<PAGE>
[LOGO OF NORTH AMERICAN FUNDS REPORT TO
APPEARS HERE] SHAREHOLDERS
North American Funds Annual Report October 31, 1998
Audited
Financial
Statements
<PAGE>
NORTH AMERICAN FUNDS
PRESIDENT'S MESSAGE
- -------------------------------------------------------------------------------
December 18, 1998
[PHOTO OF BRADFORD K. GALLAGHER APPEARS HERE]
BRADFORD K. GALLAGHER
PRESIDENT,
NORTH AMERICAN FUNDS
Dear Shareholder:
The year started out with ideal conditions for investors -- low inflation, low
interest rates, low unemployment, and slow but steady economic growth. This
environment resulted in continued strength in the financial markets. Then came
the mounting effects of the Asian crisis. By the third quarter, as the markets
reacted to a list of economic, political and financial worries on both the
domestic and international fronts, the U.S. stock market retreated with a fall
in the S&P 500 of almost 10%. Since October, the market has continued on a
choppy upward climb, hovering around the 9000 mark. The catalyst behind the
market's turnaround has been the result of many forces, one of which was the
Federal Reserve's action to lower interest rates and the apparent
stabilization of the financial crises that have gripped Japan, Russia and
Brazil.
Many investment professionals believe a "correction" was inevitable -- the
market was overvalued and needed to come down to more sustainable levels.
After all, we have rejoiced in an eight-year-old bull market. Given an
increased level of volatility throughout the year, many investors have
abandoned their irrational levels of exuberance and are returning to a long-
term perspective based on strong financial guidance and strategic asset
allocation.
At North American Funds, we are committed to offering mutual funds to meet
your specific needs. Funds that can help you to further diversify your
portfolio, to seek enhanced returns, or to pursue a greater defensive position
during times of heightened volatility. Our management approach, to select
investment managers whose investment practices and performance have
historically proven to be among the best in their asset classes, continued to
prove successful throughout 1998 as the majority of our funds were ranked in
the top half of their respective Lipper categories (through 11/30/98), and
some performed in the top quartile and received impressive Morningstar
rankings. (See pages iii through xxx for specific performance information.) In
addition to our solid fund line-up, we are proud to report that our three new
fund additions --Tax-Sensitive Equity, Emerging Growth and Senior Floating
Rate (separate annual report) -- have offered investors specialized investment
objectives and added diversification opportunities. With North American Funds,
all of your investments, across investment managers are available on one
consolidated statement.
We encourage you to contact your investment advisor to revisit your asset mix
or to answer questions regarding recent market volatility or new investment
strategies. As always, you can call upon our experienced customer service team
at 800-872-8037 during our expanded hours, Monday through Friday from 9:00 to
6:00 p.m. EST, or utilize our enhanced automated information line (800-872-
2251) 24 hours a day, seven days a week. To add to our shareholder services in
1998, we've completed a website, www.northamericanfunds.com. Here, you can
access up-to-date performance information and daily pricing for any North
American Fund.
Thank you for choosing North American Funds. We look forward to serving your
investment needs next year, and in the years ahead.
Sincerely,
/s/ Bradford K. Gallagher
Bradford K. Gallagher
President, North American Funds
<PAGE>
NORTH AMERICAN FUNDS
INDEX TO ANNUAL REPORT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Performance and Portfolio Manager's Commentary........................ iii
Report of Independent Accountants.......................................... 1
Statements of Assets and Liabilities....................................... 2
Statements of Operations................................................... 8
Statements of Changes in Net Assets........................................ 11
Financial Highlights....................................................... 15
Portfolio of Investments
International Small Cap Fund............................................. 32
International Growth and Income Fund..................................... 33
Global Equity Fund....................................................... 34
Emerging Growth Fund..................................................... 36
Small/Mid Cap Fund....................................................... 37
Growth Equity Fund....................................................... 38
Tax-Sensitive Equity Fund................................................ 39
Growth and Income Fund................................................... 40
Equity-Income Fund....................................................... 42
Balanced Fund............................................................ 44
Strategic Income Fund.................................................... 46
Investment Quality Bond Fund............................................. 49
National Municipal Bond Fund............................................. 52
U.S. Government Securities Fund.......................................... 54
Money Market Fund........................................................ 54
Notes to Financial Statements.............................................. 56
</TABLE>
ii
<PAGE>
NORTH AMERICAN FUNDS
FUND PERFORMANCE AND PORTFOLIO MANAGER'S COMMENTARY
- -------------------------------------------------------------------------------
FUND PERFORMANCE
In the following pages we have set forth information regarding the performance
of each portfolio of the North American Funds, except the Money Market Fund.
There are several ways to evaluate a Fund's historical performance. One can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. WITH RESPECT TO
ALL THE PERFORMANCE INFORMATION PRESENTED, IT IS IMPORTANT TO UNDERSTAND THAT
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. RETURN AND PRINCIPAL
FLUCTUATE, AND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST.
PERFORMANCE TABLES
The Performance Tables show two types of total return information: CUMULATIVE
AND AVERAGE ANNUAL TOTAL RETURNS. A CUMULATIVE TOTAL RETURN is an expression
of a Fund's total change in share value in percentage terms over a set period
of time -- one, five, and ten years (or since the Fund's inception if less
than the applicable period). An AVERAGE ANNUAL TOTAL RETURN takes the Fund's
cumulative total return for a time period greater than one year and shows what
would have happened if the Fund had performed at a constant rate each year.
For all share classes, the tables show cumulative and average annual total
returns both net of the possible maximum applicable front-end or back-end
sales charge, as well as without giving effect to such possible maximum
charges ("net asset value").
GRAPH -- CHANGE IN VALUE OF $10,000 INVESTMENT AND COMPARATIVE INDICES
The performance graph for each Fund shows the change in value of a $10,000
investment over the life of the Fund's Class A shares. Each Fund's performance
is compared to the performance of one or more broad-based securities indices
as a "benchmark." Fund results (which include the reinvestment of dividends
and capital gains distributions as well as the deduction of ongoing management
and distribution fees and fund operating expenses) reflect the deduction of
the maximum 4.75% sales charge applicable to Class A shares. Please note that
effective April 1, 1994, Class B and Class C shares were offered. Performance
of these share classes will differ. Historical performance prior to April 1,
1994 is that of the Fund before it adopted the current multi-class structure.
Benchmarks used for comparison are unmanaged and do not reflect any fees or
expenses.
PORTFOLIO MANAGER'S COMMENTARY
Finally, we have provided a commentary by each Fund's portfolio manager
regarding each Fund's performance during the fiscal year ended October 31,
1998. All performance results referenced in the commentary are Class A share
returns.
iii
<PAGE>
INTERNATIONAL SMALL CAP FUND
Seeks to provide long-term capital appreciation by
INVESTMENT investing primarily in securities issued by foreign
OBJECTIVE: companies which have total market capitalization or annual
revenue of $1 billion or less.
SUBADVISOR: Founders Asset Management LLC
PORTFOLIO Michael W. Gerding
MANAGER:
INCEPTION DATE: March 4, 1996
CHANGE IN VALUE OF $10,000 INVESTMENT AND COMPARATIVE INDICES
[LINE GRAPH APPEARS HERE]
[PLOT POINTS TO COME]
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
One Since Since
Periods Ended October 31, 1998 Year Inception Inception
<S> <C> <C> <C>
MSCI World ex US Index* 8.67% 6.38% 17.90%
International Small Cap Fund Class A (NAV) 0.36% 4.10% 11.28%
International Small Cap Fund Class A (net of
4.75% sales charge) -4.41% 2.21% 5.99%
International Small Cap Fund Class B (NAV) -0.36% 3.39% 9.28%
International Small Cap Fund Class B (net of
CDSC**) -5.36% 1.95% 5.28%
International Small Cap Fund Class C (NAV) -0.36% 3.39% 9.28%
International Small Cap Fund Class C (net of
CDSC***) -1.36% 3.39% 9.28%
</TABLE>
*All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
**The returns reflect the applicable sliding Contingent Deferred sales Charge
of 5%, 5%, 4%, 3%, 2%, 1%.
***The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
PORTFOLIO MANAGER'S COMMENTARY:
The Fund's Class A performance for the year-ended October 31, 1998 was 0.36%
compared to MSCI World ex. U.S. Index return of 8.67% for the same period. As
economic troubles continue in Japan, Asia, Latin America and Russia, stock
markets around the world suffered dramatic swings. The correction particularly
hit small-cap stocks as investors sought more liquid, defensive stocks,
typically those of larger-cap companies.
We believe the Japanese economy is in a depression and has been for quite
sometime. Also, there is no indication that the new Japanese government will
take the necessary steps to ease their economic problems. In fact, we believe
that the Asian crisis will be measured in years, not weeks or months. As a
result, it is very difficult to find small companies that meet our growth
criteria, and we are extremely underweight in Japan compared to our benchmark.
More than 80% of the Fund is invested in European stocks. While a correction
in Europe impacted the Portfolio toward the end of the period, we believe the
fundamentals in the region are sound, with the potential for companies to
benefit from continued restructuring. We are continuing to look for value in
European stocks that have been unfairly oversold due to emotion rather than
fundamentals. We believe we can find the most attractive small or emerging
companies in Europe.
iv
<PAGE>
INTERNATIONAL GROWTH AND INCOME FUND
INVESTMENT Seeks to provide long-term growth of capital and income by
OBJECTIVE: investing in a portfolio of securities of foreign issuers.
Under normal circumstances, the portfolio will be invested
primarily in equity securities, including up to 15% in
emerging markets.
SUBADVISOR: J.P. Morgan Investment Management Inc.
PORTFOLIO Paul Quinsee, Nigel Emmet and Andrew Cormie
MANAGER:
INCEPTION DATE: January 9, 1995
CHANGE IN VALUE OF $10,000 INVESTMENT AND COMPARATIVE INDICES
[LINE GRAPH APPEARS HERE]
[PLOT POINTS TO COME]
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
One Since Since
Periods Ended October 31, 1998 Year Inception Inception
<S> <C> <C> <C>
Customized Benchmark*+ 4.74% 7.34% 31.19%
85%/15% Composite Index*++ 10.90% 9.35% 40.88%
75%/15%/10% Composite Index* 6.73% 7.48% 31.89%
MSCI All Country World ex U.S.* -13.15% 6.14% 25.66%
International Growth and Income Fund Class A
(NAV) 0.67% 5.07% 20.73%
International Growth and Income Fund Class A
(net of 4.75% sales charge) -4.11% 3.73% 15.00%
International Growth and Income Fund Class B
(NAV) -0.03% 4.52% 18.36%
International Growth and Income Fund Class B
(net of CDSC**) -5.03% 3.82% 15.36%
International Growth and Income Fund Class C
(NAV) -0.13% 4.50% 18.28%
International Growth and Income Fund Class C
(net of CDSC***) -1.13% 4.50% 18.28%
</TABLE>
* All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
+ Comprised of 75% of the return of the MSCI EAFE Index, 15% of the return
of the Salomon Brothers Non-$ WGBI 10 Index, and 10% of the MSCI Emerging
Markets Free ex Malaysia Index. In February of 1997, the 85%/15% Composite
Index was adjusted to reflect the addition of the MSCI Emerging Markets
Free ex Malaysia Index. In January 1998, this index was changed to the
MSCI All Country World ex U.S. Index to accurately reflect the Fund's
investment objective.
++ Comprised of 85% of the return of the MSCI EAFE and 15% of the return of
the Salmon Brothers Non-$ WGBI 10 Index.
** The returns reflect the applicable sliding Contingent Deferred Sales
Charge of 5%, 5%, 4%, 3%, 2%, 1%.
*** The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
v
<PAGE>
PORTFOLIO MANAGERS' COMMENTARY
The Fund's Class A performance for the year-ended October 31, 1998 was 0.67%
as compared to the Composite Index* return of 4.74% for the same period. The
currency allocation strategy of partially hedging the Fund's Deutschemark and
Yen exposure into the U.S. dollar has been the greatest positive contributor
to the Fund's performance. However, gains were offset somewhat by adverse
country allocations in the first calendar quarter as the Fund had underweight
positions in Malaysia and Continental Europe.
European equity markets surged throughout most of the fiscal year due to
falling inflation expectations, strong bond markets, the strength of the U.S.
dollar, and optimism over the prospects for corporate profits. However, Asian
equity markets struggled throughout the fiscal year as the Asian contagion
continued to spread impacting emerging markets and eventually the developed
markets in Europe and the U.S.
The optimistic sentiment that prevailed in European markets earlier in the
year was dashed by a series of disappointing reports from companies hit by the
slowdown in world economic growth and by the growing crisis in financial
markets. World equity markets bounced back in October, including emerging
markets, as interest rate cuts in the U.S. and Europe and plans for aid to
Latin America seemed to stabilize the markets. In addition, earnings
announcements for the third quarter were generally better than expected, which
also helped to push the markets higher.
*Comprised of 75% of the return of the MSCI EAFE Index, 15% of the return of
the Salomon Brothers Non-$ WGBI 10 Index, and 10% of the MSCI Emerging Markets
Free ex Malaysia Index. In February of 1997, the 85%/15% Composite Index was
adjusted to reflect the addition of the MSCI Emerging Markets Free ex Malaysia
Index. In January 1998, this index was changed to the MSCI All Country World
ex U.S. Index to accurately reflect the Fund's investment objective.
vi
<PAGE>
GLOBAL EQUITY FUND
INVESTMENT Seeks to provide long-term capital appreciation by
OBJECTIVE: investing primarily in a global portfolio of equity
securities and securities convertible into or exercisable
for equity securities.
SUBADVISOR: Morgan Stanley Dean Witter Investment Management Inc.
PORTFOLIO Frances Campion
MANAGER:
INCEPTION DATE: November 1, 1990#
CHANGE IN VALUE OF $10,000 INVESTMENT AND COMPARATIVE INDICES
[LINE GRAPH APPEARS HERE]
[PLOT POINTS TO COME]
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
Periods Ended October 31, One Five Since Since# Since Since#
1998 Year Years Inception 10/1/96 Inception 10/1/96
<S> <C> <C> <C> <C> <C> <C>
MSCI World* 15.26% 13.03% 12.52% 15.70% 157.01% 35.50%
Global Equity Fund Class A
(NAV) 8.90% 8.99% 10.04% 16.15% 114.67% 36.57%
Global Equity Fund Class A
(net of 4.75% sales charge) 3.73% 7.93% 9.37% 13.46% 104.47% 29.74%
Global Equity Fund Class B
(NAV) 8.17% 8.45% 9.70% 15.52% 109.40% 35.05%
Global Equity Fund Class B
(net of CDSC**) 3.17% 8.16% 9.70% 13.87% 109.40% 31.05%
Global Equity Fund Class C
(NAV) 8.21% 8.45% 9.70% 15.50% 109.43% 34.99%
Global Equity Fund Class C
(net of CDSC***) 7.21% 8.45% 9.70% 15.50% 109.43% 34.99%
</TABLE>
* All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
** The returns reflect the applicable sliding Contingent Deferred Sales
Charge of 5%, 5%, 4%, 3%, 2%, 1%.
*** The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
# Current investment subadvisor assignment became effective 10/1/96.
vii
<PAGE>
PORTFOLIO MANAGER'S COMMENTARY
The Fund's Class A performance for the year-ended October 31, 1998 was 8.90%
as compared to the MSCI World Index return of 15.26% for the same period. Our
holdings in the U.S. underperformed, reflecting the narrow nature of the
market as "mega-cap" growth stocks accounted for the majority of the U.S.
market strength. We maintained an underweight position in the U.S. as
valuations and fundamentals in Europe attracted us. Our holdings in Japan
performed relatively well in a difficult market. However, Japan's fundamental
problems make it difficult for us to find compelling investments there. Our
lack of exposure to Hong Kong, Singapore and Malaysia benefited the portfolio
as these markets suffered the largest declines.
Global markets in 1998 continued to exhibit the volatility that was sparked by
the Asian currency crisis of 1997. The steep declines of major emerging
markets in Latin America and Asia culminated with the collapse of the Russian
market and its debt default and triggered the well-publicized hedge fund
bailout. While valuations, in some cases, have receded to more reasonable
levels, we remain concerned about a slowdown in GDP growth in the U.S. and
Europe as well as possible credit tightening.
The good news is that a balanced budget in the U.S. and prudent fiscal
management in Europe suggests that fiscal and monetary policy could be relaxed
to avert a major market decline. The Federal Reserve and the Bank of England
have room to significantly ease rates. We continue to believe that the
intrinsic value represented in the stocks we hold will be realized over time.
viii
<PAGE>
EMERGING GROWTH FUND
INVESTMENT Seeks to provide maximum capital appreciation by investing
OBJECTIVE: primarily in a portfolio of equity securities of domestic
companies. Under normal conditions, the portfolio will be
invested approximately 65% in common stocks or warrants of
emerging growth companies that represent attractive
opportunities for maximum capital appreciation.
SUBADVISOR: Warburg Pincus Asset Management, Inc.
PORTFOLIO Elizabeth B. Dater and Stephen J. Lurito
MANAGER:
INCEPTION DATE: January 6, 1998
CHANGE IN VALUE OF $10,000 INVESTMENT AND COMPARATIVE INDICES
[LINE GRAPH APPEARS HERE]
[PLOT POINTS TO COME]
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
One Since Since
Periods Ended October 31, 1998 Year Inception Inception
<S> <C> <C> <C>
Russell 2000 Growth* -13.85% -13.85% -13.85%
Emerging Growth Fund Class A (NAV) -11.20% -11.20% -11.20%
Emerging Growth Fund Class A (net of 4.75%
sales charge) -15.42% -15.42% -15.42%
Emerging Growth Fund Class B (NAV) -11.70% -11.70% -11.70%
Emerging Growth Fund Class B (net of CDSC**) -16.70% -16.70% -16.70%
Emerging Growth Fund Class C (NAV) -11.60% -11.60% -11.60%
Emerging Growth Fund Class C (net of CDSC***) -12.60% -12.60% -12.60%
</TABLE>
* All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
** The returns reflect the applicable sliding Contingent Deferred Sales
Charge of 5%, 5%, 4%, 3%, 2%, 1%.
*** The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
ix
<PAGE>
PORTFOLIO MANAGERS' COMMENTARY
The Fund's Class A performance for the period ended October 31, 1998 was -
11.20% as compared to the Russell 2000 Growth Index return of -13.85% for the
same period. As the fiscal period ended, there were few significant changes in
the portfolio in terms of sector or industry concentration. We continued to
emphasize the consumer, business-services, financial-services and technology
areas. Stocks we de-emphasized were those of commodity-related companies as
they are the most vulnerable to global economic weakness.
The period's unsettled environment was driven by several events. As investors
were digesting the potential severity of the effects of "Asian contagion" on
world profits, Russia was forced to devalue the ruble and default on billions
of dollars of debt. This raised new concerns about developing Latin American
economies and the subsequent effects on major financial institutions
worldwide. The negative psychology generated by these events was exacerbated
by fears that world leadership would be impaired by the unsettled political
situation in Washington, D.C.
While the U.S. is beginning to experience a slowdown in corporate profits, our
economy continues to benefit from low interest rates and full employment, low
commodity costs, and stable levels of consumer confidence. Two important
positive facts remain. First, the Federal Reserve has assumed a leadership
role by reducing interest rates that ultimately benefit equity prices. Second,
the U.S. budget surplus can support a tax cut to provide fiscal stimulus. We
believe our financial markets will continue to provide opportunities for long-
term investors.
x
<PAGE>
SMALL/MID CAP FUND
INVESTMENT Seeks to provide long-term capital appreciation by
OBJECTIVE: investing at least 65% of its assets in companies that at
the time of purchase have total market capitalization
between $500 million and $5 billion.
SUBADVISOR: Fred Alger Management, Inc.
PORTFOLIO David D. Alger
MANAGER:
INCEPTION DATE: March 4, 1996
CHANGE IN VALUE OF $10,000 INVESTMENT AND COMPARATIVE INDICES
[LINE GRAPH APPEARS HERE]
[PLOT POINTS TO COME]
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
One Since Since
Periods Ended October 31, 1998 Year Inception Inception
<S> <C> <C> <C>
S&P Mid Cap 400 Index* 6.55% 16.93% 51.75%
Russell 2000 Growth Index* -15.86% 1.63% 4.41%
50%/50% Composite Index*+ -4.66% 9.72% 28.08%
Small/Mid Cap Fund A (NAV) 5.51% 10.66% 30.92%
Small/Mid Cap Fund Class A (net of 4.75% sales
charge) 0.50% 8.65% 24.70%
Small/Mid Cap Fund Class B (NAV) 4.65% 9.83% 28.34%
Small/Mid Cap Fund Class B (net of CDSC**) -0.35% 8.54% 24.34%
Small/Mid Cap Fund Class C (NAV) 4.64% 9.89% 28.50%
Small/Mid Cap Fund Class C (net of CDSC***) 3.64% 9.89% 28.50%
</TABLE>
* All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
+ Comprised of 50% of the return of the S&P MidCap 400 Index and 50% of the
return of the Russell 2000 Growth Index
** The returns reflect the applicable sliding Contingent Deferred sales
Charge of 5%, 5%, 4%, 3%, 2%, 1%.
*** The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
xi
<PAGE>
PORTFOLIO MANAGER'S COMMENTARY
The Fund's Class A performance for the year-ended October 31, 1998 was 5.51%
as compared to the Composite Index (Russell 2000 Growth/S&P Mid-Cap 400)
return of -4.66% for the same period. The fiscal year ended October 31, 1998
appeared to be a period of great prosperity for U.S. equity markets.
Inflation, interest rates and unemployment remained low and the market, as
measured by the S&P 500 Index, appreciated 21.99%. In reality, global economic
instability, a domestic political scandal, and severe market volatility marked
this period.
The year began following an acute market sell-off that resulted from an
economic crisis throughout Asia. Confidence in the large cap equity market was
restored, as the S&P 500 Index posted six consecutive months of positive
performance. In July, August and September several external factors shook
investor confidence and stocks fell. These events included the worsening of
economic problems in Japan, the fall of the Russian economy, and bailout of
the Long-Term Capital Hedge Fund. The markets recovered in September and
October due to an interest rate cut and positive earnings announcements by
several companies.
Amid this uncertainty, an extremely risk averse investment community continued
to place a premium on large, liquid companies with a high degree of earnings
predictability. As the -15.86% return posted by the Russell 2000 Growth Index
over this 12 month period suggests, more speculative small cap issues suffered
over the course of the twelve-month period. Mid-cap stocks performed better,
yet still trailed the broad market by a wide margin. By shifting its focus to
mid-sized companies and through the strong performance by several key
holdings, the Portfolio's return was positive.
xii
<PAGE>
GROWTH EQUITY FUND
INVESTMENT Seeks to provide long-term growth of capital by investing
OBJECTIVE: at least 65% of its assets in common stocks of well-
established, high-quality growth companies.
SUBADVISOR: Founders Asset Management LLC
PORTFOLIO Paul A. LaRocco
MANAGER:
INCEPTION DATE: March 4, 1996
CHANGE IN VALUE OF $10,000 INVESTMENT AND COMPARATIVE INDICES
[LINE GRAPH APPEARS HERE]
[PLOT POINTS TO COME]
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
One Since Since
Periods Ended October 31, 1998 Year Inception Inception
<S> <C> <C> <C>
S&P 500* 21.99% 24.69% 80.10%
Growth Equity Fund Class A (NAV) 13.85% 18.49% 57.05%
Growth Equity Fund Class A (net of 4.75% sales
charge) 8.44% 16.34% 49.59%
Growth Equity Fund Class B (NAV) 12.93% 17.75% 54.44%
Growth Equity Fund Class B (net of CDSC**) 7.93% 16.59% 50.44%
Growth Equity Fund Class C (NAV) 12.87% 17.72% 54.35%
Growth Equity Fund Class C (net of CDSC***) 11.87% 17.72% 54.35%
</TABLE>
* All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
** The returns reflect the applicable sliding Contingent Deferred Sales Charge
of 5%, 5%, 4%, 3%, 2%, 1%.
*** The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
xiii
<PAGE>
PORTFOLIO MANAGER'S COMMENTARY
The Fund's Class A performance for the year-ended October 31, 1998 was 13.85%
as compared to the S&P 500 Index return of 21.99% for the same period. As the
Asian crisis spread to other emerging markets around the world including
Russia and South America, several domestic large-cap companies with multi-
national operations reported disappointing earnings. Because many domestic
valuations were on the high side, we felt the market was ripe for a
correction. During the first half of the year, large-cap stocks were popular
with investors for their liquidity and safety. However, investors are now
focusing more on earnings growth and should begin moving down the
capitalization spectrum.
While defense spending has been low for several years, there has been recent
talk about increasing the defense budget as a result of concern that the
economic problems overseas could result in unrest or conflict. Accordingly, we
increased our position in Lockheed Martin, now at 1.80% of the portfolio, and
added Northrop Grumman at .87% of the portfolio. These companies are winning
new contracts and exploiting commercial opportunities as well.
We believe the market environment may remain volatile in 1999, as economic
cross-currents from around the world continue to influence stocks both here
and overseas. Although we believe the worst may be over, it is possible the
problems in the global economy may continue for some time. Now that valuations
are lower in the large-cap spectrum, we are taking this opportunity to focus
on those mid- and large-cap names with the best earnings growth potential.
xiv
<PAGE>
TAX-SENSITIVE EQUITY FUND
INVESTMENT Seeks to provide maximum after-tax total return with an
OBJECTIVE: emphasis on long-term growth of capital, primarily through
investing in equity securities of companies that appear to
be undervalued.
SUBADVISOR: Standish, Ayer & Wood, Inc.
PORTFOLIO Laurence A. Manchester
MANAGER:
INCEPTION DATE: January 6, 1998
CHANGE IN VALUE OF $10,000 INVESTMENT AND COMPARATIVE INDICES
[LINE GRAPH APPEARS HERE]
[PLOT POINTS TO COME]
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
One Since Since
Periods Ended October 31, 1998 Year Inception Inception
<S> <C> <C> <C>
S&P 500* 14.63% 14.63% 14.63%
Tax-Sensitive Equity Fund Class A (NAV) -9.30% -9.30% -9.30%
Tax-Sensitive Equity Fund Class A (net of 4.75%
sales charge) -13.61% -13.61% -13.61%
Tax-Sensitive Equity Fund Class B (NAV) -9.60% -9.60% -9.60%
Tax-Sensitive Equity Fund Class B (net of
CDSC**) -14.60% -14.60% -14.60%
Tax-Sensitive Equity Fund Class C (NAV) -9.60% -9.60% -9.60%
Tax-Sensitive Equity Fund Class C (net of
CDSC***) -10.60% -10.60% -10.60%
</TABLE>
* All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
** The returns reflect the applicable sliding Contingent Deferred Sales Charge
of 5%, 5%, 4%, 3%, 2%, 1%.
*** The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
xv
<PAGE>
PORTFOLIO MANAGER'S COMMENTARY:
Since its inception on January 6, 1998, the Fund's Class A performance for the
period ended October 31, 1998 was -9.30% as compared to the Standard & Poor's
500 Index return of 14.63%. These returns arise from concerns over South East
Asia and a veritable panic that spread through all markets as Russia's virtual
debt default in August called into question the integrity of most emerging
economies. As a result, investors fled to the highest perceived quality,
focusing their purchases on an extremely narrow list of large capitalization
growth stocks.
On the more positive side, current prices appear to discount a more adverse
environment, and the U.S. seems relatively secure compared to most other
regions. We believe that financial markets have been providing unsustainably
high returns. That financial era has almost certainly ended, and we are now in
a period of positive, though less ebullient, stock returns.
Our investment process focuses on screening for the best combination of
reliable prior growth, forecasted future results, and a reasonable price.
Especially on the grounds of reasonable price, few of the favored large
capitalization growth stocks were deemed appropriate for the Fund. With this
very narrow group of stocks providing the bulk of the S&P 500 return, we are
left with a lagging portfolio, but one with highly attractive valuation
characteristics.
In keeping with the Fund's tax-sensitive strategy, we are happy to report that
as of October 31, 1998 the Fund had no capital gains to distribute to
shareholders.
xvi
<PAGE>
GROWTH AND INCOME FUND
INVESTMENT Seeks to provide long-term growth of capital and income
OBJECTIVE: consistent with prudent investment risk by investing
primarily in a diversified portfolio of common stocks of
United States issuers which the portfolio manager believes
are of high quality.
SUBADVISOR: Wellington Management Company LLP
PORTFOLIO Matthew E. Megargel
MANAGER:
INCEPTION DATE: May 1, 1991
CHANGE IN VALUE OF $10,000 INVESTMENT AND COMPARATIVE INDICES
[LINE GRAPH APPEARS HERE]
[PLOT POINTS TO COME]
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
One Five Since Since
Periods Ended October 31, 1998 Year Years Inception Inception
<S> <C> <C> <C> <C>
S&P 500* 21.99% 21.29% 18.29% 252.53%
Growth and Income Fund Class A (NAV) 20.82% 19.07% 16.51% 214.81%
Growth and Income Fund Class A (net of
4.75% sales charge) 15.08% 17.92% 15.75% 199.86%
Growth and Income Fund Class B (NAV) 20.04% 18.54% 16.16% 207.80%
Growth and Income Fund Class B (net of
CDSC**) 15.04% 18.33% 16.16% 207.80%
Growth and Income Fund Class C (NAV) 20.00% 18.47% 16.11% 206.95%
Growth and Income Fund Class C (net of
CDSC***) 19.00% 18.47% 16.11% 206.95%
</TABLE>
* All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
** The returns reflect the applicable sliding Contingent Deferred Sales
Charge of 5%, 5%, 4%, 3%, 2%, 1%.
*** The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
xvii
<PAGE>
PORTFOLIO MANAGER'S COMMENTARY
The Fund's Class A performance for the year-ended October 31, 1998 was 20.82%
as compared to the S&P 500 Stock Index return of 21.99% for the same period.
Fund performance was helped by overweights in consumer discretionary,
entertainment and financials and an underweight position in material stocks.
Relative performance was limited by holdings in utilities, energy and
industrial/commercial.
The year began with investors focused more on low inflation trends and the
health of the domestic economy rather than on the continuing uncertainty of
global economies. By August, however, the on-going crisis in Asia, Japanese
economic turmoil, political woes in Washington, and Russian devaluation
finally cooled investor optimism. Worries about decelerating earnings growth
turned to concern about earnings declines and liquidity problems.
Top performing sectors for the year included health care, where the large cap
pharmaceutical companies that have advanced on healthy subscription growth,
and information technology that benefited from strong investment trends in
personal computers have driven performance. Conversely, materials lagged the
overall market as commodity prices continued to be hurt by global economic
slowing. The energy sector also lagged as oil prices plummeted.
The outlook for stocks remains mixed. Economic growth continues to slow and
the profit picture looks weak, but inflation is quite subdued and interest
rates have come down significantly. So, the tug-of-war between falling
interest rates and declining earnings estimates continues. No country can
remain "an oasis of prosperity" on the global economy and much of the outlook
depends on actions taken in countries as diverse as Japan, Brazil, China, and
Russia.
xviii
<PAGE>
EQUITY-INCOME FUND
INVESTMENT Seeks to provide substantial dividend income and also long-
OBJECTIVE: term capital appreciation by investing in dividend paying
common stocks, particularly of established companies with
favorable prospects for both increasing dividends and
capital appreciation.
SUBADVISOR: T. Rowe Price Associates, Inc.
PORTFOLIO Brian C. Rogers, Stephen W. Boesel, Richard P. Howard,
MANAGER: William J. Stromberg
INCEPTION DATE: August 28, 1989#
CHANGE IN VALUE OF $10,000 INVESTMENT AND COMPARATIVE INDICES
[LINE GRAPH APPEARS HERE]
[PLOT POINTS TO COME]
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
Periods Ended October 31, One Five Since Since# Since Since#
1998 Year Years Inception 10/1/96 Inception 10/1/96
<S> <C> <C> <C> <C> <C> <C>
S&P 500* 21.99% 21.29% 16.29% 27.40% 298.86% 65.61%
Equity-Income Fund Class A
(NAV) 10.55% 14.96% 10.46% 18.16% 149.30% 41.55%
Equity-Income Fund Class A
(net of 4.75% sales charge) 5.30% 13.85% 9.88% 15.43% 137.46% 34.83%
Equity-Income Fund Class B
(NAV) 9.81% 14.37% 10.15% 17.37% 142.95% 39.57%
Equity-Income Fund Class B
(net of CDSC**) 4.81% 14.14% 10.15% 15.74% 142.95% 35.57%
Equity-Income Fund Class C
(NAV) 9.83% 14.37% 10.15% 17.36% 142.93% 39.55%
Equity-Income Fund Class C
(net of CDSC***) 8.83% 14.37% 10.15% 17.36% 142.93% 39.55%
</TABLE>
* All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
** The returns reflect the applicable sliding Contingent Deferred Sales Charge
of 5%, 5%, 4%, 3%, 2%, 1%.
*** The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
# Current investment subadvisor assignment became effective 10/1/96.
xix
<PAGE>
PORTFOLIO MANAGERS' COMMENTARY:
The Fund's Class A performance for the year-ended October 31, 1998 was 10.55%
as compared to the S&P 500 return of 21.99% and the Lipper Equity Income Funds
Average return of 9.49% for the same period. Fund performance was helped by
portfolio holdings in the telephone services and electric utilities sectors.
Strong contributors included SBC Communications, Alltel, and PECO Energy.
The Fund typically tends to display its advantages by cushioning declines
during volatile market conditions as occurred in July, August and September.
Equity-income funds underperform the S&P 500 in general, during periods of
strong market advances that are driven by a small group of large-cap stocks,
as has occurred this year.
A continuation of strong economic growth and rising stock prices characterized
the better part of the last twelve months. However, in the third quarter the
problems in international economies caught up with the United States. As these
problems took their toll, U.S. stock prices pulled back sharply in late July
and August but a loosening monetary policy resulted in a sharp rebound in
stock prices.
We expect the environment next year to be a bit more positive than we have
recently experienced. Therefore, we have been reducing our emphasis on
defensive sectors of the market. If we see a return to stock market returns
that are more in line with historical norms, it could lead to better relative
performance for the types of value stocks in which the Fund invests.
xx
<PAGE>
BALANCED FUND
INVESTMENT To provide current income and capital appreciation by
OBJECTIVE: investing in a balanced portfolio of common stocks, U.S.
and foreign government obligations and a variety of
corporate fixed-income securities.
SUBADVISOR: Founders Asset Management LLC
PORTFOLIO Brian F. Kelly
MANAGER:
INCEPTION DATE: August 28, 1989#
CHANGE IN VALUE OF $10,000 INVESTMENT AND COMPARATIVE INDICES
[LINE GRAPH APPEARS HERE]
[PLOT POINTS TO COME]
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
Periods Ended October 31, One Five Since Since# Since Since#
1998 Year Years Inception 10/1/96 Inception 10/1/96
<S> <C> <C> <C> <C> <C> <C>
S&P 500* 21.99% 21.29% 16.29% 27.40% 298.86% 65.61%
Lehman Brothers Aggregate
Bond Index* 9.32% 7.02% 8.91% 9.88% 118.72% 21.70%
50%/50% Composite*+ 15.65% 15.04% 13.09% 18.99% 208.79% 43.65%
Balanced Fund Class A (NAV) 12.42% 11.88% 9.63% 15.06% 132.53% 33.93%
Balanced Fund Class A (net
of 4.75% sales charge) 7.08% 10.80% 9.05% 12.40% 121.48% 27.23%
Balanced Fund Class B (NAV) 11.71% 11.31% 9.32% 14.33% 126.64% 32.15%
Balanced Fund Class B (net
of CDSC**) 6.71% 11.05% 9.32% 12.65% 126.64% 28.15%
Balanced Fund Class C (NAV) 11.68% 11.29% 9.31% 14.32% 126.46% 32.14%
Balanced Fund Class C (net
of CDSC***) 10.68% 11.29% 9.31% 14.32% 126.46% 32.14%
</TABLE>
* All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
** The returns reflect the applicable sliding Contingent Deferred Sales
Charge of 5%, 5%, 4%, 3%, 2%, 1%.
