<PAGE>
NORTH AMERICAN FUNDS
President's Message
- --------------------------------------------------------------------------------
December 20, 1996
Dear Shareholders:
Nineteen ninety six has certainly been a banner year for the stock markets in
general and for the shareholders of North American Funds in particular. Coming
right after a very strong year in 1995, investors have been rewarded with a good
long run of rising account values. For details on how individual funds have
performed, please check the information in the following pages.
The past twelve months have also been rich with improvements and additions to
the North American Funds. On March 1 we welcomed three new portfolios to our
overall investment offering - the Small/Mid Cap Fund of Fred Alger Management,
Inc. and the Growth Equity and International Small Cap Funds of Founders Asset
Management, Inc. ("Founders"). Judging by the flow of new assets into these
portfolios, they have been very well received by our shareholders.
On October 1 we made changes in the subadvisory arrangements of four funds. We
feel these changes substantially strengthen the depth and quality of fund
management. Founders took over responsibility for the Asset Allocation Fund
(now called the Balanced Fund), Morgan Stanley Asset Management Inc. took over
the Global Growth Fund (now called the Global Equity Fund), T. Rowe Price
Associates, Inc. took over the Value Equity Fund, and Manufacturers Adviser
Corporation took over the Money Market Fund.
The overall effect of these changes is to give shareholders more choices. Our
broad selection of top quality investment managers gives investors more
diversity of investment styles. Our portfolios continue to offer multiple asset
classes and have now added more international choices and the opportunity for
shareholders to select the size of companies in which they invest.
We also remain strongly committed to top level service to our shareholders. Our
teleservices team was a recipient of Dalbar's Key Honors Award for commitment to
excellence in customer service. We are one of only 20 mutual fund companies to
receive this award. Our customer service representatives are available daily
from 8:30 a.m. to 6:00 p.m. EST at (800) 872-8037, and our automated services
line is available 24 hours a day at (800) 872-2251.
Thank you for your continued confidence in North American Funds.
Sincerely,
Joseph M. Scott
President
<PAGE>
NORTH AMERICAN FUNDS
INDEX TO ANNUAL REPORT
- --------------------------------------------------------------------------------
Page
----
Fund Performance and Portfolio Manager's Commentary.... iii
Report of Independent Accountants...................... 1
Statements of Assets and Liabilities................... 2
Statements of Operations............................... 8
Statements of Changes in Net Assets.................... 11
Financial Highlights................................... 15
Portfolio of Investments:
Small/Mid Cap Fund.................................. 36
International Small Cap Fund........................ 37
Growth Equity Fund.................................. 39
Global Equity Fund.................................. 40
Value Equity Fund................................... 42
Growth and Income Fund.............................. 44
International Growth and Income Fund................ 46
Balanced Fund....................................... 49
Strategic Income Fund............................... 51
Investment Quality Bond Fund........................ 54
U.S. Government Securities Fund..................... 57
National Municipal Bond Fund........................ 58
Money Market Fund................................... 59
Notes to Financial Statements.......................... 61
ii
<PAGE>
NORTH AMERICAN FUNDS
FUND PERFORMANCE AND PORTFOLIO MANAGER'S COMMENTARY
- --------------------------------------------------------------------------------
Fund Performance
In the following pages we have set forth information regarding the performance
of each portfolio of the North American Funds, except the Money Market Fund.
There are several ways to evaluate a Fund's historical performance. One can look
at the total percentage change in value, the average annual percentage change,
or the growth of a hypothetical $10,000 investment. With respect to all the
performance information presented, it is important to understand that past
performance does not guarantee future results. Return and principal fluctuate,
and shares, when redeemed, may be worth more or less than their original cost.
Performance Tables
The Performance Tables show two types of total return information: cumulative
and average annual total returns. A cumulative total return is an expression of
a Fund's total change in share value in percentage terms over a set period of
time -- one, five, and ten years (or since the Fund's inception if less than the
applicable period). An average annual total return takes the Fund's cumulative
total return for a time period greater than one year and shows what would have
happened if the Fund had performed at a constant rate each year. In addition,
four funds have had portfolio management changes, namely the Global Equity,
Value Equity, Balanced and U.S. Government Securities Funds. For these funds,
the tables show an average annual total return for the period since the current
portfolio manager assumed responsibility. For all share classes, the tables
show cumulative and average annual total returns both net of the possible
maximum applicable front-end or back-end sales charge, as well as without giving
effect to such possible maximum charges ("net asset value").
Graph -- Change in Value of $10,000 Investment and Comparative Indices
The performance graph for each Fund shows the change in value of a $10,000
investment over the life of the Fund's Class A shares. Each Fund's performance
is compared to the performance of one or more broad-based securities indices as
a "benchmark." Fund results (which include the reinvestment of dividends and
capital gains distributions as well as the deduction of ongoing management and
distribution fees and fund operating expenses) reflect the deduction of the
maximum 4.75% sales charge applicable to Class A shares. Please note that
effective April 1, 1994, Class B and Class C shares were offered. Performance
of these share classes will differ. Historical performance prior to April 1,
1994 is that of the Fund before it adopted the current multi-class structure.
Benchmarks used for comparison are unmanaged and do not reflect any fees or
expenses.
Portfolio Manager's Commentary
Finally, we have provided a commentary by each Fund's portfolio manager
regarding each Fund's performance during the fiscal year ended October 31, 1996.
All performance results referenced in the commentary are Class A share returns.
iii
<PAGE>
SMALL/MID CAP FUND
INVESTMENT OBJECTIVE: Seeks to provide long-term capital appreciation by
investing at least 65% of its assets in companies that at
the time of purchase have total market capitalization
between $500 million and $5 billion.
SUBADVISOR: Fred Alger Management, Inc.
PORTFOLIO MANAGER: David D. Alger
INCEPTION DATE: March 4, 1996
Change in Value of $10,000 Investment and Comparative Indices
[CHART APPEARS HERE]
- --------------------------------------------------------------------------------
A line graph showing the growth (including reinvestment of dividends and capital
gains) of a $10,000 investment in North American Funds' Small/Mid Cap Fund Class
A shares at net asset value on March 4, 1996 through October 31, 1996, as
compared with the growth of a $10,000 investment in Russell 2000 Index and a
$10,000 investment in the S&P MidCap 400 Index over the same period. The graph
also depicts the growth of a $10,000 investment in Class A shares of the
Small/Mid Cap Fund on March 4, 1996 through October 31, 1996, assuming the
deduction of the maximum 4.75% front-end sales charge at the time of the initial
investment and reinvestment of dividends and capital gains at net asset value.
The following are the plot points used to draw this line graph.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth of $10,000 Invested in Growth of $10,000 Invested in Growth of $10,000
Class A shares at Net Asset Value Class A shares with 4.75% charge Investment in the Russell
Month Ended of the Small/Mid Cap Fund of the Small/Mid Cap Fund 2000 Growth Index
<S> <C> <C> <C>
Feb-96 $10,000 $9,525 $10,000
Mar-96 $10,168 $9,685 $10,198
Apr-96 $10,584 $10,081 $10,981
May-96 $10,768 $10,257 $11,545
Jun-96 $10,352 $9,960 $10,794
Jul-96 $9,312 $8,870 $9,476
Aug-96 $9,792 $9,327 $10,177
Sep-96 $10,325 $9,837 $10,702
Oct-96 $10,096 $9,616 $10,240
<CAPTION>
Growth of $10,000 Growth of $10,000
Investment in the S&P Investment in the 50%/50%
Month Ended MidCap 400 Index Composite Index
<S> <C> <C>
Feb-96 $10,000 $10,000
Mar-96 $10,124 $10,161
Apr-96 $10,431 $10,708
May-96 $10,573 $11,059
Jun-96 $10,411 $10,803
Jul-96 $9,709 $9,593
Aug-96 $10,288 $10,223
Sep-96 $10,716 $10,709
Oct-96 $10,747 $10,484
</TABLE>
- --------------------------------------------------------------------------------
The Russell 2000 Growth Index is designed to track the performance of small
capitalization companies. As of September 30, 1996, the range of market
capitalization of these companies was $50 million to $1.78 billion.
The S&P MidCap 400 Index is designed to track the performance of medium
capitalization companies. As of September 30, 1996, the range of market
capitalization of these companies was $177 million to $6.26 billion.
Index information is available on a month-end basis only, therefore the closest
month-end to the inception date of the fund has been used.
- --------------------------------------------------------------------------------
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Cumulative
Total Return
Since
Periods Ending October 31, 1996 Inception
<S> <C>
S&P MidCap 400 Index* 7.47%
Russell 2000 Growth Index* 2.40%
50%/50% Composite Index*+ 4.94%
Small/Mid Cap Fund Class A (at net asset value) 0.96%
Small/Mid Cap Fund Class A (net of 4.75% sales charge) -3.84%
Small/Mid Cap Fund Class B (at net asset value) 0.64%
Small/Mid Cap Fund Class B (net of CDSC**) -4.36%
Small/Mid Cap Fund Class C (at net asset value) 0.72%
Small/Mid Cap Fund Class C (net of CDSC***) -0.28%
</TABLE>
* All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
+ Comprised of 50% of the return of the S&P MidCap 400 Index and 50% of the
return of the Russell 2000 Growth Index.
** The returns reflect the applicable sliding Contingent Deferred Sales
Charge of 5%, 5%, 4%, 3%, 2%, 1%.
*** The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
PORTFOLIO MANAGER'S COMMENTARY
Throughout most of 1996, inflationary concerns, low unemployment levels and
the thought that the economy was growing too quickly led many investors to
fear Federal Reserve action. These fears spawned extreme volatility in both
the stock and bond markets. Ultimately, these collective concerns proved
overstated, as the Federal Reserve consistently maintained a neutral policy.
Following a rapid and dramatic sell off which saw the Dow Jones Industrial
Average fall to approximately 5100, the Average soared, breaking 6000 by mid
October. With both the Dow and the S&P 500 posting impressive returns, 1996
proved to be the year of both large cap stocks and value investing. The
Portfolio, employing a growth-oriented approach and investing in small to mid-
sized companies, did not perform as well as blue chip value funds or broad
market indices. Small company growth stocks were hit more severely in July and
recovered less impressively. For the period February 29 through October 31,
1996, the Russell 2000 Growth Index returned a scant 2.40%. The mid cap
portion of the Portfolio compensated for some underperformance, as the S&P
MidCap 400 returned a more impressive 7.47% over the same period. Holdings with
larger capitalization such as the Loewen Group, Adaptec and MFS Communications
helped offset disappointing small cap holdings such as Glenayre Technologies
and Cable Design Technologies.
iv
<PAGE>
INTERNATIONAL SMALL CAP FUND
INVESTMENT OBJECTIVE: Seeks to provide long-term capital appreciation by
investing primarily in securities issued by foreign
companies which have total market capitalization or
annual revenue of $1 billion or less.
SUBADVISOR: Founders Asset Management, Inc.
PORTFOLIO MANAGER: Michael W. Gerding
INCEPTION DATE: March 4, 1996
Change in Value of $10,000 Investment and Comparative Indices
[CHART APPEARS HERE]
- --------------------------------------------------------------------------------
A line graph showing the growth (including reinvestment of dividends and
capital gains) of a $10,000 investment in North American Funds' International
Small Cap Fund Class A shares at net asset value on March 4, 1996 through
October 31, 1996, as compared with the growth of a $10,000 investment in Morgan
Stanley Capital (MSCI) World ex US Index. The graph also depicts the growth of a
$10,000 investment in Class A shares of the International Small Cap Fund on
March 4, 1996 through October 31, 1996, assuming the deduction of the maximum
4.75% front-end sales charge at the time of the initial investment and
reinvestment of dividends and capital gains at net asset value. The following
are the plot points used to draw this line graph.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth of $10,000 Invested in Growth of $10,000 Invested in Growth of $10,000
Class A shares at Net Asset Value Class A shares with 4.75% charge Investment in the MSCI
Month Ended of the Int'l Small Cap Fund of the Int'l Small Cap Fund World ex US Index
<S> <C> <C> <C>
Feb-96 $10,000 $9,525 $10,000
Mar-96 $10,224 $9,738 $10,212
Apr-96 $10,552 $10,051 $10,513
May-96 $10,760 $10,249 $10,333
Jun-96 $10,776 $10,264 $10,378
Jul-96 $10,368 $9,876 $10,074
Aug-96 $10,440 $9,944 $10,112
Sep-96 $10,536 $10,036 $10,386
Oct-96 $10,744 $10,234 $10,317
</TABLE>
- --------------------------------------------------------------------------------
The Morgan Stanley Capital World ex U.S. Index is an arithmetical average of the
performance of 1,138 securities listed on the stock exchanges of Europe, Canada,
Australia, New Zealand, and the Far East. Total return figures for this index
assume change in share price and reinvestment of dividends after deduction of
local taxes. An investor may not invest in the index.
Index information is available on a month-end basis only, therefore the closest
month-end to the inception date of the fund has been used.
- --------------------------------------------------------------------------------
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Cumulative
Total Return
Since
Periods Ending October 31, 1996 Inception
<S> <C>
MSCI World ex US Index* 3.17%
International Small Cap Fund Class A (at net asset value) 7.44%
International Small Cap Fund Class A (net of 4.75% sales
charge) 2.34%
International Small Cap Fund Class B (at net asset value) 6.96%
International Small Cap Fund Class B (net of CDSC**) 1.96%
International Small Cap Fund Class C (at net asset value) 6.96%
International Small Cap Fund Class C (net of CDSC***) 5.96%
</TABLE>
* All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
** The returns reflect the applicable sliding Contingent Deferred Sales Charge
of 5%, 5%, 4%, 3%, 2%, 1%.
*** The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
PORTFOLIO MANAGER'S COMMENTARY
Throughout the first nine months of 1996, international markets again lagged
those of the U.S., with the MSCI World ex-US index up 4.78%, while the S&P 500
was up 13.5% through the first nine months. The emerging markets fared even
worse, up only 3.0% in the first nine months. Small cap stocks outperformed in
many markets, and the Fund did well relative to the indices. This is partly
due to the fact that the best earnings growth seems to be in the smaller
companies that are not faced with many of the structural problems of big
companies, especially in Europe. This allows them to be more nimble and react to
the varying economic conditions. We expect that earnings are going to continue
to improve throughout 1996 and into 1997, and we expect that these smaller
companies will continue to benefit the most, although this may not be
reflected in the indices.
During the first nine months of 1996 we have been surprised at how sluggish
the economic growth has been outside the U.S., especially in Europe. But we
are seeing more and more signs that economies are improving, and we expect
that they will exit 1996 growing at a more rapid rate than at the beginning of
the year, and we think 1997 will be better than 1996. This, combined with a
very stable interest rate environment, should lead to stronger corporate
profits in Europe in 1997. We believe the Japanese economy will grow marginally
in 1997, but is in significantly healthier shape than it was in the last two
years, and there again we expect to see better corporate profits in 1997.
Finally, many of the emerging markets' economies are slowing, but we expect that
they will grow at better than twice the rate of the developed world in 1997,
and will continue to provide excellent opportunities for investments over the
long term.
v
<PAGE>
GROWTH EQUITY FUND
INVESTMENT OBJECTIVE: Seeks to provide long-term growth of capital by investing
at least 65% of its assets in common stocks of well-
established, high-quality growth companies.
SUBADVISOR: Founders Asset Management, Inc.
PORTFOLIO MANAGER: Edward F. Keely
INCEPTION DATE: March 4, 1996
Change in Value of $10,000 Investment and Comparative Indices
[CHART APPEARS HERE]
- --------------------------------------------------------------------------------
A line graph showing the growth (including reinvestment of dividends and capital
gains) of a $10,000 investment in North American Funds' Growth Equity Fund Class
A shares at net asset value on March 4, 1996 through October 31, 1996, as
compared with the growth of a $10,000 investment in S&P 500 Composite Index. The
graph also depicts the growth of a $10,000 investment in Class A shares of the
Growth Equity Fund on March 4, 1996 through October 31, 1996, assuming the
deduction of the maximum 4.75% front-end sales charge at the time of the initial
investment and reinvestment of dividends and capital gains at net asset value.
The following are the plot points used to draw this line graph.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth of $10,000 Invested in Growth of $10,000 Invested in Growth of $10,000
Class A shares at Net Asset Value Class A shares with 4.75% charge Investment in the
Month Ended of the Growth Equity Fund of the Growth Equity Fund S&P 500
<S> <C> <C> <C>
Feb-96 $10,000 $9,525 $10,000
Mar-96 $10,080 $9,601 $10,098
Apr-96 $10,680 $10,173 $10,252
May-96 $11,168 $10,638 $10,504
Jun-96 $11,040 $10,516 $10,547
Jul-96 $10,216 $9,731 $10,083
Aug-96 $10,560 $10,058 $10,292
Sep-96 $11,104 $10,577 $10,868
Oct-96 $11,024 $10,500 $11,171
</TABLE>
- --------------------------------------------------------------------------------
The Standard and Poor's 500 Index contains a representative sample of common
stocks that trade on the New York and American Stock Exchanges and some
over-the-counter stocks. The capitalization ranges from $80 million to $76
billion. The index is weighted by market capitalization and calculated on a
total return basis with dividends reinvested.
Index information is available on a month-end basis only, therefore the closest
month-end to the inception date of the fund has been used.
- --------------------------------------------------------------------------------
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Cumulative Total Return
Since
Periods Ending October 31, 1996 Inception
<S> <C>
S&P 500* 11.71%
Growth Equity Fund Class A (at net asset value) 10.24%
Growth Equity Fund Class A (net of 4.75% sales charge) 5.00%
Growth Equity Fund Class B (at net asset value) 9.84%
Growth Equity Fund Class B (net of CDSC**) 4.84%
Growth Equity Fund Class C (at net asset value) 9.84%
Growth Equity Fund Class C (net of CDSC***) 8.84%
</TABLE>
* All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
** The returns reflect the applicable sliding Contingent Deferred Sales Charge
of 5%, 5%, 4%, 3%, 2%, 1%.
*** The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
PORTFOLIO MANAGER'S COMMENTARY
The dramatic rise in small company stocks that began in February abruptly ended
in May. The market once again rotated back to larger, more liquid growth stocks.
This has been a favorable development for the Fund. However, the third quarter
of 1996 was a difficult environment for all stocks. In July, the market
experienced a severe correction. From its past peak price the S&P 500 declined
11% to its intra-day low in the middle of the month. The NASDAQ composite
declined 20% from its peak price during the same time frame. Concerns of weak
corporate earnings and the threat of a Federal Reserve increase in interest
rates, as well as, the speculative bubble in small company stocks drove this
correction. It is expected that the Fund will hold anywhere from 40 to 90
stocks, and that international holdings will commonly comprise 10 to 15 percent
of the Fund. The Fund returned 10.24% since the inception of the Fund on March
4, 1996.
Our expectations for the economy have become very different than the current
consensus opinion. In past months, our concern was that the economy was at
serious risk of showing a negative GDP quarter or two. Our opinion has been
derived from observations of company earnings trends. Significantly more
companies have guided analysts to cut estimates or have reported earnings
disappointments. At this point in time, we have come to believe that the economy
has been undergoing a rolling inventory correction. This inventory correction
has hit different industries at different times over the last 12 months. The
brunt of this correction hit technology companies in the first quarter of this
year and is likely to continue until the fourth quarter of 1996. Auto companies
seemed to have felt the correction as long as 12 months ago. Some industries
seem to be recovering from the worst of the inventory correction currently. This
may explain some of the change in perceptions towards a stronger growth
environment. Also, there had been persistent signs of strength in the number of
new jobs added to the economy until the most recent monthly figures. We believe
that on balance the economic data will suggest moderate economic growth over the
next few months. The most recent weak employment number and uninspiring retail
sales results may protect the market from a Fed tightening. Growth stocks should
outperform value stocks in 1996 because of modest growth in earnings. However, a
serious decline in profit growth could propel the market into a significant
correction. Based on our observations, long term interest rates should stay at
7% or lower. With inflation at approximately 3%, real long term interest rates
of 4% are very attractive. A 7% long term treasury bond suggests the stock
market should sell at about 16.5 times 1997 earnings. Stock selection will be of
paramount importance to relative out performance.
vi
<PAGE>
GLOBAL EQUITY FUND
INVESTMENT OBJECTIVE: To seek long term capital appreciation, by investing
primarily in a global portfolio of equity securities and
securities con vertible into or exercisable for equity
securities.
SUBADVISOR: Morgan Stanley Asset Management Inc.
PORTFOLIO MANAGER: Frances Campion
INCEPTION DATE: November 1, 1990#
Change in Value of $10,000 Investment and Comparative Indices
[CHART APPEARS HERE]
- --------------------------------------------------------------------------------
A line graph showing the growth (including reinvestment of dividends and capital
gains) of a $10,000 investment in North American Funds' Global Equity Fund
Class A shares at net asset value on November 1, 1990 through October 31, 1996,
as compared with the growth of a $10,000 investment in the Morgan Stanley
Capital International (MSCI) World Index over the same period. The graph also
depicts the growth of a $10,000 investment in Class A shares of the Global
Equity Fund on November 1, 1990 through October 31, 1996, assuming the deduction
of the maximum 4.75% front-end sales charge at the time of the initial
investment and reinvestment of dividends and capital gains at net asset value.
The following are the plot points used to draw this line graph.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth of $10,000 Invested in Growth of $10,000 Invested in Growth of $10,000
Class A shares at Net Asset Value Class A shares with 4.75% charge Investment in the
Month Ended of the Global Equity Fund of the Global Equity Fund MSCI World Index
<S> <C> <C> <C>
Oct-90 $10,000 $9,525 $10,000
Nov-90 $9,921 $9,450 $9,838
Dec-90 $10,024 $9,548 $10,045
Jan-91 $10,272 $9,784 $10,415
Feb-91 $10,927 $10,408 $11,381
Mar-91 $10,629 $10,124 $11,047
Apr-91 $10,659 $10,153 $11,135
May-91 $10,847 $10,332 $11,390
Jun-91 $10,233 $9,747 $10,688
Jul-91 $10,698 $10,190 $11,195
Aug-91 $10,597 $10,094 $11,161
Sep-91 $10,719 $10,209 $11,456
Oct-91 $10,880 $10,364 $11,644
Nov-91 $10,466 $9,969 $11,138
Dec-91 $11,161 $10,631 $11,951
Jan-92 $11,141 $10,612 $11,732
Feb-92 $11,181 $10,650 $11,531
Mar-92 $10,725 $10,215 $10,990
Apr-92 $11,049 $10,525 $11,145
May-92 $11,587 $11,037 $11,591
Jun-92 $11,252 $10,718 $11,204
Jul-92 $11,049 $10,525 $11,235
Aug-92 $11,060 $10,534 $11,510
Sep-92 $10,776 $10,264 $11,407
Oct-92 $10,491 $9,993 $11,100
Nov-92 $10,836 $10,322 $11,301
Dec-92 $10,841 $10,326 $11,394
Jan-93 $10,871 $10,355 $11,434
Feb-93 $11,004 $10,481 $11,707
Mar-93 $11,633 $11,081 $12,388
Apr-93 $12,243 $11,662 $12,965
May-93 $12,843 $12,233 $13,265
Jun-93 $12,710 $12,107 $13,156
Jul-93 $13,036 $12,416 $13,429
Aug-93 $13,716 $13,065 $14,047
Sep-93 $13,757 $13,103 $13,790
Oct-93 $13,960 $13,297 $14,172
Nov-93 $13,117 $12,494 $13,373
Dec-93 $14,046 $13,379 $14,029
Jan-94 $14,920 $14,211 $14,957
Feb-94 $14,982 $14,270 $14,766
Mar-94 $14,529 $13,839 $14,132
Apr-94 $14,910 $14,202 $14,571
May-94 $14,684 $13,986 $14,611
Jun-94 $14,848 $14,143 $14,573
Jul-94 $15,177 $14,456 $14,853
Aug-94 $15,640 $14,897 $15,303
Sep-94 $15,074 $14,358 $14,903
Oct-94 $15,239 $14,515 $15,330
Nov-94 $14,272 $13,594 $14,668
Dec-94 $14,256 $13,579 $14,812
Jan-95 $13,459 $12,820 $14,593
Feb-95 $13,459 $12,820 $14,802
Mar-95 $13,969 $13,305 $15,512
Apr-95 $14,288 $13,609 $16,069
May-95 $14,330 $13,649 $16,210
Jun-95 $14,298 $13,619 $16,208
Jul-95 $15,095 $14,378 $17,022
Aug-95 $14,999 $14,287 $16,646
Sep-95 $15,137 $14,418 $17,134
Oct-95 $14,702 $14,003 $16,867
Nov-95 $14,819 $14,115 $17,456
Dec-95 $15,266 $14,541 $17,970
Jan-96 $15,395 $14,664 $18,298
Feb-96 $15,546 $14,808 $18,413
Mar-96 $15,934 $15,177 $18,723
Apr-96 $16,495 $15,711 $19,166
May-96 $16,312 $15,537 $19,186
Jun-96 $16,279 $15,506 $19,287
Jul-96 $15,309 $14,582 $18,609
Aug-96 $15,622 $14,880 $18,826
Sep-96 $15,719 $14,972 $19,567
Oct-96 $15,632 $14,890 $19,710
</TABLE>
- --------------------------------------------------------------------------------
The Morgan Stanley Capital International (MSCI) World Index is a global index
which measures the performance of stock markets in the United States, Europe,
Canada, Australia, New Zealand, and the Far East. The index represents
approximately 60% of the combined market capitalization of the 23 countries. The
index attempts to replicate the industry composition of each local market and
includes a representative sampling of large, medium and small capitalization
companies. The index is market-value weighted and calculated with both net and
gross dividends reinvested. The net return index reinvests dividends after
foreign taxes have been withheld and the gross return index reinvests dividends
before payment of foreign taxes.
Index information is available on a month-end basis only, therefore the closest
month-end to the inception date of the fund has been used.
- --------------------------------------------------------------------------------
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Average Annual Total Return Cumulative Total Return
Since Since Since#
Periods Ending October 31, 1996 1 Year 5 years Inception Inception Oct. 1, 1996
<S> <C> <C> <C> <C> <C>
Morgan Stanley Capital International World Index* 16.83% 11.10% 11.97% 97.10% 0.72%
Global Equity Fund Class A (at net asset value) 6.33% 7.52% 7.76% 56.32% -0.55%
Global Equity Fund Class A (net of 4.75% sales charge) 1.28% 6.48% 6.89% 48.90% -5.27%
Global Equity Fund Class B (at net asset value) 5.64% 7.21% 7.50% 54.09% -0.62%
Global Equity Fund Class B (net of CDSC**) 0.64% 6.90% 7.38% 53.09% -5.59%
Global Equity Fund Class C (at net asset value) 5.70% 7.22% 7.51% 54.18% -0.62%
Global Equity Fund Class C (at net of CDSC***) 4.70% 7.22% 7.51% 54.18% -0.61%
</TABLE>
* All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
** The returns reflect the applicable sliding Contingent Deferred Sales Charge
of 5%, 5%, 4%, 3%, 2%, 1%.
*** The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
# Current investment manager (subadvisor) assignment became effective
10/1/96.
PORTFOLIO MANAGER'S COMMENTARY
The U.S. market reached new heights in November with a remarkable 7.5% rise
following Clinton's re-election and the return of a Republican Congress. Key
factors to the market's climb have been falling bond yields, the dollar's "safe
haven" status, renewed discussion of balanced budget legislation, and reasonable
third quarter earnings. While there are some signs of a (benign) slowing
economy--softer auto sales and production schedules, fewer housing starts, lower
payroll employment, and deteriorating credit quality--the recent market advance
is due to be corrected. Alan Greenspan is clearly attempting to achieve such a
correction. In Europe, we believe markets are also in record-setting territory,
partly due to renewed currency depreciation in light of the continued
uncertainty over the fate of the European Monetary Union. Indicative of this
market's strength was the ease with which the Deutsche Telekom $10 billion
initial public offering--one of the largest in history--was absorbed. Sterling's
strength on the back of the prospect of further interest rate increases remains
a feature in the UK as booming retail sales have led to higher-than-expected
inflation (3.3%). With the UK's recent budget likely to further stoke the
consumer recovery, the economy could be opening up to the prospect of a boom
such as was seen in 1987-1988. In Japan, investors remain skeptical about the
sustainability of recovery into 1997, and hence the Bank of Japan is not
expected to moderate its current monetary policy stance in the short term.
While it seems that it is going to be continuingly difficult to find
significant pockets of value in the current global environment, we believe that
therestill are, and will be, sufficient numbers of individual, relatively cheap
stocks to provide enough names to run a successful, and defensive, portfolio.
We expect to continue to be underweighted in Japan and slightly underweight in
the U.S. We do not believe we will be able to add many names in Southeast
Asia. We expect to find the majority of new stocks in Europe, which will most
likely maintain, if not increase, its overweight status versus the benchmark
(MSCI World Index).
vii
<PAGE>
VALUE EQUITY FUND
INVESTMENT OBJECTIVE: To seek long term growth of capital by investing primarily
in common stocks and securities convertible into or
carrying the right to buy common stocks.
SUBADVISOR: T. Rowe Price Associates, Inc.
PORTFOLIO MANAGERS: Brian C. Rogers, Stephen W. Boesel, Richard P. Howard,
William J. Stromberg
INCEPTION DATE: August 28, 1989#
Change in Value of $10,000 Investment and Comparative Indices
[CHART APPEARS HERE]
- --------------------------------------------------------------------------------
A line graph showing the growth (including reinvestment of dividends and capital
gains) of a $10,000 investment in North American Funds' Value Equity Fund Class
A shares at net asset value on August 28, 1989 through October 31, 1996, as
compared with the growth of a $10,000 investment in the S&P 500 Composite Index
over the same period. The graph also depicts the growth of a $10,000 investment
in Class A shares of the Value Equity Fund on August 28, 1989 through October
31, 1996, assuming the deduction of the maximum 4.75% front-end sales charge at
the time of the initial investment and reinvestment of dividends and capital
gains at net asset value. The following are the plot points used to draw this
line graph.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth of $10,000 Invested in Growth of $10,000 Invested in Growth of $10,000
Class A shares at Net Asset Value Class A shares with 4.75% charge Investment in the
Month Ended of the Value Equity Fund of the Value Equity Fund S&P 500
<S> <C> <C> <C>
Jul-89 $10,000 $9,525 $10,000
Aug-89 $10,114 $9,634 $10,000
Sep-89 $9,861 $9,393 $9,961
Oct-89 $9,135 $8,701 $9,737
Nov-89 $9,167 $8,732 $9,926
Dec-89 $9,227 $8,789 $10,165
Jan-90 $8,408 $8,008 $9,494
Feb-90 $8,572 $8,164 $9,603
Mar-90 $8,839 $8,419 $9,863
Apr-90 $8,580 $8,173 $9,627
May-90 $9,167 $8,731 $10,541
Jun-90 $8,978 $8,552 $10,477
Jul-90 $8,684 $8,272 $10,451
Aug-90 $7,698 $7,333 $9,495
Sep-90 $7,240 $6,896 $9,039
Oct-90 $7,110 $6,772 $9,008
Nov-90 $7,491 $7,135 $9,579
Dec-90 $7,796 $7,425 $9,847
Jan-91 $8,161 $7,774 $10,286
Feb-91 $8,675 $8,262 $11,010
Mar-91 $8,831 $8,412 $11,285
Apr-91 $8,927 $8,503 $11,319
May-91 $9,266 $8,826 $11,786
Jun-91 $8,883 $8,461 $11,252
Jul-91 $9,215 $8,777 $11,788
Aug-91 $9,390 $8,944 $12,051
Sep-91 $9,215 $8,777 $11,851
Oct-91 $9,337 $8,894 $12,022
Nov-91 $8,796 $8,378 $11,525
Dec-91 $9,751 $9,287 $12,843
Jan-92 $9,917 $9,446 $12,618
Feb-92 $10,292 $9,803 $12,770
Mar-92 $10,126 $9,645 $12,522
Apr-92 $10,327 $9,837 $12,902
May-92 $10,528 $10,028 $12,947
Jun-92 $10,214 $9,728 $12,754
Jul-92 $10,406 $9,912 $13,288
Aug-92 $10,091 $9,612 $13,002
Sep-92 $10,214 $9,728 $13,153
Oct-92 $10,528 $10,028 $13,214
Nov-92 $11,262 $10,727 $13,647
Dec-92 $11,594 $11,043 $13,818
Jan-93 $11,646 $11,093 $13,949
Feb-93 $11,437 $10,894 $14,129
Mar-93 $11,874 $11,310 $14,426
Apr-93 $11,428 $10,885 $14,093
May-93 $11,813 $11,251 $14,446
Jun-93 $11,909 $11,343 $14,491
Jul-93 $12,092 $11,518 $14,447
Aug-93 $12,145 $11,568 $14,978
Sep-93 $12,398 $11,809 $14,863
Oct-93 $12,415 $11,826 $15,185
Nov-93 $12,424 $11,834 $15,023
Dec-93 $12,847 $12,236 $15,209
Jan-94 $13,155 $12,530 $15,738
Feb-94 $13,340 $12,706 $15,299
Mar-94 $12,847 $12,236 $14,634
Apr-94 $12,838 $12,228 $14,838
May-94 $12,926 $12,312 $15,058
Jun-94 $12,679 $12,077 $14,690
Jul-94 $12,847 $12,236 $15,188
Aug-94 $13,480 $12,840 $15,795
Sep-94 $13,304 $12,672 $15,406
Oct-94 $13,014 $12,396 $15,764
Nov-94 $12,327 $11,741 $15,177
Dec-94 $12,570 $11,973 $15,400
Jan-95 $12,524 $11,929 $15,811
Feb-95 $13,354 $12,719 $16,419
Mar-95 $13,717 $13,066 $16,905
Apr-95 $13,950 $13,288 $17,415
May-95 $14,370 $13,687 $18,087
Jun-95 $14,827 $14,123 $18,510
Jul-95 $15,209 $14,487 $19,134
Aug-95 $15,377 $14,647 $19,164
Sep-95 $15,433 $14,700 $19,969
Oct-95 $14,864 $14,158 $19,909
Nov-95 $15,480 $14,744 $20,766
Dec-95 $15,672 $14,928 $21,168
Jan-96 $16,039 $15,278 $21,899
Feb-96 $16,346 $15,569 $22,092
Mar-96 $16,539 $15,754 $22,307
Apr-96 $16,886 $16,084 $22,648
May-96 $17,264 $16,444 $23,206
Jun-96 $16,897 $16,094 $23,300
Jul-96 $16,264 $15,491 $22,276
Aug-96 $16,743 $15,948 $22,736
Sep-96 $17,570 $16,735 $24,010
Oct-96 $17,723 $16,881 $24,679
</TABLE>
- --------------------------------------------------------------------------------
The Standard and Poor's 500 Index contains a representative sample of common
stocks that trade on the New York and American Stock Exchanges and some
over-the-counter stocks. The capitalization ranges from $80 million to $76
billion. The index is weighted by market capitalization and calculated on a
total return basis with dividends reinvested.
Index information is available on a month-end basis only, therefore the closest
month-end to the inception date of the fund has been used.
- --------------------------------------------------------------------------------
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Average Annual Total Return Cumulative Total Return
Since Since Since#
Periods Ending October 31, 1996 1 Year 5 years Inception Inception Oct 1, 1996
<S> <C> <C> <C> <C> <C>
S&P 500* 23.96% 15.47% 13.43% 146.79% 2.79%
Value Equity Fund Class A (at net asset value) 19.23% 13.67% 8.31% 77.23% 0.87%
Value Equity Fund Class A (net of 4.75% sales charge) 13.57% 12.57% 7.57% 68.81% -3.92%
Value Equity Fund Class B (at net asset value) 18.59% 13.41% 8.13% 75.18% 0.88%
Value Equity Fund Class B (net of CDSC**) 13.59% 13.17% 8.13% 75.18% -4.12%
Value Equity Fund Class C (at net asset value) 18.53% 13.40% 8.12% 75.08% 0.82%
Value Equity Fund Class C (net of CDSC***) 17.53% 13.40% 8.12% 75.08% -0.18%
</TABLE>
* All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
** The returns reflect the applicable sliding Contingent Deferred Sales Charge
of 5%, 5%, 4%, 3%, 2%, 1%.
*** The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
# Current investment manager (subadvisor) assignment became effective
10/1/96.
PORTFOLIO MANAGER'S COMMENTARY
After soaring in the second quarter, economic growth slowed and interest rates
stabilized in the third quarter, and through the month of October. The market,
which had largely discounted the probability of higher interest rates, got a
reprieve in September when the Federal Reserve decided to leave short-term
interest rates unchanged for the time being. Following its first significant
pullback in more than two years during the July decline, the resilient U.S.
stock market marched forward, albeit at a somewhat slower pace. Most major
equity indices posted decent gains, with the S&P 500 returning 2.79% for the
month of October, on top of a 3.09% return in the third quarter. Investors
have generally shrugged off the July decline. Despite the market selling off
sharply in a short-term period, investor fund flows did not abate
substantially and cash flows into the equity markets have continued to be a
positive factor influencing stock returns. Although technology stocks rebounded
from their summer lows, from a valuation standpoint, we have steered away from
companies in the technology sector. This has been a sector with a great deal of
money flowing into it and investor expectations are quite high. We feel as
though the risk/reward relationship is tilted against the investor. Also, the
last several months have seen small company stocks fall off the pace as
investors seek the relatively lower volatility of larger companies. This is a
favorable environment for the large-cap value investment strategy employed in
the Value Equity Fund.
While the U.S. economic expansion is now over five years old, the economy
should continue to grow. Interest rates should not change materially over the
remainder of 1996. Interest rates have been in a trading range for most of the
year with long treasuries in the 6 1/2% to 7 1/4% range. Barring a surprise
move by the Fed to raise interest rates in coming months to contain potential
inflationary pressures, we do not see much changing over the remainder of
1996. The stock market should continue to perform well if investors believe
interest rates are high enough to restrain inflation, yet low enough to keep
unemployment at bay. Corporate earnings have been strong and the real story
fueling the market this year has been the tremendous inflow of cash coming
from the individual investor, and it looks as though that trend will probably
continue. One concern looking out over the next year is what will happen to
earnings growth in 1997 versus 1996. If earnings growth slows in 1997, the
equity market will face more of a challenge in the next 12 months.
viii
<PAGE>
GROWTH AND INCOME FUND
INVESTMENT OBJECTIVE: To seek long-term growth of capital and income consistent
with prudent investment risk, by investing primarily in a
diversified portfolio of common stocks of United States
issuers which the portfolio manager believes are of high
quality.
SUBADVISOR: Wellington Management Company, LLP
PORTFOLIO MANAGER: Matthew E. Megargel
INCEPTION DATE: May 1, 1991
Change in Value of $10,000 Investment and Comparative Indices
[CHART APPEARS HERE]
- --------------------------------------------------------------------------------
A line graph showing the growth (including reinvestment of dividends and
capital gains) of a $10,000 investment in North American Funds' Growth and
Income Fund Class A shares at net asset value on May 1, 1991 through
October 31, 1996, as compared with the growth of a $10,000 investment in the S&P
500 Composite Index. The graph also depicts the growth of a
$10,000 investment in Class A shares of the Growth and Income Fund on
May 1, 1990 through October 31, 1996, assuming the deduction of the maximum
4.75% front-end sales charge at the time of the initial investment and
reinvestment of dividends and capital gains at net asset value. The following
are the plot points used to draw this line graph.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth of $10,000 Invested in Growth of $10,000 Invested in Growth of $10,000
Class A shares at Net Asset Value Class A shares with 4.75% charge Investment in the
Month Ended of the Growth & Income Fund of the Growth & Income Fund S&P 500
<S> <C> <C> <C>
Apr-91 $10,000 $9,525 $10,000
May-91 $10,240 $9,754 $10,413
Jun-91 $9,879 $9,410 $9,941
Jul-91 $10,201 $9,716 $10,414
Aug-91 $10,352 $9,860 $10,646
Sep-91 $10,205 $9,720 $10,470
Oct-91 $10,588 $10,085 $10,621
Nov-91 $10,175 $9,692 $10,182
Dec-91 $11,088 $10,561 $11,346
Jan-92 $10,775 $10,263 $11,147
Feb-92 $10,876 $10,359 $11,281
Mar-92 $10,642 $10,137 $11,062
Apr-92 $10,805 $10,291 $11,398
May-92 $10,845 $10,330 $11,437
Jun-92 $10,779 $10,267 $11,267
Jul-92 $11,217 $10,684 $11,740
Aug-92 $11,146 $10,616 $11,487
Sep-92 $11,400 $10,859 $11,620
Oct-92 $11,480 $10,935 $11,674
Nov-92 $11,777 $11,218 $12,056
Dec-92 $12,007 $11,437 $12,208
Jan-93 $12,162 $11,584 $12,323
Feb-93 $12,286 $11,702 $12,482
Mar-93 $12,677 $12,075 $12,745
Apr-93 $12,430 $11,839 $12,450
May-93 $12,657 $12,055 $12,763
Jun-93 $12,656 $12,055 $12,802
Jul-93 $12,625 $12,025 $12,763
Aug-93 $13,008 $12,390 $13,233
Sep-93 $12,956 $12,341 $13,130
Oct-93 $13,153 $12,528 $13,415
Nov-93 $12,884 $12,272 $13,272
Dec-93 $13,112 $12,489 $13,436
Jan-94 $13,574 $12,929 $13,903
Feb-94 $13,406 $12,769 $13,516
Mar-94 $12,892 $12,279 $12,928
Apr-94 $13,028 $12,409 $13,109
May-94 $13,259 $12,629 $13,303
Jun-94 $12,932 $12,318 $12,976
Jul-94 $13,481 $12,840 $13,418
Aug-94 $13,871 $13,212 $13,954
Sep-94 $13,607 $12,961 $13,610
Oct-94 $13,819 $13,162 $13,926
Nov-94 $13,196 $12,569 $13,408
Dec-94 $13,421 $12,784 $13,605
Jan-95 $13,432 $12,794 $13,968
Feb-95 $13,957 $13,294 $14,505
Mar-95 $14,263 $13,585 $14,934
Apr-95 $14,700 $14,002 $15,386
May-95 $15,137 $14,418 $15,978
Jun-95 $15,458 $14,724 $16,532
Jul-95 $15,876 $15,122 $16,904
Aug-95 $16,008 $15,248 $16,930
Sep-95 $16,482 $15,699 $17,641
Oct-95 $16,206 $15,437 $17,588
Nov-95 $16,845 $16,045 $18,346
Dec-95 $17,117 $16,304 $18,701
Jan-96 $17,520 $16,688 $19,347
Feb-96 $17,565 $16,731 $19,517
Mar-96 $17,856 $17,008 $19,707
Apr-96 $18,113 $17,253 $20,008
May-96 $18,516 $17,636 $20,501
Jun-96 $18,499 $17,620 $20,584
Jul-96 $17,801 $16,956 $19,679
Aug-96 $18,195 $17,331 $20,066
Sep-96 $19,218 $18,305 $21,211
Oct-96 $19,747 $18,809 $21,803
</TABLE>
- --------------------------------------------------------------------------------
The Standard and Poor's 500 Index contains a representative sample of common
stocks that trade on the New York and American Stock Exchanges and some
over-the-counter stocks. The capitalization ranges from $80 million to $76
billion. The index is weighted by market capitalization and calculated on a
total return basis with dividends reinvested.
