NORTH AMERICAN SENIOR FLOATING RATE FUND INC, 497, 2000-03-29

NORTH AMERICAN SENIOR FLOATING RATE FUND INC
497, 2000-03-29

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<PAGE>

SUPPLEMENT TO PROSPECTUS AND STATEMENT OF ADDITIONAL
INFORMATION OF NORTH AMERICAN SENIOR FLOATING RATE FUND, INC.

Dated March 17, 2000

This will supplement all information provided in the Fund's Prospectus and
Statement of Additional Information dated March 17, 2000, that relates to the
Fund's investment adviser and distributor. This Supplement should be read in
conjunction with those portions of the Prospectus and Statement of Additional
Information.

This Supplement also provides important information about current fee
waivers, which should be read in conjunction with the Fund's expense table and
discussion of the Fund's Multiple Pricing System in the Prospectus.

CypressTree Asset Management Corporation ("CAM") has informed the North
American Senior Floating Rate Fund (the "Fund") that CypressTree Investments,
Inc. ("CypressTree"), CAM's parent company, sold substantially all of
CypressTree's assets, including all of the stock of CAM, the Fund's investment
adviser, and all of the stock of CypressTree Funds Distributors, Inc. ("CFD"),
the Fund's distributor, to American General Corporation ("American General").
The acquisition by American General of CypressTree's assets (the "Acquisition")
occured as of 4:15 p.m. Eastern Time on March 10, 2000. American General is a
part of American General Financial Group, a financial services company with
approximately $115 billion in assets and over $6 billion in total stockholders'
equity.

The Acquisition resulted in the termination of (i) the investment advisory
agreement between CAM and the Fund, (ii) the subadvisory agreement between CAM
and CypressTree Investment Management Company, Inc. ("CIMCO"), and (iii) the
distribution agreement between the Fund and CFD.

At a meeting of the Board of Directors of the Fund (the "Board") on
February 27, 2000, the Board took several actions described below.

Investment Advisory, Subadvisory, and Distribution Agreements

The Board approved an interim investment advisory agreement between CAM
(operating under its new name of American General Asset Management Corp.
("AGAM")) and the Fund, in order to allow AGAM to continue to serve as
investment adviser to the Fund after the Acquisition. Under the Investment
Company Act, however, AGAM may continue to serve as the investment adviser for
the Fund beyond an interim period of 150 days only if shareholders of the Fund
approve a new investment advisory agreement. Accordingly, the Board has voted to
call a special meeting of shareholders for June 1, 2000 (the "June Shareholder
Meeting") to vote on adoption of a new two-year investment advisory agreement
with AGAM.

The Board also approved an interim subadvisory agreement between CAM and
CIMCO, in order to allow CIMCO to continue to serve as subadviser to the Fund
after the Acquisition. Under the Investment Company Act, however, CIMCO may
continue to serve as the investment adviser for the Fund beyond an interim
period of 150 days only if shareholders of the Fund approve a new investment
advisory agreement. Shareholders will be asked to approve a new two-year
subadvisory agreement with CIMCO at the June Shareholder Meeting.

CFD, under its new name American General Funds Distributors, Inc. ("AGFD"),
has continued to serve as the distributor of the Fund's shares since the
Acquisition. The Board approved a new distribution agreement substantially
similar to the Fund's previous distribution agreement with CFD (shareholder
approval of the new distribution agreement is not required under the Investment
Company Act).

Board of Directors

Bradford K. Gallagher, Chairman of the Board and President of CAM, resigned
from the Board upon consummation of the Acquisition. Alice T. Kane, President of
American General Fund Group, was appointed by the Board as a Director of the
Fund and Chairman of the Board. Additionally, the Board nominated six additional
Directors to be proposed for election, along with Ms. Kane, at the June
Shareholder Meeting. Two of these nominees would replace current Directors
(Arthur S. Loring and William F. Achtmeyer) who are expected to resign effective
upon their successors' election. If shareholders approve the nominees, the Board
will increase in size from five to nine Directors.

Fee Waiver

Effective March 7, 2000, the Fund has voluntarily agreed to reimburse the
Fund's expenses to the extent necessary so that total annualized fund expenses
do not exceed 1.40% of average daily gross assets for Class B and Class C
Shares, and 1.35% for Class A Shares (gross assets are total assets minus all
liabilities except debt). This will include a distribution fee of 0.05% of
average daily net assets for Class B and Class C Shares. This voluntary waiver
will continue until further notice.

Telephone Transactions

The Section entitled "Telephone Transactions" on page 28 of the Prospectus
is deleted in its entirety and replaced by the following: Shareholders are not
permitted to request exchanges and/or repurchases by telephone.

0300:91412

March 17, 2000

-1-

<PAGE>

2000

[North American Funds Senior Floating Rate Fund]

[GRAPHIC]

The Securities and Exchange Commission has not approved or disapproved of these
securities or passed on the adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal offense.

March 17, 2000
<PAGE>

North American Senior Floating Rate Fund, Inc.
- -------------------------------------------------------------------------------
The North American Senior Floating Rate Fund (the "Fund"), a closed-end in-
vestment company, seeks to provide as high a level of current income as is
consistent with the preservation of capital by investing primarily in senior
secured floating rate loans. The Fund is engaged in a continuous public offer-
ing of its shares at the next determined net asset value per share without an
initial sales charge, subject to an Early Withdrawal Charge. CypressTree Asset
Management Corporation, Inc. ("CAM") is the Fund's investment adviser. CAM has
engaged CypressTree Investment Management Company, Inc. ("CIMCO") as
subadviser to manage the investment of the Fund's assets.

In order to provide liquidity to shareholders, the Fund will make monthly Re-
purchase Offers for a percentage of its outstanding shares, which we generally
expect will be 10%. See "Repurchase Offers" on page 15.

Shares of the Fund involve investment risks, including the possible loss of
some or all of the principal investment. The Fund may invest all or substan-
tially all of its assets in securities that are rated below investment grade
by a nationally recognized statistical rating organization, or in comparable
unrated securities. See "Risk Factors" on page 12. The Fund may borrow, pri-
marily in connection with the Fund's monthly Repurchase Offers for its shares.
See "Repurchase Offers" on page 15, and "Borrowing by the Fund" on page 14.

No market presently exists for the Fund's shares and we do not currently an-
ticipate that a secondary market will develop for the Fund's shares. Fund
shares may not be readily marketable.

Shares of the Fund are not deposits or obligations of, or guaranteed or en-
dorsed by, any bank or other insured depository institution, and are not fed-
erally insured by the Federal Deposit Insurance Corporation, the Federal Re-
serve Board or any other government agency.

This Prospectus sets forth important information about the Fund that you
should know before investing; you should read and retain it for future refer-
ence. The Fund has filed a Statement of Additional Information dated March 17,
2000 with the Securities and Exchange Commission, which is incorporated by
reference herein. The Table of Contents of the Statement of Additional Infor-
mation appears at the end of this Prospectus. The Statement of Additional In-
formation is available without charge from the Fund or its distributor,
CypressTree Funds Distributors, Inc., at 286 Congress Street, Boston, Massa-
chusetts 02210 ((800) 872-8037). The Statement of Additional Information and
other information about the Fund also are available on the Commission's
website (http://www.sec.gov).

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED ON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO PROCEEDS TO
PUBLIC(1) SALES LOAD(2) FUND(3)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Class B Share $9.89 None $9.89
- ----------------------------------------------------------------------------------------
Per Class C Share $9.89 None $9.89
Total $239,576,556 None $239,576,556
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ------------
(1) The shares are offered on a best efforts basis at a price equal to a net
asset value, which as of March 16, 2000 was $9.89 per share for Class B
and Class C shares.
(2) Class B and Class C shares are subject to an Early Withdrawal Charge and
asset-based Distribution and Service Fees.
(3) Assuming the sale of shares currently registered but unsold as of March
16, 2000 at a price of $9.89, per share. Expenses of registering addi-
tional shares of the Fund, in the amount of approximately $140,000 are
charged against the Fund's income on an ongoing basis, subject to expense
reimbursements.

CypressTree Funds Distributors, Inc.

PROSPECTUS DATED March 17, 2000
<PAGE>

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TABLE OF CONTENTS

- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Fund Expenses............................................................... 3
Summary..................................................................... 5
The Fund.................................................................... 8
Investment Objective........................................................ 8
Use of Proceeds............................................................. 8
Investment Policies......................................................... 8
Investments................................................................. 9
Risk Factors................................................................ 13
Repurchase Offers........................................................... 16
Management of the Fund...................................................... 19
Valuing Fund Shares......................................................... 20
Performance Information..................................................... 21
Multiple Pricing System..................................................... 22
How to Buy Fund Shares...................................................... 23
Shareholder Services........................................................ 28
Distributions............................................................... 30
Taxes....................................................................... 30
Description of Shares....................................................... 32
Reports to Shareholders..................................................... 33
Table of Contents of the Statement of Additional Information................ 35
</TABLE>
<PAGE>

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FUND EXPENSES
- -------------------------------------------------------------------------------

The following table and Example are intended to help you understand the
direct and indirect expenses applicable to each class of shares of the Fund.
This information is based on estimated fees and expenses for the fiscal year
ending December 31, 2000, after expense reimbursements that are currently in
effect.

<TABLE>
<CAPTION>
Shareholder Transaction Expenses Class B Class C
- -------------------------------- ------- -------
<S> <C> <C>
Sales Charge Imposed on Purchases of
Shares
(as a percentage of offering price).. None None
Sales Charge Imposed on Dividend
Reinvestment......................... None None
Early Withdrawal Charges
(as a percentage of original purchase
price or repurchase price, whichever 3% first year
is lower)............................ 2.5% second year
2% third year
1% fourth year 1% first year
0% after fourth year 0% after first year
Exchange fee.......................... None None
</TABLE>

Annual Fund Operating Expenses
(as a percentage of average net assets attributable to common shares)(1)

<TABLE>
<CAPTION>
Class B Class C
------- -------
<S> <C> <C>
Management Fee(2)............................................... 0.85% 0.85%
Interest Payments on Borrowed Funds............................. 0.00% 0.00%
Service Fee..................................................... 0.25% 0.25%
Distribution Fee (after reimbursement)(3)(4).................... 0.00% 0.10%
Administration Fee (after reimbursement)(2)(4).................. 0.10% 0.10%
Other Expenses.................................................. 0.25% 0.25%
- --------------------------------------------------------------------------------
Total Fund Operating Expenses (after reimbursement)(4).......... 1.45% 1.55%
- --------------------------------------------------------------------------------
</TABLE>
(1) See "Management of the Fund" for additional information.
(2) The management fee and administration fee are based on a percentage of the
Fund's average daily gross assets (gross assets are total assets minus all
liabilities except debt).
(3) The Fund pays a distribution fee of 0.50% of average daily net assets for
both Class B and Class C shares.
(4) The Fund's investment adviser has agreed to reimburse the Fund's expenses
to the extent necessary so that total annualized Fund expenses do not
exceed 1.45% and 1.55% of average daily gross assets for Class B shares
and Class C shares, respectively (gross assets are total assets minus all
liabilities except debt). Absent such reimbursement, estimated expenses
for both classes of shares would be: management fee of 0.85%, interest
payments on borrowed funds of 0.00%, administration fee of 0.40%, service
fee of 0.25%, distribution fee of 0.50%, and other expenses of 0.25%; and
total Fund operating expenses of 2.25%. This agreement may be terminated
by CAM at any time on thirty (30) days' written notice.

The Fund also has Class A Shares, which are not offered to the public. Class
B Shares automatically convert into Class A Shares eight years after purchase.
Class C Shares purchased on or after August 18, 1999 do not have an automatic
conversion feature. Class C Shares purchased before August 18, 1999
automatically convert into Class A Shares ten years after purchase. See
"Multiple Pricing System--Conversion Feature." Class A Shares are not subject
to any shareholder transaction expenses. The estimated annual Fund operating
expenses of Class A Shares are: management fee of 0.85%, interest payments on
borrowed funds of 0.00%, administration fee of 0.40%, service fee of 0.25%,
and other expenses of 0.25%, with total annual expenses of 1.45%. This
reflects reimbursement of 0.30% of the 0.40% administration fee pursuant to
CAM's agreement to reimburse the Fund's expenses to the extent necessary so
that total annualized Fund expenses do not exceed 1.45% of average daily gross
assets. See note 4, above. Absent this reimbursement, total Fund operating
expenses of Class A shares would be 1.75%.

Service and distribution fees include an asset-based sales charge; as a
result long-term shareholders of the Fund may pay more than the economic
equivalent of the maximum front-end sales charges permitted by the National
Association of Securities Dealers, Inc. ("NASD"). See "How to Buy Fund
Shares."

3
<PAGE>

EXAMPLE
- -------------------------------------------------------------------------------

An investor would pay the following expenses on a $1,000 investment,
assuming a 5% annual return.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class B Shares.................................. $45 $66 $79 $174
Class C Shares.................................. $26 $49 $84 $185
</TABLE>

Federal regulations require the Example to assume a 5% annual return, but
actual return will vary. The Example assumes reinvestment of all dividends and
distributions at net asset value and repurchase at the end of each period. The
Example assumes that the fee waivers and reimbursements referred to under
"Fund Expenses" are in effect.

The Example should not be considered a representation of future expenses
because future expenses may be greater or less than those shown.

Actual expenses may be higher or lower than the amounts shown in the fee
table and, consequently, the actual expenses incurred by an investor may be
greater (in the event the expense limitations are removed) or less than the
amounts shown in the Example. Moreover, while the Example assumes a 5% annual
return, performance will vary and may result in a return greater or less than
5%.

4
<PAGE>

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SUMMARY
- -------------------------------------------------------------------------------

Investment Objective

The Fund's investment objective is to provide as high a level of current
income as is consistent with the preservation of capital by investing
primarily in senior secured floating rate loans and other senior secured
floating rate debt obligations ("Loans"). See "Investment Objective" on page
8.

The Loans

The Loans are generally direct debt obligations undertaken by U.S.
corporations in connection with recapitalizations, acquisitions, leveraged
buy-outs, and refinancings. The Loans have floating rates of interest that
reset periodically and generally are tied to a rate such as the London
Interbank Offered Rate ("LIBOR") for 90-day dollar deposits. The Loans are
secured and generally hold the most senior position in the borrower's
capitalization structure. In selecting Loans, the Fund will employ credit
standards that CIMCO has established.

Under normal market conditions, the Fund will invest at least 80% of its
total assets in Loans. The Fund may hold up to 20% of its total assets in
cash, investment grade short-term debt and medium term obligations, and
unsecured senior floating rate loans. There is no assurance that the Fund's
objective will be achieved. See "Investment Policies" on page 8.

Repurchase Offers

The Fund is a closed-end investment company and, as such, does not redeem
its shares. We do not anticipate that a secondary market for Fund shares will
develop. In order to provide shareholders with liquidity and the ability to
receive net asset value on a disposition of shares, the Fund will conduct
monthly offers to repurchase at net asset value a percentage of its
outstanding shares, which we generally expect will be 10%. If a Repurchase
Offer is oversubscribed, the Fund will repurchase shares pro rata, and may
repurchase up to an additional 2% of outstanding shares during any three-month
period.

