<PAGE>
REGISTRATION NOS. 33-27958, 811-5797
As filed with the Securities and Exchange Commission
on April 5, 2000
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X /
--
PRE-EFFECTIVE AMENDMENT NO. __ /__/
POST-EFFECTIVE AMENDMENT NO. 33 /X /
--
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X /
--
AMENDMENT NO. 35 /X /
--
NORTH AMERICAN FUNDS
(Exact Name of Registrant as Specified in Charter)
286 Congress Street
Boston, Massachusetts 02210
(800) 872-8037
(Address of Principal Executive Offices)
John I. Fitzgerald, Esq.
General Counsel
North American Funds
286 Congress Street
Boston, MA 02210
(Agent for Service)
____________________
Copy to:
Gregory D. Sheehan, Esq.
Ropes & Gray
One International Place
Boston, MA 02110
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[_] on (date) pursuant to paragraph (b)
[x] 60 days after filing pursuant to paragraph (a)(1)
[_] on (date) pursuant to paragraph (a)(1)
<PAGE>
[_] 75 days after filing pursuant to paragraph (a)(2)
[_] on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[_] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
PARTS A AND B OF THIS AMENDMENT RELATE ONLY TO INSTITUTIONAL CLASS I SHARES
AND INSTITUTIONAL CLASS II SHARES OF THE FOLLOWING SERIES OF THE REGISTRANT:
Institutional Class I and Class II Shares
- -----------------------------------------
International Small Cap Fund
International Equity Fund
Global Equity Fund
Small Cap Growth Fund
Mid Cap Growth Fund
Large Cap Growth Fund
Growth & Income Fund
Balanced Fund
Strategic Income Fund
Core Bond Fund
U.S. Government Securities Fund
Money Market Fund
NO INFORMATION RELATING TO ANY OTHER SERIES IS AMENDED, DELETED OR SUPERSEDED BY
PARTS A AND B OF THIS AMENDMENT.
-2-
<PAGE>
[GRAPHIC]
Prospectus
2000
[NORTH AMERICAN FUNDS]
Institutional Class I Shares
Institutional CLass II Shares
International Small Cap Fund Balanced Fund
International Equity Fund Strategic Income Fund
Global Equity Fund Core Bond Fund
Small Cap Growth Fund U.S. Government Securities Fund
Mid Cap Growth Fund Money Market Fund
Large Cap Growth Fund
Growth & Income Fund
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.
June __, 2000
<PAGE>
[LOGO]
Table of Contents
Organization of Information
This Prospectus includes information about fifteen different Funds.
.Section I of the Prospectus includes summaries of each Fund.
.Section II includes additional information about the Funds' investment
strategies, additional risk information and information about the Funds'
management.
.Section III of the Prospectus includes information about how to invest
and manage your North American Funds account.
<TABLE>
<S> <C>
Section I: Summaries of the Funds............. Page 1
Summary of each Fund
.Investment Objective
.Principal Investment Strategies
.Main Investing Risks
.Investment Performance
.Descriptions of Main Investment Risks
Section II: Other Information about each Page 16
Fund..........................................
.Fees and Expenses
.More Information About Investment
Strategies and Risks
.Other Risks of Investing
.Fund Management
Section III: Investing in the Funds........... Page 33
</TABLE>
This section includes the information you need about how to invest and how to
redeem shares. It also includes other important information about sales
charges, taxes and account privileges.
More Information
If you'd like information additional to that included in this Prospectus, the
back cover lists a number of places to call or to visit for
additional materials.
<PAGE>
Section I:
Fund Summaries
North American Funds (the "Trust") is a group of mutual funds that includes
twenty-five separate investment portfolios, or Funds. Each Fund also has a
specific, unique investment objective. Each Fund has a subadvisor,
a firm responsible for making investment decisions for the Fund. This
Prospectus includes information about Institutional Class I shares and
Institutional Class II shares for twelve of the Funds.
The summaries on the next 12 pages describe each Fund's investment objective
and principal investment strategies, list the main risks of investing in the
Fund, and show the Fund's past investment performance. Explanations of the main
risks of investing in each Fund starts on page 14.
Below the Funds' descriptions are a chart and a table. The bar chart shows how
the investment returns of one class of each Fund's shares have varied in the
past ten years, or in the years since the Fund began if it is less than ten
years old. The class shown in the bar chart (either Class A shares or Class C
shares, depending on the Fund) is not offered by this Prospectus, but the
performance would have been substantially similar for Institutional Class I or
Institutional Class II shares of the same fund, differing only to the extent
that the classes have different expenses. The bar chart does not reflect sales
charges; if it did, performance would be less than shown.
The table (the Average Annual Total Return Table) following each bar chart
shows how that Fund's average annual returns for each class of shares for the
last one, five and ten years (or since the Fund began, for newer Funds)
compared to returns of a broad-based securities market index. The table
reflects sales charges, including the maximum initial sales charge for Class A
shares, and the maximum applicable Deferred Sales Charge for Class C shares.
Like the bar chart, the Average Annual Total Return Table shows performance
information for either Class A shares or Class C shares, depending on the fund,
neither of which are offered by this Prospectus.
Each Fund's bar chart and Average Annual Total Return Table provides an indica-
tion of the historical risk/return of an investment in the Fund.
It is important to remember that past performance does not predict future per-
formance, and that as with any investment, it is possible for investors to lose
money by investing in the Funds. An investment in any of the Funds is not a
deposit in a bank and is not insured by the Federal Deposit Insurance Corpora-
tion or any other government agency.
- ------
1
<PAGE>
International Small Cap Fund
Investment Goal and Strategies
The investment objective of the International Small Cap Fund is to seek capital
appreciation. To achieve this objective, Founders Asset Management, LLC
("Founders"), the Fund's subadvisor, invests primarily in equity securities
issued by foreign companies with market capitalizations, or annual revenues, of
$1 billion or less.
These companies are located in both established and emerging economies
throughout the world. Founders selects securities based on its evaluation of
their potential to offer capital appreciation opportunities. The Fund may
invest in derivatives.
Main Investing Risks
.Currency Risk
.Derivatives Risk
.Equity Risk, including the risks associated with investing in smaller compa-
nies
.Foreign Investment Risk
.Liquidity Risk
.Management Risk
The bar chart and
table provide an
indication of risk
by showing the vari-
ability of the
Fund's historical
returns.
[GRAPH]
- --------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/99
<TABLE>
<CAPTION>
Past One Year Life of Fund
(since 2/20/96)
- ----------------------------------------------
<S> <C> <C>
Class A 83.27% 23.09%
- ----------------------------------------------
MSCI WORLD 27.93% 13.18%
ex-U.S. Index
</TABLE>
- --------------------------------------------------------------------------------
------
2
<PAGE>
International Equity Fund
Investment Goal and Strategies
The investment objective of the International Equity Fund is to seek long-term
capital appreciation. Morgan Stanley Asset Management ("MSAM"), the Fund's
subadvisor, pursues this objective by investing primarily in accordance with
country and sector weightings determined by MSAM in equity securities of non-
U.S. issuers which, in the aggregate, replicate broad market indices.
MSAM seeks to maintain a diversified portfolio of international equity securi-
ties based on a top-down approach that emphasizes country and sector selection
and weighting rather than individual stock selection. MSAM capitalizes on the
significance of country and sector selection in international equity portfolio
returns by over- and underweighting countries based on three factors: (i) valu-
ation, (ii) fundamental change, and (iii) market momentum/technicals.
The Fund may use various instruments that derive their values from those of
specified securities, indices, currencies or other points of reference for both
hedging and non-hedging purposes. Derivatives may include futures, options,
forward contracts, swaps, and structured notes. These derivatives, including
those used to manage risk, are themselves subject to risks of the different
markets in which they trade and, therefore, may not serve their intended pur-
poses.
Main Investing Risks
.Currency Risk
.Derivatives Risk
.Equity Risk
.Foreign Investment Risk
.Liquidity Risk
.Management Risk
The bar chart and
table provide an
indication of risk
by showing the vari-
ability of the
Fund's historical
returns.
[GRAPH]
- --------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/99
<TABLE>
<CAPTION>
Past One Year Life of Fund
(since 1/9/95)
- ------------------------------------------------------
<S> <C> <C>
Class A 20.91% 9.55%
- ------------------------------------------------------
MSCI All Country World 30.91% 12.38%
EX-US Index
- ------------------------------------------------------
MSCI EAFE Index 26.96% 12.83%
</TABLE>
- --------------------------------------------------------------------------------
- ------
3
<PAGE>
Global Equity Fund
Investment Goal and Strategies
The investment objective of the Global Equity Fund is long-term capital
appreciation. To achieve this objective, Founders Asset Management, LLC
("Founders"), the Fund's subadvisor, invests in a globally diversified
portfolio of equity securities.
The Fund normally invests at least 65% of total assets in equity securities of
growth companies in a variety of markets throughout the world. The Fund may
purchase securities in any foreign country, as well as the United States, and
emphasizes common stocks of both emerging and established growth companies that
generally have proven performance records and strong market positions. The
Fund's portfolio will always invest at least 65% of its total assets in three
or more countries. The Fund will not invest more than 50% of its total assets
in the securities of any one foreign country. The Fund may invest in deriva-
tives.
Main Investing Risks
.Currency Risk
.Derivatives Risk
.Equity Risk, particularly the risk associated with investments in growth
stocks
.Foreign Investment Risk
.Management Risk
The bar chart and
table provide an
indication of risk
by showing the vari-
ability of the
Fund's historical
returns.
[GRAPH]
- --------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/99
<TABLE>
<CAPTION>
Past One Year Past Five Years Life of Fund
(since 11/1/90)
- -----------------------------------------------------------------
<S> <C> <C> <C>
Class C 1.33% 9.85% 9.37%
- -----------------------------------------------------------------
MSCI WORLD Index 24.93% 19.76% 14.88%
</TABLE>
- --------------------------------------------------------------------------------
------
4
<PAGE>
Small Cap Growth Fund
Investment Goal and Strategies
The investment objective of the Small Cap Growth Fund is maximum capital appre-
ciation. Credit Suisse Asset Management, LLC ("CSAM"), the Fund's subadvisor,
pursues this objective by investing primarily in equity securities of U.S. com-
panies. The focus of the Fund is emerging growth companies, which often are
small or medium-size companies with growth characteristics such as positive
earnings and potential for accelerated growth.
The Fund may also invest in high-quality bonds, and, to a certain extent, in
foreign securities. The Fund may invest in derivatives.
The Fund is not "diversified," which means that it may invest in a relatively
small number of issuers of securities, and its value may be affected very
significantly by the change in value of a single security.
Main Investing Risks
.Concentration Risk
.Credit Risk
.Currency Risk
.Derivatives Risk
.Equity Risk, particularly the risks associated with investing in smaller com-
panies
.Interest Rate Risk
.Liquidity Risk
.Foreign Investment Risk
.Management Risk
The bar chart and table
provide an indication
of risk by showing the
variability of the
Fund's historical
returns.
[GRAPH]
- --------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/99
<TABLE>
<CAPTION>
Past One Year Life of Fund
(since 1/6/98)
- ---------------------------------------------------
<S> <C> <C>
Class A 63.18% 28.58%
- ---------------------------------------------------
Russell 2000 Growth 43.09% 20.35%
</TABLE>
- --------------------------------------------------------------------------------
- ------
5
<PAGE>
Mid Cap Growth Fund
Investment Goal and Strategies
The investment objective of the Mid Cap Growth Fund is to seek long term capi-
tal appreciation. INVESCO Funds Group, Inc. ("INVESCO"), the Fund's subadvisor,
invests primarily in common stocks of mid-sized companies--those with market
capitalizations ranging from approximately $2 billion to $15 billion at the
time of purchase--but also has the flexibility to invest in other types of
securities including preferred stocks, convertible securities and bonds. The
core of the Fund's portfolio will be invested in securities of established com-
panies that are leaders in attractive growth markets with a history of strong
returns. The remainder of the portfolio will be invested in securities of com-
panies that show accelerating growth, driven by product cycles, favorable
industry or
sector conditions and other factors that the subadviser believes will lead to
rapid sales or earnings growth. The Fund's strategy relies on many short-term
factors including current information about a company, investor interest, price
movements of a company's securities and general market and monetary conditions.
Consequently, the Fund's investments will usually be bought and sold frequent-
ly. The Fund may invest in derivatives.
Main Investing Risks
.Credit Risk
.Currency Risk
.Derivatives Risk
.Equity Risk, including the risks associated with investing in smaller compa-
nies
.Foreign Investment Risk
.Interest Rate Risk
.Liquidity Risk
.Management Risk
The bar chart and table
provide an indication
of risk by showing the
variability of the
Fund's historical
returns.
[GRAPH]
- --------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/99
<TABLE>
<CAPTION>
Past One Year Life of Fund
(since 3/4/96)
- --------------------------------------------------
<S> <C> <C>
Class A 24.60% 19.33%
- --------------------------------------------------
S&P MidCap 14.72% 20.64%
400 Index
- --------------------------------------------------
Russell 2000 Index 21.26% 13.70%
</TABLE>
- --------------------------------------------------------------------------------
------
6
<PAGE>
Large Cap Growth Fund
Investment Goal and Strategies
The investment objective of the Large Cap Growth Fund is to seek long-term cap-
ital growth. To achieve this goal, Founders Asset Management LLC ("Founders"),
the Fund's subadvisor, invests at least 65% of the Fund's total assets in the
common stocks of well-established, high-quality growth companies whose earnings
are expected by Founders to increase faster than the market average.
The Fund may invest in other types of equity securities that offer opportuni-
ties for capital appreciation. The Fund may also invest in high-quality bonds.