Index information is available on a month-end basis only, therefore the closest
month-end to the inception date of the fund has been used.
- --------------------------------------------------------------------------------
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Average Annual Total Return Cumulative Total Return
Since Since
Periods Ending October 31, 1996 1 Year 5 years Inception Inception
<S> <C> <C> <C> <C>
S&P 500* 23.96% 15.47% 15.23% 118.03%
Growth and Income Fund Class A
(at net asset value) 21.84% 13.28% 13.17% 97.47%
Growth and Income Fund Class A
(net of 4.75% sales charge) 16.06% 12.18% 12.18% 88.09%
Growth and Income Fund Class B
(at net asset value) 21.08% 13.01% 12.93% 95.15%
Growth and Income Fund Class B
(net of CDSC**) 16.08% 12.76% 12.82% 94.15%
Growth and Income Fund Class C
(at net asset value) 21.12% 12.96% 12.88% 94.70%
Growth and Income Fund Class C
(net of CDSC***) 20.12% 12.96% 12.88% 94.70%
</TABLE>
* All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
** The returns reflect the applicable sliding Contingent Deferred Sales Charge
of 5%, 5%, 4%, 3%, 2%, 1%.
*** The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
PORTFOLIO MANAGER'S COMMENTARY
The U.S. equity market continued its strong performance for the year ended
October 31, 1996 as investors embraced the thesis that the economy would
continue on a path of moderate growth and modest inflation. Top performing
groups included healthcare, which benefited from favorable pharmaceutical script
trends, more stable pricing, and an accelerated approval process at the Food &
Drug Administration. Financial stocks also performed well due to declining
interest rates, a reasonably favorable credit environment, and industry
consolidation. Energy services companies rose sharply as high capacity
utilization led to rising prices and even more leveraged operating earnings
gains. Finally, the aerospace group outpaced the market with robust commercial
aircraft orders and consolidation among defense contractors. Lagging sectors
included media stocks which suffered from investor disappointment in the cable
TV and wireless telephone groups. Utilities were also weak despite lower
interest rates over concern about deregulation in both the electric and
telephone sectors. Finally, materials stocks lagged the broad market as a
decelerating economy caused commodity price declines. The Fund returned 21.84%
on a net basis for the fiscal year versus 23.96% for the benchmark S&P 500
Index. Fund performance was helped on a relative basis by overweightings in drug
stocks and energy services, along with underweightings in utilities and
electronics. Relative performance was hurt by holdings in the media, technology
software, and travel related sectors.
ix
<PAGE>
INTERNATIONAL GROWTH AND INCOME FUND
INVESTMENT OBJECTIVE: Seeks to provide long-term growth of capital and income
by investing in a portfolio of securities of foreign
issuers. Under normal circumstances, the portfolio will
be invested approximately 85% in equity securities and
15% in fixed income securities.
SUBADVISOR: J.P. Morgan Investment Management, Inc.
PORTFOLIO MANAGERS: Paul A. Quinsee, Gareth A. Fielding
INCEPTION DATE: January 9, 1995
Change in Value of $10,000 Investment and Comparative Indices
[CHART APPEARS HERE]
- --------------------------------------------------------------------------------
A line graph showing the growth (including reinvestment of dividends and capital
gains) of a $10,000 investment in North American Funds' International Growth and
Income Fund Class A shares at net asset value on January 9, 199 through October
31, 1996, as compared with the growth of both a $10,000 investment in Morgan
Stanley Capital International EAFE index and a $10,000 investment in the Salomon
Brothers Non-U.S. Dollar index over the same period. The graph also depicts the
growth of a $10,000 investment in Class A shares of the International Growth and
Income Fund on January 9, 1995 through October 31, 1996, assuming the deduction
of the maximum 4.75% front-end sales charge at the time of the initial
investment and reinvestment of dividends and capital gains at net asset value.
The following are the plot points used to draw this line graph.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth of $10,000 Invested in Growth of $10,000 Invested in Growth of $10,000
Class A shares at Net Asset Value Class A shares with 4.75% charge Investment in the MSCI
Month Ended of the Growth & Income Fund of the Growth & Income Fund EAFE Index
<S> <C> <C> <C>
Dec-94 $10,000 $9,525 $10,000
Jan-95 $9,800 $9,335 $9,618
Feb-95 $9,590 $9,134 $9,688
Mar-95 $10,030 $9,554 $10,188
Apr-95 $10,350 $9,858 $10,569
May-95 $10,150 $9,668 $10,444
Jun-95 $9,977 $9,503 $10,281
Jul-95 $10,488 $9,990 $10,900
Aug-95 $10,228 $9,742 $10,485
Sep-95 $10,308 $9,818 $10,689
Oct-95 $10,137 $9,656 $10,402
Nov-95 $10,338 $9,847 $10,891
Dec-95 $10,788 $10,273 $11,122
Jan-96 $10,888 $10,370 $11,167
Feb-96 $10,857 $10,341 $11,205
Mar-96 $11,041 $10,515 $11,406
Apr-96 $11,285 $10,730 $11,558
May-96 $11,235 $10,701 $11,550
Jun-96 $11,387 $10,827 $11,818
Jul-96 $11,102 $10,575 $11,322
Aug-96 $11,214 $10,681 $11,459
Sep-96 $11,510 $10,963 $11,755
Oct-96 $11,581 $11,031 $11,769
<CAPTION>
Growth of $10,000 Growth of $10,000
Investment in the Solomon Bros. Investment in the 85/15%
Month Ended Non-US $ Bond Index Composite Index
<S> <C> <C>
Dec-94 $10,000 $10,000
Jan-95 $10,218 $9,708
Feb-95 $10,507 $9,728
Mar-95 $11,443 $10,375
Apr-95 $11,588 $10,737
May-95 $11,943 $10,668
Jun-95 $12,003 $10,522
Jul-95 $12,088 $11,075
Aug-95 $11,376 $10,819
Sep-95 $11,711 $10,842
Oct-95 $11,748 $10,804
Nov-95 $11,850 $10,885
Dec-95 $11,953 $11,247
Jan-96 $11,888 $11,245
Feb-96 $11,722 $11,283
Mar-96 $11,752 $11,458
Apr-96 $11,724 $11,559
May-96 $11,752 $11,580
Jun-96 $11,837 $11,651
Jul-96 $11,889 $11,404
Aug-96 $11,949 $11,541
Sep-96 $11,946 $11,754
Oct-96 $12,166 $11,829
</TABLE>
- --------------------------------------------------------------------------------
The EAFE (Europe, Asia and the Far East) Index represents approximately 60% of
the combined market capitalization of 20 countries. The index attempts to
replicate the industry composition of each local market and includes a
representative sampling of small, medium, and small capitalization companies.
The index is market value-weighted and calculated both with net and gross
dividends reinvested. The net return index reinvests dividends after foreign
taxes have been withheld and the gross return index reinvests dividends before
payment of taxes.
The Salomon Brothers Non-U.S. Dollar Bond Index provides a measure of the total
return of the performance of high quality securities in the Government bond,
Eurobond and sectors of the international market. The bonds must have a minimum
quality of AA and a minimum maturity of five years.
This composite index is rebalanced to reflect the portfolio's 25% fixed weight
in Japan. This adjustment is made for both equities and bonds and then the
85/15% split is used.
Index information is available on a month-end basis only, therefore the closest
month-end to the inception date of the fund has been used.
- --------------------------------------------------------------------------------
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
Since Since
Periods Ending October 31, 1996 1 Year Inception Inception
<S> <C> <C> <C>
Morgan Stanley Capital International EAFE* 13.15% 9.29% 17.69%
Salomon Brothers Non-US Dollar Bond Index* 3.55% 11.28% 21.66%
85%/15% Composite Index*+ 11.71% 9.59% 18.29%
International Growth and Income Fund Class A (at net asset value) 14.25% 8.49% 15.81%
International Growth and Income Fund Class A (net of 4.75% sales charge) 8.82% 5.60% 10.31%
International Growth and Income Fund Class B (at net asset value) 13.58% 8.08% 15.04%
International Growth and Income Fund Class B (net of CDSC**) 8.58% 5.45% 10.04%
International Growth and Income Fund Class C (at net asset value) 13.63% 8.11% 15.09%
International Growth and Income Fund Class C (net of CDSC***) 12.63% 8.11% 15.09%
</TABLE>
* All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
+ Comprised of 85% of the return of the MSCI EAFE and 15% of the return of the
Salomon Brothers Non-US Dollar Bond Index.
** The returns reflect the applicable sliding Contingent Deferred Sales Charge
of 5%, 5%, 4%, 3%, 2%, 1%.
*** The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
PORTFOLIO MANAGER'S COMMENTARY
Building on the success enjoyed during the fourth quarter of 1995,
international equity markets performed well during 1996 spurred by renewed
optimism for economic recovery and corporate profits (due to strong Japanese
corporate profits, low interest rates in the smaller European markets, and the
favorable impact of the larger European market corporate restructurings).
International equities have considerably outperformed bonds since the beginning
of 1996. In the bond markets, the theme of convergence of high-yielding markets
towards reference markets set the tone, with Italy, Spain, and Sweden producing
strong returns in Europe, and Canada and Australia in the dollar bloc.
Asset allocation has been the most positive contributor to overall performance
year-to-date. We have significantly reduced the position in Japanese equities,
while increasing positions in German, French, and Belgian equities. These
decisions have contributed positively to performance. However, these gains were
marginally offset by underweighting the strong Swedish market. Stock selection
in the Japanese banking sector and in supermarket stocks in the retail sector
have contributed to the Fund's returns. An underweight position in Japanese
bonds and overweight position in Dutch bonds also produced a positive return
as did the Fund's yield positioning. The Fund's ongoing currency strategy of
partially hedging Japanese yen exposure into U.S. dollars has had a significant
impact on the results this year as the dollar reached a new 32-month high versus
the yen in September.
x
<PAGE>
BALANCED FUND
INVESTMENT OBJECTIVE: To seek the highest total return consistent with a
moderate level of risk tolerance. This portfolio
attempts to limit the decline in portfolio value in very
adverse market conditions to 10% over any twelve month
period. The Balanced Fund will invest in a combination
of equity, fixed-income and money mar-ket securities.
The portfolio manager retains absolute discre-tion to
determine the amount of the Fund's assets invested in
each category of securities at all times. There can be
no as-surance that the 10% limit on the decline in
portfolio value will not be exceeded.
SUBADVISOR: Founders Asset Management, Inc.
PORTFOLIO MANAGER: Brian F. Kelly
INCEPTION DATE: August 28, 1989#
Change in Value of $10,000 Investment and Comparative Indices
[CHART APPEARS HERE]
- --------------------------------------------------------------------------------
A line graph showing the growth (including reinvestment of dividends and capital
gains) of a $10,000 investment in North American Funds' Balanced Fund Class A
shares at net asset value on August 28, 1989 through October 31, 1996, as
compared with the growth of both a $10,000 investment in the S&P 500 Composite
Index and a $10,000 investment in the Lehman Brothers Aggregate Bond Index over
the same period. The graph also depicts the growth of a $10,000 investment in
Class A shares of the Balanced Fund on August 28, 1989 through October 31, 1996,
assuming the deduction of the maximum 4.75% front-end sales charge at the time
of the initial investment and reinvestment of dividends and capital gains at net
asset value. The following are the plot points used to draw this line graph.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth of $10,000 Growth of $10,000 Growth of $10,000
invested in Class A invested in Class A Investment in the Growth of $10,000
shares of Net Asset shares with 4.75% Growth of $10,000 Lehman Brothers Investment in the
Value of the charge of the investment in the Aggregate 50%/50%
Month Ended Balanced Fund Balanced Fund S&P 500 Bond Index Composite Index
<S> <C> <C> <C> <C> <C>
Jul-89 $10,000 $9,525 $10,000 $10,000 $10,000
Aug-89 $10,059 $9,581 $10,000 $10,000 $10,000
Sep-89 $9,931 $9,459 $9,961 $10,051 $10,008
Oct-89 $9,878 $9,216 $9,737 $10,299 $10,015
Nov-89 $9,735 $9,272 $9,926 $10,397 $10,162
Dec-89 $9,788 $9,328 $10,165 $10,425 $10,295
Jan-90 $9,184 $8,745 $9,494 $10,301 $9,898
Feb-90 $9,275 $8,834 $9,503 $10,334 $9,959
Mar-90 $9,275 $8,834 $9,883 $10,342 $10,103
Apr-90 $9,043 $8,814 $9,627 $10,247 $9,937
May-90 $9,528 $9,074 $10,541 $10,550 $10,546
Jun-90 $9,481 $8,030 $10,477 $10,720 $10,589
Jul-90 $9,368 $8,923 $10,451 $10,888 $10,880
Aug-90 $8,733 $8,318 $9,495 $10,723 $10,109
Sep-90 $8,406 $8,006 $9,039 $10,812 $9,925
Oct-90 $8,324 $7,928 $9,008 $10,849 $9,979
Nov-90 $8,651 $8,240 $9,579 $11,184 $10,382
Dec-90 $8,935 $8,511 $9,847 $11,359 $10,603
Jan-91 $9,217 $8,780 $10,286 $11,499 $10,893
Feb-91 $8,667 $9,208 $11,010 $11,597 $11,304
Mar-91 $9,782 $9,317 $11,285 $11,877 $11,481
Apr-91 $9,845 $9,377 $11,319 $11,804 $11,562
May-91 $9,959 $9,485 $11,786 $11,873 $11,830
Jun-91 $9,717 $9,258 $11,252 $11,867 $11,560
Jul-91 $9,994 $9,518 $11,788 $12,031 $11,910
Aug-91 $10,217 $9,732 $12,051 $12,291 $12,171
Sep-91 $10,196 $9,711 $11,851 $12,541 $12,195
Oct-91 $10,366 $9,873 $12,022 $12,680 $12,351
Nov-91 $10,227 $9,742 $11,525 $12,798 $12,161
Dec-91 $10,852 $10,335 $12,843 $13,178 $13,010
Jan-92 $10,805 $10,357 $12,518 $12,997 $12,808
Feb-92 $11,163 $10,533 $12,770 $13,082 $12,925
Mar-92 $11,013 $10,480 $12,522 $13,008 $12,785
Apr-92 $11,195 $10,883 $12,902 $13,102 $13,002
May-92 $11,420 $10,878 $12,947 $13,349 $13,148
Jun-92 $11,249 $10,714 $12,754 $13,533 $13,144
Jul-92 $11,498 $10,952 $13,295 $13,809 $13,548
Aug-92 $12,459 $11,887 $13,002 $13,949 $13,478
Sep-92 $11,442 $10,898 $13,153 $14,114 $13,634
Oct-92 $11,532 $10,964 $13,214 $13,927 $13,571
Nov-92 $11,984 $11,415 $13,547 $13,830 $13,789
Dec-92 $12,251 $11,889 $13,818 $14,152 $13,885
Jan-93 $12,377 $11,790 $13,949 $14,423 $14,188
Feb-93 $12,320 $11,735 $14,129 $14,576 $14,403
Mar-93 $12,654 $12,053 $14,425 $14,737 $14,582
Apr-93 $12,412 $11,822 $14,083 $14,839 $14,466
May-93 $12,631 $12,031 $14,446 $14,858 $14,652
Jun-93 $12,815 $12,206 $14,491 $15,128 $14,810
Jul-93 $12,942 $12,327 $14,447 $15,213 $14,830
Aug-93 $13,080 $12,458 $14,978 $15,480 $15,229
Sep-93 $13,218 $12,590 $14,883 $15,522 $15,193
Oct-93 $13,264 $12,834 $15,185 $15,580 $15,383
Nov-93 $13,195 $12,565 $15,023 $15,448 $15,235
Dec-93 $13,484 $12,844 $15,209 $15,531 $15,370
Jan-94 $13,736 $13,084 $15,738 $15,741 $15,740
Feb-94 $13,724 $13,073 $15,299 $15,468 $15,384
Mar-94 $13,280 $12,848 $14,834 $15,088 $14,860
Apr-94 $13,232 $12,604 $14,838 $14,966 $14,902
May-94 $13,288 $12,638 $15,058 $14,964 $15,011
Jun-94 $13,100 $12,478 $14,690 $14,931 $14,811
Jul-94 $13,282 $12,551 $15,185 $15,227 $15,208
Aug-94 $13,664 $13,015 $15,795 $15,246 $15,521
Sep-94 $13,496 $12,855 $15,408 $15,022 $15,214
Oct-94 $13,354 $12,729 $15,764 $15,008 $15,386
Nov-94 $12,944 $12,329 $15,177 $14,975 $15,076
Dec-94 $13,120 $12,497 $15,400 $15,078 $15,239
Jan-95 $13,237 $12,808 $15,811 $15,377 $15,594
Feb-95 $13,848 $13,190 $15,419 $15,742 $16,081
Mar-95 $14,056 $13,385 $15,905 $15,839 $16,372
Apr-95 $14,342 $13,661 $17,415 $15,050 $16,738
May-95 $14,797 $14,084 $18,087 $16,582 $17,385
Jun-95 $14,992 $14,280 $18,510 $16,804 $17,857
Jul-95 $15,352 $14,528 $19,134 $16,767 $17,951
Aug-95 $15,512 $14,776 $19,154 $16,969 $18,057
Sep-95 $15,720 $14,974 $19,989 $17,134 $18,552
Oct-95 $15,829 $14,887 $19,909 $17,357 $18,633
Nov-95 $15,951 $15,221 $20,755 $17,617 $19,192
Dec-95 $16,318 $15,541 $21,158 $17,854 $19,516
Jan-96 $16,516 $15,792 $21,899 $17,983 $19,541
Feb-96 $16,559 $15,773 $22,092 $17,870 $19,881
Mar-96 $16,558 $15,773 $22,307 $17,547 $19,927
Apr-96 $16,602 $15,814 $22,848 $17,449 $20,049
May-96 $16,789 $15,964 $23,206 $17,413 $20,310
Jun-96 $16,745 $15,950 $23,300 $17,547 $20,474
Jul-96 $16,574 $15,786 $23,276 $17,695 $19,988
Aug-96 $16,789 $15,991 $22,735 $17,656 $20,201
Sep-96 $17,305 $16,483 $24,010 $17,974 $20,992
Oct-96 $17,678 $16,838 $24,679 $18,373 $21,565
</TABLE>
- --------------------------------------------------------------------------------
The Standard and Poor's 500 Index contains a representative sample of common
stocks that trade on the New York and American Stock Exchanges and some
over-the-counter stocks. The capitalization ranges from $80 million to $78
billion. The index is weighted by market capitalization and calculated on a
total return basis with dividends reinvested. The Lehman Brothers Aggregate
Bond Index includes fixed rate debt issues rated investment grade or higher by
Moody's, Standard & Poor's or Fitch. The index includes Government, Corporate,
Mortgage-backed and Asset-backed issues. All issues have at least one year to
maturity and an outstanding par value of at least $100 million for Government
issues and $50 million for all others. Returns are market value weighted.
Index information is available on a month-end basis only, therefore the closest
month-end to the inception date of the fund has been used.
- --------------------------------------------------------------------------------
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Cumulative Total Return
Average Annual Total Return Since Since#
Periods Ending October 31, 1996 1 Year 5 Years Since Inception Inception Oct 1,1996
<S> <C> <C> <C> <C> <C>
S&P 500* 23.96% 15.47% 13.43% 146.79% 2.79%
Lehman Brothers Aggregate Bond Index* 5.85% 7.70% 8.86% 83.73% 2.22%
50%/50% Composite*+ 14.91% 11.59% 11.15% 115.26% 2.51%
Balanced Fund Class A (at net asset value) 13.10% 11.27% 8.27% 76.78% 2.15%
Balanced Fund Class A (net of 4.75% sales charge) 7.73% 10.19% 7.53% 68.38% -2.70%
Balanced Fund Class B (at net asset value) 12.35% 10.98% 8.07% 74.49% 2.08%
Balanced Fund Class B (net of CDSC**) 7.35% 10.71% 8.07% 74.49% -2.92%
Balanced Fund Class C (at net asset value) 12.41% 10.98% 8.07% 74.49% 2.15%
Balanced Fund Class C (at net asset value) 11.41% 10.98% 8.07% 74.49% 1.15%
</TABLE>
* All since inception returns for the indices begin on the month-end closest t
to the actual inception date of the Fund.
+ Comprised of 50% of the return of the S&P 500 and 50% of the return of the
Lehman Brothers Aggregate Bond Index.
** The returns reflect the applicable sliding Contingent Deferred Sales Charge
of 5%, 5%, 4%, 3%, 2%, 1%.
*** The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
# Current investment manager (subadvisor) assignment became effective 10/1/96.
PORTFOLIO MANAGER'S COMMENTARY
Since taking over the fund on October 1, 1996, the Fund has appreciated in value
by 2.15% versus an increase in the S&P 500 over this same time period of 2.79%.
Given the fact that the fund is currently targeting a 60% equity exposure and a
40% fixed income exposure, and that the Fund is in the process of being
restructured, the return listed in the previous sentence is acceptable. There
have been several changes that have been implemented since taking over the Fund.
From this point and going forward the fixed income component of this Fund will
be overwhelmingly invested solely in U.S. treasuries--with maturities typically
ranging from one to five years. A small portion of the fixed income funds may be
invested in investment grade bonds of major foreign governments or states (e.g.
Canadian government bonds), or investment grade foreign corporate issues. Also,
inherited equity positions have been trimmed and dollars have been redeployed.
It would be difficult to make the case that the market as measured by either the
S&P 500 or the Dow Jones Industrial Average is meaningfully undervalued. The
yield on these indices currently is around 1.95% to 2.00%. The stock market as
measured by either of these indices has never in history (going back as far as
1890-1900) been priced at such an extreme so as to carry so little yield. Unless
one believes that yield is no longer important as a tool for measuring
valuation, the market is overvalued by anywhere from 20% to 30% on a yield test.
The price to book ratio for both the Dow Jones and the S&P 500 is currently
about 4.0(x). On a historical basis this looks very high, but in all honesty,
the value of this particular valuation tool is difficult to assess due to
significant write-offs to corporate balance sheets over the past decade. At the
current level, the stock market reflects the low yields in the bonds market. A
meaningful or abrubt increase in interest rates would not be well received by
the stock market. Yet in spite of broad concerns about the overall valuation
level of this market, certain sectors of the economy are and will in all
likelihood be broadly represented in the portfolio. These include oil and
natural gas, pharmaceuticals, financials, and industrials and rails. Also,
investments in the following areas have been trimmed: consumer debt, retailers,
apparel manufacturers, and REIT's. Going forward, investments will be made with
a very critical eye on valuation, and directionally the equity exposure of the
Fund is more likely headed down rather than up.
xi
<PAGE>
STRATEGIC INCOME FUND
INVESTMENT OBJECTIVE: To seek a high level of total return consistent with
preservation of capital, by giving its portfolio manager
broad discretion to deploy the Fund's assets among
certain segments of the fixed-income market as the
portfolio manager believes will best contribute to
achievement of the Fund's investment objective.
SUBADVISOR: Salomon Brothers Asset Management Inc
PORTFOLIO MANAGERS: Peter J. Wilby, David J. Scott
INCEPTION DATE: November 1, 1993
Change in Value of $10,000 Investment and Comparative Indices
[CHART APPEARS HERE]
- --------------------------------------------------------------------------------
A line graph showing the growth (including reinvestment of dividends and
capital gains) of a $10,000 investment in North American Funds' Strategic
Income Fund Class A shares at net asset value on November 1, 1993 through
October 31, 1996, as compared with the growth of a $10,000 investment in the
Lehman Brothers Aggregate Bond Index. The graph also depicts the growth of a
$10,000 investment in Class A shares of the Strategic Income Fund on
November 1, 1993 through October 31, 1996, assuming the deduction of the maximum
4.75% front-end sales charge at the time of the initial investment and
reinvestment of dividends and capital gains at net asset value. The following
are the plot points used to draw this line graph.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth of $10,000 Invested in Growth of $10,000 Invested in Growth of $10,000
Class A shares at Net Asset Value Class A shares with 4.75% charge Investment in the Lehman Brothers
Month Ended of the Strategic Income Fund of the Strategic Income Fund Aggregate Bond Index
<S> <C> <C> <C>
Oct-93 $10,000 $9,525 $10,000
Nov-93 $10,019 $9,543 $9,915
Dec-93 $10,122 $9,641 $9,969
Jan-94 $10,283 $9,795 $10,103
Feb-94 $10,001 $9,525 $9,928
Mar-94 $9,539 $9,086 $9,683
Apr-94 $9,444 $8,996 $9,606
May-94 $9,567 $9,113 $9,604
Jun-94 $9,522 $9,070 $9,583
Jul-94 $9,564 $9,110 $9,773
Aug-94 $9,615 $9,158 $9,786
Sep-94 $9,638 $9,180 $9,642
Oct-94 $9,621 $9,164 $9,633
Nov-94 $9,561 $9,107 $9,612
Dec-94 $9,435 $8,986 $9,678
Jan-95 $9,448 $8,999 $9,869
Feb-95 $9,543 $9,090 $10,104
Mar-95 $9,592 $9,136 $10,166
Apr-95 $9,899 $9,429 $10,308
May-95 $10,244 $9,758 $10,707
Jun-95 $10,381 $9,888 $10,785
Jul-95 $10,428 $9,933 $10,761
Aug-95 $10,463 $9,966 $10,891
Sep-95 $10,642 $10,137 $10,997
Oct-95 $10,720 $10,211 $11,140
Nov-95 $10,905 $10,387 $11,307
Dec-95 $11,187 $10,655 $11,466
Jan-96 $11,685 $11,130 $11,542
Feb-96 $11,497 $10,951 $11,341
Mar-96 $11,502 $10,956 $11,263
Apr-96 $11,645 $11,091 $11,199
May-96 $11,737 $11,180 $11,176
Jun-96 $11,868 $11,304 $11,327
Jul-96 $11,924 $11,358 $11,358
Aug-96 $12,107 $11,532 $11,339
Sep-96 $12,494 $11,901 $11,536
Oct-96 $12,580 $11,982 $11,792
</TABLE>
- --------------------------------------------------------------------------------
The Lehman Brothers Aggregate Bond Index includes fixed rate debt issues rated
investment grade or higher by Moody's, Standard & Poor's or Fitch. The Index
includes Government, Corporate, Mortgage-backed and Asset-backed issues. All
issues have at least one year to maturity and an outstanding par value of at
least $100 million for Government issues and $50 million for all others.
Returns are market value weighted.
Index information is available on a month-end basis only, therefore the closest
month-end to the inception date of the fund has been used.
- --------------------------------------------------------------------------------
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
Since Since
Periods Ending October 31, 1996 1 Year Inception Inception
<S> <C> <C> <C>
Lehman Brothers Aggregate Bond Index* 5.85% 5.65% 17.92%
Strategic Income Fund Class A (at net asset
value) 17.35% 7.97% 25.80%
Strategic Income Fund Class A (net of 4.75%
sales charge) 11.77% 6.23% 19.82%
Strategic Income Fund Class B (at net asset
value) 16.59% 7.37% 23.69%
Strategic Income Fund Class B (net of CDSC**) 11.59% 6.19% 19.69%
Strategic Income Fund Class C (at net asset
value) 16.59% 7.36% 23.67%
Strategic Income Fund Class C (net of CDSC***) 15.59% 7.36% 23.67%
</TABLE>
* All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
** The returns reflect the applicable sliding Contingent Deferred Sales Charge
of 5%, 5%, 4%, 3%, 2%, 1%.
*** The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
PORTFOLIO MANAGER'S COMMENTARY
The Strategic Income Fund enjoyed strong performance for the year ending
10/31/96, as it posted a 17.35% return on a net asset value basis. This compares
favorably to both the investment grade bond market and multi-sector fixed income
fund average as reported by Lipper Analytical Services, Inc. For the one year
period, the investment grade bond market as measured by the Lehman Brothers
Aggregate Bond Index posted a 5.85% return and the Lipper Multi-sector fund
average posted a 12.45% return. This outperformance can be attributed to the
Fund's allocation to the high yield corporate sector and emerging markets debt.
Over the course of the year, the Fund allocated about 45% of its assets to the
high yield sector and about 22% to emerging markets debt (Brady Bonds). Credit
quality of the high yield issuers continues to improve as corporations
strengthen their balance sheets by posting higher earnings and paying down debt.
The strength in the emerging markets debt sector is attributed to improving
fiscal and monetary practices of these countries. During the year, both Moody's
and S&P upgraded Poland's debt to investment grade. This positive development
helped to boost prices across the whole sector. In addition, during 1996, a
large and growing number of institutional investors, particularly U.S. pension
funds and insurance companies, entered this market in search of higher yields.
This flow of institutional funds has helped to stabilize this market sector.
Moderate economic growth in the U.S. and positive supply and demand factors in
the high yield corporate market should support strong performance in the year
ahead. We also maintain a positive outlook on emerging market debt as broader
participation in the sector and favorable monetary and fiscal policies by
emerging market nations should continue to be positive for the market. Our US
investment grade outlook is cautious over the short run. However, long-term we
remain constructive on the fixed income market as inflation remains benign and
economic growth remains modest.
xii
<PAGE>
INVESTMENT QUALITY BOND FUND
INVESTMENT OBJECTIVE: To seek a high level of current income consistent with the
maintenance of principal and liquidity, by investing
primarily in a diversified portfolio of investment grade
corporate bonds and U.S. Government bonds with
intermediate to longer term maturities.
SUBADVISOR: Wellington Management Company, LLP
PORTFOLIO MANAGER: Thomas L. Pappas
INCEPTION DATE: May 1, 1991
Change in Value of $10,000 Investment and Comparative Indices
[CHART APPEARS HERE]
- --------------------------------------------------------------------------------
A line graph showing the growth (including reinvestment of dividends and capital
gains) of a $10,000 investment in North American Funds' Investment Quality Bond
Fund Class A shares at net asset value on May 1, 1991 through October 31, 1996,
as compared with the growth of a $10,000 investment in the Lehman Brothers
Aggregate Bond Index over the same period. The graph also depicts the growth of
a $10,000 investment in Class A shares of the Investment Quality Bond Fund on
May 1, 1991 through October 31, 1996, assuming the deduction of the maximum
4.75% front-end sales charge at the time of the initial investment and
reinvestment of dividends and capital gains at net asset value. The following
are the plot points used to draw this line graph.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth of $10,000 Growth of $10,000 Growth of $10,000 Growth of $10,000
Invested in Class A shares Invested in Class A shares Investment in the Lehman Investment in the
at Net Asset Value of the with 4.75% charge of the Brothers Aggregate 50%/50
Month Ended Investment Quality Bond Fund Investment Quality Bond Fund Bond Index Composite Index
<S> <C> <C> <C> <C>
Apr-91 $10,000 $9,525 $10,000 $10,000
May-91 $10,085 $9,606 $10,058 $10,054
Jun-91 $10,080 $9,602 $10,053 $10,046
Jul-91 $10,157 $9,674 $10,193 $10,179
Aug-91 $10,395 $9,901 $10,413 $10,412
Sep-91 $10,614 $10,110 $10,624 $10,628
Oct-91 $10,721 $10,212 $10,743 $10,725
Nov-91 $10,808 $10,294 $10,841 $10,832
Dec-91 $11,200 $10,668 $11,163 $11,193
Jan-92 $10,991 $10,469 $11,011 $11,036
Feb-92 $11,085 $10,558 $11,083 $11,111
Mar-92 $11,018 $10,495 $11,020 $11,055
Apr-92 $11,065 $10,540 $11,100 $11,117
May-92 $11,320 $10,782 $11,309 $11,344
Jun-92 $11,511 $10,964 $11,465 $11,513
Jul-92 $11,791 $11,231 $11,699 $11,812
Aug-92 $11,915 $11,349 $11,817 $11,913
Sep-92 $12,085 $11,511 $11,958 $12,069
Oct-92 $11,901 $11,335 $11,799 $11,875
Nov-92 $11,930 $11,363 $11,802 $11,874
Dec-92 $12,127 $11,551 $11,989 $12,084
Jan-93 $12,382 $11,794 $12,219 $12,353
Feb-93 $12,604 $12,006 $12,433 $12,619
Mar-93 $12,676 $12,074 $12,485 $12,662
Apr-93 $12,757 $12,151 $12,572 $12,759
May-93 $12,769 $12,162 $12,588 $12,760
Jun-93 $13,016 $12,397 $12,816 $13,057
Jul-93 $13,051 $12,431 $12,889 $13,143
Aug-93 $13,312 $12,680 $13,114 $13,454
Sep-93 $13,372 $12,737 $13,150 $13,495
Oct-93 $13,408 $12,771 $13,200 $13,555
Nov-93 $13,192 $12,565 $13,087 $13,397
Dec-93 $13,254 $12,624 $13,158 $13,462
Jan-94 $13,437 $12,799 $13,336 $13,685
Feb-94 $13,081 $12,459 $13,104 $13,379
Mar-94 $12,654 $12,053 $12,781 $13,023
Apr-94 $12,524 $11,929 $12,679 $12,909
May-94 $12,517 $11,923 $12,677 $12,877
Jun-94 $12,474 $11,881 $12,649 $12,846
Jul-94 $12,706 $12,103 $12,901 $13,126
Aug-94 $12,712 $12,109 $12,917 $13,135
Sep-94 $12,503 $11,909 $12,726 $12,920
Oct-94 $12,459 $11,867 $12,715 $12,901
Nov-94 $12,428 $11,838 $12,687 $12,879
Dec-94 $12,534 $11,939 $12,774 $12,972
Jan-95 $12,749 $12,143 $13,027 $13,230
Feb-95 $13,056 $12,436 $13,337 $13,562
Mar-95 $13,130 $12,506 $13,419 $13,661
Apr-95 $13,322 $12,689 $13,606 $13,866
May-95 $13,859 $13,201 $14,133 $14,472
Jun-95 $13,947 $13,285 $14,236 $14,593
Jul-95 $13,902 $13,241 $14,205 $14,533
Aug-95 $14,058 $13,390 $14,376 $14,735
Sep-95 $14,201 $13,527 $14,516 $14,893
Oct-95 $14,441 $13,755 $14,705 $15,103
Nov-95 $14,668 $13,971 $14,925 $15,366
Dec-95 $14,889 $14,182 $15,135 $15,602
Jan-96 $14,952 $14,242 $15,235 $15,701
Feb-96 $14,655 $13,959 $14,970 $15,354
Mar-96 $14,524 $13,834 $14,866 $15,225
Apr-96 $14,392 $13,708 $14,783 $15,112
May-96 $14,344 $13,662 $14,753 $15,085
Jun-96 $14,523 $13,833 $14,951 $15,293
Jul-96 $14,545 $13,855 $14,992 $15,327
Aug-96 $14,525 $13,835 $14,966 $15,285
Sep-96 $14,794 $14,091 $15,227 $15,574
Oct-96 $15,093 $14,376 $15,565 $15,959
</TABLE>
- --------------------------------------------------------------------------------
The Lehman Brothers Aggregate Bond Index includes fixed rate debt issues rated
investment grade or higher by Moody's, Standard & Poor's or Fitch. The Index
includes Government, Corporate, Mortgage-backed and Asset-backed issues. All
issues have at least one year to maturity and an outstanding par value of at
least $100 million for Government issues and $50 million for all others.
Returns are market value weighted.
Index information is available on a month-end basis only, therefore the closest
month-end to the inception date of the fund has been used.
- --------------------------------------------------------------------------------
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
Since Since
Periods Ending October 31, 1996 1 Year 5 years Inception Inception
<S> <C> <C> <C> <C>
Lehman Brothers Aggregate Bond Index* 5.85% 7.70% 8.38% 55.65%
50%/50% Composite* 5.70% 8.30% 8.86% 59.59%
Investment Quality Bond Fund Class A (at net asset value) 4.52% 7.08% 7.77% 50.93%
Investment Quality Bond Fund Class A (net of 4.75% sales charge) -0.45% 6.04% 6.82% 43.76%
Investment Quality Bond Fund Class B (at net asset value) 3.92% 6.75% 7.47% 48.63%
Investment Quality Bond Fund Class B (net of CDSC**) -1.08% 6.44% 7.34% 47.63%
Investment Quality Bond Fund Class C (at net asset value) 3.92% 6.75% 7.47% 48.63%
Investment Quality Bond Fund Class C (net of CDSC***) 2.92% 6.75% 7.47% 48.63%
</TABLE>
* All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
+ Comprised of 50% of the return of the Lehman Brothers Corporate Bond Index
and 50% of the return of the Lehman Brothers Government Bond Index.
** The returns reflect the applicable sliding Contingent Deferred Sales Charge
of 5%, 5%, 4%, 3%, 2%, 1%.
*** The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
PORTFOLIO MANAGER'S COMMENTARY
Over the last twelve months the Federal Reserve lowered short-term interest
rates and money market fund rates declined. In contrast, longer term interest
rates rose as investors factored in a stronger-than-expected economy. For the
fiscal year ended October 31, 1996, the Fund returned 4.52% on a net basis
compared to 5.85% for the Lehman Aggregate Bond Index. The Fund operates with a
slightly longer duration than this Lehman index, and therefore is more sensitive
to interest rate changes in both directions. Since longer term interest rates
rose over the period, the Fund experienced a slightly larger principal loss than
the index.
There have been two major themes in the bond market over the past three years.
First, bonds have been very volatile, trading within a range from below 6% to
above 8% and reacting swiftly and sharply to relevant economic news releases. At
this time it is difficult to forecast a reduction in this bond market
volatility. Second, investors have been purchasing large quantities of A-rated
corporate bonds, thereby lowering their incremental yield premium over
Treasuries from approximately 70 basis points to 60 basis points. We believe
this move to corporate bonds foreshadows a period of underperformance which will
be triggered by the first hint of economic weakness. We have not purchased 50-
100 year bonds, which we believe are positive for issuers but not for bond
investors, and will attempt to manage as high a quality profile as possible
given the risk/reward tradeoff.
xiii
<PAGE>
U.S. GOVERNMENT SECURITIES FUND
INVESTMENT OBJECTIVE: To seek a high level of current income consistent with
preservation of capital and maintenance of liquidity by
investing in securities issued or guaranteed by the U.S.
Government, its agencies, or instrumentalities.
SUBADVISOR: Salomon Brothers Asset Management Inc
PORTFOLIO MANAGER: Steven Guterman
INCEPTION DATE: August 28, 1989#
Change in Value of $10,000 Investment and Comparative Indices
[CHART APPEARS HERE]
- --------------------------------------------------------------------------------
A line graph showing the growth (including reinvestment of dividends and capital
gains) of a $10,000 investment in North American Funds' U.S. Government
Securities Fund Class A shares at net asset value on August 28, 1989 through
October 31, 1996, as compared with the growth of a $10,000 investment in the
Merrill Lynch 1-10 Year Government Index over the same period. The graph also
depicts the growth of a $10,000 investment in Class A shares of the U.S.
Government Securities Fund on August 28, 1989 through October 31, 1996, assuming
the deduction of the maximum 4.75% front-end sales charge at the time of the
initial investment and reinvestment of dividends and capital gains at net asset
value. The following are the plot points used to draw this line graph.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth of $10,000 Invested in Growth of $10,000 Invested in Growth of $10,000
Class A shares at Net Asset Value Class A shares with 4.75% charge Investment in the Merrill Lynch
Month Ended of the U.S. Gov't Securities Fund of the U.S. Gov't Securities Fund 1-10 Year Government Index
<S> <C> <C> <C>
Jul-89 $10,000 $9,525 $10,000
Aug-89 $9,979 $9,505 $10,000
Sep-89 $9,995 $9,520 $10,050
Oct-89 $10,166 $9,683 $10,256
Nov-89 $10,255 $9,767 $10,357
Dec-89 $10,302 $9,812 $10,383
Jan-90 $10,201 $9,716 $10,324
Feb-90 $10,227 $9,742 $10,349
Mar-90 $10,233 $9,747 $10,370
Apr-90 $10,162 $9,680 $10,334
May-90 $10,386 $9,892 $10,552
Jun-90 $10,523 $10,024 $10,690
Jul-90 $10,662 $10,155 $10,843
Aug-90 $10,557 $10,055 $10,796
Sep-90 $10,638 $10,133 $10,894
Oct-90 $10,765 $10,254 $11,046
Nov-90 $10,984 $10,463 $11,211
Dec-90 $11,148 $10,619 $11,370
Jan-91 $11,290 $10,754 $11,485
Feb-91 $11,362 $10,823 $11,545
Mar-91 $11,424 $10,881 $11,608
Apr-91 $11,545 $10,997 $11,728
May-91 $11,614 $11,062 $11,795
Jun-91 $11,611 $11,060 $11,807
Jul-91 $11,789 $11,229 $11,934
Aug-91 $11,969 $11,400 $12,157
Sep-91 $12,149 $11,572 $12,364
Oct-91 $12,258 $11,675 $12,504
Nov-91 $12,366 $11,779 $12,651
Dec-91 $12,638 $12,038 $12,960
Jan-92 $12,490 $11,897 $12,829
Feb-92 $12,570 $11,973 $12,878
Mar-92 $12,471 $11,879 $12,825
Apr-92 $12,624 $12,024 $12,942
May-92 $12,816 $12,207 $13,127
Jun-92 $13,009 $12,391 $13,317
Jul-92 $13,242 $12,613 $13,564
Aug-92 $13,369 $12,734 $13,721
Sep-92 $13,550 $12,907 $13,911
Oct-92 $13,379 $12,744 $13,740
Nov-92 $13,314 $12,681 $13,679
Dec-92 $13,476 $12,836 $13,859
Jan-93 $13,714 $13,063 $14,118
Feb-93 $13,886 $13,227 $14,329
Mar-93 $14,004 $13,339 $14,383
Apr-93 $14,089 $13,420 $14,497
May-93 $14,037 $13,370 $14,454
Jun-93 $14,246 $13,569 $14,661
Jul-93 $14,290 $13,612 $14,691
Aug-93 $14,474 $13,786 $14,916
Sep-93 $14,518 $13,829 $14,980
Oct-93 $14,535 $13,845 $15,006
Nov-93 $14,454 $13,767 $14,934
Dec-93 $14,505 $13,816 $14,992
Jan-94 $14,638 $13,943 $15,142
Feb-94 $14,438 $13,752 $14,927
Mar-94 $14,266 $13,588 $14,718
Apr-94 $14,269 $13,591 $14,618
May-94 $14,257 $13,580 $14,633
Jun-94 $14,231 $13,555 $14,643
Jul-94 $14,396 $13,712 $14,825
Aug-94 $14,444 $13,758 $14,871
Sep-94 $14,268 $13,590 $14,752
Oct-94 $14,226 $13,550 $14,755
Nov-94 $14,190 $13,516 $14,681
Dec-94 $14,274 $13,596 $14,737
Jan-95 $14,512 $13,823 $14,981
Feb-95 $14,812 $14,109 $15,268
Mar-95 $14,899 $14,191 $15,352
Apr-95 $15,063 $14,348 $15,528
May-95 $15,618 $14,876 $15,972
Jun-95 $15,706 $14,960 $16,076
Jul-95 $15,652 $14,909 $16,087
Aug-95 $15,805 $15,054 $16,219
Sep-95 $15,910 $15,154 $16,328
Oct-95 $16,096 $15,331 $16,514
Nov-95 $16,283 $15,510 $16,717
Dec-95 $16,455 $15,673 $16,887
Jan-96 $16,563 $15,776 $17,032
Feb-96 $16,310 $15,535 $16,841
Mar-96 $16,188 $15,419 $16,760
Apr-96 $16,132 $15,365 $16,708
May-96 $16,062 $15,299 $16,698
Jun-96 $16,243 $15,471 $16,862
Jul-96 $16,273 $15,500 $16,914
Aug-96 $16,287 $15,513 $16,932
Sep-96 $16,538 $15,753 $17,147
Oct-96 $16,843 $16,043 $17,426
</TABLE>
- --------------------------------------------------------------------------------
The Merrill Lynch 1-10 Year Government Index consists of all those issues in the
Government Master Index with a maturity greater than or equal to one year and
less than or equal to ten years. When an issue no longer meets the maturity
criteria, it is dropped from the index.
