UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number
811-10123
The North Country Funds
(Exact name of Registrant as specified in charter)
250 Glen Street, Glens Falls, NY 12801
(Address of principal executive offices)
(Zip code)
Emile Molineaux
c/o Gemini Fund Services, LLC., 450 Wireless Boulevard, Hauppauge, NY 11788
(Name and address of agent for service)
Registrant's telephone number, including area code:
631-470-2616
Date of fiscal year end:
11/30
Date of reporting period: 5/31/09
Item 1. Reports to Stockholders.
Investment Adviser North Country Investment Advisers, Inc. 250 Glen Street Glens Falls, NY 12801
Legal Counsel Ropes & Gray 700 12th Street, N.W., Suite 900 Washington, D.C. 20005
Independent Registered Public Accounting Firm Cohen Fund Audit Services, Ltd. 800 Westpoint Parkway, Suite 1100 Westlake, OH 44145
Administrator and Fund Accountant Gemini Fund Services, LLC 450 Wireless Boulevard Hauppauge, NY 11788
Transfer Agent Gemini Fund Services, LLC 4020 South 147th Street Omaha, NE 68137
Distributor Northern Lights Distributors, LLC 4020 South 147th Street Omaha, NE 68137
Custodian Bank of New York 1 Wall Street, 25th Floor New York, NY 10286
Investor Information: (888) 350-2990 | | The North Country Funds
Equity Growth Fund Intermediate Bond Fund
![[f1cover002.gif]](https://capedge.com/proxy/N-CSRS/0000910472-09-000585/f1cover002.gif)
Semi-Annual Report May 31, 2009
This report and the financial statements contained herein are submitted for the general information of shareholders and are not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Nothing herein contained is to be considered an offer of sale or solicitation of an offer to buy shares of the North Country Funds. Such offering is made only by prospectus, which includes details as to offering price and other material information. |
May 31, 2009
ECONOMIC SUMMARY
Signs of improvement in the U.S. housing market, rising consumer confidence and a rally in financial stocks suggest that the economy may be bottoming out and the worst of the financial crisis may be behind us. Indeed, the Bureau of Labor Statistics reported job losses in May were the lowest in eight months. Stock markets have risen sharply since March 9th (36.6% for the S&P 5001) as several of the biggest banks in the country announced they were profitable in the first quarter. Many banks that issued preferred stock to the government as part of the Troubled Asset Relief Program (TARP) have been successful in raising additional capital with a goal of refunding the TARP money as soon as allowable.
Indications of an improvement in the economy are coming from many sources. Real disposable income was much stronger than expected in April thanks to fiscal stimulus and May might post another uptick. With the rise in consumer confidence, the unprecedented slump in consumer spending may be behind us. Even the housing market is showing signs of improvement. New homebuilding may be stabilizing and pending and actual sales are picking up. The inventory of unsold homes is finally edging downward, thanks to continued rapid declines in house prices. Manufacturing may be on the cusp of a rebound as orders are finally increasing at the same time that inventories are falling at a record pace. Inventory reductions have been a huge factor contributing to the economic contraction. That process may now be set to reverse.
To be sure, there are headwinds. Longer-term interest rates have risen sharply as the supply of government bonds has surged and inflation concerns have increased. This has resulted in mortgage rates rising. The more rates go up, the more home prices need to go down to match consumers’ payments. Unemployment may continue to rise even while economic conditions improve. Outside of the effects of the fiscal stimulus plan, disposable income growth may stagnate if fuel prices continue to rise. But, inflation may be contained for now. Wage freezes continue to eliminate the prospect for spiraling employment costs in the next few quarters, and savings as a percent of disposable income has jumped. Also, capacity utilization rates worldwide are very low, which mitigates any sustained excess-demand pressures that might push prices upward.
__________________
1 The S&P 500 is an unmanaged market capitalization-weighted index of common stocks. You cannot invest directly in an index.
We believe the stage is set for a deceleration in the rate of economic decline in the second quarter. By the third quarter, inventories may be "right-sized," and we might get a positive bounce from consumption as the fiscal stimulus measures gather greater momentum. In our opinion, the third quarter is increasingly looking like the quarter that will allow a gradual transition to positive growth, with a gain in activity projected in the fourth quarter of 2009. Unemployment may remain high for some time, likely peaking in mid-2010. A sustained jobless recovery cannot be ruled out.
The Equity Growth Fund
For the six months and one year ended May 31, 2009 the North Country Equity Growth Fund had total returns of 3.01% and -32.82% versus the S&P 500 at 4.04% and -32.58% respectively. On an annualized basis, the three, five, and ten year total returns for the North Country Equity Growth Fund were -7.90%, -2.76%, and -1.20% versus the S&P 500 at -8.25%, -1.91%, and -1.72% respectively.
With the S&P 500 Index having rallied an astounding 36.6% from its lows on March 9th, the logical question is how sustainable is this rally going forward. We believe the positive case shows that evidence of a gradual recovery in the U.S. and global economy may be intact and that the headwinds of tight financial markets and a free fall in economic data appear to have subsided. Investors’ appetite for investment grade and selected high yield securities has provided companies with easier access to capital for short-term funding needs. Major institutions have been able to issue non-government backed debt and equity, yet another sign of normalizing capital market conditions. However, new headwinds may be surfacing. Consumers have embarked upon a long-term de-leveraging process, tighter risk controls and regulations may limit credit availability, rising energy prices could stifle consumer income and spe nding, and the corporate earnings recession in the U.S. continues to unfold. U.S. equity market valuations are now more expensive than they were on March 9, 2009 when the equity markets were at their recent low.
We remain concerned that certain industries seem structurally impaired as opposed to cyclically weak. The financial sector may see less collateralization of mortgage debt, credit card receivables, and auto loans, which may limit a funding source, and reduce earnings expectations. The auto industry may be smaller when the reorganizations are over. The healthcare sector faces a recurring fear that government intervention may crimp long-term profits.
In December of 2008 the allocations within the portfolio reflected our defensive posture. We believed that the economic outlook had deteriorated due to a decline in consumer expenditures while business equipment spending and industrial production had weakened. Moreover, sharp slowdowns in overseas economies were expected to lead to a deceleration in the growth of U.S. exports. Adding to these recessionary forces, the intensification of financial market turmoil was expected to exert additional restraint on spending. Relative to the sectors of the S&P 500, we were overweight consumer staples and healthcare, underweight in consumer discretionary, financials, information technology and materials, and marketweight energy, telecommunication services, and utilities.
In early March we received a number of positive economic reports — the first set of promising data in quite some time. Retail sales exceeded Street expectations, consumer confidence edged upward, the trade deficit narrowed once again, and jobless claims appeared to have stabilized. Meanwhile, JPMorgan, Bank of America, and Citigroup surprised many by issuing positive first quarter assessments.
At that time, there was an unprecedented amount of stimulus in the pipeline. Policy-makers around the world continued to pump enormous amounts of liquidity into the financial markets and had numerous financial backstops and interventions in place or in the works. The U.S. Treasury considered a plan to buy bad assets directly from the banks. The government had already committed to buy up to $600 billion of mortgage securities from Fannie Mae and Freddie Mac. That move has already begun to reduce mortgage rates. The Fed also planned to lend up to $200 billion to holders of securities backed by credit card and auto loans, while leaving the door open to expand this program to mortgages as well. Low interest rates were expected to continue, as we estimated that the Federal Funds Target Rate would remain at 0.25% through 2009, and there was the potential for direct intervention by the Federal Reserve in purchasing U.S. Treasury securit ies. We believed these actions would give important support to credit markets, providing a solid foundation upon which real economic recovery can build over time.
In March we made subtle changes to the sector weightings in reaction to what appeared to be an improving outlook. We reduced the underweight in information technology, though remained underweight. Strong balance sheets for many of the companies in this sector, combined with attractive valuations, supported our action. The funds for this allocation change came from a reduced overweight in healthcare, though we remained overweight. President Obama’s determination to move forward with health care reform led us to conclude that long-term earnings expectations may be reduced in the health care sector.
In April, we continued to make subtle changes to the sector weightings. It appeared to us that leadership was swinging away from defensive sectors to more cyclical sectors in expectation of an economic recovery. We reduced the overweight in the consumer staples sector, but remained overweight. We remained overweight in consumer staples as we believed that these companies offered stable earnings, dividend growth, and tremendous potential for growth in emerging markets. We reduced the healthcare sector to a marketweight from an overweight. The industrial and information technology sectors were raised to overweights. Overall, overweight sectors were consumer staples, industrials and information technology, marketweight sectors were energy, healthcare, telecommunication services, and utilities, and underweight sectors were consumer discretionary, financials and materials.
As we move into an economic recovery phase we forecast several trends: Investors may be willing to take on more risk; equities may be favored over bonds; and commodities may benefit from heightened inflation concerns, resource constraints, and a desire to own non-dollar denominated assets.
The Intermediate Bond Fund
In the six months ending May 31, 2009, we have witnessed dramatic events unfold in the Fixed Income Markets. Notably, the Federal Funds Target Rate has been reduced to a range of 0.00 to 0.25%, a flight to quality briefly brought U.S. Treasury Bill yields into negative territory, credit spreads, in particular for financial corporations, widened as risk aversion became pervasive and then, as anticipation of an eventual economic recovery emerged and opportunities were perceived where only risks were seen previously, credit spreads narrowed and a positive slope to the U.S. Treasury Yield Curve emerged.