The Fund may invest up to 100% of its total assets in American Depositary
Receipts (ADRs) and up to 30% of its total assets in foreign securities (other
than ADRs). The Fund may not invest more than 25% of its total assets in any
one foreign country. The Fund may invest in derivatives.
Main Investing Risks
.Credit Risk
.Currency Risk
.Derivatives Risk
.Equity Risk, including the particular risks associated with growth stocks
.Foreign Investment Risk
.Interest Rate Risk
.Management Risk
The bar chart and
table provide an
indication of risk
by showing the vari-
ability of the
Fund's historical
returns.
[GRAPH]
- --------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/99
<TABLE>
<CAPTION>
Past One Year Life of Fund
(since 3/4/96)
- ---------------------------------------
<S> <C> <C>
Class A 30.42% 24.39%
- ---------------------------------------
S&P 500 21.04% 26.26%
Index
</TABLE>
- --------------------------------------------------------------------------------
- ------
7
<PAGE>
Growth & Income Fund
Investment Goal and Strategies
The investment objective of the Growth & Income Fund is to provide long-term
growth of capital and income consistent with prudent investment risk.
Wellington Management Company, LLP ("Wellington"), the Fund's subadvisor,
pursues this objective by investing mostly in a diversified portfolio of common
stocks of U.S. issuers that Wellington believes are of high quality. The Fund
will typically invest in dividend-paying stocks of larger companies. The Fund
may invest up to 20% of its total assets in foreign securities.
To select stocks for the Fund, Wellington assesses a company and its business
environment, management, balance sheet, income statement, anticipated earnings
and dividends, and
other related measures of fundamental value. Wellington will also monitor and
evaluate the economic and political climate and the principal securities
markets of the country in which each company is located. The Fund may invest in
derivatives.
Main Investing Risks
.Derivatives Risk
.Equity Risk, including particular risks associated with value stocks
.Foreign Investment Risk
.Management Risk
The bar chart and
table provide an
indication of risk
by showing the vari-
ability of the
Fund's historical
returns.
[GRAPH]
- --------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/99
<TABLE>
<CAPTION>
Past One Year Past Five Years Life of Fund
(since 5/1/91)
- -------------------------------------------------------------
<S> <C> <C> <C>
Class C 15.74% 24.18% 17.17%
- -------------------------------------------------------------
S&P 500 Index 21.04% 28.54% 19.80%
</TABLE>
- --------------------------------------------------------------------------------
-------
8
<PAGE>
Balanced Fund
Investment Goal and Strategies
The investment objective of the Balanced Fund is current income and capital
appreciation. To achieve this goal, INVESCO Funds Group, Inc. ("INVESCO"), the
Fund's subadvisor, invests in a combination of common stocks and fixed-income
securities, including preferred stocks, convertible securities and bonds. the
Fund normally invests the majority of its total assets in common stocks and
approximately one-quarter of its assets in investment grade debt securities.
The portion of the Fund's portfolio invested in equity securities emphasizes
companies INVESCO believes to have better-than-average earnings growth poten-
tial, as well as companies
within industries that INVESCO believes are well-positioned for the current and
expected economic climate. Since current income is a component of total return,
INVESCO also considers companies' dividend payout records. Most of these hold-
ings are traded on national stock exchanges or in the over-the-counter market.
The Fund may also take positions in securities traded on regional or foreign
exchanges. A portion of the Fund's portfolio invested in debt securities may
include obligations of the US. government, government agencies, and investment
grade corporate bonds. Obligations issued by U.S. government agencies may
include some supported only by the credit of the issuing agency rather than by
the full faith and credit of the U.S. government. The Fund may hold securities
of any maturity, with the average maturity of the portfolio varying depending
upon economic and market conditions. The Fund may invest in derivatives.
Main Investing Risks
.Credit Risk
.Currency Risk
.Derivatives Risk
.Equity Risk
.Foreign Investment Risk
.Interest Rate Risk
.Management Risk
The bar chart and
table provide an
indication of risk
by showing the vari-
ability of the
Fund's historical
returns.
[GRAPH]
- --------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/99
<TABLE>
<CAPTION>
Past One Year Past Five Years Life of Fund
(since 8/29/89)
- ----------------------------------------------------------------
<S> <C> <C> <C>
Class C -4.74% 11.49% 9.99%
- ----------------------------------------------------------------
S&P 500
Index 21.04% 28.54% 21.24%
- ----------------------------------------------------------------
Lehman Brothers -0.83% 7.73% 6.62%
Aggregate Bond
Index
</TABLE>
- --------------------------------------------------------------------------------
- -------
9
<PAGE>
Strategic Income Fund
Investment Goal and Strategies
The investment objective of the Strategic Income Fund is to seek a high level
of total return consistent with preservation of capital. To achieve this goal,
American General Investment Management, L.P. ("AGIM"), the Fund's subadvisor,
invests at least 65% of the Fund's total assets in a broad range of fixed-
income securities, including investment grade bonds (rated Baa or higher by
Moody's
and BBB or higher by S&P), U.S. Government and agency obligations, mortgage-
backed securities, and U.S., Canadian, and foreign high-risk, high-yield bonds
(rated C or higher by Moody's and CC or higher by S&P, or comparable unrated
securities). Up to 25% of the Fund's total assets will be invested in foreign
emerging market debt, and up to an additional 25% in non-U.S.
dollar bonds. The Fund may invest up to 20% of total assets in equity
securities, such as common and preferred stocks, convertible securities, and
warrants. The Fund may invest in asset-backed securities, foreign currency,
futures and options, illiquid securities (limited to 15% of the Fund's assets),
investment companies, loan participations, money market securities, mortgage-
related securities, real estate securities, repurchase agreements, reverse
repurchase agreements, dollar rolls, structured securities, swaps, variable
amount master demand notes, variable rate demand notes, and when-issued
securities. The Fund may invest in derivatives.
Main Investing Risks
.Credit Risk, including the particular risks associated with junk bonds
.Currency Risk
.Derivatives Risk
.Foreign Investment Risk
.Interest Rate Risk
.Management Risk
The bar chart and
table provide an
indication of risk
by showing the vari-
ability of the
Fund's historical
returns.
[GRAPH]
- --------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/99
<TABLE>
<CAPTION>
Past One Year Past Five Years Life of Fund
(Since 11/1/93)
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Class A -4.47% 7.73% 5.22%
- ---------------------------------------------------------------------
Lehman Brothers -0.83% 7.73% 5.66%
Aggregate Bond Index
</TABLE>
- --------------------------------------------------------------------------------
-------
10
<PAGE>
Core Bond Fund
Investment Goal and Strategies
The investment objective of the Core Bond Fund is to provide a high level of
current income consistent with the maintenance of principal and liquidity.
American General Investment Management, L.P. ("AGIM") is subadvisor. The Fund
invests in a combination of common stocks and fixed-income securities,
including preferred stocks, convertible securities and bonds. The Fund normally
invests the majority of its total assets in common stocks and approximately
one-quarter of its assets in investment grade debt securities. The portion of
the Fund's portfolio invested in equity securities emphasizes companies AGIM
believes to have better-than-average earnings growth potential, as well as
companies within industries that AGIM believes are well-positioned for the
current and expected economic climate. Since current income is a component of
total return, AGIM also considers companies' dividend payout records. Most of
these holdings are traded on national stock exchanges or in the over-the-
counter market. The Fund may also take positions in securities traded on
regional or foreign exchanges. A portion of the Fund's portfolio invested in
debt securities may include obligations of the U.S. government, government
agencies, and investment grade corporate bonds. Obligations issued by U.S.
government agencies may include some supported only by the credit of the
issuing agency rather than by the full faith and credit of the U.S. government.
The Fund may hold securities of any maturity, with the average maturity of the
portfolio varying depending upon economic and market conditions. The Fund may
invest in derivatives.
Main Investing Risks
.Credit Risk, including the particular risks associated with junk bonds
.Currency Risk
.Derivatives Risk
.Foreign Investment Risk
.Interest Rate Risk
.Liquidity Risk
.Management Risk
The bar chart and
table provide an
indication of risk
by showing the vari-
ability of the
Fund's historical
returns.
[GRAPH]
- --------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/99
<TABLE>
<CAPTION>
Past One Year Past Five Years Life of Fund
(since 5/1/91)
- ---------------------------------------------------------------
<S> <C> <C> <C>
Class A -8.15% 5.56% 5.89%
- ---------------------------------------------------------------
100% Lehman -1.94% 8.16% 7.38%
Brothers
Corporate
- ---------------------------------------------------------------
50% Lehman -2.10% 7.80% 7.61%
Brothers
Corporate
50% Lehman
Brothers
Government
</TABLE>
- --------------------------------------------------------------------------------
- -------
11
<PAGE>
U.S. Government Securities Fund
Investment Goal and Strategies
The investment objective of the U.S. Government Securities Fund is to obtain a
high level of current income consistent with preservation of capital and main-
tenance of liquidity. American General Investment Management, L.P. ("AGIM"),
the Fund's subadvisor, pursues this objective by emphasizing investments in
debt obligations and mortgage-backed securities issued or guaranteed by the
U.S. Government or its agencies, and in derivative investments relating to such
securities.
Main Investing Risks
.Credit Risk
.Derivatives Risk
.Interest Rate Risk
.Management Risk
The bar chart and
table provide an
indication of risk
by showing the vari-
ability of the
Fund's historical
returns.
[GRAPH]
- --------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/99
<TABLE>
<CAPTION>
Past One Year Past Five Years Life of Fund
(since 8/28/89)
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Class A -6.66% 5.03% 5.98%
- ------------------------------------------------------------------------
Merrill Lynch 1-10 year 0.55% 6.9% 7.28%
Government Index
</TABLE>
- --------------------------------------------------------------------------------
-------
12
<PAGE>
Money Market Fund
Investment Goal and Strategies
The investment objective of the Money Market Fund is to obtain maximum current
income consistent with preservation of principal and liquidity. American
General Investment Management, L.P. ("AGIM") is, the Fund's subadvisor. The
Fund invests in short-term money market securities to provide you with
liquidity, protection of your investment and current income. In accordance with
Rule 2a-7 of the Investment Company Act, such securities must mature in 13
months or less and the Fund must have a dollar-weighted average portfolio
maturity of 90 days or less. The investments of the Fund may include securities
issued or guaranteed by the U.S. Government (and its agencies or
instrumentalities), certificates of deposit and other obligations of domestic
banks that have total assets in excess of $1 billion, commercial paper sold by
corporations and finance companies, corporate debt obligations with remaining
maturities of 13 months or less, repurchase agreements, money market
instruments of foreign issuers payable in U.S. dollars (limited to no more than
20% of the fund's net assets), asset-backed securities, loan participations,
adjustable rate securities, Variable Rate Demand Notes, illiquid and restricted
securities (limited to 10% of the Fund's net assets at all times), and Rule
144A securities. The Fund may invest in investment companies, real estate
securities, and reverse repurchase agreements.
Main Investing Risks
.Interest Rate Risk
.Management Risk
.An investment in the Money Market Fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or by any other government agency.
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
The bar chart and
table provide an
indication of risk
by showing the vari-
ability of the
Fund's historical
returns.
[GRAPH]
- --------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/99
<TABLE>
<CAPTION>
Past One Year Life of Fund
(since 8/28/89)
- ----------------------------------------
<S> <C> <C>
Class A 4.62% 4.80%
</TABLE>
- --------------------------------------------------------------------------------
- -------
13
<PAGE>
Descriptions of Main Investing Risks
The value of your investment in a Fund can change for many reasons, and may
decrease. The primary reasons for possible decreases in a Fund's value are
called "Main Investing Risks," and are explained in this section. Because the
types of investments a Fund may change over time, the types of risks affecting
the Fund will change as well. Section II of the Prospectus includes more
information about other risks that might affect the Funds' values.
Concentration Risk
Investment professionals believe that investment risk can be reduced through
diversification, which is simply the practice of choosing more than one type of
investment. On the other hand, concentrating investments in a smaller number of
securities increases risk.
Credit Risk
Credit risk is the risk that the issuer or the guarantor (the entity that
agrees to pay the debt if the issuer cannot) of a debt or fixed income
security, or the counterparty to a derivatives contract or a securities loan,
will not repay the principal and interest owed to the investors or otherwise
honor its obligations. There are different levels of credit risk. Funds that
invest in lower-rated securities have higher levels of credit risk. Lower-rated
or unrated securities of equivalent quality (generally known as junk bonds)
have very high levels of credit risk. Securities that are highly rated have
lower levels of credit risk.
Funds may be subject to greater credit risk because they may invest in debt
securities issued in connection with corporate restructurings by highly
leveraged (indebted) issuers and in debt securities not current in the payment
of interest or principal, or in default.
Funds that invest in foreign securities are also subject to increased credit
risk because of the difficulties of requiring foreign entities, including
issuers of sovereign (national) debt, to honor their contractual commitments,
and because a number of foreign governments and other issuers are already in
default.
Currency Risk
Funds that invest in securities that are denominated in and/or are receiving
revenues in foreign currencies are subject to currency risk. Currency risk is
the risk that foreign currencies will decline in value relative to the U.S.
dollar. In the case of hedging positions, it is the risk that the U.S. dollar
will decline in value relative to the currency hedged.
Derivatives Risk
Derivatives are financial contracts between two parties whose value depends on,
or is derived from, the change in value of an underlying asset, reference rate
or index. When the value of the underlying security or index changes, the
value of the derivative changes as well. As a result, derivatives can lose all
of their value very quickly. Derivatives also offer the opportunity for great
increases in value. Because derivatives are contracts between parties, there is
also some credit risk associated with using derivatives. Additional risks
associated with derivatives include mispricing and improper valuation. Deriva-
tives risk for some Funds will be increased by their investments in structured
securities.
