NORTH AMERICAN FUNDS, PRE 14A, 2000-03-29

NORTH AMERICAN FUNDS
PRE 14A, 2000-03-29

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<PAGE>

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[X] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))

[_] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

North American Funds
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):

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

(4) Proposed maximum aggregate value of transaction:

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

(5) Total fee paid:

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

[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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

(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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Notes:

<PAGE>

NORTH AMERICAN FUNDS
286 Congress Street
Boston, MA 02210

April 12, 2000

Dear North American Funds Shareholder:

A Special Meeting of Shareholders of all the Funds of North American Funds
(the "Trust") will be held at [Address] on June 1, 2000, at 9:00 a.m., Eastern
time, for the purpose of considering the proposals described in the enclosed
Notice of Special Meeting of Shareholders and Proxy Statement. Additionally, a
Special Meeting of Shareholders of the Equity-Income Fund and the Tax-Sensitive
Equity Fund will be held on June 1, 2000 at 10:00 a.m., Eastern time for the
purpose of considering proposals described in the additional Prospectus/Proxy
Statement that has been enclosed in the mailings sent to shareholders of those
two Funds. These additional proposals relate to the proposed reorganization of
the Equity-Income Fund and the Tax-Sensitive Equity Fund into the Growth &
Income Fund.

On March 10, 2000 CypressTree Investments, Inc. ("CypressTree") sold
substantially all of its assets including all of the stock of CypressTree Asset
Management Corporation, Inc. ("CAM"), the Trust's investment adviser, and all
of the stock of CypressTree Funds Distributors, Inc. ("CFD"), the Trust's
distributor, to American General Corporation ("American General"). The
acquisition by American General of CypressTree's assets (herein "the
Acquisition") took place pursuant to a Purchase Agreement dated February 25,
2000.

The closing of the Acquisition on March 10, 2000 (the "Closing") constituted
an assignment of the investment advisory agreement between CAM and the Trust
with respect to the Funds, and of the distribution agreement between CFD and
the Trust. Under the Investment Company Act of 1940, as amended (the
"Investment Company Act"), these assignments operated to terminate
automatically each of the investment advisory and distribution agreements.

At a meeting of the Board of Trustees of the Trust (the "Board") on February
27, 2000, the Board approved an interim investment advisory agreement between
CAM (operating under its new name of American General Asset Management Corp.
("AGAM")) and the Trust with respect to the Funds in order to allow AGAM to
continue to serve as investment adviser after the Acquisition. Under the
Investment Company Act, however, AGAM may only continue to serve as the
investment adviser for each Fund beyond an interim period of 150 days if
shareholders of such Fund approve a new investment advisory agreement with
AGAM. The Board approved, and recommended shareholder approval of, such a new
investment advisory agreement on February 27, 2000.

CFD, under its new name American General Funds Distributors, Inc. ("AGFD"),
has likewise continued to serve as the distributor of the Trust's shares since
the Closing. The Board approved a new distribution agreement substantially
similar to the Trust's previous distribution agreement with CFD on February 27,
2000 which became effective upon the Closing.

American General has advised the Board that AGAM and AGFD will continue to
provide the same high-quality services provided to the Trust prior to the
Acquisition. The number of your shares in each Fund has not changed as a result
of the Acquisition.

By their terms, the subadvisory agreements between CAM and the various
subadvisers to the Funds also terminated upon the Closing. On February 27,
2000, the Board appointed the following new subadvisers to manage various Funds
pursuant to the Trust's Manager of Managers structure: Founders Asset
Management, LLC (Large Cap Growth Fund, Global Equity Fund, International Small
Cap Fund); Morgan Stanley Dean Witter Investment Management Inc. (International
Equity Fund); Wellington Management Company, LLP
<PAGE>

(Growth & Income Fund, Tax-Sensitive Equity Fund, Equity-Income Fund); INVESCO
Funds Group, Inc. (Mid Cap Growth Fund, Balanced Fund); Credit Suisse Asset
Management, LLC (Small Cap Growth Fund). An information statement describing
these changes has been enclosed in the mailings sent to shareholders of the
above listed Funds.

Shareholders of the Funds are therefore being asked to consider several
proposals that would take effect upon shareholder approval:

. Shareholders of each Fund are being asked to approve a new investment
advisory agreement between the Trust and AGAM in respect of the Funds
which is substantially similar to the Trust's previous investment
advisory agreement with CAM.

. Shareholders of the Strategic Income Fund, the Municipal Bond Fund
(formerly, the National Municipal Bond Fund), the Core Bond Fund
(formerly, the Investment Quality Bond Fund), the U.S. Government
Securities Fund and the Money Market Fund are being asked to approve
subadvisory agreements with American General Investment Management L.P.

. Shareholders are being asked to consider the election of seven Trustees
to the Board.

. Shareholders of each of the Equity-Income Fund and the Tax-Sensitive
Equity Fund are being asked to consider the reorganization of their Fund
into the Growth & Income Fund.

Your vote is important

After reviewing these proposals, your Board of Trustees unanimously agreed
that they are in the best interests of each Fund's shareholders and voted to
approve them, as more fully described in the accompanying proxy statement and,
with respect to the Fund reorganizations, the accompanying prospectus/proxy
statement. Now it is your turn to review the proposals and vote. For more
information about the issues requiring your vote, please refer to the
accompanying documents.

No matter how many shares you own, your timely vote is important. If you are
not able to attend the meeting(s), then please complete, sign, date and mail
the enclosed proxy promptly in order to avoid the expense of additional
mailings or having our proxy solicitor, Georgeson Shareholder Communications
Corporation, telephone you.

Thank you in advance for your participation in this important event.

Sincerely,

Alice T. Kane
By___________________________________
Alice T. Kane
Chairman and President
North American Funds
<PAGE>

NORTH AMERICAN FUNDS
286 Congress Street
Boston, MA 02210
(800) 872-8037

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

To the Shareholders of North American Funds:

Notice is hereby given that a Special Meeting of Shareholders of North
American Funds (the "Trust") will be held on June 1, 2000 at [address] at 9:00
a.m., Eastern time (the "Meeting"). A Proxy Statement providing additional
information about the purpose of the Meeting is included with this Notice. At
the Meeting, shareholders of each series of the Trust (each, a "Fund"), unless
otherwise indicated below, will consider and vote upon the following proposals:

Proposal 1 Approval of an investment advisory agreement
between American General Asset Management Corp.
and the North American Funds with respect to
each Fund. (All shareholders will vote on
Proposal 1.)

Proposal 2 Approval of an investment subadvisory agreement
between American General Asset Management Corp.
and American General Investment Management,
L.P. with respect to the Strategic Income Fund.
(Only shareholders of the Strategic Income Fund
will vote on Proposal 2.)

Proposal 3 Approval of an investment subadvisory agreement
between American General Asset Management Corp.
and American General Investment Management,
L.P. with respect to the Municipal Bond Fund.
(Only shareholders of the Municipal Bond Fund
will vote on Proposal 3.)

Proposal 4 Approval of an investment subadvisory agreement
between American General Asset Management Corp.
and American General Investment Management,
L.P. with respect to the Core Bond Fund. (Only
shareholders of the Core Bond Fund will vote on
Proposal 4.)

Proposal 5 Approval of an investment subadvisory agreement
between American General Asset Management Corp.
and American General Investment Management,
L.P. with respect to the Money Market Fund.
(Only shareholders of the Money Market Fund
will vote on Proposal 5.)

Proposal 6 Approval of an investment subadvisory agreement
between American General Asset Management Corp.
and American General Investment Management,
L.P. with respect to the U.S. Government
Securities Fund. (Only shareholders of the U.S.
Government Securities Fund will vote on
Proposal 6.)

Proposal 7
Election of seven Trustees to serve as members
of the Board of Trustees. (All shareholders
will vote on Proposal 7.)

<PAGE>

Any other business that may properly come before the Meeting.

Each shareholder of record at the close of business on April 7, 2000 is
entitled to receive notice of and to vote at the Meeting and is invited to
attend the Meeting in person. Whether or not you intend to be present at the
Meeting, we urge you to fill in, sign, date, and promptly return the enclosed
proxy card in order that the Meeting may be held and the greatest number of
shares may be voted. If you attend the Meeting you may revoke your proxy and
vote your shares in person if you wish.

Sincerely,

/s/ John I. Fitzgerald
___________________________________
John I. Fitzgerald
Secretary

April 12, 2000
Boston, Massachusetts

YOUR VOTE IS IMPORTANT

PLEASE RESPOND--YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT IN
THE ENCLOSED POSTAGE PREPAID ENVELOPE SO THAT YOU WILL BE REPRESENTED AT THE
MEETING.
<PAGE>

NORTH AMERICAN FUNDS
286 Congress Street
Boston, MA 02210

PROXY STATEMENT

Special Meeting of Shareholders
June 1, 2000

This proxy statement is furnished in connection with the solicitation by the
Board of Trustees (the "Board") of North American Funds (the "Trust") of
proxies to be used at a Special Meeting of Shareholders (the "Meeting"), to be
held at [Address] on June 1, 2000 at 9:00 a.m. Eastern time, or any adjournment
or adjournments thereof. This proxy statement and the enclosed form of proxy
are first being mailed to shareholders on or about April 12, 2000.

The Trust currently offers fifteen series of shares of beneficial interest:
the Mid Cap Growth Fund (formerly, the Small/Mid Cap Fund), the International
Small Cap Fund, Large Cap Growth Fund (formerly, the Growth Equity Fund), the
Tax-Sensitive Equity Fund, the Small Cap Growth Fund (formerly, the Emerging
Growth Fund), the Global Equity Fund, the Equity-Income Fund, the Growth &
Income Fund (formerly, the Growth and Income Fund), the International Equity
Fund, the Balanced Fund, the Strategic Income Fund, the U.S. Government
Securities Fund, the Core Bond Fund (formerly, the Investment Quality Bond
Fund), the Municipal Bond Fund (formerly, the National Municipal Bond Fund) and
the Money Market Fund. (each a "Fund" and collectively the "Funds"). The
foregoing name changes to certain Funds were implemented by the Board effective
February 28, 2000.

Each Fund (other than the Core Bond Fund) offers four separate classes of
shares, designated as Class A Shares, Class B Shares, Class C Shares, and
Institutional Class I Shares. The Core Bond Fund also offers Institutional
Class II Shares. None of the Funds currently have any Institutional Class I
Shares or Institutional Class II Shares outstanding. For purposes of voting on
each proposal at the Meeting, Class A Shares, Class B Shares and Class C Shares
of each Fund will be treated as one class of shares.

In order that your shares may be represented at the Meeting or any
adjournment or adjournments thereof, you are requested to indicate your voting
instructions on the proxy card; date and sign the proxy card; mail the proxy
card promptly in the enclosed postage-paid envelope; and allow sufficient time
for the proxy card to be received before the Meeting.

Shares represented by timely and properly executed proxies will be voted as
specified. If you return a signed proxy and no specification is made with
respect to a particular matter, shares will be voted in accordance with the
recommendations of the Trustees. Proxies may be revoked at any time before they
are exercised by sending a written revocation which is received by the
Secretary of the Trust, by properly executing a later-dated proxy or by
attending the Meeting and voting in person. Attendance at the Meeting alone,
however, will not serve to revoke the proxy.

Only shareholders of record at of the close of business on April 7, 2000
(the "Record Date") shall be entitled to vote. Each whole share shall be
entitled to one vote as to any matter on which it is entitled to vote and each
fractional share shall be entitled to a proportionate fractional vote.
<PAGE>

As of the Record Date, the following number of shares of each Fund were
issued and outstanding:

<TABLE>
<S> <C>
Mid Cap Growth Fund................................................ shares
International Small Cap Fund....................................... shares
Large Cap Growth Fund.............................................. shares
Tax-Sensitive Equity Fund.......................................... shares
Small Cap Growth Fund.............................................. shares
Global Equity Fund................................................. shares
Equity-Income Fund................................................. shares
Growth & Income Fund............................................... shares
International Equity Fund.......................................... shares
Balanced Fund...................................................... shares
Strategic Income Fund.............................................. shares
Core Bond Fund..................................................... shares
U.S. Government Securities Fund.................................... shares
Municipal Bond Fund................................................ shares
Money Market Fund.................................................. shares
</TABLE>

The Trust will furnish, without charge, a copy of the Trust's Annual Report
for its fiscal year ended October 31, 1999 to a shareholder upon request. To
obtain an Annual Report, please contact the Trust by calling (800) 872-8037 or
by writing to the Trust at 286 Congress Street, Boston, Massachusetts 02210,
Attn: John I. Fitzgerald.

2
<PAGE>

Solicitation of the proxies by personal interview, mail and telephone may be
made by officers and Trustees of the Trust and officers and employees of
American General Asset Management Corp., its affiliates and other
representatives of the Trust. The Trust has retained Georgeson Shareholder
Communications Corporation ("SCC"), 17 State Street, New York, New York 10004,
to aid in the solicitation of proxies. The costs of retaining SCC and other
expenses incurred in connection with the solicitation of proxies, and the costs
of holding the Meeting, will not be borne by the Funds, but will be divided
equally between American General Corporation and CypressTree Investments, Inc.
("CypressTree").

Summary of Proposals

<TABLE>
<CAPTION>
Proposal Funds Whose Shareholders
Number Proposal Will Vote on the Proposal
-------- -------- -------------------------
<C> <S> <C>
Proposal 1 Approval of an investment advisory All Funds
agreement between American General
Asset Management Corp. and the North
American Funds with respect to each
Fund.

Proposal 2 Approval of an investment subadvisory Strategic Income Fund
agreement between American General
Asset Management Corp. and American
General Investment Management, L.P.
with respect to the Strategic Income
Fund.

Proposal 3 Approval of an investment subadvisory Municipal Bond Fund
agreement between American General
Asset Management Corp. and American
General Investment Management, L.P.
with respect to the Municipal Bond
Fund.

Proposal 4 Approval of an investment subadvisory Core Bond Fund
agreement between American General
Asset Management Corp. and American
General Investment Management, L.P.
with respect to the Core Bond Fund.

Proposal 5 Approval of an investment subadvisory Money Market Fund
agreement between American General
Asset Management Corp. and American
General Investment Management, L.P.
with respect to the Money Market Fund.

Proposal 6 Approval of an investment subadvisory U.S. Government
agreement between American General Securities Fund
Asset Management Corp. and American
General Investment Management, L.P.
with respect to the U.S. Government
Securities Fund.

