-----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, GNyAk0ax+fVCwxborxqbxh8cJ3nPlf+s9J2oj/4A79WLbPPfQnZ1eGKLZEHFI/7F kcHG8tdnfoGrKA7wonakYQ== 0000950109-99-000067.txt : 19990108 0000950109-99-000067.hdr.sgml : 19990108 ACCESSION NUMBER: 0000950109-99-000067 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981031 FILED AS OF DATE: 19990107 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: 99501756 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 FORM N-30D [LOGO OF NORTH AMERICAN FUNDS REPORT TO APPEARS HERE] SHAREHOLDERS North American Funds Annual Report October 31, 1998 Audited Financial Statements NORTH AMERICAN FUNDS PRESIDENT'S MESSAGE - ------------------------------------------------------------------------------- December 18, 1998 [PHOTO OF BRADFORD K. GALLAGHER APPEARS HERE] BRADFORD K. GALLAGHER PRESIDENT, NORTH AMERICAN FUNDS Dear Shareholder: The year started out with ideal conditions for investors -- low inflation, low interest rates, low unemployment, and slow but steady economic growth. This environment resulted in continued strength in the financial markets. Then came the mounting effects of the Asian crisis. By the third quarter, as the markets reacted to a list of economic, political and financial worries on both the domestic and international fronts, the U.S. stock market retreated with a fall in the S&P 500 of almost 10%. Since October, the market has continued on a choppy upward climb, hovering around the 9000 mark. The catalyst behind the market's turnaround has been the result of many forces, one of which was the Federal Reserve's action to lower interest rates and the apparent stabilization of the financial crises that have gripped Japan, Russia and Brazil. Many investment professionals believe a "correction" was inevitable -- the market was overvalued and needed to come down to more sustainable levels. After all, we have rejoiced in an eight-year-old bull market. Given an increased level of volatility throughout the year, many investors have abandoned their irrational levels of exuberance and are returning to a long- term perspective based on strong financial guidance and strategic asset allocation. At North American Funds, we are committed to offering mutual funds to meet your specific needs. Funds that can help you to further diversify your portfolio, to seek enhanced returns, or to pursue a greater defensive position during times of heightened volatility. Our management approach, to select investment managers whose investment practices and performance have historically proven to be among the best in their asset classes, continued to prove successful throughout 1998 as the majority of our funds were ranked in the top half of their respective Lipper categories (through 11/30/98), and some performed in the top quartile and received impressive Morningstar rankings. (See pages iii through xxx for specific performance information.) In addition to our solid fund line-up, we are proud to report that our three new fund additions --Tax-Sensitive Equity, Emerging Growth and Senior Floating Rate (separate annual report) -- have offered investors specialized investment objectives and added diversification opportunities. With North American Funds, all of your investments, across investment managers are available on one consolidated statement. We encourage you to contact your investment advisor to revisit your asset mix or to answer questions regarding recent market volatility or new investment strategies. As always, you can call upon our experienced customer service team at 800-872-8037 during our expanded hours, Monday through Friday from 9:00 to 6:00 p.m. EST, or utilize our enhanced automated information line (800-872- 2251) 24 hours a day, seven days a week. To add to our shareholder services in 1998, we've completed a website, www.northamericanfunds.com. Here, you can access up-to-date performance information and daily pricing for any North American Fund. Thank you for choosing North American Funds. We look forward to serving your investment needs next 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............................................. 32 International Growth and Income Fund..................................... 33 Global Equity Fund....................................................... 34 Emerging Growth Fund..................................................... 36 Small/Mid Cap Fund....................................................... 37 Growth Equity Fund....................................................... 38 Tax-Sensitive Equity Fund................................................ 39 Growth and Income Fund................................................... 40 Equity-Income Fund....................................................... 42 Balanced Fund............................................................ 44 Strategic Income Fund.................................................... 46 Investment Quality Bond Fund............................................. 49 National Municipal Bond Fund............................................. 52 U.S. Government Securities Fund.......................................... 54 Money Market Fund........................................................ 54 Notes to Financial Statements.............................................. 56
ii NORTH AMERICAN FUNDS FUND PERFORMANCE AND PORTFOLIO MANAGER'S COMMENTARY - ------------------------------------------------------------------------------- FUND PERFORMANCE In the following pages we have set forth information regarding the performance of each portfolio of the North American Funds, except the Money Market Fund. There are several ways to evaluate a Fund's historical performance. One can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. WITH RESPECT TO ALL THE PERFORMANCE INFORMATION PRESENTED, IT IS IMPORTANT TO UNDERSTAND THAT PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. RETURN AND PRINCIPAL FLUCTUATE, AND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PERFORMANCE TABLES The Performance Tables show two types of total return information: CUMULATIVE AND AVERAGE ANNUAL TOTAL RETURNS. A CUMULATIVE TOTAL RETURN is an expression of a Fund's total change in share value in percentage terms over a set period of time -- one, five, and ten years (or since the Fund's inception if less than the applicable period). An AVERAGE ANNUAL TOTAL RETURN takes the Fund's cumulative total return for a time period greater than one year and shows what would have happened if the Fund had performed at a constant rate each year. For all share classes, the tables show cumulative and average annual total returns both net of the possible maximum applicable front-end or back-end sales charge, as well as without giving effect to such possible maximum charges ("net asset value"). GRAPH -- CHANGE IN VALUE OF $10,000 INVESTMENT AND COMPARATIVE INDICES The performance graph for each Fund shows the change in value of a $10,000 investment over the life of the Fund's Class A shares. Each Fund's performance is compared to the performance of one or more broad-based securities indices as a "benchmark." Fund results (which include the reinvestment of dividends and capital gains distributions as well as the deduction of ongoing management and distribution fees and fund operating expenses) reflect the deduction of the maximum 4.75% sales charge applicable to Class A shares. Please note that effective April 1, 1994, Class B and Class C shares were offered. Performance of these share classes will differ. Historical performance prior to April 1, 1994 is that of the Fund before it adopted the current multi-class structure. Benchmarks used for comparison are unmanaged and do not reflect any fees or expenses. PORTFOLIO MANAGER'S COMMENTARY Finally, we have provided a commentary by each Fund's portfolio manager regarding each Fund's performance during the fiscal year ended October 31, 1998. All performance results referenced in the commentary are Class A share returns. iii INTERNATIONAL SMALL CAP FUND Seeks to provide long-term capital appreciation by INVESTMENT investing primarily in securities issued by foreign OBJECTIVE: companies which have total market capitalization or annual revenue of $1 billion or less. SUBADVISOR: Founders Asset Management LLC PORTFOLIO Michael W. Gerding MANAGER: INCEPTION DATE: March 4, 1996 CHANGE IN VALUE OF $10,000 INVESTMENT AND COMPARATIVE INDICES [LINE GRAPH APPEARS HERE] [PLOT POINTS TO COME] PERFORMANCE TABLE
Average Annual Cumulative Total Return Total Return One Since Since Periods Ended October 31, 1998 Year Inception Inception MSCI World ex US Index* 8.67% 6.38% 17.90% International Small Cap Fund Class A (NAV) 0.36% 4.10% 11.28% International Small Cap Fund Class A (net of 4.75% sales charge) -4.41% 2.21% 5.99% International Small Cap Fund Class B (NAV) -0.36% 3.39% 9.28% International Small Cap Fund Class B (net of CDSC**) -5.36% 1.95% 5.28% International Small Cap Fund Class C (NAV) -0.36% 3.39% 9.28% International Small Cap Fund Class C (net of CDSC***) -1.36% 3.39% 9.28%
*All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. **The returns reflect the applicable sliding Contingent Deferred sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. ***The returns reflect the applicable Contingent Deferred Sales Charge of 1%. PORTFOLIO MANAGER'S COMMENTARY: The Fund's Class A performance for the year-ended October 31, 1998 was 0.36% compared to MSCI World ex. U.S. Index return of 8.67% for the same period. As economic troubles continue in Japan, Asia, Latin America and Russia, stock markets around the world suffered dramatic swings. The correction particularly hit small-cap stocks as investors sought more liquid, defensive stocks, typically those of larger-cap companies. We believe the Japanese economy is in a depression and has been for quite sometime. Also, there is no indication that the new Japanese government will take the necessary steps to ease their economic problems. In fact, we believe that the Asian crisis will be measured in years, not weeks or months. As a result, it is very difficult to find small companies that meet our growth criteria, and we are extremely underweight in Japan compared to our benchmark. More than 80% of the Fund is invested in European stocks. While a correction in Europe impacted the Portfolio toward the end of the period, we believe the fundamentals in the region are sound, with the potential for companies to benefit from continued restructuring. We are continuing to look for value in European stocks that have been unfairly oversold due to emotion rather than fundamentals. We believe we can find the most attractive small or emerging companies in Europe. iv INTERNATIONAL GROWTH AND INCOME FUND INVESTMENT Seeks to provide long-term growth of capital and income by OBJECTIVE: investing in a portfolio of securities of foreign issuers. Under normal circumstances, the portfolio will be invested primarily in equity securities, including up to 15% in emerging markets. SUBADVISOR: J.P. Morgan Investment Management Inc. PORTFOLIO Paul Quinsee, Nigel Emmet and Andrew Cormie MANAGER: INCEPTION DATE: January 9, 1995 CHANGE IN VALUE OF $10,000 INVESTMENT AND COMPARATIVE INDICES [LINE GRAPH APPEARS HERE] [PLOT POINTS TO COME] PERFORMANCE TABLE
Average Annual Cumulative Total Return Total Return One Since Since Periods Ended October 31, 1998 Year Inception Inception Customized Benchmark*+ 4.74% 7.34% 31.19% 85%/15% Composite Index*++ 10.90% 9.35% 40.88% 75%/15%/10% Composite Index* 6.73% 7.48% 31.89% MSCI All Country World ex U.S.* -13.15% 6.14% 25.66% International Growth and Income Fund Class A (NAV) 0.67% 5.07% 20.73% International Growth and Income Fund Class A (net of 4.75% sales charge) -4.11% 3.73% 15.00% International Growth and Income Fund Class B (NAV) -0.03% 4.52% 18.36% International Growth and Income Fund Class B (net of CDSC**) -5.03% 3.82% 15.36% International Growth and Income Fund Class C (NAV) -0.13% 4.50% 18.28% International Growth and Income Fund Class C (net of CDSC***) -1.13% 4.50% 18.28%
* All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. + Comprised of 75% of the return of the MSCI EAFE Index, 15% of the return of the Salomon Brothers Non-$ 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. ++ Comprised of 85% of the return of the MSCI EAFE and 15% of the return of the Salmon Brothers Non-$ WGBI 10 Index. ** The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. *** The returns reflect the applicable Contingent Deferred Sales Charge of 1%. v PORTFOLIO MANAGERS' COMMENTARY The Fund's Class A performance for the year-ended October 31, 1998 was 0.67% as compared to the Composite Index* return of 4.74% for the same period. The currency allocation strategy of partially hedging the Fund's Deutschemark and Yen exposure into the U.S. dollar has been the greatest positive contributor to the Fund's performance. However, gains were offset somewhat by adverse country allocations in the first calendar quarter as the Fund had underweight positions in Malaysia and Continental Europe. European equity markets surged throughout most of the fiscal year due to falling inflation expectations, strong bond markets, the strength of the U.S. dollar, and optimism over the prospects for corporate profits. However, Asian equity markets struggled throughout the fiscal year as the Asian contagion continued to spread impacting emerging markets and eventually the developed markets in Europe and the U.S. The optimistic sentiment that prevailed in European markets earlier in the year was dashed by a series of disappointing reports from companies hit by the slowdown in world economic growth and by the growing crisis in financial markets. World equity markets bounced back in October, including emerging markets, as interest rate cuts in the U.S. and Europe and plans for aid to Latin America seemed to stabilize the markets. In addition, earnings announcements for the third quarter were generally better than expected, which also helped to push the markets higher. *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. vi 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. SUBADVISOR: Morgan Stanley Dean Witter Investment Management Inc. PORTFOLIO Frances Campion MANAGER: INCEPTION DATE: November 1, 1990# CHANGE IN VALUE OF $10,000 INVESTMENT AND COMPARATIVE INDICES [LINE GRAPH APPEARS HERE] [PLOT POINTS TO COME] PERFORMANCE TABLE
Average Annual Cumulative Total Return Total Return Periods Ended October 31, One Five Since Since# Since Since# 1998 Year Years Inception 10/1/96 Inception 10/1/96 MSCI World* 15.26% 13.03% 12.52% 15.70% 157.01% 35.50% Global Equity Fund Class A (NAV) 8.90% 8.99% 10.04% 16.15% 114.67% 36.57% Global Equity Fund Class A (net of 4.75% sales charge) 3.73% 7.93% 9.37% 13.46% 104.47% 29.74% Global Equity Fund Class B (NAV) 8.17% 8.45% 9.70% 15.52% 109.40% 35.05% Global Equity Fund Class B (net of CDSC**) 3.17% 8.16% 9.70% 13.87% 109.40% 31.05% Global Equity Fund Class C (NAV) 8.21% 8.45% 9.70% 15.50% 109.43% 34.99% Global Equity Fund Class C (net of CDSC***) 7.21% 8.45% 9.70% 15.50% 109.43% 34.99%
* All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. ** The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. *** The returns reflect the applicable Contingent Deferred Sales Charge of 1%. # Current investment subadvisor assignment became effective 10/1/96. vii PORTFOLIO MANAGER'S COMMENTARY The Fund's Class A performance for the year-ended October 31, 1998 was 8.90% as compared to the MSCI World Index return of 15.26% for the same period. Our holdings in the U.S. underperformed, reflecting the narrow nature of the market as "mega-cap" growth stocks accounted for the majority of the U.S. market strength. We maintained an underweight position in the U.S. as valuations and fundamentals in Europe attracted us. Our holdings in Japan performed relatively well in a difficult market. However, Japan's fundamental problems make it difficult for us to find compelling investments there. Our lack of exposure to Hong Kong, Singapore and Malaysia benefited the portfolio as these markets suffered the largest declines. Global markets in 1998 continued to exhibit the volatility that was sparked by the Asian currency crisis of 1997. The steep declines of major emerging markets in Latin America and Asia culminated with the collapse of the Russian market and its debt default and triggered the well-publicized hedge fund bailout. While valuations, in some cases, have receded to more reasonable levels, we remain concerned about a slowdown in GDP growth in the U.S. and Europe as well as possible credit tightening. The good news is that a balanced budget in the U.S. and prudent fiscal management in Europe suggests that fiscal and monetary policy could be relaxed to avert a major market decline. The Federal Reserve and the Bank of England have room to significantly ease rates. We continue to believe that the intrinsic value represented in the stocks we hold will be realized over time. viii EMERGING GROWTH FUND INVESTMENT Seeks to provide maximum capital appreciation by investing OBJECTIVE: primarily in a portfolio of equity securities of domestic companies. Under normal conditions, the portfolio will be invested approximately 65% 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 and Stephen J. Lurito MANAGER: INCEPTION DATE: January 6, 1998 CHANGE IN VALUE OF $10,000 INVESTMENT AND COMPARATIVE INDICES [LINE GRAPH APPEARS HERE] [PLOT POINTS TO COME] PERFORMANCE TABLE
Average Annual Cumulative Total Return Total Return One Since Since Periods Ended October 31, 1998 Year Inception Inception Russell 2000 Growth* -13.85% -13.85% -13.85% Emerging Growth Fund Class A (NAV) -11.20% -11.20% -11.20% Emerging Growth Fund Class A (net of 4.75% sales charge) -15.42% -15.42% -15.42% Emerging Growth Fund Class B (NAV) -11.70% -11.70% -11.70% Emerging Growth Fund Class B (net of CDSC**) -16.70% -16.70% -16.70% Emerging Growth Fund Class C (NAV) -11.60% -11.60% -11.60% Emerging Growth Fund Class C (net of CDSC***) -12.60% -12.60% -12.60%
* All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. ** The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. *** The returns reflect the applicable Contingent Deferred Sales Charge of 1%. ix PORTFOLIO MANAGERS' COMMENTARY The Fund's Class A performance for the period ended October 31, 1998 was - 11.20% as compared to the Russell 2000 Growth Index return of -13.85% for the same period. As the fiscal period ended, there were few significant changes in the portfolio in terms of sector or industry concentration. We continued to emphasize the consumer, business-services, financial-services and technology areas. Stocks we de-emphasized were those of commodity-related companies as they are the most vulnerable to global economic weakness. The period's unsettled environment was driven by several events. As investors were digesting the potential severity of the effects of "Asian contagion" on world profits, Russia was forced to devalue the ruble and default on billions of dollars of debt. This raised new concerns about developing Latin American economies and the subsequent effects on major financial institutions worldwide. The negative psychology generated by these events was exacerbated by fears that world leadership would be impaired by the unsettled political situation in Washington, D.C. While the U.S. is beginning to experience a slowdown in corporate profits, our economy continues to benefit from low interest rates and full employment, low commodity costs, and stable levels of consumer confidence. Two important positive facts remain. First, the Federal Reserve has assumed a leadership role by reducing interest rates that ultimately benefit equity prices. Second, the U.S. budget surplus can support a tax cut to provide fiscal stimulus. We believe our financial markets will continue to provide opportunities for long- term investors. x SMALL/MID CAP FUND INVESTMENT Seeks to provide long-term capital appreciation by OBJECTIVE: investing at least 65% of its assets in companies that at the time of purchase have total market capitalization between $500 million and $5 billion. SUBADVISOR: Fred Alger Management, Inc. PORTFOLIO David D. Alger MANAGER: INCEPTION DATE: March 4, 1996 CHANGE IN VALUE OF $10,000 INVESTMENT AND COMPARATIVE INDICES [LINE GRAPH APPEARS HERE] [PLOT POINTS TO COME] PERFORMANCE TABLE
Average Annual Cumulative Total Return Total Return One Since Since Periods Ended October 31, 1998 Year Inception Inception S&P Mid Cap 400 Index* 6.55% 16.93% 51.75% Russell 2000 Growth Index* -15.86% 1.63% 4.41% 50%/50% Composite Index*+ -4.66% 9.72% 28.08% Small/Mid Cap Fund A (NAV) 5.51% 10.66% 30.92% Small/Mid Cap Fund Class A (net of 4.75% sales charge) 0.50% 8.65% 24.70% Small/Mid Cap Fund Class B (NAV) 4.65% 9.83% 28.34% Small/Mid Cap Fund Class B (net of CDSC**) -0.35% 8.54% 24.34% Small/Mid Cap Fund Class C (NAV) 4.64% 9.89% 28.50% Small/Mid Cap Fund Class C (net of CDSC***) 3.64% 9.89% 28.50%
* All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. + Comprised of 50% of the return of the S&P MidCap 400 Index and 50% of the return of the Russell 2000 Growth Index ** The returns reflect the applicable sliding Contingent Deferred sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. *** The returns reflect the applicable Contingent Deferred Sales Charge of 1%. xi PORTFOLIO MANAGER'S COMMENTARY The Fund's Class A performance for the year-ended October 31, 1998 was 5.51% as compared to the Composite Index (Russell 2000 Growth/S&P Mid-Cap 400) return of -4.66% for the same period. The fiscal year ended October 31, 1998 appeared to be a period of great prosperity for U.S. equity markets. Inflation, interest rates and unemployment remained low and the market, as measured by the S&P 500 Index, appreciated 21.99%. In reality, global economic instability, a domestic political scandal, and severe market volatility marked this period. The year began following an acute market sell-off that resulted from an economic crisis throughout Asia. Confidence in the large cap equity market was restored, as the S&P 500 Index posted six consecutive months of positive performance. In July, August and September several external factors shook investor confidence and stocks fell. These events included the worsening of economic problems in Japan, the fall of the Russian economy, and bailout of the Long-Term Capital Hedge Fund. The markets recovered in September and October due to an interest rate cut and positive earnings announcements by several companies. Amid this uncertainty, an extremely risk averse investment community continued to place a premium on large, liquid companies with a high degree of earnings predictability. As the -15.86% return posted by the Russell 2000 Growth Index over this 12 month period suggests, more speculative small cap issues suffered over the course of the twelve-month period. Mid-cap stocks performed better, yet still trailed the broad market by a wide margin. By shifting its focus to mid-sized companies and through the strong performance by several key holdings, the Portfolio's return was positive. xii 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. SUBADVISOR: Founders Asset Management LLC PORTFOLIO Paul A. LaRocco MANAGER: INCEPTION DATE: March 4, 1996 CHANGE IN VALUE OF $10,000 INVESTMENT AND COMPARATIVE INDICES [LINE GRAPH APPEARS HERE] [PLOT POINTS TO COME] PERFORMANCE TABLE
Average Annual Cumulative Total Return Total Return One Since Since Periods Ended October 31, 1998 Year Inception Inception S&P 500* 21.99% 24.69% 80.10% Growth Equity Fund Class A (NAV) 13.85% 18.49% 57.05% Growth Equity Fund Class A (net of 4.75% sales charge) 8.44% 16.34% 49.59% Growth Equity Fund Class B (NAV) 12.93% 17.75% 54.44% Growth Equity Fund Class B (net of CDSC**) 7.93% 16.59% 50.44% Growth Equity Fund Class C (NAV) 12.87% 17.72% 54.35% Growth Equity Fund Class C (net of CDSC***) 11.87% 17.72% 54.35%
* All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. ** The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. *** The returns reflect the applicable Contingent Deferred Sales Charge of 1%. xiii PORTFOLIO MANAGER'S COMMENTARY The Fund's Class A performance for the year-ended October 31, 1998 was 13.85% as compared to the S&P 500 Index return of 21.99% for the same period. As the Asian crisis spread to other emerging markets around the world including Russia and South America, several domestic large-cap companies with multi- national operations reported disappointing earnings. Because many domestic valuations were on the high side, we felt the market was ripe for a correction. During the first half of the year, large-cap stocks were popular with investors for their liquidity and safety. However, investors are now focusing more on earnings growth and should begin moving down the capitalization spectrum. While defense spending has been low for several years, there has been recent talk about increasing the defense budget as a result of concern that the economic problems overseas could result in unrest or conflict. Accordingly, we increased our position in Lockheed Martin, now at 1.80% of the portfolio, and added Northrop Grumman at .87% of the portfolio. These companies are winning new contracts and exploiting commercial opportunities as well. We believe the market environment may remain volatile in 1999, as economic cross-currents from around the world continue to influence stocks both here and overseas. Although we believe the worst may be over, it is possible the problems in the global economy may continue for some time. Now that valuations are lower in the large-cap spectrum, we are taking this opportunity to focus on those mid- and large-cap names with the best earnings growth potential. xiv 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 Laurence A. Manchester MANAGER: INCEPTION DATE: January 6, 1998 CHANGE IN VALUE OF $10,000 INVESTMENT AND COMPARATIVE INDICES [LINE GRAPH APPEARS HERE] [PLOT POINTS TO COME] PERFORMANCE TABLE
Average Annual Cumulative Total Return Total Return One Since Since Periods Ended October 31, 1998 Year Inception Inception S&P 500* 14.63% 14.63% 14.63% Tax-Sensitive Equity Fund Class A (NAV) -9.30% -9.30% -9.30% Tax-Sensitive Equity Fund Class A (net of 4.75% sales charge) -13.61% -13.61% -13.61% Tax-Sensitive Equity Fund Class B (NAV) -9.60% -9.60% -9.60% Tax-Sensitive Equity Fund Class B (net of CDSC**) -14.60% -14.60% -14.60% Tax-Sensitive Equity Fund Class C (NAV) -9.60% -9.60% -9.60% Tax-Sensitive Equity Fund Class C (net of CDSC***) -10.60% -10.60% -10.60%
* All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. ** The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. *** The returns reflect the applicable Contingent Deferred Sales Charge of 1%. xv PORTFOLIO MANAGER'S COMMENTARY: Since its inception on January 6, 1998, the Fund's Class A performance for the period ended October 31, 1998 was -9.30% as compared to the Standard & Poor's 500 Index return of 14.63%. These returns arise from concerns over South East Asia and a veritable panic that spread through all markets as Russia's virtual debt default in August called into question the integrity of most emerging economies. As a result, investors fled to the highest perceived quality, focusing their purchases on an extremely narrow list of large capitalization growth stocks. On the more positive side, current prices appear to discount a more adverse environment, and the U.S. seems relatively secure compared to most other regions. We believe that financial markets have been providing unsustainably high returns. That financial era has almost certainly ended, and we are now in a period of positive, though less ebullient, stock returns. Our investment process focuses on screening for the best combination of reliable prior growth, forecasted future results, and a reasonable price. Especially on the grounds of reasonable price, few of the favored large capitalization growth stocks were deemed appropriate for the Fund. With this very narrow group of stocks providing the bulk of the S&P 500 return, we are left with a lagging portfolio, but one with highly attractive valuation characteristics. In keeping with the Fund's tax-sensitive strategy, we are happy to report that as of October 31, 1998 the Fund had no capital gains to distribute to shareholders. xvi 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. SUBADVISOR: Wellington Management Company LLP PORTFOLIO Matthew E. Megargel MANAGER: INCEPTION DATE: May 1, 1991 CHANGE IN VALUE OF $10,000 INVESTMENT AND COMPARATIVE INDICES [LINE GRAPH APPEARS HERE] [PLOT POINTS TO COME] PERFORMANCE TABLE
Average Annual Cumulative Total Return Total Return One Five Since Since Periods Ended October 31, 1998 Year Years Inception Inception S&P 500* 21.99% 21.29% 18.29% 252.53% Growth and Income Fund Class A (NAV) 20.82% 19.07% 16.51% 214.81% Growth and Income Fund Class A (net of 4.75% sales charge) 15.08% 17.92% 15.75% 199.86% Growth and Income Fund Class B (NAV) 20.04% 18.54% 16.16% 207.80% Growth and Income Fund Class B (net of CDSC**) 15.04% 18.33% 16.16% 207.80% Growth and Income Fund Class C (NAV) 20.00% 18.47% 16.11% 206.95% Growth and Income Fund Class C (net of CDSC***) 19.00% 18.47% 16.11% 206.95%
* All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. ** The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. *** The returns reflect the applicable Contingent Deferred Sales Charge of 1%. xvii PORTFOLIO MANAGER'S COMMENTARY The Fund's Class A performance for the year-ended October 31, 1998 was 20.82% as compared to the S&P 500 Stock Index return of 21.99% for the same period. Fund performance was helped by overweights in consumer discretionary, entertainment and financials and an underweight position in material stocks. Relative performance was limited by holdings in utilities, energy and industrial/commercial. The year began with investors focused more on low inflation trends and the health of the domestic economy rather than on the continuing uncertainty of global economies. By August, however, the on-going crisis in Asia, Japanese economic turmoil, political woes in Washington, and Russian devaluation finally cooled investor optimism. Worries about decelerating earnings growth turned to concern about earnings declines and liquidity problems. Top performing sectors for the year included health care, where the large cap pharmaceutical companies that have advanced on healthy subscription growth, and information technology that benefited from strong investment trends in personal computers have driven performance. Conversely, materials lagged the overall market as commodity prices continued to be hurt by global economic slowing. The energy sector also lagged as oil prices plummeted. The outlook for stocks remains mixed. Economic growth continues to slow and the profit picture looks weak, but inflation is quite subdued and interest rates have come down significantly. So, the tug-of-war between falling interest rates and declining earnings estimates continues. No country can remain "an oasis of prosperity" on the global economy and much of the outlook depends on actions taken in countries as diverse as Japan, Brazil, China, and Russia. xviii EQUITY-INCOME FUND INVESTMENT Seeks to provide substantial dividend income and also long- OBJECTIVE: term capital appreciation by investing in dividend paying common stocks, particularly of established companies with favorable prospects for both increasing dividends and capital appreciation. SUBADVISOR: T. Rowe Price Associates, Inc. PORTFOLIO Brian C. Rogers, Stephen W. Boesel, Richard P. Howard, MANAGER: William J. Stromberg INCEPTION DATE: August 28, 1989# CHANGE IN VALUE OF $10,000 INVESTMENT AND COMPARATIVE INDICES [LINE GRAPH APPEARS HERE] [PLOT POINTS TO COME] PERFORMANCE TABLE
Average Annual Cumulative Total Return Total Return Periods Ended October 31, One Five Since Since# Since Since# 1998 Year Years Inception 10/1/96 Inception 10/1/96 S&P 500* 21.99% 21.29% 16.29% 27.40% 298.86% 65.61% Equity-Income Fund Class A (NAV) 10.55% 14.96% 10.46% 18.16% 149.30% 41.55% Equity-Income Fund Class A (net of 4.75% sales charge) 5.30% 13.85% 9.88% 15.43% 137.46% 34.83% Equity-Income Fund Class B (NAV) 9.81% 14.37% 10.15% 17.37% 142.95% 39.57% Equity-Income Fund Class B (net of CDSC**) 4.81% 14.14% 10.15% 15.74% 142.95% 35.57% Equity-Income Fund Class C (NAV) 9.83% 14.37% 10.15% 17.36% 142.93% 39.55% Equity-Income Fund Class C (net of CDSC***) 8.83% 14.37% 10.15% 17.36% 142.93% 39.55%
* All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. ** The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. *** The returns reflect the applicable Contingent Deferred Sales Charge of 1%. # Current investment subadvisor assignment became effective 10/1/96. xix PORTFOLIO MANAGERS' COMMENTARY: The Fund's Class A performance for the year-ended October 31, 1998 was 10.55% as compared to the S&P 500 return of 21.99% and the Lipper Equity Income Funds Average return of 9.49% for the same period. Fund performance was helped by portfolio holdings in the telephone services and electric utilities sectors. Strong contributors included SBC Communications, Alltel, and PECO Energy. The Fund typically tends to display its advantages by cushioning declines during volatile market conditions as occurred in July, August and September. Equity-income funds underperform the S&P 500 in general, during periods of strong market advances that are driven by a small group of large-cap stocks, as has occurred this year. A continuation of strong economic growth and rising stock prices characterized the better part of the last twelve months. However, in the third quarter the problems in international economies caught up with the United States. As these problems took their toll, U.S. stock prices pulled back sharply in late July and August but a loosening monetary policy resulted in a sharp rebound in stock prices. We expect the environment next year to be a bit more positive than we have recently experienced. Therefore, we have been reducing our emphasis on defensive sectors of the market. If we see a return to stock market returns that are more in line with historical norms, it could lead to better relative performance for the types of value stocks in which the Fund invests. xx BALANCED FUND INVESTMENT To provide current income and capital appreciation by OBJECTIVE: investing in a balanced portfolio of common stocks, U.S. and foreign government obligations and a variety of corporate fixed-income securities. SUBADVISOR: Founders Asset Management LLC PORTFOLIO Brian F. Kelly MANAGER: INCEPTION DATE: August 28, 1989# CHANGE IN VALUE OF $10,000 INVESTMENT AND COMPARATIVE INDICES [LINE GRAPH APPEARS HERE] [PLOT POINTS TO COME] PERFORMANCE TABLE
Average Annual Cumulative Total Return Total Return Periods Ended October 31, One Five Since Since# Since Since# 1998 Year Years Inception 10/1/96 Inception 10/1/96 S&P 500* 21.99% 21.29% 16.29% 27.40% 298.86% 65.61% Lehman Brothers Aggregate Bond Index* 9.32% 7.02% 8.91% 9.88% 118.72% 21.70% 50%/50% Composite*+ 15.65% 15.04% 13.09% 18.99% 208.79% 43.65% Balanced Fund Class A (NAV) 12.42% 11.88% 9.63% 15.06% 132.53% 33.93% Balanced Fund Class A (net of 4.75% sales charge) 7.08% 10.80% 9.05% 12.40% 121.48% 27.23% Balanced Fund Class B (NAV) 11.71% 11.31% 9.32% 14.33% 126.64% 32.15% Balanced Fund Class B (net of CDSC**) 6.71% 11.05% 9.32% 12.65% 126.64% 28.15% Balanced Fund Class C (NAV) 11.68% 11.29% 9.31% 14.32% 126.46% 32.14% Balanced Fund Class C (net of CDSC***) 10.68% 11.29% 9.31% 14.32% 126.46% 32.14%
* All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. ** The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. *** The returns reflect the applicable Contingent Deferred Sales Charge of 1%. # Current investment subadvisor assignment became effective 10/1/96. xxi PORTFOLIO MANAGER'S COMMENTARY The Fund's Class A performance for the year-ended October 31, 1998 was 12.42% as compared to the composite benchmark+ return of 15.65% and the Lipper Balanced Index return of 9.13% for the same period. As market volatility increased, holdings in U.S. government securities and corporate bonds increased to 42.30%, extending the average maturity out several years to increase yields. We reduced equity holdings to 47.65% with 6.01% in cash equivalents. We have maintained a relatively conservative approach for several months based on our concerns about the overall valuation of the market. At the same time, we increased our positions in the largest and best- performing stocks such as Coca-Cola. Because we believe it's important to maintain breadth and diversity in the portfolio, we also added to our positions in other sectors such as telecoms, publishing and broadcasting, insurance, aerospace and supermarkets. Although market valuations have begun to come down they are still a concern, and it seems to us that investors' continuing "flight to quality" is one of the main factors driving market prices today. We're keeping an eye on the Asian crisis, the political climate in Washington, and the instability in several economies around the globe, particularly with respect to the long-term impact these issues may have. We think that it is almost inevitable that the problems in Asia will impact companies around the globe, and we see some indications that the U.S. and European economies may be slowing. In a slow or declining equity market such as the one we've been currently experiencing, the fixed-income component of the Fund may help contribute to performance and may protect the overall value of an investment. +Comprised of 50% of the return of the S&P 500 and 50% of the return of the Lehman Brothers Aggregate Bond Index. xxii STRATEGIC INCOME FUND INVESTMENT Seeks to provide a high level of total return consistent OBJECTIVE: with the preservation of capital by giving its portfolio manager broad discretion to deploy the portfolio's assets among certain segments of the fixed-income market as the portfolio manager believes will best contribute to achievement of the portfolio's investment objective. SUBADVISOR: Salomon Brothers Asset Management Inc. PORTFOLIO Peter Wilby, David Torchia, David J. Scott MANAGER: INCEPTION DATE: November 1, 1993 CHANGE IN VALUE OF $10,000 INVESTMENT AND COMPARATIVE INDICES [LINE GRAPH APPEARS HERE] [PLOT POINTS TO COME] PERFORMANCE TABLE
Average Annual Cumulative Total Return Total Return One Since Since Periods Ended October 31, 1998 Year Inception Inception Lehman Brothers Aggregate Bond Index* 9.32% 7.02% 40.38% Strategic Income Fund Class A (NAV) 0.22% 6.87% 39.41% Strategic Income Fund Class A (net of 4.75% sales charge) -4.54% 5.84% 32.79% Strategic Income Fund Class B (NAV) -0.43% 6.23% 35.31% Strategic Income Fund Class B (net of CDSC**) -5.43% 5.92% 33.31% Strategic Income Fund Class C (NAV) -0.43% 6.23% 35.28% Strategic Income Fund Class C (net of CDSC***) -1.43% 6.23% 35.28%
* All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. ** The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. *** The returns reflect the applicable Contingent Deferred Sales Charge of 1%. xxiii PORTFOLIO MANAGERS' COMMENTARY The Fund's Class A performance for the year ending October 31, 1998 was 0.22%. The Fund outperformed the multi-sector fund average as reported by Lipper Analytical Services, Inc. by 118 basis points. For the same period, the investment grade market, as measured by the Lehman Brothers Aggregate Bond Index, returned 9.32% and the Lipper multi-sector funds averaged a return of - 0.96% Throughout the fiscal year the global bond markets were volatile. The most notable effect was on the emerging market debt sector where spreads to comparable Treasuries widened from about 600 basis points to approximately 1,750 basis points before falling to about 1,100 at fiscal year-end. During the past twelve months, all major credit sensitive spread sectors of the U.S. fixed-income market experienced heightened volatility. Speculation that overseas economic weakness would lead to U.S. economic weakness drove U.S. stocks lower and sparked fears of deterioration in credit quality. Contributing to market instability was an excess supply of new high yield and investment grade corporate bonds issued in the first half of the year. The best performing fixed-income sector for the past twelve months was Treasuries as investors flocked to the relative safety and liquidity of U.S. government securities. The Fund continues to seek opportunities to upgrade credit quality and move to a more defensive position within the high yield sector. Within the investment grade sector of the Fund, we continued to favor discount and current coupon mortgage-backed securities. These issues performed relatively well even as the mortgage-backed securities (MBS) market lagged by offering more prepayment protection than higher coupon securities. xxiv INVESTMENT QUALITY BOND FUND INVESTMENT Seeks to provide a high level of current income consistent OBJECTIVE: with the maintenance of principal and liquidity by investing primarily in a diversified portfolio of investment grade corporate bonds and U.S. Government bonds with intermediate to longer term maturities. SUBADVISOR: Wellington Management Company, LLP PORTFOLIO Thomas L. Pappas MANAGER: INCEPTION DATE: May 1, 1991 CHANGE IN VALUE OF $10,000 INVESTMENT AND COMPARATIVE INDICES [LINE GRAPH APPEARS HERE] [PLOT POINTS TO COME] PERFORMANCE TABLE