Equity Risk
Equity securities, such as a company's common stock, may fall in value in
response to factors relating to the issuer, such as management decisions or
falling demand for a company's goods or services. Additionally, factors
affecting a company's particular industry, such as increased production costs,
may affect the value of its equity securities. Equity securities also rise and
fall in value as a result of factors affecting entire financial markets, such
as political or economic developments, or changes in investor psychology.
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14
<PAGE>
Growth stocks are the stocks of companies that have earnings that are expected
to grow relatively rapidly. As a result, the values of growth stocks may be
more sensitive to changes in current or expected earnings than the values of
other stocks.
Value stocks are the stocks of companies that are not expected to experience
significant earnings growth, but that are undervalued, or are inexpensive rela-
tive to the value of the company and its business as a whole. These companies
may have experienced recent troubles that have caused their stocks to be out of
favor with investors. If the market does not recognize the value of the company
over time, the price of its stock may fall, or simply may not increase as
expected.
Market capitalization refers to the total value of a company's outstanding
stock. Smaller companies with market capitalizations of less than $1 billion or
so are more likely than larger companies to have limited product lines, smaller
markets for their products and services, and they may depend on a small or
inexperienced management group. Small company stocks may not trade very active-
ly, and their prices may fluctuate more than stocks of larger companies. Stocks
of smaller companies may be more vulnerable to negative changes than stocks of
larger companies.
Foreign Investment Risk
Funds investing in foreign securities may experience rapid changes in value.
One reason for this volatility is that the securities markets of many foreign
countries are relatively small, with a limited number of companies representing
a small number of industries. Also, foreign securities issuers are usually not
subject to the same degree of regulation as U.S. issuers. Reporting, accounting
and auditing standards of foreign countries differ, in some cases significant-
ly, from U.S. standards.
The possibility of political instability or diplomatic developments in foreign
countries could trigger nationalization of companies and industries, expropria-
tion (confiscation of property), extremely high levels of taxation, and other
negative developments. In the event of nationalization, expropriation or other
confiscation, a Fund could lose its entire investment. Funds that invest in
sovereign debt obligations are exposed to the risks of political, social and
economic change in the countries that issued the bonds.
Interest Rate Risk (Market Risk)
Interest rate risk, or market risk, is the risk that a change in interest rates
will negatively affect the value of a security. This risk applies primarily to
debt securities such as bonds, notes and asset backed securities. Debt securi-
ties are obligations of the issuer to make payments of principal and/ or inter-
est on future dates. As interest rates rise, an investment in a Fund can lose
value, because the value of the securities the Fund holds may fall.
Market risk is generally greater for Funds that invest in debt securities with
longer maturities. This risk may be increased for Funds that invest in mort-
gage-backed or other types of asset-backed securities that are often prepaid.
Even Funds that invest in the highest quality debt securities are subject to
interest rate risk.
Liquidity Risk
Liquidity risk is the risk that a Fund will not be able to sell a security
because there are too few people who actively buy and sell, or trade, that
security on a regular basis. A Fund holding an illiquid security may not be
able to sell the security at a fair price. Liquidity risk increases for Funds
investing in derivatives, foreign investments or restricted securities.
Management Risk
Management risk is the risk that the subadvisor of a Fund, despite using vari-
ous investment and risk analysis techniques, may not produce the desired
investment results.
- -------
15
<PAGE>
Section II:
Fees and Expenses of the North American Funds--Institutional Class I Shares
and Institutional Class II Shares*
This table describes the fees and expenses that you may pay if you invest in
the Funds.
* Institutional Class II Shares are offered only by the Core Bond Fund.
Shareholder Fees (fees paid directly from your investment)
<TABLE>
<CAPTION>
Institutional Institutional
Class I Class II
- ------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of offering price) None None
Maximum Deferred Sales Charge (as a
percentage of original purchase price or
redemption price, whichever is lower) None None
Annual Fund Operating Expenses (expenses that are
deducted from fund assets)
<CAPTION>
Institutional Institutional
Fund Class I Class II
- ------------------------------------------------------------------------------
<S> <C> <C>
International Small Cap Fund
Management Fees 1.05
Other Expenses 1.02
Total Annual Fund Operating Expenses 2.07
- ------------------------------------------------------------------------------
International Equity Fund
Management Fees .90
Other Expenses .91
Total Annual Fund Operating Expenses 1.81
- ------------------------------------------------------------------------------
Global Equity Fund
Management Fees .88
Other Expenses .78
Total Annual Fund Operating Expenses 1.66
- ------------------------------------------------------------------------------
Small Cap Growth Fund
Management Fees .95
Other Expenses .84
Total Annual Fund Operating Expenses 1.79
- ------------------------------------------------------------------------------
</TABLE>
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16
<PAGE>
<TABLE>
<CAPTION>
Institutional Institutional
Fund Class I Class II
- -----------------------------------------------------------------
<S> <C> <C>
Mid Cap Growth Fund
Management Fees .93
Other Expenses .79
Total Annual Fund Operating Expenses 1.72
- -----------------------------------------------------------------
Large Cap Growth Fund
Management Fees .90
Other Expenses .82
Total Annual Fund Operating Expenses 1.72
- -----------------------------------------------------------------
Growth & Income Fund
Management Fees .73
Other Expenses .56
Total Annual Fund Operating Expenses 1.29
- -----------------------------------------------------------------
Balanced Fund
Management Fees .78
Other Expenses .65
Total Annual Fund Operating Expenses 1.43
- -----------------------------------------------------------------
</TABLE>
- -------
17
<PAGE>
<TABLE>
<CAPTION>
Institutional Institutional
Fund Class I Class II
- -----------------------------------------------------------------
<S> <C> <C>
Strategic Income Fund
Management Fees .75
Other Expenses .75
Total Annual Fund Operating Expenses 1.50
- -----------------------------------------------------------------
Core Bond Fund
Management Fees .60 .60
Other Expenses .69 .44
Total Annual Fund Operating Expenses 1.29 1.04
- -----------------------------------------------------------------
U.S. Government Securities Fund
Management Fees .60
Other Expenses .69
Total Annual Fund Operating Expenses 1.29
- -----------------------------------------------------------------
Money Market Fund
Management Fees .20
Other Expenses .97
Total Annual Fund Operating Expenses 1.17
</TABLE>
- --------------------------------------------------------------------------------
Fund fees and
expenses are
currently being
voluntarily waived
and/or reimbursed
by AGAM such that
the Funds have the
following net total
annual operating
expenses:
<TABLE>
<CAPTION>
Institutional Institutional
Class I Class II
- ------------------------------------------------------------
<S> <C> <C>
International Small Cap Fund 1.95
- ------------------------------------------------------------
International Equity Fund 1.80
- ------------------------------------------------------------
Global Equity Fund 1.65
- ------------------------------------------------------------
Small Cap Growth Fund 1.72
- ------------------------------------------------------------
Mid Cap Growth Fund 1.68
- ------------------------------------------------------------
Large Cap Growth Fund 1.67
- ------------------------------------------------------------
Growth & Income Fund N/A
- ------------------------------------------------------------
Balanced Fund 1.41
- ------------------------------------------------------------
Strategic Income Fund 1.45
- ------------------------------------------------------------
Core Bond Fund 1.20 .95
- ------------------------------------------------------------
U.S. Government Securities Fund 1.15
- ------------------------------------------------------------
Money Market Fund .95
- ------------------------------------------------------------
</TABLE>
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18
<PAGE>
By translating "Total Annual Fund Operating Expenses" into dollar amounts,
these examples help you compare the costs of investing in a particular Fund, or
a particular class of shares, with the costs of investing in other mutual
funds.
The examples assume that you:
. Invest $10,000 in a Fund for the time period indicated and then redeem all
of your shares at the end of those periods.
. Your investment earns a 5% return each year and that each Fund's operating
expenses remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
Fund 1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
International Small Cap Fund
Institutional Class I Shares 210 649 1,114 2,400
- ----------------------------------------------------------------
International Equity Fund
Institutional Class I Shares 184 569 980 2,127
- ----------------------------------------------------------------
Global Equity Fund
Institutional Class I Shares 169 523 902 1,965
- ----------------------------------------------------------------
Small Cap Growth Fund
Institutional Class I Shares 182 563 970 2,105
- ----------------------------------------------------------------
Mid Cap Growth Fund
Institutional Class I Shares 175 542 933 2,030
- ----------------------------------------------------------------
Large Cap Growth Fund
Institutional Class I Shares 175 542 933 2,030
- ----------------------------------------------------------------
Growth & Income Fund
Institutional Class I Shares 131 409 708 1,556
- ----------------------------------------------------------------
Balanced Fund
Institutional Class I Shares 146 452 782 1,713
- ----------------------------------------------------------------
Strategic Income Fund
Institutional Class I Shares 153 474 818 1,791
- ----------------------------------------------------------------
Core Bond Fund
Institutional Class I Shares 131 409 708 1,556
Institutional Class II Shares 106 331 574 1,271
- ----------------------------------------------------------------
U.S. Government Securities Fund
Institutional Class I Shares 131 409 708 1,556
- ----------------------------------------------------------------
Money Market Fund
Institutional Class I Shares 119 372 644 1,420
- ----------------------------------------------------------------
</TABLE>
- -------
19
<PAGE>
More Information About
Investment Strategies and Risks
This Prospectus does not attempt to disclose all of the different investment
techniques that the Funds might use, or all of the types of securities in which
the Funds might invest. As with any mutual fund, investors must rely on the
professional judgment and skill of the Funds' management. A subadvisor may
choose not to use some or all of the investment techniques available to a Fund,
and these choices may cause the Fund to lose money or not achieve its goal.
Each Fund has a unique investment goal (see the Fund Summaries) that it tries
to achieve through its investment strategies. The investment goals, or objec-
tives, of the Funds cannot be changed without the approval of the holders of a
majority of the outstanding shares of each Fund. However, except for certain
investment restrictions, the strategies a Fund uses to achieve its investment
objective may be changed by the Trustees without approval of the shareholders.
Because each Fund is different, they have different investment policies and
risks, and will also have different returns over time. This section provides
additional information about the Funds, and should be read in conjunction with
the Fund Summaries.
International Small Cap Fund
The Fund may invest without limit in American Depositary Receipts and American
Depositary Shares (collectively, "ADRs"). ADRs are receipts representing shares
of a foreign corporation held by a U.S. bank that entitle the holder to all
dividends and capital gains on the underlying foreign shares. ADRs are
denominated in U.S. dollars and trade in the U.S. securities markets.
The Fund may invest a significant portion of its assets in the securities of
small companies. Small companies are still in the developing stages of their
life cycles and may have limited product lines, markets or financial resources
and/or lack management depth. The securities of small companies may have lim-
ited marketability and may experience more abrupt or erratic movements in price
than securities of larger companies or the market averages in general. Because
of this, the net asset value of the International Small Cap Fund may fluctuate
more widely than popular market averages.
The Fund may also invest in convertible securities, preferred stocks, bonds,
debentures and other corporate obligations when Founders believes that these
investments offer opportunities for capital appreciation.
The Fund may invest in investment-grade bonds, debt securities and corporate
obligations. For purposes of this Fund, investment grade securities are those
rated Baa or higher by Moody's, or BBB or higher by S&P. The Fund may choose to
invest in lower-rated convertible securities and preferred stocks (securities
rated Ba or lower by Moody's and BB or lower by S&P). The Fund may also invest
in unrated convertible securities and preferred stocks if Founders believes
they are equivalent in quality to the rated securities that the Fund may buy.
The Fund will not invest more than 5% of its total assets in unrated or below
investment-grade fixed-income securities, with the exception of preferred
stocks. If the Fund holds securities that are downgraded to below investment
grade after they are purchased, the Fund does not have to sell them unless the
Fund's investments in unrated and below investment grade securities are equal
to or greater than 5% of total fund assets.
Since the Fund's assets will be invested primarily in foreign securities and
since substantially all of the Fund's revenues will be received in foreign cur-
rencies, the Fund's net asset values will be affected by changes in currency
exchange rates. The Fund will pay dividends in dollars and will incur currency
conversion costs.
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20
<PAGE>
International Equity Fund
MSAM's Active International Allocation team analyzes both the global economic
environment and the economies of the industrialized countries comprising the
MSCI Europe, Australasia, Far East (EAFE) Index. EAFE countries include Japan,
most nations in Western Europe, Australia, New Zealand, Hong Kong and Singa-
pore. MSAM views each country and sector as unique investment opportunities and
evaluates prospects for value, growth, inflation, interest rates, corporate
earnings, liquidity and risk characteristics, investor sentiment and currency
outlook. After determining to invest in a country or sector, MSAM establishes
overweight, underweight or neutral positions relative to the broad market index
for that country or sector. Within the countries or sectors selected for
investment, MSAM purchases optimized baskets of equity securities designed to
track the local market index. The Fund does not invest in securities of U.S.
issuers. MSAM considers an issuer to be from a particular country if: (i) its
principal securities trading market is in that country; (ii) alone or on a con-
solidated basis it derives 50% or more of its annual revenue from either goods
produced, sales made or services performed in that country; or (iii) it is
organized under the laws of, and has a principal office in, that country.
The Fund will limit its use of derivatives for non-hedging purposes to 33 1/3%
of its total assets measured by the aggregate notional amount of outstanding
derivatives. While the use of derivatives may be advantageous to the Fund, if
MSAM is not successful in employing them, the Fund's performance may be worse
than if it did not make such investments.
