<PAGE>
[LOGO OF NORTH AMERICAN REPORT TO
FUNDS APPEARS HERE] SHAREHOLDERS
North American Funds(R) Annual Report October 31, 1997
Audited
Financial
Statements
<PAGE>
NORTH AMERICAN FUNDS
President's Message
- --------------------------------------------------------------------------------
December 23, 1997
Dear Shareholders:
For investors and money managers alike, 1997 was an interesting year. As
confidence in the economy and markets grew during the first half of the year,
Americans continued to invest in mutual funds in record-breaking numbers and
markets reached new highs. Then, as expected by many analysts, the markets
returned to more moderate levels during the late summer and fall. Even during
this leveling out period, performance of the North American Funds remained on
par with benchmark indices.
Such market ups and downs are inevitable. As a North American Funds
shareholder, however, you can be assured that your investment will get the
attention it deserves in all market environments. At North American Funds, we
select investment managers whose reputations and performance have proven to be
among the best in their respective asset classes. Then, we conduct ongoing
reviews against rigorous criteria to ensure that these managers continually meet
our shareholders' expectations. The management team we have assembled today
offers an exceptional level of expertise, industry knowledge, and diversity of
investment styles - all in one fund family.
Our management approach has proven successful for the North American Funds
during the past 12 months. We have had consistent performance among our Growth,
Income and International portfolios. In addition, several funds have outpaced
their respective peer groups, as measured by Morningstar and/or Lipper
Analytical Services. (For specific performance information please see pages iii
through xv of this report.)
We believe that the best is yet to come. During 1998, we will introduce several
new funds that will expand your investment choices and allow you to better
diversify your portfolio. Our renewed commitment to servicing shareholders will
result in improved communications and the development of educational materials
designed to help you make more informed investment decisions.
At North American Funds, we know that we have to continually earn your business,
which is why we remain committed to you and your investment future. Whenever
you have a question or concern about your investments, recent market activity,
or investing in general, we encourage you to call your Investment Representative
or our award-winning Customer Service Specialists at 1-800-872-8037, Monday
through Friday from 9:00 a.m. to 5:00 p.m. EST.
Thank you for choosing North American Funds. We look forward to serving you
during 1998 and the years to come.
Sincerely,
Bradford K. Gallagher
President, North American Funds
Bradford K. Gallagher
President,
North American Funds
Mr. Gallagher became President of North American Funds in 1997. He is
responsible for the ongoing management of the Funds in keeping with their
particular investment objectives. A long-standing member of the financial
community, he brings 29 years of mutual fund and investment experience to the
North American Funds.
He is also President and Chief Executive Officer of Cypress Holding Company
("Cypress"), the parent company to CypressTree Investments, Inc., the Adviser to
the North American Funds.
Prior to founding Cypress in 1995, Mr. Gallagher was President of Allmerica
Financial Services and Managing Director of Fidelity Investments.
<PAGE>
NORTH AMERICAN FUNDS
INDEX TO ANNUAL REPORT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Fund Performance and Portfolio Manager's Commentary...................... iii
Report of Independent Accountants........................................ 1
Statements of Assets and Liabilities..................................... 2
Statements of Operations................................................. 8
Statements of Changes in Net Assets...................................... 11
Financial Highlights..................................................... 15
Portfolio of Investments:
International Small Cap Fund.......................................... 37
Small/Mid Cap Fund.................................................... 38
Global Equity Fund.................................................... 40
Growth Equity Fund.................................................... 41
International Growth and Income Fund.................................. 43
Growth and Income Fund................................................ 47
Equity-Income Fund.................................................... 48
Balanced Fund......................................................... 51
Strategic Income Fund................................................. 52
Investment Quality Bond Fund.......................................... 56
National Municipal Bond Fund.......................................... 59
U.S. Government Securities Fund....................................... 60
Money Market Fund..................................................... 61
Notes to Financial Statements............................................ 63
</TABLE>
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,
Equity-Income, 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, 1997.
All performance results referenced in the commentary are Class A share returns.
iii
<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
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Date NAV 4.75% Charge MSCI World ex US
- ---- --- ------------ ----------------
<S> <C> <C> <C>
Feb/95
Jun/96
Oct/96 [PLOT POINTS TO COME]
Feb/97
Jun/97
Oct/97
</TABLE>
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Average Cumulative
Annual Total Return Total Return
Since Since
Periods Ending October 31, 1997 1 Year Inception Inception
<S> <C> <C> <C>
MSCI World ex US Index* 5.52% 5.23% 8.86%
International Small Cap Fund Class A (at
net asset value) 3.20% 6.42% 10.88%
International Small Cap Fund Class A (net
of 4.75% sales charge) -1.70% 3.34% 5.61%
International Small Cap Fund Class B (at
net asset value) 2.54% 5.72% 9.68%
International Small Cap Fund Class B (net
of CDSC**) -2.46% 2.79% 4.68%
International Small Cap Fund Class C (at
net asset value) 2.54% 5.72% 9.68%
International Small Cap Fund Class C (net
of CDSC***) 1.54% 5.72% 9.68%
</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
International markets were showing signs of improvement until the dramatic de-
velopments in Asia unfolded. The currency crisis that began in Southeast Asia
spread to the South Korean market and its banking system. The impact of this
crisis will be felt throughout Asia, with the possible exception of China. Ja-
pan will continue to struggle as the crisis there takes its toll on its finan-
cial system and economy. We believe that profits will erode across Asia and
there will be a slowing in Asian GDP growth.
Fortunately, the impact outside Asia has been somewhat muted. European banks,
for example, have done a great deal of lending in Asia. But, the bulk of their
loans were to high-quality firms in Hong Kong and China. European exports are
also limited to the area. While the GDP growth in Europe is likely to slow, it
should not derail the economic recoveries that are underway.
The Fund's A shares returned 3.20% for the fiscal year ended October 31, 1997
as compared to 5.52% for the MSCI World ex US Index. As the middle class con-
tinues to expand throughout much of the world we see investment opportunities
developing. We remain focused on growth and continue to search for individual
companies that possess the fundamental strength to post consistent growth in
corporate earnings.
iv
<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
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
4.75% Russell S&P 50/50
Date NAV Sales Charge 2000 Growth MidCap 400 Composite
- ---- --- ------------ ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Feb/96
Jun/96
Oct/96
Feb/97 [PLOTS POINTS TO COME]
Jun/97
Oct/97
</TABLE>
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Average Cumulative
Annual Total Return Total Return
Since Since
Periods Ending October 31, 1997 1 Year Inception Inception
<S> <C> <C> <C>
S&P MidCap 400 Index* 32.66% 23.70% 42.54%
Russell 2000 Growth Index* 21.07% 13.77% 23.98%
50%/50% Composite Index*+ 26.94% 18.86% 33.36%
Small/Mid Cap Fund Class A (at net asset
value) 22.90% 13.88% 24.08%
Small/Mid Cap Fund Class A (net of 4.75%
sales charge) 17.06% 10.59% 18.19%
Small/Mid Cap Fund Class B (at net asset
value) 21.86% 13.08% 22.64%
Small/Mid Cap Fund Class B (net of CDSC**) 16.86% 10.28% 17.64%
Small/Mid Cap Fund Class C (at net asset
value) 21.92% 13.17% 22.80%
Small/Mid Cap Fund Class C (net of CDSC***) 20.92% 13.17% 22.80%
</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
During early 1997, the market rewarded larger companies noted for their earn-
ings predictability and liquidity. Consequently, less liquid and less stable
growth stocks grew increasingly undervalued relative to blue chips. This ef-
fect was substantially magnified on the small end of the market cap spectrum.
In many instances, quality small cap growth stocks were selling at a discount
to the broader market despite having the potential to grow their earnings
three to four times faster.
As the third quarter of the fiscal year began, it became clear that the drop
in growth stock multiples did not reflect deteriorating company fundamentals,
but was more the result of negative investor psychology. Throughout the quar-
ter, economic data indicated that the economy was in fact slowing and infla-
tion was minimal causing the market psychology to improve. As a result, many
investors shifted assets into stocks with greater return potential. Conse-
quently, premiums for quality growth stocks started to expand, which coupled
with strong earnings, helped the Fund to rebound significantly from a slow
first half.
The Fund's A shares returned 22.90% for the fiscal year ended October 31, 1997
as compared to 26.94% for its benchmark index. Market volatility impacted the
Fund's performance as returns mirrored the movement of the global markets. The
Fund benefited from its small cap exposure and its heavy weighting in technol-
ogy.
v
<PAGE>
GLOBAL EQUITY FUND
INVESTMENT OBJECTIVE: To seek long term capital appreciation by investing
primarily in a global portfolio of equity securities and
securities convertible into or exercisable for equity
securities.
SUBADVISOR: Morgan Stanley Asset Management Inc.
PORTFOLIO MANAGER: Frances Campion
INCEPTION DATE: November 1, 1990#
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
Date NAV 4.75% Sales Charge MSCI World
- ---- --- ------------------ ----------
<S> <C> <C> <C>
Oct/90
Oct/91
Oct/92
Oct/93
Oct/94 [PLOTS POINTS TO COME]
Oct/95
Oct/96
Oct/97
</TABLE>
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Cumulative
Average Annual Total Return Total Return
Since Since# Since Since#
Periods Ending October 31, 1997 1 Year 5 Years Inception Oct. 1, 1996 Inception Oct. 1, 1996
<S> <C> <C> <C> <C> <C> <C>
MSCI World* 17.26% 15.79% 12.71% 16.60% 131.05% 18.10%
Global Equity Fund Class
A (at net asset value) 26.10% 13.44% 10.21% 23.27% 97.13% 25.41%
Global Equity Fund Class
A (net of 4.75% sales
charge) 20.11% 12.35% 9.45% 17.85% 87.76% 19.45%
Global Equity Fund Class
B (at net asset value) 25.63% 13.03% 9.93% 22.76% 93.58% 24.85%
Global Equity Fund Class
B (net of CDSC**) 20.63% 12.79% 9.93% 18.21% 93.58% 19.85%
Global Equity Fund Class
C (at net asset value) 25.54% 13.03% 9.93% 22.68% 93.55% 24.76%
Global Equity Fund Class
C (at net of CDSC***) 24.54% 13.03% 9.93% 22.68% 93.55% 24.76%
</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 international market has been dominated by the Asian currency crisis re-
sulting in lower global growth forecasts, highly volatile markets, flight to
bonds, and the strength of the US dollar. The strong US dollar triggered a se-
ries of profit warnings from exporters which are likely to continue in the
face of the Asian slowdown. Japan's economy continued to suffer from the deep-
ening banking crisis and the removal of the traditional "convoy" system. Japa-
nese corporate earnings will come under further threat from Asian devaluation
while private consumption has been weak since the April VAT rise.
Merger and acquisition (M&A) activity maintained its pace with NationsBank's
$14.6 billion bid for Barnett Bank, and Travelers Group's $9 billion acquisi-
tion of Salomon Brothers. M&A activity also increased in Europe, particularly
in the financial/insurance sectors.
The Fund's A shares returned 26.10% for the fiscal year ended October 31,
1997, while the MSCI World Index rose 17.26%. The overall position in the
United States remains slightly underweight relative to the benchmark, and at
about half weighting in Japan. We are overweight in Europe and continue to
find relative value primarily in the Netherlands, United Kingdom, and the pe-
ripheral markets of Ireland and Spain.
vi
<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
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Date NAV 4.75% Sales Charge S&P 500
- ---- --- ------------------ -------
<S> <C> <C> <C>
Feb/96
Jun/96
Oct/96 [PLOTS POINTS TO COME]
Feb/97
Jun/97
Oct/97
</TABLE>
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Average Cumulative
Annual Total Return Total Return
Since Since
Periods Ending October 31, 1997 1 Year Inception Inception
<S> <C> <C> <C>
S&P 500* 32.12% 26.34% 47.65%
Growth Equity Fund Class A (at net asset
value) 25.13% 21.38% 37.94%
Growth Equity Fund Class A (net of 4.75%
sales charge) 19.19% 17.87% 31.39%
Growth Equity Fund Class B (at net asset
value) 24.50% 20.75% 36.76%
Growth Equity Fund Class B (net of CDSC**) 19.50% 18.07% 31.76%
Growth Equity Fund Class C (at net asset
value) 24.50% 20.75% 36.75%
Growth Equity Fund Class C (net of CDSC***) 23.50% 20.75% 36.75%
</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
A strong US economy coupled with inflation and stable interest rates pushed
the market to new heights. However, we were reminded this fall that the
world's economy is more global than ever before. The currency crisis in Hong
Kong and South Korea has negatively impacted most international markets. Firms
in the US, many with Southeast Asian customers, have also been impacted by the
events overseas.
We expect S&P corporate earnings growth in 1998 to be slower relative to the
past several years, most likely in single digits. This will be due in large
part to lackluster economic growth in economies around the globe such as Ja-
pan, Korea, and Brazil. Domestically, we will be in an environment of more
difficult earnings comparison for the market as a whole relative to 1997 earn-
ings. However, the US economy seems set on continuing to grow at its slow but
steady pace.
The Fund returned 25.13% for the fiscal year ended October 31, 1997 as com-
pared to 32.12% for the S&P 500. Given the international outlook, we are re-
ducing our holdings and interest in companies with dependence on international
markets. More significantly, we have dramatically reduced our exposure to
technology. We believe that heightened selectivity in the technology sector
will be necessary over the immediate term.
vii
<PAGE>
INTERNATIONAL GROWTH AND INCOME FUND
INVESTMENT Seeks to provide long-term growth of capital and income by in-
OBJECTIVE: vesting in a portfolio of securities of foreign issuers. Under
normal circumstances, the portfolio will be invested approxi-
mately 85% in equity securities, including emerging markets
and 15% in fixed income securities.
SUBADVISOR: J.P. Morgan Investment Management, Inc.
PORTFOLIO
MANAGERS: Paul A. Quinsee, Massimo Fuggetta
INCEPTION DATE: January 9, 1995
Change in Value of $10,000 Investment and Comparative Indicies
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
4.75% Sales Customized B5/16
Date NAV Charge Benchmark Composite
- ---- --- ----------- ---------- ---------
<S> <C> <C> <C> <C>
</TABLE>
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
Since Since
Periods Ending October 31, 1997 1 Year Inception Inception
<S> <C> <C> <C>
Customized Benchmark*+ 5.28% 8.05% 24.53%
85%/15% Composite Index*++ 6.74% 8.58% 26.25%
International Growth and Income Fund Class A (at
net asset value) 3.55% 6.70% 19.93%
International Growth and Income Fund Class A (net
of 4.75% sales charge) -1.37% 4.86% 14.23%
International Growth and Income Fund Class B (at
net asset value) 2.92% 6.21% 18.40%
International Growth and Income Fund Class B (net
of CDSC**) -2.08% 4.92% 14.40%
International Growth and Income Fund Class C (at
net asset value) 2.91% 6.22% 18.44%
International Growth and Income Fund Class C (net
of CDSC**) 1.91% 6.22% 18.44%
</TABLE>
* All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
+ Comprised of 75% of the return of the MSCI EAFE Index, 15% of the return
of the Salomon Brothers Non-$ WGBI 10 Index, and 10% of the MSCI Emerging
Markets Free ex Malaysia Index. In February of 1997, the 85%/15% Composite
Index was adjusted to reflect the addition of the MSCI Emerging Markets
Free ex Malaysia Index. This change was made to more accurately reflect
the investment objective of the International Growth and Income Fund.
++ Comprised of 85% of the return of the MSCI EAFE and 15% of the return of
the Salomon Brothers Non-$ WGBI 10 Index.
** The returns reflect the applicable sliding Contingent Deferred Sales
Charge of 5%, 5%, 4%, 3%, 2%, 1%.
*** The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
PORTFOLIO MANAGERS' COMMENTARY
International equity and bond markets continue to build upon last year's suc-
cess. Until October, growing signs of an economic recovery, corporate restruc-
turing activity, low inflation combined with low interest rates, and the
strength of the US dollar positively influenced European equity and bond mar-
kets. Performance in Asian markets was volatile, however. During October, eq-
uity and bond markets around the world suffered setbacks as the currency cri-
sis in Southeast Asia grew. These events have led investors to question equity
valuations in all regions as well as to reprise risk in non-governmental bonds
throughout the world.
Of significant importance to the European bond market is the increased likeli-
hood of a broad-based, on-time EMU implementation and the appropriate level
for expected European money rates at the end of next calendar year. The result
was a rapid convergence of bond yields throughout Europe.
The Fund's A shares returned 3.55% for the fiscal year ended October 31, 1997.
The currency allocation strategy of partially hedging the Fund's Deutschemark
and Yen exposure into the US dollar has been the greatest positive contributor
to the Fund's performance. Gains were offset somewhat by adverse stock selec-
tion during the third calendar quarter as the Fund was effectively positioned
against the trouble in Southeast Asia with an underweight position in both Ma-
laysia and Japan.
viii
<PAGE>
GROWTH AND INCOME FUND
INVESTMENT To seek long-term growth of capital and income consistent
OBJECTIVE: with prudent investment risk by investing primarily in a di-
versified 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 Indicies
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Date NAV 4.75% Sales Charge S&P 500
---- --- ------------------ -------
<S> <C> <C> <C>
</TABLE>
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Average Annual Total Return Cumulative Total Return
Since Since
Periods Ending October 31, 1997 1 Year 5 Years Inception Inception
<S> <C> <C> <C> <C>
S&P 500* 32.12% 19.83% 17.72% 188.71%
Growth and Income Fund Class A
(at net asset value) 31.95% 17.81% 15.88% 160.56%
Growth and Income Fund Class A
(net of 4.75% sales charge) 25.68% 16.67% 15.01% 148.18%
Growth and Income Fund Class B
(at net asset value) 31.40% 17.44% 15.59% 156.42%
Growth and Income Fund Class B
(net of CDSC**) 26.40% 17.23% 15.59% 156.42%
Growth and Income Fund Class C
(at net asset value) 31.37% 17.38% 15.55% 155.78%
Growth and Income Fund Class C
(net of CDSC***) 30.37% 17.38% 15.55% 155.78%
</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
1997 proved to be a very good year for equity investing. Solid corporate prof-
its, moderate economic growth, continued low inflation, and declining interest
rates all contributed to strong returns for US stocks. Top performing groups
include the information technology area which benefited from strong investment
trends in personal computers, enterprise software, and services. The financial
sector had a healthy advance during the year aided by declining interest rates
as well as management's increased focus on cost reduction, consolidation, and
investments in technology. The health care area was also strong with pharma-
ceuticals exhibiting positive advances as a result of new drug approvals,
healthy subscription growth, and new product innovations.
Conversely, the materials area lagged the overall market as moderate economic
growth was insufficient to drive commodity prices. The utility sector also
lagged due to concerns over industry deregulation.
The Fund's A shares returned 31.95% on a net basis for the fiscal year ended
October 31, 1997 compared to the S&P 500 Stock Index which returned 32.12%.
Fund performance was helped by overweights in drug stocks and financials and
underweights in consumer staples and utilities. Relative performance was lim-
ited by holdings in media, materials, and industrial/commercial.
ix
<PAGE>
EQUITY-INCOME FUND
INVESTMENT To seek long term growth of capital by investing primarily in
OBJECTIVE: common stocks and securities convertible into or carrying the
right to buy common stocks.
SUBADVISOR: T. Rowe Price Associates, Inc.
PORTFOLIO Brian C. Rogers, Stephen W. Boesel, Richard P. Howard, William
MANAGERS: J. Stromberg
INCEPTION DATE: August 28, 1989#
Change in Value of $10,000 Investment and Comparative Indicies
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Date NAV 4.75% Sales Charge S&P 500
---- --- ------------------ -------
<S> <C> <C> <C>
</TABLE>
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Cummulative
Average Annual Total Return Total Return
Since Since# Since Since#
Periods Ending October 31, 1997 1 Year 5 years Inception Oct 1, 1996 Inception Oct 1, 1996
<S> <C> <C> <C> <C> <C> <C>
S&P 500* 32.12% 19.83% 15.59% 32.61% 226.47% 35.77%
Equity-Income Fund Class A
(at net asset value) 27.24% 16.46% 10.46% 25.93% 125.50% 28.34%
Equity-Income Fund Class A
(net of 4.75% sales charge) 21.19% 15.33% 9.81% 20.40% 114.79% 22.25%
Equity-Income Fund Class B
(at net asset value) 26.29% 16.01% 10.20% 25.08% 121.23% 27.40%
Equity-Income Fund Class B
(net of CDSC**) 21.29% 15.79% 10.20% 20.54% 121.23% 27.40%
Equity-Income Fund Class C
(at net asset value) 26.33% 16.01% 10.20% 25.04% 121.18% 27.36%
Equity-Income Fund Class C
(net of CDSC***) 25.33% 16.01% 10.20% 25.04% 121.18% 27.36%
</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 MANAGERS' COMMENTARY
Continued economic growth in the US combined with strong corporate earnings
and moderate inflation continued to push stock prices upward. But, volatile
conditions emerged during the final months of the fiscal year bringing many
stocks down. The currency and debt crisis in emerging Southeast Asian markets
spread quickly to Latin America and Europe, and eventually to the United
States. However, for the 12 months as a whole, it was another year of high
double-digit returns.
Stock prices have recovered somewhat as inflation remains low and as the econ-
omy keeps growing at a moderate pace. There was an inflationary scare in early
spring that prompted the Federal Reserve to increase the key funds rate to
5.5%. Since then inflation has shown no signs of increasing, and the Fed has
maintained a steady course on monetary policy.
The Fund's A shares returned 27.24% for the fiscal year ended October 31, 1997
as compared to 32.12% for the Standard & Poor's 500 Stock Index. The S&P 500
will normally outperform equity income funds in periods of broad market ad-
vances, but the reverse is true when markets grow more volatile. Fund perfor-
mance was helped by portfolio holdings in the financial, telecommunications
and energy sectors. Strong contributors include Mellon Bank, AT&T and Atlantic
Richfield.
x
<PAGE>
BALANCED FUND
INVESTMENT To seek the highest total return consistent with a moderate
OBJECTIVE: 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
market securities. The portfolio manager retains absolute dis-
cretion to determine the amount of the portfolio's assets in-
vested in each category of securities at all times. There can
be no assurance 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 Indicies
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
50%/50%
LB Aggregate Corporate
Date NAV 4.75% Charge S&P 500 Bond Index
---- --- ------------ ------- ---- -----
<S> <C> <C> <C> <C> <C>
</TABLE>
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Cumulative
Average Annual Total Return Total Return
Since Since# Since Since#
Periods Ending October 31, 1997 1 Year 5 Years Inception Oct. 1, 1996 Inception Oct. 1, 1996
<S> <C> <C> <C> <C> <C> <C>
S&P 500* 32.12% 19.83% 15.59% 32.61% 226.47% 35.77%
Lehman Brothers
Aggregate Bond Index* 8.92% 7.52% 8.87% 10.42% 100.12% 11.33%
50%/50% Composite*+ 20.29% 13.63% 12.33% 21.31% 158.51% 23.28%
Balanced Fund Class A
(at net asset value) 17.01% 12.39% 9.30% 17.92% 106.84% 19.53%
Balanced Fund Class A
(net of 4.75% sales charge) 11.45% 11.31% 8.65% 12.73% 97.01% 13.85%
Balanced Fund Class B
(at net asset value) 16.27% 11.96% 9.04% 17.16% 102.88% 18.69%
Balanced Fund Class B
(net of CDSC**) 11.27% 11.71% 9.04% 12.59% 102.88% 13.69%
Balanced Fund Class C
(at net asset value) 16.21% 11.95% 9.03% 17.17% 102.77% 18.71%
Balanced Fund Class C
(at net asset value) 15.21% 11.95% 9.03% 17.17% 102.77% 18.71%
</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 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
The US stock market reached historic heights this year only to be brought down
by an emerging financial crisis in Southeast Asia. While the correction was
short-lived thanks to continued fundamental strength, investors are concerned
about the unusually high valuations of many US stocks.
However, news about the US economy remains positive. Employment rates are
high, retail sales strong, and inflation appears to be a remote threat despite
somewhat tight labor markets. As such, the market still shows signs of some
upward momentum. Investor optimism is somewhat guarded and large-cap stocks
continue to remain in favor due to their stability, liquidity, and solid earn-
ings prospects. We will continue to be vigilant for any signs of a slowdown in
corporate earnings or the overall economy.
The Fund's A shares returned 17.01% for the fiscal year ended October 31, 1997
as compared to 20.29% for its benchmark index. We have taken a relatively con-
servative approach to the Fund and have been steadily trimming the number of
stocks in our portfolio, bringing the equity portion down to just over half of
the Fund's assets. Using strong inflows of cash into the Fund, the fixed in-
come portion of the portfolio has been raised through the investment in both
short-term US Treasuries, mostly with durations of three years, and more re-
cently with some longer 30-year-dated Treasuries.
xi
<PAGE>
STRATEGIC INCOME FUND
INVESTMENT
OBJECTIVE: To seek a high level of total return consistent with preser-
vation of capital by giving its portfolio manager broad dis-
cretion to deploy the portfolio's assets among certain seg-
ments of the fixed-income market as the portfolio manager be-
lieves will best contribute to achievement of the portfolio's
investment objective.
SUBADVISOR: Salomon Brothers Asset Management Inc
PORTFOLIO
MANAGERS: Peter J. Wilby, David J. Scott, Steven Guterman
INCEPTION DATE: November 1, 1993
Change in Value of $10,000 Investment and Comparative Indicies
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Date NAV 4.75% Sales Charge S&P 500
---- --- ------------------ -------
<S> <C> <C> <C>
</TABLE>
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
Since Since
Periods Ending October 31, 1997 1 Year Inception Inception
<S> <C> <C> <C>
Lehman Brothers Aggregate Bond Index* 8.92% 6.46% 28.44%
Strategic Income Fund Class A (at net asset value) 10.57% 8.62% 39.10%
Strategic Income Fund Class A (net of 4.75% sales charge) 5.32% 7.30% 32.49%
Strategic Income Fund Class B (at net asset value) 9.86% 7.99% 35.89%
Strategic Income Fund Class B (net of CDSC**) 4.86% 7.34% 32.89%
Strategic Income Fund Class C (at net asset value) 9.86% 7.98% 35.86%
Strategic Income Fund Class C (net of CDSC***) 8.86% 7.98% 35.86%
</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 MANAGERS' COMMENTARY
The Fund returned 10.57% (A Shares) for the fiscal year ended October 31,
1997. This compares favorably to both the investment grade fixed income market
and the multi-sector fixed income averages as reported by Lipper Analytical
Services, Inc. For the fiscal year, the investment grade market, as measured
by the Lehman Brothers Aggregate Bond Index, returned 8.92% and the Lipper
multi-sector fund averaged a return of 9.83%.
The Fund's strong performance benefited from its allocation to the high yield
and emerging market debt sectors. The Salomon Brothers High Yield Index was up
14.49% and emerging market debt as measured by the Salomon Brothers Brady Bond
Index was up 14.92%. Over the course of the year, the Fund's allocation to the
high yield and emerging market debt sector averaged approximately 40% and 18%
respectively. These two sectors should add yield and return to the portfolios
as their underlying credit fundamentals continue to improve in 1998.
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 ma-
turities.
SUBADVISOR: Wellington Management Company, LLP
PORTFOLIO
MANAGER: Thomas L. Pappas
INCEPTION DATE: May 1, 1991
Change in Value of $10,000 Investment and Comparative Indicies
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
LB Aggregate
Date NAV 4.75% Sales Charge Bond
---- --- ------------------ ----
<S> <C> <C> <C>
</TABLE>
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
Since Since
Periods Ending October 31, 1997 1 Year 5 Years Inception Inception
<S> <C> <C> <C> <C>
Lehman Brothers Aggregate Bond Index* 8.92% 7.52% 8.46% 69.54%
50%/50% Composite*+ 8.96% 7.90% 8.87% 73.71%
Investment Quality Bond Fund Class A (at
net asset value) 8.57% 6.61% 7.90% 63.86%
Investment Quality Bond Fund Class A (net
of 4.75% sales charge) 3.41% 5.57% 7.09% 56.08%
Investment Quality Bond Fund Class B (at
net asset value) 8.05% 6.18% 7.56% 60.59%
Investment Quality Bond Fund Class B (net
of CDSC**) 3.05% 5.86% 7.56% 60.59%
Investment Quality Bond Fund Class C (at
net asset value) 8.05% 6.18% 7.56% 60.59%
Investment Quality Bond Fund Class C (net
of CDSC***) 7.05% 6.18% 7.56% 60.59%
</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
With the turmoil in Asia driving growth expectations lower and our own low do-
mestic inflation rate, investors are moving back into bonds. Yields have
fallen by roughly 0.5% causing prices to rise. Investors have recently begun
to prefer Treasuries over corporates or mortgages, partly as a flight-to-qual-
ity given Asia's situation and partly due to a declining budget deficit which
reduces the government's need to borrow in the future.
Thinking about the bond market has also shifted during the past year. The old
world focus on economic growth and labor utilization rates as harbingers of
inflation have been pushed aside as the new world takes comfort in the histor-
ically low, stable inflation rate actually realized. While the old world fo-
cused on Fed policy and momentum in the economy, the new world emphasizes the
current attractive real rate (Treasury yield less inflation rate) as the cen-
tral reason to buy bonds. And as the old world focused on incremental income
and corporates and mortgages, the new world recognizes that, from a supply
perspective, Treasuries are a relatively attractive investment and a safe ha-
ven from credit, currency and prepayment risk.
The Fund's A shares returned 8.57% on a net basis for the fiscal year ended
October 31, 1997 versus 8.92% for the Lehman Brothers Aggregate Bond Index,
which is an index gross of fees. We believe that rates will slowly move lower
and, therefore, leave the Fund at a slightly long duration stance. We also see
opportunities to add non-Treasuries in the Fund, while still maintaining rela-
tively high average quality, liquidity, and predictability.
xiii
<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 preserva-
tion of capital, by investing primarily in a portfolio of mu-
nicipal obligations. The portfolio will not invest in munici-
pal 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 Indicies
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
LB Municipal
Date NAV 4.75% Sales Charge Bond
---- --- ------------------ ----
<S> <C> <C> <C>
</TABLE>
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
Since Since
Periods Ending October 31, 1997 1 Year Inception Inception
<S> <C> <C> <C>
Lehman Brothers Municipal Bond Index* 8.50% 6.33% 30.47%
National Municipal Bond Fund Class A (at net
asset value) 8.85% 5.52% 26.10%
National Municipal Bond Fund Class A (net of
4.75% sales charge) 3.68% 4.34% 20.11%
National Municipal Bond Fund Class B (at net
asset value) 7.94% 4.81% 22.45%
National Municipal Bond Fund Class B (net of
CDSC**) 2.94% 4.41% 20.45%
National Municipal Bond Fund Class C (at net
asset value) 7.94% 4.80% 22.45%
National Municipal Bond Fund Class C (net of
CDSC**) 6.94% 4.80% 22.45%
</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 municipal bond market enjoyed a strong year of price returns despite a 25
basis point hike in short-term interest rates by the Federal Reserve in March.
While the rise in rates alarmed investors, fears soon dissipated as signs of
moderate growth and benign inflation pervaded the US economy. Continued good
news on the economy and inflation allowed municipal bonds to remain strong
through July. During August, tax-exempt prices fell when hints of a growth re-
surgence in the economy derailed the rally in the bond markets. Municipals
quickly recovered in September as economic data released during the month un-
dermined any perceived strength in the economy. The market rallied further in
October as the unfolding financial crisis in Asia led to higher prices for
both Treasuries and municipal bonds.
Municipals performed well for the year despite an estimated 17% increase in
new issuance from state and local governments. The main buyers continue to be
property and casualty insurance companies, mutual funds, and individual buy-
ers.
The Fund's A shares returned 8.85% for the fiscal year ended October 31, 1997,
outperforming the 8.50% return for the Lehman Brothers Municipal Bond Index.
Looking ahead, municipal new issue supply is expected to remain heavy through
the first three weeks of December. This will likely leave tax-exempts in a
strong technical position through early January when a dwindling new issue
calendar encounters an influx of cash on January 1 from maturing bonds and
coupon payments.
xiv
<PAGE>
U.S. GOVERNMENT SECURITIES FUND
To seek a high level of current income consistent with preser-
vation of capital and maintenance of liquidity by investing in
securities issued or guaranteed by the U.S. Government, its
agencies, or instrumentalities.
INVESTMENT OBJECTIVE:
SUBADVISOR: Salomon Brothers Asset Management Inc
Steven Guterman
PORTFOLIO MANAGER:
INCEPTION DATE: August 28, 1989#
Change in Value of $10,000 Investment and Comparative Indicies
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Date NAV 4.75% Sales Charge ML 1-10
---- --- ------------------ -------
<S> <C> <C> <C>
</TABLE>
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Cumulative
Average Annual Total Return Total Return
Since Since# Since Since#
Periods Ending October 31, 1997 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* 7.36% 6.44% 8.01% 6.89% 87.64% 48.35%
U.S. Government
Securities Fund Class A
(at net asset value) 7.56% 6.25% 7.54% 6.57% 81.16% 45.46%
U.S. Government
Securities Fund Class A
(net of 4.75% sales
charge) 2.45% 5.22% 6.90% 5.69% 72.56% 38.52%
U.S. Government
Securities Fund Class B
(at net asset value) 6.84% 5.77% 7.25% 6.17% 77.14% 42.23%
U.S. Government
Securities Fund Class B
(net of CDSC**) 1.84% 5.45% 7.25% 6.04% 77.14% 41.24%
U.S. Government
Securities Fund Class C
(at net asset value) 6.84% 5.77% 7.25% 6.17% 77.14% 42.23%
U.S. Government
Securities Fund Class C
(net of CDSC***) 5.84% 5.77% 7.25% 6.17% 77.14% 42.23%
</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
Inflation remained low during 1997 even as the economy continued to grow.