Average Annual Cumulative Total Return Total Return One Five Since Since Periods Ended October 31, 1998 Year Years Inception Inception Lehman Brothers Corporate Bond Index* 7.87% 7.11% 9.25% 94.14% Lehman Brothers Government Bond Index 11.29% 6.95% 8.70% 86.91% 50%/50% Composite*+ 9.58% 7.05% 8.98% 90.65% Investment Quality Bond Fund Class A (NAV) 7.63% 5.64% 7.85% 76.36% Investment Quality Bond Fund Class A (net of 4.75% sales charge) 2.52% 4.61% 7.15% 67.99% Investment Quality Bond Fund Class B (NAV) 6.93% 5.08% 7.47% 71.80% Investment Quality Bond Fund Class B (net of CDSC**) 1.93% 4.75% 7.47% 71.80% Investment Quality Bond Fund Class C (NAV) 6.93% 5.08% 7.48% 71.80% Investment Quality Bond Fund Class C (net of CDSC***) 5.93% 5.08% 7.48% 71.80%
* All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. + Comprised of 50% of the return of the Lehman Brothers Corporate Bond Index and 50% of the return of the Lehman Brothers Government Bond Index. ** The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. *** The returns reflect the applicable Contingent Deferred Sales Charge of 1%. xxv PORTFOLIO MANAGER'S COMMENTARY The Fund's Class A performance for the year-ended October 31, 1998 was 7.63% on a net basis as compared to 9.58% for the Composite Index comprised of Lehman Government Bond Index and Lehman Corporate Bond Index, which are indices gross of fees. The Fund has had approximately a 10% exposure to high yield and, because the Lehman High Yield Index had a total return of -0.50% over the same one year period, this impacted the Fund's returns versus that of the benchmark by about 1.0%. Low inflation and growth prospects helped Treasury yields fall below 6.0%, but from this point Treasuries left other sectors behind rallying another 1.0% or so. Investors searched for safety in a volatile world environment as hedge funds collapsed and some foreign issuers threatened defaults. This triggered a massive "flight to quality." Corporate bonds lagged Treasuries as credit fundamentals weakened in investors' eyes, and with lower rates came increased prepayment risk to the detriment of mortgage prices. xxvi 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 portfolio will not invest in municipal obligations that are rated below investment grade at the time of purchase. SUBADVISOR: Salomon Brothers Asset Management Inc. PORTFOLIO Robert Amodeo MANAGER: INCEPTION DATE: July 6, 1993 CHANGE IN VALUE OF $10,000 INVESTMENT AND COMPARATIVE INDICES [LINE GRAPH APPEARS HERE] [PLOT POINTS TO COME] PERFORMANCE TABLE
Average Annual Cumulative Total Return Total Return One Five Since Since Periods Ended October 31, 1998 Year Years Inception Inception Lehman Brothers Municipal Bond Index* 8.02% 6.36% 6.65% 41.00% National Municipal Bond Fund Class A (NAV) 6.04% 5.12% 5.61% 33.72% National Municipal Bond Fund Class A (net of 4.75% sales charge) 1.00% 4.10% 4.65% 27.37% National Municipal Bond Fund Class B (NAV) 5.15% 4.33% 4.86% 28.75% National Municipal Bond Fund Class B (net of CDSC**) 0.15% 3.99% 4.71% 27.75% National Municipal Bond Fund Class C (NAV) 5.15% 4.33% 4.86% 28.75% National Municipal Bond Fund Class C (net of CDSC***) 4.15% 4.33% 4.86% 28.75%
* All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. ** The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. *** The returns reflect the applicable Contingent Deferred Sales Charge of 1%. xxvii PORTFOLIO MANAGER'S COMMENTARY The Fund's Class A performance for the year-ended October 31, 1998 was 6.04% as compared to the Lehman Brothers Municipal Bond Index return of 8.02% for the same period. For the fiscal year, the Lipper General Municipal Fund averaged a return of 7.12%. Fixed income prices fluctuated during the twelve months ended October 31, 1998 as the focus of the market shifted between domestic economic growth and international concerns. Municipal bonds posted positive returns during the year, yet failed to keep pace with advances in Treasuries. Global investors flocked to U.S. Treasury securities in their effort to seek a safe haven investment away from the turmoil in Asia. As the year progressed, domestic investors shifted their attention to a strong U.S. economy. There were concerns that a strong U.S. economy coupled with tight labor markets would produce higher domestic inflation. Those concerns proved inaccurate as the Federal Reserve lowered its short-term lending rate citing lingering signs of unusual strains in the financial markets. State and local governments took advantage of a relatively low nominal interest rate environment during the year by issuing almost $277 billion of debt. Municipal new issue supply is approximately 29% higher than the similar period last year. The abundance of new issue supply caused municipals to be undervalued relative to Treasuries. Strong demand from property and casualty insurance companies, corporations and mutual funds helped absorb the supply. Market activity is likely to continue to be dictated more by global events and less from market fundamentals. Municipals are expected to be in a narrower trading range than Treasuries and remain attractive on a taxable equivalent basis. xxviii U.S. GOVERNMENT SECURITIES FUND INVESTMENT Seeks to provide a high level of current income consistent OBJECTIVE: with preservation of capital and maintenance of liquidity by investing in securities issued or guaranteed by the U.S. Government, its agencies, or intrumentalities. SUBADVISOR: Salomon Brothers Asset Management Inc. PORTFOLIO Roger Lavan MANAGER: INCEPTION DATE: August 28, 1989# CHANGE IN VALUE OF 410,000 INVESTMENT AND COMPARATIVE INDICES [LINE GRAPH APPEARS HERE] [PLOT POINTS TO COME] PERFORMANCE TABLE
Average Annual Cumulative Total Return Total Return Periods Ended October 31, One Five Since Since# Since Since# 1998 Year Years Inception 12/31/91 Inception 12/31/91 Merrill Lynch 1-10 Year Government Index* 9.81% 6.48% 8.17% 6.97% 105.37% 58.47% U.S. Government Securities Fund Class A (NAV) 7.41% 6.01% 7.52% 6.69% 94.59% 56.25% U.S. Government Securities Fund Class A (net of 4.75% sales charge) 2.31% 4.98% 6.95% 5.94% 85.34% 48.82% U.S. Government Securities Fund Class B (NAV) 6.60% 5.37% 7.17% 6.23% 88.84% 51.63% U.S. Government Securities Fund Class B (net of CDSC**) 1.60% 5.05% 7.17% 6.23% 88.84% 51.63% U.S. Government Securities Fund Class C (NAV) 6.60% 5.37% 7.17% 6.23% 88.84% 51.63% U.S. Government Securities Fund Class C (net of CDSC***) 5.60% 5.37% 7.17% 6.23% 88.84% 51.63%
* All since inception returns for the indices begin on the month-end closest to the actual inception date of the Fund. ** The returns reflect the applicable sliding Contingent Deferred Sales Charge of 5%, 5%, 4%, 3%, 2%, 1%. *** The returns reflect the applicable Contingent Deferred Sales Charge of 1%. # Current investment subadvisor assignment became effective 12/31/91. xxix PORTFOLIO MANAGER'S COMMENTARY The Fund's Class A performance for the year-ended October 31, 1998 was 7.41%. The Fund outperformed the GNMA Fund average, as reported by Lipper Analytical Services, Inc., by 64 basis points making it the 7th best performing fund in its category. For the fiscal year, the Merrill Lynch 1-10 Year Government Index returned 9.81% and the Lipper GNMA Fund averaged a return of 6.77%. We believed Asia's economic woes would slow economic growth in the U.S. causing interest rates to move modestly lower, thereby pushing bond prices higher during 1998. As a result, we moved the Fund into a slightly long duration barbelled position while overweighting discount mortgage securities. We held this position until mid-August when it became apparent that the global economy would slow considerably in 1999 and the Federal Reserve would preemptively ease monetary policy. We reduced the Fund's barbell position by swapping long maturity Treasuries and mortgages into 5-year Treasuries. The 5- year area of the Treasury curve generally performs best just prior to a Fed easing cycle. To maintain duration, we sold mortgage securities trading above par and bought discount pass-throughs. We expect that over time agencies, debentures, and mortgages will recapture a substantial amount of the relative performance they lost during the last two months. We believe financial market volatility will remain high as market psychology fluctuates between pessimism and euphoria regarding the outlook for the U.S. economy. We expect that the economy will slow to sub-par growth rates in early 1999 resulting in more easing by the Federal Reserve. xxx 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 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, 1998, and the results of their operations, the changes in their net assets and the financial highlights for the periods indicated, in conformity with generally accepted accounting principles. 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 generally accepted auditing standards 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, 1998 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Boston, Massachusetts December 18, 1998 NORTH AMERICAN FUNDS STATEMENT OF ASSETS AND LIABILITIES - OCTOBER 31, 1998 - --------------------------------------------------------------------------------
International International Global Small Cap Growth and Income Equity Fund Income Fund Fund --------------- ------------------ ------------ ASSETS: - ------- Investments in securities, at value* (Includes a repurchase agreement of $2,436,000 in International Small Cap) (See accompanying Portfolio of Investments) ............... $17,060,214 $27,604,181 $123,593,057 Receivable for forward foreign currency contracts to sell (Notes 2 and 7) ........................................... --- 5,934,966 7,753,825 Forward foreign currency contracts to buy, at value (Cost: $3,990,397 in International Growth and Income and $5,893,300 in Global Equity) (Notes 2 and 7) .............. --- 4,187,469 5,843,950 Cash ........................................................... 554 28 802 Foreign currency (Cost: $68,401 in International Small Cap and $386,319 in International Growth and Income) (Note 2) ..... 68,359 387,288 --- Deferred organization costs .................................... --- --- --- Receivables: Investments sold ....................................... 25,779 153,494 1,514,402 Fund shares sold ....................................... 2,129 8,734 8,969 Dividends .............................................. 4,875 46,633 169,904 Interest ............................................... 3,595 752 917 Foreign tax withholding reclaims ....................... 5,569 28,134 68,816 From adviser (Note 5) .................................. 18,100 11,234 --- Other assets ................................................... 24,941 11,097 16,341 ------------- ------------- ------------- Total assets .................................... 17,214,115 38,374,010 138,970,983 ------------- ------------- ------------- LIABILITIES: - ------------ Forward foreign currency contracts to sell, at value (Cost: $5,934,966 in International Growth and Income and $7,753,825 in Global Equity) (Notes 2 and 7) .............. --- 6,300,872 7,931,075 Collateral on securities loaned, at value ...................... 1,714,449 2,041,974 5,066,001 Payables: Forward foreign currency contracts to buy (Notes 2 and 7) .................................... --- 3,990,397 5,893,300 Investments purchased .................................. --- 203,334 488,588 Fund shares redeemed ................................... 6,851 9,686 220,150 Dividend and interest withholding tax .................. 768 4,191 14,867 Investment adviser ..................................... 13,018 18,701 105,036 Custodian and transfer agent fees ...................... 9,329 16,599 46,506 Distribution fee ....................................... 6,192 10,982 29,411 Other accrued expenses ................................. 9,979 18,184 59,853 ------------- ------------- ------------- Total liabilities ............................... 1,760,586 12,614,920 19,854,787 ------------- ------------- ------------- NET ASSETS ..................................................... $15,453,529 $25,759,090 $119,116,196 ============= ============= ============= NET ASSETS CONSIST OF: - ---------------------- Undistributed net investment income/(loss) (Note 2) .... --- $165,398 $226,601 Accumulated undistributed net realized gain (loss) on investments, foreign currency and forward foreign currency contracts .............................. (663,159) (177,349) 8,756,432 Unrealized appreciation (depreciation) on: Investments ..................................... 1,538,858 (633,842) 18,835,914 Foreign currency and forward foreign currency contracts .................................... 137 (164,886) (220,476) Capital shares at par value of $.001 (Note 3) .......... 1,129 2,634 7,300 Additional paid-in capital ............................. 14,576,564 26,567,135 91,510,425 ------------- ------------- ------------- Net assets ...................................... $15,453,529 $25,759,090 $119,116,196 ============ ============= ============= *Investments in securities, at identified cost (Note 2) ........ $15,521,356 $28,238,023 $104,757,143 ============ ============= ============= Emerging Small/Mid Growth Cap Fund Fund ------------- ------------- ASSETS: - ------- Investments in securities, at value* (Includes a repurchase agreement of $2,436,000 in International Small Cap) (See accompanying Portfolio of Investments) ............... $641,861 $44,608,415 Receivable for forward foreign currency contracts to sell (Notes 2 and 7) ........................................... --- --- Forward foreign currency contracts to buy, at value (Cost: $3,990,397 in International Growth and Income and $5,893,300 in Global Equity) (Notes 2 and 7) .............. --- --- Cash ........................................................... 8,631 --- Foreign currency (Cost: $68,401 in International Small Cap and $386,319 in International Growth and Income) (Note 2) ..... --- --- Deferred organization costs .................................... 27,423 --- Receivables: Investments sold ....................................... 11,010 305,636 Fund shares sold ....................................... 43 78,644 Dividends .............................................. 10 5,402 Interest ............................................... 97 2,789 Foreign tax withholding reclaims ....................... --- --- From adviser (Note 5) .................................. 10,034 19,464 Other assets ................................................... 4,606 119 ------------- ------------- Total assets .................................... 703,715 45,020,469 ------------- ------------- LIABILITIES: - ------------ Forward foreign currency contracts to sell, at value (Cost: $5,934,966 in International Growth and Income and $7,753,825 in Global Equity) (Notes 2 and 7) .............. --- --- Collateral on securities loaned, at value ...................... --- 8,837,965 Payables: Forward foreign currency contracts to buy (Notes 2 and 7) .................................... --- --- Investments purchased .................................. 23,426 1,115,047 Fund shares redeemed ................................... 120 --- Dividend and interest withholding tax .................. --- --- Investment adviser ..................................... 27,823 25,092 Custodian and transfer agent fees ...................... 4,745 15,524 Distribution fee ....................................... 417 13,077 Other accrued expenses ................................. --- 6,144 ------------- ------------- Total liabilities ............................... 56,531 10,012,849 ------------- ------------- NET ASSETS ..................................................... $647,184 $35,007,620 ============= ============= NET ASSETS CONSIST OF: - ---------------------- Undistributed net investment income/(loss) (Note 2)..... --- --- Accumulated undistributed net realized gain (loss) on investments, foreign currency and forward foreign currency contracts .............................. (39,152) 3,118,172 Unrealized appreciation (depreciation) on: Investments ..................................... (61,247) 2,199,857 Foreign currency and forward foreign currency contracts .................................... --- --- Capital shares at par value of $.001 (Note 3) .......... 73 2,213 Additional paid-in capital ............................. 747,510 29,687,378 ------------- ------------- Net assets ...................................... $647,184 $35,007,620 ============= ============= *Investments in securities, at identified cost (Note 2) ........ $703,108 $42,408,558 ============= =============
The accompanying notes are an integral part of the financial statements. 2 NORTH AMERICAN FUNDS STATEMENT OF ASSETS AND LIABILITIES continued - OCTOBER 31, 1998 - --------------------------------------------------------------------------------
International International Global Emerging Small/Mid Small Cap Growth and Equity Growth Cap Fund Income Fund Fund Fund ----------- ----------- ----------- ----------- ---------- NET ASSET VALUES: - ----------------- Class A Shares Net assets at value ........................................ $2,172,917 $3,768,893 $31,055,209 $146,261 $4,814,272 Shares outstanding ......................................... 156,260 383,345 1,890,437 16,478 299,206 Net asset value (NAV) and redemption price per share ......... $13.91 $9.83 $16.43 $8.88 $16.09 ------ ----- ------ ----- ------ Public offering price per share (100/95.25 of NAV) On sales of $100,000 or more the offering price is reduced ................................................... $14.60 $10.32 $17.25 $9.32 $16.89 ------ ------ ------ ----- ------ Class B Shares Net assets at value ........................................ $7,085,748 $14,029,753 $30,287,406 $262,870 $13,972,362 Shares outstanding ......................................... 518,840 1,436,189 1,864,538 29,770 886,278 Net asset value, offering price and redemption price per share ...................................................... 13.66 $9.77 $16.24 $8.83 $15.77 ----- ----- ------ ----- ------ Class C Shares Net assets at value ........................................ $6,194,864 $7,960,444 $57,773,581 $238,053 $16,220,986 Shares outstanding ......................................... 453,522 814,454 3,544,699 26,917 1,027,604 Net asset value, offering price and redemption price per share .................................................. $13.66 $9.77 $16.30 $8.84 $15.79 ------ ----- ------ ----- ------
The accompanying notes are an integral part of the financial statements. 3 NORTH AMERICAN FUNDS STATEMENT OF ASSETS AND LIABILITIES continued - OCTOBER 31, 1998 - --------------------------------------------------------------------------------
Growth Tax-Sensitive Growth and Equity Equity Income Fund Fund Fund ------------- ------------- ------------- ASSETS: - ------- Investments in securities, at value* (See accompanying Portfolio of Investments) ................................. $31,361,172 $10,370,103 $246,906,581 Cash ........................................................... 805 271 497 Foreign currency (Cost: $1,818 in Growth and Income, $20,352 in Equity-Income, and $3,906 in Balanced) (Note 2) ................ --- --- 1,652 Deferred organization costs .................................... --- 27,319 --- Receivables: Investments sold ....................................... 287,949 --- --- Fund shares sold ....................................... 4,794 34,251 144,458 Dividends .............................................. 15,911 7,758 291,589 Interest ............................................... 550 62 1,218 Foreign tax withholding reclaims ....................... 110 --- --- From adviser (Note 5) .................................. 17,553 10,440 --- Other assets ................................................... 11,468 3,186 7,916 ------------- ------------- ------------- Total assets .................................... 31,700,312 10,453,390 247,353,911 ============= ============ ============ LIABILITIES: - ------------ Collateral on securities loaned, at value ...................... 2,790,550 --- 5,218,468 Payables: Investments purchased .................................. 302,728 58,762 592,246 Fund shares redeemed ................................... 4,948 16,805 243,616 Dividend and interest withholding tax .................. 58 208 2,143 Investment adviser ..................................... 20,048 33,610 144,525 Custodian and transfer agent fees ...................... 11,235 4,700 54,332 Distribution fee ....................................... 11,227 4,931 70,780 Other accrued expenses ................................. 16,156 --- 143,684 ------------- ------------- ------------- Total liabilities ............................... 3,156,950 119,016 6,469,794 ============= ============= ============= NET ASSETS ..................................................... $28,543,362 $10,334,374 $240,884,117 ============= ============= ============= NET ASSETS CONSIST OF: - ---------------------- Undistributed net investment income/(loss) (Note 2)..... --- --- --- Accumulated undistributed net realized gain (loss) on investments, foreign currency and forward foreign currency contracts .............................. $1,902,490 ($754,965) 9,274,277 Unrealized appreciation (depreciation) on: Investments ..................................... 3,456,663 (782,878) 81,614,857 Foreign currency and forward foreign currency contracts .................................... 5 --- (165) Capital shares at par value of $.001 (Note 3) .......... 1,632 1,142 9,994 Additional paid-in capital ............................. 23,182,572 11,871,075 149,985,154 ------------- ------------- ------------- Net assets ...................................... $28,543,362 $10,334,374 $240,884,117 ============= ============= ============= *Investments in securities, at identified cost (Note 2) ........ $27,904,509 $11,152,981 $165,291,724 ============= ============= ============= Equity- Income Balanced Fund Fund ------------- ------------- ASSETS: - ------- Investments in securities, at value* (See accompanying Portfolio of Investments) ................................. $179,873,176 $104,946,968 Cash ........................................................... 526 830 Foreign currency (Cost: $1,818 in Growth and Income, $20,352 in Equity-Income, and $3,906 in Balanced) (Note 2) ................ 20,186 4,216 Deferred organization costs .................................... --- --- Receivables: Investments sold ....................................... 165,159 39,035 Fund shares sold ....................................... 33,151 9,205 Dividends .............................................. 275,835 57,111 Interest ............................................... 14,138 777,953 Foreign tax withholding reclaims ....................... 491 6,750 From adviser (Note 5) .................................. --- 2,730 Other assets ................................................... 10,605 11,570 ------------- ------------- Total assets .................................... 180,393,267 105,856,368 ------------- ------------- LIABILITIES: - ------------ Collateral on securities loaned, at value ...................... 8,029,487 6,307,425 Payables: Investments purchased .................................. 71,515 874,440 Fund shares redeemed ................................... 327,865 104,073 Dividend and interest withholding tax .................. 1,949 1,520 Investment adviser ..................................... 116,975 61,126 Custodian and transfer agent fees ...................... 50,982 29,003 Distribution fee ....................................... 40,915 19,859 Other accrued expenses ................................. 152,021 66,264 ------------- ------------- Total liabilities ............................... 8,791,709 7,463,710 ------------- ------------- NET ASSETS ..................................................... $171,601,558 $98,392,658 ============= ============= NET ASSETS CONSIST OF: - ---------------------- Undistributed net investment income/(loss) (Note 2)..... $1,532,483 $1,153,058 Accumulated undistributed net realized gain (loss) on investments, foreign currency and forward foreign currency contracts .............................. 10,649,150 6,715,726 Unrealized appreciation (depreciation) on: Investments ..................................... 27,084,133 7,493,022 Foreign currency and forward foreign currency contracts .................................... (101) 787 Capital shares at par value of $.001 (Note 3) .......... 9,790 8,555 Additional paid-in capital ............................. 132,326,103 83,021,510 ------------- ------------- Net assets ...................................... $171,601,558 $98,392,658 ============= ============= *Investments in securities, at identified cost (Note 2) ........ $152,789,043 $97,453,946 ============= =============
The accompanying notes are an integral part of the financial statements. 4 NORTH AMERICAN FUNDS STATEMENT OF ASSETS AND LIABILITIES continued - OCTOBER 31, 1998 - --------------------------------------------------------------------------------
Growth Tax-Sensitive Growth and Equity Equity Income Fund Fund Fund ------------ ------------ ------------ NET ASSET VALUES: - ----------------- Class A Shares Net assets at value ........................................ $3,919,360 $4,149,001 $42,915,576 Shares outstanding ......................................... 221,016 457,677 1,768,820 Net asset value (NAV) and redemption price per share ......... $17.73 $9.07 $24.26 ====== ===== ====== Public offering price per share (100/95.25 of NAV) On sales of $100,000 or more the offering price is reduced . $18.62 $9.52 $25.47 ------ ===== ====== Class B Shares Net assets at value ........................................ $11,659,136 $2,899,761 $75,573,750 Shares outstanding ......................................... 667,816 320,781 3,147,669 Net asset value, offering price and redemption price per share ................................ $17.46 $9.04 $24.01 ====== ===== ====== Class C Shares Net assets at value ........................................ $12,964,866 $3,285,612 $122,394,791 Shares outstanding ......................................... 743,321 363,463 5,077,797 Net asset value, offering price and redemption price per share $17.44 $9.04 $24.10 ====== ===== ====== Equity- Income Balanced Fund Fund ------------ ------------ NET ASSET VALUES: - ----------------- Class A Shares Net assets at value ........................................ $36,661,403 $14,415,126 Shares outstanding ......................................... 2,078,879 1,255,832 Net asset value (NAV) and redemption price per share ......... $17.64 $11.48 ====== ====== Public offering price per share (100/95.25 of NAV) On sales of $100,000 or more the offering price is reduced ................................................... $18.51 $12.05 ====== ------ Class B Shares Net assets at value ........................................ $38,953,999 $18,928,683 Shares outstanding ......................................... 2,234,764 1,661,049 Net asset value, offering price and redemption price per share .................................................. $17.43 $11.40 ====== ====== Class C Shares Net assets at value ........................................ $95,986,156 $65,048,849 Shares outstanding ......................................... 5,476,787 5,637,622 Net asset value, offering price and redemption price per share $17.53 $11.54 ======= ======
The accompanying notes are an integral part of the financial statements. 5 NORTH AMERICAN FUNDS STATEMENT OF ASSETS AND LIABILITIES continued - OCTOBER 31, 1998 - --------------------------------------------------------------------------------
Investment National Strategic Quality Municipal Income Bond Bond Fund Fund Fund ------------- ------------- ------------- ASSETS: - ------- Investments in securities, at value* (Includes repurchase agreements of $17,883,000 in U.S. Government Securities) (See accompanying Portfolio of Investments) ............... $98,793,131 $20,918,377 $15,907,552 Receivable for forward foreign currency contracts to sell (Notes 2 and 7) ........................................... 11,161,258 --- --- Forward foreign currency contracts to buy, at value (Cost: $7,452,011 in Strategic Income) (Notes 2 and 7) ........... 7,370,030 --- --- Cash ........................................................... 67,723 315 92,546 Foreign currency (Cost: $343 in Strategic Income) (Note 5) ..... 347 --- --- Receivables: Investments sold ....................................... 1,257,447 109,335 --- Fund shares sold ....................................... 2,782 12,959 --- Dividends .............................................. 867 --- --- Interest ............................................... 1,603,588 290,482 250,619 From adviser (Note 5) .................................. 3,708 18,568 17,618 Other assets ................................................... 14,247 12,545 13,200 ------------- ------------- ------------- Total assets .................................... 120,275,128 21,362,581 16,281,535 ------------- ------------- ------------- LIABILITIES: - ------------ Forward foreign currency contracts to sell, at value (Cost: $11,161,258 in Strategic Income) (Notes 2 and 7) ..... 11,359,444 --- --- Collateral on securities loaned, at value ...................... 10,858,710 3,429,644 --- Payables: Forward foreign currency contracts to buy (Notes 2 and 7) .................................... 7,452,011 --- --- Investments purchased .................................. 12,063,335 645,904 --- Fund shares redeemed ................................... 172,238 119,353 85 Dividends .............................................. 160,050 31,553 22,153 Dividend and interest withholding tax .................. 8,711 --- --- Investment adviser ..................................... 49,073 8,724 8,316 Custodian and transfer agent fees ...................... 25,648 9,836 5,923 Distribution fee ....................................... 31,525 5,111 4,934 Other accrued expenses ................................. 50,879 6,226 394 ------------- ------------- ------------- Total liabilities ............................... 42,231,624 4,256,351 41,805 ------------- ------------- ------------ NET ASSETS ..................................................... $78,043,504 $17,106,230 $16,239,730 ============= ============= ============= NET ASSETS CONSIST OF: - --------------------- Undistributed net investment income/(loss) (Note 2)..... $196,179 $11,637 ($263) Accumulated undistributed net realized gain (loss) on investments, foreign currency and forward foreign currency contracts .............................. (208,578) (370,164) (24,157) Unrealized appreciation (depreciation) on: Investments ..................................... (3,926,550) 420,438 1,024,196 Foreign currency and forward foreign currency contracts .................................... (259,717) --- --- Capital shares at par value of $.001 (Note 3) .......... 8,680 1,610 1,589 Additional paid-in capital ............................. 82,233,490 17,042,709 15,238,365 ------------- ------------- ------------- Net assets ...................................... $78,043,504 $17,106,230 $16,239,730 ============= ============= ============= *Investments in securities, at identified cost (Note 2) ........ $102,719,681 $20,497,939 $14,883,356 ============= ============= ============= U.S. Government Money Securities Market Fund Fund ------------- ------------- ASSETS: Investments in securities, at value* (Includes repurchase agreements of $17,883,000 in U.S. Government Securities) (See accompanying Portfolio of Investments) ............... $117,149,407 $24,412,022 Receivable for forward foreign currency contracts to sell (Notes 2 and 7) ........................................... --- --- Forward foreign currency contracts to buy, at value (Cost: $7,452,011 in Strategic Income) (Notes 2 and 7) ........... --- --- Cash ........................................................... 976 290 Foreign currency (Cost: $343 in Strategic Income) (Note 5) ..... --- --- Receivables: Investments sold ....................................... 28,195 --- Fund shares sold ....................................... 75,007 17,975 Dividends .............................................. --- --- Interest ............................................... 640,062 85,591 From adviser (Note 5) .................................. 10,858 28,401 Other assets ................................................... 11,849 16,584 ------------- ------------- Total assets .................................... 117,916,354 24,560,863 ------------- ------------- LIABILITIES: - ------------ Forward foreign currency contracts to sell, at value (Cost: $11,161,258 in Strategic Income) (Notes 2 and 7) ..... --- --- Collateral on securities loaned, at value ...................... 11,444,965 --- Payables: Forward foreign currency contracts to buy (Notes 2 and 7) .................................... --- --- Investments purchased .................................. 25,815,416 --- Fund shares redeemed ................................... 161,924 78,993 Dividends .............................................. 225,961 8,116 Dividend and interest withholding tax .................. --- --- Investment adviser ..................................... 7,875 4,174 Custodian and transfer agent fees ...................... 27,218 11,853 Distribution fee ....................................... 18,159 --- Other accrued expenses ................................. 32,455 6,515 ------------- ------------- Total liabilities ............................... 37,733,973 109,651 ------------- ------------- NET ASSETS ..................................................... $80,182,381 $24,451,212 ============= ============= NET ASSETS CONSIST OF: - ---------------------- Undistributed net investment income/(loss) (Note 2) .... ($229,251) $2,858 Accumulated undistributed net realized gain (loss) on investments, foreign currency and forward foreign currency contracts .............................. (1,062,756) (2,858) Unrealized appreciation (depreciation) on: Investments ..................................... 1,380,419 --- Foreign currency and forward foreign currency contracts .................................... --- --- Capital shares at par value of $.001 (Note 3) .......... 7,958 24,451 Additional paid-in capital ............................. 80,086,011 24,426,761 ------------- ------------- Net assets ...................................... $80,182,381 $24,451,212 ============= ============= *Investments in securities, at identified cost (Note 2) ........ $115,768,988 $24,412,022 ============= =============
The accompanying notes are an integral part of the financial statements. 6 NORTH AMERICAN FUNDS STATEMENT OF ASSETS AND LIABILITIES continued - OCTOBER 31, 1998 - --------------------------------------------------------------------------------
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 ........................................ $15,296,301 $6,729,503 $5,819,638 $49,624,332 $10,295,344 Shares outstanding ......................................... 1,701,232 632,860 569,289 4,924,835 10,296,058 Net asset value (NAV) and redemption price per share ......... $8.99 $10.63 $10.22 $10.08 $1.00 ----- ------ ------ ------ ----- Public offering price per share (100/95.25 of NAV) On sales of $100,000 or more the offering price is reduced ................................................... $9.44 $11.16 $10.73 $10.58 ----- ------ ------ ------ Class B Shares Net assets at value ........................................ $29,209,869 $4,844,766 $5,272,626 $17,850,236 $5,918,916 Shares outstanding ......................................... 3,248,736 456,154 515,858 1,772,145 5,919,145 Net asset value, offering price and redemption price per share............................................. $8.99 $10.62 $10.22 $10.07 $1.00 ----- ------ ------ ------ ----- Class C Shares Net assets at value ........................................ $33,537,334 $5,531,961 $5,147,466 $12,707,813 $8,236,952 Shares outstanding ......................................... 3,730,001 520,861 503,623 1,261,527 8,237,403 Net asset value, offering price and redemption price per share .................................................. $8.99 $10.62 $10.22 $10.07 $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, 1998 - --------------------------------------------------------------------------------
International International Global Small Cap Growth and Equity Fund Income Fund Fund ------------ ------------ ------------ INVESTMENT INCOME: - ------------------ Interest ................................................. $ 158,880 $ 118,984 $ 42,356 Dividends (Net of withholding tax of $17,748 in International Small Cap, $64,055 in International Growth and Income, and $195,264 in Global Equity) ..... 146,668 515,408 2,338,347 ------------ ------------ ------------ Total income ...................................... 305,548 634,392 2,380,703 ------------ ------------ ------------ EXPENSES: - --------- Distribution for Class A ................................. 9,179 15,214 115,553 Distribution for Class B ................................. 76,249 157,054 339,910 Distribution for Class C ................................. 70,469 86,017 623,791 Investment adviser fee (Note 5) .......................... 181,592 257,885 1,164,468 Custodian fee ............................................ 36,000 25,972 112,961 Transfer agent fee ....................................... 44,898 68,183 205,154 Accounting/administration ................................ 27,027 44,659 200,695 Audit and legal fees ..................................... 7,051 8,761 43,560 Amortization of organization costs ....................... -- -- -- Miscellaneous ............................................ 28,284 30,301 84,566 ------------ ------------ ------------ Expenses before reimbursement by investment adviser ..... 480,749 694,046 2,890,658 Reimbursement of expenses by investment adviser (Note 5) . 56,791 34,607 -- ------------ ------------ ------------ Net expenses .............................. 423,958 659,439 2,890,658 ------------ ------------ ------------ Net investment income/(loss) ............. (118,410) (25,047) (509,955) ------------ ------------ ------------ REALIZED AND UNREALIZED GAIN/(LOSS) ON - -------------------------------------- INVESTMENTS, FOREIGN CURRENCY AND FORWARD ----------------------------------------- FOREIGN CURRENCY CONTRACTS -------------------------- Net realized gain (loss) on: Investment transactions ............................... (75,711) 33,515 9,400,371 Foreign currency and forward foreign currency contracts (22,378) 129,326 845,669 Change in unrealized appreciation (depreciation) on: Investments ........................................... 236,882 405,513 975,938 Translation of foreign currency and forward foreign currency contracts................................... 3,020 (374,342) (700,564) ------------ ------------ ------------ Net gain/(loss) on investments, foreign currency and forward foreign currency contracts.................................. 141,813 194,012 10,521,414 ------------ ------------ ------------ Net increase/(decrease) in net assets resulting from operations ................................................. $ 23,403 $ 168,965 $ 10,011,459 ============ ============ ============ Emerging Small/Mid Growth Cap Fund * Fund ------------ ------------ INVESTMENT INCOME: - ----------------- Interest ................................................. $ 1,746 $ 134,702 Dividends (Net of withholding tax of $17,748 in International Small Cap, $64,055 in International Growth and Income, and $195,264 in Global Equity) ..... 314 126,477 ------------ ------------ Total income ...................................... 2,060 261,179 ------------ ------------ EXPENSES: - -------- Distribution for Class A ................................. 376 17,228 Distribution for Class B ................................. 952 137,602 Distribution for Class C ................................. 1,162 152,016 Investment adviser fee (Note 5) .......................... 3,034 313,427 Custodian fee ............................................ 29,926 36,000 Transfer agent fee ....................................... 7,218 85,509 Accounting/administration ................................ 451 52,159 Audit and legal fees ..................................... 84 13,223 Amortization of organization costs ....................... 5,485 -- Miscellaneous ............................................ 2,374 36,509 ------------ ------------ Expenses before reimbursement by investment adviser ...... 51,062 843,673 Reimbursement of expenses by investment adviser (Note 5) . 44,262 87,864 ------------ ------------ Net expenses .............................. 6,800 755,809 ------------ ------------ Net investment income/(loss) ............. (4,740) (494,630) ------------ ------------ REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS, FOREIGN CURRENCY AND FORWARD FOREIGN CURRENCY CONTRACTS Net realized gain (loss) on: Investment transactions ............................... (39,152) 3,617,101 Foreign currency and forward foreign currency contracts --- --- Change in unrealized appreciation (depreciation) on: Investments ........................................... (61,247) (1,868,388) Translation of foreign currency and forward foreign currency contracts................................... --- --- ------------ ------------ Net gain/(loss) on investments, foreign currency and forward foreign currency contracts.................................. (100,399) 1,748,713 ------------ ------------ Net increase/(decrease) in net assets resulting from operations ................................................. ($ 105,139) $ 1,254,083 ============ ============
