<PAGE>
SUPPLEMENT TO PROSPECTUS FOR
NORTH AMERICAN FUNDS
DATED MARCH 1, 1999, AS REVISED MAY 13, 1999
The investment objective of the International Equity Fund (the "International
Fund") as stated on page 3 of the Prospectus has been approved by the Board of
Trustees of North American Funds("Trustees"), but is subject to approval by the
international Fund's shareholders. A meeting of the International Fund's
shareholders has been called for June 2, 1999 for the purpose of voting on such
approval. Until this approval is obtained, the investment objective of the Fund
is to seek long-term growth of capital and income. In addition to the investment
strategies described on page 25 of the Prospectus, MSAM presently also considers
an additional dividend yield factor when making country and sector weightings.
This additional factor will be eliminated if shareholders approve the proposed
investment objective stated on page 3 of the Prospectus, which does not include
an income component.
May 13, 1999
<PAGE>
Prospectus
- --------------------------------------------------------------------------------
1999
[GRAPHIC]
[NORTH AMERICAN FUNDS]
International Small Cap Fund
International Equity Fund
Global Equity Fund
Emerging Growth Fund
Small/Mid Cap Fund
Growth Equity Fund
Tax-Sensitive Equity Fund
Growth and Income Fund
Equity-Income Fund
Balanced Fund
Strategic Income Fund
Investment Quality Bond Fund
National Municipal Bond Fund
U.S. Government Securities Fund
Money Market Fund
The Securities and Exchange Commission has not approved or disapproved of these
securities or passed on the adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal offense.
March 1, 1999 as revised May 13, 1999
<PAGE>
Table of Contents
Organization of Information
Because this Prospectus includes information about fifteen different Funds, the
material is organized to help you find the information you are looking for.
o Section I of the Prospectus includes summaries of each Fund.
o Section II includes additional information about the Funds'
investment strategies, additional risk information and information
about the investment managers.
o Section III of the Prospectus includes information about how to
invest and manage your North American Funds account.
Section I: Summaries of the Funds ....................................Page 1
Summary of each Fund
1. Investment Goal
2 Principal Investment Strategies
3. Descriptions of Main Investment Risks
4. Investment Performance
Section II: Other Information about each Fund ........................Page 19
o Expenses
o Fund Management
o Other Risks of Investing
Section III: Investing in the Funds ..................................Page 42
This section includes the information you need about how to invest and how to
redeem shares. It also includes other important information about sales charges,
taxes and account privileges.
More Information
If you'd like more information than is included in this Prospectus, the back
cover lists a number of places to call or to visit for additional materials.
<PAGE>
Section I:
Fund Summaries
North American Funds (the "Trust") is a group of mutual funds that includes
fifteen separate investment portfolios, or Funds. Each Fund has a specific,
unique investment objective. Each Fund has a subadvisor, a firm responsible for
making investment decisions for the Fund.
The summaries on the next 15 pages describe each Fund's investment objective and
principal investment strategies, list the main risks of investing in the Fund,
and show the Fund's past investment performance. Explanations of the main risks
of investing in each Fund starts on page 17.
Below most of the Funds' descriptions are a chart and a table (the newer
Tax-Sensitive Equity and Emerging Growth Funds do not have charts and tables
because they were less than one year old as of December 31, 1998).
The bar chart shows how the investment returns of one class of each Fund's
shares have varied in the past ten years, or in the years since the Fund began
if it is less than ten years old. The bar chart does not reflect sales charges;
if it did, performance would be less than shown.
The Table (the Average Annual Total Return Table) following each bar chart shows
how that Fund's average annual returns for each Class of shares for the last
one, five and ten years (or since the Fund began, for newer Funds) compared to
returns of a broad-based securities market index. The table reflects sales
charges, including the maximum initial sales charge for Class A shares, and the
maximum applicable Deferred Sales Charge for Class B and Class C shares. Each
Fund's bar chart and Average Annual Total Return Table provides an indication of
the historical risk/return of an investment in the Fund.
It is important to remember that past performance does not predict future
performance, and that as with any investment, it is possible for investors to
lose money on investments in the Funds. An investment in any of the Funds is not
a deposit of a bank and is not insured by the Federal Deposit Insurance
Corporation or any other government agency.
1
<PAGE>
International Small Cap Fund
Investment Goal and Strategies
The investment objective of the International Small Cap Fund is to seek capital
appreciation. To achieve this objective, Founders Asset Management, LLC
("Founders"), the Fund's subadvisor, invests primarily in equity securities
issued by foreign companies with market capitalizations, or annual revenues, of
$1 billion or less.
These companies are located in both established and emerging economies
throughout the world. The Fund may invest in derivatives. Founders selects
securities based on its evaluation of their potential to offer capital
appreciation opportunities.
Main Investing Risks
o Currency Risk
o Derivatives Risk
o Equity Risk, including the risks associated with investing in smaller
companies
o Foreign Investment Risk
o Liquidity Risk
o Management Risk
The bar chart and table provide an indication of risk by showing the variability
of the Fund's historical returns.
[GRAPHIC]
================================================================================
Calendar Year Total Returns for A shares
Annual Total Return
'97 -0.36%
'98 10.18%
Best quarter: 1st quarter 1998 14.18%
Worst quarter: 3rd quarter 1998 -20.28%
================================================================================
Average Annual Total Returns as of 12/31/98
Past One Year Life of Fund
(since 3/4/96)
================================================================================
Class A 4.95% 5.21%
- --------------------------------------------------------------------------------
Class B 4.43% 5.03%
- --------------------------------------------------------------------------------
Class C 8.50% 6.33%
- --------------------------------------------------------------------------------
MSCI WORLD 18.80% 9.30%
ex-U.S. Index
================================================================================
2
<PAGE>
International Equity Fund
Investment Goal and Strategies
The investment objective of the International Equity Fund is to seek long-term
capital appreciation. Morgan Stanley Asset Management ("MSAM"), the Fund's
subadvisor, pursues this objective by investing primarily in accordance with
country and sector weightings determined by MSAM in equity securities of
non-U.S. issuers which, in the aggregate, replicate broad market indices.
MSAM seeks to maintain a diversified portfolio of international equity
securities based on a top-down approach that emphasizes country and sector
selection and weighting rather than individual stock selection. MSAM capitalizes
on the significance of country and sector selection in international equity
portfolio returns by over- and underweighting countries based on three factors:
(i) valuation, (ii) fundamental change, and (iii) short-term market momentum/
technicals.
The Fund may use various instruments that derive their values from those of
specified securities, indices, currencies or other points of reference for both
hedging and non-hedging purposes, Derivatives may include futures, options,
forward contracts, swaps, and structured notes. These derivatives, including
those used to manage risk, are themselves subject to risks of the different
markets in which they trade and, therefore, may not serve their intended
purposes.
Main Investing Risks
o Currency Risk
o Derivatives Risk
o Equity Risk
o Foreign Investment Risk
o Liquidity Risk
o Management Risk
The bar chart and table provide an indication of risk by showing the variability
of the Fund's historical returns.
[GRAPHIC]
================================================================================
Calendar Year Total Returns for A shares
Annual Total Return
'96 12.12%
'97 -0.47%
'98 8.19%
Best quarter: 4th quarter 1998 20.89%
Worst quarter: 3rd quarter 1998 -20.56%
================================================================================
Average Annual Total Returns as of 12/31/98
Past One Year Life of Fund
(since 1/9/95)
================================================================================
Class A 3.05% 5.56%
- --------------------------------------------------------------------------------
Class B 2.48% 5.66%
- --------------------------------------------------------------------------------
Class C 6.37% 6.27%
- --------------------------------------------------------------------------------
MSCI All Country World 14.45% 8.18%
EX-US Index
================================================================================
3
<PAGE>
Global Equity Fund
Investment Goal and Strategies
The investment objective of the Global Equity Fund is long-term capital
appreciation. To achieve this objective, Morgan Stanley Asset Management Inc.
("MSAM"), the Fund's subadvisor, invests in a globally diversified portfolio of
equity securities.
MSAM's investment focus is the selection of individual stocks, with an eye
toward value. To choose stocks for the Fund, MSAM identifies stocks that it
believes to be undervalued in relation to the issuer's assets, cash flow,
earnings and revenues. To decide whether or not these stocks are suitable for
investment, MSAM estimates the future value of these stocks using a mathematical
model.
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in equity securities and at least 20% of the Fund's total assets will
be invested in the common stocks of U.S. issuers. The Fund may invest up to 80%
of its total assets in foreign securities. Although the Fund expects to invest
primarily in securities listed on stock exchanges, it will also invest in equity
securities that are traded over-the-counter or that are not admitted to listing
on a stock exchange or dealt in on a regulated market. The Fund may invest in
derivatives.
Main Investing Risks
o Currency Risk
o Derivatives Risk
o Equity Risk, particularly the risk associated with investments in value
stocks
o Foreign Investment Risk
o Management Risk
The bar chart and table provide an indication of risk by showing the variability
of the Fund's historical returns.
[GRAPHIC]
================================================================================
Calendar Year Total Returns for C shares
Annual Total Return
'91 11.34%
'92 -2.87%
'93 29.56%
'94 1.20%
'95 6.43%
'96 10.71%
'97 19.98%
'98 10.59%
Best quarter: 4th quarter 1998 15.23%
Worst quarter: 3rd quarter 1998 -14.52%
================================================================================
Average Annual Total Returns as of 12/31/98
Past One Year Past Five Years Life of Fund* Life of Fund*
(Class A & B) (Class C)
================================================================================
Class A 5.98% 9.11% 8.83% N/A
- --------------------------------------------------------------------------------
Class B 5.56% 9.35% 9.06% N/A
- --------------------------------------------------------------------------------
Class C 9.59% 9.61% N/A 10.29%
- --------------------------------------------------------------------------------
MSCI WORLD 24.30% 15.70% 15.30% 13.70%
Index
================================================================================
*Inception dates: Class A and Class B - 4/1/94; Class C - 11/1/90
4
<PAGE>
Emerging Growth Fund
Investment Goal and Strategies
The investment objective of the Emerging Growth Fund is maximum capital
appreciation. Warburg Pincus Asset Management, Inc. ("Warburg"), the Fund's
subadvisor, pursues this objective by investing primarily in equity securities
of U.S. companies. The focus of the Fund is emerging growth companies, which
often are small or medium-size companies that reflect growth characteristics
such as positive earnings comparisons and potential for accelerated growth.
The Fund may also invest in high-quality bonds, and to a certain extent, foreign
securities. The Fund may invest in derivatives.
The Fund is not "diversified," which means that it may invest in a relatively
small number of issuers of securities, and its value may be affected very
significantly by the change in value of a single security.
Main Investing Risks
o Concentration Risk
o Credit Risk
o Currency Risk
o Derivatives Risk
o Equity Risk, particularly the risks associated with investing in smaller
companies
o Interest Rate Risk
o Liquidity Risk
o Foreign Investment Risk
o Management Risk
5
<PAGE>
Small/Mid Cap Fund
Investment Goal and Strategies
The investment objective of the Small/Mid Cap Fund is to seek long term capital
appreciation. To achieve this objective, Fred Alger Management, Inc. ("Alger"),
the Fund's subadvisor, ordinarily invests at least 65% of Fund total assets in
the stock of small-to mid-size companies with market capitalizations (total
value of outstanding securities) between $500 million and $5 billion.
The Fund can invest up to 35% of its total assets in the stocks of companies
that have total market capitalization of $5 billion or more. The Fund may also
invest up to 15% of its total assets in money market and other fixed income
securities, and up to 20% of its total assets in foreign securities. The Fund
may invest in derivatives.
Main Investing Risks
o Credit Risk
o Currency Risk
o Derivatives Risk
o Equity Risk, including the risks associated with investing in smaller
companies
o Foreign Investment Risk
o Interest Rate Risk
o Liquidity Risk
o Management Risk
The bar chart and table provide an indication of risk by showing the variability
of the Fund's historical returns.
[GRAPHIC]
================================================================================
Calendar Year Total Returns for A shares
Annual Total Return
'97 15.89%
'98 29.65%
Best quarter: 4th quarter 1998 28.45%
Worst quarter: 3rd quarter 1998 -16.39%
================================================================================
Average Annual Total Returns as of 12/31/98
Past One Year Life of Fund
(since 3/4/96)
================================================================================
Class A 23.50% 15.51%
- --------------------------------------------------------------------------------
Class B 23.55% 15.56%
- --------------------------------------------------------------------------------
Class C 27.58% 16.70%
- --------------------------------------------------------------------------------
S&P MidCap 19.11% 22.82%
400 Index
================================================================================
6
<PAGE>
Growth Equity Fund
Investment Goal and Strategies
The investment objective of the Growth Equity Fund is to seek long-term capital
growth. To achieve this goal, Founders Asset Management LLC ("Founders"), the
Fund's subadvisor, invests at least 65% of its total assets in the common stocks
of well-established, high-quality growth companies whose earnings are expected
by Founders to increase faster than the market average.
The Fund may invest in other types of equity securities that offer opportunities
for capital appreciation. The Fund may also invest in high-quality bonds. The
Fund may invest up to 100% of its total assets in American Depositary Receipts
(ADRs) and up to 30% of its total assets in foreign securities (other than
ADRs). The Fund may not invest more than 25% of its total assets in any one
foreign country. The Fund may invest in derivatives.
Main Investing Risks
o Credit Risk
o Currency Risk
o Derivatives Risk
o Equity Risk, including the particular risks associated with growth stocks
o Foreign Investment Risk
o Interest Rate Risk
o Management Risk
The bar chart and table provide an indication of risk by showing the variability
of the Fund's historical returns.
[GRAPHIC]
================================================================================
Calendar Year Total Returns for A shares
Annual Total Return
'97 25.37%
'98 25.13%
Best quarter: 4th quarter 1998 21.34%
Worst quarter: 3rd quarter 1998 -13.75%
================================================================================
Average Annual Total Returns as of 12/31/98
Past One Year Life of Fund
(since 3/4/96)
================================================================================
Class A 19.19% 20.37%
- --------------------------------------------------------------------------------
Class B 19.15% 20.69%
- --------------------------------------------------------------------------------
Class C 23.11% 21.66%
- --------------------------------------------------------------------------------
S&P 500 28.72% 28.20%
Index
================================================================================
7
<PAGE>
Tax-Sensitive Equity Fund
Investment Goal and Strategies
The Fund's investment objective is to maximize after-tax total return, with
emphasis on long-term growth of capital, primarily through investment in equity
securities of companies that appear to be undervalued. Standish, Ayer & Wood,
Inc., ("Standish"), the Fund's subadvisor, uses tax-sensitive strategies
designed to reduce the impact of federal income tax on the after-tax returns
actually achieved by the Fund's shareholders. The Fund focuses on medium to
large capitalization companies with above-average capital growth potential.
Standish emphasizes individual stock selection rather than attempting to time
which industries or sectors may perform best. Standish selects stocks for the
Fund's portfolio by:
o Using a mathematical model to identify companies that have strong and
consistent historic earnings, are valued attractively by the market, and have
improving growth prospects.
o Using fundamental research and qualitative analysis to evaluate the stocks
identified by the mathematical model. Standish looks for companies with
sustainable profit growth, proven management teams, attractive businesses,
and strong financial characteristics. To reduce the impact of federal and
state income taxes on the Fund's after-tax returns, the Fund:
o Minimizes sales of securities that result in capital gains. If this cannot be
avoided, the Fund will sell the securities with the smallest capital gains,
and will sell securities with long-term gains first.
o Sells securities to create capital losses, which can offset realized capital
gains.
o Favors low yield stocks and limits income-producing investments.
The Fund may invest in derivatives.
Main Investing Risks
o Derivatives Risk
o Equity Risk, including particular risks associated value stocks
o Foreign Investment Risk
o Management Risk
8
<PAGE>
Growth and Income Fund
Investment Goal and Strategies
The investment objective of the Growth and Income Fund is to provide long-term
growth of capital and income consistent with prudent investment risk. Wellington
Management Company, LLP ("Wellington Management"), the Fund's subadvisor,
pursues this objective by investing mostly in a diversified portfolio of common
stocks of U.S. issuers which Wellington Management believes are of high quality.
The Fund will typically invest in dividend-paying stocks of larger companies.
The Fund may invest up to 20% of its total assets in foreign securities.
To select stocks for the Fund, Wellington Management assesses a company and its
business environment, management, balance sheet, income statement, anticipated
earnings and dividends, and other related measures of Wellington Management will
also monitor and evaluate the economic and political climate and the principal
securities markets of the country in which each company is located. The Fund may
invest in derivatives.
Main Investing Risks
o Currency Risk
o Derivatives Risk
o Equity Risk, including particular risks associated with value stocks
o Foreign Investment Risk
o Management Risk
The bar chart and table provide an indication of risk by showing the variability
of the Fund's historical returns.
[GRAPHIC]
================================================================================
Calendar Year Total Returns for C shares
Annual Total Return
'92 8.29%
'93 9.20%
'94 2.11%
'95 26.78%
'96 20.90%
'97 31.64%
'98 25.39%
Best quarter: 4th quarter 1998 20.07%
Worst quarter: 3rd quarter 1998 -9.81%
================================================================================
Average Annual Total Returns as of 12/31/98
Past One Year Past Five Years Life of Fund* Life of Fund*
(Class A & B) (Class C)
================================================================================
Class A 20.22% 20.36% 22.03% N/A
- --------------------------------------------------------------------------------
Class B 20.45% 20.78% 22.42% N/A
- --------------------------------------------------------------------------------
Class C 24.39% 20.90% N/A 17.23%
- --------------------------------------------------------------------------------
S&P 500 28.72% 24.10% 26.50% 19.70%
Index
================================================================================
*Inception dates: Class A and Class B - 4/1/94; Class C - 5/1/91
9
<PAGE>
Equity-Income Fund
Investment Goal and Strategies
The investment objective of the Equity-Income Fund is to provide substantial
dividend income and also long term capital appreciation. To achieve this
objective, Global Alliance Value Investors, Ltd. ("GAVIL"), the Fund's
subadvisor, invests primarily in dividend-paying common stocks of companies that
also offer the opportunity for price appreciation.
The Fund will invest up to 100% of its assets in U.S. equity securities. The
Fund's portfolio is expected to include approximately 30 stocks. GAVIL selects
stocks based on relative dividend yield (a measure of the stock's current yield
relative to the yields available in the broader stock market) coupled with a
disciplined research approach.
Main Investing Risks
o Concentration Risk
o Credit Risk
o Equity Risk, particularly the risks associated with value stocks
o Management Risk
The bar chart and table provide an indication of risk by showing the variability
of the Fund's historical returns.
[GRAPHIC]
================================================================================
Calendar Year Total Returns for C shares
Annual Total Return
'90 -15.51%
'91 25.08%
'92 18.91%
'93 10.81%
'94 -2.19%
'95 23.80%
'96 18.26%
'97 28.32%
'98 7.71%
Best quarter: 4th quarter 1992 13.52%
Worst quarter: 3rd quarter 1990 -19.36%
================================================================================
Average Annual Total Returns as of 12/31/98
Past One Year Past Five Years Life of Fund* Life of Fund*
(Class A & B) (Class C)
================================================================================
Class A 3.21% 14.12% 14.91% N/A
- --------------------------------------------------------------------------------
Class B 2.68% 14.40% 15.20% N/A
- --------------------------------------------------------------------------------
Class C 6.71% 14.62% N/A 10.49%
- --------------------------------------------------------------------------------
S&P 500 28.72% 24.10% 26.50% 17.40%
Index
================================================================================
*Inception dates: Class A and Class B - 4/1/94; Class C - 8/28/89
10
<PAGE>
Balanced Fund
Investment Goal and Strategies
The investment objective of the Balanced Fund is current income and capital
appreciation. To achieve this goal, Founders Asset Management, LLC ("Founders"),
the Fund's subadvisor, invests in a balanced portfolio of common stocks, U.S.
and foreign government debt obligations and a variety of corporate fixed-income
securities.
Normally, the Fund will invest up to 75% of its total assets in common stocks,
convertible corporate obligations, and preferred stocks. The Fund emphasizes
investments in dividend-paying common stocks with the potential for increased
dividends, as well as capital appreciation.
The Fund also may invest in non-dividend-paying companies if, in Founders'
opinion, they offer better prospects for capital appreciation.
The Fund will maintain a minimum of 25% of its total assets in fixed-income,
investment-grade securities rated Baa or higher by Moody" Investors Service,
Inc. ("Moody's" or BBB or higher by Standard & Poor's Ratings Service ("S&P").
There is no maximum limit on the amount of straight debt securities in which the
Fund may invest. The Fund may invest in derivatives.
Main Investing Risks
o Credit Risk
o Currency Risk
o Derivatives Risk
o Equity Risk, including particular risks associated with value stocks
o Foreign Investment Risk
o Interest Rate Risk
o Management Risk
The bar chart and table provide an indication of risk by showing the variability
of the Fund's historical returns.