*** The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
# Current investment subadvisor assignment became effective 10/1/96.
xxi
<PAGE>
PORTFOLIO MANAGER'S COMMENTARY
The Fund's Class A performance for the year-ended October 31, 1998 was 12.42%
as compared to the composite benchmark+ return of 15.65% and the Lipper
Balanced Index return of 9.13% for the same period. As market volatility
increased, holdings in U.S. government securities and corporate bonds
increased to 42.30%, extending the average maturity out several years to
increase yields. We reduced equity holdings to 47.65% with 6.01% in cash
equivalents. We have maintained a relatively conservative approach for several
months based on our concerns about the overall valuation of the market.
At the same time, we increased our positions in the largest and best-
performing stocks such as Coca-Cola. Because we believe it's important to
maintain breadth and diversity in the portfolio, we also added to our
positions in other sectors such as telecoms, publishing and broadcasting,
insurance, aerospace and supermarkets. Although market valuations have begun
to come down they are still a concern, and it seems to us that investors'
continuing "flight to quality" is one of the main factors driving market
prices today.
We're keeping an eye on the Asian crisis, the political climate in Washington,
and the instability in several economies around the globe, particularly with
respect to the long-term impact these issues may have. We think that it is
almost inevitable that the problems in Asia will impact companies around the
globe, and we see some indications that the U.S. and European economies may be
slowing. In a slow or declining equity market such as the one we've been
currently experiencing, the fixed-income component of the Fund may help
contribute to performance and may protect the overall value of an investment.
+Comprised of 50% of the return of the S&P 500 and 50% of the return of the
Lehman Brothers Aggregate Bond Index.
xxii
<PAGE>
STRATEGIC INCOME FUND
INVESTMENT Seeks to provide a high level of total return consistent
OBJECTIVE: with the preservation of capital by giving its portfolio
manager broad discretion to deploy the portfolio's assets
among certain segments of the fixed-income market as the
portfolio manager believes will best contribute to
achievement of the portfolio's investment objective.
SUBADVISOR: Salomon Brothers Asset Management Inc.
PORTFOLIO Peter Wilby, David Torchia, David J. Scott
MANAGER:
INCEPTION DATE: November 1, 1993
CHANGE IN VALUE OF $10,000 INVESTMENT AND COMPARATIVE INDICES
[LINE GRAPH APPEARS HERE]
[PLOT POINTS TO COME]
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
One Since Since
Periods Ended October 31, 1998 Year Inception Inception
<S> <C> <C> <C>
Lehman Brothers Aggregate Bond Index* 9.32% 7.02% 40.38%
Strategic Income Fund Class A (NAV) 0.22% 6.87% 39.41%
Strategic Income Fund Class A (net of 4.75%
sales charge) -4.54% 5.84% 32.79%
Strategic Income Fund Class B (NAV) -0.43% 6.23% 35.31%
Strategic Income Fund Class B (net of CDSC**) -5.43% 5.92% 33.31%
Strategic Income Fund Class C (NAV) -0.43% 6.23% 35.28%
Strategic Income Fund Class C (net of CDSC***) -1.43% 6.23% 35.28%
</TABLE>
* All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
** The returns reflect the applicable sliding Contingent Deferred Sales
Charge of 5%, 5%, 4%, 3%, 2%, 1%.
*** The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
xxiii
<PAGE>
PORTFOLIO MANAGERS' COMMENTARY
The Fund's Class A performance for the year ending October 31, 1998 was 0.22%.
The Fund outperformed the multi-sector fund average as reported by Lipper
Analytical Services, Inc. by 118 basis points. For the same period, the
investment grade market, as measured by the Lehman Brothers Aggregate Bond
Index, returned 9.32% and the Lipper multi-sector funds averaged a return of -
0.96%
Throughout the fiscal year the global bond markets were volatile. The most
notable effect was on the emerging market debt sector where spreads to
comparable Treasuries widened from about 600 basis points to approximately
1,750 basis points before falling to about 1,100 at fiscal year-end. During
the past twelve months, all major credit sensitive spread sectors of the U.S.
fixed-income market experienced heightened volatility. Speculation that
overseas economic weakness would lead to U.S. economic weakness drove U.S.
stocks lower and sparked fears of deterioration in credit quality.
Contributing to market instability was an excess supply of new high yield and
investment grade corporate bonds issued in the first half of the year. The
best performing fixed-income sector for the past twelve months was Treasuries
as investors flocked to the relative safety and liquidity of U.S. government
securities.
The Fund continues to seek opportunities to upgrade credit quality and move to
a more defensive position within the high yield sector. Within the investment
grade sector of the Fund, we continued to favor discount and current coupon
mortgage-backed securities. These issues performed relatively well even as the
mortgage-backed securities (MBS) market lagged by offering more prepayment
protection than higher coupon securities.
xxiv
<PAGE>
INVESTMENT QUALITY BOND FUND
INVESTMENT Seeks to provide a high level of current income consistent
OBJECTIVE: with the maintenance of principal and liquidity by
investing primarily in a diversified portfolio of
investment grade corporate bonds and U.S. Government bonds
with intermediate to longer term maturities.
SUBADVISOR: Wellington Management Company, LLP
PORTFOLIO Thomas L. Pappas
MANAGER:
INCEPTION DATE: May 1, 1991
CHANGE IN VALUE OF $10,000 INVESTMENT AND COMPARATIVE INDICES
[LINE GRAPH APPEARS HERE]
[PLOT POINTS TO COME]
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
One Five Since Since
Periods Ended October 31, 1998 Year Years Inception Inception
<S> <C> <C> <C> <C>
Lehman Brothers Corporate Bond Index* 7.87% 7.11% 9.25% 94.14%
Lehman Brothers Government Bond Index 11.29% 6.95% 8.70% 86.91%
50%/50% Composite*+ 9.58% 7.05% 8.98% 90.65%
Investment Quality Bond Fund Class A (NAV) 7.63% 5.64% 7.85% 76.36%
Investment Quality Bond Fund Class A (net
of 4.75% sales charge) 2.52% 4.61% 7.15% 67.99%
Investment Quality Bond Fund Class B (NAV) 6.93% 5.08% 7.47% 71.80%
Investment Quality Bond Fund Class B (net
of CDSC**) 1.93% 4.75% 7.47% 71.80%
Investment Quality Bond Fund Class C (NAV) 6.93% 5.08% 7.48% 71.80%
Investment Quality Bond Fund Class C (net
of CDSC***) 5.93% 5.08% 7.48% 71.80%
</TABLE>
* All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
+ Comprised of 50% of the return of the Lehman Brothers Corporate Bond Index
and 50% of the return of the Lehman Brothers Government Bond Index.
** The returns reflect the applicable sliding Contingent Deferred Sales
Charge of 5%, 5%, 4%, 3%, 2%, 1%.
*** The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
xxv
<PAGE>
PORTFOLIO MANAGER'S COMMENTARY
The Fund's Class A performance for the year-ended October 31, 1998 was 7.63%
on a net basis as compared to 9.58% for the Composite Index comprised of
Lehman Government Bond Index and Lehman Corporate Bond Index, which are
indices gross of fees. The Fund has had approximately a 10% exposure to high
yield and, because the Lehman High Yield Index had a total return of -0.50%
over the same one year period, this impacted the Fund's returns versus that of
the benchmark by about 1.0%.
Low inflation and growth prospects helped Treasury yields fall below 6.0%, but
from this point Treasuries left other sectors behind rallying another 1.0% or
so. Investors searched for safety in a volatile world environment as hedge
funds collapsed and some foreign issuers threatened defaults. This triggered a
massive "flight to quality." Corporate bonds lagged Treasuries as credit
fundamentals weakened in investors' eyes, and with lower rates came increased
prepayment risk to the detriment of mortgage prices.
xxvi
<PAGE>
NATIONAL MUNICIPAL BOND FUND
INVESTMENT Seeks to provide a high level of current income which is
OBJECTIVE: exempt from regular federal income taxes, consistent with
the preservation of capital, by investing primarily in a
portfolio of municipal obligations. The portfolio will not
invest in municipal obligations that are rated below
investment grade at the time of purchase.
SUBADVISOR: Salomon Brothers Asset Management Inc.
PORTFOLIO Robert Amodeo
MANAGER:
INCEPTION DATE: July 6, 1993
CHANGE IN VALUE OF $10,000 INVESTMENT AND COMPARATIVE INDICES
[LINE GRAPH APPEARS HERE]
[PLOT POINTS TO COME]
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
One Five Since Since
Periods Ended October 31, 1998 Year Years Inception Inception
<S> <C> <C> <C> <C>
Lehman Brothers Municipal Bond Index* 8.02% 6.36% 6.65% 41.00%
National Municipal Bond Fund Class A (NAV) 6.04% 5.12% 5.61% 33.72%
National Municipal Bond Fund Class A (net
of 4.75% sales charge) 1.00% 4.10% 4.65% 27.37%
National Municipal Bond Fund Class B (NAV) 5.15% 4.33% 4.86% 28.75%
National Municipal Bond Fund Class B (net
of CDSC**) 0.15% 3.99% 4.71% 27.75%
National Municipal Bond Fund Class C (NAV) 5.15% 4.33% 4.86% 28.75%
National Municipal Bond Fund Class C (net
of CDSC***) 4.15% 4.33% 4.86% 28.75%
</TABLE>
* All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
** The returns reflect the applicable sliding Contingent Deferred Sales
Charge of 5%, 5%, 4%, 3%, 2%, 1%.
*** The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
xxvii
<PAGE>
PORTFOLIO MANAGER'S COMMENTARY
The Fund's Class A performance for the year-ended October 31, 1998 was 6.04%
as compared to the Lehman Brothers Municipal Bond Index return of 8.02% for
the same period. For the fiscal year, the Lipper General Municipal Fund
averaged a return of 7.12%. Fixed income prices fluctuated during the twelve
months ended October 31, 1998 as the focus of the market shifted between
domestic economic growth and international concerns. Municipal bonds posted
positive returns during the year, yet failed to keep pace with advances in
Treasuries.
Global investors flocked to U.S. Treasury securities in their effort to seek a
safe haven investment away from the turmoil in Asia. As the year progressed,
domestic investors shifted their attention to a strong U.S. economy. There
were concerns that a strong U.S. economy coupled with tight labor markets
would produce higher domestic inflation. Those concerns proved inaccurate as
the Federal Reserve lowered its short-term lending rate citing lingering signs
of unusual strains in the financial markets.
State and local governments took advantage of a relatively low nominal
interest rate environment during the year by issuing almost $277 billion of
debt. Municipal new issue supply is approximately 29% higher than the similar
period last year. The abundance of new issue supply caused municipals to be
undervalued relative to Treasuries. Strong demand from property and casualty
insurance companies, corporations and mutual funds helped absorb the supply.
Market activity is likely to continue to be dictated more by global events and
less from market fundamentals. Municipals are expected to be in a narrower
trading range than Treasuries and remain attractive on a taxable equivalent
basis.
xxviii
<PAGE>
U.S. GOVERNMENT SECURITIES FUND
INVESTMENT Seeks to provide a high level of current income consistent
OBJECTIVE: with preservation of capital and maintenance of liquidity
by investing in securities issued or guaranteed by the U.S.
Government, its agencies, or intrumentalities.
SUBADVISOR: Salomon Brothers Asset Management Inc.
PORTFOLIO Roger Lavan
MANAGER:
INCEPTION DATE: August 28, 1989#
CHANGE IN VALUE OF 410,000 INVESTMENT AND COMPARATIVE INDICES
[LINE GRAPH APPEARS HERE]
[PLOT POINTS TO COME]
PERFORMANCE TABLE
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
Periods Ended October 31, One Five Since Since# Since Since#
1998 Year Years Inception 12/31/91 Inception 12/31/91
<S> <C> <C> <C> <C> <C> <C>
Merrill Lynch 1-10 Year
Government Index* 9.81% 6.48% 8.17% 6.97% 105.37% 58.47%
U.S. Government Securities
Fund Class A (NAV) 7.41% 6.01% 7.52% 6.69% 94.59% 56.25%
U.S. Government Securities
Fund Class A
(net of 4.75% sales
charge) 2.31% 4.98% 6.95% 5.94% 85.34% 48.82%
U.S. Government Securities
Fund Class B (NAV) 6.60% 5.37% 7.17% 6.23% 88.84% 51.63%
U.S. Government Securities
Fund Class B
(net of CDSC**) 1.60% 5.05% 7.17% 6.23% 88.84% 51.63%
U.S. Government Securities
Fund Class C (NAV) 6.60% 5.37% 7.17% 6.23% 88.84% 51.63%
U.S. Government Securities
Fund Class C
(net of CDSC***) 5.60% 5.37% 7.17% 6.23% 88.84% 51.63%
</TABLE>
* All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
** The returns reflect the applicable sliding Contingent Deferred Sales
Charge of 5%, 5%, 4%, 3%, 2%, 1%.
*** The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
# Current investment subadvisor assignment became effective 12/31/91.
xxix
<PAGE>
PORTFOLIO MANAGER'S COMMENTARY
The Fund's Class A performance for the year-ended October 31, 1998 was 7.41%.
The Fund outperformed the GNMA Fund average, as reported by Lipper Analytical
Services, Inc., by 64 basis points making it the 7th best performing fund in
its category. For the fiscal year, the Merrill Lynch 1-10 Year Government
Index returned 9.81% and the Lipper GNMA Fund averaged a return of 6.77%.
We believed Asia's economic woes would slow economic growth in the U.S.
causing interest rates to move modestly lower, thereby pushing bond prices
higher during 1998. As a result, we moved the Fund into a slightly long
duration barbelled position while overweighting discount mortgage securities.
We held this position until mid-August when it became apparent that the global
economy would slow considerably in 1999 and the Federal Reserve would
preemptively ease monetary policy. We reduced the Fund's barbell position by
swapping long maturity Treasuries and mortgages into 5-year Treasuries. The 5-
year area of the Treasury curve generally performs best just prior to a Fed
easing cycle. To maintain duration, we sold mortgage securities trading above
par and bought discount pass-throughs.
We expect that over time agencies, debentures, and mortgages will recapture a
substantial amount of the relative performance they lost during the last two
months. We believe financial market volatility will remain high as market
psychology fluctuates between pessimism and euphoria regarding the outlook for
the U.S. economy. We expect that the economy will slow to sub-par growth rates
in early 1999 resulting in more easing by the Federal Reserve.
xxx
<PAGE>
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Trustees and Shareholders of North American Funds:
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of North American Funds (comprising,
the International Small Cap, International Growth and Income, Global Equity,
Emerging Growth, Small/Mid Cap, Growth Equity, Tax-Sensitive Equity, Growth and
Income, Equity-Income, Balanced, Strategic Income, Investment Quality Bond,
National Municipal Bond, U.S. Government Securities and Money Market Funds,
hereafter referred to as the "Funds") at October 31, 1998, and the results of
their operations, the changes in their net assets and the financial highlights
for the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Funds'
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 18, 1998
<PAGE>
NORTH AMERICAN FUNDS
STATEMENT OF ASSETS AND LIABILITIES - OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International International Global
Small Cap Growth and Income Equity
Fund Income Fund Fund
--------------- ------------------ ------------
<S> <C> <C> <C>
ASSETS:
- -------
Investments in securities, at value* (Includes a repurchase
agreement of $2,436,000 in International Small Cap)
(See accompanying Portfolio of Investments) ............... $17,060,214 $27,604,181 $123,593,057
Receivable for forward foreign currency contracts to sell
(Notes 2 and 7) ........................................... --- 5,934,966 7,753,825
Forward foreign currency contracts to buy, at value (Cost:
$3,990,397 in International Growth and Income and
$5,893,300 in Global Equity) (Notes 2 and 7) .............. --- 4,187,469 5,843,950
Cash ........................................................... 554 28 802
Foreign currency (Cost: $68,401 in International Small Cap and
$386,319 in International Growth and Income) (Note 2) ..... 68,359 387,288 ---
Deferred organization costs .................................... --- --- ---
Receivables:
Investments sold ....................................... 25,779 153,494 1,514,402
Fund shares sold ....................................... 2,129 8,734 8,969
Dividends .............................................. 4,875 46,633 169,904
Interest ............................................... 3,595 752 917
Foreign tax withholding reclaims ....................... 5,569 28,134 68,816
From adviser (Note 5) .................................. 18,100 11,234 ---
Other assets ................................................... 24,941 11,097 16,341
------------- ------------- -------------
Total assets .................................... 17,214,115 38,374,010 138,970,983
------------- ------------- -------------
LIABILITIES:
- ------------
Forward foreign currency contracts to sell, at value
(Cost: $5,934,966 in International Growth and Income and
$7,753,825 in Global Equity) (Notes 2 and 7) .............. --- 6,300,872 7,931,075
Collateral on securities loaned, at value ...................... 1,714,449 2,041,974 5,066,001
Payables:
Forward foreign currency contracts to buy
(Notes 2 and 7) .................................... --- 3,990,397 5,893,300
Investments purchased .................................. --- 203,334 488,588
Fund shares redeemed ................................... 6,851 9,686 220,150
Dividend and interest withholding tax .................. 768 4,191 14,867
Investment adviser ..................................... 13,018 18,701 105,036
Custodian and transfer agent fees ...................... 9,329 16,599 46,506
Distribution fee ....................................... 6,192 10,982 29,411
Other accrued expenses ................................. 9,979 18,184 59,853
------------- ------------- -------------
Total liabilities ............................... 1,760,586 12,614,920 19,854,787
------------- ------------- -------------
NET ASSETS ..................................................... $15,453,529 $25,759,090 $119,116,196
============= ============= =============
NET ASSETS CONSIST OF:
- ----------------------
Undistributed net investment income/(loss) (Note 2) .... --- $165,398 $226,601
Accumulated undistributed net realized gain (loss) on
investments, foreign currency and forward foreign
currency contracts .............................. (663,159) (177,349) 8,756,432
Unrealized appreciation (depreciation) on:
Investments ..................................... 1,538,858 (633,842) 18,835,914
Foreign currency and forward foreign currency
contracts .................................... 137 (164,886) (220,476)
Capital shares at par value of $.001 (Note 3) .......... 1,129 2,634 7,300
Additional paid-in capital ............................. 14,576,564 26,567,135 91,510,425
------------- ------------- -------------
Net assets ...................................... $15,453,529 $25,759,090 $119,116,196
============ ============= =============
*Investments in securities, at identified cost (Note 2) ........ $15,521,356 $28,238,023 $104,757,143
============ ============= =============
<CAPTION>
Emerging Small/Mid
Growth Cap
Fund Fund
------------- -------------
<S> <C> <C>
ASSETS:
- -------
Investments in securities, at value* (Includes a repurchase
agreement of $2,436,000 in International Small Cap)
(See accompanying Portfolio of Investments) ............... $641,861 $44,608,415
Receivable for forward foreign currency contracts to sell
(Notes 2 and 7) ........................................... --- ---
Forward foreign currency contracts to buy, at value (Cost:
$3,990,397 in International Growth and Income and
$5,893,300 in Global Equity) (Notes 2 and 7) .............. --- ---
Cash ........................................................... 8,631 ---
Foreign currency (Cost: $68,401 in International Small Cap and
$386,319 in International Growth and Income) (Note 2) ..... --- ---
Deferred organization costs .................................... 27,423 ---
Receivables:
Investments sold ....................................... 11,010 305,636
Fund shares sold ....................................... 43 78,644
Dividends .............................................. 10 5,402
Interest ............................................... 97 2,789
Foreign tax withholding reclaims ....................... --- ---
From adviser (Note 5) .................................. 10,034 19,464
Other assets ................................................... 4,606 119
------------- -------------
Total assets .................................... 703,715 45,020,469
------------- -------------
LIABILITIES:
- ------------
Forward foreign currency contracts to sell, at value
(Cost: $5,934,966 in International Growth and Income and
$7,753,825 in Global Equity) (Notes 2 and 7) .............. --- ---
Collateral on securities loaned, at value ...................... --- 8,837,965
Payables:
Forward foreign currency contracts to buy
(Notes 2 and 7) .................................... --- ---
Investments purchased .................................. 23,426 1,115,047
Fund shares redeemed ................................... 120 ---
Dividend and interest withholding tax .................. --- ---
Investment adviser ..................................... 27,823 25,092
Custodian and transfer agent fees ...................... 4,745 15,524
Distribution fee ....................................... 417 13,077
Other accrued expenses ................................. --- 6,144
------------- -------------
Total liabilities ............................... 56,531 10,012,849
------------- -------------
NET ASSETS ..................................................... $647,184 $35,007,620
============= =============
NET ASSETS CONSIST OF:
- ----------------------
Undistributed net investment income/(loss) (Note 2)..... --- ---
Accumulated undistributed net realized gain (loss) on
investments, foreign currency and forward foreign
currency contracts .............................. (39,152) 3,118,172
Unrealized appreciation (depreciation) on:
Investments ..................................... (61,247) 2,199,857
Foreign currency and forward foreign currency
contracts .................................... --- ---
Capital shares at par value of $.001 (Note 3) .......... 73 2,213
Additional paid-in capital ............................. 747,510 29,687,378
------------- -------------
Net assets ...................................... $647,184 $35,007,620
============= =============
*Investments in securities, at identified cost (Note 2) ........ $703,108 $42,408,558
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
NORTH AMERICAN FUNDS
STATEMENT OF ASSETS AND LIABILITIES continued - OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International International Global Emerging Small/Mid
Small Cap Growth and Equity Growth Cap
Fund Income Fund Fund Fund
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUES:
- -----------------
Class A Shares
Net assets at value ........................................ $2,172,917 $3,768,893 $31,055,209 $146,261 $4,814,272
Shares outstanding ......................................... 156,260 383,345 1,890,437 16,478 299,206
Net asset value (NAV) and redemption price per share ......... $13.91 $9.83 $16.43 $8.88 $16.09
------ ----- ------ ----- ------
Public offering price per share (100/95.25 of NAV)
On sales of $100,000 or more the offering price is
reduced ................................................... $14.60 $10.32 $17.25 $9.32 $16.89
------ ------ ------ ----- ------
Class B Shares
Net assets at value ........................................ $7,085,748 $14,029,753 $30,287,406 $262,870 $13,972,362
Shares outstanding ......................................... 518,840 1,436,189 1,864,538 29,770 886,278
Net asset value, offering price and redemption price per
share ...................................................... 13.66 $9.77 $16.24 $8.83 $15.77
----- ----- ------ ----- ------
Class C Shares
Net assets at value ........................................ $6,194,864 $7,960,444 $57,773,581 $238,053 $16,220,986
Shares outstanding ......................................... 453,522 814,454 3,544,699 26,917 1,027,604
Net asset value, offering price and redemption price
per share .................................................. $13.66 $9.77 $16.30 $8.84 $15.79
------ ----- ------ ----- ------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
NORTH AMERICAN FUNDS
STATEMENT OF ASSETS AND LIABILITIES continued - OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth Tax-Sensitive Growth and
Equity Equity Income
Fund Fund Fund
------------- ------------- -------------
<S> <C> <C> <C>
ASSETS:
- -------
Investments in securities, at value* (See accompanying
Portfolio of Investments) ................................. $31,361,172 $10,370,103 $246,906,581
Cash ........................................................... 805 271 497
Foreign currency (Cost: $1,818 in Growth and Income, $20,352 in
Equity-Income, and $3,906 in Balanced) (Note 2) ................ --- --- 1,652
Deferred organization costs .................................... --- 27,319 ---
Receivables:
Investments sold ....................................... 287,949 --- ---
Fund shares sold ....................................... 4,794 34,251 144,458
Dividends .............................................. 15,911 7,758 291,589
Interest ............................................... 550 62 1,218
Foreign tax withholding reclaims ....................... 110 --- ---
From adviser (Note 5) .................................. 17,553 10,440 ---
Other assets ................................................... 11,468 3,186 7,916
------------- ------------- -------------
Total assets .................................... 31,700,312 10,453,390 247,353,911
============= ============ ============
LIABILITIES:
- ------------
Collateral on securities loaned, at value ...................... 2,790,550 --- 5,218,468
Payables:
Investments purchased .................................. 302,728 58,762 592,246
Fund shares redeemed ................................... 4,948 16,805 243,616
Dividend and interest withholding tax .................. 58 208 2,143
Investment adviser ..................................... 20,048 33,610 144,525
Custodian and transfer agent fees ...................... 11,235 4,700 54,332
Distribution fee ....................................... 11,227 4,931 70,780
Other accrued expenses ................................. 16,156 --- 143,684
------------- ------------- -------------
Total liabilities ............................... 3,156,950 119,016 6,469,794
============= ============= =============
NET ASSETS ..................................................... $28,543,362 $10,334,374 $240,884,117
============= ============= =============
NET ASSETS CONSIST OF:
- ----------------------
Undistributed net investment income/(loss) (Note 2)..... --- --- ---
Accumulated undistributed net realized gain (loss) on
investments, foreign currency and forward foreign
currency contracts .............................. $1,902,490 ($754,965) 9,274,277
Unrealized appreciation (depreciation) on:
Investments ..................................... 3,456,663 (782,878) 81,614,857
Foreign currency and forward foreign currency
contracts .................................... 5 --- (165)
Capital shares at par value of $.001 (Note 3) .......... 1,632 1,142 9,994
Additional paid-in capital ............................. 23,182,572 11,871,075 149,985,154
------------- ------------- -------------
Net assets ...................................... $28,543,362 $10,334,374 $240,884,117
============= ============= =============
*Investments in securities, at identified cost (Note 2) ........ $27,904,509 $11,152,981 $165,291,724
============= ============= =============
<CAPTION>
Equity-
Income Balanced
Fund Fund
------------- -------------
<S> <C> <C>
ASSETS:
- -------
Investments in securities, at value* (See accompanying
Portfolio of Investments) ................................. $179,873,176 $104,946,968
Cash ........................................................... 526 830
Foreign currency (Cost: $1,818 in Growth and Income, $20,352 in
Equity-Income, and $3,906 in Balanced) (Note 2) ................ 20,186 4,216
Deferred organization costs .................................... --- ---
Receivables:
Investments sold ....................................... 165,159 39,035
Fund shares sold ....................................... 33,151 9,205
Dividends .............................................. 275,835 57,111
Interest ............................................... 14,138 777,953
Foreign tax withholding reclaims ....................... 491 6,750
From adviser (Note 5) .................................. --- 2,730
Other assets ................................................... 10,605 11,570
------------- -------------
Total assets .................................... 180,393,267 105,856,368
------------- -------------
LIABILITIES:
- ------------
Collateral on securities loaned, at value ...................... 8,029,487 6,307,425
Payables:
Investments purchased .................................. 71,515 874,440
Fund shares redeemed ................................... 327,865 104,073
Dividend and interest withholding tax .................. 1,949 1,520
Investment adviser ..................................... 116,975 61,126
Custodian and transfer agent fees ...................... 50,982 29,003
Distribution fee ....................................... 40,915 19,859
Other accrued expenses ................................. 152,021 66,264
------------- -------------
Total liabilities ............................... 8,791,709 7,463,710
------------- -------------
NET ASSETS ..................................................... $171,601,558 $98,392,658
============= =============
NET ASSETS CONSIST OF:
- ----------------------
Undistributed net investment income/(loss) (Note 2)..... $1,532,483 $1,153,058
Accumulated undistributed net realized gain (loss) on
investments, foreign currency and forward foreign
currency contracts .............................. 10,649,150 6,715,726
Unrealized appreciation (depreciation) on:
Investments ..................................... 27,084,133 7,493,022
Foreign currency and forward foreign currency
contracts .................................... (101) 787
Capital shares at par value of $.001 (Note 3) .......... 9,790 8,555
Additional paid-in capital ............................. 132,326,103 83,021,510
------------- -------------
Net assets ...................................... $171,601,558 $98,392,658
============= =============
*Investments in securities, at identified cost (Note 2) ........ $152,789,043 $97,453,946
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
NORTH AMERICAN FUNDS
STATEMENT OF ASSETS AND LIABILITIES continued - OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth Tax-Sensitive Growth and
Equity Equity Income
Fund Fund Fund
------------ ------------ ------------
<S> <C> <C> <C>
NET ASSET VALUES:
- -----------------
Class A Shares
Net assets at value ........................................ $3,919,360 $4,149,001 $42,915,576
Shares outstanding ......................................... 221,016 457,677 1,768,820
Net asset value (NAV) and redemption price per share ......... $17.73 $9.07 $24.26
====== ===== ======
Public offering price per share (100/95.25 of NAV)
On sales of $100,000 or more the offering price is reduced . $18.62 $9.52 $25.47
------ ===== ======
Class B Shares
Net assets at value ........................................ $11,659,136 $2,899,761 $75,573,750
Shares outstanding ......................................... 667,816 320,781 3,147,669
Net asset value, offering price and
redemption price per share ................................ $17.46 $9.04 $24.01
====== ===== ======
Class C Shares
Net assets at value ........................................ $12,964,866 $3,285,612 $122,394,791
Shares outstanding ......................................... 743,321 363,463 5,077,797
Net asset value, offering price and redemption price per share $17.44 $9.04 $24.10
====== ===== ======
<CAPTION>
Equity-
Income Balanced
Fund Fund
------------ ------------
<S> <C> <C>
NET ASSET VALUES:
- -----------------
Class A Shares
Net assets at value ........................................ $36,661,403 $14,415,126
Shares outstanding ......................................... 2,078,879 1,255,832
Net asset value (NAV) and redemption price per share ......... $17.64 $11.48
====== ======
Public offering price per share (100/95.25 of NAV)
On sales of $100,000 or more the offering price is
reduced ................................................... $18.51 $12.05
====== ------
Class B Shares
Net assets at value ........................................ $38,953,999 $18,928,683
Shares outstanding ......................................... 2,234,764 1,661,049
Net asset value, offering price and redemption price
per share .................................................. $17.43 $11.40
====== ======
Class C Shares
Net assets at value ........................................ $95,986,156 $65,048,849
Shares outstanding ......................................... 5,476,787 5,637,622
Net asset value, offering price and redemption price per share $17.53 $11.54
======= ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
NORTH AMERICAN FUNDS
STATEMENT OF ASSETS AND LIABILITIES continued - OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment National
Strategic Quality Municipal
Income Bond Bond
Fund Fund Fund
------------- ------------- -------------
<S> <C> <C> <C>
ASSETS:
- -------
Investments in securities, at value* (Includes repurchase
agreements of $17,883,000 in U.S. Government Securities)
(See accompanying Portfolio of Investments) ............... $98,793,131 $20,918,377 $15,907,552
Receivable for forward foreign currency contracts to sell
(Notes 2 and 7) ........................................... 11,161,258 --- ---
Forward foreign currency contracts to buy, at value (Cost:
$7,452,011 in Strategic Income) (Notes 2 and 7) ........... 7,370,030 --- ---
Cash ........................................................... 67,723 315 92,546
Foreign currency (Cost: $343 in Strategic Income) (Note 5) ..... 347 --- ---
Receivables:
Investments sold ....................................... 1,257,447 109,335 ---
Fund shares sold ....................................... 2,782 12,959 ---
Dividends .............................................. 867 --- ---
Interest ............................................... 1,603,588 290,482 250,619
From adviser (Note 5) .................................. 3,708 18,568 17,618
Other assets ................................................... 14,247 12,545 13,200
------------- ------------- -------------
Total assets .................................... 120,275,128 21,362,581 16,281,535
------------- ------------- -------------
LIABILITIES:
- ------------
Forward foreign currency contracts to sell, at value
(Cost: $11,161,258 in Strategic Income) (Notes 2 and 7) ..... 11,359,444 --- ---
Collateral on securities loaned, at value ...................... 10,858,710 3,429,644 ---
Payables:
Forward foreign currency contracts to buy
(Notes 2 and 7) .................................... 7,452,011 --- ---
Investments purchased .................................. 12,063,335 645,904 ---
Fund shares redeemed ................................... 172,238 119,353 85
Dividends .............................................. 160,050 31,553 22,153
Dividend and interest withholding tax .................. 8,711 --- ---
Investment adviser ..................................... 49,073 8,724 8,316
Custodian and transfer agent fees ...................... 25,648 9,836 5,923
Distribution fee ....................................... 31,525 5,111 4,934
Other accrued expenses ................................. 50,879 6,226 394
------------- ------------- -------------
Total liabilities ............................... 42,231,624 4,256,351 41,805
------------- ------------- ------------
NET ASSETS ..................................................... $78,043,504 $17,106,230 $16,239,730
============= ============= =============
NET ASSETS CONSIST OF:
- ---------------------
Undistributed net investment income/(loss) (Note 2)..... $196,179 $11,637 ($263)
Accumulated undistributed net realized gain (loss) on
investments, foreign currency and forward foreign
currency contracts .............................. (208,578) (370,164) (24,157)
Unrealized appreciation (depreciation) on:
Investments ..................................... (3,926,550) 420,438 1,024,196
Foreign currency and forward foreign currency
contracts .................................... (259,717) --- ---
Capital shares at par value of $.001 (Note 3) .......... 8,680 1,610 1,589
Additional paid-in capital ............................. 82,233,490 17,042,709 15,238,365
------------- ------------- -------------
Net assets ...................................... $78,043,504 $17,106,230 $16,239,730
============= ============= =============
*Investments in securities, at identified cost (Note 2) ........ $102,719,681 $20,497,939 $14,883,356
============= ============= =============
<CAPTION>
U.S.
Government Money
Securities Market
Fund Fund
------------- -------------
<S> <C> <C>
ASSETS:
Investments in securities, at value* (Includes repurchase
agreements of $17,883,000 in U.S. Government Securities)
(See accompanying Portfolio of Investments) ............... $117,149,407 $24,412,022
Receivable for forward foreign currency contracts to sell
(Notes 2 and 7) ........................................... --- ---
Forward foreign currency contracts to buy, at value (Cost:
$7,452,011 in Strategic Income) (Notes 2 and 7) ........... --- ---
Cash ........................................................... 976 290
Foreign currency (Cost: $343 in Strategic Income) (Note 5) ..... --- ---
Receivables:
Investments sold ....................................... 28,195 ---
Fund shares sold ....................................... 75,007 17,975
Dividends .............................................. --- ---
Interest ............................................... 640,062 85,591
From adviser (Note 5) .................................. 10,858 28,401
Other assets ................................................... 11,849 16,584
------------- -------------
Total assets .................................... 117,916,354 24,560,863
------------- -------------
LIABILITIES:
- ------------
Forward foreign currency contracts to sell, at value
(Cost: $11,161,258 in Strategic Income) (Notes 2 and 7) ..... --- ---
Collateral on securities loaned, at value ...................... 11,444,965 ---
Payables:
Forward foreign currency contracts to buy
(Notes 2 and 7) .................................... --- ---
Investments purchased .................................. 25,815,416 ---
Fund shares redeemed ................................... 161,924 78,993
Dividends .............................................. 225,961 8,116
Dividend and interest withholding tax .................. --- ---
Investment adviser ..................................... 7,875 4,174
Custodian and transfer agent fees ...................... 27,218 11,853
Distribution fee ....................................... 18,159 ---
Other accrued expenses ................................. 32,455 6,515
------------- -------------
Total liabilities ............................... 37,733,973 109,651
------------- -------------
NET ASSETS ..................................................... $80,182,381 $24,451,212
============= =============
NET ASSETS CONSIST OF:
- ----------------------
Undistributed net investment income/(loss) (Note 2) .... ($229,251) $2,858
Accumulated undistributed net realized gain (loss) on
investments, foreign currency and forward foreign
currency contracts .............................. (1,062,756) (2,858)
Unrealized appreciation (depreciation) on:
Investments ..................................... 1,380,419 ---
Foreign currency and forward foreign currency
contracts .................................... --- ---
Capital shares at par value of $.001 (Note 3) .......... 7,958 24,451
Additional paid-in capital ............................. 80,086,011 24,426,761
------------- -------------
Net assets ...................................... $80,182,381 $24,451,212
============= =============
*Investments in securities, at identified cost (Note 2) ........ $115,768,988 $24,412,022
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
NORTH AMERICAN FUNDS
STATEMENT OF ASSETS AND LIABILITIES continued - OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment National U. S.