The Fund may invest in emerging market countries and, with regard to such
investments, make global and regional allocations to emerging markets, as well
as allocations to specific emerging market countries. Emerging market countries
are countries that major international financial institutions, such as the
World Bank, generally consider to be less economically mature than developed
nations, such as the United States or most nations in Western Europe. Emerging
market countries can include every nation in the world except the United
States, Canada, Japan, Australia, New Zealand and most countries located in
Western Europe. Emerging market countries may be more likely to experience
political turmoil or rapid changes in economic conditions than more developed
countries, and the financial condition of issuers in emerging market countries
may be more precarious than in other countries. The characteristics result in
greater risk of price volatility in emerging market countries, which may be
heightened by currency fluctuations relative to the U.S. dollar.
Global Equity Fund
The Fund invests primarily in equity securities of issuers throughout the
world, including issuers in the U.S. and emerging market countries.
The Fund may also invest in money market instruments. Although the Fund intends
to invest primarily in securities listed on stock exchanges, it will also
invest in equity securities that are traded over-the-counter or that are not
admitted to listing on a stock exchange or dealt in on a regulated market. Pri-
vately traded securities may have additional liquidity risks. The Fund may also
engage in forward foreign currency transactions and purchase when-issued or
delayed delivery securities.
- -------
21
<PAGE>
Small Cap Growth Fund
The Fund will usually invest at least 65% of its total assets in common stocks
or warrants of emerging growth companies that represent attractive opportuni-
ties for maximum capital appreciation. Emerging growth companies are small- or
medium-sized companies beyond their start-up phase showing positive earnings or
the potential for accelerated earnings growth.
Although the Fund will typically invest in smaller companies, the Fund may
invest in emerging growth companies of any size. Emerging growth companies gen-
erally benefit from new products or services, technological developments,
changes in management or other factors. The Fund may also invest in companies
experiencing unusual developments affecting their market value, called "special
situation" companies. These companies may be involved in acquisitions or con-
solidations, reorganization, recapitalization, mergers, liquidation, or distri-
bution of cash, securities or other assets, tender or exchange offers, a
breakup or workout of a holding company, lawsuits which, if resolved favorably,
would improve the value of the company's stock, or a change in corporate con-
trol.
The Fund may invest up to 20% of its total assets in investment grade debt
securities (other than money market obligations) and preferred stocks that are
not convertible into common stock. The Fund may also invest up to 20% of its
total assets in the securities of foreign issuers, which have certain risks
associated with them. The Fund's status is non-diversified , although its port-
folio managers have typically diversified the Fund's investments.
The interest income to be derived may be considered as one factor in selecting
debt securities for investment. Because the market value of debt obligations
can be expected to vary inversely with changes in prevailing interest rates,
investing in debt obligations may provide an opportunity for capital apprecia-
tion when interest rates are expected to decline. The success of such a strat-
egy is dependent upon the manager's ability to accurately forecast changes in
interest rates.
A security will be considered investment grade if it is rated within the four
highest grades by Moody's or S&P or, if unrated, is determined by the manager
to be of comparable quality. Bonds rated in the fourth highest grade may have
speculative characteristics. If a security held by the Fund is no longer rated,
or is rated below the Fund's minimum allowed rating, the manager factors this
information into the decision about whether the Fund should continue to hold
the securities. The Fund can normally invest up to 20% of its total assets in
domestic and foreign short-term money market obligations.
Investing in securities of emerging growth and small-sized companies can
involve greater risks because these securities may have limited marketability.
Because small and medium-sized companies normally have fewer shares outstanding
than larger companies, it may be more difficult for the Fund to buy or sell
large numbers of shares without affecting current prices. Small- and medium-
sized companies are typically subject to a greater degree of changes in earn-
ings and business prospects than are larger, more established companies. There
is typically less publicly available information concerning small- and medium-
sized companies than for larger, more established ones. And companies with
small market capitalizations may also be dependent upon a single proprietary
product or market niche, may have limited product lines, markets or financial
resources, or may depend on a limited management group.
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22
<PAGE>
Mid Cap Growth Fund
The Fund invests in equity securities, including common and preferred stocks,
and securities that can be converted into or exchanged for equity securities,
including warrants and rights. The Fund will typically invest in companies
whose securities are traded on domestic stock exchanges or in the over-the-
counter market.
To give the Fund the flexibility to take advantage of new opportunities that
can help to meet the Fund's investment objectives, the Fund can invest up to
15% of its net assets in money market instruments, bank and thrift obligations,
obligations issued or guaranteed by the U.S. Government or by its agencies or
instrumentalities, foreign bank obligations and obligations of foreign branches
of domestic banks, variable rate master demand notes and repurchase agreements.
The Fund may invest up to 20% of its total assets in foreign securities and
will be subject to certain risks as a result of these investments. The Fund may
also purchase American Depositary Receipts ("ADRs") or U.S. dollar-denominated
securities of foreign issuers that are not included in the 20% foreign securi-
ties limitation.
Large Cap Growth Fund
At least 65% of the Fund's total assets will be invested in common stocks of
well-established, high-quality growth companies. The Fund may also invest in
convertible securities, preferred stocks, debentures and other corporate obli-
gations when Founders believes that these investments offer opportunities for
capital appreciation. Although these securities may produce current income,
income will not be a substantial factor in selecting these securities.
The Fund may invest in investment grade bonds, debentures and corporate obliga-
tions rated Baa or higher by Moody's or BBB or higher by S&P. The Fund may
choose to invest in lower-rated (Ba or lower by Moody's and BB or lower by S&P)
convertible and preferred stocks but not rated below B. The Fund may also
invest in unrated convertible securities and preferred stocks if Founders
believes that they are equivalent in quality to the rated securities the Fund
may buy.
The Fund will never have more than 5% of its total assets invested in unrated
or below-investment-grade fixed income securities, with the exception of pre-
ferred stocks. If the Fund holds securities that are downgraded after they are
purchased, the Fund does not have to sell them unless the Fund assets in
unrated and blow investment-grade securities reaches 5% of total assets.
The Fund is also permitted to use forward foreign currency contracts and
futures contracts. The Fund may also purchase and/or write options on securi-
ties and on indices, and may invest in Rule 144A securities.
- -------
23
<PAGE>
Growth & Income Fund
Wellington Management seeks to achieve the Fund's objective by investing pri-
marily in a diversified portfolio of common stocks of U.S. issuers which Wel-
lington Management believes are of high quality. Wellington Management believes
that high quality companies are evidenced by a leadership position within an
industry, a strong or improving balance sheet, relatively high return on equi-
ty, steady or increasing dividend payout, and strong management skills. The
Fund's investments will emphasize primarily dividend paying stocks of larger
companies. The Fund may invest in securities that can be converted into, or
that include the right to buy common stocks, including convertible securities
issued in the Euromarket and preferred stocks. The Fund may also invest in mar-
ketable debt securities of domestic issuers and of foreign issuers (payable in
U.S. dollars) rated at the time of purchase "A" or better by Moody's or S&P, or
unrated securities considered to be of equivalent quality in Wellington Manage-
ment's judgment. Under normal market conditions, the subadvisor expects that
the Fund's portfolio will consist primarily of equity securities.
Balanced Fund
The Fund may invest in convertible securities, preferred stocks, bonds, deben-
tures, and other corporate obligations when Founders believes that these
investments offer opportunities for capital appreciation. Current income is
also a factor in the selection of these securities.
The Fund may invest without limit in ADRs and up to 30% of its total assets in
foreign securities (other than ADRs). The Fund will not invest more than 25% of
its total assets in the securities of any one foreign country. The Fund will be
subject to special risks as a result of its ability to invest up to 30% of its
total assets in foreign securities, excluding ADRs.
Strategic Income Fund
The Fund may invest in debt obligations issued or guaranteed by a foreign sov-
ereign government or one of its agencies or political subdivisions, and debt
obligations issued or guaranteed by international organizations designated or
supported by governmental entities to promote economic reconstruction or devel-
opment and international banking institutions and related government agencies.
Examples include the International Bank for Reconstruction and Development (the
"World Bank"), the European Coal and Steel Community, the Asian Development
Bank and the Inter-American Development Bank. These securities may be denomi-
nated in multi-national currency units.
The purpose of investing a portion of the Fund's assets in below investment
grade, mortgage, and international debt securities, is to provide investors
with a higher yield than a high-quality domestic corporate bond fund, and with
less risk than a fund that invests principally in below investment grade secu-
rities. Some of the debt securities the Fund may select may be considered com-
parable to securities having, the lowest ratings for non-subordinated debt
instruments assigned by Moody's or S&P (i.e., rated C by Moody's or CCC or
lower by S&P).
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24
<PAGE>
Core Bond Fund
Credit research on corporate bonds includes examining both quantitative (mathe-
matical) and qualitative criteria established by AGIM. These criteria include
an issuer's industry, operating and financial profiles, business strategy, man-
agement quality, and projected financial and business conditions.
At least 65% of the Fund's assets will be invested in high quality debt securi-
ties. "High quality" debt securities are those rated (at the time of purchase)
"A" or better by Moody's or S&P (in the three highest rating tiers), or unrated
debt securities considered to be of comparable quality by AGIM. The Fund may
only invest up to 20% of its total assets in debt securities rated below "Baa"
by Moody's or "BBB" by S&P, or unrated debt securities considered to be of com-
parable quality by AGIM. The Fund will not be required to sell any downgraded
bonds that cause the Fund to exceed this 20% maximum guideline.
The Fund may invest up to 20% of its assets in domestic and foreign high yield
corporate and government debt securities, commonly referred to as "high
yield/high risk" or "junk" bonds. These bonds may be rated "B" or below by
Moody's (Moody's lowest rating is "C"), or "BB" or below by S&P (S&P's lowest
rating is "D"), or they may be unrated but considered to be of comparable qual-
ity by AGIM. There is no minimum rating required by the Fund. Domestic and for-
eign high yield debt securities involve greater risks than higher quality secu-
rities, including price volatility and risk of default in the payment of inter-
est and principal.
U.S. Government Securities Fund
The Fund may invest in:
.Mortgage-backed securities guaranteed by the Government National Mortgage
Association ("GNMA"), popularly known as "Ginnie Maes," that are backed by the
full faith and credit of the U.S. Government. These are known as a "modified
pass through" type of mortgage- backed security ("GNMA Certificates"). These
securities entitle the holder to receive all interest and principal payments
due whether or not payments are actually made on the underlying mortgages
.U.S. Treasury obligations
.Obligations issued or guaranteed by agencies or instrumentalities of the U.S.
Government. These securities are backed by their own credit, and may not be
backed by the full faith and credit of the U.S. Government
- -------
25
<PAGE>
.Mortgage-backed securities guaranteed by agencies or instrumentalities of the
U.S. Government which are supported by their own credit but not the full faith
and credit of the U.S. Government, such as the Federal Home Loan Mortgage Cor-
poration and the Federal National Mortgage Association;
.Collateralized mortgage obligations issued by private issuers for which the
underlying mortgage-backed securities serving as collateral are backed (i) by
the credit alone of the U.S. Government agency or instrumentality which issues
or guarantees the mortgage backed securities, or (ii) by the full faith and
credit of the U.S. Government; and
.Repurchase agreements collateralized by any of the foregoing.
Money Market Fund
The Fund invests in high quality, U.S. dollar-denominated money market instru-
ments, as described on page 16.
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26
<PAGE>
Other Risks of Investing in North American Funds
Although a Fund may have the flexibility to use some or all of the investments
or strategies described in this Prospectus and the Statement of Additional
Information, its subadvisor may choose not to use these investments or strate-
gies for a variety of reasons. These choices may cause a Fund to miss opportu-
nities, lose money or not achieve its goal.
High Yield/High Risk Securities
High yield securities (often known as "junk bonds") include debt instruments
that have an equity security attached to them. Securities rated below invest-
ment grade and comparable unrated securities offer yields that fluctuate over
time, but generally offer higher yields than do higher rated securities. Howev-
er, securities rated below investment grade also involve greater risks than
higher- rated securities. Under rating agency guidelines, medium- and lower-
rated securities and comparable unrated securities will likely have some qual-
ity and protective characteristics that are outweighed by large uncertainties
or major risk exposures to adverse conditions.
Some of the debt securities in which the Funds may choose to invest may be, or
may be similar to, the lowest rated non-subordinated debt (securities rated C
by Moody's or CCC or lower by S&P). This type of security is very risky, as
issuers may not have the ability to repay principal and interest, and may even
default. If this should occur, the value of shares of the Fund holding them
could fall.
Foreign Securities
There are risks associated with investing in foreign securities. These risks
include unforeseen changes in tax laws, political changes, and changes in for-
eign currency values and exchange rates.
There may be less publicly available information about foreign issuers. Foreign
issuers, including foreign branches of U.S. banks, are subject to different
accounting and reporting requirements, which are generally less extensive than
the requirements for domestic issuers. Foreign stock markets generally have
substantially less volume than the U.S. exchanges and securities of foreign
issuers are generally less liquid and more volatile, relative to U.S. issuers.
For emerging markets, these risks can be more extreme.
There is frequently less governmental regulation of foreign exchanges, broker-
dealers and issuers than in the United States, and brokerage costs may be high-
er. In addition, investments in foreign companies may be subject to the possi-
bility of nationalization or other changes in policy. Policy changes may allow
foreign governments to withhold dividends, expropriate (confiscate, or keep)
investment returns, or raise taxes to extremely high levels, among other
things. Also, should a foreign issuer default, it may be difficult to recover
anything in a bankruptcy proceeding.
Lending Fund Securities
Each Fund may lend up to 33% of its total portfolio assets, or securities, to
brokers, dealers and other financial institutions. These loans must be callable
(the Fund may ask that the loan be repaid in full) at any time by the Fund. The
loans must be at all times fully secured by cash, cash equivalents or securi-
ties issued or guaranteed by the U.S. government or its agencies or instrumen-
talities, and marked to market (priced at market value) to the value of loaned
securities on a daily basis. As with any extensions of credit, there may be
risks of delay in recovery and in some cases even loss of rights in the collat-
eral should the borrower of the securities fail financially. However, these
loans of Fund securities will only be made to firms deemed by the subadvisors
to be creditworthy.