In this time period, the North Country Intermediate Bond Fund sought to benefit from opportunities for attractive yields in corporate bonds at the expense of holding U.S. Treasury Securities. This decision negatively impacted the performance of the North Country Intermediate Bond Fund relative to its benchmark, the Merrill Lynch Corporate/Government “A” Rated or better 1-10 Year Index2. As of May 31, 2009, the North Country Intermediate Bond Fund had annualized total returns for one year, three years, five years, and ten years of -0.42%, 2.90%, 2.33%, and 3.98% versus the Merrill Lynch Corporate/Government “A” Rated or better 1-10 Year Index at 4.56%, 6.00%, 4.48%, and 5.51% respectively. However, the North Country Intermediate Bond Fund has outperformed its benchmark for the one-month, three-month and six-month periods ending May 31, 2009, with period returns of 1.76%, 1.97% and 4 .17% versus the same Index at 0.45%, 1.48% and 2.70% respectively. We attribute this recent relative outperformance to a general narrowing of credit spreads and a reversal in the performance of U.S. Treasury Securities as evidenced by the one year and six month performance of the Merrill Lynch Treasury Master Index3 for the period ending May 31, 2009 of +7.63% and -0.86% respectively.
__________________
2 The Merrill Lynch Corporate/Government “A” rated or better 1-10 year index is based upon publicly issued intermediate corporate and government debt securities with maturities ranging between 1 and 10 years. You cannot invest directly in an index.
3 The Merrill Lynch Treasury Master index is based on U.S. Treasury Notes with maturities ranging form 1 to 15+ years.
Equity Growth Fund:
Annual Fund Operating Expenses: (As a Percentage of Net Assets)
Total Annual Operating Expenses:
1.07%
Intermediate Bond Fund:
Annual Fund Operating Expenses: (As a Percentage of Net Assets)
Total Annual Operating Expenses:
0.84%
Average Annual Total Returns as of March 31, 2009 (Latest Calendar Quarter)
| | | | | | |
| 1 Year | | 5 Years | | 10 Years |
| | | | | |
North Country Equity Growth Fund | -36.31% | | -5.02% | | -2.43% |
| | | | | |
North Country Intermediate Bond Fund | -4.42% | | 1.23% | | 3.65% |
| | | | | | |
Average Annual Total Returns as of May 31, 2009 (Fiscal First Half)
| | | | | | |
| 1 Year | | 5 Years | | 10 Years |
| | | | | |
North Country Equity Growth Fund | -32.82% | | -2.76% | | -1.20% |
| | | | | |
North Country Intermediate Bond Fund | -0.42% | | 2.33% | | 3.98% |
| | | | | | |
Performance data quoted above is historical and is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The Fund’s investment adviser voluntarily agreed to reduce its fees and/or absorb expenses of the fund through November 30, 2009 to insure that the net annual fund operating expenses will not exceed 1.10% for both the Growth and the Bond Fund (before acquired fund fees and expenses). Performance results shown reflect this fee waiver and recapture, without which results after February 28, 2001 could have been lower. Please review the Fund’s prospectus for more detail on the expense waiver. You can obtain performance data current to the most recent month-end by calling 1-888-35 0-2990. Information provided is unaudited.
The views expressed are as May 31, 2009 and are those of the adviser, North Country Investment Advisers, Inc. The views are subject to change at any time in response to changing circumstances in the markets and are not intended to predict or guarantee the future performance of any individual security market sector or the markets generally, or the North Country Funds.
Not FDIC insured. Not obligations of or guaranteed by the bank. May involve investment risks, including possible loss of the principal invested.
0883-NLD-7/23/2009
North Country Equity Growth Fund
Portfolio Summary (Unaudited)
May 31, 2009
| | | | |
Industries | % of Net Assets | | | % of Net Assets |
Common Stock | 96.97% | | Investment Services | 2.68% |
Oil & Gas Services | 8.26% | | Commercial Services | 2.12% |
Retail | 7.70% | | Beverages | 1.53% |
Computer / Network Products | 7.60% | | Industrial Gases | 1.36% |
Medical - Drugs | 6.83% | | Chemicals | 1.35% |
Medical Equipment & Supplies | 6.28% | | Apparel | 1.25% |
Telecommunications | 6.13% | | Biotechnology | 1.21% |
Food | 5.59% | | Transportation | 1.01% |
Conglomerates | 5.47% | | Multimedia | 0.78% |
Software & Programming | 5.45% | | Electric Products | 0.65% |
Oil & Gas Producers | 5.25% | | Mining | 0.45% |
Diversified Financial Services | 4.71% | | Motorcycles | 0.25% |
Aerospace / Defense | 3.69% | | Insurance | 0.20% |
Electric Utilities | 3.25% | | Money Market Funds | 2.81% |
Banks | 3.01% | | Other Assets Less Liabilities | 0.22% |
Consumer Products | 2.91% | | Total Net Assets | 100.00% |
| | | | |
Top Ten Holdings | % of Net Assets | | | % of Net Assets |
International Business Machines Corp. | 2.46% | | Medco Health Solutions, Inc. | 2.12% |
Transocean, Ltd. | 2.45% | | Baxter International, Inc. | 2.08% |
St. Jude Medical, Inc. | 2.31% | | Heinz Co. | 2.06% |
Kellogg Co. | 2.28% | | Cameron International Corp. | 2.02% |
ITT Educational Services, Inc. | 2.12% | | Colgate - Palmolive Co. | 1.95% |
North Country Intermediate Bond Fund
Portfolio Summary (Unaudited)
May 31, 2009
| | | | |
Industries | % of Net Assets | | | % of Net Assets |
Corporate Bonds | 59.24% | | Electrical Components & Equipment | 1.13% |
Investment Services | 6.83% | | Forest Products & Paper | 1.10% |
Telecommunications | 6.34% | | Housewares | 0.83% |
Diversified Financial Services | 6.23% | | Multimedia | 0.59% |
Foods | 5.18% | | Miscellaneous Manufacturing | 0.58% |
Banks | 4.96% | | Commercial & Professional Services | 0.57% |
Electric Utilities | 4.87% | | Iron/Steel | 0.57% |
Oil & Gas | 3.12% | | Healthcare Services | 0.53% |
Pharmaceuticals | 2.99% | | Household Products | 0.52% |
Cosmetics | 2.34% | | U.S. Govt. Agency Obligations | 32.83% |
Chemicals | 2.30% | | Government Agencies | 32.83% |
Beverages | 2.22% | | Money Market Funds | 10.27% |
Retail | 2.18% | | Liabilities in excess of other assets | (2.34%) |
Communications Equipment | 1.77% | | Total Net Assets | 100.00% |
Insurance | 1.49% | | | |
| | | | |
Top Ten Holdings | % of Net
Assets | | | % of Net Assets |
Fifth Third Bank, , 4.20%, due 2/23/10 | 2.79% | | FNMA, 3.25%, due 2/10/10 | 2.30% |
FHLB, 5.00%, due 12/21/15 | 2.43% | | Hershey Co., 5.45%, due 9/1/16 | 2.28% |
FNMA, 3.625% due 2/12/13 | 2.36% | | FNMA, 2.50%, due 3/19/12 | 2.27% |
Avon Products, Inc., 5.125%, due 1/15/11 | 2.34% | | FHLB, 3.25% due 3/18/14 | 2.26% |
FNMA, 4.80%, due 11/27/12 | 2.30% | | FHLMC, 2.50%, due 4/8/13 | 2.25% |
FHLB – Federal Home Loan Bank
FHLMC – Federal Home Loan Mortgage Corporation
FNMA – Federal National Mortgage Association
| | | | | | | | | | | | |
| THE NORTH COUNTRY FUNDS | |
EQUITY GROWTH FUND |
SCHEDULE OF INVESTMENTS (Unaudited) |
May 31, 2009 |
|
| | | | | | | | | | | | |
| | | | | | Market | | | | | | Market |
| Shares | | | | Value | | Shares | | | | Value |
| | COMMON STOCKS - 96.97% | | | | Conglomerates - 5.47% (Continued) | |
| | Aerospace / Defense - 3.69% | | | | 28,000 | Illinois Tool Works, Inc. | $ 904,120 |
| | 14,000 | General Dynamics Corp. | | $ 796,600 | | 20,000 | ITT Industries Corp. | | 823,600 |
| | 20,000 | L-3 Communications | | | | 25,000 | Parker Hannifin Corp. | | 1,056,500 |
| | | Holdings, Inc. | | 1,470,200 | | 21,000 | United Technologies Corp. | 1,104,810 |
| | 12,000 | Lockheed Martin Corp. | | 1,004,280 | | | | | | 5,904,830 |
| | 17,000 | Rockwell Collins, Inc. | | 721,140 | | Consumer Products - 2.91% | | |
| | | | | | 3,992,220 | | 32,000 | Colgate-Palmolive Co. | | 2,110,400 |
| | Apparel - 1.25% | | | | | 20,000 | Procter & Gamble Co. | | 1,038,800 |
| | 23,600 | Nike, Inc. - Cl. B | | 1,346,380 | | | | | | 3,149,200 |
| | | | | | | | Diversified Financial Services - 4.71% | |
| | Banks - 3.01% | | | | | 40,000 | American Express Co. | | 994,000 |
| | 99,000 | Bank of America | | 1,115,730 | | 9,000 | Goldman Sachs Group, Inc. | 1,301,130 |
