<PAGE> 1
Registration No. 2-94157/811-4146
As filed with the Securities and Exchange Commission
on July 11, 1996
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM N-1A
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 33
and
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 34
_________________________
NASL SERIES TRUST
(Exact Name of Registrant as Specified in Charter)
116 Huntington Avenue
Boston, Massachusetts 02116
(Address of Principal Executive Offices)
_________________________
James D. Gallagher, Esq.
General Counsel
North American Security Life Insurance Company
116 Huntington Avenue
Boston, Massachusetts 02116
(Name and Address of Agent for Service)
Copies to:
J. Sumner Jones, Esq.
Jones & Blouch L.L.P.
1025 Thomas Jefferson Street, N.W.
Washington, DC 20007
The Registrant has registered an indefinite amount of its shares under the
Securities Act of 1933 pursuant to a declaration made in accordance with
paragraph (a)(1) of Rule 24f-2 under the Investment Company Act of 1940. The
notice required by such rule for the Registrant's most recent fiscal year was
filed on February 28, 1996.
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b)
X on July 11, 1996 pursuant to paragraph (b)
---
___ 60 days after filing pursuant to paragraph (a)
___ on (date) pursuant to paragraph (a) of Rule 485
<PAGE> 2
NASL SERIES TRUST
CROSS REFERENCE TO ITEMS
REQUIRED BY RULE 404(a)
N-1A Item of Part A Caption in Prospectus
1. Cover Page
2. Synopsis
3. Financial Highlights; Management of the Trust
(Performance Data)
4. Synopsis; Investment Objectives, Policies and
Risks (Small/Mid Cap Trust, International
Small Cap Trust, Global Equity Trust;
Pasadena Growth Trust; Equity Trust; Value
Equity Trust; Growth Trust, Growth and Income
Trust; International Growth and Income Trust,
Strategic Bond Trust; Global Government Bond
Trust; Investment Quality Bond Trust; U.S.
Government Securities Trust; Money Market
Trust; Automatic Asset Allocation Trusts);
Risk Factors (Investment Restrictions
Generally; Foreign Securities; Lending
Securities; When-Issued Securities; Hedging
Techniques); Appendix I - Debt Security
Ratings; Appendix II -Options, Futures and
Currency Transactions
5. Management of the Trust (Advisory Agreement;
Subadvisory Agreements; Expenses); General
Information (Custodian)
6. General Information (Shares of the Trust;
Taxes; Dividends)
7. General Information (Purchase and Redemption
of Shares)
8. General Information (Purchase and Redemption
of Shares)
9. Not Applicable
N-1A Item of Part B Caption in Part B
10. Cover Page
11. Table of Contents
12. Not Applicable
13. Investment Policies (Money Market
Instruments); Investment Restrictions;
Portfolio Turnover
14. Management of the Trust (Compensation of
Trustees)
15. Organization of the Trust (Principal Holders
of Securities)
16. Investment Management Arrangements (The
Advisory Agreement; The Subadvisory
Agreements
17. Investment Management Arrangements (Portfolio
Brokerage)
18. Organization of the Trust (Shares of the
Trust)
19.
<PAGE> 3
Purchase and Redemption of Shares (Determination of Net Asset Value)
20. Not Applicable
21. Not Applicable
22. Purchase and Redemption of Shares
(Performance Data)
23. Financial Statements
<PAGE> 4
PART A
INFORMATION REQUIRED IN A PROSPECTUS
<PAGE> 5
NASL SERIES TRUST
116 Huntington Avenue Boston, Massachusetts 02116
NASL Series Trust (the "Trust") is a no-load, open-end management
investment company, commonly known as a mutual fund. Shares of the Trust are not
offered directly to the public but are sold only to insurance companies and
their separate accounts as the underlying investment medium for variable
contracts ("contracts"). The Trust provides a range of investment objectives
through seventeen separate investment portfolios, each of which issues its own
series of shares of beneficial interest.
The SMALL/MID CAP TRUST seeks long-term capital appreciation by investing
at least 65% of its assets in companies that at the time of purchase have total
market capitalization between $500 million and $5 billion
The INTERNATIONAL SMALL CAP TRUST seeks long term capital appreciation by
investing primarily in securities issued by foreign companies which have total
market capitalization or annual revenue of $1 billion or less.
THE GLOBAL EQUITY TRUST seeks long-term capital appreciation, by investing
primarily in a globally diversified portfolio of common stocks and securities
convertible into or exercisable for common stocks.
THE PASADENA GROWTH TRUST seeks to achieve long-term growth of capital by
emphasizing investments in companies with rapidly growing earnings per share,
some of which may be smaller emerging growth companies.
THE EQUITY TRUST seeks growth of capital, by investing primarily in common
stocks of United States issuers and securities convertible into or carrying the
right to buy common stocks.
The GROWTH TRUST seeks long-term growth of capital by investing at least
65% of its assets in common stocks of well-established, high-quality growth
companies.
THE VALUE EQUITY TRUST seeks long-term growth of capital by investing
primarily in common stocks and securities convertible into or carrying the right
to buy common stocks.
THE GROWTH AND INCOME TRUST seeks long-term growth of capital and income,
consistent with prudent investment risk, by investing primarily in a diversified
portfolio of common stocks of United States issuers which the Subadviser
believes are of high quality.
THE INTERNATIONAL GROWTH AND INCOME TRUST seeks long-term growth of
capital and income by investing primarily in a portfolio of securities of
foreign issuers.
THE STRATEGIC BOND TRUST seeks a high level of total return consistent
with preservation of capital by giving its Subadviser broad discretion to deploy
the portfolio's assets among certain segments of the fixed-income market as the
Subadviser believes will best contribute to achievement of the portfolio's
investment objective.
THE GLOBAL GOVERNMENT BOND TRUST seeks a high level of total return by
placing primary emphasis on high current income and the preservation of
capital, by investing primarily in a global portfolio of high-quality,
fixed-income securities of foreign and United States governmental entities and
supranational issuers.
THE INVESTMENT QUALITY BOND TRUST seeks a high level of current income
consistent with the maintenance of principal and liquidity, by investing
primarily in a diversified portfolio of investment grade corporate bonds and
U.S. Government bonds with intermediate to longer term maturities. Up to 20% of
the portfolio's assets may be invested in below investment grade debt
securities.
THE U.S. GOVERNMENT SECURITIES TRUST seeks a high level of current income
consistent with preservation of capital and maintenance of liquidity, by
investing in debt obligations and mortgage-backed securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
derivative securities such as collateralized mortgage obligations backed by such
securities.
THE MONEY MARKET TRUST seeks maximum current income consistent with
preservation of principal and liquidity, by investing in high quality money
market instruments with maturities of 397 days or less issued primarily by
United States entities.
THE AGGRESSIVE ASSET ALLOCATION TRUST seeks the highest total return
consistent with an aggressive level of risk tolerance. This Trust attempts to
limit the decline in portfolio value in very adverse market conditions to 15%
over any twelve month period.
THE MODERATE ASSET ALLOCATION TRUST seeks the highest total return
consistent with a moderate level of risk tolerance. This Trust attempts to limit
the decline in portfolio value in very adverse market conditions to 10% over any
twelve month period.
THE CONSERVATIVE ASSET ALLOCATION TRUST seeks the highest total return
consistent with a conservative level of risk tolerance. This Trust attempts to
limit the decline in portfolio value in very adverse market conditions to 5%
over any twelve month period. THERE CAN BE NO ASSURANCE THAT THE LIMITS IN
PORTFOLIO DECLINE SET FORTH ABOVE FOR THE AUTOMATIC ASSET ALLOCATION TRUSTS WILL
NOT BE EXCEEDED.
In pursuing their investment objectives, the Strategic Bond Trust reserves the
right to invest without limitation, and the Investment Quality Bond Trust may
invest up to 20% of its assets, in high yield (high risk) securities, commonly
known as "junk bonds" which also present a high degree of risk. High-yielding,
lower-quality securities involve comparatively greater risks, including price
volatility and risk of default in the timely payment of interest and principal,
than higher-quality securities. Although the Strategic Bond Trust's Subadviser
has the ability to invest up to 100% of the portfolio's assets in lower-rated
securities, the portfolio's Subadviser does not anticipate investing in excess
of 75% of the portfolio's assets in such securities. Purchasers should carefully
assess the risks associated with an investment in the Strategic Bond Trust. See
"RISK FACTORS -- High Yield (High Risk) Securities." AN INVESTMENT IN THE MONEY
MARKET TRUST IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT, AND THERE
CAN BE NO ASSURANCE THAT THE MONEY MARKET TRUST WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $10.00 PER SHARE. This Prospectus sets forth concisely
the information about the Trust that a prospective purchaser of a contract
should know before purchasing such a contract. PLEASE READ THIS PROSPECTUS AND
RETAIN IT FOR FUTURE REFERENCE. Additional information about the Trust has been
filed with the Securities and Exchange Commission and is available upon request
and without charge by writing the Trust at the above address or calling (617)
266-6008 and requesting the "Statement of Additional Information for NASL Series
Trust" dated the date of this Prospectus (hereinafter "Statement of Additional
Information"). The Statement of Additional Information is incorporated by
reference into this Prospectus. SHARES OF THE TRUST ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY.THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is July 11, 1996.
<PAGE> 6
NASL SERIES TRUST
TABLE OF CONTENTS
SYNOPSIS .............................................................. 3
FINANCIAL HIGHLIGHTS .................................................. 4
INVESTMENT OBJECTIVES AND POLICIES..................................... 20
Small/Mid Cap Trust............................................... 20
International Small Cap Trust..................................... 21
Global Equity Trust .............................................. 22
Pasadena Growth Trust ............................................ 23
Equity Trust ..................................................... 24
Growth Trust...................................................... 24
Value Equity Trust ............................................... 25
Growth and Income Trust .......................................... 25
International Growth and Income Trust ............................ 26
Strategic Bond Trust ............................................. 27
Global Government Bond Trust ..................................... 29
Investment Quality Bond Trust .................................... 30
U.S. Government Securities Trust ................................. 31
Money Market Trust ............................................... 32
Automatic Asset Allocation Trusts ................................ 33
RISK FACTORS .......................................................... 35
Investment Restrictions Generally ................................ 35
Additional Investment Restrictions on Borrowing
and Foreign Investing............................................. 35
High Yield Securities............................................. 36
Corporate Debt Securities......................................... 37
Foreign Sovereign Debt Securities................................. 37
Foreign Securities................................................ 38
Warrants.......................................................... 39
Lending Securities................................................ 39
When-Issued Securities ........................................... 39
Repurchase Agreements and Reverse Repurchase Agreements........... 39
Mortgage Dollar Rolls............................................. 40
Hedging and Other Strategic Transactions.......................... 40
Illiquid Securities .............................................. 41
MANAGEMENT OF THE TRUST ............................................... 41
Advisory Arrangements............................................. 41
Subadvisory Arrangements.......................................... 42
Expenses ......................................................... 47
Performance Data ................................................. 48
GENERAL INFORMATION ................................................... 48
Shares of the Trust .............................................. 48
Taxes ............................................................ 49
Dividends ........................................................ 50
Purchase and Redemption of Shares ................................ 50
Custodian ........................................................ 51
Appendix I - Debt Security Ratings .................................... 51
Appendix II - Strategic Bond and Investment Quality Bond Trust Debt
Ratings........................................................... 53
----------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE TRUST, THE ADVISER, THE SUBADVISERS OR THE
PRINCIPAL UNDERWRITER OF THE CONTRACTS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFERING IN ANY STATE IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
2
<PAGE> 7
SYNOPSIS
NASL Series Trust (the "Trust") is a series trust, which means that it has
several portfolios, each with a stated investment objective which it pursues
through separate investment policies. Currently, there are seventeen such
portfolios: the Small/Mid Cap Trust, the International Small Cap Trust, the
Global Equity Trust, the Pasadena Growth Trust, the Equity Trust, the Growth
Trust, the Value Equity Trust, the Growth and Income Trust, the International
Growth and Income Trust, the Strategic Bond Trust, the Global Government Bond
Trust, the Investment Quality Bond Trust, the U.S. Government Securities Trust,
the Money Market Trust, the Aggressive Asset Allocation Trust, the Moderate
Asset Allocation Trust and the Conservative Asset Allocation Trust. (The
Aggressive, Moderate and Conservative Asset Allocation Trusts are referred to
collectively as the "Automatic Asset Allocation Trusts.") The investment
objective of each of the seventeen portfolios is as described on the cover page
of this Prospectus.
In addition to the risks inherent in any investment in securities, certain
portfolios of the Trust are subject to particular risks associated with
investing in foreign securities, lending portfolio securities, investing in
when-issued securities and hedging techniques employed through the use of
futures contracts, options on futures contracts, forward currency contracts and
various options. See "Investment Restrictions."
The investment adviser of the Trust is NASL Financial Services, Inc. ("NASL
Financial" or the "Adviser"). The Trust currently has nine Subadvisers. Fred
Alger Management, Inc. ("Alger") serves as Subadviser to the Small/Mid Cap
Trust. Founders Asset Management, Inc. ("Founders") serves as Subadviser to the
Growth and the International Small Cap Trusts. Oechsle International Advisors,
L.P. ("Oechsle International") serves as Subadviser to the Global Equity and
Global Government Bond Trusts. Roger Engemann Management Co., Inc. ("REMC")
serves as Subadviser to the Pasadena Growth Trust. Fidelity Management Trust
Company ("FMTC") serves as Subadviser to the Equity, and the three Automatic
Asset Allocation Trusts. Goldman Sachs Asset Management ("GSAM") serves as
Subadviser to the Value Equity Trust. Wellington Management Company ("Wellington
Management") serves as Subadviser to the Growth and Income, Investment Quality
Bond and Money Market Trusts. Salomon Brothers Asset Management ("SBAM") serves
as Subadviser to the U.S. Government Securities and Strategic Bond Trusts. J.P.
Morgan Investment Management Inc. ("J.P. Morgan") serves as Subadviser to the
International Growth and Income Trust. The Adviser receives a fee from the Trust
computed separately for each portfolio as indicated in the expense table below.
The Subadviser of each portfolio receives a fee from the Adviser computed
separately for each portfolio, which fee is paid out of the advisory fee and is
not an additional charge to the portfolio or its shareholders. See "Management
of the Trust."
The Trust currently serves as the underlying investment medium for sums
invested in annuity and variable life contracts issued by North American
Security Life Insurance Company ("Security Life"), First North American Life
Assurance Company ("FNAL") and The Manufacturers Life Insurance Company of
America ("Manulife America"). The portfolios that are available for investment
by Manulife America contractholders are as follows: the Equity, Value Equity,
Growth and Income, U.S. Government, Aggressive Asset Allocation, Moderate Asset
Allocation and Conservative Asset Allocation Trusts. The Trust may, however, be
used for other purposes in the future, such as funding annuity contracts issued
by other insurance companies. Security Life is controlled by The Manufacturers
Life Insurance Company ("Manulife"), a mutual life insurance company based in
Toronto, Canada. FNAL is a wholly-owned subsidiary of Security Life and Manulife
America is a wholly owned subsidiary of Manulife. Currently, the Trust has three
shareholders, Security Life, FNAL and Manulife America. Trust shares are not
offered directly to and may not be purchased directly by members of the public.
Consequently, as of the date of this Prospectus, the terms "shareholder" and
"shareholders" in this Prospectus refer to Security Life, Manulife America and
FNAL.
Certain contract values will vary with the investment performance of the
portfolios of the Trust. Because contract owners will allocate their investments
among the portfolios, prospective purchasers should carefully consider the
information about the Trust and its portfolios presented in this Prospectus
before purchasing such a contract.
The Trust is a no-load, open-end management investment company registered
with the Securities and Exchange Commission under the Investment Company Act of
1940, and each of the portfolios, except the Global Government Bond Trust, is
diversified for purposes of the Investment Company Act of 1940. See "Global
Government Bond Trust."
Information about the performance of each portfolio of the Trust is
contained in the Trust's annual report to shareholders which may be obtained
without charge.
3
<PAGE> 8
<TABLE>
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- ----------------------------------------------------------------------------
<CAPTION>
SMALL/MID
CAP TRUST
-----------
03/04/96*
TO
06/15/96
(UNAUDITED)
-----------
<S> <C>
Net asset value, beginning of period ................. $ 12.50
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................ 0.01
Net realized and unrealized gain on investments ...... 0.93
Total from investment operations ................ 0.94
Net asset value, end of period ....................... $ 13.44
=======
Total return .................................... 7.52%
Net assets, end of period (000's) ................... $81,969
Ratio of operating expenses to
average net assets ................................. 1.19%(A)
Ratio of net investment income to
average net assets ................................. .45%(A)
Portfolio turnover rate .............................. 48%(A)
Average commission rate per share (B) ................ $ 0.069
- ----------
<FN>
* Commencement of operations.
(A) Annualized
(B) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged. In certain foreign markets the
relationship between the translated U.S. dollar price per share and
commission paid per share may vary from that of domestic markets.
</TABLE>
<PAGE> 9
<TABLE>
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- ------------------------------------------------------------------------------
<CAPTION>
INTERNATIONAL/
SMALL
CAP TRUST
-----------
03/04/96*
TO
06/15/96
(UNAUDITED)
-----------
<S> <C>
Net asset value, beginning of period .............. $ 12.50
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............................. 0.03
Net realized and unrealized gain on investments
and foreign currency transactions ............... 0.70
------
Total from investment operations ............. 0.73
Net asset value, end of period .................... $ 13.23
=======
Total return ................................. 5.84%
Net assets, end of period (000's) ................ $39,558
Ratio of operating expenses to
average net assets .............................. 1.50%(A)
Ratio of net investment income to
average net assets .............................. 2.03%(A)
Portfolio turnover rate ........................... 16%(A)
Average commission rate per share (B) ............. $ 0.019
- ----------
<FN>
* Commencement of operations.
(A) Annualized
(B) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged. In certain foreign markets the
relationship between the translated U.S. dollar price per share and
commission paid per share may vary from that of domestic markets.
</TABLE>
<PAGE> 10
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL EQUITY TRUST
------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 3/18/88*
------------------------------------------------------------------------------ TO
1995 1994 1993 1992 1991 1990 1989 12/31/88
--------- --------- --------- --------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period........................... $ 15.74 $ 15.73 $ 12.00 $ 12.24 $ 11.00 $ 12.57 $ 10.15 $10.03
Income from investment operations:
- ----------------------------------
Net investment income (loss) (B)... 0.29 0.05 0.12 0.10 0.16 0.12 0.10 (0.05)
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions.... 0.84 0.22 3.79 (0.19) 1.23 (1.41) 2.32 0.17
-------- -------- -------- -------- ------- ------- ------- ------
Total from investment
operations................. 1.13 0.27 3.91 (0.09) 1.39 (1.29) 2.42 0.12
Less distributions:
- -------------------
Dividends from net investment
income............................ (0.08) (0.02) (0.18) (0.15) (0.15) (0.04) --- ---
Distributions from capital gains.... (0.69) (0.24) --- --- --- (0.24) --- ---
-------- -------- -------- -------- ------- ------- ------- ------
Total distributions............. (0.77) (0.26) (0.18) (0.15) (0.15) (0.28) --- ---
-------- -------- -------- -------- ------- ------- ------- ------
Net asset value, end of period........ $ 16.10 $ 15.74 $ 15.73 $ 12.00 $ 12.24 $ 11.00 $ 12.57 $10.15
======== ======== ======== ======== ======= ======= ======= ======
Total return.................... 7.68% 1.74% 32.89% (0.72%) 12.80% (10.43%) 23.84% 1.20%
Net assets, end of period (000's)..... $648,183 $616,138 $377,871 $116,731 $89,003 $63,028 $26,223 $2,143
Ratio of operating expenses to
average net assets (C)............. 1.05% 1.08% 1.16% 1.16% 1.23% 1.28% 1.62% 3.98%(A)
Ratio of net investment income (loss)
to average net assets............... 0.61% 0.44% 0.77% 1.12% 1.47% 1.97% 1.82% (1.71%)(A)
Portfolio turnover rate............... 63% 52% 52% 69% 74% 67% 109% 81%(A)
- ---------------------------------
<FN>
* Commencement of operations.
(A) Annualized
(B) After expense reimbursement per share of $0.02 in 1988.
(C) The ratio of operating expenses, before reimbursement from the investment adviser, was 4.53% in 1988.
</TABLE>
4
<PAGE> 11
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PASADENA GROWTH TRUST
-----------------------------------------------------------
YEARS ENDED DECEMBER 31, 12/11/92*
----------------------------------------- TO
1995 1994 1993 12/31/92
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period....................... $ 9.05 $ 9.55 $ 9.93 $ 10.00
Income from investment operations:
- ----------------------------------
Net investment income (B)................................. 0.03 0.04 0.05 0.00
Net realized and unrealized gain
(loss) on investments.................................... 2.36 (0.50) (0.42) (0.07)
-------- -------- -------- -------
Total from investment operations.................. 2.39 (0.46) (0.37) (0.07)
Less distributions:
- -------------------
Dividends from net investment income....................... (0.04) (0.04) (0.01) ---
-------- -------- -------- -------
Total distributions............................... (0.04) (0.04) (0.01) ---
-------- -------- -------- -------
Net asset value, end of period............................. $ 11.40 $ 9.05 $ 9.55 $ 9.93
======== ======== ======== =======
Total return...................................... 26.53% (4.80%) (3.80%) (0.70%)
Net assets, end of period (000's).......................... $277,674 $151,727 $104,966 $31,118
Ratio of operating expenses to
average net assets (C).................................. 0.975% 0.975% 0.975% 1.06%(A)
Ratio of net investment income to
average net assets....................................... 0.42% 0.65% 0.75% 1.04%(A)
Portfolio turnover rate.................................... 57% 33% 12% 0%(A)
- -----------------------------
<FN>
* Commencement of operations.
(A) Annualized
(B) After subadviser expense reimbursement per share of $0.004, $0.006 and $0.01 for the years ended
December 31, 1995, 1994 and 1993, respectively.
(C) The ratio of operating expenses, before reimbursement from the subadviser, was 1.03%, 1.06% and
1.09% for the years ended December 31, 1995, 1994 and 1993, respectively.
</TABLE>
5
<PAGE> 12
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY TRUST
------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 6/18/85*
------------------------------------------------------------------------------------------------- TO
1995 1994 1993** 1992 1991 1990 1989 1988 1987 1986 12/31/85
-------- -------- -------- -------- ------- -------- -------- --------- --------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............ $ 14.66 $ 15.57 $ 13.97 $ 13.12 $ 11.33 $ 19.14 $ 15.17 $ 12.57 $ 13.01 $11.39 $10.72%
Income from
investment
operations:
-----------
Net investment
income (B)...... 0.10 0.11 0.07 0.64 0.14 0.24 0.29 0.15 0.19 0.27 0.12
Net realized
and unrealized
gain (loss) on
investments and
foreign currency
transactions.... 6.14 (0.18) 2.11 0.38 1.88 (1.95) 3.87 2.45 0.97 1.80 0.55
-------- -------- -------- -------- ------- -------- -------- --------- --------- ------ ------
Total from
investment
operations...... 6.24 (0.07) 2.18 1.02 2.02 (1.71) 4.16 2.60 1.16 2.07 0.67
Less
distributions:
--------------
Dividends from
net investment
income........... (0.11) (0.05) (0.58) (0.17) (0.23) (0.29) (0.12) --- (0.14) (0.24) ---
Distributions
from capital
gains............ --- (0.79) --- --- --- (5.81) (0.07) --- (1.46) (0.21) ---
-------- -------- -------- -------- ------- -------- -------- --------- --------- ------ ------
Total
distributions.. (0.11) (0.84) (0.58) (0.17) (0.23) (6.10) (0.19) --- (1.60) (0.45) ---
-------- -------- -------- -------- ------- -------- -------- --------- --------- ------ ------
Net asset value,
end of period...... $ 20.79 $ 14.66 $ 15.57 $ 13.97 $ 13.12 $ 11.33 $ 19.14 $ 15.17 $ 12.57 $13.01 $11.39
======== ======== ======== ======== ======= ======== ======== ========= ========= ====== ======
Total return... 42.79% (0.53%) 16.31% 7.93% 17.94% (11.79%) 27.70% 20.71% 6.87% 18.50% 6.20%
Net assets, end of
period (000's)..... $988,800 $534,562 $387,842 $192,626 $88,235 $36,564 $32,108 $133,852 $37,001 $1,408 $1,143
Ratio of operating
expenses to
average net
assets (C)......... 0.80% 0.84% 0.88% 0.95% 0.89% 0.97% 1.02% 1.08% 1.15% 1.41% 1.57%(A)
Ratio of net
investment income
to average net
assets............. 0.63% 0.88% 0.50% 7.31% 2.23% 2.74% 1.90% 1.80% 1.33% 1.19% 2.05%(A)
Portfolio turnover
rate............... 88% 132% 173% 782% 172% 95% 111% 49% 64% 209% 214%(A)
- --------------------------
<FN>
* Commencement of operations.
** Net investment income per share was calculated using the average shares method for fiscal year 1993.
(A) Annualized
(B) After expense reimbursement per share of $0.02, $0.53 and $0.14 in 1987, 1986 and 1985, respectively.
(C) The ratio of operating expenses, before reimbursement from the investment adviser, was 1.30%, 3.71% and 4.69% in 1987, 1986
and 1985, respectively.
</TABLE>
6
<PAGE> 13
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE EQUITY TRUST
-----------------------------------------------------------
YEARS ENDED DECEMBER 31, 02/19/93*
---------------------------------------- TO
1995 1994** 12/31/93
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net asset value, beginning
of period.................................... $ 11.33 $ 11.31 $ 10.00
Income from investment operations:
- ----------------------------------
Net investment income.......................... 0.17 0.12 0.07
Net realized and unrealized gain
(loss) on investments........................ 2.49 (0.03) 1.24
-------- -------- -------
Total from investment
operations....................... 2.66 0.09 1.31
Less distributions:
- -------------------
Dividends from net investment income........... (0.08) (0.05) ---
Distributions from capital gains............... (0.10) (0.02) ---
-------- -------- -------
Total distributions................ (0.18) (0.07) ---
-------- -------- -------
Net asset value, end of period................. $ 13.81 $ 11.33 $ 11.31
======== ======== =======
Total return....................... 23.69% 0.79% 13.10%
Net assets, end of period (000's).............. $396,827 $221,835 $86,472
Ratio of operating expenses to
average net assets........................... 0.85% 0.87% 0.94%(A)
Ratio of net investment income to
average net assets........................... 1.63% 1.08% 1.30%(A)
Portfolio turnover rate........................ 52% 26% 33%(A)
- -----------------------------
<FN>
* Commencement of operations.
** Net investment income per share was calculated using the average shares method for fiscal year 1994.
(A) Annualized
</TABLE>
7
<PAGE> 14
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH AND INCOME TRUST
---------------------------------------------------------------
YEARS ENDED DECEMBER 31, 4/23/91*
------------------------------------------------- TO
1995 1994 1993 1992 12/31/91
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period.................................... $ 13.04 $ 13.05 $ 12.10 $ 11.08 $ 10.00
Income from investment operations:
- ----------------------------------
Net investment income....................... 0.27 0.25 0.17 0.20 0.13
Net realized and unrealized gain
on investments and foreign currency
transactions............................. 3.45 0.11 0.98 0.92 0.95
-------- -------- -------- -------- -------
Total from investment operations...... 3.72 0.36 1.15 1.12 1.08
Less distributions:
- -------------------
Dividends from net investment income........ (0.26) (0.19) (0.18) (0.10) ---
Distributions from capital gains............ (0.13) (0.18) (0.02) --- ---
-------- -------- -------- -------- -------
Total distributions................... (0.39) (0.37) (0.20) (0.10) ---
-------- -------- -------- -------- -------
Net asset value, end of period................. $ 16.37 $ 13.04 $ 13.05 $ 12.10 $ 11.08
======== ======== ======== ======== =======
Total return......................... 29.20% 2.85% 9.62% 10.23% 10.80%
Net assets, end of period (000's).............. $669,387 $409,534 $288,765 $130,984 $57,404
Ratio of operating expenses to
average net assets........................... 0.80% 0.82% 0.85% 0.85% 0.98%(A)
Ratio of net investment income to
average net assets........................... 2.23% 2.40% 2.29% 2.78% 2.92%(A)
Portfolio turnover rate....................... 39% 42% 39% 44% 62%(A)
- ------------------
<FN>
* Commencement of operations.
(A) Annualized
</TABLE>
8
<PAGE> 15
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL
GROWTH AND
INCOME TRUST
------------------
01/09/95*
TO
12/31/95
------------------
<S> <C>
Net asset value, beginning
of period.................................... $ 10.00
Income from investment operations:
- ----------------------------------
Net investment income....................... 0.11
Net realized and unrealized loss
on investments and foreign currency
transactions............................. 0.59
--------
Total from investment
operations.......................... 0.70
Less distributions:
- -------------------
Dividends from net investment income......... (0.12)
Distributions from capital gains............. (0.11)
--------
Total distributions................... (0.23)
--------
Net asset value, end of period................. $ 10.47
========
Total return.......................... 6.98%
Net assets, end of period (000's).............. $88,638
Ratio of operating expenses to
average net assets........................... 1.47%(A)
Ratio of net investment income to
average net assets........................... 0.71%(A)
Portfolio turnover rate........................ 112%(A)
- -----------------------------
<FN>
* Commencement of operations.
(A) Annualized
</TABLE>
9
<PAGE> 16
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STRATEGIC BOND TRUST
---------------------------------------
YEARS ENDED DECEMBER 31, 02/19/93*
------------------------- TO
1995 1994 12/31/93
---- ---- --------
<S> <C> <C> <C>
Net asset value, beginning
of period.................................... $ 9.91 $10.88 $ 10.00
Income from investment operations:
- ----------------------------------
Net investment income....................... 0.78 0.57 0.33
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions............................. 1.04 (1.22) 0.55
-------- ------ -------
Total from investment
operations.......................... 1.82 (0.65) 0.88
Less distributions:
- -------------------
Dividends from net investment income........ (0.47) (0.28) ----
Distributions from capital gains............ ---- (0.04) ----
-------- ------ -------
Total distributions................... (0.47) (0.32) --
-------- ------ -------
Net asset value, end of period................. $ 11.26 $ 9.91 $ 10.88
======== ======= =======
Total return.......................... 19.22% (5.99%) 8.80%
Net assets, end of period (000's).............. $122,704 $84,433 $53,640
Ratio of operating expenses to
average net assets........................... 0.92% 0.91% 1.00%(A)
Ratio of net investment income to
average net assets........................... 8.76% 7.49% 6.56%(A)
Portfolio turnover rate........................ 181% 197% 356%(A)
- ----------
<FN>
* Commencement of operations.
(A) Annualized
</TABLE>
10
<PAGE> 17
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL GOVERNMENT BOND TRUST
-------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 3/18/88*
--------------------------------------------------------------- TO
1995 1994 1993 1992 1991 1990 1989 12/31/88
---- ---- ---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................................$ 12.47 $ 13.93 $ 12.47 $ 12.88 $ 11.59 $ 10.50 $10.21 $10.03
Income from investment operations:
- ----------------------------------
Net investment income.................... 1.16 0.74 0.59 0.42 0.55 0.25 0.45 0.14
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions........ 1.62 (1.54) 1.67 (0.16) 1.21 1.13 -- 0.04
Total from investment operations.. 2.78 (0.80) 2.26 0.26 1.76 1.38 0.45 0.18
Less distributions:
- -------------------
Dividends from net investment income..... (0.69) (0.30) (0.70) (0.43) (0.46) (0.24) (0.09) --
Distributions from capital gains......... -- (0.36) (0.10) (0.24) (0.01) (0.05) (0.07) --
-------- -------- -------- ------- ------- ------- ------ ------
Total distributions............... (0.69) (0.66) (0.80) (0.67) (0.47) (0.29) (0.16) --
-------- -------- -------- ------- ------- ------- ------ ------
Net asset value, end of period.............$ 14.56 $ 12.47 $ 13.93 $ 12.47 $ 12.88 $ 11.59 $10.50 $10.21
======== ======== ======== ======= ======= ======= ====== ======
Total return..................... 23.18% (5.75%) 18.99% 2.27% 15.86% 13.49% 4.49% 1.79%
Net assets, end of period (000's)......... $235,243 $208,513 $196,817 $67,859 $28,251 $11,582 $4,065 $1,355
Ratio of operating expenses to
average net assets....................... 0.93% 0.96% 1.06% 1.05% 1.14% 1.21% 1.50% 3.39%(A)
Ratio of net investment income to
average net assets....................... 6.83% 6.10% 5.61% 6.71% 17.28% 6.62% 7.15% 3.74%(A)
Portfolio turnover rate.................... 171% 157% 154% 132% 164% 142% 50% 234%(A)
- ----------
<FN>
* Commencement of operations.
