -------------------------------------- ---------------------------------------- - -------------------------------------- ---------------------------------------- - -------------------------------------------------------------------------------- [X] PLEASE MARK VOTES AS IN THIS EXAMPLE - -------------------------------------------------------------------------------- NORTH AMERICAN FUNDS - -------------------------------------------------------------------------------- U.S. GOVERNMENT SECURITIES FUND Mark box at right if an address change or comment has been noted [_] on the reverse side of this card. CONTROL NUMBER: -------------------------- Please be sure to sign and date this Proxy. Date - -------------------------------------------------------------------------------- - -----Shareholder sign here---------------------Co-owner sign here--------------- THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR EACH PROPOSAL. For Against Abstain 1. To approve the Investment Advisory Agreement [_] [_] [_] between American General Asset Management Corp. and the Trust. 6. To approve a New Subadvisory Agreement with For Against Abstain respect to the U.S. Government Securities Fund [_] [_] [_] between American General Asset Management Corp. and American General Investment Management, L.P. 7. To elect Trustees. For All With- For All (01) Alice T. Kane Nominees hold Except (02) Joseph T. Grause, Jr. [_] [_] [_] (03) Dr. Judith L. Craven (04) Dr. Timothy J. Ebner (05) Judge Gustavo E. Gonzales, Jr. (06) Dr. John E. Maupin, Jr. (07) Ben H. Love NOTE: If you do not wish your shares voted "For" a particular nominee, mark the "For All Except" box and strike a line through the name(s) of the nominee(s). Your shares will be voted for the remaining nominee(s). RECORD DATE SHARES: - -------------------------------------------------------------------------------- NORTH AMERICAN FUNDS PROXY SOLICITED BY THE BOARD OF TRUSTEES PROXY FOR SPECIAL MEETING OF SHAREHOLDERS ON JUNE 1, 2000 The undersigned hereby appoints John I. Fitzgerald, John N. Packs and Cathy Z. Angellis, and each of them separately, proxies with power of substitution to each, and hereby authorizes them to represent and to vote, as designated hereon, at the Special Meeting of Shareholders of North American Funds (the "Trust"), on June 1, 2000 at 9:00 Eastern time, and any adjournments thereof, all of the shares of each Fund of the Trust which the undersigned would be entitled to vote if personally present. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Meeting. The Trustees recommend a vote FOR Proposals 1, 6 and 7. - -------------------------------------------------------------------------------- PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NOTE: Please sign exactly as your name appears on this proxy card. All joint owners should sign. When signing as executor, administrator, attorney, trustee or guardian or as custodian for a minor, please give full title as such. If a corporation, please sign in full corporate name and indicate the signer's office. If a partner, sign in the partnership name. - -------------------------------------------------------------------------------- HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS? - ---------------------------------------- -------------------------------------- - ---------------------------------------- -------------------------------------- - ---------------------------------------- -------------------------------------- - -------------------------------------------------------------------------------- [X] PLEASE MARK VOTES AS IN THIS EXAMPLE - -------------------------------------------------------------------------------- NORTH AMERICAN FUNDS - -------------------------------------------------------------------------------- CORE BOND FUND Mark box at right if an address change or comment has been noted on the reverse side of this card. [_] CONTROL NUMBER: --------------------------------- Please be sure to sign and date this Proxy. Date - -------------------------------------------------------------------------------- - ----Shareholder sign here----------------------Co-owner sign here--------------- THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR EACH PROPOSAL. 1. To approve the Investment Advisory For Against Abstain Agreement between American General [ ] [ ] [ ] Asset Management Corp. and the Trust. 4. To approve a New Subadvisory Agreement with respect to the Core Bond Fund For Against Abstain between American General Asset Management [ ] [ ] [ ] Corp. and American General Investment Management, L.P. For All With- For All 7. To elect Trustees. Nominees hold Except (01) Alice T. Kane [ ] [ ] [ ] (02) Joseph T. Grause, Jr., (03) Dr. Judith L. Craven (04) Dr. Timothy J. Ebner (05) Judge Gustavo E. Gonzales, Jr. (06) Dr. John E. Maupin, Jr. (07) Ben H. Love NOTE: If you do not wish your shares voted "For" a particular nominee, mark the "For All Except" box and strike a line through the name(s) of the nominee(s). Your shares will be voted for the remaining nominee(s). RECORD DATE SHARES: - -------------------------------------------------------------------------------- NORTH AMERICAN FUNDS PROXY SOLICITED BY THE BOARD OF TRUSTEES PROXY FOR SPECIAL MEETING OF SHAREHOLDERS ON JUNE 1, 2000 The undersigned hereby appoints John I. Fitzgerald, John N. Packs and Cathy Z. Angellis, and each of them separately, proxies with power of substitution to each, and hereby authorizes them to represent and to vote, as designated hereon, at the Special Meeting of Shareholders of North American Funds (the "Trust"), on June 1, 2000 at 9:00 Eastern time, and any adjournments thereof, all of the shares of each Fund of the Trust which the undersigned would be entitled to vote if personally present. