<PAGE>
[LOGO]
REPORT TO SHAREHOLDERS
- --------------------------------------------------------------------------------
North American Funds(R) Annual Report October 31, 1999
- --------------------------------------------------------------------------------
Audited
Financial
Statements
<PAGE>
NORTH AMERICAN FUNDS
President's Message
- -------------------------------------------------------------------------------
December 14, 1999
Dear Shareholder:
During the twelve-month period ended October 31, 1999, investors benefited
from continued strong economic growth and low inflation in the U.S. and
economic recoveries in several foreign countries. For the first half of the
period, technology stocks and a relatively small number of large-cap stocks
drove market performance in the U.S. As the year progressed, however, the
market's breadth - the number of stocks participating in the market's upward
momentum - broadened and small- and mid-cap stocks began to generate gains. As
we moved into the summer months, investors became increasingly concerned about
relatively high stock prices and the possibility of accelerating inflation and
higher interest rates. In a preemptive move against inflation, the Federal
Reserve Board tightened monetary policy by raising interest rates 0.25% in
June and in August. Uncertainty over high stock valuations and further
interest rate hikes continued to dominate the market. As a result, stock
prices fluctuated broadly. Despite the volatility, however, stock prices, as
measured by the S&P 500, ended the twelve-month period on a positive note led
by a small group of growth stocks.
Some of the healthiest gains in overseas markets came from the Asia/Pacific
region, with Japan being the strongest performer. After weathering a recession
for several years, the Japanese economy reversed course, as a number of new
fiscal, monetary and business reforms were put in place. Changes in banking
and interest rate policy, large public works expenditures and corporate
restructuring were just some of the factors that helped spark recovery in
Japan. The Asian emerging markets, which had also been in recession, began to
show strength, as lower interest rates led to business expansion, more
employment and increased demand for consumer goods and services. Europe was a
weak spot overseas. Slower economic growth and the poor performance of the
Euro against the U.S. dollar were largely responsible for the lackluster
performance of European stocks.
The fixed-income markets began the twelve-month period on a strong note, with
U.S. Treasury securities and high-grade corporate bonds in the lead. As 1999
unfolded, however, inflation concerns boosted bond yields. As a result, bond
prices, which move in the opposite direction of interest rates, declined.
At North American Funds our objective is to provide you with a complementary
group of professionally managed funds accompanied by the highest quality of
service. As we enter not only the New Year, but also a new millennium, it is a
good time to contact your investment advisor and review your portfolio to make
sure it is still in line with your long-term financial goals. You can also
receive information about your North American Fund investments by calling our
experienced customer service team at 800-872-8037 from 9:00 am to 6:00 PM,
Eastern Time, Monday through Friday. Or, for your convenience, call our
enhanced automated information line at 800-872-2251, 24 hours-a-day, seven
days-a-week. Up-to-date performance information and daily pricing for any
North American Fund is also available on our Website at
www.northamericanfunds.com.
Thank you for investing with North American Funds. We look forward to serving
your investment needs in the New 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
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<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............................................. 34
International Equity Fund................................................ 36
Global Equity Fund....................................................... 42
Emerging Growth Fund..................................................... 44
Small/Mid Cap Fund....................................................... 45
Growth Equity Fund....................................................... 46
Tax-Sensitive Equity Fund................................................ 48
Growth and Income Fund................................................... 49
Equity-Income Fund....................................................... 51
Balanced Fund............................................................ 52
Strategic Income Fund.................................................... 53
Investment Quality Bond Fund............................................. 56
National Municipal Bond Fund............................................. 60
U.S. Government Securities Fund.......................................... 62
Money Market Fund........................................................ 62
Notes to Financial Statements.............................................. 64
</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 ten years (or
since the Fund's inception if less than ten years). An average annual total
return takes the Fund's cumulative total return over a set period of time -
one, five and ten years (or since the Fund's inception if less than ten
years) 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 (at net asset value "NAV").
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 current maximum sales charge applicable to each Fund's 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,
1999. All performance results referenced in the commentary are Class A share
returns.
iii
<PAGE>
International Small Cap Fund
Investment Seeks to provide long-term capital appreciation by
Objective: investing primarily in equity securities issued by
foreign companies which have total market capitalization
or annual revenue of $1 billion or less.
Subadvisor: Founders Asset Management LLC ("Founders")
Portfolio Tracy P. Stouffer
Manager:
Inception Date: March 4, 1996
[GRAPH]
Change in Value of $10,000 Investment and Comparative Indices
International Small Cap Fund
<TABLE>
<CAPTION>
Growth of $10,000 Growth of $10,000
Invested in Invested in
Class A shares Class A shares
at Net Asset Value with 5.75% charge
of the Int'l of the Int'l Growth of $10,000
Month Small Cap Fund Small Cap Fund Investment in the MSCI
Ended NAV 5.75% Sales Charge World ex US Index
<S> <C> <C> <C>
Feb-96 $10,000 $9,425 $10,000
Mar-96 $10,224 $9,636 $10,212
Apr-96 $10,552 $9,945 $10,513
May-96 $10,760 $10,141 $10,333
Jun-96 $10,776 $10,156 $10,378
Jul-96 $10,368 $9,772 $10,074
Aug-96 $10,440 $9,840 $10,112
Sep-96 $10,536 $9,930 $10,386
Oct-96 $10,744 $10,126 $10,317
Nov-96 $10,928 $10,300 $10,742
Dec-96 $11,040 $10,405 $10,592
Jan-97 $11,144 $10,503 $10,262
Feb-97 $11,352 $10,699 $10,418
Mar-97 $11,312 $10,662 $10,428
Apr-97 $11,016 $10,383 $10,492
May-97 $11,520 $10,858 $11,183
Jun-97 $11,680 $11,008 $11,780
Jul-97 $11,632 $10,963 $11,997
Aug-97 $11,176 $10,533 $11,113
Sep-97 $11,608 $10,941 $11,736
Oct-97 $11,088 $10,450 $10,852
Nov-97 $11,152 $10,511 $10,730
Dec-97 $11,000 $10,368 $10,832
Jan-98 $11,256 $10,609 $11,293
Feb-98 $11,832 $11,152 $12,029
Mar-98 $12,560 $11,838 $12,423
Apr-98 $12,896 $12,154 $12,520
May-98 $13,376 $12,607 $12,455
Jun-98 $13,376 $12,607 $12,521
Jul-98 $13,368 $12,599 $12,602
Aug-98 $11,344 $10,692 $10,993
Sep-98 $10,664 $10,051 $10,679
Oct-98 $11,128 $10,488 $11,790
Nov-98 $11,608 $10,941 $12,388
Dec-98 $12,120 $11,423 $12,864
Jan-99 $12,536 $11,815 $12,866
Feb-99 $11,920 $11,235 $12,542
Mar-99 $12,488 $11,770 $13,065
Apr-99 $13,040 $12,290 $13,625
May-99 $12,576 $11,853 $12,937
Jun-99 $13,104 $12,351 $13,443
Jul-99 $13,592 $12,810 $13,830
Aug-99 $13,720 $12,931 $13,869
Sep-99 $14,320 $13,497 $14,019
Oct-99 $15,064 $14,198 $14,565
</TABLE>
Performance Table
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
---------------- ------------
1 Since Since
Year Inception Inception
Periods Ending October 31, 1999 ------ --------- ------------
<S> <C> <C> <C>
MSCI World ex US Index/1/ 23.49% 10.80% 45.65%
International Small Cap Fund Class A (NAV) 35.37% 11.84% 50.64%
International Small Cap Fund Class A (net of
5.75% sales charge) 27.59% 10.05% 41.98%
International Small Cap Fund Class B (NAV) 34.33% 11.06% 46.80%
International Small Cap Fund Class B (net of
CDSC)/2/ 29.33% 10.43% 43.80%
International Small Cap Fund Class C (NAV) 34.48% 11.09% 46.96%
International Small Cap Fund Class C (net of
CDSC)/3/ 33.48% 11.09% 46.96%
</TABLE>
- -----------------------------------------------
/1/All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
/2/The returns reflect the applicable sliding Contingent Deferred Sales Charge
of 5%, 5%, 4%, 3%, 2%, 1%.
/3/The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
iv
<PAGE>
Portfolio Manager's Commentary
The International Small Cap Fund's Class A performance for the year-ended
October 31, 1999 was 35.37% compared to the MSCI World ex U.S. Index return of
23.49% for the same period.
As we began 1999, Japanese small-cap stocks had a very strong rally early in
the first quarter, and the Fund's performance was positively impacted by its
holdings in Japan. Even though we have seen a recovery in Japanese stocks,
Founders is still working hard to find small-cap growth companies in Japan
with demonstrated real revenue and earnings growth.
As the market shifted in favor of value-oriented stocks during the second
quarter, the Fund's performance suffered due to its strict adherence to a
bottom-up growth style.
Throughout the first half of the year, we carried an overweight position in
European companies. Unfortunately, these holdings were not positive
contributors to performance as many markets were blunted by weakness in the
Euro. Now that the crisis in Kosovo has eased, the pressure, in turn, has
eased. We continue to believe that Europe is in a constructive economic
environment and expect to see accelerating economic growth there as we move
ahead.
Tracy Stouffer began managing the Fund on July 23, 1999. Throughout the third
quarter, the Fund was restructured and repositioned to reflect new growth
opportunities in the stock markets around the world. Going forward, the assets
of the Fund will be diversified among between 175 and 225 securities across 25
to 40 countries.
The most notable shift during this process was in the Fund's exposure to
Japan, which is now the largest single country weighting. We expect continued
recovery in Japanese domestic demand and a strong yen, and we believe that
small companies there are particularly well poised to benefit from this
environment. We have also added promising companies from other Asian nations,
including South Korea, Singapore, Hong Kong, China, and Indonesia.
We often find ideas from our research in various regions and industries.
Certain recurring investment themes emerge out of this research and allow us
to take advantage of attractive market dynamics. For instance, the internet is
a strong theme throughout the Fund, as it is allowing companies to do business
globally without having to create a costly infrastructure. We have also found
excellent investment opportunities in telecommunications, especially with
Genesys, a French company that is the leading teleconferencing specialist in
Europe and the Asia-Pacific region. Both of these regions are experiencing
30%+ annual growth in teleconferencing demand, and the firm has a strong
position in the U.S., which accounts for 85% of the world market in
teleconferencing. Offering a high degree of technological sophistication and
broad geographic reach, Genesys is well positioned for strong future growth.
In addition, we see outsourcing as a strong worldwide trend, as companies
focus more sharply on their core competencies and begin to outsource
operational and developmental activities. One area we have focused on is the
changing nature of employment in Japan. To capitalize on this trend, we have
initiated positions in The Goodwill Group, Inc., a provider of outsourcing
services for blue-collar workers, and Drake Beam Morin, a provider of
outplacement counseling services. We believe both companies may benefit from
rising unemployment in Japan.
v
<PAGE>
International Equity Fund
(formerly the International Growth and Income Fund)
Investment Seeks to provide long-term capital appreciation by
Objective: investing primarily in accordance with country and sector
weightings determined by MSAM in equity securities of
non-U.S. issuers which, in the aggregate, replicate broad
market indices.
Subadvisor: Morgan Stanley Asset Management (MSAM)
Portfolio Barton M. Biggs, Ann Thivierge
Manager:
Inception Date: January 9, 1995/6/
[GRAPH]
Change in Value of $10,000 Investment and Comparative Indices
International Equity Fund
<TABLE>
<CAPTION>
Growth of $10,000 Growth of $10,000
Invested in Class Invested in Class
A shares at Net A shares with
Asset Value of the the Int'l Growth & MSCI All
Int'l Growth & Income Fund 5.75% Customized 85/15 75/15/10 Country
Month Ended Income Fund NAV Sales Charge Benchmark Composite Composite ex U.S. MSCA EAFE
<S> <C> <C> <C> <C> <C> <C> <C>
Dec-94 $10,000 $9,425 $10,000 $10,000 $10,000 $10,000 $10,000
Jan-95 $9,800 $9,237 $9,766 $9,766 $9,690 $9,546 $9,616
Feb-95 $9,590 $9,039 $9,795 $9,795 $9,662 $9,494 $9,588
Mar-95 $10,030 $9,453 $10,473 $10,473 $10,277 $10,031 $10,186
Apr-95 $10,350 $9,755 $10,840 $10,840 $10,658 $10,422 $10,569
May-95 $10,150 $9,566 $10,761 $10,761 $10,636 $10,376 $10,444
Jun-95 $9,977 $9,403 $10,608 $10,608 $10,511 $10,233 $10,261
Jul-95 $10,488 $9,885 $11,163 $11,163 $11,020 $10,813 $10,900
Aug-95 $10,228 $9,639 $10,692 $10,692 $10,579 $10,438 $10,485
Sep-95 $10,308 $9,715 $10,916 $10,916 $10,778 $10,616 $10,689
Oct-95 $10,137 $9,554 $10,662 $10,662 $10,519 $10,333 $10,402
Nov-95 $10,338 $9,743 $10,926 $10,926 $10,727 $10,576 $10,691
Dec-95 $10,786 $10,165 $11,307 $11,307 $11,102 $10,994 $11,122
Jan-96 $10,888 $10,262 $11,299 $11,299 $11,176 $11,145 $11,167
Feb-96 $10,857 $10,233 $11,331 $11,331 $11,175 $11,145 $11,205
Mar-96 $11,041 $10,406 $11,509 $11,509 $11,327 $11,353 $11,443
Apr-96 $11,265 $10,617 $11,709 $11,709 $11,541 $11,697 $11,776
May-96 $11,235 $10,589 $11,617 $11,617 $11,465 $11,521 $11,559
Jun-96 $11,367 $10,714 $11,681 $11,681 $11,529 $11,580 $11,624
Jul-96 $11,102 $10,464 $11,482 $11,482 $11,281 $11,195 $11,285
Aug-96 $11,214 $10,569 $11,617 $11,617 $11,420 $11,261 $11,309
Sep-96 $11,510 $10,848 $11,856 $11,856 $11,635 $11,541 $11,610
Oct-96 $11,581 $10,916 $11,902 $11,902 $11,637 $11,425 $11,492
Nov-96 $12,010 $11,319 $12,357 $12,357 $12,046 $11,865 $11,949
Dec-96 $12,093 $11,397 $12,296 $12,296 $11,996 $11,728 $11,795
Jan-97 $11,849 $11,167 $11,941 $11,941 $11,776 $11,513 $11,382
Feb-97 $11,926 $11,241 $12,126 $12,126 $11,959 $11,724 $11,569
Mar-97 $12,004 $11,314 $12,145 $12,146 $11,978 $11,699 $11,610
Apr-97 $11,993 $11,303 $12,167 $12,168 $12,000 $11,798 $11,672
May-97 $12,503 $11,784 $12,831 $12,832 $12,655 $12,526 $12,432
Jun-97 $12,947 $12,203 $13,448 $13,445 $13,263 $13,218 $13,117
Jul-97 $13,091 $12,339 $13,664 $13,660 $13,476 $13,485 $13,329
Aug-97 $12,270 $11,565 $12,774 $12,771 $12,598 $12,424 $12,334
Sep-97 $12,736 $12,004 $13,464 $13,461 $13,279 $13,096 $13,024
Oct-97 $11,993 $11,303 $12,530 $12,526 $12,357 $11,981 $12,023
Nov-97 $11,838 $11,157 $12,387 $12,383 $12,216 $11,831 $11,900
Dec-97 $12,036 $11,344 $12,499 $12,495 $12,327 $11,968 $12,004
Jan-98 $12,368 $11,657 $12,874 $12,869 $12,671 $12,326 $12,552
Feb-98 $13,166 $12,409 $13,732 $13,728 $13,419 $13,148 $13,358
Mar-98 $13,707 $12,919 $14,207 $14,201 $13,763 $13,602 $13,769
Apr-98 $13,940 $13,139 $14,309 $14,303 $13,881 $13,700 $13,878
May-98 $13,756 $12,965 $14,049 $14,043 $13,619 $13,451 $13,810
Jun-98 $13,559 $12,780 $13,997 $13,991 $13,560 $13,401 $13,915
Jul-98 $13,608 $12,826 $14,129 $14,123 $13,701 $13,528 $14,056
Aug-98 $11,312 $10,661 $12,137 $12,132 $12,097 $11,620 $12,314
Sep-98 $10,771 $10,152 $11,880 $11,875 $12,019 $11,375 $11,936
Oct-98 $12,073 $11,379 $13,125 $13,119 $13,191 $12,566 $13,180
Nov-98 $12,712 $11,981 $13,830 $13,824 $13,764 $13,242 $13,855
Dec-98 $13,022 $12,273 $14,307 $14,300 $14,199 $13,698 $14,401
Jan-99 $13,219 $12,459 $14,291 $14,285 $14,118 $13,683 $14,357
Feb-99 $12,837 $12,099 $13,971 $13,965 $13,806 $13,377 $14,016
Mar-99 $13,601 $12,819 $14,646 $14,640 $14,475 $14,023 $14,600
Apr-99 $14,032 $13,225 $15,239 $15,372 $15,093 $14,724 $15,192
May-99 $13,305 $12,540 $16,024 $14,650 $14,456 $14,032 $15,974
Jun-99 $13,823 $13,028 $16,649 $15,323 $15,009 $14,677 $16,597
Jul-99 $14,143 $13,330 $17,144 $15,682 $15,384 $15,022 $17,090
Aug-99 $14,192 $13,376 $17,207 $15,737 $15,451 $15,074 $17,153
Sep-99 $14,266 $13,446 $17,381 $15,843 $15,538 $15,176 $17,326
Oct-99 $14,648 $13,806 $18,033 $16,433 $15,999 $15,740 $17,976
</TABLE>
Performance Table
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
------------------------ ------------------
Periods Ending October 31, 1999 1 Since Since/6/ Since Since/6/
Year Inception 4/1/99 Inception 4/1/99
------ --------- ------- --------- --------
<S> <C> <C> <C> <C> <C>
Customized Benchmark/1/,/2/ 37.39% 12.95% 23.12% 80.33% 23.12%
85%/15% Composite Index/1/,/3/ 25.26% 10.81% 12.25% 64.33% 12.25%
75%/15%/10% Composite Index/1/,/7/ 21.29% 10.20% 10.53% 59.99% 10.53%
MSCI All Country World ex
U.S./1/,/7/ 25.26% 9.83% 12.25% 57.40% 12.25%
MSCI EAFE/1/,/8/ 36.39% 12.88% 23.12% 79.76% 23.12%
International Equity Fund A (NAV) 21.33% 8.26% 7.70% 46.48% 7.70%
International Equity Fund Class A
(net of 5.75%
sales charge) 14.35% 6.94% 1.51% 38.06% 1.51%
International Equity Fund Class B
(NAV) 20.53% 7.66% 7.31% 42.66% 7.31%
International Equity Fund Class B
(net of CDSC)/4/ 15.53% 7.35% 2.31% 40.66% 2.31%
International Equity Fund Class C
(NAV) 20.53% 7.65% 7.31% 42.56% 7.31%
International Equity Fund Class C
(net of CDSC)/5/ 19.53% 7.65% 6.31% 42.56% 6.31%
</TABLE>
vi
<PAGE>
Portfolio Managers' Commentary
The International Equity Fund's Class A performance for the year-ended October
31, 1999 was 21.33% as compared to the Composite Index* return of 37.39% for
the same period.
International markets made good progress in the fourth quarter of 1998 as they
recovered from volatility in the third quarter. Central bank easings around
the world helped equities rebound. Although European stocks lagged the U.S.
during the quarter, they still posted a strong gain of 20.5%. Continued
optimism over corporate restructuring contributed to the strength of these
markets. Japan was up 5.1% for the quarter, in spite of a continued recession.
An injection of capital into the Japanese banking sector contributed to the
market's return. The emerging markets had a strong quarter, as stocks were
boosted by global interest rate cuts.
In the first quarter of 1999, the Fund's Japanese holdings fared particularly
well, as the market in this region outperformed all other stock markets
worldwide in February and March. Investors became more optimistic that
Japanese economic growth could resume, and corporate restructuring began to
proliferate. In Europe, investors continue to be concerned about slowing
economic activity and pressure on corporate profits, which have overshadowed
an upsurge in mergers and acquisitions. For the quarter, Europe lagged both
the U.S. and Japan. Emerging markets provided strong returns for the quarter,
marked by a recovery in Brazil.
In April, 1999, Morgan Stanley Asset Management took over management of the
Fund. For much of the second quarter, the Fund was defensively positioned and
the emphasis on Japan and Asia positively affected the Fund. Although European
economic growth was picking up, we were concerned about high valuation levels.
Thus we still preferred Asia and remained underweight in Europe.
For the past several months, global markets have churned on worries about
interest rates and central bank policies. However, the October release of the
moderate U.S. 3rd quarter economic growth numbers and a lower than expected
employment cost index increased the probability of a soft landing in the U.S.
This scenario has increased our confidence that global markets will be strong.
Japan and Asia are just emerging from devastating depression and bear markets,
and Europe is in the early stages of what could be a prolonged period of
growth. We believe EAFE is well positioned versus the S&P 500 not for months,
but for years.
- ---------------------
/1/All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
/2/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.
/3/Comprised of 85% of the return of the MSCI EAFE and 15% of the return of
the Salmon Brothers Non-$ WGBI 10 Index.
/4/The returns reflect the applicable sliding Contingent Deferred Sales Charge
of 5%, 5%, 4%, 3%, 2%, 1%.
/5/The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
/6/Current investment subadvisor assignment became effective 4/1/99.
/7/Composite composed of 75% MSCI EAFE, 15% the Salomon Brothers Non-$ WGBI 10
Index, both fixed weighted Japan at 25%, and 10% Emerging Markets Free ex
Malaysia from February 1, 1997 to December 31, 1997, then MSCI All Country
World Free (ex US) Index.
/8/The benchmark became MSCI EAFE Index on 4/1/99 when Morgan Stanley Asset
Management assumed management of the Fund.
vii
<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.
Morgan Stanley Asset Management (MSAM)
Subadvisor:
Portfolio
Manager: Frances Campion
November 1, 1990/4/
Inception Date:
[GRAPH]
Change in Value of $10,000 Investment and Comparative Indices
Glogal Equity Fund
<TABLE>
<CAPTION>
Growth of $10,000 Invested in Growth of $10,000 Invested in
Class A shares at Net Asset Value Class A shares with 4.75% charge Growth of $10,000
of the Global Equity Fund of the Global Equity Fund Investment in the
Month Ended NAV 5.75% Sales Charge MSCI World Index
<S> <C> <C> <C>
Oct-90 $10,000 $9,425 $10,000
Nov-90 $9,921 $9,350 $9,838
Dec-90 $10,024 $9,448 $10,046
Jan-91 $10,272 $9,682 $10,415
Feb-91 $10,927 $10,298 $11,381
Mar-91 $10,629 $10,018 $11,047
Apr-91 $10,659 $10,046 $11,136
May-91 $10,847 $10,224 $11,390
Jun-91 $10,233 $9,645 $10,688
Jul-91 $10,698 $10,083 $11,195
Aug-91 $10,597 $9,988 $11,161
Sep-91 $10,719 $10,102 $11,456
Oct-91 $10,880 $10,255 $11,644
Nov-91 $10,466 $9,864 $11,138
Dec-91 $11,161 $10,519 $11,951
Jan-92 $11,141 $10,500 $11,733
Feb-92 $11,181 $10,538 $11,532
Mar-92 $10,725 $10,108 $10,991
Apr-92 $11,049 $10,414 $11,146
May-92 $11,587 $10,921 $11,592
Jun-92 $11,252 $10,605 $11,206
Jul-92 $11,049 $10,414 $11,237
Aug-92 $11,060 $10,424 $11,513
Sep-92 $10,776 $10,156 $11,409
Oct-92 $10,491 $9,888 $11,102
Nov-92 $10,836 $10,213 $11,303
Dec-92 $10,841 $10,218 $11,397
Jan-93 $10,871 $10,246 $11,437
Feb-93 $11,004 $10,371 $11,710
Mar-93 $11,633 $10,965 $12,392
Apr-93 $12,243 $11,539 $12,968
May-93 $12,843 $12,104 $13,269
Jun-93 $12,710 $11,980 $13,160
Jul-93 $13,036 $12,286 $13,434
Aug-93 $13,716 $12,928 $14,052
Sep-93 $13,757 $12,966 $13,794
Oct-93 $13,960 $13,157 $14,176
Nov-93 $13,117 $12,363 $13,377
Dec-93 $14,046 $13,238 $14,034
Jan-94 $14,920 $14,062 $14,961
Feb-94 $14,982 $14,120 $14,770
Mar-94 $14,529 $13,694 $14,136
Apr-94 $14,910 $14,052 $14,576
May-94 $14,684 $13,839 $14,615
Jun-94 $14,848 $13,994 $14,577
Jul-94 $15,177 $14,304 $14,857
Aug-94 $15,640 $14,741 $15,307
Sep-94 $15,074 $14,207 $14,908
Oct-94 $15,239 $14,363 $15,334
Nov-94 $14,272 $13,452 $14,672
Dec-94 $14,256 $13,436 $14,817
Jan-95 $13,459 $12,685 $14,598
Feb-95 $13,459 $12,685 $14,806
Mar-95 $13,969 $13,166 $15,517
Apr-95 $14,288 $13,466 $16,074
May-95 $14,330 $13,506 $16,214
Jun-95 $14,298 $13,476 $16,212
Jul-95 $15,095 $14,227 $17,026
Aug-95 $14,999 $14,137 $16,650
Sep-95 $15,137 $14,267 $17,138
Oct-95 $14,702 $13,856 $16,870
Nov-95 $14,819 $13,967 $17,459
Dec-95 $15,266 $14,388 $17,973
Jan-96 $15,395 $14,510 $18,301
Feb-96 $15,546 $14,652 $18,417
Mar-96 $15,934 $15,018 $18,722
Apr-96 $16,495 $15,546 $19,166
May-96 $16,312 $15,374 $19,185
Jun-96 $16,279 $15,343 $19,285
Jul-96 $15,309 $14,429 $18,606
Aug-96 $15,622 $14,723 $18,824
Sep-96 $15,719 $14,815 $19,564
Oct-96 $15,632 $14,734 $19,696
Nov-96 $16,646 $15,689 $20,796
Dec-96 $17,007 $16,029 $20,459
Jan-97 $17,043 $16,063 $20,702
Feb-97 $17,490 $16,485 $20,936
Mar-97 $17,345 $16,348 $20,518
Apr-97 $17,551 $16,541 $21,185
May-97 $18,734 $17,657 $22,489
Jun-97 $19,652 $18,522 $23,607
Jul-97 $20,462 $19,285 $24,690
Aug-97 $19,447 $18,329 $23,034
Sep-97 $20,534 $19,353 $24,282
Oct-97 $19,713 $18,579 $23,000
Nov-97 $19,809 $18,670 $23,403
Dec-97 $20,500 $19,321 $23,684
Jan-98 $20,552 $19,370 $24,341
Feb-98 $22,172 $20,897 $25,983
Mar-98 $23,453 $22,104 $27,076
Apr-98 $23,570 $22,215 $27,337
May-98 $23,348 $22,006 $26,990
Jun-98 $23,074 $21,747 $27,627
Jul-98 $22,721 $21,415 $27,578
Aug-98 $19,128 $18,028 $23,896
Sep-98 $19,755 $18,619 $24,315
Oct-98 $21,467 $20,232 $26,509
Nov-98 $22,277 $20,996 $28,081
Dec-98 $22,809 $21,498 $29,448
Jan-99 $22,640 $21,339 $30,090
Feb-99 $21,572 $20,331 $29,287
Mar-99 $21,951 $20,689 $30,502
Apr-99 $23,414 $22,067 $31,701
May-99 $23,034 $21,710 $30,538
Jun-99 $23,751 $22,386 $31,958
Jul-99 $23,906 $22,531 $31,859
Aug-99 $23,653 $22,293 $31,798
Sep-99 $22,584 $21,285 $31,486
Oct-99 $22,668 $21,365 $33,105
</TABLE>
Performance Table
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
-------------------------------- ------------------
Periods Ending October 31, 1 5 Since Since/4/ Since Since/4/
1999 Year Years Inception 10/1/96 Inception 10/1/96
------ ------ --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
MSCI World/1/ 24.91% 16.44% 13.84% 18.61% 221.05% 69.26%
Global Equity Fund A (NAV) 5.60% 8.27% 9.53% 12.61% 126.68% 44.21%
Class A (net of 5.75% sales
charge) -0.47% 7.00% 8.81% 10.47% 113.65% 35.92%
Global Equity Fund Class B
(NAV) 5.01% 7.65% 9.16% 12.00% 119.88% 41.81%
Class B (net of CDSC)/2/ 0.01% 7.35% 9.16% 11.23% 119.88% 38.81%
Global Equity Fund Class C
(NAV) 4.99% 7.65% 9.16% 11.98% 119.88% 41.73%
Class C (net of CDSC)/3/ 3.99% 7.65% 9.16% 11.98% 119.88% 41.73%
</TABLE>
- -------------------------------
/1/All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
/2/The returns reflect the applicable sliding Contingent Deferred Sales Charge
of 5%, 5%, 4%, 3%, 2%, 1%.
/3/The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
/4/Current investment subadvisor assignment became effective 10/1/96.
viii
<PAGE>
Portfolio Manager's Commentary
The Global Equity Fund's Class A performance for the year-ended October 31,
1999 was 5.60% as compared to the MSCI World Index return of 24.91% for the
same period.
While the portfolio's performance was strong during the second quarter,
coinciding with a turnaround in "value", the third quarter of the year saw a
return in the U.S. to the narrow, technology-dominated performance reminiscent
of the first quarter of this year.
We remain overweighed in Europe. The increased globalization of the economy
and the threat from powerful new entrants to Europe, like Wal-Mart, have
prompted acceleration in European consolidation. Sectors such as banking,
energy and consumer goods are consolidating in order to build scale in a world
characterized by slow growth and over-capacity.
The value of M&A activity in Europe is rising from $160 billion in 1997 to an
annualized $400 billion in 1999. Not only have specific transactions helped
the Fund, they also signal changing management attitudes toward shareholder
value. This is an important development for value investors, as management,
through their willingness to change, often provides the catalyst for value
creation.
We remain underweight vs. the U.S. market and are particularly underweight vs.
the largest U.S. companies. Recent value ideas in the U.S. include retailer
Sears and telecom operator GTE, (a less expensive way to get exposure to Bell
Atlantic since the two are merging).
In Japan, our stock selection has not been as strong as in the first six
months of the year. This is due to the strong re-rating of financials and low
quality cyclicals that has taken place in anticipation of improved operating
fundamentals. We have been drawn to relatively defensive business franchises
such as NTT and Toppan Printing or technology companies like Hitachi and
Pioneer, which are more attractively valued than their U.S. counterparts.
The market has been challenging for value investors. We remain committed to
what we know works over the long run; adherence to the discipline of
purchasing good businesses at a discount to their intrinsic value.
ix
<PAGE>
Emerging Growth Fund
Investment Seeks to provide maximum capital appreciation by
Objective: investing primarily in a portfolio of equity securities
of domestic companies. Under normal conditions, the Fund
will be mainly invested 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, Stephen J. Lurito
Manager:
Inception Date: January 6, 1998
[GRAPH]
Change in Value of $10,000 Investment and Companies Indices
Emerging Growth Fund
<TABLE>
<CAPTION>
Growth of $10,000 Invested in Growth of $10,000 Invested in Growth of $10,000
Class A shares at Net Asset Value Class A shares with 5.75% charge Investment in the
Month Ended of the Emerging Growth Fund of the Emerging Growth Fund Russell 2000 Growth
Month Ended NAV 5.75% Sales Charge Russell 2000 Growth
<S> <C> <C> <C>
1/6/98 $10,000 $9,425 $10,000
Jan-98 $9,990 $9,416 $9,867
Feb-98 $10,690 $10,075 $10,738
Mar-98 $11,160 $10,518 $11,189
Apr-98 $11,270 $10,622 $11,258
May-98 $10,640 $10,028 $10,440
Jun-98 $10,940 $10,311 $10,547
Jul-98 $9,910 $9,340 $9,666
Aug-98 $7,890 $7,436 $7,435
Sep-98 $8,470 $7,983 $8,189
Oct-98 $8,880 $8,369 $8,617
Nov-98 $9,410 $8,869 $9,285
Dec-98 $10,090 $9,510 $10,125
Jan-99 $10,350 $9,755 $10,581
Feb-99 $9,530 $8,982 $9,613
Mar-99 $10,090 $9,510 $9,955
Apr-99 $10,290 $9,698 $10,834
May-99 $10,350 $9,755 $10,852
Jun-99 $11,630 $10,961 $11,423
Jul-99 $11,530 $10,867 $11,070
Aug-99 $11,450 $10,792 $10,656
Sep-99 $11,970 $11,282 $10,862
Oct-99 $12,810 $12,073 $11,137
</TABLE>
Performance Table
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
---------------- ------------
1 Since Since
Year Inception Inception
Periods Ending October 31, 1999 ------ --------- ------------
<S> <C> <C> <C>
Russell 2000 Growth/1/ 29.98% 6.05% 11.37%
Emerging Growth Fund A (NAV) 44.26% 14.61% 28.10%
Emerging Growth Fund Class A (net of 5.75% sales
charge) 35.97% 10.93% 20.73%
Emerging Growth Fund Class B (NAV) 42.36% 13.42% 25.70%
Emerging Growth Fund Class B (net of CDSC)/2/ 37.36% 10.91% 20.70%
Emerging Growth Fund Class C (NAV) 42.19% 13.42% 25.70%
Emerging Growth Fund Class C (net of CDSC)/3/ 41.19% 13.42% 25.70%
</TABLE>
- -----------------------------------------------
/1/All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
/2/The returns reflect the applicable sliding Contingent Deferred Sales Charge
of 5%, 5%, 4%, 3%, 2%, 1%.
/3/The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
x
<PAGE>
Portfolio Manager's Commentary
Supported by optimism over interest rates and earnings, small-cap and
emerging-growth stocks had generally good showings in October, with the
Russell 2000 Growth and Russell 2500 Growth indexes up 2.56% and 4.87%,
respectively. North American Emerging Growth Fund had a gain of 7.02% for the
month, a solid return both in absolute terms and compared to those of its
benchmarks. The Emerging Growth Fund's Class A performance for the year-ended
October 31, 1999, was 44.26% as compared to the Russell 2000 Growth Index
return of 29.98% for the same period. Factors that helped the Fund included
its overweightings in the buoyant technology and communications areas.
In terms of general strategy, we remained focused on well-managed companies
offering innovative products and services. And with respect to major
investment themes, we continued to emphasize companies that stand to benefit
from a global push for enhanced productivity, as well as those standing to
benefit from a maturing and increasingly wealthy population. In this context,
our primary areas of concentration remained technology, communications,
business services, leisure & entertainment and health-care stocks.
The recent decline in smaller-cap and aggressive-growth stocks
notwithstanding, we see ample grounds for optimism regarding their longer-term
prospects. The main reason for our bullishness is the stocks' relative
valuations. By almost any relevant measure, smaller companies are selling
extremely cheaply vs. larger companies, trading at multiples well below their
20-year averages. Assuming that investors ultimately care about value - and
historically they have - smaller caps could see a material pickup in buying
interest at some point in the months ahead.
Adding to the stocks' potential appeal is these companies' relatively strong
earnings prospects. Analysts are currently calling for small-cap earnings
growth of roughly 12% in the third quarter, a healthy gain albeit a less-
robust one than that expected for larger companies. The fourth quarter looks
far better for smaller caps, though, both in relative and absolute terms, with
estimates calling for year-over-year growth of as much as 30%, vs. 20% or
thereabouts for larger companies. The medium- to longer-term outlook is
positive as well, with many analysts expecting smaller companies' earnings
growth to handily exceed that of larger companies over the next three to five
years. Assuming these projections, especially the longer-range ones, are
accurate (admittedly, a big assumption), they make small-cap stocks' current
low multiples that much more compelling.
A third factor that could spark and sustain interest in the group is the near
certainty of ongoing acquisition activity. Smaller companies have been gobbled
up by larger ones at a furious clip so far in 1999, with the total number of
deals for the year likely to be the highest in a decade. The effect on the
share prices of targeted firms has been, in most cases, considerable, and the
likelihood of continued such activity could, at some point, prove too strong a
lure for investors to continue to ignore.
Given the above, we remain positive on the asset class. Given a catalyst, such
as an easing of interest-rate concerns or a broadening of market leadership,
we think small caps could see their fortunes improve considerably, and in
fairly short order. In the meantime, we remain focused on identifying the most
promising companies, since we expect wide differences in share-price
performance between the ultimate winners and losers in the group.
xi
<PAGE>
Small/Mid Cap Fund
Investment Objective: Seeks to provide long-term capital appreciation by
investing at least 65% of its assets in the stocks of
small-to-mid size companies that have total market
capitalization between $500 million and $5 billion.
Subadvisor: Fred Alger Management, Inc.
Portfolio Manager: David D. Alger
Inception Date: March 4, 1996
[GRAPH]
Change in Value of $10,000 Investment and Comparative Indices
Small/Mid Cap Fund
<TABLE>
<CAPTION>
Growth of $10,000 Invested in Growth of $10,000 Invested in Growth of $10,000
Class A shares at Net Asset Value Class A shares with 5.75% charge Investment in the Russell
of the Small/Mid Cap Fund of the Small/Mid Cap Fund 2000 Growth Index
Month Ended NAV 5.75% Sales Charge Russell 2000 Growth Index
<S> <C> <C> <C>
Feb-96 $10,000 $9,425 $10,000
Mar-96 $10,168 $9,583 $10,198
Apr-96 $10,584 $9,975 $10,981
May-96 $10,768 $10,149 $11,545
Jun-96 $10,352 $9,757 $10,794
Jul-96 $9,312 $8,777 $9,476
Aug-96 $9,792 $9,229 $10,177
Sep-96 $10,328 $9,734 $10,702
Oct-96 $10,096 $9,515 $10,240
Nov-96 $10,696 $10,081 $10,525
Dec-96 $10,504 $9,900 $10,730
Jan-97 $10,944 $10,315 $10,990
Feb-97 $10,240 $9,651 $10,326
Mar-97 $9,688 $9,131 $9,598
Apr-97 $9,832 $9,267 $9,487
May-97 $10,600 $9,991 $10,913
Jun-97 $11,248 $10,601 $11,283
Jul-97 $12,328 $11,619 $11,860
Aug-97 $12,184 $11,483 $12,216
Sep-97 $13,080 $12,328 $13,191
Oct-97 $12,408 $11,695 $12,398
Nov-97 $12,448 $11,732 $12,103
Dec-97 $12,173 $11,473 $12,110
Jan-98 $12,156 $11,457 $11,949
Feb-98 $13,287 $12,523 $13,004
Mar-98 $14,166 $13,352 $13,551
Apr-98 $14,109 $13,298 $13,633
May-98 $13,653 $12,868 $12,642
Jun-98 $14,695 $13,850 $12,771
Jul-98 $14,410 $13,582 $11,705
Aug-98 $11,489 $10,828 $9,003
Sep-98 $12,286 $11,580 $9,916
Oct-98 $13,092 $12,339 $10,434
Nov-98 $14,052 $13,244 $11,243
Dec-98 $15,782 $14,875 $12,261
Jan-99 $15,623 $14,724 $12,813
Feb-99 $14,869 $14,014 $11,640
Mar-99 $16,146 $15,218 $12,055
Apr-99 $16,217 $15,285 $13,119
May-99 $16,323 $15,385 $13,140
Jun-99 $17,565 $16,555 $13,833
Jul-99 $16,652 $15,694 $13,405
Aug-99 $16,164 $15,234 $12,904
Sep-99 $16,031 $15,109 $13,153
Oct-99 $16,430 $15,485 $13,497
</TABLE>
<TABLE>
<CAPTION>
Growth of $10,000 Growth of $10,000
Investment in the S&P Investment in the 50%/50%
MidCap 400 Index Composite Index
Month Ended S&P MidCap 400 Index 50%/50% Composite Index
<S> <C> <C>
Feb-96 $10,000 $10,000
Mar-96 $10,120 $10,159
Apr-96 $10,429 $10,704
May-96 $10,569 $11,051
Jun-96 $10,411 $10,609
Jul-96 $9,706 $9,602
Aug-96 $10,266 $10,234
Sep-96 $10,714 $10,721
Oct-96 $10,745 $10,505
Nov-96 $11,350 $10,947
Dec-96 $11,362 $11,060
Jan-97 $11,788 $11,401
Feb-97 $11,692 $11,010
Mar-97 $11,194 $10,388
Apr-97 $11,483 $10,462
May-97 $12,487 $11,705
Jun-97 $12,838 $12,068
Jul-97 $14,109 $12,974
Aug-97 $14,092 $13,161
Sep-97 $14,902 $14,065
Oct-97 $14,254 $13,336
Nov-97 $14,465 $13,276
Dec-97 $15,026 $13,538
Jan-98 $14,741 $13,319
Feb-98 $15,961 $14,458
Mar-98 $16,681 $15,088
Apr-98 $16,985 $15,271
May-98 $16,220 $14,373
Jun-98 $16,323 $14,491
Jul-98 $15,691 $13,606
Aug-98 $12,772 $10,770
Sep-98 $13,964 $11,819
Oct-98 $15,211 $12,655
Nov-98 $15,970 $13,462
Dec-98 $17,898 $14,883
Jan-99 $17,202 $14,929
Feb-99 $16,302 $13,855
Mar-99 $16,757 $14,295
Apr-99 $18,077 $15,490
May-99 $18,155 $15,535
Jun-99 $19,126 $16,360
Jul-99 $18,721 $15,934
Aug-99 $18,079 $15,363
Sep-99 $17,522 $15,275
Oct-99 $18,399 $15,948
</TABLE>
Performance Table
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
-------------- -------------------------
1 Since Since
Year Inception/1/ Inception/1/
Periods Ending October 31, 1999 -------------- ------------ ------------
<S> <C> <C> <C>
S&P Mid Cap 400 Index 20.96% 18.09% 83.99%
Russell 2000 Growth Index 29.98% 8.52% 34.97%
50%/50% Composite Index/2/ 25.47% 13.31% 59.48%
Small/Mid Cap Fund A (NAV) 25.50% 14.53% 64.30%
Small/Mid Cap Fund Class A (net of
5.75% sales charge) 18.28% 12.69% 54.85%
Small/Mid Cap Fund Class B (NAV) 24.62% 13.69% 59.95%
Small/Mid Cap Fund Class B (net of
CDSC)/3/ 19.62% 13.10% 56.95%
Small/Mid Cap Fund Class C (NAV) 24.65% 13.74% 60.18%
Small/Mid Cap Fund Class C (net of
CDSC)/4/ 23.65% 13.74% 60.18%
</TABLE>
- -----------------------------------------------
/1/All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
/2/Comprised of 50% of the return of the S&P MidCap 400 Index and 50% of the
return of the Russell 2000 Growth Index.
/3/The returns reflect the applicable sliding Contingent Deferred Sales Charge
of 5%, 5%, 4%, 3%, 2%, 1%.
/4/The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
xii
<PAGE>
Portfolio Manager's Commentary
Despite being invested primarily in small-cap and mid-cap stocks - which
vastly underperformed large-cap stocks during the recent fiscal year - the
Small/MidCap Fund posted solid results. The Small/Mid Cap Fund Class A posted
a return of 25.50%, slightly underperforming the Composite Index (Russell 2000
Growth/S&P 400) return of 25.47% for the same period, but easily outperforming
the S&P MidCap 400 Index return of 20.96%. A heavy technology weighting, a
growth stock orientation and the strong performance of a few key holdings
allowed the Fund to outperform the small-cap and mid-cap markets.
The fiscal year ended October 31, 1999 began in the midst of a dramatic
recovery from the July/August 1998 market correction caused by the Asian
financial crisis. The third of three interest rate cuts by the Fed took place
in November 1998, adding momentum to the market's revival. During the first
half of the year, large-cap stocks marched forward without a notable setback,
while their smaller counterparts struggled. All of the major large-cap indices
continuously set new highs, and the Dow Jones Industrial Average closed over
10,000 for the first time on March 29, 1999.
May and June saw consolidation and profit taking in the equity markets. An
ongoing fear of rising interest rates was realized on June 30 when the Fed
"took back" one of three previous interest rate cuts by hiking the Fed Funds
Rate to 5%. Nonetheless, the market shrugged off the rate hike and took solace
in the Fed's return to a "neutral bias." Large-cap stocks continued to rally,
and the S&P 500 reached an intra-day high of 1420.33 on July 19.
The fourth quarter of the recent fiscal year was marked by extreme market
volatility, an overall downward trend, and ultimately, a dramatic rebound. The
market slipped steadily downward from its mid-July peak and failed to match
its previous highs during August and September. In October, mounting fears of
rising interest rates, an upward spike in the price of gold and a series of
threatening economic reports forced the yield on the long bond to 6.40%.
Equity markets reacted strongly. The Dow Jones dropped more than 1,000 points
in less than a month, briefly dipping below the 10,000 level on October 18th.
As is so often the case, however, the market recovered when it appeared to be
at its weakest. As inflation jitters and interest rate fears subsided with the
release of benign economic data, the final two weeks of October saw dramatic
gains throughout both the bond and equity markets. The long bond once again
approached 6%, and the Dow Jones neared 11,000.
The stock market is seemingly in the midst of a strong recovery. Recently, out
of favor industries such as financials and pharmaceuticals have also begun to
act well. According to David Alger, regardless of whether the Fed raises rates
on November 16th, the market may continue to rally. If the Fed does raise
rates, it will be viewed as the last in a set of three. If it does not, that
will be considered bullish.
xiii
<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.