Proposal 7 Election of seven Trustees to serve as All Funds
members of the Board of Trustees.
</TABLE>

The Acquisition

On March 10, 2000 CypressTree sold substantially all of its assets including
all of the stock of CypressTree Asset Management Corporation, Inc. ("CAM"), the
Trust's investment adviser, and all of the stock of CypressTree Funds
Distributors, Inc. ("CFD"), the Trust's distributor, to American General
Corporation ("American General"). The acquisition by American General of
CypressTree's assets (herein "the Acquisition") took place pursuant to a
Purchase Agreement dated February 25, 2000 (the "Purchase Agreement"). American
General paid a purchase price of $16.5 million in cash to CypressTree, $6.75
million of which was placed in escrow pending a determination of certain
adjustments to the purchase price.

3
<PAGE>

At the meeting of the Board on February 27, 2000, the Board approved an
interim investment advisory agreement between CAM (operating under its new name
of American General Asset Management Corp. ("AGAM")) and the Trust with respect
to the Funds in order to allow AGAM to continue to serve as investment adviser
after the Acquisition. Under the Investment Company Act, however, AGAM may only
continue to serve as the investment adviser for each Fund beyond an interim
period of 150 days if shareholders of such Fund approve a new investment
advisory agreement with AGAM. You are therefore being asked in Proposal 1 to
approve a new two year investment advisory agreement between AGAM and the Trust
with respect to the Funds that is substantially similar to the Trust's previous
investment advisory agreement with CAM. This new investment advisory agreement
would be effective upon shareholder approval, and would replace the interim
investment advisory agreement. The Board approved, and recommended shareholder
approval of, the new investment advisory agreement on February 27, 2000.

American General has advised the Board that AGAM and AGFD will continue to
provide the same high-quality services to the Trust that they have provided
prior to and since the Closing. A number of key employees of CypressTree
entered into employment agreements with American General and continue to
function in positions similar to those they held prior to the Acquisition.

Since the Closing, American General Investment Management, L.P. ("AGIM"), an
affiliate of American General, has served as the subadviser to five of the
Funds (the Strategic Income Fund, the Municipal Bond Fund, the Core Bond Fund,
the U.S. Government Securities Fund and the Money Market Fund), pursuant to
interim subadvisory agreements approved by the Board on February 27, 2000. As
an "affiliated person" of American General under the Investment Company Act,
AGIM may only continue to serve as a subadviser to those five Funds pursuant to
new subadvisory agreements approved by each of those Fund's shareholders.
Therefore shareholders of each of the Strategic Income Fund, the Municipal Bond
Fund, the Core Bond Fund, the U.S. Government Securities Fund and the Money
Market Fund are being asked in Proposals 2-6 to approve new two year investment
subadvisory agreements between AGAM and AGIM substantially similar to those in
place with respect to such Funds prior to the Acquisition.

Finally, also in connection with the Acquisition, shareholders of all the
Funds are being asked in Proposal 7 to consider the election of seven Trustees
to the Board. One of the seven Trustee nominees, Alice T. Kane, was appointed
by the Trustees to the Board effective March 10, 2000 to replace Bradford K.
Gallagher as Chairman of the Board; Ms. Kane is also the President of the Trust
and Chairman and CEO of AGAM. The other six nominees would serve as new
Trustees. It is anticipated that two current Trustees previously elected by
shareholders will remain on the Board, resulting in a Board comprised of nine
Trustees assuming shareholder approval.

4
<PAGE>

Description of American General and Its Affiliates

Members of the American General Corporation group of companies (the
"American General Financial Group") operate in each of the 50 states, the
District of Columbia, and Canada and collectively engage in substantially all
forms of financial services. American General Corporation was incorporated as a
Texas business corporation on February 26, 1980 as the successor to American
General Life Insurance Company (organized in 1926) as the result of a corporate
reorganization completed on July 1, 1980. The American General Financial Group
has approximately $115 billion in assets and over $6 billion in stockholders'
equity. American General's address is 2929 Allen Parkway, Houston, Texas 77019.

Affiliates of American General currently include VALIC Investment Services
Company, American General Distributors, Inc., The VALIC Annuity Marketing
Company, [State Street Brokerage Services, Inc.,] American Funds Distributors,
Neuberger Berman, LLC, [Sumitomo Capital Markets], [Kotak Mahindra Capital
Company], [PT Bahana Pembinaan Usha Indonesia] [Archipelago Holdings, L.L.C.]
These entities are considered to be "Affiliated Brokers." Absent an SEC
exemption or other relief, a Fund would generally be precluded from effecting
principal transactions with the Affiliated Brokers, and its ability to purchase
securities from underwriting syndicates including an Affiliated Broker or to
utilize the Affiliated Brokers for agency transactions would be subject to
restrictions. AGAM does not believe that the restrictions on transactions with
the Affiliated Brokers described above will have a material adverse affect on
its ability, post-closing, to provide services to the Funds, the Funds' ability
to take advantage of market opportunities, or any Fund's overall performance.

Interests of Certain Persons in the Acquisition

Bradford K. Gallagher, the former Chairman and President of the Trust and of
CAM, has entered into a consulting agreement with AGAM in connection with the
Acquisition. The agreement has an initial term of six months, and may be
renewed for an additional six months. Mr. Gallagher has also entered into a
two-year noncompetition agreement with American General in connection with the
Acquisition.

Joseph T. Grause, Jr., President of AGAM and a nominee for Trustee, has
entered into an employment agreement having a term of three years with AGAM in
connection with the Acquisition.

Each of Thomas J. Brown, Treasurer and Vice President of the Trust, John I.
Fitzgerald, Secretary and Vice President of the Trust, and John N. Packs, Vice
President of the Trust, have entered into a three-year employment agreement
with AGAM in connection with the Acquisition.

Messrs. Brown, Fitzgerald and Packs owned, in the aggregate, less that 1% of
the outstanding stock of CypressTree and Cypress Holding Company, Inc., the
parent of CypressTree, prior to the Acquisition.

As a result of the foregoing arrangements and ownership interests, each of
the persons identified in the foregoing paragraphs may be deemed to have a
substantial interest in shareholder approval of the matters set forth in the
Proxy Statement.

Section 15(f) of the 1940 Act

Section 15(f) provides a non-exclusive safe harbor for an investment adviser
or any affiliated persons to receive any amount or benefit in connection with a
change of control of the investment adviser to an investment company as long as
two conditions are satisfied. First, an "unfair burden" must not be imposed on
investment company clients of the adviser as a result of the transaction, or
any express or implied terms, conditions or understandings applicable to the
transaction. The term "unfair burden" (as defined in the Investment Company
Act) includes any arrangement during the two-year period after the transaction
whereby the investment adviser (or predecessor or successor adviser), or any
"interested person" (as defined in the Investment Company Act) (an "Interested
Person") of any such adviser, receives or is entitled to receive any

5
<PAGE>

compensation, directly or indirectly, from such an investment company or its
security holders (other than fees for bona fide investment advisory or other
services) or from any other person in connection with the purchase or sale of
securities or other property to, from or on behalf of such investment company.
The Board has been advised that AGAM is aware of no circumstances arising from
the Acquisition that might result in an unfair burden being imposed on a Fund.
Moreover, American General has covenanted in the Purchase Agreement that it
will use all reasonable efforts to ensure that no unfair burden will be imposed
on each Fund by or as a result of the Acquisition during such two-year period.

The second condition of Section 15(f) is that during the three-year period
after the transaction, at least 75% of each such investment company's board of
directors must not be Interested Persons of the investment adviser (or
predecessor or successor adviser). American General has covenanted in the
Purchase Agreement that it will use all reasonable efforts to comply with such
75% requirement during such three-year period.

I. APPROVAL OR DISAPPROVAL OF THE NEW ADVISORY AGREEMENT

The Board is proposing that shareholders approve a new Investment Advisory
Agreement between the Trust and AGAM that will be entered into between AGAM and
the Trust on behalf of each Fund upon shareholder approval (the "New Advisory
Agreement"). A description of the New Advisory Agreement, the services provided
thereunder, the procedure for its termination and renewal and other services
provided by AGAM and its affiliates is set forth below. This description is
qualified in its entirety by reference to the form of New Advisory Agreement
included as Appendix A to this Proxy Statement. Additional information about
AGAM is set forth below in the section entitled "Information About AGAM."

The New Advisory Agreement was approved by all the Trustees, including the
Independent Trustees (as defined below), at an in-person meeting held on
February 27, 2000.

Description of the New Advisory Agreement

As discussed above, AGAM currently serves as investment adviser of the Funds
pursuant to an interim advisory agreement with the Trust approved by the Board
effective March 10, 2000. The New Advisory Agreement is substantially similar
to the previous agreement between the Trust and CAM in effect prior to March
10, 2000 (the "Old Advisory Agreement").

The New Advisory Agreement requires that, subject to the general supervision
of the Trustees, AGAM will select, contract with and compensate subadvisers to
manage the investments of the Funds. and determine the composition of the
assets of the portfolios of the Funds. AGAM arranges for the provision of such
services in accordance with each Fund's investment objective, investment
policies and investment restrictions as stated in the Trust's registration
statement filed with the Securities and Exchange Commission (the "SEC"), as
supplemented or amended from time to time. AGAM will monitor the compliance of
each subadviser with the investment objectives and related policies stated in
the Trust's registration statement, review the performance of each subadviser,
and report periodically on such performance to the Board.

The New Advisory Agreement provides that it will, unless sooner terminated
in accordance with its terms, continue in effect with respect to a Fund for a
period of two years from its effective date and thereafter on an annual basis
with respect to the Fund, provided such continuance is specifically approved at
least annually (a) by the vote of a majority of the Board or (b) by the vote of
a majority of the outstanding voting securities of the Fund, and provided
continuance is also specifically approved by the vote of a majority of the
Board of Trustees of the Trust who are not parties to the Agreement or
"interested persons" (as defined by the Investment Company Act) of the Trust or
AGAM (the "Independent Trustees"), cast in person at a meeting called for the
purpose of voting on such approval. The New Advisory Agreement provides that it
terminates automatically in the event of its assignment (as defined by the
Investment Company Act) by AGAM. The New Advisory Agreement provides that it
may not be materially amended without a majority vote of the outstanding voting
securities of the pertinent Fund or Funds.

6
<PAGE>

including the compensation and related personnel expenses and expenses of
office space, office equipment, utilities and miscellaneous office expenses,
except any such expenses directly attributable to officers or employees of the
Adviser who are serving as President, Vice President, Treasurer or Secretary of
the Trust. The Adviser shall determine the expenses to be reimbursed by the
Trust pursuant to expense allocation procedures established by the Adviser in
accordance with generally accepted accounting principles.

The New Advisory Agreement may be terminated at any time, without the
payment of any penalty, by the Trust by vote of a majority of the Board or by
vote of a majority of the outstanding voting securities of the Trust or, with
respect to a particular Fund, by a vote of a majority of the outstanding voting
securities of the Fund, upon 60 days' written notice to AGAM, or by AGAM upon
60 days' written notice to the Trust.

The New Advisory Agreement provides that AGAM shall maintain the existence
and records of the Trust; maintain the registrations and qualifications of
Trust shares under federal and state law; and perform all administrative,
financial, accounting, bookkeeping and recordkeeping functions of the Trust
except for any such functions that may be performed by a third party pursuant
to a custodian, transfer agency or service agreement executed by the Trust. The
Trust shall reimburse the Adviser for its expenses associated with all such
services,

The advisory fee rates payable by the Funds to the Adviser under the Old
Advisory Agreement are the same as those payable under the New Advisory
Agreement and no change in the current fee structure is being proposed. The Old
Advisory Agreement contained provisions relating to a voluntary investment fee
waiver by CAM; that waiver agreement was terminated by CAM on December 15, 1999
with respect to all the Funds (except the Tax-Sensitive Equity Fund) in
accordance with the notice provisions contained in the Old Advisory Agreement.
No such voluntary waiver provisions are included in the New Advisory Agreement,
although AGAM has continued to voluntarily waive fees with respect to the Funds
(other than the Tax-Sensitive Equity Fund) in lesser amounts since December 15,
1999. AGAM has agreed to waive its fees with respect to the Tax-Sensitive Fund
to the same extent it presently waives such fees. Under the New Advisory
Agreement, each Fund will pay AGAM a monthly advisory fee at the following
annual rates, based on the average daily net assets of the particular Fund:

<TABLE>
<CAPTION>
Between Between
$50,000,000 $200,000,000
First and and Excess over
Funds $50,000,000 $200,000,000 $500,000,000 $500,000,000
----- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
International Small Cap
Fund................... 1.050% 1.000% .900% .800%
Mid Cap Growth.......... .925% .900% .875% .850%
Global Equity Fund...... .900% .900% .700% .700%
Large Cap Growth Fund... .900% .850% .825% .800%
Tax-Sensitive Equity
Fund................... .850% .800% .775% .700%
Small Cap Growth Fund... .950% .950% .950% .950%
International Equity
Fund................... .900% .850% .825% .800%
Growth & Income Fund.... .725% .675% .625% .550%
Equity-Income Fund...... .750% .650% .550% .550%
Balanced Fund........... .775% .725% .675% .625%
Strategic Income Fund... .600% .600% .525% .475%
Core Bond Fund.......... .600% .600% .525% .475%
Municipal Bond Fund..... .600% .600% .600% .600%
U.S. Government
Securities Fund........ .600% .600% .525% .475%
Money Market Fund....... .200% .200% .200% .145%
</TABLE>

7
<PAGE>

For the fiscal year ended October 31, 1999, the Funds paid CAM the following
amounts under the Old Advisory Agreement:

<TABLE>
<CAPTION>
Net
Advisory
Fee After
Fund Waivers
---- ----------
<S> <C>
Mid Cap Growth Fund.............................................. $ 390,888
International Small Cap Fund..................................... 159,614
Large Cap Growth Fund............................................ 335,777
Global Equity Fund............................................... 951,657
Tax-Sensitive Equity Fund........................................ 88,103
Small Cap Growth Fund............................................ 9,513
Equity-Income Fund............................................... 1,060,879
Growth & Income Fund............................................. 1,912,464
International Equity Fund........................................ 230,737
Strategic Income Fund............................................ 498,515
Core Fund........................................................ 94,898
U.S. Government Securities Fund.................................. 411,390
Municipal Bond Fund.............................................. 89,986
Money Market Fund................................................ 44,172
Balanced Fund.................................................... 681,955
----------
Total.......................................................... $6,960,548
==========
</TABLE>

Information About AGAM

CypressTree and its affiliates were formed in 1996 to acquire, advise and
distribute mutual funds through broker-dealers and other intermediaries. CAM
was CypressTree's wholly-owned advisory subsidiary and CFD was CypressTree's
wholly-owned distribution subsidiary. Pursuant to its advisory agreement with
the Trust, CAM oversaw the administration of all aspects of the business and
affairs of the Trust, selected, contracted with and compensated subadvisers to
manage the assets of the Funds. AGAM has continued to perform these functions
under an interim advisory agreement approved by the Board pursuant to Rule 15a-
4 under the Investment Company Act.