| | 52,830 | Bank of New York Mellon | 1,467,617 | | 45,000 | JPMorgan Chase & Co. | | 1,660,500 |
| | 35,000 | U.S. Bancorp | | 672,000 | | 25,000 | PNC Financial Services | | |
| | | | | | 3,255,347 | | | Group, Inc. | | 1,138,750 |
| | Beverages - 1.53% | | | | | | | | | 5,094,380 |
| | 31,800 | Pepsico, Inc. | | 1,655,190 | | Electric Products - 0.65% | | |
| | | | | | | | 22,000 | Emerson Electric Co. | | 705,980 |
| | Biotechnology - 1.21% | | | | | | | | | |
| | 22,000 | Genzyme Corp.* | | 1,301,080 | | Electric Utilities - 3.25% | | |
| | | | | | | | 28,000 | Dominion Resources, Inc. | 890,120 |
| | Chemicals - 1.35% | | | | | 22,000 | Exelon Corp. | | 1,056,220 |
| | 22,500 | Ecolab, Inc. | | | 840,375 | | 25,000 | Progress Energy, Inc. | | 887,750 |
| | 7,500 | Monsanto Co. | | 616,125 | | 24,000 | Southern Co. | | 681,840 |
| | | | | | 1,456,500 | | | | | | 3,515,930 |
| | Commercial Services - 2.12% | | | | Food - 5.59% | | | |
| | 25,000 | ITT Educational Services, Inc.* | 2,294,750 | | 26,300 | General Mills, Inc. | | 1,346,034 |
| | | | | | | | 61,000 | Heinz Co. | | | 2,231,380 |
| | Computer/Network Products - 7.60% | | | 57,000 | Kellogg Co. | | 2,465,250 |
| | 30,000 | Accenture, Ltd. | | 897,900 | | | | | | 6,042,664 |
| | 15,000 | Apple, Inc.* | | 2,037,150 | | Industrial Gases - 1.36% | | |
| | 86,000 | Cisco Systems, Inc.* | | 1,591,000 | | 20,000 | Praxair, Inc. | | | 1,464,000 |
| | 30,000 | Hewlett Packard, Co. | | 1,030,500 | | | | | | |
| | 25,000 | International Business | | | | Insurance - 0.20% | | | |
| | | Machines Corp. | | 2,657,000 | | 15,000 | Hartford Financial | | |
| | | | | | 8,213,550 | | | Services Group | | 215,100 |
| | Conglomerates - 5.47% | | | | Investment Services - 2.68% | | |
| | 20,000 | Danaher Corp. | | 1,207,000 | | 13,000 | Franklin Resources, Inc. | | 869,050 |
| | 60,000 | General Electric Co. | | 808,800 | | 50,000 | T. Rowe Price Group, Inc. | 2,028,500 |
| | | | | | | | | | | | 2,897,550 |
The accompanying notes are an integral part of these financial statements |
| THE NORTH COUNTRY FUNDS | |
EQUITY GROWTH FUND |
SCHEDULE OF INVESTMENTS (Unaudited) (Continued) |
May 31, 2009 |
|
| | | | | | Market | | | | | | Market |
| Shares | | | | Value | | Shares | | | | Value |
| | Medical - Drugs - 6.83% | | | | Retail -7.70% (Continued) | | |
| | 45,000 | Abbott Laboratories | | $ 2,027,700 | | 35,000 | McDonald's Corp. | | $ 2,064,650 |
| | 62,000 | Bristol-Myers Squibb Co. | 1,235,040 | | 30,000 | Staples, Inc. | | | 613,500 |
| | 33,000 | Johnson & Johnson | | 1,820,280 | | 18,500 | Target Corp. | | 727,050 |
| | 50,000 | Medco Health Solutions, Inc. | 2,294,500 | | 21,500 | Walgreen Co. | | 640,485 |
| | | | | | 7,377,520 | | 30,000 | Wal-Mart Stores, Inc. | | 1,492,200 |
| | Medical Equipment & Supplies - 6.28% | | | | | | | 8,322,725 |
| | 44,000 | Baxter International, Inc. | 2,252,360 | | Software & Programming - 5.45% | | |
| | 28,000 | Medtronic, Inc. | | 961,800 | | 38,000 | Adobe Systems, Inc.* | | 1,070,840 |
| | 64,000 | St. Jude Medical, Inc.* | | 2,497,280 | | 25,000 | Fiserv, Inc. * | | 1,059,000 |
| | 28,000 | Stryker Corp. | | 1,076,320 | | 86,000 | Microsoft Corp. | | 1,796,540 |
| | | | | | 6,787,760 | | 100,000 | Oracle Corp.* | | 1,959,000 |
| | Mining - 0.45% | | | | | | | | | 5,885,380 |
| | 11,000 | Vulcan Materials Co. | | 487,190 | | Telecommunications - 6.13% | | |
| | | | | | | | 64,000 | AT&T, Inc. | | | 1,586,560 |
| | Motorcycles - 0.25% | | | | | 108,000 | Corning, Inc. | | 1,587,600 |
| | 15,800 | Harley-Davidson, Inc. | | 268,126 | | 76,000 | Neustar, Inc. - Cl. A* | | 1,523,800 |
| | | | | | | | 66,000 | Verizon Communications, | 1,931,160 |
| | Multimedia - 0.78% | | | | | | Inc. | | | 6,629,120 |
| | 35,000 | Walt Disney Co. | | 847,700 | | Transportation - 1.01% | | | |
| | | | | | | | 15,000 | Burlington Northern | | |
| | Oil & Gas Producers - 5.25% | | | | | Santa Fe Corp. | | 1,086,600 |
| | 26,000 | Chevron Corp. | | 1,733,420 | | TOTAL COMMON STOCKS | | |
| | 30,000 | ConocoPhillips | | 1,375,200 | | (Cost $116,958,215) | | | 104,794,281 |
| | 29,500 | Exxon Mobil Corp. | | 2,045,825 | | | | | | |
| | 23,000 | Valero Energy Corp. | | 514,510 | | MONEY MARKET FUNDS - 2.81% | |
| | | | | | 5,668,955 | | 3,036,625 | BlackRock Liquidity | | |
| | Oil & Gas Services - 8.26% | | | | | Temp Fund, 0.54 % (a) | 3,036,625 |
| | 26,000 | Baker Hughes, Inc. | | 1,015,560 | | | | | | |
| | 70,000 | Cameron International Corp.* | 2,186,100 | | TOTAL MONEY MARKET FUNDS | |
| | 37,000 | National Oilwell Varco, Inc.* | 1,428,940 | | (Cost $3,036,625) | | | 3,036,625 |
| | 48,000 | Noble Corp. | | 1,649,760 | | | | | | |
| | 33,319 | Transocean, Ltd.* | | 2,648,194 | | TOTAL INVESTMENTS | | |
| | | | | | 8,928,554 | | (Cost $119,994,840) | 99.78% | | 107,830,906 |
| | Retail - 7.70% | | | | | Other assets | | | |
| | 28,000 | Costco Wholesale Corp. | | 1,358,560 | | less liabilities | 0.22% | | 238,012 |
| | 30,000 | CVS Corp. | | | 894,000 | | | | | | |
| | 28,000 | Lowe's Companies, Inc. | | 532,280 | | TOTAL NET ASSETS | 100.00% | | $ 108,068,918 |
| | | | | | | | | | | | |
| | * Non-income producing security | | | | (a) Variable rate yield; the coupon rate shown represents |
| | | | | | | | the rate at May 31, 2009. | | |
| |
The accompanying notes are an integral part of these financial statements |
| | | | | | | | | | | | |
| | | | | | | | | | | |
| | THE NORTH COUNTRY FUNDS | |
INTERMEDIATE BOND FUND |
SCHEDULE OF INVESTMENTS (Unaudited) |
May 31, 2009 |
|
| | | | | | | | | | | | |
| | Principal | | | | Market | | Principal | | | | Market |
| Amount | | | | Value | | Amount | | | | Value |
| | CORPORATE BONDS - 59.24% | | | | Diversified Financial Services - 6.23% (Continued) |
| | Banks - 4.96% | | | | | | Caterpillar Financial Services., | |
| | | American Express Centurion, | | | $ 500,000 | 4.25%, due 2/8/13 | | $ 490,797 |
| | $1,100,000 | 5.95%, due 6/12/17 | | $ 964,037 | | | General Electric Capital | | |
| | | Fifth Third Bank, | | | | | Corp., | | | |
| | 2,500,000 | 4.20%, due 2/23/10 | | 2,475,885 | | 1,000,000 | 4.25%, due 6/15/12 | | 998,503 |
| | | Wells Fargo & Co., | | | | 1,000,000 | 5.40%, due 9/20/13 | | 1,011,866 |
| | 1,000,000 | 5.00%, due 11/15/14 | | 965,595 | | 1,000,000 | 5.375%, due 10/20/16 | 974,224 |
| | | | | | 4,405,517 | | | Household Finance Corp., | |
| | Beverages - 2.22% | | | | | 1,200,000 | 6.375%, due 10/15/11 | 1,225,439 |
| | | Anheuser-Busch Cos. Inc., | | | | John Deere, | | |
| | 1,000,000 | 5.60%, due 3/1/17 | | 947,111 | | 500,000 | 5.25%, due 10/1/12 | | 525,021 |
| | | Brown-Forman Corp.- Cl. B, | | | | | | | 5,535,850 |
| | 500,000 | 5.20%, due 4/1/12 | | 525,854 | | Electrical Components & Equipment - 1.13% |
| | | Coca-Cola Co., | | | | | Emerson Electric Co., | | |
| | 500,000 | 4.875%, due 3/15/19 | | 500,149 | | 1,000,000 | 5.125%, due 12/1/16 | | 1,001,949 |
| | | | | | 1,973,114 | | | | | | |
| | Chemicals - 2.30% | | | | | Electric Utilities - 4.87% | | |
| | | Monsanto Co., | | | | | Alabama Power Co., | | |
| | 1,000,000 | 5.125%, due 4/15/18 | | 997,735 | | 1,000,000 | 5.20%, due 1/15/16 | | 1,006,110 |
| | | Praxair, Inc., | | | | | Commonwealth Edison, | |
| | 500,000 | 5.25%, due 11/15/14 | | 532,011 | | 1,000,000 | 6.15%, due 3/15/12 | | 1,047,830 |
| | 500,000 | 5.375%, due 11/1/16 | | 512,500 | | | Detroit Edison Co., | | |
| | | | | | 2,042,246 | | 1,000,000 | 5.60%, 6/15/18 | | 984,894 |
| | Commercial & Professional Services - 0.57% | | | Dominion Resources, Inc., | |
| | | Dun & Bradstreet Corp., | | | | 500,000 | 5.15%, due 7/15/15 | | 507,585 |
| | 500,000 | 5.50%, due 3/15/11 | | 503,877 | | | Southern Power Co., | | |
| | | | | | | | 500,000 | 4.875%, due 7/15/15 | | 467,185 |
| | Communications Equipment - 1.77% | | | | Virginia Electric & Power, | |
| | | Cisco Systems, Inc., | | | | 300,000 | 4.50%, due 12/15/10 | | 313,766 |
| | 1,500,000 | 5.50%, due 2/22/16 | | 1,570,940 | | | | | | 4,327,370 |
| | | | | | | | Foods - 5.18% | | | |
| | Cosmetics - 2.34% | | | | | | Campbell Soup Co., | | |