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Meeting. The Trustees recommend a vote FOR Proposals 1, 4 and 7. - -------------------------------------------------------------------------------- PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NOTE: Please sign exactly as your name appears on this proxy card. All joint owners should sign. When signing as executor, administrator, attorney, trustee or guardian or as custodian for a minor, please give full title as such. If a corporation, please sign in full corporate name and indicate the signer's office. If a partner, sign in the partnership name. - -------------------------------------------------------------------------------- HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS? - --------------------------------------------- --------------------------------- - --------------------------------------------- --------------------------------- - --------------------------------------------- --------------------------------- [X] PLEASE MARK VOTES AS IN THIS EXAMPLE - -------------------------------------------------------------------------------- NORTH AMERICAN FUNDS - -------------------------------------------------------------------------------- MUNICIPAL BOND FUND Mark box at right if an address change or comment has been noted on the reverse side of this card. [_] CONTROL NUMBER: ---------------------------- Please be sure to sign and date this Proxy. Date - -------------------------------------------------------------------------------- - --------Shareholder sign here------------------------Co-owner sign here--------- THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR EACH PROPOSAL. For Against Abstain 1. To approve the Investment Advisory Agreement [_] [_] [_] between American General Asset Management Corp. and the Trust. 3. To approve a New Subadvisory Agreement with For Against Abstain respect to the Municipal Bond Fund between [_] [_] [_] American General Asset Management Corp. and American General Investment Management, L.P. 7. To elect Trustees. For All With- For All (01) Alice T. Kane Nominees hold Except (02) Joseph T. Grause, Jr. [_] [_] [_] (03) Dr. Judith L. Craven (04) Dr. Timothy J. Ebner (05) Judge Gustavo E. Gonzales, Jr. (06) Dr. John E. Maupin, Jr. (07) Ben H. Love NOTE: If you do not wish your shares voted "For" a particular nominee, mark the "For All Except" box and strike a line through the name(s) of the nominee(s). Your shares will be voted for the remaining nominee(s). RECORD DATE SHARES: - -------------------------------------------------------------------------------- NORTH AMERICAN FUNDS PROXY SOLICITED BY THE BOARD OF TRUSTEES PROXY FOR SPECIAL MEETING OF SHAREHOLDERS ON JUNE 1, 2000 The undersigned hereby appoints John I. Fitzgerald, John N. Packs and Cathy Z. Angellis, and each of them separately, proxies with power of substitution to each, and hereby authorizes them to represent and to vote, as designated hereon, at the Special Meeting of Shareholders of North American Funds (the "Trust"), on June 1, 2000 at 9:00 Eastern time, and any adjournments thereof, all of the shares of each Fund of the Trust which the undersigned would be entitled to vote if personally present. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Meeting. The Trustees recommend a vote FOR Proposals 1, 3 and 7. - -------------------------------------------------------------------------------- PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NOTE: Please sign exactly as your name appears on this proxy card. All joint owners should sign. When signing as executor, administrator, attorney, trustee or guardian or as custodian for a minor, please give full title as such. If a corporation, please sign in full corporate name and indicate the signer's office. If a partner, sign in the partnership name. - -------------------------------------------------------------------------------- HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS? - -------------------------------------- ---------------------------------------- - -------------------------------------- ---------------------------------------- - -------------------------------------- ---------------------------------------- - -------------------------------------------------------------------------------- [x] PLEASE MARK VOTES AS IN THIS EXAMPLE - -------------------------------------------------------------------------------- NORTH AMERICAN FUNDS - -------------------------------------------------------------------------------- STRATEGIC INCOME FUND Mark box at right if an address change or comment has been noted [_] on the reverse side of this card. CONTROL NUMBER: ------------------------------- Please be sure to sign and date this Proxy. Date - -------------------------------------------------------------------------------- - ----Shareholder sign here---------------Co-owner sign here---------------------- THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR EACH PROPOSAL. For Against Abstain 1. To approve the Investment Advisory Agreement [_] [_] [_] between American General Asset Management Corp. and the Trust. For Against Abstain 2. To approve a New Subadvisory Agreement