Leverage Risk
Funds that borrow money to buy securities are using leverage. Leverage risk is
the risk that leverage, or debt, will enable a Fund to buy more of a security
that falls in value. In this case, the Fund would still need to repay the money
it borrowed. Funds can create leverage, or borrow money, by using different
types of techniques including reverse repurchase agreements, dollar rolls, and
derivatives including inverse floating rate instruments.
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27
<PAGE>
Hedging and Other
Strategic Transactions
Individual Funds may be authorized to use a variety of investment strategies
described below for hedging purposes only, including hedging various market
risks (such as interest rates, currency exchange rates and broad or specific
market movements), and managing the effective maturity or duration of debt
instruments held by the Fund. Hedging is simply believing that certain securi-
ties will fall, or rise, in value, and structuring transactions that take
advantage of those changes. These transactions are generally used to protect
against possible changes in the market value of securities a Fund already owns
or plans to buy, to protect unrealized gains or to improve the Fund's return in
some way.
Where allowed, individual Funds may purchase and sell (or write) exchange-
listed and over-the- counter put and call options on securities, index futures
contracts, financial futures contracts and fixed-income indices and other
financial instruments, enter into financial futures contracts, enter into
interest rate transactions, and enter into currency transactions. This category
includes derivative transactions. A "derivative" is generally defined as an
instrument whose value is based upon, or derived from, some underlying index or
rate. Interest rate transactions may include swaps, caps, floors and collars,
and currency transactions may include currency forward contracts, currency
futures contracts, currency swaps and options on currencies or currency futures
contracts.
Euro Conversion
Any future conversion of certain European currencies to the Euro may present
additional risks to those Funds exposed to such currencies.
Frequent Trading
A Fund may buy or sell investments extremely frequently, increasing brokerage
commissions and other expenses of the Fund. Frequent trading may also increase
the amount of capital gains realized by a Fund, including short-term capital
gains, which are generally taxable to shareholders at ordinary income tax
rates.
Temporary Defensive Strategies
A Fund's subadvisor may at certain times decide that pursuing the Fund's
investment strategies is inconsistent with market conditions. A subadvisor may
then employ defensive strategies designed mostly to limit losses. However, the
subadvisor may choose not to use defensive strategies, even in volatile or
unsettled market conditions. Such defensive strategies may cause the Fund to
miss opportunities or to not achieve its goal.
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<PAGE>
Management of the Funds
Under the federal securities laws, Massachusetts law and the Trust's Agreement
and Declaration of Trust and By-Laws, the business and affairs of the Trust are
managed under the direction of the Trustees.
American General Asset Management Corp. ("AGAM"), formerly Cypress Tree Asset
Management Corporation, Inc., is the investment adviser for the Trust. AGAM was
formed in 1996 to advise, acquire and distribute mutual funds through broker-
dealers, banks and other intermediaries. AGAM's address is 286 Congress Street,
Boston, Massachusetts 02210.
According to its Advisory Agreement with the Trust (the "Advisory Agreement"),
AGAM::
.Oversees the administration of all aspects of the business and affairs of the
Funds
.Selects, contracts with and compensates subadvisors to manage the assets of
the Funds
.Makes recommendations to the Trustees regarding the hiring, termination and
replacement of subadvisors
.Reimburses the Fund if the total of certain expenses allocated to any Fund
exceeds certain limitations
.Monitors the subadvisors for compliance with the investment objectives and
related policies of each Fund
.Reviews the performance of the subadvisors
.Periodically reports to the Trustees
The following table shows the management fees each Fund paid to AGAM for the
last fiscal year under the Advisory Agreement as a percentage of the Fund's
average daily net asset value.
<TABLE>
<CAPTION>
Funds Management
Fees
- ---------------------------------------------
<S> <C>
International Small Cap Fund 1.05%
International Equity Fund .90%
Global Equity Fund .90%
Small Cap Growth Fund .95%
Mid Cap Growth Fund .93%
Large Cap Growth Fund .90%
Growth & Income Fund .68%
Balanced Fund .75%
Strategic Income Fund .75%
Core Bond Fund .60%
U.S. Government Securities Fund .60%
Money Market Fund .20%
</TABLE>
- --------------------------------------------------------------------------------
Under an order granted to the Funds by the Securities and Exchange Commission,
AGAM is permitted to appoint a subadvisor, to create a subadvisory agreement,
and to terminate or amend a subadvisory agreement, in each case without share-
holder approval. This "Manager of Managers" structure permits the Funds to
change subadvisors or the fees paid to subadvisors without the expense and
delays associated with obtaining shareholder approval. AGAM has ultimate
responsibility under the Manager of Managers structure to oversee the
subadvisors, including making recommendations to the Trust regarding the hir-
ing, termination and replacement of subadvisors.
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29
<PAGE>
Subadvisory Agreements
Wellington Management Company, LLP
Wellington Management Company, LLP, the subadvisor to the Growth & Income Fund,
("Wellington Management"), whose principal business address is 75 State Street,
Boston, Massachusetts 02109.
Wellington Management and its predecessor organizations have provided invest-
ment management services to investment companies, employee benefit plans,
endowments, foundations and other institutions and individuals since 1928. As
of September 30, 1999, Wellington Management had investment management author-
ity with respect to approximately $217 billion of assets.
Matthew E. Megargel, Senior Vice President of Wellington Management, has served
as fund manager to the Growth & Income Fund since February 1992. Mr. Megargel
has served as fund manager of the Tax-Sensitive Equity Fund and the Equity-
Income Fund since March 2000. Mr. Megargel joined Wellington Management in 1983
as a research analyst and took on additional responsibilities as a fund manager
in 1988. In 1991, he became solely a fund manager with Wellington Management.
Credit Suisse Asset Management, LLC.
Credit Suisse Asset Management, LLC., the subadvisor to the Small Cap Growth
Fund, is located at 153 E. 53rd Street, New York, New York, 10022.
CSAM is a professional investment counseling firm which provides investment
services to investment companies, employee benefit plans, endowment funds,
foundations and other institutions and individuals. As of November 30, 1999,
CSAM managed approximately $60 billion of assets, and together with its global
affiliates, managed $168 billion worldwide.
The co-fund managers of the Small Cap Growth Fund are Elizabeth B. Dater and
Stephen J. Lurito. Ms. Dater, a managing director, has been fund manager of the
Small Cap Growth Fund since its inception and has been a fund manager since
1978. Mr. Lurito, a managing director, has been a fund manager of the Small Cap
Growth Fund since its inception and has been with the firm since 1987.
Founders Asset Management, LLC.
Investment decisions for the Large Cap Growth Fund, International Small Cap
Fund and Global Equity Funds are made by its subadvisor, Founders Asset Manage-
ment, LLC, located at 2930 East Third Avenue, Denver, Colorado 80206. Founders
is a registered investment adviser first established as an asset manager in
1938, and is a subsidiary of Mellon Bank, N.A. As of September 30, 1999, Found-
ers had over $7.5 billion of assets under management, including approximately
$5.2 billion in mutual fund accounts and $2.3 billion in other advisory
accounts.
To facilitate the day-to-day investment management of the Large Cap Growth
Fund, International Small Cap Fund, and Global Equity Fund, Founders employs a
unique team-and-lead-manager system. The management team is composed of several
members of the Investment Department, including lead portfolio managers, port-
folio traders and research analysts. Team members share responsibility for pro-
viding ideas, information, knowledge and expertise in the management of the
Funds. Each team member has one or more areas of expertise that is applied to
the management of the Fund. Daily decisions on Fund selection for the Fund
rests with a lead fund manager assigned to the Fund.
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30
<PAGE>
Tracy P. Stouffer, Vice President of Investments, has been the lead fund man-
ager for the International Small Cap Fund since July 1999. Previously, Mr.
Stouffer was a vice president and portfolio manager with Federated Global
Incorporated from 1995 to July 1999 and a vice president and portfolio manager
with Clariden Asset Management from 1988 to 1995.
Thomas M. Arrington, Vice President of Investments, is a Chartered Financial
Analyst who has been the co-portfolio manager, along with Scott Chapman, of the
Large Cap Growth Fund since December 1998. Mr. Arrington has served as co-port-
folio manager to the Global Equity Fund since March 2000. Prior to joining
Founders, he was vice president and director of income equity strategy at
HighMark Capital Management, a subsidiary of Union BanCal Corp., where he man-
aged the HighMark Income Equity Fund, a large-cap fund. He received a bache-
lor's degree in economics from the University of California, Los Angeles and an
MBA from San Francisco State University.
Scott Chapman, Vice President of Investments, is a Chartered Financial Analyst
who has been the co-portfolio manager, along with Thomas Arrington, of the
Large Cap Growth Fund since December 1998. Mr. Chapman has served as co-portfo-
lio manager to the Global Equity Fund since March 2000. Before joining Found-
ers, Chapman was vice president and director of growth strategy for HighMark
Capital. He has more than 10 years experience in equity investment management,
including security analysis positions with McCullough, Andrews and Cappiello
and Cooper Development Co. Chapman received a bachelor of science degree in
accounting from Santa Clara University and an MBA in finance from Golden Gate
University.
Douglas A. Loeffler, Vice President of Investments, is a Chartered Financial
Analyst who has served as the co-portfolio manager of the Global Equity Fund
since March, 2000. Mr. Loeffler has been the lead portfolio manager for Dreyfus
Founders Worldwide Growth Fund since July, 1999. Prior to joining Founders in
1995, Mr. Loeffler was an investment professional at Scudder, Stevens & Clark
for seven years.
INVESCO Funds Group, Inc. ("INVESCO")
INVESCO, with principal offices at 7800 E. Union Blvd., Denver, Colorado 80237,
has been the subadvisor to the Balanced Fund and the Mid Cap Growth Fund since
March 2000. Established in 1932, INVESCO Funds Group is one of the oldest
existing mutual fund management companies in the United States. Some of the
world's largest institutions and more than one million individual investors
rely on the knowledge of INVESCO's investment specialists. As of December 31,
1999, INVESCO and its affiliates managed approximately $357 billion in assets,
including $40 billion in shareholder accounts.
Charles P. Mayer, Director of Investments & Senior Vice President, manages the
equity portion of the Balanced Fund. Mr. Mayer, who joined INVESCO in 1993, has
been an investment professional since 1969. Mr. Mayer holds a BA from St.
Peter's College, and an MBA from St. John's University.
Donovan J. Paul, Senior Vice President, manages the fixed-income portion of the
Balanced Fund. Mr. Paul, who joined INVESCO in 1994, has been an investment
professional since 1976. Mr. Paul holds a BBA from the University of Iowa, and
an MBA from the University of Northern Iowa.
Peter Lovell, Vice President, is a co-manager of the Balanced Fund. Mr. Lovell,
who joined INVESCO in 1994, has been an investment professional since 1976. Mr.
Lovell holds a BBA from the University of Iowa, and an MBA from the University
of Northern Iowa.
Timothy J. Miller, Senior Vice President, manages the Mid Cap Growth Fund. Mr.
Miller, who joined INVESCO in 1992, has been an investment professional since
1979. Mr. Miller holds a BSBA from St. Louis University, and an MBA from the
University of Missouri.
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31
<PAGE>
Morgan Stanley Dean Witter Investment Management Inc.
Morgan Stanley Dean Witter Investment Management Inc., with principal offices
at 1221 Avenue of the Americas, New York, New York 10020, has been the
subadvisor to the International Equity Fund since April 1, 1999. Morgan Stanley
Dean Witter Investment Management Inc. in certain instances does business using
the name Morgan Stanley Asset Management ("MSAM"). MSAM, a wholly-owned subsid-
iary of Morgan Stanley Dean Witter & Co., conducts a worldwide fund management
business, providing a broad range of fund management services to customers in
the United States and abroad. As of September 30, 1999, MSAM, together with its
affiliated institutional asset management companies, managed investments total-
ing approximately $173.5 billion.
Ann D. Thivierge shares portfolio management responsibility for the Interna-
tional Equity Fund with Barton M. Biggs. Ms. Thivierge is a Managing Director
of MSAM. She joined MSAM in 1986 and holds a B.A. in International Relations
from James Madison College, Michigan State University, and an M.B.A. in Finance
from New York University.
Barton M. Biggs has been Chairman and a director of MSAM since 1980. He is also
a director and chairman of various registered investment companies to which
MSAM and certain of its affiliates provide investment advisory services. Mr.
Biggs holds a B.A. from Yale University and an M.B.A. from New York University.
American General Investment Management, L.P. ("AGIM")
AGIM has been the subadvisor to the Strategic Income Fund, the Core Bond Fund,
the U.S. Government Securities Fund, and the Money Market Fund since March,
2000. AGIM was formed in 1998 as a successor to the investment management divi-
sion of American General Corporation, and is an indirect wholly-owned subsidi-
ary of American General Corporation. AGIM also provides investment management
and advisory services to pension and profit sharing plans, financial institu-
tions and other investors. Accounts managed by AGIM had combined assets, as of
December 31, 1999, of approximately $68.9 billion. AGIM is located at 2929
Allen Parkway, Houston, Texas 77019.
Steven Guterman, Executive Vice President portfolio manager of the Strategic
Income Fund, joined AGIM in 1998. Mr. Guterman served as Managing Director at
Salomon Brothers, Inc. from 1996 to 1998 and as Senior Portfolio Manager and
head of the U.S. Fixed Income Portfolio Group from 1990 to 1998.