| | | Avon Products, Inc., | | | | 500,000 | 4.50%, Due 2/15/19 | | 488,139 |
| | 2,000,000 | 5.125%, due 1/15/11 | | 2,079,022 | | | Hershey Co., | | |
| | | | | | | | 1,950,000 | 5.45%, due 9/1/16 | | 2,021,468 |
| | Diversified Financial Services - 6.23% | | | | Kellogg Co., | | |
| | | American General Finance, | | | 500,000 | 4.25%, due 3/6/13 | | 511,934 |
| | 500,000 | 4.00%, due 3/15/11 | | 310,000 | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements |
| | THE NORTH COUNTRY FUNDS | |
INTERMEDIATE BOND FUND |
SCHEDULE OF INVESTMENTS (Unaudited) (Continued) |
May 31, 2009 |
|
| | | | | | | | | | | | |
| | Principal | | | | Market | | Principal | | | | Market |
| Amount | | | | Value | | Amount | | | | Value |
| | Foods - 5.18% (Continued) | | | | Investment Services - 6.83% (Continued) | |
| | | Kraft Foods, Inc., | | | | | Lehman Brothers Holdings, Inc., |
| | $ 500,000 | 6.25%, due 6/1/12 | | $ 539,588 | | $ 2,000,000 | 5.75%, due 5/17/13 (b) | $ 295,000 |
| | 1,000,000 | 5.25%, due 10/1/13 | | 1,038,514 | | 500,000 | 5.75%, due 1/3/17 (b) | 50 |
| | | | | | 4,599,643 | | | Merrill Lynch & Co., Inc., | |
| | Forest Products & Paper - 1.10% | | | | 2,000,000 | 5.00%, due 1/15/15 | | 1,696,799 |
| | | International Paper Co., | | | | | | | | 6,064,229 |
| | 1,000,000 | 6.75%, due 9/1/11 | | 976,724 | | Iron/Steel - 0.57% | | | |
| | | | | | | | | Nucor Corp., | | |
| | Healthcare Services - 0.53% | | | | 500,000 | 5.85%, due 6/1/18 | | 509,121 |
| | | UnitedHealth Group, Inc., | | | | | | | |
| | 500,000 | 5.00%, due 8/15/14 | | 470,237 | | Miscellaneous Manufacturing - 0.58% | |
| | | | | | | | | Honeywell International, Inc., | |
| | Household Products - 0.52% | | | | 500,000 | 4.25%, due 3/1/13 | | 514,638 |
| | | Fortune Brands, Inc., | | | | | | | | |
| | 500,000 | 5.375%, due 1/15/16 | | 459,817 | | Multimedia - 0.59% | | | |
| | | | | | | | | Walt Disney Co., | | |
| | Housewares - 0.83% | | | | | 500,000 | 5.625%, due 9/15/16 | 524,293 |
| | | Newell Rubbermaid, Inc., | | | | | | | |
| | 800,000 | 5.50%, due 4/15/13 | | 735,546 | | Oil & Gas - 3.12% | | | |
| | | | | | | | | Anadarko Finance Co., | | |
| | Insurance - 1.49% | | | | | 500,000 | 6.75%, due 5/1/11 | | 523,435 |
| | | American International | | | | | Anadarko Petroleum Corp., | |
| | | Group, Inc., | | | | 500,000 | 5.95%, due 9/15/16 | | 478,225 |
| | 1,000,000 | 5.60%, due 10/18/16 | | 422,856 | | | Apache Corp., | | |
| | 500,000 | 5.05%, due 10/1/15 | | 210,867 | | 500,000 | 5.25%, due 4/15/13 | | 519,517 |
| | | Genworth Financial | | | | | BJ Services Co., | | |
| | | Inc. - Cl. A, | | | | 300,000 | 5.75%, due 6/1/11 | | 307,944 |
| | 1,000,000 | 5.65%, due 6/15/12 | | 692,638 | | | Sunoco, Inc., | | |
| | | | | | 1,326,361 | | 1,000,000 | 5.75%, due 1/15/17 | | 943,354 |
| | Investment Services - 6.83% | | | | | | | | 2,772,475 |
| | | Bear Stearns Co., Inc., | | | | Pharmaceuticals - 2.99% | | |
| | 300,000 | 4.50%, due 10/28/10 | | 306,167 | | | Abbott Laboratories, | | |
| | 1,000,000 | 5.70%, due 11/15/14 | | 1,028,359 | | 500,000 | 5.15%, due 11/30/12 | | 541,555 |
| | 500,000 | 5.55%, due 1/22/17 | | 460,734 | | | GlaxoSmithKline Capital, Inc., | |
| | | Goldman Sachs Group, Inc., | | | 1,000,000 | 5.65%, due 5/15/18 | | 1,039,097 |
| | 1,000,000 | 6.60%, due 1/15/12 | | 1,060,157 | | | Wyeth, | | | |
| | 1,000,000 | 5.125%, due 1/15/15 | | 987,003 | | 1,000,000 | 5.50%, 2/1/14 | | 1,071,777 |
| | 250,000 | 5.625%, due 1/15/17 | | 229,960 | | | | | | 2,652,429 |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements |
| | THE NORTH COUNTRY FUNDS | |
INTERMEDIATE BOND FUND |
SCHEDULE OF INVESTMENTS (Unaudited) (Continued) |
May 31, 2009 |
|
| | | | | | | | | | | | |
| | Principal | | | | Market | | Principal | | | | Market |
| Amount | | | | Value | | Amount | | | | Value |
| | Retail - 2.18% | | | | | Government Agencies - 32.83% (Continued) |
| | | Home Depot, Inc., | | | | $ 2,000,000 | 4.25%, due 2/26/16 | | $ 1,976,876 |
| | $1,000,000 | 5.40%, due 3/1/16 | | $ 979,933 | | 1,000,000 | 4.25%, due 3/9/18 | | 1,024,581 |
| | | Wal-Mart Stores, Inc., | | | | 1,000,000 | 4.75%, due 3/25/19 | | 1,010,196 |
| | 1,000,000 | 4.125%, due 2/1/19 | | 961,151 | | | Federal Home Loan Mortgage | |
| | | | | | 1,941,084 | | | Coporation, | | |
| | Telecommunications - 6.34% | | | | 2,000,000 | 2.50%, due 4/8/13 | | 2,003,282 |
| | | AT&T, Inc. Global Bond, | | | 2,000,000 | 3.05%, due 6/18/14 | | 2,000,000 |
| | 1,000,000 | 5.30%, due 11/15/10 | | 1,035,468 | | | Federal National Mortgage | |
| | | AT&T, Inc., | | | | | Association, | | |
| | 1,000,000 | 4.95%, due 1/15/13 | | 1,034,103 | | 2,000,000 | 3.25%, due 2/10/10 | | 2,039,012 |
| | 1,000,000 | 5.60%, due 5/15/18 | | 1,012,810 | | 2,000,000 | 2.50%, due 3/19/12 | | 2,017,962 |
| | | Bellsouth Corp., | | | | 2,000,000 | 4.80%, due 11/27/12 | | 2,043,274 |
| | 500,000 | 4.20%, due 9/15/09 | | 502,698 | | 2,000,000 | 3.625%, due 2/12/13 | | 2,097,128 |
| | 500,000 | 5.20%, due 9/15/14 | | 506,224 | | 2,000,000 | 4.00%, due 6/24/16 | | 2,000,000 |
| | | Verizon Global, | | | | | | | | 29,169,577 |
| | 500,000 | 4.375%, due 6/1/13 | | 500,980 | | TOTAL U.S. GOVERNMENT & | | |
| | | Verizon NJ, Inc., | | | | AGENCY OBLIGATIONS | | |
| | 1,000,000 | 5.875%, due 1/17/12 | | 1,047,060 | | (Cost $28,571,083) | | | 29,169,577 |
| | | | | | 5,639,343 | | | | | | |
| | TOTAL CORPORATE BONDS | | | | MONEY MARKET FUNDS - 10.27% | |
| | (Cost $56,406,998) | | | 52,625,825 | | Shares | | | | |
| | | | | | | | 9,121,035 | BlackRock Liquidity | | |
| | U.S. GOVERNMENT & AGENCY | | | | Temp Fund, 0.54% (a) | | 9,121,035 |
| | OBLIGATIONS - 32.83% | | | | TOTAL MONEY MARKET FUNDS | |
| | Government Agencies - 32.83% | | | | (Cost $9,121,035) | | | 9,121,035 |
| | | Federal Home Loan Bank, | | | | | | | |
| | 500,000 | 5.125%, due 9/29/10 | | 528,787 | | TOTAL INVESTMENTS | | |
| | 1,000,000 | 2.625%, due 3/11/11 | | 1,028,423 | | (Cost $94,099,116) | 102.34% | | 90,916,437 |
| | 1,000,000 | 5.65%, due 6/29/12 | | 1,052,688 | | Liabilities in excess | | | |
| | 1,000,000 | 4.82%, due 11/13/12 | | 1,020,132 | | of other assets | (2.34)% | | (2,076,414) |
| | 1,000,000 | 5.25%, due 9/13/13 | | 1,108,312 | | | | | | |
| | 2,000,000 | 3.25%, due 3/18/14 | | 2,006,810 | | TOTAL NET ASSETS | 100.00% | | $ 88,840,023 |
| | 500,000 | 5.25%, due 9/12/14 | | 552,700 | | | | | | |
| | 2,000,000 | 5.00%, due 12/21/15 | | 2,156,562 | | (a) Variable rate yield; the coupon rate shown represents |
| | 1,500,000 | 4.10%, due 1/28/16 | | 1,502,852 | | the rate at May 31, 2009. | | |
| | | | | | | | (b) In default, issuer filed Chapter 11 bankruptcy. |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements |
| | | | | | | | | | | |
| |
STATEMENTS OF ASSETS AND LIABILITIES (Unaudited) |
May 31, 2009 |
|
| | | | | | | | | | | | |
| | | | | | | | | Equity | | Intermediate | |
| | | | | | | | | Growth Fund | | Bond Fund | |
| | ASSETS: | | | | | | | | | | |
| | Investments in securities, at value (Cost $119,994,840 and | | | | | |
| | $94,099,116 respectively) | | | | | $107,830,906 | | $ 90,916,437 | |
| | Receivable for securities sold | | | | | - | | 1,091,059 | |
| | Receivable for fund shares sold | | | | | 110,259 | | 79,355 | |
| | Dividends and interest receivable | | | | | 211,184 | | 988,706 | |
| | Prepaid expenses and other assets | | | | | 15,378 | | 25,747 | |
| | Total Assets | | | | | | 108,167,727 | | 93,101,304 | |
| | | | | | | | | | | | |
| | LIABILITIES: | | | | | | | | | |
| | Payable for securities purchased | | | | | - | | 4,000,000 | |
| | Dividends payable | | | | | | - | | 208,249 | |
| | Payable for fund shares repurchased | | | | | 1,700 | | - | |
| | Accrued advisory fees | | | | | | 62,792 | | 35,068 | |
| | Accrued administration fees | | | | | 10,064 | | 5,874 | |
| | Accrued transfer agency fees | | | | | 4,307 | | 1,687 | |
| | Other accrued expenses | | | | | | 19,946 | | 10,403 | |
| | Total Liabilities | | | | | | 98,809 | | 4,261,281 | |
| | Net Assets | | | | | | $108,068,918 | | $ 88,840,023 | |
| | | | | | | | | | | | |
| | NET ASSETS CONSIST OF: | | | | | | | | |