(A) Annualized
</TABLE>
11
<PAGE> 18
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT QUALITY BOND TRUST
------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 6/18/85*
-------------------------------------------------------------------------------- TO
1995 1994 1993 1992 1991** 1990 1989 1988 1987 1986 12/31/85
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period....... $ 11.01 $ 12.12 $ 11.58 $ 11.33 $ 10.74 $ 12.37 $ 11.55 $ 10.79 $ 11.58 $11.18 $10.28
Income from investment
operations:
- ----------------------
Net investment
income (B).............. 0.77 0.66 0.60 0.63 0.76 1.12 0.75 0.57 0.81 1.02 0.55
Net realized and
unrealized gain (loss)
on investments.......... 1.28 (1.23) 0.53 0.15 0.85 (1.50) 0.51 0.19 (0.50) 0.37 0.35
Total from investment
operations......... 2.05 (0.57) 1.13 0.78 1.61 (0.38) 1.26 0.76 0.31 1.39 0.90
Less distributions:
- -------------------
Dividends from net
investment income....... (0.74) (0.54) (0.59) (0.53) (1.02) (1.25) (0.44) -- (0.88) (0.69) --
Distributions from
capital gains........... -- -- -- -- -- -- -- -- (0.22) (0.30) --
-------- -------- ------- ------- ------- ------- ------- -------- ------- ------ ------
Total distributions.. (0.74) (0.54) (0.59) (0.53) (1.02) (1.25) (0.44) -- (1.10) (0.99) --
-------- -------- ------- ------- ------- ------- ------- -------- ------- ------ ------
Net asset value,
end of period............. $ 12.32 $ 11.01 $ 12.12 $ 11.58 $ 11.33 $ 10.74 $ 12.37 $ 11.55 $ 10.79 $11.58 $11.18
======== ======== ======= ======= ======= ======= ======= ======== ======= ====== ======
Total return......... 19.49% (4.64%) 10.01% 7.21% 16.07% (2.73%) 11.34% 7.09% 2.61% 13.25% 8.72%
Net assets, end of
period (000's)............ $143,103 $111,423 $99,474 $60,185 $38,896 $20,472 $26,965 $114,221 $25,131 $1,295 $1,120
Ratio of operating expenses
to average net
assets (C)................ 0.74% 0.76% 0.77% 0.80% 0.85% 0.70% 0.83% 0.89% 0.95% 1.16% 1.31%(A)
Ratio of net investment
income to average net
assets.................... 6.91% 6.49% 6.03% 6.96% 7.47% 8.41% 8.77% 7.97% 7.46% 8.11% 9.99%(A)
Portfolio turnover rate.... 137% 140% 33% 59% 115% 120% 351% 94% 201% 127% 165%(A)
- ----------
<FN>
* Commencement of operations.
** The Investment Quality Bond Trust is the successor to the Bond Trust
effective April 23, 1991.
(A) Annualized
(B) After expense reimbursement per share of $0.02, $0.28 and $0.12 in 1987, 1986 and 1985, respectively.
(C) The ratio of operating expenses, before reimbursement from the investment adviser, was 1.14%, 3.38% and 3.55% in 1987,
1986 and 1985, respectively.
</TABLE>
12
<PAGE> 19
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES TRUST
--------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 3/18/88*
--------------------------------------------------------------------- TO
1995 1994 1993 1992 1991 1990 1989** 12/31/88
---- ---- ---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................................ $ 12.64 $ 13.48 $ 13.05 $ 12.85 $ 11.83 $ 10.98 $ 9.81 $10.03
Income from investment operations:
- ----------------------------------
Net investment income (B)............... 0.89 0.77 0.48 0.10 0.19 1.07 0.20 0.07
Net realized and unrealized gain
(loss) on investments.................. 0.99 (0.95) 0.49 0.65 1.40 (0.13) 1.08 (0.29)
-------- -------- -------- -------- ------- ------- ------ ------
Total from investment operations.. 1.88 (0.18) 0.97 0.75 1.59 0.94 1.28 (0.22)
Less distributions:
- -------------------
Dividends from net investment income..... (0.87) (0.51) (0.46) (0.38) (0.53) (0.08) (0.11) --
Distributions from capital gains......... -- (0.15) (0.08) (0.17) (0.04) (0.01) -- --
-------- -------- -------- -------- ------- ------- ------ ------
Total distributions............... (0.87) (0.66) (0.54) (0.55) (0.57) (0.09) (0.11) --
-------- -------- -------- -------- ------- ------- ------ ------
Net asset value, end of period............. $ 13.65 $ 12.64 $ 13.48 $ 13.05 $ 12.85 $ 11.83 $10.98 $ 9.81
======== ======== ======== ======== ======= ======= ====== ======
Total return..................... 15.57% (1.25%) 7.64% 6.19% 14.01% 8.63% 13.16% (2.19%)
Net assets, end of period (000's).......... $216,788 $188,813 $222,072 $125,945 $29,246 $10,469 $5,905 $ 344
Ratio of operating expenses to
average net assets (C).................. 0.71% 0.73% 0.75% 0.76% 0.87% 1.04% 0.90% 5.16%(A)
Ratio of net investment income to
average net assets....................... 6.46% 5.68% 5.05% 6.12% 7.09% 7.70% 6.66% 1.16%(A)
Portfolio turnover rate.................... 212% 387% 213% 141% 233% 284% 330% 156%(A)
- ----------
<FN>
* Commencement of operations.
** The U.S. Government Securities Trust is the successor to the Convertible
Securities Trust effective May 1, 1989.
(A) Annualized
(B) After expense reimbursement per share of $0.01 and $0.06 in 1989 and 1988, respectively.
(C) The ratio of operating expenses, before reimbursement from the investment adviser, was 1.62% and 6.16% in 1989 and 1988,
respectively.
</TABLE>
13
<PAGE> 20
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET TRUST
--------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 6/18/85*
---------------------------------------------------------------------------------------- TO
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 12/31/85
------- ------- ------ ------ ------ ------- ------ ------ ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period....... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $10.00 $10.00 $10.00
Income from investment
operations:
- ----------------------
Net investment
income (B)............... 0.55 0.38 0.27 0.33 0.56 0.75 0.72 0.57 0.60 0.56 0.36
Less distributions:
- -------------------
Dividends from net
investment income....... (0.55) (0.38) (0.27) (0.33) (0.56) (0.75) (0.72) (0.57) (0.60) (0.56) (0.36)
-------- -------- -------- ------- ------- ------- ------- ------- ------ ------ ------
Net asset value, end
of period.................. $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $10.00 $10.00 $10.00
======== ======== ======== ======= ======= ======= ======= ======= ====== ====== ======
Total return...... 5.62% 3.78% 2.69% 3.36% 5.71% 7.76% 8.56% 6.77% 6.13% 5.74% 3.61%
Net assets, end of
period (000's)............. $258,117 $276,674 $132,274 $89,535 $79,069 $85,040 $19,403 $12,268 $7,147 $1,046 $1,001
Ratio of operating
expenses to average net
assets (C)................ 0.54% 0.57% 0.59% 0.60% 0.60% 0.57% 0.79% 0.99% 0.78% 1.11% 1.21%(A)
Ratio of net investment
income to average net
assets..................... 5.48% 3.93% 2.66% 3.28% 5.65% 7.27% 8.26% 6.68% 5.86% 6.84% 6.84%(A)
<FN>
- ---------------------------------
* Commencement of operations.
(A) Annualized
(B) After expense reimbursement per share of $0.08, $0.23 and $0.12 in 1987, 1986 and 1985, respectively.
(C) The ratio of operating expenses, before reimbursement from the investment adviser, was 1.57%, 3.43% and 3.50% in 1987, 1986
and 1985, respectively.
</TABLE>
14
<PAGE> 21
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE ASSET ALLOCATION TRUST
----------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------- 8/83/89*
TO
1995 1994 1993 1992 1991 1990 12/31/89
-------- ------- ------- ------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period............................... $ 11.17 $ 12.03 $ 11.25 $ 10.72 $ 9.08 $ 9.88 $ 10.00
Income from investment operations:
- ----------------------------------
Net investment income .................. 0.35 0.31 0.34 0.30 0.36 0.36 0.08
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions....... 2.07 (0.41) 0.79 0.55 1.69 (1.07) (0.20)
-------- -------- -------- -------- -------- ------- -------
Total from investment operations. 2.42 (0.10) 1.13 0.85 2.05 (0.71) (0.12)
Less distributions:
- -------------------
Dividends from net investment income.... (0.33) (0.31) (0.30) (0.32) (0.41) (0.07) ----
Distributions from capital gains........ (0.41) (0.45) (0.05) ---- ---- (0.02) ----
-------- -------- -------- -------- -------- ------- -------
Total distributions................. (0.74) (0.76) (0.35) (0.32) (0.41) (0.09) ----
-------- -------- -------- -------- -------- ------- -------
Net asset value, end of period............ $ 12.85 $ 11.17 $ 12.03 $ 11.25 $ 10.72 $ 9.08 $ 9.88
======== ======== ======== ======== ======== ======= =======
Total return....................... 22.77% (0.69%) 10.30% 8.24% 22.96% (7.27%) (1.20%)
Net assets, end of period (000's)......... $211,757 $184,662 $174,448 $151,627 $124,632 $91,581 $87,301
Ratio of operating expenses to
average net assets...................... 0.91% 0.89% 0.86% 0.89% 0.88% 0.78% 0.89%(A)
Ratio of net investment income to
average net assets...................... 2.76% 2.90% 2.96% 3.08% 3.63% 4.08% 3.32%(A)
Portfolio turnover rate................... 111% 136% 92% 123% 172% 82% 22%(A)
<FN>
- -----------------------------
* Commencement of operations.
(A) Annualized
</TABLE>
15
<PAGE> 22
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MODERATE ASSET ALLOCATION TRUST
-----------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 8/03/89*
-------------------------------------------------------------------- TO
1995 1994 1993 1992 1991 1990 12/31/89
------- ------ ------ ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................................ $ 10.79 $ 11.76 $ 11.14 $ 10.72 $ 9.29 $ 10.03 $ 10.00
Income from investment operations:
- ----------------------------------
Net investment income ................... 0.50 0.45 0.41 0.41 0.42 0.48 0.11
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions........ 1.65 (0.65) 0.67 0.43 1.50 (1.10) (0.08)
-------- -------- -------- -------- -------- -------- --------
Total from investment operations.. 2.15 (0.20) 1.08 0.84 1.92 (0.62) 0.03
Less distributions:
- -------------------
Dividends from net investment income..... (0.45) (0.40) (0.39) (0.42) (0.49) (0.10) ----
Distributions from capital gains......... (0.10) (0.37) (0.07) ---- ---- (0.02) ----
-------- -------- -------- -------- -------- -------- --------
Total distributions.................. (0.55) (0.77) (0.46) (0.42) (0.49) (0.12) ----
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period............. $ 12.39 $ 10.79 $ 11.76 $ 11.14 $ 10.72 $ 9.29 $ 10.03
======== ======== ======== ======== ======== ======== ========
Total return........................ 20.68% (1.61%) 10.06% 8.30% 21.23% (6.23%) 0.30%
Net assets, end of period (000's).......... $650,136 $604,491 $644,257 $505,967 $420,074 $327,328 $318,439
Ratio of operating expenses to
average net assets....................... 0.84% 0.85% 0.84% 0.87% 0.86% 0.73% 0.79%(A)
Ratio of net investment income to
average net assets....................... 4.09% 4.01% 4.02% 4.21% 4.38% 5.10% 4.51%(A)
Portfolio turnover rate.................... 129% 180% 135% 169% 168% 76% 41%(A)
<FN>
- -----------------------------
* Commencement of operations.
(A) Annualized
</TABLE>
16
<PAGE> 23
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONSERVATIVE ASSET ALLOCATION TRUST
-----------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 8/03/89*
------------------------------------------------------------------- TO
1995 1994 1993 1992 1991 1990 12/31/89
------ ------ ------ ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................................. $ 10.34 $ 11.26 $ 10.78 $ 10.63 $ 9.56 $ 10.11 $ 10.00
Income from investment operations:
- ----------------------------------
Net investment income .................... 0.54 0.55 0.50 0.47 0.58 0.62 0.15
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions......... 1.26 (0.76) 0.44 0.26 1.15 (1.01) (0.04)
-------- -------- -------- -------- -------- -------- --------
Total from investment operations... 1.80 (0.21) 0.94 0.73 1.73 (0.39) 0.11
Less distributions:
- -------------------
Dividends from net investment income...... (0.55) (0.46) (0.46) (0.58) (0.66) (0.13) ----
Distributions from capital gains.......... ---- (0.25) ---- ---- ---- (0.03) ----
-------- -------- -------- -------- -------- -------- --------
Total distributions................... (0.55) (0.71) (0.46) (0.58) (0.66) (0.16) ----
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period.............. $ 11.59 $ 10.34 $ 11.26 $ 10.78 $ 10.63 $ 9.56 $ 10.11
======== ======== ======== ======== ======== ======== ========
Total return......................... 18.07% (1.84%) 8.99% 7.36% 18.80% (3.84%) 1.10%
Net assets, end of period (000's)........... $224,390 $216,716 $250,117 $201,787 $165,167 $149,901 $141,191
Ratio of operating expenses to
average net assets........................ 0.87% 0.87% 0.86% 0.89% 0.88% 0.76% 0.82%(A)
Ratio of net investment income to
average net assets........................ 4.68% 4.86% 4.78% 4.99% 5.65% 6.68% 6.00%(A)
Portfolio turnover rate..................... 110% 220% 170% 252% 211% 78% 85%(A)
<FN>
- -----------------------------
* Commencement of operations.
(A) Annualized
</TABLE>
17
<PAGE> 24
INVESTMENT OBJECTIVES AND POLICIES
Each portfolio has a stated investment objective which it pursues through
separate investment policies. The differences in objectives and policies among
the portfolios can be expected to affect the return of each portfolio and the
degree of market and financial risk to which each portfolio is subject.
The investment objectives of each portfolio represent fundamental policies
of each such portfolio and may not be changed without the approval of the
holders of a majority of the outstanding shares of the portfolio. Except for
certain investment restrictions, the policies by which a portfolio seeks to
achieve its investment objectives may be changed by the Trustees of the Trust
without the approval of the shareholders.
The following is a description of the investment objectives and policies
of each portfolio. More complete descriptions of the money market instruments in
which the Trust may invest and of the options, futures, currency and other
derivative transactions that certain portfolios may engage in are set forth in
the Statement of Additional Information. A more complete description of the debt
security ratings used by the Trust assigned by Moody's Investors Service, Inc.
("Moody's") or Standard and Poor's Corporation ("S&P") is included in Appendix I
to this Prospectus.
SMALL/MID CAP TRUST
The investment objective of the Small/Mid Cap Trust is to seek long term
capital appreciation. Alger manages the Small/Mid Cap Trust and will pursue this
objective by investing at least 65% of the portfolio's total assets (except
during temporary defensive periods) in small/mid cap equity securities. As used
in this Prospectus, small/mid cap equity securities are equity securities of
companies that, at the time of purchase, have "total market capitalization" --
present market value per share multiplied by the total number of shares
outstanding -- between $500 million and $5 billion. The portfolio may invest up
to 35% of its total assets in equity securities of companies that, at the time
of purchase, have total market capitalization of $5 billion or greater and in
excess of that amount (up to 100% of its assets ) during temporary defensive
periods.
The Small/Mid Cap Trust seeks to achieve its investment objective by
investing in equity securities, such as common or preferred stocks, or
securities convertible into or exchangeable for equity securities, including
warrants and rights. The portfolio will invest primarily in companies whose
securities are traded on domestic stock exchanges or in the over-the-counter
market.
The Small/Mid Cap Trust may invest a significant portion of its assets in
the securities of small companies. Small companies are those which are still in
the developing stages of their life cycles and will attempt to achieve rapid
growth in both sales and earnings. Investments in small companies involve
greater risk than is customarily associated with more established companies.
These companies often have sales and earnings growth rates which exceed those of
large companies. Such growth rates may be reflected in more rapid share price
appreciation. However, smaller companies often have limited operating histories,
product lines, markets or financial resources, and they may be dependent upon
one-person management. These companies may be subject to intense competition
from larger entities, and the securities of such companies may have limited
marketability and may be subject to more abrupt or erratic movements in price
than securities of larger companies or the market averages in general.
Therefore, the net asset values of the Small/Mid Cap Trust may fluctuate more
widely than the popular market averages. Accordingly, an investment in the
portfolio may not be appropriate for all investors.
In order to afford the portfolio the flexibility to take advantage of new
opportunities for investments in accordance with its investment objectives, it
may hold up to 15% of its net assets (up to 100% of their assets during
temporary defensive periods) in money market instruments, bank and thrift
obligations, obligations issued or guaranteed by the U.S. Government or by its
agencies or instrumentalities, foreign bank obligations and obligations of
foreign branches or domestic banks, variable rate master demand notes and
repurchase agreements. When the portfolio is in a defensive position, the
opportunity to achieve capital growth will be limited, and, to the extent that
this assessment of market conditions is incorrect, the portfolio will be
foregoing the opportunity to benefit from capital growth resulting from
increases in the value of its investments and may not achieve its investment
objective.
Foreign Securities. The portfolio may invest up to 20% of its total assets
in foreign securities and will be subject to certain risks as a result of these
investments. These risks are described under the caption "RISK FACTORS --
Foreign Securities" in this Prospectus. Moreover, substantial investments in
foreign securities may have adverse tax implications as described under "GENERAL
INFORMATION -Taxes" in this Prospectus. The portfolio may also purchase American
Depository Receipts ("ADRs") or U.S. dollar-deonominated securities of foreign
issuers that are not included in the 20% foreign securities limitation. See
"RISK FACTORS - Foreign Securities" in this Prospectus for a description of
ADRs.
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Use of Hedging and Other Strategic Transactions. The Small/Mid Cap Trust
is currently authorized to use all of the various investment strategies referred
to under "RISK FACTORS -- Hedging and Other Strategic Transactions". The
Statement of Additional Information contains a description of these strategies
and of certain risks associated therewith.
INTERNATIONAL SMALL CAP TRUST
The investment objective of the International Small Cap Trust is to seek
long term capital appreciation. Founder manages the International Small Cap
Trust and will pursue this objective by investing primarily in securities issued
by foreign companies which have total market capitalizations (present market
value per share multiplied by the total number of shares outstanding) or annual
revenues of $1 billion or less. These securities may represent companies in both
established and emerging economies throughout the world.
At least 65% of the portfolio's total assets will normally be invested in
foreign securities representing a minimum of three countries (other than the
United States). The portfolio may invest in larger foreign companies or in U.S.
based companies if, in Founders' opinion, they represent better prospects for
appreciation.
The International Small Cap Trust may invest a significant portion of its
assets in the securities of small companies. Small companies are those which are
still in the developing stages of their life cycles and are attempting to
achieve rapid growth in both sales and earnings. Investments in small companies
involve greater risk than is customarily associated with more established
companies. These companies often have sales and earnings growth rates which
exceed those of large companies. Such growth rates may be reflected in more
rapid share price appreciation. However, smaller companies often have limited
operating histories, product lines, markets or financial resources, and they may
be dependent upon one-person management. These companies may be subject to
intense competition from larger entities, and the securities of such companies
may have limited marketability and may be subject to more abrupt or erratic
movements in price than securities of larger companies or the market averages in
general. Therefore, the net asset values of the International Small Cap Trust
may fluctuate more widely than the popular market averages. Accordingly, an
investment in the portfolio may not be appropriate for all investors.
The International Small Cap Trust will invest primarily in equity
securities but may also invest in convertible securities, preferred stocks,
bonds, debentures and other corporate obligations when Founders believes that
these investments offer opportunities for capital appreciation. Current income
will not be a substantial factor in the selection of these securities. The
portfolio will only invest in bonds, debentures and corporate obligations--other
than convertible securities and preferred stock--rated investment-grade (Baa or
higher by Moody's or BBB or higher by S&P) at the time of purchase or , if
unrated, of comparable quality in the opinion of Founders.. Convertible
securities and preferred stocks purchased by the Portfolio may be rated in
medium and lower categories by Moody's or S&P (Ba or lower by Moody's and BB or
lower by S&P) but will not be rated lower than B. The portfolio may also invest
in unrated convertible securities and preferred stocks in instances in which
Founders believes that the financial condition of the issuer or the protection
afforded by the terms of the securities limits risk to a level similar to that
of securities rated in categories no lower than B. The portfolio is not required
to dispose of debt securities whose ratings are down-graded below these ratings
subsequent to the portfolio's purchase of the securities. See "RISK FACTORS -
High Yield (High Risk) Securities." A description of the ratings used by Moody's
and S & P is set forth in Appendix I to the Prospectus.
The International Small Cap Trust may invest temporarily in the following
securities if Founders determines that it is appropriate for purposes of
enhancing liquidity or preserving capital in light of prevailing market or
economic conditions: cash, cash equivalents, U.S. government obligations,
commercial paper, bank obligations, repurchase agreements, and negotiable U.S.
dollar-denominated obligations of domestic and foreign branches of U.S.
depository institutions, U.S. branches of foreign depository institutions, and
foreign depository institutions. When the portfolio is in a defensive position,
the opportunity to achieve capital growth will be limited, and, to the exent
that this assessment of market conditions is incorrect, the portfolio will be
foregoing the opportunity to benefit from capital growth resulting from
increases in the value of equity investments and may not achieve its investment
objective.
Foreign Securities. The portfolio may invest up to 100% of its total
assets in foreign securities and will be subject to special risks as a result of
these investments. These risks are described under the caption "RISK FACTORS --
Foreign Securities" in this Prospectus. Moreover, substantial investments in
foreign securities may have adverse tax implications as described under "GENERAL
INFORMATION -Taxes" in this Prospectus. In order to comply with limitations
imposed by the State of California Insurance Department, the International Small
Cap Trust will comply with the restrictions regarding foreign investments set
forth under "Risk Factors - Additional Investment Restrictions on Borrowing and
Foreign Investing."
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Foreign investments of the International Small Cap Trust may include
securities issued by companies located in countries not considered to be major
industrialized nations. Such countries are subject to more economic, political
and business risk than major industrialized nations, and the securities they
issue and of issuers located in such countries are expected to be more volatile
and more uncertain as to payments of interest and principal. The secondary
market for such securities is expected to be less liquid than for securities of
major industrialized nations. Such countries may include (but are not limited
to) Argentina, Bolivia, Brazil, Chile, China, Colombia, Costa Rica, Czech
Republic, Ecuador, Egypt, Greece, Hong Kong, Hungary, India, Indonesia, Ireland,
Israel, Jordan, Malaysia, Mexico, New Zealand, Nigeria, North Korea, Pakistan,
Paraguay, Peru, Philippines, Poland, Portugal, Singapore, Slovak Republic. South
Africa, South Korea, Spain, Sri Lanka, Taiwan, Thailand, Turkey, Uruaguay,
Venezuela, Vietnam and the countries of the former Soviet Union. Investments of
the Portfolio may include securities created through the Brady Plan, a program
under which heavily indebted countries have restructured their bank debt into
bonds. See "OTHER INSTRUMENTS--High Yield Foreign Sovereign Debt Securities" in
the Statement of Additional Information.
Use of Hedging and Other Strategic Transactions. The International Small
Cap Trust is currently authorized to use all of the various investment
strategies referred to under "RISK FACTORS -- Hedging and Other Strategic
Transactions." The Statement of Additional Information contains a description of
these strategies and of certain risks associated therewith.
GLOBAL EQUITY TRUST
The investment objective of the Global Equity Trust is long-term capital
appreciation. Oechsle International manages the Global Equity Trust and intends
to pursue this objective by investing primarily in a globally diversified
portfolio of common stocks and securities convertible into or exercisable for
common stocks.
At least 65% of the assets of the Global Equity Trust will generally be
invested in a globally diversified portfolio of equity securities (e.g., common
and preferred stocks). Up to 35% of the assets of the Global Equity Trust may be
invested in securities convertible into or exercisable for common stocks and in
fixed income securities. Fixed income securities are discussed in the
description of the Global Government Bond Trust below. Under normal
circumstances, at least 65% of the Global Equity Trust's assets will be invested
in securities of at least three different countries. However, the Global Equity
Trust may for temporary defensive purposes choose to invest substantially all of
its assets in U.S. securities or cash and cash items. Cash is an actively
managed portfolio asset. The Global Equity Trust's cash position will reflect
Oechsle International's overall measure of optimism in the global equity
markets. If Oechsle International foresees unusual market risks, cash reserves
will be increased to reduce portfolio volatility. Cash reserves are generally
held in U.S. short-term government instruments, although non-U.S. government
securities may be held for this purpose from time to time.
Oechsle International seeks to achieve the Global Equity Trust's
investment objective of long-term capital appreciation by making investment
decisions based on a two-pronged approach of (i) choosing a limited group of
countries with strong and stable national financial markets, generally with
total capitalization in excess of $5 billion, and (ii) identifying a select
group of companies in such countries with attractive investment potential and
typical capitalization of $200 million or more. The following is a brief
description of the Oechsle International two-pronged investment approach.
Country Selection. The Global Equity Trust will seek to maximize returns
by significantly overweighing markets identified as attractive, while reducing
overall portfolio risk through broad diversification of investments across a
limited group of national markets. Broad diversification provides a prudent
method of reducing volatility while allowing the Global Equity Trust to take
advantage of the different movements of major equity markets to maximize
returns. Opportunities for global investing have broadened in recent years. For
example, in 1980 the U.S. stock market capitalization represented approximately
70% of the total world stock market capitalization and by 1990 such share had
fallen to approximately 30%.
Generally, investments will be limited to companies in countries where
total market capitalization exceeds $5 billion. The Global Equity Trust's focus
will normally be on the largest, most liquid international equity markets
including, but not limited to, the United States, Japan, the United Kingdom, the
Federal Republic of Germany, Canada, France and Italy.
Security Selection. Investments will generally be made in companies with
market capitalizations of at least $200 million. Oechsle International focuses
its research effort on exchange listed U.S. companies and a universe of
approximately 1,000 non-U.S. companies, most of which are included in either the
Morgan Stanley Capital International Europe, Australia and Far East Index or
other major international indices. The Global Equity Trust intends to purchase
and hold securities for long-term capital appreciation and does not expect to
trade for short-term gain.
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Use of Hedging and Other Strategic Transactions
The Global Equity Trust is currently authorized to use all of the various
investment strategies referred to under "Hedging and Other Strategic
Transactions." With the exception of currency transactions, however, it is not
presently anticipated that any of these strategies will be used to a significant
degree by the portfolio. The Statement of Additional Information contains a
description of these strategies and of certain risks associated therewith. The
Global Equity Trust will be subject to special risks as a result of its ability
to invest up to 100% of its assets in foreign securities. These risks are
described under the caption "Foreign Securities" in this Prospectus. In order to
comply with limitations imposed by the State of California Insurance Department,
the Global Equity Trust will comply with the restrictions regarding foreign
investments set forth under "Risk Factors - Additional Investment Restrictions
on Borrowing and Foreign Investing."
Moreover, substantial investments in foreign securities may have adverse
tax implications as described under "Taxes" in this Prospectus. The ability to
diversify its investments among the equity markets in different countries may,
however, reduce the overall level of market risk to the extent it may reduce the
Global Equity Trust's exposure to a single market.
PASADENA GROWTH TRUST
The principal investment objective of the Pasadena Growth Trust is
long-term growth of capital by emphasizing investments in companies with rapidly
growing earnings per share, some of which may be smaller emerging growth
companies.
The Pasadena Growth Trust emphasizes the purchase of common stocks of
domestic corporations with rapidly growing earnings per share. Some of the
companies in the portfolio may be unseasoned, although most are generally
well-known and established. The Pasadena Growth Trust also invests in stocks of
companies with a market capitalization of less than $500 million and companies
that, although not growing rapidly, are undervalued by other criteria of their
fundamental net worth in the opinion of its Subadviser. The volatility of its
investment portfolio is likely to be greater than that of the Standard & Poor's
500 Stock Index and greater than that of the Value Equity or Equity Trust. For
this reason, the net asset value per share of the Pasadena Growth Trust may
fluctuate substantially and the portfolio may not be appropriate for short-term
investments. Dividend and interest income received from portfolio securities is
largely incidental.
The Pasadena Growth Trust's investments may also include preferred stocks,
warrants, convertible debt obligations and other debt obligations that, in the
Subadviser's opinion, offer the possibility of capital appreciation over the
course of approximately two or more years because of the timing of such
investments. In addition to the interest received from such debt instruments, if
interest rates fall, these instruments are likely to increase in value.
Conversely, if interest rates rise, a decrease in value can be expected. The
Pasadena Growth Trust does not, however, anticipate investing a significant
portion of its total assets in such instruments.
The debt obligations which may be acquired by the Pasadena Growth Trust
include direct and indirect obligations of the U.S. Government and its agencies,
states and municipalities and their agencies, or corporate issuers. Any
corporate debt obligations in which the Pasadena Growth Trust may invest must be
rated at least BBB or Baa or better by national agencies, or, if unrated, are,
in the Subadviser's opinion, of equivalent investment quality. Securities which
are rated "BBB" or "Baa" are generally regarded as having an adequate capacity
to pay interest and repay principal in accordance with the terms of the
obligation, but may have some speculative characteristics. In addition, such
securities are generally more sensitive to changes in economic conditions than
securities rated in the higher categories, which tend to be more sensitive to
interest rate changes. In the event that the rating for any security held in the
Pasadena Growth Trust's portfolio drops below "BBB" or "Baa" such change will be
considered by the Trust's Subadviser in evaluating the overall composition of
the Trust's portfolio.
From time to time, depending on the Subadviser's analysis of market and
other considerations, all or part of the assets of the portfolio may be held in
cash and short-term money market instruments, including obligations of the U.S.
Government, high quality commercial paper, certificates of deposit, bankers'
acceptances, bank interest bearing demand accounts, and repurchase agreements
secured by U.S. Government securities. All such investments will be made for
temporary defensive purposes to protect against the erosion of capital and
pending investment in other securities.
As a matter of operating policy, the Trust may invest in securities of
unseasoned companies. The Subadviser regards a company as unseasoned when, for
example, it is relatively new to or not yet well established in its primary line
of business. Such companies generally are smaller and younger than companies
whose shares are traded on the major stock exchanges. Accordingly, their shares
are often traded over-the-counter and their share prices may be more volatile
than those of larger, exchange-listed companies. In order to avoid undue risks,
the portfolio normally will not purchase securities of any company with a record
of fewer than three years' continuous operation (including that of
predecessors).
The Pasadena Growth Trust does not intend to engage in the purchase of
securities on a when-issued or delayed delivery basis or engage in any hedging
or other transactions described in the Statement of Additional Information under
the caption "Hedging and Other Strategic Transactions." The Pasadena Growth
Trust will be subject to certain risks as a result of its ability to invest up
to 20% of its assets in
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foreign securities. These risks are described under the caption "Foreign
Securities" in this Prospectus. Moreover, substantial investments in foreign
securities may have adverse tax implications as described under "Taxes" in this
Prospectus.
EQUITY TRUST
The principal investment objective of the Equity Trust is growth of
capital. Current income is a secondary consideration although growth of income
may accompany growth of capital.
FMTC manages the Equity Trust and seeks to attain the foregoing objective
by investing primarily in common stocks of United States issuers or securities
convertible into or which carry the right to buy common stocks. It may also
invest to a limited degree, normally not in excess of 15% of the value of the
Equity Trust's total assets, in non-convertible preferred stocks and debt
securities. Portfolio securities may be selected with a view toward either
short-term or long-term capital growth. When in FMTC's opinion market or
economic conditions warrant a defensive posture, the Equity Trust may place any
portion of its assets in investment grade debt securities (i.e., the four
highest bond ratings assigned by Moody's or S&P), preferred stocks, Government
securities or cash. The fourth highest category of investment grade bonds has
some speculative characteristics and instruments with such ratings are subject
to greater fluctuations in value than more highly rated instruments as economic
conditions change. The Equity Trust is not required to dispose of such
instruments in the event they are downgraded. It may also maintain amounts in
cash or short-term debt securities pending selection of investments in
accordance with its policies.
The Equity Trust will invest primarily in securities listed on national
securities exchanges, but from time to time it may also purchase securities
traded in the "over the counter" market. The Equity Trust will be subject to
certain risks as a result of its ability to invest up to 20% of its assets in
foreign securities. These risks are described under the caption "Foreign
Securities" in this Prospectus. Moreover, substantial investments in foreign
securities may have adverse tax implications as described under "Taxes" in this
Prospectus.
Use of Hedging and Other Strategic Transactions
The Equity Trust is currently authorized to use all of the various
investment strategies referred to under "RISK FACTORS -- Hedging and Other
Strategic Transactions." However, it is not presently anticipated that any of
these strategies will be used to a significant degree by the portfolio. The
Statement of Additional Information contains a description of these strategies
and of certain risks associated therewith.
GROWTH TRUST
The investment objective of the Growth Trust is to seek long-term growth
of capital. Founders manages the Growth Trust and will pursue this objective by
investing, under normal market conditions, at least 65% of its total assets in
common stocks of well-established, high-quality growth companies that Founders
believes have the potential to increase earnings faster than the rest of the
market. These companies tend to have strong performance records, solid market
positions and reasonable financial strength, and have continuous operating
records of three years or more.
The Growth Trust may invest in convertible securities, preferred stocks,
bonds, debentures and other corporate obligations when Founders believes that
these investments offer opportunities for capital appreciation. Current income
will not be a substantial factor in the selection of these securities. The
Growth Trust will only invest in bonds, debentures and corporate
obligations--other than convertible securities and preferred stock--rated
investment-grade (Baa or higher by Moody's and BBB or higher by S&P) or, if
unrated, of comparable quality in the opinion of Founders at the time of
purchase. Convertible securities and preferred stocks purchased by the Trust may
be rated in medium and lower categories by Moody's or S&P (Ba or lower by
Moody's and BB or lower by S&P) but will not be rated lower than B. The Growth
Trust may also invest in unrated convertible securities and preferred stocks in
instances in which Founders believes that the financial condition of the issuer
or the protection afforded by the terms of the securities limits risk to a level
similar to that of securities rated in categories no lower than B. The Growth
Trust is not required to dispose of debt securities whose ratings are
down-graded below these ratings subsequent to the Portfolio's purchase of the
securities. See "Risk Factors - High Yield Securities."
The Growth Trust may invest temporarily in the following securities if
Founders determines that it is appropriate for purposes of enhancing liquidity
or preserving capital in light of prevailing market or economic conditions:
cash, cash equivalents, U.S. government obligations, commercial paper, bank
obligations, repurchase agreements, and negotiable U.S. dollar-denominated
obligations of domestic and foreign branches of U.S. depository institutions,
U.S. branches of foreign depository institutions, and foreign depository
institutions. When the Growth Trust is in a defensive position, the
opportunity to achieve capital growth will be limited, and, to the extent that
this assessment of market conditions is incorrect, the Growth Trust will be
foregoing the opportunity to benefit from capital growth resulting from
increases in the value of equity investments and may not achieve its
investment objective.