Strategic Quality Municipal Government Money
Income Bond Bond Securities Market
Fund Fund Fund Fund Fund
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUES:
- -----------------
Class A Shares
Net assets at value ........................................ $15,296,301 $6,729,503 $5,819,638 $49,624,332 $10,295,344
Shares outstanding ......................................... 1,701,232 632,860 569,289 4,924,835 10,296,058
Net asset value (NAV) and redemption price per share ......... $8.99 $10.63 $10.22 $10.08 $1.00
----- ------ ------ ------ -----
Public offering price per share (100/95.25 of NAV)
On sales of $100,000 or more the offering price is
reduced ................................................... $9.44 $11.16 $10.73 $10.58
----- ------ ------ ------
Class B Shares
Net assets at value ........................................ $29,209,869 $4,844,766 $5,272,626 $17,850,236 $5,918,916
Shares outstanding ......................................... 3,248,736 456,154 515,858 1,772,145 5,919,145
Net asset value, offering price and redemption
price per share............................................. $8.99 $10.62 $10.22 $10.07 $1.00
----- ------ ------ ------ -----
Class C Shares
Net assets at value ........................................ $33,537,334 $5,531,961 $5,147,466 $12,707,813 $8,236,952
Shares outstanding ......................................... 3,730,001 520,861 503,623 1,261,527 8,237,403
Net asset value, offering price and redemption price
per share .................................................. $8.99 $10.62 $10.22 $10.07 $1.00
----- ------ ------ ------ -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
NORTH AMERICAN FUNDS
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED OCTOBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International International Global
Small Cap Growth and Equity
Fund Income Fund Fund
------------ ------------ ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------
Interest ................................................. $ 158,880 $ 118,984 $ 42,356
Dividends (Net of withholding tax of $17,748 in
International Small Cap, $64,055 in International
Growth and Income, and $195,264 in Global Equity) ..... 146,668 515,408 2,338,347
------------ ------------ ------------
Total income ...................................... 305,548 634,392 2,380,703
------------ ------------ ------------
EXPENSES:
- ---------
Distribution for Class A ................................. 9,179 15,214 115,553
Distribution for Class B ................................. 76,249 157,054 339,910
Distribution for Class C ................................. 70,469 86,017 623,791
Investment adviser fee (Note 5) .......................... 181,592 257,885 1,164,468
Custodian fee ............................................ 36,000 25,972 112,961
Transfer agent fee ....................................... 44,898 68,183 205,154
Accounting/administration ................................ 27,027 44,659 200,695
Audit and legal fees ..................................... 7,051 8,761 43,560
Amortization of organization costs ....................... -- -- --
Miscellaneous ............................................ 28,284 30,301 84,566
------------ ------------ ------------
Expenses before reimbursement by investment adviser ..... 480,749 694,046 2,890,658
Reimbursement of expenses by investment adviser (Note 5) . 56,791 34,607 --
------------ ------------ ------------
Net expenses .............................. 423,958 659,439 2,890,658
------------ ------------ ------------
Net investment income/(loss) ............. (118,410) (25,047) (509,955)
------------ ------------ ------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON
- --------------------------------------
INVESTMENTS, FOREIGN CURRENCY AND FORWARD
-----------------------------------------
FOREIGN CURRENCY CONTRACTS
--------------------------
Net realized gain (loss) on:
Investment transactions ............................... (75,711) 33,515 9,400,371
Foreign currency and forward foreign currency contracts (22,378) 129,326 845,669
Change in unrealized appreciation (depreciation) on:
Investments ........................................... 236,882 405,513 975,938
Translation of foreign currency and forward foreign
currency contracts................................... 3,020 (374,342) (700,564)
------------ ------------ ------------
Net gain/(loss) on investments, foreign
currency and forward foreign currency
contracts.................................. 141,813 194,012 10,521,414
------------ ------------ ------------
Net increase/(decrease) in net assets resulting from
operations ................................................. $ 23,403 $ 168,965 $ 10,011,459
============ ============ ============
<CAPTION>
Emerging Small/Mid
Growth Cap
Fund * Fund
------------ ------------
<S> <C> <C>
INVESTMENT INCOME:
- -----------------
Interest ................................................. $ 1,746 $ 134,702
Dividends (Net of withholding tax of $17,748 in
International Small Cap, $64,055 in International
Growth and Income, and $195,264 in Global Equity) ..... 314 126,477
------------ ------------
Total income ...................................... 2,060 261,179
------------ ------------
EXPENSES:
- --------
Distribution for Class A ................................. 376 17,228
Distribution for Class B ................................. 952 137,602
Distribution for Class C ................................. 1,162 152,016
Investment adviser fee (Note 5) .......................... 3,034 313,427
Custodian fee ............................................ 29,926 36,000
Transfer agent fee ....................................... 7,218 85,509
Accounting/administration ................................ 451 52,159
Audit and legal fees ..................................... 84 13,223
Amortization of organization costs ....................... 5,485 --
Miscellaneous ............................................ 2,374 36,509
------------ ------------
Expenses before reimbursement by investment adviser ...... 51,062 843,673
Reimbursement of expenses by investment adviser (Note 5) . 44,262 87,864
------------ ------------
Net expenses .............................. 6,800 755,809
------------ ------------
Net investment income/(loss) ............. (4,740) (494,630)
------------ ------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS, FOREIGN CURRENCY AND FORWARD
FOREIGN CURRENCY CONTRACTS
Net realized gain (loss) on:
Investment transactions ............................... (39,152) 3,617,101
Foreign currency and forward foreign currency contracts --- ---
Change in unrealized appreciation (depreciation) on:
Investments ........................................... (61,247) (1,868,388)
Translation of foreign currency and forward foreign
currency contracts................................... --- ---
------------ ------------
Net gain/(loss) on investments, foreign
currency and forward foreign currency
contracts.................................. (100,399) 1,748,713
------------ ------------
Net increase/(decrease) in net assets resulting from
operations ................................................. ($ 105,139) $ 1,254,083
============ ============
</TABLE>
* For the period from January 6, 1998 (Commencement of Operations) through
October 31, 1998.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
Growth Tax-Sensitive Growth
Equity Equity and Income
Fund Fund * Fund
------------ ------------ ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------
Interest ...................................................... $ 114,426 $ 10,614 $ 249,375
Dividends (Net of withholding tax of $1,784 in Growth Equity,
$346 in Tax-Sensitive Equity, $21,412 in Growth and Income,
$27,386 in Equity-Income, and $39,168 in Balanced)............. 236,106 46,227 3,511,442
------------ ------------ ------------
Total income ........................................... 350,532 56,841 3,760,817
------------ ------------ ------------
EXPENSES:
- ---------
Distribution for Class A ...................................... 13,259 6,985 146,284
Distribution for Class B ...................................... 109,342 12,691 688,475
Distribution for Class C ...................................... 137,168 8,857 1,137,868
Investment adviser fee (Note 5) ............................... 255,953 35,280 1,527,239
Custodian fee ................................................. 36,000 29,926 93,772
Transfer agent fee ............................................ 63,373 9,969 304,950
Accounting/administration ..................................... 43,869 5,523 341,295
Audit and legal fees .......................................... 11,210 823 82,714
Amortization of organization costs ............................ -- 5,464 --
Miscellaneous ................................................. 32,637 5,085 115,156
------------ ------------ ------------
Expenses before reimbursement by investment adviser .......... 702,811 120,603 4,437,753
Reimbursement of expenses by investment adviser (Note 5) ...... 73,294 40,187 243,058
------------ ------------ ------------
Net expenses ................................... 629,517 80,416 4,194,695
------------ ------------ ------------
Net investment income/(loss) .................. (278,985) (23,575) (433,878)
------------ ------------ ------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON
- --------------------------------------
INVESTMENTS, FOREIGN CURRENCY AND FORWARD
-----------------------------------------
FOREIGN CURRENCY CONTRACTS:
---------------------------
Net realized gain (loss) on:
Investment transactions .................................... 2,221,648 (754,965) 9,720,012
Foreign currency and forward foreign currency contracts .... 679 --- ---
Change in unrealized appreciation (depreciation) on:
Investments ................................................ 1,275,786 (782,878) 28,812,377
Translation of foreign currency and forward foreign
currency contracts ........................................ (269) --- 53
------------ ------------ ------------
Net gain/(loss) on investments, foreign currency
and forward foreign currency contracts 3,497,844 (1,537,843) 38,532,442
------------ ------------ ------------
Net increase/(decrease) in net assets resulting from
operations ...................................................... $ 3,218,859 ($ 1,561,418) $ 38,098,564
============ ============ ============
<CAPTION>
Equity-
Income Balanced
Fund Fund
------------ ------------
<S> <C> <C>
INVESTMENT INCOME:
- ------------------
Interest ...................................................... $ 650,052 $ 2,377,179
Dividends (Net of withholding tax of $1,784 in Growth Equity,
$346 in Tax-Sensitive Equity, $21,412 in Growth and Income,
$27,386 in Equity-Income, and $39,168 in Balanced)............. 4,705,882 1,119,708
------------ ------------
Total income ........................................... 5,355,934 3,496,887
------------ ------------
EXPENSES:
- ---------
Distribution for Class A ...................................... 137,973 47,398
Distribution for Class B ...................................... 396,322 187,185
Distribution for Class C ...................................... 996,333 673,652
Investment adviser fee (Note 5) ............................... 1,300,804 747,288
Custodian fee ................................................. 75,474 43,850
Transfer agent fee ............................................ 261,185 135,205
Accounting/administration ..................................... 273,690 152,504
Audit and legal fees .......................................... 71,678 35,897
Amortization of organization costs ............................ -- --
Miscellaneous ................................................. 93,918 64,262
------------ ------------
Expenses before reimbursement by investment adviser .......... 3,607,377 2,087,241
Reimbursement of expenses by investment adviser (Note 5) ...... 162,749 138,673
------------ ------------
Net expenses ................................... 3,444,628 1,948,568
------------ ------------
Net investment income/(loss) .................. 1,911,306 1,548,319
------------ ------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON
- --------------------------------------
INVESTMENTS, FOREIGN CURRENCY AND FORWARD
-----------------------------------------
FOREIGN CURRENCY CONTRACTS:
---------------------------
Net realized gain (loss) on:
Investment transactions .................................... 11,356,830 6,740,853
Foreign currency and forward foreign currency contracts .... (959) (76,080)
Change in unrealized appreciation (depreciation) on:
Investments ................................................ 3,232,000 2,811,660
Translation of foreign currency and forward foreign
currency contracts ....................................... (788) 693
------------ ------------
Net gain/(loss) on investments, foreign currency
and forward foreign currency contracts....... 14,587,083 9,477,126
------------ ------------
Net increase/(decrease) in net assets resulting from
operations ...................................................... $ 16,498,389 $ 11,025,445
============ ============
</TABLE>
* For the period from January 6, 1998 (Commencement of Operations) through
October 31, 1998.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
Investment National
Strategic Quality Municipal
Income Bond Bond
Fund Fund Fund
----------- ----------- -----------
INVESTMENT INCOME:
- ------------------
Interest (Net of $8,021 withholding tax in Strategic Income) ............ $ 7,238,055 $ 1,316,949 $ 956,322
Dividends ............................................................... 49 3,584 ---
----------- ----------- -----------
Total income ..................................................... 7,238,104 1,320,533 956,322
----------- ----------- -----------
EXPENSES:
- ---------
Distribution for Class A ................................................ 56,898 24,634 9,042
Distribution for Class B ................................................ 331,952 47,561 57,526
Distribution for Class C ................................................ 354,349 53,351 52,979
Investment adviser fee (Note 5) ......................................... 619,206 102,778 102,477
Custodian fee ........................................................... 74,909 11,969 11,832
Transfer agent fee ...................................................... 111,198 33,461 12,092
Accounting/administration ............................................... 130,292 26,199 26,126
Audit and legal fees .................................................... 27,006 1,826 1,893
Miscellaneous ........................................................... 60,982 28,148 29,456
----------- ----------- -----------
Expenses before reimbursement by investment adviser .................... 1,766,792 329,927 303,423
Reimbursement of expenses by investment adviser (Note 5) ................ 47,269 50,377 38,418
----------- ----------- -----------
Net expenses ............................................. 1,719,523 279,550 265,005
----------- ----------- -----------
Net investment income ................................... 5,518,581 1,040,983 691,317
----------- ----------- -----------
REALIZED AND UNREALIZED GAIN/(LOSS) ON
- --------------------------------------
INVESTMENTS, FOREIGN CURRENCY AND FORWARD
-----------------------------------------
FOREIGN CURRENCY CONTRACTS:
---------------------------
Net realized gain (loss) on:
Investment transactions .............................................. (114,474) 161,325 190,227
Foreign currency and forward foreign currency contracts .............. 174,226 --- ---
Change in unrealized appreciation (depreciation) on:
Investments .......................................................... (5,541,110) 12,137 50,547
Translation of foreign currency and forward foreign currency contracts (218,242) --- ---
----------- ----------- -----------
Net gain/(loss) on investments, foreign currency
and forward foreign currency contracts................. (5,699,600) 173,462 240,774
----------- ----------- -----------
Net increase/(decrease) in net assets resulting from
operations ................................................................ ($ 181,019) $ 1,214,445 $ 932,091
=========== =========== ===========
<CAPTION>
U. S.
Government Money
Securities Market
Fund Fund
----------- -----------
<S> <C> <C>
INVESTMENT INCOME:
- ------------------
Interest (Net of $8,021 withholding tax in Strategic Income) ............ $ 5,512,102 $ 1,071,843
Dividends ............................................................... --- ---
----------- -----------
Total income ..................................................... 5,512,102 1,071,843
----------- -----------
EXPENSES:
- ---------
Distribution for Class A ................................................ 177,793 ---
Distribution for Class B ................................................ 158,596 ---
Distribution for Class C ................................................ 132,610 ---
Investment adviser fee (Note 5) ......................................... 479,512 38,630
Custodian fee ........................................................... 35,967 12,726
Transfer agent fee ...................................................... 112,805 60,669
Accounting/administration ............................................... 121,860 28,840
Audit and legal fees .................................................... 28,089 2,428
Miscellaneous ........................................................... 59,781 37,239
----------- -----------
Expenses before reimbursement by investment adviser .................... 1,307,013 180,532
Reimbursement of expenses by investment adviser (Note 5) ................ 118,394 83,958
----------- -----------
Net expenses ............................................. 1,188,619 96,574
----------- -----------
Net investment income ................................... 4,323,483 975,269
----------- -----------
REALIZED AND UNREALIZED GAIN/(LOSS) ON
- --------------------------------------
INVESTMENTS, FOREIGN CURRENCY AND FORWARD
-----------------------------------------
FOREIGN CURRENCY CONTRACTS:
---------------------------
Net realized gain (loss) on:
Investment transactions .............................................. 591,717 ---
Foreign currency and forward foreign currency contracts .............. --- ---
Change in unrealized appreciation (depreciation) on:
Investments .......................................................... 621,573 ---
Translation of foreign currency and forward foreign currency contracts --- ---
----------- -----------
Net gain/(loss) on investments, foreign currency
and forward foreign currency contracts................. 1,213,290 ---
----------- -----------
Net increase/(decrease) in net assets resulting from
operations ................................................................ $ 5,536,773 $ 975,269
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.'
10
<PAGE>
NORTH AMERICAN FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International International Growth
Small Cap Fund and Income Fund
----------------------------- ----------------------------
Year Year Year Year
Ended Ended Ended Ended
10/31/98 10/31/97 10/31/98 10/31/97
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .............................. ($118,410) ($120,495) ($25,047) $131,377
Net realized gain (loss) on:
Investment transactions ................................ (75,711) (529,214) 33,515 2,452,134
Foreign currency and forward
foreign currency contracts .......................... (22,378) (39,336) 129,326 (148,990)
Change in unrealized appreciation
(depreciation) on:
Investments ............................................ 236,882 942,729 405,513 (1,660,231)
Foreign currency and forward foreign
currency contracts .................................. 3,020 (3,105) (374,342) 118,437
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations ................................. 23,403 250,579 168,965 892,727
Net equalization credits (charges)
(Note 2) .................................................. --- 1,803 --- (9,971)
DISTRIBUTIONS:
From net investment income
Class A .............................................. --- --- (32,570) (83,820)
Class B .............................................. --- --- (49,275) (180,641)
Class C .............................................. --- --- (25,937) (105,721)
From net realized gains on investments and foreign
currency transactions.................................
Class A .............................................. --- --- (387,315) (332,915)
Class B .............................................. --- --- (1,343,452) (1,034,399)
Class C .............................................. --- --- (715,494) (616,566)
In excess of net investment income
Class A .............................................. --- --- (21,898) ---
Class B .............................................. --- --- (33,130) ---
Class C .............................................. --- --- (17,438) ---
Increase (decrease) in net assets from
capital share transactions (Note 3) ....................... (2,188,345) 4,661,417 (1,038,721) 1,701,507
------------ ------------ ------------ ------------
Increase (decrease) in net assets ............................ (2,164,942) 4,913,799 (3,496,265) 230,201
Net assets at beginning of period ............................ 17,618,471 12,704,672 29,255,355 29,025,154
------------ ------------ ------------ ------------
Net assets at end of period .................................. $15,453,529 $17,618,471 $25,759,090 $29,255,355
============ ============ ============ ============
Undistributed net investment income (loss) ................... --- $2,005 $165,398 ($46,540)
------------ ------------ ------------ ------------
<CAPTION>
Emerging
Growth
Global Equity Fund Fund
---------------------------------- ------------
Year Year 1/06/98*
Ended Ended to
10/31/98 10/31/97 10/31/98
------------ ------------ ------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .............................. ($509,955) ($181,899) ($4,740)
Net realized gain (loss) on:
Investment transactions ................................ 9,400,371 7,964,844 (39,152)
Foreign currency and forward
foreign currency contracts .......................... 845,669 559,899 ---
Change in unrealized appreciation
(depreciation) on:
Investments ............................................ 975,938 18,658,707 (61,247)
Foreign currency and forward foreign
currency contracts .................................. (700,564) 560,153 ---
------------ ------------ -----------
Net increase (decrease) in net assets
resulting from operations ................................. 10,011,459 27,561,704 (105,139)
Net equalization credits (charges)
(Note 2) .................................................. --- (134,022) ---
DISTRIBUTIONS:
From net investment income
Class A .............................................. (417,000) --- ---
Class B .............................................. (215,336) --- ---
Class C .............................................. (405,867) --- ---
From net realized gains on investments and foreign
currency transactions.................................
Class A .............................................. (1,961,256) (2,895,690) ---
Class B .............................................. (2,005,883) (2,872,442) ---
Class C .............................................. (3,781,969) (7,051,972) ---
In excess of net investment income
Class A .............................................. --- (89,634) ---
Class B .............................................. --- (89,634) ---
Class C .............................................. --- (89,634) ---
Increase (decrease) in net assets from
capital share transactions (Note 3) ....................... (6,146,407) (6,894,415) 752,323
------------ ------------ -----------
Increase (decrease) in net assets ............................ (4,922,259) 7,623,529 647,184
Net assets at beginning of period ............................ 124,038,455 116,414,926 ---
------------ ------------ -----------
Net assets at end of period .................................. $119,116,196 $124,038,455 $647,184
============ ============ ===========
Undistributed net investment income (loss) ................... $226,601 $288,367 ---
------------ ------------ -----------
</TABLE>
- --------------------------------------
* Commencement of operations
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
NORTH AMERICAN FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Small/Mid Cap Fund Growth Equity Fund
------------------------------- ----------------------------
Year Year Year Year
Ended Ended Ended Ended
10/31/98 10/31/97 10/31/98 10/31/97
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
- -----------
Net investment income (loss) .............................. ($494,630) ($367,126) ($278,985) ($144,868)
Net realized gain (loss) on:
Investment transactions ................................ 3,617,101 1,592,142 2,221,648 2,705,613
Foreign currency and forward
foreign currency contracts .......................... --- --- 679 (6,483)
Change in unrealized appreciation
(depreciation) on:
Investments ............................................ (1,868,388) 3,472,083 1,275,786 1,477,592
Foreign currency and forward foreign
currency contracts .................................. --- --- (269) 262
----------- ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations ................................. 1,254,083 4,697,099 3,218,859 4,032,116
Net equalization credits (charges)
(Note 2) .................................................. --- --- --- 33,219
DISTRIBUTIONS:
- --------------
From net investment income
Class A .............................................. --- --- --- (33,593)
Class B .............................................. --- --- --- (63,216)
Class C .............................................. --- --- --- (90,077)
From net realized gains on investments and foreign currency
transactions
Class A .............................................. (73,545) --- (262,983) ---
Class B .............................................. (196,356) --- (812,961) ---
Class C .............................................. (216,341) --- (1,091,675) ---
In excess of net investment income
Class A .............................................. --- --- --- ---
Class B .............................................. --- --- --- ---
Class C .............................................. --- --- --- ---
Increase (decrease) in net assets from
capital share transactions (Note 3) ....................... 4,796,743 6,879,852 2,632,785 7,494,842
----------- ----------- ----------- ----------
Increase (decrease) in net assets ............................ 5,564,584 11,576,951 3,684,025 11,373,291
Net assets at beginning of period ............................ 29,443,036 17,866,085 24,859,337 13,486,046
----------- ----------- ----------- ----------
Net assets at end of period .................................. $35,007,620 $29,443,036 $28,543,362 $24,859,337
=========== =========== =========== ===========
Undistributed net investment income (loss) ................... --- --- --- ---
----------- ----------- ----------- ----------
<CAPTION>
Tax-
Sensitive
Equity
Growth and Income Fund Fund
---------------------------- -----------
Year Year 1/06/98*
Ended Ended to
10/31/98 10/31/97 10/31/98
------------- ------------ -----------
OPERATIONS:
- -----------
<S> <C> <C> <C>
Net investment income (loss) .............................. ($433,878) $182,168 ($23,575)
Net realized gain (loss) on:
Investment transactions ................................ 9,720,012 15,043,013 (754,965)
Foreign currency and forward
foreign currency contracts .......................... --- 164 ---
Change in unrealized appreciation
(depreciation) on:
Investments ............................................ 28,812,377 26,450,524 (782,878)
Foreign currency and forward foreign
currency contracts .................................. 53 (93) ---
------------- ------------ -----------
Net increase (decrease) in net assets
resulting from operations ................................. 38,098,564 41,675,776 (1,561,418)
Net equalization credits (charges)
(Note 2) .................................................. --- 21,811 ---
DISTRIBUTIONS:
- --------------
From net investment income
Class A .............................................. --- (176,486) ---
Class B .............................................. --- (73,463) ---
Class C .............................................. --- (113,463) ---
From net realized gains on investments and foreign currency
transactions
Class A .............................................. (2,741,357) (1,114,556) ---
Class B .............................................. (4,507,021) (2,130,500) ---
Class C .............................................. (7,696,358) (4,448,214) ---
In excess of net investment income
Class A .............................................. (45,238) (80) ---
Class B .............................................. --- (33) ---
Class C .............................................. --- (51) ---
Increase (decrease) in net assets from
capital share transactions (Note 3) ....................... 30,468,074 25,829,943 11,895,792
------------- ------------ -----------
Increase (decrease) in net assets ............................ 53,576,664 59,470,684 10,334,374
Net assets at beginning of period ............................ 187,307,453 127,836,769 ---
------------- ------------ -----------
Net assets at end of period .................................. $240,884,117 $187,307,453 $10,334,374
============= ============ ===========
Undistributed net investment income (loss) ................... --- --- ---
------------- ------------ -----------
</TABLE>
- -----------------------------------------
* Commencement of operations
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
NORTH AMERICAN FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Equity-Income Fund Balanced Fund
----------------------------- ------------------------------
Year Year Year Year
Ended Ended Ended Ended
10/31/98 10/31/97 10/31/98 10/31/97
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
- -----------
Net investment income (loss) .............................. $1,911,306 $2,333,310 $1,548,319 $2,156,616
Net realized gain (loss) on:
Investment transactions ................................ 11,356,830 11,805,051 6,740,853 15,803,775
Foreign currency and forward
foreign currency contracts .......................... (959) (16,134) (76,080) (74,875)
Change in unrealized appreciation
(depreciation) on:
Investments ............................................ 3,232,000 21,707,197 2,811,660 (2,893,993)
Foreign currency and forward foreign
currency contracts .................................. (788) 687 693 (59)
------------- ------------- ------------ ------------
Net increase (decrease) in net assets
resulting from operations ................................. 16,498,389 35,830,111 11,025,445 14,991,464
Net equalization credits (charges)
(Note 2) .................................................. --- 28,169 --- (205,430)
DISTRIBUTIONS:
- ----------------
From net investment income
Class A .............................................. (701,503) (307,637) (317,345) (392,396)
Class B .............................................. (442,368) (123,036) (320,086) (509,836)
Class C .............................................. (1,133,438) (297,921) (1,278,949) (2,058,773)
From net realized gains on investments and foreign currency
transactions
Class A .............................................. (2,593,550) (6,143,038) (2,023,888) (1,015,169)
Class B .............................................. (2,589,634) (5,815,447) (2,767,331) (1,534,515)
Class C .............................................. (6,612,227) (17,766,496) (11,012,231) (6,683,658)
In excess of net investment income
Class A .............................................. --- --- --- ---
Class B .............................................. --- --- --- ---
Class C .............................................. --- --- --- ---
Increase (decrease) in net assets from
capital share transactions (Note 3) ...................... 2,002,286 22,385,712 7,392,323 (4,810,436)
------------- ------------- ------------ ------------
Increase (decrease) in net assets ............................ 4,427,955 27,790,417 697,938 (2,218,749)
Net assets at beginning of period ............................ 167,173,603 139,383,186 97,694,720 99,913,469
------------- ------------- ------------ ------------
Net assets at end of period .................................. $171,601,558 $167,173,603 $98,392,658 $97,694,720
============= ============= ============ ============
Undistributed net investment income (loss) ................... $1,532,483 $1,934,704 $1,153,058 $1,589,610
------------- ------------- ------------ ------------
<CAPTION>
Investment Quality
Strategic Income Fund Bond Fund
------------------------------ -----------------------------
Year Year Year Year
Ended Ended Ended Ended
10/31/98 10/31/97 10/31/98 10/31/97
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
OPERATIONS:
- -----------
Net investment income (loss) .............................. $5,297,511 $5,132,176 $1,040,983 $1,169,184
Net realized gain (loss) on:
Investment transactions ................................ (114,474) 1,433,455 161,325 42,588
Foreign currency and forward
foreign currency contracts .......................... 174,226 91,730 --- ---
Change in unrealized appreciation
(depreciation) on:
Investments ............................................ (5,320,040) 506,946 12,137 249,233
Foreign currency and forward foreign
currency contracts .................................. (218,242) 10,764 --- ---
------------- ------------- ------------ ------------
Net increase (decrease) in net assets
resulting from operations ................................. (181,019) 7,175,071 1,214,445 1,461,005
Net equalization credits (charges)
(Note 2) .................................................. --- 471 --- (2,133)
DISTRIBUTIONS:
From net investment income
Class A .............................................. (1,142,439) (1,303,877) (446,629) (506,971)
Class B .............................................. (2,118,644) (2,551,456) (276,805) (273,774)
Class C .............................................. (2,258,371) (2,097,399) (312,476) (401,143)
From net realized gains on investments and foreign currency
transactions
Class A .............................................. (219,321) (272,850) --- ---
Class B .............................................. (478,774) (599,725) --- ---
Class C .............................................. (472,034) (442,077) --- ---
In excess of net investment income
Class A .............................................. --- (33,959) --- ---
Class B .............................................. --- (66,452) --- ---
Class C .............................................. --- (54,626) --- ---
Increase (decrease) in net assets from
capital share transactions (Note 3) ....................... 1,717,355 16,388,157 (903,890) (3,722,153)
------------- ------------- ------------ ------------
Increase (decrease) in net assets ............................ (5,153,247) 16,141,278 (725,355) (3,445,169)
Net assets at beginning of period ............................ 83,196,751 67,055,473 17,831,585 21,276,754
------------- ------------- ------------ ------------
Net assets at end of period .................................. $78,043,504 $83,196,751 $17,106,230 $17,831,585
------------- ------------- ------------ ------------
Undistributed net investment income (loss) ................... $196,179 ($81,432) $11,637 $1,508
------------- ------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
NORTH AMERICAN FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
National Municipal U. S. Government
Bond Fund Securities Fund
---------------------------- ---------------------------
Year Year Year Year
Ended Ended Ended Ended
10/31/98 10/31/97 10/31/98 10/31/97
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
OPERATIONS:
- -----------
Net investment income (loss) .......... $691,317 $791,360 $4,323,483 $5,648,449
Net realized gain (loss) on:
Investment transactions ............ 190,227 211,627 591,717 (120,702)
Change in unrealized appreciation
(depreciation) on:
Investments ........................ 50,547 441,613 621,573 977,025
------------ ------------ ------------ -------------
Net increase (decrease) in net assets
resulting from operations ............. 932,091 1,444,600 5,536,773 6,504,772
Net equalization credits (charges)
(Note 2) .............................. --- --- --- (90)
DISTRIBUTIONS:
From net investment income
Class A .......................... (277,166) (318,542) (2,632,290) (3,546,760)
Class B .......................... (215,659) (254,666) (735,957) (889,120)
Class C .......................... (198,492) (218,057) (614,899) (779,044)
In excess of net investment income
Class A .......................... --- --- (314,160) (145,486)
Class B .......................... --- --- (87,836) (36,471)
Class C .......................... --- --- (73,388) (31,956)
Increase (decrease) in net assets from
capital share transactions (Note 3) .. (2,184,716) (2,003,116) (5,506,261) (28,692,600)
------------ ------------ ------------ -------------
Increase (decrease) in net assets ........ (1,943,942) (1,349,781) (4,428,018) (27,616,755)
Net assets at beginning of period ........ 18,183,672 19,533,453 84,610,399 112,227,154
------------ ------------ ------------ -------------
Net assets at end of period .............. $16,239,730 $18,183,672 $80,182,381 $84,610,399
============ ============ ============ =============
Undistributed net investment income (loss) ($263) ($474) ($229,251) ($211,584)
------------ ------------ ------------ -------------
<CAPTION>
Money Market Fund
-----------------------------
Year Year
Ended Ended
10/31/98 10/31/97
---------- ----------
<S> <C> <C>
OPERATIONS:
- -----------
Net investment income (loss) .......... $975,269 $1,005,461
Net realized gain (loss) on:
Investment transactions ............ --- ---
Change in unrealized appreciation
(depreciation) on:
Investments ........................ --- ---
------------ ------------
Net increase (decrease) in net assets
resulting from operations ............. 975,269 1,005,461
Net equalization credits (charges)
(Note 2) .............................. --- ---
DISTRIBUTIONS:
- --------------
From net investment income
Class A .......................... (452,709) (398,539)
Class B .......................... (164,474) (158,672)
Class C .......................... (358,086) (448,250)
In excess of net investment income
Class A .......................... --- ---
Class B .......................... --- ---
Class C .......................... --- ---
Increase (decrease) in net assets from
capital share transactions (Note 3) .. 2,523,350 938,733
------------ ------------
Increase (decrease) in net assets ........ 2,523,350 938,733
Net assets at beginning of period ........ 21,927,862 20,989,129
------------ ------------
Net assets at end of period .............. $24,451,212 $21,927,862
============ ============
Undistributed net investment income (loss) $2,858 ---
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Small Cap Fund
----------------------------------------------------------------------------------
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% #
- -----------------------------------------------------------------------------------------------------------------------------------
<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 Growth and Income Fund
---------------------------------------------------------
Class A
------------------------------------------------------
Year Year Year 1/09/95*
Ended Ended Ended to
10/31/98 10/31/97 10/31/96** 10/31/95
--------------------------------------------------------------------------------------------------------------------
<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% #
--------------------------------------------------------------------------------------------------------------------
<CAPTION>
International Growth and Income Fund
---------------------------------------------------
Class B
--------------------------------------------------
Year Year Year 1/09/95*
Ended Ended Ended to
10/31/98 10/31/97** 10/31/96** 10/31/95
- --------------------------------------------------------------------------------------------------------------
<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
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Growth and Income Fund
-------------------------------------------------------------------------
Class C
-------------------------------------------------------------------------
Year Year Year 1/09/95*
Ended Ended Ended to
10/31/98 10/31/97** 10/31/96** 10/31/95
----------------------------------------------------------------------------------------------------------------------------------
<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.
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Global Equity Fund
--------------------------------------------------------------------
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**
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $16.19 $14.41 $13.73 $14.79
--------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) (0.10) (0.05) (0.14) (0.09)
Net realized and unrealized gain/(loss) on
investments and foreign currency 1.35 3.47 0.92 (0.53)
--------------------------------------------------------
Total from investment operations 1.25 3.42 0.78 (0.62)
--------------------------------------------------------
Distributions
Dividends from net investment income (0.11) ------- (0.10) -------
Distributions from realized capital gains (1.03) (1.64) ------- (0.44)
Distributions from capital ------- ------- ------- -------
--------------------------------------------------------
Total distributions (1.14) (1.64) (0.10) (0.44)
--------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $16.30 $16.19 $14.41 $13.73
--------------------------------------------------------------------------------------------------------------------
Total Return 8.21% 25.54% 5.70% (4.09%)
====================================================================================================================
Ratios/Supplemental Data
--------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $57,774 $61,245 $64,830 $83,340
--------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 2.40% 2.40% 2.40% 2.40%
--------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets (0.56%) (0.32%) (0.95%) (0.64%)
--------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 20% 28% 165% 57%
--------------------------------------------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by adviser 2.40% 2.46% 2.48% 2.53%
--------------------------------------------------------------------------------------------------------------------
<CAPTION>
Global Equity Fund
------------------------------------------------------
Class C
-----------------------------------------------------
Year Ended October 31,
-----------------------------------------------------
1994 1993 1992 1991
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $13.74 $10.33 $10.76 $10.12
-----------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) (0.10) (0.01) (0.02) 0.25
Net realized and unrealized gain/(loss) on
investments and foreign currency 1.15 3.43 (0.37) 0.63
-----------------------------------------------------
Total from investment operations 1.05 3.42 (0.39) 0.88
-----------------------------------------------------
Distributions
Dividends from net investment income ------- (0.01) ------- (0.24)
Distributions from realized capital gains ------- ------- ------- -------
Distributions from capital ------- ------- (0.04) -------
-----------------------------------------------------
Total distributions ------- (0.01) (0.04) (0.24)
-----------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $14.79 $13.74 $10.33 $10.76
-----------------------------------------------------------------------------------------------------------------
Total Return 8.94% 33.06% (3.57%) 8.80%
=================================================================================================================
Ratios/Supplemental Data
-----------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $101,443 $63,503 $14,291 $8,828
-----------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 2.40% 2.40% 2.52% 1.47%
-----------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets (0.91%) (0.40%) (0.27%) 1.41%
-----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 54% 57% 69% 70%
-----------------------------------------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by adviser 2.52% 2.72% 2.78% 4.37%
-----------------------------------------------------------------------------------------------------------------
</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.
