-----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, HnmGLC/iVKl749K5uvRIOBouDBWNHN+2VrSBzYmib56rOCSk8MnWA0VkfuYIicLr 7jX9xDHLacs5RLAK0HH/6g== 0000950109-96-008714.txt : 19961231 0000950109-96-008714.hdr.sgml : 19961231 ACCESSION NUMBER: 0000950109-96-008714 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961031 FILED AS OF DATE: 19961230 SROS: NONE 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: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-05797 FILM NUMBER: 96687591 BUSINESS ADDRESS: STREET 1: 116 HUNTINGTON AVE CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 8008728037 FORMER COMPANY: FORMER CONFORMED NAME: NORTH AMERICAN SECURITY TRUST DATE OF NAME CHANGE: 19920703 N-30D 1 FORM N-30D NORTH AMERICAN FUNDS President's Message - -------------------------------------------------------------------------------- December 20, 1996 Dear Shareholders: Nineteen ninety six has certainly been a banner year for the stock markets in general and for the shareholders of North American Funds in particular. Coming right after a very strong year in 1995, investors have been rewarded with a good long run of rising account values. For details on how individual funds have performed, please check the information in the following pages. The past twelve months have also been rich with improvements and additions to the North American Funds. On March 1 we welcomed three new portfolios to our overall investment offering - the Small/Mid Cap Fund of Fred Alger Management, Inc. and the Growth Equity and International Small Cap Funds of Founders Asset Management, Inc. ("Founders"). Judging by the flow of new assets into these portfolios, they have been very well received by our shareholders. On October 1 we made changes in the subadvisory arrangements of four funds. We feel these changes substantially strengthen the depth and quality of fund management. Founders took over responsibility for the Asset Allocation Fund (now called the Balanced Fund), Morgan Stanley Asset Management Inc. took over the Global Growth Fund (now called the Global Equity Fund), T. Rowe Price Associates, Inc. took over the Value Equity Fund, and Manufacturers Adviser Corporation took over the Money Market Fund. The overall effect of these changes is to give shareholders more choices. Our broad selection of top quality investment managers gives investors more diversity of investment styles. Our portfolios continue to offer multiple asset classes and have now added more international choices and the opportunity for shareholders to select the size of companies in which they invest. We also remain strongly committed to top level service to our shareholders. Our teleservices team was a recipient of Dalbar's Key Honors Award for commitment to excellence in customer service. We are one of only 20 mutual fund companies to receive this award. Our customer service representatives are available daily from 8:30 a.m. to 6:00 p.m. EST at (800) 872-8037, and our automated services line is available 24 hours a day at (800) 872-2251. Thank you for your continued confidence in North American Funds. Sincerely, Joseph M. Scott President NORTH AMERICAN FUNDS INDEX TO ANNUAL REPORT - -------------------------------------------------------------------------------- Page ---- Fund Performance and Portfolio Manager's Commentary.... iii Report of Independent Accountants...................... 1 Statements of Assets and Liabilities................... 2 Statements of Operations............................... 8 Statements of Changes in Net Assets.................... 11 Financial Highlights................................... 15 Portfolio of Investments: Small/Mid Cap Fund.................................. 36 International Small Cap Fund........................ 37 Growth Equity Fund.................................. 39 Global Equity Fund.................................. 40 Value Equity Fund................................... 42 Growth and Income Fund.............................. 44 International Growth and Income Fund................ 46 Balanced Fund....................................... 49 Strategic Income Fund............................... 51 Investment Quality Bond Fund........................ 54 U.S. Government Securities Fund..................... 57 National Municipal Bond Fund........................ 58 Money Market Fund................................... 59 Notes to Financial Statements.......................... 61 ii NORTH AMERICAN FUNDS FUND PERFORMANCE AND PORTFOLIO MANAGER'S COMMENTARY - -------------------------------------------------------------------------------- Fund Performance In the following pages we have set forth information regarding the performance of each portfolio of the North American Funds, except the Money Market Fund. There are several ways to evaluate a Fund's historical performance. One can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. With respect to all the performance information presented, it is important to understand that past performance does not guarantee future results. Return and principal fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Performance Tables The Performance Tables show two types of total return information: cumulative and average annual total returns. A cumulative total return is an expression of a Fund's total change in share value in percentage terms over a set period of time -- one, five, and ten years (or since the Fund's inception if less than the applicable period). An average annual total return takes the Fund's cumulative total return for a time period greater than one year and shows what would have happened if the Fund had performed at a constant rate each year. In addition, four funds have had portfolio management changes, namely the Global Equity, Value Equity, Balanced and U.S. Government Securities Funds. For these funds, the tables show an average annual total return for the period since the current portfolio manager assumed responsibility. For all share classes, the tables show cumulative and average annual total returns both net of the possible maximum applicable front-end or back-end sales charge, as well as without giving effect to such possible maximum charges ("net asset value"). Graph -- Change in Value of $10,000 Investment and Comparative Indices The performance graph for each Fund shows the change in value of a $10,000 investment over the life of the Fund's Class A shares. Each Fund's performance is compared to the performance of one or more broad-based securities indices as a "benchmark." Fund results (which include the reinvestment of dividends and capital gains distributions as well as the deduction of ongoing management and distribution fees and fund operating expenses) reflect the deduction of the maximum 4.75% sales charge applicable to Class A shares. Please note that effective April 1, 1994, Class B and Class C shares were offered. Performance of these share classes will differ. Historical performance prior to April 1, 1994 is that of the Fund before it adopted the current multi-class structure. Benchmarks used for comparison are unmanaged and do not reflect any fees or expenses. Portfolio Manager's Commentary Finally, we have provided a commentary by each Fund's portfolio manager regarding each Fund's performance during the fiscal year ended October 31, 1996. All performance results referenced in the commentary are Class A share returns. iii SMALL/MID CAP FUND INVESTMENT OBJECTIVE: Seeks to provide long-term capital appreciation by investing at least 65% of its assets in companies that at the time of purchase have total market capitalization between $500 million and $5 billion. SUBADVISOR: Fred Alger Management, Inc. PORTFOLIO MANAGER: David D. Alger INCEPTION DATE: March 4, 1996 Change in Value of $10,000 Investment and Comparative Indices [CHART APPEARS HERE] - -------------------------------------------------------------------------------- A line graph showing the growth (including reinvestment of dividends and capital gains) of a $10,000 investment in North American Funds' Small/Mid Cap Fund Class A shares at net asset value on March 4, 1996 through October 31, 1996, as compared with the growth of a $10,000 investment in Russell 2000 Index and a $10,000 investment in the S&P MidCap 400 Index over the same period. The graph also depicts the growth of a $10,000 investment in Class A shares of the Small/Mid Cap Fund on March 4, 1996 through October 31, 1996, assuming the deduction of the maximum 4.75% front-end sales charge at the time of the initial investment and reinvestment of dividends and capital gains at net asset value. The following are the plot points used to draw this line graph. - --------------------------------------------------------------------------------
Growth of $10,000 Invested in Growth of $10,000 Invested in Growth of $10,000 Class A shares at Net Asset Value Class A shares with 4.75% charge Investment in the Russell Month Ended of the Small/Mid Cap Fund of the Small/Mid Cap Fund 2000 Growth Index Feb-96 $10,000 $9,525 $10,000 Mar-96 $10,168 $9,685 $10,198 Apr-96 $10,584 $10,081 $10,981 May-96 $10,768 $10,257 $11,545 Jun-96 $10,352 $9,960 $10,794 Jul-96 $9,312 $8,870 $9,476 Aug-96 $9,792 $9,327 $10,177 Sep-96 $10,325 $9,837 $10,702 Oct-96 $10,096 $9,616 $10,240 Growth of $10,000 Growth of $10,000 Investment in the S&P Investment in the 50%/50% Month Ended MidCap 400 Index Composite Index Feb-96 $10,000 $10,000 Mar-96 $10,124 $10,161 Apr-96 $10,431 $10,708 May-96 $10,573 $11,059 Jun-96 $10,411 $10,803 Jul-96 $9,709 $9,593 Aug-96 $10,288 $10,223 Sep-96 $10,716 $10,709 Oct-96 $10,747 $10,484
- -------------------------------------------------------------------------------- The Russell 2000 Growth Index is designed to track the performance of small capitalization companies. As of September 30, 1996, the range of market capitalization of these companies was $50 million to $1.78 billion. The S&P MidCap 400 Index is designed to track the performance of medium capitalization companies. As of September 30, 1996, the range of market capitalization of these companies was $177 million to $6.26 billion. Index information is available on a month-end basis only, therefore the closest month-end to the inception date of the fund has been used. - -------------------------------------------------------------------------------- PERFORMANCE TABLE
Cumulative Total Return Since Periods Ending October 31, 1996 Inception S&P MidCap 400 Index* 7.47% Russell 2000 Growth Index* 2.40% 50%/50% Composite Index*+ 4.94% Small/Mid Cap Fund Class A (at net asset value) 0.96% Small/Mid Cap Fund Class A (net of 4.75% sales charge) -3.84% Small/Mid Cap Fund Class B (at net asset value) 0.64% Small/Mid Cap Fund Class B (net of CDSC**) -4.36% Small/Mid Cap Fund Class C (at net asset value) 0.72% Small/Mid Cap Fund Class C (net of CDSC***) -0.28%
* All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. + Comprised of 50% of the return of the S&P MidCap 400 Index and 50% of the return of the Russell 2000 Growth Index. ** The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. *** The returns reflect the applicable Contingent Deferred Sales Charge of 1%. PORTFOLIO MANAGER'S COMMENTARY Throughout most of 1996, inflationary concerns, low unemployment levels and the thought that the economy was growing too quickly led many investors to fear Federal Reserve action. These fears spawned extreme volatility in both the stock and bond markets. Ultimately, these collective concerns proved overstated, as the Federal Reserve consistently maintained a neutral policy. Following a rapid and dramatic sell off which saw the Dow Jones Industrial Average fall to approximately 5100, the Average soared, breaking 6000 by mid October. With both the Dow and the S&P 500 posting impressive returns, 1996 proved to be the year of both large cap stocks and value investing. The Portfolio, employing a growth-oriented approach and investing in small to mid- sized companies, did not perform as well as blue chip value funds or broad market indices. Small company growth stocks were hit more severely in July and recovered less impressively. For the period February 29 through October 31, 1996, the Russell 2000 Growth Index returned a scant 2.40%. The mid cap portion of the Portfolio compensated for some underperformance, as the S&P MidCap 400 returned a more impressive 7.47% over the same period. Holdings with larger capitalization such as the Loewen Group, Adaptec and MFS Communications helped offset disappointing small cap holdings such as Glenayre Technologies and Cable Design Technologies. iv INTERNATIONAL SMALL CAP FUND INVESTMENT OBJECTIVE: Seeks to provide long-term capital appreciation by investing primarily in securities issued by foreign companies which have total market capitalization or annual revenue of $1 billion or less. SUBADVISOR: Founders Asset Management, Inc. PORTFOLIO MANAGER: Michael W. Gerding INCEPTION DATE: March 4, 1996 Change in Value of $10,000 Investment and Comparative Indices [CHART APPEARS HERE] - -------------------------------------------------------------------------------- A line graph showing the growth (including reinvestment of dividends and capital gains) of a $10,000 investment in North American Funds' International Small Cap Fund Class A shares at net asset value on March 4, 1996 through October 31, 1996, as compared with the growth of a $10,000 investment in Morgan Stanley Capital (MSCI) World ex US Index. The graph also depicts the growth of a $10,000 investment in Class A shares of the International Small Cap Fund on March 4, 1996 through October 31, 1996, assuming the deduction of the maximum 4.75% front-end sales charge at the time of the initial investment and reinvestment of dividends and capital gains at net asset value. The following are the plot points used to draw this line graph. - --------------------------------------------------------------------------------
Growth of $10,000 Invested in Growth of $10,000 Invested in Growth of $10,000 Class A shares at Net Asset Value Class A shares with 4.75% charge Investment in the MSCI Month Ended of the Int'l Small Cap Fund of the Int'l Small Cap Fund World ex US Index Feb-96 $10,000 $9,525 $10,000 Mar-96 $10,224 $9,738 $10,212 Apr-96 $10,552 $10,051 $10,513 May-96 $10,760 $10,249 $10,333 Jun-96 $10,776 $10,264 $10,378 Jul-96 $10,368 $9,876 $10,074 Aug-96 $10,440 $9,944 $10,112 Sep-96 $10,536 $10,036 $10,386 Oct-96 $10,744 $10,234 $10,317
- -------------------------------------------------------------------------------- The Morgan Stanley Capital World ex U.S. Index is an arithmetical average of the performance of 1,138 securities listed on the stock exchanges of Europe, Canada, Australia, New Zealand, and the Far East. Total return figures for this index assume change in share price and reinvestment of dividends after deduction of local taxes. An investor may not invest in the index. Index information is available on a month-end basis only, therefore the closest month-end to the inception date of the fund has been used. - -------------------------------------------------------------------------------- PERFORMANCE TABLE
Cumulative Total Return Since Periods Ending October 31, 1996 Inception MSCI World ex US Index* 3.17% International Small Cap Fund Class A (at net asset value) 7.44% International Small Cap Fund Class A (net of 4.75% sales charge) 2.34% International Small Cap Fund Class B (at net asset value) 6.96% International Small Cap Fund Class B (net of CDSC**) 1.96% International Small Cap Fund Class C (at net asset value) 6.96% International Small Cap Fund Class C (net of CDSC***) 5.96%
* All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. ** The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. *** The returns reflect the applicable Contingent Deferred Sales Charge of 1%. PORTFOLIO MANAGER'S COMMENTARY Throughout the first nine months of 1996, international markets again lagged those of the U.S., with the MSCI World ex-US index up 4.78%, while the S&P 500 was up 13.5% through the first nine months. The emerging markets fared even worse, up only 3.0% in the first nine months. Small cap stocks outperformed in many markets, and the Fund did well relative to the indices. This is partly due to the fact that the best earnings growth seems to be in the smaller companies that are not faced with many of the structural problems of big companies, especially in Europe. This allows them to be more nimble and react to the varying economic conditions. We expect that earnings are going to continue to improve throughout 1996 and into 1997, and we expect that these smaller companies will continue to benefit the most, although this may not be reflected in the indices. During the first nine months of 1996 we have been surprised at how sluggish the economic growth has been outside the U.S., especially in Europe. But we are seeing more and more signs that economies are improving, and we expect that they will exit 1996 growing at a more rapid rate than at the beginning of the year, and we think 1997 will be better than 1996. This, combined with a very stable interest rate environment, should lead to stronger corporate profits in Europe in 1997. We believe the Japanese economy will grow marginally in 1997, but is in significantly healthier shape than it was in the last two years, and there again we expect to see better corporate profits in 1997. Finally, many of the emerging markets' economies are slowing, but we expect that they will grow at better than twice the rate of the developed world in 1997, and will continue to provide excellent opportunities for investments over the long term. v GROWTH EQUITY FUND INVESTMENT OBJECTIVE: Seeks to provide long-term growth of capital by investing at least 65% of its assets in common stocks of well- established, high-quality growth companies. SUBADVISOR: Founders Asset Management, Inc. PORTFOLIO MANAGER: Edward F. Keely INCEPTION DATE: March 4, 1996 Change in Value of $10,000 Investment and Comparative Indices [CHART APPEARS HERE] - -------------------------------------------------------------------------------- A line graph showing the growth (including reinvestment of dividends and capital gains) of a $10,000 investment in North American Funds' Growth Equity Fund Class A shares at net asset value on March 4, 1996 through October 31, 1996, as compared with the growth of a $10,000 investment in S&P 500 Composite Index. The graph also depicts the growth of a $10,000 investment in Class A shares of the Growth Equity Fund on March 4, 1996 through October 31, 1996, assuming the deduction of the maximum 4.75% front-end sales charge at the time of the initial investment and reinvestment of dividends and capital gains at net asset value. The following are the plot points used to draw this line graph. - --------------------------------------------------------------------------------
Growth of $10,000 Invested in Growth of $10,000 Invested in Growth of $10,000 Class A shares at Net Asset Value Class A shares with 4.75% charge Investment in the Month Ended of the Growth Equity Fund of the Growth Equity Fund S&P 500 Feb-96 $10,000 $9,525 $10,000 Mar-96 $10,080 $9,601 $10,098 Apr-96 $10,680 $10,173 $10,252 May-96 $11,168 $10,638 $10,504 Jun-96 $11,040 $10,516 $10,547 Jul-96 $10,216 $9,731 $10,083 Aug-96 $10,560 $10,058 $10,292 Sep-96 $11,104 $10,577 $10,868 Oct-96 $11,024 $10,500 $11,171
- -------------------------------------------------------------------------------- The Standard and Poor's 500 Index contains a representative sample of common stocks that trade on the New York and American Stock Exchanges and some over-the-counter stocks. The capitalization ranges from $80 million to $76 billion. The index is weighted by market capitalization and calculated on a total return basis with dividends reinvested. Index information is available on a month-end basis only, therefore the closest month-end to the inception date of the fund has been used. - -------------------------------------------------------------------------------- PERFORMANCE TABLE
Cumulative Total Return Since Periods Ending October 31, 1996 Inception S&P 500* 11.71% Growth Equity Fund Class A (at net asset value) 10.24% Growth Equity Fund Class A (net of 4.75% sales charge) 5.00% Growth Equity Fund Class B (at net asset value) 9.84% Growth Equity Fund Class B (net of CDSC**) 4.84% Growth Equity Fund Class C (at net asset value) 9.84% Growth Equity Fund Class C (net of CDSC***) 8.84%
* All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. ** The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. *** The returns reflect the applicable Contingent Deferred Sales Charge of 1%. PORTFOLIO MANAGER'S COMMENTARY The dramatic rise in small company stocks that began in February abruptly ended in May. The market once again rotated back to larger, more liquid growth stocks. This has been a favorable development for the Fund. However, the third quarter of 1996 was a difficult environment for all stocks. In July, the market experienced a severe correction. From its past peak price the S&P 500 declined 11% to its intra-day low in the middle of the month. The NASDAQ composite declined 20% from its peak price during the same time frame. Concerns of weak corporate earnings and the threat of a Federal Reserve increase in interest rates, as well as, the speculative bubble in small company stocks drove this correction. It is expected that the Fund will hold anywhere from 40 to 90 stocks, and that international holdings will commonly comprise 10 to 15 percent of the Fund. The Fund returned 10.24% since the inception of the Fund on March 4, 1996. Our expectations for the economy have become very different than the current consensus opinion. In past months, our concern was that the economy was at serious risk of showing a negative GDP quarter or two. Our opinion has been derived from observations of company earnings trends. Significantly more companies have guided analysts to cut estimates or have reported earnings disappointments. At this point in time, we have come to believe that the economy has been undergoing a rolling inventory correction. This inventory correction has hit different industries at different times over the last 12 months. The brunt of this correction hit technology companies in the first quarter of this year and is likely to continue until the fourth quarter of 1996. Auto companies seemed to have felt the correction as long as 12 months ago. Some industries seem to be recovering from the worst of the inventory correction currently. This may explain some of the change in perceptions towards a stronger growth environment. Also, there had been persistent signs of strength in the number of new jobs added to the economy until the most recent monthly figures. We believe that on balance the economic data will suggest moderate economic growth over the next few months. The most recent weak employment number and uninspiring retail sales results may protect the market from a Fed tightening. Growth stocks should outperform value stocks in 1996 because of modest growth in earnings. However, a serious decline in profit growth could propel the market into a significant correction. Based on our observations, long term interest rates should stay at 7% or lower. With inflation at approximately 3%, real long term interest rates of 4% are very attractive. A 7% long term treasury bond suggests the stock market should sell at about 16.5 times 1997 earnings. Stock selection will be of paramount importance to relative out performance. vi GLOBAL EQUITY FUND INVESTMENT OBJECTIVE: To seek long term capital appreciation, by investing primarily in a global portfolio of equity securities and securities con vertible into or exercisable for equity securities. SUBADVISOR: Morgan Stanley Asset Management Inc. PORTFOLIO MANAGER: Frances Campion INCEPTION DATE: November 1, 1990# Change in Value of $10,000 Investment and Comparative Indices [CHART APPEARS HERE] - -------------------------------------------------------------------------------- A line graph showing the growth (including reinvestment of dividends and capital gains) of a $10,000 investment in North American Funds' Global Equity Fund Class A shares at net asset value on November 1, 1990 through October 31, 1996, as compared with the growth of a $10,000 investment in the Morgan Stanley Capital International (MSCI) World Index over the same period. The graph also depicts the growth of a $10,000 investment in Class A shares of the Global Equity Fund on November 1, 1990 through October 31, 1996, assuming the deduction of the maximum 4.75% front-end sales charge at the time of the initial investment and reinvestment of dividends and capital gains at net asset value. The following are the plot points used to draw this line graph. - --------------------------------------------------------------------------------
Growth of $10,000 Invested in Growth of $10,000 Invested in Growth of $10,000 Class A shares at Net Asset Value Class A shares with 4.75% charge Investment in the Month Ended of the Global Equity Fund of the Global Equity Fund MSCI World Index Oct-90 $10,000 $9,525 $10,000 Nov-90 $9,921 $9,450 $9,838 Dec-90 $10,024 $9,548 $10,045 Jan-91 $10,272 $9,784 $10,415 Feb-91 $10,927 $10,408 $11,381 Mar-91 $10,629 $10,124 $11,047 Apr-91 $10,659 $10,153 $11,135 May-91 $10,847 $10,332 $11,390 Jun-91 $10,233 $9,747 $10,688 Jul-91 $10,698 $10,190 $11,195 Aug-91 $10,597 $10,094 $11,161 Sep-91 $10,719 $10,209 $11,456 Oct-91 $10,880 $10,364 $11,644 Nov-91 $10,466 $9,969 $11,138 Dec-91 $11,161 $10,631 $11,951 Jan-92 $11,141 $10,612 $11,732 Feb-92 $11,181 $10,650 $11,531 Mar-92 $10,725 $10,215 $10,990 Apr-92 $11,049 $10,525 $11,145 May-92 $11,587 $11,037 $11,591 Jun-92 $11,252 $10,718 $11,204 Jul-92 $11,049 $10,525 $11,235 Aug-92 $11,060 $10,534 $11,510 Sep-92 $10,776 $10,264 $11,407 Oct-92 $10,491 $9,993 $11,100 Nov-92 $10,836 $10,322 $11,301 Dec-92 $10,841 $10,326 $11,394 Jan-93 $10,871 $10,355 $11,434 Feb-93 $11,004 $10,481 $11,707 Mar-93 $11,633 $11,081 $12,388 Apr-93 $12,243 $11,662 $12,965 May-93 $12,843 $12,233 $13,265 Jun-93 $12,710 $12,107 $13,156 Jul-93 $13,036 $12,416 $13,429 Aug-93 $13,716 $13,065 $14,047 Sep-93 $13,757 $13,103 $13,790 Oct-93 $13,960 $13,297 $14,172 Nov-93 $13,117 $12,494 $13,373 Dec-93 $14,046 $13,379 $14,029 Jan-94 $14,920 $14,211 $14,957 Feb-94 $14,982 $14,270 $14,766 Mar-94 $14,529 $13,839 $14,132 Apr-94 $14,910 $14,202 $14,571 May-94 $14,684 $13,986 $14,611 Jun-94 $14,848 $14,143 $14,573 Jul-94 $15,177 $14,456 $14,853 Aug-94 $15,640 $14,897 $15,303 Sep-94 $15,074 $14,358 $14,903 Oct-94 $15,239 $14,515 $15,330 Nov-94 $14,272 $13,594 $14,668 Dec-94 $14,256 $13,579 $14,812 Jan-95 $13,459 $12,820 $14,593 Feb-95 $13,459 $12,820 $14,802 Mar-95 $13,969 $13,305 $15,512 Apr-95 $14,288 $13,609 $16,069 May-95 $14,330 $13,649 $16,210 Jun-95 $14,298 $13,619 $16,208 Jul-95 $15,095 $14,378 $17,022 Aug-95 $14,999 $14,287 $16,646 Sep-95 $15,137 $14,418 $17,134 Oct-95 $14,702 $14,003 $16,867 Nov-95 $14,819 $14,115 $17,456 Dec-95 $15,266 $14,541 $17,970 Jan-96 $15,395 $14,664 $18,298 Feb-96 $15,546 $14,808 $18,413 Mar-96 $15,934 $15,177 $18,723 Apr-96 $16,495 $15,711 $19,166 May-96 $16,312 $15,537 $19,186 Jun-96 $16,279 $15,506 $19,287 Jul-96 $15,309 $14,582 $18,609 Aug-96 $15,622 $14,880 $18,826 Sep-96 $15,719 $14,972 $19,567 Oct-96 $15,632 $14,890 $19,710
- -------------------------------------------------------------------------------- The Morgan Stanley Capital International (MSCI) World Index is a global index which measures the performance of stock markets in the United States, Europe, Canada, Australia, New Zealand, and the Far East. The index represents approximately 60% of the combined market capitalization of the 23 countries. The index attempts to replicate the industry composition of each local market and includes a representative sampling of large, medium and small capitalization companies. The index is market-value weighted and calculated with both net and gross dividends reinvested. The net return index reinvests dividends after foreign taxes have been withheld and the gross return index reinvests dividends before payment of foreign taxes. Index information is available on a month-end basis only, therefore the closest month-end to the inception date of the fund has been used. - -------------------------------------------------------------------------------- PERFORMANCE TABLE
Average Annual Total Return Cumulative Total Return Since Since Since# Periods Ending October 31, 1996 1 Year 5 years Inception Inception Oct. 1, 1996 Morgan Stanley Capital International World Index* 16.83% 11.10% 11.97% 97.10% 0.72% Global Equity Fund Class A (at net asset value) 6.33% 7.52% 7.76% 56.32% -0.55% Global Equity Fund Class A (net of 4.75% sales charge) 1.28% 6.48% 6.89% 48.90% -5.27% Global Equity Fund Class B (at net asset value) 5.64% 7.21% 7.50% 54.09% -0.62% Global Equity Fund Class B (net of CDSC**) 0.64% 6.90% 7.38% 53.09% -5.59% Global Equity Fund Class C (at net asset value) 5.70% 7.22% 7.51% 54.18% -0.62% Global Equity Fund Class C (at net of CDSC***) 4.70% 7.22% 7.51% 54.18% -0.61%
* All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. ** The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. *** The returns reflect the applicable Contingent Deferred Sales Charge of 1%. # Current investment manager (subadvisor) assignment became effective 10/1/96. PORTFOLIO MANAGER'S COMMENTARY The U.S. market reached new heights in November with a remarkable 7.5% rise following Clinton's re-election and the return of a Republican Congress. Key factors to the market's climb have been falling bond yields, the dollar's "safe haven" status, renewed discussion of balanced budget legislation, and reasonable third quarter earnings. While there are some signs of a (benign) slowing economy--softer auto sales and production schedules, fewer housing starts, lower payroll employment, and deteriorating credit quality--the recent market advance is due to be corrected. Alan Greenspan is clearly attempting to achieve such a correction. In Europe, we believe markets are also in record-setting territory, partly due to renewed currency depreciation in light of the continued uncertainty over the fate of the European Monetary Union. Indicative of this market's strength was the ease with which the Deutsche Telekom $10 billion initial public offering--one of the largest in history--was absorbed. Sterling's strength on the back of the prospect of further interest rate increases remains a feature in the UK as booming retail sales have led to higher-than-expected inflation (3.3%). With the UK's recent budget likely to further stoke the consumer recovery, the economy could be opening up to the prospect of a boom such as was seen in 1987-1988. In Japan, investors remain skeptical about the sustainability of recovery into 1997, and hence the Bank of Japan is not expected to moderate its current monetary policy stance in the short term. While it seems that it is going to be continuingly difficult to find significant pockets of value in the current global environment, we believe that therestill are, and will be, sufficient numbers of individual, relatively cheap stocks to provide enough names to run a successful, and defensive, portfolio. We expect to continue to be underweighted in Japan and slightly underweight in the U.S. We do not believe we will be able to add many names in Southeast Asia. We expect to find the majority of new stocks in Europe, which will most likely maintain, if not increase, its overweight status versus the benchmark (MSCI World Index). vii VALUE EQUITY FUND INVESTMENT OBJECTIVE: To seek long term growth of capital by investing primarily in common stocks and securities convertible into or carrying the right to buy common stocks. SUBADVISOR: T. Rowe Price Associates, Inc. PORTFOLIO MANAGERS: Brian C. Rogers, Stephen W. Boesel, Richard P. Howard, William J. Stromberg INCEPTION DATE: August 28, 1989# Change in Value of $10,000 Investment and Comparative Indices [CHART APPEARS HERE] - -------------------------------------------------------------------------------- A line graph showing the growth (including reinvestment of dividends and capital gains) of a $10,000 investment in North American Funds' Value Equity Fund Class A shares at net asset value on August 28, 1989 through October 31, 1996, as compared with the growth of a $10,000 investment in the S&P 500 Composite Index over the same period. The graph also depicts the growth of a $10,000 investment in Class A shares of the Value Equity Fund on August 28, 1989 through October 31, 1996, assuming the deduction of the maximum 4.75% front-end sales charge at the time of the initial investment and reinvestment of dividends and capital gains at net asset value. The following are the plot points used to draw this line graph. - --------------------------------------------------------------------------------
Growth of $10,000 Invested in Growth of $10,000 Invested in Growth of $10,000 Class A shares at Net Asset Value Class A shares with 4.75% charge Investment in the Month Ended of the Value Equity Fund of the Value Equity Fund S&P 500 Jul-89 $10,000 $9,525 $10,000 Aug-89 $10,114 $9,634 $10,000 Sep-89 $9,861 $9,393 $9,961 Oct-89 $9,135 $8,701 $9,737 Nov-89 $9,167 $8,732 $9,926 Dec-89 $9,227 $8,789 $10,165 Jan-90 $8,408 $8,008 $9,494 Feb-90 $8,572 $8,164 $9,603 Mar-90 $8,839 $8,419 $9,863 Apr-90 $8,580 $8,173 $9,627 May-90 $9,167 $8,731 $10,541 Jun-90 $8,978 $8,552 $10,477 Jul-90 $8,684 $8,272 $10,451 Aug-90 $7,698 $7,333 $9,495 Sep-90 $7,240 $6,896 $9,039 Oct-90 $7,110 $6,772 $9,008 Nov-90 $7,491 $7,135 $9,579 Dec-90 $7,796 $7,425 $9,847 Jan-91 $8,161 $7,774 $10,286 Feb-91 $8,675 $8,262 $11,010 Mar-91 $8,831 $8,412 $11,285 Apr-91 $8,927 $8,503 $11,319 May-91 $9,266 $8,826 $11,786 Jun-91 $8,883 $8,461 $11,252 Jul-91 $9,215 $8,777 $11,788 Aug-91 $9,390 $8,944 $12,051 Sep-91 $9,215 $8,777 $11,851 Oct-91 $9,337 $8,894 $12,022 Nov-91 $8,796 $8,378 $11,525 Dec-91 $9,751 $9,287 $12,843 Jan-92 $9,917 $9,446 $12,618 Feb-92 $10,292 $9,803 $12,770 Mar-92 $10,126 $9,645 $12,522 Apr-92 $10,327 $9,837 $12,902 May-92 $10,528 $10,028 $12,947 Jun-92 $10,214 $9,728 $12,754 Jul-92 $10,406 $9,912 $13,288 Aug-92 $10,091 $9,612 $13,002 Sep-92 $10,214 $9,728 $13,153 Oct-92 $10,528 $10,028 $13,214 Nov-92 $11,262 $10,727 $13,647 Dec-92 $11,594 $11,043 $13,818 Jan-93 $11,646 $11,093 $13,949 Feb-93 $11,437 $10,894 $14,129 Mar-93 $11,874 $11,310 $14,426 Apr-93 $11,428 $10,885 $14,093 May-93 $11,813 $11,251 $14,446 Jun-93 $11,909 $11,343 $14,491 Jul-93 $12,092 $11,518 $14,447 Aug-93 $12,145 $11,568 $14,978 Sep-93 $12,398 $11,809 $14,863 Oct-93 $12,415 $11,826 $15,185 Nov-93 $12,424 $11,834 $15,023 Dec-93 $12,847 $12,236 $15,209 Jan-94 $13,155 $12,530 $15,738 Feb-94 $13,340 $12,706 $15,299 Mar-94 $12,847 $12,236 $14,634 Apr-94 $12,838 $12,228 $14,838 May-94 $12,926 $12,312 $15,058 Jun-94 $12,679 $12,077 $14,690 Jul-94 $12,847 $12,236 $15,188 Aug-94 $13,480 $12,840 $15,795 Sep-94 $13,304 $12,672 $15,406 Oct-94 $13,014 $12,396 $15,764 Nov-94 $12,327 $11,741 $15,177 Dec-94 $12,570 $11,973 $15,400 Jan-95 $12,524 $11,929 $15,811 Feb-95 $13,354 $12,719 $16,419 Mar-95 $13,717 $13,066 $16,905 Apr-95 $13,950 $13,288 $17,415 May-95 $14,370 $13,687 $18,087 Jun-95 $14,827 $14,123 $18,510 Jul-95 $15,209 $14,487 $19,134 Aug-95 $15,377 $14,647 $19,164 Sep-95 $15,433 $14,700 $19,969 Oct-95 $14,864 $14,158 $19,909 Nov-95 $15,480 $14,744 $20,766 Dec-95 $15,672 $14,928 $21,168 Jan-96 $16,039 $15,278 $21,899 Feb-96 $16,346 $15,569 $22,092 Mar-96 $16,539 $15,754 $22,307 Apr-96 $16,886 $16,084 $22,648 May-96 $17,264 $16,444 $23,206 Jun-96 $16,897 $16,094 $23,300 Jul-96 $16,264 $15,491 $22,276 Aug-96 $16,743 $15,948 $22,736 Sep-96 $17,570 $16,735 $24,010 Oct-96 $17,723 $16,881 $24,679
- -------------------------------------------------------------------------------- The Standard and Poor's 500 Index contains a representative sample of common stocks that trade on the New York and American Stock Exchanges and some over-the-counter stocks. The capitalization ranges from $80 million to $76 billion. The index is weighted by market capitalization and calculated on a total return basis with dividends reinvested. Index information is available on a month-end basis only, therefore the closest month-end to the inception date of the fund has been used. - -------------------------------------------------------------------------------- PERFORMANCE TABLE
Average Annual Total Return Cumulative Total Return Since Since Since# Periods Ending October 31, 1996 1 Year 5 years Inception Inception Oct 1, 1996 S&P 500* 23.96% 15.47% 13.43% 146.79% 2.79% Value Equity Fund Class A (at net asset value) 19.23% 13.67% 8.31% 77.23% 0.87% Value Equity Fund Class A (net of 4.75% sales charge) 13.57% 12.57% 7.57% 68.81% -3.92% Value Equity Fund Class B (at net asset value) 18.59% 13.41% 8.13% 75.18% 0.88% Value Equity Fund Class B (net of CDSC**) 13.59% 13.17% 8.13% 75.18% -4.12% Value Equity Fund Class C (at net asset value) 18.53% 13.40% 8.12% 75.08% 0.82% Value Equity Fund Class C (net of CDSC***) 17.53% 13.40% 8.12% 75.08% -0.18%
* All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. ** The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. *** The returns reflect the applicable Contingent Deferred Sales Charge of 1%. # Current investment manager (subadvisor) assignment became effective 10/1/96. PORTFOLIO MANAGER'S COMMENTARY After soaring in the second quarter, economic growth slowed and interest rates stabilized in the third quarter, and through the month of October. The market, which had largely discounted the probability of higher interest rates, got a reprieve in September when the Federal Reserve decided to leave short-term interest rates unchanged for the time being. Following its first significant pullback in more than two years during the July decline, the resilient U.S. stock market marched forward, albeit at a somewhat slower pace. Most major equity indices posted decent gains, with the S&P 500 returning 2.79% for the month of October, on top of a 3.09% return in the third quarter. Investors have generally shrugged off the July decline. Despite the market selling off sharply in a short-term period, investor fund flows did not abate substantially and cash flows into the equity markets have continued to be a positive factor influencing stock returns. Although technology stocks rebounded from their summer lows, from a valuation standpoint, we have steered away from companies in the technology sector. This has been a sector with a great deal of money flowing into it and investor expectations are quite high. We feel as though the risk/reward relationship is tilted against the investor. Also, the last several months have seen small company stocks fall off the pace as investors seek the relatively lower volatility of larger companies. This is a favorable environment for the large-cap value investment strategy employed in the Value Equity Fund. While the U.S. economic expansion is now over five years old, the economy should continue to grow. Interest rates should not change materially over the remainder of 1996. Interest rates have been in a trading range for most of the year with long treasuries in the 6 1/2% to 7 1/4% range. Barring a surprise move by the Fed to raise interest rates in coming months to contain potential inflationary pressures, we do not see much changing over the remainder of 1996. The stock market should continue to perform well if investors believe interest rates are high enough to restrain inflation, yet low enough to keep unemployment at bay. Corporate earnings have been strong and the real story fueling the market this year has been the tremendous inflow of cash coming from the individual investor, and it looks as though that trend will probably continue. One concern looking out over the next year is what will happen to earnings growth in 1997 versus 1996. If earnings growth slows in 1997, the equity market will face more of a challenge in the next 12 months. viii GROWTH AND INCOME FUND INVESTMENT OBJECTIVE: To seek long-term growth of capital and income consistent with prudent investment risk, by investing primarily in a diversified portfolio of common stocks of United States issuers which the portfolio manager believes are of high quality. SUBADVISOR: Wellington Management Company, LLP PORTFOLIO MANAGER: Matthew E. Megargel INCEPTION DATE: May 1, 1991 Change in Value of $10,000 Investment and Comparative Indices [CHART APPEARS HERE] - -------------------------------------------------------------------------------- A line graph showing the growth (including reinvestment of dividends and capital gains) of a $10,000 investment in North American Funds' Growth and Income Fund Class A shares at net asset value on May 1, 1991 through October 31, 1996, as compared with the growth of a $10,000 investment in the S&P 500 Composite Index. The graph also depicts the growth of a $10,000 investment in Class A shares of the Growth and Income Fund on May 1, 1990 through October 31, 1996, assuming the deduction of the maximum 4.75% front-end sales charge at the time of the initial investment and reinvestment of dividends and capital gains at net asset value. The following are the plot points used to draw this line graph. - --------------------------------------------------------------------------------