* For the period from January 6, 1998 (Commencement of Operations) through October 31, 1998. The accompanying notes are an integral part of the financial statements. 8
Growth Tax-Sensitive Growth Equity Equity and Income Fund Fund * Fund ------------ ------------ ------------ INVESTMENT INCOME: - ------------------ Interest ...................................................... $ 114,426 $ 10,614 $ 249,375 Dividends (Net of withholding tax of $1,784 in Growth Equity, $346 in Tax-Sensitive Equity, $21,412 in Growth and Income, $27,386 in Equity-Income, and $39,168 in Balanced)............. 236,106 46,227 3,511,442 ------------ ------------ ------------ Total income ........................................... 350,532 56,841 3,760,817 ------------ ------------ ------------ EXPENSES: - --------- Distribution for Class A ...................................... 13,259 6,985 146,284 Distribution for Class B ...................................... 109,342 12,691 688,475 Distribution for Class C ...................................... 137,168 8,857 1,137,868 Investment adviser fee (Note 5) ............................... 255,953 35,280 1,527,239 Custodian fee ................................................. 36,000 29,926 93,772 Transfer agent fee ............................................ 63,373 9,969 304,950 Accounting/administration ..................................... 43,869 5,523 341,295 Audit and legal fees .......................................... 11,210 823 82,714 Amortization of organization costs ............................ -- 5,464 -- Miscellaneous ................................................. 32,637 5,085 115,156 ------------ ------------ ------------ Expenses before reimbursement by investment adviser .......... 702,811 120,603 4,437,753 Reimbursement of expenses by investment adviser (Note 5) ...... 73,294 40,187 243,058 ------------ ------------ ------------ Net expenses ................................... 629,517 80,416 4,194,695 ------------ ------------ ------------ Net investment income/(loss) .................. (278,985) (23,575) (433,878) ------------ ------------ ------------ REALIZED AND UNREALIZED GAIN/(LOSS) ON - -------------------------------------- INVESTMENTS, FOREIGN CURRENCY AND FORWARD ----------------------------------------- FOREIGN CURRENCY CONTRACTS: --------------------------- Net realized gain (loss) on: Investment transactions .................................... 2,221,648 (754,965) 9,720,012 Foreign currency and forward foreign currency contracts .... 679 --- --- Change in unrealized appreciation (depreciation) on: Investments ................................................ 1,275,786 (782,878) 28,812,377 Translation of foreign currency and forward foreign currency contracts ........................................ (269) --- 53 ------------ ------------ ------------ Net gain/(loss) on investments, foreign currency and forward foreign currency contracts 3,497,844 (1,537,843) 38,532,442 ------------ ------------ ------------ Net increase/(decrease) in net assets resulting from operations ...................................................... $ 3,218,859 ($ 1,561,418) $ 38,098,564 ============ ============ ============ Equity- Income Balanced Fund Fund ------------ ------------ INVESTMENT INCOME: - ------------------ Interest ...................................................... $ 650,052 $ 2,377,179 Dividends (Net of withholding tax of $1,784 in Growth Equity, $346 in Tax-Sensitive Equity, $21,412 in Growth and Income, $27,386 in Equity-Income, and $39,168 in Balanced)............. 4,705,882 1,119,708 ------------ ------------ Total income ........................................... 5,355,934 3,496,887 ------------ ------------ EXPENSES: - --------- Distribution for Class A ...................................... 137,973 47,398 Distribution for Class B ...................................... 396,322 187,185 Distribution for Class C ...................................... 996,333 673,652 Investment adviser fee (Note 5) ............................... 1,300,804 747,288 Custodian fee ................................................. 75,474 43,850 Transfer agent fee ............................................ 261,185 135,205 Accounting/administration ..................................... 273,690 152,504 Audit and legal fees .......................................... 71,678 35,897 Amortization of organization costs ............................ -- -- Miscellaneous ................................................. 93,918 64,262 ------------ ------------ Expenses before reimbursement by investment adviser .......... 3,607,377 2,087,241 Reimbursement of expenses by investment adviser (Note 5) ...... 162,749 138,673 ------------ ------------ Net expenses ................................... 3,444,628 1,948,568 ------------ ------------ Net investment income/(loss) .................. 1,911,306 1,548,319 ------------ ------------ REALIZED AND UNREALIZED GAIN/(LOSS) ON - -------------------------------------- INVESTMENTS, FOREIGN CURRENCY AND FORWARD ----------------------------------------- FOREIGN CURRENCY CONTRACTS: --------------------------- Net realized gain (loss) on: Investment transactions .................................... 11,356,830 6,740,853 Foreign currency and forward foreign currency contracts .... (959) (76,080) Change in unrealized appreciation (depreciation) on: Investments ................................................ 3,232,000 2,811,660 Translation of foreign currency and forward foreign currency contracts ....................................... (788) 693 ------------ ------------ Net gain/(loss) on investments, foreign currency and forward foreign currency contracts....... 14,587,083 9,477,126 ------------ ------------ Net increase/(decrease) in net assets resulting from operations ...................................................... $ 16,498,389 $ 11,025,445 ============ ============
* For the period from January 6, 1998 (Commencement of Operations) through October 31, 1998. The accompanying notes are an integral part of the financial statements. 9
Investment National Strategic Quality Municipal Income Bond Bond Fund Fund Fund ----------- ----------- ----------- INVESTMENT INCOME: - ------------------ Interest (Net of $8,021 withholding tax in Strategic Income) ............ $ 7,238,055 $ 1,316,949 $ 956,322 Dividends ............................................................... 49 3,584 --- ----------- ----------- ----------- Total income ..................................................... 7,238,104 1,320,533 956,322 ----------- ----------- ----------- EXPENSES: - --------- Distribution for Class A ................................................ 56,898 24,634 9,042 Distribution for Class B ................................................ 331,952 47,561 57,526 Distribution for Class C ................................................ 354,349 53,351 52,979 Investment adviser fee (Note 5) ......................................... 619,206 102,778 102,477 Custodian fee ........................................................... 74,909 11,969 11,832 Transfer agent fee ...................................................... 111,198 33,461 12,092 Accounting/administration ............................................... 130,292 26,199 26,126 Audit and legal fees .................................................... 27,006 1,826 1,893 Miscellaneous ........................................................... 60,982 28,148 29,456 ----------- ----------- ----------- Expenses before reimbursement by investment adviser .................... 1,766,792 329,927 303,423 Reimbursement of expenses by investment adviser (Note 5) ................ 47,269 50,377 38,418 ----------- ----------- ----------- Net expenses ............................................. 1,719,523 279,550 265,005 ----------- ----------- ----------- Net investment income ................................... 5,518,581 1,040,983 691,317 ----------- ----------- ----------- REALIZED AND UNREALIZED GAIN/(LOSS) ON - -------------------------------------- INVESTMENTS, FOREIGN CURRENCY AND FORWARD ----------------------------------------- FOREIGN CURRENCY CONTRACTS: --------------------------- Net realized gain (loss) on: Investment transactions .............................................. (114,474) 161,325 190,227 Foreign currency and forward foreign currency contracts .............. 174,226 --- --- Change in unrealized appreciation (depreciation) on: Investments .......................................................... (5,541,110) 12,137 50,547 Translation of foreign currency and forward foreign currency contracts (218,242) --- --- ----------- ----------- ----------- Net gain/(loss) on investments, foreign currency and forward foreign currency contracts................. (5,699,600) 173,462 240,774 ----------- ----------- ----------- Net increase/(decrease) in net assets resulting from operations ................................................................ ($ 181,019) $ 1,214,445 $ 932,091 =========== =========== =========== U. S. Government Money Securities Market Fund Fund ----------- ----------- INVESTMENT INCOME: - ------------------ Interest (Net of $8,021 withholding tax in Strategic Income) ............ $ 5,512,102 $ 1,071,843 Dividends ............................................................... --- --- ----------- ----------- Total income ..................................................... 5,512,102 1,071,843 ----------- ----------- EXPENSES: - --------- Distribution for Class A ................................................ 177,793 --- Distribution for Class B ................................................ 158,596 --- Distribution for Class C ................................................ 132,610 --- Investment adviser fee (Note 5) ......................................... 479,512 38,630 Custodian fee ........................................................... 35,967 12,726 Transfer agent fee ...................................................... 112,805 60,669 Accounting/administration ............................................... 121,860 28,840 Audit and legal fees .................................................... 28,089 2,428 Miscellaneous ........................................................... 59,781 37,239 ----------- ----------- Expenses before reimbursement by investment adviser .................... 1,307,013 180,532 Reimbursement of expenses by investment adviser (Note 5) ................ 118,394 83,958 ----------- ----------- Net expenses ............................................. 1,188,619 96,574 ----------- ----------- Net investment income ................................... 4,323,483 975,269 ----------- ----------- REALIZED AND UNREALIZED GAIN/(LOSS) ON - -------------------------------------- INVESTMENTS, FOREIGN CURRENCY AND FORWARD ----------------------------------------- FOREIGN CURRENCY CONTRACTS: --------------------------- Net realized gain (loss) on: Investment transactions .............................................. 591,717 --- Foreign currency and forward foreign currency contracts .............. --- --- Change in unrealized appreciation (depreciation) on: Investments .......................................................... 621,573 --- Translation of foreign currency and forward foreign currency contracts --- --- ----------- ----------- Net gain/(loss) on investments, foreign currency and forward foreign currency contracts................. 1,213,290 --- ----------- ----------- Net increase/(decrease) in net assets resulting from operations ................................................................ $ 5,536,773 $ 975,269 =========== ===========
The accompanying notes are an integral part of the financial statements.' 10 NORTH AMERICAN FUNDS STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
International International Growth Small Cap Fund and Income Fund ----------------------------- ---------------------------- Year Year Year Year Ended Ended Ended Ended 10/31/98 10/31/97 10/31/98 10/31/97 ------------ ------------ ------------ ------------ OPERATIONS: Net investment income (loss) .............................. ($118,410) ($120,495) ($25,047) $131,377 Net realized gain (loss) on: Investment transactions ................................ (75,711) (529,214) 33,515 2,452,134 Foreign currency and forward foreign currency contracts .......................... (22,378) (39,336) 129,326 (148,990) Change in unrealized appreciation (depreciation) on: Investments ............................................ 236,882 942,729 405,513 (1,660,231) Foreign currency and forward foreign currency contracts .................................. 3,020 (3,105) (374,342) 118,437 ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations ................................. 23,403 250,579 168,965 892,727 Net equalization credits (charges) (Note 2) .................................................. --- 1,803 --- (9,971) DISTRIBUTIONS: From net investment income Class A .............................................. --- --- (32,570) (83,820) Class B .............................................. --- --- (49,275) (180,641) Class C .............................................. --- --- (25,937) (105,721) From net realized gains on investments and foreign currency transactions................................. Class A .............................................. --- --- (387,315) (332,915) Class B .............................................. --- --- (1,343,452) (1,034,399) Class C .............................................. --- --- (715,494) (616,566) 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) ....................... (2,188,345) 4,661,417 (1,038,721) 1,701,507 ------------ ------------ ------------ ------------ Increase (decrease) in net assets ............................ (2,164,942) 4,913,799 (3,496,265) 230,201 Net assets at beginning of period ............................ 17,618,471 12,704,672 29,255,355 29,025,154 ------------ ------------ ------------ ------------ Net assets at end of period .................................. $15,453,529 $17,618,471 $25,759,090 $29,255,355 ============ ============ ============ ============ Undistributed net investment income (loss) ................... --- $2,005 $165,398 ($46,540) ------------ ------------ ------------ ------------ Emerging Growth Global Equity Fund Fund ---------------------------------- ------------ Year Year 1/06/98* Ended Ended to 10/31/98 10/31/97 10/31/98 ------------ ------------ ------------ OPERATIONS: Net investment income (loss) .............................. ($509,955) ($181,899) ($4,740) Net realized gain (loss) on: Investment transactions ................................ 9,400,371 7,964,844 (39,152) Foreign currency and forward foreign currency contracts .......................... 845,669 559,899 --- Change in unrealized appreciation (depreciation) on: Investments ............................................ 975,938 18,658,707 (61,247) Foreign currency and forward foreign currency contracts .................................. (700,564) 560,153 --- ------------ ------------ ----------- Net increase (decrease) in net assets resulting from operations ................................. 10,011,459 27,561,704 (105,139) Net equalization credits (charges) (Note 2) .................................................. --- (134,022) --- DISTRIBUTIONS: From net investment income Class A .............................................. (417,000) --- --- Class B .............................................. (215,336) --- --- Class C .............................................. (405,867) --- --- From net realized gains on investments and foreign currency transactions................................. Class A .............................................. (1,961,256) (2,895,690) --- Class B .............................................. (2,005,883) (2,872,442) --- Class C .............................................. (3,781,969) (7,051,972) --- In excess of net investment income Class A .............................................. --- (89,634) --- Class B .............................................. --- (89,634) --- Class C .............................................. --- (89,634) --- Increase (decrease) in net assets from capital share transactions (Note 3) ....................... (6,146,407) (6,894,415) 752,323 ------------ ------------ ----------- Increase (decrease) in net assets ............................ (4,922,259) 7,623,529 647,184 Net assets at beginning of period ............................ 124,038,455 116,414,926 --- ------------ ------------ ----------- Net assets at end of period .................................. $119,116,196 $124,038,455 $647,184 ============ ============ =========== Undistributed net investment income (loss) ................... $226,601 $288,367 --- ------------ ------------ -----------
- -------------------------------------- * Commencement of operations The accompanying notes are an integral part of the financial statements. 11 NORTH AMERICAN FUNDS STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
Small/Mid Cap Fund Growth Equity Fund ------------------------------- ---------------------------- Year Year Year Year Ended Ended Ended Ended 10/31/98 10/31/97 10/31/98 10/31/97 ----------- ----------- ------------ ------------ OPERATIONS: - ----------- Net investment income (loss) .............................. ($494,630) ($367,126) ($278,985) ($144,868) Net realized gain (loss) on: Investment transactions ................................ 3,617,101 1,592,142 2,221,648 2,705,613 Foreign currency and forward foreign currency contracts .......................... --- --- 679 (6,483) Change in unrealized appreciation (depreciation) on: Investments ............................................ (1,868,388) 3,472,083 1,275,786 1,477,592 Foreign currency and forward foreign currency contracts .................................. --- --- (269) 262 ----------- ----------- ----------- ---------- Net increase (decrease) in net assets resulting from operations ................................. 1,254,083 4,697,099 3,218,859 4,032,116 Net equalization credits (charges) (Note 2) .................................................. --- --- --- 33,219 DISTRIBUTIONS: - -------------- From net investment income Class A .............................................. --- --- --- (33,593) Class B .............................................. --- --- --- (63,216) Class C .............................................. --- --- --- (90,077) From net realized gains on investments and foreign currency transactions Class A .............................................. (73,545) --- (262,983) --- Class B .............................................. (196,356) --- (812,961) --- Class C .............................................. (216,341) --- (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) ....................... 4,796,743 6,879,852 2,632,785 7,494,842 ----------- ----------- ----------- ---------- Increase (decrease) in net assets ............................ 5,564,584 11,576,951 3,684,025 11,373,291 Net assets at beginning of period ............................ 29,443,036 17,866,085 24,859,337 13,486,046 ----------- ----------- ----------- ---------- Net assets at end of period .................................. $35,007,620 $29,443,036 $28,543,362 $24,859,337 =========== =========== =========== =========== Undistributed net investment income (loss) ................... --- --- --- --- ----------- ----------- ----------- ---------- Tax- Sensitive Equity Growth and Income Fund Fund ---------------------------- ----------- Year Year 1/06/98* Ended Ended to 10/31/98 10/31/97 10/31/98 ------------- ------------ ----------- OPERATIONS: - ----------- Net investment income (loss) .............................. ($433,878) $182,168 ($23,575) Net realized gain (loss) on: Investment transactions ................................ 9,720,012 15,043,013 (754,965) Foreign currency and forward foreign currency contracts .......................... --- 164 --- Change in unrealized appreciation (depreciation) on: Investments ............................................ 28,812,377 26,450,524 (782,878) Foreign currency and forward foreign currency contracts .................................. 53 (93) --- ------------- ------------ ----------- Net increase (decrease) in net assets resulting from operations ................................. 38,098,564 41,675,776 (1,561,418) Net equalization credits (charges) (Note 2) .................................................. --- 21,811 --- DISTRIBUTIONS: - -------------- From net investment income Class A .............................................. --- (176,486) --- Class B .............................................. --- (73,463) --- Class C .............................................. --- (113,463) --- From net realized gains on investments and foreign currency transactions Class A .............................................. (2,741,357) (1,114,556) --- Class B .............................................. (4,507,021) (2,130,500) --- Class C .............................................. (7,696,358) (4,448,214) --- In excess of net investment income Class A .............................................. (45,238) (80) --- Class B .............................................. --- (33) --- Class C .............................................. --- (51) --- Increase (decrease) in net assets from capital share transactions (Note 3) ....................... 30,468,074 25,829,943 11,895,792 ------------- ------------ ----------- Increase (decrease) in net assets ............................ 53,576,664 59,470,684 10,334,374 Net assets at beginning of period ............................ 187,307,453 127,836,769 --- ------------- ------------ ----------- Net assets at end of period .................................. $240,884,117 $187,307,453 $10,334,374 ============= ============ =========== 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 ----------------------------- ------------------------------ Year Year Year Year Ended Ended Ended Ended 10/31/98 10/31/97 10/31/98 10/31/97 ------------ ------------ ------------ ------------ OPERATIONS: - ----------- Net investment income (loss) .............................. $1,911,306 $2,333,310 $1,548,319 $2,156,616 Net realized gain (loss) on: Investment transactions ................................ 11,356,830 11,805,051 6,740,853 15,803,775 Foreign currency and forward foreign currency contracts .......................... (959) (16,134) (76,080) (74,875) Change in unrealized appreciation (depreciation) on: Investments ............................................ 3,232,000 21,707,197 2,811,660 (2,893,993) Foreign currency and forward foreign currency contracts .................................. (788) 687 693 (59) ------------- ------------- ------------ ------------ Net increase (decrease) in net assets resulting from operations ................................. 16,498,389 35,830,111 11,025,445 14,991,464 Net equalization credits (charges) (Note 2) .................................................. --- 28,169 --- (205,430) DISTRIBUTIONS: - ---------------- From net investment income Class A .............................................. (701,503) (307,637) (317,345) (392,396) Class B .............................................. (442,368) (123,036) (320,086) (509,836) Class C .............................................. (1,133,438) (297,921) (1,278,949) (2,058,773) From net realized gains on investments and foreign currency transactions Class A .............................................. (2,593,550) (6,143,038) (2,023,888) (1,015,169) Class B .............................................. (2,589,634) (5,815,447) (2,767,331) (1,534,515) Class C .............................................. (6,612,227) (17,766,496) (11,012,231) (6,683,658) In excess of net investment income Class A .............................................. --- --- --- --- Class B .............................................. --- --- --- --- Class C .............................................. --- --- --- --- Increase (decrease) in net assets from capital share transactions (Note 3) ...................... 2,002,286 22,385,712 7,392,323 (4,810,436) ------------- ------------- ------------ ------------ Increase (decrease) in net assets ............................ 4,427,955 27,790,417 697,938 (2,218,749) Net assets at beginning of period ............................ 167,173,603 139,383,186 97,694,720 99,913,469 ------------- ------------- ------------ ------------ Net assets at end of period .................................. $171,601,558 $167,173,603 $98,392,658 $97,694,720 ============= ============= ============ ============ Undistributed net investment income (loss) ................... $1,532,483 $1,934,704 $1,153,058 $1,589,610 ------------- ------------- ------------ ------------ Investment Quality Strategic Income Fund Bond Fund ------------------------------ ----------------------------- Year Year Year Year Ended Ended Ended Ended 10/31/98 10/31/97 10/31/98 10/31/97 ---------- ---------- ---------- ---------- OPERATIONS: - ----------- Net investment income (loss) .............................. $5,297,511 $5,132,176 $1,040,983 $1,169,184 Net realized gain (loss) on: Investment transactions ................................ (114,474) 1,433,455 161,325 42,588 Foreign currency and forward foreign currency contracts .......................... 174,226 91,730 --- --- Change in unrealized appreciation (depreciation) on: Investments ............................................ (5,320,040) 506,946 12,137 249,233 Foreign currency and forward foreign currency contracts .................................. (218,242) 10,764 --- --- ------------- ------------- ------------ ------------ Net increase (decrease) in net assets resulting from operations ................................. (181,019) 7,175,071 1,214,445 1,461,005 Net equalization credits (charges) (Note 2) .................................................. --- 471 --- (2,133) DISTRIBUTIONS: From net investment income Class A .............................................. (1,142,439) (1,303,877) (446,629) (506,971) Class B .............................................. (2,118,644) (2,551,456) (276,805) (273,774) Class C .............................................. (2,258,371) (2,097,399) (312,476) (401,143) From net realized gains on investments and foreign currency transactions Class A .............................................. (219,321) (272,850) --- --- Class B .............................................. (478,774) (599,725) --- --- Class C .............................................. (472,034) (442,077) --- --- In excess of net investment income Class A .............................................. --- (33,959) --- --- Class B .............................................. --- (66,452) --- --- Class C .............................................. --- (54,626) --- --- Increase (decrease) in net assets from capital share transactions (Note 3) ....................... 1,717,355 16,388,157 (903,890) (3,722,153) ------------- ------------- ------------ ------------ Increase (decrease) in net assets ............................ (5,153,247) 16,141,278 (725,355) (3,445,169) Net assets at beginning of period ............................ 83,196,751 67,055,473 17,831,585 21,276,754 ------------- ------------- ------------ ------------ Net assets at end of period .................................. $78,043,504 $83,196,751 $17,106,230 $17,831,585 ------------- ------------- ------------ ------------ Undistributed net investment income (loss) ................... $196,179 ($81,432) $11,637 $1,508 ------------- ------------- ------------ ------------
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 10/31/98 10/31/97 10/31/98 10/31/97 ---------- ---------- ---------- ---------- OPERATIONS: - ----------- Net investment income (loss) .......... $691,317 $791,360 $4,323,483 $5,648,449 Net realized gain (loss) on: Investment transactions ............ 190,227 211,627 591,717 (120,702) Change in unrealized appreciation (depreciation) on: Investments ........................ 50,547 441,613 621,573 977,025 ------------ ------------ ------------ ------------- Net increase (decrease) in net assets resulting from operations ............. 932,091 1,444,600 5,536,773 6,504,772 Net equalization credits (charges) (Note 2) .............................. --- --- --- (90) DISTRIBUTIONS: From net investment income Class A .......................... (277,166) (318,542) (2,632,290) (3,546,760) Class B .......................... (215,659) (254,666) (735,957) (889,120) Class C .......................... (198,492) (218,057) (614,899) (779,044) In excess of net investment income Class A .......................... --- --- (314,160) (145,486) Class B .......................... --- --- (87,836) (36,471) Class C .......................... --- --- (73,388) (31,956) Increase (decrease) in net assets from capital share transactions (Note 3) .. (2,184,716) (2,003,116) (5,506,261) (28,692,600) ------------ ------------ ------------ ------------- Increase (decrease) in net assets ........ (1,943,942) (1,349,781) (4,428,018) (27,616,755) Net assets at beginning of period ........ 18,183,672 19,533,453 84,610,399 112,227,154 ------------ ------------ ------------ ------------- Net assets at end of period .............. $16,239,730 $18,183,672 $80,182,381 $84,610,399 ============ ============ ============ ============= Undistributed net investment income (loss) ($263) ($474) ($229,251) ($211,584) ------------ ------------ ------------ ------------- Money Market Fund ----------------------------- Year Year Ended Ended 10/31/98 10/31/97 ---------- ---------- OPERATIONS: - ----------- Net investment income (loss) .......... $975,269 $1,005,461 Net realized gain (loss) on: Investment transactions ............ --- --- Change in unrealized appreciation (depreciation) on: Investments ........................ --- --- ------------ ------------ Net increase (decrease) in net assets resulting from operations ............. 975,269 1,005,461 Net equalization credits (charges) (Note 2) .............................. --- --- DISTRIBUTIONS: - -------------- From net investment income Class A .......................... (452,709) (398,539) Class B .......................... (164,474) (158,672) Class C .......................... (358,086) (448,250) In excess of net investment income Class A .......................... --- --- Class B .......................... --- --- Class C .......................... --- --- Increase (decrease) in net assets from capital share transactions (Note 3) .. 2,523,350 938,733 ------------ ------------ Increase (decrease) in net assets ........ 2,523,350 938,733 Net assets at beginning of period ........ 21,927,862 20,989,129 ------------ ------------ Net assets at end of period .............. $24,451,212 $21,927,862 ============ ============ 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 3/04/96* Year Year 3/04/96* Ended Ended to Ended Ended to 10/31/98 10/31/97 10/31/96 10/31/98 10/31/97 10/31/96 - ----------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $13.86 $13.43 $12.50 $13.71 $13.37 $12.50 - ----------------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) (0.02) (0.03) 0.05 (0.12) (0.11) (0.01) Net realized and unrealized gain/(loss) on investments and foreign currency 0.07 0.46 0.88 0.07 0.45 0.88 ---------------------------------------------------------------------------------- Total from investment operations 0.05 0.43 0.93 (0.05) 0.34 0.87 - ----------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $13.91 $13.86 $13.43 $13.66 $13.71 $13.37 - ----------------------------------------------------------------------------------------------------------------------------------- Total Return 0.36% 3.20% 7.44% + (0.36%) 2.54% 6.96% + =================================================================================================================================== Ratios/Supplemental Data - ----------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000's) $2,173 $3,225 $2,120 $7,073 $7,369 $5,068 - ----------------------------------------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.90% 1.90% 1.90% # 2.55% 2.55% 2.55% # - ----------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (0.12%) (0.19%) (0.50%) # (0.79%) (0.84%) (0.15%) # - ----------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 54% 75% 67% # 54% 75% 67% # - ----------------------------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 2.23% 2.46% 3.07% # 2.88% 2.98% 3.27% # - ----------------------------------------------------------------------------------------------------------------------------------- International Small Cap Fund --------------------------------------- Class C --------------------------------------- Year Year 3/04/96* Ended Ended to 10/31/98 10/31/97 10/31/96 ---------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $13.71 $13.37 $12.50 ---------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) (0.12) (0.11) (0.01) Net realized and unrealized gain/(loss) on investments and foreign currency 0.07 0.45 0.88 --------------------------------------- Total from investment operations (0.05) 0.34 0.87 ---------------------------------------------------------------------------------------- Net Asset Value, End of Period $13.66 $13.71 $13.37 ---------------------------------------------------------------------------------------- Total Return (0.36%) 2.54% 6.96% + ======================================================================================== Ratios/Supplemental Data ---------------------------------------------------------------------------------------- Net assets, end of period (000's) $6,195 $7,025 $5,517 ---------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 2.55% 2.55% 2.55% # ---------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (0.78%) (0.84%) (0.15%) # ---------------------------------------------------------------------------------------- Portfolio turnover rate 54% 75% 67% # ---------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 2.88% 2.96% 3.25% # ----------------------------------------------------------------------------------------
International Growth and Income Fund --------------------------------------------------------- Class A ------------------------------------------------------ Year Year Year 1/09/95* Ended Ended Ended to 10/31/98 10/31/97 10/31/96** 10/31/95 -------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.81 $11.35 $10.11 $10.00 -------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.03 0.06 0.09 0.06 Net realized and unrealized gain/(loss) on investments and foreign currency 0.02 0.35 1.33 0.08 -------------------------------------------------------- Total from investment operations 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 (0.90) (0.76) (0.10) ------ -------------------------------------------------------- Total distributions (1.03) (0.95) (0.18) (0.03) -------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $9.83 $10.81 $11.35 $10.11 -------------------------------------------------------------------------------------------------------------------- Total Return 0.67% 3.55% 14.25% 1.37% + ==================================================================================================================== Ratios/Supplemental Data -------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000's) $3,769 $4,461 $4,732 $6,897 -------------------------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.75% 1.75% 1.75% 1.75% # -------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets 0.44% 0.97% 0.84% 0.70% # -------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 173% 146% 170% 69% # -------------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 1.87% 1.96% 1.97% 2.18% # -------------------------------------------------------------------------------------------------------------------- International Growth and Income Fund --------------------------------------------------- Class B -------------------------------------------------- Year Year Year 1/09/95* Ended Ended Ended to 10/31/98 10/31/97** 10/31/96** 10/31/95 - -------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.75 $11.30 $10.10 $10.00 - -------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) (0.02) 0.03 0.06 0.01 Net realized and unrealized gain/(loss) on investments and foreign currency 0.00 0.31 1.30 0.12 -------------------------------------------------- Total from investment operations (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 (0.90) (0.76) (0.11) ------ -------------------------------------------------- Total distributions (0.96) (0.89) (0.16) (0.03) - -------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $9.77 $10.75 $11.30 $10.10 - -------------------------------------------------------------------------------------------------------------- Total Return (0.03%) 2.92% 13.58% 1.28% + ============================================================================================================== Ratios/Supplemental Data - -------------------------------------------------------------------------------------------------------------- Net assets, end of period (000's) $14,030 $16,334 $15,217 $8,421 - -------------------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 2.40% 2.40% 2.40% 2.40% # - -------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (0.18%) 0.32% 0.57% 0.15% # -------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 173% 146% 170% 69% # - -------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 2.52% 2.54% 2.60% 2.93% # - --------------------------------------------------------------------------------------------------------------
* 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 Growth and Income Fund ------------------------------------------------------------------------- Class C ------------------------------------------------------------------------- Year Year Year 1/09/95* Ended Ended Ended to 10/31/98 10/31/97** 10/31/96** 10/31/95 ---------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.76 $11.31 $10.10 $10.00 ---------------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) (0.02) 0.03 0.06 0.01 Net realized and unrealized gain/(loss) on investments and foreign currency (0.01) 0.31 1.30 0.12 -------------------------------------------------------------------------- Total from investment operations (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 (0.90) (0.76) (0.10) ------ -------------------------------------------------------------------------- Total distributions (0.96) (0.89) (0.15) (0.03) ---------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $9.77 $10.76 $11.31 $10.10 ---------------------------------------------------------------------------------------------------------------------------------- Total Return (0.13%) 2.91% 13.63% 1.28% + ================================================================================================================================== Ratios/Supplemental Data ---------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000's) $7,960 $8,460 $9,076 $6,324 ---------------------------------------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 2.40% 2.40% 2.40% 2.40% # ---------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (0.19%) 0.32% 0.51% 0.13% # ---------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 173% 146% 170% 69% # ---------------------------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 2.52% 2.57% 2.60% 2.93% # ----------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Global Equity Fund ------------------------------------------------------------------------ Class A ----------------------------------------------------------------------- Year Year Year Year 4/01/94* Ended Ended Ended Ended to 10/31/98 10/31/97 10/31/96** 10/31/95 10/31/94 - -------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $16.32 $14.50 $13.84 $14.82 $14.13 - -------------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.02 0.06 (0.04) ------ (0.01) Net realized and unrealized gain/(loss) on investments and foreign currency 1.34 3.45 0.91 (0.54) 0.70 ----------------------------------------------------------------------- Total from investment operations 1.36 3.51 0.87 (0.54) 0.69 ----------------------------------------------------------------------- Distributions Dividends from net investment income (0.22) (0.05) (0.21) ------ ------ Distributions from realized capital gains (1.03) (1.64) ------ (0.44) ------ ----------------------------------------------------------------------- Total distributions (1.25) (1.69) (0.21) (0.44) ------ - -------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $16.43 $16.32 $14.50 $13.84 $14.82 - -------------------------------------------------------------------------------------------------------------------------------- Total Return 8.90% 26.10% 6.33% (3.52%) 9.16% @ ================================================================================================================================ Ratios/Supplemental Data Net assets, end of period (000's) $31,055 $30,960 $25,924 $23,894 $18,152 - -------------------------------------------------------------------------------------------------------------------------------- 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 0.09% 0.33% (0.30%) 0.03% (0.12%) # - -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 20% 28% 165% 57% 54% - -------------------------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 1.75% 1.81% 1.83% 1.92% 1.97% # - --------------------------------------------------------------------------------------------------------------------------------