The Repurchase Request Date will be the last business day of each month. The
Repurchase Price will be the Fund's net asset value as determined after the
close of business on the Pricing Date, which, under normal circumstances, we
expect will be the Repurchase Request Date. The Fund expects to distribute
payment on the next business day; in any event, the Fund will pay repurchase
proceeds no later than five business days (or seven calendar days, whichever
period is shorter) after the Pricing Date (the "Repurchase Payment Deadline").
Shareholders will be sent notification of each upcoming Repurchase Offer 7 to
14 days before the next Repurchase Request Date. See "Repurchase Offers" on
page 16.

Investment Management

CAM is the Fund's investment adviser. CIMCO, as subadviser to the Fund, is
responsible for managing the investment and reinvestment of the Fund's assets.
See "Management of the Fund" on page 19.

CIMCO was founded in 1996 by Bradford K. Gallagher and Jeffrey S. Garner as
the nation's first independent investment advisory firm specializing in the
loan asset class. Mr. Garner was, prior to the establishment of CIMCO, the
portfolio manager for the Eaton Vance Senior Debt Portfolio and its
predecessor fund, Eaton Vance Prime Rate Reserves, since its inception in
1989. CIMCO currently has approximately $4.0 billion in assets under
management. See "Management of the Fund--Portfolio Manager."

Risk Factors

The Fund's net asset value is expected to be relatively stable during normal
market conditions because the Fund's assets will consist primarily of floating
rate Loans and short-term instruments. Nevertheless, there are circumstances
that could cause a decline in the Fund's net asset value. The Fund is not a
money market fund and its net asset value will fluctuate. As a recently
organized entity, the Fund has a limited operating history.

Investments in Loans involve certain risks, including, among others, risks
of nonpayment of principal and interest; collateral impairment;
nondiversification and borrower industry concentration; and lack of full
liquidity, which may impair the Fund's ability to obtain full value for Loans
sold. In addition, your ability to liquidate your investment will be subject
to the limits on monthly Repurchase Offers. See "Risk Factors" on page 13.

5
<PAGE>

The Fund may invest all or substantially all of its assets in Loans or other
securities that are rated below investment grade, or in comparable unrated
securities. Loans made in connection with recapitalizations, acquisitions,
leveraged buy-outs, and refinancings are subject to greater credit risks than
other Loans in which the Fund may invest. It is expected that the Fund's Loans
will consist primarily of such Loans. These credit risks include the
possibility of a default on the Loan or bankruptcy of the Borrower. The value
of these Loans is subject to a greater degree of volatility in response to
interest rate fluctuations and these Loans may be less liquid than other
Loans.

Distributions

How to Buy Fund Shares

Shares are offered continuously for sale through securities dealers and
banks that have executed an agreement (a "Dealer Agreement") with CypressTree
Funds Distributors, Inc. (the "Distributor"), the distributor of the Fund's
shares. Certain states require that purchases of shares of the Fund be made
only through a broker-dealer registered in the state.

An initial investment in the Fund must be at least $5,000, and additional
investments must be at least $500. There is a $100 minimum initial and $50
additional investment requirement for purchases in connection with tax-
sheltered retirement accounts. The Fund reserves the right to waive any
minimum investment requirements and to refuse any order for the purchase of
shares. See "How to Buy Fund Shares" on page 23.

Classes of Shares

The Fund offers two classes of shares ("Class B" shares and "Class C"
shares) to the general public, with each class having a different sales charge
structure (the "Multiple Pricing System"). Each class has distinct advantages
and disadvantages for different investors, and you may choose the class that
best suits your circumstances and objectives. See "Multiple Pricing System."

Class B shares. Class B shares are offered for sale at net asset value
without a front-end sales charge, but are subject to an Early Withdrawal
Charge of 3% during the first year after purchase, and declining to 2.5% after
the first year, 2.0% after the second year, 1.0% after the third year, and 0%
after the fourth year. The applicable percentage is assessed on an amount
equal to the lesser of the original purchase price or the repurchase price of
the shares repurchased. Class B shares are also subject to a service fee of up
to 0.25%, and a distribution fee of up to 0.50% of their respective average
annual net assets.

Class C shares. Class C shares are offered for sale at net asset value
without a front-end sales charge, but are subject to an Early Withdrawal
Charge of 1% during the first year after purchase. The applicable percentage
is assessed on an amount equal to the lesser of the original purchase price or
the repurchase price of shares repurchased. Class C shares are subject to a
service fee of up to 0.25%, and a distribution fee of up to 0.50% of their
respective average annual net assets.

For a discussion of factors to consider in selecting the most beneficial
class of shares for a particular investor, see "Multiple Pricing System--
Factors for Consideration."

Automatic Conversion. The Fund also has Class A shares, which are not
offered to the public. Class B shares will automatically convert to Class A
Shares of the Fund eight years after purchase. Class C shares purchased on or
after August 18, 1999 do not have an automatic conversion feature. Class C
shares purchased before August 18, 1999 will automatically convert to Class A
shares of the Fund ten years after purchase. Class A shares are subject to a
service fee of 0.25% of average annual net assets. See "Multiple Pricing
System--Conversion Feature."

This Summary is not complete and is qualified in its entirety by reference
to the more detailed information included elsewhere in the Fund's Prospectus
and in the Fund's Statement of Additional Information. You should read this
Summary in conjunction with the more detailed information included elsewhere.

6
<PAGE>

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FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------

This table summarizes the Fund's financial history. The information has been
audited by Deloitte & Touche LLP, the Fund's independent auditors. The audit
report covering the period shown along with the Fund's financial statements,
are included in the Fund's annual report, which is available upon request.

Per Share Operating Performance (For a Share Outstanding Throughout the Period)

<TABLE>
<CAPTION>
Class B Shares Class C Shares
--------------------- ---------------------
Period from Period from
Year 8/31/98* Year 8/31/98*
ended through ended through
12/31/99 12/31/98 12/31/99 12/31/98
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $ 9.98 $10.00 $ 9.98 $ 10.00
- ------------------------------------------------------------------------------
Investment Operations:
Net investment income 0.69 0.20 0.69 0.20
Net realized and unrealized gain
on investments 0.00 (0.02) 0.00 (0.02)
------- ------ -------- -------
Total from investment operations 0.69 0.18 0.69 0.18
------- ------ -------- -------
Distributions
Dividends from net investment
income (0.69) (0.20) (0.69) (0.20)
- ------------------------------------------------------------------------------
Net Asset Value, End of Period $ 9.98 $ 9.98 $ 9.98 $ 9.98
- ------------------------------------------------------------------------------
Total Return 7.13% 1.89%+ 7.12% 1.89%+
- ------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (000's) $37,439 $4,826 $173,322 $14,259
Ratio of net expenses to average
net assets 0.70% 0.00%# 0.79% 0.00%#
Ratio of net investment income to
average net assets 6.87% 6.11%# 6.82% 6.11%#
Portfolio turnover rate 30% 18%+ 30% 18%+
Expense ratio before waiver of
fees and reimbursement of
expenses by adviser 2.29% 4.02%# 2.25% 4.01%#
Net investment income before
waiver of fees and reimbursement
of expenses by adviser 5.28% 2.09%# 5.36% 2.10%#
</TABLE>
- --------

* Commencement of Operations
+ Not annualized
# Annualized

7
<PAGE>

- -------------------------------------------------------------------------------
THE FUND
- -------------------------------------------------------------------------------

The Fund is a closed-end, non-diversified management investment company that
continuously offers its shares to the public. The Fund's principal office is
located at 286 Congress Street, Boston, Massachusetts 02210, and its telephone
number is (617) 946-0600. This prospectus will sometimes refer to the Fund as
"we".

- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
- -------------------------------------------------------------------------------

The Fund's investment objective is to provide as high a level of current
income as is consistent with the preservation of capital by investing
primarily in senior secured floating rate loans and other institutionally
traded senior secured floating rate debt obligations ("Loans"). There is no
assurance that the Fund's objective will be achieved.

- -------------------------------------------------------------------------------
USE OF PROCEEDS
- -------------------------------------------------------------------------------

The Fund will invest net proceeds of this offering, after payment of
organizational and offering expenses by the Fund, in accordance with the
Fund's investment objective and policies. The precise time frame for these
investments will depend on the availability of Loans and other relevant
conditions. Pending such investment, the Fund will invest the net proceeds of
this offering in investment grade short-term or medium-term debt obligations.

- -------------------------------------------------------------------------------
INVESTMENT POLICIES
- -------------------------------------------------------------------------------

Under normal market conditions, the Fund will invest at least 80% of its
total assets in Loans (i.e., senior secured floating rate loans and other
institutionally traded secured floating rate debt obligations). The Fund may
invest up to 20% of the Fund's total assets in cash, in investment grade
short-term and medium-term debt obligations, or in senior unsecured floating
rate loans ("Unsecured Loans").

Loans consist generally of direct obligations of companies (collectively,
"Borrowers"), primarily U.S. companies or their affiliates, undertaken to
finance the growth of the Borrower's business, internally or externally, or to
finance a capital restructuring. Loans in which the Fund will invest are
primarily highly-leveraged Loans made in connection with recapitalizations,
acquisitions, leveraged buyouts, and refinancings.

In selecting Loans, the Fund will employ credit standards established by
CIMCO. The Fund will purchase Loans only if, in the judgment of CIMCO, the
Borrower can meet debt service on the Loan (except in the case of Discount
Loans as described below). The Fund will acquire Loans that are, in the
judgment of CIMCO, in the category of senior debt of the Borrower and that
generally hold the most senior position in the Borrower's capitalization
structure. A Borrower must also meet other criteria established by CIMCO and
deemed by it to be appropriate to the analysis of the Borrower and the Loan.

The Fund's primary consideration in selecting Loans for investment by the
Fund is the Borrower's creditworthiness. Some of the Loans in which the Fund
invests are not currently rated by any nationally recognized statistical
rating organization. The Fund has no minimum rating requirement for Loans. The
quality ratings assigned to other debt obligations of a Borrower are generally
not a material factor in evaluating Loans because these rated obligations
typically will be subordinated to the Loans and will be unsecured. Instead,
CIMCO will perform its own independent credit analysis of the Borrower. This
analysis will include an evaluation of the Borrower's industry and business,
its management and financial statements, and the particular terms of the Loan
that the Fund may acquire. CIMCO will use information prepared and supplied by
the Agent (as defined below) or other participants in the Loans. CIMCO will
continue to analyze in a similar manner on an ongoing basis any Loan in which
the Fund invests. There can be no assurance that the Fund will be able to
acquire Loans satisfying the Fund's investment criteria at acceptable prices.

8
<PAGE>

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INVESTMENTS
- -------------------------------------------------------------------------------

Loans

Characteristics of Loans

Each Loan will be secured by collateral that CIMCO believes to have a market
value, at the time of acquiring the Loan, that equals or exceeds the principal
amount of the Loan. The value of the collateral underlying a Loan may decline
after purchase, with the result that the Loan may no longer be fully secured.
The Fund will not necessarily dispose of such a Loan, even if the collateral
impairment of a Loan would result in the Fund having less than 80% of its
assets in fully secured Loans.

The Loans typically will have a stated term of five to nine years. However,
because the Loans typically amortize principal over their stated life and are
frequently prepaid, their average credit exposure is expected to be two to
three years. The degree to which Borrowers prepay Loans, whether as a
contractual requirement or at their election, may be affected by general
business conditions, the Borrower's financial condition, and competitive
conditions among lenders. Accordingly, prepayments cannot be predicted with
accuracy. Prepayments generally will not have a material effect on the Fund's
performance because, under normal market conditions, the Fund should be able
to reinvest prepayments in other Loans that have similar or identical yields,
and because receipt of prepayment and facility fees may mitigate any adverse
impact on the Fund's yield.

The rate of interest payable on Loans is the sum of a base lending rate plus
a specified spread. These base lending rates are generally the London
InterBank Offered Rate ("LIBOR") for 90-day dollar deposits, the Certificate
of Deposit ("CD") Rate of a designated U.S. bank, the Prime Rate of a
designated U.S. bank, or another base lending rate used by commercial lenders.
A Borrower usually has the right to select the base lending rate and to change
the base lending rate at specified intervals.

The interest rate on LIBOR-based and CD Rate-based Loans is reset
periodically at intervals ranging from 30 to 180 days, while the interest rate
on Prime Rate-based Loans floats daily as the Prime Rate changes. Investment
in Loans with a longer interest rate reset period may increase fluctuations in
the Fund's net asset value as a result of changes in interest rates. The Fund
will attempt to maintain a portfolio of Loans that will have a dollar-weighted
average period to next interest rate adjustment of approximately 90 days or
less.

The yield on a Loan primarily will depend on the terms of the underlying
Loan and the base lending rate chosen by the Borrower initially and on
subsequent dates specified in the applicable loan agreement. The relationship
between LIBOR, the CD Rate, and the Prime Rate will vary as market conditions
change. Borrowers tend to select the base lending rate that results in the
lowest interest cost, and the rate selected may change from time to time.

Agents and Intermediate Participants

Loans are typically originated, negotiated and structured by a U.S. or
foreign commercial bank, insurance company, finance company or other financial
institution (the "Agent") for a lending syndicate of financial institutions.
The Borrower and the lender or lending syndicate enter into a loan agreement
(the "Loan Agreement"). The Agent typically administers and enforces the Loan
on behalf of the other lenders in the syndicate. In addition, an institution,
typically but not always the Agent (the "Collateral Bank"), holds any
collateral on behalf of the lenders. The Collateral Bank must be a qualified
custodian under the Investment Company Act of 1940, as amended (the "1940
Act"). The Fund may not act as an Agent, a Collateral Bank, a guarantor or
sole negotiator or structuror with respect to a Loan.

In a typical Loan, the Agent administers the terms of the Loan Agreement and
is responsible for the collection of principal and interest and fee payments
from the Borrower and the apportionment of these payments to the credit of all
lenders that are parties to the Loan Agreement. The Fund generally will rely
on the Agent to collect its portion of the payments on a Loan. Furthermore,
the Fund will rely on the Agent to use appropriate creditor remedies against
the Borrower. Typically, under Loan Agreements, the Agent is given broad
discretion in enforcing the Loan Agreement and is obligated to use only the
same care it would use in the management of its own property. The Borrower
compensates the Agent for these services. This compensation may include
special fees paid on structuring and funding the Loan and other fees paid on a
continuing basis. The typical practice of an Agent or a lender in relying
exclusively or primarily on reports from the Borrower may involve a risk of
fraud by the Borrower.