Robert N. Kase, Portfolio Manager, who serves as the portfolio manager of the
Core Bond Fund and the U.S. Government Securities Fund, joined AGIM in 1998.
Mr. Kase has served as Investment Officer of Variable Annuity Life Insurance
Company and Senior Portfolio Manager of AGIM since 1998, and was Senior Portfo-
lio Manager with CL Capital Management, Inc. from 1992 to 1998.
Teresa Moro, Portfolio Manager, who serves as the portfolio manager of the
Money Market Fund, has served as Vice President and Investment Officer of Amer-
ican General Series Portfolio Company and as portfolio manager of the American
General Series Portfolio Company Money Market Fund since 1991.
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32
<PAGE>
Section III:
Investing in North American Funds
Institutional Classes of Shares
Two classes of shares of North American Funds are offered by this Prospectus:
Institutional Class I shares and Institutional Class II shares.
Institutional Class I shares of each Fund and Institutional Class II shares of
the Core Bond Fund are available to you through your employer plan. Institu-
tional Class I shares are available to any qualifying employer plan once the
plan establishes a minimum account balance of $1 million with the Trust [Insti-
tutional Class II]. A plan's account balance is equal at any time to the aggre-
gate of all amounts contributed by the plan to the Trust, less the cost of all
redemptions by such plan from the Trust. The Distributor may waive the minimum
account balance requirement if it reasonably anticipates that the size of the
plan and/or the anticipated amount of contributions will present economies of
scale. As a participant in an employer retirement plan, you do not purchase
Institutional Class I and Class II Shares of the Funds directly. Rather, Insti-
tutional Class I and Class II Shares of a Fund are purchased for you when you
elect to allocate your retirement contributions to a Fund plan that is avail-
able as an investment option in your retirement or savings plan. You may be
permitted to elect different investment options, alter the amounts contributed
to your plan, or change how contributions are allocated among your investment
options in accordance with your plan's specific provisions. See your plan
administrator or employee benefits office for more details. Investments by
individual participants in employer retirement plans are made through their
plan sponsor or administrator, who is responsible for transmitting instructions
for all orders for the purchase, redemption and exchange of Fund shares. The
availability of an investment by a plan participant in the Funds, and the pro-
cedures for investing depend upon the provisions of the plan and whether the
plan sponsor or administrator has contracted with the Trust or designated agent
for special processing services.
For more information on how to participate in the Funds through an employee
retirement plan, please refer to your plan materials or contact your employee
benefits office.
Transfer or exchange of balances
An employer retirement plan may allow you to exchange all or part of your
existing plan balance from one investment option to another. Check with your
plan administrator for details on the rules governing exchanges in your plan.
Exchanges will be accepted by the Trust only as permitted by your plan. Your
plan administrator can explain how frequently exchanges are allowed. The Trust
reserves the right to re-fuse any exchange purchase request.
Pricing of Fund Shares
The price of the shares of each Fund is the net asset value per share (next
determined following receipt of an order). The net asset value of the shares of
each class of each Fund is calculated separately and, except as described
below, is determined once daily as of the close of regularly scheduled trading
on the New York Stock Exchange. Net asset value per share of each class of each
Fund is calculated by dividing the value of the portion of the Fund's securi-
ties and other assets attributable to that class, less the liabilities attrib-
utable to that class, by the number of shares of that class outstanding. No
determination is required on (i) days on which changes in the value of such
Fund's securities holdings will not materially affect the current net asset
value of the shares of the Fund and (ii) days when the New York Stock Exchange
is closed (for example, national holidays). Generally, trading in non-U.S. Gov-
ernment securities as well as U.S. Government Securities and money market
instruments, is substantially completed each day at various times prior to the
close of regularly scheduled trading on the New York Stock Exchange. The values
of such securities used in computing the net asset value of the shares of a
class of a Fund are generally determined as of such times. Occasionally, events
which affect the values of such securities may occur between the times at which
they are generally determined and the close of regularly scheduled trading on
the Exchange and would therefore not be reflected in the computation of a
class's net asset value. If events materially affecting the value of such secu-
rities occur during such period, then these securities will be valued at their
fair value as determined in good faith by the subadvisors under procedures
established and regularly reviewed by the Trustees.
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33
<PAGE>
All instruments held by the Money Market Fund and short-term debt instruments
with a remaining maturity of 60 days or less held by the other Funds are valued
on an amortized cost basis.
Unless you request cash payment, all dividends and distributions will be rein-
vested. All Funds except the Money Market Fund declare and pay capital gains
annually.
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34
<PAGE>
Dividends and Distributions from North American Funds
These Funds declare and pay income dividends annually:
.International Small Cap Fund
.Global Equity Fund
.Small Cap Growth Fund
.Mid Cap Growth Fund
.Large Cap Growth Fund
.Balanced Fund
These Funds declare and pay income dividends semi-annually:
.International Equity Fund
.Growth & Income Fund
These Funds declare income dividends daily and pay monthly:
.Strategic Income Fund
.Core Bond Fund
.U.S. Government Securities Fund
.Money Market Fund
- -------
35
<PAGE>
Taxes
It is expected that each Fund of the Trust will qualify as a "regulated
investment company" under the Code. If it so qualifies, a Fund will not be
subject to United States federal income taxes on its net investment income and
net capital gain, if any, that it distributes to its shareholders in each tax-
able year, provided that it distributes to its shareholders (i) at least 90%
of its net investment income for such taxable year, and at least 90% of its
net tax-exempt interest income for such taxable year. If in any year a Fund
fails to qualify as a regulated investment company, such Fund would incur reg-
ular corporate federal income tax on its taxable income for that year and be
subject to certain additional distribution requirements upon re-qualification.
Each Fund will be subject to a 4% nondeductible excise tax on its taxable
income to the extent it does not meet certain distribution requirements by the
end of each calendar year. Each Fund intends to make sufficient distributions
to avoid application of the corporate income and excise taxes.
Certain investments, including investments in assets "marked to the market"
for federal income tax purposes, debt obligations issued or purchased at a
discount and potentially so-called "index securities", may create taxable
income in excess of the cash they generate. In such cases, a Fund may be
required to sell assets (including when it is not advantageous to do so) to
generate the cash necessary to distribute as dividends to its shareholders all
of its income and gains and thereby to eliminate any tax liability at the Fund
level. In addition, transactions in options, futures contracts, hedging trans-
actions, forward contracts, and straddles may accelerate income, defer losses,
cause adjustments in the holding periods of a Fund's securities and convert
long-term capital gains into short-term capital gains and short-term capital
losses into long-term capital losses. These transactions may affect the
amount, timing and character of distributions to shareholders.
Funds investing in foreign securities or currencies may be required to pay
withholding or other taxes to foreign governments on dividends and interest.
The investment yield of the Funds investing in foreign securities or curren-
cies will be reduced by these foreign taxes. Shareholders will bear the cost
of any foreign taxes, but may not be able to claim a foreign tax credit or
deduction for these foreign taxes. If a Fund is eligible for and makes an
election to allow the shareholders of that Fund to claim a foreign tax credit
or deduction for these taxes for any taxable year, the shareholders will be
notified. The ability of the shareholders to utilize such a foreign tax credit
is subject to a holding period requirement. In addition, Funds investing in
securities of passive foreign investment companies may be subject to U.S. fed-
eral income taxes (and interest on such taxes) as a result of such invest-
ments. The investment yield of the Funds making such investments will be
reduced by these taxes and interest. Shareholders will bear the cost of these
taxes and interest, but will not be able to claim a deduction for these
amounts.
A Fund's distributions derived from interest, dividends and certain other
income, including in general short-term capital gains, will result in taxable
ordinary income to the shareholders of the Fund, whether received in cash or
reinvested in shares. Properly designated Fund distributions derived from net
long-term capital gains (i.e., net gains derived from the sale of securities
held for more than 12 months) will result in taxable long-term capital gain
income to the shareholders of the Fund, regardless of whether the distribu-
tions are received in cash or reinvested in shares and regardless of how long
a shareholder has held shares in the Fund. Distributions are taxed as
described in this paragraph even if such distributions economically represent
a return of a particular shareholder's investment. Distributions that repre-
sent a return of a particular shareholder's investment are likely to occur in
respect of shares purchased at a time when a Fund's net asset value reflects
gains that are either unrealized, or realized but not distributed.
The redemption, sale or exchange of Fund shares (including the exchange of
shares of one Fund for shares of another) is a taxable event and may result in
a gain or loss. Gain or loss, if any, recognized on the sale or other disposi-
tion of shares of the Fund will be taxed as capital gain or loss if the shares
are capital assets in the shareholder's hands. Generally, a shareholder's gain
or loss will be a long-term gain or loss if the shares have been held for more
than one year.
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36
<PAGE>
If a shareholder sells or otherwise disposes of a share of a Fund before hold-
ing it for more than six months, any loss on the sale or other disposition of
such share shall be treated as a long-term capital loss to the extent of any
capital gain dividends received by the shareholder with respect to such share.
A loss realized on a sale or exchange of shares may be disallowed if other
shares are acquired within a 61-day period beginning 30 days before and ending
30 days after the date on which the shares are disposed.
Generally, unless a shareholder of any Fund includes his or her taxpayer iden-
tification number (social security number for individuals) in the Shareholder
Application and certifies that he or she is not subject to backup withholding,
the Fund is required to withhold and remit to the U.S. Treasury 31% from divi-
dends (other than exempt-interest dividends) and other reportable payments to
the shareholder.
Depending on the residence of the shareholder for tax purposes, distributions
may also be subject to state and local taxes or withholding taxes. Most states
provide that a regulated investment company may pass through (without restric-
tion) to its shareholders state and local income tax exemptions available to
direct owners of certain types of U.S. government securities. Thus, for resi-
dents of these states, distributions derived from a Fund's investment in cer-
tain types of U.S. government securities should be free from state and local
income taxes to the extent that the interest income from such investments would
have been exempt from state and local income taxes if such securities had been
held directly by the respective shareholders themselves.
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37
<PAGE>
[GRAPHIC]
[LOGO]
North American Funds
286 Congress Street
Boston, Massachusetts 02210
(800) 872-8037
Institutional Class I Shares
Institutional CLass II Shares
International Small Cap Fund
International Equity Fund
Global Equity Fund
Small Cap Growth Fund
Mid Cap Growth Fund
Large Cap Growth Fund
Growth & Income Fund
Balanced Fund
Strategic Income Fund
Core Bond Fund
U.S. Government Securities Fund
Money Market 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
286 Congress Street
Boston, MA 02210
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 Funds' performance, list
portfolio holdings and include additional information about the Funds'
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. 811-5797
0300.90201C
<PAGE>
NORTH AMERICAN FUNDS
Supplement Dated June __, 2000
to the
Statement of Additional Information
Dated March 1, 2000
Disclosure relating to:
Institutional Class I shares and Institutional Class II shares of
International Small Cap Fund, International Equity Fund, Global Equity
Fund, Small Cap Growth Fund, Mid Cap Growth Fund, Large Cap Growth
Fund, Growth & Income Fund, Balanced Fund, Strategic Income Fund, Core
Bond Fund, U.S. Government Securities Fund, Money Market Fund:
- --------------------------------------------------------------------------
Note: This document supplements the North American Funds (the "Trust") Statement
of Additional Information dated March 1, 2000 (the "Statement of Additional
Information") filed electronically with the Securities and Exchange Commission
via EDGAR on March 2, 2000 - Registration Nos. 33-27958, 811-5797, Accession
Number: 95019-00-000730 - and incorporated herein by reference.
- --------------------------------------------------------------------------
I. Date of the Statement of additional Information.
The date of the Statement of Additional Information is hereby amended to June
__, 2000.
II. New Classes of Shares.
The Trust intends to offer Institutional Class I shares of twelve series:
International Small Cap Fund, International Equity Fund, Global Equity Fund,
Small Cap Growth Fund, Mid Cap Growth Fund, Large Cap Growth Fund, Growth &
Income Fund, Balanced Fund, Strategic Income Fund, Core Bond Fund, U.S.
Government Securities Fund, Money Market Fund. The Trust intends to offer
Institutional Class II shares of the Core Bond Fund.
<PAGE>
(c) Subadvisory Agreement between American General Asset Management
Corp. and Wellington Management Company, dated March 10, 2000.
(14)
(d) Subadvisory Agreement between American General Asset Management
Corp. and Morgan Stanley Dean Witter Investment Management Inc.
dated March 10, 2000. (14)
(e) Subadvisory Agreement between American General Asset Management
Corp. and INVESCO Funds Group, Inc. dated March 10, 2000.
(14)
(f) Subadvisory Agreement between American General Asset Management
Corp. and Founders Asset Management LLC dated March 10, 2000.
(14)
(g) (Reserved)
(h) Subadvisory Agreement between American General Asset Management
Corp. and T. Rowe Price Associates, Inc. dated March 10,
2000. (14)
(i) Subadvisory Agreement between American General Asset Management
Corp. and Neuberger Bornan Management, Inc. dated March 10,
2000. (14)
(j) (Reserved)
(k) Subadvisory Agreement between American General Asset Management
Corp. and Credit Suisse Asset Management, LLC dated March 10,
2000. (15)
2
<PAGE>
________________________________________________________________________________
(1) Previously filed as Exhibit to North American Fund's initial registration
statement on Form N-1A No. 33-27958) dated November 1, 1991.
(2) Previously filed as Exhibit to North American Fund's Post-Effective
Amendment No. 1 on Form N-1A (File No. 33-27958) dated December 29, 1989.
(3) Previously filed as Exhibit to North American Funds' Post-Effective
Amendment No. 2 on Form N-1A (File No. 33-27958) dated August 29, 1990.