Strong economic growth caused the Federal Reserve to lift the federal funds
rate by 25 basis points to 5.5% in March. The move, billed by Chairman
Greenspan as "insurance", proved to be just that as inflation continued to de-
cline despite GDP growth close to 4%.
The combination of continued low inflation and a strong economy contributed to
good bond performance. Long-term US interest rates, as measured by the 30-year
US Treasury, dropped by 49 basis points over the past year to 6.15%. Short-
term interest rates declined less significantly, dropping 12 basis points to
5.6%.
The Fund's A shares returned 7.56% for the fiscal year ended October 31, 1997
outperforming the Merrill Lynch 1-10 Year Government Index which returned
7.36%. The Fund's performance benefited from its significant allocation to
mortgage securities which have outperformed Treasuries by almost 100 basis
points on a duration adjusted basis. Over the past year, the Fund's allocation
to mortgages has ranged from 65% to 85%. Presently, the allocation is closer
to 65% as a result of our concern that mortgages may underperform due to heavy
homeowner prepayments should long-term interest rates decline further.
xv
<PAGE>
Report of Independent Accountants
- ------------------------------------------------------------------------------
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 International Small Cap, Small/Mid
Cap, Global Equity, Growth Equity, International Growth and Income, Growth and
Income, Equity-Income (formerly Value Equity), Balanced, Strategic Income,
Investment Quality Bond, National Municipal Bond, U.S. Government Securities and
Money Market Funds), including the portfolios of investments, as of October 31,
1997, 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, 1997 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 Funds as of October 31, 1997, 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.
Boston, Massachusetts
December 23, 1997
1
<PAGE>
NORTH AMERICAN FUNDS
STATEMENTS OF ASSETS AND LIABILITIES - OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net assets........................................
*Investments in securities, at identified cost (Note 2)..
International Small/Mid Global Growth
ASSETS Small Cap Cap Equity Equity
Fund Fund Fund Fund
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Investments in securities, at value* (Includes a
repurchase agreement of $3,692,000 in the International
Small Cap Fund) (See accompanying portfolio of investments).. $17,800,980 $38,155,034 $129,821,366 $31,730,170
Receivable for forward foreign currency contracts to sell
(Notes 2 and 7).............................................. 509,185 ------ 11,982,165 ------
Forward foreign currency contracts to buy, at value
(Cost: $11,771 and $1,105,329 in the International
Small Cap and Global Equity Funds, respectively)
(Notes 2 and 7).............................................. 11,836 ------ 1,129,208 ------
Cash.......................................................... 465 968 605 59
Foreign currency (Cost: $400,272, $7,055 and $7,241 in
the International Small Cap, Global Equity and Growth
Equity Funds, respectively).................................. 400,127 ------ 7,388 7,481
Receivables:
Investments sold......................................... 299,772 620,641 7,487 289,771
Fund shares sold......................................... 3,835 46,651 263,507 51,788
Dividends................................................ 10,193 8,450 310,837 22,001
Interest................................................. 513 3,006 383 327
Foreign tax withholding reclaims......................... 10,358 ------ 33,218 741
From adviser (Note 5).................................... 10,907 15,928 26,475 14,317
Other assets.................................................. 7,574 9,229 19,552 8,584
-------------- -------------- -------------- --------------
Total assets......................................... 19,065,745 38,859,907 143,602,191 32,125,239
-------------- -------------- -------------- --------------
LIABILITIES
Forward foreign currency contracts to sell, at value
(Cost: $509,185 and $11,982,165 in the International
Small Cap and Global Equity Funds, respectively)
(Notes 2 and 7).............................................. 512,785 ------ 11,529,028 ------
Payables:
Forward foreign currency contracts to buy
(Notes 2 and 7)......................................... 11,771 ------ 1,105,329 ------
Investments purchased.................................... 11,836 1,001,989 862,336 478,419
Fund shares redeemed..................................... 19,407 52,842 241,965 83,235
Dividend and interest withholding tax.................... 1,580 ------ 35,725 322
Investment adviser....................................... 16,632 24,758 100,029 19,954
Custodian and transfer agent fees........................ 21,103 24,850 50,441 22,954
Securities lending....................................... 825,701 8,269,878 5,455,720 6,624,477
Distribution fee......................................... 13,983 24,196 98,141 20,406
Other accrued expenses................................... 12,476 18,358 85,022 16,135
-------------- -------------- -------------- --------------
Total liabilities.................................... 1,447,274 9,416,871 19,563,736 7,265,902
-------------- -------------- -------------- --------------
NET ASSETS.................................................... $17,618,471 $29,443,036 $124,038,455 $24,859,337
============== ============== ============== =============
Net assets consist of:
Undistributed net investment loss (Note 2)............... $8,330 ------ ($102,559) $87,652
Accumulated undistributed net realized gain
(loss) on investments, foreign currency and
forward foreign currency contracts...................... (587,448) $481,944 7,780,248 2,126,767
Unrealized appreciation (depreciation) on:
Investments............................................ 1,301,976 4,068,245 17,859,976 2,180,877
Foreign currency and forward foreign currency
contracts............................................. (2,883) ------ 480,088 274
Capital shares at par value of $.001 (Note 3)............ 1,283 1,916 7,652 1,470
Additional paid-in capital............................... 16,897,213 24,890,931 98,013,050 20,462,297
-------------- -------------- -------------- --------------
Net assets.................................................... $17,618,471 $29,443,036 $124,038,455 $24,859,337
============== ============== ============== ==============
*Investments in Securities, at identified Cost (Note 2)....... $16,499,004 $34,086,789 $111,961,390 $29,549,293
============== ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
NORTH AMERICAN FUNDS
STATEMENTS OF ASSETS AND LIABILITIES - OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Small/Mid Global Growth
Small Cap Cap Equity Equity
NET ASSET VALUES Fund Fund Fund Fund
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Class A Shares
Net assets at value.................................... $3,225,092 $4,169,993 $30,960,252 $3,053,455
Shares outstanding..................................... 232,650 268,833 1,897,016 179,467
Net asset value (NAV) and redemption price per share..... $13.86 $15.51 $16.32 $17.01
Public offering price per share (100/95.25 of NAV) ====== ====== ====== ======
On sales of $100,000 or more the offering price
is reduced............................................ $14.55 $16.28 $17.13 $17.86
====== ====== ====== ======
Class B Shares
Net assets at value.................................... $7,368,779 $11,801,605 $31,833,423 $9,040,051
Shares outstanding..................................... 537,569 769,946 1,972,553 534,959
Net asset value, offering price and redemption price
per share.............................................. $13.71 $15.33 $16.14 $16.90
====== ====== ====== ======
Class C Shares
Net assets at value.................................... $7,024,600 $13,471,438 $61,244,780 $12,765,831
Shares outstanding..................................... 512,483 877,701 3,782,659 755,894
Net asset value, offering price and redemption price
per share............................................... $13.71 $15.35 $16.19 $16.89
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
NORTH AMERICAN FUNDS
STATEMENTS OF ASSETS AND LIABILITIES continued - OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
*Investments in securities, at identified cost (Note 2)...
ASSETS
International
Growth and Growth and Equity-Income Balanced
Income Fund Income Fund Fund Fund
--------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Investments in securities, at value* (See accompanying
portfolio of investments)................................. $29,421,934 $194,530,537 $189,265,476 $103,496,344
Receivable for forward foreign currency contracts to sell
(Notes 2 and 7)........................................... 9,137,590 ------ ------ ------
Forward foreign currency contracts to buy, at value
(Cost: $5,820,264 and $1,227,525 in the International
Growth and Income and Balanced Funds, respectively)
(Notes 2 and 7)........................................... 5,833,316 ------ ------ 1,225,391
Cash....................................................... 398 34 315 36
Foreign currency (Cost: $3,037,393, $1,818, $34 and
$147,042 in the International Growth and Income,
Growth and Income, Equity-Income and Balanced
Funds, respectively)...................................... 3,080,696 1,600 36 147,144
Receivables:
Investments sold...................................... 1,367,011 573,998 602,227 2,964,029
Fund shares sold...................................... 16,439 200,258 178,552 45,076
Dividends............................................. 36,885 269,254 327,488 113,409
Interest.............................................. 175,149 639 76 442,701
Foreign tax withholding reclaims...................... 25,796 ------ 3,613 16,140
From adviser (Note 5)................................. 8,786 36,748 24,249 22,844
Other assets............................................... 8,209 18,853 21,593 13,023
--------------- -------------- ------------- --------------
Total assets...................................... 49,112,209 195,631,921 190,423,625 108,486,137
--------------- -------------- ------------- --------------
LIABILITIES
Forward foreign currency contracts to sell, at value
(Cost: $9,137,590) (Notes 2 and 7)........................ 9,001,881 ------ ------ ------
Payables:
Forward foreign currency contracts to buy
(Notes 2 and 7)...................................... 5,820,264 ------ ------ 1,227,525
Investments purchased................................. 2,146,815 365,075 1,857,880 5,106,304
Fund shares redeemed.................................. 44,308 237,894 51,973 66,809
Dividend and interest withholding tax................. 5,499 1,763 1,736 5,354
Investment adviser.................................... 23,820 113,843 106,828 62,194
Custodian and transfer agent fees..................... 24,040 50,809 54,019 35,573
Securities lending.................................... 2,744,366 7,286,228 20,937,768 4,144,267
Distribution fee...................................... 24,607 146,370 129,524 78,019
Other accrued expenses................................ 21,254 122,486 110,294 65,372
--------------- -------------- ------------- --------------
Total liabilities................................. 19,856,854 8,324,468 23,250,022 10,791,417
--------------- -------------- ------------- --------------
NET ASSETS................................................. $29,255,355 $187,307,453 $167,173,603 $97,694,720
=============== ============== ============= ==============
Net assets consist of:
Undistributed net investment income (Note 2).......... ($50,193) $169,142 $2,048,580 $1,388,676
Accumulated undistributed net realized gain
on investments, foreign currency and
forward foreign currency contracts................... 2,323,494 14,979,443 11,039,356 15,785,914
Unrealized appreciation (depreciation) on:
Investments.......................................... (1,039,355) 52,802,480 23,852,133 4,681,362
Foreign currency and forward foreign currency
contracts.......................................... 209,456 (218) 687 94
Capital shares at par value of $.001 (Note 3)......... 2,718 8,620 9,643 7,756
Additional paid-in capital............................ 27,809,235 119,347,986 130,223,204 75,830,918
--------------- -------------- ------------- --------------
Net assets........................................ $29,255,235 $187,307,453 $167,173,603 $97,694,720
=============== ============== ============= ==============
* Investments in securities, at identified cost (Note 2)... $30,461,289 $141,728,057 $165,413,343 $98,814,982
=============== ============== ============= ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
NORTH AMERICAN FUNDS
STATEMENTS OF ASSETS AND LIABILITIES - OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International
NET ASSET VALUES Growth and Growth and
Income Income Equity-Income Balanced
Fund Fund Fund Fund
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Class A Shares
Net assets at value...................................... $4,461,437 $34,185,957 $36,333,753 $12,294,080
Shares outstanding....................................... 412,548 1,570,268 2,083,395 976,982
Net asset value (NAV) and redemption price per share....... $10.81 $21.77 $17.44 $12.58
====== ====== ====== ======
Public offering price per share (100/95.25 of NAV)
On sales of $100,000 or more the offering price
is reduced............................................... $11.35 $22.86 $18.31 $13.21
====== ====== ====== ======
Class B Shares
Net assets at value...................................... $16,334,327 $54,871,416 $36,191,071 $17,140,031
Shares outstanding....................................... 1,519,184 2,532,295 2,098,779 1,371,938
Net asset value, offering price and redemption price
per share................................................ $10.75 $21.67 $17.24 $12.49
====== ====== ====== ======
Class C Shares
Net assets at value...................................... $8,459,591 $98,250,080 $94,648,779 $68,260,609
Shares outstanding....................................... 786,235 4,517,472 5,460,985 5,406,916
Net asset value, offering price and redemption price
per share................................................ $10.76 $21.75 $17.33 $12.62
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
NORTH AMERICAN FUNDS
STATEMENTS OF ASSETS AND LIABILITIES - OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment National U.S.
Strategic Quality Municipal Government Money
Income Bond Bond Securities Market
Fund Fund Fund Fund Fund
------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at value* (Includes
a repurchase agreement of $25,375,000 in the
U.S. Government Securities Fund) (See
accompanying portfolio of investments)........ $107,782,571 $22,114,465 $18,012,070 $127,290,839 $21,911,050
Receivable for forward foreign currency
contracts to sell (Notes 2 and 7)............. 11,317,357 ---- ---- ---- ----
Forward foreign currency contracts to buy, at
value (Cost $9,677,261)(Notes 2 and 7)........ 9,817,700 ---- ---- ---- ----
Cash........................................... 810 274 89,131 42,275 13,175
Foreign Currency (Cost $19,753)................ 19,997 ---- ---- ---- ----
Receivables:
Investments sold.......................... 5,368,193 470,236 823,323 6,437,156 ----
Fund shares sold.......................... 120,879 11,838 6,720 221,379 103,072
Dividends................................. 867 ---- ---- ---- ----
Interest.................................. 1,603,743 335,107 287,103 586,013 ----
Foreign tax withholding reclaims.......... 3,825 ---- ---- ---- ----
From adviser (Note 5)..................... 10,789 8,685 11,434 53,166 14,551
Deferred organization expenses (Note 2)........ 2,512 ---- 1,813 ---- ----
Other assets................................... 15,130 8,613 9,185 15,803 14,151
------------ ------------ ------------- ------------- ------------
Total assets........................ 136,064,373 22,949,218 19,240,779 134,646,631 22,055,999
------------ ------------ ------------- ------------- ------------
LIABILITIES
Forward foreign currency contracts to sell, at
value (Cost $11,317,357)(Notes 2 and 7)....... 11,509,028 ---- ---- ---- ----
Payables:
Forward foreign currency contracts to buy
(Notes 2 and 7).......................... 9,677,261 ---- ---- ---- ----
Investments purchased..................... 15,374,126 444,078 968,590 30,069,659 ----
Fund shares redeemed...................... 201,279 1,926 15,009 39,501 82,924
Dividends................................. 165,251 20,438 27,680 200,269 7,577
Dividend and interest withholding tax..... 65 ---- ---- ---- ----
Investment adviser........................ 52,672 8,923 9,210 50,305 4,173
Custodian and transfer agent fees......... 28,191 18,754 13,649 33,764 21,248
Securities lending........................ 15,735,264 4,600,901 ---- 19,530,839 ----
Distribution fee.......................... 66,054 11,130 11,173 43,691 ----
Other accrued expenses.................... 54,100 11,483 11,796 56,889 12,215
Deferred mortgage dollar roll income........... 4,331 ---- ---- 11,315 ----
------------ ------------ ------------- ------------- ------------
Total liabilities................... 52,867,622 5,117,633 1,057,107 50,036,232 128,137
------------ ------------ ------------- ------------- ------------
NET ASSETS..................................... $83,196,751 $17,831,585 $18,183,672 $84,610,399 $21,927,862
============ ============ ============= ============= ============
Net assets consist of:
Undistributed net investment income (loss)
(Note 2)................................. ($80,961) $17,719 ($474) ($414,408) ----
Accumulated undistributed net realized
gain (loss) on investments, foreign
currency and forward foreign currency
contracts................................ 1,274,370 (526,420) (213,613) (1,991,535) ----
Unrealized appreciation (depreciation) on:
Investments.............................. 1,614,560 408,301 973,649 758,846 ----
Foreign currency and forward foreign
currency contracts...................... (41,475) ---- ---- ---- ----
Capital shares at par value of $.001
(Note 3)................................ 8,527 1,695 1,803 8,514 $21,928
Additional paid-capital.................. 80,421,730 17,930,290 17,422,307 86,248,682 21,905,934
------------ ------------ ------------- ------------- ------------
Net assets.......................... $83,196,751 $17,831,585 $18,183,672 $84,610,399 $21,927,862
============ ============ ============= ============= ============
*Investments in securities, at identified cost
(Note 2)...................................... $106,168,011 $21,706,164 $17,038,421 $126,531,993 $21,911,050
============ ============ ============= ============= ============
</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, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment National U.S.
Strategic Quality Municipal Government Money
Income Bond Bond Securities Market
Fund Fund Fund Fund Fund
----------- ---------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUES
Class A Shares
Net assets at value................................... $15,924,157 $7,109,780 $6,347,235 $53,234,761 $11,056,985
Shares outstanding.................................... 1,631,881 675,704 629,317 5,357,730 11,056,985
Net asset value (NAV) and redemption price per share... $9.76 $10.52 $10.09 $9.94 $1.00
----- ------ ------ ----- -----
Public offering price per share (100/95.25 of NAV)
On sales of $100,000 or more the offering price
is reduced............................................ $10.25 $11.04 $10.59 $10.44 ---
------ ------ ------ ------ ----
Class B Shares
Net assets at value................................... $34,589,956 $4,612,510 $6,531,524 $16,659,397 $3,331,454
Shares outstanding.................................... 3,545,149 438,362 647,576 1,676,117 3,331,454
Net asset value, offering price and redemption price
per share............................................. $9.76 $10.52 $10.09 $9.94 $1.00
----- ------ ------ ----- -----
Class C Shares
Net assets at value................................... $32,682,638 $6,109,295 $5,304,913 $14,716,241 $7,539,423
Shares outstanding.................................... 3,349,697 580,612 525,979 1,480,550 7,539,423
Net asset value, offering price and redemption price
per share............................................. $9.76 $10.52 $10.09 $9.94 $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, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Global Growth
Small Cap Small/Mid Equity Equity
Fund Cap Fund Fund Fund
------------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Investment Income:
Interest.............................................. $153,531 $81,421 $45,108 $125,017
Dividends (Net of $20,210, $1,437, $217,088 and
$2,618 withholding tax in the International Small
Cap, Small/Mid Cap, Global Equity and Growth
Equity Funds, respectively)........................... 133,914 73,423 2,547,754 169,373
----------- ------------ ----------- -----------
Total income..................................... 287,445 154,844 2,592,862 294,390
----------- ------------ ----------- -----------
Expenses:
Distribution for Class A.............................. 10,099 12,744 102,730 9,600
Distribution for Class B.............................. 69,411 88,342 287,886 72,054
Distribution for Class C.............................. 69,008 109,928 647,840 99,227
Investment adviser fee (Note 5)....................... 175,637 217,083 1,106,316 178,839
Custodian fee......................................... 30,649 41,558 98,615 35,793
Transfer agent fee.................................... 57,252 77,550 205,868 61,846
Accounting/administration............................. 30,889 42,517 235,632 35,983
Audit and legal fees.................................. 7,126 10,175 57,339 8,967
Miscellaneous......................................... 31,264 33,308 96,122 32,820
----------- ------------ ----------- -----------
Expenses before reimbursement
by investment advisor................................ 481,335 633,205 2,838,348 535,129
Reimbursement of expenses by
investment advisor (Note 5).......................... 73,395 111,235 63,587 95,871
----------- ------------ ----------- -----------
Net expenses..................................... 407,940 521,970 2,774,761 439,258
----------- ------------ ----------- -----------
Net investment loss.............................. (120,495) (367,126) (181,899) (144,868)
----------- ------------ ----------- -----------
Realized and unrealized gain on investments, foreign
currency and forward foreign currency contracts:
Net realized gain (loss) on:
Investment transactions............................... (529,214) 1,592,142 7,964,844 2,705,613
Foreign currency and forward foreign
currency contracts................................... (39,336) --- 559,899 (6,483)
Change in unrealized appreciation (depreciation) on:
Investments.......................................... 942,729 3,472,083 18,658,707 1,477,592
Translation of foreign currency and forward
foreign currency contracts.......................... (3,105) --- 560,153 262
----------- ------------ ----------- -----------
Net gain on investments, foreign currency
and forward foreign currency contracts.......... 371,074 5,064,225 27,743,603 4,176,984
----------- ------------ ----------- -----------
Net increase in net assets
resulting from operations................................. $250,579 $4,697,099 $27,561,704 $4,032,116
=========== ============ =========== ===========
</TABLE>
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, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Equity-
Growth and Growth and Income
Investment Income: Income Fund Income Fund Fund
------------- ------------ ------------
<S> <C> <C> <C>
Interest (Net of $1,542 and $1,599 withholding tax
in the International Growth and Income and
Balanced Funds, respectively)........................... $348,904 $189,855 $789,799
Dividends (Net of $66,644, $19,766, $42,693 and
$31,274 withholding tax in the International Growth
and Income, Growth and Income, Equity-Income
and Balanced Funds, respectively)....................... 498,505 3,032,120 4,425,712
------------- ------------- -------------
Total income........................................ 847,409 3,221,975 5,215,511
------------- ------------- -------------
Expenses:
Distribution for Class A................................. 18,100 89,748 114,372
Distribution for Class B................................. 166,177 461,666 319,396
Distribution for Class C................................. 93,956 892,681 908,852
Investment adviser fee (Note 5).......................... 280,663 1,112,269 1,128,276
Custodian fee............................................ 24,064 65,516 62,612
Transfer agent fee....................................... 77,814 231,418 248,497
Accounting/administration................................ 59,838 297,900 294,983
Audit and legal fees..................................... 13,777 74,246 71,257
Amortization of deferred organization expenses
(Note 2)................................................ 1,482 ------ ------
Miscellaneous............................................ 29,383 55,708 57,305
------------- ------------- -------------
Expenses before reimbursement
by investment adviser................................... 765,254 3,281,152 3,205,550
Reimbursement of expenses by
investment adviser (Note 5)............................. 49,222 241,345 323,349
------------- ------------- -------------
Net expenses........................................ 716,032 3,039,807 2,882,201
------------- ------------- -------------
Net investment income............................... 131,377 182,168 2,333,310
------------- ------------- -------------
Realized and unrealized gain on investments, foreign
currency and forward foreign currency contracts:
Net realized gain (loss) on:
Investment transactions................................ 2,452,134 15,043,013 11,805,051
Foreign currency and forward foreign
currency contracts.................................... (148,990) 164 (16,134)
Change in unrealized appreciation (depreciation) on:
Investments............................................ (1,660,231) 26,450,524 21,707,197
Translation of foreign currency and forward
foreign currency contracts............................ 118,437 (93) 687
------------- ------------- -------------
Net gain on investments, foreign currency
and forward foreign currency contracts............. 761,350 41,493,608 33,496,801
------------- ------------- -------------
Net increase in net assets
resulting from operations................................... $892,727 $41,675,776 $35,830,111
============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
Balanced
Investment Income: Fund
------------
<S> <C>
Interest (Net of $1,542 and $1,599 withholding tax
in the International Growth and Income and
Balanced Funds, respectively)............................ $2,671,191
Dividends (Net of $66,644, $19,766, $42,693 and
$31,274 withholding tax in the International Growth
and Income, Growth and Income, Equity-Income
and Balanced Funds, respectively)........................ 1,384,997
--------------
Total income......................................... 4,056,188
--------------
Expenses:
Distribution for Class A.................................. 40,665
Distribution for Class B.................................. 168,870
Distribution for Class C.................................. 707,078
Investment adviser fee (Note 5)........................... 735,884
Custodian fee............................................. 39,294
Transfer agent fee........................................ 147,826
Accounting/administration................................. 191,924
Audit and legal fees...................................... 43,751
Amortization of deferred organization expenses
(Note 2)................................................. ------
Miscellaneous............................................. 43,246
--------------
Expenses before reimbursement
by investment adviser.................................... 2,118,538
Reimbursement of expenses by
investment adviser (Note 5).............................. 218,966
--------------
Net expenses......................................... 1,899,572
--------------
Net investment income................................ 2,156,616
--------------
Realized and unrealized gain on investments, foreign
currency and forward foreign currency contracts:
Net realized gain (loss) on:
Investment transactions................................. 15,803,775
Foreign currency and forward foreign
currency contracts.................................... (74,875)
Change in unrealized appreciation (depreciation) on:
Investments............................................. (2,893,993)
Translation of foreign currency and forward
foreign currency contracts............................. (59)
--------------
Net gain on investments, foreign currency
and forward foreign currency contracts.............. 12,834,848
--------------
Net increase in net assets
resulting from operations.................................... $14,991,464
==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
NORTH AMERICAN FUNDS
STATEMENTS OF OPERATIONS - FOR THE YEAR ENDED OCTOBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment National
Strategic Quality Municipal
Income Bond Bond
Fund Fund Fund
------------- ------------ ------------
<S> <C> <C> <C>
Investment Income:
Interest................................................ $6,671,840 $1,480,320 $1,072,598
Mortgage dollar rolls................................... --- --- ---
Dividends............................................... 3,185 194 ---
------------ ------------ ------------
Total income........................................ 6,675,025 1,480,514 1,072,598
------------ ------------ ------------
Expenses:
Distribution for Class A................................. 55,049 27,000 9,802
Distribution for Class B................................. 332,169 45,985 63,462
Distribution for Class C................................. 276,993 66,860 54,263
Investment adviser fee (Note 5).......................... 561,512 113,993 109,842
Custodian fee............................................ 61,671 8,585 2,919
Transfer agent fee....................................... 106,956 52,349 27,426
Accounting/administration................................ 143,700 37,415 35,719
Audit and legal fees..................................... 33,529 8,159 8,384
Amortization of deferred organization expenses
(Note 2)................................................ 2,514 --- 2,563
Miscellaneous............................................ 38,703 24,548 18,848
------------ ------------ ------------
Expenses before reimbursement
by investment adviser................................... 1,612,796 384,894 333,228
Reimbursement of expenses by
investment adviser (Note 5)............................. 69,947 73,564 51,990
------------ ------------ ------------
Net expenses........................................ 1,542,849 311,330 281,238
------------ ------------ ------------
Net investment income............................... 5,132,176 1,169,184 791,360
------------ ------------ ------------
Realized and unrealized gain on investments, foreign
currency and forward foreign currency contracts:
Net realized gain (loss) on:
Investment transactions................................ 1,433,455 42,588 211,627
Foreign currency and forward foreign
currency contracts.................................... 91,730 --- ---
Change in unrealized appreciation (depreciation) on:
Investments............................................ 506,946 249,233 441,613
Translation of foreign currency and forward
foreign currency contracts............................ 10,764 --- ---
------------ ------------ ------------
Net gain on investments, foreign currency
and forward foreign currency contracts............. 2,042,895 291,821 653,240
------------ ------------ ------------
Net increase in net assets
resulting from operations................................... $7,175,071 $1,461,005 $1,444,600
============ ============ ============
<CAPTION>
U.S.