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Foreign Securities. The Growth Trust may invest up to 20% of its total
assets in foreign securities and will be subject to certain risks as a result of
these investments. These risks are described under the caption "RISK FACTORS --
Foreign Securities" in this Prospectus. Moreover, substantial investments in
foreign securities may have adverse tax implications as described under "GENERAL
INFORMATION -Taxes" in this Prospectus.
Use of Hedging and Other Strategic Transactions. The Growth Trust is
currently authorized to use all of the various investment strategies referred to
under "RISK FACTORS -- Hedging and Other Strategic Transactions." The Statement
of Additional Information contains a description of these strategies and of
certain risks associated therewith.
VALUE EQUITY TRUST
The principal investment objective of the Value Equity Trust is long-term
growth of capital. GSAM manages the Value Equity Trust and will seek to attain
its objective by investing under normal circumstances at least 65% of its total
assets in equity securities, consisting of common or preferred stocks, including
options and warrants.
The Value Equity Trust will invest primarily in securities listed on
national securities exchanges and securities traded in the "over-the-counter"
market. Under normal market conditions the Value Equity Trust may invest up to
35% of its total assets in preferred stocks, government securities, short-term
debt securities, money market instruments, cash or investment grade bonds (i.e.,
the four highest bond ratings assigned by Moody's or S&P or determined to be of
comparable quality by GSAM.) When in GSAM's opinion market or economic
conditions warrant a temporary defensive posture, the Value Equity Trust may
place any portion of its assets in these types of non-equity securities. The
fourth highest category of investment grade bonds has some speculative
characteristics and instruments with such ratings are subject to greater
fluctuations in value than more highly rated instruments as economic conditions
change. The Value Equity Trust is not required to dispose of such instruments in
the event they are downgraded.
The Value Equity Trust will be subject to special risks as a result of its
ability to invest up to 20% of its assets in foreign securities. These risks are
described under the caption "Foreign Securities" in this Prospectus. Moreover,
substantial investments in foreign securities may have adverse tax implications
as described under "Taxes" in this Prospectus.
Use of Hedging and Other Strategic Transactions
The Value Equity Trust is currently authorized to use all of the various
investment strategies referred to under "Hedging and Other Strategic
Transactions." The Statement of Additional Information contains a description of
these strategies and of certain risks associated therewith.
GROWTH AND INCOME TRUST
The investment objective of the Growth and Income Trust is to provide
long-term growth of capital and income consistent with prudent investment risk.
Wellington Management manages the Growth and Income Trust and seeks to
achieve the Trust's objective by investing primarily in a diversified portfolio
of common stocks of U.S. issuers which Wellington Management believes are of
high quality. Wellington Management believes that high quality is evidenced by a
leadership position within an industry, a strong or improving balance sheet,
relatively high return on equity, steady or increasing dividend payout and
strong management skills. The Trust's investments will primarily emphasize
dividends paying stocks of larger companies. The Trust may also invest in
securities convertible into or which carry the right to buy common stocks,
including those convertible securities issued in the Euromarket, preferred
stocks and debt securities. When market or financial conditions warrant a
temporary defensive posture, the Trust may, in order to reduce risk and achieve
attractive total investment return, invest up to 100% of its assets in
securities which are authorized for purchase by the Investment Quality Bond
Trust (excluding non-investment grade securities) or the Money Market Trust. The
Subadviser expects that under normal market conditions the Growth and Income
Trust will consist primarily of equity securities.
Investments will be selected on the basis of fundamental analysis to
identify those securities that, in Wellington Management's judgment, provide the
potential for long-term growth of capital and income. Fundamental analysis
involves assessing a company and its business environment, management, balance
sheet, income statement, anticipated earnings and dividends and other related
measures of value. When selecting securities of issuers domiciled outside of the
United States, Wellington Management will also monitor and evaluate the economic
and political climate and the principal securities markets of the country in
which each company is located.
The Growth and Income Trust will invest primarily in securities listed on
national securities exchanges, but from time to time it may also purchase
securities traded in the "over the counter" market.
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The Growth and Income Trust will be subject to certain risks as a result
of its ability to invest up to 20% of its assets in foreign securities. These
risks are described under the caption "Foreign Securities" in this Prospectus.
Moreover, substantial investments in foreign securities may have adverse tax
implications as described under "Taxes" in this Prospectus.
Use of Hedging and Other Strategic Transactions
The Growth and Income Trust is currently authorized to use all of the
various investment strategies referred to under "Hedging and Other Strategic
Transactions." However, it is not presently anticipated that any of these
strategies will be used to a significant degree by the portfolio. The Statement
of Additional Information contains a description of these strategies and of
certain risks associated therewith.
INTERNATIONAL GROWTH AND INCOME TRUST
The investment objective of the International Growth and Income Trust is
to seek long-term growth of capital and income. The portfolio is designed for
investors with a long-term investment horizon who want to take advantage of
investment opportunities outside the United States.
J.P. Morgan manages the International Growth and Income Trust and will
seek to achieve the portfolio's objective by investing, under normal
circumstances, at least 65% of its total assets in equity securities of foreign
issuers, consisting of common stocks and other securities with equity
characteristics such as preferred stock, warrants, rights and convertible
securities. The portfolio will focus primarily on the common stock of
established companies based in developed countries outside the United States.
Such investments will be made in at least three foreign countries. The portfolio
invests in securities listed on foreign or domestic securities exchanges and
securities traded in foreign or domestic over-the-counter markets, and may
invest in certain restricted or unlisted securities. See "RISK FACTORS --
Foreign Securities." Under normal circumstances, the International Growth and
Income Trust expects to invest primarily in equity securities. However, the
portfolio may invest up to 35% of its assets in debt obligations of corporate or
sovereign or supranational organizations rated A or higher by Moody's or S&P, or
if unrated, of equivalent credit quality as determined by the Subadviser. See
"Global Government Bond Trust" for further information on supranational
organizations. Under normal circumstances, the portfolio will be invested
approximately 85% in equity securities and 15% in these fixed income securities.
This allocation, however, may change over time. J.P. Morgan may allocate the
portfolio's investment in these asset classes in a manner consistent with the
portfolio's investment objective and current market conditions. Using a variety
of analytical tools, J.P. Morgan assesses the relative attractiveness of each
asset class and determines an optimal allocation between them. Yields on
non-U.S. equity securities tend to be lower than those on equity securities of
U.S. issuers. Therefore, current income from the portfolio may not be as high as
that available from a portfolio of U.S. equity securities.
In pursuing the International Growth and Income Trust's objective, J.P.
Morgan will actively manage the assets of the portfolio through country
allocation and stock valuation and selection. Based on fundamental research,
quantitative valuation techniques and experienced judgment, J.P. Morgan uses a
structured decision-making process to allocate the portfolio primarily across
the developed countries of the world outside the United States. This universe is
typically represented by the Morgan Stanley Europe, Australia and Far East Index
(the "EAFE Index").
Using a dividend discount model and based on analysts' industry expertise,
securities within each country are ranked within economic sectors according to
their relative value. Based on this valuation, J.P. Morgan selects the
securities which appear the most attractive for the portfolio. J.P. Morgan
believes that under normal market conditions, economic sector weightings
generally will be similar to those of the relevant equity index.
Finally, J.P. Morgan actively manages currency exposure, in conjunction
with country and stock allocation, in an attempt to protect and possibly enhance
the International Growth and Income Trust's market value. Through the use of
forward currency exchange contracts, J.P. Morgan will adjust the portfolio's
foreign currency weightings to reduce its exposure to currencies that the
Subadviser deems unattractive and, in certain circumstances, increase exposure
to currencies deemed attractive, as market conditions warrant, based on
fundamental research, technical factors and the judgment of a team of
experienced currency managers.
The International Growth and Income Trust intends to manage its investment
portfolio actively in pursuit of its investment objective. The portfolio does
not expect to trade in securities for short-term profits; however, when
circumstances warrant, securities may be sold without regard to the length of
time held. See "GENERAL INFORMATION -- Taxes." To the extent the portfolio
engages in short-term trading, it may incur increased transaction costs.
The International Growth and Income Trust may also invest in securities on
a when-issued or delayed delivery basis, enter into repurchase agreements, loan
its portfolio securities and purchase certain privately placed securities. See
"RISK FACTORS."
The International Growth and Income Trust may make money market
investments pending other investments or settlement or for liquidity purposes.
In addition, when J.P. Morgan believes that investing for defensive purposes is
appropriate, such as during periods of
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unusual or unfavorable market or economics conditions, up to 100% of the
portfolio's assets may be temporarily invested in money market instruments. The
money market investments permitted for the portfolio include obligations of the
U.S. Government and its agencies and instrumentalities, other debt securities,
commercial paper, bank obligations and repurchase agreements, as described below
under "Money Market Trust."
The International Growth and Income Trust will be subject to special risks
as a result of its ability to invest up to 100% of its assets in foreign
securities. These risks are described under the captions "RISK FACTORS --
Foreign Securities" in this Prospectus. Moreover, substantial investments in
foreign securities may have adverse tax implications as described under "GENERAL
INFORMATION -- Taxes" in this Prospectus. The ability to diversify its
investments among the equity markets of different countries may, however, reduce
the overall level of market risk to the extent it may reduce the portfolio's
exposure to a single market. In order to comply with limitations imposed by the
State of California Insurance Department, the International Growth and Income
Trust will comply with the restrictions regarding foreign investments set forth
under "Risk Factors - Additional Investment Restrictions on Borrowing and
Foreign Investing."
Use of Hedging and Other Strategic Transactions
The International Growth and Income Trust is currently authorized to use
all of the various investment strategies referred to under "RISK FACTORS --
Hedging and Other Strategic Transactions." With the exception of currency
transactions, however, it is not presently anticipated that any of these
strategies will be used to a significant degree by the portfolio. The Statement
of Additional Information contains a description of these strategies and of
certain risks associated therewith.
STRATEGIC BOND TRUST
The investment objective of the Strategic Bond Trust is to seek a high
level of total return consistent with preservation of capital.
The Strategic Bond Trust seeks to achieve its objective by giving its
Subadviser, SBAM, broad discretion to deploy the Strategic Bond Trust's assets
among certain segments of the fixed-income market as SBAM believes will best
contribute to the achievement of the portfolio's objective. At any point in
time, the Subadviser will deploy the portfolio's assets based on the
Subadviser's analysis of current economic and market conditions and the relative
risks and opportunities present in the following market segments: U.S.
Government obligations, investment grade domestic corporate debt, high yield
(high risk) corporate debt securities, mortgage backed securities and investment
grade and high yield international debt securities. The Subadviser is an
affiliate of Salomon Brothers Inc ("SBI"), and in making investment decisions is
able to draw on the research and market expertise of SBI with respect to
fixed-income securities.
In pursuing its investment objective, the Strategic Bond Trust may invest
without limitation in high yield (high risk) securities. High yield securities,
commonly known as "junk bonds", also present a high degree of risk.
High-yielding, lower-quality securities involve comparatively greater risks,
including price volatility and the risk of default in the timely payment of
interest and principal, than higher-quality securities. Due to the risks
inherent in certain of the securities in which the Strategic Bond Trust may
invest, an investment in the portfolio should not be considered as a complete
investment program and may not be appropriate for all investors. See "Risk
Factors--High Yield (High Risk) Securities."
The Subadviser will determine the amount of assets to be allocated to each
type of security in which it invests based on its assessment of the maximum
level of total return that can be achieved from a portfolio which is invested in
these securities without incurring undue risks to principal value. In making
this determination, the Subadviser will rely in part on quantitative analytical
techniques that measure relative risks and opportunities of each type of
security based on current and historical economic, market, political and
technical data for each type of security, as well as on its own assessment of
economic and market conditions both on a global and local (country) basis. In
performing quantitative analysis, the Subadviser will employ prepayment analysis
and option adjusted spread technology to evaluate mortgage securities, mean
variance optimization models to evaluate international debt securities, and
total rate of return analysis to measure relative risks and opportunities in
other fixed-income markets. Economic factors considered will include current and
projected levels of growth and inflation, balance of payment status and monetary
policy. The allocation of assets to international debt securities will further
be influenced by current and expected currency relationships and political and
sovereign factors. The portfolio's assets may not always be allocated to the
highest yielding securities if the Subadviser feels that such investments would
impair the portfolio's ability to preserve shareholder capital. The Subadviser
will continuously review this allocation of assets and make such adjustments as
it deems appropriate. The portfolio does not plan to establish a minimum or a
maximum percentage of the assets which it will invest in any particular type of
fixed-income security.
In addition, the Subadviser will have discretion to select the range of
maturities of the various fixed-income securities in which the portfolio
invests. Such maturities may vary substantially from time to time depending on
economic and market conditions.
The types and characteristics of the U.S. Government obligations,
mortgage-backed securities, investment grade corporate debt securities and
investment grade international debt securities to be purchased are set forth in
the discussion of investment objectives and policies for the Investment Quality
Bond, U.S. Government Securities and Global Government Bond Trusts, and in the
section entitled
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"Other Investments" in the Statement of Additional Information; and the types
and characteristics of the money market securities to be purchased are set forth
in the discussion of investment objectives of the Money Market Trust. Potential
investors should review the discussion therein in considering an investment in
shares of the Strategic Bond Trust. As described below, the Strategic Bond Trust
may also invest in high yield domestic and foreign debt securities.
The Strategic Bond Trust will be subject to special risks as a result of
its ability to invest up to 100% of its assets in foreign securities. These
risks are described under the captions "Risk Factors--High Yield (High Risk)
Securities" and "Foreign Securities" in this Prospectus. Moreover, substantial
investments in foreign securities may have adverse tax implications as described
under "Taxes" in this Prospectus. The ability to spread its investments among
the fixed-income markets in a number of different countries may, however, reduce
the overall level of market risk to the extent it may reduce the Strategic Bond
Trust's exposure to a single market. In order to comply with limitations imposed
by the State of California Insurance Department, the Strategic Bond Trust will
comply with the restrictions regarding foreign investments set forth under "Risk
Factors - Additional Investment Restrictions on Borrowing and Foreign
Investing."
The Strategic Bond Trust currently intends to invest substantially all of
its assets in fixed-income securities. In order to maintain liquidity, however,
the Strategic Bond Trust may invest up to 20% of its assets in high-quality
short-term money market instruments. If at some future date, in the opinion of
the Subadviser, adverse conditions prevail in the market for fixed-income
securities, the Strategic Bond Trust for temporary defensive purposes may invest
its assets without limit in high-quality short-term money market instruments.
As discussed above, the Strategic Bond Trust may invest in U.S.
dollar-denominated securities issued by domestic issuers that are rated below
investment grade or of comparable quality. Although the Subadviser does not
anticipate investing in excess of 75% of the portfolio's assets in domestic and
developing country debt securities that are rated below investment grade, the
portfolio may invest a greater percentage in such securities when, in the
opinion of the Subadviser, the yield available from such securities outweighs
their additional risks. By investing a portion of the portfolio's assets in
securities rated below investment grade, as well as through investments in
mortgage securities and international debt securities, as described below, the
Subadviser expects to provide investors with a higher yield than a high-quality
domestic corporate bond fund while at the same time presenting less risk than a
fund that invests principally in securities rated below investment grade.
Certain of the debt securities in which the portfolio may invest may have, or be
considered comparable to securities having, the lowest ratings for
non-subordinated debt instruments assigned by Moody's or S&P (i.e., rated C by
Moody's or CCC or lower by S&P). See "Risk Factors--High Yield (High Risk)
Securities--General."
In light of the risks associated with high yield corporate and sovereign
debt securities, the Subadviser will take various factors into consideration in
evaluating the credit worthiness of an issue. For corporate debt securities,
these will typically include the issuer's financial resources, its sensitivity
to economic conditions and trends, the operating history of the issuer, and the
experience and track record of the issuer's management. For sovereign debt
instruments, these will typically include the economic and political conditions
within the issuer's country, the issuer's overall and external debt levels and
debt service ratios, the issuer's access to capital markets and other sources of
funding, and the issuer's debt service payment history. The Subadviser will also
review the ratings, if any, assigned to the security by any recognized rating
agencies, although the Subadviser's judgment as to the quality of a debt
security may differ from that suggested by the rating published by a rating
service. The Strategic Bond Trust's ability to achieve its investment objective
may be more dependent on the Subadviser's credit analysis than would be the case
if it invested in higher quality debt securities.
A description of the ratings used by Moody's and S&P is set forth in
Appendix I to this Prospectus.
In addition to the types of international debt securities as set forth in
the discussion of investment objectives and policies of the Global Government
Bond Trust, the Strategic Bond Trust may also invest in international debt
securities that are below investment grade.
The high yield sovereign debt securities in which the Strategic Bond Trust
may invest are U.S. dollar-denominated and non-dollar-denominated debt
securities issued or guaranteed by governments or governmental entities of
developing and emerging countries. The Subadviser expects that these countries
will consist primarily of those which have issued or have announced plans to
issue Brady Bonds, but the portfolio is not limited to investing in the debt of
such countries. Brady Bonds are debt securities issued under the framework of
the Brady Plan, an initiative announced by U.S. Treasury Secretary Nicholas F.
Brady in 1989 as a mechanism for debtor nations to restructure their outstanding
external indebtedness. The Subadviser anticipates that the portfolio's initial
investments in sovereign debt will be concentrated in Latin American countries,
including Mexico and Central and South American and Caribbean countries. The
Subadviser expects to take advantage of additional opportunities for investment
in the debt of North African countries, such as Nigeria and Morocco, Eastern
European countries, such as Poland and Hungary, and Southeast Asian countries,
such as the Philippines. Sovereign governments may include national, provincial,
state, municipal or other foreign governments with taxing authority.
Governmental entities may include the agencies and instrumentalities of such
governments, as well as state-owned enterprises.
Use of Hedging and Other Strategic Transactions
The Strategic Bond Trust is currently authorized to use all of the various
investment strategies referred to under "Hedging and Other Strategic
Transactions." With the exception of currency transactions, however, it is not
presently anticipated that any of these
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strategies will be used to a significant degree by the portfolio. The Statement
of Additional Information contains a description of these strategies and of
certain risks associated therewith.
GLOBAL GOVERNMENT BOND TRUST
The investment objective of the Global Government Bond Trust is to seek a
high level of total return by placing primary emphasis on high current income
and the preservation of capital. Oechsle International manages the Global
Government Bond Trust and intends to pursue this objective by investing
primarily in a selected global portfolio of high-quality, fixed-income
securities of foreign and U.S. governmental entities and supranational issuers.
Oechsle International will select the Global Government Bond Trust's
assets from among countries and in currency denominations where opportunities
for total return are expected to be the most attractive. Fundamental economic
strength, credit quality, and currency and interest rate trends will be the
principal determinants of the various country and sector weightings within the
Global Government Bond Trust. The Global Government Bond Trust may substantially
invest in one or more countries but intends to have represented in its portfolio
securities from a number of different countries, although there is no limit on
the value of the portfolio's assets that may be invested in any one country or
in assets denominated in any one country's currency. Moreover, the Global
Government Bond Trust may for temporary defensive purposes choose to invest
substantially all its assets in U.S. securities or cash and cash items.
The Global Government Bond Trust, unlike the other portfolios of the
Trust, is non-diversified for purposes of the Investment Company Act of 1940.
Due to its status as non-diversified, the Global Government Bond Trust is not
subject to the general limitation under the Investment Company Act of 1940 that
it not invest more than 5% of its total assets in the securities of a single
issuer. The Global Government Bond Trust has elected non-diversified status so
that it may invest more than 5% of its assets in the obligations of a foreign
government and this practice may expose the Global Government Bond Trust to
increased financial and market risks. While non-diversified for purposes of the
Investment Company Act of 1940, the Global Government Bond Trust remains subject
to certain diversification requirements imposed under the Internal Revenue Code
which are described under the caption "Taxes" in this Prospectus.
The Global Government Bond Trust will generally invest at least 65% of its
assets in the following investments: (i) debt obligations issued or guaranteed
by the U.S. government or one of its agencies or political subdivisions; (ii)
debt obligations issued or guaranteed by a foreign sovereign government or one
of its agencies or political subdivisions; (iii) debt obligations issued or
guaranteed by supranational organizations. Supranational entities include
international organizations designated or supported by governmental entities to
promote economic reconstruction or development and international banking
institutions and related government agencies. Examples include the International
Bank for Reconstruction and Development (the "World Bank"), the European Coal
and Steel Community, the Asian Development Bank and the Inter-American
Development Bank. Such supranational issued instruments may be denominated in
multi-national currency units. Investments in multi-currency, debt securities
will be limited to those assigned within the four highest bond ratings by
Moody's or S&P or, if not rated, that are of equivalent investment quality as
determined by Oechsle International. The Global Government Bond Trust may also
invest up to 35% of its assets in (i) corporate debt securities assigned within
the three highest bond ratings by Moody's or S&P or, if not rated, that are of
equivalent investment quality as determined by Oechsle International, (ii)
preferred stocks and (iii) securities convertible into or exercisable for common
stocks. In addition, the Global Government Bond Trust will hold short-term cash
reserves (money market instruments maturing in a period of thirteen months or
less) as Oechsle International believes is advisable to maintain liquidity or
for temporary defensive purposes. Reserves may be held in any currency deemed
attractive by Oechsle International.
Oechsle International intends to invest in fixed-income securities in
countries where the combination of fixed-income market returns and exchange rate
movements is judged to be attractive. Oechsle International will actively manage
the Global Government Bond Trust's maturity structure according to its interest
rate outlook for each foreign economy. In response to rising interest rates and
falling prices, the Global Government Bond Trust may invest in securities with
shorter maturities to protect its principal value. Conversely, when certain
interest rates are falling and prices are rising, the Global Government Bond
Trust may invest in securities with longer maturities to take advantage of
higher yields and to seek capital appreciation. The Global Government Bond Trust
will seek to invest in countries having favorable currency and interest rate
trends. Investments in countries where the currency trend is unfavorable may be
made when the currency risk can be minimized through hedging. The Global
Government Bond Trust does not intend to invest in longer-term fixed income
securities in countries where the fixed income market is fundamentally
unattractive, regardless of the currency trend, but may invest in short-term
fixed income securities in such countries.
Use of Hedging and Other Strategic Transactions
The Global Government Bond Trust is currently authorized to use all of the
various investment strategies referred to under "Hedging and Other Strategic
Transactions." With the exception of currency transactions, however, it is not
presently anticipated that any of these strategies will be used to a significant
degree by the portfolio. The Statement of Additional Information contains a
description of these strategies and of certain risks associated therewith. The
Global Government Bond Trust will be subject to special risks as a result of its
ability to invest up to 100% of its assets in foreign securities. These risks
are described under the caption "Foreign Securities" in this Prospectus.
Moreover, substantial investments in foreign securities may have adverse tax
implications as described under "Taxes" in this
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Prospectus. The ability to spread its investments among the fixed-income markets
in a number of different countries may, however, reduce the overall level of
market risk to the extent it may reduce the Global Government Bond Trust's
exposure to a single market. In order to comply with limitations imposed by the
State of California Insurance Department, the Global Government Bond Trust will
comply with the restrictions regarding foreign investments set forth under "Risk
Factors Additional Investment Restrictions on Borrowing and Foreign Investing."
INVESTMENT QUALITY BOND TRUST
The investment objective of the Investment Quality Bond Trust is to
provide a high level of current income consistent with the maintenance of
principal and liquidity.
Wellington Management manages the Investment Quality Bond Trust and seeks
to achieve the Trust's objective by investing primarily in a diversified
portfolio of investment grade corporate bonds and U.S. Government bonds with
intermediate to longer term maturities. Investment management will emphasize
sector analysis, which focuses on relative value and yield spreads among
security types and among quality, issuer, and industry sectors, call protection
and credit research. Credit research on corporate bonds is based on both
quantitative and qualitative criteria established by Wellington Management, such
as an issuer's industry, operating and financial profiles, business strategy,
management quality, and projected financial and business conditions. Wellington
Management will attempt to maintain a high, steady and possibly growing income
stream.
At least 65% of the Investment Quality Bond Trust's assets will be
invested in:
(1) marketable debt securities of domestic issuers and of foreign issuers
(payable in U.S. dollars) rated at the time of purchase "A" or better by Moody's
or S&P or, if unrated, of comparable quality as determined by Wellington
Management;
(2) securities issued or guaranteed as to principal or interest by the U.S.
Government or its agencies or instrumentalities, including mortgage backed
securities (described below under U.S. Government Securities Trust); and
(3) cash and cash equivalent securities which are authorized for purchase by
the Money Market Trust.
The balance of the Investment Quality Bond Trust's investments may
include: domestic and foreign debt securities rated below "A" by Moody's and S&P
(and unrated securities of comparable quality as determined by Wellington
Management), preferred stocks, convertible securities (including those issued in
the Euromarket) and securities carrying warrants to purchase equity securities,
privately placed debt securities, asset-backed securities and privately issued
mortgage securities. At least 65% of the Investment Quality Bond Trust's assets
will be invested in bonds and debentures.
In pursuing its investment objective, the Investment Quality Bond Trust
may invest up to 20% of its assets in domestic and foreign high yield (high
risk) corporate and government debt securities, commonly known as "junk bonds"
(i.e., rated "Ba" or below by Moody's or "BB" or below by S&P, or if unrated, of
comparable quality as determined by Wellington Management). The high yield
sovereign debt securities in which the portfolio will invest are described above
under "Strategic Bond Trust." No minimum rating standard is required for a
purchase by the Portfolio. Domestic and foreign high yield debt securities
involve comparatively greater risks, including price volatility and risk of
default in the payment of interest and principal, than higher-quality
securities. See "RISK FACTORS -- High Yield (High Risk) Securities and "Foreign
Sovereign Debt Securities."
The Investment Quality Bond Trust may also invest in debt securities
carrying the fourth highest quality rating ("Baa" by Moody's or "BBB" by S&P)
and unrated securities of comparable quality as determined by Wellington
Management. While such securities are considered as investment grade and are
viewed to have adequate capacity for payment of principal and interest,
investments in such securities involve a higher degree of risk than that
associated with investments in debt securities in the higher rating categories
and such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well. For example, changes in economic conditions
or other circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than is the case with higher grade bonds. While
the Investment Quality Bond Trust may only invest up to 20% of its assets in
bonds rated below "Baa" by Moody's or "BBB" by S&P (or, if unrated, of
comparable quality as determined by Wellington Management) at the time of
investment, it is not required to dispose of bonds owned that may be downgraded
causing the portfolio to exceed this 20% maximum.
Use of Hedging and Other Strategic Transactions
The Investment Quality Bond Trust is currently authorized to use all of
the various investment strategies referred to under "Hedging and Other Strategic
Transactions." The Statement of Additional Information contains a description of
these strategies and of certain risks associated therewith . The Investment
Quality Bond Trust will be subject to certain risks as a result of its ability
to invest up to 20% of its assets in foreign securities. These risks are
described under the caption "Foreign Securities" in this Prospectus. Moreover,
substantial investments in foreign securities may have adverse tax implications
as described under "Taxes" in this Prospectus.
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U.S. GOVERNMENT SECURITIES TRUST
The investment objective of the U.S. Government Securities Trust is to
obtain a high level of current income consistent with preservation of capital
and maintenance of liquidity. SBAM manages the U.S. Government Securities Trust
and seeks to attain its objective by investing a substantial portion of its
assets in debt obligations and mortgage backed securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities and derivative
securities such as collateralized mortgage obligations backed by such
securities. The portfolio may also invest a portion of its assets in the types
of securities in which the Investment Quality Bond Trust may invest.
At least 80% of the total assets of the U.S. Government Securities Trust
will be invested in:
(1) mortgage backed securities guaranteed by the Government National Mortgage
Association that are supported by the full faith and credit of the U.S.
Government and which are the "modified pass-through" type of mortgage
backed security ("GNMA Certificates"). Such securities entitle the holder
to receive all interest and principal payments due whether or not payments
are actually made on the underlying mortgages;
(2) U.S. Treasury obligations;
(3) obligations issued or guaranteed by agencies or instrumentalities of the
U.S. Government which are backed by their own credit and may not be backed
by the full faith and credit of the U.S. Government;
(4) mortgage backed securities guaranteed by agencies or instrumentalities of
the U.S. Government which are supported by their own credit but not the
full faith and credit of the U.S. Government, such as the Federal Home Loan
Mortgage Corporation and the Federal National Mortgage Association; and
(5) collateralized mortgage obligations issued by private issuers for which the
underlying mortgage backed securities serving as collateral are backed (i)
by the credit alone of the U.S. Government agency or instrumentality which
issues or guarantees the mortgage backed securities, or (ii) by the full
faith and credit of the U.S. Government.
The mortgage backed securities in which the U.S. Government Securities
Trust invests represent participating interests in pools of residential mortgage
loans which are guaranteed by the U.S. Government, its agencies or
instrumentalities. However, the guarantee of these types of securities runs only
to the principal and interest payments and not to the market value of such
securities. In addition, the guarantee only runs to the portfolio securities
held by the U.S. Government Securities Trust and not the purchase of shares of
the portfolio.
Mortgage backed securities are issued by lenders such as mortgage bankers,
commercial banks, and savings and loan associations. Such securities differ from
conventional debt securities which provide for periodic payment of interest in
fixed amounts (usually semiannually) with principal payments at maturity or
specified call dates. Mortgage backed securities provide monthly payments which
are, in effect, a "pass-through" of the monthly interest and principal payments
(including any prepayments) made by the individual borrowers on the pooled
mortgage loans. Principal prepayments result from the sale of the underlying
property or the refinancing or foreclosure of underlying mortgages.
The yield of mortgage-backed securities is based on the average life of
the underlying pool of mortgage loans, which is computed on the basis of the
maturities of the underlying instruments. The actual life of any particular pool
may be shortened by unscheduled or early payments of principal and interest. The
occurrence of prepayments is affected by a wide range of economic, demographic
and social factors and, accordingly, it is not possible to accurately predict
the average life of a particular pool. For pools of fixed rate 30-year
mortgages, it has been common practice to assume that prepayments will result in
a 12-year average life. The actual prepayment experience of a pool of mortgage
loans may cause the yield realized by the U.S. Government Securities Trust to
differ from the yield calculated on the basis of the average life of the pool.
In addition, if any of these mortgage backed securities are purchased at a
premium, the premium may be lost in the event of early prepayment which may
result in a loss to the portfolio.
Prepayments tend to increase during periods of falling interest rates,
while during periods of rising interest rates prepayments will most likely
decline. Reinvestment by the U.S. Government Securities Trust of scheduled
principal payments and unscheduled prepayments may occur at higher or lower
rates than the original investment, thus affecting the yield of this portfolio.
Monthly interest payments received by the portfolio have a compounding effect
which will increase the yield to shareholders as compared to debt obligations
that pay interest semiannually. Because of the reinvestment of prepayments of
principal at current rates, mortgage-backed securities may be less effective
than Treasury bonds of similar maturity at maintaining yields during periods of
declining interest rates. Also, although the value of debt securities may
increase as interest rates decline, the value of these pass-through type of
securities may not increase as much due to the prepayment feature.
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The U.S. Government Securities Trust must comply with diversification
requirements established pursuant to the Internal Revenue Code for investments
of separate accounts funding contracts. Under these requirements, no more than
55% of the value of the assets of a portfolio may be represented by any one
investment; no more than 70% by any two investments; no more than 80% by any
three investments; and no more than 90% by any four investments. For these
purposes, all securities of the same issuer are treated as a single investment
and each United States government agency or instrumentality is treated as a
separate issuer. As a result of these requirements, the U.S. Government
Securities Trust may not invest more than 55% of the value of its assets in GNMA
Certificates or in securities issued or guaranteed by any other single United
States government agency or instrumentality. See the discussion under "Taxes"
below for additional information.
Use of Hedging and Other Strategic Transactions
The U.S. Government Securities Trust is currently authorized to use only
certain of the various investment strategies referred to under "Hedging and
Other Strategic Transactions." Specifically, the U.S. Government Securities
Trust may write covered call options and put options on securities and purchase
call and put options on securities, write covered call and put options on
securities indices and purchase call and put options on securities indices, and,
may enter into futures contracts on financial instruments and indices and write
and purchase put and call options on such futures contracts. It is not presently
anticipated that any of these strategies will be used to a significant degree by
the portfolio. The Statement of Additional Information contains a description of
these strategies and of certain risks associated therewith.
MONEY MARKET TRUST
The investment objective of the Money Market Trust is to obtain maximum
current income consistent with preservation of principal and liquidity.
Wellington Management manages the Money Market Trust and seeks to achieve this
objective by investing in high quality, U.S. dollar denominated money market
instruments of the following types:
(1) obligations issued or guaranteed as to principal and interest by the
United States Government, or any agency or authority controlled or
supervised by and acting as an instrumentality of the U.S. Government
pursuant to authority granted by Congress (hereinafter "U.S. Government
securities"), or obligations of foreign governments including those issued
or guaranteed as to principal or interest by the Government of Canada, the
government of any province of Canada, or any Canadian or provincial Crown
agency (any foreign obligation acquired by the Trust will be payable in
U.S. dollars);
(2) certificates of deposit, bank notes, time deposits, Eurodollars, Yankee
obligations and bankers' acceptances of U.S. banks, foreign branches of
U.S. banks, foreign banks and U.S. savings and loan associations which at
the date of investment have capital, surplus and undivided profits as of
the date of their most recent published financial statements in excess of
$100,000,000 (or less than $100,000 if the principal amount of such bank
obligations is insured by the Federal Deposit Insurance Corporation or the
Saving Association Insurance Fund);
(3) commercial paper which at the date of investment is rated (or guaranteed
by a company whose commercial paper is rated) within the two highest
rating categories by any nationally recognized statistical rating
organization ("NRSRO") (such as "P-1" or "P-2" by Moody's or "A-1" or
"A-2" by S&P) or, if not rated,is issued by a company which Wellington
Management acting pursuant to guidelines established by the Trustees, has
determined to be of minimal credit risk and comparable quality;
(4) corporate obligations maturing in 397 days or less which at the date of
investment are rated within the two highest rating categories by any NRSRO
(such as "Aa" or higher by Moody's or "AA" or higher by S&P); and
(5) short-term obligations issued by state and local governmental issuers;
(6) securities that have been structured to be eligible money market
instruments such as participation interests in special purpose trusts that
meet the quality and maturity requirements in whole or in part due to
arrangements for credit enhancement or for shortening effective maturity;
and
(7) repurchase agreements with respect to any of the foregoing obligations.