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Emerging Growth Fund
-------------------------------------------------
01/06/98* to 10/31/98
-------------------------------------------------
Class A Class B Class C
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $10.00 $10.00 $10.00
-----------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) (0.08) (0.12) *** (0.12) **
Net realized and unrealized gain/(loss) on
investments and foreign currency (1.04) (1.05) (1.04)
-------------------------------------------------
Total from investment operations (1.12) (1.17) (1.16)
-----------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $8.88 $8.83 $8.84
-----------------------------------------------------------------------------------------------------------
Total Return (11.20%) + (11.70%) + (11.60%) +
===========================================================================================================
Ratios/Supplemental Data
Net assets, end of period (000's) $146 $263 $238
-----------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 1.70% # 2.35% # 2.35% #
-----------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets (1.00%) # (1.76%) # (1.67%) #
-----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 52% + 52% + 52% +
-----------------------------------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by adviser 15.48% # 16.48% # 15.78% #
-----------------------------------------------------------------------------------------------------------
<CAPTION>
Tax-Sensitive Equity Fund
---------------------------------------------------
01/06/98* to 10/31/98
---------------------------------------------------
Class A Class B Class C
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $10.00 $10.00 $10.00
-----------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) (0.01) (0.04) (0.03)
Net realized and unrealized gain/(loss) on
investments and foreign currency (0.92) (0.92) (0.93)
---------------------------------------------------
Total from investment operations (0.93) (0.96) (0.96)
-----------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $9.07 $9.04 $9.04
-----------------------------------------------------------------------------------------------------------
Total Return (9.30%) + (9.60%) + (9.60%) +
===========================================================================================================
Ratios/Supplemental Data
Net assets, end of period (000's) $4,149 $2,900 $3,286
-----------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 1.60% # 2.25% # 2.25% #
-----------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets (0.40%) # (1.80%) # (1.84%) #
-----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 38% + 38% + 38% +
-----------------------------------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by adviser 2.51% # 3.24% # 3.16% #
-----------------------------------------------------------------------------------------------------------
</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% #
-----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Small/Mid 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 $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
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth Equity Fund
-------------------------------------------------------------------------------
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% #
----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Growth Equity 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 $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.
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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, 5/01/91*
------------------------------------------------------------------ to
1998 1997 1996 1995 1994 1993 1992 10/31/91
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $21.75 $17.56 $14.71 $13.08 $12.71 $11.21 $10.51 $10.00
----------------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) (0.07) 0.01 0.07 0.18 0.15 0.14 0.18 0.11
Net realized and unrealized gain/(loss) on
investments and foreign currency 4.12 5.25 3.00 1.90 0.46 1.48 0.70 0.47
-------------------------------------------------------------------------------
Total from investment operations 4.05 5.26 3.07 2.08 0.61 1.62 0.88 0.58
-------------------------------------------------------------------------------
Distributions
Dividends from net investment income ------ (0.03) (0.10) (0.15) (0.13) (0.12) (0.18) (0.07)
Distributions from realized capital gains (1.70) (1.04) (0.12) (0.30) (0.11) ------- ------- -------
-------------------------------------------------------------------------------
Total distributions (1.70) (1.07) (0.22) (0.45) (0.24) (0.12) (0.18) (0.07)
----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $24.10 $21.75 $17.56 $14.71 $13.08 $12.71 $11.21 $10.51
----------------------------------------------------------------------------------------------------------------------------------
Total Return 20.00% 31.37% 21.12% 16.56% 4.85% 14.57% 8.42% 5.88% +
==================================================================================================================================
Ratios/Supplemental Data
----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $122,395 $98,250 $74,825 $63,154 $46,078 $37,483 $10,821 $2,090
----------------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 1.99% 1.99% 1.99% 1.99% 1.99% 1.99% 1.94% 1.85% #
----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets (0.31%) 0.01% 0.45% 1.26% 1.11% 1.12% 1.51% 2.05% #
----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 18% 39% 49% 40% 45% 37% 48% 111% #
----------------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by adviser 2.10% 2.13% 2.20% 2.26% 2.38% 2.46% 3.18% 10.69% #
----------------------------------------------------------------------------------------------------------------------------------
</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.
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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
+ Non-annualized
** Net investment income per share has been calculated using the average share
method
@ Historical Total Return is the one-year performance return which includes
Class C performance prior to commencement of operations.
The accompanying notes are an integral part of the financial statements.
21
<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 1993
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $17.33 $17.27 $15.84 $14.77 $14.21 $12.05
-----------------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.17 0.23 0.06 0.02 (0.07) 0.01
Net realized and unrealized gain/(loss) on
investments and foreign currency 1.46 3.56 2.69 1.84 0.74 2.15
----------------------------------------------------------------------------
Total from investment operations 1.63 3.79 2.75 1.86 0.67 2.16
----------------------------------------------------------------------------
Distributions
Dividends from net investment income (0.21) (0.06) (0.04) ------- (0.03) -------
Distributions from realized capital gains (1.22) (3.67) (1.28) (0.79) (0.08) -------
Distributions from capital ------- ------- ------- ------- ------- -------
----------------------------------------------------------------------------
Total distributions (1.43) (3.73) (1.32) (0.79) (0.11) -------
-----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $17.53 $17.33 $17.27 $15.84 $14.77 $14.21
-----------------------------------------------------------------------------------------------------------------------------------
Total Return 9.83% 26.33% 18.53% 13.58% 4.75% 17.93%
===================================================================================================================================
Ratios/Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $95,986 $94,649 $83,855 $83,719 $71,219 $64,223
-----------------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 2.065% 1.99% 1.99% 1.99% 1.99% 1.99%
-----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets 0.93% 1.36% 0.33% 0.15% (0.49%) 0.27%
-----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 22% 36% 169% 54% 39% 40%
-----------------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by adviser 2.10% 2.19% 2.20% 2.23% 2.29% 2.35%
-----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Equity--Income Fund
------------------------------------------------
Class C
------------------------------------------------
Year Ended October 31, 8/28/89*
------------------------------------- to
1992 1991 1990 10/31/89
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.70 $8.22 $11.19 $12.25
-------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) (0.01) 0.02 0.05 0.01
Net realized and unrealized gain/(loss) on
investments and foreign currency 1.37 2.54 (2.39) (1.07)
------------------------------------------------
Total from investment operations 1.36 2.56 (2.34) (1.06)
------------------------------------------------
Distributions
Dividends from net investment income ------- (0.03) (0.05) -------
Distributions from realized capital gains ------- ------- (0.58) -------
Distributions from capital (0.01) (0.05) ------- -------
------------------------------------------------
Total distributions (0.01) (0.08) (0.63) -------
-------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $12.05 $10.70 $8.22 $11.19
-------------------------------------------------------------------------------------------------------
Total Return 12.75% 31.32% (22.16%) (8.65%) +
=======================================================================================================
Ratios/Supplemental Data
-------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $24,291 $15,354 $19,370 $30,627
-------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 2.47% 2.97% 2.85% 2.57% #
-------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets (0.15%) 0.27% 0.43% 0.37% #
-------------------------------------------------------------------------------------------------------
Portfolio turnover rate 91% 37% 58% 65%
-------------------------------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by adviser 3.00% 3.12% N/A N/A
-------------------------------------------------------------------------------------------------------
</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
+ Non-annualized
** Net investment income per share has been calculated using the average share
method
@ Historical Total Return is the one-year performance return which includes
Class C performance prior to commencement of operations.
The accompanying notes are an integral part of the financial statements.
22
<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 1993
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.62 $12.35 $12.02 $11.12 $11.52 $10.20
- -------------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.18 0.25 0.32 0.31 0.22 0.21
Net realized and unrealized gain/(loss) on
investments and foreign currency 1.05 1.54 1.07 1.35 (0.15) 1.30
-----------------------------------------------------------------------------
Total from investment operations 1.23 1.79 1.39 1.66 0.07 1.51
-----------------------------------------------------------------------------
Distributions
Dividends from net investment income (0.24) (0.36) (0.31) (0.24) (0.18) (0.09)
Distributions from realized capital gains (2.07) (1.16) (0.75) (0.52) (0.29) (0.10)
Distributions from capital ------- ------- ------- ------- ------- -------
-----------------------------------------------------------------------------
Total distributions (2.31) (1.52) (1.06) (0.76) (0.47) (0.19)
- -------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.54 $12.62 $12.35 $12.02 $11.12 $11.52
- -------------------------------------------------------------------------------------------------------------------------------
Total Return 11.68% 16.21% 12.41% 16.25% 0.67% 15.02%
===============================================================================================================================
Ratios/Supplemental Data
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $65,049 $68,261 $72,821 $80,626 $86,902 $96,105
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 2.04% 1.99% 1.99% 1.99% 1.99% 1.99%
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets 1.47% 2.09% 2.67% 2.76% 1.93% 1.96%
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 185% 211% 253% 226% 246% 196%
- -------------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by adviser 2.18% 2.20% 2.20% 2.24% 2.22% 2.28%
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Balanced Fund
-------------------------------------------------
Class C
-------------------------------------------------
Year Ended October 31, 8/28/89*
---------------------------------- to
1992 1991 1990 10/31/89
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.76 $8.12 $9.84 $10.17
- ----------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.20 0.27 0.32 0.05
Net realized and unrealized gain/(loss) on
investments and foreign currency 0.87 1.70 (1.66) (0.38)
-----------------------------------------------
Total from investment operations 1.07 1.97 (1.34) (0.33)
-----------------------------------------------
Distributions
Dividends from net investment income (0.19) (0.33) (0.26) -------
Distributions from realized capital gains (0.44) ------- ------- -------
Distributions from capital ------- ------- (0.12) -------
-----------------------------------------------
Total distributions (0.63) (0.33) (0.38) -------
- ----------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.20 $9.76 $8.12 $9.84
- ----------------------------------------------------------------------------------------------------
Total Return 11.25% 24.53% (13.97%) (3.24%) +
====================================================================================================
Ratios/Supplemental Data
- ----------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $48,160 $30,724 $34,713 $43,915
- ----------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 2.40% 2.88% 2.63% 2.13% #
- ----------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets 1.93% 2.77% 3.34% 3.09% #
- ----------------------------------------------------------------------------------------------------
Portfolio turnover rate 171% 84% 73% 84% #
- ----------------------------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by adviser 2.89% N/A N/A N/A
- ----------------------------------------------------------------------------------------------------
</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.
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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.
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Strategic Income Fund
------------------------------------------------------------
Class C
------------------------------------------------------------
Year Year Year Year 4/01/94*
Ended Ended Ended Ended to
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
- -------------------------------------------------------------------------------------------------------------------------
<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%
------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Investment Quality Bond Fund
--------------------------------------
Class A
--------------------------------------
Year Ended October 31,
----------------------------- 5/01/91*
to
1993 1992 10/31/91
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $10.56 $10.26 $10.00
--------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.66 0.82 0.40
Net realized and unrealized gain/(loss)on
investments 0.64 0.27 0.30
---------------------------------------
Total from investment operations 1.30 1.09 0.70
---------------------------------------
Distributions
Dividends from net investment income (0.64) (0.79) (0.40)
Distributions from realized capital gains (0.06) --- ---
Distributions from capital --- --- (0.04)
---------------------------------------
Total distributions (0.70) (0.79) (0.44)
--------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.16 $10.56 $10.26
--------------------------------------------------------------------------------------------------
Total Return 12.66% 11.00% 7.21% +
==================================================================================================
Ratios/Supplemental Data
--------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $14,674 $6,773 $2,713
--------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 0.98% 0.00% 0.00% #
--------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets 5.82% 7.76% 7.08% #
--------------------------------------------------------------------------------------------------
Portfolio turnover rate 41% 44% 39% #
--------------------------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by adviser 1.57% 2.56% 3.37% #
--------------------------------------------------------------------------------------------------
</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.
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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.
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
National Municipal Bond Fund
-----------------------------------------------------------------------
Class A
-----------------------------------------------------------------------
Year Ended October 31, 7/06/93*
------------------------------------------------------- to
1998 1997 1996 1995 1994 10/31/93
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.09 $9.73 $9.62 $8.82 $10.25 $10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.47 0.48 0.48 0.51 0.51 0.17
Net realized and unrealized gain/(loss)on
investments 0.13 0.36 0.11 0.80 (1.43) 0.24
--------------------------------------------------------------------
Total from investment operations 0.60 0.84 0.59 1.31 (0.92) 0.41
--------------------------------------------------------------------
Distributions
Dividends from net investment income (0.47) (0.48) (0.48) (0.51) (0.51) (0.16)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.22 $10.09 $9.73 $9.62 $8.82 $10.25
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 6.04% 8.85% 6.31% 15.26% (9.24%) 4.17% +
=================================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (000's) $5,820 $6,347 $7,710 $7,618 $7,663 $9,131
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 1.00% 0.99% 0.99% 0.80% 0.57% 0.23% #
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average
net assets 4.60% 4.87% 4.99% 5.55% 5.28% 4.86% #
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 43% 29% 49% 44% 6% 150% #
- ---------------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense reimbursement
by adviser 1.23% 1.23% 1.25% 1.34% 1.26% 1.10% #
- ---------------------------------------------------------------------------------------------------------------------------------
</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
+ Non-annualized
@ Historical Total Return is the one-year performance return which includes
Class A performance prior to commencement of operations.
The accompanying notes are an integral part of the financial statements.
27
<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 1993
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.94 $9.80 $9.98 $9.45 $10.35 $10.04
-----------------------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.56 0.59 0.56 0.63 0.53 0.51
Net realized and unrealized gain/(loss)on
investments 0.16 0.13 (0.12) 0.57 (0.74) 0.34
--------------------------------------------------------------------------------
Total from investment operations 0.72 0.72 0.44 1.20 (0.21) 0.85
--------------------------------------------------------------------------------
Distributions
Dividends from net investment income (0.58) (0.58) (0.56) (0.67) (0.50) (0.50)
Dividends in excess of net investment
income ------- ------- (0.06) ------- ------- -------
Distributions from realized capital gains ------- ------- ------- ------- (0.19) (0.04)
Distributions from capital ------- ------- ------- ------- ------- -------
--------------------------------------------------------------------------------
Total distributions (0.58) (0.58) (0.62) (0.67) (0.69) (0.54)
-----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.08 $9.94 $9.80 $9.98 $9.45 $10.35
-----------------------------------------------------------------------------------------------------------------------------------
Total Return 7.41% 7.56% 4.64% 13.15% (2.13%) 8.64%
===================================================================================================================================
Ratios/Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $49,624 $53,235 $72,774 $81,179 $100,622 $163,296
-----------------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net
assets 1.25% 1.25% 1.25% 1.25% 1.25% 1.07%
-----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets 5.65% 6.20% 5.71% 6.54% 5.39% 4.97%
-----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 116% 364% 477% 469% 279% 208%
-----------------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by adviser 1.40% 1.42% 1.41% 1.45% 1.47% 1.42%
-----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
U.S. Government Securities Fund
------------------------------------------
Class A
------------------------------------------
Year Ended October 31, 8/28/89*
------------------------------- to
1992 1991 1990 10/31/89
-------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $9.89 $9.47 $9.74 $9.73
-------------------------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.74 0.84 0.75 0.15
Net realized and unrealized gain/(loss)on
investments 0.13 0.42 (0.20) 0.01
-----------------------------------------------
Total from investment operations 0.87 1.26 0.55 0.16
-----------------------------------------------
Distributions
Dividends from net investment income (0.72) (0.84) (0.75) (0.15)
Dividends in excess of net investment
income --- --- --- ---
Distributions from realized capital gains --- --- --- ---
Distributions from capital --- --- (0.07) ---
------------------------------------------------
Total distributions (0.72) (0.84) (0.82) (0.15)
--------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.04 $9.89 $9.47 $9.74
--------------------------------------------------------------------------------------------------
Total Return 9.15% 13.86% 5.90% 1.66% +
==================================================================================================
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $118.543 $45,662 $43,299 $56,069
- ---------------------------------------------------------------------------------------------------
Ratio of total expenses to average net
assets 0.24% 0.68% 2.28% 2.18% #
- ---------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets 7.21% 8.65% 7.89% 8.54% #
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate 108% 195% 71% 93% #
- --------------------------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by adviser 2.13% 2.61% 2.57% N/A
- --------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations
+ Non-annualized
# Annualized
** Net investment income per share has been calculated using the average
share method
@ Historical Total Return is the one-year performance return which includes
Class C performance prior to commencement of operations.
The accompanying notes are an integral part of the financial statements.
28
<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
+ Non-annualized
# Annualized
** Net investment income per share has been calculated using the average
share method
@ Historical Total Return is the one-year performance return which includes
Class A performance prior to commencement of operations.
The accompanying notes are an integral part of the financial statements.
29
<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%
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Money Market Fund
---------------------------------------------------------------
Class A
---------------------------------------------------------------
Year Ended October 31,
-------------------------------------------------- 8/28/89*
to
1993 1992 1991 1990 10/31/89
- --------------------------------------------------------------------------------------------------------------------------
<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 0.03 0.04 0.06 0.06 0.01
Distributions
Dividends from net investment income (0.03) (0.04) (0.06) (0.06) (0.01)
- --------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------------------
Total Return 2.80% 3.69% 6.22% 5.76% 0.53% +
==========================================================================================================================
Ratios/Supplemental Data
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $18,109 $2,244 $3,421 $4,526 $7,781
- --------------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 0.50% 0.50% 1.00% 2.45% 1.96% #
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average
net assets 2.75% 3.77% 6.01% 5.52% 6.59% #
- --------------------------------------------------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by adviser 1.32% 2.71% 2.68% 2.47% N/A
- --------------------------------------------------------------------------------------------------------------------------
</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.
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
================================================================================
<TABLE>
<CAPTION>
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.
The accompanying notes are an integral part of the financial statements.
31
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS -
October 31, 1998 (showing percentage of total value of investments)
- --------------------------------------------------------------------------------
----------------------------------------------------------------------------
International Small Cap Fund
----------------------------------------------------------------------------
Shares Value
------ -----
COMMON STOCKS - 65.99%
Agricultural Machinery - 0.10%
Kverneland AS 775 $17,050
-------
Agriculture - 1.59%
Nutreco Holding N.V. 8,000 271,883
-------
Air Travel - 1.57%
Ryanair Holdings PLC, ADR * 9,100 267,312
-------
Automobiles & Related - 0.46%
Haldex * 6,995 78,857
------
Broadcasting - 3.02%
Capital Radio 20,400 171,742
Editoriale L'Espresso SPA 9,650 85,932
Flextech PLC 27,550 258,218
-------
515,892
Business Services - 10.11%
Altran Technologies SA 3,050 596,726
Brunel International * 4,975 140,587
BTG PLC 15,075 83,262
Kobenhavns Lufthavne 2,275 263,695
Select Appointments Holdings PLC 25,775 224,326
Semcon AB * 11,625 100,524
Sixt AG 1,525 314,851
-------
1,723,971
Computers & Business Equipment - 3.17%
Fuji Software ABC, Inc. 4,600 173,615
Psion PLC 44,350 367,431
-------
541,046
Conglomerates - 1.06%
Misys 25,785 180,825
-------
Containers & Glass - 1.34%
Schmalbach Lubeca AG 1,500 228,645
-------
Drugs & Health Care - 3.15%
Icon PLC * 5,000 140,000
Orvitus AB * 7,350 49,904
Schwarz Pharma AG 4,950 346,635
-------
536,539
Electronics - 2.26%
VTech Holdings, Ltd. 102,800 385,583
-------
Energy - 0.93%
Vesta Wind Systems * 3,275 158,602
-------
Food & Beverages - 2.52%
Chipita International * 1,125 31,502
Raisio Tehtaat Oy PLC 29,500 398,174
-------
429,676
Homebuilders - 1.37%
IHC Caland NV 5,175 234,038
-------
Hotels & Restaurants - 9.75%
Doutor Coffee Company 7,000 222,165
Grupo Posadas SA * 246,575 92,697
J.D. Wetherspoon PLC 52,965 175,522
Pizza Express 38,275 486,862
Tele Pizza * 83,975 685,469
-------
1,662,715
Household Appliances & Furnishings - 3.14%
Dorel Industries, Inc. * 9,675 $129,481
Hunter Douglas 6,350 227,702
Industrie Natuzzi SPA, ADR 9,825 178,692
-------
535,875
Industrial Machinery - 2.73%
KCI Konecranes International PLC 4,525 196,700
Tomra Systems AS 7,125 200,295
Turbon International AG * 5,550 70,359
------
467,354
International Oil - 0.88%
British-Borneo Petroleum 39,716 149,231
-------
Leisure Time - 3.16%
Cinar Films, Inc., Class B * 20,250 427,781
KTM-Motorraholding * 1,600 110,534
-------
538,315
Paper - 0.17%
Aracruz Cellulose SA * 3,500 29,313
------
Retail Trade - 3.87%
Beter Bed Holdings NV 3,225 86,301
Bulgari SPA 48,925 267,968
Douglas Holdings AG New * 202 11,231
Douglas Holdings AG 4,275 245,171
Narvesen ASA 2,300 49,976
------
660,647
Software - 4.37%
Dassault Systems SA 7,725 294,768
Eidos PLC ADR * 6,775 94,003
Ixos Software * 400 43,465
JBA Holdings PLC 33,125 160,780
Nippon System Development 6,000 152,856
-------
745,872
Telecommunication Services - 2.88%
Energis PLC * 23,425 315,611
Global Telesystems Group, Inc. * 4,400 176,275
-------
491,886
Telephone - 2.39%
Netcom Systems AB, Class B * 10,875 408,196
-------
TOTAL COMMON STOCKS
(Cost $10,035,650) $11,259,323
-----------
PREFERRED STOCKS - 5.54%
Automobiles - 2.28%
Porsche AG 220 $389,134
--------
Financial Services - 3.26%
Marschollek, Lautenschlaeger und 1,090 556,022
-------
TOTAL PREFERRED STOCKS
(Cost $630,836) $945,156
--------
WARRANTS - 0.01%
Gold Peak Industries (Expiration date
08/06/00; strike price HKD 5.25) * 36,000 $865
----
TOTAL WARRANTS (Cost $0) $865
----
Principal Value
--------- -----
SHORT TERM INVESTMENTS - 14.18%
Navigator Securities Lending Trust $1,714,449 $1,714,449
SSGA Money Market Fund 704,421 704,421
-------
$2,418,870
==========
The accompanying notes are an integral part of the financial statements.
32
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
Principal Value
--------- -----
REPURCHASE AGREEMENT - 14.28%
Repurchase Agreement with State Street Bank &
Trust Co. dated 10/30/98 at 4.25%, to be repurchased at
$2,436,863 on 11/02/98, collateralized by $2,115,000 U.S.
Treasury Notes, 7.00% due 07/15/06 (valued at
$2,531,965 including interest) $2,436,000 $2,436,000
----------
TOTAL INVESTMENTS (International $17,060,214
Small Cap Fund) (Cost $15,521,356)
----------------------------------------------------------------------------
International Growth and Income Fund
----------------------------------------------------------------------------
Shares Value
------ -----
COMMON STOCKS - 87.10%
Apparel & Textiles - 0.84%
Christian Dior 2,200 $232,437
--------
Auto Parts - 2.11%
Autoliv, Inc. 17,500 582,885
-------
Banking - 10.06%
Banco Pinto & Sotto Mayor * 10,313 197,623
Bank of Austria AG 2,000 108,818
Bank of Austria AG 2,200 105,351
Cie Fin Paribas 3,700 271,978
Dao Heng Bank Group 123,000 256,482
Bank of Fukuoka, Ltd. 48,000 192,692
Lloyds TSB Group PLC 23,700 292,542
Royal Bank of Canada 8,900 410,104
Societe Generale 2,244 296,863
Sparebanken * 8,820 167,692
UBS AG 900 246,698
Westpac Banking Corp., Ltd. 34,000 206,911
Yapi ve Kredi Bankasi AS 2,058,013 23,224
------
2,776,978
Broadcasting - 1.95%
Central Europe Media Enterprises, 5,300 33,788
Grupo Televisa SA * 11,500 311,937
Wolters Kluwer NV 1,000 193,743
-------
539,468
Building & Construction - 4.54%
ACS Actividades 8,700 277,627
Henderson Land Development Co. 116,000 570,639
Taiheiyo Cement Corp. 67,000 155,747
Tostem Corporation 16,000 248,550
-------
1,252,563
Business Services - 3.03%
Vivendi 3,665 837,107
-------
Capital Goods - 0.60%
Lucas Varity PLC, ADS 48,200 164,571
-------
Chemicals - 2.89%
BASF AG * 8,900 377,169
Mitsubishi Chemical Corp. * 85,000 153,114
Rhodia SA* 16,050 267,216
-------
797,499
Computers & Business Equipment - 0.89%
Fujitsu, Ltd. 23,000 244,639
-------
Shares Value
------ -----
Conglomerates - 1.59%
ABSA Group Ltd. 16,700 $90,996
First Philippine Holdings Corp. 139,200 72,446
Mitsubishi Corp. 52,000 275,210
-------
438,652
Containers & Glass - 0.59%
St. Gobain 1,100 162,746
-------
Crude Petroleum & Natural Gas - 1.26%
Elf Aquitaine SA 2,997 346,851
-------
Drugs & Health Care - 10.51%
Gambro AB * 9,000 100,307
Merck KGAA * 6,300 258,618
Roche Holdings AG 39 454,659
Sanofi SA 1,780 278,731
Schering AG 2,590 305,205
Smith & Nephew Associated Cos. * 96,500 268,110
Smithkline Beecham 26,600 332,567
Takeda Chemical Industries, Ltd. 8,000 260,079
Yamanouchi Pharmaceutical Co., 12,000 343,798
Zeneca Group PLC 7,800 299,478
-------
2,901,552
Electric Utilities - 3.64%
Companhia Paranaense de 13,300 103,075
Iberdrola SA 28,000 452,222
National Power * 15,000 130,297
Veba AG 5,700 318,292
-------
1,003,886
Electronics - 5.40%
ABB AG 150 179,517
ASM Lithography Holding NV * 6,500 164,896
Fanuc Co., Ltd. 7,000 210,156
Philips Electronics 7,870 418,678
Samsung Electronics Co. 30 682
Sony Corp. 3,700 234,860
ST Microelectronics * 4,600 281,503
-------
1,490,292
Energy - 0.22%
JSC Surgutneftagaz * 29,900 59,800
------
Food & Beverages - 5.08%
Danisco AS 2,200 121,562
Nestle SA 265 563,123
PIC International Group * 2,000 2,628
Tate & Lyle PLC 64,640 384,067
Unilever 33,000 331,392
-------
1,402,772
Industrial Machinery - 0.52%
Tadano, Ltd. * 57,000 144,725
-------
Insurance - 8.26%
Allied Zurich PLC * 20,000 237,665
Bayerische Vita * 9,500 56,204
Munchener Rucekversicherungs 1,020 466,743
Munchener Rucekversicherungs Rfd* 40 18,207
QBE Insurance Group 69,000 272,746
Royal & Sun Alliance Insurance 27,000 247,189
Schweiz Rueckversicherungs 250 556,334
Zurich Allied AG * 700 425,072
-------
2,280,160
The accompanying notes are an integral part of the financial statements.
33
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
Shares Value
------ -----
International Oil - 1.89%
Pakistan State Oil 2,446 $2,412
Shell Transport & Trading Co. 58,200 351,648
YPF Sociedad Anonima 5,830 168,706
-------
522,766
Liquor - 0.58%
South African Breweries 8,168 158,763
-------
Metals, Materials & Paper - 2.20%
Anglogold, Ltd. 5,682 289,302
Fletcher Challenge, Ltd. 123,000 78,162
Stora Kopparbergs Bergslags AB * 21,800 240,174
-------
607,638
Other - 0.76%
De Boer Unigro 3,400 209,264
-------
Petroleum Services - 1.75%
Petrofina SA 300 111,436
Total SA * 3,223 371,847
-------
483,283
Publishing - 0.83%
Lagardere S.C.A 5,700 229,399
-------
Retail Grocery - 0.42%
Ito-Yokado Co., Ltd. 2,000 116,658
-------
Retail Trade - 2.08%
Carrefour SA 359 238,304
Edgars Stores * 9,200 41,501
Vendex NV 7,400 294,265
-------
574,070
Steel - 1.15%
Acerinox SA 4,000 90,160
Rautaruukki OY 35,100 208,315
Tokyo Steel Manufacturing Co., 4,000 18,185
------
316,660
Technology - 0.17%
Olicom A/S * 8,200 46,807
------
Telecommunications - 9.95%
Cable & Wireless PLC 20,500 229,883
DDI Corp. 129 376,222
Gn Store Nord 10,800 356,685
Pakistan Telecom. Corp. * 317,500 110,918
Portugal Telecom * 4,300 203,719
RWE AG * 8,700 471,633
Swisscom AG * 1,300 440,271
Telecomunicacoes Brasileiras S/A-
Telebras, ADR 3,410 258,947
Telecom Italia SPA 59,438 299,447
-------
2,747,725
Tobacco - 0.65%
British American Tobacco PLC * 20,000 179,672
-------
Transport & Trade Services - 0.69%
Hays 4,000 58,914
Stolt-Neilsen SA * 8,500 103,061
TNT Post Groep NV * 1,100 29,436
------
191,411
TOTAL COMMON STOCKS
(Cost $24,680,033) $24,045,438
-----------
PREFERRED STOCKS - 3.08%
Automobiles - 0.34%
Volkswagen AG 2,000 $93,933
-------
Banking - 0.37%
Westpac Banking Strypes Trust 3,600 103,275
-------
Broadcasting - 1.53%
News Corporation, Ltd., ADS 70,100 421,780
-------
Capital Goods - 0.84%
GEA AG * 9,100 232,375
-------
TOTAL PREFERRED STOCKS
(Cost $836,558) $851,363
--------
Principal Value
--------- -----
CONVERTIBLE BONDS - 1.07%
Compass Group PLC,
5.75% due 10/05/07 GBP 85,000 $222,288
MTI Capital Cayman, Ltd., 144A,
0.50% due 10/01/07 * JPY 9,000,000 34,161
MTI Capital Cayman, Ltd.,
0.50% due 10/01/07 * 10,000,000 37,957
------
TOTAL CONVERTIBLE BONDS
(Cost $308,458) $294,406
--------
WARRANTS - 0.01%
Munchener Rucekversicherungs *
Expiring 06/03/02 40 $1,739
------
TOTAL WARRANTS (Cost $0) $1,739
------
SHORT TERM INVESTMENTS - 7.40%
Navigator Securities Lending Trust $2,041,974 $2,041,974
SSGA Money Market Fund 1,000 1,000
-----
$2,042,974
----------
REPURCHASE AGREEMENT - 1.34%
Repurchase Agreement with State Street Bank &
Trust Co, dated 10/30/98 at 4.20%, to be repurchased
at $370,125 on 11/02/98, collateralized by $360,000
U.S. Treasury Bonds, 7.75% due 01/31/00 (valued
at $388,724, including interest) $370,000 $370,000
--------
TOTAL INVESTMENTS
(International Growth & Income Fund)
(Cost $28,238,023) $27,604,181
-----------
----------------------------------------------------------------------------
Global Equity Fund
----------------------------------------------------------------------------
Shares Value
------ -----
COMMON STOCKS - 92.77%
Aluminum - 1.27%
Aluminum Company of America 19,800 $1,569,150
----------
Auto Parts - 1.22%
Borg-Warner Automotive, Inc. 32,200 1,509,375
---------
Automobiles - 1.81%
Volkswagen AG 29,830 2,241,977
---------
Banking - 8.40%
ABN AMRO Holdings NV 84,400 1,580,990
Bank of Ireland 97,422 1,781,377
The accompanying notes are an integral part of the financial statements.
34
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
Shares Value
------ -----
Banking - 8.40% - cont'd.
Bank One Corp. * 41,958 $2,050,697
Chase Manhattan Corp. 31,800 1,806,638
Mellon Bank Corp. 29,200 1,755,650
Nordbanken AB 234,800 1,407,717
---------
10,383,069
Broadcasting - 1.02%
Mediaset 198,700 1,258,577
---------
Business Services - 1.51%
Intelidata Technologies Corp. 119,200 113,613
WPP Group PLC, ADR 353,600 1,757,705
---------
1,871,318
Chemicals - 6.39%
Akzo Nobel NV, ADS 16,200 629,463
BASF AG 38,600 1,635,810
Bayer AG 39,600 1,608,862
Kao Corp. 108,000 2,186,310
Potash Corporation of 26,700 1,842,871
---------
7,903,316
Computers & Business Equipment - 2.63%
Data General Corp. * 109,500 1,861,500
NCR Corp. * 41,250 1,387,031
---------
3,248,531
Conglomerates - 3.15%
BTR PLC 187,718 328,322
CSR, Ltd. 344,000 787,466
Richemont Cie 2,090 2,775,769
---------
3,891,557
Construction Materials - 2.78%
Cimpor-Cimentos de Portugal SA 8,950 309,351
Holderbank Financier Glarus AG 1,600 1,781,451
Wolseley PLC 196,500 1,346,771
---------
3,437,573
Containers & Glass - 0.01%
Toyo Seikan Kaisya, Ltd. 600 10,782
------
Crude Petroleum & Natural Gas - 1.40%
Elf Aquitaine 15,000 1,735,992
---------
Domestic Oil - 0.79%
Tenneco, Inc. 32,000 972,000
-------
Drugs & Health Care - 2.77%
Fujisawa Pharmaceutical 87,000 1,026,119
Pharmacia & Upjohn, Inc. 45,400 2,403,362
---------
3,429,481
Electric Utilities - 3.51%
Iberdrola SA 112,300 1,813,733
Unicom Corp. 30,800 1,160,775
Veba AG 24,500 1,368,095
---------
4,342,603
Electrical Equipment - 0.50%
Hitachi, Ltd. 121,000 615,483
-------
Electronics - 3.43%
ABB AG 350 418,874
Ascom Holdings AG 560 960,673
GenRad, Inc. 75,400 1,225,250
Premier Farnell PLC, ADS 138,450 388,137
TDK Corporation 19,000 1,251,673
---------
4,244,607
Financial Services - 4.66%
Enhance Financial Services Group, 44,900 $1,102,856
Internationale Nederlanden Groep 43,728 2,115,663
PennCorp Financial Group, Inc. 77,200 130,275
UST Corp. 104,000 2,405,000
---------
5,753,794
Food & Beverages - 7.12%
Danone 6,700 1,771,504
IBP, Inc. 25,450 688,741
Lion Nathan, Ltd. 279,250 731,990
Nestle SA 1,600 3,399,985
Reckitt & Colman PLC 127,597 2,206,064
---------
8,798,284
Home Builders - 0.76%
Green Property Co. 176,000 938,763
-------
Household Appliances & Furnishing - 1.76%
HomeBase, Inc. * 78,100 527,175
Matsushita Electric Industrial Co., Ltd. 72,000 1,056,716
Philips Electronics NV 11,000 585,191
-------
2,169,082
Household Products - 1.30%
Benckiser Class B 14,900 844,502
Tupperware Corp. 48,900 761,006
-------
1,605,508
Industrial Machinery - 2.61%
B.F. Goodrich Co. 31,100 1,119,600
Bobst AG 400 531,248
SPX Corp. * 4,913 267,452
Tecumseh Products Co. 21,600 1,123,200
Valmet Corp. 17,215 184,178
-------
3,225,678
Insurance - 6.32%
MBIA, Inc. 41,000 2,506,125
Royal Sun Alliance Insurance Grp. 158,352 1,449,734
SCOR, ADS 28,900 1,657,254
Sumitomo Marine & Fire 148,000 865,809
Terra Nova Bermuda Holdings, Ltd. 48,100 1,334,775
---------
7,813,697
Mining - 0.30%
English China Clay 132,400 365,636
-------
Miscellaneous - 0.43%
Clondalkin Group PLC 85,700 530,713
-------
Paper - 1.32%
Boise Cascade Corp. 51,600 1,444,800
Georgia Pacific Corp. * 3,700 191,475
-------
1,636,275
Petroleum Services - 1.01%
Burmah Castrol PLC 5,000 75,316
Noble Drilling Corp. * 35,910 617,203
Ocean Energy, Inc. * 44,915 561,438
-------
1,253,957
Photography - 1.27%
Fuji Photo Film Co. 43,000 1,574,970
---------
Publishing - 2.00%
Houghton Mifflin Co. 63,300 2,468,700
---------
The accompanying notes are an integral part of the financial statements.
