-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, En4WP+kYdaU8VinTQWvh2apZZVRRRO/u0HGHCeNhFyZHblzgzkHtOcL/iphLvqKz LNDCVuKyijTATBOj13pD0w== 0001021408-00-001405.txt : 20000406 0001021408-00-001405.hdr.sgml : 20000406 ACCESSION NUMBER: 0001021408-00-001405 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20000405 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTH AMERICAN FUNDS CENTRAL INDEX KEY: 0000848103 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 485APOS SEC ACT: SEC FILE NUMBER: 033-27958 FILM NUMBER: 594230 FILING VALUES: FORM TYPE: 485APOS SEC ACT: SEC FILE NUMBER: 811-05797 FILM NUMBER: 594231 BUSINESS ADDRESS: STREET 1: CYPRESS TREE INVESTMENTS STREET 2: 286 CONGRESS ST CITY: BOSTON STATE: MA ZIP: 02210 BUSINESS PHONE: 6172104520 MAIL ADDRESS: STREET 1: CYPRESS TREE INVESTMENTS STREET 2: 286 CONGRESS ST CITY: BOSTON STATE: MA ZIP: 02210 FORMER COMPANY: FORMER CONFORMED NAME: NORTH AMERICAN SECURITY TRUST DATE OF NAME CHANGE: 19920703 485APOS 1 NORTH AMERICAN FUNDS - INSTITUTIONAL PROSPECTUS REGISTRATION NOS. 33-27958, 811-5797 As filed with the Securities and Exchange Commission on April 5, 2000 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________ FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X / -- PRE-EFFECTIVE AMENDMENT NO. __ /__/ POST-EFFECTIVE AMENDMENT NO. 33 /X / -- AND/OR REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X / -- AMENDMENT NO. 35 /X / -- NORTH AMERICAN FUNDS (Exact Name of Registrant as Specified in Charter) 286 Congress Street Boston, Massachusetts 02210 (800) 872-8037 (Address of Principal Executive Offices) John I. Fitzgerald, Esq. General Counsel North American Funds 286 Congress Street Boston, MA 02210 (Agent for Service) ____________________ Copy to: Gregory D. Sheehan, Esq. Ropes & Gray One International Place Boston, MA 02110 It is proposed that this filing will become effective (check appropriate box) [ ] immediately upon filing pursuant to paragraph (b) [_] on (date) pursuant to paragraph (b) [x] 60 days after filing pursuant to paragraph (a)(1) [_] on (date) pursuant to paragraph (a)(1) [_] 75 days after filing pursuant to paragraph (a)(2) [_] on (date) pursuant to paragraph (a)(2) of rule 485. If appropriate, check the following box: [_] This post-effective amendment designates a new effective date for a previously filed post-effective amendment. PARTS A AND B OF THIS AMENDMENT RELATE ONLY TO INSTITUTIONAL CLASS I SHARES AND INSTITUTIONAL CLASS II SHARES OF THE FOLLOWING SERIES OF THE REGISTRANT: Institutional Class I and Class II Shares - ----------------------------------------- International Small Cap Fund International Equity Fund Global Equity Fund Small Cap Growth Fund Mid Cap Growth Fund Large Cap Growth Fund Growth & Income Fund Balanced Fund Strategic Income Fund Core Bond Fund U.S. Government Securities Fund Money Market Fund NO INFORMATION RELATING TO ANY OTHER SERIES IS AMENDED, DELETED OR SUPERSEDED BY PARTS A AND B OF THIS AMENDMENT. -2- [GRAPHIC] Prospectus 2000 [NORTH AMERICAN FUNDS] Institutional Class I Shares Institutional CLass II Shares International Small Cap Fund Balanced Fund International Equity Fund Strategic Income Fund Global Equity Fund Core Bond Fund Small Cap Growth Fund U.S. Government Securities Fund Mid Cap Growth Fund Money Market Fund Large Cap Growth Fund Growth & Income Fund The Securities and Exchange Commission has not approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. June __, 2000 [LOGO] Table of Contents Organization of Information This Prospectus includes information about fifteen different Funds. .Section I of the Prospectus includes summaries of each Fund. .Section II includes additional information about the Funds' investment strategies, additional risk information and information about the Funds' management. .Section III of the Prospectus includes information about how to invest and manage your North American Funds account. Section I: Summaries of the Funds............. Page 1 Summary of each Fund .Investment Objective .Principal Investment Strategies .Main Investing Risks .Investment Performance .Descriptions of Main Investment Risks Section II: Other Information about each Page 16 Fund.......................................... .Fees and Expenses .More Information About Investment Strategies and Risks .Other Risks of Investing .Fund Management Section III: Investing in the Funds........... Page 33
This section includes the information you need about how to invest and how to redeem shares. It also includes other important information about sales charges, taxes and account privileges. More Information If you'd like information additional to that included in this Prospectus, the back cover lists a number of places to call or to visit for additional materials. Section I: Fund Summaries North American Funds (the "Trust") is a group of mutual funds that includes twenty-five separate investment portfolios, or Funds. Each Fund also has a specific, unique investment objective. Each Fund has a subadvisor, a firm responsible for making investment decisions for the Fund. This Prospectus includes information about Institutional Class I shares and Institutional Class II shares for twelve of the Funds. The summaries on the next 12 pages describe each Fund's investment objective and principal investment strategies, list the main risks of investing in the Fund, and show the Fund's past investment performance. Explanations of the main risks of investing in each Fund starts on page 14. Below the Funds' descriptions are a chart and a table. The bar chart shows how the investment returns of one class of each Fund's shares have varied in the past ten years, or in the years since the Fund began if it is less than ten years old. The class shown in the bar chart (either Class A shares or Class C shares, depending on the Fund) is not offered by this Prospectus, but the performance would have been substantially similar for Institutional Class I or Institutional Class II shares of the same fund, differing only to the extent that the classes have different expenses. The bar chart does not reflect sales charges; if it did, performance would be less than shown. The table (the Average Annual Total Return Table) following each bar chart shows how that Fund's average annual returns for each class of shares for the last one, five and ten years (or since the Fund began, for newer Funds) compared to returns of a broad-based securities market index. The table reflects sales charges, including the maximum initial sales charge for Class A shares, and the maximum applicable Deferred Sales Charge for Class C shares. Like the bar chart, the Average Annual Total Return Table shows performance information for either Class A shares or Class C shares, depending on the fund, neither of which are offered by this Prospectus. Each Fund's bar chart and Average Annual Total Return Table provides an indica- tion of the historical risk/return of an investment in the Fund. It is important to remember that past performance does not predict future per- formance, and that as with any investment, it is possible for investors to lose money by investing in the Funds. An investment in any of the Funds is not a deposit in a bank and is not insured by the Federal Deposit Insurance Corpora- tion or any other government agency. - ------ 1 International Small Cap Fund Investment Goal and Strategies The investment objective of the International Small Cap Fund is to seek capital appreciation. To achieve this objective, Founders Asset Management, LLC ("Founders"), the Fund's subadvisor, invests primarily in equity securities issued by foreign companies with market capitalizations, or annual revenues, of $1 billion or less. These companies are located in both established and emerging economies throughout the world. Founders selects securities based on its evaluation of their potential to offer capital appreciation opportunities. The Fund may invest in derivatives. Main Investing Risks .Currency Risk .Derivatives Risk .Equity Risk, including the risks associated with investing in smaller compa- nies .Foreign Investment Risk .Liquidity Risk .Management Risk The bar chart and table provide an indication of risk by showing the vari- ability of the Fund's historical returns. [GRAPH] - -------------------------------------------------------------------------------- Average Annual Total Returns as of 12/31/99
Past One Year Life of Fund (since 2/20/96) - ---------------------------------------------- Class A 83.27% 23.09% - ---------------------------------------------- MSCI WORLD 27.93% 13.18% ex-U.S. Index
- -------------------------------------------------------------------------------- ------ 2 International Equity Fund Investment Goal and Strategies The investment objective of the International Equity Fund is to seek long-term capital appreciation. Morgan Stanley Asset Management ("MSAM"), the Fund's subadvisor, pursues this objective by investing primarily in accordance with country and sector weightings determined by MSAM in equity securities of non- U.S. issuers which, in the aggregate, replicate broad market indices. MSAM seeks to maintain a diversified portfolio of international equity securi- ties based on a top-down approach that emphasizes country and sector selection and weighting rather than individual stock selection. MSAM capitalizes on the significance of country and sector selection in international equity portfolio returns by over- and underweighting countries based on three factors: (i) valu- ation, (ii) fundamental change, and (iii) market momentum/technicals. The Fund may use various instruments that derive their values from those of specified securities, indices, currencies or other points of reference for both hedging and non-hedging purposes. Derivatives may include futures, options, forward contracts, swaps, and structured notes. These derivatives, including those used to manage risk, are themselves subject to risks of the different markets in which they trade and, therefore, may not serve their intended pur- poses. Main Investing Risks .Currency Risk .Derivatives Risk .Equity Risk .Foreign Investment Risk .Liquidity Risk .Management Risk The bar chart and table provide an indication of risk by showing the vari- ability of the Fund's historical returns. [GRAPH] - -------------------------------------------------------------------------------- Average Annual Total Returns as of 12/31/99
Past One Year Life of Fund (since 1/9/95) - ------------------------------------------------------ Class A 20.91% 9.55% - ------------------------------------------------------ MSCI All Country World 30.91% 12.38% EX-US Index - ------------------------------------------------------ MSCI EAFE Index 26.96% 12.83%
- -------------------------------------------------------------------------------- - ------ 3 Global Equity Fund Investment Goal and Strategies The investment objective of the Global Equity Fund is long-term capital appreciation. To achieve this objective, Founders Asset Management, LLC ("Founders"), the Fund's subadvisor, invests in a globally diversified portfolio of equity securities. The Fund normally invests at least 65% of total assets in equity securities of growth companies in a variety of markets throughout the world. The Fund may purchase securities in any foreign country, as well as the United States, and emphasizes common stocks of both emerging and established growth companies that generally have proven performance records and strong market positions. The Fund's portfolio will always invest at least 65% of its total assets in three or more countries. The Fund will not invest more than 50% of its total assets in the securities of any one foreign country. The Fund may invest in deriva- tives. Main Investing Risks .Currency Risk .Derivatives Risk .Equity Risk, particularly the risk associated with investments in growth stocks .Foreign Investment Risk .Management Risk The bar chart and table provide an indication of risk by showing the vari- ability of the Fund's historical returns. [GRAPH] - -------------------------------------------------------------------------------- Average Annual Total Returns as of 12/31/99
Past One Year Past Five Years Life of Fund (since 11/1/90) - ----------------------------------------------------------------- Class C 1.33% 9.85% 9.37% - ----------------------------------------------------------------- MSCI WORLD Index 24.93% 19.76% 14.88%
- -------------------------------------------------------------------------------- ------ 4 Small Cap Growth Fund Investment Goal and Strategies The investment objective of the Small Cap Growth Fund is maximum capital appre- ciation. Credit Suisse Asset Management, LLC ("CSAM"), the Fund's subadvisor, pursues this objective by investing primarily in equity securities of U.S. com- panies. The focus of the Fund is emerging growth companies, which often are small or medium-size companies with growth characteristics such as positive earnings and potential for accelerated growth. The Fund may also invest in high-quality bonds, and, to a certain extent, in foreign securities. The Fund may invest in derivatives. The Fund is not "diversified," which means that it may invest in a relatively small number of issuers of securities, and its value may be affected very significantly by the change in value of a single security. Main Investing Risks .Concentration Risk .Credit Risk .Currency Risk .Derivatives Risk .Equity Risk, particularly the risks associated with investing in smaller com- panies .Interest Rate Risk .Liquidity Risk .Foreign Investment Risk .Management Risk The bar chart and table provide an indication of risk by showing the variability of the Fund's historical returns. [GRAPH] - -------------------------------------------------------------------------------- Average Annual Total Returns as of 12/31/99
Past One Year Life of Fund (since 1/6/98) - --------------------------------------------------- Class A 63.18% 28.58% - --------------------------------------------------- Russell 2000 Growth 43.09% 20.35%
- -------------------------------------------------------------------------------- - ------ 5 Mid Cap Growth Fund Investment Goal and Strategies The investment objective of the Mid Cap Growth Fund is to seek long term capi- tal appreciation. INVESCO Funds Group, Inc. ("INVESCO"), the Fund's subadvisor, invests primarily in common stocks of mid-sized companies--those with market capitalizations ranging from approximately $2 billion to $15 billion at the time of purchase--but also has the flexibility to invest in other types of securities including preferred stocks, convertible securities and bonds. The core of the Fund's portfolio will be invested in securities of established com- panies that are leaders in attractive growth markets with a history of strong returns. The remainder of the portfolio will be invested in securities of com- panies that show accelerating growth, driven by product cycles, favorable industry or sector conditions and other factors that the subadviser believes will lead to rapid sales or earnings growth. The Fund's strategy relies on many short-term factors including current information about a company, investor interest, price movements of a company's securities and general market and monetary conditions. Consequently, the Fund's investments will usually be bought and sold frequent- ly. The Fund may invest in derivatives. Main Investing Risks .Credit Risk .Currency Risk .Derivatives Risk .Equity Risk, including the risks associated with investing in smaller compa- nies .Foreign Investment Risk .Interest Rate Risk .Liquidity Risk .Management Risk The bar chart and table provide an indication of risk by showing the variability of the Fund's historical returns. [GRAPH] - -------------------------------------------------------------------------------- Average Annual Total Returns as of 12/31/99
Past One Year Life of Fund (since 3/4/96) - -------------------------------------------------- Class A 24.60% 19.33% - -------------------------------------------------- S&P MidCap 14.72% 20.64% 400 Index - -------------------------------------------------- Russell 2000 Index 21.26% 13.70%
- -------------------------------------------------------------------------------- ------ 6 Large Cap Growth Fund Investment Goal and Strategies The investment objective of the Large Cap Growth Fund is to seek long-term cap- ital growth. To achieve this goal, Founders Asset Management LLC ("Founders"), the Fund's subadvisor, invests at least 65% of the Fund's total assets in the common stocks of well-established, high-quality growth companies whose earnings are expected by Founders to increase faster than the market average. The Fund may invest in other types of equity securities that offer opportuni- ties for capital appreciation. The Fund may also invest in high-quality bonds. The Fund may invest up to 100% of its total assets in American Depositary Receipts (ADRs) and up to 30% of its total assets in foreign securities (other than ADRs). The Fund may not invest more than 25% of its total assets in any one foreign country. The Fund may invest in derivatives. Main Investing Risks .Credit Risk .Currency Risk .Derivatives Risk .Equity Risk, including the particular risks associated with growth stocks .Foreign Investment Risk .Interest Rate Risk .Management Risk The bar chart and table provide an indication of risk by showing the vari- ability of the Fund's historical returns. [GRAPH] - -------------------------------------------------------------------------------- Average Annual Total Returns as of 12/31/99
Past One Year Life of Fund (since 3/4/96) - --------------------------------------- Class A 30.42% 24.39% - --------------------------------------- S&P 500 21.04% 26.26% Index