* Commencement of Operations # Annualized + Non-annualized ** Net investment income per share has been calculated using the average share method @ Historical Total Return is the one-year performance return which includes Class C performance prior to commencement of operations. The accompanying notes are an integral part of the financial statements. 16 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
Global Equity Fund -------------------------------------------------------------------- Class B -------------------------------------------------------------------- Year Year Year Year 4/01/94* Ended Ended Ended Ended to 10/31/98 10/31/97** 10/31/96** 10/31/95** 10/31/94 - ----------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $16.14 $14.36 $13.73 $14.79 $14.13 - ----------------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) (0.11) (0.05) (0.14) (0.09) (0.03) Net realized and unrealized gain/(loss) on investments and foreign currency 1.35 3.47 0.91 (0.53) 0.69 -------------------------------------------------------------------- Total from investment operations 1.24 3.42 0.77 (0.62) 0.66 -------------------------------------------------------------------- Distributions Dividends from net investment income (0.11) ------ (0.14) ------ ------- Distributions from realized capital gains (1.03) (1.64) ------ (0.44) ------- -------------------------------------------------------------------- Total distributions (1.14) (1.64) (0.14) (0.44) ------- - ----------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $16.24 $16.14 $14.36 $13.73 $14.79 - ----------------------------------------------------------------------------------------------------------------------------------- Total Return 8.17% 25.63% 5.64% (4.09%) 8.94% @ =================================================================================================================================== Ratios/Supplemental Data Net assets, end of period (000's) $30,287 $31,833 $25,661 $23,317 $13,903 - ----------------------------------------------------------------------------------------------------------------------------------- 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 (0.55%) (0.32%) (0.95%) (0.61%) (0.77%) # - ----------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 20% 28% 165% 57% 54% - ----------------------------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 2.40% 2.47% 2.48% 2.58% 2.71% # - -----------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ Global Equity Fund ---------------------------------------------------------- Class C --------------------------------------------------------- Year Ended October 31, --------------------------------------------------------- 1998 1997** 1996** 1995** -------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $16.19 $14.41 $13.73 $14.79 -------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) (0.10) (0.05) (0.14) (0.09) Net realized and unrealized gain/(loss) on investments and foreign currency 1.35 3.47 0.92 (0.53) -------------------------------------------------------- Total from investment operations 1.25 3.42 0.78 (0.62) -------------------------------------------------------- Distributions Dividends from net investment income (0.11) ------- (0.10) ------- Distributions from realized capital gains (1.03) (1.64) ------- (0.44) Distributions from capital ------- ------- ------- ------- -------------------------------------------------------- Total distributions (1.14) (1.64) (0.10) (0.44) -------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $16.30 $16.19 $14.41 $13.73 -------------------------------------------------------------------------------------------------------------------- Total Return 8.21% 25.54% 5.70% (4.09%) ==================================================================================================================== Ratios/Supplemental Data -------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000's) $57,774 $61,245 $64,830 $83,340 -------------------------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 2.40% 2.40% 2.40% 2.40% -------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (0.56%) (0.32%) (0.95%) (0.64%) -------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 20% 28% 165% 57% -------------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 2.40% 2.46% 2.48% 2.53% -------------------------------------------------------------------------------------------------------------------- Global Equity Fund ------------------------------------------------------ Class C ----------------------------------------------------- Year Ended October 31, ----------------------------------------------------- 1994 1993 1992 1991 ----------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $13.74 $10.33 $10.76 $10.12 ----------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) (0.10) (0.01) (0.02) 0.25 Net realized and unrealized gain/(loss) on investments and foreign currency 1.15 3.43 (0.37) 0.63 ----------------------------------------------------- Total from investment operations 1.05 3.42 (0.39) 0.88 ----------------------------------------------------- Distributions Dividends from net investment income ------- (0.01) ------- (0.24) Distributions from realized capital gains ------- ------- ------- ------- Distributions from capital ------- ------- (0.04) ------- ----------------------------------------------------- Total distributions ------- (0.01) (0.04) (0.24) ----------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $14.79 $13.74 $10.33 $10.76 ----------------------------------------------------------------------------------------------------------------- Total Return 8.94% 33.06% (3.57%) 8.80% ================================================================================================================= Ratios/Supplemental Data ----------------------------------------------------------------------------------------------------------------- Net assets, end of period (000's) $101,443 $63,503 $14,291 $8,828 ----------------------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 2.40% 2.40% 2.52% 1.47% ----------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (0.91%) (0.40%) (0.27%) 1.41% ----------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 54% 57% 69% 70% ----------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 2.52% 2.72% 2.78% 4.37% -----------------------------------------------------------------------------------------------------------------
* Commencement of Operations # Annualized + Non-annualized ** Net investment income per share has been calculated using the average share method @ Historical Total Return is the one-year performance return which includes Class C performance prior to commencement of operations. The accompanying notes are an integral part of the financial statements. 17 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
Emerging Growth Fund ------------------------------------------------- 01/06/98* to 10/31/98 ------------------------------------------------- Class A Class B Class C ----------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.00 $10.00 $10.00 ----------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) (0.08) (0.12) *** (0.12) ** Net realized and unrealized gain/(loss) on investments and foreign currency (1.04) (1.05) (1.04) ------------------------------------------------- Total from investment operations (1.12) (1.17) (1.16) ----------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $8.88 $8.83 $8.84 ----------------------------------------------------------------------------------------------------------- Total Return (11.20%) + (11.70%) + (11.60%) + =========================================================================================================== Ratios/Supplemental Data Net assets, end of period (000's) $146 $263 $238 ----------------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.70% # 2.35% # 2.35% # ----------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (1.00%) # (1.76%) # (1.67%) # ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 52% + 52% + 52% + ----------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 15.48% # 16.48% # 15.78% # ----------------------------------------------------------------------------------------------------------- Tax-Sensitive Equity Fund --------------------------------------------------- 01/06/98* to 10/31/98 --------------------------------------------------- Class A Class B Class C ----------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.00 $10.00 $10.00 ----------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) (0.01) (0.04) (0.03) Net realized and unrealized gain/(loss) on investments and foreign currency (0.92) (0.92) (0.93) --------------------------------------------------- Total from investment operations (0.93) (0.96) (0.96) ----------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $9.07 $9.04 $9.04 ----------------------------------------------------------------------------------------------------------- Total Return (9.30%) + (9.60%) + (9.60%) + =========================================================================================================== Ratios/Supplemental Data Net assets, end of period (000's) $4,149 $2,900 $3,286 ----------------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.60% # 2.25% # 2.25% # ----------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (0.40%) # (1.80%) # (1.84%) # ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate 38% + 38% + 38% + ----------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 2.51% # 3.24% # 3.16% # -----------------------------------------------------------------------------------------------------------
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Small/Mid Cap Fund ----------------------------------------------------------------------------------- Class A Class B --------------------------------------- ---------------------------------------- Year Year 3/04/96* Year Year 3/04/96* Ended Ended to Ended Ended to 10/31/98 10/31/97 10/31/96 10/31/98 10/31/97** 10/31/96 ----------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $15.51 $12.62 $12.50 $15.33 $12.58 $12.50 ----------------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) (0.15) (0.14) (0.02) (0.25) (0.23) (0.05) Net realized and unrealized gain/(loss) on investments and foreign currency 0.97 3.03 0.14 0.93 2.98 0.13 ----------------------------------------------------------------------------------- Total from investment operations 0.82 2.89 0.12 0.68 2.75 0.08 Distributions Distributions from capital gains (0.24) ------ ------ (0.24) ------ ------ ----------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $16.09 $15.51 $12.62 $15.77 $15.33 $12.58 ----------------------------------------------------------------------------------------------------------------------------------- Total Return 5.51% 22.90% 0.96% + 4.65% 21.86% 0.64% + =================================================================================================================================== Ratios/Supplemental Data ----------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000's) $4,814 $4,170 $2,966 $13,972 $11,802 $6,659 ----------------------------------------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.675% 1.675% 1.675% # 2.325% 2.325% 2.325% # ----------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (0.90%) (1.02%) (0.40%) # (1.55%) (1.67%) (1.05%) # ----------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 162% 145% 92% # 162% 145% 92% # ----------------------------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement and fee waiver by adviser 1.93% 2.24% 2.69% # 2.58% 2.79% 3.05% # ----------------------------------------------------------------------------------------------------------------------------------- Small/Mid Cap Fund ---------------------------------------- Class C ---------------------------------------- Year Year 3/04/96* Ended Ended to 10/31/98 10/31/97** 10/31/96 ------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $15.35 $12.59 $12.50 ------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) (0.25) (0.23) (0.05) Net realized and unrealized gain/(loss) on investments and foreign currency 0.93 2.99 0.14 ------------------------------------------- Total from investment operations 0.68 2.76 0.09 Distributions Distributions from capital gains (0.24) ------ ------ ------------------------------------------------------------------------------------------- Net Asset Value, End of Period $15.79 $15.35 $12.59 ------------------------------------------------------------------------------------------- Total Return 4.64% 21.92% 0.72% + =========================================================================================== Ratios/Supplemental Data ------------------------------------------------------------------------------------------- Net assets, end of period (000's) $16,221 $13,471 $8,241 ------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 2.325% 2.325% 2.325% # ------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (1.55%) (1.67%) (1.05%) # ------------------------------------------------------------------------------------------- Portfolio turnover rate 162% 145% 92% # ------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement and fee waiver by adviser 2.58% 2.78% 3.04% #
* Commencement of Operations ** Net investment income per share has been calculated using the average shares method + Non-annualized # Annualized The accompanying notes are an integral part of the financial statements. 18 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
Growth Equity Fund ------------------------------------------------------------------------------- Class A Class B -------------------------------------- -------------------------------------- Year Year 3/04/96* Year Year 3/04/96* Ended Ended to Ended Ended to 10/31/98 10/31/97 10/31/96 10/31/98 10/31/97 10/31/96 ---------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $17.01 $13.78 $12.50 $16.90 $13.73 $12.50 ---------------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) (0.07) (0.03) 0.28 (0.18) (0.13) 0.24 Net realized and unrealized gain/(loss) on investments and foreign currency 2.22 3.45 1.00 2.17 3.46 0.99 ------------------------------------------------------------------------------- Total from investment operations 2.15 3.42 1.28 1.99 3.33 1.23 ------------------------------------------------------------------------------- Distributions Dividends from net investment income....... ---- (0.19) ---- ---- (0.16) ---- Distributions from realized capital gains.. (1.43) ------- ------- (1.43) ------- ------- ------------------------------------------------------------------------------- (1.43) (0.19) (1.43) (0.16) ---------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $17.73 $17.01 $13.78 $17.46 $16.90 $13.73 ---------------------------------------------------------------------------------------------------------------------------------- Total Return 13.85% 25.13% 10.24% + 12.93% 24.50% 9.84% + ================================================================================================================================== Ratios/Supplemental Data ---------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000's) $3,919 $3,053 $2,244 $11,659 $9,040 $4,748 ---------------------------------------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.65% 1.65% 1.65% 2.30% 2.30% 2.30% # ---------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (0.43%) (0.17%) 4.11% # (1.07%) (0.82%) 4.18% # ---------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 115% 181% 450% # 115% 181% 450% # ---------------------------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 1.91% 2.28% 2.71% # 2.56% 2.78% 3.06% # ---------------------------------------------------------------------------------------------------------------------------------- Growth Equity Fund ------------------------------------- Class C ------------------------------------ Year Year 3/04/96* Ended Ended to 10/31/98 10/31/97 10/31/96 ---------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $16.89 $13.73 $12.50 ---------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) (0.20) (0.13) 0.24 Net realized and unrealized gain/(loss) on investments and foreign currency 2.18 3.46 0.99 ------------------------------------- Total from investment operations 1.98 3.33 1.23 ------------------------------------- Distributions Dividends from net investment income....... ---- (0.17) ---- Distributions from realized capital gains.. (1.43) ------- ------- ------------------------------------- (1.43) (0.17) ---------------------------------------------------------------------------------------- Net Asset Value, End of Period $17.44 $16.89 $13.73 ---------------------------------------------------------------------------------------- Total Return 12.87% 24.50% 9.84% + ======================================================================================== Ratios/Supplemental Data ---------------------------------------------------------------------------------------- Net assets, end of period (000's) $12,965 $12,766 $6,494 ---------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 2.30% 2.30% 2.30% # ---------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (1.06%) (0.82%) 4.13% # ---------------------------------------------------------------------------------------- Portfolio turnover rate 115% 181% 450% # ---------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 2.56% 2.75% 2.96% # ----------------------------------------------------------------------------------------
Growth and Income Fund ------------------------------------------------------------------------- Class A ------------------------------------------------------------------------- Year Year Year Year 4/01/94* Ended Ended Ended Ended to 10/31/98 10/31/97 10/31/96 10/31/95** 10/31/94 - ---------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $21.77 $17.56 $14.72 $13.09 $12.29 - ---------------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.08 0.14 0.18 0.26 0.12 Net realized and unrealized gain/(loss) on investments and foreign currency 4.14 5.26 2.99 1.90 0.76 ------------------------------------------------------------------------- Total from investment operations 4.22 5.40 3.17 2.16 0.88 ------------------------------------------------------------------------- Distributions Dividends from net investment income --- (0.15) (0.21) (0.23) (0.08) Distributions from realized capital gains (1.70) (1.04) (0.12) (0.30) --- Distributions in excess of net investment income (0.03) --- --- --- --- ------------------------------------------------------------------------- Total distributions (1.73) (1.19) (0.33) (0.53) (0.08) - ---------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $24.26 $21.77 $17.56 $14.72 $13.09 - ---------------------------------------------------------------------------------------------------------------------------------- Total Return 20.82% 31.95% 21.84% 17.28% 5.06% @ ================================================================================================================================== Ratios/Supplemental Data Net assets, end of period (000's) $42,916 $34,186 $18,272 $12,180 $8,134 - ---------------------------------------------------------------------------------------------------------------------------------- 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 0.34% 0.66% 1.10% 1.91% 1.72% # - ---------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 18% 39% 49% 40% 45% - ---------------------------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 1.45% 1.50% 1.56% 1.69% 2.08% # - ----------------------------------------------------------------------------------------------------------------------------------
* Commencement of Operations # Annualized + Non-annualized ** Net investment income per share has been calculated using the average share method @ Historical Total Return is the one-year performance return which includes Class C performance prior to commencement of operations. The accompanying notes are an integral part of the financial statements. 19 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
Growth and Income Fund ---------------------------------------------------------------- Class B ---------------------------------------------------------------- Year Year Year Year 4/01/94* Ended Ended Ended Ended to 10/31/98 10/31/97 10/31/96** 10/31/95** 10/31/94 - -------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $21.67 $17.50 $14.69 $13.08 $12.29 - -------------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) (0.07) 0.01 0.07 0.16 0.10 Net realized and unrealized gain/(loss) on investments and foreign currency 4.11 5.23 2.99 1.94 0.77 ---------------------------------------------------------------- Total from investment operations 4.04 5.24 3.06 2.10 0.87 ---------------------------------------------------------------- Distributions Dividends from net investment income ------ (0.03) (0.13) (0.19) (0.08) Distributions from realized capital gains (1.70) (1.04) (0.12) (0.30) -------- ---------------------------------------------------------------- Total distributions (1.70) (1.07) (0.25) (0.49) (0.08) - -------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $24.01 $21.67 $17.50 $14.69 $13.08 - -------------------------------------------------------------------------------------------------------------------------------- Total Return 20.04% 31.40% 21.08% 16.73% 4.98% @ ================================================================================================================================ Ratios/Supplemental Data Net assets, end of period (000's) $75,574 $54,871 $34,740 $19,052 $3,885 - -------------------------------------------------------------------------------------------------------------------------------- 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 (0.32%) 0.01% 0.45% 1.14% 1.07% # - -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 18% 39% 49% 40% 45% - -------------------------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 2.10% 2.15% 2.20% 2.33% 3.12% # - --------------------------------------------------------------------------------------------------------------------------------
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Growth and Income Fund ------------------------------------------------------------------------------ Class C ------------------------------------------------------------------------------ Year Ended October 31, 5/01/91* ------------------------------------------------------------------ to 1998 1997 1996 1995 1994 1993 1992 10/31/91 - ---------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $21.75 $17.56 $14.71 $13.08 $12.71 $11.21 $10.51 $10.00 ---------------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) (0.07) 0.01 0.07 0.18 0.15 0.14 0.18 0.11 Net realized and unrealized gain/(loss) on investments and foreign currency 4.12 5.25 3.00 1.90 0.46 1.48 0.70 0.47 ------------------------------------------------------------------------------- Total from investment operations 4.05 5.26 3.07 2.08 0.61 1.62 0.88 0.58 ------------------------------------------------------------------------------- Distributions Dividends from net investment income ------ (0.03) (0.10) (0.15) (0.13) (0.12) (0.18) (0.07) Distributions from realized capital gains (1.70) (1.04) (0.12) (0.30) (0.11) ------- ------- ------- ------------------------------------------------------------------------------- Total distributions (1.70) (1.07) (0.22) (0.45) (0.24) (0.12) (0.18) (0.07) ---------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $24.10 $21.75 $17.56 $14.71 $13.08 $12.71 $11.21 $10.51 ---------------------------------------------------------------------------------------------------------------------------------- Total Return 20.00% 31.37% 21.12% 16.56% 4.85% 14.57% 8.42% 5.88% + ================================================================================================================================== Ratios/Supplemental Data ---------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000's) $122,395 $98,250 $74,825 $63,154 $46,078 $37,483 $10,821 $2,090 ---------------------------------------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.99% 1.99% 1.99% 1.99% 1.99% 1.99% 1.94% 1.85% # ---------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (0.31%) 0.01% 0.45% 1.26% 1.11% 1.12% 1.51% 2.05% # ---------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 18% 39% 49% 40% 45% 37% 48% 111% # ---------------------------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 2.10% 2.13% 2.20% 2.26% 2.38% 2.46% 3.18% 10.69% # ----------------------------------------------------------------------------------------------------------------------------------
* Commencement of Operations # Annualized + Non-annualized ** Net investment income per share has been calculated using the average share method @ Historical Total Return is the one-year performance return which includes Class C performance prior to commencement of operations. The accompanying notes are an integral part of the financial statements. 20 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
Equity--Income Fund ------------------------------------------------------------------- Class A ------------------------------------------------------------------- Year Year Year Year 4/01/94* Ended Ended Ended Ended to 10/31/98 10/31/97 10/31/96 10/31/95** 10/31/94 - -------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $17.44 $17.37 $15.94 $14.78 $14.59 - -------------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.29 0.33 0.16 0.12 0.02 Net realized and unrealized gain/(loss) on investments and foreign currency 1.46 3.59 2.69 1.83 0.17 ------------------------------------------------------------------- Total from investment operations 1.75 3.92 2.85 1.95 0.19 ------------------------------------------------------------------- Distributions Dividends from net investment income (0.33) (0.18) (0.14) --------- -------- Distributions from realized capital gains (1.22) (3.67) (1.28) (0.79) -------- ------------------------------------------------------------------- Total distributions (1.55) (3.85) (1.42) (0.79) -------- - -------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $17.64 $17.44 $17.37 $15.94 $14.78 - -------------------------------------------------------------------------------------------------------------------------------- Total Return 10.55% 27.24% 19.23% 14.22% 4.82% @ ================================================================================================================================ Ratios/Supplemental Data Net assets, end of period (000's) $36,661 $36,334 $28,470 $22,026 $16,326 - -------------------------------------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.415% 1.34% 1.34% 1.34% 1.34% # - -------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 1.57% 2.01% 0.98% 0.79% 0.13% # - -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 22% 36% 169% 54% 39% - -------------------------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 1.51% 1.55% 1.55% 1.62% 1.79% # - --------------------------------------------------------------------------------------------------------------------------------
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Equity--Income Fund --------------------------------------------------------------- Class B -------------------------------------------------------------- Year Year Year Year 4/01/94* Ended Ended Ended Ended to 10/31/98 10/31/97 10/31/96 10/31/95** 10/31/94 - ------------------------------------------------------------------------------------------------------------------------ Net Asset Value, Beginning of Period $17.24 $17.22 $15.84 $14.77 $14.59 - ------------------------------------------------------------------------------------------------------------------------ Investment Operations: Net investment income/(loss) 0.16 0.23 0.06 0.02 (0.02) Net realized and unrealized gain/(loss) on investments and foreign currency 1.46 3.54 2.69 1.84 0.20 -------------------------------------------------------------- Total from investment operations 1.62 3.77 2.75 1.86 0.18 -------------------------------------------------------------- Distributions Dividends from net investment income (0.21) (0.08) (0.09) --------- --------- Distributions from realized capital gains (1.22) (3.67) (1.28) (0.79) --------- -------------------------------------------------------------- Total distributions (1.43) (3.75) (1.37) (0.79) --------- - ------------------------------------------------------------------------------------------------------------------------ Net Asset Value, End of Period $17.43 $17.24 $17.22 $15.84 $14.77 - ------------------------------------------------------------------------------------------------------------------------ Total Return 9.81% 26.29% 18.59% 13.58% 4.75% @ ======================================================================================================================== Ratios/Supplemental Data Net assets, end of period (000's) $38,954 $36,191 $27,058 $19,874 $5,054 - ------------------------------------------------------------------------------------------------------------------------ Ratio of total expenses to average net assets 2.065% 1.99% 1.99% 1.99% 1.99% # - ------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average net assets 0.93% 1.36% 0.33% 0.13% (0.52%) # - ------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 22% 36% 169% 54% 39% - ------------------------------------------------------------------------------------------------------------------------ Expense ratio before expense reimbursement by adviser 2.16% 2.21% 2.20% 2.32% 2.82% # - ------------------------------------------------------------------------------------------------------------------------
* Commencement of Operations # Annualized + Non-annualized ** Net investment income per share has been calculated using the average share method @ Historical Total Return is the one-year performance return which includes Class C performance prior to commencement of operations. The accompanying notes are an integral part of the financial statements. 21 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
Equity--Income Fund --------------------------------------------------------------------------- Class C --------------------------------------------------------------------------- Year Ended October 31, ---------------------------------------------------------------------------- 1998 1997 1996 1995** 1994 1993 ----------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $17.33 $17.27 $15.84 $14.77 $14.21 $12.05 ----------------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.17 0.23 0.06 0.02 (0.07) 0.01 Net realized and unrealized gain/(loss) on investments and foreign currency 1.46 3.56 2.69 1.84 0.74 2.15 ---------------------------------------------------------------------------- Total from investment operations 1.63 3.79 2.75 1.86 0.67 2.16 ---------------------------------------------------------------------------- Distributions Dividends from net investment income (0.21) (0.06) (0.04) ------- (0.03) ------- Distributions from realized capital gains (1.22) (3.67) (1.28) (0.79) (0.08) ------- Distributions from capital ------- ------- ------- ------- ------- ------- ---------------------------------------------------------------------------- Total distributions (1.43) (3.73) (1.32) (0.79) (0.11) ------- ----------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $17.53 $17.33 $17.27 $15.84 $14.77 $14.21 ----------------------------------------------------------------------------------------------------------------------------------- Total Return 9.83% 26.33% 18.53% 13.58% 4.75% 17.93% =================================================================================================================================== Ratios/Supplemental Data ----------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000's) $95,986 $94,649 $83,855 $83,719 $71,219 $64,223 ----------------------------------------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 2.065% 1.99% 1.99% 1.99% 1.99% 1.99% ----------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets 0.93% 1.36% 0.33% 0.15% (0.49%) 0.27% ----------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 22% 36% 169% 54% 39% 40% ----------------------------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 2.10% 2.19% 2.20% 2.23% 2.29% 2.35% ----------------------------------------------------------------------------------------------------------------------------------- Equity--Income Fund ------------------------------------------------ Class C ------------------------------------------------ Year Ended October 31, 8/28/89* ------------------------------------- to 1992 1991 1990 10/31/89 ------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.70 $8.22 $11.19 $12.25 ------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) (0.01) 0.02 0.05 0.01 Net realized and unrealized gain/(loss) on investments and foreign currency 1.37 2.54 (2.39) (1.07) ------------------------------------------------ Total from investment operations 1.36 2.56 (2.34) (1.06) ------------------------------------------------ Distributions Dividends from net investment income ------- (0.03) (0.05) ------- Distributions from realized capital gains ------- ------- (0.58) ------- Distributions from capital (0.01) (0.05) ------- ------- ------------------------------------------------ Total distributions (0.01) (0.08) (0.63) ------- ------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $12.05 $10.70 $8.22 $11.19 ------------------------------------------------------------------------------------------------------- Total Return 12.75% 31.32% (22.16%) (8.65%) + ======================================================================================================= Ratios/Supplemental Data ------------------------------------------------------------------------------------------------------- Net assets, end of period (000's) $24,291 $15,354 $19,370 $30,627 ------------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 2.47% 2.97% 2.85% 2.57% # ------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (0.15%) 0.27% 0.43% 0.37% # ------------------------------------------------------------------------------------------------------- Portfolio turnover rate 91% 37% 58% 65% ------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 3.00% 3.12% N/A N/A -------------------------------------------------------------------------------------------------------
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Balanced Fund ------------------------------------------------------------------ Class A ------------------------------------------------------------------ Year Year Year Year 4/01/94* Ended Ended Ended Ended to 10/31/98 10/31/97 10/31/96** 10/31/95** 10/31/94 - ---------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $12.58 $12.33 $12.02 $11.13 $11.06 - ---------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.25 0.34 0.39 0.38 0.17 Net realized and unrealized gain/(loss) on investments and foreign currency 1.04 1.52 1.07 1.35 (0.10) ----------------------------------------------------------------- Total from investment operations 1.29 1.86 1.46 1.73 0.07 ----------------------------------------------------------------- Distributions Dividends from net investment income (0.32) (0.45) (0.40) (0.32) --------- Distributions from realized capital gains (2.07) (1.16) (0.75) (0.52) --------- ----------------------------------------------------------------- Total distributions (2.39) (1.61) (1.15) (0.84) --------- - ---------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $11.48 $12.58 $12.33 $12.02 $11.13 - ---------------------------------------------------------------------------------------------------------------------------- Total Return 12.42% 17.01% 13.10% 16.95% 0.76% @ ============================================================================================================================ Ratios/Supplemental Data Net assets, end of period (000's) $14,415 $12,294 $10,873 $10,033 $7,830 - ---------------------------------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.39% 1.34% 1.34% 1.34% 1.34% # - ---------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 2.11% 2.74% 3.32% 3.39% 2.72% # - ---------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 185% 211% 253% 226% 246% - ---------------------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 1.53% 1.59% 1.55% 1.69% 1.86% # - ----------------------------------------------------------------------------------------------------------------------------
* Commencement of Operations # Annualized + Non-annualized ** Net investment income per share has been calculated using the average share method @ Historical Total Return is the one-year performance return which includes Class C performance prior to commencement of operations. The accompanying notes are an integral part of the financial statements. 22 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
Balanced Fund ---------------------------------------------------------------------- Class B ---------------------------------------------------------------------- Year Year Year Year 4/01/94* Ended Ended Ended Ended to 10/31/98 10/31/97** 10/31/96** 10/31/95** 10/31/94 - ------------------------------------------------------------------------------------------------------------------------------ Net Asset Value, Beginning of Period $12.49 $12.26 $11.98 $11.12 $11.06 - ------------------------------------------------------------------------------------------------------------------------------ Investment Operations: Net investment income/(loss) 0.18 0.25 0.31 0.30 0.12 Net realized and unrealized gain/(loss) on investments and foreign currency 1.04 1.53 1.07 1.36 (0.06) ---------------------------------------------------------------------- Total from investment operations 1.22 1.78 1.38 1.66 0.06 ---------------------------------------------------------------------- Distributions Dividends from net investment income (0.24) (0.39) (0.35) (0.28) -------- Distributions from realized capital gains (2.07) (1.16) (0.75) (0.52) -------- ---------------------------------------------------------------------- Total distributions (2.31) (1.55) (1.10) (0.80) -------- - ------------------------------------------------------------------------------------------------------------------------------ Net Asset Value, End of Period $11.40 $12.49 $12.26 $11.98 $11.12 - ------------------------------------------------------------------------------------------------------------------------------ Total Return 11.71% 16.27% 12.35% 16.31% 0.67% @ ============================================================================================================================== Ratios/Supplemental Data Net assets, end of period (000's) $18,929 $17,140 $16,219 $9,875 $4,760 - ------------------------------------------------------------------------------------------------------------------------------ Ratio of total expenses to average net assets 2.04% 1.99% 1.99% 1.99% 1.99% # - ------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average net assets 1.46% 2.09% 2.67% 2.69% 2.07% # - ------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 185% 211% 253% 226% 246% - ------------------------------------------------------------------------------------------------------------------------------ Expense ratio before expense reimbursement by adviser 2.18% 2.23% 2.20% 2.37% 2.73% # - ------------------------------------------------------------------------------------------------------------------------------