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If an Agent becomes insolvent, or has a receiver, conservator, or similar
official appointed for it by the appropriate bank regulatory authority or
becomes a debtor in a bankruptcy proceeding, the Agent's appointment may be
terminated, and a successor agent would be appointed. Assets held by the Agent
under the Loan Agreement should remain available to holders of Loans. However,
if an appropriate regulatory authority or court determines that assets held by
the Agent for the benefit of the Fund are subject to the claims of the Agent's
general or secured creditors, the Fund might incur certain costs and delays in
realizing payment on a Loan or suffer a loss of principal and/or interest.
Furthermore, in the event of the Borrower's bankruptcy or insolvency, the
Borrower's obligation to repay the Loan may be subject to certain defenses
that the Borrower can assert as a result of improper conduct by the Agent.

The Fund's investment in a Loan may take the form of a "Participation."
Lenders may sell Loans to third parties called "Participants." Participations
may be acquired from a lender or from other Participants. If the Fund
purchases a Participation either from a lender or a Participant, the Fund will
not have established any direct contractual relationship with the Borrower.
The Fund would be required to rely on the lender or the Participant that sold
the Participation not only for the enforcement of the Fund's rights against
the Borrower but also for the receipt and processing of payments due to the
Fund under the Loan. The Fund is thus subject to the credit risk of both the
Borrower and a Participant. Lenders and Participants interposed between the
Fund and a Borrower are referred to as "Intermediate Participants."

In the case of Participations, because it may be necessary to assert through
an Intermediate Participant such rights as may exist against the Borrower in
the event the Borrower fails to pay principal and interest when due, the Fund
may be subject to delays, expenses and risks that are greater than those that
would be involved if the Fund could enforce its rights directly against the
Borrower. Moreover, under the terms of a Participation, the Fund may be
regarded as a creditor of the Intermediate Participant (rather than of the
Borrower), so that the Fund also may be subject to the risk that the
Intermediate Participant may become insolvent. The agreement between the buyer
and seller may also limit the rights of the holder of the Loan to vote on
certain changes that may be made to the Loan Agreement, such as waiving a
breach of a covenant. However, in almost all cases, the holder of a Loan will
have the right to vote on certain fundamental issues such as changes in
principal amount, payment dates, and interest rate.

CIMCO also analyzes and evaluates the financial condition of the Agent and,
if applicable, the Intermediate Participant. The Fund will invest in a Loan
only if the outstanding debt obligations of the Agent and Intermediate
Participants, if any, are, at the time of investment, investment grade (i.e.,
(a) rated BBB or better by Standard and Poor's Ratings Group ("S&P") or Baa or
better by Moody's Investors Service, Inc. ("Moody's"); or (b) rated A-3 or
better by S&P or P-3 or better by Moody's; or (c) determined by CIMCO to be of
comparable quality).

Although the Fund generally holds only Loans for which the Agent and
Intermediate Participants, if any, are banks, the Fund may acquire Loans from
non-bank financial institutions and Loans originated, negotiated and
structured by non-bank financial institutions, if the Loans conform to the
credit requirements described above. As other types of Loans are developed and
offered to investors, CIMCO will consider making investments in these Loans,
consistent with the Fund's investment objective, policies and quality
standards, and in accordance with applicable custody and other requirements of
the 1940 Act.

Discount Loans

The Fund may from time to time acquire Loans at a discount from their
nominal value or with a facility fee that exceeds the fee traditionally
received in connection with the acquisition of Loans ("Discount Loans"). The
Borrowers with respect to Discount Loans may have experienced, or may be
perceived to be likely to experience, credit problems, including involvement
in or recent emergence from bankruptcy reorganization proceedings or other
forms of credit restructuring. In addition, Discount Loans may become
available as a result of an imbalance in the supply of and demand for certain
Loans. The Fund may acquire Discount Loans in order to realize an enhanced
yield or potential capital appreciation when CIMCO believes that the market
has undervalued those Loans due to an excessively negative assessment of a
Borrower's creditworthiness or an imbalance between supply and demand. The
Fund may benefit from any appreciation in value of a Discount Loan, even if
the Fund does not obtain 100% of the Loan's face value or the Borrower is not
wholly successful in resolving its credit problems.

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<PAGE>

Other Information About Loans

A Borrower must comply with various restrictive covenants contained in the
applicable Loan Agreement. In addition to requiring the scheduled payment of
interest and principal, these covenants may include restrictions on dividend
payments and other distributions to stockholders, provisions requiring the
Borrower to maintain specific financial ratios, and limits on total debt. The
Loan Agreement may also contain a covenant requiring the Borrower to prepay
the Loan with any free cash flow. Free cash flow generally is defined as net
cash flow after scheduled debt service payments and permitted capital
expenditures, and includes the proceeds from asset dispositions or securities
sales. A breach of a covenant that is not waived by the Agent (or by the
lenders directly, as the case may be) is normally an event of default, which
provides the Agent or the lenders directly the right to call the outstanding
Loan.

The Fund may have certain obligations in connection with a Loan, such as,
under a revolving credit facility that is not fully drawn down to loan
additional funds under the terms of the credit facility. The Fund will not
invest in Loans that would require the Fund to make any additional investments
in connection with future advances if such commitments would exceed 20% of the
Fund's total assets or would cause the Fund to fail to meet the
diversification requirements described below. The Fund will maintain a
segregated account with its Custodian of liquid, high-grade debt obligations
with a value equal to the amount, if any, of the Loan that the Fund has
obligated itself to make to the Borrower, but that the Borrower has not yet
requested.

The Fund may receive and/or pay certain fees in connection with its
activities in buying, selling and holding Loans. These fees are in addition to
interest payments received, and may include facility fees, commitment fees,
commissions and prepayment penalty fees. When the Fund buys a Loan, it may
receive a facility fee, and when it sells a Loan, it may pay a facility fee.
The Fund may receive a commitment fee based on the undrawn portion of the
underlying line of credit portion of a Loan, or, in certain circumstances, the
Fund may receive a prepayment penalty fee on the prepayment of a Loan by a
Borrower. The Fund may also receive other fees, including covenant waiver fees
and covenant modification fees.

From time to time CIMCO or its affiliates may borrow money from various
banks in connection with their business activities. These banks also may sell
Loans to the Fund or acquire Loans from the Fund, or may be Intermediate
Participants with respect to Loans owned by the Fund. These banks also may act
as Agents for Loans that the Fund owns.

Unsecured Loans and Short-Term and Medium-Term Obligations

The Fund may hold up to 20% of its total assets in cash or invested in
short-term or medium-term debt obligations or in Unsecured Loans. The Fund
will invest only in Unsecured Loans that CIMCO determines have a credit
quality at least equal to that of the collateralized Loans in which the Fund
primarily invests. With respect to an Unsecured Loan, if the Borrower defaults
on its obligation, there is no specific collateral on which the Fund can
foreclose, although the Borrower typically will have assets that CIMCO
believes exceed the amount of the Unsecured Loan at the time of purchase.

The short-term and medium-term debt obligations in which the Fund may invest
include, but are not limited to, senior Unsecured Loans with a remaining
maturity of one year or less, certificates of deposit, commercial paper,
short-term and medium-term notes, bonds with remaining maturities of less than
five years, obligations issued by the U.S. Government or any of its agencies
or instrumentalities, and repurchase agreements. All of the debt instruments
described in this paragraph, other than Unsecured Loans, will be investment
grade (i.e., rated Baa, P-3 or better by Moody's or BBB, A-3 or better by S&P
or, if unrated, determined by CIMCO to be of comparable quality). For a
definition of the ratings assigned to instruments, see Appendix A to the
Statement of Additional Information. Pending investment of the proceeds of
Fund sales, or when CIMCO believes that investing for defensive purposes is
appropriate, more than 20% (up to 100%) of the Fund's total assets may be
temporarily held in cash or in the short-term and medium-term debt obligations
described in this paragraph.

Foreign Investments

The Fund also may acquire U.S. dollar denominated Loans made to non-U.S.
Borrowers (a) (i) located in any country whose unguaranteed, unsecured and
otherwise unsupported long-term sovereign debt obligations are rated A3 or
better by Moody's and A- or better by S&P or (ii) with significant U.S.
dollar-based revenues or significant U.S.-based operations and (b) located in
a country that does not impose withholding taxes on payment of principal,
interest, fees, or other payments to be made by the Borrower; provided,
however, that any such Borrower meets the credit standards established by
CIMCO for U.S. Borrowers, and no more than 25% of the Fund's net assets are
invested in Loans of non-U.S. Borrowers. Loans to non-U.S. Borrowers may
involve certain

11
<PAGE>

special considerations not typically associated with investing in U.S.
Borrowers. Information about a foreign company may differ from that available
with respect to U.S. Borrowers, because foreign companies are not generally
subject to uniform accounting, auditing and financial reporting standards,
practices and requirements comparable to those applicable to U.S. Borrowers.
There may be greater risk in valuing and monitoring the value of collateral
underlying loans to non-U.S. Borrowers. There generally is less government
supervision and regulation of financial markets and listed companies in
foreign countries than in the United States. The Fund will not invest in
Unsecured Loans of non-U.S. Borrowers.

Repurchase Agreements

The Fund may enter into repurchase agreements with respect to its permitted
investments, but currently intends to do so only with member banks of the
Federal Reserve System or with primary dealers in U.S. Government securities.
Under a repurchase agreement, the Fund buys a security at one price and
simultaneously promises to sell that same security back to the seller at a
higher price. The Fund's repurchase agreements will provide that the value of
the collateral underlying the repurchase agreement always will be at least
102% of the repurchase price, including any accrued interest earned on the
repurchase agreement, and will be marked to market daily. The repurchase date
is usually within seven days of the original purchase date. In all cases,
CIMCO must be satisfied with the creditworthiness of the other party to the
agreement before entering into a repurchase agreement. In the event of the
bankruptcy (or other insolvency proceeding) of the other party to a repurchase
agreement, the Fund might experience delays in recovering its cash. To the
extent that the value of the securities the Fund purchased may have declined
in the meantime, the Fund could experience a loss.

Other Investments

The Fund may acquire warrants and other equity securities as part of a unit
combining Loans and equity securities of the Borrower or its affiliates, but
only incidentally to the Fund's purchase of a Loan. The Fund also may acquire
equity securities issued in exchange for a Loan or issued in connection with a
Borrower's debt restructuring or reorganization, or if the acquisition, in the
judgment of CIMCO may enhance the value of a Loan or otherwise would be
consistent with the Fund's investment policies.

Fundamental Investment Restrictions And Policies

The Fund has adopted certain fundamental investment restrictions and
policies which may not be changed unless authorized by a shareholder vote.
These are set forth in the Statement of Additional Information. Among these
fundamental restrictions, the Fund may not purchase any security if, as a
result of the purchase, more than 25% of the Fund's total assets (taken at
current value) would be invested in the securities of Borrowers and other
issuers having their principal business activities in the same industry (the
electric, gas, water and telephone utility industries being treated as
separate industries for the purpose of this restriction). There is no
limitation on purchasing securities the issuer of which is deemed to be in the
financial institutions industry, which includes commercial banks, thrift
institutions, insurance companies and finance companies. There is no
limitation with respect to obligations issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities. Except for the
fundamental restrictions and policies set forth as such in the Fund's
Statement of Additional Information, the Fund's investment objective and
policies are not fundamental policies and accordingly may be changed by the
Fund's Board of Directors without obtaining the approval of the Fund's
shareholders. Notwithstanding the Fund's investment policies and restrictions,
the Fund may invest all or part of its investable assets in a management
investment company with substantially the same investment objective, policies
and restrictions as the Fund, which could allow creation of a "master/feeder"
structure.

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RISK FACTORS
- -------------------------------------------------------------------------------

Because the Fund's assets will include primarily floating rate loans and
other short-term instruments, CIMCO expects that the Fund's net asset value
will be relatively stable during normal market conditions. It is also likely
that the value of the portfolio will fluctuate less with changes in interest
rates than a portfolio that includes fixed-rate debt.

There are, of course, a number of factors that could cause a decline in the
Fund's net asset value, including loan default, changes in creditworthiness,
or a sudden and dramatic increase in interest rates. At the same time, a
sudden and extreme decline in interest rates could result in an increase in
the Fund's net asset value.

Because this is a recently organized entity, the Fund has a limited
operating history. The Fund is not a money market fund and its net asset value
will fluctuate.

Credit Risk

Under normal conditions, the Fund will invest at least 80% of its assets in
Loans. One of the most significant risks to investing in Loans is credit risk,
the risk that the Borrower will not pay interest or repay principal in a
timely manner. The Fund's receipt of principal and interest also depends on
the credit worthiness of Agents and Intermediate Participants. If payments are
late or do not occur at all, the dividends paid to investors and the net asset
value of the Fund may fall.

Loans made in connection with recapitalizations, acquisitions, leveraged
buy-outs, and refinancings may involve more credit risks than other Loans in
which the Fund invests, including the possibility of default on the Loan or
bankruptcy of the Borrower. This type of Loan may be more volatile and less
liquid than other Loans. We expect the Fund's Loans will be primarily this
type of Loan.

The Fund will generally invest in Loans that are most senior in a Borrower's
capitalization structure. These Loans require repayment ahead of other
obligations if credit restructuring occurs. Still, many of these Borrowers may
also have non-investment grade subordinated debt that they may find difficult
to repay if economic conditions deteriorate. If this occurs, the Borrower may
be perceived as less creditworthy, may have difficulties obtaining financing
to cover short-term cash flow needs, and may even be forced into bankruptcy or
other forms of credit restructuring.

"Bridge" loans provide Borrowers with temporary financing until other assets
are sold, or longer term financing is arranged. The Fund may invest directly
in these types of Loans, or may invest in Loans of Borrowers that have
obtained bridge loans from other parties. Bridge loans are subject to the risk
that the Borrower may not find permanent financing to replace the bridge loan.
This could damage the Borrower's perceived creditworthiness.

Collateral Impairment

Collateral impairment is the risk that the value of the collateral for a
loan will fall. The Fund expects to invest in collateralized loans, loans
secured by other things of value the Borrower owns.

Loans are secured unless:

(a) The value of the collateral declines below the amount of the Loan, or

(b) The Fund's security interest in the collateral is invalidated for any
reason by a court, or

(c) The collateral is no longer required under the terms of the Loan
Agreement as the creditworthiness of the Borrower improves.

There is no guarantee that the sale of collateral would allow Borrowers to
meet their obligations should they become unable to repay principal or
interest, or that the collateral could be sold quickly and easily.

The value of the collateral will be set using several criteria:

. The Borrower's financial statements

. An independent appraisal

. The market value of the collateral

. Other customary techniques chosen by CIMCO

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<PAGE>

Collateral is valued generally with the understanding that the Borrower is
an ongoing concern. As a result, the value of the collateral may exceed its
immediate liquidation value.

Collateral may include:

(a) Working capital assets, such as accounts receivable and inventory,

(b) Tangible fixed assets, such as real property, buildings and equipment,

(d) Security interests in shares of stock of subsidiaries or affiliates,
and

(e) Assets of shareholders of the Borrower, if the Borrower is private
company.

If the collateral is the stock of the Borrower's subsidiaries or other
affiliates, the Fund will be subject to the risk that this stock will decline
in value.

Any type of decline in the value of collateral could cause the Loan to
become undercollateralized or unsecured. In this case, there is usually no
requirement to pledge more collateral. The Fund may invest in Loans that are
guaranteed or collateralized by the shareholders of private companies.