Growth of $10,000 Invested in Growth of $10,000 Invested in Growth of $10,000 Class A shares at Net Asset Value Class A shares with 4.75% charge Investment in the Month Ended of the Growth & Income Fund of the Growth & Income Fund S&P 500 Apr-91 $10,000 $9,525 $10,000 May-91 $10,240 $9,754 $10,413 Jun-91 $9,879 $9,410 $9,941 Jul-91 $10,201 $9,716 $10,414 Aug-91 $10,352 $9,860 $10,646 Sep-91 $10,205 $9,720 $10,470 Oct-91 $10,588 $10,085 $10,621 Nov-91 $10,175 $9,692 $10,182 Dec-91 $11,088 $10,561 $11,346 Jan-92 $10,775 $10,263 $11,147 Feb-92 $10,876 $10,359 $11,281 Mar-92 $10,642 $10,137 $11,062 Apr-92 $10,805 $10,291 $11,398 May-92 $10,845 $10,330 $11,437 Jun-92 $10,779 $10,267 $11,267 Jul-92 $11,217 $10,684 $11,740 Aug-92 $11,146 $10,616 $11,487 Sep-92 $11,400 $10,859 $11,620 Oct-92 $11,480 $10,935 $11,674 Nov-92 $11,777 $11,218 $12,056 Dec-92 $12,007 $11,437 $12,208 Jan-93 $12,162 $11,584 $12,323 Feb-93 $12,286 $11,702 $12,482 Mar-93 $12,677 $12,075 $12,745 Apr-93 $12,430 $11,839 $12,450 May-93 $12,657 $12,055 $12,763 Jun-93 $12,656 $12,055 $12,802 Jul-93 $12,625 $12,025 $12,763 Aug-93 $13,008 $12,390 $13,233 Sep-93 $12,956 $12,341 $13,130 Oct-93 $13,153 $12,528 $13,415 Nov-93 $12,884 $12,272 $13,272 Dec-93 $13,112 $12,489 $13,436 Jan-94 $13,574 $12,929 $13,903 Feb-94 $13,406 $12,769 $13,516 Mar-94 $12,892 $12,279 $12,928 Apr-94 $13,028 $12,409 $13,109 May-94 $13,259 $12,629 $13,303 Jun-94 $12,932 $12,318 $12,976 Jul-94 $13,481 $12,840 $13,418 Aug-94 $13,871 $13,212 $13,954 Sep-94 $13,607 $12,961 $13,610 Oct-94 $13,819 $13,162 $13,926 Nov-94 $13,196 $12,569 $13,408 Dec-94 $13,421 $12,784 $13,605 Jan-95 $13,432 $12,794 $13,968 Feb-95 $13,957 $13,294 $14,505 Mar-95 $14,263 $13,585 $14,934 Apr-95 $14,700 $14,002 $15,386 May-95 $15,137 $14,418 $15,978 Jun-95 $15,458 $14,724 $16,532 Jul-95 $15,876 $15,122 $16,904 Aug-95 $16,008 $15,248 $16,930 Sep-95 $16,482 $15,699 $17,641 Oct-95 $16,206 $15,437 $17,588 Nov-95 $16,845 $16,045 $18,346 Dec-95 $17,117 $16,304 $18,701 Jan-96 $17,520 $16,688 $19,347 Feb-96 $17,565 $16,731 $19,517 Mar-96 $17,856 $17,008 $19,707 Apr-96 $18,113 $17,253 $20,008 May-96 $18,516 $17,636 $20,501 Jun-96 $18,499 $17,620 $20,584 Jul-96 $17,801 $16,956 $19,679 Aug-96 $18,195 $17,331 $20,066 Sep-96 $19,218 $18,305 $21,211 Oct-96 $19,747 $18,809 $21,803
- -------------------------------------------------------------------------------- The Standard and Poor's 500 Index contains a representative sample of common stocks that trade on the New York and American Stock Exchanges and some over-the-counter stocks. The capitalization ranges from $80 million to $76 billion. The index is weighted by market capitalization and calculated on a total return basis with dividends reinvested. Index information is available on a month-end basis only, therefore the closest month-end to the inception date of the fund has been used. - -------------------------------------------------------------------------------- PERFORMANCE TABLE
Average Annual Total Return Cumulative Total Return Since Since Periods Ending October 31, 1996 1 Year 5 years Inception Inception S&P 500* 23.96% 15.47% 15.23% 118.03% Growth and Income Fund Class A (at net asset value) 21.84% 13.28% 13.17% 97.47% Growth and Income Fund Class A (net of 4.75% sales charge) 16.06% 12.18% 12.18% 88.09% Growth and Income Fund Class B (at net asset value) 21.08% 13.01% 12.93% 95.15% Growth and Income Fund Class B (net of CDSC**) 16.08% 12.76% 12.82% 94.15% Growth and Income Fund Class C (at net asset value) 21.12% 12.96% 12.88% 94.70% Growth and Income Fund Class C (net of CDSC***) 20.12% 12.96% 12.88% 94.70%
* All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. ** The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. *** The returns reflect the applicable Contingent Deferred Sales Charge of 1%. PORTFOLIO MANAGER'S COMMENTARY The U.S. equity market continued its strong performance for the year ended October 31, 1996 as investors embraced the thesis that the economy would continue on a path of moderate growth and modest inflation. Top performing groups included healthcare, which benefited from favorable pharmaceutical script trends, more stable pricing, and an accelerated approval process at the Food & Drug Administration. Financial stocks also performed well due to declining interest rates, a reasonably favorable credit environment, and industry consolidation. Energy services companies rose sharply as high capacity utilization led to rising prices and even more leveraged operating earnings gains. Finally, the aerospace group outpaced the market with robust commercial aircraft orders and consolidation among defense contractors. Lagging sectors included media stocks which suffered from investor disappointment in the cable TV and wireless telephone groups. Utilities were also weak despite lower interest rates over concern about deregulation in both the electric and telephone sectors. Finally, materials stocks lagged the broad market as a decelerating economy caused commodity price declines. The Fund returned 21.84% on a net basis for the fiscal year versus 23.96% for the benchmark S&P 500 Index. Fund performance was helped on a relative basis by overweightings in drug stocks and energy services, along with underweightings in utilities and electronics. Relative performance was hurt by holdings in the media, technology software, and travel related sectors. ix INTERNATIONAL GROWTH AND INCOME FUND INVESTMENT OBJECTIVE: Seeks to provide long-term growth of capital and income by investing in a portfolio of securities of foreign issuers. Under normal circumstances, the portfolio will be invested approximately 85% in equity securities and 15% in fixed income securities. SUBADVISOR: J.P. Morgan Investment Management, Inc. PORTFOLIO MANAGERS: Paul A. Quinsee, Gareth A. Fielding INCEPTION DATE: January 9, 1995 Change in Value of $10,000 Investment and Comparative Indices [CHART APPEARS HERE] - -------------------------------------------------------------------------------- A line graph showing the growth (including reinvestment of dividends and capital gains) of a $10,000 investment in North American Funds' International Growth and Income Fund Class A shares at net asset value on January 9, 199 through October 31, 1996, as compared with the growth of both a $10,000 investment in Morgan Stanley Capital International EAFE index and a $10,000 investment in the Salomon Brothers Non-U.S. Dollar index over the same period. The graph also depicts the growth of a $10,000 investment in Class A shares of the International Growth and Income Fund on January 9, 1995 through October 31, 1996, assuming the deduction of the maximum 4.75% front-end sales charge at the time of the initial investment and reinvestment of dividends and capital gains at net asset value. The following are the plot points used to draw this line graph. - --------------------------------------------------------------------------------
Growth of $10,000 Invested in Growth of $10,000 Invested in Growth of $10,000 Class A shares at Net Asset Value Class A shares with 4.75% charge Investment in the MSCI Month Ended of the Growth & Income Fund of the Growth & Income Fund EAFE Index Dec-94 $10,000 $9,525 $10,000 Jan-95 $9,800 $9,335 $9,618 Feb-95 $9,590 $9,134 $9,688 Mar-95 $10,030 $9,554 $10,188 Apr-95 $10,350 $9,858 $10,569 May-95 $10,150 $9,668 $10,444 Jun-95 $9,977 $9,503 $10,281 Jul-95 $10,488 $9,990 $10,900 Aug-95 $10,228 $9,742 $10,485 Sep-95 $10,308 $9,818 $10,689 Oct-95 $10,137 $9,656 $10,402 Nov-95 $10,338 $9,847 $10,891 Dec-95 $10,788 $10,273 $11,122 Jan-96 $10,888 $10,370 $11,167 Feb-96 $10,857 $10,341 $11,205 Mar-96 $11,041 $10,515 $11,406 Apr-96 $11,285 $10,730 $11,558 May-96 $11,235 $10,701 $11,550 Jun-96 $11,387 $10,827 $11,818 Jul-96 $11,102 $10,575 $11,322 Aug-96 $11,214 $10,681 $11,459 Sep-96 $11,510 $10,963 $11,755 Oct-96 $11,581 $11,031 $11,769 Growth of $10,000 Growth of $10,000 Investment in the Solomon Bros. Investment in the 85/15% Month Ended Non-US $ Bond Index Composite Index Dec-94 $10,000 $10,000 Jan-95 $10,218 $9,708 Feb-95 $10,507 $9,728 Mar-95 $11,443 $10,375 Apr-95 $11,588 $10,737 May-95 $11,943 $10,668 Jun-95 $12,003 $10,522 Jul-95 $12,088 $11,075 Aug-95 $11,376 $10,819 Sep-95 $11,711 $10,842 Oct-95 $11,748 $10,804 Nov-95 $11,850 $10,885 Dec-95 $11,953 $11,247 Jan-96 $11,888 $11,245 Feb-96 $11,722 $11,283 Mar-96 $11,752 $11,458 Apr-96 $11,724 $11,559 May-96 $11,752 $11,580 Jun-96 $11,837 $11,651 Jul-96 $11,889 $11,404 Aug-96 $11,949 $11,541 Sep-96 $11,946 $11,754 Oct-96 $12,166 $11,829
- -------------------------------------------------------------------------------- The EAFE (Europe, Asia and the Far East) Index represents approximately 60% of the combined market capitalization of 20 countries. The index attempts to replicate the industry composition of each local market and includes a representative sampling of small, medium, and small capitalization companies. The index is market value-weighted and calculated both with net and gross dividends reinvested. The net return index reinvests dividends after foreign taxes have been withheld and the gross return index reinvests dividends before payment of taxes. The Salomon Brothers Non-U.S. Dollar Bond Index provides a measure of the total return of the performance of high quality securities in the Government bond, Eurobond and sectors of the international market. The bonds must have a minimum quality of AA and a minimum maturity of five years. This composite index is rebalanced to reflect the portfolio's 25% fixed weight in Japan. This adjustment is made for both equities and bonds and then the 85/15% split is used. Index information is available on a month-end basis only, therefore the closest month-end to the inception date of the fund has been used. - -------------------------------------------------------------------------------- PERFORMANCE TABLE
Average Annual Cumulative Total Return Total Return Since Since Periods Ending October 31, 1996 1 Year Inception Inception Morgan Stanley Capital International EAFE* 13.15% 9.29% 17.69% Salomon Brothers Non-US Dollar Bond Index* 3.55% 11.28% 21.66% 85%/15% Composite Index*+ 11.71% 9.59% 18.29% International Growth and Income Fund Class A (at net asset value) 14.25% 8.49% 15.81% International Growth and Income Fund Class A (net of 4.75% sales charge) 8.82% 5.60% 10.31% International Growth and Income Fund Class B (at net asset value) 13.58% 8.08% 15.04% International Growth and Income Fund Class B (net of CDSC**) 8.58% 5.45% 10.04% International Growth and Income Fund Class C (at net asset value) 13.63% 8.11% 15.09% International Growth and Income Fund Class C (net of CDSC***) 12.63% 8.11% 15.09%
* All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. + Comprised of 85% of the return of the MSCI EAFE and 15% of the return of the Salomon Brothers Non-US Dollar Bond Index. ** The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. *** The returns reflect the applicable Contingent Deferred Sales Charge of 1%. PORTFOLIO MANAGER'S COMMENTARY Building on the success enjoyed during the fourth quarter of 1995, international equity markets performed well during 1996 spurred by renewed optimism for economic recovery and corporate profits (due to strong Japanese corporate profits, low interest rates in the smaller European markets, and the favorable impact of the larger European market corporate restructurings). International equities have considerably outperformed bonds since the beginning of 1996. In the bond markets, the theme of convergence of high-yielding markets towards reference markets set the tone, with Italy, Spain, and Sweden producing strong returns in Europe, and Canada and Australia in the dollar bloc. Asset allocation has been the most positive contributor to overall performance year-to-date. We have significantly reduced the position in Japanese equities, while increasing positions in German, French, and Belgian equities. These decisions have contributed positively to performance. However, these gains were marginally offset by underweighting the strong Swedish market. Stock selection in the Japanese banking sector and in supermarket stocks in the retail sector have contributed to the Fund's returns. An underweight position in Japanese bonds and overweight position in Dutch bonds also produced a positive return as did the Fund's yield positioning. The Fund's ongoing currency strategy of partially hedging Japanese yen exposure into U.S. dollars has had a significant impact on the results this year as the dollar reached a new 32-month high versus the yen in September. x BALANCED FUND INVESTMENT OBJECTIVE: To seek the highest total return consistent with a moderate level of risk tolerance. This portfolio attempts to limit the decline in portfolio value in very adverse market conditions to 10% over any twelve month period. The Balanced Fund will invest in a combination of equity, fixed-income and money mar-ket securities. The portfolio manager retains absolute discre-tion to determine the amount of the Fund's assets invested in each category of securities at all times. There can be no as-surance that the 10% limit on the decline in portfolio value will not be exceeded. SUBADVISOR: Founders Asset Management, Inc. PORTFOLIO MANAGER: Brian F. Kelly INCEPTION DATE: August 28, 1989# Change in Value of $10,000 Investment and Comparative Indices [CHART APPEARS HERE] - -------------------------------------------------------------------------------- A line graph showing the growth (including reinvestment of dividends and capital gains) of a $10,000 investment in North American Funds' Balanced Fund Class A shares at net asset value on August 28, 1989 through October 31, 1996, as compared with the growth of both a $10,000 investment in the S&P 500 Composite Index and a $10,000 investment in the Lehman Brothers Aggregate Bond Index over the same period. The graph also depicts the growth of a $10,000 investment in Class A shares of the Balanced Fund on August 28, 1989 through October 31, 1996, assuming the deduction of the maximum 4.75% front-end sales charge at the time of the initial investment and reinvestment of dividends and capital gains at net asset value. The following are the plot points used to draw this line graph. - --------------------------------------------------------------------------------
Growth of $10,000 Growth of $10,000 Growth of $10,000 invested in Class A invested in Class A Investment in the Growth of $10,000 shares of Net Asset shares with 4.75% Growth of $10,000 Lehman Brothers Investment in the Value of the charge of the investment in the Aggregate 50%/50% Month Ended Balanced Fund Balanced Fund S&P 500 Bond Index Composite Index Jul-89 $10,000 $9,525 $10,000 $10,000 $10,000 Aug-89 $10,059 $9,581 $10,000 $10,000 $10,000 Sep-89 $9,931 $9,459 $9,961 $10,051 $10,008 Oct-89 $9,878 $9,216 $9,737 $10,299 $10,015 Nov-89 $9,735 $9,272 $9,926 $10,397 $10,162 Dec-89 $9,788 $9,328 $10,165 $10,425 $10,295 Jan-90 $9,184 $8,745 $9,494 $10,301 $9,898 Feb-90 $9,275 $8,834 $9,503 $10,334 $9,959 Mar-90 $9,275 $8,834 $9,883 $10,342 $10,103 Apr-90 $9,043 $8,814 $9,627 $10,247 $9,937 May-90 $9,528 $9,074 $10,541 $10,550 $10,546 Jun-90 $9,481 $8,030 $10,477 $10,720 $10,589 Jul-90 $9,368 $8,923 $10,451 $10,888 $10,880 Aug-90 $8,733 $8,318 $9,495 $10,723 $10,109 Sep-90 $8,406 $8,006 $9,039 $10,812 $9,925 Oct-90 $8,324 $7,928 $9,008 $10,849 $9,979 Nov-90 $8,651 $8,240 $9,579 $11,184 $10,382 Dec-90 $8,935 $8,511 $9,847 $11,359 $10,603 Jan-91 $9,217 $8,780 $10,286 $11,499 $10,893 Feb-91 $8,667 $9,208 $11,010 $11,597 $11,304 Mar-91 $9,782 $9,317 $11,285 $11,877 $11,481 Apr-91 $9,845 $9,377 $11,319 $11,804 $11,562 May-91 $9,959 $9,485 $11,786 $11,873 $11,830 Jun-91 $9,717 $9,258 $11,252 $11,867 $11,560 Jul-91 $9,994 $9,518 $11,788 $12,031 $11,910 Aug-91 $10,217 $9,732 $12,051 $12,291 $12,171 Sep-91 $10,196 $9,711 $11,851 $12,541 $12,195 Oct-91 $10,366 $9,873 $12,022 $12,680 $12,351 Nov-91 $10,227 $9,742 $11,525 $12,798 $12,161 Dec-91 $10,852 $10,335 $12,843 $13,178 $13,010 Jan-92 $10,805 $10,357 $12,518 $12,997 $12,808 Feb-92 $11,163 $10,533 $12,770 $13,082 $12,925 Mar-92 $11,013 $10,480 $12,522 $13,008 $12,785 Apr-92 $11,195 $10,883 $12,902 $13,102 $13,002 May-92 $11,420 $10,878 $12,947 $13,349 $13,148 Jun-92 $11,249 $10,714 $12,754 $13,533 $13,144 Jul-92 $11,498 $10,952 $13,295 $13,809 $13,548 Aug-92 $12,459 $11,887 $13,002 $13,949 $13,478 Sep-92 $11,442 $10,898 $13,153 $14,114 $13,634 Oct-92 $11,532 $10,964 $13,214 $13,927 $13,571 Nov-92 $11,984 $11,415 $13,547 $13,830 $13,789 Dec-92 $12,251 $11,889 $13,818 $14,152 $13,885 Jan-93 $12,377 $11,790 $13,949 $14,423 $14,188 Feb-93 $12,320 $11,735 $14,129 $14,576 $14,403 Mar-93 $12,654 $12,053 $14,425 $14,737 $14,582 Apr-93 $12,412 $11,822 $14,083 $14,839 $14,466 May-93 $12,631 $12,031 $14,446 $14,858 $14,652 Jun-93 $12,815 $12,206 $14,491 $15,128 $14,810 Jul-93 $12,942 $12,327 $14,447 $15,213 $14,830 Aug-93 $13,080 $12,458 $14,978 $15,480 $15,229 Sep-93 $13,218 $12,590 $14,883 $15,522 $15,193 Oct-93 $13,264 $12,834 $15,185 $15,580 $15,383 Nov-93 $13,195 $12,565 $15,023 $15,448 $15,235 Dec-93 $13,484 $12,844 $15,209 $15,531 $15,370 Jan-94 $13,736 $13,084 $15,738 $15,741 $15,740 Feb-94 $13,724 $13,073 $15,299 $15,468 $15,384 Mar-94 $13,280 $12,848 $14,834 $15,088 $14,860 Apr-94 $13,232 $12,604 $14,838 $14,966 $14,902 May-94 $13,288 $12,638 $15,058 $14,964 $15,011 Jun-94 $13,100 $12,478 $14,690 $14,931 $14,811 Jul-94 $13,282 $12,551 $15,185 $15,227 $15,208 Aug-94 $13,664 $13,015 $15,795 $15,246 $15,521 Sep-94 $13,496 $12,855 $15,408 $15,022 $15,214 Oct-94 $13,354 $12,729 $15,764 $15,008 $15,386 Nov-94 $12,944 $12,329 $15,177 $14,975 $15,076 Dec-94 $13,120 $12,497 $15,400 $15,078 $15,239 Jan-95 $13,237 $12,808 $15,811 $15,377 $15,594 Feb-95 $13,848 $13,190 $15,419 $15,742 $16,081 Mar-95 $14,056 $13,385 $15,905 $15,839 $16,372 Apr-95 $14,342 $13,661 $17,415 $15,050 $16,738 May-95 $14,797 $14,084 $18,087 $16,582 $17,385 Jun-95 $14,992 $14,280 $18,510 $16,804 $17,857 Jul-95 $15,352 $14,528 $19,134 $16,767 $17,951 Aug-95 $15,512 $14,776 $19,154 $16,969 $18,057 Sep-95 $15,720 $14,974 $19,989 $17,134 $18,552 Oct-95 $15,829 $14,887 $19,909 $17,357 $18,633 Nov-95 $15,951 $15,221 $20,755 $17,617 $19,192 Dec-95 $16,318 $15,541 $21,158 $17,854 $19,516 Jan-96 $16,516 $15,792 $21,899 $17,983 $19,541 Feb-96 $16,559 $15,773 $22,092 $17,870 $19,881 Mar-96 $16,558 $15,773 $22,307 $17,547 $19,927 Apr-96 $16,602 $15,814 $22,848 $17,449 $20,049 May-96 $16,789 $15,964 $23,206 $17,413 $20,310 Jun-96 $16,745 $15,950 $23,300 $17,547 $20,474 Jul-96 $16,574 $15,786 $23,276 $17,695 $19,988 Aug-96 $16,789 $15,991 $22,735 $17,656 $20,201 Sep-96 $17,305 $16,483 $24,010 $17,974 $20,992 Oct-96 $17,678 $16,838 $24,679 $18,373 $21,565
- -------------------------------------------------------------------------------- The Standard and Poor's 500 Index contains a representative sample of common stocks that trade on the New York and American Stock Exchanges and some over-the-counter stocks. The capitalization ranges from $80 million to $78 billion. The index is weighted by market capitalization and calculated on a total return basis with dividends reinvested. The Lehman Brothers Aggregate Bond Index includes fixed rate debt issues rated investment grade or higher by Moody's, Standard & Poor's or Fitch. The index includes Government, Corporate, Mortgage-backed and Asset-backed issues. All issues have at least one year to maturity and an outstanding par value of at least $100 million for Government issues and $50 million for all others. Returns are market value weighted. Index information is available on a month-end basis only, therefore the closest month-end to the inception date of the fund has been used. - -------------------------------------------------------------------------------- PERFORMANCE TABLE
Cumulative Total Return Average Annual Total Return Since Since# Periods Ending October 31, 1996 1 Year 5 Years Since Inception Inception Oct 1,1996 S&P 500* 23.96% 15.47% 13.43% 146.79% 2.79% Lehman Brothers Aggregate Bond Index* 5.85% 7.70% 8.86% 83.73% 2.22% 50%/50% Composite*+ 14.91% 11.59% 11.15% 115.26% 2.51% Balanced Fund Class A (at net asset value) 13.10% 11.27% 8.27% 76.78% 2.15% Balanced Fund Class A (net of 4.75% sales charge) 7.73% 10.19% 7.53% 68.38% -2.70% Balanced Fund Class B (at net asset value) 12.35% 10.98% 8.07% 74.49% 2.08% Balanced Fund Class B (net of CDSC**) 7.35% 10.71% 8.07% 74.49% -2.92% Balanced Fund Class C (at net asset value) 12.41% 10.98% 8.07% 74.49% 2.15% Balanced Fund Class C (at net asset value) 11.41% 10.98% 8.07% 74.49% 1.15%
* All since inception returns for the indices begin on the month-end closest t to the actual inception date of the Fund. + Comprised of 50% of the return of the S&P 500 and 50% of the return of the Lehman Brothers Aggregate Bond Index. ** The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. *** The returns reflect the applicable Contingent Deferred Sales Charge of 1%. # Current investment manager (subadvisor) assignment became effective 10/1/96. PORTFOLIO MANAGER'S COMMENTARY Since taking over the fund on October 1, 1996, the Fund has appreciated in value by 2.15% versus an increase in the S&P 500 over this same time period of 2.79%. Given the fact that the fund is currently targeting a 60% equity exposure and a 40% fixed income exposure, and that the Fund is in the process of being restructured, the return listed in the previous sentence is acceptable. There have been several changes that have been implemented since taking over the Fund. From this point and going forward the fixed income component of this Fund will be overwhelmingly invested solely in U.S. treasuries--with maturities typically ranging from one to five years. A small portion of the fixed income funds may be invested in investment grade bonds of major foreign governments or states (e.g. Canadian government bonds), or investment grade foreign corporate issues. Also, inherited equity positions have been trimmed and dollars have been redeployed. It would be difficult to make the case that the market as measured by either the S&P 500 or the Dow Jones Industrial Average is meaningfully undervalued. The yield on these indices currently is around 1.95% to 2.00%. The stock market as measured by either of these indices has never in history (going back as far as 1890-1900) been priced at such an extreme so as to carry so little yield. Unless one believes that yield is no longer important as a tool for measuring valuation, the market is overvalued by anywhere from 20% to 30% on a yield test. The price to book ratio for both the Dow Jones and the S&P 500 is currently about 4.0(x). On a historical basis this looks very high, but in all honesty, the value of this particular valuation tool is difficult to assess due to significant write-offs to corporate balance sheets over the past decade. At the current level, the stock market reflects the low yields in the bonds market. A meaningful or abrubt increase in interest rates would not be well received by the stock market. Yet in spite of broad concerns about the overall valuation level of this market, certain sectors of the economy are and will in all likelihood be broadly represented in the portfolio. These include oil and natural gas, pharmaceuticals, financials, and industrials and rails. Also, investments in the following areas have been trimmed: consumer debt, retailers, apparel manufacturers, and REIT's. Going forward, investments will be made with a very critical eye on valuation, and directionally the equity exposure of the Fund is more likely headed down rather than up. xi STRATEGIC INCOME FUND INVESTMENT OBJECTIVE: To seek a high level of total return consistent with preservation of capital, by giving its portfolio manager broad discretion to deploy the Fund's assets among certain segments of the fixed-income market as the portfolio manager believes will best contribute to achievement of the Fund's investment objective. SUBADVISOR: Salomon Brothers Asset Management Inc PORTFOLIO MANAGERS: Peter J. Wilby, David J. Scott INCEPTION DATE: November 1, 1993 Change in Value of $10,000 Investment and Comparative Indices [CHART APPEARS HERE] - -------------------------------------------------------------------------------- A line graph showing the growth (including reinvestment of dividends and capital gains) of a $10,000 investment in North American Funds' Strategic Income Fund Class A shares at net asset value on November 1, 1993 through October 31, 1996, as compared with the growth of a $10,000 investment in the Lehman Brothers Aggregate Bond Index. The graph also depicts the growth of a $10,000 investment in Class A shares of the Strategic Income Fund on November 1, 1993 through October 31, 1996, assuming the deduction of the maximum 4.75% front-end sales charge at the time of the initial investment and reinvestment of dividends and capital gains at net asset value. The following are the plot points used to draw this line graph. - --------------------------------------------------------------------------------
Growth of $10,000 Invested in Growth of $10,000 Invested in Growth of $10,000 Class A shares at Net Asset Value Class A shares with 4.75% charge Investment in the Lehman Brothers Month Ended of the Strategic Income Fund of the Strategic Income Fund Aggregate Bond Index Oct-93 $10,000 $9,525 $10,000 Nov-93 $10,019 $9,543 $9,915 Dec-93 $10,122 $9,641 $9,969 Jan-94 $10,283 $9,795 $10,103 Feb-94 $10,001 $9,525 $9,928 Mar-94 $9,539 $9,086 $9,683 Apr-94 $9,444 $8,996 $9,606 May-94 $9,567 $9,113 $9,604 Jun-94 $9,522 $9,070 $9,583 Jul-94 $9,564 $9,110 $9,773 Aug-94 $9,615 $9,158 $9,786 Sep-94 $9,638 $9,180 $9,642 Oct-94 $9,621 $9,164 $9,633 Nov-94 $9,561 $9,107 $9,612 Dec-94 $9,435 $8,986 $9,678 Jan-95 $9,448 $8,999 $9,869 Feb-95 $9,543 $9,090 $10,104 Mar-95 $9,592 $9,136 $10,166 Apr-95 $9,899 $9,429 $10,308 May-95 $10,244 $9,758 $10,707 Jun-95 $10,381 $9,888 $10,785 Jul-95 $10,428 $9,933 $10,761 Aug-95 $10,463 $9,966 $10,891 Sep-95 $10,642 $10,137 $10,997 Oct-95 $10,720 $10,211 $11,140 Nov-95 $10,905 $10,387 $11,307 Dec-95 $11,187 $10,655 $11,466 Jan-96 $11,685 $11,130 $11,542 Feb-96 $11,497 $10,951 $11,341 Mar-96 $11,502 $10,956 $11,263 Apr-96 $11,645 $11,091 $11,199 May-96 $11,737 $11,180 $11,176 Jun-96 $11,868 $11,304 $11,327 Jul-96 $11,924 $11,358 $11,358 Aug-96 $12,107 $11,532 $11,339 Sep-96 $12,494 $11,901 $11,536 Oct-96 $12,580 $11,982 $11,792
- -------------------------------------------------------------------------------- The Lehman Brothers Aggregate Bond Index includes fixed rate debt issues rated investment grade or higher by Moody's, Standard & Poor's or Fitch. The Index includes Government, Corporate, Mortgage-backed and Asset-backed issues. All issues have at least one year to maturity and an outstanding par value of at least $100 million for Government issues and $50 million for all others. Returns are market value weighted. Index information is available on a month-end basis only, therefore the closest month-end to the inception date of the fund has been used. - -------------------------------------------------------------------------------- PERFORMANCE TABLE
Average Annual Cumulative Total Return Total Return Since Since Periods Ending October 31, 1996 1 Year Inception Inception Lehman Brothers Aggregate Bond Index* 5.85% 5.65% 17.92% Strategic Income Fund Class A (at net asset value) 17.35% 7.97% 25.80% Strategic Income Fund Class A (net of 4.75% sales charge) 11.77% 6.23% 19.82% Strategic Income Fund Class B (at net asset value) 16.59% 7.37% 23.69% Strategic Income Fund Class B (net of CDSC**) 11.59% 6.19% 19.69% Strategic Income Fund Class C (at net asset value) 16.59% 7.36% 23.67% Strategic Income Fund Class C (net of CDSC***) 15.59% 7.36% 23.67%
* All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. ** The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. *** The returns reflect the applicable Contingent Deferred Sales Charge of 1%. PORTFOLIO MANAGER'S COMMENTARY The Strategic Income Fund enjoyed strong performance for the year ending 10/31/96, as it posted a 17.35% return on a net asset value basis. This compares favorably to both the investment grade bond market and multi-sector fixed income fund average as reported by Lipper Analytical Services, Inc. For the one year period, the investment grade bond market as measured by the Lehman Brothers Aggregate Bond Index posted a 5.85% return and the Lipper Multi-sector fund average posted a 12.45% return. This outperformance can be attributed to the Fund's allocation to the high yield corporate sector and emerging markets debt. Over the course of the year, the Fund allocated about 45% of its assets to the high yield sector and about 22% to emerging markets debt (Brady Bonds). Credit quality of the high yield issuers continues to improve as corporations strengthen their balance sheets by posting higher earnings and paying down debt. The strength in the emerging markets debt sector is attributed to improving fiscal and monetary practices of these countries. During the year, both Moody's and S&P upgraded Poland's debt to investment grade. This positive development helped to boost prices across the whole sector. In addition, during 1996, a large and growing number of institutional investors, particularly U.S. pension funds and insurance companies, entered this market in search of higher yields. This flow of institutional funds has helped to stabilize this market sector. Moderate economic growth in the U.S. and positive supply and demand factors in the high yield corporate market should support strong performance in the year ahead. We also maintain a positive outlook on emerging market debt as broader participation in the sector and favorable monetary and fiscal policies by emerging market nations should continue to be positive for the market. Our US investment grade outlook is cautious over the short run. However, long-term we remain constructive on the fixed income market as inflation remains benign and economic growth remains modest. xii INVESTMENT QUALITY BOND FUND INVESTMENT OBJECTIVE: To seek a high level of current income consistent with the maintenance of principal and liquidity, by investing primarily in a diversified portfolio of investment grade corporate bonds and U.S. Government bonds with intermediate to longer term maturities. SUBADVISOR: Wellington Management Company, LLP PORTFOLIO MANAGER: Thomas L. Pappas INCEPTION DATE: May 1, 1991 Change in Value of $10,000 Investment and Comparative Indices [CHART APPEARS HERE] - -------------------------------------------------------------------------------- A line graph showing the growth (including reinvestment of dividends and capital gains) of a $10,000 investment in North American Funds' Investment Quality Bond Fund Class A shares at net asset value on May 1, 1991 through October 31, 1996, as compared with the growth of a $10,000 investment in the Lehman Brothers Aggregate Bond Index over the same period. The graph also depicts the growth of a $10,000 investment in Class A shares of the Investment Quality Bond Fund on May 1, 1991 through October 31, 1996, assuming the deduction of the maximum 4.75% front-end sales charge at the time of the initial investment and reinvestment of dividends and capital gains at net asset value. The following are the plot points used to draw this line graph. - --------------------------------------------------------------------------------
Growth of $10,000 Growth of $10,000 Growth of $10,000 Growth of $10,000 Invested in Class A shares Invested in Class A shares Investment in the Lehman Investment in the at Net Asset Value of the with 4.75% charge of the Brothers Aggregate 50%/50 Month Ended Investment Quality Bond Fund Investment Quality Bond Fund Bond Index Composite Index Apr-91 $10,000 $9,525 $10,000 $10,000 May-91 $10,085 $9,606 $10,058 $10,054 Jun-91 $10,080 $9,602 $10,053 $10,046 Jul-91 $10,157 $9,674 $10,193 $10,179 Aug-91 $10,395 $9,901 $10,413 $10,412 Sep-91 $10,614 $10,110 $10,624 $10,628 Oct-91 $10,721 $10,212 $10,743 $10,725 Nov-91 $10,808 $10,294 $10,841 $10,832 Dec-91 $11,200 $10,668 $11,163 $11,193 Jan-92 $10,991 $10,469 $11,011 $11,036 Feb-92 $11,085 $10,558 $11,083 $11,111 Mar-92 $11,018 $10,495 $11,020 $11,055 Apr-92 $11,065 $10,540 $11,100 $11,117 May-92 $11,320 $10,782 $11,309 $11,344 Jun-92 $11,511 $10,964 $11,465 $11,513 Jul-92 $11,791 $11,231 $11,699 $11,812 Aug-92 $11,915 $11,349 $11,817 $11,913 Sep-92 $12,085 $11,511 $11,958 $12,069 Oct-92 $11,901 $11,335 $11,799 $11,875 Nov-92 $11,930 $11,363 $11,802 $11,874 Dec-92 $12,127 $11,551 $11,989 $12,084 Jan-93 $12,382 $11,794 $12,219 $12,353 Feb-93 $12,604 $12,006 $12,433 $12,619 Mar-93 $12,676 $12,074 $12,485 $12,662 Apr-93 $12,757 $12,151 $12,572 $12,759 May-93 $12,769 $12,162 $12,588 $12,760 Jun-93 $13,016 $12,397 $12,816 $13,057 Jul-93 $13,051 $12,431 $12,889 $13,143 Aug-93 $13,312 $12,680 $13,114 $13,454 Sep-93 $13,372 $12,737 $13,150 $13,495 Oct-93 $13,408 $12,771 $13,200 $13,555 Nov-93 $13,192 $12,565 $13,087 $13,397 Dec-93 $13,254 $12,624 $13,158 $13,462 Jan-94 $13,437 $12,799 $13,336 $13,685 Feb-94 $13,081 $12,459 $13,104 $13,379 Mar-94 $12,654 $12,053 $12,781 $13,023 Apr-94 $12,524 $11,929 $12,679 $12,909 May-94 $12,517 $11,923 $12,677 $12,877 Jun-94 $12,474 $11,881 $12,649 $12,846 Jul-94 $12,706 $12,103 $12,901 $13,126 Aug-94 $12,712 $12,109 $12,917 $13,135 Sep-94 $12,503 $11,909 $12,726 $12,920 Oct-94 $12,459 $11,867 $12,715 $12,901 Nov-94 $12,428 $11,838 $12,687 $12,879 Dec-94 $12,534 $11,939 $12,774 $12,972 Jan-95 $12,749 $12,143 $13,027 $13,230 Feb-95 $13,056 $12,436 $13,337 $13,562 Mar-95 $13,130 $12,506 $13,419 $13,661 Apr-95 $13,322 $12,689 $13,606 $13,866 May-95 $13,859 $13,201 $14,133 $14,472 Jun-95 $13,947 $13,285 $14,236 $14,593 Jul-95 $13,902 $13,241 $14,205 $14,533 Aug-95 $14,058 $13,390 $14,376 $14,735 Sep-95 $14,201 $13,527 $14,516 $14,893 Oct-95 $14,441 $13,755 $14,705 $15,103 Nov-95 $14,668 $13,971 $14,925 $15,366 Dec-95 $14,889 $14,182 $15,135 $15,602 Jan-96 $14,952 $14,242 $15,235 $15,701 Feb-96 $14,655 $13,959 $14,970 $15,354 Mar-96 $14,524 $13,834 $14,866 $15,225 Apr-96 $14,392 $13,708 $14,783 $15,112 May-96 $14,344 $13,662 $14,753 $15,085 Jun-96 $14,523 $13,833 $14,951 $15,293 Jul-96 $14,545 $13,855 $14,992 $15,327 Aug-96 $14,525 $13,835 $14,966 $15,285 Sep-96 $14,794 $14,091 $15,227 $15,574 Oct-96 $15,093 $14,376 $15,565 $15,959
- -------------------------------------------------------------------------------- The Lehman Brothers Aggregate Bond Index includes fixed rate debt issues rated investment grade or higher by Moody's, Standard & Poor's or Fitch. The Index includes Government, Corporate, Mortgage-backed and Asset-backed issues. All issues have at least one year to maturity and an outstanding par value of at least $100 million for Government issues and $50 million for all others. Returns are market value weighted. Index information is available on a month-end basis only, therefore the closest month-end to the inception date of the fund has been used. - -------------------------------------------------------------------------------- PERFORMANCE TABLE
Average Annual Cumulative Total Return Total Return Since Since Periods Ending October 31, 1996 1 Year 5 years Inception Inception Lehman Brothers Aggregate Bond Index* 5.85% 7.70% 8.38% 55.65% 50%/50% Composite* 5.70% 8.30% 8.86% 59.59% Investment Quality Bond Fund Class A (at net asset value) 4.52% 7.08% 7.77% 50.93% Investment Quality Bond Fund Class A (net of 4.75% sales charge) -0.45% 6.04% 6.82% 43.76% Investment Quality Bond Fund Class B (at net asset value) 3.92% 6.75% 7.47% 48.63% Investment Quality Bond Fund Class B (net of CDSC**) -1.08% 6.44% 7.34% 47.63% Investment Quality Bond Fund Class C (at net asset value) 3.92% 6.75% 7.47% 48.63% Investment Quality Bond Fund Class C (net of CDSC***) 2.92% 6.75% 7.47% 48.63%
* All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. + Comprised of 50% of the return of the Lehman Brothers Corporate Bond Index and 50% of the return of the Lehman Brothers Government Bond Index. ** The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. *** The returns reflect the applicable Contingent Deferred Sales Charge of 1%. PORTFOLIO MANAGER'S COMMENTARY Over the last twelve months the Federal Reserve lowered short-term interest rates and money market fund rates declined. In contrast, longer term interest rates rose as investors factored in a stronger-than-expected economy. For the fiscal year ended October 31, 1996, the Fund returned 4.52% on a net basis compared to 5.85% for the Lehman Aggregate Bond Index. The Fund operates with a slightly longer duration than this Lehman index, and therefore is more sensitive to interest rate changes in both directions. Since longer term interest rates rose over the period, the Fund experienced a slightly larger principal loss than the index. There have been two major themes in the bond market over the past three years. First, bonds have been very volatile, trading within a range from below 6% to above 8% and reacting swiftly and sharply to relevant economic news releases. At this time it is difficult to forecast a reduction in this bond market volatility. Second, investors have been purchasing large quantities of A-rated corporate bonds, thereby lowering their incremental yield premium over Treasuries from approximately 70 basis points to 60 basis points. We believe this move to corporate bonds foreshadows a period of underperformance which will be triggered by the first hint of economic weakness. We have not purchased 50- 100 year bonds, which we believe are positive for issuers but not for bond investors, and will attempt to manage as high a quality profile as possible given the risk/reward tradeoff. xiii U.S. GOVERNMENT SECURITIES FUND INVESTMENT OBJECTIVE: To seek a high level of current income consistent with preservation of capital and maintenance of liquidity by investing in securities issued or guaranteed by the U.S. Government, its agencies, or instrumentalities. SUBADVISOR: Salomon Brothers Asset Management Inc PORTFOLIO MANAGER: Steven Guterman INCEPTION DATE: August 28, 1989# Change in Value of $10,000 Investment and Comparative Indices [CHART APPEARS HERE] - -------------------------------------------------------------------------------- A line graph showing the growth (including reinvestment of dividends and capital gains) of a $10,000 investment in North American Funds' U.S. Government Securities Fund Class A shares at net asset value on August 28, 1989 through October 31, 1996, as compared with the growth of a $10,000 investment in the Merrill Lynch 1-10 Year Government Index over the same period. The graph also depicts the growth of a $10,000 investment in Class A shares of the U.S. Government Securities Fund on August 28, 1989 through October 31, 1996, assuming the deduction of the maximum 4.75% front-end sales charge at the time of the initial investment and reinvestment of dividends and capital gains at net asset value. The following are the plot points used to draw this line graph. - --------------------------------------------------------------------------------
Growth of $10,000 Invested in Growth of $10,000 Invested in Growth of $10,000 Class A shares at Net Asset Value Class A shares with 4.75% charge Investment in the Merrill Lynch Month Ended of the U.S. Gov't Securities Fund of the U.S. Gov't Securities Fund 1-10 Year Government Index Jul-89 $10,000 $9,525 $10,000 Aug-89 $9,979 $9,505 $10,000 Sep-89 $9,995 $9,520 $10,050 Oct-89 $10,166 $9,683 $10,256 Nov-89 $10,255 $9,767 $10,357 Dec-89 $10,302 $9,812 $10,383 Jan-90 $10,201 $9,716 $10,324 Feb-90 $10,227 $9,742 $10,349 Mar-90 $10,233 $9,747 $10,370 Apr-90 $10,162 $9,680 $10,334 May-90 $10,386 $9,892 $10,552 Jun-90 $10,523 $10,024 $10,690 Jul-90 $10,662 $10,155 $10,843 Aug-90 $10,557 $10,055 $10,796 Sep-90 $10,638 $10,133 $10,894 Oct-90 $10,765 $10,254 $11,046 Nov-90 $10,984 $10,463 $11,211 Dec-90 $11,148 $10,619 $11,370 Jan-91 $11,290 $10,754 $11,485 Feb-91 $11,362 $10,823 $11,545 Mar-91 $11,424 $10,881 $11,608 Apr-91 $11,545 $10,997 $11,728 May-91 $11,614 $11,062 $11,795 Jun-91 $11,611 $11,060 $11,807 Jul-91 $11,789 $11,229 $11,934 Aug-91 $11,969 $11,400 $12,157 Sep-91 $12,149 $11,572 $12,364 Oct-91 $12,258 $11,675 $12,504 Nov-91 $12,366 $11,779 $12,651 Dec-91 $12,638 $12,038 $12,960 Jan-92 $12,490 $11,897 $12,829 Feb-92 $12,570 $11,973 $12,878 Mar-92 $12,471 $11,879 $12,825 Apr-92 $12,624 $12,024 $12,942 May-92 $12,816 $12,207 $13,127 Jun-92 $13,009 $12,391 $13,317 Jul-92 $13,242 $12,613 $13,564 Aug-92 $13,369 $12,734 $13,721 Sep-92 $13,550 $12,907 $13,911 Oct-92 $13,379 $12,744 $13,740 Nov-92 $13,314 $12,681 $13,679 Dec-92 $13,476 $12,836 $13,859 Jan-93 $13,714 $13,063 $14,118 Feb-93 $13,886 $13,227 $14,329 Mar-93 $14,004 $13,339 $14,383 Apr-93 $14,089 $13,420 $14,497 May-93 $14,037 $13,370 $14,454 Jun-93 $14,246 $13,569 $14,661 Jul-93 $14,290 $13,612 $14,691 Aug-93 $14,474 $13,786 $14,916 Sep-93 $14,518 $13,829 $14,980 Oct-93 $14,535 $13,845 $15,006 Nov-93 $14,454 $13,767 $14,934 Dec-93 $14,505 $13,816 $14,992 Jan-94 $14,638 $13,943 $15,142 Feb-94 $14,438 $13,752 $14,927 Mar-94 $14,266 $13,588 $14,718 Apr-94 $14,269 $13,591 $14,618 May-94 $14,257 $13,580 $14,633 Jun-94 $14,231 $13,555 $14,643 Jul-94 $14,396 $13,712 $14,825 Aug-94 $14,444 $13,758 $14,871 Sep-94 $14,268 $13,590 $14,752 Oct-94 $14,226 $13,550 $14,755 Nov-94 $14,190 $13,516 $14,681 Dec-94 $14,274 $13,596 $14,737 Jan-95 $14,512 $13,823 $14,981 Feb-95 $14,812 $14,109 $15,268 Mar-95 $14,899 $14,191 $15,352 Apr-95 $15,063 $14,348 $15,528 May-95 $15,618 $14,876 $15,972 Jun-95 $15,706 $14,960 $16,076 Jul-95 $15,652 $14,909 $16,087 Aug-95 $15,805 $15,054 $16,219 Sep-95 $15,910 $15,154 $16,328 Oct-95 $16,096 $15,331 $16,514 Nov-95 $16,283 $15,510 $16,717 Dec-95 $16,455 $15,673 $16,887 Jan-96 $16,563 $15,776 $17,032 Feb-96 $16,310 $15,535 $16,841 Mar-96 $16,188 $15,419 $16,760 Apr-96 $16,132 $15,365 $16,708 May-96 $16,062 $15,299 $16,698 Jun-96 $16,243 $15,471 $16,862 Jul-96 $16,273 $15,500 $16,914 Aug-96 $16,287 $15,513 $16,932 Sep-96 $16,538 $15,753 $17,147 Oct-96 $16,843 $16,043 $17,426
- -------------------------------------------------------------------------------- The Merrill Lynch 1-10 Year Government Index consists of all those issues in the Government Master Index with a maturity greater than or equal to one year and less than or equal to ten years. When an issue no longer meets the maturity criteria, it is dropped from the index. Index information is available on a month-end basis only, therefore the closest month-end to the inception date of the fund has been used. - -------------------------------------------------------------------------------- PERFORMANCE TABLE
Cumulative Average Annual Total Return Total Return Since Since# Since Since# Periods Ending October 31, 1996 1 Year 5 years Inception Dec 13, 1991 Inception Dec 13, 1991 Merrill Lynch 1-10 Year Government Index* 5.53% 6.86% 8.06% 6.73% 74.26% 37.75% U.S. Government Securities Fund Class A (at net asset value) 4.64% 6.56% 7.54% 6.37% 68.43% 35.23% U.S. Government Securities Fund Class A (net of 4.75% sales charge) -0.33% 5.53% 6.81% 5.32% 60.43% 28.83% U.S. Government Securities Fund Class B (at net asset value) 3.97% 6.23% 7.30% 6.03% 65.80% 33.12% U.S. Government Securities Fund Class B (net of CDSC**) -1.03% 5.91% 7.30% 5.70% 65.80% 31.12% U.S. Government Securities Fund Class C (at net asset value) 3.97% 6.23% 7.30% 6.03% 65.80% 33.12% U.S. Government Securities Fund Class C (net of CDSC***) 2.97% 6.23% 7.30% 6.03% 65.80% 33.12%