AGAM is located at 286 Congress Street, Boston, Massachusetts 02210. Alice
T. Kane is Chairman and CEO of AGAM, as well as Chairman of the Board of
Trustees and a Trustee and President of the Trust. Ms Kane's principal
occupation is President of American General Fund Group. Her business address is
286 Congress Street, Boston, Massachusetts 02210.

Information regarding the material interests of the Trustees and officers of
the Trust in the Acquisition is described under "Interests of Certain Persons
in the Acquisition" above.

Approval of the New Advisory Agreement by the Trustees of the Trust

In evaluating the New Advisory Agreement, the Trustees took into account
that the New Advisory Agreement and the Old Advisory Agreement, including their
terms relating to the services to be provided by AGAM, are substantially
identical. The Trustees also considered the terms of the Acquisition and the
possible effects of the Acquisition on AGAM's ability to provide management
services to each Fund. Representatives of AGAM represented to the Trustees that
the Acquisition had not resulted in any changes, other than changes in the
ordinary course of business, in the management, operations, personnel or legal
structure of AGAM, with the exception of the replacement of Bradford K.
Gallagher by Ms. Kane.

8
<PAGE>

After consideration of the foregoing factors and such other factors as the
Trustees deemed relevant, the Trustees concluded that it was appropriate and
desirable for AGAM to continue to act as investment adviser to each Fund on the
same terms as were in effect before the Acquisition. Accordingly, the Trustees
unanimously approved the New Advisory Agreement and recommend its approval by
the shareholders.

Required Vote

Approval of the New Advisory Agreement with respect to a Fund will require
the affirmative vote of a "majority of the outstanding voting securities" of
that Fund, which means the affirmative vote of the lesser of (1) more than 50%
of the outstanding shares of that Fund or (2) 67% or more of the shares of that
Fund present at the Meeting if more than 50% of the outstanding shares of that
Fund are represented at the meeting in person or by proxy. If the shareholders
of any Fund do not approve the New Advisory Agreement, the Trustees will take
such further action as they may deem to be in the best interests of the
shareholders of that Fund. Also, if shareholders of any Fund that are also
considering a New Subadvisory Agreement, as discussed in Part II approve the
New Advisory Agreement, but not the New Subadvisory Agreement, the Trustees
will take such further action as they may deem to be in the best interests of
the shareholders of that Fund.

The Trustees unanimously recommend that shareholders of each Fund vote FOR
approval of the New Advisory Agreement for their Fund.

II. APPROVAL OF THE NEW SUBADVISORY AGREEMENTS

The Trustees are proposing that shareholders of each of the Strategic Income
Fund, the Municipal Bond Fund, the Core Bond Fund, the U.S. Government
Securities Fund and the Money Market Fund approve a New Subadvisory Agreement
between AGAM and American General Investment Management, L.P. ("AGIM").
Information applicable to all of the Subadvisory Agreements is set forth under
"General Information Concerning the New Subadvisory Agreements" below, and
information relating to specific Funds is set forth in Parts A, B and C below.

General Information Concerning the New Subadvisory Agreements

Except as described below, the terms and provisions of the New Subadvisory
Agreements that will be entered into between AGAM and AGIM upon shareholder
approval are substantially identical to those of the relevant subadvisory
agreements in effect prior to March 10, 2000, including with respect to the
fees payable by AGAM to AGIM thereunder. AGIM currently serves as subadviser to
each of the Strategic Income Fund, the Municipal Bond Fund, the Core Bond Fund,
the U.S. Government Securities Fund and the Money Market Fund pursuant to an
interim subadvisory agreement approved by the Board on February 27, 2000. The
following discussion of the New Subadvisory Agreements is qualified in its
entirety by reference to the forms of the New Subadvisory Agreements attached
to this Proxy Statement as Appendix B. The New Subadvisory Agreements were
approved by the Board of Trustees of the Trust, including the Independent
Trustees, at an in-person meeting held on February 27, 2000.

Each of the New Subadvisory Agreements provides that, subject to the general
supervision of the Trustees and AGAM, AGIM shall provide a continuous
investment program for the relevant Fund and determine the composition of the
portfolios of the relevant Fund, including the determination of the purchase,
retention or sale of securities, cash and other investments for the Fund. AGIM
provides such services in accordance with the relevant fund's investment
objective, investment policies and investment restrictions as stated in the
Trust's registration statement filed with the SEC, as supplemented and amended
from time to time.

Each New Subadvisory Agreement provides that it will continue in effect with
respect to a Fund for a period of two years from its effective date and
thereafter on an annual basis with respect to such Fund,

9
<PAGE>

provided such continuance is approved at least annually (a) by the vote of a
majority of the Board of Trustees of the Trust or (b) by the vote of a majority
of the outstanding voting securities of the Fund, and provided that continuance
is also approved by the vote of a majority of the Trustees who are not
"interested persons" (as defined by the Investment Company Act) of the Trust,
AGAM or AGIM, cast in person at a meeting called for the purpose of voting on
such approval. Each New Subadvisory Agreement provides that it may not be
materially amended without a majority vote of the outstanding voting securities
of the relevant Fund, except to the extent permitted by the terms of any
exemptive relief that may be granted by the SEC, and also provides that it
terminates automatically in the event of its assignment (as defined by the
Investment Company Act).

Each New Subadvisory Agreement may be terminated at any time, without the
payment of any penalty, by (a) the Trust by vote of a majority of the Board of
Trustees, or by a majority vote of the Trustees who are not "interested
persons" (as defined by the Investment Company Act) of the Trust, or by vote of
a majority of the outstanding voting securities of the Trust, or, with respect
to a particular Fund, by vote of a majority of the outstanding voting
securities of the Fund, upon 60 days' written notice to AGIM or (b) by AGAM
upon 60 days' written notice to AGIM. The New Subadvisory Agreements may be
terminated by AGIM upon 60 days' written notice to the Trust.

Each New Subadvisory Agreement provides that, except as required by
applicable law, AGIM and its affiliates and controlling persons shall not be
liable for any act or omission or mistake in judgment connected with or arising
out of any services rendered under the agreement, except by reason of willful
misfeasance, bad faith, or gross negligence in the performance of its duties,
or by reason of reckless disregard of AGIM's obligations and duties under the
agreement.

AGIM was formed in 1998 as a successor to the investment management division
of American General Corporation, and is an indirect wholly-owned subsidiary of
American General Corporation. AGIM also provides investment management and
advisory services to pension and profit sharing plans, financial institutions
and other investors. Accounts managed by AGIM had combined assets, as of
January 31, 2000, of approximately $61.2 billion. AGIM is located at 2929 Allen
Parkway, Houston, Texas 77019.

Required Vote

Approval of each New Subadvisory Agreement with respect to a Fund will
require the affirmative vote of a "majority of the outstanding voting
securities" of that Fund, which means the affirmative vote of the lesser of (1)
more than 50% of the outstanding shares of that Fund or (2) 67% or more of the
shares of that Fund present at the Meeting if more than 50% of the outstanding
shares of that Fund are represented at the Meeting in person or by proxy. If
the shareholders of any Fund do not approve the New Portfolio Management
Agreement, the Trustees will take such further action as they may deem to be in
the best interests of the shareholders of that Fund.

The Trustees unanimously recommend that the shareholders of each of the
Strategic Income Fund, the Municipal Bond Fund, the Core Bond Fund, the U.S.
Government Securities Fund and the Money Market Fund vote FOR approval of the
New Subadvisory Agreement for their particular Fund.

A. New Subadvisory Agreements for the Strategic Income Fund, the U.S.
Government Securities Fund and the Municipal Bond Fund

Pursuant to a Subadvisory Agreement between CAM and Salomon Brothers Asset
Management Inc. ("SBAM") dated October 1, 1997 (the "SBAM Subadvisory
Agreement"), CAM delegated to SBAM its responsibility to provide portfolio
management services to each of the Strategic Income Fund, the Municipal Bond
Fund and the U.S. Government Securities Fund (the "SMC Funds"). The Trustees
last approved the continuance of the SBAM Subadvisory Agreement for each SMC
Fund on June 8, 1999. Shareholders of the SMC Funds were not required to
approve the SBAM Subadvisory Agreement under the Trust's Manager of Managers
structure.

10
<PAGE>

Under the New Subadvisory Agreement between AGAM and AGIM, AGAM (not the
Trust) pays AGIM a monthly fee for each SMC Fund at the following annual rates
(based on the average daily net assets of the particular Fund taken
separately):

Strategic Income Fund

<TABLE>
<CAPTION>
Fee Fund Assets
--- -----------------
<S> <C>
.350%................................................... $0-200 million
.250%................................................... $200-500 million
.200%................................................... over $500 million

U.S. Government Securities Fund

<CAPTION>
Fee Fund Assets
--- -----------------
<S> <C>
.225%................................................... $0-200 million
.150%................................................... $200-500 million
.100%................................................... over $500 million

Municipal Bond Fund

<CAPTION>
Fee Fund Assets
--- -----------------
<S> <C>
.250%................................................... $0-200 million
.200%................................................... $200-500 million
.150%................................................... over $500 million
</TABLE>

The fee rates payable by CAM to SBAM under the SBAM Subadvisory Agreement
were the same as those payable under the New Subadvisory Agreement for the U.S.
Government Securities Fund and were higher (.250% at all asset levels) than
those payable under the New Subadvisory Agreement for the Municipal Bond Fund.
For the fiscal year ended October 31, 1999, CAM paid SBAM subadvisory fees of
$154,269 with respect to the U.S. Government Securities Fund and $37,494 with
respect to the Municipal Bond Fund.

The fee rates payable by CAM to SBAM under the SBAM Subadvisory Agreement
for the Strategic Income Fund were as follows:

<TABLE>
<CAPTION>
Fee Fund Assets
--- -----------------
<S> <C>
.350%................................................... $0-50 million
.300%................................................... $50-200 million
.250%................................................... $200-500 million
.200%................................................... over $500 million
</TABLE>

Because the Strategic Income Fund has less than $50 million in assets, the
fee rates payable under the New Subadvisory would not result in an increase in
fees payable by AGAM to AGIM. As noted above, because subadvisory fees are paid
by AGAM out of its advisory fee, which is not proposed to change, the amount of
subadvisory fees payable with respect to any Fund does not, in any case, affect
the expenses of such Fund. For the fiscal year ended October 31, 1999, CAM paid
SBAM $227,935 in subadvisory fees with respect to the Strategic Income Fund.

B. New Subadvisory Agreement for the Core Bond Fund

Pursuant to a Subadvisory Agreement between CAM and Wellington Management
Company, LLP ("Wellington") dated October 1, 1997 (the "Wellington Subadvisory
Agreement"), CAM delegated to Wellington its responsibility to provide
portfolio management services to the Core Bond Fund (the "Core Bond Fund"). The
Trustees last approved the continuance of the Wellington Subadvisory Agreement
on June 8, 1999.

11
<PAGE>

Shareholders of the Core Bond Fund were not required to approve the Wellington
Subadvisory Agreement under the Trust's Manager of Managers structure.

Under the new Subadvisory Agreement between AGAM and AGIM, AGAM (not the
Trust) pays AGIM a monthly fee for the Core Bond Fund at the annual rates
(based on the average daily net assets of the Fund) as follows:

<TABLE>
<CAPTION>
Fee Fund Assets
--- -----------------
<S> <C>
.250%................................................... $0-200 million
.200%................................................... $200-500 million
.150%................................................... over $500 million

The fee rates payable by CAM to Wellington under the Wellington Subadvisory
Agreement were as follows:

Although the fee rates payable under the New Subadvisory Agreement for the
Core Bond Fund would result in an increase in subadvisory fees payable by AGAM
to AGIM, because the subadvisory fees are paid by AGAM out of its advisory fee,
which is not proposed to change, the expenses of the Fund would not increase.

For the fiscal year ended October 31, 1999, CAM paid Wellington $35,587 for
its portfolio management services with respect to the Core Bond Fund.

C. New Subadvisory Agreement for the Money Market Fund

Pursuant to a Subadvisory Agreement between CAM and Manufacturers Adviser
Corporation ("MAC") dated October 1, 1997 (the "MAC Subadvisory Agreement"),
CAM delegated to MAC its responsibility to provide portfolio management
services to the Money Market Fund. The Trustees last approved the continuance
of the MAC Subadvisory Agreement on June 8, 1999. Shareholders of the Money
Market Fund were not required to approve the MAC Subadvisory Agreement under
the Trust's Manager of Managers structure.

Under the new Subadvisory Agreement between AGAM and AGIM, AGAM (not the
Trust) pays AGIM a monthly fee for the Money Market Fund at an annual rate
(based on the average daily net assets of the particular Fund taken separately)
of .075% for the first $500 million of Fund assets and .020% for Fund assets
over $500 million.

The fee rates payable by CAM to MAC under the MAC Subadvisory Agreement were
the same as those payable under the New Subadvisory Agreement. For the fiscal
year ended October 31, 1999, CAM paid MAC $16,565 for its portfolio management
services with respect to the Money Market Fund.

III. ELECTION OF TRUSTEES

The Board of Trustees of the Trust proposes that shareholders elect Alice T.
Kane, Joseph T. Grause, Jr., Dr. Judith L. Craven, Dr. Timothy J. Ebner, Judge
Gustavo E. Gonzales, Jr., Dr. John E. Maupin, Jr., and Ben H. Love to serve as
a Trustee of the Trust (the "Nominees").

12
<PAGE>

Information about the Nominees

Information about the Nominees is presented below. Except as shown, the
Nominees' principal occupation and business experience for the last five years
has been with the employer(s) indicated, although in some cases a Nominee may
have held different positions with such employer(s). The business address of
the Nominees is 286 Congress Street, Boston, Massachusetts 02210.