| | Paid in capital | | | | | | $131,094,534 | | $ 94,579,922 | |
| | Accumulated undistributed net investment income | | | 576,219 | | 194 | |
| | Accumulated net realized loss from | | | | | | | | |
| | investment transactions | | | | | (11,437,901) | | (2,557,414) | |
| | Net unrealized depreciation on investments | | | (12,163,934) | | (3,182,679) | |
| | Net Assets | | | | | | $108,068,918 | | $ 88,840,023 | |
| | | | | | | | | | | | |
| | Shares outstanding (unlimited number of shares authorized; | 13,597,829 | | 9,237,748 | |
| | no par value) | | | | | | | | | |
| | | | | | | | | | | | |
| | Net asset value, offering and redemption price per share | | $ 7.95 | | $ 9.62 | |
| | ($108,068,918/13,597,829 and $88,840,023/9,237,748, respectively) | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements |
| | | | | | | | | | | |
| |
STATEMENTS OF OPERATIONS (Unaudited) |
For the Six Months Ended May 31, 2009 |
|
| | | | | | | | | | | | |
| | | | | | | | | Equity | | Intermediate | |
| | | | | | | | | Growth Fund | | Bond Fund | |
| | | | | | | | | | | | |
| | INVESTMENT INCOME: | | | | | | | | |
| | Interest | | | | | | | $ 30,594 | | $ 1,968,748 | |
| | Dividends | | | | | | | 1,163,206 | | - | |
| | Total investment income | | | | | 1,193,800 | | 1,968,748 | |
| | | | | | | | | | | | |
| | EXPENSES: | | | | | | | | | |
| | Investment advisory fees | | | | | 352,970 | | 213,189 | |
| | Administration fees | | | | | | 69,268 | | 66,578 | |
| | Transfer agency fees | | | | | | 18,689 | | 15,270 | |
| | Custody fees | | | | | | 14,755 | | 8,303 | |
| | Legal fees | | | | | | | 11,754 | | 8,606 | |
| | Trustees' fees | | | | | | 9,179 | | 6,558 | |
| | Printing expense | | | | | | 7,344 | | 4,673 | |
| | Audit fees | | | | | | | 6,640 | | 6,640 | |
| | Chief Compliance Officer fees | | | | | 6,271 | | 3,688 | |
| | Registration & filing fees | | | | | | 4,673 | | 4,673 | |
| | Insurance expense | | | | | | 2,950 | | 1,967 | |
| | Miscellaneous expenses | | | | | | 1,230 | | 1,229 | |
| | Total expenses | | | | | | 505,723 | | 341,374 | |
| | | | | | | | | | | | |
| | Net investment income | | | | | 688,077 | | 1,627,374 | |
| | | | | | | | | | | | |
| | NET REALIZED AND UNREALIZED GAIN (LOSS) | | | | |
| | ON INVESTMENTS : | | | | | | | | |
| | Net realized loss from investment | | | | | | | | |
| | transactions | | | | | | (2,899,955) | | (1,706,893) | |
| | Net change in unrealized depreciation | | | | | | | | |
| | of investments for the period | | | | | 6,101,649 | | 3,459,668 | |
| | Net realized and unrealized gain | | | | | | | | |
| | on investments | | | | | | 3,201,694 | | 1,752,775 | |
| | Net increase in net assets resulting | | | | | | | | |
| | from operations | | | | | | $ 3,889,771 | | $ 3,380,149 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements |
| | | | | | | | | | | |
| |
EQUITY GROWTH FUND |
STATEMENT OF CHANGES IN NET ASSETS |
|
| | | | | | | | | | | | |
| | | | | | | | | For the six months | | For the year | |
| | | | | | | | | ended | | ended | |
| | | | | | | | | May 31, 2009 | | November 30, 2008 | |
| | | | | | | | | (Unaudited) | | | |
| | INCREASE (DECREASE) IN NET ASSETS | | | | | | |
| | FROM OPERATIONS: | | | | | | | | |
| | Net investment income | | | | | | $ 688,077 | | $ 977,810 | |
| | Net realized loss from investment transactions | | | (2,899,955) | | (8,516,342) | |
| | Net change in unrealized appreciation (depreciation) for the period | 6,101,649 | | (42,357,648) | |
| | Net increase (decrease) in net assets resulting from operations | | 3,889,771 | | (49,896,180) | |
| | | | | | | | | | | | |
| | DISTRIBUTIONS TO SHAREHOLDERS: | | | | | | |
| | Distributions from net investment income ($0.08 and $0.10 | | | | | |
| | per share, respectively) | | | | | | (1,009,296) | | (998,888) | |
| | | | | | | | | | | | |
| | CAPITAL SHARE TRANSACTIONS | | | 12,760,386 | | 13,589,833 | |
| | | | | | | | | | | | |
| | Net increase (decrease) in net assets | | | | | 15,640,861 | | (37,305,235) | |
| | | | | | | | | | | | |
| | NET ASSETS: | | | | | | | | | |
| | Beginning of period | | | | | | 92,428,057 | | 129,733,292 | |
| | | | | | | | | | | | |
| | End of period (including undistributed net investment income | | | | |
| | of $576,219 and $897,438 , respectively) | | | $108,068,918 | | $ 92,428,057 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements |
| | | | | | | | | | | |
| | | | | | | | | | | | |
INTERMEDIATE BOND FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
|
| | | | | | | | | | | | |
| | | | | | | | | For the six months | | For the year | |
| | | | | | | | | ended | | ended | |
| | | | | | | | | May 31, 2009 | | November 30, 2008 | |
| | | | | | | | | (Unaudited) | | | |
| | INCREASE IN NET ASSETS | | | | | | | | |
| | FROM OPERATIONS: | | | | | | | | |
| | Net investment income | | | | | | $ 1,627,374 | | $ 3,465,409 | |
| | Net realized gain (loss) from investment transactions | | | (1,706,893) | | 62,883 | |
| | Net change in unrealized appreciation (depreciation) for the period | 3,459,668 | | (6,726,860) | |
| | Net increase (decrease) in net assets resulting from operations | | 3,380,149 | | (3,198,568) | |
| | | | | | | | | | | | |
| | DISTRIBUTIONS TO SHAREHOLDERS: | | | | | | |
| | Distributions from net investment income ($0.18 and $0.41 | | | | | |
| | per share, respectively) | | | | | | (1,627,679) | | (3,465,211) | |
| | | | | | | | | | | | |
| | CAPITAL SHARE TRANSACTIONS | | | 5,086,864 | | 6,694,685 | |
| | | | | | | | | | | | |
| | Net increase in net assets | | | | | | 6,839,334 | | 30,906 | |
| | | | | | | | | | | | |
| | NET ASSETS: | | | | | | | | | |
| | Beginning of period | | | | | | 82,000,689 | | 81,969,783 | |
| | | | | | | | | | | | |
| | End of period (including undistributed net investment income | | | | |
| | of $194 and $499, respectively) | | | | | $ 88,840,023 | | $ 82,000,689 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements |
| | | | | | | | | | | | | | | |
| |
EQUITY GROWTH FUND |
FINANCIAL HIGHLIGHTS |
|
| | | | | | | | | | | | | | | | |
(For a fund share outstanding throughout each period) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | For the six months | | | | | | | | | | | |
| | | | | ended | | For the year ended November 30, |
| | | | | May 31, 2009 | | 2008 | | 2007 | | 2006 | | 2005 | | 2004 | |
| | | | | (Unaudited) | | | | | | | | | | | |
Net asset value, beginning of period | $ 7.80 | | $ 12.58 | | $ 11.39 | | $ 10.32 | | $ 9.67 | | $ 8.79 | |
| | | | | | | | | | | | | | | | |
INCOME (LOSS) FROM | | | | | | | | | | | | |
INVESTMENT OPERATIONS: | | | | | | | | | | | | |
Net investment income (1) | | 0.05 | | 0.09 | | 0.09 | | 0.06 | | 0.03 | | 0.02 | + |
Net realized and unrealized gains (losses) | | | | | | | | | | | | |
on investments | | 0.18 | | (4.77) | | 1.10 | | 1.11 | | 0.64 | | 0.86 | |
Total from investment operations | 0.23 | | (4.68) | | 1.19 | | 1.17 | | 0.67 | | 0.88 | |
| | | | | | | | | | | | | | | | |
LESS DISTRIBUTIONS: | | | | | | | | | | | | |
Dividends from net investment income | (0.08) | | (0.10) | | 0.00 | | (0.10) | | (0.02) | | 0.00 | + |
Distribution from net realized gains | | | | | | | | | | | | |
from security transactions | 0.00 | | 0.00 | | 0.00 | | 0.00 | | 0.00 | | 0.00 | |
Total distributions | | (0.08) | | (0.10) | | 0.00 | | (0.10) | | (0.02) | | 0.00 | |
| | | | | | | | | | | | | | | | |
Net asset value, end of period | $ 7.95 | | $ 7.80 | | $ 12.58 | | $ 11.39 | | $ 10.32 | | $ 9.67 | |
| | | | | | | | | | | | | | | | |
Total return (2) | | 3.01% | | (37.51%) | | 10.45% | | 11.37% | | 6.97% | | 10.02% | |
| | | | | | | | | | | | | | | | |
RATIOS/SUPPLEMENTAL DATA: | | | | | | | | | | | | |
Net assets, end of period (in 000's) | $ 108,069 | | $ 92,428 | | $ 129,733 | | $ 106,513 | | $ 95,582 | | $ 84,655 | |
Ratios to average net assets: | | | | | | | | | | | | |
Expenses, before reimbursement/recapture | 1.06% | (4) | 1.04% | | 1.03% | | 1.08% | | 1.09% | | 1.08% | |
Expenses, net of reimbursement/recapture | 1.06% | (4) | 1.04% | | 1.06% | (3) | 1.10% | (3) | 1.10% | (3) | 1.10% | (3) |
