-----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, CFj218DKL3dJbcLw48aPax5j3bwmQL+cwg7P5/JmVvNCNYzKaCdAs9/k+YvJMt/7 9gwEP0MtgcBb1TtMqOTiSQ== 0000950109-00-000037.txt : 20000106 0000950109-00-000037.hdr.sgml : 20000106 ACCESSION NUMBER: 0000950109-00-000037 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991031 FILED AS OF DATE: 20000105 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: SEC FILE NUMBER: 811-05797 FILM NUMBER: 501714 BUSINESS ADDRESS: STREET 1: CYPRESS TREE INVESTMENTS STREET 2: 286 CONGRESS ST CITY: BOSTON STATE: MA ZIP: 02210 BUSINESS PHONE: 6172104520 MAIL ADDRESS: STREET 1: CYPRESS TREE INVESTMENTS STREET 2: 286 CONGRESS ST CITY: BOSTON STATE: MA ZIP: 02210 FORMER COMPANY: FORMER CONFORMED NAME: NORTH AMERICAN SECURITY TRUST DATE OF NAME CHANGE: 19920703 N-30D 1 1999 ANNUAL REPORT [LOGO] REPORT TO SHAREHOLDERS - -------------------------------------------------------------------------------- North American Funds(R) Annual Report October 31, 1999 - -------------------------------------------------------------------------------- Audited Financial Statements NORTH AMERICAN FUNDS President's Message - ------------------------------------------------------------------------------- December 14, 1999 Dear Shareholder: During the twelve-month period ended October 31, 1999, investors benefited from continued strong economic growth and low inflation in the U.S. and economic recoveries in several foreign countries. For the first half of the period, technology stocks and a relatively small number of large-cap stocks drove market performance in the U.S. As the year progressed, however, the market's breadth - the number of stocks participating in the market's upward momentum - broadened and small- and mid-cap stocks began to generate gains. As we moved into the summer months, investors became increasingly concerned about relatively high stock prices and the possibility of accelerating inflation and higher interest rates. In a preemptive move against inflation, the Federal Reserve Board tightened monetary policy by raising interest rates 0.25% in June and in August. Uncertainty over high stock valuations and further interest rate hikes continued to dominate the market. As a result, stock prices fluctuated broadly. Despite the volatility, however, stock prices, as measured by the S&P 500, ended the twelve-month period on a positive note led by a small group of growth stocks. Some of the healthiest gains in overseas markets came from the Asia/Pacific region, with Japan being the strongest performer. After weathering a recession for several years, the Japanese economy reversed course, as a number of new fiscal, monetary and business reforms were put in place. Changes in banking and interest rate policy, large public works expenditures and corporate restructuring were just some of the factors that helped spark recovery in Japan. The Asian emerging markets, which had also been in recession, began to show strength, as lower interest rates led to business expansion, more employment and increased demand for consumer goods and services. Europe was a weak spot overseas. Slower economic growth and the poor performance of the Euro against the U.S. dollar were largely responsible for the lackluster performance of European stocks. The fixed-income markets began the twelve-month period on a strong note, with U.S. Treasury securities and high-grade corporate bonds in the lead. As 1999 unfolded, however, inflation concerns boosted bond yields. As a result, bond prices, which move in the opposite direction of interest rates, declined. At North American Funds our objective is to provide you with a complementary group of professionally managed funds accompanied by the highest quality of service. As we enter not only the New Year, but also a new millennium, it is a good time to contact your investment advisor and review your portfolio to make sure it is still in line with your long-term financial goals. You can also receive information about your North American Fund investments by calling our experienced customer service team at 800-872-8037 from 9:00 am to 6:00 PM, Eastern Time, Monday through Friday. Or, for your convenience, call our enhanced automated information line at 800-872-2251, 24 hours-a-day, seven days-a-week. Up-to-date performance information and daily pricing for any North American Fund is also available on our Website at www.northamericanfunds.com. Thank you for investing with North American Funds. We look forward to serving your investment needs in the New Year and in the years ahead. Sincerely, /s/ Bradford K. Gallagher Bradford K. Gallagher President, North American Funds 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 International Small Cap Fund............................................. 34 International Equity Fund................................................ 36 Global Equity Fund....................................................... 42 Emerging Growth Fund..................................................... 44 Small/Mid Cap Fund....................................................... 45 Growth Equity Fund....................................................... 46 Tax-Sensitive Equity Fund................................................ 48 Growth and Income Fund................................................... 49 Equity-Income Fund....................................................... 51 Balanced Fund............................................................ 52 Strategic Income Fund.................................................... 53 Investment Quality Bond Fund............................................. 56 National Municipal Bond Fund............................................. 60 U.S. Government Securities Fund.......................................... 62 Money Market Fund........................................................ 62 Notes to Financial Statements.............................................. 64
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 ten years (or since the Fund's inception if less than ten years). An average annual total return takes the Fund's cumulative total return over a set period of time - one, five and ten years (or since the Fund's inception if less than ten years) and shows what would have happened if the Fund had performed at a constant rate each year. 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 (at net asset value "NAV"). 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 current maximum sales charge applicable to each Fund's 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, 1999. All performance results referenced in the commentary are Class A share returns. iii International Small Cap Fund Investment Seeks to provide long-term capital appreciation by Objective: investing primarily in equity securities issued by foreign companies which have total market capitalization or annual revenue of $1 billion or less. Subadvisor: Founders Asset Management LLC ("Founders") Portfolio Tracy P. Stouffer Manager: Inception Date: March 4, 1996 [GRAPH] Change in Value of $10,000 Investment and Comparative Indices International Small Cap Fund
Growth of $10,000 Growth of $10,000 Invested in Invested in Class A shares Class A shares at Net Asset Value with 5.75% charge of the Int'l of the Int'l Growth of $10,000 Month Small Cap Fund Small Cap Fund Investment in the MSCI Ended NAV 5.75% Sales Charge World ex US Index Feb-96 $10,000 $9,425 $10,000 Mar-96 $10,224 $9,636 $10,212 Apr-96 $10,552 $9,945 $10,513 May-96 $10,760 $10,141 $10,333 Jun-96 $10,776 $10,156 $10,378 Jul-96 $10,368 $9,772 $10,074 Aug-96 $10,440 $9,840 $10,112 Sep-96 $10,536 $9,930 $10,386 Oct-96 $10,744 $10,126 $10,317 Nov-96 $10,928 $10,300 $10,742 Dec-96 $11,040 $10,405 $10,592 Jan-97 $11,144 $10,503 $10,262 Feb-97 $11,352 $10,699 $10,418 Mar-97 $11,312 $10,662 $10,428 Apr-97 $11,016 $10,383 $10,492 May-97 $11,520 $10,858 $11,183 Jun-97 $11,680 $11,008 $11,780 Jul-97 $11,632 $10,963 $11,997 Aug-97 $11,176 $10,533 $11,113 Sep-97 $11,608 $10,941 $11,736 Oct-97 $11,088 $10,450 $10,852 Nov-97 $11,152 $10,511 $10,730 Dec-97 $11,000 $10,368 $10,832 Jan-98 $11,256 $10,609 $11,293 Feb-98 $11,832 $11,152 $12,029 Mar-98 $12,560 $11,838 $12,423 Apr-98 $12,896 $12,154 $12,520 May-98 $13,376 $12,607 $12,455 Jun-98 $13,376 $12,607 $12,521 Jul-98 $13,368 $12,599 $12,602 Aug-98 $11,344 $10,692 $10,993 Sep-98 $10,664 $10,051 $10,679 Oct-98 $11,128 $10,488 $11,790 Nov-98 $11,608 $10,941 $12,388 Dec-98 $12,120 $11,423 $12,864 Jan-99 $12,536 $11,815 $12,866 Feb-99 $11,920 $11,235 $12,542 Mar-99 $12,488 $11,770 $13,065 Apr-99 $13,040 $12,290 $13,625 May-99 $12,576 $11,853 $12,937 Jun-99 $13,104 $12,351 $13,443 Jul-99 $13,592 $12,810 $13,830 Aug-99 $13,720 $12,931 $13,869 Sep-99 $14,320 $13,497 $14,019 Oct-99 $15,064 $14,198 $14,565
Performance Table
Average Annual Cumulative Total Return Total Return ---------------- ------------ 1 Since Since Year Inception Inception Periods Ending October 31, 1999 ------ --------- ------------ MSCI World ex US Index/1/ 23.49% 10.80% 45.65% International Small Cap Fund Class A (NAV) 35.37% 11.84% 50.64% International Small Cap Fund Class A (net of 5.75% sales charge) 27.59% 10.05% 41.98% International Small Cap Fund Class B (NAV) 34.33% 11.06% 46.80% International Small Cap Fund Class B (net of CDSC)/2/ 29.33% 10.43% 43.80% International Small Cap Fund Class C (NAV) 34.48% 11.09% 46.96% International Small Cap Fund Class C (net of CDSC)/3/ 33.48% 11.09% 46.96%
- ----------------------------------------------- /1/All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. /2/The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. /3/The returns reflect the applicable Contingent Deferred Sales Charge of 1%. iv Portfolio Manager's Commentary The International Small Cap Fund's Class A performance for the year-ended October 31, 1999 was 35.37% compared to the MSCI World ex U.S. Index return of 23.49% for the same period. As we began 1999, Japanese small-cap stocks had a very strong rally early in the first quarter, and the Fund's performance was positively impacted by its holdings in Japan. Even though we have seen a recovery in Japanese stocks, Founders is still working hard to find small-cap growth companies in Japan with demonstrated real revenue and earnings growth. As the market shifted in favor of value-oriented stocks during the second quarter, the Fund's performance suffered due to its strict adherence to a bottom-up growth style. Throughout the first half of the year, we carried an overweight position in European companies. Unfortunately, these holdings were not positive contributors to performance as many markets were blunted by weakness in the Euro. Now that the crisis in Kosovo has eased, the pressure, in turn, has eased. We continue to believe that Europe is in a constructive economic environment and expect to see accelerating economic growth there as we move ahead. Tracy Stouffer began managing the Fund on July 23, 1999. Throughout the third quarter, the Fund was restructured and repositioned to reflect new growth opportunities in the stock markets around the world. Going forward, the assets of the Fund will be diversified among between 175 and 225 securities across 25 to 40 countries. The most notable shift during this process was in the Fund's exposure to Japan, which is now the largest single country weighting. We expect continued recovery in Japanese domestic demand and a strong yen, and we believe that small companies there are particularly well poised to benefit from this environment. We have also added promising companies from other Asian nations, including South Korea, Singapore, Hong Kong, China, and Indonesia. We often find ideas from our research in various regions and industries. Certain recurring investment themes emerge out of this research and allow us to take advantage of attractive market dynamics. For instance, the internet is a strong theme throughout the Fund, as it is allowing companies to do business globally without having to create a costly infrastructure. We have also found excellent investment opportunities in telecommunications, especially with Genesys, a French company that is the leading teleconferencing specialist in Europe and the Asia-Pacific region. Both of these regions are experiencing 30%+ annual growth in teleconferencing demand, and the firm has a strong position in the U.S., which accounts for 85% of the world market in teleconferencing. Offering a high degree of technological sophistication and broad geographic reach, Genesys is well positioned for strong future growth. In addition, we see outsourcing as a strong worldwide trend, as companies focus more sharply on their core competencies and begin to outsource operational and developmental activities. One area we have focused on is the changing nature of employment in Japan. To capitalize on this trend, we have initiated positions in The Goodwill Group, Inc., a provider of outsourcing services for blue-collar workers, and Drake Beam Morin, a provider of outplacement counseling services. We believe both companies may benefit from rising unemployment in Japan. v International Equity Fund (formerly the International Growth and Income Fund) Investment Seeks to provide long-term capital appreciation by Objective: investing primarily in accordance with country and sector weightings determined by MSAM in equity securities of non-U.S. issuers which, in the aggregate, replicate broad market indices. Subadvisor: Morgan Stanley Asset Management (MSAM) Portfolio Barton M. Biggs, Ann Thivierge Manager: Inception Date: January 9, 1995/6/ [GRAPH] Change in Value of $10,000 Investment and Comparative Indices International Equity Fund
Growth of $10,000 Growth of $10,000 Invested in Class Invested in Class A shares at Net A shares with Asset Value of the the Int'l Growth & MSCI All Int'l Growth & Income Fund 5.75% Customized 85/15 75/15/10 Country Month Ended Income Fund NAV Sales Charge Benchmark Composite Composite ex U.S. MSCA EAFE Dec-94 $10,000 $9,425 $10,000 $10,000 $10,000 $10,000 $10,000 Jan-95 $9,800 $9,237 $9,766 $9,766 $9,690 $9,546 $9,616 Feb-95 $9,590 $9,039 $9,795 $9,795 $9,662 $9,494 $9,588 Mar-95 $10,030 $9,453 $10,473 $10,473 $10,277 $10,031 $10,186 Apr-95 $10,350 $9,755 $10,840 $10,840 $10,658 $10,422 $10,569 May-95 $10,150 $9,566 $10,761 $10,761 $10,636 $10,376 $10,444 Jun-95 $9,977 $9,403 $10,608 $10,608 $10,511 $10,233 $10,261 Jul-95 $10,488 $9,885 $11,163 $11,163 $11,020 $10,813 $10,900 Aug-95 $10,228 $9,639 $10,692 $10,692 $10,579 $10,438 $10,485 Sep-95 $10,308 $9,715 $10,916 $10,916 $10,778 $10,616 $10,689 Oct-95 $10,137 $9,554 $10,662 $10,662 $10,519 $10,333 $10,402 Nov-95 $10,338 $9,743 $10,926 $10,926 $10,727 $10,576 $10,691 Dec-95 $10,786 $10,165 $11,307 $11,307 $11,102 $10,994 $11,122 Jan-96 $10,888 $10,262 $11,299 $11,299 $11,176 $11,145 $11,167 Feb-96 $10,857 $10,233 $11,331 $11,331 $11,175 $11,145 $11,205 Mar-96 $11,041 $10,406 $11,509 $11,509 $11,327 $11,353 $11,443 Apr-96 $11,265 $10,617 $11,709 $11,709 $11,541 $11,697 $11,776 May-96 $11,235 $10,589 $11,617 $11,617 $11,465 $11,521 $11,559 Jun-96 $11,367 $10,714 $11,681 $11,681 $11,529 $11,580 $11,624 Jul-96 $11,102 $10,464 $11,482 $11,482 $11,281 $11,195 $11,285 Aug-96 $11,214 $10,569 $11,617 $11,617 $11,420 $11,261 $11,309 Sep-96 $11,510 $10,848 $11,856 $11,856 $11,635 $11,541 $11,610 Oct-96 $11,581 $10,916 $11,902 $11,902 $11,637 $11,425 $11,492 Nov-96 $12,010 $11,319 $12,357 $12,357 $12,046 $11,865 $11,949 Dec-96 $12,093 $11,397 $12,296 $12,296 $11,996 $11,728 $11,795 Jan-97 $11,849 $11,167 $11,941 $11,941 $11,776 $11,513 $11,382 Feb-97 $11,926 $11,241 $12,126 $12,126 $11,959 $11,724 $11,569 Mar-97 $12,004 $11,314 $12,145 $12,146 $11,978 $11,699 $11,610 Apr-97 $11,993 $11,303 $12,167 $12,168 $12,000 $11,798 $11,672 May-97 $12,503 $11,784 $12,831 $12,832 $12,655 $12,526 $12,432 Jun-97 $12,947 $12,203 $13,448 $13,445 $13,263 $13,218 $13,117 Jul-97 $13,091 $12,339 $13,664 $13,660 $13,476 $13,485 $13,329 Aug-97 $12,270 $11,565 $12,774 $12,771 $12,598 $12,424 $12,334 Sep-97 $12,736 $12,004 $13,464 $13,461 $13,279 $13,096 $13,024 Oct-97 $11,993 $11,303 $12,530 $12,526 $12,357 $11,981 $12,023 Nov-97 $11,838 $11,157 $12,387 $12,383 $12,216 $11,831 $11,900 Dec-97 $12,036 $11,344 $12,499 $12,495 $12,327 $11,968 $12,004 Jan-98 $12,368 $11,657 $12,874 $12,869 $12,671 $12,326 $12,552 Feb-98 $13,166 $12,409 $13,732 $13,728 $13,419 $13,148 $13,358 Mar-98 $13,707 $12,919 $14,207 $14,201 $13,763 $13,602 $13,769 Apr-98 $13,940 $13,139 $14,309 $14,303 $13,881 $13,700 $13,878 May-98 $13,756 $12,965 $14,049 $14,043 $13,619 $13,451 $13,810 Jun-98 $13,559 $12,780 $13,997 $13,991 $13,560 $13,401 $13,915 Jul-98 $13,608 $12,826 $14,129 $14,123 $13,701 $13,528 $14,056 Aug-98 $11,312 $10,661 $12,137 $12,132 $12,097 $11,620 $12,314 Sep-98 $10,771 $10,152 $11,880 $11,875 $12,019 $11,375 $11,936 Oct-98 $12,073 $11,379 $13,125 $13,119 $13,191 $12,566 $13,180 Nov-98 $12,712 $11,981 $13,830 $13,824 $13,764 $13,242 $13,855 Dec-98 $13,022 $12,273 $14,307 $14,300 $14,199 $13,698 $14,401 Jan-99 $13,219 $12,459 $14,291 $14,285 $14,118 $13,683 $14,357 Feb-99 $12,837 $12,099 $13,971 $13,965 $13,806 $13,377 $14,016 Mar-99 $13,601 $12,819 $14,646 $14,640 $14,475 $14,023 $14,600 Apr-99 $14,032 $13,225 $15,239 $15,372 $15,093 $14,724 $15,192 May-99 $13,305 $12,540 $16,024 $14,650 $14,456 $14,032 $15,974 Jun-99 $13,823 $13,028 $16,649 $15,323 $15,009 $14,677 $16,597 Jul-99 $14,143 $13,330 $17,144 $15,682 $15,384 $15,022 $17,090 Aug-99 $14,192 $13,376 $17,207 $15,737 $15,451 $15,074 $17,153 Sep-99 $14,266 $13,446 $17,381 $15,843 $15,538 $15,176 $17,326 Oct-99 $14,648 $13,806 $18,033 $16,433 $15,999 $15,740 $17,976
Performance Table
Average Annual Cumulative Total Return Total Return ------------------------ ------------------ Periods Ending October 31, 1999 1 Since Since/6/ Since Since/6/ Year Inception 4/1/99 Inception 4/1/99 ------ --------- ------- --------- -------- Customized Benchmark/1/,/2/ 37.39% 12.95% 23.12% 80.33% 23.12% 85%/15% Composite Index/1/,/3/ 25.26% 10.81% 12.25% 64.33% 12.25% 75%/15%/10% Composite Index/1/,/7/ 21.29% 10.20% 10.53% 59.99% 10.53% MSCI All Country World ex U.S./1/,/7/ 25.26% 9.83% 12.25% 57.40% 12.25% MSCI EAFE/1/,/8/ 36.39% 12.88% 23.12% 79.76% 23.12% International Equity Fund A (NAV) 21.33% 8.26% 7.70% 46.48% 7.70% International Equity Fund Class A (net of 5.75% sales charge) 14.35% 6.94% 1.51% 38.06% 1.51% International Equity Fund Class B (NAV) 20.53% 7.66% 7.31% 42.66% 7.31% International Equity Fund Class B (net of CDSC)/4/ 15.53% 7.35% 2.31% 40.66% 2.31% International Equity Fund Class C (NAV) 20.53% 7.65% 7.31% 42.56% 7.31% International Equity Fund Class C (net of CDSC)/5/ 19.53% 7.65% 6.31% 42.56% 6.31%
vi Portfolio Managers' Commentary The International Equity Fund's Class A performance for the year-ended October 31, 1999 was 21.33% as compared to the Composite Index* return of 37.39% for the same period. International markets made good progress in the fourth quarter of 1998 as they recovered from volatility in the third quarter. Central bank easings around the world helped equities rebound. Although European stocks lagged the U.S. during the quarter, they still posted a strong gain of 20.5%. Continued optimism over corporate restructuring contributed to the strength of these markets. Japan was up 5.1% for the quarter, in spite of a continued recession. An injection of capital into the Japanese banking sector contributed to the market's return. The emerging markets had a strong quarter, as stocks were boosted by global interest rate cuts. In the first quarter of 1999, the Fund's Japanese holdings fared particularly well, as the market in this region outperformed all other stock markets worldwide in February and March. Investors became more optimistic that Japanese economic growth could resume, and corporate restructuring began to proliferate. In Europe, investors continue to be concerned about slowing economic activity and pressure on corporate profits, which have overshadowed an upsurge in mergers and acquisitions. For the quarter, Europe lagged both the U.S. and Japan. Emerging markets provided strong returns for the quarter, marked by a recovery in Brazil. In April, 1999, Morgan Stanley Asset Management took over management of the Fund. For much of the second quarter, the Fund was defensively positioned and the emphasis on Japan and Asia positively affected the Fund. Although European economic growth was picking up, we were concerned about high valuation levels. Thus we still preferred Asia and remained underweight in Europe. For the past several months, global markets have churned on worries about interest rates and central bank policies. However, the October release of the moderate U.S. 3rd quarter economic growth numbers and a lower than expected employment cost index increased the probability of a soft landing in the U.S. This scenario has increased our confidence that global markets will be strong. Japan and Asia are just emerging from devastating depression and bear markets, and Europe is in the early stages of what could be a prolonged period of growth. We believe EAFE is well positioned versus the S&P 500 not for months, but for years. - --------------------- /1/All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. /2/Comprised of 75% of the return of the MSCI EAFE Index, 15% of the return of the Salomon Brothers Non-$ WGBI 10 Index, and 10% of the MSCI Emerging Markets Free ex Malaysia Index. In February of 1997, the 85%/15% Composite Index was adjusted to reflect the addition of the MSCI Emerging Markets Free ex Malaysia Index. In January 1998, this index was changed to the MSCI All Country World ex U.S. Index to accurately reflect the Fund's investment objective. /3/Comprised of 85% of the return of the MSCI EAFE and 15% of the return of the Salmon Brothers Non-$ WGBI 10 Index. /4/The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. /5/The returns reflect the applicable Contingent Deferred Sales Charge of 1%. /6/Current investment subadvisor assignment became effective 4/1/99. /7/Composite composed of 75% MSCI EAFE, 15% the Salomon Brothers Non-$ WGBI 10 Index, both fixed weighted Japan at 25%, and 10% Emerging Markets Free ex Malaysia from February 1, 1997 to December 31, 1997, then MSCI All Country World Free (ex US) Index. /8/The benchmark became MSCI EAFE Index on 4/1/99 when Morgan Stanley Asset Management assumed management of the Fund. vii Global Equity Fund Investment Seeks to provide long-term capital appreciation by Objective: investing primarily in a global portfolio of equity securities and securities convertible into or exercisable for equity securities. Morgan Stanley Asset Management (MSAM) Subadvisor: Portfolio Manager: Frances Campion November 1, 1990/4/ Inception Date: [GRAPH] Change in Value of $10,000 Investment and Comparative Indices Glogal Equity Fund
Growth of $10,000 Invested in Growth of $10,000 Invested in Class A shares at Net Asset Value Class A shares with 4.75% charge Growth of $10,000 of the Global Equity Fund of the Global Equity Fund Investment in the Month Ended NAV 5.75% Sales Charge MSCI World Index Oct-90 $10,000 $9,425 $10,000 Nov-90 $9,921 $9,350 $9,838 Dec-90 $10,024 $9,448 $10,046 Jan-91 $10,272 $9,682 $10,415 Feb-91 $10,927 $10,298 $11,381 Mar-91 $10,629 $10,018 $11,047 Apr-91 $10,659 $10,046 $11,136 May-91 $10,847 $10,224 $11,390 Jun-91 $10,233 $9,645 $10,688 Jul-91 $10,698 $10,083 $11,195 Aug-91 $10,597 $9,988 $11,161 Sep-91 $10,719 $10,102 $11,456 Oct-91 $10,880 $10,255 $11,644 Nov-91 $10,466 $9,864 $11,138 Dec-91 $11,161 $10,519 $11,951 Jan-92 $11,141 $10,500 $11,733 Feb-92 $11,181 $10,538 $11,532 Mar-92 $10,725 $10,108 $10,991 Apr-92 $11,049 $10,414 $11,146 May-92 $11,587 $10,921 $11,592 Jun-92 $11,252 $10,605 $11,206 Jul-92 $11,049 $10,414 $11,237 Aug-92 $11,060 $10,424 $11,513 Sep-92 $10,776 $10,156 $11,409 Oct-92 $10,491 $9,888 $11,102 Nov-92 $10,836 $10,213 $11,303 Dec-92 $10,841 $10,218 $11,397 Jan-93 $10,871 $10,246 $11,437 Feb-93 $11,004 $10,371 $11,710 Mar-93 $11,633 $10,965 $12,392 Apr-93 $12,243 $11,539 $12,968 May-93 $12,843 $12,104 $13,269 Jun-93 $12,710 $11,980 $13,160 Jul-93 $13,036 $12,286 $13,434 Aug-93 $13,716 $12,928 $14,052 Sep-93 $13,757 $12,966 $13,794 Oct-93 $13,960 $13,157 $14,176 Nov-93 $13,117 $12,363 $13,377 Dec-93 $14,046 $13,238 $14,034 Jan-94 $14,920 $14,062 $14,961 Feb-94 $14,982 $14,120 $14,770 Mar-94 $14,529 $13,694 $14,136 Apr-94 $14,910 $14,052 $14,576 May-94 $14,684 $13,839 $14,615 Jun-94 $14,848 $13,994 $14,577 Jul-94 $15,177 $14,304 $14,857 Aug-94 $15,640 $14,741 $15,307 Sep-94 $15,074 $14,207 $14,908 Oct-94 $15,239 $14,363 $15,334 Nov-94 $14,272 $13,452 $14,672 Dec-94 $14,256 $13,436 $14,817 Jan-95 $13,459 $12,685 $14,598 Feb-95 $13,459 $12,685 $14,806 Mar-95 $13,969 $13,166 $15,517 Apr-95 $14,288 $13,466 $16,074 May-95 $14,330 $13,506 $16,214 Jun-95 $14,298 $13,476 $16,212 Jul-95 $15,095 $14,227 $17,026 Aug-95 $14,999 $14,137 $16,650 Sep-95 $15,137 $14,267 $17,138 Oct-95 $14,702 $13,856 $16,870 Nov-95 $14,819 $13,967 $17,459 Dec-95 $15,266 $14,388 $17,973 Jan-96 $15,395 $14,510 $18,301 Feb-96 $15,546 $14,652 $18,417 Mar-96 $15,934 $15,018 $18,722 Apr-96 $16,495 $15,546 $19,166 May-96 $16,312 $15,374 $19,185 Jun-96 $16,279 $15,343 $19,285 Jul-96 $15,309 $14,429 $18,606 Aug-96 $15,622 $14,723 $18,824 Sep-96 $15,719 $14,815 $19,564 Oct-96 $15,632 $14,734 $19,696 Nov-96 $16,646 $15,689 $20,796 Dec-96 $17,007 $16,029 $20,459 Jan-97 $17,043 $16,063 $20,702 Feb-97 $17,490 $16,485 $20,936 Mar-97 $17,345 $16,348 $20,518 Apr-97 $17,551 $16,541 $21,185 May-97 $18,734 $17,657 $22,489 Jun-97 $19,652 $18,522 $23,607 Jul-97 $20,462 $19,285 $24,690 Aug-97 $19,447 $18,329 $23,034 Sep-97 $20,534 $19,353 $24,282 Oct-97 $19,713 $18,579 $23,000 Nov-97 $19,809 $18,670 $23,403 Dec-97 $20,500 $19,321 $23,684 Jan-98 $20,552 $19,370 $24,341 Feb-98 $22,172 $20,897 $25,983 Mar-98 $23,453 $22,104 $27,076 Apr-98 $23,570 $22,215 $27,337 May-98 $23,348 $22,006 $26,990 Jun-98 $23,074 $21,747 $27,627 Jul-98 $22,721 $21,415 $27,578 Aug-98 $19,128 $18,028 $23,896 Sep-98 $19,755 $18,619 $24,315 Oct-98 $21,467 $20,232 $26,509 Nov-98 $22,277 $20,996 $28,081 Dec-98 $22,809 $21,498 $29,448 Jan-99 $22,640 $21,339 $30,090 Feb-99 $21,572 $20,331 $29,287 Mar-99 $21,951 $20,689 $30,502 Apr-99 $23,414 $22,067 $31,701 May-99 $23,034 $21,710 $30,538 Jun-99 $23,751 $22,386 $31,958 Jul-99 $23,906 $22,531 $31,859 Aug-99 $23,653 $22,293 $31,798 Sep-99 $22,584 $21,285 $31,486 Oct-99 $22,668 $21,365 $33,105
Performance Table
Average Annual Cumulative Total Return Total Return -------------------------------- ------------------ Periods Ending October 31, 1 5 Since Since/4/ Since Since/4/ 1999 Year Years Inception 10/1/96 Inception 10/1/96 ------ ------ --------- -------- --------- -------- MSCI World/1/ 24.91% 16.44% 13.84% 18.61% 221.05% 69.26% Global Equity Fund A (NAV) 5.60% 8.27% 9.53% 12.61% 126.68% 44.21% Class A (net of 5.75% sales charge) -0.47% 7.00% 8.81% 10.47% 113.65% 35.92% Global Equity Fund Class B (NAV) 5.01% 7.65% 9.16% 12.00% 119.88% 41.81% Class B (net of CDSC)/2/ 0.01% 7.35% 9.16% 11.23% 119.88% 38.81% Global Equity Fund Class C (NAV) 4.99% 7.65% 9.16% 11.98% 119.88% 41.73% Class C (net of CDSC)/3/ 3.99% 7.65% 9.16% 11.98% 119.88% 41.73%
- ------------------------------- /1/All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. /2/The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. /3/The returns reflect the applicable Contingent Deferred Sales Charge of 1%. /4/Current investment subadvisor assignment became effective 10/1/96. viii Portfolio Manager's Commentary The Global Equity Fund's Class A performance for the year-ended October 31, 1999 was 5.60% as compared to the MSCI World Index return of 24.91% for the same period. While the portfolio's performance was strong during the second quarter, coinciding with a turnaround in "value", the third quarter of the year saw a return in the U.S. to the narrow, technology-dominated performance reminiscent of the first quarter of this year. We remain overweighed in Europe. The increased globalization of the economy and the threat from powerful new entrants to Europe, like Wal-Mart, have prompted acceleration in European consolidation. Sectors such as banking, energy and consumer goods are consolidating in order to build scale in a world characterized by slow growth and over-capacity. The value of M&A activity in Europe is rising from $160 billion in 1997 to an annualized $400 billion in 1999. Not only have specific transactions helped the Fund, they also signal changing management attitudes toward shareholder value. This is an important development for value investors, as management, through their willingness to change, often provides the catalyst for value creation. We remain underweight vs. the U.S. market and are particularly underweight vs. the largest U.S. companies. Recent value ideas in the U.S. include retailer Sears and telecom operator GTE, (a less expensive way to get exposure to Bell Atlantic since the two are merging). In Japan, our stock selection has not been as strong as in the first six months of the year. This is due to the strong re-rating of financials and low quality cyclicals that has taken place in anticipation of improved operating fundamentals. We have been drawn to relatively defensive business franchises such as NTT and Toppan Printing or technology companies like Hitachi and Pioneer, which are more attractively valued than their U.S. counterparts. The market has been challenging for value investors. We remain committed to what we know works over the long run; adherence to the discipline of purchasing good businesses at a discount to their intrinsic value. ix Emerging Growth Fund Investment Seeks to provide maximum capital appreciation by Objective: investing primarily in a portfolio of equity securities of domestic companies. Under normal conditions, the Fund will be mainly invested in common stocks or warrants of emerging growth companies that represent attractive opportunities for maximum capital appreciation. Subadvisor: Warburg Pincus Asset Management, Inc. Portfolio Elizabeth B. Dater, Stephen J. Lurito Manager: Inception Date: January 6, 1998 [GRAPH] Change in Value of $10,000 Investment and Companies Indices Emerging Growth Fund
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 5.75% charge Investment in the Month Ended of the Emerging Growth Fund of the Emerging Growth Fund Russell 2000 Growth Month Ended NAV 5.75% Sales Charge Russell 2000 Growth 1/6/98 $10,000 $9,425 $10,000 Jan-98 $9,990 $9,416 $9,867 Feb-98 $10,690 $10,075 $10,738 Mar-98 $11,160 $10,518 $11,189 Apr-98 $11,270 $10,622 $11,258 May-98 $10,640 $10,028 $10,440 Jun-98 $10,940 $10,311 $10,547 Jul-98 $9,910 $9,340 $9,666 Aug-98 $7,890 $7,436 $7,435 Sep-98 $8,470 $7,983 $8,189 Oct-98 $8,880 $8,369 $8,617 Nov-98 $9,410 $8,869 $9,285 Dec-98 $10,090 $9,510 $10,125 Jan-99 $10,350 $9,755 $10,581 Feb-99 $9,530 $8,982 $9,613 Mar-99 $10,090 $9,510 $9,955 Apr-99 $10,290 $9,698 $10,834 May-99 $10,350 $9,755 $10,852 Jun-99 $11,630 $10,961 $11,423 Jul-99 $11,530 $10,867 $11,070 Aug-99 $11,450 $10,792 $10,656 Sep-99 $11,970 $11,282 $10,862 Oct-99 $12,810 $12,073 $11,137
Performance Table
Average Annual Cumulative Total Return Total Return ---------------- ------------ 1 Since Since Year Inception Inception Periods Ending October 31, 1999 ------ --------- ------------ Russell 2000 Growth/1/ 29.98% 6.05% 11.37% Emerging Growth Fund A (NAV) 44.26% 14.61% 28.10% Emerging Growth Fund Class A (net of 5.75% sales charge) 35.97% 10.93% 20.73% Emerging Growth Fund Class B (NAV) 42.36% 13.42% 25.70% Emerging Growth Fund Class B (net of CDSC)/2/ 37.36% 10.91% 20.70% Emerging Growth Fund Class C (NAV) 42.19% 13.42% 25.70% Emerging Growth Fund Class C (net of CDSC)/3/ 41.19% 13.42% 25.70%
- ----------------------------------------------- /1/All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. /2/The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. /3/The returns reflect the applicable Contingent Deferred Sales Charge of 1%. x Portfolio Manager's Commentary Supported by optimism over interest rates and earnings, small-cap and emerging-growth stocks had generally good showings in October, with the Russell 2000 Growth and Russell 2500 Growth indexes up 2.56% and 4.87%, respectively. North American Emerging Growth Fund had a gain of 7.02% for the month, a solid return both in absolute terms and compared to those of its benchmarks. The Emerging Growth Fund's Class A performance for the year-ended October 31, 1999, was 44.26% as compared to the Russell 2000 Growth Index return of 29.98% for the same period. Factors that helped the Fund included its overweightings in the buoyant technology and communications areas. In terms of general strategy, we remained focused on well-managed companies offering innovative products and services. And with respect to major investment themes, we continued to emphasize companies that stand to benefit from a global push for enhanced productivity, as well as those standing to benefit from a maturing and increasingly wealthy population. In this context, our primary areas of concentration remained technology, communications, business services, leisure & entertainment and health-care stocks. The recent decline in smaller-cap and aggressive-growth stocks notwithstanding, we see ample grounds for optimism regarding their longer-term prospects. The main reason for our bullishness is the stocks' relative valuations. By almost any relevant measure, smaller companies are selling extremely cheaply vs. larger companies, trading at multiples well below their 20-year averages. Assuming that investors ultimately care about value - and historically they have - smaller caps could see a material pickup in buying interest at some point in the months ahead. Adding to the stocks' potential appeal is these companies' relatively strong earnings prospects. Analysts are currently calling for small-cap earnings growth of roughly 12% in the third quarter, a healthy gain albeit a less- robust one than that expected for larger companies. The fourth quarter looks far better for smaller caps, though, both in relative and absolute terms, with estimates calling for year-over-year growth of as much as 30%, vs. 20% or thereabouts for larger companies. The medium- to longer-term outlook is positive as well, with many analysts expecting smaller companies' earnings growth to handily exceed that of larger companies over the next three to five years. Assuming these projections, especially the longer-range ones, are accurate (admittedly, a big assumption), they make small-cap stocks' current low multiples that much more compelling. A third factor that could spark and sustain interest in the group is the near certainty of ongoing acquisition activity. Smaller companies have been gobbled up by larger ones at a furious clip so far in 1999, with the total number of deals for the year likely to be the highest in a decade. The effect on the share prices of targeted firms has been, in most cases, considerable, and the likelihood of continued such activity could, at some point, prove too strong a lure for investors to continue to ignore. Given the above, we remain positive on the asset class. Given a catalyst, such as an easing of interest-rate concerns or a broadening of market leadership, we think small caps could see their fortunes improve considerably, and in fairly short order. In the meantime, we remain focused on identifying the most promising companies, since we expect wide differences in share-price performance between the ultimate winners and losers in the group. xi Small/Mid Cap Fund Investment Objective: Seeks to provide long-term capital appreciation by investing at least 65% of its assets in the stocks of small-to-mid size companies that 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 [GRAPH] Change in Value of $10,000 Investment and Comparative Indices Small/Mid Cap Fund
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 5.75% charge Investment in the Russell of the Small/Mid Cap Fund of the Small/Mid Cap Fund 2000 Growth Index Month Ended NAV 5.75% Sales Charge Russell 2000 Growth Index Feb-96 $10,000 $9,425 $10,000 Mar-96 $10,168 $9,583 $10,198 Apr-96 $10,584 $9,975 $10,981 May-96 $10,768 $10,149 $11,545 Jun-96 $10,352 $9,757 $10,794 Jul-96 $9,312 $8,777 $9,476 Aug-96 $9,792 $9,229 $10,177 Sep-96 $10,328 $9,734 $10,702 Oct-96 $10,096 $9,515 $10,240 Nov-96 $10,696 $10,081 $10,525 Dec-96 $10,504 $9,900 $10,730 Jan-97 $10,944 $10,315 $10,990 Feb-97 $10,240 $9,651 $10,326 Mar-97 $9,688 $9,131 $9,598 Apr-97 $9,832 $9,267 $9,487 May-97 $10,600 $9,991 $10,913 Jun-97 $11,248 $10,601 $11,283 Jul-97 $12,328 $11,619 $11,860 Aug-97 $12,184 $11,483 $12,216 Sep-97 $13,080 $12,328 $13,191 Oct-97 $12,408 $11,695 $12,398 Nov-97 $12,448 $11,732 $12,103 Dec-97 $12,173 $11,473 $12,110 Jan-98 $12,156 $11,457 $11,949 Feb-98 $13,287 $12,523 $13,004 Mar-98 $14,166 $13,352 $13,551 Apr-98 $14,109 $13,298 $13,633 May-98 $13,653 $12,868 $12,642 Jun-98 $14,695 $13,850 $12,771 Jul-98 $14,410 $13,582 $11,705 Aug-98 $11,489 $10,828 $9,003 Sep-98 $12,286 $11,580 $9,916 Oct-98 $13,092 $12,339 $10,434 Nov-98 $14,052 $13,244 $11,243 Dec-98 $15,782 $14,875 $12,261 Jan-99 $15,623 $14,724 $12,813 Feb-99 $14,869 $14,014 $11,640 Mar-99 $16,146 $15,218 $12,055 Apr-99 $16,217 $15,285 $13,119 May-99 $16,323 $15,385 $13,140 Jun-99 $17,565 $16,555 $13,833 Jul-99 $16,652 $15,694 $13,405 Aug-99 $16,164 $15,234 $12,904 Sep-99 $16,031 $15,109 $13,153 Oct-99 $16,430 $15,485 $13,497
Growth of $10,000 Growth of $10,000 Investment in the S&P Investment in the 50%/50% MidCap 400 Index Composite Index Month Ended S&P MidCap 400 Index 50%/50% Composite Index Feb-96 $10,000 $10,000 Mar-96 $10,120 $10,159 Apr-96 $10,429 $10,704 May-96 $10,569 $11,051 Jun-96 $10,411 $10,609 Jul-96 $9,706 $9,602 Aug-96 $10,266 $10,234 Sep-96 $10,714 $10,721 Oct-96 $10,745 $10,505 Nov-96 $11,350 $10,947 Dec-96 $11,362 $11,060 Jan-97 $11,788 $11,401 Feb-97 $11,692 $11,010 Mar-97 $11,194 $10,388 Apr-97 $11,483 $10,462 May-97 $12,487 $11,705 Jun-97 $12,838 $12,068 Jul-97 $14,109 $12,974 Aug-97 $14,092 $13,161 Sep-97 $14,902 $14,065 Oct-97 $14,254 $13,336 Nov-97 $14,465 $13,276 Dec-97 $15,026 $13,538 Jan-98 $14,741 $13,319 Feb-98 $15,961 $14,458 Mar-98 $16,681 $15,088 Apr-98 $16,985 $15,271 May-98 $16,220 $14,373 Jun-98 $16,323 $14,491 Jul-98 $15,691 $13,606 Aug-98 $12,772 $10,770 Sep-98 $13,964 $11,819 Oct-98 $15,211 $12,655 Nov-98 $15,970 $13,462 Dec-98 $17,898 $14,883 Jan-99 $17,202 $14,929 Feb-99 $16,302 $13,855 Mar-99 $16,757 $14,295 Apr-99 $18,077 $15,490 May-99 $18,155 $15,535 Jun-99 $19,126 $16,360 Jul-99 $18,721 $15,934 Aug-99 $18,079 $15,363 Sep-99 $17,522 $15,275 Oct-99 $18,399 $15,948
Performance Table
Average Annual Cumulative Total Return Total Return -------------- ------------------------- 1 Since Since Year Inception/1/ Inception/1/ Periods Ending October 31, 1999 -------------- ------------ ------------ S&P Mid Cap 400 Index 20.96% 18.09% 83.99% Russell 2000 Growth Index 29.98% 8.52% 34.97% 50%/50% Composite Index/2/ 25.47% 13.31% 59.48% Small/Mid Cap Fund A (NAV) 25.50% 14.53% 64.30% Small/Mid Cap Fund Class A (net of 5.75% sales charge) 18.28% 12.69% 54.85% Small/Mid Cap Fund Class B (NAV) 24.62% 13.69% 59.95% Small/Mid Cap Fund Class B (net of CDSC)/3/ 19.62% 13.10% 56.95% Small/Mid Cap Fund Class C (NAV) 24.65% 13.74% 60.18% Small/Mid Cap Fund Class C (net of CDSC)/4/ 23.65% 13.74% 60.18%
- ----------------------------------------------- /1/All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. /2/Comprised of 50% of the return of the S&P MidCap 400 Index and 50% of the return of the Russell 2000 Growth Index. /3/The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. /4/The returns reflect the applicable Contingent Deferred Sales Charge of 1%. xii Portfolio Manager's Commentary Despite being invested primarily in small-cap and mid-cap stocks - which vastly underperformed large-cap stocks during the recent fiscal year - the Small/MidCap Fund posted solid results. The Small/Mid Cap Fund Class A posted a return of 25.50%, slightly underperforming the Composite Index (Russell 2000 Growth/S&P 400) return of 25.47% for the same period, but easily outperforming the S&P MidCap 400 Index return of 20.96%. A heavy technology weighting, a growth stock orientation and the strong performance of a few key holdings allowed the Fund to outperform the small-cap and mid-cap markets. The fiscal year ended October 31, 1999 began in the midst of a dramatic recovery from the July/August 1998 market correction caused by the Asian financial crisis. The third of three interest rate cuts by the Fed took place in November 1998, adding momentum to the market's revival. During the first half of the year, large-cap stocks marched forward without a notable setback, while their smaller counterparts struggled. All of the major large-cap indices continuously set new highs, and the Dow Jones Industrial Average closed over 10,000 for the first time on March 29, 1999. May and June saw consolidation and profit taking in the equity markets. An ongoing fear of rising interest rates was realized on June 30 when the Fed "took back" one of three previous interest rate cuts by hiking the Fed Funds Rate to 5%. Nonetheless, the market shrugged off the rate hike and took solace in the Fed's return to a "neutral bias." Large-cap stocks continued to rally, and the S&P 500 reached an intra-day high of 1420.33 on July 19. The fourth quarter of the recent fiscal year was marked by extreme market volatility, an overall downward trend, and ultimately, a dramatic rebound. The market slipped steadily downward from its mid-July peak and failed to match its previous highs during August and September. In October, mounting fears of rising interest rates, an upward spike in the price of gold and a series of threatening economic reports forced the yield on the long bond to 6.40%. Equity markets reacted strongly. The Dow Jones dropped more than 1,000 points in less than a month, briefly dipping below the 10,000 level on October 18th. As is so often the case, however, the market recovered when it appeared to be at its weakest. As inflation jitters and interest rate fears subsided with the release of benign economic data, the final two weeks of October saw dramatic gains throughout both the bond and equity markets. The long bond once again approached 6%, and the Dow Jones neared 11,000. The stock market is seemingly in the midst of a strong recovery. Recently, out of favor industries such as financials and pharmaceuticals have also begun to act well. According to David Alger, regardless of whether the Fed raises rates on November 16th, the market may continue to rally. If the Fed does raise rates, it will be viewed as the last in a set of three. If it does not, that will be considered bullish. xiii Growth Equity Fund Investment Seeks to provide long-term growth of capital by investing Objective: at least 65% of its assets in common stocks of well- established, high-quality growth companies. Founders Asset Management LLC Subadvisor: Portfolio Manager: Thomas Arrington, Scott Chapman March 4, 1996 Inception Date: [GRAPH] Change in Value of $10,000 Investment and Comparative Indices Growth Equity Fund
Growth of $10,000 Growth of $10,000 Invested in Invested in Class A shares at Class A shares with Net Asset Value of 5.75% charge Growth of $10,000 the Growth of the Growth Investment Equity Fund Equity Fund in the Month Ended NAV 5.75% Sales Charge S&P 500 Feb-96 $10,000 $9,425 $10,000 Mar-96 $10,080 $9,500 $10,098 Apr-96 $10,680 $10,066 $10,252 May-96 $11,168 $10,526 $10,504 Jun-96 $11,040 $10,405 $10,547 Jul-96 $10,216 $9,629 $10,081 Aug-96 $10,560 $9,953 $10,294 Sep-96 $11,104 $10,466 $10,873 Oct-96 $11,024 $10,390 $11,173 Nov-96 $11,712 $11,039 $12,018 Dec-96 $11,305 $10,655 $11,780 Jan-97 $11,994 $11,304 $12,516 Feb-97 $11,702 $11,029 $12,614 Mar-97 $11,329 $10,678 $12,095 Apr-97 $11,872 $11,190 $12,816 May-97 $12,578 $11,855 $13,595 Jun-97 $13,243 $12,481 $14,205 Jul-97 $14,419 $13,590 $15,334 Aug-97 $13,713 $12,925 $14,475 Sep-97 $14,419 $13,590 $15,267 Oct-97 $13,794 $13,001 $14,757 Nov-97 $13,932 $13,131 $15,440 Dec-97 $14,173 $13,358 $15,706 Jan-98 $14,323 $13,500 $15,880 Feb-98 $15,253 $14,376 $17,025 Mar-98 $16,068 $15,144 $17,897 Apr-98 $16,325 $15,386 $18,078 May-98 $16,086 $15,161 $17,767 Jun-98 $16,945 $15,971 $18,488 Jul-98 $16,644 $15,687 $18,292 Aug-98 $13,756 $12,965 $15,651 Sep-98 $14,615 $13,775 $16,654 Oct-98 $15,705 $14,802 $18,008 Nov-98 $16,476 $15,528 $19,099 Dec-98 $17,734 $16,714 $20,199 Jan-99 $18,959 $17,868 $21,043 Feb-99 $18,450 $17,389 $20,389 Mar-99 $19,467 $18,348 $21,205 Apr-99 $19,185 $18,081 $22,025 May-99 $18,375 $17,318 $21,505 Jun-99 $19,627 $18,499 $22,699 Jul-99 $18,949 $17,860 $21,991 Aug-99 $18,977 $17,886 $21,881 Sep-99 $18,657 $17,584 $21,281 Oct-99 $20,192 $19,031 $22,614
Performance Table
Average Annual Cumulative Total Return Total Return ---------------- ------------ 1 Since Since Periods Ending October 31, 1999 Year Inception Inception ------ --------- ------------ S&P 500/1/ 25.58% 24.92% 126.14% Growth Equity Fund A (NAV) 28.57% 21.17% 101.92% Growth Equity Fund Class A (net of 5.75% sales charge) 21.18% 19.23% 90.31% Growth Equity Fund Class B (NAV) 27.77% 20.41% 97.33% Growth Equity Fund Class B (net of CDSC)/2/ 22.77% 19.90% 94.33% Growth Equity Fund Class C (NAV) 27.75% 20.38% 97.18% Growth Equity Fund Class C (net of CDSC)/3/ 26.75% 20.38% 97.18%