<TABLE>
<CAPTION>
Name and Age Principal Occupation(s) During the Past Five Years
------------ --------------------------------------------------
<C> <S>
Alice T. Kane* President of American General Fund Group (1999-Present);
Age: 52 Formerly, Executive Vice President, American General
Investment Management, LP. (1998-1999); Formerly, Executive
Vice President, (1994-1998) and General Counsel (1986-1995)
New York Life Insurance Company; Chair, MainStay Mutual
Funds (1994-1998). President of other investment companies
advised by The Variable Annuity Life Insurance Company.

Joseph T. Grause, Jr.* President, AGAM (March, 2000-Present); Executive Vice
Age: 47 President of Cypress Holding Company, Inc. (1995-March,
2000); Senior Vice President of Sales and Marketing, The
Shareholder Services Group, a subsidiary of First Data
Corporation (1993-1995).

Dr. Judith L. Craven Retired Administrator; Formerly President, United Way of the
Age: 54 Texas Gulf Coast (1992-1998); Director, Houston Branch,
Federal Reserve Bank of Dallas (1992-Present), Compaq
Computer Corporation (1998-Present), Luby's Inc. (1998-
Present), A.H. Belo Corporation (journalism, TV and radio)
(1993-Present) and Sysco Corporation (marketing and
distribution of food) (1996-Present). Formerly, Board
Member, Sisters of Charity of the Incarnate Word (1996-
1999).

Dr. Timothy J. Ebner Professor and Head, Department of Neuroscience and Visscher
Age: 50 Chair of Physiology (1998-Present), Director, Graduate
Program in Neuroscience, University of Minnesota (1991-
1999). Formerly, Consultant to EMPI, Inc. (1994-1995) and
Medtronic Inc. (manufacturers of medical products) (1997-
1998).

Judge Gustavo E. Gonzales, Jr. Municipal Court Judge, Dallas, Texas (1995-Present);
Age: 59 Director, Downtown Dallas YMCA Board (1996-Present);
Director, Dallas Easter Seals Society (1997-Present).
Formerly, private attorney (litigation) (1980-1995).

Dr. John E. Maupin, Jr. President, Meharry Medical College, Nashville, Tennessee
Age: 53 (1994-Present); Nashville Advisory Board Member, First
American National Bank (1996-Present); Director, Monarch
Dental Corporation (1997-Present), LifePoint Hospitals, Inc.
(1998-Present).

Ben H. Love Retired. Formerly, Director, Mid-American (waste products)
Age: 69 (1993-1997). Formerly, Chief Executive, Boy Scouts of
America (1985-1993).
</TABLE>
- --------
* Is or will be an "interested person" of the Trust (as defined in the
Investment Company Act of 1940).

13
<PAGE>

Information regarding the material interests of any Nominee in the
Acquisition is described under "Interests of Certain Persons in the
Acquisition" above.

The term of office of each person elected as Trustee will be until his or
her successor is elected and qualified. The Nominees have agreed to serve as a
Trustee if elected. If the Nominees should be unavailable for election at the
time of the Meeting (which is not presently anticipated), the persons named as
proxies may vote for other persons in their discretion, or the Trustees may
vote to fix the number of Trustees at fewer than nine.

The Trust's Amended and Restated Agreement and Declaration of Trust does not
provide for the annual election of Trustees. However, in accordance with the
Investment Company Act, (i) the Trust will hold a shareholders' meeting for the
election of Trustees at such time as less than a majority of the Trustees
holding office have been elected by shareholders, and (ii) if, as a result of a
vacancy in the Board of Trustees, less than two-thirds of the Trustees holding
office have been elected by the shareholders, that vacancy may only be filled
by a vote of the shareholders.

14
<PAGE>

Information about Current Trustees

Currently, five persons serve as Trustees of the Trust: William F.
Achtmeyer, Don B. Allen, William F. Devin, Alice T. Kane and Kenneth J. Lavery.
Shareholders are not being asked to elect the current Trustees (except Ms.
Kane, who was initially appointed a Trustee by the Board effective March 10,
2000), and Messrs. Devin and Lavery will continue to serve under the terms of
the Trust's Amended and Restated Declaration of Trust. Messrs. Achtmeyer and
Allen are expected to resign upon the election of their successors, Messrs.
Ebner and Gonzales. The Trustees, their ages, their business addresses, their
term as a Trustee of the Trust, their positions with the Trust, and a
description of their principal occupations are shown below. Except as shown,
each Trustee's principal occupation and business experience for the last five
years have been with the employer(s) indicated, although in some cases the
Trustee may have held different positions with such employer(s).

<TABLE>
<CAPTION>
Name, Age and Principal Occupation(s) During the
Address Term as Trustee Past Five Years
------------- ----------------------------- --------------------------------------
<C> <C> <S>
William F. Achtmeyer Trustee since October, 1997 Co-founder, President and Chief
286 Congress Street Executive Officer of The Parthenon
Boston, MA 02210 Group, a strategic advisory consulting
Age 44 and investment firm.

Don B. Allen Trustee since September, 1988 Senior Lecturer, William E. Simon
286 Congress Street Graduate School of Business Admin.,
Boston, MA 02210 University of Rochester.
Age 71

William F. Devin Trustee since October, 1997 Member of the Board of Governors of
286 Congress Street the Boston Stock Exchange. Retired
Boston, MA 02210 Executive Vice President of Fidelity
Age 61 Capital Markets, a division of
National Financial Services
Corporation in Boston.

Alice T. Kane* Trustee since March, 2000 President of American General Fund
286 Congress Street Group (1999-Present); Formerly,
Boston, MA 02210 Executive Vice President, American
Age 52 General Investment Management, LP.
(1998-1999); Formerly, Executive Vice
President, (1994-1998) and General
Counsel (1986-1995) New York Life
Insurance Company; Chair, MainStay
Mutual Funds (1994-1998). President of
other investment companies advised by
The Variable Annuity Life Insurance
Company.

Kenneth J. Lavery Trustee since October, 1997 Vice President of Massachusetts
286 Congress Street Capital Resource Company.
Boston, MA 02210
Age 50
</TABLE>
- --------
* Is an "interested person" of the Trust (as defined by the Investment Company
Act).

Information regarding the material interests of the current Trustees in the
Acquisition is described under "The Acquisition" above.

In the fiscal year ended October 31, 1999, the Board of Trustees held four
meetings. Each of the Trustees attended at least 75% of the meetings.

15
<PAGE>

Committees of the Board

In the fiscal year ended October 31, 1999, the Administration Committee of
the Board, which functions as both an audit committee and a contract committee,
held four meetings. Each of Messrs. Achtmeyer, Allen, Devin and Lavery (the
Administration Committee members) attended at least 75% of the meetings.

Information About the Executive Officers

The Executive Officers, their ages, their business addresses, their position
with the Trust and a description of their principal occupations are shown
below.

<TABLE>
<CAPTION>
Principal Occupation(s)
Position with the Office Held During the Past Five
Name, Age and Address Trust Since Years
--------------------- --------------------- ------------ ------------------------
<C> <C> <C> <S>
Alice T. Kane* Chairman of the March 2000 See Above.
286 Congress Street Board of Trustees,
Boston, MA 02210 Trustee and President
Age 52

Joseph T. Grause, Jr. Vice President March 2000 See Above
286 Congress Street
Boston, MA 02210
Age 47

Thomas J. Brown Treasurer and October 1997 Chief Financial Officer
286 Congress Street Vice President and Chief Administrative
Boston, MA 02210 Officer, AGAM ( March
Age 53 2000-Present); Principal
of Cypress Holding
Company, Inc. (July
1997-March 2000);
consultant to the
financial services
industry (October 1995-
July 1997); Executive
Vice President, Boston
Company Advisors (August
1994-October 1995).

John I. Fitzgerald Secretary and October 1997 Counsel, AGAM (April
286 Congress Street Vice President 1997-Present); Counsel,
Boston, MA 02210 AGFD (April 1997-
Age 52 Present); Prior to April
1997, Executive Vice
President--Legal Affairs
and Government Relations
at the Boston Stock
Exchange.

John N. Packs Vice President March 2000 Director of Research,
286 Congress Street AGAM (March 2000-
Boston, MA 02210 Present); Vice
Age 44 President, Cypress
Holding Company
(November 1995-March
2000); Prior to November
1995, Investment
Professional, Allmerica
Financial Services.
</TABLE>

Information regarding the material interests of the Executive Officers of
the Trust in the Acquisition is described under "The Acquisition" above.

Compensation of the Trustees and Certain Executive Officers

The Trust does not pay any remuneration to its Trustees who are officers or
employees of the AGAM or its affiliates. Trustees not so affiliated receive an
annual retainer of $3,000, a fee of $2,625 for each meeting of the Trustees
that they attend in person and a fee of $200 for each such meeting conducted by
telephone. No pension or retirement benefits are paid to Trustees. Trustees are
reimbursed for travel and other out-of-pocket expenses. The officers listed
above are furnished to the Trust pursuant to the Advisory Agreement described
below and receive no compensation from the Fund.

16
<PAGE>

The following table sets forth information regarding compensation received
by those Trustees who are not "interested persons" (as defined by the
Investment Company Act) of the Trust for the fiscal year ended October 31,
1999:

COMPENSATION TABLE

<TABLE>
<CAPTION>
(3)
Total Compensation
(2) From the Trust
Aggregate and Fund Complex
(1) Compensation From Paid to the
Name of Person, Position the Trust Trustees(1)
------------------------ ----------------- ------------------
<S> <C> <C>
William F. Achtmeyer..................
Trustee $5,450 $17,150
Don B. Allen..........................
Trustee $6,375 $ 6,375
William F. Devin......................
Trustee $6,200 $19,800
Kenneth J. Lavery.....................
Trustee $6,200 $19,800
</TABLE>
- --------
(1) The amounts listed in column (3) include total compensation paid to the
Trustees for their services as Trustees of the Trust (for all Trustees) and
the CypressTree Senior Floating Rate Fund and the North American Senior
Floating Rate Fund. By virtue of having CAM as investment adviser, the
Trust and the CypressTree Senior Floating Rate Fund and the North American
Senior Floating Rate Fund were considered to be part of the same "Fund
Complex" for these purposes.

Trustee Indemnification

The Agreement and Declaration of the Trust provides that the Trust will
indemnify its Trustees and officers against liabilities and expenses incurred
in connection with litigation in which they may be involved because of their
offices with the Trust, except if it is determined in the manner specified in
the Agreement and Declaration of Trust that they have not acted in good faith
in the reasonable belief that their actions were in the best interests of the
Trust or that such indemnification would relieve any officer or Trustee of any
liability to the Trust or its shareholders by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of his or her duties. The
Trust, at its expense, provides liability insurance for the benefit of its
Trustees and officers.

Required Vote

The election of the Trustees of the Trust will be by a plurality of the
shares of the Trust (all Funds of the Trust voting together as a single class)
present at the Meeting in person or by proxy. Votes cast by proxy or in person
at the Meeting will be counted by persons appointed as tellers by the Trust.

The Trustees unanimously recommend a vote FOR the Nominees.

17
<PAGE>

IV. OTHER INFORMATION

The Trust is a diversified, open-end management investment company organized
in 1988 as a business trust under the laws of Massachusetts. The Trust is a
series type company with [15] investment portfolios that are operational. The
address of the Trust is 286 Congress Street, Boston, Massachusetts 02210.

Brokerage and Research Services

Transactions on stock exchanges and other agency transactions involve the
payment by the Funds of negotiated brokerage commission. Such commissions vary
among different brokers. Also, a particular broker may charge different
commissions according to such factors as the difficulty and size of the
transaction.

When AGAM or a subadviser places orders for the purchase and sale of
portfolio securities for the Funds, it is anticipated that such transactions
will be affected through a number of brokers and dealers. In so doing, AGAM or
Subadviser intend to use their best efforts to obtain for each Fund the most
favorable price and execution available, except to the extent they may be
permitted to pay higher brokerage commissions as described below. In seeking
the most favorable price and execution, AGAM or Subadviser consider all factors
they deem relevant, including, by way of illustration, price, the size of the
transaction, the nature of the market for the security, the amount of
commission, the timing of the transactions taking into account market prices
and trends, the reputation, experience and financial stability of the broker-
dealer involved and the quality of service rendered by the broker-dealer in
other transactions.

It has for many years been a common practice in the investment advisory
business for advisers of investment companies and other institutional investors
to receive research, statistical and quotation services from broker-dealers
which execute portfolio transactions for the clients of such advisers.
Consistent with this practice, AGAM or Subadviser may receive research,
statistical and quotation services from many of the broker-dealers with which
each Fund's portfolio transactions are placed. These services, which in some
instances could also be purchased for cash, include such matters as general
economic and security market reviews, industry and company reviews, evaluations
of securities and recommendations as to the purchase and sale of securities.
Some of these services are of value to AGAM or Subadviser in advising its other
clients, although not all of these services are necessarily useful and of value
in advising each Fund. The fees paid to the Adviser or Subadviser are not
reduced because AGAM or Subadviser receives such services.

As permitted by Section 28(e) of the Securities Exchange Act of 1934 (the
"1934 Act"), under the New Advisory Agreement and the New Subadvisory
Agreements, AGAM and/or a Sub-Adviser may cause each Fund to pay a broker-
dealer which provides "brokerage and research services" (as defined by the 1934
Act) to AGAM or Subadviser an amount of disclosed commission for effecting a
securities transaction for each Fund in excess of the commission which another
broker-dealer would have charged for effecting the same transaction. The
authority of AGAM or Subadviser to cause each Fund to pay any such greater
commission is subject to such policies as the Trustees may adopt from time to
time.

During the fiscal year ended October 31, 1999, each Fund did not pay any
brokerage commissions to any broker then affiliated with the Adviser or AGIM.