Net investment income, | | | | | | | | | | | | | |
| | before reimbursement/recapture | 1.45% | (4) | 0.85% | | 0.79% | | 0.62% | | 0.36% | | 0.26% | |
Net investment income, | | | | | | | | | | | | | |
| | net of reimbursement/recapture | 1.45% | (4) | 0.85% | | 0.77% | (3) | 0.59% | (3) | 0.35% | (3) | 0.24% | (3) |
Portfolio turnover rate | | 2% | | 11% | | 27% | | 37% | | 43% | | 37% | |
__________________ | | | | | | | | | | | | | |
(1) Net investment income per share is based on average shares outstanding during the period. | | | | | | |
(2) Total returns are historical and assume changes in share price and reinvestment of dividends and capital gain | | | |
distributions, if any. Total return does not reflect the deductions of taxes that a shareholder would pay on | | | |
distributions or on the redemption of shares. | | | | | | | | | | | |
(3) Such percentage reflects recapture of prior period expense reimbursement by adviser. | | | | | | | |
(4) Annualized. | | | | | | | | | | | | | |
+ Less than $.01 per share. | | | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements |
| | | | | | | | | | | | | | | |
| |
INTERMEDIATE BOND FUND |
FINANCIAL HIGHLIGHTS |
|
| | | | | | | | | | | | | | | | |
(For a fund share outstanding throughout each period) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | For the six months | | | | | | | | | | | |
| | | | | ended | | For the year ended November 30, |
| | | | | May 31, 2009 | | 2008 | | 2007 | | 2006 | | 2005 | | 2004 | |
| | | | | (Unaudited) | | | | | | | | | | | |
Net asset value, beginning of period | $ 9.41 | | $ 10.17 | | $ 10.18 | | $ 10.16 | | $ 10.43 | | $ 10.70 | |
| | | | | | | | | | | | | | | | |
INCOME (LOSS) FROM | | | | | | | | | | | | |
INVESTMENT OPERATIONS: | | | | | | | | | | | | |
Net investment income (1) | | 0.18 | | 0.41 | | 0.44 | | 0.42 | | 0.34 | | 0.34 | |
Net realized and unrealized gains (losses) | | | | | | | | | | | | |
on investments | | 0.21 | | (0.76) | | (0.01) | | 0.01 | | (0.25) | | (0.17) | |
Total from investment operations | 0.39 | | (0.35) | | 0.43 | | 0.43 | | 0.09 | | 0.17 | |
| | | | | | | | | | | | | | | | |
LESS DISTRIBUTIONS: | | | | | | | | | | | | |
Dividends from net investment income | (0.18) | | (0.41) | | (0.44) | | (0.41) | | (0.34) | | (0.34) | |
Distribution from net realized gains | | | | | | | | | | | | |
from security transactions | 0.00 | | 0.00 | | 0.00 | | 0.00 | | (0.02) | | (0.10) | |
Total distributions | | (0.18) | | (0.41) | | (0.44) | | (0.41) | | (0.36) | | (0.44) | |
| | | | | | | | | | | | | | | | |
Net asset value, end of period | $ 9.62 | | $ 9.41 | | $ 10.17 | | $ 10.18 | | $ 10.16 | | $ 10.43 | |
| | | | | | | | | | | | | | | | |
Total return (2) | | 4.17% | | (3.59)% | | 4.34% | | 4.38% | | 0.86% | | 1.48% | |
| | | | | | | | | | | | | | | | |
RATIOS/SUPPLEMENTAL DATA: | | | | | | | | | | | | |
Net assets, end of period (in 000's) | $ 88,840 | | $ 82,001 | | $ 81,970 | | $ 70,214 | | $ 58,497 | | $ 60,904 | |
Ratios to average net assets: | | | | | | | | | | | | |
Expenses | | | 0.79% | (3) | 0.82% | | 0.83% | | 0.89% | | 0.88% | | 0.89% | |
Net investment income | | 3.78% | (3) | 4.11% | | 4.38% | | 4.14% | | 3.33% | | 3.21% | |
Portfolio turnover rate | | 19% | | 27% | | 31% | | 54% | | 31% | | 36% | |
| | | | | | | | | | | | | | | | |
__________________ | | | | | | | | | | | | | |
(1) Net investment income per share is based on average shares outstanding during the period. | | | | | |
(2) Total returns are historical and assume changes in share price and reinvestment of dividends and capital gain | | | |
distributions, if any. Total return does not reflect the deductions of taxes that a shareholder would pay on | | | |
distributions or on the redemption of shares. | | | | | | | | | | | |
(3) Annualized. | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements |
| | | |
| | | THE NORTH COUNTRY FUNDS | |
| |
NOTES TO FINANCIAL STATEMENTS |
May 31, 2009 (Unaudited) |
| |
NOTE 1. ORGANIZATION
The North Country Funds (the “Trust”) was organized as a Massachusetts business trust on June 1, 2000, and registered under the Investment Company Act of 1940 as an open-end, diversified, management investment company on September 11, 2000. The Trust currently offers two series: the North Country Equity Growth Fund (the “Growth Fund”) and the North Country Intermediate Bond Fund (the “Bond Fund”, collectively the “Funds”). The Growth Fund’s principal investment objective is to provide investors with long-term capital appreciation while the Bond Fund seeks to provide investors with current income and total return with minimum fluctuations of principal value. Both Funds commenced operations on March 1, 2001.
The Bond Fund and the Growth Fund were initially organized on March 26, 1984 under New York law as Collective Investment Trusts sponsored by Glens Falls National Bank & Trust Company. Prior to their conversion to regulated investment companies (mutual funds) investor participation was limited to qualified employee benefit plans.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies followed by the Trust in the preparation of its financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America. The preparation of financial statements in conformity with these generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from these estimates.
Security Valuation- Securities which are traded on a national securities exchange are valued at the last quoted sale price. NASDAQ traded securities are valued using the NASDAQ official closing price (NOCP). Investments for which no sales are reported are valued at its last bid price. Any securities or other assets for which market quotations are not readily available, or securities for which the last bid price does not accurately reflect the current value, are valued at fair value as determined by the Trust's Fair Value Committee (the "Committee") in accordance with the Trust's "Portfolio Securities Valuation Procedures (the "Procedures"). Pursuant to the Procedures, the Committee will consider, among others, the following factors to determine a security's fair value: (i) the nature and pricing history (if any) of the security; (ii) whether any dealer quotations for the security are available; and (iii) possible valuation methodologies that could be used to determine the fair value of the security. There were no securities or other assets valued at fair value by the Committee as of May 31, 2009.
Fixed income securities generally are valued by using market quotations, but may be valued on the basis of prices furnished by an independent pricing service which uses prices based upon yields or prices of comparable securities, indications as to values from dealers, and general market conditions, when the adviser believes such prices accurately reflect the fair market value of the security. The ability of issuers of debt securities held by the Funds to meet their obligations may be affected by economic or political developments in a specific country or region.
| | | |
| | | THE NORTH COUNTRY FUNDS | |
| |
NOTES TO FINANCIAL STATEMENTS (Continued) |
May 31, 2009 (Unaudited) |
| |
Short term investments in fixed income securities with maturities of less than 60 days when acquired, or which subsequently are within 60 days of maturity, are valued by using the amortized cost method of valuation, which the Board has determined represents fair value.
As described under Security Valuation, the Funds utilize various methods to measure the fair value of most of its investments on a recurring basis. GAAP establishes a hierarchy that prioritizes inputs to valuation methods. The three levels of inputs are:
Level 1 – unadjusted quoted prices in active markets for identical assets that the Funds have the ability to access.
Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3 – significant unobservable inputs (including fund’s own assumptions in determining the fair value of investments.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used as of May 31, 2009 in valuing the Funds’ investments carried at fair value.