- -------------------------------------------------------------------------------- - ------ 7 Growth & Income Fund Investment Goal and Strategies The investment objective of the Growth & Income Fund is to provide long-term growth of capital and income consistent with prudent investment risk. Wellington Management Company, LLP ("Wellington"), the Fund's subadvisor, pursues this objective by investing mostly in a diversified portfolio of common stocks of U.S. issuers that Wellington believes are of high quality. The Fund will typically invest in dividend-paying stocks of larger companies. The Fund may invest up to 20% of its total assets in foreign securities. To select stocks for the Fund, Wellington assesses a company and its business environment, management, balance sheet, income statement, anticipated earnings and dividends, and other related measures of fundamental value. Wellington will also monitor and evaluate the economic and political climate and the principal securities markets of the country in which each company is located. The Fund may invest in derivatives. Main Investing Risks .Derivatives Risk .Equity Risk, including particular risks associated with value stocks .Foreign Investment Risk .Management Risk The bar chart and table provide an indication of risk by showing the vari- ability of the Fund's historical returns. [GRAPH] - -------------------------------------------------------------------------------- Average Annual Total Returns as of 12/31/99
Past One Year Past Five Years Life of Fund (since 5/1/91) - ------------------------------------------------------------- Class C 15.74% 24.18% 17.17% - ------------------------------------------------------------- S&P 500 Index 21.04% 28.54% 19.80%
- -------------------------------------------------------------------------------- ------- 8 Balanced Fund Investment Goal and Strategies The investment objective of the Balanced Fund is current income and capital appreciation. To achieve this goal, INVESCO Funds Group, Inc. ("INVESCO"), the Fund's subadvisor, invests in a combination of common stocks and fixed-income securities, including preferred stocks, convertible securities and bonds. the Fund normally invests the majority of its total assets in common stocks and approximately one-quarter of its assets in investment grade debt securities. The portion of the Fund's portfolio invested in equity securities emphasizes companies INVESCO believes to have better-than-average earnings growth poten- tial, as well as companies within industries that INVESCO believes are well-positioned for the current and expected economic climate. Since current income is a component of total return, INVESCO also considers companies' dividend payout records. Most of these hold- ings are traded on national stock exchanges or in the over-the-counter market. The Fund may also take positions in securities traded on regional or foreign exchanges. A portion of the Fund's portfolio invested in debt securities may include obligations of the US. government, government agencies, and investment grade corporate bonds. Obligations issued by U.S. government agencies may include some supported only by the credit of the issuing agency rather than by the full faith and credit of the U.S. government. The Fund may hold securities of any maturity, with the average maturity of the portfolio varying depending upon economic and market conditions. The Fund may invest in derivatives. Main Investing Risks .Credit Risk .Currency Risk .Derivatives Risk .Equity Risk .Foreign Investment Risk .Interest Rate Risk .Management Risk The bar chart and table provide an indication of risk by showing the vari- ability of the Fund's historical returns. [GRAPH] - -------------------------------------------------------------------------------- Average Annual Total Returns as of 12/31/99
Past One Year Past Five Years Life of Fund (since 8/29/89) - ---------------------------------------------------------------- Class C -4.74% 11.49% 9.99% - ---------------------------------------------------------------- S&P 500 Index 21.04% 28.54% 21.24% - ---------------------------------------------------------------- Lehman Brothers -0.83% 7.73% 6.62% Aggregate Bond Index
- -------------------------------------------------------------------------------- - ------- 9 Strategic Income Fund Investment Goal and Strategies The investment objective of the Strategic Income Fund is to seek a high level of total return consistent with preservation of capital. To achieve this goal, American General Investment Management, L.P. ("AGIM"), the Fund's subadvisor, invests at least 65% of the Fund's total assets in a broad range of fixed- income securities, including investment grade bonds (rated Baa or higher by Moody's and BBB or higher by S&P), U.S. Government and agency obligations, mortgage- backed securities, and U.S., Canadian, and foreign high-risk, high-yield bonds (rated C or higher by Moody's and CC or higher by S&P, or comparable unrated securities). Up to 25% of the Fund's total assets will be invested in foreign emerging market debt, and up to an additional 25% in non-U.S. dollar bonds. The Fund may invest up to 20% of total assets in equity securities, such as common and preferred stocks, convertible securities, and warrants. The Fund may invest in asset-backed securities, foreign currency, futures and options, illiquid securities (limited to 15% of the Fund's assets), investment companies, loan participations, money market securities, mortgage- related securities, real estate securities, repurchase agreements, reverse repurchase agreements, dollar rolls, structured securities, swaps, variable amount master demand notes, variable rate demand notes, and when-issued securities. The Fund may invest in derivatives. Main Investing Risks .Credit Risk, including the particular risks associated with junk bonds .Currency Risk .Derivatives Risk .Foreign Investment Risk .Interest Rate Risk .Management Risk The bar chart and table provide an indication of risk by showing the vari- ability of the Fund's historical returns. [GRAPH] - -------------------------------------------------------------------------------- Average Annual Total Returns as of 12/31/99
Past One Year Past Five Years Life of Fund (Since 11/1/93) - --------------------------------------------------------------------- Class A -4.47% 7.73% 5.22% - --------------------------------------------------------------------- Lehman Brothers -0.83% 7.73% 5.66% Aggregate Bond Index
- -------------------------------------------------------------------------------- ------- 10 Core Bond Fund Investment Goal and Strategies The investment objective of the Core Bond Fund is to provide a high level of current income consistent with the maintenance of principal and liquidity. American General Investment Management, L.P. ("AGIM") is subadvisor. The Fund invests in a combination of common stocks and fixed-income securities, including preferred stocks, convertible securities and bonds. The Fund normally invests the majority of its total assets in common stocks and approximately one-quarter of its assets in investment grade debt securities. The portion of the Fund's portfolio invested in equity securities emphasizes companies AGIM believes to have better-than-average earnings growth potential, as well as companies within industries that AGIM believes are well-positioned for the current and expected economic climate. Since current income is a component of total return, AGIM also considers companies' dividend payout records. Most of these holdings are traded on national stock exchanges or in the over-the- counter market. The Fund may also take positions in securities traded on regional or foreign exchanges. A portion of the Fund's portfolio invested in debt securities may include obligations of the U.S. government, government agencies, and investment grade corporate bonds. Obligations issued by U.S. government agencies may include some supported only by the credit of the issuing agency rather than by the full faith and credit of the U.S. government. The Fund may hold securities of any maturity, with the average maturity of the portfolio varying depending upon economic and market conditions. The Fund may invest in derivatives. Main Investing Risks .Credit Risk, including the particular risks associated with junk bonds .Currency Risk .Derivatives Risk .Foreign Investment Risk .Interest Rate Risk .Liquidity Risk .Management Risk The bar chart and table provide an indication of risk by showing the vari- ability of the Fund's historical returns. [GRAPH] - -------------------------------------------------------------------------------- Average Annual Total Returns as of 12/31/99
Past One Year Past Five Years Life of Fund (since 5/1/91) - --------------------------------------------------------------- Class A -8.15% 5.56% 5.89% - --------------------------------------------------------------- 100% Lehman -1.94% 8.16% 7.38% Brothers Corporate - --------------------------------------------------------------- 50% Lehman -2.10% 7.80% 7.61% Brothers Corporate 50% Lehman Brothers Government
- -------------------------------------------------------------------------------- - ------- 11 U.S. Government Securities Fund Investment Goal and Strategies The investment objective of the U.S. Government Securities Fund is to obtain a high level of current income consistent with preservation of capital and main- tenance of liquidity. American General Investment Management, L.P. ("AGIM"), the Fund's subadvisor, pursues this objective by emphasizing investments in debt obligations and mortgage-backed securities issued or guaranteed by the U.S. Government or its agencies, and in derivative investments relating to such securities. Main Investing Risks .Credit Risk .Derivatives Risk .Interest Rate Risk .Management Risk The bar chart and table provide an indication of risk by showing the vari- ability of the Fund's historical returns. [GRAPH] - -------------------------------------------------------------------------------- Average Annual Total Returns as of 12/31/99
Past One Year Past Five Years Life of Fund (since 8/28/89) - ------------------------------------------------------------------------ Class A -6.66% 5.03% 5.98% - ------------------------------------------------------------------------ Merrill Lynch 1-10 year 0.55% 6.9% 7.28% Government Index
- -------------------------------------------------------------------------------- ------- 12 Money Market Fund Investment Goal and Strategies The investment objective of the Money Market Fund is to obtain maximum current income consistent with preservation of principal and liquidity. American General Investment Management, L.P. ("AGIM") is, the Fund's subadvisor. The Fund invests in short-term money market securities to provide you with liquidity, protection of your investment and current income. In accordance with Rule 2a-7 of the Investment Company Act, such securities must mature in 13 months or less and the Fund must have a dollar-weighted average portfolio maturity of 90 days or less. The investments of the Fund may include securities issued or guaranteed by the U.S. Government (and its agencies or instrumentalities), certificates of deposit and other obligations of domestic banks that have total assets in excess of $1 billion, commercial paper sold by corporations and finance companies, corporate debt obligations with remaining maturities of 13 months or less, repurchase agreements, money market instruments of foreign issuers payable in U.S. dollars (limited to no more than 20% of the fund's net assets), asset-backed securities, loan participations, adjustable rate securities, Variable Rate Demand Notes, illiquid and restricted securities (limited to 10% of the Fund's net assets at all times), and Rule 144A securities. The Fund may invest in investment companies, real estate securities, and reverse repurchase agreements. Main Investing Risks .Interest Rate Risk .Management Risk .An investment in the Money Market Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or by any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. The bar chart and table provide an indication of risk by showing the vari- ability of the Fund's historical returns. [GRAPH] - -------------------------------------------------------------------------------- Average Annual Total Returns as of 12/31/99
Past One Year Life of Fund (since 8/28/89) - ---------------------------------------- Class A 4.62% 4.80%
- -------------------------------------------------------------------------------- - ------- 13 Descriptions of Main Investing Risks The value of your investment in a Fund can change for many reasons, and may decrease. The primary reasons for possible decreases in a Fund's value are called "Main Investing Risks," and are explained in this section. Because the types of investments a Fund may change over time, the types of risks affecting the Fund will change as well. Section II of the Prospectus includes more information about other risks that might affect the Funds' values. Concentration Risk Investment professionals believe that investment risk can be reduced through diversification, which is simply the practice of choosing more than one type of investment. On the other hand, concentrating investments in a smaller number of securities increases risk. Credit Risk Credit risk is the risk that the issuer or the guarantor (the entity that agrees to pay the debt if the issuer cannot) of a debt or fixed income security, or the counterparty to a derivatives contract or a securities loan, will not repay the principal and interest owed to the investors or otherwise honor its obligations. There are different levels of credit risk. Funds that invest in lower-rated securities have higher levels of credit risk. Lower-rated or unrated securities of equivalent quality (generally known as junk bonds) have very high levels of credit risk. Securities that are highly rated have lower levels of credit risk. Funds may be subject to greater credit risk because they may invest in debt securities issued in connection with corporate restructurings by highly leveraged (indebted) issuers and in debt securities not current in the payment of interest or principal, or in default. Funds that invest in foreign securities are also subject to increased credit risk because of the difficulties of requiring foreign entities, including issuers of sovereign (national) debt, to honor their contractual commitments, and because a number of foreign governments and other issuers are already in default. Currency Risk Funds that invest in securities that are denominated in and/or are receiving revenues in foreign currencies are subject to currency risk. Currency risk is the risk that foreign currencies will decline in value relative to the U.S. dollar. In the case of hedging positions, it is the risk that the U.S. dollar will decline in value relative to the currency hedged. Derivatives Risk Derivatives are financial contracts between two parties whose value depends on, or is derived from, the change in value of an underlying asset, reference rate or index. When the value of the underlying security or index changes, the value of the derivative changes as well. As a result, derivatives can lose all of their value very quickly. Derivatives also offer the opportunity for great increases in value. Because derivatives are contracts between parties, there is also some credit risk associated with using derivatives. Additional risks associated with derivatives include mispricing and improper valuation. Deriva- tives risk for some Funds will be increased by their investments in structured securities. Equity Risk Equity securities, such as a company's common stock, may fall in value in response to factors relating to the issuer, such as management decisions or falling demand for a company's goods or services. Additionally, factors affecting a company's particular industry, such as increased production costs, may affect the value of its equity securities. Equity securities also rise and fall in value as a result of factors affecting entire financial markets, such as political or economic developments, or changes in investor psychology. ------- 14 Growth stocks are the stocks of companies that have earnings that are expected to grow relatively rapidly. As a result, the values of growth stocks may be more sensitive to changes in current or expected earnings than the values of other stocks. Value stocks are the stocks of companies that are not expected to experience significant earnings growth, but that are undervalued, or are inexpensive rela- tive to the value of the company and its business as a whole. These companies may have experienced recent troubles that have caused their stocks to be out of favor with investors. If the market does not recognize the value of the company over time, the price of its stock may fall, or simply may not increase as expected. Market capitalization refers to the total value of a company's outstanding stock. Smaller companies with market capitalizations of less than $1 billion or so are more likely than larger companies to have limited product lines, smaller markets for their products and services, and they may depend on a small or inexperienced management group. Small company stocks may not trade very active- ly, and their prices may fluctuate more than stocks of larger companies. Stocks of smaller companies may be more vulnerable to negative changes than stocks of larger companies. Foreign Investment Risk Funds investing in foreign securities may experience rapid changes in value. One reason for this volatility is that the securities markets of many foreign countries are relatively small, with a limited number of companies representing a small number of industries. Also, foreign securities issuers are usually not subject to the same degree of regulation as U.S. issuers. Reporting, accounting and auditing standards of foreign countries differ, in some cases significant- ly, from U.S. standards. The possibility of political instability or diplomatic developments in foreign countries could trigger nationalization of companies and industries, expropria- tion (confiscation of property), extremely high levels of taxation, and other negative developments. In the event of nationalization, expropriation or other confiscation, a Fund could lose its entire investment. Funds that invest in sovereign debt obligations are exposed to the risks of political, social and economic change in the countries that issued the bonds. Interest Rate Risk (Market Risk) Interest rate risk, or market risk, is the risk that a change in interest rates will negatively affect the value of a security. This risk applies primarily to debt securities such as bonds, notes and asset backed securities. Debt securi- ties are obligations of the issuer to make payments of principal and/ or inter- est on future dates. As interest rates rise, an investment in a Fund can lose value, because the value of the securities the Fund holds may fall. Market risk is generally greater for Funds that invest in debt securities with longer maturities. This risk may be increased for Funds that invest in mort- gage-backed or other types of asset-backed securities that are often prepaid. Even Funds that invest in the highest quality debt securities are subject to interest rate risk. Liquidity Risk Liquidity risk is the risk that a Fund will not be able to sell a security because there are too few people who actively buy and sell, or trade, that security on a regular basis. A Fund holding an illiquid security may not be able to sell the security at a fair price. Liquidity risk increases for Funds investing in derivatives, foreign investments or restricted securities. Management Risk Management risk is the risk that the subadvisor of a Fund, despite using vari- ous investment and risk analysis techniques, may not produce the desired investment results. - ------- 15 Section II: Fees and Expenses of the North American Funds--Institutional Class I Shares and Institutional Class II Shares* This table describes the fees and expenses that you may pay if you invest in the Funds. * Institutional Class II Shares are offered only by the Core Bond Fund. Shareholder Fees (fees paid directly from your investment)