[GRAPHIC]
================================================================================
Calendar Year Total Returns for C shares
Annual Total Return
'90 -8.71%
'91 21.45%
'92 12.89%
'93 10.07%
'94 -2.80%
'95 23.53%
'96 10.15%
'97 16.30%
'98 13.12%
Best quarter: 2nd quarter 1997 10.31%
Worst quarter: 3rd quarter 1990 -11.34%
<TABLE>
<CAPTION>
==========================================================================================
Average Annual Total Returns as of 12/31/98
Past One Year Past Five Years Life of Fund* Life of Fund*
(Class A & B) (Class C)
==========================================================================================
<S> <C> <C> <C> <C>
Class A 8.40% 11.24% 12.26% N/A
- ------------------------------------------------------------------------------------------
Class B 8.07% 11.46% 12.45% N/A
- ------------------------------------------------------------------------------------------
Class C 12.12% 11.72% N/A 9.55%
- ------------------------------------------------------------------------------------------
S&P 500 28.72% 24.10% 26.50% 17.40%
Index
- ------------------------------------------------------------------------------------------
Lehman Brothers 8.69% 7.27% 8.33% 8.85%
Aggregate Bond Index
==========================================================================================
*Inception dates: Class A and Class B - 4/1/94; Class C - 8/28/89
</TABLE>
11
<PAGE>
Strategic Income Fund
Investment Goal and Strategies
The investment objective of the Strategic Income Fund is to seek a high level of
total return consistent with preservation of capital. To achieve this goal,
Salomon Brothers Asset Management Inc. ("SBAM"), the Fund's subadvisor, invests
in certain segments of the fixed-income market based on current economic and
market conditions and on the relative risks and opportunities in different
market segments. The segments that SBAM will consider for investment include:
U.S. Government obligations, investment grade domestic corporate debt, high
yield corporate debt securities, mortgage-backed securities and investment grade
and high yield international debt securities.
To select securities for the Fund, SBAM uses fundamental analysis as well as
mathematical, quantitative analytical techniques that measure relative risks and
opportunities of each type of security.
To maintain liquidity the Fund may invest up to 20% of its total assets in
high-quality short-term money market instruments (not including securities
relating to forward settlement of trades). The Fund may invest up to 100% of its
total assets in lower-rated securities, which are commonly called "junk bonds."
The Fund may invest in derivatives.
Main Investing Risks
o Credit Risk, including the particular risks associated with junk bonds
o Currency Risk
o Derivatives Risk
o Foreign Investment Risk
o Interest Rate Risk
o Management Risk
The bar chart and table provide an indication of risk by showing the variability
of the Fund's historical returns.
[GRAPHIC]
================================================================================
Calendar Year Total Returns for A shares
Annual Total Return
'94 -6.79%
'95 18.57%
'96 14.82%
'97 10.76%
'98 0.72%
Best quarter: 2nd quarter 1995 8.22%
Worst quarter: 1st quarter 1994 -5.76%
<TABLE>
<CAPTION>
==========================================================================================
Average Annual Total Returns as of 12/31/98
Past One Year Past Five Years Life of Fund* Life of Fund*
(Class A ) (Class B & C)
==========================================================================================
<S> <C> <C> <C> <C>
Class A -4.06% 6.16% 6.20% N/A
- ------------------------------------------------------------------------------------------
Class B -4.93% 6.22% N/A 7.88%
- ------------------------------------------------------------------------------------------
Class C -0.93% 6.53% N/A 8.20%
- ------------------------------------------------------------------------------------------
Lehman Brothers 8.69% 7.27% 6.97% 8.33%
Aggregate Bond Index
==========================================================================================
*Inception dates: Class A - 11/1/93; Class B and Class C - 4/1/94
</TABLE>
12
<PAGE>
Investment Quality Bond Fund
Investment Goal and Strategies
The investment objective of the Investment Quality Bond Fund is to provide a
high level of current income consistent with the maintenance of principal and
liquidity. Wellington Management Company, LLP ("Wellington Management"), the
Fund's subadvisor, invests primarily in a diversified portfolio of investment
grade corporate bonds and U.S. Government bonds with intermediate to longer term
maturities. The Fund strives to generate and maintain a high, steady and
possibly growing income stream.
Wellington Management's investment management process includes credit research
on issuers and particular securities, as well as sector analysis. In performing
sector analysis, Wellington Management analyzes differences among classes of
securities, issuers and industry sectors to seek to obtain value and yield
advantages.
At least 65% of the Fund's total assets will be invested in high quality,
marketable debt securities issued by U.S. and foreign companies that are
denominated in U.S. dollars, and securities that are either issued or that have
a guarantee as to principal or interest by the U.S. Government or its agencies
or instrumentalities, including mortgage-backed securities. The balance of the
Fund's investments may include lower-rated debt securities including junk bonds,
preferred stocks and convertible securities. The Fund may invest in derivatives.
Main Investing Risks
o Credit Risk, including the particular risks associated with junk bonds
o Currency Risk
o Derivatives Risk
o Foreign Investment Risk
o Interest Rate Risk
o Liquidity Risk
o Management Risk
The bar chart and table provide an indication of risk by showing the variability
of the Fund's historical returns.
[GRAPHIC]
================================================================================
Calendar Year Total Returns for A shares
Annual Total Return
'92 8.27%
'93 9.29%
'94 -5.43%
'95 18.79%
'96 2.17%
'97 9.28%
'98 7.61%
Best quarter: 2nd quarter 1995 6.23%
Worst quarter: 1st quarter 1994 -4.53%
<TABLE>
<CAPTION>
==============================================================================================
Average Annual Total Returns as of 12/31/98
Past One Year Past Five Years Life of Fund* Life of Fund*
(Class A ) (Class B & C)
==============================================================================================
<S> <C> <C> <C> <C>
Class A 2.50% 5.15% 7.19% N/A
- ----------------------------------------------------------------------------------------------
Class B 2.11% 5.31% N/A 6.63%
- ----------------------------------------------------------------------------------------------
Class C 6.11% 5.64% N/A 6.96%
- ----------------------------------------------------------------------------------------------
100% Lehman Brothers 8.46% 7.72% 9.35% 8.96%
Corporate
- ----------------------------------------------------------------------------------------------
50% Lehman Brothers 9.20% 7.50% 9.00% 8.60%
Corporate
50% Lehman Brothers
Government
==============================================================================================
*Inception dates: Class A - 5/1/91; Class B and Class C - 4/1/94
</TABLE>
13
<PAGE>
National Municipal Bond Fund
Investment Goal and Strategies
The investment objective of the National Municipal Bond Fund is to achieve a
high level of current income that is exempt from regular federal income taxes.
The Fund is also particularly concerned with preserving capital. To achieve
these goals, the Fund invests primarily in municipal debt. Salomon Brothers
Asset Management Inc. ("SBAM"), the Fund's subadvisor, manages the National
Municipal Bond Fund. Under normal circumstances, at least 80% of the Fund's net
assets will be invested in municipal debt securities whose interest payments are
exempt from regular federal income tax. Some of the Fund's dividends may be
subject to the federal alternative minimum tax.
The Fund will not purchase below investment-grade securities. Because the Fund
focuses on securities with long-term maturities, the average Fund maturity will
probably be 20 to 30 years, with an average duration of 8 to 11 years. The
Fund's portfolio may also include securities issued by municipalities that are
exempt from federal income tax. In order to maintain liquidity, the Fund may
invest up to 20% of its total assets in taxable obligations, including taxable
high-quality short-term money market instruments.
Main Investing Risks
o Concentration Risk
o Credit Risk
o Interest Rate Risk
o Liquidity Risk
o Management Risk
The bar chart and table provide an indication of risk by showing the variability
of the Fund's historical returns.
[GRAPHIC]
================================================================================
Calendar Year Total Returns for A shares
Annual Total Return
'94 -9.21%
'95 18.43%
'96 4.14%
'97 9.65%
'98 3.97%
Best quarter: 1st quarter 1995 7.39%
Worst quarter: 1st quarter 1994 -7.58%
<TABLE>
<CAPTION>
=============================================================================================
Average Annual Total Returns as of 12/31/98
Past One Year Past Five Years Life of Fund* Life of Fund*
(Class A ) (Class B & C)
=============================================================================================
<S> <C> <C> <C> <C>
Class A -0.97% 4.04% 4.52% N/A
- ---------------------------------------------------------------------------------------------
Class B -1.84% 3.91% N/A 5.87%
- ---------------------------------------------------------------------------------------------
Class C 2.16% 4.25% N/A 6.20%
- ---------------------------------------------------------------------------------------------
Lehman Brothers 6.48% 6.23% 6.63% 7.84%
Aggregate Bond Index
=============================================================================================
*Inception dates: Class A - 7/6/93; Class B and Class C - 4/1/94
</TABLE>
14
<PAGE>
U.S. Government Securities Fund
Investment Goal and Strategies
The investment objective of the U.S. Government Securities Fund is to obtain a
high level of current income consistent with preservation of capital and
maintenance of liquidity. Salomon Brothers Asset Management Inc ("SBAM"), the
Fund's subadvisor, pursues this objective by emphasizing investments in debt
obligations and mortgage-backed securities issued or guaranteed by the U.S.
Government or its agencies, and in derivative securities relating to such
securities.
Main Investing Risks
o Credit Risk
o Derivatives Risk
o Interest Rate Risk
o Management Risk
The bar chart and table provide an indication of risk by showing the variability
of the Fund's historical returns.
[GRAPHIC]
================================================================================
Calendar Year Total Returns for A shares
Annual Total Return
'90 8.22%
'91 13.36%
'92 6.63%
'93 7.64%
'94 -1.59%
'95 15.28%
'96 3.04%
'97 7.99%
'98 6.86%
Best quarter: 2nd quarter 1995 5.42%
Worst quarter: 1st quarter 1994 -1.65%
Average Annual Total Returns as of 12/31/98
<TABLE>
<CAPTION>
=========================================================================================================
Past One Year Past Five Years Life of Fund* Life of Fund*
(Class A ) (Class B & C)
=========================================================================================================
<S> <C> <C> <C> <C>
Class A 1.79% 5.14% 6.89% N/A
- ---------------------------------------------------------------------------------------------------------
Class B 1.06% 5.19% N/A 5.84%
- ---------------------------------------------------------------------------------------------------------
Class C 5.06% 5.51% N/A 6.17%
- ---------------------------------------------------------------------------------------------------------
Merrill Lynch 1-10 year 8.63% 6.50% 8.02% 7.27%
Government Index
=========================================================================================================
*Inception dates: Class A - 8/28/89; Class B and Class C - 4/1/94
</TABLE>
15
<PAGE>
Money Market Fund
Investment Goal and Strategies
The investment objective of the Money Market Fund is to obtain maximum current
income consistent with preservation of principal and liquidity. To achieve this
objective, Manufacturers Adviser Corporation ("MAC"), the Fund's subadvisor,
invests in high quality, U.S. dollar denominated money market instruments.
Main Investing Risks
o Interest Rate Risk
o Management Risk
o An investment in the Money Market Fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or by any other government agency.
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
The bar chart and table provide an indication of risk by showing the variability
of the Fund's historical returns.
[GRAPHIC]
================================================================================
Calendar Year Total Returns for A shares
Annual Total Return
'90 5.69%
'91 5.97%
'92 3.42%
'93 2.76%
'94 3.88%
'95 5.66%
'96 5.08%
'97 5.19%
'98 5.05%
Best quarter: 4th quarter 1989 1.68%
Worst quarter: 2nd quarter 1993 0.66%
================================================================================
Average Annual Total Returns as of 12/31/98
Past One Year Life of Fund* Life of Fund*
(Class A) (Class B & C)
================================================================================
Class A 5.05% 4.82% N/A
- --------------------------------------------------------------------------------
Class B 5.05% N/A 4.97%
- --------------------------------------------------------------------------------
Class C 5.05% N/A 4.97%
================================================================================
*Inception dates: Class A - 8/28/89; Class B and Class C - 4/1/94
16
<PAGE>
Descriptions of Main Investing Risks
The value of your investment in a Fund can change for many reasons, and may
decrease. The primary reasons for possible decreases in a Fund's value are
called "Main Investing Risks," and are explained in this section. Because the
types of investments a Fund makes change over time, the types of risks affecting
the Fund will change as well. Section II of the Prospectus includes more
information about other risks that might affect the Funds' values.
Concentration Risk
Investment professionals believe that investment risk can be reduced through
diversification, which is simply the practice of choosing more than one type of
investment. On the other hand, concentrating investments in a smaller number of
securities increases risk.
Credit Risk
Credit risk is the risk that the issuer or the guarantor (the entity that agrees
to pay the debt if the issuer cannot) of a debt or fixed income security, or the
counterparty to a derivatives contract or a securities loan, will not repay the
principal and interest owed to the investors or otherwise honor its obligations.
There are different levels of credit risk. Funds that invest in lower-rated
securities have higher levels of credit risk. Lower-rated or unrated securities
of equivalent quality (generally known as junk bonds) have very high levels of
credit risk. Securities that are highly rated have lower levels of credit risk.
Funds may be subject to greater credit risk because they may invest in debt
securities issued in connection with corporate restructurings by highly
leveraged (indebted) issuers and in debt securities not current in the payment
of interest or principal, or in default.
Funds that invest in foreign securities are also subject to increased credit
risk because of the difficulties of requiring foreign entities, including
issuers of sovereign (national) debt, to honor their contractual commitments,
and because a number of foreign governments and other issuers are already in
default.
Currency Risk
Funds that invest in securities denominated in and/or are receiving revenues in
foreign currencies are subject to currency risk. Currency risk is the risk that
foreign currencies will decline in value relative to the U.S. dollar. In the
case of hedging positions, this is the risk that the U.S. dollar will decline in
value relative to the currency hedged.
Derivatives Risk
Derivatives are financial contracts between two parties whose value depends on,
or is derived from, the change in value of an underlying asset, reference rate
or index. When the value of the underlying security or index changes, the value
of the derivative changes as well. As a result, derivatives can lose all of
their value very quickly. Derivatives also offer the opportunity for great
increases in value. Because derivatives are contracts between parties, there is
also some credit risk associated with using derivatives. Additional risks
associated with derivatives include mispricing and improper valuation.
Derivatives risk for some Funds will be increased by their investments in
structured securities.
Equity Risk
Equity securities, such as a company's common stock, may fall in value in
response to factors relating to the issuer, such as management decisions or
falling demand for a company's goods or services. Factors affecting a company's
particular industry, such as increased production costs, may affect the value of
its equity securities. Equity securities also rise and fall in value as a result
of factors affecting entire financial markets, such as political or economic
developments, or changes in investor psychology.
17
<PAGE>
Growth stocks are the stocks of companies that have earnings that are expected
to grow relatively rapidly. As a result, the values of growth stocks may be more
sensitive to changes in current or expected earnings than the values of other
stocks.
Value stocks are the stocks of companies that are not expected to experience
significant earnings growth, but that are undervalued, or are cheap relative to
the value of the company and its business as a whole. These companies may have
experienced some recent troubles that have caused their stocks to be out of
favor. If the market does not recognize the value of the company over time, the
price of its stock may fall, or simply may not increase as expected.
Market capitalization refers to the total value of a company's outstanding
stock. Smaller companies with market capitalizations of less than $1 billion or
so are more likely than larger companies to have limited product lines, smaller
markets for their products and services, and they may depend on a small or
inexperienced management group. Small company stocks may not trade very
actively, and their prices may fluctuate more than stocks of other companies.
Stocks of smaller companies may be more vulnerable to negative changes than
stocks of larger companies.
Foreign Investment Risk
Funds investing in foreign securities may experience rapid changes in value. One
reason for this volatility is that the securities markets of many foreign
countries are relatively small, with a limited number of companies representing
a small number of industries. Also, foreign securities issuers are usually not
subject to the same degree of regulation as U.S. issuers. Reporting, accounting
and auditing standards of foreign countries differ, in some cases significantly,
from U.S. standards.
The possibility of political instability or diplomatic developments in foreign
countries could trigger nationalization of companies and industries,
expropriation (confiscation of property), extremely high levels of taxation, and
other negative developments. In the event of nationalization, expropriation or
other confiscation, a Fund could lose its entire investment. Funds that invest
in sovereign debt obligations are exposed to the risks of political, social and
economic change in the countries that issued the bonds.
Interest Rate Risk or Market Risk
Interest rate risk or market risk is the risk that a change in interest rates
will negatively affect the value of a security. This risk applies primarily to
debt securities such as bonds, notes and asset backed securities. Debt
securities are obligations of the issuer to make payments of principal and/ or
interest on future dates. As interest rates rise, an investment in a Fund can
lose value, because the value of the securities the Fund holds may fall.
Market risk is generally greater for Funds that invest in debt securities with
longer maturities. This risk may be increased for Funds that invest in
mortgage-backed or other types of asset-backed securities that are often
prepaid. Even Funds that invest in the highest quality debt securities are
subject to interest rate risk.
Liquidity Risk
Liquidity risk is the risk that a Fund will not be able to sell a security
because there are too few people who actively buy and sell, or trade, that
security on a regular basis. A Fund holding an illiquid security may not be able
to sell the security at a fair price. Liquidity risk increases for Funds
investing with derivatives, foreign investments and restricted securities, which
all involve increased liquidity risk.
Management Risk
Management risk is the risk that the management of a Fund, despite using various
investment and risk analysis techniques, may not produce the desired investment
results.
18
<PAGE>
Section II:
Fees and Expenses of the North American Funds
This table describes the fees and expenses that you may pay if you invest in the
Funds.
Shareholder Fees (fees paid directly from your investment)
<TABLE>
<CAPTION>
Class A Class B Class C
============================================================================================================================
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of offering price)
Equity Funds1 5.75% None None
Other Funds except Money Market Fund 4.75% None None
Money Market Fund None None None
Maximum Deferred Sales Charge (as a percentage
of original purchase price or
redemption price, whichever is lower)
Other Funds except Money Market Fund 1%* 5%** 1%***
Money Market Fund None None None
</TABLE>
Annual Fund Operating Expenses (expenses that are deducted from fund assets)
<TABLE>
<CAPTION>
Fund Class A Class B Class C
============================================================================================================================
<S> <C> <C> <C>
International Small Cap Fund
Management Fees 1.05% 1.05% 1.05%
Distribution (12b-1) Fees 0.35% 1.00% 1.00%
Other Expenses**** 0.50% 0.50% 0.50%
Total Annual Fund Operating Expenses 1.90% 2.55% 2.55%
- ----------------------------------------------------------------------------------------------------------------------------
International Equity Fund
Management Fees 0.90% 0.90% 0.90%
Distribution (12b-1) Fees 0.35% 1.00% 1.00%
Other Expenses**** 0.50% 0.50% 0.50%
Total Annual Fund Operating Expenses 1.75% 2.40% 2.40%
- ----------------------------------------------------------------------------------------------------------------------------
Global Equity Fund
Management Fees 0.90% 0.90% 0.90%
Distribution (12b-1) Fees 0.35% 1.00% 1.00%
Other Expenses**** 0.50% 0.50% 0.50%
Total Annual Fund Operating Expenses 1.75% 2.40% 2.40%
- ----------------------------------------------------------------------------------------------------------------------------
Emerging Growth Fund
Management Fees 0.95% 0.95% 0.95%
Distribution (12b-1) Fees 0.35% 1.00% 1.00%
Other Expenses**** 0.40% 0.40% 0.40%
Total Annual Fund Operating Expenses 1.70% 2.35% 2.35%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Fund Class A Class B Class C
============================================================================================================================
<S> <C> <C> <C>
Small/Mid Cap Fund
Management Fees 0.93% 0.93% 0.93%
Distribution (12b-1) Fees 0.35% 1.00% 1.00%
Other Expenses**** 0.40% 0.40% 0.40%
Total Annual Fund Operating Expenses 1.68% 2.33% 2.33%
- ----------------------------------------------------------------------------------------------------------------------------
Growth Equity Fund
Management Fees 0.90% 0.90% 0.90%
Distribution (12b-1) Fees 0.35% 1.00% 1.00%
Other Expenses**** 0.40% 0.40% 0.40%
Total Annual Fund Operating Expenses 1.65% 2.30% 2.30%
- ----------------------------------------------------------------------------------------------------------------------------
Tax-Sensitive Equity Fund
Management Fees 0.85% 0.85% 0.85%
Distribution (12b-1) Fees 0.35% 1.00% 1.00%
Other Expenses**** 0.40% 0.40% 0.40%
Total Annual Fund Operating Expenses 1.60% 2.25% 2.25%
- ----------------------------------------------------------------------------------------------------------------------------
Growth and Income Fund
Management Fees 0.73% 0.73% 0.73%
Distribution (12b-1) Fees 0.35% 1.00% 1.00%
Other Expenses**** 0.26% 0.26% 0.26%
Total Annual Fund Operating Expenses 1.34% 1.99% 1.99%
- ----------------------------------------------------------------------------------------------------------------------------
Equity-Income Fund
Management Fees 0.75% 0.75% 0.75%
Distribution (12b-1) Fees 0.35% 1.00% 1.00%
Other Expenses**** 0.27% 0.27% 0.27%
Total Annual Fund Operating Expenses 1.37% 2.02% 2.02%
- ----------------------------------------------------------------------------------------------------------------------------
Balanced Fund
Management Fees 0.78% 0.78% 0.78%
Distribution (12b-1) Fees 0.35% 1.00% 1.00%
Other Expenses**** 0.26% 0.26% 0.26%
Total Annual Fund Operating Expenses 1.39% 2.04% 2.04%
- ----------------------------------------------------------------------------------------------------------------------------
Strategic Income Fund
Management Fees 0.75% 0.75% 0.75%
Distribution (12b-1) Fees 0.35% 1.00% 1.00%
Other Expenses**** 0.40% 0.40% 0.40%
Total Annual Fund Operating Expenses 1.50% 2.15% 2.15%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Fund Class A Class B Class C
============================================================================================================================
<S> <C> <C> <C>
Investment Quality Bond Fund
Management Fees 0.60% 0.60% 0.60%
Distribution (12b-1) Fees 0.35% 1.00% 1.00%
Other Expenses**** 0.30% 0.30% 0.30%
Total Annual Fund Operating Expenses 1.25% 1.90% 1.90%
- ----------------------------------------------------------------------------------------------------------------------------
National Municipal Bond Fund
Management Fees 0.60% 0.60% 0.60%
Distribution (12b-1) Fees 0.15% 1.00% 1.00%
Other Expenses**** 0.25% 0.25% 0.25%
Total Annual Fund Operating Expenses 1.00% 1.85% 1.85%
- ----------------------------------------------------------------------------------------------------------------------------
U.S. Government Securities Fund
Management Fees 0.60% 0.60% 0.60%
Distribution (12b-1) Fees 0.35% 1.00% 1.00%
Other Expenses**** 0.30% 0.30% 0.30%
Total Annual Fund Operating Expenses 1.25% 1.90% 1.90%
- ----------------------------------------------------------------------------------------------------------------------------
Money Market Fund
Management Fees 0.20% 0.20% 0.20%
Distribution (12b-1) Fees 0.00% 0.00% 0.00%
Other Expenses**** 0.30% 0.30% 0.30%
Total Annual Fund Operating Expenses 0.50% 0.50% 0.50%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 "Equity Funds" are the first ten funds listed in the table.