Government Money
Securities Market
Fund Fund
------------- -------------
<S> <C> <C>
Investment Income:
Interest................................................ $6,316,097 $1,105,794
Mortgage dollar rolls................................... 728,480 ---
Dividends............................................... --- ---
------------ ------------
Total income........................................ 7,044,577 1,105,794
------------ ------------
Expenses:
Distribution for Class A................................. 216,152 ---
Distribution for Class B................................. 175,346 ---
Distribution for Class C................................. 152,729 ---
Investment adviser fee (Note 5).......................... 567,391 40,088
Custodian fee............................................ 40,223 5,863
Transfer agent fee....................................... 138,665 74,506
Accounting/administration................................ 189,000 37,968
Audit and legal fees..................................... 41,309 7,810
Amortization of deferred organization expenses
(Note 2)................................................ --- ---
Miscellaneous............................................ 40,430 32,415
------------ ------------
Expenses before reimbursement
by investment adviser................................... 1,561,245 198,650
Reimbursement of expenses by
investment adviser (Note 5)............................. 165,117 98,317
------------ ------------
Net expenses........................................ 1,396,128 100,333
------------ ------------
Net investment income............................... 5,648,449 1,005,461
------------ ------------
Realized and unrealized gain on investments, foreign
currency and forward foreign currency contracts:
Net realized gain (loss) on:
Investment transactions................................ (120,702) ---
Foreign currency and forward foreign
currency contracts.................................... --- ---
Change in unrealized appreciation (depreciation) on:
Investments............................................ 977,025 ---
Translation of foreign currency and forward
foreign currency contracts............................ --- ---
------------ ------------
Net gain on investments, foreign currency
and forward foreign currency contracts............. 856,323 ---
------------ ------------
Net increase in net assets
resulting from operations................................... $6,504,772 $1,005,461
============ ============
</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>
International
Small Cap Fund Small/Mid Cap Fund Global Equity Fund
------------------------- ----------------------- -------------------------
Year 03/04/96* Year 03/04/96* Year Year
Ended to Ended to Ended Ended
10/31/97 10/31/96 10/31/97 10/31/96 10/31/97 10/31/96
Increase (decrease) in net assets: ------------ ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income (loss)......... ($120,495) ($2,132) ($367,126) ($64,498) ($181,899) ($1,061,996)
Net realized gain (loss) on:
Investment transactions............ (529,214) (62,589) 1,592,142 (771,607) 7,964,844 20,253,188
Foreign currency and forward
foreign currency contracts........ (39,336) (2,661) ------ ------ 559,899 (2,845,571)
Change in unrealized appreciation
(depreciation) on:
Investments........................ 942,729 359,247 3,472,083 596,162 18,658,707 (8,931,531)
Foreign currency and forward
foreign currency contracts........ (3,105) 222 ------ ------ 560,153 384,459
------------ ----------- ----------- ----------- ------------ ------------
Net increase (decrease) in net assets
resulting from operations............. 250,579 292,087 4,697,099 (239,943) 27,561,704 7,798,549
Net equalization credits (charges)
(Note 2)............................. 1,803 4,522 ------ ------ (134,022) (222,342)
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............................ ------ ------ ------ ------ (2,895,690) ------
Class B............................ ------ ------ ------ ------ (2,872,442) ------
Class C............................ ------ ------ ------ ------ (7,051,972) ------
Distribution to shareholders:
In excess of net investment income
Class A............................ ------ ------ ------ ------ (89,634) ------
Increase (decrease) in net assets
from capital share transactions
(Note 3)............................... 4,661,417 12,408,063 6,879,852 18,106,028 (6,894,415) (20,505,106)
------------ ----------- ----------- ----------- ------------ ------------
Increase (decrease) in net assets...... 4,913,799 12,704,672 11,576,951 17,866,085 7,623,529 (14,136,512)
Net assets at beginning of period...... 12,704,672 ------ 17,866,085 ------ 116,414,926 130,551,438
------------ ----------- ----------- ----------- ------------ ------------
Net assets at end of period............ $17,618,471 $12,704,672 $29,443,036 $17,866,085 $124,038,455 $116,414,926
============ =========== =========== =========== ============ ============
Undistributed net
investment income (loss)............. $8,330 $4,522 ------ ------ ($102,559) ($256,903)
============ =========== =========== =========== ============ ============
<CAPTION>
Growth Equity Fund
-------------------------
Year 03/04/96*
Ended to
10/31/97 10/31/96
Increase (decrease) in net assets: ------------ -----------
<S> <C> <C>
Operations:
Net investment income (loss)......... ($144,868) $187,173
Net realized gain (loss) on:
Investment transactions............ 2,705,613 (423,274)
Foreign currency and forward
foreign currency contracts........ (6,483) (4,508)
Change in unrealized appreciation
(depreciation) on:
Investments........................ 1,477,592 703,285
Foreign currency and forward
foreign currency contracts........ 262 12
------------ -----------
Net increase (decrease) in net assets
resulting from operations............. 4,032,116 462,688
Net equalization credits (charges)
(Note 2).............................. 33,219 54,433
Distribution to shareholders from:
Net investment income
Class A............................ (33,593) ------
Class B............................ (63,216) ------
Class C............................ (90,077) ------
Net realized gains on investments
and foreign currency transactions
Class A............................ ------ ------
Class B............................ ------ ------
Class C............................ ------ ------
Distribution to shareholders:
In excess of net investment income
Class A............................ ------ ------
Increase (decrease) in net assets
from capital share transactions
(Note 3)............................... 7,494,842 12,968,925
------------ -----------
Increase (decrease) in net assets...... 11,373,291 13,486,046
Net assets at beginning of period...... 13,486,046 ------
------------ -----------
Net assets at end of period............ $24,859,337 $13,486,046
============ ===========
Undistributed net
investment income (loss)............. $87,652 $240,392
============ ===========
</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>
International
Growth and Income Fund Growth and Income Fund
---------------------------- ---------------------------
Year Year Year Year
Ended Ended Ended Ended
Increase in net assets: 10/31/97 10/31/96 10/31/97 10/31/96
-------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Operations:
Net investment income.................... $131,377 $159,225 $182,168 $606,189
Net realized gain (loss) on:
Investment transactions................ 2,452,134 3,404,649 15,043,013 7,749,188
Foreign currency and forward foreign
currency contracts................... (148,990) (986,073) 164 (40,894)
Change in unrealized appreciation
(depreciation) on:
Investments............................ (1,660,231) 947,754 26,450,524 12,987,230
Foreign currency and forward foreign
currency contracts................... 118,437 (284,107) (93) 261
-------------- ------------ ------------- -------------
Net increase in net assets resulting
from operations........................... 892,727 3,241,448 41,675,776 21,301,974
Net equalization credits (charges) (Note 2) (9,971) 6,318 21,811 14,902
Distribution to shareholders from:
Net investment income
Class A................................ (83,820) (56,090) (176,486) (186,049)
Class B................................ (180,641) (52,389) (73,463) (205,020)
Class C................................ (105,721) (34,562) (113,463) (430,616)
Net realized gains on investments and
foreign currency transactions
Class A................................ (332,915) (75,054) (1,114,556) (105,286)
Class B................................ (1,034,399) (104,218) (2,130,500) (184,505)
Class C................................ (616,566) (73,099) (4,448,214) (525,694)
Distribution to shareholders:
In excess of net investment income
Class A................................ ------ ------ (80) ------
Class B................................ ------ ------ (33) ------
Class C................................ ------ ------ (51) ------
Increase in net assets from capital
share transactions (Note 3).............. 1,701,507 4,531,170 25,829,943 13,771,553
-------------- ------------ ------------- -------------
Increase in net assets..................... 230,201 7,383,524 59,470,684 33,451,259
Net assets at beginning of period.......... 29,025,154 21,641,630 127,836,769 94,385,510
-------------- ------------ ------------- -------------
Net assets at end of period................ $29,255,355 $29,025,154 $187,307,453 $127,836,769
============== ============ ============= =============
Undistributed net
investment income........................ ($50,193) $263,235 $169,142 $270,481
============== ============ ============= =============
<CAPTION>
Equity-Income Fund
(formerly, the
Value Equity Fund
--------------------------
Year Year
Ended Ended
Increase in net assets: 10/31/97 10/31/96
----------- ------------
<S> <C> <C>
Operations:
Net investment income.................... $2,333,310 $616,758
Net realized gain (loss) on:
Investment transactions................ 11,805,051 28,962,312
Foreign currency and forward foreign
currency contracts................... (16,134) (6,379)
Change in unrealized appreciation
(depreciation) on:
Investments............................ 21,707,197 (6,846,565)
Foreign currency and forward foreign
currency contracts................... 687 ------
------------ -------------
Net increase in net assets resulting
from operations........................... 35,830,111 22,726,126
Net equalization credits (charges) (Note 2) 28,169 44,707
Distribution to shareholders from:
Net investment income
Class A................................ (307,637) (216,448)
Class B................................ (123,036) (118,093)
Class C................................ (297,921) (187,978)
Net realized gains on investments and
foreign currency transactions
Class A................................ (6,143,038) (1,874,732)
Class B................................ (5,815,447) (1,711,898)
Class C................................ (17,766,496) (6,634,855)
Distribution to shareholders:
In excess of net investment income
Class A................................ ------ ------
Class B................................ ------ ------
Class C................................ ------ ------
Increase in net assets from capital
share transactions (Note 3).............. 22,385,712 1,737,386
------------ -------------
Increase in net assets..................... 27,790,417 13,764,215
Net assets at beginning of period.......... 139,383,186 125,618,971
------------ -------------
Net assets at end of period................ $167,173,603 $139,383,186
============ =============
Undistributed net
investment income........................ $2,048,580 $454,658
============ =============
</TABLE>
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 Strategic Income fund
----------------------------- ----------------------------
Year Year Year Year
Ended Ended Ended Ended
Increase (decrease) in net assets: 10/31/97 10/31/96 10/31/97 10/31/96
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Operations:
Net investment income...................... $ 2,156,616 $ 2,810,880 $ 5,132,176 $ 4,313,039
Net realized gain (loss) on:
Investment transactions.................. 15,803,775 9,535,049 1,433,455 2,401,213
Futures contracts........................ ------ (80,559) ------ ------
Foreign currency and forward foreign
currency contracts..................... (74,875) (1,438) 91,730 80,533
Change in unrealized appreciation
(depreciation) on:
Investments.............................. (2,893,993) (344,241) 506,946 1,743,690
Futures contracts........................ ------ 4,372 ------ ------
Foreign currency and forward foreign
currency contracts...................... (59) 153 10,764 56,961
------------- ------------- ------------- -------------
Net increase in net assets
resulting from operations.................. 14,991,464 11,924,216 7,175,071 8,595,436
Net equalization credits (charges) (Note 2) (205,430) 7,941 471 ------
Distribution to shareholders from:
Net investment income
Class A.................................. (392,396) (342,751) (1,303,877) (944,160)
Class B.................................. (509,836) (316,830) (2,551,456) (2,001,770)
Class C.................................. (2,058,773) (2,066,083) (2,097,399) (1,367,107)
Net realized gains on investments, futures
and foreign currency transactions
Class A.................................. (1,015,169) (646,271) (272,850) ------
Class B.................................. (1,534,515) (692,368) (599,725) ------
Class C.................................. (6,683,658) (4,999,304) (442,077) ------
Distribution to shareholders:
In excess of net investment income
Class A.................................. ------ ------ (33,959) ------
Class B.................................. ------ ------ (66,452) ------
Class C.................................. ------ ------ (54,626) ------
Increase (decrease) in net assets
from capital share transactions (Note 3).... (4,810,436) (3,488,924) 16,388,157 17,786,584
------------- ------------- ------------- -------------
Increase (decrease) in net assets............ (2,218,749) (620,374) 16,141,278 22,068,983
Net assets at beginning of period............ 99,913,469 100,533,843 67,055,473 44,986,490
------------- ------------- ------------- -------------
Net assets at end of period.................. $ 97,694,720 $ 99,913,469 $ 83,196,751 $ 67,055,473
============= ============= ============= =============
Undistributed net investment income (loss)... $1,388,676 $2,461,605 ($80,961) $708,280
============= ============= ============= =============
<CAPTION>
Investment Quality Bond
Fund
-----------------------------
Year Year
Ended Ended
Increase (decrease) in net assets: 10/31/97 10/31/96
------------- -------------
<S> <C> <C>
Operations:
Net investment income...................... $ 1,169,184 $ 1,277,708
Net realized gain (loss) on:
Investment transactions.................. 42,588 137,744
Futures contracts........................ ------ ------
Foreign currency and forward foreign
currency contracts..................... ------ ------
Change in unrealized appreciation
(depreciation) on:
Investments.............................. 249,233 (529,084)
Futures contracts........................ ------ ------
Foreign currency and forward foreign
currency contracts..................... ------ ------
------------- -------------
Net increase in net assets
resulting from operations.................. 1,461,005 886,368
Net equalization credits (charges) (Note 2) (2,133) 3,940
Distribution to shareholders from:
Net investment income
Class A.................................. (506,971) (633,961)
Class B.................................. (273,774) (264,717)
Class C.................................. (401,143) (418,906)
Net realized gains on investments, futures
and foreign currency transactions
Class A.................................. ------ ------
Class B.................................. ------ ------
Class C.................................. ------ ------
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).... (3,722,153) 681,354
------------- -------------
Increase (decrease) in net assets............ (3,445,169) 254,078
Net assets at beginning of period............ 21,276,754 21,022,676
------------- -------------
Net assets at end of period.................. $ 17,831,585 $ 21,276,754
============= =============
Undistributed net investment income (loss)... $ 17,719 $ 24,735
============= =============
</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>
National Municipal U.S. Government
Bond Fund Securities Fund
---------------------------- --------------------------
Year Year Year Year
Ended Ended Ended Ended
10/31/97 10/31/96 10/31/97 10/31/96
------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................... $791,360 $902,673 $5,648,449 $6,347,417
Net realized gain (loss) on
investment transactions.................. 211,627 51,281 (120,702) 692,635
Change in unrealized appreciation
(depreciation) on investments............ 441,613 134,956 977,025 (2,144,261)
-------------- ------------ ------------- -------------
Net increase in net assets resulting
from operations............................ 1,444,600 1,088,910 6,504,772 4,895,791
Net equalization credits (charges) (Note 2) ------ ------ (90) 5
Distribution to shareholders from:
Net investment income
Class A................................. (318,542) (386,541) (3,546,760) (4,374,305)
Class B................................. (254,666) (252,541) (889,120) (943,899)
Class C................................. (218,057) (263,588) (779,044) (1,029,213)
Distribution to shareholders:
In excess of net investment income
Class A................................. ------ ------ (145,486) (502,592)
Class B................................. ------ ------ (36,471) (108,446)
Class C................................. ------ ------ (31,956) (118,254)
Increase (decrease) in net assets from
capital share transactions (Note 3)........ (2,003,116) (980,922) (28,692,600) (949,834)
-------------- ------------ ------------- -------------
Increase (decrease) in net assets........... (1,349,781) (794,682) (27,616,755) (3,130,747)
Net assets at beginning of period........... 19,533,453 20,328,135 112,227,154 115,357,901
-------------- ------------ ------------- -------------
Net assets at end of period................. $18,183,672 $19,533,453 $84,610,399 $112,227,154
============== ============ ============= =============
Undistributed net
investment loss............................ ($474) ($569) ($414,108) ($383,354)
============== ============ ============= =============
<CAPTION>
Money Market Fund
--------------------------
Year Year
Ended Ended
10/31/97 10/31/96
----------- ------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................... $1,005,461 $961,436
Net realized gain (loss) on
investment transactions.................. ------ ------
Change in unrealized appreciation
(depreciation) on investments............ ------ ------
------------ -------------
Net increase in net assets resulting
from operations............................ 1,005,461 961,436
Net equalization credits (charges) (Note 2) ------ ------
Distribution to shareholders from:
Net investment income
Class A................................. (398,539) (405,871)
Class B................................. (158,672) (88,592)
Class C................................. (448,250) (466,973)
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)........ 938,733 (1,348,319)
------------ -------------
Increase (decrease) in net assets........... 938,733 (1,348,319)
Net assets at beginning of period........... 20,989,129 22,337,448
------------ -------------
Net assets at end of period................. $21,927,862 $20,989,129
============ =============
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>
International Small Cap Fund
-----------------------------------------------------------------------------------
Year 03/04/96* Year 03/04/96* Year 03/04/96*
Ended to Ended to Ended to
10/31/97 10/31/96 10/31/97 10/31/96 10/31/97 10/31/96
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......... $13.43 $12.50 $13.37 $12.50 $13.37 $12.50
Income from investment operations:
- ----------------------------------
Net investment income (loss) (B)............. (0.03) 0.05 (0.11) (0.01) (0.11) (0.01)
Net realized and unrealized gain on invest-
ments and foreign currency transactions.... 0.46 0.88 0.45 0.88 0.45 0.88
----- ----- ----- ----- ----- -----
Total from investment
operations......................... 0.43 0.93 0.34 0.87 0.34 0.87
Net asset value, end of period............... $13.86 $13.43 $13.71 $13.37 $13.71 $13.37
====== ====== ====== ====== ====== ======
Total return......................... 3.20% 7.44%+ 2.54% 6.96%+ 2.54% 6.96%+
Net assets, end of period (000's)............ $3,225 $2,120 $7,369 $5,068 $7,025 $5,517
Ratio of operating expenses
to average net assets (C).................. 1.90% 1.90%(A) 2.55% 2.55%(A) 2.55% 2.55%(A)
Ratio of net investment income
(loss) to average net assets............... (0.19%) 0.50%(A) (0.84%) (0.15%)(A) (0.84%) (0.15%)(A)
Portfolio turnover rate...................... 75% 67%(A) 75% 67%(A) 75% 67%(A)
Average commission rate per share (D)........ $0.014 $0.016 $0.014 $0.016 $0.014 $0.016
</TABLE>
- -----------------------------
* Commencement of operations
+ Non-annualized
(A) Annualized
(B) After expense reimbursement by the adviser of $0.09, $0.05 and $0.05 per
share for the International Small Cap Fund - Classes A, B and C
respectively, for the year ended October 31, 1997 and $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
2.46%, 2.98% and 2.96% for the International Small Cap Fund, Classes A, B
and C respectively, for the year ended October 31, 1997 and 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.
15
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Small/Mid Cap Fund
-----------------------------------------------------------------------------------
Year 03/04/96* Year 03/04/96* Year 03/04/96*
Ended to Ended to Ended to
10/31/97 10/31/96 10/31/97** 10/31/96 10/31/97** 10/31/96
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... $12.62 $12.50 $12.58 $12.50 $12.59 $12.50
Income from investment operations:
- ---------------------------------
Net investment loss (B)................ (0.14) (0.02) (0.23) (0.05) (0.23) (0.05)
Net realized and unrealized gain
on investments....................... 3.03 0.14 2.98 0.13 2.99 0.14
----- ----- ----- ----- ----- -----
Total from investment
operations................... 2.89 0.12 2.75 0.08 2.76 0.09
Net asset value, end of period......... $15.51 $12.62 $15.33 $12.58 $15.35 $12.59
====== ====== ====== ====== ====== ======
Total return................... 22.90% 0.96%+ 21.86% 0.64%+ 21.92% 0.72%+
Net assets, end of period (000's)...... $4,170 $2,966 $11,802 $6,659 $13,471 $8,241
Ratio of operating expenses
to average net assets (C)............ 1.675% 1.675%(A) 2.325% 2.325%(A) 2.325% 2.325%(A)
Ratio of net investment loss
to average net assets................ (1.02%) (0.40%)(A) (1.67%) (1.05%)(A) (1.67%) (1.05%)(A)
Portfolio turnover rate................ 145% 92%(A) 145% 92%(A) 145% 92%(A)
Average commission rate per share (D).. $0.070 $0.069 $0.070 $0.069 $0.070 $0.069
</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 $0.08, $0.06 and $0.06 per
share for the Small/Mid Cap Fund - Classes A, B and C respectively, for the
year ended October 31, 1997 and $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
and 2.24%, 2.79% and 2.78% for the Small/Mid Cap Fund, Classes A, B and C
respectively, for the year ended October 31, 1997 and 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.
16
<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 Year 04/01/94* Year Year Year 04/01/94*
Ended Ended Ended to Ended Ended Ended to
10/31/97 10/31/96** 10/31/95 10/31/94 10/31/97** 10/31/96** 10/31/95** 10/31/94
Class A Class A Class A Class A Class B Class B Class B Class B
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..... $14.50 $13.84 $14.82 $14.13 $14.36 $13.73 $14.79 $14.13
Income (loss) from investment operations
- ----------------------------------------
Net investment income (loss) (B)......... 0.06 (0.04) --- (0.01) (0.05) (0.14) (0.09) (0.03)
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions......................... 3.45 0.91 (0.54) 0.70 3.47 0.91 (0.53) 0.69
----- ----- ---- ----- ----- ----- ---- -----
Total from investment
operations..................... 3.51 0.87 (0.54) 0.69 3.42 0.77 (0.62) 0.66
Less distributions
- ------------------
Dividends from net investment income..... (0.05) (0.21) ---- ---- ---- (0.14) ---- ----
Distributions from capital gains......... (1.64) ---- (0.44) ---- (1.64) ---- (0.44) ----
----- ----- ---- ----- ----- ----- ---- -----
Total distributions.............. (1.69) (0.21) (0.44) ---- (1.64) (0.14) (0.44) ----
----- ----- ---- ----- ----- ----- ---- -----
Net asset value, end of period........... $16.32 $14.50 $13.84 $14.82 $16.14 $14.36 $13.73 $14.79
====== ====== ====== ====== ====== ====== ====== ======
Total return..................... 26.10% 6.33% (3.52%) 9.16%(E) 25.63% 5.64% (4.09%) 8.94%(E)
Net assets, end of period (000's)........ $30,960 $25,924 $23,894 $18,152 $31,833 $25,661 $23,317 $13,903
Ratio of operating expenses
to average net assets (C).............. 1.75% 1.75% 1.75% 1.75%(A) 2.40% 2.40% 2.40% 2.40%(A)
Ratio of net investment income
(loss) to average net assets........... 0.33% (0.30%) 0.03% (0.12%)(A) (0.32%) (0.95%) (0.61%) (0.77%)(A)
Portfolio turnover rate.................. 28% 165% 57% 54% 28% 165% 57% 54%
Average commission rate per share (D).... $0.036 $0.016 N/A N/A $0.036 $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, $0.01, $0.02 and $0.01
per share for the Global Equity Fund - Class A and $0.01, $0.01, $0.02 and
$0.01 per share for the Global Equity Fund - Class B, for the years ended
October 31, 1997, 1996 and 1995 and the period April 1, 1994 to October 31,
1994, respectively.
(C) The ratio of operating expenses, before reimbursement by the adviser, was
1.81%, 1.83%, 1.92% and 1.97% for the Global Equity Fund - Class A and
2.47%, 2.48%, 2.58% and 2.71% for the Global Equity Fund - Class B, for the
years ended October 31, 1997, 1996 and 1995 and the period April 1, 1994 to
October 31, 1994 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. 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.
17
<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,
---------------------------------------------------------------------------------
1997** 1996** 1995** 1994 1993 1992 1991
--------- ---------- --------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period... $14.41 $13.73 $14.79 $13.74 $10.33 $10.76 $10.12
Income (loss) from investment operations
- ----------------------------------------
Net investment income (loss) (A)....... (0.05) (0.14) (0.09) (0.10) (0.01) (0.02) 0.25
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions....................... 3.47 0.92 (0.53) 1.15 3.43 (0.37) 0.63
----- ----- ----- ----- ----- ----- -----
Total from investment
operations................... 3.42 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....... (1.64) ---- (0.44) ---- ---- ---- ----
Distributions from capital............. ---- ---- ---- ---- ---- (0.04) ----
----- ----- ----- ----- ----- ----- -----
Total distributions............ (1.64) (0.10) (0.44) ---- (0.01) (0.04) (0.24)
----- ----- ----- ----- ----- ----- -----
Net asset value, end of period......... $16.19 $14.41 $13.73 $14.79 $13.74 $10.33 $10.76
====== ====== ====== ====== ====== ====== ======
Total return................... 25.54% 5.70% (4.09%) 8.94% 33.06% (3.57%) 8.80%
Net assets, end of period (000's)...... $61,245 $64,830 $83,340 $101,443 $63,503 $14,291 $8,828
Ratio of operating expenses
to average net assets (B)............ 2.40% 2.40% 2.40% 2.40% 2.40% 2.52% 1.47%
Ratio of net investment income
(loss) to average net assets......... (0.32%) (0.95%) (0.64%) (0.91%) (0.40%) (0.27%) 1.41%
Portfolio turnover rate................ 28% 165% 57% 54% 57% 69% 70%
Average commission rate per share (C).. $0.036 $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) After expense reimbursement by the adviser of $0.01, $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, 1997, 1996, 1995, 1994, 1993, 1992 and 1991,
respectively.
(B) The ratio of operating expenses, before reimbursement by the adviser, was
2.46%, 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, 1997, 1996, 1995, 1994, 1993,
1992 and 1991, respectively.
(C) 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.
18
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth Equity Fund
-----------------------------------------------------------------------------------
Year 03/04/96* Year 03/04/96* Year 03/04/96*
Ended to Ended to Ended to
10/31/97 10/31/96 10/31/97 10/31/96 10/31/97 10/31/96
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... $13.78 $12.50 $13.73 $12.50 $13.73 $12.50
Income from investment operations:
- ---------------------------------
Net investment income (loss) (B)....... (0.03) 0.28 (0.13) 0.24 (0.13) 0.24
Net realized and unrealized gain
on investments....................... 3.45 1.00 3.46 0.99 3.46 0.99
----- ----- ----- ----- ----- ------
Total from investment
operations................... 3.42 1.28 3.33 1.23 3.33 1.23
Less Distributions
- ------------------
Dividends from net investment income... (0.19) ------ (0.16) ------ (0.17) ------
----- ----- -----
Net asset value, end of period......... $17.01 $13.78 $16.90 $13.73 $16.89 $13.73
====== ====== ====== ====== ====== ======
Total return................... 25.13% 10.24%+ 24.50% 9.84%+ 24.50% 9.84%+
Net assets, end of period (000's)...... $3,053 $2,244 $9,040 $4,748 $12,766 $6,494
Ratio of operating expenses
to average net assets (C)............ 1.65% 1.65%(A) 2.30% 2.30%(A) 2.30%(A) 2.30%(A)
Ratio of net investment income
(loss) to average net assets......... (0.17%) 4.11%(A) (0.82%) 4.18%(A) (0.82%) 4.13%(A)
Portfolio turnover rate................ 181% 450%(A) 181% 450%(A) 181% 450%(A)
Average commission rate per share (D).. $0.062 $0.043 $0.062 $0.043 $0.062 $0.043
</TABLE>
- -----------------------------
* Commencement of operations
+ Non-annualized
(A) Annualized
(B) After expense reimbursement by the adviser of $0.10, $0.07 and $0.07 per
share for the Growth Equity Fund - Classes A, B and C respectively, for the
year ended October 31, 1997 and $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
2.28%, 2.78% and 2.75% for the Growth Equity Fund, Classes A, B and C
respectively, for the year ended October 31, 1997 and 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.
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>
International Growth and Income Fund
-------------------------------------------------------------------------------------------
Year Year 01/09/95* Year Year 01/09/95* Year Year 01/09/95*
Ended Ended to Ended Ended to Ended Ended to
10/31/97 10/31/96** 10/31/95 10/31/97** 10/31/96** 10/31/95 10/31/97** 10/31/96** 10/31/95
Class A Class A Class A Class B Class B Class B Class C Class C Class C
--------- -------- -------- --------- -------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $11.35 $10.11 $10.00 $11.30 $10.10 $10.00 $11.31 $10.10 $10.00
Income from investment operations:
- ---------------------------------
Net investment income (B)........... 0.06 0.09 0.06 0.03 0.06 0.01 0.03 0.06 0.01
Net realized and unrealized gain on
investments and foreign currency
transactions. 0.35 1.33 0.08 0.31 1.30 0.12 0.31 1.30 0.12
------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations................ 0.41 1.42 0.14 0.34 1.36 0.13 0.34 1.36 0.13
Less distributions
- ------------------
Dividends from net investment income (0.19) (0.08) (0.03) (0.13) (0.05) (0.03) (0.13) (0.05) (0.03)
Distributions from capital gains.... (0.76) (0.10) ------ (0.76) (0.11) ------ (0.76) (0.10) ------
------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions......... (0.95) (0.18) (0.03) (0.89) (0.16) (0.03) (0.89) (0.15) (0.03)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period...... $10.81 $11.35 $10.11 $10.75 $11.30 $10.10 $10.76 $11.31 $10.10
====== ====== ====== ====== ====== ====== ====== ====== ======
Total return................ 3.55% 14.25% 1.37%+ 2.92% 13.58% 1.28%+ 2.91% 13.63% 1.28%+
Net assets, end of period (000's)... $4,461 $4,732 $6,897 $16,334 $15,217 $8,421 $8,460 $9,076 $6,324
Ratio of operating expenses
to average net assets (C)......... 1.75% 1.75% 1.75%(A) 2.40% 2.40% 2.40%(A) 2.40% 2.40% 2.40%(A)
Ratio of net investment income
to average net assets............. 0.97% 0.84% 0.70%(A) 0.32% 0.57% 0.15%(A) 0.32% 0.51% 0.13%(A)
Portfolio turnover rate............. 146% 170% 69%(A) 146% 170% 69%(A) 146% 170% 69%(A)
Average commission rate per
share (D)......................... $0.004 $0.022 N/A $0.004 $0.022 N/A $0.004 $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 $0.01, $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, 1997, $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
1.96%, 2.54% and 2.57% for the International Growth and Income Fund,
Classes A, B and C respectively, for the year ended October 31, 1997,
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.
20
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth and Income Fund
----------------------------------------------------------------------------------------
Year Year Year 04/01/94* Year Year Year 04/01/94*
Ended Ended Ended to Ended Ended Ended to
10/31/97 10/31/96 10/31/95** 10/31/94 10/31/97 10/31/96** 10/31/95** 10/31/94
Class A Class A Class A Class A Class B Class B Class B Class B
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................. $17.56 $14.72 $13.09 $12.29 $17.50 $14.69 $13.08 $12.29
Income from investment operations
- ---------------------------------
Net investment income (B)............ 0.14 0.18 0.26 0.12 0.01 0.07 0.16 0.10
Net realized and unrealized gain
on investments..................... 5.26 2.99 1.90 0.76 5.23 2.99 1.94 0.77
----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations................. 5.40 3.17 2.16 0.88 5.24 3.06 2.10 0.87
Less distributions
- ------------------
Dividends from net investment income. (0.15) (0.21) (0.23) (0.08) (0.03) (0.13) (0.19) (0.08)
Distributions from capital gains..... (1.04) (0.12) (0.30) ---- (1.04) (0.12) (0.30) ----
----- ----- ----- ----- ----- ----- ----- -----
Total distributions.......... (1.19) (0.33) (0.53) (0.08) (1.07) (0.25) (0.49) (0.08)
----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period....... $21.77 $17.56 $14.72 $13.09 $21.67 $17.50 $14.69 $13.08
====== ====== ====== ====== ====== ====== ====== ======
Total return................. 31.95% 21.84% 17.28% 5.06%(E) 31.40% 21.08% 16.73% 4.98%(E)
Net assets, end of period (000's).... $34,186 $18,272 $12,180 $8,134 $54,871 $34,740 $19,052 $3,885
Ratio of operating expenses
to average net assets (C).......... 1.34% 1.34% 1.34% 1.34%(A) 1.99% 1.99% 1.99% 1.99%(A)
Ratio of net investment income
to average net assets.............. 0.66% 1.10% 1.91% 1.72%(A) 0.01% 0.45% 1.14% 1.07%(A)
Portfolio turnover rate.............. 39% 49% 40% 45% 39% 49% 40% 45%
Average commission rate per
share (D).......................... $0.054 $0.055 N/A N/A $0.054 $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, $0.03, $0.05 and $0.05
per share for the Growth and Income Fund Class A and $0.30, $0.03, $0.05 and
$0.12 per share for the Growth and Income Fund - Class B, for the years
ended October 31, 1997, 1996, 1995 and the period April 1, 1994 to October
31, 1994, respectively.
(C) The ratio of operating expenses, before reimbursement by the adviser, was
1.50%, 1.56%, 1.69% and 2.08% for the Growth and Income Fund - Class A and
2.15%, 2.20%, 2.33% and 3.12% for the Growth and Income Fund - Class B, for
the years ended October 31, 1997, 1996 and 1995 and the period April 1, 1994
to October 31, 1994 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.
(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.
21
<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
1997 1996 1995 1994 1993 1992 10/31/91
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period... $17.56 $14.71 $13.08 $12.71 $11.21 $10.51 $10.00
Income from investment operations
- ---------------------------------
Net investment income (B).............. 0.01 0.07 0.18 0.15 0.14 0.18 0.11
Net realized and unrealized gain
on investments....................... 5.25 3.00 1.90 0.46 1.48 0.70 0.47
----- ----- ----- ----- ----- ----- -----
Total from investment
operations................... 5.26 3.07 2.08 0.61 1.62 0.88 0.58
Less distributions
- ------------------
Dividends from net investment income... (0.03) (0.10) (0.15) (0.13) (0.12) (0.18) (0.07)
Distributions from capital gains....... (1.04) (0.12) (0.30) (0.11) ---- ---- ----
----- ----- ----- ----- ----- ----- -----
Total distributions............ (1.07) (0.22) (0.45) (0.24) (0.12) (0.18) (0.07)
----- ----- ----- ----- ----- ----- -----
Net asset value, end of period......... $21.75 $17.56 $14.71 $13.08 $12.71 $11.21 $10.51
====== ====== ====== ====== ====== ====== ======
Total return................... 31.37% 21.12% 16.56% 4.85% 14.57% 8.42% 5.88%+
Net assets, end of period (000's)...... $98,250 $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% 1.99% 1.94% 1.85%(A)
Ratio of net investment income
to average net assets................ 0.01% 0.45% 1.26% 1.11% 1.12% 1.51% 2.05%(A)
Portfolio turnover rate................ 39% 49% 40% 45% 37% 48% 111%(A)
Average commission rate per share (D).. $0.054 $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, $0.03,
$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, 1997, 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 2.13%, 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, 1997, 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.
22
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Equity-Income Fund
(formerly, the Value Equity Fund, formerly, the Growth Fund)
----------------------------------------------------------------------------------------
Year Year Year 04/01/94* Year Year Year 04/01/94*
Ended Ended Ended to Ended Ended Ended to
10/31/97 10/31/96 10/31/95** 10/31/94 10/31/97 10/31/96 10/31/95** 10/31/94
Class A Class A Class A Class A Class B Class B Class B Class B
--------- --------- --------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period... $17.37 $15.94 $14.78 $14.59 $17.22 $15.84 $14.77 $14.59
Income from investment operations
- ---------------------------------
Net investment income (loss) (B)....... 0.33 0.16 0.12 0.02 0.23 0.06 0.02 (0.02)
Net realized and unrealized gain
on investments....................... 3.59 2.69 1.83 0.17 3.54 2.69 1.84 0.20
------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations................... 3.92 2.85 1.95 0.19 3.77 2.75 1.86 0.18
Less distributions
- ------------------
Distributions from net investment
income............................... (0.18) (0.14) ----- ----- (0.08) (0.09) ----- -----
Distributions from capital gains....... (3.67) (1.28) (0.79) ----- (3.67) (1.28) (0.79) -----
----- ----- ----- ----- ----- ----- ----- -----
Total distributions............ (3.85) (1.42) (0.79) ----- (3.75) (1.37) (0.79) -----
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period......... $17.44 $17.37 $15.94 $14.78 $17.24 $17.22 $15.84 $14.77
====== ====== ====== ====== ====== ====== ====== ======
Total return................... 27.24% 19.23% 14.22% 4.82%(E) 26.29% 18.59% 13.58% 4.75%(E)
Net assets, end of period (000's)...... $36,334 $28,470 $22,026 $16,326 $36,191 $27,058 $19,874 $5,054
Ratio of operating expenses
to average net assets (C)............ 1.34% 1.34% 1.34% 1.34%(A) 1.99% 1.99% 1.99% 1.99%(A)
Ratio of net investment income
(loss) to average net assets......... 2.01% 0.98% 0.79% 0.13%(A) 1.36% 0.33% 0.13% (0.52%)(A)
Portfolio turnover rate................ 36% 169% 54% 39% 36% 169% 54% 39%
Average commission rate per share (D).. $0.037 $0.053 N/A N/A $0.037 $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, $0.04, $0.04 and $0.06
per share for the Equity-Income Fund - Class A and $0.04, $0.04, $0.05 and
$0.03 per share for the Equity-Income Fund - Class B, for the years ended
October 31, 1997, 1996 and 1995 and the period April 1, 1994 to October 31,
1994, respectively.
(C) The ratio of operating expenses, before reimbursement by the adviser, was
1.55%, 1.55%, 1.62% and 1.79% for the Equity-Income Fund - Class A and
2.21%, 2.20%, 2.32% and 2.82% for the Equity-Income Fund - Class B, for the
years ended October 31, 1997, 1996 and 1995 the period April 1, 1994 to
October 31, 1994 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.
(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.
23
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Equity-Income Fund - Class C
(formerly, the Value Equity Fund - Class C, formerly, the Growth Fund - Class C)
--------------------------------------------------------------------------------------------
Years Ended October 31, 08/28/89*
--------------------------------------------------------------------------------- to
1997 1996 1995** 1994 1993 1992 1991 1990 10/31/89
--------- -------- --------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $17.27 $15.84 $14.77 $14.21 $12.05 $10.70 $ 8.22 $11.19 $12.25
Income (loss) from investment
- -----------------------------
operations
- ----------
Net investment income (loss) (B).... 0.23 0.06 0.02 (0.07) 0.01 (0.01) 0.02 0.05 0.01
Net realized and unrealized gain
(loss) on investments............. 3.56 2.69 1.84 0.74 2.15 1.37 2.54 (2.39) (1.07)
----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations................ 3.79 2.75 1.86 0.67 2.16 1.36 2.56 (2.34) (1.06)
Less distributions
- ------------------
Dividends from net investment
income............................ (0.06) (0.04) ------ (0.03) ------ ------ (0.03) (0.05) ------
Distributions from capital gains.... (3.67) (1.28) (0.79) (0.08) ------ ------ ------ (0.58) ------
Distributions from capital.......... ------ ------ ------ ------ ------ (0.01) (0.05) ------ ------
------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions......... (3.73) (1.32) (0.79) (0.11) ------ (0.01) (0.08) (0.63) ------
------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of period...... $17.33 $17.27 $15.84 $14.77 $14.21 $12.05 $10.70 $ 8.22 $11.19
======= ======= ======= ======= ======= ======= ======= ======= =======
Total return................ 26.33% 18.53% 13.58% 4.75% 17.93% 12.75% 31.32% (22.16%) (8.65%)+
Net assets, end of period (000's)... $94,649 $83,855 $83,719 $71,219 $64,223 $24,291 $15,354 $19,370 $30,627
Ratio of operating expenses
to average net assets (C)......... 1.99% 1.99% 1.99% 1.99% 1.99% 2.47% 2.97% 2.85% 2.57%(A)
Ratio of net investment income
(loss) to average net assets...... 1.36% 0.33% 0.15% (0.49%) 0.27% (0.15%) 0.27% 0.43% 0.37%(A)
Portfolio turnover rate............. 36% 169% 54% 39% 40% 91% 37% 58% 65%(A)
Average commission rate per share
(D)............................... $0.037 $0.053 N/A N/A N/A N/A N/A 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, $0.03,
$0.04, $0.04, $0.02, $0.05 and $0.01 per share for the Equity-Income Fund -
Class C for the years ended October 31, 1997, 1996, 1995, 1994, 1993, 1992
and 1991, respectively.
(C) The ratio of operating expenses, before reimbursement and waiver by the
adviser, was 2.19%, 2.20%, 2.23%, 2.29%, 2.35%, 3.00% and 3.12% for the
Equity - Income Fund - Class C for the year ended October 31, 1997 and 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.