North Country Equity Growth Fund:
| | |
Valuation Inputs | Investments in Securities ($) | Other Financial Instruments* ($) |
Level 1– Quoted Prices | 107,830,906 | - |
Level 2– Other Significant Observable Inputs | - | - |
Level 3– Significant Unobservable Inputs | - | - |
Total | 107,830,906 | - |
North Country Intermediate Bond Fund:
| | |
Valuation Inputs | Investments in Securities ($) | Other Financial Instruments* ($) |
Level 1– Quoted Prices | 9,121,035 | - |
Level 2– Other Significant Observable Inputs | 81,795,402 | - |
Level 3– Significant Unobservable Inputs | - | - |
Total | 90,916,437 | - |
*Other financial instruments include derivative instruments such as futures, forward currency exchange contracts
and swap contracts, which are valued at the unrealized appreciation (depreciation) on the instrument.
The Funds did not hold any Level 3 investments during the period.
Federal Income Taxes- The Trust intends to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its net investment income and any realized capital gain. Therefore, no federal income tax provision is required.
| | | |
| | | THE NORTH COUNTRY FUNDS | |
| |
NOTES TO FINANCIAL STATEMENTS (Continued) |
May 31, 2009 (Unaudited) |
| |
Management reviewed the tax positions in open tax years 2005 through 2008 and determined that the Funds did not have a liability for unrecognized tax benefits. The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the statements of operations. During the period, the Funds did not incur any interest or penalties. The Funds identify their major tax jurisdictions as U.S. Federal and New York State.
Dividends and Distributions- The Bond Fund pays dividends from net investment income on a monthly basis. The Growth Fund will pay dividends from net investment income, if any, on an annual basis. Both Funds will declare and pay distributions from net realized capital gains, if any, at least annually. Income and capital gain distributions to shareholders are recorded on the ex-dividend date and are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles.
Security Transactions- Securities transactions are recorded no later than the first business day after the trade date, except for reporting purposes when trade date is used. Realized gains and losses on sales of securities are calculated on the identified cost basis. Dividend income is recorded on the ex-dividend date and interest income is recorded on an accrual basis. Discount and premium on securities purchased are amortized over the life of the respective securities. Withholding taxes on foreign dividends have been provided for in accordance with the fund’s understanding of the applicable country’s tax rules and rates.
Indemnification – The Trust indemnifies its officers and trustees for certain liabilities that may arise from the
performance of their duties to the Trust. Additionally, in the normal course of business, each Fund enters into contracts that contain a variety of representations and warranties and which provide general indemnities. A Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may
be made against the Fund that have not yet occurred. However, based on experience, the Funds expect the risk of loss due to these warranties and indemnities to be remote.
NOTE 3. INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
The Trust has entered into an investment advisory agreement (the “Advisory Agreement”) with North Country Investment Advisers, Inc. (the “Adviser”). Pursuant to the Advisory Agreement, the Adviser is responsible for formulating the Trust’s investment programs, making day-to-day investment decisions and engaging in portfolio transactions, subject to the authority of the Board of Trustees. Under the terms of the agreement, each Fund pays a fee, calculated daily and paid monthly, at an annual rate of 0.75% and 0.50% of the average daily net assets of the Equity Fund and Bond Fund, respectively. For the six months ended May 31, 2009, the Adviser received advisory fees of $352,970 from the Equity Fund and $213,189 from the Bond Fund.
The Adviser has voluntarily agreed to waive its advisory fee or, if necessary, to reimburse the Funds if and to the extent that the total annual operating expense ratio (excluding brokerage commissions, taxes, and extraordinary expenses) exceeds 1.10% of the average daily net assets, through November 30, 2009. For the six months ended May 31, 2009, there were no fee waivers or expense reimbursements paid by the Adviser to the Funds.
| | | |
| | | THE NORTH COUNTRY FUNDS | |
| |
NOTES TO FINANCIAL STATEMENTS (Continued) |
May 31, 2009 (Unaudited) |
| |
Under the terms of the Advisory Agreement, fees waived or expenses reimbursed by the Adviser are subject to reimbursement by the Fund up to five years from the date that the fee or expense was waived or reimbursed. The Adviser has further agreed to limit the period for which it may recover fee waivers or expense reimbursements to three years from the date such fee was waived or expense reimbursed. However, no reimbursement payment will be made by the Fund if it would result in the Fund exceeding the voluntary expense limitation described above. As of May 31, 2009, there were no fee waivers subject to recapture by the Adviser.
Gemini Fund Services, LLC (“GFS” or the “Administrator”) serves as administrator providing administration and accounting services to the Funds pursuant to an Administration and Accounting Agreement. Under the terms of such agreement, GFS is paid a monthly fee from each Fund that is based on a percentage of average daily net assets, subject to certain minimums, as follows: 0.15% on the first $75 million; 0.10% on the next $75 million; 0.07% in excess of $150 million. Each Fund also reimburses GFS for any out-of-pocket expenses. GFS also serves as transfer and dividend-disbursing agent to the Funds. For its services as transfer and dividend-disbursing agent, GFS receives a monthly fee, subject to certain minimums, based on an annual per account rate of $10 from the Growth Fund and $13 from the Bond Fund for open accounts and $2 for closed accounts, plus transactional charges. Each Fund also reimbu rses GFS for any out-of-pocket expenses. Total expenses incurred by each Fund for such services provided by GFS are disclosed in the Statement of Operations.
GFS receives $200 per month from SI Trust Servicing (“SI”), the custody administrator to the Funds, for processing the expenses for the Trust. GFS performs this service at the request of SI for the benefit of the Trust.
GemCom, LLC (“GemCom”), an affiliate of GFS, provides EDGAR conversion and filing services as well as print management services for the Funds on an ad-hoc basis. For EDGAR services, GemCom charges a per-
page conversion fee and a flat filing fee. For the six months ended May 31, 2009, GemCom received $3,402 from the Equity Fund and $3,121 from the Bond Fund for providing such services.
Pursuant to a service agreement with the Trust, Northern Lights Compliance Services, LLC (“NLCS”), an affiliate of GFS, provides a Chief Compliance Officer (“CCO”) to the Trust, including related administrative support. Under the terms of such agreement, NLCS is paid an annual fee of $19,845 from the Trust, payable quarterly, and is reimbursed for out-of-pocket expenses.
Certain officers and/or trustees of the Adviser and Administrator are also officers/trustees of the Trust.
NOTE 4. FUND SHARE TRANSACTIONS
At May 31, 2009, there were an unlimited number of shares authorized with no par value. Paid in capital for the Equity Fund and Bond Fund amounted to $131,094,534 and $94,579,922, respectively.
| | | |
| | | THE NORTH COUNTRY FUNDS | |
| |
NOTES TO FINANCIAL STATEMENTS (Continued) |
May 31, 2009 (Unaudited) |
| |
Transactions in capital shares were as follows:
| | | | | | | | |
Equity Growth Fund: | | | | | | | |
| | For the six months | | For the year |
| | ended | | ended |
| | May 31, 2009 | | November 30, 2008 |
| | Shares | | Amount | | Shares | | Amount |
| | (Unaudited) | | | | |
Shares sold
| 2,458,731 | | $ 17,889,412 | | 3,182,232 | | $ 30,675,031 |
Shares issued for reinvestment | | | | | | | |
of dividends | 32,069 | | 244,367 | | 21,559 | | 269,710 |
Shares redeemed
| (746,663) | | (5,373,393) | | (1,664,552) | | (17,354,908) |
Net increase
| 1,744,137 | | $ 12,760,386 | | 1,539,239 | | $ 13,589,833 |
| | | | | | | | |
| | | | | | | | |
Intermediate Bond Fund: | | | | | | | |
| | For the six months | | For the year |
| | ended | | ended |
| | May 31, 2009 | | November 30, 2008 |
| | Shares | | Amount | | Shares | | Amount |
| | (Unaudited) | | | | |
Shares sold
| 1,161,409 | | $ 11,164,903 | | 1,816,105 | | $ 18,106,474 |
Shares issued for reinvestment | | | | | | | |
of dividends | 24,960 | | 238,867 | | 52,564 | | 522,411 |
Shares redeemed
| (661,485) | | (6,316,906) | | (1,216,582) | | (11,934,200) |
Net increase | 524,884 | | $ 5,086,864 | | 652,087 | | $ 6,694,685 |
NOTE 5. INVESTMENTS
Investment transactions, excluding short-term securities, for the six months ended May 31, 2009 were as follows:
| | | |
| | | Intermediate Bond Fund |
| |
Equity Growth Fund | Excluding U.S. Government Securities | U.S. Government Securities |
Purchases
| $16,577,343 | $ 3,471,335 | $16,500,000 |
Sales | $ 2,098,804 | $11,005,990 | $ 4,000,000 |
| | | |
| | | THE NORTH COUNTRY FUNDS | |
| |
NOTES TO FINANCIAL STATEMENTS (Continued) |
May 31, 2009 (Unaudited) |
| |
At May 31, 2009, net unrealized appreciation (depreciation), for book purposes, on investment securities was as follows:
| | | |
| | Equity Growth Fund | | Intermediate Bond Fund |
Aggregate gross unrealized appreciation | | | |
for all investments for which there was an excess of value over cost |
$ 7,317,662 | |
$ 1,511,403 |
Aggregate gross unrealized depreciation | | | |
for all investments for which there was an excess of cost over value |
(19,481,596) | |
(4,694,082) |
Net unrealized depreciation | $ (12,163,934) | | $ (3,182,679) |
The aggregate cost of securities for federal income tax purposes at May 31, 2009 is the same as for book purposes for both Funds.