35
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
Shares Value
------ -----
Retail Grocery - 3.08%
Albertsons, Inc. 36,600 $2,033,588
American Stores Co. 54,300 1,768,144
---------
3,801,732
Retail Trade - 2.81%
BJ's Wholesale Club, Inc. * 47,200 1,696,250
Delhaize-Le Lion SA 12,900 1,101,726
G.I.B. Holdings, Ltd. 14,100 674,276
-------
3,472,252
Telecommunication Services - 9.65%
Comsat Corp. 96,420 3,802,564
Swisscom AG * 3,920 1,327,588
Telecom Italia SPA 482,300 2,429,812
Telefonica de Espana SA 68,400 3,088,343
Telus Corporation 61,950 1,274,733
---------
11,923,040
Tires & Rubber - 0.41%
Michelin * 12,240 504,502
-------
Tobacco - 3.37%
Imperial Tobacco, Ltd. 77,500 789,944
Philip Morris Companies, Inc. 65,900 3,369,138
---------
4,159,082
TOTAL COMMON STOCKS
(Cost $95,825,142) $114,661,056
------------
Principal Value
--------- -----
SHORT TERM INVESTMENTS - 4.10%
Navigator Securities Lending Trust $5,066,001 $5,066,001
SSGA Money Market Fund 1,000 1,000
-----
$5,067,001
----------
REPURCHASE AGREEMENT - 3.13%
Repurchase Agreement with State Street Bank & Trust Co.
dated 10/30/98 at 4.25%, to be repurchased at $3,866,350
on 11/02/98, collateralized by $2,950,000 U.S. Treasury
Bonds, 7.625% due 11/15/22 (valued at
$4,049,810, including interest) $3,865,000 $3,865,000
----------
TOTAL INVESTMENTS
(Global Equity Fund) (Cost $104,757,143) $123,593,057
============
----------------------------------------------------------------------------
Emerging Growth Fund
----------------------------------------------------------------------------
Shares Value
------ -----
COMMON STOCKS - 95.64%
Aerospace & Defense - 0.96%
Tristar Aerospace Co. * 600 $6,150
------
Apparel & Textiles - 0.96%
Interface, Inc. 500 6,156
-----
Banking - 0.62%
Bank United Corp. Class A 100 3,984
-----
Broadcasting - 1.84%
Granite Broadcasting Corp. * 700 3,588
Heftel Broadcasting Corp. 200 8,225
-----
11,813
Building Construction - 0.74%
D.R. Horton, Inc. 300 4,763
-----
Business Services - 14.06%
Acxiom Corp. * 340 $8,543
CB Richard Ellis Services, Inc. * 400 7,800
Getty Images, Inc. * 600 7,388
INSpire Insurance Solutions, Inc. 200 5,000
Iron Mountain, Inc. 250 7,641
Kroll-O'Gara Co. * 400 9,850
LaSalle Partners, Inc. * 200 5,850
Protection One, Inc. 700 7,875
QRS Corp. * 200 7,600
Robert Half International, Inc. * 100 4,013
Romac International, Inc. * 300 5,250
Technology Solutions Co. 500 6,000
Wilmar Industries, Inc. * 300 7,425
-----
90,235
Chemicals - 0.96%
NOVA Corporation * 214 6,179
-----
Communications & Media - 3.94%
Infoseek Corp. * 300 8,887
Lycos, Inc. 100 4,063
Outdoor Systems, Inc. 300 6,619
Playboy Enterprises, Inc. * 400 5,750
-----
25,319
Computers & Business Equipment - 4.44%
Avant Corp. * 400 6,825
National Instruments Corp. * 200 5,475
Radiant Systems, Inc. * 800 5,400
Transaction Systems Architects, Inc. 300 10,828
------
28,528
Consumer Services - 5.10%
DeVRY, Inc. 500 11,000
ITT Eucational Services, Inc. * 300 8,906
Service Experts, Inc. * 200 6,038
Strayer Education, Inc. 200 6,800
-----
32,744
Drugs & Health Care - 13.86%
Advanced Paradigm, Inc. * 300 9,900
Alternative Living Services, Inc. * 300 7,837
Assisted Living Concepts, Inc. * 300 4,050
ChiRex, Inc. * 300 4,575
Coulter Pharmaceutical, Inc. * 200 5,650
GelTex Pharmaceuticals, Inc. * 300 7,500
Hanger Orthopedic Group, Inc. * 300 5,925
Jones Pharma, Inc. 200 6,463
Minimed, Inc. * 100 5,550
NovaCare, Inc. * 100 412
PharMerica, Inc. * 1,400 4,725
Renal Care Group, Inc. 300 8,738
SangStat Medical Corp. * 200 4,150
Sunrise Assisted Living, Inc. * 200 8,613
VWR Scientific Products Corp. * 200 4,862
-----
88,950
Electronics - 5.78%
Aavid Thermal Technologies, Inc. 300 4,500
Burr-Brown Corp. 300 5,569
Cerprobe Corp. * 400 5,475
Flextronics International, Ltd. * 100 5,194
Uniphase Corp. 200 9,900
Vitesse Semiconductor Corp. 200 6,450
-----
37,088
The accompanying notes are an integral part of the financial statements.
36
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
Shares Value
------ -----
Energy - 1.92%
Chieftain International, Inc. * 300 $5,887
Stone Energy Corp. 200 6,425
-----
12,312
Financial Services - 2.33%
Allmerica Financial Corp. 200 10,000
Enhance Financial Services Group, 200 4,912
Metris Companies, Inc. 0.68 22
--
14,934
Food & Beverages - 2.93%
Ben & Jerry's Homemade, Inc. Class A * 500 9,625
Bob Evans Farms, Inc. 300 5,906
Suiza Foods Corp. * 100 3,263
-----
18,794
Insurance - 2.97%
Amerin Corp. * 200 4,275
Protective Life Corp. 100 3,706
Terra Nova Bermuda Holdings, Ltd. 400 11,100
------
19,081
Leisure Time - 8.03%
Ambassadors International, Inc. * 300 4,387
Coach USA, Inc. * 300 8,044
Fairfield Communities, Inc. 500 4,906
Family Golf Centers, Inc. 200 4,212
Loews Cineplex Entertainment 700 7,350
Premier Parks, Inc. 600 13,312
Sunterra Corp. * 400 3,800
Vistana, Inc. * 500 5,562
-----
51,573
Metals & Mining - 0.93%
Metals USA, Inc. * 600 5,963
-----
Other - 1.23%
Central Garden & Pet Co. * 400 7,900
-----
Petroleum Services - 1.33%
Petroleum Geo Services, Inc. ADR 400 8,550
-----
Pollution Control - 2.39%
Allied Waste Industries, Inc. * 300 6,487
Casella Waste Systems, Inc. * 300 8,850
-----
15,337
Publishing - 0.83%
Peterson Companies, Inc. Class A 200 5,312
-----
Real Estate - 1.47%
Apartment Investment & Management Co.
Class A 200 6,988
U.S. Restaurant Properties, Inc. 100 2,432
-----
9,420
Retail Grocery - 1.25%
Whole Foods Market, Inc. * 200 8,013
-----
Retail Trade - 5.97%
99 Cents Only Stores 200 9,250
Borders Group, Inc. * 300 7,613
Delia's, Inc. * 600 5,025
Stage Stores, Inc. 500 6,625
Staples, Inc. 300 9,788
-----
38,301
Software - 4.94%
Boole & Babbage, Inc. 300 7,988
JDA Software Group, Inc. 500 4,750
Mercury Computer Systems, Inc. * 300 5,287
Mercury Interactive Corp. * 200 8,300
Micrografx, Inc. * 600 5,400
-----
31,725
Telecommunication Services - 2.86%
Intermedia Communications of Florida, Inc. 200 3,700
McLeodUSA, Inc. Class A * 200 7,312
Metro Networks, Inc. * 200 7,325
-----
18,337
Transportation - 1.00%
Mark VII, Inc. 400 6,400
-----
TOTAL COMMON STOCKS
(Cost $675,108) $613,861
--------
Principal Value
--------- -----
SHORT TERM INVESTMENTS - 4.36%
SSGA Money Market Fund $28,000 $28,000
-------
TOTAL INVESTMENTS (Emerging Growth Fund)
(Cost $703,108) $641,861
--------
---------------------------------------------------------------------------
Small/Mid Cap Fund
---------------------------------------------------------------------------
Shares Value
------ -----
COMMON STOCKS - 71.23%
Air Travel - 2.98%
ASA Holdings, Inc. 9,600 $344,400
Continental Airlines, Inc. * 18,400 729,100
Skywest, Inc. 10,000 255,000
-------
1,328,500
Apparel & Textiles - 0.83%
Tommy Hilfiger Corp. * 8,000 371,500
-------
Banking - 0.64%
Firstar Corp. 5,000 283,750
-------
Broadcasting - 1.23%
Jacor Communications, Inc. * 6,300 346,500
Jones Intercable, Inc. * 7,200 202,050
-------
548,550
Business Services - 2.73%
America Online, Inc. 9,600 1,219,800
---------
Computers & Business Equipment - 4.29%
Ceridian Corp. * 15,500 889,312
Citrix Systems, Inc. * 12,000 850,500
Quantum Corp. * 10,000 175,000
-------
1,914,812
Drugs & Health Care - 16.77%
Allegiance Corp. 17,000 632,187
Alza Corp. Class A * 16,200 775,575
Bergen Brunswig Corp., Class A 4,000 195,250
Biomatrix, Inc. * 5,000 235,000
Biomet, Inc. 12,400 420,825
Centocor, Inc. * 27,300 1,214,850
Elan Corporation PLC, ADR * 10,900 763,681
Forest Laboratories, Inc. Class A * 15,700 656,456
IMS Health, Inc. 11,900 791,350
McKesson Corp. 9,800 754,600
Omnicare, Inc. 30,100 1,040,331
---------
7,480,105
The accompanying notes are an integral part of the financial statements.
37
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
Shares Value
------ -----
Electronics - 1.21%
Micron Technology, Inc. * 7,000 $266,000
Sanmina Corp. * 6,700 274,700
-------
540,700
Financial Services - 5.96%
Dime Bancorp, Inc. 26,700 635,794
Finova Group, Inc. 15,000 731,250
Paine Webber Group, Inc. 6,000 200,625
Sovereign Bancorp, Inc. 39,800 522,375
SunAmerica, Inc. 8,050 567,525
-------
2,657,569
Food & Beverages - 6.40%
Aurora Foods, Inc. * 17,700 309,750
Food Lion, Inc. 30,000 330,000
Outback Steakhouse, Inc. * 24,500 848,313
Starbucks Corp. * 15,100 654,962
U.S. Foodservice * 15,000 712,500
-------
2,855,525
Homebuilders - 1.00%
Champion Enterprises, Inc. * 22,500 447,187
-------
Household Appliances & Furnishing - 0.92%
Furniture Brands International, Inc. 19,000 408,500
-------
Household Products - 0.60%
Rubbermaid, Inc. 8,000 265,500
-------
Insurance - 1.91%
Fremont General Corp. 8,200 404,875
MGIC Investment Corp. 11,500 448,500
-------
853,375
Leisure Time - 2.97%
Coach USA, Inc. * 13,900 372,694
International Game Technology 42,300 954,394
-------
1,327,088
Manufacturing - 2.29%
Wabash National Corp. 16,700 296,425
Leggett & Platt 31,000 724,625
-------
1,021,050
Railroads - 2.52%
Kansas City Southern Industries, 29,100 1,123,988
---------
Retail Trade - 8.88%
BJ's Wholesale Club, Inc. * 8,000 287,500
Bed, Bath & Beyond, Inc. * 36,100 995,006
Borders Group, Inc. * 27,400 695,275
Family Dollar Stores, Inc. 21,000 380,625
Office Depot, Inc. * 23,600 590,000
Staples, Inc. * 16,450 536,681
Williams Sonoma, Inc. * 17,400 474,150
-------
3,959,237
Software - 5.59%
Compuware Corp. * 19,200 1,040,400
Intuit * 11,500 580,750
Microchip Technology, Inc. * 32,300 874,119
-------
2,495,269
Telecommunications - 1.51%
Ascend Communications, Inc. * 7,100 342,575
Cox Communications, Inc. * 6,000 329,250
-------
671,825
TOTAL COMMON STOCKS
(Cost $29,573,973) $31,773,830
-----------
Principal Value
--------- -----
SHORT TERM INVESTMENTS - 28.77%
Bayerische Vereinsbank AG $600,000 $599,652
Block Financial Corp. 600,000 599,915
Hasbro, Inc. 600,000 599,047
National Australia Funding 600,000 599,652
Progress Capital Holdings 600,000 599,828
TIC Pacific 600,000 599,915
Navigator Securities Lending Trust 8,837,965 8,837,965
SSGA Money Market Fund 398,611 398,611
-------
TOTAL SHORT TERM INVESTMENTS $12,834,585
(Cost $12,834,585)
TOTAL INVESTMENTS
(Small/Mid Cap Fund) (Cost $42,408,558) $44,608,415
===========
----------------------------------------------------------------------------
Growth Equity Fund
----------------------------------------------------------------------------
Shares Value
------ -----
COMMON STOCKS - 83.73%
Aerospace & Defense - 2.66%
Lockheed Martin Corp. 5,025 $559,659
Northrup Grumman Corp. 3,450 275,137
-------
834,796
Air Travel - 0.87%
Lufthansa AG 12,500 271,657
-------
Automobiles - 0.57%
General Motors Corp. 2,850 179,728
-------
Banking - 1.20%
Citigroup, Inc. 8,000 376,500
-------
Broadcasting - 4.41%
CBS Corp. 8,500 237,469
Jacor Communications, Inc. * 5,025 276,375
Mediaone Group, Inc. * 5,850 247,528
Tele Communications, Inc. 14,775 622,397
-------
1,383,769
Business Services - 5.25%
Comdisco, Inc. 12,200 188,337
Computer Sciences Corp. 7,000 369,250
Fiserv, Inc. * 11,487 534,145
Sterling Commerce, Inc. * 9,600 338,400
Viad Corp. 7,900 216,756
-------
1,646,888
Chemicals - 0.63%
Monsanto Co. 4,850 197,031
-------
Computers & Business Equipment - 3.44%
Compaq Computer Corp. 12,100 382,662
International Business Machines, 4,200 623,437
Oce-Van Der Grinten NV 2,200 71,353
------
1,077,452
Drugs & Health Care - 13.78%
Amgen, Inc. * 5,200 408,525
Bristol-Myers Squibb Co. 3,300 364,856
Eli Lilly and Co. 5,125 414,805
Glaxo Wellcome PLC 3,800 236,550
IMS Health, Inc. 5,400 359,100
Medtronic, Inc. 5,550 360,750
Merck & Co., Inc. 2,225 300,931
Novartis AG 150 270,051
The accompanying notes are an integral part of the financial statements.
38
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
Shares Value
------ -----
Drugs & Health Care - 13.78% - cont'd.
Pfizer, Inc. 6,400 $686,800
Tenet Healthcare Corp. * 8,500 237,469
Warner Lambert Co. 8,675 679,903
-------
4,319,740
Electrical Equipment - 2.72%
General Electric Co. 9,750 853,125
-------
Electronics - 3.17%
Intel Corp. 8,600 767,012
Maxim Integrated Products, Inc. * 6,350 226,616
-------
993,628
Financial Services - 6.07%
Associates First Capital Corp. 9,215 649,657
Capital One 3,800 386,650
Federal National Mortgage 7,925 561,189
Household International,. Inc. 8,346 305,151
-------
1,902,647
Food & Beverages - 4.17%
Coca-Cola Enterprises, Inc. 13,950 503,072
Outback Steakhouse, Inc. * 10,700 370,488
Sara Lee Corp. 7,250 432,734
-------
1,306,294
Household Appliances Furnishing - 1.41%
Hunter Douglas NV 2,525 90,543
Newell Co. 8,000 352,000
-------
442,543
Household Products - 3.74%
Black & Decker Corp. 1,150 59,441
Colgate Palmolive Co. 4,350 384,431
Dial Corp. 14,225 392,077
Procter & Gamble Co. 3,800 337,725
-------
1,173,674
Industrial Machinery - 0.65%
Crane Co. 7,112 204,915
-------
Insurance - 4.80%
Conseco, Inc. 18,389 637,868
Everest Reinsurance Holdings 4,975 171,327
Hartford Financial Services Group 7,350 390,469
Marsh & McLennan Companies, 5,525 306,638
-------
1,506,302
Leisure Time - 2.51%
America Online, Inc. 2,900 368,481
Galileo International, Inc. 11,050 419,209
-------
787,690
Newspapers - 0.83%
News Corp., Ltd. 10,800 261,225
-------
Petroleum Services - 0.37%
Total SA * 1,975 115,538
-------
Pollution Control - 0.60%
Waste Management, Inc. 4,150 187,269
-------
Publishing - 0.44%
Time Warner, Inc. 1,500 139,219
-------
Retail Trade - 7.14%
Best Buy Company, Inc. * 6,500 312,000
Circuit City Stores, Inc. 6,500 235,219
Fred Meyer, Inc. * 9,825 523,795
Gap, Inc. 2,500 150,313
K-Mart Corp. * 20,350 287,444
Lowes Companies, Inc. 9,200 309,925
Rite Aid Corp. 10,600 420,687
-------
2,239,383
Savings & Loan - 1.04%
Golden West Financial Corp. 3,600 326,475
-------
Software - 3.28%
Intuit, Inc. * 6,100 308,050
Microsoft Corp. * 4,200 444,675
PeopleSoft, Inc. * 1,075 22,777
Veritas Software Corp. * 5,025 251,878
-------
1,027,380
Telecommunications - 7.52%
Ascend Communications, Inc. * 3,700 178,525
Bell Atlantic Corp. 9,300 494,063
Bellsouth Corp. 3,050 243,428
MCI Commmunications 24,131 1,333,238
Tellabs, Inc. * 2,000 110,000
-------
2,359,254
Toys, Amusements, Sporting Goods - 0.46%
Mattel, Inc. 4,000 143,500
-------
TOTAL COMMON STOCKS
(Cost $22,800,959) $26,257,622
-----------
Principal Value
--------- -----
SHORT TERM INVESTMENTS - 8.90%
Navigator Securities Lending Trust $2,790,550 $2,790,550
SSGA Money Market Fund 1,000 1,000
-----
$2,791,550
----------
REPURCHASE AGREEMENT - 7.37%
Repurchase Agreement with State Street Bank & Trust
dated 10/30/98 at 4.25%, to be repurchased at $2,312,819 on
11/02/98, collateralized by $2,005,000 U.S. Treasury
7.00% due 07/15/06 (valued at $2,400,279,
including interest) $2,312,000 $2,312,000
----------
TOTAL INVESTMENTS
(Growth Equity Fund) (Cost $27,904,509) $31,361,172
===========
----------------------------------------------------------------------------
Tax-Sensitive Equity Fund
----------------------------------------------------------------------------
Shares Value
------ -----
COMMON STOCKS - 97.62%
Agricultural Machinery - 1.71%
Deere & Company 5,000 $176,875
--------
Apparel & Textiles - 2.16%
Jones Apparel Group, Inc. * 6,000 103,500
Tommy Hilfiger Corp. * 2,600 120,737
-------
224,237
Auto Parts - 2.63%
Lear Corp. * 8,500 273,063
-------
Banking - 2.08%
Bankamerica Corp. 1,471 84,491
Chase Manhattan Corp. 2,300 130,669
-------
215,160
Business Services - 9.05%
Interim Services, Inc. * 15,000 318,750
The accompanying notes are an integral part of the financial statements.
39
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
Shares Value
------ -----
Business Services - 9.05% - cont'd.
Shared Medi Cal System 6,700 $334,162
Xerox Corp. 2,950 285,781
-------
938,693
Computers & Business Equipment - 5.35%
Sun Microsystems , Inc. * 4,500 262,125
SCI Systems, Inc. * 7,400 292,300
-------
554,425
Containers & Glass - 2.83%
Owens Illinois, Inc. * 9,600 293,400
-------
Drugs & Health Care - 4.61%
Amgen, Inc. * 3,000 235,688
Merck & Company, Inc. 650 87,913
Schering Plough Corp. 850 87,444
Watson Pharmaceuticals, Inc. * 1,200 66,750
------
477,795
Electrical Equipment - 3.23%
American Power Conversion Corp. * 7,900 335,256
-------
Financial Services - 4.33%
Citigroup, Inc. 2,500 117,656
Enhance Financial Services Group, 6,000 147,375
SLM Holding Corp. 4,600 184,288
-------
449,319
Home Building - 2.38%
Clayton Homes, Inc. 16,000 247,000
-------
Hotels & Casinos - 8.03%
Carnival Group 10,000 323,750
GTech Holdings Corp. * 9,000 216,000
International Game Technology 13,000 293,312
-------
833,062
Industrial Conglomerates - 6.98%
Crane Company 11,900 342,869
United Technologies Corp. 4,000 381,000
-------
723,869
Insurance - 13.87%
Allstate Corp. 3400 146,412
Ambac Financial Group, Inc. 2500 145,469
Conseco, Inc. 11,000 381,562
Delphi Financial Group, Inc. * 5,612 261,659
Old Republic International Corp. 8,950 170,050
Reliastar Financial Group 7,600 332,975
-------
1,438,127
International Oil - 6.72%
British Petroleum 2,900 256,469
Exxon Corp. 2,200 156,750
Mobil Corp. 2,100 158,944
Texaco, Inc. 2,100 124,556
-------
696,719
Metal Fabrication - 3.49%
Kaydon Corp. 10,300 361,787
-------
Office Furnishings - 2.41%
Hon Industries, Inc. 11,800 250,013
-------
Packaged Foods & Products - 5.32%
Interstate Bakeries Corp. 6,000 150,375
Lancaster Colony Corp. 3,700 111,000
Universal Foods Corp. 13,400 290,612
-------
551,987
Real Estate - 2.60%
General Growth Properties, Inc. 1,200 $42,675
Liberty Property 2,400 55,200
Patriot American Hospitality, Inc. 6,000 53,250
Prentiss Properties Trust 2,800 57,750
Starwood Hotels & Resorts 2,150 60,872
------
269,747
Retail Grocery - 2.89%
Kroger Co. * 5,400 299,700
-------
Retail Trade - 2.82%
Claire's Stores, Inc. 4,900 82,994
Pier 1 Imports, Inc. 13,500 124,875
Ross Stores, Inc. 2,600 84,500
------
292,369
Software - 2.13%
Computer Associates International, Inc. 5,600 220,500
-------
TOTAL COMMON STOCKS
(Cost $10,905,981) $10,123,103
-----------
Principal Value
--------- -----
SHORT TERM INVESTMENTS - 0.01%
SSGA Money Market Fund $1,000 $1,000
------
REPURCHASE AGREEMENT - 2.37%
Repurchase Agreement with State Street Bank & Trust
Co. dated 10/30/98 at 4.25%, to be repurchased at
$246,087 on 11/02/98 collateralized by $255,000 U.S.
Treasury Notes, 5.625% due 03/15/28 (valued
at $257,483, including interest) $246,000 $246,000
--------
TOTAL INVESTMENTS
(Tax-Sensitive Equity Fund) (Cost $11,152,981) $10,370,103
===========
----------------------------------------------------------------------------
Growth and Income Fund
----------------------------------------------------------------------------
Shares Value
------ -----
COMMON STOCKS - 96.24%
Aerospace & Defense - 2.33%
Boeing Co. 52,000 $1,950,000
Lockheed Martin Corp. 19,500 2,171,812
United Technologies Corp. 17,000 1,619,250
---------
5,741,062
Agricultural Machinery - 0.44%
Deere & Company 31,000 1,096,625
---------
Air Travel - 1.11%
Southwest Airlines Co. 129,800 2,750,138
---------
Aluminum - 0.63%
Aluminium Company of America 19,600 1,553,300
---------
Automobiles - 0.34%
General Motors Corp. 22,200 849,150
-------
Banking - 8.97%
The Chase Manhattan Corp. 28,100 1,596,431
Citigroup 172,800 8,132,400
First Union Corp. 73,900 4,286,200
U.S. Bancorp 111,000 4,051,500
Wachovia Corp. 44,900 4,080,287
---------
22,146,818
The accompanying notes are an integral part of the financial statements.
40
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
Shares Value
------ -----
Business Services - 2.29%
Automatic Data Processing, Inc. 33,000 $2,567,813
First Data Corp. 75,200 1,992,800
Service Corporation International 30,500 1,086,563
---------
5,647,176
Chemicals - 2.27%
The Dow Chemical Co. 17,900 1,675,888
E.I. Du Pont de Nemours & Co. 34,300 1,972,250
Zeneca Group PLC, ADR 50,400 1,965,600
---------
5,613,738
Computers & Business Equipment - 7.24%
Cisco Systems, Inc. 51,250 3,228,750
Computer Sciences Corp. * 40,000 2,110,000
EMC Corp. * 28,200 1,815,375
Hewlett-Packard Company 38,700 2,329,256
International Business Machines 39,000 5,789,063
Xerox Corp. 27,000 2,615,625
---------
17,888,069
Drugs & Health Care - 12.80%
Abbott Laboratories 88,000 4,130,500
American Home Products Corp. 63,300 3,085,875
Baxter International, Inc. 39,200 2,349,550
Bristol-Myers Squibb Co. 23,800 2,631,387
Columbia/HCA Healthcare Corp. 99,900 2,097,900
Johnson & Johnson 30,000 2,445,000
Merck & Company, Inc. 19,000 2,569,750
Pfizer, Inc. 38,200 4,099,337
Pharmacia & Upjohn, Inc. 86,000 4,552,625
Warner-Lambert Co. 46,500 3,644,438
---------
31,606,362
Electric Utilities - 2.32%
DPL, Inc. 82,500 1,562,344
Duke Energy Co. 29,000 1,875,937
New England Electric System 24,000 976,500
Texas Utilities Co. 30,000 1,312,500
---------
5,727,281
Electrical Equipment - 3.47%
General Electric Co. 97,800 8,557,500
---------
Electronics - 3.06%
Analog Devices, Inc. 30,000 596,250
Intel Corp. 44,000 3,924,250
Motorola, Inc. 35,300 1,835,600
Texas Instruments, Inc. 18,800 1,202,025
---------
7,558,125
Financial Services - 4.69%
American Express Co. 46,000 4,065,250
Federal National Mortgage 63,000 4,461,187
Merrill Lynch & Co., Inc. 51,600 3,057,300
---------
11,583,737
Food & Beverages - 3.64%
Coca-Cola Company 27,000 1,825,875
General Mills, Inc. 15,500 1,139,250
H.J. Heinz Co. 22,000 1,278,750
Pepsico, Inc. 44,800 1,512,000
Sara Lee Corp. 54,000 3,223,125
---------
8,979,000
Gas & Pipeline Utilities - 0.88%
K N Energy, Inc. 15,000 745,312
National Fuel Gas Co. NJ 16,000 756,000
Peoples Energy Corp. 18,000 663,750
-------
2,165,062
Hotels & Restaurants - 1.49%
McDonald's Corp. 55,000 3,678,125
---------
Household Products - 2.72%
Colgate Palmolive Co. 18,000 1,590,750
Gillette Co. 32,800 1,473,950
Procter & Gamble Co. 41,000 3,643,875
---------
6,708,575
Insurance - 3.57%
ACE, Ltd. 75,000 2,540,625
American International Group 36,000 3,069,000
Marsh & McLennan Companies 57,600 3,196,800
---------
8,806,425
International Oil - 5.94%
Amoco Corp. 51,400 2,884,825
Chevron Corp. 39,000 3,178,500
Exxon Corp. 52,500 3,740,625
Royal Dutch Petroleum Co. 71,000 3,496,750
UNOCAL Corp. 40,000 1,357,500
---------
14,658,200
Leisure Time - 0.80%
The Walt Disney Co. 73,600 1,982,600
---------
Liquor - 1.21%
Anheuser-Busch Companies, Inc. 50,300 2,989,706
---------
Newspapers - 1.45%
Gannett, Inc. 58,000 3,588,750
---------
Paper - 2.14%
International Paper Co. 24,200 1,123,787
Kimberly Clark Corp. 48,000 2,316,000
Minnesota Mining 23,000 1,840,000
---------
5,279,787
Petroleum Services - 1.60%
Conoco, Inc. * 27,200 676,600
Diamond Offshore Drilling, Inc. 32,700 1,003,482
Schlumberger, Ltd. 43,200 2,268,000
---------
3,948,082
Photography - 0.49%
Eastman Kodak Co. 15,700 1,216,750
---------
Railroads & Equipment - 0.69%
Union Pacific Corp. 35,600 1,695,450
---------
Real Estate - 0.20%
Archstone Communities Trust 24,000 483,000
-------
Retail Trade - 5.63%
Dayton Hudson Corp. 92,000 3,898,500
The GAP, Inc. 42,000 2,525,250
May Dept Stores 32,200 1,964,200
Wal-Mart Stores, Inc. 80,000 5,520,000
---------
13,907,950
Software - 3.02%
Microsoft Corp. * 64,000 6,776,000
Peoplesoft, Inc. * 32,300 684,356
-------
7,460,356
Telecommunication Services - 0.43%
Cox Communications, Inc. 19,300 1,059,088
---------
Telephone - 6.62%
Bell Atlantic Corp. 77,192 4,100,825
BellSouth Corp. 21,000 1,676,063
SBC Communications, Inc. 96,000 4,446,000
The accompanying notes are an integral part of the financial statements.
41
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
Shares Value
------ -----
Telephone - 6.62% cont'd
U.S. West, Inc. 50,000 $2,868,750
MCI WorldCom, Inc. * 59,000 3,259,750
---------
16,351,388
Tobacco - 1.76%
Philip Morris Companies, Inc. 85,100 4,350,738
---------
TOTAL COMMON STOCKS
(Cost $156,013,256) $237,628,113
------------
Principal Value
--------- -----
SHORT TERM INVESTMENT - 2.11%
Navigator Securities Lending Trust $5,218,468 $5,218,468
----------
REPURCHASE AGREEMENT - 1.65%
Repurchase Agreement with Paribas dated
at 5.40%, to be repurchased at
$4,061,827 on 11/02/98, at collateralized
by $4,012,000 U.S. Treasury Notes,
5.875% due 02/15/00 (valued at $4,135,290
including interest) $4,060,000 $4,060,000
----------
TOTAL INVESTMENTS $246,906,581
(Growth & Income Fund) (Cost $165,291,724) -----------
----------------------------------------------------------------------------
Equity-Income Fund
----------------------------------------------------------------------------
Shares Value
------ -----
COMMON STOCKS - 91.83%
Aerospace & Defense - 0.73%
Allied Signal Corp. 21,000 $817,688
Boeing Co. 13,000 487,500
-------
1,305,188
Autos & Related - 2.28%
Dana Corp. * 1,300 54,356
Eaton Corp. * 2,500 169,219
General Motors Corp. 20,400 1,286,475
TRW, Inc. 22,900 1,303,869
Genuine Parts Company 40,600 1,278,900
---------
4,092,819
Banking - 9.13%
Bank One Corp. 27,650 1,351,394
Bankamerica Corp. * 10,000 574,375
BankBoston Corp. 19,000 699,437
Bankers Trust New York Corp. 11,600 728,625
The Chase Manhattan Corp. 19,400 1,102,162
Citigroup, Inc. 34,449 1,621,256
First Union Corp. 20,810 1,206,980
Fleet Financial Group, Inc. 34,200 1,365,862
J.P. Morgan & Company, Inc. 15,600 1,470,300
Mellon Bank Corp. 45,600 2,741,700
Mercantile Bankshares Corp. 19,150 624,769
National City Corp. 15,400 990,412
PNC Bank Corp. 14,400 720,000
Wells Fargo & Company 3,300 1,221,000
---------
16,418,272
Beverages - 1.98%
Anheuser-Busch Companies, Inc. 38,800 2,306,175
Brown-Forman Corp., Class B 18,400 1,250,050
---------
3,556,225
Business Services - 0.64%
H & R Block, Inc. 25,600 1,147,200
---------
Shares Value
Chemicals - 6.48%
The Dow Chemical Co. 27,300 $2,555,963
E.I. Du Pont De Nemours & Co. 24,100 1,385,750
Great Lakes Chemical Corp. 27,600 1,148,850
Hercules, Inc. 37,600 1,252,550
Imperial Chemical Industries PLC, 11,500 416,875
Lubrizol Corp. 23,000 641,125
Minnesota Mining 21,800 1,744,000
Nalco Chemical Co. 24,300 751,781
Olin Corp. 26,300 728,181
Pall Corp. 41,100 1,037,775
---------
11,662,850
Cosmetics & Toiletries - 0.80%
International Flavors 38,600 1,445,088
---------
Domestic Oil - 4.19%
Amerada Hess Corp. 24,200 1,337,050
Atlantic Richfield Co. 30,600 2,107,575
The British Petroleum Company 13,500 1,193,906
Occidental Petroleum Corp. 26,800 532,650
Phillips Petroleum Co. 17,200 743,900
Unocal Corp. 22,900 777,169
USX-Marathon Group 25,700 840,069
-------
7,532,319
Drugs & Health Care - 4.13%
Abbott Laboratories 20,000 938,750
American Home Products Corp. 53,000 2,583,750
Bausch & Lomb, Inc. 18,200 758,712
Pharmacia & Upjohn, Inc. 46,800 2,477,475
Smith & Nephew PLC 241,700 671,525
-------
7,430,212
Electric Utilities - 6.42%
Baltimore Gas & Electric Co. 13,300 417,288
Central & South West Corp. 13,300 369,906
Dominion Resources, Inc. 15,000 692,813
DQE, Inc. 22,100 871,569
Duke Energy Co. 20,100 1,300,219
Entergy Corp. 20,000 575,000
FirstEnergy Corp. 45,950 1,378,500
GPU, Inc. 9,000 388,125
Houston Industries, Inc. 32,000 994,000
PacifiCorp 40,000 762,500
PECO Energy Co. 18,700 723,456
Southern Co. 46,800 1,319,175
TECO Energy, Inc. 20,000 552,500
Unicom Corp. 32,100 1,209,769
---------
11,554,820
Electrical Equipment - 2.39%
Cooper Industries, Inc. 19,000 838,375
General Electric Co. 20,700 1,811,250
Hubbell, Inc. 21,100 841,362
Tyco International, Ltd. 12,930 800,852
-------
4,291,839
Electronic Components - 0.67%
AMP, Inc. 29,220 1,199,846
---------
Electronic Systems - 0.57%
Hewlett Packard Co. 17,000 1,023,187
---------
Energy Services - 0.88%
Baker Hughes, Inc. * 38,500 849,406
Witco Corp. 38,900 731,806
-------
1,581,212
The accompanying notes are an integral part of the financial statements.