- ----------------------------------------------- /1/All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. /2/The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. /3/The returns reflect the applicable Contingent Deferred Sales Charge of 1%. xiv Portfolio Manager's Commentary The Growth Equity Fund's Class A performance for the year-ended October 31, 1999 was 28.57% as compared to the S&P 500 Index return of 25.58% for the same period. In December 1998, Thomas Arrington and Scott Chapman became co- managers of the Fund. While the first half of the year saw strong performance in mid- to large-cap equities, the U.S. stock market experienced a summer pullback. This was driven initially by investors' concern that the Federal Reserve would further raise short-term interest rates, a fear that was realized in the form of August's hikes in the Federal Funds and discount rates. Specifically, the performance of the Fund during the second quarter was adversely affected by a major shift in investor preference away from large- cap, consistent growth companies toward economically sensitive companies. This shift occurred primarily because the United States' economy grew faster than expected while, at the same time, Asian economies appeared to be stabilizing. Consequently, the Fund faced strong headwinds in the second quarter as cyclical, mid-cap and small-cap stocks rebounded with a vengeance from their multi-year performance dormancy and traders took profits in large cap growth stocks. Traders became more confident of a robust economic outlook which gave them courage to buy companies with less certain longer-term outlooks. Despite the market shift during the quarter, the Fund remained true to its investment discipline. We focus on companies that we believe have the potential to deliver consistent earnings growth in all-weather economic environments, not on companies that are inextricably tied to the health of the economy. The Fund emphasizes a diversified portfolio of brand-name large- and mid-capitalization growth companies with a demonstrated track record of reliable earnings growth. In the third quarter, this focus led us to be slightly overweight in the healthcare and technology sectors, positioning that served the Fund well. The imperatives of consumers investing in Internet access and companies investing in e-commerce capabilities also contributed to the gains in the technology sector. Both stock selection and an overweight position in the sector contributed to our performance. xv Tax-Sensitive Equity Fund Investment Seeks to provide maximum after-tax total return with an Objective: emphasis on long-term growth of capital, primarily through investing in equity securities of companies that appear to be undervalued. Subadvisor: Standish, Ayer & Wood, Inc. Portfolio Manager: Laurence A. Manchester Inception Date: January 6, 1998 [GRAPH] Change in Value of $10,000 Investment and Comparative Indices Tax-Sensitive Equity Funds
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 5.75% charge Investment in the Month Ended of the Growth Equity Fund of the Growth Equity Fund S&P 500 Month Ended NAV 5.75% Sales Charge S&P 500 1/6/98 $10,000 $9,425 $10,000 Jan-98 $9,900 $9,331 $10,111 Feb-98 $10,650 $10,038 $10,840 Mar-98 $11,060 $10,424 $11,395 Apr-98 $11,020 $10,386 $11,510 May-98 $10,610 $10,000 $11,312 Jun-98 $10,640 $10,028 $11,771 Jul-98 $10,270 $9,679 $11,647 Aug-98 $8,110 $7,644 $9,965 Sep-98 $8,440 $7,955 $10,604 Oct-98 $9,070 $8,548 $11,466 Nov-98 $9,680 $9,123 $12,160 Dec-98 $10,240 $9,651 $12,861 Jan-99 $10,080 $9,500 $13,399 Feb-99 $9,410 $8,869 $12,982 Mar-99 $9,290 $8,756 $13,501 Apr-99 $9,720 $9,161 $14,024 May-99 $9,890 $9,321 $13,693 Jun-99 $10,290 $9,698 $14,453 Jul-99 $9,940 $9,368 $14,002 Aug-99 $9,550 $9,001 $13,932 Sep-99 $9,200 $8,671 $13,550 Oct-99 $9,500 $8,954 $14,395
Performance Table
Average Annual Cumulative Total Return Total Return ---------------- ------------ 1 Since Since Year Inception Inception Periods Ending October 31, 1999 ------ --------- ------------ S&P 500/1/ 25.58% 21.98% 43.95% Tax-Sensitive Equity Fund A (NAV) 4.63% -2.78% -5.00% Tax-Sensitive Equity Fund Class A (net of 5.75% sales charge) -1.28% -5.90% -10.46% Tax-Sensitive Equity Fund Class B (NAV) 3.54% -3.58% -6.40% Tax-Sensitive Equity Fund Class B (net of CDSC)/2/ -1.46% -6.26% -11.08% Tax-Sensitive Equity Fund Class C (NAV) 3.43% -3.58% -6.40% Tax-Sensitive Equity Fund Class C (net of CDSC)/3/ 2.43% -3.58% -6.40%
- ----------------------------------------------- /1/All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. /2/The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. /3/The returns reflect the applicable Contingent Deferred Sales Charge of 1%. xvi Portfolio Manager's Commentary The Tax-Sensitive Equity Fund's Class A performance for the period ended October 31, 1999 was 4.63% as compared to the Standard & Poor's 500 Index return of 25.58%. As of October 31, 1999, the Fund had no capital gains distributions to shareholders. The 12 months ending October 31, 1999, was a period in which the stock market experienced increased volatility, in part due to the strength of the U.S. economy and fears of rising inflation. Interest rates have risen as the Federal Reserve Board instituted several interest rate hikes in an attempt to prevent a pick-up in inflation. Our outlook on the economy has not varied much over the last several quarters. We expect economic growth to continue around the world with the U.S. growing at a subdued pace relative to recent experience. We anticipate that inflation will remain under control with slight upward pressure in the near term. Corporate profits should continue to be strong, although less so than in early 1999. All of this good economic news, assuming it continues, should create an environment for U.S. stocks to deliver positive returns. For most of the last 12 months, the returns from the U.S. stock market have been dominated by a small set of growth stocks. The largest 100 companies continue to sell at over 30 times anticipated earnings, but those ranging between $2 billion and $8 billion in capitalization are selling at only 19 times. This is a full 40% discount. Within this environment, the North American Tax-Sensitive Equity Fund's stocks sell at almost a 30% discount to the S&P 500. Yet, the earnings of the stocks in the Fund have grown 17% a year faster than the earnings of the S&P 500 over the last five years. We continue to challenge the current lack of valuation discipline in the market, and as a result, we struggle for returns. We remain committed to our philosophy of investing in a diversified portfolio of companies with a history of strong earnings growth, above average expectations for future growth, and below average valuations. This discipline leads us to many of the intermediate-sized companies that remain out of favor in the eyes of the market. We believe, however, that the worst risk is not the under performance of our current portfolio, but the potential for losses embedded in that very narrow group of current market leaders now selling at exceedingly high historic valuations. xvii Growth and Income Fund Investment Seeks to provide long-term growth of capital and income Objective: 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. Wellington Management Company LLP Subadvisor: Portfolio Manager: Matthew E. Megargel May 1, 1991 Inception Date: [GRAPH] Change in Value of $10,000 Investment and Comparative Indices Growth and Income Fund
Growth of $10,000 Invested in Growth of $10,000 Invested in Class A shares at Net Asset Value Class A shares with 5.75% charge Growth of $10,000 of the Growth & Income Fund of the Growth & Income Fund Investment in the Month Ended NAV 5.75% Sales Charge S&P 500 Apr-91 $10,000 $9,425 $10,000 May-91 $10,240 $9,651 $10,428 Jun-91 $9,879 $9,311 $9,951 Jul-91 $10,201 $9,614 $10,417 Aug-91 $10,352 $9,757 $10,662 Sep-91 $10,205 $9,618 $10,487 Oct-91 $10,588 $9,979 $10,628 Nov-91 $10,175 $9,590 $10,198 Dec-91 $11,088 $10,450 $11,364 Jan-92 $10,775 $10,155 $11,153 Feb-92 $10,876 $10,250 $11,295 Mar-92 $10,642 $10,030 $11,074 Apr-92 $10,805 $10,183 $11,396 May-92 $10,845 $10,222 $11,458 Jun-92 $10,779 $10,159 $11,292 Jul-92 $11,217 $10,572 $11,747 Aug-92 $11,146 $10,505 $11,509 Sep-92 $11,400 $10,745 $11,642 Oct-92 $11,480 $10,820 $11,684 Nov-92 $11,777 $11,100 $12,077 Dec-92 $12,007 $11,317 $12,236 Jan-93 $12,162 $11,463 $12,325 Feb-93 $12,286 $11,579 $12,491 Mar-93 $12,677 $11,948 $12,760 Apr-93 $12,430 $11,715 $12,447 May-93 $12,657 $11,929 $12,783 Jun-93 $12,656 $11,928 $12,826 Jul-93 $12,625 $11,899 $12,765 Aug-93 $13,008 $12,260 $13,252 Sep-93 $12,956 $12,211 $13,154 Oct-93 $13,153 $12,396 $13,421 Nov-93 $12,884 $12,143 $13,294 Dec-93 $13,112 $12,358 $13,458 Jan-94 $13,574 $12,793 $13,909 Feb-94 $13,406 $12,635 $13,533 Mar-94 $12,892 $12,150 $12,945 Apr-94 $13,028 $12,279 $13,113 May-94 $13,259 $12,497 $13,327 Jun-94 $12,932 $12,188 $12,997 Jul-94 $13,481 $12,706 $13,428 Aug-94 $13,871 $13,074 $13,974 Sep-94 $13,607 $12,825 $13,637 Oct-94 $13,819 $13,024 $13,950 Nov-94 $13,196 $12,437 $13,438 Dec-94 $13,421 $12,650 $13,634 Jan-95 $13,432 $12,660 $13,988 Feb-95 $13,957 $13,154 $14,531 Mar-95 $14,263 $13,443 $14,961 Apr-95 $14,700 $13,855 $15,397 May-95 $15,137 $14,267 $16,005 Jun-95 $15,458 $14,569 $16,381 Jul-95 $15,876 $14,963 $16,926 Aug-95 $16,008 $15,088 $16,972 Sep-95 $16,482 $15,534 $17,683 Oct-95 $16,206 $15,275 $17,621 Nov-95 $16,845 $15,876 $18,397 Dec-95 $17,117 $16,133 $18,737 Jan-96 $17,520 $16,513 $19,374 Feb-96 $17,565 $16,555 $19,554 Mar-96 $17,856 $16,829 $19,742 Apr-96 $18,113 $17,072 $20,032 May-96 $18,516 $17,451 $20,549 Jun-96 $18,499 $17,435 $20,627 Jul-96 $17,801 $16,778 $19,715 Aug-96 $18,195 $17,149 $20,131 Sep-96 $19,218 $18,113 $21,265 Oct-96 $19,747 $18,611 $21,852 Nov-96 $21,231 $20,010 $23,504 Dec-96 $20,826 $19,628 $23,038 Jan-97 $21,963 $20,700 $24,478 Feb-97 $22,190 $20,914 $24,669 Mar-97 $21,328 $20,102 $23,655 Apr-97 $22,549 $21,253 $25,065 May-97 $23,842 $22,471 $26,589 Jun-97 $25,146 $23,701 $27,780 Jul-97 $27,109 $25,551 $29,989 Aug-97 $25,637 $24,163 $28,309 Sep-97 $26,990 $25,438 $29,858 Oct-97 $26,056 $24,558 $28,860 Nov-97 $27,241 $25,675 $30,197 Dec-97 $27,549 $25,965 $30,716 Jan-98 $27,861 $26,259 $31,057 Feb-98 $29,729 $28,020 $33,296 Mar-98 $31,222 $29,426 $35,001 Apr-98 $31,637 $29,818 $35,355 May-98 $30,806 $29,035 $34,746 Jun-98 $32,013 $30,172 $36,157 Jul-98 $31,844 $30,013 $35,774 Aug-98 $27,264 $25,696 $30,608 Sep-98 $28,912 $27,249 $32,570 Oct-98 $31,481 $29,671 $35,218 Nov-98 $33,207 $31,298 $37,352 Dec-98 $34,771 $32,771 $39,504 Jan-99 $35,875 $33,812 $41,155 Feb-99 $35,053 $33,038 $39,875 Mar-99 $36,575 $34,472 $41,470 Apr-99 $38,097 $35,906 $43,075 May-99 $37,046 $34,916 $42,058 Jun-99 $39,013 $36,769 $44,393 Jul-99 $37,935 $35,754 $43,008 Aug-99 $37,693 $35,525 $42,793 Sep-99 $36,562 $34,459 $41,620 Oct-99 $38,757 $36,528 $44,270
Performance Table
Average Annual Cumulative Total Return Total Return ----------------------- ------------ 5 Since Since Periods Ending October 31, 1999 1 Year Years Inception Inception ------ ------ --------- ------------ S&P 500/1/ 25.58% 25.99% 19.13% 342.70% Growth and Income Fund A (NAV) 23.11% 22.91% 17.26% 287.57% Growth and Income Fund Class A (net of 5.75% sales charge) 16.03% 21.46% 16.45% 265.28% Growth and Income Fund Class B (NAV) 22.28% 22.21% 16.86% 276.39% Growth and Income Fund Class B (net of CDSC)/2/ 17.28% 22.03% 16.86% 276.39% Growth and Income Fund Class C (NAV) 22.28% 22.17% 16.82% 275.34% Growth and Income Fund Class C (net of CDSC)/3/ 21.28% 22.17% 16.82% 275.34%
- ----------------------------------------------- /1/All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. /2/The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. /3/The returns reflect the applicable Contingent Deferred Sales Charge of 1%. xviii Portfolio Manager's Commentary The Growth and Income Fund's Class A performance for the year-ended October 31, 1999 was 23.11% as compared to the S&P 500 Stock Index return of 25.58% for the same period. This performance compares favorably to the average growth and income fund, as reported by Lipper Analytical Services, Inc., that climbed 17.55% over the same period. Fund performance was helped by select energy, information technology, and industrial and commercial stocks and by being underweight in finance and consumer discretionary stocks. Relative performance was limited by select health care and consumer staples holdings. At the start of the fiscal year investors were concerned with tightening credit conditions sparked by the Russian default and the near collapse of a highly leveraged bond hedge fund. Fearing deflation and a global bear market, cautious investors created an upheaval in the capital markets. Investors sought refuge in safer issues, particularly U.S. Treasury securities and large, highly liquid stocks. Fortunately, the U.S. economy continued to perform well allowing interest rate spreads (the difference between yields on Treasury securities and bonds of lesser quality) to narrow from historically wide gaps. In addition, Japan, the Pacific Rim area, most of Europe, and some Latin America nations recovered or stabilized. Ratifying investor sentiment, the Dow broke 10,000 for the first time in March. Looking ahead, an accelerating world economy is central to our investment outlook. We believe improving Japanese consumer confidence, a growth rebound in much of Asia, greater stability in Latin America, a stronger Europe, and slower, but solid growth in the U.S. should leave the world poised for growth. We continue to believe that longer-term economic conditions for equities are favorable. Despite the recent rise in energy prices, we expect inflation to remain low. Technological innovation has boosted productivity and helped keep inflation under wraps in the recent past. That trend should continue. While we are anticipating moderating GDP growth, we would not be surprised by one or two Federal Reserve rate hikes in the next six months. We are intrigued by pending deregulation in the financial services industry and may see renewed interest in the sector sparked by consolidation activity. While values appear to be emerging in some sectors such as health care and finance, it may take time for the overall market to establish a firm base from which to move higher. xix Equity-Income Fund Investment Seeks to provide dividend income and long-term capital Objective: appreciation by taking a value approach and investing in stocks and other securities that appear to be temporaily undervalued by various measures, such as price/earnings ratios. Global Alliance Value Investors, Ltd. ("Global Alliance") Subadvisor: Portfolio Manager: Nancy Tengler August 28, 1989/4/ Inception Date: [GRAPH] Change in Value of $10,000 Investment and Comparative Indices Equity-Income Fund Growth of Growth of $10,000 $10,000 Invested in Invested in Class A shares Class A shares Growth of at Net Asset Value with 5.75% $10,000 of the Value charge of the Investment Equity Fund Value Equity Fund in the Month Ended NAV 5.75% Sales Charge S&P 500 Oct-89 $10,000 $9,425 $10,000 Nov-89 $10,036 $9,459 $10,204 Dec-89 $10,101 $9,520 $10,449 Jan-90 $9,204 $8,675 $9,748 Feb-90 $9,383 $8,844 $9,874 Mar-90 $9,676 $9,120 $10,135 Apr-90 $9,393 $8,853 $9,882 May-90 $10,035 $9,458 $10,845 Jun-90 $9,829 $9,264 $10,772 Jul-90 $9,507 $8,960 $10,737 Aug-90 $8,427 $7,943 $9,766 Sep-90 $7,926 $7,470 $9,291 Oct-90 $7,784 $7,336 $9,251 Nov-90 $8,200 $7,729 $9,848 Dec-90 $8,534 $8,043 $10,123 Jan-91 $8,934 $8,421 $10,565 Feb-91 $9,496 $8,950 $11,320 Mar-91 $9,668 $9,112 $11,594 Apr-91 $9,772 $9,211 $11,622 May-91 $10,144 $9,561 $12,119 Jun-91 $9,725 $9,166 $11,565 Jul-91 $10,088 $9,508 $12,107 Aug-91 $10,279 $9,688 $12,391 Sep-91 $10,088 $9,508 $12,188 Oct-91 $10,222 $9,634 $12,351 Nov-91 $9,629 $9,076 $11,852 Dec-91 $10,674 $10,060 $13,207 Jan-92 $10,856 $10,232 $12,961 Feb-92 $11,267 $10,619 $13,127 Mar-92 $11,085 $10,448 $12,870 Apr-92 $11,305 $10,655 $13,244 May-92 $11,525 $10,863 $13,316 Jun-92 $11,181 $10,538 $13,123 Jul-92 $11,392 $10,737 $13,652 Aug-92 $11,047 $10,412 $13,376 Sep-92 $11,181 $10,538 $13,530 Oct-92 $11,525 $10,863 $13,578 Nov-92 $12,329 $11,620 $14,036 Dec-92 $12,692 $11,963 $14,220 Jan-93 $12,750 $12,017 $14,324 Feb-93 $12,520 $11,800 $14,517 Mar-93 $12,998 $12,251 $14,829 Apr-93 $12,511 $11,791 $14,466 May-93 $12,931 $12,188 $14,856 Jun-93 $13,037 $12,287 $14,905 Jul-93 $13,238 $12,476 $14,835 Aug-93 $13,295 $12,530 $15,401 Sep-93 $13,572 $12,792 $15,287 Oct-93 $13,591 $12,810 $15,597 Nov-93 $13,601 $12,819 $15,450 Dec-93 $14,063 $13,255 $15,640 Jan-94 $14,401 $13,573 $16,164 Feb-94 $14,603 $13,764 $15,728 Mar-94 $14,063 $13,255 $15,044 Apr-94 $14,054 $13,246 $15,239 May-94 $14,150 $13,337 $15,488 Jun-94 $13,880 $13,082 $15,105 Jul-94 $14,063 $13,255 $15,605 Aug-94 $14,757 $13,909 $16,240 Sep-94 $14,565 $13,727 $15,849 Oct-94 $14,247 $13,427 $16,212 Nov-94 $13,495 $12,719 $15,617 Dec-94 $13,761 $12,970 $15,845 Jan-95 $13,710 $12,922 $16,257 Feb-95 $14,619 $13,778 $16,888 Mar-95 $15,017 $14,153 $17,387 Apr-95 $15,272 $14,394 $17,893 May-95 $15,731 $14,827 $18,600 Jun-95 $16,232 $15,298 $19,037 Jul-95 $16,650 $15,693 $19,671 Aug-95 $16,834 $15,866 $19,724 Sep-95 $16,895 $15,924 $20,551 Oct-95 $16,272 $15,337 $20,479 Nov-95 $16,946 $15,972 $21,380 Performance Table
Cumulative Average Annual Total Return Total Return ----------------------------- ---------------- Periods Ending October 31, 1999 1 5 10 Since/4/ 10 Since/4/ Year Years Years 4/1/99 Years 4/1/99 ------ ------ ------ -------- ------- -------- S&P 500/1/ 25.58% 25.99% 17.80% 6.65% 414.49% 6.65% Equity-Income Fund Class A (NAV) 3.93% 14.76% 10.99% 0.42% 183.64% 0.42% Class A (net of 5.75% sales charge) -2.05% 13.41% 10.33% -5.36% 167.33% -5.36% Equity-Income Fund Class B (NAV) 3.30% 14.05% 10.63% 0.00% 174.73% 0.00% Class B (net of CDSC)/2/ -1.70% 13.81% 10.63% -5.00% 174.73% -5.00% Equity-Income Fund Class C (NAV) 3.22% 14.03% 10.63% 0.00% 174.51% 0.00% Class C (net of CDSC)/3/ 2.22% 14.03% 10.63% -1.00% 174.51% -1.00%
- --------------------- /1/All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. /2/The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. /3/The returns reflect the applicable Contingent Deferred Sales Charge of 1%. /4/Current investment subadvisor assignment became effective 4/1/99. xx Portfolio Manager's Commentary The Equity-Income Fund's Class A performance for the year-ended October 31, 1999 was 3.93% as compared to the S&P 500 return of 25.58% and the Lipper Equity Income Funds Average return of 9.56% for the same period. Equity income funds underperformed the S&P 500 due to the continued narrowing of the market over the period. A few very large cap growth stocks, mainly in the technology sector, drove the returns of the indices while the majority of stocks performed significantly worse than the market. Global Alliance took over management of the Fund on April 1, 1999. At that time, the Fund held over 140 securities. As large cap value managers, we employ a time-proven valuation discipline that identifies periods of over and under valuation based on a stock's relative dividend yield compared to the market and the stock's own history. This valuation discipline is complemented by rigorous fundamental research using our proprietary 12 Fundamental Factors. We brought the Fund into line with our strategy during the 2nd calendar quarter, buying securities that met our fundamental analysis factors and valuation criteria, while selling those that did not. As of October 31, 1999, the Fund held 29 securities. The universe of stocks available to equity income managers was generally weak during the 3rd calendar quarter, led by the battered financial and pharmaceutical stocks. Telephone stocks provided relative outperformance, with our largest telecom holding, Bell Atlantic, generating a positive return for the 3rd quarter. The fundamentals for the telecom group are strong and the potential growth for these companies will be mid double-digits. Given their low relative valuations they remain attractive holdings in the Fund. We also believe that both financial and pharmaceutical stocks could provide better than market returns in the coming year and remain committed to our holdings. We believe that the most important statistic to watch in the coming months will be the labor numbers. So far, tight labor has not put pressure on corporations to pay higher wages but if/when that occurs, inflation could heat up. Yet, it could be that those worries are pretty well reflected in the markets already - both stock and bond. Because of the very high level of volatility and uncertainty, we remain convinced of the value of research, discipline and a long-term focus. xxi Balanced Fund To provide current income and capital appreciation by Investment investing in a balanced portfolio of common stocks, U.S. Objective: and foreign government obligations and a variety of corporate fixed-income securities. Subadvisor: Founders Asset Management LLC Portfolio Brian F. Kelly Manager: August 28, 1989/5/ Inception Date: [GRAPH] Change in Value of $10,000 Investment and Comparative Indices Balanced Fund
Growth of $10,000 Invested in Growth of $10,000 Invested in Class A shares at Net Asset Value Class A shares with 5.75% charge Growth of $10,000 of the Balanced Fund of the Balanced Fund Investment in the Month Ended NAV 5.75% Sales Charge S&P 500 Oct-89 $10,000 $9,425 $10,000 Nov-89 $10,061 $9,482 $10,204 Dec-89 $10,117 $9,535 $10,449 Jan-90 $9,492 $8,946 $9,748 Feb-90 $9,586 $9,035 $9,874 Mar-90 $9,586 $9,035 $10,135 Apr-90 $9,346 $8,809 $9,882 May-90 $9,846 $9,280 $10,845 Jun-90 $9,799 $9,235 $10,772 Jul-90 $9,682 $9,125 $10,737 Aug-90 $9,026 $8,507 $9,766 Sep-90 $8,687 $8,188 $9,291 Oct-90 $8,603 $8,108 $9,251 Nov-90 $8,941 $8,427 $9,848 Dec-90 $9,235 $8,704 $10,123 Jan-91 $9,527 $8,979 $10,565 Feb-91 $9,991 $9,417 $11,320 Mar-91 $10,110 $9,529 $11,594 Apr-91 $10,175 $9,590 $11,622 May-91 $10,293 $9,702 $12,119 Jun-91 $10,043 $9,466 $11,565 Jul-91 $10,329 $9,735 $12,107 Aug-91 $10,559 $9,952 $12,391 Sep-91 $10,537 $9,932 $12,188 Oct-91 $10,713 $10,097 $12,351 Nov-91 $10,570 $9,963 $11,852 Dec-91 $11,216 $10,571 $13,207 Jan-92 $11,271 $10,623 $12,961 Feb-92 $11,537 $10,874 $13,127 Mar-92 $11,382 $10,728 $12,870 Apr-92 $11,570 $10,905 $13,244 May-92 $11,803 $11,124 $13,316 Jun-92 $11,626 $10,957 $13,123 Jul-92 $11,884 $11,200 $13,652 Aug-92 $12,877 $12,137 $13,376 Sep-92 $11,825 $11,145 $13,530 Oct-92 $11,919 $11,233 $13,578 Nov-92 $12,386 $11,674 $14,036 Dec-92 $12,662 $11,934 $14,220 Jan-93 $12,793 $12,057 $14,324 Feb-93 $12,733 $12,001 $14,517 Mar-93 $13,078 $12,326 $14,829 Apr-93 $12,828 $12,091 $14,466 May-93 $13,054 $12,304 $14,856 Jun-93 $13,245 $12,483 $14,905 Jul-93 $13,376 $12,607 $14,835 Aug-93 $13,518 $12,741 $15,401 Sep-93 $13,661 $12,876 $15,287 Oct-93 $13,709 $12,921 $15,597 Nov-93 $13,637 $12,853 $15,450 Dec-93 $13,937 $13,135 $15,640 Jan-94 $14,197 $13,381 $16,164 Feb-94 $14,185 $13,369 $15,728 Mar-94 $13,726 $12,936 $15,044 Apr-94 $13,676 $12,890 $15,239 May-94 $13,713 $12,925 $15,488 Jun-94 $13,539 $12,761 $15,105 Jul-94 $13,738 $12,948 $15,605 Aug-94 $14,123 $13,311 $16,240 Sep-94 $13,949 $13,147 $15,849 Oct-94 $13,812 $13,018 $16,212 Nov-94 $13,378 $12,609 $15,617 Dec-94 $13,560 $12,780 $15,845 Jan-95 $13,681 $12,894 $16,257 Feb-95 $14,312 $13,490 $16,888 Mar-95 $14,528 $13,692 $17,387 Apr-95 $14,823 $13,971 $17,893 May-95 $15,294 $14,414 $18,600 Jun-95 $15,495 $14,604 $19,037 Jul-95 $15,764 $14,857 $19,671 Aug-95 $16,033 $15,111 $19,724 Sep-95 $16,248 $15,313 $20,551 Oct-95 $16,154 $15,225 $20,479 Nov-95 $16,516 $15,567 $21,380 Dec-95 $16,863 $15,893 $21,776 Jan-96 $17,070 $16,089 $22,516 Feb-96 $17,115 $16,130 $22,725 Mar-96 $17,115 $16,130 $22,943 Apr-96 $17,159 $16,172 $23,281 May-96 $17,322 $16,326 $23,881 Jun-96 $17,307 $16,312 $23,972 Jul-96 $17,129 $16,144 $22,913 Aug-96 $17,352 $16,354 $23,396 Sep-96 $17,885 $16,857 $24,713 Oct-96 $18,270 $17,220 $25,395 Nov-96 $18,893 $17,806 $27,315 Dec-96 $18,692 $17,618 $26,774 Jan-97 $19,185 $18,082 $28,448 Feb-97 $19,151 $18,050 $28,670 Mar-97 $18,811 $17,730 $27,491 Apr-97 $19,406 $18,290 $29,130 May-97 $20,154 $18,995 $30,901 Jun-97 $20,783 $19,588 $32,285 Jul-97 $21,411 $20,180 $34,852 Aug-97 $20,698 $19,507 $32,900 Sep-97 $21,564 $20,324 $34,700 Oct-97 $21,377 $20,148 $33,541 Nov-97 $21,632 $20,388 $35,094 Dec-97 $21,897 $20,638 $35,697 Jan-98 $22,483 $21,191 $36,094 Feb-98 $23,195 $21,861 $38,696 Mar-98 $23,635 $22,276 $40,677 Apr-98 $23,844 $22,473 $41,088 May-98 $23,719 $22,355 $40,381 Jun-98 $24,074 $22,690 $42,021 Jul-98 $23,488 $22,138 $41,575 Aug-98 $22,107 $20,835 $35,572 Sep-98 $23,258 $21,921 $37,852 Oct-98 $24,033 $22,651 $40,929 Nov-98 $24,556 $23,144 $43,410 Dec-98 $24,920 $23,487 $45,910 Jan-99 $24,597 $23,183 $47,829 Feb-99 $23,906 $22,532 $46,342 Mar-99 $24,275 $22,879 $48,195 Apr-99 $24,782 $23,357 $50,061 May-99 $24,666 $23,248 $48,879 Jun-99 $24,989 $23,552 $51,592 Jul-99 $24,436 $23,031 $49,982 Aug-99 $24,482 $23,074 $49,732 Sep-99 $23,929 $22,554 $48,370 Oct-99 $24,321 $22,923 $51,449
Growth of $10,000 Growth of $10,000 Investment in the Lehman Brothers Investment in the 50%/50% Month Ended Aggregate Bond Index Composite Index Oct-89 $10,000 $10,000 Nov-89 $10,095 $10,149 Dec-89 $10,122 $10,284 Jan-90 $10,002 $9,876 Feb-90 $10,034 $9,955 Mar-90 $10,041 $10,087 Apr-90 $9,948 $9,916 May-90 $10,243 $10,541 Jun-90 $10,407 $10,587 Jul-90 $10,550 $10,643 Aug-90 $10,409 $10,091 Sep-90 $10,495 $9,900 Oct-90 $10,629 $9,948 Nov-90 $10,857 $10,359 Dec-90 $11,027 $10,580 Jan-91 $11,163 $10,867 Feb-91 $11,258 $11,289 Mar-91 $11,336 $11,463 Apr-91 $11,458 $11,539 May-91 $11,525 $11,819 Jun-91 $11,519 $11,542 Jul-91 $11,679 $11,890 Aug-91 $11,931 $12,159 Sep-91 $12,174 $12,181 Oct-91 $12,309 $12,330 Nov-91 $12,422 $12,140 Dec-91 $12,791 $12,997 Jan-92 $12,617 $12,787 Feb-92 $12,699 $12,911 Mar-92 $12,628 $12,747 Apr-92 $12,719 $12,979 May-92 $12,959 $13,136 Jun-92 $13,138 $13,130 Jul-92 $13,406 $13,527 Aug-92 $13,541 $13,460 Sep-92 $13,703 $13,617 Oct-92 $13,520 $13,549 Nov-92 $13,523 $13,777 Dec-92 $13,738 $13,976 Jan-93 $14,002 $14,161 Feb-93 $14,247 $14,380 Mar-93 $14,307 $14,565 Apr-93 $14,407 $14,436 May-93 $14,426 $14,639 Jun-93 $14,687 $14,795 Jul-93 $14,770 $14,803 Aug-93 $15,029 $15,213 Sep-93 $15,069 $15,177 Oct-93 $15,125 $15,358 Nov-93 $14,997 $15,221 Dec-93 $15,078 $15,356 Jan-94 $15,281 $15,718 Feb-94 $15,015 $15,368 Mar-94 $14,644 $14,842 Apr-94 $14,527 $14,879 May-94 $14,526 $15,001 Jun-94 $14,494 $14,796 Jul-94 $14,782 $15,189 Aug-94 $14,800 $15,512 Sep-94 $14,582 $15,209 Oct-94 $14,569 $15,381 Nov-94 $14,537 $15,071 Dec-94 $14,638 $15,234 Jan-95 $14,927 $15,585 Feb-95 $15,283 $16,076 Mar-95 $15,376 $16,370 Apr-95 $15,591 $16,729 May-95 $16,195 $17,384 Jun-95 $16,313 $17,660 Jul-95 $16,277 $17,955 Aug-95 $16,474 $18,081 Sep-95 $16,634 $18,570 Oct-95 $16,850 $18,644 Nov-95 $17,103 $19,217 Dec-95 $17,342 $19,534 Jan-96 $17,460 $19,959 Feb-96 $17,156 $19,909 Mar-96 $17,036 $19,956 Apr-96 $16,941 $20,075 May-96 $16,907 $20,355 Jun-96 $17,133 $20,514 Jul-96 $17,180 $20,014 Aug-96 $17,150 $20,238 Sep-96 $17,449 $21,040 Oct-96 $17,836 $21,573 Nov-96 $18,141 $22,676 Dec-96 $17,972 $22,324 Jan-97 $18,028 $23,179 Feb-97 $18,073 $23,311 Mar-97 $17,873 $22,628 Apr-97 $18,141 $23,573 May-97 $18,313 $24,536 Jun-97 $18,531 $25,330 Jul-97 $19,031 $26,852 Aug-97 $18,870 $25,805 Sep-97 $19,149 $26,836 Oct-97 $19,426 $26,404 Nov-97 $19,516 $27,217 Dec-97 $19,713 $27,615 Jan-98 $19,965 $27,938 Feb-98 $19,949 $29,217 Mar-98 $20,017 $30,230 Apr-98 $20,121 $30,486 May-98 $20,312 $30,233 Jun-98 $20,485 $31,131 Jul-98 $20,528 $30,933 Aug-98 $20,863 $28,134 Sep-98 $21,351 $29,508 Oct-98 $21,238 $30,972 Nov-98 $21,359 $32,259 Dec-98 $21,423 $33,528 Jan-99 $21,575 $34,553 Feb-99 $21,197 $33,627 Mar-99 $21,314 $34,602 Apr-99 $21,382 $35,559 May-99 $21,194 $34,880 Jun-99 $21,126 $36,187 Jul-99 $21,037 $35,346 Aug-99 $21,027 $35,217 Sep-99 $21,271 $34,667 Oct-99 $21,349 $36,400
Performance Table
Average Annual Cumulative Total Return Total Return ----------------------------- ---------------- Periods Ending October 31, 1 5 10 Since/5/ 10 Since/5/ 1999 Year Years Years 10/1/96 Years 10/1/96 ------ ------ ------ -------- ------- -------- S&P 500/1/ 25.58% 25.99% 17.80% 26.80% 414.49% 107.94% Lehman Brothers Aggregate Bond Index/1/ 0.53% 7.94% 7.88% 6.76% 113.49% 22.36% 50%/50% Composite/1/,/2/ 13.06% 16.97% 12.84% 16.78% 264.00% 66.15% Balanced Fund A (NAV) 1.20% 11.98% 9.29% 10.37% 143.21% 35.54% Class A (net of 5.75% sales charge) -4.62% 10.66% 8.64% 8.27% 129.23% 27.75% Balanced Fund Class B (NAV) 0.57% 11.29% 8.95% 9.67% 135.58% 32.91% Class B (net of CDSC)/3/ -4.43% 11.03% 8.95% 8.86% 135.58% 29.91% Balanced Fund Class C (NAV) 0.58% 11.27% 8.94% 9.67% 135.42% 32.91% Class C (net of CDSC)/4/ -0.42% 11.27% 8.94% 9.67% 135.42% 32.91%
- ------------------------------- /1/All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. /2/Comprised of 50% of the return of the S&P 500 and 50% of the return of the Lehman Brothers Aggregate Bond Index. /3/The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. /4/The returns reflect the applicable Contingent Deferred Sales Charge of 1%. /5/Current investment subadvisor assignment became effective 10/1/96. xxii Portfolio Manager's Commentary The Balanced Fund's Class A performance for the year-ended October 31, 1999, was 1.20% as compared to the 50% S&P/50% Lehman Brothers Aggregate Bond Index return of 13.06% for the same period. The Fund maintains the flexibility to strategically shift its composition to take advantage of market conditions. In building the equity portion of the Balanced Fund, we follow a growth philosophy, looking for those firms whose fundamental strengths suggest the potential for consistent streams of corporate earnings. To the extent that our research process does not identify attractive equity opportunities, our exposure to bonds or cash may increase. We continue to take a conservative approach to the Fund and have been closely monitoring the number of stocks in the Fund. At the end of the third quarter, approximately 48% of the Fund was invested in equities. The Fund has carried a heavier weighting in bonds than the average balanced fund because we have been concerned about the high absolute and relative valuations the market currently awards many of the quality large-cap companies. We are confident in the equities we own and have taken larger positions in a smaller number of names as a way of targeting those companies that we believe offer the best opportunities for earnings growth. We believe that this structure best positions the Balanced Fund in the current environment to pursue income and capital appreciation. We have been pleased with XL Capital Ltd. (4.51% of the Fund), a Bermuda-based corporation that provides liability insurance coverage. XL Capital has a low p/e, and its dividend looks secure. Analysts expect the pricing environment for reinsurance companies to improve after prices hit relative lows, and we believe XL Capital could benefit from this improved climate. The Fund has been overweight vs. the S&P 500 Index in pharmaceuticals and unfortunately, as a group, they have lagged the market. Pharmaceutical companies are introducing many new products and generally have delivered on their earnings. Although not inexpensive, this appears to be a sector of the market that can grow into its current valuation. This sector has shown steady earnings growth, and multiples are one-half or less than those of many technology stocks. We continue to believe in the long-term fundamentals of our drug holdings and will monitor their growth rates and valuations closely. As we concentrate the number of stocks in the Fund, we've moved additional assets into the Fund's fixed-income allocation. Since interest rates across all durations of U.S. Treasury instruments have generally increased in 1999, the value of bonds has dropped. Consequently, this portion of the Fund has adversely affected performance on a year-to-date basis. xxiii Strategic Income Fund Investment Seeks to provide a high level of total return consistent Objective: with the preservation of capital. The Fund invests in certain segments of the fixed-income market based on current economic and market conditions and on the relative risks and opportunities in the different market segments. Subadvisor: Salomon Brothers Asset Management Inc. Portfolio Robert Lavan, Peter Wilby, David J. Scott Manager: Inception Date: November 1, 1993 [GRAPH] Change in Value of $10,000 Investment and Comparative Indices Strategic Income Fund
Growth of $10,000 Growth of $10,000 Invested in Invested in Growth of $10,000 Class A shares at Class A shares with Investment in the Net Asset Value 5.75% charge Lehman Brothers of the Strategic of the Strategic Aggregate Bond Index Month Ended Income Fund Income Fund LB Aggregate Month Ended NAV 5.75% Sales Charge 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 $9,927 Mar-94 $9,539 $9,086 $9,682 Apr-94 $9,444 $8,996 $9,605 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 $9,785 Sep-94 $9,638 $9,180 $9,641 Oct-94 $9,621 $9,164 $9,632 Nov-94 $9,561 $9,107 $9,611 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 $10,892 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 $11,544 Feb-96 $11,497 $10,951 $11,343 Mar-96 $11,502 $10,956 $11,263 Apr-96 $11,645 $11,091 $11,200 May-96 $11,737 $11,180 $11,178 Jun-96 $11,868 $11,304 $11,328 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 Nov-96 $12,812 $12,204 $11,994 Dec-96 $12,845 $12,234 $11,882 Jan-97 $13,005 $12,387 $11,919 Feb-97 $13,153 $12,528 $11,949 Mar-97 $12,926 $12,312 $11,816 Apr-97 $13,072 $12,451 $11,994 May-97 $13,356 $12,721 $12,108 Jun-97 $13,518 $12,876 $12,252 Jul-97 $13,886 $13,227 $12,583 Aug-97 $13,835 $13,178 $12,476 Sep-97 $14,112 $13,441 $12,660 Oct-97 $13,910 $13,249 $12,844 Nov-97 $14,090 $13,421 $12,903 Dec-97 $14,142 $13,470 $13,033 Jan-98 $14,298 $13,619 $13,200 Feb-98 $14,412 $13,728 $13,189 Mar-98 $14,482 $13,794 $13,234 Apr-98 $14,516 $13,827 $13,303 May-98 $14,513 $13,824 $13,429 Jun-98 $14,475 $13,788 $13,544 Jul-98 $14,529 $13,839 $13,572 Aug-98 $13,537 $12,894 $13,793 Sep-98 $13,942 $13,280 $14,116 Oct-98 $13,859 $13,201 $14,041 Nov-98 $14,220 $13,545 $14,121 Dec-98 $14,244 $13,567 $14,164 Jan-99 $14,190 $13,516 $14,264 Feb-99 $14,104 $13,434 $14,015 Mar-99 $14,319 $13,639 $14,092 Apr-99 $14,590 $13,897 $14,137 May-99 $14,271 $13,593 $14,012 Jun-99 $14,225 $13,549 $13,968 Jul-99 $14,147 $13,475 $13,909 Aug-99 $13,987 $13,323 $13,902 Sep-99 $14,126 $13,455 $14,063 Oct-99 $14,234 $13,558 $14,112
Performance Table
Average Annual Cumulative Total Return Total Return ---------------------- ------------ 1 5 Since Since Periods Ending October 31, 1999 Year Years Inception Inception ------ ----- --------- --------- Lehman Brothers Aggregate Bond Index/1/ 0.53% 7.94% 5.91% 41.12% Strategic Income Fund Class A (NAV) 2.10% 8.15% 6.06% 42.34% Strategic Income Fund Class A (net of 4.75% sales charge) -2.75% 7.10% 5.20% 35.58% Strategic Income Fund Class B (NAV) 1.56% 7.48% 5.44% 37.42% Strategic Income Fund Class B (net of CDSC)/2/ -3.44% 7.18% 5.31% 36.42% Strategic Income Fund Class C (NAV) 1.56% 7.48% 5.44% 37.40% Strategic Income Fund Class C (net of CDSC)/3/ 0.56% 7.48% 5.44% 37.40%
- ----------------------------------------------- /1/All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. /2/The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. /3/The returns reflect the applicable Contingent Deferred Sales Charge of 1%. xxiv Portfolio Manager's Commentary In a rather lackluster year for bonds, the Strategic Income Fund's Class A returned 2.10% for the year ending October 31, 1999, as compared to the Lehman Brothers Aggregate Bond Index return of 0.53% for the same time period. The fiscal year began on a strong note as the Fund snapped back strongly in November when it became apparent to investors that the financial market crisis of the previous months was stabilizing. As investor confidence grew, a flight to risk developed, causing spreads to narrow and prices to increase on emerging market debt and high yield securities. Despite the rebound, the Federal Reserve opted for a third 25 basis point rate cut during the Fund's fiscal year at their November meeting. After the first of the year, the U.S. bond market suffered as U.S. economic growth remained surprisingly robust while Europe and Asia began to rebound from the recession. Soaring oil prices and a rising CRB Index pushed bond prices lower and yields higher. By the end of February, the yield on the 30- year Treasury rose to 5.56%, the highest level in more than six months. Corporates and mortgages outperformed Treasuries as investors looked to add more yield to their portfolios. High yield bonds and emerging market debt performed well through the second quarter. Strong domestic economic growth continued through the third quarter heightening fears about the prospect of higher inflation. The Federal Reserve took a proactive stance and began to unwind the 75 basis point reduction of the previous fall with two subsequent increases in the Federal Funds Rate. The Federal Funds Rate currently stands at 5.25% and the Federal Reserve is likely to push it modestly higher over the next few months. In general, we expect continued financial market volatility from Y2K concerns going forward, though we don't necessarily expect a major correction. In terms of the bond market, we expect the next 12 months will bring significantly higher returns than those witnessed thus far in 1999. Our view is that the Federal Reserve has engineered a nice balance between strong economic growth and low inflation and that any further rise in bond yields will be modest. Those factors, coupled with strong expected company earnings, should provide a favorable environment for the Fund. xxv Investment Quality Bond Fund Seeks to provide a high level of current income Investment consistent with the maintenance of principal and Objective: 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 Thomas L. Pappas Manager: May 1, 1991 Inception Date: [GRAPH] Change in Value of $10,000 Investment and Comparative Indices Investment Quality Bond Fund Month 5.75% Ended NAV Sales Charge 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 $10,742 $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 $11,021 $11,055 Apr-92 $11,065 $10,540 $11,100 $11,117 May-92 $11,320 $10,782 $11,310 $11,344 Jun-92 $11,511 $10,964 $11,466 $11,513 Jul-92 $11,791 $11,231 $11,700 $11,812 Aug-92 $11,915 $11,349 $11,818 $11,913 Sep-92 $12,085 $11,511 $11,959 $12,069 Oct-92 $11,901 $11,335 $11,800 $11,875 Nov-92 $11,930 $11,363 $11,802 $11,874 Dec-92 $12,127 $11,551 $11,990 $12,084 Jan-93 $12,382 $11,794 $12,220 $12,353 Feb-93 $12,604 $12,006 $12,434 $12,619 Mar-93 $12,676 $12,074 $12,486 $12,662 Apr-93 $12,757 $12,151 $12,573 $12,759 May-93 $12,769 $12,162 $12,590 $12,760 Jun-93 $13,016 $12,397 $12,817 $13,057 Jul-93 $13,051 $12,431 $12,891 $13,143 Aug-93 $13,312 $12,680 $13,116 $13,454 Sep-93 $13,372 $12,737 $13,152 $13,495 Oct-93 $13,408 $12,771 $13,200 $13,555 Nov-93 $13,192 $12,565 $13,088 $13,397 Dec-93 $13,254 $12,624 $13,159 $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 $12,678 $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 $12,916 $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 $12,775 $12,972 Jan-95 $12,749 $12,143 $13,028 $13,230 Feb-95 $13,056 $12,436 $13,338 $13,562 Mar-95 $13,130 $12,506 $13,419 $13,661 Apr-95 $13,322 $12,689 $13,607 $13,866 May-95 $13,859 $13,201 $14,133 $14,472 Jun-95 $13,947 $13,285 $14,237 $14,592 Jul-95 $13,902 $13,241 $14,205 $14,533 Aug-95 $14,058 $13,390 $14,377 $14,735 Sep-95 $14,201 $13,527 $14,517 $14,893 Oct-95 $14,441 $13,755 $14,705 $15,103 Nov-95 $14,668 $13,971 $14,926 $15,365 Dec-95 $14,889 $14,182 $15,135 $15,601 Jan-96 $14,952 $14,242 $15,238 $15,699 Feb-96 $14,655 $13,959 $14,973 $15,352 Mar-96 $14,524 $13,834 $14,868 $15,223 Apr-96 $14,392 $13,708 $14,785 $15,111 May-96 $14,344 $13,662 $14,755 $15,085 Jun-96 $14,523 $13,833 $14,953 $15,293 Jul-96 $14,545 $13,855 $14,993 $15,327 Aug-96 $14,525 $13,835 $14,968 $15,286 Sep-96 $14,794 $14,091 $15,228 $15,575 Oct-96 $15,093 $14,376 $15,566 $15,959 Nov-96 $15,379 $14,649 $15,832 $16,269 Dec-96 $15,212 $14,489 $15,685 $16,073 Jan-97 $15,235 $14,512 $15,734 $16,094 Feb-97 $15,289 $14,563 $15,773 $16,139 Mar-97 $15,074 $14,358 $15,598 $15,927 Apr-97 $15,323 $14,595 $15,832 $16,163 May-97 $15,453 $14,719 $15,982 $16,324 Jun-97 $15,659 $14,915 $16,172 $16,531 Jul-97 $16,156 $15,389 $16,609 $17,068 Aug-97 $15,951 $15,193 $16,468 $16,857 Sep-97 $16,206 $15,437 $16,712 $17,131 Oct-97 $16,386 $15,608 $16,954 $17,388 Nov-97 $16,458 $15,676 $17,032 $17,481 Dec-97 $16,624 $15,834 $17,204 $17,666 Jan-98 $16,901 $16,098 $17,424 $17,903 Feb-98 $16,894 $16,092 $17,410 $17,877 Mar-98 $16,936 $16,131 $17,469 $17,935 Apr-98 $16,993 $16,186 $17,560 $18,032 May-98 $17,180 $16,364 $17,727 $18,232 Jun-98 $17,303 $16,481 $17,878 $18,403 Jul-98 $17,312 $16,490 $17,915 $18,409 Aug-98 $17,355 $16,531 $18,207 $18,691 Sep-98 $17,825 $16,978 $18,633 $19,246 Oct-98 $17,636 $16,799 $18,535 $19,065 Nov-98 $17,862 $17,014 $18,640 $19,248 Dec-98 $17,889 $17,039 $18,696 $19,298 Jan-99 $17,999 $17,144 $18,829 $19,449 Feb-99 $17,571 $16,737 $18,499 $18,986 Mar-99 $17,717 $16,875 $18,601 $19,090 Apr-99 $17,778 $16,934 $18,661 $19,140 May-99 $17,549 $16,715 $18,497 $18,928 Jun-99 $17,456 $16,627 $18,437 $18,860 Jul-99 $17,380 $16,554 $18,360 $18,794 Aug-99 $17,303 $16,481 $18,351 $18,771 Sep-99 $17,436 $16,608 $18,564 $18,949 Oct-99 $17,447 $16,618 $18,627 $19,008 Performance Table
Average Annual Cumulative Total Return Total Return ---------------------- ------------ 1 5 Since Since Periods Ending October 31, 1999 Year Years Inception Inception ------ ----- --------- ------------ Lehman Brothers Aggregate Bond Index/1/ 0.53% 7.94% 7.59% 86.27% 50%/50% Composite/1/,/2/ -0.30% 8.06% 7.85% 90.08% Investment Quality Bond Fund A (NAV) -1.08% 6.97% 6.76% 74.47% Investment Quality Bond Fund Class A (net of 4.75% sales charge) -5.77% 5.93% 6.15% 66.18% Investment Quality Bond Fund Class B (NAV) -1.56% 6.35% 6.37% 69.05% Investment Quality Bond Fund Class B (net of CDSC)/3/ -6.48% 6.04% 6.37% 69.05% Investment Quality Bond Fund Class C (NAV) -1.56% 6.35% 6.37% 69.05% Investment Quality Bond Fund Class C (net of CDSC)/4/ -2.54% 6.35% 6.37% 69.05%
- ---------------------------------------------- /1/All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. /2/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. /3/The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. /4/The returns reflect the applicable Contingent Deferred Sales Charge of 1%. xxvi Portfolio Manager's Commentary The Investment Quality Bond Fund's Class A performance for the year-ended October 31, 1999 was -1.08% as compared to -0.30% for the Composite Index comprised of Lehman Government Bond Index and Lehman Corporate Bond Index. The past fiscal year was difficult for fixed income investors. Yields increased approximately 1.5% across the maturity spectrum. Particularly hard hit (based on yield changes) were bonds with two to ten years until maturity. The year began with turmoil in the credit markets due to the Russian default and the near collapse of a large fixed income hedge fund. Investors worldwide were anxious about holding anything but US Treasury securities. This flight to quality expanded the yield gap (spread) between US Treasuries and bonds of lesser quality to an uncharacteristically wide margin, given the strong economic environment. The yield spread has contracted somewhat since then, but is still larger than usual. In addition to US Treasuries, the Fund may hold corporate bonds, mortgage securities, and high yield issues. We took advantage of the lower prices and higher yields of non-Treasury debt because we felt these bonds would eventually return to favor once investors realized the world was not headed toward a depression. Currently, we are sticking with our above-index allocations of these securities. We do not know where yield spreads will be one month or so from now, particularly with the Y2K wildcard thrown in. However, looking into next year, it is highly unlikely that spreads will stay as wide as they currently are. Fundamentals, such as strong interest coverage and a growing economy, favor corporate bonds, while mortgages benefit from low volatility and diminished refinancings. The Treasury yield curve is priced to reflect a view that inflation is more likely to go up than down, and that economic growth is a bit stronger than the Fed would like. Over the next year, we believe growth will be lower, but inflation higher, and without knowing which one will lead the way, we are not betting that interest rates will move significantly one way or the other from their current levels. xxvii National Municipal Bond Fund Investment Seeks to provide a high level of current income which is Objective: exempt from regular federal income taxes, consistent with the preservation of capital, by investing primarily in a portfolio of municipal obligations. The Fund will not invest in municipal obligations that are rated below investment grade at the time of purchase. Subadvisor: Salomon Brothers Asset Management Inc. Portfolio Robert Amodeo Manager: Inception Date: July 6, 1993 [GRAPH] Change in Value of $10,000 Investment and Comparative Indices National Municipal Bond Fund Growth of Growth of Growth of $10,000 Invested $10,000 Invested $10,000 Investment in Class A in Class A in the shares at shares with Lehman Bros. Net Asset Value 5.75% charge Municipal of the National of the National Bond Index Muni Fund Muni Fund LB Municipal Month Ended NAV 5.75% Sales Charge 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 $10,357 Nov-93 $10,300 $9,811 $10,266 Dec-93 $10,457 $9,960 $10,483 Jan-94 $10,616 $10,112 $10,602 Feb-94 $10,302 $9,813 $10,328 Mar-94 $9,665 $9,206 $9,907 Apr-94 $9,742 $9,280 $9,992 May-94 $9,839 $9,372 $10,079 Jun-94 $9,756 $9,293 $10,020 Jul-94 $9,944 $9,472 $10,204 Aug-94 $9,943 $9,471 $10,239 Sep-94 $9,709 $9,248 $10,089 Oct-94 $9,454 $9,005 $9,909 Nov-94 $9,158 $8,723 $9,730 Dec-94 $9,494 $9,043 $9,944 Jan-95 $9,766 $9,302 $10,228 Feb-95 $10,106 $9,626 $10,526 Mar-95 $10,195 $9,711 $10,647 Apr-95 $10,209 $9,724 $10,660 May-95 $10,587 $10,085 $11,000 Jun-95 $10,435 $9,939 $10,904 Jul-95 $10,514 $10,015 $11,008 Aug-95 $10,649 $10,143 $11,147 Sep-95 $10,717 $10,208 $11,218 Oct-95 $10,897 $10,380 $11,380 Nov-95 $11,147 $10,618 $11,569 Dec-95 $11,273 $10,737 $11,680 Jan-96 $11,307 $10,770 $11,769 Feb-96 $11,227 $10,694 $11,689 Mar-96 $11,055 $10,530 $11,539 Apr-96 $10,998 $10,475 $11,507 May-96 $11,009 $10,486 $11,503 Jun-96 $11,149 $10,619 $11,628 Jul-96 $11,242 $10,708 $11,734 Aug-96 $11,254 $10,719 $11,731 Sep-96 $11,443 $10,899 $11,896 Oct-96 $11,585 $11,035 $12,030 Nov-96 $11,787 $11,227 $12,250 Dec-96 $11,739 $11,182 $12,199 Jan-97 $11,727 $11,170 $12,222 Feb-97 $11,837 $11,274 $12,334 Mar-97 $11,727 $11,170 $12,170 Apr-97 $11,837 $11,274 $12,273 May-97 $11,995 $11,425 $12,457 Jun-97 $12,130 $11,554 $12,590 Jul-97 $12,486 $11,893 $12,939 Aug-97 $12,375 $11,787 $12,817 Sep-97 $12,511 $11,917 $12,970 Oct-97 $12,610 $12,011 $13,053 Nov-97 $12,672 $12,070 $13,130 Dec-97 $12,872 $12,260 $13,321 Jan-98 $13,009 $12,391 $13,458 Feb-98 $12,996 $12,379 $13,462 Mar-98 $13,020 $12,401 $13,475 Apr-98 $12,955 $12,340 $13,414 May-98 $13,146 $12,522 $13,626 Jun-98 $13,197 $12,570 $13,679 Jul-98 $13,118 $12,495 $13,713 Aug-98 $13,324 $12,691 $13,926 Sep-98 $13,427 $12,789 $14,100 Oct-98 $13,372 $12,737 $14,100 Nov-98 $13,343 $12,709 $14,149 Dec-98 $13,390 $12,754 $14,185 Jan-99 $13,531 $12,889 $14,353 Feb-99 $13,462 $12,822 $14,290 Mar-99 $13,445 $12,806 $14,310 Apr-99 $13,494 $12,853 $14,346 May-99 $13,397 $12,761 $14,263 Jun-99 $13,233 $12,604 $14,057 Jul-99 $13,257 $12,627 $14,108 Aug-99 $13,145 $12,521 $13,995 Sep-99 $13,130 $12,506 $14,001 Oct-99 $12,970 $12,354 $13,850 Performance Table