Institutional Institutional Class I Class II - ------------------------------------------------------------------------------ Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) None None Maximum Deferred Sales Charge (as a percentage of original purchase price or redemption price, whichever is lower) None None Annual Fund Operating Expenses (expenses that are deducted from fund assets) Institutional Institutional Fund Class I Class II - ------------------------------------------------------------------------------ International Small Cap Fund Management Fees 1.05 Other Expenses 1.02 Total Annual Fund Operating Expenses 2.07 - ------------------------------------------------------------------------------ International Equity Fund Management Fees .90 Other Expenses .91 Total Annual Fund Operating Expenses 1.81 - ------------------------------------------------------------------------------ Global Equity Fund Management Fees .88 Other Expenses .78 Total Annual Fund Operating Expenses 1.66 - ------------------------------------------------------------------------------ Small Cap Growth Fund Management Fees .95 Other Expenses .84 Total Annual Fund Operating Expenses 1.79 - ------------------------------------------------------------------------------
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Institutional Institutional Fund Class I Class II - ----------------------------------------------------------------- Mid Cap Growth Fund Management Fees .93 Other Expenses .79 Total Annual Fund Operating Expenses 1.72 - ----------------------------------------------------------------- Large Cap Growth Fund Management Fees .90 Other Expenses .82 Total Annual Fund Operating Expenses 1.72 - ----------------------------------------------------------------- Growth & Income Fund Management Fees .73 Other Expenses .56 Total Annual Fund Operating Expenses 1.29 - ----------------------------------------------------------------- Balanced Fund Management Fees .78 Other Expenses .65 Total Annual Fund Operating Expenses 1.43 - -----------------------------------------------------------------
- ------- 17
Institutional Institutional Fund Class I Class II - ----------------------------------------------------------------- Strategic Income Fund Management Fees .75 Other Expenses .75 Total Annual Fund Operating Expenses 1.50 - ----------------------------------------------------------------- Core Bond Fund Management Fees .60 .60 Other Expenses .69 .44 Total Annual Fund Operating Expenses 1.29 1.04 - ----------------------------------------------------------------- U.S. Government Securities Fund Management Fees .60 Other Expenses .69 Total Annual Fund Operating Expenses 1.29 - ----------------------------------------------------------------- Money Market Fund Management Fees .20 Other Expenses .97 Total Annual Fund Operating Expenses 1.17
- -------------------------------------------------------------------------------- Fund fees and expenses are currently being voluntarily waived and/or reimbursed by AGAM such that the Funds have the following net total annual operating expenses:
Institutional Institutional Class I Class II - ------------------------------------------------------------ International Small Cap Fund 1.95 - ------------------------------------------------------------ International Equity Fund 1.80 - ------------------------------------------------------------ Global Equity Fund 1.65 - ------------------------------------------------------------ Small Cap Growth Fund 1.72 - ------------------------------------------------------------ Mid Cap Growth Fund 1.68 - ------------------------------------------------------------ Large Cap Growth Fund 1.67 - ------------------------------------------------------------ Growth & Income Fund N/A - ------------------------------------------------------------ Balanced Fund 1.41 - ------------------------------------------------------------ Strategic Income Fund 1.45 - ------------------------------------------------------------ Core Bond Fund 1.20 .95 - ------------------------------------------------------------ U.S. Government Securities Fund 1.15 - ------------------------------------------------------------ Money Market Fund .95 - ------------------------------------------------------------
------- 18 By translating "Total Annual Fund Operating Expenses" into dollar amounts, these examples help you compare the costs of investing in a particular Fund, or a particular class of shares, with the costs of investing in other mutual funds. The examples assume that you: . Invest $10,000 in a Fund for the time period indicated and then redeem all of your shares at the end of those periods. . Your investment earns a 5% return each year and that each Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
Fund 1 Year 3 Years 5 Years 10 Years - ---------------------------------------------------------------- International Small Cap Fund Institutional Class I Shares 210 649 1,114 2,400 - ---------------------------------------------------------------- International Equity Fund Institutional Class I Shares 184 569 980 2,127 - ---------------------------------------------------------------- Global Equity Fund Institutional Class I Shares 169 523 902 1,965 - ---------------------------------------------------------------- Small Cap Growth Fund Institutional Class I Shares 182 563 970 2,105 - ---------------------------------------------------------------- Mid Cap Growth Fund Institutional Class I Shares 175 542 933 2,030 - ---------------------------------------------------------------- Large Cap Growth Fund Institutional Class I Shares 175 542 933 2,030 - ---------------------------------------------------------------- Growth & Income Fund Institutional Class I Shares 131 409 708 1,556 - ---------------------------------------------------------------- Balanced Fund Institutional Class I Shares 146 452 782 1,713 - ---------------------------------------------------------------- Strategic Income Fund Institutional Class I Shares 153 474 818 1,791 - ---------------------------------------------------------------- Core Bond Fund Institutional Class I Shares 131 409 708 1,556 Institutional Class II Shares 106 331 574 1,271 - ---------------------------------------------------------------- U.S. Government Securities Fund Institutional Class I Shares 131 409 708 1,556 - ---------------------------------------------------------------- Money Market Fund Institutional Class I Shares 119 372 644 1,420 - ----------------------------------------------------------------
- ------- 19 More Information About Investment Strategies and Risks This Prospectus does not attempt to disclose all of the different investment techniques that the Funds might use, or all of the types of securities in which the Funds might invest. As with any mutual fund, investors must rely on the professional judgment and skill of the Funds' management. A subadvisor may choose not to use some or all of the investment techniques available to a Fund, and these choices may cause the Fund to lose money or not achieve its goal. Each Fund has a unique investment goal (see the Fund Summaries) that it tries to achieve through its investment strategies. The investment goals, or objec- tives, of the Funds cannot be changed without the approval of the holders of a majority of the outstanding shares of each Fund. However, except for certain investment restrictions, the strategies a Fund uses to achieve its investment objective may be changed by the Trustees without approval of the shareholders. Because each Fund is different, they have different investment policies and risks, and will also have different returns over time. This section provides additional information about the Funds, and should be read in conjunction with the Fund Summaries. International Small Cap Fund The Fund may invest without limit in American Depositary Receipts and American Depositary Shares (collectively, "ADRs"). ADRs are receipts representing shares of a foreign corporation held by a U.S. bank that entitle the holder to all dividends and capital gains on the underlying foreign shares. ADRs are denominated in U.S. dollars and trade in the U.S. securities markets. The Fund may invest a significant portion of its assets in the securities of small companies. Small companies are still in the developing stages of their life cycles and may have limited product lines, markets or financial resources and/or lack management depth. The securities of small companies may have lim- ited marketability and may experience more abrupt or erratic movements in price than securities of larger companies or the market averages in general. Because of this, the net asset value of the International Small Cap Fund may fluctuate more widely than popular market averages. The Fund may also invest in convertible securities, preferred stocks, bonds, debentures and other corporate obligations when Founders believes that these investments offer opportunities for capital appreciation. The Fund may invest in investment-grade bonds, debt securities and corporate obligations. For purposes of this Fund, investment grade securities are those rated Baa or higher by Moody's, or BBB or higher by S&P. The Fund may choose to invest in lower-rated convertible securities and preferred stocks (securities rated Ba or lower by Moody's and BB or lower by S&P). The Fund may also invest in unrated convertible securities and preferred stocks if Founders believes they are equivalent in quality to the rated securities that the Fund may buy. The Fund will not invest more than 5% of its total assets in unrated or below investment-grade fixed-income securities, with the exception of preferred stocks. If the Fund holds securities that are downgraded to below investment grade after they are purchased, the Fund does not have to sell them unless the Fund's investments in unrated and below investment grade securities are equal to or greater than 5% of total fund assets. Since the Fund's assets will be invested primarily in foreign securities and since substantially all of the Fund's revenues will be received in foreign cur- rencies, the Fund's net asset values will be affected by changes in currency exchange rates. The Fund will pay dividends in dollars and will incur currency conversion costs. ------- 20 International Equity Fund MSAM's Active International Allocation team analyzes both the global economic environment and the economies of the industrialized countries comprising the MSCI Europe, Australasia, Far East (EAFE) Index. EAFE countries include Japan, most nations in Western Europe, Australia, New Zealand, Hong Kong and Singa- pore. MSAM views each country and sector as unique investment opportunities and evaluates prospects for value, growth, inflation, interest rates, corporate earnings, liquidity and risk characteristics, investor sentiment and currency outlook. After determining to invest in a country or sector, MSAM establishes overweight, underweight or neutral positions relative to the broad market index for that country or sector. Within the countries or sectors selected for investment, MSAM purchases optimized baskets of equity securities designed to track the local market index. The Fund does not invest in securities of U.S. issuers. MSAM considers an issuer to be from a particular country if: (i) its principal securities trading market is in that country; (ii) alone or on a con- solidated basis it derives 50% or more of its annual revenue from either goods produced, sales made or services performed in that country; or (iii) it is organized under the laws of, and has a principal office in, that country. The Fund will limit its use of derivatives for non-hedging purposes to 33 1/3% of its total assets measured by the aggregate notional amount of outstanding derivatives. While the use of derivatives may be advantageous to the Fund, if MSAM is not successful in employing them, the Fund's performance may be worse than if it did not make such investments. The Fund may invest in emerging market countries and, with regard to such investments, make global and regional allocations to emerging markets, as well as allocations to specific emerging market countries. Emerging market countries are countries that major international financial institutions, such as the World Bank, generally consider to be less economically mature than developed nations, such as the United States or most nations in Western Europe. Emerging market countries can include every nation in the world except the United States, Canada, Japan, Australia, New Zealand and most countries located in Western Europe. Emerging market countries may be more likely to experience political turmoil or rapid changes in economic conditions than more developed countries, and the financial condition of issuers in emerging market countries may be more precarious than in other countries. The characteristics result in greater risk of price volatility in emerging market countries, which may be heightened by currency fluctuations relative to the U.S. dollar. Global Equity Fund The Fund invests primarily in equity securities of issuers throughout the world, including issuers in the U.S. and emerging market countries. The Fund may also invest in money market instruments. Although the Fund intends to invest primarily in securities listed on stock exchanges, it will also invest in equity securities that are traded over-the-counter or that are not admitted to listing on a stock exchange or dealt in on a regulated market. Pri- vately traded securities may have additional liquidity risks. The Fund may also engage in forward foreign currency transactions and purchase when-issued or delayed delivery securities. - ------- 21 Small Cap Growth Fund The Fund will usually invest at least 65% of its total assets in common stocks or warrants of emerging growth companies that represent attractive opportuni- ties for maximum capital appreciation. Emerging growth companies are small- or medium-sized companies beyond their start-up phase showing positive earnings or the potential for accelerated earnings growth. Although the Fund will typically invest in smaller companies, the Fund may invest in emerging growth companies of any size. Emerging growth companies gen- erally benefit from new products or services, technological developments, changes in management or other factors. The Fund may also invest in companies experiencing unusual developments affecting their market value, called "special situation" companies. These companies may be involved in acquisitions or con- solidations, reorganization, recapitalization, mergers, liquidation, or distri- bution of cash, securities or other assets, tender or exchange offers, a breakup or workout of a holding company, lawsuits which, if resolved favorably, would improve the value of the company's stock, or a change in corporate con- trol. The Fund may invest up to 20% of its total assets in investment grade debt securities (other than money market obligations) and preferred stocks that are not convertible into common stock. The Fund may also invest up to 20% of its total assets in the securities of foreign issuers, which have certain risks associated with them. The Fund's status is non-diversified , although its port- folio managers have typically diversified the Fund's investments. The interest income to be derived may be considered as one factor in selecting debt securities for investment. Because the market value of debt obligations can be expected to vary inversely with changes in prevailing interest rates, investing in debt obligations may provide an opportunity for capital apprecia- tion when interest rates are expected to decline. The success of such a strat- egy is dependent upon the manager's ability to accurately forecast changes in interest rates. A security will be considered investment grade if it is rated within the four highest grades by Moody's or S&P or, if unrated, is determined by the manager to be of comparable quality. Bonds rated in the fourth highest grade may have speculative characteristics. If a security held by the Fund is no longer rated, or is rated below the Fund's minimum