* For purchases of $1 million or more.
** 5% first and second year; 4% third year; 3% fourth year; 2% fifth year; 1%
sixth year and 0% thereafter.
*** 0% after first year.
**** Reflects terms of the Advisory Agreement which may not be changed without
a shareholder vote.
The higher Distribution Fees borne by Class B and Class C shares may cause
long-term shareholders to pay more in sales charges than the maximum permitted
front-end sales charge on Class A shares.
By translating "Total Annual Fund Operating Expenses" into dollar amounts, these
examples help you compare the costs of investing in a particular Fund, or a
particular class of shares, with the costs of investing in other mutual funds.
The examples assume that you:
o Invest $10,000 in a Fund for the time period indicated and then redeem all of
your shares at the end of those periods.
o Your investment earns a 5% return each year and that each Fund's operating
expenses remain the same.
21
<PAGE>
Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
<TABLE>
<CAPTION>
Fund 1 Year 3 Years 5 Years 10 Years
====================================================================================================================================
<S> <C> <C> <C> <C>
International Small Cap Fund
Class A Shares 757 1,138 1,542 2,669
Class B Shares 758 1,193 1,555 2,724
Class B No redemption 258 793 1,355 2,724
Class C Shares 358 793 1,355 2,885
Class C No redemption 258 793 1,355 2,885
- ------------------------------------------------------------------------------------------------------------------------------------
International Equity Fund
Class A Shares 743 1,094 1,469 2,519
Class B Shares 743 1,148 1,480 2,572
Class B No redemption 243 748 1,280 2,572
Class C Shares 343 748 1,280 2,736
Class C No redemption 243 748 1,280 2,736
- ------------------------------------------------------------------------------------------------------------------------------------
Global Equity Fund
Class A Shares 743 1,094 1,469 2,519
Class B Shares 743 1,148 1,480 2,572
Class B No redemption 243 748 1,280 2,572
Class C Shares 343 748 1,280 2,736
Class C No redemption 243 748 1,280 2,736
- ------------------------------------------------------------------------------------------------------------------------------------
Emerging Growth Fund
Class A Shares 738 1,080
Class B Shares 738 1,133 1,455 2,522
Class B No redemption 238 733 1,255 2,522
Class C Shares 338 733 1,255 2,686
Class C No redemption 238 733 1,255 2,686
- ------------------------------------------------------------------------------------------------------------------------------------
Small/Mid Cap Fund
Class A Shares 736 1,074 1,435 2,448
Class B Shares 736 1,127 1,445 2,501
Class B No redemption 236 727 1,245 2,501
Class C Shares 336 727 1,245 2,666
Class C No redemption 236 727 1,245 2,666
- ------------------------------------------------------------------------------------------------------------------------------------
Growth Equity Fund
Class A Shares 733 1,065 1,420 2,417
Class B Shares 733 1,118 1,430 2,470
Class B No redemption 233 718 1,230 2,470
Class C Shares 333 718 1,230 2,636
Class C No redemption 233 718 1,230 2,636
- ------------------------------------------------------------------------------------------------------------------------------------
Tax-Sensitive Equity Fund
Class A Shares 728 1,051
Class B Shares 728 1,103 1,405 2,419
Class B No redemption 228 703 1,205 2,419
Class C Shares 328 703 1,205 2,585
Class C No redemption 228 703 1,205 2,585
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Fund 1 Year 3 Years 5 Years 10 Years
====================================================================================================================================
<S> <C> <C> <C> <C>
Growth and Income Fund
Class A Shares 704 975 1,267 2,090
Class B Shares 702 1,024 1,273 2,147
Class B No redemption 202 624 1,073 2,147
Class C Shares 302 624 1,073 2,317
Class C No redemption 202 624 1,073 2,317
- ------------------------------------------------------------------------------------------------------------------------------------
Equity-Income Fund
Class A Shares 706 984 1,282 2,127
Class B Shares 705 1,034 1,288 2,127
Class B No redemption 205 634 1,088 2,127
Class C Shares 305 634 1,088 2,348
Class C No redemption 205 634 1,088 2,348
- ------------------------------------------------------------------------------------------------------------------------------------
Balanced Fund
Class A Shares 708 990 1,292 2,148
Class B Shares 707 1,040 1,298 2,200
Class B No redemption 207 640 1,098 2,200
Class C Shares 307 640 1,098 2,369
Class C No redemption 207 640 1,098 2,269
- ------------------------------------------------------------------------------------------------------------------------------------
Strategic Income Fund
Class A Shares 620 927 1,255 2,180
Class B Shares 718 1,073 1,354 2,315
Class B No redemption 218 673 1,154 2,315
Class C Shares 318 673 1,154 2,483
Class C No redemption 218 673 1,154 2,483
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Quality Bond Fund
Class A Shares 596 853 1,129 1.915
Class B Shares 693 997 1,226 2,051
Class B No redemption 193 597 1,026 2,051
Class C Shares 293 597 1,026 2,222
Class C No redemption 193 597 1,026 2,222
- ------------------------------------------------------------------------------------------------------------------------------------
National Municipal Bond Fund
Class A Shares 572 778 1,001 1.641
Class B Shares 688 982 1,201 1,944
Class B No redemption 188 582 1,001 1.944
Class C Shares 288 582 1,001 2,169
Class C No redemption 188 582 1,001 2,169
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Government Securities Fund
Class A Shares 596 853 1,129 1.915
Class B Shares 693 997 1,226 2,051
Class B No redemption 193 597 1,026 2,051
Class C Shares 293 597 1,026 2,222
Class C No redemption 193 597 1,026 2,222
- ------------------------------------------------------------------------------------------------------------------------------------
Money Market Fund
Class A Shares 51 161 282 642
Class B Shares 51 161 282 642
Class C Shares 51 161 282 642
====================================================================================================================================
</TABLE>
23
<PAGE>
More Information About
Investment Objectives,
Strategies and Risks
This Prospectus does not attempt to disclose all of the different investment
techniques that the Funds might use, or all of the types of securities in which
the Funds might invest. As with any mutual fund, investors must rely on the
professional judgment and skill of the Funds' management. A subadvisor may
choose not to use some or all of the investment techniques available to a Fund,
and these choices may cause the Fund to lose money or not achieve its goal.
Each Fund has a unique investment goal (see the Fund Summaries) that it tries to
achieve through its investment strategies. The investment goals, or objectives,
of the Funds cannot be changed without the approval of the holders of a majority
of the outstanding shares of each Fund. However, except for certain investment
restrictions, the strategies a Fund uses to achieve its investment objective may
be changed by the Trustees without approval of the shareholders. Because each
Fund is different, they have different investment policies and risks, and will
also have different returns over time. This section provides additional
information about the Funds, and should be read in conjunction with the Fund
Summaries.
International Small Cap Fund
The Fund may invest without limit in American Depositary Receipts and American
Depositary Shares (collectively, "ADRs"). ADRs are receipts representing shares
of a foreign corporation held by a U.S. bank that entitle the holder to all
dividends and capital gains on the underlying foreign shares. ADRs are
denominated in U.S. dollars and trade in the U.S. securities markets.
The Fund may invest a significant portion of its assets in the securities of
small companies. Small companies are still in the developing stages of their
life cycles and have limited product lines, markets or financial resources
and/or lack management depth. The securities of small companies may have limited
marketability and may experience more abrupt or erratic movements in price than
securities of larger companies or the market averages in general. Because of
this, the net asset value of the International Small Cap Fund may fluctuate more
widely than popular market averages.
The Fund may also invest in convertible securities, preferred stocks, bonds,
debentures and other corporate obligations when Founders believes that these
investments offer opportunities for capital appreciation.
The Fund may invest in investment-grade bonds, debt securities and corporate
obligations (Baa or higher by Moody's, or BBB or higher by S&P). The Fund may
choose to invest in lower-rated (Ba or lower by Moody's and BB or lower by S&P)
convertible securities and preferred stocks. The Fund may also invest in unrated
convertible securities and preferred stocks if Founders believes they are
equivalent in quality to the rated securities that the Fund may buy.
The Fund will not invest more than 5% of its total assets in unrated or below
investment grade fixed-income securities, with the exception of preferred
stocks. If the Fund holds securities that are downgraded after they are
purchased, the Fund does not have to sell them unless the total Fund assets in
unrated and below investment grade securities reach 5% of assets.
Since the Fund's assets will be invested primarily in foreign securities and
since substantially all of the Fund's revenues will be received in foreign
currencies, the Fund's net asset values will be affected by changes in currency
exchange rates. The Fund will pay dividends in dollars and will incur currency
conversion costs.
24
<PAGE>
International Equity Fund
MSAM's Active International Allocation team analyzes both the global economic
environment and the economies of the industrialized countries comprising the
MSCI Europe, Australasia, Far East (EAFE) Index. EAFE countries include Japan,
most nations in Western Europe, Australia, New Zealand, Hong Kong and Singapore.
MSAM views each EAFE country and major sectors as unique investment
opportunities and evaluates prospects for value, growth, inflation, interest
rates, corporate earnings, dividend yield, liquidity and risk characteristics,
investor sentiment and currency outlook. After determining to invest in an EAFE
country, MSAM establishes overweight, underweight or neutral positions relative
to the EAFE Index. Within the EAFE countries or sectors selected for investment,
MSAM purchases optimized baskets of equity securities designed to track the
local market index within a specified tolerance. The Fund does not invest in
securities of U.S. issuers. MSAM considers an issuer to be from a particular
EAFE country if (i) its principal securities trading market is in that country;
(ii) alone or on a consolidated basis it derives 50% or more of its annual
revenue from either goods produced, sales made or services performed in that
country; or (iii) it is organized under the laws of, and has a principal office
in, that country.
The Fund will limit its use of derivatives for non-hedging purposes to 33 1/3%
of its total assets measured by the aggregate notional amount of outstanding
derivatives. While the use of derivatives may be advantageous to the Fund, if
MSAM is not successful in employing them, the Fund's performance may be worse
than if it did not make such investments.
Emerging market countries are countries that major international financial
institutions, such as the World Bank, generally consider to be less economically
mature than developed nations, such as the United States or most nations in
Western Europe. Emerging market countries can include every nation in the world
except the United States, Canada, Japan, Australia, New Zealand and most
countries located in Western Europe. Emerging market countries may be more
likely to experience political turmoil or rapid changes in economic conditions
than more developed countries, and the financial condition of issuers in
emerging market countries may be more precarious than in other countries. The
characteristics result in greater risk of price volatility in emerging market
countries, which may be heightened by currency fluctuations relative to the U.S.
dollar.
Global Equity Fund
The Fund invests primarily in common and preferred stocks, convertible
securities, rights and warrants to purchase common stocks, American and Global
Depositary Receipts and other equity securities of issuers throughout the world,
including issuers in the U.S. and emerging market countries.
Under normal circumstances, at least 65% of the value of the total assets of the
Fund will be invested in equity securities and at least 20% of the value of the
Fund's total assets will be invested in the common stocks of U.S. issuers. The
Fund may also invest in money market instruments. Although the Fund intends to
invest primarily in securities listed on stock exchanges, it will also invest in
equity securities that are traded over-the-counter or that are not admitted to
listing on a stock exchange or dealt in on a regulated market. Privately traded
securities may have additional liquidity risks. The Fund may also engage in
forward foreign currency transactions and purchase when-issued or delayed
delivery securities.
MSAM's investment focus is the selection of individual stocks, with an eye
toward value. To choose stocks for the Fund, MSAM identifies stocks that it
believes to be undervalued in relation to the issuer's assets, cash flow,
earnings and revenues. To decide whether or not these stocks are suitable for
investment, MSAM estimates the future value of these stocks using a mathematical
model, called a dividend discount model. MSAM uses research from a number of
sources, including Morgan Stanley Capital International, an affiliate located in
Geneva, Switzerland. Fund holdings are reviewed regularly, and analyzed to be
sure they continue to conform to MSAM's value criteria. Equity securities that
stop conforming to the Fund's investment criteria will be sold. Although the
Fund will not invest for short-term trading purposes, securities may be sold
that were held only for a short time.
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Emerging Growth Fund
The Fund will usually invest at least 65% of its total assets in common stocks
or warrants of emerging growth companies that represent attractive opportunities
for maximum capital appreciation. Emerging growth companies are small- or
medium-sized companies beyond their start-up phase showing positive earnings or
the potential for accelerated earnings growth.
Although the Fund will typically invest in small and mid-sized companies, the
Fund may invest in emerging growth companies of any size. Emerging growth
companies generally benefit from new products or services, technological
developments, changes in management or other factors. The Fund may also invest
in companies experiencing unusual developments affecting their market value,
called "special situation" companies. These companies may be involved in
acquisitions or consolidations, reorganization, recapitalization, mergers,
liquidation, or distribution of cash, securities or other assets, tender or
exchange offers, a breakup or workout of a holding company, lawsuits which, if
resolved favorably, would improve the value of the company's stock, or a change
in corporate control.
The Fund may invest up to 20% of its total assets in investment grade debt
securities (other than money market obligations) and preferred stocks that are
not convertible into common stock. The Fund may also invest up to 20% of its
total assets in the securities of foreign issuers, which have certain risks
associated with them. The Fund's status is non-diversified , although its
portfolio managers have typically diversified the Fund's investments.
The interest income to be derived may be considered as one factor in selecting
debt securities for investment. Because the market value of debt obligations can
be expected to vary inversely with changes in prevailing interest rates,
investing in debt obligations may provide an opportunity for capital
appreciation when interest rates are expected to decline. The success of such a
strategy is dependent upon Warburg's ability to accurately forecast changes in
interest rates.
A security will be considered investment grade if it is rated within the four
highest grades by Moody's or S&P or, if unrated, is determined by Warburg to be
of comparable quality. Bonds rated in the fourth highest grade may have
speculative characteristics. If a security held by the Fund is no longer rated,
or is rated below the Fund's minimum allowed rating, Warburg factors this
information into the decision about whether the Fund should continue to hold the
securities. The Fund can normally invest up to 20% of its total assets in
domestic and foreign short-term money market obligations.
Investing in securities of emerging growth and small-sized companies can involve
greater risks because these securities may have limited marketability. Because
small and medium-sized companies normally have fewer shares outstanding than
larger companies, it may be more difficult for the Fund to buy or sell large
numbers of shares without affecting current prices. Small- and medium-sized
companies are typically subject to a greater degree of changes in earnings and
business prospects than are larger, more established companies. There is
typically less publicly available information concerning small- and medium-sized
companies than for larger, more established ones. And companies with small
market capitalizations may also be dependent upon a single proprietary product
or market niche, may have limited product lines, markets or financial resources,
or may depend on a limited management group.
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Small/Mid Cap Fund
The Fund invests in equity securities, including common and preferred stocks,
and securities that can be converted into or exchanged for equity securities,
including warrants and rights. The Fund will typically invest in companies whose
securities are traded on domestic stock exchanges or in the over-the-counter
market.
Small companies are still in the developing stages of their life cycles and are
attempting to achieve rapid growth in both sales and earnings. The securities of
small companies may have limited marketability and may experience more abrupt or
erratic movements in price than securities of larger companies or the market
averages in general. Because of this, the net asset value of the Small/Mid Cap
Fund may fluctuate more widely than those of the popular market averages.
To give the Fund the flexibility to take advantage of new opportunities that can
help to meet the Fund's investment objectives, the Fund can invest up to 15% of
its net assets in money market instruments, bank and thrift obligations,
obligations issued or guaranteed by the U.S. Government or by its agencies or
instrumentalities, foreign bank obligations and obligations of foreign branches
of domestic banks, variable rate master demand notes and repurchase agreements.
The Fund may invest up to 20% of its total assets in foreign securities and will
be subject to certain risks as a result of these investments. The Fund may also
purchase American Depositary Receipts ("ADRs") or U.S. dollar-denominated
securities of foreign issuers that are not included in the 20% foreign
securities limitation.
Growth Equity Fund
At least 65% of the Fund's total assets will be invested in common stocks of
well-established, high-quality growth companies. The Fund may also invest in
convertible securities, preferred stocks, debentures and other corporate
obligations when Founders believes that these investments offer opportunities
for capital appreciation. Although these securities may produce current income,
income will not be a substantial factor in selecting these securities.
The Fund may invest in investment grade bonds, debentures and corporate
obligations rated Baa or higher by Moody's or BBB or higher by S&P. The Fund may
choose to invest in lower-rated (Ba or lower by Moody's and BB or lower by S&P)
convertible and preferred stocks but not rated below B. The Fund may also invest
in unrated convertible securities and preferred stocks if Founders believes that
they are equivalent in quality to the rated securities the Fund may buy.
The Fund will never have more than 5% of its total assets invested in unrated or
below-investment-grade fixed income securities, with the exception of preferred
stocks. If the Fund holds securities that are downgraded after they are
purchased, the Fund does not have to sell them unless the Fund assets in unrated
and blow investment-grade securities reaches 5% of total assets.
The Fund is also permitted to use forward foreign currency contracts and futures
contracts. The Fund may also purchase and/or write options on securities and on
indices, and may invest in Rule 144A securities.
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<PAGE>
Tax-Sensitive Equity Fund
This Fund is designed for investors in all but the lowest federal income tax
bracket seeking the highest long-term after-tax total return. The Fund tries to
minimize taxable dividend income by emphasizing securities with low dividend
yields and minimizing investments in income producing securities.
Usually, at least 80% of the Fund's total assets will be invested in equity and
equity-related securities, such as common stocks and preferred stocks. The Fund
may invest in equity securities of foreign issuers that are listed on a U.S.
securities exchange or traded in the U.S. over-the-counter market, but will not
invest more than 10% of its total assets in securities that are not listed or
traded. The Fund currently intends to limit its investments in foreign
securities to those that are denominated or quoted in U.S. dollars.
When selling portfolio securities, the Fund will generally select the highest
cost shares of the specific security (and/or, if gains will be realized, shares
that will produce long-term capital gains) in order to reduce the realization of
capital gains, short-term gains in particular. To help achieve its investment
objective, the Fund may sell securities in order to realize capital losses.
Realized capital losses can be used to offset realized capital gains, reducing
the amount of capital gains the Fund would distribute.
The Fund generally expects to have relatively low annual portfolio turnover
under normal circumstances, which is one way to help minimize taxable gains to
investors. For taxpayers in all but the lowest tax brackets, ordinary income is
taxed at a higher tax rate than capital gains on securities held for more than
one year ("long-term capital gains"). Ordinary income includes dividends from
the Fund's net investment income and net short-term capital gains. Net long-term
capital gains realized and distributed by the Fund are subject to federal taxes
as long-term capital gains. The Fund expects generally to hold appreciated
portfolio securities for more than one year. This holding period will reduce the
realization and distribution to shareholders of short-term capital gains, which
are taxed at higher ordinary income rates.
Although the Fund will always consider the impact of federal and state income
taxes on a shareholder's investment returns, portfolio management decisions may
be made based on other criteria, including actual or anticipated economic,
market or issuer-specific developments. In this case, the Fund may produce
taxable ordinary income. The Fund may occasionally need to sell securities it
would otherwise have held to generate cash, pay expenses or meet shareholder
redemption requests. Certain investments by the Fund may produce ordinary
taxable income on a regular basis.
As part of the strategy of reducing the impact of federal and state income taxes
paid by shareholders on Fund distributions, the Fund will follow a disciplined
investment strategy, emphasizing stocks that Standish believes to offer
above-average potential for capital growth while offering low dividend yields.
Although the precise application of the strategy will vary according to market
conditions, to identify attractive equity securities Standish intends to use
statistical modeling techniques that look at stock-specific factors. These
factors include: Current price/earnings ratios; stability of earnings growth;
forecasted changes in earnings growth; trends in consensus analysts' estimates;
and measures of earnings results relative to expectations. Once securities are
identified, fundamental analysis will be completed before they are included in
the Fund's holdings. Securities selected for inclusion in the Fund's portfolio
will represent various industries and sectors.
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Growth and Income Fund
Wellington Management seeks to achieve the Fund's objective by investing
primarily in a diversified portfolio of common stocks of U.S. issuers which
Wellington Management believes are of high quality. Wellington Management
believes that high quality companies is evidenced by a leadership position
within an industry, a strong or improving balance sheet, relatively high return
on equity, steady or increasing dividend payout, and strong management skills.
The Fund's investments will emphasize primarily dividend paying stocks of larger
companies The Fund may invest in securities that can be converted into, or that
include the right to buy common stocks, including convertible securities issued
in the Euromarket and preferred stocks. The Fund may also invest in marketable
debt securities of domestic issuers and of foreign issuers (payable in U.S.
dollars) rated at the time of purchase "A" or better by Moody's or S&P, or
unrated securities considered to be of equivalent quality in Wellington
Management's judgment. Under normal market conditions, the subadvisor expects
that the Fund's portfolio will consist primarily of equity securities.
