<PAGE>
NORTH AMERICAN FUNDS
Prospectus dated February 28, 1996
SUPPLEMENT FOR TEXAS RESIDENTS
dated February 28, 1996
Investors in Texas generally purchase shares through a broker-dealer registered
in Texas such as Rauscher Pierce Refsnes, Inc.
<PAGE>
NORTH AMERICAN FUNDS
Prospectus dated February 28, 1996
SUPPLEMENT FOR MARYLAND RESIDENTS
DATED February 28, 1996
The "Investment Portfolios" section begins on page 24 of the
Prospectus and the "Risk Factors" section begins on page 39 of the Prospectus.
Each of the Portfolios may enter into Hedging and Other Strategic
Transactions (also referred to as derivative transactions) for hedging purposes
only.
Hedging and Other Strategic Transactions have special risks associated
with them, including possible default by the counterparty to the transaction,
illiquidity and, to the extent the subadviser's view as to certain market
movements is incorrect, the risk that the use of the Hedging and Other Strategic
Transactions could result in losses greater than if they had not been used.
Even derivatives used for hedging purposes may entail risk and may contribute to
increasing the volatility of a Portfolio.
Each Portfolio anticipates engaging in Hedging and Other Strategic
Transactions (derivative transactions) to the extent described below:
The International Small Cap, the Growth Equity, the International
Growth and Income Fund, the Global Growth Fund, the Growth and Income Fund and
the Strategic Income Fund expect that, under normal market conditions, a maximum
of 100%, 100%, 25%, 20%, 25% and 100%, respectively, of each Portfolio's foreign
currency exposure would be hedged back into the U.S. dollar through the use of
forward foreign currency exchange contracts.
The Investment Quality Bond Fund expects that, under normal market
conditions, a maximum of 25% of the Portfolio's total assets will be exposed to
the financial markets through the use of futures contracts and options on
futures contracts.
The Value Equity Fund and the Asset Allocation Fund expect that, under
normal market conditions, a maximum of 25% of each Portfolio's total assets will
be exposed to the financial markets through the use of futures contracts.
The National Municipal Bond Fund and the Small/Mid Cap Fund do not
presently anticipate that any of the strategies referred to under Hedging and
Other Strategic Transaction will be used to a significant degree.
The U.S. Government Securities Fund and the Money Market Fund are not
currently authorized to use any of the various investment strategies referred to
under "Hedging and Other Strategic Transactions."