Average Annual Cumulative Total Return Total Return ---------------------- ------------ 1 5 Since Since Year Years Inception Inception Periods Ending October 31, 1999 ------ ----- --------- ------------ Lehman Brothers Municipal Bond Index/1/ -1.78% 6.93% 5.28% 38.50% National Municipal Bond Fund A (NAV) -2.95% 6.53% 4.20% 29.70% National Municipal Bond Fund Class A (net of 4.75% sales charge) -7.61% 5.50% 3.40% 23.54% National Municipal Bond Fund Class B (NAV) -3.77% 5.67% 3.45% 23.90% National Municipal Bond Fund Class B (net of CDSC)/2/ -8.58% 5.34% 3.45% 23.90% National Municipal Bond Fund Class C (NAV) -3.77% 5.67% 3.45% 23.90% National Municipal Bond Fund Class C (net of CDSC)/3/ -4.73% 5.67% 3.45% 23.90%
- ----------------------------------------------- /1/All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. /2/The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. /3/The returns reflect the applicable Contingent Deferred Sales Charge of 1%. xxviii Portfolio Manager's Commentary The National Municipal Bond Fund's Class A performance for the year-ended October 31, 1999 was -2.95% as compared to the Lehman Brothers Municipal Bond Index return of -1.78% for the same period. During the last three months of 1998 investor confidence grew following a 25 basis points decrease in the Federal Funds rate in October. This move injected stability into an unstable market. As a result a flight to risk emerged, causing credit spreads to narrow and prices to increase on emerging markets' debt and high yield securities. Despite the rallies, the Fed opted to take out additional insurance against inflation concerns in the form of another 25 basis point rate cut at its November 1998 meeting. Most fixed income securities achieved modest returns during the month of December as another large upturn in the equity markets captured greater investor attention. Municipal bonds began the year on a positive note. After closing 1998 at near record issuance levels, state and local governments borrowed just $13.8 billion of new debt during January 1999. That represents a 24% decrease over the same period last year. This lower than expected municipal new issue calendar, coupled with an influx of cash from January 1st maturities and coupon payments, created a favorable environment for municipal bonds as demand outpaced supply. The imbalance enabled tax-exempts to smartly outperform Treasuries in January. Tax-exempts continued to benefit from the continued decline in new issue volume that enabled them to outperform Treasuries for the first three months of the year. The next three months were characterized by higher interest rates, highlighted by an increase in the Fed Funds Rate 25 basis points to 5.00% at the conclusion of the June 30th FOMC meeting. Prices for tax-exempts retreated during the quarter as a lack of support from institutional buyers caused municipal dealers' inventories to swell. July was the largest bond redemption month of the year with nearly $25 billion redeemed, which lent support to a manageable municipal new issue calendar. The specter of impending increases in short-term interest rates by the Fed unsettled the fixed income markets during the four months ending October 31st. The Fed did raise the federal funds rate 25 basis points to 5.25% during August. At its meeting on October 5, 1999, the Fed adopted a bias toward the future possibility of raising interest rates. This resulted in a sell-off in the fixed income markets, which continued through the first several weeks of October. The market, however, was able to pare some of those losses during the last week of the month. The catalyst for the bounce back was data displaying strong economic growth with little threat of inflation. Prices for municipal bonds were lower during the four-month period ending October, but setbacks were not as pronounced as those were in Treasuries. A notable exception was tax-exempt bonds that mature beyond twenty years, where losses where magnified due to continued lack of sponsorship from institutional buyers. Individual investors remained a constant in the marketplace due to high nominal yields and the relative attractiveness of tax-exempts as compared to Treasuries. xxix U.S. Government Securities Fund Investment Seeks to provide a high level of current income Objective: 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 Roger Lavan Manager: Inception Date: August 28, 1989/4/ [GRAPH] Change in Value of $10,000 Investment and Comparative Indices U.S. Government Securities Fund
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 5.75% 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 Month Ended NAV 5.75% Sales Charge ML 1-10 Yr Gov't Index Oct-89 $10,000 $9,525 $10,000 Nov-89 $10,087 $9,608 $10,098 Dec-89 $10,134 $9,652 $10,123 Jan-90 $10,034 $9,558 $10,066 Feb-90 $10,061 $9,583 $10,091 Mar-90 $10,066 $9,588 $10,111 Apr-90 $9,997 $9,522 $10,075 May-90 $10,216 $9,731 $10,288 Jun-90 $10,352 $9,860 $10,423 Jul-90 $10,488 $9,990 $10,572 Aug-90 $10,384 $9,891 $10,526 Sep-90 $10,465 $9,968 $10,622 Oct-90 $10,590 $10,087 $10,770 Nov-90 $10,805 $10,292 $10,930 Dec-90 $10,966 $10,445 $11,086 Jan-91 $11,106 $10,578 $11,198 Feb-91 $11,177 $10,646 $11,256 Mar-91 $11,238 $10,704 $11,317 Apr-91 $11,357 $10,818 $11,434 May-91 $11,424 $10,882 $11,499 Jun-91 $11,422 $10,879 $11,512 Jul-91 $11,597 $11,046 $11,635 Aug-91 $11,773 $11,214 $11,853 Sep-91 $11,951 $11,383 $12,054 Oct-91 $12,058 $11,485 $12,191 Nov-91 $12,165 $11,587 $12,333 Dec-91 $12,432 $11,841 $12,634 Jan-92 $12,287 $11,703 $12,506 Feb-92 $12,365 $11,777 $12,554 Mar-92 $12,268 $11,685 $12,503 Apr-92 $12,418 $11,828 $12,616 May-92 $12,607 $12,008 $12,797 Jun-92 $12,797 $12,189 $12,982 Jul-92 $13,026 $12,407 $13,224 Aug-92 $13,151 $12,526 $13,376 Sep-92 $13,329 $12,696 $13,560 Oct-92 $13,161 $12,536 $13,394 Nov-92 $13,096 $12,474 $13,335 Dec-92 $13,256 $12,626 $13,511 Jan-93 $13,491 $12,850 $13,763 Feb-93 $13,660 $13,011 $13,970 Mar-93 $13,776 $13,122 $14,023 Apr-93 $13,859 $13,201 $14,134 May-93 $13,808 $13,152 $14,091 Jun-93 $14,014 $13,348 $14,294 Jul-93 $14,057 $13,390 $14,324 Aug-93 $14,238 $13,561 $14,543 Sep-93 $14,282 $13,603 $14,606 Oct-93 $14,298 $13,619 $14,631 Nov-93 $14,218 $13,543 $14,561 Dec-93 $14,269 $13,591 $14,617 Jan-94 $14,399 $13,715 $14,763 Feb-94 $14,202 $13,528 $14,554 Mar-94 $14,033 $13,367 $14,350 Apr-94 $14,036 $13,369 $14,252 May-94 $14,025 $13,358 $14,267 Jun-94 $13,998 $13,334 $14,277 Jul-94 $14,161 $13,489 $14,454 Aug-94 $14,208 $13,533 $14,499 Sep-94 $14,035 $13,368 $14,383 Oct-94 $13,994 $13,329 $14,385 Nov-94 $13,958 $13,295 $14,314 Dec-94 $14,042 $13,375 $14,368 Jan-95 $14,275 $13,597 $14,606 Feb-95 $14,571 $13,879 $14,885 Mar-95 $14,656 $13,960 $14,967 Apr-95 $14,817 $14,114 $15,139 May-95 $15,363 $14,634 $15,572 Jun-95 $15,450 $14,716 $15,674 Jul-95 $15,397 $14,666 $15,685 Aug-95 $15,547 $14,808 $15,813 Sep-95 $15,650 $14,907 $15,919 Oct-95 $15,833 $15,081 $16,101 Nov-95 $16,017 $15,257 $16,299 Dec-95 $16,187 $15,418 $16,465 Jan-96 $16,292 $15,519 $16,605 Feb-96 $16,044 $15,282 $16,427 Mar-96 $15,924 $15,168 $16,353 Apr-96 $15,868 $15,115 $16,303 May-96 $15,800 $15,049 $16,294 Jun-96 $15,978 $15,219 $16,456 Jul-96 $16,007 $15,247 $16,507 Aug-96 $16,021 $15,260 $16,525 Sep-96 $16,269 $15,496 $16,736 Oct-96 $16,568 $15,781 $17,041 Nov-96 $16,801 $16,003 $17,249 Dec-96 $16,679 $15,887 $17,159 Jan-97 $16,761 $15,965 $17,224 Feb-97 $16,792 $15,994 $17,245 Mar-97 $16,668 $15,876 $17,159 Apr-97 $16,872 $16,071 $17,184 May-97 $17,008 $16,200 $17,198 Jun-97 $17,144 $16,330 $17,218 Jul-97 $17,475 $16,645 $17,541 Aug-97 $17,419 $16,591 $17,466 Sep-97 $17,628 $16,791 $17,659 Oct-97 $17,821 $16,974 $18,553 Nov-97 $17,835 $16,988 $18,596 Dec-97 $18,012 $17,156 $18,754 Jan-98 $18,225 $17,360 $19,007 Feb-98 $18,222 $17,356 $18,982 Mar-98 $18,273 $17,405 $19,045 Apr-98 $18,361 $17,489 $19,130 May-98 $18,486 $17,608 $19,259 Jun-98 $18,575 $17,693 $19,393 Jul-98 $18,628 $17,743 $19,469 Aug-98 $18,886 $17,989 $19,858 Sep-98 $19,240 $18,326 $20,326 Oct-98 $19,141 $18,232 $20,307 Nov-98 $19,175 $18,265 $20,231 Dec-98 $19,248 $18,334 $20,306 Jan-99 $19,340 $18,421 $20,404 Feb-99 $19,105 $18,197 $20,090 Mar-99 $19,237 $18,323 $20,236 Apr-99 $19,291 $18,375 $20,299 May-99 $19,111 $18,203 $20,163 Jun-99 $18,950 $18,050 $20,199 Jul-99 $18,927 $18,027 $20,221 Aug-99 $18,923 $18,024 $20,260 Sep-99 $19,198 $18,286 $20,422 Oct-99 $19,233 $18,321 $20,167
Performance Table
Average Annual Cumulative Total Return Total Return --------------------------- ---------------- Periods Ending October 31, 1999 1 5 10 Since/4/ 10 Since/4/ Year Years Years 12/31/91 Years 12/31/91 ------ ----- ----- -------- ------- -------- Merrill Lynch 1-10 Year Government Index/1/ 0.72% 6.99% 7.27% 6.15% 101.67% 59.61% U.S. Government Securities Fund A (NAV) 0.48% 6.57% 6.76% 5.89% 92.33% 57.00% Class A (net of 4.75% sales charge) -4.29% 5.54% 6.24 5.23% 83.21% 49.12% U.S. Government Securities Fund Class B (NAV) 0.01% 5.90% 6.39% 5.42% 85.78% 51.65% Class B (net of CDSC)/2/ -4.99% 5.58% 6.39% 5.42% 85.78% 51.65% U.S. Government Securities Fund Class C (NAV) 0.01% 5.90% 6.39% 5.42% 85.78% 51.65% Class C (net of CDSC)/3/ -0.99% 5.90% 6.39% 5.42% 85.78% 51.65%
- --------------------------------------- /1/All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. /2/The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. /3/The returns reflect the applicable Contingent Deferred Sales Charge of 1%. /4/Current investment subadvisor assignment became effective 12/31/91. xxx Portfolio Manager's Commentary The U. S. Government Securities Fund's Class A performance for the year-ended October 31, 1999 was 0.48% as compared to the Merrill Lynch 1-10 Year Government Index return of 0.72%. After performing very strongly during the fiscal year 1998, U.S. Government bonds and bond funds suffered breakeven returns in 1999. The Federal Reserve aggressively reduced interest rates and sent bond prices significantly higher in late 1998 to counteract the global economic crisis that swept through Asia and Europe and began to threaten the United States. The Federal Reserve aggressiveness in lowering rates helped stabilize the global capital markets and by the beginning of 1999, it was apparent that the crisis had past. Prices on U.S. government bonds began to decline as U.S. economic growth remained surprisingly robust while Europe and Asia began to rebound from the recession. In addition, soaring oil prices and a rising CRB Index began to ignite inflation fears and concerns that the Federal Reserve would need to reverse course and begin to raise rates. In fact, the market was correct to worry because the Federal Reserve took a proactive stance and began to unwind the 75 basis point reduction of the previous fall when it raised interest rates by 25 basis points in June and again in August. The Federal Funds Rate currently stands at 5.25% and the Federal Reserve is likely to push it modestly higher over the next few months. In general, we expect continued financial market volatility from Y2K concerns going forward, though we don't necessarily expect a major correction. In terms of the bond market, we expect the next 12 months will bring significantly higher returns than those witnessed thus far in 1999. Our view is that the Federal Reserve has engineered a nice balance between strong economic growth and low inflation and that any further rise in bond yields will be modest. We are currently underweighted in lower yielding U.S. government bonds such as Treasury and agency debentures in favor of agency mortgage pass-through securities. We believe that mortgages such as Fannie Mae and Freddie Mac will provide investors with higher returns over the next six months. xxxi Report of Independent Accountants - ------------------------------------------------------------------------------- To the Trustees and Shareholders of North American Funds: In our opinion, the accompanying statements of assets and liabilities, including the portfolios of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of North American Funds (comprising, the International Small Cap, International Equity (formerly International Growth and Income), Global Equity, Emerging Growth, Small/Mid Cap, Growth Equity, Tax-Sensitive Equity, Growth and Income, Equity-Income, Balanced, Strategic Income, Investment Quality Bond, National Municipal Bond, U.S. Government Securities and Money Market Funds, hereafter referred to as the "Funds") at October 31, 1999, and the results of their operations, the changes in their net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 1999 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Boston, Massachusetts December 20, 1999 1 NORTH AMERICAN FUNDS STATEMENT OF ASSETS AND LIABILITIES - OCTOBER 31, 1999 - --------------------------------------------------------------------------------
International International Global Emerging Small/Mid Small Cap Equity Equity Growth Cap Fund Fund** Fund Fund Fund ------------- ------------- ----------- ---------- ----------- ASSETS: Investments in securities, at value* (See accompanying Portfolio of Investments)........... $16,264,145 $25,628,249 $82,885,928 $1,230,782 $42,595,851 Receivable for forward foreign currency contracts to sell (Notes 2 and 8)........ - 3,979,413 6,531,900 - - Forward foreign currency contracts to buy, at value (Cost: $4,105,676) (Notes 2 and 8)........ - 4,109,593 - - - Cash.................... 6,525 385 200 - - Foreign currency (Cost:$2,296, $139,868 and $3,599 in International Small Cap, International Equity and Global Equity, respectively).. 2,159 138,372 3,527 - - Investment in State Street Bank & Trust Company Navigator Securities Lending Trust held as collateral for securities on loan, at value (Note 2)......... - 3,922,082 4,528,860 - 8,104,967 Variation margin receivable for open futures contracts...... - 151,098 - - - Deferred organization costs.................. - - - 20,842 - Receivables: Investments sold....... 448,933 - 657,826 16,313 302,604 Fund shares sold....... 18,091 13,508 24,240 15,486 217,049 Dividends.............. 5,104 35,880 111,138 - 152 Interest............... 1,560 259 1,059 82 1,895 Foreign tax withholding reclaims.............. 3,554 16,475 48,824 - - From adviser........... - - - 3,956 - Other assets............ 44,917 41,522 - 47,653 44,274 ----------- ----------- ----------- ---------- ----------- Total assets.......... 16,794,988 38,036,836 94,793,502 1,335,114 51,266,792 ----------- ----------- ----------- ---------- ----------- LIABILITIES: Forward foreign currency contracts to sell, at value (Cost: $3,979,413 and $6,531,900 in International Equity and Global Equity, respectively) (Notes 2 and 8)................. - 3,993,804 6,384,453 - - Collateral on securities loaned, at value (Note 2)..................... - 3,922,082 4,528,860 - 8,104,967 Payables: Forward foreign currency contracts to buy (Notes 2 and 8)... - 4,105,676 - - - Investments purchased.. 1,043,054 1,012,385 188,400 3,735 921,815 Fund shares redeemed... 27,074 22,188 183,724 2,450 79,914 Dividend and interest withholding tax....... 670 4,607 7,702 - - Investment adviser..... 16,786 13,631 83,144 - 22,397 Custodian and transfer agent fees............ 2,779 3,687 19,427 3,687 3,750 Distribution fee....... 6,606 11,254 23,784 911 31,258 Other accrued expenses.............. - 1,543 35,474 - 9,716 ----------- ----------- ----------- ---------- ----------- Total liabilities..... 1,096,969 13,090,857 11,454,968 10,783 9,173,817 ----------- ----------- ----------- ---------- ----------- NET ASSETS.............. $15,698,019 $24,945,979 $83,338,534 $1,324,331 $42,092,975 ----------- ----------- ----------- ---------- ----------- NET ASSETS CONSIST OF: Undistributed net investment income/(loss) (Note 2).................... - $53,768 ($147,081) - - Accumulated undistributed net realized gain (loss) on investments, foreign currency and forward foreign currency contracts.... $3,733,997 1,830,855 9,983,190 $10,382 $7,120,712 Unrealized appreciation (depreciation) on: Investments........... 1,665,954 2,146,348 10,025,592 248,604 3,570,546 Futures............... - (27,820) - - - Foreign currency and forward foreign currency contracts... (821) (12,515) 145,002 - - Capital shares at par value of $.001 (Note 3).................... 852 2,121 5,240 104 2,329 Additional paid-in capital............... 10,298,037 20,953,222 63,326,591 1,065,241 31,399,388 ----------- ----------- ----------- ---------- ----------- Net assets............ $15,698,019 $24,945,979 $83,338,534 $1,324,331 $42,092,975 ----------- ----------- ----------- ---------- ----------- *Investments in securities, at identified cost (Note 2)..................... $14,598,191 $23,481,901 $72,860,336 $982,178 $39,025,305 ----------- ----------- ----------- ---------- -----------
- --------------------- ** Formerly the International Growth and Income Fund The accompanying notes are an integral part of the financial statements. 2 NORTH AMERICAN FUNDS STATEMENT OF ASSETS AND LIABILITIES continued - OCTOBER 31, 1999 - --------------------------------------------------------------------------------
International International Global Emerging Small/Mid Small Cap Equity Equity Growth Cap Fund Fund** Fund Fund Fund ------------- ------------- ----------- -------- ----------- NET ASSET VALUES: Class A Shares Net assets at value.... $2,308,936 $ 3,996,628 $12,757,320 $223,641 $ 5,970,129 Shares outstanding..... 122,638 335,997 791,278 17,458 322,314 Net asset value (NAV) and redemption price per share.............. $18.83 $11.89 $16.12 $12.81 $18.52 ------ ------ ------ ------ ------ Public offering price per share (100/94.25 of NAV) On sales of $100,000 or more the offering price is reduced............. $19.98 $12.62 $17.10 $13.59 $19.65 ------ ------ ------ ------ ------ Class B Shares Net assets at value.... $7,417,091 $14,269,099 $25,380,528 $660,471 $17,184,297 Shares outstanding..... 404,250 1,215,619 1,603,463 52,556 955,434 Net asset value, offering price and redemption price per share.................. $18.35 $11.74 $15.83 $12.57 $17.99 ------ ------ ------ ------ ------ Class C Shares Net assets at value.... $5,971,992 $ 6,680,252 $45,200,686 $440,219 $18,938,549 Shares outstanding..... 325,123 569,075 2,845,052 35,019 1,051,128 Net asset value, offering price and redemption price per share.................. $18.37 $11.74 $15.89 $12.57 $18.02 ------ ------ ------ ------ ------
- --------------------- ** Formerly the International Growth and Income Fund The accompanying notes are an integral part of the financial statements. 3 NORTH AMERICAN FUNDS STATEMENT OF ASSETS AND LIABILITIES continued - OCTOBER 31, 1999 - --------------------------------------------------------------------------------
Tax- Growth Sensitive Growth and Equity- Equity Equity Income Income Balanced Fund Fund Fund Fund Fund ----------- ----------- ------------ ------------ ----------- ASSETS: Investments in securities, at value* (See accompanying Portfolio of Investments)............. $42,533,943 $8,886,969 $298,543,702 $115,694,225 $71,769,480 Cash...................... 986 440 538 41 660 Foreign currency (Cost: $7,931 in Balanced)...... - - - - 7,820 Investment in State Street Bank & Trust Company Navigator Securities Lending Trust held as collateral for securities on loan, at value (Note 2)....................... 5,048,747 - 4,962,600 1,242,600 5,183,450 Deferred organization costs.................... - 20,762 - - - Receivables: Investments sold......... 895,240 - - - 1,770,989 Fund shares sold......... 326,104 30,477 870,080 219,680 9,923 Dividends................ 15,603 6,659 320,593 266,679 52,772 Interest................. 525 57 1,328 42 760,414 Foreign tax withholding reclaims................ 101 - 5,829 - 6,899 Other assets.............. 26,860 40,757 2,049 1,998 1,476 ----------- ----------- ------------ ------------ ----------- Total assets............ 48,848,109 8,986,121 304,706,719 117,425,265 79,563,883 ----------- ----------- ------------ ------------ ----------- LIABILITIES: Collateral on securities loaned, at value (Note 2)....................... 5,048,747 - 4,962,600 1,242,600 5,183,450 Payables: Investments purchased.... 1,324,957 - 844,918 - 672,265 Fund shares redeemed..... 134,298 - 484,718 150,648 36,583 Dividend and interest withholding tax......... 5 - - 36 1,156 Investment adviser....... 22,375 2,732 198,339 61,661 49,057 Custodian and transfer agent fees.............. 2,959 3,692 18,309 19,662 11,591 Distribution fee......... 15,810 6,185 87,817 29,738 14,139 Other accrued expenses... 8,306 - 147,863 71,697 32,706 ----------- ----------- ------------ ------------ ----------- Total liabilities....... 6,557,457 12,609 6,744,564 1,576,042 6,000,947 ----------- ----------- ------------ ------------ ----------- NET ASSETS................ $42,290,652 $8,973,512 $297,962,155 $115,849,223 $73,562,936 ----------- ----------- ------------ ------------ ----------- NET ASSETS CONSIST OF: Undistributed net investment income/(loss) (Note 2)................ - - - $509,106 $1,271,183 Accumulated undistributed net realized gain (loss) on investments, foreign currency and forward foreign currency contracts............... $5,692,446 ($1,761,798) $25,033,619 21,841,836 8,646,672 Unrealized appreciation (depreciation) on: Investments............. 6,079,643 731,804 108,981,644 7,699,450 (1,896,585) Foreign currency and forward foreign currency contracts..... (2) - (12) - (133) Capital shares at par value of $.001 (Note 3)...................... 2,013 957 10,492 6,900 6,940 Additional paid-in capital................. 30,516,552 10,002,549 163,936,412 85,791,931 65,534,859 ----------- ----------- ------------ ------------ ----------- Net assets.............. $42,290,652 $8,973,512 $297,962,155 $115,849,223 $73,562,936 ----------- ----------- ------------ ------------ ----------- *Investments in securities, at identified cost (Note 2)............ $36,454,300 $8,155,165 $189,562,058 $107,994,775 $73,666,065 ----------- ----------- ------------ ------------ -----------
The accompanying notes are an integral part of the financial statements. 4 NORTH AMERICAN FUNDS STATEMENT OF ASSETS AND LIABILITIES continued - OCTOBER 31, 1999 - --------------------------------------------------------------------------------
Tax- Growth Sensitive Growth and Equity- Equity Equity Income Income Balanced Fund Fund Fund Fund Fund ----------- ---------- ------------ ----------- ----------- NET ASSET VALUES: Class A Shares Net assets at value.... $ 5,656,237 $1,526,499 $ 37,210,426 $13,989,760 $ 5,936,108 Shares outstanding..... 263,876 160,826 1,293,038 827,331 561,872 Net asset value (NAV) and redemption price per share.............. $21.44 $9.49 $28.78 $16.91 $10.56 ------ ----- ------ ------ ------ Public offering price per share (100/94.25 of NAV) On sales of $100,000 or more the offering price is reduced............. $22.75 $10.07 $30.54 $17.94 $11.20 ------ ------ ------ ------ ------ Class B Shares Net assets at value.... $17,171,410 $3,724,303 $104,695,326 $31,659,383 $13,957,744 Shares outstanding..... 819,152 398,104 3,702,446 1,894,670 1,330,817 Net asset value, offering price and redemption price per share.................. $20.96 $9.36 $28.28 $16.71 $10.49 ------ ----- ------ ------ ------ Class C Shares Net assets at value.... $19,463,005 $3,722,710 $156,056,403 $70,200,080 $53,669,084 Shares outstanding..... 930,076 397,954 5,496,180 4,177,566 5,046,875 Net asset value, offering price and redemption price per share.................. $20.93 $9.35 $28.39 $16.80 $10.63 ------ ----- ------ ------ ------
The accompanying notes are an integral part of the financial statements. 5 NORTH AMERICAN FUNDS STATEMENT OF ASSETS AND LIABILITIES continued - OCTOBER 31, 1999 - --------------------------------------------------------------------------------
Investment National U. S. Strategic Quality Municipal Government Money Income Bond Bond Securities Market Fund Fund Fund Fund Fund ----------- ----------- ----------- ----------- ----------- ASSETS: Investments in securities, at value* (Includes a repurchase agreement of $11,883,000 in U. S. Government Securities) (See accompanying Portfolio of Investments)............. $52,135,699 $12,164,731 $12,315,669 $67,520,526 $20,023,054 Receivable for forward foreign currency contracts to sell (Notes 2 and 8)................. 1,924,403 - - - - Forward foreign currency contracts to buy, at value (Cost: $1,370,978) (Notes 2 and 8)................. 1,365,629 - - - - Cash...................... 69,642 643 38,522 662 807 Investment in State Street Bank & Trust Company Navigator Securities Lending Trust held as collateral for securities on loan, at value (Note 2)....................... 6,274,430 1,618,069 - - - Receivables: Investments sold......... 210,824 - - 48,032 - Fund shares sold......... 27,200 177 - 669 345,198 Dividends................ 2,836 - - - - Interest................. 1,049,042 234,729 195,856 348,439 60,895 From adviser............. - 134 - - 5,717 Other assets.............. 59,785 40,287 47,684 19,172 67,310 ----------- ----------- ----------- ----------- ----------- Total assets............ 63,119,490 14,058,770 12,597,731 67,937,500 20,502,981 ----------- ----------- ----------- ----------- ----------- LIABILITIES: Forward foreign currency contracts to sell, at value (Cost: $1,924,403) (Notes 2 and 8)................. 1,918,812 - - - - Collateral on securities loaned, at value (Note 2)....................... 6,274,430 1,618,069 - - - Payables: Forward foreign currency contracts to buy (Notes 2 and 8)................ 1,370,978 - - - - Investments purchased.... 2,042,958 - - 9,130,828 - Fund shares redeemed..... 187,607 8,200 10 64,283 1,257,870 Dividends................ 132,167 30,610 20,987 484,528 13,104 Dividend and interest withholding tax......... 4,660 21 - - - Investment adviser....... 38,604 - 6,104 37,454 - Custodian and transfer agent fees.............. 11,330 1,527 4,139 10,329 855 Distribution fee......... 22,535 4,299 3,970 11,916 - Due to custodian......... 1,700 - - - - Other accrued expenses... 27,671 1,296 - 9,789 6,054 ----------- ----------- ----------- ----------- ----------- Total liabilities....... 12,033,452 1,664,022 35,210 9,749,127 1,277,883 ----------- ----------- ----------- ----------- ----------- NET ASSETS................ $51,086,038 $12,394,748 $12,562,521 $58,188,373 $19,225,098 ----------- ----------- ----------- ----------- ----------- NET ASSETS CONSIST OF: Undistributed net investment income/(loss) (Note 2)................ ($94,527) ($20,882) ($263) ($488,884) - Accumulated undistributed net realized gain (loss) on investments, foreign currency and forward foreign currency contracts............... (4,012,655) (577,532) (100,115) (1,657,535) - Unrealized appreciation (depreciation) on: Investments............. (4,208,516) (558,562) 12,048 (1,289,319) - Foreign currency and forward foreign currency contracts..... (4,371) - - - - Capital shares at par value of $.001 (Note 3)...................... 6,079 1,259 1,324 6,092 $19,225 Additional paid-in capital................. 59,400,028 13,550,465 12,649,527 61,618,019 19,205,873 ----------- ----------- ----------- ----------- ----------- Net assets.............. $51,086,038 $12,394,748 $12,562,521 $58,188,373 $19,225,098 ----------- ----------- ----------- ----------- ----------- *Investments in securities, at identified cost (Note 2)............ $56,344,215 $12,723,293 $12,303,621 $68,809,845 $20,023,054 ----------- ----------- ----------- ----------- -----------
The accompanying notes are an integral part of the financial statements. 6 NORTH AMERICAN FUNDS STATEMENT OF ASSETS AND LIABILITIES continued - OCTOBER 31, 1999 - --------------------------------------------------------------------------------
Investment National U. S. Strategic Quality Municipal Government Money Income Bond Bond Securities Market Fund Fund Fund Fund Fund ----------- ---------- ---------- ----------- ---------- NET ASSET VALUES: Class A Shares Net assets at value.... $8,996,901 $3,506,653 $4,434,703 $35,378,988 $6,029,946 Shares outstanding..... 1,071,397 356,060 467,555 3,704,557 6,029,890 Net asset value (NAV) and redemption price per share.............. $8.40 $9.85 $9.48 $9.55 $1.00 ----- ----- ----- ----- ----- Public offering price per share (100/95.25 of NAV) On sales of $100,000 or more the offering price is reduced............. $8.82 $10.34 $9.95 $10.03 ----- ------ ----- ------ Class B Shares Net assets at value.... $21,340,388 $4,294,772 $4,196,827 $12,033,479 $4,550,981 Shares outstanding..... 2,538,419 436,117 442,570 1,259,202 4,550,563 Net asset value, offering price and redemption price per share.................. $8.41 $9.85 $9.48 $9.56 $1.00 ----- ----- ----- ----- ----- Class C Shares Net assets at value.... $20,748,749 $4,593,323 $3,930,991 $10,775,906 $8,644,171 Shares outstanding..... 2,468,053 466,440 414,531 1,127,653 8,643,100 Net asset value, offering price and redemption price per share.................. $8.41 $9.85 $9.48 $9.56 $1.00 ----- ----- ----- ----- -----
The accompanying notes are an integral part of the financial statements. 7 NORTH AMERICAN FUNDS STATEMENT OF OPERATIONS - FOR THE YEAR ENDED OCTOBER 31, 1999 - --------------------------------------------------------------------------------
International International Global Emerging Small/Mid Small Cap Equity Equity Growth Cap Fund Fund* Fund Fund Fund ------------- ------------- ---------- --------- ---------- INVESTMENT INCOME: Interest................... $46,839 $41,854 $78,368 $2,455 $134,064 Dividends (Net of $12,406, $61,226, $192,286 and $2,192 withholding tax in International Small Cap, International Equity, Global Equity and Small/Mid Cap, respectively)............. 108,444 453,691 2,212,121 558 85,506 ---------- ---------- ---------- --------- ---------- Total income.............. 155,283 495,545 2,290,489 3,013 219,570 ---------- ---------- ---------- --------- ---------- EXPENSES: Distribution for Class A... 7,675 13,640 81,774 687 20,192 Distribution for Class B... 71,002 145,027 288,848 5,043 171,666 Distribution for Class C... 59,084 72,373 534,908 3,007 193,223 Investment adviser fee (Note 5).................. 159,614 230,737 951,657 9,513 390,888 Custodian fee.............. 36,195 36,313 136,423 36,014 36,554 Transfer agent fee......... 44,945 61,348 184,116 9,187 102,694 Accounting/administration.. 23,176 39,260 164,347 1,488 63,966 Audit and legal fees....... 7,792 13,198 54,463 514 21,821 Amortization of organization costs........ - - - 6,581 - Miscellaneous.............. 15,516 35,271 90,217 2,984 35,939 ---------- ---------- ---------- --------- ---------- Expenses before reimbursement by investment adviser........ 424,999 647,167 2,486,753 75,018 1,036,943 Reimbursement of expenses by investment adviser (Note 5).................. 51,624 58,359 102,604 52,756 91,998 ---------- ---------- ---------- --------- ---------- Net expenses.............. 373,375 588,808 2,384,149 22,262 944,945 ---------- ---------- ---------- --------- ---------- Net investment income/(loss)............ (218,092) (93,263) (93,660) (19,249) (725,375) ---------- ---------- ---------- --------- ---------- REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS, FOREIGN CURRENCY AND FORWARD FOREIGN CURRENCY CONTRACTS: Net realized gain/(loss) on: Investment transactions.... 4,674,222 2,202,524 15,363,203 63,202 8,025,646 Futures contracts.......... - (105,083) - - - Foreign currency and forward foreign currency contracts................. (58,974) (41,996) (270,661) - 8 Change in unrealized appreciation (depreciation) on: Investments................ 127,096 2,776,922 (8,810,322) 309,851 1,370,689 Futures contracts.......... - (27,820) - - - Translation of foreign currency and forward foreign currency contracts................. (958) 155,639 365,478 - - ---------- ---------- ---------- --------- ---------- Net gain/(loss) on investments, foreign currency and forward foreign currency contracts................ 4,741,386 4,960,186 6,647,698 373,053 9,396,343 ---------- ---------- ---------- --------- ---------- Net increase in net assets resulting from operations.. $4,523,294 $4,866,923 $6,554,038 $353,804 $8,670,968 ---------- ---------- ---------- --------- ----------
- --------------------- * Formerly the International Growth and Income Fund The accompanying notes are an integral part of the financial statements. 8 NORTH AMERICAN FUNDS STATEMENT OF OPERATIONS - FOR THE YEAR ENDED OCTOBER 31, 1999 - --------------------------------------------------------------------------------
Tax- Growth Sensitive Growth and Equity- Equity Equity Income Income Balanced Fund Fund Fund Fund Fund ---------- ----------- ----------- ------------ ----------- INVESTMENT INCOME: Interest................... $68,723 $9,783 $222,376 $127,679 $2,451,719 Dividends (Net of $475, $820, $24,277, $13,628 and $30,950 withholding tax in Growth Equity, Tax- Sensitive Equity, Growth and Income, Equity-Income and Balanced, respectively)............. 196,785 106,361 3,928,924 3,799,150 845,697 ---------- ----------- ----------- ------------ ----------- Total income.............. 265,508 116,144 4,151,300 3,926,829 3,297,416 ---------- ----------- ----------- ------------ ----------- EXPENSES: Distribution for Class A... 17,231 10,685 158,039 96,309 41,514 Distribution for Class B... 149,211 37,160 943,742 363,445 170,727 Distribution for Class C... 174,643 35,963 1,464,659 849,454 616,807 Investment adviser fee (Note 5)................... 335,777 88,103 1,912,464 1,060,879 681,955 Custodian fee.............. 36,522 36,143 140,315 83,437 58,065 Transfer agent fee......... 89,017 13,827 376,715 233,528 129,193 Accounting/administration.. 56,337 15,915 434,861 231,614 140,051 Audit and legal fees....... 19,331 5,325 148,248 76,533 46,612 Amortization of organization costs......... - 6,557 - - - Miscellaneous.............. 32,101 10,443 234,964 139,534 76,717 ---------- ----------- ----------- ------------ ----------- Expenses before reimbursement by investment adviser.................... 910,170 260,121 5,814,007 3,134,733 1,961,641 Reimbursement of expenses by investment adviser (Note 5)......................... 84,102 45,864 414,305 277,002 190,199 ---------- ----------- ----------- ------------ ----------- Net expenses.............. 826,068 214,257 5,399,702 2,857,731 1,771,442 ---------- ----------- ----------- ------------ ----------- Net investment income/(loss)............. (560,560) (98,113) (1,248,402) 1,069,098 1,525,974 ---------- ----------- ----------- ------------ ----------- REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS, FOREIGN CURRENCY AND FORWARD FOREIGN CURRENCY CONTRACTS: Net realized gain (loss) on: Investment transactions.... 6,256,855 (1,007,031) 29,073,940 25,209,364 9,063,680 Foreign currency and forward foreign currency contracts.................. (2,574) - (244) (11,895) (43,308) Change in unrealized appreciation (depreciation) on: Investments................ 2,622,980 1,514,682 27,366,787 (19,384,683) (9,389,607) Translation of foreign currency and forward foreign currency contracts................. (7) - 153 101 (920) ---------- ----------- ----------- ------------ ----------- Net gain/(loss) on investments, foreign currency and forward foreign currency contracts................ 8,877,254 507,651 56,440,636 5,812,887 (370,155) ---------- ----------- ----------- ------------ ----------- Net increase in net assets resulting from operations... $8,316,694 $409,538 $55,192,234 $6,881,985 $1,155,819 ---------- ----------- ----------- ------------ -----------
The accompanying notes are an integral part of the financial statements. 9 NORTH AMERICAN FUNDS STATEMENT OF OPERATIONS - FOR THE YEAR ENDED OCTOBER 31, 1999 - --------------------------------------------------------------------------------
Investment National U.S. Strategic Quality Municipal Government Money Income Bond Bond Securities Market Fund Fund Fund Fund Fund ---------- ---------- ---------- ---------- ---------- INVESTMENT INCOME: Interest (Net of $9,756 and $21 withholding tax in Strategic Income and Investment Quality Bond, respectively)............. $6,483,191 $1,197,389 $826,875 $4,721,160 $1,097,161 Dividends.................. - 4,063 - - - ---------- ---------- ---------- ---------- ---------- Total income.............. 6,483,191 1,201,452 826,875 4,721,160 1,097,161 ---------- ---------- ---------- ---------- ---------- EXPENSES: Distribution for Class A... 42,157 19,724 8,045 151,280 - Distribution for Class B... 268,194 46,976 49,930 131,921 - Distribution for Class C... 287,809 54,899 46,413 121,489 - Investment adviser fee (Note 5)................... 498,515 94,898 89,986 411,390 44,172 Custodian fee.............. 91,391 36,179 36,186 45,773 36,192 Transfer agent fee......... 103,440 37,925 18,297 101,959 70,210 Accounting/administration.. 104,964 24,557 23,167 106,197 34,090 Audit and legal fees....... 34,703 8,172 7,740 35,282 11,456 Miscellaneous.............. 58,419 14,782 14,045 57,618 19,532 ---------- ---------- ---------- ---------- ---------- Expenses before reimbursement by investment adviser.................... 1,489,592 338,112 293,809 1,162,909 215,652 Reimbursement of expenses by investment adviser (Note 5)......................... 113,062 74,346 61,828 141,964 105,222 ---------- ---------- ---------- ---------- ---------- Net expenses.............. 1,376,530 263,766 231,981 1,020,945 110,430 ---------- ---------- ---------- ---------- ---------- Net investment income/(loss)............. 5,106,661 937,686 594,894 3,700,215 986,731 ---------- ---------- ---------- ---------- ---------- REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS, FOREIGN CURRENCY AND FORWARD FOREIGN CURRENCY CONTRACTS: Net realized gain (loss) on: Investment transactions.... (3,377,733) (205,464) (75,958) (821,237) 572 Foreign currency and forward foreign currency contracts.................. (246,365) - - - - Change in unrealized appreciation (depreciation) on: Investments................ (281,966) (979,000) (1,012,148) (2,669,738) - Translation of foreign currency and forward foreign currency contracts................. 255,346 - - - - ---------- ---------- ---------- ---------- ---------- Net gain/(loss) on investments, foreign currency and forward foreign currency contracts................ (3,650,718) (1,184,464) (1,088,106) (3,490,975) 572 ---------- ---------- ---------- ---------- ---------- Net increase/(decrease) in net assets resulting from operations................. $1,455,943 ($246,778) ($493,212) $209,240 $987,303 ---------- ---------- ---------- ---------- ----------
The accompanying notes are an integral part of the financial statements. 10 NORTH AMERICAN FUNDS STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
International Small Cap Fund International Equity Fund** Global Equity Fund ------------------------- ----------------------------- -------------------------- Year Year Year Year Year Year Ended Ended Ended Ended Ended Ended 10/31/99 10/31/98 10/31/99 10/31/98 10/31/99 10/31/98 ----------- ----------- ------------- ------------- ----------- ------------ OPERATIONS: Net investment income (loss) ..... ($218,092) ($118,410) ($93,263) ($25,047) ($93,660) ($509,955) Net realized gain (loss) on: Investment transactions....... 4,674,222 (75,711) 2,202,524 33,515 15,363,203 9,400,371 Futures contracts... - - (105,083) - - - Foreign currency and forward foreign currency contracts.......... (58,974) (22,378) (41,996) 129,326 (270,661) 845,669 Change in unrealized appreciation (depreciation) on: Investments......... 127,096 236,882 2,780,190 405,513 (8,810,322) 975,938 Futures contracts... - - (27,820) - - - Foreign currency and forward foreign currency contracts.......... (958) 3,020 152,371 (374,342) 365,478 (700,564) ----------- ----------- ------------- ------------- ----------- ------------ Net increase (decrease) in net assets resulting from operations..... 4,523,294 23,403 4,866,923 168,965 6,554,038 10,011,459 DISTRIBUTIONS FROM: Net investment income Class A............. - - - (32,570) - (417,000) Class B............. - - - (49,275) - (215,336) Class C............. - - - (25,937) - (405,867) Net realized gains on investments and foreign currency transactions....... Class A............. - - (12,093) (387,315) (2,303,340) (1,961,256) Class B............. - - (44,312) (1,343,452) (2,219,820) (2,005,883) Class C............. - - (25,387) (715,494) (4,228,655) (3,781,969) In excess of net investment income Class A............. - - - (21,898) - - Class B............. - - - (33,130) - - Class C............. - - - (17,438) - - Increase (decrease) in net assets from capital share transactions (Note 3).................. (4,278,804) (2,188,345) (5,598,242) (1,038,721) (33,579,885) (6,146,407) ----------- ----------- ------------- ------------- ----------- ------------ Increase (decrease) in net assets....... 244,490 (2,164,942) (813,111) (3,496,265) (35,777,662) (4,922,259) Net assets at beginning of period.............. 15,453,529 17,618,471 25,759,090 29,255,355 119,116,196 124,038,455 ----------- ----------- ------------- ------------- ----------- ------------ Net assets at end of period.............. $15,698,019 $15,453,529 $24,945,979 $25,759,090 $83,338,534 $119,116,196 ----------- ----------- ------------- ------------- ----------- ------------ Undistributed net investment income (loss).............. - - $53,768 $165,398 ($147,081) $226,601 ----------- ----------- ------------- ------------- ----------- ------------ Emerging Growth Fund ----------------------- Year 01/06/98 * Ended to 10/31/99 10/31/98 ----------- ----------- OPERATIONS: Net investment income (loss) ..... ($19,249) ($4,740) Net realized gain (loss) on: Investment transactions....... 63,202 (39,152) Futures contracts... - - Foreign currency and forward foreign currency contracts.......... - - Change in unrealized appreciation (depreciation) on: Investments......... 309,851 (61,247) Futures contracts... - - Foreign currency and forward foreign currency contracts.......... - - ----------- ----------- Net increase (decrease) in net assets resulting from operations..... 353,804 (105,139) DISTRIBUTIONS 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............. - - In excess of net investment income Class A............. - - Class B............. - - Class C............. - - Increase (decrease) in net assets from capital share transactions (Note 3).................. 323,343 752,323 ----------- ----------- Increase (decrease) in net assets....... 677,147 647,184 Net assets at beginning of period.............. 647,184 - ----------- ----------- Net assets at end of period.............. $1,324,331 $647,184 ----------- ----------- Undistributed net investment income (loss).............. - - ----------- -----------
- ------------------- * Commencement of operations ** Formerly known as the International Growth and Income Fund The accompanying notes are an integral part of the financial statements. 11 NORTH AMERICAN FUNDS STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