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 Year 04/01/94* Year Year Year 04/01/94*
Ended Ended Ended to Ended Ended Ended to
10/31/97 10/31/96** 10/31/95** 10/31/94 10/31/97** 10/31/96** 10/31/95** 10/31/94
Class A Class A Class A Class A Class B Class B Class B Class B
--------- --------- --------- --------- ---------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period..................... $12.33 $12.02 $11.13 $11.06 $12.26 $11.98 $11.12 $11.06
Income (loss) from investment
- -----------------------------
operations
- ----------
Net investment income (B)....... 0.34 0.39 0.38 0.17 0.25 0.31 0.30 0.12
Net realized and unrealized gain
(loss) on investments......... 1.52 1.07 1.35 (0.10) 1.53 1.07 1.36 (0.06)
----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations............ 1.86 1.46 1.73 0.07 1.78 1.38 1.66 0.06
Less distributions
- ------------------
Dividends from net investment
income........................ (0.45) (0.40) (0.32) ----- (0.39) (0.35) (0.28) -----
Distributions from capital
gains......................... (1.16) (0.75) (0.52) ----- (1.16) (0.75) (0.52) -----
----- ----- ----- ----- ----- ----- ----- -----
Total distributions..... (1.61) (1.15) (0.84) ----- (1.55) (1.10) (0.80) -----
----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period.. $12.58 $12.33 $12.02 $11.13 $12.49 $12.26 $11.98 $11.12
====== ====== ====== ====== ====== ====== ====== ======
Total return............ 17.01% 13.10% 16.95% 0.76%(E) 16.27% 12.35% 16.31% 0.67%(E)
Net assets, end of
period (000's)................ $12,294 $10,873 $10,033 $7,830 $17,140 $16,219 $9,875 $4,760
Ratio of operating expenses
to average net assets (C)..... 1.34% 1.34% 1.34% 1.34%(A) 1.99% 1.99% 1.99% 1.99%(A)
Ratio of net investment income
to average net assets......... 2.74% 3.32% 3.39% 2.72%(A) 2.09% 2.67% 2.69% 2.07%(A)
Portfolio turnover rate......... 211% 253% 226% 246% 211% 253% 226% 246%
Average commission rate per
share (D)..................... $0.062 $0.059 N/A N/A $0.062 $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 $0.03, $0.02, $0.04 and $0.03
for the Balanced Fund - Class A and $0.03, $0.02, $0.04 and $0.04 for the
Balanced Fund - Class B, for the years ended October 31, 1997, 1996 and
1995 and the period April 1, 1994 to October 31, 1994, respectively.
(C) The ratio of operating expenses, before reimbursement by the adviser, was
1.59%, 1.55%, 1.69% and 1.86% for the Balanced Fund - Class A and 2.23%,
2.20%, 2.37% and 2.73% for the Balanced Fund - Class B, for the years ended
October 31, 1997, 1996 and 1995 and the period April 1, 1994 to October 31,
1994 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.
(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
(formerly, the Asset Allocation Fund - Class C)
--------------------------------------------------------------------------------------------
Years Ended October 31, 08/28/89*
--------------------------------------------------------------------------------- to
1997** 1996** 1995** 1994 1993 1992 1991 1990 10/31/89
--------- -------- --------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period...................... $12.35 $12.02 $11.12 $11.52 $10.20 $9.76 $8.12 $9.84 $10.17
Income (loss) from investment
- -----------------------------
operations
- ----------
Net investment income (B)....... 0.25 0.32 0.31 0.22 0.21 0.20 0.27 0.32 0.05
Net realized and unrealized gain
(loss) on investments......... 1.54 1.07 1.35 (0.15) 1.30 0.87 1.70 (1.66) (0.38)
----- ----- ----- ----- ----- ----- ----- ------ -----
Total from investment
operations............ 1.79 1.39 1.66 0.07 1.51 1.07 1.97 (1.34) (0.33)
Less distributions
- ------------------
Dividends from net investment
income........................ (0.36) (0.31) (0.24) (0.18) (0.09) (0.19) (0.33) (0.26) ------
Distributions from capital
gains......................... (1.16) (0.75) (0.52) (0.29) (0.10) (0.44) ------ ------ ------
Distributions from capital...... ------ ------ ------ ------ ------ ------ ------ (0.12) ------
------- ------- ------- ------- ------- ------- ------- ----- -------
Total distributions..... (1.52) (1.06) (0.76) (0.47) (0.19) (0.63) (0.33) (0.38) ------
----- ----- ----- ----- ----- ----- ----- ----- -------
Net asset value, end of period.. $12.62 $12.35 $12.02 $11.12 $11.52 $10.20 $9.76 $8.12 $9.84
====== ====== ====== ====== ====== ====== ===== ===== =====
Total return............ 16.21% 12.41% 16.25% 0.67% 15.02% 11.25% 24.53% (13.97%) (3.24%)+
Net assets, end of period (000's) $68,261 $72,821 $80,626 $86,902 $96,105 $48,160 $30,724 $34,713 $43,915
Ratio of operating expenses
to average net assets (C)..... 1.99% 1.99% 1.99% 1.99% 1.99% 2.40% 2.88% 2.63% 2.13%(A)
Ratio of net investment income
to average net assets......... 2.09% 2.67% 2.76% 1.93% 1.96% 1.93% 2.77% 3.34% 3.09%(A)
Portfolio turnover rate......... 211% 253% 226% 246% 196% 171% 84% 73% 84%(A)
Average commission rate per
share (D)..................... $0.062 $0.059 N/A N/A N/A N/A 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 $0.03, $0.01,
$0.03, $0.04, $0.03 and $0.04 for the Balanced Fund - Class C for the years
ended October 31, 1997, 1996, 1995, 1994, 1993 and 1992, respectively.
(C) The ratio of operating expenses, before reimbursement and waiver by the
adviser, was 2.20%, 2.20%, 2.24%, 2.22%, 2.28% and 2.89% for the Balanced
Fund - Class C for the years ended October 31, 1997, 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.
The accompnaying 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 - Class A
----------------------------------------------------
Years Ended October 31, 11/01/93*
-------------------------------------- to
1997 1996 1995 10/31/94
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period......... $9.80 $9.07 $8.90 $10.00
Income (loss) from investment operations
- ----------------------------------------
Net investment income (A).................... 0.70 0.80 0.78 0.65
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions............................. 0.28 0.72 0.18 (1.10)
----- ----- ----- -----
Total from investment
operations......................... 0.98 1.52 0.96 (0.45)
Less distributions
- ------------------
Dividends from net investment income......... (0.84) (0.79) (0.79) (0.65)
Distributions from capital gains............. (0.18) ----- ----- -----
----- ----- ----- -----
Total distributions...................... (1.02) (0.79) (0.79) (0.65)
----- ----- ----- -----
Net asset value, end of period............... $9.76 $9.80 $9.07 $8.90
===== ===== ===== =====
Total return......................... 10.57% 17.35% 11.43% (3.79%)
Net assets, end of period (000's)............ $15,924 $13,382 $10,041 $15,507
Ratio of operating expenses
to average net assets (B).................. 1.50% 1.50% 1.07% 0.41%
Ratio of net investment income
to average net assets...................... 7.25% 8.28% 9.08% 8.26%
Portfolio turnover rate...................... 193% 68% 180% 136%
</TABLE>
- ------------------------------
* Commencement of operations
(A) After expense reimbursement and waiver by the adviser of $0.01, $0.01, $0.05
and $0.04 per share for the Strategic Income Fund - Class A for the years
ended October 31, 1997, 1996, 1995 and 1994, respectively.
(B) The ratio of operating expenses, before reimbursement and waiver by the
adviser, was 1.61%, 1.65%, 1.69% and 0.96% for the Strategic Income Fund -
Class A for the years ended October 31, 1997, 1996, 1995 and 1994,
respectively.
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>
Strategic Income Fund
----------------------------------------------------------------------------------------
Year Year Year 04/01/94* Year Year Year 04/01/94*
Ended Ended Ended to Ended Ended Ended to
10/31/97 10/31/96 10/31/95 10/31/94 10/31/97 10/31/96 10/31/95 10/31/94
Class B Class B Class B Class B Class C Class C Class C Class C
--------- --------- --------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period....................... $9.80 $9.07 $8.90 $9.31 $9.80 $9.07 $8.90 $9.31
Income (loss) from investment operations
- ----------------------------------------
Net investment income (B)......... 0.64 0.73 0.73 0.38 0.64 0.73 0.73 0.38
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions... 0.28 0.73 0.17 (0.41) 0.28 0.73 0.17 (0.41)
----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations.............. 0.92 1.46 0.90 (0.03) 0.92 1.46 0.90 (0.03)
Less distributions
- ------------------
Dividends from net investment
income.......................... (0.78) (0.73) (0.73) (0.38) (0.78) (0.73) (0.73) (0.38)
Distributions from capital gains.. (0.18) ----- ----- ----- (0.18) ----- ----- -----
----- ----- ----- ----- ----- ----- ----- -----
Total distributions........... (0.96) (0.73) (0.73) (0.38) (0.96) (0.73) (0.73) (0.38)
----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period.... $9.76 $9.80 $9.07 $8.90 $9.76 $9.80 $9.07 $8.90
===== ===== ===== ===== ===== ===== ===== =====
Total return.............. 9.86% 16.59% 10.72% (4.18%)(D) 9.86% 16.59% 10.72% (4.20%)(D)
Net assets, end of period (000's). $34,590 $30,890 $20,672 $5,440 $32,683 $22,783 $14,273 $8,439
Ratio of operating expenses
to average net assets (C)....... 2.15% 2.15% 1.95% 1.00%(A) 2.15% 2.15% 1.95% 1.00%(A)
Ratio of net investment income
to average net assets........... 6.60% 7.63% 8.10% 8.59%(A) 6.60% 7.63% 8.25% 8.59%(A)
Portfolio turnover rate........... 193% 68% 180% 136% 193% 68% 180% 136%
</TABLE>
- ------------------------------
* Commencement of operations
(A) Annualized
(B) After expense reimbursement and waiver by the adviser of $0.01, $0.01, $0.04
and $0.05 for the Strategic Income Fund - Class B and $0.01, $0.01, $0.05
and $0.04 for the Strategic Income Fund - Class C, for the years ended
October 31, 1997, 1996 and 1995 and the period April 1, 1994 to October 31,
1994, respectively.
(C) The ratio of operating expenses, before reimbursement and waiver by the
adviser, was 2.23%, 2.27%, 2.38% and 2.04% for the Strategic Income Fund -
Class B and 2.24%, 2.28%, 2.37% and 1.96% for the Strategic Income Fund -
Class C, for the years ended October 31, 1997, 1996 and 1995 and the period
April 1, 1994 to October 31, 1994 on an annualized basis, respectively.
(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 accompany 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 - Class A
------------------------------------------------------------------------------------
Years Ended October 31, 05/01/91*
----------------------------------------------------------------------- to
1997 1996 1995 1994 1993 1992 10/31/91
---------- --------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $10.34 $10.56 $9.74 $11.16 $10.56 $10.26 $10.00
Income (loss) from investment operations
- ----------------------------------------
Net investment income (B)............... 0.67 0.66 0.68 0.60 0.66 0.82 0.40
Net realized and unrealized gain (loss)
on investments........................ 0.18 (0.20) 0.82 (1.37) 0.64 0.27 0.30
----- ----- ----- ----- ----- ----- -----
Total from investment
operations.................... 0.85 0.46 1.50 (0.77) 1.30 1.09 0.70
Less distributions
- ------------------
Dividends from net investment income.... (0.67) (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............. (0.67) (0.68) (0.68) (0.65) (0.70) (0.79) (0.44)
----- ----- ----- ----- ----- ----- -----
Net asset value, end of period.......... $10.52 $10.34 $10.56 $9.74 $11.16 $10.56 $10.26
Total return.................... 8.57% 4.52% 15.91% (7.08%) 12.66% 11.00% 7.21%+
Net assets, end of period (000's)....... $7,110 $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% 1.25% 0.98% 0.00% 0.00%(A)
Ratio of net investment income
to average net assets................. 6.54% 6.37% 6.72% 5.86% 5.82% 7.76% 7.08%(A)
Portfolio turnover rate................. 65% 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 $0.04, $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, 1997, 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 1.62%, 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, 1997,
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.
29
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment Quality Bond Fund
----------------------------------------------------------------------------------------
Year Year Year 04/01/94* Year Year Year 04/01/94*
Ended Ended Ended to Ended Ended Ended to
10/31/97 10/31/96 10/31/95 10/31/94 10/31/97 10/31/96 10/31/95 10/31/94
Class B Class B Class B Class B Class C Class C Class C Class C
--------- --------- --------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.33 $10.55 $9.74 $10.21 $10.33 $10.55 $9.74 $10.21
Income (loss) from investment
- ------------------------------
operations
- ----------
Net investment income (B).............. 0.60 0.60 0.61 0.33 0.60 0.60 0.61 0.33
Net realized and unrealized gain (loss)
on investments....................... 0.20 (0.20) 0.82 (0.51) 0.20 (0.20) 0.82 (0.51)
----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations................... 0.80 0.40 1.43 (0.18) 0.80 0.40 1.43 (0.18)
Less distributions
- ------------------
Dividends from net investment income... (0.61) (0.62) (0.62) (0.29) (0.61) (0.62) (0.62) (0.29)
----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period......... $10.52 $10.33 $10.55 $9.74 $10.52 $10.33 $10.55 $9.74
====== ====== ====== ===== ====== ====== ====== =====
Total return................... 8.05% 3.92% 15.12% (7.34%)(D) 8.05% 3.92% 15.12% (7.34%)(D)
Net assets, end of period (000's)...... $4,613 $4,678 $3,472 $489 $6,109 $7,543 $7,206 $2,406
Ratio of operating expenses
to average net assets (C)............ 1.90% 1.90% 1.90% 1.90%(A) 1.90% 1.90% 1.90% 1.90%(A)
Ratio of net investment income
to average net assets................ 5.89% 5.72% 5.95% 5.70%(A) 5.89% 5.72% 6.00% 5.70%(A)
Portfolio turnover rate................ 65% 56% 132% 186% 65% 56% 132% 186%
</TABLE>
- ------------------------------
* Commencement of operations
(A) Annualized
(B) After expense reimbursement by the adviser of $0.04, $0.03, $0.08 and $0.19
per share for the Investment Quality Bond Fund - Class B and $0.04, $0.03,
$0.06 and $0.07 per share for the Investment Quality Bond Fund - Class C,
for the years ended October 31, 1997, 1996 and 1995 and the period April 1,
1994 to October 31, 1994, respectively.
(C) The ratio of operating expenses, before reimbursement by the adviser, was
2.33%, 2.27%, 2.69%, 4.88% and for the Investment Quality Bond Fund - Class
B and 2.29%, 2.22%, 2.50% and 3.05% for the Investment Quality Bond Fund -
Class C, for the years ended October 31, 1997, 1996 and 1995 and the period
April 1, 1994 to October 31, 1994 on an annualized basis, respectively.
(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.
30
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
National Municipal Bond Fund - Class A
----------------------------------------------------------------------------
Years Ended October 31, 07/06/93*
------------------------------------------------------------ to
1997 1996 1995 1994 10/31/93
------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $9.73 $9.62 $8.82 $10.25 $10.00
Income (loss) from investment operations
- ----------------------------------------
Net investment income (B)................... 0.48 0.48 0.51 0.51 0.17
Net realized and unrealized gain (loss)
on investments............................ 0.36 0.11 0.80 (1.43) 0.24
----- ----- ----- ----- -----
Total from investment
operations........................ 0.84 0.59 1.31 (0.92) 0.41
Less distributions
- ------------------
Dividends from net investment income........ (0.48) (0.48) (0.51) (0.51) (0.16)
----- ----- ----- ----- -----
Net asset value, end of period.............. $10.09 $9.73 $9.62 $8.82 $10.25
====== ===== ===== ===== ======
Total return........................ 8.85% 6.31% 15.26% (9.24%) 4.17%+
Net assets, end of period (000's)........... $6,347 $7,710 $7,618 $7,663 $9,131
Ratio of operating expenses
to average net assets (C)................. 0.99% 0.99% 0.80% 0.57% 0.23%(A)
Ratio of net investment income
to average net assets..................... 4.87% 4.99% 5.55% 5.28% 4.86%(A)
Portfolio turnover rate..................... 29% 49% 44% 6% 150%(A)
</TABLE>
- ------------------------------
* Commencement of operations
+ Non-annualized
(A) Annualized
(B) After expense reimbursement and waiver by the adviser of $0.02, $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, 1997, 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 1.23%, 1.25%, 1.34%, 1.26% and 1.10% for the National Municipal
Bond Fund - Class A for the years ended October 31, 1997, 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.
31
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
National Municipal Bond Fund
----------------------------------------------------------------------------------------
Year Year Year 04/01/94* Year Year Year 04/01/94*
Ended Ended Ended to Ended Ended Ended to
10/31/97 10/31/96 10/31/95 10/31/94 10/31/97 10/31/96 10/31/95 10/31/94
Class B Class B Class B Class B Class C Class C Class C Class C
--------- --------- --------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................ $9.73 $9.62 $8.81 $9.30 $9.73 $9.62 $8.81 $9.30
Income (loss) from investment
- -----------------------------
operations
----------
Net investment income (B)....... 0.40 0.40 0.43 0.25 0.40 0.40 0.43 0.25
Net realized and unrealized gain (loss)
on investments................ 0.36 0.11 0.81 (0.49) 0.36 0.11 0.81 (0.49)
----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations............ 0.76 0.51 1.24 (0.24) 0.76 0.51 1.24 (0.24)
Less distributions
Dividends from net investment
income........................ (0.40) (0.40) (0.43) (0.25) (0.40) (0.40) (0.43) (0.25)
----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period.. $10.09 $9.73 $9.62 $8.81 $10.09 $9.73 $9.62 $8.81
====== ===== ===== ===== ====== ===== ===== =====
Total return............ 7.94% 5.41% 14.42% (9.71%)(D) 7.94% 5.41% 14.42% (9.71%)(D)
Net assets, end of period (000's) $6,532 $6,130 $5,876 $2,036 $5,305 $5,693 $6,834 $1,911
Ratio of operating expenses
to average net assets (C)..... 1.84% 1.84% 1.70% 1.24%(A) 1.84% 1.84% 1.70% 1.24%(A)
Ratio of net investment income
to average net assets......... 4.02% 4.14% 4.59% 4.62%(A) 4.02% 4.14% 4.53% 4.62%(A)
Portfolio turnover rate......... 29% 49% 44% 6% 29% 49% 44% 6%
</TABLE>
- ------------------------------
* Commencement of operations
(A) Annualized
(B) After expense reimbursement and waiver by the adviser of $0.03, $0.03, $0.07
and $0.09 per share for the National Municipal Bond Fund - Class B and
$0.03, $0.04, $0.09 and $0.09 per share for the National Municipal Bond Fund
- Class C, for the years ended October 31, 1997, 1996 and 1995 and the
period April 1, 1994 to October 31, 1994, respectively.
(C) The ratio of operating expenses, before reimbursement and waiver by the
adviser, was 2.15%, 2.11%, 2.41% and 2.81% for the National Municipal Bond
Fund - Class B and 2.15%, 2.25%, 2.63% and 2.78% for the National Municipal
Bond Fund - Class C, for the ended October 31, 1997, 1996 and 1995 and the
period April 1, 1994 to October 31, 1994 on an annualized basis,
respectively.
(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.
32
<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, 08/28/89*
---------------------------------------------------------------------------------- to
1997 1996** 1995 1994 1993 1992 1991 1990 10/31/89
----------- --------- -------- -------- -------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.80 $9.98 $9.45 $10.35 $10.04 $ 9.89 $ 9.47 $ 9.74 $ 9.73
Income (loss) from investment
- -----------------------------
operations
----------
Net investment income (B)........... 0.59 0.56 0.63 0.53 0.51 0.74 0.84 0.75 0.15
Net realized and unrealized
gain (loss) on investments......... 0.13 (0.12) 0.57 (0.74) 0.34 0.13 0.42 (0.20) 0.01
----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations................ 0.72 0.44 1.20 (0.21) 0.85 0.87 1.26 0.55 0.16
Less distributions
Dividends from net investment income (0.58) (0.56) (0.67) (0.50) (0.50) (0.72) (0.84) (0.75) (0.15)
Dividends in excess of net
investment income.................. ------ (0.06) ------ ------ ------ ------ ------ ------ ------
Distributions from capital gains.... ------ ------ ------ (0.19) (0.04) ------ ------ ------ ------
Distributions from capital.......... ------ ------ ------ ------ ------ ------ ------ (0.07) ------
------- ------- ------- ------- ------- ------- ------- ----- -------
Total distributions......... (0.58) (0.62) (0.67) (0.69) (0.54) (0.72) (0.84) (0.82) (0.15)
----- ------ ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period...... $9.94 $9.80 $9.98 $9.45 $10.35 $10.04 $9.89 $9.47 $9.74
===== ===== ===== ===== ====== ====== ===== ===== =====
Total return................ 7.56% 4.64% 13.15% (2.13%) 8.64% 9.15% 13.86% 5.90% 1.66%+
Net assets, end of period (000's)... $53,235 $72,774 $81,179 $100,622 $163,296 $118,543 $45,662 $43,299 $56,069
Ratio of operating expenses
to average net assets (C)......... 1.25% 1.25% 1.25% 1.25% 1.07% 0.24% 0.68% 2.28% 2.18%(A)
Ratio of net investment income
to average net assets............. 6.20% 5.71% 6.54% 5.39% 4.97% 7.21% 8.65% 7.89% 8.54%(A)
Portfolio turnover rate............. 364% 477% 469% 279% 208% 108% 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, $0.02, $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, 1997,
1996, 1995, 1994, 1993, 1992, 1991 and 1990, respectively.
(C) The ratio of operating expenses, before reimbursement and waiver by the
adviser, was 1.42%, 1.41%, 1.45%, 1.47%, 1.42%, 2.13%, 2.61% and 2.57% for
the years ended October 31, 1997, 1996, 1995, 1994, 1993, 1992, 1991 and
1990, respectively.
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>
U.S. Government Securities Fund
----------------------------------------------------------------------------------------
Year Year Year 04/01/94* Year Year Year 04/01/94*
Ended Ended Ended to Ended Ended Ended to
10/31/97 10/31/96** 10/31/95 10/31/94 10/31/97** 10/31/96 10/31/95 10/31/94
Class B Class B Class B Class B Class C Class C Class C Class C
--------- --------- --------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.80 $9.98 $9.45 $9.77 $9.80 $9.98 $9.45 $9.77
Income (loss) from investment
- ------------------------------
operations
- ----------
Net investment income (B)............. 0.54 0.50 0.56 0.29 0.54 0.50 0.56 0.26
Net realized and unrealized gain
(loss) on investments............... 0.11 (0.12) 0.58 (0.35) 0.11 (0.12) 0.58 (0.32)
----- ----- ----- ----- ------ ----- ----- -----
Total from investment
operations.................. 0.65 0.38 1.14 (0.06) 0.65 0.38 1.14 (0.06)
Less distributions
- ------------------
Dividends from net investment income.. (0.51) (0.50) (0.61) (0.26) (0.51) (0.50) (0.61) (0.26)
Dividends in excess of net
investment income................... ---- (0.06) ---- ---- ----- (0.06) ---- ----
----- ----- ------ ----- ------ ----- ----- -----
Total distributions........... (0.51) (0.56) (0.61) (0.26) (0.51) (0.56) (0.61) (0.26)
----- ----- ------ ----- ------ ----- ----- -----
Net asset value, end of period........ $9.94 $9.80 $9.98 $9.45 $9.94 $9.80 $9.98 $9.45
===== ===== ===== ===== ------ ===== ===== =====
Total return.................. 6.84% 3.97% 12.45% (2.44%)(D) 6.84% 3.97% 12.45% (2.44%)(D)
Net assets, end of period (000's)..... $16,659 $19,444 $13,993 $2,746 $14,716 $20,009 $20,186 $10,766
Ratio of operating expenses
to average net assets (C)........... 1.90% 1.90% 1.90% 1.90%(A) 1.90% 1.90% 1.90% 1.90%(A)
Ratio of net investment income
to average net assets............... 5.55% 5.06% 5.53% 5.06%(A) 5.55% 5.06% 5.74% 5.06%(A)
Portfolio turnover rate............... 364% 477% 469% 279% 364% 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, $0.02, $0.04 and $0.08
per share for the U.S. Government Securities Fund - Class B and $0.02,
$0.02, $0.03 and $0.03 per share for the U.S. Government Securities Fund -
Class C, for the years ended October 31, 1997, 1996 and 1995 and the period
April 1, 1994 to October 31, 1994, respectively.
(C) The ratio of operating expenses, before reimbursement by the adviser, was
2.09%, 2.06%, 2.28% and 3.40% for the U.S. Government Securities Fund -
Class B and 2.09%, 2.06%, 2.15% and 2.44% for the U.S. Government Securities
Fund - Class C, for the years ended October 31, 1997, 1996 and 1995 and the
period April 1, 1994 to October 31, 1994 on an annualized basis,
respectively.
(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.
34
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Money Market Fund - Class A
---------------------------------------------------------------------------------------------
Years Ended October 31, 08/28/89*
----------------------------------------------------------------------------------- to
1997 1996 1995 1994 1993 1992 1991 1990 10/31/89
---------- --------- --------- -------- --------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period......................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations
- ---------------------------------
Net investment income (B)........... 0.05 0.05 0.05 0.03 0.03 0.04 0.06 0.06 0.01
Less distributions
- ------------------
Dividends from net investment
income............................ (0.05) (0.05) (0.05) (0.03) (0.03) (0.04) (0.06) (0.06) (0.01)
---- ---- ---- ---- ---- ---- ---- ---- ----
Net asset value, end of period...... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== ===== ===== ===== =====
Total return................ 5.13% 5.16% 5.60% 3.48% 2.80% 3.69% 6.22% 5.76% 0.53%+
Net assets, end of period (000's)... $11,057 $8,087 $11,379 $8,499 $18,109 $2,244 $3,421 $4,526 $7,781
Ratio of operating expenses
to average net assets (C)......... 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 1.00% 2.45% 1.96%(A)
Ratio of net investment income
to average net assets............. 5.02% 5.02% 5.45% 3.40% 2.75% 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 $0.005, $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, 1997, 1996,
1995, 1994, 1993, 1992, 1991 and 1990, respectively.
(C) The ratio of operating expenses, before reimbursement and waiver by the
adviser, was 0.96%, 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, 1997, 1996,
1995, 1994, 1993, 1992, 1991 and 1990, respectively.
The accompanying notes are an integral part of the financial statements.
35
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Money Market Fund
----------------------------------------------------------------------------------------
Year Year Year 04/01/94* Year Year Year 04/01/94*
Ended Ended Ended to Ended Ended Ended to
10/31/97 10/31/96 10/31/95 10/31/94 10/31/97 10/31/96 10/31/95 10/31/94
Class B Class B Class B Class B Class C Class C Class C Class C
--------- --------- --------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period.......................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations
- ---------------------------------
Net investment income (B)............ 0.05 0.05 0.05 0.02 0.05 0.05 0.05 0.02
Less distributions
- ------------------
Dividends from net investment
income............................. (0.05) (0.05) (0.05) (0.02) (0.05) (0.05) (0.05) (0.02)
---- ---- ---- ---- ---- ---- ---- ----
Net asset value, end of period....... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== ===== ===== =====
Total return................. 5.13% 5.16% 5.60% 3.48%(D) 5.13% 5.16% 5.60% 3.48%(D)
Net assets, end of period (000's).... $3,332 $3,062 $1,564 $312 $7,539 $9,840 $9,394 $12,170
Ratio of operating expenses
to average net assets (C).......... 0.50% 0.50% 0.50% 0.50%(A) 0.50% 0.50% 0.50% 0.50%(A)
Ratio of net investment income
to average net assets.............. 5.02% 5.02% 5.52% 3.96%(A) 5.01% 5.02% 5.46% 3.96%(A)
</TABLE>
- ------------------------------
* Commencement of operations
(A) Annualized
(B) After expense reimbursement by the adviser of $0.005, $0.007, $0.009 and
$0.0228 per share for the Money Market Fund - Class B and $0.005, $0.005,
$0.005 and $0.0037 per share for the Money Market Fund - Class C, for the
years ended October 31, 1997, 1996 and 1995 and the period April 1, 1994 to
October 31, 1994, respectively.
(C) The ratio of operating expenses, before reimbursement by the adviser, was
1.05%, 1.18%, 1.41% and 4.83% for the Money Market Fund - Class B and 1.00%,
0.98%, 0.95% and 1.18% for the Money Market Fund - Class C, for the years
ended October 31, 1997, 1996 and 1995 and the period April 1, 1994 to
October 31, 1994 on an annualized basis, respectively.
(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.
36
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1997
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
International Small Cap Fund
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
COMMON STOCKS - 70.87%
Agricultural Machinery - 0.58%
Kverneland AS 5,500 $102,474
-------
Agricultural Products - 0.79%
Perusahaan Perkebunan 131,400 141,241
-------
Air Travel - 0.71%
Ryanair Holdings PLC, ADR 5,075 126,875
-------
Apparel & Textiles - 0.32%
CSP International Industria Calze SPA 5,250 57,834
Auto Service - 0.28%
Sixt AG 575 50,035
------
Banking - 1.56%
Banco de A. Edwards, ADR 6,475 112,503
Banco Latinoamericano
de Exportaciones SA 4,150 164,962
-------
277,465
Broadcasting - 0.31%
Editoriale L'Espresso SPA 12,000 55,641
------
Business Services - 4.22%
Altran Technologies SA 975 260,304
Brunel International* 2,225 46,987
Kobenhavns Lufthavne 2,900 347,345
Select Appointments Holdings PLC 10,450 95,903
-------
750,539
Computers & Business Equipment - 3.27%
Enator AB* 4,000 63,552
Fuji Software ABC, Incorporated 2,600 89,655
Net One Systems Company, Ltd. 20 108,517
Psion PLC 42,450 320,492
-------
582,216
Conglomerates - 1.76%
Misys 12,407 313,024
-------
Containers & Glass - 2.97%
Compania Cervecerias Unidas SA, ADR 7,975 194,391
International Container Terminal
& Services* 71,925 14,202
SCHMALBACH LUBECA AG 1,725 320,223
-------
528,816
Drugs & Health Care - 1.51%
Schwarz Pharma AG 3,800 268,941
-------
Electronics - 2.05%
Elec & Eltek International
Holdings, Ltd. 240,000 88,469
Toolex-Alpha NV* 4,200 49,755
VTech Holdings, Ltd. 115,800 226,163
-------
364,387
Financial Services - 2.57%
JBA Holdings PLC 28,800 $456,617
-------
Food & Beverages - 2.02%
Raisio Tehtaat Oy PLC 3,325 359,928
-------
Homebuilders - 1.09%
IHC Caland NV 3,150 193,721
-------
Hotels & Restaurants - 8.77%
Doutor Coffee 5,000 137,100
Company
Grupo Posadas SA 200,000 119,261
J.D. Wetherspoon PLC 16,633 452,078
Pizza Express 32,450 407,234
Regent Inns PLC 24,525 117,268
Tele Pizza* 4,775 327,918
----------
1,560,859
Household Appliances Furnishing - 3.73%
DFS Furniture 22,250 202,142
Company
Hunter Douglas 6,950 286,376
Industrie Natuzzi SPA, ADR* 7,850 175,644
-------
664,162
Industrial Machinery - 3.79%
KCI Konecranes International PLC 5,125 193,181
Noritsu Koki Company 6,200 206,066
Tomra Systems AS 10,650 274,744
-------
673,991
International Oil - 4.92%
British-Borneo Petroleum 54,566 437,600
Syndicate PLC
Cairn Energy PLC* 36,150 269,896
Gulf Canada Resources, Ltd. 14,275 119,553
Gulf Indonesia Resources, Ltd. 2,300 48,300
-------
875,349
Leisure Time - 4.89%
AAPC, Ltd. 131,759 46,330
Capital Radio 24,475 194,228
Cinar Films, Incorporated, Class B* 5,825 226,447
Flextech PLC* 30,500 299,353
Village Roadshow 41,500 104,774
-------
871,132
Miscellaneous - 3.17%
BTG PLC* 8,850 100,225
S.T. Dupont* 3,100 52,345
PT Daya Guna Samudera 26,500 34,182
Plettac AG 240 43,578
Rofin-Sinar Technologies, Incorporated* 24,125 334,734
-------
565,064
Office Furnishings & Supplies - 0.88%
Turbon International AG 5,650 157,327
-------
Paper - 1.08%
Guilbert SA 1,475 192,550
-------
Petroleum Services - 2.77%
Coflexip SA, ADR 3,525 $193,875
</TABLE>
The accoompanying notes are an integral part of the financial statements.
37
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1997 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Fred Olsen Energy ASA* 2,300 58,016
Petroleum Geological Services AS, ADR* 3,475 240,644
-------
492,535
Retail Trade - 2.00%
Beter Bed Holdings NV 2,050 44,664
Bulgari SPA 41,000 222,800
Douglas Holdings AG 2,500 89,192
-------
356,656
Software - 1.93%
Dassault Systems SA 7,300 218,940
Nippon System Development 5,000 124,636
-------
343,576
Telecommunication Services - 2.25%
Asia Satellite Telecommunications
Holdings, ADR 6,725 157,197
Grupo Iusacell SA, ADR* 13,500 243,000
-------
400,197
Telephone - 2.84%
Cellular Communications International* 8,200 328,000
Netcom Systems AB, Class B* 10,550 176,775
-------
504,775
Toys, Amusements & Sporting Goods - 0.91%
Salomon SA 1,825 162,624
-------
Transportation - 0.93%
Tranz Rail Holdings, Ltd., ADR 12,200 164,700
-------
TOTAL COMMON STOCKS
(Cost $11,495,162) $12,615,251
----------
PREFERRED STOCKS - 3.74%
Automobiles - 1.82%
Porsche AG 220 323,529
-------
Financial Services - 1.92%
Marschollek, Lautenschlaeger und
Partner AG 1,490 341,426
-------
TOTAL PREFERRED STOCKS
(Cost $486,141) $664,955
-------
WARRANTS - 0.02%
Gold Peak Industries (Expiration
date 08/06/00; strike price HKD 5.25)* 36,000 3,073
-----
TOTAL WARRANTS (Cost $0) $3,073
-----
<CAPTION>
Principal
Amount Value
------ -----
<S> <C>
SHORT TERM INVESTMENT - 4.64%
$825,701 Navigator Securities Lending Trust $825,701
-------
<CAPTION>
Principal
Amount Value
------ -----
<S> <C>
REPURCHASE AGREEMENT - 20.74%
$3,692,000 Repurchase Agreement with State
Street Bank & Trust Company dated
10/31/97 at 5.00%, to be repurchased
at $3,693,538 on 11/03/97,
collateralized by $3,615,000 U.S.