NOTE 6. TAX INFORMATION
The tax character of distributions paid during the six months ended May 31, 2009 and the year ended November 30, 2008, were as follows:
| | | |
Equity Growth Fund: |
For the six months ended May 31, 2009 | |
For the year ended Nov. 30, 2008 |
Ordinary income
| $ 1,009,296 | | $ 998,888 |
Long-term capital gains
| − | | − |
Total
| $ 1,009,296 | | $ 998,888 |
| | | |
Intermediate Bond Fund: | | | |
Ordinary income
| $1,627,679 | | $3,465,211 |
Long-term capital gains
| − | | − |
Total
| $1,627,679 | | $3,465,211 |
As of November 30, 2008, the components of distributable earnings on a tax basis were as follows:
| | | |
| | Undistributed Ordinary Income |
Long Term Gains (Losses) | Unrealized Appreciation (Depreciation) |
Equity Growth Fund | $ 897,438 | $ (8,537,946) | $ (18,265,583) |
Intermediate Bond Fund | 499 | (850,521) | (6,642,347) |
| | | |
| | | THE NORTH COUNTRY FUNDS | |
| |
NOTES TO FINANCIAL STATEMENTS (Continued) |
May 31, 2009 (Unaudited) |
| |
As of November 30, 2008, the Funds had available, for federal income tax purposes, the following unused capital loss carryforwards available to offset future capital gains expiring on November 30 of the years below:
| | | | | | | | | | | |
| | 2011 | | 2012 | | 2013 | | 2014 | | 2015 | | Total |
Equity Growth Fund | $21,604 | | $ - | | $ - | | $ - | | $8,516,342 | | $8,537,946 |
Intermediate Bond Fund.... | - | | - | | 730,867 | | 119,654 | | - | | 850,521 |
NOTE 7. CONTROL OWNERSHIP
The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a Fund creates presumption of control of the Fund, under Section 2(a) 9 of the Act. As of May 31, 2009, Cam Co., an account holding shares for the benefit of others in nominee name, held approximately 77% of the voting securities of the North Country Equity Growth Fund and approximately 85% of the North Country Intermediate Bond Fund.
NOTE 8. NEW ACCOUNTING PRONOUNCEMENTS
In April 2009, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position No. 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP 157-4”). FSP 157-4 provides additional guidance for estimating fair value in accordance with FAS 157, when the volume and level of activity for the asset or liability have significantly decreased as well as guidance on identifying circumstances that indicate a transaction is not orderly. FSP 157-4 is effective for fiscal years and interim periods ending after June 15, 2009. Management is currently evaluating the impact the adoption of FSP 157-4 will have on the Fund’s financial disclosures.
NOTE 9. SUBSEQUENT EVENTS
On July 24, 2009, a combined Special Meeting of Shareholders of the North Country Equity Growth Fund and The North Country Intermediate Bond Fund was held at which the shareholders of the Funds voted as indicated below with respect to the following proposal:
To elect two Trustees for the Trust
FOR
WITHHOLD
John E. Arsenault
21,654,273
4,285
John C. Olsen
21,654,870
3,688
| | | |
| | THE NORTH COUNTRY FUNDS | |
| |
DISCLOSURE OF FUND EXPENSES (Unaudited) |
| |
As a shareholder of a Fund in The North Country Funds, you incur ongoing costs, including management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. Please note, the expenses shown in the tables are meant to highlight ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges (CDSCs) on redemptions.
This example is based on an investment of $1,000 invested at December 1, 2008 and held until May 31, 2009.
Actual Expenses: The “Actual” section of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the column under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during the period.
Hypothetical Examples for Comparison Purposes: The “Hypothetical” section of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs which may be applicable to your account. Therefore, the “Hypothetical” example is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if transactional costs were included, your costs would have been higher.
| | | | |
| | Beginning Account Value (12/1/08) | Ending Account Value (5/31/09) | Expense Ratio (Annualized) | Expenses Paid During the Period* (12/1/08-5/31/09) |
Equity Growth Fund | | | | |
Actual | $1,000.00 | $ 1,030.15 | 1.06% | $5.37 |
Hypothetical (5% return before expenses) |
$1,000.00 |
$1,019.65 |
1.06% |
$5.34 |
Intermediate Bond Fund | | | | |
Actual | $1,000.00 | $1,041.69 | 0.79% | $4.02 |
Hypothetical (5% return before expenses) |
$1,000.00 |
$1,020.99 |
0.79% |
$3.98 |
* Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the
period, multiplied by 182 days divided by 365 days.
| | | |
| | THE NORTH COUNTRY FUNDS | |
| |
ADDITIONAL INFORMATION (Unaudited) |
| |
FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE INVESTMENT ADVISORY AGREEMENT
At a meeting (the “Meeting”) of the Board of Trustees (the “Board”) held on January 27, 2009, a majority of the Board, including a majority of trustees who are not “interested persons” of the Trust, as that term is defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended (hereafter, the “Independent Trustees”), unanimously approved the continuance of the investment advisory agreement (the “Agreement”) between the Adviser and the Funds. Fund counsel discussed with the Board its fiduciary responsibility to shareholders and the importance of assessing certain specific factors in its deliberations. Prior to the Meeting, the Adviser provided the Board with a number of written materials, including information relating to: a) the terms of the Agreement and fee arrangements with the Funds; b) the quality of the Adviser’s management and investment personnel; c) the financia l condition and stability of the Adviser and its parent company; d) data comparing each Fund’s fees and operating expenses with a group of similar mutual funds as independently chosen by Lipper Analytical, Inc. (the “Peer Group”); and e) past performance summaries for each Fund and their benchmark indices. In addition, the Board engaged in in-person discussions with representatives of the Adviser. The Board also met outside the presence of the Adviser to consider this matter and consulted with independent counsel and the Funds’ Chief Compliance Officer.
The Board, including the Independent Trustees unanimously approved continuance of the Agreement based upon its review of the written materials provided at the Meeting, the reports provided at each quarterly meeting of the Board, the Board’s discussions with key personnel of the Adviser, and the Board’s deliberations. In so doing, the Board concluded that the Adviser provides high quality service to the Funds, is committed both to compliance with regulatory requirements and to managing and growing the assets of the Funds. The Board also discussed the profits realized by the Adviser and its affiliates resulting from the relationship with the Funds and concluded that undue profitability was not a concern. In addition, the Board considered that the Adviser has voluntarily limited the overall expense ratio of each Fund since its inception and has agreed to continue to limit expenses for each of the Funds, at least through the fiscal year ending November 30, 2009. The Board compared the advisory fees to fees paid by other funds with similar investment strategies and asset size. The Board concluded that the cost of the services provided by the Adviser is fair and within a reasonable range. In assessing the investment performance of the Funds and the Adviser, the Board found that the performance of the Growth Fund has been satisfactory, consistent with market conditions and comparable to its Peer Group. The Board concluded that the performance of the Bond Fund had trailed its Peer Group, but had improved recently and reflected a conservative management approach that is appropriate for long-term, risk-averse investment. The Board also discussed the potential for alternate advisory arrangements and found that such measure would not be practical or cost-efficient. With respect to economies of scale, the Board determined, due to the Funds’ small size, that it was acceptable that the Funds’ contractu al fee levels do not currently reflect economies of scale. The Board further noted current voluntary limits on total expenses and the Adviser’s willingness to consider adjustments in advisory fees when each Fund’s total assets approach $500 million. Based on the foregoing and given the Adviser’s past performance managing the Funds and the competitive nature of the fees and expenses to be paid by the Funds for investment advisory services, the Board concluded that the overall arrangements provided under the terms of the Agreement were reasonable business arrangements, and, therefore, renewal of the Agreement was in the best interests of the Funds’ shareholders.
How to Obtain Proxy Voting Information
Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ending June 30, as well as a description of the policies and procedures that the Funds use to determine how to vote proxies is available without charge, upon request, by calling toll-free 1-888-350-2990 or by referring to the Security and Exchange Commission’s (“SEC”) website at http://www.sec.gov.
How to Obtain 1st and 3rd Fiscal Quarter Portfolio Holdings
Each Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Form N-Q is available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC (1-800-SEC-0330). The information on Form N-Q is available without charge, upon request, by calling 1-888-350-2990.
Item 2. Code of Ethics. Not applicable.
Item 3. Audit Committee Financial Expert. Not applicable.
Item 4. Principal Accountant Fees and Services. Not applicable.
Item 5. Audit Committee of Listed Companies. Not applicable to open-end investment companies.
Item 6. Schedule of Investments. Schedule of investments in securities of unaffiliated issuers is included under Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Funds. Not applicable to open-end investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable to open-end investment companies.
Item 9. Purchases of Equity Securities by Closed-End Funds. Not applicable to open-end investment companies.
Item 10. Submission of Matters to a Vote of Security Holders. None
Item 11. Controls and Procedures.
(a)
Based on an evaluation of the Registrant’s disclosure controls and procedures as of a date within 90 days of filing date of this Form N-CSR, the principal executive officer and principal financial officer of the Registrant have concluded that the disclosure controls and procedures of the Registrant are reasonably designed to ensure that the information required in filings on Form N-CSR is recorded, processed, summarized, and reported by the filing date, including that information required to be disclosed is accumulated and communicated to the Registrant’s management, including the Registrant’s principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
(b)
There were no significant changes in the Registrant’s internal control over financial reporting that occurred during the Registrant’s last fiscal half-year that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.
Item 12. Exhibits.
(a)(1)
Not applicable.
(a)(2)
Certifications required by Section 302 of the Sarbanes-Oxley Act of 2002 (and Item 11(a)(2) of Form N-CSR) are filed herewith.
(a)(3)
Not applicable for open-end investment companies.
(b)
Certifications required by Section 906 of the Sarbanes-Oxley Act of 2002 (and Item 11(b) of Form N-CSR) are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant)
The North Country Funds
By (Signature and Title)
/s/ Andrew Rogers
Andrew Rogers, President
Date
8/8/09
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By (Signature and Title)
/s/ Andrew Rogers
Andrew Rogers, President
Date
8/8/09
By (Signature and Title)
/s/ James Colantino
James Colantino, Treasurer
Date
8/8/09