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Balanced Fund ----------------------------------------------------------------------------- Class C ----------------------------------------------------------------------------- Year Ended October 31, ----------------------------------------------------------------------------- 1998 1997** 1996** 1995** 1994 1993 - ------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $12.62 $12.35 $12.02 $11.12 $11.52 $10.20 - ------------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.18 0.25 0.32 0.31 0.22 0.21 Net realized and unrealized gain/(loss) on investments and foreign currency 1.05 1.54 1.07 1.35 (0.15) 1.30 ----------------------------------------------------------------------------- Total from investment operations 1.23 1.79 1.39 1.66 0.07 1.51 ----------------------------------------------------------------------------- Distributions Dividends from net investment income (0.24) (0.36) (0.31) (0.24) (0.18) (0.09) Distributions from realized capital gains (2.07) (1.16) (0.75) (0.52) (0.29) (0.10) Distributions from capital ------- ------- ------- ------- ------- ------- ----------------------------------------------------------------------------- Total distributions (2.31) (1.52) (1.06) (0.76) (0.47) (0.19) - ------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $11.54 $12.62 $12.35 $12.02 $11.12 $11.52 - ------------------------------------------------------------------------------------------------------------------------------- Total Return 11.68% 16.21% 12.41% 16.25% 0.67% 15.02% =============================================================================================================================== Ratios/Supplemental Data - ------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000's) $65,049 $68,261 $72,821 $80,626 $86,902 $96,105 - ------------------------------------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 2.04% 1.99% 1.99% 1.99% 1.99% 1.99% - ------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets 1.47% 2.09% 2.67% 2.76% 1.93% 1.96% - ------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 185% 211% 253% 226% 246% 196% - ------------------------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 2.18% 2.20% 2.20% 2.24% 2.22% 2.28% - ------------------------------------------------------------------------------------------------------------------------------- Balanced Fund ------------------------------------------------- Class C ------------------------------------------------- Year Ended October 31, 8/28/89* ---------------------------------- to 1992 1991 1990 10/31/89 - ---------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $9.76 $8.12 $9.84 $10.17 - ---------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.20 0.27 0.32 0.05 Net realized and unrealized gain/(loss) on investments and foreign currency 0.87 1.70 (1.66) (0.38) ----------------------------------------------- Total from investment operations 1.07 1.97 (1.34) (0.33) ----------------------------------------------- Distributions Dividends from net investment income (0.19) (0.33) (0.26) ------- Distributions from realized capital gains (0.44) ------- ------- ------- Distributions from capital ------- ------- (0.12) ------- ----------------------------------------------- Total distributions (0.63) (0.33) (0.38) ------- - ---------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $10.20 $9.76 $8.12 $9.84 - ---------------------------------------------------------------------------------------------------- Total Return 11.25% 24.53% (13.97%) (3.24%) + ==================================================================================================== Ratios/Supplemental Data - ---------------------------------------------------------------------------------------------------- Net assets, end of period (000's) $48,160 $30,724 $34,713 $43,915 - ---------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 2.40% 2.88% 2.63% 2.13% # - ---------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets 1.93% 2.77% 3.34% 3.09% # - ---------------------------------------------------------------------------------------------------- Portfolio turnover rate 171% 84% 73% 84% # - ---------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 2.89% N/A N/A N/A - ----------------------------------------------------------------------------------------------------
* Commencement of Operations # Annualized + Non-annualized ** Net investment income per share has been calculated using the average share method @ Historical Total Return is the one-year performance return which includes Class C performance prior to commencement of operations. The accompanying notes are an integral part of the financial statements. 23 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
Strategic Income Fund -------------------------------------------------------------- Class A -------------------------------------------------------------- Year Year Year Year 11/01/93* Ended Ended Ended Ended to 10/31/98 10/31/97 10/31/96 10/31/95 10/31/94 - --------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $9.76 $9.80 $9.07 $8.90 $10.00 - --------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.67 0.70 0.80 0.78 0.65 Net realized and unrealized gain/(loss) on investments and foreign currency (0.63) 0.28 0.72 0.18 (1.10) -------------------------------------------------------------- Total from investment operations 0.04 0.98 1.52 0.96 (0.45) -------------------------------------------------------------- Distributions Dividends from net investment income (0.67) (0.84) (0.79) (0.79) (0.65) Distributions from realized capital gains (0.14) (0.18) ------ ------ ------ -------------------------------------------------------------- Total distributions (0.81) (1.02) (0.79) (0.79) (0.65) - -------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $8.99 $9.76 $9.80 $9.07 $8.90 - --------------------------------------------------------------------------------------------------------------------------- Total Return 0.22% 10.57% 17.35% 11.43% (3.79%) =========================================================================================================================== Ratios/Supplemental Data Net assets, end of period (000's) $15,296 $15,924 $13,382 $10,041 $15,507 - --------------------------------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.50% 1.50% 1.50% 1.07% 0.41% - --------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 7.02% 7.25% 8.28% 9.08% 8.26% - --------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 162% 193% 68% 180% 136% - --------------------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 1.56% 1.61% 1.65% 1.69% .96% - ---------------------------------------------------------------------------------------------------------------------------
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Strategic Income Fund ----------------------------------------------------------------- Class B ----------------------------------------------------------------- Year Year Year Year 4/01/94* Ended Ended Ended Ended to 10/31/98 10/31/97 10/31/96 10/31/95 10/31/94 - ------------------------------------------------------------------------------------------------------------------------------ Net Asset Value, Beginning of Period $9.76 $9.80 $9.07 $8.90 $9.31 - ------------------------------------------------------------------------------------------------------------------------------ Investment Operations: Net investment income/(loss) 0.61 0.64 0.73 0.73 0.38 Net realized and unrealized gain/(loss) on investments and foreign currency (0.63) 0.28 0.73 0.17 (0.41) ----------------------------------------------------------------- Total from investment operations (0.02) 0.92 1.46 0.90 (0.03) ----------------------------------------------------------------- Distributions Dividends from net investment income (0.61) (0.78) (0.73) (0.73) (0.38) Distributions from realized capital gains (0.14) (0.18) --------- --------- ------- ----------------------------------------------------------------- Total distributions (0.75) (0.96) (0.73) (0.73) (0.38) - ------------------------------------------------------------------------------------------------------------------------------ Net Asset Value, End of Period $8.99 $9.76 $9.80 $9.07 $8.90 - ------------------------------------------------------------------------------------------------------------------------------ Total Return (0.43%) 9.86% 16.59% 10.72% (4.18%) @ ============================================================================================================================== Ratios/Supplemental Data Net assets, end of period (000's) $29,210 $34,590 $30,890 $20,672 $5,440 - ------------------------------------------------------------------------------------------------------------------------------ Ratio of total expenses to average net assets 2.15% 2.15% 2.15% 1.95% 1.00% # - ------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average net assets 6.39% 6.60% 7.63% 8.10% 8.59% # - ------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 162% 193% 68% 180% 136% - ------------------------------------------------------------------------------------------------------------------------------ Expense ratio before expense reimbursement by adviser 2.21% 2.23% 2.27% 2.38% 2.04% # - ------------------------------------------------------------------------------------------------------------------------------
* Commencement of Operations # Annualized @ Historical Total Return is the one-year performance return which includes Class A performance prior to commencement of operations. The accompanying notes are an integral part of the financial statements. 24 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
Strategic Income Fund ------------------------------------------------------------ Class C ------------------------------------------------------------ Year Year Year Year 4/01/94* Ended Ended Ended Ended to 10/31/98 10/31/97 10/31/96 10/31/95 10/31/94 - ------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $9.76 $9.80 $9.07 $8.90 $9.31 - ------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.61 0.64 0.73 0.73 0.38 Net realized and unrealized gain/(loss) on investments and foreign currency (0.63) 0.28 0.73 0.17 (0.41) ------------------------------------------------------------ Total from investment operations (0.02) 0.92 1.46 0.90 (0.03) ------------------------------------------------------------ Distributions Dividends from net investment income (0.61) (0.78) (0.73) (0.73) (0.38) Distributions from realized capital gains (0.14) (0.18) --- --- --- ------------------------------------------------------------ Total distributions (0.75) (0.96) (0.73) (0.73) (0.38) - ------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $8.99 $9.76 $9.80 $9.07 $8.90 - ------------------------------------------------------------------------------------------------------------------------- Total Return (0.43%) 9.86% 16.59% 10.72% (4.20%) @ ========================================================================================================================= Ratios/Supplemental Data Net assets, end of period (000's) $33,537 $32,683 $22,783 $14,273 $8,439 - ------------------------------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 2.15% 2.15% 2.15% 1.95% 1.00% # - ------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 6.37% 6.60% 7.63% 8.25% 8.59% # - ------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 162% 193% 68% 180% 136% - ------------------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 2.21% 2.24% 2.28% 2.37% 1.96% # - -------------------------------------------------------------------------------------------------------------------------
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Investment Quality Bond Fund ---------------------------------------------------------------------- Class A --------------------------------------------------------------------- Year Ended October 31, --------------------------------------------------------------------- 1998 1997 1996 1995 1994 ------------------------------------------------------------------------------------------------------------------------------ Net Asset Value, Beginning of Period $10.52 $10.34 $10.56 $9.74 $11.16 ------------------------------------------------------------------------------------------------------------------------------ Investment Operations: Net investment income/(loss) 0.68 0.67 0.66 0.68 0.60 Net realized and unrealized gain/(loss)on investments 0.10 0.18 (0.20) 0.82 (1.37) --------------------------------------------------------------------- Total from investment operations 0.78 0.85 0.46 1.50 (0.77) --------------------------------------------------------------------- Distributions Dividends from net investment income (0.67) (0.67) (0.68) (0.68) (0.56) Distributions from realized capital gains --- --- --- --- (0.09) Distributions from capital --- --- --- --- --- --------------------------------------------------------------------- Total distributions (0.67) (0.67) (0.68) (0.68) (0.65) ------------------------------------------------------------------------------------------------------------------------------ Net Asset Value, End of Period $10.63 $10.52 $10.34 $10.56 $9.74 ------------------------------------------------------------------------------------------------------------------------------ Total Return 7.63% 8.57% 4.52% 15.91% (7.08%) ============================================================================================================================== Ratios/Supplemental Data ------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (000's) $6,730 $7,110 $9,056 $10,345 $11,150 ------------------------------------------------------------------------------------------------------------------------------ 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 6.45% 6.54% 6.37% 6.72% 5.86% ------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 48% 65% 56% 132% 186% ------------------------------------------------------------------------------------------------------------------------------ Expense ratio before expense reimbursement by adviser 1.54% 1.62% 1.55% 1.73% 1.74% ------------------------------------------------------------------------------------------------------------------------------ Investment Quality Bond Fund -------------------------------------- Class A -------------------------------------- Year Ended October 31, ----------------------------- 5/01/91* to 1993 1992 10/31/91 ------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.56 $10.26 $10.00 -------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.66 0.82 0.40 Net realized and unrealized gain/(loss)on investments 0.64 0.27 0.30 --------------------------------------- Total from investment operations 1.30 1.09 0.70 --------------------------------------- Distributions Dividends from net investment income (0.64) (0.79) (0.40) Distributions from realized capital gains (0.06) --- --- Distributions from capital --- --- (0.04) --------------------------------------- Total distributions (0.70) (0.79) (0.44) -------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $11.16 $10.56 $10.26 -------------------------------------------------------------------------------------------------- Total Return 12.66% 11.00% 7.21% + ================================================================================================== Ratios/Supplemental Data -------------------------------------------------------------------------------------------------- Net assets, end of period (000's) $14,674 $6,773 $2,713 -------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 0.98% 0.00% 0.00% # -------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets 5.82% 7.76% 7.08% # -------------------------------------------------------------------------------------------------- Portfolio turnover rate 41% 44% 39% # -------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 1.57% 2.56% 3.37% # --------------------------------------------------------------------------------------------------
* Commencement of Operations # Annualized + Non-annualized @ Historical Total Return is the one-year performance return which includes Class A performance prior to commencement of operations. The accompanying notes are an integral part of the financial statements. 25 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
Investment Quality Bond Fund ------------------------------------------------------------------ Class B ------------------------------------------------------------------ Year Year Year Year 4/01/94* Ended Ended Ended Ended to 10/31/98 10/31/97 10/31/96 10/31/95 10/31/94 - ------------------------------------------------------------------------------------------------------------------------------ Net Asset Value, Beginning of Period $10.52 $10.33 $10.55 $9.74 $10.21 - ------------------------------------------------------------------------------------------------------------------------------ Investment Operations: Net investment income/(loss) 0.61 0.60 0.60 0.61 0.33 Net realized and unrealized gain/(loss)on investments 0.10 0.20 (0.20) 0.82 (0.51) ------------------------------------------------------------------ Total from investment operations 0.71 0.80 0.40 1.43 (0.18) ------------------------------------------------------------------ Distributions Dividends from net investment income (0.61) (0.61) (0.62) (0.62) (0.29) - ------------------------------------------------------------------------------------------------------------------------------ Net Asset Value, End of Period $10.62 $10.52 $10.33 $10.55 $9.74 - ------------------------------------------------------------------------------------------------------------------------------ Total Return 6.93% 8.05% 3.92% 15.12% (7.34%)@ ============================================================================================================================== Ratios/Supplemental Data Net assets, end of period (000's) $4,845 $4,613 $4,678 $3,472 $489 - ------------------------------------------------------------------------------------------------------------------------------ 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 5.81% 5.89% 5.72% 5.95% 5.70% # - ------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 48% 65% 56% 132% 186% - ------------------------------------------------------------------------------------------------------------------------------ Expense ratio before expense reimbursement by adviser 2.20% 2.33% 2.27% 2.69% 4.88% # - ------------------------------------------------------------------------------------------------------------------------------
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Investment Quality Bond Fund -------------------------------------------------------------------- Class C -------------------------------------------------------------------- Year Year Year Year 4/01/94* Ended Ended Ended Ended to 10/31/98 10/31/97 10/31/96 10/31/95 10/31/94 - ------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.52 $10.33 $10.55 $9.74 $10.21 - ------------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.61 0.60 0.60 0.61 0.33 Net realized and unrealized gain/(loss)on investments 0.10 0.20 (0.20) 0.82 (0.51) -------------------------------------------------------------------- Total from investment operations 0.71 0.80 0.40 1.43 (0.18) -------------------------------------------------------------------- Distributions Dividends from net investment income (0.61) (0.61) (0.62) (0.62) (0.29) - ------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $10.62 $10.52 $10.33 $10.55 $9.74 - ------------------------------------------------------------------------------------------------------------------------------- Total Return 6.93% 8.05% 3.92% 15.12% (7.34%) @ =============================================================================================================================== Ratios/Supplemental Data Net assets, end of period (000's) $5,532 $6,109 $7,543 $7,206 $2,406 - ------------------------------------------------------------------------------------------------------------------------------- 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 5.81% 5.89% 5.72% 6.00% 5.70% # - ------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 48% 65% 56% 132% 186% - ------------------------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 2.20% 2.29% 2.22% 2.50% 3.05% # - -------------------------------------------------------------------------------------------------------------------------------
* Commencement of Operations # Annualized + Non-annualized @ Historical Total Return is the one-year performance return which includes Class A performance prior to commencement of operations. The accompanying notes are an integral part of the financial statements. 26 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
National Municipal Bond Fund ----------------------------------------------------------------------- Class A ----------------------------------------------------------------------- Year Ended October 31, 7/06/93* ------------------------------------------------------- to 1998 1997 1996 1995 1994 10/31/93 - --------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.09 $9.73 $9.62 $8.82 $10.25 $10.00 - --------------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.47 0.48 0.48 0.51 0.51 0.17 Net realized and unrealized gain/(loss)on investments 0.13 0.36 0.11 0.80 (1.43) 0.24 -------------------------------------------------------------------- Total from investment operations 0.60 0.84 0.59 1.31 (0.92) 0.41 -------------------------------------------------------------------- Distributions Dividends from net investment income (0.47) (0.48) (0.48) (0.51) (0.51) (0.16) - --------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $10.22 $10.09 $9.73 $9.62 $8.82 $10.25 - --------------------------------------------------------------------------------------------------------------------------------- Total Return 6.04% 8.85% 6.31% 15.26% (9.24%) 4.17% + ================================================================================================================================= Ratios/Supplemental Data Net assets, end of period (000's) $5,820 $6,347 $7,710 $7,618 $7,663 $9,131 - --------------------------------------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.00% 0.99% 0.99% 0.80% 0.57% 0.23% # - --------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 4.60% 4.87% 4.99% 5.55% 5.28% 4.86% # - --------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 43% 29% 49% 44% 6% 150% # - --------------------------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 1.23% 1.23% 1.25% 1.34% 1.26% 1.10% # - ---------------------------------------------------------------------------------------------------------------------------------
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National Municipal Bond Fund ------------------------------------------------------------------- Class B ------------------------------------------------------------------- Year Year Year Year 4/01/94* Ended Ended Ended Ended to 10/31/98 10/31/97 10/31/96 10/31/95 10/31/94 - ----------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.09 $9.73 $9.62 $8.81 $9.30 - ----------------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.38 0.40 0.40 0.43 0.25 Net realized and unrealized gain/(loss)on investments 0.13 0.36 0.11 0.81 (0.49) ------------------------------------------------------------------- Total from investment operations 0.51 0.76 0.51 1.24 (0.24) ------------------------------------------------------------------- Distributions Dividends from net investment income (0.38) (0.40) (0.40) (0.43) (0.25) - ----------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $10.22 $10.09 $9.73 $9.62 $8.81 - ----------------------------------------------------------------------------------------------------------------------------------- Total Return 5.15% 7.94% 5.41% 14.42% (9.71%) @ =================================================================================================================================== Ratios/Supplemental Data Net assets, end of period (000's) $5,273 $6,532 $6,130 $5,876 $2,036 - ----------------------------------------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.85% 1.84% 1.84% 1.70% 1.24% # - ----------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 3.75% 4.02% 4.14% 4.59% 4.62% # - ----------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 43% 29% 49% 44% 6% # - ----------------------------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 2.08% 2.15% 2.11% 2.41% 2.81% # - -----------------------------------------------------------------------------------------------------------------------------------
* Commencement of Operations # Annualized + Non-annualized @ Historical Total Return is the one-year performance return which includes Class A performance prior to commencement of operations. The accompanying notes are an integral part of the financial statements. 27 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) - --------------------------------------------------------------------------------
National Municipal Bond Fund ----------------------------------------------------------------- Class C ----------------------------------------------------------------- Year Year Year Year 4/01/94* Ended Ended Ended Ended to 10/31/98 10/31/97 10/31/96 10/31/95 10/31/94 - --------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $10.09 $9.73 $9.62 $8.81 $9.30 - --------------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.38 0.40 0.40 0.43 0.25 Net realized and unrealized gain/(loss)on investments 0.13 0.36 0.11 0.81 (0.49) ----------------------------------------------------------------- Total from investment operations 0.51 0.76 0.51 1.24 (0.24) ----------------------------------------------------------------- Distributions Dividends from net investment income (0.38) (0.40) (0.40) (0.43) (0.25) - --------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $10.22 $10.09 $9.73 $9.62 $8.81 - --------------------------------------------------------------------------------------------------------------------------------- Total Return 5.15% 7.94% 5.41% 14.42% (9.71%) @ ================================================================================================================================= Ratios/Supplemental Data Net assets, end of period (000's) $5,147 $5,305 $5,693 $6,834 $1,911 - --------------------------------------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.85% 1.84% 1.84% 1.70% 1.24% # - --------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets 3.75% 4.02% 4.14% 4.53% 4.62% # - ---------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 43% 29% 49% 44% 6% - ---------------------------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 2.08% 2.15% 2.25% 2.63% 2.78% # - ----------------------------------------------------------------------------------------------------------------------------------
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U.S. Government Securities Fund --------------------------------------------------------------------------------- Class A --------------------------------------------------------------------------------- Year Ended October 31, -------------------------------------------------------------------------------- 1998 1997 1996** 1995 1994 1993 ----------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $9.94 $9.80 $9.98 $9.45 $10.35 $10.04 ----------------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.56 0.59 0.56 0.63 0.53 0.51 Net realized and unrealized gain/(loss)on investments 0.16 0.13 (0.12) 0.57 (0.74) 0.34 -------------------------------------------------------------------------------- Total from investment operations 0.72 0.72 0.44 1.20 (0.21) 0.85 -------------------------------------------------------------------------------- Distributions Dividends from net investment income (0.58) (0.58) (0.56) (0.67) (0.50) (0.50) Dividends in excess of net investment income ------- ------- (0.06) ------- ------- ------- Distributions from realized capital gains ------- ------- ------- ------- (0.19) (0.04) Distributions from capital ------- ------- ------- ------- ------- ------- -------------------------------------------------------------------------------- Total distributions (0.58) (0.58) (0.62) (0.67) (0.69) (0.54) ----------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $10.08 $9.94 $9.80 $9.98 $9.45 $10.35 ----------------------------------------------------------------------------------------------------------------------------------- Total Return 7.41% 7.56% 4.64% 13.15% (2.13%) 8.64% =================================================================================================================================== Ratios/Supplemental Data ----------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000's) $49,624 $53,235 $72,774 $81,179 $100,622 $163,296 ----------------------------------------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 1.25% 1.25% 1.25% 1.25% 1.25% 1.07% ----------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets 5.65% 6.20% 5.71% 6.54% 5.39% 4.97% ----------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 116% 364% 477% 469% 279% 208% ----------------------------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 1.40% 1.42% 1.41% 1.45% 1.47% 1.42% ----------------------------------------------------------------------------------------------------------------------------------- U.S. Government Securities Fund ------------------------------------------ Class A ------------------------------------------ Year Ended October 31, 8/28/89* ------------------------------- to 1992 1991 1990 10/31/89 ------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $9.89 $9.47 $9.74 $9.73 ------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.74 0.84 0.75 0.15 Net realized and unrealized gain/(loss)on investments 0.13 0.42 (0.20) 0.01 ----------------------------------------------- Total from investment operations 0.87 1.26 0.55 0.16 ----------------------------------------------- Distributions Dividends from net investment income (0.72) (0.84) (0.75) (0.15) Dividends in excess of net investment income --- --- --- --- Distributions from realized capital gains --- --- --- --- Distributions from capital --- --- (0.07) --- ------------------------------------------------ Total distributions (0.72) (0.84) (0.82) (0.15) -------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $10.04 $9.89 $9.47 $9.74 -------------------------------------------------------------------------------------------------- Total Return 9.15% 13.86% 5.90% 1.66% + ================================================================================================== Ratios/Supplemental Data - --------------------------------------------------------------------------------------------------- Net assets, end of period (000's) $118.543 $45,662 $43,299 $56,069 - --------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 0.24% 0.68% 2.28% 2.18% # - --------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets 7.21% 8.65% 7.89% 8.54% # - -------------------------------------------------------------------------------------------------- Portfolio turnover rate 108% 195% 71% 93% # - -------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 2.13% 2.61% 2.57% N/A - --------------------------------------------------------------------------------------------------
* Commencement of Operations + Non-annualized # Annualized ** Net investment income per share has been calculated using the average share method @ Historical Total Return is the one-year performance return which includes Class C performance prior to commencement of operations. The accompanying notes are an integral part of the financial statements. 28 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) ================================================================================
U.S. Government Securities Fund -------------------------------------------------------------------- Class B -------------------------------------------------------------------- Year Year Year Year 4/01/94* Ended Ended Ended Ended to 10/31/98 10/31/97 10/31/96** 10/31/95 10/31/94 - ---------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $9.94 $9.80 $9.98 $9.45 $9.77 - ---------------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.49 0.54 0.50 0.56 0.29 Net realized and unrealized gain/(loss) on investments 0.15 0.11 (0.12) 0.58 (0.35) -------------------------------------------------------------------- Total from investment operations 0.64 0.65 0.38 1.14 (0.06) -------------------------------------------------------------------- Distributions Dividends from net investment income (0.51) (0.51) (0.50) (0.61) (0.26) Distributions in excess of net investment income ------ ------ (0.06) ------ ------ -------------------------------------------------------------------- Total distributions (0.51) (0.51) (0.56) (0.61) (0.26) - ---------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $10.07 $9.94 $9.80 $9.98 $9.45 - ---------------------------------------------------------------------------------------------------------------------------------- Total Return 6.60% 6.84% 3.97% 12.45% (2.44%) @ ================================================================================================================================= Ratios/Supplemental Data Net assets, end of period (000's) $17,850 $16,659 $19,444 $13,993 $2,746 - --------------------------------------------------------------------------------------------------------------------------------- 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 4.99% 5.55% 5.06% 5.53% 5.06% # - --------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 116% 364% 477% 469% 279% - --------------------------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 2.05% 2.09% 2.06% 2.28% 3.40% # - ---------------------------------------------------------------------------------------------------------------------------------
================================================================================
U.S. Government Securities Fund ------------------------------------------------------------------- Class C ------------------------------------------------------------------- Year Year Year Year 4/01/94* Ended Ended Ended Ended to 10/31/98 10/31/97** 10/31/96 10/31/95 10/31/94 - --------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $9.94 $9.80 $9.98 $9.45 $9.77 - --------------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income/(loss) 0.49 0.54 0.50 0.56 0.26 Net realized and unrealized gain/(loss)on investments 0.15 0.11 (0.12) 0.58 (0.32) ------------------------------------------------------------------- Total from investment operations 0.64 0.65 0.38 1.14 (0.06) ------------------------------------------------------------------- Distributions Dividends from net investment income (0.51) (0.51) (0.50) (0.61) (0.26) Distributions in excess of net investment income ------ ------ (0.06) ------ ------ ------------------------------------------------------------------- Total distributions (0.51) (0.51) (0.56) (0.61) (0.26) - --------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $10.07 $9.94 $9.80 $9.98 $9.45 - --------------------------------------------------------------------------------------------------------------------------------- Total Return 6.60% 6.84% 3.97% 12.45% (2.44%) @ ================================================================================================================================= Ratios/Supplemental Data Net assets, end of period (000's) $12,708 $14,716 $20,009 $20,186 $10,766 - --------------------------------------------------------------------------------------------------------------------------------- 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% 5.55% 5.06% 5.74% 5.06% # - --------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 116% 364% 477% 469% 279% - --------------------------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 2.05% 2.09% 2.06% 2.15% 2.44% # - ---------------------------------------------------------------------------------------------------------------------------------
* Commencement of Operations + Non-annualized # Annualized ** Net investment income per share has been calculated using the average share method @ Historical Total Return is the one-year performance return which includes Class A performance prior to commencement of operations. The accompanying notes are an integral part of the financial statements. 29 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) ================================================================================
Money Market Fund ------------------------------------------------------------------- Class A ------------------------------------------------------------------- Year Ended October 31, ------------------------------------------------------------------- 1998 1997 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------ Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00 - ------------------------------------------------------------------------------------------------------------------------------ Investment Operations: Net investment income 0.05 0.05 0.05 0.05 0.03 Distributions Dividends from net investment income (0.05) (0.05) (0.05) (0.05) (0.03) - ------------------------------------------------------------------------------------------------------------------------------ Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00 - ------------------------------------------------------------------------------------------------------------------------------ Total Return 5.18% 5.13% 5.16% 5.60% 3.48% ============================================================================================================================== Ratios/Supplemental Data - ------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (000's) $10,295 $11,057 $8,087 $11,379 $8,499 - ------------------------------------------------------------------------------------------------------------------------------ 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 5.06% 5.02% 5.02% 5.45% 3.40% - ------------------------------------------------------------------------------------------------------------------------------ Expense ratio before expense reimbursement by adviser 0.92% 0.96% 0.95% 0.96% 0.95% - ------------------------------------------------------------------------------------------------------------------------------ Money Market Fund --------------------------------------------------------------- Class A --------------------------------------------------------------- Year Ended October 31, -------------------------------------------------- 8/28/89* to 1993 1992 1991 1990 10/31/89 - -------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00 - -------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income 0.03 0.04 0.06 0.06 0.01 Distributions Dividends from net investment income (0.03) (0.04) (0.06) (0.06) (0.01) - -------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00 - -------------------------------------------------------------------------------------------------------------------------- Total Return 2.80% 3.69% 6.22% 5.76% 0.53% + ========================================================================================================================== Ratios/Supplemental Data - -------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000's) $18,109 $2,244 $3,421 $4,526 $7,781 - -------------------------------------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 0.50% 0.50% 1.00% 2.45% 1.96% # - -------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets 2.75% 3.77% 6.01% 5.52% 6.59% # - -------------------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 1.32% 2.71% 2.68% 2.47% N/A - --------------------------------------------------------------------------------------------------------------------------
================================================================================
Money Market Fund ------------------------------------------------------------------------ Class B ---------------------------------------------------------------------- Year Year Year Year 4/01/94* Ended Ended Ended Ended to 10/31/98 10/31/97 10/31/96 10/31/95 10/31/94 - ---------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00 - ---------------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income 0.05 0.05 0.05 0.05 0.02 Distributions Dividends from net investment income (0.05) (0.05) (0.05) (0.05) (0.02) - ---------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00 - ---------------------------------------------------------------------------------------------------------------------------------- Total Return 5.18% 5.13% 5.16% 5.60% 3.48% @ ================================================================================================================================== Ratios/Supplemental Data Net assets, end of period (000's) $5,919 $3,332 $3,062 $1,564 $312 - ---------------------------------------------------------------------------------------------------------------------------------- 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 5.02% 5.02% 5.02% 5.52% 3.96% # - ---------------------------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 0.98% 1.05% 1.18% 1.41% 4.83% # - ----------------------------------------------------------------------------------------------------------------------------------
* Commencement of Operations + Non-annualized # Annualized @ Historical Total Return is the one-year performance return which includes Class A performance prior to commencement of operations. The accompanying notes are an integral part of the financial statements. 30 NORTH AMERICAN FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period) ================================================================================