Equity-Income Fund
The Fund will generally consider companies with the following characteristics:
o established operating histories;
o above-average current dividend yield relative to the average yield of the S&P
500 Stock Index;
o low price/earnings ratios relative to the S&P 500 Stock Index;
o sound balance sheets and other financial characteristics; and
o low stock price relative to a company's underlying value as measured by
assets, earnings, cash flow, or business franchises.
The Fund will tend to take a "value" approach and invest in stocks and other
securities that appear to be temporarily undervalued by various measures, such
as price/earnings ratios. Value investors seek to buy a stock (or other
security) when its price is low in relation to what they believe to be its real
worth or future prospects. By identifying companies whose stocks are currently
out of favor, value investors hope to realize significant appreciation as other
investors recognize the stock's real value and the price rises accordingly.
The Fund may also buy bonds of any quality, including "junk bonds," preferred
stocks, convertible securities, and warrants, and may hold U.S.
dollar-denominated money market securities, including repurchase agreements, in
the two highest rating categories that mature in one year or less.
Balanced Fund
The Fund may invest in convertible securities, preferred stocks, bonds,
debentures, and other corporate obligations when Founders believes that these
investments offer opportunities for capital appreciation. Current income is also
a factor in the selection of these securities. The Fund may purchase convertible
securities and preferred stocks rated above B in medium and lower categories by
Moody's or S&P (Ba or lower by Moody's and BB or lower by S&P).
The Fund may invest without limit in ADRs and up to 30% of its total assets in
foreign securities (other than ADRs). The Fund will not invest more than 25% of
its total assets in the securities of any one foreign country. The Fund will be
subject to special risks as a result of its ability to invest up to 30% of its
total assets in foreign securities, excluding ADRs.
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Strategic Income Fund
SBAM has entered into a subadvisory consulting agreement with its London-based
affiliate, Salomon Brothers Asset Management Limited ("SBAM Limited") under
which SBAM Limited provides certain advisory services to SBAM relating to
currency transactions and investments in non-dollar denominated debt securities.
The Fund may invest up to 100% of Fund assets in lower-rated securities usually
called "junk bonds." Junk bonds are rated "B" or below by Moody's (Moody's
lowest rating is C), or "BB" or below by S&P (S&P's lowest rating is D). If they
are unrated, SBAM will determine that they are of similar quality to rated
securities.
In addition to fundamental analysis, SBAM relies in part on mathematical,
quantitative analytical techniques that measure relative risks and opportunities
of each type of security. The techniques consider current and historical
economic, market, political and technical data for each type of security. SBAM
also assesses economic and market conditions on a global and local (country)
basis, including include current and projected levels of growth and inflation,
balance of payment status and monetary policy. SBAM also uses sophisticated
fixed income analysis tools, including prepayment analysis and option adjusted
spread technology to evaluate mortgage securities, mean variance optimization
models to evaluate international debt securities, and total rate of return
analysis to measure relative risks and opportunities in other fixed-income
markets.
Currency relationships and politics also impact the selection of international
debt securities. If the Fund is concerned about preserving capital, it may
choose to invest in securities that do not offer the highest possible yields.
SBAM continuously reviews how the Fund's assets are invested, and make s
appropriate adjustments. The Fund will invest in securities that range in
maturity.
The Fund may also invest in debt obligations issued or guaranteed by a foreign
sovereign government or one of its agencies or political subdivisions, and debt
obligations issued or guaranteed by international organizations designated or
supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related government
agencies. Examples include the International Bank for Reconstruction and
Development (the "World Bank"), the European Coal and Steel Community, the Asian
Development Bank and the Inter-American Development Bank. These securities may
be denominated in multi-national currency units.
As discussed above, the Fund may invest in U.S. dollar-denominated securities
issued by domestic issuers that are rated below investment grade or, if unrated,
determined by SBAM to be of comparable quality Although SBAM does not plan to
invest more than 75% of the Fund's assets in below investment-grade domestic and
developing country debt securities, the Fund may choose to invest more than that
if SBAM feels that the yield available from such securities outweighs their
additional risks.
The purpose of investing a portion of the Fund's assets in below investment
grade, mortgage, and international debt securities, is to provide investors with
a higher yield than a high-quality domestic corporate bond fund, and with less
risk than a fund that invests principally in below investment grade securities.
Some of the debt securities the Fund may select may considered comparable to
securities having, the lowest ratings for non-subordinated debt instruments
assigned by Moody's or S&P (i.e., rated C by Moody's or CCC or lower by S&P).
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Investment Quality Bond Fund
The investment objective of the Fund is to provide a high level of current
income consistent with the maintenance of principal and liquidity. The Fund
invests primarily in a diversified portfolio of fixed income securities.
Credit research on corporate bonds includes examining both quantitative
(mathematical) and qualitative criteria established by Wellington Management.
These criteria include an issuer's industry, operating and financial profiles,
business strategy, management quality, and projected financial and business
conditions.
At least 65% of the Fund's assets will be invested in high quality debt
securities. "High quality" debt securities are those rated (at the time of
purchase) "A" or better by Moody's or S&P (in the three highest rating tiers),
or unrated debt securities considered to be of comparable quality by Wellington
Management. The Fund may only invest up to 20% of its total assets in debt
securities rated below "Baa" by Moody's or "BBB" by S&P, or unrated debt
securities considered to be of comparable quality by Wellington Management. The
Fund will not be required to sell any downgraded bonds that cause the Fund to
exceed this 20% minimum.
The Fund may invest up to 20% of its assets in domestic and foreign high yield
corporate and government debt securities, commonly referred to as "high
yield/high risk" or "junk" bonds. These bonds may be rated "B" or below by
Moody's (Moody's lowest rating is "C"), or "BB" or below by S&P (S&P's lowest
rating is "D"), or they may be unrated but considered to be of comparable
quality by Wellington Management. There is no minimum rating required by the
Fund. Domestic and foreign high yield debt securities involve greater risks than
higher quality securities, including price volatility and risk of default in the
payment of interest and principal.
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National Municipal Bond Fund
The Fund's portfolio may include "moral obligation" securities, which are
normally issued by special purpose public authorities. If the issuer of moral
obligation securities cannot make its interest and principal payments from
current revenues, it may rely on a reserve fund. The availability of the reserve
fund is a moral commitment, but not a legal obligation, of the state or
municipality that created the issuer.
In addition, the Fund may invest in municipal lease obligations ("MLOs"). MLOs
are not fully backed by the municipality's credit and their interest may become
taxable if the lease is assigned, or sold to another lender. If timely lease
payments are not made, the lease will end, and it is possible that the MLO will
default and that the Fund will suffer a loss. Because SBAM plans to invest more
than 5% of the Fund's net assets in MLOs the Trustees of the Fund have
established procedures for SBAM to use in considering an investment in MLOs. The
factors SBAM must examine include:
o the frequency of trades and quotes for the MLO
o the number of dealers willing to purchase or sell such MLO and the number of
other potential purchasers
o the willingness of dealers to undertake to make a market in the MLO
o the nature of the MLO and the nature of the marketplace trades (e.g., the
time needed to dispose of the security and the method of soliciting offers)
o the nature of the offering of such MLO (e.g., the size of the issue and the
number of anticipated holders)
o the ability of the MLO to maintain its marketability throughout the time the
instrument is held in the Fund
o other factors, if any, which SBAM deems relevant to determining the existence
of a trading market for such MLO.
The Fund also may invest in resource recovery bonds, which may be general
obligations of the issuing municipality or supported by corporate or bank
guarantees. The viability of the resource recovery project, environmental
protection regulations and project operator tax incentives may affect the value
and credit quality of resource recovery bonds.
In order to maintain liquidity, the Fund may invest up to 20% of its total
assets in taxable obligations, including taxable high-quality short-term money
market instruments, including:
o Obligations of the U.S. Government or its agencies or instrumentalities
o Commercial paper of issuers rated at the time of purchase "A-2" or better by
S&P, "P-2" or better by Moody's, or "F-2" or better by Fitch Investors
Services, Inc., ("Fitch"), or unrated securities of similar quality
o Certificates of deposit, bankers' acceptances or time deposits of U.S. banks
with total assets of at least $1 billion (including obligations of foreign
branches of such banks) and of the 75 largest foreign commercial banks in
terms of total assets (including domestic branches of such banks), and
repurchase agreements with respect to such obligations.
If at some point, SBAM determines that the market to securities exempt from
federal income taxes is troubled, the Fund may invest up to 100% of its net
assets taxable high-quality short-term money market instruments. Of course,
dividends paid by the Fund that are generated by taxable money market
instruments will be taxable to investors. From time to time, the Fund may invest
more than 25% of its total assets in obligations whose interest payments are
from revenues of similar projects (such as utilities or hospitals) or whose
issuers share the same geographic location. As a result, the Fund may be more
susceptible to a single economic, political or regulatory development than would
a Fund of securities with a greater variety of issuers.
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<PAGE>
U.S. Government
Securities Fund
The Fund may invest in:
o Mortgage-backed securities guaranteed by the Government National Mortgage
Association ("GNMA"), popularly known as "Ginnie Maes," that are backed by
the full faith and credit of the U.S.Government. These are known as a
"modified pass through" type of mortgage-backed security ("GNMA
Certificates"). These securities entitle the holder to receive all interest
and principal payments due whether or not payments are actually made on the
underlying mortgages
o U.S. Treasury obligations
o Obligations issued or guaranteed by agencies or instrumentalities of the U.S.
Government. These securities are backed by their own credit, and may not be
backed by the full faith and credit of the U.S. Government
o Mortgage-backed securities guaranteed by agencies or instrumentalities of the
U.S. Government which are supported by their own credit but not the full
faith and credit of the U.S. Government, such as the Federal Home Loan
Mortgage Corporation and the Federal National Mortgage Association;
o Collateralized mortgage obligations issued by private issuers for which the
underlying mortgage-backed securities serving as collateral are backed (i) by
the credit alone of the U.S. Government agency or instrumentality which
issues or guarantees the mortgage backed securities, or (ii) by the full
faith and credit of the U.S. Government; and
o Repurchase agreements collateralized by any of the foregoing.
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<PAGE>
Money Market Fund
The Fund invests in high quality, U.S. dollar-denominated money market
instruments including:
o Obligations that are issued by or whose principal or interest is guaranteed
by the U.S. Government. Obligations of any agency or authority controlled or
supervised by and acting as an instrumentality of the U.S. Government under
authority granted by Congress. These are called '"U.S. Government
securities."'
o Certificates of deposit, bank notes, time deposits, Eurodollars, Yankee
obligations and bankers' acceptances of U.S. banks, foreign branches of U.S.
banks, foreign banks and U.S. savings and loan associations which at the date
of investment have capital, surplus and undivided profits as of the date of
their most recent published financial statements in excess of $100,000,000
(or less than $100,000,000 if the principal amount of such bank obligations
is insured by the Federal Deposit Insurance Corporation ("FDIC") or the
Savings Association Insurance Fund ("SAIF"))
o Commercial paper which at the date of investment is rated (or guaranteed by a
company whose commercial paper is rated) within the two highest rating
categories by any nationally recognized statistical rating organization
("NRSRO") (such as "P-1" or "P-2" by Moody's or "A-1" or "A-2" by S&P) or, if
not rated, is issued by a company which MAC, acting pursuant to guidelines
established by the Trustees, has determined to be of minimal credit risk and
comparable quality
o Corporate obligations maturing in 397 days or less which at the date of
investment are rated within the two highest rating categories by any NRSRO
(such as "Aa" or higher by Moody's or "AA" or higher by S&P)
o Short-term obligations issued by state and local governmental issuers
o Obligations of foreign governments, including Canadian and Provincial
Government and Crown Agency Obligations
o Securities that have been structured to be eligible money market instruments
such as participation interests in special purpose trusts that meet the
quality and maturity requirements in whole or in part due to arrangements for
credit enhancement or for shortening effective maturity
o Repurchase agreements with respect to any of the foregoing obligations
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<PAGE>
Other Risks of Investing in the North American Funds
Although a Fund may have the flexibility to use some or all of the investments
or strategies described in this Prospectus and the Statement of Additional
Information, its subadvisor may choose not to use these investments or
strategies for a variety of reasons. These choices may cause a Fund to miss
opportunities, lose money or not achieve its goal.
High Yield/High Risk Securities
High yield securities (often known as "junk bonds") include debt instruments
that have an equity security attached to them. Securities rated below investment
grade and comparable unrated securities offer yields that fluctuate over time,
but generally offer higher yields than do higher rated securities. However,
securities rated below investment grade also involve greater risks than higher
rated securities. Under rating agency guidelines, medium- and lower-rated
securities and comparable unrated securities will likely have some quality and
protective characteristics that are outweighed by large uncertainties or major
risk exposures to adverse conditions.
Some of the debt securities in which the Funds may choose to invest may be, or
may be similar to the lowest rated, (C by Moody's or CCC or lower by S&P)
non-subordinated debt. This type of security is very risky, as issuers may not
have the ability to repay principal and interest, and may even default. If this
should occur, the value of shares of the Fund holding them could fall.
Foreign Securities
There are risks associated with investing in foreign securities. These risks
include unforeseen changes in tax laws, political changes, and changes in
foreign currency values and exchange rates.
There may be less publicly available information about foreign issuers. Foreign
issuers, including foreign branches of U.S. banks, are subject to different
accounting and reporting requirements, which are generally less extensive than
the requirements for domestic issuers. Foreign stock markets generally have
substantially less volume than the U.S. exchanges and securities of foreign
issuers are generally less liquid and more volatile, relative to U.S. issuers.
For emerging markets, these risks can be more extreme.
There is frequently less governmental regulation of foreign exchanges,
broker-dealers and issuers than in the United States, and brokerage costs may be
higher. In addition, investments in foreign companies may be subject to the
possibility of nationalization or other changes in policy. Policy changes may
allow foreign governments to withhold dividends, expropriate (confiscate, or
keep) investment returns, or raise taxes to extremely high levels, among other
things. Also, should a foreign issuer default, it may be difficult to recover
anything in a bankruptcy proceeding.
Lending Fund Securities
Each Fund may lend up to 33% of its total portfolio assets, or securities, to
brokers, dealers and other financial institutions. These loans must be callable
(the Fund may ask that the loan be repaid in full) at any time by the Fund. The
loans must be at all times fully secured by cash, cash equivalents or securities
issued or guaranteed by the U.S. government or its agencies or
instrumentalities, and marked to market (priced at market value) to the value of
loaned securities on a daily basis. As with any extensions of credit, there may
be risks of delay in recovery and in some cases even loss of rights in the
collateral should the borrower of the securities fail financially. However,
these loans of Fund securities will only be made to firms deemed by the
subadvisors to be creditworthy.
Leverage Risk
Funds that borrow money to buy securities are using leverage. Leverage risk is
the risk that leverage, or debt, will enable a Fund to buy more of a security
that falls in value. In this case, the Fund's investment could fall, and the
Fund would still need to repay the money it borrowed. Funds can create leverage,
or borrow money, by using different types of techniques including reverse
repurchase agreements, dollar rolls, and derivatives including inverse floating
rate instruments.
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<PAGE>
Hedging and Other Strategic Transactions
Individual Funds may be authorized to use a variety of investment strategies
described below for hedging purposes only, including hedging various market
risks (such as interest rates, currency exchange rates and broad or specific
market movements), and managing the effective maturity or duration of debt
instruments held by the Fund. Hedging is simply believing that certain
securities will fall, or rise, in value, and structuring transactions that take
advantage of those changes. These transactions are generally used to protect
against possible changes in the market value of securities a Fund already owns
or plans to buy, to protect unrealized gains or to improve the Fund's return in
some way.
Where allowed, individual Funds may purchase and sell (or write) exchange-listed
and over-the-counter put and call options on securities, index futures
contracts, financial futures contracts and fixed-income indices and other
financial instruments, enter into financial futures contracts, enter into
interest rate transactions, and enter into currency transactions. This category
includes derivative transactions. A "derivative" is generally defined as an
instrument whose value is based upon, or derived from, some underlying index or
rate. Interest rate transactions may include swaps, caps, floors and collars,
and currency transactions may include currency forward contracts, currency
futures contracts, currency swaps and options on currencies or currency futures
contracts.
Year 2000
Year 2000 computer problems involve the inability of some computer systems to
properly process data-related information in respect to the end of this century.
While this problem could have a negative effect on the Funds, the advisor is
working to avoid this problem and obtain assurances from the subadvisors and
other service providers that they are adequately addressing any possible year
2000 problems. The year 2000 problem could also have a negative effect on
issuers whose securities are owned by the Funds, potentially decreasing the
value of such securities.
Euro Conversion
The conversion of certain European currencies to the Euro may present additional
risks to those Funds exposed to such currencies.
Frequent Trading
A Fund may buy or sell investments extremely frequently, increasing brokerage
commissions and other expenses of the Fund. Frequent trading may also increase
the amount of capital gains realized by a Fund, including short-term capital
gains, which are generally taxable to shareholders at ordinary income tax rates.
Temporary Defensive Strategies
A Fund's subadvisor may at certain times decide that pursuing the Fund's
investment strategies is inconsistent with market conditions. A subadvisor may
then employ defensive strategies designed mostly to limit losses. However, the
subadvisor may choose not to use defensive strategies, even in volatile or
unsettled market conditions. Such defensive strategies may cause the Fund to
miss opportunities or to not achieve its goal.
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<PAGE>
Management of the Funds
Under the federal securities laws, Massachusetts law and the Trust's Agreement
and Declaration of Trust and By-Laws, the business and affairs of the Trust are
managed under the direction of the Trustees.
CypressTree Asset Management Corporation, Inc. ("CAM") is the investment adviser
for the Trust. CAM was formed in 1996 to advise, acquire and distribute mutual
funds through broker-dealers, banks and other intermediaries. CAM's address is
286 Congress Street, Boston, Massachusetts 02210.
According to its Advisory Agreement with the Trust (the "Advisory Agreement"),
CAM:
o Oversees the administration of all aspects of the business and affairs of the
Funds
o Selects, contracts with and compensates subadvisors to manage the assets of
the Funds
o Makes recommendations to the Trustees regarding the hiring, termination and
replacement of subadvisors
o Reimburses the Fund if the total of certain expenses allocated to any Fund
exceeds certain limitations
o Monitors the subadvisors for compliance with the investment objectives and
related policies of each Fund
o Reviews the performance of the subadvisors
o Periodically reports to the Trustees
The following table shows the management fees each Fund paid to CAM for the last
fiscal year under the Advisory Agreement as a percentage of the Fund's average
daily net asset value.
Funds Management
Fees
================================================================================
International Small Cap Fund 1.05%
International Equity Fund .90%
Global Equity Fund .90%
Emerging Growth Fund .95%
Small/Mid Cap Fund .92%
Growth Equity Fund .90%
Tax-Sensitive Equity Fund .85%
Growth and Income Fund .68%
Equity-Income Fund .73%
Balanced Fund .75%
Strategic Income Fund .73%
Investment Quality Bond Fund .60%
National Municipal Bond Fund .60%
U.S. Government Securities Fund .60%
Money Market Fund .20%
================================================================================
Under an order granted to the Funds by the Securities and Exchange Commission,
CAM is permitted to appoint a subadvisor, to create a subadvisory agreement and
to terminate or amend a subadvisory agreement, in each case without shareholder
approval. This "Manager of Managers" structure permits the Funds to change
subadvisors or the fees paid to subadvisors without the expense and delays
associated with obtaining shareholder approval. CAM has ultimate responsibility
under the Manager of Managers structure to oversee the subadvisors, including
making recommendations to the Trust regarding the hiring, termination and
replacement of subadvisors.
37
<PAGE>
Subadvisory Arrangements
Nine investment subadvisors which provide portfolio management services to the
Funds:
Wellington Management Company, LLP
Wellington Management Company, LLP, the subadvisor to the Growth and Income and
Investment Quality Bond Funds, ("Wellington Management"), whose principal
business address is 75 State Street, Boston, Massachusetts 02109.
Wellington Management and its predecessor organizations have provided investment
management services to investment companies, employee benefit plans, endowments,
foundations and other institutions and individuals since 1928. As of September
30, 1998, Wellington Management had investment management authority with respect
to approximately $186.5 billion of assets.
Matthew E. Megargel, Senior Vice President of Wellington Management, has served
as fund manager to the Growth and Income Fund since February 1992. Mr. Megargel
joined Wellington Management in 1983 as a research analyst and took on
additional responsibilities as a fund manager in 1988. In 1991, he became solely
a fund manager with Wellington Management.
Thomas L. Pappas, Senior Vice President of Wellington Management, has served as
fund manager to the Investment Quality Bond Fund since March 1994. Mr. Pappas
has been a fund manager with Wellington Management since 1987.
Standish, Ayer & Wood, Inc.
Standish, Ayer & Wood, Inc., the subadvisor to the Tax-Sensitive Equity Fund, is
a Massachusetts corporation incorporated in 1933 with offices at One Financial
Center, Boston, Massachusetts 02111. Standish provides fully discretionary
management services and counseling and advisory services to a broad range of
clients throughout the United States and abroad. Standish or its affiliate,
Standish International Management Company, L.P., serves as the investment
adviser to each of the funds in the Standish, Ayer & Wood family of funds.
Corporate pension funds are the largest asset under active management by
Standish. Standish's clients also include charitable and educational endowment
funds, financial institutions, trusts and individual investors. As of September
30, 1998, Standish managed approximately $46 billion in assets.
The Tax-Sensitive Equity Fund's fund manager is Laurence A. Manchester, who has
served in such capacity since the Tax-Sensitive Equity Fund's inception. During
the past five years, Mr. Manchester has served as a Vice President and Director
of Standish.
Warburg Pincus Asset Management, Inc.
Warburg Pincus Asset Management, Inc., the subadvisor to the Emerging Growth
Fund, is indirectly controlled by Warburg, Pincus & Co. Warburg's address is 466
Lexington Ave., New York, N.Y., 10017-3147.