Tax-Sensitive Small/Mid Cap Fund Growth Equity Fund Equity Fund --------------------------- --------------------------- ------------------------- Year Year Year Year Year 01/06/98 * Ended Ended Ended Ended Ended to 10/31/99 10/31/98 10/31/99 10/31/98 10/31/99 10/31/98 ----------- ----------- ----------- ----------- ---------- ----------- OPERATIONS: Net investment income (loss) .............. ($725,375) ($494,630) ($560,560) ($278,985) ($98,113) ($23,575) Net realized gain (loss) on: Investment transactions......... 8,025,646 3,617,101 6,256,855 2,221,648 (1,007,031) (754,965) Foreign currency and forward foreign currency contracts... 8 - (2,574) 679 - - Change in unrealized appreciation (depreciation) on: Investments........... 1,370,689 (1,868,388) 2,622,980 1,275,786 1,514,682 (782,878) Foreign currency and forward foreign currency contracts... - - (7) (269) - - ----------- ----------- ----------- ----------- ---------- ----------- Net increase (decrease) in net assets resulting from operations............ 8,670,968 1,254,083 8,316,694 3,218,859 409,538 (1,561,418) DISTRIBUTIONS FROM: Net realized gains on investments and foreign currency transactions: Class A............... (460,517) (73,545) (265,199) (262,983) - - Class B............... (1,326,329) (196,356) (781,956) (812,961) - - Class C............... (1,510,893) (216,341) (851,533) (1,091,675) - - In excess of net investment income Class A............... - - - - - - Class B............... - - - - - - Class C............... - - - - - - Increase (decrease) in net assets from capital share transactions (Note 3)............. 1,712,126 4,796,743 7,329,284 2,632,785 (1,770,400) 11,895,792 ----------- ----------- ----------- ----------- ---------- ----------- Increase (decrease) in net assets........... 7,085,355 5,564,584 13,747,290 3,684,025 (1,360,862) 10,334,374 Net assets at beginning of period............... 35,007,620 29,443,036 28,543,362 24,859,337 10,334,374 - ----------- ----------- ----------- ----------- ---------- ----------- Net assets at end of period............... $42,092,975 $35,007,620 $42,290,652 $28,543,362 $8,973,512 $10,334,374 ----------- ----------- ----------- ----------- ---------- ----------- Undistributed net investment income (loss)............... - - - - - - ----------- ----------- ----------- ----------- ---------- ----------- Growth and Income Fund ----------------------------------- Year Year Ended Ended 10/31/99 10/31/98 ----------------- ----------------- OPERATIONS: Net investment income (loss) .............. ($1,248,402) ($433,878) Net realized gain (loss) on: Investment transactions......... 29,073,940 9,720,012 Foreign currency and forward foreign currency contracts... (244) - Change in unrealized appreciation (depreciation) on: Investments........... 27,366,787 28,812,377 Foreign currency and forward foreign currency contracts... 153 53 ----------------- ----------------- Net increase (decrease) in net assets resulting from operations............ 55,192,234 38,098,564 DISTRIBUTIONS FROM: Net realized gains on investments and foreign currency transactions: Class A............... (1,712,771) (2,741,357) Class B............... (3,082,778) (4,507,021) Class C............... (4,839,860) (7,696,358) In excess of net investment income Class A............... - (45,238) Class B............... - - Class C............... - - Increase (decrease) in net assets from capital share transactions (Note 3)............. 11,521,213 30,468,074 ----------------- ----------------- Increase (decrease) in net assets........... 57,078,038 53,576,664 Net assets at beginning of period............... 240,884,117 187,307,453 ----------------- ----------------- Net assets at end of period............... $297,962,155 $240,884,117 ----------------- ----------------- Undistributed net investment income (loss)............... - - ----------------- -----------------
- ------------------- * Commencement of operations The accompanying notes are an integral part of the financial statements. 12 NORTH AMERICAN FUNDS STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
Equity-Income Fund Balanced Fund Strategic Income Fund ------------------------------ --------------------------- --------------------------- Year Year Year Year Year Year Ended Ended Ended Ended Ended Ended 10/31/99 10/31/98 10/31/99 10/31/98 10/31/99 10/31/98 ------------ ------------ ----------- ----------- ----------- ----------- OPERATIONS: Net investment income (loss)..... $1,069,098 $1,911,306 $1,525,974 $1,548,319 $5,106,661 $5,297,511 Net realized gain (loss) on: Investment transactions...... 25,209,364 11,356,830 9,063,680 6,740,853 (3,377,733) (114,474) Foreign currency and forward foreign currency contracts......... (11,895) (959) (43,308) (76,080) (246,365) 174,226 Change in unrealized appreciation (depreciation) on: Investments........ (19,384,683) 3,232,000 (9,389,607) 2,811,660 (281,966) (5,320,040) Foreign currency and forward foreign currency contracts......... 101 (788) (920) 693 255,346 (218,242) ------------ ------------ ----------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations.... 6,881,985 16,498,389 1,155,819 11,025,445 1,455,943 (181,019) DISTRIBUTIONS FROM: Net investment income Class A............ (602,777) (701,503) (284,543) (317,345) (985,588) (1,142,439) Class B............ (371,918) (442,368) (243,851) (320,086) (2,027,623) (2,118,644) Class C............ (918,427) (1,133,438) (835,387) (1,278,949) (2,174,265) (2,258,371) Net realized gains on investments and foreign currency transactions...... Class A............ (2,331,204) (2,593,550) (1,061,187) (2,023,888) (94,062) (219,321) Class B............ (2,468,438) (2,589,634) (1,381,136) (2,767,331) (189,150) (478,774) Class C............ (6,050,850) (6,612,227) (4,691,171) (11,012,231) (202,710) (472,034) Increase (decrease) in net assets from capital share transactions (Note 3)................. (49,890,706) 2,002,286 (17,488,266) 7,392,323 (22,740,011) 1,717,355 ------------ ------------ ----------- ----------- ----------- ----------- Increase (decrease) in net assets...... (55,752,335) 4,427,955 (24,829,722) 697,938 (26,957,466) (5,153,247) Net assets at beginning of period............. 171,601,558 167,173,603 98,392,658 97,694,720 78,043,504 83,196,751 ------------ ------------ ----------- ----------- ----------- ----------- Net assets at end of period............. $115,849,223 $171,601,558 $73,562,936 $98,392,658 $51,086,038 $78,043,504 ------------ ------------ ----------- ----------- ----------- ----------- Undistributed net investment income (loss)............. $509,106 $1,532,483 $1,271,183 $1,153,058 ($94,527) $196,179 ------------ ------------ ----------- ----------- ----------- ----------- Investment Quality Bond Fund ------------------------------- Year Year Ended Ended 10/31/99 10/31/98 --------------- --------------- OPERATIONS: Net investment income (loss)..... $937,686 $1,040,983 Net realized gain (loss) on: Investment transactions...... (205,464) 161,325 Foreign currency and forward foreign currency contracts......... - - Change in unrealized appreciation (depreciation) on: Investments........ (979,000) 12,137 Foreign currency and forward foreign currency contracts......... - - --------------- --------------- Net increase (decrease) in net assets resulting from operations.... (246,778) 1,214,445 DISTRIBUTIONS FROM: Net investment income Class A............ (366,860) (446,629) Class B............ (279,710) (276,805) Class C............ (326,493) (312,476) 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)................. (3,491,641) (903,890) --------------- --------------- Increase (decrease) in net assets...... (4,711,482) (725,355) Net assets at beginning of period............. 17,106,230 17,831,585 --------------- --------------- Net assets at end of period............. $12,394,748 $17,106,230 --------------- --------------- Undistributed net investment income (loss)............. ($20,882) $11,637 --------------- ---------------
The accompanying notes are an integral part of the financial statements. 13 NORTH AMERICAN FUNDS STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
National Municipal U. S. Government Bond Fund Securities Fund --------------------------- --------------------------- Year Year Year Year Ended Ended Ended Ended 10/31/99 10/31/98 10/31/99 10/31/98 ----------- ----------- ----------- ----------- OPERATIONS: Net investment income (loss) .................... $594,894 $691,317 $3,700,215 $4,323,483 Net realized gain (loss) on: Investment transactions.......................... (75,958) 190,227 (821,237) 591,717 Change in unrealized appreciation (depreciation) on: Investments..................................... (1,012,148) 50,547 (2,669,738) 621,573 ----------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations.................................. (493,212) 932,091 209,240 5,536,773 DISTRIBUTIONS FROM: Net investment income Class A.......................................... (241,991) (277,166) (2,291,801) (2,632,290) Class B.......................................... (182,925) (215,659) (622,804) (735,957) Class C.......................................... (169,977) (198,492) (572,045) (614,899) In excess of net investment income Class A.......................................... - - (166,512) (314,160) Class B.......................................... - - (45,250) (87,836) Class C.......................................... - - (41,562) (73,388) Return of capital Class A.......................................... - - (127,295) - Class B.......................................... - - (34,593) - Class C.......................................... - - (31,774) - Increase (decrease) in net assets from capital share transactions (Note 3)...................... (2,589,104) (2,184,716) (18,269,612) (5,506,261) ----------- ----------- ----------- ----------- Increase (decrease) in net assets................. (3,677,209) (1,943,942) (21,994,008) (4,428,018) Net assets at beginning of period................. 16,239,730 18,183,672 80,182,381 84,610,399 ----------- ----------- ----------- ----------- Net assets at end of period....................... $12,562,521 $16,239,730 $58,188,373 $80,182,381 ----------- ----------- ----------- ----------- Undistributed net investment income (loss)........ ($263) ($263) ($488,884) ($229,251) ----------- ----------- ----------- ----------- Money Market Fund ------------------------------- Year Year Ended Ended 10/31/99 10/31/98 --------------- --------------- OPERATIONS: Net investment income (loss) .................... $986,731 $975,269 Net realized gain (loss) on: Investment transactions.......................... 572 - Change in unrealized appreciation (depreciation) on: Investments..................................... - - --------------- --------------- Net increase (decrease) in net assets resulting from operations.................................. 987,303 975,269 DISTRIBUTIONS FROM: Net investment income Class A.......................................... (390,560) (452,709) Class B.......................................... (226,689) (164,474) Class C.......................................... (370,054) (358,086) In excess of net investment income Class A.......................................... - - Class B.......................................... - - Class C.......................................... - - Return of capital Class A.......................................... - - Class B.......................................... - - Class C.......................................... - - Increase (decrease) in net assets from capital share transactions (Note 3)...................... (5,226,114) 2,523,350 --------------- --------------- Increase (decrease) in net assets................. (5,226,114) 2,523,350 Net assets at beginning of period................. 24,451,212 21,927,862 --------------- --------------- Net assets at end of period....................... $19,225,098 $24,451,212 --------------- --------------- Undistributed net investment income (loss)........ - $2,858 --------------- ---------------
The accompanying notes are an integral part of the financial statements. 14 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
International Small Cap Fund ---------------------------------------------------------------------------------- Class A Class B ----------------------------------------- -------------------------------------- Year Year Year 3/04/96* Year Year Year 3/04/96* Ended Ended Ended to Ended Ended Ended to 10/31/99 ** 10/31/98 10/31/97 10/31/96 10/31/99 10/31/98 10/31/97 10/31/96 - -------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $13.91 $13.86 $13.43 $12.50 $13.66 $13.71 $13.37 $12.50 - -------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) (0.14) (0.02) (0.03) 0.05 (0.27) (0.12) (0.11) (0.01) Net realized and unrealized gain/(loss) on investments and foreign currency 5.06 0.07 0.46 0.88 4.96 0.07 0.45 0.88 ---------------------------------------------------------------------------------- Total from investment operations 4.92 0.05 0.43 0.93 4.69 (0.05) 0.34 0.87 - -------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $18.83 $13.91 $13.86 $13.43 $18.35 $13.66 $13.71 $13.37 - -------------------------------------------------------------------------------------------------------------- Total Return 35.37% 0.36% 3.20% 7.44%+ 34.33% (0.36%) 2.54% 6.96%+ - -------------------------------------------------------------------------------------------------------------- Ratios/Supplemental Data - -------------------------------------------------------------------------------------------------------------- Net assets, end of period (000's) $2,309 $2,173 $3,225 $2,120 $7,417 $7,073 $7,369 $5,068 - -------------------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.90% 1.90% 1.90% 1.90%# 2.55% 2.55% 2.55% 2.55%# - -------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (0.87%) (0.12%) (0.19%) (0.50%)# (1.53) (0.79%) (0.84%) (0.15%)# - -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 202% 54% 75% 67%# 202% 54% 75% 67%# - -------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 2.24% 2.23% 2.46% 3.07%# 2.89% 2.88% 2.98% 3.27%# - --------------------------------------------------------------------------------------------------------------
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International Small Cap Fund -------------------------------------- Class C -------------------------------------- Year Year Year 3/04/96* Ended Ended Ended to 10/31/99 10/31/98 10/31/97 10/31/96 - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $13.66 $13.71 $13.37 $12.50 - -------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) (0.31) (0.12) (0.11) (0.01) Net realized and unrealized gain/(loss) on investments and foreign currency 5.02 0.07 0.45 0.88 -------------------------------------- Total from investment operations 4.71 (0.05) 0.34 0.87 - -------------------------------------------------------------------------------- Net Asset Value, End of Period $18.37 $13.66 $13.71 $13.37 - -------------------------------------------------------------------------------- Total Return 34.48% (0.36%) 2.54% 6.96%+ - -------------------------------------------------------------------------------- Ratios/Supplemental Data - -------------------------------------------------------------------------------- Net assets, end of period (000's) $5,972 $6,195 $7,025 $5,517 - -------------------------------------------------------------------------------- Ratio of total expenses to average net assets 2.55% 2.55% 2.55% 2.55%# - -------------------------------------------------------------------------------- Ratio of net investment income to average net assets (1.53) (0.78%) (0.84%) (0.15%)# - -------------------------------------------------------------------------------- Portfolio turnover rate 202% 54% 75% 67%# - -------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 2.89% 2.88% 2.96% 3.25%# - --------------------------------------------------------------------------------
* Commencement of Operations ** Net investment income per share has been calculated using the average share method # Annualized + Non-annualized 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 Equity Fund (formerly the International Growth and Income Fund) ----------------------------------------------------- Class A ----------------------------------------------------- Year Year Year Year 1/09/95* Ended Ended Ended Ended to 10/31/99 ** 10/31/98 10/31/97 10/31/96** 10/31/95 - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $9.83 $10.81 $11.35 $10.11 $10.00 - -------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.02 0.03 0.06 0.09 0.06 Net realized and unrealized gain/(loss) on investments and foreign currency 2.07 0.02 0.35 1.33 0.08 ----------------------------------------------------- Total from investment operations 2.09 0.05 0.41 1.42 0.14 ----------------------------------------------------- Distributions Dividends from net investment income - (0.13) (0.19) (0.08) (0.03) Distributions from realized capital gains (0.03) (0.90) (0.76) (0.10) - ----------------------------------------------------- Total distributions (0.03) (1.03) (0.95) (0.18) (0.03) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $11.89 $9.83 $10.81 $11.35 $10.11 - -------------------------------------------------------------------------------- Total Return 21.33% 0.67% 3.55% 14.25% 1.37%+ - -------------------------------------------------------------------------------- Ratios/Supplemental Data - -------------------------------------------------------------------------------- Net assets, end of period (000's) $3,997 $3,769 $4,461 $4,732 $6,897 - -------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.75% 1.75% 1.75% 1.75% 1.75%# - -------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 0.18% 0.44% 0.97% 0.84% 0.70%# - -------------------------------------------------------------------------------- Portfolio turnover rate 142% 173% 146% 170% 69% - -------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 1.98% 1.87% 1.96% 1.97% 2.18%# - --------------------------------------------------------------------------------
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International Equity Fund (formerly the International Growth and Income Fund) ------------------------------------------------------- Class B ------------------------------------------------------- Year Year Year Year 1/09/95* Ended Ended Ended Ended to 10/31/99 ** 10/31/98 10/31/97** 10/31/96** 10/31/95 - ---------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $9.77 $10.75 $11.30 $10.10 $10.00 - ---------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) (0.05) (0.02) 0.03 0.06 0.01 Net realized and unrealized gain/(loss) on investments and foreign currency 2.05 0.00 0.31 1.30 0.12 ------------------------------------------------------- Total from investment operations 2.00 (0.02) 0.34 1.36 0.13 ------------------------------------------------------- Distributions Dividends from net investment income - (0.06) (0.13) (0.05) (0.03) Distributions from realized capital gains (0.03) (0.90) (0.76) (0.11) - ------------------------------------------------------- Total distributions (0.03) (0.96) (0.89) (0.16) (0.03) - ---------------------------------------------------------------------------------- Net Asset Value, End of Period $11.74 $9.77 $10.75 $11.30 $10.10 - ---------------------------------------------------------------------------------- Total Return 20.53% (0.03%) 2.92% 13.58% 1.28%+ - ---------------------------------------------------------------------------------- Ratios/Supplemental Data - ---------------------------------------------------------------------------------- Net assets, end of period (000's) $14,269 $14,030 $16,334 $15,217 $8,421 - ---------------------------------------------------------------------------------- Ratio of total expenses to average net assets 2.40% 2.40% 2.40% 2.40% 2.40%# - ---------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets (0.45%) (0.18%) 0.32% 0.57% 0.15%# - ---------------------------------------------------------------------------------- Portfolio turnover rate 142% 173% 146% 170% 69% - ---------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 2.63% 2.52% 2.54% 2.60% 2.93%# - ----------------------------------------------------------------------------------
* Commencement of Operations # Annualized + Non-annualized ** Net investment income per share has been calculated using the average share method The accompanying notes are an integral part of the financial statements. 16 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
International Equity Fund (formerly the International Growth and Income Fund) ------------------------------------------------------- Class C ------------------------------------------------------- Year Year Year Year 1/09/95* Ended Ended Ended Ended to 10/31/99 ** 10/31/98 10/31/97** 10/31/96** 10/31/95 - ---------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $9.77 $10.76 $11.31 $10.10 $10.00 - ---------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) (0.05) (0.02) 0.03 0.06 0.01 Net realized and unrealized gain/(loss) on Investments and foreign currency 2.05 (0.01) 0.31 1.30 0.12 ------------------------------------------------------- Total from investment operations 2.00 (0.03) 0.34 1.36 0.13 ------------------------------------------------------- Distributions Dividends from net investment income - (0.06) (0.13) (0.05) (0.03) Distributions from realized capital gains (0.03) (0.90) (0.76) (0.10) - ------------------------------------------------------- Total distributions (0.03) (0.96) (0.89) (0.15) (0.03) - ---------------------------------------------------------------------------------- Net Asset Value, End of Period $11.74 $9.77 $10.76 $11.31 $10.10 - ---------------------------------------------------------------------------------- Total Return 20.53% (0.13%) 2.91% 13.63% 1.28%+ - ---------------------------------------------------------------------------------- Ratios/Supplemental Data - ---------------------------------------------------------------------------------- Net assets, end of period (000's) $6,680 $7,960 $8,460 $9,076 $6,324 - ---------------------------------------------------------------------------------- Ratio of total expenses to average net assets 2.40% 2.40% 2.40% 2.40% 2.40%# - ---------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets (0.49%) (0.19%) 0.32% 0.51% 0.13%# - ---------------------------------------------------------------------------------- Portfolio turnover rate 142% 173% 146% 170% 69% - ---------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 2.62% 2.52% 2.57% 2.60% 2.93%# - ----------------------------------------------------------------------------------
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Global Equity Fund ---------------------------------------------------- Class A ---------------------------------------------------- Year Year Year Year Year Ended Ended Ended Ended Ended 10/31/99** 10/31/98 10/31/97 10/31/96** 10/31/95 - --------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $16.43 $16.32 $14.50 $13.84 $14.82 - --------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.08 0.02 0.06 (0.04) - Net realized and unrealized gain/(loss) on investments and foreign currency 0.82 1.34 3.45 0.91 (0.54) ---------------------------------------------------- Total from investment operations 0.90 1.36 3.51 0.87 (0.54) ---------------------------------------------------- Distributions Dividends from net investment income - (0.22) (0.05) (0.21) - Distributions from realized capital gains (1.21) (1.03) (1.64) - (0.44) ---------------------------------------------------- Total distributions (1.21) (1.25) (1.69) (0.21) (0.44) - --------------------------------------------------------------------------------- Net Asset Value, End of Period $16.12 $16.43 $16.32 $14.50 $13.84 - --------------------------------------------------------------------------------- Total Return 5.60% 8.90% 26.10% 6.33% (3.52%) - --------------------------------------------------------------------------------- Ratios/Supplemental Data - --------------------------------------------------------------------------------- Net assets, end of period (000's) $12,757 $31,055 $30,960 $25,924 $23,894 - --------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.75% 1.75% 1.75% 1.75% 1.75% - --------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 0.47% 0.09% 0.33% (0.30%) 0.03% - --------------------------------------------------------------------------------- Portfolio turnover rate 38% 20% 28% 165% 57% - --------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 1.84% 1.75% 1.81% 1.83% 1.92% - ---------------------------------------------------------------------------------
* Commencement of Operations # Annualized + Non-annualized ** Net investment income per share has been calculated using the average share method 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 ---------------------------------------------------- Class B ---------------------------------------------------- Year Year Year Year Year Ended Ended Ended Ended Ended 10/31/99* 10/31/98 10/31/97* 10/31/96* 10/31/95* - --------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $16.24 $16.14 $14.36 $13.73 $14.79 - --------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) (0.04) (0.11) (0.05) (0.14) (0.09) Net realized and unrealized gain/(loss) on investments and foreign currency 0.84 1.35 3.47 0.91 (0.53) ---------------------------------------------------- Total from investment operations 0.80 1.24 3.42 0.77 (0.62) ---------------------------------------------------- Distributions Dividends from net investment income - (0.11) (0.14) - Distributions from realized capital gains (1.21) (1.03) (1.64) - (0.44) ---------------------------------------------------- Total distributions (1.21) (1.14) (1.64) (0.14) (0.44) - --------------------------------------------------------------------------------- Net Asset Value, End of Period $15.83 $16.24 $16.14 $14.36 $13.73 - --------------------------------------------------------------------------------- Total Return 5.01% 8.17% 25.63% 5.64% (4.09%) - --------------------------------------------------------------------------------- Ratios/Supplemental Data - --------------------------------------------------------------------------------- Net assets, end of period (000's) $25,381 $30,287 $31,833 $25,661 $23,317 - --------------------------------------------------------------------------------- Ratio of total expenses to average net assets 2.40% 2.40% 2.40% 2.40% 2.40% - --------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets (0.25%) (0.55%) (0.32%) (0.95%) (0.61%) - --------------------------------------------------------------------------------- Portfolio turnover rate 38% 20% 28% 165% 57% - --------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 2.50% 2.40% 2.47% 2.48% 2.58% - ---------------------------------------------------------------------------------
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Global Equity Fund -------------------------------------------------- Class C -------------------------------------------------- Year Year Year Year Year Ended Ended Ended Ended Ended 10/31/99* 10/31/98 10/31/97 10/31/96* 10/31/95 - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $16.30 $16.19 $14.41 $13.73 $14.79 - -------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) (0.04) (0.10) (0.05) (0.14) (0.09) Net realized and unrealized gain/(loss) on investments and foreign currency 0.84 1.35 3.47 0.92 (0.53) -------------------------------------------------- Total from investment operations 0.80 1.25 3.42 0.78 (0.62) -------------------------------------------------- Distributions Dividends from net investment income - (0.11) - (0.10) - Distributions from realized capital gains (1.21) (1.03) (1.64) - (0.44) -------------------------------------------------- Total distributions (1.21) (1.14) (1.64) (0.10) (0.44) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $15.89 $16.30 $16.19 $14.41 $13.73 - -------------------------------------------------------------------------------- Total Return 4.99% 8.21% 25.54% 5.70% (4.09%) - -------------------------------------------------------------------------------- Ratios/Supplemental Data - -------------------------------------------------------------------------------- Net assets, end of period (000's) $45,201 $57,774 $61,245 $64,830 $83,340 - -------------------------------------------------------------------------------- Ratio of total expenses to average net assets 2.40% 2.40% 2.40% 2.40% 2.40% - -------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets (0.24%) (0.56%) (0.32%) (0.95%) (0.64%) - -------------------------------------------------------------------------------- Portfolio turnover rate 38% 20% 28% 165% 57% - -------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 2.50% 2.40% 2.46% 2.48% 2.53% - --------------------------------------------------------------------------------
* Net investment income per share has been calculated using the average share method The accompanying notes are an integral part of the financial statements. 18 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
Emerging Growth Fund ----------------------------------------------------------------------- Class A Class B Class C --------------------- --------------------- --------------------- Year 1/06/98* Year 1/06/98* Year 1/06/98* Ended to Ended to Ended to 10/31/99 ** 10/31/98 10/31/99 ** 10/31/98 10/31/99 ** 10/31/98 - ---------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $8.88 $10.00 $8.83 $10.00 $8.84 $10.00 - ---------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) (0.15) (0.08) (0.21) (0.12)*** (0.21) (0.12)** Net realized and unrealized gain/(loss) on investments and foreign currency 4.08 (1.04) 3.95 (1.05) 3.94 (1.04) ----------------------------------------------------------------------- Total from investment operations 3.93 (1.12) 3.74 (1.17) 3.73 (1.16) - ---------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $12.81 $8.88 $12.57 $8.83 $12.57 $8.84 - ---------------------------------------------------------------------------------------------------- Total Return 44.26% (11.20%)+ 42.36% (11.70%)+ 42.19% (11.60%)+ - ---------------------------------------------------------------------------------------------------- Ratios/Supplemental Data - ---------------------------------------------------------------------------------------------------- Net assets, end of period (000's) $224 $146 $660 $263 $440 $238 - ---------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.70% 1.70%# 2.35% 2.35%# 2.35% 2.35%# - ---------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (1.43%) (1.00%)# (2.04%) (1.76%)# (2.03%) (1.67%)# - ---------------------------------------------------------------------------------------------------- Portfolio turnover rate 129% 52%+ 129% 52%+ 129% 52%+ - ---------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 6.96% 15.48%# 7.58% 16.48%# 7.60% 15.78%# - ----------------------------------------------------------------------------------------------------
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Small/Mid Cap Fund --------------------------------------------------------------------------------------- Class A Class B ----------------------------------------- ------------------------------------------- Year Year Year 3/04/96* Year Year Year 3/04/96* Ended Ended Ended to Ended Ended Ended to 10/31/99 ** 10/31/98 10/31/97 10/31/96 10/31/99 ** 10/31/98 10/31/97** 10/31/96 - -------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $16.09 $15.51 $12.62 $12.50 $15.77 $15.33 $12.58 $12.50 - -------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) (0.21) (0.15) (0.14) (0.02) (0.32) (0.25) (0.23) (0.05) Net realized and unrealized gain/(loss) on investments and foreign currency 4.12 0.97 3.03 0.14 4.02 0.93 2.98 0.13 --------------------------------------------------------------------------------------- Total from investment operations 3.91 0.82 2.89 0.12 3.70 0.68 2.75 0.08 Distributions Distributions from capital gains (1.48) (0.24) - - (1.48) (0.24) - - - -------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $18.52 $16.09 $15.51 $12.62 $17.99 $15.77 $15.33 $12.58 - -------------------------------------------------------------------------------------------------------------------- Total Return 25.50% 5.51% 22.90% 0.96%+ 24.62% 4.65% 21.86% 0.64%+ - -------------------------------------------------------------------------------------------------------------------- Ratios/Supplemental Data - -------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000's) $5,970 $4,814 $4,170 $2,966 $17,184 $13,972 $11,802 $6,659 - -------------------------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.68% 1.68% 1.68% 1.68%# 2.33% 2.33% 2.33% 2.33%# - -------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (1.15%) (0.90%) (1.02%) (0.40%)# (1.80%) (1.55%) (1.67%) (1.05%) # - -------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 181% 162% 145% 92%# 181% 162% 145% 92%# - -------------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 1.89% 1.93% 2.24% 2.69%# 2.54% 2.58% 2.79% 3.05%# - --------------------------------------------------------------------------------------------------------------------
* Commencement of Operations # Annualized + Non-annualized ** Net investment income per share has been calculated using the average share method The accompanying notes are an integral part of the financial statements. 19 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
Small/Mid Cap Fund ------------------------------------------- Class C ------------------------------------------- Year 3/04/96* Year Ended Ended Year Ended to 10/31/99 ** 10/31/98 10/31/97** 10/31/96 - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $15.79 $15.35 $12.59 $12.50 - -------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) (0.32) (0.25) (0.23) (0.05) Net realized and unrealized gain/(loss) on investments and foreign currency 4.03 0.93 2.99 0.14 ------------------------------------------- Total from investment operations 3.71 0.68 2.76 0.09 Distributions Distributions from capital gains (1.48) (0.24) - - - -------------------------------------------------------------------------------- Net Asset Value, End of Period $18.02 $15.79 $15.35 $12.59 - -------------------------------------------------------------------------------- Total Return 24.65% 4.64% 21.92% 0.72%+ - -------------------------------------------------------------------------------- Ratios/Supplemental Data - -------------------------------------------------------------------------------- Net assets, end of period (000's) $18,939 $16,221 $13,471 $8,241 - -------------------------------------------------------------------------------- Ratio of total expenses to average net assets 2.33% 2.33% 2.33% 2.33%# - -------------------------------------------------------------------------------- Ratio of net investment income to average net assets (1.80%) (1.55%) (1.67%) (1.05%)# - -------------------------------------------------------------------------------- Portfolio turnover rate 181% 162% 145% 92%# - -------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 2.54% 2.58% 2.78% 3.04%# - --------------------------------------------------------------------------------
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Growth Equity Fund ------------------------------------------------------------------------------------ Class A Class B ----------------------------------------- ----------------------------------------- Year Year Year 3/04/96* Year Year Year 3/04/96* Ended Ended Ended to Ended Ended Ended to 10/31/99 ** 10/31/98 10/31/97 10/31/96 10/31/99 ** 10/31/98 10/31/97 10/31/96 - --------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $17.73 $17.01 $13.78 $12.50 $17.46 $16.90 $13.73 $12.50 - --------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) (0.19) (0.07) (0.03) 0.28 (0.31) (0.18) (0.13) 0.24 Net realized and unrealized gain/(loss) on investments and foreign currency 5.05 2.22 3.45 1.00 4.96 2.17 3.46 0.99 ------------------------------------------------------------------------------------ Total from investment operations 4.86 2.15 3.42 1.28 4.65 1.99 3.33 1.23 Distributions Dividends from net investment income - - (0.19) - - - (0.16) - Distributions from capital gains (1.15) (1.43) - - (1.15) (1.43) - - ------------------------------------------------------------------------------------ Total distributions (1.15) (1.43) (0.19) (1.15) (1.43) (0.16) - --------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $21.44 $17.73 $17.01 $13.78 $20.96 $17.46 $16.90 $13.73 - --------------------------------------------------------------------------------------------------------------- Total Return 28.57% 13.85% 25.13% 10.24% 27.77%+ 12.93% 24.50% 9.84%+ - --------------------------------------------------------------------------------------------------------------- Ratios/Supplemental Data - --------------------------------------------------------------------------------------------------------------- Net assets, end of period (000's) $5,656 $3,919 $3,053 $2,244 $17,171 $11,659 $9,040 $4,748 - --------------------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.65% 1.65% 1.65% 1.65%# 2.30% 2.30% 2.30% 2.30%# - --------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (0.94) (0.43%) (0.17%) 4.11%# (1.58) (1.07%) (0.82%) 4.18%# - --------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 145% 115% 181% 450% 145%# 115% 181% 450%# - --------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 1.90% 1.91% 2.28% 2.71%# 2.52% 2.56% 2.78% 3.06%# - ---------------------------------------------------------------------------------------------------------------
* Commencement of Operations ** Net investment income per share has been calculated using the average share method # Annualized + Non-annualized The accompanying notes are an integral part of the financial statements. 20 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
Growth Equity Fund ----------------------------------------- Class C ----------------------------------------- Year Year 3/04/96* Year Ended Ended Ended to 10/31/99 ** 10/31/98 10/31/97 10/31/96 - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $17.44 $16.89 $13.73 $12.50 - -------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) (0.31) (0.20) (0.13) 0.24 Net realized and unrealized gain/(loss) on investments and foreign currency 4.95 2.18 3.46 0.99 ----------------------------------------- Total from investment operations 4.64 1.98 3.33 1.23 Distributions Dividends from net investment income - - (0.17) - Distributions from capital gains (1.15) (1.43) - - ----------------------------------------- Total distributions (1.15) (1.43) (0.17) - - -------------------------------------------------------------------------------- Net Asset Value, End of Period $20.93 $17.44 $16.89 $13.73 - -------------------------------------------------------------------------------- Total Return 27.75% 12.87% 24.50% 9.84%+ - -------------------------------------------------------------------------------- Ratios/Supplemental Data - -------------------------------------------------------------------------------- Net assets, end of period (000's) $19,463 $12,965 $12,766 $6,494 - -------------------------------------------------------------------------------- Ratio of total expenses to average net assets 2.30% 2.30% 2.30% 2.30%# - -------------------------------------------------------------------------------- Ratio of net investment income to average net assets (1.58%) (1.06%) (0.82%) 4.13%# - -------------------------------------------------------------------------------- Portfolio turnover rate 145% 115% 181% 450%# - -------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 2.52% 2.56% 2.75% 2.96%# - --------------------------------------------------------------------------------
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Tax-Sensitive Equity Fund ---------------------------------------------------------------------- Class A Class B Class C --------------------- --------------------- --------------------- Year 1/06/98* Year 1/06/98* Year 1/06/98* Ended to Ended to Ended to 10/31/99 ** 10/31/98 10/31/99 ** 10/31/98 10/31/99 ** 10/31/98 - --------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $9.07 $10.00 $9.04 $10.00 $9.04 $10.00 - --------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) (0.05) (0.01) (0.11) (0.04)** (0.11) (0.03)** Net realized and unrealized gain/(loss) on Investments and foreign currency 0.47 (0.92) 0.43 (0.92) 0.42 (0.93) ---------------------------------------------------------------------- Total from investment operations 0.42 (0.93) 0.32 (0.96) 0.31 (0.96) - --------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $9.49 $9.07 $9.36 $9.04 $9.35 $9.04 - --------------------------------------------------------------------------------------------------- Total Return 4.63% (9.30%)+ 3.54% (9.60%)+ 3.43% (9.60%)+ - --------------------------------------------------------------------------------------------------- Ratios/Supplemental Data - --------------------------------------------------------------------------------------------------- Net assets, end of period (000's) $1,526 $4,149 $3,724 $2,900 $3,723 $3,286 - --------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.60% 1.60%# 2.25% 2.25%# 2.25% 2.25% # - --------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (0.48%) (0.40%)# (1.14%) (1.80%)# (1.14%) (1.84%)# - --------------------------------------------------------------------------------------------------- Portfolio turnover rate 56% 38% + 56% 38% + 56% 38% + - --------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 2.05% 2.51%# 2.71% 3.24%# 2.71% 3.16%# - ---------------------------------------------------------------------------------------------------
* Commencement of Operations ** Net investment income per share has been calculated using the average share method + Non-annualized # Annualized 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 -------------------------------------------------- Class A -------------------------------------------------- Year Year Year Year Year Ended Ended Ended Ended Ended 10/31/99* 10/31/98 10/31/97 10/31/96 10/31/95* - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $24.26 $21.77 $17.56 $14.72 $13.09 - -------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.03 0.08 0.14 0.18 0.26 Net realized and unrealized gain/(loss) on investments and foreign currency 5.45 4.14 5.26 2.99 1.90 -------------------------------------------------- Total from investment operations 5.48 4.22 5.40 3.17 2.16 -------------------------------------------------- Distributions Dividends from net investment income - - (0.15) (0.21) (0.23) Distributions from realized capital gains (0.96) (1.70) (1.04) (0.12) (0.30) Distributions in excess of net investment income - (0.03) - - - -------------------------------------------------- Total distributions (0.96) (1.73) (1.19) (0.33) (0.53) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $28.78 $24.26 $21.77 $17.56 $14.72 - -------------------------------------------------------------------------------- Total Return 23.11% 20.82% 31.95% 21.84% 17.28% - -------------------------------------------------------------------------------- Ratios/Supplemental Data - -------------------------------------------------------------------------------- Net assets, end of period (000's) $37,210 $42,916 $34,186 $18,272 $12,180 - -------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.34% 1.34% 1.34% 1.34% 1.34% - -------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 0.11% 0.34% 0.66% 1.10% 1.91% - -------------------------------------------------------------------------------- Portfolio turnover rate 28% 18% 39% 49% 40% - -------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 1.49% 1.45% 1.50% 1.56% 1.69% - --------------------------------------------------------------------------------
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Growth and Income Fund --------------------------------------------------- Class B --------------------------------------------------- Year Year Year Year Year Ended Ended Ended Ended Ended 10/31/99* 10/31/98 10/31/97 10/31/96* 10/31/95* - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $24.01 $21.67 $17.50 $14.69 $13.08 - -------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) (0.15) (0.07) 0.01 0.07 0.16 Net realized and unrealized gain/(loss) on investments and foreign currency 5.38 4.11 5.23 2.99 1.94 --------------------------------------------------- Total from investment operations 5.23 4.04 5.24 3.06 2.10 --------------------------------------------------- Distributions Dividends from net investment income - - (0.03) (0.13) (0.19) Distributions from realized capital gains (0.96) (1.70) (1.04) (0.12) (0.30) --------------------------------------------------- Total distributions (0.96) (1.70) (1.07) (0.25) (0.49) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $28.28 $24.01 $21.67 $17.50 $14.69 - -------------------------------------------------------------------------------- Total Return 22.28% 20.04% 31.40% 21.08% 16.73% - -------------------------------------------------------------------------------- Ratios/Supplemental Data - -------------------------------------------------------------------------------- Net assets, end of period (000's) $104,695 $75,574 $54,871 $34,740 $19,052 - -------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.99% 1.99% 1.99% 1.99% 1.99% - -------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets (0.54%) (0.32%) 0.01% 0.45% 1.14% - -------------------------------------------------------------------------------- Portfolio turnover rate 28% 18% 39% 49% 40% - -------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 2.13% 2.10% 2.15% 2.20% 2.33% - --------------------------------------------------------------------------------
* Net investment income per share has been calculated using the average share method 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 ------------------------------------------------- Year Year Year Year Year Ended Ended Ended Ended Ended 10/31/99* 10/31/98 10/31/97 10/31/96 10/31/95 - --------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $24.10 $21.75 $17.56 $14.71 $13.08 - --------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) (0.15) (0.07) 0.01 0.07 0.18 Net realized and unrealized gain/(loss) on investments and foreign currency 5.40 4.12 5.25 3.00 1.90 ------------------------------------------------- Total from investment operations 5.25 4.05 5.26 3.07 2.08 ------------------------------------------------- Distributions Dividends from net investment income - - (0.03) (0.10) (0.15) Distributions from realized capital gains (0.96) (1.70) (1.04) (0.12) (0.30) ------------------------------------------------- Total distributions (0.96) (1.70) (1.07) (0.22) (0.45) - --------------------------------------------------------------------------------- Net Asset Value, End of Period $28.39 $24.10 $21.75 $17.56 $14.71 - --------------------------------------------------------------------------------- Total Return 22.28% 20.00% 31.37% 21.12% 16.56% - --------------------------------------------------------------------------------- Ratios/Supplemental Data - --------------------------------------------------------------------------------- Net assets, end of period (000's) $156,056 $122,395 $98,250 $74,825 $63,154 - --------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.99% 1.99% 1.99% 1.99% 1.99% - --------------------------------------------------------------------------------- Ratio of net investment income to average net assets (0.54%) (0.31%) 0.01% 0.45% 1.26% - --------------------------------------------------------------------------------- Portfolio turnover rate 28% 18% 39% 49% 40% - --------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 2.13% 2.10% 2.13% 2.20% 2.26% - ---------------------------------------------------------------------------------