If a Borrower becomes involved in bankruptcy proceedings, a court may decide
that the Loan does not require repayment through the sale of collateral and
may even determine that other obligations be repaid first. Other things could
occur, including errors in paperwork, which could invalidate the Fund's
security interest in Loan collateral. If this occurs, the Fund is unlikely to
recover the full amount of the principal and interest due on the Loan.

Loans may be unsecured for brief periods if a Borrower's principal asset is
the stock of a related company which may not legally be pledged, until this
stock can be pledged or is exchanged for other assets.

Investments in Lower Quality Securities

The Fund may invest all or nearly all of its assets in Loans or other
securities that are rated below investment grade by Moody's Investors Service,
similarly rated by another nationally recognized statistical rating
organization, or, if unrated, deemed by CIMCO to be of equivalent quality.

Debt rated Baa or higher by Moody's is considered to be investment grade.
Moody's considers debt rated Baa by Moody's to have speculative
characteristics. Moody's considers debt rated Ba or B by Moody's to be
predominantly speculative regarding the issuer's ability to pay interest and
repaying principal. Moody's also uses the numerical modifiers 1, 2 and 3 to
indicate where in the generic rating classification a particular security
ranks, with 1 being the highest and 3 the lowest.

These ratings of debt securities represent the rating agency's opinion
regarding their quality, they are not a guarantee of quality. Rating agencies
try to evaluate the safety of principal and interest payments, they do not
take into consideration the risks of fluctuations in market value. Because
rating agencies may not change ratings quickly in response to company changes,
an issuer's current financial condition may be better or worse than a rating
indicates. Securities rated Ba and lower are the equivalent of high-yield,
high-risk bonds, commonly known as "junk bonds," and involve a high degree of
risk. They are generally more vulnerable to economic downturns or developments
affecting the Borrower. CIMCO does not expect to invest in any securities
rated lower than B3 at the time of investment. See Appendix A to the Statement
of Additional Information "Description of Ratings" for a full description of
Moody's long-term debt ratings. In the event of a downgrade or decrease in the
rating of a Loan, CIMCO will consider whether to sell that Loan.

Typically, the market values of lower-quality loans change in response to
company changes more than higher quality loans. Higher quality loans react
primarily to fluctuations in the general level of interest rates. Also, lower-
quality debt securities tend to be more sensitive to economic conditions and
generally have more volatile prices than higher-quality securities.

Non-Diversification and Industry Concentration

The Fund is classified as a "non-diversified" investment company within the
meaning of the 1940 Act. This means that the only limits on the amount the
Fund may invest in a single issuer are the diversification requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
See "Taxes" in the Statement of Additional Information for a description of
these requirements. The Fund plans to invest no more than 10% of its assets in
Loans of any one Borrower.

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<PAGE>

When the Fund chooses to invest a high percentage of its assets in the
obligations of just a few issuers, the value of the Fund's investments can
react more significantly to any one event than the value of a fund that is
more diversified.

The Fund may acquire Loans made to Borrowers in any industry. The Fund will
not concentrate its investments in any one industry. However, because the Fund
may buy loans through intermediaries who may be legally considered issuers,
the Fund may be deemed concentrated in the financial services industry.
Because this is so, the Fund is subject to certain risks. Some of the risks
related to financial services include regulatory controls and legislative
changes that may limit lending or make it riskier or less profitable, and
general financial and economic conditions. See "Investment Restrictions" in
the Statement of Additional Information.

Illiquid Instruments

Not all Loans are easy to sell because of legal and contractual
restrictions. Although Loans are traded among certain financial institutions,
some of the Loans that the Fund buys are not as liquid, or saleable, as
typical investment grade debt and may be considered illiquid. It may be more
difficult to sell Loans where the creditworthiness of the Borrower has
changed, or is thought to have changed. Reselling loans may also become more
difficult with market changes or other concerns about Borrowers' ability to
repay loans in general.

This illiquidity may affect the Fund's ability to maintain its net asset
value if Loans must be sold. Over time, the liquidity of Loans should improve.

SEC rules and Board of Directors procedures require the Fund to maintain
enough liquidity to make its monthly Repurchase Offers, generally expected to
be 10% of outstanding shares, but there are no other liquidity restrictions.
See "Repurchase Offers."

Borrowing By The Fund

The Fund may borrow money in amounts up to 33 1/3% of the value of its total
assets to finance Repurchase Offers, for temporary, extraordinary or emergency
purposes. Although it currently does not intend to, the Fund also may issue
one or more series of preferred shares or borrow money to finance additional
investments but only when it believes that the return will exceed the costs of
this strategy. If costs do exceed returns, the return realized by the Fund's
shareholders will be adversely affected. While borrowing and issuing a class
of preferred stock having priority over the Fund's common shares create an
opportunity for greater income per common share, it also involves increased
exposure to losses. These risks may be reduced through borrowing and preferred
stock with floating rates of interest. Borrowing may also limit the Fund's
freedom to pay dividends or engage in other activities.

The Fund may establish an unsecured, discretionary credit facility (the
"Facility") to partially finance Repurchases. The Facility would allow the
Fund to borrow up to $100,000,000 or 33 1/3% of the Fund's total assets,
whichever is less, on an unsecured, uncommitted basis. This Facility will have
a floating interest rate, such as LIBOR, to be selected at the Fund's option.

Under the 1940 Act, the Fund may only borrow money provided that right after
borrowing, the Fund has assets that equal 300% of the total outstanding
principal balance of indebtedness. Also, the 1940 Act requires that the Fund
may only declare dividends or distributions or purchase capital stock provided
that right after doing so, the Fund has assets that equal 300% of total
principal balance of debt.

If the Fund cannot make distributions as a result of these requirements the
Fund may no longer qualify as a regulated investment company and could be
required to pay additional taxes. The Fund may also be forced to sell
investments on unfavorable terms if market fluctuations or other factors
reduce the required asset below what is required.

The Fund's willingness to borrow money for investment purposes, and the
amount it will borrow, will depend on many factors, the most important of
which are investment outlook, market conditions and interest rates. Successful
use of a borrowing strategy depends on CIMCO's ability to predict correctly
interest rates and market movements, and there is no assurance that a
borrowing strategy will be successful during any period in which it is
employed.

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<PAGE>

Any indebtedness issued by the Fund or borrowing by the Fund either:

(a) will mature by the next Repurchase Request Date (as defined below under
"Repurchase Offers") or

(b) Can be redeemed, called or repaid by the Fund by the next Repurchase
Request Date without penalty or premium, if that is necessary to allow
the Fund to repurchase shares as required by the Board of Directors and
the 1940 Act.

Limited Availability of Loans

Investment in Loans that meet the Fund's standards may be subject to limited
availability. There is risk that the Fund may not be able to invest 80% or
more of its total assets in Loans.

- -------------------------------------------------------------------------------
REPURCHASE OFFERS
- -------------------------------------------------------------------------------

In order to provide shareholders with liquidity and the ability to receive
net asset value on a disposition of shares, the Fund will make monthly offers
to repurchase a percentage of outstanding shares at net asset value
("Repurchase Offers"). For this purpose, Class A, Class B, and Class C shares
are considered as a single class. Because the Fund is a closed-end fund, you
will not be able to redeem your shares on a daily basis.

As explained in more detail below, the "Repurchase Request Date" will be the
last business day of each month. Under normal circumstances, we expect that
the Fund will determine the net asset value applicable to repurchases on that
date. The Fund expects to distribute payment on the next business day, and
will distribute payment on or before the Repurchase Payment Deadline, which is
no later than five business days (or seven calendar days, whichever period is
shorter) after the Pricing Date. Shareholders will be sent notification of the
next Repurchase Offer 7 to 14 days prior to the next Repurchase Request Date.
It is unlikely that a secondary market for the Fund's shares will develop, and
the Distributor will not engage in any efforts to develop a secondary market.

Repurchase Amount

Each month, the Fund's Board of Directors will determine the percentage of
shares to be repurchased ("Repurchase Amount"). We expect that the Repurchase
Amount generally will be 10%, but it may vary between 5% and 25%, of shares
outstanding on the Repurchase Request Date. Currently, the Fund is subject to
an undertaking that the Repurchase Amount will not exceed 10%.

There is no minimum number of shares that must be tendered before the Fund
will honor repurchase requests. In other words, if, in the aggregate, only one
share is tendered in a given month, the Fund must repurchase it. However,
there is a maximum Repurchase Amount, so you should be aware of the risk that
the Fund may not be able to repurchase all shares tendered in any given month.
See "Oversubscribed Repurchase Offers; Pro Rata Allocation."

Repurchase Requests

Shareholders will be sent a Notification of Repurchase Offer
("Notification") 7 to 14 days before the next Repurchase Request Date. The
Notification will provide information about the Repurchase Offer, including
the Repurchase Amount, the Repurchase Request Date, and the means by which
shareholders may obtain the Fund's net asset value.

Shareholders who wish to tender shares for repurchase must notify the Fund
or their Authorized Intermediary on or before the Repurchase Request Date in a
manner designated by the Fund. THE REPURCHASE REQUEST DATE IS A DEADLINE THAT
WILL BE STRICTLY OBSERVED. Shareholders and Authorized Intermediaries that
fail to submit Repurchase Requests in good order by this deadline will be
unable to liquidate shares until a subsequent Repurchase Offer.

A shareholder may tender all or a portion of his or her holdings (although
the Fund may not be able to repurchase the shareholder's entire tender if
aggregate tenders exceed the Repurchase Amount (as discussed further below)).
A shareholder may withdraw or change a Repurchase Request at any point before
the Repurchase Request Date, but not after that date.

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<PAGE>

Determination of Repurchase Price

The Fund will establish the Repurchase Price at a share's net asset value as
determined after the close of business on the Pricing Date. Under normal
circumstances, we expect that the Pricing Date generally will be the
Repurchase Request Date. In no event will the Pricing Date be more than three
business days after the Repurchase Request Date. The Fund will compute net
asset value daily (as described under "Valuing Fund Shares"), and you may
obtain daily net asset value by calling 800-872-8037.

The Fund does not presently intend to deduct any repurchase fees from this
amount (other than any applicable Early Withdrawal Charge). However, in the
future, the Board of Directors may determine to charge a repurchase fee
payable to the Fund reasonably to compensate it for its expenses directly
related to the repurchase. These fees could be used to compensate the Fund
for, among other things, its costs incurred in disposing of securities or in
borrowing in order to make payment for repurchased shares. Any repurchase fee
will never exceed two percent of the proceeds of the repurchase and will be
charged to all repurchased shares on a pro rata basis. It should be noted that
the Board may implement repurchase fees without a shareholder vote.

Payment

The Fund expects to distribute payment on the next business day after the
Pricing Date; in any event, the Fund will pay repurchase proceeds no later
than the Repurchase Payment Deadline, which is five business days (or seven
calendar days, whichever is shorter) after the Pricing Date. Repurchase
proceeds will be paid by wire transfer or check.

Early Withdrawal Charge

Class B Shares are subject to an Early Withdrawal Charge of 3% during the
first year after purchase, and declining to 2.5% after the first year, 2.0%
after the second year, 1.0% after the third year, and 0% after the fourth
year. Class C Shares are subject to an Early Withdrawal Charge of 1% during
the first year after purchase.

Oversubscribed Repurchase Offers; Pro Rata Allocation

In any given month, shareholders may tender a number of shares that exceeds
the Repurchase Offer Amount (this prospectus refers to this situation as an
"Oversubscribed Repurchase Offer"). In the event of an Oversubscribed
Repurchase Offer, the Fund may repurchase additional shares in excess of 10%
but only up to a maximum aggregate of two percent of the shares outstanding
for any three consecutive Repurchase Offers ("Additional Repurchase Amount").

For example, if in Month 1 the Fund offers to repurchase 10% of shares then
outstanding, and shareholders tender 11%, the Fund could determine to
repurchase the extra 1% of shares then outstanding. In that event, over the
next two repurchase offers, the Fund only would be able to repurchase an
aggregate of 1% of shares outstanding pursuant to an Oversubscribed Repurchase
Offer. If the Fund determines not to repurchase the Additional Repurchase
Amount, or if shareholders tender an amount exceeding the Repurchase Offer
Amount plus the Additional Repurchase Amount, the Fund will repurchase the
shares tendered on a pro rata basis.

In the event of an Oversubscribed Repurchase Offer, shareholders may be
unable to liquidate some or all of their investment during that monthly
Repurchase Offer. A shareholder may have to wait until a later month to tender
shares that the Fund is unable to repurchase, and would be subject to the risk
of net asset value fluctuations during this time period.

Adoption of Repurchase Policy

The Board has adopted a resolution setting forth the Fund's fundamental
policy to conduct Repurchase Offers ("Repurchase Policy"). The Repurchase
Policy may be changed only by a majority vote of the Fund's outstanding voting
securities. The Repurchase Policy states that the Fund will make monthly
Repurchase Offers, that the Repurchase Date will be the last business day of
the month, and that the Pricing Date will be no later than three business days
after the Repurchase Request Date. Under the Repurchase Policy, the Repurchase
Amount may be from 5% to 25% of the Fund's shares outstanding on the
Repurchase Request Date. The Fund's undertaking to limit the Repurchase Amount
to 10% is not part of the Repurchase Policy and may be changed without a
shareholder vote. The Fund also may offer to repurchase its shares on a
discretionary basis, not pursuant to its fundamental policy, not more
frequently than once every two years.

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<PAGE>

Liquidity Requirements

The Fund must maintain liquid assets equal to the Repurchase Offer Amount
from the time that the Notification is sent to shareholders until the Pricing
Date. The Fund will ensure that a percentage of its net assets equal to at
least 100 percent of the Repurchase Offer Amount consists of assets (a) that
can be sold or disposed of in the ordinary course of business at approximately
the price at which the Fund has valued the investment within the time period
between the Repurchase Request Date and the Repurchase Payment Deadline; or
(b) that mature by the Repurchase Payment Deadline.

The Board has adopted procedures that are reasonably designed to ensure that
the Fund's assets are sufficiently liquid so that the Fund can comply with the
Repurchase Policy and the liquidity requirements described in the previous
paragraph. If, at any time, the Fund falls out of compliance with these
liquidity requirements, the Board will take whatever action it deems
appropriate to ensure compliance.

The Fund intends to satisfy the liquidity requirements with cash on hand,
cash raised through borrowings, and Loans. There is some risk that the need to
sell Loans to fund Repurchase Offers may affect the market for those Loans. In
turn, this could diminish the Fund's net asset value.

Suspension or Postponement of a Repurchase Offer

The Fund may suspend or postpone a Repurchase Offer in limited
circumstances, and only by vote of a majority of the Board of Directors,
including a majority of the independent Directors. These circumstances are
limited and include the following:

(a) if the repurchase would cause the Fund to lose its status as a
regulated investment company under Subchapter M of the Internal Revenue
Code;

(b) for any period during which an emergency exists as a result of which it
is not reasonably practicable for the Fund to dispose of securities it
owns or to determine the value of the Fund's net assets;

(c) for any other periods that the Securities and Exchange Commission
permits by order for the protection of shareholders;

(d) if the shares are listed on a national securities exchange or quoted in
an inter-dealer quotation system of a national securities association
(e.g., Nasdaq) and the repurchase would cause the shares to lose that
status; or

(e) during any period in which any market on which the shares are
principally traded is closed, or during any period in which trading on
the market is restricted.