18
<PAGE>

Ownership of Shares and Voting Information

As of March 20, 2000, the Trust believes that the Trustees and officers of
the Trust, as a group, owned less than one percent of each class of shares of
each Fund and of the Trust as a whole. As of March 20, 2000, the following
persons owned of record or beneficially 5% or more of the noted class of shares
of the noted Fund:

<TABLE>
<CAPTION>
Fund Shareholder % of Fund Held
---- ----------- --------------
<C> <S> <C>
Municipal Bond Fund
Class A Shares Mary W. Hamby 5%
1686 Partridge Hill Road
Lancaster, SC 29720-8886

Doris McPherson & Alice McPherson 5%
JTWROS TOD University of WI Med School
Alice R. McPherson Retina Ins.
Dr. Dan Albert, Chairman of Ophthalm.
2909 Poplar Creek Lane
Pearland, TX 77584-2014

Dain Rauscher Incorporated FBO 8%
Elbert J. Scribner
20403 S. Hillcrest
Porter, TX 77365-3858

Janet E. Brown 6%
Emmaus Court
3109 Fellowship Road
Basking Ridge, NJ 07920-3904

Municipal Bond Fund
Class B Shares Southwest Securities Inc. FBO 7%
Hellen Bebb Trust
P.O. Box 509002
Dallas, TX 75250-9002

William H. Elliot IV TTEE 5%
William H. Elliot IV
Family Ltd Partnership
1105 Crumbley Road
McDonough, GA 30252-4426

Municipal Bond Fund
Class C Shares Herbert Hartman & Janet Hartman CO/TTEES 6%
UA DTD 1-8-92
Janet Hartman Trust
12850 Oak Knoll Drive
Palm Beach Gardens, FL 33418-6989

Mark A. Kielar & Tammy Kielar JT/WROS 6%
1655 SW 2nd Ave.
Boca Raton, FL 33432-7228

Claire Koh 21%
963C Heritage Hills Drive
Somers, NY 10589-1913
</TABLE>

19
<PAGE>

<TABLE>
<CAPTION>
Fund Shareholder % of Fund Held
---- ----------- --------------
<C> <S> <C>
U.S. Government Securities Fund
Class A Shares Paine Webber For the Benefit 5%
of
First Federal Savings Bank
Attn: Walter Manijak
633 LaSalle Street
Ottawa, IL 61350-2931

U.S. Government Securities Fund
Class C Shares Arlen J. DeYoung 8%
Eileen G. DeYoung JT TEN
8656 Vinup Road
Lynden, WA 98264-9332

Paget Partners L.P. 5%
P.O. Box 5430
Incline Village, NV 89450-
5430

Core Bond Fund
Class C Shares State Street Bank & Trust Co. 9%
FBO Shirley Einhorn R/O IRA
10662 SW 79 Terr
Miami, FL 33173-2912

Analytical Pathology Services 5%
LTD
PSP UA DTD 12-24-86
FBO Juan Kang
PMB 104
11220 W. Florissant Ave.
Florissant, MO 63033-6741

Global Equity Fund
Class A Shares North American Life Assurance 22%
Co.
c/o Elliott & Page, Brett
HYRB
393 University Ave., Suite
2100
Toronto, Ontario
Canada MSG 1E6

International Small Cap Fund
Class A Shares First Union Securities, Inc. 5%
A/C 7285-9625
Sitnasuak Native Corporation
111 East Kilbourn Avenue
Milwaukee, WI 53202-6611

National Investor Services 6%
FBO
514-90284-16
55 Water Street, 32nd Floor
New York, NY 10041-3299

International Small Cap Fund
Class B Shares Wexford Clearing Services 6%
Corp. FBO
Robert M. Freeman
14 Kanawha Road
Richmond, VA 23226-3308
</TABLE>

20
<PAGE>

<TABLE>
<CAPTION>
Fund Shareholder % of Fund Held
---- ----------- --------------
<C> <S> <C>
Large Cap Growth Fund
Class A Shares Farmers State Bank Employees Pension 7%
C/O Farmers State Bank Trustee U/A
Carolyn Dickerson Tr. Officer
Carolyn Bollman Asst. Tr. Officer
P.O. Box 538
108 E. Adams Street
Pittsfield, IL 62363-0538

Balanced Fund
Class A Shares Farmers State Bank Employees Pension 9%
C/O Farmers State Bank Trustee U/A
Carolyn Dickerson Tt. Officer
Carolyn Bollman Asst. Tr. Officer
P.O. Box 538
108 E. Adams Street
Pittsfield, IL 62363-0538

Lewco Securities Corp. 8%
FBO A/C #W36-900262-1-04
34 Exchange Place, 4th Floor
Jersey City, NJ 07302-3885

Mark Meyer & Michelle McGuirk Trustees 5%
Meyers Campers Inc. PSP Trust
3338 State Road
Caledonic, NY 14423-9757

Small Cap Growth Fund
Class A Shares Phyllis Hilfiker 5%
8 Hasler Lane
Little Silver, NJ 07739-1650

North Pinnellas Anesthesia Association 10%
PA
William N. Hartenbach MD & Marvin
Sponaugle
MD, TTEES
1810 Alt 19 South, Suite N
Tarpon Springs, FL 34689-1954

Frances Katheryn King Eddy 8%
3 Obtuse Road South
Brookfield, CT 06804-3625

Wexford Clearing Services Corp. FBO 5%
Constance S. Brown
2800 Kellipe Road
Glen Allen, VA 23059-4712

Small Cap Growth Fund
Class C Shares First Union National Bank TTEE 9%
FBO Christian Barton PSP
</TABLE>

21
<PAGE>

<TABLE>
<CAPTION>
Fund Shareholder % of Fund Held
---- ----------- --------------
<C> <S> <C>
FBO JE Betts P/S/P U/A/D 2/1/79
A/C #5041140787 Trust Operations
1525 West WT Harris Blvd. NC 1151
Charlotte, NC 28262-8522

Tax-Sensitive Equity Fund
Class A Shares Margaret M. Werner Family Trust 9%
3 Sweets View Lane
Fairport, NY 14450-8423

Donaldson Lufkin Jenrette 7%
Secuirities Corp.
P.O. Box 2052
Jersey City, NJ 07303-2052

Wexford Clearing Services Corp. FBO 14%
Eloise C. Basler
10023 Willow Cove Road, SE
Huntsville, AL 35803-2623

Richard R. Irwin, Cust. 12%
Jennifer Irwin UTMA--PA
1269 Barnstaple Dr.
Library, PA 15129-8975

Tax-Sensitive Equity Fund
Class B Shares Joanne Cichanowicz 6%
7 Bay Point Circle
Rochester, NY 14622-3332

Tax-Sensitive Equity Fund
Class C Shares Doris J. Hoag, TTEE 34%
Robert A. Johnston Irrevocable
Trust DTD 1/4/90
2988 County House Woods Road
Bluff Point, NY 14478-9709

PaineWebber For the Benefit of 15%
Sheri Ellen Schwartz
Revocable Trust DTD 11-4-94
Managed Account Two
500 Duvall Drive
Greenville, SC 29607-3629

Money Market Fund
Class A Shares Wendall & Co. 62%
C/O The Bank of New York
P.O. Box 1066 Wall Street Station
New York, NY 10268-1066
</TABLE>

22
<PAGE>

Certain Trustees and Officers of the Trust

The following table lists the names of each Trustee and officer of the Trust
who is also an officer or employee of AGAM or AGIM:

<TABLE>
<CAPTION>
Position with the Adviser or Sub-
Name Position with the Trust Adviser
---- ----------------------- ---------------------------------
<C> <C> <S>
Alice T. Kane Chairman of Board of Trustees, Chairman and Chief Executive Officer;
Trustee and President Director*

Joseph T. Grause, Jr. Vice President President; Director*

Thomas J. Brown Treasurer and Vice President Chief Financial Officer, Chief
Administrative Officer, Assistant
Treasurer

John I. Fitzgerald Secretary and Vice President Counsel and Assistant Secretary

John N. Packs Vice President Director of Research
</TABLE>
- --------
* Ms. Kane and Mr. Grause are also the directors of AGAM. Other directors of
AGAM are Kent E. Barrett and John A. Graf, both of whom are officers of
American General.

In the period since November 1, 1998 Ms. Kane has been granted stock and
options to purchase stock in connection with her employment by American
General.

Other Funds Managed by AGIM

AGIM provides investment services to other funds having similar investment
objectives to the Funds covered by this Proxy Statement. The Table below sets
forth a list of each such other fund and states the size of each other fund and
the rate of compensation paid to AGIM for the provision of investment services.
The table additionally indicates whether AGIM has waived, reduced or otherwise
agreed to reduce its compensation under the relevant agreement.

<TABLE>
<CAPTION>
Annual Portfolio
Management Fee Rate (as a Approximate Net Assets (in
percentage of average daily millions) as of
Name of Fund net assets) March 20, 2000
- ------------ --------------------------- --------------------------
<S> <C> <C>
American General Series Portfolio Company 2
Core Bond Fund 0.25% on first $200 million $319
0.20% on next $300 million
0.15% over $500 million
High Yield Bond Fund 0.45% on first $200 million $65
0.35% on next $300 million
0.30% over $500 million
Municipal Bond Fund 0.25% on first $200 million $7
0.20% on next $300 million
0.15% over $500 million
Municipal Money Market
Fund 0.25% on first $200 million $7
0.20% on next $300 million
0.15% over $500 million
Strategic Bond Fund 0.35% on first $200 million $6
0.20% on next $300 million
0.20% over $500 million
</TABLE>

23
<PAGE>

<TABLE>
<CAPTION>
Annual Portfolio
Management Fee Rate (as a Approximate Net Assets (in
percentage of average daily millions) as of
Name of Fund net assets) March 20, 2000
- ------------ --------------------------- --------------------------
<S> <C> <C>
American General Series Portfolio Company 3
Core Bond Fund 0.25% on first $200 million $5
0.20% on next $300 million
0.15% over $500 million
High Yield Bond Fund 0.45% on first $200 million $6
0.35% on next $300 million
0.30% over $500 million
Strategic Bond Fund 0.35% on first $200 million $5
0.25% on next $300 million
0.20% over $500 million
</TABLE>

Principal Underwriter

American General Funds Distributors, Inc., whose address is 286 Congress
Street, Boston, Massachusetts 02210, is the principal underwriter for the
Funds. American General Funds Distributors, Inc. is an affiliate of AGAM.

Quorum and Methods of Tabulation

Thirty percent of the shares of each Fund entitled to vote in person or
represented by proxy, shall be a quorum for the transaction of business by the
shareholders of each Fund at the Meeting. Votes cast by proxy or in person at
the Meeting will be counted by persons appointed by the Trust as tellers for
the Meeting. The tellers will count the total number of votes cast "for"
approval of each Proposal for purposes of determining whether sufficient
affirmative votes have been cast. The tellers will count all shares represented
by proxies that reflect abstentions and "broker non-votes" (i.e., shares held
by brokers or nominees as to which (a) instructions have not been received from
the beneficial owners or the persons entitled to vote and (b) the broker or
nominee does not have discretionary voting power on a particular matter) as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum. Assuming the presence of a quorum, abstentions and broker
non-votes have the effect of a negative vote on each Proposal.

Adjournments

In the event that a quorum is not present for purposes of acting on a
Proposal, or if sufficient votes in favor of a Proposal are not received by the
time of the Meeting, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies. Any such
adjournment will require the affirmative vote of a plurality of the shares
present in person or represented by proxy at the session of the Meeting to be
adjourned. The persons named as proxies will vote in favor of such adjournment
those proxies which they are entitled to vote in favor of any Proposal that has
not then been adopted. They will vote against any such adjournment those
proxies required to be voted against each Proposal that has not then been
adopted and will not vote any proxies that direct them to abstain from voting
on such Proposals.

The costs of any additional Solicitation and of any adjourned session will
be divided equally between CypressTree and American General. Any proposal for
which sufficient favorable votes have been received by the time of the Meeting
will be acted upon and such action will be final regardless of whether the
Meeting is adjourned to permit additional solicitation with respect to another
proposal.

24
<PAGE>

Shareholder Voting

In addition to voting by mail, you may also give your voting instructions by
touchtone telephone by following the instructions set forth on the proxy card.
SCC, which has been engaged by the Adviser to provide proxy-related services,
will record your instructions and, within [ ] hours, send you a letter or
mailgram to confirm your vote. That letter will also provide you with
instructions on how to proceed if the confirmation does not reflect your voting
instructions correctly.

Telephone Voting. You may give your voting instructions over the telephone
by calling 1-800-[ ]. A representative of SCC will answer your call. When
receiving your instructions by telephone, the EquiServe representative is
required to ask you for your full name, address, social security or employer
identification number, title (if the person giving the proxy is authorized to
act for an entity, such as a corporation), the number of shares of a Fund owned
and to confirm that you have received the proxy statement in the mail. If the
information you provide matches the information provided to SCC by the Adviser,
then the SCC representative will explain the process. SCC is not permitted to
recommend to you how to vote, other than to read any recommendation included in
the proxy statement. SCC will record your instructions and transmit them to the
official tabulator and, within [ ] hours, send you a letter or mailgram to
confirm your vote. That letter will also ask you to call SCC immediately if the
confirmation does not reflect your instructions correctly.

As the Meeting date approaches, you may receive a call from a representative
of SCC if the Adviser has not yet received your vote. SCC may ask you for
authority, by telephone or by electronically transmitted instructions, to
permit SCC to sign a proxy on your behalf. SCC will record all instructions it
receives from shareholders by telephone or electronically, and the proxies it
signs in accordance with those instructions, in accordance with the procedures
set forth above. The Trustees of the Trust believe those procedures are
reasonably designed to determine accurately the shareholder's identity and
voting instructions.

Voting by Mail. If you wish to participate in the Meeting, but do not wish
to give a proxy by telephone, you can still complete, sign and mail the proxy
card received with the proxy statement or attend the Meeting in person.

Shareholder Proposals at Future Meetings

The Trust does not hold annual or other regular meetings of shareholders.
Shareholder proposals to be presented at any future meeting of shareholders of
the Trust must be received by the Trust a reasonable time before that meeting
in order for such proposals to be considered for inclusion in the proxy
materials relating to that meeting.

Other Matters

The Trust is not aware of any other matters that are expected to arise at
the Meeting. If any other matter should arise, however, the persons named in
properly executed proxies have discretionary authority to vote such proxies as
they shall decide.

April 12, 2000

25
<PAGE>

Exhibit A

INVESTMENT ADVISORY AGREEMENT

AGREEMENT made this ___ day of June, 2000, between North American
Funds, a Massachusetts business trust (the "Trust"), and American General Asset
Management Corp., a Delaware corporation (the "Adviser"). In consideration of
the mutual covenants contained herein, the parties agree as follows:

1. APPOINTMENT OF ADVISER

The Trust hereby appoints the Adviser, subject to the supervision of
the Trustees of the Trust and the terms of this Agreement, as the investment
adviser for each of the portfolios of the Trust specified in Appendix A to this
Agreement as it shall be amended by the Adviser and the Trust from time to time
(the "Funds"). The Adviser accepts such appointment and agrees to render the
services and to assume the obligations set forth in this Agreement commencing on
its effective date. The Adviser will be an independent contractor and will have
no authority to act for or represent the Trust in any way or otherwise be deemed
an agent unless expressly authorized in this Agreement or another writing by the
Trust and Adviser.