Index information is available on a month-end basis only, therefore the closest
month-end to the inception date of the fund has been used.
- --------------------------------------------------------------------------------
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Cumulative
Average Annual Total Return Total Return
Since Since# Since Since#
Periods Ending October 31, 1996 1 Year 5 years Inception Dec 13, 1991 Inception Dec 13, 1991
<S> <C> <C> <C> <C> <C> <C>
Merrill Lynch 1-10 Year
Government Index* 5.53% 6.86% 8.06% 6.73% 74.26% 37.75%
U.S. Government
Securities Fund Class A
(at net asset value) 4.64% 6.56% 7.54% 6.37% 68.43% 35.23%
U.S. Government
Securities Fund Class A
(net of 4.75% sales
charge) -0.33% 5.53% 6.81% 5.32% 60.43% 28.83%
U.S. Government
Securities Fund Class B
(at net asset value) 3.97% 6.23% 7.30% 6.03% 65.80% 33.12%
U.S. Government
Securities Fund Class B
(net of CDSC**) -1.03% 5.91% 7.30% 5.70% 65.80% 31.12%
U.S. Government
Securities Fund Class C
(at net asset value) 3.97% 6.23% 7.30% 6.03% 65.80% 33.12%
U.S. Government
Securities Fund Class C
(net of CDSC***) 2.97% 6.23% 7.30% 6.03% 65.80% 33.12%
</TABLE>
* All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
** The returns reflect the applicable sliding Contingent Deferred Sales Charge
of 5%, 5%, 4%, 3%, 2%, 1%.
*** The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
# Current investment manager (subadvisor) assignment became effective
12/13/91.
PORTFOLIO MANAGER'S COMMENTARY
The fixed income markets closed 1995 on a positive note as a combination of
moderate economic growth and benign inflation data helped lift bond prices
across the yield curve. The Federal Reserve reduced short-term interest rates
by 25 basis points on December 19, 1995 and then again in January, 1996.
However, the markets faced a deluge of supply in February. This coupled with
strong employment data and comments from Federal Reserve Chairman Greenspan
that implied that further easing was unnecessary drove bond prices down. As a
result, the interest rate sensitivity of the Fund was reduced in anticipation
of further declines in the bond market in the near term. We also added to the
Fund's allocation to mortgage-backed securities as we believed that prepayment
fears had subsided and market sentiment for the sector improved as higher
interest rates ensued. This allocation was maintained through October, 1996 as
Federal Reserve policy remained on hold and economic data indicated modest
growth.
xiv
<PAGE>
NATIONAL MUNICIPAL BOND FUND
INVESTMENT OBJECTIVE: To seek a high level of current income which is exempt
from regular federal income taxes, consistent with the
preservation of capital, by investing primarily in a
portfolio of municipal obligations. The portfolio will not
invest in municipal obligations that are rated below
investment grade at the time of purchase.
SUBADVISOR: Salomon Brothers Asset Management Inc
PORTFOLIO MANAGER: MaryBeth Whyte
INCEPTION DATE: July 6, 1993
Change in Value of $10,000 Investment and Comparative Indices
[CHART APPEARS HERE]
- --------------------------------------------------------------------------------
A line graph showing the growth (including reinvestment of dividends and capital
gains) of a $10,000 investment in North American Funds' National Municipal Bond
Fund Class A shares at net asset value on July 6, 1993 through October 31, 1996,
as compared with the growth of a $10,000 investment in the Lehman Brothers
Municipal Bond Index over the same period. The graph also depicts the growth of
a $10,000 investment in Class A shares of the National Municipal Bond Fund on
July 6, 1993 through October 31, 1996, assuming the deduction of the maximum
4.75% front-end sales charge at the time of the initial investment and
reinvestment of dividends and capital gains at net asset value. The following
are the plot points used to draw this line graph.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth of $10,000 Invested in Growth of $10,000 Invested in Growth of $10,000
Class A shares at Net Asset Value Class A shares with 4.75% charge Investment in the Lehman Bros.
Month Ended of the National Muni Fund of the National Muni Fund Municipal Bond Index
<S> <C> <C> <C>
Jun-93 $10,000 $9,525 $10,000
Jul-93 $10,020 $9,544 $10,013
Aug-93 $10,261 $9,774 $10,221
Sep-93 $10,373 $9,881 $10,338
Oct-93 $10,417 $9,922 $10,358
Nov-93 $10,300 $9,811 $10,266
Dec-93 $10,457 $9,960 $10,483
Jan-94 $10,616 $10,112 $10,603
Feb-94 $10,302 $9,813 $10,328
Mar-94 $9,665 $9,206 $9,908
Apr-94 $9,742 $9,280 $9,992
May-94 $9,839 $9,372 $10,078
Jun-94 $9,756 $9,293 $10,020
Jul-94 $9,944 $9,472 $10,200
Aug-94 $9,943 $9,471 $10,236
Sep-94 $9,709 $9,248 $10,086
Oct-94 $9,454 $9,005 $9,907
Nov-94 $9,158 $8,723 $9,727
Dec-94 $9,494 $9,043 $9,945
Jan-95 $9,766 $9,302 $10,226
Feb-95 $10,106 $9,626 $10,523
Mar-95 $10,195 $9,711 $10,644
Apr-95 $10,209 $9,724 $10,656
May-95 $10,587 $10,085 $10,996
Jun-95 $10,435 $9,939 $10,900
Jun-95 $10,514 $10,015 $11,003
Aug-95 $10,649 $10,143 $11,143
Sep-95 $10,717 $10,208 $11,214
Oct-95 $10,897 $10,380 $11,377
Nov-95 $11,147 $10,618 $11,566
Dec-95 $11,273 $10,737 $11,677
Jan-96 $11,307 $10,770 $11,765
Feb-96 $11,227 $10,694 $11,685
Mar-96 $11,055 $10,530 $11,536
Apr-96 $10,998 $10,475 $11,503
May-96 $11,009 $10,486 $11,499
Jun-96 $11,149 $10,619 $11,624
Jul-96 $11,242 $10,708 $11,729
Aug-96 $11,254 $10,719 $11,727
Sep-96 $11,443 $10,899 $11,891
Oct-96 $11,585 $11,035 $12,025
</TABLE>
- --------------------------------------------------------------------------------
The Lehman Brothers Municipal Bond is intended to be a benchmark for the
long-term, investment-grade tax-exempt bond market. The index consists of
approximately 21,000 municipal bonds which are priced by Muller Data
Corporation. The bonds must have a minimum credit rating of at least Baa, been
issued within the last five years and as part of a deal of at least $50 million,
have a maturity of at least one year and an amount outstanding of at least $3
million. Bonds subject to the Alternative Minimum Tax and bonds with floating or
zero coupons are excluded.
Index information is available on a month-end basis only, therefore the closest
month-end to the inception date of the fund has been used.
- --------------------------------------------------------------------------------
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
Since Since
Periods Ending October 31, 1996 1 Year Inception Inception
<S> <C> <C> <C>
Lehman Brothers Municipal Long Bond Index* 5.70% 5.69% 20.25%
National Municipal Bond Fund Class A (at net
asset value) 6.31% 4.54% 15.85%
National Municipal Bond Fund Class A (net of
4.75% sales charge) 1.26% 3.01% 10.35%
National Municipal Bond Fund Class B (at net
asset value) 5.41% 3.88% 13.45%
National Municipal Bond Fund Class B (net of
CDSC**) 0.41% 3.04% 10.45%
National Municipal Bond Fund Class C (at net
asset value) 5.41% 3.88% 13.44%
National Municipal Bond Fund Class C (net of
CDSC***) 4.41% 3.88% 13.44%
</TABLE>
* All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
** The returns reflect the applicable sliding Contingent Deferred Sales Charge
of 5%, 5%, 4%, 3%, 2%, 1%.
*** The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
PORTFOLIO MANAGER'S COMMENTARY
The NAF National Municipal Bond Fund returned 6.31% for the year ending
10/31/96. This compared favorably with the Lehman Brothers Municipal Long Bond
Index average which returned 5.70% for the same period. The year began on a
strong note for municipals as a combination of moderate economic growth and
benign inflation carried bond prices to yearly highs. The rally took place
despite a dramatic pick up in new issue volume during the first quarter. Strong
technicals, portfolio restructuring and the declining prospects of the flat tax
all helped to absorb over $40 billion of new municipals. The rally was derailed
in March when a much higher than anticipated increase in employment caused bond
prices to fall. Fixed-income prices faltered for the balance of the quarter, but
the decline for municipals was not as dramatic as the taxable market. Tax-
exempts were able to temper their losses as individual investors returned to the
market attracted by higher yields. Further support was lent by insurance
companies who were major buyers of municipals due to their continued
profitability. Results for fixed-income securities returned to profitability in
the third quarter as renewed doubts over the strength of the economy reversed
the downward trend for bonds. Positive supply and demand factors allowed
municipals to outperform taxables over this time period. However, the better
showing by municipals left them trading at near historically rich percentages to
Treasuries. The fixed-income rally was sustained in the fourth quarter when a
decision by the Federal Reserve not to raise short-term interest rates lifted
the market. Nonetheless, municipal gains were muted due to their unfavorable
relationship to the taxable market.
Looking ahead, municipal new issuance is expected to be robust through the first
half of December before quieting down for the holidays. Tax-exempts are likely
to underperform taxables through the balance of the year, but may catch up in
January. Typically, in January a light new issue calendar combines with an
influx of cash from maturities and coupon payments to create a supply/demand
imbalance. This occurrence, known as the "January Effect", has often resulted in
a scramble for municipals the first weeks of the new year. Market pundits also
estimate that total new issue volume for 1997 should be moderately higher than
the $160 billion mark of 1996.
xv
<PAGE>
Report of Independent Accountants Annual Report
- --------------------------------------------------------------------------------
To the Trustees and Shareholders of North American Funds:
We have audited the accompanying statements of assets and liabilities of North
American Funds (the "Funds") (comprising, the Small/Mid Cap, International Small
Cap, Growth Equity, Global Equity (formerly Global Growth), Value Equity
(formerly Growth), Growth and Income, International Growth and Income, Balanced
(formerly Asset Allocation), Strategic Income, Investment Quality Bond, U.S.
Government Securities, National Municipal Bond and Money Market Funds),
including the portfolios of investments, as of October 31, 1996, the related
statements of operations, the statements of changes in net assets and the
financial highlights for each of the periods indicated therein. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1996 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentations. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the portfolios comprising the North American Funds as of October 31, 1996,
the results of their operations, the changes in their net assets and the
financial highlights for each of the periods indicated therein, in conformity
with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
December 20, 1996
1
<PAGE>
NORTH AMERICAN FUNDS
STATEMENTS OF ASSETS AND LIABILITIES - OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International
Small/Mid Cap Small Cap Growth Equity Global Equity
Fund Fund Fund Fund
---------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at value* (Includes
repurchase agreements of $2,528,000 and $1,871,000
in the International Small Cap and Growth Equity
Funds, respectively) (See accompanying portfolio of
investments)...................................... $17,566,949 $12,514,544 $13,279,520 $111,570,121
Receivable for forward foreign currency contracts to
sell (Notes 2 and 7).............................. ---- 126,897 ---- ----
Forward foreign currency contracts to buy, at value
(Cost: $285,122 and $1,518,819 in the International
Small Cap and Global Equity Funds, respectively)
(Notes 2 and 7)................................... ---- 287,599 ---- 1,516,911
Cash................................................ 4 170,949 529 278
Foreign currency (Cost: $30,312, $1,158 and $7,096,918
in the International Small Cap, Growth Equity and
Global Equity Funds, respectively)................ ---- 30,326 1,165 7,031,546
Receivables:
Investments sold.............................. 86,528 126,906 135,475 219,900
Fund shares sold.............................. 418,234 145,259 467,993 143,590
Dividends..................................... 1,241 10,602 43,781 194,174
Interest...................................... 3,774 333 247 137
Foreign tax withholding reclaim............... ---- 3,284 4 64,802
From adviser (Note 5)......................... 9,257 2,625 1,761 2,470
Other assets........................................ 16,570 16,384 15,869 14,140
----------- ----------- ----------- ------------
Total assets............................. 18,102,557 13,435,708 13,946,344 120,758,069
----------- ----------- ----------- ------------
LIABILITIES
Forward foreign currency contracts to sell, at value
(Cost: $126,897) (Notes 2 and 7).................. ---- 126,906 ---- ----
Payables:
Forward foreign currency contracts to buy
(Notes 2 and 7)............................. ---- 285,122 ---- 1,518,819
Investments purchased......................... 204,572 288,843 437,601 2,415,886
Fund shares redeemed.......................... ---- 4,970 1,785 198,580
Dividend and interest withholding tax......... ---- 1,712 66 15,087
Investment adviser............................ 13,946 10,918 9,808 90,601
Custodian and transfer agent fees............. 12,079 8,776 7,398 43,212
Other accrued expenses........................ 5,875 3,789 3,640 60,958
----------- ----------- ----------- ------------
Total liabilities........................ 236,472 731,036 460,298 4,343,143
----------- ----------- ----------- ------------
NET ASSETS.......................................... $17,866,085 $12,704,672 $13,486,046 $116,414,926
=========== =========== =========== ============
Net assets consist of:
Accumulated undistributed net investment
income (loss) (Note 2)...................... ---- $4,522 $240,392 ($256,903)
Accumulated undistributed net realized gain
(loss) on investments....................... ($771,607) (58,234) (426,568) 12,643,301
Unrealized appreciation (depreciation) on:
Investments................................. 596,162 359,247 703,285 (798,731)
Foreign currency and forward foreign currency
contracts................................. ---- 222 12 (80,065)
Capital shares at par value of $.001 (Note 3). 1,419 950 982 8,075
Additional paid-in capital.................... 18,040,111 12,397,965 12,967,943 104,899,249
----------- ----------- ----------- ------------
Net assets............................... $17,866,085 $12,704,672 $13,486,046 $116,414,926
=========== =========== =========== ============
*Investments in securities, at identified
cost (Note 2)............................. $16,970,787 $12,155,297 $12,576,235 $112,368,852
=========== =========== =========== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
NORTH AMERICAN FUNDS
STATEMENTS OF ASSETS AND LIABILITIES continued- OCTOBER 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International
Small/Mid Cap Small Cap Growth Equity Global Equity
Fund Fund Fund Fund
---------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
NET ASSET VALUES
Class A Shares
Net assets at value............................... $2,965,850 $2,120,184 $2,244,023 $25,924,117
Shares outstanding................................ 234,954 157,851 162,826 1,788,038
Net asset value (NAV) and redemption price per
share.............................................. $12.62 $13.43 $13.78 $14.50
------ ------ ------ ------
Public offering price per share (100/95.25 of NAV)
On sales of $100,000 or more the offering price
is reduced........................................ $13.25 $14.10 $14.47 $15.22
------ ------ ------ ------
Class B Shares
Net assets at value............................... $6,658,807 $5,067,948 $4,748,277 $25,661,317
Shares outstanding................................ 529,111 378,970 345,868 1,786,687
Net asset value, offering price and redemption
price per share................................... $12.58 $13.37 $13.73 $14.36
------ ------ ------ ------
Class C Shares
Net assets at value............................... $8,241,428 $5,516,540 $6,493,746 $64,829,492
Shares outstanding................................ 654,464 412,466 472,932 4,500,203
Net asset value, offering price and redemption
price per share................................... $12.59 $13.37 $13.73 $14.41
------ ------ ------ ------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
NORTH AMERICAN FUNDS
STATEMENTS OF ASSETS AND LIABILITIES - OCTOBER 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value International
Equity Growth and Growth and Balanced
Fund Income Fund Income Fund Fund
---------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at value* (See accompanying
portfolio of investments)......................... $139,653,436 $127,361,334 $28,480,817 $102,351,482
Receivable for forward foreign currency contracts to sell
(Notes 2 and 7)................................... ------ ------ 6,336,393 ------
Forward foreign currency contracts to buy, at value
(Cost: $2,635,577) (Notes 2 and 7)................ ------ ------ 2,631,199 ------
Cash................................................ 55,615 80 72,120 11,483
Foreign currency (Cost: $1,818 and $127,146 in the
Growth and Income and International Growth and
Income Funds, respectively)....................... ------ 1,693 127,283 ------
Receivables:
Investments sold.............................. 589,858 2,127,750 326,422 ------
Fund shares sold.............................. 220,733 139,768 125,663 69,794
Dividends..................................... 223,588 231,875 55,141 39,547
Interest...................................... ------ 216 115,512 422,179
Foreign tax withholding reclaim............... ------ ------ 40,271 ------
From adviser (Note 5)......................... ------ 8,585 2,273 1,005
Deferred organization expenses (Note 2)............. ------ ------ 5,184 ------
Other assets........................................ 16,869 15,274 8,325 15,282
------------ ------------ ----------- ------------
Total assets............................. 140,760,099 129,886,575 38,326,603 102,910,772
------------ ------------ ----------- ------------
LIABILITIES
Forward foreign currency contracts to sell, at value
(Cost: $6,336,393) (Notes 2 and 7)................ ------ ------ 6,242,128 ------
Payables:
Forward foreign currency contracts to buy
(Notes 2 and 7)............................. ------ ------ 2,635,577 ------
Investments purchased......................... 1,030,978 1,680,225 327,954 2,803,420
Fund shares redeemed.......................... 158,382 211,604 41,419 62,260
Dividend and interest withholding tax......... ------ 1,981 8,783 1,594
Investment adviser............................ 89,670 74,609 22,140 58,106
Custodian and transfer agent fees............. 39,147 29,937 11,490 26,680
Other accrued expenses........................ 58,736 51,450 11,958 45,243
------------ ------------ ----------- ------------
Total liabilities........................ 1,376,913 2,049,806 9,301,449 2,997,303
------------ ------------ ----------- ------------
NET ASSETS.......................................... $139,383,186 $127,836,769 $29,025,154 $99,913,469
============ ============ =========== ============
Net assets consist of:
Accumulated undistributed net investment
income (loss) (Note 2)...................... $454,658 $270,481 $263,235 $2,461,605
Accumulated undistributed net realized gain
on investments.............................. 28,952,740 7,687,354 1,939,578 9,227,246
Unrealized appreciation (depreciation) on:
Investments................................. 2,144,936 26,351,956 620,876 7,575,355
Foreign currency and forward foreign currency
contracts................................. ------ (125) 91,019 153
Capital shares at par value of $.001 (Note 3). 8,066 7,288 2,566 8,101
Additional paid-in capital.................... 107,822,786 93,519,815 26,107,880 80,641,009
------------ ------------ ----------- ------------
Net assets............................... $139,383,186 $127,836,769 $29,025,154 $99,913,469
============ ============ =========== ============
*Investments in securities, at identified cost (Note 2) $137,508,500 $101,009,378 $27,859,941 $94,776,127
============ ============ =========== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
NORTH AMERICAN FUNDS
STATEMENTS OF ASSETS AND LIABILITIES continued - OCTOBER 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value International
Equity Growth and Growth and Balanced
Fund Income Fund Income Fund Fund
---------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
NET ASSET VALUES
Class A Shares
Net assets at value............................... $28,470,030 $18,271,820 $4,732,428 $10,872,866
Shares outstanding................................ 1,638,828 1,040,832 416,908 881,735
Net asset value (NAV) and redemption price per share $17.37 $17.56 $11.35 $12.33
------ ------ ------ ------
Public offering price per share (100/95.25 of NAV)
On sales of $100,000 or more the offering price
is reduced........................................ $18.24 $18.44 $11.92 $12.94
------ ------ ------ ------
Class B Shares
Net assets at value............................... $27,058,047 $34,740,191 $15,217,086 $16,219,131
Shares outstanding................................ 1,571,748 1,985,111 1,346,082 1,322,501
Net asset value, offering price and redemption
price per share................................... $17.22 $17.50 $11.30 $12.26
------ ------ ------ ------
Class C Shares
Net assets at value............................... $83,855,109 $74,824,758 $9,075,640 $72,821,472
Shares outstanding................................ 4,854,997 4,261,109 802,784 5,896,688
Net asset value, offering price and redemption
price per share................................... $17.27 $17.56 $11.31 $12.35
------ ------ ------ ------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
NORTH AMERICAN FUNDS
STATEMENTS OF ASSETS AND LIABILITIES - OCTOBER 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment U.S. National
Strategic Quality Government Municipal
Income Bond Securities Bond Money Market
Fund Fund Fund Fund Fund
-------------- -------------- -------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at value* (Includes
repurchase agreements of $17,719,000 and
$17,719,000 in the U.S. Government Securities
Fund) (See accompanying portfolio of
investments)...................................... $66,650,975 $20,834,493 $147,582,827 $19,549,903 $21,950,653
Receivable for forward foreign currency contracts to
sell (Notes 2 and 7).............................. 4,570,572 ---- ---- ---- ----
Forward foreign currency contracts to buy, at value
(Cost: $2,589,313) (Notes 2 and 7)................ 2,586,569 ---- ---- ---- ----
Cash................................................ 36,486 17,026 2,644 59,163 1,219
Foreign currency (Cost: $36)........................ 38 ---- ---- ---- ----
Receivables:
Investments sold.............................. 1,006,279 464,852 28,800,961 ---- ----
Fund shares sold.............................. 375,726 10,170 50,652 160,872 230,167
Dividends..................................... 867 ---- ---- ---- ----
Interest...................................... 1,224,478 393,074 651,932 316,144 15,163
From adviser (Note 5)......................... ---- 1,949 35,443 2,340 8,021
Deferred organization expenses (Note 2)............. 5,025 ---- ---- 4,375 ----
Other assets........................................ 14,933 9,014 12,851 5,951 14,966
----------- ----------- ------------ ----------- -----------
Total assets............................. 76,471,948 21,730,578 177,137,310 20,098,748 22,220,189
----------- ----------- ------------ ----------- -----------
LIABILITIES
Forward foreign currency contracts to sell, at value
(Cost: $4,570,572) (Notes 2 and 7)................ 4,620,143 ---- ---- ---- ----
Payables:
Forward foreign currency contracts to buy
(Notes 2 and 7)............................. 2,589,313 ---- ---- ---- ----
Investments purchased......................... 1,884,904 371,975 64,427,811 497,600 788,693
Fund shares redeemed.......................... 82,903 41,008 161,609 10,000 407,886
Dividends..................................... 153,536 14,035 155,797 29,871 8,466
Dividend and interest withholding tax......... 559 ---- ---- ---- ----
Investment adviser............................ 41,869 10,664 64,489 9,934 4,445
Custodian and transfer agent fees............. 14,924 6,340 22,378 8,915 11,261
Other accrued expenses........................ 27,422 9,802 52,949 8,975 10,309
Deferred mortgage dollar roll income................ 902 ---- 25,123 ---- ----
----------- ----------- ------------ ----------- -----------
Total liabilities........................ 9,416,475 453,824 64,910,156 565,295 1,231,060
----------- ----------- ------------ ----------- -----------
NET ASSETS.......................................... $67,055,473 $21,276,754 $112,227,154 $19,533,453 $20,989,129
=========== =========== ============ =========== ===========
Net assets consist of:
Accumulated undistributed net investment
income (loss) (Note 2)....................... $708,280 $24,735 ($383,354) ($569) ----
Accumulated undistributed net realized gain
(loss) on investments....................... 1,284,537 (560,604) (2,294,981) (425,240) ----
Unrealized appreciation (depreciation) on:
Investments................................. 1,107,614 159,068 (218,179) 532,036 ----
Foreign currency and forward foreign
currency contracts........................ (52,239) ---- ---- ---- ----
Capital shares at par value of $.001 (Note 3). 6,840 2,059 11,450 2,007 $20,989
Additional paid-in capital.................... 64,000,441 21,651,496 115,112,218 19,425,219 20,968,140
----------- ----------- ------------ ----------- -----------
Net assets............................... $67,055,473 $21,276,754 $112,227,154 $19,533,453 $20,989,129
=========== =========== ============ =========== ===========
*Investments in securities, at identified cost
(Note 2)......................................... $65,543,361 $20,675,425 $147,801,006 $19,017,867 $21,950,653
=========== =========== ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
NORTH AMERICAN FUNDS
STATEMENTS OF ASSETS AND LIABILITIES continued - OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment U.S.
Quality Government National
Strategic Bond Securities Municipal Bond Money Market
Income Fund Fund Fund Fund Fund
--------------- -------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUES
Class A Shares
Net assets at value............................... $13,381,714 $9,056,178 $72,774,179 $7,710,387 $8,086,668
Shares outstanding................................ 1,364,948 875,794 7,425,475 792,318 8,086,668
Net asset value (NAV) and redemption price
per share $9.80 $10.34 $9.80 $9.73 $1.00
----- ------ ----- ----- -----
Public offering price per share (100/95.25 of NAV)
On sales of $100,000 or more the offering price
is reduced........................................ $10.29 $10.86 $10.29 $10.22 ---
----- ------ ----- ----- -----
Class B Shares
Net assets at value............................... $30,890,474 $4,677,736 $19,443,843 $6,129,958 $3,062,351
Shares outstanding................................ 3,151,002 452,815 1,983,872 629,916 3,062,351
Net asset value, offering price and redemption
price per share................................... $9.80 $10.33 $9.80 $9.73 $1.00
----- ------ ----- ----- -----
Class C Shares
Net assets at value............................... $22,783,285 $7,542,840 $20,009,132 $5,693,108 $9,840,110
Shares outstanding................................ 2,324,147 730,094 2,041,634 585,040 9,840,110
Net asset value, offering price and redemption
price per share................................... $9.80 $10.33 $9.80 $9.73 $1.00
----- ------ ----- ----- -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
NORTH AMERICAN FUNDS
STATEMENTS OF OPERATIONS - FOR THE YEAR ENDED OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International
Small/Mid Small Cap Growth Equity Global Equity
Cap Fund* Fund* Fund* Fund
---------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Investment Income:
Interest................................................... $74,250 $63,471 $37,347 $166,454
Dividends (Net of $195, $6,585, $555 and $181,306
withholding tax in the Small/Mid Cap, International
Small Cap, Growth Equity and Global Equity Funds,
respectively)............................................ 11,545 44,601 245,845 1,744,798
----------- ---------- ----------- ------------
Total income........................................ 85,795 108,072 283,192 1,911,252
----------- ---------- ----------- ------------
Expenses:
Distribution for Class A................................... 4,983 3,423 4,388 92,463
Distribution for Class B................................... 26,559 17,639 15,450 264,577
Distribution for Class C................................... 27,816 18,263 17,304 776,515
Investment adviser fee (Note 5)............................ 63,467 47,966 40,762 1,174,747
Custodian fee.............................................. 15,822 10,293 9,885 116,022
Transfer agent fee......................................... 30,594 20,207 16,619 285,425
Accounting/administration.................................. 11,178 7,240 7,075 233,745
Audit and legal fees....................................... 3,614 2,359 2,278 53,859
Miscellaneous.............................................. 19,709 19,581 18,614 61,281
----------- ---------- ----------- ------------
Expenses before reimbursement
by investment adviser.................................... 203,742 146,971 132,375 3,058,634
Reimbursement of expenses by
investment adviser (Note 5).............................. 53,449 36,767 36,356 85,386
----------- ---------- ----------- ------------
Net expenses........................................ 150,293 110,204 96,019 2,973,248
----------- ---------- ----------- ------------
Net investment income (loss)........................ (64,498) (2,132) 187,173 (1,061,996)
----------- ---------- ----------- ------------
Realized and unrealized gain (loss) on investments and
foreign currency:
Net realized gain (loss) on:
Investment transactions.................................. (771,607) (62,589) (423,274) 20,253,188
Foreign currency and forward foreign
currency contracts..................................... ------ (2,661) (4,508) (2,845,571)
Change in unrealized appreciation (depreciation) on:
Investments.............................................. 596,162 359,247 703,285 (8,931,531)
Translation of foreign currency and forward
foreign currency contracts............................. ------ 222 12 384,459
----------- ---------- ----------- ------------
Net gain (loss) on investments and
foreign currency.................................. (175,445) 294,219 275,515 8,860,545
----------- ---------- ----------- ------------
Net increase (decrease) in net assets
resulting from operations.................................... ($239,943) $292,087 $462,688 $7,798,549
=========== ========== =========== ============
</TABLE>
* For the period March 4, 1996 (commencement
of operations) to October 31, 1996.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
NORTH AMERICAN FUNDS
STATEMENTS OF OPERATIONS - FOR THE YEAR ENDED OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value International
Equity Growth and Growth and Balanced
Fund Income Fund Income Fund Fund
-------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Investment Income:
Interest (Net of $1,444 and $1,687 withholding tax
in the International Growth and Income and
Balanced Funds, respectively)...................... $419,617 $171,438 $222,679 $3,529,754
Dividends (Net of $2,226, $14,199, $75,605 and
$543 withholding tax in the Value Equity, Growth
and Income, International Growth and Income and
Balanced Funds, respectively)...................... 2,714,831 2,577,625 533,059 1,256,701
----------- ----------- ---------- -----------
Total income.................................. 3,134,448 2,749,063 755,738 4,786,455
----------- ----------- ---------- -----------
Expenses:
Distribution for Class A............................. 90,493 52,788 18,796 37,745
Distribution for Class B............................. 243,765 280,833 128,706 132,045
Distribution for Class C............................. 847,265 694,153 80,388 787,578
Investment adviser fee (Note 5)...................... 936,036 784,990 236,517 718,609
Custodian fee........................................ 54,133 48,632 36,024 44,649
Transfer agent fee................................... 288,827 226,998 66,887 186,807
Accounting/administration............................ 235,995 193,803 44,219 182,453
Audit and legal fees................................. 52,289 43,865 10,284 40,102
Amortization of deferred organization expenses
(Note 2)........................................... ---- 627 1,093 ----
Miscellaneous........................................ 45,616 46,609 25,372 37,597
----------- ----------- ---------- -----------
Expenses before reimbursement
by investment adviser.............................. 2,794,419 2,373,298 648,286 2,167,585
Reimbursement of expenses by
investment adviser (Note 5)........................ 276,729 230,424 51,773 192,010
----------- ----------- ---------- -----------
Net expenses.................................. 2,517,690 2,142,874 596,513 1,975,575
----------- ----------- ---------- -----------
Net investment income......................... 616,758 606,189 159,225 2,810,880
----------- ----------- ---------- -----------
Realized and unrealized gain on investments,
futures and foreign currency:
Net realized gain (loss) on:
Investment transactions............................ 28,962,312 7,749,188 3,404,649 9,535,049
Futures contracts.................................. ---- ---- ---- (80,559)
Foreign currency and forward foreign
currency contracts............................... (6,379) (40,894) (986,073) (1,438)
Change in unrealized appreciation (depreciation) on:
Investments........................................ (6,846,565) 12,987,230 947,754 (344,241)
Futures contracts.................................. ---- ---- ---- 4,372
Translation of foreign currency and forward
foreign currency contracts....................... ---- 261 (284,107) 153
----------- ----------- ---------- -----------
Net gain on investments, futures
and foreign currency........................ 22,109,368 20,695,785 3,082,223 9,113,336
----------- ----------- ---------- -----------
Net increase in net assets
resulting from operations.............................. $22,726,126 $21,301,974 $3,241,448 $11,924,216
=========== =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
NORTH AMERICAN FUNDS
STATEMENTS OF OPERATIONS-FOR THE YEAR ENDED OCTOBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment U.S. National
Strategic Quality Government Municipal Money
Income Bond Securities Bond Market
Fund Fund Fund Fund Fund
---------------- -------------- -------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Investment Income:
Interest (Net of $1,440 withholding tax in the
Strategic Income Fund)........................ $5,435,110 $1,618,282 $8,041,807 $1,209,111 $1,057,116
----------- ----------- ------------ ----------- -----------
Expenses:
Distribution for Class A........................ 39,987 34,096 268,717 11,631 ------
Distribution for Class B........................ 263,335 44,719 186,537 61,124 ------
Distribution for Class C........................ 179,766 70,534 201,379 63,682 ------
Investment adviser fee (Note 5)................. 415,019 127,602 693,407 121,407 38,258
Custodian fee................................... 50,839 9,307 50,227 8,844 7,652
Transfer agent fee.............................. 91,637 50,845 183,036 22,757 65,888
Accounting/administration....................... 94,844 37,363 205,184 35,314 35,035
Audit and legal fees............................ 22,527 8,313 42,716 7,760 9,373
Amortization of deferred organization expenses
(Note 2)...................................... 2,522 623 ------ 2,522 ------
Miscellaneous................................... 32,122 25,203 41,369 34,274 32,184
----------- ----------- ------------ ----------- -----------
Expenses before reimbursement
by investment adviser......................... 1,192,598 408,605 1,872,572 369,315 188,390
Reimbursement of expenses by
investment adviser (Note 5)................... 70,527 68,031 178,182 62,877 92,710
----------- ----------- ------------ ----------- -----------
Net expenses............................. 1,122,071 340,574 1,694,390 306,438 95,680
----------- ----------- ------------ ----------- -----------
Net investment income.................... 4,313,039 1,277,708 6,347,417 902,673 961,436
----------- ----------- ------------ ----------- -----------
Realized and unrealized gain (loss) on investments
and foreign currency:
Net realized gain on:
Investment transactions....................... 2,401,213 137,744 692,635 51,281 ------
Foreign currency and forward foreign
currency contracts.......................... 80,533 ------ ------ ------ ------
Change in unrealized appreciation (depreciation)
on: Investments............................... 1,743,690 (529,084) (2,144,261) 134,956 ------
Translation of foreign currency and forward
foreign currency contracts.................. 56,961 ------ ------ ------ ------
----------- ----------- ------------ ----------- -----------
Net gain (loss) on investments and
foreign currency....................... 4,282,397 (391,340) (1,451,626) 186,237 ------
----------- ----------- ------------ ----------- -----------
Net increase in net assets
resulting from operations......................... $8,595,436 $886,368 $4,895,791 $1,088,910 $961,436
=========== =========== ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
NORTH AMERICAN FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Small/Mid Cap International Growth Equity
Fund Small Cap Fund Fund
----------------- ------------------- -------------------
03/04/96* 03/04/96* 03/04/96*
to to to
10/31/96 10/31/96 10/31/96
----------------- ------------------- -------------------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income (loss)........ ($64,498) ($2,132) $187,173
Net realized gain (loss) on:
Investment transactions........... (771,607) (62,589) (423,274)
Foreign currency and forward foreign
currency contracts.............. ------ (2,661) (4,508)
Change in unrealized appreciation
(depreciation) on:
Investments....................... 596,162 359,247 703,285
Foreign currency and forward foreign
currency contracts.............. ------ 222 12
--------------- ---------------- -----------------
Net increase (decrease) in net assets
resulting from operations............ (239,943) 292,087 462,688
Net equalization credits (charges) (Note 2) ------ 4,522 54,433
Distribution to shareholders from:
Net investment income
Class A........................... ------ ------ ------
Class B........................... ------ ------ ------
Class C........................... ------ ------ ------
Net realized gains on investments and
foreign currency transactions
Class A........................... ------ ------ ------
Class B........................... ------ ------ ------
Class C........................... ------ ------ ------
Increase (decrease) in net assets from
capital share transactions (Note 3).. 18,106,028 12,408,063 12,968,925
--------------- ---------------- -----------------
Increase (decrease) in net assets...... 17,866,085 12,704,672 13,486,046
Net assets at beginning of period...... ------ ------ ------
--------------- ---------------- -----------------
Net assets at end of period............ $17,866,085 $12,704,672 $13,486,046
=============== ================ =================
Accumulated undistributed net
investment income (loss)............. ------ $4,522 $240,392
=============== ================ =================
</TABLE>
<TABLE>
<CAPTION>
Global Equity Fund
(formerly, the
Global Growth Fund)
-------------------------------
Year Year
Ended Ended
10/31/96 10/31/95
--------------- ---------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income (loss)........ ($1,061,996) ($700,789)
Net realized gain (loss) on:
Investment transactions........... 20,253,188 (3,295,215)
Foreign currency and forward foreign
currency contracts.............. (2,845,571) 1,789,553
Change in unrealized appreciation
(depreciation) on:
Investments....................... (8,931,531) (2,565,015)
Foreign currency and forward foreign
currency contracts.............. 384,459 (137,518)
------------- --------------
Net increase (decrease) in net assets
resulting from operations............ 7,798,549 (4,908,984)
Net equalization credits (charges) (Note 2) (222,342) (34,561)
Distribution to shareholders from:
Net investment income
Class A........................... (370,905) -----
Class B........................... (247,709) -----
Class C........................... (588,999) -----
Net realized gains on investments and
foreign currency transactions
Class A........................... ----- (277,128)
Class B........................... ----- (2,291,951)
Class C........................... ----- (1,476,968)
Increase (decrease) in net assets from
capital share transactions (Note 3).. (20,505,106) 6,043,444
------------- --------------
Increase (decrease) in net assets...... (14,136,512) (2,946,148)
Net assets at beginning of period...... 130,551,438 133,497,586
------------- --------------
Net assets at end of period............ $116,414,926 $130,551,438
============= ==============
Accumulated undistributed net
investment income (loss)............. ($256,903) $1,556,196
============= ==============
</TABLE>
- --------------------------------
* Commencement of operations
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
NORTH AMERICAN FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value Equity Fund
(formerly, the Growth Fund) Growth and Income Fund
---------------------------- -------------------------------
Year Year Year Year
Ended Ended Ended Ended
10/31/96 10/31/95 10/31/96 10/31/95
------------- -------------- --------------- ---------------
Increase in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income............... $616,758 $281,091 $606,189 $977,895
Net realized gain (loss) on:
Investment transactions........... 28,962,312 10,219,108 7,749,188 716,372
Foreign currency and forward foreign
currency contracts.............. (6,379) ------ (40,894) 102,753
Change in unrealized appreciation
(depreciation) on:
Investments....................... (6,846,565) 3,234,064 12,987,230 9,980,846
Foreign currency and forward foreign
currency contracts.............. ------ ------ 261 (386)
------------ ------------- -------------- --------------
Net increase in net assets
resulting from operations............ 22,726,126 13,734,263 21,301,974 11,777,480
Net equalization credits (Note 2)...... 44,707 21,466 14,902 83,756
Distribution to shareholders from:
Net investment income
Class A........................... (216,448) ------ (186,049) (161,680)
Class B........................... (118,093) ------ (205,020) (104,194)
Class C........................... (187,978) ------ (430,616) (570,011)
Net realized gains on investments and
foreign currency transactions
Class A........................... (1,874,732) (890,547) (105,286) (193,161)
Class B........................... (1,711,898) (316,510) (184,505) (109,460)
Class C........................... (6,634,855) (3,831,715) (525,694) (1,083,890)
Increase in net assets from capital
share transactions (Note 3).......... 1,737,386 24,302,675 13,771,553 26,649,617
------------ ------------- ------------- --------------
Increase in net assets................. 13,764,215 33,019,632 33,451,259 36,288,457
Net assets at beginning of period...... 125,618,971 92,599,339 94,385,510 58,097,053
------------ ------------- ------------- --------------
Net assets at end of period............ $139,383,186 $125,618,971 $127,836,769 $94,385,510
============ ============= ============= ==============
Accumulated undistributed net
investment income (loss)............. $454,658 $322,091 $270,481 $452,599
============ ============= ============= ==============
</TABLE>
<TABLE>
<CAPTION>
International
Growth and Income Fund
-----------------------------
Year 1/09/95*
Ended to
10/31/96 10/31/95
-------------- --------------
Increase in net assets:
<S> <C> <C>
Operations:
Net investment income............... $159,225 $39,864
Net realized gain (loss) on:
Investment transactions........... 3,404,649 275,761
Foreign currency and forward foreign
currency contracts.............. (986,073) (260,048)
Change in unrealized appreciation
(depreciation) on:
Investments....................... 947,754 (326,878)
Foreign currency and forward foreign
currency contracts.............. (284,107) 375,126
------------- --------------
Net increase in net assets
resulting from operations............ 3,241,448 103,825
Net equalization credits (Note 2)...... 6,318 ------
Distribution to shareholders from:
Net investment income
Class A........................... (56,090) (14,446)
Class B........................... (52,389) (14,765)
Class C........................... (34,562) (12,260)
Net realized gains on investments and
foreign currency transactions
Class A........................... (75,054) ------
Class B........................... (104,218) ------
Class C........................... (73,099) ------
Increase in net assets from capital
share transactions (Note 3).......... 4,531,170 21,579,276
------------- --------------
Increase in net assets................. 7,383,524 21,641,630
Net assets at beginning of period...... 21,641,630 ------
============= ==============
$29,025,154 $21,641,630
============= ==============
Accumulated undistributed net
investment income (loss)............. $263,235 ($231,087)
============= ==============
</TABLE>
- ---------------------------------
* Commencement of operations
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
NORTH AMERICAN FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balanced Fund
(formerly, the
Asset Allocation Fund) Strategic Income Fund
----------------------------- ------------------------------
Year Year Year Year
Ended Ended Ended Ended
10/31/96 10/31/95 10/31/96 10/31/95
-------------- -------------- -------------- ---------------
Increase (decrease) in net assets:
<S> <C> <C> <C> <C>
Operations:
Net investment income............... $ 2,810,880 $ 2,757,769 $ 4,313,039 $ 2,961,902
Net realized gain (loss) on:
Investment transactions........... 9,535,049 6,529,806 2,401,213 264,926
Futures contracts................. (80,559) 2,303 ------ ------
Foreign currency and forward foreign
currency contracts.............. (1,438) ------ 80,533 (83,304)
Change in unrealized appreciation
(depreciation) on:
Investments....................... (344,241) 5,539,360 1,743,690 919,881
Futures contracts................. 4,372 (4,372) ------ ------
Foreign currency and forward foreign
currency contracts.............. 153 ------ 56,961 (109,134)
------------- ------------- ------------- --------------
Net increase in net assets
resulting from operations............ 11,924,216 14,824,866 8,595,436 3,954,271
Net equalization credits (charges) (Note 2) 7,941 (54,967) ------ ------
Distribution to shareholders from:
Net investment income
Class A........................... (342,751) (235,768) (944,160) (974,298)
Class B........................... (316,830) (110,719) (2,001,770) (1,054,898)
Class C........................... (2,066,083) (1,850,266) (1,367,107) (930,449)
Net realized gains on investments,
futures and foreign currency
transactions
Class A........................... (646,271) (362,509) ------ ------
Class B........................... (692,368) (237,460) ------ ------
Class C........................... (4,999,304) (3,967,004) ------ ------
Increase (decrease) in net assets from
capital share transactions (Note 3).. (3,488,924) (6,965,262) 17,786,584 14,605,227
------------- ------------- ------------- --------------
Increase (decrease) in net assets...... (620,374) 1,040,911 22,068,983 15,599,853
Net assets at beginning of period...... 100,533,843 99,492,932 44,986,490 29,386,637
------------- ------------- ------------- --------------
Net assets at end of period............ $ 99,913,469 $ 100,533,843 $ 67,055,473 $ 44,986,490
============= ============= ============= =============
Accumulated undistributed net
investment income (loss)............. $ 2,461,605 $ 2,141,058 $ 708,280 ($35,848)
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
Investment Quality Bond Fund
----------------------------
Year Year
Ended Ended
10/31/96 10/31/95
------------- -------------
Increase (decrease) in net assets:
<S> <C> <C>
Operations:
Net investment income............... $ 1,277,708 $ 1,065,675
Net realized gain (loss) on:
Investment transactions........... 137,744 24,835
Futures contracts................. ------ ------
Foreign currency and forward foreign
currency contracts.............. ------ ------
------------- --------------
Change in unrealized appreciation
(depreciation) on:
Investments....................... (529,084) 1,318,370
Futures contracts................. ------ ------
Foreign currency and forward foreign
currency contracts.............. ------ ------
Net increase in net assets
resulting from operations............ 886,368 2,408,880
Net equalization credits (charges) (Note 2) 3,940 20,893
Distribution to shareholders from:
Net investment income
Class A........................... (633,961) (701,998)
Class B........................... (264,717) (110,088)
Class C........................... (418,906) (255,000)
Net realized gains on investments,
futures and foreign currency
transactions
Class A........................... ------ ------
Class B........................... ------ ------
Class C........................... ------ ------
Increase (decrease) in net assets from
capital share transactions (Note 3).. 681,354 5,614,479
------------- --------------
Increase (decrease) in net assets...... 254,078 6,977,166
Net assets at beginning of period...... 21,022,676 14,045,510
------------- --------------
Net assets at end of period............ $ 21,276,754 $ 21,022,676
============= ==============
Accumulated undistributed net
investment income (loss)............. $ 24,735 $ 46,769
============= ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
NORTH AMERICAN FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. Government National Municipal
Securities Fund Bond Fund
---------------------------- ------------------------------
Year Year Year Year
Ended Ended Ended Ended
10/31/96 10/31/95 10/31/96 10/31/95
------------- -------------- -------------- ---------------
Increase (decrease) in net assets:
<S> <C> <C> <C> <C>
Operations:
Net investment income............... $ 6,347,417 $ 7,002,787 $ 902,673 $ 801,761
Net realized gain (loss) on
investment transactions........... 692,635 2,016,765 51,281 (451,322)
Change in unrealized appreciation
(depreciation) on investments...... (2,144,261) 4,354,862 134,956 1,830,370
-------------- ------------- ----------- -------------
Net increase in net assets
resulting from operations............ 4,895,791 13,374,414 1,088,910 2,180,809
Net equalization credits (charges) (Note 2) 5 (101,581) ------ ------
Distribution to shareholders from:
Net investment income
Class A........................... (4,374,305) (6,031,782) (386,541) (429,394)
Class B........................... (943,899) (421,002) (252,541) (188,030)
Class C........................... (1,029,213) (1,008,460) (263,588) (184,416)
Distribution to shareholders:
In excess of net investment income
Class A........................... (502,592) ------ ------ ------
Class B........................... (108,446) ------ ------ ------
Class C........................... (118,254) ------ ------ ------
Increase (decrease) in net assets from
capital share transactions (Note 3)... (949,834) (4,588,211) (980,922) 7,339,594
------------- ------------ ---------- -----------
Increase (decrease) in net assets...... (3,130,747) 1,223,378 (794,682) 8,718,563
Net assets at beginning of period...... 115,357,901 114,134,523 20,328,135 11,609,572
------------- ------------- ----------- -----------
Net assets at end of period............ $112,227,154 $115,357,901 $19,533,453 $20,328,135
------------- ------------- ----------- -----------
Accumulated undistributed net
investment loss...................... ($383,354) ($389,597) ($569) ($572)
------------- ------------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
Money Market Fund
-----------------------------
Year Year
Ended Ended
10/31/96 10/31/95
-------------- --------------
Increase (decrease) in net assets:
<S> <C> <C>
Operations:
Net investment income............... $ 961,436 $ 1,208,891
Net realized gain (loss) on
investment transactions........... ------ ------
Change in unrealized appreciation
(depreciation) on investments...... ------ ------
------------- ------------
Net increase in net assets
resulting from operations............ 961,436 1,208,891
Net equalization credits (charges) (Note 2) ------ ------
Distribution to shareholders from:
Net investment income
Class A........................... (405,871) (467,507)
Class B........................... (88,592) (88,435)
Class C........................... (466,973) (652,949)
Distribution to shareholders:
In excess of net investment income
Class A........................... ------ ------
Class B........................... ------ ------
Class C........................... ------ ------
Increase (decrease) in net assets from
capital share transactions (Note 3)... (1,348,319) 1,356,401
------------- ------------
Increase (decrease) in net assets...... (1,348,319) 1,356,401
Net assets at beginning of period...... 22,337,448 20,981,047
Net assets at end of period............ $20,989,129 $22,337,448
------------- ------------
Accumulated undistributed net
investment loss...................... ------ ------
------------- ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Small/Mid Cap Fund
---------------------------------------------------------------------
03/04/96* 03/04/96* 03/04/96*
to to to
10/31/96 10/31/96 10/31/96
Class A Class B Class C
------------------- -------------------- --------------------
<S> <C> <C> <C>
Net asset value, beginning of period............. $12.50 $12.50 $12.50
Income (loss) from investment operations:
- ----------------------------------------
Net investment loss (B).......................... (0.02) (0.05) (0.05)
Net realized and unrealized gain on investments.. 0.14 0.13 0.14
----- ----- -----
Total from investment
operations............................ 0.12 0.08 0.09
Net asset value, end of period................... $12.62 $12.58 $12.59
====== ====== ======
Total return............................ 0.96% + 0.64% + 0.72% +
Net assets, end of period (000's)................ $2,966 $6,659 $8,241
Ratio of operating expenses to
average net assets (C)......................... 1.675%(A) 2.325%(A) 2.325%(A)
Ratio of net investment loss to
average net assets............................. (0.40%)(A) (1.05%)(A) (1.05%)(A)
Portfolio turnover rate.......................... 92%(A) 92%(A) 92%(A)
Average commission rate per share (D)............ $0.069 $0.069 $0.069
</TABLE>
- -----------------------------
* Commencement of operations
+ Non-annualized
(A) Annualized
(B) After expense reimbursement by the adviser of $0.06, $0.03 and $0.03 per
share for the Small/Mid Cap Fund - Classes A, B and C respectively, for
the period March 4, 1996 (commencement of operations) to October 31, 1996.