Commerical paper may include variable amount master demand notes, which
are obligations that permit investment of fluctuating amounts at varying rates
of interest. Such notes are direct lending arrangements between the Money Market
Trust and the note issuer, and Wellington Management will monitor the
creditworthiness of the issuer and its earning power and cash flow, and will
also consider situations in which all holders of such notes would redeem at the
same time. Variable amount master demand notes are redeemable on demand.
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All of the Money Market Trust's investments will mature in 397 days or
less and the portfolio will maintain a dollar-weighted average portfolio
maturity of 90 days or less. By limiting the maturity of its investments, the
Money Market Trust seeks to lessen the changes in the value of its assets caused
by fluctuations in short-term interest rates. In addition, the Money Market
Trust will invest only in securities the Trustees determine to present minimal
credit risks and which at the time of purchase are "eligible securities" as
defined by Rule 2a-7 under the Investment Company Act of 1940. The Money Market
Trust also intends to maintain, to the extent practicable, a constant per share
net asset value of $10.00, but there is no assurance that it will be able to do
so.
The Money Market Fund will be subject to certain risks as a result of its
ability to invest up to 20% of its assets in foreign securities. These risks are
described under "RISK FACTORS - Foreign Securities."
Use of Hedging and Other Strategic Transactions
The Money Market Trust is not authorized to use any of the various
investment strategies referred to under "Hedging and Other Strategic
Transactions."
AUTOMATIC ASSET ALLOCATION TRUSTS
There are three Automatic Asset Allocation Trusts - Aggressive, Moderate
and Conservative. The investment objective of each of the Automatic Asset
Allocation Trusts is to obtain the highest potential total return consistent
with a specified level of risk tolerance -- aggressive, moderate and
conservative. The Automatic Asset Allocation Trusts are designed for:
* The investor who wants to maximize total return potential, but lacks the
time, temperament or expertise to do so effectively;
* The investor who does not want to monitor the financial markets in order
to make periodic exchanges among portfolios;
* The investor who wants the opportunity to improve on the return of an
income-oriented investment program, but wants to take advantage of the
risk management features of an asset allocation program; and
* Retirement program fiduciaries who have a responsibility to limit risk in
a meaningful way, while seeking the highest potential total return.
Each of the Automatic Asset Allocation Trusts may invest in a combination
of equity, fixed-income and money market securities. The amount of each
portfolio's assets invested in each category of securities is dependent upon the
judgment of FMTC as to what percentages of each portfolio's assets in each
category will contribute to the limitation of risk and the achievement of its
investment objective. Unlike many asset allocation and timing services offered
by competitors, the Automatic Asset Allocation Trusts permit FMTC to reallocate
each portfolio's assets among the categories of securities "automatically,"
without a delay for a request or response by the shareholder, whenever, in the
subadviser's judgment, market or economic changes warrant such a reallocation.
FMTC reserves complete discretion to determine the allocations among the
categories of securities.
The investor chooses an Automatic Asset Allocation Trust by determining
which risk tolerance level most closely corresponds to the investor's individual
planning needs, objectives and comfort. Generally, the higher the portfolio's
level of risk tolerance, the higher is the expected total return for the
portfolio over the long-term and under favorable market conditions. Over the
long-term, it is expected that the total return of the Aggressive Asset
Allocation Trust will exceed that of the Moderate Asset Allocation Trust and
that the total return of the Moderate Asset Allocation Trust will exceed that of
the Conservative Asset Allocation Trust, although there is no assurance that
this will be the case. Moreover, as a general matter, the higher the risk
tolerance of a portfolio, the greater is the expected volatility of the
portfolio. In adverse market conditions, it is expected that the losses will be
greater in the Aggressive Asset Allocation Trust than in the Moderate Asset
Allocation Trust and greater in the Moderate Asset Allocation Trust than in the
Conservative Asset Allocation Trust, although again there is no assurance that
this will be the case.
FMTC attempts to limit the maximum amount of decline in value each
portfolio incurs under very adverse market conditions, to define the level of
risk tolerance -- aggressive, moderate or conservative. Very adverse market
conditions are defined as a substantial increase in long-term interest rates
accompanied by a similarly substantial decline in one or more commonly-followed
stock market indices over a twelve month period. Of course, FMTC cannot predict
with certainty when adverse market conditions will arise. Consequently, FMTC
must manage each of the Automatic Asset Allocation Trusts under all market
conditions with a view toward limiting risk and portfolio decline should very
adverse market conditions arise. For example, since the Conservative Asset
Allocation Trust has the lowest risk tolerance level, its assets under all
market conditions will be invested less aggressively (i.e., with greater
emphasis on fixed-income securities and money market instruments) than those of
the other Automatic Asset Allocation Trusts. In addition, when market conditions
deteriorate (the probability of very adverse market conditions rises), FMTC will
give greater emphasis to fixed-income securities and money market instruments in
an effort to limit overall declines in portfolio value.
An investor should select an Automatic Asset Allocation Trust depending on
his or her objective in terms of balancing the potential long-term total returns
of a portfolio against limiting risk and portfolio declines in very adverse
market conditions. There can be no assurance that actual declines in portfolio
value will not exceed the percentage limitations set forth below in the
description of each portfolio.
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THE AGGRESSIVE ASSET ALLOCATION TRUST
The investment objective of the Aggressive Asset Allocation Trust is to
seek the highest total return consistent with an aggressive level of risk
tolerance. This Trust attempts to limit the decline in portfolio value in very
adverse market conditions to 15% in any twelve month period. This Trust will
tend to invest a greater portion of its assets in equity and foreign securities
than the Moderate and Conservative Asset Allocation Trusts and a lower
percentage of its assets in fixed-income securities and money market instruments
than such Trusts. FMTC will invest the Aggressive Asset Allocation Trust's
assets to attempt to produce a total return competitive with that of equity
funds, while at the same time exposing the Trust's assets to less risk than the
typical aggressive equity fund by allocating a portion of the portfolio's assets
to fixed-income securities and money market instruments. There can be no
assurance that FMTC will be able to attain this objective.
THE MODERATE ASSET ALLOCATION TRUST
The investment objective of the Moderate Asset Allocation Trust is to seek
the highest total return consistent with a moderate level of risk tolerance.
This Trust attempts to limit the decline in portfolio value in very adverse
market conditions to 10% over any twelve month period. The amount of the
Moderate Asset Allocation Trust's assets invested in each category of securities
will depend on the judgment of FMTC as to what relative portions of the
portfolio's assets in each category will contribute to the achievement of its
objective. Generally, it will place greater emphasis on equity and foreign
securities than the Conservative Asset Allocation Trust but more emphasis on
fixed-income securities and money market instruments than the Aggressive Asset
Allocation Trust. FMTC will invest the Moderate Asset Allocation Trust's assets
to attempt to give the portfolio a substantial participation in favorable equity
and bond markets, although the expected total return will not necessarily exceed
the best returns available from either of those markets.
THE CONSERVATIVE ASSET ALLOCATION TRUST
The investment objective of the Conservative Asset Allocation Trust is to
seek the highest total return consistent with a conservative level of risk
tolerance. This Trust attempts to limit the decline in portfolio value in very
adverse market conditions to 5% over any twelve month period. This Trust will
tend to invest a greater portion of its assets in fixed-income securities and
money market instruments than the Moderate and Aggressive Asset Allocation
Trusts and a lower percentage of its assets in equity and foreign securities
than such Trusts. FMTC will attempt to invest the Conservative Asset Allocation
Trust's assets in order to produce a higher total return than that which is
available from a bond or a money market portfolio alone, although there can be
no assurance that FMTC will be able to attain this objective.
The types and characteristics of equity securities to be purchased by the
Automatic Asset Allocation Trusts are set forth above in the discussion of
investment objectives and policies for the Equity Trust; the types and
characteristics of the fixed-income securities to be purchased are set forth in
the discussion of investment objectives and policies for the Investment Quality
Bond (the Automatic Asset Allocation Trusts may not invest in below investment
grade securities except as noted below) and U.S. Government Securities Trusts;
and the types and characteristics of the money market securities to be purchased
are set forth in the discussion of investment objectives of the Money Market
Trust. Potential investors should review the discussion therein in considering
an investment in shares of the Automatic Asset Allocation Trusts.
The Aggressive Asset Allocation Trust and the Moderate Asset Allocation
Trust may each invest up to 10% of their assets in domestic and foreign high
yield corporate and government debt securities, commonly known as "junk bonds"
(i.e., rated "Ba" or below by Moody's or "BB" or below by S & P, or if unrated,
of comparable quality as determied by FMTC. Domestic and foreign high yield debt
securities involve comparatively greater risks, including price volatility and
risk of default in the payment of interest and principal, than higher quality
securities. See "RISK FACTORS -- High Yield (High Risk) Securities" for further
information.
Use of Hedging and Other Strategic Transactions
The Automatic Asset Allocation Trusts are currently authorized to use all
of the various investment strategies referred to under "Hedging and Other
Strategic Transactions." The Statement of Additional Information contains a
description of these strategies and of certain risks associated therewith. The
Aggressive Asset Allocation Trust may invest up to 35% of its assets, the
Moderate Asset Allocation Trust may invest up to 25% of its assets and the
Conservative Allocation Trust may invest up to 15% of its assets in securities
issued by foreign entities and/or denominated in foreign currencies. The
Automatic Asset Allocation Trusts will be subject to certain risks as a result
of their ability to invest in foreign securities. These risks are described
under the caption "Foreign Securities" in this Prospectus. Moreover, substantial
investments in foreign securities may have adverse tax implications as described
under "Taxes" in this Prospectus. In order to comply with limitations imposed by
the State of California Insurance Department, the Aggressive and Moderate Asset
Allocation Trusts will comply with the restrictions regarding foreign
investments set forth under "Risk Factors - Additional Investment Restrictions
on Borrowing and Foreign Investing."
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The portfolio turnover rate of each of the Trust's portfolios may vary
from year to year, as well as within a year. Higher portfolio turnover rates can
result in corresponding increases in portfolio transaction costs for a
portfolio. See "Portfolio Turnover" in the Statement of Additional Information.
RISK FACTORS
INVESTMENT RESTRICTIONS GENERALLY
The Trust is subject to a number of restrictions in pursuing its
investment objectives and policies. The following is a brief summary of certain
restrictions that may be of interest to contract owners. Some of these
restrictions are subject to exceptions not stated here. Such exceptions and a
complete list of the investment restrictions applicable to the individual
portfolios and to the Trust are set forth in the Statement of Additional
Information under the caption "Investment Restrictions."
Except for the restrictions specifically identified as fundamental, all
investment restrictions described in this Prospectus and in the Statement of
Additional Information are not fundamental, so that the Trustees of the Trust
may change them without shareholder approval. Fundamental policies may not be
changed without the affirmative vote of a majority of the outstanding voting
securities.
Fundamental policies applicable to all portfolios include prohibitions on
(i) investing more than 25% of the total assets of any portfolio in the
securities of issuers having their principal activities in any particular
industry (with exceptions for U.S. Government securities and certain other
obligations) and (ii) borrowing money, except for temporary or emergency
purposes (but not for leveraging)and then not in excess of 33 1/3% of the value
of the total assets of the portfolio at the time the borrowing is made. In
addition, each portfolio may borrow in connection with reverse repurchase
agreements, mortgage dollar rolls and other similar transactions. Reverse
repurchase agreements and mortgage dollar rolls may be considered a form of
borrowing and will be treated as a borrowing for purposes of the restriction on
borrowing in excess of 33 1/3% of the value of the total assets of a portfolio.
A portfolio will not purchase securities while borrowings (other than reverse
repurchase agreements, mortgage dollar rolls and similiar transactions) exceed
5% of total assets. In addition, each of the portfolios except the Global
Government Bond Trust is prohibited from purchasing securities of any issuer if
the purchase would cause more than 5% of the value of a portfolio's total assets
to be invested in the securities of any one issuer (excluding U.S. Government
securities and bank obligations) or cause more than 10% of the voting securities
of the issuer to be held by a portfolio, except that up to 25% of the value of
each portfolio's total assets (except the Money Market Trust) may be invested
without regard to this restriction.
Restrictions that apply to all portfolios and that are not fundamental
include prohibitions on (i) knowingly investing more than 15% of the net assets
of any portfolio in "illiquid" securities (including repurchase agreements
maturing in more than seven days but excluding master demand notes), (ii)
pledging, hypothecating, mortgaging or transferring more than 10% of the total
assets of any portfolio as security for indebtedness, and (iii) purchasing
securities of other investment companies, other than in connection with a
merger, consolidation or reorganization, if the purchase would cause more than
10% of the value of a portfolio's total assets to be invested in investment
company securities. The percentage restriction in clause (i) of the preceding
sentence, however, is 10% in the case of the Money Market Trust.
Finally, the Money Market Trust is subject to certain restrictions
required by Rule 2a-7 under the Investment Company Act of 1940. In order to
comply with such restrictions, the Money Market Trust will, inter alia, not
purchase the securities of any issuer if it would cause (i) more than 5% of its
total assets to be invested in the securities of any one issuer (excluding U.S.
Government securities and repurchase agreements fully collateralized by U.S.
Government securities), except as permitted by the Rule for certain securities
for a period of up to three business days after purchase, (ii) more than 5% of
its total assets to be invested in "second tier securities," as defined by the
Rule, or (iii) more than the greater of $1 million or 1% of its total net assets
to be invested in the second tier securities of that issuer.
There are also diversification and other requirements for all of the
portfolios imposed by the federal tax laws, as described under "Taxes" in this
Prospectus.
The following is a description of certain investment policies subject to
investment restrictions that may be of particular interest to contract owners.
ADDITIONAL INVESTMENT RESTRICTIONS ON BORROWING AND FOREIGN INVESTING
In order to comply with limitations imposed by the State of California
Insurance Department, each Trust will comply with the following restrictions on
borrowing and each Trust that invests in foreign securities will comply with the
following restrictions regarding foreign investments. These restrictions are
nonfundamental and may be changed without shareholder approval.
Borrowing. Each portfolio of the Trust will not borrow money except that
each portfolio may borrow in an amount (i) up to 25% of the portfolio's net
assets for temporary purposes to facilitate redemptions (not for leveraging) and
(ii) up to 10% of the
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portfolio's net assets in connection with reverse repurchase agreements,
mortgage dollar rolls and other similar transactions. This limitation is more
restrictive than the Trust's fundamental restriction on borrowing.
Foreign Securities. Each portfolio of the Trust that invests in foreign
securities will comply with the following restrictions:
(i) A portfolio will be invested in a minimum of five different foreign
countries at all times. However, this minimum is reduced to four when foreign
country investments comprise less than 80% of the portfolio's net asset value;
to three when less than 60% of such value; to two when less than 40%; and to one
when less than 20%.
(ii) Except as set forth in items (iii) and (iv) below, a portfolio will have no
more than 20% of its net asset value invested in securities of issuers located
in any one country.
(iii) A portfolio may have an additional 15% of its net asset value invested in
securities of issuers located in any one of the following countries (to the
extent such investment is consistent with the investment policies of the
portfolio): Australia, Canada, France, Japan, the United Kingdom or West
Germany.
(iv) A portfolio's investments in United States issuers are not subject to these
foreign country diversification restrictions.
HIGH YIELD (HIGH RISK) SECURITIES
GENERAL. The Strategic Bond Trust may invest without limitation, and the
Investment Quality Bond Trust may invest up to 20% of its assets, in "high
yield" (high risk) securities. The Growth and the International Small Cap Trust
may also invest in "high yield" (high risk) securities to the extent described
above under the description of the portfolio. Securities rated below investment
grade and comparable unrated securities offer yields that fluctuate over time,
but generally are superior to the yields offered by higher rated securities.
However, securities rated below investment grade also involve greater risks than
higher rated securities. Under rating agency guidelines, medium- and lower-rated
securities and comparable unrated securities will likely have some quality and
protective characteristics that are outweighed by large uncertainties or major
risk exposures to adverse conditions. Certain of the debt securities in which
the portfolios may invest may have, or be considered comparable to securities
having, the lowest ratings for non-subordinated debt instruments assigned by
Moody's or S&P (i.e., rated C by Moody's or CCC or lower by S&P). These
securities are considered to have extremely poor prospects of ever attaining any
real investment standing, to have a current identifiable vulnerability to
default, to be unlikely to have the capacity to pay interest and repay principal
when due in the event of adverse business, financial or economic conditions,
and/or to be in default or not current in the payment of interest or principal.
Such securities are considered speculative with respect to the issuer's capacity
to pay interest and repay principal in accordance with the terms of the
obligations. Accordingly, it is possible that these types of factors could, in
certain instances, reduce the value of securities held by the portfolio with a
commensurate effect on the value of the portfolio's shares. Because the
Strategic Bond Trust may invest without limitation in high yield debt
securities, an investment in that portfolio should not be considered as a
complete investment program for all investors.
Because the Strategic Bond and Investment Quality Bond Trusts will invest
primarily in fixed-income securities, the net asset value of each portfolio's
shares can be expected to change as general levels of interest rates fluctuate,
although the market values of securities rated below investment grade and
comparable unrated securities tend to react less to fluctuations in interest
rate levels than do those of higher-rated securities. Except to the extent that
values are affected independently by other factors such as developments relating
to a specific issuer, when interest rates decline, the value of a fixed-income
portfolio can generally be expected to rise. Conversely, when interest rates
rise, the value of a fixed-income portfolio can generally be expected to
decline.
The secondary markets for high yield corporate and sovereign debt
securities are not as liquid as the secondary markets for higher rated
securities. The secondary markets for high yield debt securities are
concentrated in relatively few market makers and participants in the market are
mostly institutional investors, including insurance companies, banks, other
financial institutions and mutual funds. In addition, the trading volume for
high yield debt securities is generally lower than that for higher-rated
securities and the secondary markets could contract under adverse market or
economic conditions independent of any specific adverse changes in the condition
of a particular issuer. These factors may have an adverse effect on the
Strategic Bond and Investment Quality Bond Trusts' ability to dispose of
particular portfolio investments and may limit the ability of those portfolios
to obtain accurate market quotations for purposes of valuing securities and
calculating net asset value. If the Strategic Bond Trust or the Investment
Quality Bond Trust is not able to obtain precise or accurate market quotations
for a particular security, it will become more difficult for the Board of
Trustees to value that portfolio's investment portfolio and the Trustees may
have to use a greater degree of judgment in making such valuations. Less liquid
secondary markets may also affect a portfolio's ability to sell securities at
their fair value. In addition, each portfolio may invest up to 15% (10% in the
case of the Money Market Trust) of its net assets, measured at the time of
investment, in illiquid securities, which may be more difficult to value and to
sell at fair value.
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If the secondary markets for high yield debt securities are affected by adverse
economic conditions, the proportion of a portfolio's assets invested in illiquid
securities may increase.
CORPORATE DEBT SECURITIES. While the market values of securities rated
below investment grade and comparable unrated securities tend to react less to
fluctuations in interest rate levels than do those of higher-rated securities,
the market values of certain of these securities also tend to be more sensitive
to individual corporate developments and changes in economic conditions than
higher-rated securities. In addition, such securities generally present a higher
degree of credit risk. Issuers of these securities are often highly leveraged
and may not have more traditional methods of financing available to them, so
that their ability to service their debt obligations during an economic downturn
or during sustained periods of rising interest rates may be impaired. The risk
of loss due to default by such issuers is significantly greater than with
investment grade securities because such securities generally are unsecured and
frequently are subordinated to the prior payment of senior indebtedness.
FOREIGN SOVEREIGN DEBT SECURITIES. Investing in foreign sovereign debt
securities will expose the Strategic Bond and Investment Quality Bond Trusts to
the direct or indirect consequences of political, social or economic changes in
the developing and emerging countries that issue the securities. The ability and
willingness of sovereign obligors in developing and emerging countries or the
governmental authorities that control repayment of their external debt to pay
principal and interest on such debt when due may depend on general economic and
political conditions within the relevant country. Countries such as those in
which these portfolios may invest have historically experienced, and may
continue to experience, high rates of inflation, high interest rates, exchange
rate trade difficulties and extreme poverty and unemployment. Many of these
countries are also characterized by political uncertainty or instability.
Additional factors which may influence the ability or willingness to service
debt include, but are not limited to, a country's cash flow situation, the
availability of sufficient foreign exchange on the date a payment is due, the
relative size of its debt service burden to the economy as a whole, and its
government's policy towards the International Monetary Fund, the World Bank and
other international agencies.
The ability of a foreign sovereign obligor to make timely payments on its
external debt obligations will also be strongly influenced by the obligor's
balance of payments, including export performance, its access to international
credits and investments, fluctuations in interest rates and the extent of its
foreign reserves. A country whose exports are concentrated in a few commodities
or whose economy depends on certain strategic imports could be vulnerable to
fluctuations in international prices of these commodities or imports. To the
extent that a country receives payment for its exports in currencies other than
dollars, its ability to make debt payments denominated in dollars could be
adversely affected. If a foreign sovereign obligor cannot generate sufficient
earnings form foreign trade to service its external debt, it may need to depend
on continuing loans and aid from foreign governments, commercial banks, and
multilateral organizations, and inflows of foreign investment. The commitment on
the part of these foreign governments, multilateral organizations and others to
make such disbursements may be conditioned on the government's implementation of
economic reforms and/or economic performance and the timely service of its
obligations. Failure to implement such reforms, achieve such levels of economic
performance or repay principal or interest when due may result in the
cancellation of such third parties' commitments to lend funds, which may further
impair the obligor's ability or willingness to timely service its debts. The
cost of servicing external debt will also generally be adversely affected by
rising international interest rates, because many external debt obligations bear
interest at rates which are adjusted based upon international interest rates.
The ability to service external debt will also depend on the level of the
relevant government's international currency reserves and its access to foreign
exchange. Currency devaluations may affect the ability of a sovereign obligor to
obtain sufficient foreign exchange to service its external debt.
As a result of the foregoing, a governmental obligor may default on its
obligations. If such an event occurs, the Strategic Bond or Investment Quality
Bond Trust may have limited legal recourse against the issuer and/or guarantor.
Remedies must, in some cases, be pursued in the courts of the defaulting party
itself, and the ability of the holder of foreign sovereign debt securities to
obtain recourse may be subject to the political climate in the relevant country.
In addition, no assurance can be given that the holders of commercial bank debt
will not contest payments to the holders of other foreign sovereign debt
obligations in the event of default under their commercial bank loan agreements.
Sovereign obligors in developing and emerging countries are among the
world's largest debtors to commercial banks, other governments, international
financial organizations and other financial institutions. These obligors have in
the past experienced substantial difficulties in servicing their external debt
obligations, which led to defaults on certain obligations and the restructuring
of certain indebtedness. Restructuring arrangements have included, among other
things, reducing and rescheduling interest and principal payments by negotiating
new or amended credit agreements or converting outstanding principal and unpaid
interest to Brady Bonds, and obtaining new credit to finance interest payments.
Holders of certain foreign sovereign debt securities may be requested to
participate in the restructuring of such obligations and to extend further loans
to their issuers. There can be no assurance that the Brady Bonds and other
foreign sovereign debt securities in which the portfolios may invest will not be
subject to similar restructuring arrangements or to requests for new credit
which may adversely affect the portfolio's holdings. Furthermore, certain
participants in the secondary market for such debt may be directly involved in
negotiating the terms of these arrangements and may therefore have access to
information not available to other market participants.
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In addition to high yield foreign sovereign debt securities, the Strategic
Bond and Investment Quality Bond Trusts may also invest in investment grade
foreign securities. For a discussion of such securities and their associated
risks, see "Foreign Securities" below.
FOREIGN SECURITIES
Each of the portfolios, other than the U.S. Government Securities Trust,
may invest in securities of foreign issuers. Such foreign securities may be
denominated in foreign currencies, except with respect to the Money Market Trust
which may only invest in U.S. dollar-denominated securities of foreign issuers.
The International Small Cap, Global Equity, Global Government Bond,
International Growth and Income and Strategic Bond Trusts may each, without
limitation, invest up to 100% of its assets in securities issued by foreign
entities and/or denominated in foreign currencies. The Aggressive Asset
Allocation Trust may invest up to 35% of its assets, the Moderate Asset
Allocation Trust up to 25% of its assets, the Conservative Asset Allocation
Trust up to 15% of its assets, and each of the other portfolios other than the
U.S. Government Securities Trust up to 20% of its assets in such securities. (In
the case of the Small/Mid Cap Trust, ADRs and U.S. dollar denominated securities
are not included in this 20% limitation.)
Securities of foreign issuers include obligations of foreign branches of
U.S. banks and of foreign banks, common and preferred stocks, debt securities
issued by foreign governments, corporations and supranational organizations, and
American Depository Receipts, European Depository Receipts and Global Depository
Receipts ("ADRs", "EDRs" and "GDRs"). ADRs are U.S. dollar-denominated
securities backed by foreign securities deposited in a U.S. securities
depository. ADRs are created for trading in the U.S. markets. The value of an
ADR will fluctuate with the value of the underlying security, reflect any
changes in exchange rates and otherwise involve risks associated with investing
in foreign securities. ADRs in which the portfolios may invest may be sponsored
or unsponsored. There may be less information available about foreign issuers of
unsponsored ADRs. Each of the portfolios, except for the Growth, International
Small Cap, Global Equity, International Growth and Income, Global Government
Bond and Strategic Bond Trusts, anticipates that its foreign investments will
consist primarily of ADRs that are regularly traded on recognized U.S. exchanges
or in the U.S. "over-the-counter" market.
Securities of foreign issuers also include EDRs and GDRs, which are
receipts evidencing an arrangement with a non-U.S. bank similar to that for ADRs
and are designed for use in non-U.S. securities markets. EDRs and GDRs are not
necessarily quoted in the same currency as the underlying security.
Foreign securities may be subject to foreign government taxes which reduce
their attractiveness. See "Taxes." In addition, investing in securities
denominated in foreign currencies and in the securities of foreign issuers,
particularly non-governmental issuers, involves risks which are not ordinarily
associated with investing in domestic issuers. These risks include political or
economic instability in the country involved and the possibility of imposition
of currency controls. Since certain portfolios may invest in securities
denominated or quoted in currencies other than the United States dollar, changes
in foreign currency exchange rates may affect the value of investments in the
portfolio and the unrealized appreciation or depreciation of investments insofar
as United States investors are concerned. Foreign currency exchange rates are
determined by forces of supply and demand on the foreign exchange markets. These
forces are, in turn, affected by the international balance of payments and other
economic and financial conditions, government intervention, speculation and
other factors. The portfolios may incur transaction charges in exchanging
foreign currencies.
There may be less publicly available information about a foreign issuer
than about a domestic issuer. Foreign issuers, including foreign branches of
U.S. banks, are subject to different accounting and reporting requirements which
are generally less extensive than the requirements applicable to domestic
issuers. Foreign stock markets (other than Japan) have substantially less volume
than the United States exchanges and securities of foreign issuers are generally
less liquid and more volatile than those of comparable domestic issuers. There
is frequently less governmental regulation of exchanges, broker-dealers and
issuers than in the United States, and brokerage costs may be higher. In
addition, investments in foreign companies may be subject to the possibility of
nationalization, withholding of dividends at the source, expropriation or
confiscatory taxation, currency blockage, political or economic instability or
diplomatic developments that could adversely affect the value of those
investments. Finally, in the event of a default on any foreign obligation, it
may be difficult for the Trust to obtain or to enforce a judgment against the
issuer.
Foreign markets, especially emerging markets, may have different clearance
and settlement procedures, and in certain markets there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. Delays in
settlement could result in temporary periods when a portion of the assets of a
portfolio is uninvested and no return is earned thereon. The inability of a
portfolio to make intended security purchases due to settlement problems could
cause the portfolio to miss attractive investment opportunities. Inability to
dispose of portfolio securities due to settlement problems could result in
losses to a portfolio due to subsequent declines in values of the portfolio
securities or, if the portfolio has entered into a contract to sell the
security, possible liability to the purchaser. Certain foreign markets,
especially emerging markets, may require governmental approval for the
repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. A portfolio could be adversely affected by
delays in, or a refusal to grant, any required governmental approval for
repatriation of capital, as well as by the application to the portfolio of any
restrictions on investments.
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In addition to the foreign securities listed above, the Strategic Bond and
Investment Quality Bond Trusts may also invest in foreign sovereign debt
securities, which involve certain additional risks. See "Risk Factors--High
Yield (High Yield) Securities--Foreign Sovereign Debt Securities" above.
WARRANTS
Subject to certain restrictions, each of the Portfolios except the Money
Market Trust may purchase warrants, including warrants traded independently of
the underlying securities.
LENDING SECURITIES
Each portfolio may lend its securities so long as such loans do not
represent in excess of 33 1/3% of a portfolio's total assets. This is a
fundamental policy. The procedure for lending securities is for the borrower to
give the lending portfolio collateral consisting of cash, cash equivalents or
securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities. The lending portfolio may invest the cash collateral and earn
additional income or receive an agreed upon fee from a borrower which has
delivered cash equivalent collateral. The Trust anticipates that its securities
will be loaned only under the following conditions: (1) the borrower must
furnish collateral equal at all times to the market value of the securities
loaned and the borrower must agree to increase the collateral on a daily basis
if the securities increase in value; (2) the loan will be made in accordance
with New York Stock Exchange rules, which presently require the borrower, after
notice, to redeliver the securities within five business days; and (3) the
portfolio making the loan may pay reasonable service, placement, custodian or
other fees in connection with loans of securities and share a portion of the
interest from these investments with the borrower of the securities. As with
other extensions of credit there are risks of delay in recovery or even loss of
rights in the collateral should the borrower of the securities fail financially.
WHEN-ISSUED SECURITIES ("FORWARD COMMITMENTS")
In order to help ensure the availability of suitable securities, each of
the portfolios may purchase debt securities on a "when-issued" or on a "forward
delivery" basis, which means that the obligations will be delivered to the
portfolio at a future date, which may be a month or more after the date of
commitment (referred to as "forward commitments"). It is expected that, under
normal circumstances, a portfolio purchasing securities on a when-issued or
forward delivery basis will take delivery of the securities, but the portfolio
may sell the securities before the settlement date, if such action is deemed
advisable. In general, a portfolio does not pay for the securities or start
earning interest on them until the obligations are scheduled to be settled, but
it does, in the meantime, record the transaction and reflect the value each day
of the securities in determining its net asset value. At the time delivery is
made, the value of when-issued or forward delivery securities may be more or
less than the transaction price, and the yields then available in the market may
be higher than those obtained in the transaction. While awaiting delivery of the
obligations purchased on such bases, a portfolio will establish a segregated
account consisting of cash or high quality debt securities equal to the amount
of the commitments to purchase when-issued or forward delivery securities. The
availability of liquid assets for this purpose and the effect of asset
segregation on a portfolio's ability to meet its current obligations, to honor
requests for redemption and to have its investment portfolio managed properly
will limit the extent to which the portfolio may purchase when-issued or forward
delivery securities. Except as may be imposed by these factors, there is no
limit on the percent of a portfolio's total assets that may be committed to such
transactions.
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
Each of the Trust's portfolios may enter into repurchase agreements and
reverse repurchase agreements. Repurchase agreements involve the acquisition by
a portfolio of debt securities subject to an agreement to resell them at an
agreed-upon price. Under a repurchase agreement, at the time the portfolio
acquires a security, it agrees to resell it to the original seller (a financial
institution or broker/dealer which meets the guidelines established by the
Trustees) and must deliver the security (and/or securities that may be added to
or substituted for it under the repurchase agreement) to the original seller on
an agreed-upon date in the future. The repurchase price is in excess of the
purchase price. The arrangement is in economic effect a loan collateralized by
securities.
The Trustees have adopted procedures that establish certain
creditworthiness, asset and collateralization requirements for the
counterparties to a portfolio's repurchase agreements. The Trustees will
regularly monitor the use of repurchase agreements and the Subadvisers will,
pursuant to procedures adopted by the Trustees, continuously monitor the amount
of collateral held with respect to a repurchase transaction so that it equals or
exceeds the amount of the obligation.
A portfolio's risk in a repurchase transaction is limited to the ability
of the seller to pay the agreed-upon sum on the delivery date. In the event of
bankruptcy or other default by the seller, there may be possible delays and
expenses in liquidating the instrument purchased, decline in its value and loss
of interest. Securities subject to repurchase agreements will be valued every
business day and additional
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<PAGE> 44
collateral will be requested if necessary so that the value of the collateral is
at least equal to the value of the repurchase obligation, including the interest
accrued thereon.
Each portfolio of the Trust may enter into "reverse" repurchase
agreements. Under a reverse repurchase agreement, a portfolio may sell a debt
security and agree to repurchase it at an agreed upon time and at an agreed upon
price. The portfolio retains record ownership of the security and the right to
receive interest and principal payments thereon. At an agreed upon future date,
the portfolio repurchases the security by remitting the proceeds previously
received, plus interest. The difference between the amount the portfolio
receives for the security and the amount it pays on repurchase is deemed to be
payment of interest. The portfolio will maintain in a segregated custodial
account cash, Treasury bills or other U.S. Government securities having an
aggregate value equal to the amount of such commitment to repurchase including
accrued interest, until payment is made. In certain types of agreements, there
is no agreed-upon repurchase date and interest payments are calculated daily,
often based on the prevailing overnight repurchase rate. While a reverse
repurchase agreement may be considered a form of leveraging and may, therefore,
increase fluctuations in a portfolio's net asset value per share, each portfolio
will cover the transaction as described above.