Consequences of Repurchase Offers

Although the Board believes that Repurchase Offers generally will be
beneficial to the Fund's shareholders, repurchases will decrease the Fund's
total assets and therefore have the possible effect of increasing the Fund's
expense ratio. Furthermore, if the Fund borrows to finance repurchases,
interest on that borrowing may reduce the Fund's net investment income. The
Fund intends to offer new shares continuously, which may alleviate these
potential consequences, although there is no assurance that the Fund will be
able to secure new investments.

Repurchase Offers provide shareholders with the opportunity to dispose of
shares at net asset value. The Fund does not anticipate that a secondary
market will develop, but in the event that a secondary market were to develop,
it is possible that shares would trade in that market at a discount to net
asset value. The existence of periodic Repurchase Offers at net asset value
may not alleviate such a discount.

In addition, the repurchase of shares by the Fund will be a taxable event to
shareholders. See "Distributions and Taxes" for further information.

Change of Notice and Monthly Board Meeting Requirements

Currently, the Fund's Board of Directors determines the amount of the
Repurchase Offer once each month, and shareholders receive a notice before
each Repurchase Offer, under rules of the Securities and Exchange Commission.
The Fund may request approval from the Securities and Exchange Commission to
make its determination and provide notice to its shareholders on a quarterly
basis. If such approval is granted, then the Board would meet once each
quarter to determine the amount of the next three Repurchase Offers, and you
would receive one notice for those three Repurchase Offers.

18
<PAGE>

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MANAGEMENT OF THE FUND
- -------------------------------------------------------------------------------

The Board of Directors oversees the management of the Fund and elects its
officers. The Fund's officers are responsible for the Fund's day-to-day
operations.

Advisory Arrangements

CAM is the investment adviser for the Fund. CAM was formed in 1996, together
with Distributors, to advise and distribute mutual funds through broker-
dealers, banks and other intermediaries. CAM and Distributors are wholly-owned
subsidiaries of CypressTree Investments, Inc., an affiliate of Cypress Holding
Company, Inc., which is controlled by its management and Berkshire Fund IV,
L.P., a leveraged buyout firm. The address of CAM is 125 High Street, Boston,
Massachusetts 02110, and the address of Distributors is 286 Congress Street,
Boston, Massachusetts 02210. CAM serves as investment adviser to the North
American Funds, an open-end series fund with 15 separate investment portfolios
managed by nine different subadvisers, with approximately $1.1 billion in
aggregate assets. CAM also serves as investment adviser to another closed-end
fund investing in Loans.

Pursuant to its advisory agreement with the Fund (the "Advisory Agreement"),
CAM oversees the administration of certain aspects of the business and affairs
of the Fund, and selects, contracts with and compensates the subadviser to
manage the Fund's assets. CAM monitors the compliance of the subadviser with
the investment objectives and related policies of the Fund, reviews the
performance of the subadviser, and reports periodically on such performance to
the Board of Directors. CAM permits its directors, officers and employees to
serve as directors or officers of the Fund, without cost to the Fund.

As compensation for its services, CAM receives from the Fund an annual fee
paid monthly equal to the following percentage of average daily gross assets,
depending on the size of the Fund: 0.85% for the first $1 billion of average
daily gross assets; 0.80% for average daily gross assets of between $1 billion
and $2 billion; and 0.75% for average daily gross assets of more than $2
billion. For purposes of computing the advisory fee, average daily gross
assets are determined by deducting from total assets of the Fund all
liabilities except the principal amount of any indebtedness from money
borrowed, including debt securities issued by the Fund.

CAM has agreed to waive a portion of its advisory fee or reimburse the Fund
in order to prevent the total expenses of the Fund, excluding taxes, portfolio
brokerage commissions, interest, certain litigation and indemnification
expenses, and extraordinary expenses, from exceeding 1.45% of average daily
gross assets for Class A and Class B shares and 1.55% of average daily gross
assets for Class C shares. This agreement may be terminated by CAM at any time
on thirty (30) days' written notice.

CIMCO has been retained by CAM as the subadviser to the Fund to manage the
investment and reinvestment of the Fund's assets. CAM also has retained CIMCO
to serve as investment subadviser to another closed-end fund investing in
Loans with approximately $87 million in assets. CIMCO was founded in 1996 as
the nation's first independent investment advisory firm specializing in the
loan asset class and currently has $4.0 billion in assets under management.
CIMCO is a wholly-owned subsidiary of Cypress Holding Company.

Pursuant to a subadvisory agreement between CAM and CIMCO (the "Subadvisory
Agreement"), CIMCO selects the investments made by the Fund and establishes
and applies credit standards applicable to the Fund's investments in Loans.
See "Investment Policies." As compensation for its services as subadviser,
CIMCO receives from CAM an annual fee paid monthly equal to the following
percentage of average daily gross assets, based on the size of the Fund: 0.45%
for the first $1 billion of average daily gross assets; 0.40% for average
daily gross assets between $1 billion and $2 billion; and 0.35% for average
daily gross assets of more than $2 billion. Average daily gross assets are
computed as described above. The fee to CIMCO is paid by CAM and is not an
additional charge to the Fund or its shareholders. For further information,
see "Advisory, Administration and Distribution Services" in the Statement of
Additional Information.

Portfolio Management

Jeffrey S. Garner, age 43, has been employed as Chief Investment Officer of
CIMCO since 1996, and is an Executive Vice President of the Fund. As Chief
Investment Officer, Mr. Garner is responsible for the overall supervision of
CIMCO'S investment management of the Fund. From 1989 to 1996, Mr. Garner was a
Vice President of Eaton Vance Management, where he served as the portfolio
manager for the Senior Debt Portfolio managed by Eaton Vance (the "master"
fund for Eaton Vance Prime Rate Reserves, EV Classic Senior Floating-Rate
Fund, and the EV Medallion Senior Floating-Rate Funds) (the "Eaton Vance
Senior Debt Portfolio").

19
<PAGE>

Peter K. Merrill, age 38, is the Portfolio Manager of the Fund, and is a
Vice President of CIMCO. Mr. Merrill joined CIMCO in June 1997. Previously,
from 1988, Mr. Merrill held a variety of positions with BankBoston
Corporation, specializing in high yield portfolio management and leveraged
bank loans.

Administration Agreement

CAM acts as the Fund's administrator under an Administration Agreement (the
"Administration Agreement"). Under the Administration Agreement, CAM is
responsible for managing the Fund's business affairs, subject to supervision
by the Fund's Board of Directors. CAM reserves the right to delegate all or a
part of its obligations under the Administration Agreement to a third party.
Any delegation of administrative duties will not affect the administration fee
paid by the Fund.

Services provided by the administrator include recordkeeping, preparation
and filing of documents required to comply with federal and state securities
laws, supervising the activities of the Fund's custodian and transfer agent,
providing assistance in connection with the Directors' and shareholders'
meetings, providing services in connection with Repurchase Offers, and other
administrative services necessary to conduct the Fund's business. In return
for these services, facilities and payments, the Fund pays CAM an annual fee
paid monthly equal to 0.40% annually of the average daily gross assets of the
Fund as compensation under the Administration Agreement. For purposes of
computing the administration fee, average daily gross assets are determined by
deducting from total assets of the Fund all liabilities except the principal
amount of any indebtedness for money borrowed, including debt securities that
the Fund has issued.

Fund Costs and Expenses

The Fund is responsible for all of its costs and expenses not expressly
stated to be payable by CAM under the Advisory Agreement or the Administration
Agreement, or by Distributors under its Distribution Agreement. See "Advisory,
Administration and Distribution Services" in the Statement of Additional
Information.

- -------------------------------------------------------------------------------
VALUING FUND SHARES
- -------------------------------------------------------------------------------

The Fund values its shares once on each day the New York Stock Exchange
("NYSE") is open for trading as of the close of regular trading on the
exchange. The Fund is informed that, as of the date of this prospectus, the
NYSE observes the following business holidays: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.

The Fund's net asset value per share is determined by State Street Bank &
Trust Company (as agent for the Fund) in the manner authorized by the Fund's
Board of Directors. State Street Bank & Trust Company also serves as Transfer
Agent and Custodian for the Fund and has custody of the Fund's assets. The
Custodian's address is 225 Franklin Street, Boston, Massachusetts 02110.

The net asset value of the shares of each class of the Fund is calculated
separately. In determining the net asset value of a share of each class of the
Fund, the value of the securities and other assets attributable to that class
(including interest and dividends accumulated but not yet received) minus all
liabilities (including accrued expenses) attributable to that class is divided
by the total number of shares of that class of the Fund outstanding at that
time. Expenses, including the fees payable to CAM, are accrued daily.

Loans will be valued in accordance with guidelines established by the Board
of Directors. Under the Fund's current guidelines, Loans for which an active
secondary market exists to a reliable degree in the opinion of CIMCO and for
which CIMCO can obtain at least two quotations from banks or dealers in Loans
will be valued by calculating the mean of the last available bid and asked
prices in the market for such Loans, and then using the mean of those two
means. If only one quote for a particular Loan is available, the Loan will be
valued on the basis of the mean of the last available bid and asked price in
the market.

Loans for which an active secondary market does not exist to a reliable
degree in the opinion of CIMCO will be valued at fair value, which is intended
to approximate market value. In valuing a Loan at fair value, CIMCO will
consider, among other factors, (a) the creditworthiness of the Borrower and
any Intermediate Participants, (b) the terms of the Loan, (c) recent prices in
the market for similar Loans, if any, and (d) recent prices in the market for
instruments of similar quality, rate, period until next interest rate reset
and maturity.

20
<PAGE>

Other portfolio securities (other than short-term obligations but including
listed issues) may be valued on the basis of prices furnished by one or more
pricing services that determine prices for normal, institutional-size trading
units of such securities using market information, transactions for comparable
securities and various relationships between securities which are generally
recognized by institutional traders. In certain circumstances, other portfolio
securities are valued at the last sale price on the exchange that is the
primary market for such securities, or the last quoted bid price for those
securities for which the over-the-counter market is the primary market or for
listed securities in which there were no sales during the day. Positions in
options are valued at the last sale price on the principal trading market for
the option. Obligations purchased with remaining maturities of 60 days or less
are valued at amortized cost unless this method no longer produces fair
valuation. Repurchase agreements are valued at cost plus accrued interest.
Rights or warrants to acquire stock, or stock acquired pursuant to the
exercise of a right or warrant, may be valued taking into account various
factors such as original cost to the Fund, earnings and net worth of the
issuer, market prices for securities of similar issuers, assessment of the
issuer's future prosperity, or liquidation value or third party transactions
involving the issuer's securities. Securities for which there exist no price
quotations or valuations and all other assets are valued at fair value as
determined in good faith by or on behalf of the Board of Directors of the
Fund.

- -------------------------------------------------------------------------------
PERFORMANCE INFORMATION
- -------------------------------------------------------------------------------

The Fund seeks to provide an effective yield that is higher than other
short-term instrument alternatives. From time to time, the Fund may include
its current and/or effective yield based on various specific time periods.
Yields will fluctuate from time to time and are not necessarily representative
of future results.

The current yield is calculated by annualizing the most recent monthly
distribution (i.e., multiplying the distribution amount by 365/31 for a 31 day
month) and dividing the product by the current maximum offering price. The
effective yield is calculated by dividing the current yield by 12 and adding
1. The resulting quotient is then taken to the 12th power and reduced by 1.
The result is the effective yield.

On occasion, the Fund may compare its yield to: (a) LIBOR, quoted daily in
the Wall Street Journal, (b) the CD Rate as quoted daily in the Wall Street
Journal as the average of top rates paid by major New York banks on primary
new issues of negotiable CDs, usually on amounts of $1 million or more, (c)
the Prime Rate, quoted daily in The Wall Street Journal as the base rate on
corporate loans at large U.S. money center commercial banks, (d) one or more
averages compiled by Donoghue's Money Fund Report, a widely recognized
independent publication that monitors the performance of money market mutual
funds, (e) the average yield reported by the Bank Rate Monitor National
IndexTM for money market deposit accounts offered by the 100 leading banks and
thrift institutions in the ten largest standard metropolitan statistical
areas, (f) yield data published by Lipper Analytical Services, Inc., (g) the
yield on an investment in 90-day Treasury bills on a rolling basis, assuming
quarterly compounding, or (h) the yield on an index of loan funds comprised of
all continually offered closed-end bank loan funds, as categorized by Lipper
(the "loan fund index"). In addition, the Fund may compare the Prime Rate, the
Donoghue's averages and the other yield data described above to each other.
Yield comparisons should not be considered indicative of the Fund's yield or
relative performance for any future period.

Advertisements and communications to present or prospective shareholders
also may cite a total return for any period. Total return is calculated by
subtracting the net asset value of a single purchase of shares at a given date
from the net asset value of those shares (assuming reinvestment of
distributions) on a later date. The difference divided by the original net
asset value is the total return. The Fund may include information about the
total return on the loan fund index, and compare that to the total return of
the Fund and other indices.

All dividends and distributions are assumed to be reinvested in additional
shares of the Fund at net asset value. Therefore, the calculation of the
Fund's total return and effective yield reflects the effect of compounding.
The calculation of total return, current yield and effective yield does not
reflect the amount of any shareholder income tax liability, which would reduce
the performance quoted. If the Fund's fees or expenses are waived or
reimbursed, the Fund's performance will be higher.

Finally, the Fund may include information on the history of the Fund's net
asset value per share and the net asset value per share of the loan fund
index, including comparisons between them, in advertisements and other
material furnished to present and prospective shareholders. Information about
the performance of the Fund or other investments is not necessarily indicative
of future performance and should not be considered a representation of what an
investor's yield or total return may be in the future.

21
<PAGE>

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MULTIPLE PRICING SYSTEM
- -------------------------------------------------------------------------------

The Fund's Multiple Pricing System permits you to choose the method of
purchasing shares that is most beneficial given the amount of the purchase and
the length of time you expect to hold the shares.

Class B Shares. Class B shares are offered for sale at net asset value
without a front-end sales charge, but are subject to an Early Withdrawal
Charge of 3% during the first year after purchase, and declining to 2.5% after
the first year, 2.0% after the second year, 1.0% after the third year, and 0%
after the fourth year. See "Multiple Pricing System--Early Withdrawal Charge."
In addition, Class B shares are subject to a service fee of up to 0.25%, and a
distribution fee of up to 0.50% of average annual net assets. See "How to Buy
Fund Shares--Class B Shares" and "--Distribution Expenses." Class B shares
will automatically convert to Class A shares eight years after the end of the
calendar month in which the shareholder's order to purchase was accepted. See
"Multiple Pricing System--Conversion Feature."