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Equity-Income Fund -------------------------------------------------- Class A -------------------------------------------------- Year Year Year Year Year Ended Ended Ended Ended Ended 10/31/99* 10/31/98 10/31/97 10/31/96 10/31/95* - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $17.64 $17.44 $17.37 $15.94 $14.78 - -------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.22 0.29 0.33 0.16 0.12 Net realized and unrealized gain/(loss) on investments and foreign currency 0.46 1.46 3.59 2.69 1.83 -------------------------------------------------- Total from investment operations 0.68 1.75 3.92 2.85 1.95 -------------------------------------------------- Distributions Dividends from net investment income (0.29) (0.33) (0.18) (0.14) - Distributions from realized capital gains (1.12) (1.22) (3.67) (1.28) (0.79) -------------------------------------------------- Total distributions (1.41) (1.55) (3.85) (1.42) (0.79) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $16.91 $17.64 $17.44 $17.37 $15.94 - -------------------------------------------------------------------------------- Total Return 3.93% 10.55% 27.24% 19.23% 14.22% - -------------------------------------------------------------------------------- Ratios/Supplemental Data - -------------------------------------------------------------------------------- Net assets, end of period (000's) $13,990 $36,661 $36,334 $28,470 $22,026 - -------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.40% 1.42% 1.34% 1.34% 1.34% - -------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 1.30% 1.57% 2.01% 0.98% 0.79% - -------------------------------------------------------------------------------- Portfolio turnover rate 73% 22% 36% 169% 54% - -------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 1.58% 1.51% 1.55% 1.55% 1.62% - --------------------------------------------------------------------------------
* Net investment income per share has been calculated using the average share method The accompanying notes are an integral part of the financial statements. 23 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
Equity-Income Fund -------------------------------------------------- Class B -------------------------------------------------- Year Year Year Year Year Ended Ended Ended Ended Ended 10/31/99* 10/31/98 10/31/97 10/31/96 10/31/95* - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $17.43 $17.24 $17.22 $15.84 $14.77 - -------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.10 0.16 0.23 0.06 0.02 Net realized and unrealized gain/(loss) on investments and foreign currency 0.47 1.46 3.54 2.69 1.84 -------------------------------------------------- Total from investment operations 0.57 1.62 3.77 2.75 1.86 -------------------------------------------------- Distributions Dividends from net investment income (0.17) (0.21) (0.08) (0.09) - Distributions from realized capital gains (1.12) (1.22) (3.67) (1.28) (0.79) -------------------------------------------------- Total distributions (1.29) (1.43) (3.75) (1.37) (0.79) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $16.71 $17.43 $17.24 $17.22 $15.84 - -------------------------------------------------------------------------------- Total Return 3.30% 9.81% 26.29% 18.59% 13.58% - -------------------------------------------------------------------------------- Ratios/Supplemental Data - -------------------------------------------------------------------------------- Net assets, end of period (000's) $31,659 $38,954 $36,191 $27,058 $19,874 - -------------------------------------------------------------------------------- Ratio of total expenses to average net assets 2.04% 2.07% 1.99% 1.99% 1.99% - -------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 0.58% 0.93% 1.36% 0.33% 0.13% - -------------------------------------------------------------------------------- Portfolio turnover rate 73% 22% 36% 169% 54% - -------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 2.23% 2.16% 2.21% 2.20% 2.32% - --------------------------------------------------------------------------------
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Equity-Income Fund ---------------------------------------------------- Class C ---------------------------------------------------- Year Year Year Year Year Ended Ended Ended Ended Ended 10/31/99 * 10/31/98 10/31/97 10/31/96 10/31/95 * - --------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $17.53 $17.33 $17.27 $15.84 $14.77 - --------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.10 0.17 0.23 0.06 0.02 Net realized and unrealized gain/(loss) on investments and foreign currency 0.46 1.46 3.56 2.69 1.84 ---------------------------------------------------- Total from investment operations 0.56 1.63 3.79 2.75 1.86 ---------------------------------------------------- Distributions Dividends from net investment income (0.17) (0.21) (0.06) (0.04) - Distributions from realized capital gains (1.12) (1.22) (3.67) (1.28) (0.79) ---------------------------------------------------- Total distributions (1.29) (1.43) (3.73) (1.32) (0.79) - --------------------------------------------------------------------------------- Net Asset Value, End of Period $16.80 $17.53 $17.33 $17.27 $15.84 - --------------------------------------------------------------------------------- Total Return 3.22% 9.83% 26.33% 18.53% 13.58% - --------------------------------------------------------------------------------- Ratios/Supplemental Data - --------------------------------------------------------------------------------- Net assets, end of period (000's) $70,200 $95,986 $94,649 $83,855 $83,719 - --------------------------------------------------------------------------------- Ratio of total expenses to average net assets 2.04% 2.07% 1.99% 1.99% 1.99% - --------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 0.59% 0.93% 1.36% 0.33% 0.15% - --------------------------------------------------------------------------------- Portfolio turnover rate 73% 22% 36% 169% 54% - --------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 2.23% 2.10% 2.19% 2.20% 2.23% - ---------------------------------------------------------------------------------
* Net investment income per share has been calculated using the average share method 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 ------------------------------------------------------ Class A ------------------------------------------------------ Year Year Year Year Year Ended Ended Ended Ended Ended 10/31/99 * 10/31/98 10/31/97 10/31/96 * 10/31/95 * - --------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $11.48 $12.58 $12.33 $12.02 $11.13 - --------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.24 0.25 0.34 0.39 0.38 Net realized and unrealized gain/(loss) on investments and foreign currency (0.09) 1.04 1.52 1.07 1.35 ------------------------------------------------------ Total from investment operations 0.15 1.29 1.86 1.46 1.73 ------------------------------------------------------ Distributions Dividends from net investment income (0.23) (0.32) (0.45) (0.40) (0.32) Distributions from realized capital gains (0.84) (2.07) (1.16) (0.75) (0.52) ------------------------------------------------------ Total distributions (1.07) (2.39) (1.61) (1.15) (0.84) - --------------------------------------------------------------------------------- Net Asset Value, End of Period $10.56 $11.48 $12.58 $12.33 $12.02 - --------------------------------------------------------------------------------- Total Return 1.20% 12.42% 17.01% 13.10% 16.95% - --------------------------------------------------------------------------------- Ratios/Supplemental Data - --------------------------------------------------------------------------------- Net assets, end of period (000's) $5,936 $14,415 $12,294 $10,873 $10,033 - --------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.39% 1.39% 1.34% 1.34% 1.34% - --------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 2.18% 2.11% 2.74% 3.32% 3.39% - --------------------------------------------------------------------------------- Portfolio turnover rate 198% 185% 211% 253% 226% - --------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 1.60% 1.53% 1.59% 1.55% 1.69% - ---------------------------------------------------------------------------------
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Balanced Fund -------------------------------------------------------- Class B -------------------------------------------------------- Year Year Year Year Year Ended Ended Ended Ended Ended 10/31/99 * 10/31/98 10/31/97 * 10/31/96 * 10/31/95 * - ----------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $11.40 $12.49 $12.26 $11.98 $11.12 - ----------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.18 0.18 0.25 0.31 0.30 Net realized and unrealized gain/(loss) on investments and foreign currency (0.10) 1.04 1.53 1.07 1.36 -------------------------------------------------------- Total from investment operations 0.08 1.22 1.78 1.38 1.66 -------------------------------------------------------- Distributions Dividends from net investment income (0.15) (0.24) (0.39) (0.35) (0.28) Distributions from realized capital gains (0.84) (2.07) (1.16) (0.75) (0.52) -------------------------------------------------------- Total distributions (0.99) (2.31) (1.55) (1.10) (0.80) - ----------------------------------------------------------------------------------- Net Asset Value, End of Period $10.49 $11.40 $12.49 $12.26 $11.98 - ----------------------------------------------------------------------------------- Total Return 0.57% 11.71% 16.27% 12.35% 16.31% - ----------------------------------------------------------------------------------- Ratios/Supplemental Data - ----------------------------------------------------------------------------------- Net assets, end of period (000's) $13,958 $18,929 $17,140 $16,219 $9,875 - ----------------------------------------------------------------------------------- Ratio of total expenses to average net assets 2.04% 2.04% 1.99% 1.99% 1.99% - ----------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 1.60% 1.46% 2.09% 2.67% 2.69% - ----------------------------------------------------------------------------------- Portfolio turnover rate 198% 185% 211% 253% 226% - ----------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 2.25% 2.18% 2.23% 2.20% 2.37% - -----------------------------------------------------------------------------------
* Net investment income per share has been calculated using the average share method 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 ---------------------------------------------------- Year Year Year Year Year Ended Ended Ended Ended Ended 10/31/99 * 10/31/98 10/31/97 10/31/96 10/31/95 * - --------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $11.54 $12.62 $12.35 $12.02 $11.12 - --------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.17 0.18 0.25 0.32 0.31 Net realized and unrealized gain/(loss) on investments and foreign currency (0.09) 1.05 1.54 1.07 1.35 ---------------------------------------------------- Total from investment operations 0.08 1.23 1.79 1.39 1.66 ---------------------------------------------------- Distributions Dividends from net investment income (0.15) (0.24) (0.36) (0.31) (0.24) Distributions from realized capital gains (0.84) (2.07) (1.16) (0.75) (0.52) ---------------------------------------------------- Total distributions (0.99) (2.31) (1.52) (1.06) (0.76) - --------------------------------------------------------------------------------- Net Asset Value, End of Period $10.63 $11.54 $12.62 $12.35 $12.02 - --------------------------------------------------------------------------------- Total Return 0.58% 11.68% 16.21% 12.41% 16.25% - --------------------------------------------------------------------------------- Ratios/Supplemental Data - --------------------------------------------------------------------------------- Net assets, end of period (000's) $53,669 $65,049 $68,261 $72,821 $80,626 - --------------------------------------------------------------------------------- Ratio of total expenses to average net assets 2.04% 2.04% 1.99% 1.99% 1.99% - --------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 1.55% 1.47% 2.09% 2.67% 2.76% - --------------------------------------------------------------------------------- Portfolio turnover rate 198% 185% 211% 253% 226% - --------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 2.25% 2.18% 2.20% 2.20% 2.24% - ---------------------------------------------------------------------------------
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Strategic Income Fund -------------------------------------------------- Class A -------------------------------------------------- Year Year Year Year Year Ended Ended Ended Ended Ended 10/31/99 * 10/31/98 10/31/97 10/31/96 10/31/95 - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $8.99 $9.76 $9.80 $9.07 $8.90 - -------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.72 0.67 0.70 0.80 0.78 Net realized and unrealized gain/(loss) on investments and foreign currency (0.53) (0.63) 0.28 0.72 0.18 -------------------------------------------------- Total from investment operations 0.19 0.04 0.98 1.52 0.96 -------------------------------------------------- Distributions Dividends from net investment income (0.73) (0.67) (0.84) (0.79) (0.79) Distributions from realized capital gains (0.05) (0.14) (0.18) - - -------------------------------------------------- Total distributions (0.78) (0.81) (1.02) (0.79) (0.79) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $8.40 $8.99 $9.76 $9.80 $9.07 - -------------------------------------------------------------------------------- Total Return 2.10% 0.22% 10.57% 17.35% 11.43% - -------------------------------------------------------------------------------- Ratios/Supplemental Data - -------------------------------------------------------------------------------- Net assets, end of period (000's) $8,997 $15,296 $15,924 $13,382 $10,041 - -------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.50% 1.50% 1.50% 1.50% 1.07% - -------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 8.21% 7.02% 7.25% 8.28% 9.08% - -------------------------------------------------------------------------------- Portfolio turnover rate 119% 162% 193% 68% 180% - -------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 1.67% 1.56% 1.61% 1.65% 1.69% - --------------------------------------------------------------------------------
* Net investment income per share has been calculated using the average share method 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 -------------------------------------------------- Class B -------------------------------------------------- Year Year Year Year Year Ended Ended Ended Ended Ended 10/31/99 * 10/31/98 10/31/97 10/31/96 10/31/95 - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $8.99 $9.76 $9.80 $9.07 $8.90 - -------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.66 0.61 0.64 0.73 0.73 Net realized and unrealized gain/(loss) on investments and foreign currency (0.52) (0.63) 0.28 0.73 0.17 -------------------------------------------------- Total from investment operations 0.14 (0.02) 0.92 1.46 0.90 -------------------------------------------------- Distributions Dividends from net investment income (0.67) (0.61) (0.78) (0.73) (0.73) Distributions from realized capital gains (0.05) (0.14) (0.18) - - -------------------------------------------------- Total distributions (0.72) (0.75) (0.96) (0.73) (0.73) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $8.41 $8.99 $9.76 $9.80 $9.07 - -------------------------------------------------------------------------------- Total Return 1.56% (0.43%) 9.86% 16.59% 10.72% - -------------------------------------------------------------------------------- Ratios/Supplemental Data - -------------------------------------------------------------------------------- Net assets, end of period (000's) $21,340 $29,210 $34,590 $30,890 $20,672 - -------------------------------------------------------------------------------- Ratio of total expenses to average net assets 2.15% 2.15% 2.15% 2.15% 1.95% - -------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 7.58% 6.39% 6.60% 7.63% 8.10% - -------------------------------------------------------------------------------- Portfolio turnover rate 119% 162% 193% 68% 180% - -------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 2.32% 2.21% 2.23% 2.27% 2.38% - --------------------------------------------------------------------------------
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Strategic Income Fund -------------------------------------------------- Class C -------------------------------------------------- Year Year Year Year Year Ended Ended Ended Ended Ended 10/31/99 * 10/31/98 10/31/97 10/31/96 10/31/95 - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $8.99 $9.76 $9.80 $9.07 $8.90 - -------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.66 0.61 0.64 0.73 0.73 Net realized and unrealized gain/(loss) on investments and foreign currency (0.52) (0.63) 0.28 0.73 0.17 -------------------------------------------------- Total from investment operations 0.14 (0.02) 0.92 1.46 0.90 -------------------------------------------------- Distributions Dividends from net investment income (0.67) (0.61) (0.78) (0.73) (0.73) Distributions from realized capital gains (0.05) (0.14) (0.18) - - -------------------------------------------------- Total distributions (0.72) (0.75) (0.96) (0.73) (0.73) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $8.41 $8.99 $9.76 $9.80 $9.07 - -------------------------------------------------------------------------------- Total Return 1.56% (0.43%) 9.86% 16.59% 10.72% - -------------------------------------------------------------------------------- Ratios/Supplemental Data - -------------------------------------------------------------------------------- Net assets, end of period (000's) $20,749 $33,537 $32,683 $22,783 $14,273 - -------------------------------------------------------------------------------- Ratio of total expenses to average net assets 2.15% 2.15% 2.15% 2.15% 1.95% - -------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 7.57% 6.37% 6.60% 7.63% 8.25% - -------------------------------------------------------------------------------- Portfolio turnover rate 119% 162% 193% 68% 180% - -------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 2.32% 2.21% 2.24% 2.28% 2.37% - --------------------------------------------------------------------------------
* Net investment income per share has been calculated using the average share method 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 -------------------------------------------------- Year Year Year Year Year Ended Ended Ended Ended Ended 10/31/99* 10/31/98 10/31/97 10/31/96 10/31/95* - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.63 $10.52 $10.34 $10.56 $9.74 - -------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.66 0.68 0.67 0.66 0.68 Net realized and unrealized gain/(loss) on investments and foreign currency (0.77) 0.10 0.18 (0.20) 0.82 -------------------------------------------------- Total from investment operations (0.11) 0.78 0.85 0.46 1.50 -------------------------------------------------- Distributions Dividends from net investment income (0.67) (0.67) (0.67) (0.68) (0.68) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $9.85 $10.63 $10.52 $10.34 $10.56 - -------------------------------------------------------------------------------- Total Return (1.08%) 7.63% 8.57% 4.52% 15.91% - -------------------------------------------------------------------------------- Ratios/Supplemental Data - -------------------------------------------------------------------------------- Net assets, end of period (000's) $3,507 $6,730 $7,110 $9,056 $10,345 - -------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.25% 1.25% 1.25% 1.25% 1.25% - -------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 4.77% 6.45% 6.54% 6.37% 6.72% - -------------------------------------------------------------------------------- Portfolio turnover rate 43% 48% 65% 56% 132% - -------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 1.70% 1.54% 1.62% 1.55% 1.73% - --------------------------------------------------------------------------------
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Investment Quality Bond Fund ------------------------------------------------- Class B ------------------------------------------------- Year Year Year Year Year Ended Ended Ended Ended Ended 10/31/99* 10/31/98 10/31/97 10/31/96 10/31/95 - --------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.62 $10.52 $10.33 $10.55 $9.74 - --------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.59 0.61 0.60 0.60 0.61 Net realized and unrealized gain/(loss) on investments (0.75) 0.10 0.20 (0.20) 0.82 ------------------------------------------------- Total from investment operations (0.16) 0.71 0.80 0.40 1.43 ------------------------------------------------- Distributions Dividends from net investment income (0.61) (0.61) (0.61) (0.62) (0.62) - --------------------------------------------------------------------------------- Net Asset Value, End of Period $9.85 $10.62 $10.52 $10.33 $10.55 - --------------------------------------------------------------------------------- Total Return (1.56%) 6.93% 8.05% 3.92% 15.12% - --------------------------------------------------------------------------------- Ratios/Supplemental Data - --------------------------------------------------------------------------------- Net assets, end of period (000's) $4,295 $4,845 $4,613 $4,678 $3,472 - --------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.90% 1.90% 1.90% 1.90% 1.90% - --------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 5.71% 5.81% 5.89% 5.72% 5.95% - --------------------------------------------------------------------------------- Portfolio turnover rate 43% 48% 65% 56% 132% - --------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 2.39% 2.20% 2.33% 2.27% 2.69% - ---------------------------------------------------------------------------------
* Net investment income per share has been calculated using the average share method 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 ------------------------------------------------- Class C ------------------------------------------------- Year Year Year Year Year Ended Ended Ended Ended Ended 10/31/99* 10/31/98 10/31/97 10/31/96 10/31/95 - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.62 $10.52 $10.33 $10.55 $9.74 - -------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.59 0.61 0.60 0.60 0.61 Net realized and unrealize gain/(loss) on investments (0.75) 0.10 0.20 (0.20) 0.82 ------------------------------------------------- Total from investment operations (0.16) 0.71 0.80 0.40 1.43 ------------------------------------------------- Distributions Dividends from net investment income (0.61) (0.61) (0.61) (0.62) (0.62) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $9.85 $10.62 $10.52 $10.33 $10.55 - -------------------------------------------------------------------------------- Total Return (1.56%) 6.93%+ 8.05% 3.92% 15.12% - -------------------------------------------------------------------------------- Ratios/Supplemental Data - -------------------------------------------------------------------------------- Net assets, end of period (000's) $4.593 $5,532 $6,109 $7,543 $7,206 - -------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.90% 1.90% 1.90% 1.90% 1.90% - -------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 5.70% 5.81% 5.89% 5.72% 6.00% - -------------------------------------------------------------------------------- Portfolio turnover rate 43% 48% 65% 56% 132% - -------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 2.38% 2.20% 2.29% 2.22% 2.50% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- National Municipal Bond Fund ------------------------------------------------ Class A ------------------------------------------------ Year Year Year Year Year Ended Ended Ended Ended Ended 10/31/99 10/31/98 10/31/97 10/31/96 10/31/95 - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.22 $10.09 $9.73 $9.62 $8.82 - -------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.45 0.47 0.48 0.48 0.51 Net realized and unrealized gain/(loss) on investments (0.74) 0.13 0.36 0.11 0.80 [CAPTION] ------------------------------------------------ Total from investment operations (0.29) 0.60 0.84 0.59 1.31 [CAPTION] ------------------------------------------------ Distributions Dividends from net investment income (0.45) (0.47) (0.48) (0.48) (0.51) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $9.48 $10.22 $10.09 $9.73 $9.62 - -------------------------------------------------------------------------------- Total Return (2.95%) 6.04% 8.85% 6.31% 15.26% - -------------------------------------------------------------------------------- Ratios/Supplemental Data - -------------------------------------------------------------------------------- Net assets, end of period (000's) $4,435 $5,820 $6,347 $7,710 $7,618 - -------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.00% 1.00% 0.99% 0.99% 0.80% - -------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 4.52% 4.60% 4.87% 4.99% 5.55% - -------------------------------------------------------------------------------- Portfolio turnover rate 46% 43% 29% 49% 44% - -------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 1.41% 1.23% 1.23% 1.25% 1.34% - -------------------------------------------------------------------------------- * Net investment income per share has been calculated using the average share method The accompanying notes are an integral part of the financial statements. 29 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - -------------------------------------------------------------------------------- National Municipal Bond Fund ------------------------------------------------ Class B ------------------------------------------------ Year Year Year Year Year Ended Ended Ended Ended Ended 10/31/99 10/31/98 10/31/97 10/31/96 10/31/95 - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.22 $10.09 $9.73 $9.62 $8.81 - -------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.37 0.38 0.40 0.40 0.43 Net realized and unrealized gain/(loss) on investments (0.74) 0.13 0.36 0.11 0.81 [CAPTION] ------------------------------------------------ Total from investment operations (0.37) 0.51 0.76 0.51 1.24 [CAPTION] ------------------------------------------------ Distributions Dividends from net investment income (0.37) (0.38) (0.40) (0.40) (0.43) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $9.48 $10.22 $10.09 $9.73 $9.62 - -------------------------------------------------------------------------------- Total Return (3.77%) 5.15% 7.94% 5.41% 14.42% - -------------------------------------------------------------------------------- Ratios/Supplemental Data - -------------------------------------------------------------------------------- Net assets, end of period (000's) $4,197 $5,273 $6,532 $6,130 $5,876 - -------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.85% 1.85% 1.84% 1.84% 1.70% - -------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 3.67% 3.75% 4.02% 4.14% 4.59% - -------------------------------------------------------------------------------- Portfolio turnover rate 46% 43% 29% 49% 44% - -------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 2.26% 2.08% 2.15% 2.11% 2.41% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- National Municipal Bond Fund ------------------------------------------------ Class C ------------------------------------------------ Year Year Year Year Year Ended Ended Ended Ended Ended 10/31/99 10/31/98 10/31/97 10/31/96 10/31/95 - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.22 $10.09 $9.73 $9.62 $8.81 - -------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.37 0.38 0.40 0.40 0.43 Net realized and unrealized gain/(loss) on investments (0.74) 0.13 0.36 0.11 0.81 [CAPTION] ------------------------------------------------ Total from investment operations (0.37) 0.51 0.76 0.51 1.24 [CAPTION] ------------------------------------------------ Distributions Dividends from net investment income (0.37) (0.38) (0.40) (0.40) (0.43) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $9.48 $10.22 $10.09 $9.73 $9.62 - -------------------------------------------------------------------------------- Total Return (3.77%) 5.15% 7.94% 5.41% 14.42% - -------------------------------------------------------------------------------- Ratios/Supplemental Data - -------------------------------------------------------------------------------- Net assets, end of period (000's) $3,931 $5,147 $5,305 $5,693 $6,834 - -------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.85% 1.85% 1.84% 1.84% 1.70% - -------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 3.67% 3.75% 4.02% 4.14% 4.53% - -------------------------------------------------------------------------------- Portfolio turnover rate 46% 43% 29% 49% 44% - -------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 2.26% 2.08% 2.15% 2.25% 2.63% - -------------------------------------------------------------------------------- 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 ------------------------------------------------ Class A ------------------------------------------------ Year Year Year Year Year Ended Ended Ended Ended Ended 10/31/99 10/31/98 10/31/97 10/31/96 10/31/95 - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.08 $9.94 $9.80 $9.98 $9.45 - -------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.53 0.56 0.59 0.56 0.63 Net realized and unrealized gain/(loss)on investments (0.48) 0.16 0.13 (0.12) 0.57 ------------------------------------------------ Total from investment operations 0.05 0.72 0.72 0.44 1.20 ------------------------------------------------ Distributions Dividends from net investment income (0.58) (0.58) (0.58) (0.56) (0.67) Distributions in excess of net investment income - - - (0.06) - [CAPTION] ------------------------------------------------ Total distributions (0.58) (0.58) (0.58) (0.62) (0.67) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $9.55 $10.08 $9.94 $9.80 $9.98 - -------------------------------------------------------------------------------- Total Return 0.48% 7.41% 7.56% 4.64% 13.15% - -------------------------------------------------------------------------------- Ratios/Supplemental Data - -------------------------------------------------------------------------------- Net assets, end of period (000's) $35,379 $49,624 $53,235 $72,774 $81,179 - -------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.25% 1.25% 1.25% 1.25% 1.25% - -------------------------------------------------------------------------------- Ratio of net investment income to average net assets 5.64% 5.65% 6.20% 5.71% 6.54% - -------------------------------------------------------------------------------- Portfolio turnover rate 63% 116% 364% 477% 469% - -------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 1.46% 1.40% 1.42% 1.41% 1.45% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- U.S. Government Securities Fund ------------------------------------------------ Class B ------------------------------------------------ Year Year Year Year Year Ended Ended Ended Ended Ended 10/31/99 10/31/98 10/31/97 10/31/96 10/31/95 - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.07 $9.94 $9.80 $9.98 $9.45 - -------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.47 0.49 0.54 0.50 0.56 Net realized and unrealized gain/(loss)on investments (0.47) 0.15 0.11 (0.12) 0.58 [CAPTION] ------------------------------------------------ Total from investment operations 0.00 0.64 0.65 0.38 1.14 [CAPTION] ------------------------------------------------ Distributions Dividends from net investment income (0.51) (0.51) (0.51) (0.50) (0.61) Distributions in excess of net investment income - - - (0.06) - [CAPTION] ------------------------------------------------ Total distributions (0.51) (0.51) (0.51) (0.56) (0.61) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $9.56 $10.07 $9.94 $9.80 $9.98 - -------------------------------------------------------------------------------- Total Return 0.01% 6.60% 6.84% 3.97% 12.45% - -------------------------------------------------------------------------------- Ratios/Supplemental Data - -------------------------------------------------------------------------------- Net assets, end of period (000's) $12,033 $17,850 $16,659 $19,444 $13,993 - -------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.90% 1.90% 1.90% 1.90% 1.90% - -------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 5.00% 4.99% 5.55% 5.06% 5.53% - -------------------------------------------------------------------------------- Portfolio turnover rate 63% 116% 364% 477% 469% - -------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 2.11% 2.05% 2.09% 2.06% 2.28% - -------------------------------------------------------------------------------- * Net investment income per share has been calculated using the average share method The accompanying notes are an integral part of the financial statements. 31 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - -------------------------------------------------------------------------------- U.S. Government Securities Fund ------------------------------------------------- Class C ------------------------------------------------- Year Year Year Year Year Ended Ended Ended Ended Ended 10/31/99 10/31/98 10/31/97 10/31/96* 10/31/95 - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.07 $9.94 $9.80 $9.98 $9.45 - -------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.47 0.49 0.54 0.50 0.56 Net realized and unrealized gain/(loss)on investments (0.47) 0.15 0.11 (0.12) 0.58 ------------------------------------------------- Total from investment operations 0.00 0.64 0.65 0.38 1.14 ------------------------------------------------- Distributions Dividends from net investment income (0.51) (0.51) (0.51) (0.50) (0.61) Distributions in excess of net investment income - - - (0.06) - ------------------------------------------------- Total distributions (0.51) (0.51) (0.51) (0.56) (0.61) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $9.56 $10.07 $9.94 $9.80 $9.98 - -------------------------------------------------------------------------------- Total Return 0.01% 6.60% 6.84% 3.97% 12.45% - -------------------------------------------------------------------------------- Ratios/Supplemental Data - -------------------------------------------------------------------------------- Net assets, end of period (000's) $10,776 $12,708 $14,716 $20,009 $20,186 - -------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.90% 1.90% 1.90% 1.90% 1.90% - -------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 5.00% 5.00% 5.55% 5.06% 5.74% - -------------------------------------------------------------------------------- Portfolio turnover rate 63% 116% 364% 477% 469% - -------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 2.11% 2.05% 2.09% 2.06% 2.15% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Money Market Fund -------------------------------------------------- Class A -------------------------------------------------- Year Year Year Year Year Ended Ended Ended Ended Ended 10/31/99 * 10/31/98 10/31/97 10/31/96 10/31/95 - -------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00 - -------------------------------------------------------------------------------- Investment Operations: Net investment income 0.04 0.05 0.05 0.05 0.05 Distributions Dividends from net investment income (0.04) (0.05) (0.05) (0.05) (0.05) - -------------------------------------------------------------------------------- Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00 - -------------------------------------------------------------------------------- Total Return 4.56% 5.18% 5.13% 5.16% 5.60% - -------------------------------------------------------------------------------- Ratios/Supplemental Data - -------------------------------------------------------------------------------- Net assets, end of period (000's) $6,030 $10,295 $11,057 $8,087 $11,379 - -------------------------------------------------------------------------------- Ratio of total expenses to average net assets 0.50% 0.50% 0.50% 0.50% 0.50% - -------------------------------------------------------------------------------- Ratio of net investment income to average net assets 4.46% 5.06% 5.02% 5.02% 5.45% - -------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 0.95% 0.92% 0.96% 0.95% 0.96% - -------------------------------------------------------------------------------- * Net investment income per share has been calculated using the average share method The accompanying notes are an integral part of the financial statements. 32 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
Money Market Fund ------------------------------------------------- Class B ------------------------------------------------- Year Year Year Year Year Ended Ended Ended Ended Ended 10/31/99* 10/31/98 10/31/97 10/31/96 10/31/95 - --------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00 - --------------------------------------------------------------------------------- Investment Operations: Net investment income 0.04 0.05 0.05 0.05 0.05 Distributions Dividends from net investment income (0.04) (0.05) (0.05) (0.05) (0.05) - --------------------------------------------------------------------------------- Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00 - --------------------------------------------------------------------------------- Total Return 4.56% 5.18% 5.13% 5.16% 5.60% - --------------------------------------------------------------------------------- Ratios/Supplemental Data - --------------------------------------------------------------------------------- Net assets, end of period (000's) $4,551 $5,919 $3,332 $3,062 $1,564 - --------------------------------------------------------------------------------- Ratio of total expenses to average net assets 0.50% 0.50% 0.50% 0.50% 0.50% - --------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 4.47% 5.02% 5.02% 5.02% 5.52% - --------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 0.99% 0.98% 1.05% 1.18% 1.41% - ---------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Money Market Fund ------------------------------------------------- Class C ------------------------------------------------- Year Year Year Year Year Ended Ended Ended Ended Ended 10/31/99* 10/31/98 10/31/97 10/31/96 10/31/95 - --------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00 - --------------------------------------------------------------------------------- Investment Operations: Net investment income 0.04 0.05 0.05 0.05 0.05 Distributions Dividends from net investment income (0.04) (0.05) (0.05) (0.05) (0.05) - --------------------------------------------------------------------------------- Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00 - --------------------------------------------------------------------------------- Total Return 4.56% 5.18% 5.13% 5.16% 5.60% - --------------------------------------------------------------------------------- Ratios/Supplemental Data - --------------------------------------------------------------------------------- Net assets, end of period (000's) $8,644 $8,237 $7,539 $9,840 $9,394 - --------------------------------------------------------------------------------- Ratio of total expenses to average net assets 0.50% 0.50% 0.50% 0.50% 0.50% - --------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 4.48% 5.05% 5.01% 5.02% 5.46% - --------------------------------------------------------------------------------- Expense ratio before expense reimbursement by advisor 1.01% 0.94% 1.00% 0.98% 0.95% - ---------------------------------------------------------------------------------
* Net investment income per share has been calculated using the average share method The accompanying notes are an integral part of the financial statements. 33 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1999 (showing percentage of total value of investments) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- International Small Cap Fund - --------------------------------------------------------------
Shares Value ------ ----- COMMON STOCKS - 93.03% Automobiles & Related - 0.81% Koito Manufacturing Company 13,000 $74,681 Musashi Seimitsu 4,000 57,543 ------------ 132,224 Banking - 0.43% Commercial Int'l Bank of Egypt, 144A* 5,625 69,469 ------------ Building Materials - 0.25% Kingspan Group Plc 16,175 40,493 ------------ Business Services - 19.01% 4Front Software International, Inc.* 8,175 111,384 Able, Inc. 2,000 184,137 A-Com AB, 144A* 8,800 101,654 Allgon AB 12,125 163,652 Alten 850 92,894 Consodata SA* 6,375 120,700 Creyf's SA 2,425 60,835 F. I. Group Plc 8,600 72,777 FI System 700 69,948 Fuso Lexel, Inc. 7,000 147,022 GFK AG, 144A* 10,150 286,658 Guardian IT Plc* 11,475 123,882 HIQ International AB* 4,925 140,731 Incepta Group Plc 28,500 29,972 Information Highway Center 3,575 117,805 IPSOS* 2,025 102,985 LibertyOne, Ltd.* 58,075 71,847 ParaRede, SGPS* 9,175 96,507 Specialised Outsourcing, Ltd. 10,400 51,461 Tanseisha Company 8,500 57,063 The Goodwill Group, Inc. 1 719,190 Trafficmaster Plc 20,775 168,980 ------------ 3,092,084 Capital Goods - 0.75% Whatman Plc 6,950 122,768 ------------ Computer Equipment - 3.58% BATM Advanced Comm., Ltd.* 3,025 158,565 Imagination Technologies Group* 24,275 68,434 Jot Automation Group 43,975 226,650 Psion Plc 5,100 128,219 ------------ 581,868 Computer Networking - 1.06% Automated Systems Holdings 336,000 173,006 ------------ Computer Software & Services - 10.78% Alpha Systems, Inc. 1,000 139,062 Autonomy Corporation Plc* 5,600 118,048 BackWeb Technologies, Ltd.* 6,075 127,955 Baltimore Technology Plc* 875 27,031 Brokat Infosystems 850 103,936
Shares Value ------ ----- Computer Software & Services - continued Chip Application Technology* 47,775 $45,395 Computer & Tech. Holdings, Ltd.* 188,000 48,401 Connecta AB, 144A* 11,900 173,638 Cresco, Ltd. 1,500 128,033 Fantastic Corporation* 1,125 79,283 Informatics Holdings 65,000 31,654 Intershop Communications AG 1,975 247,211 Kewill Systems Plc 6,975 77,937 PCA Corporation 2,418 112,471 RM Plc 9,650 98,788 Sausage Software, Ltd.* 22,625 39,677 Secure Network Solutions, Ltd.* 69,775 102,785 Solution 6 Holdings, Ltd. 11,775 51,661 ------------ 1,752,966 Construction - 0.86% Colas SA 675 139,657 ------------ Consumer Products & Services - 2.69% H. I. S. Company 4,420 175,918 Kabel New Media* 4,825 67,500 Zapf Creation AG* 5,575 193,397 ------------ 436,815 Distribution - 0.91% IAWS Group Plc 9,675 47,830 Paltek Corporation 2,000 99,741 ------------ 147,571 Electronics - 7.44% Chiyoda Integre Company 7,000 114,798 Elec & Eltek International 23,000 78,200 Great Wall Electronics 98,000 5,062 Kaba Holdings AG 235 172,669 Kudelski SA* 40 166,371 Kuroda Electric Company 320 18,352 Matsuo Electric Company* 1,358 5,144 Nidec Copal Electronics Corp. 7,000 110,099 Pace Micro Tech. Plc 10,500 46,748 Perlos Corporation* 3,250 53,329 Star Micronics Company, Ltd. 6,000 84,876 Technology Nexus AB 2,650 22,395 Toyo Corporation 4,000 109,332 Yokowo Company 13,000 222,547 ------------ 1,209,922 Energy - 1.48% ERG SpA 26,250 83,662 Vestas Wind Systems, 144A 1,200 157,085 ------------ 240,747 Financial Services - 0.96% Celestial Asia Securities Hldg. 780,000 77,312 Ichiyoshi Securities Company 8,000 50,024 JCG Holdings, Ltd. 54,000 29,369 ------------ 156,705
The accompanying notes are an integral part of the financial statements. 34 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Shares Value ------ ----- Food & Beverages - 1.57% Kamps AG 2,650 $148,290 Q'sai Company, Ltd. 1,000 68,956 Wine Planet Holdings, Ltd.* 254,525 38,143 ------------ 255,389 Healthcare Services - 0.30% Sonic Healthcare, Ltd. 12,525 48,722 ------------ Leisure & Entertainment - 4.47% AVEX, Inc. 800 168,793 Eidos Plc* 4,025 280,995 Enlight Interactive AB 725 8,375 Jurys Doyle Hotel Group Plc 4,825 41,616 Koei Company 3,700 143,004 Trenno (Societa) Spa 11,425 84,482 ------------ 727,265 Machinery & Manufacturing - 2.93% Arrk Corporation 3,000 106,454 Mecatherm SA 1,625 61,533 Meiki Compamy, Ltd. 6,000 140,117 Neopost SA 3,050 105,548 Swisslog Holding AG 400 62,914 ------------ 476,566 Medical Supplies & Equipment - 2.80% Gretag Imaging Group 700 88,631 Japan Lifeline Company 1,200 26,470 Kalbe Farma 157,000 19,468 Medical Support Company, Ltd. 2,000 93,795 Novogen Ltd.* 37,925 81,019 Straumann Holdings AG 330 146,133 ------------ 455,516 Metals & Mining - 0.44% Eldorado Gold Corporation* 17,550 11,923 International Mineral Resources 92,250 34,708 Natsteel Broadway 14,000 24,920 ------------ 71,551 Office Supplies & Equipment - 3.07% Gruppo Buffetti SpA 9,075 75,314 Ideal Group SA* 2,120 87,140 Okamura Corporation 23,000 86,027 Uchida Yoko Company 27,000 251,175 ------------ 499,656 Photography & Imaging - 0.56% Xaar Plc* 39,700 91,329 ------------ Publishing & Broadcasting - 2.57% Bloomsbury Publishing Plc 7,725 64,103 Capital Radio 10,550 173,184 Edipresse SA 250 102,834 NRJ SA 250 77,837 ------------ 417,958