* All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. ** The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. *** The returns reflect the applicable Contingent Deferred Sales Charge of 1%. # Current investment manager (subadvisor) assignment became effective 12/13/91. PORTFOLIO MANAGER'S COMMENTARY The fixed income markets closed 1995 on a positive note as a combination of moderate economic growth and benign inflation data helped lift bond prices across the yield curve. The Federal Reserve reduced short-term interest rates by 25 basis points on December 19, 1995 and then again in January, 1996. However, the markets faced a deluge of supply in February. This coupled with strong employment data and comments from Federal Reserve Chairman Greenspan that implied that further easing was unnecessary drove bond prices down. As a result, the interest rate sensitivity of the Fund was reduced in anticipation of further declines in the bond market in the near term. We also added to the Fund's allocation to mortgage-backed securities as we believed that prepayment fears had subsided and market sentiment for the sector improved as higher interest rates ensued. This allocation was maintained through October, 1996 as Federal Reserve policy remained on hold and economic data indicated modest growth. xiv NATIONAL MUNICIPAL BOND FUND INVESTMENT OBJECTIVE: To seek a high level of current income which is exempt from regular federal income taxes, consistent with the preservation of capital, by investing primarily in a portfolio of municipal obligations. The portfolio will not invest in municipal obligations that are rated below investment grade at the time of purchase. SUBADVISOR: Salomon Brothers Asset Management Inc PORTFOLIO MANAGER: MaryBeth Whyte INCEPTION DATE: July 6, 1993 Change in Value of $10,000 Investment and Comparative Indices [CHART APPEARS HERE] - -------------------------------------------------------------------------------- A line graph showing the growth (including reinvestment of dividends and capital gains) of a $10,000 investment in North American Funds' National Municipal Bond Fund Class A shares at net asset value on July 6, 1993 through October 31, 1996, as compared with the growth of a $10,000 investment in the Lehman Brothers Municipal Bond Index over the same period. The graph also depicts the growth of a $10,000 investment in Class A shares of the National Municipal Bond Fund on July 6, 1993 through October 31, 1996, assuming the deduction of the maximum 4.75% front-end sales charge at the time of the initial investment and reinvestment of dividends and capital gains at net asset value. The following are the plot points used to draw this line graph. - --------------------------------------------------------------------------------
Growth of $10,000 Invested in Growth of $10,000 Invested in Growth of $10,000 Class A shares at Net Asset Value Class A shares with 4.75% charge Investment in the Lehman Bros. Month Ended of the National Muni Fund of the National Muni Fund Municipal Bond Index Jun-93 $10,000 $9,525 $10,000 Jul-93 $10,020 $9,544 $10,013 Aug-93 $10,261 $9,774 $10,221 Sep-93 $10,373 $9,881 $10,338 Oct-93 $10,417 $9,922 $10,358 Nov-93 $10,300 $9,811 $10,266 Dec-93 $10,457 $9,960 $10,483 Jan-94 $10,616 $10,112 $10,603 Feb-94 $10,302 $9,813 $10,328 Mar-94 $9,665 $9,206 $9,908 Apr-94 $9,742 $9,280 $9,992 May-94 $9,839 $9,372 $10,078 Jun-94 $9,756 $9,293 $10,020 Jul-94 $9,944 $9,472 $10,200 Aug-94 $9,943 $9,471 $10,236 Sep-94 $9,709 $9,248 $10,086 Oct-94 $9,454 $9,005 $9,907 Nov-94 $9,158 $8,723 $9,727 Dec-94 $9,494 $9,043 $9,945 Jan-95 $9,766 $9,302 $10,226 Feb-95 $10,106 $9,626 $10,523 Mar-95 $10,195 $9,711 $10,644 Apr-95 $10,209 $9,724 $10,656 May-95 $10,587 $10,085 $10,996 Jun-95 $10,435 $9,939 $10,900 Jun-95 $10,514 $10,015 $11,003 Aug-95 $10,649 $10,143 $11,143 Sep-95 $10,717 $10,208 $11,214 Oct-95 $10,897 $10,380 $11,377 Nov-95 $11,147 $10,618 $11,566 Dec-95 $11,273 $10,737 $11,677 Jan-96 $11,307 $10,770 $11,765 Feb-96 $11,227 $10,694 $11,685 Mar-96 $11,055 $10,530 $11,536 Apr-96 $10,998 $10,475 $11,503 May-96 $11,009 $10,486 $11,499 Jun-96 $11,149 $10,619 $11,624 Jul-96 $11,242 $10,708 $11,729 Aug-96 $11,254 $10,719 $11,727 Sep-96 $11,443 $10,899 $11,891 Oct-96 $11,585 $11,035 $12,025
- -------------------------------------------------------------------------------- The Lehman Brothers Municipal Bond is intended to be a benchmark for the long-term, investment-grade tax-exempt bond market. The index consists of approximately 21,000 municipal bonds which are priced by Muller Data Corporation. The bonds must have a minimum credit rating of at least Baa, been issued within the last five years and as part of a deal of at least $50 million, have a maturity of at least one year and an amount outstanding of at least $3 million. Bonds subject to the Alternative Minimum Tax and bonds with floating or zero coupons are excluded. Index information is available on a month-end basis only, therefore the closest month-end to the inception date of the fund has been used. - -------------------------------------------------------------------------------- PERFORMANCE TABLE
Average Annual Cumulative Total Return Total Return Since Since Periods Ending October 31, 1996 1 Year Inception Inception Lehman Brothers Municipal Long Bond Index* 5.70% 5.69% 20.25% National Municipal Bond Fund Class A (at net asset value) 6.31% 4.54% 15.85% National Municipal Bond Fund Class A (net of 4.75% sales charge) 1.26% 3.01% 10.35% National Municipal Bond Fund Class B (at net asset value) 5.41% 3.88% 13.45% National Municipal Bond Fund Class B (net of CDSC**) 0.41% 3.04% 10.45% National Municipal Bond Fund Class C (at net asset value) 5.41% 3.88% 13.44% National Municipal Bond Fund Class C (net of CDSC***) 4.41% 3.88% 13.44%
* All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. ** The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. *** The returns reflect the applicable Contingent Deferred Sales Charge of 1%. PORTFOLIO MANAGER'S COMMENTARY The NAF National Municipal Bond Fund returned 6.31% for the year ending 10/31/96. This compared favorably with the Lehman Brothers Municipal Long Bond Index average which returned 5.70% for the same period. The year began on a strong note for municipals as a combination of moderate economic growth and benign inflation carried bond prices to yearly highs. The rally took place despite a dramatic pick up in new issue volume during the first quarter. Strong technicals, portfolio restructuring and the declining prospects of the flat tax all helped to absorb over $40 billion of new municipals. The rally was derailed in March when a much higher than anticipated increase in employment caused bond prices to fall. Fixed-income prices faltered for the balance of the quarter, but the decline for municipals was not as dramatic as the taxable market. Tax- exempts were able to temper their losses as individual investors returned to the market attracted by higher yields. Further support was lent by insurance companies who were major buyers of municipals due to their continued profitability. Results for fixed-income securities returned to profitability in the third quarter as renewed doubts over the strength of the economy reversed the downward trend for bonds. Positive supply and demand factors allowed municipals to outperform taxables over this time period. However, the better showing by municipals left them trading at near historically rich percentages to Treasuries. The fixed-income rally was sustained in the fourth quarter when a decision by the Federal Reserve not to raise short-term interest rates lifted the market. Nonetheless, municipal gains were muted due to their unfavorable relationship to the taxable market. Looking ahead, municipal new issuance is expected to be robust through the first half of December before quieting down for the holidays. Tax-exempts are likely to underperform taxables through the balance of the year, but may catch up in January. Typically, in January a light new issue calendar combines with an influx of cash from maturities and coupon payments to create a supply/demand imbalance. This occurrence, known as the "January Effect", has often resulted in a scramble for municipals the first weeks of the new year. Market pundits also estimate that total new issue volume for 1997 should be moderately higher than the $160 billion mark of 1996. xv Report of Independent Accountants Annual Report - -------------------------------------------------------------------------------- To the Trustees and Shareholders of North American Funds: We have audited the accompanying statements of assets and liabilities of North American Funds (the "Funds") (comprising, the Small/Mid Cap, International Small Cap, Growth Equity, Global Equity (formerly Global Growth), Value Equity (formerly Growth), Growth and Income, International Growth and Income, Balanced (formerly Asset Allocation), Strategic Income, Investment Quality Bond, U.S. Government Securities, National Municipal Bond and Money Market Funds), including the portfolios of investments, as of October 31, 1996, the related statements of operations, the statements of changes in net assets and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 1996 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentations. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the portfolios comprising the North American Funds as of October 31, 1996, the results of their operations, the changes in their net assets and the financial highlights for each of the periods indicated therein, in conformity with generally accepted accounting principles. /s/ Coopers & Lybrand L.L.P. Coopers & Lybrand L.L.P. Boston, Massachusetts December 20, 1996 1 NORTH AMERICAN FUNDS STATEMENTS OF ASSETS AND LIABILITIES - OCTOBER 31, 1996 - --------------------------------------------------------------------------------
International Small/Mid Cap Small Cap Growth Equity Global Equity Fund Fund Fund Fund ---------------- -------------- -------------- --------------- ASSETS Investments in securities, at value* (Includes repurchase agreements of $2,528,000 and $1,871,000 in the International Small Cap and Growth Equity Funds, respectively) (See accompanying portfolio of investments)...................................... $17,566,949 $12,514,544 $13,279,520 $111,570,121 Receivable for forward foreign currency contracts to sell (Notes 2 and 7).............................. ---- 126,897 ---- ---- Forward foreign currency contracts to buy, at value (Cost: $285,122 and $1,518,819 in the International Small Cap and Global Equity Funds, respectively) (Notes 2 and 7)................................... ---- 287,599 ---- 1,516,911 Cash................................................ 4 170,949 529 278 Foreign currency (Cost: $30,312, $1,158 and $7,096,918 in the International Small Cap, Growth Equity and Global Equity Funds, respectively)................ ---- 30,326 1,165 7,031,546 Receivables: Investments sold.............................. 86,528 126,906 135,475 219,900 Fund shares sold.............................. 418,234 145,259 467,993 143,590 Dividends..................................... 1,241 10,602 43,781 194,174 Interest...................................... 3,774 333 247 137 Foreign tax withholding reclaim............... ---- 3,284 4 64,802 From adviser (Note 5)......................... 9,257 2,625 1,761 2,470 Other assets........................................ 16,570 16,384 15,869 14,140 ----------- ----------- ----------- ------------ Total assets............................. 18,102,557 13,435,708 13,946,344 120,758,069 ----------- ----------- ----------- ------------ LIABILITIES Forward foreign currency contracts to sell, at value (Cost: $126,897) (Notes 2 and 7).................. ---- 126,906 ---- ---- Payables: Forward foreign currency contracts to buy (Notes 2 and 7)............................. ---- 285,122 ---- 1,518,819 Investments purchased......................... 204,572 288,843 437,601 2,415,886 Fund shares redeemed.......................... ---- 4,970 1,785 198,580 Dividend and interest withholding tax......... ---- 1,712 66 15,087 Investment adviser............................ 13,946 10,918 9,808 90,601 Custodian and transfer agent fees............. 12,079 8,776 7,398 43,212 Other accrued expenses........................ 5,875 3,789 3,640 60,958 ----------- ----------- ----------- ------------ Total liabilities........................ 236,472 731,036 460,298 4,343,143 ----------- ----------- ----------- ------------ NET ASSETS.......................................... $17,866,085 $12,704,672 $13,486,046 $116,414,926 =========== =========== =========== ============ Net assets consist of: Accumulated undistributed net investment income (loss) (Note 2)...................... ---- $4,522 $240,392 ($256,903) Accumulated undistributed net realized gain (loss) on investments....................... ($771,607) (58,234) (426,568) 12,643,301 Unrealized appreciation (depreciation) on: Investments................................. 596,162 359,247 703,285 (798,731) Foreign currency and forward foreign currency contracts................................. ---- 222 12 (80,065) Capital shares at par value of $.001 (Note 3). 1,419 950 982 8,075 Additional paid-in capital.................... 18,040,111 12,397,965 12,967,943 104,899,249 ----------- ----------- ----------- ------------ Net assets............................... $17,866,085 $12,704,672 $13,486,046 $116,414,926 =========== =========== =========== ============ *Investments in securities, at identified cost (Note 2)............................. $16,970,787 $12,155,297 $12,576,235 $112,368,852 =========== =========== =========== ============
The accompanying notes are an integral part of the financial statements. 2 NORTH AMERICAN FUNDS STATEMENTS OF ASSETS AND LIABILITIES continued- OCTOBER 31, 1996 - -------------------------------------------------------------------------------
International Small/Mid Cap Small Cap Growth Equity Global Equity Fund Fund Fund Fund ---------------- -------------- -------------- --------------- NET ASSET VALUES Class A Shares Net assets at value............................... $2,965,850 $2,120,184 $2,244,023 $25,924,117 Shares outstanding................................ 234,954 157,851 162,826 1,788,038 Net asset value (NAV) and redemption price per share.............................................. $12.62 $13.43 $13.78 $14.50 ------ ------ ------ ------ Public offering price per share (100/95.25 of NAV) On sales of $100,000 or more the offering price is reduced........................................ $13.25 $14.10 $14.47 $15.22 ------ ------ ------ ------ Class B Shares Net assets at value............................... $6,658,807 $5,067,948 $4,748,277 $25,661,317 Shares outstanding................................ 529,111 378,970 345,868 1,786,687 Net asset value, offering price and redemption price per share................................... $12.58 $13.37 $13.73 $14.36 ------ ------ ------ ------ Class C Shares Net assets at value............................... $8,241,428 $5,516,540 $6,493,746 $64,829,492 Shares outstanding................................ 654,464 412,466 472,932 4,500,203 Net asset value, offering price and redemption price per share................................... $12.59 $13.37 $13.73 $14.41 ------ ------ ------ ------
The accompanying notes are an integral part of the financial statements. 3 NORTH AMERICAN FUNDS STATEMENTS OF ASSETS AND LIABILITIES - OCTOBER 31, 1996 - -------------------------------------------------------------------------------
Value International Equity Growth and Growth and Balanced Fund Income Fund Income Fund Fund ---------------- -------------- -------------- ------------- ASSETS Investments in securities, at value* (See accompanying portfolio of investments)......................... $139,653,436 $127,361,334 $28,480,817 $102,351,482 Receivable for forward foreign currency contracts to sell (Notes 2 and 7)................................... ------ ------ 6,336,393 ------ Forward foreign currency contracts to buy, at value (Cost: $2,635,577) (Notes 2 and 7)................ ------ ------ 2,631,199 ------ Cash................................................ 55,615 80 72,120 11,483 Foreign currency (Cost: $1,818 and $127,146 in the Growth and Income and International Growth and Income Funds, respectively)....................... ------ 1,693 127,283 ------ Receivables: Investments sold.............................. 589,858 2,127,750 326,422 ------ Fund shares sold.............................. 220,733 139,768 125,663 69,794 Dividends..................................... 223,588 231,875 55,141 39,547 Interest...................................... ------ 216 115,512 422,179 Foreign tax withholding reclaim............... ------ ------ 40,271 ------ From adviser (Note 5)......................... ------ 8,585 2,273 1,005 Deferred organization expenses (Note 2)............. ------ ------ 5,184 ------ Other assets........................................ 16,869 15,274 8,325 15,282 ------------ ------------ ----------- ------------ Total assets............................. 140,760,099 129,886,575 38,326,603 102,910,772 ------------ ------------ ----------- ------------ LIABILITIES Forward foreign currency contracts to sell, at value (Cost: $6,336,393) (Notes 2 and 7)................ ------ ------ 6,242,128 ------ Payables: Forward foreign currency contracts to buy (Notes 2 and 7)............................. ------ ------ 2,635,577 ------ Investments purchased......................... 1,030,978 1,680,225 327,954 2,803,420 Fund shares redeemed.......................... 158,382 211,604 41,419 62,260 Dividend and interest withholding tax......... ------ 1,981 8,783 1,594 Investment adviser............................ 89,670 74,609 22,140 58,106 Custodian and transfer agent fees............. 39,147 29,937 11,490 26,680 Other accrued expenses........................ 58,736 51,450 11,958 45,243 ------------ ------------ ----------- ------------ Total liabilities........................ 1,376,913 2,049,806 9,301,449 2,997,303 ------------ ------------ ----------- ------------ NET ASSETS.......................................... $139,383,186 $127,836,769 $29,025,154 $99,913,469 ============ ============ =========== ============ Net assets consist of: Accumulated undistributed net investment income (loss) (Note 2)...................... $454,658 $270,481 $263,235 $2,461,605 Accumulated undistributed net realized gain on investments.............................. 28,952,740 7,687,354 1,939,578 9,227,246 Unrealized appreciation (depreciation) on: Investments................................. 2,144,936 26,351,956 620,876 7,575,355 Foreign currency and forward foreign currency contracts................................. ------ (125) 91,019 153 Capital shares at par value of $.001 (Note 3). 8,066 7,288 2,566 8,101 Additional paid-in capital.................... 107,822,786 93,519,815 26,107,880 80,641,009 ------------ ------------ ----------- ------------ Net assets............................... $139,383,186 $127,836,769 $29,025,154 $99,913,469 ============ ============ =========== ============ *Investments in securities, at identified cost (Note 2) $137,508,500 $101,009,378 $27,859,941 $94,776,127 ============ ============ =========== ============
The accompanying notes are an integral part of the financial statements. 4 NORTH AMERICAN FUNDS STATEMENTS OF ASSETS AND LIABILITIES continued - OCTOBER 31, 1996 - -------------------------------------------------------------------------------
Value International Equity Growth and Growth and Balanced Fund Income Fund Income Fund Fund ---------------- -------------- -------------- --------------- NET ASSET VALUES Class A Shares Net assets at value............................... $28,470,030 $18,271,820 $4,732,428 $10,872,866 Shares outstanding................................ 1,638,828 1,040,832 416,908 881,735 Net asset value (NAV) and redemption price per share $17.37 $17.56 $11.35 $12.33 ------ ------ ------ ------ Public offering price per share (100/95.25 of NAV) On sales of $100,000 or more the offering price is reduced........................................ $18.24 $18.44 $11.92 $12.94 ------ ------ ------ ------ Class B Shares Net assets at value............................... $27,058,047 $34,740,191 $15,217,086 $16,219,131 Shares outstanding................................ 1,571,748 1,985,111 1,346,082 1,322,501 Net asset value, offering price and redemption price per share................................... $17.22 $17.50 $11.30 $12.26 ------ ------ ------ ------ Class C Shares Net assets at value............................... $83,855,109 $74,824,758 $9,075,640 $72,821,472 Shares outstanding................................ 4,854,997 4,261,109 802,784 5,896,688 Net asset value, offering price and redemption price per share................................... $17.27 $17.56 $11.31 $12.35 ------ ------ ------ ------
The accompanying notes are an integral part of the financial statements. 5 NORTH AMERICAN FUNDS STATEMENTS OF ASSETS AND LIABILITIES - OCTOBER 31, 1996 - -------------------------------------------------------------------------------
Investment U.S. National Strategic Quality Government Municipal Income Bond Securities Bond Money Market Fund Fund Fund Fund Fund -------------- -------------- -------------- --------------- ------------ ASSETS Investments in securities, at value* (Includes repurchase agreements of $17,719,000 and $17,719,000 in the U.S. Government Securities Fund) (See accompanying portfolio of investments)...................................... $66,650,975 $20,834,493 $147,582,827 $19,549,903 $21,950,653 Receivable for forward foreign currency contracts to sell (Notes 2 and 7).............................. 4,570,572 ---- ---- ---- ---- Forward foreign currency contracts to buy, at value (Cost: $2,589,313) (Notes 2 and 7)................ 2,586,569 ---- ---- ---- ---- Cash................................................ 36,486 17,026 2,644 59,163 1,219 Foreign currency (Cost: $36)........................ 38 ---- ---- ---- ---- Receivables: Investments sold.............................. 1,006,279 464,852 28,800,961 ---- ---- Fund shares sold.............................. 375,726 10,170 50,652 160,872 230,167 Dividends..................................... 867 ---- ---- ---- ---- Interest...................................... 1,224,478 393,074 651,932 316,144 15,163 From adviser (Note 5)......................... ---- 1,949 35,443 2,340 8,021 Deferred organization expenses (Note 2)............. 5,025 ---- ---- 4,375 ---- Other assets........................................ 14,933 9,014 12,851 5,951 14,966 ----------- ----------- ------------ ----------- ----------- Total assets............................. 76,471,948 21,730,578 177,137,310 20,098,748 22,220,189 ----------- ----------- ------------ ----------- ----------- LIABILITIES Forward foreign currency contracts to sell, at value (Cost: $4,570,572) (Notes 2 and 7)................ 4,620,143 ---- ---- ---- ---- Payables: Forward foreign currency contracts to buy (Notes 2 and 7)............................. 2,589,313 ---- ---- ---- ---- Investments purchased......................... 1,884,904 371,975 64,427,811 497,600 788,693 Fund shares redeemed.......................... 82,903 41,008 161,609 10,000 407,886 Dividends..................................... 153,536 14,035 155,797 29,871 8,466 Dividend and interest withholding tax......... 559 ---- ---- ---- ---- Investment adviser............................ 41,869 10,664 64,489 9,934 4,445 Custodian and transfer agent fees............. 14,924 6,340 22,378 8,915 11,261 Other accrued expenses........................ 27,422 9,802 52,949 8,975 10,309 Deferred mortgage dollar roll income................ 902 ---- 25,123 ---- ---- ----------- ----------- ------------ ----------- ----------- Total liabilities........................ 9,416,475 453,824 64,910,156 565,295 1,231,060 ----------- ----------- ------------ ----------- ----------- NET ASSETS.......................................... $67,055,473 $21,276,754 $112,227,154 $19,533,453 $20,989,129 =========== =========== ============ =========== =========== Net assets consist of: Accumulated undistributed net investment income (loss) (Note 2)....................... $708,280 $24,735 ($383,354) ($569) ---- Accumulated undistributed net realized gain (loss) on investments....................... 1,284,537 (560,604) (2,294,981) (425,240) ---- Unrealized appreciation (depreciation) on: Investments................................. 1,107,614 159,068 (218,179) 532,036 ---- Foreign currency and forward foreign currency contracts........................ (52,239) ---- ---- ---- ---- Capital shares at par value of $.001 (Note 3). 6,840 2,059 11,450 2,007 $20,989 Additional paid-in capital.................... 64,000,441 21,651,496 115,112,218 19,425,219 20,968,140 ----------- ----------- ------------ ----------- ----------- Net assets............................... $67,055,473 $21,276,754 $112,227,154 $19,533,453 $20,989,129 =========== =========== ============ =========== =========== *Investments in securities, at identified cost (Note 2)......................................... $65,543,361 $20,675,425 $147,801,006 $19,017,867 $21,950,653 =========== =========== ============ =========== ===========
The accompanying notes are an integral part of the financial statements. 6 NORTH AMERICAN FUNDS STATEMENTS OF ASSETS AND LIABILITIES continued - OCTOBER 31, 1996 - --------------------------------------------------------------------------------
Investment U.S. Quality Government National Strategic Bond Securities Municipal Bond Money Market Income Fund Fund Fund Fund Fund --------------- -------------- -------------- --------------- --------------- NET ASSET VALUES Class A Shares Net assets at value............................... $13,381,714 $9,056,178 $72,774,179 $7,710,387 $8,086,668 Shares outstanding................................ 1,364,948 875,794 7,425,475 792,318 8,086,668 Net asset value (NAV) and redemption price per share $9.80 $10.34 $9.80 $9.73 $1.00 ----- ------ ----- ----- ----- Public offering price per share (100/95.25 of NAV) On sales of $100,000 or more the offering price is reduced........................................ $10.29 $10.86 $10.29 $10.22 --- ----- ------ ----- ----- ----- Class B Shares Net assets at value............................... $30,890,474 $4,677,736 $19,443,843 $6,129,958 $3,062,351 Shares outstanding................................ 3,151,002 452,815 1,983,872 629,916 3,062,351 Net asset value, offering price and redemption price per share................................... $9.80 $10.33 $9.80 $9.73 $1.00 ----- ------ ----- ----- ----- Class C Shares Net assets at value............................... $22,783,285 $7,542,840 $20,009,132 $5,693,108 $9,840,110 Shares outstanding................................ 2,324,147 730,094 2,041,634 585,040 9,840,110 Net asset value, offering price and redemption price per share................................... $9.80 $10.33 $9.80 $9.73 $1.00 ----- ------ ----- ----- -----
The accompanying notes are an integral part of the financial statements. 7 NORTH AMERICAN FUNDS STATEMENTS OF OPERATIONS - FOR THE YEAR ENDED OCTOBER 31, 1996 - --------------------------------------------------------------------------------
International Small/Mid Small Cap Growth Equity Global Equity Cap Fund* Fund* Fund* Fund ---------------- -------------- -------------- --------------- Investment Income: Interest................................................... $74,250 $63,471 $37,347 $166,454 Dividends (Net of $195, $6,585, $555 and $181,306 withholding tax in the Small/Mid Cap, International Small Cap, Growth Equity and Global Equity Funds, respectively)............................................ 11,545 44,601 245,845 1,744,798 ----------- ---------- ----------- ------------ Total income........................................ 85,795 108,072 283,192 1,911,252 ----------- ---------- ----------- ------------ Expenses: Distribution for Class A................................... 4,983 3,423 4,388 92,463 Distribution for Class B................................... 26,559 17,639 15,450 264,577 Distribution for Class C................................... 27,816 18,263 17,304 776,515 Investment adviser fee (Note 5)............................ 63,467 47,966 40,762 1,174,747 Custodian fee.............................................. 15,822 10,293 9,885 116,022 Transfer agent fee......................................... 30,594 20,207 16,619 285,425 Accounting/administration.................................. 11,178 7,240 7,075 233,745 Audit and legal fees....................................... 3,614 2,359 2,278 53,859 Miscellaneous.............................................. 19,709 19,581 18,614 61,281 ----------- ---------- ----------- ------------ Expenses before reimbursement by investment adviser.................................... 203,742 146,971 132,375 3,058,634 Reimbursement of expenses by investment adviser (Note 5).............................. 53,449 36,767 36,356 85,386 ----------- ---------- ----------- ------------ Net expenses........................................ 150,293 110,204 96,019 2,973,248 ----------- ---------- ----------- ------------ Net investment income (loss)........................ (64,498) (2,132) 187,173 (1,061,996) ----------- ---------- ----------- ------------ Realized and unrealized gain (loss) on investments and foreign currency: Net realized gain (loss) on: Investment transactions.................................. (771,607) (62,589) (423,274) 20,253,188 Foreign currency and forward foreign currency contracts..................................... ------ (2,661) (4,508) (2,845,571) Change in unrealized appreciation (depreciation) on: Investments.............................................. 596,162 359,247 703,285 (8,931,531) Translation of foreign currency and forward foreign currency contracts............................. ------ 222 12 384,459 ----------- ---------- ----------- ------------ Net gain (loss) on investments and foreign currency.................................. (175,445) 294,219 275,515 8,860,545 ----------- ---------- ----------- ------------ Net increase (decrease) in net assets resulting from operations.................................... ($239,943) $292,087 $462,688 $7,798,549 =========== ========== =========== ============
* For the period March 4, 1996 (commencement of operations) to October 31, 1996. The accompanying notes are an integral part of the financial statements. 8 NORTH AMERICAN FUNDS STATEMENTS OF OPERATIONS - FOR THE YEAR ENDED OCTOBER 31, 1996 - --------------------------------------------------------------------------------
Value International Equity Growth and Growth and Balanced Fund Income Fund Income Fund Fund -------------- ------------- ------------- ------------ Investment Income: Interest (Net of $1,444 and $1,687 withholding tax in the International Growth and Income and Balanced Funds, respectively)...................... $419,617 $171,438 $222,679 $3,529,754 Dividends (Net of $2,226, $14,199, $75,605 and $543 withholding tax in the Value Equity, Growth and Income, International Growth and Income and Balanced Funds, respectively)...................... 2,714,831 2,577,625 533,059 1,256,701 ----------- ----------- ---------- ----------- Total income.................................. 3,134,448 2,749,063 755,738 4,786,455 ----------- ----------- ---------- ----------- Expenses: Distribution for Class A............................. 90,493 52,788 18,796 37,745 Distribution for Class B............................. 243,765 280,833 128,706 132,045 Distribution for Class C............................. 847,265 694,153 80,388 787,578 Investment adviser fee (Note 5)...................... 936,036 784,990 236,517 718,609 Custodian fee........................................ 54,133 48,632 36,024 44,649 Transfer agent fee................................... 288,827 226,998 66,887 186,807 Accounting/administration............................ 235,995 193,803 44,219 182,453 Audit and legal fees................................. 52,289 43,865 10,284 40,102 Amortization of deferred organization expenses (Note 2)........................................... ---- 627 1,093 ---- Miscellaneous........................................ 45,616 46,609 25,372 37,597 ----------- ----------- ---------- ----------- Expenses before reimbursement by investment adviser.............................. 2,794,419 2,373,298 648,286 2,167,585 Reimbursement of expenses by investment adviser (Note 5)........................ 276,729 230,424 51,773 192,010 ----------- ----------- ---------- ----------- Net expenses.................................. 2,517,690 2,142,874 596,513 1,975,575 ----------- ----------- ---------- ----------- Net investment income......................... 616,758 606,189 159,225 2,810,880 ----------- ----------- ---------- ----------- Realized and unrealized gain on investments, futures and foreign currency: Net realized gain (loss) on: Investment transactions............................ 28,962,312 7,749,188 3,404,649 9,535,049 Futures contracts.................................. ---- ---- ---- (80,559) Foreign currency and forward foreign currency contracts............................... (6,379) (40,894) (986,073) (1,438) Change in unrealized appreciation (depreciation) on: Investments........................................ (6,846,565) 12,987,230 947,754 (344,241) Futures contracts.................................. ---- ---- ---- 4,372 Translation of foreign currency and forward foreign currency contracts....................... ---- 261 (284,107) 153 ----------- ----------- ---------- ----------- Net gain on investments, futures and foreign currency........................ 22,109,368 20,695,785 3,082,223 9,113,336 ----------- ----------- ---------- ----------- Net increase in net assets resulting from operations.............................. $22,726,126 $21,301,974 $3,241,448 $11,924,216 =========== =========== ========== ===========
The accompanying notes are an integral part of the financial statements. 9 NORTH AMERICAN FUNDS STATEMENTS OF OPERATIONS-FOR THE YEAR ENDED OCTOBER 31, 1996 - --------------------------------------------------------------------------------
Investment U.S. National Strategic Quality Government Municipal Money Income Bond Securities Bond Market Fund Fund Fund Fund Fund ---------------- -------------- -------------- --------------- ------------- Investment Income: Interest (Net of $1,440 withholding tax in the Strategic Income Fund)........................ $5,435,110 $1,618,282 $8,041,807 $1,209,111 $1,057,116 ----------- ----------- ------------ ----------- ----------- Expenses: Distribution for Class A........................ 39,987 34,096 268,717 11,631 ------ Distribution for Class B........................ 263,335 44,719 186,537 61,124 ------ Distribution for Class C........................ 179,766 70,534 201,379 63,682 ------ Investment adviser fee (Note 5)................. 415,019 127,602 693,407 121,407 38,258 Custodian fee................................... 50,839 9,307 50,227 8,844 7,652 Transfer agent fee.............................. 91,637 50,845 183,036 22,757 65,888 Accounting/administration....................... 94,844 37,363 205,184 35,314 35,035 Audit and legal fees............................ 22,527 8,313 42,716 7,760 9,373 Amortization of deferred organization expenses (Note 2)...................................... 2,522 623 ------ 2,522 ------ Miscellaneous................................... 32,122 25,203 41,369 34,274 32,184 ----------- ----------- ------------ ----------- ----------- Expenses before reimbursement by investment adviser......................... 1,192,598 408,605 1,872,572 369,315 188,390 Reimbursement of expenses by investment adviser (Note 5)................... 70,527 68,031 178,182 62,877 92,710 ----------- ----------- ------------ ----------- ----------- Net expenses............................. 1,122,071 340,574 1,694,390 306,438 95,680 ----------- ----------- ------------ ----------- ----------- Net investment income.................... 4,313,039 1,277,708 6,347,417 902,673 961,436 ----------- ----------- ------------ ----------- ----------- Realized and unrealized gain (loss) on investments and foreign currency: Net realized gain on: Investment transactions....................... 2,401,213 137,744 692,635 51,281 ------ Foreign currency and forward foreign currency contracts.......................... 80,533 ------ ------ ------ ------ Change in unrealized appreciation (depreciation) on: Investments............................... 1,743,690 (529,084) (2,144,261) 134,956 ------ Translation of foreign currency and forward foreign currency contracts.................. 56,961 ------ ------ ------ ------ ----------- ----------- ------------ ----------- ----------- Net gain (loss) on investments and foreign currency....................... 4,282,397 (391,340) (1,451,626) 186,237 ------ ----------- ----------- ------------ ----------- ----------- Net increase in net assets resulting from operations......................... $8,595,436 $886,368 $4,895,791 $1,088,910 $961,436 =========== =========== ============ =========== ===========
The accompanying notes are an integral part of the financial statements. 10 NORTH AMERICAN FUNDS STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
Small/Mid Cap International Growth Equity Fund Small Cap Fund Fund ----------------- ------------------- ------------------- 03/04/96* 03/04/96* 03/04/96* to to to 10/31/96 10/31/96 10/31/96 ----------------- ------------------- ------------------- Increase (decrease) in net assets: Operations: Net investment income (loss)........ ($64,498) ($2,132) $187,173 Net realized gain (loss) on: Investment transactions........... (771,607) (62,589) (423,274) Foreign currency and forward foreign currency contracts.............. ------ (2,661) (4,508) Change in unrealized appreciation (depreciation) on: Investments....................... 596,162 359,247 703,285 Foreign currency and forward foreign currency contracts.............. ------ 222 12 --------------- ---------------- ----------------- Net increase (decrease) in net assets resulting from operations............ (239,943) 292,087 462,688 Net equalization credits (charges) (Note 2) ------ 4,522 54,433 Distribution to shareholders from: Net investment income Class A........................... ------ ------ ------ Class B........................... ------ ------ ------ Class C........................... ------ ------ ------ Net realized gains on investments and foreign currency transactions Class A........................... ------ ------ ------ Class B........................... ------ ------ ------ Class C........................... ------ ------ ------ Increase (decrease) in net assets from capital share transactions (Note 3).. 18,106,028 12,408,063 12,968,925 --------------- ---------------- ----------------- Increase (decrease) in net assets...... 17,866,085 12,704,672 13,486,046 Net assets at beginning of period...... ------ ------ ------ --------------- ---------------- ----------------- Net assets at end of period............ $17,866,085 $12,704,672 $13,486,046 =============== ================ ================= Accumulated undistributed net investment income (loss)............. ------ $4,522 $240,392 =============== ================ =================
Global Equity Fund (formerly, the Global Growth Fund) ------------------------------- Year Year Ended Ended 10/31/96 10/31/95 --------------- --------------- Increase (decrease) in net assets: Operations: Net investment income (loss)........ ($1,061,996) ($700,789) Net realized gain (loss) on: Investment transactions........... 20,253,188 (3,295,215) Foreign currency and forward foreign currency contracts.............. (2,845,571) 1,789,553 Change in unrealized appreciation (depreciation) on: Investments....................... (8,931,531) (2,565,015) Foreign currency and forward foreign currency contracts.............. 384,459 (137,518) ------------- -------------- Net increase (decrease) in net assets resulting from operations............ 7,798,549 (4,908,984) Net equalization credits (charges) (Note 2) (222,342) (34,561) Distribution to shareholders from: Net investment income Class A........................... (370,905) ----- Class B........................... (247,709) ----- Class C........................... (588,999) ----- Net realized gains on investments and foreign currency transactions Class A........................... ----- (277,128) Class B........................... ----- (2,291,951) Class C........................... ----- (1,476,968) Increase (decrease) in net assets from capital share transactions (Note 3).. (20,505,106) 6,043,444 ------------- -------------- Increase (decrease) in net assets...... (14,136,512) (2,946,148) Net assets at beginning of period...... 130,551,438 133,497,586 ------------- -------------- Net assets at end of period............ $116,414,926 $130,551,438 ============= ============== Accumulated undistributed net investment income (loss)............. ($256,903) $1,556,196 ============= ==============
- -------------------------------- * Commencement of operations The accompanying notes are an integral part of the financial statements. 11 NORTH AMERICAN FUNDS STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