Founders Asset Management LLC
Subadvisor:
Portfolio
Manager: Thomas Arrington, Scott Chapman
March 4, 1996
Inception Date:
[GRAPH]
Change in Value of $10,000 Investment and Comparative Indices
Growth Equity Fund
<TABLE>
<CAPTION>
Growth of $10,000 Growth of $10,000
Invested in Invested in
Class A shares at Class A shares with
Net Asset Value of 5.75% charge Growth of $10,000
the Growth of the Growth Investment
Equity Fund Equity Fund in the
Month Ended NAV 5.75% Sales Charge S&P 500
<S> <C> <C> <C>
Feb-96 $10,000 $9,425 $10,000
Mar-96 $10,080 $9,500 $10,098
Apr-96 $10,680 $10,066 $10,252
May-96 $11,168 $10,526 $10,504
Jun-96 $11,040 $10,405 $10,547
Jul-96 $10,216 $9,629 $10,081
Aug-96 $10,560 $9,953 $10,294
Sep-96 $11,104 $10,466 $10,873
Oct-96 $11,024 $10,390 $11,173
Nov-96 $11,712 $11,039 $12,018
Dec-96 $11,305 $10,655 $11,780
Jan-97 $11,994 $11,304 $12,516
Feb-97 $11,702 $11,029 $12,614
Mar-97 $11,329 $10,678 $12,095
Apr-97 $11,872 $11,190 $12,816
May-97 $12,578 $11,855 $13,595
Jun-97 $13,243 $12,481 $14,205
Jul-97 $14,419 $13,590 $15,334
Aug-97 $13,713 $12,925 $14,475
Sep-97 $14,419 $13,590 $15,267
Oct-97 $13,794 $13,001 $14,757
Nov-97 $13,932 $13,131 $15,440
Dec-97 $14,173 $13,358 $15,706
Jan-98 $14,323 $13,500 $15,880
Feb-98 $15,253 $14,376 $17,025
Mar-98 $16,068 $15,144 $17,897
Apr-98 $16,325 $15,386 $18,078
May-98 $16,086 $15,161 $17,767
Jun-98 $16,945 $15,971 $18,488
Jul-98 $16,644 $15,687 $18,292
Aug-98 $13,756 $12,965 $15,651
Sep-98 $14,615 $13,775 $16,654
Oct-98 $15,705 $14,802 $18,008
Nov-98 $16,476 $15,528 $19,099
Dec-98 $17,734 $16,714 $20,199
Jan-99 $18,959 $17,868 $21,043
Feb-99 $18,450 $17,389 $20,389
Mar-99 $19,467 $18,348 $21,205
Apr-99 $19,185 $18,081 $22,025
May-99 $18,375 $17,318 $21,505
Jun-99 $19,627 $18,499 $22,699
Jul-99 $18,949 $17,860 $21,991
Aug-99 $18,977 $17,886 $21,881
Sep-99 $18,657 $17,584 $21,281
Oct-99 $20,192 $19,031 $22,614
</TABLE>
Performance Table
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
---------------- ------------
1 Since Since
Periods Ending October 31, 1999 Year Inception Inception
------ --------- ------------
<S> <C> <C> <C>
S&P 500/1/ 25.58% 24.92% 126.14%
Growth Equity Fund A (NAV) 28.57% 21.17% 101.92%
Growth Equity Fund Class A (net of 5.75% sales
charge) 21.18% 19.23% 90.31%
Growth Equity Fund Class B (NAV) 27.77% 20.41% 97.33%
Growth Equity Fund Class B (net of CDSC)/2/ 22.77% 19.90% 94.33%
Growth Equity Fund Class C (NAV) 27.75% 20.38% 97.18%
Growth Equity Fund Class C (net of CDSC)/3/ 26.75% 20.38% 97.18%
</TABLE>
- -----------------------------------------------
/1/All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
/2/The returns reflect the applicable sliding Contingent Deferred Sales Charge
of 5%, 5%, 4%, 3%, 2%, 1%.
/3/The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
xiv
<PAGE>
Portfolio Manager's Commentary
The Growth Equity Fund's Class A performance for the year-ended October 31,
1999 was 28.57% as compared to the S&P 500 Index return of 25.58% for the same
period. In December 1998, Thomas Arrington and Scott Chapman became co-
managers of the Fund.
While the first half of the year saw strong performance in mid- to large-cap
equities, the U.S. stock market experienced a summer pullback. This was driven
initially by investors' concern that the Federal Reserve would further raise
short-term interest rates, a fear that was realized in the form of August's
hikes in the Federal Funds and discount rates.
Specifically, the performance of the Fund during the second quarter was
adversely affected by a major shift in investor preference away from large-
cap, consistent growth companies toward economically sensitive companies. This
shift occurred primarily because the United States' economy grew faster than
expected while, at the same time, Asian economies appeared to be stabilizing.
Consequently, the Fund faced strong headwinds in the second quarter as
cyclical, mid-cap and small-cap stocks rebounded with a vengeance from their
multi-year performance dormancy and traders took profits in large cap growth
stocks. Traders became more confident of a robust economic outlook which gave
them courage to buy companies with less certain longer-term outlooks.
Despite the market shift during the quarter, the Fund remained true to its
investment discipline. We focus on companies that we believe have the
potential to deliver consistent earnings growth in all-weather economic
environments, not on companies that are inextricably tied to the health of the
economy. The Fund emphasizes a diversified portfolio of brand-name large- and
mid-capitalization growth companies with a demonstrated track record of
reliable earnings growth. In the third quarter, this focus led us to be
slightly overweight in the healthcare and technology sectors, positioning that
served the Fund well. The imperatives of consumers investing in Internet
access and companies investing in e-commerce capabilities also contributed to
the gains in the technology sector. Both stock selection and an overweight
position in the sector contributed to our performance.
xv
<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
Manager: Laurence A. Manchester
Inception Date: January 6, 1998
[GRAPH]
Change in Value of $10,000 Investment and Comparative Indices
Tax-Sensitive Equity Funds
<TABLE>
<CAPTION>
Growth of $10,000 Invested in Growth of $10,000 Invested in Growth of $10,000
Class A shares at Net Asset Value Class A shares with 5.75% charge Investment in the
Month Ended of the Growth Equity Fund of the Growth Equity Fund S&P 500
Month Ended NAV 5.75% Sales Charge S&P 500
<S> <C> <C> <C>
1/6/98 $10,000 $9,425 $10,000
Jan-98 $9,900 $9,331 $10,111
Feb-98 $10,650 $10,038 $10,840
Mar-98 $11,060 $10,424 $11,395
Apr-98 $11,020 $10,386 $11,510
May-98 $10,610 $10,000 $11,312
Jun-98 $10,640 $10,028 $11,771
Jul-98 $10,270 $9,679 $11,647
Aug-98 $8,110 $7,644 $9,965
Sep-98 $8,440 $7,955 $10,604
Oct-98 $9,070 $8,548 $11,466
Nov-98 $9,680 $9,123 $12,160
Dec-98 $10,240 $9,651 $12,861
Jan-99 $10,080 $9,500 $13,399
Feb-99 $9,410 $8,869 $12,982
Mar-99 $9,290 $8,756 $13,501
Apr-99 $9,720 $9,161 $14,024
May-99 $9,890 $9,321 $13,693
Jun-99 $10,290 $9,698 $14,453
Jul-99 $9,940 $9,368 $14,002
Aug-99 $9,550 $9,001 $13,932
Sep-99 $9,200 $8,671 $13,550
Oct-99 $9,500 $8,954 $14,395
</TABLE>
Performance Table
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
---------------- ------------
1 Since Since
Year Inception Inception
Periods Ending October 31, 1999 ------ --------- ------------
<S> <C> <C> <C>
S&P 500/1/ 25.58% 21.98% 43.95%
Tax-Sensitive Equity Fund A (NAV) 4.63% -2.78% -5.00%
Tax-Sensitive Equity Fund Class A (net of 5.75%
sales charge) -1.28% -5.90% -10.46%
Tax-Sensitive Equity Fund Class B (NAV) 3.54% -3.58% -6.40%
Tax-Sensitive Equity Fund Class B (net of
CDSC)/2/ -1.46% -6.26% -11.08%
Tax-Sensitive Equity Fund Class C (NAV) 3.43% -3.58% -6.40%
Tax-Sensitive Equity Fund Class C (net of
CDSC)/3/ 2.43% -3.58% -6.40%
</TABLE>
- -----------------------------------------------
/1/All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
/2/The returns reflect the applicable sliding Contingent Deferred Sales Charge
of 5%, 5%, 4%, 3%, 2%, 1%.
/3/The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
xvi
<PAGE>
Portfolio Manager's Commentary
The Tax-Sensitive Equity Fund's Class A performance for the period ended
October 31, 1999 was 4.63% as compared to the Standard & Poor's 500 Index
return of 25.58%. As of October 31, 1999, the Fund had no capital gains
distributions to shareholders.
The 12 months ending October 31, 1999, was a period in which the stock market
experienced increased volatility, in part due to the strength of the U.S.
economy and fears of rising inflation. Interest rates have risen as the
Federal Reserve Board instituted several interest rate hikes in an attempt to
prevent a pick-up in inflation. Our outlook on the economy has not varied much
over the last several quarters. We expect economic growth to continue around
the world with the U.S. growing at a subdued pace relative to recent
experience. We anticipate that inflation will remain under control with slight
upward pressure in the near term. Corporate profits should continue to be
strong, although less so than in early 1999. All of this good economic news,
assuming it continues, should create an environment for U.S. stocks to deliver
positive returns.
For most of the last 12 months, the returns from the U.S. stock market have
been dominated by a small set of growth stocks. The largest 100 companies
continue to sell at over 30 times anticipated earnings, but those ranging
between $2 billion and $8 billion in capitalization are selling at only 19
times. This is a full 40% discount. Within this environment, the North
American Tax-Sensitive Equity Fund's stocks sell at almost a 30% discount to
the S&P 500. Yet, the earnings of the stocks in the Fund have grown 17% a year
faster than the earnings of the S&P 500 over the last five years.
We continue to challenge the current lack of valuation discipline in the
market, and as a result, we struggle for returns. We remain committed to our
philosophy of investing in a diversified portfolio of companies with a history
of strong earnings growth, above average expectations for future growth, and
below average valuations. This discipline leads us to many of the
intermediate-sized companies that remain out of favor in the eyes of the
market. We believe, however, that the worst risk is not the under performance
of our current portfolio, but the potential for losses embedded in that very
narrow group of current market leaders now selling at exceedingly high
historic valuations.
xvii
<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.
Wellington Management Company LLP
Subadvisor:
Portfolio
Manager: Matthew E. Megargel
May 1, 1991
Inception Date:
[GRAPH]
Change in Value of $10,000 Investment and Comparative Indices
Growth and Income Fund
<TABLE>
<CAPTION>
Growth of $10,000 Invested in Growth of $10,000 Invested in
Class A shares at Net Asset Value Class A shares with 5.75% charge Growth of $10,000
of the Growth & Income Fund of the Growth & Income Fund Investment in the
Month Ended NAV 5.75% Sales Charge S&P 500
<S> <C> <C> <C>
Apr-91 $10,000 $9,425 $10,000
May-91 $10,240 $9,651 $10,428
Jun-91 $9,879 $9,311 $9,951
Jul-91 $10,201 $9,614 $10,417
Aug-91 $10,352 $9,757 $10,662
Sep-91 $10,205 $9,618 $10,487
Oct-91 $10,588 $9,979 $10,628
Nov-91 $10,175 $9,590 $10,198
Dec-91 $11,088 $10,450 $11,364
Jan-92 $10,775 $10,155 $11,153
Feb-92 $10,876 $10,250 $11,295
Mar-92 $10,642 $10,030 $11,074
Apr-92 $10,805 $10,183 $11,396
May-92 $10,845 $10,222 $11,458
Jun-92 $10,779 $10,159 $11,292
Jul-92 $11,217 $10,572 $11,747
Aug-92 $11,146 $10,505 $11,509
Sep-92 $11,400 $10,745 $11,642
Oct-92 $11,480 $10,820 $11,684
Nov-92 $11,777 $11,100 $12,077
Dec-92 $12,007 $11,317 $12,236
Jan-93 $12,162 $11,463 $12,325
Feb-93 $12,286 $11,579 $12,491
Mar-93 $12,677 $11,948 $12,760
Apr-93 $12,430 $11,715 $12,447
May-93 $12,657 $11,929 $12,783
Jun-93 $12,656 $11,928 $12,826
Jul-93 $12,625 $11,899 $12,765
Aug-93 $13,008 $12,260 $13,252
Sep-93 $12,956 $12,211 $13,154
Oct-93 $13,153 $12,396 $13,421
Nov-93 $12,884 $12,143 $13,294
Dec-93 $13,112 $12,358 $13,458
Jan-94 $13,574 $12,793 $13,909
Feb-94 $13,406 $12,635 $13,533
Mar-94 $12,892 $12,150 $12,945
Apr-94 $13,028 $12,279 $13,113
May-94 $13,259 $12,497 $13,327
Jun-94 $12,932 $12,188 $12,997
Jul-94 $13,481 $12,706 $13,428
Aug-94 $13,871 $13,074 $13,974
Sep-94 $13,607 $12,825 $13,637
Oct-94 $13,819 $13,024 $13,950
Nov-94 $13,196 $12,437 $13,438
Dec-94 $13,421 $12,650 $13,634
Jan-95 $13,432 $12,660 $13,988
Feb-95 $13,957 $13,154 $14,531
Mar-95 $14,263 $13,443 $14,961
Apr-95 $14,700 $13,855 $15,397
May-95 $15,137 $14,267 $16,005
Jun-95 $15,458 $14,569 $16,381
Jul-95 $15,876 $14,963 $16,926
Aug-95 $16,008 $15,088 $16,972
Sep-95 $16,482 $15,534 $17,683
Oct-95 $16,206 $15,275 $17,621
Nov-95 $16,845 $15,876 $18,397
Dec-95 $17,117 $16,133 $18,737
Jan-96 $17,520 $16,513 $19,374
Feb-96 $17,565 $16,555 $19,554
Mar-96 $17,856 $16,829 $19,742
Apr-96 $18,113 $17,072 $20,032
May-96 $18,516 $17,451 $20,549
Jun-96 $18,499 $17,435 $20,627
Jul-96 $17,801 $16,778 $19,715
Aug-96 $18,195 $17,149 $20,131
Sep-96 $19,218 $18,113 $21,265
Oct-96 $19,747 $18,611 $21,852
Nov-96 $21,231 $20,010 $23,504
Dec-96 $20,826 $19,628 $23,038
Jan-97 $21,963 $20,700 $24,478
Feb-97 $22,190 $20,914 $24,669
Mar-97 $21,328 $20,102 $23,655
Apr-97 $22,549 $21,253 $25,065
May-97 $23,842 $22,471 $26,589
Jun-97 $25,146 $23,701 $27,780
Jul-97 $27,109 $25,551 $29,989
Aug-97 $25,637 $24,163 $28,309
Sep-97 $26,990 $25,438 $29,858
Oct-97 $26,056 $24,558 $28,860
Nov-97 $27,241 $25,675 $30,197
Dec-97 $27,549 $25,965 $30,716
Jan-98 $27,861 $26,259 $31,057
Feb-98 $29,729 $28,020 $33,296
Mar-98 $31,222 $29,426 $35,001
Apr-98 $31,637 $29,818 $35,355
May-98 $30,806 $29,035 $34,746
Jun-98 $32,013 $30,172 $36,157
Jul-98 $31,844 $30,013 $35,774
Aug-98 $27,264 $25,696 $30,608
Sep-98 $28,912 $27,249 $32,570
Oct-98 $31,481 $29,671 $35,218
Nov-98 $33,207 $31,298 $37,352
Dec-98 $34,771 $32,771 $39,504
Jan-99 $35,875 $33,812 $41,155
Feb-99 $35,053 $33,038 $39,875
Mar-99 $36,575 $34,472 $41,470
Apr-99 $38,097 $35,906 $43,075
May-99 $37,046 $34,916 $42,058
Jun-99 $39,013 $36,769 $44,393
Jul-99 $37,935 $35,754 $43,008
Aug-99 $37,693 $35,525 $42,793
Sep-99 $36,562 $34,459 $41,620
Oct-99 $38,757 $36,528 $44,270
</TABLE>
Performance Table
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
----------------------- ------------
5 Since Since
Periods Ending October 31, 1999 1 Year Years Inception Inception
------ ------ --------- ------------
<S> <C> <C> <C> <C>
S&P 500/1/ 25.58% 25.99% 19.13% 342.70%
Growth and Income Fund A (NAV) 23.11% 22.91% 17.26% 287.57%
Growth and Income Fund Class A (net of
5.75% sales charge) 16.03% 21.46% 16.45% 265.28%
Growth and Income Fund Class B (NAV) 22.28% 22.21% 16.86% 276.39%
Growth and Income Fund Class B (net of
CDSC)/2/ 17.28% 22.03% 16.86% 276.39%
Growth and Income Fund Class C (NAV) 22.28% 22.17% 16.82% 275.34%
Growth and Income Fund Class C (net of
CDSC)/3/ 21.28% 22.17% 16.82% 275.34%
</TABLE>
- -----------------------------------------------
/1/All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
/2/The returns reflect the applicable sliding Contingent Deferred Sales Charge
of 5%, 5%, 4%, 3%, 2%, 1%.
/3/The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
xviii
<PAGE>
Portfolio Manager's Commentary
The Growth and Income Fund's Class A performance for the year-ended October
31, 1999 was 23.11% as compared to the S&P 500 Stock Index return of 25.58%
for the same period. This performance compares favorably to the average growth
and income fund, as reported by Lipper Analytical Services, Inc., that climbed
17.55% over the same period. Fund performance was helped by select energy,
information technology, and industrial and commercial stocks and by being
underweight in finance and consumer discretionary stocks. Relative performance
was limited by select health care and consumer staples holdings.
At the start of the fiscal year investors were concerned with tightening
credit conditions sparked by the Russian default and the near collapse of a
highly leveraged bond hedge fund. Fearing deflation and a global bear market,
cautious investors created an upheaval in the capital markets. Investors
sought refuge in safer issues, particularly U.S. Treasury securities and
large, highly liquid stocks. Fortunately, the U.S. economy continued to
perform well allowing interest rate spreads (the difference between yields on
Treasury securities and bonds of lesser quality) to narrow from historically
wide gaps. In addition, Japan, the Pacific Rim area, most of Europe, and some
Latin America nations recovered or stabilized. Ratifying investor sentiment,
the Dow broke 10,000 for the first time in March.
Looking ahead, an accelerating world economy is central to our investment
outlook. We believe improving Japanese consumer confidence, a growth rebound
in much of Asia, greater stability in Latin America, a stronger Europe, and
slower, but solid growth in the U.S. should leave the world poised for growth.
We continue to believe that longer-term economic conditions for equities are
favorable. Despite the recent rise in energy prices, we expect inflation to
remain low. Technological innovation has boosted productivity and helped keep
inflation under wraps in the recent past. That trend should continue. While we
are anticipating moderating GDP growth, we would not be surprised by one or
two Federal Reserve rate hikes in the next six months. We are intrigued by
pending deregulation in the financial services industry and may see renewed
interest in the sector sparked by consolidation activity. While values appear
to be emerging in some sectors such as health care and finance, it may take
time for the overall market to establish a firm base from which to move
higher.
xix
<PAGE>
Equity-Income Fund
Investment Seeks to provide dividend income and long-term capital
Objective: appreciation by taking a value approach and investing in
stocks and other securities that appear to be temporaily
undervalued by various measures, such as price/earnings
ratios.
Global Alliance Value Investors, Ltd. ("Global Alliance")
Subadvisor:
Portfolio
Manager: Nancy Tengler
August 28, 1989/4/
Inception Date:
[GRAPH]
Change in Value of $10,000 Investment and Comparative Indices
Equity-Income Fund
Growth of Growth of
$10,000 $10,000
Invested in Invested in
Class A shares Class A shares Growth of
at Net Asset Value with 5.75% $10,000
of the Value charge of the Investment
Equity Fund Value Equity Fund in the
Month Ended NAV 5.75% Sales Charge S&P 500
Oct-89 $10,000 $9,425 $10,000
Nov-89 $10,036 $9,459 $10,204
Dec-89 $10,101 $9,520 $10,449
Jan-90 $9,204 $8,675 $9,748
Feb-90 $9,383 $8,844 $9,874
Mar-90 $9,676 $9,120 $10,135
Apr-90 $9,393 $8,853 $9,882
May-90 $10,035 $9,458 $10,845
Jun-90 $9,829 $9,264 $10,772
Jul-90 $9,507 $8,960 $10,737
Aug-90 $8,427 $7,943 $9,766
Sep-90 $7,926 $7,470 $9,291
Oct-90 $7,784 $7,336 $9,251
Nov-90 $8,200 $7,729 $9,848
Dec-90 $8,534 $8,043 $10,123
Jan-91 $8,934 $8,421 $10,565
Feb-91 $9,496 $8,950 $11,320
Mar-91 $9,668 $9,112 $11,594
Apr-91 $9,772 $9,211 $11,622
May-91 $10,144 $9,561 $12,119
Jun-91 $9,725 $9,166 $11,565
Jul-91 $10,088 $9,508 $12,107
Aug-91 $10,279 $9,688 $12,391
Sep-91 $10,088 $9,508 $12,188
Oct-91 $10,222 $9,634 $12,351
Nov-91 $9,629 $9,076 $11,852
Dec-91 $10,674 $10,060 $13,207
Jan-92 $10,856 $10,232 $12,961
Feb-92 $11,267 $10,619 $13,127
Mar-92 $11,085 $10,448 $12,870
Apr-92 $11,305 $10,655 $13,244
May-92 $11,525 $10,863 $13,316
Jun-92 $11,181 $10,538 $13,123
Jul-92 $11,392 $10,737 $13,652
Aug-92 $11,047 $10,412 $13,376
Sep-92 $11,181 $10,538 $13,530
Oct-92 $11,525 $10,863 $13,578
Nov-92 $12,329 $11,620 $14,036
Dec-92 $12,692 $11,963 $14,220
Jan-93 $12,750 $12,017 $14,324
Feb-93 $12,520 $11,800 $14,517
Mar-93 $12,998 $12,251 $14,829
Apr-93 $12,511 $11,791 $14,466
May-93 $12,931 $12,188 $14,856
Jun-93 $13,037 $12,287 $14,905
Jul-93 $13,238 $12,476 $14,835
Aug-93 $13,295 $12,530 $15,401
Sep-93 $13,572 $12,792 $15,287
Oct-93 $13,591 $12,810 $15,597
Nov-93 $13,601 $12,819 $15,450
Dec-93 $14,063 $13,255 $15,640
Jan-94 $14,401 $13,573 $16,164
Feb-94 $14,603 $13,764 $15,728
Mar-94 $14,063 $13,255 $15,044
Apr-94 $14,054 $13,246 $15,239
May-94 $14,150 $13,337 $15,488
Jun-94 $13,880 $13,082 $15,105
Jul-94 $14,063 $13,255 $15,605
Aug-94 $14,757 $13,909 $16,240
Sep-94 $14,565 $13,727 $15,849
Oct-94 $14,247 $13,427 $16,212
Nov-94 $13,495 $12,719 $15,617
Dec-94 $13,761 $12,970 $15,845
Jan-95 $13,710 $12,922 $16,257
Feb-95 $14,619 $13,778 $16,888
Mar-95 $15,017 $14,153 $17,387
Apr-95 $15,272 $14,394 $17,893
May-95 $15,731 $14,827 $18,600
Jun-95 $16,232 $15,298 $19,037
Jul-95 $16,650 $15,693 $19,671
Aug-95 $16,834 $15,866 $19,724
Sep-95 $16,895 $15,924 $20,551
Oct-95 $16,272 $15,337 $20,479
Nov-95 $16,946 $15,972 $21,380
Performance Table
<TABLE>
<CAPTION>
Cumulative
Average Annual Total Return Total Return
----------------------------- ----------------
Periods Ending October 31, 1999 1 5 10 Since/4/ 10 Since/4/
Year Years Years 4/1/99 Years 4/1/99
------ ------ ------ -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
S&P 500/1/ 25.58% 25.99% 17.80% 6.65% 414.49% 6.65%
Equity-Income Fund Class A (NAV) 3.93% 14.76% 10.99% 0.42% 183.64% 0.42%
Class A (net of 5.75% sales
charge) -2.05% 13.41% 10.33% -5.36% 167.33% -5.36%
Equity-Income Fund Class B (NAV) 3.30% 14.05% 10.63% 0.00% 174.73% 0.00%
Class B (net of CDSC)/2/ -1.70% 13.81% 10.63% -5.00% 174.73% -5.00%
Equity-Income Fund Class C (NAV) 3.22% 14.03% 10.63% 0.00% 174.51% 0.00%
Class C (net of CDSC)/3/ 2.22% 14.03% 10.63% -1.00% 174.51% -1.00%
</TABLE>
- ---------------------
/1/All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
/2/The returns reflect the applicable sliding Contingent Deferred Sales Charge
of 5%, 5%, 4%, 3%, 2%, 1%.
/3/The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
/4/Current investment subadvisor assignment became effective 4/1/99.
xx
<PAGE>
Portfolio Manager's Commentary
The Equity-Income Fund's Class A performance for the year-ended October 31,
1999 was 3.93% as compared to the S&P 500 return of 25.58% and the Lipper
Equity Income Funds Average return of 9.56% for the same period.
Equity income funds underperformed the S&P 500 due to the continued narrowing
of the market over the period. A few very large cap growth stocks, mainly in
the technology sector, drove the returns of the indices while the majority of
stocks performed significantly worse than the market.
Global Alliance took over management of the Fund on April 1, 1999. At that
time, the Fund held over 140 securities. As large cap value managers, we
employ a time-proven valuation discipline that identifies periods of over and
under valuation based on a stock's relative dividend yield compared to the
market and the stock's own history. This valuation discipline is complemented
by rigorous fundamental research using our proprietary 12 Fundamental Factors.
We brought the Fund into line with our strategy during the 2nd calendar
quarter, buying securities that met our fundamental analysis factors and
valuation criteria, while selling those that did not. As of October 31, 1999,
the Fund held 29 securities.
The universe of stocks available to equity income managers was generally weak
during the 3rd calendar quarter, led by the battered financial and
pharmaceutical stocks. Telephone stocks provided relative outperformance, with
our largest telecom holding, Bell Atlantic, generating a positive return for
the 3rd quarter. The fundamentals for the telecom group are strong and the
potential growth for these companies will be mid double-digits. Given their
low relative valuations they remain attractive holdings in the Fund. We also
believe that both financial and pharmaceutical stocks could provide better
than market returns in the coming year and remain committed to our holdings.
We believe that the most important statistic to watch in the coming months
will be the labor numbers. So far, tight labor has not put pressure on
corporations to pay higher wages but if/when that occurs, inflation could heat
up. Yet, it could be that those worries are pretty well reflected in the
markets already - both stock and bond. Because of the very high level of
volatility and uncertainty, we remain convinced of the value of research,
discipline and a long-term focus.
xxi
<PAGE>
Balanced Fund
To provide current income and capital appreciation by
Investment investing in a balanced portfolio of common stocks, U.S.
Objective: and foreign government obligations and a variety of
corporate fixed-income securities.
Subadvisor: Founders Asset Management LLC
Portfolio Brian F. Kelly
Manager: August 28, 1989/5/
Inception Date:
[GRAPH]
Change in Value of $10,000 Investment and Comparative Indices
Balanced Fund
<TABLE>
<CAPTION>
Growth of $10,000 Invested in Growth of $10,000 Invested in
Class A shares at Net Asset Value Class A shares with 5.75% charge Growth of $10,000
of the Balanced Fund of the Balanced Fund Investment in the
Month Ended NAV 5.75% Sales Charge S&P 500
<S> <C> <C> <C>
Oct-89 $10,000 $9,425 $10,000
Nov-89 $10,061 $9,482 $10,204
Dec-89 $10,117 $9,535 $10,449
Jan-90 $9,492 $8,946 $9,748
Feb-90 $9,586 $9,035 $9,874
Mar-90 $9,586 $9,035 $10,135
Apr-90 $9,346 $8,809 $9,882
May-90 $9,846 $9,280 $10,845
Jun-90 $9,799 $9,235 $10,772
Jul-90 $9,682 $9,125 $10,737
Aug-90 $9,026 $8,507 $9,766
Sep-90 $8,687 $8,188 $9,291
Oct-90 $8,603 $8,108 $9,251
Nov-90 $8,941 $8,427 $9,848
Dec-90 $9,235 $8,704 $10,123
Jan-91 $9,527 $8,979 $10,565
Feb-91 $9,991 $9,417 $11,320
Mar-91 $10,110 $9,529 $11,594
Apr-91 $10,175 $9,590 $11,622
May-91 $10,293 $9,702 $12,119
Jun-91 $10,043 $9,466 $11,565
Jul-91 $10,329 $9,735 $12,107
Aug-91 $10,559 $9,952 $12,391
Sep-91 $10,537 $9,932 $12,188
Oct-91 $10,713 $10,097 $12,351
Nov-91 $10,570 $9,963 $11,852
Dec-91 $11,216 $10,571 $13,207
Jan-92 $11,271 $10,623 $12,961
Feb-92 $11,537 $10,874 $13,127
Mar-92 $11,382 $10,728 $12,870
Apr-92 $11,570 $10,905 $13,244
May-92 $11,803 $11,124 $13,316
Jun-92 $11,626 $10,957 $13,123
Jul-92 $11,884 $11,200 $13,652
Aug-92 $12,877 $12,137 $13,376
Sep-92 $11,825 $11,145 $13,530
Oct-92 $11,919 $11,233 $13,578
Nov-92 $12,386 $11,674 $14,036
Dec-92 $12,662 $11,934 $14,220
Jan-93 $12,793 $12,057 $14,324
Feb-93 $12,733 $12,001 $14,517
Mar-93 $13,078 $12,326 $14,829
Apr-93 $12,828 $12,091 $14,466
May-93 $13,054 $12,304 $14,856
Jun-93 $13,245 $12,483 $14,905
Jul-93 $13,376 $12,607 $14,835
Aug-93 $13,518 $12,741 $15,401
Sep-93 $13,661 $12,876 $15,287
Oct-93 $13,709 $12,921 $15,597
Nov-93 $13,637 $12,853 $15,450
Dec-93 $13,937 $13,135 $15,640
Jan-94 $14,197 $13,381 $16,164
Feb-94 $14,185 $13,369 $15,728
Mar-94 $13,726 $12,936 $15,044
Apr-94 $13,676 $12,890 $15,239
May-94 $13,713 $12,925 $15,488
Jun-94 $13,539 $12,761 $15,105
Jul-94 $13,738 $12,948 $15,605
Aug-94 $14,123 $13,311 $16,240
Sep-94 $13,949 $13,147 $15,849
Oct-94 $13,812 $13,018 $16,212
Nov-94 $13,378 $12,609 $15,617
Dec-94 $13,560 $12,780 $15,845
Jan-95 $13,681 $12,894 $16,257
Feb-95 $14,312 $13,490 $16,888
Mar-95 $14,528 $13,692 $17,387
Apr-95 $14,823 $13,971 $17,893
May-95 $15,294 $14,414 $18,600
Jun-95 $15,495 $14,604 $19,037
Jul-95 $15,764 $14,857 $19,671
Aug-95 $16,033 $15,111 $19,724
Sep-95 $16,248 $15,313 $20,551
Oct-95 $16,154 $15,225 $20,479
Nov-95 $16,516 $15,567 $21,380
Dec-95 $16,863 $15,893 $21,776
Jan-96 $17,070 $16,089 $22,516
Feb-96 $17,115 $16,130 $22,725
Mar-96 $17,115 $16,130 $22,943
Apr-96 $17,159 $16,172 $23,281
May-96 $17,322 $16,326 $23,881
Jun-96 $17,307 $16,312 $23,972
Jul-96 $17,129 $16,144 $22,913
Aug-96 $17,352 $16,354 $23,396
Sep-96 $17,885 $16,857 $24,713
Oct-96 $18,270 $17,220 $25,395
Nov-96 $18,893 $17,806 $27,315
Dec-96 $18,692 $17,618 $26,774
Jan-97 $19,185 $18,082 $28,448
Feb-97 $19,151 $18,050 $28,670
Mar-97 $18,811 $17,730 $27,491
Apr-97 $19,406 $18,290 $29,130
May-97 $20,154 $18,995 $30,901
Jun-97 $20,783 $19,588 $32,285
Jul-97 $21,411 $20,180 $34,852
Aug-97 $20,698 $19,507 $32,900
Sep-97 $21,564 $20,324 $34,700
Oct-97 $21,377 $20,148 $33,541
Nov-97 $21,632 $20,388 $35,094
Dec-97 $21,897 $20,638 $35,697
Jan-98 $22,483 $21,191 $36,094
Feb-98 $23,195 $21,861 $38,696
Mar-98 $23,635 $22,276 $40,677
Apr-98 $23,844 $22,473 $41,088
May-98 $23,719 $22,355 $40,381
Jun-98 $24,074 $22,690 $42,021
Jul-98 $23,488 $22,138 $41,575
Aug-98 $22,107 $20,835 $35,572
Sep-98 $23,258 $21,921 $37,852
Oct-98 $24,033 $22,651 $40,929
Nov-98 $24,556 $23,144 $43,410
Dec-98 $24,920 $23,487 $45,910
Jan-99 $24,597 $23,183 $47,829
Feb-99 $23,906 $22,532 $46,342
Mar-99 $24,275 $22,879 $48,195
Apr-99 $24,782 $23,357 $50,061
May-99 $24,666 $23,248 $48,879
Jun-99 $24,989 $23,552 $51,592
Jul-99 $24,436 $23,031 $49,982
Aug-99 $24,482 $23,074 $49,732
Sep-99 $23,929 $22,554 $48,370
Oct-99 $24,321 $22,923 $51,449
</TABLE>
<TABLE>
<CAPTION>
Growth of $10,000 Growth of $10,000
Investment in the Lehman Brothers Investment in the 50%/50%
Month Ended Aggregate Bond Index Composite Index
<S> <C> <C>
Oct-89 $10,000 $10,000
Nov-89 $10,095 $10,149
Dec-89 $10,122 $10,284
Jan-90 $10,002 $9,876
Feb-90 $10,034 $9,955
Mar-90 $10,041 $10,087
Apr-90 $9,948 $9,916
May-90 $10,243 $10,541
Jun-90 $10,407 $10,587
Jul-90 $10,550 $10,643
Aug-90 $10,409 $10,091
Sep-90 $10,495 $9,900
Oct-90 $10,629 $9,948
Nov-90 $10,857 $10,359
Dec-90 $11,027 $10,580
Jan-91 $11,163 $10,867
Feb-91 $11,258 $11,289
Mar-91 $11,336 $11,463
Apr-91 $11,458 $11,539
May-91 $11,525 $11,819
Jun-91 $11,519 $11,542
Jul-91 $11,679 $11,890
Aug-91 $11,931 $12,159
Sep-91 $12,174 $12,181
Oct-91 $12,309 $12,330
Nov-91 $12,422 $12,140
Dec-91 $12,791 $12,997
Jan-92 $12,617 $12,787
Feb-92 $12,699 $12,911
Mar-92 $12,628 $12,747
Apr-92 $12,719 $12,979
May-92 $12,959 $13,136
Jun-92 $13,138 $13,130
Jul-92 $13,406 $13,527
Aug-92 $13,541 $13,460
Sep-92 $13,703 $13,617
Oct-92 $13,520 $13,549
Nov-92 $13,523 $13,777
Dec-92 $13,738 $13,976
Jan-93 $14,002 $14,161
Feb-93 $14,247 $14,380
Mar-93 $14,307 $14,565
Apr-93 $14,407 $14,436
May-93 $14,426 $14,639
Jun-93 $14,687 $14,795
Jul-93 $14,770 $14,803
Aug-93 $15,029 $15,213
Sep-93 $15,069 $15,177
Oct-93 $15,125 $15,358
Nov-93 $14,997 $15,221
Dec-93 $15,078 $15,356
Jan-94 $15,281 $15,718
Feb-94 $15,015 $15,368
Mar-94 $14,644 $14,842
Apr-94 $14,527 $14,879
May-94 $14,526 $15,001
Jun-94 $14,494 $14,796
Jul-94 $14,782 $15,189
Aug-94 $14,800 $15,512
Sep-94 $14,582 $15,209
Oct-94 $14,569 $15,381
Nov-94 $14,537 $15,071
Dec-94 $14,638 $15,234
Jan-95 $14,927 $15,585
Feb-95 $15,283 $16,076
Mar-95 $15,376 $16,370
Apr-95 $15,591 $16,729
May-95 $16,195 $17,384
Jun-95 $16,313 $17,660
Jul-95 $16,277 $17,955
Aug-95 $16,474 $18,081
Sep-95 $16,634 $18,570
Oct-95 $16,850 $18,644
Nov-95 $17,103 $19,217
Dec-95 $17,342 $19,534
Jan-96 $17,460 $19,959
Feb-96 $17,156 $19,909
Mar-96 $17,036 $19,956
Apr-96 $16,941 $20,075
May-96 $16,907 $20,355
Jun-96 $17,133 $20,514
Jul-96 $17,180 $20,014
Aug-96 $17,150 $20,238
Sep-96 $17,449 $21,040
Oct-96 $17,836 $21,573
Nov-96 $18,141 $22,676
Dec-96 $17,972 $22,324
Jan-97 $18,028 $23,179
Feb-97 $18,073 $23,311
Mar-97 $17,873 $22,628
Apr-97 $18,141 $23,573
May-97 $18,313 $24,536
Jun-97 $18,531 $25,330
Jul-97 $19,031 $26,852
Aug-97 $18,870 $25,805
Sep-97 $19,149 $26,836
Oct-97 $19,426 $26,404
Nov-97 $19,516 $27,217
Dec-97 $19,713 $27,615
Jan-98 $19,965 $27,938
Feb-98 $19,949 $29,217
Mar-98 $20,017 $30,230
Apr-98 $20,121 $30,486
May-98 $20,312 $30,233
Jun-98 $20,485 $31,131
Jul-98 $20,528 $30,933
Aug-98 $20,863 $28,134
Sep-98 $21,351 $29,508
Oct-98 $21,238 $30,972
Nov-98 $21,359 $32,259
Dec-98 $21,423 $33,528
Jan-99 $21,575 $34,553
Feb-99 $21,197 $33,627
Mar-99 $21,314 $34,602
Apr-99 $21,382 $35,559
May-99 $21,194 $34,880
Jun-99 $21,126 $36,187
Jul-99 $21,037 $35,346
Aug-99 $21,027 $35,217
Sep-99 $21,271 $34,667
Oct-99 $21,349 $36,400
</TABLE>
Performance Table
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
----------------------------- ----------------
Periods Ending October 31, 1 5 10 Since/5/ 10 Since/5/
1999 Year Years Years 10/1/96 Years 10/1/96
------ ------ ------ -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
S&P 500/1/ 25.58% 25.99% 17.80% 26.80% 414.49% 107.94%
Lehman Brothers Aggregate Bond
Index/1/ 0.53% 7.94% 7.88% 6.76% 113.49% 22.36%
50%/50% Composite/1/,/2/ 13.06% 16.97% 12.84% 16.78% 264.00% 66.15%
Balanced Fund A (NAV) 1.20% 11.98% 9.29% 10.37% 143.21% 35.54%
Class A (net of 5.75% sales
charge) -4.62% 10.66% 8.64% 8.27% 129.23% 27.75%
Balanced Fund Class B (NAV) 0.57% 11.29% 8.95% 9.67% 135.58% 32.91%
Class B (net of CDSC)/3/ -4.43% 11.03% 8.95% 8.86% 135.58% 29.91%
Balanced Fund Class C (NAV) 0.58% 11.27% 8.94% 9.67% 135.42% 32.91%
Class C (net of CDSC)/4/ -0.42% 11.27% 8.94% 9.67% 135.42% 32.91%
</TABLE>
- -------------------------------
/1/All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
/2/Comprised of 50% of the return of the S&P 500 and 50% of the return of the
Lehman Brothers Aggregate Bond Index.
/3/The returns reflect the applicable sliding Contingent Deferred Sales Charge
of 5%, 5%, 4%, 3%, 2%, 1%.
/4/The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
/5/Current investment subadvisor assignment became effective 10/1/96.
xxii
<PAGE>
Portfolio Manager's Commentary
The Balanced Fund's Class A performance for the year-ended October 31, 1999,
was 1.20% as compared to the 50% S&P/50% Lehman Brothers Aggregate Bond Index
return of 13.06% for the same period.
The Fund maintains the flexibility to strategically shift its composition to
take advantage of market conditions. In building the equity portion of the
Balanced Fund, we follow a growth philosophy, looking for those firms whose
fundamental strengths suggest the potential for consistent streams of
corporate earnings. To the extent that our research process does not identify
attractive equity opportunities, our exposure to bonds or cash may increase.
We continue to take a conservative approach to the Fund and have been closely
monitoring the number of stocks in the Fund. At the end of the third quarter,
approximately 48% of the Fund was invested in equities.
The Fund has carried a heavier weighting in bonds than the average balanced
fund because we have been concerned about the high absolute and relative
valuations the market currently awards many of the quality large-cap
companies.
We are confident in the equities we own and have taken larger positions in a
smaller number of names as a way of targeting those companies that we believe
offer the best opportunities for earnings growth. We believe that this
structure best positions the Balanced Fund in the current environment to
pursue income and capital appreciation.
We have been pleased with XL Capital Ltd. (4.51% of the Fund), a Bermuda-based
corporation that provides liability insurance coverage. XL Capital has a low
p/e, and its dividend looks secure. Analysts expect the pricing environment
for reinsurance companies to improve after prices hit relative lows, and we
believe XL Capital could benefit from this improved climate.
The Fund has been overweight vs. the S&P 500 Index in pharmaceuticals and
unfortunately, as a group, they have lagged the market. Pharmaceutical
companies are introducing many new products and generally have delivered on
their earnings. Although not inexpensive, this appears to be a sector of the
market that can grow into its current valuation. This sector has shown steady
earnings growth, and multiples are one-half or less than those of many
technology stocks. We continue to believe in the long-term fundamentals of our
drug holdings and will monitor their growth rates and valuations closely.
As we concentrate the number of stocks in the Fund, we've moved additional
assets into the Fund's fixed-income allocation. Since interest rates across
all durations of U.S. Treasury instruments have generally increased in 1999,
the value of bonds has dropped. Consequently, this portion of the Fund has
adversely affected performance on a year-to-date basis.
xxiii
<PAGE>
Strategic Income Fund
Investment Seeks to provide a high level of total return consistent
Objective: with the preservation of capital. The Fund invests in
certain segments of the fixed-income market based on
current economic and market conditions and on the
relative risks and opportunities in the different market
segments.
Subadvisor: Salomon Brothers Asset Management Inc.
Portfolio Robert Lavan, Peter Wilby, David J. Scott
Manager:
Inception Date: November 1, 1993
[GRAPH]
Change in Value of $10,000 Investment and Comparative Indices
Strategic Income Fund
<TABLE>
<CAPTION>
Growth of $10,000 Growth of $10,000
Invested in Invested in Growth of $10,000
Class A shares at Class A shares with Investment in the
Net Asset Value 5.75% charge Lehman Brothers
of the Strategic of the Strategic Aggregate Bond Index
Month Ended Income Fund Income Fund LB Aggregate
Month Ended NAV 5.75% Sales Charge Bond Index
<S> <C> <C> <C>
Oct-93 $10,000 $9,525 $10,000
Nov-93 $10,019 $9,543 $9,915
Dec-93 $10,122 $9,641 $9,969
Jan-94 $10,283 $9,795 $10,103
Feb-94 $10,001 $9,525 $9,927
Mar-94 $9,539 $9,086 $9,682
Apr-94 $9,444 $8,996 $9,605
May-94 $9,567 $9,113 $9,604
Jun-94 $9,522 $9,070 $9,583
Jul-94 $9,564 $9,110 $9,773
Aug-94 $9,615 $9,158 $9,785
Sep-94 $9,638 $9,180 $9,641
Oct-94 $9,621 $9,164 $9,632
Nov-94 $9,561 $9,107 $9,611
Dec-94 $9,435 $8,986 $9,678
Jan-95 $9,448 $8,999 $9,869
Feb-95 $9,543 $9,090 $10,104
Mar-95 $9,592 $9,136 $10,166
Apr-95 $9,899 $9,429 $10,308
May-95 $10,244 $9,758 $10,707
Jun-95 $10,381 $9,888 $10,785
Jul-95 $10,428 $9,933 $10,761
Aug-95 $10,463 $9,966 $10,892
Sep-95 $10,642 $10,137 $10,997
Oct-95 $10,720 $10,211 $11,140
Nov-95 $10,905 $10,387 $11,307
Dec-95 $11,187 $10,655 $11,466
Jan-96 $11,685 $11,130 $11,544
Feb-96 $11,497 $10,951 $11,343
Mar-96 $11,502 $10,956 $11,263
Apr-96 $11,645 $11,091 $11,200
May-96 $11,737 $11,180 $11,178
Jun-96 $11,868 $11,304 $11,328
Jul-96 $11,924 $11,358 $11,358
Aug-96 $12,107 $11,532 $11,339
Sep-96 $12,494 $11,901 $11,536
Oct-96 $12,580 $11,982 $11,792
Nov-96 $12,812 $12,204 $11,994
Dec-96 $12,845 $12,234 $11,882
Jan-97 $13,005 $12,387 $11,919
Feb-97 $13,153 $12,528 $11,949
Mar-97 $12,926 $12,312 $11,816
Apr-97 $13,072 $12,451 $11,994
May-97 $13,356 $12,721 $12,108
Jun-97 $13,518 $12,876 $12,252
Jul-97 $13,886 $13,227 $12,583
Aug-97 $13,835 $13,178 $12,476
Sep-97 $14,112 $13,441 $12,660
Oct-97 $13,910 $13,249 $12,844
Nov-97 $14,090 $13,421 $12,903
Dec-97 $14,142 $13,470 $13,033
Jan-98 $14,298 $13,619 $13,200
Feb-98 $14,412 $13,728 $13,189
Mar-98 $14,482 $13,794 $13,234
Apr-98 $14,516 $13,827 $13,303
May-98 $14,513 $13,824 $13,429
Jun-98 $14,475 $13,788 $13,544
Jul-98 $14,529 $13,839 $13,572
Aug-98 $13,537 $12,894 $13,793
Sep-98 $13,942 $13,280 $14,116
Oct-98 $13,859 $13,201 $14,041
Nov-98 $14,220 $13,545 $14,121
Dec-98 $14,244 $13,567 $14,164
Jan-99 $14,190 $13,516 $14,264
Feb-99 $14,104 $13,434 $14,015
Mar-99 $14,319 $13,639 $14,092
Apr-99 $14,590 $13,897 $14,137
May-99 $14,271 $13,593 $14,012
Jun-99 $14,225 $13,549 $13,968
Jul-99 $14,147 $13,475 $13,909
Aug-99 $13,987 $13,323 $13,902
Sep-99 $14,126 $13,455 $14,063
Oct-99 $14,234 $13,558 $14,112
</TABLE>
Performance Table
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
---------------------- ------------
1 5 Since Since
Periods Ending October 31, 1999 Year Years Inception Inception
------ ----- --------- ---------
<S> <C> <C> <C> <C>
Lehman Brothers Aggregate Bond Index/1/ 0.53% 7.94% 5.91% 41.12%
Strategic Income Fund Class A (NAV) 2.10% 8.15% 6.06% 42.34%
Strategic Income Fund Class A (net of
4.75% sales charge) -2.75% 7.10% 5.20% 35.58%
Strategic Income Fund Class B (NAV) 1.56% 7.48% 5.44% 37.42%
Strategic Income Fund Class B (net of
CDSC)/2/ -3.44% 7.18% 5.31% 36.42%
Strategic Income Fund Class C (NAV) 1.56% 7.48% 5.44% 37.40%
Strategic Income Fund Class C (net of
CDSC)/3/ 0.56% 7.48% 5.44% 37.40%
</TABLE>
- -----------------------------------------------
/1/All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
/2/The returns reflect the applicable sliding Contingent Deferred Sales Charge
of 5%, 5%, 4%, 3%, 2%, 1%.
/3/The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
xxiv
<PAGE>
Portfolio Manager's Commentary
In a rather lackluster year for bonds, the Strategic Income Fund's Class A
returned 2.10% for the year ending October 31, 1999, as compared to the Lehman
Brothers Aggregate Bond Index return of 0.53% for the same time period.