Class C Shares. Class C shares are offered for sale at net asset value
without a front-end sales charge, but are subject to an Early Withdrawal
Charge of 1% during the first year after purchase. See "Multiple Pricing
System--Early Withdrawal Charge." Class C shares are subject to a service fee
of up to 0.25%, and a distribution fee of up to 0.50% of average annual net
assets. Class C shares purchased on or after August 18, 1999 ("New Class C
shares") do not have an automatic conversion feature. Class C shares purchased
before August 18, 1999 ("Old Class C shares") will automatically convert to
Class A shares ten years after the end of the calendar month in which the
shareholder's order to purchase was accepted. See "Multiple Pricing System--
Conversion Feature." The higher ongoing distribution fees payable by Class C
shares as a result of the lack of a conversion feature for New Class C shares
(or the longer time period for conversion for Old Class C shares) would cause
the Class C shares to have an overall higher expense ratio and to pay lower
dividends than Class B shares. See "How to Buy Fund Shares--Class C Shares"
and "--Distribution Expenses."

If you tender your Class C shares for repurchase or exchange in one of the
Fund's monthly repurchase offers, Class C shares will be repurchased in order
of the date purchased, with the shares purchased earliest being repurchased
first, unless you specifically request that specific shares be repurchased.

Class A Shares. Class A shares are available only upon conversion of Class B
and Old Class C shares. See "Multiple Pricing System--Conversion Feature."
Class A shares are subject to a service fee of up to 0.25% of average annual
net assets.

Conversion Feature. Class B shares will automatically convert to Class A
shares eight years after the end of the calendar month in which the
shareholder's order to purchase was accepted and after that date will no
longer be subject to the distribution fee. Conversion will be on the basis of
the relative net asset values per share, without the imposition of any sales
charge, fee or other charge. The purpose of the conversion feature is to
relieve the holders of Class B shares from most of the burden of distribution-
related expenses at such time as the shares have been outstanding for a
duration sufficient for Distributors to have been substantially compensated
for distribution-related expenses incurred in connection with those shares.

New Class C Shares do not have an automatic conversion feature. Old Class C
Shares automatically convert to Class A shares after the end of the calendar
month in which the shareholder's order to purchase was accepted and after that
date will no longer be subject to a distribution fee.

For purposes of the conversion of Class B and Old Class C shares to Class A
shares, shares purchased through the reinvestment of dividends and
distributions paid on Class B shares or Old Class C shares, as the case may
be, in a shareholder's account will be considered to be held in a separate
sub-account. Each time any Class B shares or Old Class C shares in the
shareholder's account (other than those in the sub-account) convert to Class A
shares, a pro rata portion of the Class B shares or Old Class C shares, as the
case may be, in the sub-account will also convert to Class A shares. Class C
shares purchased through the reinvestment of dividends and distributions paid
on New Class C Shares purchased on or after August 18, 1999 will not convert
to Class A shares.

The conversion of Class B and Old Class C shares to Class A shares is
subject to the continuing availability of an opinion of counsel to the effect
that such conversion will not constitute a taxable event for federal tax
purposes. The conversion of Class B and Old Class C shares may be suspended if
such an opinion is no longer available. In that event, no further conversions
of Class B or Old Class C shares would occur, and those shares might continue
to be subject to the distribution fee for an indefinite period which may
extend beyond the period ending eight years or ten years, respectively, after
the end of the calendar month in which the shareholder's order to purchase was
accepted.

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<PAGE>

Factors for Consideration. The Fund's Multiple Pricing System is designed to
provide you with the option of choosing the class of shares best suited to
your individual circumstances and objectives. To assist you in evaluating the
costs and benefits of purchasing shares of each class, the information
provided above under the captions "Fee Table" and "Example" sets forth the
charges applicable to each class and illustrates an example of a hypothetical
investment in each class of shares of the Fund.

There are important distinctions among the classes of shares that you should
understand and evaluate in comparing the options offered by the Multiple
Pricing System. Class C shares are subject to the same ongoing distribution
fee (0.50%) and service fee (0.25%) as Class B shares, but as a result of
current fee waivers and reimbursements, distribution fees paid for Class B
shares are 0.00% while distribution fees paid for Class C shares are 0.10%.
Class B shares thus currently pay correspondingly higher dividends per share.
Class C shares are subject to a lower Early Withdrawal Charge and an Early
Withdrawal Charge for a shorter period of time (one year as opposed to three
years) than Class B shares. Class B shares convert to Class A shares in eight
years whereas Class C shares that you purchase do not have a conversion
feature. Class A shares are not subject to the distribution fee applicable to
Class B and Class C shares, and, accordingly, may pay correspondingly higher
dividends per share. Based on the fee waivers and reimbursements currently in
effect, Class A shares would pay higher dividends per share than Class C
shares.

In light of these distinctions among the classes of shares, you should weigh
such factors as (a) whether, at the time of purchase, you anticipate being
subject to an Early Withdrawal Charge upon repurchase and (b) the differential
in the relative amounts that would be paid during the anticipated life of
investments (which are made at the same time and in the same amount) in each
class that are attributable to the accumulated distribution and service fees
(and any applicable Early Withdrawal Charge) payable with respect to Class C
shares and to Class B shares (and Old Class C shares) before their conversion
to Class A shares. You should consult your investment representative for
assistance in evaluating the relative benefits of the different classes of
shares.

The distribution and shareholder service expenses incurred by Distributors
in connection with the sale of shares will be paid from the ongoing
distribution and service fees and from the proceeds of the Early Withdrawal
Charges. Sales personnel of broker-dealers distributing the Fund's shares and
any other persons entitled to receive compensation for selling or servicing
the Fund's shares may receive different compensation for selling or servicing
one class of shares over another. You should understand that Early Withdrawal
Charges and ongoing distribution and service fees are all intended to
compensate Distributors for distribution services. See "How to Buy Fund
Shares--Distribution Expenses."

Dividends paid by the Fund with respect to each class of shares will be
calculated in substantially the same manner at the same time on the same day,
except that distribution and service fees and any other costs specifically
attributable to a particular class of shares will be borne solely by the
applicable class. See "Distributions."

The Directors of the Fund have determined that currently no conflict of
interest exists between the classes of shares. On an ongoing basis, the
Directors of the Fund, pursuant to their fiduciary duties under the 1940 Act
and state laws, will seek to ensure that no such conflict arises.

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HOW TO BUY FUND SHARES
- -------------------------------------------------------------------------------

Introduction

The Fund offers two classes of shares to the general public, sold without a
front-end sales charge, but subject to an Early Withdrawal Charge. See
"Multiple Pricing System" for a discussion of factors to consider in selecting
which class of shares to purchase.

Shares are offered continuously for sale through securities dealers and
banks that have executed an agreement (a "Dealer Agreement") with
Distributors. Certain states require that purchases of shares of the Fund be
made only through a broker-dealer registered in the state.

The initial purchase of any class of shares must be at least $5,000. The
minimum for subsequent investments is $500. There is a $100 minimum initial
and a $50 subsequent investment requirement for purchases made in connection
with tax-sheltered retirement accounts.

When purchasing shares, you must specify whether the purchase is for Class B
or Class C shares.

23
<PAGE>

General Methods of Purchasing Shares

1. By Mail. To make an initial account purchase, mail a check made payable
in U.S. dollars to "North American Funds" with a completed New Account
Application (copy enclosed with this Prospectus) to:

North American Funds
P.O. Box 8505
Boston, MA 02266-8505

Third party checks payable to an existing shareholder of the Fund who is a
natural person (as opposed to a corporation or partnership) and endorsed over
to the Fund will be accepted.

To make a purchase of shares to an existing North American Funds account,
please note your account number on the check and forward it with an account
investment slip to the above address.

Note: To establish certain tax deferred retirement plan accounts, such as
IRAs, you will be required to complete a separate application which may be
obtained from Distributors or a securities dealer who has a Dealer Agreement
with Distributors. See "Considerations for Retirement Plan Investors."

2. By Federal Funds Wire. Shares may be purchased by wire transfer. To
obtain instructions for Federal Funds Wire purchases, please contact the
Customer Service Department at (800) 872-8037.

3. Through a Securities Dealer. You may purchase shares by contacting a
securities dealer who has a Dealer Agreement with Distributors.

Orders will be assigned the next closing price after receipt of the order.

Exchange Privileges

Shareholders of the Fund are offered certain exchange privileges with shares
of beneficial interest of the Portfolios of the North American Funds, an open-
end management investment company for which CAM serves as the advisor. A
prospectus describing the North American Funds and the various Portfolios can
be obtained from Distributors.

Exchange of Fund Shares for North American Fund Shares. Shareholders of the
Fund whose shares are repurchased in a Monthly Repurchase Offer may exchange
those shares for shares of the same class of certain Portfolios of the North
American Funds. Exchanges will be at relative net asset value, without the
imposition of any front end sales charge.

No Early Withdrawal Charge will be imposed on shares of the Fund making such
an exchange. However, Class B and Class C shareholders will be subject to a
contingent deferred sales charge ("CDSC") on any North American Funds shares
acquired equivalent to the Early Withdrawal Charge on the Fund shares
exchanged. Thus shares of the North American Funds may be subject to a CDSC
upon a subsequent redemption from the North American Funds. The time of
purchase for computing the CDSC period will be deemed the time of the initial
purchase of Fund shares. The CDSC or Early Withdrawal Period will be tolled
for any period of time shares are held in the North American Funds Money
Market Fund.

Exchange of North American Fund Shares for Fund Shares. Shareholders of the
North American Funds will have such privilege of exchanging their shares for
shares of the Fund as is described in the North American Funds Prospectus.
Generally, shareholders of a class of the North American Funds may exchange
their shares for shares of the same class of the Fund, at relative net asset
value and without imposition of any front end sales charge. These shareholders
will become subject to an Early Withdrawal Charge on Fund shares equivalent to
the CDSC applicable to the particular class exchanged, and will be deemed to
have purchased Fund shares at the time of the initial purchase of North
American Fund shares. The CDSC or Early Withdrawal Period will be tolled for
any period of time shares are held in the North American Funds Money Market
Fund.

General Information

Exchanges are generally regarded as sales for federal and state income tax
purposes and could result in a gain or loss, depending on the original cost of
shares exchanged. If the exchanged shares were acquired within the previous 90
days, the gain or loss may have to be computed without regard to any sales
charges incurred on the exchanged shares (except to the extent those sales
charges exceed those sales charges waived in connection with the exchange).
See "Taxation." Exchanges are free and unlimited in number and will occur on
the same

24
<PAGE>

day as requested with respect to exchanges into the Fund, and on the
Repurchase Payment Date with respect to exchanges out of the Fund. The terms
of the foregoing exchange privilege are subject to change and the privileges
may be terminated at any time. The exchange privilege is available only where
the exchange may be made legally.

By mail--an exchange will be honored by written letter request to the Fund
if signed by all registered owners of the account.

By telephone--all accounts are eligible for the telephone exchange
privilege.

Share Price

Class B Shares. Class B shares are offered for sale at net asset value
without a front-end sales charge. Class B shares repurchased within four years
of purchase are subject to an Early Withdrawal Charge at the rates set forth
in the table below. See "How to Buy Fund Shares--Early Withdrawal Charge."

<TABLE>
<S> <C>
First Year.............................................................. 3.0%
Second Year............................................................. 2.5%
Third Year.............................................................. 2.0%
Fourth Year............................................................. 1.0%
After Fourth Year....................................................... 0.0%
</TABLE>

The Early Withdrawal Charge may be waived on certain repurchases of shares.
See "How to Buy Fund Shares--Waiver of Early Withdrawal Charge."

Class C Shares. Class C shares are offered for sale at net asset value
without a front-end sales charge. Class C shares are subject to an Early
Withdrawal Charge of 1% during the first year after purchase. See "How to Buy
Fund Shares--Early Withdrawal Charge."

The Early Withdrawal Charge may be waived on certain repurchases of shares.
See "How to Buy Fund Shares--Waiver of Early Withdrawal Charge."

Early Withdrawal Charge

The Early Withdrawal Charge is assessed on an amount equal to the lesser of
the net asset value at repurchase or the initial purchase price of the shares
being repurchased. Solely for purposes of determining the amount of time from
the purchase of shares until repurchase, all orders accepted during a month
are aggregated and deemed to have been made on the last business day of that
month.

In determining the amount of the Early Withdrawal Charge that may be
applicable to a repurchase, any shares in the shareholder's account that may
be repurchased without charge will be assumed to be repurchased before those
subject to a charge. In addition, if the Early Withdrawal Charge is determined
to be applicable to repurchased shares, it will be assumed that shares held
for the longest duration are repurchased first. No Early Withdrawal Charge is
imposed on (a) amounts representing increases in the net asset value per
share; or (b) shares acquired through reinvestment of income dividends or
capital gains distributions.

Waiver of Early Withdrawal Charge

Qualified Retirement Plans. The Early Withdrawal Charge may be waived in
connection with repurchases from qualified retirement plans (other than
Individual Retirement Accounts ("IRAs")) in the case of (a) death or
disability (as defined in section 72(m)(7) of the Code, as amended from time
to time) of the participant in the retirement plan, (b) required minimum
distributions from the retirement plan due to attainment of age 70 1/2, (c)
tax-free return of an excess contribution to the retirement plan, (d)
retirement of the participant in the retirement plan, (e) a loan from the
retirement plan (repayment of a loan, however, will constitute a new sale for
the purposes of assessing Early Withdrawal Charge), (f) "financial hardship"
of the participant in the retirement plan, as that term is defined in Treasury
Regulation 1.401(k)-1(d)(2), as amended from time to time, (g) termination of
employment of the participant in the plan (excluding, however, a partial or
other termination of the retirement plan), and (h) the plan participant
obtaining age 59 1/2.

Certain Qualified Purchasers. The Early Withdrawal Charge will be waived for
Class C Shares purchased by the following:

(a) directors and officers of the Fund, and their immediate families
(immediate family means the spouse, children, mother or father);

25
<PAGE>

(b) full-time employees and registered representatives of broker-dealers
having Dealer Agreements with Distributors ("Selling Broker"), and
their immediate families (and any trust, pension, profit sharing or
other benefit plan for the benefit of such persons);

(c) full-time employees of a bank, savings and loan, credit union or other
financial institution that uses a Selling Broker to clear purchases of
Fund shares, and their immediate families.

(d) CAM, CIMCO and any of their affiliates, and any director, officer,
full-time employee or sales representatives of these entities, and
their immediate families (or any trust, pension, profit sharing or
other benefit plan for the benefit of such persons);

(e) Shareholders of other investment companies who invest in the Fund in
response to certain promotional activities.