Warburg is a professional investment counseling firm which provides investment
services to investment companies, employee benefit plans, endowment funds,
foundations and other institutions and individuals. As of October 31, 1998,
Warburg managed approximately $20 billion of assets, including approximately
$10.3 billion of investment company assets.
The co-fund managers of the Emerging Growth Fund are Elizabeth B. Dater and
Stephen J. Lurito. Ms. Dater, a managing director of Warburg, has been fund
manager of the Emerging Growth Fund since its inception and has been a fund
manager of Warburg since 1978. Mr. Lurito, a managing director of Warburg, has
been a fund manager of the Emerging Growth Fund since its inception and has been
with Warburg since 1987.
38
<PAGE>
Salomon Brothers Asset Management Inc
Salomon Brothers Asset Management Inc ("SBAM") is the Subadvisor to the U.S.
Government Securities Fund, the Strategic Income Fund and the National Municipal
Bond Fund. SBAM is an indirect, wholly-owned subsidiary of CitiGroup Inc.
("CitiGroup"). CitiGroup is a diversified financial services company engaged in
investment services, asset management, banking, consumer finance and life and
property and casualty insurance services. SBAM was incorporated in 1987 and,
together with affiliates in London, Frankfurt and Hong Kong, provides a full
range of fixed income and equity investment advisory services for individual and
institutional clients located throughout the world, and serves as investment
adviser to various investment companies. In providing such investment advisory
services, SBAM and its affiliates have access to SBAM's and its affiliates' more
than 40 economists and mortgage, bond, sovereign and equity analysts. As of
September 30, 1998, SBAM and its worldwide investment advisory affiliates
managed approximately $29 billion in assets. SBAM's business offices are located
at 7 World Trade Center, New York, New York 10048.
In connection with SBAM's service as subadvisor to the Strategic Income Fund,
SBAM's London-based affiliate, SBAM Ltd., whose business address is Victoria
Plaza, 111 Buckingham Palace Road, London SW1W OSB, England, provides certain
advisory services to SBAM with regard to currency transactions and investments
in non-dollar denominated debt securities for the benefit of the Strategic
Income Fund. SBAM Ltd. is compensated by SBAM at no additional expense to the
Strategic Income Fund. SBAM Ltd. is a wholly-owned indirect subsidiary of
CitiGroup. SBAM Ltd. is a member of the Investment Management Regulatory
Organization Limited in the United Kingdom and is registered as an investment
adviser in the United States pursuant to the Investment Advisers Act of 1940, as
amended.
Roger Lavan has had responsibility for the day-to-day management of the
mortgage-backed securities and U.S. government securities components of the U.S.
Government Securities Fund portfolio since December 1991 and the Strategic
Income Fund portfolio since its inception in November 1993, and assumed sole
primary responsibility for such management in August 1998.
Peter Wilby is primarily responsible for the day-to-day management of the high
yield and sovereign bond portions of the Strategic Income Fund. Mr. Wilby, who
joined SBAM in 1989, is a Managing Director of Salomon Smith Barney Inc. and
SBAM, responsible for investment company and institutional funds which invest in
high yield U.S. and non-U.S. corporate debt securities and high yield foreign
sovereign debt securities. In addition to other registered investment companies
for which Mr. Wilby serves as fund manager, he also serves as fund manager for a
number of offshore and institutional clients.
David Scott is primarily responsible for a portion of the Strategic Income Fund
relating to currency transactions and investments in non-dollar denominated
securities. David Scott is a Senior Fund Manager with SBAM Ltd. in London with
primary responsibility for managing long-term global bond funds. He also plays
an integral role in developing strategy. Prior to joining SBAM Limited in April
1994, Mr. Scott worked at J.P. Morgan from 1990 to 1994 where he had
responsibility for global and non-dollar funds.
Robert Amodeo is responsible for developing and executing municipal bond
portfolio investment strategies for the National Municipal Bond Fund. Mr. Amodeo
pioneered adaptation and the use of the Yield Book for municipal bond portfolio
management, analysis, performance attribution and optimization. Prior to joining
SBAM, he was a member of Salomon Brothers Partnership Investment Group where he
was responsible for analyzing and managing various partnership investments. Mr.
Amodeo received a B.S. (Magna Cum Laude) in Business Management from Long Island
University. He also holds a Chartered Financial Analyst designation and is a
member of the New York Society of Security Analysts.
39
<PAGE>
Fred Alger Management, Inc.
Investment decisions for the Small/Mid Cap Fund are made by its Subadvisor, Fred
Alger Management, Inc. Alger, located at One World Trade Center, New York, New
York 10048, has been in the business of providing investment advisory services
since 1964. As of October 31, 1998 Alger had approximately $8.5 billion under
management, including $5.3 billion in mutual fund accounts and $3.2 billion in
other advisory accounts. Alger is wholly owned by Fred Alger & Company, Inc.,
which in turn is wholly owned by Alger Associates, Inc., a financial services
holding company.
David D. Alger, President of Alger, has been primarily responsible for the
day-to-day management of the Small/Mid Cap Fund since the Fund's inception
(March 1996). He has been employed by Alger as Executive Vice President and
Director of Research since 1971 and as President since 1995 and he serves as
fund manager for other mutual funds and investment accounts managed by Alger
Management. Also participating in the management of the Small/Mid Cap Fund since
the Fund's inception are Ronald Tartaro and Seilai Khoo. Mr. Tartaro has been
employed by Alger since 1990, and he serves as a Senior Vice President. Ms. Khoo
has been employed by Alger Management since 1989, and she serves as a Senior
Vice President.
Founders Asset Management, LLC.
Investment decisions for the Growth Equity, International Small Cap and Balanced
Funds are made by its Subadvisor, Founders Asset Management, LLC, located at
2930 East Third Avenue, Denver, Colorado 80206. Founders is a registered
investment adviser first established as an asset manager in 1938, and is a
subsidiary of Mellon Bank, N.A. As of September 30, 1998, Founders had over $6.3
billion of assets under management, including approximately $4.5 billion in
mutual fund accounts and $1.8 billion in other advisory accounts.
To facilitate the day-to-day investment management of the Growth Equity,
International Small Cap and Balanced Funds, Founders employs a unique
team-and-lead-manager system. The management team is composed of several members
of the Investment Department, including lead portfolio managers, portfolio
traders and research analysts. Team members share responsibility for providing
ideas, information, knowledge and expertise in the management of the Funds. Each
team member has one or more areas of expertise that is applied to the management
of the Fund. Daily decisions on Fund selection for the Fund rests with a lead
fund manager assigned to the Fund.
Michael W. Gerding, Vice President of Investments, has been the lead fund
manager for the International Small Cap Fund since the Fund's inception (March
1996). Mr. Gerding is a chartered financial analyst who has been part of
Founders' investment department since 1990. Brian F. Kelly, Fund Manager, has
been the lead fund manager for the Balanced Fund since October 1996. Mr. Kelly
joined Founders in 1996. Prior to joining Founders, Mr. Kelly served as fund
manager for Invesco Trust Company (1993-1996) and as a senior investment analyst
for Sears Investment Management Company (1986-1993).
Thomas M. Arrington, Vice President of Investments, is a Chartered Financial
Analyst who has been the co-portfolio manager, along with Scott Chapman, of the
Growth Fund since December 1998. Prior to joining Founders, he was vice
president and director of income equity strategy at HighMark Capital Management,
a subsidiary of Union BanCal Corp., where he managed the HighMark Income Equity
Fund, a large-cap fund. He received a bachelor's degree in economics from the
University of California, Los Angeles and an MBA from San Francisco State
University.
Scott Chapman, Vice President of Investments, is a Chartered Financial Analyst
who has been the co-portfolio manager, along with Thomas Arrington, of the
Growth Fund since December 1998. Before joining Founders, Chapman was vice
president and director of growth strategy for HighMark Capital. He has more than
10 years experience in equity investment management, including security analysis
positions with McCullough, Andrews and Cappiello and Cooper Development Co.
Chapman received a bachelor of science degree in accounting
40
<PAGE>
from Santa Clara University and an MBA in finance from Golden Gate University.
Global Alliance Value Investors, Ltd
Global Alliance Value Investors, Ltd. ("GAVIL"), whose address is 985 Moraga
Road, Lafayette, California 94549, is the subadvisor to the Equity-Income Fund.
GAVIL is an equity investment management firm founded in 1997 by its current
President and investment strategy team leader, Nancy Tengler. The firm invests
in the securities of U.S.-based issuers for clients around the world. Cypress
Holding Company, Inc., an affiliate of CAM, holds a majority interest in GAVIL.
Ms. Tengler is the former Managing Director and Head of the Value Equities Group
at Union Bank of Switzerland Asset Management. She is also the Co-Founder,
former President and Portfolio Manager at Spare, Tengler, Kaplan and Bischel.
Ms. Tengler is the co-author of Relative Dividend Yield -- Common Stock
Investing for Income and Appreciation.
Morgan Stanley Dean Witter Investment Management Inc.
Morgan Stanley Dean Witter Investment Management Inc., with principal offices at
1221 Avenue of the Americas, New York, New York 10020, has been the subadvisor
to the Global Equity Fund since October 1, 1996, and to the International Equity
Fund since April 1, 1999. MSDW in certain instances does business using the name
Morgan Stanley Asset Management ("MSAM"). MSAM, a wholly-owned subsidiary of
Morgan Stanley Dean Witter & Co., conducts a worldwide fund management business,
providing a broad range of fund management services to customers in the United
States and abroad. As of October 30, 1998, MSAM, together with its affiliated
institutional asset management companies, managed investments totaling
approximately $156.2 billion, including approximately $137.6 billion under
active management and $18.6 billion as named fiduciary or fiduciary adviser.
Ann D. Thivierge shares portfolio management responsibility for the
International Equity Fund with Barton M. Biggs. Ms. Thivierge is a Managing
Director of MSAM and a member of MSAM's asset allocation committee. She joined
MSAM in 1986 and holds a B.A. in International Relations from James Madison
College, Michigan State University, and an M.B.A. in Finance from New York
University.
Barton M. Biggs has been Chairman and a director of MSAM since 1980 and a
Managing Director of Morgan Stanley since 1975. He is also a director and
chairman of various registered investment companies to which MSAM and certain of
its affiliates provide investment advisory services. Mr. Biggs holds a B.A. from
Yale University and an M.B.A. from New York University.
Frances Campion has been primarily responsible for the fund management of the
Global Equity Fund since October 1996. Ms. Campion joined MSAM in January 1990
as a global equity fund manager and is now a Managing Director of Morgan Stanley
& Co. Incorporated. Her responsibilities include day to day management of the
Morgan Stanley's global equity products.
Manufacturers Adviser Corporation
Manufacturers Adviser Corporation, a Colorado corporation, is the subadvisor of
the Money Market Fund. Its principal business at the present time is to provide
investment management services to these funds and comparable funds of NASL
Series Trust. MAC is an indirect wholly-owned subsidiary of Manulife. The
address of MAC is 200 Bloor Street East, Toronto, Ontario, Canada M4W 1E5. As of
September 30, 1998, MAC together with Manulife had approximately $13 billion of
assets under management.
This Fund is managed by a team of investment professionals each of whom plays an
important role in the management process of each Fund. Team members work
together to develop investment strategies and select securities for a Fund. They
are supported by research analysts, traders and other investment specialists who
work alongside the investment professionals in an effort to utilize all
available resources to benefit the shareholders.
41
<PAGE>
Section III:
Investing in the North American Funds
Classes of Shares
There are three classes of shares of North American Funds: A, B, and C.
The initial investment minimum for all classes of shares per fund is $1,000. For
retirement plans and other automatic investment programs, the initial purchase
minimum is $50. You must maintain a minimum account balance of $500, or $50 for
retirement plans and other automatic investing programs. Purchases and
redemptions will be made at the share price calculated by North American Funds
after the request is received in good order. Confirmations of all transactions
will be mailed to you promptly, and a copy will be sent to your broker of
record. North American Funds may refuse any request to purchase shares.
<TABLE>
<CAPTION>
Buying Fund Redeeming Fund
Shares Shares
================================================================================================
<S> <C> <C>
By Mail Mail a check and account Send a written request to:
application to: North American Funds
North American Funds P.O. Box 8505
P.O. Box 8505 Boston, MA 02266-8508
Boston, MA 02266-8508
To add to an existing account, mail
a check with your account number:
North American Funds
P.O. Box 8505
Boston, MA 02266-8508
Overnight Mailing Address:
North American Funds
c/o Boston Financial
attn: Leadership Services
66 Brooks Dr.
Braintree MA 02184
- ------------------------------------------------------------------------------------------------
By Wire Transfer For wire instructions, contact Yes, with a minimum of $1,000.
Customer Service at 1-800-872-8037 For wire instructions, contact
Customer Service at
1-800-872-8037
- ------------------------------------------------------------------------------------------------
By Phone No Yes, simply call
1-800-872-8037 by 4:00 p.m. to
receive that day's closing
price
- ------------------------------------------------------------------------------------------------
Through Broker Dealers Yes, if a dealer agreement is Yes, if a dealer agreement is
in place in place
================================================================================================
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
====================================================================================================================================
<S> <C> <C> <C>
Sales Charges o Purchases of less than $1 o Shares are sold without a o Shares are sold without a
million are sold with a front end sales charge. For front end sales charge. For
front end sales charge (see shares redeemed within six shares redeemed within one
table on next page). years there is a sales year there is a 1% sales
charge at redemption (see charge at redemption.
o Purchases over $1 million table on next page). This
are sold without a front does not apply to the Money o Available for purchases
end sales charge. For Market Fund. under $1 million.
shares redeemed within one
year there is a 1% back end o Available for purchases of
sales charge at redemption. $250,000 or less.
- ------------------------------------------------------------------------------------------------------------------------------------
Programs That Reduce o Rights of Accumulation - you o For B and C Shares, the
Sales Charges will pay the sales charge back end sales charge is
applicable to your total equal to the lesser of the
account balance in all net asset value at
classes of shares. redemption, or the original
purchase price.
o Statement of intention -
agree to invest a certain
amount over 13 months and
you will pay the sales
charge based on your goal.
---------------------------------------------------------------------------------------------------------
o For an account opened after
5-1-95, in any class of
shares, there will be no
deferred sales charge
applied, if a systematic
withdrawal plan is
established for up to 12%
of the account value to be
withdrawn annually.
o For qualified group
retirement plans, please
see the Statement of
Additional Information
(SAI) for a more detailed
discussion.
====================================================================================================================================
</TABLE>
43
<PAGE>
Sales Charge Tables
Class A Shares Sales Charge Table
There is no front end sales charge for Class A shares of the Money Market Fund.
If A shares of this
Fund are exchanged for Class A shares of another Fund, the regular sales charge
for Class A shares will be charged.
<TABLE>
<CAPTION>
Sales Charge
Sales Charge as a Concession to
as a Percentage of Broker Dealer as
Amount of Percentage of the Net Amount a Percentage of
Purchase Payment the Offering Price Invested Offering Price
======================================================================================================
<S> <C> <C> <C>
Less than $50,000
Equity Funds 5.75% 6.10% 5.00%
Other Funds 4.75% 4.99% 4.00%
- ------------------------------------------------------------------------------------------------------
$50,000 but less than $100,000 4.75% 4.99% 4.00%
- ------------------------------------------------------------------------------------------------------
$100,000 but less than $250,000 4.00% 4.17% 3.25%
- ------------------------------------------------------------------------------------------------------
$250,000 but less than $500,000 3.00% 3.09% 2.50%
- ------------------------------------------------------------------------------------------------------
$500,000 but less than $1 million 2.25% 2.30% 1.75%
- ------------------------------------------------------------------------------------------------------
$1 million or more None* None* See Below**
======================================================================================================
</TABLE>
* A CDSC (back end sales charge) may apply.
** For purchases of Class A shares of $1 million or more the Distributor will
pay a commission to dealers as follows: 1.00% on sales up to $5 million
(0.50% for sales of the National Municipal Bond Fund), plus 0.50% of the
amount in excess of $5 million; provided, however, that the Distributor may
pay a commission on sales in excess of $5 million of up to 1.00% to certain
dealers which, at the Distributor's invitation, enter into an agreement with
the Distributor in which the dealer agrees to return any commission paid to
it on the sale (or a pro rata portion thereof) if the shareholder redeems his
shares within a period of time after purchase as specified by the
Distributor. Purchases of $1 million or more for each shareholder account
will be aggregated over a 12 month period (commencing from the date of the
first such purchase) for purposes of determining the level of commission to
be paid during that period with respect to such account.
44
<PAGE>
Class B Shares Sales Charge Table*
Year(s) Since Purchase Deferred Sales Charge
as Percentage of
Amount Redeemed
================================================================================
Up to 2 years 5%
- --------------------------------------------------------------------------------
2 years or more but less than 3 years 4%
- --------------------------------------------------------------------------------
3 years or more but less than 4 years 3%
- --------------------------------------------------------------------------------
4 years or more but less than 5 years 2%
- --------------------------------------------------------------------------------
5 years or more but less than 6 years 1%
- --------------------------------------------------------------------------------
6 or more years 0%
================================================================================
Class C Shares*
Class C shares are offered for sale at net asset value and are offered for
purchases of less than $1 million. Class C shares are sold without a front end
sales charge. Class C shares are subject to a deferred sales charge of 1% of the
dollar amount subject thereto during the first year after purchase.
Redemption in Kind
The Funds reserve the right to redeem proceeds in whole or in part by a
distribution in kind of marketable securities held by the Fund.
Payment Following Redemption
Each Fund will normally send the proceeds from a redemption (less any applicable
deferred sales charge) on the next business day, but may delay payment for up to
seven days.
Payment may be delayed if the shares to be redeemed were purchased by a check
that has not cleared. Each Fund may suspend the right of redemption and may
postpone payment for more than seven days when the New York Stock Exchange is
closed for other than weekends or holidays, or if permitted by the rules of, or
action by, the SEC.
* Any shares in the redeeming shareholder's account that can be redeemed without
charge will be redeemed prior to those subject to a charge. Only time of
ownership spent in Funds other than the Money Market Fund counts towards
determining the applicable deferred sales charge.
45
<PAGE>
Pricing of Fund Shares
The public offering price of the Class A shares of each Fund is the net asset
value per share (next determined following receipt of an order) plus, in the
case of all Funds except the Money Market Fund, a front end sales charge, if
applicable. The share price for Class B shares and Class C shares is the net
asset value per share (next determined following receipt of an order).
The net asset value of the shares of each class of each Fund is calculated
separately and, except as described below, is determined once daily as of the
close of regularly scheduled trading on the New York Stock Exchange. Net asset
value per share of each class of each Fund (other than the Money Market Fund, as
described below) is calculated by dividing the value of the portion of the
Fund's securities and other assets attributable to that class, less the
liabilities attributable to that class, by the number of shares of that class
outstanding. No determination is required on (i) days on which changes in the
value of such Fund's securities holdings will not materially affect the current
net asset value of the shares of the Fund, (ii) days when the New York Stock
Exchange is closed (for example, national holidays). Generally, trading in
non-U.S. securities, as well as U.S.
Government securities and money market instruments, is substantially completed
each day at various times prior to the close of regularly scheduled trading on
the New York Stock Exchange. The values of such securities used in computing the
net asset value of the shares of a class of a Fund are generally determined as
of such times. Occasionally, events which affect the values of such securities
may occur between the times at which they are generally determined and the close
of regularly scheduled trading on the Exchange and would therefore not be
reflected in the computation of a class's net asset value. If events materially
affecting the value of such securities occur during such period, then these
securities will be valued at their fair value as determined in good faith by the
subadvisors under procedures established and regularly reviewed by the Trustees.
Shares of the Fund are available at the net asset value to investors purchasing
shares of the Funds with redemption proceeds from other mutual fund complexes on
which the investor has paid for front end sales charge or was subject to a
deferred sales charge, whether or not paid, if such redemption occurred more
than 60 days prior to such purchase. The Distributor will require satisfactory
evidence of your qualification of this waiver. Please call for more information.
The redemption of the shares from the other mutual fund is, for federal income
tax purposes, a sale upon which a gain or loss may be realized.
All instruments held by the Money Market Fund and short-term debt instruments
with a remaining maturity of 60 days or less held by the other Funds are valued
on an amortized cost basis.
Unless you request cash payment, all dividends and distributions will be
reinvested. All Funds except the Money Market Fund declare and pay capital gains
annually.
46
<PAGE>
Dividends and Distributions from North American Funds
These Funds declare and pay income dividends annually:
o International Small Cap Fund
o Global Equity Fund
o Emerging Growth
o Small/Mid Cap Fund
o Growth Equity Fund
o Tax-Sensitive Equity Fund
o Equity-Income Fund
o Balanced Fund
These Funds declare and pay income dividends semi-annually:
o International Equity Fund
o Growth and Income Fund
These Funds declare income dividends daily and pay monthly:
o Strategic Income Fund
o Investment Quality Bond Fund
o National Municipal Bond Fund
o U.S. Government Securities Fund
o Money Market Fund
47
<PAGE>
Taxes
It is expected that each Fund of the Trust will qualify as a "regulated
investment company" under the Code. If it so qualifies, a Fund will not be
subject to United States federal income taxes on its net investment income and
net capital gain, if any, that it distributes to its shareholders in each
taxable year, provided that it distributes to its shareholders (i) at least 90%
of its net investment income for such taxable year, and (ii) with respect to the
National Municipal Bond Fund at least 90% of its net tax-exempt interest income
for such taxable year. If in any year a Fund fails to qualify as a regulated
investment company, such Fund would incur regular corporate federal income tax
on its taxable income for that year and be subject to certain additional
distribution requirements upon re-qualification. Each Fund will be subject to a
4% nondeductible excise tax on its taxable income to the extent it does not meet
certain distribution requirements by the end of each calendar year. Each Fund
intends to make sufficient distributions to avoid application of the corporate
income and excise taxes. Funds investing in foreign securities or currencies may
be required to pay withholding or other taxes to foreign governments on
dividends and interest. The investment yield of the Funds investing in foreign
securities or currencies will be reduced by these foreign taxes. Shareholders
will bear the cost of any foreign taxes, but may not be able to claim a foreign
tax
credit or deduction for these foreign taxes. If a Fund is eligible for and makes
an election to allow the shareholders of that Fund to claim a foreign tax credit
or deduction for these taxes for any taxable year, the shareholders will be
notified. The ability of the shareholders to utilize such a foreign tax credit
is subject to a holding period requirement. In addition, Funds investing in
securities of passive foreign investment companies may be subject to U.S.
federal income taxes (and interest on such taxes) as a result of such
investments. The investment yield of the Funds making such investments will be
reduced by these taxes and interest. Shareholders will bear the cost of these
taxes and interest, but will not be able to claim a deduction for these amounts.