Value Equity Fund (formerly, the Growth Fund) Growth and Income Fund ---------------------------- ------------------------------- Year Year Year Year Ended Ended Ended Ended 10/31/96 10/31/95 10/31/96 10/31/95 ------------- -------------- --------------- --------------- Increase in net assets: Operations: Net investment income............... $616,758 $281,091 $606,189 $977,895 Net realized gain (loss) on: Investment transactions........... 28,962,312 10,219,108 7,749,188 716,372 Foreign currency and forward foreign currency contracts.............. (6,379) ------ (40,894) 102,753 Change in unrealized appreciation (depreciation) on: Investments....................... (6,846,565) 3,234,064 12,987,230 9,980,846 Foreign currency and forward foreign currency contracts.............. ------ ------ 261 (386) ------------ ------------- -------------- -------------- Net increase in net assets resulting from operations............ 22,726,126 13,734,263 21,301,974 11,777,480 Net equalization credits (Note 2)...... 44,707 21,466 14,902 83,756 Distribution to shareholders from: Net investment income Class A........................... (216,448) ------ (186,049) (161,680) Class B........................... (118,093) ------ (205,020) (104,194) Class C........................... (187,978) ------ (430,616) (570,011) Net realized gains on investments and foreign currency transactions Class A........................... (1,874,732) (890,547) (105,286) (193,161) Class B........................... (1,711,898) (316,510) (184,505) (109,460) Class C........................... (6,634,855) (3,831,715) (525,694) (1,083,890) Increase in net assets from capital share transactions (Note 3).......... 1,737,386 24,302,675 13,771,553 26,649,617 ------------ ------------- ------------- -------------- Increase in net assets................. 13,764,215 33,019,632 33,451,259 36,288,457 Net assets at beginning of period...... 125,618,971 92,599,339 94,385,510 58,097,053 ------------ ------------- ------------- -------------- Net assets at end of period............ $139,383,186 $125,618,971 $127,836,769 $94,385,510 ============ ============= ============= ============== Accumulated undistributed net investment income (loss)............. $454,658 $322,091 $270,481 $452,599 ============ ============= ============= ==============
International Growth and Income Fund ----------------------------- Year 1/09/95* Ended to 10/31/96 10/31/95 -------------- -------------- Increase in net assets: Operations: Net investment income............... $159,225 $39,864 Net realized gain (loss) on: Investment transactions........... 3,404,649 275,761 Foreign currency and forward foreign currency contracts.............. (986,073) (260,048) Change in unrealized appreciation (depreciation) on: Investments....................... 947,754 (326,878) Foreign currency and forward foreign currency contracts.............. (284,107) 375,126 ------------- -------------- Net increase in net assets resulting from operations............ 3,241,448 103,825 Net equalization credits (Note 2)...... 6,318 ------ Distribution to shareholders from: Net investment income Class A........................... (56,090) (14,446) Class B........................... (52,389) (14,765) Class C........................... (34,562) (12,260) Net realized gains on investments and foreign currency transactions Class A........................... (75,054) ------ Class B........................... (104,218) ------ Class C........................... (73,099) ------ Increase in net assets from capital share transactions (Note 3).......... 4,531,170 21,579,276 ------------- -------------- Increase in net assets................. 7,383,524 21,641,630 Net assets at beginning of period...... 21,641,630 ------ ============= ============== $29,025,154 $21,641,630 ============= ============== Accumulated undistributed net investment income (loss)............. $263,235 ($231,087) ============= ==============
- --------------------------------- * Commencement of operations The accompanying notes are an integral part of the financial statements. 12 NORTH AMERICAN FUNDS STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
Balanced Fund (formerly, the Asset Allocation Fund) Strategic Income Fund ----------------------------- ------------------------------ Year Year Year Year Ended Ended Ended Ended 10/31/96 10/31/95 10/31/96 10/31/95 -------------- -------------- -------------- --------------- Increase (decrease) in net assets: Operations: Net investment income............... $ 2,810,880 $ 2,757,769 $ 4,313,039 $ 2,961,902 Net realized gain (loss) on: Investment transactions........... 9,535,049 6,529,806 2,401,213 264,926 Futures contracts................. (80,559) 2,303 ------ ------ Foreign currency and forward foreign currency contracts.............. (1,438) ------ 80,533 (83,304) Change in unrealized appreciation (depreciation) on: Investments....................... (344,241) 5,539,360 1,743,690 919,881 Futures contracts................. 4,372 (4,372) ------ ------ Foreign currency and forward foreign currency contracts.............. 153 ------ 56,961 (109,134) ------------- ------------- ------------- -------------- Net increase in net assets resulting from operations............ 11,924,216 14,824,866 8,595,436 3,954,271 Net equalization credits (charges) (Note 2) 7,941 (54,967) ------ ------ Distribution to shareholders from: Net investment income Class A........................... (342,751) (235,768) (944,160) (974,298) Class B........................... (316,830) (110,719) (2,001,770) (1,054,898) Class C........................... (2,066,083) (1,850,266) (1,367,107) (930,449) Net realized gains on investments, futures and foreign currency transactions Class A........................... (646,271) (362,509) ------ ------ Class B........................... (692,368) (237,460) ------ ------ Class C........................... (4,999,304) (3,967,004) ------ ------ Increase (decrease) in net assets from capital share transactions (Note 3).. (3,488,924) (6,965,262) 17,786,584 14,605,227 ------------- ------------- ------------- -------------- Increase (decrease) in net assets...... (620,374) 1,040,911 22,068,983 15,599,853 Net assets at beginning of period...... 100,533,843 99,492,932 44,986,490 29,386,637 ------------- ------------- ------------- -------------- Net assets at end of period............ $ 99,913,469 $ 100,533,843 $ 67,055,473 $ 44,986,490 ============= ============= ============= ============= Accumulated undistributed net investment income (loss)............. $ 2,461,605 $ 2,141,058 $ 708,280 ($35,848) ============= ============= ============= =============
Investment Quality Bond Fund ---------------------------- Year Year Ended Ended 10/31/96 10/31/95 ------------- ------------- Increase (decrease) in net assets: Operations: Net investment income............... $ 1,277,708 $ 1,065,675 Net realized gain (loss) on: Investment transactions........... 137,744 24,835 Futures contracts................. ------ ------ Foreign currency and forward foreign currency contracts.............. ------ ------ ------------- -------------- Change in unrealized appreciation (depreciation) on: Investments....................... (529,084) 1,318,370 Futures contracts................. ------ ------ Foreign currency and forward foreign currency contracts.............. ------ ------ Net increase in net assets resulting from operations............ 886,368 2,408,880 Net equalization credits (charges) (Note 2) 3,940 20,893 Distribution to shareholders from: Net investment income Class A........................... (633,961) (701,998) Class B........................... (264,717) (110,088) Class C........................... (418,906) (255,000) Net realized gains on investments, futures and foreign currency transactions Class A........................... ------ ------ Class B........................... ------ ------ Class C........................... ------ ------ Increase (decrease) in net assets from capital share transactions (Note 3).. 681,354 5,614,479 ------------- -------------- Increase (decrease) in net assets...... 254,078 6,977,166 Net assets at beginning of period...... 21,022,676 14,045,510 ------------- -------------- Net assets at end of period............ $ 21,276,754 $ 21,022,676 ============= ============== Accumulated undistributed net investment income (loss)............. $ 24,735 $ 46,769 ============= ==============
The accompanying notes are an integral part of the financial statements. 13 NORTH AMERICAN FUNDS STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
U.S. Government National Municipal Securities Fund Bond Fund ---------------------------- ------------------------------ Year Year Year Year Ended Ended Ended Ended 10/31/96 10/31/95 10/31/96 10/31/95 ------------- -------------- -------------- --------------- Increase (decrease) in net assets: Operations: Net investment income............... $ 6,347,417 $ 7,002,787 $ 902,673 $ 801,761 Net realized gain (loss) on investment transactions........... 692,635 2,016,765 51,281 (451,322) Change in unrealized appreciation (depreciation) on investments...... (2,144,261) 4,354,862 134,956 1,830,370 -------------- ------------- ----------- ------------- Net increase in net assets resulting from operations............ 4,895,791 13,374,414 1,088,910 2,180,809 Net equalization credits (charges) (Note 2) 5 (101,581) ------ ------ Distribution to shareholders from: Net investment income Class A........................... (4,374,305) (6,031,782) (386,541) (429,394) Class B........................... (943,899) (421,002) (252,541) (188,030) Class C........................... (1,029,213) (1,008,460) (263,588) (184,416) Distribution to shareholders: In excess of net investment income Class A........................... (502,592) ------ ------ ------ Class B........................... (108,446) ------ ------ ------ Class C........................... (118,254) ------ ------ ------ Increase (decrease) in net assets from capital share transactions (Note 3)... (949,834) (4,588,211) (980,922) 7,339,594 ------------- ------------ ---------- ----------- Increase (decrease) in net assets...... (3,130,747) 1,223,378 (794,682) 8,718,563 Net assets at beginning of period...... 115,357,901 114,134,523 20,328,135 11,609,572 ------------- ------------- ----------- ----------- Net assets at end of period............ $112,227,154 $115,357,901 $19,533,453 $20,328,135 ------------- ------------- ----------- ----------- Accumulated undistributed net investment loss...................... ($383,354) ($389,597) ($569) ($572) ------------- ------------- ----------- -----------
Money Market Fund ----------------------------- Year Year Ended Ended 10/31/96 10/31/95 -------------- -------------- Increase (decrease) in net assets: Operations: Net investment income............... $ 961,436 $ 1,208,891 Net realized gain (loss) on investment transactions........... ------ ------ Change in unrealized appreciation (depreciation) on investments...... ------ ------ ------------- ------------ Net increase in net assets resulting from operations............ 961,436 1,208,891 Net equalization credits (charges) (Note 2) ------ ------ Distribution to shareholders from: Net investment income Class A........................... (405,871) (467,507) Class B........................... (88,592) (88,435) Class C........................... (466,973) (652,949) Distribution to shareholders: In excess of net investment income Class A........................... ------ ------ Class B........................... ------ ------ Class C........................... ------ ------ Increase (decrease) in net assets from capital share transactions (Note 3)... (1,348,319) 1,356,401 ------------- ------------ Increase (decrease) in net assets...... (1,348,319) 1,356,401 Net assets at beginning of period...... 22,337,448 20,981,047 Net assets at end of period............ $20,989,129 $22,337,448 ------------- ------------ Accumulated undistributed net investment loss...................... ------ ------ ------------- ------------
The accompanying notes are an integral part of the financial statements. 14 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
Small/Mid Cap Fund --------------------------------------------------------------------- 03/04/96* 03/04/96* 03/04/96* to to to 10/31/96 10/31/96 10/31/96 Class A Class B Class C ------------------- -------------------- -------------------- Net asset value, beginning of period............. $12.50 $12.50 $12.50 Income (loss) from investment operations: - ---------------------------------------- Net investment loss (B).......................... (0.02) (0.05) (0.05) Net realized and unrealized gain on investments.. 0.14 0.13 0.14 ----- ----- ----- Total from investment operations............................ 0.12 0.08 0.09 Net asset value, end of period................... $12.62 $12.58 $12.59 ====== ====== ====== Total return............................ 0.96% + 0.64% + 0.72% + Net assets, end of period (000's)................ $2,966 $6,659 $8,241 Ratio of operating expenses to average net assets (C)......................... 1.675%(A) 2.325%(A) 2.325%(A) Ratio of net investment loss to average net assets............................. (0.40%)(A) (1.05%)(A) (1.05%)(A) Portfolio turnover rate.......................... 92%(A) 92%(A) 92%(A) Average commission rate per share (D)............ $0.069 $0.069 $0.069
- ----------------------------- * Commencement of operations + Non-annualized (A) Annualized (B) After expense reimbursement by the adviser of $0.06, $0.03 and $0.03 per share for the Small/Mid Cap Fund - Classes A, B and C respectively, for the period March 4, 1996 (commencement of operations) to October 31, 1996. (C) The ratio of operating expenses, before reimbursement by the adviser, was 2.69%, 3.05% and 3.04% for the Small/Mid Cap Fund, Classes A, B and C respectively, for the period March 4, 1996 (commencement of operations) to October 31, 1996 on an annualized basis. (D) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per share of all security trades on which commissions are charged. The accompanying notes are an integral part of the financial statements. 15 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
International Small Cap Fund --------------------------------------------------------------------- 03/04/96* 03/04/96* 03/04/96* to to to 10/31/96 10/31/96 10/31/96 Class A Class B Class C ------------------- -------------------- -------------------- Net asset value, beginning of period................. $12.50 $12.50 $12.50 Income (loss) from investment operations: - ----------------------------------------- Net investment income (loss) (B)..................... 0.05 (0.01) (0.01) Net realized and unrealized gain on investments and foreign currency transactions.................. 0.88 0.88 0.88 ----- ----- ----- Total from investment operations................................ 0.93 0.87 0.87 Net asset value, end of period....................... $13.43 $13.37 $13.37 ====== ====== ====== Total return................................ 7.44% + 6.96% + 6.96% + Net assets, end of period (000's).................... $2,120 $5,068 $5,517 Ratio of operating expenses to average net assets (C)............................. 1.90%(A) 2.55%(A) 2.55%(A) Ratio of net investment income (loss) to average net assets................................. 0.50%(A) (0.15%)(A) (0.15%)(A) Portfolio turnover rate.............................. 67%(A) 67%(A) 67%(A) Average commission rate per share (D)................ $0.016 $0.016 $0.016
- ----------------------------- * Commencement of operations + Non-annualized (A) Annualized (B) After expense reimbursement by the adviser of $0.11, $0.02 and $0.02 per share for the International Small Cap Fund - Classes A, B and C respectively, for the period March 4, 1996 (commencement of operations) to October 31, 1996. (C) The ratio of operating expenses, before reimbursement by the adviser, was 3.07%, 3.27% and 3.25% for the International Small Cap Fund, Classes A, B and C respectively, for the period March 4, 1996 (commencement of operations) to October 31, 1996 on an annualized basis. (D) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per share of all security trades on which commissions are charged. In certain foreign markets the relationship between the translated U.S. dollar price per share and commission paid per share may vary from that of domestic markets. The accompanying notes are an integral part of the financial statements. 16 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
Growth Equity Fund --------------------------------------------------------------------- 03/04/96* 03/04/96* 03/04/96* to to to 10/31/96 10/31/96 10/31/96 Class A Class B Class C ------------------- -------------------- -------------------- Net asset value, beginning of period................. $12.50 $12.50 $12.50 Income from investment operations: - ---------------------------------- Net investment income (B)............................ 0.28 0.24 0.24 Net realized and unrealized gain on investments and foreign currency transactions.................. 1.00 0.99 0.99 ----- ----- ----- Total from investment operations................................ 1.28 1.23 1.23 Net asset value, end of period....................... $13.78 $13.73 $13.73 ====== ====== ====== Total return................................ 10.24% + 9.84% + 9.84% + Net assets, end of period (000's).................... $2,244 $4,748 $6,494 Ratio of operating expenses to average net assets (C)............................. 1.65%(A) 2.30%(A) 2.30%(A) Ratio of net investment income to average net assets................................. 4.11%(A) 4.18%(A) 4.13%(A) Portfolio turnover rate.............................. 450%(A) 450%(A) 450%(A) Average commission rate per share (D)................ $0.043 $0.043 $0.043
- ----------------------------- * Commencement of operations + Non-annualized (A) Annualized (B) After expense reimbursement by the adviser of $0.07, $0.04 and $0.04 per share for the Growth Equity Fund - Classes A, B and C respectively, for the period March 4, 1996 (commencement of operations) to October 31, 1996. (C) The ratio of operating expenses, before reimbursement by the adviser, was 2.71%, 3.06% and 2.96% for the Growth Equity Fund, Classes A, B and C respectively, for the period March 4, 1996 (commencement of operations) to October 31, 1996 on an annualized basis. (D) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per share of all security trades on which commissions are charged. In certain foreign markets the relationship between the translated U.S. dollar price per share and commission paid per share may vary from that of domestic markets. The accompanying notes are an integral part of the financial statements. 17 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
Global Equity Fund (formerly, the Global Growth Fund) --------------------------------------------------------------------------------- Year Year 04/01/94* Year Year 04/01/94* Ended Ended to Ended Ended to 10/31/96** 10/31/95 10/31/94 10/31/96** 10/31/95** 10/31/94 Class A Class A Class A Class B Class B Class B ---------- ---------- ----------- ----------- ---------- ---------- Net asset value, beginning of period.... $13.84 $14.82 $14.13 $13.73 $14.79 $14.13 Income (loss) from investment operations - ---------------------------------------- Net investment loss (B)................. (0.04) ---- (0.01) (0.14) (0.09) (0.03) Net realized and unrealized gain (loss) on investments and foreign currency transactions........................ 0.91 (0.54) 0.70 0.91 (0.53) 0.69 ------ ------ ------ ------ ------ ------ Total from investment operations................... 0.87 (0.54) 0.69 0.77 (0.62) 0.66 Less distributions - ------------------ Dividends from net investment income.... (0.21) ---- ---- (0.14) ---- ---- Distributions from capital gains........ ---- (0.44) ---- ---- (0.44) ---- ------ ------ ------ ------ ------ ------ Total distributions............ (0.21) (0.44) ---- (0.14) (0.44) ---- ------ ------ ------ ------ ------ ------ Net asset value, end of period.......... $14.50 $13.84 $14.82 $14.36 $13.73 $14.79 ====== ====== ====== ====== ====== ====== Total return................... 6.33% (3.52%) 9.16%(E) 5.64% (4.09%) 8.94%(E) Net assets, end of period (000's)....... $25,924 $23,894 $18,152 $25,661 $23,317 $13,903 Ratio of operating expenses to average net assets (C)............. 1.75% 1.75% 1.75%(A) 2.40% 2.40% 2.40%(A) Ratio of net investment income (loss) to average net assets.......... (0.30%) 0.03% (0.12%)(A) (0.95%) (0.61%) (0.77%)(A) Portfolio turnover rate................. 165% 57% 54% 165% 57% 54% Average commission rate per share (D)... $0.016 N/A N/A $0.016 N/A N/A
- ------------------------------ * Commencement of operations ** Net investment income per share has been calculated using the average shares method. (A) Annualized (B) After expense reimbursement by the adviser of $0.01 and $0.02 per share for the Global Equity Fund - Class A and $0.01 and $0.02 per share for the Global Equity Fund - Class B, for the years ended October 31, 1996 and 1995, respectively and $0.01 and $0.01 per share for the Global Equity Fund - Classes A and B respectively, for the period April 1, 1994 to October 31, 1994. (C) The ratio of operating expenses, before reimbursement by the adviser, was 1.83% and 1.92% for the Global Equity Fund - Class A and 2.48% and 2.58% for the Global Equity Fund - Class B, for the years ended October 31, 1996 and 1995, respectively and 1.97% and 2.71% for the Global Equity Fund - Classes A and B respectively, for the period April 1, 1994 to October 31, 1994 on an annualized basis. (D) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per share of all security trades on which commissions are charged. In certain foreign markets the relationship between the translated U.S. dollar price per share and commission paid per share may vary from that of domestic markets. (E) Historical total returns for Classes A and B shares are one year performance returns which include Class C performance prior to April 1, 1994. The accompanying notes are an integral part of the financial statements. 18 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
Global Equity Fund - Class C (formerly, the Global Growth Fund - Class C) -------------------------------------------------------------------------------- Years Ended October, 31 --------------------------------------------------------------------------------- 1996** 1995** 1994 1993 1992 1991 ----------- ----------- ----------- ---------- ---------- ---------- Net asset value, beginning of period.... $13.73 $14.79 $13.74 $10.33 $10.76 $10.12 Income (loss) from investment operations - ---------------------------------------- Net investment income (loss) (B)........ (0.14) (0.09) (0.10) (0.01) (0.02) 0.25 Net realized and unrealized gain (loss) on investments and foreign currency transactions........................ 0.92 (0.53) 1.15 3.43 (0.37) 0.63 ------ ------ ------ ------ ------ ------ Total from investment operations................. 0.78 (0.62) 1.05 3.42 (0.39) 0.88 Less distributions - ------------------ Dividends from net investment income.... (0.10) ------ ------ (0.01) ------ (0.24) Distributions from capital gains........ ------ (0.44) ------ ------ ------ ------ Distributions from capital.............. ------ ------ ------ ------ (0.04) ------ -------- -------- -------- -------- ------ -------- Total distributions............ (0.10) (0.44) ------ (0.01) (0.04) (0.24) ------- ------ -------- ------ ------ ------ Net asset value, end of period.......... $14.41 $13.73 $14.79 $13.74 $10.33 $10.76 ====== ====== ====== ====== ====== ====== Total return................... 5.70% (4.09%) 8.94% 33.06% (3.57%) 8.80% Net assets, end of period (000's)....... $64,830 $83,340 $101,443 $63,503 $14,291 $8,828 Ratio of operating expenses to average net assets (C)............. 2.40% 2.40% 2.40% 2.40% 2.52% 1.47% Ratio of net investment income (loss) to average net assets.......... (0.95%) (0.64%) (0.91%) (0.40%) (0.27%) 1.41% Portfolio turnover rate................. 165% 57% 54% 57% 69% 70% Average commission rate per share (D)... $0.016 N/A N/A N/A N/A N/A
- ------------------------------ ** Net investment income per share has been calculated using the average shares method. (A) Annualized (B) After expense reimbursement by the adviser of $0.01, $0.02, $0.01, $0.02, $0.02 and $0.05 per share for the Global Equity Fund - Class C for the years ended October 31, 1996, 1995, 1994, 1993, 1992 and 1991, respectively. (C) The ratio of operating expenses, before reimbursement by the adviser, was 2.48%, 2.53%, 2.52%, 2.72%, 2.78% and 4.37% for the Global Equity Fund- Class C for the years ended October 31, 1996, 1995, 1994, 1993, 1992 and 1991, respectively. (D) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per share of all security trades on which commissions are charged. In certain foreign markets the relationship between the translated U.S. dollar price per share and commission paid per share may vary from that of domestic markets. The accompanying notes are an integral part of the financial statements. 19 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
Value Equity Fund (formerly, the Growth Fund) -------------------------------------------------------------------------------- Year Year 04/01/94* Year Year 04/01/94* Ended Ended to Ended Ended to 10/31/96 10/31/95** 10/31/94 10/31/96 10/31/95** 10/31/94 Class A Class A Class A Class B Class B Class B ---------- ---------- ----------- ----------- ---------- ---------- Net asset value, beginning of period.... $15.94 $14.78 $14.59 $15.84 $14.77 $14.59 Income (loss) from investment operations - ---------------------------------------- Net investment income (loss) (B)........ 0.16 0.12 0.02 0.06 0.02 (0.02) Net realized and unrealized gain on investments........................ 2.69 1.83 0.17 2.69 1.84 0.20 ----- ----- ----- ----- ----- ----- Total from investment operations................... 2.85 1.95 0.19 2.75 1.86 0.18 Less distributions - ------------------ Distributions from net investment income (0.14) ------ ------ (0.09) ------ ------ Distributions from capital gains........ (1.28) (0.79) ------ (1.28) (0.79) ------ ------ ------ -------- ------ ------ -------- Total distributions............ (1.42) (0.79) ------ (1.37) (0.79) (0.24) ------ ------ -------- ------ ------ ------ Net asset value, end of period.......... $17.37 $15.94 $14.78 $17.22 $15.84 $14.77 ====== ====== ====== ====== ====== ====== Total return................... 19.23% 14.22% 4.82%(E) 18.59% 13.58% 4.75%(E) Net assets, end of period (000's)....... $28,470 $22,026 $16,326 $27,058 $19,874 $5,054 Ratio of operating expenses to average net assets (C)........................ 1.34% 1.34% 1.34%(A) 1.99% 1.99% 1.99%(A) Ratio of net investment income (loss) to average net assets.................... 0.98% 0.79% 0.13%(A) 0.33% 0.13% (0.52%)(A) Portfolio turnover rate................. 169% 54% 39% 169% 54% 39% Average commission rate per share (D)... $0.053 N/A N/A $0.053 N/A N/A
- ------------------------------ * Commencement of operations ** Net investment income per share has been calculated using the average shares method for fiscal year 1995. (A) Annualized (B) After expense reimbursement by the adviser of $0.04 and $0.04 per share for the Value Equity Fund - Class A and $0.04 and $0.05 per share for the Value Equity Fund - Class B, for the years ended October 31, 1996 and 1995, respectively and $0.06 and $0.03 per share for the Value Equity Fund - Classes A and B respectively, for the period April 1, 1994 to October 31, 1994. (C) The ratio of operating expenses, before reimbursement by the adviser, was 1.55% and 1.62% for the Value Equity Fund - Class A and 2.20% and 2.32% for the Value Equity Fund - Class B, for the years ended October 31, 1996 and 1995, respectively and 1.79% and 2.82% for the Value Equity Fund - Classes A and B respectively, for the period April 1, 1994 to October 31, 1994 on an annualized basis. (D) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per share of all security trades on which commissions are charged. (E) Historical total returns for Classes A and B shares are one year performance returns which include Class C performance prior to April 1, 1994. The accompanying notes are an integral part of the financial statements. 20 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
Value Equity Fund - Class C (formerly, the Growth Fund - Class C) ---------------------------------------------------------------------------- Years Ended October 31, ---------------------------------------------------------------------------- 1996 1995** 1994 1993 1992 1991 ------------- ---------- ----------- ---------- ---------- ---------- Net asset value, beginning of period...... $15.84 $14.77 $14.21 $12.05 $10.70 $ 8.22 Income (loss) from investment operations - ---------------------------------------- Net investment income (loss) (B).......... 0.06 0.02 (0.07) 0.01 (0.01) 0.02 Net realized and unrealized gain (loss) on investments................... 2.69 1.84 0.74 2.15 1.37 2.54 ----- ----- ----- ----- ----- ----- Total from investment operations..................... 2.75 1.86 0.67 2.16 1.36 2.56 Less distributions - ------------------ Dividends from net investment income...... (0.04) ------ (0.03) ------ ------ (0.03) Distributions from capital gains.......... (1.28) (0.79) (0.08) ------ ------ ------ Distributions from capital................ ------ ------ ------ ------ (0.01) (0.05) -------- -------- -------- -------- ------ ------ Total distributions.............. (1.32) (0.79) (0.11) ------ (0.01) (0.08) ------ ------ ------- -------- ------ ------ Net asset value, end of period............ $17.27 $15.84 $14.77 $14.21 $12.05 $10.70 ====== ====== ====== ====== ====== ====== Total return..................... 18.53% 13.58% 4.75% 17.93% 12.75% 31.32% Net assets, end of period (000's)......... $83,855 $83,719 $71,219 $64,223 $24,291 $15,354 Ratio of operating expenses to average net assets (C).......................... 1.99% 1.99% 1.99% 1.99% 2.47% 2.97% Ratio of net investment income (loss) to average net assets...................... 0.33% 0.15% (0.49%) 0.27% (0.15%) 0.27% Portfolio turnover rate................... 169% 54% 39% 40% 91% 37% Average commission rate per share (D)..... $0.053 N/A N/A N/A N/A N/A ----------------------- 08/28/89* ----------- to 1990 10/31/89 ----------- ---------- Net asset value, beginning of period...... $11.19 $12.25 Income (loss) from investment operations - ---------------------------------------- Net investment income (loss) (B).......... 0.05 0.01 Net realized and unrealized gain (loss) on investments................... (2.39) (1.07) ------ ------ Total from investment operations..................... (2.34) (1.06) Less distributions - ------------------ Dividends from net investment income...... (0.05) ---- Distributions from capital gains.......... (0.58) ---- Distributions from capital................ ---- ---- ------ ------ Total distributions.............. (0.63) ---- ------ ------ Net asset value, end of period............ $ 8.22 $11.19 ====== ====== Total return..................... (22.16%) (8.65%) Net assets, end of period (000's)......... $19,370 $30,627 Ratio of operating expenses to average net assets (C).......................... 2.85% 2.57%(A) Ratio of net investment income (loss) to average net assets...................... 0.43% 0.37%(A) Portfolio turnover rate................... 58% 65%(A) Average commission rate per share (D)..... N/A N/A
- ------------------------------ * Commencement of operations ** Net investment income per share has been calculated using the average shares method for fiscal year 1995. + Non-annualized (A) Annualized (B) After expense reimbursement and waiver by the adviser of $0.03, $0.04, $0.04, $0.02, $0.05 and $0.01 per share for the Value Equity Fund - Class C for the years ended October 31, 1996, 1995, 1994, 1993, 1992 and 1991, respectively. (C) The ratio of operating expenses, before reimbursement and waiver by the adviser, was 2.20%, 2.23%, 2.29%, 2.35%, 3.00% and 3.12% for the Value Equity Fund - Class C for the years ended October 31, 1996, 1995, 1994, 1993, 1992 and 1991, respectively. (D) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per share of all security trades on which commissions are charged. The accompanying notes are an integral part of the financial statements. 21 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
Growth and Income Fund -------------------------------------------------------------------------------- Year Year 04/01/94* Year Year 04/01/94* Ended Ended to Ended Ended to 10/31/96 10/31/95** 10/31/94 10/31/96** 10/31/95** 10/31/94 Class A Class A Class A Class B Class B Class B ---------- ---------- ----------- ----------- ---------- ---------- Net asset value, beginning of period.... $14.72 $13.09 $12.29 $14.69 $13.08 $12.29 Income from investment operations - --------------------------------- Net investment income (B)............... 0.18 0.26 0.12 0.07 0.16 0.10 Net realized and unrealized gain on investments........................ 2.99 1.90 0.76 2.99 1.94 0.77 ------ ------ ------ ------ ------ ------ Total from investment operations................... 3.17 2.16 0.88 3.06 2.10 0.87 Less distributions - ------------------ Dividends from net investment income.... (0.21) (0.23) (0.08) (0.13) (0.19) (0.08) Distributions from capital gains........ (0.12) (0.30) ---- (0.12) (0.30) ---- ------ ------ -------- ------ ------ -------- Total distributions............ (0.33) (0.53) (0.08) (0.25) (0.49) (0.08) ------ ------ ------ ------ ------ ------ Net asset value, end of period.......... $17.56 $14.72 $13.09 $17.50 $14.69 $13.08 ====== ====== ====== ====== ====== ====== Total return................... 21.84% 17.28% 5.06%(E) 21.08% 16.73% 4.98%(E) Net assets, end of period (000's)....... $18,272 $12,180 $8,134 $34,740 $19,052 $3,885 Ratio of operating expenses to average net assets (C)........................ 1.34% 1.34% 1.34%(A) 1.99% 1.99% 1.99%(A) Ratio of net investment income to average net assets.................... 1.10% 1.91% 1.72%(A) 0.45% 1.14% 1.07%(A) Portfolio turnover rate................. 49% 40% 45% 49% 40% 45% Average commission rate per share (D)... $0.055 N/A N/A $0.055 N/A N/A
- ------------------------------ * Commencement of operations ** Net investment income per share has been calculated using the average shares method. (A) Annualized (B) After expense reimbursement by the adviser of $0.03 and $0.05 per share for the Growth and Income Fund - Class A and $0.03 and $0.05 per share for the Growth and Income Fund - Class B, for the years ended October 31, 1996 and 1995, respectively and $0.05 and $0.12 per share for the Growth and Income Fund - Classes A and B respectively, for the period April 1, 1994 to October 31, 1994. (C) The ratio of operating expenses, before reimbursement by the adviser, was 1.56% and 1.69% for the Growth and Income Fund - Class A and 2.20% and 2.33% for the Growth and Income Fund - Class B, for the years ended October 31, 1996 and 1995, respectively and 2.08% and 3.12% for the Growth and Income Fund - Classes A and B respectively, for the period April 1, 1994 to October 31, 1994 on an annualized basis. (D) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per share of all security trades on which commissions are charged. (E) Historical total returns for Classes A and B shares are one year performance returns which include Class C performance prior to April 1, 1994. The accompanying notes are an integral part of the financial statements. 22 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
Growth and Income Fund - Class C ---------------------------------------------------------------------------------- Years Ended October, 31 05/01/91* to 1996 1995 1994 1993 1992 10/31/91 ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of period.... $14.71 $13.08 $12.71 $11.21 $10.51 $10.00 Income from investment operations - --------------------------------- Net investment income (B)............... 0.07 0.18 0.15 0.14 0.18 0.11 Net realized and unrealized gain on investments........................ 3.00 1.90 0.46 1.48 0.70 0.47 ------ ------ ------ ------ ------ ------ Total from investment operations................... 3.07 2.08 0.61 1.62 0.88 0.58 Less distributions - ------------------ Dividends from net investment income.... (0.10) (0.15) (0.13) (0.12) (0.18) (0.07) Distributions from capital gains........ (0.12) (0.30) (0.11) ---- ---- ---- ------ ------ ------ -------- -------- -------- Total distributions............ (0.22) (0.45) (0.24) (0.12) (0.18) (0.07) ------ ------ ------ ------ ------ ------ Net asset value, end of period.......... $17.56 $14.71 $13.08 $12.71 $11.21 $10.51 ====== ====== ====== ====== ====== ====== Total return................... 21.12% 16.56% 4.85% 14.57% 8.42% 5.88% + Net assets, end of period (000's)....... $74,825 $63,154 $46,078 $37,483 $10,821 $2,090 Ratio of operating expenses to average net assets (C)........................ 1.99% 1.99% 1.99% 1.99% 1.94% 1.85%(A) Ratio of net investment income to average net assets.................... 0.45% 1.26% 1.11% 1.12% 1.51% 2.05%(A) Portfolio turnover rate................. 49% 40% 45% 37% 48% 111%(A) Average commission rate per share (D)... $0.055 N/A N/A N/A N/A N/A
- ------------------------------ * Commencement of operations + Non-annualized (A) Annualized (B) After expense reimbursement and waiver by the adviser of $0.03, $0.04, $0.05, $0.06, $0.15 and $0.37 per share for the Growth and Income Fund - Class C for the years ended October 31, 1996, 1995, 1994, 1993 and 1992 and the period May 1, 1991 (commencement of operations) to October 31, 1991, respectively. (C) The ratio of operating expenses, before reimbursement and waiver by the adviser, was 2.20%, 2.26%, 2.38%, 2.46%, 3.18% and 10.69% for the Growth and Income Fund - Class C for the years ended October 31, 1996, 1995, 1994, 1993 and 1992 and the period May 1, 1991 (commencement of operations) to October 31, 1991 on an annualized basis, respectively. (D) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per share of all security trades on which commissions are charged. The accompanying notes are an integral part of the financial statements. 23 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
International Growth and Income Fund -------------------------------------------------------------------------------- Year 01/09/95* Year 01/09/95* Year 01/09/95* Ended to Ended to Ended to 10/31/96** 10/31/95** 10/31/96** 10/31/95** 10/31/96** 10/31/95** Class A Class A Class B Class B Class C Class C ---------- ---------- ----------- ----------- ---------- ---------- Net asset value, beginning of period........ $10.11 $10.00 $10.10 $10.00 $10.10 $10.00 Income from investment operations: - --------------------------------- Net investment income (B)................... 0.09 0.06 0.06 0.01 0.06 0.01 Net realized and unrealized gain on investments and foreign currency transactions......... 1.33 0.08 1.30 0.12 1.30 0.12 ----- ----- ----- ----- ----- ----- Total from investment operations....................... 1.42 0.14 1.36 0.13 1.36 0.13 Less distributions - ------------------ Dividends from net investment income........ (0.08) (0.03) (0.05) (0.03) (0.05) (0.03) Distributions from capital gains............ (0.10) ---- (0.11) ---- (0.10) ---- ------ ------ ------ ------ ------ ------ Total distributions................ (0.18) (0.03) (0.16) (0.03) (0.15) (0.03) ------ ------ ------ ------ ------ ------ Net asset value, end of period.............. $11.35 $10.11 $11.30 $10.10 $11.31 $10.10 ====== ====== ====== ====== ====== ====== Total return....................... 14.25% 1.37% + 13.58% 1.28% + 13.63% 1.28% + Net assets, end of period (000's)........... $4,732 $6,897 $15,217 $8,421 $9,076 $6,324 Ratio of operating expenses to average net assets (C).................... 1.75% 1.75%(A) 2.40% 2.40%(A) 2.40% 2.40%(A) Ratio of net investment income to average net assets........................ 0.84% 0.70%(A) 0.57% 0.15%(A) 0.51% 0.13%(A) Portfolio turnover rate..................... 170% 69%(A) 170% 69%(A) 170% 69%(A) Average commission rate per share (D)....... $0.022 N/A $0.022 N/A $0.022 N/A
- ----------------------------- * Commencement of operations ** Net investment income per share has been calculated using the average shares method. + Non-annualized (A) Annualized (B) After expense reimbursement by the adviser of $0.02, $0.02 and $0.02 per share for the International Growth and Income Fund - Classes A, B and C respectively, for the year ended October 31, 1996 and $0.04, $0.04 and $0.04 per share for the International Growth and Income Fund - Classes A, B and C respectively, for the period January 9, 1995 (commencement of operations) to October 31, 1995. (C) The ratio of operating expenses, before reimbursement by the adviser, was 1.97%, 2.60% and 2.60% for the International Growth and Income Fund, Classes A, B and C respectively, for the year ended October 31, 1996 and 2.18%, 2.93% and 2.93% for the International Growth and Income Fund, Classes A, B and C respectively, for the period January 9, 1995 (commencement of operations) to October 31, 1995 on an annualized basis. (D) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per share of all security trades on which commissions are charged. In certain foreign markets the relationship between the translated U.S. dollar price per share and commission paid per share may vary from that of domestic markets. The accompanying notes are an integral part of the financial statements. 24 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
Balanced Fund (formerly, the Asset Allocation Fund) --------------------------------------------------------------------------------- Year Year 04/01/94* Year Year 04/01/94* Ended Ended to Ended Ended to 10/31/96** 10/31/95** 10/31/94 10/31/96** 10/31/95** 10/31/94 Class A Class A Class A Class B Class B Class B ---------- ---------- ----------- ----------- ---------- ---------- Net asset value, beginning of period.... $12.02 $11.13 $11.06 $11.98 $11.12 $11.06 Income (loss) from investment operations - ---------------------------------------- Net investment income (B)............... 0.39 0.38 0.17 0.31 0.30 0.12 Net realized and unrealized gain (loss) on investments................. 1.07 1.35 (0.10) 1.07 1.36 (0.06) ------ ------ ------ ------ ------ ------ Total from investment operations................... 1.46 1.73 0.07 1.38 1.66 0.06 Less distributions - ------------------ Dividends from net investment income.... (0.40) (0.32) ------ (0.35) (0.28) ------ Distributions from capital gains........ (0.75) (0.52) ------ (0.75) (0.52) ------ ------ ------ -------- ------ ------ -------- Total distributions............ (1.15) (0.84) ------ (1.10) (0.80) ------ ------ ------ -------- ------ ------ -------- Net asset value, end of period.......... $12.33 $12.02 $11.13 $12.26 $11.98 $11.12 ====== ====== ====== ====== ====== ====== Total return................... 13.10% 16.95% 0.76%(E) 12.35% 16.31% 0.67%(E) Net assets, end of period (000's)....... $10,873 $10,033 $7,830 $16,219 $9,875 $4,760 Ratio of operating expenses to average net assets (C)........................ 1.34% 1.34% 1.34%(A) 1.99% 1.99% 1.99%(A) Ratio of net investment income to average net assets............................ 3.32% 3.39% 2.72%(A) 2.67% 2.69% 2.07%(A) Portfolio turnover rate................. 253% 226% 246% 253% 226% 246% Average commission rate per share (D)... $0.059 N/A N/A $0.059 N/A N/A