Money Market Fund --------------------------------------------------------------------- Class C --------------------------------------------------------------------- Year Year Year Year 4/01/94* Ended Ended Ended Ended to 10/31/98 10/31/97 10/31/96 10/31/95 10/31/94 - --------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00 - --------------------------------------------------------------------------------------------------------------------------------- Investment Operations: Net investment income 0.05 0.05 0.05 0.05 0.02 Distributions Dividends from net investment income (0.05) (0.05) (0.05) (0.05) (0.02) - --------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00 - --------------------------------------------------------------------------------------------------------------------------------- Total Return 5.18% 5.13% 5.16% 5.60% 3.48% @ ================================================================================================================================= Ratios/Supplemental Data Net assets, end of period (000's) $8,237 $7,539 $9,840 $9,394 $12,170 - --------------------------------------------------------------------------------------------------------------------------------- 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 5.05% 5.01% 5.02% 5.46% 3.96% # - --------------------------------------------------------------------------------------------------------------------------------- Expense ratio before expense reimbursement by adviser 0.94% 1.00% 0.98% 0.95% 1.18% # - ---------------------------------------------------------------------------------------------------------------------------------
* Commencement of Operations + Non-annualized # Annualized @ Historical Total Return is the one-year performance return which includes Class A performance prior to commencement of operations. The accompanying notes are an integral part of the financial statements. 31 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1998 (showing percentage of total value of investments) - -------------------------------------------------------------------------------- ---------------------------------------------------------------------------- International Small Cap Fund ---------------------------------------------------------------------------- Shares Value ------ ----- COMMON STOCKS - 65.99% Agricultural Machinery - 0.10% Kverneland AS 775 $17,050 ------- Agriculture - 1.59% Nutreco Holding N.V. 8,000 271,883 ------- Air Travel - 1.57% Ryanair Holdings PLC, ADR * 9,100 267,312 ------- Automobiles & Related - 0.46% Haldex * 6,995 78,857 ------ Broadcasting - 3.02% Capital Radio 20,400 171,742 Editoriale L'Espresso SPA 9,650 85,932 Flextech PLC 27,550 258,218 ------- 515,892 Business Services - 10.11% Altran Technologies SA 3,050 596,726 Brunel International * 4,975 140,587 BTG PLC 15,075 83,262 Kobenhavns Lufthavne 2,275 263,695 Select Appointments Holdings PLC 25,775 224,326 Semcon AB * 11,625 100,524 Sixt AG 1,525 314,851 ------- 1,723,971 Computers & Business Equipment - 3.17% Fuji Software ABC, Inc. 4,600 173,615 Psion PLC 44,350 367,431 ------- 541,046 Conglomerates - 1.06% Misys 25,785 180,825 ------- Containers & Glass - 1.34% Schmalbach Lubeca AG 1,500 228,645 ------- Drugs & Health Care - 3.15% Icon PLC * 5,000 140,000 Orvitus AB * 7,350 49,904 Schwarz Pharma AG 4,950 346,635 ------- 536,539 Electronics - 2.26% VTech Holdings, Ltd. 102,800 385,583 ------- Energy - 0.93% Vesta Wind Systems * 3,275 158,602 ------- Food & Beverages - 2.52% Chipita International * 1,125 31,502 Raisio Tehtaat Oy PLC 29,500 398,174 ------- 429,676 Homebuilders - 1.37% IHC Caland NV 5,175 234,038 ------- Hotels & Restaurants - 9.75% Doutor Coffee Company 7,000 222,165 Grupo Posadas SA * 246,575 92,697 J.D. Wetherspoon PLC 52,965 175,522 Pizza Express 38,275 486,862 Tele Pizza * 83,975 685,469 ------- 1,662,715 Household Appliances & Furnishings - 3.14% Dorel Industries, Inc. * 9,675 $129,481 Hunter Douglas 6,350 227,702 Industrie Natuzzi SPA, ADR 9,825 178,692 ------- 535,875 Industrial Machinery - 2.73% KCI Konecranes International PLC 4,525 196,700 Tomra Systems AS 7,125 200,295 Turbon International AG * 5,550 70,359 ------ 467,354 International Oil - 0.88% British-Borneo Petroleum 39,716 149,231 ------- Leisure Time - 3.16% Cinar Films, Inc., Class B * 20,250 427,781 KTM-Motorraholding * 1,600 110,534 ------- 538,315 Paper - 0.17% Aracruz Cellulose SA * 3,500 29,313 ------ Retail Trade - 3.87% Beter Bed Holdings NV 3,225 86,301 Bulgari SPA 48,925 267,968 Douglas Holdings AG New * 202 11,231 Douglas Holdings AG 4,275 245,171 Narvesen ASA 2,300 49,976 ------ 660,647 Software - 4.37% Dassault Systems SA 7,725 294,768 Eidos PLC ADR * 6,775 94,003 Ixos Software * 400 43,465 JBA Holdings PLC 33,125 160,780 Nippon System Development 6,000 152,856 ------- 745,872 Telecommunication Services - 2.88% Energis PLC * 23,425 315,611 Global Telesystems Group, Inc. * 4,400 176,275 ------- 491,886 Telephone - 2.39% Netcom Systems AB, Class B * 10,875 408,196 ------- TOTAL COMMON STOCKS (Cost $10,035,650) $11,259,323 ----------- PREFERRED STOCKS - 5.54% Automobiles - 2.28% Porsche AG 220 $389,134 -------- Financial Services - 3.26% Marschollek, Lautenschlaeger und 1,090 556,022 ------- TOTAL PREFERRED STOCKS (Cost $630,836) $945,156 -------- WARRANTS - 0.01% Gold Peak Industries (Expiration date 08/06/00; strike price HKD 5.25) * 36,000 $865 ---- TOTAL WARRANTS (Cost $0) $865 ---- Principal Value --------- ----- SHORT TERM INVESTMENTS - 14.18% Navigator Securities Lending Trust $1,714,449 $1,714,449 SSGA Money Market Fund 704,421 704,421 ------- $2,418,870 ========== The accompanying notes are an integral part of the financial statements. 32 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued (showing percentage of total value of investments) - -------------------------------------------------------------------------------- Principal Value --------- ----- REPURCHASE AGREEMENT - 14.28% Repurchase Agreement with State Street Bank & Trust Co. dated 10/30/98 at 4.25%, to be repurchased at $2,436,863 on 11/02/98, collateralized by $2,115,000 U.S. Treasury Notes, 7.00% due 07/15/06 (valued at $2,531,965 including interest) $2,436,000 $2,436,000 ---------- TOTAL INVESTMENTS (International $17,060,214 Small Cap Fund) (Cost $15,521,356) ---------------------------------------------------------------------------- International Growth and Income Fund ---------------------------------------------------------------------------- Shares Value ------ ----- COMMON STOCKS - 87.10% Apparel & Textiles - 0.84% Christian Dior 2,200 $232,437 -------- Auto Parts - 2.11% Autoliv, Inc. 17,500 582,885 ------- Banking - 10.06% Banco Pinto & Sotto Mayor * 10,313 197,623 Bank of Austria AG 2,000 108,818 Bank of Austria AG 2,200 105,351 Cie Fin Paribas 3,700 271,978 Dao Heng Bank Group 123,000 256,482 Bank of Fukuoka, Ltd. 48,000 192,692 Lloyds TSB Group PLC 23,700 292,542 Royal Bank of Canada 8,900 410,104 Societe Generale 2,244 296,863 Sparebanken * 8,820 167,692 UBS AG 900 246,698 Westpac Banking Corp., Ltd. 34,000 206,911 Yapi ve Kredi Bankasi AS 2,058,013 23,224 ------ 2,776,978 Broadcasting - 1.95% Central Europe Media Enterprises, 5,300 33,788 Grupo Televisa SA * 11,500 311,937 Wolters Kluwer NV 1,000 193,743 ------- 539,468 Building & Construction - 4.54% ACS Actividades 8,700 277,627 Henderson Land Development Co. 116,000 570,639 Taiheiyo Cement Corp. 67,000 155,747 Tostem Corporation 16,000 248,550 ------- 1,252,563 Business Services - 3.03% Vivendi 3,665 837,107 ------- Capital Goods - 0.60% Lucas Varity PLC, ADS 48,200 164,571 ------- Chemicals - 2.89% BASF AG * 8,900 377,169 Mitsubishi Chemical Corp. * 85,000 153,114 Rhodia SA* 16,050 267,216 ------- 797,499 Computers & Business Equipment - 0.89% Fujitsu, Ltd. 23,000 244,639 ------- Shares Value ------ ----- Conglomerates - 1.59% ABSA Group Ltd. 16,700 $90,996 First Philippine Holdings Corp. 139,200 72,446 Mitsubishi Corp. 52,000 275,210 ------- 438,652 Containers & Glass - 0.59% St. Gobain 1,100 162,746 ------- Crude Petroleum & Natural Gas - 1.26% Elf Aquitaine SA 2,997 346,851 ------- Drugs & Health Care - 10.51% Gambro AB * 9,000 100,307 Merck KGAA * 6,300 258,618 Roche Holdings AG 39 454,659 Sanofi SA 1,780 278,731 Schering AG 2,590 305,205 Smith & Nephew Associated Cos. * 96,500 268,110 Smithkline Beecham 26,600 332,567 Takeda Chemical Industries, Ltd. 8,000 260,079 Yamanouchi Pharmaceutical Co., 12,000 343,798 Zeneca Group PLC 7,800 299,478 ------- 2,901,552 Electric Utilities - 3.64% Companhia Paranaense de 13,300 103,075 Iberdrola SA 28,000 452,222 National Power * 15,000 130,297 Veba AG 5,700 318,292 ------- 1,003,886 Electronics - 5.40% ABB AG 150 179,517 ASM Lithography Holding NV * 6,500 164,896 Fanuc Co., Ltd. 7,000 210,156 Philips Electronics 7,870 418,678 Samsung Electronics Co. 30 682 Sony Corp. 3,700 234,860 ST Microelectronics * 4,600 281,503 ------- 1,490,292 Energy - 0.22% JSC Surgutneftagaz * 29,900 59,800 ------ Food & Beverages - 5.08% Danisco AS 2,200 121,562 Nestle SA 265 563,123 PIC International Group * 2,000 2,628 Tate & Lyle PLC 64,640 384,067 Unilever 33,000 331,392 ------- 1,402,772 Industrial Machinery - 0.52% Tadano, Ltd. * 57,000 144,725 ------- Insurance - 8.26% Allied Zurich PLC * 20,000 237,665 Bayerische Vita * 9,500 56,204 Munchener Rucekversicherungs 1,020 466,743 Munchener Rucekversicherungs Rfd* 40 18,207 QBE Insurance Group 69,000 272,746 Royal & Sun Alliance Insurance 27,000 247,189 Schweiz Rueckversicherungs 250 556,334 Zurich Allied AG * 700 425,072 ------- 2,280,160 The accompanying notes are an integral part of the financial statements. 33 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued (showing percentage of total value of investments) - -------------------------------------------------------------------------------- Shares Value ------ ----- International Oil - 1.89% Pakistan State Oil 2,446 $2,412 Shell Transport & Trading Co. 58,200 351,648 YPF Sociedad Anonima 5,830 168,706 ------- 522,766 Liquor - 0.58% South African Breweries 8,168 158,763 ------- Metals, Materials & Paper - 2.20% Anglogold, Ltd. 5,682 289,302 Fletcher Challenge, Ltd. 123,000 78,162 Stora Kopparbergs Bergslags AB * 21,800 240,174 ------- 607,638 Other - 0.76% De Boer Unigro 3,400 209,264 ------- Petroleum Services - 1.75% Petrofina SA 300 111,436 Total SA * 3,223 371,847 ------- 483,283 Publishing - 0.83% Lagardere S.C.A 5,700 229,399 ------- Retail Grocery - 0.42% Ito-Yokado Co., Ltd. 2,000 116,658 ------- Retail Trade - 2.08% Carrefour SA 359 238,304 Edgars Stores * 9,200 41,501 Vendex NV 7,400 294,265 ------- 574,070 Steel - 1.15% Acerinox SA 4,000 90,160 Rautaruukki OY 35,100 208,315 Tokyo Steel Manufacturing Co., 4,000 18,185 ------ 316,660 Technology - 0.17% Olicom A/S * 8,200 46,807 ------ Telecommunications - 9.95% Cable & Wireless PLC 20,500 229,883 DDI Corp. 129 376,222 Gn Store Nord 10,800 356,685 Pakistan Telecom. Corp. * 317,500 110,918 Portugal Telecom * 4,300 203,719 RWE AG * 8,700 471,633 Swisscom AG * 1,300 440,271 Telecomunicacoes Brasileiras S/A- Telebras, ADR 3,410 258,947 Telecom Italia SPA 59,438 299,447 ------- 2,747,725 Tobacco - 0.65% British American Tobacco PLC * 20,000 179,672 ------- Transport & Trade Services - 0.69% Hays 4,000 58,914 Stolt-Neilsen SA * 8,500 103,061 TNT Post Groep NV * 1,100 29,436 ------ 191,411 TOTAL COMMON STOCKS (Cost $24,680,033) $24,045,438 ----------- PREFERRED STOCKS - 3.08% Automobiles - 0.34% Volkswagen AG 2,000 $93,933 ------- Banking - 0.37% Westpac Banking Strypes Trust 3,600 103,275 ------- Broadcasting - 1.53% News Corporation, Ltd., ADS 70,100 421,780 ------- Capital Goods - 0.84% GEA AG * 9,100 232,375 ------- TOTAL PREFERRED STOCKS (Cost $836,558) $851,363 -------- Principal Value --------- ----- CONVERTIBLE BONDS - 1.07% Compass Group PLC, 5.75% due 10/05/07 GBP 85,000 $222,288 MTI Capital Cayman, Ltd., 144A, 0.50% due 10/01/07 * JPY 9,000,000 34,161 MTI Capital Cayman, Ltd., 0.50% due 10/01/07 * 10,000,000 37,957 ------ TOTAL CONVERTIBLE BONDS (Cost $308,458) $294,406 -------- WARRANTS - 0.01% Munchener Rucekversicherungs * Expiring 06/03/02 40 $1,739 ------ TOTAL WARRANTS (Cost $0) $1,739 ------ SHORT TERM INVESTMENTS - 7.40% Navigator Securities Lending Trust $2,041,974 $2,041,974 SSGA Money Market Fund 1,000 1,000 ----- $2,042,974 ---------- REPURCHASE AGREEMENT - 1.34% Repurchase Agreement with State Street Bank & Trust Co, dated 10/30/98 at 4.20%, to be repurchased at $370,125 on 11/02/98, collateralized by $360,000 U.S. Treasury Bonds, 7.75% due 01/31/00 (valued at $388,724, including interest) $370,000 $370,000 -------- TOTAL INVESTMENTS (International Growth & Income Fund) (Cost $28,238,023) $27,604,181 ----------- ---------------------------------------------------------------------------- Global Equity Fund ---------------------------------------------------------------------------- Shares Value ------ ----- COMMON STOCKS - 92.77% Aluminum - 1.27% Aluminum Company of America 19,800 $1,569,150 ---------- Auto Parts - 1.22% Borg-Warner Automotive, Inc. 32,200 1,509,375 --------- Automobiles - 1.81% Volkswagen AG 29,830 2,241,977 --------- Banking - 8.40% ABN AMRO Holdings NV 84,400 1,580,990 Bank of Ireland 97,422 1,781,377 The accompanying notes are an integral part of the financial statements. 34 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued (showing percentage of total value of investments) - -------------------------------------------------------------------------------- Shares Value ------ ----- Banking - 8.40% - cont'd. Bank One Corp. * 41,958 $2,050,697 Chase Manhattan Corp. 31,800 1,806,638 Mellon Bank Corp. 29,200 1,755,650 Nordbanken AB 234,800 1,407,717 --------- 10,383,069 Broadcasting - 1.02% Mediaset 198,700 1,258,577 --------- Business Services - 1.51% Intelidata Technologies Corp. 119,200 113,613 WPP Group PLC, ADR 353,600 1,757,705 --------- 1,871,318 Chemicals - 6.39% Akzo Nobel NV, ADS 16,200 629,463 BASF AG 38,600 1,635,810 Bayer AG 39,600 1,608,862 Kao Corp. 108,000 2,186,310 Potash Corporation of 26,700 1,842,871 --------- 7,903,316 Computers & Business Equipment - 2.63% Data General Corp. * 109,500 1,861,500 NCR Corp. * 41,250 1,387,031 --------- 3,248,531 Conglomerates - 3.15% BTR PLC 187,718 328,322 CSR, Ltd. 344,000 787,466 Richemont Cie 2,090 2,775,769 --------- 3,891,557 Construction Materials - 2.78% Cimpor-Cimentos de Portugal SA 8,950 309,351 Holderbank Financier Glarus AG 1,600 1,781,451 Wolseley PLC 196,500 1,346,771 --------- 3,437,573 Containers & Glass - 0.01% Toyo Seikan Kaisya, Ltd. 600 10,782 ------ Crude Petroleum & Natural Gas - 1.40% Elf Aquitaine 15,000 1,735,992 --------- Domestic Oil - 0.79% Tenneco, Inc. 32,000 972,000 ------- Drugs & Health Care - 2.77% Fujisawa Pharmaceutical 87,000 1,026,119 Pharmacia & Upjohn, Inc. 45,400 2,403,362 --------- 3,429,481 Electric Utilities - 3.51% Iberdrola SA 112,300 1,813,733 Unicom Corp. 30,800 1,160,775 Veba AG 24,500 1,368,095 --------- 4,342,603 Electrical Equipment - 0.50% Hitachi, Ltd. 121,000 615,483 ------- Electronics - 3.43% ABB AG 350 418,874 Ascom Holdings AG 560 960,673 GenRad, Inc. 75,400 1,225,250 Premier Farnell PLC, ADS 138,450 388,137 TDK Corporation 19,000 1,251,673 --------- 4,244,607 Financial Services - 4.66% Enhance Financial Services Group, 44,900 $1,102,856 Internationale Nederlanden Groep 43,728 2,115,663 PennCorp Financial Group, Inc. 77,200 130,275 UST Corp. 104,000 2,405,000 --------- 5,753,794 Food & Beverages - 7.12% Danone 6,700 1,771,504 IBP, Inc. 25,450 688,741 Lion Nathan, Ltd. 279,250 731,990 Nestle SA 1,600 3,399,985 Reckitt & Colman PLC 127,597 2,206,064 --------- 8,798,284 Home Builders - 0.76% Green Property Co. 176,000 938,763 ------- Household Appliances & Furnishing - 1.76% HomeBase, Inc. * 78,100 527,175 Matsushita Electric Industrial Co., Ltd. 72,000 1,056,716 Philips Electronics NV 11,000 585,191 ------- 2,169,082 Household Products - 1.30% Benckiser Class B 14,900 844,502 Tupperware Corp. 48,900 761,006 ------- 1,605,508 Industrial Machinery - 2.61% B.F. Goodrich Co. 31,100 1,119,600 Bobst AG 400 531,248 SPX Corp. * 4,913 267,452 Tecumseh Products Co. 21,600 1,123,200 Valmet Corp. 17,215 184,178 ------- 3,225,678 Insurance - 6.32% MBIA, Inc. 41,000 2,506,125 Royal Sun Alliance Insurance Grp. 158,352 1,449,734 SCOR, ADS 28,900 1,657,254 Sumitomo Marine & Fire 148,000 865,809 Terra Nova Bermuda Holdings, Ltd. 48,100 1,334,775 --------- 7,813,697 Mining - 0.30% English China Clay 132,400 365,636 ------- Miscellaneous - 0.43% Clondalkin Group PLC 85,700 530,713 ------- Paper - 1.32% Boise Cascade Corp. 51,600 1,444,800 Georgia Pacific Corp. * 3,700 191,475 ------- 1,636,275 Petroleum Services - 1.01% Burmah Castrol PLC 5,000 75,316 Noble Drilling Corp. * 35,910 617,203 Ocean Energy, Inc. * 44,915 561,438 ------- 1,253,957 Photography - 1.27% Fuji Photo Film Co. 43,000 1,574,970 --------- Publishing - 2.00% Houghton Mifflin Co. 63,300 2,468,700 --------- The accompanying notes are an integral part of the financial statements. 35 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued (showing percentage of total value of investments) - -------------------------------------------------------------------------------- Shares Value ------ ----- Retail Grocery - 3.08% Albertsons, Inc. 36,600 $2,033,588 American Stores Co. 54,300 1,768,144 --------- 3,801,732 Retail Trade - 2.81% BJ's Wholesale Club, Inc. * 47,200 1,696,250 Delhaize-Le Lion SA 12,900 1,101,726 G.I.B. Holdings, Ltd. 14,100 674,276 ------- 3,472,252 Telecommunication Services - 9.65% Comsat Corp. 96,420 3,802,564 Swisscom AG * 3,920 1,327,588 Telecom Italia SPA 482,300 2,429,812 Telefonica de Espana SA 68,400 3,088,343 Telus Corporation 61,950 1,274,733 --------- 11,923,040 Tires & Rubber - 0.41% Michelin * 12,240 504,502 ------- Tobacco - 3.37% Imperial Tobacco, Ltd. 77,500 789,944 Philip Morris Companies, Inc. 65,900 3,369,138 --------- 4,159,082 TOTAL COMMON STOCKS (Cost $95,825,142) $114,661,056 ------------ Principal Value --------- ----- SHORT TERM INVESTMENTS - 4.10% Navigator Securities Lending Trust $5,066,001 $5,066,001 SSGA Money Market Fund 1,000 1,000 ----- $5,067,001 ---------- REPURCHASE AGREEMENT - 3.13% Repurchase Agreement with State Street Bank & Trust Co. dated 10/30/98 at 4.25%, to be repurchased at $3,866,350 on 11/02/98, collateralized by $2,950,000 U.S. Treasury Bonds, 7.625% due 11/15/22 (valued at $4,049,810, including interest) $3,865,000 $3,865,000 ---------- TOTAL INVESTMENTS (Global Equity Fund) (Cost $104,757,143) $123,593,057 ============ ---------------------------------------------------------------------------- Emerging Growth Fund ---------------------------------------------------------------------------- Shares Value ------ ----- COMMON STOCKS - 95.64% Aerospace & Defense - 0.96% Tristar Aerospace Co. * 600 $6,150 ------ Apparel & Textiles - 0.96% Interface, Inc. 500 6,156 ----- Banking - 0.62% Bank United Corp. Class A 100 3,984 ----- Broadcasting - 1.84% Granite Broadcasting Corp. * 700 3,588 Heftel Broadcasting Corp. 200 8,225 ----- 11,813 Building Construction - 0.74% D.R. Horton, Inc. 300 4,763 ----- Business Services - 14.06% Acxiom Corp. * 340 $8,543 CB Richard Ellis Services, Inc. * 400 7,800 Getty Images, Inc. * 600 7,388 INSpire Insurance Solutions, Inc. 200 5,000 Iron Mountain, Inc. 250 7,641 Kroll-O'Gara Co. * 400 9,850 LaSalle Partners, Inc. * 200 5,850 Protection One, Inc. 700 7,875 QRS Corp. * 200 7,600 Robert Half International, Inc. * 100 4,013 Romac International, Inc. * 300 5,250 Technology Solutions Co. 500 6,000 Wilmar Industries, Inc. * 300 7,425 ----- 90,235 Chemicals - 0.96% NOVA Corporation * 214 6,179 ----- Communications & Media - 3.94% Infoseek Corp. * 300 8,887 Lycos, Inc. 100 4,063 Outdoor Systems, Inc. 300 6,619 Playboy Enterprises, Inc. * 400 5,750 ----- 25,319 Computers & Business Equipment - 4.44% Avant Corp. * 400 6,825 National Instruments Corp. * 200 5,475 Radiant Systems, Inc. * 800 5,400 Transaction Systems Architects, Inc. 300 10,828 ------ 28,528 Consumer Services - 5.10% DeVRY, Inc. 500 11,000 ITT Eucational Services, Inc. * 300 8,906 Service Experts, Inc. * 200 6,038 Strayer Education, Inc. 200 6,800 ----- 32,744 Drugs & Health Care - 13.86% Advanced Paradigm, Inc. * 300 9,900 Alternative Living Services, Inc. * 300 7,837 Assisted Living Concepts, Inc. * 300 4,050 ChiRex, Inc. * 300 4,575 Coulter Pharmaceutical, Inc. * 200 5,650 GelTex Pharmaceuticals, Inc. * 300 7,500 Hanger Orthopedic Group, Inc. * 300 5,925 Jones Pharma, Inc. 200 6,463 Minimed, Inc. * 100 5,550 NovaCare, Inc. * 100 412 PharMerica, Inc. * 1,400 4,725 Renal Care Group, Inc. 300 8,738 SangStat Medical Corp. * 200 4,150 Sunrise Assisted Living, Inc. * 200 8,613 VWR Scientific Products Corp. * 200 4,862 ----- 88,950 Electronics - 5.78% Aavid Thermal Technologies, Inc. 300 4,500 Burr-Brown Corp. 300 5,569 Cerprobe Corp. * 400 5,475 Flextronics International, Ltd. * 100 5,194 Uniphase Corp. 200 9,900 Vitesse Semiconductor Corp. 200 6,450 ----- 37,088 The accompanying notes are an integral part of the financial statements. 36 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued (showing percentage of total value of investments) - -------------------------------------------------------------------------------- Shares Value ------ ----- Energy - 1.92% Chieftain International, Inc. * 300 $5,887 Stone Energy Corp. 200 6,425 ----- 12,312 Financial Services - 2.33% Allmerica Financial Corp. 200 10,000 Enhance Financial Services Group, 200 4,912 Metris Companies, Inc. 0.68 22 -- 14,934 Food & Beverages - 2.93% Ben & Jerry's Homemade, Inc. Class A * 500 9,625 Bob Evans Farms, Inc. 300 5,906 Suiza Foods Corp. * 100 3,263 ----- 18,794 Insurance - 2.97% Amerin Corp. * 200 4,275 Protective Life Corp. 100 3,706 Terra Nova Bermuda Holdings, Ltd. 400 11,100 ------ 19,081 Leisure Time - 8.03% Ambassadors International, Inc. * 300 4,387 Coach USA, Inc. * 300 8,044 Fairfield Communities, Inc. 500 4,906 Family Golf Centers, Inc. 200 4,212 Loews Cineplex Entertainment 700 7,350 Premier Parks, Inc. 600 13,312 Sunterra Corp. * 400 3,800 Vistana, Inc. * 500 5,562 ----- 51,573 Metals & Mining - 0.93% Metals USA, Inc. * 600 5,963 ----- Other - 1.23% Central Garden & Pet Co. * 400 7,900 ----- Petroleum Services - 1.33% Petroleum Geo Services, Inc. ADR 400 8,550 ----- Pollution Control - 2.39% Allied Waste Industries, Inc. * 300 6,487 Casella Waste Systems, Inc. * 300 8,850 ----- 15,337 Publishing - 0.83% Peterson Companies, Inc. Class A 200 5,312 ----- Real Estate - 1.47% Apartment Investment & Management Co. Class A 200 6,988 U.S. Restaurant Properties, Inc. 100 2,432 ----- 9,420 Retail Grocery - 1.25% Whole Foods Market, Inc. * 200 8,013 ----- Retail Trade - 5.97% 99 Cents Only Stores 200 9,250 Borders Group, Inc. * 300 7,613 Delia's, Inc. * 600 5,025 Stage Stores, Inc. 500 6,625 Staples, Inc. 300 9,788 ----- 38,301 Software - 4.94% Boole & Babbage, Inc. 300 7,988 JDA Software Group, Inc. 500 4,750 Mercury Computer Systems, Inc. * 300 5,287 Mercury Interactive Corp. * 200 8,300 Micrografx, Inc. * 600 5,400 ----- 31,725 Telecommunication Services - 2.86% Intermedia Communications of Florida, Inc. 200 3,700 McLeodUSA, Inc. Class A * 200 7,312 Metro Networks, Inc. * 200 7,325 ----- 18,337 Transportation - 1.00% Mark VII, Inc. 400 6,400 ----- TOTAL COMMON STOCKS (Cost $675,108) $613,861 -------- Principal Value --------- ----- SHORT TERM INVESTMENTS - 4.36% SSGA Money Market Fund $28,000 $28,000 ------- TOTAL INVESTMENTS (Emerging Growth Fund) (Cost $703,108) $641,861 -------- --------------------------------------------------------------------------- Small/Mid Cap Fund --------------------------------------------------------------------------- Shares Value ------ ----- COMMON STOCKS - 71.23% Air Travel - 2.98% ASA Holdings, Inc. 9,600 $344,400 Continental Airlines, Inc. * 18,400 729,100 Skywest, Inc. 10,000 255,000 ------- 1,328,500 Apparel & Textiles - 0.83% Tommy Hilfiger Corp. * 8,000 371,500 ------- Banking - 0.64% Firstar Corp. 5,000 283,750 ------- Broadcasting - 1.23% Jacor Communications, Inc. * 6,300 346,500 Jones Intercable, Inc. * 7,200 202,050 ------- 548,550 Business Services - 2.73% America Online, Inc. 9,600 1,219,800 --------- Computers & Business Equipment - 4.29% Ceridian Corp. * 15,500 889,312 Citrix Systems, Inc. * 12,000 850,500 Quantum Corp. * 10,000 175,000 ------- 1,914,812 Drugs & Health Care - 16.77% Allegiance Corp. 17,000 632,187 Alza Corp. Class A * 16,200 775,575 Bergen Brunswig Corp., Class A 4,000 195,250 Biomatrix, Inc. * 5,000 235,000 Biomet, Inc. 12,400 420,825 Centocor, Inc. * 27,300 1,214,850 Elan Corporation PLC, ADR * 10,900 763,681 Forest Laboratories, Inc. Class A * 15,700 656,456 IMS Health, Inc. 11,900 791,350 McKesson Corp. 9,800 754,600 Omnicare, Inc. 30,100 1,040,331 --------- 7,480,105 The accompanying notes are an integral part of the financial statements. 37 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued (showing percentage of total value of investments) - -------------------------------------------------------------------------------- Shares Value ------ ----- Electronics - 1.21% Micron Technology, Inc. * 7,000 $266,000 Sanmina Corp. * 6,700 274,700 ------- 540,700 Financial Services - 5.96% Dime Bancorp, Inc. 26,700 635,794 Finova Group, Inc. 15,000 731,250 Paine Webber Group, Inc. 6,000 200,625 Sovereign Bancorp, Inc. 39,800 522,375 SunAmerica, Inc. 8,050 567,525 ------- 2,657,569 Food & Beverages - 6.40% Aurora Foods, Inc. * 17,700 309,750 Food Lion, Inc. 30,000 330,000 Outback Steakhouse, Inc. * 24,500 848,313 Starbucks Corp. * 15,100 654,962 U.S. Foodservice * 15,000 712,500 ------- 2,855,525 Homebuilders - 1.00% Champion Enterprises, Inc. * 22,500 447,187 ------- Household Appliances & Furnishing - 0.92% Furniture Brands International, Inc. 19,000 408,500 ------- Household Products - 0.60% Rubbermaid, Inc. 8,000 265,500 ------- Insurance - 1.91% Fremont General Corp. 8,200 404,875 MGIC Investment Corp. 11,500 448,500 ------- 853,375 Leisure Time - 2.97% Coach USA, Inc. * 13,900 372,694 International Game Technology 42,300 954,394 ------- 1,327,088 Manufacturing - 2.29% Wabash National Corp. 16,700 296,425 Leggett & Platt 31,000 724,625 ------- 1,021,050 Railroads - 2.52% Kansas City Southern Industries, 29,100 1,123,988 --------- Retail Trade - 8.88% BJ's Wholesale Club, Inc. * 8,000 287,500 Bed, Bath & Beyond, Inc. * 36,100 995,006 Borders Group, Inc. * 27,400 695,275 Family Dollar Stores, Inc. 21,000 380,625 Office Depot, Inc. * 23,600 590,000 Staples, Inc. * 16,450 536,681 Williams Sonoma, Inc. * 17,400 474,150 ------- 3,959,237 Software - 5.59% Compuware Corp. * 19,200 1,040,400 Intuit * 11,500 580,750 Microchip Technology, Inc. * 32,300 874,119 ------- 2,495,269 Telecommunications - 1.51% Ascend Communications, Inc. * 7,100 342,575 Cox Communications, Inc. * 6,000 329,250 ------- 671,825 TOTAL COMMON STOCKS (Cost $29,573,973) $31,773,830 ----------- Principal Value --------- ----- SHORT TERM INVESTMENTS - 28.77% Bayerische Vereinsbank AG $600,000 $599,652 Block Financial Corp. 600,000 599,915 Hasbro, Inc. 600,000 599,047 National Australia Funding 600,000 599,652 Progress Capital Holdings 600,000 599,828 TIC Pacific 600,000 599,915 Navigator Securities Lending Trust 8,837,965 8,837,965 SSGA Money Market Fund 398,611 398,611 ------- TOTAL SHORT TERM INVESTMENTS $12,834,585 (Cost $12,834,585) TOTAL INVESTMENTS (Small/Mid Cap Fund) (Cost $42,408,558) $44,608,415 =========== ---------------------------------------------------------------------------- Growth Equity Fund ---------------------------------------------------------------------------- Shares Value ------ ----- COMMON STOCKS - 83.73% Aerospace & Defense - 2.66% Lockheed Martin Corp. 5,025 $559,659 Northrup Grumman Corp. 3,450 275,137 ------- 834,796 Air Travel - 0.87% Lufthansa AG 12,500 271,657 ------- Automobiles - 0.57% General Motors Corp. 2,850 179,728 ------- Banking - 1.20% Citigroup, Inc. 8,000 376,500 ------- Broadcasting - 4.41% CBS Corp. 8,500 237,469 Jacor Communications, Inc. * 5,025 276,375 Mediaone Group, Inc. * 5,850 247,528 Tele Communications, Inc. 14,775 622,397 ------- 1,383,769 Business Services - 5.25% Comdisco, Inc. 12,200 188,337 Computer Sciences Corp. 7,000 369,250 Fiserv, Inc. * 11,487 534,145 Sterling Commerce, Inc. * 9,600 338,400 Viad Corp. 7,900 216,756 ------- 1,646,888 Chemicals - 0.63% Monsanto Co. 4,850 197,031 ------- Computers & Business Equipment - 3.44% Compaq Computer Corp. 12,100 382,662 International Business Machines, 4,200 623,437 Oce-Van Der Grinten NV 2,200 71,353 ------ 1,077,452 Drugs & Health Care - 13.78% Amgen, Inc. * 5,200 408,525 Bristol-Myers Squibb Co. 3,300 364,856 Eli Lilly and Co. 5,125 414,805 Glaxo Wellcome PLC 3,800 236,550 IMS Health, Inc. 5,400 359,100 Medtronic, Inc. 5,550 360,750 Merck & Co., Inc. 2,225 300,931 Novartis AG 150 270,051 The accompanying notes are an integral part of the financial statements. 38 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued (showing percentage of total value of investments) - -------------------------------------------------------------------------------- Shares Value ------ ----- Drugs & Health Care - 13.78% - cont'd. Pfizer, Inc. 6,400 $686,800 Tenet Healthcare Corp. * 8,500 237,469 Warner Lambert Co. 8,675 679,903 ------- 4,319,740 Electrical Equipment - 2.72% General Electric Co. 9,750 853,125 ------- Electronics - 3.17% Intel Corp. 8,600 767,012 Maxim Integrated Products, Inc. * 6,350 226,616 ------- 993,628 Financial Services - 6.07% Associates First Capital Corp. 9,215 649,657 Capital One 3,800 386,650 Federal National Mortgage 7,925 561,189 Household International,. Inc. 8,346 305,151 ------- 1,902,647 Food & Beverages - 4.17% Coca-Cola Enterprises, Inc. 13,950 503,072 Outback Steakhouse, Inc. * 10,700 370,488 Sara Lee Corp. 7,250 432,734 ------- 1,306,294 Household Appliances Furnishing - 1.41% Hunter Douglas NV 2,525 90,543 Newell Co. 8,000 352,000 ------- 442,543 Household Products - 3.74% Black & Decker Corp. 1,150 59,441 Colgate Palmolive Co. 4,350 384,431 Dial Corp. 14,225 392,077 Procter & Gamble Co. 3,800 337,725 ------- 1,173,674 Industrial Machinery - 0.65% Crane Co. 7,112 204,915 ------- Insurance - 4.80% Conseco, Inc. 18,389 637,868 Everest Reinsurance Holdings 4,975 171,327 Hartford Financial Services Group 7,350 390,469 Marsh & McLennan Companies, 5,525 306,638 ------- 1,506,302 Leisure Time - 2.51% America Online, Inc. 2,900 368,481 Galileo International, Inc. 11,050 419,209 ------- 787,690 Newspapers - 0.83% News Corp., Ltd. 10,800 261,225 ------- Petroleum Services - 0.37% Total SA * 1,975 115,538 ------- Pollution Control - 0.60% Waste Management, Inc. 4,150 187,269 ------- Publishing - 0.44% Time Warner, Inc. 1,500 139,219 ------- Retail Trade - 7.14% Best Buy Company, Inc. * 6,500 312,000 Circuit City Stores, Inc. 6,500 235,219 Fred Meyer, Inc. * 9,825 523,795 Gap, Inc. 2,500 150,313 K-Mart Corp. * 20,350 287,444 Lowes Companies, Inc. 9,200 309,925 Rite Aid Corp. 10,600 420,687 ------- 2,239,383 Savings & Loan - 1.04% Golden West Financial Corp. 3,600 326,475 ------- Software - 3.28% Intuit, Inc. * 6,100 308,050 Microsoft Corp. * 4,200 444,675 PeopleSoft, Inc. * 1,075 22,777 Veritas Software Corp. * 5,025 251,878 ------- 1,027,380 Telecommunications - 7.52% Ascend Communications, Inc. * 3,700 178,525 Bell Atlantic Corp. 9,300 494,063 Bellsouth Corp. 3,050 243,428 MCI Commmunications 24,131 1,333,238 Tellabs, Inc. * 2,000 110,000 ------- 2,359,254 Toys, Amusements, Sporting Goods - 0.46% Mattel, Inc. 4,000 143,500 ------- TOTAL COMMON STOCKS (Cost $22,800,959) $26,257,622 ----------- Principal Value --------- ----- SHORT TERM INVESTMENTS - 8.90% Navigator Securities Lending Trust $2,790,550 $2,790,550 SSGA Money Market Fund 1,000 1,000 ----- $2,791,550 ---------- REPURCHASE AGREEMENT - 7.37% Repurchase Agreement with State Street Bank & Trust dated 10/30/98 at 4.25%, to be repurchased at $2,312,819 on 11/02/98, collateralized by $2,005,000 U.S. Treasury 7.00% due 07/15/06 (valued at $2,400,279, including interest) $2,312,000 $2,312,000 ---------- TOTAL INVESTMENTS (Growth Equity Fund) (Cost $27,904,509) $31,361,172 =========== ---------------------------------------------------------------------------- Tax-Sensitive Equity Fund ---------------------------------------------------------------------------- Shares Value ------ ----- COMMON STOCKS - 97.62% Agricultural Machinery - 1.71% Deere & Company 5,000 $176,875 -------- Apparel & Textiles - 2.16% Jones Apparel Group, Inc. * 6,000 103,500 Tommy Hilfiger Corp. * 2,600 120,737 ------- 224,237 Auto Parts - 2.63% Lear Corp. * 8,500 273,063 ------- Banking - 2.08% Bankamerica Corp. 1,471 84,491 Chase Manhattan Corp. 2,300 130,669 ------- 215,160 Business Services - 9.05% Interim Services, Inc. * 15,000 318,750 The accompanying notes are an integral part of the financial statements. 39 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued (showing percentage of total value of investments) - -------------------------------------------------------------------------------- Shares Value ------ ----- Business Services - 9.05% - cont'd. Shared Medi Cal System 6,700 $334,162 Xerox Corp. 2,950 285,781 ------- 938,693 Computers & Business Equipment - 5.35% Sun Microsystems , Inc. * 4,500 262,125 SCI Systems, Inc. * 7,400 292,300 ------- 554,425 Containers & Glass - 2.83% Owens Illinois, Inc. * 9,600 293,400 ------- Drugs & Health Care - 4.61% Amgen, Inc. * 3,000 235,688 Merck & Company, Inc. 650 87,913 Schering Plough Corp. 850 87,444 Watson Pharmaceuticals, Inc. * 1,200 66,750 ------ 477,795 Electrical Equipment - 3.23% American Power Conversion Corp. * 7,900 335,256 ------- Financial Services - 4.33% Citigroup, Inc. 2,500 117,656 Enhance Financial Services Group, 6,000 147,375 SLM Holding Corp. 4,600 184,288 ------- 449,319 Home Building - 2.38% Clayton Homes, Inc. 16,000 247,000 ------- Hotels & Casinos - 8.03% Carnival Group 10,000 323,750 GTech Holdings Corp. * 9,000 216,000 International Game Technology 13,000 293,312 ------- 833,062 Industrial Conglomerates - 6.98% Crane Company 11,900 342,869 United Technologies Corp. 4,000 381,000 ------- 723,869 Insurance - 13.87% Allstate Corp. 3400 146,412 Ambac Financial Group, Inc. 2500 145,469 Conseco, Inc. 11,000 381,562 Delphi Financial Group, Inc. * 5,612 261,659 Old Republic International Corp. 8,950 170,050 Reliastar Financial Group 7,600 332,975 ------- 1,438,127 International Oil - 6.72% British Petroleum 2,900 256,469 Exxon Corp. 2,200 156,750 Mobil Corp. 2,100 158,944 Texaco, Inc. 2,100 124,556 ------- 696,719 Metal Fabrication - 3.49% Kaydon Corp. 10,300 361,787 ------- Office Furnishings - 2.41% Hon Industries, Inc. 11,800 250,013 ------- Packaged Foods & Products - 5.32% Interstate Bakeries Corp. 6,000 150,375 Lancaster Colony Corp. 3,700 111,000 Universal Foods Corp. 13,400 290,612 ------- 551,987 Real Estate - 2.60% General Growth Properties, Inc. 1,200 $42,675 Liberty Property 2,400 55,200 Patriot American Hospitality, Inc. 6,000 53,250 Prentiss Properties Trust 2,800 57,750 Starwood Hotels & Resorts 2,150 60,872 ------ 269,747 Retail Grocery - 2.89% Kroger Co. * 5,400 299,700 ------- Retail Trade - 2.82% Claire's Stores, Inc. 4,900 82,994 Pier 1 Imports, Inc. 13,500 124,875 Ross Stores, Inc. 2,600 84,500 ------ 292,369 Software - 2.13% Computer Associates International, Inc. 5,600 220,500 ------- TOTAL COMMON STOCKS (Cost $10,905,981) $10,123,103 ----------- Principal Value --------- ----- SHORT TERM INVESTMENTS - 0.01% SSGA Money Market Fund $1,000 $1,000 ------ REPURCHASE AGREEMENT - 2.37% Repurchase Agreement with State Street Bank & Trust Co. dated 10/30/98 at 4.25%, to be repurchased at $246,087 on 11/02/98 collateralized by $255,000 U.S. Treasury Notes, 5.625% due 03/15/28 (valued at $257,483, including interest) $246,000 $246,000 -------- TOTAL INVESTMENTS (Tax-Sensitive Equity Fund) (Cost $11,152,981) $10,370,103 =========== ---------------------------------------------------------------------------- Growth and Income Fund ---------------------------------------------------------------------------- Shares Value ------ ----- COMMON STOCKS - 96.24% Aerospace & Defense - 2.33% Boeing Co. 52,000 $1,950,000 Lockheed Martin Corp. 19,500 2,171,812 United Technologies Corp. 17,000 1,619,250 --------- 5,741,062 Agricultural Machinery - 0.44% Deere & Company 31,000 1,096,625 --------- Air Travel - 1.11% Southwest Airlines Co. 129,800 2,750,138 --------- Aluminum - 0.63% Aluminium Company of America 19,600 1,553,300 --------- Automobiles - 0.34% General Motors Corp. 22,200 849,150 ------- Banking - 8.97% The Chase Manhattan Corp. 28,100 1,596,431 Citigroup 172,800 8,132,400 First Union Corp. 73,900 4,286,200 U.S. Bancorp 111,000 4,051,500 Wachovia Corp. 44,900 4,080,287 --------- 22,146,818 The accompanying notes are an integral part of the financial statements. 40 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued (showing percentage of total value of investments) - -------------------------------------------------------------------------------- Shares Value ------ ----- Business Services - 2.29% Automatic Data Processing, Inc. 33,000 $2,567,813 First Data Corp. 75,200 1,992,800 Service Corporation International 30,500 1,086,563 --------- 5,647,176 Chemicals - 2.27% The Dow Chemical Co. 17,900 1,675,888 E.I. Du Pont de Nemours & Co. 34,300 1,972,250 Zeneca Group PLC, ADR 50,400 1,965,600 --------- 5,613,738 Computers & Business Equipment - 7.24% Cisco Systems, Inc. 51,250 3,228,750 Computer Sciences Corp. * 40,000 2,110,000 EMC Corp. * 28,200 1,815,375 Hewlett-Packard Company 38,700 2,329,256 International Business Machines 39,000 5,789,063 Xerox Corp. 27,000 2,615,625 --------- 17,888,069 Drugs & Health Care - 12.80% Abbott Laboratories 88,000 4,130,500 American Home Products Corp. 63,300 3,085,875 Baxter International, Inc. 39,200 2,349,550 Bristol-Myers Squibb Co. 23,800 2,631,387 Columbia/HCA Healthcare Corp. 99,900 2,097,900 Johnson & Johnson 30,000 2,445,000 Merck & Company, Inc. 19,000 2,569,750 Pfizer, Inc. 38,200 4,099,337 Pharmacia & Upjohn, Inc. 86,000 4,552,625 Warner-Lambert Co. 46,500 3,644,438 --------- 31,606,362 Electric Utilities - 2.32% DPL, Inc. 82,500 1,562,344 Duke Energy Co. 29,000 1,875,937 New England Electric System 24,000 976,500 Texas Utilities Co. 30,000 1,312,500 --------- 5,727,281 Electrical Equipment - 3.47% General Electric Co. 97,800 8,557,500 --------- Electronics - 3.06% Analog Devices, Inc. 30,000 596,250 Intel Corp. 44,000 3,924,250 Motorola, Inc. 35,300 1,835,600 Texas Instruments, Inc. 18,800 1,202,025 --------- 7,558,125 Financial Services - 4.69% American Express Co. 46,000 4,065,250 Federal National Mortgage 63,000 4,461,187 Merrill Lynch & Co., Inc. 51,600 3,057,300 --------- 11,583,737 Food & Beverages - 3.64% Coca-Cola Company 27,000 1,825,875 General Mills, Inc. 15,500 1,139,250 H.J. Heinz Co. 22,000 1,278,750 Pepsico, Inc. 44,800 1,512,000 Sara Lee Corp. 54,000 3,223,125 --------- 8,979,000 Gas & Pipeline Utilities - 0.88% K N Energy, Inc. 15,000 745,312 National Fuel Gas Co. NJ 16,000 756,000 Peoples Energy Corp. 18,000 663,750 ------- 2,165,062 Hotels & Restaurants - 1.49% McDonald's Corp. 55,000 3,678,125 --------- Household Products - 2.72% Colgate Palmolive Co. 18,000 1,590,750 Gillette Co. 32,800 1,473,950 Procter & Gamble Co. 41,000 3,643,875 --------- 6,708,575 Insurance - 3.57% ACE, Ltd. 75,000 2,540,625 American International Group 36,000 3,069,000 Marsh & McLennan Companies 57,600 3,196,800 --------- 8,806,425 International Oil - 5.94% Amoco Corp. 51,400 2,884,825 Chevron Corp. 39,000 3,178,500 Exxon Corp. 52,500 3,740,625 Royal Dutch Petroleum Co. 71,000 3,496,750 UNOCAL Corp. 40,000 1,357,500 --------- 14,658,200 Leisure Time - 0.80% The Walt Disney Co. 73,600 1,982,600 --------- Liquor - 1.21% Anheuser-Busch Companies, Inc. 50,300 2,989,706 --------- Newspapers - 1.45% Gannett, Inc. 58,000 3,588,750 --------- Paper - 2.14% International Paper Co. 24,200 1,123,787 Kimberly Clark Corp. 48,000 2,316,000 Minnesota Mining 23,000 1,840,000 --------- 5,279,787 Petroleum Services - 1.60% Conoco, Inc. * 27,200 676,600 Diamond Offshore Drilling, Inc. 32,700 1,003,482 Schlumberger, Ltd. 43,200 2,268,000 --------- 3,948,082 Photography - 0.49% Eastman Kodak Co. 15,700 1,216,750 --------- Railroads & Equipment - 0.69% Union Pacific Corp. 35,600 1,695,450 --------- Real Estate - 0.20% Archstone Communities Trust 24,000 483,000 ------- Retail Trade - 5.63% Dayton Hudson Corp. 92,000 3,898,500 The GAP, Inc. 42,000 2,525,250 May Dept Stores 32,200 1,964,200 Wal-Mart Stores, Inc. 80,000 5,520,000 --------- 13,907,950 Software - 3.02% Microsoft Corp. * 64,000 6,776,000 Peoplesoft, Inc. * 32,300 684,356 ------- 7,460,356 Telecommunication Services - 0.43% Cox Communications, Inc. 19,300 1,059,088 --------- Telephone - 6.62% Bell Atlantic Corp. 77,192 4,100,825 BellSouth Corp. 21,000 1,676,063 SBC Communications, Inc. 96,000 4,446,000 The accompanying notes are an integral part of the financial statements. 