(f) Investors whose purchase represents the proceeds from the redemption,
within the preceding 60 days, of shares of any other load mutual fund
(i.e., a mutual fund that deducts a sales charge from purchase payments
or a contingent deferred sales charge upon redemption). When making a
purchase pursuant to this provision, the selling dealer must so
indicate on the New Account Application. Only the initial purchase of
shares is eligible for the waiver. All subsequent purchases will be
subject to the early withdrawal charge; and

We will waive the early withdrawal charge for selling dealers which include
the Class C share in "wrap fee programs" (i.e., advisory programs where the
client is charged a specific fee not based directly upon transactions in the
clients account for investment advisory services and execution of
transactions). The selling dealer must indicate the wrap fee account use on
the New Account Application. We will also waive the early withdrawal charges
for purchases of Class C shares in the amount of $3 million or more. In both
of these types of cases, the .75% dealer fee will not be paid to a broker or
intermediary and the distribution and service fee of .75% will be credited
immediately rather than in the 13th month. See "Distribution Expenses."

Other Waivers. The Early Withdrawal Charge may be waived in connection with
(a) repurchases made following the death of a shareholder, (b) repurchases
effected pursuant to the Fund's right to liquidate a shareholder's account if
the aggregate net asset value of the shares held in the account is less than
any applicable minimum account size and (c) a tax-free return of an excess
contribution to any retirement plan.

Distribution Expenses

In addition to the Early Withdrawal Charge that may apply on repurchases of
Class B and Class C shares, each class of shares is authorized under the
Distribution Plan applicable to that class of shares (the "Class B Plan" and
the "Class C Plan," and collectively, the "Plans") to use the assets
attributable to that class of shares of the Fund to finance certain activities
relating to the distribution of shares to investors. The Plans are
"compensation" plans providing for the payment of a fixed percentage of
average net assets to finance distribution expenses. The Plans allow for the
payment by each class of shares of the Fund of a monthly distribution and
service fee to Distributors, as principal underwriter for the Fund. Portions
of the fees described below are used to provide payments to Distributors, to
promotional agents, to brokers, dealers or financial institutions
(collectively, "Selling Agents") and to service organizations for ongoing
account services to shareholders and are similar to "service fees" as defined
in Rule 2830(b)(9) of the Rules of Conduct of the NASD.

Payments under the Plans are used primarily to compensate Distributors for
distribution services provided by it in connection with the offering and sale
of the applicable class of shares, and related expenses incurred, including
payments by Distributors to compensate or reimburse Selling Agents for sales
support services provided and related expenses incurred by Selling Agents.
These services and expenses may include the development, formulation and
implementation of marketing and promotional activities, the preparation,
printing and distribution of prospectuses and reports to recipients other than
existing shareholders, the preparation, printing and distribution of sales
literature, expenditures for support services such as telephone facilities and
expenses and shareholder services as the Fund may reasonably request,
provision to the Fund of such information, analyses and opinions with respect
to marketing and promotional activities as the Fund may, from time to time,
reasonably request, commissions, incentive compensation or other compensation
to, and expenses of, account executive or other employees of Distributors or
Selling Agents, attributable to distribution or sales support activities
respectively, overhead and other office expenses of Distributors or Selling
Agents and any other costs and expenses relating to distribution or sales
support activities. Distributors may pay directly Selling Agents and may provide
directly the distribution services described above.

26
<PAGE>

Distributors currently pays a trail commission to securities dealers with
respect to accounts that those dealers continue to service as follows: Class B
shares--0% in the first year, 0.10% in the second year, 0.15% in the third
year, and 0.20% in the fourth year and 0.25% annually each year after the
fourth year; and Class C--0.75% shares annually. Trail commissions commence
the 13th month after purchase. The trail commission payable following
conversion of Class B and Class C shares to Class A shares will be in the
amount of 0.25% annually.

In the case of sales of Class B shares, Distributors will pay each dealer a
fee of 3% of the amount of Class B shares purchased as a commission or
transaction fee. In the case of sales of Class C shares, Distributors will pay
each securities dealer a fee of 0.75% of the purchase price of Class C shares
purchased through the securities dealer as a commission or transaction fee.

The distribution and service fees attributable to the Class B and Class C
shares are designed to permit an investor to purchase shares without the
assessment of a front-end sales charge, and, with respect to the Class C
shares, with the assessment of an Early Withdrawal Charge in the first year
only, and at the same time permit Distributors to compensate securities
dealers with respect to those sales.

Distributors is authorized by each Plan to retain any excess of the fees it
receives under the Plan over its payments to selected dealers and its expenses
incurred in connection with providing distribution services. Thus, payments
under a Plan may result in a profit to Distributors. Payments made under the
Plans are subject to quarterly review by the Directors and the Plans are
subject to annual review and approval by the Directors. In 1999, Distributors
received $7,047 for the distribution of Class B shares and $43,899 for the
distribution of Class C shares. This amount is inclusive of expense
reimbursements. Absent such reimbursements, the Fund is authorized to pay up
to .50% of average daily net assets for Class B and Class C shares.

In adopting the Plans, the Directors determined that the adoption of the
Plans is in the best interests of the Fund and its shareholders, that there is
a reasonable likelihood that the Plans will benefit the Fund and its
shareholders, and that the Plans are essential to, and an integral part of,
the Fund's program for financing the sale of shares to the public.

Distributors is a broker/dealer registered under the Securities Exchange Act
of 1934, as amended (the "1934 Act") and is a member of the NASD.
Distributors' address is 286 Congress Street, Boston, Massachusetts 02210.

The compensation paid to securities dealers and the principal underwriter at
the time of the purchase, the trail commissions described herein, and the
early withdrawal charge paid to securities dealers and the principal
underwriter, if any, in connection with this offering will not exceed 8% of
the aggregate offering price unless the National Association of Securities
Dealers permits.

Suspension of Sales

From time to time the Fund may suspend the continuous offering of its shares
in response to market conditions in the securities markets or otherwise, and
may later resume the continuous offering. During any such suspension,
shareholders who reinvest their distributions in additional shares will be
permitted to continue reinvestments, and the Fund may permit tax sheltered
retirement plans that own shares to purchase additional shares of the Fund.
The Fund may refuse any order for the purchase of shares.

The Fund is not an appropriate investment for investors who are market-
timers. Investors who engage in excessive in-and-out trading activity generate
additional costs that are borne by all of the Fund's shareholders. To minimize
these costs, which reduce the ultimate returns achieved by all shareholders,
the Fund reserves the right to reject any purchase orders from investors
identified as market-timers.

Considerations for Retirement Plan Investors

Retirement plan investors should be aware of certain features of the Fund
that may affect their decision as to whether the Fund is an appropriate
investment for the retirement plan. Unlike shares of an open-end mutual fund,
Fund shares are not redeemable on each day that the Fund is open for business;
and unlike traditional closed end funds, shares of the Fund do not trade on
any exchange and thus cannot readily be sold. Although the Fund has adopted a
policy of Monthly Repurchase Offers, these Repurchase Offers may not provide
shareholders with the degree of liquidity they desire or may require for tax
purposes. Even during a Repurchase Offer, a shareholder may not be able to
have all of the shares it wishes to tender be repurchased by the Fund.
Moreover, shares repurchased may be subject to the Early Withdrawal Charge.

27
<PAGE>

The features described above could result in a retirement plan paying an
Early Withdrawal Charge and/or not being able to comply with mandatory
distribution requirements. Accordingly, retirement plan investors may wish to
limit the percentage of plan assets that are invested in the Fund.

The Fund does not monitor retirement plan requirements for any investor.
Please consult your legal, tax or retirement plan specialist before choosing a
retirement plan or electing to invest in the Fund through a retirement plan.
Your investment representative or advisor can help you make investment
decisions within your plan.

- -------------------------------------------------------------------------------
SHAREHOLDER SERVICES
- -------------------------------------------------------------------------------

For additional information on any of the programs described in the following
sections, you should contact the Fund or eligible securities dealers.

Automatic Investment Plan

Shareholders who open an account who wish to make subsequent monthly
investments in the Fund may establish an Automatic Investment Plan as part of
the initial Application or subsequently by submitting an Application. Under
this plan, on or about the tenth day of each month the Transfer Agent will
debit the shareholder's bank account in the amount specified by the
shareholder (which monthly amount may not be less than $500). The proceeds
will be invested in shares of the specified class of the Fund at the
applicable offering price determined on the date of the debit. Participation
in the Automatic Investment Plan may be discontinued on 30 days' written
notice to the Transfer Agent, or if a debit is not honored.

Transfer of Shares

Shareholders may transfer Fund shares to family members and others at any
time without incurring an Early Withdrawal Charge being imposed at that time.
Shareholders should consult their tax adviser concerning transfers.

Telephone Transactions

Shareholders are permitted to request exchanges and/or repurchases by
telephone. The Fund will not be liable for following instructions communicated
by telephone that it reasonably believes to be genuine. The Fund will employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine and may only be liable for any losses due to unauthorized or
fraudulent instructions where it fails to employ its procedures properly.

Upon telephoning a request, shareholders will be asked to provide their
account number, and if not available, their social security number. For the
shareholder's and Fund's protection, all conversations with shareholders will
be tape recorded. All telephone transactions will be followed by a
confirmation statement of the transaction.

Payment

Payment for shares repurchased will be made by federal wire or by mail as
specified by the shareholder in the Fund Application. Payment will normally be
sent on the business day following the date of receipt of the request. Payment
by wire to the shareholder's bank account must be in amounts of $1,000 or
more. Although the Fund does not assess a charge for wire transfers, banks may
assess charges for the transaction. Payments by mail may only be sent to an
account address of record and may only be payable to the registered owner(s).

Additional Shareholder Privileges

Certain privileges listed in this section may not be offered by the Fund if
a shareholder holds shares with the Fund in the "street name" of a financial
institution, or if the account is networked through National Securities
Clearing Corporation (NSCC).

Automatic Investment Plan. A shareholder who wishes to make subsequent,
periodic investments in the Fund by electronic funds transfer from a bank
account may establish an Automatic Investment Plan on the shareholder's
account. The bank at which the account is maintained must be a member of the
Automated Clearing House. The frequency with which the investments occur is
specified by the shareholder (monthly, every alternate month, quarterly, etc.)
with the exception that no more than one investment will be processed each
month. On or about the tenth of the month, the Fund will debit the
shareholder's bank account in the specified amount (minimum of $50 per draft)
and the proceeds will be invested at the applicable offering price determined
on the date of the debit.

28
<PAGE>

Automatic Dividend Reinvestment. Dividends and distributions will be
automatically reinvested at the net asset value per share next determined on
the payable date of the dividend or distribution. Pursuant to the Fund's
Automatic Dividend Reinvestment ("ADR") Program (the "Program"), all dividends
and other distributions, net of any applicable withholding taxes, will be
automatically reinvested in additional shares, newly issued by the Fund,
unless the shareholder otherwise instructs in writing the Fund's Transfer
Agent, as the Program agent (the "Program Agent"). There will be no charge to
participants for reinvesting dividends or other distributions. The Fund will
pay the Program Agent's fees for the handling of reinvestment of
distributions.

A shareholder whose shares are held by a broker-dealer or nominee that does
not provide a dividend reinvestment service may be required to have his or her
shares registered in his or her own name to participate in the Program.
Similarly, a shareholder may be unable to transfer his or her account to
certain broker-dealers and continue to participate in the Program. Investors
who own shares registered in street name should contact the broker or nominee
for details concerning participation in the Program.

The Program Agent will maintain all participant accounts in the Program and
furnish written confirmations of all transactions in the accounts, including
information needed for personal and tax records. The Program Agent may hold
shares in the participant's account in non-certificated form in the name of
the Program Agent or the Program Agent's nominee, and each shareholder's proxy
will include those shares purchased pursuant to the Program. Participants in
the Program may withdraw from the Program on written notice to the Program
Agent.

In the case of a shareholder of record, such as a bank, broker-dealer or
nominee, that holds shares for others who are the beneficial owners, the
Program Agent will administer the Program on the basis of the number of shares
certified from time to time by the record shareholder as representing the
total amount registered in the shareholder's name and held for the account of
beneficial owners who participate in the Program.

All registered holders of shares (other than brokers and nominees) will be
mailed information regarding the Program, including a form with which they may
elect to terminate participation in the Program and receive further dividends
and other distributions in cash. An election to terminate participation in the
Program must be made in writing to the Program Agent and should include the
shareholder's name and address as they appear on the account registration. An
election to terminate will be deemed to be an election by a shareholder to
take all subsequent distributions in cash until the election is changed. An
election will be effective only for distributions declared and having a record
date at least ten days after the date on which the election is received.

Shareholders who do not participate in the Program will receive all
dividends and other distributions in cash, net of any applicable withholding
taxes, paid in U.S. dollars by check or wire transfer. Shareholders who do not
wish to have dividends and other distributions reinvested automatically should
notify the Program Agent at P.O. Box 8505, Boston, MA 02266-8505. Dividends
and other distributions with respect to shares registered in the name of a
broker-dealer or other nominee (i.e., in "street name") will be reinvested
under the Program unless the broker-dealer does not provide that service, or
if the nominee or the shareholder elects to receive dividends and other
distributions in cash.

The Fund and the Program Agent reserve the right to terminate the Program as
applied to any dividend or other distribution paid subsequent to notice of the
termination sent to the participants in the Program at least 30 days before
the record date for the distribution. The Program also may be amended by the
Fund or the Program Agent, but (except when necessary or appropriate to comply
with applicable law, rules or policies of a regulatory authority) only by at
least 30 days' written notice to participants in the Program. Shareholders
should direct all correspondence regarding the Program to the Program Agent,
at P.O. Box 8505, Boston, MA 02266-8505.

The receipt of dividends and other distributions in shares under the Program
will not relieve participants of any income tax (including withholding taxes)
that may be payable with respect to the distributions. See "Taxes."

How to Obtain Investment Information

1. Confirmation of Share Transactions and Dividend Payments. Share
transactions, other than transactions pursuant to a Systematic
Withdrawal Plan, Automatic Investment Plan, and Systematic Investing
Plan, will be confirmed immediately in the form of an account
confirmation statement which will be mailed to the account address of
record.

The Fund will confirm all account activity occurring within a calendar
quarter, including the payment of dividend and capital gain distributions and
transactions made as a result of a Systematic Withdrawal Plan, Automatic
Investment Plan, and Systematic Investing Plan, shortly after the end of each
calendar quarter.

29
<PAGE>

The Fund also reserves the right to confirm, with respect to certain tax
qualified plans and certain group plans, purchases and sales of Fund shares on
a quarterly basis.

A copy of all confirmation statements will be sent to the securities dealer
firm listed on the shareholder's account.

2. Shareholder Inquiries. Shareholders should direct any questions or
requests concerning the Fund or your account by writing to North
American Funds, P.O. Box 8505, Boston, Massachusetts 02266-8505, or by
calling the Fund Customer Service Department at 1-800-872-8037.

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DISTRIBUTIONS
- -------------------------------------------------------------------------------

The Fund will declare distributions daily and pay distributions monthly.
Substantially all of the Fund's investment income, less Fund expenses, will be
declared daily as a distribution to shareholders of record as recorded by the
Transfer Agent at the time of declaration. Daily distribution crediting will
begin on the day after the Transfer Agent has received funds for the purchase
of Fund shares, even if orders to purchase shares had been placed with
Authorized Intermediaries. The Fund ordinarily will pay investment income
distributions on the last day of each month, whether the shareholder elects to
receive cash or to reinvest in additional shares. The Fund will distribute
realized net capital gains, if any, at least annually, usually in December,
after offset by any capital loss carryovers.