MORTGAGE DOLLAR ROLLS
Each portfolio of the Trust (except the Money Market Trust) may enter into
mortgage dollar rolls. Under a mortgage dollar roll, a portfolio sells
mortgage-backed securities for delivery in the future (generally within 30 days)
and simultaneously contracts to repurchase substantially similar (same type,
coupon and maturity) securities on a specified future date. During the roll
period, the portfolio forgoes principal and interest paid on the mortgage-backed
securities. A portfolio is compensated by the difference between the current
sale price and the lower forward price for the future purchase (often referred
to as the "drop") as well as by the interest earned on the cash proceeds of the
initial sale. A portfolio may also be compensated by receipt of a commitment
fee. A portfolio may only enter into covered rolls. A "covered roll" is a
specific type of dollar roll for which there is an offsetting cash or cash
equivalent security position which matures on or before the forward settlement
date of the dollar roll transaction. Dollar roll transactions involve the risk
that the market value of the securities sold by the portfolio may decline below
the repurchase price of those securities. While a mortgage dollar roll may be
considered a form of leveraging, and may, therefore, increase fluctuations in a
portfolio's net asset value per share, each portfolio will cover the transaction
as described above.
HEDGING AND OTHER STRATEGIC TRANSACTIONS
Individual portfolios may be authorized to use a variety of investment
strategies described below for hedging purposes only, including hedging various
market risks (such as interest rates, currency exchange rates and broad or
specific market movements) and managing the effective maturity or duration of
debt instruments held by the portfolio. The description in this Prospectus of
each portfolio indicates which, if any, of these types of transactions may be
used by the portfolio. Although these strategies are regularly used by some
investment companies and other institutional investors, it is not presently
anticipated that any of these strategies will be used to a significant degree by
any portfolio unless otherwise specifically indicated in the description of the
portfolio contained in this Prospectus. Limitations on the portion of a
portfolio's assets that may be used in connection with the investment strategies
described below are set out in the Statement of Additional Information.
Subject to the constraints described above, an individual portfolio may
(if and to the extent so authorized) purchase and sell (or write)
exchange-listed and over-the-counter put and call options on securities,
financial futures contracts and fixed income indices and other financial
instruments, enter into financial futures contracts, enter into interest rate
transactions, and enter into currency transactions (collectively, these
transactions are referred to in this Prospectus as "Hedging and Other Strategic
Transactions"). A portfolio's interest rate transactions may take the form of
swaps, caps, floors and collars, and a portfolio's currency transactions may
take the form of currency forward contracts, currency futures contracts,
currency swaps and options on currencies or currency futures contracts.
Hedging and Other Strategic Transactions may be used to attempt to protect
against possible changes in the market value of securities held or to be
purchased by a portfolio resulting from securities markets or currency exchange
rate fluctuations, to protect a portfolio's unrealized gains in the value of its
securities, to facilitate the sale of those securities for investment purposes,
to manage the effective maturity or duration of a portfolio's securities or to
establish a position in the derivatives markets as a temporary substitute for
purchasing or selling particular securities. A portfolio may use any or all
types of Hedging and Other Strategic Transactions which it is authorized to use
at any time; no particular strategy will dictate the use of one type of
transaction rather than another, as use of any authorized Hedging and Other
Strategic Transaction will be a function of numerous variables, including market
conditions. The ability of a portfolio to utilize Hedging and Other Strategic
Transactions successfully will depend on, in addition to the factors described
above, the subadviser's ability to predict pertinent market movements, which
cannot be assured. These skills are different from those needed to select a
portfolio's securities. None of the portfolios is a "commodity pool" (i.e., a
pooled investment vehicle which trades in commodity futures contracts and
options thereon and the operator of which is registered with the Commodity
Futures Trading Commission (the "CFTC")) and
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<PAGE> 45
Hedging and Other Strategic Transactions involving futures contracts and options
on futures contracts will be purchased, sold or entered into only for bona fide
hedging, risk management or appropriate portfolio management purposes and not
for speculative purposes. The use of certain Hedging and Other Strategic
Transactions will require that a portfolio segregate cash, liquid high grade
debt obligations or other assets to the extent a portfolio's obligations are not
otherwise "covered" through ownership of the underlying security, financial
instrument or currency. Risks associated with Hedging and Other Strategic
Transactions are described in "Hedging and Other Strategic Transactions -- Risk
Factors" in the Statement of Additional Information. A detailed discussion of
various Hedging and Other Strategic Transactions, including applicable
regulations of the CFTC and the requirement to segregate assets with respect to
these transactions, also appears in the Statement of Additional Information.
ILLIQUID SECURITIES
Each of the portfolios is precluded from investing in excess of 15% of its
net assets in securities that are not readily marketable, except that the Money
Market Trust may not invest in excess of 10% of its net assets in such
securities. Excluded from the 10% and 15% limitation are securities that are
restricted as to resale but for which a ready market is available pursuant to
exemption provided by Rule 144A adopted pursuant to the Securities Act of 1933
("1933 Act") or other exemptions from the registration requirements of the 1933
Act. Whether securities sold pursuant to Rule 144A are readily marketable for
purposes of the Trust's investment restriction is a determination to be made by
the Subadvisers subject to the Trustees' oversight and for which the Trustees
are ultimately responsible. The Subadvisers will also monitor the liquidity of
Rule 144A securities held by the portfolios for which they are responsible. To
the extent Rule 144A securities held by a portfolio should become illiquid
because of a lack of interest on the part of qualified institutional investors,
the overall liquidity of the portfolio could be adversely affected. In addition,
the Money Market Trust may invest in commercial paper issued in reliance on the
exemption from registration afforded by Section 4(2) of the 1933 Act. Section
4(2) commercial paper is restricted as to the disposition under federal
securities law, and is generally sold to institutional investors, such as the
Trust, who agree that they are purchasing the paper for investment purposes and
not with a view to public distribution. Any resale by the purchaser must be made
in an exempt transaction. Section 4(2) commercial paper is normally resold to
other institutional investors like the Money Market Trust through or with the
assistance of the issuer or investment dealers who make a market in Section 4(2)
commercial paper, thus providing liquidity. The Money Market Trust's subadviser
believes that Section 4(2) commercial paper meets its criteria for liquidity and
is quite liquid. The Money Market Trust intends, therefore, to treat Section
4(2) commercial paper as liquid and not subject to the investment limitation
applicable to illiquid securities. The Money Market Trust's subadviser will
monitor the liquidity of 4(2) commercial paper held by the Money Market Trust,
subject to the Trustees' oversight and for which the Trustees are ultimately
responsible.
MANAGEMENT OF THE TRUST
Under Massachusetts law and the Trust's Declaration of Trust and By-Laws,
the management of the business and affairs of the Trust is the responsibility of
its Trustees. The Trust was originally organized on August 3, 1984 as "NASL
Series Fund, Inc." (the "Fund"), a Maryland corporation. Pursuant to an
Agreement and Plan of Reorganization and Liquidation approved at the Special
Meeting of Shareholders held on December 2, 1988, the Fund was reorganized as a
Massachusetts business trust established pursuant to an Agreement and
Declaration of Trust dated September 29, 1988 (the "Declaration of Trust"). The
reorganization became effective on December 31, 1988. At that time, the assets
and liabilities of each of the Fund's separate investment portfolios were
assumed by the corresponding portfolios of the Trust and the Trust carried on
the business and operations of the Fund with the same investment management
arrangements as were in effect for the Fund immediately prior to such
reorganization.
ADVISORY ARRANGEMENTS
NASL Financial Services, Inc. ("NASL Financial" or, in its capacity as
investment adviser to the Trust the "Adviser"), a Massachusetts corporation
whose principal offices are located at 116 Huntington Avenue, Boston,
Massachusetts 02116, is a wholly-owned subsidiary of Security Life the ultimate
parent of which is The Manufacturers Life Insurance Company ("Manulife"), a
Canadian mutual life insurance company based in Toronto, Canada. Prior to
January 1, 1996, Security Life was a wholly owned subsidiary of North American
Life Assurance Company ("NAL"), a Canadian mutual life insurance company. On
January 1, 1996 NAL and Manulife merged with the combined company retaining the
name Manulife. NASL Financial is registered as an investment adviser under the
Investment Advisers Act of 1940 and as a broker-dealer under the Securities
Exchange Act of 1934, and it is a member of the National Association of
Securities Dealers, Inc. ("NASD"). In addition, NASL Financial serves as
principal underwriter of certain contracts issued by Security Life and as
investment adviser to one other investment company, North American Funds.
Under the terms of the Advisory Agreement, the Adviser administers the
business and affairs of the Trust. The Adviser is responsible for performing or
paying for various administrative services for the Trust, including providing at
the Adviser's expense, (i) office space and all necessary office facilities and
equipment, (ii) necessary executive and other personnel for managing the affairs
of the Trust and for performing certain clerical, accounting and other office
functions, and (iii) all other information and services, other than services of
counsel, independent accountants or investment subadvisory services provided by
any subadviser under a subadvisory agreement, required in connection with the
preparation of all tax returns and documents required to comply with the federal
securities laws. The Adviser pays the cost of (i) any advertising or sales
literature relating solely to the Trust, (ii) the cost of printing and mailing
prospectuses to persons other
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than current holders of Trust shares or of variable contracts funded by Trust
shares and (iii) the compensation of the Trust's officers and Trustees that are
officers, directors or employees of the Adviser or its affiliates. In addition,
advisory fees are reduced or the Adviser reimburses the Trust if the total of
all expenses (excluding advisory fees, taxes, portfolio brokerage commissions,
interest, litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of the Trust's business) applicable
to a portfolio exceeds an annual rate of .75% in the case of the International
Small Cap, Global Equity, Global Government Bond and International Growth and
Income Trusts or .50% in the case of all other portfolios of the average annual
net assets of such portfolio. The expense limitations will continue in effect
from year to year unless otherwise terminated at any year end by the Adviser on
30 days' notice to the Trust. For the prior fiscal year, the Adviser did not
reimburse the Trust for any expenses since expenses were below the expense
limitations. However, if expenses were to increase above the expense limits and
the reimbursements were terminated, Trust expenses would increase.
In addition to providing the services and expense limitations described
above, the Adviser selects, contracts with and compensates subadvisers to manage
the investment and reinvestment of the assets of the portfolios of the Trust.
The Adviser monitors the compliance of such subadvisers with the investment
objectives and related policies of each portfolio and reviews the performance of
such subadvisers and reports periodically on such performance to the Trustees of
the Trust.
<TABLE>
As compensation for its services, the Adviser receives a fee from the
Trust computed separately for each portfolio. The fee for each portfolio is
stated as an annual percentage of the current value of the net assets of the
portfolio. The fee, which is accrued daily and payable monthly, is calculated
for each day by multiplying the daily equivalent of the annual percentage
prescribed for a portfolio by the value of the net assets of the portfolio at
the close of business on the previous business day of the Trust. The following
is a schedule of the management fees each portfolio currently is obligated to
pay the Adviser:
<CAPTION>
PORTFOLIO
-----------------------------------------------------
<S> <C>
Small/Mid Cap Trust....................... 1.000%
International Small Cap Trust............. 1.100%
Global Equity Trust....................... .900%
Pasadena Growth Trust..................... .975%
Equity Trust.............................. .750%
Growth Trust.............................. .850%
Value Equity Trust........................ .800%
Growth and Income Trust................... .750%
International Growth and Income Trust..... .950%
Strategic Bond Trust...................... .775%
Global Government Bond Trust ............. .800%
Investment Quality Bond Trust............. .650%
U.S. Government Securities Trust ......... .650%
Money Market Trust........................ .500%
Aggressive Asset Allocation Trust......... .750%
Moderate Asset Allocation Trust........... .750%
Conservative Asset Allocation Trust ...... .750%
</TABLE>
The fees shown above, other than those paid by the Investment Quality Bond and
U.S. Government Securities Trusts and the Money Market Trust, are higher than
those paid by most funds to their advisers, but are not higher than the fees
paid by many funds with similar investment objectives and policies.
For the year ended December 31, 1995 the aggregate investment advisory fees
paid by the Trust was $33,808,255, allocated among the portfolios as follows:
$5,513,312-- Global Equity Trust, $2,115,434-- Pasadena Growth Trust,
$5,643,363-- Equity Trust, $2,459,247-- Value Equity, $3,922,671-- Growth and
Income Trust, $450,200-- International Growth and Income Trust (January 9, 1995,
commencement of operations, to December 31, 1995), $767,448 - Strategic Bond
Trust, $1,757,909-- Global Government Bond Trust, $798,045--Investment Quality
Bond Trust, $1,291,668-- U.S. Government Securities Trust, $1,318,573-- Money
Market Trust, $1,463,421-- Aggressive Asset Allocation Trust, $4,667,061--
Moderate Asset Allocation Trust and $1,639,903-- Conservative Asset Allocation
Trust. FOR THE PERIOD MARCH 4, 1996 TO JUNE 15, 1996, THE SMALL/MID CAP TRUST
PAID INVESTMENT ADVISORY FEES OF $102,833 AND THE INTERNATIONAL SMALL CAP TRUST
PAID INVESTMENT ADVISORY FEES OF $54,605.
SUBADVISORY ARRANGEMENTS
Each of the Trust's subadvisers, except Fidelity Management Trust Company,
is registered as an investment adviser under the Investment Advisers Act of
1940.
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Fidelity Management Trust Company ("FMTC"), the subadviser to the Equity
and Automatic Asset Allocation Trusts, founded in 1946, is located at 82
Devonshire Street, Boston, Massachusetts 02109. FMTC is part of Fidelity
Investments, a group of companies that provides investment management and other
financial services. FMTC is a wholly-owned subsidiary of FMR Corp., the parent
company of the Fidelity companies. Founded in 1981, FMTC serves as investment
manager to institutional clients, managing assets for insurance companies,
tax-exempt retirement funds, endowments, foundations and other institutional
investors. As of February 29, 1996 FMTC had investment management responsibility
for approximately $31.8 billion of assets. Fidelity Investments, founded by
Edward C. Johnson 2d, the father of the current chairman, Edward C. Johnson 3d,
is the country's largest privately-owned investment management organization and
as of February 29, 1996 had assets under management exceeding $428.4 billion.
Fidelity Investments maintains a staff of over 100 in-house research analysts
and follows some 7000 companies worldwide.
David Felman has been primarily responsible for the day-to-day management
of the Equity Trust since June 1996. Scott D. Stewart and Boyce I. Greer have
been primarily responsible for the day-to-day management of the three Asset
Allocation Trusts since December 1991.
David Felman joined Fidelity in June, 1993. Prior to managing the Equity
Trust, Mr. Felman held the following positions at Fidelity: portfolio manager of
the Select Telecommunications portfolio (April, 1994 to June, 1996), portfolio
manager of the Select Chemical portfolio (January, 1995 to July, 1995),
assistant to the portfolio manager of the Magellan Fund (December, 1994 to June,
1996) and research analyst (prior to April, 1994). Mr. Felman received an A.M.
from Harvard University in 1993, a M.B.A. from New York University in 1991 and a
B.A. from Columbia University in 1988.
Scott Stewart joined Fidelity in 1987, and is Senior Vice President,
Portfolio Manager and head of the Structured Equity Group.
Boyce Greer is the Group Leader and Senior Vice President of FMTC and Vice
President of FMR in the Fixed Income Group. He joined Fidelity in 1987 as a
Portfolio Manager responsible for portfolio risk analysis.
Oechsle International Advisors, L.P. ("Oechsle International"), the
subadviser to the Global Equity and Global Government Bond Trusts, founded in
1986, is a Delaware limited partnership whose principal offices are located at
One International Place, Boston, Massachusetts 02110. Oechsle International,
which also has offices in London, England, Frankfurt, Germany and Tokyo, Japan,
as of May 31, 1996 manages approximately $9.4 billion for institutional and
private investors. Oechsle International is a money manager providing management
and advisory services with respect to all primary international securities
markets. Each year Oechsle International's investment professionals concentrate
on up to 30 different countries, averaging 700 visits to companies annually.
Steven H. Schaefer has been primarily responsible for the day-to-day
management of the Global Equity Trust since March 1988 and since 1991 Stephen J.
Butters has shared this responsibility. Astrid Vogler has been primarily
responsible for the day-to-day management of the Global Government Bond Trust
since March 1988. Messrs. Schaefer and Butters are also portfolio managers to
North American Funds' Global Growth Fund.
Mr. Schaefer has been a General Partner and Portfolio Manager at Oechsle
International and Managing Director for the firm's London subsidiary since 1986.
Mr. Butters works in the U.S. Equity management sector of Oechsle
International. Prior to joining Oechsle International in 1991, Mr. Butters
worked at the Putnam Management Company as Senior Vice President and Portfolio
Manager from 1982 to 1988. He also founded his own firm, Butters Lyons, in 1988
where he provided investment management services to individuals and small
business corporations.
Ms. Vogler has been a Fixed Income Portfolio Manager at Oechsle
International in Frankfurt, West Germany since 1988.
Roger Engemann Management Co., Inc. ("REMC") is the subadviser for the
Pasadena Growth Trust. The business address of REMC is 600 North Rosemead
Boulevard, Pasadena, California 91107-2138. Roger Engemann & Associates, Inc.
("RE&A"), which is a wholly-owned subsidiary of Pasadena Capital Corporation,
owns 93.5% of REMC's capital stock. Roger Engemann, controlling shareholder of
Pasadena Capital Corporation, is the Chairman of the Board and President of RE&A
and REMC. RE&A has been engaged in the business of investment management since
1969, and provides investment counseling services to retirement plans, colleges,
corporations, trusts and individuals. REMC has been in business since 1985 and
manages The Pasadena Group of Mutual Funds. The portfolio managers, research
analysts and supporting staff are substantially the same for both REMC and RE&A.
The combined assets under management of REMC and RE&A as of May 31, 1996 are
approximately $4.7 billion.
Roger Engemann, James E. Mair and John S. Tilson are primarily responsible
for the day-to-day management of the Pasadena Growth Trust, and have been since
its inception.
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<PAGE> 48
Mr. Engemann has been the president of the Subadviser, REMC, since its
organization in 1985, and has been President of its parent, REA, since its
organization in 1969. Messrs. Mair and Tilson are both Executive Vice Presidents
and Managing Directors of portfolio management of REMC and REA, and both have
been with REMC since its inception and with REA since 1983.
Goldman Sachs Asset Management ("GSAM"), the subadviser to the Value Equity
Trust, is a separate operating division of Goldman, Sachs & Co., located at 85
Broad Street, New York, New York 10004. The main business address of GSAM is One
New York Plaza, New York, New York 10004. GSAM also has offices in London,
Tokyo, Singapore and Sydney. Goldman, Sachs & Co. was registered as an
investment adviser in 1981 and together with its affiliates currently acts as an
investment adviser, administrator or distributor to 75 mutual fund portfolios.
As of May 29, 1996, GSAM and its affiliates managed a total of approximately
$58.6 billion of assets; approximately $38.7 billion in mutual fund assets and
approximately $19.9 billion in assets for various individual and institutional
accounts including 9 of the 50 largest U.S. Pension funds and three central
banks. Goldman, Sachs & Co. was founded in 1869, has 32 offices world wide,
employs over 8900 individuals, and is one of the leading worldwide investment
banking and brokerage organizations and provides a broad range of financing and
investing services both in the U.S. and abroad. GSAM has access to the resources
of Goldman Sachs & Co., including its highly regarded staff of over 504 research
professionals that cover more than 1,600 companies in over 60 industries.
Mitch Cantor and Paul Farrell have been primarily responsible for the
day-to-day management of the Value Equity Trust since February 1993. Messrs.
Cantor and Farrell are senior portfolio managers for the Value Equity Trust as
well as North American Funds' Value Equity Fund.
Mitch Cantor is also a senior equity portfolio manager for the North
American Funds' Asset Allocation Fund. Mr. Cantor joined Goldman Sachs Asset
Management in 1991. Before joining GSAM, he was a senior partner at Sanford C.
Bernstein & Co. where he served as Research Director for the Investment
Management Division. Mr. Cantor was at Sanford C. Bernstein & Co. from August
1983 to October 1991.
Before joining GSAM in 1991, Paul Farrell served as a managing director at
Plaza Investments, the investment subsidiary of GEICO Corp., a major insurance
company, from February 1991 to August 1991. Mr. Farrell was previously employed
in the Investment Research Department at Goldman Sachs from June 1986 to
February 1991. Mr. Farrell is a Certified Financial Analyst as well.
Wellington Management Company ("Wellington Management"), the subadviser to
the Growth and Income, Investment Quality Bond and Money Market Trusts, founded
in 1933, is a Massachusetts partnership whose principal business address is 75
State Street, Boston, Massachusetts 02109. Wellington Management is a
professional investment counseling firm which provides investment services to
investment companies, employee benefit plans, endowments, foundations and other
institutions and individuals. As of May 31, 1996, Wellington Management had
investment management authority with respect to approximately $118 billion of
client assets. The managing partners of Wellington Management are Robert W.
Doran, Duncan M. McFarland and John R. Ryan.
Matthew E. Megargel, Senior Vice President of Wellington Management, has
served as portfolio manager to the Growth and Income Trust since February 1992.
Mr. Megargel also serves as the portfolio manager for the North American Funds'
Growth and Income Fund. Mr. Megargel joined Wellington Management in 1983 as a
research analyst and took on additional responsibilities as a portfolio manager
in 1988. In 1991, he became solely a portfolio manager with Wellington
Management.
Thomas L. Pappas, Senior Vice President of Wellington Management, has
served as portfolio manager to the Investment Quality Bond Trust since March
1994. Mr. Pappas also serves as portfolio manager to the North American Funds'
Investment Quality Bond Fund. Mr. Pappas has been a portfolio manager with
Wellington Management since 1987.
John C. Keogh, Senior Vice President of Wellington Management, serves as
portfolio manager to the Money Market Trust. He has served as portfolio manager
to the Money Market Trust since December 1991, when Wellington Management became
subadviser to the Money Market Trust. Mr. Keogh also serves as the portfolio
manager for the North American Funds' Money Market Fund. Mr. Keogh has been a
portfolio manager with Wellington Management since 1983.
J.P. Morgan Investment Management, Inc. ("J.P. Morgan") is the Subadviser
to the International Growth and Income Trust. J.P. Morgan, with principal
offices at 522 Fifth Avenue, New York 10036, is a wholly-owned subsidiary of
J.P. Morgan & Co. Incorporated ("J.P. Morgan & Co."), a bank holding company
organized under the laws of Delaware which is located at 60 Wall Street, New
York, New York 10260. Through offices in New York City and abroad, J.P. Morgan &
Co., through J.P. Morgan and other subsidiaries, offers a wide range of services
to governmental, institutional, corporate and individual customers and acts as
investment adviser to individual and institutional clients with combined assets
under management of approximately $183 billion as of March 31, 1996. J.P. Morgan
has managed international securities for institutional investors since 1974. As
of March 31, 1996, the non-U.S. securities under J.P. Morgan's management was
approximately $44 billion. J.P. Morgan provides investment advice and portfolio
management services to the portfolio. Subject to the supervision of the
Trustees, J.P. Morgan makes the portfolio's day-to-day investment decisions,
arranges for the execution of portfolio transactions and generally manages the
Portfolio's investments.
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<PAGE> 49
J.P. Morgan uses a sophisticated, disciplined, collaborative process for
managing the portfolio. The following persons are primarily responsible for the
day-to-day management of the portfolio (their business experience for the past
five years is indicated parenthetically): Paul A. Quinsee, Vice President
(employed by J.P. Morgan since February 1992, previously Vice President,
Citibank) and Gareth A. Fielding, Vice President (employed by J.P. Morgan since
February 1992, previously he received his MBA from Imperial College at London
University, while he was a self-employed trader on the London International
Financial Futures Exchange.)
Mr. Quinsee is primarily responsible for the day-to-day management of 16
other institutional and investment company accounts that invest in international
securities constituting approximately $2.9 billion of assets. Since July 1994,
Mr. Fielding has been responsible for the day-to-day management (in some cases
with another person) of 11 institutional and investment company portfolios that
invest primarily in international fixed income securities, constituting
approximately $1.5 billion of assets. Mr. Fielding is a specialist in mortgage
and asset-backed securities. Prior to July 1994, Mr. Fielding traded global
fixed income products on J.P. Morgan's London trading desk.
Salomon Brothers Asset Management Inc ("SBAM"), the subadviser to the U.S.
Government Securities and Strategic Bond Trusts, is an indirect, wholly-owned
subsidiary of Salomon Inc ("SI") incorporated in 1987. The business address of
SBAM is 7 World Trade Center, New York, New York 10048. Through its office in
New York and affiliates in London, Frankfurt, Hong Kong and Tokyo, SBAM provides
a full range of fixed income and equity investment advisory services for its
individual and institutional clients around the world, including European and
Far East central banks, pension funds, endowments, insurance companies, and
various investment companies (including portfolios thereof). As of May 31, 1996,
SBAM Limited, SBAM and their advisory affiliates had investment advisory
responsibility for approximately $14.5 billion of assets. SBAM has access to
SI's more than 400 economists, mortgage, bond, sovereign and equity analysts.
In connection with SBAM's service as subadviser to the Strategic Bond
Trust, SBAM's London based affiliate, Salomon Brothers Asset Management Limited
("SBAM Limited"), whose business address is Victoria Plaza, 111 Buckingham
Palace Road, London SW1W OSB, England, provides certain advisory services to
SBAM relating to currency transactions and investments in non-dollar denominated
debt securities for the benefit of the Strategic Bond Trust. SBAM Limited is
compensated by SBAM at no additional expense to the Trust. SBAM Limited was
formed to acquire the asset management division of a sister company, Salomon
Brothers International Limited, which currently has approximately $2 billion
under management. Like SBAM, SBAM Limited is an indirect, wholly-owned
subsidiary of Salomon Inc. SBAM Limited is a member of the Investment Management
Regulatory Organization Limited in the United Kingdom and is registered as an
investment adviser in the United States pursuant to the Investment Advisers Act
of 1940.
Steven Guterman has been primarily responsible for the day-to-day
management of the mortgage-backed securities and U.S. government securities
portions of the U.S. Government Securities Trust since December 1991 and the
Strategic Bond Trust since February 1993. Mr. Guterman is assisted in the
management of the two foregoing Trusts by Roger Lavan. Peter J. Wilby has been
primarily responsible for the day-to-day management of the high yield and
sovereign debt portions of the Strategic Bond Trust since February 1993. Mr.
David Scott is primarily responsible for the international portion of the
Strategic Bond Trust.
Mr. Guterman, who joined SBAM in 1990, is a Managing Director of Salomon
Brothers Inc. and a Senior Portfolio Manager, responsible for the SBAM's
investment company and institutional portfolios which invest primarily in
mortgage-backed securities and U.S. government issues. Mr. Guterman also serves
as portfolio manager for North American Funds' U.S. Government Securities and
Strategic Income Funds, Salomon Brothers Mortgage Investment Fund, and Salomon
Brothers Mortgage Arbitrage Finance Limited. In addition, Mr. Guterman serves as
portfolio manager for a number of SBAM's institutional clients. Mr. Guterman
joined Salomon Brothers, Inc. in 1983. He initially worked in the mortgage
research group where he became a Research Director and later traded derivative
mortgage-backed securities for Salomon Brothers, Inc.
Mr. Lavan has assisted Mr. Guterman with the day to day management of the
mortgage-backed securities portions of the U.S. Government Securities Trust
since December 1991 and the Strategic Bond Trust since February 1993. Mr. Lavan
joined SBAM in 1990 and is a Portfolio Manager and Quantitative Fixed Income
Analyst for SBAM where he is responsible for working with senior portfolio
managers to monitor and analyze market relationships and identify and implement
relative value transactions in SBAM's investment company and institutional
portfolios which invest in mortgage-backed securities and U.S. Government
Securities. Mr. Lavan also assists Mr. Guterman with the day to day management
of the mortgage-backed securities portions of the North American Funds' U.S.
Government Securities and Strategic Income Funds. Prior to joining SBAM, Mr.
Lavan spent four years analyzing portfolios for Salomon's Fixed Income Sales
Group and Product Support Divisions.
Mr. Wilby, who joined SBAM in 1989, is a Managing Director of Salomon
Brothers Inc. and a Senior Portfolio Manager, responsible for SBAM's investment
company and institutional portfolios which invest in high yield U.S. corporate
debt securities and high yield foreign sovereign debt securities. Mr. Wilby is
also primarily responsible for the day-to-day management of the high yield and
sovereign debt portions of North American Fund's Strategic Income Fund, Salomon
Brothers High Income Fund, Inc, The Emerging Markets Income Fund, Inc, The
Emerging Markets Income Fund, Inc and the Latin America Investment Fund, Inc.
(with respect to the Fund's investment in Latin American sovereign debt). From
1984 to 1989, Mr. Wilby was employed by Prudential Capital Management
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<PAGE> 50
Group ("Prudential"). He served as director of Prudential's credit research unit
and as a corporate and sovereign credit analyst with Prudential. Mr. Wilby later
managed high yield bonds and leveraged equities in the mutual funds and
institutional portfolios at Prudential.
David Scott is a senior fixed-income portfolio manager with SBAM Limited in
London. His primary responsibility is managing long term global bond portfolios.
He also takes an integral role in developing investment strategy. Prior to
joining Salomon Brothers in April 1994, Mr. Scott worked at J.P. Morgan
Investment Management ("J.P. Morgan") from October 1990 to March 1994 where he
had responsibility for global and non-dollar portfolios. Clients included
government departments, pension funds and insurance companies. Before joining
J.P. Morgan, Mr. Scott worked for Mercury Asset Management from January 1987 to
October 1990 where he had responsibility for captive insurance portfolios and
product. Mr. Scott is a Fellow of the Institute of Actuaries and worked for the
Wyatt Company from November 1984 to January 1987 as a consultant advising
companies on pension and employee related benefit issues. He received a BSc in
Mathematics and Economics from Nottingham University.
Investment decisions for the Small/Mid Cap Trust are made by its
Subadviser, Fred Alger Management, Inc. ("Alger"). Alger, located at 75 Maiden
Lane, New York, New York 10038, has been in the business of providing investment
advisory services since 1964 and as of May 31, 1996 had approximately $6.4
billion under management, including $3.9 billion in mutual fund accounts and
$2.5 billion in other advisory accounts. Alger Management is wholly owned by
Fred Alger & Company, Incorporated which in turn is wholly owned by Alger
Associates, Inc., a financial services holding company. Fred M. Alger, III and
his brother, David D. Alger, are the majority shareholders of Alger Associates,
Inc. and may be deemed to control that company and its subsidiaries.
David D. Alger, President of Alger Management, is primarily responsible for
the day-to-day management of the Small/Mid Cap Trust. He has been employed by
Alger as Executive Vice President and Director of Research since 1971 and as
President since 1995 and he serves as portfolio manager for other mutual funds
and investment accounts managed by Alger Management. Also participating in the
management of the Small/Mid Cap Trust are Ronald Tartaro and Seilai Khoo. Mr.
Tartaro has been employed by Alger Management since 1990 and he serves as a
Senior Vice President. Prior to 1990, he was a member of the technical staff at
AT&T Bell Laboratories. Ms. Khoo has been employed by Alger Management since
1989 and she serves as a Senior Vice President.
Investment decisions for the Growth and International Small Cap Trust are
made by its Subadviser, Founders Asset Management, Inc., ("Founders") located at
2930 East Third Avenue, Denver, Colorado 80206, a registered investment adviser
first established as an asset manager in 1938. Bjorn K. Borgen, Chief Investment
Officer and Chairman of Founders, owns 100% of the voting stock of Founders. As
of May 31, 1996, Founders had over $4 billion of assets under management,
including $3.2 billion in mutual fund accounts and $.7 billion in other advisory
accounts.
To facilitate the day-to-day investment management of the Growth and the
International Small Cap Trust, Founders employs a unique team-and-lead-manager
system. The management team is composed of several members of the Investment
Department, including Founders' Chief Investment Officer, lead portfolio
managers, assistant portfolio managers, portfolio traders and research analysts.
Team members share responsibility for providing ideas, information, knowledge
and expertise in the management of the portfolios. Each team member has one or
more areas of expertise that is applied to the management of the Portfolio.
Daily decisions on portfolio selection for the Portfolio rests with a lead
portfolio manager assigned to the Portfolio.
Michael W. Gerding, Vice President of Investments, is the lead portfolio
manager for the International Small Cap Trust. Mr. Gerding is a chartered
financial analyst who has been part of Founders' investment department for five
years. Mr. Gerding is the lead portfolio manager of the International Small Cap
Trust. Prior to joining Founders, Mr. Gerding served as a portfolio manager and
research analyst with NCNB Texas for several years. Mr. Gerding earned a BBA in
finance and an MBA from Texas Christian University.
Edward F. Keely, Vice President of Investments, is the lead portfolio
manager for the Growth Trust. Mr. Keely is a chartered financial analyst who
joined Founders in 1989. A graduate of The Colorado College, Mr. Keely holds a
Bachelor of Arts degree in economics.
Under the terms of each of the Subadvisory Agreements, the subadviser
manages the investment and reinvestment of the assets of the assigned
portfolios, subject to the supervision of the Trustees of the Trust. The
subadviser formulates a continuous investment program for each such portfolio
consistent with its investment objectives and policies outlined in this
Prospectus. Each subadviser implements such programs by purchases and sales of
securities and regularly reports to the Adviser and the Trustees of the Trust
with respect to the implementation of such programs. In addition, the subadviser
to the Pasadena Growth Trust has agreed to reimburse the Pasadena Growth Trust
for its "Other Expenses," as defined in the Subadvisory Agreement and set forth
in the Statement of Additional Information, to a maximum on an annual basis of
.15% of the average net assets of the Pasadena Growth Trust.