41 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued (showing percentage of total value of investments) - -------------------------------------------------------------------------------- Shares Value ------ ----- Telephone - 6.62% cont'd U.S. West, Inc. 50,000 $2,868,750 MCI WorldCom, Inc. * 59,000 3,259,750 --------- 16,351,388 Tobacco - 1.76% Philip Morris Companies, Inc. 85,100 4,350,738 --------- TOTAL COMMON STOCKS (Cost $156,013,256) $237,628,113 ------------ Principal Value --------- ----- SHORT TERM INVESTMENT - 2.11% Navigator Securities Lending Trust $5,218,468 $5,218,468 ---------- REPURCHASE AGREEMENT - 1.65% Repurchase Agreement with Paribas dated at 5.40%, to be repurchased at $4,061,827 on 11/02/98, at collateralized by $4,012,000 U.S. Treasury Notes, 5.875% due 02/15/00 (valued at $4,135,290 including interest) $4,060,000 $4,060,000 ---------- TOTAL INVESTMENTS $246,906,581 (Growth & Income Fund) (Cost $165,291,724) ----------- ---------------------------------------------------------------------------- Equity-Income Fund ---------------------------------------------------------------------------- Shares Value ------ ----- COMMON STOCKS - 91.83% Aerospace & Defense - 0.73% Allied Signal Corp. 21,000 $817,688 Boeing Co. 13,000 487,500 ------- 1,305,188 Autos & Related - 2.28% Dana Corp. * 1,300 54,356 Eaton Corp. * 2,500 169,219 General Motors Corp. 20,400 1,286,475 TRW, Inc. 22,900 1,303,869 Genuine Parts Company 40,600 1,278,900 --------- 4,092,819 Banking - 9.13% Bank One Corp. 27,650 1,351,394 Bankamerica Corp. * 10,000 574,375 BankBoston Corp. 19,000 699,437 Bankers Trust New York Corp. 11,600 728,625 The Chase Manhattan Corp. 19,400 1,102,162 Citigroup, Inc. 34,449 1,621,256 First Union Corp. 20,810 1,206,980 Fleet Financial Group, Inc. 34,200 1,365,862 J.P. Morgan & Company, Inc. 15,600 1,470,300 Mellon Bank Corp. 45,600 2,741,700 Mercantile Bankshares Corp. 19,150 624,769 National City Corp. 15,400 990,412 PNC Bank Corp. 14,400 720,000 Wells Fargo & Company 3,300 1,221,000 --------- 16,418,272 Beverages - 1.98% Anheuser-Busch Companies, Inc. 38,800 2,306,175 Brown-Forman Corp., Class B 18,400 1,250,050 --------- 3,556,225 Business Services - 0.64% H & R Block, Inc. 25,600 1,147,200 --------- Shares Value Chemicals - 6.48% The Dow Chemical Co. 27,300 $2,555,963 E.I. Du Pont De Nemours & Co. 24,100 1,385,750 Great Lakes Chemical Corp. 27,600 1,148,850 Hercules, Inc. 37,600 1,252,550 Imperial Chemical Industries PLC, 11,500 416,875 Lubrizol Corp. 23,000 641,125 Minnesota Mining 21,800 1,744,000 Nalco Chemical Co. 24,300 751,781 Olin Corp. 26,300 728,181 Pall Corp. 41,100 1,037,775 --------- 11,662,850 Cosmetics & Toiletries - 0.80% International Flavors 38,600 1,445,088 --------- Domestic Oil - 4.19% Amerada Hess Corp. 24,200 1,337,050 Atlantic Richfield Co. 30,600 2,107,575 The British Petroleum Company 13,500 1,193,906 Occidental Petroleum Corp. 26,800 532,650 Phillips Petroleum Co. 17,200 743,900 Unocal Corp. 22,900 777,169 USX-Marathon Group 25,700 840,069 ------- 7,532,319 Drugs & Health Care - 4.13% Abbott Laboratories 20,000 938,750 American Home Products Corp. 53,000 2,583,750 Bausch & Lomb, Inc. 18,200 758,712 Pharmacia & Upjohn, Inc. 46,800 2,477,475 Smith & Nephew PLC 241,700 671,525 ------- 7,430,212 Electric Utilities - 6.42% Baltimore Gas & Electric Co. 13,300 417,288 Central & South West Corp. 13,300 369,906 Dominion Resources, Inc. 15,000 692,813 DQE, Inc. 22,100 871,569 Duke Energy Co. 20,100 1,300,219 Entergy Corp. 20,000 575,000 FirstEnergy Corp. 45,950 1,378,500 GPU, Inc. 9,000 388,125 Houston Industries, Inc. 32,000 994,000 PacifiCorp 40,000 762,500 PECO Energy Co. 18,700 723,456 Southern Co. 46,800 1,319,175 TECO Energy, Inc. 20,000 552,500 Unicom Corp. 32,100 1,209,769 --------- 11,554,820 Electrical Equipment - 2.39% Cooper Industries, Inc. 19,000 838,375 General Electric Co. 20,700 1,811,250 Hubbell, Inc. 21,100 841,362 Tyco International, Ltd. 12,930 800,852 ------- 4,291,839 Electronic Components - 0.67% AMP, Inc. 29,220 1,199,846 --------- Electronic Systems - 0.57% Hewlett Packard Co. 17,000 1,023,187 --------- Energy Services - 0.88% Baker Hughes, Inc. * 38,500 849,406 Witco Corp. 38,900 731,806 ------- 1,581,212 The accompanying notes are an integral part of the financial statements. 42 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued (showing percentage of total value of investments) - -------------------------------------------------------------------------------- Shares Value ------ ----- Entertainment & Leisure - 0.68% Hilton Hotels Corp. 33,900 $680,119 The Reader's Digest Association, Inc. 25,200 548,100 ------- 1,228,219 Financial Services - 1.25% Federal National Mortgage 28,800 2,039,400 Morgan Stanley Dean Witter 3,300 213,675 ------- 2,253,075 Food Processing - 4.45% General Mills, Inc. 33,100 2,432,850 H.J. Heinz Co. 21,300 1,238,063 Kellogg Co. 30,600 1,009,800 McCormick & Company, Inc. 43,000 1,335,688 Quaker Oats Co. 28,200 1,665,562 Sara Lee Corp. 5,300 316,344 ------- 7,998,307 Forest Products - 0.96% Georgia Pacific Corp. 12,200 631,350 International Paper Co. 23,600 1,095,925 --------- 1,727,275 Household Appliances Furnishing - 0.62% Whirlpool Corp. 21,900 1,122,375 --------- Household Products - 0.46% Corning, Inc. * 10,500 381,281 Stanley Works * 4,400 132,000 Tupperware Corp. 20,500 319,031 ------- 832,312 Insurance - 4.52% American General 25,500 1,746,750 Corp. Exel, Ltd. 18,700 1,429,381 Lincoln National Corp. 10,500 796,688 SAFECO Corp. 35,600 1,541,925 St. Paul Companies, Inc. 51,924 1,719,982 Transamerica Corp. 8,700 904,800 ------- 8,139,526 International Oil - 7.22% Amoco Corp. 51,000 2,862,375 Chevron Corp. 26,800 2,184,200 Exxon Corp. 38,300 2,728,875 Mobil Corp. 23,600 1,786,225 Royal Dutch Petroleum Co., ADR 26,600 1,310,050 Texaco, Inc. 35,700 2,117,456 --------- 12,989,181 Media & Communications - 2.40% Dow Jones & Co. 17,600 806,300 Dun & Bradstreet Corp. 30,300 859,763 Knight-Ridder, Inc. 30,500 1,553,594 R.H. Donnelley Corp. 6,060 84,840 R.R. Donnelley & Sons Co. 23,300 1,004,812 --------- 4,309,309 Metals - 1.49% Inco, Ltd. 33,000 352,688 Phelps Dodge Corp. 16,600 956,575 Reynolds Metals Co. 15,500 929,031 USX-U.S. Steel Group 19,400 451,050 ------- 2,689,344 Mining - 0.41% Newmont Mining Corp. 35,000 743,750 ------- Miscellaneous Consumer Products - 2.54% Armstrong World Industries, Inc. 20,400 $1,264,800 Fortune Brands, Inc. 29,600 978,650 PPG Industries, Inc. 20,400 1,166,625 Tomkins PLC 250,000 1,156,944 --------- 4,567,019 Paper - 2.14% Consolidated Papers, Inc. 33,100 796,469 Kimberly-Clark Corp. 36,800 1,775,600 Union Camp Corp. 29,800 1,281,400 --------- 3,853,469 Photography - 0.99% Eastman Kodak Co. 22,900 1,774,750 --------- Pollution Control - 1.34% Browning Ferris Industries, Inc. 33,700 1,194,244 Waste Management, Inc. 26,825 1,210,478 --------- 2,404,722 Railroads & Equipment - 3.11% Burlington Northern Santa Fe Corp. 30,600 944,775 GATX Corp. 11,600 400,200 Norfolk Southern Corp. 71,100 2,341,856 Union Pacific Corp. 39,900 1,900,237 --------- 5,587,068 Real Estate - 2.43% Archstone Communities 19,400 390,425 Crescent Real Estate Equities 25,500 639,094 Rouse Co. 6,600 185,213 Simon DeBartolo Group, Inc. 46,500 1,392,094 Starwood Hotels and Resorts 43,718 1,237,766 Weingarten Realty Investors 12,000 533,250 ------- 4,377,842 Retail Trade - 1.49% May Department Stores Co. 16,300 994,300 J.C. Penney Company, Inc. 22,900 1,087,750 Toys 'R Us, Inc. * 30,700 600,569 ------- 2,682,619 Telephone - 8.81% Alltel Corp. 56,200 2,630,863 American Telephone & Telegraph Corp. 25,300 1,574,925 BCE, Inc. 26,800 912,875 Bell Atlantic Corp. 33,600 1,785,000 BellSouth Corp. 13,300 1,061,506 Frontier Corp. 10,700 321,669 GTE Corp. 36,100 2,118,619 SBC Communications, Inc. 79,268 3,671,099 Telecomunicacoes Brasilieras 10,300 782,156 U.S. West, Inc. * 17,100 981,112 ------- 15,839,824 Tobacco - 3.06% Philip Morris Companies, Inc. 54,900 2,806,762 RJR Nabisco Holdings Corp. 32,300 922,569 UST, Inc. 52,300 1,778,200 --------- 5,507,531 Transportation - 0.17% Alexander & Baldwin, Inc. 15,000 304,688 ------- TOTAL COMMON STOCKS (Cost $138,089,149) $165,173,282 ------------ The accompanying notes are an integral part of the financial statements. 43 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued (showing percentage of total value of investments) - -------------------------------------------------------------------------------- Principal Value --------- ----- SHORT TERM INVESTMENTS - 7.85% California Pollution Association, 5.60% due 11/02/98 $1,000,000 $1,000,000 Novartis Fin Corp., 5.05% due 11/20/98 5,100,000 5,086,407 Navigator Securities Lending 8,029,487 8,029,487 --------- TOTAL SHORT TERM INVESTMENTS (Cost $14,115,894) $14,115,894 ----------- REPURCHASE AGREEMENT - 0.32% Repurchase Agreement with State Street Bank & Trust Co. dated 10/30/98 at 4.25%, to be repurchased at $584,207 on 11/02/98, collateralized by $415,000 Treasury Bonds, 8.75% due 05/15/17 (valued at $615,161, including interest) $584,000 $584,000 -------- TOTAL INVESTMENTS $179,873,176 (Equity-Income Fund) (Cost $152,789,043) ------------ ---------------------------------------------------------------------------- Balanced Fund ---------------------------------------------------------------------------- Shares Value ------ ----- COMMON STOCKS - 47.65% Aerospace & Defense - 0.78% Lockheed Martin Corp. 3,900 $434,363 Northrop Grumman Corp. 4,825 384,794 ------- 819,157 Air Travel - 0.28% UAL Corp. * 4,500 292,219 ------- Auto Parts - 0.18% Genuine Parts Co. 6,000 189,000 ------- Automobiles - 0.47% Chrysler Corp. 10,200 490,875 ------- Banking - 2.52% Chase Manhattan Corp. 10,900 619,256 Comerica, Inc. 4,900 316,050 First Union Corp. 6,600 382,800 PNC Bank Corp. 5,500 275,000 Summit Bancorp 7,100 269,356 Union Planters Corp. 16,900 784,794 ------- 2,647,256 Broadcasting - 0.36% Telecommunications, Inc. 9,000 379,125 ------- Business Services - 1.29% Service Corporation International 38,100 1,357,313 --------- Chemicals - 0.89% Dow Chemical Co. 2,400 224,700 E.I. DuPont de Nemours & Co. 12,300 707,250 ------- 931,950 Computers & Business Equipment - 2.08% Cisco Systems, Inc. * 2,500 157,500 Compaq Computer Corp. 6,600 208,725 Hewlett Packard Co. 4,200 252,787 International Business Machines 7,900 1,172,656 Sun Microsystems, Inc. 6,700 390,275 ------- 2,181,943 Domestic Oil - 1.86% Atlantic Richfield Co. 12,175 $838,553 Phillips Petroleum Co. 19,700 852,025 USX-Marathon Group 7,850 256,597 ------- 1,947,175 Drugs & Health Care - 13.99% Abbott Laboratories 8,000 375,500 Allegiance Corp. * 13,100 487,156 American Home Products 8,200 399,750 Amgen, Inc. * 2,100 164,981 Beckton Dickinson & Co. 11,800 497,075 Bristol Myers Squibb Co. 11,450 1,265,941 Glaxo Wellcome PLC, ADR 19,025 590,990 Glaxo Wellcome PLC 29,650 1,845,713 Johnson & Johnson 10,300 839,450 Eli Lilly and Co. 10,075 815,445 Merck & Company, Inc. 5,700 770,925 Novartis AG 400 720,136 Pfizer, Inc. 9,000 965,813 Schering AG 8,125 957,440 SmithKline Beecham PLC 14,400 918,000 SmithKline Beecham PLC, ADR 66,900 836,419 Synthelabo 3,200 610,522 Tenet Healthcare Corp. * 5,000 139,688 Warner Lambert 13,100 1,026,712 Zeneca Group 11,900 456,896 ------- 14,684,552 Electric Utilities - 1.13% Allegheny Energy, Inc. 14,700 452,025 Cinergy Corp. 10,275 354,488 Kansas City Power & Light Co. 13,000 374,563 ------- 1,181,076 Electrical Equipment - 1.12% General Electric Co. 13,400 1,172,500 --------- Electronics - 1.19% Intel Corp. 9,900 882,956 Philips Electronics NV 6,700 367,662 ------- 1,250,618 Financial Services - 1.42% American Express Co. 8,700 768,863 Citigroup, Inc. 15,400 724,762 ------- 1,493,625 Food & Beverages - 1.05% Coca Cola Co. 4,000 270,500 Nestle SA 300 637,497 Tyson Foods, Inc. 8,300 190,900 ------- 1,098,897 Gas & Pipeline Utilities - 0.49% Sonat, Inc. 16,775 508,492 ------- Gold - 0.85% Barrick Gold Corp. 41,500 887,062 ------- Household Products - 1.89% Colgate Palmolive Co. 3,500 309,313 Dial Corp. 22,175 611,198 Gillette Co. 6,400 287,600 Kimberly-Clark Corp. 6,600 318,450 Procter & Gamble Co. 5,100 453,263 ------- 1,979,824 The accompanying notes are an integral part of the financial statements. 44 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued (showing percentage of total value of investments) - -------------------------------------------------------------------------------- Shares Value ------ ----- Insurance - 3.00% Allstate Corp. 38,975 $1,678,361 W.R. Berkley Corp. 16,837 507,741 Chubb Corp. 5,375 330,563 The Equitable Companies, Inc. 3,000 147,000 Travelers Property Casualty Corp. Class A 15,700 481,794 ------- 3,145,459 International Oil - 2.66% The British Petroleum Company PLC 15,400 1,361,937 Mobil Corp. 6,200 469,262 Royal Dutch Petroleum Co., ADR 19,500 960,375 ------- 2,791,574 Leisure Time - 0.39% Walt Disney Co. 15,300 412,144 ------- Manufacturing - 0.36% Avery Dennison Corp. 2,700 111,881 Minnesota Mining & 3,300 264,000 ------- 375,881 Mining - 0.13% Potash Corporation of 2,000 138,750 ------- Newspapers - 0.91% Tribune Co. 9,200 530,150 Washington Post Co. 800 424,800 ------- 954,950 Paper - 0.18% Westvaco Corp. 7,600 187,150 ------- Petroleum Services - 1.22% Conoco, Inc. * 29,500 733,813 Halliburton Co. 15,100 542,656 ------- 1,276,469 Publishing - 0.02% Meredith Corp. 625 23,125 ------ Railroads - 0.63% Canadian National Railway Co. 13,200 665,775 ------- Retail Grocery - 0.53% Hannaford Bros. 12,800 560,800 ------- Retail Trade - 0.62% Wal-Mart Stores, Inc. 9,500 655,500 ------- Software - 0.66% Autodesk, Inc. 3,700 115,394 Oracle Corp. 11,400 337,013 Parametric Technology Corp. 14,600 242,725 ------- 695,132 Telecommunications Equipment - 0.31% Qualcomm, Inc. * 2,000 111,250 Tellabs, Inc. * 3,900 214,500 ------- 325,750 Telephone - 0.93% Bell Atlantic 10,200 541,875 GTE Corp. 7,450 437,222 ------- 979,097 Tobacco - 1.26% Philip Morris 25,825 1,320,303 --------- TOTAL COMMON STOCKS (Cost $45,532,510) $50,000,518 ----------- U.S. TREASURY OBLIGATIONS - 41.12% U.S. Treasury Strips - 0.43% Principal Only due 08/15/99 470,000 454,048 -------- Federal National Mortgage Association - 2.42% 6.00% due 05/15/08 1,450,000 1,537,000 6.35% due 01/08/03 1,000,000 1,001,720 --------- 2,538,720 U.S. Treasury Bonds - 14.26% 6.00% due 02/15/26 1,000,000 1,091,720 6.125% due 11/15/27 2,500,000 2,813,275 6.25% due 08/15/23 3,600,000 4,028,616 6.375% due 08/15/27 1,000,000 1,152,340 6.50% due 11/15/26 320,000 372,451 6.625% due 02/15/27 2,650,000 3,137,759 7.25% due 08/15/22 1,900,000 2,367,571 --------- 14,963,732 U.S. Treasury Notes - 24.01% 5.375% due 06/30/00 1,000,000 1,016,410 5.375% due 06/30/03 1,000,000 1,044,220 5.50% due 02/28/03 1,000,000 1,043,750 5.50% due 02/15/08 3,400,000 3,632,696 5.625% due 05/15/08 500,000 538,985 5.875% due 07/31/99 1,050,000 1,060,332 5.875% due 02/15/00 2,000,000 2,036,240 5.875% due 02/15/04 650,000 695,806 5.875% due 11/15/05 750,000 812,813 6.125% due 07/31/00 830,000 854,900 6.25% due 02/15/07 1,580,000 1,752,315 6.25% due 08/31/00 965,000 997,115 6.25% due 04/30/01 1,000,000 1,044,530 6.625% due 03/31/02 1,600,000 1,711,248 6.625% due 04/30/02 3,500,000 3,749,935 6.875% due 05/15/06 2,800,000 3,205,552 --------- 25,196,847 TOTAL U.S. TREASURY OBLIGATIONS (Cost $40,100,999) $43,153,347 ----------- FOREIGN GOVERNMENT OBLIGATIONS - 1.78% Ontario Province-1.78% 6.125% due 09/12/07 CAD 1,330,000 $899,452 6.500% due 03/08/29 1,405,000 967,929 ------- $1,867,381 ---------- TOTAL FOREIGN GOVERNMENT OBLIGATIONS (Cost $1,884,327) $1,867,381 ---------- CORPORATE BONDS - 1.18% Electric Utilities-0.24% Commonwealth Edison Co., 7.625% due 01/15/07 $234,000 $253,623 -------- Gas & Pipeline Utilities - 0.94% SONAT, Inc., 6.625% due 02/01/08 235,000 243,502 SONAT, Inc., 7.00% due 02/01/18 735,000 745,172 ------- 988,674 TOTAL CORPORATE BONDS (Cost $1,252,685) $1,242,297 ---------- The accompanying notes are an integral part of the financial statements. 45 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued (showing percentage of total value of investments) - -------------------------------------------------------------------------------- Principal Value --------- ----- SHORT TERM INVESTMENTS - 6.01% Navigator Securities Lending Trust $6,307,425 $6,307,425 SSGA Money Market Fund 1,000 1,000 ----- $6,308,425 REPURCHASE AGREEMENT - 2.26% Repurchase Agreement with State Street Bank & Trust Co., dated 10/30/98 at 4.25%, to be repurchased at $2,375,841 on 11/02/98, collateralized by $2,185,000 U.S. Treasury Bonds, 6.00% due 02/15/26 (valued at $2,452,886, including interest) $2,375,000 $2,375,000 ---------- TOTAL INVESTMENTS $104,946,968 (Balanced Fund) (Cost $97,453,946) ------------ ---------------------------------------------------------------------------- Strategic Income Fund ---------------------------------------------------------------------------- Principal Value --------- ----- CORPORATE BONDS - 37.93% Aerospace - 0.24% B.E. Aerospace, Inc., 8.00% due 03/01/08 $250,000 $233,750 -------- Banking - 1.81% Bank One Corp., 7.60% due 05/01/07 600,000 667,392 Korea Development Bank, 9.60% due 12/01/00 1,000,000 960,170 Sudwest LB Capital Markets, 17.50% due 05/05/03 PLN 480,000 156,401 ------- 1,783,963 Business Services - 2.35% CSC Holdings, Inc. 10.50% due 05/15/16 $500,000 560,000 Comdisco, Inc., 6.13% due 08/01/01 500,000 496,785 First Data Corp., 6.375% due 12/15/07 500,000 513,070 Iron Mountain, Inc., 10.125% due 10/01/06 500,000 527,500 United States Leasing Capital Corp., 8.45% due 01/25/05 200,000 232,270 ------- 2,329,625 Chemical Products - 0.36% Revlon Worldwide Corp., Series B, zero coupon due 03/15/01 600,000 357,000 ------- Crude Petroleum & Natural Gas - 2.11% Bellwether Exploration Co., 10.875% due 04/01/07 250,000 225,000 Benton Oil & Gas Co., 11.625% due 05/01/03 200,000 160,000 Cliffs Drilling Co., 10.25% due 05/15/03 250,000 261,250 National Energy Group, Inc., 10.75% due 11/01/06 500,000 247,500 Occidental Petroleum Corp., 9.25% due 08/01/19 700,000 778,715 Texas Petrochemicals Corp., 11.125% due 07/01/06 250,000 225,000 United Refining Co., 10.75% due 06/15/07 250,000 185,000 ------- 2,082,465 Drugs & Health Care - 1.17% Dade International, Inc., 11.125% 05/01/06 $500,000 $535,000 Prime Medical Services, Inc., 8.75% due 04/01/08 500,000 467,500 Vencor, Inc., 9.875% due 05/01/05 200,000 154,000 ------- 1,156,500 Electronics - 0.81% Decisionone Corp., 9.75% due 08/01/07 500,000 300,000 Unisys Corp., 7.875% due 04/01/08 500,000 505,000 ------- 805,000 Energy & Utilities - 1.02% Costilla Energy, Inc., 10.25% due 10/01/06 500,000 410,000 Dawson Production Svcs., 9.375% due 02/01/07 250,000 250,000 High Voltage Engineering Corp., 10.5% due 08/15/04 250,000 225,000 Transamerican Energy Corp., 11.5% due 06/15/02 325,000 120,250 ------- 1,005,250 Financial Services - 6.57% DLJ Commercial Mortgage Corp., Interest Only, due 05/10/23 9,764,577 441,173 First Union Residential Securities, 7.00% due 08/25/28 248,384 244,618 Green Tree Financial Corp., 7.07% due 09/15/07 2,139,645 2,157,683 Merrill Lynch & Co., Inc., 6.00% due 02/12/03 225,000 228,017 Navistar International Corp., 8.00% due 02/01/08 500,000 487,500 Paine Webber Group, Inc., 7.00% due 03/01/00 400,000 404,040 PNC Mortgage Securities Corp., 6.50% due 02/22/22 1,000,000 952,500 6.734% due 07/25/28 423,597 406,242 6.75% due 02/22/22 400,000 371,000 6.75% due 05/25/28 348,662 334,356 6.838% due 05/25/28 473,150 459,636 ------- 6,486,765 Food & Beverages - 2.23% Ameriserve Food Distr, Inc., 10.125% due 07/15/07 500,000 410,000 Dole Foods, Inc., 6.75% due 07/15/00 1,000,000 1,006,750 SC International Services, Inc., 9.25% due 09/01/07 500,000 485,000 Stroh Brewery Co., 11.10% due 07/01/06 500,000 300,000 ------- 2,201,750 Food Stores - 0.46% Carr Gottstein Foods Co., 12.00% due 11/15/05 400,000 457,000 ------- The accompanying notes are an integral part of the financial statements. 46 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued (showing percentage of total value of investments) - -------------------------------------------------------------------------------- Principal Value --------- ----- Forest Products - 0.18% Doman Industries, Ltd., 8.75% due 03/15/04 250,000 175,000 ------- Hotels & Restaurants - 0.48% Prime Hospitality Corp., 9.75% due 04/01/07 $500,000 $473,750 -------- Industrials - 5.94% Alvey Systems, Inc., 11.375% due 01/31/03 250,000 252,500 Berry Plastics Corp., 12.25% due 04/15/04 650,000 659,750 CFP Holdings, Inc., 11.625% due 01/15/04 250,000 145,000 Commonwealth Aluminum Corp., 10.75% due 10/01/06 400,000 368,000 Dana Corp., 6.50% due 03/15/08 300,000 306,348 Doane Products Co., 10.625% due 03/01/06 250,000 263,750 Foamex, L.P., 9.875% due 05/15/07 375,000 446,250 Harnischfeger Industries, Inc., 6.875% due 02/15/27 600,000 539,430 ICG Holdings, Inc., Step up to 13.50% due 09/15/05 500,000 375,000 Marcus Cable Company, Step up to 14.25% due 12/15/05 250,000 227,500 Norsk Hydro A/S, 6.70% due 01/15/18 400,000 382,628 Polymer Group, Inc., 8.75% due 03/01/08 150,000 138,000 9.00% due 07/01/07 190,000 176,700 Praxair, Inc., 6.15% due 04/15/03 500,000 504,270 Raytheon Company, 5.95% due 03/15/01 100,000 101,248 Stellex Industries, Inc., 9.50% due 11/01/07 250,000 232,500 Synthetic Industries, Inc., 9.25% due 02/15/07 25,000 25,000 Venture Holdings Trust, 9.75% due 04/01/04 250,000 225,000 Williams Scotsman, Inc., 9.875% due 06/01/07 500,000 500,000 ------- 5,868,874 Insurance - 0.48% Aetna Services, Inc., 7.625% due 08/15/26 500,000 478,110 ------- Leisure Time - 0.52% Grand Casinos, Inc., 9.00% due 10/15/04 500,000 512,500 ------- Metal & Metal Products - 0.25% Renco Metals, Inc., 11.50% due 07/01/03 250,000 247,500 ------- Other - 2.05% Hines Horticulture, Inc., Series B, 11.75% due 10/15/05 325,000 325,000 The Holt Group, Inc., 9.75% due 01/15/06 500,000 325,000 Kindercare Learning Centre, Inc., 9.50% due 02/15/09 250,000 238,750 La Petite Academy, Inc., 10.0% due 05/15/08 375,000 363,750 LIN Holdings Corp., Zero Coupon due 03/01/08 500,000 321,250 United International Holdings, Inc. Step up to 10.75%, due 02/15/08 1,000,000 450,000 ------- 2,023,750 Pollution Control - 0.84% Allied Waste Industries, Inc., Step up to 11.30% due 06/01/07 750,000 558,750 Norcal Waste Systems, Inc., Step up to 13.25% due 11/15/05 250,000 275,000 ------- 833,750 Publishing - 0.52% American Media Operations, Inc., 11.625% due 11/15/04 500,000 510,000 ------- Real Estate - 0.98% HMH Properties, Inc., 7.875% due 08/01/08 500,000 485,000 Radnor Holdings Corp., 10.00% due 12/01/03 500,000 485,000 ------- 970,000 Retail Trade - 1.35% Cole National Group, Inc., 8.625% due 08/15/07 250,000 232,500 Hills Stores Company, 12.50% due 07/01/03 250,000 98,750 Musicland Group, Inc., 9.875% due 03/15/08 250,000 237,500 Staples, Inc., 7.125% due 08/15/07 750,000 762,983 ------- 1,331,733 Steel - 0.43% Murrin Murrin Holdings, 9.375% due 08/31/07 500,000 425,000 ------- Telecommunication Services - 4.30% Adelphia Communications Corp., 9.875% due 03/01/07 175,000 186,375 British Telecommunications, 7.0% due 05/23/07 1,080,000 1,200,150 Comcast Cellular Holdings, Inc., 9.50% due 05/01/07 500,000 511,250 Century Communications Corp., Zero coupon due 01/15/08 275,000 128,563 GTE Corp., 6.94% due 04/15/28 200,000 205,806 International Cabletel, Inc., Step up to 11.50% due 02/01/06 1,000,000 750,000 Nextel Communications, Step up to 9.95%, due 02/15/08 250,000 133,750 Step up to 9.75%, due 08/15/04 400,000 373,000 SFX Broadcasting, Inc., 10.75% due 05/15/06 164,000 175,890 The accompanying notes are an integral part of the financial statements. 47 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued (showing percentage of total value of investments) - -------------------------------------------------------------------------------- Principal Value --------- ----- Telecommunication Services - 4.30% - cont'd. Telewest Communication PLC, Step up to 11.00% due 10/01/07 750,000 585,938 ------- 4,250,722 Transportation - 0.48% Stena AB 10.5% due 12/15/05 $250,000 $253,750 TFM SA DE CV, Step up to 11.75% due 06/15/09 500,000 220,000 ------- 473,750 TOTAL CORPORATE BONDS (Cost $40,213,540) $37,473,507 ----------- CONVERTIBLE BONDS - 0.61% Fresenius Medical Care Capital 9.00% due 12/01/06 $250,000 $247,500 Hollinger, Inc., Zero coupon due 10/05/13 875,000 358,750 ------- TOTAL CONVERTIBLE BONDS (Cost $592,439) $606,250 -------- U.S. TREASURY OBLIGATIONS - 0.65% U.S. Treasury Bonds - 0.33% 3.6250% due 04/15/28 $100,000 $100,062 6.125% due 11/15/27 200,000 225,062 ------- 325,124 U.S. Treasury Notes - 0.32% 5.250% due 08/15/03 200,000 208,688 6.375% due 03/31/01 100,000 104,594 ------- 313,282 TOTAL U.S. TREASURY OBLIGATIONS (Cost $639,979) $638,406 -------- U.S. GOVERNMENT AGENCY OBLIGATIONS - 17.24% Federal Home Loan Banks - 0.47% 5.89% due 07/24/00 $450,000 $458,510 -------- Federal Home Loan Mortgage Corporation - 3.00% 6.50% due 12/01/10 1,293,305 1,313,895 6.50% TBA ** 700,000 705,684 8.50% due 05/01/08 409,601 426,362 10.00% due 05/15/20 415,026 454,063 Interest Only due 06/15/21 266,046 67,051 ------ 2,967,055 Government National Mortgage Association - 0.95% 7.50% due 07/15/27 450,032 463,389 7.50% due 10/15/27 374,529 385,646 7.50% due 10/15/27 89,234 91,882 ------ 940,917 Federal National Mortgage Association - 12.34% Interest Only due 03/17/20, 6,702,427 176,261 Interest Only due 10/17/36, 12,738,446 360,281 Interest Only due 02/25/35, 6,525,128 520,881 8.80% due 01/25/19, REMIC 558,314 598,792 10.40% due 04/25/19, REMIC 93,046 102,816 6.0% TBA ** 750,000 741,090 6.5% TBA 7,000,000 7,054,670 7.0% TBA 2,500,000 2,553,900 13.00% due 11/15/15 72,116 85,729 ------ 12,194,420 Student Loan Marketing Association - 0.48% 7.20% due 11/09/00 450,000 470,601 ------- TOTAL U.S. GOVERNMENT OBLIGATIONS (Cost $17,030,699) $17,031,503 ----------- FIXED INCOME - OTHER - 2.60% Miscellaneous Asset Backed Securities - 2.60% Mid State Trust VI, Class A, 7.34% due 07/01/35 $1,559,517 $1,617,998 GE Capital Management 6.75% due 11/25/28 REMIC 999,223 952,079 ------- TOTAL FIXED INCOME - OTHER (Cost $2,558,504) $2,570,077 ---------- FOREIGN GOVERNMENT OBLIGATIONS - 20.28% Republic of Argentina - 2.21% 6.188% due 03/31/05 $2,726,000 $2,186,388 ---------- Federal Republic of Brazil - 1.29% 10.125% due 05/15/27 1,025,000 704,688 6.125% due 04/15/24 975,000 567,938 ------- 1,272,626 National Republic of Bulgaria - 0.67% 6.688% due 07/28/11 1,000,000 662,500 ------- Government of Canada - 0.27% 7.00% due 12/01/06 CAD 360,000 262,630 ------- Government of Costa Rica - 0.24% Series B, 6.25% due 05/21/15 $300,000 237,000 ------- Kingdom of Denmark - 3.02% 6.00% due 02/15/99 DKK 11,440,000 1,823,715 8.00% due 05/15/03 6,340,000 1,159,179 --------- 2,982,894 Republic of Ecuador - 0.36% 3.25% due 02/27/15 $848,738 358,592 ------- Republic of Finland - 0.22% 6.00% due 04/25/08 FIM 1,000,000 221,814 ------- Federal Republic of Germany - 1.07% 4.75% due 07/04/08 DEM 810,000 513,187 5.625% due 01/04/28 530,000 340,525 6.5% due 07/04/27 290,000 208,051 ------- 1,061,763 Republic of Greece - 1.30% 8.70% due 04/08/05 GRD 27,000,000 96,158 8.90% due 04/01/03 245,200,000 874,564 11.00% due 02/25/00 90,400,000 311,525 ------- 1,282,247 Republic of Italy - 1.47% 6.25% due 02/21/99 XEU 350,000 415,135 European Investment Bank, ITL 7.45% due 02/04/99 1,680,000 1,032,997 --------- 1,448,132 Government of Mexico - 1.54% 6.25% due 12/31/19, Series B $1,250,000 932,875 6.25% due 12/31/19, Series W-A 250,000 186,575 11.50% due 05/15/26 400,000 402,250 ------- 1,521,700 Government of Morocco - 0.76% 6.562% due 01/01/09 1,000,000 750,000 ------- The accompanying notes are an integral part of the financial statements. 48 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued (showing percentage of total value of investments) - -------------------------------------------------------------------------------- Principal Value --------- ----- New South Wales Treasury Corp - 0.07% 7.375% due 02/21/07 AUD 100,000 69,958 ------ Government of New Zealand - 0.38% 6.5% due 02/15/00 NZD 700,000 376,615 ------- Government of Panama - 0.73% 4.00% due 07/17/14 $1,000,000 $725,000 -------- Government of Peru - 0.92% 4.00% due 03/07/17 1,600,000 904,000 ------- Republic of Poland - 0.45% 5.00% due 10/27/14 500,000 448,750 ------- Russia - 0.18% Principal Loans-3.312% due 12/15/20 2,250,000 168,750 Vnesheconomobank, 144A 6.625% due 12/15/15 30,700 3,070 Vnesheconomobank, 6.625% due 12/15/15 52,630 5,131 ----- 176,951 Kingdom of Sweden - 1.16% 6.50% due 05/05/28 SEK 4,200,000 609,102 11.00% due 01/21/99 4,100,000 532,722 ------- 1,141,824 Republic of Venezuela - 1.97% 6.125% due 03/31/07 $1,011,900 617,259 6.625% due 12/18/07 2,261,904 1,323,778 --------- 1,941,037 TOTAL FOREIGN GOVERNMENT OBLIGATIONS (Cost $21,174,808) $20,032,421 ----------- Shares Value ------ ----- RIGHTS & WARRANTS - 0.03% Crude Petroleum & Natural Gas - 0.03% Terex Corporation 2,000 $28,250 Industrials - 0.00% Berry Plastics Corp. 500 0 Telephone - 0.00% Wireless One, Inc. 750 7 In-flight Phone Corp. 1,000 0 Foreign Governments - 0.00% United Mexican States 1,500,000 0 - TOTAL WARRANTS (Cost $0) $28,257 ------- Principal Value --------- ----- SHORT TERM INVESTMENTS - 10.99% Navigator Securities Lending Trust $10,858,710 $10,858,710 ----------- REPURCHASE AGREEMENT - 9.67% Repurchase Agreement with State Street Bank & Trust Co. dated 10/30/98 at 5.35%, to be repurchased 11/02/98 at $9,558,259 collateralized by $6,190,000 U. S. Treasury Bonds, 12.00% due 08/15/13 (valued at $9,908,164, including interest) 9,554,000 $9,554,000 ---------- TOTAL INVESTMENTS (Strategic Income Fund) (Cost $102,719,681) $98,793,131 ----------- Investment Quality Bond Fund ---------------------------------------------------------------------------- Principal Value --------- ----- CORPORATE BONDS - 35.92% Apparel & Textiles - 0.05% Collins & Aikman Products Co., 11.50% due 04/15/06 $10,000 $10,050 ------- Banking - 6.82% BankAmerica Corp., 9.50% due 04/01/01 114,000 123,795 Credit National, 7.00%, due 11/14/05 150,000 154,219 Export-Import Bank of Korea, 6.375% due 02/15/06 200,000 147,536 First Financial Caribbean Corp., 7.84% due 10/10/06 135,000 143,088 NBD Bancorp, 8.25% due 11/01/24 300,000 344,691 Republic New York Corp., 9.75% due 12/01/00 155,000 168,000 U.S. Bancorp, 7.50% due 06/01/26 300,000 327,906 Western Financial Bank, 8.875% due 08/01/07 25,000 18,000 ------ 1,427,235 Broadcasting - 0.11% Granite Broadcasting Corp., 8.875% due 05/15/08 15,000 12,900 Jacor Communications Co., 8.75% due 06/15/07 10,000 10,400 ------ 23,300 Building Products - 0.10% Falcon Building Products, Inc., 9.50% due 06/15/07 20,000 16,400 Falcon Holding Group LP, 8.375% due 04/15/10 5,000 4,950 ----- 21,350 Business Services - 0.06% AMSC Acquisition, Inc., 12.25% due 04/01/08 5,000 2,375 Iron Mountain, Inc., 8.75% due 09/30/09 10,000 9,950 ----- 12,325 Chemical Products - 0.26% Huntsman Corp., 9.50% due 07/01/07 15,000 14,100 Revlon Consumer Products Corp., 8.625% due 02/01/08 10,000 9,000 Revlon Worldwide Corp., Series B, zero coupon due 03/15/01 20,000 11,900 Sovereign Specialty Chemicals, 9.50% due 08/01/07 10,000 9,400 Texas-Petro Chemical Corp., 11.125% due 07/01/06 10,000 9,000 ----- 53,400 Crude Petroleum & Natural Gas - 0.62% Costilla Energy, Inc., 10.25% due 10/01/06 20,000 16,700 Cross Timbers Oil Co., 9.25% due 04/01/07 20,000 18,000 Dailey Petroleum Services Corp., 9.50% due 02/15/08 25,000 10,375 The accompanying notes are an integral part of the financial statements. 49 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued (showing percentage of total value of investments) - -------------------------------------------------------------------------------- Principal Value --------- ----- Crude Petroleum & Natural Gas - 0.62% - cont'd. Energy Corporation of America, 9.50% due 05/15/07 $20,000 $17,800 Newfield Exploration Co., 7.45% due 10/15/07 45,000 44,106 Petroleos Mexicanos, 8.85% due 09/15/07 25,000 21,750 --------- 128,731 Drugs & Health Care - 2.32% Allegiance Corp., 7.00% due 10/15/26 325,000 340,847 Owens & Minor, Inc., 10.875% due 06/01/06 20,000 20,400 Tenet Healthcare Corp., 7.875% due 01/15/03 110,000 111,375 Universal Hospital Services, 10.25% due 03/01/08 15,000 12,600 --------- 485,222 Electric Utilities - 0.61% The Cleveland Electric Company, 7.19% due 07/01/00 125,000 127,966 --------- Financial Services - 7.36% American General Finance Corp., 8.00% due 02/15/05 230,000 237,990 Amerus Capital I, 8.85% due 02/01/27 100,000 103,495 Amresco Communications, Inc., 9.875% due 03/15/05 10,000 6,100 Amvescap PLC, 6.60% due 05/15/05 150,000 156,995 BanPonce Financial Corp., 6.75% due 08/09/01 250,000 255,600 Beneficial Corp., 8.40% due 05/15/08 75,000 85,570 Contifinancial Corp., 8.125% due 04/01/08 10,000 5,900 Japan Financial Corp., 9.125% due 10/11/00 200,000 214,082 KFW International Financial, Inc., 9.125% due 05/15/01 200,000 219,008 Neenah Corp., 11.125% due 05/01/07 10,000 10,200 Olympic Financial, 11.5% due 03/15/07 10,000 6,300 Pindo Deli Financial Mauritius, 10.75% due 10/01/07 10,000 4,900 Sun Canada Financial Co., 7.25% due 12/15/15 200,000 222,392 Tembec Finance Corp., 9.875% due 09/30/05 10,000 10,150 --------- 1,538,682 Food & Beverages - 0.09% Aurora Foods, Inc., 8.75% due 07/01/08 5,000 5,150 Del Monte Foods Co., Step-up to 12.50%, due 12/15/07 25,000 14,250 --------- 19,400 Homebuilders - 0.04% Engle Homes, Inc., 9.25% due 02/01/08 10,000 9,375 --------- Industrials - 6.27% Abraxas Petroleum Corp., 11.50% due 11/01/04 10,000 7,700 Accuride Corp., 9.25% due 02/01/08 10,000 9,300 American Pad & Paper Co., 13.00% due 11/15/05 20,000 9,400 Acindar Industria, Argentina, 11.25% due 02/15/04 10,000 6,500 Advanced Micro Devices, Inc., 11.00% due 08/01/03 25,000 25,250 Argo-Tech Corp., 8.625% due 10/01/07 15,000 13,875 Associates Corp. of North 5.75% due 11/01/03 120,000 120,277 Cincinnati Milacron, Inc., 7.875% due 05/15/00 130,000 133,947 Consumers International, Inc., 10.25% due 04/01/05 5,000 5,000 DecisionOne Holdings, 9.75% due 08/01/07 10,000 6,000 Dime Capital Trust I, 9.33% due 05/06/27 150,000 154,783 Disco S.A. 9.875% due 05/15/08 10,000 6,600 Domtar, Inc., 9.50% due 08/01/16 10,000 9,774 Duane Reade, Inc., 9.25% due 02/15/08 15,000 14,250 EchoStar DBS Corp., 12.50% due 07/01/02 5,000 5,075 Fairchild Semiconductor Corp., 10.125% due 03/15/07 10,000 9,000 Fisher Scientific Int'l., Inc., 9.00% due 02/01/08 10,000 9,650 Frontiervision Holding, L.P., Step-up to 11.875%, due 09/15/07 5,000 4,012 Gaylord Container Corp., 9.375% due 06/15/07 15,000 11,100 Globalstar L.P. Capital Corp., 10.75% due 11/01/04 25,000 15,750 Grove Worldwide LLC, 9.25% due 05/01/08 15,000 12,862 Grupo Int'l Durango, 12.625% due 08/01/03 15,000 10,800 Guitar Center Management Co. Inc., 11.00% due 07/01/06 17,000 17,340 Iridium LLC/Capital Corp., 10.875% due 07/15/05 5,000 3,650 Iridium LLC/Capital Corp., 11.25% due 07/15/05 30,000 22,200 K & F Industries, Inc., 9.25% due 10/15/07 10,000 9,500 LaRoche Industries, Inc., 9.50% due 09/15/07 5,000 4,300 LDM Technologies, Inc., 10.75% due 01/15/07 20,000 17,000 Moog, Inc., Series B, 10.00% due 05/01/06 25,000 25,000 MTL, Inc., 10.0% due 06/15/06 10,000 9,700 The accompanying notes are an integral part of the financial statements. 50 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued (showing percentage of total value of investments) - -------------------------------------------------------------------------------- Principal Value --------- ----- Industrials - 6.27% - cont'd. News America Holdings, Inc., 9.25% due 02/01/13 $250,000 $287,548 NTL, Inc., Step-up due 10/01/08 20,000 11,101 P&L Coal Holdings Corp., 9.625% due 05/15/08 35,000 34,650 Pioneer Americas Acquisiton Corp., 9.25% due 06/15/07 10,000 7,500 Plains Resources, Inc., Series B, 10.25% due 03/15/06 20,000 19,600 Psinet, Inc., 11.50% due 11/01/08 5,000 5,150 Psinet, Inc., 10.00% due 02/15/05 20,000 19,400 Repap New Brunswick, Inc., 10.625% due 04/15/05 25,000 16,250 Rifkin Acquisitions Partners, L.P., 11.125% due 01/15/06 10,000 10,600 Standard Pacific Corp., 8.50% due 06/15/07 15,000 14,831 Sullivan Graphics, Inc., 12.75% due 08/01/05 20,000 20,000 Verio, Inc., 10.375% due 04/01/05 10,000 9,550 WESCO Distribution, Inc., 9.125% due 06/01/08 15,000 14,400 YPF Sociedad Anonima, 8.00% due 02/15/04 145,000 132,313 ------- 1,312,488 Insurance - 2.66% Equitable Companies, Inc., 7.00% due 04/01/28 100,000 98,616 Jackson National Life Insurance 8.15% due 03/15/27 100,000 116,661 Ohio National Life Insurance Co., 8.50% due 05/15/26 150,000 177,971 Security Benefit Life Co., 8.75% due 05/15/16 150,000 163,788 ------- 557,036 Leisure Time - 0.19% Argosy Gaming Co., 13.25% due 06/01/04 25,000 26,625 Fitzgerald's Gaming Corp., 12.25% due 12/15/04 5,000 2,950 Loew's Cineplex Entertainment 8.875% due 08/01/08 10,000 9,800 ----- 39,375 Metal Products - 0.05% Silgan Holdings, Inc., 9.00% due 06/01/09 10,000 9,500 ----- Office Products - 0.45% Boise Cascade Office Products 7.05% due 05/15/05 100,000 95,086 ------ Paper - 0.51% Boise Cascade Corp., 9.90% due 10/01/01 100,000 106,689 ------- Retail Trade - 0.98% J.C. Penney Company, Inc., 7.40% due 04/01/37 200,000 204,146 ------- Steel - 0.11% Armco, Inc., 9% due 09/15/07 $5,000 $5,000 Amersteel Corp., 8.75% due 04/15/08 5,000 4,400 Bayou Steel Corp., 9.5% due 05/15/08 15,000 13,050 ------ 22,450 Telecommunication Services - 2.66% Adelphia Communications Co. 8.375% due 02/01/08 10,000 9,850 Allbritton Communications Co., 8.875% due 02/01/08 15,000 14,100 e.Spire Communications, Inc., 144A Step-up to 10.625%, due 04/01/06 15,000 10,875 e.Spire Communications, Inc., Step-up to 10.625%, due 07/01/08 10,000 4,900 BTI Telecommunications Corp., 10.50% due 09/15/07 20,000 14,800 Century Communications, Zero coupon, due 01/15/08 35,000 16,362 Concentric Network Corp., 12.75% due 12/15/07 10,000 8,800 Echostar Satellite Broadcast Step-up to 13.125%, due 03/15/04 5,000 4,400 GST Telecommunications, 12.75% due 11/15/07 20,000 18,000 Innova S. de R.L., 12.875% due 04/01/07 20,000 11,000 Intermedia Communications, Inc., 8.875% due 11/01/07 25,000 24,000 Intermedia Communications, Inc., 8.6% due 06/01/08 10,000 9,550 ITC Deltacom, Inc., 8.875% due 03/01/08 10,000 9,675 ITC Deltacom, Inc., 9.75% due 11/15/08 5,000 5,000 IXC Communications, Inc., 9.00% due 04/15/08 20,000 19,700 KMC Telecom. Holdings, Inc., Step-up to 12.50%, due 02/15/08 50,000 23,000 Level 3 Communications, Inc., 9.125% due 05/01/08 25,000 23,500 LIN Holdings Corp., Step-up to 10.00%, due 03/01/08 25,000 16,062 MGC Communications, Inc., 13.0% due 10/01/04 5,000 3,725 Nextlink Communications, Inc., Step-up to 9.45%, due 04/15/08 25,000 13,125 Paging Network, Inc., 10.125% due 08/01/07 15,000 14,550 Qwest Communications Int'l., 7.50% due 11/01/08 5,000 4,981 RSL Communications PLC, 9.125% due 03/01/08 20,000 17,000 Telecommunications Tech Co., 9.75% due 05/15/08 15,000 12,900 Tele-Communications, Inc., 9.25% due 04/15/02 200,000 223,224 Time Warner Telecommunications, 9.75% due 07/15/08 10,000 10,000 The accompanying notes are an integral part of the financial statements. 51 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued (showing percentage of total value of investments) - -------------------------------------------------------------------------------- Principal Value --------- ----- Telecommunication Services - 2.66% - cont'd. Viatel, Inc., 11.25% due 04/15/08 $15,000 $13,200 ------- 556,279 Telephone - 2.91% Classic Cable, Inc., 9.875% due 08/01/08 5,000 5,050 Comcast Cable Communications, 8.50% due 05/01/27 150,000 180,459 McLeod USA, Inc., 9.50% due 11/01/08 10,000 10,225 MobileMedia Communications, 9.375% due 11/01/07 50,000 6,500 NEXTEL Communications, Inc., Step up to 9.75% due 10/31/07 60,000 32,400 U.S. West Capital Funding, Inc., 6.25% due 07/15/05 150,000 157,572 WorldCom, Inc., 7.55% due 04/01/04 200,000 216,852 ------- 609,058 Transportation - 0.58% Continental Airlines, 6.648% due 03/15/19 70,000 67,537 Johnstown American Industries, Inc., 11.75% due 08/15/05 20,000 20,675 Southern Railway Company, 8.75% due 10/15/03 30,000 34,093 ------ 122,305 Utilities - 0.11% GCI, Inc., 9.75% due 08/01/07 25,000 22,719 ------ TOTAL CORPORATE BONDS (Cost $7,565,386) $7,514,167 ---------- U.S. TREASURY OBLIGATIONS - 28.05% U.S. Treasury Bonds - 28.05% 12.00% due 08/15/13 3,800,000 $5,866,858 ---------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $5,508,581) $5,866,858 ---------- U.S. GOVERNMENT AGENCY OBLIGATIONS - 15.72% Federal Home Loan Mortgage Corp. - 5.19% 6.00% due 09/25/22 $474,000 $421,184 6.00% TBA ** 300,000 300,093 6.50% due 06/15/23 100,000 104,937 7.00% due 09/15/21 200,000 210,062 ------- 1,086,276 Federal National Mortgage Association - 7.63% 5.50% due 08/01/28 353,500 339,360 6.00% TBA ** 300,000 296,436 6.25% due 11/25/19 500,000 509,375 6.60% due 09/25/18, REMIC 300,000 304,125 8.00% due 01/01/99 - 02/01/99 144,105 145,739 ------- 1,595,035 Government National Mortgage Association - 2.90% 7.00% due 06/15/23 - 10/15/23 592,961 607,228 ------- TOTAL U.S. GOVERNMENT OBLIGATIONS (Cost $3,172,750) $3,288,539 ---------- FIXED INCOME - OTHER - 1.10% Miscellaneous Asset Backed Securities - 1.10% First Union Lehman Bros., Series Class A2, 6.60% due 05/18/07 $200,000 $204,536 Western Financial Grantor Trust, 1995, Class A1, 7.10% due 24,316 24,560 ------ TOTAL FIXED INCOME - OTHER (Cost $225,290) $229,096 -------- Shares Value ------ ----- PREFERRED STOCKS - 0.24% Fairfield Manufacturing Co., Inc. 25 $23,812 Primedia, Inc. 145 13,086 SF Holdings Group, Inc. * 2 13,850 SF Holdings Group, Inc. * 74 148 Viatel, Inc. 7 422 --- TOTAL PREFERRED STOCKS (Cost $58,288) $51,318 ------- WARRANTS - 0.00% American Mobile Satellite * 5 $242 Concentric Network Corp. * 5 351 KMC Telecom. Holdings, Inc. * 50 162 TOTAL WARRANTS (Cost $0) $755 ---- Principal Value --------- ----- SHORT TERM INVESTMENT - 16.40% Navigator Securities Lending $3,429,644 $3,429,644 ---------- ---------- REPURCHASE AGREEMENT - 2.57% Repurchase Agreement with Swiss Bank dated 10/30/98 at 5.38% to be repurchased at $538,241 on 11/02/98, collateralized by $452,000 U.S. Treasury Bonds, 6.75% due 08/15/26 (valued at $547,936, including interest.) $538,000 $538,000 -------- TOTAL INVESTMENTS (Investment $20,918,377 Quality Bond Fund) (Cost $20,497,939) ---------------------------------------------------------------------------- National Municipal Bond Fund ---------------------------------------------------------------------------- Principal Value --------- ----- LONG-TERM INVESTMENTS - 97.30% Alabama - 2.21% Alabama Housing Finance Single Family Mortgage Revenue Collateralized Home Mortgage Series B-2, 6.40%, 04/01/25 $335,000 $352,219 -------- California - 6.74% California Housing Finance Revenue, Series H, 6.15%, 08/01/16 1,000,000 1,072,650 --------- Georgia - 3.35% Fulton County, Georgia, School Refunding 5.25% due 01/01/14 500,000 532,920 ------- Illinois - 4.67% Illinois Health Facilities Authority Revenue (Hospital Association Project), 7.00%, 02/15/22 200,000 223,444 Chicago, Illinois, Skyway Toll Revenue, 5.375%, 01/01/16 500,000 518,805 ------- 742,249 The accompanying notes are an integral part of the financial statements. 