(C) The ratio of operating expenses, before reimbursement by the adviser, was
2.69%, 3.05% and 3.04% for the Small/Mid Cap Fund, Classes A, B and C
respectively, for the period March 4, 1996 (commencement of operations) to
October 31, 1996 on an annualized basis.
(D) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged.
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Small Cap Fund
---------------------------------------------------------------------
03/04/96* 03/04/96* 03/04/96*
to to to
10/31/96 10/31/96 10/31/96
Class A Class B Class C
------------------- -------------------- --------------------
<S> <C> <C> <C>
Net asset value, beginning of period................. $12.50 $12.50 $12.50
Income (loss) from investment operations:
- -----------------------------------------
Net investment income (loss) (B)..................... 0.05 (0.01) (0.01)
Net realized and unrealized gain on investments
and foreign currency transactions.................. 0.88 0.88 0.88
----- ----- -----
Total from investment
operations................................ 0.93 0.87 0.87
Net asset value, end of period....................... $13.43 $13.37 $13.37
====== ====== ======
Total return................................ 7.44% + 6.96% + 6.96% +
Net assets, end of period (000's).................... $2,120 $5,068 $5,517
Ratio of operating expenses to
average net assets (C)............................. 1.90%(A) 2.55%(A) 2.55%(A)
Ratio of net investment income (loss) to
average net assets................................. 0.50%(A) (0.15%)(A) (0.15%)(A)
Portfolio turnover rate.............................. 67%(A) 67%(A) 67%(A)
Average commission rate per share (D)................ $0.016 $0.016 $0.016
</TABLE>
- -----------------------------
* Commencement of operations
+ Non-annualized
(A) Annualized
(B) After expense reimbursement by the adviser of $0.11, $0.02 and $0.02 per
share for the International Small Cap Fund - Classes A, B and C
respectively, for the period March 4, 1996 (commencement of operations) to
October 31, 1996.
(C) The ratio of operating expenses, before reimbursement by the adviser, was
3.07%, 3.27% and 3.25% for the International Small Cap Fund, Classes A, B
and C respectively, for the period March 4, 1996 (commencement of
operations) to October 31, 1996 on an annualized basis.
(D) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged. In certain foreign markets the
relationship between the translated U.S. dollar price per share and
commission paid per share may vary from that of domestic markets.
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth Equity Fund
---------------------------------------------------------------------
03/04/96* 03/04/96* 03/04/96*
to to to
10/31/96 10/31/96 10/31/96
Class A Class B Class C
------------------- -------------------- --------------------
<S> <C> <C> <C>
Net asset value, beginning of period................. $12.50 $12.50 $12.50
Income from investment operations:
- ----------------------------------
Net investment income (B)............................ 0.28 0.24 0.24
Net realized and unrealized gain on investments
and foreign currency transactions.................. 1.00 0.99 0.99
----- ----- -----
Total from investment
operations................................ 1.28 1.23 1.23
Net asset value, end of period....................... $13.78 $13.73 $13.73
====== ====== ======
Total return................................ 10.24% + 9.84% + 9.84% +
Net assets, end of period (000's).................... $2,244 $4,748 $6,494
Ratio of operating expenses to
average net assets (C)............................. 1.65%(A) 2.30%(A) 2.30%(A)
Ratio of net investment income to
average net assets................................. 4.11%(A) 4.18%(A) 4.13%(A)
Portfolio turnover rate.............................. 450%(A) 450%(A) 450%(A)
Average commission rate per share (D)................ $0.043 $0.043 $0.043
</TABLE>
- -----------------------------
* Commencement of operations
+ Non-annualized
(A) Annualized
(B) After expense reimbursement by the adviser of $0.07, $0.04 and $0.04 per
share for the Growth Equity Fund - Classes A, B and C respectively, for
the period March 4, 1996 (commencement of operations) to October 31, 1996.
(C) The ratio of operating expenses, before reimbursement by the adviser, was
2.71%, 3.06% and 2.96% for the Growth Equity Fund, Classes A, B and C
respectively, for the period March 4, 1996 (commencement of operations) to
October 31, 1996 on an annualized basis.
(D) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged. In certain foreign markets the
relationship between the translated U.S. dollar price per share and
commission paid per share may vary from that of domestic markets.
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Global Equity Fund
(formerly, the Global Growth Fund)
---------------------------------------------------------------------------------
Year Year 04/01/94* Year Year 04/01/94*
Ended Ended to Ended Ended to
10/31/96** 10/31/95 10/31/94 10/31/96** 10/31/95** 10/31/94
Class A Class A Class A Class B Class B Class B
---------- ---------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $13.84 $14.82 $14.13 $13.73 $14.79 $14.13
Income (loss) from investment operations
- ----------------------------------------
Net investment loss (B)................. (0.04) ---- (0.01) (0.14) (0.09) (0.03)
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions........................ 0.91 (0.54) 0.70 0.91 (0.53) 0.69
------ ------ ------ ------ ------ ------
Total from investment
operations................... 0.87 (0.54) 0.69 0.77 (0.62) 0.66
Less distributions
- ------------------
Dividends from net investment income.... (0.21) ---- ---- (0.14) ---- ----
Distributions from capital gains........ ---- (0.44) ---- ---- (0.44) ----
------ ------ ------ ------ ------ ------
Total distributions............ (0.21) (0.44) ---- (0.14) (0.44) ----
------ ------ ------ ------ ------ ------
Net asset value, end of period.......... $14.50 $13.84 $14.82 $14.36 $13.73 $14.79
====== ====== ====== ====== ====== ======
Total return................... 6.33% (3.52%) 9.16%(E) 5.64% (4.09%) 8.94%(E)
Net assets, end of period (000's)....... $25,924 $23,894 $18,152 $25,661 $23,317 $13,903
Ratio of operating expenses
to average net assets (C)............. 1.75% 1.75% 1.75%(A) 2.40% 2.40% 2.40%(A)
Ratio of net investment income
(loss) to average net assets.......... (0.30%) 0.03% (0.12%)(A) (0.95%) (0.61%) (0.77%)(A)
Portfolio turnover rate................. 165% 57% 54% 165% 57% 54%
Average commission rate per share (D)... $0.016 N/A N/A $0.016 N/A N/A
</TABLE>
- ------------------------------
* Commencement of operations
** Net investment income per share has been calculated using the average
shares method.
(A) Annualized
(B) After expense reimbursement by the adviser of $0.01 and $0.02 per share for
the Global Equity Fund - Class A and $0.01 and $0.02 per share for the
Global Equity Fund - Class B, for the years ended October 31, 1996 and
1995, respectively and $0.01 and $0.01 per share for the Global Equity Fund
- Classes A and B respectively, for the period April 1, 1994 to October 31,
1994.
(C) The ratio of operating expenses, before reimbursement by the adviser, was
1.83% and 1.92% for the Global Equity Fund - Class A and 2.48% and 2.58% for
the Global Equity Fund - Class B, for the years ended October 31, 1996 and
1995, respectively and 1.97% and 2.71% for the Global Equity Fund - Classes
A and B respectively, for the period April 1, 1994 to October 31, 1994 on an
annualized basis.
(D) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share of all security trades on
which commissions are charged. In certain foreign markets the relationship
between the translated U.S. dollar price per share and commission paid per
share may vary from that of domestic markets.
(E) Historical total returns for Classes A and B shares are one year performance
returns which include Class C performance prior to April 1, 1994.
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Global Equity Fund - Class C
(formerly, the Global Growth Fund - Class C)
--------------------------------------------------------------------------------
Years Ended October, 31
---------------------------------------------------------------------------------
1996** 1995** 1994 1993 1992 1991
----------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $13.73 $14.79 $13.74 $10.33 $10.76 $10.12
Income (loss) from investment operations
- ----------------------------------------
Net investment income (loss) (B)........ (0.14) (0.09) (0.10) (0.01) (0.02) 0.25
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions........................ 0.92 (0.53) 1.15 3.43 (0.37) 0.63
------ ------ ------ ------ ------ ------
Total from investment
operations................. 0.78 (0.62) 1.05 3.42 (0.39) 0.88
Less distributions
- ------------------
Dividends from net investment income.... (0.10) ------ ------ (0.01) ------ (0.24)
Distributions from capital gains........ ------ (0.44) ------ ------ ------ ------
Distributions from capital.............. ------ ------ ------ ------ (0.04) ------
-------- -------- -------- -------- ------ --------
Total distributions............ (0.10) (0.44) ------ (0.01) (0.04) (0.24)
------- ------ -------- ------ ------ ------
Net asset value, end of period.......... $14.41 $13.73 $14.79 $13.74 $10.33 $10.76
====== ====== ====== ====== ====== ======
Total return................... 5.70% (4.09%) 8.94% 33.06% (3.57%) 8.80%
Net assets, end of period (000's)....... $64,830 $83,340 $101,443 $63,503 $14,291 $8,828
Ratio of operating expenses
to average net assets (C)............. 2.40% 2.40% 2.40% 2.40% 2.52% 1.47%
Ratio of net investment income
(loss) to average net assets.......... (0.95%) (0.64%) (0.91%) (0.40%) (0.27%) 1.41%
Portfolio turnover rate................. 165% 57% 54% 57% 69% 70%
Average commission rate per share (D)... $0.016 N/A N/A N/A N/A N/A
</TABLE>
- ------------------------------
** Net investment income per share has been calculated using the average shares
method.
(A) Annualized
(B) After expense reimbursement by the adviser of $0.01, $0.02, $0.01, $0.02,
$0.02 and $0.05 per share for the Global Equity Fund - Class C for the years
ended October 31, 1996, 1995, 1994, 1993, 1992 and 1991, respectively.
(C) The ratio of operating expenses, before reimbursement by the adviser, was
2.48%, 2.53%, 2.52%, 2.72%, 2.78% and 4.37% for the Global Equity Fund-
Class C for the years ended October 31, 1996, 1995, 1994, 1993, 1992 and
1991, respectively.
(D) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share of all security trades on
which commissions are charged. In certain foreign markets the relationship
between the translated U.S. dollar price per share and commission paid per
share may vary from that of domestic markets.
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value Equity Fund
(formerly, the Growth Fund)
--------------------------------------------------------------------------------
Year Year 04/01/94* Year Year 04/01/94*
Ended Ended to Ended Ended to
10/31/96 10/31/95** 10/31/94 10/31/96 10/31/95** 10/31/94
Class A Class A Class A Class B Class B Class B
---------- ---------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $15.94 $14.78 $14.59 $15.84 $14.77 $14.59
Income (loss) from investment operations
- ----------------------------------------
Net investment income (loss) (B)........ 0.16 0.12 0.02 0.06 0.02 (0.02)
Net realized and unrealized gain
on investments........................ 2.69 1.83 0.17 2.69 1.84 0.20
----- ----- ----- ----- ----- -----
Total from investment
operations................... 2.85 1.95 0.19 2.75 1.86 0.18
Less distributions
- ------------------
Distributions from net investment income (0.14) ------ ------ (0.09) ------ ------
Distributions from capital gains........ (1.28) (0.79) ------ (1.28) (0.79) ------
------ ------ -------- ------ ------ --------
Total distributions............ (1.42) (0.79) ------ (1.37) (0.79) (0.24)
------ ------ -------- ------ ------ ------
Net asset value, end of period.......... $17.37 $15.94 $14.78 $17.22 $15.84 $14.77
====== ====== ====== ====== ====== ======
Total return................... 19.23% 14.22% 4.82%(E) 18.59% 13.58% 4.75%(E)
Net assets, end of period (000's)....... $28,470 $22,026 $16,326 $27,058 $19,874 $5,054
Ratio of operating expenses to average
net assets (C)........................ 1.34% 1.34% 1.34%(A) 1.99% 1.99% 1.99%(A)
Ratio of net investment income (loss) to
average net assets.................... 0.98% 0.79% 0.13%(A) 0.33% 0.13% (0.52%)(A)
Portfolio turnover rate................. 169% 54% 39% 169% 54% 39%
Average commission rate per share (D)... $0.053 N/A N/A $0.053 N/A N/A
</TABLE>
- ------------------------------
* Commencement of operations
** Net investment income per share has been calculated using the average shares
method for fiscal year 1995.
(A) Annualized
(B) After expense reimbursement by the adviser of $0.04 and $0.04 per share for
the Value Equity Fund - Class A and $0.04 and $0.05 per share for the Value
Equity Fund - Class B, for the years ended October 31, 1996 and 1995,
respectively and $0.06 and $0.03 per share for the Value Equity Fund -
Classes A and B respectively, for the period April 1, 1994 to October 31,
1994.
(C) The ratio of operating expenses, before reimbursement by the adviser, was
1.55% and 1.62% for the Value Equity Fund - Class A and 2.20% and 2.32% for
the Value Equity Fund - Class B, for the years ended October 31, 1996 and
1995, respectively and 1.79% and 2.82% for the Value Equity Fund - Classes
A and B respectively, for the period April 1, 1994 to October 31, 1994 on
an annualized basis.
(D) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged.
(E) Historical total returns for Classes A and B shares are one year performance
returns which include Class C performance prior to April 1, 1994.
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value Equity Fund - Class C
(formerly, the Growth Fund - Class C)
----------------------------------------------------------------------------
Years Ended October 31,
----------------------------------------------------------------------------
1996 1995** 1994 1993 1992 1991
------------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...... $15.84 $14.77 $14.21 $12.05 $10.70 $ 8.22
Income (loss) from investment operations
- ----------------------------------------
Net investment income (loss) (B).......... 0.06 0.02 (0.07) 0.01 (0.01) 0.02
Net realized and unrealized gain
(loss) on investments................... 2.69 1.84 0.74 2.15 1.37 2.54
----- ----- ----- ----- ----- -----
Total from investment
operations..................... 2.75 1.86 0.67 2.16 1.36 2.56
Less distributions
- ------------------
Dividends from net investment income...... (0.04) ------ (0.03) ------ ------ (0.03)
Distributions from capital gains.......... (1.28) (0.79) (0.08) ------ ------ ------
Distributions from capital................ ------ ------ ------ ------ (0.01) (0.05)
-------- -------- -------- -------- ------ ------
Total distributions.............. (1.32) (0.79) (0.11) ------ (0.01) (0.08)
------ ------ ------- -------- ------ ------
Net asset value, end of period............ $17.27 $15.84 $14.77 $14.21 $12.05 $10.70
====== ====== ====== ====== ====== ======
Total return..................... 18.53% 13.58% 4.75% 17.93% 12.75% 31.32%
Net assets, end of period (000's)......... $83,855 $83,719 $71,219 $64,223 $24,291 $15,354
Ratio of operating expenses to average
net assets (C).......................... 1.99% 1.99% 1.99% 1.99% 2.47% 2.97%
Ratio of net investment income (loss) to
average net assets...................... 0.33% 0.15% (0.49%) 0.27% (0.15%) 0.27%
Portfolio turnover rate................... 169% 54% 39% 40% 91% 37%
Average commission rate per share (D)..... $0.053 N/A N/A N/A N/A N/A
<CAPTION>
-----------------------
08/28/89*
----------- to
1990 10/31/89
----------- ----------
<S> <C> <C>
Net asset value, beginning of period...... $11.19 $12.25
Income (loss) from investment operations
- ----------------------------------------
Net investment income (loss) (B).......... 0.05 0.01
Net realized and unrealized gain
(loss) on investments................... (2.39) (1.07)
------ ------
Total from investment
operations..................... (2.34) (1.06)
Less distributions
- ------------------
Dividends from net investment income...... (0.05) ----
Distributions from capital gains.......... (0.58) ----
Distributions from capital................ ---- ----
------ ------
Total distributions.............. (0.63) ----
------ ------
Net asset value, end of period............ $ 8.22 $11.19
====== ======
Total return..................... (22.16%) (8.65%)
Net assets, end of period (000's)......... $19,370 $30,627
Ratio of operating expenses to average
net assets (C).......................... 2.85% 2.57%(A)
Ratio of net investment income (loss) to
average net assets...................... 0.43% 0.37%(A)
Portfolio turnover rate................... 58% 65%(A)
Average commission rate per share (D)..... N/A N/A
</TABLE>
- ------------------------------
* Commencement of operations
** Net investment income per share has been calculated using the average shares
method for fiscal year 1995.
+ Non-annualized
(A) Annualized
(B) After expense reimbursement and waiver by the adviser of $0.03, $0.04,
$0.04, $0.02, $0.05 and $0.01 per share for the Value Equity Fund - Class C
for the years ended October 31, 1996, 1995, 1994, 1993, 1992 and 1991,
respectively.
(C) The ratio of operating expenses, before reimbursement and waiver by the
adviser, was 2.20%, 2.23%, 2.29%, 2.35%, 3.00% and 3.12% for the Value
Equity Fund - Class C for the years ended October 31, 1996, 1995, 1994,
1993, 1992 and 1991, respectively.
(D) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share of all security trades on
which commissions are charged.
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth and Income Fund
--------------------------------------------------------------------------------
Year Year 04/01/94* Year Year 04/01/94*
Ended Ended to Ended Ended to
10/31/96 10/31/95** 10/31/94 10/31/96** 10/31/95** 10/31/94
Class A Class A Class A Class B Class B Class B
---------- ---------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $14.72 $13.09 $12.29 $14.69 $13.08 $12.29
Income from investment operations
- ---------------------------------
Net investment income (B)............... 0.18 0.26 0.12 0.07 0.16 0.10
Net realized and unrealized gain
on investments........................ 2.99 1.90 0.76 2.99 1.94 0.77
------ ------ ------ ------ ------ ------
Total from investment
operations................... 3.17 2.16 0.88 3.06 2.10 0.87
Less distributions
- ------------------
Dividends from net investment income.... (0.21) (0.23) (0.08) (0.13) (0.19) (0.08)
Distributions from capital gains........ (0.12) (0.30) ---- (0.12) (0.30) ----
------ ------ -------- ------ ------ --------
Total distributions............ (0.33) (0.53) (0.08) (0.25) (0.49) (0.08)
------ ------ ------ ------ ------ ------
Net asset value, end of period.......... $17.56 $14.72 $13.09 $17.50 $14.69 $13.08
====== ====== ====== ====== ====== ======
Total return................... 21.84% 17.28% 5.06%(E) 21.08% 16.73% 4.98%(E)
Net assets, end of period (000's)....... $18,272 $12,180 $8,134 $34,740 $19,052 $3,885
Ratio of operating expenses to average
net assets (C)........................ 1.34% 1.34% 1.34%(A) 1.99% 1.99% 1.99%(A)
Ratio of net investment income to
average net assets.................... 1.10% 1.91% 1.72%(A) 0.45% 1.14% 1.07%(A)
Portfolio turnover rate................. 49% 40% 45% 49% 40% 45%
Average commission rate per share (D)... $0.055 N/A N/A $0.055 N/A N/A
</TABLE>
- ------------------------------
* Commencement of operations
** Net investment income per share has been calculated using the average shares
method.
(A) Annualized
(B) After expense reimbursement by the adviser of $0.03 and $0.05 per share for
the Growth and Income Fund - Class A and $0.03 and $0.05 per share for the
Growth and Income Fund - Class B, for the years ended October 31, 1996 and
1995, respectively and $0.05 and $0.12 per share for the Growth and Income
Fund - Classes A and B respectively, for the period April 1, 1994 to
October 31, 1994.
(C) The ratio of operating expenses, before reimbursement by the adviser, was
1.56% and 1.69% for the Growth and Income Fund - Class A and 2.20% and
2.33% for the Growth and Income Fund - Class B, for the years ended October
31, 1996 and 1995, respectively and 2.08% and 3.12% for the Growth and
Income Fund - Classes A and B respectively, for the period April 1, 1994 to
October 31, 1994 on an annualized basis.
(D) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share of all security trades on
which commissions are charged.
(E) Historical total returns for Classes A and B shares are one year performance
returns which include Class C performance prior to April 1, 1994.
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth and Income Fund - Class C
----------------------------------------------------------------------------------
Years Ended October, 31 05/01/91*
to
1996 1995 1994 1993 1992 10/31/91
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $14.71 $13.08 $12.71 $11.21 $10.51 $10.00
Income from investment operations
- ---------------------------------
Net investment income (B)............... 0.07 0.18 0.15 0.14 0.18 0.11
Net realized and unrealized gain
on investments........................ 3.00 1.90 0.46 1.48 0.70 0.47
------ ------ ------ ------ ------ ------
Total from investment
operations................... 3.07 2.08 0.61 1.62 0.88 0.58
Less distributions
- ------------------
Dividends from net investment income.... (0.10) (0.15) (0.13) (0.12) (0.18) (0.07)
Distributions from capital gains........ (0.12) (0.30) (0.11) ---- ---- ----
------ ------ ------ -------- -------- --------
Total distributions............ (0.22) (0.45) (0.24) (0.12) (0.18) (0.07)
------ ------ ------ ------ ------ ------
Net asset value, end of period.......... $17.56 $14.71 $13.08 $12.71 $11.21 $10.51
====== ====== ====== ====== ====== ======
Total return................... 21.12% 16.56% 4.85% 14.57% 8.42% 5.88% +
Net assets, end of period (000's)....... $74,825 $63,154 $46,078 $37,483 $10,821 $2,090
Ratio of operating expenses to average
net assets (C)........................ 1.99% 1.99% 1.99% 1.99% 1.94% 1.85%(A)
Ratio of net investment income to
average net assets.................... 0.45% 1.26% 1.11% 1.12% 1.51% 2.05%(A)
Portfolio turnover rate................. 49% 40% 45% 37% 48% 111%(A)
Average commission rate per share (D)... $0.055 N/A N/A N/A N/A N/A
</TABLE>
- ------------------------------
* Commencement of operations
+ Non-annualized
(A) Annualized
(B) After expense reimbursement and waiver by the adviser of $0.03, $0.04,
$0.05, $0.06, $0.15 and $0.37 per share for the Growth and Income Fund -
Class C for the years ended October 31, 1996, 1995, 1994, 1993 and 1992 and
the period May 1, 1991 (commencement of operations) to October 31, 1991,
respectively.
(C) The ratio of operating expenses, before reimbursement and waiver by the
adviser, was 2.20%, 2.26%, 2.38%, 2.46%, 3.18% and 10.69% for the Growth
and Income Fund - Class C for the years ended October 31, 1996, 1995, 1994,
1993 and 1992 and the period May 1, 1991 (commencement of operations) to
October 31, 1991 on an annualized basis, respectively.
(D) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share of all security trades on
which commissions are charged.
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Growth and Income Fund
--------------------------------------------------------------------------------
Year 01/09/95* Year 01/09/95* Year 01/09/95*
Ended to Ended to Ended to
10/31/96** 10/31/95** 10/31/96** 10/31/95** 10/31/96** 10/31/95**
Class A Class A Class B Class B Class C Class C
---------- ---------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $10.11 $10.00 $10.10 $10.00 $10.10 $10.00
Income from investment operations:
- ---------------------------------
Net investment income (B)................... 0.09 0.06 0.06 0.01 0.06 0.01
Net realized and unrealized gain on investments
and foreign currency transactions......... 1.33 0.08 1.30 0.12 1.30 0.12
----- ----- ----- ----- ----- -----
Total from investment
operations....................... 1.42 0.14 1.36 0.13 1.36 0.13
Less distributions
- ------------------
Dividends from net investment income........ (0.08) (0.03) (0.05) (0.03) (0.05) (0.03)
Distributions from capital gains............ (0.10) ---- (0.11) ---- (0.10) ----
------ ------ ------ ------ ------ ------
Total distributions................ (0.18) (0.03) (0.16) (0.03) (0.15) (0.03)
------ ------ ------ ------ ------ ------
Net asset value, end of period.............. $11.35 $10.11 $11.30 $10.10 $11.31 $10.10
====== ====== ====== ====== ====== ======
Total return....................... 14.25% 1.37% + 13.58% 1.28% + 13.63% 1.28% +
Net assets, end of period (000's)........... $4,732 $6,897 $15,217 $8,421 $9,076 $6,324
Ratio of operating expenses to
average net assets (C).................... 1.75% 1.75%(A) 2.40% 2.40%(A) 2.40% 2.40%(A)
Ratio of net investment income to
average net assets........................ 0.84% 0.70%(A) 0.57% 0.15%(A) 0.51% 0.13%(A)
Portfolio turnover rate..................... 170% 69%(A) 170% 69%(A) 170% 69%(A)
Average commission rate per share (D)....... $0.022 N/A $0.022 N/A $0.022 N/A
</TABLE>
- -----------------------------
* Commencement of operations
** Net investment income per share has been calculated using the average
shares method.
+ Non-annualized
(A) Annualized
(B) After expense reimbursement by the adviser of $0.02, $0.02 and $0.02 per
share for the International Growth and Income Fund - Classes A, B and C
respectively, for the year ended October 31, 1996 and $0.04, $0.04 and
$0.04 per share for the International Growth and Income Fund - Classes A,
B and C respectively, for the period January 9, 1995 (commencement of
operations) to October 31, 1995.
(C) The ratio of operating expenses, before reimbursement by the adviser, was
1.97%, 2.60% and 2.60% for the International Growth and Income Fund,
Classes A, B and C respectively, for the year ended October 31, 1996 and
2.18%, 2.93% and 2.93% for the International Growth and Income Fund,
Classes A, B and C respectively, for the period January 9, 1995
(commencement of operations) to October 31, 1995 on an annualized basis.
(D) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged. In certain foreign markets the
relationship between the translated U.S. dollar price per share and
commission paid per share may vary from that of domestic markets.
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balanced Fund
(formerly, the Asset Allocation Fund)
---------------------------------------------------------------------------------
Year Year 04/01/94* Year Year 04/01/94*
Ended Ended to Ended Ended to
10/31/96** 10/31/95** 10/31/94 10/31/96** 10/31/95** 10/31/94
Class A Class A Class A Class B Class B Class B
---------- ---------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $12.02 $11.13 $11.06 $11.98 $11.12 $11.06
Income (loss) from investment operations
- ----------------------------------------
Net investment income (B)............... 0.39 0.38 0.17 0.31 0.30 0.12
Net realized and unrealized gain
(loss) on investments................. 1.07 1.35 (0.10) 1.07 1.36 (0.06)
------ ------ ------ ------ ------ ------
Total from investment
operations................... 1.46 1.73 0.07 1.38 1.66 0.06
Less distributions
- ------------------
Dividends from net investment income.... (0.40) (0.32) ------ (0.35) (0.28) ------
Distributions from capital gains........ (0.75) (0.52) ------ (0.75) (0.52) ------
------ ------ -------- ------ ------ --------
Total distributions............ (1.15) (0.84) ------ (1.10) (0.80) ------
------ ------ -------- ------ ------ --------
Net asset value, end of period.......... $12.33 $12.02 $11.13 $12.26 $11.98 $11.12
====== ====== ====== ====== ====== ======
Total return................... 13.10% 16.95% 0.76%(E) 12.35% 16.31% 0.67%(E)
Net assets, end of period (000's)....... $10,873 $10,033 $7,830 $16,219 $9,875 $4,760
Ratio of operating expenses to average
net assets (C)........................ 1.34% 1.34% 1.34%(A) 1.99% 1.99% 1.99%(A)
Ratio of net investment income to average
net assets............................ 3.32% 3.39% 2.72%(A) 2.67% 2.69% 2.07%(A)
Portfolio turnover rate................. 253% 226% 246% 253% 226% 246%
Average commission rate per share (D)... $0.059 N/A N/A $0.059 N/A N/A
</TABLE>
- ------------------------------
* Commencement of operations
** Net investment income per share has been calculated using the average shares
method.
(A) Annualized
(B) After expense reimbursement by the adviser of $0.02 and $0.04 for the
Balanced Fund - Class A and $0.02 and $0.04 for the Balanced Fund - Class
B, for the years ended October 31, 1996 and 1995, respectively and $0.03
and $0.04 for the Balanced Fund - Classes A and B respectively, for the
period April 1, 1994 to October 31, 1994.
(C) The ratio of operating expenses, before reimbursement by the adviser, was
1.55% and 1.69% for the Balanced Fund - Class A and 2.20% and 2.37% for the
Balanced Fund - Class B, for the years ended October 31, 1996 and 1995,
respectively and 1.86% and 2.73% for the Balanced Fund - Classes A and B
respectively, for the period April 1, 1994 to October 31, 1994 on an
annualized basis.
(D) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share of all security trades on
which commissions are charged.
(E) Historical total returns for Classes A and B shares are one year performance
returns which include Class C performance prior to April 1, 1994.
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balanced Fund - Class C (E)
(formerly, the Asset Allocation Fund - Class C (E))
---------------------------------------------------------------
Years Ended October 31,
---------------------------------------------------------------
1996** 1995** 1994 1993 1992
------------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period...... $12.02 $11.12 $11.52 $10.20 $ 9.76
Income (loss) from investment operations
- ----------------------------------------
Net investment income (B)................. 0.32 0.31 0.22 0.21 0.20
Net realized and unrealized gain
(loss) on investments................... 1.07 1.35 (0.15) 1.30 0.87
------ ------ ------ ------ ------
Total from investment
operations..................... 1.39 1.66 0.07 1.51 1.07
Less distributions
- ------------------
Dividends from net investment income...... (0.31) (0.24) (0.18) (0.09) (0.19)
Distributions from capital gains.......... (0.75) (0.52) (0.29) (0.10) (0.44)
Distributions from capital................ ------ ------ ------ ------ ------
-------- -------- -------- -------- --------
Total distributions.............. (1.06) (0.76) (0.47) (0.19) (0.63)
------ ------ ------ ------ ------
Net asset value, end of period............ $12.35 $12.02 $11.12 $11.52 $10.20
====== ====== ====== ====== ======
Total return..................... 12.41% 16.25% 0.67% 15.02% 11.25%
Net assets, end of period (000's)......... $72,821 $80,626 $86,902 $96,105 $48,160
Ratio of operating expenses to
average net assets (C).................. 1.99% 1.99% 1.99% 1.99% 2.40%
Ratio of net investment income to
average net assets...................... 2.67% 2.76% 1.93% 1.96% 1.93%
Portfolio turnover rate................... 253% 226% 246% 196% 171%
Average commission rate per share (D)..... $0.059 N/A N/A N/A N/A
<CAPTION>
Balanced Fund - Class C (E)
(formerly, the Asset Allocation Fund - Class C (E))
---------------------------------------------------
08/28/89*
Years Ended October 31, to
-----------------------
1991 1990 10/31/89
---------- ----------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period...... $ 8.12 $ 9.84 $10.17
Income (loss) from investment operations
- ----------------------------------------
Net investment income (B)................. 0.27 0.32 0.05
Net realized and unrealized gain
(loss) on investments................... 1.70 (1.66) (0.38)
------ ------ ------
Total from investment
operations..................... 1.97 (1.34) (0.33)
Less distributions
- ------------------
Dividends from net investment income...... (0.33) (0.26) ------
Distributions from capital gains.......... ------ ------ ------
Distributions from capital................ ------ (0.12) ------
------- ------ --------
Total distributions.............. (0.33) (0.38) ------
------ ------ --------
Net asset value, end of period............ $ 9.76 $ 8.12 $ 9.84
====== ====== ======
Total return..................... 24.53% (13.97%) (3.24%) +
Net assets, end of period (000's)......... $30,724 $34,713 $43,915
Ratio of operating expenses to
average net assets (C).................. 2.88% 2.63% 2.13%(A)
Ratio of net investment income to
average net assets...................... 2.77% 3.34% 3.09%(A)
Portfolio turnover rate................... 84% 73% 84%(A)
Average commission rate per share (D)..... N/A N/A N/A
</TABLE>
- -----------------------------
* Commencement of operations
** Net investment income per share has been calculated using the average shares
method.
+ Non-annualized
(A) Annualized
(B) After expense reimbursement and waiver by the adviser of $0.01, $0.03,
$0.04, $0.03 and $0.04 for the Balanced Fund - Class C for the years ended
October 31, 1996, 1995, 1994, 1993 and 1992, respectively.
(C) The ratio of operating expenses, before reimbursement and waiver by the
adviser, was 2.20%, 2.24%, 2.22%, 2.28% and 2.89% for the Balanced Fund -
Class C for the years ended October 31, 1996, 1995, 1994, 1993 and 1992,
respectively.
(D) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share of all security trades on
which commissions are charged.
(E) On July 10, 1992, the Aggressive Fund and Conservative Fund portfolios of
the old Asset Allocation Funds were liquidated and shares were exchanged
for shares of the new Asset Allocation Fund. The new Asset Allocation Fund
is comprised of the Moderate Fund portfolio of the old Asset Allocation
Fund (the accounting "survivor") and the assets of the former Aggressive
and Conservative portfolios of the old Asset Allocation Funds. For purposes
of presenting financial highlights - selected per share data and ratios,
only the historical results of the old Moderate Fund have been presented
since it is considered the accounting survivor of the merger because, among
other reasons, the investment objective of the new Asset Allocation Fund is
substantially the same as that of the old Moderate Fund. At the date of the
merger, 3,567,198 shares of the old Moderate Fund with a per share value of
$8.11 were decreased to 2,891,572 shares with a per share value of $10.00,
similar to a reverse stock split, and re-named as shares of the new Asset
Allocation Fund. The historical per share data presented above has been
adjusted as though a reverse stock split had occurred at the beginning of
the earliest period presented which results in fewer shares outstanding at
a correspondingly higher net asset value per share.
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Strategic Income Fund
--------------------------------------------------------------------
Year Year 11/01/93* Year Year 04/01/94*
Ended Ended to Ended Ended to
10/31/96 10/31/95 10/31/94 10/31/96 10/31/95 10/31/94
Class A Class A Class A Class B Class B Class B
---------- ---------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $9.07 $8.90 $10.00 $9.07 $8.90 $ 9.31
Income (loss) from investment operations
- ----------------------------------------
Net investment income (B)............... 0.80 0.78 0.65 0.73 0.73 0.38
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions........................ 0.72 0.18 (1.10) 0.73 0.17 (0.41)
------ ------ ------ ------ ------ ------
Total from investment
operations................... 1.52 0.96 (0.45) 1.46 0.90 (0.03)
Less distributions
- ------------------
Dividends from net investment income.... (0.79) (0.79) (0.65) (0.73) (0.73) (0.38)
------ ------ ------ ------ ------ ------
Net asset value, end of period.......... $9.80 $9.07 $8.90 $9.80 $9.07 $8.90
===== ===== ===== ===== ===== =====
Total return................... 17.35% 11.43% (3.79%) 16.59% 10.72% (4.18%)(D)
Net assets, end of period (000's)....... $13,382 $10,041 $15,507 $30,890 $20,672 $5,440
Ratio of operating expenses to
average net assets (C)................ 1.50% 1.07% 0.41% 2.15% 1.95% 1.00%(A)
Ratio of net investment income to
average net assets.................... 8.28% 9.08% 8.26% 7.63% 8.10% 8.59%(A)
Portfolio turnover rate................. 68% 180% 136% 68% 180% 136%
</TABLE>
<TABLE>
<CAPTION>
Strategic Income Fund
---------------------------------
Year Year 4/01/94*
Ended Ended to
10/31/96 10/31/95 10/31/94
Class C Class C Class C
----------- ---------- ---------
<S> <C> <C> <C>
Net asset value, beginning of period.... $9.07 $8.90 $ 9.31
Income (loss) from investment operations
- ----------------------------------------
Net investment income (B)............... 0.73 0.73 0.38
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions........................ 0.73 0.17 (0.41)
------ ------ ------
Total from investment
operations................... 1.46 0.90 (0.03)
Less distributions
- ------------------
Dividends from net investment income.... (0.73) (0.73) (0.38)
------ ------ ------
Net asset value, end of period.......... $9.80 $9.07 $8.90
===== ===== =====
Total return................... 16.59% 10.72% (4.20%)(D)
Net assets, end of period (000's)....... $22,783 $14,273 $8,439
Ratio of operating expenses to
average net assets (C)................ 2.15% 1.95% 1.00% (A)
Ratio of net investment income to
average net assets.................... 7.63% 8.25% 8.59% (A)
Portfolio turnover rate................. 68% 180% 136%
</TABLE>
- ------------------------------
* Commencement of operations
(A) Annualized
(B) After expense reimbursement and waiver by the adviser of $0.01, $0.05 and
$0.04 per share for the Strategic Income Fund - Class A for the years ended
October 31, 1996, 1995 and 1994, respectively, $0.01 and $0.04 for the
Strategic Income Fund - Class B and $0.01 and $0.05 for the Strategic
Income Fund - Class C, for the years ended October 31, 1996 and 1995,
respectively and $0.05 and $0.04 for the Strategic Income Fund Classes B
and C respectively, for the period April 1, 1994 to October 31, 1994.