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<PAGE> 51
<TABLE>
As compensation for their services, the subadvisers receive fees from the
Adviser computed separately for each portfolio. The fee for each portfolio is
stated as an annual percentage of the current value of the net assets of such
portfolio. The fees are calculated on the basis of the average of all valuations
of net assets of each portfolio made at the close of business on each business
day of the Trust during the period for which such fees are paid. Once the
average net assets of a portfolio exceed specified amounts, the fee is reduced
with respect to such excess. The following is a schedule of the management fees
the Adviser currently is obligated to pay the subadvisers out of the advisory
fee it receives from each portfolio as specified above:
<CAPTION>
BETWEEN BETWEEN
$50,000,000 $200,000,000
FIRST AND AND EXCESS OVER
PORTFOLIO $50,000,000 $200,000,000 $500,000,000 $500,000,000
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Small/Mid Cap Trust.............. .525% .500% .475% .450%
International Small Cap Trust.... .650% .600% .500% .400%
Global Equity Trust.............. .500% .450% .375% .325%
Pasadena Growth Trust............ .550% .500% .450% .375%
Equity Trust .................... .325% .275% .225% .150%
Growth Trust..................... .450% .450% .350% .300%
Value Equity Trust............... .400% .300% .200% .200%
Growth and Income Trust.......... .325% .275% .225% .150%
International Growth and
Income Trust.................. .500% .450% .400% .350%
Strategic Bond Trust*............ .350% .300% .250% .200%
Global Government Bond Trust..... .375% .350% .300% .250%
Investment Quality Bond Trust.... .225% .225% .150% .100%
U.S. Government Securities Trust. .225% .225% .150% .100%
Money Market Trust .............. .075% .075% .075% .020%
Aggressive Asset Allocation Trust .325% .275% .225% .150%
Moderate Asset Allocation Trust.. .325% .275% .225% .150%
Conservative Asset Allocation
Trust......................... .325% .275% .225% .150%
- ----------
<FN>
* In connection with the subadvisory consulting agreement between SBAM and SBAM
Limited, SBAM will pay SBAM Limited, as full compensation for all services
provided under the subadvisory consulting agreement, a portion of its
subadvisory fee, such amount being an amount equal to the fee payable under
SBAM's subadvisory agreement multiplied by the current value of the net assets
of the portion of the assets of the Strategic Bond Trust that SBAM Limited has
been delegated to manage divided by the current value of the net assets of the
portfolio.
</TABLE>
For the year ended December 31, 1995, the Adviser paid aggregate
subadvisory fees of $12,007,940, allocated among the portfolios as follows:
Global Equity Trust - $2,415,918, Pasadena Growth Trust - $978,146, Equity Trust
- - $1,628,673, Value Equity Trust - $864,812, Growth & Income Trust - $1,267,236,
International Growth & Income Trust - $232,320, Global Government Bond Trust -
$771,716, Investment Quality Bond Trust - $276,246, U.S. Government Securities
Trust - $442,603, Money Market Trust - $197,786, Aggressive Asset Allocation
Trust - $560,019, Moderate Asset Allocation Trust - $1,433,417, Conservative
Asset Allocation Trust - $616,971, Strategic Bond Trust - $322,077 ($63,321 of
this amount was paid to SBAM Limited.) For the period March 4, 1996 to June 15,
1996, the Adviser paid subadvisory fees of $53,557 to Alger for subadvisory
services to the Small/Mid Cap Trust and paid subadvisory fees of $32,265 to
Founders for subadvisory services to the International Small Cap Trust.
Above are brief summaries of the advisory agreement with NASL Financial
("Advisory Agreement") and the subadvisory agreements with the subadvisers
("Subadvisory Agreements"). A more comprehensive statement of the terms of such
agreements appears in the Statement of Additional Information under the caption
"Investment Management Arrangements".
All or a portion of Trust brokerage commissions may be paid to affiliates
of Salomon, J.P. Morgan, Goldman, Alger, Fidelity and Oechsle. Information on
the amount of these commissions is set forth in the Statement of Additional
Information under "Portfolio Brokerage."
EXPENSES
Subject to the expense limitations discussed above, the Trust is
responsible for the payment of all expenses of its organization, operations and
business, except for those expenses the Adviser or subadvisers have agreed to
pay pursuant to the Advisory or Subadvisory Agreements. Among the expenses to be
borne by the Trust are charges and expenses of the custodian, independent
accountants and transfer,
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bookkeeping and dividend disbursing agents appointed by the Trust; brokers'
commissions and issue and transfer taxes on securities transactions to which the
Trust is a party; taxes payable by the Trust; and legal fees and expenses in
connection with the affairs of the Trust, including registering and qualifying
its shares with regulatory authorities and in connection with any litigation.
For the year ended December 31, 1995, the expenses, including the Adviser's
fee but excluding portfolio brokerage commissions, expressed as a percentage of
average net assets, for each of the Trust's portfolios was as follows: 1.05% --
Global Equity Trust, .975% -- Pasadena Growth Trust, .80% -- Equity Trust .85%
- -- Value Equity Trust, .80% -- Growth and Income Trust 1.47% (annualized) --
International Growth and Income Trust, .92% - Strategic Bond Trust, .93% --
Global Government Bond Trust, .74% -- Investment Quality Bond Trust, .71% --
U.S. Government Securities Trust, .54% -- Money Market Trust, .91% -- Aggressive
Asset Allocation Trust, .84% -- Moderate Asset Allocation Trust and .87% --
Conservative Asset Allocation Trust.
For the year ended December 31, 1995, the expenses, excluding the Adviser's
fee and portfolio brokerage commissions, expressed as a percentage of average
net assets, for each of the Trust's portfolios was as follows: .15% -- Global
Equity Trust, 0% -- Pasadena Growth Trust, .05% -- Equity Trust .05% -- Value
Equity Trust, .05% -- Growth and Income Trust .52% (annualized) -- International
Growth and Income Trust, .15% - Strategic Bond Trust, .13% -- Global Government
Bond Trust, .09% -- Investment Quality Bond Trust, .06% -- U.S. Government
Securities Trust, .04% -- Money Market Trust, .16% -- Aggressive Asset
Allocation Trust, .09% -- Moderate Asset Allocation Trust and .12% --
Conservative Asset Allocation Trust.
Each of the portfolios, except the Global Equity, Pasadena Growth, Equity,
Value Equity and Growth and Income porfolios, anticipate that their annual
portfolio turnover rates will exceed 100%. A high portfolio turnover rate
generally involves correspondingly greater brokerage commission expenses, which
must be borne directly by the portfolio.
PERFORMANCE DATA
From time to time the Trust may publish advertisements containing
performance data relating to its portfolios. Performance data will consist of
total return quotations which will always include quotations for recent one-year
and, when applicable, five-year and ten-year periods and where less than five or
ten years, for the period since the date the portfolio, including its
predecessor prior to the reorganization of the Fund on December 31, 1988, became
available for investment. Such quotations for such periods will be the average
annual rates of return required for an initial investment of $1,000 to equal the
market value of such investment on the last day of the period, after reflection
of all Trust charges and expenses and assuming reinvestment of all dividends and
distributions. Performance figures used by the Trust are based on the actual
historical performance of its portfolios for specified periods, and the figures
are not intended to indicate future performance. Moreover, the Trust's
performance figures are not comparable to those for public mutual funds. Trust
shares are only available as the underlying investment medium for contracts
which provide for certain charges, as described in the accompanying contract
Prospectus. The impact of such charges is not reflected in the Trust's
performance figures. More detailed information on the computations is set forth
in the Statement of Additional Information. The Trust's annual report, which is
available without charge upon request, contains further discussions of Fund
performance.
The Trust may also from time to time advertise the performance of certain
portfolios relative to that of unmanaged indices, including but not limited to
the Dow Jones Industrial Average, the Lehman Brothers Bond, Government
Corporate, Corporate and Aggregate Indices, the Standard and Poor's 500, the
Value Line Composite and the Morgan Stanley Capital International Europe,
Australia and Far East ("EAFE") and World Indices. The Trust may also advertise
the performance rankings assigned certain portfolios or their investment
subadvisers by various statistical services, including but not limited to SEI,
Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis and Variable
Insurance Products Performance Analysis, Variable Annuity Research and Data
Service, Intersec Research Survey of Non-U.S. Equity Fund Returns and Frank
Russell International Universe, and any other data which may be presented from
time to time by such analysts as Dow Jones, Morning Star, Chase International
Performance, Wilson Associates, Stanger, CDA Investment Technology, the Consumer
Price Index ("CPI"), The Bank Rate Monitor National Index, IBC/Donaghue's
Average U.S. Government and Agency, or as they appear in various publications,
including The Wall Street Journal, New York Times, Forbes, Barrons, Fortune,
Money Magazine, Financial World and Financial Services Week.
GENERAL INFORMATION
SHARES OF THE TRUST
The Trust's Declaration of Trust authorizes the Trustees to issue an
unlimited number of full and fractional shares of beneficial interest having a
par value of $.01 per share, to divide such shares into an unlimited number of
series of shares and to designate the relative rights and preferences thereof,
all without shareholder approval. In addition, the Trustees are authorized to
divide any series of shares into separate classes, also without shareholder
approval. The Trust currently has seventeen series of shares, one for each
portfolio. Shares of each portfolio have equal rights with regard to
redemptions, dividends, distributions and liquidations with respect to that
portfolio. When issued,
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<PAGE> 53
shares are fully paid and non-assessable and do not have preemptive or
conversion rights or cumulative voting rights. All shares are entitled to one
vote and are voted by series, except that when voting for the election of
Trustees and when otherwise permitted by the Investment Company Act of 1940,
shares are voted in the aggregate. Only shares of a particular portfolio are
entitled to vote on matters determined by the Trustees to affect only the
interests of that portfolio.
The Trust currently has three shareholders, Security Life, Manulife America
and FNAL. Security Life provided the Trust with its initial capital. Currently,
Security Life owns Trust shares attributable to the initial capitalization of
the Growth and Income Trust. Each shareholder owns the Trust shares attributable
to contracts participating in its separate accounts and will vote such shares
and, in the case of Security Life, Trust shares owned beneficially by Security
Life, in accordance with instructions received from contract owners.
Shares of the Trust may be sold to both variable annuity separate accounts
and variable life insurance separate accounts of affiliated insurance companies.
The Trust currently does not foresee any disadvantages to the owners of variable
annuity or variable life insurance contracts arising from the fact that the
interests of those owners may differ. Nevertheless, the Trust's Board of
Trustees will monitor events in order to identify any material irreconcilable
conflicts which may possibly arise due to differences of tax treatment or other
considerations and to determine what action, if any, should be taken in response
thereto. Such an action could include the withdrawal of a separate account from
participation in the Trust.
TAXES
TAX STATUS. The Trust believes that each portfolio will qualify as a
regulated investment company under Subchapter M, Chapter 1, Subtitle A of the
Internal Revenue Code (the "Code"), and the Trust intends to take the steps
necessary to so qualify each portfolio. As a result of qualifying as a regulated
investment company, each portfolio will not be subject to Federal income tax to
the extent that the portfolio distributes its net income, including its net
realized capital gains, to its shareholders. Accordingly, each portfolio intends
to distribute substantially all of its net income, including all of its net
realized capital gains, to its shareholders. Under current law, net income,
including net realized capital gain, is not taxed to a life insurance company to
the extent that it is applied to increase the reserves for the company's
variable annuity and life insurance contracts.
SOURCES OF GROSS INCOME. To qualify for treatment as a regulated investment
company, a portfolio must, among other things, derive its income from certain
sources. Specifically, in each taxable year a portfolio must derive at least 90%
of its gross income from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stock, securities
or foreign currencies, or other income (including, but not limited to, gains
from options, futures or forward contracts) derived with respect to its business
of investing in stock, securities, or currencies. A portfolio must also derive
less than 30% of its gross income from the sale or other disposition of any of
the following which was held for less than three months: (1) stock or
securities, (2) options, futures, or forward contracts (other than options,
futures, or forward contracts on foreign currencies), or (3) foreign currencies
(or options, futures, or forward contracts on foreign currencies) but only if
such currencies (or options, futures, or forward contracts) are not directly
related to the portfolio's principal business of investing in stock or
securities (or options and futures with respect to stocks or securities). For
purposes of these tests, gross income generally is determined without regard to
losses from the sale or other disposition of stock or securities or other
portfolio assets. Compliance with these requirements may prevent a portfolio
from utilizing options, futures, and forward contracts as much as the subadviser
might otherwise believe to be desirable.
DIVERSIFICATION OF ASSETS. To qualify for treatment as a regulated
investment company, a portfolio must also satisfy certain requirements with
respect to the diversification of its assets. A portfolio must have, at the
close of each quarter of the taxable year, at least 50% of the value of its
total assets represented by cash, cash items, United States Government
securities, securities of other regulated investment companies, and other
securities which, in respect of any one issuer, do not represent more than 5% of
the value of the assets of the portfolio nor more than 10% of the voting
securities of that issuer. In addition, at those times not more than 25% of the
value of the portfolio's assets may be invested in securities (other than United
States Government securities or the securities of other regulated investment
companies) of any one issuer, or of two or more issuers which the portfolio
controls and which are engaged in the same or similar trades or businesses or
related trades or businesses.
Because the Trust is established as an investment medium for insurance
company separate accounts, regulations under Subchapter L of the Code impose
additional diversification requirements on each portfolio. These requirements
generally are that no more than 55% of the value of the assets of a portfolio
may be represented by any one investment; no more than 70% by any two
investments; no more than 80% by any three investments; and no more than 90% by
any four investments. For these purposes, all securities of the same issuer are
treated as a single investment and each United States government agency or
instrumentality is treated as a separate issuer.
FOREIGN INVESTMENTS. Portfolios investing in foreign securities or
currencies may be required to pay withholding or other taxes to foreign
governments. Foreign tax withholding from dividends and interest, if any, is
generally at a rate between 10% and 35%. The investment yield of any portfolio
that invests in foreign securities or currencies will be reduced by these
foreign taxes. Shareholders will bear
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<PAGE> 54
the cost of any foreign tax withholding, but may not be able to claim a foreign
tax credit or deduction for these foreign taxes. Portfolios investing in
securities of passive foreign investment companies may be subject to U.S.
federal income taxes and interest charges (and investment yield of the
portfolios making such investments will be reduced by these taxes and interest
charges). Shareholders will bear the cost of these taxes and interest charges,
but will not be able to claim a deduction for these amounts.
ADDITIONAL TAX CONSIDERATIONS. If a portfolio failed to qualify as a
regulated investment company, owners of contracts based on the portfolio (1)
might be taxed currently on the investment earnings under their contracts and
thereby lose the benefit of tax deferral, and (2) the portfolio might incur
additional taxes. In addition, if a portfolio failed to comply with the
diversification requirements of the regulations under Subchapter L of the Code,
owners of contracts based on the portfolio would be taxed on the investment
earnings under their contracts and thereby lose the benefit of tax deferral.
Accordingly, compliance with the above rules is carefully monitored by the
Adviser and the Subadvisers and it is intended that the portfolios will comply
with these rules as they exist or as they may be modified from time to time.
Compliance with the tax requirements described above may result in a reduction
in the return under a portfolio, since, to comply with the above rules, the
investments utilized (and the time at which such investments are entered into
and closed out) may be different from that Subadvisers might otherwise believe
to be desirable.
OTHER INFORMATION. For more information regarding the tax implications for
the purchaser of a variable annuity or life insurance contracts who allocates
investments to the Trust, please refer to the prospectus for the contract.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury Regulations currently in effect. It is not
intended to be a complete explanation or a substitute for consultation with
individual tax advisors. For the complete provisions, reference should be made
to the pertinent Code sections and the Treasury Regulations promulgated
thereunder. The Code and Regulations are subject to change.
DIVIDENDS
The Trust intends to declare as dividends substantially all of the net
investment income, if any, of each portfolio. For dividend purposes, net
investment income of each portfolio except the Money Market Trust will consist
of all payments of dividends (other than stock dividends) or interest received
by such portfolio less the estimated expenses of such portfolio (including fees
payable to the Adviser) and for the Money Market Trust it will consist of the
interest income earned on investments, plus or minus amortized purchase discount
or premium, plus or minus realized gains and losses, less estimated expenses.
Dividends from the net investment income and the net realized short-term and
long-term capital gains, if any, for each portfolio except the Money Market
Trust will be declared not less frequently than annually and reinvested in
additional full and fractional shares of that portfolio or paid in cash.
Dividends from net investment income and net realized short-term and long-term
capital gains, if any, for the Money Market Trust will be declared and
reinvested, or paid in cash, daily.
PURCHASE AND REDEMPTION OF SHARES
Shares of the Trust are offered continuously, without sales charge, at
prices equal to the respective net asset values of the portfolio. The Trust
sells its shares directly without the use of any underwriter. Shares of the
Trust are sold and redeemed at their net asset value next computed after a
purchase payment or redemption request is received by Security Life from the
contract owner or after any other purchase or redemption order is received by
the Trust. Depending upon the net asset values at that time, the amount paid
upon redemption may be more or less than the cost of the shares redeemed.
Payment for shares redeemed will be made as soon as possible, but in any event
within seven days after receipt of a request for redemption.
The net asset value of the shares of each portfolio is determined once
daily as of the close of regularly scheduled trading of the New York Stock
Exchange, Monday through Friday, except that no determination is required on (i)
days on which changes in the value of such portfolio's portfolio securities will
not materially affect the current net asset value of the shares of the
portfolio, (ii) days during which no shares of such portfolio are tendered for
redemption and no order to purchase or sell such shares is received by the
Trust, or (iii) the following business holidays or the days on which such
holidays are observed by the New York Stock Exchange: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Generally, trading in non-U.S. securities,
as well as U.S. Government securities and money market instruments, is
substantially completed each day at various times prior to the close of
regularly scheduled trading of the New York Stock Exchange. The values of such
securities used in computing the net asset value of a portfolio's shares are
generally determined as of such times. Occasionally, events which affect the
values of such securities may occur between the times at which they are
generally determined and the close of the New York Stock Exchange and would
therefore not be reflected in the computation of a portfolio's net asset value.
If events materially affecting the value of such securities occur during such
period, then these securities will be valued at their fair value as determined
in good faith by the subadvisers under procedures established and regularly
reviewed by the Trustees.
The net asset values per share of all portfolios other than the Money
Market Trust are computed by adding the sum of the value of the securities held
by each portfolio plus any cash or other assets it holds, subtracting all its
liabilities, and dividing the result by the total number of shares outstanding
of that portfolio at such time. Securities held by each of the portfolios other
than the Money Market Trust,
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except for money market instruments with remaining maturities of 60 days or
less, are valued at their market value if market quotations are readily
available. Otherwise, such securities are valued at fair value as determined in
good faith by the Trustees although the actual calculations may be made by
persons acting pursuant to the direction of the Trustees.
All instruments held by the Money Market Trust and money market instruments
with a remaining maturity of 60 days or less held by the other portfolios are
valued on an amortized cost basis.
CUSTODIAN
State Street Bank and Trust Company, ("State Street") 225 Franklin Street,
Boston, Massachusetts 02110, currently acts as custodian and bookkeeping agent
of all the Trust assets. State Street has selected various banks and trust
companies in foreign countries to maintain custody of certain foreign
securities. State Street is authorized to use the facilities of the Depository
Trust Company, the Participants Trust Company and the book-entry system of the
Federal Reserve Banks.
APPENDIX I
DEBT SECURITY RATINGS
STANDARD & POOR'S RATINGS GROUP ("S&P")
Commercial Paper:
A-1 The rating A-1 is the highest rating assigned by S&P to commercial
paper. This designation indicates that the degree of safety
regarding timely payment is either overwhelming or very strong.
Those issues determined to possess overwhelming safety
characteristics are denoted with a plus (+) sign designation.
A-2 Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high for
issuers designated "A-1".
Bonds:
AAA Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small
degree.
A Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
debt in higher rated categories.
BBB Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in
higher rated categories.
BB-B-CCC-CC Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the
obligations. BB indicates the lowest degree of speculation and CC
the highest degree of speculation. While such bonds will likely have
some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
D Bonds rated D are in default. The D category is used when interest
payments or principal payments are not made on the date due even if
the applicable grace period has not expired. The D rating is also
used upon the filing of a bankruptcy petition if debt service
payments are jeopardized.
The ratings set forth above may be modified by the addition of a plus or minus
to show relative standing within the major rating categories.
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")
Commercial Paper:
51
<PAGE> 56
P-1 The rating P-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated P-1 (or related supporting institutions) have
a superior capacity for repayment of short-term promissory
obligations. P-1 repayment capacity will normally be evidenced by
the following characteristics: (1) leading market positions in
establishedindustries; (2) high rates of return on funds employed;
(3) conservative capitalization structures with moderate reliance on
debt and ample asset protection; (4) broad margins in earnings
coverage of fixed financial charges and high internal cash
generation; and (5) well established access to a range of financial
markets and assured sources of alternate liquidity.
P-2 Issuers rated P-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics cited
above but to a lesser degree. Earnings trends and coverage ratios,
while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by
external conditions. Ample alternative liquidity is maintained.
Bonds:
Aaa Bonds which are rated Aaa by Moody's are judged to be of the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edge". Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
Aa Bonds which are rated Aa by Moody's are judged to be of high quality
by all standards. Together with the Aaa group, they comprise what
are generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large as
in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A Bonds which are rated A by Moody's possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are
considered adequate but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Baa Bonds which are rated Baa by Moody's are considered as medium grade
obligations, that is, they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact
have speculative characteristics as well.
B Bonds which are rated B generally lack characteristics of a
desirable investment. Assurance of interest and principal payments
or of maintenance and other terms of the contract over any long
period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect
to principal or interest.
Ca Bonds which are rated Ca represent obligations which are speculative
in high degree. Such issues are often in default or have other
marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Moody's applies numerical modifiers "1", "2" and "3" to certain of its
rating classifications. The modifier "1" indicates that the security ranks in
the higher end of its generic rating category; the modifier "2" indicates a
mid-range ranking; and the modifier "3" indicates that the issue ranks in the
lower end of its generic rating category.
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<PAGE> 57
APPENDIX II
STRATEGIC BOND TRUST DEBT RATING
<TABLE>
The average distribution of investments in corporate and government bonds
by ratings for the fiscal year ended December 31, 1995, calculated monthly
on a dollar-weighted basis, for the Strategic Bond Trust, are as follows:
<CAPTION>
UNRATED BUT OF
MOODY'S STANDARD & POOR'S COMPARABLE QUALITY PERCENTAGE*
- -----------------------------------------------------------
<S> <C> <C> <C>
Aaa AAA 11% 0%
Aa AA 0% 0%
A A 0% 2%
Baa BBB 0% 3%
Ba BB 23% 4%
B B 0% 33%
Caa CCC 0% 2%
Ca CC 0% 0%
C C 0% 0%
D 0% 0%
Unrated as a Group 34%
U.S. Government Securities 22%
---
100%
</TABLE>
The actual distribution of the Strategic Bond Trust's corporate and
government bond investments by ratings on any given date will vary. In addition,
the distribution of the Trust's investments by ratings as set forth above should
not be considered as representative of the Trust's future portfolio composition.
*Obligations issued or guaranteed by the U.S. Government or its agencies,
authorities or instrumentalities.
INVESTMENT QUALITY BOND TRUST DEBT RATINGS
<TABLE>
The average distribution of investments in corporate and government bonds
by ratings for the fiscal year ended December 31, 1995, calculated monthly
on a dollar-weighted basis, for the Investment Quality Bond Trust, are as
follows:
<CAPTION>
UNRATED BUT OF
MOODY'S STANDARD & POOR'S COMPARABLE QUALITY PERCENTAGE*
- -----------------------------------------------------------
<S> <C> <C> <C>
Aaa AAA 0% 9%
Aa AA 0% 5%
A A 0% 19%
Baa BBB 0% 5%
Ba BB 0% 2%
B B 0% 1%
Caa CCC 0% 0%
Ca CC 0% 0%
C C 0% 0%
D 0% 0%
Unrated as a Group 0%
U.S. Government Securities * 59%
---
100%
</TABLE>
The actual distribution of the Investment Quality Bond Trust's corporate
and government bond investments by ratings on any given date will vary. In
addition, the distribution of the Trust's investments by ratings as set forth
above should not be considered as representative of the Trust's future portfolio
composition.
*Obligations issued or guaranteed by the U.S. Government or its agencies,
authorities or instrumentalities.
53
<PAGE> 58
PART B
<PAGE> 59
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
NASL SERIES TRUST
(THE "TRUST")
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the Trust's Prospectus dated July 11, 1996 which may
be obtained from NASL Series Trust, 116 Huntington Avenue, Boston,
Massachusetts, 02116.
The date of this Statement of Additional Information is July 11, 1996.
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<PAGE> 60
<TABLE>
TABLE OF CONTENTS
<CAPTION>
<S> <C>
INVESTMENT POLICIES ...................................... ............................................. 3
Money Market Instruments ............................ ............................................. 3
Other Instruments ................................... ............................................. 4
HEDGING AND OTHER STRATEGIC TRANSACTIONS ................. ............................................. 9
General Characteristics of Options ................................................................ 9
General Characteristics of Futures Contracts and Options on Futures Contracts................ ..... 11
Options on Securities Indices and Other Financial Indices............................... .......... 11
Currency Transactions................................ ............................................. 11
Combined Transactions................................ ............................................. 12
Swaps, Caps, Floors and Collars...................... ............................................. 12
Eurodollar Instruments............................... ............................................. 13
Risk Factors......................................... ............................................. 13
Risks of Hedging and Other Strategic Transactions Outside the United States..................... .. 14
Use of Segregated and Other Special Accounts........ .............................................. 14
Other Limitations................................... .............................................. 15
INVESTMENT RESTRICTIONS .................................. ............................................. 15
Fundamental......................................... .............................................. 15
Nonfundamental...................................... .............................................. 16
PORTFOLIO TURNOVER ....................................... ............................................. 17
MANAGEMENT OF THE TRUST .................................. ............................................. 18
Compensation of Trustees ........................... .............................................. 19
INVESTMENT MANAGEMENT ARRANGEMENTS ....................... ............................................. 19
The Advisory Agreement ............................. .............................................. 20
The Subadvisory Agreements ......................... .............................................. 21
Agreement With Prior Subadviser..................... .............................................. 24
PORTFOLIO BROKERAGE ...................................... ............................................. 24
PURCHASE AND REDEMPTION OF SHARES ........................ ............................................. 28
DETERMINATION OF NET ASSET VALUE ......................... ............................................. 28
PERFORMANCE DATA ......................................... ............................................. 29
ORGANIZATION OF THE TRUST ................................ ............................................. 30
Shares of the Trust ................................ .............................................. 30
Principal Holders of Securities .................... .............................................. 31
REPORTS TO SHAREHOLDERS .................................. ............................................. 32
INDEPENDENT ACCOUNTANTS .................................. ............................................. 32
LEGAL COUNSEL ............................................ ............................................. 32
FINANCIAL STATEMENTS ..................................... ............................................. 33
</TABLE>
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<PAGE> 61
INVESTMENT POLICIES
The following discussion supplements the Trust's "Investment Objectives and
Policies" set forth in the Prospectus.
MONEY MARKET INSTRUMENTS
The Money Market Trust will be invested in the types of money market
instruments described below. Certain of the instruments listed below may also be
purchased by the other portfolios in accordance with their investment policies
and all portfolios may purchase such instruments to invest otherwise idle cash
or for defensive purposes, except that the U.S. Government Securities Trust may
not invest in the instruments described in 2. below.
1. U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS. Government
obligations are debt securities issued or guaranteed as to principal or interest
by the U.S. Treasury. These securities include treasury bills, notes and bonds.
U.S. Government agency obligations are debt securities issued or guaranteed as
to principal or interest by an agency or instrumentality of the U.S. Government
pursuant to authority granted by Congress. U.S. Government agency obligations
include, but are not limited to, the Student Loan Marketing Association, Federal
Home Loan Banks, Federal Intermediate Credit Banks and the Federal National
Mortgage Association. U.S. instrumentality obligations include, but are not
limited to, the Export-Import Bank and Farmers Home Administration. Some
obligations issued or guaranteed by U.S. Government agencies or
instrumentalities are supported by the right of the issuer to borrow from the
U.S. Treasury or the Federal Reserve Banks, such as those issued by Federal
Intermediate Credit Banks; others, such as those issued by the Federal National
Mortgage Association, by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality; and others, such
as those issued by the Student Loan Marketing Association, only by the credit of
the agency or instrumentality. There are also separately traded interest
components of securities issued or guaranteed by the United States Treasury. No
assurance can be given that the U.S. Government will provide financial support
to such U.S. Government sponsored agencies or instrumentalities in the future,
since it is not obligated to do so by law. The foregoing types of instruments
are hereafter collectively referred to as "U.S. Government securities."
2. CANADIAN AND PROVINCIAL GOVERNMENT AND CROWN AGENCY Obligations.
Canadian Government obligations are debt securities issued or guaranteed as to
principal or interest by the Government of Canada pursuant to authority granted
by the Parliament of Canada and approved by the Governor in Council, where
necessary. These securities include treasury bills, notes, bonds, debentures and
marketable Government of Canada loans. Canadian Crown agency obligations are
debt securities issued or guaranteed by a Crown corporation, company or agency
("Crown agencies") pursuant to authority granted by the Parliament of Canada and
approved by the Governor in Council, where necessary. Certain Crown agencies are
by statute agents of Her Majesty in right of Canada, and their obligations, when
properly authorized, constitute direct obligations of the Government of Canada.
Such obligations include, but are not limited to, those issued or guaranteed by
the Export Development Corporation, Farm Credit Corporation, Federal Business
Development Bank and Canada Post Corporation. In addition, certain Crown
agencies which are not by law agents of Her Majesty may issue obligations which
by statute the Governor in Council may authorize the Minister of Finance to
guarantee on behalf of the Government of Canada. Other Crown agencies which are
not by law agents of Her Majesty may issue or guarantee obligations not entitled
to be guaranteed by the Government of Canada. No assurance can be given that the
Government of Canada will support the obligations of Crown agencies which are
not agents of Her Majesty, which it has not guaranteed, since it is not
obligated to do so by law.
Provincial Government obligations are debt securities issued or guaranteed
as to principal or interest by the government of any province of Canada pursuant
to authority granted by the Legislature of any such province and approved by the
Lieutenant Governor in Council of any such province, where necessary. These
securities include treasury bills, notes, bonds and debentures. Provincial Crown
agency obligations are debt securities issued or guaranteed by a provincial
Crown corporation, company or agency ("provincial Crown agencies") pursuant to
authority granted by a provincial Legislature and approved by the Lieutenant
Governor in Council of such province, where necessary. Certain provincial Crown
agencies are by statute agents of Her Majesty in right of a particular province
of Canada, and their obligations, when properly authorized, constitute direct
obligations of such province. Other provincial Crown agencies which are not by
law agents of Her Majesty in right of a particular province of Canada may issue
obligations which by statute the Lieutenant Governor in Council of such province
may guarantee, or may authorize the Treasurer thereof to guarantee, on behalf of
the government of such province. Finally, other provincial Crown agencies which
are not by law agencies of Her Majesty may issue or guarantee obligations not
entitled to be guaranteed by a provincial government. No assurance can be given
that the government of any province of Canada will support the obligations of
provincial Crown agencies which are not agents of Her Majesty, which it has not
guaranteed, as it is not obligated to do so by law. Provincial Crown agency
obligations described above include, but are not limited to, those issued or
guaranteed by a provincial railway corporation, a provincial hydroelectric or
power commission or authority, a provincial municipal financing corporation or
agency and a provincial telephone commission or authority.
Any Canadian obligation acquired by the Money Market Trust will be payable
in U.S. dollars.
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<PAGE> 62
3. CERTIFICATES OF DEPOSIT AND BANKERS' ACCEPTANCES. Certificates of
deposit are certificates issued against funds deposited in a bank or a savings
and loan. They are for a definite period of time and earn a specified rate of
return. Bankers' acceptances are short-term credit instruments evidencing the
obligation of a bank to pay a draft which has been drawn on it by a customer.
These instruments reflect the obligation both of the bank and of the drawer to
pay the face amount of the instrument upon maturity. They are primarily used to
finance the import, export, transfer or storage of goods. They are termed
"accepted" when a bank guarantees their payment at maturity.
Trust portfolios may acquire obligations of foreign banks and foreign
branches of U.S. banks. These obligations are not insured by the Federal Deposit
Insurance Corporation.
4. COMMERCIAL PAPER. Commercial paper consists of unsecured promissory
notes issued by corporations to finance short-term credit needs. Commercial
paper is issued in bearer form with maturities generally not exceeding nine
months. Commercial paper obligations may include variable amount master demand
notes. Variable amount master demand notes are obligations that permit the
investment of fluctuating amounts at varying rates of interest pursuant to
direct arrangements between a portfolio, as lender, and the borrower. These
notes permit daily changes in the amounts borrowed. The portfolio has the right
to increase the amount under the note at any time up to the full amount provided
by the note agreement, or to decrease the amount, and the borrower may prepay up
to the full amount of the note without penalty. Because variable amount master
demand notes are direct lending arrangements between the lender and borrower, it
is not generally contemplated that such instruments will be traded, and there is
no secondary market for these notes, although they are redeemable (and thus
immediately repayable by the borrower) at face value, plus accrued interest, at
any time. A portfolio will only invest in variable amount master demand notes
issued by companies which at the date of investment have an outstanding debt
issue rated "Aaa" or "Aa" by Moody's or "AAA" or "AA" by S&P and which the
applicable Subadviser has determined present minimal risk of loss to the
portfolio. A Subadviser will look generally at the financial strength of the
issuing company as "backing" for the note and not to any security interest or
supplemental source such as a bank letter of credit. A master demand note will
be valued each day a portfolio's net asset value is determined, which value will
generally be equal to the face value of the note plus accrued interest unless
the financial position of the issuer is such that its ability to repay the note
when due is in question.
5. CORPORATE OBLIGATIONS. Corporate obligations include bonds and notes
issued by corporations to finance long-term credit needs.
6. REPURCHASE AGREEMENTS. Repurchase agreements are arrangements involving
the purchase of obligations by a portfolio and the simultaneous agreement to
resell the same obligations on demand or at a specified future date and at an
agreed upon price. A repurchase agreement can be viewed as a loan made by a
portfolio to the seller of the obligation with such obligation serving as
collateral for the seller's agreement to repay the amount borrowed with
interest. Such transactions afford an opportunity for a portfolio to earn a
return on cash which is only temporarily available. Repurchase agreements
entered into by the portfolio will be with banks, brokers or dealers. However, a
portfolio will enter into a repurchase agreement with a broker or dealer only if
the broker or dealer agrees to deposit additional collateral should the value of
the obligation purchased by the portfolio decrease below the resale price.