Shares Value ------ ----- Restaurants - 3.32% Daisyo Corporation 4,000 $54,282 JD Wetherspoon 14,265 80,166 Kappa Create Company, Ltd.* 5,000 158,243 Krasnapolsky Hotels & Restaurants 1,150 74,694 Matsuya Foods Company 2,500 172,149 ------------ 539,534 Retail Trade - 6.54% Arcland Sakamoto Company 1,000 16,783 Cecile Company 1,900 93,296 Edgars Consolidated Stores 4,400 42,971 Electronics Boutique Plc 37,025 58,406 Grafton Group Plc 2,000 44,178 Gruppo Coin SpA* 16,400 162,153 Happinet Corporation 1,000 57,543 JD Group, Ltd. 5,900 37,453 Matalan Plc* 6,275 142,293 Megane Top Co., Ltd. 4,000 176,465 Nishimatsuya Chain Company, Ltd. 3,000 143,857 Nitori Company 1,000 41,239 Waterford Wedgwood Plc 43,350 46,054 ------------ 1,062,691 Semiconductors & Equipment - 5.83% ASM Pacific Technology 80,000 94,227 CE Consumer Electronic 1,775 161,685 Dialog Semiconductor, 144A* 9,700 249,972 ESEC Holding AG 60 90,533 Genesis Microchip, Inc.* 3,075 50,353 Komatsu Electronic Metals Co., Ltd. 4,700 48,681 Micronas Semiconductor 850 162,829 Mimasu Semiconductor Industry Co. 4,300 89,695 ------------ 947,975 Telecommunication Services - 4.24% Davnet Limited* 131,500 60,377 Detron Group NV* 3,100 39,129 Genesys 2,275 44,533 MultiEmedia.com, Ltd.* 238,750 60,900 PowerLan Limited, 144A 19,300 45,169 Redstone Telecom Plc* 6,100 19,396 Telegate AG* 3,175 113,547 Telelogic AB* 3,650 59,916 Teligent AB* 7,425 71,776 Tiscali SpA 144A* 1,275 87,843 Westel Group, Ltd.* 402,500 87,269 ------------ 689,855 Telecommunications Equipment - 2.08% AudioCodes, Ltd.* 1,950 117,975 Avenir Telecom 1,275 118,688 Toyo Communication Equipmenrt Co. 8,000 102,043 ------------ 338,706 Transportation - 0.18% Transportes Azkar SA 3,400 29,755 ------------
The accompanying notes are an integral part of the financial statements. 35 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Shares Value ------ ----- Utilities - 1.12% Independent Energy Holdings Plc* 6,725 $181,995 ------------ TOTAL COMMON STOCKS (Cost $13,419,692) $15,130,758 ------------ WARRANTS - 0.41% China Everbright, Ltd. (Expiration date 01/05/00)* 408,000 $65,650 Gold Peak Industries (Expiration date 08/06/00)* 36,000 463 ------------ TOTAL WARRANTS (Cost $111,225) $66,113 ------------ Shares Value ------ ----- SHORT TERM INVESTMENTS - 1.85% SSGA Money Market Fund (Cost $301,274) $301,274 $301,274 ------------ Principal Value --------- ----- REPURCHASE AGREEMENT - 4.71% Repurchase Agreement with State Street Bank & Trust Co. dated 10/29/99 at 4.25%, to be repurchased at $766,271 on 11/01/99, collateralized by $780,000 U. S. Treasury Notes, 4.00% due 10/31/00 (valued at $798,330, with interest) (Cost $766,000) $766,000 $766,000 ------------ TOTAL INVESTMENTS (International Small Cap Fund) (Cost $14,598,191) $16,264,145 ------------ - ------------------------------------------------------------------------------- International Equity Fund - ------------------------------------------------------------------------------- Shares Value ------ ----- COMMON STOCKS - 96.66% Aerospace & Military Technology - 0.35% British Aerospace Plc 3,650 $21,592 Cobham Plc 730 8,829 Meggitt Plc 1,604 4,006 Rolls Royce Plc 2,164 7,681 Singapore Technologies Engineering 23,000 33,325 Thomson CSF 417 14,167 ------------ 89,600 Appliances & Household Durables - 3.19% Electrolux AB 1,400 27,918 Philips Electronics 966 99,068 Matsushita Electric Industrial 11,000 231,562 Sanyo Electric Company Ltd. 11,000 52,748 Sharp Corporation 6,000 95,521 Sony Corporation 2,000 311,883 ------------ 818,700
Shares Value ------ ----- Automobiles - 4.28% Cycle & Carriage Ltd. 1,000 $3,397 Daimlerchrysler AG 3,700 287,997 Fiat SpA 861 27,260 Honda Motor Company 3,000 126,594 Nissan Motor Company 8,000 47,952 Peugeot SA 135 25,915 Toyota Motor Corp. 13,000 450,082 Volkswagen AG 1,250 73,892 Volvo AB Series A 700 18,258 Volvo AB Series B 1,400 36,175 ------------ 1,097,522 Banking - 14.20% 77th Bank Ltd. 1,000 11,873 Abbey National Plc. 2,518 49,154 ABN Amro Holdings NV 4,283 103,572 Argentaria, Caja Postal Y Banco 2,332 51,756 Asahi Bank Ltd. 10,000 88,808 Banca Commerciale Italiana 747 4,495 Banca Intesa SpA 10,944 46,736 Banca Popolare di Milano 870 5,848 Banco Bilbao Vizcaya SA 10,534 141,605 Banco Comercial Portugues SA 1,336 37,633 Banco Espirito Santo 690 17,941 Banco Santander Central Hispano 18,056 187,453 Bank Austria AG 861 42,810 Bank of East Asia Ltd. 3,600 7,878 Bank of Tokyo-Mitsubishi Ltd 16,000 265,158 Banque Nationale de Paris 805 70,703 Barclays Plc 1,903 58,381 Bayerische Hypo-Und Vereinsbank 1,550 101,735 BPI-SGPS SA 4,425 17,687 Chiba Bank Ltd. 600 3,280 Credit Suisse Holding 780 149,931 Daiwa Bank Ltd. 7,000 33,500 DBS Group Holdings Ltd. 5,815 65,726 Deutsche Bank AG 2,000 143,472 Dresdner Bank AG 1,900 97,827 Foereningssparbanken AB 2,400 38,230 Fuji Bank Ltd. 11,000 150,858 Bank of Fukuoka Ltd. 1,000 7,701 Halifax Group Plc 3,935 50,241 Hang Seng Bank Ltd. 5,500 59,825 HSBC Holdings Plc 13,514 166,213 Industrial Bank of Japan 10,000 135,226 Joyo Bank Ltd. 2,400 11,739 Lloyds TSB Group Plc 9,981 138,094 Mediobanca SpA 1,377 14,165 Merita Plc 3,075 17,822 Mitsubishi Trust & Banking Corp. 4,000 53,822 National Australia Bank Ltd. 3,197 49,337 Oversea-Chinese Banking Corp. Ltd. 8,400 63,128 Sakura Bank Ltd. 16,000 137,489
The accompanying notes are an integral part of the financial statements. 36 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Shares Value ------ ----- Banking - continued Sao Paolo IMI SpA 3,094 $40,095 Shizuoka Bank Ltd. 4,000 45,267 Skandinaviska Enskilda Banken 2,800 28,769 Societe Generale 258 56,175 Sumitomo Bank 10,000 160,928 Suncorp Metway Ltd. 766 4,034 Svenska Handelsbanken 3,000 41,586 Tokai Bank Ltd 8,000 69,819 UBS AG 600 174,572 Unicredito Italiano 10,457 48,946 United Overseas Bank Ltd. 6,000 45,452 Westpac Banking Corp. 4,391 28,175 ------------ 3,642,670 Beverages & Tobacco - 1.44% Asahi Breweries Ltd. 2,000 28,445 Austria Tabak AG 169 7,599 Bass Plc 1,456 15,958 Coca-Cola Amatil Ltd. 1,520 4,691 Diageo Plc 5,942 60,438 Fosters Brewing Group Ltd. 4,277 11,368 Fraser & Neave Ltd. 2,000 8,537 Hartwall 76 974 Heineken Holdings NV 905 46,159 Kirin Brewery Company Ltd. 6,000 68,706 Moet Hennessy Louis Vuitton 225 67,923 Oesterreichische Brau-Beteilign 70 3,221 Pernod Ricard 227 15,329 Seita Soc. Nat'l. D'Exploitation 152 8,474 Swedish Match AB 1,400 5,124 Tabacalera SA 904 14,881 Unicer Uniao Cervejjeira SA 94 1,780 ------------ 369,607 Broadcasting & Publishing - 1.23% British Sky Broadcasting Group 2,871 30,948 Canal Plus SA 309 21,451 Elsevier NV 1,752 16,641 EMAP Plc 374 4,855 Granada Group Plc 2,737 21,723 Mediaset SpA 2,891 28,858 News Corp Ltd. 4,535 32,795 Pearson Plc 1,248 28,095 Reed International Plc 2,207 12,947 Singapore Press Holdings 3,000 51,404 South China Morning Post 2,000 1,480 Television Broadcasts Ltd. 1,000 5,342 Tokyo Broadcasting System, Inc. 1,000 26,422 Trinity Mirror Plc 1,304 5,614 Wolters Kluwer NV 852 28,472 ------------ 317,047 Building Materials & Components - 0.63% Blue Circle Industries Plc 3,595 16,688 Boral Ltd. 2,733 4,113
Shares Value ------ ----- Building Materials & Components - continued BPB Plc 3,263 $19,302 Cimpor Cimentos de Portugal SA 964 15,991 CSR Ltd. 2,472 5,549 Heidelberger Zement AG 50 3,944 Holderbank Financiere Glarus AG 20 24,628 Italcementi Fabbriche Riunite 553 2,577 Italcementi Fabbriche Riunite NCNV 377 4,763 Jarvis Plc 1,140 4,908 Lafarge SA 263 25,312 Pioneer International Ltd. 2,234 4,886 RMC Group Plc 761 10,942 Rugby Group Plc 2,861 5,547 Sumitomo Osaka Cement Co. Ltd. 400 660 Weinerberger Baustoffindustrie 528 12,146 ------------ 161,956 Business & Public Services - 2.69% Adecco SA 60 36,371 Anglian Water Plc 1,207 13,447 Associated British Ports Holdings 3,146 15,612 Autopistas Concesionaria Espanol 1,338 14,426 BAA Plc 2,161 15,802 Benesse Corporation Ltd. 200 42,774 Brambles Industries Ltd. 529 14,877 Cap Gemini SA 201 30,445 CSK Corporation 100 4,603 Dai Nippon Printing Co. Ltd. 3,000 54,695 Flughafen Wein AG 163 5,627 Hyder Plc 1,485 13,372 Kelda Group Plc 1,111 6,773 Lex Services Plc 829 6,334 Mayne Nickless Ltd. 877 2,377 Pennon Group Plc 679 10,209 Railtrack Group Plc 920 18,836 Rentokil Initial Plc 4,998 16,733 Reuters Group 2,210 20,336 SAP AG 200 74,303 Securitas AB 1,800 26,702 Soc. Gen. De Aguas de Barcelona 723 11,544 Sodexho Alliance SA 79 12,963 Suez Lyonnaise des Eaux 345 55,703 Thames Water Plc 794 11,481 Toppan Printing Co. Ltd. 3,000 36,799 United Utilities Plc 1,171 11,603 Vedior NV 213 3,585 Vivendi SA 1,337 101,326 ------------ 689,658 Chemicals - 3.74% Akzo Nobel NV 971 41,814 Asahi Chemical Industry Co. Ltd. 5,000 30,210 BASF AG 2,550 114,665 Bayer AG 2,800 114,567 BOC Group Plc 1,580 34,011
The accompanying notes are an integral part of the financial statements. 37 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Shares Value ------ ----- Chemicals - continued Cin Corporacao Industrial Norte 34 $855 Imperial Chemical Industries Plc 1,324 13,173 L'Air Liquide 192 29,586 Lenzing AG 28 1,635 Mitsubishi Chemical Corp. 11,000 49,899 Novartis AG 190 284,196 Orica Ltd. 700 3,701 Rhone Poulenc SA 965 54,000 Shin-Etsu Chemical Co. Ltd. 2,000 82,478 Sumitomo Chemical Co. Ltd. 9,000 57,744 Toray Industries, Inc. 8,000 44,116 Wesfarmers Ltd. 450 3,332 ------------ 959,982 Construction & Housing - 0.87% Acs Actividades de Construccion 310 7,434 AMEC Plc 1,218 4,293 Barratt Development Plc 868 3,380 Bau Holdings AG 36 1,242 Beazer Group Plc 1,573 3,386 Berkeley Group Plc 422 3,807 Bilfinger & Berger Bauaktienge 250 5,128 Bouygues 85 29,594 Daiwa House Industry Co. Ltd. 2,000 18,299 Drott AB 1,730 16,618 Engil SGPS 96 976 Fomento de Construcciones Y Contra 472 11,841 Grupo Dragados SA 888 9,406 Hazama Corporation 900 578 Impregilo SpA 1,043 737 Kajima Corporation 9,000 31,677 Kumagai Gumi Co. Ltd. 600 564 Leighton Holdings Ltd. 661 2,403 Penta-Ocean Construction Co. Ltd. 800 1,335 Sekisui House Ltd. 4,000 43,311 Sirti SpA 448 2,427 Skanska/Frueher AB 600 21,960 Taylor Woodrow Plc 1,411 3,316 ------------ 223,712 Data Processing & Reproduction - 2.12% Canon, Inc. 5,000 141,460 Fuji Software ABC, Inc. 100 9,159 Fujitsu Ltd. 10,000 301,141 Getronics NV 221 11,019 Meitec Corporation 100 3,750 Nidec Corporation 200 38,841 OCE NV 269 4,456 Olivetti & Co. SpA 9,381 18,255 Tietoenator Corporation 225 7,810 Wm-Data Nordik AB 200 8,402 ------------ 544,293
Shares Value ------ ----- Electrical & Electronics - 6.48% ABB AG 700 $70,491 Alcatel 466 72,789 FKI Plc 1,710 4,496 L M Ericsson Telefon AB 6,200 257,831 General Electric Plc 5,077 55,269 Hitachi Ltd. 14,000 151,319 Johnson Electric Holdings Ltd. 2,500 13,516 Legrand SA 71 16,990 Misys Plc 2,860 23,827 Mitsubishi Electric Corp. 13,000 71,938 NEC Corporation 9,000 182,123 Nokia AB 3,452 395,088 Schneider SA 414 28,523 Siemens AG 2,250 201,995 Toshiba Corporation 18,000 113,244 ------------ 1,659,439 Electronic Components & Instruments - 2.23% Advantest Corporation 600 90,342 Alps Electric Co. Ltd. 1,000 19,373 Creative Technology Ltd. 700 8,164 Fanuc Ltd. 1,000 77,683 Hirose Electric Company Ltd. 100 17,445 Kyocera Corporation 1,100 105,495 Murata Manufacturing Co. Ltd. 1,000 128,513 Nikon Corporation 1,000 23,784 Tokyo Electron Ltd. 1,000 83,054 Venture Manufacturing, Singapore 2,000 17,796 ------------ 571,649 Energy Sources - 4.97% BP Amoco Plc 32,032 311,073 Broken Hill Proprietary Co. Ltd. 3,856 39,853 Burmah Castrol Plc 1,457 25,115 Ente Nazionale Idrocarburi SpA 17,265 100,971 Enterprise Oil 1,536 10,929 Lasmo Plc 6,149 13,640 Nippon Mitsubishi Oil Corp. 9,000 39,705 OMV AG 205 19,797 Repsol SA 4,889 100,999 Royal Dutch Petroleum Co. NV 6,266 374,560 Santos Ltd. 1,459 3,750 Total Fina SA 1,720 232,469 ------------ 1,272,861 Financial Services - 2.18% Acom Co. Ltd. 500 54,666 AMP Limited 2,297 23,358 Colonial Ltd. 1,929 7,098 Daiwa Securities Group, Inc. 5,000 53,371 ING Groep NV 2,745 161,921 Limit Plc 3,294 8,011 Nichiei Company Ltd. 300 15,537 Nomura Securities Co. Ltd. 6,000 99,031 OM Gruppen AB 300 3,867
The accompanying notes are an integral part of the financial statements. 38 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Shares Value ------ ----- Financial Services - continued Orix Corporation 200 $26,853 Promise Company Ltd. 500 33,567 Schroder Plc 311 6,224 Takefuji Corporation 500 64,736 ------------ 558,240 Food & Household Products - 2.36% Ajinomoto Co., Inc. 3,000 33,634 Azucarera Ebro Agricolas 165 2,947 Cadbury Schweppes Plc 3,456 22,488 Eridania Beghin-Say SA 88 9,997 Goodman Fielder Wattie Ltd. 2,953 2,731 Groupe Danone 180 45,913 Jeronimo Martins Sgps. SA 565 15,773 KAO Corporation 2,000 60,995 Nestle SA 120 231,451 Parmalat Finanziaria SpA 4,303 5,653 Prima Inmobiloaroa SA 1,260 11,159 Raisio Group Plc 508 3,308 Unilever NV 1,697 112,454 Unilever Plc 5,049 46,875 ------------ 605,378 Forest Products & Paper - 0.44% Amcor Ltd. 1,574 6,879 Arjo Wiggins Appleton Plc 1,920 6,657 Buhrmann NV 267 4,603 Cartiere Burgo SpA 210 1,546 Investimentos Participacoes 119 1,036 Oji Paper Co. Ltd. 4,000 28,196 Portucel Industrial SA 660 4,512 Reno de Medici SpA 295 864 Rexam Plc 905 3,718 Svenska Cellulosa AB 1,000 26,994 UPM-Kymmene 844 26,633 ------------ 111,638 Gold Mines - 0.01% Normandy Mining Ltd. 4,810 3,650 ------------ Health & Personal Care - 5.45% Astrazeneca Plc 2,848 128,789 Beiersdorf AG 400 26,927 CSL Ltd. 257 3,114 Faulding & Co. Ltd. 297 1,816 Glaxo Wellcome Plc 5,906 174,297 L'Oreal 160 106,784 Roche Holding AG 5 87,253 Roche Holding Genusschein 21 252,116 Sankyo Co. Ltd. 2,000 56,967 Sanofi Synthelabo SA 1,679 74,086 Schering AG 200 23,793 Shiseido Co. Ltd. 1,000 15,249 Smithkline Beecham Plc 8,850 114,157 Taisho Pharmaceutical Co. Ltd. 2,000 83,245 Takeda Chemical Industries Ltd. 3,000 172,341
Shares Value ------ ----- Health & Personal Care - continued Terumo Corporation 1,000 $30,402 Yamanouchi Pharmaceutical Co. 1,000 45,363 ------------ 1,396,699 Industrial Components - 1.04% BICC Plc 1,343 2,405 Bridgestone Corporation 3,000 82,574 Cie Generale des Establissement 374 16,286 Continental AG 500 10,860 Denso Corporation 2,000 42,774 Fag Kugelfischer Georg Schaefer 650 5,504 Pirelli SpA 5,441 12,476 SKF AB 400 8,123 Sumitomo Electric Industries 5,000 67,181 Valeo SA 239 17,170 ------------ 265,353 Insurance - 5.27% Aegon NV 1,642 151,556 Allianz AG 900 274,059 Allied Zurich Plc 2,465 29,974 Assicurazione Generali SpA 2,426 77,830 Axa 812 114,535 CGU Plc 1,932 28,159 Cie De Seguros Tranquilidad SA 65 1,811 Corporacion Mapfre Cia International 372 6,339 Generali Holding, Vienna 54 8,788 Gio Australia Holdings Ltd. 540 1,026 Istituto Nazionale delle Assicuratrice 8,413 25,530 Legal & General Group Plc 14,174 39,361 Muenchener Rueckversicherungs 550 126,117 Prudential Corporation Plc 3,499 54,851 QBE Insurance Group Ltd. 966 4,035 Riunione Adriatica de Sicurta 1,183 10,913 Royal & Sun Alliance Insurance 2,475 16,857 Sai Sta Assicuratrice Industrial 336 3,517 Sampo Insurance Company Ltd. 332 11,524 Skandia Forsakring AB 2,400 53,405 Swiss Ruckversicher 45 93,289 Tokio Marine & Fire Insurance Co. 5,000 65,455 Unione Immobiliare SpA 140,836 72,440 Zurich Allied AG 140 79,263 ------------ 1,350,634 Leisure & Tourism - 0.45% Accor SA 21 20,484 Compass Group Plc 1,002 10,702 Hilton Group Plc 2,840 8,680 Hongkong & Shanghai Hotels Ltd. 2,500 1,834 Hotel Properties Ltd. 3,000 2,561 Oriental Land Company Plc 400 37,902 Overseas Union Enterprise Ltd. 1,000 2,754 Rank Group Plc 3,326 10,357 Shangri-La Asia Ltd. 2,000 2,175 Sol Melia SA 495 5,649
The accompanying notes are an integral part of the financial statements. 39 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Shares Value ------ ----- Leisure & Tourism - continued Tabcorp Holdings Ltd. 788 $4,995 Telepizza SA 1,144 6,113 ------------ 114,206 Machinery & Engineering - 1.90% Atlas Copco AB Ser A 600 15,832 Atlas Copco AB Ser B 300 7,806 BWT (Benckiser) AG 13 2,349 GKN Plc 2,453 39,461 Komatsu Ltd. 4,000 23,247 Laird Group Plc 1,113 4,682 Linde AG 350 18,334 Man AG 500 16,619 Mannesmann AG 1,350 212,290 Metso 488 5,518 Mitsubishi Heavy Industries Ltd. 13,000 50,993 Mitsui Engineering & Shipbuilding Co. 800 714 Sembcorp Industries Ltd. 10,000 12,626 SMC Corporation 300 50,609 Smith Industries Plc 368 4,995 Stork NV 137 2,688 Sulzer AG 10 7,020 VA Technologies AG 115 7,690 Zardoya Otis SA 248 2,786 ------------ 486,259 Merchandising - 2.78% Boots Company Plc 1,880 19,292 Carrefour 738 136,623 Casino Guichard Perrachon 213 24,197 Coles Myer Ltd. 2,643 13,146 Douglas Holding AG 400 18,155 Great Universal Stores Plc 1,704 12,908 Hennes & Mauritz AB 3,800 100,961 Ito-Yokado Company Ltd. 1,000 79,985 Jusco Company Ltd. 2,000 46,610 Karstadt AG 100 4,523 Kingfisher Plc 2,640 28,891 KoninklijkeAhold NV 1,752 53,811 Marks & Spencer Plc 4,980 22,995 Marui Company Ltd. 1,000 18,893 Next Plc 932 10,054 Pinault-Printemps Redoute 309 58,926 Rinascente Per L'Esercizio 527 3,659 Safeway Plc 2,149 6,780 J. Sainsbury Plc 3,214 19,303 Tesco Plc 6,258 18,587 Valora Holding AG 20 5,091 Woolworths Ltd. 2,745 9,330 ------------ 712,720 Metals - Non-Ferrous - 0.31% IMI Plc 1,437 5,643 North Ltd. 1,641 3,171
Shares Value ------ ----- Metals - Non-Ferrous - continued Outakumpa 588 $6,729 Pechiney SA 235 13,150 Rio Tinto Plc 1,832 31,277 Straits Trading Company Ltd. 1,000 1,052 WMC Ltd. 4,360 18,712 ------------ 79,734 Metals - Steel - 1.05% Acerinox SA 381 11,582 Boehler-Uddeholm 85 3,558 Corus Group Plc 3,788 7,220 Kawasaki Steel Corporation 8,000 18,107 Natsteel Ltd. 3,000 5,014 Nippon Steel Corporation 47,000 119,450 Sandvik AB Ser A 900 23,146 Sandvik AB Ser B 400 10,360 SSAB Swedish Steel 600 7,478 Sumitomo Metal Industries Ltd. 16,000 15,652 Thyssen Krupp AG 1,600 37,867 Usinor 685 9,518 ------------ 268,952 Misc Materials & Commodities - 0.47% Asahi Glass Company Ltd. 5,000 39,753 Caradon Plc 4,230 9,860 Cie de Saint Gobain 233 40,438 Corticeira Amorim Socdad Gestora 158 1,579 Mayr-Melnhof Karton AG 92 4,098 Pilkington Plc 9,480 14,214 Rhi AG 108 3,033 Rio Tinto Ltd. 439 7,057 ------------ 120,032 Multi-Industry - 1.44% Agiv AG 800 13,911 Alusuisse Lonza Group AG 20 12,202 Berisford Plc 1,239 5,782 Corporacion Financiera Alba SA 444 12,890 Hanson Plc 2,782 21,668 Howard Smith Ltd. 488 3,499 Hutchison Whampoa Ltd. 10,000 100,405 Invensys Plc 6,839 33,601 Johnson Matthey Plc 1,692 15,681 Keppel Corporation Ltd. 7,000 19,022 Lagardere Groupe SCA 388 15,713 Lonmin Plc 1,504 15,125 Metra AB 211 3,995 Montedison SpA 3,429 6,114 Pacific Dunlop Ltd. 2,596 3,659 Preussag AG 450 24,377 Racal Electronics 803 5,925 SNIA SpA 2,119 2,292 Sonae Investimentos SA 332 11,091 Swire Pacific Ltd. 4,500 22,302 Southcorp Ltd. 1,529 5,314
The accompanying notes are an integral part of the financial statements. 40 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Shares Value ------ ----- Multi-Industry - continued T.I. Group Plc 1,043 $7,027 Trelleborg AB 700 6,384 ------------ 367,979 Real Estate - 3.81% AMP Diversified Property Trust 949 1,422 British Land Company Plc 11,659 83,912 Capital Shopping Centres Plc 2,710 17,946 Castellum AB 1,590 13,727 Cheung Kong Holdings Ltd. 6,000 54,644 Cie Fonciere Klepierre 260 26,883 City Developments Ltd. 6,000 31,023 DBS Land Ltd. 10,000 18,517 Diligentia AB 2,645 18,815 First Capital Corporation Ltd. 2,000 2,381 Fonciere Lyonnaise SA 120 16,068 General Property Trust Units 3,281 5,270 Grantchester Holdings Plc 14,750 32,720 Great Portland Estates Plc 6,370 19,888 Hammerson Plc 4,560 33,715 Hang Lung Development Co. Ltd. 6,000 6,449 Hopewell Holdings Ltd. 4,000 2,536 Hysan Development Co. Ltd. 3,000 3,572 Land Securities Plc 9,784 121,864 Lend Lease Corp. Ltd. 1,298 14,935 MEPC Plc 7,782 53,963 Metrovacesa SA 1,369 30,240 Mitsubishi Estate Company Ltd. 4,000 40,088 Mitsui Fudosan Company Ltd. 2,000 14,942 New World Development Co. Ltd. 6,000 11,354 Parkway Holdings Ltd. 3,000 5,519 SILIC 70 11,560 SIMCO 400 34,459 Sino Land Company Ltd. 10,000 4,570 Slough Estates 8,823 51,178 Stockland Trust Group 794 1,710 Sun Hung Kai Properties Ltd. 7,000 56,768 Tornet Fastighets AB 910 11,840 Unibail SA 280 40,938 United Industrial Corp. Ltd. 11,000 5,985 United Overseas Land Ltd. 5,000 4,329 Vallehermoso SA 5,362 46,305 Westfield Trust 133 247 Westfield Trust 3,102 5,954 Wharf Holdings Ltd. 6,000 17,339 ------------ 975,575 Recreation - Other Consumer Goods - 1.02% Adidas Salomon AG 200 14,473 BIC 187 9,146 EMI Group Plc 3,740 29,499 Fuji Photo Film Company Ltd. 2,000 64,256
Shares Value ------ ----- Recreation - Other Consumer Goods - continued Nintendo Company Ltd. 800 $126,978 The Swatch Group AG 20 15,929 ------------ 260,281 Telecommunications - 10.64% British Telecommunications Plc 10,244 185,835 Cable & Wireless Plc 5,103 59,534 Cable & Wireless HKT Ltd. 32,000 73,115 Deutsche Telekom AG 9,938 456,808 France Telecom SA 2,389 230,806 Koninklijke KPN NV 1,357 69,640 Netcom AB 400 16,609 Nippon Telegraph & Telephone 43 659,824 Portugal Telecom SA 1,260 56,193 Singapore Telecommunications Ltd. 45,000 85,492 Sonera Corporation 1,218 36,576 Swisscom AG 200 60,945 Telecom Italia Mobile SpA 3,606 12,516 Telecom Italia Mobile SpA 15,270 95,407 Telecom Italia SpA 8,015 69,215 Telecom Italia SpA 1,029 5,055 Telefonica SA 13,935 229,244 Telstra Corporation Ltd. 11,677 59,400 TNT Post Groep NV 1,432 36,451 Vodafone Airtouch Plc 48,995 228,242 ------------ 2,726,907 Textiles & Apparel - 0.04% Benetton Group SpA 4,146 9,158 Toyobo Company Ltd. 800 1,205 ------------ 10,363 Transportation - Airlines - 0.80% Alitalia Linee Aeree Italiane 3,315 9,153 Austrian Airlines 166 3,527 British Airways Plc 2,159 11,033 Cathay Pacific Airways Ltd. 9,000 18,247 Deutsche Lufthansa AG 1,350 28,400 Japan Airlines Company Ltd. 13,000 43,637 KLM Royal Dutch Air 190 5,176 Sairgroup 50 10,513 Singapore Airlines Ltd. 7,000 74,070 ------------ 203,756 Transportation - Road & Rail - 1.13% Brisa Auto-Estradas de Portugal 431 16,978 Central Japan Railway Company 9 60,852 Comfort Group Ltd. 4,000 2,008 East Japan Railway Company 17 104,181 Firstgroup Plc 1,490 5,962 Hankyu Corp. 200 689 Kinki Nippon Railway Company Ltd. 10,000 46,322 NFC Plc 2,446 7,878 Nippon Express Company Ltd. 5,000 35,389
The accompanying notes are an integral part of the financial statements. 41 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Shares Value ------ ----- Transportation - Road & Rail - continued Odakyu Electric Railway Co. Ltd. 470 $1,465 Stagecoach Holdings Plc 2,618 7,442 ------------ 289,166 Transportation - Shipping - 0.09% Koninklijke Nedlloyd NV 77 2,150 Neptune Orient Lines Ltd. 2,000 2,898 Peninsular & Orient Steam Navigation 1,204 17,311 ------------ 22,359 Utilities - Electrical & Gas - 4.00% Australian Gas Light Company 912 5,031 BG Plc 7,128 39,589 Centrica Plc 8,276 24,036 CLP Holdings Ltd. 4,500 20,680 Edison SpA 1,656 13,743 Electricidade de Portugal 4,211 65,466 Endesa SA 4,797 96,020 Gas Natural Sdg SA 2,259 49,899 Hongkong & China Gas Company Ltd. 14,000 18,562 Iberdrola SA 4,540 66,187 Italgas Sta Italiana Per Il Gas 1,122 4,638 Kansai Electric Power Co., Inc. 5,200 97,198 National Grid Group Plc 2,129 15,848 National Power Plc 2,597 17,624 Oesterreichische Elektrizitaets 235 34,013 Osaka Gas Company Ltd. 9,000 30,124 RWE AG 1,850 74,529 Tohoku Electric Power Co., Inc. 2,300 35,911 Tokyo Electric Power Co., Inc. 5,800 129,606 Union Electrica Fenosa 1,504 22,005 Veba AG 2,000 108,130 Viag AG 3,000 55,380 ------------ 1,024,219 Wholesale & International Trade - 1.56% Hagemeyer NV 243 4,982 Kesko Corporation 547 6,225 Metro AG 950 51,062 Mitsubishi Corporation 7,000 50,350 Mitsui & Company 4,000 29,577 Softbank Corporation 500 207,634 Sumitomo Corporation 7,000 51,156 ------------ 400,986 TOTAL COMMON STOCKS (Cost $22,651,558) $24,773,782 ------------ PREFERRED STOCKS - 0.47% Automobiles - 0.06% Fiat SpA 152 $2,336 Volkswagen AG 400 14,179 ------------ 16,515
Shares Value ------ ----- Broadcasting & Publishing - 0.11% News Corporation 4,007 $27,129 ------------ Business & Public Services - 0.26% SAP AG 150 66,109 ------------ Food & Household Products - 0.04% Unilever NV 1,951 10,302 ------------ TOTAL PREFERRED STOCKS (Cost $107,548) $120,055 ------------ RIGHTS & WARRANTS - 0.06% Banque Nationale de Paris warrants expire 7/15/02 338 $1,998 Linde AG rights expire11/03/99 350 736 Lonza Group AG rights expire 11/01/99 20 11,678 ------------ TOTAL RIGHTS AND WARRANTS (Cost $2,795) $14,412 ------------ SHORT TERM INVESTMENTS - 0.00% SSGA Money Market Fund (Cost $1,000) 1,000 $1,000 ------------ Principal Value --------- ----- REPURCHASE AGREEMENT - 2.81% Repurchase Agreement with State Street Bank & Trust Co. dated 10/29/99 at 4.25%, to be repurchased at $719,255 on 11/01/99, collateralized by $740,000 U.S. Treasury Notes, 4.875% due 03/31/01 (valued at $736,766 with interest) (Cost $719,000) $719,000 $719,000 ------------ TOTAL INVESTMENTS (International Equity Fund) (Cost $23,481,901) $25,628,249 ------------ - ------------------------------------------------------------------------------- Global Equity Fund - ------------------------------------------------------------------------------- Shares Value ------ ----- COMMON STOCKS - 96.41% Aerospace & Military Technology - 1.18% B.F. Goodrich Co. 24,100 $570,869 General Dynamics Corp. 7,400 410,237 ------------ 981,106 Appliances & Household Durables - 1.78% Philips Electronics NV 8,610 883,002 Pioneer Electronic Corp. 33,000 588,981 ------------ 1,471,983 Automobiles - 0.78% Volkswagen AG 10,930 646,116 ------------ Banking - 9.41% ABN AMRO Holdings NV 28,400 686,770 Bank of Ireland 213,113 1,663,296
The accompanying notes are an integral part of the financial statements. 42 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Shares Value ------ ----- Banking - continued Chase Manhattan Corp. 8,200 $716,475 Mellon Financial Corp. 45,700 1,688,044 National Westminster 19,450 439,133 Nordbanken Holding AB 159,950 933,560 U. S. Bancorp 19,600 726,425 Westpac Banking Corp. 147,300 945,156 ------------ 7,798,859 Beverages & Tobacco - 6.54% Allied Domecq Plc 206,540 1,157,307 Imperial Tobacco, Ltd. 94,500 1,001,571 Pernod-Ricard 18,290 1,235,101 Philip Morris Companies, Inc. 80,500 2,027,594 ------------ 5,421,573 Broadcasting & Publishing - 3.25% Houghton Mifflin Co. 39,100 1,656,863 Mediaset 104,200 1,040,130 ------------ 2,696,993 Building Materials & Components - 3.39% Blue Circle Industries Plc 113,250 525,711 Cimpor-Cimentos de Portugal SA 34,950 579,739 CSR, Ltd. 155,100 348,153 Holderbank Financier Glarus AG 780 960,480 Wolseley Plc 57,900 394,360 ------------ 2,808,443 Business & Public Services - 1.71% Cadiz, Inc.* 44,950 376,456 Toppan Printing Co. 17,000 208,526 WPP Group Plc 76,500 829,651 ------------ 1,414,633 Chemicals - 3.77% BASF AG 32,570 1,464,562 Bayer AG 19,700 806,064 Potash Corporation of Saskatchewan, Inc. 19,010 852,408 ------------ 3,123,034 Data Processing & Reproduction - 0.92% NCR Corp.* 22,947 760,119 ------------ Electric Utilities - 5.68% Hong Kong Electric 128,500 392,853 Iberdrola SA 102,400 1,492,853 Unicom Corp. 42,160 1,615,255 Veba AG 22,400 1,211,058 ------------ 4,712,019 Electrical & Electronics - 1.82% GenRad, Inc.* 43,400 830,025 Hitachi, Ltd. 49,000 529,615 Intelidata Technologies Corp. 95,850 146,770 ------------ 1,506,410 Energy Equipment & Services - 0.55% Noble Drilling Corp.* 20,510 455,066 ------------
Shares Value ------ ----- Energy Sources - 4.42% Burmah Castrol Plc 36,854 $635,258 Ocean Energy, Inc.* 41,715 383,257 Total Fina SA 19,570 2,645,134 ------------ 3,663,649 Financial Services - 4.73% Enhance Financial Services Group, Inc. 60,600 1,105,950 Finova Group, Inc. 26,305 1,159,064 ING Groep 28,078 1,656,258 ------------ 3,921,272 Food & Household Products - 8.64% Benckiser Cl. B 9,640 569,859 Danisco 10,700 445,187 Groupe Danone 6,310 1,609,514 KAO Corp. 30,000 914,932 Nestle SA 1,310 2,526,668 Reckitt & Colman Plc 90,215 1,094,020 ------------ 7,160,180 Forest Products & Paper - 1.37% Boise Cascade Corp. 19,400 691,125 Georgia Pacific Corp. 11,300 448,469 ------------ 1,139,594 Health & Personal Care - 4.61% Astrazeneca 860 38,890 Daiichi Pharmaceutical Co. 66,000 946,293 Fort James Products 25,000 657,812 Rhone-Poulenc SA 29,800 1,667,561 Schering AG 4,300 511,546 ------------ 3,822,102 Industrial Components - 1.51% Borg-Warner Automotive, Inc. 18,200 718,900 Michelin CGDE 12,240 533,010 ------------ 1,251,910 Insurance - 5.75% MBIA, Inc. 34,120 1,946,972 Royal Sun Alliance Insurance 162,538 1,107,056 SCOR 21,960 1,097,185 Sumitomo Marine & Fire 80,000 617,627 ------------ 4,768,840 Leisure & Tourism - 0.18% Bass 13,869 152,006 ------------ Merchandising - 6.72% Albertsons, Inc. 55,960 2,032,048 BJ's Wholesale Club, Inc.* 32,200 992,162 Delhaize Freres SA 5,500 386,739 Great Univ Stores 67,050 507,914 Rite Aid Corp. 21,600 189,000 J. Sainsbury Plc 135,500 813,798 Sears, Roebuck & Co. 22,850 644,084 ------------ 5,565,745
The accompanying notes are an integral part of the financial statements. 43 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Shares Value ------ ----- Multi Industry - 2.79% Cie Financiere Richemont 1,210 $2,311,566 ------------ Non-Ferrous Metals - 0.71% Alcoa, Inc. 9,700 589,275 ------------ Real Estate - 0.90% Green Property Co. 134,500 746,982 ------------ Recreation & Other Consumer Goods - 2.50% Fuji Photo Film Co. 37,000 1,188,741 Tupperware Corp. 44,500 881,656 ------------ 2,070,397 Telecommunication Services - 10.80% BCT Telus Communications Ord 47,249 985,491 BCT Telus Communications NV 18,249 375,047 Comsat Corp. 25,588 478,176 GTE Corp. 9,400 705,000 Nippon Telephone & Telegraph Co. 181 2,777,405 Swisscom AG 1,380 420,527 Telecom Italia SpA 306,100 1,503,606 Telefonica CA* 103,508 1,702,804 ------------ 8,948,056 ------------ TOTAL COMMON STOCKS (Cost $69,882,336) $79,907,928 ------------ Principal Value --------- ----- REPURCHASE AGREEMENT - 3.59% Repurchase Agreement with State Street Bank & Trust Co. dated 10/29/99 at 4.25%, to be repurchased at $2,978,054 on 11/01/99, collateralized by $3,065,000 U.S. Treasury Notes, 4.875% due 03/31/01 (valued at $3,051,603, with interest) (Cost $2,977,000) $2,977,000 $2,977,000 ------------ Shares Value ------ ----- SHORT TERM INVESTMENTS - 0.00% SSGA Money Market Fund (Cost $1,000) 1,000 $1,000 ------------ TOTAL INVESTMENTS (Global Equity Fund) (Cost $72,860,336) $82,885,928 ------------ - ----------------------------------------------------------------------------- Emerging Growth Fund - ----------------------------------------------------------------------------- Shares Value ------ ----- COMMON STOCKS - 96.04% Aerospace & Defense - 0.70% Tristar Aerospace Co.* 1,300 $8,612 ------------ Business Services - 9.61% Acxiom Corp.* 840 13,860 Cysive, Inc.* 300 17,269 DSP Group, Inc.* 200 9,550
Shares Value ------ ----- Business Services - continued Getty Images, Inc.* 600 $18,487 Go2Net* 100 7,038 INSpire Insurance Solutions, Inc.* 700 4,463 Interspeed, Inc.* 300 3,319 Iron Mountain, Inc.* 450 13,612 Metamor Worldwide, Inc.* 400 7,550 Multex Systems, Inc.* 400 6,425 QRS Corp.* 300 16,688 ------------ 118,261 Communications & Media - 9.28% Aether Systems, Inc.* 200 13,912 Entercom Communications Corp.* 200 9,962 Hispanic Broadcasting Corp.* 86 6,966 InfoSpace.com, Inc.* 300 16,688 Network Event Theater, Inc.* 600 13,800 Pegasus Communicaions Corp.* 100 4,425 Valuevision International, Inc.* 400 13,075 VerticalNet, Inc.* 200 11,200 Westwood One, Inc.* 300 13,838 Xoom.com, Inc.* 165 10,312 ------------ 114,178 Computer Peripherals - 0.86% Aspect Development, Inc.* 300 10,612 ------------ Computers - 15.55% Business Objects SA* 300 21,600 Concord Communications, Inc.* 300 15,581 Emulex Corp.* 100 15,594 Hyperion Solutions Corp.* 500 12,188 Legato Systems, Inc.* 300 16,125 Mercury Interactive Corp.* 200 16,225 National Instruments Corp.* 450 13,528 Peregrine Systems, Inc.* 500 21,938 Radiant Systems, Inc.* 900 14,175 Remedy Corp.* 500 21,500 Research In Motion, Ltd.* 300 9,225 RSA Sec, Inc.* 300 10,650 Zapme Corp.* 400 3,000 ------------ 191,329 Consumer Services - 1.43% DeVry, Inc.* 500 10,531 Strayer Education, Inc. 400 7,025 ------------ 17,556 Drugs & Health Care - 7.22% Alkermes, Inc.* 400 14,125 Advanced Paradigm, Inc.* 300 12,788 ChiRex, Inc.* 400 11,300 Hanger Orthopedic Group, Inc.* 800 9,850 Mid Atlantic Medical Services, Inc.* 1,400 7,613 Minimed, Inc.* 200 15,162
The accompanying notes are an integral part of the financial statements. 44 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Shares Value ------ ----- Drugs & Health Care - continued Oxford Health Plans, Inc.* 900 $10,631 Renal Care Group, Inc.* 400 7,450 ------------ 88,919 Electronics - 12.38% Adaptive Broadband Corp.* 300 11,081 Alpha Industries, Inc.* 300 16,575 Avant! Corp.* 500 6,438 Burr-Brown Corp.* 400 15,725 C-Cube Microsystems, Inc.* 400 17,800 Etec Systems, Inc.* 200 7,637 Galileo Technology, Ltd.* 5,600 13,725 Novellus Systems, Inc.* 200 15,500 Photronics, Inc.* 500 10,469 Sandisk Corp.* 100 6,063 Telcom Semiconductor, Inc.* 800 7,400 Triquint Semiconductor, Inc.* 300 24,000 ------------ 152,413 Energy - 1.18% Stone Energy Corp.* 300 14,588 ------------ Financial Services - 0.59% Enhance Financial Services Group, Inc. 400 7,300 ------------ Food & Beverages - 0.69% Ben & Jerry's Homemade, Inc.* 500 8,438 ------------ Industrial Mfg. & Processing - 2.61% Advanced Energy Industries, Inc.* 500 20,562 Applied Power, Inc.* 400 11,625 ------------ 32,187 Leisure Time - 5.10% American Classic Voyages Co.* 500 12,500 Fairfield Communities, Inc.* 1,300 15,925 Midway Games, Inc.* 700 13,956 Sunterra Corp.* 800 8,000 THQ, Inc.* 300 12,338 ------------ 62,719 Lodgings & Restaurants - 0.78% Jack-in-the-Box, Inc.* 400 9,625 ------------ Petroleum Services - 4.13% BJ Services Company* 400 13,725 Cooper Cameron Corp.* 300 11,606 Petroleum Geo Services, Inc.* 800 11,700 Smith International, Inc.* 400 13,825 ------------ 50,856 Retail Trade - 2.68% 99 Cents Only Stores* 150 4,481 Ames Department Stores, Inc.* 300 9,506 Ann Taylor Stores Corp.* 200 8,512 Linens n Things, Inc.* 200 7,950 Value America, Inc.* 200 2,487 ------------ 32,936
Shares Value ------ ----- Telecommunication Services - 20.61% Advanced Fibre Communications* 800 $17,500 Aironet Wireless Communication* 600 21,450 Antec Corp.* 400 19,400 AudioCodes, Ltd.* 300 18,150 Concentric Network Corp.* 500 12,813 Gilat Satellite Networks, Ltd.* 200 10,425 Omnipoint Corp.* 200 16,525 Pairgain Technologies, Inc.* 1,200 14,700 Powertel, Inc.* 300 17,662 Powerwave Technologies, Inc.* 400 26,025 Proxim, Inc.* 400 18,725 Spectrian Corp.* 500 16,750 Stanford Communications, Inc.* 700 19,600 Viatel, Inc.* 400 13,350 Western Wireless Corp.* 200 10,575 ------------ 253,650 Transportation - 0.64% Swift Transportation, Inc.* 450 7,847 ------------ TOTAL COMMON STOCKS (Cost $933,422) $1,182,026 ------------ Shares Value ------ ----- SHORT TERM INVESTMENTS - 3.96% SSGA Money Market Fund (Cost $48,756) 48,756 $48,756 ------------ TOTAL INVESTMENTS (Emerging Growth Fund) (Cost $982,178) $1,230,782 ------------ - ------------------------------------------------------------ Small/Mid Cap Fund - ------------------------------------------------------------ Shares Value ------ ----- COMMON STOCKS - 90.67% Advertising - 2.71% Lamar Advertising Co. 5,300 $286,200 Young & Rubicam, Inc. 19,000 869,250 ------------ 1,155,450 Biotechnology - 5.76% Biogen, Inc.* 10,800 800,550 Medimmune, Inc.* 8,900 996,800 Sepracor, Inc.* 7,900 657,181 ------------ 2,454,531 Business Services - 7.54% Cintas Corp. 12,900 777,225 CSG Systems International, Inc.* 4,100 140,681 DST Systems, Inc.* 7,000 445,812 DuPont Photomasks, Inc.* 5,000 247,500 Exodus Communications, Inc.* 4,000 344,000 Fiserv, Inc.* 30,250 968,000 Yahoo, Inc.* 1,605 287,395 ------------ 3,210,613
The accompanying notes are an integral part of the financial statements. 45 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Shares Value ------ ----- Computer Peripherals - 6.61% Intuit, Inc.* 50,400 $1,467,900 Legato Systems, Inc.* 4,100 220,375 Microchip Technology, Inc.* 16,900 1,125,962 ------------ 2,814,237 Computer Services - 0.65% Amdocs Limited* 10,000 278,125 ------------ Drugs & Health Care - 5.82% Express Scripts, Inc.* 15,300 751,612 Forest Laboratories, Inc.* 33,500 1,536,812 Medquist, Inc.* 5,900 188,800 ------------ 2,477,224 Electric Utilities - 1.62% Calpine Corp.* 12,000 691,500 ------------ Electronic Components - 4.11% ATMI, Inc.* 11,200 301,700 Conexant Systems, Inc.* 2,900 270,787 Linear Technology Corp. 3,800 265,763 Vitesse Semiconductor Corp.* 4,800 220,200 Xilinx, Inc.* 8,800 691,900 ------------ 1,750,350 Electronics - 8.94% Altera Corp.* 15,600 758,550 ASM Lithography Holding NV * 5,000 363,125 Flextronics International, Ltd.* 12,000 852,000 Maxim Integrated Products, Inc.* 8,600 678,863 Sanmina Corp. * 12,800 1,152,800 ------------ 3,805,338 Financial Services - 6.50% Charter One Financial, Inc. 29,505 724,717 Kansas City Southern Industries, Inc. 25,000 1,185,938 Paine Webber Group, Inc. 21,000 855,750 ------------ 2,766,405 Industrial Equipment - 2.84% Waters Corp.* 22,800 1,211,250 ------------ Manufacturing - 0.90% SPX Corp.* 4,500 381,375 ------------ Motor Vehicles - 0.70% Harley Davidson, Inc. 5,000 296,563 ------------ Packaged Foods & Products - 3.73% Dean Foods Co. 5,500 254,375 U.S. Foodservice* 69,600 1,335,450 ------------ 1,589,825 Petroleum Services - 6.39% B.J. Services Co.* 27,500 943,594 Devon Energy Corp. 10,200 396,525 EOG Resources, Inc. 11,500 239,344 Nabors Industries, Inc.* 41,700 946,069 Union Pacific Res Group, Inc. 13,600 197,200 ------------ 2,722,732
Shares Value ------ ----- Restaurants & Lodging - 4.55% Mandalay Resort Group* 44,559 $829,911 Outback Steakhouse, Inc.* 48,250 1,109,750 ------------ 1,939,661 Retail Trade - 17.49% Abercrombie & Fitch Co.* 25,000 681,250 Bed, Bath & Beyond, Inc.* 41,100 1,369,144 BJ's Wholesale Club, Inc.* 34,000 1,047,625 Family Dollar Stores, Inc. 39,000 804,375 Gucci Group NV 14,700 1,187,025 Linens N Things, Inc.* 19,400 771,150 Tiffany & Company 11,000 654,500 Williams Sonoma, Inc.* 17,400 935,250 ------------ 7,450,319 Telecommunications - 3.81% Cnet, Inc.* 34,400 1,623,250 ------------ TOTAL COMMON STOCKS (Cost $35,303,575) $38,618,748 ------------ Shares Value ------ ----- RIGHTS - 3.27% Electric Components - 3.27% Teradyne, Inc. Callable through 03/26/00 36,200 $1,393,700 ------------ TOTAL RIGHTS (Cost $1,138,327) $1,393,700 ------------ Principal Value --------- ----- SHORT TERM INVESTMENTS - 6.06% Atlantis One Funding Corp. $600,000 $599,378 Enterprise Funding Corp. 400,000 398,934 Ford Motor Credit Corp. 1,500,000 1,496,731 SSGA Money Market Fund 88,360 88,360 ------------ TOTAL SHORT TERM INVESTMENTS (Cost $2,583,403) $2,583,403 ------------ TOTAL INVESTMENTS (Small/Mid Cap Fund) (Cost $39,025,305) $42,595,851 ------------ - --------------------------------------------------------------- Growth Equity Fund - --------------------------------------------------------------- Shares Value ------ ----- COMMON STOCKS - 96.55% Automotive - 1.40% General Motors Corporation 8,175 $595,242 ------------ Banking - 4.20% Bank America Corporation 7,250 466,719 Citigroup, Inc. 10,468 566,580 Fifth Third Bancorp 2,854 210,661 Wells Fargo & Company 11,306 541,275 ------------ 1,785,235
The accompanying notes are an integral part of the financial statements. 46 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Shares Value ------ ----- Biotechnology - 0.60% Amgen, Inc.* 1,243 $99,129 Genetech, Inc.* 1,075 156,681 ------------ 255,810 Broadcasting - 7.74% AMFM, Inc.* 12,138 849,660 AT&T Corp-Liberty Media Group* 15,600 619,125 Comcast Corporation 15,549 655,002 Time Warner, Inc. 13,665 952,280 USA Networks, Inc.* 4,825 217,427 ------------ 3,293,494 Business Services - 2.50% Cintas Corporation 4,728 284,862 Computer Sciences Corporation* 5,783 397,220 Interpublic Group Companies, Inc. 9,399 381,834 ------------ 1,063,916 Computer Peripherals - 1.28% EMC Corporation* 7,445 543,485 ------------ Computer Services - 0.75% Devry, Inc.* 6,782 142,846 eBay, Inc.* 1,300 175,663 ------------ 318,509 Computer Software - 8.02% Amdocs Limited* 1,225 34,070 Automatic Data Processing, Inc. 8,492 409,208 BMC Software, Inc.* 1,800 115,538 Inktomi Corporation* 975 98,902 Microsoft Corporation* 16,181 1,497,754 Momentum Business Applications* 22 171 RealNetworks, Inc.* 1,350 148,078 Siebel Systems, Inc.* 1,350 148,247 Verisign, Inc.* 1,150 142,025 VERITAS Software Corporation* 1,225 132,147 Yahoo, Inc.* 3,821 684,198 ------------ 3,410,338 Computers & Business Equipment - 2.01% Apple Computer* 5,200 416,650 Sun Microsystems, Inc.* 4,143 438,381 ------------ 855,031 Diversified - 1.99% Berkshire Hathaway, Inc.* 406 848,540 ------------ Drugs & Health Care - 12.86% Bristol-Myers Squibb 10,702 822,047 Guidant Corporation 3,300 162,938 IMS Health, Inc. 17,458 506,282 Johnson & Johnson 4,705 492,849 MedImmune, Inc.* 925 103,600 Medtronic, Inc. 7,770 269,036 Merck & Company, Inc. 8,904 708,425 Pfizer, Inc. 22,116 873,582
Shares Value ------ ----- Drugs & Health Care - continued Schering Plough Corporation 14,089 $697,405 Warner Lambert Co. 10,460 834,839 ------------ 5,471,003 Electrical Equipment - 3.81% General Electric Co. 11,963 1,621,734 ------------ Electronic Components - 11.82% Applied Micro Circuits Corporation* 3,100 241,219 Comverse Technology, Inc.* 2,325 263,887 General Instrument Corportion* 2,375 127,805 Intel Corp. 16,702 1,293,361 Jabil Circuit, Inc.* 2,450 128,012 JDS Uniphase Corporation* 5,150 859,406 Linear Technology Corporation 3,350 234,291 Motorola, Inc. 1,115 108,643 Perkin Elmer Corporation 3,782 245,357 PMC-Sierra, Inc.* 1,925 181,431 RF Micro Devices, Inc.* 4,525 233,603 Solectron Corporation* 1,415 106,479 Texas Instruments, Inc. 8,850 794,287 Vitesse Semiconductor Corporation* 4,550 208,731 ------------ 5,026,512 Financial Services - 4.21% American Express Company 1,705 262,570 Associates First Capital Corp. 9,196 335,654 Federal National Mortgage Assn. 6,331 447,918 Merrill Lynch & Co., Inc. 2,725 213,912 Morgan Stanley Dean Witter & Co. 1,900 209,594 Northern Trust Corporation 849 81,982 Charles Schwab Corp. 6,144 239,232 ------------ 1,790,862 Food & Beverages - 2.54% Coca-Cola Company 17,049 1,005,891 Tootsie Roll Industries, Inc. 2,392 75,797 ------------ 1,081,688 Household Products - 3.40% Clorox Company 2,450 100,297 Colgate Palmolive Co. 5,564 336,622 Dial Corporation 11,410 266,709 Gillette Company 5,252 190,057 Procter & Gamble Company 5,250 550,594 ------------ 1,444,279 Insurance - 2.56% American International Group, Inc. 6,065 624,316 Marsh & Mclennan Cos., Inc. 5,858 463,148 ------------ 1,087,464 Leisure & Entertainment - 1.73% America Online, Inc.* 4,175 541,445 Carnival Corporation 2,003 89,133 Walt Disney Company 3,922 103,443 ------------ 734,021
The accompanying notes are an integral part of the financial statements. 47 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Shares Value ------ ----- Lodging & Restaurants - 0.46% McDonalds Corporation 4,733 $195,236 ------------ Manufacturing - 0.47% Tyco International Ltd. 5,018 200,406 ------------ Motor Vehicles - 0.67% Danaher Corporation 3,324 160,591 Harley Davidson, Inc. 2,053 121,769 ------------ 282,360 Publishing - 1.42% Gannett, Inc. 6,777 522,676 Washington Post Company 150 79,809 ------------ 602,485 Retail Trade - 6.37% Costco Companies, Inc.* 9,550 766,984 Home Depot, Inc. 9,163 691,806 Intimate Brands, Inc. 2,178 89,298 Kohl's Corporation* 3,578 267,679 Wal Mart Stores, Inc. 15,796 895,436 ------------ 2,711,203 Telecommunications - 13.74% Cisco Systems, Inc.* 22,259 1,647,166 EchoStar Communications Corporation* 2,398 148,376 GTE Corporation 2,600 195,000 Lucent Technologies, Inc. 9,479 609,026 MCI WorldCom, Inc.* 2,634 226,030 Nextel Communications, Inc.* 2,775 239,170 Nokia Corporation 4,529 523,383 Nortel Networks Corporation 2,400 148,650 Qualcomm, Inc.* 1,050 233,887 SBC Communications, Inc. 6,400 326,000 Sprint Corporation* 2,625 217,711 Sycamore Networks, Inc.* 225 48,375 Tellabs, Inc.* 4,739 299,742 Vodaphone Airtouch Plc 8,720 418,015 VoiceStream Wireless Corporation* 3,000 296,250 Western Wireless Corporation* 2,825 149,372 Williams Communications Group* 3,700 117,937 ------------ 5,844,090 TOTAL COMMON STOCKS (Cost $34,983,300) $41,062,943 ------------ SHORT TERM INVESTMENTS - 0.00% SSGA Money Market Fund (Cost $1,000) 1,000 $1,000 ------------
Principal Value --------- ----- REPURCHASE AGREEMENT - 3.45% Repurchase Agreement with State Street Bank & Trust Co. dated 10/29/99 at 4.25%, to be repurchased at $1,470,521 on 11/01/99, collateralized by $1,495,000 U.S. Treasury Notes, 4.00% due 10/31/00 (valued at $1,530,132, with interest) (Cost $1,470,000) $1,470,000 $1,470,000 ------------ TOTAL INVESTMENTS (Growth Equity Fund) (Cost $36,454,300) $42,533,943 ------------ - ----------------------------------------------------------------------------- Tax-Sensitive Equity Fund - ----------------------------------------------------------------------------- Shares Value ------ ----- COMMON STOCKS - 98.31% Aerospace & Defense - 4.03% General Dynamics Corporation 2,000 $110,875 General Motors Corporation 3,400 247,562 ------------ 358,437 Apparel & Textiles - 3.61% Jones Apparel Group, Inc.* 5,500 173,937 Tommy Hilfiger Corp.* 5,200 146,900 ------------ 320,837 Banking - 3.00% Chase Manhattan Corp. 1,800 157,275 Fleet Boston Corporation 2,500 109,063 ------------ 266,338 Business Services - 2.80% Shared Medi Cal System 3,700 139,675 Xerox Corp. 3,900 109,200 ------------ 248,875 Computers & Business Equipment - 9.43% Hewlett Packard Co. 1,800 133,313 Sun Microsystems , Inc.* 3,400 359,762 SCI Systems, Inc.* 6,000 296,250 Unisys Corporation* 2,000 48,500 ------------ 837,825 Consumer Durables - 1.87% Leggett & Platt, Inc. 7,500 166,406 ------------ Drugs & Health Care - 10.70% Abbott Laboratories 3,000 121,125 Amgen, Inc.* 3,300 263,175 Bristol Myers Squibb Co. 1,000 76,813 Merck & Company, Inc. 1,300 103,431 Schering Plough Corp. 2,200 108,900 Steris Corp.* 12,000 159,750 Watson Pharmaceuticals, Inc.* 3,700 117,475 ------------ 950,669 Electrical Equipment - 2.25% Tyco International, Ltd. 5,000 199,687 ------------