The fiscal year began on a strong note as the Fund snapped back strongly in
November when it became apparent to investors that the financial market crisis
of the previous months was stabilizing. As investor confidence grew, a flight
to risk developed, causing spreads to narrow and prices to increase on
emerging market debt and high yield securities. Despite the rebound, the
Federal Reserve opted for a third 25 basis point rate cut during the Fund's
fiscal year at their November meeting.
After the first of the year, the U.S. bond market suffered as U.S. economic
growth remained surprisingly robust while Europe and Asia began to rebound
from the recession. Soaring oil prices and a rising CRB Index pushed bond
prices lower and yields higher. By the end of February, the yield on the 30-
year Treasury rose to 5.56%, the highest level in more than six months.
Corporates and mortgages outperformed Treasuries as investors looked to add
more yield to their portfolios. High yield bonds and emerging market debt
performed well through the second quarter. Strong domestic economic growth
continued through the third quarter heightening fears about the prospect of
higher inflation. The Federal Reserve took a proactive stance and began to
unwind the 75 basis point reduction of the previous fall with two subsequent
increases in the Federal Funds Rate. The Federal Funds Rate currently stands
at 5.25% and the Federal Reserve is likely to push it modestly higher over the
next few months.
In general, we expect continued financial market volatility from Y2K concerns
going forward, though we don't necessarily expect a major correction. In terms
of the bond market, we expect the next 12 months will bring significantly
higher returns than those witnessed thus far in 1999.
Our view is that the Federal Reserve has engineered a nice balance between
strong economic growth and low inflation and that any further rise in bond
yields will be modest. Those factors, coupled with strong expected company
earnings, should provide a favorable environment for the Fund.
xxv
<PAGE>
Investment Quality Bond Fund
Seeks to provide a high level of current income
Investment consistent with the maintenance of principal and
Objective: 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: May 1, 1991
Inception Date:
[GRAPH]
Change in Value of $10,000 Investment and Comparative Indices
Investment Quality Bond Fund
Month 5.75%
Ended NAV Sales Charge Bond Index Composite Index
Apr-91 $10,000 $9,525 $10,000 $10,000
May-91 $10,085 $9,606 $10,058 $10,054
Jun-91 $10,080 $9,602 $10,053 $10,046
Jul-91 $10,157 $9,674 $10,193 $10,179
Aug-91 $10,395 $9,901 $10,413 $10,412
Sep-91 $10,614 $10,110 $10,624 $10,628
Oct-91 $10,721 $10,212 $10,742 $10,725
Nov-91 $10,808 $10,294 $10,841 $10,832
Dec-91 $11,200 $10,668 $11,163 $11,193
Jan-92 $10,991 $10,469 $11,011 $11,036
Feb-92 $11,085 $10,558 $11,083 $11,111
Mar-92 $11,018 $10,495 $11,021 $11,055
Apr-92 $11,065 $10,540 $11,100 $11,117
May-92 $11,320 $10,782 $11,310 $11,344
Jun-92 $11,511 $10,964 $11,466 $11,513
Jul-92 $11,791 $11,231 $11,700 $11,812
Aug-92 $11,915 $11,349 $11,818 $11,913
Sep-92 $12,085 $11,511 $11,959 $12,069
Oct-92 $11,901 $11,335 $11,800 $11,875
Nov-92 $11,930 $11,363 $11,802 $11,874
Dec-92 $12,127 $11,551 $11,990 $12,084
Jan-93 $12,382 $11,794 $12,220 $12,353
Feb-93 $12,604 $12,006 $12,434 $12,619
Mar-93 $12,676 $12,074 $12,486 $12,662
Apr-93 $12,757 $12,151 $12,573 $12,759
May-93 $12,769 $12,162 $12,590 $12,760
Jun-93 $13,016 $12,397 $12,817 $13,057
Jul-93 $13,051 $12,431 $12,891 $13,143
Aug-93 $13,312 $12,680 $13,116 $13,454
Sep-93 $13,372 $12,737 $13,152 $13,495
Oct-93 $13,408 $12,771 $13,200 $13,555
Nov-93 $13,192 $12,565 $13,088 $13,397
Dec-93 $13,254 $12,624 $13,159 $13,462
Jan-94 $13,437 $12,799 $13,336 $13,685
Feb-94 $13,081 $12,459 $13,104 $13,379
Mar-94 $12,654 $12,053 $12,781 $13,023
Apr-94 $12,524 $11,929 $12,678 $12,909
May-94 $12,517 $11,923 $12,677 $12,877
Jun-94 $12,474 $11,881 $12,649 $12,846
Jul-94 $12,706 $12,103 $12,901 $13,126
Aug-94 $12,712 $12,109 $12,916 $13,135
Sep-94 $12,503 $11,909 $12,726 $12,920
Oct-94 $12,459 $11,867 $12,715 $12,901
Nov-94 $12,428 $11,838 $12,687 $12,879
Dec-94 $12,534 $11,939 $12,775 $12,972
Jan-95 $12,749 $12,143 $13,028 $13,230
Feb-95 $13,056 $12,436 $13,338 $13,562
Mar-95 $13,130 $12,506 $13,419 $13,661
Apr-95 $13,322 $12,689 $13,607 $13,866
May-95 $13,859 $13,201 $14,133 $14,472
Jun-95 $13,947 $13,285 $14,237 $14,592
Jul-95 $13,902 $13,241 $14,205 $14,533
Aug-95 $14,058 $13,390 $14,377 $14,735
Sep-95 $14,201 $13,527 $14,517 $14,893
Oct-95 $14,441 $13,755 $14,705 $15,103
Nov-95 $14,668 $13,971 $14,926 $15,365
Dec-95 $14,889 $14,182 $15,135 $15,601
Jan-96 $14,952 $14,242 $15,238 $15,699
Feb-96 $14,655 $13,959 $14,973 $15,352
Mar-96 $14,524 $13,834 $14,868 $15,223
Apr-96 $14,392 $13,708 $14,785 $15,111
May-96 $14,344 $13,662 $14,755 $15,085
Jun-96 $14,523 $13,833 $14,953 $15,293
Jul-96 $14,545 $13,855 $14,993 $15,327
Aug-96 $14,525 $13,835 $14,968 $15,286
Sep-96 $14,794 $14,091 $15,228 $15,575
Oct-96 $15,093 $14,376 $15,566 $15,959
Nov-96 $15,379 $14,649 $15,832 $16,269
Dec-96 $15,212 $14,489 $15,685 $16,073
Jan-97 $15,235 $14,512 $15,734 $16,094
Feb-97 $15,289 $14,563 $15,773 $16,139
Mar-97 $15,074 $14,358 $15,598 $15,927
Apr-97 $15,323 $14,595 $15,832 $16,163
May-97 $15,453 $14,719 $15,982 $16,324
Jun-97 $15,659 $14,915 $16,172 $16,531
Jul-97 $16,156 $15,389 $16,609 $17,068
Aug-97 $15,951 $15,193 $16,468 $16,857
Sep-97 $16,206 $15,437 $16,712 $17,131
Oct-97 $16,386 $15,608 $16,954 $17,388
Nov-97 $16,458 $15,676 $17,032 $17,481
Dec-97 $16,624 $15,834 $17,204 $17,666
Jan-98 $16,901 $16,098 $17,424 $17,903
Feb-98 $16,894 $16,092 $17,410 $17,877
Mar-98 $16,936 $16,131 $17,469 $17,935
Apr-98 $16,993 $16,186 $17,560 $18,032
May-98 $17,180 $16,364 $17,727 $18,232
Jun-98 $17,303 $16,481 $17,878 $18,403
Jul-98 $17,312 $16,490 $17,915 $18,409
Aug-98 $17,355 $16,531 $18,207 $18,691
Sep-98 $17,825 $16,978 $18,633 $19,246
Oct-98 $17,636 $16,799 $18,535 $19,065
Nov-98 $17,862 $17,014 $18,640 $19,248
Dec-98 $17,889 $17,039 $18,696 $19,298
Jan-99 $17,999 $17,144 $18,829 $19,449
Feb-99 $17,571 $16,737 $18,499 $18,986
Mar-99 $17,717 $16,875 $18,601 $19,090
Apr-99 $17,778 $16,934 $18,661 $19,140
May-99 $17,549 $16,715 $18,497 $18,928
Jun-99 $17,456 $16,627 $18,437 $18,860
Jul-99 $17,380 $16,554 $18,360 $18,794
Aug-99 $17,303 $16,481 $18,351 $18,771
Sep-99 $17,436 $16,608 $18,564 $18,949
Oct-99 $17,447 $16,618 $18,627 $19,008
Performance Table
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
---------------------- ------------
1 5 Since Since
Periods Ending October 31, 1999 Year Years Inception Inception
------ ----- --------- ------------
<S> <C> <C> <C> <C>
Lehman Brothers Aggregate Bond Index/1/ 0.53% 7.94% 7.59% 86.27%
50%/50% Composite/1/,/2/ -0.30% 8.06% 7.85% 90.08%
Investment Quality Bond Fund A (NAV) -1.08% 6.97% 6.76% 74.47%
Investment Quality Bond Fund Class A (net
of 4.75%
sales charge) -5.77% 5.93% 6.15% 66.18%
Investment Quality Bond Fund Class B (NAV) -1.56% 6.35% 6.37% 69.05%
Investment Quality Bond Fund Class B (net
of CDSC)/3/ -6.48% 6.04% 6.37% 69.05%
Investment Quality Bond Fund Class C (NAV) -1.56% 6.35% 6.37% 69.05%
Investment Quality Bond Fund Class C (net
of CDSC)/4/ -2.54% 6.35% 6.37% 69.05%
</TABLE>
- ----------------------------------------------
/1/All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
/2/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.
/3/The returns reflect the applicable sliding Contingent Deferred Sales Charge
of 5%, 5%, 4%, 3%, 2%, 1%.
/4/The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
xxvi
<PAGE>
Portfolio Manager's Commentary
The Investment Quality Bond Fund's Class A performance for the year-ended
October 31, 1999 was -1.08% as compared to -0.30% for the Composite Index
comprised of Lehman Government Bond Index and Lehman Corporate Bond Index.
The past fiscal year was difficult for fixed income investors. Yields
increased approximately 1.5% across the maturity spectrum. Particularly hard
hit (based on yield changes) were bonds with two to ten years until maturity.
The year began with turmoil in the credit markets due to the Russian default
and the near collapse of a large fixed income hedge fund. Investors worldwide
were anxious about holding anything but US Treasury securities. This flight to
quality expanded the yield gap (spread) between US Treasuries and bonds of
lesser quality to an uncharacteristically wide margin, given the strong
economic environment. The yield spread has contracted somewhat since then, but
is still larger than usual.
In addition to US Treasuries, the Fund may hold corporate bonds, mortgage
securities, and high yield issues. We took advantage of the lower prices and
higher yields of non-Treasury debt because we felt these bonds would
eventually return to favor once investors realized the world was not headed
toward a depression. Currently, we are sticking with our above-index
allocations of these securities. We do not know where yield spreads will be
one month or so from now, particularly with the Y2K wildcard thrown in.
However, looking into next year, it is highly unlikely that spreads will stay
as wide as they currently are. Fundamentals, such as strong interest coverage
and a growing economy, favor corporate bonds, while mortgages benefit from low
volatility and diminished refinancings.
The Treasury yield curve is priced to reflect a view that inflation is more
likely to go up than down, and that economic growth is a bit stronger than the
Fed would like. Over the next year, we believe growth will be lower, but
inflation higher, and without knowing which one will lead the way, we are not
betting that interest rates will move significantly one way or the other from
their current levels.
xxvii
<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 Fund 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
[GRAPH]
Change in Value of $10,000 Investment and Comparative Indices
National Municipal Bond Fund
Growth of Growth of Growth of
$10,000 Invested $10,000 Invested $10,000 Investment
in Class A in Class A in the
shares at shares with Lehman Bros.
Net Asset Value 5.75% charge Municipal
of the National of the National Bond Index
Muni Fund Muni Fund LB Municipal
Month Ended NAV 5.75% Sales Charge Bond Index
Jun-93 $10,000 $9,525 $10,000
Jul-93 $10,020 $9,544 $10,013
Aug-93 $10,261 $9,774 $10,221
Sep-93 $10,373 $9,881 $10,338
Oct-93 $10,417 $9,922 $10,357
Nov-93 $10,300 $9,811 $10,266
Dec-93 $10,457 $9,960 $10,483
Jan-94 $10,616 $10,112 $10,602
Feb-94 $10,302 $9,813 $10,328
Mar-94 $9,665 $9,206 $9,907
Apr-94 $9,742 $9,280 $9,992
May-94 $9,839 $9,372 $10,079
Jun-94 $9,756 $9,293 $10,020
Jul-94 $9,944 $9,472 $10,204
Aug-94 $9,943 $9,471 $10,239
Sep-94 $9,709 $9,248 $10,089
Oct-94 $9,454 $9,005 $9,909
Nov-94 $9,158 $8,723 $9,730
Dec-94 $9,494 $9,043 $9,944
Jan-95 $9,766 $9,302 $10,228
Feb-95 $10,106 $9,626 $10,526
Mar-95 $10,195 $9,711 $10,647
Apr-95 $10,209 $9,724 $10,660
May-95 $10,587 $10,085 $11,000
Jun-95 $10,435 $9,939 $10,904
Jul-95 $10,514 $10,015 $11,008
Aug-95 $10,649 $10,143 $11,147
Sep-95 $10,717 $10,208 $11,218
Oct-95 $10,897 $10,380 $11,380
Nov-95 $11,147 $10,618 $11,569
Dec-95 $11,273 $10,737 $11,680
Jan-96 $11,307 $10,770 $11,769
Feb-96 $11,227 $10,694 $11,689
Mar-96 $11,055 $10,530 $11,539
Apr-96 $10,998 $10,475 $11,507
May-96 $11,009 $10,486 $11,503
Jun-96 $11,149 $10,619 $11,628
Jul-96 $11,242 $10,708 $11,734
Aug-96 $11,254 $10,719 $11,731
Sep-96 $11,443 $10,899 $11,896
Oct-96 $11,585 $11,035 $12,030
Nov-96 $11,787 $11,227 $12,250
Dec-96 $11,739 $11,182 $12,199
Jan-97 $11,727 $11,170 $12,222
Feb-97 $11,837 $11,274 $12,334
Mar-97 $11,727 $11,170 $12,170
Apr-97 $11,837 $11,274 $12,273
May-97 $11,995 $11,425 $12,457
Jun-97 $12,130 $11,554 $12,590
Jul-97 $12,486 $11,893 $12,939
Aug-97 $12,375 $11,787 $12,817
Sep-97 $12,511 $11,917 $12,970
Oct-97 $12,610 $12,011 $13,053
Nov-97 $12,672 $12,070 $13,130
Dec-97 $12,872 $12,260 $13,321
Jan-98 $13,009 $12,391 $13,458
Feb-98 $12,996 $12,379 $13,462
Mar-98 $13,020 $12,401 $13,475
Apr-98 $12,955 $12,340 $13,414
May-98 $13,146 $12,522 $13,626
Jun-98 $13,197 $12,570 $13,679
Jul-98 $13,118 $12,495 $13,713
Aug-98 $13,324 $12,691 $13,926
Sep-98 $13,427 $12,789 $14,100
Oct-98 $13,372 $12,737 $14,100
Nov-98 $13,343 $12,709 $14,149
Dec-98 $13,390 $12,754 $14,185
Jan-99 $13,531 $12,889 $14,353
Feb-99 $13,462 $12,822 $14,290
Mar-99 $13,445 $12,806 $14,310
Apr-99 $13,494 $12,853 $14,346
May-99 $13,397 $12,761 $14,263
Jun-99 $13,233 $12,604 $14,057
Jul-99 $13,257 $12,627 $14,108
Aug-99 $13,145 $12,521 $13,995
Sep-99 $13,130 $12,506 $14,001
Oct-99 $12,970 $12,354 $13,850
Performance Table
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
---------------------- ------------
1 5 Since Since
Year Years Inception Inception
Periods Ending October 31, 1999 ------ ----- --------- ------------
<S> <C> <C> <C> <C>
Lehman Brothers Municipal Bond Index/1/ -1.78% 6.93% 5.28% 38.50%
National Municipal Bond Fund A (NAV) -2.95% 6.53% 4.20% 29.70%
National Municipal Bond Fund Class A (net
of 4.75% sales charge) -7.61% 5.50% 3.40% 23.54%
National Municipal Bond Fund Class B (NAV) -3.77% 5.67% 3.45% 23.90%
National Municipal Bond Fund Class B (net
of CDSC)/2/ -8.58% 5.34% 3.45% 23.90%
National Municipal Bond Fund Class C (NAV) -3.77% 5.67% 3.45% 23.90%
National Municipal Bond Fund Class C (net
of CDSC)/3/ -4.73% 5.67% 3.45% 23.90%
</TABLE>
- -----------------------------------------------
/1/All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
/2/The returns reflect the applicable sliding Contingent Deferred Sales Charge
of 5%, 5%, 4%, 3%, 2%, 1%.
/3/The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
xxviii
<PAGE>
Portfolio Manager's Commentary
The National Municipal Bond Fund's Class A performance for the year-ended
October 31, 1999 was -2.95% as compared to the Lehman Brothers Municipal Bond
Index return of -1.78% for the same period.
During the last three months of 1998 investor confidence grew following a 25
basis points decrease in the Federal Funds rate in October. This move injected
stability into an unstable market. As a result a flight to risk emerged,
causing credit spreads to narrow and prices to increase on emerging markets'
debt and high yield securities. Despite the rallies, the Fed opted to take out
additional insurance against inflation concerns in the form of another 25
basis point rate cut at its November 1998 meeting.
Most fixed income securities achieved modest returns during the month of
December as another large upturn in the equity markets captured greater
investor attention. Municipal bonds began the year on a positive note.
After closing 1998 at near record issuance levels, state and local governments
borrowed just $13.8 billion of new debt during January 1999. That represents a
24% decrease over the same period last year. This lower than expected
municipal new issue calendar, coupled with an influx of cash from January 1st
maturities and coupon payments, created a favorable environment for municipal
bonds as demand outpaced supply. The imbalance enabled tax-exempts to smartly
outperform Treasuries in January. Tax-exempts continued to benefit from the
continued decline in new issue volume that enabled them to outperform
Treasuries for the first three months of the year. The next three months were
characterized by higher interest rates, highlighted by an increase in the Fed
Funds Rate 25 basis points to 5.00% at the conclusion of the June 30th FOMC
meeting. Prices for tax-exempts retreated during the quarter as a lack of
support from institutional buyers caused municipal dealers' inventories to
swell. July was the largest bond redemption month of the year with nearly $25
billion redeemed, which lent support to a manageable municipal new issue
calendar. The specter of impending increases in short-term interest rates by
the Fed unsettled the fixed income markets during the four months ending
October 31st. The Fed did raise the federal funds rate 25 basis points to
5.25% during August.
At its meeting on October 5, 1999, the Fed adopted a bias toward the future
possibility of raising interest rates. This resulted in a sell-off in the
fixed income markets, which continued through the first several weeks of
October. The market, however, was able to pare some of those losses during the
last week of the month. The catalyst for the bounce back was data displaying
strong economic growth with little threat of inflation. Prices for municipal
bonds were lower during the four-month period ending October, but setbacks
were not as pronounced as those were in Treasuries. A notable exception was
tax-exempt bonds that mature beyond twenty years, where losses where magnified
due to continued lack of sponsorship from institutional buyers. Individual
investors remained a constant in the marketplace due to high nominal yields
and the relative attractiveness of tax-exempts as compared to Treasuries.
xxix
<PAGE>
U.S. Government Securities Fund
Investment Seeks to provide a high level of current income
Objective: consistent with preservation of capital and maintenance
of liquidity by investing in securities issued or
guaranteed by the U.S. Government, its agencies, or
instrumentalities.
Subadvisor: Salomon Brothers Asset Management Inc.
Portfolio Roger Lavan
Manager:
Inception Date: August 28, 1989/4/
[GRAPH]
Change in Value of $10,000 Investment and Comparative Indices
U.S. Government Securities Fund
<TABLE>
<CAPTION>
Growth of $10,000 Invested in Growth of $10,000 Invested in Growth of $10,000
Class A shares at Net Asset Value Class A shares with 5.75% charge Investment in the Merrill Lynch
Month Ended of the U.S. Gov't Securities Fund of the U.S. Gov't Securities Fund 1-10 Year Government Index
Month Ended NAV 5.75% Sales Charge ML 1-10 Yr Gov't Index
<S> <C> <C> <C>
Oct-89 $10,000 $9,525 $10,000
Nov-89 $10,087 $9,608 $10,098
Dec-89 $10,134 $9,652 $10,123
Jan-90 $10,034 $9,558 $10,066
Feb-90 $10,061 $9,583 $10,091
Mar-90 $10,066 $9,588 $10,111
Apr-90 $9,997 $9,522 $10,075
May-90 $10,216 $9,731 $10,288
Jun-90 $10,352 $9,860 $10,423
Jul-90 $10,488 $9,990 $10,572
Aug-90 $10,384 $9,891 $10,526
Sep-90 $10,465 $9,968 $10,622
Oct-90 $10,590 $10,087 $10,770
Nov-90 $10,805 $10,292 $10,930
Dec-90 $10,966 $10,445 $11,086
Jan-91 $11,106 $10,578 $11,198
Feb-91 $11,177 $10,646 $11,256
Mar-91 $11,238 $10,704 $11,317
Apr-91 $11,357 $10,818 $11,434
May-91 $11,424 $10,882 $11,499
Jun-91 $11,422 $10,879 $11,512
Jul-91 $11,597 $11,046 $11,635
Aug-91 $11,773 $11,214 $11,853
Sep-91 $11,951 $11,383 $12,054
Oct-91 $12,058 $11,485 $12,191
Nov-91 $12,165 $11,587 $12,333
Dec-91 $12,432 $11,841 $12,634
Jan-92 $12,287 $11,703 $12,506
Feb-92 $12,365 $11,777 $12,554
Mar-92 $12,268 $11,685 $12,503
Apr-92 $12,418 $11,828 $12,616
May-92 $12,607 $12,008 $12,797
Jun-92 $12,797 $12,189 $12,982
Jul-92 $13,026 $12,407 $13,224
Aug-92 $13,151 $12,526 $13,376
Sep-92 $13,329 $12,696 $13,560
Oct-92 $13,161 $12,536 $13,394
Nov-92 $13,096 $12,474 $13,335
Dec-92 $13,256 $12,626 $13,511
Jan-93 $13,491 $12,850 $13,763
Feb-93 $13,660 $13,011 $13,970
Mar-93 $13,776 $13,122 $14,023
Apr-93 $13,859 $13,201 $14,134
May-93 $13,808 $13,152 $14,091
Jun-93 $14,014 $13,348 $14,294
Jul-93 $14,057 $13,390 $14,324
Aug-93 $14,238 $13,561 $14,543
Sep-93 $14,282 $13,603 $14,606
Oct-93 $14,298 $13,619 $14,631
Nov-93 $14,218 $13,543 $14,561
Dec-93 $14,269 $13,591 $14,617
Jan-94 $14,399 $13,715 $14,763
Feb-94 $14,202 $13,528 $14,554
Mar-94 $14,033 $13,367 $14,350
Apr-94 $14,036 $13,369 $14,252
May-94 $14,025 $13,358 $14,267
Jun-94 $13,998 $13,334 $14,277
Jul-94 $14,161 $13,489 $14,454
Aug-94 $14,208 $13,533 $14,499
Sep-94 $14,035 $13,368 $14,383
Oct-94 $13,994 $13,329 $14,385
Nov-94 $13,958 $13,295 $14,314
Dec-94 $14,042 $13,375 $14,368
Jan-95 $14,275 $13,597 $14,606
Feb-95 $14,571 $13,879 $14,885
Mar-95 $14,656 $13,960 $14,967
Apr-95 $14,817 $14,114 $15,139
May-95 $15,363 $14,634 $15,572
Jun-95 $15,450 $14,716 $15,674
Jul-95 $15,397 $14,666 $15,685
Aug-95 $15,547 $14,808 $15,813
Sep-95 $15,650 $14,907 $15,919
Oct-95 $15,833 $15,081 $16,101
Nov-95 $16,017 $15,257 $16,299
Dec-95 $16,187 $15,418 $16,465
Jan-96 $16,292 $15,519 $16,605
Feb-96 $16,044 $15,282 $16,427
Mar-96 $15,924 $15,168 $16,353
Apr-96 $15,868 $15,115 $16,303
May-96 $15,800 $15,049 $16,294
Jun-96 $15,978 $15,219 $16,456
Jul-96 $16,007 $15,247 $16,507
Aug-96 $16,021 $15,260 $16,525
Sep-96 $16,269 $15,496 $16,736
Oct-96 $16,568 $15,781 $17,041
Nov-96 $16,801 $16,003 $17,249
Dec-96 $16,679 $15,887 $17,159
Jan-97 $16,761 $15,965 $17,224
Feb-97 $16,792 $15,994 $17,245
Mar-97 $16,668 $15,876 $17,159
Apr-97 $16,872 $16,071 $17,184
May-97 $17,008 $16,200 $17,198
Jun-97 $17,144 $16,330 $17,218
Jul-97 $17,475 $16,645 $17,541
Aug-97 $17,419 $16,591 $17,466
Sep-97 $17,628 $16,791 $17,659
Oct-97 $17,821 $16,974 $18,553
Nov-97 $17,835 $16,988 $18,596
Dec-97 $18,012 $17,156 $18,754
Jan-98 $18,225 $17,360 $19,007
Feb-98 $18,222 $17,356 $18,982
Mar-98 $18,273 $17,405 $19,045
Apr-98 $18,361 $17,489 $19,130
May-98 $18,486 $17,608 $19,259
Jun-98 $18,575 $17,693 $19,393
Jul-98 $18,628 $17,743 $19,469
Aug-98 $18,886 $17,989 $19,858
Sep-98 $19,240 $18,326 $20,326
Oct-98 $19,141 $18,232 $20,307
Nov-98 $19,175 $18,265 $20,231
Dec-98 $19,248 $18,334 $20,306
Jan-99 $19,340 $18,421 $20,404
Feb-99 $19,105 $18,197 $20,090
Mar-99 $19,237 $18,323 $20,236
Apr-99 $19,291 $18,375 $20,299
May-99 $19,111 $18,203 $20,163
Jun-99 $18,950 $18,050 $20,199
Jul-99 $18,927 $18,027 $20,221
Aug-99 $18,923 $18,024 $20,260
Sep-99 $19,198 $18,286 $20,422
Oct-99 $19,233 $18,321 $20,167
</TABLE>
Performance Table
<TABLE>
<CAPTION>
Average Annual Cumulative
Total Return Total Return
--------------------------- ----------------
Periods Ending October 31, 1999 1 5 10 Since/4/ 10 Since/4/
Year Years Years 12/31/91 Years 12/31/91
------ ----- ----- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Merrill Lynch 1-10 Year
Government Index/1/ 0.72% 6.99% 7.27% 6.15% 101.67% 59.61%
U.S. Government Securities Fund A
(NAV) 0.48% 6.57% 6.76% 5.89% 92.33% 57.00%
Class A (net of 4.75% sales
charge) -4.29% 5.54% 6.24 5.23% 83.21% 49.12%
U.S. Government Securities Fund
Class B (NAV) 0.01% 5.90% 6.39% 5.42% 85.78% 51.65%
Class B (net of CDSC)/2/ -4.99% 5.58% 6.39% 5.42% 85.78% 51.65%
U.S. Government Securities Fund
Class C (NAV) 0.01% 5.90% 6.39% 5.42% 85.78% 51.65%
Class C (net of CDSC)/3/ -0.99% 5.90% 6.39% 5.42% 85.78% 51.65%
</TABLE>
- ---------------------------------------
/1/All since inception returns for the indices begin on the month-end closest
to the actual inception date of the Fund.
/2/The returns reflect the applicable sliding Contingent Deferred Sales Charge
of 5%, 5%, 4%, 3%, 2%, 1%.
/3/The returns reflect the applicable Contingent Deferred Sales Charge of 1%.
/4/Current investment subadvisor assignment became effective 12/31/91.
xxx
<PAGE>
Portfolio Manager's Commentary
The U. S. Government Securities Fund's Class A performance for the year-ended
October 31, 1999 was 0.48% as compared to the Merrill Lynch 1-10 Year
Government Index return of 0.72%.
After performing very strongly during the fiscal year 1998, U.S. Government
bonds and bond funds suffered breakeven returns in 1999. The Federal Reserve
aggressively reduced interest rates and sent bond prices significantly higher
in late 1998 to counteract the global economic crisis that swept through Asia
and Europe and began to threaten the United States.
The Federal Reserve aggressiveness in lowering rates helped stabilize the
global capital markets and by the beginning of 1999, it was apparent that the
crisis had past. Prices on U.S. government bonds began to decline as U.S.
economic growth remained surprisingly robust while Europe and Asia began to
rebound from the recession. In addition, soaring oil prices and a rising CRB
Index began to ignite inflation fears and concerns that the Federal Reserve
would need to reverse course and begin to raise rates. In fact, the market was
correct to worry because the Federal Reserve took a proactive stance and began
to unwind the 75 basis point reduction of the previous fall when it raised
interest rates by 25 basis points in June and again in August. The Federal
Funds Rate currently stands at 5.25% and the Federal Reserve is likely to push
it modestly higher over the next few months.
In general, we expect continued financial market volatility from Y2K concerns
going forward, though we don't necessarily expect a major correction. In terms
of the bond market, we expect the next 12 months will bring significantly
higher returns than those witnessed thus far in 1999. Our view is that the
Federal Reserve has engineered a nice balance between strong economic growth
and low inflation and that any further rise in bond yields will be modest.
We are currently underweighted in lower yielding U.S. government bonds such as
Treasury and agency debentures in favor of agency mortgage pass-through
securities. We believe that mortgages such as Fannie Mae and Freddie Mac will
provide investors with higher returns over the next six months.
xxxi
<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 Equity (formerly
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, 1999, and the results of their operations, the
changes in their net assets and the financial highlights for the periods
indicated, in conformity with accounting principles generally accepted in the
United States. 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 auditing standards generally accepted in the
United States 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, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 20, 1999
1
<PAGE>
NORTH AMERICAN FUNDS
STATEMENT OF ASSETS AND LIABILITIES - OCTOBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International International Global Emerging Small/Mid
Small Cap Equity Equity Growth Cap
Fund Fund** Fund Fund Fund
------------- ------------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in
securities, at value*
(See accompanying
Portfolio of
Investments)........... $16,264,145 $25,628,249 $82,885,928 $1,230,782 $42,595,851
Receivable for forward
foreign currency
contracts to sell
(Notes 2 and 8)........ - 3,979,413 6,531,900 - -
Forward foreign currency
contracts to buy, at
value
(Cost: $4,105,676)
(Notes 2 and 8)........ - 4,109,593 - - -
Cash.................... 6,525 385 200 - -
Foreign currency
(Cost:$2,296, $139,868
and $3,599 in
International Small
Cap, International
Equity and Global
Equity, respectively).. 2,159 138,372 3,527 - -
Investment in State
Street Bank & Trust
Company Navigator
Securities Lending
Trust held as
collateral for
securities on loan, at
value (Note 2)......... - 3,922,082 4,528,860 - 8,104,967
Variation margin
receivable for open
futures contracts...... - 151,098 - - -
Deferred organization
costs.................. - - - 20,842 -
Receivables:
Investments sold....... 448,933 - 657,826 16,313 302,604
Fund shares sold....... 18,091 13,508 24,240 15,486 217,049
Dividends.............. 5,104 35,880 111,138 - 152
Interest............... 1,560 259 1,059 82 1,895
Foreign tax withholding
reclaims.............. 3,554 16,475 48,824 - -
From adviser........... - - - 3,956 -
Other assets............ 44,917 41,522 - 47,653 44,274
----------- ----------- ----------- ---------- -----------
Total assets.......... 16,794,988 38,036,836 94,793,502 1,335,114 51,266,792
----------- ----------- ----------- ---------- -----------
LIABILITIES:
Forward foreign currency
contracts to sell, at
value
(Cost: $3,979,413 and
$6,531,900 in
International Equity
and Global Equity,
respectively) (Notes 2
and 8)................. - 3,993,804 6,384,453 - -
Collateral on securities
loaned, at value (Note
2)..................... - 3,922,082 4,528,860 - 8,104,967
Payables:
Forward foreign
currency contracts to
buy (Notes 2 and 8)... - 4,105,676 - - -
Investments purchased.. 1,043,054 1,012,385 188,400 3,735 921,815
Fund shares redeemed... 27,074 22,188 183,724 2,450 79,914
Dividend and interest
withholding tax....... 670 4,607 7,702 - -
Investment adviser..... 16,786 13,631 83,144 - 22,397
Custodian and transfer
agent fees............ 2,779 3,687 19,427 3,687 3,750
Distribution fee....... 6,606 11,254 23,784 911 31,258
Other accrued
expenses.............. - 1,543 35,474 - 9,716
----------- ----------- ----------- ---------- -----------
Total liabilities..... 1,096,969 13,090,857 11,454,968 10,783 9,173,817
----------- ----------- ----------- ---------- -----------
NET ASSETS.............. $15,698,019 $24,945,979 $83,338,534 $1,324,331 $42,092,975
----------- ----------- ----------- ---------- -----------
NET ASSETS CONSIST OF:
Undistributed net
investment
income/(loss) (Note
2).................... - $53,768 ($147,081) - -
Accumulated
undistributed net
realized gain (loss)
on investments,
foreign currency and
forward foreign
currency contracts.... $3,733,997 1,830,855 9,983,190 $10,382 $7,120,712
Unrealized appreciation
(depreciation) on:
Investments........... 1,665,954 2,146,348 10,025,592 248,604 3,570,546
Futures............... - (27,820) - - -
Foreign currency and
forward foreign
currency contracts... (821) (12,515) 145,002 - -
Capital shares at par
value of $.001 (Note
3).................... 852 2,121 5,240 104 2,329
Additional paid-in
capital............... 10,298,037 20,953,222 63,326,591 1,065,241 31,399,388
----------- ----------- ----------- ---------- -----------
Net assets............ $15,698,019 $24,945,979 $83,338,534 $1,324,331 $42,092,975
----------- ----------- ----------- ---------- -----------
*Investments in
securities, at
identified cost (Note
2)..................... $14,598,191 $23,481,901 $72,860,336 $982,178 $39,025,305
----------- ----------- ----------- ---------- -----------
</TABLE>
- ---------------------
** Formerly the International Growth and Income Fund
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
NORTH AMERICAN FUNDS
STATEMENT OF ASSETS AND LIABILITIES continued - OCTOBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International International Global Emerging Small/Mid
Small Cap Equity Equity Growth Cap
Fund Fund** Fund Fund Fund
------------- ------------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUES:
Class A Shares
Net assets at value.... $2,308,936 $ 3,996,628 $12,757,320 $223,641 $ 5,970,129
Shares outstanding..... 122,638 335,997 791,278 17,458 322,314
Net asset value (NAV)
and redemption price
per share.............. $18.83 $11.89 $16.12 $12.81 $18.52
------ ------ ------ ------ ------
Public offering price
per share (100/94.25 of
NAV)
On sales of $100,000 or
more the offering price
is reduced............. $19.98 $12.62 $17.10 $13.59 $19.65
------ ------ ------ ------ ------
Class B Shares
Net assets at value.... $7,417,091 $14,269,099 $25,380,528 $660,471 $17,184,297
Shares outstanding..... 404,250 1,215,619 1,603,463 52,556 955,434
Net asset value,
offering price and
redemption price per
share.................. $18.35 $11.74 $15.83 $12.57 $17.99
------ ------ ------ ------ ------
Class C Shares
Net assets at value.... $5,971,992 $ 6,680,252 $45,200,686 $440,219 $18,938,549
Shares outstanding..... 325,123 569,075 2,845,052 35,019 1,051,128
Net asset value,
offering price and
redemption price per
share.................. $18.37 $11.74 $15.89 $12.57 $18.02
------ ------ ------ ------ ------
</TABLE>
- ---------------------
** Formerly the International Growth and Income Fund
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
NORTH AMERICAN FUNDS
STATEMENT OF ASSETS AND LIABILITIES continued - OCTOBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Tax-
Growth Sensitive Growth and Equity-
Equity Equity Income Income Balanced
Fund Fund Fund Fund Fund
----------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in securities,
at value* (See
accompanying Portfolio of
Investments)............. $42,533,943 $8,886,969 $298,543,702 $115,694,225 $71,769,480
Cash...................... 986 440 538 41 660
Foreign currency (Cost:
$7,931 in Balanced)...... - - - - 7,820
Investment in State Street
Bank & Trust Company
Navigator Securities
Lending Trust held as
collateral for securities
on loan, at value (Note
2)....................... 5,048,747 - 4,962,600 1,242,600 5,183,450
Deferred organization
costs.................... - 20,762 - - -
Receivables:
Investments sold......... 895,240 - - - 1,770,989
Fund shares sold......... 326,104 30,477 870,080 219,680 9,923
Dividends................ 15,603 6,659 320,593 266,679 52,772
Interest................. 525 57 1,328 42 760,414
Foreign tax withholding
reclaims................ 101 - 5,829 - 6,899
Other assets.............. 26,860 40,757 2,049 1,998 1,476
----------- ----------- ------------ ------------ -----------
Total assets............ 48,848,109 8,986,121 304,706,719 117,425,265 79,563,883
----------- ----------- ------------ ------------ -----------
LIABILITIES:
Collateral on securities
loaned, at value (Note
2)....................... 5,048,747 - 4,962,600 1,242,600 5,183,450
Payables:
Investments purchased.... 1,324,957 - 844,918 - 672,265
Fund shares redeemed..... 134,298 - 484,718 150,648 36,583
Dividend and interest
withholding tax......... 5 - - 36 1,156
Investment adviser....... 22,375 2,732 198,339 61,661 49,057
Custodian and transfer
agent fees.............. 2,959 3,692 18,309 19,662 11,591
Distribution fee......... 15,810 6,185 87,817 29,738 14,139
Other accrued expenses... 8,306 - 147,863 71,697 32,706
----------- ----------- ------------ ------------ -----------
Total liabilities....... 6,557,457 12,609 6,744,564 1,576,042 6,000,947
----------- ----------- ------------ ------------ -----------
NET ASSETS................ $42,290,652 $8,973,512 $297,962,155 $115,849,223 $73,562,936
----------- ----------- ------------ ------------ -----------
NET ASSETS CONSIST OF:
Undistributed net
investment income/(loss)
(Note 2)................ - - - $509,106 $1,271,183
Accumulated undistributed
net realized gain (loss)
on investments, foreign
currency and forward
foreign currency
contracts............... $5,692,446 ($1,761,798) $25,033,619 21,841,836 8,646,672
Unrealized appreciation
(depreciation) on:
Investments............. 6,079,643 731,804 108,981,644 7,699,450 (1,896,585)
Foreign currency and
forward foreign
currency contracts..... (2) - (12) - (133)
Capital shares at par
value of $.001 (Note
3)...................... 2,013 957 10,492 6,900 6,940
Additional paid-in
capital................. 30,516,552 10,002,549 163,936,412 85,791,931 65,534,859
----------- ----------- ------------ ------------ -----------
Net assets.............. $42,290,652 $8,973,512 $297,962,155 $115,849,223 $73,562,936
----------- ----------- ------------ ------------ -----------
*Investments in
securities, at identified
cost (Note 2)............ $36,454,300 $8,155,165 $189,562,058 $107,994,775 $73,666,065
<CAPTION>
----------- ----------- ------------ ------------ -----------
</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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Tax-
Growth Sensitive Growth and Equity-
Equity Equity Income Income Balanced
Fund Fund Fund Fund Fund
----------- ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUES:
Class A Shares
Net assets at value.... $ 5,656,237 $1,526,499 $ 37,210,426 $13,989,760 $ 5,936,108
Shares outstanding..... 263,876 160,826 1,293,038 827,331 561,872
Net asset value (NAV)
and redemption price
per share.............. $21.44 $9.49 $28.78 $16.91 $10.56
------ ----- ------ ------ ------
Public offering price
per share (100/94.25 of
NAV)
On sales of $100,000 or
more the offering price
is reduced............. $22.75 $10.07 $30.54 $17.94 $11.20
------ ------ ------ ------ ------
Class B Shares
Net assets at value.... $17,171,410 $3,724,303 $104,695,326 $31,659,383 $13,957,744
Shares outstanding..... 819,152 398,104 3,702,446 1,894,670 1,330,817
Net asset value,
offering price and
redemption price per
share.................. $20.96 $9.36 $28.28 $16.71 $10.49
------ ----- ------ ------ ------
Class C Shares
Net assets at value.... $19,463,005 $3,722,710 $156,056,403 $70,200,080 $53,669,084
Shares outstanding..... 930,076 397,954 5,496,180 4,177,566 5,046,875
Net asset value,
offering price and
redemption price per
share.................. $20.93 $9.35 $28.39 $16.80 $10.63
------ ----- ------ ------ ------
</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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment National U. S.
Strategic Quality Municipal Government Money
Income Bond Bond Securities Market
Fund Fund Fund Fund Fund
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in securities,
at value* (Includes a
repurchase agreement of
$11,883,000 in U. S.