2. DUTIES OF THE ADVISER

a. Subject to the general supervision of the Trustees of the Trust and the
terms of this Agreement, the Adviser will at its own expense select,
contract with, and compensate investment subadvisers ("Subadvisers") to
manage the investments and determine the composition of the assets of
the Funds; provided, that any contract with a Subadviser (the
"Subadvisory Agreement") shall be in compliance with and approved as
required by the Investment Company Act of 1940, as amended ("Investment
Company Act"). Subject always to the direction and control of the
Trustees of the Trust, the Adviser will monitor compliance of each
Subadviser with the investment objectives and related investment
policies, as set forth in the Trust's registration statement as filed
with the Securities and Exchange Commission, of any Fund or Funds under
the management of such Subadviser, and review and report to the
Trustees of the Trust on the performance of such Subadviser.

b. The Adviser will oversee the administration of all aspects of the
Trust's business and affairs and in that connection will furnish to the
Trust the following services:

(1) Office and Other Facilities. The Adviser shall furnish to the
Trust office space in the offices of the Adviser or in such
other place as may be agreed upon by the parties hereto from
time to time and such other office facilities, utilities and
office equipment as are necessary for the Trust's operations.

(2) Trustees and Officers. The Adviser agrees to permit
individuals who are directors, officers or employees of the
Adviser to serve (if duly elected or appointed) as Trustees or
President, Vice President, Treasurer or Secretary of the
Trust, without remuneration from or other cost to the Trust.

(3) Other Personnel. The Adviser shall furnish to the Trust, at
the Trust's expense, any other personnel necessary for the
operations of the Trust.

1
<PAGE>

(4) Financial, Accounting, and Administrative Services. The
Adviser shall maintain the existence and records of the Trust;
maintain the registrations and qualifications of Trust shares
under federal and state law; and perform all administrative,
financial, accounting, bookkeeping and recordkeeping functions
of the Trust except for any such functions that may be
performed by a third party pursuant to a custodian, transfer
agency or service agreement executed by the Trust. The Trust
shall reimburse the Adviser for its expenses associated with
all such services, including the compensation and related
personnel expenses and expenses of office space, office
equipment, utilities and miscellaneous office expenses, except
any such expenses directly attributable to officers or
employees of the Adviser who are serving as President, Vice
President, Treasurer or Secretary of the Trust. The Adviser
shall determine the expenses to be reimbursed by the Trust
pursuant to expense allocation procedures established by the
Adviser in accordance with generally accepted accounting
principles.

(5) Liaisons with Agents. The Adviser, at its own expense, shall
maintain liaison with the various agents and other persons
employed by the Trust (including the Trust's transfer agent,
custodian, independent accountants and legal counsel) and
assist in the coordination of their activities on behalf of
the Trust. Fees and expenses of such agents and other persons
will be paid by the Trust.

(6) Reports to Trust. The Adviser shall furnish to or place at the
disposal of the Trust such information, reports, valuations,
analyses and opinions as the Trust may, at any time or from
time to time, reasonably request or as the Adviser may deem
helpful to the Trust, provided that the expenses associated
with any such materials furnished by the Adviser at the
request of the Trust shall be borne by the Trust.

(7) Reports and Other Communications to Trust Shareholders. The
Adviser shall assist the Trust in developing (but not pay for)
all general shareholder communications including regular
shareholder reports.

3. EXPENSES ASSUMED BY THE TRUST

In addition to paying the advisory fee provided for in Section 4, the
Trust will pay all expenses of its organization, operations and business not
specifically assumed or agreed to be paid by the Adviser as provided in this
Agreement, by a Subadviser as provided in a Subadvisory Agreement, or by the
Distributor as provided in the Distribution Agreement. Without limiting the
generality of the foregoing, the Trust, in addition to certain expenses
described in Section 2 above, shall pay or arrange for the payment of the
following:

a. Custody and Accounting Services. All expenses of the transfer, receipt,
safekeeping, servicing and accounting for the Trust's cash, securities,
and other property, including all charges of depositories, custodians
and other agents, if any;

b. Shareholder Servicing. All expenses of maintaining and servicing
shareholder accounts, including all charges of the Trust's transfer,
shareholder recordkeeping, dividend disbursing, redemption, and other
agents, if any;

c. Shareholder Communications. All expenses of preparing, setting in type,
printing, and distributing reports and other communications to
shareholders;

-2-
<PAGE>

d. Shareholder Meetings. All expenses incidental to holding meetings of
Trust shareholders, including the printing of notices and proxy
material, and proxy solicitation therefor;

e. Prospectuses. All expenses of preparing, setting in type, and printing
of annual or more frequent revisions of the Trust's prospectus and
statement of additional information and any supplements thereto and of
mailing them to shareholders;

f. Pricing. All expenses of computing the net asset value per share for
each of the Funds, including the cost of any equipment or services used
for obtaining price quotations and valuing its investment portfolio;

g. Communication Equipment. All charges for equipment or services used for
communication between the Adviser or the Trust and the custodian,
transfer agent or any other agent selected by the Trust;

h. Legal and Accounting Fees and Expenses. All charges for services and
expenses of the Trust's legal counsel and independent auditors;

i. Trustees and Officers. Except as expressly provided otherwise in
paragraph 2.b.(2), all compensation of Trustees and officers, all
expenses incurred in connection with the service of Trustees and
officers, and all expenses of meetings of the Trustees and Committees
of Trustees;

j. Federal Registration Fees. All fees and expenses of registering and
maintaining the registration of the Trust under the Investment Company
Act and the registration of the Trust's shares under the Securities Act
of 1933, as amended (the "1933 Act"), including all fees and expenses
incurred in connection with the preparation, setting in type, printing
and filing of any registration statement and prospectus under the 1933
Act or the Investment Company Act, and any amendments or supplements
that may be made from time to time;

k. State Registration Fees. All fees and expenses of qualifying and
maintaining qualification of the Trust and of the Trust's shares for
sale under securities laws of various states or jurisdictions, and of
registration and qualification of the Trust under all other laws
applicable to the Trust or its business activities (including
registering the Trust as a broker-dealer, or any officer of the Trust
or any person as agent or salesman of the Trust in any state);

l. Issue and Redemption of Trust Shares. All expenses incurred in
connection with the issue, redemption, and transfer of Trust shares,
including the expense of confirming all share transactions, and of
preparing and transmitting certificates for shares of beneficial
interest in the Trust;

m. Bonding and Insurance. All expenses of bond, liability and other
insurance coverage required by law or regulation or deemed advisable by
the Trust's Trustees including, without limitation, such bond,
liability and other insurance expense that may from time to time be
allocated to the Trust in a manner approved by its Trustees;

n. Brokerage Commissions. All brokers' commissions and other charges
incident to the purchase, sale, or lending of the Trust's portfolio
securities;

o. Taxes. All taxes or governmental fees payable by or with respect to the
Trust to federal, state, or other governmental agencies, domestic or
foreign, including stamp or other transfer taxes, and all expenses
incurred in the preparation of tax returns;

-3-
<PAGE>

p. Trade Association Fees. All fees, dues, and other expenses incurred in
connection with the Trust's membership in any trade association or
other investment organization; and

q. Nonrecurring and Extraordinary Expenses. Such nonrecurring expenses as
may arise, including the costs of actions, suits, or proceedings to
which the Trust is, or is threatened to be made, a party and the
expenses the Trust may incur as a result of its legal obligation to
provide indemnification to its Trustees, officers, agents and
shareholders.

4. COMPENSATION OF ADVISER

For the services provided, the Trust will pay the Adviser with respect
to each Fund the compensation specified in Appendix A of this Agreement.

5. NON-EXCLUSIVITY

The services of the Adviser to the Trust are not to be deemed to be
exclusive, and the Adviser shall be free to render investment advisory or other
services to others (including other investment companies) and to engage in other
activities. It is understood and agreed that the directors, officers, and
employees of the Adviser are not prohibited from engaging in any other business
activity or from rendering services to any other person, or from serving as
partners, officers, directors, trustees or employees of any other firm or
corporation, including other investment companies.

6. SUPPLEMENTAL ARRANGEMENTS

The Adviser may enter into arrangements with other persons affiliated
with the Adviser to better enable it to fulfill its obligations under this
Agreement for the provision of certain personnel and facilities to the Adviser.

7. CONFLICTS OF INTEREST

It is understood that Trustees, officers, agents and shareholders of
the Trust are or may be interested in the Adviser as directors, officers,
stockholders, or otherwise; that directors, officers, agents and stockholders of
the Adviser are or may be interested in the Trust as Trustees, officers,
shareholders or otherwise; that the Adviser may be interested in the Trust; and
that the existence of any such dual interest shall not affect the validity
hereof or of any transactions hereunder except as otherwise provided in the
Agreement and Declaration of Trust of the Trust and the Articles of
Incorporation of the Adviser, respectively, or by specific provision of
applicable law.

8. REGULATION

The Adviser shall submit to all regulatory and administrative bodies
having jurisdiction over the services provided pursuant to this Agreement any
information, reports or other material which any such body by reason of this
Agreement may request or require pursuant to applicable laws and regulations.
The Adviser will comply in all material respects with Rule 17j-1 under the
Investment Company Act.

9. DURATION AND TERMINATION OF AGREEMENT

This Agreement shall become effective on the later of (i) its execution
and (ii) date of the meeting of the shareholders of the Trust, at which meeting
this New Advisory Agreement is approved by the vote of a majority of the
outstanding voting securities (as defined in the Investment Company Act) of each
of the Funds. The Agreement will continue in effect for a period more than two
years from the date of its

-4-
<PAGE>

execution only so long as such continuance is specifically approved at least
annually either by the Trustees of the Trust or by the vote of a majority of the
outstanding voting securities of each of the Funds, provided that in either
event such continuance shall also be approved by the vote of a majority of the
Trustees of the Trust who are not interested persons (as defined in the
Investment Company Act) of any party to this Agreement cast in person at a
meeting called for the purpose of voting on such approval. The required
shareholder approval of the Agreement or of any continuance of the Agreement
shall be effective with respect to any Fund if a majority of the outstanding
voting securities of the series (as defined in Rule 18f-2(h) under the
Investment Company Act) of shares of that Fund votes to approve the Agreement or
its continuance, notwithstanding that the Agreement or its continuance may not
have been approved by a majority of the outstanding voting securities of (a) any
other Fund affected by the Agreement or (b) all the Funds of the Trust.

If the shareholders of any Fund fail to approve the Agreement or any
continuance of the Agreement, the Adviser will continue to act as investment
adviser with respect to such Fund pending the required approval of the Agreement
or its continuance or of a new contract with the Adviser or a different adviser
or other definitive action; provided, that the compensation received by the
Adviser in respect of such Fund during such period is in compliance with Rule
15a-4 under the Investment Company Act.

This Agreement may be terminated at any time, without the payment of
any penalty, by the Trustees of the Trust, by the vote of a majority of the
outstanding voting securities of the Trust, or with respect to any Fund by the
vote of a majority of the outstanding voting securities of such Fund, on sixty
days' written notice to the Adviser, or by the Adviser on sixty days' written
notice to the Trust. This Agreement will automatically terminate, without the
payment of any penalty, in the event of its assignment (as defined in the
Investment Company Act).

10. PROVISION OF CERTAIN INFORMATION BY ADVISER

The Adviser will promptly notify the Trust in writing of the occurrence
of any of the following events:

a. the Adviser fails to be registered as an investment adviser under the
Investment Advisers Act or under the laws of any jurisdiction in which
the Adviser is required to be registered as an investment adviser in
order to perform its obligations under this Agreement;

b. the Adviser is served or otherwise receives notice of any action, suit,
proceeding, inquiry or investigation, at law or in equity, before or by
any court, public board or body, involving the affairs of the Trust;
and

c. the chief executive officer or controlling stockholder of the Adviser
or the Fund manager of any Fund changes.

11. AMENDMENTS TO THE AGREEMENT

This Agreement may be amended by the parties only if such amendment is
specifically approved by the vote of a majority of the outstanding voting
securities of each of the Funds affected by the amendment and by the vote of a
majority of the Trustees of the Trust who are not interested persons of any
party to this Agreement cast in person at a meeting called for the purpose of
voting on such approval. The required shareholder approval shall be effective
with respect to any Fund if a majority of the outstanding voting securities of
the series of shares of that Fund vote to approve the amendment, notwithstanding
that the amendment may not have been approved by a majority of the outstanding
voting securities of (a) any other Fund affected by the amendment or (b) all the
Funds of the Trust.

-5-
<PAGE>

12. ENTIRE AGREEMENT

This Agreement contains the entire understanding and agreement of the
parties.

13. HEADINGS

The headings in the sections of this Agreement are inserted for
convenience of reference only and shall not constitute a part hereof.

14. NOTICES

All notices required to be given pursuant to this Agreement shall be
delivered or mailed to the last known business address of the Trust or Adviser
in person or by registered mail or a private mail or delivery service providing
the sender with notice of receipt. Notice shall be deemed given on the date
delivered or mailed in accordance with this section.

15. SEVERABILITY

Should any portion of this Agreement for any reason be held to be void
in law or in equity, the Agreement shall be construed, insofar as is possible,
as if such portion had never been contained herein.

16. GOVERNING LAW

The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of The Commonwealth of Massachusetts, or any of the
applicable provisions of the Investment Company Act. To the extent that the laws
of The Commonwealth of Massachusetts, or any of the provisions in this
Agreement, conflict with applicable provisions of the Investment Company Act,
the latter shall control.

17. LIMITATION OF LIABILITY

The Declaration of Trust establishing the Trust, dated September 29,
1988, as amended and restated February 18, 1994, a copy of which, together with
all amendments thereto (the "Declaration"), is on file in the office of the
Secretary of The Commonwealth of Massachusetts, provides that the name "North
American Funds" refers to the Trustees under the Declaration collectively as
Trustees, but not as individuals or personally; and no Trustee, shareholder,
officer, employee or agent of the Trust shall be held to any personal liability,
nor shall resort be had to their private property, for the satisfaction of any
obligation or claim, in connection with the affairs of the Trust or any
Portfolio thereof, but only the assets belonging to the Trust, or to the
particular Portfolio with which the obligee or claimant dealt, shall be liable.

-6-
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers as of the date first
mentioned above.

North American Funds

By:
--------------------------------

American General Asset Management
Corp.