allowed rating, the manager factors this information into the decision about whether the Fund should continue to hold the securities. The Fund can normally invest up to 20% of its total assets in domestic and foreign short-term money market obligations. Investing in securities of emerging growth and small-sized companies can involve greater risks because these securities may have limited marketability. Because small and medium-sized companies normally have fewer shares outstanding than larger companies, it may be more difficult for the Fund to buy or sell large numbers of shares without affecting current prices. Small- and medium- sized companies are typically subject to a greater degree of changes in earn- ings and business prospects than are larger, more established companies. There is typically less publicly available information concerning small- and medium- sized companies than for larger, more established ones. And companies with small market capitalizations may also be dependent upon a single proprietary product or market niche, may have limited product lines, markets or financial resources, or may depend on a limited management group. ------- 22 Mid Cap Growth Fund The Fund invests in equity securities, including common and preferred stocks, and securities that can be converted into or exchanged for equity securities, including warrants and rights. The Fund will typically invest in companies whose securities are traded on domestic stock exchanges or in the over-the- counter market. To give the Fund the flexibility to take advantage of new opportunities that can help to meet the Fund's investment objectives, the Fund can invest up to 15% of its net assets in money market instruments, bank and thrift obligations, obligations issued or guaranteed by the U.S. Government or by its agencies or instrumentalities, foreign bank obligations and obligations of foreign branches of domestic banks, variable rate master demand notes and repurchase agreements. The Fund may invest up to 20% of its total assets in foreign securities and will be subject to certain risks as a result of these investments. The Fund may also purchase American Depositary Receipts ("ADRs") or U.S. dollar-denominated securities of foreign issuers that are not included in the 20% foreign securi- ties limitation. Large Cap Growth Fund At least 65% of the Fund's total assets will be invested in common stocks of well-established, high-quality growth companies. The Fund may also invest in convertible securities, preferred stocks, debentures and other corporate obli- gations when Founders believes that these investments offer opportunities for capital appreciation. Although these securities may produce current income, income will not be a substantial factor in selecting these securities. The Fund may invest in investment grade bonds, debentures and corporate obliga- tions rated Baa or higher by Moody's or BBB or higher by S&P. The Fund may choose to invest in lower-rated (Ba or lower by Moody's and BB or lower by S&P) convertible and preferred stocks but not rated below B. The Fund may also invest in unrated convertible securities and preferred stocks if Founders believes that they are equivalent in quality to the rated securities the Fund may buy. The Fund will never have more than 5% of its total assets invested in unrated or below-investment-grade fixed income securities, with the exception of pre- ferred stocks. If the Fund holds securities that are downgraded after they are purchased, the Fund does not have to sell them unless the Fund assets in unrated and blow investment-grade securities reaches 5% of total assets. The Fund is also permitted to use forward foreign currency contracts and futures contracts. The Fund may also purchase and/or write options on securi- ties and on indices, and may invest in Rule 144A securities. - ------- 23 Growth & Income Fund Wellington Management seeks to achieve the Fund's objective by investing pri- marily in a diversified portfolio of common stocks of U.S. issuers which Wel- lington Management believes are of high quality. Wellington Management believes that high quality companies are evidenced by a leadership position within an industry, a strong or improving balance sheet, relatively high return on equi- ty, steady or increasing dividend payout, and strong management skills. The Fund's investments will emphasize primarily dividend paying stocks of larger companies. The Fund may invest in securities that can be converted into, or that include the right to buy common stocks, including convertible securities issued in the Euromarket and preferred stocks. The Fund may also invest in mar- ketable debt securities of domestic issuers and of foreign issuers (payable in U.S. dollars) rated at the time of purchase "A" or better by Moody's or S&P, or unrated securities considered to be of equivalent quality in Wellington Manage- ment's judgment. Under normal market conditions, the subadvisor expects that the Fund's portfolio will consist primarily of equity securities. Balanced Fund The Fund may invest in convertible securities, preferred stocks, bonds, deben- tures, and other corporate obligations when Founders believes that these investments offer opportunities for capital appreciation. Current income is also a factor in the selection of these securities. The Fund may invest without limit in ADRs and up to 30% of its total assets in foreign securities (other than ADRs). The Fund will not invest more than 25% of its total assets in the securities of any one foreign country. The Fund will be subject to special risks as a result of its ability to invest up to 30% of its total assets in foreign securities, excluding ADRs. Strategic Income Fund The Fund may invest in debt obligations issued or guaranteed by a foreign sov- ereign government or one of its agencies or political subdivisions, and debt obligations issued or guaranteed by international organizations designated or supported by governmental entities to promote economic reconstruction or devel- opment and international banking institutions and related government agencies. Examples include the International Bank for Reconstruction and Development (the "World Bank"), the European Coal and Steel Community, the Asian Development Bank and the Inter-American Development Bank. These securities may be denomi- nated in multi-national currency units. The purpose of investing a portion of the Fund's assets in below investment grade, mortgage, and international debt securities, is to provide investors with a higher yield than a high-quality domestic corporate bond fund, and with less risk than a fund that invests principally in below investment grade secu- rities. Some of the debt securities the Fund may select may be considered com- parable to securities having, the lowest ratings for non-subordinated debt instruments assigned by Moody's or S&P (i.e., rated C by Moody's or CCC or lower by S&P). ------- 24 Core Bond Fund Credit research on corporate bonds includes examining both quantitative (mathe- matical) and qualitative criteria established by AGIM. These criteria include an issuer's industry, operating and financial profiles, business strategy, man- agement quality, and projected financial and business conditions. At least 65% of the Fund's assets will be invested in high quality debt securi- ties. "High quality" debt securities are those rated (at the time of purchase) "A" or better by Moody's or S&P (in the three highest rating tiers), or unrated debt securities considered to be of comparable quality by AGIM. The Fund may only invest up to 20% of its total assets in debt securities rated below "Baa" by Moody's or "BBB" by S&P, or unrated debt securities considered to be of com- parable quality by AGIM. The Fund will not be required to sell any downgraded bonds that cause the Fund to exceed this 20% maximum guideline. The Fund may invest up to 20% of its assets in domestic and foreign high yield corporate and government debt securities, commonly referred to as "high yield/high risk" or "junk" bonds. These bonds may be rated "B" or below by Moody's (Moody's lowest rating is "C"), or "BB" or below by S&P (S&P's lowest rating is "D"), or they may be unrated but considered to be of comparable qual- ity by AGIM. There is no minimum rating required by the Fund. Domestic and for- eign high yield debt securities involve greater risks than higher quality secu- rities, including price volatility and risk of default in the payment of inter- est and principal. U.S. Government Securities Fund The Fund may invest in: .Mortgage-backed securities guaranteed by the Government National Mortgage Association ("GNMA"), popularly known as "Ginnie Maes," that are backed by the full faith and credit of the U.S. Government. These are known as a "modified pass through" type of mortgage- backed security ("GNMA Certificates"). These securities entitle the holder to receive all interest and principal payments due whether or not payments are actually made on the underlying mortgages .U.S. Treasury obligations .Obligations issued or guaranteed by agencies or instrumentalities of the U.S. Government. These securities are backed by their own credit, and may not be backed by the full faith and credit of the U.S. Government - ------- 25 .Mortgage-backed securities guaranteed by agencies or instrumentalities of the U.S. Government which are supported by their own credit but not the full faith and credit of the U.S. Government, such as the Federal Home Loan Mortgage Cor- poration and the Federal National Mortgage Association; .Collateralized mortgage obligations issued by private issuers for which the underlying mortgage-backed securities serving as collateral are backed (i) by the credit alone of the U.S. Government agency or instrumentality which issues or guarantees the mortgage backed securities, or (ii) by the full faith and credit of the U.S. Government; and .Repurchase agreements collateralized by any of the foregoing. Money Market Fund The Fund invests in high quality, U.S. dollar-denominated money market instru- ments, as described on page 16. ------- 26 Other Risks of Investing in North American Funds Although a Fund may have the flexibility to use some or all of the investments or strategies described in this Prospectus and the Statement of Additional Information, its subadvisor may choose not to use these investments or strate- gies for a variety of reasons. These choices may cause a Fund to miss opportu- nities, lose money or not achieve its goal. High Yield/High Risk Securities High yield securities (often known as "junk bonds") include debt instruments that have an equity security attached to them. Securities rated below invest- ment grade and comparable unrated securities offer yields that fluctuate over time, but generally offer higher yields than do higher rated securities. Howev- er, securities rated below investment grade also involve greater risks than higher- rated securities. Under rating agency guidelines, medium- and lower- rated securities and comparable unrated securities will likely have some qual- ity and protective characteristics that are outweighed by large uncertainties or major risk exposures to adverse conditions. Some of the debt securities in which the Funds may choose to invest may be, or may be similar to, the lowest rated non-subordinated debt (securities rated C by Moody's or CCC or lower by S&P). This type of security is very risky, as issuers may not have the ability to repay principal and interest, and may even default. If this should occur, the value of shares of the Fund holding them could fall. Foreign Securities There are risks associated with investing in foreign securities. These risks include unforeseen changes in tax laws, political changes, and changes in for- eign currency values and exchange rates. There may be less publicly available information about foreign issuers. Foreign issuers, including foreign branches of U.S. banks, are subject to different accounting and reporting requirements, which are generally less extensive than the requirements for domestic issuers. Foreign stock markets generally have substantially less volume than the U.S. exchanges and securities of foreign issuers are generally less liquid and more volatile, relative to U.S. issuers. For emerging markets, these risks can be more extreme. There is frequently less governmental regulation of foreign exchanges, broker- dealers and issuers than in the United States, and brokerage costs may be high- er. In addition, investments in foreign companies may be subject to the possi- bility of nationalization or other changes in policy. Policy changes may allow foreign governments to withhold dividends, expropriate (confiscate, or keep) investment returns, or raise taxes to extremely high levels, among other things. Also, should a foreign issuer default, it may be difficult to recover anything in a bankruptcy proceeding. Lending Fund Securities Each Fund may lend up to 33% of its total portfolio assets, or securities, to brokers, dealers and other financial institutions. These loans must be callable (the Fund may ask that the loan be repaid in full) at any time by the Fund. The loans must be at all times fully secured by cash, cash equivalents or securi- ties issued or guaranteed by the U.S. government or its agencies or instrumen- talities, and marked to market (priced at market value) to the value of loaned securities on a daily basis. As with any extensions of credit, there may be risks of delay in recovery and in some cases even loss of rights in the collat- eral should the borrower of the securities fail financially. However, these loans of Fund securities will only be made to firms deemed by the subadvisors to be creditworthy. Leverage Risk Funds that borrow money to buy securities are using leverage. Leverage risk is the risk that leverage, or debt, will enable a Fund to buy more of a security that falls in value. In this case, the Fund would still need to repay the money it borrowed. Funds can create leverage, or borrow money, by using different types of techniques including reverse repurchase agreements, dollar rolls, and derivatives including inverse floating rate instruments. - ------- 27 Hedging and Other Strategic Transactions Individual Funds may be authorized to use a variety of investment strategies described below for hedging purposes only, including hedging various market risks (such as interest rates, currency exchange rates and broad or specific market movements), and managing the effective maturity or duration of debt instruments held by the Fund. Hedging is simply believing that certain securi- ties will fall, or rise, in value, and structuring transactions that take advantage of those changes. These transactions are generally used to protect against possible changes in the market value of securities a Fund already owns or plans to buy, to protect unrealized gains or to improve the Fund's return in some way. Where allowed, individual Funds may purchase and sell (or write) exchange- listed and over-the- counter put and call options on securities, index futures contracts, financial futures contracts and fixed-income indices and other financial instruments, enter into financial futures contracts, enter into interest rate transactions, and enter into currency transactions. This category includes derivative transactions. A "derivative" is generally defined as an instrument whose value is based upon, or derived from, some underlying index or rate. Interest rate transactions may include swaps, caps, floors and collars, and currency transactions may include currency forward contracts, currency futures contracts, currency swaps and options on currencies or currency futures contracts. Euro Conversion Any future conversion of certain European currencies to the Euro may present additional risks to those Funds exposed to such currencies. Frequent Trading A Fund may buy or sell investments extremely frequently, increasing brokerage commissions and other expenses of the Fund. Frequent trading may also increase the amount of capital gains realized by a Fund, including short-term capital gains, which are generally taxable to shareholders at ordinary income tax rates. Temporary Defensive Strategies A Fund's subadvisor may at certain times decide that pursuing the Fund's investment strategies is inconsistent with market conditions. A subadvisor may then employ defensive strategies designed mostly to limit losses. However, the subadvisor may choose not to use defensive strategies, even in volatile or unsettled market conditions. Such defensive strategies may cause the Fund to miss opportunities or to not achieve its goal. ------- 28 Management of the Funds Under the federal securities laws, Massachusetts law and the Trust's Agreement and Declaration of Trust and By-Laws, the business and affairs of the Trust are managed under the direction of the Trustees. American General Asset Management Corp. ("AGAM"), formerly Cypress Tree Asset Management Corporation, Inc., is the investment adviser for the Trust. AGAM was formed in 1996 to advise, acquire and distribute mutual funds through broker- dealers, banks and other intermediaries. AGAM's address is 286 Congress Street, Boston, Massachusetts 02210. According to its Advisory Agreement with the Trust (the "Advisory Agreement"), AGAM:: .Oversees the administration of all aspects of the business and affairs of the Funds .Selects, contracts with and compensates subadvisors to manage the assets of the Funds .Makes recommendations to the Trustees regarding the hiring, termination and replacement of subadvisors .Reimburses the Fund if the total of certain expenses allocated to any Fund exceeds certain limitations .Monitors the subadvisors for compliance with the investment objectives and related policies of each Fund .Reviews the performance of the subadvisors .Periodically reports to the Trustees The following table shows the management fees each Fund paid to AGAM for the last fiscal year under the Advisory Agreement as a percentage of the Fund's average daily net asset value.