Government Securities)
(See accompanying
Portfolio of
Investments)............. $52,135,699 $12,164,731 $12,315,669 $67,520,526 $20,023,054
Receivable for forward
foreign currency
contracts to sell (Notes
2 and 8)................. 1,924,403 - - - -
Forward foreign currency
contracts to buy, at
value
(Cost: $1,370,978) (Notes
2 and 8)................. 1,365,629 - - - -
Cash...................... 69,642 643 38,522 662 807
Investment in State Street
Bank & Trust Company
Navigator Securities
Lending Trust held as
collateral for securities
on loan, at value (Note
2)....................... 6,274,430 1,618,069 - - -
Receivables:
Investments sold......... 210,824 - - 48,032 -
Fund shares sold......... 27,200 177 - 669 345,198
Dividends................ 2,836 - - - -
Interest................. 1,049,042 234,729 195,856 348,439 60,895
From adviser............. - 134 - - 5,717
Other assets.............. 59,785 40,287 47,684 19,172 67,310
----------- ----------- ----------- ----------- -----------
Total assets............ 63,119,490 14,058,770 12,597,731 67,937,500 20,502,981
----------- ----------- ----------- ----------- -----------
LIABILITIES:
Forward foreign currency
contracts to sell, at
value
(Cost: $1,924,403) (Notes
2 and 8)................. 1,918,812 - - - -
Collateral on securities
loaned, at value (Note
2)....................... 6,274,430 1,618,069 - - -
Payables:
Forward foreign currency
contracts to buy (Notes
2 and 8)................ 1,370,978 - - - -
Investments purchased.... 2,042,958 - - 9,130,828 -
Fund shares redeemed..... 187,607 8,200 10 64,283 1,257,870
Dividends................ 132,167 30,610 20,987 484,528 13,104
Dividend and interest
withholding tax......... 4,660 21 - - -
Investment adviser....... 38,604 - 6,104 37,454 -
Custodian and transfer
agent fees.............. 11,330 1,527 4,139 10,329 855
Distribution fee......... 22,535 4,299 3,970 11,916 -
Due to custodian......... 1,700 - - - -
Other accrued expenses... 27,671 1,296 - 9,789 6,054
----------- ----------- ----------- ----------- -----------
Total liabilities....... 12,033,452 1,664,022 35,210 9,749,127 1,277,883
----------- ----------- ----------- ----------- -----------
NET ASSETS................ $51,086,038 $12,394,748 $12,562,521 $58,188,373 $19,225,098
----------- ----------- ----------- ----------- -----------
NET ASSETS CONSIST OF:
Undistributed net
investment income/(loss)
(Note 2)................ ($94,527) ($20,882) ($263) ($488,884) -
Accumulated undistributed
net realized gain (loss)
on investments, foreign
currency and forward
foreign currency
contracts............... (4,012,655) (577,532) (100,115) (1,657,535) -
Unrealized appreciation
(depreciation) on:
Investments............. (4,208,516) (558,562) 12,048 (1,289,319) -
Foreign currency and
forward foreign
currency contracts..... (4,371) - - - -
Capital shares at par
value of $.001 (Note
3)...................... 6,079 1,259 1,324 6,092 $19,225
Additional paid-in
capital................. 59,400,028 13,550,465 12,649,527 61,618,019 19,205,873
----------- ----------- ----------- ----------- -----------
Net assets.............. $51,086,038 $12,394,748 $12,562,521 $58,188,373 $19,225,098
----------- ----------- ----------- ----------- -----------
*Investments in
securities, at identified
cost (Note 2)............ $56,344,215 $12,723,293 $12,303,621 $68,809,845 $20,023,054
<CAPTION>
----------- ----------- ----------- ----------- -----------
</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, 1999
- --------------------------------------------------------------------------------
<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.... $8,996,901 $3,506,653 $4,434,703 $35,378,988 $6,029,946
Shares outstanding..... 1,071,397 356,060 467,555 3,704,557 6,029,890
Net asset value (NAV)
and redemption price
per share.............. $8.40 $9.85 $9.48 $9.55 $1.00
----- ----- ----- ----- -----
Public offering price
per share (100/95.25 of
NAV)
On sales of $100,000 or
more the offering price
is reduced............. $8.82 $10.34 $9.95 $10.03
----- ------ ----- ------
Class B Shares
Net assets at value.... $21,340,388 $4,294,772 $4,196,827 $12,033,479 $4,550,981
Shares outstanding..... 2,538,419 436,117 442,570 1,259,202 4,550,563
Net asset value,
offering price and
redemption price per
share.................. $8.41 $9.85 $9.48 $9.56 $1.00
----- ----- ----- ----- -----
Class C Shares
Net assets at value.... $20,748,749 $4,593,323 $3,930,991 $10,775,906 $8,644,171
Shares outstanding..... 2,468,053 466,440 414,531 1,127,653 8,643,100
Net asset value,
offering price and
redemption price per
share.................. $8.41 $9.85 $9.48 $9.56 $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, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International International Global Emerging Small/Mid
Small Cap Equity Equity Growth Cap
Fund Fund* Fund Fund Fund
------------- ------------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest................... $46,839 $41,854 $78,368 $2,455 $134,064
Dividends (Net of $12,406,
$61,226, $192,286 and
$2,192 withholding tax in
International Small Cap,
International Equity,
Global Equity and
Small/Mid Cap,
respectively)............. 108,444 453,691 2,212,121 558 85,506
---------- ---------- ---------- --------- ----------
Total income.............. 155,283 495,545 2,290,489 3,013 219,570
---------- ---------- ---------- --------- ----------
EXPENSES:
Distribution for Class A... 7,675 13,640 81,774 687 20,192
Distribution for Class B... 71,002 145,027 288,848 5,043 171,666
Distribution for Class C... 59,084 72,373 534,908 3,007 193,223
Investment adviser fee
(Note 5).................. 159,614 230,737 951,657 9,513 390,888
Custodian fee.............. 36,195 36,313 136,423 36,014 36,554
Transfer agent fee......... 44,945 61,348 184,116 9,187 102,694
Accounting/administration.. 23,176 39,260 164,347 1,488 63,966
Audit and legal fees....... 7,792 13,198 54,463 514 21,821
Amortization of
organization costs........ - - - 6,581 -
Miscellaneous.............. 15,516 35,271 90,217 2,984 35,939
---------- ---------- ---------- --------- ----------
Expenses before
reimbursement by
investment adviser........ 424,999 647,167 2,486,753 75,018 1,036,943
Reimbursement of expenses
by investment adviser
(Note 5).................. 51,624 58,359 102,604 52,756 91,998
---------- ---------- ---------- --------- ----------
Net expenses.............. 373,375 588,808 2,384,149 22,262 944,945
---------- ---------- ---------- --------- ----------
Net investment
income/(loss)............ (218,092) (93,263) (93,660) (19,249) (725,375)
---------- ---------- ---------- --------- ----------
REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS,
FOREIGN CURRENCY AND
FORWARD FOREIGN CURRENCY
CONTRACTS:
Net realized gain/(loss)
on:
Investment transactions.... 4,674,222 2,202,524 15,363,203 63,202 8,025,646
Futures contracts.......... - (105,083) - - -
Foreign currency and
forward foreign currency
contracts................. (58,974) (41,996) (270,661) - 8
Change in unrealized
appreciation
(depreciation) on:
Investments................ 127,096 2,776,922 (8,810,322) 309,851 1,370,689
Futures contracts.......... - (27,820) - - -
Translation of foreign
currency and forward
foreign currency
contracts................. (958) 155,639 365,478 - -
---------- ---------- ---------- --------- ----------
Net gain/(loss) on
investments, foreign
currency and forward
foreign currency
contracts................ 4,741,386 4,960,186 6,647,698 373,053 9,396,343
---------- ---------- ---------- --------- ----------
Net increase in net assets
resulting from operations.. $4,523,294 $4,866,923 $6,554,038 $353,804 $8,670,968
---------- ---------- ---------- --------- ----------
</TABLE>
- ---------------------
* Formerly the International Growth and Income Fund
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
NORTH AMERICAN FUNDS
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED OCTOBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Tax-
Growth Sensitive Growth and Equity-
Equity Equity Income Income Balanced
Fund Fund Fund Fund Fund
---------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest................... $68,723 $9,783 $222,376 $127,679 $2,451,719
Dividends (Net of $475,
$820, $24,277, $13,628 and
$30,950 withholding tax in
Growth Equity, Tax-
Sensitive Equity, Growth
and Income, Equity-Income
and Balanced,
respectively)............. 196,785 106,361 3,928,924 3,799,150 845,697
---------- ----------- ----------- ------------ -----------
Total income.............. 265,508 116,144 4,151,300 3,926,829 3,297,416
---------- ----------- ----------- ------------ -----------
EXPENSES:
Distribution for Class A... 17,231 10,685 158,039 96,309 41,514
Distribution for Class B... 149,211 37,160 943,742 363,445 170,727
Distribution for Class C... 174,643 35,963 1,464,659 849,454 616,807
Investment adviser fee
(Note 5)................... 335,777 88,103 1,912,464 1,060,879 681,955
Custodian fee.............. 36,522 36,143 140,315 83,437 58,065
Transfer agent fee......... 89,017 13,827 376,715 233,528 129,193
Accounting/administration.. 56,337 15,915 434,861 231,614 140,051
Audit and legal fees....... 19,331 5,325 148,248 76,533 46,612
Amortization of
organization costs......... - 6,557 - - -
Miscellaneous.............. 32,101 10,443 234,964 139,534 76,717
---------- ----------- ----------- ------------ -----------
Expenses before
reimbursement by investment
adviser.................... 910,170 260,121 5,814,007 3,134,733 1,961,641
Reimbursement of expenses
by investment adviser (Note
5)......................... 84,102 45,864 414,305 277,002 190,199
---------- ----------- ----------- ------------ -----------
Net expenses.............. 826,068 214,257 5,399,702 2,857,731 1,771,442
---------- ----------- ----------- ------------ -----------
Net investment
income/(loss)............. (560,560) (98,113) (1,248,402) 1,069,098 1,525,974
---------- ----------- ----------- ------------ -----------
REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS,
FOREIGN CURRENCY AND
FORWARD FOREIGN CURRENCY
CONTRACTS:
Net realized gain (loss)
on:
Investment transactions.... 6,256,855 (1,007,031) 29,073,940 25,209,364 9,063,680
Foreign currency and
forward foreign currency
contracts.................. (2,574) - (244) (11,895) (43,308)
Change in unrealized
appreciation (depreciation)
on:
Investments................ 2,622,980 1,514,682 27,366,787 (19,384,683) (9,389,607)
Translation of foreign
currency and forward
foreign currency
contracts................. (7) - 153 101 (920)
---------- ----------- ----------- ------------ -----------
Net gain/(loss) on
investments, foreign
currency and forward
foreign currency
contracts................ 8,877,254 507,651 56,440,636 5,812,887 (370,155)
---------- ----------- ----------- ------------ -----------
Net increase in net assets
resulting from operations... $8,316,694 $409,538 $55,192,234 $6,881,985 $1,155,819
---------- ----------- ----------- ------------ -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
NORTH AMERICAN FUNDS
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED OCTOBER 31, 1999
- --------------------------------------------------------------------------------
<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>
INVESTMENT INCOME:
Interest (Net of $9,756 and
$21 withholding tax in
Strategic Income and
Investment Quality Bond,
respectively)............. $6,483,191 $1,197,389 $826,875 $4,721,160 $1,097,161
Dividends.................. - 4,063 - - -
---------- ---------- ---------- ---------- ----------
Total income.............. 6,483,191 1,201,452 826,875 4,721,160 1,097,161
---------- ---------- ---------- ---------- ----------
EXPENSES:
Distribution for Class A... 42,157 19,724 8,045 151,280 -
Distribution for Class B... 268,194 46,976 49,930 131,921 -
Distribution for Class C... 287,809 54,899 46,413 121,489 -
Investment adviser fee
(Note 5)................... 498,515 94,898 89,986 411,390 44,172
Custodian fee.............. 91,391 36,179 36,186 45,773 36,192
Transfer agent fee......... 103,440 37,925 18,297 101,959 70,210
Accounting/administration.. 104,964 24,557 23,167 106,197 34,090
Audit and legal fees....... 34,703 8,172 7,740 35,282 11,456
Miscellaneous.............. 58,419 14,782 14,045 57,618 19,532
---------- ---------- ---------- ---------- ----------
Expenses before
reimbursement by investment
adviser.................... 1,489,592 338,112 293,809 1,162,909 215,652
Reimbursement of expenses
by investment adviser (Note
5)......................... 113,062 74,346 61,828 141,964 105,222
---------- ---------- ---------- ---------- ----------
Net expenses.............. 1,376,530 263,766 231,981 1,020,945 110,430
---------- ---------- ---------- ---------- ----------
Net investment
income/(loss)............. 5,106,661 937,686 594,894 3,700,215 986,731
---------- ---------- ---------- ---------- ----------
REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS,
FOREIGN CURRENCY AND
FORWARD FOREIGN CURRENCY
CONTRACTS:
Net realized gain (loss)
on:
Investment transactions.... (3,377,733) (205,464) (75,958) (821,237) 572
Foreign currency and
forward foreign currency
contracts.................. (246,365) - - - -
Change in unrealized
appreciation (depreciation)
on:
Investments................ (281,966) (979,000) (1,012,148) (2,669,738) -
Translation of foreign
currency and forward
foreign currency
contracts................. 255,346 - - - -
---------- ---------- ---------- ---------- ----------
Net gain/(loss) on
investments, foreign
currency and forward
foreign currency
contracts................ (3,650,718) (1,184,464) (1,088,106) (3,490,975) 572
---------- ---------- ---------- ---------- ----------
Net increase/(decrease) in
net assets resulting from
operations................. $1,455,943 ($246,778) ($493,212) $209,240 $987,303
---------- ---------- ---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
NORTH AMERICAN FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International
Small Cap Fund International Equity Fund** Global Equity Fund
------------------------- ----------------------------- --------------------------
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
10/31/99 10/31/98 10/31/99 10/31/98 10/31/99 10/31/98
----------- ----------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income (loss) ..... ($218,092) ($118,410) ($93,263) ($25,047) ($93,660) ($509,955)
Net realized gain
(loss) on:
Investment
transactions....... 4,674,222 (75,711) 2,202,524 33,515 15,363,203 9,400,371
Futures contracts... - - (105,083) - - -
Foreign currency and
forward foreign
currency
contracts.......... (58,974) (22,378) (41,996) 129,326 (270,661) 845,669
Change in unrealized
appreciation
(depreciation) on:
Investments......... 127,096 236,882 2,780,190 405,513 (8,810,322) 975,938
Futures contracts... - - (27,820) - - -
Foreign currency and
forward foreign
currency
contracts.......... (958) 3,020 152,371 (374,342) 365,478 (700,564)
----------- ----------- ------------- ------------- ----------- ------------
Net increase
(decrease) in net
assets resulting
from operations..... 4,523,294 23,403 4,866,923 168,965 6,554,038 10,011,459
DISTRIBUTIONS FROM:
Net investment
income
Class A............. - - - (32,570) - (417,000)
Class B............. - - - (49,275) - (215,336)
Class C............. - - - (25,937) - (405,867)
Net realized gains
on investments and
foreign currency
transactions.......
Class A............. - - (12,093) (387,315) (2,303,340) (1,961,256)
Class B............. - - (44,312) (1,343,452) (2,219,820) (2,005,883)
Class C............. - - (25,387) (715,494) (4,228,655) (3,781,969)
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).................. (4,278,804) (2,188,345) (5,598,242) (1,038,721) (33,579,885) (6,146,407)
----------- ----------- ------------- ------------- ----------- ------------
Increase (decrease)
in net assets....... 244,490 (2,164,942) (813,111) (3,496,265) (35,777,662) (4,922,259)
Net assets at
beginning of
period.............. 15,453,529 17,618,471 25,759,090 29,255,355 119,116,196 124,038,455
----------- ----------- ------------- ------------- ----------- ------------
Net assets at end of
period.............. $15,698,019 $15,453,529 $24,945,979 $25,759,090 $83,338,534 $119,116,196
----------- ----------- ------------- ------------- ----------- ------------
Undistributed net
investment income
(loss).............. - - $53,768 $165,398 ($147,081) $226,601
----------- ----------- ------------- ------------- ----------- ------------
<CAPTION>
Emerging Growth Fund
-----------------------
Year 01/06/98 *
Ended to
10/31/99 10/31/98
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment
income (loss) ..... ($19,249) ($4,740)
Net realized gain
(loss) on:
Investment
transactions....... 63,202 (39,152)
Futures contracts... - -
Foreign currency and
forward foreign
currency
contracts.......... - -
Change in unrealized
appreciation
(depreciation) on:
Investments......... 309,851 (61,247)
Futures contracts... - -
Foreign currency and
forward foreign
currency
contracts.......... - -
----------- -----------
Net increase
(decrease) in net
assets resulting
from operations..... 353,804 (105,139)
DISTRIBUTIONS FROM:
Net investment
income
Class A............. - -
Class B............. - -
Class C............. - -
Net realized gains
on investments and
foreign currency
transactions.......
Class A............. - -
Class B............. - -
Class C............. - -
In excess of net
investment income
Class A............. - -
Class B............. - -
Class C............. - -
Increase (decrease)
in net assets from
capital share
transactions (Note
3).................. 323,343 752,323
----------- -----------
Increase (decrease)
in net assets....... 677,147 647,184
Net assets at
beginning of
period.............. 647,184 -
----------- -----------
Net assets at end of
period.............. $1,324,331 $647,184
----------- -----------
Undistributed net
investment income
(loss).............. - -
----------- -----------
</TABLE>
- -------------------
* Commencement of operations
** Formerly known as the International Growth and Income Fund
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
NORTH AMERICAN FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Tax-Sensitive
Small/Mid Cap Fund Growth Equity Fund Equity Fund
--------------------------- --------------------------- -------------------------
Year Year Year Year Year 01/06/98 *
Ended Ended Ended Ended Ended to
10/31/99 10/31/98 10/31/99 10/31/98 10/31/99 10/31/98
----------- ----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss) .............. ($725,375) ($494,630) ($560,560) ($278,985) ($98,113) ($23,575)
Net realized gain
(loss) on:
Investment
transactions......... 8,025,646 3,617,101 6,256,855 2,221,648 (1,007,031) (754,965)
Foreign currency and
forward foreign
currency contracts... 8 - (2,574) 679 - -
Change in unrealized
appreciation
(depreciation) on:
Investments........... 1,370,689 (1,868,388) 2,622,980 1,275,786 1,514,682 (782,878)
Foreign currency and
forward foreign
currency contracts... - - (7) (269) - -
----------- ----------- ----------- ----------- ---------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 8,670,968 1,254,083 8,316,694 3,218,859 409,538 (1,561,418)
DISTRIBUTIONS FROM:
Net realized gains on
investments and
foreign currency
transactions:
Class A............... (460,517) (73,545) (265,199) (262,983) - -
Class B............... (1,326,329) (196,356) (781,956) (812,961) - -
Class C............... (1,510,893) (216,341) (851,533) (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)............. 1,712,126 4,796,743 7,329,284 2,632,785 (1,770,400) 11,895,792
----------- ----------- ----------- ----------- ---------- -----------
Increase (decrease) in
net assets........... 7,085,355 5,564,584 13,747,290 3,684,025 (1,360,862) 10,334,374
Net assets at
beginning of
period............... 35,007,620 29,443,036 28,543,362 24,859,337 10,334,374 -
----------- ----------- ----------- ----------- ---------- -----------
Net assets at end of
period............... $42,092,975 $35,007,620 $42,290,652 $28,543,362 $8,973,512 $10,334,374
----------- ----------- ----------- ----------- ---------- -----------
Undistributed net
investment income
(loss)............... - - - - - -
----------- ----------- ----------- ----------- ---------- -----------
<CAPTION>
Growth and Income Fund
-----------------------------------
Year Year
Ended Ended
10/31/99 10/31/98
----------------- -----------------
<S> <C> <C>
OPERATIONS:
Net investment income
(loss) .............. ($1,248,402) ($433,878)
Net realized gain
(loss) on:
Investment
transactions......... 29,073,940 9,720,012
Foreign currency and
forward foreign
currency contracts... (244) -
Change in unrealized
appreciation
(depreciation) on:
Investments........... 27,366,787 28,812,377
Foreign currency and
forward foreign
currency contracts... 153 53
----------------- -----------------
Net increase (decrease)
in net assets
resulting from
operations............ 55,192,234 38,098,564
DISTRIBUTIONS FROM:
Net realized gains on
investments and
foreign currency
transactions:
Class A............... (1,712,771) (2,741,357)
Class B............... (3,082,778) (4,507,021)
Class C............... (4,839,860) (7,696,358)
In excess of net
investment income
Class A............... - (45,238)
Class B............... - -
Class C............... - -
Increase (decrease) in
net assets
from capital share
transactions
(Note 3)............. 11,521,213 30,468,074
----------------- -----------------
Increase (decrease) in
net assets........... 57,078,038 53,576,664
Net assets at
beginning of
period............... 240,884,117 187,307,453
----------------- -----------------
Net assets at end of
period............... $297,962,155 $240,884,117
----------------- -----------------
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 Strategic Income Fund
------------------------------ --------------------------- ---------------------------
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
10/31/99 10/31/98 10/31/99 10/31/98 10/31/99 10/31/98
------------ ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment
income (loss)..... $1,069,098 $1,911,306 $1,525,974 $1,548,319 $5,106,661 $5,297,511
Net realized gain
(loss) on:
Investment
transactions...... 25,209,364 11,356,830 9,063,680 6,740,853 (3,377,733) (114,474)
Foreign currency
and forward
foreign currency
contracts......... (11,895) (959) (43,308) (76,080) (246,365) 174,226
Change in
unrealized
appreciation
(depreciation) on:
Investments........ (19,384,683) 3,232,000 (9,389,607) 2,811,660 (281,966) (5,320,040)
Foreign currency
and forward
foreign currency
contracts......... 101 (788) (920) 693 255,346 (218,242)
------------ ------------ ----------- ----------- ----------- -----------
Net increase
(decrease) in net
assets resulting
from operations.... 6,881,985 16,498,389 1,155,819 11,025,445 1,455,943 (181,019)
DISTRIBUTIONS FROM:
Net investment
income
Class A............ (602,777) (701,503) (284,543) (317,345) (985,588) (1,142,439)
Class B............ (371,918) (442,368) (243,851) (320,086) (2,027,623) (2,118,644)
Class C............ (918,427) (1,133,438) (835,387) (1,278,949) (2,174,265) (2,258,371)
Net realized gains
on investments and
foreign currency
transactions......
Class A............ (2,331,204) (2,593,550) (1,061,187) (2,023,888) (94,062) (219,321)
Class B............ (2,468,438) (2,589,634) (1,381,136) (2,767,331) (189,150) (478,774)
Class C............ (6,050,850) (6,612,227) (4,691,171) (11,012,231) (202,710) (472,034)
Increase (decrease)
in net assets from
capital share
transactions (Note
3)................. (49,890,706) 2,002,286 (17,488,266) 7,392,323 (22,740,011) 1,717,355
------------ ------------ ----------- ----------- ----------- -----------
Increase (decrease)
in net assets...... (55,752,335) 4,427,955 (24,829,722) 697,938 (26,957,466) (5,153,247)
Net assets at
beginning of
period............. 171,601,558 167,173,603 98,392,658 97,694,720 78,043,504 83,196,751
------------ ------------ ----------- ----------- ----------- -----------
Net assets at end of
period............. $115,849,223 $171,601,558 $73,562,936 $98,392,658 $51,086,038 $78,043,504
------------ ------------ ----------- ----------- ----------- -----------
Undistributed net
investment income
(loss)............. $509,106 $1,532,483 $1,271,183 $1,153,058 ($94,527) $196,179
------------ ------------ ----------- ----------- ----------- -----------
<CAPTION>
Investment Quality
Bond Fund
-------------------------------
Year Year
Ended Ended
10/31/99 10/31/98
--------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment
income (loss)..... $937,686 $1,040,983
Net realized gain
(loss) on:
Investment
transactions...... (205,464) 161,325
Foreign currency
and forward
foreign currency
contracts......... - -
Change in
unrealized
appreciation
(depreciation) on:
Investments........ (979,000) 12,137
Foreign currency
and forward
foreign currency
contracts......... - -
--------------- ---------------
Net increase
(decrease) in net
assets resulting
from operations.... (246,778) 1,214,445
DISTRIBUTIONS FROM:
Net investment
income
Class A............ (366,860) (446,629)
Class B............ (279,710) (276,805)
Class C............ (326,493) (312,476)
Net realized gains
on investments and
foreign currency
transactions......
Class A............ - -
Class B............ - -
Class C............ - -
Increase (decrease)
in net assets from
capital share
transactions (Note
3)................. (3,491,641) (903,890)
--------------- ---------------
Increase (decrease)
in net assets...... (4,711,482) (725,355)
Net assets at
beginning of
period............. 17,106,230 17,831,585
--------------- ---------------
Net assets at end of
period............. $12,394,748 $17,106,230
--------------- ---------------
Undistributed net
investment income
(loss)............. ($20,882) $11,637
--------------- ---------------
</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
10/31/99 10/31/98 10/31/99 10/31/98
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................... $594,894 $691,317 $3,700,215 $4,323,483
Net realized gain (loss) on:
Investment transactions.......................... (75,958) 190,227 (821,237) 591,717
Change in unrealized appreciation (depreciation) on:
Investments..................................... (1,012,148) 50,547 (2,669,738) 621,573
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting
from operations.................................. (493,212) 932,091 209,240 5,536,773
DISTRIBUTIONS FROM:
Net investment income
Class A.......................................... (241,991) (277,166) (2,291,801) (2,632,290)
Class B.......................................... (182,925) (215,659) (622,804) (735,957)
Class C.......................................... (169,977) (198,492) (572,045) (614,899)
In excess of net investment income
Class A.......................................... - - (166,512) (314,160)
Class B.......................................... - - (45,250) (87,836)
Class C.......................................... - - (41,562) (73,388)
Return of capital
Class A.......................................... - - (127,295) -
Class B.......................................... - - (34,593) -
Class C.......................................... - - (31,774) -
Increase (decrease) in net assets from capital
share transactions (Note 3)...................... (2,589,104) (2,184,716) (18,269,612) (5,506,261)
----------- ----------- ----------- -----------
Increase (decrease) in net assets................. (3,677,209) (1,943,942) (21,994,008) (4,428,018)
Net assets at beginning of period................. 16,239,730 18,183,672 80,182,381 84,610,399
----------- ----------- ----------- -----------
Net assets at end of period....................... $12,562,521 $16,239,730 $58,188,373 $80,182,381
----------- ----------- ----------- -----------
Undistributed net investment income (loss)........ ($263) ($263) ($488,884) ($229,251)
<CAPTION>
----------- ----------- ----------- -----------
<CAPTION>
Money Market Fund
-------------------------------
Year Year
Ended Ended
10/31/99 10/31/98
--------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) .................... $986,731 $975,269
Net realized gain (loss) on:
Investment transactions.......................... 572 -
Change in unrealized appreciation (depreciation) on:
Investments..................................... - -
--------------- ---------------
Net increase (decrease) in net assets resulting
from operations.................................. 987,303 975,269
DISTRIBUTIONS FROM:
Net investment income
Class A.......................................... (390,560) (452,709)
Class B.......................................... (226,689) (164,474)
Class C.......................................... (370,054) (358,086)
In excess of net investment income
Class A.......................................... - -
Class B.......................................... - -
Class C.......................................... - -
Return of capital
Class A.......................................... - -
Class B.......................................... - -
Class C.......................................... - -
Increase (decrease) in net assets from capital
share transactions (Note 3)...................... (5,226,114) 2,523,350
--------------- ---------------
Increase (decrease) in net assets................. (5,226,114) 2,523,350
Net assets at beginning of period................. 24,451,212 21,927,862
--------------- ---------------
Net assets at end of period....................... $19,225,098 $24,451,212
--------------- ---------------
Undistributed net investment income (loss)........ - $2,858
<CAPTION>
--------------- ---------------
</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 Year 3/04/96* Year Year Year 3/04/96*
Ended Ended Ended to Ended Ended Ended to
10/31/99 ** 10/31/98 10/31/97 10/31/96 10/31/99 10/31/98 10/31/97 10/31/96
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $13.91 $13.86 $13.43 $12.50 $13.66 $13.71 $13.37 $12.50
- --------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment
income/(loss) (0.14) (0.02) (0.03) 0.05 (0.27) (0.12) (0.11) (0.01)
Net realized and
unrealized gain/(loss)
on investments and
foreign currency 5.06 0.07 0.46 0.88 4.96 0.07 0.45 0.88
----------------------------------------------------------------------------------
Total from investment
operations 4.92 0.05 0.43 0.93 4.69 (0.05) 0.34 0.87
- --------------------------------------------------------------------------------------------------------------
Net Asset Value, End of
Period $18.83 $13.91 $13.86 $13.43 $18.35 $13.66 $13.71 $13.37
- --------------------------------------------------------------------------------------------------------------
Total Return 35.37% 0.36% 3.20% 7.44%+ 34.33% (0.36%) 2.54% 6.96%+
- --------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------------------------------------
Net assets, end of
period (000's) $2,309 $2,173 $3,225 $2,120 $7,417 $7,073 $7,369 $5,068
- --------------------------------------------------------------------------------------------------------------
Ratio of total expenses
to average net assets 1.90% 1.90% 1.90% 1.90%# 2.55% 2.55% 2.55% 2.55%#
- --------------------------------------------------------------------------------------------------------------
Ratio of net investment
income to average net
assets (0.87%) (0.12%) (0.19%) (0.50%)# (1.53) (0.79%) (0.84%) (0.15%)#
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 202% 54% 75% 67%# 202% 54% 75% 67%#
- --------------------------------------------------------------------------------------------------------------
Expense ratio before
expense reimbursement
by advisor 2.24% 2.23% 2.46% 3.07%# 2.89% 2.88% 2.98% 3.27%#
- --------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Small Cap Fund
--------------------------------------
Class C
--------------------------------------
Year Year Year 3/04/96*
Ended Ended Ended to
10/31/99 10/31/98 10/31/97 10/31/96
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $13.66 $13.71 $13.37 $12.50
- --------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) (0.31) (0.12) (0.11) (0.01)
Net realized and unrealized
gain/(loss) on investments and
foreign currency 5.02 0.07 0.45 0.88
--------------------------------------
Total from investment operations 4.71 (0.05) 0.34 0.87
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $18.37 $13.66 $13.71 $13.37
- --------------------------------------------------------------------------------
Total Return 34.48% (0.36%) 2.54% 6.96%+
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
Net assets, end of period (000's) $5,972 $6,195 $7,025 $5,517
- --------------------------------------------------------------------------------
Ratio of total expenses to average net
assets 2.55% 2.55% 2.55% 2.55%#
- --------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (1.53) (0.78%) (0.84%) (0.15%)#
- --------------------------------------------------------------------------------
Portfolio turnover rate 202% 54% 75% 67%#
- --------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by advisor 2.89% 2.88% 2.96% 3.25%#
- --------------------------------------------------------------------------------
</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 Equity Fund
(formerly the International Growth and Income
Fund)
-----------------------------------------------------
Class A
-----------------------------------------------------
Year Year Year Year 1/09/95*
Ended Ended Ended Ended to
10/31/99 ** 10/31/98 10/31/97 10/31/96** 10/31/95
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $9.83 $10.81 $11.35 $10.11 $10.00
- --------------------------------------------------------------------------------
Investment Operations:
Net investment
income/(loss) 0.02 0.03 0.06 0.09 0.06
Net realized and
unrealized gain/(loss)
on investments and
foreign currency 2.07 0.02 0.35 1.33 0.08
-----------------------------------------------------
Total from investment
operations 2.09 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 (0.03) (0.90) (0.76) (0.10) -
<CAPTION>
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total distributions (0.03) (1.03) (0.95) (0.18) (0.03)
- --------------------------------------------------------------------------------
Net Asset Value, End of
Period $11.89 $9.83 $10.81 $11.35 $10.11
- --------------------------------------------------------------------------------
Total Return 21.33% 0.67% 3.55% 14.25% 1.37%+
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
Net assets, end of
period (000's) $3,997 $3,769 $4,461 $4,732 $6,897
- --------------------------------------------------------------------------------
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 0.18% 0.44% 0.97% 0.84% 0.70%#
- --------------------------------------------------------------------------------
Portfolio turnover rate 142% 173% 146% 170% 69%
- --------------------------------------------------------------------------------
Expense ratio before
expense reimbursement
by advisor 1.98% 1.87% 1.96% 1.97% 2.18%#
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Equity Fund
(formerly the International Growth and Income Fund)
-------------------------------------------------------
Class B
-------------------------------------------------------
Year Year Year Year 1/09/95*
Ended Ended Ended Ended to
10/31/99 ** 10/31/98 10/31/97** 10/31/96** 10/31/95
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $9.77 $10.75 $11.30 $10.10 $10.00
- ----------------------------------------------------------------------------------
Investment Operations:
Net investment
income/(loss) (0.05) (0.02) 0.03 0.06 0.01
Net realized and
unrealized gain/(loss)
on investments and
foreign currency 2.05 0.00 0.31 1.30 0.12
-------------------------------------------------------
Total from investment
operations 2.00 (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 (0.03) (0.90) (0.76) (0.11) -
-------------------------------------------------------
Total distributions (0.03) (0.96) (0.89) (0.16) (0.03)
- ----------------------------------------------------------------------------------
Net Asset Value, End of
Period $11.74 $9.77 $10.75 $11.30 $10.10
- ----------------------------------------------------------------------------------
Total Return 20.53% (0.03%) 2.92% 13.58% 1.28%+
- ----------------------------------------------------------------------------------
Ratios/Supplemental Data
- ----------------------------------------------------------------------------------
Net assets, end of
period (000's) $14,269 $14,030 $16,334 $15,217 $8,421
- ----------------------------------------------------------------------------------
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 (0.45%) (0.18%) 0.32% 0.57% 0.15%#
- ----------------------------------------------------------------------------------
Portfolio turnover rate 142% 173% 146% 170% 69%
- ----------------------------------------------------------------------------------
Expense ratio before
expense reimbursement
by advisor 2.63% 2.52% 2.54% 2.60% 2.93%#
- ----------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations
# Annualized
+ Non-annualized
** Net investment income per share has been calculated using the average share
method
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>
International Equity Fund
(formerly the International Growth and Income Fund)
-------------------------------------------------------
Class C
-------------------------------------------------------
Year Year Year Year 1/09/95*
Ended Ended Ended Ended to
10/31/99 ** 10/31/98 10/31/97** 10/31/96** 10/31/95
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $9.77 $10.76 $11.31 $10.10 $10.00
- ----------------------------------------------------------------------------------
Investment Operations:
Net investment
income/(loss) (0.05) (0.02) 0.03 0.06 0.01
Net realized and
unrealized gain/(loss)
on Investments and
foreign currency 2.05 (0.01) 0.31 1.30 0.12
-------------------------------------------------------
Total from investment
operations 2.00 (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 (0.03) (0.90) (0.76) (0.10) -
-------------------------------------------------------
Total distributions (0.03) (0.96) (0.89) (0.15) (0.03)
- ----------------------------------------------------------------------------------
Net Asset Value, End of
Period $11.74 $9.77 $10.76 $11.31 $10.10
- ----------------------------------------------------------------------------------
Total Return 20.53% (0.13%) 2.91% 13.63% 1.28%+
- ----------------------------------------------------------------------------------
Ratios/Supplemental Data
- ----------------------------------------------------------------------------------
Net assets, end of
period (000's) $6,680 $7,960 $8,460 $9,076 $6,324
- ----------------------------------------------------------------------------------
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 (0.49%) (0.19%) 0.32% 0.51% 0.13%#
- ----------------------------------------------------------------------------------
Portfolio turnover rate 142% 173% 146% 170% 69%
- ----------------------------------------------------------------------------------
Expense ratio before
expense reimbursement
by advisor 2.62% 2.52% 2.57% 2.60% 2.93%#
- ----------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Global Equity Fund
----------------------------------------------------
Class A
----------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/99** 10/31/98 10/31/97 10/31/96** 10/31/95
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $16.43 $16.32 $14.50 $13.84 $14.82
- ---------------------------------------------------------------------------------
Investment Operations:
Net investment
income/(loss) 0.08 0.02 0.06 (0.04) -
Net realized and
unrealized gain/(loss)
on investments and
foreign currency 0.82 1.34 3.45 0.91 (0.54)
----------------------------------------------------
Total from investment
operations 0.90 1.36 3.51 0.87 (0.54)
----------------------------------------------------
Distributions
Dividends from net
investment income - (0.22) (0.05) (0.21) -
Distributions from
realized capital gains (1.21) (1.03) (1.64) - (0.44)
----------------------------------------------------
Total distributions (1.21) (1.25) (1.69) (0.21) (0.44)
- ---------------------------------------------------------------------------------
Net Asset Value, End of
Period $16.12 $16.43 $16.32 $14.50 $13.84
- ---------------------------------------------------------------------------------
Total Return 5.60% 8.90% 26.10% 6.33% (3.52%)
- ---------------------------------------------------------------------------------
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------
Net assets, end of period
(000's) $12,757 $31,055 $30,960 $25,924 $23,894
- ---------------------------------------------------------------------------------
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 0.47% 0.09% 0.33% (0.30%) 0.03%
- ---------------------------------------------------------------------------------
Portfolio turnover rate 38% 20% 28% 165% 57%
- ---------------------------------------------------------------------------------
Expense ratio before
expense reimbursement by
advisor 1.84% 1.75% 1.81% 1.83% 1.92%
- ---------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations
# Annualized
+ Non-annualized
** Net investment income per share has been calculated using the average share
method
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Global Equity Fund
----------------------------------------------------
Class B
----------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/99* 10/31/98 10/31/97* 10/31/96* 10/31/95*
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $16.24 $16.14 $14.36 $13.73 $14.79
- ---------------------------------------------------------------------------------
Investment Operations:
Net investment
income/(loss) (0.04) (0.11) (0.05) (0.14) (0.09)
Net realized and
unrealized gain/(loss)
on investments and
foreign currency 0.84 1.35 3.47 0.91 (0.53)
----------------------------------------------------
Total from investment
operations 0.80 1.24 3.42 0.77 (0.62)
----------------------------------------------------
Distributions
Dividends from net
investment income - (0.11) (0.14) -
Distributions from
realized capital gains (1.21) (1.03) (1.64) - (0.44)
----------------------------------------------------
Total distributions (1.21) (1.14) (1.64) (0.14) (0.44)
- ---------------------------------------------------------------------------------
Net Asset Value, End of
Period $15.83 $16.24 $16.14 $14.36 $13.73
- ---------------------------------------------------------------------------------
Total Return 5.01% 8.17% 25.63% 5.64% (4.09%)
- ---------------------------------------------------------------------------------
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------
Net assets, end of period
(000's) $25,381 $30,287 $31,833 $25,661 $23,317
- ---------------------------------------------------------------------------------
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 (0.25%) (0.55%) (0.32%) (0.95%) (0.61%)
- ---------------------------------------------------------------------------------
Portfolio turnover rate 38% 20% 28% 165% 57%
- ---------------------------------------------------------------------------------
Expense ratio before
expense reimbursement by
advisor 2.50% 2.40% 2.47% 2.48% 2.58%
- ---------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Global Equity Fund
--------------------------------------------------
Class C
--------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/99* 10/31/98 10/31/97 10/31/96* 10/31/95
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $16.30 $16.19 $14.41 $13.73 $14.79
- --------------------------------------------------------------------------------
Investment Operations:
Net investment
income/(loss) (0.04) (0.10) (0.05) (0.14) (0.09)
Net realized and unrealized
gain/(loss) on
investments and foreign
currency 0.84 1.35 3.47 0.92 (0.53)
--------------------------------------------------
Total from investment
operations 0.80 1.25 3.42 0.78 (0.62)
--------------------------------------------------
Distributions
Dividends from net
investment income - (0.11) - (0.10) -
Distributions from realized
capital gains (1.21) (1.03) (1.64) - (0.44)
--------------------------------------------------
Total distributions (1.21) (1.14) (1.64) (0.10) (0.44)
- --------------------------------------------------------------------------------
Net Asset Value, End of
Period $15.89 $16.30 $16.19 $14.41 $13.73
- --------------------------------------------------------------------------------
Total Return 4.99% 8.21% 25.54% 5.70% (4.09%)
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
Net assets, end of period
(000's) $45,201 $57,774 $61,245 $64,830 $83,340
- --------------------------------------------------------------------------------
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 (0.24%) (0.56%) (0.32%) (0.95%) (0.64%)
- --------------------------------------------------------------------------------
Portfolio turnover rate 38% 20% 28% 165% 57%
- --------------------------------------------------------------------------------
Expense ratio before
expense reimbursement by
advisor 2.50% 2.40% 2.46% 2.48% 2.53%
- --------------------------------------------------------------------------------
</TABLE>
* Net investment income per share has been calculated using the average share
method
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>
Emerging Growth Fund
-----------------------------------------------------------------------
Class A Class B Class C
--------------------- --------------------- ---------------------
Year 1/06/98* Year 1/06/98* Year 1/06/98*
Ended to Ended to Ended to
10/31/99 ** 10/31/98 10/31/99 ** 10/31/98 10/31/99 ** 10/31/98
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $8.88 $10.00 $8.83 $10.00 $8.84 $10.00
- ----------------------------------------------------------------------------------------------------
Investment Operations:
Net investment
income/(loss) (0.15) (0.08) (0.21) (0.12)*** (0.21) (0.12)**
Net realized and
unrealized gain/(loss)
on investments and
foreign currency 4.08 (1.04) 3.95 (1.05) 3.94 (1.04)
-----------------------------------------------------------------------
Total from investment
operations 3.93 (1.12) 3.74 (1.17) 3.73 (1.16)
- ----------------------------------------------------------------------------------------------------
Net Asset Value, End of
Period $12.81 $8.88 $12.57 $8.83 $12.57 $8.84
- ----------------------------------------------------------------------------------------------------
Total Return 44.26% (11.20%)+ 42.36% (11.70%)+ 42.19% (11.60%)+
- ----------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ----------------------------------------------------------------------------------------------------
Net assets, end of
period (000's) $224 $146 $660 $263 $440 $238
- ----------------------------------------------------------------------------------------------------
Ratio of total expenses
to average net assets 1.70% 1.70%# 2.35% 2.35%# 2.35% 2.35%#
- ----------------------------------------------------------------------------------------------------
Ratio of net investment
income to average net
assets (1.43%) (1.00%)# (2.04%) (1.76%)# (2.03%) (1.67%)#
- ----------------------------------------------------------------------------------------------------
Portfolio turnover rate 129% 52%+ 129% 52%+ 129% 52%+
- ----------------------------------------------------------------------------------------------------
Expense ratio before
expense reimbursement
by advisor 6.96% 15.48%# 7.58% 16.48%# 7.60% 15.78%#
- ----------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Small/Mid Cap Fund
---------------------------------------------------------------------------------------
Class A Class B
----------------------------------------- -------------------------------------------
Year Year Year 3/04/96* Year Year Year 3/04/96*
Ended Ended Ended to Ended Ended Ended to
10/31/99 ** 10/31/98 10/31/97 10/31/96 10/31/99 ** 10/31/98 10/31/97** 10/31/96
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $16.09 $15.51 $12.62 $12.50 $15.77 $15.33 $12.58 $12.50
- --------------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment
income/(loss) (0.21) (0.15) (0.14) (0.02) (0.32) (0.25) (0.23) (0.05)
Net realized and
unrealized gain/(loss)
on investments and
foreign currency 4.12 0.97 3.03 0.14 4.02 0.93 2.98 0.13
---------------------------------------------------------------------------------------
Total from investment
operations 3.91 0.82 2.89 0.12 3.70 0.68 2.75 0.08
Distributions
Distributions from
capital gains (1.48) (0.24) - - (1.48) (0.24) - -
- --------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of
Period $18.52 $16.09 $15.51 $12.62 $17.99 $15.77 $15.33 $12.58
- --------------------------------------------------------------------------------------------------------------------
Total Return 25.50% 5.51% 22.90% 0.96%+ 24.62% 4.65% 21.86% 0.64%+
- --------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------------------------------------------
Net assets, end of
period (000's) $5,970 $4,814 $4,170 $2,966 $17,184 $13,972 $11,802 $6,659
- --------------------------------------------------------------------------------------------------------------------
Ratio of total expenses
to average net assets 1.68% 1.68% 1.68% 1.68%# 2.33% 2.33% 2.33% 2.33%#
- --------------------------------------------------------------------------------------------------------------------
Ratio of net investment
income to average net
assets (1.15%) (0.90%) (1.02%) (0.40%)# (1.80%) (1.55%) (1.67%) (1.05%) #
- --------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 181% 162% 145% 92%# 181% 162% 145% 92%#
- --------------------------------------------------------------------------------------------------------------------
Expense ratio before
expense reimbursement
by advisor 1.89% 1.93% 2.24% 2.69%# 2.54% 2.58% 2.79% 3.05%#
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations
# Annualized
+ Non-annualized
** Net investment income per share has been calculated using the average share
method
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>
Small/Mid Cap Fund
-------------------------------------------
Class C
-------------------------------------------
Year 3/04/96*
Year Ended Ended Year Ended to
10/31/99 ** 10/31/98 10/31/97** 10/31/96
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $15.79 $15.35 $12.59 $12.50
- --------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) (0.32) (0.25) (0.23) (0.05)
Net realized and unrealized
gain/(loss) on investments and
foreign currency 4.03 0.93 2.99 0.14
-------------------------------------------
Total from investment operations 3.71 0.68 2.76 0.09
Distributions
Distributions from capital gains (1.48) (0.24) - -
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $18.02 $15.79 $15.35 $12.59
- --------------------------------------------------------------------------------
Total Return 24.65% 4.64% 21.92% 0.72%+
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
Net assets, end of period (000's) $18,939 $16,221 $13,471 $8,241
- --------------------------------------------------------------------------------
Ratio of total expenses to
average net assets 2.33% 2.33% 2.33% 2.33%#
- --------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (1.80%) (1.55%) (1.67%) (1.05%)#
- --------------------------------------------------------------------------------
Portfolio turnover rate 181% 162% 145% 92%#
- --------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by advisor 2.54% 2.58% 2.78% 3.04%#
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth Equity Fund
------------------------------------------------------------------------------------
Class A Class B
----------------------------------------- -----------------------------------------
Year Year Year 3/04/96* Year Year Year 3/04/96*
Ended Ended Ended to Ended Ended Ended to
10/31/99 ** 10/31/98 10/31/97 10/31/96 10/31/99 ** 10/31/98 10/31/97 10/31/96
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $17.73 $17.01 $13.78 $12.50 $17.46 $16.90 $13.73 $12.50
- ---------------------------------------------------------------------------------------------------------------
Investment Operations:
Net investment
income/(loss) (0.19) (0.07) (0.03) 0.28 (0.31) (0.18) (0.13) 0.24
Net realized and
unrealized gain/(loss)
on investments and
foreign currency 5.05 2.22 3.45 1.00 4.96 2.17 3.46 0.99
------------------------------------------------------------------------------------
Total from investment
operations 4.86 2.15 3.42 1.28 4.65 1.99 3.33 1.23
Distributions
Dividends from net
investment income - - (0.19) - - - (0.16) -
Distributions from
capital gains (1.15) (1.43) - - (1.15) (1.43) - -
------------------------------------------------------------------------------------
Total distributions (1.15) (1.43) (0.19) (1.15) (1.43) (0.16)
- ---------------------------------------------------------------------------------------------------------------
Net Asset Value, End of
Period $21.44 $17.73 $17.01 $13.78 $20.96 $17.46 $16.90 $13.73
- ---------------------------------------------------------------------------------------------------------------
Total Return 28.57% 13.85% 25.13% 10.24% 27.77%+ 12.93% 24.50% 9.84%+
- ---------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------------------------------------
Net assets, end of
period (000's) $5,656 $3,919 $3,053 $2,244 $17,171 $11,659 $9,040 $4,748
- ---------------------------------------------------------------------------------------------------------------
Ratio of total expenses
to average net assets 1.65% 1.65% 1.65% 1.65%# 2.30% 2.30% 2.30% 2.30%#
- ---------------------------------------------------------------------------------------------------------------
Ratio of net investment
income to average net
assets (0.94) (0.43%) (0.17%) 4.11%# (1.58) (1.07%) (0.82%) 4.18%#
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 145% 115% 181% 450% 145%# 115% 181% 450%#
- ---------------------------------------------------------------------------------------------------------------
Expense ratio before
expense reimbursement
by advisor 1.90% 1.91% 2.28% 2.71%# 2.52% 2.56% 2.78% 3.06%#
- ---------------------------------------------------------------------------------------------------------------
</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.