(C) The ratio of operating expenses, before reimbursement and waiver by the
adviser, was 1.65%, 1.69% and 0.96% for the Strategic Income Fund Class A
for the years ended October 31, 1996, 1995 and 1994, respectively. The
ratio of operating expenses, before reimbursement and waiver by the
adviser, was 2.27% and 2.38% for the Strategic Income Fund - Class B and
2.28% and 2.37% for the Strategic Income Fund - Class C, for the years
ended October 31, 1996 and 1995, respectively and 2.04% and 1.96% for the
Strategic Income Fund - Classes B and C respectively, for the period April
1, 1994 to October 31, 1994 on an annualized basis.
(D) Historical total returns for Classes B and C shares are one year performance
returns which include Class A performance prior to April 1, 1994.
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment Quality Bond Fund - Class A
--------------------------------------------------------------------------------
Years Ended October, 31 05/01/91*
------------------------------------------------------------------- to
1996 1995 1994 1993 1992 10/31/91
----------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $10.56 $9.74 $11.16 $10.56 $10.26 $10.00
Income (loss) from investment operations
- ----------------------------------------
Net investment income (B)............... 0.66 0.68 0.60 0.66 0.82 0.40
Net realized and unrealized gain (loss)
on investments........................ (0.20) 0.82 (1.37) 0.64 0.27 0.30
------ ------ ------ ------ ------ ------
Total from investment
operations................... 0.46 1.50 (0.77) 1.30 1.09 0.70
Less distributions
- ------------------
Dividends from net investment income.... (0.68) (0.68) (0.56) (0.64) (0.79) (0.40)
Distributions from capital gains........ ------ ------ (0.09) (0.06) ------ ------
Distributions from capital.............. ------ ------ ------ ------ ------ (0.04)
-------- -------- -------- -------- -------- ------
Total distributions............ (0.68) (0.68) (0.65) (0.70) (0.79) (0.44)
------ ------ ------ ------ ------ ------
Net asset value, end of period.......... $10.34 $10.56 $ 9.74 $11.16 $10.56 $10.26
====== ====== ====== ====== ====== ======
Total return................... 4.52% 15.91% (7.08%) 12.66% 11.00% 7.21% +
Net assets, end of period (000's)....... $9,056 $10,345 $11,150 $14,674 $6,773 $2,713
Ratio of operating expenses to
average net assets (C)................ 1.25% 1.25% 1.25% 0.98% 0.00% 0.00%(A)
Ratio of net investment income to
average net assets.................... 6.37% 6.72% 5.86% 5.82% 7.76% 7.08%(A)
Portfolio turnover rate................. 56% 132% 186% 41% 44% 39%(A)
</TABLE>
- ------------------------------
* Commencement of operations
+ Non-annualized
(A) Annualized
(B) After expense reimbursement and waiver by the adviser of $0.03, $0.05,
$0.06, $0.07, $0.27 and $0.19 per share for the Investment Quality Bond
Fund - Class A for the years ended October 31, 1996, 1995, 1994, 1993 and
1992 and the period May 1, 1991 (commencement of operations) to October 31,
1991, respectively.
(C) The ratio of operating expenses, before reimbursement and waiver by the
adviser, was 1.55%, 1.73%, 1.74%, 1.57%, 2.56% and 3.37% for the Investment
Quality Bond Fund - Class A for the years ended October 31, 1996, 1995,
1994, 1993 and 1992 and the period May 1, 1991 (commencement of operations)
to October 31, 1991 on an annualized basis, respectively.
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment Quality Bond Fund
--------------------------------------------------------------------------------
Year Year 04/01/94* Year Year 04/01/94*
Ended Ended to Ended Ended to
10/31/96 10/31/95 10/31/94 10/31/96 10/31/95 10/31/94
Class B Class B Class B Class C Class C Class C
---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $10.55 $9.74 $10.21 $10.55 $9.74 $10.21
Income (loss) from investment operations
- ----------------------------------------
Net investment income (B)............... 0.60 0.61 0.33 0.60 0.61 0.33
Net realized and unrealized gain (loss)
on investments........................ (0.20) 0.82 (0.51) (0.20) 0.82 (0.51)
------ ------ ------ ------ ------ ------
Total from investment
operations................... 0.40 1.43 (0.18) 0.40 1.43 (0.18)
Less distributions
- ------------------
Dividends from net investment income.... (0.62) (0.62) (0.29) (0.62) (0.62) (0.29)
Net asset value, end of period.......... $10.33 $10.55 $ 9.74 $10.33 $10.55 $ 9.74
====== ====== ====== ====== ====== ======
Total return................... 3.92% 15.12% (7.34%)(D) 3.92% 15.12% (7.34%)(D)
Net assets, end of period (000's)....... $4,678 $3,472 $489 $7,543 $7,206 $2,406
Ratio of operating expenses to
average net assets (C)................ 1.90% 1.90% 1.90%(A) 1.90% 1.90% 1.90%(A)
Ratio of net investment income to
average net assets.................... 5.72% 5.95% 5.70%(A) 5.72% 6.00% 5.70%(A)
Portfolio turnover rate................. 56% 132% 186% 56% 132% 186%
</TABLE>
- ------------------------------
* Commencement of operations
(A) Annualized
(B) After expense reimbursement by the adviser of $0.03 and $0.08 per share for
the Investment Quality Bond Fund - Class B and $0.03 and $0.06 per share
for the Investment Quality Bond Fund - Class C, for the years ended October
31, 1996 and 1995, respectively and $0.19 and $0.07 per share for the
Investment Quality Bond Fund - Classes B and C respectively, for the period
April 1, 1994 to October 31, 1994.
(C) The ratio of operating expenses, before reimbursement by the adviser, was
2.27% and 2.69% for the Investment Quality Bond Fund - Class B and 2.22%
and 2.50% for the Investment Quality Bond Fund - Class C, for the years
ended October 31, 1996 and 1995, respectively and 4.88% and 3.05% for the
Investment Quality Bond Fund - Classes B and C respectively, for the period
April 1, 1994 to October 31, 1994 on an annualized basis.
(D) Historical total returns for Classes B and C shares are one year performance
returns which include Class A performance prior to April 1, 1994.
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. Government Securities Fund - Class A
---------------------------------------------------------------
Years Ended October 31,
---------------------------------------------------------------
1996** 1995 1994 1993 1992
------------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $9.98 $9.45 $10.35 $10.04 $ 9.89
Income (loss) from investment operations
- ----------------------------------------
Net investment income (B).................... 0.56 0.63 0.53 0.51 0.74
Net realized and unrealized gain (loss)
on investments............................. (0.12) 0.57 (0.74) 0.34 0.13
------ ------ ------ ------ ------
Total from investment
operations........................ 0.44 1.20 (0.21) 0.85 0.87
Less distributions
- ------------------
Dividends from net investment income......... (0.56) (0.67) (0.50) (0.50) (0.72)
Dividends in excess of net investment income. (0.06) ------ ------ ------ ------
Distributions from capital gains............. ------ ------ (0.19) (0.04) ------
Distributions from capital................... ------ ------ ------ ------ ------
-------- -------- -------- -------- --------
Total distributions................. (0.62) (0.67) (0.69) (0.54) (0.72)
------ ------ ------ ------ ------
Net asset value, end of period............... $9.80 $ 9.98 $ 9.45 $10.35 $10.04
===== ====== ====== ====== ======
Total return........................ 4.64% 13.15% (2.13%) 8.64% 9.15%
Net assets, end of period (000's)............ $72,774 $81,179 $100,622 $163,296 $118,543
Ratio of operating expenses to
average net assets (C)..................... 1.25% 1.25% 1.25% 1.07% 0.24%
Ratio of net investment income to
average net assets......................... 5.71% 6.54% 5.39% 4.97% 7.21%
Portfolio turnover rate...................... 477% 469% 279% 208% 108%
</TABLE>
<TABLE>
<CAPTION>
U.S. Government Securities Fund - Class A
-----------------------------------------
Years Ended October 31, 08/28/89*
------------------------- to
1991 1990 10/31/89
---------- ----------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period......... $ 9.47 $ 9.74 $9.73
Income (loss) from investment operations
- ----------------------------------------
Net investment income (B).................... 0.84 0.75 0.15
Net realized and unrealized gain (loss)
on investments............................. 0.42 (0.20) 0.01
------ ------ ------
Total from investment
operations........................ 1.26 0.55 0.16
Less distributions
- ------------------
Dividends from net investment income......... (0.84) (0.75) (0.15)
Dividends in excess of net investment income. ------ ------ ------
Distributions from capital gains............. ------ ------ ------
Distributions from capital................... ------ (0.07) ------
-------- ------ --------
Total distributions................. (0.84) (0.82) (0.15)
------ ------ ------
Net asset value, end of period............... $ 9.89 $ 9.47 $ 9.74
====== ====== ======
Total return........................ 13.86% 5.90% 1.66% +
Net assets, end of period (000's)............ $45,662 $43,299 $56,069
Ratio of operating expenses to
average net assets (C)..................... 0.68% 2.28% 2.18%(A)
Ratio of net investment income to
average net assets......................... 8.65% 7.89% 8.54%(A)
Portfolio turnover rate...................... 195% 71% 93%(A)
</TABLE>
- ------------------------------
* Commencement of operations
** Net investment income per share has been calculated using the average shares
method.
+ Non-annualized
(A) Annualized
(B) After expense reimbursement and waiver by the adviser of $0.02, $0.02,
$0.02, $0.04, $0.19, $0.18 and $0.03 per share for the U.S. Government
Securities Fund - Class A for the years ended October 31, 1996, 1995, 1994,
1993, 1992, 1991 and 1990, respectively.
(C) The ratio of operating expenses, before reimbursement and waiver by the
adviser, was 1.41%, 1.45%, 1.47%, 1.42%, 2.13%, 2.61% and 2.57% for the
years ended October 31, 1996, 1995, 1994, 1993, 1992, 1991 and 1990,
respectively.
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. Government Securities Fund
--------------------------------------------------------------------------------
Year Year 04/01/94* Year Year 04/01/94*
Ended Ended to Ended Ended to
10/31/96** 10/31/95 10/31/94 10/31/96 10/31/95 10/31/94
Class B Class B Class B Class C Class C Class C
---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $9.98 $9.45 $9.77 $9.98 $9.45 $9.77
Income (loss) from investment operations
- ----------------------------------------
Net investment income (B).................... 0.50 0.56 0.29 0.50 0.56 0.26
Net realized and unrealized gain (loss)
on investments............................. (0.12) 0.58 (0.35) (0.12) 0.58 (0.32)
----- ----- ----- ----- ----- -----
Total from investment
operations........................ 0.38 1.14 (0.06) 0.38 1.14 (0.06)
Less distributions
- ------------------
Dividends from net investment income......... (0.50) (0.61) (0.26) (0.50) (0.61) (0.26)
Dividends in excess of net investment income. (0.06) ------ ------ (0.06) ------ ------
----- ------- ------- ----- ------- -------
Total distributions................. (0.56) (0.61) (0.26) (0.56) (0.61) (0.26)
------ ------ ------ ------ ------ ------
Net asset value, end of period............... $9.80 $9.98 $9.45 $9.80 $9.98 $9.45
===== ===== ===== ===== ===== =====
Total return........................ 3.97% 12.45% (2.44%)(D) 3.97% 12.45% (2.44%)(D)
Net assets, end of period (000's)............ $19,444 $13,993 $2,746 $20,009 $20,186 $10,766
Ratio of operating expenses to average
net assets (C)............................. 1.90% 1.90% 1.90%(A) 1.90% 1.90% 1.90%(A)
Ratio of net investment income to average
net assets................................. 5.06% 5.53% 5.06%(A) 5.06% 5.74% 5.06%(A)
Portfolio turnover rate...................... 477% 469% 279% 477% 469% 279%
</TABLE>
- ------------------------------
* Commencement of operations
** Net investment income per share has been calculated using the average shares
method.
(A) Annualized
(B) After expense reimbursement by the adviser of $0.02 and $0.04 per share for
the U.S. Government Securities Fund - Class B and $0.02 and $0.03 per share
for the U.S. Government Securities Fund - Class C, for the years ended
October 31, 1996 and 1995, respectively and $0.08 and $0.03 per share for
the U.S. Government Securities Fund - Classes B and C respectively, for the
period April 1, 1994 to October 31, 1994.
(C) The ratio of operating expenses, before reimbursement by the adviser, was
2.06% and 2.28% for the U.S. Government Securities Fund - Class B and 2.06%
and 2.15% for the U.S. Government Securities Fund - Class C, for the years
ended October 31, 1996 and 1995, respectively and 3.40% and 2.44% for the
U.S. Government Securities Fund - Classes B and C respectively, for the
period April 1, 1994 to October 31, 1994 on an annualized basis.
(D) Historical total returns for Classes B and C shares are one year performance
returns which include Class A performance prior to April 1, 1994.
The accompanying notes are an integral part of the financial statements.
31
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
National Municipal Bond Fund - Class A
---------------------------------------------------------------------
07/06/93*
Years Ended October 31, to
1996 1995 1994 10/31/93
---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........ $9.62 $8.82 $10.25 $10.00
Income (loss) from investment operations
- ----------------------------------------
Net investment income (B)................... 0.48 0.51 0.51 0.17
Net realized and unrealized gain (loss)
on investments............................ 0.11 0.80 (1.43) 0.24
------ ----- ------ ------
Total from investment
operations....................... 0.59 1.31 (0.92) 0.41
Less distributions
- ------------------
Dividends from net investment income........ (0.48) (0.51) (0.51) (0.16)
------ ------ ------ ------
Net asset value, end of period.............. $9.73 $9.62 $8.82 $10.25
===== ===== ===== ======
Total return....................... 6.31% 15.26% (9.24%) 4.17% +
Net assets, end of period (000's)........... $7,710 $7,618 $7,663 $9,131
Ratio of operating expenses to
average net assets (C).................... 0.99% 0.80% 0.57% 0.23%(A)
Ratio of net investment income to
average net assets........................ 4.99% 5.55% 5.28% 4.86%(A)
Portfolio turnover rate..................... 49% 44% 6% 150%(A)
</TABLE>
- ------------------------------
* Commencement of operations
+ Non-annualized
(A) Annualized
(B) After expense reimbursement and waiver by the adviser of $0.03, $0.05,
$0.07 and $0.03 per share for the National Municipal Bond Fund - Class A
for the years ended October 31, 1996, 1995 and 1994 and the period July 6,
1993 (commencement of operations) to October 31, 1993, respectively.
(C) The ratio of operating expenses, before reimbursement and waiver by the
adviser, was 1.25%, 1.34%, 1.26% and 1.10% for the National Municipal Bond
Fund - Class A for the years ended October 31, 1996, 1995 and 1994 and the
period July 6, 1993 (commencement of operations) to October 31, 1993 on an
annualized basis, respectively.
The accompanying notes are an integral part of the financial statements.
32
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
National Municipal Bond Fund
---------------------------------------------------------------------------------
Year Year 04/01/94* Year Year 04/01/94*
Ended Ended to Ended Ended to
10/31/96 10/31/95 10/31/94 10/31/96 10/31/95 10/31/94
Class B Class B Class B Class C Class C Class C
---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period....... $9.62 $8.81 $9.30 $9.62 $8.81 $9.30
Income (loss) from investment operations
- ----------------------------------------
Net investment income (B).................. 0.40 0.43 0.25 0.40 0.43 0.25
Net realized and unrealized gain (loss)
on investments............................ 0.11 0.81 (0.49) 0.11 0.81 (0.49)
------ ----- ------ ------ ----- ------
Total from investment
operations....................... 0.51 1.24 (0.24) 0.51 1.24 (0.24)
Less distributions
- ------------------
Dividends from net investment income....... (0.40) (0.43) (0.25) (0.40) (0.43) (0.25)
------ ------ ------ ------ ------ ------
Net asset value, end of period............. $9.73 $9.62 $8.81 $9.73 $9.62 $8.81
===== ===== ===== ===== ===== =====
Total return...................... 5.41% 14.42% (9.71%)(D) 5.41% 14.42% (9.71%)(D)
Net assets, end of period (000's).......... $6,130 $5,876 $2,036 $5,693 $6,834 $1,911
Ratio of operating expenses to
average net assets (C).................... 1.84% 1.70% 1.24%(A) 1.84% 1.70% 1.24%(A)
Ratio of net investment income to
average net assets........................ 4.14% 4.59% 4.62%(A) 4.14% 4.53% 4.62%(A)
Portfolio turnover rate.................... 49% 44% 6% 49% 44% 6%
</TABLE>
- ------------------------------
* Commencement of operations
(A) Annualized
(B) After expense reimbursement and waiver by the adviser of $0.03 and $0.07
per share for the National Municipal Bond Fund - Class B and $0.04 and
$0.09 per share for the National Municipal Bond Fund - Class C, for the
years ended October 31, 1996 and 1995, respectively and $0.09 and $0.09 per
share for the National Municipal Bond Fund - Classes B and C respectively,
for the period April 1, 1994 to October 31, 1994.
(C) The ratio of operating expenses, before reimbursement and waiver by the
adviser, was 2.11% and 2.41% for the National Municipal Bond Fund-Class B
and 2.25% and 2.63% for the National Municipal Bond Fund - Class C, for the
years ended October 31, 1996 and 1995, respectively and 2.81% and 2.78% for
the National Municipal Bond Fund - Classes B and C respectively, for the
period April 1, 1994 to October 31, 1994 on an annualized basis.
(D) Historical total returns for Classes B and C shares are one year
performance returns which include Class A performance prior to April 1,
1994.
The accompanying notes are an integral part of the financial statements.
33
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Money Market Fund - Class A
--------------------------------------------------
Years Ended October 31,
--------------------------------------------------
1996 1995 1994 1993
------------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period...... $1.00 $1.00 $1.00 $1.00
Income from investment operations
- ---------------------------------
Net investment income (B)................. 0.05 0.05 0.03 0.03
Less distributions
- ------------------
Dividends from net investment income...... (0.05) (0.05) (0.03) (0.03)
----- ----- ----- -----
Net asset value, end of period............ $1.00 $1.00 $1.00 $1.00
===== ===== ===== =====
Total return..................... 5.16% 5.60% 3.48% 2.80%
Net assets, end of period (000's)......... $8,087 $11,379 $8,499 $18,109
Ratio of operating expenses to average
net assets (C)........................... 0.50% 0.50% 0.50% 0.50%
Ratio of net investment income to
average net assets....................... 5.02% 5.45% 3.40% 2.75%
<CAPTION>
Money Market Fund - Class A
-------------------------------------------------
Years Ended October 31, 08/28/89*
-------------------------------------- to
1992 1991 1990 10/31/89
------------ ---------- ----------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of period...... $1.00 $1.00 $1.00 $1.00
Income from investment operations
- ---------------------------------
Net investment income (B)................. 0.04 0.06 0.06 0.01
Less distributions
- ------------------
Dividends from net investment income...... (0.04) (0.06) (0.06) (0.01)
----- ----- ----- -----
Net asset value, end of period............ $1.00 $1.00 $1.00 $1.00
===== ===== ===== =====
Total return..................... 3.69% 6.22% 5.76% 0.53%+
Net assets, end of period (000's)......... $2,244 $3,421 $4,526 $7,781
Ratio of operating expenses to average
net assets (C)........................... 0.50% 1.00% 2.45% 1.96%(A)
Ratio of net investment income to
average net assets....................... 3.77% 6.01% 5.52% 6.59%(A)
</TABLE>
- ------------------------------
* Commencement of operations
+ Non-annualized
(A) Annualized
(B) After expense reimbursement and waiver by the adviser of $0.004, $0.004,
$0.0044, $0.0084, $0.0211, $0.0270 and $0.0002 per share for the Money
Market Fund - Class A for the years ended October 31, 1996, 1995, 1994,
1993, 1992, 1991 and 1990, respectively.
(C) The ratio of operating expenses, before reimbursement and waiver by the
adviser, was 0.95%, 0.96%, 0.95%, 1.32%, 2.71%, 2.68% and 2.47% for the
Money Market Fund - Class A for the years ended October 31, 1996, 1995,
1994, 1993, 1992, 1991 and 1990, respectively.
The accompanying notes are an integral part of the financial statements.
34
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Money Market Fund
--------------------------------------------------------------------------------
Year Year 04/01/94* Year Year 04/01/94*
Ended Ended to Ended Ended to
10/31/96 10/31/95 10/31/94 10/31/96 10/31/95 10/31/94
Class B Class B Class B Class C Class C Class C
---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations
- ---------------------------------
Net investment income (B)............. 0.05 0.05 0.02 0.05 0.05 0.02
Less distributions
- ------------------
Dividends from net investment income.. (0.05) (0.05) (0.02) (0.05) (0.05) (0.02)
----- ----- ----- ----- ----- -----
Net asset value, end of period........ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== =====
Total return................. 5.16% 5.60% 3.48%(D) 5.16% 5.60% 3.48%(D)
Net assets, end of period (000's)..... $3,062 $1,564 $312 $9,840 $9,394 $12,170
Ratio of operating expenses to average
net assets (C)....................... 0.50% 0.50% 0.50%(A) 0.50% 0.50% 0.50%(A)
Ratio of net investment income to average
net assets........................... 5.02% 5.52% 3.96%(A) 5.02% 5.46% 3.96%(A)
</TABLE>
- ------------------------------
* Commencement of operations
(A) Annualized
(B) After expense reimbursement by the adviser of $0.007 and $0.009 per share
for the Money Market Fund - Class B and $0.005 and $0.005 per share for the
Money Market Fund - Class C, for the years ended October 31, 1996 and 1995,
respectively and $0.0228 and $0.0037 per share for the Money Market Fund -
Classes B and C respectively, for the period April 1, 1994 to October 31,
1994.
(C) The ratio of operating expenses, before reimbursement by the adviser, was
1.18% and 1.41% for the Money Market Fund - Class B and 0.98% and 0.95% for
the Money Market Fund - Class C, for the years ended October 31, 1996 and
1995, respectively and 4.83% and 1.18% for the Money Market Fund - Classes
B and C respectively, for the period April 1, 1994 to October 31, 1994 on
an annualized basis.
(D) Historical total returns for Classes B and C shares are one year
performance returns which include Class A performance prior to April 1,
1994.
The accompanying notes are an integral part of the financial statements.
35
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
Small/Mid Cap Fund
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
COMMON STOCKS - 90.15%
Aerospace - 1.02%
Gulfstream Aerospace Corporation* 3,700 $87,412
Rohr Industries, Incorporated 5,000 92,500
------
179,912
Agricultural Products - 0.34%
DEKALB Genetics Corporation, Class B 1,500 59,250
------
Apparel & Textiles - 6.12%
Cintas Corporation 5,000 291,250
G & K Services, Class A 3,000 87,000
Gucci Group NV 4,800 331,200
Nautica Enterprises, 2,000 61,500
Incorporated*
Oakley, Incorporated* 6,000 89,250
Stage Stores, Incorporated* 4,700 85,775
Tommy Hilfiger Corporation* 2,500 130,000
---------
1,075,975
Business Services - 7.23%
Employee Solutions, Incorporated* 5,000 110,625
FactSet Research Systems,
Incorporated* 3,000 72,000
Gartner Group, Incorporated, Class A* 2,500 76,875
Leasing Solutions, Incorporated* 5,000 157,500
Loewen Group, Incorporated 4,900 194,162
Nokia Corporation 4,000 185,500
Paychex, Incorporated 1,400 79,800
Service Corporation International 13,800 393,300
---------
1,269,762
Chemicals - 0.35%
Waters Corporation* 2,000 62,000
------
Computers & Business Equipment - 4.45%
3Com Corporation* 4,900 331,362
Applix, Incorporated* 2,900 70,325
Medic Computer Systems, Incorporated* 5,500 155,375
Sundstrand Corpration 5,600 225,400
-------
782,462
Crude Petroleum & Natural Gas - 0.97%
B.J. Services Company* 3,800 170,525
-------
Drugs & Health Care - 4.79%
Access Health Marketing, Incorporated* 4,100 135,300
American Medical Response* 3,500 105,000
Biopsys Medical, Incorporated* 4,000 68,500
Centocor, Incorporated* 2,000 58,750
Conmed Corporation* 5,000 86,250
Guidant Corporation 3,400 156,825
IDEXX Laboratories, Incorporated* 1,000 39,250
Mentor Corporation 2,000 44,250
Phycor, Incorporated* 3,100 96,100
VISX, Incorporated* 2,000 50,500
-------
840,725
Electrical Equipment - 1.46%
American Power Conversion Corporation* 5,900 126,112
Cable Design Technologies Corporation* 5,000 130,000
-------
256,112
Electronics - 11.29%
Adaptec, Incorporated* 6,700 407,863
Altera Corporation* 4,500 279,000
Electronics For Imaging, Incorporated* 2,500 180,000
Glenayre Technologies, Incorporated* 1,500 38,625
Hologic, Incorporated* 6,700 152,425
Input/Output, Incorporated* 6,700 199,325
Maxim Integrated Products,
Incorporated* 1,600 56,000
PictureTel Corporation* 6,100 164,700
S3, Incorporated* 5,000 94,375
Target Therapeutics, Incorporated* 3,000 111,000
Tellabs, Incorporated* 1,300 110,662
Xilinx, Incorporated* 5,800 189,950
---------
1,983,925
Financial Services - 3.86%
Case Corporation 1,300 60,450
Green Tree Financial Corporation 5,400 213,975
Money Store, Incorporated* 15,700 404,275
-------
678,700
Hotels & Restaurants - 4.86%
Boston Market, Incorporated* 4,000 145,500
Landrys Seafood Restaurants* 3,000 61,500
Lone Star Steakhouse & Saloon,
Incorporated* 13,000 333,125
Mirage Resorts, Incorporated* 10,000 220,000
Outback Steakhouse, Incorporated* 4,000 92,750
-------
852,875
Industrial Machinery - 1.15%
Tyco International, Ltd. 2,000 99,250
U.S. Filter Corporation* 3,000 103,500
-------
202,750
Insurance - 2.94%
CompDent Corporation* 2,600 89,375
Equifax, Incorporated 6,000 178,500
MGIC Investment Corporation 2,300 157,837
Travelers/Aetna Property Casual
Corporation, Class A 3,000 90,000
-------
515,712
Investment Companies - 1.00%
The Charles Schwab Corporation 7,000 175,000
-------
Leisure Time - 4.12%
International Game Technology 18,000 380,250
Sports Authority, Incorporated* 14,200 344,350
-------
724,600
Miscellaneous Manufacturing - 0.55%
Blyth Industries, Incorporated 2,500 97,188
------
</TABLE>
The accompanying notes are an integral part of the financial statements.
36
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Medical Supplies - 0.38%
Heartport, Incorporated* 2,500 $65,938
------
Metal & Metal Products - 1.05%
Titanium Metals Corporation* 6,000 184,500
-------
Mobile Homes - 0.24%
Clayton Homes, Incorporated 2,500 42,187
------
Office Furnishings & Supplies - 1.19%
OfficeMax, Incorporated* 15,450 208,575
-------
Petroleum Services - 2.52%
Global Marine, Incorporated* 8,000 147,000
Halliburton Company 3,200 181,200
Smith International, Incorporated 3,000 114,000
-------
442,200
Plastics - 1.26%
Sealed Air Corporation* 5,700 221,588
-------
Pollution Control - 2.97%
United Waste Systems, Incorporated* 4,000 137,500
USA Waste Services, Incorporated* 12,000 384,000
-------
521,500
Retail Grocery - 0.61%
Safeway, Incorporated* 2,500 107,188
-------
Retail Trade - 5.73%
Dollar General Corporation 9,100 252,525
Nine West Group, Incorporated* 5,500 274,313
PETsMART, Incorporated* 4,000 108,000
Saks Holdings, Incorporated* 2,200 77,000
Rite Aid Corporation 3,600 122,400
TJX Companies, Incorporated 4,300 172,000
-----------
1,006,238
Software - 8.71%
Compuware Corporation* 3,900 205,725
HBO & Company 1,500 90,187
Informix Corporation* 15,400 341,688
Microchip Technology, Incorporated* 1,900 68,875
Parametric Technology Corporation* 6,200 303,025
Softkey International, Incorporated 5,400 109,350
Sterling Commerce, Incorporated* 6,700 188,438
Structural Dynamics Research
Corporation* 12,600 223,650
----------
1,530,938
Telecommunication Services - 4.75%
Ascend Communications, Incorporated* 2,800 183,050
Cascade Communications Corporation* 1,500 108,937
EXCEL Communications, Incorporated* 2,700 70,200
MFS Communications, Incorporated* 1,700 85,212
PairGain Technologies, Incorporated* 1,100 75,763
QUALCOMM, Incorporated* 5,300 210,675
Univision Communications,
Incorporated, Class A 3,000 101,250
-------
835,087
Telephone - 2.98%
LCI International, Incorporated* 8,100 258,188
Worldcom, Incorporated* 10,900 265,687
-------
523,875
Trucking & Freight - 1.25%
Tidewater, Incorporated 5,000 218,750
-------
TOTAL COMMON STOCKS
(Cost $15,239,875) $15,836,037
----------
<CAPTION>
Principal
SHORT TERM INVESTMENTS - 9.85% Amount Value
------ -----
<S> <C> <C>
Barton Capital Corporation,
5.27% due 11/08/96 $800,000 $799,180
Commed Fuel, Incorporated,
5.25% due 11/05/96 800,000 799,534
Seven Seas Money Market Fund 132,198 132,198
---------
1,730,912
TOTAL INVESTMENTS
(Small/Mid Cap Fund) (Cost $16,970,787) $17,566,949
==========
<CAPTION>
International Small Cap Fund
Shares Value
------ -----
<S> <C> <C>
COMMON STOCKS - 77.38%
Agricultural Machinery - 1.78%
Kverneland AS 9,500 $223,326
-------
Agricultural Products - 0.95%
London Sumatra Indonesia* 46,000 119,478
-------
Banking - 3.54%
Banco de A. Edwards, ADR 5,975 114,272
Banco Latinoamericano
de Exportaciones SA 3,700 193,325
Bank Tiara 150,000 135,234
-------
442,831
Broadcasting - 3.15%
Flextech PLC 25,800 258,252
Sistem Televisyen Malaysia 60,000 135,365
-------
393,617
Business Services - 2.74%
Altran Technologies SA 450 134,670
Kobenhavns Lufthavne 2,000 208,179
-------
342,849
Computers & Business Equipment - 0.89%
Enator AB* 5,000 111,015
-------
Chemicals - 0.57%
Budi Acid Jaya 55,000 70,837
------
Conglomerates - 3.80%
Amer Group, Ltd. 7,000 159,757
Hunter Douglas NV 3,300 233,394
Solid Group, Incorporated* 400,000 82,192
-------
475,343
</TABLE>
The accompanying notes are an integral part of the financial statements.
37
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Containers & Glass - 1.08%
International Container 205,000 $134,560
-------
Drugs & Health Care - 3.09%
Medeva PLC 12,275 210,209
Schwarz Pharma AG 2,300 177,087
-------
387,296
Electrical Equipment - 0.95%
TLG PLC 63,200 118,294
-------
Electronics - 2.65%
Gold Peak Industries, Ltd. 180,000 111,740
VTech Holdings, Ltd.* 112,800 220,284
-------
332,024
Financial Services - 4.43%
Guoco Group 43,000 227,452
JBA Holdings 21,000 176,025
Manhattan Card Company 304,000 150,384
-------
553,861
Food & Beverages - 5.59%
Doutor Coffee Company 5,000 221,773
Grolsch NV 5,600 224,436
J.D. Wetherspoon PLC 13,158 253,780
-------
699,989
Household Appliances Furnishing - 3.71%
DFS Furniture Company 21,000 186,450
Industrie Natuzzi SPA, ADR 2,875 130,453
Laox Company 8,800 147,627
-------
464,530
Industrial Machinery - 4.30%
IHC Caland NV 3,900 217,675
KCI Konecranes International 5,950 164,002
Tomra Systems AS 11,000 156,015
-------
537,692
International Oil - 4.07%
British-Borneo Petroleum
Syndicate PLC 12,000 128,320
Cairn Energy PLC* 22,000 130,339
Gulf Canada Resources, Ltd.* 36,500 250,937
-------
509,596
Leisure Time - 4.59%
AAPC, Ltd. 155,009 93,379
Cinar Films, Incorporated, Class B* 5,175 126,787
Euro Disney SCA* 17,133 33,680
Tiemco 2,000 151,069
Village Roadshow 41,000 169,642
-------
574,557
Miscellaneous - 4.11%
Axxicon Group NV 4,000 92,415
Noritsu Koki Company 4,000 209,038
Rofin-Sinar Technologies, Incorporated* 17,400 213,150
-------
514,603
Office Furnishings & Supplies - 1.01%
Turbon International AG 5,650 126,849
-------
Paper - 1.65%
Guilbert SA 1,300 206,729
-------
Petroleum Services - 1.79%
Petroleum Geological Services AS 6,500 222,625
-------
Publishing - 1.77%
Dorling Kindersley Holdings PLC 25,000 221,761
-------
Retail Trade - 4.16%
Bulgari SPA 9,700 168,167
Matahari Putra Prima 85,000 73,896
Next PLC 19,800 179,824
Paris Miki, Incorporated 2,500 98,810
-------
520,697
Software - 3.27%
Baan Company NV* 4,500 166,500
Psion PLC 28,900 199,440
Dassault Systemes SA* 1,000 43,032
--------
408,972
Telecommunication Services - 1.69%
Comcast UK Cable Partners,
Ltd., Class A* 10,500 132,562
Smartone Telecommunications* 37,000 78,956
-------
211,518
Telephone - 1.57%
Cellular Communications International* 6,250 196,094
-------
Toys, Amusements & Sporting Goods - 1.72%
Salomon SA 1,000 89,584
Skis Rossignol SA 4,600 125,066
-------
214,650
Transportation - 2.77%
ASG AB 8,800 183,342
Tranz Rail Holdings, Ltd., ADR* 10,000 163,750
-------
347,092
TOTAL COMMON STOCKS
(Cost $9,413,514) $9,683,285
---------
PREFERRED STOCKS - 2.10%
Financial Services - 2.10%
Marschollek, Lautenschlaeger und
Partner AG 1,900 263,471
-------
TOTAL PREFERRED STOCKS (Cost $213,783) $263,471
-------
RIGHTS - 0.32%*
Financial Services - 0.02%
Marschollek, Lautenschlaeger und
Partner AG (Expiration date 11/11/96;
strike price DEM 190) 1,900 2,384
-----
Retail Trade - 0.30%
Matahari Putra Prima (Expiration date
11/14/96; strike price IDR 1000) 85,000 37,404
------
TOTAL RIGHTS (Cost $0) $39,788
------
</TABLE>
The accompanying notes are an integral part of the financial statements.
38
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
REPURCHASE AGREEMENT - 20.20%
$2,528,000 Repurchase Agreement with State Street
Bank & Trust Company dated 10/31/96
at 4.75%, to be repurchased at $2,528,334
on 11/01/96, collateralized by $2,005,000
U.S. Treasury Bonds, 9.25% due 02/15/16
(valued at $2,620,516, including interest) $2,528,000
TOTAL INVESTMENTS (International
Small Cap Fund) (Cost $12,155,297) $12,514,544
===========
Growth Equity Fund
Shares Value
------ -----
<S> <C> <C>
COMMON STOCKS - 85.91%
Aerospace - 4.23%
Boeing Company 1,100 $104,912
Computer Sciences Corporation* 2,475 183,769
Gulfstream Aerospace Corporation* 7,000 165,375
Lockheed Martin Corporation 1,200 107,550
-------
561,606
Banking - 1.28%
BankAmerica Corporation 1,850 169,275
-------
Business Services - 2.82%
First Data Corporation 1,350 107,662
Fiserv, Incorporated* 3,600 138,150
Gartner Group, Incorporated* 3,200 98,400
Oakley, Incorporated* 2,050 30,494
-------
374,706
Chemicals - 0.81%
The B.F. Goodrich Company 2,550 108,056
-------
Computers & Business Equipment - 7.50%
3Com Corporation* 2,100 142,012
Cisco Systems, Incorporated* 2,625 162,422
Compaq Computer Corporation* 2,050 142,731
Fore Systems* 3,450 137,138
International Business Machines,
Corporation 1,550 199,950
Oce-Van Der Grinten NV 750 80,008
Sun Microsystems, Incorporated* 2,150 131,150
-------
995,411
Conglomerates - 0.75%
Hunter Douglas NV 1,400 99,016
------
Construction & Mining Equipment - 0.66%
Foster Wheeler Corporation 2,150 88,150
------
Containers & Glass - 0.65%
Crown Cork & Seal, Incorporated 1,800 86,400
------
Domestic Oil - 0.57%
Phillips Petroleum Company 1,850 $75,850
------
Drugs & Health Care - 11.13%
Astra AB 400 17,950
Astra AB - SEK 2,150 98,088
Baxter International, Incorporated 2,450 101,981
Bristol Myers Squibb Company 1,375 145,406
Cardinal Health, Incorporated 1,441 113,119
Columbia/HCA Healthcare Corporation 4,425 158,194
Johnson & Johnson 2,100 103,425
Oxford Health Plans, Incorporated* 3,100 141,050
Pacificare Health Systems, Incorporated* 1,000 70,250
Phycor, Incorporated 3,700 114,700
SmithKline Beecham PLC 2,125 133,078
Tenet Healthcare Corporation* 1,750 36,531
United States Surgical Corporation 2,025 84,797
Warner-Lambert Company 2,500 159,063
---------
1,477,632
Electrical Equipment - 2.67%
Duracell International, Incorporated 1,900 126,825
General Electric Company 2,350 227,362
-------
354,187
Electronics - 13.65%
ADC Telecommunications,
Incorporated* 2,350 160,681
Altera Corporation* 3,350 207,700
Analog Devices, Incorporated* 3,000 78,000
Andrew Corporation* 1,450 70,688
Gateway 2000, Incorporated* 2,300 108,244
Intel Corporation 4,250 466,969
Linear Technology Corporation 900 30,150
Maxim Integrated Products,
Incorporated* 2,100 73,500
Picturetel Corporation* 4,425 119,475
Tellabs, Incorporated* 2,500 212,812
Xilinx, Incorporated* 8,700 284,925
---------
1,813,144
Financial Services - 3.15%
Associates First Capital Corporation 3,400 147,475
The Chase Manhattan Corporation 1,234 105,816
Federal Home Loan Mortgage
Corporation 775 78,275
Federal National Mortgage Association 2,225 87,053
-------
418,619
Food & Beverages - 2.13%
The Coca-Cola Company 2,550 128,775
Coca-Cola Enterprises, Incorporated 3,625 154,516
-------
283,291
Hotels & Restaurants - 4.70%
The Cheesecake Factory, Incorporated* 2,575 47,637
HFS, Incorporated* 1,550 113,538
Host Marriot Corporation 5,650 86,869
ITT Corporation* 1,750 73,500
</TABLE>
The accompanying notes are an integral part of the financial statements.
39
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Hotels & Restaurants - continued
Marriot International, Incorporated 2,800 $159,250
Planet Hollywood International,
Incorporated* 1,900 39,425
Sun International Hotels, Ltd.* 2,200 103,950
-------
624,169
Household Appliances Furnishing - 1.21%
Sunbeam Corporation 6,500 160,062
-------
Insurance - 1.43%
Everest Reinsurance Holdings 3,525 89,887
General Re Corporation 350 51,538
The Progressive Corporation 700 48,125
-------
189,550
International Oil - 2.73%
The British Petroleum Company PLC 650 83,606
Exxon Corporation 750 66,469
Gulf Canada Resources, Ltd.* 5,000 34,375
Royal Dutch Petroleum Company 400 66,150
Texaco, Incorporated 1,100 111,788
-------
362,388
Leisure Time - 0.83%
International Game Technology 5,200 109,850
-------
Office Furnishings & Supplies - 0.37%
Staples, Incorporated* 2,650 49,356
------
Petroleum Services - 1.94%
Global Marine, Incorporated* 3,000 55,125
Rowan Companies, Incorporated* 5,500 123,062
Schlumberger, Ltd. 800 79,300
-------
257,487
Retail Grocery - 1.57%
Kroger Company* 1,700 75,862
Safeway, Incorporated* 3,100 132,913
-------
208,775
Retail Trade - 2.90%
Borders Group, Incorporated* 1,325 41,737
Consolidated Stores Corporation* 2,600 100,425
Federated Department Stores,
Incorporated* 2,800 92,400
The Home Depot, Incorporated 2,750 150,563
-------
385,125
Software - 8.23%
BMC Software, Incorporated* 1,900 157,700
Cadence Design Systems,
Incorporated* 4,275 156,038
Computer Associates International,
Incorporated 3,750 221,719
Documentum, Incorporated* 950 35,387
Microsoft Corporation* 500 68,625
Parametric Technology Corporation* 3,300 161,287
PeopleSoft, Incorporated* 1,875 168,281
Shared Medical System 2,575 124,244
---------
1,093,281
Telecommunication Services - 5.84%
Advanced Fibre Communications* 200 $11,425
Ascend Communications, Incorporated* 2,600 169,975
Cascade Communications Corporation* 2,500 181,563
Korea Mobile Telecommunications, ADR* 4,600 57,500
Lucent Technologies, Incorporated 2,750 129,250
Premisys Communications,
Incorporated* 2,700 135,000
TeleCom Brazil-Telebras, ADR 1,225 91,263
-------
775,976
Telephone - 2.16%
DDI Corporation 10 75,096
Worldcom, Incorporated* 8,700 212,062
-------
287,158
TOTAL COMMON STOCKS
(Cost $10,705,235) $11,408,520
----------
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
REPURCHASE AGREEMENT - 14.09%
$1,871,000 Repurchase Agreement with State Street Bank
& Trust Company dated 10/31/96 at 4.75%,
to be repurchased at $1,871,247 on 11/01/96,
collateralized by $1,835,000 U.S. Treasury
Note, 7.50% due 10/31/99 (valued at
$1,911,934, including interest) $1,871,000
---------
TOTAL INVESTMENTS
(Growth Equity Fund) (Cost $12,576,235) $13,279,520
==========
<CAPTION>
Global Equity Fund
Shares Value
------ -----
<S> <C> <C>
COMMON STOCKS - 99.07%
Air Travel - 1.66%
AMR Corporation* 22,000 $1,848,000
---------
Aluminum - 1.04%
Aluminum Company of America 19,800 1,160,775
---------
Automobiles - 3.62%
General Motors Corporation 24,400 1,314,550
Peugeot SA 8,000 834,034
Volkswagen AG 4,800 1,889,857
---------
4,038,441
Banking - 11.19%
ABN AMRO Holdings NV 21,100 1,192,603
Bank of New York, Incorporated 79,700 2,640,063
Banque Nationale de Paris 30,900 1,156,219
Den Norske Bank 183,700 610,337
First Chicago NBD Corporation 25,900 1,320,900
HSBC Holdings 92,000 1,885,221
Jardine Strategic Holdings, Ltd. 735,000 2,396,100
Mellon Bank Corporation 19,700 1,282,963
----------
12,484,406
</TABLE>
The accompanying notes are an integral part of the financial statements.