The redemption, sale or exchange of Fund shares (including the exchange of
shares of one Fund for shares of another) is a taxable event and may result in a
gain or loss. Gain or loss, if any, recognized on the sale or other disposition
of shares of the Fund will be taxed as capital gain or loss if the shares are
capital assets in the shareholder's hands. Generally, a shareholder's gain or
loss will be a long-term gain or loss if the shares have been held for more than
one year. Pursuant to the Taxpayer Relief Act of 1997, long-term capital gains
generally are subject to a maximum tax rate of 20%.
If a shareholder sells or otherwise disposes of a share of the Fund before
holding it for more than six months, any loss on the sale or other disposition
of such share shall be (i) treated as a long-term capital loss to the extent of
any capital gain dividends received by the shareholder with respect to such
share or (ii) in the case of the National Municipal Bond Fund, disallowed to the
extent of any exempt-interest dividend received by the shareholder with respect
to such shares. A loss realized on a sale or exchange of shares may be
disallowed if other shares are acquired within a 61-day period beginning 30 days
before and ending 30 days after the date on which the shares are disposed.
Generally, unless a shareholder of any Fund includes his or her taxpayer
identification number (social security number for individuals) in the
Shareholder Application and certifies that he or she is not subject to backup
withholding, the Fund is required to withhold and remit to the U.S. Treasury 31%
from dividends other than exempt-interest dividends and other reportable
payments to the shareholder.
48
<PAGE>
Depending on the residence of the shareholder for tax purposes, distributions
may also be subject to state and local taxes or withholding taxes. Most states
provide that a regulated investment company may pass through (without
restriction) to its shareholders state and local income tax exemptions available
to direct owners of certain types of U.S. government securities. Thus, for
residents of these states, distributions derived from a Fund's investment in
certain types of U.S. government securities should be free from state and local
income taxes to the extent that the interest income from such investments would
have been exempt from state and local income taxes if such securities had been
held directly by the respective shareholders themselves.
National Municipal Bond Fund--Taxation
The National Municipal Bond Fund also intends to satisfy conditions under the
Code that will enable interest from municipal obligations, which is exempt from
regular federal income taxes in the hands of each Fund, to qualify as
"exempt-interest dividends" when distributed to such Fund's shareholders. Except
as discussed below, such dividends are exempt from regular federal income taxes.
Although exempt-interest dividends paid by the National Municipal Bond Fund will
be excluded by shareholders of the Funds from their gross income for regular
federal income tax purposes, under the Code all or a portion of such dividends
may be (i) a preference item for purposes of the alternative minimum tax, (ii) a
component of the "ACE" adjustment for purposes of determining the amount of
corporate alternative minimum tax or (iii) a factor in determining the extent to
which a shareholder's Social Security or railroad retirement benefits are
taxable. Moreover, the receipt of exempt-interest dividends from each of the
Funds affect the federal tax liability of certain foreign corporations, S
Corporations and insurance companies. Furthermore, under the Code, interest on
indebtedness incurred or continued to purchase or carry Fund shares, which
interest is deemed to relate to exempt-interest dividends, will not be
deductible by shareholders of the Fund for federal income tax purposes.
The exemption of exempt-interest dividend income from regular federal income
taxation does not necessarily result in similar exemptions for such income under
tax laws of state or local taxing authorities. In general, states exempt from
state income tax only that portion of any exempt-interest dividend that is
derived from interest received by a regulated investment company on its holdings
of obligations issued by that state or its political subdivisions and
instrumentalities.
A notice detailing the tax status of dividends and distributions paid by the
National Municipal Bond Fund will be mailed annually to its shareholders. As
part of this notice, the Fund will report to its shareholders the percentage of
interest income earned by the Fund during the preceding year on tax-exempt
obligations indicating, on a state-by-state basis, the source of such income.
Descriptions of tax consequences set forth in this Prospectus and in the
Statement of Additional Information are intended to be a general guide.
Investors should consult their tax advisers with respect to the specific tax
consequences of an investment in a Fund, including the effect and applicability
of state, local, foreign, and other tax laws and the possible effects of changes
in federal or other tax laws. This discussion is not intended as a substitute
for careful tax planning.
49
<PAGE>
Rule 12b-1 Fees
The Trust has adopted a distribution plan under Rule 12b-1 of the Investment
Company Act of 1940, as amended, that allows the Funds to pay distribution fees
for the sale and distribution of Fund shares. Portions of the fees are used to
provide payments for services provided to shareholders ("service fees"), as
indicated below.
Class A shares of each Fund, except the Money Market Fund and the National
Municipal Bond Fund, are subject to a fee of up to .35% of average daily net
assets, five-sevenths of which (.25%) is a "service fee." There are no Rule
12b-1 fees on the Money Market Fund, and the Rule 12b-1 fee paid by Class A
shares, or for the National Municipal Bond Fund is up to .15% of average annual
net assets, all of which is a "service fee."
Class B shares of each Fund except the Money Market Fund are subject to a Rule
12b-1 fee of up to 1.00% of average annual net assets, one-fourth (.25%) of this
is a "service fee."
Class C shares of each Fund except the Money Market Fund are subject to a fee of
up to 1.00% of average annual net assets, one-fourth (.25%) of this is a
"service fee."
Because these fees are paid out of the Fund's assets on an ongoing basis, over
time they will increase the cost of your investment and may cost you more than
paying other types of sales charges. The higher fees for Class B and Class C
shares may therefore cost you more than paying the maximum permitted front-end
sales charge on Class A Shares.
50
<PAGE>
Account Services
To use any of these programs, simply fill out the appropriate section of your
account application, or request the appropriate form.
Automatic Dividend Diversification
With this program, you can have all dividends and other distributions from one
Fund automatically invested in the same class of shares of another Fund.
Automatic Investment Plan
Shareholders can set up an Automatic Investment Plan. Once each month the
shareholder's account will be debited the amount (at least $50) specified by the
shareholder.
Checkwriting
Checkwriting is available to Class A and Class C shareholders of the U.S.
Government Securities, National Municipal Bond and Money Market Funds. Simply
request this on your account application, and complete a signature card, and you
will receive a book of blank checks. The minimum amount of a check is $250. When
a check is presented for payment, enough shares will be redeemed to cover the
amount of the check and any applicable deferred sales charge. If the amount of
the check plus the sales charge is more than the account value, the check will
be returned unpaid.
Exchange Privilege
Shareholders may make free unlimited exchanges by mail or telephone within
classes of shares without any sales charge. Shares of one class may not be
exchanged for shares of any other class of any Fund. Be aware that exchanges are
regarded as sales for federal and state income tax purposes and could result in
a gain or loss, depending on the original cost of shares exchanged. Exchanges
usually occur on the same day they are requested. The terms of the exchange
privilege may change and the privilege may be revoked at any time without
notice.
The Fund will not be responsible for any losses resulting from unauthorized
telephone transactions if it follows reasonable procedures designed to varify
the identify of the caller. The Fund will request personal or other information
from the caller, and will record calls. By establishing an account with the
Fund, you consent to all recording of telephone calls.
You may make exchanges over the phone by calling 1-800-872-8037.
Reinstatement Privilege
If you redeem Class A shares (under $1 million) and reinvest within 90 days, you
will not have to pay a sales charge. If you redeem A shares over $1 million, or
Class B or C shares and pay a deferred sales charge and then reinvest within 90
days, your account will be credited the amount of the deferred sales charge.
Systematic Investing
Your shares of any class of the Money Market, U.S. Government Securities or
National Municipal Bond Fund can be exchanged monthly for shares of the same
class of other Funds. An exchange of at least $50 per exchange will be made
around the 15th of each month in accordance with your instructions. This program
takes advantage of dollar cost averaging.
Systematic Withdrawal Plan
If you have an account balance of at least $10,000, you can set up a plan to
have redemptions paid to you, or someone you designate, on a monthly, quarterly,
semi-annual or annual basis. You can withdraw up to 12% of the account value
annually, if a monthly plan, up to 1% per month, without a deferred sales
charge. If you request this service after completing your application and
payments are to be made to someone other than yourself, you will have to provide
a signature guarantee. Redemption checks are generally mailed within two days
after redemption. The availability of this service may end, and a fee of up to
$5 per withdrawal may be charged with 30 days written notice to you.
Transfer of Shares
You may transfer Fund shares to family members and others at any time without a
sales charge. Consult your tax adviser concerning such transfers.
51
<PAGE>
Financial Highlights
The financial highlights tables are intended to help you understand each Fund's
financial performance for the past five years or, if shorter, the period of a
Fund's operations. Certain information reflects financial results for a single
Fund share. The Total returns in the tables represent the return that an
investor would have earned or lost on an investment in a Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, whose report, along with each Fund's
financial statements, is included in the Trust's annual report, which is
available upon request.
[GRAPHIC]
52
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Small Cap Fund
- --------------------------------------------------------------------------------------------------------------------------------
Class A Class B
---------------------------------------------------------------------------
Year Year 3/04/96* Year Year 3/04/96*
Ended Ended to Ended Ended to
10/31/98 10/31/97 10/31/96 10/31/98 10/31/97 10/31/96
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $13.86 $13.43 $12.50 $13.71 $13.37 $12.50
- --------------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) (0.02) (0.03) 0.05 (0.12) (0.11) (0.01)
Net realized and unrealized gain/(loss) on
investments and foreign currency 0.07 0.46 0.88 0.07 0.45 0.88
---------------------------------------------------------------------------
Total from investment operations 0.05 0.43 0.93 (0.05) 0.34 0.87
- --------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.91 $13.86 $13.43 $13.66 $13.71 $13.37
- --------------------------------------------------------------------------------------------------------------------------------
Total Return 0.36% 3.20% 7.44%+ (0.36%) 2.54% 6.96%+
================================================================================================================================
Ratios/Supplemental Data
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $2,173 $3,225 $2,120 $7,073 $7,369 $5,068
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net
assets 1.90% 1.90% 1.90%# 2.55% 2.55% 2.55%#
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (0.12%) (0.19%) (0.50%)# (0.79%) (0.84%) (0.15%)#
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 54% 75% 67%# 54% 75% 67%#
- --------------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by adviser 2.23% 2.46% 3.07%# 2.88% 2.98% 3.27%#
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
International Small Cap Fund
- --------------------------------------------------------------------------------------
Class C
-------------------------------
Year Year 3/04/96*
Ended Ended to
10/31/98 10/31/97 10/31/96
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $13.71 $13.37 $12.50
- ------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) (0.12) (0.11) (0.01)
Net realized and unrealized gain/(loss) on
investments and foreign currency 0.07 0.45 0.88
-------------------------------
Total from investment operations (0.05) 0.34 0.87
- ------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.66 $13.71 $13.37
- ------------------------------------------------------------------------------------
Total Return (0.36%) 2.54% 6.96%+
====================================================================================
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------
Net assets, end of period (000's) $6,195 $7,025 $5,517
- ------------------------------------------------------------------------------------
Ratio of total expenses to average net
assets 2.55% 2.55% 2.55%#
- ------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (0.78%) (0.84%) (0.15%)#
- ------------------------------------------------------------------------------------
Portfolio turnover rate 54% 75% 67%#
- ------------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by adviser 2.88% 2.96% 3.25%#
- ------------------------------------------------------------------------------------
</TABLE>
================================================================================
<TABLE>
<CAPTION>
International Equity Fund (Formerly International Growth & Income Fund)
- --------------------------------------------------------------------------------------------------------------
Class A
------------------------------------------------------
Year Year Year 1/09/95*
Ended Ended Ended to
10/31/98 10/31/97 10/31/96** 10/31/95
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.81 $11.35 $10.11 $10.00
- --------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.03 0.06 0.09 0.06
Net realized and unrealized gain/(loss) on
investments and foreign currency 0.02 0.35 1.33 0.08
------------------------------------------------------
Total from investment operations 0.05 0.41 1.42 0.14
------------------------------------------------------
Distributions
Dividends from net investment income (0.13) (0.19) (0.08) (0.03)
Distributions from realized capital gains (0.90) (0.76) (0.10) --
------------------------------------------------------
Total distributions (1.03) (0.95) (0.18) (0.03)
- --------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $9.83 $10.81 $11.35 $10.11
- --------------------------------------------------------------------------------------------------------------
Total Return 0.67% 3.55% 14.25% 1.37%+
==============================================================================================================
Ratios/Supplemental Data
- --------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $3,769 $4,461 $4,732 $6,897
- --------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 1.75% 1.75% 1.75% 1.75%#
- --------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets 0.44% 0.97% 0.84% 0.70%#
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 173% 146% 170% 69%#
- --------------------------------------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by adviser 1.87% 1.96% 1.97% 2.18%#
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
International Equity Fund (Formerly International Growth & Income Fund)
- ------------------------------------------------------------------------------------------------------------
Class B
----------------------------------------------------
Year Year Year 1/09/95*
Ended Ended Ended to
10/31/98 10/31/97** 10/31/96** 10/31/95
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.75 $11.30 $10.10 $10.00
- ------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) (0.02) 0.03 0.06 0.01
Net realized and unrealized gain/(loss) on
investments and foreign currency 0.00 0.31 1.30 0.12
----------------------------------------------------
Total from investment operations (0.02) 0.34 1.36 0.13
----------------------------------------------------
Distributions
Dividends from net investment income (0.06) (0.13) (0.05) (0.03)
Distributions from realized capital gains (0.90) (0.76) (0.11) --
----------------------------------------------------
Total distributions (0.96) (0.89) (0.16) (0.03)
- ------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $9.77 $10.75 $11.30 $10.10
- ------------------------------------------------------------------------------------------------------------
Total Return (0.03%) 2.92% 13.58% 1.28%+
============================================================================================================
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $14,030 $16,334 $15,217 $8,421
- ------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 2.40% 2.40% 2.40% 2.40%#
- ------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets (0.18%) 0.32% 0.57% 0.15%#
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 173% 146% 170% 69%#
- ------------------------------------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by adviser 2.52% 2.54% 2.60% 2.93%#
- ------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations
** Net investment income per share has been calculated using the average
share method
# Annualized
+ Non-annualized
53
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Equity Fund (Formerly International Growth & Income Fund)
- --------------------------------------------------------------------------------------------------------
Class C
-------------------------------------------------
Year Year Year 1/09/95*
Ended Ended Ended to
10/31/98 10/31/97** 10/31/96** 10/31/95
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.76 $11.31 $10.10 $10.00
- --------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) (0.02) 0.03 0.06 0.01
Net realized and unrealized gain/(loss) on
investments and foreign currency (0.01) 0.31 1.30 0.12
-------------------------------------------------
Total from investment operations (0.03) 0.34 1.36 0.13
-------------------------------------------------
Distributions
Dividends from net investment income (0.06) (0.13) (0.05) (0.03)
Distributions from realized capital gains (0.90) (0.76) (0.10) --
-------------------------------------------------
Total distributions (0.96) (0.89) (0.15) (0.03)
- --------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $9.77 $10.76 $11.31 $10.10
- --------------------------------------------------------------------------------------------------------
Total Return (0.13%) 2.91% 13.63% 1.28%+
========================================================================================================
Ratios/Supplemental Data
- --------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $7,960 $8,460 $9,076 $6,324
- --------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 2.40% 2.40% 2.40% 2.40%#
- --------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets (0.19%) 0.32% 0.51% 0.13%#
- --------------------------------------------------------------------------------------------------------
Portfolio turnover rate 173% 146% 170% 69%#
- --------------------------------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by adviser 2.52% 2.57% 2.60% 2.93%#
- --------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
<TABLE>
<CAPTION>
Global Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------
Class A
--------------------------------------------------------------------
Year Year Year Year 4/01/94*
Ended Ended Ended Ended to
10/31/98 10/31/97 10/31/96** 10/31/95 10/31/94
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $16.32 $14.50 $13.84 $14.82 $14.13
- ------------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.02 0.06 (0.04) -- (0.01)
Net realized and unrealized gain/(loss) on
investments and foreign currency 1.34 3.45 0.91 (0.54) 0.70
--------------------------------------------------------------------
Total from investment operations 1.36 3.51 0.87 (0.54) 0.69
--------------------------------------------------------------------
Distributions
Dividends from net investment income (0.22) (0.05) (0.21) -- --
Distributions from realized capital gains (1.03) (1.64) -- (0.44) --
--------------------------------------------------------------------
Total distributions (1.25) (1.69) (0.21) (0.44) --
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $16.43 $16.32 $14.50 $13.84 $14.82
- ------------------------------------------------------------------------------------------------------------------------------
Total Return 8.90% 26.10% 6.33% (3.52%) 9.16%@
==============================================================================================================================
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $31,055 $30,960 $25,924 $23,894 $18,152
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 1.75% 1.75% 1.75% 1.75% 1.75%#
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
net assets 0.09% 0.33% (0.30%) 0.03% (0.12%)#
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 20% 28% 165% 57% 54%
- ------------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense reimbursement
by adviser 1.75% 1.81% 1.83% 1.92% 1.97%#
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations
# Annualized
+ Non-annualized
** Net investment income per share has been calculated using the average
share method
@ Historical Total Return is the one-year performance return which
includes Class C performance prior to commencement of operations.
54
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Global Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------
Class B
--------------------------------------------------------------------
Year Year Year Year 4/01/94*
Ended Ended Ended Ended to
10/31/98 10/31/97** 10/31/96** 10/31/95** 10/31/94
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $16.14 $14.36 $13.73 $14.79 $14.13
- ------------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) (0.11) (0.05) (0.14) (0.09) (0.03)
Net realized and unrealized gain/(loss) on
investments and foreign currency 1.35 3.47 0.91 (0.53) 0.69
--------------------------------------------------------------------
Total from investment operations 1.24 3.42 0.77 (0.62) 0.66
--------------------------------------------------------------------
Distributions
Dividends from net investment income (0.11) -- (0.14) -- --
Distributions from realized capital gains (1.03) (1.64) -- (0.44) --
--------------------------------------------------------------------
Total distributions (1.14) (1.64) (0.14) (0.44) --
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $16.24 $16.14 $14.36 $13.73 $14.79
- ------------------------------------------------------------------------------------------------------------------------------
Total Return 8.17% 25.63% 5.64% (4.09%) 8.94%@
==============================================================================================================================
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $30,287 $31,833 $25,661 $23,317 $13,903
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 2.40% 2.40% 2.40% 2.40% 2.40%#
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
net assets (0.55%) (0.32%) (0.95%) (0.61%) (0.77%)#
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 20% 28% 165% 57% 54%
- ------------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense reimbursement by
adviser 2.40% 2.47% 2.48% 2.58% 2.71%#
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
<TABLE>
<CAPTION>
Global Equity Fund
- -------------------------------------------------------------------------------------------------------------------------
Class C
-------------------------------------------------------------------
Year Ended October 31,
-------------------------------------------------------------------
1998 1997** 1996** 1995** 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $16.19 $14.41 $13.73 $14.79 $13.74
- -------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) (0.10) (0.05) (0.14) (0.09) (0.10)
Net realized and unrealized gain/(loss) on
investments and foreign currency 1.35 3.47 0.92 (0.53) 1.15
-------------------------------------------------------------------
Total from investment operations 1.25 3.42 0.78 (0.62) 1.05
-------------------------------------------------------------------
Distributions
Dividends from net investment income (0.11) -- (0.10) -- --
Distributions from realized capital gains (1.03) (1.64) -- (0.44) --
Distributions from capital -- -- -- -- --
-------------------------------------------------------------------
Total distributions (1.14) (1.64) (0.10) (0.44) --
- -------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $16.30 $16.19 $14.41 $13.73 $14.79
- -------------------------------------------------------------------------------------------------------------------------
Total Return 8.21% 25.54% 5.70% (4.09%) 8.94%
=========================================================================================================================
Ratios/Supplemental Data
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $57,774 $61,245 $64,830 $83,340 $101,443
- -------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 2.40% 2.40% 2.40% 2.40% 2.40%
- -------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets (0.56%) (0.32%) (0.95%) (0.64%) (0.91%)
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 20% 28% 165% 57% 54%
- -------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by adviser 2.40% 2.46% 2.48% 2.53% 2.52%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations
# Annualized
** Net investment income per share has been calculated using the average
share method
@ Historical Total Return is the one-year performance return which
includes Class C performance prior to commencement of operations.