Treasury Notes, 6.625% due 07/31/01
(valued at $3,830,206, including
interest) $3,692,000
---------
TOTAL INVESTMENTS (International
Small Cap Fund) (Cost $16,499,004) $17,800,980
==========
<CAPTION>
Small/Mid Cap Fund
Shares Value
------ -----
<S> <C> <C>
COMMON STOCKS - 75.16%
Aerospace - 1.87%
BE Aerospace, Incorporated* 9,000 $253,125
Gulfstream Aerospace Corporation* 15,900 461,100
-------
714,225
Air Travel - 2.16%
AMR Corporation* 4,100 477,394
Continental Airlines, Incorporated* 8,000 346,000
-------
823,394
Apparel & Textiles - 2.04%
G & K Services, Class A 3,000 108,000
Nautica Enterprises, Incorporated* 5,300 141,113
Tommy Hilfiger Corporation* 13,400 530,137
-------
779,250
Banking - 0.37%
Star Banc Corporation 2,900 142,281
-------
Business Services - 4.54%
America Online, Incorporated* 1,800 138,600
CUC International, Incorporated* 18,500 545,750
HBO & Company 12,600 548,100
Paychex, Incorporated 8,600 327,875
Systems & Computer Technology* 4,000 172,500
---------
1,732,825
Computers & Business Equipment - 3.30%
Bay Networks, Incorporated* 8,000 253,000
Cisco Systems, Incorporated* 3,900 319,922
Citrix System, Incorporated* 2,000 146,875
E*Trade Group, Incorporated* 8,700 268,612
Sundstrand Corporation 5,000 271,875
---------
1,260,284
Drugs & Health Care - 16.25%
AmeriSource Health Corporation,
Class A* 10,400 617,500
Bergen Brunswig Corporation, Class A 10,000 400,625
BioChem Pharma, Incorporated* 18,400 461,150
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Drugs & Health Care - continued
Biomatrix, Incorporated* 5,000 $173,125
Biomet, Incorporated 12,400 309,225
Cardinal Health, Incorporated 9,100 675,675
Elan Corporation PLC, ADR* 9,000 448,875
General Nutrition Companies,
Incorporated* 27,600 869,400
</TABLE>
The accompanying notes are an integralpart of the financial statements.
38
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1997 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Guidant Corporation 8,300 477,250
McKesson Corporation 5,100 547,294
Mentor Corporation 3,400 123,887
Omnicare, Incorporated 10,000 278,125
Phycor, Incorporated* 7,900 182,194
Quorum Health Group, Incorporated* 26,250 636,562
---------
6,200,887
Electronics - 12.06%
Adaptec, Incorporated* 3,200 155,000
Advanced Fibre Communications* 5,000 145,313
Altera Corporation* 19,200 852,000
CIENA Corporation* 8,400 462,000
Electronics For Imaging, Incorporated* 13,600 635,800
Linear Technology Corporation 14,000 880,250
Maxim Integrated Products, Incorporated* 9,000 596,250
Tellabs, Incorporated* 5,700 307,800
Teradyne, Incorporated* 8,300 310,731
Texas Instruments, Incorporated 2,400 256,050
---------
4,601,194
Financial Services - 3.89%
INMC Mortgage Holdings, Incorporated 10,200 242,250
Money Store, Incorporated 28,200 800,175
Paine Webber Group, Incorporated 6,600 291,637
Sovereign Bancorp, Incorporated 8,500 150,875
---------
1,484,937
Hotels & Restaurants - 0.67%
Mirage Resorts, Incorporated* 10,200 255,000
-------
Household Appliances Furnishing - 2.83%
Newell Company 3,200 122,800
Sunbeam Corporation 21,100 956,094
---------
1,078,894
Industrial Machinery - 1.67%
Applied Materials, Incorporated* 4,200 140,175
Tyco International, Ltd. 13,116 495,129
-------
635,304
Insurance - 2.65%
MGIC Investment Corporation 12,000 723,750
SunAmerica, Incorporated 7,950 285,703
---------
1,009,453
Leisure Time - 3.50%
Carnival Corporation 6,500 315,250
Coach USA, Incorporated* 3,800 113,050
International Game Technology 35,500 907,469
---------
1,335,769
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Metal & Metal Products - 0.37%
Titanium Metals Corporation* 4,500 $140,625
--------
Miscellaneous - 0.30%
Fortune Brands, Incorporated 3,500 115,719
-------
Petroleum Services - 7.29%
Diamond Offshore Drilling, Incorporated 8,300 516,675
EVI, Incorporated* 3,200 205,400
Global Industries, Incorporated* 11,400 229,425
Global Marine, Incorporated* 8,000 249,000
Halliburton Company 6,400 381,600
Nabors Industries, Incorporated* 14,600 600,425
Santa Fe International Corporation 7,500 368,906
Smith International, Incorporated* 3,000 228,750
---------
2,780,181
Pollution Control - 1.81%
Allied Waste Industries, Incorporated* 13,100 266,912
USA Waste Services, Incorporated* 11,475 424,575
-------
691,487
Real Estate - 0.63%
Boston Properties, Incorporated* 7,500 240,000
-------
Retail Trade - 4.35%
BJ's Wholesale Club, Incorporated* 5,000 144,375
Bed Bath & Beyond, Incorporated* 5,000 158,750
Borders Group, Incorporated* 19,400 503,188
CompUSA, Incorporated* 17,000 556,750
Staples, Incorporated* 5,600 147,000
TJX Companies, Incorporated* 5,000 148,125
---------
1,658,188
Software -1.96%
Parametric Technology Corporation* 11,900 525,088
Sterling Commerce, Incorporated* 6,700 222,356
-------
747,444
Tires & Rubber - 0.65%
Safeskin Corporation* 5,500 249,563
-------
TOTAL COMMON STOCKS
(Cost $24,608,659) $28,676,904
----------
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
SHORT TERM INVESTMENTS - 24.84%
Fingerhut Owner Trust,
5.62% due 11/07/97 $500,000 $499,532
Navigator Securities Lending Trust 8,269,878 8,269,878
Sony Capital Corporation,
5.62% due 11/07/97 500,000 499,531
SSGA Money Market Fund 209,189 209,189
--------
9,478,130
TOTAL INVESTMENTS
(Small/Mid Cap Fund) (Cost $34,086,789) $38,155,034
==========
<CAPTION>
Global Equity Fund
Shares Value
------ -----
<S> <C> <C>
COMMON STOCKS - 93.67%
Aluminum - 1.11%
Aluminum Company of America 19,800 $1,445,400
---------
Auto Parts - 1.28%
Borg-Warner Automotive, Incorporated 30,500 1,662,250
---------
Automobiles - 1.26%
Volkswagen AG 2,770 1,637,446
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
39
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1997 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Banking - 7.77%
ABN AMRO Holdings NV 84,400 1,699,737
Bank of Ireland 95,500 1,209,700
Banque Nationale de Paris 31,565 1,395,410
First Chicago NBD Corporation 25,900 1,884,225
Jardine Strategic Holdings, Ltd. 549,000 1,756,800
Mellon Bank Corporation 39,400 2,031,562
Nordbanken AB 3,300 103,539
----------
10,080,973
Broadcasting - 0.61%
Mediaset 174,300 790,682
-------
Business Services - 0.78%
Intelidata Technologies Corporation* 119,200 402,300
NCR Corporation* 20,050 607,766
---------
1,010,066
Chemicals - 6.10%
Akzo Nobel NV, ADS 8,100 1,427,253
BASF AG 38,600 1,309,955
Bayer AG 57,000 2,000,522
B.F. Goodrich Company 22,550 1,004,884
Potash Corporation of Saskatchewan,
Incorporated 26,700 2,179,611
---------
7,922,225
Computers & Business Equipment - 0.93%
Data General Corporation* 62,700 1,206,975
---------
Conglomerates - 0.92%
CSR, Ltd. 344,000 1,195,317
---------
Construction & Mining Equipment - 0.01%
Greenfield Industries, Incorporated 400 15,150
------
Construction Materials - 1.08%
Cimpor-Cimentos de Portugal SA 4,500 114,413
Holderbank Financier Glarus AG 1,600 1,287,770
---------
1,402,183
Containers & Glass - 0.48%
Toyo Seikan Kaisha 39,600 621,886
-------
Crude Petroleum & Natural Gas - 1.87%
Elf Aquitaine 15,000 1,856,716
United Meridian Corporation* 16,750 568,453
---------
2,425,169
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Domestic Oil - 0.72%
Tenneco, Incorporated 20,690 $929,757
-------
Drugs & Health Care - 2.00%
Fujisawa Pharmaceutical Company, Ltd. 46,000 389,863
Pharmacia & Upjohn, Incorporated 69,400 2,203,450
---------
2,593,313
Electric Utilities - 2.56%
Iberdrola SA 97,500 1,166,220
Southern Electric PLC 102,107 786,313
VEBA AG 24,500 1,365,849
---------
3,318,382
Electrical Equipment - 1.16%
General Signal Corporation 14,400 577,800
Hitachi, Ltd. 121,000 929,996
---------
1,507,796
Electronics - 4.67%
Ascom Holdings AG* 560 731,869
GenRad, Incorporated* 60,000 1,770,000
Premier Farnell PLC, ADS 76,700 591,944
Racal Electronics 139,285 518,782
SGS Thomson Microelectronics,
Incorporated* 12,200 868,218
TDK Corporation 19,000 1,575,571
---------
6,056,384
Financial Services - 6.71%
Enhance Financial Services Group,
Incorporated 22,450 1,185,641
Internationale Nederlanden Groep NV 57,000 2,392,738
PennCorp Financial Group,
Incorporated 74,900 2,438,931
UST Corporation 104,000 2,691,000
---------
8,708,310
Food & Beverages - 8.27%
Bass, ADS 73,300 1,018,267
Danone 4,000 611,624
IBP, Incorporated 24,600 570,412
Kao Corporation 108,000 1,507,603
Lion Nathan, Ltd. 242,200 585,126
Nestle SA 1,600 2,254,455
Reckitt & Colman PLC 200,897 3,082,369
Tate & Lyle PLC 145,846 1,106,014
----------
10,735,870
Household Appliances Furnishing - 2.18%
HomeBase, Incorporated* 82,500 757,969
Matsushita Electric Industrial
Company, Ltd. 72,000 1,208,475
Philips Electronics NV 11,000 861,190
---------
2,827,634
Household Products - 2.33%
Unilever PLC 405,200 3,018,422
---------
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Industrial Machinery - 2.26%
Bobst AG 400 $622,746
Schindler Holding AG 600 662,025
Sumitomo Rubber Industries 80,000 453,344
Tecumseh Products Company 21,600 1,120,500
United Dominion Industries, Ltd. 2,900 75,762
---------
2,934,377
Insurance - 9.10%
Irish Life PLC 644,742 3,393,695
MBIA, Incorporated 41,000 2,449,750
Royal & Sun Alliance Insurance
Group PLC 155,000 1,486,194
SCOR, ADS 16,550 768,646
Sumitomo Marine & Fire 148,000 986,257
</TABLE>
The accompanying notes are an integral part of the financial statements.
40
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1997 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Terra Nova Bermuda Holdings, Ltd. 48,100 1,244,587
WPP Group PLC, ADR 325,000 1,483,132
----------
11,812,261
Investment Companies - 0.01%
India Gateway Fund 1,480 6,690
-----
Leisure Time - 0.38%
Ascent Entertainment Group,
Incorporated* 50,590 499,576
-------
Mining - 0.31%
English China Clay 90,800 398,369
-------
Miscellaneous - 0.58%
Clondalkin Group PLC 85,700 747,673
-------
Paper - 1.38%
Boise Cascade Corporation 51,600 1,786,650
---------
Petroleum Services - 0.20%
Burmah Castrol PLC 5,000 85,985
Noble Drilling Corporation* 5,050 179,590
-------
265,575
Photography - 2.15%
Fuji Photo Film Company 77,000 2,789,530
---------
Pollution Control - 0.72%
Browning-Ferris Industries,
Incorporated 28,678 932,035
-------
Publishing - 2.82%
Houghton Mifflin Company 103,200 3,663,600
---------
Retail Grocery - 1.04%
Albertsons, Incorporated 36,600 1,349,625
---------
Retail Trade - 5.87%
BJ's Wholesale Club, Incorporated* 82,500 2,382,187
Coles Myer, Ltd. 239,011 1,149,698
Delhaize-Le Lion SA 21,100 1,001,225
G.I.B. Holdings, Ltd. 14,100 714,728
Karstadt AG 4,500 1,566,307
Toys R Us, Incorporated* 23,800 810,688
---------
7,624,833
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Steel - 0.30%
NKK Corporation 283,000 $392,696
-------
Telecommunication Services - 2.12%
Comsat Corporation 103,920 2,377,170
France Telecom, ADS* 9,900 374,669
---------
2,751,839
Telephone - 4.93%
American Telephone & Telegraph
Corporation 30,400 1,487,700
MCI Communications Corporation 11,200 397,600
Telecom Italia SPA* 564,000 2,278,653
Telefonica de Espana SA 62,700 1,711,136
Telus Corporation 26,250 524,311
---------
6,399,400
Tobacco - 3.58%
B.A.T. Industries PLC 87,344 $764,214
Imperial Tobacco, Ltd. 77,500 478,495
Philip Morris Companies, Incorporated 85,800 3,399,825
---------
4,642,534
Trucking & Freight - 1.15%
Peninsular & Oriental Steam
Navigation Company 129,296 1,496,793
---------
TOTAL COMMON STOCKS
(Cost $103,745,670) $121,605,646
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<C> <S> <C>
SHORT TERM INVESTMENT - 4.20%
$5,455,720 Navigator Securities Lending Trust $5,455,720
---------
REPURCHASE AGREEMENT - 2.13%
$2,760,000 Repurchase Agreement with State
Street Bank & Trust Company dated
10/31/97 at 5.00%, to be repurchased
at $2,761,150 on 11/03/97,
collateralized by $2,700,000 U.S.
Treasury Notes, 6.625% due 07/31/01
(valued at $2,860,735, including
interest) $2,760,000
---------
TOTAL INVESTMENTS
(Global Equity Fund) (Cost $111,961,390) $129,821,366
===========
</TABLE>
Growth Equity Fund
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
COMMON STOCKS - 71.70%
Aerospace - 0.34%
Gulfstream Aerospace Corporation* 3,750 $108,750
-------
Air Travel - 1.53%
Lufthansa AG* 14,200 247,952
Southwest Airlines Company 7,275 237,347
-------
485,299
Automobiles - 1.17%
Ford Motor Company 8,500 371,344
-------
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Banking - 2.32%
BankAmerica Corporation 4,750 $339,625
The Chase Manhattan Corporation 2,150 248,056
Mellon Bank Corporation 2,900 149,531
-------
737,212
Business Services - 2.50%
Cognizant Corporation 4,150 162,628
Fiserv, Incorporated* 7,800 349,050
Nokia Corporation, ADR 3,175 280,194
-------
791,872
Chemicals - 0.39%
Imperial Chemical Industries PLC, ADR 2,075 124,241
-------
Computers & Business Equipment - 5.81%
3Com Corporation* 6,000 248,625
Bay Networks, Incorporated* 5,450 172,356
FORE Systems* 5,900 95,875
</TABLE>
The accompanying notes are an integral part of the financial statements.
41
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1997 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Hewlett-Packard Company 12,475 769,552
Oce-Van Der Grinten NV 1,550 176,835
Xerox Corporation 4,800 380,700
----------
1,843,943
Drugs & Health Care - 9.53%
ALZA Corporation* 6,300 164,194
American Home Products Corporation 4,200 311,325
Bristol-Myers Squibb Company 4,800 421,200
Dura Pharmaceuticals, Incorporated* 2,550 123,356
HEALTHSOUTH Corporation* 8,850 226,228
Eli Lilly and Company 3,400 227,375
Merck & Company, Incorporated 3,250 290,062
Novartis AG 200 313,230
Pfizer, Incorporated 3,475 245,856
SmithKline Beecham PLC, ADR 5,550 264,319
Stryker Corporation 5,425 201,742
Wellpoint Health Networks, Incorporated* 5,125 234,469
-------
3,023,356
Electrical Equipment - 3.71%
General Electric Company 8,100 522,956
Philips Electronics NV, ADR 4,550 356,606
Westinghouse Electric Corporation 11,200 296,100
---------
1,175,662
Electronics - 7.16%
Adaptec, Incorporated* 5,725 277,305
Altera Corporation* 9,000 399,375
CIENA Corporation* 5,000 275,000
L.M. Ericsson Telephone Company, ADR 7,450 329,663
Lam Research Corporation* 2,800 101,150
Maxim Integrated Products, Incorporated* 4,700 311,375
National Semiconductor Corporation* 7,375 265,500
Raytheon Company 900 48,825
Tellabs, Incorporated* 4,900 264,600
---------
2,272,793
Financial Services - 5.32%
H.F. Ahmanson & Company 4,650 274,350
Associates First Capital Corporation 4,700 299,037
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Financial Services - continued
Beneficial Corporation 800 $61,350
Federal National Mortgage Association 4,925 238,555
SLM Holdings Corporation 2,975 417,616
Washington Mutual, Incorporated 5,822 398,443
---------
1,689,351
Food & Beverages - 2.99%
PepsiCo, Incorporated 7,800 287,138
Coca-Cola Enterprises, Incorporated 12,600 354,375
Sara Lee Corporation 6,000 306,750
-------
948,263
Forest Products - 0.48%
Georgia-Pacific Corporation 1,800 152,663
-------
Gas & Pipeline Utilities - 1.40%
BJ Services Company* 2,800 237,300
Cooper Cameron Corporation* 1,150 83,087
Talisman Energy, Incorporated* 3,400 122,312
-------
442,699
Hotels & Restaurants - 0.12%
Mirage Resorts, Incorporated* 1,550 38,750
------
Household Appliances Furnishing - 2.98%
Hunter Douglas NV 2,525 104,043
Maytag Corporation 11,700 390,488
Sunbeam Corporation 9,950 450,859
-------
945,390
Household Products - 2.62%
Clorox Company 3,050 213,500
Dial Corporation 11,800 199,125
Gillette Company 2,000 178,125
Procter & Gamble Company 3,550 241,400
-------
832,150
Industrial Machinery - 0.43%
Crane Company 3,250 135,078
-------
Insurance - 3.05%
Allstate Corporation 3,150 261,253
Everest Reinsurance Holdings 4,975 187,184
Hartford Financial Services Group 2,900 234,900
Marsh & McLennan Companies, Incorporated 2,100 149,100
The Progressive Corporation 1,300 135,525
-------
967,962
Leisure Time - 1.23%
Galileo International, Incorporated* 10,275 258,159
The Walt Disney Company 1,600 131,600
-------
389,759
Paper - 3.30%
Bowater, Incorporated 1,200 50,175
Champion International Corporation 2,450 135,209
Fort James Corporation 5,550 220,266
International Paper Company 5,600 252,000
Mead Corporation 3,550 214,775
Union Camp Corporation 3,250 176,109
---------
1,048,534
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Petroleum Services - 3.71%
Baker Hughes, Incorporated 6,150 $282,515
Nabors Industries, Incorporated* 8,325 342,366
Reading & Bates Corporation* 4,650 197,044
Schlumberger, Ltd. 4,050 354,375
---------
1,176,300
Pollution Control - 0.28%
Allied Waste Industries, Incorporated* 4,425 90,159
------
Retail Trade - 2.48%
Dayton Hudson Corporation 5,000 314,063
Lowes Companies, Incorporated 5,550 231,019
Toys R Us, Incorporated* 7,100 241,844
-------
786,926
Software - 2.22%
Microsoft Corporation* 1,825 237,250
Oracle Systems Corporation* 5,300 189,641
PeopleSoft, Incorporated* 4,425 278,222
-------
705,113
</TABLE>
The accompanying notes are an integral part of the financial statements.
42
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1997 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Telecommunications Services - 1.63%
Chancellor Media Corporation* 725 39,784
Lucent Technologies, Incorporated 4,600 379,212
Telecomunicacoes Brasileiras
SA-Telebras, ADR 975 98,963
-------
517,959
Telephone - 0.48%
American Telephone & Telegraph
Corporation 3,100 151,706
-------
Tobacco - 1.59%
Philip Morris Companies, Incorporated 6,600 261,525
RJR Nabisco Holdings Corporation 7,650 242,409
-------
503,934
Trucking & Freight - 0.93%
CNF Transportation, Incorporated 6,600 294,525
-------
TOTAL COMMON STOCKS
(Cost $20,570,816) $22,751,693
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<C> <S> <C>
SHORT TERM INVESTMENT - 20.88%
$6,624,477 Navigator Securities Lending Trust $6,624,477
---------
REPURCHASE AGREEMENT - 7.42%
$2,354,000 Repurchase Agreement with State
Street Bank & Trust Company dated
10/31/97 at 5.00%, to be repurchased
at $2,354,981 on 11/03/97,
collateralized by $2,320,000 U.S.
Treasury Notes, 6.625% due 03/31/02
(valued at $2,415,056, including
interest) $2,354,000
---------
TOTAL INVESTMENTS
(Growth Equity Fund) (Cost $29,549,293) $31,730,170
==========
</TABLE>
<TABLE>
<CAPTION>
International Growth and Income Fund
Shares Value
----- -----
<S> <C> <C>
COMMON STOCKS - 64.81%
Aerospace - 1.43%
CSF Thomson 5,600 $152,226
Lucas Varity PLC, ADS 78,200 268,304
-------
420,530
Air Travel - 1.22%
British Airways PLC 12,000 117,174
Deutsche Lufthansa AG* 4,000 69,846
Singapore Airlines, Ltd. 23,000 172,318
-------
359,338
Apparel & Textiles - 0.11%
Tomen Corporation 20,000 33,569
------
Auto Parts - 0.34%
Qingling Motors Company 155,000 101,242
-------
Automobiles - 1.91%
Fiat SPA 76,000 137,366
Nissan Motor Company, Ltd. 22,000 117,175
Toyota Motor Corporation 11,000 306,190
-------
560,731
Banking - 8.78%
Allied Irish Banks, ADS 41,400 351,777
Asahi Bank, Ltd. 12,000 62,219
Bangkok Bank 7,800 26,618
Bank of East Asia 80 179
Bank of Tokyo-Mitsubishi, ADS 4,000 52,181
Banco Santander Chile, ADR 6,900 89,700
Dai Ichi Kangyo Bank 2,000 16,951
Deutsche Bank AG 1,440 94,229
Dresdner Bank AG 1,220 49,896
HSBC Holdings PLC - HKD 2,000 45,269
HSBC Holdings ORD - HKD 4,309 101,212
HSBC Holdings ORD - [_] 7,700 191,842
Istituto Mobiliare Italiano 17,000 152,026
Keiyo Bank 28,000 81,196
The Mitsui Trust & Banking Company,
Ltd. 23,000 79,884
Royal Bank of Scotland Group PLC 29,300 310,679
Societe Generale 1,623 222,281
United Overseas Bank 27,000 149,143
Westpac Banking Corporation, Ltd. 66,000 384,312
Wielkopolski Bank Kredytowy SA 7,800 42,525
Yapi ve Kredi Bankasi AS 2,605,080 79,466
---------
2,583,585
Broadcasting - 0.78%
Central European Media Enterprises,
Ltd.* 3,700 108,225
Mediaset 27,000 122,481
-------
230,706
Business Services - 1.92%
Eaux (Cie Generale Des) 2,125 247,930
Keppel Telecom & Transport 142,000 95,568
Wessex Water PLC 26,200 221,983
-------
565,481
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Chemicals - 1.45%
Allied Colloids Group PLC 102,214 $176,634
Bayer AG 2,530 88,795
Fauji Fertilizer Company, Ltd. 18,000 40,086
Mitsubishi Rayon Company, Ltd. 10,000 32,073
Quimica Minera de Chile SA, ADR 1,725 89,484
-------
427,072
Coal - 0.22%
Banpu Public Company, Ltd. 9,500 65,302
------
Computers & Business Equipment - 0.71%
Fujitsu, Ltd. 12,000 131,616
Ricoh Company, Ltd. 6,000 77,275
-------
208,891
Conglomerates - 1.62%
Aoyama Trading Company, Ltd. 2,000 53,677
First Philippine Holdings Corporation 126,300 105,102
Hutchison Whampoa, Ltd. 7,000 48,438
Sime Darby BHD 20,000 28,798
Tomkins 46,600 239,241
-------
475,256
Construction & Mining Equipment - 0.15%
Nishimatsu Construction 9,000 44,121
------
</TABLE>
The accompanying notes are an integral part of the financial statements.
43
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1997 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Construction Materials - 0.86%
CRH 12,000 144,374
PT Semen Cibinong 245,000 32,282
Siam Cement Company 4,100 34,179
Tostem Corporation 3,000 41,629
------
252,464
Crude Petroleum & Natural Gas - 1.99%
Elf Aquitaine 2,450 303,264
ENI SPA, ADS 50,000 281,158
-------
584,422
Drugs & Health Care - 4.19%
Daiichi Pharmaceutical Company 7,000 99,460
Elan PLC, ADR* 1,300 64,837
Glaxo Wellcome 9,500 203,696
Kissei Pharmacuetical Company, Ltd. 5,000 81,429
Sanofi SA 1,780 169,105
Schering AG 490 47,499
Wockhardt, Ltd., ADR 13,500 109,687
Yamanouchi Pharmaceutical
Company, Ltd. 6,000 147,570
Zeneca Group PLC 9,800 309,273
---------
1,232,556
Electric Utilities - 1.43%
Chilgener SA, ADR 4,800 130,800
Hong Kong Electric 21,500 72,858
Tokyo Electric Power 4,100 78,355
VEBA AG 2,500 139,372
-------
421,385
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Electrical Equipment - 0.80%
Hitachi, Ltd. 12,000 $92,231
Siemens AG 2,340 144,027
-------
236,258
Electronics - 2.24%
Fanuc, Ltd. 1,000 40,382
K.R. Precision Public Company, Ltd. 6,900 49,784
Kyocera Corporation 2,000 114,499
Nissei Sangyo Company 6,000 62,318
Racal Electronics 43,300 161,276
Samsung Electronics, Ltd., ADR* 3,198 65,559
TDK Corporation 2,000 165,850
-------
659,668
Financial Services - 0.80%
Brierley Investment, Ltd. 170,000 131,254
Koc Holdings 59,000 22,176
Nomura Securities 7,000 81,429
-------
234,859
Food & Beverages - 3.33%
Cadbury Schweppes, ADS 29,000 291,929
Itoham Foods, Incorporated 11,000 49,539
Japan Tobacco, Incorporated 10 82,011
Lion Nathan, Ltd. 110,200 266,230
Molinos Rio de la Plata SA 28,370 70,116
Nestle SA* 120 168,570
Okocimskie Zaklady Piwowarskie SA* 6,900 39,796
President Enterprises Corporation, ADR 1,170 12,285
-------
980,476
Forest Products - 0.49%
Carter Holt Harvey 83,000 144,704
-------
Homebuilders - 0.35%
Bilfinger & Berger
Bauaktiengesellschaft AG 880 31,600
Taisei Corporation 20,000 70,129
-------
101,729
Household Appliances Furnishing - 1.30%
Guangdong Kelon Elec Holdings 70,000 88,728
Matsushita Electric Industrial
Company, Ltd. 10,000 167,844
Sony Corporation 1,500 124,512
-------
381,084
Industrial Machinery - 1.78%
Daiken Corporation 16,000 63,149
Ebara Corporation 9,000 108,434
Hindalco Industries, Ltd., ADR 3,200 83,509
Ishihara Sangyo Kaisha* 10,000 20,523
Mitsubishi Heavy Industries, Ltd. 15,000 73,660
Reliance Industries, ADR 8,500 174,250
-------
523,525
Insurance - 3.45%
Axa-UAP 1,300 89,022
Irish Life PLC 33,000 173,700
Istituto Nazionale delle Assicurazioni 179,000 288,113
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Insurance - continued
Muenchener Rueckversicherungs AG 700 $203,852
Norwich Union PLC 33,500 191,096
Tokio Marine & Fire Insurance
Company 7,000 69,796
---------
1,015,579
International Oil - 1.61%
The British Petroleum Company PLC 17,815 261,829
Nippon Oil Company 6,000 24,578
YPF Sociedad Anonima, ADR 5,830 186,560
-------
472,967
Leisure Time - 1.06%
Compass Group 29,600 312,867
-------
Mining - 0.19%
Mitsui Mining & Smelting 13,000 57,358
------
Miscellaneous -0.23%
Yue Yuen Industrial Holdings 30,800 67,325
------
Newspaper - 0.64%
Hurriyet Gazetecilik ve Matbaacilik 1,590,000 188,378
Non-Ferrous Metals - 0.40%
WMC, Ltd. 32,900 116,842
-------
Paper - 1.37%
</TABLE>
The accompanying notes are an integral part of the financial statements.
44
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1997 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Fletcher Challenge, Ltd. 82,200 135,120
Pabrik Kertas Tjiwi Kimia 152,000 55,867
Jefferson Smurfit Group PLC 71,300 211,239
-------
402,226
Petroleum Services - 1.33%
Broken Hill Proprietary Company, Ltd. 24,100 238,971
Indian Pertochemicals Corporation, Ltd 10,000 82,500
Petroleo Brasileiro S/A-Petrobras, ADR 3,500 69,527
-------
390,998
Photography - 0.62%
Canon Sales Company, Incorporated 2,000 36,394
Fuji Photo Film Company 4,000 144,911
-------
181,305
Publishing - 0.14%
Singapore Press Holdings, Ltd. 3,000 41,333
------
Railroads & Equipment - 0.45%
West Japan Railway Company 38 132,929
-------
Real Estate - 1.20%
City Developments 18,000 75,428
Daiwa Kosho Lease 11,000 66,905
Henderson Land Development
Company, Ltd. 9,000 49,822
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Real Estate -continued
Mitsubishi Estate Company, Ltd. 7,000 $88,409
Pryce Corporation* 787,200 29,312
Sun Hung Kai Properties 6,000 44,235
-------
354,111
Retail Grocery - 1.21%
Izumi Company 4,000 32,140
J. Sainsbury PLC 32,800 273,775
Ito-Yokado Company, Ltd. 1,000 49,688
-------
355,603
Retail Trade - 1.48%
Ava Allgemeine Handels-Der Verbr AG* 170 43,393
Cifra SA de CV, ADR 4,511 8,786
Carrefour SA 359 187,334
Great Universal Stores PLC 13,000 154,093
Izumiya Company 5,000 41,130
JD Group, Ltd. 185 1,242
-------
435,978
Shipbuilding -0.17%
Sembawang Maritime, Ltd. 19,000 48,737
------
Software -0.46%
SAP AG 470 134,827
-------
Steel - 1.14%
Nippon Steel Corporation 46,000 94,790
Rautaruukki OY 9,900 92,814
Tokyo Steel Manufacturing Company, Ltd. 5,000 35,314
Unisor SA 6,828 113,045
-------
335,963
Telecommunication Services - 1.67%
France Telecom SA 9,000 340,606
Telecom Argentina Stet France, ADR 5,970 151,116
-------
491,722
Telephone - 4.89%
DDI Corporation 16 53,444
Nippon Telegraph & Telephone
Corporation 24 203,407
Philippine Long Distance
Telephone Company, GDS 1,722 48,646
Philippine Long Distance
Telephone Company, ADR 3,500 84,875
Telecom Corporation of New Zealand 56,000 271,276
Telecomunicacoes Brasileiras
S/A-Telebras, ADR 750 76,125
Telekom Italia Di Risp 96,000 387,862
Vodafone Group, ADR 57,400 312,984
---------
1,438,619
Tires & Rubber - 0.54%
Bridgestone Corporation 3,000 64,811
Continental AG 3,900 92,986
-------
157,797
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Trucking & Freight - 0.36%
Nippon Express Company 12,000 $64,612
Osprey Maritime, Ltd. 43,000 40,406
-------
105,018
TOTAL COMMON STOCKS
(Cost $20,175,963) $19,067,436
----------
PREFERRED STOCKS - 1.50%
International Oil - 0.32%
RWE AG 2,610 94,177
------
Miscellaneous - 0.38%
WBK STRYPES Trust 3,600 111,600
-------
Newspapers - 0.80%
News Corporation, Ltd., ADS 53,000 235,188
-------
TOTAL PREFERRED STOCKS
(Cost $454,892) $440,965
-------
WARRANTS - 0.39%*
Automobiles - 0.21%
Volkswagen International (Expiration
date 10/27/98; strike price DEM 221) 190 60,401
------
Chemicals - 0.19%
Shin-Etsu Chemical (Expiration
date 08/01/00; strike price [ ] 1917) 21 54,600
------
TOTAL WARRANTS (Cost $69,565) $115,001
-------
</TABLE>
The accompanying notes are an integral part of the financial statements.