52 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued (showing percentage of total value of investments) - -------------------------------------------------------------------------------- Principal Value --------- ----- Iowa - 1.06% Iowa Finance Authority Hospital Revenue Refunding (Trinity Hospital Project), 7.00%, 07/01/12 $150,000 $168,622 -------- Louisiana - 3.30% Louisiana Public Facilities Authority Hospital Revenue Refunding (Touro Project), Series B, 6.125%, 08/15/23 500,000 524,385 ------- Maine - 0.17% Maine State Housing Authority Purchase, Series A-4, 6.375%, 11/15/12 25,000 26,355 ------ Massachusetts - 6.75% Massachusetts State General Series C, 5.25% due 08/01/17 500,000 525,040 Massachusetts State Special Revenue, Series A, 5.50%, 06/01/13 500,000 548,530 ------- 1,073,570 Missouri - 3.39% Missouri State Health & Facilities Authority Revenue, 6.25%, 02/15/11 500,000 538,635 ------- Nebraska - 8.24% Nebraska Higher Education Loan Program Income Revenue, 6.65%, 12/01/08 1,200,000 1,311,216 --------- Nevada - 4.31% Nevada Housing Division, Single- Program, B-2, 6.95%, 10/01/26 300,000 322,260 Nevada Housing Division, Single- Program, Issue C, 6.35%, 10/01/12 340,000 363,977 ------- 686,237 New Jersey - 3.59% New Jersey Economic Authority Water Facilities (New Jersey American Water Company, Incorporated Project), 6.875%, 11/01/34 500,000 570,940 ------- New York - 18.48% New York State Local Assistance Corporation, Series 6.00%, 04/01/16 1,000,000 1,098,400 New York State Dormitory Revenue, State University Facilities, Series A, 6.25%, 05/15/08 500,000 557,965 New York State Environmental Corporation Pollution Control Refunding (IBM Corporation Project), 7.125%, 07/01/12 580,000 621,076 New York State Mortgage Agency Rev., Series 40-A, 6.35%, 04/01/21 630,000 662,930 ------- 2,940,371 Pennsylvania - 7.11% Delaware Valley, Pennsylvania, Regional Finance Authority Series A, 5.50%, 08/01/28 500,000 546,680 Philadelphia, Pennsylvania, & Wastewater Revenue, 6.25%, 08/01/12 500,000 583,910 ------- 1,130,590 South Carolina - 3.39% Greenville Hospital Systems Hospital Facilities Revenue, Series B, 5.70%, 05/01/12 $500,000 $539,320 -------- Tennessee - 3.16% Humphreys County, Tennessee, Industrial Development Board Solid Waste Disposal Revenue (E.I. Du Pont De Nemours & Co. Project), 6.70%, 05/01/24 450,000 502,488 ------- Texas - 4.35% Texas State Veterans Housing Assistance, 6.80%, 12/01/23 85,000 91,719 Port Arthur, Texas, Navy District, Zero Coupon, 03/01/10 1,000,000 599,820 ------- 691,539 Virginia - 2.00% Virginia State Housing Authority Commonwealth Subseries I-1, 6.55%, 07/01/17 300,000 317,619 ------- Washington - 3.40% Washington State General Series C, 5.50%, 07/01/16 500,000 541,340 ------- Wisconsin - 7.63% Wisconsin Housing & Economic Development Authority Home Revenue, Series D, 6.10%, 07/01/24 130,000 134,137 Wisconsin State Health & Facilities Authority Revenue, Hospital of Janesville, 6.60%, 08/15/22 1,000,000 1,080,150 --------- 1,214,287 TOTAL LONG TERM INVESTMENTS (Cost $14,453,356) $15,477,552 ----------- SHORT TERM INVESTMENTS - 2.70% North Carolina - 0.82% Halifax County, North Carolina, Industrial Facilities & Pollution Control, 3.80% due 06/01/21 $130,000 $130,000 -------- Virginia - 1.88% King George County, Virginia, Industrial Authority, Partners-A, 3.80% due 10/01/24 100,000 100,000 King George County, Virginia, Industrial Authority, Partners-B, 3.80% due 12/01/24 200,000 200,000 ------- 300,000 TOTAL SHORT TERM INVESTMENTS (Cost $430,000) $430,000 -------- TOTAL INVESTMENTS (National Municipal Bond Fund) (Cost $14,883,356) $15,907,552 ----------- The accompanying notes are an integral part of the financial statements. 53 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued (showing percentage of total value of investments) - -------------------------------------------------------------------------------- ---------------------------------------------------------------------------- U.S. Government Securities Fund ---------------------------------------------------------------------------- Principal Value --------- ----- U.S. TREASURY OBLIGATIONS - 18.98% U.S. Treasury Bonds - 0.79% 6.375% due 08/15/27 $800,000 $921,871 -------- U.S. Treasury Notes - 18.19% 5.375% due 08/15/03 $5,500,000 $5,738,920 5.625% due 05/15/08 4,200,000 4,527,474 5.625% due 12/31/02 2,000,000 2,093,440 5.750% due 04/30/03 1,200,000 1,267,692 5.875% due 09/30/02 2,000,000 2,103,740 6.25% due 08/31/02 5,250,000 5,583,847 --------- 21,315,113 ---------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $21,423,014) $22,236,984 ----------- U.S. GOVERNMENT AGENCY OBLIGATIONS - 55.98% U.S. Department of Veteran Affairs - 1.23% 7.25% due 10/15/10 REMIC $1,438,496 $1,442,092 ---------- Federal Home Loan Mortgage Corporation - 17.10% 5.80% due 09/02/08 1,500,000 1,555,080 6.00% due 09/01/10 - 10/01/10 531,460 534,946 6.247% due 03/25/21 REMIC 3,000,000 3,048,690 6.50% TBA** 4,000,000 4,032,480 7.00% due 10/01/12 8,033,589 8,201,732 7.00% due 04/15/21 1,174,139 1,191,225 8.00% due 06/01/08 185,884 192,422 8.25% due 07/01/06 147,293 152,037 8.50% due 05/01/08 233,720 241,865 9.50% due 08/01/20 792,172 852,076 11.75% due 08/01/13 32,885 37,336 ------ 20,039,889 Federal National Mortgage Association - 33.92% 6.00% TBA 5,500,000 5,434,660 6.50% TBA 5,400,000 5,442,174 6.50% due 12/01/03 - 08/01/27 5,049,383 5,089,619 6.527% due 05/25/30 REMIC 2,750,000 2,792,969 6.70% due 10/30/06 2,500,000 2,531,640 6.783% due 01/17/03 REMIC 1,125,610 1,152,343 7.00% TBA 8,100,000 8,274,636 7.00% due 05/01/26 - 11/01/26 3,412,777 3,487,414 8.00% due 08/01/04 38,434 38,954 8.25% due 03/25/06 REMIC 675,000 734,906 8.50% due 08/01/02 71,330 73,124 11.00% due 02/01/15 449 498 11.50% due 04/01/19 273,848 306,515 12.00% due 02/01/16 - 04/01/16 1,451,494 1,710,477 12.50% due 07/01/15 980,051 1,165,036 13.00% due 01/01/99 994,068 1,181,698 14.50% due 11/01/14 264,922 320,225 ------- 39,736,888 Government National Mortgage Association - 3.73% 7.50% due 04/15/02 - 09/15/27 1,194,503 1,227,105 7.75% due 04/15/04 48,143 49,573 8.00% due 11/15/06 - 02/15/08 32,899 34,274 9.00% due 03/20/16 - 06/20/17 1,433,163 1,526,894 10.25% due 02/15/00 - 03/15/01 28,218 29,355 11.00% due 03/15/00 - 09/20/15 35,251 37,090 11.25% due 10/20/15 9,972 10,821 11.50% due 08/20/00 - 09/20/15 393,905 434,911 12.50% due 09/15/14 42,122 47,936 13.00% due 01/15/11 - 06/15/15 455,077 522,640 13.25% due 07/15/14 $40,014 $45,879 13.50% due 11/15/12 - 02/15/13 45,155 52,324 15.00% due 07/15/11 - 09/15/12 90,367 107,851 15.50% due 08/15/11 - 12/15/11 190,709 227,220 16.00% due 11/15/11 9,672 11,715 ------ 4,365,588 TOTAL U.S. GOVERNMENT OBLIGATIONS (Cost $65,018,009) $65,584,457 ----------- SHORT TERM INVESTMENT - 9.77% Navigator Securities Lending $11,444,965 $11,444,965 REPURCHASE AGREEMENTS - 15.27% Repurchase Agreement with Dillon Read dated 10/30/98 at 5.35%, to be repurchased at $17,619,852 on 11/02/98, collateralized by $12,786,000 U.S. Treasury Bonds, 8.50% due 02/15/20 (valued at $18,191,733 including interest) $17,612,000 $17,612,000 ----------- Repurchase Agreement with State Street Bank & Trust Co. dated 10/30/98 at 5.35%, to be repurchased at $271,121 on 11/02/98, collateralized by $180,000 U.S. Treasury Bonds, 12.00% due 08/15/13 (valued at $288,121 including interest) 271,000 271,000 ------- TOTAL U.S. REPURCHASE AGREEMENTS (Cost $17,883,000) $17,883,000 ----------- TOTAL INVESTMENTS (U.S. Government Securities Fund ) (Cost $115,768,988) $117,149,407 ============ ---------------------------------------------------------------------------- Money Market Fund ---------------------------------------------------------------------------- Principal Value --------- ----- COMMERCIAL PAPER - 13.82% Bellsouth Capital Funding Corp., 5.20% due 11/16/98 $500,000 $498,917 Emerson Electric, 5.19% due 11/16/98 1,000,000 997,837 Goldman Sachs Group LP, 5.18% due 03/15/99 900,000 882,647 United Parcel Service, 4.90% due 12/21/98 1,000,000 993,194 ------- TOTAL COMMERCIAL PAPER 3,372,595 --------- U.S. GOVERNMENT AGENCY OBLIGATIONS - 57.94% Student Loan Marketing Association - 12.31% 5.12% due 04/15/99 $1,000,000 $1,000,000 5.74% due 11/16/98 2,000,000 2,004,300 --------- 3,004,300 Federal Home Loan Banks - 24.78% 4.73% discount note due 01/20/99 500,000 494,745 5.01% discount note due 01/14/99 1,000,000 989,702 5.04% discount note due 01/28/99 1,000,000 987,680 5.25% discount note due 01/06/99 1,000,000 990,375 5.27% discount note due 12/03/98 600,000 597,189 5.33% discount note due 12/04/98 2,000,000 1,990,228 --------- 6,049,919 The accompanying notes are an integral part of the financial statements. 54 NORTH AMERICAN FUNDS PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued (showing percentage of total value of investments) - -------------------------------------------------------------------------------- Principal Value --------- ----- Federal National Mortgage Association - 20.85% 4.54% due 02/04/99 $2,000,000 $1,999,792 4.64% due 04/09/99 2,000,000 1,999,564 5.29% due 12/22/98 1,100,000 1,091,757 --------- 5,091,113 TOTAL U.S. GOVERNMENT OBLIGATIONS $14,145,332 U.S. TREASURY OBLIGATIONS - 20.10% U.S. Treasury Notes - 20.10% 4.45% due 04/01/99 $2,000,000 $1,962,670 4.63% due 03/25/99 3,000,000 2,944,440 --------- TOTAL US TREASURY OBLIGATIONS $4,907,110 ---------- FOREIGN GOVERNMENT OBLIGATIONS - 4.05% Canada - 4.05% 4.97% due 01/27/99 $1,000,000 $987,985 -------- TOTAL FOREIGN GOVERNMENT OBLIGATIONS $987,985 REPURCHASE AGREEMENT - 4.09% Repurchase Agreement with State Street Bank & Trust Co. dated 10/30/98 at 5.35%, to be repurchased at $999,445 on 11/02/98, collateralized by $990,000 U.S. Treasury Notes, 7.125% due 09/30/99 (valued at $1,025,740, including interest) $999,000 $999,000 -------- TOTAL INVESTMENTS (Money Market Fund) $24,412,022 ----------- Key to Currency Abbreviations ----------------------------- AUD - Australian Dollar CAD - Canadian Dollar DKK - Danish Krone XEU - European Currency Unit FIM - Finnish Markka DEM - German Deutsche Mark GBP - Great British Pound GRD - Greek Drachma HKD - Hong Kong Dollar ITL - Italian Lira JPY - Japanese Yen NZD - New Zealand Dollar PLN - Polish Zloty SEK - Swedish Krona CHF - Swiss Franc Key to Security Abbreviations and Legend ---------------------------------------- ADR - American Depository Receipt ADS - American Depository Shares REMIC Real Estate Mortgage Investment Conduit TBA - To Be Announced + - Non-Income producing, issuer is in bankruptcy and is in default of interest payments * - Non-Income producing ** - Purchased on a forward commitment (Note 2) The accompanying notes are an integral part of the financial statements. 55 NORTH AMERICAN FUNDS Notes to Financial Statements - -------------------------------------------------------------------------------- 1. ORGANIZATION OF THE FUND. North American Funds (the "Fund") is an open-end, diversified management investment company. The Fund is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended. It is a series company, which means it has several portfolios, each with a stated investment objective which it pursues through separate investment policies. As of October 31, 1998, the Fund offered the following fifteen portfolios: the International Small Cap Fund ("International Small Cap"), the International Growth and Income Fund ("International Growth and Income"), 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"). The Fund offers Class A, Class B and Class C shares. Class A shares are sold with a front-end sales charge up to 4.75%. Class B 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. Class C shares will automatically convert to Class A shares of the same portfolio ten years after purchase. All three classes of shares have identical voting, dividend, liquidation and other rights, except that each class has exclusive voting rights with respect to its distribution plan (See Note 5). 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, effective October 1, 1997, pursuant to approval by the Fund's Board of Trustees and the Fund's shareholders. Previously, those services were provided to the Fund by NASL Financial Services, Inc. CypressTree Funds Distributors, Inc. ("CFD"), also a wholly-owned subsidiary of CypressTree, serves as distributor for the Fund, effective October 1, 1997. 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 policies described below are followed when preparing the Funds' financial statements. These policies are in accordance with generally accepted accounting principles ("GAAP"). Security Valuation. Securities held by 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. 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 56 NORTH AMERICAN FUNDS Notes to Financial Statements - -------------------------------------------------------------------------------- Note 2 - continued rates supplied by a quotation service. The Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. Net realized gains (losses) on forward foreign currency contracts, shown in the Statements of Operations, includes net gains or losses realized by a portfolio on contracts which have matured or which the portfolio has terminated by entering into an offsetting commitment. Forward Commitments. The Fund may make forward commitments to purchase and sell securities. Delivery and payment for securities which have been purchased or sold on a forward commitment basis can take place a month or more (not to exceed 120 days) after the date of the transaction. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the securities underlying a forward commitment to purchase securities, and any subsequent fluctuations in their value, is taken into account when determining the portfolio's net asset value starting on the day the portfolio agrees to purchase the securities. At October 31, 1998, the forward commitments were $741,090 in Strategic Income, $596,529 in Investment Quality Bond, and $4,032,480 in U. S. Government Securities. Mortgage Dollar Rolls. Strategic Income and U. S. Government Securities may enter into mortgage dollar rolls in which they sell mortgage-backed securities for normal delivery in the current month and simultaneously contract to repurchase similar, but not identical, securities at the same price on an agreed upon date. The portfolio receives compensation as consideration for entering into the commitment to repurchase. The compensation is recorded as deferred income and amortized to income over the roll period. As the holder, the counterparty receives all principal and interest payments, including prepayments, made with respect to the similar security. Mortgage dollar rolls may be renewed with a new sale and repurchase price with a cash settlement made at renewal without physical delivery of the securities subject to the contract. Securities Lending. The Fund may lend its portfolio securities in amounts up to 33% of its total non-cash assets to brokers, dealers and other financial institutions, provided such loans are callable at any time and are at all times fully collateralized by cash, cash equivalents, 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. Income generated from the investment of cash collateral is included as interest income in the Statements of Operations. All collateral received will be in an amount equal to at least 100% of the market value of the loaned securities and 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, 1998, the value of the securities loaned amounted to $1,690,741, $1,976,967, $4,915,370, $8,679,806, $2,754,187, $5,102,023, $8,167,507, $6,191,131, $10,746,432, $3,352,312 and $11,181,287 in International Small Cap, International Growth and Income, Global Equity, Small/Mid Cap, Growth Equity, Growth and Income, Equity-Income, Balanced, Strategic Income, Investment Quality Bond and U.S. Government Securities, respectively. At October 31, 1998, the value of collateral amounted to $1,714,449, $2,041,974, $5,066,001, $8,837,965, $2,790,550, $5,218,468, $8,029,487, $6,307,425, $10,858,710, $3,429,644 and $11,444,965 in International Small Cap, International Growth and Income, Global Equity, Small/Mid Cap, Growth Equity, Growth and Income, Equity-Income, Balanced, Strategic Income, Investment Quality Bond and U.S. Government Securities, 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 Growth and Income 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 57 NORTH AMERICAN FUNDS Notes to Financial Statements - -------------------------------------------------------------------------------- Note 2 - continued 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, 1998, capital loss carryforwards available to offset future recognized gains were approximately:
Capital Loss Carryforwards Expiration Year ------------------------------------------------------------------------------------- Portfolio 2002 2003 2004 2005 2006 - ------------------------------------------- -------------- ------------- ------------- ------------- ------------ Emerging Growth .......................... --- --- --- --- $ 39,153 International Small Cap .................. --- --- $ 54,060 $ 517,432 85,758 Investment Quality Bond .................. $ 329,026 --- --- --- --- National Municipal Bond .................. --- $ 24,157 --- --- --- Tax-Sensitive Equity ..................... --- --- --- --- 754,731 U. S. Government Securities .............. --- 1,062,756 --- --- --- Money Market ............................. --- --- --- 1,702 1,156
Equalization. Through the year ended October 31, 1997 the Fund followed the accounting practice known as equalization, by which a portion of the proceeds from sales and costs of repurchases of the Fund's shares were allocated, on a per share basis, to undistributed net investment income. As a result, book undistributed net investment income per share was unaffected by sales or redemptions of the Fund's shares. Because Distributions to shareholders are determined on a tax basis, however, this practice is no longer considered meaningful, so, as of November 1, 1997 this practice was discontinued. This change does not effect the Funds' net assets, net asset value per share or the increase/(decrease) in net assets. The cumulative effect of this change was to decrease undistributed net investment income/(loss) and to increase paid-in-capital previously reported through October 31, 1997 by $6,325 in the International Small Cap Fund, by $87,652 in the Growth Equity fund, by $169,122 in the Growth and Income Fund, by $113,876 in the Equity-Income Fund, by $471 in the Strategic Income Fund, and by $16,211 in the Investment Quality Bond Fund, and to increase undistributed net investment income/(loss) and to decrease paid-in-capital previously reported through October 31, 1997 by $3,653 in the International Growth and Income Fund, by $390,926 in the Global Equity Fund by $200,934 in the Balanced Fund, and by $202,524 in the U. S. Government Securities Fund. 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. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates. Capital Accounts. The Fund reports the accumulated undistributed net investment income (loss) and accumulated undistributed net realized gain (loss) accounts on a basis approximating amounts available for future tax distributions (or to offset future taxable realized gains when a capital loss carryforward is available). Accordingly, each portfolio of the Fund may periodically make reclassifications among certain capital accounts without impacting the net asset value. 58 NORTH AMERICAN FUNDS Notes to Financial Statements - -------------------------------------------------------------------------------- 3. CAPITAL SHARES. Share activity for the year ended October 31, 1998 is as follows:
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 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 ============ ============ ============ ============ ============ ============ 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 ============ ============ ============ ============ ============ ============
59 NORTH AMERICAN FUNDS Notes to Financial Statements - -------------------------------------------------------------------------------- Note 3 - continued
Class A Class B Class C ---------------------------- ---------------------------- ---------------------------- Shares Capital Shares Capital Shares Capital ------------ ------------ ------------ ------------ ------------ ------------ 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 ============ ============ ============ ============ ============ ============
Share activity for the year ended October 31, 1997 was as follows:
Class A Class B Class C ---------------------------- ---------------------------- ---------------------------- Shares Capital Shares Capital Shares Capital ------------ ------------ ------------ ------------ ------------ ------------ International Small Cap - ----------------------- Sold ............................... 172,223 $ 2,420,431 311,497 $ 4,351,711 287,465 $ 4,020,988 Redeemed ........................... (97,424) ($ 1,351,821) (152,898) ($ 2,152,252) (187,448) ($ 2,627,640) ------------ ------------ ------------ ------------ ------------ ------------ Net increase .................. 74,799 $ 1,068,610 158,599 $ 2,199,459 100,017 $ 1,393,348 ============ ============ ============ ============ ============ ============ International Growth and Income - ------------------------------- Sold ............................... 167,110 $ 1,792,918 334,333 $ 3,645,247 227,165 $ 2,478,076 Reinvestment of distributions ...... 35,116 372,765 98,555 1,060,875 61,067 656,479 Redeemed ........................... (206,586) (2,209,558) (259,786) (2,818,848) (304,781) (3,276,447) ------------ ------------ ------------ ------------ ------------ ------------ Net increase/(decrease) ....... (4,360) ($ 43,875) 173,102 $ 1,887,274 (16,549) ($ 141,892) ============ ============ ============ ============ ============ ============ Global Equity - ------------- Sold ............................... 464,254 $ 7,173,904 399,551 $ 6,134,403 473,379 $ 7,118,221 Reinvestment of distributions ...... 208,420 2,882,299 193,787 2,670,382 469,264 6,461,761 Redeemed ........................... (563,696) (8,611,676) (407,472) (6,025,088) (1,660,187) (24,698,621) ------------ ------------ ------------ ------------ ------------ ------------ Net increase/(decrease) ....... 108,978 $ 1,444,527 185,866 $ 2,779,697 (717,544) ($11,118,639) ============ ============ ============ ============ ============ ============ Small/Mid Cap - ------------- Sold ............................... 195,283 $ 2,625,840 399,400 $ 5,644,058 742,841 $ 10,160,673 Redeemed ........................... (161,404) (2,248,506) (158,565) (2,183,317) (519,604) (7,118,896) ------------ ------------ ------------ ------------ ------------ ------------ Net increase .................. 33,879 $ 377,334 240,835 $ 3,460,741 223,237 $ 3,041,777 ============ ============ ============ ============ ============ ============ Growth Equity - ------------- Sold ............................... 126,280 $ 1,864,938 494,750 $ 7,629,840 521,137 $ 7,942,112 Reinvestment of distributions ...... 2,321 32,171 3,748 51,907 6,399 88,628 Redeemed ........................... (111,960) (1,666,958) (309,407) (4,730,354) (244,574) (3,717,442) ------------ ------------ ------------ ------------ ------------ ------------ Net increase .................. 16,641 $ 230,151 189,091 $ 2,951,393 282,962 $ 4,313,298 ============ ============ ============ ============ ============ ============ Growth and Income - ----------------- Sold ............................... 912,261 $ 18,629,321 787,724 $ 15,658,730 882,662 $ 17,499,038 Reinvestment of distributions ...... 67,848 1,195,199 115,717 2,014,284 245,065 4,269,417 Redeemed ........................... (450,673) (9,067,086) (356,257) (7,090,345) (871,364) (17,278,615) ------------ ------------ ------------ ------------ ------------ ------------ Net increase .................. 529,436 $ 10,757,434 547,184 $ 10,582,669 256,363 $ 4,489,840 ============ ============ ============ ============ ============ ============
60 NORTH AMERICAN FUNDS Notes to Financial Statements - -------------------------------------------------------------------------------- Note 3 - continued
Class A Class B Class C ---------------------------- ---------------------------- ---------------------------- Shares Capital Shares Capital Shares Capital ------------ ------------ ------------ ------------ ------------ ------------ Equity-Income - ------------- Sold ............................... 592,754 $ 9,599,623 500,961 $ 8,087,441 824,546 $ 13,307,463 Reinvestment of distributions ...... 442,599 6,338,505 382,378 5,479,472 1,218,941 17,554,558 Redeemed ........................... (590,786) (9,345,352) (356,308) (5,740,317) (1,437,499) (22,895,681) ------------ ------------ ------------ ------------ ------------ ------------ Net increase .................. 444,567 $ 6,592,776 527,031 $ 7,826,596 605,988 $ 7,966,340 ============ ============ ============ ============ ============ ============ Balanced - -------- Sold ............................... 234,801 $ 2,757,480 279,360 $ 3,253,994 406,687 $ 4,786,572 Reinvestment of distributions ...... 125,521 1,380,732 160,862 1,766,281 737,223 8,183,433 Redeemed ........................... (265,075) (3,120,596) (390,785) (4,597,129) (1,633,682) (19,221,203) ------------ ------------ ------------ ------------ ------------ ------------ Net increase/(decrease) ....... 95,247 $ 1,017,616 49,437 $ 423,146 (489,772) $ (6,251,198) ============ ============ ============ ============ ============ ============ Strategic Income - ---------------- Sold ............................... 728,750 $ 7,068,862 883,892 $ 8,617,970 1,643,552 $ 16,024,302 Reinvestment of distributions ...... 108,211 1,049,234 178,435 1,729,297 209,694 2,033,928 Redeemed ........................... (570,028) (5,577,914) (668,180) (6,506,732) (827,696) (8,050,790) ------------ ------------ ------------ ------------ ------------ ------------ Net increase .................. 266,933 $ 2,540,182 394,147 $ 3,840,535 1,025,550 $ 10,007,440 ============ ============ ============ ============ ============ ============ Investment Quality Bond - ----------------------- Sold ............................... 71,210 $ 732,772 85,547 $ 882,438 93,047 $ 957,800 Reinvestment of distributions ...... 39,782 410,260 22,683 233,667 34,695 357,313 Redeemed ........................... (311,082) (3,204,349) (122,683) (1,257,374) (277,224) (2,834,680) ------------ ------------ ------------ ------------ ------------ ------------ Net increase/(decrease) ....... (200,090) $ (2,061,317) (14,453) $ (141,269) (149,482) $ (1,519,567) ============ ============ ============ ============ ============ ============ National Municipal Bond - ----------------------- Sold ............................... 34,409 $ 340,883 138,304 $ 1,351,243 75,518 $ 739,075 Reinvestment of distributions ...... 17,041 167,921 17,223 169,763 17,180 169,430 Redeemed ........................... (214,451) (2,098,316) (137,867) (1,352,138) (151,759) (1,490,977) ------------ ------------ ------------ ------------ ------------ ------------ Net increase/(decrease) ....... (163,001) $ (1,589,512) 17,660 $ 168,868 (59,061) $ (582,472) ============ ============ ============ ============ ============ ============ U.S. Government Securities - -------------------------- Sold ............................... 669,065 $ 6,537,020 360,887 $ 3,536,454 447,002 $ 4,382,934 Reinvestment of distributions ...... 241,937 2,367,629 59,099 578,306 71,244 697,491 Redeemed ........................... (2,978,747) (29,121,804) (727,741) (7,114,391) (1,079,330) (10,556,239) ------------ ------------ ------------ ------------ ------------ ------------ Net increase/(decrease) ....... (2,067,745) $(20,217,155) (307,755) $ (2,999,631) (561,084) $ (5,475,814) ============ ============ ============ ============ ============ ============ Money Market - ------------ Sold ............................... 22,410,945 $ 22,410,945 12,033,916 $ 12,033,916 25,707,878 $ 25,707,878 Reinvestment of distributions ...... 360,144 360,144 140,200 140,200 413,794 413,794 Redeemed ........................... (19,800,772) (19,800,772) (11,905,013) (11,905,013) (28,422,359) (28,422,359) ------------ ------------ ------------ ------------ ------------ ------------ Net increase/(decrease) ....... 2,970,317 $ 2,970,317 269,103 $ 269,103 (2,300,687) $ (2,300,687) ============ ============ ============ ============ ============ ============
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 year ended October 31, 1998:
Purchases Sales ---------------------------------------- ------------------------------------ Portfolio U.S. Government Other Issues U.S. Government Other Issues --------------- ------------------- ----------------- -------------------- -------------- International Small Cap ........................ ------ $ 7,492,570 ------ $ 8,673,305 International Growth & Income .................. ------ 47,739,029 ------ 49,312,015 Global Equity .................................. ------ 25,689,666 ------ 43,010,565 Emerging Growth ................................ ------ 902,507 ------ 188,248 Small/Mid Cap .................................. ------ 52,841,086 ------ 50,596,640 Growth Equity .................................. ------ 29,998,892 ------ 29,990,392 Tax-Sensitive Equity ........................... ------ 13,624,649 ------ 1,963,703 Growth and Income .............................. ------ 54,167,141 ------ 38,258,727 Equity-Income .................................. ------ 35,817,239 ------ 39,139,567 Balanced ....................................... $ 33,167,681 140,229,483 $ 29,010,489 151,909,167 Strategic Income ............................... 67,833,901 68,435,026 73,809,809 41,524,027 Investment Quality Bond ........................ 3,784,737 4,191,917 4,123,910 4,085,748
61 NORTH AMERICAN FUNDS Notes to Financial Statements - -------------------------------------------------------------------------------- Note 4, Continued
Purchases Sales ---------------------------------------- ------------------------------------ Portfolio U.S. Government Other Issues U.S. Government Other Issues --------------- ------------------- ----------------- -------------------- -------------- U.S. Government Securities ....................... $316,127,342 ------ $313,553,780 ----
Purchases and sales (maturities) for Money Market for the year ended October 31, 1998 were $491,963,713 and $490,127,283, respectively. At October 31, 1998, tax basis net unrealized appreciation was equal to the aggregate gross unrealized appreciation for all securities in which there was an excess of market value over tax cost and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over market value as follows:
Tax Basis Net Unrealized Tax Basis Tax Basis Tax Basis Appreciation Unrealized Unrealized Portfolio Cost (Depreciation) Appreciation Depreciation - --------------------- ----------------- -------------------- ----------------- -------------- International Small Cap .......................... $ 15,527,268 $ 1,532,946 $ 2,511,708 ($978,762) International Growth and Income .................. 28,519,667 (915,485) 2,123,142 (3,038,627) Global Equity .................................... 104,757,143 18,835,914 27,920,550 (9,084,636) Emerging Growth .................................. 703,108 (61,247) 41,375 (102,622) Small/Mid Cap .................................... 42,578,021 2,030,394 3,500,371 (1,469,977) Growth Equity .................................... 27,904,509 3,456,663 4,285,103 (828,440) Tax-Sensitive Equity ............................. 11,153,216 (783,113) 481,807 (1,264,920) Growth and Income ................................ 165,618,641 81,287,940 87,360,207 (6,072,267) Equity-Income .................................... 152,950,084 26,923,092 33,919,775 (6,996,683) Balanced ......................................... 97,870,954 7,076,014 8,327,878 (1,251,864) Strategic Income ................................. 103,414,181 (4,621,050) 1,421,163 (6,042,213) Investment Quality Bond .......................... 20,539,075 379,302 739,863 (360,561) National Municipal Bond .......................... 14,883,356 1,024,196 1,024,197 (1) U. S. Government Securities ...................... 115,773,739 1,375,668 1,546,201 (170,533)
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 $50,000,000 $200,000,000 First and and $500,000,000 Excess over Portfolio $50,000,000 $200,000,000 $500,000,000 - -------------------- ------------------ ---------------- ----------------- ---------------- International Small Cap ...................... 1.050% 1.000% .900% .800% International Growth and Income .............. .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% Tax-Sensitive Equity ......................... .850% .800% .775% .700% Growth and Income ............................ .725% .675% .625% .550% Equity-Income ................................ .800% .700% .600% .600% 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%
62 NORTH AMERICAN FUNDS Notes to Financial Statements - -------------------------------------------------------------------------------- Note 5, continued For the year ended October 31, 1998, CAM paid aggregate subadvisory fees of $3,386,336. In addition, CAM retained net investment advisory fees of $3,743,238 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 ......................... $112,414 .65% $ 69,178 .40% International Growth and Income ................. 143,270 .50% 114,615 .40% Global Equity ................................... 607,233 .47% 557,235 .43% Emerging Growth ................................. 1,756 .55% 1,278 .40% Small/Mid Cap ................................... 177,891 .53% 135,536 .40% Growth Equity ................................... 142,195 .50% 113,758 .40% Tax-Sensitive Equity ............................ 18,677 .45% 16,603 .40% Growth and Income ............................... 629,517 .28% 897,722 .40% Equity-Income ................................... 649,730 .36% 651,074 .36% Balanced ........................................ 348,785 .35% 398,503 .40% Strategic Income ................................ 279,664 .33% 339,543 .40% Investment Quality Bond ......................... 38,542 .22% 64,236 .37% National Municipal Bond ......................... 42,359 .25% 60,118 .35% U.S. Government Securities ...................... 179,817 .22% 299,695 .37% Money Market .................................... 14,486 .08% 24,144 .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 (excluding taxes, portfolio brokerage commissions, interest, certain litigation and indemnification expenses, extraordinary expenses and all of the portfolio's distribution fees) for expenses incurred in excess (Expense limitation) of the following annual percentages of average net assets as highlighted in the table below. The Fund has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940 to use its assets to finance certain activities relating to the distribution of its shares to investors. The Plan is a "compensation" plan providing for the payment by each portfolio, other than 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% ----- ----- ----- International Growth and Income - ------------------------------- Management fees .................................... 0.900% 0.900% 0.900% Other expenses ..................................... 0.500% 0.500% 0.500% ----- ----- ----- Expense limitation ................................. 1.400% 1.400% 1.400% ===== ===== ===== Rule 12b-1 fees .................................... 0.350% 1.000% 1.000% 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%
63 NORTH AMERICAN FUNDS Notes to Financial Statements - -------------------------------------------------------------------------------- Note 5, continued
Portfolio Class A Class B Class C - -------------------- ----------- ----------- ------------ Small/Mid Cap - ------------- Management fees .................................... 0.925% 0.925% 0.925% Other expenses ..................................... 0.400% 0.400% 0.400% ----- ----- ----- Expense limitation ................................. 1.325% 1.325% 1.325% ===== ===== ===== Rule 12b-1 fees .................................... 0.350% 1.000% 1.000% 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 .................................... 0.800% 0.800% 0.800% Other expenses ..................................... 0.265% 0.265% 0.265% ----- ----- ----- Expense limitation ................................. 1.065% 1.065% 1.065% ===== ===== ===== Rule 12b-1 fees .................................... 0.350% 1.000% 1.000% 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% 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% ===== ===== =====
64 NORTH AMERICAN FUNDS Notes to Financial Statements - -------------------------------------------------------------------------------- Note 5, continued In accordance with the Investment Advisory agreement, the Advisers, in addition to providing advisory services, provide accounting and administrative services for which CAM charged $1,475,189 to the Fund, before reimbursement based on expense limitations, for the period ended October 31, 1998. 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. On September 15, 1998 the Fund 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 not used during the period ended October 31, 1998. 8. COMMITMENTS. At October 31, 1998, International Growth and Income, 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, 1998 were as follows:
Net Contracts Unrealized to In Exchange Settlement Appreciation Deliver For Date Value (Depreciation) --------- ------------- ------------ ----------- -------------- International Growth and Income - -------------------------------- Sales Swiss Franc .......................... 2,499,902 $1,738,153 11/19/98 $1,848,753 ($110,600) Australian Dollar .................... 1,160,890 693,400 11/19/98 726,269 (32,869) Deutsche Mark ........................ 5,410,259 3,066,841 11/19/98 3,269,263 (202,422) Hong Kong Dollar ..................... 1,950,000 247,855 11/19/98 251,643 (3,788) New Zealand Dollar ................... 257,923 129,877 11/19/98 136,655 (6,778) South African Rand ................... 385,000 58,840 11/19/98 68,289 (9,449) ---------- ---------- --------- $5,934,966 $6,300,872 ($365,906) ========== ========== ========= Purchases - --------- $1,006,094 CHF 1,437,412 11/19/98 $1,063,009 $ 56,915 2,854,778 DEM 4,944,476 11/19/98 2,987,805 133,026 129,525 NZD 257,923 11/19/98 136,655 7,131 ---------- ---------- --------- $3,990,397 $4,187,469 $ 197,072 ========== ========== ========= ($168,834) ========= Global Equity - ------------- Sales Great British Pounds ................. 4,750,000 $7,753,825 12/16/98 $7,931,075 ($177,250) Purchases $5,893,300 GBP 3,500,000 12/16/98 $5,843,950 ($49,350) --------- ($226,600) ========= Strategic Income - ---------------- Sales Finnish Markka ....................... 1,133,727 $ 209,946 11/12/98 $ 225,170 ($15,224) Danish Krona ......................... 7,299,571 1,079,818 11/12/98 1,159,321 (79,503) Greek Drachma ........................ 56,590,833 1,255,465 11/12/98 1,265,325 (9,860) Deutsche Mark ........................ 11,339,376 6,835,266 11/12/98 6,849,467 (14,201) New Zealand Dollar ................... 691,076 349,684 11/12/98 366,085 (16,401) European Currency Unit ............... 400,000 478,200 11/12/98 474,657 3,543 Italian Lira ......................... 1,671,349,250 952,879 11/12/98 1,019,419 (66,540) ----------- ----------- --------- $11,161,258 $11,359,444 ($198,186) =========== =========== ========= Purchases $7,120,254 DEM 11,648,711 11/12/98 $7,030,040 ($90,214) 331,757 GRD 96,008,819 11/12/98 339,990 8,233 ---------- ---------- --------- $7,452,011 $7,370,030 (81,981) ========== ========== ========= ($280,167) =========
65 Trustees Bradford K. Gallagher, Chairman William F. Achtmeyer Donald 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 L.L.P. One Post Office Square Boston, MA 02109 North American Funds Shareholder Service 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-----