(4) Previously filed as Exhibit to North American Fund's Post-Effective
Amendment No. 7 on Form N-1A (File No. 33-27958) dated November 1, 1991.
(5) Previously filed as Exhibit to North American Funds' Post-Effective
Amendment No. 17 on Form N-1A (File No. 33-27958) dated April 1, 1994.
(6) Previously filed as Exhibit to North American Funds Post effective
Amendment No. 21 on Form N1-A (File No. 33-27958) dated December 15, 1995.
(7) Previously filed as Exhibit to North American Funds Post-Effective
Amendment No. 22 on Form N-1A (File No. 33-27958) dated February 23, 1996.
(8) Previously filed as Exhibit to North American Funds' Post-Effective
Amendment No. 25 on Form N-1A dated December 30, 1996.
(9) Previously filed as Exhibit to North American Funds' Post-Effective
Amendment No. 26 on Form N-1A (File No. 33-27958) dated October 17, 1997.
(10) Previously filed as Exhibit to North American Funds' Post-Effective
Amendment No. 27 on Form N-1A (File No. 33-27958) dated December 30, 1997.
(11) Previously filed as Exhibit to North American Funds' Post-Effective
Amendment No. 28 on Form N-1A (File No. 33-27958) dated December 18, 1998.
(12) Previously filed as Exhibit to North American Funds' Post-Effective
Amendment No. 29 on Form N-1A (File No. 33-27958) dated March 1, 1999.
(13) Previously filed as Exhibit to North American Funds' Post-Effective
Amendment No. 31 on Form N-1A (File No. 33-27958) dated March 2, 2000.
(14) Previously filed as Exhibit to North American Funds' Post-Effective
Amendment No. 32 on Form N-1A (File No. 33-27958) dated March 17, 2000.
(15) Filed herewith.
5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, North American Funds has
duly caused this Amendment to its Registration Statement to be signed on its
behalf by the undersigned, duly authorized, in the City of Boston, and
Commonwealth of Massachusetts on the 5th day of April, 2000.
NORTH AMERICAN FUNDS
--------------------
Registrant
By: *
-------------------------
Alice T. Kane, President
Attest:
/s/ John I. Fitzgerald
- -----------------------
John I. Fitzgerald
Secretary
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended,
this amended Registration Statement has been signed by the following persons in
the capacities and on the 5th day of April, 2000.
Title
-----
*
- ------------------------------- Trustee
William F. Achtmeyer
*
- ------------------------------- Trustee
Don B. Allen
*
- ------------------------------- Trustee
William F. Devin
*
- ------------------------------- Trustee, Chairman and President
Alice T. Kane
*
- ------------------------------- Trustee
Kenneth J. Lavery
*
- ------------------------------- Assistant Treasurer
Thomas J. Brown (Principal Accounting Officer)
(Principal Financial Officer)
/s/ John I. Fitzgerald
- ------------------------------- *By John I. Fitzgerald
John I. Fitzgerald Attorney-in-fact
-2-
<PAGE>
Exhibit Index
4(k). Subadvisory Agreement between American General Asset Management Corp. and
Credit Suisse Asset Management, LLC dated March 1, 2000.
<PAGE>
Exhibit (4)(K)
SUBADVISORY AGREEMENT
---------------------
THIS AGREEMENT is made and entered into on this 1st day of
March, 2000, between AMERICAN GENERAL ASSET MANAGEMENT CORP. (the "Adviser"), a
Delaware corporation registered under the Investment Advisers Act of 1940, as
amended (the "Advisers Act"), and CREDIT SUISSE ASSET MANAGEMENT, LLC (the
"Subadviser"), a Delaware limited liability company also registered under the
Advisers Act.
W I T N E S S E T H :
WHEREAS, the Adviser has, pursuant to an Advisory Agreement
with the North American Funds, a Massachusetts business trust (the "Trust"),
dated as of March 1, 2000 (the "Advisory Agreement"), been retained to act as
investment adviser for the Emerging Growth Fund (the "Fund"), one of the Trust's
series of shares;
WHEREAS, the Trust is registered with the Securities and
Exchange Commission (the "SEC") as an open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Advisory Agreement permits the Adviser to
delegate certain of its duties under the Advisory Agreement to other investment
advisers; and
WHEREAS, the Adviser desires to retain the Subadviser to
assist it in the provision of a continuous investment program for that portion
of the Fund's assets which the Adviser, from time to time, assigns to the
Subadviser (the "Subadviser Assets"), and the Subadviser is willing to render
such services subject to the terms and conditions set forth in this Agreement.
NOW, THEREFORE, the parties do mutually agree and promise as
follows:
1. Investment Description; Appointment as Subadviser. The Fund
-------------------------------------------------
desires to employ its capital by investing and reinvesting in securities of the
kind and in accordance with the limitations specified in the Trust's Prospectus
and Statement of Additional Information relating to the Fund as may be in effect
from time to time (collectively, the "Prospectus") and which are filed with the
SEC as part of the Trust's Registration Statement on Form N-1A, as amended from
time to time, and in such manner and to such extent as may be approved by the
Board of Trustees of the Trust. A copy of the Prospectus, as currently in
effect, has been provided to the Subadviser. The Adviser hereby retains the
Subadviser to act as investment adviser for and to manage the Subadviser Assets
subject to the supervision of the Adviser and the Board of Trustees of the Trust
and subject to the terms of
<PAGE>
this Agreement; and the Subadviser hereby accepts such employment. In such
capacity, the Subadviser shall be responsible for the investment management of
the Subadviser Assets. It is recognized that the Subadviser now acts, and that
from time to time hereafter may act, as investment adviser to one or more other
investment companies and to fiduciary or other managed accounts and that the
Adviser and the Trust have no objection to such activities.
2. Duties of the Subadviser
(a) Investments. The Subadviser is hereby authorized and
-----------
directed and hereby agrees, subject to the stated investment policies
and restrictions of the Fund as set forth in the Prospectus and
subject to the directions of the Adviser and the Trust's Board of
Trustees, to purchase, hold and sell investments for the Subadviser
Assets ("Fund Investments") and to monitor on a continuous basis the
performance of such Fund Investments. Subject to the supervision of
the Board of Trustees and the Adviser and the terms and conditions
hereof, including without limitation Section 2(b), the Subadviser
will: (1) manage the Subadviser Assets in accordance with the Fund's
investment objective, policies and limitations as stated in the
Prospectus as they apply to the Subadviser Assets; (2) make investment
decisions for the Fund; (3) place purchase and sale orders for
portfolio transactions for the Fund; and (4) manage otherwise
uninvested cash assets included in the Subadviser Assets. In providing
these services, the Subadviser will formulate and implement a
continuous program of investment, evaluation and, if appropriate, sale
and reinvestment of the Subadviser Assets. The Adviser agrees to
provide to the Subadviser such assistance as may be reasonably
requested by the Subadviser in connection with its activities under
this Agreement, including, without limitation, information concerning
the Fund, its funds available, or to become available, for investment
and generally as to the conditions of the Fund's affairs.
(b) Compliance with Applicable Laws and Governing Documents.
-------------------------------------------------------
In the performance of its duties and obligations under this Agreement,
the Subadviser shall act in conformity with the Prospectus and with
the instructions and directions received in writing from the Adviser
or the Board of Trustees of the Trust and will comply with the
requirements of the 1940 Act, the Advisers Act, the Internal Revenue
Code of 1986, as amended (the "Code") (including the requirements for
qualification as a regulated investment company) and all other federal
and state laws and regulations applicable to its services hereunder.
Notwithstanding
2
<PAGE>
the foregoing, the Adviser shall remain responsible for ensuring the
Fund's overall compliance with the 1940 Act, the Advisers Act, the
Code and all other applicable federal and state laws and regulations
and the Subadviser is only obligated to comply with subsection (b)
with respect to the Subadviser Assets.
The Adviser will provide the Subadviser with reasonable
advance notice of any change in the Fund's investment objectives,
policies and restrictions as stated in the Prospectus, and the
Subadviser shall, in the performance of its duties and obligations
under this Agreement, manage the Fund Investments consistent with such
changes. The Adviser acknowledges and agrees that the Prospectus will
at all times be in compliance with all disclosure requirements under
all applicable federal and state laws and regulations relating to the
Trust or the Fund, including, without limitation, the 1940 Act and the
rules and regulations thereunder, and that the Subadviser shall have
no liability in connection therewith, except as to the accuracy of
material information furnished in writing by the Subadviser to the
Fund or to the Adviser specifically for inclusion in the Prospectus.
The Subadviser hereby agrees to provide to the Adviser in a timely
manner such information relating to the Subadviser and its
relationship to, and actions for, the Fund as may be required to be
contained in the Prospectus.
In fulfilling these requirements and its other requirements
and obligations hereunder, the Subadviser shall be entitled to rely on
and act in accordance with (1) information, which is not clearly
inaccurate on its face, provided to it by the Trust's administrator,
fund accountant, custodian or other service provider and (2)
instructions, which may be standing instructions, from the Adviser.
The Adviser agrees to provide or cause to be provided to the
Subadviser on an ongoing basis upon request by the Subadviser, such
information as is requested by the Subadviser for the performance of
its obligations under this Agreement, and the Subadviser shall not be
in breach of any term of this Agreement or be deemed to have acted
negligently if the Adviser fails to provide or cause to be provided
such information and the Subadviser relies on the information most
recently provided to it.
(c) Voting of Proxies. The Subadviser shall have the power
-----------------
to vote, either in person or by proxy, all securities in which the
Subadviser Assets may be invested from time to time, and shall not be
required to seek instructions from, the Adviser or the Fund.
3
<PAGE>
(d) Agent. Subject to any other written instructions of the
-----
Adviser or the Trust, the Subadviser is hereby appointed the Adviser's
and the Trust's agent and attorney-in-fact for the limited purposes of
executing account documentation, agreements, contracts and other
documents as the Subadviser shall be requested by brokers, dealers,
counterparties and other persons in connection with its management of
the assets of the Fund. The Subadviser agrees to provide the Adviser
and the Trust with copies of any such agreements executed on behalf of
the Adviser or the Trust.
(e) Brokerage. The Subadviser is authorized, subject to the
---------
supervision of the Adviser and the Trust's Board of Trustees and in
accordance with the Prospectus or such other policies or practices as
may be established by the Trustees, to establish and maintain accounts
on behalf of the Fund with, and place orders for the purchase and sale
of the Fund Investments with or through, such persons, brokers or
dealers ("brokers") as Subadviser may elect and negotiate commissions
to be paid on such transactions. The Subadviser, however, is not
required to obtain the consent of the Adviser or the Trust's Board of
Trustees prior to establishing any such brokerage account. The
Subadviser shall place all orders for the purchase and sale of
portfolio investments for the Fund's account with brokers selected by
the Subadviser. In the selection of such brokers and the placing of
such orders, the Subadviser shall use its best efforts to seek to
obtain for the Fund the most favorable price and execution available,
except to the extent it may be permitted to pay higher brokerage
commissions or spreads for brokerage and research services, as
provided below. In using its best efforts to obtain for the Fund the
most favorable price and execution available, the Subadviser, bearing
in mind the Fund's best interests at all times, shall consider all
factors it deems relevant, including price, the size of the
transaction, the breadth and nature of the market for the security,
the difficulty of the execution, the amount of the commission or
spreads, if any, the timing of the transaction, market prices and
trends, the reputation, experience and financial stability of the
broker involved, and the quality of service rendered by the broker or
dealer in other transactions. Subject to such policies as the Trustees
may determine, including, without limitation, policies contained in
the Prospectus, or as may be mutually agreed to by the Adviser and the
Subadviser, and to the extent permitted by applicable law, the
Subadviser shall be allowed to select a broker that provides brokerage
and research services to the Subadviser who charges a commission or
4
<PAGE>
spread for effecting a Fund investment transaction that is in excess
of the amount of commission or spread that another broker would have
charged for effecting that transaction.
It is recognized that the services provided by such brokers
may be useful to the Subadviser in connection with the Subadviser's
services to other clients. On occasions when the Subadviser deems the
purchase or sale of a security to be in the best interests of the Fund
as well as other clients of the Subadviser, the Subadviser, to the
extent permitted by applicable laws and regulations, may, but shall be
under no obligation to, aggregate the securities to be sold or
purchased in order to obtain the most favorable price or lower
brokerage commissions and efficient execution. In such event,
allocation of securities so sold or purchased, as well as the expenses
incurred in the transaction, will be made by the Subadviser in the
manner the Subadviser considers to be the most equitable and
consistent with its fiduciary obligations to the Fund and to such
other clients over time. It is recognized that in some cases, this
procedure may adversely affect the price paid or received by the Fund
or the size of the position obtainable for, or disposed of by, the
Fund.
(f) Securities Transactions. The Subadviser and any
-----------------------
affiliated person of the Subadviser will not purchase securities or
other instruments from or sell securities or other instruments to the
Fund; provided, however, the Subadviser may purchase securities or
-------- -------
other instruments from or sell securities or other instruments to the
Fund if such transaction is permissible under applicable laws and
regulations, including, without limitation, the 1940 Act and the
Advisers Act and the rules and regulations promulgated thereunder.
The Subadviser, including its Access Persons (as defined in
subsection (e) of Rule 17j-l under the 1940 Act), agrees to observe
and comply with Rule 17j-l and its Code of Ethics (which shall comply
in all material respects with Rule 17j-l, as the same may be amended
from time to time). On a quarterly basis, the Subadviser will either
(i) certify to the Adviser that the Subadviser and its Access Persons
have complied with the Subadviser's Code of Ethics with respect to the
Subadviser Assets or (ii) identify any material violations which have
occurred with respect to the Subadviser Assets. In addition, the
Subadviser will report at least annually to the Adviser concerning any
other violations of the Subadviser's Code of Ethics
5
<PAGE>
which required significant remedial action and which were not
previously reported.