45
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1997 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
CONVERTIBLE BONDS - 1.97%
BTM Cayman Finance,
4.25% due 03/31/49 [ ] 20,000,000 $176,153
Elektrim SA,
2.00% due 05/30/04 DEM 81,000 48,928
MTI Capital Cayman, Ltd.,
0.50% due 10/01/07 [ ] 40,000,000 275,031
STB Cayman Capital,
0.50% due 10/01/07 10,000,000 79,819
------
TOTAL CONVERTIBLE BONDS
(Cost $709,594) $579,931
--------
CORPORATE BONDS -7.29%
Nykredit,
6.00% due 10/01/26 DKK 2,000,000 282,423
Metsa-Serla OY,
4.375% due 10/15/02 161,000 161,352
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
CORPORATE BONDS -continued
Tennessee Valley Authority,
6.375% due 09/18/06 DEM 250,000 $150,612
Treuhandanstalt,
6.625% due 07/09/03 2,500,000 1,549,773
---------
TOTAL CORPORATE BONDS
(Cost $2,112,487) $2,144,160
---------
FOREIGN GOVERNMENT OBLIGATIONS -14.30%
Government of Canada - 1.95%
7.00% due 12/01/06 CAD 730,000 574,360
-------
Kingdom of Denmark - 3.33%
8.00% due 05/15/03 DKK 202,000 34,297
8.00% due 03/15/06 5,500,000 944,416
-------
978,713
Government of Germany - 0.61%
6.00% due 01/04/07 DEM 300,000 178,907
-------
Government of Great Britain - 6.73%
United Kingdom
Treasury,
6.75% due 11/26/04 [ ] 250,000 425,598
8.00% due 09/27/13 450,000 857,147
9.00% due 10/13/08 350,000 698,600
---------
1,981,345
Republic of Italy - 0.91%
8.50% due 08/01/04 ITL 400,000,000 267,178
-------
Government of Spain - 0.77%
7.90% due 02/28/02 ESP 30,000,000 225,572
-------
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS (Cost $4,070,422) $4,206,075
---------
<CAPTION>
Principal
Amount Value
------ -----
<S> <C>
SHORT TERM INVESTMENT - 9.33%
$2,744,366 Navigator Securities Lending Trust $2,744,366
---------
REPURCHASE AGREEMENT - 0.42%
$124,000 Repurchase Agreement with State
Street Bank & Trust Company dated
10/31/97 at 5.00%, to be repurchased
at $124,052 on 11/03/97,collateralized
by $95,000 U.S. Treasury Notes,
7.50% due 11/15/01 (valued at
$107,155, including interest) and
$25,000 U.S. Treasury Notes,
5.875% due 07/31/99 (valued at
$25,793, including interest)
$124,000
-------
TOTAL INVESTMENTS
(International Growth & Income Fund)
(Cost $30,461,289) $29,421,934
==========
Growth and Income Fund
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
COMMON STOCKS - 94.17%
Aerospace - 3.28%
Boeing Company 58,000 $2,776,750
Lockheed Martin Corporation 22,000 2,091,375
United Technologies Corporation 21,600 1,512,000
---------
6,380,125
Agricultural Machinery -1.10%
Deere & Company 40,500 2,131,312
---------
Air Travel -1.43%
Southwest Airlines Company 85,000 2,773,125
---------
Aluminum - 0.74%
Aluminium Company of America 19,600 1,430,800
---------
Automobiles -0.51%
General Motors Corporation 15,600 986,700
-------
Banking - 6.86%
The Chase Manhattan Corporation 5,000 576,875
Citicorp 30,200 3,776,887
Crestar Financial Corporation 29,500 1,395,719
First Union Corporation 78,000 3,826,875
U.S. Bancorp 37,000 3,762,438
----------
13,338,794
Business Services - 1.50%
Automatic Data Processing,
Incorporated 23,000 1,175,875
First Data Corporation 60,000 1,743,750
---------
2,919,625
Chemicals - 2.44%
The Dow Chemical Company 17,400 1,579,050
E.I. Du Pont De Nemours & Company 29,000 1,649,375
</TABLE>
The accompanying notes are an integral part of the financial statements.
46
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1997 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Zeneca Group PLC, ADR 16,000 1,526,000
---------
4,754,425
Computers & Business Equipment - 5.77%
3Com Corporation* 12,400 513,825
Cisco Systems, Incorporated* 22,000 1,804,688
EMC Corporation* 20,000 1,120,000
Hewlett-Packard Company 34,400 2,122,050
International Business Machines
Corporation 36,000 3,530,250
Xerox Corporation 27,000 2,141,437
----------
11,232,250
Construction & Mining Equipment - 1.37%
Caterpillar, Incorporated 32,800 1,681,000
Foster Wheeler Corporation 30,000 984,375
---------
2,665,375
Containers & Glass - 0.43%
Crown Cork & Seal, Incorporated 18,700 842,669
-------
Domestic Oil - 0.85%
Unocal Corporation 40,000 1,650,000
---------
Drugs & Health Care - 10.18%
Abbott Laboratories 44,000 $2,697,750
American Home Products Corporation 11,000 815,375
Bristol-Myers Squibb Company 26,400 2,316,600
Columbia/HCA Healthcare Corporation* 44,000 1,243,000
Johnson & Johnson 28,000 1,606,500
Merck & Company, Incorporated 15,500 1,383,375
Pfizer, Incorporated 59,000 4,174,250
Pharmacia & Upjohn, Incorporated 69,500 2,206,625
Tenet Healthcare Corporation* 16,400 501,225
Warner-Lambert Company 20,000 2,863,750
----------
19,808,450
Electric Utilities - 2.46%
DPL, Incorporated 55,000 1,364,687
Duke Energy Company 29,000 1,399,250
New England Electric System 24,000 940,500
Texas Utilities Company 30,000 1,076,250
---------
4,780,687
Electrical Equipment - 2.95%
General Electric Company 89,000 5,746,062
---------
Electronics - 4.16%
AMP, Incorporated 37,000 1,665,000
Analog Devices, Incorporated* 30,000 916,875
Intel Corporation 36,400 2,802,800
Motorola, Incorporated 35,300 2,179,775
Texas Instruments, Incorporated 5,000 533,438
---------
8,097,888
Financial Services - 6.40%
American Express Company 46,000 3,588,000
Federal National Mortgage Association 70,000 3,390,625
Morgan Stanley Dean Witter 30,000 1,470,000
Travelers Group, Incorporated 57,200 4,004,000
----------
12,452,625
Food & Beverages - 2.68%
General Mills, Incorporated 20,000 1,320,000
H.J. Heinz Company 19,000 882,312
Sara Lee Corporation 59,000 3,016,375
---------
5,218,687
Hotels & Restaurants - 1.04%
McDonald's Corporation 45,000 2,016,563
---------
Household Products - 2.20%
Colgate Palmolive Company 18,000 1,165,500
Gillette Company 6,000 534,375
Procter & Gamble Company 38,000 2,584,000
---------
4,283,875
Insurance - 5.50%
ACE, Ltd. 28,800 2,676,600
Allstate Corporation 44,000 3,649,250
American International Group,
Incorporated 24,000 2,449,500
Marsh & McLennan Companies,
Incorporated 27,000 1,917,000
----------
10,692,350
International Oil - 5.91%
Amoco Corporation 25,700 $2,356,369
Chevron Corporation 39,000 3,234,562
Exxon Corporation 46,000 2,826,125
Royal Dutch Petroleum Company 58,400 3,073,300
----------
11,490,356
Leisure Time - 0.27%
The Walt Disney Company 6,500 534,625
-------
Liquor - 0.82%
Anheuser-Busch Companies, Incorporated 39,800 1,589,513
---------
Mining - 0.07%
Phelps Dodge Corporation 1,800 133,875
-------
Newspapers - 1.57%
Gannett, Incorporated 58,000 3,048,625
---------
Non-Ferrous Metals - 0.55%
Engelhard Corporation 61,825 1,074,209
---------
Paper - 2.95%
International Paper Company 30,000 1,350,000
Kimberly Clark Corporation 44,000 2,285,250
Minnesota Mining & Manufacturing
Company 23,000 2,104,500
---------
5,739,750
Petroleum Services - 2.52%
Diamond Offshore Drilling, Incorporated 18,000 1,120,500
Schlumberger, Ltd. 43,200 3,780,000
---------
4,900,500
Photography - 0.25%
Eastman Kodak Company 8,100 484,988
-------
Railroads & Equipment - 0.94%
Union Pacific Corporation 30,000 1,837,500
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
47
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1997 - continued
(showing percentage of total value of investments)
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Real Estate - 0.28%
Security Capital Pacific Trust 24,000 537,000
-------
Retail Trade - 4.45%
Dayton Hudson Corporation 46,000 2,889,375
The GAP, Incorporated 28,000 1,489,250
Sears Roebuck & Company 35,000 1,465,625
Wal-Mart Stores, Incorporated 80,000 2,810,000
---------
8,654,250
Software - 1.75%
Microsoft Corporation* 26,200 3,406,000
---------
Telecommunication Services - 0.43%
Cox Communications, Incorporated* 27,000 $830,250
-------
Telephone - 5.52%
Bell Atlantic 36,096 2,883,168
Corporation
BellSouth Corporation 15,000 709,688
SBC Communications, 55,000 3,499,375
Incorporated
U.S. West, Incorporated 50,000 1,990,625
WorldCom, Incorporated* 49,000 1,647,625
----------
10,730,481
Tires & Rubber - 0.71%
The Goodyear Tire and Rubber
Company 22,000 1,377,750
---------
Tobacco - 1.34%
Philip Morris Companies, Incorporated 66,000 2,615,250
---------
TOTAL COMMON STOCKS
(Cost $130,384,829) $183,187,309
-----------
<CAPTION>
Principal
Amount Value
------ -----
<S> <C>
SHORT TERM INVESTMENT - 3.75%
$7,286,228 Navigator Securities Lending Trust $7,286,228
---------
REPURCHASE AGREEMENT - 2.09%
$4,057,000 Repurchase Agreement with Paine
Webber dated 10/31/97 at 5.67%, to be
repurchased at $4,058,917 on
11/03/97, collateralized by $4,050,000
U.S. Treasury Notes, 6.25% due
08/31/00 (valued at $4,145,810,
including interest)
$4,057,000
---------
TOTAL INVESTMENTS
(Growth & Income Fund) (Cost $141,728,057) $194,530,537
===========
</TABLE>
<TABLE>
<CAPTION>
Equity-Income Fund
Shares Value
------ -----
<S> <C> <C>
COMMON STOCKS - 81.32%
Aluminum - 0.50%
Reynolds Metals Company 15,500 $944,531
-------
Auto Parts - 1.06%
Eaton Corporation 4,500 434,813
Echlin, Incorporated 15,000 491,250
Genuine Parts Company 34,200 1,070,887
---------
1,996,950
Automobiles - 0.61%
General Motors Corporation 17,900 1,148,956
---------
Banking - 8.62%
Banc One Corporation 27,500 1,433,438
BankBoston Corporation 13,300 1,078,131
Bankers Trust New York Corporation 14,600 1,722,800
The Chase Manhattan Corporation 15,100 1,742,162
First Union Corporation 2,000 98,125
Fleet Financial Group, Incorporated 19,300 1,241,231
Mellon Bank Corporation 58,000 2,990,625
Mercantile Bankshares Corporation 21,150 753,469
J.P. Morgan & Company, Incorporated 13,700 1,503,575
National City
Corporation
16,400 979,900
PNC Bank Corporation 16,400 779,000
Signet Banking Corporation 17,100 920,194
Wells Fargo & Company 3,700 1,078,087
----------
16,320,737
Business Services - 1.31%
H & R Block, Incorporated 30,800 1,139,600
Deluxe Corporation 9,000 294,750
R.R. Donnelley & Sons Company 31,900 1,040,738
---------
2,475,088
Chemicals - 6.24%
The Dow Chemical Company 29,900 2,713,425
E.I. Du Pont De Nemours & Company 30,200 1,717,625
Eastman Chemical Company 10,100 602,212
Great Lakes Chemical Corporation 25,600 1,203,200
Imperial Chemical Industries PLC, ADR 15,500 928,063
Lubrizol Corporation 23,000 885,500
Nalco Chemical Company 22,000 880,000
Olin Corporation 26,300 1,195,006
Witco Corporation 38,900 1,692,150
----------
11,817,181
Conglomerates - 1.25%
Fortune Brands, Incorporated 22,900 757,131
Lonrho PLC 197,000 323,907
Tomkins 250,000 1,283,479
---------
2,364,517
Construction Materials - 0.32%
Armstrong World Industries, 9,000 599,062
-------
Incorporated
Cosmetics & Toiletries - 0.92%
International Flavors & Fragrances,
Incorporated 35,800 1,731,825
---------
Domestic Oil - 3.28%
Amerada Hess Corporation 22,200 1,363,912
Atlantic Richfield Company 34,400 2,831,550
</TABLE>
The accompany notes are an integral part of the financial statements.
48
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1997 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Phillips Petroleum Company 17,600 $ 851,400
USX-Marathon Group 32,400 1,158,300
---------
6,205,162
Drugs & Health Care - 4.66%
Abbott Laboratories 17,300 1,060,706
American Home Products Corporation 29,400 2,179,275
Amgen, Incorporated 9,400 462,950
C.R. Bard, Incorporated 14,800 410,700
Bausch & Lomb, Incorporated 22,600 887,050
Baxter International, Incorporated 14,000 647,500
Pharmacia & Upjohn, Incorporated 48,900 1,552,575
Smith & Nephew PLC 241,700 703,564
United States Surgical Corporation 34,200 921,263
---------
8,825,583
Electric Utilities - 6.97%
Baltimore Gas & Electric Company 16,500 452,719
Centerior Energy Corporation 63,000 819,000
Central & South West Corporation 15,100 325,594
Dominion Resources, Incorporated 19,700 732,594
DQE, Incorporated 22,100 683,719
Duke Energy Company 28,900 1,394,425
Entergy Corporation 30,000 733,125
GPU, Incorporated 9,000 325,687
Houston Industries, Incorporated 37,000 804,750
Ohio Edison Company 20,000 495,000
PacifiCorp 40,000 867,500
PECO Energy Company 36,000 816,750
PG & E Corporation 27,900 713,194
Public Service Enterprise Group,
Incorporated 24,500 635,468
Southern Company 50,400 1,156,050
TECO Energy, Incorporated 17,000 405,875
Unicom Corporation 37,500 1,050,000
Western Resources, Incorporated 21,000 782,250
----------
13,193,700
Electrical Equipment - 1.90%
Cooper Industries, Incorporated 19,000 990,375
General Electric Company 25,900 1,672,169
Hubbell, Incorporated 21,100 929,719
---------
3,592,263
Electronics - 0.66%
AMP, Incorporated 27,700 1,246,500
---------
Financial Services - 1.85%
American Express Company 12,400 967,200
Federal National Mortgage Association 28,800 1,395,000
Travelers Group, Incorporated 16,166 1,131,620
---------
3,493,820
Food & Beverages - 4.09%
Cadbury Schweppes, ADS 50,600 509,365
General Mills, Incorporated 24,400 1,610,400
H.J. Heinz Company 27,500 1,277,031
McCormick & Company, Incorporated 44,000 1,100,000
Quaker Oats Company 31,400 1,503,275
Sara Lee Corporation 17,000 869,125
Unilever NV 16,400 875,350
---------
7,744,546
Forest Products - 0.41%
Georgia Pacific Corporation 9,100 771,794
-------
Gold - 0.61%
Newmont Mining Corporation 32,900 1,151,500
---------
Hotels & Restaurants - 0.49%
ITT Corporation* 12,400 926,125
-------
Household Appliances Furnishing - 0.70%
Whirlpool Corporation 21,900 1,327,688
---------
Household Products - 0.24%
Tupperware Corporation 18,200 $456,137
-------
Industrial Machinery - 0.41%
Pall Corporation 37,300 771,644
-------
Insurance - 4.19%
American General Corporation 29,500 1,504,500
Exel, Ltd. 18,700 1,130,181
Hilb, Rogal & Hamilton Company 4,600 83,375
Lincoln National Corporation,
Incorporated 10,500 721,875
SAFECO Corporation 21,300 1,014,413
St. Paul Companies, Incorporated 20,600 1,646,713
Transamerica Corporation 8,700 878,156
USF & G Corporation 23,500 475,875
Willis Corroon Group PLC, ADR 44,100 476,831
---------
7,931,919
International Oil - 6.30%
Amoco Corporation 15,700 1,439,494
The British Petroleum Company PLC 16,200 1,421,550
Chevron Corporation 22,600 1,874,388
Exxon Corporation 36,600 2,248,612
Mobil Corporation 22,600 1,645,563
Royal Dutch Petroleum Company, ADR 26,600 1,399,825
Texaco, Incorporated 33,400 1,901,712
----------
11,931,144
Liquor - 1.26%
Anheuser-Busch Companies,
Incorporated 36,900 1,473,694
Brown-Forman Corporation, Class B 18,400 905,050
---------
2,378,744
Newspapers - 1.45%
Dow Jones & Company, Incorporated 24,700 1,148,550
Knight-Ridder, Incorporated 30,500 1,593,625
---------
2,742,175
Paper - 2.48%
Consolidated Papers, Incorporated 22,800 1,184,175
International Paper Company 23,600 1,062,000
Kimberly-Clark Corporation 2,300 119,456
Minnesota Mining & Manufacturing
Company 6,300 576,450
Union Camp Corporation 32,400 1,755,675
---------
4,697,756
</TABLE>
The accompanying notes are an integral part of the financial statements.
49
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1997 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Petroleum Services - 1.28%
Enron Corporation 18,300 $ 695,400
Occidental Petroleum Corporation 33,400 931,025
Repsol SA, ADR 18,600 790,500
---------
2,416,925
Photography - 0.70%
Eastman Kodak Company 22,000 1,317,250
---------
Pollution Control - 0.36%
Waste Management, Incorporated 29,000 $677,875
-------
Publishing - 1.24%
Dun & Bradstreet Corporation 30,300 865,444
McGraw-Hill Companies, Incorporated 15,000 980,625
The Reader's Digest Association,
Incorporated 22,200 505,050
---------
2,351,119
Railroads & Equipment - 2.27%
Burlington Northern Santa Fe
Corporation 12,600 1,197,000
GATX Corporation 5,000 322,813
Norfolk Southern Corporation 25,000 803,125
Union Pacific Corporation 32,200 1,972,250
---------
4,295,188
Real Estate - 1.12%
Rouse Company 900 24,975
Security Capital Pacific Trust 5,600 125,300
Simon DeBartolo Group, Incorporated 48,400 1,497,375
Weingarten Realty Investors 12,000 477,750
---------
2,125,400
Retail Trade - 1.56%
The Limited, Incorporated 7,200 169,650
May Department Stores Company 16,300 878,163
J.C. Penney Company, Incorporated 32,400 1,901,475
---------
2,949,288
Steel - 0.08%
USX-U.S. Steel Group 4,600 156,400
-------
Telephone - 7.65%
ALLTEL Corporation 61,200 2,164,950
American Telephone & Telegraph
Corporation 54,800 2,681,775
BCE, Incorporated 35,000 977,812
Bell Atlantic Corporation 16,800 1,341,900
BellSouth Corporation 27,700 1,310,556
Frontier Corporation 29,000 627,125
GTE Corporation 36,100 1,531,994
SBC Communications, Incorporated 26,546 1,688,989
Southern New England
Telecommunications Corporation 14,900 638,838
Sprint Corporation 14,500 754,000
U.S. West, Incorporated 19,300 768,381
----------
14,486,320
Tobacco - 2.08%
Philip Morris Companies, Incorporated 42,900 1,699,913
RJR Nabisco Holdings Corporation 21,000 665,437
UST, Incorporated 52,300 1,565,731
---------
3,931,081
Trucking & Freight - 0.22%
Alexander & Baldwin, Incorporated 15,000 412,500
-------
TOTAL COMMON STOCKS
(Cost $130,054,260) $153,906,393
-----------
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
SHORT TERM INVESTMENTS - 18.39%
Federal Home Loan Mortgage,
Corporation, 5.39% due 11/13/97 $2,295,000 $2,290,877
Student Loan Marketing
Association, 5.48% due 11/12/97 4,700,000 4,692,130
France Telecom,
5.49% due 11/03/97 2,700,000 2,699,177
National Australia Funding,
5.48% due 11/18/97 4,200,000 4,189,131
Navigator Securities Lending Trust 20,937,768 20,937,768
----------
34,809,083
<CAPTION>
Principal
Amount Value
------ -----
<S> <C>
REPURCHASE AGREEMENT - 0.29%
$550,000 Repurchase Agreement with State
Street Bank & Trust Company dated
10/31/97 at 5.00%, to be repurchased
at $550,229 on 11/03/97, collateralized
by $415,000 U.S. Treasury Notes,
10.375% due 11/15/12 (valued at
$585,252, including interest) $550,000
-------
TOTAL INVESTMENTS
(Equity-Income Fund) (Cost $165,413,343) $189,265,476
===========
<CAPTION>
Balanced Fund
Shares Value
------ -----
<S> <C> <C>
COMMON STOCKS - 55.73%
Banking - 0.64%
Mellon Bank Corporation 12,750 $657,422
-------
Chemicals - 2.01%
ARCO Chemical Company 21,000 1,026,375
Imperial Chemical Industries PLC, ADR 17,600 1,053,800
---------
2,080,175
Computers & Business Equipment - 2.62%
Hewlett-Packard Company 22,000 1,357,125
International Business Machines
Corporation 5,300 519,731
Sun Microsystems, Incorporated* 24,500 839,125
---------
2,715,981
Domestic Oil - 2.98%
Atlantic Richfield Company 26,800 2,205,975
Phillips Petroleum Company 18,100 875,588
---------
3,081,563
Drugs & Health Care - 15.24%
Abbott Laboratories 10,000 613,125
</TABLE>
The accompanying notes are an integral part of the financial statements.
50
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1997 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ALZA Corporation* 15,950 415,697
American Home Products Corporation 13,500 1,000,687
Becton, Dickinson & Company 15,600 718,575
Columbia/HCA Healthcare Corporation 42,675 1,205,569
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Drugs & Health Care - continued
Glaxo Wellcome PLC, ADR 61,600 $2,637,250
Johnson & Johnson 20,575 1,180,491
Eli Lilly and Company 16,275 1,088,391
Merck & Company, Incorporated 8,400 749,700
Novartis AG 800 1,252,919
Pfizer, Incorporated 28,500 2,016,375
Schering-Plough Corporation 6,600 370,012
SmithKline Beecham PLC, ADR 53,100 2,528,887
----------
15,777,678
Electric Utilities - 1.61%
Consolidated Edison Company
of New York, Incorporated 14,700 503,475
Duke Energy Company 24,081 1,161,908
---------
1,665,383
Electrical Equipment - 3.49%
General Electric Company 33,600 2,169,300
Philips Electronics NV, ADR 12,900 1,011,037
Technitrol, Incorporated 13,850 427,619
---------
3,607,956
Food & Beverages - 1.37%
Nestle SA 500 704,517
PepsiCo, Incorporated 19,300 710,481
---------
1,414,998
Gas & Pipeline Utilities - 1.48%
Coastal Corporation 1,700 102,212
Questar Corporation 15,825 611,241
Sonat, Incorporated 17,900 822,281
---------
1,535,734
Gold - 1.61%
Newmont Mining Corporation 47,500 1,662,500
---------
Household Products - 0.65%
Colgate Palmolive Company 10,400 673,400
-------
Insurance - 5.23%
Allstate Corporation 28,600 2,372,013
W.R. Berkley Corporation 23,437 963,847
General Re Corporation 1,000 197,187
Marsh & McLennan Companies,
Incorporated 5,000 355,000
SAFECO Corporation 9,475 451,247
TIG Holdings, Incorporated 10,400 352,300
Travelers Property Casualty
Corporation, Class A 19,825 716,178
---------
5,407,772
International Oil - 2.94%
Amoco Corporation 7,200 660,150
The British Petroleum Company PLC 11,200 982,800
Exxon Corporation 7,900 485,356
Mobil Corporation 6,300 458,719
Texaco, Incorporated 8,000 455,500
---------
3,042,525
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Mining - 2.81%
Potash Corporation of Saskatchewan,
Incorporated 35,525 $2,910,830
---------
Paper - 3.08%
Fort James Corporation 36,525 1,449,586
Kimberly-Clark Corporation 33,400 1,734,713
---------
3,184,299
Petroleum Services - 2.14%
Burlington Resources, Incorporated 15,550 760,978
Global Marine, Incorporated* 14,400 448,200
Helmerich & Payne, Incorporated 12,400 1,000,525
---------
2,209,703
Railroads & Equipment - 1.15%
Canadian Pacific, Ltd. 40,000 1,192,500
---------
Real Estate - 1.18%
Legacy Hotels Real Estate
Investment Trust 176,225 1,225,391
---------
Telephone - 3.51%
U.S. West, Incorporated 91,200 3,630,900
---------
TOTAL COMMON STOCKS
(Cost $54,346,492) $57,676,710
----------
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
U.S. TREASURY OBLIGATIONS - 35.31%
U.S. Treasury Strips - 0.41%
Principal Only due 08/15/99 $470,000 $425,637
-------
U.S. Treasury Bonds - 8.21%
6.375% due 08/15/27 1,000,000 1,030,620
6.50% due 11/15/26 320,000 333,549
6.625% due 02/15/27 3,150,000 3,339,977
7.125% due 02/15/23 1,485,000 1,652,760
7.25% due 08/15/22 1,900,000 2,141,946
---------
8,498,852
U.S. Treasury Notes - 26.69%
5.875% due 01/31/99 1,320,000 1,323,920
5.875% due 02/15/00 6,800,000 6,827,608
5.875% due 02/15/04 650,000 652,438
6.00% due 08/15/00 4,800,000 4,838,256
6.125% due 07/31/00 830,000 838,947
6.25% due 02/15/07 1,580,000 1,619,010
6.375% due 04/30/99 1,400,000 1,415,092
6.625% due 03/31/02 4,500,000 4,645,530
6.625% due 04/30/02 2,400,000 2,479,128
6.875% due 05/15/06 2,800,000 2,978,949
----------
27,618,878
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $35,192,223) $36,543,367
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
51
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1997 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SHORT TERM INVESTMENT - 4.00%
Navigator Securities Lending Trust $4,144,267 $4,144,267
---------
<CAPTION>
Principal
Amount Value
------ -----
<S> <C>
REPURCHASE AGREEMENT - 4.96%
$5,132,000 Repurchase Agreement with State
Street Bank & Trust Company dated
10/31/97 at 5.00%, to be repurchased
at $5,134,138 on 11/03/97,
collateralized by $3,825,000 U.S.
Treasury Bonds, 9.125% due 05/15/18
(valued at $5,396,473, including
interest) $5,132,000
---------
TOTAL INVESTMENTS
(Balanced Fund) (Cost $98,814,982) $103,496,344
===========
</TABLE>
Strategic Income Fund
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
CORPORATE BONDS - 34.45%
Apparel & Textiles - 0.50%
Clark-Schwebel, Incorporated,
10.50% due 04/15/06 $500,000 $540,000
-------
Banking - 3.08%
Banc One Corporation,
7.60% due 05/01/07 1,600,000 1,713,440
Korea Development Bank,
9.60% due 12/01/00 1,000,000 1,061,660
Midland Bank PLC, 7.65% due 5/01/25 500,000 547,475
---------
3,322,575
Business Services - 0.97%
Borg-Warner Security Corporation,
9.125% due 05/01/03 500,000 500,000
Iron Mountain, Incorporated,
10.125% due 10/01/06 500,000 542,500
---------
1,042,500
Chemical Products - 0.48%
Revlon Worldwide Corporation,
Series B, zero coupon due 03/15/01 750,000 513,750
-------
Construction & Building Materials - 0.51%
Southdown, Incorporated, Series B,
10.00% due 03/01/06 500,000 552,500
-------
Crude Petroleum & Natural Gas - 2.28%
Bellwether Exploration Company,
10.875% due 04/01/07 250,000 273,125
Benton Oil & Gas Company,
11.625% due 05/01/03 250,000 272,500
Cliffs Drilling Company,
10.25% due 05/15/03 250,000 270,000
National Energy Group, Incorporated,
10.75% due 11/01/06 500,000 520,000
Occidental Petroleum Corporation,
9.25% due 08/01/19 700,000 865,368
United Refining Company,
10.75% due 06/15/07 250,000 257,500
---------
2,458,493
Drugs & Health Care - 1.24%
Dade International, Incorporated,
11.125% due 05/01/06 $500,000 $561,250
Graham-Field Health Products,
Incorporated 9.75% due 08/15/07 250,000 260,000
UROHEALTH Systems, Incorporated,
12.50% due 04/01/04 500,000 510,000
---------
1,331,250
Energy & Utilities - 0.73%
AES Corporation,
8.50% due 11/01/07 250,000 245,264
KCS Energy, Incorporated, Series B,
11.00% due 01/15/03 500,000 546,250
-------
791,514
Financial Services - 2.74%
Dollar Financial Group, Incorporated,
10.875% due 11/15/03 275,000 294,250
Green Tree Financial Corporation,
7.07% due 09/15/07 2,197,672 2,255,361
Paine Webber Group, Incorporated,
7.00% due 03/01/00 400,000 407,228
---------
2,956,839
Food & Beverages - 1.43%
Dole Foods, Incorporated,
6.75% due 07/15/00 1,000,000 1,013,910
Stroh Brewery Company,
11.10% due 07/01/06 500,000 522,500
---------
1,536,410
Food Stores - 0.41%
Carr Gottstein Foods Company,
12.00% due 11/15/05 400,000 442,000
-------
Forest Products - 0.45%
Doman Industries, Ltd.,
8.75% due 03/15/04 500,000 486,250
-------
General Obligation - 0.20%
United States Leasing International,
8.45% due 01/25/05 200,000 220,860
-------
Hotels & Restaurants - 0.49%
Prime Hospitality Corporation,
9.75% due 04/01/07 500,000 530,000
-------
Industrials - 7.56%
Alvey Systems, Incorporated,
11.375% due 01/31/03 250,000 257,500
Berry Plastics Corporation,
12.25% due 04/15/04 650,000 713,375
CFP Holdings, Incorporated,
11.625% due 01/15/04 250,000 240,000
Coleman Escrow Corporation,
zero coupon due 05/15/01 750,000 480,000
Commonwealth Aluminum
Corporation, 10.75% due 10/01/06 400,000 430,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
52
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1997 - continued
(showing percentage of total value of investments)
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
Industrials - continued
Doane Products Company,
10.625% due 03/01/06 $250,000 $267,500
Exide Electronics Group, Incorporated,
Series B, 11.50% due 03/15/06 250,000 293,750
Foamex, L.P.,
9.875% due 06/15/07 375,000 386,250
Harnischfeger Industries, Incorporated,
6.875% due 02/15/27 600,000 620,424
Hollinger, Incorporated,
zero coupon due 10/05/13 1,500,000 571,875
ICG Holdings, Incorporated,
Step up to 13.50% due 09/15/05 500,000 407,500
Marcus Cable Company,
Step up to 14.25% due 12/15/05 750,000 630,000
Plastic Specialties & Technologies,
Incorporated, 11.25% due 12/01/03 500,000 540,000
Pueblo Xtra International,
9.50% due 08/01/03 500,000 500,000
Rayovac Corporation,
10.25% due 11/01/06 500,000 540,000
Terex Corporation,
13.25% due 05/15/02 333,000 371,295
Venture Holdings Trust,
9.75% due 04/01/04 390,000 382,200
Williams Scotsman, Incorporated,
9.875% due 06/01/07 500,000 517,500
---------
8,149,169
Insurance - 0.48%
Aetna Services, Incorporated,
7.625% due 08/15/26 500,000 517,875
-------
Leisure Time - 1.21%
Grand Casinos,
9.00% due 10/15/04 500,000 495,000
Trump Atlantic City Associates,
11.25% due 05/01/06 250,000 246,250
Wyndham Hotel Corporation,
10.50% due 05/15/06 500,000 566,250
---------
1,307,500
Metal & Metal Products - 0.51%
Algoma Steel, Incorporated,
12.375% due 07/15/05 250,000 287,500
Renco Metals, Incorporated,
11.50% due 07/01/03 250,000 263,750
-------
551,250
Other - 1.52%
American Media Operations,
Incorporated, 11.625% due 11/15/04 500,000 548,750
Herff Jones, Incorporated, Series B,
11.00% due 08/15/05 500,000 540,000
Hines Horticulture, Incorporated,
Series B, 11.75% due 10/15/05 500,000 550,000
---------
1,638,750
Paper - 0.24%
Stone Container Corporation,
12.25% due 04/01/02 $250,000 $259,688
-------
Pollution Control - 0.99%
Allied Waste Industries, Incorporated,
Step up to 11.30% due 06/01/07 750,000 506,250
Norcal Waste Systems, Incorporated,
Step up to 13.25% due 11/15/05 500,000 560,000
---------
1,066,250
Real Estate - 0.48%
Radnor Holdings Corporation,
10.00% due 12/01/03 500,000 517,500
-------
Retail Trade - 1.64%
Crown Paper Company,
11.00% due 09/01/05 250,000 266,875
Eye Care Centers of America,
Incorporated, 12.00% due 10/01/03 500,000 542,500
Hills Stores Company, Series B,
12.50% due 07/01/03 250,000 195,000
Staples, Incorporated,
7.125% due 08/15/07 750,000 767,025
---------
1,771,400
Telephone - 0.51%
NEXTEL Communications, Incorporated,
Step up to 9.75% due 10/31/07 750,000 414,375
Wireless One, Incorporated,
13.00% due 10/15/03 250,000 131,875
-------
546,250
Telecommunication Services - 3.50%
Adelphia Communications Corporation,
9.875% due 03/01/07 175,000 175,875
10.50% due 07/15/04 75,000 77,250
Cablevision Systems Corporation,
10.50% due 05/15/16 500,000 545,000
Comcast Cellular Holdings,
Incorporated, 9.50% due 05/01/07 500,000 517,500
International Cabletel, Incorporated,
Step up to 11.50% due 02/01/06 1,000,000 730,000
Nextlink Communications,
12.50% due 04/15/06 250,000 282,500
SFX Broadcasting, Incorporated,
10.75% due 05/15/06 250,000 271,250
Telewest Communications PLC,
Step up to 11.00% due 10/01/07 750,000 562,500
United International Holdings,
Incorporated, zero coupon
due 11/15/99 750,000 611,250
---------
3,773,125
</TABLE>
The accompanying notes are an integral part of the financial statements.