55
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Emerging Growth Fund Tax-Sensitive Equity Fund
- -------------------------------------------------------------------------------------- --------------------------------------
01/06/98* to 10/31/98 01/06/98* to 10/31/98
- -------------------------------------------------------------------------------------- --------------------------------------
Class A Class B Class C Class A Class B Class C
- -------------------------------------------------------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
- -------------------------------------------------------------------------------------- --------------------------------------
Investment Operations:
Net investment income/(loss) (0.08) (0.12)** (0.12)** (0.01) (0.04) (0.03)
Net realized and unrealized gain/(loss) on
investments and foreign currency (1.04) (1.05) (1.04) (0.92) (0.92) (0.93)
--------------------------------- --------------------------------------
Total from investment operations (1.12) (1.17) (1.16) (0.93) (0.96) (0.96)
- -------------------------------------------------------------------------------------- --------------------------------------
Net Asset Value, End of Period $8.88 $8.83 $8.84 $9.07 $9.04 $9.04
- -------------------------------------------------------------------------------------- --------------------------------------
Total Return (11.20%)+ (11.70%)+ (11.60%)+ (9.30%)+ (9.60%)+ (9.60%)
====================================================================================== ======================================
Ratios/Supplemental Data
- -------------------------------------------------------------------------------------- --------------------------------------
Net assets, end of period (000's) $146 $263 $238 $4,149 $2,900 $3,286
- -------------------------------------------------------------------------------------- --------------------------------------
Ratio of total expenses to average net assets 1.70%# 2.35%# 2.35%# 1.60%# 2.25%# 2.25%
- -------------------------------------------------------------------------------------- --------------------------------------
Ratio of net investment income to average
net assets (1.00%)# (1.76%)# (1.67%)# (0.40%)# (1.80%)# (1.84%)
- -------------------------------------------------------------------------------------- --------------------------------------
Portfolio turnover rate 52%+ 52%+ 52%+ 38%+ 38%+ 38%
- -------------------------------------------------------------------------------------- --------------------------------------
Expense ratio before expense
reimbursement by adviser 15.48%# 16.48%# 15.78%# 2.51%# 3.24%# 3.16%
- -------------------------------------------------------------------------------------- --------------------------------------
</TABLE>
================================================================================
<TABLE>
<CAPTION>
Small/Mid Cap Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Class A Class B
------------------------------------- -----------------------------------
Year Year 3/04/96* Year Year 3/04/96*
Ended Ended to Ended Ended to
10/31/98 10/31/97 10/31/96 10/31/98 10/31/97** 10/31/96
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $15.51 $12.62 $12.50 $15.33 $12.58 $12.50
- ----------------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) (0.15) (0.14) (0.02) (0.25) (0.23) (0.05)
Net realized and unrealized gain/(loss) on
investments and foreign currency 0.97 3.03 0.14 0.93 2.98 0.13
-----------------------------------------------------------------------------
Total from investment operations 0.82 2.89 0.12 0.68 2.75 0.08
Distributions
Distributions from capital gains (0.24) -- -- (0.24) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $16.09 $15.51 $12.62 $15.77 $15.33 $12.58
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return 5.51% 22.90% 0.96%+ 4.65% 21.86% 0.64%+
==================================================================================================================================
Ratios/Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $4,814 $4,170 $2,966 $13,972 $11,802 $6,659
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net
assets 1.675% 1.675% 1.675%# 2.325% 2.325% 2.325%#
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (0.90%) (1.02%) (0.40%)# (1.55%) (1.67%) (1.05%)#
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 162% 145% 92%# 162% 145% 92%#
- ----------------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense
reimbursement and fee waiver by adviser 1.93% 2.24% 2.69%# 2.58% 2.79% 3.05%#
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Class C
---------------------------------------
Year Year 3/04/96*
Ended Ended to
10/31/98 10/31/97** 10/31/96
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $15.35 $12.59 $12.50
- --------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) (0.25) (0.23) (0.05)
Net realized and unrealized gain/(loss) on
investments and foreign currency 0.93 2.99 0.14
---------------------------------------
Total from investment operations 0.68 2.76 0.09
Distributions
Distributions from capital gains (0.24) -- --
- --------------------------------------------------------------------------------------------
Net Asset Value, End of Period $15.79 $15.35 $12.59
- --------------------------------------------------------------------------------------------
Total Return 4.64% 21.92% 0.72%+
============================================================================================
Ratios/Supplemental Data
- --------------------------------------------------------------------------------------------
Net assets, end of period (000's) $16,221 $13,471 $8,241
- --------------------------------------------------------------------------------------------
Ratio of total expenses to average net
assets 2.325% 2.325% 2.325%#
- --------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (1.55%) (1.67%) (1.05%)#
- --------------------------------------------------------------------------------------------
Portfolio turnover rate 162% 145% 92%#
- --------------------------------------------------------------------------------------------
Expense ratio before expense
reimbursement and fee waiver by adviser 2.58% 2.78% 3.04%#
- --------------------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations
** Net investment income per share has been calculated using the average
shares method
+ Non-annualized
# Annualized
56
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth Equity Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Class A Class B
-----------------------------------------------------------------------------
Year Year 3/04/96* Year Year 3/04/96*
Ended Ended to Ended Ended to
10/31/98 10/31/97 10/31/96 10/31/98 10/31/97 10/31/96
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $17.01 $13.78 $12.50 $16.90 $13.73 $12.50
- ----------------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) (0.07) (0.03) 0.28 (0.18) (0.13) 0.24
Net realized and unrealized gain/(loss) on
investments and foreign currency 2.22 3.45 1.00 2.17 3.46 0.99
-----------------------------------------------------------------------------
Total from investment operations 2.15 3.42 1.28 1.99 3.33 1.23
-----------------------------------------------------------------------------
Distributions
Dividends from net investment income -- (0.19) -- -- (0.16) --
Distributions from realized capital gains (1.43) -- -- (1.43) -- --
-----------------------------------------------------------------------------
(1.43) (0.19) (1.43) (0.16)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $17.73 $17.01 $13.78 $17.46 $16.90 $13.73
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return 13.85% 25.13% 10.24%+ 12.93% 24.50% 9.84%+
==================================================================================================================================
Ratios/Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $3,919 $3,053 $2,244 $11,659 $9,040 $4,748
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average
net assets 1.65% 1.65% 1.65% 2.30% 2.30% 2.30%#
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (0.43%) (0.17%) 4.11%# (1.07%) (0.82%) 4.18%#
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 115% 181% 450%# 115% 181% 450%#
- ----------------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by adviser 1.91% 2.28% 2.71%# 2.56% 2.78% 3.06%#
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Class C
-------------------------------------
Year Year 3/04/96*
Ended Ended to
10/31/98 10/31/97 10/31/96
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $16.89 $13.73 $12.50
- ------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) (0.20) (0.13) 0.24
Net realized and unrealized gain/(loss) on
investments and foreign currency 2.18 3.46 0.99
-------------------------------------
Total from investment operations 1.98 3.33 1.23
-------------------------------------
Distributions
Dividends from net investment income -- (0.17) --
Distributions from realized capital gains (1.43) -- --
-------------------------------------
(1.43) (0.17)
- ------------------------------------------------------------------------------------------
Net Asset Value, End of Period $17.44 $16.89 $13.73
- ------------------------------------------------------------------------------------------
Total Return 12.87% 24.50% 9.84%+
==========================================================================================
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------
Net assets, end of period (000's) $12,965 $12,766 $6,494
- ------------------------------------------------------------------------------------------
Ratio of total expenses to average
net assets 2.30% 2.30% 2.30%#
- ------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (1.06%) (0.82%) 4.13%#
- ------------------------------------------------------------------------------------------
Portfolio turnover rate 115% 181% 450%#
- ------------------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by adviser 2.56% 2.75% 2.96%#
- ------------------------------------------------------------------------------------------
</TABLE>
================================================================================
<TABLE>
<CAPTION>
Growth and Income Fund
- ------------------------------------------------------------------------------------------------------------------------------
Class A
-------------------------------------------------------------------
Year Year Year Year 4/01/94*
Ended Ended Ended Ended to
10/31/98 10/31/97 10/31/96 10/31/95** 10/31/94
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $21.77 $17.56 $14.72 $13.09 $12.29
- ------------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.08 0.14 0.18 0.26 0.12
Net realized and unrealized gain/(loss) on
investments and foreign currency 4.14 5.26 2.99 1.90 0.76
-------------------------------------------------------------------
Total from investment operations 4.22 5.40 3.17 2.16 0.88
-------------------------------------------------------------------
Distributions
Dividends from net investment income -- (0.15) (0.21) (0.23) (0.08)
Distributions from realized capital gains (1.70) (1.04) (0.12) (0.30) --
Distributions in excess of net investment income (0.03) -- -- -- --
-------------------------------------------------------------------
Total distributions (1.73) (1.19) (0.33) (0.53) (0.08)
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $24.26 $21.77 $17.56 $14.72 $13.09
- ------------------------------------------------------------------------------------------------------------------------------
Total Return 20.82% 31.95% 21.84% 17.28% 5.06%@
==============================================================================================================================
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $42,916 $34,186 $18,272 $12,180 $8,134
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 1.34% 1.34% 1.34% 1.34% 1.34%#
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
net assets 0.34% 0.66% 1.10% 1.91% 1.72%#
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 18% 39% 49% 40% 45%
- ------------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense reimbursement
by adviser 1.45% 1.50% 1.56% 1.69% 2.08%#
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations
# Annualized
+ Non-annualized
** Net investment income per share has been calculated using the average
share method
@ Historical Total Return is the one-year performance return which
includes Class C performance prior to commencement of operations.
57
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth and Income Fund
- ------------------------------------------------------------------------------------------------------------------------------
Class B
-------------------------------------------------------------------
Year Year Year Year 4/01/94*
Ended Ended Ended Ended to
10/31/98 10/31/97 10/31/96** 10/31/95** 10/31/94
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $21.67 $17.50 $14.69 $13.08 $12.29
- ------------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) (0.07) 0.01 0.07 0.16 0.10
Net realized and unrealized gain/(loss) on
investments and foreign currency 4.11 5.23 2.99 1.94 0.77
-------------------------------------------------------------------
Total from investment operations 4.04 5.24 3.06 2.10 0.87
-------------------------------------------------------------------
Distributions
Dividends from net investment income -- (0.03) (0.13) (0.19) (0.08)
Distributions from realized capital gains (1.70) (1.04) (0.12) (0.30) --
-------------------------------------------------------------------
Total distributions (1.70) (1.07) (0.25) (0.49) (0.08)
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $24.01 $21.67 $17.50 $14.69 $13.08
- ------------------------------------------------------------------------------------------------------------------------------
Total Return 20.04% 31.40% 21.08% 16.73% 4.98%@
==============================================================================================================================
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $75,574 $54,871 $34,740 $19,052 $3,885
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 1.99% 1.99% 1.99% 1.99% 1.99%#
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
net assets (0.32%) 0.01% 0.45% 1.14% 1.07%#
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 18% 39% 49% 40% 45%
- ------------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense reimbursement
by adviser 2.10% 2.15% 2.20% 2.33% 3.12%#
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
<TABLE>
<CAPTION>
Growth and Income Fund
- ----------------------------------------------------------------------------------------------------------------------------
Class C
-------------------------------------------------------------------
Year Ended October 31,
-------------------------------------------------------------------
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $21.75 $17.56 $14.71 $13.08 $12.71
- ----------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) (0.07) 0.01 0.07 0.18 0.15
Net realized and unrealized gain/(loss) on
investments and foreign currency 4.12 5.25 3.00 1.90 0.46
-------------------------------------------------------------------
Total from investment operations 4.05 5.26 3.07 2.08 0.61
-------------------------------------------------------------------
Distributions
Dividends from net investment income -- (0.03) (0.10) (0.15) (0.13)
Distributions from realized capital gains (1.70) (1.04) (0.12) (0.30) (0.11)
-------------------------------------------------------------------
Total distributions (1.70) (1.07) (0.22) (0.45) (0.24)
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $24.10 $21.75 $17.56 $14.71 $13.08
- ----------------------------------------------------------------------------------------------------------------------------
Total Return 20.00% 31.37% 21.12% 16.56% 4.85%
============================================================================================================================
Ratios/Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $122,395 $98,250 $74,825 $63,154 $46,078
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 1.99% 1.99% 1.99% 1.99% 1.99%
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets (0.31%) 0.01% 0.45% 1.26% 1.11%
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 18% 39% 49% 40% 45%
- ----------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by adviser 2.10% 2.13% 2.20% 2.26% 2.38%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations
# Annualized
** Net investment income per share has been calculated using the average
share method
@ Historical Total Return is the one-year performance return which
includes Class C performance prior to commencement of operations.
58
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Equity--Income Fund
- -------------------------------------------------------------------------------------------------------------------------------
Class A
--------------------------------------------------------------------
Year Year Year Year 4/01/94*
Ended Ended Ended Ended to
10/31/98 10/31/97 10/31/96 10/31/95** 10/31/94
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $17.44 $17.37 $15.94 $14.78 $14.59
- -------------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.29 0.33 0.16 0.12 0.02
Net realized and unrealized gain/(loss) on
investments and foreign currency 1.46 3.59 2.69 1.83 0.17
--------------------------------------------------------------------
Total from investment operations 1.75 3.92 2.85 1.95 0.19
--------------------------------------------------------------------
Distributions
Dividends from net investment income (0.33) (0.18) (0.14) -- --
Distributions from realized capital gains (1.22) (3.67) (1.28) (0.79) --
Total distributions (1.55) (3.85) (1.42) (0.79) --
- -------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $17.64 $17.44 $17.37 $15.94 $14.78
- -------------------------------------------------------------------------------------------------------------------------------
Total Return 10.55% 27.24% 19.23% 14.22% 4.82%@
===============================================================================================================================
Ratios/Supplemental Data
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $36,661 $36,334 $28,470 $22,026 $16,326
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 1.415% 1.34% 1.34% 1.34% 1.34%#
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
net assets 1.57% 2.01% 0.98% 0.79% 0.13%#
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 22% 36% 169% 54% 39%
- -------------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense reimbursement
by adviser 1.51% 1.55% 1.55% 1.62% 1.79%#
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
<TABLE>
<CAPTION>
Equity--Income Fund
- -------------------------------------------------------------------------------------------------------------------------------
Class B
--------------------------------------------------------------------
Year Year Year Year 4/01/94*
Ended Ended Ended Ended to
10/31/98 10/31/97 10/31/96 10/31/95** 10/31/94
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $17.24 $17.22 $15.84 $14.77 $14.59
- -------------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.16 0.23 0.06 0.02 (0.02)
Net realized and unrealized gain/(loss) on
investments and foreign currency 1.46 3.54 2.69 1.84 0.20
--------------------------------------------------------------------
Total from investment operations 1.62 3.77 2.75 1.86 0.18
--------------------------------------------------------------------
Distributions
Dividends from net investment income (0.21) (0.08) (0.09) -- --
Distributions from realized capital gains (1.22) (3.67) (1.28) (0.79) --
--------------------------------------------------------------------
Total distributions (1.43) (3.75) (1.37) (0.79) --
- -------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $17.43 $17.24 $17.22 $15.84 $14.77
- -------------------------------------------------------------------------------------------------------------------------------
Total Return 9.81% 26.29% 18.59% 13.58% 4.75%@
===============================================================================================================================
Ratios/Supplemental Data
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $38,954 $36,191 $27,058 $19,874 $5,054
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 2.065% 1.99% 1.99% 1.99% 1.99%#
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
net assets 0.93% 1.36% 0.33% 0.13% (0.52%)#
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 22% 36% 169% 54% 39%
- -------------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense reimbursement
by adviser 2.16% 2.21% 2.20% 2.32% 2.82%#
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations
# Annualized
** Net investment income per share has been calculated using the average
share method
@ Historical Total Return is the one-year performance return which
includes Class C performance prior to commencement of operations.
59
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Equity--Income Fund
- -----------------------------------------------------------------------------------------------------------------------------
Class C
--------------------------------------------------------------------
Year Ended October 31,
--------------------------------------------------------------------
1998 1997 1996 1995** 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $17.33 $17.27 $15.84 $14.77 $14.21
- -----------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.17 0.23 0.06 0.02 (0.07)
Net realized and unrealized gain/(loss) on
investments and foreign currency 1.46 3.56 2.69 1.84 0.74
--------------------------------------------------------------------
Total from investment operations 1.63 3.79 2.75 1.86 0.67
--------------------------------------------------------------------
Distributions
Dividends from net investment income (0.21) (0.06) (0.04) -- (0.03)
Distributions from realized capital gains (1.22) (3.67) (1.28) (0.79) (0.08)
Distributions from capital -- -- -- -- --
--------------------------------------------------------------------
Total distributions (1.43) (3.73) (1.32) (0.79) (0.11)
- -----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $17.53 $17.33 $17.27 $15.84 $14.77
- -----------------------------------------------------------------------------------------------------------------------------
Total Return 9.83% 26.33% 18.53% 13.58% 4.75%
=============================================================================================================================
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $95,986 $94,649 $83,855 $83,719 $71,219
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 2.065% 1.99% 1.99% 1.99% 1.99%
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets 0.93% 1.36% 0.33% 0.15% (0.49%)
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 22% 36% 169% 54% 39%
- -----------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by adviser 2.10% 2.19% 2.20% 2.23% 2.29%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
<TABLE>
<CAPTION>
Balanced Fund
- ------------------------------------------------------------------------------------------------------------------------------
Class A
-------------------------------------------------------------------
Year Year Year Year 4/01/94*
Ended Ended Ended Ended to
10/31/98 10/31/97 10/31/96** 10/31/95** 10/31/94
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.58 $12.33 $12.02 $11.13 $11.06
- ------------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.25 0.34 0.39 0.38 0.17
Net realized and unrealized gain/(loss) on
investments and foreign currency 1.04 1.52 1.07 1.35 (0.10)
-------------------------------------------------------------------
Total from investment operations 1.29 1.86 1.46 1.73 0.07
-------------------------------------------------------------------
Distributions
Dividends from net investment income (0.32) (0.45) (0.40) (0.32) --
Distributions from realized capital gains (2.07) (1.16) (0.75) (0.52) --
-------------------------------------------------------------------
Total distributions (2.39) (1.61) (1.15) (0.84) --
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.48 $12.58 $12.33 $12.02 $11.13
- ------------------------------------------------------------------------------------------------------------------------------
Total Return 12.42% 17.01% 13.10% 16.95% 0.76%@
==============================================================================================================================
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $14,415 $12,294 $10,873 $10,033 $7,830
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 1.39% 1.34% 1.34% 1.34% 1.34%#
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
net assets 2.11% 2.74% 3.32% 3.39% 2.72%#
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 185% 211% 253% 226% 246%
- ------------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense reimbursement
by adviser 1.53% 1.59% 1.55% 1.69% 1.86%#
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations
# Annualized
** Net investment income per share has been calculated using the average
share method
@ Historical Total Return is the one-year performance return which
includes Class C performance prior to commencement of operations.
60
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balanced Fund
- -----------------------------------------------------------------------------------------------------------------------------
Class B
------------------------------------------------------------------
Year Year Year Year 4/01/94*
Ended Ended Ended Ended to
10/31/98 10/31/97** 10/31/96** 10/31/95** 10/31/94
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.49 $12.26 $11.98 $11.12 $11.06
- -----------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.18 0.25 0.31 0.30 0.12
Net realized and unrealized gain/(loss) on
investments and foreign currency 1.04 1.53 1.07 1.36 (0.06)
------------------------------------------------------------------
Total from investment operations 1.22 1.78 1.38 1.66 0.06
------------------------------------------------------------------
Distributions
Dividends from net investment income (0.24) (0.39) (0.35) (0.28) --
Distributions from realized capital gains (2.07) (1.16) (0.75) (0.52) --
------------------------------------------------------------------
Total distributions (2.31) (1.55) (1.10) (0.80) --
- -----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.40 $12.49 $12.26 $11.98 $11.12
- -----------------------------------------------------------------------------------------------------------------------------
Total Return 11.71% 16.27% 12.35% 16.31% 0.67%@
=============================================================================================================================
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $18,929 $17,140 $16,219 $9,875 $4,760
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 2.04% 1.99% 1.99% 1.99% 1.99%#
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
net assets 1.46% 2.09% 2.67% 2.69% 2.07%#
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 185% 211% 253% 226% 246%
- -----------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense reimbursement
by adviser 2.18% 2.23% 2.20% 2.37% 2.73%#
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
<TABLE>
<CAPTION>
Balanced Fund
- ------------------------------------------------------------------------------------------------------------------------------
Class C
---------------------------------------------------------------------
Year Ended October 31,
---------------------------------------------------------------------
1998 1997** 1996** 1995** 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.62 $12.35 $12.02 $11.12 $11.52
- ------------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.18 0.25 0.32 0.31 0.22
Net realized and unrealized gain/(loss) on
investments and foreign currency 1.05 1.54 1.07 1.35 (0.15)
---------------------------------------------------------------------
Total from investment operations 1.23 1.79 1.39 1.66 0.07
---------------------------------------------------------------------
Distributions
Dividends from net investment income (0.24) (0.36) (0.31) (0.24) (0.18)
Distributions from realized capital gains (2.07) (1.16) (0.75) (0.52) (0.29)
Distributions from capital -- -- -- -- --
---------------------------------------------------------------------
Total distributions (2.31) (1.52) (1.06) (0.76) (0.47)
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.54 $12.62 $12.35 $12.02 $11.12
- ------------------------------------------------------------------------------------------------------------------------------
Total Return 11.68% 16.21% 12.41% 16.25% 0.67%
==============================================================================================================================
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $65,049 $68,261 $72,821 $80,626 $86,902
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 2.04% 1.99% 1.99% 1.99% 1.99%
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets 1.47% 2.09% 2.67% 2.76% 1.93%
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 185% 211% 253% 226% 246%
- ------------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by adviser 2.18% 2.20% 2.20% 2.24% 2.22%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations
# Annualized
** Net investment income per share has been calculated using the average
share method
@ Historical Total Return is the one-year performance return which
includes Class C performance prior to commencement of operations.