By:
--------------------------------

-7-
<PAGE>

APPENDIX A

1. Growth and Income Fund: .725% of the first $50,000,000, .675% between
$50,000,000 and $200,000,000, .625% between $200,000,000 and
$500,000,000 and .550% on the excess over $500,000,000 of the average
net assets of the Fund.

2. Balanced Fund: .775% of the first $200,000,000, .675% between
$200,000,000 and $500,000,000 and .625% on the excess over $500,000,000
of the average net assets of the Fund.

3. U.S. Government Securities Fund: .600% of the first $200,000,000, .525%
between $200,000,000 and $500,000,000 and .475% on the excess over
$500,000,000 of the average net assets of the Fund.

4. Core Bond Fund: .600% of the first $200,000,000, .525% between
$200,000,000 and $500,000,000 and .475% on the excess over $500,000,000
of the average net assets of the Fund.

5. Money Market Fund: .200% of the first $500,000,000 and .145% on the
excess over $500,000,000 of the average net assets of the Fund.

6. Global Equity Fund: .900% of the first $500,000,000, and .700% on the
excess over $500,000,000 of the average net assets of the Fund.

7. Municipal Bond Fund: .600% of the net assets of the Fund.

8. Strategic Income Fund: .750% of the first $50 million, .700% between
$50,000,000 and $200,000,000, .650% between $200,000,000 and
$500,000,000 and .600% on the excess over $500,000,000 of the average
net assets of the Fund.

9. International Equity Fund: .900% of the first $50 million, .850%
between $50,000,000 and $200,000,000, .800% between $200,000,000 and
$500,000,000 and .750% on the excess over $500,000,000 of the average
net assets of the Fund.

10. Mid Cap Growth Fund: .925% of the first $50,000,000, .900% between
$50,000,000 and $200,000,000, .875% between $200,000,000 and
$500,000,000 and .850% on the excess over $500,000,000 of the average
net assets of the Fund.

11. International Small Cap Fund: 1.05% of the first $50,000,000, 1.00%
between $50,000,000 and $200,000,000, .900% between $200,000,000 and
$500,000,000 and .800% on the excess over $500,000,000 of the average
net assets of the Fund.

12. Large Cap Growth Fund: .900% of the first $50,000,000, .850% between
$50,000,000 and $200,000,000, .825% between $200,000,000 and
$500,000,000 and .800% on the excess over $500,000,000 of the average
net assets of the Fund.

13. Small Cap Growth Portfolio: 950% of the average net assets of the Fund.

14. Mid Cap Value Fund: .900% of the first $100,000,000, .875% between
$100,000,000 and $250,000,000, .850% between $250,000,000 and
$500,000,000, .825% between $500,000,000 and $750,000,000 and .800% on
the excess over $750,000,000 of the average net assets of the Fund.

-8-
<PAGE>

15. Stock Index Fund: .270% of the first $500,000,000 and .260% on the
excess over $500,000,000 of the average net assets of the Fund.

16. Small Cap Index Fund: .280% of the first $500,000,000 and .270% on the
excess over $500,000,000 of the average net assets of the Fund.

17. Socially Responsible Fund: .650% of the average net assets of the Fund.

18. High Yield Bond Fund : .825% of the first $200,000,000, .725% between
$200,000,000 and $500,000,000, and .675% on the excess over
$500,000,000 of the average net assets of the Fund.

19. Growth Lifestyle Fund: .100% of the average net assets of the Fund.

20. Moderate Growth Lifestyle Fund: .100% of the average net assets of the
Fund.

21. Conservative Growth Lifestyle Fund: .100% of the average net assets of
the Fund.

22. Municipal Money Market Fund: .350% of the average net assets of the
Fund.

23. Science & Technology Fund: .900% of the average net assets of the Fund.

24. Capital Appreciation Fund: .900% of the first $50,000,000, .850%
between $50,000,000 and $200,000,000, .825% between $200,000,000 and
$500,000,000 and .800% on the excess over $500,000,000 of the average
net assets of the Fund.

25. Tax-Sensitive Equity Fund: .850% of the first $50 million, .800%
between $50,000,000 and $200,000,000, .775% between $200,000,000 and
$500,000,000 and .700% on the excess over $500,000,000 of the average
net assets of the Fund.

26. Equity-Income Fund: .750% of the first $50 million, .650% between
$50,000,000 and $200,000,000, .550% on the excess over $200,000,000 of
the average net assets of the Fund.

The Percentage Fee for each Fund shall be accrued for each calendar day
and the sum of the daily fee accruals shall be payable monthly to the Adviser.
The daily fee accruals will be computed by multiplying the fraction of one over
the number of calendar days in the year by the applicable annual rate described
in the preceding paragraph, and multiplying this product by the net assets of
the Fund as determined in accordance with the Fund's prospectus and statement of
additional information as of the close of business on the previous business day
on which the Fund was open for business.

If this Agreement becomes effective or terminates before the end of any
month, the fee for the period from the effective date to the end of such month
or from the beginning of such month to the date of termination, as the case may
be, shall be prorated according to the proportion which such period bears to the
full month in which such effectiveness or termination occurs.

-9-
<PAGE>

Exhibit B

NORTH AMERICAN FUNDS
SUBADVISORY AGREEMENT

AGREEMENT made as of June ___, 2000, between American General Asset
Management Corp., a Delaware corporation (the "Adviser"), and American General
Investment Management L.P., a Delaware limited partnership (the "Subadviser").
In consideration of the mutual covenants contained herein, the parties agree as
follows:

1. APPOINTMENT OF SUBADVISER

The Subadviser undertakes to act as investment subadviser to, and,
subject to the supervision of the Trustees of North American Funds (the "Trust")
and the terms of this Agreement, to manage the investment and reinvestment of
the assets of the series of the Trust specified in Appendix A to this Agreement
as it shall be amended by the Adviser and the Subadviser from time to time (the
"Funds"). The Subadviser will be an independent contractor and will have no
authority to act for or represent the Trust or Adviser in any way except as
expressly authorized in this Agreement or another writing by the Trust and
Adviser.

2. SERVICES TO BE RENDERED BY THE SUBADVISER TO THE TRUST

a. Subject always to the direction and control of the Trustees of the
Trust, the Subadviser will manage the investments and determine the
composition of the assets of the Funds in accordance with the Funds'
registration statement, as amended. In fulfilling its obligations to
manage the investments and reinvestments of the assets of the Funds,
the Subadviser will:

i. obtain and evaluate pertinent economic, statistical, financial
and other information affecting the economy generally and
individual companies or industries the securities of which are
included in the Funds or are under consideration for inclusion
in the Funds;

ii. formulate and implement a continuous investment program for
each Fund consistent with the investment objectives and
related investment policies for each such Fund as described in
the Trust's registration statement, as amended;

iii. take whatever steps are necessary to implement these
investment programs by the purchase and sale of securities
including the placing of orders for such purchases and sales;

iv. regularly report to the Trustees of the Trust with respect to
the implementation of these investment programs;

v. provide assistance to the Trust's Custodian regarding the fair
value of securities held by the Funds for which market
quotations are not readily available for purposes of enabling
the Trust's Custodian to calculate net asset value; and

vi. vote proxies in accordance with the Proxy Voting Policy of the
Trust.

b. The Subadviser, at its expense, will furnish (i) all necessary
investment and management facilities, including salaries of personnel
required for it to execute its duties faithfully, and (ii)
administrative facilities, including bookkeeping, clerical personnel
and equipment necessary for the efficient conduct of the investment
affairs of the Funds (excluding determination of net asset value and
shareholder accounting services).

1
<PAGE>

c. The Subadviser will select brokers and dealers to effect all
transactions subject to the following conditions: The Subadviser will
place all orders with brokers, dealers, or issuers, and will negotiate
brokerage commissions if applicable. The Subadviser is directed at all
times to seek to execute brokerage transactions for the Funds in
accordance with such policies or practices as may be established by the
Trustees and described in the Trust's registration statement as
amended. The Subadviser may pay a broker-dealer which provides research
and brokerage services a higher spread or commission for a particular
transaction than otherwise might have been charged by another
broker-dealer, if the Subadviser determines that the higher spread or
commission is reasonable in relation to the value of the brokerage and
research services that such broker-dealer provides, viewed in terms of
either the particular transaction or the Subadviser's overall
responsibilities with respect to accounts managed by the Subadviser.
The Subadviser may use for the benefit of the Subadviser's other
clients, or make available to companies affiliated with the Subadviser
or to its directors for the benefit of its clients, any such brokerage
and research services that the Subadviser obtains from brokers or
dealers.

d. On occasions when the Subadviser deems the purchase or sale of a
security to be in the best interest of the Fund as well as other
clients of the Subadviser, the Subadviser to the extent permitted by
applicable laws and regulations, may, but shall be under no obligation
to, aggregate the securities to be purchased or sold to attempt to
obtain a more favorable price or lower brokerage commissions and
efficient execution. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction,
will be made by the Subadviser in the manner the Subadviser considers
to be the most equitable and consistent with its fiduciary obligations
to the Fund and to its other clients.

e. The Subadviser will maintain all accounts, books and records with
respect to the Funds as are required of an investment adviser of a
registered investment company under the Investment Company Act of 1940,
as amended (the "Investment Company Act") and Investment Advisers Act
of 1940, as amended (the "Investment Advisers Act") and the rules
thereunder.

f. The Subadviser agrees to observe and comply with Rule 17j-1under the
Investment Company Act and its Code of Ethics (which shall comply in
all material respects with Rule 17j-1, as the same may be amended from
time to time). On a quarterly basis, the Subadviser will either (i)
certify to the Adviser that the Subadviser and its Access Persons have
complied with the Subadviser's Code of Ethics with respect to the Fund
or (ii) identify any material violations which have occurred with
respect to the Fund. In addition, the Subadviser will report at least
annually to the Adviser concerning any other violations of the
Subadviser's Code of Ethics which required significant remedial action
and which were not previously reported.

3. COMPENSATION OF SUBADVISER

The Adviser will pay the Subadviser with respect to each Fund the
compensation specified in Appendix A to this Agreement.

4. LIABILITY OF SUBADVISER

Neither the Subadviser nor any of its employees shall be liable to the
Adviser or Trust for any loss suffered by the Adviser or Trust resulting from
any error of judgment made in the good faith exercise of the Subadviser's
investment discretion in connection with selecting Fund investments except for
losses resulting from willful misfeasance, bad faith or gross negligence of, or
from reckless disregard of, the duties of the Subadviser or any of its partners
or employees; and neither the Subadviser nor any of its employees shall be
liable to the Adviser or Trust for any loss suffered by the Adviser or Trust
resulting from any other matters to which this Agreement relates (i.e., those
other matters specified in Sections 2 and 8 of this Agreement), except for
losses resulting from willful misfeasance, bad faith, or gross negligence in the
performance of, or from disregard of, the duties of the Subadviser or any of its
partners or employees.

2
<PAGE>

5. SUPPLEMENTAL ARRANGEMENTS

The Subadviser may enter into arrangements with other persons
affiliated with the Subadviser to better enable it to fulfill its obligations
under this Agreement for the provision of certain personnel and facilities to
the Subadviser.

6. CONFLICTS OF INTEREST

It is understood that trustees, officers, agents and shareholders of
the Trust are or may be interested in the Subadviser as trustees, officers,
partners or otherwise; that directors, officers, agents and partners of the
Subadviser are or may be interested in the Trust as trustees, officers,
shareholders or otherwise; that the Subadviser may be interested in the Trust;
and that the existence of any such dual interest shall not affect the validity
hereof or of any transactions hereunder except as otherwise provided in the
Agreement and Declaration of Trust of the Trust and the Certificate of
Incorporation of the Subadviser, respectively, or by specific provision of
applicable law.

7. REGULATION

The Subadviser shall submit to all regulatory and administrative bodies
having jurisdiction over the services provided pursuant to this Agreement any
information, reports or other material which any such body by reason of this
Agreement may request or require pursuant to applicable laws and regulations.

8. DURATION AND TERMINATION OF AGREEMENT

This Agreement shall become effective with respect to each Fund on the
later of (i) its execution, and (ii) the date of the meeting of the shareholders
of the Fund, at which meeting this Agreement is approved by the vote of a
majority of the outstanding voting securities (as defined in the Investment
Company Act) of the Fund. The Agreement will continue in effect for a period
more than two years from the date of its execution only so long as such
continuance is specifically approved at least annually either by the Trustees of
the Trust or by a majority of the outstanding voting securities of each of the
Funds, provided that in either event such continuance shall also be approved by
the vote of a majority of the Trustees of the Trust who are not interested
persons (as defined in the Investment Company Act) of any party to this
Agreement cast in person at a meeting called for the purpose of voting on such
approval. The required shareholder approval of the Agreement or of any
continuance of the Agreement shall be effective with respect to any Fund if a
majority of the outstanding voting securities of the series (as defined in Rule
18f-2(h) under the Investment Company Act) of shares of that Fund votes to
approve the Agreement or its continuance, notwithstanding that the Agreement or
its continuance may not have been approved by a majority of the outstanding
voting securities of (a) any other Fund affected by the Agreement or (b) all the
series of the Trust.

If the shareholders of any Fund fail to approve the New Sub-Advisory
Agreement the Subadviser will continue to act as investment subadviser with
respect to such Fund pending the required approval of the Agreement or its
continuance or of any contract with the Subadviser or a different adviser or
subadviser or other definitive action; provided, that the compensation received
by the Subadviser in respect of such Fund during such period is in compliance
with Rule 15a-4 under the Investment Company Act.

This Agreement may be terminated at any time, without the payment of
any penalty, by the Trustees of the Trust, by the vote of a majority of the
outstanding voting securities of the Trust, or with respect to any Fund by the
vote of a majority of the outstanding voting securities of such Fund, on sixty
days' written notice to the Adviser and the Subadviser, or by the Adviser or
Subadviser on sixty days' written notice to the Trust and the other party. This
agreement will automatically terminate, without the payment of any penalty, in
the event of its assignment (as defined in the Investment Company Act) or in the
event the Advisory Agreement between the Adviser and the Trust terminates for
any reason.

3
<PAGE>

9. PROVISION OF CERTAIN INFORMATION BY SUBADVISER

The Subadviser will promptly notify the Adviser in writing of the
occurrence of any of the following events:

a. the Subadviser fails to be registered as an investment adviser under
the Investment Advisers Act or under the laws of any jurisdiction in
which the Subadviser is required to be registered as an investment
adviser in order to perform its obligations under this Agreement;

b. the Subadviser is served or otherwise receives notice of any action,
suit, proceeding, inquiry or investigation, at law or in equity, before
or by any court, public board or body, involving the affairs of the
Trust; and

c. any change in actual control or management of the Subadviser or the
portfolio manager of any Fund.