53
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1997 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
TFM SA DE CV,
Step up to 11.75% due 06/15/09 $500,000 $305,000
-------
TOTAL CORPORATE BONDS
(Cost $35,787,568) $37,128,698
----------
CONVERTIBLE BONDS - 0.24%
Fresenius Medical Care Capital
Trust, 9.00% due 12/01/06 250,000 259,375
-------
TOTAL CONVERTIBLE BONDS
(Cost $255,625) $259,375
-------
U.S. TREASURY OBLIGATIONS - 9.44%
U.S. Treasury Bonds - 1.50%
6.375% due 08/15/27 1,570,000 1,618,073
---------
U.S. Treasury Notes - 7.94%
3.375% due 01/15/07 360,000 355,162
5.875% due 09/30/02 1,300,000 1,306,708
6.125% due 08/15/07 2,760,000 2,819,947
6.25% due 08/31/02 4,000,000 4,078,120
---------
8,559,937
TOTAL U.S. TREASURY OBLIGATIONS (Cost
$10,068,722) $10,178,010
----------
U.S. GOVERNMENT
AGENCY OBLIGATIONS - 13.01%
Federal Home Loan Banks - 0.42%
5.89% due 07/24/00 450,000 450,702
-------
Federal Home Loan Mortgage Corporation - 1.77%
6.50% TBA** 700,000 688,625
8.50% due 05/01/08 534,302 557,309
10.00% due 05/15/20 589,343 657,300
---------
1,903,234
Federal National Mortgage Association - 10.39%
Interest Only due 03/17/20, REMIC 7,497,877 231,966
Interest Only due 10/17/36, REMIC 12,825,637 404,809
7.00% TBA** 7,500,000 7,523,400
7.50% TBA** 1,000,000 1,021,560
6.65% due 08/25/07, REMIC 1,200,000 1,227,000
8.80% due 01/25/19, REMIC 500,000 538,750
10.40% due 04/25/19, REMIC 127,785 143,838
13.00% due 11/15/15 93,329 112,243
----------
11,203,566
Student Loan Marketing Association - 0.43%
7.20% due 11/09/00 450,000 466,736
-------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS (Cost $13,802,065) $14,024,238
----------
FIXED INCOME - OTHER - 1.69%
Miscellaneous Asset Backed
Securities - 1.69%
Mid State Trust VI, Class A,
7.34% due 07/01/35 $1,739,977 $1,819,907
---------
TOTAL FIXED INCOME - OTHER
(Cost $1,739,708) $1,819,907
---------
FOREIGN BONDS - 0.37%
Treuhandanstalt,
7.375% due 12/02/02 DEM 630,000 401,836
-------
TOTAL FOREIGN BONDS
(Cost $398,209) $401,836
-------
FOREIGN GOVERNMENT OBLIGATIONS - 16.66%
Republic of Argentina - 1.52%
6.687% due 03/31/05 $1,920,000 1,636,800
---------
Commonwealth of Australia - 0.04%
8.75% due 08/15/08 AUD 50,000 39,445
------
Federal Republic of Brazil - 2.58%
10.125% due 05/15/27 $3,625,000 2,777,656
---------
Government of Canada - 0.65%
7.00% due 12/01/06 CAD 360,000 283,246
7.50% due 09/01/00 550,000 417,526
-------
700,772
Government of Costa Rica - 0.20%
Series B, 6.25% due 05/21/15 $300,000 219,000
-------
Kingdom of Denmark - 0.90%
6.00% due 11/15/02 DKK 5,230,000 819,133
8.00% due 03/15/06 860,000 147,672
-------
966,805
Republic of Ecuador - 0.47%
3.25% due 02/27/15 $710,810 507,340
-------
Federal Republic of Germany - 1.81%
5.25% due 10/20/98 DEM 2,930,000 1,719,960
6.00% due 07/04/07 390,000 232,647
---------
1,952,607
Republic of Italy - 0.88%
zero coupon due 07/31/98 ITL 1,680,000,000 949,106
-------
Government of Mexico - 4.04%
6.25% due 12/31/19, Series B $1,500,000 1,149,375
6.25% due 12/31/19, Series W-A 250,000 193,125
6.25% due 12/31/19, Series W-B 750,000 584,625
11.50% due 05/15/26 2,200,000 2,425,500
---------
4,352,625
Government of Morocco - 0.75%
FRN due 01/01/09 $1,000,000 $807,500
-------
Government of Panama - 0.66%
3.75% due 07/17/14 1,000,000 711,250
-------
</TABLE>
The accompanying notes are an integral part of the financial statements.
54
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1997 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
Kingdom of Sweden - 1.16%
6.50% due 10/25/06 SEK 2,300,000 310,556
11.00% due 01/21/99 6,600,000 940,711
---------
1,251,267
Republic of Venezuela - 1.01%
6.75% due 12/18/07 $1,250,000 1,089,063
---------
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS (Cost $18,154,850) $17,961,236
----------
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
WARRANTS - 0.04%*
Electronics - 0.04%
Exide Electronics Group (Expiration
date 03/15/06; strike price $13.475) 500 $38,000
------
Financial Services - 0.01%
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 7
------
TOTAL WARRANTS (Cost $0) $48,007
------
<CAPTION>
Principal
Amount Value
------ -----
<S> <C>
SHORT TERM INVESTMENT - 14.60%
$15,735,264 Navigator Securities Lending Trust $15,735,264
----------
REPURCHASE AGREEMENT - 9.49%***
$10,226,000 Repurchase Agreement with State
Street Bank & Trust Company
dated 10/31/97 at 5.55%, to be
repurchased at $10,230,730
on 11/03/97, collateralized by
$7,890,000 U.S. Treasury Bonds,
8.75% due 08/15/20 (valued at
$10,480,353, including interest)
and $85,000 U.S. Treasury Bonds,
8.125% due 08/15/21 (valued at
$106,856, including interest) $10,226,000
----------
TOTAL INVESTMENTS
(Strategic Income Fund) (Cost $106,168,011) $107,782,571
===========
</TABLE>
<TABLE>
<CAPTION>
Investment Quality Bond Fund
Principal
Amount Value
------ -----
<S> <C> <C>
CORPORATE BONDS - 34.23%
Apparel & Textiles - 0.18%
Clark-Schwebel, Incorporated,
10.50% due 04/15/06 $10,000 $10,800
Collins & Aikman Products Company,
11.50% due 04/15/06 25,000 28,375
------
39,175
Banking - 6.60%
BankAmerica Corporation,
9.50% due 04/01/01 114,000 125,226
Credit National, 7.00% due 11/14/05 150,000 150,375
Export-Import Bank of Korea,
6.375% due 02/15/06 200,000 171,498
First Financial Caribbean Corporation,
7.84% due 10/10/06 135,000 142,159
NBD Bancorp, 8.25% due 11/01/24 300,000 350,316
Republic New York Corporation,
9.75% due 12/01/00 155,000 169,855
U.S. Bancorp, 7.50% due 06/01/26 300,000 324,594
Western Financial Bank,
8.875% due 08/01/07 25,000 25,066
---------
1,459,089
Broadcasting - 0.27%
Granite Broadcasting Corporation,
10.375% due 05/15/05 25,000 25,250
Jacor Communications Company,
8.75% due 06/15/07 10,000 10,050
Young Broadcasting, Incorporated,
9.00% due 01/15/06 25,000 24,375
------
59,675
Business Services - 0.97%
International Lease Finance
Corporation, 7.50% due 03/01/99 200,000 203,882
Iron Mountain, Incorporated,
8.75% due 09/30/09 10,000 10,100
-------
213,982
Chemical Products - 0.32%
Huntsman Corporation,
9.50% due 07/01/07 15,000 15,562
Revlon Worldwide Corporation,
Series B, zero coupon due 03/15/01 40,000 27,400
Sovereign Specialty Chemicals,
9.50% due 08/01/07 5,000 5,138
Texas-Petro Chemical Corporation,
11.125% due 07/01/06 20,000 22,000
------
70,100
Crude Petroleum & Natural Gas - 1.16%
Cross Timbers Oil Company,
9.25% due 04/01/07 30,000 30,600
Newfield Exploration Company,
7.45% due 10/15/07 35,000 35,178
Petroliam Nasional BHD,
7.125% due 08/15/05 $150,000 $151,293
Petroleos Mexicanos,
8.85% due 09/15/07 40,000 39,388
-------
256,459
</TABLE>
The accopapny notes are an integral part of these financial statements.
55
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1997 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
7.00% due 10/15/26 $325,000 $334,623
Owens & Minor, Incorporated,
10.875% due 06/01/06 25,000 27,437
Quorum Health Group, Incorporated,
8.75% due 11/01/05 15,000 15,600
Tenet Healthcare Corporation,
7.875% due 01/15/03 110,000 111,375
Vencor, Incorporated,
8.625% due 07/15/07 30,000 29,175
-------
518,210
Electric Utilities - 1.78%
The Cleveland Electric Illuminating
Company, 7.19% due 07/01/00 125,000 126,406
Virginia Electric & Power Company,
9.375% due 06/01/98 262,000 267,264
-------
393,670
Financial Services -5.24%
American General Finance
Corporation, 8.00% due 02/15/05 230,000 238,475
Amerus Capital I,
8.85% due 02/01/27 100,000 106,798
BanPonce Financial Corporation,
6.75% due 08/09/01 250,000 254,535
Beneficial Corporation,
8.40% due 05/15/08 75,000 84,330
Japan Financial Corporation,
9.125% due 10/11/00 200,000 216,206
Neenah Corporation,
11.125% due 05/01/07 10,000 10,850
Pindo Deli Financial Mauritius, Ltd.,
10.75% due 10/01/07 10,000 9,250
Sun Canada Financial Company,
7.25% due 12/15/15 200,000 206,560
Tembec Finance Corporation,
9.875% due 09/30/05 30,000 31,650
---------
1,158,654
Food Stores - 0.09%
Stater Brothers Holdings,
Incorporated, 9.00% due 07/01/04 20,000 20,050
------
Homebuilders - 0.07%
Standard Pacific Corporation,
8.50% due 06/15/07 15,000 15,075
------
Industrials - 5.76%
Acindar Industria, Argentina,
11.25% due 02/15/04 $10,000 $10,000
Advanced Micro Devices,
Incorporated, 11.00% due 08/01/03 25,000 26,875
Argo-Tech Corporation,
8.625% due 10/01/07 30,000 29,850
Cabot Safety Acquisition
Corporation, 12.50% due 07/15/05 25,000 27,500
Cincinnati Milacron, Incorporated,
7.875% due 05/15/00 130,000 133,555
Container Corporation of America,
9.75% due 04/01/03 25,000 27,000
Decision Holdings Corporation,
Step-up to 11.50% due 08/01/08 10,000 6,100
Dime Capital Trust I,
9.33% due 05/06/27 150,000 169,485
EchoStar DBS Corporation,
12.50% due 07/01/02 10,000 10,625
Fairchild Semiconductor Corporation,
10.125% due 03/15/07 20,000 21,150
Globalstar L.P. Capital Corporation,
10.75% due 11/01/04 35,000 33,688
Guitar Center Management Company,
Incorporated, 11.00% due 07/01/06 17,000 18,870
Hylsa SA De CV,
9.25% due 09/15/07 25,000 23,000
International Wire Group, Incorporated,
11.75% due 06/01/05 15,000 16,388
Iridium LLC/Capital Corporation,
11.25% due 07/15/05 15,000 13,950
K & F Industries, Incorporated,
9.25% due 10/15/07 5,000 5,000
Key Plastics, Incorporated,
10.25% due 03/15/07 15,000 15,638
LDM Technologies, Incorporated,
10.75% due 01/15/07 20,000 21,800
Marcus Cable Operating Company,
Step-up to 13.50% due 08/01/04 45,000 40,725
Moog, Incorporated, Series B,
10.00% due 05/01/06 25,000 26,500
News America Holdings,
Incorporated, 9.25% due 02/01/13 250,000 292,707
Pioneer Americas Acquisiton
Corporation, 9.25% due 06/15/07 20,000 19,800
Plains Resources, Incorporated,
Series B, 10.25% due 03/15/06 50,000 53,250
Plitt Theaters, Incorporated,
10.875% due 06/15/04 15,000 16,350
RCN Corporation,
Step-up to 11.125% due 10/15/07 25,000 14,500
Repap New Brunswick, Incorporated,
10.625% due 04/15/05 25,000 24,625
Rifkin Acquisitions Partners, L.P.,
11.125% due 01/15/06 $25,000 $27,000
YPF Sociedad Anonima,
8.00% due 02/15/04 145,000 147,538
---------
1,273,469
Insurance - 1.98%
Jackson National Life Insurance
Company, 8.15% due 03/15/27 100,000 108,587
Ohio National Life Insurance
Company, 8.50% due 05/15/26 150,000 164,370
Security Benefit Life Company,
</TABLE>
The accompanying notes are an integral part of the financial statements.
56
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1997 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
8.75% due 05/15/16 150,000 165,878
-------
438,835
Leisure Time - 0.11%
Riviera Holdings Corporation,
10.00% due 08/15/04 25,000 25,125
------
Metal Products - 0.32%
Howmet Corporation,
10.00% due 12/01/03 25,000 26,750
NS Group, Incorporated,
13.50% due 07/15/03 15,000 17,175
Sheffield Steel Corporation,
12.00% due 11/01/01 15,000 15,900
Silgan Holdings, Incorporated,
9.00% due 06/01/09 10,000 10,150
------
69,975
Non-Bank Finance - 0.99%
KFW International Financial, Incorporated,
9.125% due 05/15/01 200,000 219,688
-------
Publishing - 0.25%
S.D. Warren Company, Series B,
12.00% due 12/15/04 50,000 56,000
------
Retail Trade - 1.01%
J. Crew Group, Incorporated,
Step-up to 13.125 due 10/15/08 15,000 8,100
J.C. Penney Company, Incorporated,
7.40% due 04/01/37 200,000 216,106
-------
224,206
Steel - 0.07%
AK Steel Corporation,
9.125% due 12/15/06 15,000 15,600
------
Telecommunication Services - 1.23%
Heritage Media Services,
11.00% due 06/15/02 50,000 52,750
Tele-Communications, Incorporated,
9.25% due 04/15/02 200,000 218,578
-------
271,328
<CAPTION>
Principal
Amount Value
--------- -----
<S> <C> <C>
Telephone - 3.07%
Benedek Communications,
Step up to 13.25% due 05/15/06 $35,000 $24,500
Comcast Cable Communications,
8.50% due 05/01/27 150,000 171,279
Lenfest Communications,
Incorporated, 8.375% due 11/01/05 25,000 24,875
MobileMedia Communications,
Incorporated, 9.375% due 11/01/07 50,000 10,500
NEXTEL Communications, Incorporated,
Step up to 9.75% due 10/31/07 50,000 27,625
Rogers Cantel, Incorporated,
8.80% due 10/01/07 30,000 29,850
Teleport Communications,
Step-up to 11.125% due 07/01/07 40,000 31,300
U.S. West Capital Funding,
Incorporated, 6.95% due 01/15/37 150,000 152,205
WorldCom, Incorporated,
7.55% due 04/01/04 200,000 207,310
-------
679,444
Transportation - 0.30%
Johnstown American Industries,
Incorporated, 11.75% due 08/15/05 30,000 32,700
Southern Railway Company,
8.75% due 10/15/03 30,000 33,571
------
66,271
Transportation Equipment - 0.12%
Hayes Wheels International,
Incorporated, 11.00% due 07/15/06 10,000 11,100
Walbro Corporation, Series B,
9.875% due 07/15/05 15,000 15,375
------
26,475
TOTAL CORPORATE BONDS
(Cost $7,393,280) $7,570,555
---------
U.S. TREASURY OBLIGATIONS - 30.85%
U.S. Treasury Bonds - 27.69%
11.625% due 11/15/04 300,000 397,968
11.875% due 11/15/03 795,000 1,035,734
12.00% due 08/15/13 3,200,000 4,688,992
---------
6,122,694
U.S. Treasury Notes - 3.17%
5.75% due 10/31/00 700,000 700,434
-------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $6,648,592) $6,823,128
---------
U.S. GOVERNMENT
AGENCY OBLIGATIONS - 11.59%
Federal Home Loan Mortgage Corporation - 4.68%
6.00% due 10/01/03 - 09/25/22 955,302 935,486
6.50% due 06/15/23 100,000 100,500
---------
1,035,986
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
Federal National
Mortgage Association - 3.70%
4.50% due 01/25/98, REMIC $14,091 $14,016
6.25% due 11/25/19, REMIC 500,000 500,465
6.60% due 09/25/18, REMIC 300,000 302,718
-------
817,199
Government National
Mortgage Association - 3.21%
7.00% due 06/15/23 - 10/15/23 703,302 709,231
-------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS (Cost $2,478,784) $2,562,416
---------
FIXED INCOME - OTHER - 0.38%
Miscellaneous Asset Backed Securities - 0.38%
</TABLE>
The accompanying notes are an integral part of the financial statements.
57
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1997 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Premier Auto Trust, Series 1993,
Class A2, 4.65% due 11/02/99 23,688 23,510
Western Financial Grantor Trust, Series
1995, Class A1, 7.10% due 07/01/00 59,248 59,855
------
83,365
TOTAL FIXED INCOME - OTHER (Cost $82,257) $83,365
------
FOREIGN GOVERNMENT OBLIGATIONS - 0.92%
Republic of Argentina - 0.92%
11.00% due 10/09/06 210,000 204,225
-------
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS (Cost $232,475) $204,225
-------
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
PREFERRED STOCKS - 0.12%
Fairfield Manufacturing Company,
Incorporated 25 $25,875
------
TOTAL PREFERRED STOCKS (Cost $25,875) $25,875
------
<CAPTION>
Principal
Amount Value
--------- -----
<S> <C>
SHORT TERM INVESTMENT - 20.80%
$4,600,901 Navigator Securities Lending Trust $4,600,901
---------
REPURCHASE AGREEMENT - 1.10%
$244,000 Repurchase Agreement with Paine
Webber dated 10/31/97 at 5.67%,
to be repurchased at $244,115
on 11/03/97, collateralized
by $235,000 U.S. Treasury Notes,
7.75% due 11/30/99 (valued at
$251,940, including interest) $244,000
-------
TOTAL INVESTMENTS (Investment
Quality Bond Fund) (Cost $21,706,164) $22,114,465
==========
</TABLE>
National Municipal Bond Fund
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
LONG-TERM INVESTMENTS - 97.78%
Alabama - 2.54%
Alabama Housing Finance Authority
Single Family Mortgage Revenue
Collateralized Home Mortgage Program,
Series B-2, 6.40%, 04/01/25 $440,000 $457,530
-------
California - 5.79%
California Housing Finance Agency
Revenue, Series H, 6.15%, 08/01/16 1,000,000 1,043,050
---------
Colorado - 2.65%
E470 Public Highway Authority, Colorado
Revenue, Series A, 5.00%, 09/01/26 500,000 476,505
-------
Illinois - 9.36%
Illinois Health Facilities Authority
Revenue (Hospital Association
Project), 7.00%, 02/15/22 200,000 224,008
Chicago, Illinois Skyway Toll Bridging
Revenue, 5.375%, 01/01/16 500,000 500,170
Chicago, Illinois Wastewater Transmission
Revenue, 5.125%, 01/01/25 1,000,000 960,970
---------
1,685,148
Indiana - 2.93%
Indiana Health Facility Financing
Authority Hospital Revenue,
5.90%, 08/15/07 500,000 527,720
-------
Iowa - 0.94%
Iowa Finance Authority Hospital Facility
Revenue Refunding (Trinity Regional
Hospital Project), 7.00%, 07/01/12 150,000 168,727
-------
Louisiana - 2.82%
Louisiana Public Facilities Authority Hospital
Revenue Refunding (Touro Infirmary
Project), Series B, 6.125%, 08/15/23 500,000 508,795
-------
Maine - 0.14%
Maine State Housing Authority Mortgage
Purchase, Series A-4, 6.375%, 11/15/12 25,000 26,085
------
Massachusetts - 2.91%
Massachusetts State Special Obligation
Revenue, Series A, 5.50%, 06/01/13 500,000 524,050
-------
Missouri - 2.91%
Missouri State Health & Educational
Facilities Authority Revenue,
6.25%, 02/15/11 500,000 524,705
-------
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
Nebraska - 7.27%
Nebraska Higher Education Loan Program
Income Revenue, 6.65%, 06/01/08 $1,200,000 $1,309,536
---------
Nevada - 3.80%
Nevada Housing Division, Single-Family
Program, 6.35%, 10/01/12 350,000 364,052
Nevada Housing Division, Single-Family
Program, Series B-2, 6.95%, 10/01/26 300,000 320,028
-------
684,080
New Jersey - 3.11%
New Jersey Economic Development
Authority Water Facilities Revenue
(New Jersey American Water
Company, Incorporated Project),
6.875%, 11/01/34 500,000 560,930
-------
New York - 24.19%
</TABLE>
The accompanying notes are an integral part of the financial statements.
58
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1997 - continued
(showing percentage of total value of investments
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Metropolitan Transportation Authority,
New York Service Contract (Transit
Facilities), Series O, 6.25%, 07/01/14 375,000 408,210
New York State Local Government
Assistance Corporation, Series A,
6.00%, 04/01/16 1,000,000 1,067,360
New York State Dormitory Authority
Revenue, State University Educational
Facilities, Series A, 6.25%, 05/15/08 500,000 554,445
New York State Environmental Facilities
Corporation Pollution Control Revenue
Refunding (IBM Corporation Project),
7.125%, 07/01/12 580,000 629,950
New York State Mortgage Agency
Revenue, Series 40-A, 6.35%, 04/01/21 630,000 656,151
Triborough Bridging & Tunnel Authority
Revenue, Series Y, 5.50%, 01/01/17 1,000,000 1,041,000
----------
4,357,116
Ohio - 2.75%
Butler County, Ohio Transportation
Improvment District, Series A,
5.125%, 04/01/17 500,000 495,088
-------
Pennsylvania - 8.94%
Monroeville, Pennsylvania Hospitals
Authority Hospitals Revenue,
6.25%, 10/01/15 1,000,000 1,048,500
Philadelphia, Pennsylvania Water
& Wastewater Revenue,
6.25%, 08/01/12 500,000 561,270
----------
1,609,770
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
South Carolina - 2.87%
Greenville Hospital Systems
Hospital Facilities Revenue,
Series B, 5.70%, 05/01/12 $500,000 $517,415
-------
Tennessee - 2.75%
Humphreys County, Tennessee Industrial
Development Board Solid Waste Disposal
Revenue (E.I. Du Pont De Nemours &
Company Project), 6.70%, 05/01/24 450,000 495,450
-------
Texas - 0.53%
Texas State Veterans Housing
Assistance, 6.80%, 12/01/23 90,000 95,617
------
Virginia - 1.75%
Virginia State Housing Development
Authority Commonwealth Mortgage,
Subseries I-1, 6.55%, 07/01/17 300,000 314,982
-------
Wisconsin - 6.83%
Wisconsin Housing & Economic
Development Authority Home Ownership
Revenue, Series D, 6.10%, 07/01/24 160,000 163,021
Wisconsin State Health & Educational
Facilities Authority Revenue, Mercy
Hospital of Janesville, Incorporated,
6.60%, 08/15/22 1,000,000 1,066,750
---------
1,229,771
TOTAL LONG-TERM INVESTMENTS
(Cost $16,638,421) $17,612,070
----------
SHORT-TERM INVESTMENTS - 2.22%
South Carolina - 0.55%
Charleston County, South Carolina
Industrial Revenue Massey Coal Terminal
Corporation, VR, 4.00%, 01/01/07 100,000 100,000
-------
Virginia - 1.67%
Roanoke, Virginia Industrial Development
Authority Hospital Revenue Carilion
Health System, VR, 4.00%, 07/01/27 300,000 300,000
-------
TOTAL INVESTMENTS
(National Municipal Bond Fund)
(Cost $17,038,421) $18,012,070
==========
</TABLE>
U.S. Government Securities Fund
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
U.S. TREASURY OBLIGATIONS - 19.37%
U.S. Treasury Bonds - 0.65%
6.375% due 08/15/27 $800,000 $824,496
-------
U.S. Treasury Notes - 18.72%
5.00% due 01/31/98 5,000,000 4,992,950
5.875% due 09/30/02 2,000,000 2,010,320
6.125% due 08/15/07 3,750,000 3,831,450
6.25% due 08/31/02 12,750,000 12,999,007
----------
23,833,727
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $24,472,276) $24,658,223
----------
U.S. GOVERNMENT
AGENCY OBLIGATIONS - 45.35%
Federal Home Loan
Mortgage Corporation - 13.82%
6.00% due 09/01/10 - 10/01/10 613,006 605,914
6.50% TBA** 4,000,000 3,937,481
7.00% TBA** 9,600,000 9,734,976
7.00% due 04/15/21 1,292,752 1,309,852
</TABLE>
The accompanying notes are an integral part of the financial statements.
59
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1997 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
8.00% due 06/01/08 232,510 240,506
8.25% due 07/01/06 185,604 191,486
8.50% due 05/01/08 364,384 358,694
9.50% due 08/01/20 1,091,314 1,173,839
11.75% due 08/01/13 34,504 38,545
----------
17,591,293
Federal National
Mortgage Association - 26.51%
6.50% due 12/01/03 - 08/01/26 5,666,253 5,591,031
6.74% due 08/14/07 3,100,000 3,193,969
6.783 due 01/17/03, REMIC 1,345,755 1,364,679
6.909% due 06/25/16, REMIC 2,950,000 3,028,352
7.00% TBA** 5,900,000 5,918,408
7.00% due 05/01/26 - 11/01/26 3,958,620 3,978,414
7.50% TBA** 3,000,000 3,064,680
8.00% due 08/01/04 58,275 59,333
8.25% due 03/25/06, REMIC 675,000 738,065
8.50% due 08/01/02 134,340 138,196
11.00% due 02/01/15 606 685
11.50% due 04/01/19 392,311 449,152
12.00% due 02/01/16 - 04/01/16 2,089,315 2,439,602
12.50% due 08/01/11 - 07/01/15 1,496,556 1,762,429
13.00% due 11/15/15 1,286,471 1,547,183
14.50% due 11/01/14 383,817 476,953
----------
33,751,131
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
Government National
Mortgage Association - 5.02%
7.50% TBA** $1,000,000 $1,022,500
7.50% due 04/15/02 - 02/15/07 396,993 404,537
7.75% due 04/15/04 55,081 56,525
8.00% due 11/15/06 - 02/15/08 37,041 38,740
9.00% due 03/20/16 - 06/20/17 2,441,458 2,628,952
10.25% due 02/15/00 - 03/15/01 88,132 89,836
10.50% due 01/15/01 14,443 15,163
11.00% due 03/15/00 - 09/20/15 69,598 74,366
11.25% due 04/15/98 - 10/20/15 10,420 11,319
11.50% due 08/20/00 - 09/20/15 493,725 559,876
11.75% due 09/15/98 458 460
12.50% due 09/15/14 68,605 80,866
13.00% due 01/15/11 - 06/15/15 660,068 793,826
13.25% due 07/15/14 40,695 46,837
13.50% due 11/15/12 - 02/15/13 64,714 77,193
15.00% due 07/15/11 - 09/15/12 134,833 164,726
15.50% due 08/15/11 - 12/15/11 225,843 282,903
16.00% due 11/15/11 - 12/15/11 28,409 35,728
---------
6,384,353
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS (Cost $57,153,878) $57,726,777
----------
SHORT TERM INVESTMENT - 15.34%
$19,530,839 Navigator Securities Lending Trust $19,530,839
----------
REPURCHASE AGREEMENT - 19.93%***
$25,375,000 Repurchase Agreement with State
Street Bank & Trust Company
dated 10/31/97 at 5.55%, to be
repurchased at $25,386,736 on
11/03/97, collateralized by
$19,760,000 U.S. Treasury Bonds,
8.75% due 8/15/20 (valued at
$26,247,374, including interest) $25,375,000
----------
TOTAL INVESTMENTS (U.S. Government
Securities Fund) (Cost $126,531,993) $127,290,839
===========
</TABLE>
Money Market Fund
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
COMMERCIAL PAPER - 100.00%
American Greetings Corporation,
5.49% due 11/06/97 $900,000 $899,314
Bell Atlantic Financial Services,
5.50% due 11/05/97 900,000 899,450
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
COMMERCIAL PAPER - continued
Bil North America,
5.59% due 01/23/98 $600,000 $592,267
Block Financial Corporation,
5.52% due 11/14/97 900,000 898,206
Cargill, Incorporated,
5.51% due 12/08/97 900,000 894,903
Caterpillar Financial Services NV,
5.50% due 01/22/98 900,000 888,725
Cregem of North America,
Incorporated, 5.60% due 01/29/98 900,000 887,540
CXC, Incorporated,
5.62% due 01/29/98 900,000 887,496
Export Development Corporation,
5.53% due 01/26/98 900,000 888,111
General Electric Capital Corporation,
5.58% due 02/20/98 900,000 884,515
General Re Corporation
5.50% due 12/18/97 900,000 893,538
Goldman Sachs Group L.P.,
5.51% due 11/20/97 900,000 897,383
Grand Metro Capital Corporation,
5.54% due 01/07/98 900,000 890,721
Great Western Life & Annuity
Insurance, 5.52% due 11/07/97 900,000 899,172
Hasbro, Incorporated,
5.53% due 12/15/97 900,000 893,917
International Lease Finance
</TABLE>
The accompanying note are an integral part of the financial statements.
60
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1997 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Corporation, 5.53% due 01/23/98 900,000 888,525
Kimberly Clark Corporation,
5.52% due 11/06/97 900,000 899,310
Manitoba Hydro Electric Board,
5.51% due 11/05/97 800,000 799,510
Merrill Lynch & Company,
Incorporated, 5.55% due 01/08/98 900,000 890,565
JP Morgan & Company, Incorporated,
5.49% due 11/19/97 735,000 732,982
Nordbanken North America,
Incorporated, 5.51% due 11/21/97 395,000 393,791
PHH Corporation,
5.55% due 01/26/98 900,000 888,067
Province of British Columbia,
5.48% due 01/14/98 900,000 889,862
Toronto-Dominion Holdings,
5.54% due 01/26/98 900,000 888,089
United Parcel Service,
5.48% due 11/05/97 650,000 649,604
Xerox Corporation,
5.47% due 12/04/97 900,000 895,487
TOTAL COMMERCIAL PAPER $21,911,050
----------
TOTAL INVESTMENTS
(Money Market Fund) $21,911,050
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
61
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1997 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
Key to Currency Abbreviations
- -----------------------------
AUD - Australian Dollar
CAD - Canadian Dollar
DKK - Danish Krone
FRF - French Franc
DEM - German Deustche Mark
POUND - Great British Pound
HKD - Hong Kong Dollar
IEP - Irish Punt
ITL - Italian Lira
YEN - Japanese Yen
NLG - Netherland Guilder
NZD - New Zealand Dollar
NOK - Norwegian Krone
PKR - Pakistan Rupee
ESP - Spanish Peseta
SEK - Swedish Krona
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, 1997)
+ - Non-Income producing, issuer is in bankruptcy and
is in default of interest payments
* - Non-Income producing
** - Purchased on a forward commitment (Note 2)
*** - At October 31, 1997 a portion of this security was
pledged to cover forward commitments purchased.
The accompanying notes are an integral part of the financial statements.
62
<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, 1997, the Fund offered the
following thirteen portfolios: the International Small Cap Fund ("International
Small Cap"), the Small/Mid Cap Fund ("Small/Mid Cap"), the Global Equity Fund
("Global Equity"), the Growth Equity Fund ("Growth Equity"), the International
Growth and Income Fund ("International Growth and Income"), the Growth and
Income Fund ("Growth and Income"), the Equity-Income Fund ("Equity-Income,"
formerly Value Equity), the Balanced Fund ("Balanced"), the Strategic Income
Fund ("Strategic Income"), the Investment Quality Bond Fund ("Investment Quality
Bond"), the National Municipal Bond Fund ("National Municipal Bond"), the U.S.
Government Securities Fund ("U.S. Government Securities") and the Money Market
Fund ("Money Market").
The Fund offers Class A, Class B and Class C shares. Class A shares are sold
with a front-end sales charge up to 4.75%. Class B 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 Money Market
have the same expense structure and no distribution expense.
CypressTree Asset Management Corporation, Inc. ("CAM"), a wholly-owned
subsidiary of CypressTree Investments, Inc. ("CypressTree"), serves as
investment adviser and principal underwriter for the Fund, effective October 1,
1997, pursuant to approval by the Fund's Board of Trustees and the Fund's
shareholders. Previously, those services were provided to the Fund by NASL
Financial Services, Inc. ("NASL Financial"). CypressTree Funds Distributors,
Inc. ("CFD"), also a wholly-owned subsidiary of CypressTree, serves as
distributor for the Fund, effective October 1, 1997.
CypressTree, located in Boston, Massachusetts was formed in 1996 to acquire,
advise and distribute mutual funds through broker-dealers, banks and other
intermediaries.
2. SIGNIFICANT ACCOUNTING POLICIES. The policies described below are followed
when preparing the Funds' financial statements. These policies are in accordance
with generally accepted accounting principles ("GAAP").
Security Valuation. Securities held by Money Market and money market instruments
with remaining maturities of 60 days or less held by the other portfolios are
valued at either the amortized cost basis or original cost plus accrued
interest, both of which approximate current market value. All other securities
held by the Fund are valued at the last sale price as of the close of business
on a principal securities exchange (domestic or foreign) or, lacking any sales,
at the closing bid price. Securities traded only in the over-the-counter market
are valued at the last bid price quoted by brokers making markets in the
securities at the close of trading on the Exchange. Other assets and securities
for which no such quotation or valuations are readily available are valued at
their fair value as determined in good faith under consistently applied
procedures established by and under the general supervision of the Trustees.
Foreign Currency Translations. The accounting records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(i) market value of securities, other assets and other liabilities at the
current rate of exchange of such currencies against U.S. dollars; and
(ii) purchases and sales of securities, income and expenses at the rate of
exchange quoted on the respective dates of such transactions.
Gains and losses that arise from changes in foreign exchange rates have been
segregated from gains and losses that arise from changes in the market prices of
investments. These gains and losses are included with gains and losses on
foreign currency and forward foreign currency contracts in the Statements of
Operations.
63
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- ------------------------------------------------------------------------------
Note 2 - continued
Forward Foreign Currency Contracts. All portfolios with the exception of U.S.