20
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth Equity Fund
-----------------------------------------
Class C
-----------------------------------------
Year Year 3/04/96*
Year Ended Ended Ended to
10/31/99 ** 10/31/98 10/31/97 10/31/96
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $17.44 $16.89 $13.73 $12.50
- --------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) (0.31) (0.20) (0.13) 0.24
Net realized and unrealized
gain/(loss) on investments and
foreign currency 4.95 2.18 3.46 0.99
-----------------------------------------
Total from investment operations 4.64 1.98 3.33 1.23
Distributions
Dividends from net investment income - - (0.17) -
Distributions from capital gains (1.15) (1.43) - -
-----------------------------------------
Total distributions (1.15) (1.43) (0.17) -
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $20.93 $17.44 $16.89 $13.73
- --------------------------------------------------------------------------------
Total Return 27.75% 12.87% 24.50% 9.84%+
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
Net assets, end of period (000's) $19,463 $12,965 $12,766 $6,494
- --------------------------------------------------------------------------------
Ratio of total expenses to average
net assets 2.30% 2.30% 2.30% 2.30%#
- --------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (1.58%) (1.06%) (0.82%) 4.13%#
- --------------------------------------------------------------------------------
Portfolio turnover rate 145% 115% 181% 450%#
- --------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by advisor 2.52% 2.56% 2.75% 2.96%#
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Tax-Sensitive Equity Fund
----------------------------------------------------------------------
Class A Class B Class C
--------------------- --------------------- ---------------------
Year 1/06/98* Year 1/06/98* Year 1/06/98*
Ended to Ended to Ended to
10/31/99 ** 10/31/98 10/31/99 ** 10/31/98 10/31/99 ** 10/31/98
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $9.07 $10.00 $9.04 $10.00 $9.04 $10.00
- ---------------------------------------------------------------------------------------------------
Investment Operations:
Net investment
income/(loss) (0.05) (0.01) (0.11) (0.04)** (0.11) (0.03)**
Net realized and
unrealized gain/(loss)
on Investments and
foreign currency 0.47 (0.92) 0.43 (0.92) 0.42 (0.93)
----------------------------------------------------------------------
Total from investment
operations 0.42 (0.93) 0.32 (0.96) 0.31 (0.96)
- ---------------------------------------------------------------------------------------------------
Net Asset Value, End of
Period $9.49 $9.07 $9.36 $9.04 $9.35 $9.04
- ---------------------------------------------------------------------------------------------------
Total Return 4.63% (9.30%)+ 3.54% (9.60%)+ 3.43% (9.60%)+
- ---------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------------------------
Net assets, end of
period (000's) $1,526 $4,149 $3,724 $2,900 $3,723 $3,286
- ---------------------------------------------------------------------------------------------------
Ratio of total expenses
to average net assets 1.60% 1.60%# 2.25% 2.25%# 2.25% 2.25% #
- ---------------------------------------------------------------------------------------------------
Ratio of net investment
income to average net
assets (0.48%) (0.40%)# (1.14%) (1.80%)# (1.14%) (1.84%)#
- ---------------------------------------------------------------------------------------------------
Portfolio turnover rate 56% 38% + 56% 38% + 56% 38% +
- ---------------------------------------------------------------------------------------------------
Expense ratio before
expense reimbursement
by advisor 2.05% 2.51%# 2.71% 3.24%# 2.71% 3.16%#
- ---------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations
** Net investment income per share has been calculated using the average share
method
+ Non-annualized
# Annualized
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth and Income Fund
--------------------------------------------------
Class A
--------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/99* 10/31/98 10/31/97 10/31/96 10/31/95*
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $24.26 $21.77 $17.56 $14.72 $13.09
- --------------------------------------------------------------------------------
Investment Operations:
Net investment
income/(loss) 0.03 0.08 0.14 0.18 0.26
Net realized and unrealized
gain/(loss) on investments
and foreign currency 5.45 4.14 5.26 2.99 1.90
--------------------------------------------------
Total from investment
operations 5.48 4.22 5.40 3.17 2.16
--------------------------------------------------
Distributions
Dividends from net
investment income - - (0.15) (0.21) (0.23)
Distributions from realized
capital gains (0.96) (1.70) (1.04) (0.12) (0.30)
Distributions in excess of
net investment income - (0.03) - - -
--------------------------------------------------
Total distributions (0.96) (1.73) (1.19) (0.33) (0.53)
- --------------------------------------------------------------------------------
Net Asset Value, End of
Period $28.78 $24.26 $21.77 $17.56 $14.72
- --------------------------------------------------------------------------------
Total Return 23.11% 20.82% 31.95% 21.84% 17.28%
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
Net assets, end of period
(000's) $37,210 $42,916 $34,186 $18,272 $12,180
- --------------------------------------------------------------------------------
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 0.11% 0.34% 0.66% 1.10% 1.91%
- --------------------------------------------------------------------------------
Portfolio turnover rate 28% 18% 39% 49% 40%
- --------------------------------------------------------------------------------
Expense ratio before
expense reimbursement by
advisor 1.49% 1.45% 1.50% 1.56% 1.69%
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth and Income Fund
---------------------------------------------------
Class B
---------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/99* 10/31/98 10/31/97 10/31/96* 10/31/95*
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $24.01 $21.67 $17.50 $14.69 $13.08
- --------------------------------------------------------------------------------
Investment Operations:
Net investment
income/(loss) (0.15) (0.07) 0.01 0.07 0.16
Net realized and
unrealized gain/(loss) on
investments and foreign
currency 5.38 4.11 5.23 2.99 1.94
---------------------------------------------------
Total from investment
operations 5.23 4.04 5.24 3.06 2.10
---------------------------------------------------
Distributions
Dividends from net
investment income - - (0.03) (0.13) (0.19)
Distributions from
realized capital gains (0.96) (1.70) (1.04) (0.12) (0.30)
---------------------------------------------------
Total distributions (0.96) (1.70) (1.07) (0.25) (0.49)
- --------------------------------------------------------------------------------
Net Asset Value, End of
Period $28.28 $24.01 $21.67 $17.50 $14.69
- --------------------------------------------------------------------------------
Total Return 22.28% 20.04% 31.40% 21.08% 16.73%
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
Net assets, end of period
(000's) $104,695 $75,574 $54,871 $34,740 $19,052
- --------------------------------------------------------------------------------
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 (0.54%) (0.32%) 0.01% 0.45% 1.14%
- --------------------------------------------------------------------------------
Portfolio turnover rate 28% 18% 39% 49% 40%
- --------------------------------------------------------------------------------
Expense ratio before
expense reimbursement by
advisor 2.13% 2.10% 2.15% 2.20% 2.33%
- --------------------------------------------------------------------------------
</TABLE>
* Net investment income per share has been calculated using the average share
method
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth and Income Fund
-------------------------------------------------
Class C
-------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/99* 10/31/98 10/31/97 10/31/96 10/31/95
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $24.10 $21.75 $17.56 $14.71 $13.08
- ---------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) (0.15) (0.07) 0.01 0.07 0.18
Net realized and unrealized
gain/(loss) on investments
and foreign currency 5.40 4.12 5.25 3.00 1.90
-------------------------------------------------
Total from investment
operations 5.25 4.05 5.26 3.07 2.08
-------------------------------------------------
Distributions
Dividends from net
investment income - - (0.03) (0.10) (0.15)
Distributions from realized
capital gains (0.96) (1.70) (1.04) (0.12) (0.30)
-------------------------------------------------
Total distributions (0.96) (1.70) (1.07) (0.22) (0.45)
- ---------------------------------------------------------------------------------
Net Asset Value, End of
Period $28.39 $24.10 $21.75 $17.56 $14.71
- ---------------------------------------------------------------------------------
Total Return 22.28% 20.00% 31.37% 21.12% 16.56%
- ---------------------------------------------------------------------------------
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------
Net assets, end of period
(000's) $156,056 $122,395 $98,250 $74,825 $63,154
- ---------------------------------------------------------------------------------
Ratio of total expenses to
average net assets 1.99% 1.99% 1.99% 1.99% 1.99%
- ---------------------------------------------------------------------------------
Ratio of net investment
income to average net
assets (0.54%) (0.31%) 0.01% 0.45% 1.26%
- ---------------------------------------------------------------------------------
Portfolio turnover rate 28% 18% 39% 49% 40%
- ---------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by advisor 2.13% 2.10% 2.13% 2.20% 2.26%
- ---------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Equity-Income Fund
--------------------------------------------------
Class A
--------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/99* 10/31/98 10/31/97 10/31/96 10/31/95*
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $17.64 $17.44 $17.37 $15.94 $14.78
- --------------------------------------------------------------------------------
Investment Operations:
Net investment
income/(loss) 0.22 0.29 0.33 0.16 0.12
Net realized and unrealized
gain/(loss) on investments
and foreign currency 0.46 1.46 3.59 2.69 1.83
--------------------------------------------------
Total from investment
operations 0.68 1.75 3.92 2.85 1.95
--------------------------------------------------
Distributions
Dividends from net
investment income (0.29) (0.33) (0.18) (0.14) -
Distributions from realized
capital gains (1.12) (1.22) (3.67) (1.28) (0.79)
--------------------------------------------------
Total distributions (1.41) (1.55) (3.85) (1.42) (0.79)
- --------------------------------------------------------------------------------
Net Asset Value, End of
Period $16.91 $17.64 $17.44 $17.37 $15.94
- --------------------------------------------------------------------------------
Total Return 3.93% 10.55% 27.24% 19.23% 14.22%
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
Net assets, end of period
(000's) $13,990 $36,661 $36,334 $28,470 $22,026
- --------------------------------------------------------------------------------
Ratio of total expenses to
average net assets 1.40% 1.42% 1.34% 1.34% 1.34%
- --------------------------------------------------------------------------------
Ratio of net investment
income (loss) to average
net assets 1.30% 1.57% 2.01% 0.98% 0.79%
- --------------------------------------------------------------------------------
Portfolio turnover rate 73% 22% 36% 169% 54%
- --------------------------------------------------------------------------------
Expense ratio before
expense reimbursement by
advisor 1.58% 1.51% 1.55% 1.55% 1.62%
- --------------------------------------------------------------------------------
</TABLE>
* Net investment income per share has been calculated using the average share
method
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Equity-Income Fund
--------------------------------------------------
Class B
--------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/99* 10/31/98 10/31/97 10/31/96 10/31/95*
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $17.43 $17.24 $17.22 $15.84 $14.77
- --------------------------------------------------------------------------------
Investment Operations:
Net investment
income/(loss) 0.10 0.16 0.23 0.06 0.02
Net realized and unrealized
gain/(loss) on investments
and foreign currency 0.47 1.46 3.54 2.69 1.84
--------------------------------------------------
Total from investment
operations 0.57 1.62 3.77 2.75 1.86
--------------------------------------------------
Distributions
Dividends from net
investment income (0.17) (0.21) (0.08) (0.09) -
Distributions from realized
capital gains (1.12) (1.22) (3.67) (1.28) (0.79)
--------------------------------------------------
Total distributions (1.29) (1.43) (3.75) (1.37) (0.79)
- --------------------------------------------------------------------------------
Net Asset Value, End of
Period $16.71 $17.43 $17.24 $17.22 $15.84
- --------------------------------------------------------------------------------
Total Return 3.30% 9.81% 26.29% 18.59% 13.58%
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
Net assets, end of period
(000's) $31,659 $38,954 $36,191 $27,058 $19,874
- --------------------------------------------------------------------------------
Ratio of total expenses to
average net assets 2.04% 2.07% 1.99% 1.99% 1.99%
- --------------------------------------------------------------------------------
Ratio of net investment
income (loss) to average
net assets 0.58% 0.93% 1.36% 0.33% 0.13%
- --------------------------------------------------------------------------------
Portfolio turnover rate 73% 22% 36% 169% 54%
- --------------------------------------------------------------------------------
Expense ratio before
expense reimbursement by
advisor 2.23% 2.16% 2.21% 2.20% 2.32%
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Equity-Income Fund
----------------------------------------------------
Class C
----------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/99 * 10/31/98 10/31/97 10/31/96 10/31/95 *
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $17.53 $17.33 $17.27 $15.84 $14.77
- ---------------------------------------------------------------------------------
Investment Operations:
Net investment
income/(loss) 0.10 0.17 0.23 0.06 0.02
Net realized and
unrealized gain/(loss)
on investments and
foreign currency 0.46 1.46 3.56 2.69 1.84
----------------------------------------------------
Total from investment
operations 0.56 1.63 3.79 2.75 1.86
----------------------------------------------------
Distributions
Dividends from net
investment income (0.17) (0.21) (0.06) (0.04) -
Distributions from
realized capital gains (1.12) (1.22) (3.67) (1.28) (0.79)
----------------------------------------------------
Total distributions (1.29) (1.43) (3.73) (1.32) (0.79)
- ---------------------------------------------------------------------------------
Net Asset Value, End of
Period $16.80 $17.53 $17.33 $17.27 $15.84
- ---------------------------------------------------------------------------------
Total Return 3.22% 9.83% 26.33% 18.53% 13.58%
- ---------------------------------------------------------------------------------
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------
Net assets, end of period
(000's) $70,200 $95,986 $94,649 $83,855 $83,719
- ---------------------------------------------------------------------------------
Ratio of total expenses
to average net assets 2.04% 2.07% 1.99% 1.99% 1.99%
- ---------------------------------------------------------------------------------
Ratio of net investment
income (loss) to average
net assets 0.59% 0.93% 1.36% 0.33% 0.15%
- ---------------------------------------------------------------------------------
Portfolio turnover rate 73% 22% 36% 169% 54%
- ---------------------------------------------------------------------------------
Expense ratio before
expense reimbursement by
advisor 2.23% 2.10% 2.19% 2.20% 2.23%
- ---------------------------------------------------------------------------------
</TABLE>
* Net investment income per share has been calculated using the average share
method
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balanced Fund
------------------------------------------------------
Class A
------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/99 * 10/31/98 10/31/97 10/31/96 * 10/31/95 *
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $11.48 $12.58 $12.33 $12.02 $11.13
- ---------------------------------------------------------------------------------
Investment Operations:
Net investment
income/(loss) 0.24 0.25 0.34 0.39 0.38
Net realized and
unrealized gain/(loss)
on investments and
foreign currency (0.09) 1.04 1.52 1.07 1.35
------------------------------------------------------
Total from investment
operations 0.15 1.29 1.86 1.46 1.73
------------------------------------------------------
Distributions
Dividends from net
investment income (0.23) (0.32) (0.45) (0.40) (0.32)
Distributions from
realized capital gains (0.84) (2.07) (1.16) (0.75) (0.52)
------------------------------------------------------
Total distributions (1.07) (2.39) (1.61) (1.15) (0.84)
- ---------------------------------------------------------------------------------
Net Asset Value, End of
Period $10.56 $11.48 $12.58 $12.33 $12.02
- ---------------------------------------------------------------------------------
Total Return 1.20% 12.42% 17.01% 13.10% 16.95%
- ---------------------------------------------------------------------------------
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------
Net assets, end of
period (000's) $5,936 $14,415 $12,294 $10,873 $10,033
- ---------------------------------------------------------------------------------
Ratio of total expenses
to average net assets 1.39% 1.39% 1.34% 1.34% 1.34%
- ---------------------------------------------------------------------------------
Ratio of net investment
income (loss) to
average net assets 2.18% 2.11% 2.74% 3.32% 3.39%
- ---------------------------------------------------------------------------------
Portfolio turnover rate 198% 185% 211% 253% 226%
- ---------------------------------------------------------------------------------
Expense ratio before
expense reimbursement
by advisor 1.60% 1.53% 1.59% 1.55% 1.69%
- ---------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balanced Fund
--------------------------------------------------------
Class B
--------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/99 * 10/31/98 10/31/97 * 10/31/96 * 10/31/95 *
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $11.40 $12.49 $12.26 $11.98 $11.12
- -----------------------------------------------------------------------------------
Investment Operations:
Net investment
income/(loss) 0.18 0.18 0.25 0.31 0.30
Net realized and
unrealized gain/(loss)
on investments and
foreign currency (0.10) 1.04 1.53 1.07 1.36
--------------------------------------------------------
Total from investment
operations 0.08 1.22 1.78 1.38 1.66
--------------------------------------------------------
Distributions
Dividends from net
investment income (0.15) (0.24) (0.39) (0.35) (0.28)
Distributions from
realized capital gains (0.84) (2.07) (1.16) (0.75) (0.52)
--------------------------------------------------------
Total distributions (0.99) (2.31) (1.55) (1.10) (0.80)
- -----------------------------------------------------------------------------------
Net Asset Value, End of
Period $10.49 $11.40 $12.49 $12.26 $11.98
- -----------------------------------------------------------------------------------
Total Return 0.57% 11.71% 16.27% 12.35% 16.31%
- -----------------------------------------------------------------------------------
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------
Net assets, end of
period (000's) $13,958 $18,929 $17,140 $16,219 $9,875
- -----------------------------------------------------------------------------------
Ratio of total expenses
to average net assets 2.04% 2.04% 1.99% 1.99% 1.99%
- -----------------------------------------------------------------------------------
Ratio of net investment
income (loss) to
average net assets 1.60% 1.46% 2.09% 2.67% 2.69%
- -----------------------------------------------------------------------------------
Portfolio turnover rate 198% 185% 211% 253% 226%
- -----------------------------------------------------------------------------------
Expense ratio before
expense reimbursement
by advisor 2.25% 2.18% 2.23% 2.20% 2.37%
- -----------------------------------------------------------------------------------
</TABLE>
* Net investment income per share has been calculated using the average share
method
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balanced Fund
----------------------------------------------------
Class C
----------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/99 * 10/31/98 10/31/97 10/31/96 10/31/95 *
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $11.54 $12.62 $12.35 $12.02 $11.12
- ---------------------------------------------------------------------------------
Investment Operations:
Net investment
income/(loss) 0.17 0.18 0.25 0.32 0.31
Net realized and
unrealized gain/(loss)
on investments and
foreign currency (0.09) 1.05 1.54 1.07 1.35
----------------------------------------------------
Total from investment
operations 0.08 1.23 1.79 1.39 1.66
----------------------------------------------------
Distributions
Dividends from net
investment income (0.15) (0.24) (0.36) (0.31) (0.24)
Distributions from
realized capital gains (0.84) (2.07) (1.16) (0.75) (0.52)
----------------------------------------------------
Total distributions (0.99) (2.31) (1.52) (1.06) (0.76)
- ---------------------------------------------------------------------------------
Net Asset Value, End of
Period $10.63 $11.54 $12.62 $12.35 $12.02
- ---------------------------------------------------------------------------------
Total Return 0.58% 11.68% 16.21% 12.41% 16.25%
- ---------------------------------------------------------------------------------
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------
Net assets, end of period
(000's) $53,669 $65,049 $68,261 $72,821 $80,626
- ---------------------------------------------------------------------------------
Ratio of total expenses
to average net assets 2.04% 2.04% 1.99% 1.99% 1.99%
- ---------------------------------------------------------------------------------
Ratio of net investment
income (loss) to average
net assets 1.55% 1.47% 2.09% 2.67% 2.76%
- ---------------------------------------------------------------------------------
Portfolio turnover rate 198% 185% 211% 253% 226%
- ---------------------------------------------------------------------------------
Expense ratio before
expense reimbursement by
advisor 2.25% 2.18% 2.20% 2.20% 2.24%
- ---------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Strategic Income Fund
--------------------------------------------------
Class A
--------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/99 * 10/31/98 10/31/97 10/31/96 10/31/95
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $8.99 $9.76 $9.80 $9.07 $8.90
- --------------------------------------------------------------------------------
Investment Operations:
Net investment
income/(loss) 0.72 0.67 0.70 0.80 0.78
Net realized and unrealized
gain/(loss) on investments
and foreign currency (0.53) (0.63) 0.28 0.72 0.18
--------------------------------------------------
Total from investment
operations 0.19 0.04 0.98 1.52 0.96
--------------------------------------------------
Distributions
Dividends from net
investment income (0.73) (0.67) (0.84) (0.79) (0.79)
Distributions from realized
capital gains (0.05) (0.14) (0.18) - -
--------------------------------------------------
Total distributions (0.78) (0.81) (1.02) (0.79) (0.79)
- --------------------------------------------------------------------------------
Net Asset Value, End of
Period $8.40 $8.99 $9.76 $9.80 $9.07
- --------------------------------------------------------------------------------
Total Return 2.10% 0.22% 10.57% 17.35% 11.43%
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
Net assets, end of period
(000's) $8,997 $15,296 $15,924 $13,382 $10,041
- --------------------------------------------------------------------------------
Ratio of total expenses to
average net assets 1.50% 1.50% 1.50% 1.50% 1.07%
- --------------------------------------------------------------------------------
Ratio of net investment
income (loss) to average
net assets 8.21% 7.02% 7.25% 8.28% 9.08%
- --------------------------------------------------------------------------------
Portfolio turnover rate 119% 162% 193% 68% 180%
- --------------------------------------------------------------------------------
Expense ratio before
expense reimbursement by
advisor 1.67% 1.56% 1.61% 1.65% 1.69%
- --------------------------------------------------------------------------------
</TABLE>
* Net investment income per share has been calculated using the average share
method
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Strategic Income Fund
--------------------------------------------------
Class B
--------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/99 * 10/31/98 10/31/97 10/31/96 10/31/95
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $8.99 $9.76 $9.80 $9.07 $8.90
- --------------------------------------------------------------------------------
Investment Operations:
Net investment
income/(loss) 0.66 0.61 0.64 0.73 0.73
Net realized and unrealized
gain/(loss) on investments
and foreign currency (0.52) (0.63) 0.28 0.73 0.17
--------------------------------------------------
Total from investment
operations 0.14 (0.02) 0.92 1.46 0.90
--------------------------------------------------
Distributions
Dividends from net
investment income (0.67) (0.61) (0.78) (0.73) (0.73)
Distributions from realized
capital gains (0.05) (0.14) (0.18) - -
--------------------------------------------------
Total distributions (0.72) (0.75) (0.96) (0.73) (0.73)
- --------------------------------------------------------------------------------
Net Asset Value, End of
Period $8.41 $8.99 $9.76 $9.80 $9.07
- --------------------------------------------------------------------------------
Total Return 1.56% (0.43%) 9.86% 16.59% 10.72%
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
Net assets, end of period
(000's) $21,340 $29,210 $34,590 $30,890 $20,672
- --------------------------------------------------------------------------------
Ratio of total expenses to
average net assets 2.15% 2.15% 2.15% 2.15% 1.95%
- --------------------------------------------------------------------------------
Ratio of net investment
income (loss) to average
net assets 7.58% 6.39% 6.60% 7.63% 8.10%
- --------------------------------------------------------------------------------
Portfolio turnover rate 119% 162% 193% 68% 180%
- --------------------------------------------------------------------------------
Expense ratio before
expense reimbursement by
advisor 2.32% 2.21% 2.23% 2.27% 2.38%
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Strategic Income Fund
--------------------------------------------------
Class C
--------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/99 * 10/31/98 10/31/97 10/31/96 10/31/95
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $8.99 $9.76 $9.80 $9.07 $8.90
- --------------------------------------------------------------------------------
Investment Operations:
Net investment
income/(loss) 0.66 0.61 0.64 0.73 0.73
Net realized and unrealized
gain/(loss) on investments
and foreign currency (0.52) (0.63) 0.28 0.73 0.17
--------------------------------------------------
Total from investment
operations 0.14 (0.02) 0.92 1.46 0.90
--------------------------------------------------
Distributions
Dividends from net
investment income (0.67) (0.61) (0.78) (0.73) (0.73)
Distributions from realized
capital gains (0.05) (0.14) (0.18) - -
--------------------------------------------------
Total distributions (0.72) (0.75) (0.96) (0.73) (0.73)
- --------------------------------------------------------------------------------
Net Asset Value, End of
Period $8.41 $8.99 $9.76 $9.80 $9.07
- --------------------------------------------------------------------------------
Total Return 1.56% (0.43%) 9.86% 16.59% 10.72%
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
Net assets, end of period
(000's) $20,749 $33,537 $32,683 $22,783 $14,273
- --------------------------------------------------------------------------------
Ratio of total expenses to
average net assets 2.15% 2.15% 2.15% 2.15% 1.95%
- --------------------------------------------------------------------------------
Ratio of net investment
income (loss) to average
net assets 7.57% 6.37% 6.60% 7.63% 8.25%
- --------------------------------------------------------------------------------
Portfolio turnover rate 119% 162% 193% 68% 180%
- --------------------------------------------------------------------------------
Expense ratio before
expense reimbursement by
advisor 2.32% 2.21% 2.24% 2.28% 2.37%
- --------------------------------------------------------------------------------
</TABLE>
* Net investment income per share has been calculated using the average share
method
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment Quality Bond Fund
--------------------------------------------------
Class A
--------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/99* 10/31/98 10/31/97 10/31/96 10/31/95*
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $10.63 $10.52 $10.34 $10.56 $9.74
- --------------------------------------------------------------------------------
Investment Operations:
Net investment
income/(loss) 0.66 0.68 0.67 0.66 0.68
Net realized and unrealized
gain/(loss) on investments
and foreign currency (0.77) 0.10 0.18 (0.20) 0.82
--------------------------------------------------
Total from investment
operations (0.11) 0.78 0.85 0.46 1.50
--------------------------------------------------
Distributions
Dividends from net
investment income (0.67) (0.67) (0.67) (0.68) (0.68)
- --------------------------------------------------------------------------------
Net Asset Value, End of
Period $9.85 $10.63 $10.52 $10.34 $10.56
- --------------------------------------------------------------------------------
Total Return (1.08%) 7.63% 8.57% 4.52% 15.91%
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
Net assets, end of period
(000's) $3,507 $6,730 $7,110 $9,056 $10,345
- --------------------------------------------------------------------------------
Ratio of total expenses to
average net assets 1.25% 1.25% 1.25% 1.25% 1.25%
- --------------------------------------------------------------------------------
Ratio of net investment
income (loss) to average
net assets 4.77% 6.45% 6.54% 6.37% 6.72%
- --------------------------------------------------------------------------------
Portfolio turnover rate 43% 48% 65% 56% 132%
- --------------------------------------------------------------------------------
Expense ratio before
expense reimbursement by
advisor 1.70% 1.54% 1.62% 1.55% 1.73%
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment Quality Bond Fund
-------------------------------------------------
Class B
-------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/99* 10/31/98 10/31/97 10/31/96 10/31/95
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $10.62 $10.52 $10.33 $10.55 $9.74
- ---------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.59 0.61 0.60 0.60 0.61
Net realized and unrealized
gain/(loss) on investments (0.75) 0.10 0.20 (0.20) 0.82
-------------------------------------------------
Total from investment
operations (0.16) 0.71 0.80 0.40 1.43
-------------------------------------------------
Distributions
Dividends from net
investment income (0.61) (0.61) (0.61) (0.62) (0.62)
- ---------------------------------------------------------------------------------
Net Asset Value, End of
Period $9.85 $10.62 $10.52 $10.33 $10.55
- ---------------------------------------------------------------------------------
Total Return (1.56%) 6.93% 8.05% 3.92% 15.12%
- ---------------------------------------------------------------------------------
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------
Net assets, end of period
(000's) $4,295 $4,845 $4,613 $4,678 $3,472
- ---------------------------------------------------------------------------------
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 5.71% 5.81% 5.89% 5.72% 5.95%
- ---------------------------------------------------------------------------------
Portfolio turnover rate 43% 48% 65% 56% 132%
- ---------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by advisor 2.39% 2.20% 2.33% 2.27% 2.69%
- ---------------------------------------------------------------------------------
</TABLE>
* Net investment income per share has been calculated using the average share
method
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)
- --------------------------------------------------------------------------------
Investment Quality Bond Fund
-------------------------------------------------
Class C
-------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/99* 10/31/98 10/31/97 10/31/96 10/31/95
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of
Period $10.62 $10.52 $10.33 $10.55 $9.74
- --------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.59 0.61 0.60 0.60 0.61
Net realized and unrealize
gain/(loss) on investments (0.75) 0.10 0.20 (0.20) 0.82
-------------------------------------------------
Total from investment
operations (0.16) 0.71 0.80 0.40 1.43
-------------------------------------------------
Distributions
Dividends from net
investment income (0.61) (0.61) (0.61) (0.62) (0.62)
- --------------------------------------------------------------------------------
Net Asset Value, End of
Period $9.85 $10.62 $10.52 $10.33 $10.55
- --------------------------------------------------------------------------------
Total Return (1.56%) 6.93%+ 8.05% 3.92% 15.12%
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
Net assets, end of period
(000's) $4.593 $5,532 $6,109 $7,543 $7,206
- --------------------------------------------------------------------------------
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 5.70% 5.81% 5.89% 5.72% 6.00%
- --------------------------------------------------------------------------------
Portfolio turnover rate 43% 48% 65% 56% 132%
- --------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by advisor 2.38% 2.20% 2.29% 2.22% 2.50%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
National Municipal Bond Fund
------------------------------------------------
Class A
------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/99 10/31/98 10/31/97 10/31/96 10/31/95
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of
Period $10.22 $10.09 $9.73 $9.62 $8.82
- --------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.45 0.47 0.48 0.48 0.51
Net realized and unrealized
gain/(loss) on investments (0.74) 0.13 0.36 0.11 0.80
[CAPTION]
------------------------------------------------
Total from investment
operations (0.29) 0.60 0.84 0.59 1.31
[CAPTION]
------------------------------------------------
Distributions
Dividends from net investment
income (0.45) (0.47) (0.48) (0.48) (0.51)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $9.48 $10.22 $10.09 $9.73 $9.62
- --------------------------------------------------------------------------------
Total Return (2.95%) 6.04% 8.85% 6.31% 15.26%
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
Net assets, end of period
(000's) $4,435 $5,820 $6,347 $7,710 $7,618
- --------------------------------------------------------------------------------
Ratio of total expenses to
average net assets 1.00% 1.00% 0.99% 0.99% 0.80%
- --------------------------------------------------------------------------------
Ratio of net investment
income (loss) to average net
assets 4.52% 4.60% 4.87% 4.99% 5.55%
- --------------------------------------------------------------------------------
Portfolio turnover rate 46% 43% 29% 49% 44%
- --------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by advisor 1.41% 1.23% 1.23% 1.25% 1.34%
- --------------------------------------------------------------------------------
* Net investment income per share has been calculated using the average share
method
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)
- --------------------------------------------------------------------------------
National Municipal Bond Fund
------------------------------------------------
Class B
------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/99 10/31/98 10/31/97 10/31/96 10/31/95
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of
Period $10.22 $10.09 $9.73 $9.62 $8.81
- --------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.37 0.38 0.40 0.40 0.43
Net realized and unrealized
gain/(loss) on investments (0.74) 0.13 0.36 0.11 0.81
[CAPTION]
------------------------------------------------
Total from investment
operations (0.37) 0.51 0.76 0.51 1.24
[CAPTION]
------------------------------------------------
Distributions
Dividends from net investment
income (0.37) (0.38) (0.40) (0.40) (0.43)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $9.48 $10.22 $10.09 $9.73 $9.62
- --------------------------------------------------------------------------------
Total Return (3.77%) 5.15% 7.94% 5.41% 14.42%
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
Net assets, end of period
(000's) $4,197 $5,273 $6,532 $6,130 $5,876
- --------------------------------------------------------------------------------
Ratio of total expenses to
average net assets 1.85% 1.85% 1.84% 1.84% 1.70%
- --------------------------------------------------------------------------------
Ratio of net investment
income (loss) to average net
assets 3.67% 3.75% 4.02% 4.14% 4.59%
- --------------------------------------------------------------------------------
Portfolio turnover rate 46% 43% 29% 49% 44%
- --------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by advisor 2.26% 2.08% 2.15% 2.11% 2.41%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
National Municipal Bond Fund
------------------------------------------------
Class C
------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/99 10/31/98 10/31/97 10/31/96 10/31/95
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of
Period $10.22 $10.09 $9.73 $9.62 $8.81
- --------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.37 0.38 0.40 0.40 0.43
Net realized and unrealized
gain/(loss) on investments (0.74) 0.13 0.36 0.11 0.81
[CAPTION]
------------------------------------------------
Total from investment
operations (0.37) 0.51 0.76 0.51 1.24
[CAPTION]
------------------------------------------------
Distributions
Dividends from net investment
income (0.37) (0.38) (0.40) (0.40) (0.43)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $9.48 $10.22 $10.09 $9.73 $9.62
- --------------------------------------------------------------------------------
Total Return (3.77%) 5.15% 7.94% 5.41% 14.42%
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
Net assets, end of period
(000's) $3,931 $5,147 $5,305 $5,693 $6,834
- --------------------------------------------------------------------------------
Ratio of total expenses to
average net assets 1.85% 1.85% 1.84% 1.84% 1.70%
- --------------------------------------------------------------------------------
Ratio of net investment
income (loss) to average net
assets 3.67% 3.75% 4.02% 4.14% 4.53%
- --------------------------------------------------------------------------------
Portfolio turnover rate 46% 43% 29% 49% 44%
- --------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by advisor 2.26% 2.08% 2.15% 2.25% 2.63%
- --------------------------------------------------------------------------------
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)
- --------------------------------------------------------------------------------
U.S. Government Securities Fund
------------------------------------------------
Class A
------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/99 10/31/98 10/31/97 10/31/96 10/31/95
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of
Period $10.08 $9.94 $9.80 $9.98 $9.45
- --------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.53 0.56 0.59 0.56 0.63
Net realized and unrealized
gain/(loss)on investments (0.48) 0.16 0.13 (0.12) 0.57
------------------------------------------------
Total from investment
operations 0.05 0.72 0.72 0.44 1.20
------------------------------------------------
Distributions
Dividends from net investment
income (0.58) (0.58) (0.58) (0.56) (0.67)
Distributions in excess of
net investment income - - - (0.06) -
[CAPTION]
------------------------------------------------
Total distributions (0.58) (0.58) (0.58) (0.62) (0.67)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $9.55 $10.08 $9.94 $9.80 $9.98
- --------------------------------------------------------------------------------
Total Return 0.48% 7.41% 7.56% 4.64% 13.15%
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
Net assets, end of period
(000's) $35,379 $49,624 $53,235 $72,774 $81,179
- --------------------------------------------------------------------------------
Ratio of total expenses to
average net assets 1.25% 1.25% 1.25% 1.25% 1.25%
- --------------------------------------------------------------------------------
Ratio of net investment
income to average net assets 5.64% 5.65% 6.20% 5.71% 6.54%
- --------------------------------------------------------------------------------
Portfolio turnover rate 63% 116% 364% 477% 469%
- --------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by advisor 1.46% 1.40% 1.42% 1.41% 1.45%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. Government Securities Fund
------------------------------------------------
Class B
------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/99 10/31/98 10/31/97 10/31/96 10/31/95
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of
Period $10.07 $9.94 $9.80 $9.98 $9.45
- --------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.47 0.49 0.54 0.50 0.56
Net realized and unrealized
gain/(loss)on investments (0.47) 0.15 0.11 (0.12) 0.58
[CAPTION]
------------------------------------------------
Total from investment
operations 0.00 0.64 0.65 0.38 1.14
[CAPTION]
------------------------------------------------
Distributions
Dividends from net investment
income (0.51) (0.51) (0.51) (0.50) (0.61)
Distributions in excess of
net investment income - - - (0.06) -
[CAPTION]
------------------------------------------------
Total distributions (0.51) (0.51) (0.51) (0.56) (0.61)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $9.56 $10.07 $9.94 $9.80 $9.98
- --------------------------------------------------------------------------------
Total Return 0.01% 6.60% 6.84% 3.97% 12.45%
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
Net assets, end of period
(000's) $12,033 $17,850 $16,659 $19,444 $13,993
- --------------------------------------------------------------------------------
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% 4.99% 5.55% 5.06% 5.53%
- --------------------------------------------------------------------------------
Portfolio turnover rate 63% 116% 364% 477% 469%
- --------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by advisor 2.11% 2.05% 2.09% 2.06% 2.28%
- --------------------------------------------------------------------------------
* Net investment income per share has been calculated using the average share
method
The accompanying notes are an integral part of the financial statements.
31
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
U.S. Government Securities Fund
-------------------------------------------------
Class C
-------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/99 10/31/98 10/31/97 10/31/96* 10/31/95
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of
Period $10.07 $9.94 $9.80 $9.98 $9.45
- --------------------------------------------------------------------------------
Investment Operations:
Net investment income/(loss) 0.47 0.49 0.54 0.50 0.56
Net realized and unrealized
gain/(loss)on investments (0.47) 0.15 0.11 (0.12) 0.58
-------------------------------------------------
Total from investment
operations 0.00 0.64 0.65 0.38 1.14
-------------------------------------------------
Distributions
Dividends from net
investment income (0.51) (0.51) (0.51) (0.50) (0.61)
Distributions in excess of
net investment income - - - (0.06) -
-------------------------------------------------
Total distributions (0.51) (0.51) (0.51) (0.56) (0.61)
- --------------------------------------------------------------------------------
Net Asset Value, End of
Period $9.56 $10.07 $9.94 $9.80 $9.98
- --------------------------------------------------------------------------------
Total Return 0.01% 6.60% 6.84% 3.97% 12.45%
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
Net assets, end of period
(000's) $10,776 $12,708 $14,716 $20,009 $20,186
- --------------------------------------------------------------------------------
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% 5.00% 5.55% 5.06% 5.74%
- --------------------------------------------------------------------------------
Portfolio turnover rate 63% 116% 364% 477% 469%
- --------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by advisor 2.11% 2.05% 2.09% 2.06% 2.15%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Money Market Fund
--------------------------------------------------
Class A
--------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/99 * 10/31/98 10/31/97 10/31/96 10/31/95
- --------------------------------------------------------------------------------
Net Asset Value, Beginning
of Period $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------
Investment Operations:
Net investment income 0.04 0.05 0.05 0.05 0.05
Distributions
Dividends from net
investment income (0.04) (0.05) (0.05) (0.05) (0.05)
- --------------------------------------------------------------------------------
Net Asset Value, End of
Period $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------
Total Return 4.56% 5.18% 5.13% 5.16% 5.60%
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
Net assets, end of period
(000's) $6,030 $10,295 $11,057 $8,087 $11,379
- --------------------------------------------------------------------------------
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 4.46% 5.06% 5.02% 5.02% 5.45%
- --------------------------------------------------------------------------------
Expense ratio before
expense reimbursement by
advisor 0.95% 0.92% 0.96% 0.95% 0.96%
- --------------------------------------------------------------------------------
* Net investment income per share has been calculated using the average share
method
The accompanying notes are an integral part of the financial statements.
32
<PAGE>
NORTH AMERICAN FUNDS
FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Money Market Fund
-------------------------------------------------
Class B
-------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/99* 10/31/98 10/31/97 10/31/96 10/31/95
- ---------------------------------------------------------------------------------
<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 0.04 0.05 0.05 0.05 0.05
Distributions
Dividends from net
investment income (0.04) (0.05) (0.05) (0.05) (0.05)
- ---------------------------------------------------------------------------------
Net Asset Value, End of
Period $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------
Total Return 4.56% 5.18% 5.13% 5.16% 5.60%
- ---------------------------------------------------------------------------------
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------
Net assets, end of period
(000's) $4,551 $5,919 $3,332 $3,062 $1,564
- ---------------------------------------------------------------------------------
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 4.47% 5.02% 5.02% 5.02% 5.52%
- ---------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by advisor 0.99% 0.98% 1.05% 1.18% 1.41%
- ---------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Money Market Fund
-------------------------------------------------
Class C
-------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/99* 10/31/98 10/31/97 10/31/96 10/31/95
- ---------------------------------------------------------------------------------
<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 0.04 0.05 0.05 0.05 0.05
Distributions
Dividends from net
investment income (0.04) (0.05) (0.05) (0.05) (0.05)
- ---------------------------------------------------------------------------------
Net Asset Value, End of
Period $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------
Total Return 4.56% 5.18% 5.13% 5.16% 5.60%
- ---------------------------------------------------------------------------------
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------
Net assets, end of period
(000's) $8,644 $8,237 $7,539 $9,840 $9,394
- ---------------------------------------------------------------------------------
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 4.48% 5.05% 5.01% 5.02% 5.46%
- ---------------------------------------------------------------------------------
Expense ratio before expense
reimbursement by advisor 1.01% 0.94% 1.00% 0.98% 0.95%
- ---------------------------------------------------------------------------------
</TABLE>
* Net investment income per share has been calculated using the average share
method
The accompanying notes are an integral part of the financial statements.
33
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1999
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
International Small Cap Fund
<TABLE>
- --------------------------------------------------------------
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
COMMON STOCKS - 93.03%
Automobiles & Related - 0.81%
Koito Manufacturing Company 13,000 $74,681
Musashi Seimitsu 4,000 57,543
------------
132,224
Banking - 0.43%
Commercial Int'l Bank of Egypt, 144A* 5,625 69,469
------------
Building Materials - 0.25%
Kingspan Group Plc 16,175 40,493
------------
Business Services - 19.01%
4Front Software International, Inc.* 8,175 111,384
Able, Inc. 2,000 184,137
A-Com AB, 144A* 8,800 101,654
Allgon AB 12,125 163,652
Alten 850 92,894
Consodata SA* 6,375 120,700
Creyf's SA 2,425 60,835
F. I. Group Plc 8,600 72,777
FI System 700 69,948
Fuso Lexel, Inc. 7,000 147,022
GFK AG, 144A* 10,150 286,658
Guardian IT Plc* 11,475 123,882
HIQ International AB* 4,925 140,731
Incepta Group Plc 28,500 29,972
Information Highway Center 3,575 117,805
IPSOS* 2,025 102,985
LibertyOne, Ltd.* 58,075 71,847
ParaRede, SGPS* 9,175 96,507
Specialised Outsourcing, Ltd. 10,400 51,461
Tanseisha Company 8,500 57,063
The Goodwill Group, Inc. 1 719,190
Trafficmaster Plc 20,775 168,980
------------
3,092,084
Capital Goods - 0.75%
Whatman Plc 6,950 122,768
------------
Computer Equipment - 3.58%
BATM Advanced Comm., Ltd.* 3,025 158,565
Imagination Technologies Group* 24,275 68,434
Jot Automation Group 43,975 226,650
Psion Plc 5,100 128,219
------------
581,868
Computer Networking - 1.06%
Automated Systems Holdings 336,000 173,006
------------
Computer Software & Services - 10.78%
Alpha Systems, Inc. 1,000 139,062
Autonomy Corporation Plc* 5,600 118,048
BackWeb Technologies, Ltd.* 6,075 127,955
Baltimore Technology Plc* 875 27,031
Brokat Infosystems 850 103,936
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Computer Software & Services - continued
Chip Application Technology* 47,775 $45,395
Computer & Tech. Holdings, Ltd.* 188,000 48,401
Connecta AB, 144A* 11,900 173,638
Cresco, Ltd. 1,500 128,033
Fantastic Corporation* 1,125 79,283
Informatics Holdings 65,000 31,654
Intershop Communications AG 1,975 247,211
Kewill Systems Plc 6,975 77,937
PCA Corporation 2,418 112,471
RM Plc 9,650 98,788
Sausage Software, Ltd.* 22,625 39,677
Secure Network Solutions, Ltd.* 69,775 102,785
Solution 6 Holdings, Ltd. 11,775 51,661
------------
1,752,966
Construction - 0.86%
Colas SA 675 139,657
------------
Consumer Products & Services - 2.69%
H. I. S. Company 4,420 175,918
Kabel New Media* 4,825 67,500
Zapf Creation AG* 5,575 193,397
------------
436,815
Distribution - 0.91%
IAWS Group Plc 9,675 47,830
Paltek Corporation 2,000 99,741
------------
147,571
Electronics - 7.44%
Chiyoda Integre Company 7,000 114,798
Elec & Eltek International 23,000 78,200
Great Wall Electronics 98,000 5,062
Kaba Holdings AG 235 172,669
Kudelski SA* 40 166,371
Kuroda Electric Company 320 18,352
Matsuo Electric Company* 1,358 5,144
Nidec Copal Electronics Corp. 7,000 110,099
Pace Micro Tech. Plc 10,500 46,748
Perlos Corporation* 3,250 53,329
Star Micronics Company, Ltd. 6,000 84,876
Technology Nexus AB 2,650 22,395
Toyo Corporation 4,000 109,332
Yokowo Company 13,000 222,547
------------
1,209,922
Energy - 1.48%
ERG SpA 26,250 83,662
Vestas Wind Systems, 144A 1,200 157,085
------------
240,747
Financial Services - 0.96%
Celestial Asia Securities Hldg. 780,000 77,312
Ichiyoshi Securities Company 8,000 50,024
JCG Holdings, Ltd. 54,000 29,369
------------
156,705
</TABLE>
The accompanying notes are an integral part of the financial statements.
34
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Food & Beverages - 1.57%
Kamps AG 2,650 $148,290
Q'sai Company, Ltd. 1,000 68,956
Wine Planet Holdings, Ltd.* 254,525 38,143
------------
255,389
Healthcare Services - 0.30%
Sonic Healthcare, Ltd. 12,525 48,722
------------
Leisure & Entertainment - 4.47%
AVEX, Inc. 800 168,793
Eidos Plc* 4,025 280,995
Enlight Interactive AB 725 8,375
Jurys Doyle Hotel Group Plc 4,825 41,616
Koei Company 3,700 143,004
Trenno (Societa) Spa 11,425 84,482
------------
727,265
Machinery & Manufacturing - 2.93%
Arrk Corporation 3,000 106,454
Mecatherm SA 1,625 61,533
Meiki Compamy, Ltd. 6,000 140,117
Neopost SA 3,050 105,548
Swisslog Holding AG 400 62,914
------------
476,566
Medical Supplies & Equipment - 2.80%
Gretag Imaging Group 700 88,631
Japan Lifeline Company 1,200 26,470
Kalbe Farma 157,000 19,468
Medical Support Company, Ltd. 2,000 93,795
Novogen Ltd.* 37,925 81,019
Straumann Holdings AG 330 146,133
------------
455,516
Metals & Mining - 0.44%
Eldorado Gold Corporation* 17,550 11,923
International Mineral Resources 92,250 34,708
Natsteel Broadway 14,000 24,920
------------
71,551
Office Supplies & Equipment - 3.07%
Gruppo Buffetti SpA 9,075 75,314
Ideal Group SA* 2,120 87,140
Okamura Corporation 23,000 86,027
Uchida Yoko Company 27,000 251,175
------------
499,656
Photography & Imaging - 0.56%
Xaar Plc* 39,700 91,329
------------
Publishing & Broadcasting - 2.57%
Bloomsbury Publishing Plc 7,725 64,103
Capital Radio 10,550 173,184
Edipresse SA 250 102,834
NRJ SA 250 77,837
------------
417,958
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Restaurants - 3.32%
Daisyo Corporation 4,000 $54,282
JD Wetherspoon 14,265 80,166
Kappa Create Company, Ltd.* 5,000 158,243
Krasnapolsky Hotels & Restaurants 1,150 74,694
Matsuya Foods Company 2,500 172,149
------------
539,534
Retail Trade - 6.54%
Arcland Sakamoto Company 1,000 16,783
Cecile Company 1,900 93,296
Edgars Consolidated Stores 4,400 42,971
Electronics Boutique Plc 37,025 58,406
Grafton Group Plc 2,000 44,178
Gruppo Coin SpA* 16,400 162,153
Happinet Corporation 1,000 57,543
JD Group, Ltd. 5,900 37,453
Matalan Plc* 6,275 142,293
Megane Top Co., Ltd. 4,000 176,465
Nishimatsuya Chain Company, Ltd. 3,000 143,857
Nitori Company 1,000 41,239
Waterford Wedgwood Plc 43,350 46,054
------------
1,062,691
Semiconductors & Equipment - 5.83%
ASM Pacific Technology 80,000 94,227
CE Consumer Electronic 1,775 161,685
Dialog Semiconductor, 144A* 9,700 249,972
ESEC Holding AG 60 90,533
Genesis Microchip, Inc.* 3,075 50,353
Komatsu Electronic Metals Co., Ltd. 4,700 48,681
Micronas Semiconductor 850 162,829
Mimasu Semiconductor Industry Co. 4,300 89,695
------------
947,975
Telecommunication Services - 4.24%
Davnet Limited* 131,500 60,377
Detron Group NV* 3,100 39,129
Genesys 2,275 44,533
MultiEmedia.com, Ltd.* 238,750 60,900
PowerLan Limited, 144A 19,300 45,169
Redstone Telecom Plc* 6,100 19,396
Telegate AG* 3,175 113,547
Telelogic AB* 3,650 59,916
Teligent AB* 7,425 71,776
Tiscali SpA 144A* 1,275 87,843
Westel Group, Ltd.* 402,500 87,269
------------
689,855
Telecommunications Equipment - 2.08%
AudioCodes, Ltd.* 1,950 117,975
Avenir Telecom 1,275 118,688
Toyo Communication Equipmenrt Co. 8,000 102,043
------------
338,706
Transportation - 0.18%
Transportes Azkar SA 3,400 29,755
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
35
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Utilities - 1.12%
Independent Energy Holdings Plc* 6,725 $181,995
------------
TOTAL COMMON STOCKS
(Cost $13,419,692) $15,130,758
------------
WARRANTS - 0.41%
China Everbright, Ltd.
(Expiration date 01/05/00)* 408,000 $65,650
Gold Peak Industries
(Expiration date 08/06/00)* 36,000 463
------------
TOTAL WARRANTS (Cost $111,225) $66,113
------------
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
SHORT TERM INVESTMENTS - 1.85%
SSGA Money Market Fund
(Cost $301,274) $301,274 $301,274
------------
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
REPURCHASE AGREEMENT - 4.71%
Repurchase Agreement with State Street Bank & Trust
Co. dated 10/29/99 at 4.25%, to be repurchased at
$766,271 on 11/01/99, collateralized by $780,000 U. S.