40
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Chemicals - 6.05%
Akzo Nobel NV, ADS 9,600 $1,209,690
BASF AG 38,600 1,233,650
Bayer AG 64,000 2,418,172
Potash Corporation Saskatchewan,
Incorporated 26,700 1,890,636
---------
6,752,148
Computers & Business Equipment - 2.54%
Data General Corporation 62,700 932,663
Olivetti & C. SPA* 960,000 279,077
Tandy Corporation 43,200 1,625,400
---------
2,837,140
Conglomerates - 1.04%
CSR, Ltd. 344,000 1,156,119
---------
Construction & Mining Equipment - 0.69%
Greenfield Industries, Incorporated 29,000 768,500
-------
Construction Materials - 0.99%
Holderbank Financier Glarus AG 1,600 1,107,595
---------
Containers & Glass - 1.02%
Toyo Seikan Kaisha 36,000 1,138,290
---------
Crude Petroleum & Natural Gas - 1.08%
Elf Aquitaine 15,000 1,199,413
---------
Electric Utilities - 3.39%
Iberdrola SA 120,700 1,281,778
Southern Electric PLC 63,000 659,326
VEBA AG 34,500 1,840,046
---------
3,781,150
Electrical Equipment - 0.96%
Hitachi 121,000 1,073,383
---------
Electronics - 3.08%
Ascom Holdings AG 560 544,937
GenRad, Incorporated* 56,000 1,134,000
SGS Thomson Microelectronics,
Incorporated* 12,200 646,451
TDK Corporation 19,000 1,114,751
---------
3,440,139
Financial Services - 3.05%
Enhance Financial Services Group,
Incorporated 22,450 749,269
Internationale Nederlanden Groep NV 56,150 1,750,654
PennCorp Financial Group, Incorporated 5,850 202,556
UST Corporation 39,300 704,944
---------
3,407,423
Food & Beverages - 8.86%
Danone 4,000 547,677
Kao Corporation 281,000 3,307,189
Nestle SA 1,600 1,737,975
Reckitt & Colman PLC 209,000 2,422,005
Tate & Lyle PLC 239,850 1,866,021
---------
9,880,867
Household Appliances Furnishing - 2.06%
Matsushita Electric Industrial
Company, Ltd. 72,000 $1,150,938
Philips Electronics NV 32,400 1,141,934
---------
2,292,872
Household Products - 2.11%
Unilever 111,900 2,351,284
---------
Industrial Machinery - 4.83%
Bobst AG 400 518,038
Schindler Holding AG 600 611,393
Sulzer AG 1,000 568,829
Sumitomo Rubber Industries 80,000 566,334
Tecumseh Products Company 21,600 1,215,000
Valeo 31,800 1,908,311
---------
5,387,905
Insurance - 3.66%
MBIA, Incorporated 20,500 1,816,812
Sumitomo Marine & Fire 148,000 1,060,718
WPP Group PLC, ADR* 325,000 1,206,055
---------
4,083,585
Investment Companies - 0.39%
India Gateway Fund 73,890 359,105
Indian Opportunities Fund 8,518 73,763
--------
432,868
Paper - 1.43%
Boise Cascade Corporation 51,600 1,599,600
---------
Petroleum Services - 1.55%
Repsol SA 53,100 1,733,308
---------
Photography - 1.98%
Fuji Photo Film Company 77,000 2,211,497
---------
Pollution Control - 2.20%
Browning-Ferris Industries,
Incorporated 93,600 2,457,000
---------
Publishing - 2.22%
Houghton Mifflin Company 49,800 2,471,325
---------
Railroads & Equipment - 0.99%
East Japan Railway 240 1,102,455
---------
Retail Trade - 9.36%
Coles Myer, Ltd. 322,000 1,176,617
Delhaize-Le Lion SA 21,100 1,180,491
G.I.B. Holdings, Ltd. 14,100 594,921
Karstadt AG 6,800 2,479,952
Limited, Incorporated 61,200 1,124,550
D.S. Revco, Incorporated* 20,200 608,525
Vendex International NV 15,000 605,587
Waban, Incorporated* 102,300 2,672,588
----------
10,443,231
</TABLE>
The accompanying notes are an integral part of the financial statements.
41
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Software - 0.44%
Novell, Incorporated* 53,200 $492,100
-------
Steel - 0.25%
Lukens, Incorporated 20,400 280,500
-------
Telecommunication Services - 2.79%
Comsat Corporation 103,500 2,432,250
Lucent Technologies, Incorporated 5,995 281,765
US Order, Incorporated* 41,300 400,094
----------
3,114,109
Telephone - 8.74%
American Telephone & Telegraph
Corporation 60,800 2,120,400
MCI Communications 68,500 1,721,063
Corporation
Nippon Telegraph & Telephone
Corporation 419 2,925,695
STET 650,000 1,731,048
Telefonica de Espana SA 62,700 1,257,980
---------
9,756,186
Tobacco - 2.71%
B.A.T. Industries PLC 87,000 603,223
Philip Morris Companies, Incorporated 26,100 2,417,512
---------
3,020,735
Trucking & Freight - 1.10%
Peninsular & Oriental Steam
Navigation Company 125,000 1,224,772
---------
TOTAL COMMON STOCKS
(Cost $111,327,852) $110,529,121
-----------
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
REPURCHASE AGREEMENT- 0.93%
$1,041,000 Repurchase Agreement with State Street Bank & Trust Company
dated 10/31/96 at 4.75%, to be repurchased at $1,041,137 on
11/01/96, collateralized by $845,000 U.S. Treasury Bond, 8.75%
due 05/15/17 (valued at $1,097,358, including
interest) $1,041,000
---------
TOTAL INVESTMENTS
(Global Equity Fund) (Cost $112,368,852) $111,570,121
============
<CAPTION>
Value Equity Fund
Shares Value
------ -----
<S> <C> <C>
COMMON STOCKS - 90.12%
Aluminum - 0.77%
Reynolds Metals Company 19,200 $1,080,000
---------
Auto Parts - 0.65%
Eaton Corporation* 10,000 597,500
Genuine Parts Company 7,000 306,250
-------
903,750
Automobiles - 0.64%
Ford Motor Company 11,200 $350,000
General Motors Corporation 10,100 544,137
-------
894,137
Banking - 8.89%
Banc One Corporation 17,900 758,513
BankBoston Corporation 16,800 1,075,200
Bankers Trust New York Corporation 10,700 904,150
Fleet Financial Group, Incorporated 23,000 1,147,125
Mellon Bank Corporation 31,200 2,031,900
Mercantile Bankshares Corporation 14,100 424,762
J.P. Morgan & Company, Incorporated 16,100 1,390,638
National City Corporation 20,000 867,500
PNC Bank Corporation 21,500 779,375
Signet Banking Corporation 20,000 577,500
U.S. Bancorp 18,000 720,000
Wells Fargo & Company 6,500 1,736,312
----------
12,412,975
Business Services - 1.68%
H & R Block, Incorporated 33,000 816,750
Deluxe Corporation 9,000 293,625
R.R. Donnelley & Sons Company 25,900 786,712
PHH Corporation 15,000 446,250
---------
2,343,337
Chemicals - 6.48%
Betz Dearborn, Incorporated 19,000 997,500
Ciba-Geigy AG* 1,000 1,231,804
The Dow Chemical Company 15,500 1,205,125
E.I. Du Pont De Nemours & Company 20,400 1,892,100
FMC Corporation 6,000 441,750
Great Lakes Chemical Corporation 17,000 886,125
Lubrizol Corporation 25,000 743,750
Nalco Chemical Company 24,000 873,000
Witco Corporation 24,900 771,900
---------
9,043,054
Computers & Business Equipment - 0.26%
Pitney Bowes, Incorporated 6,400 357,600
-------
Conglomerates - 0.34%
Lonrho PLC 197,000 480,957
-------
Construction Materials - 0.40%
Armstrong World Industries, Incorporated 8,400 560,700
-------
Cosmetics & Toiletries - 0.76%
International Flavors & Fragrances,
Incorporated 25,700 1,063,337
---------
Crude Petroleum & Natural Gas - 0.20%
Union Pacific Resources Group,
Incorporated 9,994 274,834
-------
</TABLE>
The accompanying notes are an integral part of the financial statements.
42
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Domestic Oil - 2.76%
Atlantic Richfield Company 20,400 $2,703,000
Pennzoil Company 1,400 71,400
Sun Company, Incorporated 11,400 255,075
USX-Marathon Group 38,000 831,250
---------
3,860,725
Drugs & Health Care - 7.91%
Abbott Laboratories 26,900 1,361,813
Allegiance Corporation* 3,480 65,250
American Home Products Corporation 24,900 1,525,125
Bausch & Lomb, Incorporated 19,000 641,250
Baxter International, Incorporated 21,500 894,937
Eli Lilly & Company 17,300 1,219,650
Pharmacia & Upjohn, Incorporated 39,000 1,404,000
SmithKline Beecham PLC, ADR 22,700 1,421,588
Tambrands, Incorporated 20,000 852,500
Warner-Lambert Company 26,000 1,654,250
----------
11,040,363
Electric Utilities - 5.79%
Baltimore Gas & Electric Company 16,500 449,625
Dominion Resources, Incorporated 17,000 641,750
DQE, Incorporated 10,000 287,500
Edison International 25,800 509,550
Entergy Corporation 30,000 840,000
Florida Progress Corporation 9,000 300,375
GPU, Incorporated 9,000 295,875
Ohio Edison Company 20,000 417,500
Pacific Gas & Electric Company 27,900 655,650
PacifiCorp 40,000 845,000
PECO Energy Company 36,000 909,000
Public Service Enterprise Group,
Incorporated 24,500 658,437
Southern Company 22,400 495,600
Unicom Corporation 30,000 780,000
---------
8,085,862
Electrical Equipment - 3.34%
Cooper Industries, Incorporated 19,000 764,750
General Electric Company 30,100 2,912,175
Hubbell, Incorporated 24,100 985,087
---------
4,662,012
Electronics - 0.81%
AMP, Incorporated 8,800 298,100
Honeywell, Incorporated 13,500 838,687
---------
1,136,787
Financial Services - 5.30%
American Express Company 27,000 1,269,000
Chase Manhattan Corporation 28,500 2,443,875
Federal National Mortgage Association 32,800 1,283,300
Student Loan Marketing Association 14,000 1,158,500
Travelers Group, Incorporated 23,000 1,247,750
---------
7,402,425
Food & Beverages - 5.18%
General Mills, Incorporated 27,500 1,570,938
H.J. Heinz Company 35,000 1,242,500
McCormick & Company, Incorporated 44,000 1,061,500
Quaker Oats Company 39,000 1,384,500
Sara Lee Corporation 17,000 603,500
Unilever NV 9,000 1,375,875
---------
7,238,813
Forest Products - 1.07%
Georgia Pacific Corporation 19,900 1,492,500
---------
Gas & Pipeline Utilities - 0.14%
TransCanada Pipelines, Ltd. 12,000 202,500
-------
Gold - 0.55%
Newmont Mining Corporation 16,500 763,125
-------
Hotels & Restaurants - 0.36%
ITT Corporation* 12,000 504,000
-------
Household Products - 0.80%
Corning, Incorporated 29,000 1,123,750
---------
Industrial Machinery - 0.12%
TRINOVA Corporation 5,000 164,375
-------
Insurance - 3.46%
Alexander & Alexander Services,
Incorporated 7,500 114,375
American General Corporation 36,100 1,344,725
Lincoln National Corporation,
Incorporated 11,900 577,150
Provident Companies, Incorporated 13,000 482,625
SAFECO Corporation 9,000 339,750
St. Paul Companies, Incorporated 13,000 706,875
Travelers/Aetna Property Casual
Corporation 1,500 45,000
UNUM Corporation 4,000 251,500
USF & G Corporation 30,000 570,000
Willis Corroon Group PLC 40,000 395,000
---------
4,827,000
International Oil - 8.01%
Amoco Corporation 16,800 1,272,600
The British Petroleum Company PLC 9,800 1,260,525
Chevron Corporation 23,600 1,551,700
Exxon Corporation 25,800 2,286,525
Mobil Corporation 8,800 1,027,400
Royal Dutch Petroleum Company 9,700 1,604,137
Texaco, Incorporated 21,500 2,184,938
----------
11,187,825
Liquor - 1.57%
Anheuser-Busch Companies,
Incorporated 31,400 1,208,900
Brown-Forman Corporation, Class B 22,800 986,100
---------
2,195,000
Newspapers - 0.54%
Gannett, Incorporated 10,000 758,750
-------
</TABLE>
The accompanying notes are an integral part of the financial statements.
43
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Paper - 4.36%
Consolidated Papers, Incorporated 14,500 $ 726,813
International Paper Company 23,600 1,008,900
James River Corporation of Virginia 16,000 504,000
Kimberly Clark Corporation 12,000 1,119,000
Minnesota Mining & Manufacturing
Company 17,200 1,317,950
Union Camp Corporation 28,900 1,408,875
---------
6,085,538
Petroleum Services - 0.69%
McDermott International,
Incorporated 14,000 248,500
Repsol SA 22,000 717,750
-------
966,250
Photography - 0.83%
Eastman Kodak Company 14,500 1,156,375
---------
Publishing - 1.68%
Dun & Bradstreet Corporation 16,000 926,000
McGraw-Hill Companies, Incorporated 15,000 703,125
The Reader's Digest Association,
Incorporated 20,200 719,625
---------
2,348,750
Railroads & Equipment - 1.01%
Conrail, Incorporated 5,400 513,675
GATX Corporation 5,000 238,750
Union Pacific Corporation 11,800 662,275
---------
1,414,700
Real Estate - 1.87%
General Growth Properties, Incorporated 8,000 202,000
Rouse Company 9,000 228,375
Security Capital Pacific Trust 6,000 135,000
Simon DeBartolo Group, Incorporated 60,100 1,585,138
Weingarten Realty Investors 12,000 460,500
---------
2,611,013
Retail Grocery - 0.58%
Fleming Companies, Incorporated 11,000 191,125
Grand Metropolitan PLC 20,000 612,500
-------
803,625
Retail Trade - 1.24%
May Department Stores Company 12,600 596,925
J.C. Penney Company, Incorporated 21,500 1,128,750
---------
1,725,675
Telephone - 6.47%
ALLTEL Corporation 31,100 948,550
American Telephone & Telegraph
Corporation 38,400 1,339,200
BCE, Incorporated 21,100 970,600
Bell Atlantic Corporation 14,600 879,650
BellSouth Corporation 31,100 1,267,325
GTE Corporation 30,100 1,267,963
Pacific Telesis Group 17,700 601,800
SBC Communications, Incorporated 13,400 651,575
Southern New England
Telecommunications Corporation 14,100 525,225
U.S. West, Incorporated 19,300 586,237
---------
9,038,125
Tobacco - 2.38%
American Brands, Incorporated 26,000 1,241,500
Philip Morris Companies, Incorporated 10,100 935,513
RJR Nabisco Holdings Corporation 12,800 369,600
UST, Incorporated 27,000 779,625
---------
3,326,238
Trucking & Freight - 0.23%
Alexander & Baldwin, Incorporated 13,000 320,125
-------
TOTAL COMMON STOCKS
(Cost $123,711,971) $125,856,907
-----------
<CAPTION>
Principal
SHORT TERM INVESTMENTS - 9.88% Amount Value
------ -----
<S> <C> <C>
BHF Finance Delaware,
5.25% due 11/25/96 $3,815,000 $ 3,801,648
General Electric Capital Corporation,
5.25% due 12/11/96 1,105,000 1,098,554
Kellogg Company,
5.25% due 12/13/96 1,950,000 1,938,056
Minnesota Mining & Manufacturing
Company, 5.23% due 12/16/96 5,000,000 4,967,313
Warner-Lambert Company,
5.25% due 12/02/96 2,000,000 1,990,958
----------
13,796,529
TOTAL INVESTMENTS
(Value Equity Fund) (Cost $137,508,500) $139,653,436
===========
<CAPTION>
Growth and Income Fund
Shares Value
------ -----
<S> <C> <C>
COMMON STOCKS - 98.0.2%
Aerospace - 3.41%
Boeing Company 14,500 $ 1,382,937
Northrop Grumman Corporation 19,500 1,574,625
United Technologies Corporation 10,800 1,390,500
---------
4,348,062
Air Travel - 0.92%
Southwest Airlines Company 52,000 1,170,000
---------
Aluminum - 0.90%
Aluminium Company of America 19,600 1,149,050
---------
Automobiles - 2.32%
Ford Motor Company 94,703 2,959,469
---------
Banking - 5.84%
Citicorp 30,200 2,989,800
First Union Corporation 23,000 1,673,250
NationsBank Corporation 29,400 2,770,950
---------
7,434,000
Broadcasting - 1.20%
Viacom, Incorporated* 47,000 1,533,375
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
44
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Business Services - 2.98%
Cognizant Corporation 24,000 $750,000
First Data Corporation 20,800 1,658,800
Nokia Corporation, ADR 30,000 1,391,250
---------
3,800,050
Chemicals - 3.34%
The Dow Chemical Company 26,000 2,021,500
E.I. Du Pont De Nemours & Company 8,000 742,000
Zeneca Group PLC, ADR 18,300 1,491,450
---------
4,254,950
Computers & Business Equipment - 5.78%
3Com Corporation* 26,000 1,758,250
Hewlett-Packard Company 34,400 1,517,900
International Business Machines
Corporation 23,000 2,967,000
Xerox Corporation 24,000 1,113,000
---------
7,356,150
Construction & Mining Equipment - 1.90%
Caterpillar, Incorporated 18,300 1,255,838
Foster Wheeler Corporation 28,500 1,168,500
---------
2,424,338
Crude Petroleum & Natural Gas - 0.53%
Union Pacific Resources Group,
Incorporated 24,327 668,984
-------
Drugs & Health Care - 10.74%
Abbott Laboratories 48,000 2,430,000
Bristol-Myers Squibb Company 13,200 1,395,900
Johnson & Johnson 28,000 1,379,000
Merck & Company, Incorporated 15,500 1,148,938
Pfizer, Incorporated 29,200 2,416,300
Pharmacia & Upjohn, Incorporated 17,000 612,000
Rhone Poulenc Rorer, Incorporated 26,200 1,758,675
Tenet Healthcare Corporation* 54,600 1,139,775
Warner-Lambert Company 22,000 1,399,750
----------
13,680,338
Electric Utilities - 2.75%
DPL, Incorporated 45,000 1,074,375
Pinnacle West Capital Corporation 43,000 1,327,625
Texas Utilities Company 27,000 1,093,500
---------
3,495,500
Electrical Equipment - 3.31%
General Electric Company 28,000 2,709,000
Hubbell, Incorporated 37,000 1,512,375
---------
4,221,375
Electronics - 2.58%
AMP, Incorporated 51,000 1,727,625
Intel Corporation 14,200 1,560,225
---------
3,287,850
Financial Services - 8.64%
Allstate Corporation 44,000 2,469,500
American Express Company 51,000 2,397,000
Federal National Mortgage Association 50,800 1,987,550
State Street Boston Corporation 25,000 1,584,375
Travelers Group, Incorporated 47,400 2,571,450
----------
11,009,875
Food & Beverages - 2.46%
General Mills, Incorporated 20,000 1,142,500
Sara Lee Corporation 56,000 1,988,000
---------
3,130,500
Forest Products - 0.82%
Georgia-Pacific Corporation 14,000 1,050,000
---------
Hotels and Restaurants - 1.10%
McDonalds Corporation 31,500 1,397,812
---------
Household Products - 2.71%
Colgate Palmolive Company 17,000 1,564,000
Procter & Gamble Company 19,000 1,881,000
---------
3,445,000
Industrial Machinery - 0.91%
York International Corporation 24,000 1,161,000
---------
Insurance - 2.56%
ACE, Ltd. 24,200 1,324,950
Chubb Corporation 38,600 1,930,000
---------
3,254,950
International Oil - 6.61%
Amoco Corporation 25,700 1,946,775
Chevron Corporation 30,000 1,972,500
Exxon Corporation 23,500 2,082,688
Royal Dutch Petroleum Company 14,600 2,414,475
---------
8,416,438
Liquor - 1.20%
Anheuser-Busch Companies,
Incorporated 39,800 1,532,300
---------
Newspapers - 1.61%
Gannett, Incorporated 27,000 2,048,625
---------
Non-Ferrous Metals - 0.63%
Engelhard Corporation 43,825 799,806
-------
Paper - 4.55%
International Paper Company 50,000 2,137,500
Kimberly Clark Corporation 22,000 2,051,500
Minnesota Mining & Manufacturing
Company 21,000 1,609,125
---------
5,798,125
Petroleum Services - 1.68%
Schlumberger, Ltd. 21,600 2,141,100
---------
Photography - 0.51%
Eastman Kodak Company 8,200 653,950
-------
</TABLE>
The accompanying notes are an integral part of the financial statements.
45
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Railroads & Equipment - 1.06%
Union Pacific Corporation 24,000 $1,347,000
---------
Retail Trade - 4.88%
The May Department Stores Company 32,800 1,553,900
J.C. Penney Company, Incorporated 28,000 1,470,000
Sears Roebuck & Company 22,000 1,064,250
Wal-Mart Stores, Incorporated 80,000 2,130,000
---------
6,218,150
Software - 1.80%
Microsoft Corporation 9,900 1,358,775
Policy Management Systems
Corporation* 26,000 936,000
-------
2,294,775
Telecommunication Services - 0.53%
Lucent Technologies, Incorporated 14,246 669,562
-------
Telephone - 4.46%
American Telephone and Telegraph
Corporation 31,000 1,081,125
MCI Communications Corporation 42,000 1,055,250
NYNEX Corporation 37,000 1,646,500
SBC Communications, Incorporated 39,000 1,896,375
---------
5,679,250
Tires & Rubber - 0.79%
The Goodyear Tire and Rubber
Company 22,000 1,009,250
---------
TOTAL COMMON STOCKS
(Cost $98,171,600) $124,840,959
-----------
PREFERRED STOCKS - 0.87%
Domestic Oil - 0.87%
Sun Company, Incorporated, Series A 47,000 1,110,375
---------
TOTAL PREFERRED STOCKS
(Cost $1,427,778) $1,110,375
---------
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
REPURCHASE AGREEMENT - 1.11%
$1,410,000 Repurchase Agreement with Swiss Bank dated
10/31/96 at 5.51%, to be repurchased at
$1,410,216 on 11/01/96, collateralized
by $1,369,00 Treasury Note, 7.375% due
11/15/97 (valued at $1,439,325,
including interest) $1,410,000
---------
TOTAL INVESTMENTS
(Growth & Income Fund) (Cost $101,009,378) $127,361,334
===========
<CAPTION>
International Growth and Income Fund
Shares Value
------ -----
<S> <C> <C>
COMMON STOCKS - 83.37%
Aerospace - 1.28%
British Airways PLC 12,000 $108,008
LucasVarity PLC, ADS* 63,700 257,641
-------
365,649
Apparel & Textiles - 0.41%
Tomen Corporation 36,000 117,940
-------
Automobiles - 2.52%
Fiat SPA* 55,000 147,017
Nissan Motor Company, Ltd. 16,000 120,996
Peugeot SA 1,825 190,264
Toyota Motor Corporation 11,000 259,892
-------
718,169
Banking - 11.90%
Asahi Bank, Ltd. 6,000 61,657
Bank of Ireland 28,000 231,623
Bank of Tokyo-Mitsubishi, ADS 3,000 61,130
Banco Intercontinental Espanol 1,200 143,799
Banco Popular Espanol SA 850 162,479
Bayerische Hypotheken und
Wechsel Bank AG 4,560 133,542
Dai Ichi Kangyo Bank 5,000 81,244
Daiwa Bank 23,000 130,297
Dresdner Bank AG 11,140 297,920
Fukui Bank 16,000 71,951
Hang Seng Bank 4,100 48,651
Hokuriku Bank 8,000 44,197
HSBC Holdings - (Pounds) 14,200 298,376
HSBC Holdings - HKD 7,600 154,807
Kredietbank NV 290 93,676
Lloyds TSB Group PLC 36,800 233,294
National Australia Bank, Ltd. 16,200 177,846
Sakura Bank 20,000 189,715
Sanwa Bank 6,000 102,235
Schweizerischer Bankverein 977 188,212
Societe Generale 2,973 320,415
Toyo Trust & Banking 19,000 162,206
---------
3,389,272
Business Services - 0.82%
Eaux (Cie Generale Des) 1,955 233,644
-------
Chemicals - 4.27%
Air Liquide 1,197 184,730
BASF AG 13,300 425,066
Henkel KGaA 3,229 143,497
Kemira OY 13,500 147,652
Mitsui Toatsu Chemical 35,000 122,349
Solvay SA 250 149,688
UBE Industries 13,000 42,018
---------
1,215,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
46
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Conglomerates - 3.48%
Nokia OY AB, Series A 9,799 $452,461
Swire Pacific, Ltd. 30,000 264,802
Tomkins 65,000 272,949
-------
990,212
Construction & Mining Equipment - 0.16%
Nishimatsu Construction 5,000 46,111
------
Construction Materials - 1.40%
CRH 16,000 164,924
Nippon Hodo Company 3,000 41,896
Tarmac 132,600 193,159
-------
399,979
Crude Petroleum & Natural Gas - 0.54%
ENI SPA, ADS 32,000 153,250
-------
Drugs & Health Care - 4.73%
Chugai Pharmaceutical Company 4,000 36,538
Glaxo Wellcome 23,900 375,382
Ono Pharmaceutical 4,000 124,720
Sandoz AG 165 190,716
Synthelabo 3,700 353,174
Zeneca Group PLC 9,800 267,012
---------
1,347,542
Electric Utilities - 4.30%
Electrabel 1,235 286,675
Fuerzas Electricas De Cataluna SA,
Series A 31,950 255,410
Iberdrola SA 26,500 281,418
Scottish Power 53,000 270,866
Tokyo Electric Power 5,700 130,666
---------
1,225,035
Electrical Equipment - 1.85%
Fuji Electric Company 8,000 36,327
Hitachi, Ltd. 20,000 177,419
Sanden Corporation 2,000 14,896
Siemens AG 5,770 298,139
-------
526,781
Electronics - 1.81%
Murata Manufacturing Company, Ltd. 4,000 128,585
Racal Electronics 43,300 195,216
Rexel SA 650 192,616
-------
516,417
Food & Beverages - 5.49%
Danone 1,570 214,963
Greencore Group PLC 26,000 149,878
Guinness 26,000 186,198
Hillsdown Holdings 71,200 201,641
Itoham Foods, Incorporated 6,000 38,997
Japan Tobacco, Incorporated 4 28,246
Lion Nathan, Ltd. 110,200 284,563
Nestle SA 170 184,660
Sapporo Breweries 14,000 122,594
Seita 3,800 153,041
---------
1,564,781
Forest Products - 0.82%
Sumitomo Forestry Company 6,000 84,845
UPM-Kymmene OY 7,400 150,121
-------
234,966
Gas & Pipeline Utilities - 0.45%
Hyder 11,200 128,333
-------
Homebuilders - 0.95%
Bilfinger & Berger
Bauaktiengesellschaft AG 2,000 80,956
Bouygues 1,922 188,347
-------
269,303
Hotel & Restaurants - 0.72%
Ladbroke Group 63,000 204,565
-------
Household Appliances Furnishing - 1.44%
Matsushita Electric Industrial
Company, Ltd. 5,000 79,926
Philips Electronics NV 5,940 209,355
Sony Corporation 2,000 119,977
-------
409,258
Household Products - 0.89%
Unilever NV 1,660 252,419
-------
Industrial Machinery - 2.83%
Daiken Corporation 14,000 103,290
Daikin Industries 3,000 28,457
Ebara Corporation 10,000 144,043
IMI PLC 10,000 79,136
Krupp AG Hoesch 950 149,614
Mitsubishi Heavy Industries, 15,000 115,278
Ltd.
Sidel 2,800 186,813
-------
806,631
Insurance - 6.95%
Abbey National 24,000 249,219
Aegon NV 4,054 206,200
Allianz AG Holdings 150 269,216
Assicurazioni Generali 8,800 169,967
Fortis AG 1,380 193,793
Guardian Royal Exchange 56,000 229,687
Irish Life PLC 33,000 141,866
Munchener Ruckvers 113 270,114
Tokio Marine & Fire Insurance
Company 8,000 87,831
Union des Assurance Federales 1,440 161,956
---------
1,979,849
International Oil - 1.69%
The British Petroleum Company 35,137 377,591
Cosmo Oil Company 9,000 48,694
Petrofina SA 180 55,345
--------
481,630
Investment Companies - 0.58%
Nomura Securities 10,000 165,122
-------
Leisure Time - 0.92%
Rank Group PLC, ADR 39,500 262,626
-------
</TABLE>
The accompanying notes are an integral part of the financial statements.
47
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Non-Ferrous Metals - 0.62%
RTZ Corporation PLC 11,000 $175,993
-------
Paper - 1.76%
Fletcher Challenge 170,500 308,794
OJI Paper Company 5,000 36,538
Jefferson Smurfit Group PLC 57,000 155,007
-------
500,339
Petroleum Services - 3.80%
Broken Hill Proprietary Company, Ltd. 13,700 181,892
Repsol SA 5,400 176,269
Royal Dutch Petroleum Company 2,150 355,060
Total SA "B" Shares 4,715 368,807
---------
1,082,028
Photography - 0.18%
Canon Sales Company, Incorporated 2,000 50,766
------
Publishing - 0.79%
Arnoldo Mondadori Editore 8,000 59,064
Lagardere Groupe 5,295 167,265
-------
226,329
Railroads & Equipment - 0.37%
East Japan Railway Company 23 105,652
-------
Real Estate - 2.59%
Cheung Kong Holdings 31,000 248,571
Daiwa Kosho Lease 9,000 82,210
Henderson Land Development
Company, Ltd. 9,000 80,022
Sumitomo Realty & Development 20,000 145,448
Sun Hung Kai Properties 16,000 182,096
-------
738,347
Retail Grocery - 0.92%
J. Sainsbury PLC 44,000 260,677
-------
Retail Trade - 3.31%
Ava Allgemeine Handels-Der Verbr AG* 250 66,033
Douglas Holding AG 2,100 88,055
Izumiya Company 7,000 111,282
Kingfisher 22,500 239,868
Promodes* 1,300 350,904
Safeway 200 1,186
Takashimaya Company, Ltd. 6,000 85,899
-------
943,227
Steel - 1.67%
Arbed SA 1,400 164,283
Nippon Steel Corporation 48,000 139,968
Rautaruukki OY 19,600 172,013
-------
476,264
Telephone - 2.90%
Hong Kong Telecommunications, Ltd. 38,800 68,495
Nippon Telegraph & Telephone
Corporation 11 76,808
Telecom Corporation of New Zealand 56,000 291,192
Telekom Italia 72,000 160,422
Vodafone Group, ADR 59,100 228,455
-------
825,372
Tires & Rubber - 0.31%
Continental AG 5,000 87,493
------
Tobacco - 0.68%
B.A.T. Industries PLC 28,100 194,834
-------
Trucking & Freight - 0.26%
Peninsular & Oriental Steam
Navigation 100 980
Company
Yamato Transport 7,000 72,548
------
73,528
TOTAL COMMON STOCKS
(Cost $23,269,021) $23,745,333
----------
PREFERRED STOCKS - 3.32%
Automobiles - 1.05%
Volkswagen AG 990 300,386
-------
Industrial Machinery - 0.64%
GEA AG 250 84,027
M.A.N. AG 496 97,765
-------
181,792
International Oil - 0.50%
RWE AG 4,200 142,551
-------
Newspapers - 0.89%
News Corporation, Ltd., ADS 45,000 253,963
-------
Software - 0.23%
SAP AG 490 65,942
------
TOTAL PREFERRED STOCKS
(Cost $840,548) $944,634
-------
WARRANTS - 0.61%*
Banking - 0.00%
Schweizerischer Bankverein (Expiration
date 06/30/00; strike price CHF 250) 85 219
---
Financial Services - 0.55%
Veba International Finance BV (Expiration
date 04/06/98; strike price DEM 375) 554 156,937
-------
Mining - 0.04%
Dowa Mining Company (Expiration
date 12/09/97; strike price <L107>428) 17 12,750
------
Non-Ferrous Metals - 0.01%
Maeda Corporation (Expiration date
02/05/97; strike price $856) 10 4,250
-----
TOTAL WARRANTS (Cost $178,710) $174,156
-------
</TABLE>
The accompanying notes are an integral part of the financial statements.
48
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
CONVERTIBLE BONDS - 1.43%
Bot Cayman Finance,
4.25% due 03/31/49 (YEN) 10,000,000 $125,159
Daido Hoxan, Incorporated,
1.60% due 03/29/02 14,000,000 132,186
NEC Corporation,
1.90% due 03/30/01 9,000,000 101,972
Sagami Railway Company,
3.80% due 09/30/99 5,000,000 49,185
------
TOTAL CONVERTIBLE BONDS
(Cost $422,913) $408,502
--------
CORPORATE BONDS - 1.92%
Treuhandanstalt,
7.125% due 01/29/03 DEM 650,000 465,910
7.75% due 10/01/02 110,000 81,171
------
TOTAL CORPORATE BONDS
(Cost $556,962) $547,081
--------
FOREIGN GOVERNMENT OBLIGATIONS - 9.34%
Kingdom of Denmark - 0.66%
7.00% due 12/15/04 DKK 50,000 8,830
8.00% due 11/15/01 260,000 48,982
8.00% due 03/15/06 700,000 129,611
-------
187,423
Government of Germany - 1.45%
6.00% due 01/05/06 DEM 280,000 184,836
9.00% due 10/20/00 300,000 228,507
-------
413,343
Government of Great Britain - 3.06%
United Kingdom Treasury,
7.50% due 12/07/06 (POUND) 425,000 686,544
8.00% due 12/07/00 111,000 186,084
-------
872,628
Republic of Italy - 1.53%
6.50% due 06/28/01 ITL 25,000,000 16,707
10.50% due 07/15/00 580,000,000 420,185
-------
436,892
Government of Netherlands - 1.35%
6.00% due 01/15/06 NLG 141,000 83,834
8.75% due 05/01/00 450,000 300,760
-------
384,594
Government of Spain - 1.29%
10.10% due 02/28/01 ESP 42,000,000 366,231
-------
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS (Cost $2,591,787) $2,661,111
---------
TOTAL INVESTMENTS
(International Growth & Income Fund)
(Cost $27,859,941) $28,480,817
==========
<CAPTION>
Balanced Fund
Shares Value
------ -----
<S> <C> <C>
COMMON STOCKS - 49.13%
Aerospace - 1.99%
McDonnell Douglas Corporation 27,700 $1,509,650
Northrop Grumman Corporation 6,500 524,875
---------
2,034,525
Apparel & Textiles - 1.16%
Fruit of The Loom,
Incorporated, Class A* 32,600 1,185,825
---------
Auto Parts - 0.53%
Genuine Parts Company 1,950 85,312
Lear Seating Corporation* 12,300 455,100
-------
540,412
Banking - 2.81%
BankAmerica Corporation 12,800 1,171,200
NationsBank Corporation 13,600 1,281,800
Republic NY Corporation 5,600 427,000
---------
2,880,000
Chemicals - 1.17%
Agrium, Incorporated 20,000 267,500
ARCO Chemical Company 15,000 716,250
E.I. Du Pont De Nemours & Company 2,250 208,687
---------
1,192,437
Computers & Business Equipment - 0.42%
Hewlett-Packard Company 9,700 428,012
-------
Containers & Glass - 0.38%
Owens-Illinois, Incorporated* 25,200 390,600
-------
Domestic Oil - 2.04%
Ashland, Incorporated 13,100 556,750
Atlantic Richfield Company 8,700 1,152,750
Sun Company, Incorporated 17,000 380,375
---------
2,089,875
Drugs & Health Care - 4.59%
Baxter International Incorporated 26,100 1,086,413
Merck & Company, Incorporated 15,200 1,126,700
Pharmacia & Upjohn, Incorporated 44,400 1,598,400
Tenet Healthcare Corporation* 42,700 891,362
---------
4,702,875
Electric Utilities - 2.69%
CMS Energy Corporation 15,000 474,375
Idaho Power Company 17,000 529,125
IES Industries, Incorporated 57,000 1,752,750
---------
2,756,250
Electronics - 1.44%
Intel Corporation 5,000 549,375
Raytheon Company 5,300 261,025
Teradyne, Incorporated* 26,800 425,450
Texas Instruments, Incorporated 4,900 235,812
---------
1,471,662
Financial Services - 0.41%
The Chase Manhattan Corporation 4,900 420,175
-------
</TABLE>
The accompanying notes are an integral part of the financial statements.
49
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Food & Beverages - 3.03%
Archer-Daniels-Midland Company 62,500 $1,359,375
PepsiCo, Incorporated 36,200 1,072,425
Pioneer Hi Bred International,
Incorporated 10,000 671,250
---------
3,103,050
Forest Products - 0.47%
Georgia-Pacific Corporation 6,400 480,000
-------
Gas & Pipeline Utilities - 3.68%
Brooklyn Union Gas Company 19,200 556,800
Equitable Resourses, Incorporated 42,725 1,228,344
Questar Corporation 33,400 1,202,400
Williams Companies, Incorporated 15,000 783,750
---------
3,771,294
Gold - 0.82%
Barrick Gold Corporation 12,200 318,725
Santa Fe Pacific Gold Corporation 43,800 520,125
-------
838,850
Household Appliances Furnishing - 0.37%
Sunbeam Corporation 15,400 379,225
-------
Insurance - 7.17%
Aetna, Incorporated 13,200 882,750
W.R. Berkley Corporation 41,600 2,163,200
Chubb Corporation 6,000 300,000
CIGNA Corporation 12,400 1,618,200
Integon Corporation 4,690 88,524
Lincoln National Corporation,
Incorporated 25,000 1,212,500
PartnerRe, Ltd. 25,000 718,750
St. Paul Companies, Incorporated 6,600 358,875
---------
7,342,799
International Oil - 4.20%
Mobil Corporation 13,600 1,587,800
Royal Dutch Petroleum Company 8,300 1,372,613
Texaco, Incorporated 13,200 1,341,450
---------
4,301,863
Investment Companies - 0.36%
Lehman Brothers Holdings,
Incorporated 14,800 371,850
-------
Leisure Time - 0.25%
Brunswick Corporation 11,000 258,500
-------
Miscellaneous - 1.94%
Canadian Pacific, Ltd. 78,800 1,989,700
---------
Petroleum Services - 1.42%
Tosco Corporation 17,300 970,963
Ultramar Corporation 16,800 480,900
---------
1,451,863
Railroads & Equipment - 0.59%
Illinois Central Corporation 18,600 602,175
-------
Retail Trade - 1.52%
J.C. Penney Company, 21,900 1,149,750
Incorporated
Sears Roebuck & Company 8,300 401,513
---------
1,551,263
Telecommunication Services - 0.51%
Lucent Technologies, Incorporated 11,100 521,700
-------
Telephone - 2.23%
Ameritech Corporation 14,500 793,875
Frontier Corporation 36,925 1,070,825
NYNEX Corporation 9,400 418,300
---------
2,283,000
Tobacco - 0.93%
RJR Nabisco Holdings Corporation 18,040 520,905
Universal Corporation 15,700 427,825
-------
948,730
TOTAL COMMON STOCKS
(Cost $43,504,564) $50,288,510
----------
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
CORPORATE BONDS - 5.00%
Finance & Banking - 3.78%
BankAmerica Corporation,
7.75% due 07/15/02 $400,000 $419,848
British Aerospace Finance,
Incorporated, 7.55% due 05/15/97 350,000 352,387
Capital One Financial,
8.625% due 01/15/97 900,000 904,500
Countrywide Funding Corporation,
8.43% due 11/16/99 500,000 527,305
Financiera Energetica Nacional,
6.625% due 12/13/96 360,000 359,640
Ford Holdings, Incorporated,
9.25% due 03/01/00 500,000 542,635
General Motors Acceptance Corporation,
7.50% due 11/04/97 175,000 177,866
7.625% due 03/09/98 575,000 587,679
---------
3,871,860
Petroleum Services - 0.82%
TransCanada Pipelines, Ltd.,
8.55% due 02/01/06 1,000,000 835,696
-------
Industrials - 0.40%
News America Holdings, Incorporated,
7.50% due 03/01/00 30,000 30,817
9.125% due 10/15/99 351,000 376,412
-------
407,229
TOTAL CORPORATE BONDS
(Cost $5,037,917) $5,114,785
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
50
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
U.S. TREASURY OBLIGATIONS - 17.21%
U.S. Treasury STRIPS - 1.85%
Principal Only due 08/15/99 $470,000 $399,336
Principal Only due 08/15/09 1,500,000 645,375
Principal Only due 08/15/20 370,000 72,427
Principal Only due 05/15/20 3,910,000 778,598
---------
1,895,736
U.S. Treasury Bonds - 0.87%
8.75% due 05/15/17 730,000 893,338
-------
U.S Treasury Notes - 14.49%
5.625% due 10/31/97 280,000 280,305
5.75% due 09/30/97 1,000,000 1,002,190
5.875% due 04/30/98 300,000 300,936
5.875% due 02/15/04 650,000 635,479
6.00% due 09/30/98 5,000,000 5,022,650
6.00% due 08/15/99 5,000,000 5,013,300
6.125% due 07/31/00 830,000 833,113
6.875% due 08/31/99 1,700,000 1,742,500
----------
14,830,473
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $17,220,358) $17,619,547
----------
U.S. GOVERNMENT
AGENCY OBLIGATIONS - 19.26%
Federal Home Loan Bank - 0.36%
6.125% due 09/20/00 370,000 369,537
-------
Federal Home Loan
Mortgage Corporation - 4.16%
6.00% due 11/15/16 906,508 884,407
7.50% TBA** 2,000,000 2,006,860
7.50% due 07/01/11 - 09/01/11 1,000,000 1,016,871
8.20% due 01/16/98 350,000 352,023
---------
4,260,161
Federal National Mortgage Association - 7.69%
zero coupon due 03/09/02 570,000 558,777
3.50% due 05/25/19 1,000,000 871,560
6.25% due 07/25/18 500,000 492,810
7.00% due 02/01/26 3,964,587 3,888,983
8.00% due 10/01/26 1,000,000 1,020,000
8.50% due 06/01/26 - 08/01/26 1,000,000 1,034,680
---------
7,866,810
Government National
Mortgage Association - 6.98%
7.00% due 08/15/23 - 12/15/23 1,905,439 1,879,849
7.50% due 03/15/23 971,642 979,531
8.00% due 07/15/26 - 10/15/26 4,000,001 4,090,001
9.00% due 01/15/22 180,231 191,833
---------
7,141,214
Resolution Funding Corporation - 0.07%
zero coupon due 01/15/21 $390,000 $71,889
------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS (Cost $19,422,937) $19,709,611
----------
FOREIGN GOVERNMENT BONDS - 2.34%
Government of Canada - 2.34%
Province of British Columbia,
7.75% due 06/16/03 1,000,000 812,706
Province of Manitoba,
6.50% due 09/04/01 1,000,000 774,018
Province of Ontario,
7.75% due 07/24/06 1,000,000 808,305
---------
2,395,029
TOTAL FOREIGN BONDS
(Cost $2,366,351) $2,395,029
---------
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
REPURCHASE AGREEMENT - 7.06%***
$7,224,000 Repurchase Agreement with State Street Bank
& Trust Company dated
10/31/96 at 4.75%, to be repurchased
at $7,224,953 on 11/01/96, collateralized
by $7,070,000 U.S. Treasury Notes, 6.375%
due 05/31/01 (valued at
$7,557,672, including interest) $7,224,000
---------
TOTAL INVESTMENTS
(Balanced Fund) (Cost $94,776,127) $102,351,482
===========
<CAPTION>
Strategic Income Fund
CORPORATE BONDS - 50.53%
Apparel & Textiles - 0.78%
Clark-Schwebel, Incorporated,
10.50% due 04/15/06 $500,000 $520,000
-------
Auto Parts - 0.77%
Speedy Muffler King, Incorporated,
10.875% due 10/01/06 500,000 512,500
-------
Business Services - 0.73%
Borg-Warner Security Corporation,
9.125% due 05/01/03 500,000 485,000
-------
</TABLE>
The accompanying notes are an integral part of the financial statements.