The accompanying notes are an integral part of the financial statements. 48 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Shares Value ------ ----- Financial Services - 6.05% Citigroup, Inc. 2,750 $148,844 Federal National Mortgage Assn. 3,000 212,250 Morgan Stanley Dean Witter & Co. 1,600 176,500 ------------ 537,594 Food & Drug Distribution - 3.15% CVS Corporation 2,700 117,281 Kroger Co.* 7,800 162,337 ------------ 279,618 Home Building - 1.77% Clayton Homes, Inc. 15,500 156,938 ------------ Hotels & Casinos - 3.37% Carnival Corporation 5,500 244,750 Starwood Hotels & Resorts 2,400 55,050 ------------ 299,800 Household Products - 1.48% Fort James Corp. 5,000 131,563 ------------ Industrial Conglomerates - 5.64% Ingersoll Rand Co. 4,500 235,125 United Technologies Corp. 4,400 266,200 ------------ 501,325 Infrastructure Software - 7.17% BMC Software, Inc.* 5,000 320,938 Computer Associates International, Inc. 5,600 316,400 ------------ 637,338 Insurance - 12.14% Ambac Financial Group, Inc. 3,500 209,125 Conseco, Inc. 10,700 260,144 Delphi Financial Group, Inc.* 5,838 186,816 Reliastar Financial Group 7,600 326,325 Unumprovident Corporation 2,920 96,178 ------------ 1,078,588 International Oil - 6.34% BP Amoco Plc 4,000 231,000 Chevron Corporation 1,000 91,313 Mobil Corp. 2,500 241,250 ------------ 563,563 Packaged Foods & Products - 1.59% Universal Foods Corp. 7,400 141,525 ------------ Peripherals - 3.48% American Power Conversion Corp.* 13,800 309,638 ------------ Real Estate - 1.66% Boston Properties, Inc. 1,700 50,681 Equity Residential Properties Trust 1,000 41,812 General Growth Properties, Inc. 1,900 54,981 ------------ 147,474 Retail Trade - 1.16% Ross Stores, Inc. 5,000 103,125 ------------ Semiconductors - 2.70% Intel Corp. 3,100 240,056 ------------
Shares Value ------ ----- Telephone - 2.92% Bell Atlantic Corp. 4,000 $259,750 ------------ TOTAL COMMON STOCKS (Cost $8,005,165) $8,736,969 ------------ SHORT TERM INVESTMENTS - 0.01% SSGA Money Market Fund (Cost $1,000) 1,000 $1,000 ------------ Principal Value --------- ----- REPURCHASE AGREEMENT - 1.68% Repurchase Agreement with State Street Bank & Trust Co. dated 10/29/99 at 4.25%, to be repurchased at $149,053 on 11/01/99, collateralized by $150,000 U.S Treasury Notes,5.00% due 04/30/01 (valued at $155,775,with interest) (Cost $149,000) $149,000 $149,000 ------------ TOTAL INVESTMENTS (Tax-Sensitive Equity Fund) (Cost $8,155,165) $ 8,886,969 ------------ - ----------------------------------------------------------------------------- Growth and Income Fund - ----------------------------------------------------------------------------- Shares Value ------ ----- COMMON STOCKS - 98.63% Aerospace & Defense - 1.90% Allied Signal, Inc. 38,700 $2,203,481 General Motors Corp.* 21,000 1,529,062 United Technologies Corp. 32,200 1,948,100 ------------ 5,680,643 Air Travel - 0.95% AMR Corporation* 44,800 2,844,800 ------------ Banks - 7.40% The Chase Manhattan Corp. 26,600 2,324,175 Citigroup, Inc. 170,400 9,222,900 First Union Corp. 70,000 2,988,125 U.S. Bancorp 105,100 3,895,269 Wachovia Corp. 42,500 3,665,625 ------------ 22,096,094 Broadcasting - 0.87% AT&T Corp-Liberty Media Group* 36,400 1,444,625 Time Warner, Inc. 16,400 1,142,875 ------------ 129,800 2,587,500 Business Services - 2.10% Automatic Data Processing, Inc. 62,500 3,011,719 First Data Corp. 71,200 3,252,950 ------------ 6,264,669
The accompanying notes are an integral part of the financial statements. 49 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Shares Value ------ ----- Chemicals - 2.12% The Dow Chemical Co. 11,900 $1,407,175 E.I. Du Pont de Nemours & Co. 64,400 4,149,775 Monsanto Co. 20,000 770,000 ------------ 6,326,950 Computer Peripherals - 4.63% Computer Sciences Corp.* 37,900 2,603,256 Microsoft Corp.* 121,200 11,218,575 ------------ 13,821,831 Computers & Business Equipment - 8.00% Cisco Systems, Inc.* 97,000 7,178,000 EMC Corp.* 26,600 1,941,800 Hewlett-Packard Company 28,800 2,133,000 International Business Machines Corp. 56,200 5,528,675 Lucent Technologies 77,100 4,953,675 Xerox Corp. 76,200 2,133,600 ------------ 23,868,750 Drugs & Health Care - 13.01% Abbott Laboratories 83,300 3,363,238 American Home Products Corp. 104,400 5,454,900 Astrazeneca Plc 47,700 2,182,275 Baxter International, Inc. 49,300 3,198,337 Bristol-Myers Squibb Co. 45,100 3,464,244 Cardinal Health, Inc. 38,400 1,656,000 Columbia/HCA Healthcare Corp. 94,600 2,282,225 Johnson & Johnson 34,600 3,624,350 Merck & Company, Inc. 54,600 4,344,112 Pharmacia & Upjohn, Inc. 72,300 3,899,681 Warner-Lambert Co. 67,400 5,379,362 ------------ 38,848,724 Electrical Equipment - 5.06% General Electric Co. 87,200 11,821,060 Tyco International Ltd. 82,600 3,298,838 ------------ 15,119,898 Electronic Components - 5.86% Analog Devices, Inc.* 28,400 1,508,750 Intel Corp. 92,500 7,162,969 Micron Technology, Inc.* 41,900 2,987,994 Motorola, Inc. 27,000 2,630,813 Texas Instruments, Inc. 35,600 3,195,100 ------------ 17,485,626 Financial Services - 5.61% Associates First Capital Corp. 111,200 4,058,800 Federal National Mortgage Association 59,600 4,216,700 Marsh & McLennan Companies, Inc. 58,700 4,640,969 Merrill Lynch & Co., Inc. 48,800 3,830,800 ------------ 16,747,269 Food & Beverages - 1.64% Anheuser-Busch Companies, Inc. 39,900 2,865,319 Pepsico, Inc. 58,400 2,025,750 ------------ 4,891,069
Shares Value ------ ----- Forest Products - 1.77% International Paper Co. 61,200 $ 3,220,650 Minnesota Mining & Manufacturing Co. 21,800 2,072,363 ------------ 5,293,013 Hotels & Restaurants - 1.44% McDonald's Corp. 104,100 4,294,125 ------------ Household Products - 4.45% Colgate Palmolive Co. 34,000 2,057,000 Corning, Inc. 16,400 1,289,450 Gillette Company 31,000 1,121,813 Kimberly Clark Corp. 55,800 3,522,375 Procter & Gamble Co. 50,500 5,296,187 ------------ 13,286,825 Industrial Components - 1.24% Caterpillar, Inc. 33,800 1,867,450 Illinois Tool Works, Inc. 25,100 1,838,575 ------------ 3,706,025 Insurance - 1.93% ACE, Ltd. 71,000 1,380,063 American International Group, Inc. 42,625 4,387,711 ------------ 5,767,774 Leisure & Entertainment - 1.06% America Online, Inc.* 7,000 907,812 The Walt Disney Co. 85,800 2,262,975 ------------ 3,170,787 Motor Vehicle Parts - 0.38% Eaton Corporation 15,000 1,128,750 ------------ Motor Vehicles - 0.57% Ford Motor Company 31,200 1,712,100 ------------ Newspapers - 1.42% Gannett, Inc. 54,900 4,234,162 ------------ Non-Ferrous Metals - 0.85% Alcoa Inc. 41,700 2,533,275 ------------ Petroleum - 5.53% Chevron Corp. 36,900 3,369,431 Exxon Corp. 91,900 6,806,344 Royal Dutch Petroleum Co. 83,600 5,010,775 UNOCAL Corp. 37,900 1,307,550 ------------ 16,494,100 Petroleum Services - 1.23% Schlumberger, Ltd. 60,500 3,664,031 ------------ Retail Trade - 6.11% Dayton Hudson Corp. 78,200 5,053,675 The GAP, Inc. 81,300 3,018,263 May Dept Stores 45,700 1,585,219 Wal-Mart Stores, Inc. 151,500 8,588,156 ------------ 18,245,313 Telecommunication Services - 1.45% AT&T Corp.* 92,400 4,319,700 ------------
The accompanying notes are an integral part of the financial statements. 50 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Shares Value ------ ----- Transportation - 0.38% CSX Corp. 27,700 $1,135,700 ------------ Utilities-Electric - 2.20% Duke Energy Do. 45,800 2,587,700 Pinnacle West Capital Corp. 28,400 1,047,250 Texas Utilities Co. 39,800 1,542,250 Unicom Corp. 36,300 1,390,744 ------------ 6,567,944 Utilities-Gas & Pipeline - 0.44% National Fuel Gas Co. NJ 27,000 1,319,625 ------------ Utilities-Telephone - 6.25% Bell Atlantic Corp. 100,492 6,525,699 MCI WorldCom, Inc.* 73,900 6,341,544 SBC Communications, Inc. 113,400 5,776,312 ------------ 18,643,555 Tobacco - 0.78% Philip Morris Companies, Inc. 92,600 2,332,363 ------------ TOTAL COMMON STOCKS (Cost $185,392,058) $294,432,990 ------------ CONVERTIBLE PREFERRED STOCK - 0.35% Chemicals - 0.35% Monsanto Corp. (Cost $1,116,000) 27,900 $1,056,712 ------------ Principal Value --------- ----- REPURCHASE AGREEMENT - 1.02% Repurchase Agreement with Paine Webber, dated 10/29/99, at 5.22% to be repurchased at $3,055,328 on 11/01/99, collateralized by $2,960,000 U.S. Treasury Bills, 6.75% due 08/15/26 (valued at $3,114,656 with interest) (Cost $3,054,000) $3,054,000 $3,054,000 ------------ TOTAL INVESTMENTS (Growth & Income Fund) (Cost $189,562,058) $298,543,702 ------------ - --------------------------------------------------------------------------- Equity-Income Fund - --------------------------------------------------------------------------- Shares Value ------ ----- COMMON STOCKS - 99.90% Banking - 15.15% Bankamerica Corp. 31,800 $ 2,047,125 First Union Corp. 114,000 4,866,375 Mellon Financial Corp. 184,850 6,827,897 U.S. Bancorp 41,900 1,552,919 Wells Fargo & Co. 46,650 2,233,369 ------------ 17,527,685 Business Services - 3.90% Pitney Bowes, Inc. 98,900 4,506,131 ------------
Shares Value ------ ----- Chemicals - 2.11% E.I. Du Pont De Nemours & Co. 37,900 $2,442,181 ------------ Computers & Business Equipment - 2.27% Xerox Corp. 94,000 2,632,000 ------------ Drugs & Health Care - 19.64% American Home Products Corp. 136,100 7,111,225 Baxter International, Inc. 48,300 3,133,463 Bristol Myers Squibb Co. 75,800 5,822,388 Pharmacia & Upjohn, Inc. 123,400 6,655,888 ------------ 22,722,964 Food & Beverages - 8.65% General Mills, Inc. 52,800 4,603,500 H.J. Heinz Co. 113,300 5,410,075 ------------ 10,013,575 Household Products - 5.76% Gillette Co. 24,500 886,594 Kimberly-Clark Corp. 91,600 5,782,250 ------------ 6,668,844 Insurance - 6.72% American General Corp. 47,400 3,516,487 Marsh & McLennan Cos., Inc. 53,800 4,253,563 ------------ 7,770,050 International Oil - 8.49% Chevron Corp. 52,500 4,793,906 Exxon Corp. 25,800 1,910,812 Texaco, Inc. 50,700 3,111,713 ------------ 9,816,431 Multi Industry - 3.48% Minnesota Mining & Manufacturing Co. 42,400 4,030,650 ------------ Paper - 3.53% International Paper Co. 52,807 2,778,968 Weyerhaeuser Co. 21,800 1,301,187 ------------ 4,080,155 Telephone - 17.47% Bell Atlantic Corp. 107,750 6,997,016 GTE Corp. 47,300 3,547,500 SBC Communications, Inc. 111,754 5,692,469 U.S. West, Inc. 65,000 3,969,062 ------------ 20,206,047 Tobacco - 2.73% Philip Morris Companies, Inc. 125,400 3,158,512 ------------ TOTAL COMMON STOCKS (Cost $107,875,775) $115,575,225 ------------
The accompanying notes are an integral part of the financial statements. 51 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Principal Value --------- ----- REPURCHASE AGREEMENT - 0.10% Repurchase Agreement with State Street Bank & Trust Co. dated 10/29/99 at 4.25%, to be repurchased at $119,042 on 11/01/99, collateralized by $125,000 U.S. Treasury Notes, 5.75% due 08/15/03 valued at ($126,791, with interest) (Cost $119,000) $119,000 $119,000 ------------ TOTAL INVESTMENTS (Equity-Income Fund) (Cost $107,994,775) $115,694,225 ------------ - ------------------------------------------------------------------------------ Balanced Fund - ------------------------------------------------------------------------------ Shares Value ------ ----- COMMON STOCKS - 45.73% Aerospace - 0.44% Precision Castparts, Corp. 10,700 $315,650 ------------ Agriculture - 1.08% Archer Daniels Midland Company 57,600 709,200 Conagra, Inc. 2,500 65,156 ------------ 774,356 Building Materials - 1.14% Lafarge Corporation 27,600 819,375 ------------ Chemicals - 2.22% B.F. Goodrich Company 39,800 942,762 IMC Global, Inc. 4,100 52,275 Potash Corporation of Saskatchewan, Inc. 13,550 598,741 ------------ 1,593,778 Domestic Oil - 0.51% Phillips Petroleum Co. 7,800 362,700 ------------ Drugs & Health Care - 12.92% Abbott Laboratories 56,800 2,293,300 Baxter International, Inc. 12,200 791,475 Beckton Dickinson & Co. 30,500 773,937 Glaxo Wellcome Plc 19,150 1,146,606 Mallinckrodt, Inc. 3,100 105,206 Merck KGAA 31,725 1,094,534 Merck & Company, Inc. 16,400 1,304,825 Pharmacia & Upjohn, Inc. 13,900 749,731 Warner Lambert Co. 12,700 1,013,619 ------------ 9,273,233 Electric Utilities - 0.22% Scana Corporation 6,400 159,200 ------------ Entertainment & Recreation--1.65% Granada Group 82,700 656,361 Mirage Resorts, Inc.* 36,300 528,619 ------------ 1,184,980
Shares Value ------ ----- Gas & Pipeline Utilities - 5.62% Coastal Corp. 38,800 $1,634,450 Columbia Energy Group 36,900 2,398,500 ------------ 4,032,950 Precious Metals - 3.33% Franco Nevada Mining Ltd. 55,600 1,031,239 Placer Dome, Inc. 111,900 1,356,787 ------------ 2,388,026 Household Products - 2.55% Clorox Company 32,200 1,318,188 Dial Corp. 21,975 513,666 ------------ 1,831,854 Insurance - 4.51% XL Capital, Ltd. 60,210 3,232,524 ------------ Petroleum Services - 6.14% Conoco, Inc. 127,300 3,492,794 Texaco, Inc. 14,900 914,488 ------------ 4,407,282 Supermarkets - 1.59% Albertson's, Inc. 31,447 1,141,919 ------------ Telephone - 1.81% U.S. West, Inc. 21,300 1,300,631 ------------ TOTAL COMMON STOCKS (Cost $34,335,615) $32,818,458 ------------ Principal Value --------- ----- U.S. TREASURY OBLIGATIONS - 44.66% U.S. Treasury Notes - 44.66% 5.375% due 06/30/03 $1,000,000 $981,560 5.50% due 02/15/08 3,400,000 3,261,348 5.625% due 05/15/08 3,820,000 3,685,689 5.75% due 11/30/02 985,000 980,843 5.875% due 02/15/04 4,115,000 4,103,437 6.25% due 06/30/02 3,950,000 3,984,563 6.625% due 03/31/02 1,000,000 1,016,560 6.625% due 04/30/02 3,130,000 3,184,274 6.875% due 05/15/06 4,800,000 4,981,488 7.25% due 05/15/04 4,300,000 4,506,916 7.25% due 08/15/04 1,300,000 1,364,792 ------------ 32,051,470 TOTAL U.S. TREASURY OBLIGATIONS (Cost $32,302,363) $32,051,470 ------------ U.S. GOVERNMENT AGENCY OBLIGATIONS - 2.11% Federal Home Loan Mortgage Corporation - 2.11% 6.45% due 04/29/09 1,600,000 1,519,248 ------------ TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $1,599,760) $1,519,248 ------------
The accompanying notes are an integral part of the financial statements. 52 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Principal Value --------- ----- FOREIGN GOVERNMENT OBLIGATIONS - 2.56% Ontario Province - 2.56% 6.125% due 09/12/07 $1,330,000 $893,239 6.500% due 03/08/29 1,405,000 943,065 ------------ 1,836,304 ------------ TOTAL FOREIGN GOVERNMENT OBLIGATIONS (Cost $1,884,327) $1,836,304 ------------ Shares Value ------ ----- SHORT TERM INVESTMENTS - 0.00% SSGA Money Market Fund (Cost $1,000) 1,000 $1,000 ------------ Principal Value --------- ----- REPURCHASE AGREEMENT - 4.94% Repurchase Agreement with State Street Bank & Trust Co. dated 10/29/99 at 4.25%, to be repurchased at $3,544,255 on 11/01/99, collateralized by $3,605,000 U.S. Treasury Notes, 4.00% due 10/31/00 (valued at $3,689,717, with interest) (Cost $3,543,000) $3,543,000 $3,543,000 ------------ TOTAL INVESTMENTS (Balanced Fund) (Cost $73,666,065) $71,769,480 ------------ - ----------------------------------------------------------------------------- Strategic Income Fund - ----------------------------------------------------------------------------- Principal Value --------- ----- CORPORATE BONDS - 41.45% Aerospace - 1.11% B.E. Aerospace, Inc., 8.00% due 03/01/08 $250,000 $218,125 Lear Corporation, 8.11% due 05/15/09 375,000 358,579 ------------ 576,704 Banking - 0.91% Commerzbank, 10.25% due 04/28/00 AUD 540,000 351,486 European Bank Recon. & Development, 10.50% due 01/25/01 PLN 400,000 90,295 Nordiska Investeringsbanken, 17.75% due 04/15/02 PLN 140,000 34,921 ------------ 476,702 Business Services - 2.77% Comdisco, Inc., 6.00% due 01/30/02 $400,000 389,020 CSC Holdings, Inc., 10.50% due 05/15/16 500,000 545,000
Principal Value --------- ----- Business Services - continued Iron Mountain, Inc., 10.125% due 10/01/06 $500,000 $510,000 ------------ 1,444,020 Chemical Products - 0.25% Revlon Worldwide Corp., Series B, zero coupon due 03/15/01 600,000 132,000 ------------ Crude Petroleum & Natural Gas - 2.11% Bellwether Exploration Co., 10.875% due 04/01/07 250,000 230,625 Benton Oil & Gas Co., 11.625% due 05/01/03 200,000 144,500 Pennzoil Company, 10.25% due 11/01/05 500,000 542,905 United Refining Co., 10.75% due 06/15/07 250,000 181,250 ------------ 1,099,280 Drugs & Health Care - 0.45% Fresenius Medical Care Capital Trust, 9.00% due 12/01/06 250,000 236,250 ------------ Electronics - 0.52% Breed Technologies, Inc.,/2/ 9.25% due 04/15/08 500,000 15,000 Jordan Telecommunication Products, Series B Step Up due 08/01/07 250,000 205,000 Protection One, Inc., 8.125% due 01/15/09, 144A 250,000 50,000 ------------ 270,000 Energy & Utilities - 0.68% Costilla Energy, Inc.,/2 / 10.25% due 10/01/06 500,000 125,000 High Voltage Engineering Corp., 10.50% due 08/15/04 250,000 230,000 ------------ 355,000 Financial Services - 4.07% ContiFinancial Corp., 8.125% due 04/01/08 500,000 100,000 Ford Motor Credit Company, 7.375% due 10/28/09 300,000 302,418 KFW International Finance, 16.30% due 06/24/03 PLN 860,000 218,083 KFW International Finance, 2.05% due 09/21/09 JPY 34,000,000 331,065 Merrill Lynch & Co., Inc., 6.00% due 11/15/04 $190,000 182,866 Merrill Lynch & Co., Inc., 5.97% due 09/11/00 CAD 370,000 252,155 Navistar International Corp., 8.00% due 02/01/08 $500,000 478,750
The accompanying notes are an integral part of the financial statements. 53 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Principal Value --------- ----- Financial Services - continued Toyota Motor Credit Corp., 6.25% due 08/04/03 GBP 160,000 $255,813 ------------ 2,121,150 Food & Beverages - 0.55% Ameriserve Food Distributors, Inc., 10.125% due 07/15/07 $500,000 285,000 ------------ Hotels & Restaurants - 0.79% Prime Hospitality Corp., 9.75% due 04/01/07 450,000 409,500 ------------ Industrials - 7.10% Alvey Systems, Inc., 11.375% due 01/31/03 375,000 386,250 Berry Plastics Corp., 12.25% due 04/15/04 650,000 657,313 CFP Holdings, Inc., Series B 11.625% due 01/15/04 250,000 207,500 Foamex, L.P., 9.875% due 05/15/07 375,000 322,500 ICG Holdings, Inc., Step up to 13.50% due 09/15/05 500,000 427,500 P&L Coal Holdings Corp., 8.875% due 05/15/08 250,000 240,625 Polymer Group, Inc., 8.75% due 03/01/08 150,000 141,000 9.00% due 07/01/07 190,000 182,400 Praxair, Inc., 6.15% due 04/15/03 300,000 289,644 Raytheon Company, 6.15% due 11/01/08 175,000 157,099 Stellex Industries, Inc., 9.50% due 11/01/07 250,000 185,000 Synthetic Industries, Inc., 9.25% due 02/15/07 25,000 25,000 Williams Scotsman, Inc., 9.875% due 06/01/07 500,000 478,750 ------------ 3,700,581 Leisure Time - 2.24% Harrah's, Inc., 7.875% due 12/15/05 500,000 476,250 Mohegan Tribal Gaming Authority, 8.75% due 01/01/09 225,000 218,813 Park Place Entertainment Corp., 7.875% due 12/15/05 500,000 471,250 ------------ 1,166,313 Other - 6.14% American Standard, Inc., 7.375% due 02/01/08 400,000 352,000 Countrywide Funding Corp., 6.25% due 04/15/09 400,000 367,852 Hines Horticulture, Inc., Series B, 11.75% due 10/15/05 325,000 331,500
Principal Value --------- ----- Other - continued The Holt Group, Inc., 9.75% due 01/15/06 $500,000 $326,250 Huntsman Corp., 9.50% due 07/01/07, 144A 350,000 325,500 La Petite Academy, Inc., Series B 10.00% due 05/15/08 375,000 296,250 LIN Holdings Corp., zero coupon due 03/01/08 500,000 326,250 Service Corporation International, Inc., 6.00% due 12/15/05 400,000 300,504 United International Holdings, Inc., step-up to 10.75% due 02/15/08 1,000,000 575,000 ------------ 3,201,106 Pollution Control - 0.82% Allied Waste North America, Inc., 7.875% due 01/01/09 500,000 425,625 ------------ Publishing - 1.43% Big Flowers Press Holdings, Inc., 8.625% due 12/01/08 500,000 501,250 Hollinger International, Inc., 9.25% due 03/15/07 250,000 245,000 ------------ 746,250 Real Estate - 0.90% HMH Properties, Inc., 7.875% due 08/01/08 250,000 216,875 Radnor Holdings Corp., 10.00% due 12/01/03 250,000 250,625 ------------ 467,500 Retail Trade - 1.41% Cole National Group, Inc., 8.625% due 08/15/07 250,000 195,000 Musicland Group, Inc., 9.875% due 03/15/08 250,000 210,000 Staples, Inc., 7.125% due 08/15/07 350,000 331,940 ------------ 736,940 Steel - 0.82% Murrin Murrin Holdings Property Ltd., 9.375% due 08/31/07 500,000 430,000 ------------ Telecommunication Services - 5.33% Adelphia Communications Corp., Series B 9.50% due 02/15/04 46,998 47,233 9.875% due 03/01/07 175,000 178,500 Century Communications Corp., 8.875% due 01/15/07 175,000 169,750 zero coupon due 01/15/08 250,000 106,875 GTE Corp., 6.94% due 04/15/28 200,000 188,126 International Cabletel, Inc., 11.50% due 02/01/06 1,000,000 872,500
The accompanying notes are an integral part of the financial statements. 54 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Principal Value --------- ----- Telecommunication Services - continued Nextel Communications, step-up to 9.95% due 02/15/08 $250,000 $177,500 9.75% due 08/15/04 400,000 407,500 SFX Broadcasting, Inc., 10.75% due 05/15/06 164,000 182,040 Telewest Communication Plc, Step up to 11.00% due 10/01/07 500,000 452,500 ------------ 2,782,524 Transportation - 1.05% Stena AB, 10.5% due 12/15/05 250,000 247,500 TFM SA de CV, Step up to 11.75% due 06/15/09 500,000 300,000 ------------ 547,500 TOTAL CORPORATE BONDS (Cost $25,303,488) $21,609,945 ------------ U.S. GOVERNMENT AGENCY OBLIGATIONS - 11.60% Federal Home Loan Banks - 0.86% 5.89% due 07/24/00 $450,000 $449,577 ------------ Federal Home Loan Mortgage Corporation - 2.53% 6.50% due 12/01/99 Gold 30 TBA** 700,000 671,125 8.50% due 05/01/08 299,599 307,131 10.00% due 05/15/20 281,577 299,085 1156.50% due 06/15/21, Interest Only Strip 1,633 42,265 ------------ 1,319,606 Government National Mortgage Association - 1.33% 7.50% due 07/15/27 270,237 270,913 7.50% due 10/15/27 419,408 420,456 ------------ 691,369 Federal National Mortgage Association - 2.02% 7.50% TBA ** 1,000,000 1,002,180 13.00% due 11/15/15 46,659 53,067 ------------ 1,055,247 Federal National Mortgage Association - Interest Only - 2.38% Interest Only due 03/17/20, REMIC 6,164,069 142,199 Interest Only due 02/25/35, REMIC 5,992,618 423,523 Interest Only due 10/17/36, REMIC 12,644,890 320,207 Interest Only due 06/25/38, REMIC 6,218,201 351,996 ------------ 1,237,925 Federal National Mortgage Association - CMO - 1.61% 8.80% due 01/25/19, REMIC 367,987 383,395 10.40% due 04/25/19, REMIC 63,962 68,360 7.387% due 08/17/03, REMIC 384,772 386,072 ------------ 837,827 Student Loan Marketing Association - 0.87% 7.20% due 11/09/00 450,000 454,216 ------------ TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $6,251,003) $6,045,767 ------------
Principal Value --------- ----- FIXED INCOME - OTHER - 16.76% Collateralized Mortgage Obligations - 6.52% Green Tree Financial Corp./\ 7.07% due 09/15/07 $2,077,083 $2,036,185 Mid State Trust VI, Class A,/\ 7.34% due 07/01/35 1,381,939 1,362,067 ------------ 3,398,252 Commercial Mortgage Backed Securities - 3.67% Commercial Mortgage Asset Trust, 7.35% due 08/17/13 1,200,000 1,126,860 DLJ Commercial Mortgage Corp., Interest Only Strips: due 05/10/23 9,661,164 410,721 due 11/12/31 7,618,941 374,234 ------------ 1,911,815 Residential Subordinate Securities - 6.57% ContiMortgage Home EquityLoan, 7.00% due 12/25/29, 144A 500,000 439,250 First Union Residential Securities, 7.00% due 08/25/28 244,746 215,710 GE Capital Mortgage Services, Inc. 6.75% due 11/25/28 989,393 848,404 PNC Mortgage Securities Corp., 6.734% due 07/25/28 417,616 360,084 6.75% due 05/25/28 345,187 317,085 6.772% due 03/25/29 496,799 451,280 6.838% due 05/25/28 468,241 408,306 6.905% due 04/25/29 446,138 388,636 ------------ 3,428,755 TOTAL FIXED INCOME - OTHER (Cost $9,250,530) $8,738,822 ------------ FOREIGN GOVERNMENT OBLIGATIONS - 30.02% Algeria - 2.34% 6.375% due 03/04/10 $1,796,706 $1,221,760 ------------ Republic of Argentina - 4.85% 11.00% due 12/04/05 500,000 477,500 11.375% due 01/30/17 2,150,000 2,053,357 ------------ 2,530,857 Federal Republic of Brazil - 4.42% 5.00% due 04/15/14 1,168,324 777,784 7.00% due 04/15/12 200,000 130,260 9.375% due 04/07/08 150,000 121,395 14.5% due 10/15/09 1,222,192 1,277,190 ------------ 2,306,629 National Republic of Bulgaria - 2.52% 2.75% due 07/28/12 1,100,000 739,750 6.50% due 07/28/11 750,000 571,875 ------------ 1,311,625 Republic of Ecuador - 0.45% 4.00% FRB due 02/28/25/1/ 700,000 235,375 ------------
The accompanying notes are an integral part of the financial statements. 55 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Principal Value --------- ----- Federal Republic of Germany - 0.37% 5.625% due 01/04/28 EUR 190,000 $193,256 ------------ Republic of Greece - 1.48% 6.60% due 01/15/04 GRD 80,000,000 247,897 8.90% due 04/01/03 GRD 70,000,000 231,408 11.00% due 02/25/00 GRD 90,400,000 291,501 ------------ 770,806 Republic of Italy - 0.28% 5.25% due 11/01/29 EUR 150,000 143,404 ------------ Ivory Coast - 2.36% 2.00% due 03/29/18 $4,100,000 1,230,000 ------------ Government of Mexico - 0.97% 10.375% due 02/17/09 500,000 506,275 ------------ Government of Morocco - 0.64% 5.906% due 01/01/09 384,524 332,613 ------------ Kingdom of Norway - 0.24% 5.80% due 11/17/99 NOK 1,000,000 127,422 ------------ Government of Peru - 2.19% 3.75% FRB due 03/07/17 $1,400,000 770,000 4.50% due 03/07/17 600,000 372,000 ------------ 1,142,000 Russia - 2.16% 10.00% due 06/26/07 144A 700,000 333,165 12.75% due 06/24/28 1,500,000 793,575 ------------ 1,126,740 Kingdom of Sweden - 0.68% 6.50% due 05/05/08 SEK 1,000,000 127,541 10.25% due 05/05/03 SEK 1,600,000 224,864 ------------ 352,405 Republic of Venezuela - 4.07% 6.00% FRB due 03/31/07 $357,140 283,927 6.875% due 03/31/07 892,852 709,818 13.625% due 08/15/18 1,250,000 1,125,000 ------------ 2,118,745 TOTAL FOREIGN GOVERNMENT OBLIGATIONS (Cost $15,367,229) $15,649,912 ------------ Shares Value ------ ----- PREFERRED STOCK - 0.00% TCR Holdings-Class B 570 $6 TCR Holdings-Class C 314 3 TCR Holdings-Class D 827 8 TCR Holdings-Class E 1,711 17 ------------ TOTAL PREFERED STOCK (Cost $204) $34 ------------ RIGHTS & WARRANTS - 0.17% Crude Petroleum & Natural Gas - 0.05% Terex Corporation, rights expire 12/31/00 2,000 $28,250 ------------ Foreign Governments - 0.12% United Mexican States, warrants exp. 02/17/09 935 62,762 ------------
Shares Value ------ ----- Other - 0.00% BCP Holdings Corp., warrants exp. 04/15/04 500 $0 ------------ Telephone - 0.00% Wireless One, Inc., warrants expire 10/19/00 750 8 ------------ In-flight Phone Corp., warrants expire 5/15/02 1,000 0 ------------ TOTAL RIGHTS & WARRANTS (Cost $32,378) $91,020 ------------ Contracts Value --------- ----- PURCHASED OPTIONS - 0.00% Foreign Currency - 0.00% Hong Kong Dollars, Strike Price 7.81, Put, Expiration Jan. 2000 (premium $101,215.01) 103,000 $0 Hong Kong Dollars, Strike Price 7.8025, Put, Expiration Jan. 2000 (premium $38,167.50) 52,500 199 ------------ TOTAL PURCHASED OPTIONS (Cost $139,383) $199 ------------ TOTAL INVESTMENTS (Strategic Income Fund) (Cost $56,344,215) $52,135,699 ------------ - ------------------------------------------------------------------------------ Investment Quality Bond Fund - ------------------------------------------------------------------------------ Principal Value --------- ----- CORPORATE BONDS - 54.87% Banking - 11.01% BankAmerica Corp., 9.50% due 04/01/01 $114,000 $118,309 Credit National, 7.00%, due 11/14/05 150,000 144,592 First Financial Caribbean Corp., 7.84% due 10/10/06 135,000 130,741 NBD Bancorp, 8.25% due 11/01/24 300,000 321,117 Republic New York Corp., 9.75% due 12/01/00 155,000 159,912 Royal Bank of Scotland Group Plc, 6.40% due 04/01/09 150,000 137,834 U.S. Bancorp, 7.50% due 06/01/26 300,000 304,494 Western Financial Savings, 8.875% due 08/01/07 25,000 22,125 ------------ 1,339,124 Broadcasting - 0.24% Emmis Communications Corp., 8.125% due 03/15/09 5,000 4,762 Granite Broadcasting Corp., 8.875% due 05/15/08 15,000 14,437 Jacor Communications Co., 8.75% due 06/15/07 10,000 10,050 ------------ 29,249
The accompanying notes are an integral part of the financial statements. 56 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Principal Value --------- ----- Building Products - 0.09% Falcon Building Products, Inc., Step-up due 06/15/07* $15,000 $11,025 ------------ Business Services - 0.10% AMSC Acquisition, Inc., 12.25% due 04/01/08 5,000 3,100 Iron Mountain, Inc., 8.75% due 09/30/09 10,000 9,400 ------------ 12,500 Chemical Products - 0.97% Arco Chemical Co., 9.80% due 02/01/20 5,000 4,728 Huntsman Corp., 9.50% due 07/01/07, 144A 10,000 9,325 ICI North America, Inc., 8.875% due 11/15/06 65,000 68,824 Lyondell Chemical Company, 9.875% due 05/01/07 20,000 19,950 Sovereign Specialty Chemicals, 9.50% due 08/01/07 15,000 14,775 ------------ 117,602 Crude Petroleum & Natural Gas - 1.58% Costilla Energy, Inc.,/2 / 10.25% due 10/01/06* 20,000 5,000 Energy Corporation of America, 9.50% due 05/15/07 20,000 9,600 Enron Corp., 6.75% due 09/01/04 100,000 98,532 Kelley Oil & Gas Corp., 14.00% due 04/15/03 7,000 6,440 Newfield Exploration Co., 7.45% due 10/15/07 45,000 41,885 Petroleos Mexicanos, 8.85% due 09/15/07 25,000 22,688 Texas Petrochemicals Corp., 11.125% due 07/01/06 10,000 8,100 ------------ 192,245 Drugs & Health Care - 3.82% Alaris Medical, Inc., Step-up due 08/01/08* 15,000 6,375 Allegiance Corp., 7.00% due 10/15/26 325,000 319,046 Mediq/PRN Life Support Services, 11.0% due 06/01/08 10,000 3,200 Owens & Minor, Inc., 10.875% due 06/01/06 15,000 15,319 Tenet Healthcare Corp., 7.875% due 01/15/03 110,000 105,050 Triad Hospitals Holdings, Inc., 11.0% due 05/15/09, 144A 5,000 4,912 Universal Hospital Services, Inc., 10.25% due 03/01/08 15,000 10,200 ------------ 464,102
Principal Value --------- ----- Electric Utilities - 1.03% Cleveland Electric Illuminating Company, 7.19% due 07/01/00 $125,000 $125,026 ------------ Financial Services - 8.00% AAG Holding, Inc., 6.875% due 06/01/08 100,000 89,878 Amerus Capital I, 8.85% due 02/01/27 100,000 86,050 Amvescap Plc, 6.60% due 05/15/05 150,000 143,545 BanPonce Financial Corp., 6.75% due 08/09/01 250,000 248,600 Beneficial Corp., 8.40% due 05/15/08 75,000 80,092 EOP Operating LP, 6.50% due 01/15/04 95,000 91,661 Neenah Corp., 11.125% due 05/01/07 10,000 9,225 Olympic Financial, Ltd., 11.5% due 03/15/07 10,000 6,200 Pindo Deli Financial Mauritius, Ltd., 10.75% due 10/01/07 10,000 6,350 RBF Finance, 11.375% due 03/15/09 10,000 10,525 Sun Canada Financial Co., 7.25% due 12/15/15, 144A 200,000 195,390 Tembec Finance Corp., 9.875% due 10/31/05 5,000 5,162 ------------ 972,678 Food & Beverages - 0.90% B & G Foods Corp., 9.625% due 08/01/07 10,000 8,900 Chiquita Brands International, Inc., 10.0%, due 06/15/09 5,000 3,750 Del Monte Foods Co., Step-up, due 12/15/07* 16,000 12,160 Nash Finch Company, 8.50% due 05/01/08 10,000 8,500 Joseph E. Seagram & Sons, Inc., 7.50% due 12/15/18 65,000 62,466 Vlasic Foods, Inc. 10.25% due 07/01/09 15,000 14,100 ------------ 109,876 Homebuilders - 0.07% Engle Homes, Inc., 9.25% due 02/01/08 10,000 8,700 ------------ Industrials - 11.17% Abraxas Petroleum Corp., 11.50% due 11/01/04 20,000 12,800 Acetex Corp., 9.75% due 10/01/03 10,000 8,600 Accuride Corp., 9.25% due 02/01/08 10,000 9,212
The accompanying notes are an integral part of the financial statements. 57 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Principal Value --------- ----- Industrials - continued Acindar Industria, Argentina, 11.25% due 02/15/04 $10,000 $6,900 Advanced Micro Devices, Inc., 11.00% due 08/01/03 10,000 9,250 Associates Corp. of North America, 5.75% due 11/01/03 120,000 115,854 Cincinnati Milacron, Inc., 7.875% due 05/15/00 130,000 130,178 DecisionOne Corp.,/1 / 9.75% due 08/01/07* 10,000 150 Dime Capital Trust I, 9.33% due 05/06/27 150,000 148,030 Disco SA, 9.875% due 05/15/08 10,000 8,750 Doman Industries, Ltd., 12.0% due 07/01/04, 144A 10,000 10,200 Domtar, Inc., 9.50% due 08/01/16 10,000 10,340 Duane Reade, Inc., 9.25% due 02/15/08 20,000 19,600 Dunlop Aerospace Holdings Plc, 11.875% due 05/15/09, 144A 10,000 10,100 EchoStar DBS Corp., 9.375% due 02/01/09 30,000 29,700 Fairchild Semiconductor Corp., 10.125% due 03/15/07 15,000 14,700 Fisher Scientific Int'l., Inc., 9.00% due 02/01/08 10,000 9,400 Frontiervision Holding, L.P., Step-up, due 09/15/07 * 5,000 4,225 Gaylord Container Corp., 9.375% due 06/15/07 5,000 4,650 Globalstar LP, 10.75% due 11/01/04 15,000 7,950 Grove Worldwide LLC, 9.25% due 05/01/08 15,000 4,950 Grupo Int'l Durango SA, 12.625% due 08/01/03 15,000 14,494 Guitar Center Management Co., Inc., 11.00% due 07/01/06 17,000 16,660 Iridium Operations LLC, 11.25% due 07/15/05* 25,000 1,375 K & F Industries, Inc., 9.25% due 10/15/07 10,000 9,575 KN Energy, Inc., 6.65% due 03/01/05 100,000 95,431 LDM Technologies, Inc., 10.75% due 01/15/07 20,000 17,600 Multicanal, 13.125% due 04/15/09, 144A 20,000 18,850 News America Holdings, Inc., 9.25% due 02/01/13 250,000 274,710 NTL, Inc., Step-up due 10/01/08* 20,000 13,400
Principal Value --------- ----- Industrials - continued P&L Coal Holdings Corp., 9.625% due 05/15/08 $25,000 $24,063 Pioneer Americas Acquisiton Corp., 9.25% due 06/15/07 5,000 3,900 Plains Resources, Inc., Series B, 10.25% due 03/15/06 10,000 10,050 Psinet, Inc., 11.50% due 11/01/08 5,000 5,206 Psinet, Inc., 10.00% due 02/15/05 10,000 9,825 Repap New Brunswick, Inc., 10.625% due 04/15/05 15,000 13,312 Royster Clark, Inc., 10.25% due 04/01/09, 144A 10,000 8,800 SCL Aereo Santiago, 6.95% due 07/01/12, 144A 100,000 93,042 Standard Pacific Corp., 8.50% due 06/15/07 5,000 4,550 Stater Bros. Holdings. Inc., 10.75% due 08/15/06 10,000 10,175 Sullivan Graphics, Inc., 12.75% due 08/01/05 20,000 20,450 Verio, Inc., 10.375% due 04/01/05 15,000 15,000 Verio, Inc., 11.25% due 12/01/08 10,000 10,300 Wesco Distribution, Inc., 9.125% due 06/01/08 15,000 13,425 YPF SA, 8.00% due 02/15/04 70,000 68,928 ZSC Specialty Corp., 11.0% due 07/01/09, 144A 10,000 10,050 ------------ 1,358,710 Insurance - 5.49% Equitable Companies, Inc., 7.00% due 04/01/28 100,000 90,970 Florida Windstorm Underwriting, 7.125% due 02/25/19, 144A 180,000 167,195 Jackson National Life Insurance Co., 8.15% due 03/15/27, 144A 100,000 99,270 Ohio National Life Insurance Co., 8.50% due 05/15/26, 144A 150,000 155,638 Security Benefit Life Co., 8.75% due 05/15/16, 144A 150,000 155,101 ------------ 668,174 Leisure Time - 0.54% Aztar Corp., 8.875% due 05/15/07 10,000 9,450 AMC Entertainment, Inc., 9.50% due 03/15/09 10,000 8,850 Bell Sports, Inc., 11.00% due 08/15/08 10,000 9,825 Loew's Cineplex Entertainment Corp., 8.875% due 08/01/08 10,000 9,025
The accompanying notes are an integral part of the financial statements. 58 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Principal Value --------- ----- Leisure Time - continued Station Casinos, Inc., 8.875% due 12/01/08, 144A $15,000 $14,475 True Temper Sports, Inc., 10.875% due 012/01/08 15,000 14,400 ------------ 66,025 Metal Products - 0.04% Silgan Holdings, Inc., 9.00% due 06/01/09 5,000 4,738 ------------ Office Products - 0.76% Boise Cascade Office Products Co., 7.05% due 05/15/05 100,000 92,719 ------------ Paper - 0.86% Boise Cascade Corp., 9.90% due 10/01/01 100,000 104,109 ------------ Retail Trade - 0.68% J.C. Penney, Inc., 7.40% due 04/01/37 80,000 77,714 Mattress Discounters Corp., Units, 12.625% due 07/15/07, 144A 5 4,700 ------------ 82,414 Steel - 0.11% AK Steel Corp., 7.875% due 02/15/09 15,000 13,650 ------------ Telecommunication Services - 4.20% Allbritton Communications Co., 8.875% due 02/01/08 20,000 19,050 American Media Operations, Inc., 10.25% due 05/01/09 5,000 4,900 Benedek Communications Corp., Step-up due 05/15/06* 5,000 4,375 BTI Telecommunications Corp., 10.50% due 09/15/07 5,000 4,250 Century Communications, Step-up, due 01/15/08* 35,000 14,963 Charter Communications Holdings, 8.625% due 04/01/09 15,000 14,175 Concentric Network Corp., 12.75% due 12/15/07 10,000 10,400 e.Spire Communications, Inc., Step-up, due 04/01/06* 15,000 8,325 Exodus Communications, Inc., 11.25% due 07/01/08 10,000 10,225 GST Telecommunications, Inc., Step-up due 11/15/07* 20,000 20,000 Hyperion Telecommunications, Inc., 13.0% due 04/15/03* 10,000 8,550 Innova S. de R.L., 12.875% due 04/01/07 20,000 16,100 Intermedia Communications, Inc., 8.875% due 11/01/07 25,000 22,500
Principal Value --------- ----- Telecommunication Services - continued Intermedia Communications, Inc., 8.60% due 06/01/08 $10,000 $8,850 KMC Telecom. Holdings, Inc., Step-up due 02/15/08* 50,000 27,000 Level 3 Communications, Inc., 8.00% due 08/01/08 5,000 4,575 LIN Holdings Corp., Step-up due 03/01/08* 30,000 19,575 MGC Communications, Inc., 13.0% due 10/01/04 5,000 4,463 Nextlink Communications, Inc., Step-up due 04/15/08* 30,000 17,850 RCN Corporation, Step-up due 07/01/08* 15,000 9,450 RSL Communications Plc, 9.125% due 03/01/08 10,000 8,700 Satelites Mexicanos SA 10.125% due 11/01/04 10,000 7,312 Telecommunications Techniques Co., LLC, 9.75% due 05/15/08 15,000 14,250 Tele-Communications, Inc., 9.25% due 04/15/02 200,000 211,284 Time Warner Telecommunications, LLC, 9.75% due 07/15/08 5,000 5,100 Viatel, Inc., 11.25% due 04/15/08 15,000 14,175 ------------ 510,397 Telephone - 2.64% Classic Cable, Inc., 9.875% due 08/01/08 5,000 5,083 Nextel Communications, Inc., Step up to 9.75% due 10/31/07* 50,000 36,000 U.S. West Capital Funding, Inc., 6.25% due 07/15/05 80,000 76,510 WorldCom, Inc., 7.55% due 04/01/04 200,000 203,332 ------------ 320,925 Transportation - 0.38% Johnstown American Industries, Inc., 11.75% due 08/15/05 10,000 10,175 Southern Railway Company, 8.75% due 10/15/03 30,000 31,602 Werner Holding, Inc., 10.00% due 11/15/07 5,000 4,850 ------------ 46,627 Utilities - 0.19% GCI, Inc., 9.75% due 08/01/07 25,000 23,625 ------------ TOTAL CORPORATE BONDS (Cost $7,000,829) $6,674,240 ------------
The accompanying notes are an integral part of the financial statements. 59 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Principal Value --------- ----- U.S. TREASURY OBLIGATIONS - 18.00% U.S. Treasury Bonds - 18.00% 7.50% due 11/15/16 $560,000 $617,927 9.25% due 02/15/16 125,000 159,160 12.00% due 08/15/13 1,030,000 1,412,068 ------------ TOTAL U.S. TREASURY OBLIGATIONS (Cost $2,271,023) $2,189,155 ------------ U.S. GOVERNMENT AGENCY OBLIGATIONS - 18.30% Federal Home Loan Mortgage Corp. - 8.21% 6.00% due 11/01/13 - 09/25/22 $751,185 $706,274 6.50% due 06/15/23 100,000 96,031 7.00% due 09/15/21 200,000 196,936 ------------ 999,241 Federal National Mortgage Association - 6.00% 5.50% due 08/01/28 348,645 316,176 6.18% due 07/01/08 19,734 18,650 6.27% due 11/01/07 54,134 51,609 6.295% due 06/01/08 19,728 18,784 6.30% due 01/01/08 19,642 18,744 6.305% due 02/01/08 196,490 192,202 6.34% due 01/01/0/ 19,462 18,638 6.39% due 01/01/06 19,227 18,690 6.43% due 01/01/08 19,640 18,887 6.981% due 06/01/07 18,828 18,824 7.04% due 03/01/07 19,539 19,514 7.28% due 10/01/06 19,491 19,740 ------------ 730,458 Government National Mortgage Association - 4.09% 7.00% due 06/15/23 - 10/15/23 503,176 496,886 ------------ TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $2,271,538) $2,226,585 ------------ MUNICIPAL SECURITIES - 2.67% Philadelphia, PA, Retirement System Authority, 5.59% due 04/15/05 $170,000 $159,195 Phoenix, AZ, Civic Improvement Corp., 6.30% due 07/01/08 125,000 117,284 Southern California Public Power Authority, 6.93% due 05/15/17 50,000 48,859 ------------ TOTAL MUNICIPAL SECURITIES (Cost $350,856) $325,338 ------------ FIXED INCOME - OTHER - 3.68% Aesop Funding II LLC, 6.40% due 10/20/03, 144A $100,000 $98,999 Continental Airlines, 6.90% due 01/02/18 97,919 91,724 Continental Airlines pass-through, 6.648% due 09/15/17 68,494 63,246 First Union Lehman Bros., Series 1997, Class A2, 6.60% due 05/18/07 200,000 193,806 ------------ TOTAL FIXED INCOME - OTHER (Cost $468,769) $447,775 ------------
Shares Value ------ ----- COMMON STOCKS - 0.02% Telecommunication Services - 0.02% Arch Communications Group 557 $2,785 ------------ TOTAL COMMON STOCKS (Cost $49,664) $2,785 ------------ PREFERRED STOCKS - 0.40% Concentric Network, PIK 13.5% 5 $4,762 Fairfield Mfg. Co., Inc., PIK 11.25% 25 24,813 Primedia, Inc., 8.625% 145 12,724 SF Holdings Group, Inc.*, 13.75% 2 6,050 SF Holdings Group, Inc.* 144A 74 10 ------------ TOTAL PREFERRED STOCKS (Cost $61,614) $48,359 ------------ WARRANTS - 0.01% American Mobile Satellite, Exp. 04/01/08, 144A 5 $91 Concentric Network Corp.*, Exp. 12/15/07 5 1,250 KMC Telecom. Holdings, Inc.*, Exp. 04/15/08, 144A 50 153 ------------ TOTAL WARRANTS (Cost $0) $1,494 ------------ Principal Value --------- ----- REPURCHASE AGREEMENT - 2.05% Repurchase Agreement with Paine Webber, dated 10/29/99 at 5.22% to be repurchased at $249,108 on 11/01/99, collateralized by $260,000 U.S. Treasury Notes, 5.625% due 05/15/08 (valued at $257,616 with interest) (Cost $249,000) $249,000 $249,000 ------------ TOTAL INVESTMENTS (Investment Quality Bond Fund) (Cost $12,723,293) $12,164,731 ------------ - -------------------------------------------------------------------------------------- National Municipal Bond Fund - -------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS - 99.19% Alabama - 1.78% Alabama Housing Finance Authority Single Family Mortgage Revenue Collateralized Home Mortgage Program, Series B-2, 6.40%, 04/01/25 $215,000 $219,569 ------------ California - 8.24% California Housing Finance Agency Revenue, Series H, 6.15%, 08/01/16 1,000,000 1,014,750 ------------ Illinois - 9.92% Illinois Health Facilities Authority Revenue (Hospital Association Project), 7.00%, 02/15/22 200,000 214,538 Chicago, Illinois, Water Revenue, 6.50%, 11/01/15 500,000 538,895 Chicago, Illinois, Skyway Toll Bridging Revenue, 5.375%, 01/01/16 500,000 467,895 ------------ 1,221,328
The accompanying notes are an integral part of the financial statements. 60 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued (showing percentage of total value of investments) - --------------------------------------------------------------------------------
Principal Value --------- ----- Iowa - 1.31% Iowa Finance Authority Hospital Facility Revenue Refunding (Trinity Regional Hospital Project), 7.00%, 07/01/12 $150,000 $161,442 ------------ Louisiana - 3.89% Louisiana Public Facilities Authority Hospital Revenue Refunding (Touro Infirmary Project), Series B, 6.125%, 08/15/23 500,000 479,430 ------------ Maine - 0.21% Maine State Housing Authority Mortgage Purchase, Series A-4, 6.375%, 11/15/12 25,000 25,376 ------------ Missouri - 4.26% Missouri State Health & Educational Facilities Authority Revenue, 6.25%, 02/15/11 500,000 524,377 ------------ Nevada - 4.83% Nevada Housing Division, Single-Family Program, B-2, 6.95%, 10/01/26 260,000 268,658 Nevada Housing Division, Single-Family Program, Issue C, 6.35%, 10/01/12 320,000 325,843 ------------ 594,501 New Jersey - 4.35% New Jersey Economic Development Authority Water Facilities Revenue (New Jersey American Water Company, Incorporated Project), 6.875%, 11/01/34 500,000 536,550 ------------ New York - 25.32% Long Island Power Authority, New York Electric Systems Revenue, 5.125%, 04/01/12 250,000 239,460 New York State Local Government Assistance Corporation, Series A, 6.00%, 04/01/16 1,000,000 1,010,070 New York State Dormitory Authority Revenue, State University Educational Facilities, Series A, 6.25%, 05/15/08 450,000 537,240 New York State Environmental Facilities Corporation Pollution Control Revenue Refunding (IBM Corporation Project), 7.125%, 07/01/12 580,000 601,100 New York State Mortgage Agency Revenue, Series 40-A, 6.35%, 04/01/21 630,000 633,414 Triborough Bridge & Tunnel Authority, Series Y, 5.5%, 01/01/17 100,000 97,074 ------------ 3,118,358
Principal Value --------- ----- Pennsylvania - 8.17% Delaware Valley, Pennsylvania, Regional Finance Authority Series A, 5.50%, 08/01/28 $500,000 $473,080 Philadelphia, Pennsylvania, Water & Wastewater Revenue, 6.25%, 08/01/12 500,000 533,530 ------------ 1,006,610 South Carolina - 4.05% Greenville Hospital Systems Hospital Facilities Revenue, Series B, 5.70%, 05/01/12 500,000 498,670 ------------ Tennessee - 3.83% Humphreys County, Tennessee, Industrial Development Board Solid Waste Disposal Revenue (E.I. Du Pont De Nemours & Company Project), 6.70%, 05/01/24 450,000 471,438 ------------ Texas - 5.15% Texas State Veterans Housing Assistance, 6.80%, 12/01/23 65,000 67,649 Port Arthur, Texas, Navy District, Zero Coupon, 03/01/10 1,000,000 566,090 ------------ 633,739 Virginia - 2.48% Virginia State Housing Development Authority Commonwealth Mortgage, Subseries I-1, 6.55%, 07/01/17 300,000 305,481 ------------ Washington - 2.36% Washington State General Obligation, Series C, 5.50%, 07/01/16 300,000 290,748 ------------ Wisconsin - 9.04% Wisconsin Housing & Economic Development Authority Home Ownership Revenue, Series D, 6.10%, 07/01/24 100,000 97,052 Wisconsin State Health & Educational Facilities Authority Revenue, Mercy Hospital of Janesville, Incorporated, 6.60%, 08/15/22 1,000,000 1,016,250 ------------ 1,113,302 TOTAL LONG TERM INVESTMENTS (Cost $12,203,621) $12,215,669 ------------ SHORT TERM INVESTMENTS--0.81% Jasper County, Indiana, Pollution Control Revenue, Northern Indiana Public Service B, 3.50% due 06/01/13 (Cost $100,000) 100,000 100,000 ------------ TOTAL INVESTMENTS (National Municipal Bond Fund) (Cost $12,303,621) $12,315,669 ------------
The accompanying notes are an integral part of the financial statements. 61 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued (showing percentage of total value of investments) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- U.S. Government Securities Fund - -------------------------------------------------------