Government Securities, National Municipal Bond and Money Market may purchase and
sell forward foreign currency contracts in order to hedge a specific transaction
or portfolio position.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held at the end of the period and the resulting net unrealized
appreciation (depreciation) and related net receivable or payable amount are
determined 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.
Forward Commitments. The Fund may make forward commitments to purchase and sell
securities. Delivery and payment for securities which have been purchased or
sold on a forward commitment basis can take place a month or more (not to exceed
120 days) after the date of the transaction. The price of the underlying
securities and the date when the securities will be delivered and paid for are
fixed at the time the transaction is negotiated. The value of the securities
underlying a forward commitment to purchase securities, and any subsequent
fluctuations in their value, is taken into account when determining the
portfolio's net asset value starting on the day the portfolio agrees to purchase
the securities. At October 31, 1997, forward commitments in Strategic Income and
U.S. Government Securities were valued at $9,233,585 and $23,678,045,
respectively.
Mortgage Dollar Rolls. Strategic Income and U. S. Government Securities may
enter into mortgage dollar rolls in which they sell mortgage-backed securities
for normal delivery in the current month and simultaneously contract to
repurchase similar, but not identical, securities at the same price on an agreed
upon date. The portfolio receives compensation as consideration for entering
into the commitment to repurchase. The compensation is recorded as deferred
income and amortized to income over the roll period. As the holder, the
counterparty receives all principal and interest payments, including
prepayments, made with respect to the similar security. Mortgage dollar rolls
may be renewed with a new sale and repurchase price with a cash settlement made
at renewal without physical delivery of the securities subject to the contract.
Securities Lending. The Fund may lend its portfolio securities in amounts up to
33% of its total non-cash assets to brokers, dealers and other financial
institutions, provided such loans are callable at any time and are at all times
fully collateralized by cash, cash equivalents, short term investments or
securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities, and marked to market to the value of the loaned securities on
a daily basis. The portfolio may bear the risk of delay in recovery of, or even
loss of rights in, the securities loaned should the borrower of the securities
fail financially. Consequently, loans of portfolio securities will only be made
to firms deemed by the Subadvisers to be creditworthy.
The portfolio receives compensation for lending its securities either in the
form of fees or by retaining a portion of interest on the investment of any cash
received as collateral. Income generated from the investment of cash collateral
is included as interest income in the Statements of Operations. All collateral
received will be in an amount equal to at least 100% of the market value of the
loaned securities and 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, 1997, the value of the securities loaned amounted to $788,465, $8,075,235,
$5,077,804, $6,485,700, $2,608,307, $7,198,951, $20,473,341, $4,074,129,
$15,396,390, $4,506,101 and $19,308,021 in International Small Cap, Small/Mid
Cap, Global Equity, Growth Equity, International Growth and Income, Growth and
Income, Equity-Income, Balanced, Strategic Income, Investment Quality Bond and
U.S. Government Securities, respectively. At October 31, 1997, the value of cash
collateral amounted to $825,701, $8,269,878, $5,455,720, $6,624,477, $2,744,366,
$7,286,228, $20,937,768, $4,144,267, $15,735,264, $4,600,901 and $19,530,839 in
International Small Cap, Small/Mid Cap, Global Equity, Growth Equity,
International Growth and Income, Growth and Income, Equity-Income, Balanced,
Strategic Income, Investment Quality Bond and U.S. Government Securities,
respectively.
64
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- ------------------------------------------------------------------------------
Note 2 - continued
Organization Costs. Costs incurred by each portfolio 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 are being amortized on a straight line basis over a five-year period.
Federal Income Taxes. The Fund's policy is for each portfolio to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code, as
amended, and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required. Each portfolio is
treated as a separate taxpayer for federal income tax purposes.
Distributions of Income and Gains. Distributions of net investment income are
declared as a dividend to shareholders of record as of the close of business
each day and are paid monthly for Strategic Income, Investment Quality Bond,
National Municipal Bond, U.S. Government Securities and Money Market, semi-
annually to shareholders of International Growth and Income and Growth and
Income, and annually to shareholders of International Small Cap, Small/Mid Cap,
Global Equity, Growth Equity, Equity-Income and Balanced. During any particular
year, net realized gains from investment, futures and foreign currency
transactions for each portfolio, in excess of available capital loss
carryforwards of each portfolio, would be taxable to the portfolio if not
distributed and, therefore, will be distributed to shareholders. An additional
distribution may be made to the extent necessary to avoid the payment of a
federal excise tax.
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, 1997:
<TABLE>
<CAPTION>
Capital Gain Distribution
-------------------------------
Portfolio 20% Rate Gain 28% Rate Gain
- --------------------------------- ------------- --------------
<S> <C> <C>
Small/Mid Cap.................... $207,502 $276,728
Global Equity.................... ---- 796,660
Growth Equity.................... 96,141 405,054
International Growth and Income.. 220,069 426,373
Growth and Income................ 5,730,464 6,431,749
Equity-Income.................... 493,431 1,117,848
Balanced......................... 172,725 6,133,008
Strategic Income................. 405,436 ----
</TABLE>
Capital Loss Carryforwards. At October 31, 1997, capital loss carryforwards
available to offset future recognized gains were approximately:
<TABLE>
<CAPTION>
Capital Loss Carryforwards
Expiration Year
---------------------------------------
Portfolio 2002 2003 2004 2005
- ---------------------------- -------- ---------- ------- --------
<S> <C> <C> <C> <C>
International Small Cap..... ---- ---- $54,000 $517,000
Investment Quality Bond..... $485,000 ---- ---- ----
National Municipal Bond..... ---- $214,000 ---- ----
U.S. Government Securities.. ---- 1,976,000 ---- ----
</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.
Note 2 - continued
65
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- ------------------------------------------------------------------------------
Repurchase and Reverse Repurchase Agreements. Each portfolio may enter into
repurchase agreements and, additionally, U.S. Government Securities may enter
into reverse repurchase agreements. When a portfolio enters into a repurchase
agreement through its custodian, it receives delivery of 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, U.S. Government
Securities may sell a debt security and agree to repurchase it at an agreed upon
time and at an agreed upon price.
Other. Investment security transactions are accounted for on the trade date.
Interest income is accrued as earned. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. All original issue discounts
are accreted for financial and federal income tax reporting purposes. The Fund
uses the First In, First Out method for determining realized gain or loss on
investments, futures and foreign currency for both financial and federal income
tax reporting purposes. The preparation of financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the
reported amount of assets, liabilities, income and expenses. Actual results may
differ from these estimates.
Capital Accounts. The Fund reports the accumulated undistributed net investment
income (loss) and accumulated undistributed net realized gain (loss) accounts on
a basis approximating amounts available for future tax distributions (or to
offset future taxable realized gains when a capital loss carryforward is
available). Accordingly, each portfolio of the Fund may periodically make
reclassifications among certain capital accounts without impacting the net asset
value.
3. CAPITAL SHARES. Share activity for the year ended October 31, 1997 is as
follows:
<TABLE>
<CAPTION>
Shares Capital
-------- -----------
<S> <C> <C>
International Small Cap - Class A
Sold............................... 172,223 $2,420,431
Redeemed........................... (97,424) (1,351,821)
------ ----------
Net increase...................... 74,799 $1,068,610
====== ==========
International Small Cap - Class B
Sold............................... 311,497 $4,351,711
Redeemed........................... (152,898) (2,152,252)
------- ----------
Net increase...................... 158,599 $2,199,459
======= ==========
International Small Cap - Class C
Sold............................... 287,465 $4,020,988
Redeemed........................... (187,448) (2,627,640)
------- ----------
Net increase...................... 100,017 $1,393,348
======= ==========
Small/Mid Cap - Class A
Sold............................... 195,283 $2,625,840
Redeemed........................... (161,404) (2,248,506)
------- ----------
Net increase...................... 33,879 $ 377,334
======= ==========
Small/Mid Cap - Class B
Sold............................... 399,400 $5,644,058
Redeemed........................... (158,565) (2,183,317)
------- ----------
Net increase...................... 240,835 $3,460,741
======= ==========
Small/Mid Cap - Class C
Sold............................... 742,841 $10,160,673
Redeemed........................... (519,604) (7,118,896)
------- -----------
Net increase...................... 223,237 $ 3,041,777
======= ===========
Global Equity - Class A
Sold............................... 464,254 $7,173,904
Reinvestment of distributions...... 208,420 2,882,299
Redeemed........................... (563,696) (8,611,676)
------- ----------
Net increase...................... 108,978 $1,444,527
======= ==========
</TABLE>
Note 3 - continued
<TABLE>
<CAPTION>
Shares Capital
-------- -----------
<S> <C> <C>
Global Equity - Class B
Sold............................... 399,551 $ 6,134,403
</TABLE>
66
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- ------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Reinvestment of distributions............ 193,787 2,670,382
Redeemed................................. (407,472) (6,025,088)
------- ----------
Net increase............................ 185,866 $2,779,697
======= ==========
Global Equity - Class C
Sold..................................... 473,379 $ 7,118,221
Reinvestment of distributions............ 469,264 6,461,761
Redeemed................................. (1,660,187) (24,698,621)
--------- -----------
Net decrease............................ (717,544) ($11,118,639)
========= ===========
Growth Equity - Class A
Sold..................................... 126,280 $1,864,938
Reinvestment of distributions............ 2,321 32,171
Redeemed................................. (111,960) (1,666,958)
------- ----------
Net increase............................ 16,641 $ 230,151
======= ==========
Growth Equity - Class B
Sold..................................... 494,750 $7,629,840
Reinvestment of distributions............ 3,748 51,907
Redeemed................................. (309,407) (4,730,354)
------- ----------
Net increase............................ 189,091 $2,951,393
======= ==========
Growth Equity - Class C
Sold..................................... 521,137 $7,942,112
Reinvestment of distributions............ 6,399 88,628
Redeemed................................. (244,574) (3,717,442)
------- ----------
Net increase............................ 282,962 $4,313,298
======= ==========
International Growth & Income - Class A
Sold..................................... 167,110 $1,792,918
Reinvestment of distributions............ 35,116 372,765
Redeemed................................. (206,586) (2,209,558)
------- ----------
Net decrease............................ (4,360) $ (43,875)
======= ==========
International Growth & Income - Class B
Sold..................................... 334,333 $3,645,247
Reinvestment of distributions............ 98,555 1,060,875
Redeemed................................. (259,786) (2,818,848)
------- ----------
Net increase............................ 173,102 $1,887,274
======= ==========
International Growth & Income - Class C
Sold..................................... 227,165 $2,478,076
Reinvestment of distributions............ 61,067 656,479
Redeemed................................. (304,781) (3,276,447)
------- ----------
Net decrease............................ (16,549) $ (141,892)
======= ==========
Growth and Income - Class A
Sold..................................... 912,261 $18,629,321
Reinvestment of distributions............ 67,848 1,195,199
Redeemed................................. (450,673) (9,067,086)
------- -----------
Net increase............................ 529,436 $10,757,434
======= ===========
Growth and Income - Class B
Sold..................................... 787,724 $15,658,730
Reinvestment of distributions............ 115,717 2,014,284
Redeemed................................. (356,257) (7,090,345)
------- -----------
Net increase............................ 547,184 $10,582,669
======= ===========
<CAPTION>
Note 3 - continued
Shares Capital
--------- -----------
<S> <C> <C>
Growth and Income - Class C
Sold..................................... 882,662 $17,499,038
Reinvestment of distributions............ 245,065 4,269,417
Redeemed................................. (871,364) (17,278,615)
------- -----------
</TABLE>
67
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Net increase...................... 256,363 $ 4,489,840
========== ============
Equity-Income - Class A
(formerly Value Equity - Class A)
Sold............................... 592,754 $ 9,599,623
Reinvestment of distributions...... 442,599 6,338,505
Redeemed........................... (590,786) (9,345,352)
---------- ------------
Net increase...................... 444,567 $ 6,592,776
========== ============
Equity-Income - Class B
(formerly Value Equity - Class B)
Sold............................... 500,961 $ 8,087,441
Reinvestment of distributions...... 382,378 5,479,472
Redeemed........................... (356,308) (5,740,317)
---------- ------------
Net increase...................... 527,031 $ 7,826,596
========== ============
Equity-Income - Class C
(formerly Value Equity - Class C)
Sold............................... 824,546 $ 13,307,463
Reinvestment of distributions...... 1,218,941 17,554,558
Redeemed........................... (1,437,499) (22,895,681)
---------- ------------
Net increase...................... 605,988 $ 7,966,340
========== ============
Balanced - Class A
Sold............................... 234,801 $ 2,757,480
Reinvestment of distributions...... 125,521 1,380,732
Redeemed........................... (265,075) (3,120,596)
---------- ------------
Net increase...................... 95,247 $ 1,017,616
========== ============
Balanced - Class B
Sold............................... 279,360 $ 3,253,994
Reinvestment of distributions...... 160,862 1,766,281
Redeemed........................... (390,785) (4,597,129)
---------- ------------
Net increase...................... 49,437 $ 423,146
========== ============
Balanced - Class C
Sold............................... 406,687 $ 4,786,572
Reinvestment of distributions...... 737,223 8,183,433
Redeemed........................... (1,633,682) (19,221,203)
---------- ------------
Net decrease...................... (489,772) $ (6,251,198)
========== ============
Strategic Income - Class A
Sold............................... 728,750 $ 7,068,862
Reinvestment of distributions...... 108,211 1,049,234
Redeemed........................... (570,028) (5,577,914)
---------- ------------
Net increase...................... 266,933 $ 2,540,182
========== ============
Strategic Income - Class B
Sold............................... 883,892 $ 8,617,970
Reinvestment of distributions...... 178,435 1,729,297
Redeemed........................... (668,180) (6,506,732)
---------- ------------
Net increase...................... 394,147 $ 3,840,535
========== ============
<CAPTION>
Note 3 - continued
Shares Capital
---------- ------------
<S> <C> <C>
Strategic Income - Class C
Sold.................................. 1,643,552 $ 16,024,302
Reinvestment of distributions......... 209,694 2,033,928
Redeemed.............................. (827,696) (8,050,790)
---------- ------------
Net increase......................... 1,025,550 $ 10,007,440
========== ============
</TABLE>
68
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Quality Bond - Class A
Sold.................................. 71,210 $ 732,772
Reinvestment of distributions......... 39,782 410,260
Redeemed.............................. (311,082) (3,204,349)
---------- ------------
Net decrease......................... (200,090) ($2,061,317)
========== ============
Investment Quality Bond - Class B
Sold.................................. 85,547 $ 882,438
Reinvestment of distributions......... 22,683 233,667
Redeemed.............................. (122,683) (1,257,374)
---------- ------------
Net decrease......................... (14,453) ($141,269)
========== ============
Investment Quality Bond - Class C
Sold.................................. 93,047 $ 957,800
Reinvestment of distributions......... 34,695 357,313
Redeemed.............................. (277,224) (2,834,680)
---------- ------------
Net decrease......................... (149,482) ($1,519,567)
========== ============
National Municipal Bond - Class A
Sold.................................. 34,409 $ 340,883
Reinvestment of distributions......... 17,041 167,921
Redeemed.............................. (214,451) (2,098,316)
---------- ------------
Net decrease......................... (163,001) ($1,589,512)
========== ============
National Municipal Bond - Class B
Sold.................................. 138,304 $ 1,351,243
Reinvestment of distributions......... 17,223 169,763
Redeemed.............................. (137,867) (1,352,138)
---------- ------------
Net increase......................... 17,660 $ 168,868
========== ============
National Municipal Bond - Class C
Sold.................................. 75,518 $ 739,075
Reinvestment of distributions......... 17,180 169,430
Redeemed.............................. (151,759) (1,490,977)
---------- ------------
Net decrease......................... (59,061) ($582,472)
========== ============
U.S. Government Securities - Class A
Sold.................................. 669,065 $ 6,537,020
Reinvestment of distributions......... 241,937 2,367,629
Redeemed.............................. (2,978,747) (29,121,804)
---------- ------------
Net decrease......................... (2,067,745) ($20,217,155)
========== ============
U.S. Government Securities - Class B
Sold.................................. 360,887 $ 3,536,454
Reinvestment of distributions......... 59,099 578,306
Redeemed.............................. (727,741) (7,114,391)
---------- ------------
Net decrease......................... (307,755) ($2,999,631)
========== ============
U.S. Government Securities - Class C
Sold.................................. 447,002 $ 4,382,934
Reinvestment of distributions......... 71,244 697,491
Redeemed.............................. (1,079,330) (10,556,239)
---------- ------------
Net decrease......................... (561,084) ($5,475,814)
========== ============
<CAPTION>
Note 3 - continued
Shares Capital
---------- ------------
<S> <C> <C>
Money Market - Class A
Sold.................................. 22,410,945 $ 22,410,945
Reinvestment of distributions......... 360,144 360,144
Redeemed.............................. (19,800,772) (19,800,772)
---------- ------------
Net increase......................... 2,970,317 $ 2,970,317
========== ============
Money Market - Class B
Sold.................................. 12,033,916 $ 12,033,916
Reinvestment of distributions......... 140,200 140,200
</TABLE>
69
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Redeemed....................... (11,905,013) (11,905,013)
---------- ------------
Net increase.................. 269,103 $ 269,103
========== ============
Money Market - Class C
Sold........................... 25,707,878 $ 25,707,878
Reinvestment of distributions.. 413,794 413,794
Redeemed....................... (28,422,359) (28,422,359)
---------- ------------
Net decrease.................. (2,300,687) ($2,300,687)
========== ============
</TABLE>
4. PURCHASES AND SALES OF SECURITIES. The following table summarizes the
securities transactions (excluding short-term investments) for all portfolios,
excluding Money Market, for the year ended October 31, 1997:
<TABLE>
<CAPTION>
Purchases Sales
------------------------------- -------------------------------
Portfolio U.S. Government Other Issues U.S. Government Other Issues
- ------------- --------------- ------------ --------------- ------------
<S> <C> <C> <C> <C>
International Small Cap..... ------ $13,054,320 ------ $10,116,164
Small/Mid Cap............... ------ 39,534,750 ------ 31,758,158
Global Equity............... ------ 33,594,967 ------ 49,139,337
Growth Equity............... ------ 38,240,278 ------ 31,056,219
International Growth &
Income..................... ------ 44,457,195 ------ 46,765,504
Growth and Income........... ------ 76,543,522 ------ 60,801,046
Equity-Income............... ------ 50,835,159 ------ 56,298,121
Balanced.................... $37,104,092 159,372,045 $39,073,661 170,785,929
Strategic Income............ 135,831,918 85,570,061 126,895,345 74,323,552
Investment Quality Bond..... 6,348,699 5,737,170 9,418,927 6,542,949
National Municipal Bond..... ------ 5,194,807 ------ 7,583,403
U.S. Government Securities.. 697,334,984 ------ 727,955,964 1,638
</TABLE>
Purchases and sales (maturities) for Money Market for the year ended October 31,
1997 were $298,340,840 and $299,453,404, respectively.
At October 31, 1997, 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>
International Small Cap........ $ 16,514,960 $ 1,286,019 $ 2,091,109 $ 805,090
Small/Mid Cap.................. 34,089,075 4,065,958 4,552,518 486,560
Global Equity.................. 111,961,391 17,859,975 21,049,018 3,189,043
Growth Equity.................. 29,587,604 2,142,566 2,687,508 544,942
International Growth and Income 30,521,225 (1,099,291) 1,573,567 2,672,858
Growth and Income.............. 141,727,418 52,803,118 55,091,521 2,288,403
Equity-Income.................. 166,158,489 23,106,987 25,266,549 2,159,562
Balanced....................... 98,840,109 4,656,235 5,484,615 828,380
Strategic Income............... 106,173,768 1,608,803 3,023,490 1,414,687
Investment Quality Bond........ 21,747,300 367,165 517,146 149,981
National Municipal Bond........ 17,038,421 973,649 976,395 2,746
U.S. Government Securities..... 126,547,306 743,533 819,001 75,468
</TABLE>
5. INVESTMENT ADVISORY AGREEMENTS. The Fund maintains an Investment Advisory
Agreement with CAM ("the Adviser"), effective October 1, 1997, pursuant to
approval by the Fund's Board of Trustees and Fund shareholders. Previously, NASL
Financial was the Fund's investment adviser. The investment advisory fee and
expense limitation were the same for CAM and NASL Financial for the respective
periods they advised the Funds during the year ended October 31, 1997. 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:
70
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- --------------------------------------------------------------------------------
<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>
International Small Cap.......... 1.050% 1.000% .900% .800%
Small/Mid Cap.................... .925% .900% .875% .850%
Global Equity.................... .900% .900% .700% .700%
Growth Equity.................... .900% .850% .825% .800%
International Growth and Income.. .900% .850% .800% .750%
Growth and Income................ .725% .675% .625% .550%
Equity-Income.................... .800% .700% .600% .600%
Balanced......................... .775% .725% .675% .625%
Strategic Income................. .750% .700% .650% .600%
Investment Quality Bond.......... .600% .600% .525% .475%
National Municipal Bond.......... .600% .600% .600% .600%
U.S. Government Securities....... .600% .600% .525% .475%
Money Market..................... .200% .200% .200% .145%
</TABLE>
For the year ended October 31, 1997, NASL Financial and CAM paid aggregate
subadvisory fees of $2,949,885. In addition, net investment advisory fees
retained by NASL Financial and CAM after payment of subadvisory fees were
$3,103,404 and $274,504, respectively, allocated among the portfolios as
follows:
<TABLE>
<CAPTION>
Fee % of Net Assets Fee Retained Fee % of Net Assets
Paid to Paid to by NASL Retained Retained
Portfolio Subadviser Subadviser Financial by CAM by Advisers
- ---------- ------------ --------------- -------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
International Small Cap.......... $108,728 .62% $56,613 $10,296 .38%
Small/Mid Cap.................... 123,209 .42% 79,822 14,052 .32%
Global Equity.................... 578,158 .47% 476,034 52,124 .43%
Growth Equity.................... 99,355 .40% 68,399 11,085 .32%
International Growth and Income.. 155,924 .53% 111,506 13,233 .43%
Growth and Income................ 467,961 .25% 596,669 47,639 .34%
Equity-Income.................... 506,265 .30% 573,801 48,210 .37%
Balanced......................... 339,031 .35% 367,284 29,569 .41%
Strategic Income................. 254,934 .31% 282,791 23,787 .37%
Investment Quality Bond.......... 42,747 .24% 67,862 3,384 .40%
National Municipal Bond.......... 45,768 .25% 60,237 3,837 .35%
U.S. Government Securities....... 212,772 .25% 338,483 16,136 .42%
Money Market..................... 15,033 .07% 23,903 1,152 .11%
</TABLE>
Note 5 - continued
Expense Reimbursement and Distribution Plan. Pursuant to the Investment
Advisory Agreement, the Adviser will reduce the advisory fee or if necessary
reimburse each portfolio of the Fund (excluding taxes, portfolio brokerage
commissions, interest, certain litigation and indemnification expenses,
extraordinary expenses and all of the portfolio's distribution fees) for
expenses incurred in excess (Expense limitation) of the following annual
percentages of average net assets as highlighted in the table below.
The Fund has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940 to use its assets to finance certain
activities relating to the distribution of its shares to investors. The Plan is
a "compensation" plan providing for the payment by each portfolio, other than
Money Market, of a monthly distribution fee to the Adviser as principal
underwriter for the Fund as highlighted in the table below:
71
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Portfolio Class A Class B Class C
- ---------- --------- --------- ---------
<S> <C> <C> <C>
International Small Cap
Management fees................. 1.050% 1.050% 1.050%
Other expenses.................. 0.500% 0.500% 0.500%
------ ------ ------
Expense limitation.............. 1.550% 1.550% 1.550%
====== ====== ======
Rule 12b-1 fees................. 0.350% 1.000% 1.000%
====== ====== ======
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%
====== ====== ======
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%
====== ====== ======
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%
====== ====== ======
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%
====== ====== ======
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%
====== ====== ======
</TABLE>
Note 5 - continued
<TABLE>
<CAPTION>
Portfolio Class A Class B Class C
- ---------- --------- --------- ---------
<S> <C> <C> <C>
Equity-Income
Management fees................. 0.800% 0.800% 0.800%
Other expenses.................. 0.265% 0.265% 0.265%
------ ------ ------
Expense limitation.............. 1.065% 1.065% 1.065%
====== ====== ======
Rule 12b-1 fees................. 0.350% 1.000% 1.000%
====== ====== ======
Balanced
Management fees................. 0.775% 0.775% 0.775%
Other expenses.................. 0.265% 0.265% 0.265%
------ ------ ------
</TABLE>
72
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Expense limitation.............. 1.040% 1.040% 1.040%
====== ====== ======
Rule 12b-1 fees................. 0.350% 1.000% 1.000%
====== ====== ======
Strategic Income
Management fees................. 0.750% 0.750% 0.750%
Other expenses.................. 0.400% 0.400% 0.400%
------ ------ ------
Expense limitation.............. 1.150% 1.150% 1.150%
====== ====== ======
Rule 12b-1 fees................. 0.350% 1.000% 1.000%
====== ====== ======
Investment Quality Bond
Management fees................. 0.600% 0.600% 0.600%
Other expenses.................. 0.300% 0.300% 0.300%
------ ------ ------
Expense limitation.............. 0.900% 0.900% 0.900%
====== ====== ======
Rule 12b-1 fees................. 0.350% 1.000% 1.000%
====== ====== ======
National Municipal Bond
Management fees................. 0.600% 0.600% 0.600%
Other expenses.................. 0.240% 0.240% 0.240%
------ ------ ------
Expense limitation.............. 0.840% 0.840% 0.840%
====== ====== ======
Rule 12b-1 fees................. 0.150% 1.000% 1.000%
====== ====== ======
U.S. Government Securities
Management fees................. 0.600% 0.600% 0.600%
Other expenses.................. 0.300% 0.300% 0.300%
------ ------ ------
Expense limitation.............. 0.900% 0.900% 0.900%
====== ====== ======
Rule 12b-1 fees................. 0.350% 1.000% 1.000%
====== ====== ======
Money Market
Management fees................. 0.200% 0.200% 0.200%
Other expenses.................. 0.300% 0.300% 0.300%
------ ------ ------
Expense limitation.............. 0.500% 0.500% 0.500%
====== ====== ======
</TABLE>
In accordance with the Investment Advisory agreement, the Advisers, in addition
to providing advisory services, provide accounting and administrative services
for which NASL Financial and CAM charged $1,435,586 and $197,882, respectively
to the Fund, before reimbursement based on expense limitations, for the year
ended October 31, 1997.
6. TRUSTEE'S FEES. The Fund pays each Trustee who is not an employee or a
director of the Adviser or its affiliates a fee of $750 plus travel expenses for
each Board of Trustees meeting attended and an annual retainer of $3,000.
7. COMMITMENTS. At October 31, 1997, International Small Cap, Global Equity,
International Growth and Income, Balanced and Strategic Income had entered into
forward foreign currency contracts which contractually obligate the portfolio to
deliver currencies at future dates. Open sale and purchase contracts at October
31, 1997 were as follows:
<TABLE>
<CAPTION>
Net
Contracts Unrealized
to In Exchange Settlement Appreciation
Deliver For Date Value (Depreciation)
------------- ------------ ------------ --------- --------------
<S> <C> <C> <C> <C> <C>
International Small Cap
Sales
Australian Dollar.... 11,963 $8,249 11/03/97 $8,413 ($164)
French Franc......... 15,066 2,595 11/03/97 2,612 (17)
Indonesian Rupiah.... 3,229,753 897 11/03/97 896 1
Netherlands Guilder.. 66,398 33,790 11/03/97 34,199 (409)
Spanish Peseta....... 3,455,485 23,507 11/03/97 23,754 (247)
Swedish Krona........ 234,462 31,011 11/03/97 31,303 (292)
</TABLE>
73
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
French Franc...................... 12,082 2,094 11/04/97 2,095 (1)
Great British Pound............... 157,397 262,538 11/04/97 264,073 (1,535)
Indonesian Rupiah................. 1,482,105 412 11/04/97 411 1
Japanese Yen...................... 7,922,016 65,471 11/04/97 65,825 (354)
Indonesian Rupiah................. 6,521,262 1,776 11/05/97 1,809 (33)
Swedish Krona..................... 579,683 76,845 11/05/97 77,395 (550)
-------- -------- -------
$509,185 $512,785 ($3,600)
======== ======== =======
Purchases
$7,180 DEM 12,400 11/03/97 $7,193 $13
4,591 [_] 2,767 11/03/97 4,643 52
------- ------- -------
$11,771 $11,836 65
======= ======= =======
($3,535)
=======
Global Equity
Sales
French Franc...................... 33,000,000 $ 6,461,339 12/03/97 $5,732,155 $729,184
French Franc...................... 8,001,257 1,390,000 12/05/97 1,390,013 (13)
Netherlands Guilder............... 8,500,000 4,130,826 02/25/98 4,406,860 (276,034)
----------- ----------- --------
$11,982,165 $11,529,028 $453,137
=========== =========== ========
Purchases
$1,105,329 FRF 6,500,000 12/05/97 $1,129,208 $23,879
========== =========== ========
$477,016
========
International Growth and Income
Sales
Belgian Franc..................... 16,039,402 $449,065 11/04/97 $451,687 ($2,622)
Netherlands Guilder............... 893,879 457,761 11/04/97 460,407 (2,646)
Australian Dollar................. 2,618,479 1,916,282 11/20/97 1,842,188 74,094
Canadian Dollar................... 824,623 588,375 11/20/97 585,692 2,683
Great British Pound............... 519,527 868,000 11/20/97 870,886 (2,886)
Hong Kong Dollar.................. 3,388,345 433,625 11/20/97 436,371 (2,746)
Japanese Yen...................... 319,287,285 2,700,209 11/20/97 2,660,587 39,622
New Zealand Dollar................ 1,708,201 1,094,273 11/20/97 1,062,335 31,938
Singapore Dollar.................. 997,920 630,000 11/20/97 631,728 (1,728)
---------- ---------- --------
$9,137,590 $9,001,881 $135,709
========== ========== ========
Purchases
$906,826 DEM 1,570,395 11/04/97 $911,008 $4,182
41,211 PKR 1,813,500 11/04/97 41,210 (1)
87,870 AUD 118,562 11/20/97 83,413 (4,457)
222,357 CAD 307,075 11/20/97 218,101 (4,256)
3,080,000 DEM 5,333,351 11/20/97 3,097,556 17,556
1,302,000 [_] 156,411,880 11/20/97 1,303,363 1,363
180,000 NZD 287,288 11/20/97 178,665 (1,335)
---------- ---------- --------
$5,820,264 $5,833,316 13,052
========== ========== ========
$148,761
========
</TABLE>
Note 7 - continued
<TABLE>
<CAPTION>
Net
Contracts Unrealized
to In Exchange Settlement Appreciation
Deliver For Date Value (Depreciation)
------------ ------------- ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Balanced
Purchases
$1,227,525 CAD 1,727,005 11/10/97 $1,225,391 ($2,134)
========== ========== ======
Strategic Income
Sales
German Deutsche Mark...... 1,788,254 $1,032,664 11/03/97 $ 1,037,391 ($4,727)
Irish Punt................ 672,235 1,009,059 11/03/97 1,010,975 (1,916)
Australian Dollar......... 48,397 35,330 12/19/97 34,074 1,256
</TABLE>
74
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Canadian Dollar............ 2,161,193 1,570,000 12/19/97 1,537,385 32,615
German Deutsche Mark....... 3,981,186 2,274,372 12/19/97 2,316,169 (41,797)
Great British Pound........ 392,304 631,610 12/19/97 656,808 (25,198)
Irish Punt................. 2,241,863 3,254,070 12/19/97 3,368,993 (114,923)
Italian Lira............... 2,623,297,822 1,510,252 12/19/97 1,547,233 (36,981)
----------- ----------- ---------
$11,317,357 $11,509,028 ($191,671)
=========== =========== =========
Purchases
$809,886 DKK 5,340,876 11/03/97 $814,903 $5,017
860,000 CAD 1,183,713 12/19/97 842,045 (17,955)
3,392,776 DEM 5,942,946 12/19/97 3,457,479 64,703
664,218 [_] 406,249 12/19/97 680,156 15,938
3,344,336 IEP 2,268,226 12/19/97 3,408,610 64,274
606,045 ITL 1,041,882,006 12/19/97 614,507 8,462
---------- ---------- --------
$9,677,261 $9,817,700 $140,439
========== ========== ========
($51,232)
========
</TABLE>
- --------------------------------------------------------------------------------
Federal Income Tax Information - (Unaudited)
Exempt Interest Dividends. National Municipal Bond designates all dividends
paid during the fiscal year ended October 31, 1997 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, 1998.
Corporate Dividends-Received Deduction Information. Listed below, for each
applicable portfolio, are the percentages of ordinary income distributions which
qualify for the corporate dividends-received deduction.
<TABLE>
<CAPTION>
Portfolio Percentage
- ----------- --------------
<S> <C>
Global Equity.......... 88%
Growth and Income...... 100%
Equity-Income.......... 100%
Balanced............... 68%
</TABLE>
75
<PAGE>
Trustees Transfer and Dividend Agent
Bradford K. Gallagher,Chairman State Street Bank and Trust
William F. Achtmeyer Company
Don B. Allen P.O. Box 8505
William F. Devin Boston, MA 02266-8505
Kenneth J. Lavery
Officers Independent Accountants
Bradford K. Gallagher, President Coopers & Lybrand L.L.P.
Joseph T.Grause, Jr., Vice President One Post Office Square
and Treasurer Boston, MA 02109
John I. Fitzgerald, Secretary
Paul F. Foley, Assistant Secretary Promotional Agent
Thomas J. Brown, Assistant Treasurer Wood Logan Associates, Inc.
1455 East Putman Avenue
Old Greenwich, CT 06870-1367
Distributor
Cypress Tree Funds Distributors, Inc. North American Funds
Boston, MA
Adviser 800-872-8037
Cypress Tree Asset Management
Corporation