Treasury Notes, 4.00% due 10/31/00 (valued at
$798,330, with interest) (Cost $766,000) $766,000 $766,000
------------
TOTAL INVESTMENTS (International Small Cap Fund) (Cost
$14,598,191) $16,264,145
------------
- -------------------------------------------------------------------------------
International Equity Fund
- -------------------------------------------------------------------------------
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
COMMON STOCKS - 96.66%
Aerospace & Military Technology - 0.35%
British Aerospace Plc 3,650 $21,592
Cobham Plc 730 8,829
Meggitt Plc 1,604 4,006
Rolls Royce Plc 2,164 7,681
Singapore Technologies Engineering 23,000 33,325
Thomson CSF 417 14,167
------------
89,600
Appliances & Household Durables - 3.19%
Electrolux AB 1,400 27,918
Philips Electronics 966 99,068
Matsushita Electric Industrial 11,000 231,562
Sanyo Electric Company Ltd. 11,000 52,748
Sharp Corporation 6,000 95,521
Sony Corporation 2,000 311,883
------------
818,700
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Automobiles - 4.28%
Cycle & Carriage Ltd. 1,000 $3,397
Daimlerchrysler AG 3,700 287,997
Fiat SpA 861 27,260
Honda Motor Company 3,000 126,594
Nissan Motor Company 8,000 47,952
Peugeot SA 135 25,915
Toyota Motor Corp. 13,000 450,082
Volkswagen AG 1,250 73,892
Volvo AB Series A 700 18,258
Volvo AB Series B 1,400 36,175
------------
1,097,522
Banking - 14.20%
77th Bank Ltd. 1,000 11,873
Abbey National Plc. 2,518 49,154
ABN Amro Holdings NV 4,283 103,572
Argentaria, Caja Postal Y Banco 2,332 51,756
Asahi Bank Ltd. 10,000 88,808
Banca Commerciale Italiana 747 4,495
Banca Intesa SpA 10,944 46,736
Banca Popolare di Milano 870 5,848
Banco Bilbao Vizcaya SA 10,534 141,605
Banco Comercial Portugues SA 1,336 37,633
Banco Espirito Santo 690 17,941
Banco Santander Central Hispano 18,056 187,453
Bank Austria AG 861 42,810
Bank of East Asia Ltd. 3,600 7,878
Bank of Tokyo-Mitsubishi Ltd 16,000 265,158
Banque Nationale de Paris 805 70,703
Barclays Plc 1,903 58,381
Bayerische Hypo-Und Vereinsbank 1,550 101,735
BPI-SGPS SA 4,425 17,687
Chiba Bank Ltd. 600 3,280
Credit Suisse Holding 780 149,931
Daiwa Bank Ltd. 7,000 33,500
DBS Group Holdings Ltd. 5,815 65,726
Deutsche Bank AG 2,000 143,472
Dresdner Bank AG 1,900 97,827
Foereningssparbanken AB 2,400 38,230
Fuji Bank Ltd. 11,000 150,858
Bank of Fukuoka Ltd. 1,000 7,701
Halifax Group Plc 3,935 50,241
Hang Seng Bank Ltd. 5,500 59,825
HSBC Holdings Plc 13,514 166,213
Industrial Bank of Japan 10,000 135,226
Joyo Bank Ltd. 2,400 11,739
Lloyds TSB Group Plc 9,981 138,094
Mediobanca SpA 1,377 14,165
Merita Plc 3,075 17,822
Mitsubishi Trust & Banking Corp. 4,000 53,822
National Australia Bank Ltd. 3,197 49,337
Oversea-Chinese Banking Corp. Ltd. 8,400 63,128
Sakura Bank Ltd. 16,000 137,489
</TABLE>
The accompanying notes are an integral part of the financial statements.
36
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Banking - continued
Sao Paolo IMI SpA 3,094 $40,095
Shizuoka Bank Ltd. 4,000 45,267
Skandinaviska Enskilda Banken 2,800 28,769
Societe Generale 258 56,175
Sumitomo Bank 10,000 160,928
Suncorp Metway Ltd. 766 4,034
Svenska Handelsbanken 3,000 41,586
Tokai Bank Ltd 8,000 69,819
UBS AG 600 174,572
Unicredito Italiano 10,457 48,946
United Overseas Bank Ltd. 6,000 45,452
Westpac Banking Corp. 4,391 28,175
------------
3,642,670
Beverages & Tobacco - 1.44%
Asahi Breweries Ltd. 2,000 28,445
Austria Tabak AG 169 7,599
Bass Plc 1,456 15,958
Coca-Cola Amatil Ltd. 1,520 4,691
Diageo Plc 5,942 60,438
Fosters Brewing Group Ltd. 4,277 11,368
Fraser & Neave Ltd. 2,000 8,537
Hartwall 76 974
Heineken Holdings NV 905 46,159
Kirin Brewery Company Ltd. 6,000 68,706
Moet Hennessy Louis Vuitton 225 67,923
Oesterreichische Brau-Beteilign 70 3,221
Pernod Ricard 227 15,329
Seita Soc. Nat'l. D'Exploitation 152 8,474
Swedish Match AB 1,400 5,124
Tabacalera SA 904 14,881
Unicer Uniao Cervejjeira SA 94 1,780
------------
369,607
Broadcasting & Publishing - 1.23%
British Sky Broadcasting Group 2,871 30,948
Canal Plus SA 309 21,451
Elsevier NV 1,752 16,641
EMAP Plc 374 4,855
Granada Group Plc 2,737 21,723
Mediaset SpA 2,891 28,858
News Corp Ltd. 4,535 32,795
Pearson Plc 1,248 28,095
Reed International Plc 2,207 12,947
Singapore Press Holdings 3,000 51,404
South China Morning Post 2,000 1,480
Television Broadcasts Ltd. 1,000 5,342
Tokyo Broadcasting System, Inc. 1,000 26,422
Trinity Mirror Plc 1,304 5,614
Wolters Kluwer NV 852 28,472
------------
317,047
Building Materials & Components - 0.63%
Blue Circle Industries Plc 3,595 16,688
Boral Ltd. 2,733 4,113
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Building Materials & Components - continued
BPB Plc 3,263 $19,302
Cimpor Cimentos de Portugal SA 964 15,991
CSR Ltd. 2,472 5,549
Heidelberger Zement AG 50 3,944
Holderbank Financiere Glarus AG 20 24,628
Italcementi Fabbriche Riunite 553 2,577
Italcementi Fabbriche Riunite NCNV 377 4,763
Jarvis Plc 1,140 4,908
Lafarge SA 263 25,312
Pioneer International Ltd. 2,234 4,886
RMC Group Plc 761 10,942
Rugby Group Plc 2,861 5,547
Sumitomo Osaka Cement Co. Ltd. 400 660
Weinerberger Baustoffindustrie 528 12,146
------------
161,956
Business & Public Services - 2.69%
Adecco SA 60 36,371
Anglian Water Plc 1,207 13,447
Associated British Ports Holdings 3,146 15,612
Autopistas Concesionaria Espanol 1,338 14,426
BAA Plc 2,161 15,802
Benesse Corporation Ltd. 200 42,774
Brambles Industries Ltd. 529 14,877
Cap Gemini SA 201 30,445
CSK Corporation 100 4,603
Dai Nippon Printing Co. Ltd. 3,000 54,695
Flughafen Wein AG 163 5,627
Hyder Plc 1,485 13,372
Kelda Group Plc 1,111 6,773
Lex Services Plc 829 6,334
Mayne Nickless Ltd. 877 2,377
Pennon Group Plc 679 10,209
Railtrack Group Plc 920 18,836
Rentokil Initial Plc 4,998 16,733
Reuters Group 2,210 20,336
SAP AG 200 74,303
Securitas AB 1,800 26,702
Soc. Gen. De Aguas de Barcelona 723 11,544
Sodexho Alliance SA 79 12,963
Suez Lyonnaise des Eaux 345 55,703
Thames Water Plc 794 11,481
Toppan Printing Co. Ltd. 3,000 36,799
United Utilities Plc 1,171 11,603
Vedior NV 213 3,585
Vivendi SA 1,337 101,326
------------
689,658
Chemicals - 3.74%
Akzo Nobel NV 971 41,814
Asahi Chemical Industry Co. Ltd. 5,000 30,210
BASF AG 2,550 114,665
Bayer AG 2,800 114,567
BOC Group Plc 1,580 34,011
</TABLE>
The accompanying notes are an integral part of the financial statements.
37
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Chemicals - continued
Cin Corporacao Industrial Norte 34 $855
Imperial Chemical Industries Plc 1,324 13,173
L'Air Liquide 192 29,586
Lenzing AG 28 1,635
Mitsubishi Chemical Corp. 11,000 49,899
Novartis AG 190 284,196
Orica Ltd. 700 3,701
Rhone Poulenc SA 965 54,000
Shin-Etsu Chemical Co. Ltd. 2,000 82,478
Sumitomo Chemical Co. Ltd. 9,000 57,744
Toray Industries, Inc. 8,000 44,116
Wesfarmers Ltd. 450 3,332
------------
959,982
Construction & Housing - 0.87%
Acs Actividades de Construccion 310 7,434
AMEC Plc 1,218 4,293
Barratt Development Plc 868 3,380
Bau Holdings AG 36 1,242
Beazer Group Plc 1,573 3,386
Berkeley Group Plc 422 3,807
Bilfinger & Berger Bauaktienge 250 5,128
Bouygues 85 29,594
Daiwa House Industry Co. Ltd. 2,000 18,299
Drott AB 1,730 16,618
Engil SGPS 96 976
Fomento de Construcciones Y Contra 472 11,841
Grupo Dragados SA 888 9,406
Hazama Corporation 900 578
Impregilo SpA 1,043 737
Kajima Corporation 9,000 31,677
Kumagai Gumi Co. Ltd. 600 564
Leighton Holdings Ltd. 661 2,403
Penta-Ocean Construction Co. Ltd. 800 1,335
Sekisui House Ltd. 4,000 43,311
Sirti SpA 448 2,427
Skanska/Frueher AB 600 21,960
Taylor Woodrow Plc 1,411 3,316
------------
223,712
Data Processing & Reproduction - 2.12%
Canon, Inc. 5,000 141,460
Fuji Software ABC, Inc. 100 9,159
Fujitsu Ltd. 10,000 301,141
Getronics NV 221 11,019
Meitec Corporation 100 3,750
Nidec Corporation 200 38,841
OCE NV 269 4,456
Olivetti & Co. SpA 9,381 18,255
Tietoenator Corporation 225 7,810
Wm-Data Nordik AB 200 8,402
------------
544,293
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Electrical & Electronics - 6.48%
ABB AG 700 $70,491
Alcatel 466 72,789
FKI Plc 1,710 4,496
L M Ericsson Telefon AB 6,200 257,831
General Electric Plc 5,077 55,269
Hitachi Ltd. 14,000 151,319
Johnson Electric Holdings Ltd. 2,500 13,516
Legrand SA 71 16,990
Misys Plc 2,860 23,827
Mitsubishi Electric Corp. 13,000 71,938
NEC Corporation 9,000 182,123
Nokia AB 3,452 395,088
Schneider SA 414 28,523
Siemens AG 2,250 201,995
Toshiba Corporation 18,000 113,244
------------
1,659,439
Electronic Components & Instruments - 2.23%
Advantest Corporation 600 90,342
Alps Electric Co. Ltd. 1,000 19,373
Creative Technology Ltd. 700 8,164
Fanuc Ltd. 1,000 77,683
Hirose Electric Company Ltd. 100 17,445
Kyocera Corporation 1,100 105,495
Murata Manufacturing Co. Ltd. 1,000 128,513
Nikon Corporation 1,000 23,784
Tokyo Electron Ltd. 1,000 83,054
Venture Manufacturing, Singapore 2,000 17,796
------------
571,649
Energy Sources - 4.97%
BP Amoco Plc 32,032 311,073
Broken Hill Proprietary Co. Ltd. 3,856 39,853
Burmah Castrol Plc 1,457 25,115
Ente Nazionale Idrocarburi SpA 17,265 100,971
Enterprise Oil 1,536 10,929
Lasmo Plc 6,149 13,640
Nippon Mitsubishi Oil Corp. 9,000 39,705
OMV AG 205 19,797
Repsol SA 4,889 100,999
Royal Dutch Petroleum Co. NV 6,266 374,560
Santos Ltd. 1,459 3,750
Total Fina SA 1,720 232,469
------------
1,272,861
Financial Services - 2.18%
Acom Co. Ltd. 500 54,666
AMP Limited 2,297 23,358
Colonial Ltd. 1,929 7,098
Daiwa Securities Group, Inc. 5,000 53,371
ING Groep NV 2,745 161,921
Limit Plc 3,294 8,011
Nichiei Company Ltd. 300 15,537
Nomura Securities Co. Ltd. 6,000 99,031
OM Gruppen AB 300 3,867
</TABLE>
The accompanying notes are an integral part of the financial statements.
38
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Financial Services - continued
Orix Corporation 200 $26,853
Promise Company Ltd. 500 33,567
Schroder Plc 311 6,224
Takefuji Corporation 500 64,736
------------
558,240
Food & Household Products - 2.36%
Ajinomoto Co., Inc. 3,000 33,634
Azucarera Ebro Agricolas 165 2,947
Cadbury Schweppes Plc 3,456 22,488
Eridania Beghin-Say SA 88 9,997
Goodman Fielder Wattie Ltd. 2,953 2,731
Groupe Danone 180 45,913
Jeronimo Martins Sgps. SA 565 15,773
KAO Corporation 2,000 60,995
Nestle SA 120 231,451
Parmalat Finanziaria SpA 4,303 5,653
Prima Inmobiloaroa SA 1,260 11,159
Raisio Group Plc 508 3,308
Unilever NV 1,697 112,454
Unilever Plc 5,049 46,875
------------
605,378
Forest Products & Paper - 0.44%
Amcor Ltd. 1,574 6,879
Arjo Wiggins Appleton Plc 1,920 6,657
Buhrmann NV 267 4,603
Cartiere Burgo SpA 210 1,546
Investimentos Participacoes 119 1,036
Oji Paper Co. Ltd. 4,000 28,196
Portucel Industrial SA 660 4,512
Reno de Medici SpA 295 864
Rexam Plc 905 3,718
Svenska Cellulosa AB 1,000 26,994
UPM-Kymmene 844 26,633
------------
111,638
Gold Mines - 0.01%
Normandy Mining Ltd. 4,810 3,650
------------
Health & Personal Care - 5.45%
Astrazeneca Plc 2,848 128,789
Beiersdorf AG 400 26,927
CSL Ltd. 257 3,114
Faulding & Co. Ltd. 297 1,816
Glaxo Wellcome Plc 5,906 174,297
L'Oreal 160 106,784
Roche Holding AG 5 87,253
Roche Holding Genusschein 21 252,116
Sankyo Co. Ltd. 2,000 56,967
Sanofi Synthelabo SA 1,679 74,086
Schering AG 200 23,793
Shiseido Co. Ltd. 1,000 15,249
Smithkline Beecham Plc 8,850 114,157
Taisho Pharmaceutical Co. Ltd. 2,000 83,245
Takeda Chemical Industries Ltd. 3,000 172,341
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Health & Personal Care - continued
Terumo Corporation 1,000 $30,402
Yamanouchi Pharmaceutical Co. 1,000 45,363
------------
1,396,699
Industrial Components - 1.04%
BICC Plc 1,343 2,405
Bridgestone Corporation 3,000 82,574
Cie Generale des Establissement 374 16,286
Continental AG 500 10,860
Denso Corporation 2,000 42,774
Fag Kugelfischer Georg Schaefer 650 5,504
Pirelli SpA 5,441 12,476
SKF AB 400 8,123
Sumitomo Electric Industries 5,000 67,181
Valeo SA 239 17,170
------------
265,353
Insurance - 5.27%
Aegon NV 1,642 151,556
Allianz AG 900 274,059
Allied Zurich Plc 2,465 29,974
Assicurazione Generali SpA 2,426 77,830
Axa 812 114,535
CGU Plc 1,932 28,159
Cie De Seguros Tranquilidad SA 65 1,811
Corporacion Mapfre Cia International 372 6,339
Generali Holding, Vienna 54 8,788
Gio Australia Holdings Ltd. 540 1,026
Istituto Nazionale delle Assicuratrice 8,413 25,530
Legal & General Group Plc 14,174 39,361
Muenchener Rueckversicherungs 550 126,117
Prudential Corporation Plc 3,499 54,851
QBE Insurance Group Ltd. 966 4,035
Riunione Adriatica de Sicurta 1,183 10,913
Royal & Sun Alliance Insurance 2,475 16,857
Sai Sta Assicuratrice Industrial 336 3,517
Sampo Insurance Company Ltd. 332 11,524
Skandia Forsakring AB 2,400 53,405
Swiss Ruckversicher 45 93,289
Tokio Marine & Fire Insurance Co. 5,000 65,455
Unione Immobiliare SpA 140,836 72,440
Zurich Allied AG 140 79,263
------------
1,350,634
Leisure & Tourism - 0.45%
Accor SA 21 20,484
Compass Group Plc 1,002 10,702
Hilton Group Plc 2,840 8,680
Hongkong & Shanghai Hotels Ltd. 2,500 1,834
Hotel Properties Ltd. 3,000 2,561
Oriental Land Company Plc 400 37,902
Overseas Union Enterprise Ltd. 1,000 2,754
Rank Group Plc 3,326 10,357
Shangri-La Asia Ltd. 2,000 2,175
Sol Melia SA 495 5,649
</TABLE>
The accompanying notes are an integral part of the financial statements.
39
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Leisure & Tourism - continued
Tabcorp Holdings Ltd. 788 $4,995
Telepizza SA 1,144 6,113
------------
114,206
Machinery & Engineering - 1.90%
Atlas Copco AB Ser A 600 15,832
Atlas Copco AB Ser B 300 7,806
BWT (Benckiser) AG 13 2,349
GKN Plc 2,453 39,461
Komatsu Ltd. 4,000 23,247
Laird Group Plc 1,113 4,682
Linde AG 350 18,334
Man AG 500 16,619
Mannesmann AG 1,350 212,290
Metso 488 5,518
Mitsubishi Heavy Industries Ltd. 13,000 50,993
Mitsui Engineering & Shipbuilding Co. 800 714
Sembcorp Industries Ltd. 10,000 12,626
SMC Corporation 300 50,609
Smith Industries Plc 368 4,995
Stork NV 137 2,688
Sulzer AG 10 7,020
VA Technologies AG 115 7,690
Zardoya Otis SA 248 2,786
------------
486,259
Merchandising - 2.78%
Boots Company Plc 1,880 19,292
Carrefour 738 136,623
Casino Guichard Perrachon 213 24,197
Coles Myer Ltd. 2,643 13,146
Douglas Holding AG 400 18,155
Great Universal Stores Plc 1,704 12,908
Hennes & Mauritz AB 3,800 100,961
Ito-Yokado Company Ltd. 1,000 79,985
Jusco Company Ltd. 2,000 46,610
Karstadt AG 100 4,523
Kingfisher Plc 2,640 28,891
KoninklijkeAhold NV 1,752 53,811
Marks & Spencer Plc 4,980 22,995
Marui Company Ltd. 1,000 18,893
Next Plc 932 10,054
Pinault-Printemps Redoute 309 58,926
Rinascente Per L'Esercizio 527 3,659
Safeway Plc 2,149 6,780
J. Sainsbury Plc 3,214 19,303
Tesco Plc 6,258 18,587
Valora Holding AG 20 5,091
Woolworths Ltd. 2,745 9,330
------------
712,720
Metals - Non-Ferrous - 0.31%
IMI Plc 1,437 5,643
North Ltd. 1,641 3,171
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Metals - Non-Ferrous - continued
Outakumpa 588 $6,729
Pechiney SA 235 13,150
Rio Tinto Plc 1,832 31,277
Straits Trading Company Ltd. 1,000 1,052
WMC Ltd. 4,360 18,712
------------
79,734
Metals - Steel - 1.05%
Acerinox SA 381 11,582
Boehler-Uddeholm 85 3,558
Corus Group Plc 3,788 7,220
Kawasaki Steel Corporation 8,000 18,107
Natsteel Ltd. 3,000 5,014
Nippon Steel Corporation 47,000 119,450
Sandvik AB Ser A 900 23,146
Sandvik AB Ser B 400 10,360
SSAB Swedish Steel 600 7,478
Sumitomo Metal Industries Ltd. 16,000 15,652
Thyssen Krupp AG 1,600 37,867
Usinor 685 9,518
------------
268,952
Misc Materials & Commodities - 0.47%
Asahi Glass Company Ltd. 5,000 39,753
Caradon Plc 4,230 9,860
Cie de Saint Gobain 233 40,438
Corticeira Amorim Socdad Gestora 158 1,579
Mayr-Melnhof Karton AG 92 4,098
Pilkington Plc 9,480 14,214
Rhi AG 108 3,033
Rio Tinto Ltd. 439 7,057
------------
120,032
Multi-Industry - 1.44%
Agiv AG 800 13,911
Alusuisse Lonza Group AG 20 12,202
Berisford Plc 1,239 5,782
Corporacion Financiera Alba SA 444 12,890
Hanson Plc 2,782 21,668
Howard Smith Ltd. 488 3,499
Hutchison Whampoa Ltd. 10,000 100,405
Invensys Plc 6,839 33,601
Johnson Matthey Plc 1,692 15,681
Keppel Corporation Ltd. 7,000 19,022
Lagardere Groupe SCA 388 15,713
Lonmin Plc 1,504 15,125
Metra AB 211 3,995
Montedison SpA 3,429 6,114
Pacific Dunlop Ltd. 2,596 3,659
Preussag AG 450 24,377
Racal Electronics 803 5,925
SNIA SpA 2,119 2,292
Sonae Investimentos SA 332 11,091
Swire Pacific Ltd. 4,500 22,302
Southcorp Ltd. 1,529 5,314
</TABLE>
The accompanying notes are an integral part of the financial statements.
40
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Multi-Industry - continued
T.I. Group Plc 1,043 $7,027
Trelleborg AB 700 6,384
------------
367,979
Real Estate - 3.81%
AMP Diversified Property Trust 949 1,422
British Land Company Plc 11,659 83,912
Capital Shopping Centres Plc 2,710 17,946
Castellum AB 1,590 13,727
Cheung Kong Holdings Ltd. 6,000 54,644
Cie Fonciere Klepierre 260 26,883
City Developments Ltd. 6,000 31,023
DBS Land Ltd. 10,000 18,517
Diligentia AB 2,645 18,815
First Capital Corporation Ltd. 2,000 2,381
Fonciere Lyonnaise SA 120 16,068
General Property Trust Units 3,281 5,270
Grantchester Holdings Plc 14,750 32,720
Great Portland Estates Plc 6,370 19,888
Hammerson Plc 4,560 33,715
Hang Lung Development Co. Ltd. 6,000 6,449
Hopewell Holdings Ltd. 4,000 2,536
Hysan Development Co. Ltd. 3,000 3,572
Land Securities Plc 9,784 121,864
Lend Lease Corp. Ltd. 1,298 14,935
MEPC Plc 7,782 53,963
Metrovacesa SA 1,369 30,240
Mitsubishi Estate Company Ltd. 4,000 40,088
Mitsui Fudosan Company Ltd. 2,000 14,942
New World Development Co. Ltd. 6,000 11,354
Parkway Holdings Ltd. 3,000 5,519
SILIC 70 11,560
SIMCO 400 34,459
Sino Land Company Ltd. 10,000 4,570
Slough Estates 8,823 51,178
Stockland Trust Group 794 1,710
Sun Hung Kai Properties Ltd. 7,000 56,768
Tornet Fastighets AB 910 11,840
Unibail SA 280 40,938
United Industrial Corp. Ltd. 11,000 5,985
United Overseas Land Ltd. 5,000 4,329
Vallehermoso SA 5,362 46,305
Westfield Trust 133 247
Westfield Trust 3,102 5,954
Wharf Holdings Ltd. 6,000 17,339
------------
975,575
Recreation - Other Consumer Goods - 1.02%
Adidas Salomon AG 200 14,473
BIC 187 9,146
EMI Group Plc 3,740 29,499
Fuji Photo Film Company Ltd. 2,000 64,256
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Recreation - Other Consumer Goods - continued
Nintendo Company Ltd. 800 $126,978
The Swatch Group AG 20 15,929
------------
260,281
Telecommunications - 10.64%
British Telecommunications Plc 10,244 185,835
Cable & Wireless Plc 5,103 59,534
Cable & Wireless HKT Ltd. 32,000 73,115
Deutsche Telekom AG 9,938 456,808
France Telecom SA 2,389 230,806
Koninklijke KPN NV 1,357 69,640
Netcom AB 400 16,609
Nippon Telegraph & Telephone 43 659,824
Portugal Telecom SA 1,260 56,193
Singapore Telecommunications Ltd. 45,000 85,492
Sonera Corporation 1,218 36,576
Swisscom AG 200 60,945
Telecom Italia Mobile SpA 3,606 12,516
Telecom Italia Mobile SpA 15,270 95,407
Telecom Italia SpA 8,015 69,215
Telecom Italia SpA 1,029 5,055
Telefonica SA 13,935 229,244
Telstra Corporation Ltd. 11,677 59,400
TNT Post Groep NV 1,432 36,451
Vodafone Airtouch Plc 48,995 228,242
------------
2,726,907
Textiles & Apparel - 0.04%
Benetton Group SpA 4,146 9,158
Toyobo Company Ltd. 800 1,205
------------
10,363
Transportation - Airlines - 0.80%
Alitalia Linee Aeree Italiane 3,315 9,153
Austrian Airlines 166 3,527
British Airways Plc 2,159 11,033
Cathay Pacific Airways Ltd. 9,000 18,247
Deutsche Lufthansa AG 1,350 28,400
Japan Airlines Company Ltd. 13,000 43,637
KLM Royal Dutch Air 190 5,176
Sairgroup 50 10,513
Singapore Airlines Ltd. 7,000 74,070
------------
203,756
Transportation - Road & Rail - 1.13%
Brisa Auto-Estradas de Portugal 431 16,978
Central Japan Railway Company 9 60,852
Comfort Group Ltd. 4,000 2,008
East Japan Railway Company 17 104,181
Firstgroup Plc 1,490 5,962
Hankyu Corp. 200 689
Kinki Nippon Railway Company Ltd. 10,000 46,322
NFC Plc 2,446 7,878
Nippon Express Company Ltd. 5,000 35,389
</TABLE>
The accompanying notes are an integral part of the financial statements.
41
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Transportation - Road & Rail - continued
Odakyu Electric Railway Co. Ltd. 470 $1,465
Stagecoach Holdings Plc 2,618 7,442
------------
289,166
Transportation - Shipping - 0.09%
Koninklijke Nedlloyd NV 77 2,150
Neptune Orient Lines Ltd. 2,000 2,898
Peninsular & Orient Steam Navigation 1,204 17,311
------------
22,359
Utilities - Electrical & Gas - 4.00%
Australian Gas Light Company 912 5,031
BG Plc 7,128 39,589
Centrica Plc 8,276 24,036
CLP Holdings Ltd. 4,500 20,680
Edison SpA 1,656 13,743
Electricidade de Portugal 4,211 65,466
Endesa SA 4,797 96,020
Gas Natural Sdg SA 2,259 49,899
Hongkong & China Gas Company Ltd. 14,000 18,562
Iberdrola SA 4,540 66,187
Italgas Sta Italiana Per Il Gas 1,122 4,638
Kansai Electric Power Co., Inc. 5,200 97,198
National Grid Group Plc 2,129 15,848
National Power Plc 2,597 17,624
Oesterreichische Elektrizitaets 235 34,013
Osaka Gas Company Ltd. 9,000 30,124
RWE AG 1,850 74,529
Tohoku Electric Power Co., Inc. 2,300 35,911
Tokyo Electric Power Co., Inc. 5,800 129,606
Union Electrica Fenosa 1,504 22,005
Veba AG 2,000 108,130
Viag AG 3,000 55,380
------------
1,024,219
Wholesale & International Trade - 1.56%
Hagemeyer NV 243 4,982
Kesko Corporation 547 6,225
Metro AG 950 51,062
Mitsubishi Corporation 7,000 50,350
Mitsui & Company 4,000 29,577
Softbank Corporation 500 207,634
Sumitomo Corporation 7,000 51,156
------------
400,986
TOTAL COMMON STOCKS
(Cost $22,651,558) $24,773,782
------------
PREFERRED STOCKS - 0.47%
Automobiles - 0.06%
Fiat SpA 152 $2,336
Volkswagen AG 400 14,179
------------
16,515
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Broadcasting & Publishing - 0.11%
News Corporation 4,007 $27,129
------------
Business & Public Services - 0.26%
SAP AG 150 66,109
------------
Food & Household Products - 0.04%
Unilever NV 1,951 10,302
------------
TOTAL PREFERRED STOCKS
(Cost $107,548) $120,055
------------
RIGHTS & WARRANTS - 0.06%
Banque Nationale de Paris warrants expire 7/15/02 338 $1,998
Linde AG rights expire11/03/99 350 736
Lonza Group AG rights expire 11/01/99 20 11,678
------------
TOTAL RIGHTS AND WARRANTS (Cost $2,795) $14,412
------------
SHORT TERM INVESTMENTS - 0.00%
SSGA Money Market Fund (Cost $1,000) 1,000 $1,000
------------
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
REPURCHASE AGREEMENT - 2.81%
Repurchase Agreement with State Street Bank & Trust
Co. dated 10/29/99 at 4.25%, to be repurchased at
$719,255 on 11/01/99, collateralized by $740,000 U.S.
Treasury Notes, 4.875% due 03/31/01 (valued at
$736,766 with interest) (Cost $719,000) $719,000 $719,000
------------
TOTAL INVESTMENTS (International Equity Fund) (Cost $23,481,901) $25,628,249
------------
- -------------------------------------------------------------------------------
Global Equity Fund
- -------------------------------------------------------------------------------
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
COMMON STOCKS - 96.41%
Aerospace & Military Technology - 1.18%
B.F. Goodrich Co. 24,100 $570,869
General Dynamics Corp. 7,400 410,237
------------
981,106
Appliances & Household Durables - 1.78%
Philips Electronics NV 8,610 883,002
Pioneer Electronic Corp. 33,000 588,981
------------
1,471,983
Automobiles - 0.78%
Volkswagen AG 10,930 646,116
------------
Banking - 9.41%
ABN AMRO Holdings NV 28,400 686,770
Bank of Ireland 213,113 1,663,296
</TABLE>
The accompanying notes are an integral part of the financial statements.
42
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Banking - continued
Chase Manhattan Corp. 8,200 $716,475
Mellon Financial Corp. 45,700 1,688,044
National Westminster 19,450 439,133
Nordbanken Holding AB 159,950 933,560
U. S. Bancorp 19,600 726,425
Westpac Banking Corp. 147,300 945,156
------------
7,798,859
Beverages & Tobacco - 6.54%
Allied Domecq Plc 206,540 1,157,307
Imperial Tobacco, Ltd. 94,500 1,001,571
Pernod-Ricard 18,290 1,235,101
Philip Morris Companies, Inc. 80,500 2,027,594
------------
5,421,573
Broadcasting & Publishing - 3.25%
Houghton Mifflin Co. 39,100 1,656,863
Mediaset 104,200 1,040,130
------------
2,696,993
Building Materials & Components - 3.39%
Blue Circle Industries Plc 113,250 525,711
Cimpor-Cimentos de Portugal SA 34,950 579,739
CSR, Ltd. 155,100 348,153
Holderbank Financier Glarus AG 780 960,480
Wolseley Plc 57,900 394,360
------------
2,808,443
Business & Public Services - 1.71%
Cadiz, Inc.* 44,950 376,456
Toppan Printing Co. 17,000 208,526
WPP Group Plc 76,500 829,651
------------
1,414,633
Chemicals - 3.77%
BASF AG 32,570 1,464,562
Bayer AG 19,700 806,064
Potash Corporation of Saskatchewan, Inc. 19,010 852,408
------------
3,123,034
Data Processing & Reproduction - 0.92%
NCR Corp.* 22,947 760,119
------------
Electric Utilities - 5.68%
Hong Kong Electric 128,500 392,853
Iberdrola SA 102,400 1,492,853
Unicom Corp. 42,160 1,615,255
Veba AG 22,400 1,211,058
------------
4,712,019
Electrical & Electronics - 1.82%
GenRad, Inc.* 43,400 830,025
Hitachi, Ltd. 49,000 529,615
Intelidata Technologies Corp. 95,850 146,770
------------
1,506,410
Energy Equipment & Services - 0.55%
Noble Drilling Corp.* 20,510 455,066
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Energy Sources - 4.42%
Burmah Castrol Plc 36,854 $635,258
Ocean Energy, Inc.* 41,715 383,257
Total Fina SA 19,570 2,645,134
------------
3,663,649
Financial Services - 4.73%
Enhance Financial Services Group, Inc. 60,600 1,105,950
Finova Group, Inc. 26,305 1,159,064
ING Groep 28,078 1,656,258
------------
3,921,272
Food & Household Products - 8.64%
Benckiser Cl. B 9,640 569,859
Danisco 10,700 445,187
Groupe Danone 6,310 1,609,514
KAO Corp. 30,000 914,932
Nestle SA 1,310 2,526,668
Reckitt & Colman Plc 90,215 1,094,020
------------
7,160,180
Forest Products & Paper - 1.37%
Boise Cascade Corp. 19,400 691,125
Georgia Pacific Corp. 11,300 448,469
------------
1,139,594
Health & Personal Care - 4.61%
Astrazeneca 860 38,890
Daiichi Pharmaceutical Co. 66,000 946,293
Fort James Products 25,000 657,812
Rhone-Poulenc SA 29,800 1,667,561
Schering AG 4,300 511,546
------------
3,822,102
Industrial Components - 1.51%
Borg-Warner Automotive, Inc. 18,200 718,900
Michelin CGDE 12,240 533,010
------------
1,251,910
Insurance - 5.75%
MBIA, Inc. 34,120 1,946,972
Royal Sun Alliance Insurance 162,538 1,107,056
SCOR 21,960 1,097,185
Sumitomo Marine & Fire 80,000 617,627
------------
4,768,840
Leisure & Tourism - 0.18%
Bass 13,869 152,006
------------
Merchandising - 6.72%
Albertsons, Inc. 55,960 2,032,048
BJ's Wholesale Club, Inc.* 32,200 992,162
Delhaize Freres SA 5,500 386,739
Great Univ Stores 67,050 507,914
Rite Aid Corp. 21,600 189,000
J. Sainsbury Plc 135,500 813,798
Sears, Roebuck & Co. 22,850 644,084
------------
5,565,745
</TABLE>
The accompanying notes are an integral part of the financial statements.
43
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Multi Industry - 2.79%
Cie Financiere Richemont 1,210 $2,311,566
------------
Non-Ferrous Metals - 0.71%
Alcoa, Inc. 9,700 589,275
------------
Real Estate - 0.90%
Green Property Co. 134,500 746,982
------------
Recreation & Other Consumer Goods - 2.50%
Fuji Photo Film Co. 37,000 1,188,741
Tupperware Corp. 44,500 881,656
------------
2,070,397
Telecommunication Services - 10.80%
BCT Telus Communications Ord 47,249 985,491
BCT Telus Communications NV 18,249 375,047
Comsat Corp. 25,588 478,176
GTE Corp. 9,400 705,000
Nippon Telephone & Telegraph Co. 181 2,777,405
Swisscom AG 1,380 420,527
Telecom Italia SpA 306,100 1,503,606
Telefonica CA* 103,508 1,702,804
------------
8,948,056
------------
TOTAL COMMON STOCKS (Cost $69,882,336) $79,907,928
------------
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
REPURCHASE AGREEMENT - 3.59%
Repurchase Agreement with State Street Bank & Trust
Co. dated 10/29/99 at 4.25%, to be repurchased at
$2,978,054 on 11/01/99, collateralized by $3,065,000
U.S. Treasury Notes, 4.875% due 03/31/01 (valued at
$3,051,603, with interest) (Cost $2,977,000) $2,977,000 $2,977,000
------------
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
SHORT TERM INVESTMENTS - 0.00%
SSGA Money Market Fund (Cost $1,000) 1,000 $1,000
------------
TOTAL INVESTMENTS
(Global Equity Fund) (Cost $72,860,336) $82,885,928
------------
- -----------------------------------------------------------------------------
Emerging Growth Fund
- -----------------------------------------------------------------------------
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
COMMON STOCKS - 96.04%
Aerospace & Defense - 0.70%
Tristar Aerospace Co.* 1,300 $8,612
------------
Business Services - 9.61%
Acxiom Corp.* 840 13,860
Cysive, Inc.* 300 17,269
DSP Group, Inc.* 200 9,550
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Business Services - continued
Getty Images, Inc.* 600 $18,487
Go2Net* 100 7,038
INSpire Insurance Solutions, Inc.* 700 4,463
Interspeed, Inc.* 300 3,319
Iron Mountain, Inc.* 450 13,612
Metamor Worldwide, Inc.* 400 7,550
Multex Systems, Inc.* 400 6,425
QRS Corp.* 300 16,688
------------
118,261
Communications & Media - 9.28%
Aether Systems, Inc.* 200 13,912
Entercom Communications Corp.* 200 9,962
Hispanic Broadcasting Corp.* 86 6,966
InfoSpace.com, Inc.* 300 16,688
Network Event Theater, Inc.* 600 13,800
Pegasus Communicaions Corp.* 100 4,425
Valuevision International, Inc.* 400 13,075
VerticalNet, Inc.* 200 11,200
Westwood One, Inc.* 300 13,838
Xoom.com, Inc.* 165 10,312
------------
114,178
Computer Peripherals - 0.86%
Aspect Development, Inc.* 300 10,612
------------
Computers - 15.55%
Business Objects SA* 300 21,600
Concord Communications, Inc.* 300 15,581
Emulex Corp.* 100 15,594
Hyperion Solutions Corp.* 500 12,188
Legato Systems, Inc.* 300 16,125
Mercury Interactive Corp.* 200 16,225
National Instruments Corp.* 450 13,528
Peregrine Systems, Inc.* 500 21,938
Radiant Systems, Inc.* 900 14,175
Remedy Corp.* 500 21,500
Research In Motion, Ltd.* 300 9,225
RSA Sec, Inc.* 300 10,650
Zapme Corp.* 400 3,000
------------
191,329
Consumer Services - 1.43%
DeVry, Inc.* 500 10,531
Strayer Education, Inc. 400 7,025
------------
17,556
Drugs & Health Care - 7.22%
Alkermes, Inc.* 400 14,125
Advanced Paradigm, Inc.* 300 12,788
ChiRex, Inc.* 400 11,300
Hanger Orthopedic Group, Inc.* 800 9,850
Mid Atlantic Medical Services, Inc.* 1,400 7,613
Minimed, Inc.* 200 15,162
</TABLE>
The accompanying notes are an integral part of the financial statements.
44
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Drugs & Health Care - continued
Oxford Health Plans, Inc.* 900 $10,631
Renal Care Group, Inc.* 400 7,450
------------
88,919
Electronics - 12.38%
Adaptive Broadband Corp.* 300 11,081
Alpha Industries, Inc.* 300 16,575
Avant! Corp.* 500 6,438
Burr-Brown Corp.* 400 15,725
C-Cube Microsystems, Inc.* 400 17,800
Etec Systems, Inc.* 200 7,637
Galileo Technology, Ltd.* 5,600 13,725
Novellus Systems, Inc.* 200 15,500
Photronics, Inc.* 500 10,469
Sandisk Corp.* 100 6,063
Telcom Semiconductor, Inc.* 800 7,400
Triquint Semiconductor, Inc.* 300 24,000
------------
152,413
Energy - 1.18%
Stone Energy Corp.* 300 14,588
------------
Financial Services - 0.59%
Enhance Financial Services Group, Inc. 400 7,300
------------
Food & Beverages - 0.69%
Ben & Jerry's Homemade, Inc.* 500 8,438
------------
Industrial Mfg. & Processing - 2.61%
Advanced Energy Industries, Inc.* 500 20,562
Applied Power, Inc.* 400 11,625
------------
32,187
Leisure Time - 5.10%
American Classic Voyages Co.* 500 12,500
Fairfield Communities, Inc.* 1,300 15,925
Midway Games, Inc.* 700 13,956
Sunterra Corp.* 800 8,000
THQ, Inc.* 300 12,338
------------
62,719
Lodgings & Restaurants - 0.78%
Jack-in-the-Box, Inc.* 400 9,625
------------
Petroleum Services - 4.13%
BJ Services Company* 400 13,725
Cooper Cameron Corp.* 300 11,606
Petroleum Geo Services, Inc.* 800 11,700
Smith International, Inc.* 400 13,825
------------
50,856
Retail Trade - 2.68%
99 Cents Only Stores* 150 4,481
Ames Department Stores, Inc.* 300 9,506
Ann Taylor Stores Corp.* 200 8,512
Linens n Things, Inc.* 200 7,950
Value America, Inc.* 200 2,487
------------
32,936
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Telecommunication Services - 20.61%
Advanced Fibre Communications* 800 $17,500
Aironet Wireless Communication* 600 21,450
Antec Corp.* 400 19,400
AudioCodes, Ltd.* 300 18,150
Concentric Network Corp.* 500 12,813
Gilat Satellite Networks, Ltd.* 200 10,425
Omnipoint Corp.* 200 16,525
Pairgain Technologies, Inc.* 1,200 14,700
Powertel, Inc.* 300 17,662
Powerwave Technologies, Inc.* 400 26,025
Proxim, Inc.* 400 18,725
Spectrian Corp.* 500 16,750
Stanford Communications, Inc.* 700 19,600
Viatel, Inc.* 400 13,350
Western Wireless Corp.* 200 10,575
------------
253,650
Transportation - 0.64%
Swift Transportation, Inc.* 450 7,847
------------
TOTAL COMMON STOCKS (Cost $933,422) $1,182,026
------------
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
SHORT TERM INVESTMENTS - 3.96%
SSGA Money Market Fund
(Cost $48,756) 48,756 $48,756
------------
TOTAL INVESTMENTS (Emerging Growth Fund)
(Cost $982,178) $1,230,782
------------
- ------------------------------------------------------------
Small/Mid Cap Fund
- ------------------------------------------------------------
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
COMMON STOCKS - 90.67%
Advertising - 2.71%
Lamar Advertising Co. 5,300 $286,200
Young & Rubicam, Inc. 19,000 869,250
------------
1,155,450
Biotechnology - 5.76%
Biogen, Inc.* 10,800 800,550
Medimmune, Inc.* 8,900 996,800
Sepracor, Inc.* 7,900 657,181
------------
2,454,531
Business Services - 7.54%
Cintas Corp. 12,900 777,225
CSG Systems International, Inc.* 4,100 140,681
DST Systems, Inc.* 7,000 445,812
DuPont Photomasks, Inc.* 5,000 247,500
Exodus Communications, Inc.* 4,000 344,000
Fiserv, Inc.* 30,250 968,000
Yahoo, Inc.* 1,605 287,395
------------
3,210,613
</TABLE>
The accompanying notes are an integral part of the financial statements.
45
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Computer Peripherals - 6.61%
Intuit, Inc.* 50,400 $1,467,900
Legato Systems, Inc.* 4,100 220,375
Microchip Technology, Inc.* 16,900 1,125,962
------------
2,814,237
Computer Services - 0.65%
Amdocs Limited* 10,000 278,125
------------
Drugs & Health Care - 5.82%
Express Scripts, Inc.* 15,300 751,612
Forest Laboratories, Inc.* 33,500 1,536,812
Medquist, Inc.* 5,900 188,800
------------
2,477,224
Electric Utilities - 1.62%
Calpine Corp.* 12,000 691,500
------------
Electronic Components - 4.11%
ATMI, Inc.* 11,200 301,700
Conexant Systems, Inc.* 2,900 270,787
Linear Technology Corp. 3,800 265,763
Vitesse Semiconductor Corp.* 4,800 220,200
Xilinx, Inc.* 8,800 691,900
------------
1,750,350
Electronics - 8.94%
Altera Corp.* 15,600 758,550
ASM Lithography Holding NV * 5,000 363,125
Flextronics International, Ltd.* 12,000 852,000
Maxim Integrated Products, Inc.* 8,600 678,863
Sanmina Corp. * 12,800 1,152,800
------------
3,805,338
Financial Services - 6.50%
Charter One Financial, Inc. 29,505 724,717
Kansas City Southern Industries, Inc. 25,000 1,185,938
Paine Webber Group, Inc. 21,000 855,750
------------
2,766,405
Industrial Equipment - 2.84%
Waters Corp.* 22,800 1,211,250
------------
Manufacturing - 0.90%
SPX Corp.* 4,500 381,375
------------
Motor Vehicles - 0.70%
Harley Davidson, Inc. 5,000 296,563
------------
Packaged Foods & Products - 3.73%
Dean Foods Co. 5,500 254,375
U.S. Foodservice* 69,600 1,335,450
------------
1,589,825
Petroleum Services - 6.39%
B.J. Services Co.* 27,500 943,594
Devon Energy Corp. 10,200 396,525
EOG Resources, Inc. 11,500 239,344
Nabors Industries, Inc.* 41,700 946,069
Union Pacific Res Group, Inc. 13,600 197,200
------------
2,722,732
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Restaurants & Lodging - 4.55%
Mandalay Resort Group* 44,559 $829,911
Outback Steakhouse, Inc.* 48,250 1,109,750
------------
1,939,661
Retail Trade - 17.49%
Abercrombie & Fitch Co.* 25,000 681,250
Bed, Bath & Beyond, Inc.* 41,100 1,369,144
BJ's Wholesale Club, Inc.* 34,000 1,047,625
Family Dollar Stores, Inc. 39,000 804,375
Gucci Group NV 14,700 1,187,025
Linens N Things, Inc.* 19,400 771,150
Tiffany & Company 11,000 654,500
Williams Sonoma, Inc.* 17,400 935,250
------------
7,450,319
Telecommunications - 3.81%
Cnet, Inc.* 34,400 1,623,250
------------
TOTAL COMMON STOCKS (Cost $35,303,575) $38,618,748
------------
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
RIGHTS - 3.27%
Electric Components - 3.27%
Teradyne, Inc.
Callable through 03/26/00 36,200 $1,393,700
------------
TOTAL RIGHTS (Cost $1,138,327) $1,393,700
------------
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
SHORT TERM INVESTMENTS - 6.06%
Atlantis One Funding Corp. $600,000 $599,378
Enterprise Funding Corp. 400,000 398,934
Ford Motor Credit Corp. 1,500,000 1,496,731
SSGA Money Market Fund 88,360 88,360
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $2,583,403) $2,583,403
------------
TOTAL INVESTMENTS
(Small/Mid Cap Fund) (Cost $39,025,305) $42,595,851
------------
- ---------------------------------------------------------------
Growth Equity Fund
- ---------------------------------------------------------------
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
COMMON STOCKS - 96.55%
Automotive - 1.40%
General Motors Corporation 8,175 $595,242
------------
Banking - 4.20%
Bank America Corporation 7,250 466,719
Citigroup, Inc. 10,468 566,580
Fifth Third Bancorp 2,854 210,661
Wells Fargo & Company 11,306 541,275
------------
1,785,235
</TABLE>
The accompanying notes are an integral part of the financial statements.