42
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
Shares Value
------ -----
Entertainment & Leisure - 0.68%
Hilton Hotels Corp. 33,900 $680,119
The Reader's Digest Association, Inc. 25,200 548,100
-------
1,228,219
Financial Services - 1.25%
Federal National Mortgage 28,800 2,039,400
Morgan Stanley Dean Witter 3,300 213,675
-------
2,253,075
Food Processing - 4.45%
General Mills, Inc. 33,100 2,432,850
H.J. Heinz Co. 21,300 1,238,063
Kellogg Co. 30,600 1,009,800
McCormick & Company, Inc. 43,000 1,335,688
Quaker Oats Co. 28,200 1,665,562
Sara Lee Corp. 5,300 316,344
-------
7,998,307
Forest Products - 0.96%
Georgia Pacific Corp. 12,200 631,350
International Paper Co. 23,600 1,095,925
---------
1,727,275
Household Appliances Furnishing - 0.62%
Whirlpool Corp. 21,900 1,122,375
---------
Household Products - 0.46%
Corning, Inc. * 10,500 381,281
Stanley Works * 4,400 132,000
Tupperware Corp. 20,500 319,031
-------
832,312
Insurance - 4.52%
American General 25,500 1,746,750
Corp.
Exel, Ltd. 18,700 1,429,381
Lincoln National Corp. 10,500 796,688
SAFECO Corp. 35,600 1,541,925
St. Paul Companies, Inc. 51,924 1,719,982
Transamerica Corp. 8,700 904,800
-------
8,139,526
International Oil - 7.22%
Amoco Corp. 51,000 2,862,375
Chevron Corp. 26,800 2,184,200
Exxon Corp. 38,300 2,728,875
Mobil Corp. 23,600 1,786,225
Royal Dutch Petroleum Co., ADR 26,600 1,310,050
Texaco, Inc. 35,700 2,117,456
---------
12,989,181
Media & Communications - 2.40%
Dow Jones & Co. 17,600 806,300
Dun & Bradstreet Corp. 30,300 859,763
Knight-Ridder, Inc. 30,500 1,553,594
R.H. Donnelley Corp. 6,060 84,840
R.R. Donnelley & Sons Co. 23,300 1,004,812
---------
4,309,309
Metals - 1.49%
Inco, Ltd. 33,000 352,688
Phelps Dodge Corp. 16,600 956,575
Reynolds Metals Co. 15,500 929,031
USX-U.S. Steel Group 19,400 451,050
-------
2,689,344
Mining - 0.41%
Newmont Mining Corp. 35,000 743,750
-------
Miscellaneous Consumer Products - 2.54%
Armstrong World Industries, Inc. 20,400 $1,264,800
Fortune Brands, Inc. 29,600 978,650
PPG Industries, Inc. 20,400 1,166,625
Tomkins PLC 250,000 1,156,944
---------
4,567,019
Paper - 2.14%
Consolidated Papers, Inc. 33,100 796,469
Kimberly-Clark Corp. 36,800 1,775,600
Union Camp Corp. 29,800 1,281,400
---------
3,853,469
Photography - 0.99%
Eastman Kodak Co. 22,900 1,774,750
---------
Pollution Control - 1.34%
Browning Ferris Industries, Inc. 33,700 1,194,244
Waste Management, Inc. 26,825 1,210,478
---------
2,404,722
Railroads & Equipment - 3.11%
Burlington Northern Santa Fe Corp. 30,600 944,775
GATX Corp. 11,600 400,200
Norfolk Southern Corp. 71,100 2,341,856
Union Pacific Corp. 39,900 1,900,237
---------
5,587,068
Real Estate - 2.43%
Archstone Communities 19,400 390,425
Crescent Real Estate Equities 25,500 639,094
Rouse Co. 6,600 185,213
Simon DeBartolo Group, Inc. 46,500 1,392,094
Starwood Hotels and Resorts 43,718 1,237,766
Weingarten Realty Investors 12,000 533,250
-------
4,377,842
Retail Trade - 1.49%
May Department Stores Co. 16,300 994,300
J.C. Penney Company, Inc. 22,900 1,087,750
Toys 'R Us, Inc. * 30,700 600,569
-------
2,682,619
Telephone - 8.81%
Alltel Corp. 56,200 2,630,863
American Telephone & Telegraph Corp. 25,300 1,574,925
BCE, Inc. 26,800 912,875
Bell Atlantic Corp. 33,600 1,785,000
BellSouth Corp. 13,300 1,061,506
Frontier Corp. 10,700 321,669
GTE Corp. 36,100 2,118,619
SBC Communications, Inc. 79,268 3,671,099
Telecomunicacoes Brasilieras 10,300 782,156
U.S. West, Inc. * 17,100 981,112
-------
15,839,824
Tobacco - 3.06%
Philip Morris Companies, Inc. 54,900 2,806,762
RJR Nabisco Holdings Corp. 32,300 922,569
UST, Inc. 52,300 1,778,200
---------
5,507,531
Transportation - 0.17%
Alexander & Baldwin, Inc. 15,000 304,688
-------
TOTAL COMMON STOCKS
(Cost $138,089,149) $165,173,282
------------
The accompanying notes are an integral part of the financial statements.
43
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
Principal Value
--------- -----
SHORT TERM INVESTMENTS - 7.85%
California Pollution Association,
5.60% due 11/02/98 $1,000,000 $1,000,000
Novartis Fin Corp.,
5.05% due 11/20/98 5,100,000 5,086,407
Navigator Securities Lending 8,029,487 8,029,487
---------
TOTAL SHORT TERM INVESTMENTS
(Cost $14,115,894) $14,115,894
-----------
REPURCHASE AGREEMENT - 0.32%
Repurchase Agreement with State Street Bank & Trust
Co. dated 10/30/98 at 4.25%, to be repurchased at
$584,207 on 11/02/98, collateralized by $415,000
Treasury Bonds, 8.75% due 05/15/17 (valued
at $615,161, including interest) $584,000 $584,000
--------
TOTAL INVESTMENTS $179,873,176
(Equity-Income Fund) (Cost $152,789,043) ------------
----------------------------------------------------------------------------
Balanced Fund
----------------------------------------------------------------------------
Shares Value
------ -----
COMMON STOCKS - 47.65%
Aerospace & Defense - 0.78%
Lockheed Martin Corp. 3,900 $434,363
Northrop Grumman Corp. 4,825 384,794
-------
819,157
Air Travel - 0.28%
UAL Corp. * 4,500 292,219
-------
Auto Parts - 0.18%
Genuine Parts Co. 6,000 189,000
-------
Automobiles - 0.47%
Chrysler Corp. 10,200 490,875
-------
Banking - 2.52%
Chase Manhattan Corp. 10,900 619,256
Comerica, Inc. 4,900 316,050
First Union Corp. 6,600 382,800
PNC Bank Corp. 5,500 275,000
Summit Bancorp 7,100 269,356
Union Planters Corp. 16,900 784,794
-------
2,647,256
Broadcasting - 0.36%
Telecommunications, Inc. 9,000 379,125
-------
Business Services - 1.29%
Service Corporation International 38,100 1,357,313
---------
Chemicals - 0.89%
Dow Chemical Co. 2,400 224,700
E.I. DuPont de Nemours & Co. 12,300 707,250
-------
931,950
Computers & Business Equipment - 2.08%
Cisco Systems, Inc. * 2,500 157,500
Compaq Computer Corp. 6,600 208,725
Hewlett Packard Co. 4,200 252,787
International Business Machines 7,900 1,172,656
Sun Microsystems, Inc. 6,700 390,275
-------
2,181,943
Domestic Oil - 1.86%
Atlantic Richfield Co. 12,175 $838,553
Phillips Petroleum Co. 19,700 852,025
USX-Marathon Group 7,850 256,597
-------
1,947,175
Drugs & Health Care - 13.99%
Abbott Laboratories 8,000 375,500
Allegiance Corp. * 13,100 487,156
American Home Products 8,200 399,750
Amgen, Inc. * 2,100 164,981
Beckton Dickinson & Co. 11,800 497,075
Bristol Myers Squibb Co. 11,450 1,265,941
Glaxo Wellcome PLC, ADR 19,025 590,990
Glaxo Wellcome PLC 29,650 1,845,713
Johnson & Johnson 10,300 839,450
Eli Lilly and Co. 10,075 815,445
Merck & Company, Inc. 5,700 770,925
Novartis AG 400 720,136
Pfizer, Inc. 9,000 965,813
Schering AG 8,125 957,440
SmithKline Beecham PLC 14,400 918,000
SmithKline Beecham PLC, ADR 66,900 836,419
Synthelabo 3,200 610,522
Tenet Healthcare Corp. * 5,000 139,688
Warner Lambert 13,100 1,026,712
Zeneca Group 11,900 456,896
-------
14,684,552
Electric Utilities - 1.13%
Allegheny Energy, Inc. 14,700 452,025
Cinergy Corp. 10,275 354,488
Kansas City Power & Light Co. 13,000 374,563
-------
1,181,076
Electrical Equipment - 1.12%
General Electric Co. 13,400 1,172,500
---------
Electronics - 1.19%
Intel Corp. 9,900 882,956
Philips Electronics NV 6,700 367,662
-------
1,250,618
Financial Services - 1.42%
American Express Co. 8,700 768,863
Citigroup, Inc. 15,400 724,762
-------
1,493,625
Food & Beverages - 1.05%
Coca Cola Co. 4,000 270,500
Nestle SA 300 637,497
Tyson Foods, Inc. 8,300 190,900
-------
1,098,897
Gas & Pipeline Utilities - 0.49%
Sonat, Inc. 16,775 508,492
-------
Gold - 0.85%
Barrick Gold Corp. 41,500 887,062
-------
Household Products - 1.89%
Colgate Palmolive Co. 3,500 309,313
Dial Corp. 22,175 611,198
Gillette Co. 6,400 287,600
Kimberly-Clark Corp. 6,600 318,450
Procter & Gamble Co. 5,100 453,263
-------
1,979,824
The accompanying notes are an integral part of the financial statements.
44
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
Shares Value
------ -----
Insurance - 3.00%
Allstate Corp. 38,975 $1,678,361
W.R. Berkley Corp. 16,837 507,741
Chubb Corp. 5,375 330,563
The Equitable Companies, Inc. 3,000 147,000
Travelers Property Casualty Corp.
Class A 15,700 481,794
-------
3,145,459
International Oil - 2.66%
The British Petroleum Company PLC 15,400 1,361,937
Mobil Corp. 6,200 469,262
Royal Dutch Petroleum Co., ADR 19,500 960,375
-------
2,791,574
Leisure Time - 0.39%
Walt Disney Co. 15,300 412,144
-------
Manufacturing - 0.36%
Avery Dennison Corp. 2,700 111,881
Minnesota Mining & 3,300 264,000
-------
375,881
Mining - 0.13%
Potash Corporation of 2,000 138,750
-------
Newspapers - 0.91%
Tribune Co. 9,200 530,150
Washington Post Co. 800 424,800
-------
954,950
Paper - 0.18%
Westvaco Corp. 7,600 187,150
-------
Petroleum Services - 1.22%
Conoco, Inc. * 29,500 733,813
Halliburton Co. 15,100 542,656
-------
1,276,469
Publishing - 0.02%
Meredith Corp. 625 23,125
------
Railroads - 0.63%
Canadian National Railway Co. 13,200 665,775
-------
Retail Grocery - 0.53%
Hannaford Bros. 12,800 560,800
-------
Retail Trade - 0.62%
Wal-Mart Stores, Inc. 9,500 655,500
-------
Software - 0.66%
Autodesk, Inc. 3,700 115,394
Oracle Corp. 11,400 337,013
Parametric Technology Corp. 14,600 242,725
-------
695,132
Telecommunications Equipment - 0.31%
Qualcomm, Inc. * 2,000 111,250
Tellabs, Inc. * 3,900 214,500
-------
325,750
Telephone - 0.93%
Bell Atlantic 10,200 541,875
GTE Corp. 7,450 437,222
-------
979,097
Tobacco - 1.26%
Philip Morris 25,825 1,320,303
---------
TOTAL COMMON STOCKS
(Cost $45,532,510) $50,000,518
-----------
U.S. TREASURY OBLIGATIONS - 41.12%
U.S. Treasury Strips - 0.43%
Principal Only due 08/15/99 470,000 454,048
--------
Federal National Mortgage Association - 2.42%
6.00% due 05/15/08 1,450,000 1,537,000
6.35% due 01/08/03 1,000,000 1,001,720
---------
2,538,720
U.S. Treasury Bonds - 14.26%
6.00% due 02/15/26 1,000,000 1,091,720
6.125% due 11/15/27 2,500,000 2,813,275
6.25% due 08/15/23 3,600,000 4,028,616
6.375% due 08/15/27 1,000,000 1,152,340
6.50% due 11/15/26 320,000 372,451
6.625% due 02/15/27 2,650,000 3,137,759
7.25% due 08/15/22 1,900,000 2,367,571
---------
14,963,732
U.S. Treasury Notes - 24.01%
5.375% due 06/30/00 1,000,000 1,016,410
5.375% due 06/30/03 1,000,000 1,044,220
5.50% due 02/28/03 1,000,000 1,043,750
5.50% due 02/15/08 3,400,000 3,632,696
5.625% due 05/15/08 500,000 538,985
5.875% due 07/31/99 1,050,000 1,060,332
5.875% due 02/15/00 2,000,000 2,036,240
5.875% due 02/15/04 650,000 695,806
5.875% due 11/15/05 750,000 812,813
6.125% due 07/31/00 830,000 854,900
6.25% due 02/15/07 1,580,000 1,752,315
6.25% due 08/31/00 965,000 997,115
6.25% due 04/30/01 1,000,000 1,044,530
6.625% due 03/31/02 1,600,000 1,711,248
6.625% due 04/30/02 3,500,000 3,749,935
6.875% due 05/15/06 2,800,000 3,205,552
---------
25,196,847
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $40,100,999) $43,153,347
-----------
FOREIGN GOVERNMENT OBLIGATIONS - 1.78%
Ontario Province-1.78%
6.125% due 09/12/07 CAD 1,330,000 $899,452
6.500% due 03/08/29 1,405,000 967,929
-------
$1,867,381
----------
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $1,884,327) $1,867,381
----------
CORPORATE BONDS - 1.18%
Electric Utilities-0.24%
Commonwealth Edison Co.,
7.625% due 01/15/07 $234,000 $253,623
--------
Gas & Pipeline Utilities - 0.94%
SONAT, Inc.,
6.625% due 02/01/08 235,000 243,502
SONAT, Inc.,
7.00% due 02/01/18 735,000 745,172
-------
988,674
TOTAL CORPORATE BONDS
(Cost $1,252,685) $1,242,297
----------
The accompanying notes are an integral part of the financial statements.
45
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
Principal Value
--------- -----
SHORT TERM INVESTMENTS - 6.01%
Navigator Securities Lending Trust $6,307,425 $6,307,425
SSGA Money Market Fund 1,000 1,000
-----
$6,308,425
REPURCHASE AGREEMENT - 2.26%
Repurchase Agreement with State Street Bank &
Trust Co., dated 10/30/98 at 4.25%, to be
repurchased at $2,375,841 on 11/02/98,
collateralized by $2,185,000 U.S. Treasury
Bonds, 6.00% due 02/15/26 (valued at
$2,452,886, including interest) $2,375,000 $2,375,000
----------
TOTAL INVESTMENTS $104,946,968
(Balanced Fund) (Cost $97,453,946) ------------
----------------------------------------------------------------------------
Strategic Income Fund
----------------------------------------------------------------------------
Principal Value
--------- -----
CORPORATE BONDS - 37.93%
Aerospace - 0.24%
B.E. Aerospace, Inc.,
8.00% due 03/01/08 $250,000 $233,750
--------
Banking - 1.81%
Bank One Corp.,
7.60% due 05/01/07 600,000 667,392
Korea Development Bank,
9.60% due 12/01/00 1,000,000 960,170
Sudwest LB Capital Markets,
17.50% due 05/05/03 PLN 480,000 156,401
-------
1,783,963
Business Services - 2.35%
CSC Holdings, Inc.
10.50% due 05/15/16 $500,000 560,000
Comdisco, Inc.,
6.13% due 08/01/01 500,000 496,785
First Data Corp.,
6.375% due 12/15/07 500,000 513,070
Iron Mountain, Inc.,
10.125% due 10/01/06 500,000 527,500
United States Leasing Capital Corp.,
8.45% due 01/25/05 200,000 232,270
-------
2,329,625
Chemical Products - 0.36%
Revlon Worldwide Corp.,
Series B, zero coupon due 03/15/01 600,000 357,000
-------
Crude Petroleum & Natural Gas - 2.11%
Bellwether Exploration Co.,
10.875% due 04/01/07 250,000 225,000
Benton Oil & Gas Co.,
11.625% due 05/01/03 200,000 160,000
Cliffs Drilling Co.,
10.25% due 05/15/03 250,000 261,250
National Energy Group, Inc.,
10.75% due 11/01/06 500,000 247,500
Occidental Petroleum Corp.,
9.25% due 08/01/19 700,000 778,715
Texas Petrochemicals Corp.,
11.125% due 07/01/06 250,000 225,000
United Refining Co.,
10.75% due 06/15/07 250,000 185,000
-------
2,082,465
Drugs & Health Care - 1.17%
Dade International, Inc.,
11.125% 05/01/06 $500,000 $535,000
Prime Medical Services, Inc.,
8.75% due 04/01/08 500,000 467,500
Vencor, Inc.,
9.875% due 05/01/05 200,000 154,000
-------
1,156,500
Electronics - 0.81%
Decisionone Corp.,
9.75% due 08/01/07 500,000 300,000
Unisys Corp.,
7.875% due 04/01/08 500,000 505,000
-------
805,000
Energy & Utilities - 1.02%
Costilla Energy, Inc.,
10.25% due 10/01/06 500,000 410,000
Dawson Production Svcs.,
9.375% due 02/01/07 250,000 250,000
High Voltage Engineering Corp.,
10.5% due 08/15/04 250,000 225,000
Transamerican Energy Corp.,
11.5% due 06/15/02 325,000 120,250
-------
1,005,250
Financial Services - 6.57%
DLJ Commercial Mortgage Corp.,
Interest Only, due 05/10/23 9,764,577 441,173
First Union Residential Securities,
7.00% due 08/25/28 248,384 244,618
Green Tree Financial Corp.,
7.07% due 09/15/07 2,139,645 2,157,683
Merrill Lynch & Co., Inc.,
6.00% due 02/12/03 225,000 228,017
Navistar International Corp.,
8.00% due 02/01/08 500,000 487,500
Paine Webber Group, Inc.,
7.00% due 03/01/00 400,000 404,040
PNC Mortgage Securities Corp.,
6.50% due 02/22/22 1,000,000 952,500
6.734% due 07/25/28 423,597 406,242
6.75% due 02/22/22 400,000 371,000
6.75% due 05/25/28 348,662 334,356
6.838% due 05/25/28 473,150 459,636
-------
6,486,765
Food & Beverages - 2.23%
Ameriserve Food Distr, Inc.,
10.125% due 07/15/07 500,000 410,000
Dole Foods, Inc.,
6.75% due 07/15/00 1,000,000 1,006,750
SC International Services, Inc.,
9.25% due 09/01/07 500,000 485,000
Stroh Brewery Co.,
11.10% due 07/01/06 500,000 300,000
-------
2,201,750
Food Stores - 0.46%
Carr Gottstein Foods Co.,
12.00% due 11/15/05 400,000 457,000
-------
The accompanying notes are an integral part of the financial statements.
46
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
Principal Value
--------- -----
Forest Products - 0.18%
Doman Industries, Ltd.,
8.75% due 03/15/04 250,000 175,000
-------
Hotels & Restaurants - 0.48%
Prime Hospitality Corp.,
9.75% due 04/01/07 $500,000 $473,750
--------
Industrials - 5.94%
Alvey Systems, Inc.,
11.375% due 01/31/03 250,000 252,500
Berry Plastics Corp.,
12.25% due 04/15/04 650,000 659,750
CFP Holdings, Inc.,
11.625% due 01/15/04 250,000 145,000
Commonwealth Aluminum Corp.,
10.75% due 10/01/06 400,000 368,000
Dana Corp.,
6.50% due 03/15/08 300,000 306,348
Doane Products Co.,
10.625% due 03/01/06 250,000 263,750
Foamex, L.P.,
9.875% due 05/15/07 375,000 446,250
Harnischfeger Industries, Inc.,
6.875% due 02/15/27 600,000 539,430
ICG Holdings, Inc.,
Step up to 13.50% due 09/15/05 500,000 375,000
Marcus Cable Company,
Step up to 14.25% due 12/15/05 250,000 227,500
Norsk Hydro A/S,
6.70% due 01/15/18 400,000 382,628
Polymer Group, Inc.,
8.75% due 03/01/08 150,000 138,000
9.00% due 07/01/07 190,000 176,700
Praxair, Inc.,
6.15% due 04/15/03 500,000 504,270
Raytheon Company,
5.95% due 03/15/01 100,000 101,248
Stellex Industries, Inc.,
9.50% due 11/01/07 250,000 232,500
Synthetic Industries, Inc.,
9.25% due 02/15/07 25,000 25,000
Venture Holdings Trust,
9.75% due 04/01/04 250,000 225,000
Williams Scotsman, Inc.,
9.875% due 06/01/07 500,000 500,000
-------
5,868,874
Insurance - 0.48%
Aetna Services, Inc.,
7.625% due 08/15/26 500,000 478,110
-------
Leisure Time - 0.52%
Grand Casinos, Inc.,
9.00% due 10/15/04 500,000 512,500
-------
Metal & Metal Products - 0.25%
Renco Metals, Inc.,
11.50% due 07/01/03 250,000 247,500
-------
Other - 2.05%
Hines Horticulture, Inc.,
Series B, 11.75% due 10/15/05 325,000 325,000
The Holt Group, Inc.,
9.75% due 01/15/06 500,000 325,000
Kindercare Learning Centre, Inc.,
9.50% due 02/15/09 250,000 238,750
La Petite Academy, Inc.,
10.0% due 05/15/08 375,000 363,750
LIN Holdings Corp.,
Zero Coupon due 03/01/08 500,000 321,250
United International Holdings, Inc.
Step up to 10.75%, due 02/15/08 1,000,000 450,000
-------
2,023,750
Pollution Control - 0.84%
Allied Waste Industries, Inc.,
Step up to 11.30% due 06/01/07 750,000 558,750
Norcal Waste Systems, Inc.,
Step up to 13.25% due 11/15/05 250,000 275,000
-------
833,750
Publishing - 0.52%
American Media Operations, Inc.,
11.625% due 11/15/04 500,000 510,000
-------
Real Estate - 0.98%
HMH Properties, Inc.,
7.875% due 08/01/08 500,000 485,000
Radnor Holdings Corp.,
10.00% due 12/01/03 500,000 485,000
-------
970,000
Retail Trade - 1.35%
Cole National Group, Inc.,
8.625% due 08/15/07 250,000 232,500
Hills Stores Company,
12.50% due 07/01/03 250,000 98,750
Musicland Group, Inc.,
9.875% due 03/15/08 250,000 237,500
Staples, Inc.,
7.125% due 08/15/07 750,000 762,983
-------
1,331,733
Steel - 0.43%
Murrin Murrin Holdings,
9.375% due 08/31/07 500,000 425,000
-------
Telecommunication Services - 4.30%
Adelphia Communications Corp.,
9.875% due 03/01/07 175,000 186,375
British Telecommunications,
7.0% due 05/23/07 1,080,000 1,200,150
Comcast Cellular Holdings, Inc.,
9.50% due 05/01/07 500,000 511,250
Century Communications Corp.,
Zero coupon due 01/15/08 275,000 128,563
GTE Corp.,
6.94% due 04/15/28 200,000 205,806
International Cabletel, Inc.,
Step up to 11.50% due 02/01/06 1,000,000 750,000
Nextel Communications,
Step up to 9.95%, due 02/15/08 250,000 133,750
Step up to 9.75%, due 08/15/04 400,000 373,000
SFX Broadcasting, Inc.,
10.75% due 05/15/06 164,000 175,890
The accompanying notes are an integral part of the financial statements.
47
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
Principal Value
--------- -----
Telecommunication Services - 4.30% - cont'd.
Telewest Communication PLC,
Step up to 11.00% due 10/01/07 750,000 585,938
-------
4,250,722
Transportation - 0.48%
Stena AB
10.5% due 12/15/05 $250,000 $253,750
TFM SA DE CV,
Step up to 11.75% due 06/15/09 500,000 220,000
-------
473,750
TOTAL CORPORATE BONDS
(Cost $40,213,540) $37,473,507
-----------
CONVERTIBLE BONDS - 0.61%
Fresenius Medical Care Capital
9.00% due 12/01/06 $250,000 $247,500
Hollinger, Inc.,
Zero coupon due 10/05/13 875,000 358,750
-------
TOTAL CONVERTIBLE BONDS
(Cost $592,439) $606,250
--------
U.S. TREASURY OBLIGATIONS - 0.65%
U.S. Treasury Bonds - 0.33%
3.6250% due 04/15/28 $100,000 $100,062
6.125% due 11/15/27 200,000 225,062
-------
325,124
U.S. Treasury Notes - 0.32%
5.250% due 08/15/03 200,000 208,688
6.375% due 03/31/01 100,000 104,594
-------
313,282
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $639,979) $638,406
--------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 17.24%
Federal Home Loan Banks - 0.47%
5.89% due 07/24/00 $450,000 $458,510
--------
Federal Home Loan Mortgage Corporation - 3.00%
6.50% due 12/01/10 1,293,305 1,313,895
6.50% TBA ** 700,000 705,684
8.50% due 05/01/08 409,601 426,362
10.00% due 05/15/20 415,026 454,063
Interest Only due 06/15/21 266,046 67,051
------
2,967,055
Government National Mortgage Association - 0.95%
7.50% due 07/15/27 450,032 463,389
7.50% due 10/15/27 374,529 385,646
7.50% due 10/15/27 89,234 91,882
------
940,917
Federal National Mortgage Association - 12.34%
Interest Only due 03/17/20, 6,702,427 176,261
Interest Only due 10/17/36, 12,738,446 360,281
Interest Only due 02/25/35, 6,525,128 520,881
8.80% due 01/25/19, REMIC 558,314 598,792
10.40% due 04/25/19, REMIC 93,046 102,816
6.0% TBA ** 750,000 741,090
6.5% TBA 7,000,000 7,054,670
7.0% TBA 2,500,000 2,553,900
13.00% due 11/15/15 72,116 85,729
------
12,194,420
Student Loan Marketing Association - 0.48%
7.20% due 11/09/00 450,000 470,601
-------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $17,030,699) $17,031,503
-----------
FIXED INCOME - OTHER - 2.60%
Miscellaneous Asset Backed Securities - 2.60%
Mid State Trust VI, Class A,
7.34% due 07/01/35 $1,559,517 $1,617,998
GE Capital Management
6.75% due 11/25/28 REMIC 999,223 952,079
-------
TOTAL FIXED INCOME - OTHER
(Cost $2,558,504) $2,570,077
----------
FOREIGN GOVERNMENT OBLIGATIONS - 20.28%
Republic of Argentina - 2.21%
6.188% due 03/31/05 $2,726,000 $2,186,388
----------
Federal Republic of Brazil - 1.29%
10.125% due 05/15/27 1,025,000 704,688
6.125% due 04/15/24 975,000 567,938
-------
1,272,626
National Republic of Bulgaria - 0.67%
6.688% due 07/28/11 1,000,000 662,500
-------
Government of Canada - 0.27%
7.00% due 12/01/06 CAD 360,000 262,630
-------
Government of Costa Rica - 0.24%
Series B, 6.25% due 05/21/15 $300,000 237,000
-------
Kingdom of Denmark - 3.02%
6.00% due 02/15/99 DKK 11,440,000 1,823,715
8.00% due 05/15/03 6,340,000 1,159,179
---------
2,982,894
Republic of Ecuador - 0.36%
3.25% due 02/27/15 $848,738 358,592
-------
Republic of Finland - 0.22%
6.00% due 04/25/08 FIM 1,000,000 221,814
-------
Federal Republic of Germany - 1.07%
4.75% due 07/04/08 DEM 810,000 513,187
5.625% due 01/04/28 530,000 340,525
6.5% due 07/04/27 290,000 208,051
-------
1,061,763
Republic of Greece - 1.30%
8.70% due 04/08/05 GRD 27,000,000 96,158
8.90% due 04/01/03 245,200,000 874,564
11.00% due 02/25/00 90,400,000 311,525
-------
1,282,247
Republic of Italy - 1.47%
6.25% due 02/21/99 XEU 350,000 415,135
European Investment Bank, ITL
7.45% due 02/04/99 1,680,000 1,032,997
---------
1,448,132
Government of Mexico - 1.54%
6.25% due 12/31/19, Series B $1,250,000 932,875
6.25% due 12/31/19, Series W-A 250,000 186,575
11.50% due 05/15/26 400,000 402,250
-------
1,521,700
Government of Morocco - 0.76%
6.562% due 01/01/09 1,000,000 750,000
-------
The accompanying notes are an integral part of the financial statements.
48
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
Principal Value
--------- -----
New South Wales Treasury Corp - 0.07%
7.375% due 02/21/07 AUD 100,000 69,958
------
Government of New Zealand - 0.38%
6.5% due 02/15/00 NZD 700,000 376,615
-------
Government of Panama - 0.73%
4.00% due 07/17/14 $1,000,000 $725,000
--------
Government of Peru - 0.92%
4.00% due 03/07/17 1,600,000 904,000
-------
Republic of Poland - 0.45%
5.00% due 10/27/14 500,000 448,750
-------
Russia - 0.18%
Principal Loans-3.312% due 12/15/20 2,250,000 168,750
Vnesheconomobank, 144A
6.625% due 12/15/15 30,700 3,070
Vnesheconomobank,
6.625% due 12/15/15 52,630 5,131
-----
176,951
Kingdom of Sweden - 1.16%
6.50% due 05/05/28 SEK 4,200,000 609,102
11.00% due 01/21/99 4,100,000 532,722
-------
1,141,824
Republic of Venezuela - 1.97%
6.125% due 03/31/07 $1,011,900 617,259
6.625% due 12/18/07 2,261,904 1,323,778
---------
1,941,037
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $21,174,808) $20,032,421
-----------
Shares Value
------ -----
RIGHTS & WARRANTS - 0.03%
Crude Petroleum & Natural Gas - 0.03%
Terex Corporation 2,000 $28,250
Industrials - 0.00%
Berry Plastics Corp. 500 0
Telephone - 0.00%
Wireless One, Inc. 750 7
In-flight Phone Corp. 1,000 0
Foreign Governments - 0.00%
United Mexican States 1,500,000 0
-
TOTAL WARRANTS (Cost $0) $28,257
-------
Principal Value
--------- -----
SHORT TERM INVESTMENTS - 10.99%
Navigator Securities Lending Trust $10,858,710 $10,858,710
-----------
REPURCHASE AGREEMENT - 9.67%
Repurchase Agreement with State Street Bank & Trust Co.
dated 10/30/98 at 5.35%, to be repurchased 11/02/98
at $9,558,259 collateralized by $6,190,000 U. S.
Treasury Bonds, 12.00% due 08/15/13 (valued
at $9,908,164, including interest) 9,554,000 $9,554,000
----------
TOTAL INVESTMENTS
(Strategic Income Fund) (Cost $102,719,681) $98,793,131
-----------
Investment Quality Bond Fund
----------------------------------------------------------------------------
Principal Value
--------- -----
CORPORATE BONDS - 35.92%
Apparel & Textiles - 0.05%
Collins & Aikman Products Co.,
11.50% due 04/15/06 $10,000 $10,050
-------
Banking - 6.82%
BankAmerica Corp.,
9.50% due 04/01/01 114,000 123,795
Credit National,
7.00%, due 11/14/05 150,000 154,219
Export-Import Bank of Korea,
6.375% due 02/15/06 200,000 147,536
First Financial Caribbean Corp.,
7.84% due 10/10/06 135,000 143,088
NBD Bancorp,
8.25% due 11/01/24 300,000 344,691
Republic New York Corp.,
9.75% due 12/01/00 155,000 168,000
U.S. Bancorp,
7.50% due 06/01/26 300,000 327,906
Western Financial Bank,
8.875% due 08/01/07 25,000 18,000
------
1,427,235
Broadcasting - 0.11%
Granite Broadcasting Corp.,
8.875% due 05/15/08 15,000 12,900
Jacor Communications Co.,
8.75% due 06/15/07 10,000 10,400
------
23,300
Building Products - 0.10%
Falcon Building Products, Inc.,
9.50% due 06/15/07 20,000 16,400
Falcon Holding Group LP,
8.375% due 04/15/10 5,000 4,950
-----
21,350
Business Services - 0.06%
AMSC Acquisition, Inc.,
12.25% due 04/01/08 5,000 2,375
Iron Mountain, Inc.,
8.75% due 09/30/09 10,000 9,950
-----
12,325
Chemical Products - 0.26%
Huntsman Corp.,
9.50% due 07/01/07 15,000 14,100
Revlon Consumer Products Corp.,
8.625% due 02/01/08 10,000 9,000
Revlon Worldwide Corp.,
Series B, zero coupon due 03/15/01 20,000 11,900
Sovereign Specialty Chemicals,
9.50% due 08/01/07 10,000 9,400
Texas-Petro Chemical Corp.,
11.125% due 07/01/06 10,000 9,000
-----
53,400
Crude Petroleum & Natural Gas - 0.62%
Costilla Energy, Inc.,
10.25% due 10/01/06 20,000 16,700
Cross Timbers Oil Co.,
9.25% due 04/01/07 20,000 18,000
Dailey Petroleum Services Corp.,
9.50% due 02/15/08 25,000 10,375
The accompanying notes are an integral part of the financial statements.
49
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
Principal Value
--------- -----
Crude Petroleum & Natural Gas - 0.62% - cont'd.