In selecting sellers with whom the portfolio will enter into repurchase
transactions, the Trustees have adopted procedures that establish certain credit
worthiness, asset and collateralization requirements and limit the
counterparties to repurchase transactions to those financial institutions which
are members of the Federal Reserve System and for a primary government
securities dealer reporting to the Federal Reserve Bank of New York's Market
Reports Division or a broker/dealer which meet certain credit worthiness
criteria or which report U.S. Government securities positions to the Federal
Reserve Board. However, the Trustees reserve the right to change the criteria
used to select such financial institutions and broker/dealers. The Trustees will
regularly monitor the use of repurchase agreements and the Subadviser will,
pursuant to procedures adopted by the Trustees, continuously monitor that the
collateral held with respect to a repurchase transaction equals or exceeds the
amount of the obligations.
Should an issuer of a repurchase agreement fail to repurchase the
underlying obligation, the loss to the portfolio, if any, would be the
difference between the repurchase price and the underlying obligation's market
value. A portfolio might also incur certain costs in liquidating the underlying
obligation. Moreover, if bankruptcy or other insolvency proceedings should be
commenced with respect to the seller, realization upon the underlying obligation
by the Trust might be delayed or limited. Generally, repurchase agreements are
of a short duration, often less than one week but on occasion for longer
periods.
OTHER INSTRUMENTS
The following provides a more detailed explanation of some of the other
instruments in which the Growth, International Small Cap, Value Equity,
Strategic Bond, International Growth and Income, U.S. Government Securities,
Investment Quality Bond and Automatic Asset Allocation Trusts may invest.
4
<PAGE> 63
1. MORTGAGE SECURITIES
Mortgage securities differ from conventional bonds in that principal is
paid over the life of the securities rather than at maturity. As a result, a
portfolio receives monthly scheduled payments of principal and interest, and may
receive unscheduled principal payments representing prepayments on the
underlying mortgages. When a portfolio reinvests the payments and any
unscheduled prepayments of principal it receives, it may receive a rate of
interest which is higher or lower than the rate on the existing mortgage
securities. For this reason, mortgage securities may be less effective than
other types of debt securities as a means of locking in long term interest
rates.
In addition, because the underlying mortgage loans and assets may be
prepaid at any time, if a portfolio purchases mortgage securities at a premium,
a prepayment rate that is faster than expected will reduce yield to maturity,
while a prepayment rate that is slower than expected will have the opposite
effect of increasing yield to maturity. Conversely, if a portfolio purchases
these securities at a discount, faster than expected prepayments will increase,
while slower than expected payments will reduce, yield to maturity.
Adjustable rate mortgage securities, are similar to the mortgage securities
discussed above, except that unlike fixed rate mortgage securities, adjustable
rate mortgage securities are collateralized by or represent interests in
mortgage loans with variable rates of interest. These variable rates of interest
reset periodically to align themselves with market rates. Most adjustable rate
mortgage securities provide for an initial mortgage rate that is in effect for a
fixed period, typically ranging from three to twelve months. Thereafter, the
mortgage interest rate will reset periodically in accordance with movements in a
specified published interest rate index. The amount of interest due to an
adjustable rate mortgage holder is determined in accordance with movements in a
specified published interest rate index by adding a pre-determined increment or
"margin" to the specified interest rate index. Many adjustable rate mortgage
securities reset their interest rates based on changes in the one-year,
three-year and five-year constant maturity Treasury rates, the three-month or
six-month Treasury Bill rate, the 11th District Federal Home Loan Bank Cost of
Funds, the National Median Cost of Funds, the one-month, three-month, six-month
or one-year London Interbank Offered Rate ("LIBOR") and other market rates.
A portfolio will not benefit from increases in interest rates to the extent
that interest rates rise to the point where they cause the current coupon of
adjustable rate mortgages held as investments to exceed any maximum allowable
annual or lifetime reset limits (or "cap rates") for a particular mortgage. In
this event, the value of the mortgage securities in a portfolio would likely
decrease. Also, the portfolio's net asset value could vary to the extent that
current yields on adjustable rate mortgage securities are different than market
yields during interim periods between coupon reset dates. During periods of
declining interest rates, income to a portfolio derived from adjustable rate
mortgages which remain in a mortgage pool will decrease in contrast to the
income on fixed rate mortgages, which will remain constant. Adjustable rate
mortgages also have less potential for appreciation in value as interest rates
decline than do fixed rate investments.
Privately-Issued Mortgage Securities. Privately-issued pass through
securities provide for the monthly principal and interest payments made by
individual borrowers to pass through to investors on a corporate basis, and in
privately issued collateralized mortgage obligations, as further described
below. Privately-issued mortgage securities are issued by private originators
of, or investors in, mortgage loans, including mortgage bankers, commercial
banks, investment banks, savings and loan associations and special purpose
subsidiaries of the foregoing. Since privately-issued mortgage certificates are
not guaranteed by an entity having the credit status of GNMA or FHLMC, such
securities generally are structured with one or more types of credit
enhancement. For a description of the types of credit enhancements that may
accompany privately-issued mortgage securities, see "Types of Credit Support"
below. A portfolio will not limit its investments to asset-backed securities
with credit enhancements.
Collateralized Mortgage Obligations ("CMOs"). CMOs generally are bonds or
certificates issued in multiple classes that are collateralized by or represent
an interest in mortgages. CMOs may be issued by single-purpose, stand-alone
finance subsidiaries or trusts of financial institutions, government agencies,
investment banks or other similar institutions. Each class of CMOs, often
referred to as a "tranche", may be issued with a specific fixed coupon rate
(which may be zero) or a floating coupon rate, and has a stated maturity or
final distribution date. Principal prepayments on the underlying mortgages may
cause the CMOs to be retired substantially earlier than their stated maturities
or final distribution dates. Interest is paid or accrued on CMOs on a monthly,
quarterly or semiannual basis. The principal of and interest on the underlying
mortgages may be allocated among the several classes of a series of a CMO in
many ways. The general goal sought to be achieved in allocating cash flows on
the underlying mortgages to the various classes of a series of CMOs is to create
tranches on which the expected cash flows have a higher degree of predictability
than the underlying mortgages. As a general matter, the more predictable the
cash flow is on a CMO tranche, the lower the anticipated yield will be on that
tranche at the time of issuance. As part of the process of creating more
predictable cash flows on most of the tranches in a series of CMOs, one or more
tranches generally must be created that absorb most of the volatility in the
cash flows on the underlying mortgages. The yields on these tranches are
relatively higher than on tranches with more predictable cash flows. Because of
the uncertainty of the cash flows on these tranches, and the sensitivity thereof
to changes in prepayment rates on the underlying mortgages, the market prices of
and yield on these tranches tend to be highly volatile.
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<PAGE> 64
CMOs purchased may be:
(1) collateralized by pools of mortgages in which each mortgage is
guaranteed as to payment of principal and interest by an agency or
instrumentality of the U.S. Government;
(2) collateralized by pools of mortgages in which payment of principal
and interest is guaranteed by the issuer and the guarantee is
collateralized by U.S. Government securities; or
(3) securities for which the proceeds of the issuance are invested in
mortgage securities and payment of the principal and interest is supported
by the credit of an agency or instrumentality of the U.S. Government.
STRIPS. In addition to the U.S. Government securities discussed above,
certain portfolios may invest in separately traded interest components of
securities issued or guaranteed by the United States Treasury. The interest
components of selected securities are traded independently under the Separate
Trading of Registered Interest and Principal of Securities program ("STRIPS").
Under the STRIPS program, the interest components are individually numbered and
separately issued by the United States Treasury at the request of depository
financial institutions, which then trade the component parts independently.
Stripped Mortgage Securities. Stripped mortgage securities are derivative
multiclass mortgage securities. Stripped mortgage securities may be issued by
agencies or instrumentalities of the U.S. Government, or by private issuers,
including savings and loan associations, mortgage banks, commercial banks,
investment banks and special purpose subsidiaries of the foregoing. Stripped
mortgage securities have greater volatility than other types of mortgage
securities in which the portfolio invests. Although stripped mortgage securities
are purchased and sold by institutional investors through several investment
banking firms acting as brokers or dealers, the market for such securities has
not yet been fully developed. Accordingly, stripped mortgage securities are
generally illiquid and to such extent, together with any other illiquid
investments, will not exceed 15% of a portfolio's net assets.
Stripped mortgage securities are usually structured with two classes that
receive different proportions of the interest and principal distributions on a
pool of mortgage assets. A common type of stripped mortgage security will have
one class receiving some of the interest and most of the principal from the
mortgage assets, while the other class will receive most of the interest and the
remainder of the principal. In the most extreme case, one class will receive all
of the interest (the interest-only or "IO" class), while the other class will
receive all of the principal (the principal-only or "PO" class). The yield to
maturity on an IO class is extremely sensitive not only to changes in prevailing
interest rates but also the rate of principal payments (including prepayments)
on the related underlying mortgage assets, and a rapid rate of principal
payments may have a material adverse effect on the portfolio's yield to
maturity. If the underlying mortgage assets experience greater than anticipated
prepayments of principal, the portfolio may fail to fully recoup its initial
investment in these securities even if the securities are rated AAA by S&P.
As interest rates rise and fall, the value of IOs tends to move in the same
direction as interest rates. The value of the other mortgage securities
described in this Prospectus, like other debt instruments, will tend to move in
the opposite direction to interest rates. Accordingly, the Trust believes that
investing in IOs, in conjunction with the other mortgage securities described
herein, will contribute to a portfolio's relatively stable net asset value.
In addition to the stripped mortgage securities described above, the
Strategic Bond Trust may invest in similar securities such as Super POs and
Levered IOs which are more volatile than POs IOs and IOettes. Risks associated
with instruments such as Super POs are similar in nature to those risks related
to investments in POs. Risks connected with Levered IOs and IOettes are similar
in nature to those associated with IOs. The Strategic Bond Trust may also invest
in other similar instruments developed in the future that are deemed consistent
with the investment objectives, policies and restrictions of the portfolio.
Under the Internal Revenue Code of 1986, as amended (the "Code"), POs may
generate taxable income from the current accrual of original issue discount,
without a corresponding distribution of cash to the portfolio. See "Additional
Information Concerning Taxes."
Inverse Floaters. The Strategic Bond Trust may invest in inverse floaters
which are also derivative mortgage securities. Inverse floaters may be issued by
agencies or instrumentalities of the U.S. Government, or by private issuers,
including savings and loan associations, mortgage banks, commercial banks,
investment banks and special purpose subsidiaries of the foregoing. Inverse
floaters have greater volatility than other types of mortgage securities in
which the portfolio invests (with the exception of stripped mortgage
securities). Although inverse floaters are purchased and sold by institutional
investors through several investment banking firms acting as brokers or dealers,
the market for such securities has not yet been fully developed. Accordingly,
inverse floaters are generally illiquid and to such extent, together with any
other illiquid investments, will not exceed 15% of a portfolio's net assets.
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Inverse floaters are structured as a class of security that receives
distributions on a pool of mortgage assets and whose yields move in the opposite
direction of short-term interest rates and at an accelerated rate. Inverse
floaters may be volatile and there is a risk that their market value will vary
from their amortized cost.
2. ASSET-BACKED SECURITIES
The securitization techniques used to develop mortgage securities are also
being applied to a broad range of other assets. Through the use of trusts and
special purpose corporations, automobile and credit card receivables are being
securitized in pass-through structures similar to mortgage pass-through
structures or in a pay-through structure similar to the CMO structure. Generally
the issuers of asset-backed bonds, notes or pass-through certificates are
special purpose entities and do not have any significant assets other than the
receivables securing such obligations. In general, the collateral supporting
asset-backed securities is of shorter maturity than mortgage loans. As a result,
investment in these securities should result in greater price stability for the
portfolio's shares. Instruments backed by pools of receivables are similar to
mortgage-backed securities in that they are subject to unscheduled prepayments
of principal prior to maturity. When the obligations are prepaid, the portfolio
must reinvest the prepaid amounts in securities the yields of which reflect
interest rates prevailing at the time. Therefore, a portfolio's ability to
maintain a portfolio which includes high-yielding asset-backed securities will
be adversely affected to the extent that prepayments of principal must be
reinvested in securities which have lower yields than the prepaid obligations.
Moreover, prepayments of securities purchased at a premium could result in a
realized loss. A portfolio will only invest in asset-backed securities rated, at
the time of purchase, AA or better by S&P or Aa or better by Moody's or which,
in the opinion of the investment subadviser, are of comparable quality.
As with mortgage securities, asset-backed securities are often backed by a
pool of assets representing the obligation of a number of different parties and
use similar credit enhancement techniques. For a description of the types of
credit enhancement that may accompany privately-issued mortgage securities, see
"Types of Credit Support" below. A portfolio will not limit its investments to
asset-backed securities with credit enhancements. Although asset-backed
securities are not generally traded on a national securities exchange, such
securities are widely traded by brokers and dealers, and to such extent will not
be considered illiquid securities for the purposes of the investment restriction
under "Investment Restrictions" below.
TYPES OF CREDIT SUPPORT. Mortgage securities and asset-backed securities
are often backed by a pool of assets representing the obligations of a number of
different parties. To lessen the effect of failure by obligors on underlying
assets to make payments, such securities may contain elements of credit support.
Such credit support falls into two categories: (i) liquidity protection and (ii)
protection against losses resulting from ultimate default by an obligor on the
underlying assets. Liquidity protection refers to the provision of advances,
generally by the entity administering the pool of assets, to ensure that the
pass-through of payments due on the underlying pool occurs in a timely fashion.
Protection against losses resulting from ultimate default enhances the
likelihood of ultimate payment of the obligations on at least a portion of the
assets in the pool. Such protection may be provided through guarantees,
insurance policies or letters of credit obtained by the issuer or sponsor from
third parties, through various means of structuring the transaction or through a
combination of such approaches. The Fund will not pay any additional fees for
such credit support, although the existence of credit support may increase the
price of a security.
The ratings of mortgage securities and asset-backed securities for which
third-party credit enhancement provides liquidity protection or protection
against losses from default are generally dependent upon the continued
creditworthiness of the provider of the credit enhancement. The ratings of such
securities could be subject to reduction in the event of deterioration in the
creditworthiness of the credit enhancement provider even in cases where the
delinquency and loss experience on the underlying pool of assets is better than
expected.
Examples of credit support arising out of the structure of the transaction
include "senior-subordinated securities" (multiple class securities with one or
more classes subordinate to other classes as to the payment of principal thereof
and interest thereon, with the result that defaults on the underlying assets are
borne first by the holders of the subordinated class), creation of "reserve
funds" (where cash or investments sometimes funded from a portion of the
payments on the underlying assets, are held in reserve against future losses)
and "over-collateralization" (where the scheduled payments on, or the principal
amount of, the underlying assets exceed those required to make payment of the
securities and pay any servicing or other fees). The degree of credit support
provided for each issue is generally based on historical information with
respect to the level of credit risk associated with the underlying assets.
Delinquency or loss in excess of that which is anticipated could adversely
affect the return on an investment in such security.
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3. ZERO COUPON SECURITIES AND PAY-IN-KIND BONDS
Zero coupon securities and pay-in-kind bonds involve special risk
considerations. Zero coupon securities are debt securities that pay no cash
income but are sold at substantial discounts from their value at maturity. When
a zero coupon security is held to maturity, its entire return, which consists of
the amortization of discount, comes from the difference between its purchase
price and its maturity value. This difference is known at the time of purchase,
so that investors holding zero coupon securities until maturity know at the time
of their investment what the return on their investment will be. Certain zero
coupon securities also are sold at substantial discounts from their maturity
value and provide for the commencement of regular interest payments at a
deferred date. The portfolios also may purchase pay-in-kind bonds. Pay-in-kind
bonds are bonds that pay all or a portion of their interest in the form of debt
or equity securities.
Zero coupon securities and pay-in-kind bonds tend to be subject to greater
price fluctuations in response to changes in interest rates than are ordinary
interest-paying debt securities with similar maturities. The value of zero
coupon securities appreciates more during periods of declining interest rates
and depreciates more during periods of rising interest rates.
Zero coupon securities and pay-in-kind bonds may be issued by a wide
variety of corporate and governmental issuers. Although zero coupon securities
and pay-in-kind bonds are generally not traded on a national securities
exchange, such securities are widely traded by brokers and dealers and, to such
extent, will not be considered illiquid for the purposes of the investment
restriction under "Investment Restrictions" below.
Current federal income tax law requires the holder of a zero coupon
security or certain pay-in-kind bonds to accrue income with respect to these
securities prior to the receipt of cash payments. To maintain its qualification
as a regulated investment company and avoid liability for federal income and
excise taxes, a portfolio may be required to distribute income accrued with
respect to these securities and may have to dispose of portfolio securities
under disadvantageous circumstances in order to generate cash to satisfy these
distribution requirements. See "Taxes -- Pay-in-kind Bonds and Zero Coupon
Bonds" below.
4. HIGH YIELD (HIGH RISK) DOMESTIC CORPORATE DEBT SECURITIES
The market for high yield U.S. corporate debt securities has undergone
significant changes in the past decade. Issuers in the U.S. high yield market
originally consisted primarily of growing small capitalization companies and
larger capitalization companies whose credit quality had declined from
investment grade. During the mid-1980's, participants in the U.S. high yield
market issued high yield securities principally in connection with leveraged
buyouts and other leveraged recapitalizations. In late 1989 and 1990, the volume
of new issues of high yield U.S. corporate debt declined significantly and
liquidity in the market decreased. Since early 1991, the volume of new issues of
high yield U.S. corporate debt securities has increased substantially and
secondary market liquidity has improved. During the same periods, the U.S. high
yield debt market exhibited strong returns, and it continues to be an attractive
market in terms of yield and yield spread over U.S. Treasury securities.
Currently, most new offerings of U.S. high yield securities are being issued to
refinance higher coupon debt and to raise funds for general corporate purposes.
High yield U.S. corporate debt securities in which the portfolios may
invest include bonds, debentures, notes and commercial paper and will generally
be unsecured. Most of these debt securities will bear interest at fixed rates.
However, the portfolios may also invest in debt securities with variable rates
of interest or which involve equity features, such as contingent interest or
participations based on revenues, sales or profits (i.e., interest or other
payments, often in addition to a fixed rate of return, that are based on the
borrower's attainment of specified levels of revenues, sales or profits and thus
enable the holder of the security to share in the potential success of the
venture).
5. HIGH YIELD FOREIGN SOVEREIGN DEBT SECURITIES
The Strategic Bond and Investment Quality Bond Trusts expect that a
significant portion of their emerging market governmental debt obligations will
consist of "Brady Bonds." In addition, the Moderate and Aggressive Asset
Allocation Trusts may also invest in Brady Bonds. Brady Bonds are debt
securities issued under the framework of the "Brady Plan," an initiative
announced by former U.S. Treasury Secretary Nicholas F. Brady in 1989 as a
mechanism for debtor nations to restructure their outstanding external
commercial bank indebtedness. The Brady Plan framework, as it has developed,
contemplates the exchange of external commercial bank debt for newly issued
bonds (Brady Bonds). Brady Bonds may also be issued in respect of new money
being advanced by existing lenders in connection with the debt restructuring.
Investors should recognize that Brady Bonds have been issued only recently, and
accordingly do not have a long payment history. Brady Bonds issued to date
generally have maturities of between 15 and 30 years from the date of issuance
and have traded at a deep discount from their face value. The Trusts may invest
in Brady Bonds of emerging market countries that have been issued to date, as
well as those which may be issued in the future. In addition to Brady Bonds, the
Trusts may invest in emerging market governmental obligations issued as a result
of debt restructuring agreements outside of the scope of the Brady Plan.
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Agreements implemented under the Brady Plan to date are designed to achieve
debt and debt-service reduction through specific options negotiated by a debtor
nation with its creditors. As a result, the financial packages offered by each
country differ. The types of options have included the exchange of outstanding
commercial bank debt for bonds issued at 100% of face value of such debt which
carry a below-market stated rate of interest (generally known as par bonds),
bonds issued at a discount from face value of such debt (generally known as
discount bonds), bonds bearing an interest rate which increases over time and
bonds issued in exchange for the advancement of new money by existing lenders.
Discount bonds issued to date under the framework of the Brady Plan have
generally borne interest computed semi-annually at a rate equal to 13/16 of one
percent above the current six month LIBOR rate. Regardless of the stated face
amount and stated interest rate of the various types of Brady Bonds, the Trusts
will purchase Brady Bonds in secondary markets, as described below, in which the
price and yield to the investor reflect market conditions at the time of
purchase. Brady Bonds issued to date have traded at a deep discount from their
face value. Certain sovereign bonds are entitled to "value recovery payments" in
certain circumstances, which in effect constitute supplemental interest payments
but generally are not collateralized. Certain Brady Bonds have been
collateralized as to principal due at maturity (typically 15 to 30 years from
the date of issuance) by U.S. Treasury zero coupon bonds with a maturity equal
to the final maturity of such Brady Bonds, although the collateral is not
available to investors until the final maturity of the Brady Bonds. Collateral
purchases are financed by the International Monetary Fund (the "IMF"), the World
Bank and the debtor nations' reserves. In addition, interest payments on certain
types of Brady Bonds may be collateralized by cash or high-grade securities in
amounts that typically represent between 12 and 18 months of interest accruals
on these instruments with the balance of the interest accruals being
uncollateralized. The Trusts may purchase Brady Bonds with no or limited
collateralization, and will be relying for payment of interest and (except in
the case of principal collateralized Brady Bonds) principal primarily on the
willingness and ability of the foreign government to make payment in accordance
with the terms of the Brady Bonds. Brady Bonds issued to date are purchased and
sold in secondary markets through U.S. securities dealers and other financial
institutions and are generally maintained through European transactional
securities depositories. A substantial portion of the Brady Bonds and other
sovereign debt securities in which the portfolios invest are likely to be
acquired at a discount.
HEDGING AND OTHER STRATEGIC TRANSACTIONS
As described in the Prospectus under "Hedging and Other Strategic
Transactions", an individual portfolio may be authorized to use a variety of
investment strategies. These strategies will be used for hedging purposes only,
including hedging various market risks (such as interest rates, currency
exchange rates and broad or specific market movements), and managing the
effective maturity or duration of debt instruments held by the portfolio (such
investment strategies and transactions are referred to herein as "Hedging and
Other Strategic Transactions"). The description in this Prospectus of each
portfolio indicates which, if any, of these types of transactions may be used by
the portfolio.
A detailed discussion of Hedging and Other Strategic Transactions follows
below. No portfolio which is authorized to use any of these investment
strategies will be obligated, however, to pursue any of such strategies and no
portfolio makes any representation as to the availability of these techniques at
this time or at any time in the future. In addition, a portfolio's ability to
pursue certain of these strategies may be limited by the Commodity Exchange Act,
as amended, applicable rules and regulations of the CFTC thereunder and the
federal income tax requirements applicable to regulated investment companies
which are not operated as commodity pools.
GENERAL CHARACTERISTICS OF OPTIONS
Put options and call options typically have similar structural
characteristics and operational mechanics regardless of the underlying
instrument on which they are purchased or sold. Thus, the following general
discussion relates to each of the particular types of options discussed in
greater detail below. In addition, many Hedging and Other Strategic Transactions
involving options require segregation of portfolio assets in special accounts,
as described below under "Use of Segregated and Other Special Accounts."
A put option gives the purchaser of the option, upon payment of a premium,
the right to sell, and the writer the obligation to buy, the underlying
security, commodity, index, currency or other instrument at the exercise price.
A portfolio's purchase of a put option on a security, for example, might be
designed to protect its holdings in the underlying instrument (or, in some
cases, a similar instrument) against a substantial decline in the market value
of such instrument by giving the portfolio the right to sell the instrument at
the option exercise price. A call option, upon payment of a premium, gives the
purchaser of the option the right to buy, and the seller the obligation to sell,
the underlying instrument at the exercise price. A portfolio's purchase of a
call option on a security, financial futures contract, index, currency or other
instrument might be intended to protect the portfolio against an increase in the
price of the underlying instrument that it intends to purchase in the future by
fixing the price at which it may purchase the instrument. An "American" style
put or call option may be exercised at any time during the option period,
whereas a "European" style put or call option may be exercised only upon
expiration or during a fixed period prior to expiration. Exchange-listed options
are issued by a regulated intermediary such as the Options Clearing Corporation
("OCC"), which guarantees the performance of the obligations of the parties to
the options. The discussion below uses the OCC as an example, but is also
applicable to other similar financial intermediaries.
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OCC-issued and exchange-listed options, with certain exceptions, generally
settle by physical delivery of the underlying security or currency, although in
the future, cash settlement may become available. Index options and Eurodollar
instruments (which are described below under "Eurodollar Instruments") are cash
settled for the net amount, if any, by which the option is "in-the-money" (that
is, the amount by which the value of the underlying instrument exceeds, in the
case of a call option, or is less than, in the case of a put option, the
exercise price of the option) at the time the option is exercised. Frequently,
rather than taking or making delivery of the underlying instrument through the
process of exercising the option, listed options are closed by entering into
offsetting purchase or sale transactions that do not result in ownership of the
new option.
A portfolio's ability to close out its position as a purchaser or seller of
an OCC-issued or exchange-listed put or call option is dependent, in part, upon
the liquidity of the particular option market. Among the possible reasons for
the absence of a liquid option market on an exchange are: (1) insufficient
trading interest in certain options, (2) restrictions on transactions imposed by
an exchange, (3) trading halts, suspensions or other restrictions imposed with
respect to particular classes or series of options or underlying securities,
including reaching daily price limits, (4) interruption of the normal operations
of the OCC or an exchange, (5) inadequacy of the facilities of an exchange or
the OCC to handle current trading volume or (6) a decision by one or more
exchanges to discontinue the trading of options (or a particular class or series
of options), in which event the relevant market for that option on that exchange
would cease to exist, although any such outstanding options on that exchange
would continue to be exercisable in accordance with their terms.
The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent that
the option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that would not be reflected in the corresponding option
markets.
Over-the-counter ("OTC") options are purchased from or sold to securities
dealers, financial institutions or other parties (collectively referred to as
"Counterparties" and individually referred to as a "Counterparty") through
direct bilateral agreement with the Counterparty. In contrast to exchange-listed
options, which generally have standardized terms and performance mechanics, all
of the terms of an OTC option, including such terms as method of settlement,
term, exercise price, premium, guaranties and security, are determined by
negotiation of the parties. It is anticipated that any portfolio authorized to
use OTC options will generally only enter into OTC options that have cash
settlement provisions, although it will not be required to do so.
Unless the parties provide for it, no central clearing or guaranty function
is involved in an OTC option. As a result, if a Counterparty fails to make or
take delivery of the security, currency or other instrument underlying an OTC
option it has entered into with a portfolio or fails to make a cash settlement
payment due in accordance with the terms of that option, the portfolio will lose
any premium it paid for the option as well as any anticipated benefit of the
transaction. Thus, the subadviser must assess the creditworthiness of each such
Counterparty or any guarantor or credit enhancement of the Counterparty's credit
to determine the likelihood that the terms of the OTC option will be met. A
portfolio will enter into OTC option transactions only with U.S. Government
securities dealers recognized by the Federal Reserve Bank of New York as
"primary dealers," or broker-dealers, domestic or foreign banks, or other
financial institutions that are deemed creditworthy by the subadviser. In the
absence of a change in the current position of the staff of the Commission, OTC
options purchased by a portfolio and the amount of the portfolio's obligation
pursuant to an OTC option sold by the portfolio (the cost of the sell-back plus
the in-the-money amount, if any) or the value of the assets held to cover such
options will be deemed illiquid.
If a portfolio sells a call option, the premium that it receives may serve
as a partial hedge, to the extent of the option premium, against a decrease in
the value of the underlying securities or instruments held by the portfolio or
will increase the portfolio's income. Similarly, the sale of put options can
also provide portfolio gains.
If and to the extent authorized to do so, a portfolio may purchase and sell
call options on securities and on Eurodollar instruments that are traded on U.S.
and foreign securities exchanges and in the OTC markets, and on securities
indices, currencies and futures contracts. All calls sold by a portfolio must be
"covered" (that is, the portfolio must own the securities or futures contract
subject to the call) or must otherwise meet the asset segregation requirements
described below for so long as the call is outstanding. Even though a portfolio
will receive the option premium to help protect it against loss, a call sold by
the portfolio will expose the portfolio during the term of the option to
possible loss of opportunity to realize appreciation in the market price of the
underlying security or instrument and may require the portfolio to hold a
security or instrument that it might otherwise have sold.
Each portfolio reserves the right to invest in options on instruments and
indices which may be developed in the future to the extent consistent with
applicable law, the portfolio's investment objective and the restrictions set
forth herein.
If and to the extent authorized to do so, a portfolio may purchase and sell
put options on securities (whether or not it holds the securities in its
portfolio) and on securities indices, currencies and futures contracts. A
portfolio will not sell put options if, as a result, more than 50% of the
portfolio's assets would be required to be segregated to cover its potential
obligations under put options other than those with
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respect to futures contracts. In selling put options, a portfolio faces the risk
that it may be required to buy the underlying security at a disadvantageous
price above the market price.
GENERAL CHARACTERISTICS OF FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
If and to the extent authorized to do so, a portfolio may trade financial
futures contracts or purchase or sell put and call options on those contracts as
a hedge against anticipated interest rate, currency or market changes, for
duration management and for risk management purposes. Futures contracts are
generally bought and sold on the commodities exchanges on which they are listed
with payment of initial and variation margin as described below. The sale of a
futures contract creates a firm obligation by a portfolio, as seller, to deliver
to the buyer the specific type of financial instrument called for in the
contract at a specific future time for a specified price (or, with respect to
certain instruments, the net cash amount). Options on futures contracts are
similar to options on securities except that an option on a futures contract
gives the purchaser the right, in return for the premium paid, to assume a
position in a futures contract and obligates the seller to deliver that
position.
A portfolio's use of financial futures contracts and options thereon will
in all cases be consistent with applicable regulatory requirements and in
particular the rules and regulations of the CFTC and will be entered into only
for bona fide hedging, risk management (including duration management) or other
appropriate portfolio management purposes. Maintaining a futures contract or
selling an option on a futures contract will typically require a portfolio to
deposit with a financial intermediary, as security for its obligations, an
amount of cash or other specified assets ("initial margin") that initially is
from 1% to 10% of the face amount of the contract (but may be higher in some
circumstances). Additional cash or assets ("variation margin") may be required
to be deposited thereafter daily as the mark-to-market value of the futures
contract fluctuates. The purchase of an option on a financial futures contract
involves payment of a premium for the option without any further obligation on
the part of a portfolio. If a portfolio exercises an option on a futures
contract it will be obligated to post initial margin (and potentially variation
margin) for the resulting futures position just as it would for any futures
position. Futures contracts and options thereon are generally settled by
entering into an offsetting transaction, but no assurance can be given that a
position can be offset prior to settlement or that delivery will occur.
No portfolio will enter into a futures contract or option thereon if,
immediately thereafter, the sum of the amount of its initial margin and
premiums on open futures contracts and options thereon would exceed 5% of the
current fair market value of the portfolio's total assets; however, in the case
of an option that is in-the-money at the time of the purchase, the in-the-money
amount may be excluded in calculating the 5% limitation. The value of all
futures contracts sold by a portfolio (adjusted for the historical volatility
relationship between such portfolio and the contracts) will not exceed the
total market value of the portfolio's securities. The segregation requirements
with respect to futures contracts and options thereon are described below under
"Use of Segregated and Other Special Accounts".
OPTIONS ON SECURITIES INDICES AND OTHER FINANCIAL INDICES
If and to the extent authorized to do so, a portfolio may purchase and sell
call and put options on securities indices and other financial indices. In so
doing, the portfolio can achieve many of the same objectives it would achieve
through the sale or purchase of options on individual securities or other
instruments. Options on securities indices and other financial indices are
similar to options on a security or other instrument except that, rather than
settling by physical delivery of the underlying instrument, options on indices
settle by cash settlement; that is, an option on an index gives the holder the
right to receive, upon exercise of the option, an amount of cash if the closing
level of the index upon which the option is based exceeds, in the case of a
call, or is less than, in the case of a put, the exercise price of the option
(except if, in the case of an OTC option, physical delivery is specified). This
amount of cash is equal to the excess of the closing price of the index over the
exercise price of the option, which also may be multiplied by a formula value.
The seller of the option is obligated, in return for the premium received, to
make delivery of this amount. The gain or loss on an option on an index depends
on price movements in the instruments comprising the market, market segment,
industry or other composite on which the underlying index is based, rather than
price movements in individual securities, as is the case with respect to options
on securities.
CURRENCY TRANSACTIONS
If and to the extent authorized to do so, a portfolio may engage in
currency transactions with Counterparties to hedge the value of portfolio
securities denominated in particular currencies against fluctuations in relative
value. Currency transactions include currency forward contracts, exchange-listed
currency futures contracts and options thereon, exchange-listed and OTC options
on currencies, and currency swaps. A forward currency contract involves a
privately negotiated obligation to purchase or sell (with delivery generally
required) a specific currency at a future date, which may be any fixed number of
days from the date of the contract agreed upon by the parties, at a price set at
the time of the contract. A currency swap is an agreement to exchange cash flows
based on the notional difference among two or more currencies and operates
similarly to an interest rate swap, which is described below under "Swaps, Caps,
Floors and Collars". A portfolio may enter into currency transactions only with
Counterparties that are deemed creditworthy by the subadviser.
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A portfolio's dealings in forward currency contracts and other currency
transactions such as futures contracts, options, options on futures contracts
and swaps will be limited to hedging and other non-speculative purposes,
including transaction hedging and position hedging. Transaction hedging is
entering into a currency transaction with respect to specific assets or
liabilities of a portfolio, which will generally arise in connection with the
purchase or sale of the portfolio's portfolio securities or the receipt of
income from them. Position hedging is entering into a currency transaction with
respect to portfolio securities positions denominated or generally quoted in
that currency. A portfolio will not enter into a transaction to hedge currency
exposure to an extent greater, after netting all transactions intended wholly or
partially to offset other transactions, than the aggregate market value (at the
time of entering into the transaction) of the securities held by the portfolio
that are denominated or generally quoted in or currently convertible into the
currency, other than with respect to proxy hedging as described below.