Funds Management Fees - --------------------------------------------- International Small Cap Fund 1.05% International Equity Fund .90% Global Equity Fund .90% Small Cap Growth Fund .95% Mid Cap Growth Fund .93% Large Cap Growth Fund .90% Growth & Income Fund .68% Balanced Fund .75% Strategic Income Fund .75% Core Bond Fund .60% U.S. Government Securities Fund .60% Money Market Fund .20%
- -------------------------------------------------------------------------------- Under an order granted to the Funds by the Securities and Exchange Commission, AGAM is permitted to appoint a subadvisor, to create a subadvisory agreement, and to terminate or amend a subadvisory agreement, in each case without share- holder approval. This "Manager of Managers" structure permits the Funds to change subadvisors or the fees paid to subadvisors without the expense and delays associated with obtaining shareholder approval. AGAM has ultimate responsibility under the Manager of Managers structure to oversee the subadvisors, including making recommendations to the Trust regarding the hir- ing, termination and replacement of subadvisors. - ------- 29 Subadvisory Agreements Wellington Management Company, LLP Wellington Management Company, LLP, the subadvisor to the Growth & Income Fund, ("Wellington Management"), whose principal business address is 75 State Street, Boston, Massachusetts 02109. Wellington Management and its predecessor organizations have provided invest- ment management services to investment companies, employee benefit plans, endowments, foundations and other institutions and individuals since 1928. As of September 30, 1999, Wellington Management had investment management author- ity with respect to approximately $217 billion of assets. Matthew E. Megargel, Senior Vice President of Wellington Management, has served as fund manager to the Growth & Income Fund since February 1992. Mr. Megargel has served as fund manager of the Tax-Sensitive Equity Fund and the Equity- Income Fund since March 2000. Mr. Megargel joined Wellington Management in 1983 as a research analyst and took on additional responsibilities as a fund manager in 1988. In 1991, he became solely a fund manager with Wellington Management. Credit Suisse Asset Management, LLC. Credit Suisse Asset Management, LLC., the subadvisor to the Small Cap Growth Fund, is located at 153 E. 53rd Street, New York, New York, 10022. CSAM is a professional investment counseling firm which provides investment services to investment companies, employee benefit plans, endowment funds, foundations and other institutions and individuals. As of November 30, 1999, CSAM managed approximately $60 billion of assets, and together with its global affiliates, managed $168 billion worldwide. The co-fund managers of the Small Cap Growth Fund are Elizabeth B. Dater and Stephen J. Lurito. Ms. Dater, a managing director, has been fund manager of the Small Cap Growth Fund since its inception and has been a fund manager since 1978. Mr. Lurito, a managing director, has been a fund manager of the Small Cap Growth Fund since its inception and has been with the firm since 1987. Founders Asset Management, LLC. Investment decisions for the Large Cap Growth Fund, International Small Cap Fund and Global Equity Funds are made by its subadvisor, Founders Asset Manage- ment, LLC, located at 2930 East Third Avenue, Denver, Colorado 80206. Founders is a registered investment adviser first established as an asset manager in 1938, and is a subsidiary of Mellon Bank, N.A. As of September 30, 1999, Found- ers had over $7.5 billion of assets under management, including approximately $5.2 billion in mutual fund accounts and $2.3 billion in other advisory accounts. To facilitate the day-to-day investment management of the Large Cap Growth Fund, International Small Cap Fund, and Global Equity Fund, Founders employs a unique team-and-lead-manager system. The management team is composed of several members of the Investment Department, including lead portfolio managers, port- folio traders and research analysts. Team members share responsibility for pro- viding ideas, information, knowledge and expertise in the management of the Funds. Each team member has one or more areas of expertise that is applied to the management of the Fund. Daily decisions on Fund selection for the Fund rests with a lead fund manager assigned to the Fund. ------- 30 Tracy P. Stouffer, Vice President of Investments, has been the lead fund man- ager for the International Small Cap Fund since July 1999. Previously, Mr. Stouffer was a vice president and portfolio manager with Federated Global Incorporated from 1995 to July 1999 and a vice president and portfolio manager with Clariden Asset Management from 1988 to 1995. Thomas M. Arrington, Vice President of Investments, is a Chartered Financial Analyst who has been the co-portfolio manager, along with Scott Chapman, of the Large Cap Growth Fund since December 1998. Mr. Arrington has served as co-port- folio manager to the Global Equity Fund since March 2000. Prior to joining Founders, he was vice president and director of income equity strategy at HighMark Capital Management, a subsidiary of Union BanCal Corp., where he man- aged the HighMark Income Equity Fund, a large-cap fund. He received a bache- lor's degree in economics from the University of California, Los Angeles and an MBA from San Francisco State University. Scott Chapman, Vice President of Investments, is a Chartered Financial Analyst who has been the co-portfolio manager, along with Thomas Arrington, of the Large Cap Growth Fund since December 1998. Mr. Chapman has served as co-portfo- lio manager to the Global Equity Fund since March 2000. Before joining Found- ers, Chapman was vice president and director of growth strategy for HighMark Capital. He has more than 10 years experience in equity investment management, including security analysis positions with McCullough, Andrews and Cappiello and Cooper Development Co. Chapman received a bachelor of science degree in accounting from Santa Clara University and an MBA in finance from Golden Gate University. Douglas A. Loeffler, Vice President of Investments, is a Chartered Financial Analyst who has served as the co-portfolio manager of the Global Equity Fund since March, 2000. Mr. Loeffler has been the lead portfolio manager for Dreyfus Founders Worldwide Growth Fund since July, 1999. Prior to joining Founders in 1995, Mr. Loeffler was an investment professional at Scudder, Stevens & Clark for seven years. INVESCO Funds Group, Inc. ("INVESCO") INVESCO, with principal offices at 7800 E. Union Blvd., Denver, Colorado 80237, has been the subadvisor to the Balanced Fund and the Mid Cap Growth Fund since March 2000. Established in 1932, INVESCO Funds Group is one of the oldest existing mutual fund management companies in the United States. Some of the world's largest institutions and more than one million individual investors rely on the knowledge of INVESCO's investment specialists. As of December 31, 1999, INVESCO and its affiliates managed approximately $357 billion in assets, including $40 billion in shareholder accounts. Charles P. Mayer, Director of Investments & Senior Vice President, manages the equity portion of the Balanced Fund. Mr. Mayer, who joined INVESCO in 1993, has been an investment professional since 1969. Mr. Mayer holds a BA from St. Peter's College, and an MBA from St. John's University. Donovan J. Paul, Senior Vice President, manages the fixed-income portion of the Balanced Fund. Mr. Paul, who joined INVESCO in 1994, has been an investment professional since 1976. Mr. Paul holds a BBA from the University of Iowa, and an MBA from the University of Northern Iowa. Peter Lovell, Vice President, is a co-manager of the Balanced Fund. Mr. Lovell, who joined INVESCO in 1994, has been an investment professional since 1976. Mr. Lovell holds a BBA from the University of Iowa, and an MBA from the University of Northern Iowa. Timothy J. Miller, Senior Vice President, manages the Mid Cap Growth Fund. Mr. Miller, who joined INVESCO in 1992, has been an investment professional since 1979. Mr. Miller holds a BSBA from St. Louis University, and an MBA from the University of Missouri. - ------- 31 Morgan Stanley Dean Witter Investment Management Inc. Morgan Stanley Dean Witter Investment Management Inc., with principal offices at 1221 Avenue of the Americas, New York, New York 10020, has been the subadvisor to the International Equity Fund since April 1, 1999. Morgan Stanley Dean Witter Investment Management Inc. in certain instances does business using the name Morgan Stanley Asset Management ("MSAM"). MSAM, a wholly-owned subsid- iary of Morgan Stanley Dean Witter & Co., conducts a worldwide fund management business, providing a broad range of fund management services to customers in the United States and abroad. As of September 30, 1999, MSAM, together with its affiliated institutional asset management companies, managed investments total- ing approximately $173.5 billion. Ann D. Thivierge shares portfolio management responsibility for the Interna- tional Equity Fund with Barton M. Biggs. Ms. Thivierge is a Managing Director of MSAM. She joined MSAM in 1986 and holds a B.A. in International Relations from James Madison College, Michigan State University, and an M.B.A. in Finance from New York University. Barton M. Biggs has been Chairman and a director of MSAM since 1980. He is also a director and chairman of various registered investment companies to which MSAM and certain of its affiliates provide investment advisory services. Mr. Biggs holds a B.A. from Yale University and an M.B.A. from New York University. American General Investment Management, L.P. ("AGIM") AGIM has been the subadvisor to the Strategic Income Fund, the Core Bond Fund, the U.S. Government Securities Fund, and the Money Market Fund since March, 2000. AGIM was formed in 1998 as a successor to the investment management divi- sion of American General Corporation, and is an indirect wholly-owned subsidi- ary of American General Corporation. AGIM also provides investment management and advisory services to pension and profit sharing plans, financial institu- tions and other investors. Accounts managed by AGIM had combined assets, as of December 31, 1999, of approximately $68.9 billion. AGIM is located at 2929 Allen Parkway, Houston, Texas 77019. Steven Guterman, Executive Vice President portfolio manager of the Strategic Income Fund, joined AGIM in 1998. Mr. Guterman served as Managing Director at Salomon Brothers, Inc. from 1996 to 1998 and as Senior Portfolio Manager and head of the U.S. Fixed Income Portfolio Group from 1990 to 1998. Robert N. Kase, Portfolio Manager, who serves as the portfolio manager of the Core Bond Fund and the U.S. Government Securities Fund, joined AGIM in 1998. Mr. Kase has served as Investment Officer of Variable Annuity Life Insurance Company and Senior Portfolio Manager of AGIM since 1998, and was Senior Portfo- lio Manager with CL Capital Management, Inc. from 1992 to 1998. Teresa Moro, Portfolio Manager, who serves as the portfolio manager of the Money Market Fund, has served as Vice President and Investment Officer of Amer- ican General Series Portfolio Company and as portfolio manager of the American General Series Portfolio Company Money Market Fund since 1991. ------- 32 Section III: Investing in North American Funds Institutional Classes of Shares Two classes of shares of North American Funds are offered by this Prospectus: Institutional Class I shares and Institutional Class II shares. Institutional Class I shares of each Fund and Institutional Class II shares of the Core Bond Fund are available to you through your employer plan. Institu- tional Class I shares are available to any qualifying employer plan once the plan establishes a minimum account balance of $1 million with the Trust [Insti- tutional Class II]. A plan's account balance is equal at any time to the aggre- gate of all amounts contributed by the plan to the Trust, less the cost of all redemptions by such plan from the Trust. The Distributor may waive the minimum account balance requirement if it reasonably anticipates that the size of the plan and/or the anticipated amount of contributions will present economies of scale. As a participant in an employer retirement plan, you do not purchase Institutional Class I and Class II Shares of the Funds directly. Rather, Insti- tutional Class I and Class II Shares of a Fund are purchased for you when you elect to allocate your retirement contributions to a Fund plan that is avail- able as an investment option in your retirement or savings plan. You may be permitted to elect different investment options, alter the amounts contributed to your plan, or change how contributions are allocated among your investment options in accordance with your plan's specific provisions. See your plan administrator or employee benefits office for more details. Investments by individual participants in employer retirement plans are made through their plan sponsor or administrator, who is responsible for transmitting instructions for all orders for the purchase, redemption and exchange of Fund shares. The availability of an investment by a plan participant in the Funds, and the pro- cedures for investing depend upon the provisions of the plan and whether the plan sponsor or administrator has contracted with the Trust or designated agent for special processing services. For more information on how to participate in the Funds through an employee retirement plan, please refer to your plan materials or contact your employee benefits office. Transfer or exchange of balances An employer retirement plan may allow you to exchange all or part of your existing plan balance from one investment option to another. Check with your plan administrator for details on the rules governing exchanges in your plan. Exchanges will be accepted by the Trust only as permitted by your plan. Your plan administrator can explain how frequently exchanges are allowed. The Trust reserves the right to re-fuse any exchange purchase request. Pricing of Fund Shares The price of the shares of each Fund is the net asset value per share (next determined following receipt of an order). The net asset value of the shares of each class of each Fund is calculated separately and, except as described below, is determined once daily as of the close of regularly scheduled trading on the New York Stock Exchange. Net asset value per share of each class of each Fund is calculated by dividing the value of the portion of the Fund's securi- ties and other assets attributable to that class, less the liabilities attrib- utable to that class, by the number of shares of that class outstanding. No determination is required on (i) days on which changes in the value of such Fund's securities holdings will not materially affect the current net asset value of the shares of the Fund and (ii) days when the New York Stock Exchange is closed (for example, national holidays). Generally, trading in non-U.S. Gov- ernment securities as well as U.S. Government Securities and money market instruments, is substantially completed each day at various times prior to the close of regularly scheduled trading on the New York Stock Exchange. The values of such securities