51
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
Chemical Products - 1.58%
NL Industries, Incorporated,
Step up to 13.00% due 10/15/05 $750,000 $615,000
Revlon Worldwide Corporation,
Series B, zero coupon due 03/15/98 500,000 440,000
---------
1,055,000
Construction & Building Materials - 0.78%
Southdown, Incorporated, Series B,
10.00% due 03/01/06 500,000 522,500
-------
Crude Petroleum & Natural Gas - 0.60%
National Energy Group, Incorporated,
10.75% due 11/01/06 400,000 400,000
-------
Drugs & Health Care - 0.80%
Dade International, Incorporated,
11.125% due 05/01/06 500,000 535,000
-------
Energy & Utilities - 1.58%
KSC Energy, Incorporated, Series B,
11.00% due 01/15/03 500,000 541,250
Petro PSC Properties,
12.50% due 06/01/02 500,000 515,000
---------
1,056,250
Finance & Banking - 4.42%
Foamex Capital Corporation,
11.875% due 10/01/04 500,000 525,000
Korea Development Bank,
9.60% due 12/01/00 1,000,000 1,108,170
Mellon Financial Company,
9.75% due 06/15/01 500,000 560,000
Paine Webber Group, Incorporated,
7.00% due 03/01/00 400,000 403,944
Venture Holdings Trust,
9.75% due 04/01/04 390,000 349,050
---------
2,946,164
Food & Beverages - 3.09%
Dole Foods, Incorporated,
6.75% due 07/15/00 1,000,000 1,001,210
Smith's Food & Drug Centers,
11.25% due 05/15/07 500,000 540,000
The Stroh Brewery Company,
11.10% due 07/01/06 500,000 520,000
---------
2,061,210
Food Stores - 1.73%
Big V Supermarkets, Incorporated,
Series B, 11.00% due 02/15/04 500,000 480,000
Carr Gottstein Foods Company,
12.00% due 11/15/05 400,000 420,000
Penn Traffic Company,
9.625% due 04/15/05 500,000 250,000
---------
1,150,000
Forest Products - 0.71%
Doman Industries, Ltd.,
8.75% due 03/15/04 500,000 $470,000
-------
General Obligation - 0.33%
United States Leasing International,
8.45% due 01/25/05 200,000 217,346
-------
Household Appliances & Furnishing - 0.51%
Decorative Home Accents, Incorporated,
Series B, 13.00% due 06/30/02 500,000 340,000
-------
Industrials - 15.59%
Arkla, Incorporated,
8.875% due 07/15/99 500,000 528,115
Alvey Systems, Incorporated,
11.375% due 01/31/03 500,000 520,000
Berry Plastics Corporation,
12.25% due 04/15/04 650,000 702,000
Ekco Group, Incorporated, Series B,
9.25% due 04/01/06 500,000 470,000
Exide Electronics Group, Incorporated,
Series B, 11.50% due 03/15/06 500,000 520,000
Forest Oil Corporation,
11.25% due 09/01/03 500,000 532,500
Four M Corporation,
12.00% due 06/01/06 500,000 523,750
Guitar Center Management Company,
Incorporated, 11.00% due 07/01/06 500,000 525,000
Harris Chemical North America,
Incorporated, 10.75% due 10/15/03 500,000 502,500
Hollinger, Incorporated,
zero coupon, due 10/05/13 1,500,000 517,500
ICG Holding, Incorporated,
Step up to 13.50% due 09/15/05 500,000 330,000
Jordan Industries, Incorporated,
10.375% due 08/01/03 500,000 485,000
Marcus Cable Company,
14.25% due 12/15/05 750,000 498,750
Norcal Waste Systems, Incorporated,
Series B, 12.75% due 11/15/05 500,000 540,000
Plastic Specialties & Technologies,
Incorporated, 11.25% due 12/01/03 500,000 510,000
Rayovac Corporation,
10.25% due 11/01/06 550,000 558,250
SC International Services,
Incorporated, 13.00% due 10/01/05 500,000 555,000
Specialty Equipment Companies,
Incorporated, 11.375% due 12/01/03 500,000 540,625
Terex Corporation,
13.75% due 05/15/02 500,000 530,000
Twin Laboratories, Incorporated,
10.25% due 05/15/06 500,000 505,000
----------
10,393,990
</TABLE>
The accompanying notes are an integral part of the financial statements.
52
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
Leather Products - 0.40%
Samsonite Corporation, Series B,
11.125% due 07/15/05 $250,000 $265,000
-------
Leisure Time - 1.14%
Hollywood Casino, Incorporated,
12.75% due 11/01/03 250,000 237,500
Wyndham Hotel Corporation,
10.50% due 05/15/06 500,000 522,500
-------
760,000
Other - 3.17%
American Media Operations,
Incorporated,11.625% due 11/15/04 500,000 533,750
Herff Jones, Incorporated, Series B,
11.00% due 08/15/05 500,000 525,000
Hines Horticulture, Incorporated,
Series B, 11.75% due 10/15/05 500,000 521,250
The Selmer Company, Incorporated,
11.00% due 05/15/05 500,000 530,000
---------
2,110,000
Retail Trade - 2.24%
Cole National Group, Incorporated,
11.25% due 10/01/01 500,000 535,000
Finlay Fine Jewerly Corporation,
10.625% due 05/01/03 500,000 506,250
Hills Stores Company, Series B,
12.50% due 07/01/03 500,000 450,000
---------
1,491,250
Rubber & Plastic - 0.76%
Remington Product Company,
11.00% due 05/15/06 500,000 503,750
-------
Steel - 0.78%
Algoma Steel, Incorporated,
12.375% due 07/15/05 500,000 517,500
-------
Telephone - 1.62%
In Flight Phone Corporation, Series B,
Step up to 14.00% due 05/15/02 650,000 234,000
Telex Communications, Incorporated,
12.00% due 07/15/04 550,000 594,000
Wireless One, Incorporated,
13.00% due 10/15/03 250,000 253,750
---------
1,081,750
Telecommunication Services - 4.88%
Adelphia Communications
Corporation, 12.50% due 05/15/02 375,000 371,250
Cablevision Systems Corporation,
10.50% due 05/15/16 500,000 487,500
International Cabletel, Incorporated,
Step up to 11.50% due 02/01/06 1,000,000 600,000
Nextlink Communications,
12.50% due 04/15/06 250,000 255,000
People's Choice TV Corporation,
Step up to 13.125% due 06/01/04 500,000 270,000
Telewest Communication PLC,
Step up to 11.00% due 10/01/07 750,000 478,125
United International Holdings,
Incorporated, zero coupon
due 11/15/99 750,000 517,500
Winstar Communications,
Incorporated, 14.00% due 10/15/05 500,000 275,000
---------
3,254,375
Transportation - 0.77%
Iron Mountain, Incorporated,
10.125% due 10/01/06 500,000 513,750
-------
Transportation Equipment - 0.77%
Hayes Wheels International,
Incorporated, 11.00% due 07/15/06 500,000 516,250
-------
TOTAL CORPORATE BONDS
(Cost $33,471,071) $33,678,585
----------
U.S. TREASURY OBLIGATIONS - 12.75%
U.S. Treasury Bonds - 0.35%
6.75% due 08/15/26 230,000 232,730
-------
U.S. Treasury Notes - 12.40%
5.625% due 02/28/01 2,790,000 2,744,663
5.875% due 11/15/05 1,110,000 1,073,925
6.25% due 04/30/01 1,000,000 1,006,720
6.50% due 08/31/01 1,000,000 1,016,410
6.50% due 10/15/06 500,000 504,920
6.875% due 05/15/06 1,850,000 1,915,323
---------
8,261,961
TOTAL U.S. TREASURY OBLIGATIONS (Cost
$8,398,624) $8,494,691
---------
U.S. GOVERNMENT
AGENCY OBLIGATIONS - 9.85%
Federal Home Loan Banks - 0.67%
5.89% due 07/24/00 450,000 446,202
-------
Federal Home Loan Mortgage Corporation - 3.20%
6.50% TBA** 700,000 670,684
8.50% due 05/01/08 616,628 644,518
10.00% due 05/15/20 750,000 817,965
---------
2,133,167
Federal National Mortgage Association - 5.28%
6.50% due 03/01/26 - 04/01/26 2,485,362 2,377,398
7.00% TBA** 837,500 821,529
10.40% due 04/25/19 163,371 178,279
13.00% due 01/01/99 118,580 141,851
---------
3,519,057
</TABLE>
The accompanying notes are an integral part of the financial statements.
53
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
Student Loan Marketing Association - 0.70%
7.20% due 11/09/00 $450,000 $466,029
-------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS (Cost $6,539,429) $6,564,455
---------
FOREIGN GOVERNMENT OBLIGATIONS - 15.54%
Republic of Argentina - 1.39%
6.625% due 03/31/05 1,127,000 924,140
-------
Federal Republic of Brazil - 4.31%
4.50% due 04/15/14 826,033 565,832
5.00% due 04/15/24 1,500,000 900,000
6.00% due 09/15/13 750,000 525,000
6.50% due 04/15/24 1,200,000 880,500
---------
2,871,332
Government of Canada - 0.66%
7.50% due 09/01/00 CAD 550,000 442,823
-------
Government of Costa Rica - 0.34%
Series B, 6.25% due 05/21/15 $300,000 223,500
-------
Kingdom of Denmark - 0.59%
8.00% due 11/15/01 DKK 2,100,000 395,626
-------
Republic of Ecuador - 0.57%
3.00% due 02/27/15 $687,303 383,171
-------
Federal Republic of Germany - 1.77%
6.00% due 04/20/98 DEM 530,000 362,187
6.375% due 08/14/98 1,180,000 815,497
-------
1,177,684
Government of Mexico - 1.58%
Series B, 6.25% due 12/31/19 $1,500,000 1,054,688
---------
Government of Morocco - 1.91%
6.593% due 01/01/09 1,600,000 1,270,000
---------
Government of Panama - 0.50%
3.50% due 07/17/14 500,000 330,000
-------
Republic of Philippines - 1.00%
6.437% due 12/01/09 700,000 669,830
-------
Republic of Venezuela - 0.92%
6.625% due 12/18/07 750,000 615,450
-------
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS (Cost $9,605,237) $10,358,244
----------
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
COMMON STOCKS - 0.00%
Household Appliances & Furnishing - 0.00%
Decorative Home Accents, Incorporated 500 $3,000
-----
TOTAL COMMON STOCKS (Cost $5,000) $3,000
-----
WARRANTS - 0.04%*
Electronics - 0.02%
Exide Electronics Group (Expiration
date 03/15/06; strike price $13.475) 500 $15,000
------
Financial Services - 0.02%
BPC Holdings Corporation (Expiration
date 04/15/04; strike price $18.797) 500 10,000
------
Telephone - 0.00%
Wireless One, Incorporated (Expiration
date 10/19/00; strike price $11.50) 750 3,000
-----
TOTAL WARRANTS (Cost $0) $28,000
------
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
REPURCHASE AGREEMENT - 11.29%***
$7,524,000 Repurchase Agreement with State
Street Bank & Trust Company
dated 10/31/96 at 5.47%, to be
repurchased at $7,525,143
on 11/01/96, collateralized by
$6,105,000 U.S. Treasury Bonds,
8.875% due 02/15/19 (valued at
$7,790,261, including interest) $7,524,000
----------
TOTAL INVESTMENTS
(Strategic Income Fund) (Cost $65,543,361) $66,650,975
==========
<CAPTION>
Investment Quality Bond Fund
Principal
Amount Value
------ -----
<S> <C> <C>
CORPORATE BONDS - 33.46%
Apparel & Textiles - 0.34%
Collins & Aikman Products Company,
11.50% due 04/15/06 $50,000 $51,750
Dominion Textile (USA),
Incorporated, 9.25% due 04/01/06 20,000 20,050
------
71,800
Broadcasting - 0.28%
Chancellor Broadcasting Company,
9.375% due 10/01/04 10,000 9,700
Granite Broadcasting Corporation,
10.375% due 05/15/05 25,000 24,875
Young Broadcasting, Incorporated,
9.00% due 01/15/06 25,000 22,750
------
57,325
Chemical Products - 0.31%
Rexene Corporation,
11.75% due 12/01/04 50,000 55,000
Texas-Petro Chemical Corporation,
11.125% due 07/01/06 10,000 10,625
------
65,625
</TABLE>
The accompanying notes are an integral part of the financial statements.
54
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
Drug & Health Care - 0.54%
Integrated Health Services,
Incorporated, 10.25% due 04/30/06 $15,000 $15,300
OrNda Healthcorp, 11.375%, 08/15/04 50,000 56,750
Owens & Minor, Incorporated,
10.875% due 06/01/06 25,000 26,125
Quorum Health Group, Incorporated
8.75% due 11/01/05 15,000 15,150
-------
113,325
Electric Utilities - 1.56%
El Paso Electric Company, Series D,
8.90% due 02/01/06 50,000 51,681
Virginia Electric & Power Company,
9.375% due 06/01/98 262,000 274,343
-------
326,024
Food & Beverages - 0.26%
Smith's Food & Drug Centers,
11.25% due 05/15/07 50,000 54,000
------
Finance & Banking - 14.00%
American General Finance
Corporation, 8.00% due 02/15/05 230,000 240,803
Associates Corporation of North
America, 6.95% due 08/01/02 320,000 325,584
BankAmerica Corporation,
9.50% due 04/01/01 114,000 126,908
BanPonce Financial Corporation,
6.80% due 12/21/05 250,000 245,370
Beneficial Corporation,
8.40% due 05/15/08 75,000 84,916
Commercial Credit Group,
Incorporated, 10.00% due 05/01/99 50,000 54,316
First Financial Caribbean Corporation,
7.84% due 10/10/06 70,000 70,596
General Motors Acceptance
Corporation, 6.00% due 01/11/99 150,000 149,400
International Lease Finance
Corporation, 7.50% due 03/01/99 200,000 205,318
Mesa Operate Company,
10.625% due 07/01/06 25,000 26,500
NBD Bancorp, 8.25% due 11/01/24 300,000 339,630
Norwest Corporation,
6.00% due 03/15/00 100,000 99,048
Republic New York Corporation,
9.75% due 12/01/00 155,000 172,761
Sun Canada Financial Company,
7.25% due 12/15/15 200,000 191,526
Tembec Finance Corporation,
9.875% due 09/30/05 50,000 48,000
Trump Atlantic City,
11.25% due 05/01/06 15,000 14,175
United Bankshares, Incorporated,
8.625% due 04/15/98 200,000 206,456
U.S. Bancorp, 7.50% due 06/01/26 300,000 314,913
---------
2,916,220
Forest Products - 0.54%
Boise Cascade Corporation,
9.85% due 06/15/02 100,000 112,021
-------
Gas & Pipeline Utilities - 0.25%
Transport De Gas Del Sur,
10.25% due 04/25/01 50,000 51,250
------
Industrials - 5.91%
Armco, Incorporated,
9.375% due 11/01/00 50,000 49,500
Bell & Howell Company, Series B,
Step-up to 11.50% due 03/01/05 50,000 35,500
Cablevision Systems Corporation,
9.25% due 11/01/05 25,000 23,750
Cincinnati Milacron, Incorporated,
7.875% due 05/15/00 130,000 131,922
Coastal Corporation,
8.75% due 05/15/99 400,000 419,148
Container Corporation of America,
9.75% due 04/01/03 50,000 51,250
Fort Howard Corporation,
9.25% due 03/15/01 50,000 51,500
Harris Chemical North America,
Incorporated, 10.25% due 07/15/01 25,000 25,469
Interlake Corporation,
12.00% due 11/15/01 25,000 26,500
K & F Industries, Incorporated,
11.875% due 12/01/03 50,000 54,000
Moog, Incorporated, Series B,
10.00% due 05/01/06 50,000 51,500
Muzak L.P./Muzak Capital,
10.00% due 10/01/03 5,000 5,000
News America Holdings,
Incorporated, 9.25% due 02/01/13 150,000 168,479
Plains Resources, Incorporated,
Series B, 10.25% due 03/15/06 50,000 52,000
Repap New Brunswick, Incorporated,
9.875% due 07/15/00 50,000 51,000
Westvaco Corporation,
9.65% due 03/01/02 30,000 33,442
---------
1,229,960
Insurance - 2.70%
Equitable Life Assurance Society of the
United States, 6.95% due 12/01/05 250,000 247,760
Ohio National Life Insurance,
Company, 8.50% due 05/15/26 150,000 155,568
</TABLE>
The accompanying notes are an integral part of the financial statements.
55
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
Insurance - continued
Security Benefit Life Company,
8.75% due 05/15/16 $150,000 $159,000
-------
562,328
International Oil - 0.48%
Amoco Canada Petroleum Company,
Ltd., 7.95% due 10/01/22 100,000 100,658
-------
Metal Products - 0.26%
Howmet Corporation, 10.00%, 12/01/03 50,000 53,750
------
Non-Bank Finance - 1.32%
KFW International Financial, Incorporated,
8.85% due 06/15/99 50,000 53,248
9.125% due 05/15/01 200,000 221,704
-------
274,952
Publishing - 0.37%
S.D. Warren Company, Series B,
12.00% due 12/15/04 25,000 26,750
World Color Press, Incorporated,
9.125% due 03/15/03 50,000 50,000
------
76,750
Telecommunication Services - 1.98%
Comcast Corporation,
9.125% due 10/15/06 50,000 48,750
Heritage Media Services,
11.00% due 06/15/02 50,000 53,500
Tele-Communications, Incorporated,
9.80% due 02/01/12 275,000 283,762
Videotron, Ltd., 10.25% due 10/15/02 25,000 26,500
-------
412,512
Telephone - 1.72%
360 Communications,
7.125% due 03/01/03 150,000 148,661
Arch Communications Group,
Incorporated, Step-up to
10.875% due 03/15/08 50,000 27,500
Benedek Communications,
13.25% due 05/15/06 65,000 35,750
MobileMedia Communications,
Incorporated, 9.375% due 11/01/07 50,000 27,500
New York Telephone Company,
7.875% due 06/15/17 100,000 103,475
Paging Network, Incorporated,
10.125% due 08/01/07 15,000 15,000
-------
357,886
Transportation - 0.52%
CSX Corporation, 9.04% due 02/28/97 75,000 75,734
Southern Railway Company,
8.75% due 10/15/03 30,000 33,217
-------
108,951
Transportation Equipment - 0.12%
Hayes Wheels International,
Incorporated, 11.00% due 07/15/06 $10,000 $10,325
Walbro Corporation, Series B,
9.875% due 07/15/05 15,000 15,225
------
25,550
TOTAL CORPORATE BONDS
(Cost $6,927,325) $6,970,887
---------
U.S. TREASURY OBLIGATIONS - 31.79%
U.S. Treasury Bonds - 31.16%
10.75% due 02/15/03 300,000 370,173
11.625% due 11/15/04 350,000 465,608
11.875% due 11/15/03 1,400,000 1,841,658
12.00% due 08/15/13 2,650,000 3,815,179
---------
6,492,618
U.S. Treasury Notes - 0.63%
7.875% due 11/15/99 125,000 131,680
-------
TOTAL U.S. TREASURY
OBLIGATIONS (Cost $6,558,603) $6,624,298
---------
U.S. GOVERNMENT
AGENCY OBLIGATIONS - 27.73%
Federal Home Loan Mortgage Corporation - 14.16%
6.00% due 10/01/03 - 09/25/22 706,590 679,155
6.50% due 02/01/11 - 04/01/24 963,170 928,911
7.00% due 09/01/03 - 10/01/25 1,352,377 1,342,671
---------
2,950,737
Federal National Mortgage Association - 4.17%
4.50% due 01/25/98, REMIC 74,043 73,163
6.25% due 11/25/19, REMIC 500,000 492,810
6.60% due 09/25/18, REMIC 300,000 301,875
-------
867,848
Government National
Mortgage Association - 9.40%
7.00% due 06/15/23 - 10/15/23 801,192 790,432
8.00% due 10/15/16 - 08/15/23 1,132,495 1,168,448
---------
1,958,880
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS (Cost $5,724,218) $5,777,465
---------
FIXED INCOME - OTHER - 3.87%
Miscellaneous Asset Backed Securities - 3.87%
Advanta Credit Card Master Trust, Series
1994, Class A, 5.66% due 10/01/01 300,000 301,125
Premier Auto Trust, Series 1993,
Class A2, 4.65% due 11/02/99 59,755 59,063
Western Financial Grantor Trust, Series
1995, Class A1, 7.10% due 07/01/00 116,461 118,202
World Omni Automobile Lease, Series
1995, Class A, 6.05% due 11/25/01 200,000 199,750
</TABLE>
The accompanying notes are an integral part of the financial statements.
56
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
Miscellaneous Asset Backed Securities - continued
World Omni Automobile Lease, Series
1994, Class A, 6.45% due 09/25/00 $127,312 $127,631
-------
805,771
TOTAL FIXED INCOME - OTHER
(Cost $801,695) $805,771
-------
FOREIGN BONDS - 3.15%
Canada - 2.11%
Hydro-Quebec, 8.05% due 07/07/24 400,000 438,992
-------
Japan - 1.04%
Japan Financial Corporation,
9.125% due 10/11/00 200,000 217,080
-------
TOTAL FOREIGN BONDS
(Cost $663,584) $656,072
-------
TOTAL INVESTMENTS
(Investment Quality Bond Fund)
(Cost $20,675,425) $20,834,493
==========
U.S. Government Securities Fund
U.S. TREASURY OBLIGATIONS - 9.61%
U.S. Treasury Bonds - 0.27%
6.75% due 08/15/26 $400,000 $404,748
-------
U.S. Treasury Notes - 9.34%
5.00% due 01/31/98 6,000,000 5,954,040
6.25% due 10/31/01 3,500,000 3,522,960
6.50% due 08/15/05 2,920,000 2,950,572
6.50% due 10/15/06 1,000,000 1,009,840
7.00% due 07/15/06 325,000 339,320
----------
13,776,732
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $14,320,311) $14,181,480
----------
U.S. GOVERNMENT
AGENCY OBLIGATIONS - 66.37%
Federal Home Loan Mortgage Corporation - 8.34%
6.00% due 09/01/10 - 10/01/10 680,161 658,688
6.50% TBA** 11,000,000 10,539,320
7.00% due 07/01/11 11,833 11,851
8.00% due 06/01/08 275,782 285,865
8.25% due 07/01/06 246,079 254,412
8.50% due 05/01/08 475,330 491,657
11.75% due 08/01/13 65,495 73,432
----------
12,315,225
Federal National Mortgage Association - 45.26%
6.50% due 12/01/99 - 04/01/26 $4,866,453 $4,655,055
7.00% TBA** 36,287,500 36,079,997
7.00% due 05/01/26 4,261,607 4,180,338
7.52% due 08/26/05 1,000,000 1,008,826
8.00% TBA** 7,500,000 7,650,000
8.00% due 08/01/04 79,155 81,339
8.25% due 03/25/06, REMIC 675,000 725,625
8.50% due 08/01/02 167,076 174,069
9.50% due 08/01/22 3,047,686 3,293,406
11.00% due 02/01/15 683 769
11.50% due 04/01/19 - 02/01/20 2,811,240 3,199,528
12.00% due 04/01/16 589,473 690,421
12.50% due 07/01/15 - 08/01/15 2,011,264 2,377,447
13.00% due 11/01/15 1,634,533 1,955,310
14.50% due 11/01/14 576,562 719,981
----------
66,792,111
Government National Mortgage Association - 12.77%
7.00% TBA** 6,400,000 6,275,968
7.00% due 03/15/26 - 05/15/26 9,237,972 9,060,364
7.50% due 04/15/02 - 02/15/07 507,357 513,345
7.75% due 04/15/04 74,045 76,128
8.00% due 11/15/06 - 02/15/08 41,638 43,344
10.25% due 02/15/00 - 03/15/01 182,019 191,859
10.50% due 01/15/01 18,081 19,336
11.00% due 03/15/00 - 09/20/15 175,521 190,178
11.25% due 04/15/98 - 10/20/15 12,683 14,076
11.50% due 08/20/00 - 09/20/15 532,810 606,259
11.75% due 09/15/98 1,141 1,210
12.50% due 09/15/14 78,225 92,388
13.00% due 01/15/11 - 06/15/15 851,602 1,013,417
13.25% due 07/15/14 41,288 49,004
13.50% due 11/15/12 - 02/15/13 72,727 87,737
15.00% due 07/15/11 - 09/15/12 158,777 197,763
15.50% due 07/15/11 - 12/15/11 295,563 373,148
16.00% due 11/15/11 - 12/15/11 29,454 36,817
-----------
18,842,341
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS (Cost $98,028,692) $97,949,677
----------
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.01%
Drexel Burnham Lambert, 9.30%
due 06/01/17 (Collateralized by
GNMA, 10.00%) 13,431 13,670
------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS (Cost $14,004) $13,670
------
</TABLE>
The accompanying notes are an integral part of the financial statements.
57
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
REPURCHASE AGREEMENTS - 24.01%***
$17,719,000 Repurchase Agreement with J.P. Morgan
dated 10/31/96 at 5.50%, to be
repurchased at $17,721,707 on 11/01/96,
collateralized by $12,584,000
U.S. Treasury Bonds, 10.625% due 08/15/15
(valued at $18,353,533, including interest) $17,719,000
17,719,000 Repurchase Agreement with State Street
Bank & Trust Company dated 10/31/96 at
5.47%, to be repurchased at $17,721,692
on 11/01/96, collateralized by
$14,375,000 U.S. Treasury Bonds, 8.875%
due 02/15/19 (valued at $18,343,160,
including interest) 17,719,000
-----------
$35,438,000
TOTAL INVESTMENTS
(U.S. Government Securities Fund)
(Cost $147,801,006) $147,582,827
============
<CAPTION>
National Municipal Bond Fund
Principal
Amount Value
------ -----
<S> <C> <C>
LONG-TERM INVESTMENTS - 98.98%
Alabama - 2.74%
Alabama Housing Finance Authority
Single Family Mortgage Revenue
Collateralized Home Mortgage Program,
Series B-2, 6.40%, 04/01/25 $520,000 $535,735
-------
California - 15.65%
California Housing Finance Agency
Revenue, Series H, 6.15%, 08/01/16 1,000,000 1,014,930
California State Public Works Board
Lease Revenue, Various Community
College Projects, 7.00%, 03/01/14 500,000 577,370
Los Angeles, California Harbor Department
Revenue, Series B, 6.625%, 08/01/19 390,000 414,309
Santa Clara, California Electric
Revenue, Series A, 6.25%, 07/01/13 1,000,000 1,053,830
---------
3,060,439
Florida - 2.41%
Gainesville, Florida Utilities Systems
Revenue, Series A, 5.20%, 10/01/22 500,000 471,495
-------
Illinois - 6.79%
Illinois Health Facilities Authority
Revenue (OSF Health Care System),
6.00%, 11/15/23 $200,000 $198,408
Illinois Health Facilities Authority
Revenue (Hospital Association
Project), 7.00%, 02/15/22 200,000 212,250
Chicago, Illinois Wastewater Transmission
Revenue, 5.125%, 01/01/25 1,000,000 915,840
----------
1,326,498
Iowa - 0.80%
Iowa Finance Authority Hospital Facility
Revenue Refunding (Trinity Regional
Hospital Project), 7.00%, 07/01/12 150,000 156,567
-------
Louisiana - 2.45%
Louisiana Public Facilities Authority Hospital
Revenue Refunding (Touro Infirmary
Project), Series B, 6.125%, 08/15/23 500,000 478,000
-------
Maine - 0.13%
Maine State Housing Authority Mortgage
Purchase, Series A-4, 6.375%, 11/15/12 25,000 25,577
------
Massachusetts - 3.60%
Massachusetts State Water Pollution,
Series A, 5.70%, 02/01/14 700,000 703,626
-------
Missouri - 2.57%
Missouri State Health & Educational
Facilities Authority Revenue,
6.25%, 02/15/11 500,000 501,870
-------
Nebraska - 6.30%
Nebraska Higher Education Loan Program
Income Revenue, 6.65%, 06/01/08 1,200,000 1,231,104
---------
Nevada - 4.73%
Nevada Housing Division, Single-Family
Program, 6.35%, 10/01/12 600,000 612,330
Nevada Housing Division, Single-Family
Program, Series B-2, 6.95%, 10/01/26 300,000 313,023
-------
925,353
New Jersey - 5.64%
New Jersey Economic Development
Authority Water Facilities Revenue
(New Jersey American Water
Company, Incorporated Project),
6.875%, 11/01/34 1,000,000 1,101,670
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
58
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
New York - 21.54%
Metropolitan Transportation Authority,
New York Service Contract (Transit
Facilities), Series O, 6.25%, 07/01/14 $375,000 $398,501
New York State Local Government Assistance
Corporation, Series A, 6.00%, 04/01/16 1,000,000 1,016,200
New York State Dormitory Authority
Revenue, State University Educational
Facilities, Series A, 6.25%, 05/15/08 500,000 521,460
New York State Environmental Facilities
Corporation Pollution Control Revenue
Refunding (IBM Corporation Project),
7.125%, 07/01/12 580,000 626,794
New York State Mortgage Agency
Revenue, Series 40-A, 6.35%, 04/01/21 630,000 645,391
Triborough Bridging & Tunnel Authority
Revenue, Series Y, 5.50%, 01/01/17 1,000,000 1,003,550
---------
4,211,896
Pennsylvania - 5.20%
Monroeville, Pennsylvania Hospitals
Authority Hospitals Revenue,
6.25%, 10/01/15 1,000,000 1,017,350
---------
South Carolina - 2.57%
Greenville Hospital Systems
Hospital Facilities Revenue,
Series B, 5.70%, 05/01/12 500,000 502,515
-------
Tennessee - 2.47%
Humphreys County, Tennessee Industrial
Development Board Solid Waste Disposal
Revenue (E.I. Du Pont De Nemours &
Company Project), 6.70%, 05/01/24 450,000 482,216
-------
Texas - 3.08%
Fort Worth, Texas,
Series A, 5.10%, 03/01/06 500,000 502,990
Texas State Veterans Housing
Assistance, 6.80%, 12/01/23 95,000 98,307
--------
601,297
Virginia - 1.57%
Virginia State Housing Development
Authority Commonwealth Mortgage,
Subseries I-1, 6.55%, 07/01/17 300,000 307,647
-------
Washington - 2.51%
Washington State Health Care Facilities
Authority Revenue, 5.50%, 10/01/14 500,000 491,590
-------
Wisconsin - 6.23%
Wisconsin Housing & Economic
Development Authority Home Ownership
Revenue, Series D, 6.10%, 07/01/24 $175,000 $176,258
Wisconsin State Health & Educational
Facilities Authority Revenue, Mercy
Hospital of Janesville, Incorporated,
6.60%, 08/15/22 1,000,000 1,041,200
---------
1,217,458
TOTAL LONG-TERM INVESTMENTS
(Cost $18,817,867) $19,349,903
----------
SHORT-TERM INVESTMENTS - 1.02%
Ohio - 0.51%
Ohio State Air Quality
Development Authority Revenue,
VR, 3.60%, 09/01/30 100,000 100,000
-------
Wyoming - 0.51%
Kemmerer, Wyoming
Pollution Control Revenue,
VR, 3.50%, 11/01/24 100,000 100,000
-------
TOTAL SHORT-TERM INVESTMENTS
(Cost $200,000) $200,000
-------
TOTAL INVESTMENTS
(National Municipal Bond Fund)
(Cost $19,017,867) $19,549,903
==========
<CAPTION>
Money Market Fund Principal
Amount Value
------ -----
<S> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS - 21.81%
Federal Home Loan Bank - 4.64%
5.35% due 11/25/96 - 12/16/96 $1,025,000 $1,019,296
---------
Federal National Mortgage Association - 4.51%
5.21% due 01/15/97 1,000,000 989,146
-------
Student Loan Marketing Association - 12.66%
5.53% due 11/01/96 2,780,000 2,780,000
---------
TOTAL U.S. GOVERNMENT OBLIGATIONS $4,788,442
==========
U.S. TREASURY OBLIGATIONS - 3.67%
U.S. Treasury Notes - 3.67%
7.50% due 01/31/97 800,000 804,514
-------
TOTAL U.S. TREASURY OBLIGATIONS $804,514
</TABLE> ========
The accompanying notes are an integral part of the financial statements.
59
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 1996 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
COMMERCIAL PAPER - 74.52%
American Brands, Incorporated,
5.28% due 01/03/97 $800,000 $792,608
American Express Credit Corporation,
5.27% due 12/02/96 800,000 796,397
Anheuser-Busch, Incorporated,
5.25% due 12/09/96 800,000 795,609
Bear Stearns Companies, Incorporated,
5.35% due 11/06/96 200,000 199,851
5.38% due 11/04/96 500,000 499,776
BHP Finance USA,
5.35% due 12/06/96 700,000 696,359
Canadian Wheat Board,
5.25% due 01/17/97 800,000 791,017
The Coca-Cola Enterprises,
Incorporated, 5.35% due 11/20/96 700,000 698,024
Commerzbank U.S. Finance,
5.40% due 01/22/97 700,000 691,390
Daimler-Benz of North America,
5.50% due 12/05/96 500,000 497,403
Walt Disney Company,
5.27% due 01/13/97 800,000 791,451
Ford Motor Company of Canada, Ltd.,
5.31% due 01/22/97 800,000 790,324
General Motors Acceptance
Corporation, 5.45% due 11/08/96 500,000 499,470
Goldman Sachs Group L.P.,
5.24% due 11/25/96 800,000 797,205
Her Majesty In Right of Canada,
5.25% due 01/27/97 800,000 789,850
Merrill Lynch & Company,
Incorporated, 5.34% due 01/15/97 800,000 791,100
Philip Morris Companies,
Incorporated, 5.30% due 01/13/97 800,000 791,402
Private Export Funding Corporation,
5.31% due 11/14/96 500,000 499,041
Province of British Columbia,
5.28% due 01/22/97 800,000 790,379
Province of Quebec,
5.40% due 01/28/97 500,000 493,400
Toshiba America, Incorporated,
5.50% due 01/17/97 700,000 691,765
Transamerica Finance Group,
Incorporated, 5.30% due 01/30/97 800,000 789,400
Xerox Corporation,
5.30% due 02/05/97 800,000 788,693
Zeneca Wilmington Company,
5.50% due 12/17/96 600,000 595,783
TOTAL COMMERCIAL PAPER $16,357,697
----------
TOTAL INVESTMENTS
(Money Market Fund) $21,950,653
----------
</TABLE>
Key to Currency Abbreviations
- -----------------------------
CAD - Canadian Dollar
DKK - Danish Krone
DEM - German Deustche Mark
(POUND) - Great British Pound
HKD - Hong Kong Dollar
IDR - Indonesian Rupiah
ITL - Italian Lira
(YEN) - Japanese Yen
NLG - Netherland Guilder
ESP - Spanish Peseta
SEK - Swedish Krona
CHF - Swiss Franc
Key to Security Abbreviations and Legend
- ----------------------------------------
ADR - American Depository Receipt
ADS - American Depository Shares
FRN - Floating Rate Note
REMIC- Real Estate Mortgage Investment Conduit
TBA - To Be Announced
VR - Variable Rate Demand Note (Rate effective as of October 31, 1996.)
* - Non-Income producing
** - Purchased on a forward commitment (Note 2)
*** - At October 31, 1996 a portion of this security was
pledged to cover forward commitments purchased.
The accompanying notes are an integral part of the financial statements.
60
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. ORGANIZATION OF THE FUND. North American Funds (the "Fund") is an open-end,
diversified management investment company. The Fund is organized as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended. It is a series company, which means it has several
portfolios, each with a stated investment objective which it pursues through
separate investment policies. As of October 31, 1996, the Fund offered the
following thirteen portfolios: the Small/Mid Cap Fund, the International Small
Cap Fund, the Growth Equity Fund, the Global Equity Fund (formerly, the Global
Growth Fund), the Value Equity Fund (formerly, the Growth Fund), the Growth and
Income Fund, the International Growth and Income Fund, the Balanced Fund
(formerly, the Asset Allocation Fund), the Strategic Income Fund, the Investment
Quality Bond Fund, the U.S. Government Securities Fund, the National Municipal
Bond Fund and the Money Market Fund.
On April 1, 1994, the multiple class structure as approved by the Board of
Trustees and shareholders was implemented. The Fund offers Class A, Class B and
Class C shares. Class A shares are sold with a front-end sales charge up to
4.75%. Class B shares are sold with a contingent deferred sales charge which
declines from 5% to zero depending on the period of time shares are held. Class
B shares will automatically convert to Class A shares of the same portfolio six
years after purchase. Class C shares are sold without an initial sales charge.
Class C shares will automatically convert to Class A shares of the same
portfolio ten years after purchase. All three classes of shares have identical
voting, dividend, liquidation and other rights, except that each class has
exclusive voting rights with respect to its distribution plan (See Note 5).
Class A, Class B and Class C of the Money Market Fund have the same expense
structure and no distribution expense.
NASL Financial Services, Inc. ("NASL Financial"), a wholly-owned subsidiary of
North American Security Life Insurance Company, serves as investment adviser,
principal underwriter and distributor for the Fund.
New Portfolios. On March 4, 1996, the Small/Mid Cap, International Small Cap
and Growth Equity Funds commenced operations. Fred Alger Management, Inc. is
the subadviser to the Small/Mid Cap Fund. The subadviser to the International
Small Cap and Growth Equity Funds is Founders Asset Management, Inc.
2. SIGNIFICANT ACCOUNTING POLICIES. The policies described below are followed
when preparing the Funds' financial statements. These policies are in
accordance with generally accepted accounting principles ("GAAP").
Security Valuation. Securities held by the Money Market Fund and money market
instruments with remaining maturities of 60 days or less held by the other
portfolios are valued at either the amortized cost basis or original cost plus
accrued interest, both of which approximate current market value. All other
securities held by the Fund are valued at the last sale price as of the close of
business on a principal securities exchange (domestic or foreign) or, lacking
any sales, at the closing bid price. Securities traded only in the over-the-
counter market are valued at the last bid price quoted by brokers making markets
in the securities at the close of trading on the Exchange. Other assets and
securities for which no such quotation or valuations are readily available are
valued at their fair value as determined in good faith under consistently
applied procedures established by and under the general supervision of the
Trustees.
Foreign Currency Translations. The accounting records of the Fund are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars on the following basis:
(i) market value of securities, other assets and other liabilities at the
current rate of exchange of such currencies against U.S. dollars; and
(ii) purchases and sales of securities, income and expenses at the rate of
exchange quoted on the respective dates of such transactions.
Gains and losses that arise from changes in foreign exchange rates have been
segregated from gains and losses that arise from changes in the market prices of
investments. These gains and losses are included with gains and losses on
foreign currency and forward foreign currency contracts in the Statements of
Operations.
Forward Foreign Currency Contracts. All portfolios with the exception of the
U.S. Government Securities, National Municipal Bond and Money Market Funds may
purchase and sell forward foreign currency contracts in order to hedge a
specific transaction or portfolio position.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held at the end of the period and the resulting net unrealized
appreciation (depreciation) and related net receivable or payable amount are
determined using forward currency exchange rates supplied by a quotation
service. The Fund could be exposed to risks if the counterparties to the
contracts are unable to meet the terms of their contracts or if the value of the
foreign currency changes unfavorably.
Net realized gains (losses) on forward foreign currency contracts, shown in the
Statements of Operations, includes net gains or losses realized by a portfolio
on contracts which have matured or which the portfolio has terminated by
entering into an offsetting commitment.
61
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 2 - continued
Futures. All portfolios other than the U.S. Government Securities and Money
Market Fund may purchase and sell financial futures contracts and options on
those contracts. The portfolios invest in contracts based on financial
instruments such as U.S. Treasury bonds or notes or on securities indices such
as the S&P 500 Index, in order to hedge against a decline in the value of
securities owned by the portfolios.
When a portfolio sells a futures contract based on a financial instrument, the
portfolio becomes obligated to deliver that kind of instrument at an agreed upon
date for a specified price. The portfolio realizes a gain or loss depending on
whether the price of an offsetting purchase is less or more than the price of
the initial sale or on whether the price of an offsetting sale is more or less
than the price of the initial purchase. The portfolio could be exposed to
risks if it could not close out futures positions because of an illiquid
secondary market or the inability of counterparties to meet the terms of their
contracts. Upon entering into futures contracts, the portfolio is required to
deposit with a broker an amount, initial margin, which represents 5% of the
purchase price indicated in the futures contract.
Payments to and from the broker, known as variation margin, are required to be
made on a daily basis as the price of the futures contract fluctuates, making
the long or short positions in the contract more or less valuable. If the
position is closed out by taking an opposite position prior to the settlement
date of the futures contract, a final determination of variation margin is made,
cash is required to be paid to or released by the broker, and the portfolio
realizes a gain or loss.