Energy Corporation of America,
9.50% due 05/15/07 $20,000 $17,800
Newfield Exploration Co.,
7.45% due 10/15/07 45,000 44,106
Petroleos Mexicanos,
8.85% due 09/15/07 25,000 21,750
---------
128,731
Drugs & Health Care - 2.32%
Allegiance Corp.,
7.00% due 10/15/26 325,000 340,847
Owens & Minor, Inc.,
10.875% due 06/01/06 20,000 20,400
Tenet Healthcare Corp.,
7.875% due 01/15/03 110,000 111,375
Universal Hospital Services,
10.25% due 03/01/08 15,000 12,600
---------
485,222
Electric Utilities - 0.61%
The Cleveland Electric
Company, 7.19% due 07/01/00 125,000 127,966
---------
Financial Services - 7.36%
American General Finance
Corp., 8.00% due 02/15/05 230,000 237,990
Amerus Capital I,
8.85% due 02/01/27 100,000 103,495
Amresco Communications, Inc.,
9.875% due 03/15/05 10,000 6,100
Amvescap PLC,
6.60% due 05/15/05 150,000 156,995
BanPonce Financial Corp.,
6.75% due 08/09/01 250,000 255,600
Beneficial Corp.,
8.40% due 05/15/08 75,000 85,570
Contifinancial Corp.,
8.125% due 04/01/08 10,000 5,900
Japan Financial Corp.,
9.125% due 10/11/00 200,000 214,082
KFW International Financial, Inc.,
9.125% due 05/15/01 200,000 219,008
Neenah Corp.,
11.125% due 05/01/07 10,000 10,200
Olympic Financial,
11.5% due 03/15/07 10,000 6,300
Pindo Deli Financial Mauritius,
10.75% due 10/01/07 10,000 4,900
Sun Canada Financial Co.,
7.25% due 12/15/15 200,000 222,392
Tembec Finance Corp.,
9.875% due 09/30/05 10,000 10,150
---------
1,538,682
Food & Beverages - 0.09%
Aurora Foods, Inc.,
8.75% due 07/01/08 5,000 5,150
Del Monte Foods Co.,
Step-up to 12.50%, due 12/15/07 25,000 14,250
---------
19,400
Homebuilders - 0.04%
Engle Homes, Inc.,
9.25% due 02/01/08 10,000 9,375
---------
Industrials - 6.27%
Abraxas Petroleum Corp.,
11.50% due 11/01/04 10,000 7,700
Accuride Corp.,
9.25% due 02/01/08 10,000 9,300
American Pad & Paper Co.,
13.00% due 11/15/05 20,000 9,400
Acindar Industria, Argentina,
11.25% due 02/15/04 10,000 6,500
Advanced Micro Devices,
Inc., 11.00% due 08/01/03 25,000 25,250
Argo-Tech Corp.,
8.625% due 10/01/07 15,000 13,875
Associates Corp. of North
5.75% due 11/01/03 120,000 120,277
Cincinnati Milacron, Inc.,
7.875% due 05/15/00 130,000 133,947
Consumers International, Inc.,
10.25% due 04/01/05 5,000 5,000
DecisionOne Holdings,
9.75% due 08/01/07 10,000 6,000
Dime Capital Trust I,
9.33% due 05/06/27 150,000 154,783
Disco S.A.
9.875% due 05/15/08 10,000 6,600
Domtar, Inc.,
9.50% due 08/01/16 10,000 9,774
Duane Reade, Inc.,
9.25% due 02/15/08 15,000 14,250
EchoStar DBS Corp.,
12.50% due 07/01/02 5,000 5,075
Fairchild Semiconductor Corp.,
10.125% due 03/15/07 10,000 9,000
Fisher Scientific Int'l., Inc.,
9.00% due 02/01/08 10,000 9,650
Frontiervision Holding, L.P.,
Step-up to 11.875%, due 09/15/07 5,000 4,012
Gaylord Container Corp.,
9.375% due 06/15/07 15,000 11,100
Globalstar L.P. Capital Corp.,
10.75% due 11/01/04 25,000 15,750
Grove Worldwide LLC,
9.25% due 05/01/08 15,000 12,862
Grupo Int'l Durango,
12.625% due 08/01/03 15,000 10,800
Guitar Center Management Co.
Inc., 11.00% due 07/01/06 17,000 17,340
Iridium LLC/Capital Corp.,
10.875% due 07/15/05 5,000 3,650
Iridium LLC/Capital Corp.,
11.25% due 07/15/05 30,000 22,200
K & F Industries, Inc.,
9.25% due 10/15/07 10,000 9,500
LaRoche Industries, Inc.,
9.50% due 09/15/07 5,000 4,300
LDM Technologies, Inc.,
10.75% due 01/15/07 20,000 17,000
Moog, Inc., Series B,
10.00% due 05/01/06 25,000 25,000
MTL, Inc.,
10.0% due 06/15/06 10,000 9,700
The accompanying notes are an integral part of the financial statements.
50
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
Principal Value
--------- -----
Industrials - 6.27% - cont'd.
News America Holdings,
Inc., 9.25% due 02/01/13 $250,000 $287,548
NTL, Inc.,
Step-up due 10/01/08 20,000 11,101
P&L Coal Holdings Corp.,
9.625% due 05/15/08 35,000 34,650
Pioneer Americas Acquisiton
Corp., 9.25% due 06/15/07 10,000 7,500
Plains Resources, Inc.,
Series B, 10.25% due 03/15/06 20,000 19,600
Psinet, Inc.,
11.50% due 11/01/08 5,000 5,150
Psinet, Inc.,
10.00% due 02/15/05 20,000 19,400
Repap New Brunswick, Inc.,
10.625% due 04/15/05 25,000 16,250
Rifkin Acquisitions Partners, L.P.,
11.125% due 01/15/06 10,000 10,600
Standard Pacific Corp.,
8.50% due 06/15/07 15,000 14,831
Sullivan Graphics, Inc.,
12.75% due 08/01/05 20,000 20,000
Verio, Inc.,
10.375% due 04/01/05 10,000 9,550
WESCO Distribution, Inc.,
9.125% due 06/01/08 15,000 14,400
YPF Sociedad Anonima,
8.00% due 02/15/04 145,000 132,313
-------
1,312,488
Insurance - 2.66%
Equitable Companies, Inc.,
7.00% due 04/01/28 100,000 98,616
Jackson National Life Insurance
8.15% due 03/15/27 100,000 116,661
Ohio National Life Insurance Co.,
8.50% due 05/15/26 150,000 177,971
Security Benefit Life Co.,
8.75% due 05/15/16 150,000 163,788
-------
557,036
Leisure Time - 0.19%
Argosy Gaming Co.,
13.25% due 06/01/04 25,000 26,625
Fitzgerald's Gaming Corp.,
12.25% due 12/15/04 5,000 2,950
Loew's Cineplex Entertainment
8.875% due 08/01/08 10,000 9,800
-----
39,375
Metal Products - 0.05%
Silgan Holdings, Inc.,
9.00% due 06/01/09 10,000 9,500
-----
Office Products - 0.45%
Boise Cascade Office Products
7.05% due 05/15/05 100,000 95,086
------
Paper - 0.51%
Boise Cascade Corp.,
9.90% due 10/01/01 100,000 106,689
-------
Retail Trade - 0.98%
J.C. Penney Company, Inc.,
7.40% due 04/01/37 200,000 204,146
-------
Steel - 0.11%
Armco, Inc.,
9% due 09/15/07 $5,000 $5,000
Amersteel Corp.,
8.75% due 04/15/08 5,000 4,400
Bayou Steel Corp.,
9.5% due 05/15/08 15,000 13,050
------
22,450
Telecommunication Services - 2.66%
Adelphia Communications Co.
8.375% due 02/01/08 10,000 9,850
Allbritton Communications Co.,
8.875% due 02/01/08 15,000 14,100
e.Spire Communications, Inc., 144A
Step-up to 10.625%, due 04/01/06 15,000 10,875
e.Spire Communications, Inc.,
Step-up to 10.625%, due 07/01/08 10,000 4,900
BTI Telecommunications Corp.,
10.50% due 09/15/07 20,000 14,800
Century Communications,
Zero coupon, due 01/15/08 35,000 16,362
Concentric Network Corp.,
12.75% due 12/15/07 10,000 8,800
Echostar Satellite Broadcast
Step-up to 13.125%, due 03/15/04 5,000 4,400
GST Telecommunications,
12.75% due 11/15/07 20,000 18,000
Innova S. de R.L.,
12.875% due 04/01/07 20,000 11,000
Intermedia Communications, Inc.,
8.875% due 11/01/07 25,000 24,000
Intermedia Communications, Inc.,
8.6% due 06/01/08 10,000 9,550
ITC Deltacom, Inc.,
8.875% due 03/01/08 10,000 9,675
ITC Deltacom, Inc.,
9.75% due 11/15/08 5,000 5,000
IXC Communications, Inc.,
9.00% due 04/15/08 20,000 19,700
KMC Telecom. Holdings, Inc.,
Step-up to 12.50%, due 02/15/08 50,000 23,000
Level 3 Communications, Inc.,
9.125% due 05/01/08 25,000 23,500
LIN Holdings Corp.,
Step-up to 10.00%, due 03/01/08 25,000 16,062
MGC Communications, Inc.,
13.0% due 10/01/04 5,000 3,725
Nextlink Communications, Inc.,
Step-up to 9.45%, due 04/15/08 25,000 13,125
Paging Network, Inc.,
10.125% due 08/01/07 15,000 14,550
Qwest Communications Int'l.,
7.50% due 11/01/08 5,000 4,981
RSL Communications PLC,
9.125% due 03/01/08 20,000 17,000
Telecommunications Tech Co.,
9.75% due 05/15/08 15,000 12,900
Tele-Communications, Inc.,
9.25% due 04/15/02 200,000 223,224
Time Warner Telecommunications,
9.75% due 07/15/08 10,000 10,000
The accompanying notes are an integral part of the financial statements.
51
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
Principal Value
--------- -----
Telecommunication Services - 2.66% - cont'd.
Viatel, Inc.,
11.25% due 04/15/08 $15,000 $13,200
-------
556,279
Telephone - 2.91%
Classic Cable, Inc.,
9.875% due 08/01/08 5,000 5,050
Comcast Cable Communications,
8.50% due 05/01/27 150,000 180,459
McLeod USA, Inc.,
9.50% due 11/01/08 10,000 10,225
MobileMedia Communications,
9.375% due 11/01/07 50,000 6,500
NEXTEL Communications, Inc.,
Step up to 9.75% due 10/31/07 60,000 32,400
U.S. West Capital Funding, Inc.,
6.25% due 07/15/05 150,000 157,572
WorldCom, Inc.,
7.55% due 04/01/04 200,000 216,852
-------
609,058
Transportation - 0.58%
Continental Airlines,
6.648% due 03/15/19 70,000 67,537
Johnstown American Industries,
Inc., 11.75% due 08/15/05 20,000 20,675
Southern Railway Company,
8.75% due 10/15/03 30,000 34,093
------
122,305
Utilities - 0.11%
GCI, Inc.,
9.75% due 08/01/07 25,000 22,719
------
TOTAL CORPORATE BONDS
(Cost $7,565,386) $7,514,167
----------
U.S. TREASURY OBLIGATIONS - 28.05%
U.S. Treasury Bonds - 28.05%
12.00% due 08/15/13 3,800,000 $5,866,858
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $5,508,581) $5,866,858
----------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 15.72%
Federal Home Loan Mortgage Corp. - 5.19%
6.00% due 09/25/22 $474,000 $421,184
6.00% TBA ** 300,000 300,093
6.50% due 06/15/23 100,000 104,937
7.00% due 09/15/21 200,000 210,062
-------
1,086,276
Federal National Mortgage Association - 7.63%
5.50% due 08/01/28 353,500 339,360
6.00% TBA ** 300,000 296,436
6.25% due 11/25/19 500,000 509,375
6.60% due 09/25/18, REMIC 300,000 304,125
8.00% due 01/01/99 - 02/01/99 144,105 145,739
-------
1,595,035
Government National Mortgage Association - 2.90%
7.00% due 06/15/23 - 10/15/23 592,961 607,228
-------
TOTAL U.S. GOVERNMENT
OBLIGATIONS (Cost $3,172,750) $3,288,539
----------
FIXED INCOME - OTHER - 1.10%
Miscellaneous Asset Backed Securities - 1.10%
First Union Lehman Bros., Series
Class A2, 6.60% due 05/18/07 $200,000 $204,536
Western Financial Grantor Trust,
1995, Class A1, 7.10% due 24,316 24,560
------
TOTAL FIXED INCOME - OTHER (Cost $225,290) $229,096
--------
Shares Value
------ -----
PREFERRED STOCKS - 0.24%
Fairfield Manufacturing Co., Inc. 25 $23,812
Primedia, Inc. 145 13,086
SF Holdings Group, Inc. * 2 13,850
SF Holdings Group, Inc. * 74 148
Viatel, Inc. 7 422
---
TOTAL PREFERRED STOCKS (Cost $58,288) $51,318
-------
WARRANTS - 0.00%
American Mobile Satellite * 5 $242
Concentric Network Corp. * 5 351
KMC Telecom. Holdings, Inc. * 50 162
TOTAL WARRANTS (Cost $0) $755
----
Principal Value
--------- -----
SHORT TERM INVESTMENT - 16.40%
Navigator Securities Lending $3,429,644 $3,429,644
---------- ----------
REPURCHASE AGREEMENT - 2.57%
Repurchase Agreement with Swiss Bank dated 10/30/98 at 5.38%
to be repurchased at $538,241 on 11/02/98, collateralized by
$452,000 U.S. Treasury Bonds, 6.75% due 08/15/26 (valued at
$547,936, including interest.) $538,000 $538,000
--------
TOTAL INVESTMENTS (Investment $20,918,377
Quality Bond Fund) (Cost $20,497,939)
----------------------------------------------------------------------------
National Municipal Bond Fund
----------------------------------------------------------------------------
Principal Value
--------- -----
LONG-TERM INVESTMENTS - 97.30%
Alabama - 2.21%
Alabama Housing Finance
Single Family Mortgage Revenue
Collateralized Home Mortgage
Series B-2, 6.40%, 04/01/25 $335,000 $352,219
--------
California - 6.74%
California Housing Finance Revenue,
Series H, 6.15%, 08/01/16 1,000,000 1,072,650
---------
Georgia - 3.35%
Fulton County, Georgia, School
Refunding 5.25% due 01/01/14 500,000 532,920
-------
Illinois - 4.67%
Illinois Health Facilities Authority
Revenue (Hospital Association
Project), 7.00%, 02/15/22 200,000 223,444
Chicago, Illinois, Skyway Toll
Revenue, 5.375%, 01/01/16 500,000 518,805
-------
742,249
The accompanying notes are an integral part of the financial statements.
52
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
Principal Value
--------- -----
Iowa - 1.06%
Iowa Finance Authority Hospital
Revenue Refunding (Trinity Hospital
Project), 7.00%, 07/01/12 $150,000 $168,622
--------
Louisiana - 3.30%
Louisiana Public Facilities Authority Hospital
Revenue Refunding (Touro Project),
Series B, 6.125%, 08/15/23 500,000 524,385
-------
Maine - 0.17%
Maine State Housing Authority Purchase,
Series A-4, 6.375%, 11/15/12 25,000 26,355
------
Massachusetts - 6.75%
Massachusetts State General
Series C, 5.25% due 08/01/17 500,000 525,040
Massachusetts State Special Revenue,
Series A, 5.50%, 06/01/13 500,000 548,530
-------
1,073,570
Missouri - 3.39%
Missouri State Health &
Facilities Authority Revenue,
6.25%, 02/15/11 500,000 538,635
-------
Nebraska - 8.24%
Nebraska Higher Education Loan Program
Income Revenue, 6.65%, 12/01/08 1,200,000 1,311,216
---------
Nevada - 4.31%
Nevada Housing Division, Single-
Program, B-2, 6.95%, 10/01/26 300,000 322,260
Nevada Housing Division, Single-
Program, Issue C, 6.35%, 10/01/12 340,000 363,977
-------
686,237
New Jersey - 3.59%
New Jersey Economic
Authority Water Facilities
(New Jersey American Water
Company, Incorporated Project),
6.875%, 11/01/34 500,000 570,940
-------
New York - 18.48%
New York State Local
Assistance Corporation, Series
6.00%, 04/01/16 1,000,000 1,098,400
New York State Dormitory
Revenue, State University Facilities,
Series A, 6.25%, 05/15/08 500,000 557,965
New York State Environmental
Corporation Pollution Control
Refunding (IBM Corporation Project),
7.125%, 07/01/12 580,000 621,076
New York State Mortgage Agency
Rev., Series 40-A, 6.35%, 04/01/21 630,000 662,930
-------
2,940,371
Pennsylvania - 7.11%
Delaware Valley, Pennsylvania,
Regional Finance Authority
Series A, 5.50%, 08/01/28 500,000 546,680
Philadelphia, Pennsylvania,
& Wastewater Revenue,
6.25%, 08/01/12 500,000 583,910
-------
1,130,590
South Carolina - 3.39%
Greenville Hospital Systems
Hospital Facilities Revenue,
Series B, 5.70%, 05/01/12 $500,000 $539,320
--------
Tennessee - 3.16%
Humphreys County, Tennessee, Industrial
Development Board Solid Waste Disposal
Revenue (E.I. Du Pont De Nemours &
Co. Project), 6.70%, 05/01/24 450,000 502,488
-------
Texas - 4.35%
Texas State Veterans Housing
Assistance, 6.80%, 12/01/23 85,000 91,719
Port Arthur, Texas, Navy District,
Zero Coupon, 03/01/10 1,000,000 599,820
-------
691,539
Virginia - 2.00%
Virginia State Housing
Authority Commonwealth
Subseries I-1, 6.55%, 07/01/17 300,000 317,619
-------
Washington - 3.40%
Washington State General
Series C, 5.50%, 07/01/16 500,000 541,340
-------
Wisconsin - 7.63%
Wisconsin Housing & Economic
Development Authority Home Revenue,
Series D, 6.10%, 07/01/24 130,000 134,137
Wisconsin State Health &
Facilities Authority Revenue,
Hospital of Janesville,
6.60%, 08/15/22 1,000,000 1,080,150
---------
1,214,287
TOTAL LONG TERM INVESTMENTS
(Cost $14,453,356) $15,477,552
-----------
SHORT TERM INVESTMENTS - 2.70%
North Carolina - 0.82%
Halifax County, North Carolina, Industrial
Facilities & Pollution Control,
3.80% due 06/01/21 $130,000 $130,000
--------
Virginia - 1.88%
King George County, Virginia, Industrial
Authority, Partners-A, 3.80%
due 10/01/24 100,000 100,000
King George County, Virginia, Industrial
Authority, Partners-B, 3.80%
due 12/01/24 200,000 200,000
-------
300,000
TOTAL SHORT TERM INVESTMENTS
(Cost $430,000) $430,000
--------
TOTAL INVESTMENTS
(National Municipal Bond Fund)
(Cost $14,883,356) $15,907,552
-----------
The accompanying notes are an integral part of the financial statements.
53
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
----------------------------------------------------------------------------
U.S. Government Securities Fund
----------------------------------------------------------------------------
Principal Value
--------- -----
U.S. TREASURY OBLIGATIONS - 18.98%
U.S. Treasury Bonds - 0.79%
6.375% due 08/15/27 $800,000 $921,871
--------
U.S. Treasury Notes - 18.19%
5.375% due 08/15/03 $5,500,000 $5,738,920
5.625% due 05/15/08 4,200,000 4,527,474
5.625% due 12/31/02 2,000,000 2,093,440
5.750% due 04/30/03 1,200,000 1,267,692
5.875% due 09/30/02 2,000,000 2,103,740
6.25% due 08/31/02 5,250,000 5,583,847
---------
21,315,113
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $21,423,014) $22,236,984
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 55.98%
U.S. Department of Veteran Affairs - 1.23%
7.25% due 10/15/10 REMIC $1,438,496 $1,442,092
----------
Federal Home Loan Mortgage Corporation - 17.10%
5.80% due 09/02/08 1,500,000 1,555,080
6.00% due 09/01/10 - 10/01/10 531,460 534,946
6.247% due 03/25/21 REMIC 3,000,000 3,048,690
6.50% TBA** 4,000,000 4,032,480
7.00% due 10/01/12 8,033,589 8,201,732
7.00% due 04/15/21 1,174,139 1,191,225
8.00% due 06/01/08 185,884 192,422
8.25% due 07/01/06 147,293 152,037
8.50% due 05/01/08 233,720 241,865
9.50% due 08/01/20 792,172 852,076
11.75% due 08/01/13 32,885 37,336
------
20,039,889
Federal National Mortgage Association - 33.92%
6.00% TBA 5,500,000 5,434,660
6.50% TBA 5,400,000 5,442,174
6.50% due 12/01/03 - 08/01/27 5,049,383 5,089,619
6.527% due 05/25/30 REMIC 2,750,000 2,792,969
6.70% due 10/30/06 2,500,000 2,531,640
6.783% due 01/17/03 REMIC 1,125,610 1,152,343
7.00% TBA 8,100,000 8,274,636
7.00% due 05/01/26 - 11/01/26 3,412,777 3,487,414
8.00% due 08/01/04 38,434 38,954
8.25% due 03/25/06 REMIC 675,000 734,906
8.50% due 08/01/02 71,330 73,124
11.00% due 02/01/15 449 498
11.50% due 04/01/19 273,848 306,515
12.00% due 02/01/16 - 04/01/16 1,451,494 1,710,477
12.50% due 07/01/15 980,051 1,165,036
13.00% due 01/01/99 994,068 1,181,698
14.50% due 11/01/14 264,922 320,225
-------
39,736,888
Government National Mortgage Association - 3.73%
7.50% due 04/15/02 - 09/15/27 1,194,503 1,227,105
7.75% due 04/15/04 48,143 49,573
8.00% due 11/15/06 - 02/15/08 32,899 34,274
9.00% due 03/20/16 - 06/20/17 1,433,163 1,526,894
10.25% due 02/15/00 - 03/15/01 28,218 29,355
11.00% due 03/15/00 - 09/20/15 35,251 37,090
11.25% due 10/20/15 9,972 10,821
11.50% due 08/20/00 - 09/20/15 393,905 434,911
12.50% due 09/15/14 42,122 47,936
13.00% due 01/15/11 - 06/15/15 455,077 522,640
13.25% due 07/15/14 $40,014 $45,879
13.50% due 11/15/12 - 02/15/13 45,155 52,324
15.00% due 07/15/11 - 09/15/12 90,367 107,851
15.50% due 08/15/11 - 12/15/11 190,709 227,220
16.00% due 11/15/11 9,672 11,715
------
4,365,588
TOTAL U.S. GOVERNMENT
OBLIGATIONS (Cost $65,018,009) $65,584,457
-----------
SHORT TERM INVESTMENT - 9.77%
Navigator Securities Lending $11,444,965 $11,444,965
REPURCHASE AGREEMENTS - 15.27%
Repurchase Agreement with Dillon Read dated
10/30/98 at 5.35%, to be repurchased at
$17,619,852 on 11/02/98, collateralized by
$12,786,000 U.S. Treasury Bonds, 8.50% due
02/15/20 (valued at $18,191,733
including interest) $17,612,000 $17,612,000
-----------
Repurchase Agreement with State Street Bank & Trust Co.
dated 10/30/98 at 5.35%, to be repurchased at $271,121
on 11/02/98, collateralized by $180,000 U.S.
Treasury Bonds, 12.00% due 08/15/13
(valued at $288,121 including interest) 271,000 271,000
-------
TOTAL U.S. REPURCHASE AGREEMENTS
(Cost $17,883,000) $17,883,000
-----------
TOTAL INVESTMENTS (U.S. Government
Securities Fund ) (Cost $115,768,988) $117,149,407
============
----------------------------------------------------------------------------
Money Market Fund
----------------------------------------------------------------------------
Principal Value
--------- -----
COMMERCIAL PAPER - 13.82%
Bellsouth Capital Funding Corp.,
5.20% due 11/16/98 $500,000 $498,917
Emerson Electric,
5.19% due 11/16/98 1,000,000 997,837
Goldman Sachs Group LP,
5.18% due 03/15/99 900,000 882,647
United Parcel Service,
4.90% due 12/21/98 1,000,000 993,194
-------
TOTAL COMMERCIAL PAPER 3,372,595
---------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 57.94%
Student Loan Marketing Association - 12.31%
5.12% due 04/15/99 $1,000,000 $1,000,000
5.74% due 11/16/98 2,000,000 2,004,300
---------
3,004,300
Federal Home Loan Banks - 24.78%
4.73% discount note due 01/20/99 500,000 494,745
5.01% discount note due 01/14/99 1,000,000 989,702
5.04% discount note due 01/28/99 1,000,000 987,680
5.25% discount note due 01/06/99 1,000,000 990,375
5.27% discount note due 12/03/98 600,000 597,189
5.33% discount note due 12/04/98 2,000,000 1,990,228
---------
6,049,919
The accompanying notes are an integral part of the financial statements.
54
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1998 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
Principal Value
--------- -----
Federal National Mortgage Association - 20.85%
4.54% due 02/04/99 $2,000,000 $1,999,792
4.64% due 04/09/99 2,000,000 1,999,564
5.29% due 12/22/98 1,100,000 1,091,757
---------
5,091,113
TOTAL U.S. GOVERNMENT OBLIGATIONS $14,145,332
U.S. TREASURY OBLIGATIONS - 20.10%
U.S. Treasury Notes - 20.10%
4.45% due 04/01/99 $2,000,000 $1,962,670
4.63% due 03/25/99 3,000,000 2,944,440
---------
TOTAL US TREASURY OBLIGATIONS $4,907,110
----------
FOREIGN GOVERNMENT OBLIGATIONS - 4.05%
Canada - 4.05%
4.97% due 01/27/99 $1,000,000 $987,985
--------
TOTAL FOREIGN GOVERNMENT OBLIGATIONS $987,985
REPURCHASE AGREEMENT - 4.09%
Repurchase Agreement with State Street Bank & Trust
Co. dated 10/30/98 at 5.35%, to be repurchased at
$999,445 on 11/02/98, collateralized by $990,000
U.S. Treasury Notes, 7.125% due 09/30/99 (valued
at $1,025,740, including interest) $999,000 $999,000
--------
TOTAL INVESTMENTS
(Money Market Fund) $24,412,022
-----------
Key to Currency Abbreviations
-----------------------------
AUD - Australian Dollar
CAD - Canadian Dollar
DKK - Danish Krone
XEU - European Currency Unit
FIM - Finnish Markka
DEM - German Deutsche Mark
GBP - Great British Pound
GRD - Greek Drachma
HKD - Hong Kong Dollar
ITL - Italian Lira
JPY - Japanese Yen
NZD - New Zealand Dollar
PLN - Polish Zloty
SEK - Swedish Krona
CHF - Swiss Franc
Key to Security Abbreviations and Legend
----------------------------------------
ADR - American Depository Receipt
ADS - American Depository Shares
REMIC Real Estate Mortgage Investment Conduit
TBA - To Be Announced
+ - Non-Income producing, issuer is in bankruptcy and
is in default of interest payments
* - Non-Income producing
** - Purchased on a forward commitment (Note 2)
The accompanying notes are an integral part of the financial statements.
55
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. ORGANIZATION OF THE FUND. North American Funds (the "Fund") is an open-end,
diversified management investment company. The Fund is organized as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended. It is a series company, which means it has several
portfolios, each with a stated investment objective which it pursues through
separate investment policies. As of October 31, 1998, the Fund offered the
following fifteen portfolios: the International Small Cap Fund ("International
Small Cap"), the International Growth and Income Fund ("International Growth and
Income"), the Global Equity Fund ("Global Equity"), the Emerging Growth Fund
("Emerging Growth"), the Small/Mid Cap Fund ("Small/Mid Cap"), the Growth Equity
Fund ("Growth Equity"), the Tax-Sensitive Equity Fund ("Tax-Sensitive Equity"),
the Growth and Income Fund ("Growth and Income"), the Equity-Income Fund
("Equity-Income"), the Balanced Fund ("Balanced"), the Strategic Income Fund
("Strategic Income"), the Investment Quality Bond Fund ("Investment Quality
Bond"), the National Municipal Bond Fund ("National Municipal Bond"), the U.S.
Government Securities Fund ("U.S. Government Securities") and the Money Market
Fund ("Money Market").
The Fund offers Class A, Class B and Class C shares. Class A shares are sold
with a front-end sales charge up to 4.75%. Class B and Class C shares are sold
without an initial sales charge. Class B shares are sold with a contingent
deferred sales charge which declines from 5% to zero depending on the period of
time shares are held. Class C shares are sold with a contingent deferred sales
charge of 1% in the first year after purchase. Class B shares will automatically
convert to Class A shares of the same portfolio eight years after purchase.
Class C shares will automatically convert to Class A shares of the same
portfolio ten years after purchase. All three classes of shares have identical
voting, dividend, liquidation and other rights, except that each class has
exclusive voting rights with respect to its distribution plan (See Note 5).
Investment income, realized and unrealized capital gains and losses and common
expenses of each portfolio are allocated on a pro-rata basis to each class based
on their relative net assets.
CypressTree Asset Management Corporation, Inc. ("CAM"), a wholly-owned
subsidiary of CypressTree Investments, Inc. ("CypressTree"), serves as
investment adviser and principal underwriter for the Fund, effective October 1,
1997, pursuant to approval by the Fund's Board of Trustees and the Fund's
shareholders. Previously, those services were provided to the Fund by NASL
Financial Services, Inc. CypressTree Funds Distributors, Inc. ("CFD"), also a
wholly-owned subsidiary of CypressTree, serves as distributor for the Fund,
effective October 1, 1997.
CypressTree, located in Boston, Massachusetts was formed in 1996 to acquire,
advise and distribute mutual funds through broker-dealers, banks and other
intermediaries.
2. SIGNIFICANT ACCOUNTING POLICIES. The policies described below are followed
when preparing the Funds' financial statements. These policies are in accordance
with generally accepted accounting principles ("GAAP").
Security Valuation. Securities held by Money Market and money market instruments
with remaining maturities of 60 days or less held by the other portfolios are
valued at either the amortized cost basis or original cost plus accrued
interest, both of which approximate current market value. All other securities
held by the Fund are valued at the last sale price as of the close of business
on a principal securities exchange (domestic or foreign) or, lacking any sales,
at the closing bid price. Securities traded only in the over-the-counter market
are valued at the last bid price quoted by brokers making markets in the
securities at the close of trading on the Exchange. Other assets and securities
for which no such quotation or valuations are readily available are valued at
their fair value as determined in good faith under consistently applied
procedures established by and under the general supervision of the Trustees.
Foreign Currency Translations. The accounting records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(i) market value of securities, other assets and other liabilities at the
current rate of exchange of such currencies against U.S. dollars; and
(ii) purchases and sales of securities, income and expenses at the rate of
exchange quoted on the respective dates of such transactions.
Gains and losses that arise from changes in foreign exchange rates have been
segregated from gains and losses that arise from changes in the market prices of
investments. These gains and losses are included with gains and losses on
foreign currency and forward foreign currency contracts in the Statements of
Operations.
Forward Foreign Currency Contracts. All portfolios with the exception of U.S.
Government Securities, National Municipal Bond and Money Market may purchase and
sell forward foreign currency contracts in order to hedge a specific transaction
or portfolio position.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held at the end of the period and the resulting net unrealized
appreciation (depreciation) and related net receivable or payable amount are
determined daily using forward currency exchange
56
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 2 - continued
rates supplied by a quotation service. The Fund could be exposed to risks if the
counterparties to the contracts are unable to meet the terms of their contracts
or if the value of the foreign currency changes unfavorably.
Net realized gains (losses) on forward foreign currency contracts, shown in the
Statements of Operations, includes net gains or losses realized by a portfolio
on contracts which have matured or which the portfolio has terminated by
entering into an offsetting commitment.
Forward Commitments. The Fund may make forward commitments to purchase and sell
securities. Delivery and payment for securities which have been purchased or
sold on a forward commitment basis can take place a month or more (not to exceed
120 days) after the date of the transaction. The price of the underlying
securities and the date when the securities will be delivered and paid for are
fixed at the time the transaction is negotiated. The value of the securities
underlying a forward commitment to purchase securities, and any subsequent
fluctuations in their value, is taken into account when determining the
portfolio's net asset value starting on the day the portfolio agrees to purchase
the securities. At October 31, 1998, the forward commitments were $741,090 in
Strategic Income, $596,529 in Investment Quality Bond, and $4,032,480 in U. S.
Government Securities.
Mortgage Dollar Rolls. Strategic Income and U. S. Government Securities may
enter into mortgage dollar rolls in which they sell mortgage-backed securities
for normal delivery in the current month and simultaneously contract to
repurchase similar, but not identical, securities at the same price on an agreed
upon date. The portfolio receives compensation as consideration for entering
into the commitment to repurchase. The compensation is recorded as deferred
income and amortized to income over the roll period. As the holder, the
counterparty receives all principal and interest payments, including
prepayments, made with respect to the similar security. Mortgage dollar rolls
may be renewed with a new sale and repurchase price with a cash settlement made
at renewal without physical delivery of the securities subject to the contract.
Securities Lending. The Fund may lend its portfolio securities in amounts up to
33% of its total non-cash assets to brokers, dealers and other financial
institutions, provided such loans are callable at any time and are at all times
fully collateralized by cash, cash equivalents, short term investments or
securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities, and marked to market to the value of the loaned securities on
a daily basis. The portfolio may bear the risk of delay in recovery of, or even
loss of rights in, the securities loaned should the borrower of the securities
fail financially. Consequently, loans of portfolio securities will only be made
to firms deemed by the Subadvisers to be creditworthy.
The portfolio receives compensation for lending its securities either in the
form of fees or by retaining a portion of interest on the investment of any cash
received as collateral. Income generated from the investment of cash collateral
is included as interest income in the Statements of Operations. All collateral
received will be in an amount equal to at least 100% of the market value of the
loaned securities and should be maintained at that level during the period of
the loan. During the loan period, the portfolio continues to retain rights of
ownership, including dividends and interest of the loaned securities. At October
31, 1998, the value of the securities loaned amounted to $1,690,741, $1,976,967,
$4,915,370, $8,679,806, $2,754,187, $5,102,023, $8,167,507, $6,191,131,
$10,746,432, $3,352,312 and $11,181,287 in International Small Cap,
International Growth and Income, Global Equity, Small/Mid Cap, Growth Equity,
Growth and Income, Equity-Income, Balanced, Strategic Income, Investment Quality
Bond and U.S. Government Securities, respectively. At October 31, 1998, the
value of collateral amounted to $1,714,449, $2,041,974, $5,066,001, $8,837,965,
$2,790,550, $5,218,468, $8,029,487, $6,307,425, $10,858,710, $3,429,644 and
$11,444,965 in International Small Cap, International Growth and Income, Global
Equity, Small/Mid Cap, Growth Equity, Growth and Income, Equity-Income,
Balanced, Strategic Income, Investment Quality Bond and U.S. Government
Securities, respectively.
Organization Costs. Costs incurred by each portfolio in connection with its
organization are being amortized on a straight line basis over a five year
period.
Federal Income Taxes. The Fund's policy is for each portfolio to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code, as
amended, and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required. Each portfolio is
treated as a separate taxpayer for federal income tax purposes.
Distributions of Income and Gains. Distributions of net investment income are
declared as a dividend to shareholders of record as of the close of business
each day and are paid monthly for Strategic Income, Investment Quality Bond,
National Municipal Bond, U.S. Government Securities and Money Market,
semi-annually to shareholders of International Growth and Income and Growth and
Income, and annually to shareholders of International Small Cap, Global Equity,
Emerging Growth, Small/Mid Cap, Growth Equity, Tax-Sensitive Equity,
Equity-Income and Balanced. During any particular year, net realized gains from
investment, futures and foreign currency transactions for each portfolio, in
57
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 2 - continued
excess of available capital loss carryforwards of each portfolio, would be
taxable to the portfolio if not distributed and, therefore, will be distributed
to shareholders. An additional distribution may be made to the extent necessary
to avoid the payment of a federal excise tax.