- -------------------------------------------------------------------------------
TAXES
- -------------------------------------------------------------------------------

The Fund intends to satisfy those requirements relating to the sources of
its income, the distribution of its income, and the diversification of its
assets necessary to qualify for the special tax treatment afforded to
regulated investment companies under the Internal Revenue Code (the "Code").
In any taxable year in which it so qualifies, the Fund will not be liable for
federal income or excise taxes to the extent that it distributes its net
investment income and net realized capital gains to shareholders in accordance
with the timing requirements imposed by the Code. (For a detailed discussion
of tax issues pertaining to the Fund, see "Taxes" in the Statement of
Additional Information.)

Distributions paid by the Fund from its ordinary income or from an excess of
net short-term capital gain over net long-term capital loss will be treated as
ordinary income in the hands of the shareholders to the extent of the Fund's
earnings and profits. (Any such distributions in excess of the Fund's earnings
and profits first will reduce a shareholder's basis in his or her shares and,
after that basis is reduced to zero, will constitute capital gains to the
shareholder, assuming the shares are held as a capital asset.) Distributions,
if any, from the excess of net long-term capital gain over net short-term
capital loss and designated as capital gains dividends are taxable to
shareholders as long-term capital gain, regardless of the length of time the
shares of the Fund have been held by such shareholders and will generally be
subject to a maximum federal tax rate of 20%. Distributions will be taxed as
described above, whether received by the shareholders in cash or in additional
shares. It is not expected that any portion of distributions will be eligible
for the corporate dividends- received deduction.

Not later than 60 days after the close of the calendar year, the Fund will
provide its shareholders with a written notice designating the amounts of any
ordinary income dividends or capital gain dividends. If the Fund pays a
dividend in January that was declared in the previous October, November or
December to shareholders of record on a specified date in one of those months,
then such dividend will be treated for tax purposes as being paid by the Fund
and received by its shareholders on December 31 of the earlier year in which
the dividend was declared.

A holder of Fund shares who, pursuant to a Repurchase Offer, tenders all of
his or her Fund shares (and any Fund shares the holder is considered to own
pursuant to attribution rules contained in the Code) may realize a taxable
gain or loss depending upon the shareholder's basis in the shares. Such gain
or loss realized on the disposition of shares (whether pursuant to a
Repurchase Offer or in connection with a sale or other taxable disposition of
shares in a secondary market) generally will be treated as long-term capital
gain or loss if the shares have been held as a capital asset for more than one
year and as short-term capital gain or loss if held as a capital asset for one
year or less. If Fund shares are sold at a loss after being held for six
months or less, the loss will be treated as long-term--instead of short-term--
capital loss to the extent of any capital gain distributions received on those
shares. All or a portion of any loss realized on a sale or exchange of shares
of the Fund will be disallowed if the shareholder acquires other Fund shares
within 30 days before or after the disposition. In such a case, the basis of
the shares acquired will be adjusted to reflect the disallowed loss.

30
<PAGE>

Different tax consequences may apply to tendering shareholders other than
fully-tendering shareholders described in the previous paragraph and to non-
tendering shareholders in connection with a Repurchase Offer. For example, if
a shareholder tenders fewer than all shares owned by or attributed to him or
her, the proceeds received could be treated as a taxable dividend, a return of
capital, or capital gain depending on the portion of shares tendered, the
Fund's earnings and profits, and the shareholder's basis in the tendered
shares. Moreover, when a shareholder tenders fewer than all shares owned
pursuant to a Repurchase Offer, there is a risk that non-tendering
shareholders may be considered to have received a deemed distribution that is
taxable to them in whole or in part. Shareholders may wish to consult their
tax advisors.

The Fund has obtained an opinion of counsel (the "Opinion) (which opinion is
not binding on the Internal Revenue Service) concluding that shareholders will
not recognize gain or loss upon the conversion of Class B or Class C shares
into Class A shares. The Opinion also concludes that a shareholder's basis in
Class A shares received will equal his basis in the shares surrendered, and
that the shareholder's holding period for the shares received will include his
holding period for the shares surrendered.

The Fund must withhold 31% from distributions and repurchase payments, if
any, payable to any individuals and certain other noncorporate shareholders
who have not furnished to the Fund a correct taxpayer identification number
("TIN") or a properly completed claim for exemption on Form W-8 or W-9, or who
are otherwise subject to such "backup withholding." When establishing an
account, an investor must certify under penalties of perjury that the
investor's TIN (generally, his or her social security number) is correct and
that the investor is not otherwise subject to backup withholding.

Nonresident alien individuals, foreign corporations and certain other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% (or lower treaty rate) on distributions from ordinary income and from
the excess of net short-term capital gain over net long-term capital loss.
Distributions to such shareholders from the excess of net long-term capital
gain over net short-term capital loss and any amount treated as gain from the
sale or other disposition of shares of the Fund generally will not be subject
to U.S. taxation, provided that the shareholder has certified nonresident
alien status. Different U.S. tax consequences may result if the shareholder is
engaged in a trade or business in the United States or is present in the
United States for specified periods of time during a taxable year. Foreign
shareholders should consult their tax advisers regarding the U.S. and foreign
tax consequences of an investment in the Fund.

The discussion contained in this section is a general and abbreviated
summary of certain federal tax considerations affecting the Fund and its
shareholders, and is not intended as tax advice or to address a shareholder's
particular circumstances. This discussion does not address non-federal tax
consequences, or the special tax rules applicable to certain classes of
investors, such as retirement plans, tax-exempt entities, insurance companies
and financial institutions. For further information, reference should be made
to the pertinent sections of the Code and the regulations promulgated
thereunder, which are subject to change by legislative, judicial, or
administrative action, either prospectively or retroactively. Investors are
urged to consult their tax advisors regarding specific questions as to
federal, state, local, or foreign taxes. The Fund does not provide any
guarantee regarding the tax consequences of investing in the Fund.

31
<PAGE>

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DESCRIPTION OF SHARES
- -------------------------------------------------------------------------------

The Fund is a corporation organized under Maryland law. The Fund was
incorporated on March 6, 1998. The Fund's Board of Directors is responsible
for the overall management and supervision of its affairs.

The Fund is authorized to issue 1 billion shares of common stock $0.01 par
value per share. These shares are currently divided into three classes of
shares, designated as Class A, Class B and Class C shares. All shares of
common stock have equal voting rights (except as described below with respect
to matters specifically affecting a class of shares) and have no preemptive or
conversion rights (other than the automatic conversion rights of Class B and
Old Class C shares to convert to Class A shares under the Multiple Pricing
System.) The per-share net asset value of each class of shares is calculated
separately and may differ as between classes as a result of the differences in
distribution and service fees payable by the classes and the allocation of
certain incremental class-specific expenses to the appropriate class to which
such expenses apply.

All shares of the Fund have equal voting rights and will be voted in the
aggregate, and not by class, except where voting by class is required by law,
or where the matter involved affects only one class (for example matters
pertaining to the plan of distribution relating to Class B shares will only be
voted on by Class B shares). In accordance with the Fund's Articles of
Incorporation, the Board of Directors may classify and reclassify unissued
shares and may authorize the creation of additional classes of shares with
such preferences, privileges, limitations and voting and dividend rights as
the Board may determine.

Each share of each class of common stock is equal as to earnings, assets and
voting privileges, except as noted above, and each class bears the expenses
related to the distribution of its shares. In the event of liquidation, each
share of common stock of the Fund is entitled to its portion of all the Fund's
assets after all debts and expenses of the Fund have been paid. The Fund's
shares do not have cumulative voting rights for the election of directors.

The Fund does not intend to hold annual meetings of shareholders unless
otherwise required by law. The Fund will not be required to hold meetings of
shareholders unless, for example, the election of directors is required to be
acted on by shareholders under the 1940 Act.

The following table sets forth information for each class of the Fund's
authorized securities, as of March 16, 2000;

<TABLE>
<CAPTION>
Amount
Outstanding
Amount Held by Exclusive of
Registrant or for its Amount Shown
Title of Class Amount Authorized Account Under(3)
- -------------- ------------------ --------------------- ------------
<S> <C> <C> <C>
Class A................... 400,000,000 shares None 0
Class B................... 300,000,000 shares None 3,804,343
Class C................... 300,000,000 shares None 19,064,383
</TABLE>

The Fund's Articles of Incorporation generally may not be amended without
the affirmative vote of a majority of the outstanding shares of the Fund (or
such greater vote as is described below under "Anti-Takeover Provisions"). The
Fund will continue indefinitely.

Anti-Takeover Provisions

The Fund has certain anti-takeover provisions in its Articles of
Incorporation that are intended to limit, and could have the effect of
limiting, the ability of other entities or persons to acquire control of the
Fund, to cause the Fund to engage in certain transactions, or to modify the
Fund's structure.

The affirmative vote or consent of the holders of two-thirds of the Fund's
capital stock outstanding and entitled to vote on the matter (a greater vote
than that required by the 1940 Act), is required to authorize the conversion
of the Fund from a closed-end to an open-end investment company. However, if
two-thirds of the Board of Directors recommends conversion, the approval by
vote of the holders of a majority of the outstanding shares entitled to vote
on the matter will be sufficient. This provision of the Fund's Articles of
Incorporation may not be amended without the affirmative vote or consent of
two-thirds of the Fund's outstanding shares of capital stock.

32
<PAGE>

The affirmative vote or consent of the holders of at least three-fourths of
the Fund's shares of capital stock outstanding and entitled to vote on the
matter is required to approve any of the following Fund transactions (the
"Transactions"):

(a) merger, consolidation, or statutory share exchange with or into any
person;

(b) issuance of any Fund securities to any person for cash, securities, or
other property having a fair market value of $1,000,000 or more, except
for issuance or transfers of debt securities, sales of securities in
connection with a public offering, issuance of securities pursuant to a
dividend reinvestment plan, issuance of securities on the exercise of
any stock subscription rights distributed by the Fund, and portfolio
transactions effected in the ordinary course of business;

(c) sale, lease, exchange, mortgage, pledge, transfer, or other disposition
by the Fund of any assets having an aggregate fair market value of
$1,000,000 or more, except for portfolio transactions conducted in the
ordinary course of business;

(d) voluntary liquidation or dissolution of the Fund, or an amendment to
the Fund's Articles of Incorporation to terminate the Fund's existence;
or

(e) unless federal law requires a lesser vote, any shareholder proposal as
to specific investment decisions made or to be made with respect to the
Fund's assets as to which shareholder approval is required under
Maryland or federal law.

In addition, in the case of a Transaction listed in (a), (b) or (c) above,
the affirmative vote or consent of the holders of at least two-thirds of the
Fund's shares of capital stock outstanding and entitled to vote on the matter,
excluding votes entitled to be cast by the person (or an affiliate of the
person) who is a party to the Transaction with the Fund, is required.

However, the shareholder votes mentioned above will not be required with
respect to any Transaction (other than those set forth in (e) above) approved
by a vote of three-fourths of the Directors who do not have an interest in the
Transaction, including a majority of the Continuing Directors (as defined in
the Articles of Incorporation) who do not have an interest in the Transaction
and who are not "interested Directors," as that term is defined in the 1940
Act. In that case, if Maryland law requires shareholder approval, the
affirmative vote of a majority of the shares of capital stock of the Fund
outstanding and entitled to vote on the matter is required.

The provisions of the Fund's Articles of Incorporation described in this
section relating to approval of Transactions may not be amended without the
affirmative vote or consent of three-fourths of the Fund's outstanding shares
of capital stock. For the full text of these provisions, see the Articles of
Incorporation on file with the Securities and Exchange Commission.

The provisions described in this section will make it more difficult to
convert the Fund to an open-end investment company and to consummate the
Transactions without the approval of the Board of Directors. These provisions
could have the effect of depriving shareholders of an opportunity to sell
their shares at a premium over prevailing market prices (in the event that a
secondary market for the Fund shares develops) by discouraging a third party
from seeking to obtain control of the Fund in a tender offer or similar
transaction. However, the Board of Directors has considered these anti-
takeover provisions and believes that they are in the shareholders' best
interests and benefit shareholders by providing the advantage of potentially
requiring persons seeking control of the Fund to negotiate with its management
regarding the price to be paid to shareholders.

- -------------------------------------------------------------------------------
REPORTS TO SHAREHOLDERS
- -------------------------------------------------------------------------------

The Fund will send semi-annual and annual reports to its shareholders. These
reports will include financial statements which, in the case of the annual
reports, will be audited by the Fund's independent certified public
accountants. The Fund will provide shareholders with information necessary to
prepare federal and state tax returns shortly after the end of each calendar
year.

The Fund will describe the Repurchase Policy in its annual report to
shareholders. The annual report also will disclose the number of Repurchase
Offers conducted each year, the amount of each Repurchase Offer, the amount
tendered each month, and the extent to which the Fund repurchased shares in an
Oversubscribed Repurchase Offer.

33
<PAGE>

North American Senior Floating Rate Fund

PROSPECTUS
March 17, 2000

INVESTMENT ADVISER
CypressTree Asset Management Corporation, Inc.
286 Congress Street
Boston, Massachusetts 02210

INVESTMENT SUBADVISER
CypressTree Investment Management Company, Inc.
125 High Street
Boston, Massachusetts 02110

ADMINISTRATOR
CypressTree Asset Management Corporation, Inc.
286 Congress Street
Boston, Massachusetts 02210

DISTRIBUTOR
CypressTree Funds Distributors, Inc.
286 Congress Street
Boston, Massachusetts 02210

34
<PAGE>

[LOGO OF NORTH AMERICAN FUNDS]

North American Funds
286 Congress Street
Boston, Massachusetts 02210
(800) 872-8037

North American Senior Floating Rate Fund

For Additional Information
More information about the Funds, including
the SAI is available to you free of charge.
To request additional information:

By Telephone
Call: 1-800-872-8037

By Mail from the Funds (There is no fee:)
Write to:
North American Funds
P.O. Box 8505
Boston, MA 02266-8505
By Mail or in Person from the Public Reference Room of the
Securities and Exchange Commission (SEC), (You will pay a
duplication fee.)

Visit or Write to:
SEC's Public Reference Section
450 Fifth Street, NW
Washington, DC 20549-6009
1-800-SEC-0330

Online at the SEC's Internet Site
Text-only versions of fund documents can be
viewed online or downloaded from http://www.sec.gov

Statement of Additional Information (SAI)
The SAI provides additional information about the Trust and
the Funds. The SAI and the auditor's report and financial
statements included in the Trust's most recent Annual
Report to its shareholders are incorporated by reference
as part of this Prospectus.

Annual and Semi-annual Reports
The Annual and Semi-annual Reports describe the Fund's
performance, list portfolio holdings and include additional
information about the Fund's investments. The Annual
Report discusses the market conditions and investment
strategies that significantly affected the Fund's
performance during their last fiscal year.

File No. 811-8727
0300-90514