46
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Biotechnology - 0.60%
Amgen, Inc.* 1,243 $99,129
Genetech, Inc.* 1,075 156,681
------------
255,810
Broadcasting - 7.74%
AMFM, Inc.* 12,138 849,660
AT&T Corp-Liberty Media Group* 15,600 619,125
Comcast Corporation 15,549 655,002
Time Warner, Inc. 13,665 952,280
USA Networks, Inc.* 4,825 217,427
------------
3,293,494
Business Services - 2.50%
Cintas Corporation 4,728 284,862
Computer Sciences Corporation* 5,783 397,220
Interpublic Group Companies, Inc. 9,399 381,834
------------
1,063,916
Computer Peripherals - 1.28%
EMC Corporation* 7,445 543,485
------------
Computer Services - 0.75%
Devry, Inc.* 6,782 142,846
eBay, Inc.* 1,300 175,663
------------
318,509
Computer Software - 8.02%
Amdocs Limited* 1,225 34,070
Automatic Data Processing, Inc. 8,492 409,208
BMC Software, Inc.* 1,800 115,538
Inktomi Corporation* 975 98,902
Microsoft Corporation* 16,181 1,497,754
Momentum Business Applications* 22 171
RealNetworks, Inc.* 1,350 148,078
Siebel Systems, Inc.* 1,350 148,247
Verisign, Inc.* 1,150 142,025
VERITAS Software Corporation* 1,225 132,147
Yahoo, Inc.* 3,821 684,198
------------
3,410,338
Computers & Business Equipment - 2.01%
Apple Computer* 5,200 416,650
Sun Microsystems, Inc.* 4,143 438,381
------------
855,031
Diversified - 1.99%
Berkshire Hathaway, Inc.* 406 848,540
------------
Drugs & Health Care - 12.86%
Bristol-Myers Squibb 10,702 822,047
Guidant Corporation 3,300 162,938
IMS Health, Inc. 17,458 506,282
Johnson & Johnson 4,705 492,849
MedImmune, Inc.* 925 103,600
Medtronic, Inc. 7,770 269,036
Merck & Company, Inc. 8,904 708,425
Pfizer, Inc. 22,116 873,582
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Drugs & Health Care - continued
Schering Plough Corporation 14,089 $697,405
Warner Lambert Co. 10,460 834,839
------------
5,471,003
Electrical Equipment - 3.81%
General Electric Co. 11,963 1,621,734
------------
Electronic Components - 11.82%
Applied Micro Circuits Corporation* 3,100 241,219
Comverse Technology, Inc.* 2,325 263,887
General Instrument Corportion* 2,375 127,805
Intel Corp. 16,702 1,293,361
Jabil Circuit, Inc.* 2,450 128,012
JDS Uniphase Corporation* 5,150 859,406
Linear Technology Corporation 3,350 234,291
Motorola, Inc. 1,115 108,643
Perkin Elmer Corporation 3,782 245,357
PMC-Sierra, Inc.* 1,925 181,431
RF Micro Devices, Inc.* 4,525 233,603
Solectron Corporation* 1,415 106,479
Texas Instruments, Inc. 8,850 794,287
Vitesse Semiconductor Corporation* 4,550 208,731
------------
5,026,512
Financial Services - 4.21%
American Express Company 1,705 262,570
Associates First Capital Corp. 9,196 335,654
Federal National Mortgage Assn. 6,331 447,918
Merrill Lynch & Co., Inc. 2,725 213,912
Morgan Stanley Dean Witter & Co. 1,900 209,594
Northern Trust Corporation 849 81,982
Charles Schwab Corp. 6,144 239,232
------------
1,790,862
Food & Beverages - 2.54%
Coca-Cola Company 17,049 1,005,891
Tootsie Roll Industries, Inc. 2,392 75,797
------------
1,081,688
Household Products - 3.40%
Clorox Company 2,450 100,297
Colgate Palmolive Co. 5,564 336,622
Dial Corporation 11,410 266,709
Gillette Company 5,252 190,057
Procter & Gamble Company 5,250 550,594
------------
1,444,279
Insurance - 2.56%
American International Group, Inc. 6,065 624,316
Marsh & Mclennan Cos., Inc. 5,858 463,148
------------
1,087,464
Leisure & Entertainment - 1.73%
America Online, Inc.* 4,175 541,445
Carnival Corporation 2,003 89,133
Walt Disney Company 3,922 103,443
------------
734,021
</TABLE>
The accompanying notes are an integral part of the financial statements.
47
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Lodging & Restaurants - 0.46%
McDonalds Corporation 4,733 $195,236
------------
Manufacturing - 0.47%
Tyco International Ltd. 5,018 200,406
------------
Motor Vehicles - 0.67%
Danaher Corporation 3,324 160,591
Harley Davidson, Inc. 2,053 121,769
------------
282,360
Publishing - 1.42%
Gannett, Inc. 6,777 522,676
Washington Post Company 150 79,809
------------
602,485
Retail Trade - 6.37%
Costco Companies, Inc.* 9,550 766,984
Home Depot, Inc. 9,163 691,806
Intimate Brands, Inc. 2,178 89,298
Kohl's Corporation* 3,578 267,679
Wal Mart Stores, Inc. 15,796 895,436
------------
2,711,203
Telecommunications - 13.74%
Cisco Systems, Inc.* 22,259 1,647,166
EchoStar Communications Corporation* 2,398 148,376
GTE Corporation 2,600 195,000
Lucent Technologies, Inc. 9,479 609,026
MCI WorldCom, Inc.* 2,634 226,030
Nextel Communications, Inc.* 2,775 239,170
Nokia Corporation 4,529 523,383
Nortel Networks Corporation 2,400 148,650
Qualcomm, Inc.* 1,050 233,887
SBC Communications, Inc. 6,400 326,000
Sprint Corporation* 2,625 217,711
Sycamore Networks, Inc.* 225 48,375
Tellabs, Inc.* 4,739 299,742
Vodaphone Airtouch Plc 8,720 418,015
VoiceStream Wireless Corporation* 3,000 296,250
Western Wireless Corporation* 2,825 149,372
Williams Communications Group* 3,700 117,937
------------
5,844,090
TOTAL COMMON STOCKS
(Cost $34,983,300) $41,062,943
------------
SHORT TERM INVESTMENTS - 0.00%
SSGA Money Market Fund (Cost $1,000) 1,000 $1,000
------------
</TABLE>
<TABLE>
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
REPURCHASE AGREEMENT - 3.45%
Repurchase Agreement with State Street Bank & Trust
Co. dated 10/29/99 at 4.25%, to be repurchased at
$1,470,521 on 11/01/99, collateralized by $1,495,000
U.S. Treasury Notes, 4.00% due 10/31/00 (valued at
$1,530,132, with interest) (Cost $1,470,000) $1,470,000 $1,470,000
------------
TOTAL INVESTMENTS
(Growth Equity Fund) (Cost $36,454,300) $42,533,943
------------
- -----------------------------------------------------------------------------
Tax-Sensitive Equity Fund
- -----------------------------------------------------------------------------
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
COMMON STOCKS - 98.31%
Aerospace & Defense - 4.03%
General Dynamics Corporation 2,000 $110,875
General Motors Corporation 3,400 247,562
------------
358,437
Apparel & Textiles - 3.61%
Jones Apparel Group, Inc.* 5,500 173,937
Tommy Hilfiger Corp.* 5,200 146,900
------------
320,837
Banking - 3.00%
Chase Manhattan Corp. 1,800 157,275
Fleet Boston Corporation 2,500 109,063
------------
266,338
Business Services - 2.80%
Shared Medi Cal System 3,700 139,675
Xerox Corp. 3,900 109,200
------------
248,875
Computers & Business Equipment - 9.43%
Hewlett Packard Co. 1,800 133,313
Sun Microsystems , Inc.* 3,400 359,762
SCI Systems, Inc.* 6,000 296,250
Unisys Corporation* 2,000 48,500
------------
837,825
Consumer Durables - 1.87%
Leggett & Platt, Inc. 7,500 166,406
------------
Drugs & Health Care - 10.70%
Abbott Laboratories 3,000 121,125
Amgen, Inc.* 3,300 263,175
Bristol Myers Squibb Co. 1,000 76,813
Merck & Company, Inc. 1,300 103,431
Schering Plough Corp. 2,200 108,900
Steris Corp.* 12,000 159,750
Watson Pharmaceuticals, Inc.* 3,700 117,475
------------
950,669
Electrical Equipment - 2.25%
Tyco International, Ltd. 5,000 199,687
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
48
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Financial Services - 6.05%
Citigroup, Inc. 2,750 $148,844
Federal National Mortgage Assn. 3,000 212,250
Morgan Stanley Dean Witter & Co. 1,600 176,500
------------
537,594
Food & Drug Distribution - 3.15%
CVS Corporation 2,700 117,281
Kroger Co.* 7,800 162,337
------------
279,618
Home Building - 1.77%
Clayton Homes, Inc. 15,500 156,938
------------
Hotels & Casinos - 3.37%
Carnival Corporation 5,500 244,750
Starwood Hotels & Resorts 2,400 55,050
------------
299,800
Household Products - 1.48%
Fort James Corp. 5,000 131,563
------------
Industrial Conglomerates - 5.64%
Ingersoll Rand Co. 4,500 235,125
United Technologies Corp. 4,400 266,200
------------
501,325
Infrastructure Software - 7.17%
BMC Software, Inc.* 5,000 320,938
Computer Associates International, Inc. 5,600 316,400
------------
637,338
Insurance - 12.14%
Ambac Financial Group, Inc. 3,500 209,125
Conseco, Inc. 10,700 260,144
Delphi Financial Group, Inc.* 5,838 186,816
Reliastar Financial Group 7,600 326,325
Unumprovident Corporation 2,920 96,178
------------
1,078,588
International Oil - 6.34%
BP Amoco Plc 4,000 231,000
Chevron Corporation 1,000 91,313
Mobil Corp. 2,500 241,250
------------
563,563
Packaged Foods & Products - 1.59%
Universal Foods Corp. 7,400 141,525
------------
Peripherals - 3.48%
American Power Conversion Corp.* 13,800 309,638
------------
Real Estate - 1.66%
Boston Properties, Inc. 1,700 50,681
Equity Residential Properties Trust 1,000 41,812
General Growth Properties, Inc. 1,900 54,981
------------
147,474
Retail Trade - 1.16%
Ross Stores, Inc. 5,000 103,125
------------
Semiconductors - 2.70%
Intel Corp. 3,100 240,056
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Telephone - 2.92%
Bell Atlantic Corp. 4,000 $259,750
------------
TOTAL COMMON STOCKS
(Cost $8,005,165) $8,736,969
------------
SHORT TERM INVESTMENTS - 0.01%
SSGA Money Market Fund (Cost $1,000) 1,000 $1,000
------------
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
REPURCHASE AGREEMENT - 1.68%
Repurchase Agreement with State Street Bank & Trust
Co. dated 10/29/99 at 4.25%, to be repurchased at
$149,053 on 11/01/99, collateralized by $150,000 U.S
Treasury Notes,5.00% due 04/30/01 (valued at
$155,775,with interest) (Cost $149,000) $149,000 $149,000
------------
TOTAL INVESTMENTS
(Tax-Sensitive Equity Fund) (Cost $8,155,165) $ 8,886,969
------------
- -----------------------------------------------------------------------------
Growth and Income Fund
- -----------------------------------------------------------------------------
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
COMMON STOCKS - 98.63%
Aerospace & Defense - 1.90%
Allied Signal, Inc. 38,700 $2,203,481
General Motors Corp.* 21,000 1,529,062
United Technologies Corp. 32,200 1,948,100
------------
5,680,643
Air Travel - 0.95%
AMR Corporation* 44,800 2,844,800
------------
Banks - 7.40%
The Chase Manhattan Corp. 26,600 2,324,175
Citigroup, Inc. 170,400 9,222,900
First Union Corp. 70,000 2,988,125
U.S. Bancorp 105,100 3,895,269
Wachovia Corp. 42,500 3,665,625
------------
22,096,094
Broadcasting - 0.87%
AT&T Corp-Liberty Media Group* 36,400 1,444,625
Time Warner, Inc. 16,400 1,142,875
------------
129,800 2,587,500
Business Services - 2.10%
Automatic Data Processing, Inc. 62,500 3,011,719
First Data Corp. 71,200 3,252,950
------------
6,264,669
</TABLE>
The accompanying notes are an integral part of the financial statements.
49
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Chemicals - 2.12%
The Dow Chemical Co. 11,900 $1,407,175
E.I. Du Pont de Nemours & Co. 64,400 4,149,775
Monsanto Co. 20,000 770,000
------------
6,326,950
Computer Peripherals - 4.63%
Computer Sciences Corp.* 37,900 2,603,256
Microsoft Corp.* 121,200 11,218,575
------------
13,821,831
Computers & Business Equipment - 8.00%
Cisco Systems, Inc.* 97,000 7,178,000
EMC Corp.* 26,600 1,941,800
Hewlett-Packard Company 28,800 2,133,000
International Business Machines Corp. 56,200 5,528,675
Lucent Technologies 77,100 4,953,675
Xerox Corp. 76,200 2,133,600
------------
23,868,750
Drugs & Health Care - 13.01%
Abbott Laboratories 83,300 3,363,238
American Home Products Corp. 104,400 5,454,900
Astrazeneca Plc 47,700 2,182,275
Baxter International, Inc. 49,300 3,198,337
Bristol-Myers Squibb Co. 45,100 3,464,244
Cardinal Health, Inc. 38,400 1,656,000
Columbia/HCA Healthcare Corp. 94,600 2,282,225
Johnson & Johnson 34,600 3,624,350
Merck & Company, Inc. 54,600 4,344,112
Pharmacia & Upjohn, Inc. 72,300 3,899,681
Warner-Lambert Co. 67,400 5,379,362
------------
38,848,724
Electrical Equipment - 5.06%
General Electric Co. 87,200 11,821,060
Tyco International Ltd. 82,600 3,298,838
------------
15,119,898
Electronic Components - 5.86%
Analog Devices, Inc.* 28,400 1,508,750
Intel Corp. 92,500 7,162,969
Micron Technology, Inc.* 41,900 2,987,994
Motorola, Inc. 27,000 2,630,813
Texas Instruments, Inc. 35,600 3,195,100
------------
17,485,626
Financial Services - 5.61%
Associates First Capital Corp. 111,200 4,058,800
Federal National Mortgage Association 59,600 4,216,700
Marsh & McLennan Companies, Inc. 58,700 4,640,969
Merrill Lynch & Co., Inc. 48,800 3,830,800
------------
16,747,269
Food & Beverages - 1.64%
Anheuser-Busch Companies, Inc. 39,900 2,865,319
Pepsico, Inc. 58,400 2,025,750
------------
4,891,069
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Forest Products - 1.77%
International Paper Co. 61,200 $ 3,220,650
Minnesota Mining & Manufacturing Co. 21,800 2,072,363
------------
5,293,013
Hotels & Restaurants - 1.44%
McDonald's Corp. 104,100 4,294,125
------------
Household Products - 4.45%
Colgate Palmolive Co. 34,000 2,057,000
Corning, Inc. 16,400 1,289,450
Gillette Company 31,000 1,121,813
Kimberly Clark Corp. 55,800 3,522,375
Procter & Gamble Co. 50,500 5,296,187
------------
13,286,825
Industrial Components - 1.24%
Caterpillar, Inc. 33,800 1,867,450
Illinois Tool Works, Inc. 25,100 1,838,575
------------
3,706,025
Insurance - 1.93%
ACE, Ltd. 71,000 1,380,063
American International Group, Inc. 42,625 4,387,711
------------
5,767,774
Leisure & Entertainment - 1.06%
America Online, Inc.* 7,000 907,812
The Walt Disney Co. 85,800 2,262,975
------------
3,170,787
Motor Vehicle Parts - 0.38%
Eaton Corporation 15,000 1,128,750
------------
Motor Vehicles - 0.57%
Ford Motor Company 31,200 1,712,100
------------
Newspapers - 1.42%
Gannett, Inc. 54,900 4,234,162
------------
Non-Ferrous Metals - 0.85%
Alcoa Inc. 41,700 2,533,275
------------
Petroleum - 5.53%
Chevron Corp. 36,900 3,369,431
Exxon Corp. 91,900 6,806,344
Royal Dutch Petroleum Co. 83,600 5,010,775
UNOCAL Corp. 37,900 1,307,550
------------
16,494,100
Petroleum Services - 1.23%
Schlumberger, Ltd. 60,500 3,664,031
------------
Retail Trade - 6.11%
Dayton Hudson Corp. 78,200 5,053,675
The GAP, Inc. 81,300 3,018,263
May Dept Stores 45,700 1,585,219
Wal-Mart Stores, Inc. 151,500 8,588,156
------------
18,245,313
Telecommunication Services - 1.45%
AT&T Corp.* 92,400 4,319,700
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
50
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Transportation - 0.38%
CSX Corp. 27,700 $1,135,700
------------
Utilities-Electric - 2.20%
Duke Energy Do. 45,800 2,587,700
Pinnacle West Capital Corp. 28,400 1,047,250
Texas Utilities Co. 39,800 1,542,250
Unicom Corp. 36,300 1,390,744
------------
6,567,944
Utilities-Gas & Pipeline - 0.44%
National Fuel Gas Co. NJ 27,000 1,319,625
------------
Utilities-Telephone - 6.25%
Bell Atlantic Corp. 100,492 6,525,699
MCI WorldCom, Inc.* 73,900 6,341,544
SBC Communications, Inc. 113,400 5,776,312
------------
18,643,555
Tobacco - 0.78%
Philip Morris Companies, Inc. 92,600 2,332,363
------------
TOTAL COMMON STOCKS (Cost $185,392,058) $294,432,990
------------
CONVERTIBLE PREFERRED STOCK - 0.35%
Chemicals - 0.35%
Monsanto Corp. (Cost $1,116,000) 27,900 $1,056,712
------------
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
REPURCHASE AGREEMENT - 1.02%
Repurchase Agreement with Paine Webber, dated
10/29/99, at 5.22% to be repurchased at $3,055,328
on 11/01/99, collateralized by $2,960,000 U.S.
Treasury Bills, 6.75% due 08/15/26 (valued at
$3,114,656 with interest) (Cost $3,054,000) $3,054,000 $3,054,000
------------
TOTAL INVESTMENTS
(Growth & Income Fund) (Cost $189,562,058) $298,543,702
------------
- ---------------------------------------------------------------------------
Equity-Income Fund
- ---------------------------------------------------------------------------
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
COMMON STOCKS - 99.90%
Banking - 15.15%
Bankamerica Corp. 31,800 $ 2,047,125
First Union Corp. 114,000 4,866,375
Mellon Financial Corp. 184,850 6,827,897
U.S. Bancorp 41,900 1,552,919
Wells Fargo & Co. 46,650 2,233,369
------------
17,527,685
Business Services - 3.90%
Pitney Bowes, Inc. 98,900 4,506,131
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Chemicals - 2.11%
E.I. Du Pont De Nemours & Co. 37,900 $2,442,181
------------
Computers & Business Equipment - 2.27%
Xerox Corp. 94,000 2,632,000
------------
Drugs & Health Care - 19.64%
American Home Products Corp. 136,100 7,111,225
Baxter International, Inc. 48,300 3,133,463
Bristol Myers Squibb Co. 75,800 5,822,388
Pharmacia & Upjohn, Inc. 123,400 6,655,888
------------
22,722,964
Food & Beverages - 8.65%
General Mills, Inc. 52,800 4,603,500
H.J. Heinz Co. 113,300 5,410,075
------------
10,013,575
Household Products - 5.76%
Gillette Co. 24,500 886,594
Kimberly-Clark Corp. 91,600 5,782,250
------------
6,668,844
Insurance - 6.72%
American General Corp. 47,400 3,516,487
Marsh & McLennan Cos., Inc. 53,800 4,253,563
------------
7,770,050
International Oil - 8.49%
Chevron Corp. 52,500 4,793,906
Exxon Corp. 25,800 1,910,812
Texaco, Inc. 50,700 3,111,713
------------
9,816,431
Multi Industry - 3.48%
Minnesota Mining & Manufacturing Co. 42,400 4,030,650
------------
Paper - 3.53%
International Paper Co. 52,807 2,778,968
Weyerhaeuser Co. 21,800 1,301,187
------------
4,080,155
Telephone - 17.47%
Bell Atlantic Corp. 107,750 6,997,016
GTE Corp. 47,300 3,547,500
SBC Communications, Inc. 111,754 5,692,469
U.S. West, Inc. 65,000 3,969,062
------------
20,206,047
Tobacco - 2.73%
Philip Morris Companies, Inc. 125,400 3,158,512
------------
TOTAL COMMON STOCKS
(Cost $107,875,775) $115,575,225
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
51
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
REPURCHASE AGREEMENT - 0.10%
Repurchase Agreement with State Street Bank & Trust
Co. dated 10/29/99 at 4.25%, to be repurchased at
$119,042 on 11/01/99, collateralized by $125,000 U.S.
Treasury Notes, 5.75% due 08/15/03 valued at
($126,791, with interest) (Cost $119,000) $119,000 $119,000
------------
TOTAL INVESTMENTS
(Equity-Income Fund) (Cost $107,994,775) $115,694,225
------------
- ------------------------------------------------------------------------------
Balanced Fund
- ------------------------------------------------------------------------------
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
COMMON STOCKS - 45.73%
Aerospace - 0.44%
Precision Castparts, Corp. 10,700 $315,650
------------
Agriculture - 1.08%
Archer Daniels Midland Company 57,600 709,200
Conagra, Inc. 2,500 65,156
------------
774,356
Building Materials - 1.14%
Lafarge Corporation 27,600 819,375
------------
Chemicals - 2.22%
B.F. Goodrich Company 39,800 942,762
IMC Global, Inc. 4,100 52,275
Potash Corporation of Saskatchewan, Inc. 13,550 598,741
------------
1,593,778
Domestic Oil - 0.51%
Phillips Petroleum Co. 7,800 362,700
------------
Drugs & Health Care - 12.92%
Abbott Laboratories 56,800 2,293,300
Baxter International, Inc. 12,200 791,475
Beckton Dickinson & Co. 30,500 773,937
Glaxo Wellcome Plc 19,150 1,146,606
Mallinckrodt, Inc. 3,100 105,206
Merck KGAA 31,725 1,094,534
Merck & Company, Inc. 16,400 1,304,825
Pharmacia & Upjohn, Inc. 13,900 749,731
Warner Lambert Co. 12,700 1,013,619
------------
9,273,233
Electric Utilities - 0.22%
Scana Corporation 6,400 159,200
------------
Entertainment & Recreation--1.65%
Granada Group 82,700 656,361
Mirage Resorts, Inc.* 36,300 528,619
------------
1,184,980
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Gas & Pipeline Utilities - 5.62%
Coastal Corp. 38,800 $1,634,450
Columbia Energy Group 36,900 2,398,500
------------
4,032,950
Precious Metals - 3.33%
Franco Nevada Mining Ltd. 55,600 1,031,239
Placer Dome, Inc. 111,900 1,356,787
------------
2,388,026
Household Products - 2.55%
Clorox Company 32,200 1,318,188
Dial Corp. 21,975 513,666
------------
1,831,854
Insurance - 4.51%
XL Capital, Ltd. 60,210 3,232,524
------------
Petroleum Services - 6.14%
Conoco, Inc. 127,300 3,492,794
Texaco, Inc. 14,900 914,488
------------
4,407,282
Supermarkets - 1.59%
Albertson's, Inc. 31,447 1,141,919
------------
Telephone - 1.81%
U.S. West, Inc. 21,300 1,300,631
------------
TOTAL COMMON STOCKS
(Cost $34,335,615) $32,818,458
------------
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
U.S. TREASURY OBLIGATIONS - 44.66%
U.S. Treasury Notes - 44.66%
5.375% due 06/30/03 $1,000,000 $981,560
5.50% due 02/15/08 3,400,000 3,261,348
5.625% due 05/15/08 3,820,000 3,685,689
5.75% due 11/30/02 985,000 980,843
5.875% due 02/15/04 4,115,000 4,103,437
6.25% due 06/30/02 3,950,000 3,984,563
6.625% due 03/31/02 1,000,000 1,016,560
6.625% due 04/30/02 3,130,000 3,184,274
6.875% due 05/15/06 4,800,000 4,981,488
7.25% due 05/15/04 4,300,000 4,506,916
7.25% due 08/15/04 1,300,000 1,364,792
------------
32,051,470
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $32,302,363) $32,051,470
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 2.11%
Federal Home Loan Mortgage Corporation - 2.11%
6.45% due 04/29/09 1,600,000 1,519,248
------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS
(Cost $1,599,760) $1,519,248
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
52
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
FOREIGN GOVERNMENT OBLIGATIONS - 2.56%
Ontario Province - 2.56%
6.125% due 09/12/07 $1,330,000 $893,239
6.500% due 03/08/29 1,405,000 943,065
------------
1,836,304
------------
TOTAL FOREIGN GOVERNMENT OBLIGATIONS (Cost $1,884,327) $1,836,304
------------
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
SHORT TERM INVESTMENTS - 0.00%
SSGA Money Market Fund (Cost $1,000) 1,000 $1,000
------------
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
REPURCHASE AGREEMENT - 4.94%
Repurchase Agreement with State Street Bank & Trust
Co. dated 10/29/99 at 4.25%, to be repurchased at
$3,544,255 on 11/01/99, collateralized by
$3,605,000 U.S. Treasury Notes, 4.00% due 10/31/00
(valued at $3,689,717, with interest) (Cost
$3,543,000) $3,543,000 $3,543,000
------------
TOTAL INVESTMENTS
(Balanced Fund) (Cost $73,666,065) $71,769,480
------------
- -----------------------------------------------------------------------------
Strategic Income Fund
- -----------------------------------------------------------------------------
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
CORPORATE BONDS - 41.45%
Aerospace - 1.11%
B.E. Aerospace, Inc.,
8.00% due 03/01/08 $250,000 $218,125
Lear Corporation,
8.11% due 05/15/09 375,000 358,579
------------
576,704
Banking - 0.91%
Commerzbank,
10.25% due 04/28/00 AUD 540,000 351,486
European Bank Recon. & Development,
10.50% due 01/25/01 PLN 400,000 90,295
Nordiska Investeringsbanken,
17.75% due 04/15/02 PLN 140,000 34,921
------------
476,702
Business Services - 2.77%
Comdisco, Inc.,
6.00% due 01/30/02 $400,000 389,020
CSC Holdings, Inc.,
10.50% due 05/15/16 500,000 545,000
</TABLE>
<TABLE>
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
Business Services - continued
Iron Mountain, Inc.,
10.125% due 10/01/06 $500,000 $510,000
------------
1,444,020
Chemical Products - 0.25%
Revlon Worldwide Corp., Series B,
zero coupon due 03/15/01 600,000 132,000
------------
Crude Petroleum & Natural Gas - 2.11%
Bellwether Exploration Co.,
10.875% due 04/01/07 250,000 230,625
Benton Oil & Gas Co.,
11.625% due 05/01/03 200,000 144,500
Pennzoil Company,
10.25% due 11/01/05 500,000 542,905
United Refining Co.,
10.75% due 06/15/07 250,000 181,250
------------
1,099,280
Drugs & Health Care - 0.45%
Fresenius Medical Care Capital Trust,
9.00% due 12/01/06 250,000 236,250
------------
Electronics - 0.52%
Breed Technologies, Inc.,/2/ 9.25% due 04/15/08 500,000 15,000
Jordan Telecommunication Products, Series B Step
Up due 08/01/07 250,000 205,000
Protection One, Inc.,
8.125% due 01/15/09, 144A 250,000 50,000
------------
270,000
Energy & Utilities - 0.68%
Costilla Energy, Inc.,/2
/ 10.25% due 10/01/06 500,000 125,000
High Voltage Engineering Corp.,
10.50% due 08/15/04 250,000 230,000
------------
355,000
Financial Services - 4.07%
ContiFinancial Corp.,
8.125% due 04/01/08 500,000 100,000
Ford Motor Credit Company,
7.375% due 10/28/09 300,000 302,418
KFW International Finance,
16.30% due 06/24/03 PLN 860,000 218,083
KFW International Finance,
2.05% due 09/21/09 JPY 34,000,000 331,065
Merrill Lynch & Co., Inc.,
6.00% due 11/15/04 $190,000 182,866
Merrill Lynch & Co., Inc.,
5.97% due 09/11/00 CAD 370,000 252,155
Navistar International Corp.,
8.00% due 02/01/08 $500,000 478,750
</TABLE>
The accompanying notes are an integral part of the financial statements.
53
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
Financial Services - continued
Toyota Motor Credit Corp.,
6.25% due 08/04/03 GBP 160,000 $255,813
------------
2,121,150
Food & Beverages - 0.55%
Ameriserve Food Distributors, Inc.,
10.125% due 07/15/07 $500,000 285,000
------------
Hotels & Restaurants - 0.79%
Prime Hospitality Corp.,
9.75% due 04/01/07 450,000 409,500
------------
Industrials - 7.10%
Alvey Systems, Inc.,
11.375% due 01/31/03 375,000 386,250
Berry Plastics Corp.,
12.25% due 04/15/04 650,000 657,313
CFP Holdings, Inc., Series B
11.625% due 01/15/04 250,000 207,500
Foamex, L.P.,
9.875% due 05/15/07 375,000 322,500
ICG Holdings, Inc.,
Step up to 13.50% due 09/15/05 500,000 427,500
P&L Coal Holdings Corp.,
8.875% due 05/15/08 250,000 240,625
Polymer Group, Inc.,
8.75% due 03/01/08 150,000 141,000
9.00% due 07/01/07 190,000 182,400
Praxair, Inc.,
6.15% due 04/15/03 300,000 289,644
Raytheon Company,
6.15% due 11/01/08 175,000 157,099
Stellex Industries, Inc.,
9.50% due 11/01/07 250,000 185,000
Synthetic Industries, Inc.,
9.25% due 02/15/07 25,000 25,000
Williams Scotsman, Inc.,
9.875% due 06/01/07 500,000 478,750
------------
3,700,581
Leisure Time - 2.24%
Harrah's, Inc.,
7.875% due 12/15/05 500,000 476,250
Mohegan Tribal Gaming Authority,
8.75% due 01/01/09 225,000 218,813
Park Place Entertainment Corp.,
7.875% due 12/15/05 500,000 471,250
------------
1,166,313
Other - 6.14%
American Standard, Inc.,
7.375% due 02/01/08 400,000 352,000
Countrywide Funding Corp.,
6.25% due 04/15/09 400,000 367,852
Hines Horticulture, Inc., Series B,
11.75% due 10/15/05 325,000 331,500
</TABLE>
<TABLE>
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
Other - continued
The Holt Group, Inc.,
9.75% due 01/15/06 $500,000 $326,250
Huntsman Corp.,
9.50% due 07/01/07, 144A 350,000 325,500
La Petite Academy, Inc., Series B
10.00% due 05/15/08 375,000 296,250
LIN Holdings Corp.,
zero coupon due 03/01/08 500,000 326,250
Service Corporation International, Inc.,
6.00% due 12/15/05 400,000 300,504
United International Holdings, Inc.,
step-up to 10.75% due 02/15/08 1,000,000 575,000
------------
3,201,106
Pollution Control - 0.82%
Allied Waste North America, Inc.,
7.875% due 01/01/09 500,000 425,625
------------
Publishing - 1.43%
Big Flowers Press Holdings, Inc.,
8.625% due 12/01/08 500,000 501,250
Hollinger International, Inc.,
9.25% due 03/15/07 250,000 245,000
------------
746,250
Real Estate - 0.90%
HMH Properties, Inc.,
7.875% due 08/01/08 250,000 216,875
Radnor Holdings Corp.,
10.00% due 12/01/03 250,000 250,625
------------
467,500
Retail Trade - 1.41%
Cole National Group, Inc.,
8.625% due 08/15/07 250,000 195,000
Musicland Group, Inc.,
9.875% due 03/15/08 250,000 210,000
Staples, Inc.,
7.125% due 08/15/07 350,000 331,940
------------
736,940
Steel - 0.82%
Murrin Murrin Holdings Property Ltd.,
9.375% due 08/31/07 500,000 430,000
------------
Telecommunication Services - 5.33%
Adelphia Communications Corp., Series B
9.50% due 02/15/04 46,998 47,233
9.875% due 03/01/07 175,000 178,500
Century Communications Corp.,
8.875% due 01/15/07 175,000 169,750
zero coupon due 01/15/08 250,000 106,875
GTE Corp.,
6.94% due 04/15/28 200,000 188,126
International Cabletel, Inc.,
11.50% due 02/01/06 1,000,000 872,500
</TABLE>
The accompanying notes are an integral part of the financial statements.
54
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
Telecommunication Services - continued
Nextel Communications,
step-up to 9.95% due 02/15/08 $250,000 $177,500
9.75% due 08/15/04 400,000 407,500
SFX Broadcasting, Inc.,
10.75% due 05/15/06 164,000 182,040
Telewest Communication Plc,
Step up to 11.00% due 10/01/07 500,000 452,500
------------
2,782,524
Transportation - 1.05%
Stena AB,
10.5% due 12/15/05 250,000 247,500
TFM SA de CV,
Step up to 11.75% due 06/15/09 500,000 300,000
------------
547,500
TOTAL CORPORATE BONDS
(Cost $25,303,488) $21,609,945
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 11.60%
Federal Home Loan Banks - 0.86%
5.89% due 07/24/00 $450,000 $449,577
------------
Federal Home Loan Mortgage Corporation - 2.53%
6.50% due 12/01/99 Gold 30 TBA** 700,000 671,125
8.50% due 05/01/08 299,599 307,131
10.00% due 05/15/20 281,577 299,085
1156.50% due 06/15/21, Interest Only Strip 1,633 42,265
------------
1,319,606
Government National Mortgage Association - 1.33%
7.50% due 07/15/27 270,237 270,913
7.50% due 10/15/27 419,408 420,456
------------
691,369
Federal National Mortgage Association - 2.02%
7.50% TBA ** 1,000,000 1,002,180
13.00% due 11/15/15 46,659 53,067
------------
1,055,247
Federal National Mortgage Association -
Interest Only - 2.38%
Interest Only due 03/17/20, REMIC 6,164,069 142,199
Interest Only due 02/25/35, REMIC 5,992,618 423,523
Interest Only due 10/17/36, REMIC 12,644,890 320,207
Interest Only due 06/25/38, REMIC 6,218,201 351,996
------------
1,237,925
Federal National Mortgage Association - CMO - 1.61%
8.80% due 01/25/19, REMIC 367,987 383,395
10.40% due 04/25/19, REMIC 63,962 68,360
7.387% due 08/17/03, REMIC 384,772 386,072
------------
837,827
Student Loan Marketing Association - 0.87%
7.20% due 11/09/00 450,000 454,216
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost
$6,251,003) $6,045,767
------------
</TABLE>
<TABLE>
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
FIXED INCOME - OTHER - 16.76%
Collateralized Mortgage Obligations - 6.52%
Green Tree Financial Corp./\
7.07% due 09/15/07 $2,077,083 $2,036,185
Mid State Trust VI, Class A,/\
7.34% due 07/01/35 1,381,939 1,362,067
------------
3,398,252
Commercial Mortgage Backed Securities - 3.67%
Commercial Mortgage Asset Trust,
7.35% due 08/17/13 1,200,000 1,126,860
DLJ Commercial Mortgage Corp., Interest Only
Strips:
due 05/10/23 9,661,164 410,721
due 11/12/31 7,618,941 374,234
------------
1,911,815
Residential Subordinate Securities - 6.57%
ContiMortgage Home EquityLoan, 7.00% due 12/25/29,
144A 500,000 439,250
First Union Residential Securities, 7.00% due
08/25/28 244,746 215,710
GE Capital Mortgage Services, Inc.
6.75% due 11/25/28 989,393 848,404
PNC Mortgage Securities Corp.,
6.734% due 07/25/28 417,616 360,084
6.75% due 05/25/28 345,187 317,085
6.772% due 03/25/29 496,799 451,280
6.838% due 05/25/28 468,241 408,306
6.905% due 04/25/29 446,138 388,636
------------
3,428,755
TOTAL FIXED INCOME - OTHER (Cost $9,250,530) $8,738,822
------------
FOREIGN GOVERNMENT OBLIGATIONS - 30.02%
Algeria - 2.34%
6.375% due 03/04/10 $1,796,706 $1,221,760
------------
Republic of Argentina - 4.85%
11.00% due 12/04/05 500,000 477,500
11.375% due 01/30/17 2,150,000 2,053,357
------------
2,530,857
Federal Republic of Brazil - 4.42%
5.00% due 04/15/14 1,168,324 777,784
7.00% due 04/15/12 200,000 130,260
9.375% due 04/07/08 150,000 121,395
14.5% due 10/15/09 1,222,192 1,277,190
------------
2,306,629
National Republic of Bulgaria - 2.52%
2.75% due 07/28/12 1,100,000 739,750
6.50% due 07/28/11 750,000 571,875
------------
1,311,625
Republic of Ecuador - 0.45%
4.00% FRB due 02/28/25/1/ 700,000 235,375
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
55
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
Federal Republic of Germany - 0.37%
5.625% due 01/04/28 EUR 190,000 $193,256
------------
Republic of Greece - 1.48%
6.60% due 01/15/04 GRD 80,000,000 247,897
8.90% due 04/01/03 GRD 70,000,000 231,408
11.00% due 02/25/00 GRD 90,400,000 291,501
------------
770,806
Republic of Italy - 0.28%
5.25% due 11/01/29 EUR 150,000 143,404
------------
Ivory Coast - 2.36%
2.00% due 03/29/18 $4,100,000 1,230,000
------------
Government of Mexico - 0.97%
10.375% due 02/17/09 500,000 506,275
------------
Government of Morocco - 0.64%
5.906% due 01/01/09 384,524 332,613
------------
Kingdom of Norway - 0.24%
5.80% due 11/17/99 NOK 1,000,000 127,422
------------
Government of Peru - 2.19%
3.75% FRB due 03/07/17 $1,400,000 770,000
4.50% due 03/07/17 600,000 372,000
------------
1,142,000
Russia - 2.16%
10.00% due 06/26/07 144A 700,000 333,165
12.75% due 06/24/28 1,500,000 793,575
------------
1,126,740
Kingdom of Sweden - 0.68%
6.50% due 05/05/08 SEK 1,000,000 127,541
10.25% due 05/05/03 SEK 1,600,000 224,864
------------
352,405
Republic of Venezuela - 4.07%
6.00% FRB due 03/31/07 $357,140 283,927
6.875% due 03/31/07 892,852 709,818
13.625% due 08/15/18 1,250,000 1,125,000
------------
2,118,745
TOTAL FOREIGN GOVERNMENT OBLIGATIONS (Cost $15,367,229) $15,649,912
------------
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
PREFERRED STOCK - 0.00%
TCR Holdings-Class B 570 $6
TCR Holdings-Class C 314 3
TCR Holdings-Class D 827 8
TCR Holdings-Class E 1,711 17
------------
TOTAL PREFERED STOCK (Cost $204) $34
------------
RIGHTS & WARRANTS - 0.17%
Crude Petroleum & Natural Gas - 0.05%
Terex Corporation, rights expire 12/31/00 2,000 $28,250
------------
Foreign Governments - 0.12%
United Mexican States, warrants exp. 02/17/09 935 62,762
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
Other - 0.00%
BCP Holdings Corp., warrants exp. 04/15/04 500 $0
------------
Telephone - 0.00%
Wireless One, Inc., warrants expire 10/19/00 750 8
------------
In-flight Phone Corp., warrants expire 5/15/02 1,000 0
------------
TOTAL RIGHTS & WARRANTS (Cost $32,378) $91,020
------------
<CAPTION>
Contracts Value
--------- -----
<S> <C> <C>
PURCHASED OPTIONS - 0.00%
Foreign Currency - 0.00%
Hong Kong Dollars, Strike Price 7.81, Put, Expiration
Jan. 2000 (premium $101,215.01) 103,000 $0
Hong Kong Dollars, Strike Price 7.8025, Put,
Expiration Jan. 2000 (premium $38,167.50) 52,500 199
------------
TOTAL PURCHASED OPTIONS (Cost $139,383) $199
------------
TOTAL INVESTMENTS
(Strategic Income Fund) (Cost $56,344,215) $52,135,699
------------
- ------------------------------------------------------------------------------
Investment Quality Bond Fund
- ------------------------------------------------------------------------------
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
CORPORATE BONDS - 54.87%
Banking - 11.01%
BankAmerica Corp.,
9.50% due 04/01/01 $114,000 $118,309
Credit National,
7.00%, due 11/14/05 150,000 144,592
First Financial Caribbean Corp., 7.84% due 10/10/06 135,000 130,741
NBD Bancorp,
8.25% due 11/01/24 300,000 321,117
Republic New York Corp.,
9.75% due 12/01/00 155,000 159,912
Royal Bank of Scotland Group Plc, 6.40% due 04/01/09 150,000 137,834
U.S. Bancorp,
7.50% due 06/01/26 300,000 304,494
Western Financial Savings, 8.875% due 08/01/07 25,000 22,125
------------
1,339,124
Broadcasting - 0.24%
Emmis Communications Corp., 8.125% due 03/15/09 5,000 4,762
Granite Broadcasting Corp., 8.875% due 05/15/08 15,000 14,437
Jacor Communications Co.,
8.75% due 06/15/07 10,000 10,050
------------
29,249
</TABLE>
The accompanying notes are an integral part of the financial statements.
56
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
Building Products - 0.09%
Falcon Building Products, Inc., Step-up due 06/15/07* $15,000 $11,025
------------
Business Services - 0.10%
AMSC Acquisition, Inc., 12.25% due 04/01/08 5,000 3,100
Iron Mountain, Inc.,
8.75% due 09/30/09 10,000 9,400
------------
12,500
Chemical Products - 0.97%
Arco Chemical Co.,
9.80% due 02/01/20 5,000 4,728
Huntsman Corp.,
9.50% due 07/01/07, 144A 10,000 9,325
ICI North America, Inc.,
8.875% due 11/15/06 65,000 68,824
Lyondell Chemical Company, 9.875% due 05/01/07 20,000 19,950
Sovereign Specialty Chemicals, 9.50% due 08/01/07 15,000 14,775
------------
117,602
Crude Petroleum & Natural Gas - 1.58%
Costilla Energy, Inc.,/2
/ 10.25% due 10/01/06* 20,000 5,000
Energy Corporation of America, 9.50% due 05/15/07 20,000 9,600
Enron Corp.,
6.75% due 09/01/04 100,000 98,532
Kelley Oil & Gas Corp., 14.00% due 04/15/03 7,000 6,440
Newfield Exploration Co., 7.45% due 10/15/07 45,000 41,885
Petroleos Mexicanos,
8.85% due 09/15/07 25,000 22,688
Texas Petrochemicals Corp., 11.125% due 07/01/06 10,000 8,100
------------
192,245
Drugs & Health Care - 3.82%
Alaris Medical, Inc.,
Step-up due 08/01/08* 15,000 6,375
Allegiance Corp.,
7.00% due 10/15/26 325,000 319,046
Mediq/PRN Life Support Services, 11.0% due 06/01/08 10,000 3,200
Owens & Minor, Inc., 10.875% due 06/01/06 15,000 15,319
Tenet Healthcare Corp., 7.875% due 01/15/03 110,000 105,050
Triad Hospitals Holdings, Inc., 11.0% due 05/15/09,
144A 5,000 4,912
Universal Hospital Services, Inc., 10.25% due 03/01/08 15,000 10,200
------------
464,102
</TABLE>
<TABLE>
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
Electric Utilities - 1.03%
Cleveland Electric Illuminating Company, 7.19% due
07/01/00 $125,000 $125,026
------------
Financial Services - 8.00%
AAG Holding, Inc.,
6.875% due 06/01/08 100,000 89,878
Amerus Capital I,
8.85% due 02/01/27 100,000 86,050
Amvescap Plc,
6.60% due 05/15/05 150,000 143,545
BanPonce Financial Corp., 6.75% due 08/09/01 250,000 248,600
Beneficial Corp.,
8.40% due 05/15/08 75,000 80,092
EOP Operating LP,
6.50% due 01/15/04 95,000 91,661
Neenah Corp.,
11.125% due 05/01/07 10,000 9,225
Olympic Financial, Ltd.,
11.5% due 03/15/07 10,000 6,200
Pindo Deli Financial Mauritius, Ltd., 10.75% due
10/01/07 10,000 6,350
RBF Finance,
11.375% due 03/15/09 10,000 10,525
Sun Canada Financial Co., 7.25% due 12/15/15, 144A 200,000 195,390
Tembec Finance Corp., 9.875% due 10/31/05 5,000 5,162
------------
972,678
Food & Beverages - 0.90%
B & G Foods Corp.,
9.625% due 08/01/07 10,000 8,900
Chiquita Brands International, Inc., 10.0%, due
06/15/09 5,000 3,750
Del Monte Foods Co.,
Step-up, due 12/15/07* 16,000 12,160
Nash Finch Company,
8.50% due 05/01/08 10,000 8,500
Joseph E. Seagram & Sons, Inc., 7.50% due 12/15/18 65,000 62,466
Vlasic Foods, Inc.
10.25% due 07/01/09 15,000 14,100
------------
109,876
Homebuilders - 0.07%
Engle Homes, Inc.,
9.25% due 02/01/08 10,000 8,700
------------
Industrials - 11.17%
Abraxas Petroleum Corp., 11.50% due 11/01/04 20,000 12,800
Acetex Corp.,
9.75% due 10/01/03 10,000 8,600
Accuride Corp.,
9.25% due 02/01/08 10,000 9,212
</TABLE>
The accompanying notes are an integral part of the financial statements.
57
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
Industrials - continued
Acindar Industria, Argentina, 11.25% due 02/15/04 $10,000 $6,900
Advanced Micro Devices, Inc., 11.00% due 08/01/03 10,000 9,250
Associates Corp. of North America, 5.75% due 11/01/03 120,000 115,854
Cincinnati Milacron, Inc., 7.875% due 05/15/00 130,000 130,178
DecisionOne Corp.,/1
/ 9.75% due 08/01/07* 10,000 150
Dime Capital Trust I,
9.33% due 05/06/27 150,000 148,030
Disco SA,
9.875% due 05/15/08 10,000 8,750
Doman Industries, Ltd.,
12.0% due 07/01/04, 144A 10,000 10,200
Domtar, Inc.,
9.50% due 08/01/16 10,000 10,340
Duane Reade, Inc.,
9.25% due 02/15/08 20,000 19,600
Dunlop Aerospace Holdings Plc, 11.875% due 05/15/09,
144A 10,000 10,100
EchoStar DBS Corp.,
9.375% due 02/01/09 30,000 29,700
Fairchild Semiconductor Corp., 10.125% due 03/15/07 15,000 14,700
Fisher Scientific Int'l., Inc., 9.00% due 02/01/08 10,000 9,400
Frontiervision Holding, L.P., Step-up, due 09/15/07 * 5,000 4,225
Gaylord Container Corp., 9.375% due 06/15/07 5,000 4,650
Globalstar LP,
10.75% due 11/01/04 15,000 7,950
Grove Worldwide LLC,
9.25% due 05/01/08 15,000 4,950
Grupo Int'l Durango SA, 12.625% due 08/01/03 15,000 14,494
Guitar Center Management Co., Inc., 11.00% due
07/01/06 17,000 16,660
Iridium Operations LLC, 11.25% due 07/15/05* 25,000 1,375
K & F Industries, Inc.,
9.25% due 10/15/07 10,000 9,575
KN Energy, Inc.,
6.65% due 03/01/05 100,000 95,431
LDM Technologies, Inc., 10.75% due 01/15/07 20,000 17,600
Multicanal,
13.125% due 04/15/09, 144A 20,000 18,850
News America Holdings, Inc., 9.25% due 02/01/13 250,000 274,710
NTL, Inc.,
Step-up due 10/01/08* 20,000 13,400
</TABLE>
<TABLE>
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
Industrials - continued
P&L Coal Holdings Corp., 9.625% due 05/15/08 $25,000 $24,063
Pioneer Americas Acquisiton Corp., 9.25% due 06/15/07 5,000 3,900
Plains Resources, Inc., Series B, 10.25% due 03/15/06 10,000 10,050
Psinet, Inc.,
11.50% due 11/01/08 5,000 5,206
Psinet, Inc.,
10.00% due 02/15/05 10,000 9,825
Repap New Brunswick, Inc., 10.625% due 04/15/05 15,000 13,312
Royster Clark, Inc.,
10.25% due 04/01/09, 144A 10,000 8,800
SCL Aereo Santiago,
6.95% due 07/01/12, 144A 100,000 93,042
Standard Pacific Corp.,
8.50% due 06/15/07 5,000 4,550
Stater Bros. Holdings. Inc., 10.75% due 08/15/06 10,000 10,175
Sullivan Graphics, Inc., 12.75% due 08/01/05 20,000 20,450
Verio, Inc.,
10.375% due 04/01/05 15,000 15,000
Verio, Inc.,
11.25% due 12/01/08 10,000 10,300
Wesco Distribution, Inc.,
9.125% due 06/01/08 15,000 13,425
YPF SA,
8.00% due 02/15/04 70,000 68,928
ZSC Specialty Corp.,
11.0% due 07/01/09, 144A 10,000 10,050
------------
1,358,710
Insurance - 5.49%
Equitable Companies, Inc., 7.00% due 04/01/28 100,000 90,970
Florida Windstorm Underwriting, 7.125% due 02/25/19,
144A 180,000 167,195
Jackson National Life Insurance Co., 8.15% due
03/15/27, 144A 100,000 99,270
Ohio National Life Insurance Co., 8.50% due 05/15/26,
144A 150,000 155,638
Security Benefit Life Co., 8.75% due 05/15/16, 144A 150,000 155,101
------------
668,174
Leisure Time - 0.54%
Aztar Corp.,
8.875% due 05/15/07 10,000 9,450
AMC Entertainment, Inc., 9.50% due 03/15/09 10,000 8,850
Bell Sports, Inc.,
11.00% due 08/15/08 10,000 9,825
Loew's Cineplex Entertainment Corp.,
8.875% due 08/01/08 10,000 9,025
</TABLE>
The accompanying notes are an integral part of the financial statements.