used in computing the net asset value of the shares of a class of a Fund are generally determined as of such times. Occasionally, events which affect the values of such securities may occur between the times at which they are generally determined and the close of regularly scheduled trading on the Exchange and would therefore not be reflected in the computation of a class's net asset value. If events materially affecting the value of such secu- rities occur during such period, then these securities will be valued at their fair value as determined in good faith by the subadvisors under procedures established and regularly reviewed by the Trustees. - ------- 33 All instruments held by the Money Market Fund and short-term debt instruments with a remaining maturity of 60 days or less held by the other Funds are valued on an amortized cost basis. Unless you request cash payment, all dividends and distributions will be rein- vested. All Funds except the Money Market Fund declare and pay capital gains annually. ------- 34 Dividends and Distributions from North American Funds These Funds declare and pay income dividends annually: .International Small Cap Fund .Global Equity Fund .Small Cap Growth Fund .Mid Cap Growth Fund .Large Cap Growth Fund .Balanced Fund These Funds declare and pay income dividends semi-annually: .International Equity Fund .Growth & Income Fund These Funds declare income dividends daily and pay monthly: .Strategic Income Fund .Core Bond Fund .U.S. Government Securities Fund .Money Market Fund - ------- 35 Taxes It is expected that each Fund of the Trust will qualify as a "regulated investment company" under the Code. If it so qualifies, a Fund will not be subject to United States federal income taxes on its net investment income and net capital gain, if any, that it distributes to its shareholders in each tax- able year, provided that it distributes to its shareholders (i) at least 90% of its net investment income for such taxable year, and at least 90% of its net tax-exempt interest income for such taxable year. If in any year a Fund fails to qualify as a regulated investment company, such Fund would incur reg- ular corporate federal income tax on its taxable income for that year and be subject to certain additional distribution requirements upon re-qualification. Each Fund will be subject to a 4% nondeductible excise tax on its taxable income to the extent it does not meet certain distribution requirements by the end of each calendar year. Each Fund intends to make sufficient distributions to avoid application of the corporate income and excise taxes. Certain investments, including investments in assets "marked to the market" for federal income tax purposes, debt obligations issued or purchased at a discount and potentially so-called "index securities", may create taxable income in excess of the cash they generate. In such cases, a Fund may be required to sell assets (including when it is not advantageous to do so) to generate the cash necessary to distribute as dividends to its shareholders all of its income and gains and thereby to eliminate any tax liability at the Fund level. In addition, transactions in options, futures contracts, hedging trans- actions, forward contracts, and straddles may accelerate income, defer losses, cause adjustments in the holding periods of a Fund's securities and convert long-term capital gains into short-term capital gains and short-term capital losses into long-term capital losses. These transactions may affect the amount, timing and character of distributions to shareholders. Funds investing in foreign securities or currencies may be required to pay withholding or other taxes to foreign governments on dividends and interest. The investment yield of the Funds investing in foreign securities or curren- cies will be reduced by these foreign taxes. Shareholders will bear the cost of any foreign taxes, but may not be able to claim a foreign tax credit or deduction for these foreign taxes. If a Fund is eligible for and makes an election to allow the shareholders of that Fund to claim a foreign tax credit or deduction for these taxes for any taxable year, the shareholders will be notified. The ability of the shareholders to utilize such a foreign tax credit is subject to a holding period requirement. In addition, Funds investing in securities of passive foreign investment companies may be subject to U.S. fed- eral income taxes (and interest on such taxes) as a result of such invest- ments. The investment yield of the Funds making such investments will be reduced by these taxes and interest. Shareholders will bear the cost of these taxes and interest, but will not be able to claim a deduction for these amounts. A Fund's distributions derived from interest, dividends and certain other income, including in general short-term capital gains, will result in taxable ordinary income to the shareholders of the Fund, whether received in cash or reinvested in shares. Properly designated Fund distributions derived from net long-term capital gains (i.e., net gains derived from the sale of securities held for more than 12 months) will result in taxable long-term capital gain income to the shareholders of the Fund, regardless of whether the distribu- tions are received in cash or reinvested in shares and regardless of how long a shareholder has held shares in the Fund. Distributions are taxed as described in this paragraph even if such distributions economically represent a return of a particular shareholder's investment. Distributions that repre- sent a return of a particular shareholder's investment are likely to occur in respect of shares purchased at a time when a Fund's net asset value reflects gains that are either unrealized, or realized but not distributed. The redemption, sale or exchange of Fund shares (including the exchange of shares of one Fund for shares of another) is a taxable event and may result in a gain or loss. Gain or loss, if any, recognized on the sale or other disposi- tion of shares of the Fund will be taxed as capital gain or loss if the shares are capital assets in the shareholder's hands. Generally, a shareholder's gain or loss will be a long-term gain or loss if the shares have been held for more than one year. ------- 36 If a shareholder sells or otherwise disposes of a share of a Fund before hold- ing it for more than six months, any loss on the sale or other disposition of such share shall be treated as a long-term capital loss to the extent of any capital gain dividends received by the shareholder with respect to such share. A loss realized on a sale or exchange of shares may be disallowed if other shares are acquired within a 61-day period beginning 30 days before and ending 30 days after the date on which the shares are disposed. Generally, unless a shareholder of any Fund includes his or her taxpayer iden- tification number (social security number for individuals) in the Shareholder Application and certifies that he or she is not subject to backup withholding, the Fund is required to withhold and remit to the U.S. Treasury 31% from divi- dends (other than exempt-interest dividends) and other reportable payments to the shareholder. Depending on the residence of the shareholder for tax purposes, distributions may also be subject to state and local taxes or withholding taxes. Most states provide that a regulated investment company may pass through (without restric- tion) to its shareholders state and local income tax exemptions available to direct owners of certain types of U.S. government securities. Thus, for resi- dents of these states, distributions derived from a Fund's investment in cer- tain types of U.S. government securities should be free from state and local income taxes to the extent that the interest income from such investments would have been exempt from state and local income taxes if such securities had been held directly by the respective shareholders themselves. - ------- 37 [GRAPHIC] [LOGO] North American Funds 286 Congress Street Boston, Massachusetts 02210 (800) 872-8037 Institutional Class I Shares Institutional CLass II Shares International Small Cap Fund International Equity Fund Global Equity Fund Small Cap Growth Fund Mid Cap Growth Fund Large Cap Growth Fund Growth & Income Fund Balanced Fund Strategic Income Fund Core Bond Fund U.S. Government Securities Fund Money Market Fund For Additional Information More information about the Funds, including the SAI, is available to you free of charge. To request additional information: By Telephone Call 1-800-872-8037 By Mail from the Funds (There is no fee.) Write to: North American Funds 286 Congress Street Boston, MA 02210 By Mail or In Person from the Public Reference Room of the Securities and Exchange Commission (SEC). (You will pay a duplication fee.) Visit or Write to: SEC's Public Reference Section 450 Fifth Street, NW Washington, DC, 20549-6009 1-800-SEC-0330 Online at the SEC's Internet Site Text-only versions of fund documents can be viewed online or downloaded from http://www.sec.gov. Statement of Additional Information (SAI) The SAI provides additional information about the Trust and the Funds. The SAI and the auditor's report and financial statements included in the Trust's most recent Annual Report to its shareholders are incorporated by reference as part of this Prospectus. Annual and Semi-annual Reports The Annual and Semi-annual Reports describe the Funds' performance, list portfolio holdings and include additional information about the Funds' investments. The Annual Report discusses the market conditions and investment strategies that significantly affected the Fund's performance during their last fiscal year. File No. 811-5797 0300.90201C NORTH AMERICAN FUNDS Supplement Dated June __, 2000 to the Statement of Additional Information Dated March 1, 2000 Disclosure relating to: Institutional Class I shares and Institutional Class II shares of International Small Cap Fund, International Equity Fund, Global Equity Fund, Small Cap Growth Fund, Mid Cap Growth Fund, Large Cap Growth Fund, Growth & Income Fund, Balanced Fund, Strategic Income Fund, Core Bond Fund, U.S. Government Securities Fund, Money Market Fund: - -------------------------------------------------------------------------- Note: This document supplements the North American Funds (the "Trust") Statement of Additional Information dated March 1, 2000 (the "Statement of Additional Information") filed electronically with the Securities and Exchange Commission via EDGAR on March 2, 2000 - Registration Nos. 33-27958, 811-5797, Accession Number: 95019-00-000730 - and incorporated herein by reference. - -------------------------------------------------------------------------- I. Date of the Statement of additional Information. The date of the Statement of Additional Information is hereby amended to June __, 2000. II. New Classes of Shares. The Trust intends to offer Institutional Class I shares of twelve series: International Small Cap Fund, International Equity Fund, Global Equity Fund, Small Cap Growth Fund, Mid Cap Growth Fund, Large Cap Growth Fund, Growth & Income Fund, Balanced Fund, Strategic Income Fund, Core Bond Fund, U.S. Government Securities Fund, Money Market Fund. The Trust intends to offer Institutional Class II shares of the Core Bond Fund. (c) Subadvisory Agreement between American General Asset Management Corp. and Wellington Management Company, dated March 10, 2000. (14) (d) Subadvisory Agreement between American General Asset Management Corp. and Morgan Stanley Dean Witter Investment Management Inc. dated March 10, 2000. (14) (e) Subadvisory Agreement between American General Asset Management Corp. and INVESCO Funds Group, Inc. dated March 10, 2000. (14) (f) Subadvisory Agreement between American General Asset Management Corp. and Founders Asset Management LLC dated March 10, 2000. (14) (g) (Reserved) (h) Subadvisory Agreement between American General Asset Management Corp. and T. Rowe Price Associates, Inc. dated March 10, 2000. (14) (i) Subadvisory Agreement between American General Asset Management Corp. and Neuberger Bornan Management, Inc. dated March 10, 2000. (14) (j) (Reserved) (k) Subadvisory Agreement between American General Asset Management Corp. and Credit Suisse Asset Management, LLC dated March 10, 2000. (15) 2 ________________________________________________________________________________ (1) Previously filed as Exhibit to North American Fund's initial registration statement on Form N-1A No. 33-27958) dated November 1, 1991. (2) Previously filed as Exhibit to North American Fund's Post-Effective Amendment No. 1 on Form N-1A (File No. 33-27958) dated December 29, 1989. (3) Previously filed as Exhibit to North American Funds' Post-Effective Amendment No. 2 on Form N-1A (File No. 33-27958) dated August 29, 1990. (4) Previously filed as Exhibit to North American Fund's Post-Effective Amendment No. 7 on Form N-1A (File No. 33-27958) dated November 1, 1991. (5) Previously filed as Exhibit to North American Funds' Post-Effective Amendment No. 17 on Form N-1A (File No. 33-27958) dated April 1, 1994. (6) Previously filed as Exhibit to North American Funds Post effective Amendment No. 21 on Form N1-A (File No. 33-27958) dated December 15, 1995. (7) Previously filed as Exhibit to North American Funds Post-Effective Amendment No. 22 on Form N-1A (File No. 33-27958) dated February 23, 1996. (8) Previously filed as Exhibit to North American Funds' Post-Effective Amendment No. 25 on Form N-1A dated December 30, 1996. (9) Previously filed as Exhibit to North American Funds' Post-Effective Amendment No. 26 on Form N-1A (File No. 33-27958) dated October 17, 1997. (10) Previously filed as Exhibit to North American Funds' Post-Effective Amendment No. 27 on Form N-1A (File No. 33-27958) dated December 30, 1997. (11) Previously filed as Exhibit to North American Funds' Post-Effective Amendment No. 28 on Form N-1A (File No. 33-27958) dated December 18, 1998. (12) Previously filed as Exhibit to North American Funds' Post-Effective Amendment No. 29 on Form N-1A (File No. 33-27958) dated March 1, 1999. (13) Previously filed as Exhibit to North American Funds' Post-Effective Amendment No. 31 on Form N-1A (File No. 33-27958) dated March 2, 2000. (14) Previously filed as Exhibit to North American Funds' Post-Effective Amendment No. 32 on Form N-1A (File No. 33-27958) dated March 17, 2000. (15) Filed herewith. 