- ------------------------------ * Commencement of operations ** Net investment income per share has been calculated using the average shares method. (A) Annualized (B) After expense reimbursement by the adviser of $0.02 and $0.04 for the Balanced Fund - Class A and $0.02 and $0.04 for the Balanced Fund - Class B, for the years ended October 31, 1996 and 1995, respectively and $0.03 and $0.04 for the Balanced Fund - Classes A and B respectively, for the period April 1, 1994 to October 31, 1994. (C) The ratio of operating expenses, before reimbursement by the adviser, was 1.55% and 1.69% for the Balanced Fund - Class A and 2.20% and 2.37% for the Balanced Fund - Class B, for the years ended October 31, 1996 and 1995, respectively and 1.86% and 2.73% for the Balanced Fund - Classes A and B respectively, for the period April 1, 1994 to October 31, 1994 on an annualized basis. (D) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per share of all security trades on which commissions are charged. (E) Historical total returns for Classes A and B shares are one year performance returns which include Class C performance prior to April 1, 1994. The accompanying notes are an integral part of the financial statements. 25 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
Balanced Fund - Class C (E) (formerly, the Asset Allocation Fund - Class C (E)) --------------------------------------------------------------- Years Ended October 31, --------------------------------------------------------------- 1996** 1995** 1994 1993 1992 ------------- ---------- ----------- ---------- ---------- Net asset value, beginning of period...... $12.02 $11.12 $11.52 $10.20 $ 9.76 Income (loss) from investment operations - ---------------------------------------- Net investment income (B)................. 0.32 0.31 0.22 0.21 0.20 Net realized and unrealized gain (loss) on investments................... 1.07 1.35 (0.15) 1.30 0.87 ------ ------ ------ ------ ------ Total from investment operations..................... 1.39 1.66 0.07 1.51 1.07 Less distributions - ------------------ Dividends from net investment income...... (0.31) (0.24) (0.18) (0.09) (0.19) Distributions from capital gains.......... (0.75) (0.52) (0.29) (0.10) (0.44) Distributions from capital................ ------ ------ ------ ------ ------ -------- -------- -------- -------- -------- Total distributions.............. (1.06) (0.76) (0.47) (0.19) (0.63) ------ ------ ------ ------ ------ Net asset value, end of period............ $12.35 $12.02 $11.12 $11.52 $10.20 ====== ====== ====== ====== ====== Total return..................... 12.41% 16.25% 0.67% 15.02% 11.25% Net assets, end of period (000's)......... $72,821 $80,626 $86,902 $96,105 $48,160 Ratio of operating expenses to average net assets (C).................. 1.99% 1.99% 1.99% 1.99% 2.40% Ratio of net investment income to average net assets...................... 2.67% 2.76% 1.93% 1.96% 1.93% Portfolio turnover rate................... 253% 226% 246% 196% 171% Average commission rate per share (D)..... $0.059 N/A N/A N/A N/A Balanced Fund - Class C (E) (formerly, the Asset Allocation Fund - Class C (E)) --------------------------------------------------- 08/28/89* Years Ended October 31, to ----------------------- 1991 1990 10/31/89 ---------- ----------- ---------- Net asset value, beginning of period...... $ 8.12 $ 9.84 $10.17 Income (loss) from investment operations - ---------------------------------------- Net investment income (B)................. 0.27 0.32 0.05 Net realized and unrealized gain (loss) on investments................... 1.70 (1.66) (0.38) ------ ------ ------ Total from investment operations..................... 1.97 (1.34) (0.33) Less distributions - ------------------ Dividends from net investment income...... (0.33) (0.26) ------ Distributions from capital gains.......... ------ ------ ------ Distributions from capital................ ------ (0.12) ------ ------- ------ -------- Total distributions.............. (0.33) (0.38) ------ ------ ------ -------- Net asset value, end of period............ $ 9.76 $ 8.12 $ 9.84 ====== ====== ====== Total return..................... 24.53% (13.97%) (3.24%) + Net assets, end of period (000's)......... $30,724 $34,713 $43,915 Ratio of operating expenses to average net assets (C).................. 2.88% 2.63% 2.13%(A) Ratio of net investment income to average net assets...................... 2.77% 3.34% 3.09%(A) Portfolio turnover rate................... 84% 73% 84%(A) Average commission rate per share (D)..... N/A N/A N/A
- ----------------------------- * Commencement of operations ** Net investment income per share has been calculated using the average shares method. + Non-annualized (A) Annualized (B) After expense reimbursement and waiver by the adviser of $0.01, $0.03, $0.04, $0.03 and $0.04 for the Balanced Fund - Class C for the years ended October 31, 1996, 1995, 1994, 1993 and 1992, respectively. (C) The ratio of operating expenses, before reimbursement and waiver by the adviser, was 2.20%, 2.24%, 2.22%, 2.28% and 2.89% for the Balanced Fund - Class C for the years ended October 31, 1996, 1995, 1994, 1993 and 1992, respectively. (D) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per share of all security trades on which commissions are charged. (E) On July 10, 1992, the Aggressive Fund and Conservative Fund portfolios of the old Asset Allocation Funds were liquidated and shares were exchanged for shares of the new Asset Allocation Fund. The new Asset Allocation Fund is comprised of the Moderate Fund portfolio of the old Asset Allocation Fund (the accounting "survivor") and the assets of the former Aggressive and Conservative portfolios of the old Asset Allocation Funds. For purposes of presenting financial highlights - selected per share data and ratios, only the historical results of the old Moderate Fund have been presented since it is considered the accounting survivor of the merger because, among other reasons, the investment objective of the new Asset Allocation Fund is substantially the same as that of the old Moderate Fund. At the date of the merger, 3,567,198 shares of the old Moderate Fund with a per share value of $8.11 were decreased to 2,891,572 shares with a per share value of $10.00, similar to a reverse stock split, and re-named as shares of the new Asset Allocation Fund. The historical per share data presented above has been adjusted as though a reverse stock split had occurred at the beginning of the earliest period presented which results in fewer shares outstanding at a correspondingly higher net asset value per share. The accompanying notes are an integral part of the financial statements. 26 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
Strategic Income Fund -------------------------------------------------------------------- Year Year 11/01/93* Year Year 04/01/94* Ended Ended to Ended Ended to 10/31/96 10/31/95 10/31/94 10/31/96 10/31/95 10/31/94 Class A Class A Class A Class B Class B Class B ---------- ---------- ---------- ----------- --------- ---------- Net asset value, beginning of period.... $9.07 $8.90 $10.00 $9.07 $8.90 $ 9.31 Income (loss) from investment operations - ---------------------------------------- Net investment income (B)............... 0.80 0.78 0.65 0.73 0.73 0.38 Net realized and unrealized gain (loss) on investments and foreign currency transactions........................ 0.72 0.18 (1.10) 0.73 0.17 (0.41) ------ ------ ------ ------ ------ ------ Total from investment operations................... 1.52 0.96 (0.45) 1.46 0.90 (0.03) Less distributions - ------------------ Dividends from net investment income.... (0.79) (0.79) (0.65) (0.73) (0.73) (0.38) ------ ------ ------ ------ ------ ------ Net asset value, end of period.......... $9.80 $9.07 $8.90 $9.80 $9.07 $8.90 ===== ===== ===== ===== ===== ===== Total return................... 17.35% 11.43% (3.79%) 16.59% 10.72% (4.18%)(D) Net assets, end of period (000's)....... $13,382 $10,041 $15,507 $30,890 $20,672 $5,440 Ratio of operating expenses to average net assets (C)................ 1.50% 1.07% 0.41% 2.15% 1.95% 1.00%(A) Ratio of net investment income to average net assets.................... 8.28% 9.08% 8.26% 7.63% 8.10% 8.59%(A) Portfolio turnover rate................. 68% 180% 136% 68% 180% 136%
Strategic Income Fund --------------------------------- Year Year 4/01/94* Ended Ended to 10/31/96 10/31/95 10/31/94 Class C Class C Class C ----------- ---------- --------- Net asset value, beginning of period.... $9.07 $8.90 $ 9.31 Income (loss) from investment operations - ---------------------------------------- Net investment income (B)............... 0.73 0.73 0.38 Net realized and unrealized gain (loss) on investments and foreign currency transactions........................ 0.73 0.17 (0.41) ------ ------ ------ Total from investment operations................... 1.46 0.90 (0.03) Less distributions - ------------------ Dividends from net investment income.... (0.73) (0.73) (0.38) ------ ------ ------ Net asset value, end of period.......... $9.80 $9.07 $8.90 ===== ===== ===== Total return................... 16.59% 10.72% (4.20%)(D) Net assets, end of period (000's)....... $22,783 $14,273 $8,439 Ratio of operating expenses to average net assets (C)................ 2.15% 1.95% 1.00% (A) Ratio of net investment income to average net assets.................... 7.63% 8.25% 8.59% (A) Portfolio turnover rate................. 68% 180% 136%
- ------------------------------ * Commencement of operations (A) Annualized (B) After expense reimbursement and waiver by the adviser of $0.01, $0.05 and $0.04 per share for the Strategic Income Fund - Class A for the years ended October 31, 1996, 1995 and 1994, respectively, $0.01 and $0.04 for the Strategic Income Fund - Class B and $0.01 and $0.05 for the Strategic Income Fund - Class C, for the years ended October 31, 1996 and 1995, respectively and $0.05 and $0.04 for the Strategic Income Fund Classes B and C respectively, for the period April 1, 1994 to October 31, 1994. (C) The ratio of operating expenses, before reimbursement and waiver by the adviser, was 1.65%, 1.69% and 0.96% for the Strategic Income Fund Class A for the years ended October 31, 1996, 1995 and 1994, respectively. The ratio of operating expenses, before reimbursement and waiver by the adviser, was 2.27% and 2.38% for the Strategic Income Fund - Class B and 2.28% and 2.37% for the Strategic Income Fund - Class C, for the years ended October 31, 1996 and 1995, respectively and 2.04% and 1.96% for the Strategic Income Fund - Classes B and C respectively, for the period April 1, 1994 to October 31, 1994 on an annualized basis. (D) Historical total returns for Classes B and C shares are one year performance returns which include Class A performance prior to April 1, 1994. The accompanying notes are an integral part of the financial statements. 27 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
Investment Quality Bond Fund - Class A -------------------------------------------------------------------------------- Years Ended October, 31 05/01/91* ------------------------------------------------------------------- to 1996 1995 1994 1993 1992 10/31/91 ----------- ----------- ----------- ---------- ---------- ---------- Net asset value, beginning of period.... $10.56 $9.74 $11.16 $10.56 $10.26 $10.00 Income (loss) from investment operations - ---------------------------------------- Net investment income (B)............... 0.66 0.68 0.60 0.66 0.82 0.40 Net realized and unrealized gain (loss) on investments........................ (0.20) 0.82 (1.37) 0.64 0.27 0.30 ------ ------ ------ ------ ------ ------ Total from investment operations................... 0.46 1.50 (0.77) 1.30 1.09 0.70 Less distributions - ------------------ Dividends from net investment income.... (0.68) (0.68) (0.56) (0.64) (0.79) (0.40) Distributions from capital gains........ ------ ------ (0.09) (0.06) ------ ------ Distributions from capital.............. ------ ------ ------ ------ ------ (0.04) -------- -------- -------- -------- -------- ------ Total distributions............ (0.68) (0.68) (0.65) (0.70) (0.79) (0.44) ------ ------ ------ ------ ------ ------ Net asset value, end of period.......... $10.34 $10.56 $ 9.74 $11.16 $10.56 $10.26 ====== ====== ====== ====== ====== ====== Total return................... 4.52% 15.91% (7.08%) 12.66% 11.00% 7.21% + Net assets, end of period (000's)....... $9,056 $10,345 $11,150 $14,674 $6,773 $2,713 Ratio of operating expenses to average net assets (C)................ 1.25% 1.25% 1.25% 0.98% 0.00% 0.00%(A) Ratio of net investment income to average net assets.................... 6.37% 6.72% 5.86% 5.82% 7.76% 7.08%(A) Portfolio turnover rate................. 56% 132% 186% 41% 44% 39%(A)
- ------------------------------ * Commencement of operations + Non-annualized (A) Annualized (B) After expense reimbursement and waiver by the adviser of $0.03, $0.05, $0.06, $0.07, $0.27 and $0.19 per share for the Investment Quality Bond Fund - Class A for the years ended October 31, 1996, 1995, 1994, 1993 and 1992 and the period May 1, 1991 (commencement of operations) to October 31, 1991, respectively. (C) The ratio of operating expenses, before reimbursement and waiver by the adviser, was 1.55%, 1.73%, 1.74%, 1.57%, 2.56% and 3.37% for the Investment Quality Bond Fund - Class A for the years ended October 31, 1996, 1995, 1994, 1993 and 1992 and the period May 1, 1991 (commencement of operations) to October 31, 1991 on an annualized basis, respectively. The accompanying notes are an integral part of the financial statements. 28 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
Investment Quality Bond Fund -------------------------------------------------------------------------------- Year Year 04/01/94* Year Year 04/01/94* Ended Ended to Ended Ended to 10/31/96 10/31/95 10/31/94 10/31/96 10/31/95 10/31/94 Class B Class B Class B Class C Class C Class C ---------- ---------- ----------- ---------- ---------- ---------- Net asset value, beginning of period.... $10.55 $9.74 $10.21 $10.55 $9.74 $10.21 Income (loss) from investment operations - ---------------------------------------- Net investment income (B)............... 0.60 0.61 0.33 0.60 0.61 0.33 Net realized and unrealized gain (loss) on investments........................ (0.20) 0.82 (0.51) (0.20) 0.82 (0.51) ------ ------ ------ ------ ------ ------ Total from investment operations................... 0.40 1.43 (0.18) 0.40 1.43 (0.18) Less distributions - ------------------ Dividends from net investment income.... (0.62) (0.62) (0.29) (0.62) (0.62) (0.29) Net asset value, end of period.......... $10.33 $10.55 $ 9.74 $10.33 $10.55 $ 9.74 ====== ====== ====== ====== ====== ====== Total return................... 3.92% 15.12% (7.34%)(D) 3.92% 15.12% (7.34%)(D) Net assets, end of period (000's)....... $4,678 $3,472 $489 $7,543 $7,206 $2,406 Ratio of operating expenses to average net assets (C)................ 1.90% 1.90% 1.90%(A) 1.90% 1.90% 1.90%(A) Ratio of net investment income to average net assets.................... 5.72% 5.95% 5.70%(A) 5.72% 6.00% 5.70%(A) Portfolio turnover rate................. 56% 132% 186% 56% 132% 186%
- ------------------------------ * Commencement of operations (A) Annualized (B) After expense reimbursement by the adviser of $0.03 and $0.08 per share for the Investment Quality Bond Fund - Class B and $0.03 and $0.06 per share for the Investment Quality Bond Fund - Class C, for the years ended October 31, 1996 and 1995, respectively and $0.19 and $0.07 per share for the Investment Quality Bond Fund - Classes B and C respectively, for the period April 1, 1994 to October 31, 1994. (C) The ratio of operating expenses, before reimbursement by the adviser, was 2.27% and 2.69% for the Investment Quality Bond Fund - Class B and 2.22% and 2.50% for the Investment Quality Bond Fund - Class C, for the years ended October 31, 1996 and 1995, respectively and 4.88% and 3.05% for the Investment Quality Bond Fund - Classes B and C respectively, for the period April 1, 1994 to October 31, 1994 on an annualized basis. (D) Historical total returns for Classes B and C shares are one year performance returns which include Class A performance prior to April 1, 1994. The accompanying notes are an integral part of the financial statements. 29 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
U.S. Government Securities Fund - Class A --------------------------------------------------------------- Years Ended October 31, --------------------------------------------------------------- 1996** 1995 1994 1993 1992 ------------- ---------- ----------- ---------- ---------- Net asset value, beginning of period......... $9.98 $9.45 $10.35 $10.04 $ 9.89 Income (loss) from investment operations - ---------------------------------------- Net investment income (B).................... 0.56 0.63 0.53 0.51 0.74 Net realized and unrealized gain (loss) on investments............................. (0.12) 0.57 (0.74) 0.34 0.13 ------ ------ ------ ------ ------ Total from investment operations........................ 0.44 1.20 (0.21) 0.85 0.87 Less distributions - ------------------ Dividends from net investment income......... (0.56) (0.67) (0.50) (0.50) (0.72) Dividends in excess of net investment income. (0.06) ------ ------ ------ ------ Distributions from capital gains............. ------ ------ (0.19) (0.04) ------ Distributions from capital................... ------ ------ ------ ------ ------ -------- -------- -------- -------- -------- Total distributions................. (0.62) (0.67) (0.69) (0.54) (0.72) ------ ------ ------ ------ ------ Net asset value, end of period............... $9.80 $ 9.98 $ 9.45 $10.35 $10.04 ===== ====== ====== ====== ====== Total return........................ 4.64% 13.15% (2.13%) 8.64% 9.15% Net assets, end of period (000's)............ $72,774 $81,179 $100,622 $163,296 $118,543 Ratio of operating expenses to average net assets (C)..................... 1.25% 1.25% 1.25% 1.07% 0.24% Ratio of net investment income to average net assets......................... 5.71% 6.54% 5.39% 4.97% 7.21% Portfolio turnover rate...................... 477% 469% 279% 208% 108%
U.S. Government Securities Fund - Class A ----------------------------------------- Years Ended October 31, 08/28/89* ------------------------- to 1991 1990 10/31/89 ---------- ----------- ---------- Net asset value, beginning of period......... $ 9.47 $ 9.74 $9.73 Income (loss) from investment operations - ---------------------------------------- Net investment income (B).................... 0.84 0.75 0.15 Net realized and unrealized gain (loss) on investments............................. 0.42 (0.20) 0.01 ------ ------ ------ Total from investment operations........................ 1.26 0.55 0.16 Less distributions - ------------------ Dividends from net investment income......... (0.84) (0.75) (0.15) Dividends in excess of net investment income. ------ ------ ------ Distributions from capital gains............. ------ ------ ------ Distributions from capital................... ------ (0.07) ------ -------- ------ -------- Total distributions................. (0.84) (0.82) (0.15) ------ ------ ------ Net asset value, end of period............... $ 9.89 $ 9.47 $ 9.74 ====== ====== ====== Total return........................ 13.86% 5.90% 1.66% + Net assets, end of period (000's)............ $45,662 $43,299 $56,069 Ratio of operating expenses to average net assets (C)..................... 0.68% 2.28% 2.18%(A) Ratio of net investment income to average net assets......................... 8.65% 7.89% 8.54%(A) Portfolio turnover rate...................... 195% 71% 93%(A)
- ------------------------------ * Commencement of operations ** Net investment income per share has been calculated using the average shares method. + Non-annualized (A) Annualized (B) After expense reimbursement and waiver by the adviser of $0.02, $0.02, $0.02, $0.04, $0.19, $0.18 and $0.03 per share for the U.S. Government Securities Fund - Class A for the years ended October 31, 1996, 1995, 1994, 1993, 1992, 1991 and 1990, respectively. (C) The ratio of operating expenses, before reimbursement and waiver by the adviser, was 1.41%, 1.45%, 1.47%, 1.42%, 2.13%, 2.61% and 2.57% for the years ended October 31, 1996, 1995, 1994, 1993, 1992, 1991 and 1990, respectively. The accompanying notes are an integral part of the financial statements. 30 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
U.S. Government Securities Fund -------------------------------------------------------------------------------- Year Year 04/01/94* Year Year 04/01/94* Ended Ended to Ended Ended to 10/31/96** 10/31/95 10/31/94 10/31/96 10/31/95 10/31/94 Class B Class B Class B Class C Class C Class C ---------- ---------- ----------- ---------- ---------- ---------- Net asset value, beginning of period......... $9.98 $9.45 $9.77 $9.98 $9.45 $9.77 Income (loss) from investment operations - ---------------------------------------- Net investment income (B).................... 0.50 0.56 0.29 0.50 0.56 0.26 Net realized and unrealized gain (loss) on investments............................. (0.12) 0.58 (0.35) (0.12) 0.58 (0.32) ----- ----- ----- ----- ----- ----- Total from investment operations........................ 0.38 1.14 (0.06) 0.38 1.14 (0.06) Less distributions - ------------------ Dividends from net investment income......... (0.50) (0.61) (0.26) (0.50) (0.61) (0.26) Dividends in excess of net investment income. (0.06) ------ ------ (0.06) ------ ------ ----- ------- ------- ----- ------- ------- Total distributions................. (0.56) (0.61) (0.26) (0.56) (0.61) (0.26) ------ ------ ------ ------ ------ ------ Net asset value, end of period............... $9.80 $9.98 $9.45 $9.80 $9.98 $9.45 ===== ===== ===== ===== ===== ===== Total return........................ 3.97% 12.45% (2.44%)(D) 3.97% 12.45% (2.44%)(D) Net assets, end of period (000's)............ $19,444 $13,993 $2,746 $20,009 $20,186 $10,766 Ratio of operating expenses to average net assets (C)............................. 1.90% 1.90% 1.90%(A) 1.90% 1.90% 1.90%(A) Ratio of net investment income to average net assets................................. 5.06% 5.53% 5.06%(A) 5.06% 5.74% 5.06%(A) Portfolio turnover rate...................... 477% 469% 279% 477% 469% 279%
- ------------------------------ * Commencement of operations ** Net investment income per share has been calculated using the average shares method. (A) Annualized (B) After expense reimbursement by the adviser of $0.02 and $0.04 per share for the U.S. Government Securities Fund - Class B and $0.02 and $0.03 per share for the U.S. Government Securities Fund - Class C, for the years ended October 31, 1996 and 1995, respectively and $0.08 and $0.03 per share for the U.S. Government Securities Fund - Classes B and C respectively, for the period April 1, 1994 to October 31, 1994. (C) The ratio of operating expenses, before reimbursement by the adviser, was 2.06% and 2.28% for the U.S. Government Securities Fund - Class B and 2.06% and 2.15% for the U.S. Government Securities Fund - Class C, for the years ended October 31, 1996 and 1995, respectively and 3.40% and 2.44% for the U.S. Government Securities Fund - Classes B and C respectively, for the period April 1, 1994 to October 31, 1994 on an annualized basis. (D) Historical total returns for Classes B and C shares are one year performance returns which include Class A performance prior to April 1, 1994. The accompanying notes are an integral part of the financial statements. 31 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
National Municipal Bond Fund - Class A --------------------------------------------------------------------- 07/06/93* Years Ended October 31, to 1996 1995 1994 10/31/93 ---------------- --------------- --------------- ---------------- Net asset value, beginning of period........ $9.62 $8.82 $10.25 $10.00 Income (loss) from investment operations - ---------------------------------------- Net investment income (B)................... 0.48 0.51 0.51 0.17 Net realized and unrealized gain (loss) on investments............................ 0.11 0.80 (1.43) 0.24 ------ ----- ------ ------ Total from investment operations....................... 0.59 1.31 (0.92) 0.41 Less distributions - ------------------ Dividends from net investment income........ (0.48) (0.51) (0.51) (0.16) ------ ------ ------ ------ Net asset value, end of period.............. $9.73 $9.62 $8.82 $10.25 ===== ===== ===== ====== Total return....................... 6.31% 15.26% (9.24%) 4.17% + Net assets, end of period (000's)........... $7,710 $7,618 $7,663 $9,131 Ratio of operating expenses to average net assets (C).................... 0.99% 0.80% 0.57% 0.23%(A) Ratio of net investment income to average net assets........................ 4.99% 5.55% 5.28% 4.86%(A) Portfolio turnover rate..................... 49% 44% 6% 150%(A)
- ------------------------------ * Commencement of operations + Non-annualized (A) Annualized (B) After expense reimbursement and waiver by the adviser of $0.03, $0.05, $0.07 and $0.03 per share for the National Municipal Bond Fund - Class A for the years ended October 31, 1996, 1995 and 1994 and the period July 6, 1993 (commencement of operations) to October 31, 1993, respectively. (C) The ratio of operating expenses, before reimbursement and waiver by the adviser, was 1.25%, 1.34%, 1.26% and 1.10% for the National Municipal Bond Fund - Class A for the years ended October 31, 1996, 1995 and 1994 and the period July 6, 1993 (commencement of operations) to October 31, 1993 on an annualized basis, respectively. The accompanying notes are an integral part of the financial statements. 32 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
National Municipal Bond Fund --------------------------------------------------------------------------------- Year Year 04/01/94* Year Year 04/01/94* Ended Ended to Ended Ended to 10/31/96 10/31/95 10/31/94 10/31/96 10/31/95 10/31/94 Class B Class B Class B Class C Class C Class C ---------- ---------- ----------- ---------- ---------- ---------- Net asset value, beginning of period....... $9.62 $8.81 $9.30 $9.62 $8.81 $9.30 Income (loss) from investment operations - ---------------------------------------- Net investment income (B).................. 0.40 0.43 0.25 0.40 0.43 0.25 Net realized and unrealized gain (loss) on investments............................ 0.11 0.81 (0.49) 0.11 0.81 (0.49) ------ ----- ------ ------ ----- ------ Total from investment operations....................... 0.51 1.24 (0.24) 0.51 1.24 (0.24) Less distributions - ------------------ Dividends from net investment income....... (0.40) (0.43) (0.25) (0.40) (0.43) (0.25) ------ ------ ------ ------ ------ ------ Net asset value, end of period............. $9.73 $9.62 $8.81 $9.73 $9.62 $8.81 ===== ===== ===== ===== ===== ===== Total return...................... 5.41% 14.42% (9.71%)(D) 5.41% 14.42% (9.71%)(D) Net assets, end of period (000's).......... $6,130 $5,876 $2,036 $5,693 $6,834 $1,911 Ratio of operating expenses to average net assets (C).................... 1.84% 1.70% 1.24%(A) 1.84% 1.70% 1.24%(A) Ratio of net investment income to average net assets........................ 4.14% 4.59% 4.62%(A) 4.14% 4.53% 4.62%(A) Portfolio turnover rate.................... 49% 44% 6% 49% 44% 6%
- ------------------------------ * Commencement of operations (A) Annualized (B) After expense reimbursement and waiver by the adviser of $0.03 and $0.07 per share for the National Municipal Bond Fund - Class B and $0.04 and $0.09 per share for the National Municipal Bond Fund - Class C, for the years ended October 31, 1996 and 1995, respectively and $0.09 and $0.09 per share for the National Municipal Bond Fund - Classes B and C respectively, for the period April 1, 1994 to October 31, 1994. (C) The ratio of operating expenses, before reimbursement and waiver by the adviser, was 2.11% and 2.41% for the National Municipal Bond Fund-Class B and 2.25% and 2.63% for the National Municipal Bond Fund - Class C, for the years ended October 31, 1996 and 1995, respectively and 2.81% and 2.78% for the National Municipal Bond Fund - Classes B and C respectively, for the period April 1, 1994 to October 31, 1994 on an annualized basis. (D) Historical total returns for Classes B and C shares are one year performance returns which include Class A performance prior to April 1, 1994. The accompanying notes are an integral part of the financial statements. 33 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
Money Market Fund - Class A -------------------------------------------------- Years Ended October 31, -------------------------------------------------- 1996 1995 1994 1993 ------------- ---------- ----------- ---------- Net asset value, beginning of period...... $1.00 $1.00 $1.00 $1.00 Income from investment operations - --------------------------------- Net investment income (B)................. 0.05 0.05 0.03 0.03 Less distributions - ------------------ Dividends from net investment income...... (0.05) (0.05) (0.03) (0.03) ----- ----- ----- ----- Net asset value, end of period............ $1.00 $1.00 $1.00 $1.00 ===== ===== ===== ===== Total return..................... 5.16% 5.60% 3.48% 2.80% Net assets, end of period (000's)......... $8,087 $11,379 $8,499 $18,109 Ratio of operating expenses to average net assets (C)........................... 0.50% 0.50% 0.50% 0.50% Ratio of net investment income to average net assets....................... 5.02% 5.45% 3.40% 2.75% Money Market Fund - Class A ------------------------------------------------- Years Ended October 31, 08/28/89* -------------------------------------- to 1992 1991 1990 10/31/89 ------------ ---------- ----------- --------- Net asset value, beginning of period...... $1.00 $1.00 $1.00 $1.00 Income from investment operations - --------------------------------- Net investment income (B)................. 0.04 0.06 0.06 0.01 Less distributions - ------------------ Dividends from net investment income...... (0.04) (0.06) (0.06) (0.01) ----- ----- ----- ----- Net asset value, end of period............ $1.00 $1.00 $1.00 $1.00 ===== ===== ===== ===== Total return..................... 3.69% 6.22% 5.76% 0.53%+ Net assets, end of period (000's)......... $2,244 $3,421 $4,526 $7,781 Ratio of operating expenses to average net assets (C)........................... 0.50% 1.00% 2.45% 1.96%(A) Ratio of net investment income to average net assets....................... 3.77% 6.01% 5.52% 6.59%(A)
- ------------------------------ * Commencement of operations + Non-annualized (A) Annualized (B) After expense reimbursement and waiver by the adviser of $0.004, $0.004, $0.0044, $0.0084, $0.0211, $0.0270 and $0.0002 per share for the Money Market Fund - Class A for the years ended October 31, 1996, 1995, 1994, 1993, 1992, 1991 and 1990, respectively. (C) The ratio of operating expenses, before reimbursement and waiver by the adviser, was 0.95%, 0.96%, 0.95%, 1.32%, 2.71%, 2.68% and 2.47% for the Money Market Fund - Class A for the years ended October 31, 1996, 1995, 1994, 1993, 1992, 1991 and 1990, respectively. The accompanying notes are an integral part of the financial statements. 34 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
Money Market Fund -------------------------------------------------------------------------------- Year Year 04/01/94* Year Year 04/01/94* Ended Ended to Ended Ended to 10/31/96 10/31/95 10/31/94 10/31/96 10/31/95 10/31/94 Class B Class B Class B Class C Class C Class C ---------- ---------- ----------- ---------- ---------- ---------- Net asset value, beginning of period.. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 Income from investment operations - --------------------------------- Net investment income (B)............. 0.05 0.05 0.02 0.05 0.05 0.02 Less distributions - ------------------ Dividends from net investment income.. (0.05) (0.05) (0.02) (0.05) (0.05) (0.02) ----- ----- ----- ----- ----- ----- Net asset value, end of period........ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 ===== ===== ===== ===== ===== ===== Total return................. 5.16% 5.60% 3.48%(D) 5.16% 5.60% 3.48%(D) Net assets, end of period (000's)..... $3,062 $1,564 $312 $9,840 $9,394 $12,170 Ratio of operating expenses to average net assets (C)....................... 0.50% 0.50% 0.50%(A) 0.50% 0.50% 0.50%(A) Ratio of net investment income to average net assets........................... 5.02% 5.52% 3.96%(A) 5.02% 5.46% 3.96%(A)
- ------------------------------ * Commencement of operations (A) Annualized (B) After expense reimbursement by the adviser of $0.007 and $0.009 per share for the Money Market Fund - Class B and $0.005 and $0.005 per share for the Money Market Fund - Class C, for the years ended October 31, 1996 and 1995, respectively and $0.0228 and $0.0037 per share for the Money Market Fund - Classes B and C respectively, for the period April 1, 1994 to October 31, 1994. (C) The ratio of operating expenses, before reimbursement by the adviser, was 1.18% and 1.41% for the Money Market Fund - Class B and 0.98% and 0.95% for the Money Market Fund - Class C, for the years ended October 31, 1996 and 1995, respectively and 4.83% and 1.18% for the Money Market Fund - Classes B and C respectively, for the period April 1, 1994 to October 31, 1994 on an annualized basis. (D) Historical total returns for Classes B and C shares are one year performance returns which include Class A performance prior to April 1, 1994. The accompanying notes are an integral part of the financial statements. 35 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 (showing percentage of total value of investments) - -------------------------------------------------------------------------------- Small/Mid Cap Fund
Shares Value ------ ----- COMMON STOCKS - 90.15% Aerospace - 1.02% Gulfstream Aerospace Corporation* 3,700 $87,412 Rohr Industries, Incorporated 5,000 92,500 ------ 179,912 Agricultural Products - 0.34% DEKALB Genetics Corporation, Class B 1,500 59,250 ------ Apparel & Textiles - 6.12% Cintas Corporation 5,000 291,250 G & K Services, Class A 3,000 87,000 Gucci Group NV 4,800 331,200 Nautica Enterprises, 2,000 61,500 Incorporated* Oakley, Incorporated* 6,000 89,250 Stage Stores, Incorporated* 4,700 85,775 Tommy Hilfiger Corporation* 2,500 130,000 --------- 1,075,975 Business Services - 7.23% Employee Solutions, Incorporated* 5,000 110,625 FactSet Research Systems, Incorporated* 3,000 72,000 Gartner Group, Incorporated, Class A* 2,500 76,875 Leasing Solutions, Incorporated* 5,000 157,500 Loewen Group, Incorporated 4,900 194,162 Nokia Corporation 4,000 185,500 Paychex, Incorporated 1,400 79,800 Service Corporation International 13,800 393,300 --------- 1,269,762 Chemicals - 0.35% Waters Corporation* 2,000 62,000 ------ Computers & Business Equipment - 4.45% 3Com Corporation* 4,900 331,362 Applix, Incorporated* 2,900 70,325 Medic Computer Systems, Incorporated* 5,500 155,375 Sundstrand Corpration 5,600 225,400 ------- 782,462 Crude Petroleum & Natural Gas - 0.97% B.J. Services Company* 3,800 170,525 ------- Drugs & Health Care - 4.79% Access Health Marketing, Incorporated* 4,100 135,300 American Medical Response* 3,500 105,000 Biopsys Medical, Incorporated* 4,000 68,500 Centocor, Incorporated* 2,000 58,750 Conmed Corporation* 5,000 86,250 Guidant Corporation 3,400 156,825 IDEXX Laboratories, Incorporated* 1,000 39,250 Mentor Corporation 2,000 44,250 Phycor, Incorporated* 3,100 96,100 VISX, Incorporated* 2,000 50,500 ------- 840,725 Electrical Equipment - 1.46% American Power Conversion Corporation* 5,900 126,112 Cable Design Technologies Corporation* 5,000 130,000 ------- 256,112 Electronics - 11.29% Adaptec, Incorporated* 6,700 407,863 Altera Corporation* 4,500 279,000 Electronics For Imaging, Incorporated* 2,500 180,000 Glenayre Technologies, Incorporated* 1,500 38,625 Hologic, Incorporated* 6,700 152,425 Input/Output, Incorporated* 6,700 199,325 Maxim Integrated Products, Incorporated* 1,600 56,000 PictureTel Corporation* 6,100 164,700 S3, Incorporated* 5,000 94,375 Target Therapeutics, Incorporated* 3,000 111,000 Tellabs, Incorporated* 1,300 110,662 Xilinx, Incorporated* 5,800 189,950 --------- 1,983,925 Financial Services - 3.86% Case Corporation 1,300 60,450 Green Tree Financial Corporation 5,400 213,975 Money Store, Incorporated* 15,700 404,275 ------- 678,700 Hotels & Restaurants - 4.86% Boston Market, Incorporated* 4,000 145,500 Landrys Seafood Restaurants* 3,000 61,500 Lone Star Steakhouse & Saloon, Incorporated* 13,000 333,125 Mirage Resorts, Incorporated* 10,000 220,000 Outback Steakhouse, Incorporated* 4,000 92,750 ------- 852,875 Industrial Machinery - 1.15% Tyco International, Ltd. 2,000 99,250 U.S. Filter Corporation* 3,000 103,500 ------- 202,750 Insurance - 2.94% CompDent Corporation* 2,600 89,375 Equifax, Incorporated 6,000 178,500 MGIC Investment Corporation 2,300 157,837 Travelers/Aetna Property Casual Corporation, Class A 3,000 90,000 ------- 515,712 Investment Companies - 1.00% The Charles Schwab Corporation 7,000 175,000 ------- Leisure Time - 4.12% International Game Technology 18,000 380,250 Sports Authority, Incorporated* 14,200 344,350 ------- 724,600 Miscellaneous Manufacturing - 0.55% Blyth Industries, Incorporated 2,500 97,188 ------
The accompanying notes are an integral part of the financial statements. 36 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Shares Value ------ ----- Medical Supplies - 0.38% Heartport, Incorporated* 2,500 $65,938 ------ Metal & Metal Products - 1.05% Titanium Metals Corporation* 6,000 184,500 ------- Mobile Homes - 0.24% Clayton Homes, Incorporated 2,500 42,187 ------ Office Furnishings & Supplies - 1.19% OfficeMax, Incorporated* 15,450 208,575 ------- Petroleum Services - 2.52% Global Marine, Incorporated* 8,000 147,000 Halliburton Company 3,200 181,200 Smith International, Incorporated 3,000 114,000 ------- 442,200 Plastics - 1.26% Sealed Air Corporation* 5,700 221,588 ------- Pollution Control - 2.97% United Waste Systems, Incorporated* 4,000 137,500 USA Waste Services, Incorporated* 12,000 384,000 ------- 521,500 Retail Grocery - 0.61% Safeway, Incorporated* 2,500 107,188 ------- Retail Trade - 5.73% Dollar General Corporation 9,100 252,525 Nine West Group, Incorporated* 5,500 274,313 PETsMART, Incorporated* 4,000 108,000 Saks Holdings, Incorporated* 2,200 77,000 Rite Aid Corporation 3,600 122,400 TJX Companies, Incorporated 4,300 172,000 ----------- 1,006,238 Software - 8.71% Compuware Corporation* 3,900 205,725 HBO & Company 1,500 90,187 Informix Corporation* 15,400 341,688 Microchip Technology, Incorporated* 1,900 68,875 Parametric Technology Corporation* 6,200 303,025 Softkey International, Incorporated 5,400 109,350 Sterling Commerce, Incorporated* 6,700 188,438 Structural Dynamics Research Corporation* 12,600 223,650 ---------- 1,530,938 Telecommunication Services - 4.75% Ascend Communications, Incorporated* 2,800 183,050 Cascade Communications Corporation* 1,500 108,937 EXCEL Communications, Incorporated* 2,700 70,200 MFS Communications, Incorporated* 1,700 85,212 PairGain Technologies, Incorporated* 1,100 75,763 QUALCOMM, Incorporated* 5,300 210,675 Univision Communications, Incorporated, Class A 3,000 101,250 ------- 835,087 Telephone - 2.98% LCI International, Incorporated* 8,100 258,188 Worldcom, Incorporated* 10,900 265,687 ------- 523,875 Trucking & Freight - 1.25% Tidewater, Incorporated 5,000 218,750 ------- TOTAL COMMON STOCKS (Cost $15,239,875) $15,836,037 ---------- Principal SHORT TERM INVESTMENTS - 9.85% Amount Value ------ ----- Barton Capital Corporation, 5.27% due 11/08/96 $800,000 $799,180 Commed Fuel, Incorporated, 5.25% due 11/05/96 800,000 799,534 Seven Seas Money Market Fund 132,198 132,198 --------- 1,730,912 TOTAL INVESTMENTS (Small/Mid Cap Fund) (Cost $16,970,787) $17,566,949 ========== International Small Cap Fund Shares Value ------ ----- COMMON STOCKS - 77.38% Agricultural Machinery - 1.78% Kverneland AS 9,500 $223,326 ------- Agricultural Products - 0.95% London Sumatra Indonesia* 46,000 119,478 ------- Banking - 3.54% Banco de A. Edwards, ADR 5,975 114,272 Banco Latinoamericano de Exportaciones SA 3,700 193,325 Bank Tiara 150,000 135,234 ------- 442,831 Broadcasting - 3.15% Flextech PLC 25,800 258,252 Sistem Televisyen Malaysia 60,000 135,365 ------- 393,617 Business Services - 2.74% Altran Technologies SA 450 134,670 Kobenhavns Lufthavne 2,000 208,179 ------- 342,849 Computers & Business Equipment - 0.89% Enator AB* 5,000 111,015 ------- Chemicals - 0.57% Budi Acid Jaya 55,000 70,837 ------ Conglomerates - 3.80% Amer Group, Ltd. 7,000 159,757 Hunter Douglas NV 3,300 233,394 Solid Group, Incorporated* 400,000 82,192 ------- 475,343