58
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
Leisure Time - continued
Station Casinos, Inc.,
8.875% due 12/01/08, 144A $15,000 $14,475
True Temper Sports, Inc., 10.875% due 012/01/08 15,000 14,400
------------
66,025
Metal Products - 0.04%
Silgan Holdings, Inc.,
9.00% due 06/01/09 5,000 4,738
------------
Office Products - 0.76%
Boise Cascade Office Products Co., 7.05% due 05/15/05 100,000 92,719
------------
Paper - 0.86%
Boise Cascade Corp.,
9.90% due 10/01/01 100,000 104,109
------------
Retail Trade - 0.68%
J.C. Penney, Inc.,
7.40% due 04/01/37 80,000 77,714
Mattress Discounters Corp., Units, 12.625% due
07/15/07, 144A 5 4,700
------------
82,414
Steel - 0.11%
AK Steel Corp.,
7.875% due 02/15/09 15,000 13,650
------------
Telecommunication Services - 4.20%
Allbritton Communications Co., 8.875% due 02/01/08 20,000 19,050
American Media Operations, Inc., 10.25% due 05/01/09 5,000 4,900
Benedek Communications Corp., Step-up due 05/15/06* 5,000 4,375
BTI Telecommunications Corp., 10.50% due 09/15/07 5,000 4,250
Century Communications,
Step-up, due 01/15/08* 35,000 14,963
Charter Communications Holdings, 8.625% due 04/01/09 15,000 14,175
Concentric Network Corp., 12.75% due 12/15/07 10,000 10,400
e.Spire Communications, Inc., Step-up, due 04/01/06* 15,000 8,325
Exodus Communications, Inc., 11.25% due 07/01/08 10,000 10,225
GST Telecommunications, Inc., Step-up due 11/15/07* 20,000 20,000
Hyperion Telecommunications, Inc., 13.0% due 04/15/03* 10,000 8,550
Innova S. de R.L.,
12.875% due 04/01/07 20,000 16,100
Intermedia Communications, Inc., 8.875% due 11/01/07 25,000 22,500
</TABLE>
<TABLE>
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
Telecommunication Services - continued
Intermedia Communications, Inc., 8.60% due 06/01/08 $10,000 $8,850
KMC Telecom. Holdings, Inc., Step-up due 02/15/08* 50,000 27,000
Level 3 Communications, Inc., 8.00% due 08/01/08 5,000 4,575
LIN Holdings Corp.,
Step-up due 03/01/08* 30,000 19,575
MGC Communications, Inc., 13.0% due 10/01/04 5,000 4,463
Nextlink Communications, Inc., Step-up due 04/15/08* 30,000 17,850
RCN Corporation,
Step-up due 07/01/08* 15,000 9,450
RSL Communications Plc, 9.125% due 03/01/08 10,000 8,700
Satelites Mexicanos SA 10.125% due 11/01/04 10,000 7,312
Telecommunications Techniques Co., LLC,
9.75% due 05/15/08 15,000 14,250
Tele-Communications, Inc., 9.25% due 04/15/02 200,000 211,284
Time Warner Telecommunications, LLC,
9.75% due 07/15/08 5,000 5,100
Viatel, Inc.,
11.25% due 04/15/08 15,000 14,175
------------
510,397
Telephone - 2.64%
Classic Cable, Inc.,
9.875% due 08/01/08 5,000 5,083
Nextel Communications, Inc., Step up to 9.75% due
10/31/07* 50,000 36,000
U.S. West Capital Funding, Inc., 6.25% due 07/15/05 80,000 76,510
WorldCom, Inc.,
7.55% due 04/01/04 200,000 203,332
------------
320,925
Transportation - 0.38%
Johnstown American Industries, Inc., 11.75% due
08/15/05 10,000 10,175
Southern Railway Company, 8.75% due 10/15/03 30,000 31,602
Werner Holding, Inc.,
10.00% due 11/15/07 5,000 4,850
------------
46,627
Utilities - 0.19%
GCI, Inc.,
9.75% due 08/01/07 25,000 23,625
------------
TOTAL CORPORATE BONDS (Cost $7,000,829) $6,674,240
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
59
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
U.S. TREASURY OBLIGATIONS - 18.00%
U.S. Treasury Bonds - 18.00%
7.50% due 11/15/16 $560,000 $617,927
9.25% due 02/15/16 125,000 159,160
12.00% due 08/15/13 1,030,000 1,412,068
------------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $2,271,023) $2,189,155
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 18.30%
Federal Home Loan Mortgage Corp. - 8.21%
6.00% due 11/01/13 - 09/25/22 $751,185 $706,274
6.50% due 06/15/23 100,000 96,031
7.00% due 09/15/21 200,000 196,936
------------
999,241
Federal National Mortgage Association - 6.00%
5.50% due 08/01/28 348,645 316,176
6.18% due 07/01/08 19,734 18,650
6.27% due 11/01/07 54,134 51,609
6.295% due 06/01/08 19,728 18,784
6.30% due 01/01/08 19,642 18,744
6.305% due 02/01/08 196,490 192,202
6.34% due 01/01/0/ 19,462 18,638
6.39% due 01/01/06 19,227 18,690
6.43% due 01/01/08 19,640 18,887
6.981% due 06/01/07 18,828 18,824
7.04% due 03/01/07 19,539 19,514
7.28% due 10/01/06 19,491 19,740
------------
730,458
Government National Mortgage Association - 4.09%
7.00% due 06/15/23 - 10/15/23 503,176 496,886
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $2,271,538) $2,226,585
------------
MUNICIPAL SECURITIES - 2.67%
Philadelphia, PA, Retirement System Authority,
5.59% due 04/15/05 $170,000 $159,195
Phoenix, AZ, Civic Improvement Corp., 6.30% due
07/01/08 125,000 117,284
Southern California Public Power Authority, 6.93%
due 05/15/17 50,000 48,859
------------
TOTAL MUNICIPAL SECURITIES (Cost $350,856) $325,338
------------
FIXED INCOME - OTHER - 3.68%
Aesop Funding II LLC,
6.40% due 10/20/03, 144A $100,000 $98,999
Continental Airlines,
6.90% due 01/02/18 97,919 91,724
Continental Airlines pass-through, 6.648% due
09/15/17 68,494 63,246
First Union Lehman Bros., Series 1997,
Class A2, 6.60% due 05/18/07 200,000 193,806
------------
TOTAL FIXED INCOME - OTHER (Cost $468,769) $447,775
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
COMMON STOCKS - 0.02%
Telecommunication Services - 0.02%
Arch Communications Group 557 $2,785
------------
TOTAL COMMON STOCKS (Cost $49,664) $2,785
------------
PREFERRED STOCKS - 0.40%
Concentric Network, PIK 13.5% 5 $4,762
Fairfield Mfg. Co., Inc., PIK 11.25% 25 24,813
Primedia, Inc., 8.625% 145 12,724
SF Holdings Group, Inc.*, 13.75% 2 6,050
SF Holdings Group, Inc.* 144A 74 10
------------
TOTAL PREFERRED STOCKS (Cost $61,614) $48,359
------------
WARRANTS - 0.01%
American Mobile Satellite, Exp. 04/01/08, 144A 5 $91
Concentric Network Corp.*, Exp. 12/15/07 5 1,250
KMC Telecom. Holdings, Inc.*, Exp. 04/15/08, 144A 50 153
------------
TOTAL WARRANTS (Cost $0) $1,494
------------
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
REPURCHASE AGREEMENT - 2.05%
Repurchase Agreement with Paine Webber,
dated 10/29/99 at 5.22% to be repurchased
at $249,108 on 11/01/99, collateralized by $260,000
U.S. Treasury Notes, 5.625% due 05/15/08 (valued at
$257,616 with interest) (Cost $249,000) $249,000 $249,000
------------
TOTAL INVESTMENTS (Investment
Quality Bond Fund) (Cost $12,723,293) $12,164,731
------------
- --------------------------------------------------------------------------------------
National Municipal Bond Fund
- --------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 99.19%
Alabama - 1.78%
Alabama Housing Finance Authority Single
Family Mortgage Revenue Collateralized Home Mortgage Program,
Series B-2, 6.40%, 04/01/25 $215,000 $219,569
------------
California - 8.24%
California Housing Finance Agency Revenue, Series H,
6.15%, 08/01/16 1,000,000 1,014,750
------------
Illinois - 9.92%
Illinois Health Facilities Authority Revenue (Hospital
Association Project), 7.00%, 02/15/22 200,000 214,538
Chicago, Illinois, Water Revenue, 6.50%, 11/01/15 500,000 538,895
Chicago, Illinois, Skyway Toll Bridging Revenue,
5.375%, 01/01/16 500,000 467,895
------------
1,221,328
</TABLE>
The accompanying notes are an integral part of the financial statements.
60
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
Iowa - 1.31%
Iowa Finance Authority Hospital Facility
Revenue Refunding (Trinity Regional Hospital Project),
7.00%, 07/01/12 $150,000 $161,442
------------
Louisiana - 3.89%
Louisiana Public Facilities Authority Hospital Revenue
Refunding (Touro Infirmary Project), Series B, 6.125%,
08/15/23 500,000 479,430
------------
Maine - 0.21%
Maine State Housing Authority Mortgage Purchase,
Series A-4, 6.375%, 11/15/12 25,000 25,376
------------
Missouri - 4.26%
Missouri State Health & Educational Facilities
Authority Revenue, 6.25%, 02/15/11 500,000 524,377
------------
Nevada - 4.83%
Nevada Housing Division, Single-Family
Program, B-2, 6.95%, 10/01/26 260,000 268,658
Nevada Housing Division, Single-Family
Program, Issue C, 6.35%, 10/01/12 320,000 325,843
------------
594,501
New Jersey - 4.35%
New Jersey Economic Development Authority Water
Facilities Revenue (New Jersey American Water Company,
Incorporated Project), 6.875%, 11/01/34 500,000 536,550
------------
New York - 25.32%
Long Island Power Authority, New York Electric Systems
Revenue, 5.125%, 04/01/12 250,000 239,460
New York State Local Government Assistance
Corporation, Series A, 6.00%, 04/01/16 1,000,000 1,010,070
New York State Dormitory Authority Revenue, State
University Educational Facilities, Series A, 6.25%,
05/15/08 450,000 537,240
New York State Environmental Facilities Corporation
Pollution Control Revenue Refunding (IBM Corporation
Project), 7.125%, 07/01/12 580,000 601,100
New York State Mortgage Agency Revenue, Series 40-A,
6.35%, 04/01/21 630,000 633,414
Triborough Bridge & Tunnel Authority, Series Y, 5.5%,
01/01/17 100,000 97,074
------------
3,118,358
</TABLE>
<TABLE>
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
Pennsylvania - 8.17%
Delaware Valley, Pennsylvania, Regional Finance
Authority Series A, 5.50%, 08/01/28 $500,000 $473,080
Philadelphia, Pennsylvania, Water & Wastewater
Revenue, 6.25%, 08/01/12 500,000 533,530
------------
1,006,610
South Carolina - 4.05%
Greenville Hospital Systems Hospital Facilities
Revenue, Series B, 5.70%, 05/01/12 500,000 498,670
------------
Tennessee - 3.83%
Humphreys County, Tennessee, Industrial Development
Board Solid Waste Disposal Revenue (E.I. Du Pont De
Nemours & Company Project), 6.70%, 05/01/24 450,000 471,438
------------
Texas - 5.15%
Texas State Veterans Housing Assistance, 6.80%,
12/01/23 65,000 67,649
Port Arthur, Texas, Navy District, Zero Coupon,
03/01/10 1,000,000 566,090
------------
633,739
Virginia - 2.48%
Virginia State Housing Development Authority
Commonwealth Mortgage, Subseries I-1, 6.55%, 07/01/17 300,000 305,481
------------
Washington - 2.36%
Washington State General Obligation, Series C, 5.50%,
07/01/16 300,000 290,748
------------
Wisconsin - 9.04%
Wisconsin Housing & Economic Development Authority
Home Ownership Revenue, Series D, 6.10%, 07/01/24 100,000 97,052
Wisconsin State Health & Educational Facilities
Authority Revenue, Mercy Hospital of Janesville,
Incorporated, 6.60%, 08/15/22 1,000,000 1,016,250
------------
1,113,302
TOTAL LONG TERM INVESTMENTS (Cost $12,203,621) $12,215,669
------------
SHORT TERM INVESTMENTS--0.81%
Jasper County, Indiana, Pollution Control Revenue,
Northern Indiana Public Service B, 3.50% due 06/01/13
(Cost $100,000) 100,000 100,000
------------
TOTAL INVESTMENTS
(National Municipal Bond Fund)
(Cost $12,303,621) $12,315,669
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
61
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued
(showing percentage of total value of investments)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. Government Securities Fund
<TABLE>
- -------------------------------------------------------
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
U.S. TREASURY OBLIGATIONS - 2.88%
U.S. Treasury Bonds - 1.18%
6.375% due 08/15/27 $800,000 $797,248
------------
U.S. Treasury Notes - 1.70%
4.750% due 02/15/04 1,200,000 1,145,808
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $1,948,847) $1,943,056
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 79.52%
Federal Home Loan Banks - 2.08%
5.80% due 09/02/08/\ $1,500,000 $1,404,375
------------
Federal Home Loan Mortgage Corporation - 29.28%
6.00% due 12/01/99 - 10/01/28/\ 3,790,432 3,128,723
6.247% due 03/25/21 REMIC 3,000,000 2,919,000
6.00% TBA** 1,000,000 933,120
6.50% TBA** 4,000,000 3,835,000
7.00% due 10/01/12/\ 5,805,553 5,803,695
7.00% due 04/15/21 871,861 872,672
8.00% due 06/01/08 143,120 144,899
8.25% due 07/01/06 111,378 113,001
8.50% due 05/01/08 137,597 140,311
9.50% due 08/01/20/\ 480,702 508,453
10.00% due 03/01/16/\ 1,246,134 1,338,585
11.75% due 08/01/13 31,853 35,259
------------
19,772,718
Federal National Mortgage Association - 42.66%
6.50% TBA** 2,500,000 2,395,300
6.50% due 12/01/03 - 04/01/29/\ 5,623,832 5,415,499
6.527% due 05/25/30 REMIC 2,750,000 2,671,845
6.689% due 12/28/28 REMIC 2,109,350 2,057,847
6.783% due 01/17/03 REMIC 888,925 892,827
7.00% TBA** 1,000,000 981,870
7.00% due 02/01/26 - 03/01/29 10,035,297 9,861,451
8.00% TBA** 500,000 509,375
8.00% due 08/01/04 21,854 22,051
8.25% due 03/25/06 REMIC 675,000 698,200
8.50% due 08/01/02 31,798 32,243
11.00% due 02/01/15 366 403
11.50% due 04/01/19 171,663 190,818
12.00% due 02/01/16 - 04/01/16 1,064,965 1,214,054
12.50% due 07/01/15 809,321 939,824
13.00% due 01/01/99 643,162 731,488
14.50% due 11/01/14 162,237 189,006
------------
28,804,101
Government National Mortgage Association - 5.50%
7.50% TBA** 500,000 501,250
7.50% due 04/15/02 - 09/15/27 847,676 851,146
7.75% due 04/15/04 40,618 41,368
8.00% due 11/15/06 - 02/15/08 28,294 29,158
9.00% due 03/20/16 - 06/20/17 1,150,095 1,206,430
</TABLE>
<TABLE>
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
Government National Mortgage Association - continued
10.25% due 03/15/01 $16,395 $16,829
11.00% due 03/15/00 - 09/20/15 14,764 15,743
11.25% due 10/20/15 3,803 4,155
11.50% due 08/20/00 - 09/20/15 307,475 341,200
12.50% due 09/15/14 29,964 34,095
13.00% due 01/15/11 - 06/15/15 305,784 353,864
13.25% due 07/15/14 39,234 44,849
13.50% due 11/15/12 - 02/15/13 34,132 39,358
15.00% due 07/15/11 - 09/15/12 70,944 83,515
15.50% due 08/15/11 - 09/15/11 119,631 139,027
16.00% due 11/15/11 9,411 11,289
------------
3,713,276
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $54,977,998) $53,694,470
------------
REPURCHASE AGREEMENTS - 17.60%
Repurchase Agreement with State Street Bank
& Trust Co. dated 10/29/99 at 5.18%, to be
repurchased at $11,888,129 on 11/01/99,
collateralized by $9,585,000 U.S. Treasury
Bonds, 8.875% due 02/15/19 /\ (valued at $12,303,018 including
interest)
(Cost $11,883,000) $11,883,000 $11,883,000
------------
TOTAL INVESTMENTS (U.S. Government Securities Fund ) (Cost
$68,809,845) $67,520,526
------------
- ----------------------------------------------------------------------------
Money Market Fund
- ----------------------------------------------------------------------------
COMMERCIAL PAPER - 54.63%
Canada Government,
5.50% due 01/24/00 $1,000,000 $987,167
Canadian Wheat Board,
5.67% due 02/14/00 1,000,000 983,462
Emerson Electric,
5.22% due 11/03/99 1,000,000 999,710
Export Development Corp.,
5.50% due 02/10/00 1,000,000 984,569
General Electric Capital Corp., 5.25% due 11/01/99 1,000,000 1,000,000
Goldman Sachs Group LP, 5.30% due 11/22/99 1,000,000 996,908
H.J. Heinz Co.,
5.27% due 11/09/99 1,000,000 998,829
Lucent Technology, Inc., 5.29% due 11/29/99 1,000,000 995,886
Paccar Financial Corp., 5.29% due 11/12/99 1,000,000 998,384
Sara Lee Corp.,
5.28% due 11/08/99 1,000,000 998,973
United Parcel Service,
5.25% due 12/01/99 1,000,000 995,625
------------
TOTAL COMMERCIAL PAPER $10,939,513
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
62
<PAGE>
NORTH AMERICAN FUNDS
PORTFOLIO OF INVESTMENTS - October 31, 1999 - continued
(showing percentage of total value of investments)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Value
--------- -----
<S> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS - 27.45%
Student Loan Marketing Association - 4.99%
5.425% due 11/18/99 $1,000,000 $1,000,000
------------
Federal Home Loan Banks - 17.48%
5.545% disc note due 06/09/00 2,000,000 2,000,000
5.595% disc note due 01/21/00 1,500,000 1,500,000
------------
3,500,000
Federal National Mortgage Association - 4.98%
5.12% disc note due 11/22/99 1,000,000 997,013
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS $5,497,013
------------
U.S. TREASURY OBLIGATIONS - 14.75%
U.S. Treasury Bills - 14.75%
4.685% due 02/10/00 $1,000,000 $986,856
4.790% due 03/09/00 2,000,000 1,965,672
------------
2,952,528
------------
TOTAL US TREASURY OBLIGATIONS $2,952,528
------------
REPURCHASE AGREEMENT - 3.17%
Repurchase Agreement with State Street Bank
& Trust Co. dated 10/29/99 at 5.17%, to be
repurchased at $634,273 on 11/01/99,
collateralized by $620,000 U.S. Treasury
Bonds, 8.25% due 05/15/05 (valued at
$673,715, with interest)
(Cost $634,000) $634,000 $634,000
------------
TOTAL INVESTMENTS (Money Market Fund) $20,023,054
------------
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Key to Currency Abbreviations
AUD- Australian Dollar
CAD- Canadian Dollar
EUR- European Currency Unit
GBP- British Pound
GRD- Greek Drachma
HKD- Hong Kong Dollar
JPY- Japanese Yen
NOK- Norwegian Krone
PLN- Polish Zloty
SEK- Swedish Krona
Key to Security Abbreviations and Legend
FRB Floating Rate Bond. The interest rates shown on FRBs are the current
interest rates at October 31, 1999, which are subject to change based on
the terms of the security.
REMIC Real Estate Mortgage Investment Conduit
TBA To Be Announced
/1/ Non-Income producing, issuer is in default of interest payments
/2/ Non-Income producing, issuer is in bankruptcy and is in default of
interest payments
/\ Collateral for forward commitments
* Non-Income producing
** Purchased on a forward commitment (Note 2)
The accompanying notes are an integral part of the financial statements.
63
<PAGE>
NORTH AMERICAN FUNDS
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. ORGANIZATION OF THE FUND. North American Funds (the "Fund") is organized as
a Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company. 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, 1999, the Fund offered the following fifteen portfolios: the
International Small Cap Fund ("International Small Cap"), the International
Equity Fund, (formerly the International Growth and Income Fund)
("International Equity"), 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"). All of the portfolios
are diversified management investment companies except for Emerging Growth,
which is a non-diversified management investment company.
The Fund offers Class A, Class B and Class C shares. Class A shares are sold
with a front-end sales charge up to 5.75%. 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. 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. CypressTree Funds
Distributors, Inc. ("CFD"), also a wholly-owned subsidiary of CypressTree,
serves as distributor for the Fund. Effective April 1, 1999, Morgan Stanley
Asset Management became sub-adviser to International Equity, and Global
Alliance Value Investors, Ltd. became sub-adviser to Equity-Income.
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 following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of
its financial statements. The preparation of financial statements is in
conformity with generally accepted accounting principles and requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements and the
reported amounts of increases and decreases in net assets from operations
during the reporting period. Actual results could differ from those estimates.
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.
64
<PAGE>
NORTH AMERICAN FUNDS
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Note 2 - continued
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 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.
Options Contracts. The Fund may use option contracts to hedge against changes
in the value of securities the Fund owns or expects to purchase. The Fund may
also write options on securities it owns or in which it may invest in an
attempt to increase its current returns. The potential risk to the Fund is
that the change in value of options contracts may not correspond to the change
in value of the hedged instruments. Also, losses may arise from changes in the
value of the underlying instruments, if there is an illiquid secondary market
for the contracts, or if the counterparty to the contract is unable to
perform. When the contract is closed, the Fund records a realized gain or loss
equal to the difference between the value of the contract at the time it was
opened and the value at the time it was closed. Realized gains and losses on
purchased options are included in realized gains and losses on investment
securities.
Forward Commitments. The Fund may purchase debt securities on a "when-issued"
or "forward delivery" basis. 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 Fund
will establish a segregated account consisting of cash or liquid high-quality
debt securities equal to the amount of the commitment to purchase when-issued
or forward delivery securities. 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, 1999, the forward commitments were $1,673,305 in Strategic Income
and $9,155,915 in U. S. Government Securities.
Mortgage Dollar Rolls. Each of the Funds except the Money Market Fund 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.
Futures Contracts. The Fund may enter into futures contacts. Upon entering
into a futures contract, the portfolio is required to deposit with the
custodian on behalf of the broker an amount of cash or cash equivalents equal
to a certain percentage of the contract amount, which is known as the "initial
margin". The potential risk to the Fund is that the change in value of futures
contracts may not correspond to the change in value of the hedged instruments.
Also, losses may arise from changes in the value of the underlying
instruments, if there is an illiquid secondary market for the contracts, or if
the counterparty to the contract is unable to perform. Subsequent payments,
called "variation margin", are made or received by the portfolio, depending
upon the fluctuation of the value of the futures contract. When futures
contracts are closed, the difference between the opening value at the date of
purchase and the value at closing is recorded as realized gain/(loss) in the
Statement of Operations.
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. Cash collateral provided is invested in the State
Street Bank and Trust Company Navigator
65
<PAGE>
NORTH AMERICAN FUNDS
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Note 2 - continued
Securities Lending Trust. The related income 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, 1999, the
value of the securities loaned amounted to $3,830,759, $4,411,608, $8,258,901,
$5,273,173, $4,840,087, $1,301,187, $4,980,228, $5,776,982 and $1,589,148 in
International Equity, Global Equity, Small/Mid Cap, Growth Equity, Growth and
Income, Equity-Income, Balanced, Strategic Income and Investment Quality Bond,
respectively. At October 31, 1999, the value of collateral amounted to
$3,950,226, $4,528,860, $8,104,967, $5,048,747, $4,962,600, $1,242,600,
$5,183,450, $6,274,430 and $1,618,069 in International Equity, Global Equity,
Small/Mid Cap, Growth Equity, Growth and Income, Equity-Income, Balanced,
Strategic Income and Investment Quality Bond, 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 Equity 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 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, 1999, capital loss carryforwards
available to offset future recognized gains were approximately:
<TABLE>
<CAPTION>
Capital Loss Carryforwards
Expiration Year
------------------------------------------------
Portfolio 2002 2003 2004 2005 2006 2007
- ------------------------------ -------- --------- ---- ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Tax-Sensitive Equity.......... - - - - 754,731 991,007
Strategic Income.............. 3,866,240
Investment Quality Bond....... $329,026 - - - - 186,540
National Municipal Bond....... - - - 24,157 - 75,958
U. S. Government Securities... - 1,062,756 - - - 594,779
Money Market.................. - - - 1,130 1,156 -
</TABLE>
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.
66
<PAGE>
NORTH AMERICAN FUNDS
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Note 2 - continued
Capital Accounts. The Fund reports the accumulated undistributed net
investment income (loss) and accumulated undistributed net realized gain
(loss) accounts on a basis approximating amounts available for future tax
distributions (or to offset future taxable realized gains when a capital loss
carryforward is available). Accordingly, each portfolio of the Fund may
periodically make reclassifications among certain capital accounts without
impacting the net asset value.
3. CAPITAL SHARES. Share activity for the year ended October 31,1999, 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.................... 20,122 $317,282 55,279 $858,748 45,908 $706,902
Redeemed................ (53,744) (845,699) (169,869) (2,632,560) (174,307) (2,683,477)
---------- ------------ --------- ----------- ---------- ------------
Net
increase/(decrease)... (33,622) ($528,417) (114,590) ($1,773,812) (128,399) ($1,976,575)
---------- ------------ --------- ----------- ---------- ------------
International Equity
Sold.................... 88,662 $974,431 180,051 $1,967,284 96,884 $1,067,562
Reinvestment of
distributions.......... 1,100 11,388 3,861 39,697 2,310 23,747
Redeemed................ (137,110) (1,500,053) (404,482) (4,414,104) (344,573) (3,768,194)
---------- ------------ --------- ----------- ---------- ------------
Net
increase/(decrease)... (47,348) ($514,234) (220,570) ($2,407,123) (245,379) ($2,676,885)
---------- ------------ --------- ----------- ---------- ------------
Global Equity
Sold.................... 1,423,394 $22,816,700 129,757 $2,083,840 1,897,782 $30,883,719
Reinvestment of
distributions.......... 142,681 2,268,622 131,730 2,068,160 255,619 4,026,003
Redeemed................ (2,665,234) (42,997,272) (522,562) (8,405,115) (2,853,048) (46,324,542)
---------- ------------ --------- ----------- ---------- ------------
Net
increase/(decrease)... (1,099,159) ($17,911,950) (261,075) ($4,253,115) (699,647) ($11,414,820)
---------- ------------ --------- ----------- ---------- ------------
Emerging Growth
Sold.................... 15,516 $160,205 49,363 $491,033 23,740 $251,163
Redeemed................ (14,536) (152,525) (26,577) (268,051) (15,638) (158,481)
---------- ------------ --------- ----------- ---------- ------------
Net
increase/(decrease)... 980 $7,680 22,786 $222,982 8,102 $92,682
---------- ------------ --------- ----------- ---------- ------------
Small/Mid Cap
Sold.................... 126,496 $2,275,849 291,328 $5,096,560 542,798 $9,521,511
Reinvestment of
distributions.......... 25,158 411,088 78,912 1,259,456 86,436 1,382,112
Redeemed................ (128,546) (2,337,709) (301,084) (5,259,240) (605,710) (10,637,501)
---------- ------------ --------- ----------- ---------- ------------
Net
increase/(decrease)... 23,108 $349,228 69,156 $1,096,776 23,524 $266,122
---------- ------------ --------- ----------- ---------- ------------
Growth Equity
Sold.................... 121,585 $2,413,151 281,502 $5,559,694 393,750 $7,688,421
Reinvestment of
distributions.......... 14,236 259,959 39,479 708,254 45,768 820,167
Redeemed................ (92,961) (1,834,145) (169,645) (3,324,990) (252,763) (4,961,227)
---------- ------------ --------- ----------- ---------- ------------
Net
increase/(decrease)... 42,860 $838,965 151,336 $2,942,958 186,755 $3,547,361
---------- ------------ --------- ----------- ---------- ------------
Tax-Sensitive Equity
Sold.................... 44,179 $426,380 168,820 $1,607,230 173,510 $1,670,244
Redeemed................ (341,030) (3,225,653) (91,497) (878,505) (139,019) (1,370,096)
---------- ------------ --------- ----------- ---------- ------------
Net
increase/(decrease)... (296,851) ($2,799,273) 77,323 $728,725 34,491 $300,148
---------- ------------ --------- ----------- ---------- ------------
Growth and Income
Sold.................... 593,218 $16,112,290 1,020,665 $27,330,906 1,567,435 $42,427,008
Reinvestment of
distributions.......... 64,085 1,621,392 114,011 2,851,439 176,921 4,442,490
Redeemed................ (1,133,085) (31,765,735) (579,899) (15,547,216) (1,325,973) (35,951,361)
---------- ------------ --------- ----------- ---------- ------------
Net
increase/(decrease)... (475,782) ($14,032,053) 554,777 $14,635,129 418,383 $10,918,137
---------- ------------ --------- ----------- ---------- ------------
Equity-Income
Sold.................... 228,238 $3,967,738 168,204 $2,871,566 382,424 $6,602,195
Reinvestment of
distributions.......... 171,602 2,870,904 159,337 2,648,183 397,396 6,644,473
Redeemed................ (1,651,388) (28,635,140) (667,635) (11,308,913) (2,079,041) (35,551,712)
---------- ------------ --------- ----------- ---------- ------------
Net
increase/(decrease)... (1,251,548) ($21,796,498) (340,094) ($5,789,164) (1,299,221) ($22,305,044)
---------- ------------ --------- ----------- ---------- ------------
</TABLE>
67
<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>
Balanced
Sold.................... 156,485 $1,680,266 113,675 $1,223,061 323,739 $3,527,724
Reinvestment of
distributions.......... 124,734 1,332,156 143,215 1,528,102 483,841 5,230,466
Redeemed................ (975,179) (10,544,849) (587,122) (6,295,079) (1,398,327) (15,170,133)
----------- ------------ ----------- ----------- ----------- ------------
Net
increase/(decrease)... (693,960) (7,532,427) (330,232) (3,543,916) (590,747) (6,411,943)
----------- ------------ ----------- ----------- ----------- ------------
Strategic Income
Sold.................... 355,037 $3,163,049 470,944 $4,269,053 212,534 $1,899,105
Reinvestment of
distributions.......... 80,202 708,185 151,925 1,339,782 195,047 1,722,274
Redeemed................ (1,065,074) (9,458,644) (1,333,186) (11,782,693) (1,669,529) (14,600,123)
----------- ------------ ----------- ----------- ----------- ------------
Net
increase/(decrease)... (629,835) ($5,587,410) (710,317) ($6,173,858) (1,261,948) ($10,978,744)
----------- ------------ ----------- ----------- ----------- ------------
Investment Quality Bond
Sold.................... 69,728 $725,581 157,085 $1,652,116 128,622 $1,337,848
Reinvestment of
distributions.......... 28,223 291,270 23,317 239,071 27,756 284,636
Redeemed................ (374,751) (3,799,199) (200,439) (2,081,049) (210,799) (2,141,915)
----------- ------------ ----------- ----------- ----------- ------------
Net
increase/(decrease)... (276,800) ($2,782,348) (20,037) ($189,862) (54,421) ($519,431)
----------- ------------ ----------- ----------- ----------- ------------
National Municipal Bond
Sold.................... 12,373 $121,276 38,617 $389,927 58,284 $590,526
Reinvestment of
distributions.......... 13,971 138,776 11,804 117,251 12,945 128,980
Redeemed................ (128,078) (1,256,715) (123,709) (1,221,515) (160,321) (1,597,610)
----------- ------------ ----------- ----------- ----------- ------------
Net
increase/(decrease)... (101,734) ($996,663) (73,288) ($714,337) (89,092) ($878,104)
----------- ------------ ----------- ----------- ----------- ------------
U.S. Government
Securities
Sold.................... 418,180 $4,109,724 316,176 $3,095,258 3,441,704 $33,633,113
Reinvestment of
distributions.......... 160,487 1,575,298 43,417 425,351 49,911 488,789
Redeemed................ (1,798,945) (17,585,651) (872,536) (8,630,181) (3,625,489) (35,381,313)
----------- ------------ ----------- ----------- ----------- ------------
Net
increase/(decrease)... (1,220,278) ($11,900,629) (512,943) ($5,109,572) (133,874) ($1,259,411)
----------- ------------ ----------- ----------- ----------- ------------
Money Market
Sold.................... 35,775,604 $35,777,032 11,223,162 $11,223,619 29,891,743 $29,892,797
Reinvestment of
distributions.......... 335,040 335,040 197,442 197,442 334,268 334,268
Redeemed................ (40,376,812) (40,376,812) (12,789,186) (12,789,186) (29,820,314) (29,820,314)
----------- ------------ ----------- ----------- ----------- ------------
Net
increase/(decrease)... (4,266,168) ($4,264,740) (1,368,582) ($1,368,125) 405,697 $406,751
----------- ------------ ----------- ----------- ----------- ------------
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 Equity (formerly
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
----------- ------------ ----------- ----------- ----------- ------------
</TABLE>
68
<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>
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
----------- ----------- ---------- ----------- ----------- -----------
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>
69
<PAGE>
NORTH AMERICAN FUNDS
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
4. PURCHASES AND SALES OF SECURITIES. The following table summarizes the
securities transactions (excluding short-term investments) for all portfolios,
excluding Money Market, for the period ended October 31, 1999:
<TABLE>
<CAPTION>
Purchases Sales
---------------------------- ----------------------------
Portfolio U.S. Government Other Issues U.S. Government Other Issues
- ------------ --------------- ------------ --------------- ------------
<S> <C> <C> <C> <C>
International Small
Cap..................... - $28,438,228 - $30,247,677
International Equity.... - 34,993,698 - 40,062,486
Global Equity........... - 39,474,648 - 79,421,956
Emerging Growth......... - 1,333,201 - 1,134,089
Small/Mid Cap........... - 71,339,006 - 72,309,418
Growth Equity........... - 57,531,440 - 51,547,592
Tax-Sensitive Equity.... - 5,579,448 - 7,472,258
Growth and Income....... - 80,215,793 - 78,646,418
Equity-Income........... - 106,154,596 - 160,872,700
Balanced................ $56,549,898 111,365,374 $63,523,446 132,132,727
Strategic Income........ 12,469,524 63,732,787 22,195,488 75,914,625
Investment Quality
Bond.................... 3,498,304 3,048,904 7,304,552 2,892,970
National Municipal
Bond.................... - 6,641,594 - 8,830,000
U.S. Government
Securities.............. 37,444,510 - 55,675,620 -
</TABLE>
At October 31, 1999, 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
ortfolio P Cost (Depreciation) Appreciation Depreciation
- ------------ ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
International Small Cap... 14,638,417 1,625,728 2,150,143 (524,415)
International Equity...... 23,584,465 2,043,784 2,934,290 (890,506)
Global Equity............. 73,323,295 9,562,633 16,557,372 (6,994,739)
Emerging Growth........... 983,933 246,849 324,527 (77,678)
Small/Mid Cap............. 39,155,626 3,440,225 5,041,285 (1,601,060)
Growth Equity............. 36,658,002 5,875,941 6,403,996 (528,055)
Tax-Sensitive Equity...... 8,170,990 715,979 1,510,818 (794,839)
Growth and Income......... 189,874,480 108,669,222 116,448,197 (7,778,975)
Equity-Income............. 107,938,492 7,755,733 15,223,141 (7,467,408)
Balanced.................. 73,769,104 (1,999,624) 1,468,400 (3,468,024)
Strategic Income.......... 56,502,428 (4,366,729) 888,660 (5,255,389)
Investment Quality Bond... 12,785,257 (620,526) (2,010) (618,516)
National Municipal Bond... 12,303,621 12,048 238,773 (226,725)
U.S. Government
Securities................ 68,816,430 (1,295,904) 37,933 (1,333,837)
</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
First $50,000,000 $200,000,000 Excess over
Portfolio $50,000,000 and $200,000,000 and $500,000,000 $500,000,000
- ------------ ----------- ---------------- ---------------- ------------
<S> <C> <C> <C> <C>
International Small
Cap..................... 1.050% 1.000% .900% .800%
International Equity.... .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%
</TABLE>
70
<PAGE>
NORTH AMERICAN FUNDS
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Note 5 - continued
<TABLE>
<CAPTION>
Between Between
First $50,000,000 $200,000,000 Excess over
Portfolio $50,000,000 and $200,000,000 and $500,000,000 $500,000,000
- ------------ ----------- ---------------- ---------------- ------------
<S> <C> <C> <C> <C>
Tax-Sensitive Equity.... .850% .800% .775% .700%
Growth and Income....... .725% .675% .625% .550%
Equity-Income *......... .750% .650% .550% .550%
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>
* Prior to May 12, 1999, the fees for Equity-Income were .800% on the first
$50,000,000, .700% on the next $150,000,000, and .600% thereafter.
For the period ended October 31,1999, CAM paid aggregate subadvisory fees of
$3,299,474. In addition, CAM retained net investment advisory fees of
$3,661,074 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.. $98,810 .65% $60,804 .40%
International Equity..... 128,186 .50% 102,551 .40%
Global Equity............ 500,828 .47% 450,829 .43%
Emerging Growth.......... 5,910 .59% 3,603 .36%
Small/Mid Cap............ 221,855 .53% 169,033 .40%
Growth Equity............ 186,543 .50% 149,234 .40%
Tax-Sensitive Equity..... 46,643 .45% 41,460 .40%
Growth and Income........ 768,487 .27% 1,143,977 .40%
Equity-Income............ 550,865 .37% 510,014 .34%
Balanced................. 319,497 .35% 362,458 .40%
Strategic Income......... 227,935 .34% 270,580 .40%
Investment Quality Bond.. 35,587 .23% 59,311 .38%
National Municipal Bond.. 37,494 .25% 52,492 .35%
U.S. Government
Securities............... 154,269 .23% 257,121 .38%
Money Market............. 16,565 .08% 27,607 .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 for expenses (excluding taxes,
portfolio brokerage commissions, interest, certain litigation and
indemnification expenses, extraordinary expenses and all of the portfolio's
distribution fees) 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%
</TABLE>
71
<PAGE>
NORTH AMERICAN FUNDS
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 5 - continued
<TABLE>
<CAPTION>
ortfolio P Class A Class B Class C
- ------------ ------- ------- -------
<S> <C> <C> <C>
International 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%
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%
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....................................... 0.750% 0.750% 0.750%
Other expenses........................................ 0.270% 0.270% 0.270%
------ ------ ------
Expense limitation.................................... 1.020% 1.020% 1.020%
------ ------ ------
Rule 12b-1 fees....................................... 0.350% 1.000% 1.000%
On May 12, 1999, management fees were reduced from .800% to .750%, and the
expense limitation was reduced from 1.065% to 1.020%.
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%
</TABLE>
72
<PAGE>
NORTH AMERICAN FUNDS
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Note 5 - continued
<TABLE>
<CAPTION>
ortfolio P Class A Class B Class C
- ------------ ------- ------- -------
<S> <C> <C> <C>
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>
In accordance with the Investment Advisory agreement, the Adviser, in addition
to providing advisory services, provides accounting and administrative
services for which CAM charged $1,463,990 to the Fund, before reimbursement
based on expense limitations, for the period ended October 31, 1999.
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. The Fund has 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 used by
Equity-Income, Growth and Income, and Global Equity during the year ended
October 31, 1999. The average annual balance outstanding for each of those
funds was $75,605 for Equity-Income, $116,164 for Growth and Income, and
$43,836 for Global Equity.
8. COMMITMENTS. At October 31, 1999, International Equity, 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, 1999, were as follows:
FORWARD CONTRACTS
<TABLE>
<CAPTION>
Net
Contracts Unrealized
to In Exchange Settlement Appreciation
Deliver For Date Value (Depreciation)
----------- ----------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
International Equity
Sales
Euro................... 614,400 $653,644 3/10/00 $652,360 $1,284
British Pounds......... 226,000 370,641 3/10/00 371,533 (892)
British Pounds......... 935,747 1,532,010 3/24/00 1,538,240 (6,230)
Japanese Yen........... 145,968,726 1,423,118 3/17/00 1,431,671 (8,553)
----------- ---------- --------------
$3,979,413 $3,993,804 ($14,391)
----------- ---------- --------------
</TABLE>
73
<PAGE>
NORTH AMERICAN FUNDS
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 8 - continued
<TABLE>
<CAPTION>
Net
Contracts Unrealized
to In Exchange Settlement Appreciation
Deliver For Date Value (Depreciation)
----------- ----------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Purchases
$391,815 Euro 371,600 3/10/00 $394,559 $2,744
1,895,442 British Pounds 1,145,140 3/10/00 1,882,552 (12,890)
1,540,847 British Pounds 935,747 3/24/00 1,538,240 (2,607)
277,572 Japanese Yen 30,000,000 3/17/00 294,242 16,670
----------- ---------- --------------
$4,105,676 $4,109,593 3,917
----------- ---------- --------------
($10,474)
--------------
Global Equity
Sales
Euro................... 6,000,000 $6,531,900 4/12/00 $6,384,453 $147,447
----------- ---------- --------------
Strategic Income
Sales
Euro................... 69,050 $72,399 11/04/99 $72,661 ($262)
British Pounds......... 213,319 352,904 1/28/00 350,739 2,165
Greek Drachma.......... 125,362,000 398,519 1/28/00 394,916 3,603
Japanese Yen........... 34,515,053 335,913 1/28/00 336,014 (101)
British Pounds......... 49,156 80,571 1/18/00 80,823 (252)
----------- ---------- --------------
$1,240,306 $1,235,153 $5,153
----------- ---------- --------------
Purchases $141,089 Canadian Dollars 207,027 1/28/00 $141,022 ($67)
72,811 Euro 69,050 1/18/00 73,073 262
745,268 Euro 698,241 1/28/00 739,402 (5,866)
331,239 Japanese Yen 34,515,053 11/04/99 331,309 70
80,571 British Pounds 49,156 1/18/00 80,823 252
----------- ---------- --------------
$1,370,978 $1,365,629 (5,349)
----------- ---------- --------------
($196)
--------------
</TABLE>
Cross Currency
<TABLE>
<CAPTION>
Net
Contracts Unrealized
Payable To Receivable In Exchange Settlement Appreciation
Currency Deliver Value Currency For Value Date (Depreciation)
- ------------- --------- -------- ------------- ----------- -------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Swedish Krona 2,800,000 $341,118 Euro 323,887 $342,980 1/28/00 $1,862
Euro 323,886 342,541 Swedish Krona 2,800,000 341,117 1/28/00 (1,424)
-------- -------- --------------
$683,659 $684,097 $438
-------- -------- --------------
</TABLE>
FUTURES CONTRACTS
Futures Contracts outstanding at October 31, 1999, were as follows:
<TABLE>
<CAPTION>
Net
Unrealized
Aggregate Expiration Total Appreciation
Cost Date Value (Depreciation)
---------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
International Equity
MIB 30 Index (Long).......... $183,561 12/17/99 $174,833 ($8,728)
TOPIX Index (Long)........... 286,070 12/09/99 300,323 14,253
CAC 40 EURO Index (Short).... 436,105 12/30/99 463,629 (27,524)
NIKKEI 300 Index (Short)..... 110,333 12/09/99 116,154 (5,821)
---------- ---------- --------------
$1,016,069 $1,054,939 (27,820)
---------- ---------- --------------
</TABLE>
74
<PAGE>
NORTH AMERICAN FUNDS
OTHER INFORMATION (Unaudited)
- -------------------------------------------------------------------------------
Capital Gain Distributions (Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, the distributions set
forth below have been designated as capital gains distributions for the fiscal
year ended October 31, 1999:
<TABLE>
<CAPTION>
Capital Gain
Portfolio Distribution
-------------------------------- ------------
<S> <C>
International Small Cap........ $2,595,106
International Equity........... 1,519,788
Global Equity.................. 13,221,906
Small/Mid Cap.................. 1,562,415
Growth Equity.................. 4,343,394
Growth and Income.............. 29,061,779
Equity-Income.................. 25,068,864
Balanced....................... 3,871,523
</TABLE>
Shareholder Votes (Unaudited)
During the year the following matters were put to a vote of shareholders of
the Portfolios shown:
Equity-Income - On May 12, 1999 a special shareholder meeting was held at
which the shareholders approved a new sub-advisory agreement with Global
Alliance Value Investors Ltd. At the meeting 6,017,311 votes were cast in
favor of the proposal, 40,252 were cast against the proposal, and there were
381,875 abstentions with respect to the proposal.
International Equity - A special meeting of the shareholders of International
Equity was held on June 2, 1999, adjourned until June 30, 1999, at which the
shareholders approved a change in the investment objective to eliminate growth
of income from the investment objective of the Portfolio. At the meeting
1,071,076 votes were cast in favor of the proposal, 46,177 were cast against
the proposal, and there were 76,576 abstentions with respect to the proposal.
75
<PAGE>
Trustees
Bradford K. Gallagher, Chairman
William F. Achtmeyer
Don 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 LLP
160 Federal Street
Boston, MA 02110
North American Funds Shareholder Services
286 Congress Street
Boston, MA 02210
800-872-8037
<PAGE>
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