5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, North American Funds has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, duly authorized, in the City of Boston, and Commonwealth of Massachusetts on the 5th day of April, 2000. NORTH AMERICAN FUNDS -------------------- Registrant By: * ------------------------- Alice T. Kane, President Attest: /s/ John I. Fitzgerald - ----------------------- John I. Fitzgerald Secretary Pursuant to the requirements of the Securities Act of 1933, as amended, this amended Registration Statement has been signed by the following persons in the capacities and on the 5th day of April, 2000. Title ----- * - ------------------------------- Trustee William F. Achtmeyer * - ------------------------------- Trustee Don B. Allen * - ------------------------------- Trustee William F. Devin * - ------------------------------- Trustee, Chairman and President Alice T. Kane * - ------------------------------- Trustee Kenneth J. Lavery * - ------------------------------- Assistant Treasurer Thomas J. Brown (Principal Accounting Officer) (Principal Financial Officer) /s/ John I. Fitzgerald - ------------------------------- *By John I. Fitzgerald John I. Fitzgerald Attorney-in-fact -2- Exhibit Index 4(k). Subadvisory Agreement between American General Asset Management Corp. and Credit Suisse Asset Management, LLC dated March 1, 2000. EX-99.4K 2 SUBADVISORY AGREEMENT Exhibit (4)(K) SUBADVISORY AGREEMENT --------------------- THIS AGREEMENT is made and entered into on this 1st day of March, 2000, between AMERICAN GENERAL ASSET MANAGEMENT CORP. (the "Adviser"), a Delaware corporation registered under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and CREDIT SUISSE ASSET MANAGEMENT, LLC (the "Subadviser"), a Delaware limited liability company also registered under the Advisers Act. W I T N E S S E T H : WHEREAS, the Adviser has, pursuant to an Advisory Agreement with the North American Funds, a Massachusetts business trust (the "Trust"), dated as of March 1, 2000 (the "Advisory Agreement"), been retained to act as investment adviser for the Emerging Growth Fund (the "Fund"), one of the Trust's series of shares; WHEREAS, the Trust is registered with the Securities and Exchange Commission (the "SEC") as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"); WHEREAS, the Advisory Agreement permits the Adviser to delegate certain of its duties under the Advisory Agreement to other investment advisers; and WHEREAS, the Adviser desires to retain the Subadviser to assist it in the provision of a continuous investment program for that portion of the Fund's assets which the Adviser, from time to time, assigns to the Subadviser (the "Subadviser Assets"), and the Subadviser is willing to render such services subject to the terms and conditions set forth in this Agreement. NOW, THEREFORE, the parties do mutually agree and promise as follows: 1. Investment Description; Appointment as Subadviser. The Fund ------------------------------------------------- desires to employ its capital by investing and reinvesting in securities of the kind and in accordance with the limitations specified in the Trust's Prospectus and Statement of Additional Information relating to the Fund as may be in effect from time to time (collectively, the "Prospectus") and which are filed with the SEC as part of the Trust's Registration Statement on Form N-1A, as amended from time to time, and in such manner and to such extent as may be approved by the Board of Trustees of the Trust. A copy of the Prospectus, as currently in effect, has been provided to the Subadviser. The Adviser hereby retains the Subadviser to act as investment adviser for and to manage the Subadviser Assets subject to the supervision of the Adviser and the Board of Trustees of the Trust and subject to the terms of this Agreement; and the Subadviser hereby accepts such employment. In such capacity, the Subadviser shall be responsible for the investment management of the Subadviser Assets. It is recognized that the Subadviser now acts, and that from time to time hereafter may act, as investment adviser to one or more other investment companies and to fiduciary or other managed accounts and that the Adviser and the Trust have no objection to such activities. 2. Duties of the Subadviser (a) Investments. The Subadviser is hereby authorized and ----------- directed and hereby agrees, subject to the stated investment policies and restrictions of the Fund as set forth in the Prospectus and subject to the directions of the Adviser and the Trust's Board of Trustees, to purchase, hold and sell investments for the Subadviser Assets ("Fund Investments") and to monitor on a continuous basis the performance of such Fund Investments. Subject to the supervision of the Board of Trustees and the Adviser and the terms and conditions hereof, including without limitation Section 2(b), the Subadviser will: (1) manage the Subadviser Assets in accordance with the Fund's investment objective, policies and limitations as stated in the Prospectus as they apply to the Subadviser Assets; (2) make investment decisions for the Fund; (3) place purchase and sale orders for portfolio transactions for the Fund; and (4) manage otherwise uninvested cash assets included in the Subadviser Assets. In providing these services, the Subadviser will formulate and implement a continuous program of investment, evaluation and, if appropriate, sale and reinvestment of the Subadviser Assets. The Adviser agrees to provide to the Subadviser such assistance as may be reasonably requested by the Subadviser in connection with its activities under this Agreement, including, without limitation, information concerning the Fund, its funds available, or to become available, for investment and generally as to the conditions of the Fund's affairs. (b) Compliance with Applicable Laws and Governing Documents. ------------------------------------------------------- In the performance of its duties and obligations under this Agreement, the Subadviser shall act in conformity with the Prospectus and with the instructions and directions received in writing from the Adviser or the Board of Trustees of the Trust and will comply with the requirements of the 1940 Act, the Advisers Act, the Internal Revenue Code of 1986, as amended (the "Code") (including the requirements for qualification as a regulated investment company) and all other federal and state laws and regulations applicable to its services hereunder. Notwithstanding 2 the foregoing, the Adviser shall remain responsible for ensuring the Fund's overall compliance with the 1940 Act, the Advisers Act, the Code and all other applicable federal and state laws and regulations and the Subadviser is only obligated to comply with subsection (b) with respect to the Subadviser Assets. The Adviser will provide the Subadviser with reasonable advance notice of any change in the Fund's investment objectives, policies and restrictions as stated in the Prospectus, and the Subadviser shall, in the performance of its duties and obligations under this Agreement, manage the Fund Investments consistent with such changes. The Adviser acknowledges and agrees that the Prospectus will at all times be in compliance with all disclosure requirements under all applicable federal and state laws and regulations relating to the Trust or the Fund, including, without limitation, the 1940 Act and the rules and regulations thereunder, and that the Subadviser shall have no liability in connection therewith, except as to the accuracy of material information furnished in writing by the Subadviser to the Fund or to the Adviser specifically for inclusion in the Prospectus. The Subadviser hereby agrees to provide to the Adviser in a timely manner such information relating to the Subadviser and its relationship to, and actions for, the Fund as may be required to be contained in the Prospectus. In fulfilling these requirements and its other requirements and obligations hereunder, the Subadviser shall be entitled to rely on and act in accordance with (1) information, which is not clearly inaccurate on its face, provided to it by the Trust's administrator, fund accountant, custodian or other service provider and (2) instructions, which may be standing instructions, from the Adviser. The Adviser agrees to provide or cause to be provided to the Subadviser on an ongoing basis upon request by the Subadviser, such information as is requested by the Subadviser for the performance of its obligations under this Agreement, and the Subadviser shall not be in breach of any term of this Agreement or be deemed to have acted negligently if the Adviser fails to provide or cause to be provided such information and the Subadviser relies on the information most recently provided to it. (c) Voting of Proxies. The Subadviser shall have the power ----------------- to vote, either in person or by proxy, all securities in which the Subadviser Assets may be invested from time to time, and shall not be required to seek instructions from, the Adviser or the Fund. 3 (d) Agent. Subject to any other written instructions of the ----- Adviser or the Trust, the Subadviser is hereby appointed the Adviser's and the Trust's agent and attorney-in-fact for the limited purposes of executing account documentation, agreements, contracts and other documents as the Subadviser shall be requested by brokers, dealers, counterparties and other persons in connection with its management of the assets of the Fund. The Subadviser agrees to provide the Adviser and the Trust with copies of any such agreements executed on behalf of the Adviser or the Trust. (e) Brokerage. The Subadviser is authorized, subject to the --------- supervision of the Adviser and the Trust's Board of Trustees and in accordance with the Prospectus or such other policies or practices as may be established by the Trustees, to establish and maintain accounts on behalf of the Fund with, and place orders for the purchase and sale of the Fund Investments with or through, such persons, brokers or dealers ("brokers") as Subadviser may elect and negotiate commissions to be paid on such transactions. The Subadviser, however, is not required to obtain the consent of the Adviser or the Trust's Board of Trustees prior to establishing any such brokerage account. The Subadviser shall place all orders for the purchase and sale of portfolio investments for the Fund's account with brokers selected by the Subadviser. In the selection of such brokers and the placing of such orders, the Subadviser shall use its best efforts to seek to obtain for the Fund the most favorable price and execution available, except to the extent it may be permitted to pay higher brokerage commissions or spreads for brokerage and research services, as provided below. In using its best efforts to obtain for the Fund the most favorable price and execution available, the Subadviser, bearing in mind the Fund's best interests at all times, shall consider all factors it deems relevant, including price, the size of the transaction, the breadth and nature of the market for the security, the difficulty of the execution, the amount of the commission or spreads, if any, the timing of the transaction, market prices and trends, the reputation, experience and financial stability of the broker involved, and the quality of service rendered by the broker or dealer in other transactions. Subject to such policies as the Trustees may determine, including, without limitation, policies contained in the Prospectus, or as may be mutually agreed to by the Adviser and the Subadviser, and to the extent permitted by applicable law, the Subadviser shall be allowed to select a broker that provides brokerage and research services to the Subadviser who charges a commission or 4 spread for effecting a Fund investment transaction that is in excess of the amount of commission or spread that another broker would have charged for effecting that transaction. It is recognized that the services provided by such brokers may be useful to the Subadviser in connection with the Subadviser's services to other clients. On occasions when the Subadviser deems the purchase or sale of a security to be in the best interests of the Fund as well as other clients of the Subadviser, the Subadviser, to the extent permitted by applicable laws and regulations, may, but shall be under no obligation to, aggregate the securities to be sold or purchased in order to obtain the most favorable price or lower brokerage commissions and efficient execution. In such event, allocation of securities so sold or purchased, as well as the expenses incurred in the transaction, will be made by the Subadviser in the manner the Subadviser considers to be the most equitable and consistent with its fiduciary obligations to the Fund and to such other clients over time. It is recognized that in some cases, this procedure may adversely affect the price paid or received by the Fund or the size of the position obtainable for, or disposed of by, the Fund. (f) Securities Transactions. The Subadviser and any ----------------------- affiliated person of the Subadviser will not purchase securities or other instruments from or sell securities or other instruments to the Fund; provided, however, the Subadviser may purchase securities or -------- ------- other instruments from or sell securities or other instruments to the Fund if such transaction is permissible under applicable laws and regulations, including, without limitation, the 1940 Act and the Advisers Act and the rules and regulations promulgated thereunder. The Subadviser, including its Access Persons (as defined in subsection (e) of Rule 17j-l under the 1940 Act), agrees to observe and comply with Rule 17j-l and its Code of Ethics (which shall comply in all material respects with Rule 17j-l, as the same may be amended from time to time). On a quarterly basis, the Subadviser will either (i) certify to the Adviser that the Subadviser and its Access Persons have complied with the Subadviser's Code of Ethics with respect to the Subadviser Assets or (ii) identify any material violations which have occurred with respect to the Subadviser Assets. In addition, the Subadviser will report at least annually to the Adviser concerning any other violations of the Subadviser's Code of Ethics 5 which required significant remedial action and which were not previously reported. (g) Books and Records. Pursuant both to the 1940 Act and the ----------------- Advisers Act and the rules and regulations promulgated thereunder, the Subadviser shall maintain separate books and records of all matters pertaining to the Subadviser Assets. The Fund's books and records (relating to the Subadviser Assets) shall be available to the Adviser at any time upon reasonable request during normal business hours and shall be available for telecopying without unreasonable delay to the Adviser during any day that the Fund is open for business. (h) Information Concerning Fund Investments and Subadviser. ------------------------------------------------------ From time to time (but no less often than quarterly) as the Adviser or the Fund may reasonably request, the Subadviser will furnish the requesting party reports on portfolio transactions and reports on Fund Investments held in the portfolio, all in such detail as the Adviser or the Fund may reasonably request. The Subadviser will also inform the Adviser promptly of changes in portfolio managers responsible for Subadviser Assets or of changes in the control of the Subadviser. The Subadviser will make available its officers and employees to meet with the Trust's Board of Trustees in person annually on reasonable notice to review the Fund Investments and the Subadviser will report to the Board of Trustees in writing on the Fund Investments quarterly. Under normal circumstances, employees of the Subadviser shall not be obligated to attend in person more than one Board meeting per year. (i) Custody Arrangements. The Subadviser shall on each -------------------- business day provide the Adviser and the Trust's custodian such information as the Adviser and the Trust's custodian may reasonably request relating to all transactions concerning the Fund Investments including, without limitation, recommendations, in accordance with policies and procedures established by the Trustees, of the fair value of securities for which market quotes are not available. 