with [_] [_] [_] respect to the Strategic Income Fund between American General Asset Management Corp. and American General Investment Management, L.P. 7. To elect Trustees. For All With- For All (01) Alice T. Kane Nominees hold Except (02) Joseph T. Grause, Jr. [_] [_] [_] (03) Dr. Judith L. Craven (04) Dr. Timothy J. Ebner (05) Judge Gustavo E. Gonzales, Jr. (06) Dr. John E. Maupin, Jr. (07) Ben H. Love NOTE: If you do not wish your shares voted "For" a particular nominee, mark the "For All Except" box and strike a line through the name(s) of the nominee(s). Your shares will be voted for the remaining nominee(s). RECORD DATE SHARES: - -------------------------------------------------------------------------------- NORTH AMERICAN FUNDS PROXY SOLICITED BY THE BOARD OF TRUSTEES PROXY FOR SPECIAL MEETING OF SHAREHOLDERS ON JUNE 1, 2000 The undersigned hereby appoints John I. Fitzgerald, John N. Packs and Cathy Z. Angellis, and each of them separately, proxies with power of substitution to each, and hereby authorizes them to represent and to vote, as designated hereon, at the Special Meeting of Shareholders of North American Funds (the "Trust"), on June 1, 2000 at 9:00 Eastern time, and any adjournments thereof, all of the shares of each Fund of the Trust which the undersigned would be entitled to vote if personally present. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Meeting. The Trustees recommend a vote FOR Proposals 1, 2 and 7. - -------------------------------------------------------------------------------- PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NOTE: Please sign exactly as your name appears on this proxy card. All joint owners should sign. When signing as executor, administrator, attorney, trustee or guardian or as custodian for a minor, please give full title as such. If a corporation, please sign in full corporate name and indicate the signer's office. If a partner, sign in the partnership name. - -------------------------------------------------------------------------------- HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS? - -------------------------------------- -------------------------------------- - -------------------------------------- -------------------------------------- - -------------------------------------- -------------------------------------- - -------------------------------------------------------------------------------- [X] PLEASE MARK VOTES AS IN THIS EXAMPLE - -------------------------------------------------------------------------------- NORTH AMERICAN FUNDS - -------------------------------------------------------------------------------- Mark box at right if an address change or comment has been noted on the reverse side of this card. [ ] CONTROL NUMBER: ----------------------------- Please be sure to sign and date this Proxy. Date - -------------------------------------------------------------------------------- - -----Shareholder sign here-----------------Co-owner sign here------------------- THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR EACH PROPOSAL. 1. To approve the Investment Advisory For Against Abstain Agreement between American General [ ] [ ] [ ] Asset Management Corp. and the Trust. 7. To elect Trustees. For All With- For All (01) Alice T. Kane Nominees hold Except (02) Joseph T. Grause, Jr. [ ] [ ] [ ] (03) Dr. Judith L. Craven (04) Dr. Timothy J. Ebner (05) Judge Gustavo E. Gonzales, Jr. (06) Dr. John E. Maupin, Jr. (07) Ben H. Love NOTE: If you do not wish your shares voted "For" a particular nominee, mark the "For All Except" box and strike a line through the name(s) of the nominee(s). Your shares will be voted for the remaining nominee(s). RECORD DATE SHARES: - -------------------------------------------------------------------------------- NORTH AMERICAN FUNDS PROXY SOLICITED BY THE BOARD OF TRUSTEES PROXY FOR SPECIAL MEETING OF SHAREHOLDERS ON JUNE 1, 2000 The undersigned hereby appoints John I. Fitzgerald, John N. Packs and Cathy Z. Angellis, and each of them separately, proxies with power of substitution to each, and hereby authorizes them to represent and to vote, as designated hereon, at the Special Meeting of Shareholders of North American Funds (the "Trust"), on June 1, 2000 at 9:00 Eastern time, and any adjournments thereof, all of the shares of each Fund of the Trust which the undersigned would be entitled to vote if personally present. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Meeting. The Trustees recommend a vote FOR Proposals 1 and 7. - -------------------------------------------------------------------------------- PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NOTE: Please sign exactly as your name appears on this proxy card. All joint owners should sign. When signing as executor, administrator, attorney, trustee or guardian or as custodian for a minor, please give full title as such. If a corporation, please sign in full corporate name and indicate the signer's office. If a partner, sign in the partnership name. - -------------------------------------------------------------------------------- HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS? - --------------------------------------- --------------------------------------- - --------------------------------------- --------------------------------------- - --------------------------------------- --------------------------------------- - --------------------------------------------------------------------------------