The accompanying notes are an integral part of the financial statements. 37 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Shares Value ------ ----- Containers & Glass - 1.08% International Container 205,000 $134,560 ------- Drugs & Health Care - 3.09% Medeva PLC 12,275 210,209 Schwarz Pharma AG 2,300 177,087 ------- 387,296 Electrical Equipment - 0.95% TLG PLC 63,200 118,294 ------- Electronics - 2.65% Gold Peak Industries, Ltd. 180,000 111,740 VTech Holdings, Ltd.* 112,800 220,284 ------- 332,024 Financial Services - 4.43% Guoco Group 43,000 227,452 JBA Holdings 21,000 176,025 Manhattan Card Company 304,000 150,384 ------- 553,861 Food & Beverages - 5.59% Doutor Coffee Company 5,000 221,773 Grolsch NV 5,600 224,436 J.D. Wetherspoon PLC 13,158 253,780 ------- 699,989 Household Appliances Furnishing - 3.71% DFS Furniture Company 21,000 186,450 Industrie Natuzzi SPA, ADR 2,875 130,453 Laox Company 8,800 147,627 ------- 464,530 Industrial Machinery - 4.30% IHC Caland NV 3,900 217,675 KCI Konecranes International 5,950 164,002 Tomra Systems AS 11,000 156,015 ------- 537,692 International Oil - 4.07% British-Borneo Petroleum Syndicate PLC 12,000 128,320 Cairn Energy PLC* 22,000 130,339 Gulf Canada Resources, Ltd.* 36,500 250,937 ------- 509,596 Leisure Time - 4.59% AAPC, Ltd. 155,009 93,379 Cinar Films, Incorporated, Class B* 5,175 126,787 Euro Disney SCA* 17,133 33,680 Tiemco 2,000 151,069 Village Roadshow 41,000 169,642 ------- 574,557 Miscellaneous - 4.11% Axxicon Group NV 4,000 92,415 Noritsu Koki Company 4,000 209,038 Rofin-Sinar Technologies, Incorporated* 17,400 213,150 ------- 514,603 Office Furnishings & Supplies - 1.01% Turbon International AG 5,650 126,849 ------- Paper - 1.65% Guilbert SA 1,300 206,729 ------- Petroleum Services - 1.79% Petroleum Geological Services AS 6,500 222,625 ------- Publishing - 1.77% Dorling Kindersley Holdings PLC 25,000 221,761 ------- Retail Trade - 4.16% Bulgari SPA 9,700 168,167 Matahari Putra Prima 85,000 73,896 Next PLC 19,800 179,824 Paris Miki, Incorporated 2,500 98,810 ------- 520,697 Software - 3.27% Baan Company NV* 4,500 166,500 Psion PLC 28,900 199,440 Dassault Systemes SA* 1,000 43,032 -------- 408,972 Telecommunication Services - 1.69% Comcast UK Cable Partners, Ltd., Class A* 10,500 132,562 Smartone Telecommunications* 37,000 78,956 ------- 211,518 Telephone - 1.57% Cellular Communications International* 6,250 196,094 ------- Toys, Amusements & Sporting Goods - 1.72% Salomon SA 1,000 89,584 Skis Rossignol SA 4,600 125,066 ------- 214,650 Transportation - 2.77% ASG AB 8,800 183,342 Tranz Rail Holdings, Ltd., ADR* 10,000 163,750 ------- 347,092 TOTAL COMMON STOCKS (Cost $9,413,514) $9,683,285 --------- PREFERRED STOCKS - 2.10% Financial Services - 2.10% Marschollek, Lautenschlaeger und Partner AG 1,900 263,471 ------- TOTAL PREFERRED STOCKS (Cost $213,783) $263,471 ------- RIGHTS - 0.32%* Financial Services - 0.02% Marschollek, Lautenschlaeger und Partner AG (Expiration date 11/11/96; strike price DEM 190) 1,900 2,384 ----- Retail Trade - 0.30% Matahari Putra Prima (Expiration date 11/14/96; strike price IDR 1000) 85,000 37,404 ------ TOTAL RIGHTS (Cost $0) $39,788 ------
The accompanying notes are an integral part of the financial statements. 38 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Principal Amount Value ------ ----- REPURCHASE AGREEMENT - 20.20% $2,528,000 Repurchase Agreement with State Street Bank & Trust Company dated 10/31/96 at 4.75%, to be repurchased at $2,528,334 on 11/01/96, collateralized by $2,005,000 U.S. Treasury Bonds, 9.25% due 02/15/16 (valued at $2,620,516, including interest) $2,528,000 TOTAL INVESTMENTS (International Small Cap Fund) (Cost $12,155,297) $12,514,544 =========== Growth Equity Fund Shares Value ------ ----- COMMON STOCKS - 85.91% Aerospace - 4.23% Boeing Company 1,100 $104,912 Computer Sciences Corporation* 2,475 183,769 Gulfstream Aerospace Corporation* 7,000 165,375 Lockheed Martin Corporation 1,200 107,550 ------- 561,606 Banking - 1.28% BankAmerica Corporation 1,850 169,275 ------- Business Services - 2.82% First Data Corporation 1,350 107,662 Fiserv, Incorporated* 3,600 138,150 Gartner Group, Incorporated* 3,200 98,400 Oakley, Incorporated* 2,050 30,494 ------- 374,706 Chemicals - 0.81% The B.F. Goodrich Company 2,550 108,056 ------- Computers & Business Equipment - 7.50% 3Com Corporation* 2,100 142,012 Cisco Systems, Incorporated* 2,625 162,422 Compaq Computer Corporation* 2,050 142,731 Fore Systems* 3,450 137,138 International Business Machines, Corporation 1,550 199,950 Oce-Van Der Grinten NV 750 80,008 Sun Microsystems, Incorporated* 2,150 131,150 ------- 995,411 Conglomerates - 0.75% Hunter Douglas NV 1,400 99,016 ------ Construction & Mining Equipment - 0.66% Foster Wheeler Corporation 2,150 88,150 ------ Containers & Glass - 0.65% Crown Cork & Seal, Incorporated 1,800 86,400 ------ Domestic Oil - 0.57% Phillips Petroleum Company 1,850 $75,850 ------ Drugs & Health Care - 11.13% Astra AB 400 17,950 Astra AB - SEK 2,150 98,088 Baxter International, Incorporated 2,450 101,981 Bristol Myers Squibb Company 1,375 145,406 Cardinal Health, Incorporated 1,441 113,119 Columbia/HCA Healthcare Corporation 4,425 158,194 Johnson & Johnson 2,100 103,425 Oxford Health Plans, Incorporated* 3,100 141,050 Pacificare Health Systems, Incorporated* 1,000 70,250 Phycor, Incorporated 3,700 114,700 SmithKline Beecham PLC 2,125 133,078 Tenet Healthcare Corporation* 1,750 36,531 United States Surgical Corporation 2,025 84,797 Warner-Lambert Company 2,500 159,063 --------- 1,477,632 Electrical Equipment - 2.67% Duracell International, Incorporated 1,900 126,825 General Electric Company 2,350 227,362 ------- 354,187 Electronics - 13.65% ADC Telecommunications, Incorporated* 2,350 160,681 Altera Corporation* 3,350 207,700 Analog Devices, Incorporated* 3,000 78,000 Andrew Corporation* 1,450 70,688 Gateway 2000, Incorporated* 2,300 108,244 Intel Corporation 4,250 466,969 Linear Technology Corporation 900 30,150 Maxim Integrated Products, Incorporated* 2,100 73,500 Picturetel Corporation* 4,425 119,475 Tellabs, Incorporated* 2,500 212,812 Xilinx, Incorporated* 8,700 284,925 --------- 1,813,144 Financial Services - 3.15% Associates First Capital Corporation 3,400 147,475 The Chase Manhattan Corporation 1,234 105,816 Federal Home Loan Mortgage Corporation 775 78,275 Federal National Mortgage Association 2,225 87,053 ------- 418,619 Food & Beverages - 2.13% The Coca-Cola Company 2,550 128,775 Coca-Cola Enterprises, Incorporated 3,625 154,516 ------- 283,291 Hotels & Restaurants - 4.70% The Cheesecake Factory, Incorporated* 2,575 47,637 HFS, Incorporated* 1,550 113,538 Host Marriot Corporation 5,650 86,869 ITT Corporation* 1,750 73,500
The accompanying notes are an integral part of the financial statements. 39 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Shares Value ------ ----- Hotels & Restaurants - continued Marriot International, Incorporated 2,800 $159,250 Planet Hollywood International, Incorporated* 1,900 39,425 Sun International Hotels, Ltd.* 2,200 103,950 ------- 624,169 Household Appliances Furnishing - 1.21% Sunbeam Corporation 6,500 160,062 ------- Insurance - 1.43% Everest Reinsurance Holdings 3,525 89,887 General Re Corporation 350 51,538 The Progressive Corporation 700 48,125 ------- 189,550 International Oil - 2.73% The British Petroleum Company PLC 650 83,606 Exxon Corporation 750 66,469 Gulf Canada Resources, Ltd.* 5,000 34,375 Royal Dutch Petroleum Company 400 66,150 Texaco, Incorporated 1,100 111,788 ------- 362,388 Leisure Time - 0.83% International Game Technology 5,200 109,850 ------- Office Furnishings & Supplies - 0.37% Staples, Incorporated* 2,650 49,356 ------ Petroleum Services - 1.94% Global Marine, Incorporated* 3,000 55,125 Rowan Companies, Incorporated* 5,500 123,062 Schlumberger, Ltd. 800 79,300 ------- 257,487 Retail Grocery - 1.57% Kroger Company* 1,700 75,862 Safeway, Incorporated* 3,100 132,913 ------- 208,775 Retail Trade - 2.90% Borders Group, Incorporated* 1,325 41,737 Consolidated Stores Corporation* 2,600 100,425 Federated Department Stores, Incorporated* 2,800 92,400 The Home Depot, Incorporated 2,750 150,563 ------- 385,125 Software - 8.23% BMC Software, Incorporated* 1,900 157,700 Cadence Design Systems, Incorporated* 4,275 156,038 Computer Associates International, Incorporated 3,750 221,719 Documentum, Incorporated* 950 35,387 Microsoft Corporation* 500 68,625 Parametric Technology Corporation* 3,300 161,287 PeopleSoft, Incorporated* 1,875 168,281 Shared Medical System 2,575 124,244 --------- 1,093,281 Telecommunication Services - 5.84% Advanced Fibre Communications* 200 $11,425 Ascend Communications, Incorporated* 2,600 169,975 Cascade Communications Corporation* 2,500 181,563 Korea Mobile Telecommunications, ADR* 4,600 57,500 Lucent Technologies, Incorporated 2,750 129,250 Premisys Communications, Incorporated* 2,700 135,000 TeleCom Brazil-Telebras, ADR 1,225 91,263 ------- 775,976 Telephone - 2.16% DDI Corporation 10 75,096 Worldcom, Incorporated* 8,700 212,062 ------- 287,158 TOTAL COMMON STOCKS (Cost $10,705,235) $11,408,520 ---------- Principal Amount Value ------ ----- REPURCHASE AGREEMENT - 14.09% $1,871,000 Repurchase Agreement with State Street Bank & Trust Company dated 10/31/96 at 4.75%, to be repurchased at $1,871,247 on 11/01/96, collateralized by $1,835,000 U.S. Treasury Note, 7.50% due 10/31/99 (valued at $1,911,934, including interest) $1,871,000 --------- TOTAL INVESTMENTS (Growth Equity Fund) (Cost $12,576,235) $13,279,520 ========== Global Equity Fund Shares Value ------ ----- COMMON STOCKS - 99.07% Air Travel - 1.66% AMR Corporation* 22,000 $1,848,000 --------- Aluminum - 1.04% Aluminum Company of America 19,800 1,160,775 --------- Automobiles - 3.62% General Motors Corporation 24,400 1,314,550 Peugeot SA 8,000 834,034 Volkswagen AG 4,800 1,889,857 --------- 4,038,441 Banking - 11.19% ABN AMRO Holdings NV 21,100 1,192,603 Bank of New York, Incorporated 79,700 2,640,063 Banque Nationale de Paris 30,900 1,156,219 Den Norske Bank 183,700 610,337 First Chicago NBD Corporation 25,900 1,320,900 HSBC Holdings 92,000 1,885,221 Jardine Strategic Holdings, Ltd. 735,000 2,396,100 Mellon Bank Corporation 19,700 1,282,963 ---------- 12,484,406
The accompanying notes are an integral part of the financial statements. 40 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Shares Value ------ ----- Chemicals - 6.05% Akzo Nobel NV, ADS 9,600 $1,209,690 BASF AG 38,600 1,233,650 Bayer AG 64,000 2,418,172 Potash Corporation Saskatchewan, Incorporated 26,700 1,890,636 --------- 6,752,148 Computers & Business Equipment - 2.54% Data General Corporation 62,700 932,663 Olivetti & C. SPA* 960,000 279,077 Tandy Corporation 43,200 1,625,400 --------- 2,837,140 Conglomerates - 1.04% CSR, Ltd. 344,000 1,156,119 --------- Construction & Mining Equipment - 0.69% Greenfield Industries, Incorporated 29,000 768,500 ------- Construction Materials - 0.99% Holderbank Financier Glarus AG 1,600 1,107,595 --------- Containers & Glass - 1.02% Toyo Seikan Kaisha 36,000 1,138,290 --------- Crude Petroleum & Natural Gas - 1.08% Elf Aquitaine 15,000 1,199,413 --------- Electric Utilities - 3.39% Iberdrola SA 120,700 1,281,778 Southern Electric PLC 63,000 659,326 VEBA AG 34,500 1,840,046 --------- 3,781,150 Electrical Equipment - 0.96% Hitachi 121,000 1,073,383 --------- Electronics - 3.08% Ascom Holdings AG 560 544,937 GenRad, Incorporated* 56,000 1,134,000 SGS Thomson Microelectronics, Incorporated* 12,200 646,451 TDK Corporation 19,000 1,114,751 --------- 3,440,139 Financial Services - 3.05% Enhance Financial Services Group, Incorporated 22,450 749,269 Internationale Nederlanden Groep NV 56,150 1,750,654 PennCorp Financial Group, Incorporated 5,850 202,556 UST Corporation 39,300 704,944 --------- 3,407,423 Food & Beverages - 8.86% Danone 4,000 547,677 Kao Corporation 281,000 3,307,189 Nestle SA 1,600 1,737,975 Reckitt & Colman PLC 209,000 2,422,005 Tate & Lyle PLC 239,850 1,866,021 --------- 9,880,867 Household Appliances Furnishing - 2.06% Matsushita Electric Industrial Company, Ltd. 72,000 $1,150,938 Philips Electronics NV 32,400 1,141,934 --------- 2,292,872 Household Products - 2.11% Unilever 111,900 2,351,284 --------- Industrial Machinery - 4.83% Bobst AG 400 518,038 Schindler Holding AG 600 611,393 Sulzer AG 1,000 568,829 Sumitomo Rubber Industries 80,000 566,334 Tecumseh Products Company 21,600 1,215,000 Valeo 31,800 1,908,311 --------- 5,387,905 Insurance - 3.66% MBIA, Incorporated 20,500 1,816,812 Sumitomo Marine & Fire 148,000 1,060,718 WPP Group PLC, ADR* 325,000 1,206,055 --------- 4,083,585 Investment Companies - 0.39% India Gateway Fund 73,890 359,105 Indian Opportunities Fund 8,518 73,763 -------- 432,868 Paper - 1.43% Boise Cascade Corporation 51,600 1,599,600 --------- Petroleum Services - 1.55% Repsol SA 53,100 1,733,308 --------- Photography - 1.98% Fuji Photo Film Company 77,000 2,211,497 --------- Pollution Control - 2.20% Browning-Ferris Industries, Incorporated 93,600 2,457,000 --------- Publishing - 2.22% Houghton Mifflin Company 49,800 2,471,325 --------- Railroads & Equipment - 0.99% East Japan Railway 240 1,102,455 --------- Retail Trade - 9.36% Coles Myer, Ltd. 322,000 1,176,617 Delhaize-Le Lion SA 21,100 1,180,491 G.I.B. Holdings, Ltd. 14,100 594,921 Karstadt AG 6,800 2,479,952 Limited, Incorporated 61,200 1,124,550 D.S. Revco, Incorporated* 20,200 608,525 Vendex International NV 15,000 605,587 Waban, Incorporated* 102,300 2,672,588 ---------- 10,443,231
The accompanying notes are an integral part of the financial statements. 41 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Shares Value ------ ----- Software - 0.44% Novell, Incorporated* 53,200 $492,100 ------- Steel - 0.25% Lukens, Incorporated 20,400 280,500 ------- Telecommunication Services - 2.79% Comsat Corporation 103,500 2,432,250 Lucent Technologies, Incorporated 5,995 281,765 US Order, Incorporated* 41,300 400,094 ---------- 3,114,109 Telephone - 8.74% American Telephone & Telegraph Corporation 60,800 2,120,400 MCI Communications 68,500 1,721,063 Corporation Nippon Telegraph & Telephone Corporation 419 2,925,695 STET 650,000 1,731,048 Telefonica de Espana SA 62,700 1,257,980 --------- 9,756,186 Tobacco - 2.71% B.A.T. Industries PLC 87,000 603,223 Philip Morris Companies, Incorporated 26,100 2,417,512 --------- 3,020,735 Trucking & Freight - 1.10% Peninsular & Oriental Steam Navigation Company 125,000 1,224,772 --------- TOTAL COMMON STOCKS (Cost $111,327,852) $110,529,121 ----------- Principal Amount Value ------ ----- REPURCHASE AGREEMENT- 0.93% $1,041,000 Repurchase Agreement with State Street Bank & Trust Company dated 10/31/96 at 4.75%, to be repurchased at $1,041,137 on 11/01/96, collateralized by $845,000 U.S. Treasury Bond, 8.75% due 05/15/17 (valued at $1,097,358, including interest) $1,041,000 --------- TOTAL INVESTMENTS (Global Equity Fund) (Cost $112,368,852) $111,570,121 ============ Value Equity Fund Shares Value ------ ----- COMMON STOCKS - 90.12% Aluminum - 0.77% Reynolds Metals Company 19,200 $1,080,000 --------- Auto Parts - 0.65% Eaton Corporation* 10,000 597,500 Genuine Parts Company 7,000 306,250 ------- 903,750 Automobiles - 0.64% Ford Motor Company 11,200 $350,000 General Motors Corporation 10,100 544,137 ------- 894,137 Banking - 8.89% Banc One Corporation 17,900 758,513 BankBoston Corporation 16,800 1,075,200 Bankers Trust New York Corporation 10,700 904,150 Fleet Financial Group, Incorporated 23,000 1,147,125 Mellon Bank Corporation 31,200 2,031,900 Mercantile Bankshares Corporation 14,100 424,762 J.P. Morgan & Company, Incorporated 16,100 1,390,638 National City Corporation 20,000 867,500 PNC Bank Corporation 21,500 779,375 Signet Banking Corporation 20,000 577,500 U.S. Bancorp 18,000 720,000 Wells Fargo & Company 6,500 1,736,312 ---------- 12,412,975 Business Services - 1.68% H & R Block, Incorporated 33,000 816,750 Deluxe Corporation 9,000 293,625 R.R. Donnelley & Sons Company 25,900 786,712 PHH Corporation 15,000 446,250 --------- 2,343,337 Chemicals - 6.48% Betz Dearborn, Incorporated 19,000 997,500 Ciba-Geigy AG* 1,000 1,231,804 The Dow Chemical Company 15,500 1,205,125 E.I. Du Pont De Nemours & Company 20,400 1,892,100 FMC Corporation 6,000 441,750 Great Lakes Chemical Corporation 17,000 886,125 Lubrizol Corporation 25,000 743,750 Nalco Chemical Company 24,000 873,000 Witco Corporation 24,900 771,900 --------- 9,043,054 Computers & Business Equipment - 0.26% Pitney Bowes, Incorporated 6,400 357,600 ------- Conglomerates - 0.34% Lonrho PLC 197,000 480,957 ------- Construction Materials - 0.40% Armstrong World Industries, Incorporated 8,400 560,700 ------- Cosmetics & Toiletries - 0.76% International Flavors & Fragrances, Incorporated 25,700 1,063,337 --------- Crude Petroleum & Natural Gas - 0.20% Union Pacific Resources Group, Incorporated 9,994 274,834 -------
The accompanying notes are an integral part of the financial statements. 42 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Shares Value ------ ----- Domestic Oil - 2.76% Atlantic Richfield Company 20,400 $2,703,000 Pennzoil Company 1,400 71,400 Sun Company, Incorporated 11,400 255,075 USX-Marathon Group 38,000 831,250 --------- 3,860,725 Drugs & Health Care - 7.91% Abbott Laboratories 26,900 1,361,813 Allegiance Corporation* 3,480 65,250 American Home Products Corporation 24,900 1,525,125 Bausch & Lomb, Incorporated 19,000 641,250 Baxter International, Incorporated 21,500 894,937 Eli Lilly & Company 17,300 1,219,650 Pharmacia & Upjohn, Incorporated 39,000 1,404,000 SmithKline Beecham PLC, ADR 22,700 1,421,588 Tambrands, Incorporated 20,000 852,500 Warner-Lambert Company 26,000 1,654,250 ---------- 11,040,363 Electric Utilities - 5.79% Baltimore Gas & Electric Company 16,500 449,625 Dominion Resources, Incorporated 17,000 641,750 DQE, Incorporated 10,000 287,500 Edison International 25,800 509,550 Entergy Corporation 30,000 840,000 Florida Progress Corporation 9,000 300,375 GPU, Incorporated 9,000 295,875 Ohio Edison Company 20,000 417,500 Pacific Gas & Electric Company 27,900 655,650 PacifiCorp 40,000 845,000 PECO Energy Company 36,000 909,000 Public Service Enterprise Group, Incorporated 24,500 658,437 Southern Company 22,400 495,600 Unicom Corporation 30,000 780,000 --------- 8,085,862 Electrical Equipment - 3.34% Cooper Industries, Incorporated 19,000 764,750 General Electric Company 30,100 2,912,175 Hubbell, Incorporated 24,100 985,087 --------- 4,662,012 Electronics - 0.81% AMP, Incorporated 8,800 298,100 Honeywell, Incorporated 13,500 838,687 --------- 1,136,787 Financial Services - 5.30% American Express Company 27,000 1,269,000 Chase Manhattan Corporation 28,500 2,443,875 Federal National Mortgage Association 32,800 1,283,300 Student Loan Marketing Association 14,000 1,158,500 Travelers Group, Incorporated 23,000 1,247,750 --------- 7,402,425 Food & Beverages - 5.18% General Mills, Incorporated 27,500 1,570,938 H.J. Heinz Company 35,000 1,242,500 McCormick & Company, Incorporated 44,000 1,061,500 Quaker Oats Company 39,000 1,384,500 Sara Lee Corporation 17,000 603,500 Unilever NV 9,000 1,375,875 --------- 7,238,813 Forest Products - 1.07% Georgia Pacific Corporation 19,900 1,492,500 --------- Gas & Pipeline Utilities - 0.14% TransCanada Pipelines, Ltd. 12,000 202,500 ------- Gold - 0.55% Newmont Mining Corporation 16,500 763,125 ------- Hotels & Restaurants - 0.36% ITT Corporation* 12,000 504,000 ------- Household Products - 0.80% Corning, Incorporated 29,000 1,123,750 --------- Industrial Machinery - 0.12% TRINOVA Corporation 5,000 164,375 ------- Insurance - 3.46% Alexander & Alexander Services, Incorporated 7,500 114,375 American General Corporation 36,100 1,344,725 Lincoln National Corporation, Incorporated 11,900 577,150 Provident Companies, Incorporated 13,000 482,625 SAFECO Corporation 9,000 339,750 St. Paul Companies, Incorporated 13,000 706,875 Travelers/Aetna Property Casual Corporation 1,500 45,000 UNUM Corporation 4,000 251,500 USF & G Corporation 30,000 570,000 Willis Corroon Group PLC 40,000 395,000 --------- 4,827,000 International Oil - 8.01% Amoco Corporation 16,800 1,272,600 The British Petroleum Company PLC 9,800 1,260,525 Chevron Corporation 23,600 1,551,700 Exxon Corporation 25,800 2,286,525 Mobil Corporation 8,800 1,027,400 Royal Dutch Petroleum Company 9,700 1,604,137 Texaco, Incorporated 21,500 2,184,938 ---------- 11,187,825 Liquor - 1.57% Anheuser-Busch Companies, Incorporated 31,400 1,208,900 Brown-Forman Corporation, Class B 22,800 986,100 --------- 2,195,000 Newspapers - 0.54% Gannett, Incorporated 10,000 758,750 -------
The accompanying notes are an integral part of the financial statements. 43 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Shares Value ------ ----- Paper - 4.36% Consolidated Papers, Incorporated 14,500 $ 726,813 International Paper Company 23,600 1,008,900 James River Corporation of Virginia 16,000 504,000 Kimberly Clark Corporation 12,000 1,119,000 Minnesota Mining & Manufacturing Company 17,200 1,317,950 Union Camp Corporation 28,900 1,408,875 --------- 6,085,538 Petroleum Services - 0.69% McDermott International, Incorporated 14,000 248,500 Repsol SA 22,000 717,750 ------- 966,250 Photography - 0.83% Eastman Kodak Company 14,500 1,156,375 --------- Publishing - 1.68% Dun & Bradstreet Corporation 16,000 926,000 McGraw-Hill Companies, Incorporated 15,000 703,125 The Reader's Digest Association, Incorporated 20,200 719,625 --------- 2,348,750 Railroads & Equipment - 1.01% Conrail, Incorporated 5,400 513,675 GATX Corporation 5,000 238,750 Union Pacific Corporation 11,800 662,275 --------- 1,414,700 Real Estate - 1.87% General Growth Properties, Incorporated 8,000 202,000 Rouse Company 9,000 228,375 Security Capital Pacific Trust 6,000 135,000 Simon DeBartolo Group, Incorporated 60,100 1,585,138 Weingarten Realty Investors 12,000 460,500 --------- 2,611,013 Retail Grocery - 0.58% Fleming Companies, Incorporated 11,000 191,125 Grand Metropolitan PLC 20,000 612,500 ------- 803,625 Retail Trade - 1.24% May Department Stores Company 12,600 596,925 J.C. Penney Company, Incorporated 21,500 1,128,750 --------- 1,725,675 Telephone - 6.47% ALLTEL Corporation 31,100 948,550 American Telephone & Telegraph Corporation 38,400 1,339,200 BCE, Incorporated 21,100 970,600 Bell Atlantic Corporation 14,600 879,650 BellSouth Corporation 31,100 1,267,325 GTE Corporation 30,100 1,267,963 Pacific Telesis Group 17,700 601,800 SBC Communications, Incorporated 13,400 651,575 Southern New England Telecommunications Corporation 14,100 525,225 U.S. West, Incorporated 19,300 586,237 --------- 9,038,125 Tobacco - 2.38% American Brands, Incorporated 26,000 1,241,500 Philip Morris Companies, Incorporated 10,100 935,513 RJR Nabisco Holdings Corporation 12,800 369,600 UST, Incorporated 27,000 779,625 --------- 3,326,238 Trucking & Freight - 0.23% Alexander & Baldwin, Incorporated 13,000 320,125 ------- TOTAL COMMON STOCKS (Cost $123,711,971) $125,856,907 ----------- Principal SHORT TERM INVESTMENTS - 9.88% Amount Value ------ ----- BHF Finance Delaware, 5.25% due 11/25/96 $3,815,000 $ 3,801,648 General Electric Capital Corporation, 5.25% due 12/11/96 1,105,000 1,098,554 Kellogg Company, 5.25% due 12/13/96 1,950,000 1,938,056 Minnesota Mining & Manufacturing Company, 5.23% due 12/16/96 5,000,000 4,967,313 Warner-Lambert Company, 5.25% due 12/02/96 2,000,000 1,990,958 ---------- 13,796,529 TOTAL INVESTMENTS (Value Equity Fund) (Cost $137,508,500) $139,653,436 =========== Growth and Income Fund Shares Value ------ ----- COMMON STOCKS - 98.0.2% Aerospace - 3.41% Boeing Company 14,500 $ 1,382,937 Northrop Grumman Corporation 19,500 1,574,625 United Technologies Corporation 10,800 1,390,500 --------- 4,348,062 Air Travel - 0.92% Southwest Airlines Company 52,000 1,170,000 --------- Aluminum - 0.90% Aluminium Company of America 19,600 1,149,050 --------- Automobiles - 2.32% Ford Motor Company 94,703 2,959,469 --------- Banking - 5.84% Citicorp 30,200 2,989,800 First Union Corporation 23,000 1,673,250 NationsBank Corporation 29,400 2,770,950 --------- 7,434,000 Broadcasting - 1.20% Viacom, Incorporated* 47,000 1,533,375 ---------
The accompanying notes are an integral part of the financial statements. 44 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Shares Value ------ ----- Business Services - 2.98% Cognizant Corporation 24,000 $750,000 First Data Corporation 20,800 1,658,800 Nokia Corporation, ADR 30,000 1,391,250 --------- 3,800,050 Chemicals - 3.34% The Dow Chemical Company 26,000 2,021,500 E.I. Du Pont De Nemours & Company 8,000 742,000 Zeneca Group PLC, ADR 18,300 1,491,450 --------- 4,254,950 Computers & Business Equipment - 5.78% 3Com Corporation* 26,000 1,758,250 Hewlett-Packard Company 34,400 1,517,900 International Business Machines Corporation 23,000 2,967,000 Xerox Corporation 24,000 1,113,000 --------- 7,356,150 Construction & Mining Equipment - 1.90% Caterpillar, Incorporated 18,300 1,255,838 Foster Wheeler Corporation 28,500 1,168,500 --------- 2,424,338 Crude Petroleum & Natural Gas - 0.53% Union Pacific Resources Group, Incorporated 24,327 668,984 ------- Drugs & Health Care - 10.74% Abbott Laboratories 48,000 2,430,000 Bristol-Myers Squibb Company 13,200 1,395,900 Johnson & Johnson 28,000 1,379,000 Merck & Company, Incorporated 15,500 1,148,938 Pfizer, Incorporated 29,200 2,416,300 Pharmacia & Upjohn, Incorporated 17,000 612,000 Rhone Poulenc Rorer, Incorporated 26,200 1,758,675 Tenet Healthcare Corporation* 54,600 1,139,775 Warner-Lambert Company 22,000 1,399,750 ---------- 13,680,338 Electric Utilities - 2.75% DPL, Incorporated 45,000 1,074,375 Pinnacle West Capital Corporation 43,000 1,327,625 Texas Utilities Company 27,000 1,093,500 --------- 3,495,500 Electrical Equipment - 3.31% General Electric Company 28,000 2,709,000 Hubbell, Incorporated 37,000 1,512,375 --------- 4,221,375 Electronics - 2.58% AMP, Incorporated 51,000 1,727,625 Intel Corporation 14,200 1,560,225 --------- 3,287,850 Financial Services - 8.64% Allstate Corporation 44,000 2,469,500 American Express Company 51,000 2,397,000 Federal National Mortgage Association 50,800 1,987,550 State Street Boston Corporation 25,000 1,584,375 Travelers Group, Incorporated 47,400 2,571,450 ---------- 11,009,875 Food & Beverages - 2.46% General Mills, Incorporated 20,000 1,142,500 Sara Lee Corporation 56,000 1,988,000 --------- 3,130,500 Forest Products - 0.82% Georgia-Pacific Corporation 14,000 1,050,000 --------- Hotels and Restaurants - 1.10% McDonalds Corporation 31,500 1,397,812 --------- Household Products - 2.71% Colgate Palmolive Company 17,000 1,564,000 Procter & Gamble Company 19,000 1,881,000 --------- 3,445,000 Industrial Machinery - 0.91% York International Corporation 24,000 1,161,000 --------- Insurance - 2.56% ACE, Ltd. 24,200 1,324,950 Chubb Corporation 38,600 1,930,000 --------- 3,254,950 International Oil - 6.61% Amoco Corporation 25,700 1,946,775 Chevron Corporation 30,000 1,972,500 Exxon Corporation 23,500 2,082,688 Royal Dutch Petroleum Company 14,600 2,414,475 --------- 8,416,438 Liquor - 1.20% Anheuser-Busch Companies, Incorporated 39,800 1,532,300 --------- Newspapers - 1.61% Gannett, Incorporated 27,000 2,048,625 --------- Non-Ferrous Metals - 0.63% Engelhard Corporation 43,825 799,806 ------- Paper - 4.55% International Paper Company 50,000 2,137,500 Kimberly Clark Corporation 22,000 2,051,500 Minnesota Mining & Manufacturing Company 21,000 1,609,125 --------- 5,798,125 Petroleum Services - 1.68% Schlumberger, Ltd. 21,600 2,141,100 --------- Photography - 0.51% Eastman Kodak Company 8,200 653,950 -------
The accompanying notes are an integral part of the financial statements. 45 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Shares Value ------ ----- Railroads & Equipment - 1.06% Union Pacific Corporation 24,000 $1,347,000 --------- Retail Trade - 4.88% The May Department Stores Company 32,800 1,553,900 J.C. Penney Company, Incorporated 28,000 1,470,000 Sears Roebuck & Company 22,000 1,064,250 Wal-Mart Stores, Incorporated 80,000 2,130,000 --------- 6,218,150 Software - 1.80% Microsoft Corporation 9,900 1,358,775 Policy Management Systems Corporation* 26,000 936,000 ------- 2,294,775 Telecommunication Services - 0.53% Lucent Technologies, Incorporated 14,246 669,562 ------- Telephone - 4.46% American Telephone and Telegraph Corporation 31,000 1,081,125 MCI Communications Corporation 42,000 1,055,250 NYNEX Corporation 37,000 1,646,500 SBC Communications, Incorporated 39,000 1,896,375 --------- 5,679,250 Tires & Rubber - 0.79% The Goodyear Tire and Rubber Company 22,000 1,009,250 --------- TOTAL COMMON STOCKS (Cost $98,171,600) $124,840,959 ----------- PREFERRED STOCKS - 0.87% Domestic Oil - 0.87% Sun Company, Incorporated, Series A 47,000 1,110,375 --------- TOTAL PREFERRED STOCKS (Cost $1,427,778) $1,110,375 --------- Principal Amount Value ------ ----- REPURCHASE AGREEMENT - 1.11% $1,410,000 Repurchase Agreement with Swiss Bank dated 10/31/96 at 5.51%, to be repurchased at $1,410,216 on 11/01/96, collateralized by $1,369,00 Treasury Note, 7.375% due 11/15/97 (valued at $1,439,325, including interest) $1,410,000 --------- TOTAL INVESTMENTS (Growth & Income Fund) (Cost $101,009,378) $127,361,334 =========== International Growth and Income Fund Shares Value ------ ----- COMMON STOCKS - 83.37% Aerospace - 1.28% British Airways PLC 12,000 $108,008 LucasVarity PLC, ADS* 63,700 257,641 ------- 365,649 Apparel & Textiles - 0.41% Tomen Corporation 36,000 117,940 ------- Automobiles - 2.52% Fiat SPA* 55,000 147,017 Nissan Motor Company, Ltd. 16,000 120,996 Peugeot SA 1,825 190,264 Toyota Motor Corporation 11,000 259,892 ------- 718,169 Banking - 11.90% Asahi Bank, Ltd. 6,000 61,657 Bank of Ireland 28,000 231,623 Bank of Tokyo-Mitsubishi, ADS 3,000 61,130 Banco Intercontinental Espanol 1,200 143,799 Banco Popular Espanol SA 850 162,479 Bayerische Hypotheken und Wechsel Bank AG 4,560 133,542 Dai Ichi Kangyo Bank 5,000 81,244 Daiwa Bank 23,000 130,297 Dresdner Bank AG 11,140 297,920 Fukui Bank 16,000 71,951 Hang Seng Bank 4,100 48,651 Hokuriku Bank 8,000 44,197 HSBC Holdings - (Pounds) 14,200 298,376 HSBC Holdings - HKD 7,600 154,807 Kredietbank NV 290 93,676 Lloyds TSB Group PLC 36,800 233,294 National Australia Bank, Ltd. 16,200 177,846 Sakura Bank 20,000 189,715 Sanwa Bank 6,000 102,235 Schweizerischer Bankverein 977 188,212 Societe Generale 2,973 320,415 Toyo Trust & Banking 19,000 162,206 --------- 3,389,272 Business Services - 0.82% Eaux (Cie Generale Des) 1,955 233,644 ------- Chemicals - 4.27% Air Liquide 1,197 184,730 BASF AG 13,300 425,066 Henkel KGaA 3,229 143,497 Kemira OY 13,500 147,652 Mitsui Toatsu Chemical 35,000 122,349 Solvay SA 250 149,688 UBE Industries 13,000 42,018 --------- 1,215,000
The accompanying notes are an integral part of the financial statements. 46 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Shares Value ------ ----- Conglomerates - 3.48% Nokia OY AB, Series A 9,799 $452,461 Swire Pacific, Ltd. 30,000 264,802 Tomkins 65,000 272,949 ------- 990,212 Construction & Mining Equipment - 0.16% Nishimatsu Construction 5,000 46,111 ------ Construction Materials - 1.40% CRH 16,000 164,924 Nippon Hodo Company 3,000 41,896 Tarmac 132,600 193,159 ------- 399,979 Crude Petroleum & Natural Gas - 0.54% ENI SPA, ADS 32,000 153,250 ------- Drugs & Health Care - 4.73% Chugai Pharmaceutical Company 4,000 36,538 Glaxo Wellcome 23,900 375,382 Ono Pharmaceutical 4,000 124,720 Sandoz AG 165 190,716 Synthelabo 3,700 353,174 Zeneca Group PLC 9,800 267,012 --------- 1,347,542 Electric Utilities - 4.30% Electrabel 1,235 286,675 Fuerzas Electricas De Cataluna SA, Series A 31,950 255,410 Iberdrola SA 26,500 281,418 Scottish Power 53,000 270,866 Tokyo Electric Power 5,700 130,666 --------- 1,225,035 Electrical Equipment - 1.85% Fuji Electric Company 8,000 36,327 Hitachi, Ltd. 20,000 177,419 Sanden Corporation 2,000 14,896 Siemens AG 5,770 298,139 ------- 526,781 Electronics - 1.81% Murata Manufacturing Company, Ltd. 4,000 128,585 Racal Electronics 43,300 195,216 Rexel SA 650 192,616 ------- 516,417 Food & Beverages - 5.49% Danone 1,570 214,963 Greencore Group PLC 26,000 149,878 Guinness 26,000 186,198 Hillsdown Holdings 71,200 201,641 Itoham Foods, Incorporated 6,000 38,997 Japan Tobacco, Incorporated 4 28,246 Lion Nathan, Ltd. 110,200 284,563 Nestle SA 170 184,660 Sapporo Breweries 14,000 122,594 Seita 3,800 153,041 --------- 1,564,781 Forest Products - 0.82% Sumitomo Forestry Company 6,000 84,845 UPM-Kymmene OY 7,400 150,121 ------- 234,966 Gas & Pipeline Utilities - 0.45% Hyder 11,200 128,333 ------- Homebuilders - 0.95% Bilfinger & Berger Bauaktiengesellschaft AG 2,000 80,956 Bouygues 1,922 188,347 ------- 269,303 Hotel & Restaurants - 0.72% Ladbroke Group 63,000 204,565 ------- Household Appliances Furnishing - 1.44% Matsushita Electric Industrial Company, Ltd. 5,000 79,926 Philips Electronics NV 5,940 209,355 Sony Corporation 2,000 119,977 ------- 409,258 Household Products - 0.89% Unilever NV 1,660 252,419 ------- Industrial Machinery - 2.83% Daiken Corporation 14,000 103,290 Daikin Industries 3,000 28,457 Ebara Corporation 10,000 144,043 IMI PLC 10,000 79,136 Krupp AG Hoesch 950 149,614 Mitsubishi Heavy Industries, 15,000 115,278 Ltd. Sidel 2,800 186,813 ------- 806,631 Insurance - 6.95% Abbey National 24,000 249,219 Aegon NV 4,054 206,200 Allianz AG Holdings 150 269,216 Assicurazioni Generali 8,800 169,967 Fortis AG 1,380 193,793 Guardian Royal Exchange 56,000 229,687 Irish Life PLC 33,000 141,866 Munchener Ruckvers 113 270,114 Tokio Marine & Fire Insurance Company 8,000 87,831 Union des Assurance Federales 1,440 161,956 --------- 1,979,849 International Oil - 1.69% The British Petroleum Company 35,137 377,591 Cosmo Oil Company 9,000 48,694 Petrofina SA 180 55,345 -------- 481,630 Investment Companies - 0.58% Nomura Securities 10,000 165,122 ------- Leisure Time - 0.92% Rank Group PLC, ADR 39,500 262,626 -------
The accompanying notes are an integral part of the financial statements. 47 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Shares Value ------ ----- Non-Ferrous Metals - 0.62% RTZ Corporation PLC 11,000 $175,993 ------- Paper - 1.76% Fletcher Challenge 170,500 308,794 OJI Paper Company 5,000 36,538 Jefferson Smurfit Group PLC 57,000 155,007 ------- 500,339 Petroleum Services - 3.80% Broken Hill Proprietary Company, Ltd. 13,700 181,892 Repsol SA 5,400 176,269 Royal Dutch Petroleum Company 2,150 355,060 Total SA "B" Shares 4,715 368,807 --------- 1,082,028 Photography - 0.18% Canon Sales Company, Incorporated 2,000 50,766 ------ Publishing - 0.79% Arnoldo Mondadori Editore 8,000 59,064 Lagardere Groupe 5,295 167,265 ------- 226,329 Railroads & Equipment - 0.37% East Japan Railway Company 23 105,652 ------- Real Estate - 2.59% Cheung Kong Holdings 31,000 248,571 Daiwa Kosho Lease 9,000 82,210 Henderson Land Development Company, Ltd. 9,000 80,022 Sumitomo Realty & Development 20,000 145,448 Sun Hung Kai Properties 16,000 182,096 ------- 738,347 Retail Grocery - 0.92% J. Sainsbury PLC 44,000 260,677 ------- Retail Trade - 3.31% Ava Allgemeine Handels-Der Verbr AG* 250 66,033 Douglas Holding AG 2,100 88,055 Izumiya Company 7,000 111,282 Kingfisher 22,500 239,868 Promodes* 1,300 350,904 Safeway 200 1,186 Takashimaya Company, Ltd. 6,000 85,899 ------- 943,227 Steel - 1.67% Arbed SA 1,400 164,283 Nippon Steel Corporation 48,000 139,968 Rautaruukki OY 19,600 172,013 ------- 476,264 Telephone - 2.90% Hong Kong Telecommunications, Ltd. 38,800 68,495 Nippon Telegraph & Telephone Corporation 11 76,808 Telecom Corporation of New Zealand 56,000 291,192 Telekom Italia 72,000 160,422 Vodafone Group, ADR 59,100 228,455 ------- 825,372 Tires & Rubber - 0.31% Continental AG 5,000 87,493 ------ Tobacco - 0.68% B.A.T. Industries PLC 28,100 194,834 ------- Trucking & Freight - 0.26% Peninsular & Oriental Steam Navigation 100 980 Company Yamato Transport 7,000 72,548 ------ 73,528 TOTAL COMMON STOCKS (Cost $23,269,021) $23,745,333 ---------- PREFERRED STOCKS - 3.32% Automobiles - 1.05% Volkswagen AG 990 300,386 ------- Industrial Machinery - 0.64% GEA AG 250 84,027 M.A.N. AG 496 97,765 ------- 181,792 International Oil - 0.50% RWE AG 4,200 142,551 ------- Newspapers - 0.89% News Corporation, Ltd., ADS 45,000 253,963 ------- Software - 0.23% SAP AG 490 65,942 ------ TOTAL PREFERRED STOCKS (Cost $840,548) $944,634 ------- WARRANTS - 0.61%* Banking - 0.00% Schweizerischer Bankverein (Expiration date 06/30/00; strike price CHF 250) 85 219 --- Financial Services - 0.55% Veba International Finance BV (Expiration date 04/06/98; strike price DEM 375) 554 156,937 ------- Mining - 0.04% Dowa Mining Company (Expiration date 12/09/97; strike price 428) 17 12,750 ------ Non-Ferrous Metals - 0.01% Maeda Corporation (Expiration date 02/05/97; strike price $856) 10 4,250 ----- TOTAL WARRANTS (Cost $178,710) $174,156 -------
The accompanying notes are an integral part of the financial statements. 48 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Principal Amount Value ------ ----- CONVERTIBLE BONDS - 1.43% Bot Cayman Finance, 4.25% due 03/31/49 (YEN) 10,000,000 $125,159 Daido Hoxan, Incorporated, 1.60% due 03/29/02 14,000,000 132,186 NEC Corporation, 1.90% due 03/30/01 9,000,000 101,972 Sagami Railway Company, 3.80% due 09/30/99 5,000,000 49,185 ------ TOTAL CONVERTIBLE BONDS (Cost $422,913) $408,502 -------- CORPORATE BONDS - 1.92% Treuhandanstalt, 7.125% due 01/29/03 DEM 650,000 465,910 7.75% due 10/01/02 110,000 81,171 ------ TOTAL CORPORATE BONDS (Cost $556,962) $547,081 -------- FOREIGN GOVERNMENT OBLIGATIONS - 9.34% Kingdom of Denmark - 0.66% 7.00% due 12/15/04 DKK 50,000 8,830 8.00% due 11/15/01 260,000 48,982 8.00% due 03/15/06 700,000 129,611 ------- 187,423 Government of Germany - 1.45% 6.00% due 01/05/06 DEM 280,000 184,836 9.00% due 10/20/00 300,000 228,507 ------- 413,343 Government of Great Britain - 3.06% United Kingdom Treasury, 7.50% due 12/07/06 (POUND) 425,000 686,544 8.00% due 12/07/00 111,000 186,084 ------- 872,628 Republic of Italy - 1.53% 6.50% due 06/28/01 ITL 25,000,000 16,707 10.50% due 07/15/00 580,000,000 420,185 ------- 436,892 Government of Netherlands - 1.35% 6.00% due 01/15/06 NLG 141,000 83,834 8.75% due 05/01/00 450,000 300,760 ------- 384,594 Government of Spain - 1.29% 10.10% due 02/28/01 ESP 42,000,000 366,231 ------- TOTAL FOREIGN GOVERNMENT OBLIGATIONS (Cost $2,591,787) $2,661,111 --------- TOTAL INVESTMENTS (International Growth & Income Fund) (Cost $27,859,941) $28,480,817 ========== Balanced Fund Shares Value ------ ----- COMMON STOCKS - 49.13% Aerospace - 1.99% McDonnell Douglas Corporation 27,700 $1,509,650 Northrop Grumman Corporation 6,500 524,875 --------- 2,034,525 Apparel & Textiles - 1.16% Fruit of The Loom, Incorporated, Class A* 32,600 1,185,825 --------- Auto Parts - 0.53% Genuine Parts Company 1,950 85,312 Lear Seating Corporation* 12,300 455,100 ------- 540,412 Banking - 2.81% BankAmerica Corporation 12,800 1,171,200 NationsBank Corporation 13,600 1,281,800 Republic NY Corporation 5,600 427,000 --------- 2,880,000 Chemicals - 1.17% Agrium, Incorporated 20,000 267,500 ARCO Chemical Company 15,000 716,250 E.I. Du Pont De Nemours & Company 2,250 208,687 --------- 1,192,437 Computers & Business Equipment - 0.42% Hewlett-Packard Company 9,700 428,012 ------- Containers & Glass - 0.38% Owens-Illinois, Incorporated* 25,200 390,600 ------- Domestic Oil - 2.04% Ashland, Incorporated 13,100 556,750 Atlantic Richfield Company 8,700 1,152,750 Sun Company, Incorporated 17,000 380,375 --------- 2,089,875 Drugs & Health Care - 4.59% Baxter International Incorporated 26,100 1,086,413 Merck & Company, Incorporated 15,200 1,126,700 Pharmacia & Upjohn, Incorporated 44,400 1,598,400 Tenet Healthcare Corporation* 42,700 891,362 --------- 4,702,875 Electric Utilities - 2.69% CMS Energy Corporation 15,000 474,375 Idaho Power Company 17,000 529,125 IES Industries, Incorporated 57,000 1,752,750 --------- 2,756,250 Electronics - 1.44% Intel Corporation 5,000 549,375 Raytheon Company 5,300 261,025 Teradyne, Incorporated* 26,800 425,450 Texas Instruments, Incorporated 4,900 235,812 --------- 1,471,662 Financial Services - 0.41% The Chase Manhattan Corporation 4,900 420,175 -------
The accompanying notes are an integral part of the financial statements. 49 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Shares Value ------ ----- Food & Beverages - 3.03% Archer-Daniels-Midland Company 62,500 $1,359,375 PepsiCo, Incorporated 36,200 1,072,425 Pioneer Hi Bred International, Incorporated 10,000 671,250 --------- 3,103,050 Forest Products - 0.47% Georgia-Pacific Corporation 6,400 480,000 ------- Gas & Pipeline Utilities - 3.68% Brooklyn Union Gas Company 19,200 556,800 Equitable Resourses, Incorporated 42,725 1,228,344 Questar Corporation 33,400 1,202,400 Williams Companies, Incorporated 15,000 783,750 --------- 3,771,294 Gold - 0.82% Barrick Gold Corporation 12,200 318,725 Santa Fe Pacific Gold Corporation 43,800 520,125 ------- 838,850 Household Appliances Furnishing - 0.37% Sunbeam Corporation 15,400 379,225 ------- Insurance - 7.17% Aetna, Incorporated 13,200 882,750 W.R. Berkley Corporation 41,600 2,163,200 Chubb Corporation 6,000 300,000 CIGNA Corporation 12,400 1,618,200 Integon Corporation 4,690 88,524 Lincoln National Corporation, Incorporated 25,000 1,212,500 PartnerRe, Ltd. 25,000 718,750 St. Paul Companies, Incorporated 6,600 358,875 --------- 7,342,799 International Oil - 4.20% Mobil Corporation 13,600 1,587,800 Royal Dutch Petroleum Company 8,300 1,372,613 Texaco, Incorporated 13,200 1,341,450 --------- 4,301,863 Investment Companies - 0.36% Lehman Brothers Holdings, Incorporated 14,800 371,850 ------- Leisure Time - 0.25% Brunswick Corporation 11,000 258,500 ------- Miscellaneous - 1.94% Canadian Pacific, Ltd. 78,800 1,989,700 --------- Petroleum Services - 1.42% Tosco Corporation 17,300 970,963 Ultramar Corporation 16,800 480,900 --------- 1,451,863 Railroads & Equipment - 0.59% Illinois Central Corporation 18,600 602,175 ------- Retail Trade - 1.52% J.C. Penney Company, 21,900 1,149,750 Incorporated Sears Roebuck & Company 8,300 401,513 --------- 1,551,263 Telecommunication Services - 0.51% Lucent Technologies, Incorporated 11,100 521,700 ------- Telephone - 2.23% Ameritech Corporation 14,500 793,875 Frontier Corporation 36,925 1,070,825 NYNEX Corporation 9,400 418,300 --------- 2,283,000 Tobacco - 0.93% RJR Nabisco Holdings Corporation 18,040 520,905 Universal Corporation 15,700 427,825 ------- 948,730 TOTAL COMMON STOCKS (Cost $43,504,564) $50,288,510 ---------- Principal Amount Value ------ ----- CORPORATE BONDS - 5.00% Finance & Banking - 3.78% BankAmerica Corporation, 7.75% due 07/15/02 $400,000 $419,848 British Aerospace Finance, Incorporated, 7.55% due 05/15/97 350,000 352,387 Capital One Financial, 8.625% due 01/15/97 900,000 904,500 Countrywide Funding Corporation, 8.43% due 11/16/99 500,000 527,305 Financiera Energetica Nacional, 6.625% due 12/13/96 360,000 359,640 Ford Holdings, Incorporated, 9.25% due 03/01/00 500,000 542,635 General Motors Acceptance Corporation, 7.50% due 11/04/97 175,000 177,866 7.625% due 03/09/98 575,000 587,679 --------- 3,871,860 Petroleum Services - 0.82% TransCanada Pipelines, Ltd., 8.55% due 02/01/06 1,000,000 835,696 ------- Industrials - 0.40% News America Holdings, Incorporated, 7.50% due 03/01/00 30,000 30,817 9.125% due 10/15/99 351,000 376,412 ------- 407,229 TOTAL CORPORATE BONDS (Cost $5,037,917) $5,114,785 ---------