3. Independent Contractor. In the performance of its duties hereunder, ---------------------- the Subadviser is and shall be an independent contractor and unless otherwise expressly provided herein or otherwise authorized in writing, shall have no authority to act for or represent the Fund or the Adviser in any way or otherwise be deemed an agent of the Fund or the Adviser. 4. Expenses. During the term of this Agreement, Subadviser will pay -------- all expenses incurred by it in connection with its activities under this Agreement other than the cost of securities, commodities and other investments (including 6 brokerage fees and commissions and other transaction charges, if any) purchased for the Fund. The Subadviser shall not be responsible for any expenses of the operations of the Fund including, without limitation, brokerage fees and commissions and other transaction charges, if any. The Subadviser shall not be responsible for the Trust's, the Fund's or the Adviser's expenses. 5. Compensation. For the services provided and the expenses assumed ------------ with respect to the Fund pursuant to this Agreement, the Subadviser will be entitled to a fee, computed and accrued daily and payable monthly in arrears no later than the seventh (7th) business day following the end of each month, from the Adviser or the Trust, calculated at the annual rate set forth in Exhibit I. The method of determining net assets of the Fund for purposes hereof shall be the same as the method of determining net assets for purposes of establishing the offering and redemption price of the shares of the Fund as described in the Prospectus. If this Agreement shall be effective for only a portion of a month, the aforesaid fee shall be prorated for the portion of such month during which this Agreement is in effect. Notwithstanding any other provision of this Agreement, the Subadviser may from time to time agree not to impose all or a portion of its fee otherwise payable hereunder (in advance of the time such fee or portion thereof would otherwise accrue). Any such fee reduction may be discontinued or modified by the Subadviser at any time. 6. Representation and Warranties of Subadviser. The Subadviser ------------------------------------------- represents and warrants to the Adviser and the Fund as follows: (a) The Subadviser is registered as an investment adviser under the Advisers Act; (b) The Subadviser is a corporation duly organized and validly existing under the laws of the State of Delaware with the power to own and possess its assets and carry on its business as it is now being conducted; (c) The execution, delivery and performance by the Subadviser of this Agreement are within the Subadviser's powers and have been duly authorized by its Board of Directors or shareholders, and no action by or in respect of, or filing with, any governmental body, agency or official is required on the part of the Subadviser for the execution, delivery and performance by the Subadviser of this Agreement, and the execution, delivery and performance by the Subadviser of this Agreement do not contravene or constitute a default 7 under (i) any provision of applicable law, rule or regulation, (ii) the Subadviser's governing instruments, or (iii) any material agreement, judgment, injunction, order, decree or other instrument binding upon the Subadviser; (d) The Form ADV of the Subadviser previously provided to the Adviser is a true and complete copy of the form filed with the SEC and the information contained therein is accurate and complete in all material respects. 7. Representations and Warranties of Adviser. The Adviser represents ----------------------------------------- and warrants to the Subadviser as follows: (a) The Adviser is registered as an investment adviser under the Advisers Act; (b) The Adviser is a corporation duly organized and validly existing under the laws of the State of Delaware with the power to own and possess its assets and carry on its business as it is now being conducted; (c) The execution, delivery and performance by the Adviser of this Agreement are within the Adviser's powers and have been duly authorized by its Board of Directors or shareholders, and no action by or in respect of, or filing with, any governmental body, agency or official is required on the part of the Adviser for the execution, delivery and performance by the Adviser of this Agreement, and the execution, delivery and performance by the Adviser of this Agreement do not contravene or constitute a default under (i) any provision of applicable law, rule or regulation, (ii) the Adviser's governing instruments, or (iii) any material agreement, judgment, injunction, order, decree or other instrument binding upon the Adviser; (d) The Form ADV of the Adviser previously provided to the Subadviser is a true and complete copy of the form filed with the SEC and the information contained therein is accurate and complete in all material respects; (e) The Adviser acknowledges that it has received a copy of the Subadviser's Form ADV prior to the execution of this Agreement; (f) The Trust is in compliance in all material respects, and during the term of this Agreement will remain in compliance in all material respects, with all federal and state laws, rules and regulations applicable to the Trust and the operation of its 8 business (other than those related to investment objectives, policies and restrictions over which the Subadviser has discretion pursuant to the terms hereof), including, without limitation, applicable disclosure and filing obligations for prospectuses, statements of additional information, registration statements, periodic reports to shareholders and regulatory bodies, proxy statements and promotional materials and advertisements; and (g) The Trust is in compliance in all material respects, and during the term of this Agreement will remain in compliance in all material respects, with the terms and conditions of the Prospectus (other than those related to investment objectives, policies and restrictions over which the Subadviser has discretion pursuant to the terms hereof), including, without limitation, provisions relating to the computation of the Trust's net asset value and those relating to processing purchase, exchange and redemption requests. 8. Survival of Representations and Warranties; Duty to Update ---------------------------------------------------------- Information. All representations and warranties made by the Subadviser and the - ----------- Adviser pursuant to Sections 6 and 7, respectively, shall survive for the duration of this Agreement and the parties hereto shall promptly notify each other in writing upon becoming aware that any of the foregoing representations and warranties are no longer true. 9. Liability. Except as may otherwise be provided by the 1940 Act or --------- other federal securities laws, in the absence of willful misfeasance, bad faith or gross negligence on the part of the Subadviser or a reckless disregard of its duties hereunder, the Subadviser, any affiliated person of the Subadviser and each person, if any, who within the meaning of the Securities Act of 1933, as amended, controls the Subadviser ("Controlling Persons") shall not be subject to any liability to the Adviser, the Trust or the Fund or any of the Fund's shareholders, and, in the absence of willful misfeasance, bad faith or gross negligence on the part of the Adviser or a reckless disregard of its duties hereunder, the Adviser, any affiliated person of the Adviser and each of its Controlling Persons shall not be subject to any liability to the Subadviser, for any act or omission in the case of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of Fund Investments. 10. Duration and Termination. ------------------------ (a) Duration. This Agreement shall become effective as of -------- March 1, 2000. This Agreement will continue for an initial period of two years and thereafter shall continue automatically for successive 9 annual periods, provided such continuance is specifically approved at least annually by the Trust's Board of Trustees or vote of a majority of the outstanding voting securities of the Fund; provided that in -------- either event its continuance also is approved by a majority of the Trust's Trustees who are not "interested persons" (as defined in the 1940 Act) of any party to this Agreement, by vote cast in person at a meeting called for the purpose of voting on such approval. (b) Termination. Notwithstanding whatever may be provided ----------- herein to the contrary, this Agreement may be terminated at any time, without payment of any penalty: (i) By vote of a majority of the Trust's Board of Trustees, or by vote of a majority of the outstanding voting securities of the Fund, or by the Adviser, in each case, upon sixty (60) days' written notice to the Subadviser; (ii) By any party hereto immediately upon written notice to the other parties in the event of a material breach of any provision of this Agreement by the other party; or (iii) By the Subadviser upon sixty (60) days written notice to the Adviser and the Trust. This Agreement shall not be assigned (as such term is defined in the 1940 Act) and shall terminate automatically in the event of its assignment or upon the termination of the Advisory Agreement. In the event this Agreement is terminated or is not approved in the foregoing manner, the provisions contained in Section 9 shall remain in effect. 11. Reference to Subadviser. Neither the Adviser, the Trust nor any ----------------------- affiliated person or agent of the Adviser or the Trust shall make reference to or use the name of "Warburg Pincus" or "Credit Suisse" or "CSAM" or any derivative thereof or logo associated with that name, except references concerning the identity of and services provided by the Subadviser to the Fund, which references shall not differ in substance from those included in the Prospectus and this Agreement, in any advertising or promotional materials without the prior approval of the Subadviser, which approval shall not be unreasonably withheld or delayed. Upon termination of this Agreement in accordance with Section 10(b) hereof, the Adviser, the Trust and the Fund and their affiliates shall cease to make such reference or use such name (or derivative or logo). 10 12. Amendment. This Agreement may be amended by written amendment --------- signed by the parties, provided that the terms of any material amendment shall be approved by: (a) the Trust's Board of Trustees or by a vote of a majority of the outstanding voting securities of the Fund and (b) the vote of a majority of those Trustees of the Trust who are not "interested persons" of either party to this Agreement cast in person at a meeting called for the purpose of voting on such approval, if such approval is required by applicable law. 13. Confidentiality. Subject to the duties of the Subadviser to comply --------------- with applicable law, including any demand of any regulatory or taxing authority having jurisdiction, the Subadviser shall treat as confidential all records and other information pertaining to the Fund or the Adviser which the Subadviser maintains or receives as a result of its responsibilities under this Agreement. In addition, subject to the duties to comply with any applicable law, the Adviser agrees to treat as confidential any information concerning the Subadviser, including its investment policies or objectives, which the Adviser receives as the result of its actions under this Agreement. 14. Notice. Any notice that is required to be given by the parties to ------ each other under the terms of this Agreement shall be in writing, delivered, or mailed postpaid to the other parties at the following addresses, which may from time to time be changed by the parties by notice to the other parties: (a) If to the Subadviser: Credit Suisse Asset Management, LLC 466 Lexington Avenue New York, New York 10017-3147 Attention: General Counsel (b) If to the Adviser: American General Asset Management Corp. 286 Congress Street Boston, Massachusetts 02210 Attention: Joseph T. Grause, Jr. (c) If to the Trust: North American Funds c/o CypressTree Asset Management Corporation, Inc. 286 Congress Street Boston, Massachusetts 02210 Attention: Joseph T. Grause, Jr. 11 15. Jurisdiction. This Agreement shall be governed by and construed in ------------ accordance with substantive laws of the Commonwealth of Massachusetts without reference to choice of law principles thereof and in accordance with the 1940 Act. In the case of any conflict, the 1940 Act shall control. 16. Counterparts. This Agreement may be executed in one or more ------------ counterparts, each of which shall be deemed an original, all of which shall together constitute one and the same instrument. 17. Certain Definitions. For the purposes of this Agreement, ------------------- "interested person," "affiliated person", "majority of outstanding voting securities" and "assignment" shall have their respective meanings as set forth in the 1940 Act, subject, however, to such exemptions as may be granted by the SEC. 18. Captions. The captions herein are included for convenience of -------- reference only and shall be ignored in the construction or interpretation hereof. 19. Severability. If any provision of this Agreement shall be held or ------------ made invalid by a court decision or applicable law, the remainder of the Agreement shall not be affected adversely and shall remain in full force and effect. 20. Massachusetts Business Trust. The terms "Trust" and "Trustees" ---------------------------- refer respectively to the Trust created and the Trustees as trustees but not individually or personally, acting from time to time under a Declaration of Trust, which has been or may be amended from time to time, and to which reference is hereby made and a copy of which is on file at the office of the Secretary of State of The Commonwealth of Massachusetts and elsewhere as required by law, and to any and all amendments thereto so filed or hereafter filed. The Subadviser hereby acknowledges and agrees that the obligations of the Trust entered into in the name or on behalf thereof by any of the Trust, the Trustees or their representatives or agents are not made individually, but only in their capacities with respect to the Trust. Such obligations are not binding upon any of the Trustees, shareholders or representatives of the Trust personally, but bind only the assets of the Trust. The Subadviser hereby acknowledges and agrees that all persons dealing with any series of shares of the Trust must look solely to the assets of the Trust belonging to such series for the enforcement of any claims against the Trust. 12 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first written above. AMERICAN GENERAL ASSET MANAGEMENT CORP. By:_______________________________ Joseph T. Grause, Jr. Vice President CREDIT SUISSE ASSET MANAGEMENT, LLC By:_______________________________ 13 EXHIBIT I .55% of the Fund's average daily net assets 14 -----END PRIVACY-ENHANCED MESSAGE-----