Forward Commitments. The Fund may make forward commitments to purchase and sell
securities. Delivery and payment for securities which have been purchased or
sold on a forward commitment basis can take place a month or more (not to exceed
120 days) after the date of the transaction. The price of the underlying
securities and the date when the securities will be delivered and paid for are
fixed at the time the transaction is negotiated. The value of the securities
underlying a forward commitment to purchase securities, and any subsequent
fluctuations in their value, is taken into account when determining the
portfolios net asset value starting on the day the portfolio agrees to purchase
the securities. At October 31, 1996, forward commitments in the Balanced,
Strategic Income and U.S. Government Securities Funds were valued at $2,006,860,
$1,492,213 and $60,545,285, respectively.
Mortgage Dollar Rolls. The Strategic Income and U.S. Government Securities
Funds may enter into mortgage dollar rolls in which they sell mortgage-backed
securities for normal delivery in the current month and simultaneously contract
to repurchase similar, but not identical, securities at the same price on an
agreed upon date. The portfolio receives compensation as consideration for
entering into the commitment to repurchase. The compensation is recorded as
deferred income and amortized to income over the roll period. As the holder,
the counterparty receives all principal and interest payments, including
prepayments, made with respect to the similar security. Mortgage dollar rolls
may be renewed with a new sale and repurchase price with a cash settlement made
at renewal without physical delivery of the securities subject to the contract.
Securities Lending. The Fund may lend its portfolio securities in amounts up to
33% of its total non-cash assets to brokers, dealers and other financial
institutions, provided such loans are callable at any time and are at all times
fully collateralized by cash, cash equivalents or securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities, and
marked to market to the value of the loaned securities on a daily basis. The
portfolio may bear the risk of delay in recovery of, or even loss of rights in,
the securities loaned should the borrower of the securities fail financially.
Consequently, loans of portfolio securities will only be made to firms deemed by
the Subadvisers to be creditworthy.
The portfolio receives compensation for lending its securities either in the
form of fees or by retaining a portion of interest on the investment of any cash
received as collateral. Income generated from the investment of cash collateral
is included as interest income in the Statements of Operations. All collateral
received will be in an amount equal to at least 100% of the market value of the
loaned securities and must be maintained at that level during the period of the
loan. During the loan period, the portfolio continues to retain rights of
ownership, including dividends and interest of the loaned securities. At
October 31, 1996, the value of the securities loaned amounted to $1,876,034,
$7,635,641, $10,556,189, $3,666,651, $12,368,122, $8,533,896, $4,533,414 and
$6,440,993 in the Global Equity, Value Equity, Growth and Income, International
Growth and Income, Balanced, Strategic Income, Investment Quality Bond and U.S.
Government Securities Funds, respectively. At October 31, 1996, the value of
cash collateral amounted to $1,982,701, $7,967,100, $10,797,480, $3,845,306,
$12,651,263, $8,825,965, $4,629,699 and $6,567,000 in the Global Equity, Value
Equity, Growth and Income, International Growth and Income, Balanced, Strategic
Income, Investment Quality Bond and U.S. Government Securities Funds,
respectively.
62
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 2 - continued
Organization Costs. Cost incurred by the Fund in connection with its
organization, its initial registration with the Securities and Exchange
Commission and with various states, and the initial public offering of its
shares is being amortized on a straight line basis over a five-year period for
the International Growth and Income, Strategic Income and the National Municipal
Bond Funds.
Federal Income Taxes. The Fund's policy is for each portfolio to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code, as
amended, and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required. Each portfolio is
treated as a separate taxpayer for federal income tax purposes.
Distributions of Income and Gains. Distribution of net investment income is
declared as a dividend to shareholders of record as of the close of business
each day and is paid monthly for the Investment Quality Bond and U.S. Government
Securities Funds, semi-annually to shareholders of the Growth and Income and
International Growth and Income Funds, and annually to shareholders of the
Small/Mid Cap, International Small Cap, Growth Equity, Global Equity, Value
Equity and Balanced Funds. All of the net investment income of the Strategic
Income, National Municipal Bond and Money Market Funds is declared as a dividend
to shareholders of record as of the close of business each day and is paid
monthly. During any particular year, net realized gains from investment,
futures and foreign currency transactions for each portfolio, in excess of
available capital loss carryforwards of each portfolio, would be taxable to the
portfolio if not distributed and, therefore, will be distributed to
shareholders. An additional distribution may be made to the extent necessary to
avoid the payment of a four percent federal excise tax.
Pursuant to Section 852 of the Internal Revenue Code, the distributions set
forth below have been designated as capital gains distributions for the fiscal
year ended October 31, 1996:
<TABLE>
<CAPTION>
Portfolio Capital Gain Distribution
- ----------------------------------- --------------------------------
<S> <C>
Global Equity...................... $12,813,300
Value Equity....................... 14,983,316
Growth and Income.................. 6,194,241
International Growth and Income.... 666,284
Balanced........................... 7,326,163
Strategic Income................... 1,249,004
</TABLE>
Capital Loss Carryforwards. At October 31, 1996, capital loss carryforwards
available to offset future realized gains were approximately:
<TABLE>
<CAPTION>
Capital Loss Carryforwards
Expiration Year
--------------------------------------
Portfolio 2002 2003 2004
- ------------------------------ -------- ---------- --------
<S> <C> <C> <C>
Small/Mid Cap................. -- -- $761,000
International Small Cap....... -- -- 54,000
Growth Equity................. -- -- 414,000
Investment Quality Bond....... $535,000 -- --
U.S. Government Securities.... -- $2,263,000 --
National Municipal Bond....... -- 425,000 --
</TABLE>
Equalization. The Fund follows the accounting practice known as equalization,
by which a portion of the proceeds from sales and costs of repurchases of the
Fund's shares are allocated, on a per share basis, to undistributed net
investment income. As a result, undistributed net investment income per share
is unaffected by sales or redemptions of the Fund's shares.
63
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 2 - continued
Repurchase and Reverse Repurchase Agreements. Each portfolio may enter into
repurchase agreements and, additionally, the U.S. Government Securities Fund may
enter into reverse repurchase agreements. When a portfolio enters into a
repurchase agreement through its custodian, it receives delivery of the
underlying securities, the amount of which at the time of purchase and each
subsequent business day is required to be maintained at such a level that the
market value is equal to 102% of the resale price, and such portfolio will take
constructive receipt of all securities underlying the repurchase agreements
until such agreements expire. If the seller defaults, a portfolio would suffer
a loss to the extent that proceeds from the sale of underlying securities were
less than the repurchase price. Under a reverse repurchase agreement, the U.S.
Government Securities Fund may sell a debt security and agree to repurchase it
at an agreed upon time and at an agreed upon price.
Other. Investment security transactions are accounted for on the trade date.
Interest income is accrued as earned. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. All original issue discounts
are accreted for financial and federal income tax reporting purposes. The Fund
uses the First In, First Out method for determining realized gain or loss on
investments, futures and foreign currency for both financial and federal income
tax reporting purposes. The preparation of financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the
reported amount of assets, liabilities, income and expenses. Actual results may
differ from these estimates.
Capital Accounts. The Fund reports the accumulated undistributed net investment
income (loss) and accumulated undistributed net realized gain (loss) accounts on
a basis approximating amounts available for future tax distributions (or to
offset future taxable realized gains when a capital loss carryforward is
available). Accordingly, each portfolio of the Fund may periodically make
reclassifications among certain capital accounts without impacting the net asset
value.
3. CAPITAL SHARES. Share activity for the year ended October 31, 1996 is as
follows:
<TABLE>
<CAPTION>
Additional
Shares Par Value Paid-in Capital
----------- --------- ---------------
<S> <C> <C> <C>
Small/Mid Cap Fund-Class A
Outstanding at March 4, 1996
(commencement of operations)........... ---- --- ----
Sold................................... 323,804 $324 $4,125,082
Redeemed............................... (88,850) (89) (1,126,067)
------- ---- ----------
Net increase.......................... 234,954 235 2,999,015
------- ---- ----------
Outstanding at October 31, 1996......... 234,954 $235 $2,999,015
======= ==== ==========
Small/Mid Cap Fund-Class B
Outstanding at March 4, 1996
(commencement of operations)........... ---- --- ----
Sold................................... 562,252 $562 $7,191,046
Redeemed............................... (33,141) (33) (420,978)
------- ---- ----------
Net increase.......................... 529,111 529 6,770,068
------- ---- ----------
Outstanding at October 31, 1996......... 529,111 $529 $6,770,068
======= ==== ==========
Small/Mid Cap Fund-Class C
Outstanding at March 4, 1996
(commencement of operations)........... ---- --- ----
Sold................................... 714,630 $715 $9,110,987
Redeemed............................... (60,166) (60) (775,461)
------- ---- ----------
Net increase.......................... 654,464 655 8,335,526
------- ---- ----------
Outstanding at October 31, 1996......... 654,464 $655 $8,335,526
======= ==== ==========
International Small Cap Fund-Class A
Outstanding at March 4, 1996
(commencement of operations)........... ---- --- ----
Sold................................... 187,102 $187 $2,441,008
Redeemed............................... (29,251) (29) (388,442)
------- ---- ----------
Net increase.......................... 157,851 158 2,052,566
------- ---- ----------
Outstanding at October 31, 1996......... 157,851 $158 $2,052,566
======= ==== ==========
</TABLE>
64
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 3 - continued
<TABLE>
<CAPTION>
Additional
Shares Par Value Paid-in Capital
----------- --------- ---------------
<S> <C> <C> <C>
International Small Cap Fund-Class B
Outstanding at March 4, 1996
(commencement of operations)........... ---- --- ----
Sold................................... 388,668 $389 $5,096,099
Redeemed............................... (9,698) (10) (127,551)
----------- ---- ----------
Net increase.......................... 378,970 379 4,968,548
----------- ---- ----------
Outstanding at October 31, 1996......... 378,970 $379 $4,968,548
=========== ==== ==========
International Small Cap Fund-Class C
Outstanding at March 4, 1996
(commencement of operations)........... ---- --- ----
Sold................................... 437,910 $438 $5,723,107
Redeemed............................... (25,444) (25) (337,108)
----------- ---- ----------
Net increase.......................... 412,466 413 5,385,999
----------- ---- ----------
Outstanding at October 31, 1996......... 412,466 $413 $5,385,999
=========== ==== ==========
Growth Equity Fund-Class A
Outstanding at March 4, 1996
(commencement of operations)........... ---- --- ----
Sold................................... 296,685 $297 $3,885,431
Redeemed............................... (133,859) (134) (1,825,177)
----------- ---- ----------
Net increase.......................... 162,826 163 2,060,254
----------- ---- ----------
Outstanding at October 31, 1996......... 162,826 $163 $2,060,254
=========== ==== ==========
Growth Equity Fund-Class B
Outstanding at March 4, 1996
(commencement of operations)........... ---- --- ----
Sold................................... 441,286 $441 $5,782,136
Redeemed............................... (95,418) (95) (1,218,787)
----------- ---- ----------
Net increase.......................... 345,868 346 4,563,349
----------- ---- ----------
Outstanding at October 31, 1996......... 345,868 $346 $4,563,349
=========== ==== ==========
Growth Equity Fund-Class C
Outstanding at March 4, 1996
(commencement of operations)........... ---- --- ----
Sold................................... 500,864 $501 $6,717,848
Redeemed............................... (27,932) (28) (373,508)
----------- ---- ----------
Net increase.......................... 472,932 473 6,344,340
----------- ---- ----------
Outstanding at October 31, 1996......... 472,932 $473 $6,344,340
=========== ==== ==========
Global Equity Fund-Class A (formerly
the Global Growth Fund-Class A)
Outstanding at October 31, 1995......... 1,726,660 $1,727 $24,333,372
Sold................................... 1,384,480 1,384 19,538,181
Reinvestment of distributions.......... 26,279 26 369,986
Redeemed............................... (1,349,381) (1,349) (19,144,478)
----------- ------ -----------
Net increase.......................... 61,378 61 763,689
----------- ------ -----------
Outstanding at October 31, 1996......... 1,788,038 $1,788 $25,097,061
=========== ====== ===========
Global Equity Fund-Class B (formerly
the Global Growth Fund-Class B)
Outstanding at October 31, 1995......... 1,698,251 $1,698 $23,880,103
Sold................................... 524,030 524 7,455,003
Reinvestment of distributions.......... 16,612 17 233,046
Redeemed............................... (452,206) (452) (6,464,535)
----------- ------ -----------
Net increase.......................... 88,436 89 1,223,514
----------- ------ -----------
Outstanding at October 31, 1996......... 1,786,687 $1,787 $25,103,617
=========== ====== ===========
</TABLE>
65
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 3 - continued
<TABLE>
<CAPTION>
Additional
Shares Par Value Paid-in Capital
------------ ----------- ----------------
<S> <C> <C> <C>
Global Equity Fund-Class C (formerly
the Global Growth Fund-Class C)
Outstanding at October 31, 1995......... 6,069,937 $6,070 $77,071,294
Sold................................... 751,610 751 10,749,680
Reinvestment of distributions.......... 38,871 39 546,838
Redeemed............................... (2,360,215) (2,360) (33,787,407)
----------- ------ -----------
Net decrease.......................... (1,569,734) (1,570) (22,490,889)
----------- ------ -----------
Outstanding at October 31, 1996......... 4,500,203 $4,500 $54,580,405
=========== ====== ===========
Value Equity Fund-Class A (formerly
the Growth Fund-Class A)
Outstanding at October 31, 1995......... 1,381,954 $1,382 $20,109,792
Sold................................... 928,055 928 15,106,428
Reinvestment of distributions.......... 137,144 137 2,055,642
Redeemed............................... (808,325) (808) (13,113,921)
----------- ------ -----------
Net increase.......................... 256,874 257 4,048,149
----------- ------ -----------
Outstanding at October 31, 1996......... 1,638,828 $1,639 $24,157,941
=========== ====== ===========
Value Equity Fund-Class B (formerly
the Growth Fund-Class B)
Outstanding at October 31, 1995......... 1,254,421 $1,254 $18,921,823
Sold................................... 624,167 625 10,115,495
Reinvestment of distributions.......... 113,120 113 1,704,582
Redeemed............................... (419,960) (420) (6,804,863)
----------- ------ -----------
Net increase.......................... 317,327 318 5,015,214
----------- ------ -----------
Outstanding at October 31, 1996......... 1,571,748 $1,572 $23,937,037
=========== ====== ===========
Value Equity Fund-Class C (formerly
the Growth Fund-Class C)
Outstanding at October 31,1995.......... 5,284,502 $5,285 $67,053,930
Sold................................... 953,226 954 15,513,636
Reinvestment of distributions.......... 439,112 439 6,652,164
Redeemed............................... (1,821,843) (1,823) (29,491,922)
----------- ------ -----------
Net decrease.......................... (429,505) (430) (7,326,122)
----------- ------ -----------
Outstanding at October 31, 1996......... 4,854,997 $4,855 $59,727,808
=========== ====== ===========
Growth and Income Fund-Class A
Outstanding at October 31, 1995......... 827,682 $828 $10,769,205
Sold................................... 404,689 405 6,512,774
Reinvestment of distributions.......... 17,981 18 276,309
Redeemed............................... (209,520) (210) (3,361,540)
----------- ------ -----------
Net increase.......................... 213,150 213 3,427,543
----------- ------ -----------
Outstanding at October 31, 1996......... 1,040,832 $1,041 $14,196,748
=========== ====== ===========
Growth and Income Fund-Class B
Outstanding at October 31, 1995......... 1,297,356 $1,297 $17,462,876
Sold................................... 948,621 949 15,050,426
Reinvestment of distributions.......... 23,339 23 357,514
Redeemed............................... (284,205) (284) (4,587,169)
----------- ------ -----------
Net increase.......................... 687,755 688 10,820,771
----------- ------ -----------
Outstanding at October 31, 1996......... 1,985,111 $1,985 $28,283,647
=========== ====== ===========
Growth and Income Fund-Class C
Outstanding at October 31, 1995......... 4,292,794 $4,293 $51,514,264
Sold................................... 1,136,822 1,137 18,164,159
Reinvestment of distributions.......... 58,513 58 892,120
Redeemed............................... (1,227,020) (1,227) (19,533,910)
----------- ------ -----------
Net decrease.......................... (31,685) (32) (477,631)
----------- ------ -----------
Outstanding at October 31, 1996......... 4,261,109 $4,261 $51,036,633
=========== ====== ===========
</TABLE>
66
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Note 3 - continued
Additional
Shares Par Value Paid-in Capital
------------- ----------- ---------------
<S> <C> <C> <C>
International Growth & Income
Fund-Class A
Outstanding at October 31, 1995.......... 682,252 $682 $6,889,119
Sold.................................... 262,160 263 2,810,233
Reinvestment of distributions........... 12,258 12 127,603
Redeemed................................ (539,762) (540) (5,726,314)
--------- -------- ----------
Net decrease.......................... (265,344) (265) (2,788,478)
--------- -------- ----------
Outstanding at October 31, 1996.......... 416,908 $417 $4,100,641
========= ======== ==========
International Growth & Income Fund-Class B
Outstanding at October 31, 1995.......... 834,017 $834 $8,385,870
Sold.................................... 717,507 717 7,662,050
Reinvestment of distributions........... 13,587 14 141,835
Redeemed................................ (219,029) (219) (2,370,528)
--------- -------- -----------
Net increase.......................... 512,065 512 5,433,357
--------- -------- -----------
Outstanding at October 31, 1996.......... 1,346,082 $1,346 $13,819,227
========= ======== ===========
International Growth & Income Fund-Class C
Outstanding at October 31, 1995.......... 626,235 $626 $6,302,145
Sold.................................... 603,200 603 6,488,338
Reinvestment of distributions........... 9,958 10 104,054
Redeemed................................ (436,609) (436) (4,706,525)
--------- -------- ----------
Net increase.......................... 176,549 177 1,885,867
--------- -------- ----------
Outstanding at October 31, 1996.......... 802,784 $803 $8,188,012
========= ======== ==========
Balanced Fund-Class A (formerly
the Asset Allocation Fund-Class A)
Outstanding at October 31, 1995.......... 834,714 $835 $9,207,069
Sold.................................... 198,770 199 2,311,075
Reinvestment of distributions........... 85,976 86 941,431
Redeemed................................ (237,725) (238) (2,753,497)
--------- -------- ----------
Net increase.......................... 47,021 47 499,009
--------- -------- ----------
Outstanding at October 31, 1996.......... 881,735 $881 $9,706,078
========= ======== ==========
Balanced Fund-Class B (formerly
the Asset Allocation Fund-Class B)
Outstanding at October 31, 1995.......... 824,443 $824 $9,061,513
Sold.................................... 599,541 599 6,969,412
Reinvestment of distributions........... 85,887 86 943,699
Redeemed................................ (187,370) (187) (2,173,049)
--------- -------- -----------
Net increase.......................... 498,058 498 5,740,062
--------- -------- -----------
Outstanding at October 31, 1996.......... 1,322,501 $1,323 $14,801,575
========= ======== ===========
Balanced Fund-Class C (formerly
the Asset Allocation Fund-Class C)
Outstanding at October 31, 1995.......... 6,706,025 $6,706 $65,861,087
Sold.................................... 613,342 613 7,130,252
Reinvestment of distributions........... 577,601 578 6,358,726
Redeemed................................ (2,000,280) (2,000) (23,216,709)
---------- -------- -----------
Net decrease.......................... (809,337) (809) (9,727,731)
---------- -------- -----------
Outstanding at October 31, 1996.......... 5,896,688 $5,897 $56,133,356
========== ======== ===========
Strategic Income Fund-Class A
Outstanding at October 31, 1995.......... 1,107,567 $1,107 $11,964,572
Sold.................................... 496,437 497 4,710,685
Reinvestment of distributions........... 60,408 60 574,304
Redeemed................................ (299,464) (299) (2,847,082)
--------- -------- -----------
Net increase.......................... 257,381 258 2,437,907
--------- -------- -----------
Outstanding at October 31, 1996.......... 1,364,948 $1,365 $14,402,479
========= ======== ===========
</TABLE>
67
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- -------------------------------------------------------------------------------
Note 3 - continued
<TABLE>
<CAPTION>
Additional
Shares Par Value Paid-in Capital
------------ ------------ ---------------
<S> <C> <C> <C>
Strategic Income Fund-Class B
Outstanding at October 31, 1995......... 2,280,183 $2,280 $20,129,660
Sold................................... 1,228,732 1,229 11,624,907
Reinvestment of distributions.......... 105,959 106 1,007,991
Redeemed............................... (463,872) (464) (4,399,310)
--------- -------- ------------
Net increase.......................... 870,819 871 8,233,588
--------- -------- ------------
Outstanding at October 31, 1996......... 3,151,002 $3,151 $28,363,248
========= ======== ============
Strategic Income Fund-Class C
Outstanding at October 31, 1995......... 1,574,343 $1,574 $14,068,758
Sold................................... 1,139,454 1,140 10,808,854
Reinvestment of distributions.......... 114,188 114 1,086,669
Redeemed............................... (503,838) (504) (4,782,313)
--------- -------- ------------
Net increase.......................... 749,804 750 7,113,210
--------- -------- ------------
Outstanding at October 31, 1996......... 2,324,147 $2,324 $21,181,968
========= ======== ============
Investment Quality Bond Fund-Class A
Outstanding at October 31, 1995......... 979,526 $980 $10,738,901
Sold................................... 101,513 101 1,049,598
Reinvestment of distributions.......... 49,845 50 515,653
Redeemed............................... (255,090) (255) (2,626,903)
--------- -------- ------------
Net decrease.......................... (103,732) (104) (1,061,652)
--------- -------- ------------
Outstanding at October 31, 1996......... 875,794 $ 876 $9,677,249
========= ======== ============
Investment Quality Bond Fund-Class B
Outstanding at October 31, 1995......... 328,970 $329 $3,312,807
Sold................................... 253,182 253 2,635,230
Reinvestment of distributions.......... 21,978 22 226,451
Redeemed............................... (151,315) (151) (1,556,299)
--------- -------- ------------
Net increase.......................... 123,845 124 1,305,382
--------- -------- ------------
Outstanding at October 31, 1996......... 452,815 $453 $4,618,189
========= ======== ============
Investment Quality Bond Fund-Class C
Outstanding at October 31, 1995......... 683,013 $683 $6,915,070
Sold................................... 412,421 412 4,225,809
Reinvestment of distributions.......... 37,585 38 387,983
Redeemed............................... (402,925) (403) (4,176,235)
--------- -------- ------------
Net increase.......................... 47,081 47 437,557
--------- -------- ------------
Outstanding at October 31, 1996......... 730,094 $730 $7,352,627
========= ======== ============
U.S. Government Securities Fund-Class A
Outstanding at October 31, 1995......... 8,130,813 $8,130 $84,036,450
Sold................................... 1,020,293 1,020 9,911,592
Reinvestment of distributions.......... 331,636 332 3,248,473
Redeemed............................... (2,057,267) (2,057) (20,125,365)
--------- -------- ------------
Net decrease.......................... (705,338) (705) (6,965,300)
--------- -------- ------------
Outstanding at October 31, 1996......... 7,425,475 $7,425 $77,071,150
========= ======== ============
U.S. Government Securities Fund-Class B
Outstanding at October 31, 1995......... 1,402,069 $1,402 $13,649,755
Sold................................... 1,092,841 1,093 10,803,400
Reinvestment of distributions.......... 73,608 74 720,250
Redeemed............................... (584,646) (585) (5,711,446)
--------- -------- ------------
Net increase.......................... 581,803 582 5,812,204
--------- -------- ------------
Outstanding at October 31, 1996......... 1,983,872 $ 1,984 $ 19,461,959
========= ======== ============
</TABLE>
68
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- -------------------------------------------------------------------------------
Note 3 - continued
<TABLE>
<CAPTION>
Additional
Shares Par Value Paid-in Capital
----------- ----------- ---------------
<S> <C> <C> <C>
U.S. Government Securities Fund-Class C
Outstanding at October 31, 1995......... 2,022,679 $2,023 $19,474,359
Sold................................... 1,238,374 1,238 12,110,479
Reinvestment of distributions.......... 100,270 100 981,683
Redeemed............................... (1,319,689) (1,320) (12,888,795)
--------- -------- ------------
Net increase.......................... 18,955 18 203,367
--------- -------- ------------
Outstanding at October 31, 1996......... 2,041,634 $2,041 $19,677,726
========= ======== ============
National Municipal Bond Fund-Class A
Outstanding at October 31, 1995......... 791,917 $792 $8,182,439
Sold................................... 114,622 115 1,105,668
Reinvestment of distributions.......... 21,374 21 206,202
Redeemed............................... (135,595) (136) (1,297,620)
--------- -------- ------------
Net increase.......................... 401 ---- 14,250
--------- -------- ------------
Outstanding at October 31, 1996......... 792,318 $792 $8,196,689
========= ======== ============
National Municipal Bond Fund-Class B
Outstanding at October 31, 1995......... 610,972 $611 $5,609,968
Sold................................... 147,773 148 1,427,797
Reinvestment of distributions.......... 18,158 18 175,069
Redeemed............................... (146,987) (147) (1,410,072)
--------- -------- ------------
Net increase.......................... 18,944 19 192,794
--------- -------- ------------
Outstanding at October 31, 1996......... 629,916 $630 $5,802,762
========= ======== ============
National Municipal Bond Fund-Class C
Outstanding at October 31, 1995......... 710,507 $711 $6,609,550
Sold................................... 135,926 136 1,306,862
Reinvestment of distributions.......... 21,229 21 204,712
Redeemed............................... (282,622) (283) (2,699,433)
--------- -------- ------------
Net decrease.......................... (125,467) (126) (1,187,859)
--------- -------- ------------
Outstanding at October 31, 1996......... 585,040 $585 $5,421,691
========= ======== ============
Money Market Fund-Class A
Outstanding at October 31, 1995......... 11,378,848 $11,379 $11,367,470
Sold................................... 33,533,459 33,534 33,499,925
Reinvestment of distributions.......... 373,297 373 372,924
Redeemed............................... (37,198,936) (37,199) (37,161,737)
----------- -------- ------------
Net decrease.......................... (3,292,180) (3,292) (3,288,888)
----------- -------- ------------
Outstanding at October 31, 1996......... 8,086,668 $8,087 $8,078,581
=========== ======== ============
Money Market Fund-Class B
Outstanding at October 31, 1995......... 1,564,104 $1,565 $1,562,539
Sold................................... 8,522,308 8,521 8,513,787
Reinvestment of distributions.......... 79,817 80 79,737
Redeemed............................... (7,103,878) (7,104) (7,096,774)
---------- -------- ------------
Net increase.......................... 1,498,247 1,497 1,496,750
---------- -------- ------------
Outstanding at October 31, 1996......... 3,062,351 $3,062 $3,059,289
========== ======== ============
Money Market Fund-Class C
Outstanding at October 31, 1995......... 9,394,496 $9,395 $9,385,101
Sold................................... 24,516,367 24,516 24,491,850
Reinvestment of distributions.......... 436,724 437 436,288
Redeemed............................... (24,507,477) (24,508) (24,482,969)
----------- -------- ------------
Net increase.......................... 445,614 445 445,169
----------- -------- ------------
Outstanding at October 31, 1996......... 9,840,110 $9,840 $9,830,270
=========== ======== ============
</TABLE>
69
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
================================================================================
4. PURCHASES AND SALES OF SECURITIES. The following table summarizes the
securities transactions (excluding short-term investments) for all portfolios,
excluding the Money Market Fund, for the year ended October 31, 1996:
<TABLE>
<CAPTION>
Purchases Sales
--------------------------------- ---------------------------------
Portfolio U.S. Government Other Issues U.S. Government Other Issues
- ------------ ---------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Small/Mid Cap*................... ------ $ 21,527,205 ------ $ 5,515,724
International Small Cap*......... ------ 12,135,811 ------ 2,450,279
Growth Equity*................... ------ 29,506,136 ------ 18,374,333
Global Equity.................... ------ 211,736,396 ------ 236,118,160
Value Equity..................... ------ 213,855,722 ------ 225,191,007
Growth and Income................ ------ 67,711,169 ------ 54,043,311
International Growth & Income.... ------ 48,882,945 ------ 43,026,795
Balanced......................... $180,093,876 71,500,798 $ 36,113,637 227,299,383
Strategic Income................. 53,147,864 70,306,739 47,457,913 64,710,363
Investment Quality Bond.......... 8,098,421 4,377,754 6,806,585 4,543,064
U.S. Government Securities....... 518,706,112 8,291,250 520,187,391 1,551,091
National Municipal Bond.......... ------ 9,559,254 ------ 10,306,329
</TABLE>
* For the period March 4, 1996 (commencement of operations) to October 31, 1996.
Purchases and sales (maturities) for the Money Market Fund for the year ended
October 31, 1996 were $321,747,928 and $320,391,374, respectively.
At October 31, 1996, tax basis net unrealized appreciation was equal to the
aggregate gross unrealized appreciation for all securities in which there was an
excess of market value over tax cost and aggregate gross unrealized depreciation
for all securities in which there was an excess of tax cost over market value as
follows:
<TABLE>
<CAPTION>
Tax Basis Net
Unrealized Tax Basis Tax Basis
Tax Basis Appreciation Unrealized Unrealized
Portfolio Cost (Depreciation) Appreciation Depreciation
- ------------ --------------- -------------- --------------- ------------
<S> <C> <C> <C> <C>
Small/Mid Cap....... $ 16,981,373 $ 585,576 $ 1,246,126 $ 660,550
International Small
Cap................ 12,159,472 355,072 773,666 418,594
Growth Equity....... 12,588,953 690,567 939,019 248,452
Global Equity....... 112,546,643 (976,522) 2,591,445 3,567,967
Value Equity........ 138,274,030 1,379,406 4,252,468 2,873,062
Growth and Income... 101,008,299 26,354,727 28,428,041 2,073,314
International
Growth and Income.. 27,902,129 578,688 1,555,707 977,019
Balanced............ 94,776,549 7,574,933 7,995,145 420,212
Strategic Income.... 65,571,750 1,079,225 2,004,390 925,165
Investment Quality
Bond............... 20,701,178 133,315 281,008 147,693
U.S. Government
Securities......... 147,832,595 (249,768) 652,335 902,103
National Municipal
Bond............... 19,017,867 532,036 591,977 59,941
</TABLE>
The following is a summary of futures contracts activity for the year ended
October 31, 1996:
<TABLE>
<CAPTION>
Sales of Futures Contracts Purchases of Futures Contracts
-------------------------------- -------------------------------
Number Aggregate Number Aggregate
of Face Value of of Face Value of
Contracts Contracts Contracts Contracts
-------------- -------------- ------------- ----------------
<S> <C> <C> <C> <C>
Balanced Fund:
U.S. Treasury Bond
Futures:
Outstanding,
October 31, 1995..... 7 $ 700,000 38 $ 3,800,000
Contracts opened...... 52 5,200,000 242 24,200,000
Contracts closed...... (59) (5,900,000) (280) (28,000,000)
Outstanding,
October 31, 1996..... --- --------- ---- -----------
=== ========= ==== ===========
</TABLE>
70
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- --------------------------------------------------------------------------------
5. INVESTMENT ADVISORY AGREEMENTS. The Fund maintains an Investment Advisory
Agreement with NASL Financial ("the Adviser"). The Adviser is responsible for
managing the corporate and business affairs of the Fund and for selecting and
compensating subadvisers to handle the investment and reinvestment of the assets
of each portfolio, subject to the supervision of the Trustees of the Fund. As
compensation for its services, the Adviser receives a fee from the Fund computed
separately for each portfolio at an annual percentage of average net assets as
follows:
<TABLE>
<CAPTION>
Between Between
$ 50,000,000 $200,000,000
First and and Excess over
Portfolio $50,000,000 $200,000,000 $500,000,000 $500,000,000
- ----------- ------------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Small/Mid Cap...................... .925% .900% .875% .850%
International Small Cap............ 1.050% 1.000% .900% .800%
Growth Equity...................... .900% .850% .825% .800%
Global Equity...................... .900% .900% .700% .700%
Value Equity....................... .725% .675% .625% .550%
Growth and Income.................. .725% .675% .625% .550%
International Growth and Income.... .900% .850% .800% .750%
Balanced........................... .725% .675% .625% .550%
Strategic Income................... .750% .700% .650% .600%
Investment Quality Bond............ .600% .600% .525% .475%
U.S. Government Securities......... .600% .600% .525% .475%
National Municipal Bond............ .600% .600% .600% .600%
Money Market....................... .200% .200% .200% .145%
</TABLE>
Expense Reimbursement and Distribution Plan. Pursuant to the Investment
Advisory Agreement, NASL Financial will reduce the advisory fee or if necessary
reimburse each portfolio of the Fund (excluding taxes, portfolio brokerage
commissions, interest, certain litigation and indemnification expenses,
extraordinary expenses and all of the portfolio's distribution fees) for
expenses incurred in excess (Expense limitation) of the following annual
percentages of average net assets as highlighted in the table below.
The Fund has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940 to use its assets to finance certain
activities relating to the distribution of its shares to investors. The Plan is
a "compensation" plan providing for the payment by each portfolio, other than
the Money Market Fund, of a monthly distribution fee to NASL Financial, as
principal underwriter for the Fund as highlighted in the table below:
<TABLE>
<CAPTION>
Portfolio Class A Class B Class C
------------ ------- ------- -------
<S> <C> <C> <C>
Small/Mid Cap
Management fees.................. 0.925% 0.925% 0.925%
Other expenses................... 0.400% 0.400% 0.400%
----- ----- -----
Expense limitation............... 1.325% 1.325% 1.325%
===== ===== =====
Rule 12b-1 fees.................. 0.350% 1.000% 1.000%
===== ===== =====
International Small Cap
Management fees.................. 1.050% 1.050% 1.050%
Other expenses................... 0.500% 0.500% 0.500%
----- ----- -----
Expense limitation............... 1.550% 1.550% 1.550%
===== ===== =====
Rule 12b-1 fees.................. 0.350% 1.000% 1.000%
===== ===== =====
Growth Equity
Management fees.................. 0.900% 0.900% 0.900%
Other expenses................... 0.400% 0.400% 0.400%
----- ----- -----
Expense limitation............... 1.300% 1.300% 1.300%
===== ===== =====
Rule 12b-1 fees.................. 0.350% 1.000% 1.000%
===== ===== =====
</TABLE>
71
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 5 - continued
<TABLE>
<CAPTION>
Portfolio Class A Class B Class C
----------- ------- ------- -------
<S> <C> <C> <C>
Global Equity
Management fees.................. 0.900% 0.900% 0.900%
Other expenses................... 0.500% 0.500% 0.500%
----- ----- -----
Expense limitation............... 1.400% 1.400% 1.400%
===== ===== =====
Rule 12b-1 fees.................. 0.350% 1.000% 1.000%
===== ===== =====
Value Equity
Management fees.................. 0.725% 0.725% 0.725%
Other expenses................... 0.265% 0.265% 0.265%
----- ----- -----
Expense limitation............... 0.990% 0.990% 0.990%
===== ===== =====
Rule 12b-1 fees.................. 0.350% 1.000% 1.000%
===== ===== =====
Growth and Income
Management fees.................. 0.725% 0.725% 0.725%
Other expenses................... 0.265% 0.265% 0.265%
----- ----- -----
Expense limitation............... 0.990% 0.990% 0.990%
===== ===== =====
Rule 12b-1 fees.................. 0.350% 1.000% 1.000%
===== ===== =====
International Growth and Income
Management fees.................. 0.900% 0.900% 0.900%
Other expenses................... 0.500% 0.500% 0.500%
----- ----- -----
Expense limitation............... 1.400% 1.400% 1.400%
===== ===== =====
Rule 12b-1 fees.................. 0.350% 1.000% 1.000%
===== ===== =====
Balanced
Management fees.................. 0.725% 0.725% 0.725%
Other expenses................... 0.265% 0.265% 0.265%
----- ----- -----
Expense limitation............... 0.990% 0.990% 0.990%
===== ===== =====
Rule 12b-1 fees.................. 0.350% 1.000% 1.000%
===== ===== =====
Strategic Income
Management fees.................. 0.750% 0.750% 0.750%
Other expenses................... 0.400% 0.400% 0.400%
----- ----- -----
Expense limitation............... 1.150% 1.150% 1.150%
===== ===== =====
Rule 12b-1 fees.................. 0.350% 1.000% 1.000%
===== ===== =====
Investment Quality Bond
Management fees.................. 0.600% 0.600% 0.600%
Other expenses................... 0.300% 0.300% 0.300%
----- ----- -----
Expense limitation............... 0.900% 0.900% 0.900%
===== ===== =====
Rule 12b-1 fees.................. 0.350% 1.000% 1.000%
===== ===== =====
U.S. Government Securities
Management fees.................. 0.600% 0.600% 0.600%
Other expenses................... 0.300% 0.300% 0.300%
----- ----- -----
Expense limitation............... 0.900% 0.900% 0.900%
===== ===== =====
Rule 12b-1 fees.................. 0.350% 1.000% 1.000%
===== ===== =====
</TABLE>
72
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 5 - continued
<TABLE>
<CAPTION>
Portfolio Class A Class B Class C
- ------------- ------- ------- -------
<S> <C> <C> <C>
National Municipal Bond
Management fees.................. 0.600% 0.600% 0.600%
Other expenses................... 0.240% 0.240% 0.240%
----- ----- -----
Expense limitation............... 0.840% 0.840% 0.840%
===== ===== =====
Rule 12b-1 fees.................. 0.150% 1.000% 1.000%
===== ===== =====
Money Market
Management fees.................. 0.200% 0.200% 0.200%
Other expenses................... 0.300% 0.300% 0.300%
----- ----- -----
Expense limitation............... 0.500% 0.500% 0.500%
===== ===== =====
</TABLE>
In accordance with the Investment Advisory agreement, NASL Financial, in
addition to providing advisory services, provides accounting and administrative
services for which NASL Financial charged $1,323,448 to the Fund, before
reimbursement based on expense limitations, for the year ended October 31, 1996.
6. TRUSTEE'S FEES. The Fund pays each Trustee who is not an employee or a
director of the Adviser or its affiliates a fee of $1,000 plus travel expenses
for each Board of Trustees meeting attended and an annual retainer of $5,000.
7. COMMITMENTS. At October 31, 1996, the International Small Cap, Global
Equity, International Growth and Income and Strategic Income Funds had entered
into forward foreign currency contracts which contractually obligate the
portfolio to deliver currencies at future dates. Open sale and purchase
contracts at October 31, 1996 were as follows:
<TABLE>
<CAPTION>
Net
Contracts Unrealized
to In Exchange Settlement Appreciation
Deliver For Date Value (Depreciation)
----------- ------------ ---------- ----------- --------------
International Small Cap
<S> <C> <C> <C> <C> <C>
Sales
Hong Kong Dollar.......... 718,018 $ 92,854 11/04/96 $ 92,861 $ (7)
Great British Pound....... 4,361 7,029 11/05/96 7,098 (69)
French Franc.............. 137,768 27,014 11/29/96 26,947 67
---------- -------- -------
$ 126,897 $126,906 $ (9)
========== ======== =======
Purchases
$ 2,019 AUD 2,554 11/01/96 $ 2,024 $ 5
2,173 DEM 3,304 11/01/96 2,182 9
126,765 L 78,932 11/01/96 128,470 1,705
8,944 Y 1,022,143 11/01/96 8,978 34
36,264 NOK 231,891 11/01/96 36,342 78
1,197 AUD 1,512 11/04/96 1,198 1
1,925 L 1,194 11/04/96 1,944 19
71,614 L 44,431 11/05/96 72,316 702
8,972 Y 1,022,917 11/05/96 8,984 12
1,591 AUD 2,010 11/06/96 1,593 2
22,024 L 13,475 11/06/96 21,932 (92)
1,634 AUD 2,064 11/07/96 1,636 2
-------- -------- ------
$285,122 $287,599 $2,477
======== ======== ------
$2,468
======
</TABLE>
73
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 7- continued
<TABLE>
<CAPTION>
Contracts Net Unrealized
to In Exchange Settlement Appreciation
Deliver For Date Value (Depreciation)
------------- ----------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Global Equity
Purchases
$ 230,919 CAD 309,293 11/01/96 $ 230,781 $ (138)
626,160 DEM 946,128 11/01/96 624,754 (1,406)
661,740 L 406,349 11/04/96 661,376 (364)
---------- ----------
$1,518,819 $1,516,911 $ (1,908)
========== ==========
$ (1,908)
========
International Growth and Income
Sales
French Franc......... 4,270,391 $ 840,628 11/22/96 $ 836,289 $ 4,339
German Deutsche Mark. 3,874,987 2,614,814 11/22/96 2,562,248 52,566
Hong Kong Dollar..... 2,816,071 364,069 11/22/96 364,189 (120)
Italian Lira......... 1,152,854,640 756,000 11/22/96 758,768 (2,768)
Japanese Yen......... 71,941,974 661,000 11/22/96 633,757 27,243
Spanish Peseta....... 138,817,550 1,099,882 11/22/96 1,086,877 13,005
---------- ---------- --------
$6,336,393 $6,242,128 $ 94,265
========== ========== --------
Purchases
$ 229,000 FRF 4,270,391 11/22/96 $ 230,933 $ 1,933
846,577 DEM 1,301,231 11/22/96 860,410 13,833
290,000 ITL 441,303,150 11/22/96 290,450 450
574,000 Y 62,620,519 11/22/96 551,642 (22,358)
696,000 ESP 89,119,494 11/22/96 697,764 1,764
---------- ---------- --------
$2,635,577 $2,631,199 $ (4,378)
========== ========== --------
$ 89,887
========
Strategic Income
Sales
Canadian Dollar...... 597,808 $ 447,126 01/22/97 $ 448,360 $ (1,234)
Danish Krone......... 2,293,130 394,212 01/22/97 396,192 (1,980)
German Deutsche Mark. 3,160,599 2,060,364 01/22/97 2,098,197 (37,833)
Irish Punt........... 471,887 754,075 01/22/97 768,039 (13,964)
New Zealand Dollar... 1,295,606 914,795 01/22/97 909,355 5,440
---------- ---------- --------
$4,570,572 $4,620,143 $(49,571)
========== ========== --------
Purchases
$ 901,309 DEM 1,353,012 01/22/97 $ 898,212 $ (3,097)
776,805 IEP 478,623 01/22/97 779,002 2,197
911,199 NZD 1,295,606 01/22/97 909,355 (1,844)
---------- ---------- --------
$2,589,313 $2,586,569 $ (2,744)
========== ========== --------
$(52,315)
========
</TABLE>
- --------------------------------------------------------------------------------
Federal Income Tax Information - (Unaudited)
Exempt Interest Dividends. The National Municipal Bond Fund designates all
dividends paid during the fiscal year ended October 31, 1996 as 100% exempt
interest dividends. Accordingly, 100% of the distributions paid are tax-exempt
for federal income tax purposes. Shareholders will receive pertinent tax
information in January, 1997.
74