61
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Strategic Income Fund
- ------------------------------------------------------------------------------------------------------------------------------
Class A
--------------------------------------------------------------------
Year Year Year Year 11/01/93*
Ended Ended Ended Ended to
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.76 $9.80 $9.07 $8.90 $10.00
- ------------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.67 0.70 0.80 0.78 0.65
Net realized and unrealized gain/(loss) on
investments and foreign currency (0.63) 0.28 0.72 0.18 (1.10)
--------------------------------------------------------------------
Total from investment operations 0.04 0.98 1.52 0.96 (0.45)
--------------------------------------------------------------------
Distributions
Dividends from net investment income (0.67) (0.84) (0.79) (0.79) (0.65)
Distributions from realized capital gains (0.14) (0.18) -- -- --
--------------------------------------------------------------------
Total distributions (0.81) (1.02) (0.79) (0.79) (0.65)
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $8.99 $9.76 $9.80 $9.07 $8.90
- ------------------------------------------------------------------------------------------------------------------------------
Total Return 0.22% 10.57% 17.35% 11.43% (3.79%)
==============================================================================================================================
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $15,296 $15,924 $13,382 $10,041 $15,507
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 1.50% 1.50% 1.50% 1.07% 0.41%
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
net assets 7.02% 7.25% 8.28% 9.08% 8.26%
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 162% 193% 68% 180% 136%
- ------------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense reimbursement
by adviser 1.56% 1.61% 1.65% 1.69% .96%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
<TABLE>
<CAPTION>
Strategic Income Fund
- ------------------------------------------------------------------------------------------------------------------------------
Class B
--------------------------------------------------------------------
Year Year Year Year 4/01/94*
Ended Ended Ended Ended to
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.76 $9.80 $9.07 $8.90 $9.31
- ------------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.61 0.64 0.73 0.73 0.38
Net realized and unrealized gain/(loss) on
investments and foreign currency (0.63) 0.28 0.73 0.17 (0.41)
--------------------------------------------------------------------
Total from investment operations (0.02) 0.92 1.46 0.90 (0.03)
--------------------------------------------------------------------
Distributions
Dividends from net investment income (0.61) (0.78) (0.73) (0.73) (0.38)
Distributions from realized capital gains (0.14) (0.18) -- -- --
--------------------------------------------------------------------
Total distributions (0.75) (0.96) (0.73) (0.73) (0.38)
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $8.99 $9.76 $9.80 $9.07 $8.90
- ------------------------------------------------------------------------------------------------------------------------------
Total Return (0.43%) 9.86% 16.59% 10.72% (4.18%)@
==============================================================================================================================
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $29,210 $34,590 $30,890 $20,672 $5,440
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 2.15% 2.15% 2.15% 1.95% 1.00%#
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
net assets 6.39% 6.60% 7.63% 8.10% 8.59%#
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 162% 193% 68% 180% 136%
- ------------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense reimbursement
by adviser 2.21% 2.23% 2.27% 2.38% 2.04%#
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations
# Annualized
@ Historical Total Return is the one-year performance return which
includes Class A performance prior to commencement of operations.
62
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Strategic Income Fund
- ------------------------------------------------------------------------------------------------------------------------------
Class C
--------------------------------------------------------------------
Year Year Year Year 11/01/94*
Ended Ended Ended Ended to
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.76 $9.80 $9.07 $8.90 $9.31
- ------------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.61 0.64 0.73 0.73 0.38
Net realized and unrealized gain/(loss) on
investments and foreign currency (0.63) 0.28 0.73 0.17 (0.41)
--------------------------------------------------------------------
Total from investment operations (0.02) 0.92 1.46 0.90 (0.03)
--------------------------------------------------------------------
Distributions
Dividends from net investment income (0.61) (0.78) (0.73) (0.73) (0.38)
Distributions from realized capital gains (0.14) (0.18) -- -- --
--------------------------------------------------------------------
Total distributions (0.75) (0.96) (0.73) (0.73) (0.38)
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $8.99 $9.76 $9.80 $9.07 $8.90
- ------------------------------------------------------------------------------------------------------------------------------
Total Return (0.43%) 9.86% 16.59% 10.72% (4.20%)@
==============================================================================================================================
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $33,537 $32,683 $22,783 $14,273 $8,439
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 2.15% 2.15% 2.15% 1.95% 1.00%#
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
net assets 6.37% 6.60% 7.63% 8.25% 8.59%#
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 162% 193% 68% 180% 136%
- ------------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense reimbursement
by adviser 2.21% 2.24% 2.28% 2.37% 1.96%#
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
<TABLE>
<CAPTION>
Investment Quality Bond Fund
- ------------------------------------------------------------------------------------------------------------------------
Class A
---------------------------------------------------------------
Year Ended October 31,
---------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.52 $10.34 $10.56 $9.74 $11.16
- ------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.68 0.67 0.66 0.68 0.60
Net realized and unrealized gain/(loss)on
investments 0.10 0.18 (0.20) 0.82 (1.37)
---------------------------------------------------------------
Total from investment operations 0.78 0.85 0.46 1.50 (0.77)
---------------------------------------------------------------
Distributions
Dividends from net investment income (0.67) (0.67) (0.68) (0.68) (0.56)
Distributions from realized capital gains -- -- -- -- (0.09)
Distributions from capital -- -- -- -- --
---------------------------------------------------------------
Total distributions (0.67) (0.67) (0.68) (0.68) (0.65)
- ------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.63 $10.52 $10.34 $10.56 $9.74
- ------------------------------------------------------------------------------------------------------------------------
Total Return 7.63% 8.57% 4.52% 15.91% (7.08%)
========================================================================================================================
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $6,730 $7,110 $9,056 $10,345 $11,150
- ------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 1.25% 1.25% 1.25% 1.25% 1.25%
- ------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets 6.45% 6.54% 6.37% 6.72% 5.86%
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 48% 65% 56% 132% 186%
- ------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by adviser 1.54% 1.62% 1.55% 1.73% 1.74%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations
# Annualized
@ Historical Total Return is the one-year performance return which
includes Class A performance prior to commencement of operations.
63
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment Quality Bond Fund
- -------------------------------------------------------------------------------------------------------------------------
Class B
----------------------------------------------------------------
Year Year Year Year 4/01/94*
Ended Ended Ended Ended to
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.52 $10.33 $10.55 $9.74 $10.21
- -------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.61 0.60 0.60 0.61 0.33
Net realized and unrealized gain/(loss)on
investments 0.10 0.20 (0.20) 0.82 (0.51)
----------------------------------------------------------------
Total from investment operations 0.71 0.80 0.40 1.43 (0.18)
----------------------------------------------------------------
Distributions
Dividends from net investment income (0.61) (0.61) (0.62) (0.62) (0.29)
- -------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.62 $10.52 $10.33 $10.55 $9.74
- -------------------------------------------------------------------------------------------------------------------------
Total Return 6.93% 8.05% 3.92% 15.12% (7.34%)@
=========================================================================================================================
Ratios/Supplemental Data
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $4,845 $4,613 $4,678 $3,472 $489
- -------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 1.90% 1.90% 1.90% 1.90% 1.90%#
- -------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
net assets 5.81% 5.89% 5.72% 5.95% 5.70%#
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 48% 65% 56% 132% 186%
- -------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense reimbursement
by adviser 2.20% 2.33% 2.27% 2.69% 4.88%#
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
<TABLE>
<CAPTION>
Investment Quality Bond Fund
- --------------------------------------------------------------------------------------------------------------------------
Class C
----------------------------------------------------------------
Year Year Year Year 4/01/94*
Ended Ended Ended Ended to
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.52 $10.33 $10.55 $9.74 $10.21
- --------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.61 0.60 0.60 0.61 0.33
Net realized and unrealized gain/(loss)on
investments 0.10 0.20 (0.20) 0.82 (0.51)
---------------------------------------------------------------
Total from investment operations 0.71 0.80 0.40 1.43 (0.18)
---------------------------------------------------------------
Distributions
Dividends from net investment income (0.61) (0.61) (0.62) (0.62) (0.29)
- --------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.62 $10.52 $10.33 $10.55 $9.74
- --------------------------------------------------------------------------------------------------------------------------
Total Return 6.93% 8.05% 3.92% 15.12% (7.34%)@
==========================================================================================================================
Ratios/Supplemental Data
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $5,532 $6,109 $7,543 $7,206 $2,406
- --------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 1.90% 1.90% 1.90% 1.90% 1.90%#
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
net assets 5.81% 5.89% 5.72% 6.00% 5.70%#
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 48% 65% 56% 132% 186%
- --------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense reimbursement
by adviser 2.20% 2.29% 2.22% 2.50% 3.05%#
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations
# Annualized
+ Non-annualized
@ Historical Total Return is the one-year performance return which
includes Class A performance prior to commencement of operations.
64
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
National Municipal Bond Fund
- -------------------------------------------------------------------------------------------------------------------------
Class A
--------------------------------------------------------------
Year Ended October 31,
--------------------------------------------------------------
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.09 $9.73 $9.62 $8.82 $10.25
- -------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.47 0.48 0.48 0.51 0.51
Net realized and unrealized gain/(loss)on
investments 0.13 0.36 0.11 0.80 (1.43)
--------------------------------------------------------------
Total from investment operations 0.60 0.84 0.59 1.31 (0.92)
--------------------------------------------------------------
Distributions
Dividends from net investment income (0.47) (0.48) (0.48) (0.51) (0.51)
- -------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.22 $10.09 $9.73 $9.62 $8.82
- -------------------------------------------------------------------------------------------------------------------------
Total Return 6.04% 8.85% 6.31% 15.26% (9.24%)
=========================================================================================================================
Ratios/Supplemental Data
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $5,820 $6,347 $7,710 $7,618 $7,663
- -------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 1.00% 0.99% 0.99% 0.80% 0.57%
- -------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
net assets 4.60% 4.87% 4.99% 5.55% 5.28%
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 43% 29% 49% 44% 6%
- -------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense reimbursement
by adviser 1.23% 1.23% 1.25% 1.34% 1.26%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
<TABLE>
<CAPTION>
National Municipal Bond Fund
- -------------------------------------------------------------------------------------------------------------------------
Class B
----------------------------------------------------------------
Year Year Year Year 4/01/94*
Ended Ended Ended Ended to
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.09 $9.73 $9.62 $8.81 $9.30
- -------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.38 0.40 0.40 0.43 0.25
Net realized and unrealized gain/(loss)on
investments 0.13 0.36 0.11 0.81 (0.49)
----------------------------------------------------------------
Total from investment operations 0.51 0.76 0.51 1.24 (0.24)
----------------------------------------------------------------
Distributions
Dividends from net investment income (0.38) (0.40) (0.40) (0.43) (0.25)
- -------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.22 $10.09 $9.73 $9.62 $8.81
- -------------------------------------------------------------------------------------------------------------------------
Total Return 5.15% 7.94% 5.41% 14.42% (9.71%)@
=========================================================================================================================
Ratios/Supplemental Data
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $5,273 $6,532 $6,130 $5,876 $2,036
- -------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 1.85% 1.84% 1.84% 1.70% 1.24%#
- -------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
net assets 3.75% 4.02% 4.14% 4.59% 4.62%#
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 43% 29% 49% 44% 6%#
- -------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense reimbursement
by adviser 2.08% 2.15% 2.11% 2.41% 2.81%#
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations
# Annualized
@ Historical Total Return is the one-year performance return which
includes Class A performance prior to commencement of operations.
65
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
National Municipal Bond Fund
- -------------------------------------------------------------------------------------------------------------------------
Class C
----------------------------------------------------------------
Year Year Year Year 4/01/94*
Ended Ended Ended Ended to
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.09 $9.73 $9.62 $8.81 $9.30
- -------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.38 0.40 0.40 0.43 0.25
Net realized and unrealized gain/(loss)on
investments 0.13 0.36 0.11 0.81 (0.49)
----------------------------------------------------------------
Total from investment operations 0.51 0.76 0.51 1.24 (0.24)
----------------------------------------------------------------
Distributions
Dividends from net investment income (0.38) (0.40) (0.40) (0.43) (0.25)
- -------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.22 $10.09 $9.73 $9.62 $8.81
- -------------------------------------------------------------------------------------------------------------------------
Total Return 5.15% 7.94% 5.41% 14.42% (9.71%)@
=========================================================================================================================
Ratios/Supplemental Data
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $5,147 $5,305 $5,693 $6,834 $1,911
- -------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 1.85% 1.84% 1.84% 1.70% 1.24%#
- -------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
net assets 3.75% 4.02% 4.14% 4.53% 4.62%#
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 43% 29% 49% 44% 6%
- -------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense reimbursement
by adviser 2.08% 2.15% 2.25% 2.63% 2.78%#
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
<TABLE>
<CAPTION>
U.S. Government Securities Fund
- ----------------------------------------------------------------------------------------------------------------------------
Class A
-------------------------------------------------------------------
Year Ended October 31,
-------------------------------------------------------------------
1998 1997 1996** 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.94 $9.80 $9.98 $9.45 $10.35
- ----------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.56 0.59 0.56 0.63 0.53
Net realized and unrealized gain/(loss)on
investments 0.16 0.13 (0.12) 0.57 (0.74)
-------------------------------------------------------------------
Total from investment operations 0.72 0.72 0.44 1.20 (0.21)
-------------------------------------------------------------------
Distributions
Dividends from net investment income (0.58) (0.58) (0.56) (0.67) (0.50)
Dividends in excess of net investment income -- -- (0.06) -- --
Distributions from realized capital gains -- -- -- -- (0.19)
Distributions from capital -- -- -- -- --
-------------------------------------------------------------------
Total distributions (0.58) (0.58) (0.62) (0.67) (0.69)
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.08 $9.94 $9.80 $9.98 $9.45
- ----------------------------------------------------------------------------------------------------------------------------
Total Return 7.41% 7.56% 4.64% 13.15% (2.13%)
============================================================================================================================
Ratios/Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $49,624 $53,235 $72,774 $81,179 $100,622
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 1.25% 1.25% 1.25% 1.25% 1.25%
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets 5.65% 6.20% 5.71% 6.54% 5.39%
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 116% 364% 477% 469% 279%
- ----------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by adviser 1.40% 1.42% 1.41% 1.45% 1.47%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations
# Annualized
** Net investment income per share has been calculated using the average
share method
@ Historical Total Return is the one-year performance return which
includes Class C performance prior to commencement of operations.
66
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. Government Securities Fund
- ------------------------------------------------------------------------------------------------------------------------------
Class B
--------------------------------------------------------------------
Year Year Year Year 4/01/94*
Ended Ended Ended Ended to
10/31/98 10/31/97 10/31/96** 10/31/95 10/31/94
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.94 $9.80 $9.98 $9.45 $9.77
- ------------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.49 0.54 0.50 0.56 0.29
Net realized and unrealized gain/(loss)on
investments 0.15 0.11 (0.12) 0.58 (0.35)
--------------------------------------------------------------------
Total from investment operations 0.64 0.65 0.38 1.14 (0.06)
--------------------------------------------------------------------
Distributions
Dividends from net investment income (0.51) (0.51) (0.50) (0.61) (0.26)
Distributions in excess of net investment income -- -- (0.06) -- --
--------------------------------------------------------------------
Total distributions (0.51) (0.51) (0.56) (0.61) (0.26)
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.07 $9.94 $9.80 $9.98 $9.45
- ------------------------------------------------------------------------------------------------------------------------------
Total Return 6.60% 6.84% 3.97% 12.45% (2.44%)@
==============================================================================================================================
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $17,850 $16,659 $19,444 $13,993 $2,746
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 1.90% 1.90% 1.90% 1.90% 1.90%#
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
net assets 4.99% 5.55% 5.06% 5.53% 5.06%#
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 116% 364% 477% 469% 279%
- ------------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense reimbursement
by adviser 2.05% 2.09% 2.06% 2.28% 3.40%#
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
<TABLE>
<CAPTION>
U.S. Government Securities Fund
- ------------------------------------------------------------------------------------------------------------------------------
Class C
--------------------------------------------------------------------
Year Year Year Year 4/01/94*
Ended Ended Ended Ended to
10/31/98 10/31/97** 10/31/96 10/31/95 10/31/94
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.94 $9.80 $9.98 $9.45 $9.77
- ------------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.49 0.54 0.50 0.56 0.26
Net realized and unrealized gain/(loss)on
investments 0.15 0.11 (0.12) 0.58 (0.32)
--------------------------------------------------------------------
Total from investment operations 0.64 0.65 0.38 1.14 (0.06)
--------------------------------------------------------------------
Distributions
Dividends from net investment income (0.51) (0.51) (0.50) (0.61) (0.26)
Distributions in excess of net investment income -- -- (0.06) -- --
--------------------------------------------------------------------
Total distributions (0.51) (0.51) (0.56) (0.61) (0.26)
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.07 $9.94 $9.80 $9.98 $9.45
- ------------------------------------------------------------------------------------------------------------------------------
Total Return 6.60% 6.84% 3.97% 12.45% (2.44%)@
==============================================================================================================================
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $12,708 $14,716 $20,009 $20,186 $10,766
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 1.90% 1.90% 1.90% 1.90% 1.90%#
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
net assets 5.00% 5.55% 5.06% 5.74% 5.06%#
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 116% 364% 477% 469% 279%
- ------------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense reimbursement
by adviser 2.05% 2.09% 2.06% 2.15% 2.44%#
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations
# Annualized
** Net investment income per share has been calculated using the average
share method
@ Historical Total Return is the one-year performance return which
includes Class A performance prior to commencement of operations.
67
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Money Market Fund
- --------------------------------------------------------------------------------------------------------------------------
Class A
------------------------------------------------------------------
Year Ended October 31,
------------------------------------------------------------------
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income 0.05 0.05 0.05 0.05 0.03
Distributions
Dividends from net investment income (0.05) (0.05) (0.05) (0.05) (0.03)
- --------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------------------
Total Return 5.18% 5.13% 5.16% 5.60% 3.48%
==========================================================================================================================
Ratios/Supplemental Data
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $10,295 $11,057 $8,087 $11,379 $8,499
- --------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 0.50% 0.50% 0.50% 0.50% 0.50%
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets 5.06% 5.02% 5.02% 5.45% 3.40%
- --------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by adviser 0.92% 0.96% 0.95% 0.96% 0.95%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
<TABLE>
<CAPTION>
Money Market Fund
- -------------------------------------------------------------------------------------------------------------------------
Class B
-----------------------------------------------------------------
Year Year Year Year 4/01/94*
Ended Ended Ended Ended to
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income 0.05 0.05 0.05 0.05 0.02
Distributions
Dividends from net investment income (0.05) (0.05) (0.05) (0.05) (0.02)
- -------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------------------
Total Return 5.18% 5.13% 5.16% 5.60% 3.48%@
=========================================================================================================================
Ratios/Supplemental Data
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $5,919 $3,332 $3,062 $1,564 $312
- -------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 0.50% 0.50% 0.50% 0.50% 0.50%#
- -------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
net assets 5.02% 5.02% 5.02% 5.52% 3.96%#
- -------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense reimbursement by
adviser 0.98% 1.05% 1.18% 1.41% 4.83%#
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations
+ Non-annualized
# Annualized
@ Historical Total Return is the one-year performance return which
includes Class A performance prior to commencement of operations.
68
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Money Market Fund
- -------------------------------------------------------------------------------------------------------------------------
Class C
----------------------------------------------------------------
Year Year Year Year 4/01/94*
Ended Ended Ended Ended to
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income 0.05 0.05 0.05 0.05 0.02
Distributions
Dividends from net investment income (0.05) (0.05) (0.05) (0.05) (0.02)
- -------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------------------
Total Return 5.18% 5.13% 5.16% 5.60% 3.48%@
=========================================================================================================================
Ratios/Supplemental Data
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $8,237 $7,539 $9,840 $9,394 $12,170
- -------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 0.50% 0.50% 0.50% 0.50% 0.50%#
- -------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
net assets 5.05% 5.01% 5.02% 5.46% 3.96%#
- -------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense reimbursement by
adviser 0.94% 1.00% 0.98% 0.95% 1.18%#
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations
+ Non-annualized
# Annualized
@ Historical Total Return is the one-year performance return which
includes Class A performance prior to commencement of operations.
================================================================================
69
<PAGE>
[LOGO]
North American Funds
286 Congress Street
Boston, Massachusetts 02210
(800) 872-8037
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Equity-Income Fund
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National Municipal Bond Fund
U.S. Government Securities Fund
Money Market Fund
For Additional Information
More information about the Funds, including
the SAI, is available to you free of charge.
To request additional information:
By Telephone
Call 1-800-872-8037
By Mail from the Funds (There is no fee.)
Write to:
North American Funds
286 Congress Street
Boston, MA 02210
By Mail or In Person from the Public Reference Room of the
Securities and Exchange Commission (SEC). (You will pay a
duplication fee.)
Visit or Write to:
SEC's Public Reference Section
450 Fifth Street, NW
Washington, DC, 20549-6009
1-800-SEC-0330
Online at the SEC's Internet Site
Text-only versions of fund documents can be viewed online or downloaded from
http://www.sec.gov.
Statement of Additional Information (SAI)
The SAI provides additional information about the Trust and the Funds. The SAI
and the auditor's report and financial statements included in the Trust's most
recent Annual Report to its shareholders are incorporated by reference as part
of this Prospectus.
Annual and Semi-annual Reports
The Annual and Semi-annual Reports describe the Funds' performance, list
portfolio holdings and include additional information about the Funds'
investments. The Annual Report discusses the market conditions and investment
strategies that significantly affected the Fund's performance during their last
fiscal year.
File No. 811-5797
0599:90201