Capital Loss Carryforwards. At October 31, 1998, capital loss carryforwards
available to offset future recognized gains were approximately:
<TABLE>
<CAPTION>
Capital Loss Carryforwards
Expiration Year
-------------------------------------------------------------------------------------
Portfolio 2002 2003 2004 2005 2006
- ------------------------------------------- -------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Emerging Growth .......................... --- --- --- --- $ 39,153
International Small Cap .................. --- --- $ 54,060 $ 517,432 85,758
Investment Quality Bond .................. $ 329,026 --- --- --- ---
National Municipal Bond .................. --- $ 24,157 --- --- ---
Tax-Sensitive Equity ..................... --- --- --- --- 754,731
U. S. Government Securities .............. --- 1,062,756 --- --- ---
Money Market ............................. --- --- --- 1,702 1,156
</TABLE>
Equalization. Through the year ended October 31, 1997 the Fund followed the
accounting practice known as equalization, by which a portion of the proceeds
from sales and costs of repurchases of the Fund's shares were allocated, on a
per share basis, to undistributed net investment income. As a result, book
undistributed net investment income per share was unaffected by sales or
redemptions of the Fund's shares. Because Distributions to shareholders are
determined on a tax basis, however, this practice is no longer considered
meaningful, so, as of November 1, 1997 this practice was discontinued. This
change does not effect the Funds' net assets, net asset value per share or the
increase/(decrease) in net assets. The cumulative effect of this change was to
decrease undistributed net investment income/(loss) and to increase
paid-in-capital previously reported through October 31, 1997 by $6,325 in the
International Small Cap Fund, by $87,652 in the Growth Equity fund, by $169,122
in the Growth and Income Fund, by $113,876 in the Equity-Income Fund, by $471 in
the Strategic Income Fund, and by $16,211 in the Investment Quality Bond Fund,
and to increase undistributed net investment income/(loss) and to decrease
paid-in-capital previously reported through October 31, 1997 by $3,653 in the
International Growth and Income Fund, by $390,926 in the Global Equity Fund by
$200,934 in the Balanced Fund, and by $202,524 in the U. S. Government
Securities Fund.
Repurchase and Reverse Repurchase Agreements. Each portfolio may enter into
repurchase agreements and, additionally, U.S. Government Securities may enter
into reverse repurchase agreements. When a portfolio enters into a repurchase
agreement through its custodian, it receives delivery of securities, the amount
of which at the time of purchase and each subsequent business day is required to
be maintained at such a level that the market value is equal to 102% of the
repurchase price, and such portfolio will take constructive receipt of all
securities underlying the repurchase agreements until such agreements expire. If
the seller defaults, a portfolio would suffer a loss to the extent that proceeds
from the sale of underlying securities were less than the repurchase price.
Under a reverse repurchase agreement, U.S. Government Securities may sell a debt
security and agree to repurchase it at an agreed upon time and at an agreed upon
price.
Other. Investment security transactions are accounted for on the trade date.
Interest income is accrued as earned. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. All original issue discounts
are accreted for financial and federal income tax reporting purposes. The Fund
uses the First In, First Out method for determining realized gain or loss on
investments, futures and foreign currency for both financial and federal income
tax reporting purposes. The preparation of financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the
reported amount of assets, liabilities, income and expenses. Actual results may
differ from these estimates.
Capital Accounts. The Fund reports the accumulated undistributed net investment
income (loss) and accumulated undistributed net realized gain (loss) accounts on
a basis approximating amounts available for future tax distributions (or to
offset future taxable realized gains when a capital loss carryforward is
available). Accordingly, each portfolio of the Fund may periodically make
reclassifications among certain capital accounts without impacting the net asset
value.
58
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- --------------------------------------------------------------------------------
3. CAPITAL SHARES. Share activity for the year ended October 31, 1998 is as
follows:
<TABLE>
<CAPTION>
Class A Class B Class C
---------------------------- ---------------------------- ----------------------------
Shares Capital Shares Capital Shares Capital
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
International Small Cap
- -----------------------
Sold ............................... 38,317 $ 585,923 158,290 $ 2,313,605 99,606 $ 1,479,559
Redeemed ........................... (114,707) (1,649,155) (177,019) (2,565,436) (158,567) (2,352,841)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ....... (76,390) ($ 1,063,232) (18,729) ($ 251,831) (58,961) ($ 873,282)
============ ============ ============ ============ ============ ============
International Growth and Income
- -------------------------------
Sold ............................... 199,128 $ 2,104,258 276,576 $ 2,901,231 218,156 $ 2,308,683
Reinvestment of distributions ...... 44,088 424,134 131,412 1,264,722 73,392 706,029
Redeemed ........................... (272,419) (2,839,795) (490,983) (5,115,710) (263,329) (2,792,273)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ....... (29,203) ($ 311,403) (82,995) ($ 949,757) 28,219 $ 222,439
============ ============ ============ ============ ============ ============
Global Equity
- -------------
Sold ............................... 446,573 $ 7,442,815 280,820 $ 4,734,000 526,057 $ 8,521,394
Reinvestment of distributions ...... 152,180 2,323,793 136,778 2,076,461 262,341 3,998,091
Redeemed ........................... (605,332) (10,137,623) (525,613) (8,376,635) (1,026,358) (16,728,703)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ....... (6,579) ($ 371,015) (108,015) ($ 1,566,174) (237,960) ($ 4,209,218)
============ ============ ============ ============ ============ ============
Emerging Growth
- ---------------
Sold ............................... 22,245 $ 229,241 30,970 $ 308,715 27,355 $ 289,054
Redeemed ........................... (5,767) (60,513) (1,200) (10,251) (438) (3,923)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ....... 16,478 $ 168,728 29,770 $ 298,464 26,917 $ 285,131
============ ============ ============ ============ ============ ============
Small/Mid Cap
- -------------
Sold ............................... 183,881 $ 2,977,455 366,794 $ 5,878,496 478,367 $ 7,674,000
Reinvestment of distributions ...... 4,511 64,099 13,425 188,347 13,917 195,545
Redeemed ........................... (158,019) (2,553,137) (263,887) (4,140,429) (342,381) (5,487,633)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ....... 30,373 $ 488,417 116,332 $ 1,926,414 149,903 $ 2,381,912
============ ============ ============ ============ ============ ============
Growth Equity
- -------------
Sold ............................... 139,044 $ 2,458,526 264,945 $ 4,640,723 222,095 $ 3,924,774
Reinvestment of distributions ...... 16,479 255,776 47,951 737,982 69,363 1,066,801
Redeemed ........................... (113,974) (2,026,744) (180,039) (3,088,010) (304,031) (5,337,043)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ....... 41,549 $ 687,558 132,857 $ 2,290,695 (12,573) ($ 345,468)
============ ============ ============ ============ ============ ============
Tax-Sensitive Equity
- --------------------
Sold ............................... 505,569 $ 5,423,710 327,006 $ 3,440,453 373,346 $ 3,674,143
Redeemed ........................... (47,892) (502,935) (6,225) (55,022) (9,883) (84,557)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ....... 457,677 $ 4,920,775 320,781 $ 3,385,431 363,463 $ 3,589,586
============ ============ ============ ============ ============ ============
Growth and Income
- -----------------
Sold ............................... 875,486 $ 20,239,609 951,247 $ 22,019,893 1,138,031 $ 26,430,588
Reinvestment of distributions ...... 127,179 2,612,268 202,572 4,138,748 348,181 7,145,010
Redeemed ........................... (804,113) (18,494,847) (538,445) (12,243,375) (925,887) (21,379,820)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ....... 198,552 $ 4,357,030 615,374 $ 13,915,266 560,325 $ 12,195,778
============ ============ ============ ============ ============ ============
Equity-Income
- -------------
Sold ............................... 479,470 $ 8,464,050 386,814 $ 6,812,335 766,845 $ 13,528,867
Reinvestment of distributions ...... 194,948 3,251,762 170,544 2,827,635 446,831 7,448,669
Redeemed ........................... (678,934) (11,894,736) (421,373) (7,372,953) (1,197,874) (21,063,343)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ....... (4,516) ($ 178,924) 135,985 $ 2,267,017 15,802 ($ 85,807)
============ ============ ============ ============ ============ ============
Balanced
- --------
Sold ............................... 233,949 $ 2,624,837 349,775 $ 3,884,232 310,079 $ 3,514,608
Reinvestment of distributions ...... 222,869 2,300,076 274,666 2,832,512 1,113,960 11,629,960
Redeemed ........................... (177,968) (1,997,969) (335,330) (3,806,142) (1,193,333) (13,589,791)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ....... 278,850 $ 2,926,944 289,111 $ 2,910,602 230,706 $ 1,554,777
============ ============ ============ ============ ============ ============
Strategic Income
- ----------------
Sold ............................... 370,479 $ 3,594,336 691,131 $ 6,593,782 1,046,821 $ 10,134,342
Reinvestment of distributions ...... 95,493 912,850 149,034 1,426,572 220,511 2,109,372
Redeemed ........................... (396,621) (3,797,754) (1,136,578) (10,809,182) (887,028) (8,446,963)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ....... 69,351 $ 709,432 (296,413) ($ 2,788,828) 380,304 $ 3,796,751
============ ============ ============ ============ ============ ============
</TABLE>
59
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 3 - continued
<TABLE>
<CAPTION>
Class A Class B Class C
---------------------------- ---------------------------- ----------------------------
Shares Capital Shares Capital Shares Capital
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Investment Quality Bond
- -----------------------
Sold ............................... 170,210 $ 1,802,178 117,621 $ 1,245,709 198,006 $ 2,105,448
Reinvestment of distributions ...... 33,910 360,020 22,312 236,748 25,597 271,574
Redeemed ........................... (246,964) (2,627,068) (122,141) (1,294,362) (283,354) (3,004,137)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ....... (42,844) ($ 464,870) 17,792 $ 188,095 (59,751) ($ 627,115)
============ ============ ============ ============ ============ ============
National Municipal Bond
- -----------------------
Sold ............................... 65,843 $ 675,842 34,659 $ 354,757 85,884 $ 879,629
Reinvestment of distributions ...... 13,963 142,649 13,125 134,060 15,971 163,141
Redeemed ........................... (139,834) (1,426,114) (179,502) (1,839,689) (124,211) (1,268,991)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ....... (60,028) ($ 607,623) (131,718) ($ 1,350,872) (22,356) ($ 226,221)
============ ============ ============ ============ ============ ============
U.S. Government Securities
- --------------------------
Sold ............................... 504,070 $ 5,044,310 940,887 $ 9,443,101 813,806 $ 8,150,377
Reinvestment of distributions ...... 197,452 1,973,152 52,081 520,627 59,278 592,076
Redeemed ........................... (1,134,417) (11,333,731) (896,940) (8,975,680) (1,092,107) (10,920,493)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ....... (432,895) ($ 4,316,269) 96,028 $ 988,048 (219,023) ($ 2,178,040)
============ ============ ============ ============ ============ ============
Money Market
- ------------
Sold ............................... 19,804,375 $ 19,803,662 12,413,813 $ 12,413,585 17,413,158 $ 17,412,707
Reinvestment of distributions ...... 411,135 411,135 142,434 142,434 341,140 341,141
Redeemed ........................... (20,976,437) (20,976,438) (9,968,556) (9,968,557) (17,056,318) (17,056,319)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ....... (760,927) ($ 761,641) 2,587,691 $ 2,587,462 697,980 $ 697,529
============ ============ ============ ============ ============ ============
</TABLE>
Share activity for the year ended October 31, 1997 was as follows:
<TABLE>
<CAPTION>
Class A Class B Class C
---------------------------- ---------------------------- ----------------------------
Shares Capital Shares Capital Shares Capital
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
International Small Cap
- -----------------------
Sold ............................... 172,223 $ 2,420,431 311,497 $ 4,351,711 287,465 $ 4,020,988
Redeemed ........................... (97,424) ($ 1,351,821) (152,898) ($ 2,152,252) (187,448) ($ 2,627,640)
------------ ------------ ------------ ------------ ------------ ------------
Net increase .................. 74,799 $ 1,068,610 158,599 $ 2,199,459 100,017 $ 1,393,348
============ ============ ============ ============ ============ ============
International Growth and Income
- -------------------------------
Sold ............................... 167,110 $ 1,792,918 334,333 $ 3,645,247 227,165 $ 2,478,076
Reinvestment of distributions ...... 35,116 372,765 98,555 1,060,875 61,067 656,479
Redeemed ........................... (206,586) (2,209,558) (259,786) (2,818,848) (304,781) (3,276,447)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ....... (4,360) ($ 43,875) 173,102 $ 1,887,274 (16,549) ($ 141,892)
============ ============ ============ ============ ============ ============
Global Equity
- -------------
Sold ............................... 464,254 $ 7,173,904 399,551 $ 6,134,403 473,379 $ 7,118,221
Reinvestment of distributions ...... 208,420 2,882,299 193,787 2,670,382 469,264 6,461,761
Redeemed ........................... (563,696) (8,611,676) (407,472) (6,025,088) (1,660,187) (24,698,621)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ....... 108,978 $ 1,444,527 185,866 $ 2,779,697 (717,544) ($11,118,639)
============ ============ ============ ============ ============ ============
Small/Mid Cap
- -------------
Sold ............................... 195,283 $ 2,625,840 399,400 $ 5,644,058 742,841 $ 10,160,673
Redeemed ........................... (161,404) (2,248,506) (158,565) (2,183,317) (519,604) (7,118,896)
------------ ------------ ------------ ------------ ------------ ------------
Net increase .................. 33,879 $ 377,334 240,835 $ 3,460,741 223,237 $ 3,041,777
============ ============ ============ ============ ============ ============
Growth Equity
- -------------
Sold ............................... 126,280 $ 1,864,938 494,750 $ 7,629,840 521,137 $ 7,942,112
Reinvestment of distributions ...... 2,321 32,171 3,748 51,907 6,399 88,628
Redeemed ........................... (111,960) (1,666,958) (309,407) (4,730,354) (244,574) (3,717,442)
------------ ------------ ------------ ------------ ------------ ------------
Net increase .................. 16,641 $ 230,151 189,091 $ 2,951,393 282,962 $ 4,313,298
============ ============ ============ ============ ============ ============
Growth and Income
- -----------------
Sold ............................... 912,261 $ 18,629,321 787,724 $ 15,658,730 882,662 $ 17,499,038
Reinvestment of distributions ...... 67,848 1,195,199 115,717 2,014,284 245,065 4,269,417
Redeemed ........................... (450,673) (9,067,086) (356,257) (7,090,345) (871,364) (17,278,615)
------------ ------------ ------------ ------------ ------------ ------------
Net increase .................. 529,436 $ 10,757,434 547,184 $ 10,582,669 256,363 $ 4,489,840
============ ============ ============ ============ ============ ============
</TABLE>
60
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 3 - continued
<TABLE>
<CAPTION>
Class A Class B Class C
---------------------------- ---------------------------- ----------------------------
Shares Capital Shares Capital Shares Capital
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Equity-Income
- -------------
Sold ............................... 592,754 $ 9,599,623 500,961 $ 8,087,441 824,546 $ 13,307,463
Reinvestment of distributions ...... 442,599 6,338,505 382,378 5,479,472 1,218,941 17,554,558
Redeemed ........................... (590,786) (9,345,352) (356,308) (5,740,317) (1,437,499) (22,895,681)
------------ ------------ ------------ ------------ ------------ ------------
Net increase .................. 444,567 $ 6,592,776 527,031 $ 7,826,596 605,988 $ 7,966,340
============ ============ ============ ============ ============ ============
Balanced
- --------
Sold ............................... 234,801 $ 2,757,480 279,360 $ 3,253,994 406,687 $ 4,786,572
Reinvestment of distributions ...... 125,521 1,380,732 160,862 1,766,281 737,223 8,183,433
Redeemed ........................... (265,075) (3,120,596) (390,785) (4,597,129) (1,633,682) (19,221,203)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ....... 95,247 $ 1,017,616 49,437 $ 423,146 (489,772) $ (6,251,198)
============ ============ ============ ============ ============ ============
Strategic Income
- ----------------
Sold ............................... 728,750 $ 7,068,862 883,892 $ 8,617,970 1,643,552 $ 16,024,302
Reinvestment of distributions ...... 108,211 1,049,234 178,435 1,729,297 209,694 2,033,928
Redeemed ........................... (570,028) (5,577,914) (668,180) (6,506,732) (827,696) (8,050,790)
------------ ------------ ------------ ------------ ------------ ------------
Net increase .................. 266,933 $ 2,540,182 394,147 $ 3,840,535 1,025,550 $ 10,007,440
============ ============ ============ ============ ============ ============
Investment Quality Bond
- -----------------------
Sold ............................... 71,210 $ 732,772 85,547 $ 882,438 93,047 $ 957,800
Reinvestment of distributions ...... 39,782 410,260 22,683 233,667 34,695 357,313
Redeemed ........................... (311,082) (3,204,349) (122,683) (1,257,374) (277,224) (2,834,680)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ....... (200,090) $ (2,061,317) (14,453) $ (141,269) (149,482) $ (1,519,567)
============ ============ ============ ============ ============ ============
National Municipal Bond
- -----------------------
Sold ............................... 34,409 $ 340,883 138,304 $ 1,351,243 75,518 $ 739,075
Reinvestment of distributions ...... 17,041 167,921 17,223 169,763 17,180 169,430
Redeemed ........................... (214,451) (2,098,316) (137,867) (1,352,138) (151,759) (1,490,977)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ....... (163,001) $ (1,589,512) 17,660 $ 168,868 (59,061) $ (582,472)
============ ============ ============ ============ ============ ============
U.S. Government Securities
- --------------------------
Sold ............................... 669,065 $ 6,537,020 360,887 $ 3,536,454 447,002 $ 4,382,934
Reinvestment of distributions ...... 241,937 2,367,629 59,099 578,306 71,244 697,491
Redeemed ........................... (2,978,747) (29,121,804) (727,741) (7,114,391) (1,079,330) (10,556,239)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ....... (2,067,745) $(20,217,155) (307,755) $ (2,999,631) (561,084) $ (5,475,814)
============ ============ ============ ============ ============ ============
Money Market
- ------------
Sold ............................... 22,410,945 $ 22,410,945 12,033,916 $ 12,033,916 25,707,878 $ 25,707,878
Reinvestment of distributions ...... 360,144 360,144 140,200 140,200 413,794 413,794
Redeemed ........................... (19,800,772) (19,800,772) (11,905,013) (11,905,013) (28,422,359) (28,422,359)
------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease) ....... 2,970,317 $ 2,970,317 269,103 $ 269,103 (2,300,687) $ (2,300,687)
============ ============ ============ ============ ============ ============
</TABLE>
4. PURCHASES AND SALES OF SECURITIES. The following table summarizes the
securities transactions (excluding short-term investments) for all portfolios,
excluding Money Market, for the year ended October 31, 1998:
<TABLE>
<CAPTION>
Purchases Sales
---------------------------------------- ------------------------------------
Portfolio U.S. Government Other Issues U.S. Government Other Issues
--------------- ------------------- ----------------- -------------------- --------------
<S> <C> <C> <C> <C>
International Small Cap ........................ ------ $ 7,492,570 ------ $ 8,673,305
International Growth & Income .................. ------ 47,739,029 ------ 49,312,015
Global Equity .................................. ------ 25,689,666 ------ 43,010,565
Emerging Growth ................................ ------ 902,507 ------ 188,248
Small/Mid Cap .................................. ------ 52,841,086 ------ 50,596,640
Growth Equity .................................. ------ 29,998,892 ------ 29,990,392
Tax-Sensitive Equity ........................... ------ 13,624,649 ------ 1,963,703
Growth and Income .............................. ------ 54,167,141 ------ 38,258,727
Equity-Income .................................. ------ 35,817,239 ------ 39,139,567
Balanced ....................................... $ 33,167,681 140,229,483 $ 29,010,489 151,909,167
Strategic Income ............................... 67,833,901 68,435,026 73,809,809 41,524,027
Investment Quality Bond ........................ 3,784,737 4,191,917 4,123,910 4,085,748
</TABLE>
61
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 4, Continued
<TABLE>
<CAPTION>
Purchases Sales
---------------------------------------- ------------------------------------
Portfolio U.S. Government Other Issues U.S. Government Other Issues
--------------- ------------------- ----------------- -------------------- --------------
<S> <C> <C> <C> <C>
U.S. Government Securities ....................... $316,127,342 ------ $313,553,780 ----
</TABLE>
Purchases and sales (maturities) for Money Market for the year ended October 31,
1998 were $491,963,713 and $490,127,283, respectively.
At October 31, 1998, tax basis net unrealized appreciation was equal to the
aggregate gross unrealized appreciation for all securities in which there was an
excess of market value over tax cost and aggregate gross unrealized depreciation
for all securities in which there was an excess of tax cost over market value as
follows:
<TABLE>
<CAPTION>
Tax Basis Net
Unrealized Tax Basis Tax Basis
Tax Basis Appreciation Unrealized Unrealized
Portfolio Cost (Depreciation) Appreciation Depreciation
- --------------------- ----------------- -------------------- ----------------- --------------
<S> <C> <C> <C> <C>
International Small Cap .......................... $ 15,527,268 $ 1,532,946 $ 2,511,708 ($978,762)
International Growth and Income .................. 28,519,667 (915,485) 2,123,142 (3,038,627)
Global Equity .................................... 104,757,143 18,835,914 27,920,550 (9,084,636)
Emerging Growth .................................. 703,108 (61,247) 41,375 (102,622)
Small/Mid Cap .................................... 42,578,021 2,030,394 3,500,371 (1,469,977)
Growth Equity .................................... 27,904,509 3,456,663 4,285,103 (828,440)
Tax-Sensitive Equity ............................. 11,153,216 (783,113) 481,807 (1,264,920)
Growth and Income ................................ 165,618,641 81,287,940 87,360,207 (6,072,267)
Equity-Income .................................... 152,950,084 26,923,092 33,919,775 (6,996,683)
Balanced ......................................... 97,870,954 7,076,014 8,327,878 (1,251,864)
Strategic Income ................................. 103,414,181 (4,621,050) 1,421,163 (6,042,213)
Investment Quality Bond .......................... 20,539,075 379,302 739,863 (360,561)
National Municipal Bond .......................... 14,883,356 1,024,196 1,024,197 (1)
U. S. Government Securities ...................... 115,773,739 1,375,668 1,546,201 (170,533)
</TABLE>
5. INVESTMENT ADVISORY AGREEMENTS. The Fund maintains an Investment Advisory
Agreement with CAM ("the Adviser"), pursuant to approval by the Fund's Board of
Trustees and Fund shareholders. The Adviser is responsible for managing the
corporate and business affairs of the Fund and for selecting and compensating
subadvisers to handle the investment and reinvestment of the assets of each
portfolio, subject to the supervision of the Trustees of the Fund. As
compensation for its services, the Adviser receives a fee from the Fund computed
separately for each portfolio at an annual percentage of average net assets as
follows:
<TABLE>
<CAPTION>
Between Between
$50,000,000 $200,000,000
First and and $500,000,000 Excess over
Portfolio $50,000,000 $200,000,000 $500,000,000
- -------------------- ------------------ ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
International Small Cap ...................... 1.050% 1.000% .900% .800%
International Growth and Income .............. .900% .850% .800% .750%
Global Equity ................................ .900% .900% .700% .700%
Emerging Growth .............................. .950% .950% .950% .950%
Small/Mid Cap ................................ .925% .900% .875% .850%
Growth Equity ................................ .900% .850% .825% .800%
Tax-Sensitive Equity ......................... .850% .800% .775% .700%
Growth and Income ............................ .725% .675% .625% .550%
Equity-Income ................................ .800% .700% .600% .600%
Balanced ..................................... .775% .725% .675% .625%
Strategic Income ............................. .750% .700% .650% .600%
Investment Quality Bond ...................... .600% .600% .525% .475%
National Municipal Bond ...................... .600% .600% .600% .600%
U.S. Government Securities ................... .600% .600% .525% .475%
Money Market ................................. .200% .200% .200% .145%
</TABLE>
62
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 5, continued
For the year ended October 31, 1998, CAM paid aggregate subadvisory fees of
$3,386,336. In addition, CAM retained net investment advisory fees of $3,743,238
after payment of subadvisory fees, which were allocated among the portfolios as
follows:
<TABLE>
<CAPTION>
Fee % of Net Assets Fee % of Net Assets
Paid to Paid to Retained Retained
Portfolio Subadviser Subadviser by CAM by Adviser
- -------------------- ---------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
International Small Cap ......................... $112,414 .65% $ 69,178 .40%
International Growth and Income ................. 143,270 .50% 114,615 .40%
Global Equity ................................... 607,233 .47% 557,235 .43%
Emerging Growth ................................. 1,756 .55% 1,278 .40%
Small/Mid Cap ................................... 177,891 .53% 135,536 .40%
Growth Equity ................................... 142,195 .50% 113,758 .40%
Tax-Sensitive Equity ............................ 18,677 .45% 16,603 .40%
Growth and Income ............................... 629,517 .28% 897,722 .40%
Equity-Income ................................... 649,730 .36% 651,074 .36%
Balanced ........................................ 348,785 .35% 398,503 .40%
Strategic Income ................................ 279,664 .33% 339,543 .40%
Investment Quality Bond ......................... 38,542 .22% 64,236 .37%
National Municipal Bond ......................... 42,359 .25% 60,118 .35%
U.S. Government Securities ...................... 179,817 .22% 299,695 .37%
Money Market .................................... 14,486 .08% 24,144 .13%
</TABLE>
Expense Reimbursement and Distribution Plan. Pursuant to the Investment Advisory
Agreement, the Adviser will reduce the advisory fee or if necessary reimburse
each portfolio of the Fund (excluding taxes, portfolio brokerage commissions,
interest, certain litigation and indemnification expenses, extraordinary
expenses and all of the portfolio's distribution fees) for expenses incurred in
excess (Expense limitation) of the following annual percentages of average net
assets as highlighted in the table below.
The Fund has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940 to use its assets to finance certain
activities relating to the distribution of its shares to investors. The Plan is
a "compensation" plan providing for the payment by each portfolio, other than
Money Market, of a monthly distribution fee to the Adviser as principal
underwriter for the Fund as highlighted in the table below:
<TABLE>
<CAPTION>
Portfolio Class A Class B Class C
- ----------------------- ----------- ----------- ------------
<S> <C> <C> <C>
International Small Cap
- -----------------------
Management fees .................................... 1.050% 1.050% 1.050%
Other expenses ..................................... 0.500% 0.500% 0.500%
----- ----- -----
Expense limitation ................................. 1.550% 1.550% 1.550%
===== ===== =====
Rule 12b-1 fees .................................... 0.350% 1.000% 1.000%
----- ----- -----
International Growth and Income
- -------------------------------
Management fees .................................... 0.900% 0.900% 0.900%
Other expenses ..................................... 0.500% 0.500% 0.500%
----- ----- -----
Expense limitation ................................. 1.400% 1.400% 1.400%
===== ===== =====
Rule 12b-1 fees .................................... 0.350% 1.000% 1.000%
Global Equity
- -------------
Management fees .................................... 0.900% 0.900% 0.900%
Other expenses ..................................... 0.500% 0.500% 0.500%
----- ----- -----
Expense limitation ................................. 1.400% 1.400% 1.400%
===== ===== =====
Rule 12b-1 fees .................................... 0.350% 1.000% 1.000%
Emerging Growth
- ---------------
Management fees .................................... 0.950% 0.950% 0.950%
Other expenses ..................................... 0.400% 0.400% 0.400%
----- ----- -----
Expense limitation ................................. 1.350% 1.350% 1.350%
===== ===== =====
Rule 12b-1 fees .................................... 0.350% 1.000% 1.000%
</TABLE>
63
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 5, continued
<TABLE>
<CAPTION>
Portfolio Class A Class B Class C
- -------------------- ----------- ----------- ------------
<S> <C> <C> <C>
Small/Mid Cap
- -------------
Management fees .................................... 0.925% 0.925% 0.925%
Other expenses ..................................... 0.400% 0.400% 0.400%
----- ----- -----
Expense limitation ................................. 1.325% 1.325% 1.325%
===== ===== =====
Rule 12b-1 fees .................................... 0.350% 1.000% 1.000%
Growth Equity
- -------------
Management fees .................................... 0.900% 0.900% 0.900%
Other expenses ..................................... 0.400% 0.400% 0.400%
----- ----- -----
Expense limitation ................................. 1.300% 1.300% 1.300%
===== ===== =====
Rule 12b-1 fees .................................... 0.350% 1.000% 1.000%
Tax-Sensitive Equity
- --------------------
Management fees .................................... 0.850% 0.850% 0.850%
Other expenses ..................................... 0.400% 0.400% 0.400%
----- ----- -----
Expense limitation ................................. 1.250% 1.250% 1.250%
===== ===== =====
Rule 12b-1 fees .................................... 0.350% 1.000% 1.000%
Growth and Income
- -----------------
Management fees .................................... 0.725% 0.725% 0.725%
Other expenses ..................................... 0.265% 0.265% 0.265%
----- ----- -----
Expense limitation ................................. 0.990% 0.990% 0.990%
===== ===== =====
Rule 12b-1 fees .................................... 0.350% 1.000% 1.000%
Equity-Income
- -------------
Management fees .................................... 0.800% 0.800% 0.800%
Other expenses ..................................... 0.265% 0.265% 0.265%
----- ----- -----
Expense limitation ................................. 1.065% 1.065% 1.065%
===== ===== =====
Rule 12b-1 fees .................................... 0.350% 1.000% 1.000%
Balanced
- --------
Management fees .................................... 0.775% 0.775% 0.775%
Other expenses ..................................... 0.265% 0.265% 0.265%
----- ----- -----
Expense limitation ................................. 1.040% 1.040% 1.040%
===== ===== =====
Rule 12b-1 fees .................................... 0.350% 1.000% 1.000%
Strategic Income
- ----------------
Management fees .................................... 0.750% 0.750% 0.750%
Other expenses ..................................... 0.400% 0.400% 0.400%
----- ----- -----
Expense limitation ................................. 1.150% 1.150% 1.150%
===== ===== =====
Rule 12b-1 fees .................................... 0.350% 1.000% 1.000%
Investment Quality Bond
- -----------------------
Management fees .................................... 0.600% 0.600% 0.600%
Other expenses ..................................... 0.300% 0.300% 0.300%
----- ----- -----
Expense limitation ................................. 0.900% 0.900% 0.900%
===== ===== =====
Rule 12b-1 fees .................................... 0.350% 1.000% 1.000%
National Municipal Bond
- -----------------------
Management fees .................................... 0.600% 0.600% 0.600%
Other expenses ..................................... 0.250% 0.250% 0.250%
----- ----- -----
Expense limitation ................................. 0.850% 0.850% 0.850%
===== ===== =====
Rule 12b-1 fees .................................... 0.150% 1.000% 1.000%
U.S. Government Securities
- --------------------------
Management fees .................................... 0.600% 0.600% 0.600%
Other expenses ..................................... 0.300% 0.300% 0.300%
----- ----- -----
Expense limitation ................................. 0.900% 0.900% 0.900%
===== ===== =====
Rule 12b-1 fees .................................... 0.350% 1.000% 1.000%
Money Market
- ------------
Management fees .................................... 0.200% 0.200% 0.200%
Other expenses ..................................... 0.300% 0.300% 0.300%
----- ----- -----
Expense limitation ................................. 0.500% 0.500% 0.500%
===== ===== =====
</TABLE>
64
<PAGE>
NORTH AMERICAN FUNDS
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 5, continued
In accordance with the Investment Advisory agreement, the Advisers, in addition
to providing advisory services, provide accounting and administrative services
for which CAM charged $1,475,189 to the Fund, before reimbursement based on
expense limitations, for the period ended October 31, 1998.
6. TRUSTEE'S FEES. The Fund pays each Trustee who is not an employee or a
director of the Adviser or its affiliates a fee of $750 plus travel expenses for
each Board of Trustees meeting attended and an annual retainer of $3,000.
7. LINE OF CREDIT. On September 15, 1998 the Fund entered into an agreement with
Fleet National Bank that provides a $20,000,000 Line of Credit to the Fund which
may be used for cash overdraft protection. The Fund pays a commitment fee of
$20,000 annually, and interest is charged on any borrowed amounts at the
currently effective Federal Funds Rate plus .55%. This Line of Credit was not
used during the period ended October 31, 1998.
8. COMMITMENTS. At October 31, 1998, International Growth and Income, Global
Equity, and Strategic Income had entered into forward foreign currency contracts
which contractually obligate the portfolio to deliver currencies at future
dates. Open sale and purchase contracts at October 31, 1998 were as follows:
<TABLE>
<CAPTION>
Net
Contracts Unrealized
to In Exchange Settlement Appreciation
Deliver For Date Value (Depreciation)
--------- ------------- ------------ ----------- --------------
International Growth and Income
- --------------------------------
Sales
<S> <C> <C> <C> <C> <C> <C>
Swiss Franc .......................... 2,499,902 $1,738,153 11/19/98 $1,848,753 ($110,600)
Australian Dollar .................... 1,160,890 693,400 11/19/98 726,269 (32,869)
Deutsche Mark ........................ 5,410,259 3,066,841 11/19/98 3,269,263 (202,422)
Hong Kong Dollar ..................... 1,950,000 247,855 11/19/98 251,643 (3,788)
New Zealand Dollar ................... 257,923 129,877 11/19/98 136,655 (6,778)
South African Rand ................... 385,000 58,840 11/19/98 68,289 (9,449)
---------- ---------- ---------
$5,934,966 $6,300,872 ($365,906)
========== ========== =========
Purchases
- ---------
$1,006,094 CHF 1,437,412 11/19/98 $1,063,009 $ 56,915
2,854,778 DEM 4,944,476 11/19/98 2,987,805 133,026
129,525 NZD 257,923 11/19/98 136,655 7,131
---------- ---------- ---------
$3,990,397 $4,187,469 $ 197,072
========== ========== =========
($168,834)
=========
Global Equity
- -------------
Sales
Great British Pounds ................. 4,750,000 $7,753,825 12/16/98 $7,931,075 ($177,250)
Purchases
$5,893,300 GBP 3,500,000 12/16/98 $5,843,950 ($49,350)
---------
($226,600)
=========
Strategic Income
- ----------------
Sales
Finnish Markka ....................... 1,133,727 $ 209,946 11/12/98 $ 225,170 ($15,224)
Danish Krona ......................... 7,299,571 1,079,818 11/12/98 1,159,321 (79,503)
Greek Drachma ........................ 56,590,833 1,255,465 11/12/98 1,265,325 (9,860)
Deutsche Mark ........................ 11,339,376 6,835,266 11/12/98 6,849,467 (14,201)
New Zealand Dollar ................... 691,076 349,684 11/12/98 366,085 (16,401)
European Currency Unit ............... 400,000 478,200 11/12/98 474,657 3,543
Italian Lira ......................... 1,671,349,250 952,879 11/12/98 1,019,419 (66,540)
----------- ----------- ---------
$11,161,258 $11,359,444 ($198,186)
=========== =========== =========
Purchases
$7,120,254 DEM 11,648,711 11/12/98 $7,030,040 ($90,214)
331,757 GRD 96,008,819 11/12/98 339,990 8,233
---------- ---------- ---------
$7,452,011 $7,370,030 (81,981)
========== ========== =========
($280,167)
=========
</TABLE>
65
<PAGE>
Trustees
Bradford K. Gallagher, Chairman
William F. Achtmeyer
Donald B. Allen
William F. Devin
Kenneth J. Lavery
Officers
Bradford K. Gallagher, President
Joseph T. Grause, Jr.,
Vice President and Treasurer
John I. Fitzgerald, Secretary
Distributor
CypressTree Funds Distributors, Inc.
286 Congress Street
Boston, MA 02210
Adviser
CypressTree Asset Management Corporation, Inc.
125 High Street
Boston, MA 02110
Transfer and Dividend Agent
State Street Bank and Trust Company
P.O. Box 8505
Boston, MA 02266-8505
Independent Accountants
PricewaterhouseCoopers L.L.P.
One Post Office Square
Boston, MA 02109
North American Funds Shareholder Service
286 Congress Street
Boston, MA 02210
800-872-8037
<PAGE>
Bulk Third Class
U.S. POSTAGE
PAID
Permit No. 19
Hudson, MA