Principal Value --------- ----- U.S. TREASURY OBLIGATIONS - 2.88% U.S. Treasury Bonds - 1.18% 6.375% due 08/15/27 $800,000 $797,248 ------------ U.S. Treasury Notes - 1.70% 4.750% due 02/15/04 1,200,000 1,145,808 ------------ TOTAL U.S. TREASURY OBLIGATIONS (Cost $1,948,847) $1,943,056 ------------ U.S. GOVERNMENT AGENCY OBLIGATIONS - 79.52% Federal Home Loan Banks - 2.08% 5.80% due 09/02/08/\ $1,500,000 $1,404,375 ------------ Federal Home Loan Mortgage Corporation - 29.28% 6.00% due 12/01/99 - 10/01/28/\ 3,790,432 3,128,723 6.247% due 03/25/21 REMIC 3,000,000 2,919,000 6.00% TBA** 1,000,000 933,120 6.50% TBA** 4,000,000 3,835,000 7.00% due 10/01/12/\ 5,805,553 5,803,695 7.00% due 04/15/21 871,861 872,672 8.00% due 06/01/08 143,120 144,899 8.25% due 07/01/06 111,378 113,001 8.50% due 05/01/08 137,597 140,311 9.50% due 08/01/20/\ 480,702 508,453 10.00% due 03/01/16/\ 1,246,134 1,338,585 11.75% due 08/01/13 31,853 35,259 ------------ 19,772,718 Federal National Mortgage Association - 42.66% 6.50% TBA** 2,500,000 2,395,300 6.50% due 12/01/03 - 04/01/29/\ 5,623,832 5,415,499 6.527% due 05/25/30 REMIC 2,750,000 2,671,845 6.689% due 12/28/28 REMIC 2,109,350 2,057,847 6.783% due 01/17/03 REMIC 888,925 892,827 7.00% TBA** 1,000,000 981,870 7.00% due 02/01/26 - 03/01/29 10,035,297 9,861,451 8.00% TBA** 500,000 509,375 8.00% due 08/01/04 21,854 22,051 8.25% due 03/25/06 REMIC 675,000 698,200 8.50% due 08/01/02 31,798 32,243 11.00% due 02/01/15 366 403 11.50% due 04/01/19 171,663 190,818 12.00% due 02/01/16 - 04/01/16 1,064,965 1,214,054 12.50% due 07/01/15 809,321 939,824 13.00% due 01/01/99 643,162 731,488 14.50% due 11/01/14 162,237 189,006 ------------ 28,804,101 Government National Mortgage Association - 5.50% 7.50% TBA** 500,000 501,250 7.50% due 04/15/02 - 09/15/27 847,676 851,146 7.75% due 04/15/04 40,618 41,368 8.00% due 11/15/06 - 02/15/08 28,294 29,158 9.00% due 03/20/16 - 06/20/17 1,150,095 1,206,430
Principal Value --------- ----- Government National Mortgage Association - continued 10.25% due 03/15/01 $16,395 $16,829 11.00% due 03/15/00 - 09/20/15 14,764 15,743 11.25% due 10/20/15 3,803 4,155 11.50% due 08/20/00 - 09/20/15 307,475 341,200 12.50% due 09/15/14 29,964 34,095 13.00% due 01/15/11 - 06/15/15 305,784 353,864 13.25% due 07/15/14 39,234 44,849 13.50% due 11/15/12 - 02/15/13 34,132 39,358 15.00% due 07/15/11 - 09/15/12 70,944 83,515 15.50% due 08/15/11 - 09/15/11 119,631 139,027 16.00% due 11/15/11 9,411 11,289 ------------ 3,713,276 TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $54,977,998) $53,694,470 ------------ REPURCHASE AGREEMENTS - 17.60% Repurchase Agreement with State Street Bank & Trust Co. dated 10/29/99 at 5.18%, to be repurchased at $11,888,129 on 11/01/99, collateralized by $9,585,000 U.S. Treasury Bonds, 8.875% due 02/15/19 /\ (valued at $12,303,018 including interest) (Cost $11,883,000) $11,883,000 $11,883,000 ------------ TOTAL INVESTMENTS (U.S. Government Securities Fund ) (Cost $68,809,845) $67,520,526 ------------ - ---------------------------------------------------------------------------- Money Market Fund - ---------------------------------------------------------------------------- COMMERCIAL PAPER - 54.63% Canada Government, 5.50% due 01/24/00 $1,000,000 $987,167 Canadian Wheat Board, 5.67% due 02/14/00 1,000,000 983,462 Emerson Electric, 5.22% due 11/03/99 1,000,000 999,710 Export Development Corp., 5.50% due 02/10/00 1,000,000 984,569 General Electric Capital Corp., 5.25% due 11/01/99 1,000,000 1,000,000 Goldman Sachs Group LP, 5.30% due 11/22/99 1,000,000 996,908 H.J. Heinz Co., 5.27% due 11/09/99 1,000,000 998,829 Lucent Technology, Inc., 5.29% due 11/29/99 1,000,000 995,886 Paccar Financial Corp., 5.29% due 11/12/99 1,000,000 998,384 Sara Lee Corp., 5.28% due 11/08/99 1,000,000 998,973 United Parcel Service, 5.25% due 12/01/99 1,000,000 995,625 ------------ TOTAL COMMERCIAL PAPER $10,939,513 ------------
The accompanying notes are an integral part of the financial statements. 62 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued (showing percentage of total value of investments) - -------------------------------------------------------------------------------
Principal Value --------- ----- U.S. GOVERNMENT AGENCY OBLIGATIONS - 27.45% Student Loan Marketing Association - 4.99% 5.425% due 11/18/99 $1,000,000 $1,000,000 ------------ Federal Home Loan Banks - 17.48% 5.545% disc note due 06/09/00 2,000,000 2,000,000 5.595% disc note due 01/21/00 1,500,000 1,500,000 ------------ 3,500,000 Federal National Mortgage Association - 4.98% 5.12% disc note due 11/22/99 1,000,000 997,013 ------------ TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS $5,497,013 ------------ U.S. TREASURY OBLIGATIONS - 14.75% U.S. Treasury Bills - 14.75% 4.685% due 02/10/00 $1,000,000 $986,856 4.790% due 03/09/00 2,000,000 1,965,672 ------------ 2,952,528 ------------ TOTAL US TREASURY OBLIGATIONS $2,952,528 ------------ REPURCHASE AGREEMENT - 3.17% Repurchase Agreement with State Street Bank & Trust Co. dated 10/29/99 at 5.17%, to be repurchased at $634,273 on 11/01/99, collateralized by $620,000 U.S. Treasury Bonds, 8.25% due 05/15/05 (valued at $673,715, with interest) (Cost $634,000) $634,000 $634,000 ------------ TOTAL INVESTMENTS (Money Market Fund) $20,023,054 ------------
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Key to Currency Abbreviations AUD- Australian Dollar CAD- Canadian Dollar EUR- European Currency Unit GBP- British Pound GRD- Greek Drachma HKD- Hong Kong Dollar JPY- Japanese Yen NOK- Norwegian Krone PLN- Polish Zloty SEK- Swedish Krona Key to Security Abbreviations and Legend FRB Floating Rate Bond. The interest rates shown on FRBs are the current interest rates at October 31, 1999, which are subject to change based on the terms of the security. REMIC Real Estate Mortgage Investment Conduit TBA To Be Announced /1/ Non-Income producing, issuer is in default of interest payments /2/ Non-Income producing, issuer is in bankruptcy and is in default of interest payments /\ Collateral for forward commitments * Non-Income producing ** Purchased on a forward commitment (Note 2) The accompanying notes are an integral part of the financial statements. 63 NORTH AMERICAN FUNDS NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 1. ORGANIZATION OF THE FUND. North American Funds (the "Fund") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. 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, 1999, the Fund offered the following fifteen portfolios: the International Small Cap Fund ("International Small Cap"), the International Equity Fund, (formerly the International Growth and Income Fund) ("International Equity"), the Global Equity Fund ("Global Equity"), the Emerging Growth Fund ("Emerging Growth"), the Small/Mid Cap Fund ("Small/Mid Cap"), the Growth Equity Fund ("Growth Equity"), the Tax-Sensitive Equity Fund ("Tax-Sensitive Equity"), the Growth and Income Fund ("Growth and Income"), the Equity-Income Fund ("Equity-Income"), the Balanced Fund ("Balanced"), the Strategic Income Fund ("Strategic Income"), the Investment Quality Bond Fund ("Investment Quality Bond"), the National Municipal Bond Fund ("National Municipal Bond"), the U.S. Government Securities Fund ("U.S. Government Securities") and the Money Market Fund ("Money Market"). All of the portfolios are diversified management investment companies except for Emerging Growth, which is a non-diversified management investment company. The Fund offers Class A, Class B and Class C shares. Class A shares are sold with a front-end sales charge up to 5.75%. Class B and Class C shares are sold without an initial sales charge. 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 C shares are sold with a contingent deferred sales charge of 1% in the first year after purchase. Class B shares will automatically convert to Class A shares of the same portfolio eight 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). Investment income, realized and unrealized capital gains and losses and common expenses of each portfolio are allocated on a pro-rata basis to each class based on their relative net assets. CypressTree Asset Management Corporation, Inc. ("CAM"), a wholly-owned subsidiary of CypressTree Investments, Inc. ("CypressTree"), serves as investment adviser and principal underwriter for the Fund. CypressTree Funds Distributors, Inc. ("CFD"), also a wholly-owned subsidiary of CypressTree, serves as distributor for the Fund. Effective April 1, 1999, Morgan Stanley Asset Management became sub-adviser to International Equity, and Global Alliance Value Investors, Ltd. became sub-adviser to Equity-Income. CypressTree, located in Boston, Massachusetts, was formed in 1996 to acquire, advise and distribute mutual funds through broker-dealers, banks and other intermediaries. 2. SIGNIFICANT ACCOUNTING POLICIES. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements is in conformity with generally accepted accounting principles and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. Security Valuation. Securities held by Money Market 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 U.S. Government Securities, National Municipal Bond and Money Market may purchase and sell forward foreign currency contracts in order to hedge a specific transaction or portfolio position. 64 NORTH AMERICAN FUNDS NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- Note 2 - continued 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 daily 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. Options Contracts. The Fund may use option contracts to hedge against changes in the value of securities the Fund owns or expects to purchase. The Fund may also write options on securities it owns or in which it may invest in an attempt to increase its current returns. The potential risk to the Fund is that the change in value of options contracts may not correspond to the change in value of the hedged instruments. Also, losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contracts, or if the counterparty to the contract is unable to perform. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Realized gains and losses on purchased options are included in realized gains and losses on investment securities. Forward Commitments. The Fund may purchase debt securities on a "when-issued" or "forward delivery" basis. 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 Fund will establish a segregated account consisting of cash or liquid high-quality debt securities equal to the amount of the commitment to purchase when-issued or forward delivery securities. 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 portfolio's net asset value starting on the day the portfolio agrees to purchase the securities. At October 31, 1999, the forward commitments were $1,673,305 in Strategic Income and $9,155,915 in U. S. Government Securities. Mortgage Dollar Rolls. Each of the Funds except the Money Market Fund 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. Futures Contracts. The Fund may enter into futures contacts. Upon entering into a futures contract, the portfolio is required to deposit with the custodian on behalf of the broker an amount of cash or cash equivalents equal to a certain percentage of the contract amount, which is known as the "initial margin". The potential risk to the Fund is that the change in value of futures contracts may not correspond to the change in value of the hedged instruments. Also, losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contracts, or if the counterparty to the contract is unable to perform. Subsequent payments, called "variation margin", are made or received by the portfolio, depending upon the fluctuation of the value of the futures contract. When futures contracts are closed, the difference between the opening value at the date of purchase and the value at closing is recorded as realized gain/(loss) in the Statement of Operations. 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, short term investments 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. Cash collateral provided is invested in the State Street Bank and Trust Company Navigator 65 NORTH AMERICAN FUNDS NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- Note 2 - continued Securities Lending Trust. The related income 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 should 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, 1999, the value of the securities loaned amounted to $3,830,759, $4,411,608, $8,258,901, $5,273,173, $4,840,087, $1,301,187, $4,980,228, $5,776,982 and $1,589,148 in International Equity, Global Equity, Small/Mid Cap, Growth Equity, Growth and Income, Equity-Income, Balanced, Strategic Income and Investment Quality Bond, respectively. At October 31, 1999, the value of collateral amounted to $3,950,226, $4,528,860, $8,104,967, $5,048,747, $4,962,600, $1,242,600, $5,183,450, $6,274,430 and $1,618,069 in International Equity, Global Equity, Small/Mid Cap, Growth Equity, Growth and Income, Equity-Income, Balanced, Strategic Income and Investment Quality Bond, respectively. Organization Costs. Costs incurred by each portfolio in connection with its organization are being amortized on a straight line basis over a five year period. 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. Distributions of net investment income are declared as a dividend to shareholders of record as of the close of business each day and are paid monthly for Strategic Income, Investment Quality Bond, National Municipal Bond, U.S. Government Securities and Money Market, semi- annually to shareholders of International Equity and Growth and Income, and annually to shareholders of International Small Cap, Global Equity, Emerging Growth, Small/Mid Cap, Growth Equity, Tax-Sensitive Equity, Equity-Income and Balanced. 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 federal excise tax. Capital Loss Carryforwards. At October 31, 1999, capital loss carryforwards available to offset future recognized gains were approximately:
Capital Loss Carryforwards Expiration Year ------------------------------------------------ Portfolio 2002 2003 2004 2005 2006 2007 - ------------------------------ -------- --------- ---- ------ ------- --------- Tax-Sensitive Equity.......... - - - - 754,731 991,007 Strategic Income.............. 3,866,240 Investment Quality Bond....... $329,026 - - - - 186,540 National Municipal Bond....... - - - 24,157 - 75,958 U. S. Government Securities... - 1,062,756 - - - 594,779 Money Market.................. - - - 1,130 1,156 -
Repurchase and Reverse Repurchase Agreements. Each portfolio may enter into repurchase agreements and, additionally, U.S. Government Securities may enter into reverse repurchase agreements. When a portfolio enters into a repurchase agreement through its custodian, it receives delivery of 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 repurchase 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, U.S. Government Securities 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. 66 NORTH AMERICAN FUNDS NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- Note 2 - continued 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 31,1999, is as follows:
Class A Class B Class C ------------------------ ---------------------- ------------------------ Shares Capital Shares Capital Shares Capital ---------- ------------ --------- ----------- ---------- ------------ International Small Cap Sold.................... 20,122 $317,282 55,279 $858,748 45,908 $706,902 Redeemed................ (53,744) (845,699) (169,869) (2,632,560) (174,307) (2,683,477) ---------- ------------ --------- ----------- ---------- ------------ Net increase/(decrease)... (33,622) ($528,417) (114,590) ($1,773,812) (128,399) ($1,976,575) ---------- ------------ --------- ----------- ---------- ------------ International Equity Sold.................... 88,662 $974,431 180,051 $1,967,284 96,884 $1,067,562 Reinvestment of distributions.......... 1,100 11,388 3,861 39,697 2,310 23,747 Redeemed................ (137,110) (1,500,053) (404,482) (4,414,104) (344,573) (3,768,194) ---------- ------------ --------- ----------- ---------- ------------ Net increase/(decrease)... (47,348) ($514,234) (220,570) ($2,407,123) (245,379) ($2,676,885) ---------- ------------ --------- ----------- ---------- ------------ Global Equity Sold.................... 1,423,394 $22,816,700 129,757 $2,083,840 1,897,782 $30,883,719 Reinvestment of distributions.......... 142,681 2,268,622 131,730 2,068,160 255,619 4,026,003 Redeemed................ (2,665,234) (42,997,272) (522,562) (8,405,115) (2,853,048) (46,324,542) ---------- ------------ --------- ----------- ---------- ------------ Net increase/(decrease)... (1,099,159) ($17,911,950) (261,075) ($4,253,115) (699,647) ($11,414,820) ---------- ------------ --------- ----------- ---------- ------------ Emerging Growth Sold.................... 15,516 $160,205 49,363 $491,033 23,740 $251,163 Redeemed................ (14,536) (152,525) (26,577) (268,051) (15,638) (158,481) ---------- ------------ --------- ----------- ---------- ------------ Net increase/(decrease)... 980 $7,680 22,786 $222,982 8,102 $92,682 ---------- ------------ --------- ----------- ---------- ------------ Small/Mid Cap Sold.................... 126,496 $2,275,849 291,328 $5,096,560 542,798 $9,521,511 Reinvestment of distributions.......... 25,158 411,088 78,912 1,259,456 86,436 1,382,112 Redeemed................ (128,546) (2,337,709) (301,084) (5,259,240) (605,710) (10,637,501) ---------- ------------ --------- ----------- ---------- ------------ Net increase/(decrease)... 23,108 $349,228 69,156 $1,096,776 23,524 $266,122 ---------- ------------ --------- ----------- ---------- ------------ Growth Equity Sold.................... 121,585 $2,413,151 281,502 $5,559,694 393,750 $7,688,421 Reinvestment of distributions.......... 14,236 259,959 39,479 708,254 45,768 820,167 Redeemed................ (92,961) (1,834,145) (169,645) (3,324,990) (252,763) (4,961,227) ---------- ------------ --------- ----------- ---------- ------------ Net increase/(decrease)... 42,860 $838,965 151,336 $2,942,958 186,755 $3,547,361 ---------- ------------ --------- ----------- ---------- ------------ Tax-Sensitive Equity Sold.................... 44,179 $426,380 168,820 $1,607,230 173,510 $1,670,244 Redeemed................ (341,030) (3,225,653) (91,497) (878,505) (139,019) (1,370,096) ---------- ------------ --------- ----------- ---------- ------------ Net increase/(decrease)... (296,851) ($2,799,273) 77,323 $728,725 34,491 $300,148 ---------- ------------ --------- ----------- ---------- ------------ Growth and Income Sold.................... 593,218 $16,112,290 1,020,665 $27,330,906 1,567,435 $42,427,008 Reinvestment of distributions.......... 64,085 1,621,392 114,011 2,851,439 176,921 4,442,490 Redeemed................ (1,133,085) (31,765,735) (579,899) (15,547,216) (1,325,973) (35,951,361) ---------- ------------ --------- ----------- ---------- ------------ Net increase/(decrease)... (475,782) ($14,032,053) 554,777 $14,635,129 418,383 $10,918,137 ---------- ------------ --------- ----------- ---------- ------------ Equity-Income Sold.................... 228,238 $3,967,738 168,204 $2,871,566 382,424 $6,602,195 Reinvestment of distributions.......... 171,602 2,870,904 159,337 2,648,183 397,396 6,644,473 Redeemed................ (1,651,388) (28,635,140) (667,635) (11,308,913) (2,079,041) (35,551,712) ---------- ------------ --------- ----------- ---------- ------------ Net increase/(decrease)... (1,251,548) ($21,796,498) (340,094) ($5,789,164) (1,299,221) ($22,305,044) ---------- ------------ --------- ----------- ---------- ------------
67 NORTH AMERICAN FUNDS NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- Note 3 - continued
Class A Class B Class C ------------------------- ------------------------ ------------------------- Shares Capital Shares Capital Shares Capital ----------- ------------ ----------- ----------- ----------- ------------ Balanced Sold.................... 156,485 $1,680,266 113,675 $1,223,061 323,739 $3,527,724 Reinvestment of distributions.......... 124,734 1,332,156 143,215 1,528,102 483,841 5,230,466 Redeemed................ (975,179) (10,544,849) (587,122) (6,295,079) (1,398,327) (15,170,133) ----------- ------------ ----------- ----------- ----------- ------------ Net increase/(decrease)... (693,960) (7,532,427) (330,232) (3,543,916) (590,747) (6,411,943) ----------- ------------ ----------- ----------- ----------- ------------ Strategic Income Sold.................... 355,037 $3,163,049 470,944 $4,269,053 212,534 $1,899,105 Reinvestment of distributions.......... 80,202 708,185 151,925 1,339,782 195,047 1,722,274 Redeemed................ (1,065,074) (9,458,644) (1,333,186) (11,782,693) (1,669,529) (14,600,123) ----------- ------------ ----------- ----------- ----------- ------------ Net increase/(decrease)... (629,835) ($5,587,410) (710,317) ($6,173,858) (1,261,948) ($10,978,744) ----------- ------------ ----------- ----------- ----------- ------------ Investment Quality Bond Sold.................... 69,728 $725,581 157,085 $1,652,116 128,622 $1,337,848 Reinvestment of distributions.......... 28,223 291,270 23,317 239,071 27,756 284,636 Redeemed................ (374,751) (3,799,199) (200,439) (2,081,049) (210,799) (2,141,915) ----------- ------------ ----------- ----------- ----------- ------------ Net increase/(decrease)... (276,800) ($2,782,348) (20,037) ($189,862) (54,421) ($519,431) ----------- ------------ ----------- ----------- ----------- ------------ National Municipal Bond Sold.................... 12,373 $121,276 38,617 $389,927 58,284 $590,526 Reinvestment of distributions.......... 13,971 138,776 11,804 117,251 12,945 128,980 Redeemed................ (128,078) (1,256,715) (123,709) (1,221,515) (160,321) (1,597,610) ----------- ------------ ----------- ----------- ----------- ------------ Net increase/(decrease)... (101,734) ($996,663) (73,288) ($714,337) (89,092) ($878,104) ----------- ------------ ----------- ----------- ----------- ------------ U.S. Government Securities Sold.................... 418,180 $4,109,724 316,176 $3,095,258 3,441,704 $33,633,113 Reinvestment of distributions.......... 160,487 1,575,298 43,417 425,351 49,911 488,789 Redeemed................ (1,798,945) (17,585,651) (872,536) (8,630,181) (3,625,489) (35,381,313) ----------- ------------ ----------- ----------- ----------- ------------ Net increase/(decrease)... (1,220,278) ($11,900,629) (512,943) ($5,109,572) (133,874) ($1,259,411) ----------- ------------ ----------- ----------- ----------- ------------ Money Market Sold.................... 35,775,604 $35,777,032 11,223,162 $11,223,619 29,891,743 $29,892,797 Reinvestment of distributions.......... 335,040 335,040 197,442 197,442 334,268 334,268 Redeemed................ (40,376,812) (40,376,812) (12,789,186) (12,789,186) (29,820,314) (29,820,314) ----------- ------------ ----------- ----------- ----------- ------------ Net increase/(decrease)... (4,266,168) ($4,264,740) (1,368,582) ($1,368,125) 405,697 $406,751 ----------- ------------ ----------- ----------- ----------- ------------ Class A Class B Class C ------------------------- ------------------------ ------------------------- Shares Capital Shares Capital Shares Capital ----------- ------------ ----------- ----------- ----------- ------------ International Small Cap Sold.................... 38,317 $585,923 158,290 $2,313,605 99,606 $1,479,559 Redeemed................ (114,707) (1,649,155) (177,019) (2,565,436) (158,567) (2,352,841) ----------- ------------ ----------- ----------- ----------- ------------ Net increase/(decrease)... (76,390) ($1,063,232) (18,729) ($251,831) (58,961) ($873,282) ----------- ------------ ----------- ----------- ----------- ------------ International Equity (formerly International Growth and Income) Sold.................... 199,128 $2,104,258 276,576 $2,901,231 218,156 $2,308,683 Reinvestment of distributions.......... 44,088 424,134 131,412 1,264,722 73,392 706,029 Redeemed................ (272,419) (2,839,795) (490,983) (5,115,710) (263,329) (2,792,273) ----------- ------------ ----------- ----------- ----------- ------------ Net increase/(decrease)... (29,203) ($311,403) (82,995) ($949,757) 28,219 $222,439 ----------- ------------ ----------- ----------- ----------- ------------ Global Equity Sold.................... 446,573 $7,442,815 280,820 $4,734,000 526,057 $8,521,394 Reinvestment of distributions.......... 152,180 2,323,793 136,778 2,076,461 262,341 3,998,091 Redeemed................ (605,332) (10,137,623) (525,613) (8,376,635) (1,026,358) (16,728,703) ----------- ------------ ----------- ----------- ----------- ------------ Net increase/(decrease)... (6,579) ($371,015) (108,015) ($1,566,174) (237,960) ($4,209,218) ----------- ------------ ----------- ----------- ----------- ------------ Emerging Growth Sold.................... 22,245 $229,241 30,970 $308,715 27,355 $289,054 Redeemed................ (5,767) (60,513) (1,200) (10,251) (438) (3,923) ----------- ------------ ----------- ----------- ----------- ------------ Net increase/(decrease)... 16,478 $168,728 29,770 $298,464 26,917 $285,131 ----------- ------------ ----------- ----------- ----------- ------------
68 NORTH AMERICAN FUNDS NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- Note 3 - continued
Class A Class B Class C ------------------------ ----------------------- ------------------------ Shares Capital Shares Capital Shares Capital ----------- ----------- ---------- ----------- ----------- ----------- Small/Mid Cap Sold.................... 183,881 $2,977,455 366,794 $5,878,496 478,367 $7,674,000 Reinvestment of distributions.......... 4,511 64,099 13,425 188,347 13,917 195,545 Redeemed................ (158,019) (2,553,137) (263,887) (4,140,429) (342,381) (5,487,633) ----------- ----------- ---------- ----------- ----------- ----------- Net increase/(decrease)... 30,373 $488,417 116,332 $1,926,414 149,903 $2,381,912 ----------- ----------- ---------- ----------- ----------- ----------- Growth Equity Sold.................... 139,044 $2,458,526 264,945 $4,640,723 222,095 $3,924,774 Reinvestment of distributions.......... 16,479 255,776 47,951 737,982 69,363 1,066,801 Redeemed................ (113,974) (2,026,744) (180,039) (3,088,010) (304,031) (5,337,043) ----------- ----------- ---------- ----------- ----------- ----------- Net increase/(decrease)... 41,549 $687,558 132,857 $2,290,695 (12,573) ($345,468) ----------- ----------- ---------- ----------- ----------- ----------- Tax-Sensitive Equity Sold.................... 505,569 $5,423,710 327,006 $3,440,453 373,346 $3,674,143 Redeemed................ (47,892) (502,935) (6,225) (55,022) (9,883) (84,557) ----------- ----------- ---------- ----------- ----------- ----------- Net increase/(decrease)... 457,677 $4,920,775 320,781 $3,385,431 363,463 $3,589,586 ----------- ----------- ---------- ----------- ----------- ----------- Growth and Income Sold.................... 875,486 $20,239,609 951,247 $22,019,893 1,138,031 $26,430,588 Reinvestment of distributions.......... 127,179 2,612,268 202,572 4,138,748 348,181 7,145,010 Redeemed................ (804,113) (18,494,847) (538,445) (12,243,375) (925,887) (21,379,820) ----------- ----------- ---------- ----------- ----------- ----------- Net increase/(decrease)... 198,552 $4,357,030 615,374 $13,915,266 560,325 $12,195,778 ----------- ----------- ---------- ----------- ----------- ----------- Equity-Income Sold.................... 479,470 $8,464,050 386,814 $6,812,335 766,845 $13,528,867 Reinvestment of distributions.......... 194,948 3,251,762 170,544 2,827,635 446,831 7,448,669 Redeemed................ (678,934) (11,894,736) (421,373) (7,372,953) (1,197,874) (21,063,343) ----------- ----------- ---------- ----------- ----------- ----------- Net increase/(decrease)... (4,516) ($178,924) 135,985 $2,267,017 15,802 ($85,807) ----------- ----------- ---------- ----------- ----------- ----------- Balanced Sold.................... 233,949 $2,624,837 349,775 $3,884,232 310,079 $3,514,608 Reinvestment of distributions.......... 222,869 2,300,076 274,666 2,832,512 1,113,960 11,629,960 Redeemed................ (177,968) (1,997,969) (335,330) (3,806,142) (1,193,333) (13,589,791) ----------- ----------- ---------- ----------- ----------- ----------- Net increase/(decrease)... 278,850 $2,926,944 289,111 $2,910,602 230,706 $1,554,777 ----------- ----------- ---------- ----------- ----------- ----------- Strategic Income Sold.................... 370,479 $3,594,336 691,131 $6,593,782 1,046,821 $10,134,342 Reinvestment of distributions.......... 95,493 912,850 149,034 1,426,572 220,511 2,109,372 Redeemed................ (396,621) (3,797,754) (1,136,578) (10,809,182) (887,028) (8,446,963) ----------- ----------- ---------- ----------- ----------- ----------- Net increase/(decrease)... 69,351 $709,432 (296,413) ($2,788,828) 380,304 $3,796,751 ----------- ----------- ---------- ----------- ----------- ----------- Investment Quality Bond Sold.................... 170,210 $1,802,178 117,621 $1,245,709 198,006 $2,105,448 Reinvestment of distributions.......... 33,910 360,020 22,312 236,748 25,597 271,574 Redeemed................ (246,964) (2,627,068) (122,141) (1,294,362) (283,354) (3,004,137) ----------- ----------- ---------- ----------- ----------- ----------- Net increase/(decrease)... (42,844) ($464,870) 17,792 $188,095 (59,751) ($627,115) ----------- ----------- ---------- ----------- ----------- ----------- National Municipal Bond Sold.................... 65,843 $675,842 34,659 $354,757 85,884 $879,629 Reinvestment of distributions.......... 13,963 142,649 13,125 134,060 15,971 163,141 Redeemed................ (139,834) (1,426,114) (179,502) (1,839,689) (124,211) (1,268,991) ----------- ----------- ---------- ----------- ----------- ----------- Net increase/(decrease)... (60,028) ($607,623) (131,718) ($1,350,872) (22,356) ($226,221) ----------- ----------- ---------- ----------- ----------- ----------- U.S. Government Securities Sold.................... 504,070 $5,044,310 940,887 $9,443,101 813,806 $8,150,377 Reinvestment of distributions.......... 197,452 1,973,152 52,081 520,627 59,278 592,076 Redeemed................ (1,134,417) (11,333,731) (896,940) (8,975,680) (1,092,107) (10,920,493) ----------- ----------- ---------- ----------- ----------- ----------- Net increase/(decrease)... (432,895) ($4,316,269) 96,028 $988,048 (219,023) ($2,178,040) ----------- ----------- ---------- ----------- ----------- ----------- Money Market Sold.................... 19,804,375 $19,803,662 12,413,813 $12,413,585 17,413,158 $17,412,707 Reinvestment of distributions.......... 411,135 411,135 142,434 142,434 341,140 341,141 Redeemed................ (20,976,437) (20,976,438) (9,968,556) (9,968,557) (17,056,318) (17,056,319) ----------- ----------- ---------- ----------- ----------- ----------- Net increase/(decrease)... (760,927) ($761,641) 2,587,691 $2,587,462 697,980 $697,529 ----------- ----------- ---------- ----------- ----------- -----------
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 Money Market, for the period ended October 31, 1999:
Purchases Sales ---------------------------- ---------------------------- Portfolio U.S. Government Other Issues U.S. Government Other Issues - ------------ --------------- ------------ --------------- ------------ International Small Cap..................... - $28,438,228 - $30,247,677 International Equity.... - 34,993,698 - 40,062,486 Global Equity........... - 39,474,648 - 79,421,956 Emerging Growth......... - 1,333,201 - 1,134,089 Small/Mid Cap........... - 71,339,006 - 72,309,418 Growth Equity........... - 57,531,440 - 51,547,592 Tax-Sensitive Equity.... - 5,579,448 - 7,472,258 Growth and Income....... - 80,215,793 - 78,646,418 Equity-Income........... - 106,154,596 - 160,872,700 Balanced................ $56,549,898 111,365,374 $63,523,446 132,132,727 Strategic Income........ 12,469,524 63,732,787 22,195,488 75,914,625 Investment Quality Bond.................... 3,498,304 3,048,904 7,304,552 2,892,970 National Municipal Bond.................... - 6,641,594 - 8,830,000 U.S. Government Securities.............. 37,444,510 - 55,675,620 -
At October 31, 1999, 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 ortfolio P Cost (Depreciation) Appreciation Depreciation - ------------ ----------- -------------- ------------ ------------ International Small Cap... 14,638,417 1,625,728 2,150,143 (524,415) International Equity...... 23,584,465 2,043,784 2,934,290 (890,506) Global Equity............. 73,323,295 9,562,633 16,557,372 (6,994,739) Emerging Growth........... 983,933 246,849 324,527 (77,678) Small/Mid Cap............. 39,155,626 3,440,225 5,041,285 (1,601,060) Growth Equity............. 36,658,002 5,875,941 6,403,996 (528,055) Tax-Sensitive Equity...... 8,170,990 715,979 1,510,818 (794,839) Growth and Income......... 189,874,480 108,669,222 116,448,197 (7,778,975) Equity-Income............. 107,938,492 7,755,733 15,223,141 (7,467,408) Balanced.................. 73,769,104 (1,999,624) 1,468,400 (3,468,024) Strategic Income.......... 56,502,428 (4,366,729) 888,660 (5,255,389) Investment Quality Bond... 12,785,257 (620,526) (2,010) (618,516) National Municipal Bond... 12,303,621 12,048 238,773 (226,725) U.S. Government Securities................ 68,816,430 (1,295,904) 37,933 (1,333,837)
5. INVESTMENT ADVISORY AGREEMENTS. The Fund maintains an Investment Advisory Agreement with CAM ("the Adviser"), pursuant to approval by the Fund's Board of Trustees and Fund shareholders. 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 First $50,000,000 $200,000,000 Excess over Portfolio $50,000,000 and $200,000,000 and $500,000,000 $500,000,000 - ------------ ----------- ---------------- ---------------- ------------ International Small Cap..................... 1.050% 1.000% .900% .800% International Equity.... .900% .850% .800% .750% Global Equity........... .900% .900% .700% .700% Emerging Growth......... .950% .950% .950% .950% Small/Mid Cap........... .925% .900% .875% .850% Growth Equity........... .900% .850% .825% .800%
70 NORTH AMERICAN FUNDS NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- Note 5 - continued
Between Between First $50,000,000 $200,000,000 Excess over Portfolio $50,000,000 and $200,000,000 and $500,000,000 $500,000,000 - ------------ ----------- ---------------- ---------------- ------------ Tax-Sensitive Equity.... .850% .800% .775% .700% Growth and Income....... .725% .675% .625% .550% Equity-Income *......... .750% .650% .550% .550% Balanced................ .775% .725% .675% .625% Strategic Income........ .750% .700% .650% .600% Investment Quality Bond.................... .600% .600% .525% .475% National Municipal Bond.................... .600% .600% .600% .600% U.S. Government Securities.............. .600% .600% .525% .475% Money Market............ .200% .200% .200% .145%
* Prior to May 12, 1999, the fees for Equity-Income were .800% on the first $50,000,000, .700% on the next $150,000,000, and .600% thereafter. For the period ended October 31,1999, CAM paid aggregate subadvisory fees of $3,299,474. In addition, CAM retained net investment advisory fees of $3,661,074 after payment of subadvisory fees, which were allocated among the portfolios as follows:
Fee % of Net Assets Fee % of Net Assets Paid to Paid to Retained Retained Portfolio Subadviser Subadviser by CAM by Adviser - ------------ ---------- --------------- --------- --------------- International Small Cap.. $98,810 .65% $60,804 .40% International Equity..... 128,186 .50% 102,551 .40% Global Equity............ 500,828 .47% 450,829 .43% Emerging Growth.......... 5,910 .59% 3,603 .36% Small/Mid Cap............ 221,855 .53% 169,033 .40% Growth Equity............ 186,543 .50% 149,234 .40% Tax-Sensitive Equity..... 46,643 .45% 41,460 .40% Growth and Income........ 768,487 .27% 1,143,977 .40% Equity-Income............ 550,865 .37% 510,014 .34% Balanced................. 319,497 .35% 362,458 .40% Strategic Income......... 227,935 .34% 270,580 .40% Investment Quality Bond.. 35,587 .23% 59,311 .38% National Municipal Bond.. 37,494 .25% 52,492 .35% U.S. Government Securities............... 154,269 .23% 257,121 .38% Money Market............. 16,565 .08% 27,607 .13%
Expense Reimbursement and Distribution Plan. Pursuant to the Investment Advisory Agreement, the Adviser will reduce the advisory fee, or, if necessary, reimburse each portfolio of the Fund for expenses (excluding taxes, portfolio brokerage commissions, interest, certain litigation and indemnification expenses, extraordinary expenses and all of the portfolio's distribution fees) 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 Money Market, of a monthly distribution fee to the Adviser as principal underwriter for the Fund as highlighted in the table below:
Portfolio Class A Class B Class C - ------------ ------- ------- ------- 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%
71 NORTH AMERICAN FUNDS NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- Note 5 - continued
ortfolio P Class A Class B Class C - ------------ ------- ------- ------- International 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% 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% Emerging Growth Management fees....................................... 0.950% 0.950% 0.950% Other expenses........................................ 0.400% 0.400% 0.400% ------ ------ ------ Expense limitation.................................... 1.350% 1.350% 1.350% ------ ------ ------ Rule 12b-1 fees....................................... 0.350% 1.000% 1.000% 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% 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% Tax-Sensitive Equity Management fees....................................... 0.850% 0.850% 0.850% Other expenses........................................ 0.400% 0.400% 0.400% ------ ------ ------ Expense limitation.................................... 1.250% 1.250% 1.250% ------ ------ ------ 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% Equity-Income Management fees....................................... 0.750% 0.750% 0.750% Other expenses........................................ 0.270% 0.270% 0.270% ------ ------ ------ Expense limitation.................................... 1.020% 1.020% 1.020% ------ ------ ------ Rule 12b-1 fees....................................... 0.350% 1.000% 1.000% On May 12, 1999, management fees were reduced from .800% to .750%, and the expense limitation was reduced from 1.065% to 1.020%. Balanced Management fees....................................... 0.775% 0.775% 0.775% Other expenses........................................ 0.265% 0.265% 0.265% ------ ------ ------ Expense limitation.................................... 1.040% 1.040% 1.040% ------ ------ ------ 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%
72 NORTH AMERICAN FUNDS NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- Note 5 - continued
ortfolio P Class A Class B Class C - ------------ ------- ------- ------- 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% National Municipal Bond Management fees....................................... 0.600% 0.600% 0.600% Other expenses........................................ 0.250% 0.250% 0.250% ------ ------ ------ Expense limitation.................................... 0.850% 0.850% 0.850% ------ ------ ------ Rule 12b-1 fees....................................... 0.150% 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% 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, the Adviser, in addition to providing advisory services, provides accounting and administrative services for which CAM charged $1,463,990 to the Fund, before reimbursement based on expense limitations, for the period ended October 31, 1999. 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 $750 plus travel expenses for each Board of Trustees meeting attended and an annual retainer of $3,000. 7. LINE OF CREDIT. The Fund has entered into an agreement with Fleet National Bank that provides a $20,000,000 Line of Credit to the Fund which may be used for cash overdraft protection. The Fund pays a commitment fee of $20,000 annually, and interest is charged on any borrowed amounts at the currently effective Federal Funds Rate plus .55%. This Line of Credit was used by Equity-Income, Growth and Income, and Global Equity during the year ended October 31, 1999. The average annual balance outstanding for each of those funds was $75,605 for Equity-Income, $116,164 for Growth and Income, and $43,836 for Global Equity. 8. COMMITMENTS. At October 31, 1999, International Equity, Global Equity, and Strategic Income 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, 1999, were as follows: FORWARD CONTRACTS
Net Contracts Unrealized to In Exchange Settlement Appreciation Deliver For Date Value (Depreciation) ----------- ----------- ---------- ---------- -------------- International Equity Sales Euro................... 614,400 $653,644 3/10/00 $652,360 $1,284 British Pounds......... 226,000 370,641 3/10/00 371,533 (892) British Pounds......... 935,747 1,532,010 3/24/00 1,538,240 (6,230) Japanese Yen........... 145,968,726 1,423,118 3/17/00 1,431,671 (8,553) ----------- ---------- -------------- $3,979,413 $3,993,804 ($14,391) ----------- ---------- --------------
73 NORTH AMERICAN FUNDS NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- Note 8 - continued
Net Contracts Unrealized to In Exchange Settlement Appreciation Deliver For Date Value (Depreciation) ----------- ----------- ---------- ---------- -------------- Purchases $391,815 Euro 371,600 3/10/00 $394,559 $2,744 1,895,442 British Pounds 1,145,140 3/10/00 1,882,552 (12,890) 1,540,847 British Pounds 935,747 3/24/00 1,538,240 (2,607) 277,572 Japanese Yen 30,000,000 3/17/00 294,242 16,670 ----------- ---------- -------------- $4,105,676 $4,109,593 3,917 ----------- ---------- -------------- ($10,474) -------------- Global Equity Sales Euro................... 6,000,000 $6,531,900 4/12/00 $6,384,453 $147,447 ----------- ---------- -------------- Strategic Income Sales Euro................... 69,050 $72,399 11/04/99 $72,661 ($262) British Pounds......... 213,319 352,904 1/28/00 350,739 2,165 Greek Drachma.......... 125,362,000 398,519 1/28/00 394,916 3,603 Japanese Yen........... 34,515,053 335,913 1/28/00 336,014 (101) British Pounds......... 49,156 80,571 1/18/00 80,823 (252) ----------- ---------- -------------- $1,240,306 $1,235,153 $5,153 ----------- ---------- -------------- Purchases $141,089 Canadian Dollars 207,027 1/28/00 $141,022 ($67) 72,811 Euro 69,050 1/18/00 73,073 262 745,268 Euro 698,241 1/28/00 739,402 (5,866) 331,239 Japanese Yen 34,515,053 11/04/99 331,309 70 80,571 British Pounds 49,156 1/18/00 80,823 252 ----------- ---------- -------------- $1,370,978 $1,365,629 (5,349) ----------- ---------- -------------- ($196) --------------
Cross Currency
Net Contracts Unrealized Payable To Receivable In Exchange Settlement Appreciation Currency Deliver Value Currency For Value Date (Depreciation) - ------------- --------- -------- ------------- ----------- -------- ---------- -------------- Swedish Krona 2,800,000 $341,118 Euro 323,887 $342,980 1/28/00 $1,862 Euro 323,886 342,541 Swedish Krona 2,800,000 341,117 1/28/00 (1,424) -------- -------- -------------- $683,659 $684,097 $438 -------- -------- --------------
FUTURES CONTRACTS Futures Contracts outstanding at October 31, 1999, were as follows:
Net Unrealized Aggregate Expiration Total Appreciation Cost Date Value (Depreciation) ---------- ---------- ---------- -------------- International Equity MIB 30 Index (Long).......... $183,561 12/17/99 $174,833 ($8,728) TOPIX Index (Long)........... 286,070 12/09/99 300,323 14,253 CAC 40 EURO Index (Short).... 436,105 12/30/99 463,629 (27,524) NIKKEI 300 Index (Short)..... 110,333 12/09/99 116,154 (5,821) ---------- ---------- -------------- $1,016,069 $1,054,939 (27,820) ---------- ---------- --------------
74 NORTH AMERICAN FUNDS OTHER INFORMATION (Unaudited) - ------------------------------------------------------------------------------- Capital Gain Distributions (Unaudited) 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, 1999:
Capital Gain Portfolio Distribution -------------------------------- ------------ International Small Cap........ $2,595,106 International Equity........... 1,519,788 Global Equity.................. 13,221,906 Small/Mid Cap.................. 1,562,415 Growth Equity.................. 4,343,394 Growth and Income.............. 29,061,779 Equity-Income.................. 25,068,864 Balanced....................... 3,871,523
Shareholder Votes (Unaudited) During the year the following matters were put to a vote of shareholders of the Portfolios shown: Equity-Income - On May 12, 1999 a special shareholder meeting was held at which the shareholders approved a new sub-advisory agreement with Global Alliance Value Investors Ltd. At the meeting 6,017,311 votes were cast in favor of the proposal, 40,252 were cast against the proposal, and there were 381,875 abstentions with respect to the proposal. International Equity - A special meeting of the shareholders of International Equity was held on June 2, 1999, adjourned until June 30, 1999, at which the shareholders approved a change in the investment objective to eliminate growth of income from the investment objective of the Portfolio. At the meeting 1,071,076 votes were cast in favor of the proposal, 46,177 were cast against the proposal, and there were 76,576 abstentions with respect to the proposal. 75 Trustees Bradford K. Gallagher, Chairman William F. Achtmeyer Don B. Allen William F. Devin Kenneth J. Lavery Officers Bradford K. Gallagher, President Joseph T. Grause, Jr., Vice President and Treasurer John I. Fitzgerald, Secretary Distributor CypressTree Funds Distributors, Inc. 286 Congress Street Boston, MA 02210 Adviser CypressTree Asset Management Corporation, Inc. 125 High Street Boston, MA 02110 Transfer and Dividend Agent State Street Bank and Trust Company P.O. Box 8505 Boston, MA 02266-8505 Independent Accountants PricewaterhouseCoopers LLP 160 Federal Street Boston, MA 02110 North American Funds Shareholder Services 286 Congress Street Boston, MA 02210 800-872-8037 Bulk Third Class U.S. POSTAGE PAID Permit No. 19 Hudson, MA -----END PRIVACY-ENHANCED MESSAGE-----