(g) Books and Records. Pursuant both to the 1940 Act and the
-----------------
Advisers Act and the rules and regulations promulgated thereunder, the
Subadviser shall maintain separate books and records of all matters
pertaining to the Subadviser Assets. The Fund's books and records
(relating to the Subadviser Assets) shall be available to the Adviser
at any time upon reasonable request during normal business hours and
shall be available for telecopying without unreasonable delay to the
Adviser during any day that the Fund is open for business.
(h) Information Concerning Fund Investments and Subadviser.
------------------------------------------------------
From time to time (but no less often than quarterly) as the Adviser or
the Fund may reasonably request, the Subadviser will furnish the
requesting party reports on portfolio transactions and reports on Fund
Investments held in the portfolio, all in such detail as the Adviser
or the Fund may reasonably request. The Subadviser will also inform
the Adviser promptly of changes in portfolio managers responsible for
Subadviser Assets or of changes in the control of the Subadviser. The
Subadviser will make available its officers and employees to meet with
the Trust's Board of Trustees in person annually on reasonable notice
to review the Fund Investments and the Subadviser will report to the
Board of Trustees in writing on the Fund Investments quarterly. Under
normal circumstances, employees of the Subadviser shall not be
obligated to attend in person more than one Board meeting per year.
(i) Custody Arrangements. The Subadviser shall on each
--------------------
business day provide the Adviser and the Trust's custodian such
information as the Adviser and the Trust's custodian may reasonably
request relating to all transactions concerning the Fund Investments
including, without limitation, recommendations, in accordance with
policies and procedures established by the Trustees, of the fair value
of securities for which market quotes are not available.
3. Independent Contractor. In the performance of its duties hereunder,
----------------------
the Subadviser is and shall be an independent contractor and unless otherwise
expressly provided herein or otherwise authorized in writing, shall have no
authority to act for or represent the Fund or the Adviser in any way or
otherwise be deemed an agent of the Fund or the Adviser.
4. Expenses. During the term of this Agreement, Subadviser will pay
--------
all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities, commodities and other investments
(including
6
<PAGE>
brokerage fees and commissions and other transaction charges, if any) purchased
for the Fund. The Subadviser shall not be responsible for any expenses of the
operations of the Fund including, without limitation, brokerage fees and
commissions and other transaction charges, if any. The Subadviser shall not be
responsible for the Trust's, the Fund's or the Adviser's expenses.
5. Compensation. For the services provided and the expenses assumed
------------
with respect to the Fund pursuant to this Agreement, the Subadviser will be
entitled to a fee, computed and accrued daily and payable monthly in arrears no
later than the seventh (7th) business day following the end of each month, from
the Adviser or the Trust, calculated at the annual rate set forth in Exhibit I.
The method of determining net assets of the Fund for purposes hereof
shall be the same as the method of determining net assets for purposes of
establishing the offering and redemption price of the shares of the Fund as
described in the Prospectus. If this Agreement shall be effective for only a
portion of a month, the aforesaid fee shall be prorated for the portion of such
month during which this Agreement is in effect.
Notwithstanding any other provision of this Agreement, the Subadviser
may from time to time agree not to impose all or a portion of its fee otherwise
payable hereunder (in advance of the time such fee or portion thereof would
otherwise accrue). Any such fee reduction may be discontinued or modified by the
Subadviser at any time.
6. Representation and Warranties of Subadviser. The Subadviser
-------------------------------------------
represents and warrants to the Adviser and the Fund as follows:
(a) The Subadviser is registered as an investment adviser
under the Advisers Act;
(b) The Subadviser is a corporation duly organized and
validly existing under the laws of the State of Delaware with the
power to own and possess its assets and carry on its business as it is
now being conducted;
(c) The execution, delivery and performance by the
Subadviser of this Agreement are within the Subadviser's powers and
have been duly authorized by its Board of Directors or shareholders,
and no action by or in respect of, or filing with, any governmental
body, agency or official is required on the part of the Subadviser for
the execution, delivery and performance by the Subadviser of this
Agreement, and the execution, delivery and performance by the
Subadviser of this Agreement do not contravene or constitute a default
7
<PAGE>
under (i) any provision of applicable law, rule or regulation, (ii)
the Subadviser's governing instruments, or (iii) any material
agreement, judgment, injunction, order, decree or other instrument
binding upon the Subadviser;
(d) The Form ADV of the Subadviser previously provided to
the Adviser is a true and complete copy of the form filed with the SEC
and the information contained therein is accurate and complete in all
material respects.
7. Representations and Warranties of Adviser. The Adviser represents
-----------------------------------------
and warrants to the Subadviser as follows:
(a) The Adviser is registered as an investment adviser under
the Advisers Act;
(b) The Adviser is a corporation duly organized and validly
existing under the laws of the State of Delaware with the power to own
and possess its assets and carry on its business as it is now being
conducted;
(c) The execution, delivery and performance by the Adviser
of this Agreement are within the Adviser's powers and have been duly
authorized by its Board of Directors or shareholders, and no action by
or in respect of, or filing with, any governmental body, agency or
official is required on the part of the Adviser for the execution,
delivery and performance by the Adviser of this Agreement, and the
execution, delivery and performance by the Adviser of this Agreement
do not contravene or constitute a default under (i) any provision of
applicable law, rule or regulation, (ii) the Adviser's governing
instruments, or (iii) any material agreement, judgment, injunction,
order, decree or other instrument binding upon the Adviser;
(d) The Form ADV of the Adviser previously provided to the
Subadviser is a true and complete copy of the form filed with the SEC
and the information contained therein is accurate and complete in all
material respects;
(e) The Adviser acknowledges that it has received a copy of
the Subadviser's Form ADV prior to the execution of this Agreement;
(f) The Trust is in compliance in all material respects, and
during the term of this Agreement will remain in compliance in all
material respects, with all federal and state laws, rules and
regulations applicable to the Trust and the operation of its
8
<PAGE>
business (other than those related to investment objectives, policies
and restrictions over which the Subadviser has discretion pursuant to
the terms hereof), including, without limitation, applicable
disclosure and filing obligations for prospectuses, statements of
additional information, registration statements, periodic reports to
shareholders and regulatory bodies, proxy statements and promotional
materials and advertisements; and
(g) The Trust is in compliance in all material respects, and
during the term of this Agreement will remain in compliance in all
material respects, with the terms and conditions of the Prospectus
(other than those related to investment objectives, policies and
restrictions over which the Subadviser has discretion pursuant to the
terms hereof), including, without limitation, provisions relating to
the computation of the Trust's net asset value and those relating to
processing purchase, exchange and redemption requests.
8. Survival of Representations and Warranties; Duty to Update
----------------------------------------------------------
Information. All representations and warranties made by the Subadviser and the
- -----------
Adviser pursuant to Sections 6 and 7, respectively, shall survive for the
duration of this Agreement and the parties hereto shall promptly notify each
other in writing upon becoming aware that any of the foregoing representations
and warranties are no longer true.
9. Liability. Except as may otherwise be provided by the 1940 Act or
---------
other federal securities laws, in the absence of willful misfeasance, bad faith
or gross negligence on the part of the Subadviser or a reckless disregard of its
duties hereunder, the Subadviser, any affiliated person of the Subadviser and
each person, if any, who within the meaning of the Securities Act of 1933, as
amended, controls the Subadviser ("Controlling Persons") shall not be subject to
any liability to the Adviser, the Trust or the Fund or any of the Fund's
shareholders, and, in the absence of willful misfeasance, bad faith or gross
negligence on the part of the Adviser or a reckless disregard of its duties
hereunder, the Adviser, any affiliated person of the Adviser and each of its
Controlling Persons shall not be subject to any liability to the Subadviser, for
any act or omission in the case of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding or
sale of Fund Investments.
10. Duration and Termination.
------------------------
(a) Duration. This Agreement shall become effective as of
--------
March 1, 2000. This Agreement will continue for an initial period of
two years and thereafter shall continue automatically for successive
9
<PAGE>
annual periods, provided such continuance is specifically approved at
least annually by the Trust's Board of Trustees or vote of a majority
of the outstanding voting securities of the Fund; provided that in
--------
either event its continuance also is approved by a majority of the
Trust's Trustees who are not "interested persons" (as defined in the
1940 Act) of any party to this Agreement, by vote cast in person at a
meeting called for the purpose of voting on such approval.
(b) Termination. Notwithstanding whatever may be provided
-----------
herein to the contrary, this Agreement may be terminated at any time,
without payment of any penalty:
(i) By vote of a majority of the Trust's Board of
Trustees, or by vote of a majority of the outstanding voting
securities of the Fund, or by the Adviser, in each case,
upon sixty (60) days' written notice to the Subadviser;
(ii) By any party hereto immediately upon written
notice to the other parties in the event of a material
breach of any provision of this Agreement by the other
party; or
(iii) By the Subadviser upon sixty (60) days
written notice to the Adviser and the Trust.
This Agreement shall not be assigned (as such term is defined in the
1940 Act) and shall terminate automatically in the event of its
assignment or upon the termination of the Advisory Agreement. In the
event this Agreement is terminated or is not approved in the foregoing
manner, the provisions contained in Section 9 shall remain in effect.
11. Reference to Subadviser. Neither the Adviser, the Trust nor any
-----------------------
affiliated person or agent of the Adviser or the Trust shall make reference to
or use the name of "Warburg Pincus" or "Credit Suisse" or "CSAM" or any
derivative thereof or logo associated with that name, except references
concerning the identity of and services provided by the Subadviser to the Fund,
which references shall not differ in substance from those included in the
Prospectus and this Agreement, in any advertising or promotional materials
without the prior approval of the Subadviser, which approval shall not be
unreasonably withheld or delayed.
Upon termination of this Agreement in accordance with Section 10(b)
hereof, the Adviser, the Trust and the Fund and their affiliates shall cease to
make such reference or use such name (or derivative or logo).
10
<PAGE>
12. Amendment. This Agreement may be amended by written amendment
---------
signed by the parties, provided that the terms of any material amendment shall
be approved by: (a) the Trust's Board of Trustees or by a vote of a majority of
the outstanding voting securities of the Fund and (b) the vote of a majority of
those Trustees of the Trust who are not "interested persons" of either party to
this Agreement cast in person at a meeting called for the purpose of voting on
such approval, if such approval is required by applicable law.
13. Confidentiality. Subject to the duties of the Subadviser to comply
---------------
with applicable law, including any demand of any regulatory or taxing authority
having jurisdiction, the Subadviser shall treat as confidential all records and
other information pertaining to the Fund or the Adviser which the Subadviser
maintains or receives as a result of its responsibilities under this Agreement.
In addition, subject to the duties to comply with any applicable law, the
Adviser agrees to treat as confidential any information concerning the
Subadviser, including its investment policies or objectives, which the Adviser
receives as the result of its actions under this Agreement.
14. Notice. Any notice that is required to be given by the parties to
------
each other under the terms of this Agreement shall be in writing, delivered, or
mailed postpaid to the other parties at the following addresses, which may from
time to time be changed by the parties by notice to the other parties:
(a) If to the Subadviser:
Credit Suisse Asset Management, LLC
466 Lexington Avenue
New York, New York 10017-3147
Attention: General Counsel
(b) If to the Adviser:
American General Asset Management Corp.
286 Congress Street
Boston, Massachusetts 02210
Attention: Joseph T. Grause, Jr.
(c) If to the Trust:
North American Funds
c/o CypressTree Asset Management
Corporation, Inc.
286 Congress Street
Boston, Massachusetts 02210
Attention: Joseph T. Grause, Jr.
11
<PAGE>
15. Jurisdiction. This Agreement shall be governed by and construed in
------------
accordance with substantive laws of the Commonwealth of Massachusetts without
reference to choice of law principles thereof and in accordance with the 1940
Act. In the case of any conflict, the 1940 Act shall control.
16. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, all of which shall
together constitute one and the same instrument.
17. Certain Definitions. For the purposes of this Agreement,
-------------------
"interested person," "affiliated person", "majority of outstanding voting
securities" and "assignment" shall have their respective meanings as set forth
in the 1940 Act, subject, however, to such exemptions as may be granted by the
SEC.
18. Captions. The captions herein are included for convenience of
--------
reference only and shall be ignored in the construction or interpretation
hereof.
19. Severability. If any provision of this Agreement shall be held or
------------
made invalid by a court decision or applicable law, the remainder of the
Agreement shall not be affected adversely and shall remain in full force and
effect.
20. Massachusetts Business Trust. The terms "Trust" and "Trustees"
----------------------------
refer respectively to the Trust created and the Trustees as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust, which has been or may be amended from time to time, and to which
reference is hereby made and a copy of which is on file at the office of the
Secretary of State of The Commonwealth of Massachusetts and elsewhere as
required by law, and to any and all amendments thereto so filed or hereafter
filed. The Subadviser hereby acknowledges and agrees that the obligations of the
Trust entered into in the name or on behalf thereof by any of the Trust, the
Trustees or their representatives or agents are not made individually, but only
in their capacities with respect to the Trust. Such obligations are not binding
upon any of the Trustees, shareholders or representatives of the Trust
personally, but bind only the assets of the Trust. The Subadviser hereby
acknowledges and agrees that all persons dealing with any series of shares of
the Trust must look solely to the assets of the Trust belonging to such series
for the enforcement of any claims against the Trust.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first written above.
AMERICAN GENERAL ASSET MANAGEMENT CORP.
By:_______________________________
Joseph T. Grause, Jr.
Vice President
CREDIT SUISSE ASSET MANAGEMENT, LLC
By:_______________________________
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EXHIBIT I
.55% of the Fund's average daily net assets
14