10. PROVISION OF CERTAIN INFORMATION BY THE ADVISER

The Adviser shall furnish the Subadviser with copies of the Trust's
Prospectus and Statement of Additional Information, and any reports made by the
Trust to its shareholders, as soon as practicable after such documents become
available. The Adviser shall furnish the Subadviser with any further documents,
materials or information that the Subadviser may reasonably request to enable it
to perform its duties pursuant to this Agreement.

11. SERVICES TO OTHER CLIENTS

The Adviser understand, and has advised the Trust's Board of Trustees,
that the Subadviser now acts, or may in the future act, as an investment adviser
to fiduciary and other managed accounts and as investment adviser or subadviser
to other investment companies. Further, the Adviser understands, and has advised
the Trust's Board of Trustees that the Subadviser and its affiliates may give
advice and take action for its accounts, including investment companies, which
differs from advice given on the timing or nature of action taken for the Fund.
The Subadviser is not obligated to initiate transaction for the Portfolio in any
security which the Subadviser, its principals, affiliates or employees may
purchase or sell for their own accounts or other clients.

12. AMENDMENTS TO THE AGREEMENT

This Agreement may be amended by the parties only if such amendment is
specifically approved by the vote of a majority of the outstanding voting
securities of each of the Funds affected by the amendment and by the vote of a
majority of the Trustees of the Trust who are not interested persons of any
party to this Agreement cast in person at a meeting called for the purpose of
voting on such approval. The required shareholder approval shall be effective
with respect to any Fund if a majority of the outstanding voting securities of
that Fund vote to approve the amendment, notwithstanding that the amendment may
not have been approved by a majority of the outstanding voting securities of (a)
any other Fund affected by the amendment or (b) all the series of the Trust.

13. ENTIRE AGREEMENT

This Agreement contains the entire understanding and agreement of the
parties.

14. HEADINGS

The headings in the sections of this Agreement are inserted for
convenience of reference only and shall not constitute a part hereof.

4
<PAGE>

15. NOTICES

All notices required to be given pursuant to this Agreement shall be
delivered or mailed to the last known business address of the Trust or
applicable party in person or by registered mail or a private mail or delivery
service providing the sender with notice of receipt. Notice shall be deemed
given on the date delivered or mailed in accordance with this paragraph.

16. SEVERABILITY

17. GOVERNING LAW

18. LIMITATION OF LIABILITY

The Amended and Restated Agreement and Declaration of Trust dated
February 18, 1994, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of The Commonwealth of
Massachusetts, provides that the name "North American Funds" refers to the
Trustees under the Declaration collectively as Trustees, but not as individuals
or personally; and no Trustee, shareholder, officer, employee or agent of the
Trust shall be held to any personal liability, nor shall resort be had to their
private property, for the satisfaction of any obligation or claim, in connection
with the affairs of the Trust or any portfolio thereof, but only the assets
belonging to the Trust, or to the particular portfolio with which the obligee or
claimant dealt, shall be liable.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers as of the date first
mentioned above.

AMERICAN GENERAL ASSET MANAGEMENT CORP.

By:
--------------------------------

AMERICAN GENERAL INVESTMENT
MANAGEMENT, L.P.

By:
--------------------------------

5
<PAGE>

APPENDIX A

The Subadviser shall serve as investment subadviser for the following
Funds of the Trust. The Adviser will pay the Subadviser, as full compensation
for all services provided under this Agreement, the fee computed separately for
each such Fund at an annual rate as follows (the "Subadviser Percentage Fee"):

1. U.S. Government Securities Fund: .225% of the first
$200,000,000, .15% between $200,000,000 and $500,000,000 and
.10% on the excess over $500,000,000 of the average net assets
of the Fund.

2. Municipal Bond Fund: .25% of the first $200,000,000, .20%
between $200,000,000 and $500,000,000 and .15% on the excess
over $500,000,000 of the average net assets of the Fund.

3. Strategic Income Fund: .35% of the first $200,000,000, .25%
between $200,000,000 and $500,000,000 and .20% on the excess
over $500,000,000 of the average net assets of the Fund.

4. Money Market Fund: .075% of the first $500,000,000 and .020%
on the excess over $500,000,000 o f the average net assets of
the Fund.

5. Core Bond Fund: .25% of the first $200,000,000, .20% between
$200,000,000 and $500,000,000 and .15% on the excess over
$500,000,000 of the average net assets of the Fund.

6. High Yield Bond Fund: .450% of the first $200,000,000; .350%
between $200,000,000 and $500,000,000 and .300% on the excess
over $500,000,000 of the average net assets of the Fund.

7. Municipal Money Market Fund: .250% of the first $200,000,000;
.200% between $200,000,000 and $500,000,000 and .150% on the
excess over $500,000,000 of the average net assets of the
Fund.

8. Stock Index Fund: .020% of the first $2 billion and .010% on
the excess over $2 billion of the average net assets of the
Fund.

9. Small Cap Index Fund: .030% of the first $150,000,000 and
.020% on the excess over $150,000,000 of the average net
assets of the Fund.

10. Socially Responsible Fund: .250% of the Fund's average daily
assets.

11. Growth Lifestyle Fund: .100% of the Fund's average daily
assets.

12. Moderate Growth Lifestyle Fund: .100% of the Fund's average
daily assets.

13. Conservative Growth Lifestyle Fund: .100% of the Fund's
average daily assets.

The Subadviser Percentage Fee for each Fund shall be accrued for each
calendar day and the sum of the daily fee accruals shall be paid monthly to the
Subadviser. The daily fee accruals will be computed by multiplying the fraction
of one over the number of calendar days in the year by the applicable annual
rate described in the preceding paragraph, and multiplying this product by the
net assets of the Fund as determined in accordance with the Trust's prospectus
and statement of additional information as of the close of business on the
previous business day on which the Trust was open for business.

If this Agreement becomes effective or terminates before the end of any
month, the fee (if any) for the period from the effective date to the end of
such month or from the beginning of such month to the date of termination, as
the case may be, shall be prorated according to the proportion which such period
bears to the full month in which such effectiveness or termination occurs.

6
<PAGE>

[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE

- --------------------------------------------------------------------------------
NORTH AMERICAN FUNDS
- --------------------------------------------------------------------------------
MONEY MARKET FUND

Mark box at right if an address change [ ]
or comment has been noted on the reverse
side of this card.

CONTROL NUMBER:

--------------------------------
Please be sure to sign and date this Proxy. Date
- --------------------------------------------------------------------------------

- ---------Shareholder sign here----------------Co-owner sign here----------------

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR EACH PROPOSAL.

1. To approve the Investment Advisory Agreement For Against Abstain
between American General Asset Management [ ] [ ] [ ]
Corp. and the Trust.

5. To approve a New Subadvisory Agreement For Against Abstain
with respect to the Money Market Fund [ ] [ ] [ ]
between American General Asset Management
Corp. and American General Investment
Management, L.P.

7. To elect Trustees. For All With- For All
(01) Alice T. Kane Nominees hold Except
(02) Joseph T. Grause, Jr. [ ] [ ] [ ]
(03) Dr. Judith L. Craven
(04) Dr. Timothy J. Ebner
(05) Judge Gustavo E. Gonzales, Jr.
(06) Dr. John E. Maupin, Jr.
(07) Ben H. Love

NOTE: If you do not wish your shares voted "For" a particular nominee, mark the
"For All Except" box and strike a line through the name(s) of the nominee(s).
Your shares will be voted for the remaining nominee(s).

RECORD DATE SHARES:
- --------------------------------------------------------------------------------

NORTH AMERICAN FUNDS

PROXY SOLICITED BY THE BOARD OF TRUSTEES
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS ON JUNE 1, 2000

The undersigned hereby appoints John I. Fitzgerald, John N. Packs and Cathy Z.
Angellis, and each of them separately, proxies with power of substitution to
each, and hereby authorizes them to represent and to vote, as designated hereon,
at the Special Meeting of Shareholders of North American Funds (the "Trust"), on
June 1, 2000 at 9:00 Eastern time, and any adjournments thereof, all of the
shares of each Fund of the Trust which the undersigned would be entitled to vote
if personally present.

In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Meeting. The Trustees recommend a vote FOR
Proposals 1, 5 and 7.

- --------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
NOTE: Please sign exactly as your name appears on this proxy card. All joint
owners should sign. When signing as executor, administrator, attorney, trustee
or guardian or as custodian for a minor, please give full title as such. If a
corporation, please sign in full corporate name and indicate the signer's
office. If a partner, sign in the partnership name.
- --------------------------------------------------------------------------------

HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?

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

- --------------------------------------------------------------------------------
<PAGE>

[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE

Mark box at right if an address change or comment has been noted [_]
on the reverse side of this card.

CONTROL NUMBER:

--------------------------
Please be sure to sign and date this Proxy. Date
- --------------------------------------------------------------------------------

- -----Shareholder sign here---------------------Co-owner sign here---------------

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR EACH PROPOSAL.

For Against Abstain
1. To approve the Investment Advisory Agreement [_] [_] [_]
between American General Asset Management Corp.
and the Trust.

6. To approve a New Subadvisory Agreement with For Against Abstain
respect to the U.S. Government Securities Fund [_] [_] [_]
between American General Asset Management Corp.
and American General Investment Management, L.P.

7. To elect Trustees. For All With- For All
(01) Alice T. Kane Nominees hold Except
(02) Joseph T. Grause, Jr. [_] [_] [_]
(03) Dr. Judith L. Craven
(04) Dr. Timothy J. Ebner
(05) Judge Gustavo E. Gonzales, Jr.
(06) Dr. John E. Maupin, Jr.
(07) Ben H. Love

RECORD DATE SHARES:
- --------------------------------------------------------------------------------

NORTH AMERICAN FUNDS

PROXY SOLICITED BY THE BOARD OF TRUSTEES
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS ON JUNE 1, 2000

In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Meeting. The Trustees recommend a vote FOR
Proposals 1, 6 and 7.

HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?

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

- --------------------------------------------------------------------------------
<PAGE>

[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE

Mark box at right if an address change or comment has been noted
on the reverse side of this card. [_]

CONTROL NUMBER:

---------------------------------
Please be sure to sign and date this Proxy. Date
- --------------------------------------------------------------------------------

- ----Shareholder sign here----------------------Co-owner sign here---------------

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR EACH PROPOSAL.

1. To approve the Investment Advisory For Against Abstain
Agreement between American General [ ] [ ] [ ]
Asset Management Corp. and the Trust.

4. To approve a New Subadvisory Agreement
with respect to the Core Bond Fund For Against Abstain
between American General Asset Management [ ] [ ] [ ]
Corp. and American General
Investment Management, L.P.

For All With- For All
7. To elect Trustees. Nominees hold Except
(01) Alice T. Kane [ ] [ ] [ ]
(02) Joseph T. Grause, Jr.,
(03) Dr. Judith L. Craven
(04) Dr. Timothy J. Ebner
(05) Judge Gustavo E. Gonzales, Jr.
(06) Dr. John E. Maupin, Jr.
(07) Ben H. Love

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

NORTH AMERICAN FUNDS

PROXY SOLICITED BY THE BOARD OF TRUSTEES
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS ON JUNE 1, 2000

In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Meeting. The Trustees recommend a vote FOR
Proposals 1, 4 and 7.

HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?

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

- --------------------------------------------- ---------------------------------
<PAGE>

[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE

Mark box at right if an address change or comment has been
noted on the reverse side of this card. [_]

CONTROL NUMBER:

----------------------------
Please be sure to sign and date this Proxy. Date
- --------------------------------------------------------------------------------

- --------Shareholder sign here------------------------Co-owner sign here---------

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR EACH PROPOSAL.

For Against Abstain
1. To approve the Investment Advisory Agreement [_] [_] [_]
between American General Asset Management Corp.
and the Trust.

3. To approve a New Subadvisory Agreement with For Against Abstain
respect to the Municipal Bond Fund between [_] [_] [_]
American General Asset Management Corp. and
American General Investment Management, L.P.

RECORD DATE SHARES:

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

NORTH AMERICAN FUNDS

PROXY SOLICITED BY THE BOARD OF TRUSTEES
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS ON JUNE 1, 2000

In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Meeting. The Trustees recommend a vote FOR
Proposals 1, 3 and 7.

HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?

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

- --------------------------------------------------------------------------------
<PAGE>

[x] PLEASE MARK VOTES
AS IN THIS EXAMPLE

Mark box at right if an address change or comment has been noted [_]
on the reverse side of this card.

CONTROL NUMBER:

-------------------------------
Please be sure to sign and date this Proxy. Date
- --------------------------------------------------------------------------------

- ----Shareholder sign here---------------Co-owner sign here----------------------

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR EACH PROPOSAL.

For Against Abstain
1. To approve the Investment Advisory Agreement [_] [_] [_]
between American General Asset Management
Corp. and the Trust.
For Against Abstain
2. To approve a New Subadvisory Agreement with [_] [_] [_]
respect to the Strategic Income Fund between
American General Asset Management Corp. and
American General Investment Management, L.P.

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

NORTH AMERICAN FUNDS

PROXY SOLICITED BY THE BOARD OF TRUSTEES
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS ON JUNE 1, 2000

In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Meeting. The Trustees recommend a vote FOR
Proposals 1, 2 and 7.

HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?

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

- --------------------------------------------------------------------------------
<PAGE>

[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE

- --------------------------------------------------------------------------------
NORTH AMERICAN FUNDS
- --------------------------------------------------------------------------------

Mark box at right if an address change or comment has been noted on the reverse
side of this card. [ ]

CONTROL NUMBER:

-----------------------------
Please be sure to sign and date this Proxy. Date
- --------------------------------------------------------------------------------

- -----Shareholder sign here-----------------Co-owner sign here-------------------

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR EACH PROPOSAL.

1. To approve the Investment Advisory For Against Abstain
Agreement between American General [ ] [ ] [ ]
Asset Management Corp. and the Trust.

RECORD DATE SHARES:
- --------------------------------------------------------------------------------

NORTH AMERICAN FUNDS

PROXY SOLICITED BY THE BOARD OF TRUSTEES
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS ON JUNE 1, 2000

In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Meeting. The Trustees recommend a vote FOR
Proposals 1 and 7.

HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?

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

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