The accompanying notes are an integral part of the financial statements. 50 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Principal Amount Value ------ ----- U.S. TREASURY OBLIGATIONS - 17.21% U.S. Treasury STRIPS - 1.85% Principal Only due 08/15/99 $470,000 $399,336 Principal Only due 08/15/09 1,500,000 645,375 Principal Only due 08/15/20 370,000 72,427 Principal Only due 05/15/20 3,910,000 778,598 --------- 1,895,736 U.S. Treasury Bonds - 0.87% 8.75% due 05/15/17 730,000 893,338 ------- U.S Treasury Notes - 14.49% 5.625% due 10/31/97 280,000 280,305 5.75% due 09/30/97 1,000,000 1,002,190 5.875% due 04/30/98 300,000 300,936 5.875% due 02/15/04 650,000 635,479 6.00% due 09/30/98 5,000,000 5,022,650 6.00% due 08/15/99 5,000,000 5,013,300 6.125% due 07/31/00 830,000 833,113 6.875% due 08/31/99 1,700,000 1,742,500 ---------- 14,830,473 TOTAL U.S. TREASURY OBLIGATIONS (Cost $17,220,358) $17,619,547 ---------- U.S. GOVERNMENT AGENCY OBLIGATIONS - 19.26% Federal Home Loan Bank - 0.36% 6.125% due 09/20/00 370,000 369,537 ------- Federal Home Loan Mortgage Corporation - 4.16% 6.00% due 11/15/16 906,508 884,407 7.50% TBA** 2,000,000 2,006,860 7.50% due 07/01/11 - 09/01/11 1,000,000 1,016,871 8.20% due 01/16/98 350,000 352,023 --------- 4,260,161 Federal National Mortgage Association - 7.69% zero coupon due 03/09/02 570,000 558,777 3.50% due 05/25/19 1,000,000 871,560 6.25% due 07/25/18 500,000 492,810 7.00% due 02/01/26 3,964,587 3,888,983 8.00% due 10/01/26 1,000,000 1,020,000 8.50% due 06/01/26 - 08/01/26 1,000,000 1,034,680 --------- 7,866,810 Government National Mortgage Association - 6.98% 7.00% due 08/15/23 - 12/15/23 1,905,439 1,879,849 7.50% due 03/15/23 971,642 979,531 8.00% due 07/15/26 - 10/15/26 4,000,001 4,090,001 9.00% due 01/15/22 180,231 191,833 --------- 7,141,214 Resolution Funding Corporation - 0.07% zero coupon due 01/15/21 $390,000 $71,889 ------ TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $19,422,937) $19,709,611 ---------- FOREIGN GOVERNMENT BONDS - 2.34% Government of Canada - 2.34% Province of British Columbia, 7.75% due 06/16/03 1,000,000 812,706 Province of Manitoba, 6.50% due 09/04/01 1,000,000 774,018 Province of Ontario, 7.75% due 07/24/06 1,000,000 808,305 --------- 2,395,029 TOTAL FOREIGN BONDS (Cost $2,366,351) $2,395,029 --------- Principal Amount Value ------ ----- REPURCHASE AGREEMENT - 7.06%*** $7,224,000 Repurchase Agreement with State Street Bank & Trust Company dated 10/31/96 at 4.75%, to be repurchased at $7,224,953 on 11/01/96, collateralized by $7,070,000 U.S. Treasury Notes, 6.375% due 05/31/01 (valued at $7,557,672, including interest) $7,224,000 --------- TOTAL INVESTMENTS (Balanced Fund) (Cost $94,776,127) $102,351,482 =========== Strategic Income Fund CORPORATE BONDS - 50.53% Apparel & Textiles - 0.78% Clark-Schwebel, Incorporated, 10.50% due 04/15/06 $500,000 $520,000 ------- Auto Parts - 0.77% Speedy Muffler King, Incorporated, 10.875% due 10/01/06 500,000 512,500 ------- Business Services - 0.73% Borg-Warner Security Corporation, 9.125% due 05/01/03 500,000 485,000 -------
The accompanying notes are an integral part of the financial statements. 51 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Principal Amount Value ------ ----- Chemical Products - 1.58% NL Industries, Incorporated, Step up to 13.00% due 10/15/05 $750,000 $615,000 Revlon Worldwide Corporation, Series B, zero coupon due 03/15/98 500,000 440,000 --------- 1,055,000 Construction & Building Materials - 0.78% Southdown, Incorporated, Series B, 10.00% due 03/01/06 500,000 522,500 ------- Crude Petroleum & Natural Gas - 0.60% National Energy Group, Incorporated, 10.75% due 11/01/06 400,000 400,000 ------- Drugs & Health Care - 0.80% Dade International, Incorporated, 11.125% due 05/01/06 500,000 535,000 ------- Energy & Utilities - 1.58% KSC Energy, Incorporated, Series B, 11.00% due 01/15/03 500,000 541,250 Petro PSC Properties, 12.50% due 06/01/02 500,000 515,000 --------- 1,056,250 Finance & Banking - 4.42% Foamex Capital Corporation, 11.875% due 10/01/04 500,000 525,000 Korea Development Bank, 9.60% due 12/01/00 1,000,000 1,108,170 Mellon Financial Company, 9.75% due 06/15/01 500,000 560,000 Paine Webber Group, Incorporated, 7.00% due 03/01/00 400,000 403,944 Venture Holdings Trust, 9.75% due 04/01/04 390,000 349,050 --------- 2,946,164 Food & Beverages - 3.09% Dole Foods, Incorporated, 6.75% due 07/15/00 1,000,000 1,001,210 Smith's Food & Drug Centers, 11.25% due 05/15/07 500,000 540,000 The Stroh Brewery Company, 11.10% due 07/01/06 500,000 520,000 --------- 2,061,210 Food Stores - 1.73% Big V Supermarkets, Incorporated, Series B, 11.00% due 02/15/04 500,000 480,000 Carr Gottstein Foods Company, 12.00% due 11/15/05 400,000 420,000 Penn Traffic Company, 9.625% due 04/15/05 500,000 250,000 --------- 1,150,000 Forest Products - 0.71% Doman Industries, Ltd., 8.75% due 03/15/04 500,000 $470,000 ------- General Obligation - 0.33% United States Leasing International, 8.45% due 01/25/05 200,000 217,346 ------- Household Appliances & Furnishing - 0.51% Decorative Home Accents, Incorporated, Series B, 13.00% due 06/30/02 500,000 340,000 ------- Industrials - 15.59% Arkla, Incorporated, 8.875% due 07/15/99 500,000 528,115 Alvey Systems, Incorporated, 11.375% due 01/31/03 500,000 520,000 Berry Plastics Corporation, 12.25% due 04/15/04 650,000 702,000 Ekco Group, Incorporated, Series B, 9.25% due 04/01/06 500,000 470,000 Exide Electronics Group, Incorporated, Series B, 11.50% due 03/15/06 500,000 520,000 Forest Oil Corporation, 11.25% due 09/01/03 500,000 532,500 Four M Corporation, 12.00% due 06/01/06 500,000 523,750 Guitar Center Management Company, Incorporated, 11.00% due 07/01/06 500,000 525,000 Harris Chemical North America, Incorporated, 10.75% due 10/15/03 500,000 502,500 Hollinger, Incorporated, zero coupon, due 10/05/13 1,500,000 517,500 ICG Holding, Incorporated, Step up to 13.50% due 09/15/05 500,000 330,000 Jordan Industries, Incorporated, 10.375% due 08/01/03 500,000 485,000 Marcus Cable Company, 14.25% due 12/15/05 750,000 498,750 Norcal Waste Systems, Incorporated, Series B, 12.75% due 11/15/05 500,000 540,000 Plastic Specialties & Technologies, Incorporated, 11.25% due 12/01/03 500,000 510,000 Rayovac Corporation, 10.25% due 11/01/06 550,000 558,250 SC International Services, Incorporated, 13.00% due 10/01/05 500,000 555,000 Specialty Equipment Companies, Incorporated, 11.375% due 12/01/03 500,000 540,625 Terex Corporation, 13.75% due 05/15/02 500,000 530,000 Twin Laboratories, Incorporated, 10.25% due 05/15/06 500,000 505,000 ---------- 10,393,990
The accompanying notes are an integral part of the financial statements. 52 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Principal Amount Value ------ ----- Leather Products - 0.40% Samsonite Corporation, Series B, 11.125% due 07/15/05 $250,000 $265,000 ------- Leisure Time - 1.14% Hollywood Casino, Incorporated, 12.75% due 11/01/03 250,000 237,500 Wyndham Hotel Corporation, 10.50% due 05/15/06 500,000 522,500 ------- 760,000 Other - 3.17% American Media Operations, Incorporated,11.625% due 11/15/04 500,000 533,750 Herff Jones, Incorporated, Series B, 11.00% due 08/15/05 500,000 525,000 Hines Horticulture, Incorporated, Series B, 11.75% due 10/15/05 500,000 521,250 The Selmer Company, Incorporated, 11.00% due 05/15/05 500,000 530,000 --------- 2,110,000 Retail Trade - 2.24% Cole National Group, Incorporated, 11.25% due 10/01/01 500,000 535,000 Finlay Fine Jewerly Corporation, 10.625% due 05/01/03 500,000 506,250 Hills Stores Company, Series B, 12.50% due 07/01/03 500,000 450,000 --------- 1,491,250 Rubber & Plastic - 0.76% Remington Product Company, 11.00% due 05/15/06 500,000 503,750 ------- Steel - 0.78% Algoma Steel, Incorporated, 12.375% due 07/15/05 500,000 517,500 ------- Telephone - 1.62% In Flight Phone Corporation, Series B, Step up to 14.00% due 05/15/02 650,000 234,000 Telex Communications, Incorporated, 12.00% due 07/15/04 550,000 594,000 Wireless One, Incorporated, 13.00% due 10/15/03 250,000 253,750 --------- 1,081,750 Telecommunication Services - 4.88% Adelphia Communications Corporation, 12.50% due 05/15/02 375,000 371,250 Cablevision Systems Corporation, 10.50% due 05/15/16 500,000 487,500 International Cabletel, Incorporated, Step up to 11.50% due 02/01/06 1,000,000 600,000 Nextlink Communications, 12.50% due 04/15/06 250,000 255,000 People's Choice TV Corporation, Step up to 13.125% due 06/01/04 500,000 270,000 Telewest Communication PLC, Step up to 11.00% due 10/01/07 750,000 478,125 United International Holdings, Incorporated, zero coupon due 11/15/99 750,000 517,500 Winstar Communications, Incorporated, 14.00% due 10/15/05 500,000 275,000 --------- 3,254,375 Transportation - 0.77% Iron Mountain, Incorporated, 10.125% due 10/01/06 500,000 513,750 ------- Transportation Equipment - 0.77% Hayes Wheels International, Incorporated, 11.00% due 07/15/06 500,000 516,250 ------- TOTAL CORPORATE BONDS (Cost $33,471,071) $33,678,585 ---------- U.S. TREASURY OBLIGATIONS - 12.75% U.S. Treasury Bonds - 0.35% 6.75% due 08/15/26 230,000 232,730 ------- U.S. Treasury Notes - 12.40% 5.625% due 02/28/01 2,790,000 2,744,663 5.875% due 11/15/05 1,110,000 1,073,925 6.25% due 04/30/01 1,000,000 1,006,720 6.50% due 08/31/01 1,000,000 1,016,410 6.50% due 10/15/06 500,000 504,920 6.875% due 05/15/06 1,850,000 1,915,323 --------- 8,261,961 TOTAL U.S. TREASURY OBLIGATIONS (Cost $8,398,624) $8,494,691 --------- U.S. GOVERNMENT AGENCY OBLIGATIONS - 9.85% Federal Home Loan Banks - 0.67% 5.89% due 07/24/00 450,000 446,202 ------- Federal Home Loan Mortgage Corporation - 3.20% 6.50% TBA** 700,000 670,684 8.50% due 05/01/08 616,628 644,518 10.00% due 05/15/20 750,000 817,965 --------- 2,133,167 Federal National Mortgage Association - 5.28% 6.50% due 03/01/26 - 04/01/26 2,485,362 2,377,398 7.00% TBA** 837,500 821,529 10.40% due 04/25/19 163,371 178,279 13.00% due 01/01/99 118,580 141,851 --------- 3,519,057
The accompanying notes are an integral part of the financial statements. 53 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Principal Amount Value ------ ----- Student Loan Marketing Association - 0.70% 7.20% due 11/09/00 $450,000 $466,029 ------- TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $6,539,429) $6,564,455 --------- FOREIGN GOVERNMENT OBLIGATIONS - 15.54% Republic of Argentina - 1.39% 6.625% due 03/31/05 1,127,000 924,140 ------- Federal Republic of Brazil - 4.31% 4.50% due 04/15/14 826,033 565,832 5.00% due 04/15/24 1,500,000 900,000 6.00% due 09/15/13 750,000 525,000 6.50% due 04/15/24 1,200,000 880,500 --------- 2,871,332 Government of Canada - 0.66% 7.50% due 09/01/00 CAD 550,000 442,823 ------- Government of Costa Rica - 0.34% Series B, 6.25% due 05/21/15 $300,000 223,500 ------- Kingdom of Denmark - 0.59% 8.00% due 11/15/01 DKK 2,100,000 395,626 ------- Republic of Ecuador - 0.57% 3.00% due 02/27/15 $687,303 383,171 ------- Federal Republic of Germany - 1.77% 6.00% due 04/20/98 DEM 530,000 362,187 6.375% due 08/14/98 1,180,000 815,497 ------- 1,177,684 Government of Mexico - 1.58% Series B, 6.25% due 12/31/19 $1,500,000 1,054,688 --------- Government of Morocco - 1.91% 6.593% due 01/01/09 1,600,000 1,270,000 --------- Government of Panama - 0.50% 3.50% due 07/17/14 500,000 330,000 ------- Republic of Philippines - 1.00% 6.437% due 12/01/09 700,000 669,830 ------- Republic of Venezuela - 0.92% 6.625% due 12/18/07 750,000 615,450 ------- TOTAL FOREIGN GOVERNMENT OBLIGATIONS (Cost $9,605,237) $10,358,244 ---------- Shares Value ------ ----- COMMON STOCKS - 0.00% Household Appliances & Furnishing - 0.00% Decorative Home Accents, Incorporated 500 $3,000 ----- TOTAL COMMON STOCKS (Cost $5,000) $3,000 ----- WARRANTS - 0.04%* Electronics - 0.02% Exide Electronics Group (Expiration date 03/15/06; strike price $13.475) 500 $15,000 ------ Financial Services - 0.02% BPC Holdings Corporation (Expiration date 04/15/04; strike price $18.797) 500 10,000 ------ Telephone - 0.00% Wireless One, Incorporated (Expiration date 10/19/00; strike price $11.50) 750 3,000 ----- TOTAL WARRANTS (Cost $0) $28,000 ------ Principal Amount Value ------ ----- REPURCHASE AGREEMENT - 11.29%*** $7,524,000 Repurchase Agreement with State Street Bank & Trust Company dated 10/31/96 at 5.47%, to be repurchased at $7,525,143 on 11/01/96, collateralized by $6,105,000 U.S. Treasury Bonds, 8.875% due 02/15/19 (valued at $7,790,261, including interest) $7,524,000 ---------- TOTAL INVESTMENTS (Strategic Income Fund) (Cost $65,543,361) $66,650,975 ========== Investment Quality Bond Fund Principal Amount Value ------ ----- CORPORATE BONDS - 33.46% Apparel & Textiles - 0.34% Collins & Aikman Products Company, 11.50% due 04/15/06 $50,000 $51,750 Dominion Textile (USA), Incorporated, 9.25% due 04/01/06 20,000 20,050 ------ 71,800 Broadcasting - 0.28% Chancellor Broadcasting Company, 9.375% due 10/01/04 10,000 9,700 Granite Broadcasting Corporation, 10.375% due 05/15/05 25,000 24,875 Young Broadcasting, Incorporated, 9.00% due 01/15/06 25,000 22,750 ------ 57,325 Chemical Products - 0.31% Rexene Corporation, 11.75% due 12/01/04 50,000 55,000 Texas-Petro Chemical Corporation, 11.125% due 07/01/06 10,000 10,625 ------ 65,625
The accompanying notes are an integral part of the financial statements. 54 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Principal Amount Value ------ ----- Drug & Health Care - 0.54% Integrated Health Services, Incorporated, 10.25% due 04/30/06 $15,000 $15,300 OrNda Healthcorp, 11.375%, 08/15/04 50,000 56,750 Owens & Minor, Incorporated, 10.875% due 06/01/06 25,000 26,125 Quorum Health Group, Incorporated 8.75% due 11/01/05 15,000 15,150 ------- 113,325 Electric Utilities - 1.56% El Paso Electric Company, Series D, 8.90% due 02/01/06 50,000 51,681 Virginia Electric & Power Company, 9.375% due 06/01/98 262,000 274,343 ------- 326,024 Food & Beverages - 0.26% Smith's Food & Drug Centers, 11.25% due 05/15/07 50,000 54,000 ------ Finance & Banking - 14.00% American General Finance Corporation, 8.00% due 02/15/05 230,000 240,803 Associates Corporation of North America, 6.95% due 08/01/02 320,000 325,584 BankAmerica Corporation, 9.50% due 04/01/01 114,000 126,908 BanPonce Financial Corporation, 6.80% due 12/21/05 250,000 245,370 Beneficial Corporation, 8.40% due 05/15/08 75,000 84,916 Commercial Credit Group, Incorporated, 10.00% due 05/01/99 50,000 54,316 First Financial Caribbean Corporation, 7.84% due 10/10/06 70,000 70,596 General Motors Acceptance Corporation, 6.00% due 01/11/99 150,000 149,400 International Lease Finance Corporation, 7.50% due 03/01/99 200,000 205,318 Mesa Operate Company, 10.625% due 07/01/06 25,000 26,500 NBD Bancorp, 8.25% due 11/01/24 300,000 339,630 Norwest Corporation, 6.00% due 03/15/00 100,000 99,048 Republic New York Corporation, 9.75% due 12/01/00 155,000 172,761 Sun Canada Financial Company, 7.25% due 12/15/15 200,000 191,526 Tembec Finance Corporation, 9.875% due 09/30/05 50,000 48,000 Trump Atlantic City, 11.25% due 05/01/06 15,000 14,175 United Bankshares, Incorporated, 8.625% due 04/15/98 200,000 206,456 U.S. Bancorp, 7.50% due 06/01/26 300,000 314,913 --------- 2,916,220 Forest Products - 0.54% Boise Cascade Corporation, 9.85% due 06/15/02 100,000 112,021 ------- Gas & Pipeline Utilities - 0.25% Transport De Gas Del Sur, 10.25% due 04/25/01 50,000 51,250 ------ Industrials - 5.91% Armco, Incorporated, 9.375% due 11/01/00 50,000 49,500 Bell & Howell Company, Series B, Step-up to 11.50% due 03/01/05 50,000 35,500 Cablevision Systems Corporation, 9.25% due 11/01/05 25,000 23,750 Cincinnati Milacron, Incorporated, 7.875% due 05/15/00 130,000 131,922 Coastal Corporation, 8.75% due 05/15/99 400,000 419,148 Container Corporation of America, 9.75% due 04/01/03 50,000 51,250 Fort Howard Corporation, 9.25% due 03/15/01 50,000 51,500 Harris Chemical North America, Incorporated, 10.25% due 07/15/01 25,000 25,469 Interlake Corporation, 12.00% due 11/15/01 25,000 26,500 K & F Industries, Incorporated, 11.875% due 12/01/03 50,000 54,000 Moog, Incorporated, Series B, 10.00% due 05/01/06 50,000 51,500 Muzak L.P./Muzak Capital, 10.00% due 10/01/03 5,000 5,000 News America Holdings, Incorporated, 9.25% due 02/01/13 150,000 168,479 Plains Resources, Incorporated, Series B, 10.25% due 03/15/06 50,000 52,000 Repap New Brunswick, Incorporated, 9.875% due 07/15/00 50,000 51,000 Westvaco Corporation, 9.65% due 03/01/02 30,000 33,442 --------- 1,229,960 Insurance - 2.70% Equitable Life Assurance Society of the United States, 6.95% due 12/01/05 250,000 247,760 Ohio National Life Insurance, Company, 8.50% due 05/15/26 150,000 155,568
The accompanying notes are an integral part of the financial statements. 55 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Principal Amount Value ------ ----- Insurance - continued Security Benefit Life Company, 8.75% due 05/15/16 $150,000 $159,000 ------- 562,328 International Oil - 0.48% Amoco Canada Petroleum Company, Ltd., 7.95% due 10/01/22 100,000 100,658 ------- Metal Products - 0.26% Howmet Corporation, 10.00%, 12/01/03 50,000 53,750 ------ Non-Bank Finance - 1.32% KFW International Financial, Incorporated, 8.85% due 06/15/99 50,000 53,248 9.125% due 05/15/01 200,000 221,704 ------- 274,952 Publishing - 0.37% S.D. Warren Company, Series B, 12.00% due 12/15/04 25,000 26,750 World Color Press, Incorporated, 9.125% due 03/15/03 50,000 50,000 ------ 76,750 Telecommunication Services - 1.98% Comcast Corporation, 9.125% due 10/15/06 50,000 48,750 Heritage Media Services, 11.00% due 06/15/02 50,000 53,500 Tele-Communications, Incorporated, 9.80% due 02/01/12 275,000 283,762 Videotron, Ltd., 10.25% due 10/15/02 25,000 26,500 ------- 412,512 Telephone - 1.72% 360 Communications, 7.125% due 03/01/03 150,000 148,661 Arch Communications Group, Incorporated, Step-up to 10.875% due 03/15/08 50,000 27,500 Benedek Communications, 13.25% due 05/15/06 65,000 35,750 MobileMedia Communications, Incorporated, 9.375% due 11/01/07 50,000 27,500 New York Telephone Company, 7.875% due 06/15/17 100,000 103,475 Paging Network, Incorporated, 10.125% due 08/01/07 15,000 15,000 ------- 357,886 Transportation - 0.52% CSX Corporation, 9.04% due 02/28/97 75,000 75,734 Southern Railway Company, 8.75% due 10/15/03 30,000 33,217 ------- 108,951 Transportation Equipment - 0.12% Hayes Wheels International, Incorporated, 11.00% due 07/15/06 $10,000 $10,325 Walbro Corporation, Series B, 9.875% due 07/15/05 15,000 15,225 ------ 25,550 TOTAL CORPORATE BONDS (Cost $6,927,325) $6,970,887 --------- U.S. TREASURY OBLIGATIONS - 31.79% U.S. Treasury Bonds - 31.16% 10.75% due 02/15/03 300,000 370,173 11.625% due 11/15/04 350,000 465,608 11.875% due 11/15/03 1,400,000 1,841,658 12.00% due 08/15/13 2,650,000 3,815,179 --------- 6,492,618 U.S. Treasury Notes - 0.63% 7.875% due 11/15/99 125,000 131,680 ------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $6,558,603) $6,624,298 --------- U.S. GOVERNMENT AGENCY OBLIGATIONS - 27.73% Federal Home Loan Mortgage Corporation - 14.16% 6.00% due 10/01/03 - 09/25/22 706,590 679,155 6.50% due 02/01/11 - 04/01/24 963,170 928,911 7.00% due 09/01/03 - 10/01/25 1,352,377 1,342,671 --------- 2,950,737 Federal National Mortgage Association - 4.17% 4.50% due 01/25/98, REMIC 74,043 73,163 6.25% due 11/25/19, REMIC 500,000 492,810 6.60% due 09/25/18, REMIC 300,000 301,875 ------- 867,848 Government National Mortgage Association - 9.40% 7.00% due 06/15/23 - 10/15/23 801,192 790,432 8.00% due 10/15/16 - 08/15/23 1,132,495 1,168,448 --------- 1,958,880 TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $5,724,218) $5,777,465 --------- FIXED INCOME - OTHER - 3.87% Miscellaneous Asset Backed Securities - 3.87% Advanta Credit Card Master Trust, Series 1994, Class A, 5.66% due 10/01/01 300,000 301,125 Premier Auto Trust, Series 1993, Class A2, 4.65% due 11/02/99 59,755 59,063 Western Financial Grantor Trust, Series 1995, Class A1, 7.10% due 07/01/00 116,461 118,202 World Omni Automobile Lease, Series 1995, Class A, 6.05% due 11/25/01 200,000 199,750
The accompanying notes are an integral part of the financial statements. 56 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Principal Amount Value ------ ----- Miscellaneous Asset Backed Securities - continued World Omni Automobile Lease, Series 1994, Class A, 6.45% due 09/25/00 $127,312 $127,631 ------- 805,771 TOTAL FIXED INCOME - OTHER (Cost $801,695) $805,771 ------- FOREIGN BONDS - 3.15% Canada - 2.11% Hydro-Quebec, 8.05% due 07/07/24 400,000 438,992 ------- Japan - 1.04% Japan Financial Corporation, 9.125% due 10/11/00 200,000 217,080 ------- TOTAL FOREIGN BONDS (Cost $663,584) $656,072 ------- TOTAL INVESTMENTS (Investment Quality Bond Fund) (Cost $20,675,425) $20,834,493 ========== U.S. Government Securities Fund U.S. TREASURY OBLIGATIONS - 9.61% U.S. Treasury Bonds - 0.27% 6.75% due 08/15/26 $400,000 $404,748 ------- U.S. Treasury Notes - 9.34% 5.00% due 01/31/98 6,000,000 5,954,040 6.25% due 10/31/01 3,500,000 3,522,960 6.50% due 08/15/05 2,920,000 2,950,572 6.50% due 10/15/06 1,000,000 1,009,840 7.00% due 07/15/06 325,000 339,320 ---------- 13,776,732 TOTAL U.S. TREASURY OBLIGATIONS (Cost $14,320,311) $14,181,480 ---------- U.S. GOVERNMENT AGENCY OBLIGATIONS - 66.37% Federal Home Loan Mortgage Corporation - 8.34% 6.00% due 09/01/10 - 10/01/10 680,161 658,688 6.50% TBA** 11,000,000 10,539,320 7.00% due 07/01/11 11,833 11,851 8.00% due 06/01/08 275,782 285,865 8.25% due 07/01/06 246,079 254,412 8.50% due 05/01/08 475,330 491,657 11.75% due 08/01/13 65,495 73,432 ---------- 12,315,225 Federal National Mortgage Association - 45.26% 6.50% due 12/01/99 - 04/01/26 $4,866,453 $4,655,055 7.00% TBA** 36,287,500 36,079,997 7.00% due 05/01/26 4,261,607 4,180,338 7.52% due 08/26/05 1,000,000 1,008,826 8.00% TBA** 7,500,000 7,650,000 8.00% due 08/01/04 79,155 81,339 8.25% due 03/25/06, REMIC 675,000 725,625 8.50% due 08/01/02 167,076 174,069 9.50% due 08/01/22 3,047,686 3,293,406 11.00% due 02/01/15 683 769 11.50% due 04/01/19 - 02/01/20 2,811,240 3,199,528 12.00% due 04/01/16 589,473 690,421 12.50% due 07/01/15 - 08/01/15 2,011,264 2,377,447 13.00% due 11/01/15 1,634,533 1,955,310 14.50% due 11/01/14 576,562 719,981 ---------- 66,792,111 Government National Mortgage Association - 12.77% 7.00% TBA** 6,400,000 6,275,968 7.00% due 03/15/26 - 05/15/26 9,237,972 9,060,364 7.50% due 04/15/02 - 02/15/07 507,357 513,345 7.75% due 04/15/04 74,045 76,128 8.00% due 11/15/06 - 02/15/08 41,638 43,344 10.25% due 02/15/00 - 03/15/01 182,019 191,859 10.50% due 01/15/01 18,081 19,336 11.00% due 03/15/00 - 09/20/15 175,521 190,178 11.25% due 04/15/98 - 10/20/15 12,683 14,076 11.50% due 08/20/00 - 09/20/15 532,810 606,259 11.75% due 09/15/98 1,141 1,210 12.50% due 09/15/14 78,225 92,388 13.00% due 01/15/11 - 06/15/15 851,602 1,013,417 13.25% due 07/15/14 41,288 49,004 13.50% due 11/15/12 - 02/15/13 72,727 87,737 15.00% due 07/15/11 - 09/15/12 158,777 197,763 15.50% due 07/15/11 - 12/15/11 295,563 373,148 16.00% due 11/15/11 - 12/15/11 29,454 36,817 ----------- 18,842,341 TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $98,028,692) $97,949,677 ---------- COLLATERALIZED MORTGAGE OBLIGATIONS - 0.01% Drexel Burnham Lambert, 9.30% due 06/01/17 (Collateralized by GNMA, 10.00%) 13,431 13,670 ------ TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $14,004) $13,670 ------
The accompanying notes are an integral part of the financial statements. 57 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Principal Amount Value ------ ----- REPURCHASE AGREEMENTS - 24.01%*** $17,719,000 Repurchase Agreement with J.P. Morgan dated 10/31/96 at 5.50%, to be repurchased at $17,721,707 on 11/01/96, collateralized by $12,584,000 U.S. Treasury Bonds, 10.625% due 08/15/15 (valued at $18,353,533, including interest) $17,719,000 17,719,000 Repurchase Agreement with State Street Bank & Trust Company dated 10/31/96 at 5.47%, to be repurchased at $17,721,692 on 11/01/96, collateralized by $14,375,000 U.S. Treasury Bonds, 8.875% due 02/15/19 (valued at $18,343,160, including interest) 17,719,000 ----------- $35,438,000 TOTAL INVESTMENTS (U.S. Government Securities Fund) (Cost $147,801,006) $147,582,827 ============ National Municipal Bond Fund Principal Amount Value ------ ----- LONG-TERM INVESTMENTS - 98.98% Alabama - 2.74% Alabama Housing Finance Authority Single Family Mortgage Revenue Collateralized Home Mortgage Program, Series B-2, 6.40%, 04/01/25 $520,000 $535,735 ------- California - 15.65% California Housing Finance Agency Revenue, Series H, 6.15%, 08/01/16 1,000,000 1,014,930 California State Public Works Board Lease Revenue, Various Community College Projects, 7.00%, 03/01/14 500,000 577,370 Los Angeles, California Harbor Department Revenue, Series B, 6.625%, 08/01/19 390,000 414,309 Santa Clara, California Electric Revenue, Series A, 6.25%, 07/01/13 1,000,000 1,053,830 --------- 3,060,439 Florida - 2.41% Gainesville, Florida Utilities Systems Revenue, Series A, 5.20%, 10/01/22 500,000 471,495 ------- Illinois - 6.79% Illinois Health Facilities Authority Revenue (OSF Health Care System), 6.00%, 11/15/23 $200,000 $198,408 Illinois Health Facilities Authority Revenue (Hospital Association Project), 7.00%, 02/15/22 200,000 212,250 Chicago, Illinois Wastewater Transmission Revenue, 5.125%, 01/01/25 1,000,000 915,840 ---------- 1,326,498 Iowa - 0.80% Iowa Finance Authority Hospital Facility Revenue Refunding (Trinity Regional Hospital Project), 7.00%, 07/01/12 150,000 156,567 ------- Louisiana - 2.45% Louisiana Public Facilities Authority Hospital Revenue Refunding (Touro Infirmary Project), Series B, 6.125%, 08/15/23 500,000 478,000 ------- Maine - 0.13% Maine State Housing Authority Mortgage Purchase, Series A-4, 6.375%, 11/15/12 25,000 25,577 ------ Massachusetts - 3.60% Massachusetts State Water Pollution, Series A, 5.70%, 02/01/14 700,000 703,626 ------- Missouri - 2.57% Missouri State Health & Educational Facilities Authority Revenue, 6.25%, 02/15/11 500,000 501,870 ------- Nebraska - 6.30% Nebraska Higher Education Loan Program Income Revenue, 6.65%, 06/01/08 1,200,000 1,231,104 --------- Nevada - 4.73% Nevada Housing Division, Single-Family Program, 6.35%, 10/01/12 600,000 612,330 Nevada Housing Division, Single-Family Program, Series B-2, 6.95%, 10/01/26 300,000 313,023 ------- 925,353 New Jersey - 5.64% New Jersey Economic Development Authority Water Facilities Revenue (New Jersey American Water Company, Incorporated Project), 6.875%, 11/01/34 1,000,000 1,101,670 ---------
The accompanying notes are an integral part of the financial statements. 58 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Principal Amount Value ------ ----- New York - 21.54% Metropolitan Transportation Authority, New York Service Contract (Transit Facilities), Series O, 6.25%, 07/01/14 $375,000 $398,501 New York State Local Government Assistance Corporation, Series A, 6.00%, 04/01/16 1,000,000 1,016,200 New York State Dormitory Authority Revenue, State University Educational Facilities, Series A, 6.25%, 05/15/08 500,000 521,460 New York State Environmental Facilities Corporation Pollution Control Revenue Refunding (IBM Corporation Project), 7.125%, 07/01/12 580,000 626,794 New York State Mortgage Agency Revenue, Series 40-A, 6.35%, 04/01/21 630,000 645,391 Triborough Bridging & Tunnel Authority Revenue, Series Y, 5.50%, 01/01/17 1,000,000 1,003,550 --------- 4,211,896 Pennsylvania - 5.20% Monroeville, Pennsylvania Hospitals Authority Hospitals Revenue, 6.25%, 10/01/15 1,000,000 1,017,350 --------- South Carolina - 2.57% Greenville Hospital Systems Hospital Facilities Revenue, Series B, 5.70%, 05/01/12 500,000 502,515 ------- Tennessee - 2.47% Humphreys County, Tennessee Industrial Development Board Solid Waste Disposal Revenue (E.I. Du Pont De Nemours & Company Project), 6.70%, 05/01/24 450,000 482,216 ------- Texas - 3.08% Fort Worth, Texas, Series A, 5.10%, 03/01/06 500,000 502,990 Texas State Veterans Housing Assistance, 6.80%, 12/01/23 95,000 98,307 -------- 601,297 Virginia - 1.57% Virginia State Housing Development Authority Commonwealth Mortgage, Subseries I-1, 6.55%, 07/01/17 300,000 307,647 ------- Washington - 2.51% Washington State Health Care Facilities Authority Revenue, 5.50%, 10/01/14 500,000 491,590 ------- Wisconsin - 6.23% Wisconsin Housing & Economic Development Authority Home Ownership Revenue, Series D, 6.10%, 07/01/24 $175,000 $176,258 Wisconsin State Health & Educational Facilities Authority Revenue, Mercy Hospital of Janesville, Incorporated, 6.60%, 08/15/22 1,000,000 1,041,200 --------- 1,217,458 TOTAL LONG-TERM INVESTMENTS (Cost $18,817,867) $19,349,903 ---------- SHORT-TERM INVESTMENTS - 1.02% Ohio - 0.51% Ohio State Air Quality Development Authority Revenue, VR, 3.60%, 09/01/30 100,000 100,000 ------- Wyoming - 0.51% Kemmerer, Wyoming Pollution Control Revenue, VR, 3.50%, 11/01/24 100,000 100,000 ------- TOTAL SHORT-TERM INVESTMENTS (Cost $200,000) $200,000 ------- TOTAL INVESTMENTS (National Municipal Bond Fund) (Cost $19,017,867) $19,549,903 ========== Money Market Fund Principal Amount Value ------ ----- U.S. GOVERNMENT AGENCY OBLIGATIONS - 21.81% Federal Home Loan Bank - 4.64% 5.35% due 11/25/96 - 12/16/96 $1,025,000 $1,019,296 --------- Federal National Mortgage Association - 4.51% 5.21% due 01/15/97 1,000,000 989,146 ------- Student Loan Marketing Association - 12.66% 5.53% due 11/01/96 2,780,000 2,780,000 --------- TOTAL U.S. GOVERNMENT OBLIGATIONS $4,788,442 ========== U.S. TREASURY OBLIGATIONS - 3.67% U.S. Treasury Notes - 3.67% 7.50% due 01/31/97 800,000 804,514 ------- TOTAL U.S. TREASURY OBLIGATIONS $804,514
======== The accompanying notes are an integral part of the financial statements. 59 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Principal Amount Value ------ ----- COMMERCIAL PAPER - 74.52% American Brands, Incorporated, 5.28% due 01/03/97 $800,000 $792,608 American Express Credit Corporation, 5.27% due 12/02/96 800,000 796,397 Anheuser-Busch, Incorporated, 5.25% due 12/09/96 800,000 795,609 Bear Stearns Companies, Incorporated, 5.35% due 11/06/96 200,000 199,851 5.38% due 11/04/96 500,000 499,776 BHP Finance USA, 5.35% due 12/06/96 700,000 696,359 Canadian Wheat Board, 5.25% due 01/17/97 800,000 791,017 The Coca-Cola Enterprises, Incorporated, 5.35% due 11/20/96 700,000 698,024 Commerzbank U.S. Finance, 5.40% due 01/22/97 700,000 691,390 Daimler-Benz of North America, 5.50% due 12/05/96 500,000 497,403 Walt Disney Company, 5.27% due 01/13/97 800,000 791,451 Ford Motor Company of Canada, Ltd., 5.31% due 01/22/97 800,000 790,324 General Motors Acceptance Corporation, 5.45% due 11/08/96 500,000 499,470 Goldman Sachs Group L.P., 5.24% due 11/25/96 800,000 797,205 Her Majesty In Right of Canada, 5.25% due 01/27/97 800,000 789,850 Merrill Lynch & Company, Incorporated, 5.34% due 01/15/97 800,000 791,100 Philip Morris Companies, Incorporated, 5.30% due 01/13/97 800,000 791,402 Private Export Funding Corporation, 5.31% due 11/14/96 500,000 499,041 Province of British Columbia, 5.28% due 01/22/97 800,000 790,379 Province of Quebec, 5.40% due 01/28/97 500,000 493,400 Toshiba America, Incorporated, 5.50% due 01/17/97 700,000 691,765 Transamerica Finance Group, Incorporated, 5.30% due 01/30/97 800,000 789,400 Xerox Corporation, 5.30% due 02/05/97 800,000 788,693 Zeneca Wilmington Company, 5.50% due 12/17/96 600,000 595,783 TOTAL COMMERCIAL PAPER $16,357,697 ---------- TOTAL INVESTMENTS (Money Market Fund) $21,950,653 ----------
Key to Currency Abbreviations - ----------------------------- CAD - Canadian Dollar DKK - Danish Krone DEM - German Deustche Mark (POUND) - Great British Pound HKD - Hong Kong Dollar IDR - Indonesian Rupiah ITL - Italian Lira (YEN) - Japanese Yen NLG - Netherland Guilder ESP - Spanish Peseta SEK - Swedish Krona CHF - Swiss Franc Key to Security Abbreviations and Legend - ---------------------------------------- ADR - American Depository Receipt ADS - American Depository Shares FRN - Floating Rate Note REMIC- Real Estate Mortgage Investment Conduit TBA - To Be Announced VR - Variable Rate Demand Note (Rate effective as of October 31, 1996.) * - Non-Income producing ** - Purchased on a forward commitment (Note 2) *** - At October 31, 1996 a portion of this security was pledged to cover forward commitments purchased. The accompanying notes are an integral part of the financial statements. 60 NORTH AMERICAN FUNDS Notes to Financial Statements - -------------------------------------------------------------------------------- 1. ORGANIZATION OF THE FUND. North American Funds (the "Fund") is an open-end, diversified management investment company. The Fund is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended. It is a series company, which means it has several portfolios, each with a stated investment objective which it pursues through separate investment policies. As of October 31, 1996, the Fund offered the following thirteen portfolios: the Small/Mid Cap Fund, the International Small Cap Fund, the Growth Equity Fund, the Global Equity Fund (formerly, the Global Growth Fund), the Value Equity Fund (formerly, the Growth Fund), the Growth and Income Fund, the International Growth and Income Fund, the Balanced Fund (formerly, the Asset Allocation Fund), the Strategic Income Fund, the Investment Quality Bond Fund, the U.S. Government Securities Fund, the National Municipal Bond Fund and the Money Market Fund. On April 1, 1994, the multiple class structure as approved by the Board of Trustees and shareholders was implemented. The Fund offers Class A, Class B and Class C shares. Class A shares are sold with a front-end sales charge up to 4.75%. Class B shares are sold with a contingent deferred sales charge which declines from 5% to zero depending on the period of time shares are held. Class B shares will automatically convert to Class A shares of the same portfolio six years after purchase. Class C shares are sold without an initial sales charge. Class C shares will automatically convert to Class A shares of the same portfolio ten years after purchase. All three classes of shares have identical voting, dividend, liquidation and other rights, except that each class has exclusive voting rights with respect to its distribution plan (See Note 5). Class A, Class B and Class C of the Money Market Fund have the same expense structure and no distribution expense. NASL Financial Services, Inc. ("NASL Financial"), a wholly-owned subsidiary of North American Security Life Insurance Company, serves as investment adviser, principal underwriter and distributor for the Fund. New Portfolios. On March 4, 1996, the Small/Mid Cap, International Small Cap and Growth Equity Funds commenced operations. Fred Alger Management, Inc. is the subadviser to the Small/Mid Cap Fund. The subadviser to the International Small Cap and Growth Equity Funds is Founders Asset Management, Inc. 2. SIGNIFICANT ACCOUNTING POLICIES. The policies described below are followed when preparing the Funds' financial statements. These policies are in accordance with generally accepted accounting principles ("GAAP"). Security Valuation. Securities held by the Money Market Fund and money market instruments with remaining maturities of 60 days or less held by the other portfolios are valued at either the amortized cost basis or original cost plus accrued interest, both of which approximate current market value. All other securities held by the Fund are valued at the last sale price as of the close of business on a principal securities exchange (domestic or foreign) or, lacking any sales, at the closing bid price. Securities traded only in the over-the- counter market are valued at the last bid price quoted by brokers making markets in the securities at the close of trading on the Exchange. Other assets and securities for which no such quotation or valuations are readily available are valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Trustees. Foreign Currency Translations. The accounting records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on the following basis: (i) market value of securities, other assets and other liabilities at the current rate of exchange of such currencies against U.S. dollars; and (ii) purchases and sales of securities, income and expenses at the rate of exchange quoted on the respective dates of such transactions. Gains and losses that arise from changes in foreign exchange rates have been segregated from gains and losses that arise from changes in the market prices of investments. These gains and losses are included with gains and losses on foreign currency and forward foreign currency contracts in the Statements of Operations. Forward Foreign Currency Contracts. All portfolios with the exception of the U.S. Government Securities, National Municipal Bond and Money Market Funds may purchase and sell forward foreign currency contracts in order to hedge a specific transaction or portfolio position. The net U.S. dollar value of foreign currency underlying all contractual commitments held at the end of the period and the resulting net unrealized appreciation (depreciation) and related net receivable or payable amount are determined using forward currency exchange rates supplied by a quotation service. The Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. Net realized gains (losses) on forward foreign currency contracts, shown in the Statements of Operations, includes net gains or losses realized by a portfolio on contracts which have matured or which the portfolio has terminated by entering into an offsetting commitment. 61 NORTH AMERICAN FUNDS Notes to Financial Statements - -------------------------------------------------------------------------------- Note 2 - continued Futures. All portfolios other than the U.S. Government Securities and Money Market Fund may purchase and sell financial futures contracts and options on those contracts. The portfolios invest in contracts based on financial instruments such as U.S. Treasury bonds or notes or on securities indices such as the S&P 500 Index, in order to hedge against a decline in the value of securities owned by the portfolios. When a portfolio sells a futures contract based on a financial instrument, the portfolio becomes obligated to deliver that kind of instrument at an agreed upon date for a specified price. The portfolio realizes a gain or loss depending on whether the price of an offsetting purchase is less or more than the price of the initial sale or on whether the price of an offsetting sale is more or less than the price of the initial purchase. The portfolio could be exposed to risks if it could not close out futures positions because of an illiquid secondary market or the inability of counterparties to meet the terms of their contracts. Upon entering into futures contracts, the portfolio is required to deposit with a broker an amount, initial margin, which represents 5% of the purchase price indicated in the futures contract. Payments to and from the broker, known as variation margin, are required to be made on a daily basis as the price of the futures contract fluctuates, making the long or short positions in the contract more or less valuable. If the position is closed out by taking an opposite position prior to the settlement date of the futures contract, a final determination of variation margin is made, cash is required to be paid to or released by the broker, and the portfolio realizes a gain or loss. Forward Commitments. The Fund may make forward commitments to purchase and sell securities. Delivery and payment for securities which have been purchased or sold on a forward commitment basis can take place a month or more (not to exceed 120 days) after the date of the transaction. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the securities underlying a forward commitment to purchase securities, and any subsequent fluctuations in their value, is taken into account when determining the portfolios net asset value starting on the day the portfolio agrees to purchase the securities. At October 31, 1996, forward commitments in the Balanced, Strategic Income and U.S. Government Securities Funds were valued at $2,006,860, $1,492,213 and $60,545,285, respectively. Mortgage Dollar Rolls. The Strategic Income and U.S. Government Securities Funds may enter into mortgage dollar rolls in which they sell mortgage-backed securities for normal delivery in the current month and simultaneously contract to repurchase similar, but not identical, securities at the same price on an agreed upon date. The portfolio receives compensation as consideration for entering into the commitment to repurchase. The compensation is recorded as deferred income and amortized to income over the roll period. As the holder, the counterparty receives all principal and interest payments, including prepayments, made with respect to the similar security. Mortgage dollar rolls may be renewed with a new sale and repurchase price with a cash settlement made at renewal without physical delivery of the securities subject to the contract. Securities Lending. The Fund may lend its portfolio securities in amounts up to 33% of its total non-cash assets to brokers, dealers and other financial institutions, provided such loans are callable at any time and are at all times fully collateralized by cash, cash equivalents or securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, and marked to market to the value of the loaned securities on a daily basis. The portfolio may bear the risk of delay in recovery of, or even loss of rights in, the securities loaned should the borrower of the securities fail financially. Consequently, loans of portfolio securities will only be made to firms deemed by the Subadvisers to be creditworthy. The portfolio receives compensation for lending its securities either in the form of fees or by retaining a portion of interest on the investment of any cash received as collateral. Income generated from the investment of cash collateral is included as interest income in the Statements of Operations. All collateral received will be in an amount equal to at least 100% of the market value of the loaned securities and must be maintained at that level during the period of the loan. During the loan period, the portfolio continues to retain rights of ownership, including dividends and interest of the loaned securities. At October 31, 1996, the value of the securities loaned amounted to $1,876,034, $7,635,641, $10,556,189, $3,666,651, $12,368,122, $8,533,896, $4,533,414 and $6,440,993 in the Global Equity, Value Equity, Growth and Income, International Growth and Income, Balanced, Strategic Income, Investment Quality Bond and U.S. Government Securities Funds, respectively. At October 31, 1996, the value of cash collateral amounted to $1,982,701, $7,967,100, $10,797,480, $3,845,306, $12,651,263, $8,825,965, $4,629,699 and $6,567,000 in the Global Equity, Value Equity, Growth and Income, International Growth and Income, Balanced, Strategic Income, Investment Quality Bond and U.S. Government Securities Funds, respectively. 62 NORTH AMERICAN FUNDS Notes to Financial Statements - -------------------------------------------------------------------------------- Note 2 - continued Organization Costs. Cost incurred by the Fund in connection with its organization, its initial registration with the Securities and Exchange Commission and with various states, and the initial public offering of its shares is being amortized on a straight line basis over a five-year period for the International Growth and Income, Strategic Income and the National Municipal Bond Funds. Federal Income Taxes. The Fund's policy is for each portfolio to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and to distribute all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. Each portfolio is treated as a separate taxpayer for federal income tax purposes. Distributions of Income and Gains. Distribution of net investment income is declared as a dividend to shareholders of record as of the close of business each day and is paid monthly for the Investment Quality Bond and U.S. Government Securities Funds, semi-annually to shareholders of the Growth and Income and International Growth and Income Funds, and annually to shareholders of the Small/Mid Cap, International Small Cap, Growth Equity, Global Equity, Value Equity and Balanced Funds. All of the net investment income of the Strategic Income, National Municipal Bond and Money Market Funds is declared as a dividend to shareholders of record as of the close of business each day and is paid monthly. During any particular year, net realized gains from investment, futures and foreign currency transactions for each portfolio, in excess of available capital loss carryforwards of each portfolio, would be taxable to the portfolio if not distributed and, therefore, will be distributed to shareholders. An additional distribution may be made to the extent necessary to avoid the payment of a four percent federal excise tax. Pursuant to Section 852 of the Internal Revenue Code, the distributions set forth below have been designated as capital gains distributions for the fiscal year ended October 31, 1996:
Portfolio Capital Gain Distribution - ----------------------------------- -------------------------------- Global Equity...................... $12,813,300 Value Equity....................... 14,983,316 Growth and Income.................. 6,194,241 International Growth and Income.... 666,284 Balanced........................... 7,326,163 Strategic Income................... 1,249,004
Capital Loss Carryforwards. At October 31, 1996, capital loss carryforwards available to offset future realized gains were approximately:
Capital Loss Carryforwards Expiration Year -------------------------------------- Portfolio 2002 2003 2004 - ------------------------------ -------- ---------- -------- Small/Mid Cap................. -- -- $761,000 International Small Cap....... -- -- 54,000 Growth Equity................. -- -- 414,000 Investment Quality Bond....... $535,000 -- -- U.S. Government Securities.... -- $2,263,000 -- National Municipal Bond....... -- 425,000 --
Equalization. The Fund follows the accounting practice known as equalization, by which a portion of the proceeds from sales and costs of repurchases of the Fund's shares are allocated, on a per share basis, to undistributed net investment income. As a result, undistributed net investment income per share is unaffected by sales or redemptions of the Fund's shares. 63 NORTH AMERICAN FUNDS Notes to Financial Statements - -------------------------------------------------------------------------------- Note 2 - continued Repurchase and Reverse Repurchase Agreements. Each portfolio may enter into repurchase agreements and, additionally, the U.S. Government Securities Fund may enter into reverse repurchase agreements. When a portfolio enters into a repurchase agreement through its custodian, it receives delivery of the underlying securities, the amount of which at the time of purchase and each subsequent business day is required to be maintained at such a level that the market value is equal to 102% of the resale price, and such portfolio will take constructive receipt of all securities underlying the repurchase agreements until such agreements expire. If the seller defaults, a portfolio would suffer a loss to the extent that proceeds from the sale of underlying securities were less than the repurchase price. Under a reverse repurchase agreement, the U.S. Government Securities Fund may sell a debt security and agree to repurchase it at an agreed upon time and at an agreed upon price. Other. Investment security transactions are accounted for on the trade date. Interest income is accrued as earned. Dividend income and distributions to shareholders are recorded on the ex-dividend date. All original issue discounts are accreted for financial and federal income tax reporting purposes. The Fund uses the First In, First Out method for determining realized gain or loss on investments, futures and foreign currency for both financial and federal income tax reporting purposes. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates. Capital Accounts. The Fund reports the accumulated undistributed net investment income (loss) and accumulated undistributed net realized gain (loss) accounts on a basis approximating amounts available for future tax distributions (or to offset future taxable realized gains when a capital loss carryforward is available). Accordingly, each portfolio of the Fund may periodically make reclassifications among certain capital accounts without impacting the net asset value. 3. CAPITAL SHARES. Share activity for the year ended October 31, 1996 is as follows:
Additional Shares Par Value Paid-in Capital ----------- --------- --------------- Small/Mid Cap Fund-Class A Outstanding at March 4, 1996 (commencement of operations)........... ---- --- ---- Sold................................... 323,804 $324 $4,125,082 Redeemed............................... (88,850) (89) (1,126,067) ------- ---- ---------- Net increase.......................... 234,954 235 2,999,015 ------- ---- ---------- Outstanding at October 31, 1996......... 234,954 $235 $2,999,015 ======= ==== ========== Small/Mid Cap Fund-Class B Outstanding at March 4, 1996 (commencement of operations)........... ---- --- ---- Sold................................... 562,252 $562 $7,191,046 Redeemed............................... (33,141) (33) (420,978) ------- ---- ---------- Net increase.......................... 529,111 529 6,770,068 ------- ---- ---------- Outstanding at October 31, 1996......... 529,111 $529 $6,770,068 ======= ==== ========== Small/Mid Cap Fund-Class C Outstanding at March 4, 1996 (commencement of operations)........... ---- --- ---- Sold................................... 714,630 $715 $9,110,987 Redeemed............................... (60,166) (60) (775,461) ------- ---- ---------- Net increase.......................... 654,464 655 8,335,526 ------- ---- ---------- Outstanding at October 31, 1996......... 654,464 $655 $8,335,526 ======= ==== ========== International Small Cap Fund-Class A Outstanding at March 4, 1996 (commencement of operations)........... ---- --- ---- Sold................................... 187,102 $187 $2,441,008 Redeemed............................... (29,251) (29) (388,442) ------- ---- ---------- Net increase.......................... 157,851 158 2,052,566 ------- ---- ---------- Outstanding at October 31, 1996......... 157,851 $158 $2,052,566 ======= ==== ==========
64 NORTH AMERICAN FUNDS Notes to Financial Statements - -------------------------------------------------------------------------------- Note 3 - continued
Additional Shares Par Value Paid-in Capital ----------- --------- --------------- International Small Cap Fund-Class B Outstanding at March 4, 1996 (commencement of operations)........... ---- --- ---- Sold................................... 388,668 $389 $5,096,099 Redeemed............................... (9,698) (10) (127,551) ----------- ---- ---------- Net increase.......................... 378,970 379 4,968,548 ----------- ---- ---------- Outstanding at October 31, 1996......... 378,970 $379 $4,968,548 =========== ==== ========== International Small Cap Fund-Class C Outstanding at March 4, 1996 (commencement of operations)........... ---- --- ---- Sold................................... 437,910 $438 $5,723,107 Redeemed............................... (25,444) (25) (337,108) ----------- ---- ---------- Net increase.......................... 412,466 413 5,385,999 ----------- ---- ---------- Outstanding at October 31, 1996......... 412,466 $413 $5,385,999 =========== ==== ========== Growth Equity Fund-Class A Outstanding at March 4, 1996 (commencement of operations)........... ---- --- ---- Sold................................... 296,685 $297 $3,885,431 Redeemed............................... (133,859) (134) (1,825,177) ----------- ---- ---------- Net increase.......................... 162,826 163 2,060,254 ----------- ---- ---------- Outstanding at October 31, 1996......... 162,826 $163 $2,060,254 =========== ==== ========== Growth Equity Fund-Class B Outstanding at March 4, 1996 (commencement of operations)........... ---- --- ---- Sold................................... 441,286 $441 $5,782,136 Redeemed............................... (95,418) (95) (1,218,787) ----------- ---- ---------- Net increase.......................... 345,868 346 4,563,349 ----------- ---- ---------- Outstanding at October 31, 1996......... 345,868 $346 $4,563,349 =========== ==== ========== Growth Equity Fund-Class C Outstanding at March 4, 1996 (commencement of operations)........... ---- --- ---- Sold................................... 500,864 $501 $6,717,848 Redeemed............................... (27,932) (28) (373,508) ----------- ---- ---------- Net increase.......................... 472,932 473 6,344,340 ----------- ---- ---------- Outstanding at October 31, 1996......... 472,932 $473 $6,344,340 =========== ==== ========== Global Equity Fund-Class A (formerly the Global Growth Fund-Class A) Outstanding at October 31, 1995......... 1,726,660 $1,727 $24,333,372 Sold................................... 1,384,480 1,384 19,538,181 Reinvestment of distributions.......... 26,279 26 369,986 Redeemed............................... (1,349,381) (1,349) (19,144,478) ----------- ------ ----------- Net increase.......................... 61,378 61 763,689 ----------- ------ ----------- Outstanding at October 31, 1996......... 1,788,038 $1,788 $25,097,061 =========== ====== =========== Global Equity Fund-Class B (formerly the Global Growth Fund-Class B) Outstanding at October 31, 1995......... 1,698,251 $1,698 $23,880,103 Sold................................... 524,030 524 7,455,003 Reinvestment of distributions.......... 16,612 17 233,046 Redeemed............................... (452,206) (452) (6,464,535) ----------- ------ ----------- Net increase.......................... 88,436 89 1,223,514 ----------- ------ ----------- Outstanding at October 31, 1996......... 1,786,687 $1,787 $25,103,617 =========== ====== ===========
65 NORTH AMERICAN FUNDS Notes to Financial Statements - -------------------------------------------------------------------------------- Note 3 - continued
Additional Shares Par Value Paid-in Capital ------------ ----------- ---------------- Global Equity Fund-Class C (formerly the Global Growth Fund-Class C) Outstanding at October 31, 1995......... 6,069,937 $6,070 $77,071,294 Sold................................... 751,610 751 10,749,680 Reinvestment of distributions.......... 38,871 39 546,838 Redeemed............................... (2,360,215) (2,360) (33,787,407) ----------- ------ ----------- Net decrease.......................... (1,569,734) (1,570) (22,490,889) ----------- ------ ----------- Outstanding at October 31, 1996......... 4,500,203 $4,500 $54,580,405 =========== ====== =========== Value Equity Fund-Class A (formerly the Growth Fund-Class A) Outstanding at October 31, 1995......... 1,381,954 $1,382 $20,109,792 Sold................................... 928,055 928 15,106,428 Reinvestment of distributions.......... 137,144 137 2,055,642 Redeemed............................... (808,325) (808) (13,113,921) ----------- ------ ----------- Net increase.......................... 256,874 257 4,048,149 ----------- ------ ----------- Outstanding at October 31, 1996......... 1,638,828 $1,639 $24,157,941 =========== ====== =========== Value Equity Fund-Class B (formerly the Growth Fund-Class B) Outstanding at October 31, 1995......... 1,254,421 $1,254 $18,921,823 Sold................................... 624,167 625 10,115,495 Reinvestment of distributions.......... 113,120 113 1,704,582 Redeemed............................... (419,960) (420) (6,804,863) ----------- ------ ----------- Net increase.......................... 317,327 318 5,015,214 ----------- ------ ----------- Outstanding at October 31, 1996......... 1,571,748 $1,572 $23,937,037 =========== ====== =========== Value Equity Fund-Class C (formerly the Growth Fund-Class C) Outstanding at October 31,1995.......... 5,284,502 $5,285 $67,053,930 Sold................................... 953,226 954 15,513,636 Reinvestment of distributions.......... 439,112 439 6,652,164 Redeemed............................... (1,821,843) (1,823) (29,491,922) ----------- ------ ----------- Net decrease.......................... (429,505) (430) (7,326,122) ----------- ------ ----------- Outstanding at October 31, 1996......... 4,854,997 $4,855 $59,727,808 =========== ====== =========== Growth and Income Fund-Class A Outstanding at October 31, 1995......... 827,682 $828 $10,769,205 Sold................................... 404,689 405 6,512,774 Reinvestment of distributions.......... 17,981 18 276,309 Redeemed............................... (209,520) (210) (3,361,540) ----------- ------ ----------- Net increase.......................... 213,150 213 3,427,543 ----------- ------ ----------- Outstanding at October 31, 1996......... 1,040,832 $1,041 $14,196,748 =========== ====== =========== Growth and Income Fund-Class B Outstanding at October 31, 1995......... 1,297,356 $1,297 $17,462,876 Sold................................... 948,621 949 15,050,426 Reinvestment of distributions.......... 23,339 23 357,514 Redeemed............................... (284,205) (284) (4,587,169) ----------- ------ ----------- Net increase.......................... 687,755 688 10,820,771 ----------- ------ ----------- Outstanding at October 31, 1996......... 1,985,111 $1,985 $28,283,647 =========== ====== =========== Growth and Income Fund-Class C Outstanding at October 31, 1995......... 4,292,794 $4,293 $51,514,264 Sold................................... 1,136,822 1,137 18,164,159 Reinvestment of distributions.......... 58,513 58 892,120 Redeemed............................... (1,227,020) (1,227) (19,533,910) ----------- ------ ----------- Net decrease.......................... (31,685) (32) (477,631) ----------- ------ ----------- Outstanding at October 31, 1996......... 4,261,109 $4,261 $51,036,633 =========== ====== ===========
66 NORTH AMERICAN FUNDS Notes to Financial Statements - --------------------------------------------------------------------------------
Note 3 - continued Additional Shares Par Value Paid-in Capital ------------- ----------- --------------- International Growth & Income Fund-Class A Outstanding at October 31, 1995.......... 682,252 $682 $6,889,119 Sold.................................... 262,160 263 2,810,233 Reinvestment of distributions........... 12,258 12 127,603 Redeemed................................ (539,762) (540) (5,726,314) --------- -------- ---------- Net decrease.......................... (265,344) (265) (2,788,478) --------- -------- ---------- Outstanding at October 31, 1996.......... 416,908 $417 $4,100,641 ========= ======== ========== International Growth & Income Fund-Class B Outstanding at October 31, 1995.......... 834,017 $834 $8,385,870 Sold.................................... 717,507 717 7,662,050 Reinvestment of distributions........... 13,587 14 141,835 Redeemed................................ (219,029) (219) (2,370,528) --------- -------- ----------- Net increase.......................... 512,065 512 5,433,357 --------- -------- ----------- Outstanding at October 31, 1996.......... 1,346,082 $1,346 $13,819,227 ========= ======== =========== International Growth & Income Fund-Class C Outstanding at October 31, 1995.......... 626,235 $626 $6,302,145 Sold.................................... 603,200 603 6,488,338 Reinvestment of distributions........... 9,958 10 104,054 Redeemed................................ (436,609) (436) (4,706,525) --------- -------- ---------- Net increase.......................... 176,549 177 1,885,867 --------- -------- ---------- Outstanding at October 31, 1996.......... 802,784 $803 $8,188,012 ========= ======== ========== Balanced Fund-Class A (formerly the Asset Allocation Fund-Class A) Outstanding at October 31, 1995.......... 834,714 $835 $9,207,069 Sold.................................... 198,770 199 2,311,075 Reinvestment of distributions........... 85,976 86 941,431 Redeemed................................ (237,725) (238) (2,753,497) --------- -------- ---------- Net increase.......................... 47,021 47 499,009 --------- -------- ---------- Outstanding at October 31, 1996.......... 881,735 $881 $9,706,078 ========= ======== ========== Balanced Fund-Class B (formerly the Asset Allocation Fund-Class B) Outstanding at October 31, 1995.......... 824,443 $824 $9,061,513 Sold.................................... 599,541 599 6,969,412 Reinvestment of distributions........... 85,887 86 943,699 Redeemed................................ (187,370) (187) (2,173,049) --------- -------- ----------- Net increase.......................... 498,058 498 5,740,062 --------- -------- ----------- Outstanding at October 31, 1996.......... 1,322,501 $1,323 $14,801,575 ========= ======== =========== Balanced Fund-Class C (formerly the Asset Allocation Fund-Class C) Outstanding at October 31, 1995.......... 6,706,025 $6,706 $65,861,087 Sold.................................... 613,342 613 7,130,252 Reinvestment of distributions........... 577,601 578 6,358,726 Redeemed................................ (2,000,280) (2,000) (23,216,709) ---------- -------- ----------- Net decrease.......................... (809,337) (809) (9,727,731) ---------- -------- ----------- Outstanding at October 31, 1996.......... 5,896,688 $5,897 $56,133,356 ========== ======== =========== Strategic Income Fund-Class A Outstanding at October 31, 1995.......... 1,107,567 $1,107 $11,964,572 Sold.................................... 496,437 497 4,710,685 Reinvestment of distributions........... 60,408 60 574,304 Redeemed................................ (299,464) (299) (2,847,082) --------- -------- ----------- Net increase.......................... 257,381 258 2,437,907 --------- -------- ----------- Outstanding at October 31, 1996.......... 1,364,948 $1,365 $14,402,479 ========= ======== ===========
67 NORTH AMERICAN FUNDS Notes to Financial Statements - ------------------------------------------------------------------------------- Note 3 - continued
Additional Shares Par Value Paid-in Capital ------------ ------------ --------------- Strategic Income Fund-Class B Outstanding at October 31, 1995......... 2,280,183 $2,280 $20,129,660 Sold................................... 1,228,732 1,229 11,624,907 Reinvestment of distributions.......... 105,959 106 1,007,991 Redeemed............................... (463,872) (464) (4,399,310) --------- -------- ------------ Net increase.......................... 870,819 871 8,233,588 --------- -------- ------------ Outstanding at October 31, 1996......... 3,151,002 $3,151 $28,363,248 ========= ======== ============ Strategic Income Fund-Class C Outstanding at October 31, 1995......... 1,574,343 $1,574 $14,068,758 Sold................................... 1,139,454 1,140 10,808,854 Reinvestment of distributions.......... 114,188 114 1,086,669 Redeemed............................... (503,838) (504) (4,782,313) --------- -------- ------------ Net increase.......................... 749,804 750 7,113,210 --------- -------- ------------ Outstanding at October 31, 1996......... 2,324,147 $2,324 $21,181,968 ========= ======== ============ Investment Quality Bond Fund-Class A Outstanding at October 31, 1995......... 979,526 $980 $10,738,901 Sold................................... 101,513 101 1,049,598 Reinvestment of distributions.......... 49,845 50 515,653 Redeemed............................... (255,090) (255) (2,626,903) --------- -------- ------------ Net decrease.......................... (103,732) (104) (1,061,652) --------- -------- ------------ Outstanding at October 31, 1996......... 875,794 $ 876 $9,677,249 ========= ======== ============ Investment Quality Bond Fund-Class B Outstanding at October 31, 1995......... 328,970 $329 $3,312,807 Sold................................... 253,182 253 2,635,230 Reinvestment of distributions.......... 21,978 22 226,451 Redeemed............................... (151,315) (151) (1,556,299) --------- -------- ------------ Net increase.......................... 123,845 124 1,305,382 --------- -------- ------------ Outstanding at October 31, 1996......... 452,815 $453 $4,618,189 ========= ======== ============ Investment Quality Bond Fund-Class C Outstanding at October 31, 1995......... 683,013 $683 $6,915,070 Sold................................... 412,421 412 4,225,809 Reinvestment of distributions.......... 37,585 38 387,983 Redeemed............................... (402,925) (403) (4,176,235) --------- -------- ------------ Net increase.......................... 47,081 47 437,557 --------- -------- ------------ Outstanding at October 31, 1996......... 730,094 $730 $7,352,627 ========= ======== ============ U.S. Government Securities Fund-Class A Outstanding at October 31, 1995......... 8,130,813 $8,130 $84,036,450 Sold................................... 1,020,293 1,020 9,911,592 Reinvestment of distributions.......... 331,636 332 3,248,473 Redeemed............................... (2,057,267) (2,057) (20,125,365) --------- -------- ------------ Net decrease.......................... (705,338) (705) (6,965,300) --------- -------- ------------ Outstanding at October 31, 1996......... 7,425,475 $7,425 $77,071,150 ========= ======== ============ U.S. Government Securities Fund-Class B Outstanding at October 31, 1995......... 1,402,069 $1,402 $13,649,755 Sold................................... 1,092,841 1,093 10,803,400 Reinvestment of distributions.......... 73,608 74 720,250 Redeemed............................... (584,646) (585) (5,711,446) --------- -------- ------------ Net increase.......................... 581,803 582 5,812,204 --------- -------- ------------ Outstanding at October 31, 1996......... 1,983,872 $ 1,984 $ 19,461,959 ========= ======== ============
68 NORTH AMERICAN FUNDS Notes to Financial Statements - ------------------------------------------------------------------------------- Note 3 - continued
Additional Shares Par Value Paid-in Capital ----------- ----------- --------------- U.S. Government Securities Fund-Class C Outstanding at October 31, 1995......... 2,022,679 $2,023 $19,474,359 Sold................................... 1,238,374 1,238 12,110,479 Reinvestment of distributions.......... 100,270 100 981,683 Redeemed............................... (1,319,689) (1,320) (12,888,795) --------- -------- ------------ Net increase.......................... 18,955 18 203,367 --------- -------- ------------ Outstanding at October 31, 1996......... 2,041,634 $2,041 $19,677,726 ========= ======== ============ National Municipal Bond Fund-Class A Outstanding at October 31, 1995......... 791,917 $792 $8,182,439 Sold................................... 114,622 115 1,105,668 Reinvestment of distributions.......... 21,374 21 206,202 Redeemed............................... (135,595) (136) (1,297,620) --------- -------- ------------ Net increase.......................... 401 ---- 14,250 --------- -------- ------------ Outstanding at October 31, 1996......... 792,318 $792 $8,196,689 ========= ======== ============ National Municipal Bond Fund-Class B Outstanding at October 31, 1995......... 610,972 $611 $5,609,968 Sold................................... 147,773 148 1,427,797 Reinvestment of distributions.......... 18,158 18 175,069 Redeemed............................... (146,987) (147) (1,410,072) --------- -------- ------------ Net increase.......................... 18,944 19 192,794 --------- -------- ------------ Outstanding at October 31, 1996......... 629,916 $630 $5,802,762 ========= ======== ============ National Municipal Bond Fund-Class C Outstanding at October 31, 1995......... 710,507 $711 $6,609,550 Sold................................... 135,926 136 1,306,862 Reinvestment of distributions.......... 21,229 21 204,712 Redeemed............................... (282,622) (283) (2,699,433) --------- -------- ------------ Net decrease.......................... (125,467) (126) (1,187,859) --------- -------- ------------ Outstanding at October 31, 1996......... 585,040 $585 $5,421,691 ========= ======== ============ Money Market Fund-Class A Outstanding at October 31, 1995......... 11,378,848 $11,379 $11,367,470 Sold................................... 33,533,459 33,534 33,499,925 Reinvestment of distributions.......... 373,297 373 372,924 Redeemed............................... (37,198,936) (37,199) (37,161,737) ----------- -------- ------------ Net decrease.......................... (3,292,180) (3,292) (3,288,888) ----------- -------- ------------ Outstanding at October 31, 1996......... 8,086,668 $8,087 $8,078,581 =========== ======== ============ Money Market Fund-Class B Outstanding at October 31, 1995......... 1,564,104 $1,565 $1,562,539 Sold................................... 8,522,308 8,521 8,513,787 Reinvestment of distributions.......... 79,817 80 79,737 Redeemed............................... (7,103,878) (7,104) (7,096,774) ---------- -------- ------------ Net increase.......................... 1,498,247 1,497 1,496,750 ---------- -------- ------------ Outstanding at October 31, 1996......... 3,062,351 $3,062 $3,059,289 ========== ======== ============ Money Market Fund-Class C Outstanding at October 31, 1995......... 9,394,496 $9,395 $9,385,101 Sold................................... 24,516,367 24,516 24,491,850 Reinvestment of distributions.......... 436,724 437 436,288 Redeemed............................... (24,507,477) (24,508) (24,482,969) ----------- -------- ------------ Net increase.......................... 445,614 445 445,169 ----------- -------- ------------ Outstanding at October 31, 1996......... 9,840,110 $9,840 $9,830,270 =========== ======== ============
69 NORTH AMERICAN FUNDS Notes to Financial Statements ================================================================================ 4. PURCHASES AND SALES OF SECURITIES. The following table summarizes the securities transactions (excluding short-term investments) for all portfolios, excluding the Money Market Fund, for the year ended October 31, 1996:
Purchases Sales --------------------------------- --------------------------------- Portfolio U.S. Government Other Issues U.S. Government Other Issues - ------------ ---------------- -------------- --------------- --------------- Small/Mid Cap*................... ------ $ 21,527,205 ------ $ 5,515,724 International Small Cap*......... ------ 12,135,811 ------ 2,450,279 Growth Equity*................... ------ 29,506,136 ------ 18,374,333 Global Equity.................... ------ 211,736,396 ------ 236,118,160 Value Equity..................... ------ 213,855,722 ------ 225,191,007 Growth and Income................ ------ 67,711,169 ------ 54,043,311 International Growth & Income.... ------ 48,882,945 ------ 43,026,795 Balanced......................... $180,093,876 71,500,798 $ 36,113,637 227,299,383 Strategic Income................. 53,147,864 70,306,739 47,457,913 64,710,363 Investment Quality Bond.......... 8,098,421 4,377,754 6,806,585 4,543,064 U.S. Government Securities....... 518,706,112 8,291,250 520,187,391 1,551,091 National Municipal Bond.......... ------ 9,559,254 ------ 10,306,329
* For the period March 4, 1996 (commencement of operations) to October 31, 1996. Purchases and sales (maturities) for the Money Market Fund for the year ended October 31, 1996 were $321,747,928 and $320,391,374, respectively. At October 31, 1996, tax basis net unrealized appreciation was equal to the aggregate gross unrealized appreciation for all securities in which there was an excess of market value over tax cost and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over market value as follows:
Tax Basis Net Unrealized Tax Basis Tax Basis Tax Basis Appreciation Unrealized Unrealized Portfolio Cost (Depreciation) Appreciation Depreciation - ------------ --------------- -------------- --------------- ------------ Small/Mid Cap....... $ 16,981,373 $ 585,576 $ 1,246,126 $ 660,550 International Small Cap................ 12,159,472 355,072 773,666 418,594 Growth Equity....... 12,588,953 690,567 939,019 248,452 Global Equity....... 112,546,643 (976,522) 2,591,445 3,567,967 Value Equity........ 138,274,030 1,379,406 4,252,468 2,873,062 Growth and Income... 101,008,299 26,354,727 28,428,041 2,073,314 International Growth and Income.. 27,902,129 578,688 1,555,707 977,019 Balanced............ 94,776,549 7,574,933 7,995,145 420,212 Strategic Income.... 65,571,750 1,079,225 2,004,390 925,165 Investment Quality Bond............... 20,701,178 133,315 281,008 147,693 U.S. Government Securities......... 147,832,595 (249,768) 652,335 902,103 National Municipal Bond............... 19,017,867 532,036 591,977 59,941
The following is a summary of futures contracts activity for the year ended October 31, 1996:
Sales of Futures Contracts Purchases of Futures Contracts -------------------------------- ------------------------------- Number Aggregate Number Aggregate of Face Value of of Face Value of Contracts Contracts Contracts Contracts -------------- -------------- ------------- ---------------- Balanced Fund: U.S. Treasury Bond Futures: Outstanding, October 31, 1995..... 7 $ 700,000 38 $ 3,800,000 Contracts opened...... 52 5,200,000 242 24,200,000 Contracts closed...... (59) (5,900,000) (280) (28,000,000) Outstanding, October 31, 1996..... --- --------- ---- ----------- === ========= ==== ===========
70 NORTH AMERICAN FUNDS Notes to Financial Statements - -------------------------------------------------------------------------------- 5. INVESTMENT ADVISORY AGREEMENTS. The Fund maintains an Investment Advisory Agreement with NASL Financial ("the Adviser"). The Adviser is responsible for managing the corporate and business affairs of the Fund and for selecting and compensating subadvisers to handle the investment and reinvestment of the assets of each portfolio, subject to the supervision of the Trustees of the Fund. As compensation for its services, the Adviser receives a fee from the Fund computed separately for each portfolio at an annual percentage of average net assets as follows:
Between Between $ 50,000,000 $200,000,000 First and and Excess over Portfolio $50,000,000 $200,000,000 $500,000,000 $500,000,000 - ----------- ------------- ------------ ------------ -------------- Small/Mid Cap...................... .925% .900% .875% .850% International Small Cap............ 1.050% 1.000% .900% .800% Growth Equity...................... .900% .850% .825% .800% Global Equity...................... .900% .900% .700% .700% Value Equity....................... .725% .675% .625% .550% Growth and Income.................. .725% .675% .625% .550% International Growth and Income.... .900% .850% .800% .750% Balanced........................... .725% .675% .625% .550% Strategic Income................... .750% .700% .650% .600% Investment Quality Bond............ .600% .600% .525% .475% U.S. Government Securities......... .600% .600% .525% .475% National Municipal Bond............ .600% .600% .600% .600% Money Market....................... .200% .200% .200% .145%
Expense Reimbursement and Distribution Plan. Pursuant to the Investment Advisory Agreement, NASL Financial will reduce the advisory fee or if necessary reimburse each portfolio of the Fund (excluding taxes, portfolio brokerage commissions, interest, certain litigation and indemnification expenses, extraordinary expenses and all of the portfolio's distribution fees) for expenses incurred in excess (Expense limitation) of the following annual percentages of average net assets as highlighted in the table below. The Fund has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940 to use its assets to finance certain activities relating to the distribution of its shares to investors. The Plan is a "compensation" plan providing for the payment by each portfolio, other than the Money Market Fund, of a monthly distribution fee to NASL Financial, as principal underwriter for the Fund as highlighted in the table below:
Portfolio Class A Class B Class C ------------ ------- ------- ------- Small/Mid Cap Management fees.................. 0.925% 0.925% 0.925% Other expenses................... 0.400% 0.400% 0.400% ----- ----- ----- Expense limitation............... 1.325% 1.325% 1.325% ===== ===== ===== Rule 12b-1 fees.................. 0.350% 1.000% 1.000% ===== ===== ===== International Small Cap Management fees.................. 1.050% 1.050% 1.050% Other expenses................... 0.500% 0.500% 0.500% ----- ----- ----- Expense limitation............... 1.550% 1.550% 1.550% ===== ===== ===== Rule 12b-1 fees.................. 0.350% 1.000% 1.000% ===== ===== ===== Growth Equity Management fees.................. 0.900% 0.900% 0.900% Other expenses................... 0.400% 0.400% 0.400% ----- ----- ----- Expense limitation............... 1.300% 1.300% 1.300% ===== ===== ===== Rule 12b-1 fees.................. 0.350% 1.000% 1.000% ===== ===== =====
71 NORTH AMERICAN FUNDS Notes to Financial Statements - -------------------------------------------------------------------------------- Note 5 - continued
Portfolio Class A Class B Class C ----------- ------- ------- ------- Global Equity Management fees.................. 0.900% 0.900% 0.900% Other expenses................... 0.500% 0.500% 0.500% ----- ----- ----- Expense limitation............... 1.400% 1.400% 1.400% ===== ===== ===== Rule 12b-1 fees.................. 0.350% 1.000% 1.000% ===== ===== ===== Value Equity Management fees.................. 0.725% 0.725% 0.725% Other expenses................... 0.265% 0.265% 0.265% ----- ----- ----- Expense limitation............... 0.990% 0.990% 0.990% ===== ===== ===== Rule 12b-1 fees.................. 0.350% 1.000% 1.000% ===== ===== ===== Growth and Income Management fees.................. 0.725% 0.725% 0.725% Other expenses................... 0.265% 0.265% 0.265% ----- ----- ----- Expense limitation............... 0.990% 0.990% 0.990% ===== ===== ===== Rule 12b-1 fees.................. 0.350% 1.000% 1.000% ===== ===== ===== International Growth and Income Management fees.................. 0.900% 0.900% 0.900% Other expenses................... 0.500% 0.500% 0.500% ----- ----- ----- Expense limitation............... 1.400% 1.400% 1.400% ===== ===== ===== Rule 12b-1 fees.................. 0.350% 1.000% 1.000% ===== ===== ===== Balanced Management fees.................. 0.725% 0.725% 0.725% Other expenses................... 0.265% 0.265% 0.265% ----- ----- ----- Expense limitation............... 0.990% 0.990% 0.990% ===== ===== ===== Rule 12b-1 fees.................. 0.350% 1.000% 1.000% ===== ===== ===== Strategic Income Management fees.................. 0.750% 0.750% 0.750% Other expenses................... 0.400% 0.400% 0.400% ----- ----- ----- Expense limitation............... 1.150% 1.150% 1.150% ===== ===== ===== Rule 12b-1 fees.................. 0.350% 1.000% 1.000% ===== ===== ===== Investment Quality Bond Management fees.................. 0.600% 0.600% 0.600% Other expenses................... 0.300% 0.300% 0.300% ----- ----- ----- Expense limitation............... 0.900% 0.900% 0.900% ===== ===== ===== Rule 12b-1 fees.................. 0.350% 1.000% 1.000% ===== ===== ===== U.S. Government Securities Management fees.................. 0.600% 0.600% 0.600% Other expenses................... 0.300% 0.300% 0.300% ----- ----- ----- Expense limitation............... 0.900% 0.900% 0.900% ===== ===== ===== Rule 12b-1 fees.................. 0.350% 1.000% 1.000% ===== ===== =====
72 NORTH AMERICAN FUNDS Notes to Financial Statements - -------------------------------------------------------------------------------- Note 5 - continued
Portfolio Class A Class B Class C - ------------- ------- ------- ------- National Municipal Bond Management fees.................. 0.600% 0.600% 0.600% Other expenses................... 0.240% 0.240% 0.240% ----- ----- ----- Expense limitation............... 0.840% 0.840% 0.840% ===== ===== ===== Rule 12b-1 fees.................. 0.150% 1.000% 1.000% ===== ===== ===== Money Market Management fees.................. 0.200% 0.200% 0.200% Other expenses................... 0.300% 0.300% 0.300% ----- ----- ----- Expense limitation............... 0.500% 0.500% 0.500% ===== ===== =====
In accordance with the Investment Advisory agreement, NASL Financial, in addition to providing advisory services, provides accounting and administrative services for which NASL Financial charged $1,323,448 to the Fund, before reimbursement based on expense limitations, for the year ended October 31, 1996. 6. TRUSTEE'S FEES. The Fund pays each Trustee who is not an employee or a director of the Adviser or its affiliates a fee of $1,000 plus travel expenses for each Board of Trustees meeting attended and an annual retainer of $5,000. 7. COMMITMENTS. At October 31, 1996, the International Small Cap, Global Equity, International Growth and Income and Strategic Income Funds had entered into forward foreign currency contracts which contractually obligate the portfolio to deliver currencies at future dates. Open sale and purchase contracts at October 31, 1996 were as follows:
Net Contracts Unrealized to In Exchange Settlement Appreciation Deliver For Date Value (Depreciation) ----------- ------------ ---------- ----------- -------------- International Small Cap Sales Hong Kong Dollar.......... 718,018 $ 92,854 11/04/96 $ 92,861 $ (7) Great British Pound....... 4,361 7,029 11/05/96 7,098 (69) French Franc.............. 137,768 27,014 11/29/96 26,947 67 ---------- -------- ------- $ 126,897 $126,906 $ (9) ========== ======== ======= Purchases $ 2,019 AUD 2,554 11/01/96 $ 2,024 $ 5 2,173 DEM 3,304 11/01/96 2,182 9 126,765 L 78,932 11/01/96 128,470 1,705 8,944 Y 1,022,143 11/01/96 8,978 34 36,264 NOK 231,891 11/01/96 36,342 78 1,197 AUD 1,512 11/04/96 1,198 1 1,925 L 1,194 11/04/96 1,944 19 71,614 L 44,431 11/05/96 72,316 702 8,972 Y 1,022,917 11/05/96 8,984 12 1,591 AUD 2,010 11/06/96 1,593 2 22,024 L 13,475 11/06/96 21,932 (92) 1,634 AUD 2,064 11/07/96 1,636 2 -------- -------- ------ $285,122 $287,599 $2,477 ======== ======== ------ $2,468 ======
73 NORTH AMERICAN FUNDS Notes to Financial Statements - -------------------------------------------------------------------------------- Note 7- continued
Contracts Net Unrealized to In Exchange Settlement Appreciation Deliver For Date Value (Depreciation) ------------- ----------- ---------- ------------- -------------- Global Equity Purchases $ 230,919 CAD 309,293 11/01/96 $ 230,781 $ (138) 626,160 DEM 946,128 11/01/96 624,754 (1,406) 661,740 L 406,349 11/04/96 661,376 (364) ---------- ---------- $1,518,819 $1,516,911 $ (1,908) ========== ========== $ (1,908) ======== International Growth and Income Sales French Franc......... 4,270,391 $ 840,628 11/22/96 $ 836,289 $ 4,339 German Deutsche Mark. 3,874,987 2,614,814 11/22/96 2,562,248 52,566 Hong Kong Dollar..... 2,816,071 364,069 11/22/96 364,189 (120) Italian Lira......... 1,152,854,640 756,000 11/22/96 758,768 (2,768) Japanese Yen......... 71,941,974 661,000 11/22/96 633,757 27,243 Spanish Peseta....... 138,817,550 1,099,882 11/22/96 1,086,877 13,005 ---------- ---------- -------- $6,336,393 $6,242,128 $ 94,265 ========== ========== -------- Purchases $ 229,000 FRF 4,270,391 11/22/96 $ 230,933 $ 1,933 846,577 DEM 1,301,231 11/22/96 860,410 13,833 290,000 ITL 441,303,150 11/22/96 290,450 450 574,000 Y 62,620,519 11/22/96 551,642 (22,358) 696,000 ESP 89,119,494 11/22/96 697,764 1,764 ---------- ---------- -------- $2,635,577 $2,631,199 $ (4,378) ========== ========== -------- $ 89,887 ======== Strategic Income Sales Canadian Dollar...... 597,808 $ 447,126 01/22/97 $ 448,360 $ (1,234) Danish Krone......... 2,293,130 394,212 01/22/97 396,192 (1,980) German Deutsche Mark. 3,160,599 2,060,364 01/22/97 2,098,197 (37,833) Irish Punt........... 471,887 754,075 01/22/97 768,039 (13,964) New Zealand Dollar... 1,295,606 914,795 01/22/97 909,355 5,440 ---------- ---------- -------- $4,570,572 $4,620,143 $(49,571) ========== ========== -------- Purchases $ 901,309 DEM 1,353,012 01/22/97 $ 898,212 $ (3,097) 776,805 IEP 478,623 01/22/97 779,002 2,197 911,199 NZD 1,295,606 01/22/97 909,355 (1,844) ---------- ---------- -------- $2,589,313 $2,586,569 $ (2,744) ========== ========== -------- $(52,315) ========
- -------------------------------------------------------------------------------- Federal Income Tax Information - (Unaudited) Exempt Interest Dividends. The National Municipal Bond Fund designates all dividends paid during the fiscal year ended October 31, 1996 as 100% exempt interest dividends. Accordingly, 100% of the distributions paid are tax-exempt for federal income tax purposes. Shareholders will receive pertinent tax information in January, 1997. 74
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