A portfolio may cross-hedge currencies by entering into transactions to
purchase or sell one or more currencies that are expected to increase or decline
in value relative to other currencies to which the portfolio has or in which the
portfolio expects to have exposure. To reduce the effect of currency
fluctuations on the value of existing or anticipated holdings of its securities,
a portfolio may also engage in proxy hedging. Proxy hedging is often used when
the currency to which a portfolio's holdings is exposed is difficult to hedge
generally or difficult to hedge against the dollar. Proxy hedging entails
entering into a forward contract to sell a currency, the changes in the value of
which are generally considered to be linked to a currency or currencies in which
some or all of a portfolio's securities are or are expected to be denominated,
and to buy dollars. The amount of the contract would not exceed the market value
of the portfolio's securities denominated in linked currencies.
Currency transactions are subject to risks different from other portfolio
transactions, as discussed below under "Risk Factors". If a portfolio enters
into a currency hedging transaction, the portfolio will comply with the asset
segregation requirements described below under "Use of Segregated and Other
Special Accounts".
COMBINED TRANSACTIONS
If and to the extent authorized to do so, a portfolio may enter into
multiple transactions, including multiple options transactions, multiple futures
transactions, multiple currency transactions (including forward currency
contracts), multiple interest rate transactions and any combination of futures,
options, currency and interest rate transactions, instead of a single Hedging
and Other Strategic Transaction, as part of a single or combined strategy when,
in the judgment of the subadviser, it is in the best interests of the portfolio
to do so. A combined transaction will usually contain elements of risk that are
present in each of its component transactions. Although combined transactions
will normally be entered into by a portfolio based on the subadviser's judgment
that the combined strategies will reduce risk or otherwise more effectively
achieve the desired portfolio management goal, it is possible that the
combination will instead increase the risks or hinder achievement of the
portfolio management objective.
SWAPS, CAPS, FLOORS AND COLLARS
Among the Hedging and Other Strategic Transactions into which a portfolio
may be authorized to enter are interest rate, currency and index swaps, the
purchase or sale of related caps, floors and collars and other derivatives. A
portfolio will enter into these transactions primarily to seek to preserve a
return or spread on a particular investment or portion of its portfolio, to
protect against currency fluctuations, as a duration management technique or to
protect against any increase in the price of securities a portfolio anticipates
purchasing at a later date. A portfolio will use these transactions for
non-speculative purposes and will not sell interest rate caps or floors if it
does not own securities or other instruments providing the income the portfolio
may be obligated to pay. Interest rate swaps involve the exchange by a portfolio
with another party of their respective commitments to pay or receive interest
(for example, an exchange of floating rate payments for fixed rate payments with
respect to a notional amount of principal). A currency swap is an agreement to
exchange cash flows on a notional amount based on changes in the values of the
reference indices. The purchase of a cap entitles the purchaser to receive
payments on a notional principal amount from the party selling the cap to the
extent that a specified index exceeds a predetermined interest rate. The
purchase of an interest rate floor entitles the purchaser to receive payments of
interest on a notional principal amount from the party selling the interest rate
floor to the extent that a specified index falls below a predetermined interest
rate or amount. The purchase of a floor entitles the purchaser to receive
payments on a notional principal amount from the party selling the floor to the
extent that a specific index falls below a predetermined interest rate or
amount. A collar is a combination of a cap and a floor that preserves a certain
return with a predetermined range of interest rates or values.
A portfolio will usually enter into interest rate swaps on a net basis,
that is, two payment streams are netted out in a cash settlement on the payment
date or dates specified in the instrument, with the portfolio receiving or
paying, as the case may be, only the net amount of the two payments. Inasmuch as
these swaps, caps, floors, collars and other similar derivatives are entered
into for good faith hedging or other non-speculative purposes, they do not
constitute senior securities under the Investment Company Act of 1940, as
amended, and, thus, will not be treated as being subject to the portfolio's
borrowing restrictions. A portfolio will not enter into any swap, cap, floor,
collar or other derivative transaction unless the Counterparty is deemed
creditworthy by the subadviser. If a Counterparty defaults, a portfolio may have
12
<PAGE> 71
contractual remedies pursuant to the agreements related to the transaction. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent innovations for
which standardized documentation has not yet been fully developed and, for that
reason, they are less liquid than swaps.
The liquidity of swap agreements will be determined by a Subadviser based
on various factors, including (1) the frequency of trades and quotations, (2)
the number of dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including any
demand or tender features), and (5) the nature of the marketplace for trades
(including the ability to assign or offset a portfolio's rights and obligations
relating to the investment). Such determination will govern whether a swap will
be deemed to be within the 15% restriction on investments in securities that are
not readily marketable.
Each portfolio will maintain cash and appropriate liquid assets in a
segregated custodial account to cover its current obligations under swap
agreements. If a portfolio enters into a swap agreement on a net basis, it will
segregate assets with a daily value at least equal to the excess, if any, of the
portfolio's accrued obligations under the swap agreement over the accrued amount
the portfolio is entitled to receive under the agreement. If a portfolio enters
into a swap agreement on other than a net basis, it will segregate assets with a
value equal to the full amount of the portfolio's accrued obligations under the
agreement. See also, "Use of Segregated and Other Special Accounts."
EURODOLLAR INSTRUMENTS
If and to the extent authorized to do so, a portfolio may make investments
in Eurodollar instruments, which are typically dollar-denominated futures
contracts or options on those contracts that are linked to the London Interbank
Offered Rate ("LIBOR"), although foreign currency denominated instruments are
available from time to time. Eurodollar futures contracts enable purchasers to
obtain a fixed rate for the lending of funds and sellers to obtain a fixed rate
for borrowings. A portfolio might use Eurodollar futures contracts and options
thereon to hedge against changes in LIBOR, to which many interest rate swaps and
fixed income instruments are linked.
RISK FACTORS
Hedging and Other Strategic Transactions have special risks associated with
them, including possible default by the Counterparty to the transaction,
illiquidity and, to the extent the subadviser's view as to certain market
movements is incorrect, the risk that the use of the Hedging and Other Strategic
Transactions could result in losses greater than if they had not been used. Use
of put and call options could result in losses to a portfolio, force the sale or
purchase of portfolio securities at inopportune times or for prices higher than
(in the case of put options) or lower than (in the case of call options) current
market values, or cause a portfolio to hold a security it might otherwise sell.
The use of futures and options transactions entails certain special risks.
In particular, the variable degree of correlation between price movements of
futures contracts and price movements in the related securities position of a
portfolio could create the possibility that losses on the hedging instrument are
greater than gains in the value of the portfolio's position. In addition,
futures and options markets could be illiquid in some circumstances and certain
over-the-counter options could have no markets. As a result, in certain markets,
a portfolio might not be able to close out a transaction without incurring
substantial losses. Although a portfolio's use of futures and options
transactions for hedging should tend to minimize the risk of loss due to a
decline in the value of the hedged position, at the same time it will tend to
limit any potential gain to a portfolio that might result from an increase in
value of the position. Finally, the daily variation margin requirements for
futures contracts create a greater ongoing potential financial risk than would
purchases of options, in which case the exposure is limited to the cost of the
initial premium.
Currency hedging involves some of the same risks and considerations as
other transactions with similar instruments. Currency transactions can result in
losses to a portfolio if the currency being hedged fluctuates in value to a
degree or in a direction that is not anticipated. Further, the risk exists that
the perceived linkage between various currencies may not be present or may not
be present during the particular time that a portfolio is engaging in proxy
hedging. Currency transactions are also subject to risks different from those of
other portfolio transactions. Because currency control is of great importance to
the issuing governments and influences economic planning and policy, purchases
and sales of currency and related instruments can be adversely affected by
government exchange controls, limitations or restrictions on repatriation of
currency, and manipulations or exchange restrictions imposed by governments.
These forms of governmental actions can result in losses to a portfolio if it is
unable to deliver or receive currency or monies in settlement of obligations and
could also cause hedges it has entered into to be rendered useless, resulting in
full currency exposure as well as incurring transaction costs. Buyers and
sellers of currency futures contracts are subject to the same risks that apply
to the use of futures contracts generally. Further, settlement of a currency
futures contract for the purchase of most currencies must occur at a bank based
in the issuing nation. Trading options on currency futures contracts is
relatively new, and the ability to establish and close out positions on these
options is subject to the maintenance of a liquid market that may not always be
available. Currency exchange rates may fluctuate based on factors extrinsic to
that country's economy.
13
<PAGE> 72
Losses resulting from the use of Hedging and Other Strategic Transactions
will reduce a portfolio's net asset value, and possibly income, and the losses
can be greater than if Hedging and Other Strategic Transactions had not been
used.
RISKS OF HEDGING AND OTHER STRATEGIC TRANSACTIONS OUTSIDE THE UNITED STATES
When conducted outside the United States, Hedging and Other Strategic
Transactions may not be regulated as rigorously as in the United States, may not
involve a clearing mechanism and related guarantees, and will be subject to the
risk of governmental actions affecting trading in, or the prices of, foreign
securities, currencies and other instruments. The value of positions taken as
part of non-U.S. Hedging and Other Strategic Transactions also could be
adversely affected by: (1) other complex foreign political, legal and economic
factors, (2) lesser availability of data on which to make trading decisions than
in the United States, (3) delays in a portfolio's ability to act upon economic
events occurring in foreign markets during non-business hours in the United
States, (4) the imposition of different exercise and settlement terms and
procedures and margin requirements than in the United States and (5) lower
trading volume and liquidity.
USE OF SEGREGATED AND OTHER SPECIAL ACCOUNTS
Use of many Hedging and Other Strategic Transactions by a portfolio will
require, among other things, that the portfolio segregate cash, liquid high
grade debt obligations or other assets with its custodian, or a designated
sub-custodian, to the extent the portfolio's obligations are not otherwise
"covered" through ownership of the underlying security, financial instrument or
currency. In general, either the full amount of any obligation by a portfolio to
pay or deliver securities or assets must be covered at all times by the
securities, instruments or currency required to be delivered, or, subject to any
regulatory restrictions, an amount of cash or liquid high grade debt obligations
at least equal to the current amount of the obligation must be segregated with
the custodian or sub-custodian. The segregated assets cannot be sold or
transferred unless equivalent assets are substituted in their place or it is no
longer necessary to segregate them. A call option on securities written by a
portfolio, for example, will require the portfolio to hold the securities
subject to the call (or securities convertible into the needed securities
without additional consideration) or to segregate liquid high grade debt
obligations sufficient to purchase and deliver the securities if the call is
exercised. A call option sold by a portfolio on an index will require the
portfolio to own portfolio securities that correlate with the index or to
segregate liquid high grade debt obligations equal to the excess of the index
value over the exercise price on a current basis. A put option on securities
written by a portfolio will require the portfolio to segregate liquid high grade
debt obligations equal to the exercise price. Except when a portfolio enters
into a forward contract in connection with the purchase or sale of a security
denominated in a foreign currency or for other non-speculative purposes, which
requires no segregation, a currency contract that obligates the portfolio to buy
or sell a foreign currency will generally require the portfolio to hold an
amount of that currency or liquid securities denominated in that currency equal
to a portfolio's obligations or to segregate liquid high grade debt obligations
equal to the amount of the portfolio's obligations.
OTC options entered into by a portfolio, including those on securities,
currency, financial instruments or indices, and OCC-issued and exchange-listed
index options will generally provide for cash settlement, although a portfolio
will not be required to do so. As a result, when a portfolio sells these
instruments it will segregate an amount of assets equal to its obligations under
the options. OCC-issued and exchange-listed options sold by a portfolio other
than those described above generally settle with physical delivery, and the
portfolio will segregate an amount of assets equal to the full value of the
option. OTC options settling with physical delivery or with an election of
either physical delivery or cash settlement will be treated the same as other
options settling with physical delivery.
In the case of a futures contract or an option on a futures contract, a
portfolio must deposit initial margin and, in some instances, daily variation
margin in addition to segregating assets sufficient to meet its obligations to
purchase or provide securities or currencies, or to pay the amount owed at the
expiration of an index-based futures contract. These assets may consist of cash,
cash equivalents, liquid debt or equity securities or other acceptable assets. A
portfolio will accrue the net amount of the excess, if any, of its obligations
relating to swaps over its entitlements with respect to each swap on a daily
basis and will segregate with its custodian, or designated sub-custodian, an
amount of cash or liquid high grade debt obligations having an aggregate value
equal to at least the accrued excess. Caps, floors and collars require
segregation of assets with a value equal to a portfolio's net obligation, if
any.
Hedging and Other Strategic Transactions may be covered by means other than
those described above when consistent with applicable regulatory policies. A
portfolio may also enter into offsetting transactions so that its combined
position, coupled with any segregated assets, equals its net outstanding
obligation in related options and Hedging and Other Strategic Transactions. A
portfolio could purchase a put option, for example, if the strike price of that
option is the same or higher than the strike price of a put option sold by the
portfolio. Moreover, instead of segregating assets if it holds a futures
contracts or forward contract, a portfolio could purchase a put option on the
same futures contract or forward contract with a strike price as high or higher
than the price of the contract held. Other Hedging and Other Strategic
Transactions may also be offset in combinations. If the offsetting transaction
terminates at the time of or after the primary transaction, no segregation is
required, but if it terminates prior to that time, assets equal to any remaining
obligation would need to be segregated.
14
<PAGE> 73
OTHER LIMITATIONS
No portfolio will maintain open short positions in futures contracts, call
options written on futures contracts, and call options written on securities
indices if, in the aggregate, the current market value of the open positions
exceeds the current market value of that portion of its securities portfolio
being hedged by those futures and options plus or minus the unrealized gain or
loss on those open positions, adjusted for the historical volatility
relationship between that portion of the portfolio and the contracts (e.g., the
Beta volatility factor). For purposes of the limitation stated in the
immediately preceding sentence, to the extent the portfolio has written call
options on specific securities in that portion of its portfolio, the value of
those securities will be deducted from the current market value of that portion
of the securities portfolio. If this limitation should be exceeded at any time,
the portfolio will take prompt action to close out the appropriate number of
open short positions to bring its open futures and options positions within this
limitation.
The degree to which a portfolio may utilize Hedging and Other Strategic
Transactions may also be affected by certain provisions of the Internal Revenue
Code of 1986, as amended.
INVESTMENT RESTRICTIONS
There are two classes of investment restrictions to which the Trust is
subject in implementing the investment policies of the portfolios: fundamental
and nonfundamental. Nonfundamental restrictions are subject to change by the
Trustees of the Trust without shareholder approval. Fundamental restrictions may
only be changed by a vote of the lesser of (i) 67% or more of the shares
represented at a meeting at which more than 50% of the outstanding shares are
represented or (ii) more than 50% of the outstanding shares.
With respect to the submission of a change in an investment restriction to
the holders of the Trust's outstanding voting securities, the matter shall be
deemed to have been effectively acted upon with respect to a particular
portfolio if a majority of the outstanding voting securities of the portfolio
vote for the approval of the matter, notwithstanding (1) that the matter has not
been approved by the holders of a majority of the outstanding voting securities
of any other portfolio affected by the matter, and (2) that the matter has not
been approved by the vote of a majority of the outstanding voting securities of
the Trust.
All of the restrictions through restriction 8. are fundamental.
Restrictions 9. through 15. are nonfundamental.
FUNDAMENTAL
The Trust may not issue senior securities, except to the extent that the
borrowing of money in accordance with restriction 3. may constitute the issuance
of a senior security. (For purposes of this restriction, purchasing securities
on a when-issued or delayed delivery basis and engaging in Hedging and Other
Strategic Transactions will not be deemed to constitute the issuance of a senior
security.) In addition, unless a portfolio is specifically excepted by the terms
of a restriction, each portfolio will not:
(1) Invest more than 25% of the value of its total assets in securities of
issuers having their principal activities in any particular industry,
excluding United States Government securities and obligations of domestic
branches of U.S. banks and savings and loan associations. [The Trust has
determined to forego the exclusion from the above policy of obligations of
domestic branches of U.S. savings and loan associations and to limit the
exclusion of obligations of domestic branches of U.S. banks to the Money
Market Trust.] For purposes of this restriction, neither finance
companies as a group nor utility companies as a group are considered to be
a single industry. Such companies will be grouped instead according to
their services; for example, gas, electric and telephone utilities will
each be considered a separate industry. Also for purposes of this
restriction, foreign government issuers and supranational issuers are not
considered members of any industry.
(2) Purchase the securities of any issuer if the purchase would cause more
than 5% of the value of the portfolio's total assets to be invested in the
securities of any one issuer (excluding United States Government
securities) or cause more than 10% of the voting securities of the issuer
to be held by the portfolio, except that up to 25% of the value of each
portfolio's total assets may be invested without regard to these
restrictions. The Global Government Bond Trust is not subject to this
restriction.
(3) Borrow money, except that each portfolio may borrow (i) for temporary or
emergency purposes (not for leveraging) up to 33 1/3% of the value of the
portfolio's total assets (including amounts borrowed) less liabilities
(other than borrowings) and (ii) in connection with reverse repurchase
agreements, mortgage dollar rolls and other similar transactions.
(4) Underwrite securities of other issuers except insofar as the Trust may be
considered an underwriter under the Securities Act of 1933 in selling
portfolio securities.
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<PAGE> 74
(5) Purchase or sell real estate, except that each portfolio may invest in
securities issued by companies which invest in real estate or interests
therein and each of the portfolios other than the Money Market Trust may
invest in mortgages and mortgage backed securities.
(6) Purchase or sell commodities or commodity contracts except that each
portfolio other than the Money Market Trust may purchase and sell futures
contracts on financial instruments and indices and options on such futures
contracts and each portfolio other than the Money Market Trust and U.S.
Government Securities Trust may purchase and sell futures contracts on
foreign currencies and options on such futures contracts.
(7) Lend money to other persons except by the purchase of obligations in
which the portfolio is authorized to invest and by entering into
repurchase agreements. For purposes of this restriction, collateral
arrangements with respect to options, forward currency and futures
transactions will not be deemed to involve the lending of money.
(8) Lend securities in excess of 33 1/3% of the value of its total assets.
For purposes of this restriction, collateral arrangements with respect to
options, forward currency and futures transactions will not be deemed to
involve loans of securities.
NONFUNDAMENTAL
(9) Knowingly invest more than 15% of the value of its net assets in
securities or other investments, including repurchase agreements maturing
in more than seven days but excluding master demand notes, that are not
readily marketable, except that the Money Market Trust may not invest in
excess of 10% of its net assets in such securities or other investments.
(10) Sell securities short or purchase securities on margin except that it may
obtain such short-term credits as may be required to clear transactions.
For purposes of this restriction, collateral arrangements with respect to
Hedging and Other Strategic Transactions will not be deemed to involve the
use of margin.
(11) Write or purchase options on securities, financial indices or currencies
except to the extent a portfolio is specifically authorized to engage in
Hedging and Other Strategic Transactions.
(12) Purchase securities for the purpose of exercising control or management.
(13) Purchase securities of other investment companies if the purchase would
cause more than 10% of the value of the portfolio's total assets to be
invested in investment company securities, provided that (i) no investment
will be made in the securities of any one investment company if
immediately after such investment more than 3% of the outstanding voting
securities of such company would be owned by the portfolio or more than 5%
of the value of the portfolio's total assets would be invested in such
company and (ii) no restrictions shall apply to a purchase of investment
company securities in connection with a merger, consolidation or
reorganization. For purposes of this restriction, privately issued
collateralized mortgage obligations will not be treated as investment
company securities if issued by "Exemptive Issuers". Exemptive Issuers
are defined as unmanaged, fixed-asset issuers that (a) invest primarily in
mortgage-backed securities, (b) do not issue redeemable securities as
defined in section 2(a)(32) of the Investment Company Act of 1940, (c)
operate under general exemptive orders exempting them from "all provisions
of the Investment Company Act of 1940," and (d) are not registered or
regulated under the Investment Company Act of 1940 as investment
companies.
(14) Pledge, hypothecate, mortgage or transfer (except as provided in
restriction 8.) as security for indebtedness any securities held by the
portfolio except in an amount of not more than 10% of the value of the
portfolio's total assets and then only to secure borrowings permitted by
restrictions 3. and 10. For purposes of this restriction, collateral
arrangements with respect to Hedging and Other Strategic Transactions will
not be deemed to involve a pledge of assets.
(15) Purchase securities of foreign issuers, except that (A) the Aggressive
Asset Allocation Trust may invest up to 35% of its assets in such
securities; (B) the Moderate Asset Allocation Trust may invest up to 25%
of its assets in such securities; (C) the Conservative Asset Allocation
Trust may invest up to 15% of its assets in such securities; (D) each
other portfolio other than the U.S. Government Securities Trust may invest
up to 20% of its total assets in such securities (in the case of the
Small/Mid Cap Trust, ADRs and U.S. dollar-denominated securities are not
included in the 20% limit); and (E) this restriction shall not apply to
the International Small Cap, Global Equity, Global Government Bond,
International Growth and Income and Strategic Bond Trusts.
In addition to the above policies, the Money Market Trust is subject to
certain restrictions required by Rule 2a-7 under the Investment Company Act of
1940. In order to comply with such restrictions, the Money Market Trust will,
inter alia, not purchase the securities of any issuer if it would cause (i) more
than 5% of its total assets to be invested in the securities of any one issuer
(excluding U.S.
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<PAGE> 75
Government securities and repurchase agreements fully collateralized by U.S.
Government securities), except as permitted by Rule 2a-7 for certain securities
for a period of up to three business days after purchase, (ii) more than 5% of
its total assets to be invested in "second tier securities," as defined by Rule,
or (iii) more than the greater of $1 million or 1% of its total assets to be
invested in the second tier securities of that issuer.
If a percentage restriction is adhered to at the time of an investment, a
later increase or decrease in the investment's percentage of the value of a
portfolio's total assets resulting from a change in such values or assets will
not constitute a violation of the percentage restriction, except in the case of
the Money Market Trust where the percentage limitation of restriction 9. must be
met at all times.
PORTFOLIO TURNOVER
<TABLE>
The annual rate of portfolio turnover will normally differ for each
portfolio and may vary from year to year. Portfolio turnover is calculated by
dividing the lesser of purchases or sales of portfolio securities during the
fiscal year by the monthly average of the value of the portfolio's securities
(excluding from the computation all securities, including options, with
maturities at the time of acquisition of one year or less). A high rate of
portfolio turnover generally involves correspondingly greater brokerage
commission expenses, which must be borne directly by the portfolio. No portfolio
turnover rate can be calculated for the Money Market Trust due to the short
maturities of the instruments purchased. The portfolio turnover rate may vary
from year to year, as well as within a year. The Growth, Small/Mid Cap and the
International Small Cap Trusts anticipate that their turnover rates generally
will not exceed 175%, 120%, and 100%, respectively. High portfolio turnover
rates (100% or more) can result in corresponding increases in brokerage
commissions for the portfolio. The portfolio turnover rates for the other
portfolios of the Trust for the years ended December 31, 1995 and 1994 were as
follows:
<CAPTION>
1994 1995
- ------------------------------------------------------
<S> <C> <C>
Global Equity Trust ................ 52% 63%
Pasadena Growth Trust .............. 33% 57%
Equity Trust ....................... 132% 88%
Value Equity Trust ................. 26% 52%
Growth and Income Trust ............ 42% 39%
International Growth and Income .... NA 112%*
Strategic Bond Trust ............... 197% 181%
Global Government Bond Trust ....... 157% 171%
Investment Quality Bond Trust ...... 140% 137%
U.S. Government Securities Trust ... 387% 212%
Aggressive Asset Allocation Trust .. 136% 111%
Moderate Asset Allocation Trust .... 180% 129%
Conservative Asset Allocation Trust 220% 110%
<FN>
*Annualized
</TABLE>
Prior rates of portfolio turnover do not provide an accurate guide as to
what the rate will be in any future year, and prior rates and estimated rates
are not a limiting factor when it is deemed appropriate to purchase or sell
securities for a portfolio. Each portfolio of the Trust intends to comply with
the various requirements of the Internal Revenue Code so as to qualify as a
"regulated investment company" thereunder. One such requirement is that a
portfolio must derive less than 30% of its gross income from the sale or other
disposition of stock or securities held for less than three months. Accordingly,
the ability of a particular portfolio to effect certain portfolio transactions
may be limited.
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<PAGE> 76
MANAGEMENT OF THE TRUST
<TABLE>
The Trustees and officers of the Trust, together with information as to
their principal occupations during the past five years, are listed below:
<CAPTION>
==================================================================================
NAME, ADDRESS AND AGE POSITION WITH THE PRINCIPAL OCCUPATION
TRUST DURING PAST FIVE YEARS
- ----------------------------------------------------------------------------------
<S> <C> <C>
Don B. Allen Trustee Senior Lecturer,
136 Knickerbocker Road William E. Simon
Pittsford, NY 14534 Graduate School of
Age: 67 Business
Administration,
University of
Rochester
- ----------------------------------------------------------------------------------
William J. Atherton* President President and
116 Huntington Avenue Director, North
Boston, MA 02116 American Security
Age: 57 Life Insurance
Company; Vice
President, U.S.
Annuities (Boston),
Manulife, January 1,
1996 to date
- ----------------------------------------------------------------------------------
Charles L. Bardelis Trustee President and
297 Dillingham Ave. Executive Officer,
Falmouth, MA 02540 Island Commuter
Age: 54 Corp.(Marine
Transport)
- ----------------------------------------------------------------------------------
Samuel Hoar** Trustee Senior Mediator,
73 Tremont Street Judicial Arbitration
Boston, MA 02109 Mediation Services
Age: 68 "JAMS/Endispute,"
June 1, 1994 to date;
Partner, Goodwin,
Proctor and Hoar,
prior to June 1, 1994
- ----------------------------------------------------------------------------------
Brian L. Moore* Chairman of Trustees Executive Vice
5650 Yonge Street President, Canadian
North York, Ontario, Canada, M2M 4G4 Insurance Operations,
Age: 51 The Manufacturers
Life Insurance
Company, January 1,
1996 to date; Chief
Executive Officer,
The North American
Group, Oct. 1993 to
December 31, 1995;
Executive Vice
President and Chief
Financial Officer,
Sept. 1988 to Oct.
1993, North American
Life Assurance
Company
- ----------------------------------------------------------------------------------
Robert J. Myers Trustee Consulting Actuary
9610 Wire Avenue (self-employed),
Silver Springs, MD 20921 April 1983 to date;
Age: 83 Chairman, Commission
on Railroad
Retirement Reform,
1988 to 1990.
- ----------------------------------------------------------------------------------
John G. Vrysen Vice President Vice President, Chief
116 Huntington Avenue Financial Officer,
Boston, MA 02116 U.S. Operations, of
Age: 40 Manulife, January
1996 to date; Vice
President and
Actuary, January 1986
to date, North
American Security
Life Insurance
Company.
==================================================================================
</TABLE>
18
<PAGE> 77
<TABLE>
================================================================================
<S> <C> <C>
James D. Gallagher Secretary Vice President,
116 Huntington Avenue Legal Services, of
Boston, MA 02116 Manulife, January
Age: 41 1996 to date; Vice
President,
Secretary and
General Counsel,
June 1994 to date,
North American
Security Life
Insurance Company;
Vice President and
Associate General
Counsel, 1990 to
1994, The
Prudential
Insurance Company
of America.
--------------------------------------------------------------------------------
Richard C. Hirtle Vice President Vice President,
116 Huntington Avenue and Treasurer Chief Financial
Boston, MA 02116 Officer, Annuities,
Age: 40 of Manulife,
January 1996 to
date; Vice
President,
Treasurer and Chief
Financial Officer,
November 1988 to
date, North
American Security
Life Insurance
Company.
================================================================================
<FN>
*Trustee who is an "interested person", as defined in the Investment Company Act of 1940.
**Trustee who is an "interested person" of the Trust but not the Adviser.
</TABLE>
COMPENSATION OF TRUSTEES
The Trust does not pay any remuneration to its Trustees who are officers or
employees of the Adviser or its affiliates. Trustees not so affiliated receive
an annual retainer of $18,000, a fee of $4,750 for each meeting of the Trustees
that they attend in person and a fee of $200 for each such meeting conducted by
telephone. Trustees are reimbursed for travel and other out-of-pocket expenses.
The officers listed above are furnished to the Trust pursuant to the Advisory
Agreement described below and receive no compensation from the Trust. These
officers spend only a portion of their time on the affairs of the Trust.
<TABLE>
<CAPTION>
===============================================================================================
NAMES OF PERSON, POSTION AGGREGATE COMPENSATION FROM TOTAL COMPENSATION FROM TRUST
TRUST FOR PRIOR FISCAL YEAR* COMPLEX FOR PRIOR FISCAL YEAR*#
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Don B. Allen, Trustee $35,000 $42,500
-----------------------------------------------------------------------------------------------
Charles L. Bardelis, Trustee $35,000 $42,500
-----------------------------------------------------------------------------------------------
Samuel Hoar, Trustee $35,000 $42,500
-----------------------------------------------------------------------------------------------
Robert J. Myers, Trustee $35,000 $42,500
===============================================================================================
<FN>
*Compensation received for services as Trustee.
#Trust Complex includes all portfolios of the Trust as well as all portfolios of North American Funds
of which NASL Financial is the investment advisor.
</TABLE>
INVESTMENT MANAGEMENT ARRANGEMENTS
The following information supplements the material appearing in the
Prospectus under the caption "Management of the Trust." Copies of the Advisory
and Subadvisory Agreements discussed below have been filed with and are
available from the Securities and Exchange Commission.
The Trust, formerly a Maryland corporation known as "NASL Series Fund,
Inc." (the "Fund"), was reorganized as a Massachusetts business trust effective
December 31, 1988. Pursuant to such reorganization, the Trust assumed all the
assets and liabilities of the Fund and
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<PAGE> 78
carried on its business and operations with the same investment management
arrangements as were in effect for the Fund at the time of the reorganization.
The assets and liabilities of each of the Fund's separate portfolios were
assumed by the corresponding portfolios of the Trust.
NASL Financial (the "Adviser") is a Massachusetts corporation whose
principal offices are located at 116 Huntington Avenue, Boston, Massachusetts
02116. NASL Financial is registered as an investment adviser under the
Investment Advisers Act of 1940 and as a broker-dealer under the Securities
Exchange Act of 1934. It is a member of the National Association of Securities
Dealers, Inc. (the "NASD"). In addition, NASL Financial serves as principal
underwriter of certain contracts issued by Security Life.
The Advisory Agreement, each Subadvisory Agreement (except the Founders
Asset Management, Inc. Subadvisory Agreement and the Fred Alger Management, Inc.
Subadvisory Agreement) and the Salomon Brothers Asset Management Limited
Consulting Agreement were approved by the Trustees on September 28, 1995 and by
the shareholders of the portfolios on December 5, 1995. These approvals occurred
in connection with the change of control of NASL Financials as a result of the
merger of North American Life Assurance Company, the ultimate controlling parent
of NASL Financial, with The Manufacturers Life Insurance Company on January 1,
1996.
On December 15, 1995, the Trustees appointed Fred Alger Management, Inc.
("Alger") pursuant to a new Subadvisory Agreement with Alger ("Alger Subadvisory
Agreement") to manage the Small/Mid Cap Trust. The Alger Subadvisory Agreement
and an amendment to the Advisory Agreement, both to provide for the management
of the Small/Mid Cap Trust, were approved by the Trustees, including a majority
of the Trustees who are not parties to the agreements or interested persons of
any party to such agreements. The Alger Subadvisory Agreement and the related
amendment to the Advisory Agreement have been approved by the sole shareholder
of the Small/Mid Cap Trust.
On December 15, 1995, the Trustees appointed Founders Asset Management, Inc
("Founders") pursuant to a new Subadvisory Agreement with Founders ("Founders
Subadvisory Agreement") to manage the International Small Cap Trust and on June
20, 1996, the Trustees appointed Founders pursuant to an amendment to the
Founders Subadvisory Agreement to manage the Growth Trust. The Founders
Subadvisory Agreement (and in the case of the Growth Trust, the amendment to the
Founders Subadvisory Agreement) and amendments to the Advisory Agreement, both
to provide for the management of the Growth and International Small Cap Trust,
were approved by the Trustees, including a majority of the Trustees who are not
parties to the agreements or interested persons of any party to such agreements.
The Founders Subadvisory Agreement (and in the case of the Growth Trust, the
amendment to the Founders Subadvisory Agreement) and the related amendments to
the Advisory Agreement have been approved by the sole shareholders of the Growth
and the International Small Cap Trust.
THE ADVISORY AGREEMENT
Under the terms of the Advisory Agreement, the Adviser administers the
business and affairs of the Trust. The Adviser is responsible for performing or
paying for various administrative services for the Trust, including providing at
the Adviser's expense (i) office space and all necessary office facilities and
equipment, (ii) necessary executive and other personnel for managing the affairs
of the Trust and for performing certain clerical, accounting and other office
functions, and (iii) all other information and services, other than services of
counsel, independent accountants or investment subadvisory services provided by
any subadviser under a subadvisory agreement, required in connection with the
preparation of all tax returns and documents required to comply with the federal
securities laws. The Adviser pays the cost of any advertising or sales
literature relating solely to the Trust, the cost of printing and mailing
Prospectuses to persons other than current holders of Trust shares or of
variable contracts funded by Trust shares and the compensation of the Trust's
officers and Trustees that are officers, directors or employees of the Adviser
or its affiliates. In addition, advisory fees are reduced or the Adviser
reimburses the Trust if the total of all expenses (excluding advisory fees,
taxes, portfolio brokerage commissions, interest, litigation and indemnification
expenses and other extraordinary expenses not incurred in the ordinary course of
the Trust's business) applicable to a portfolio exceeds an annual rate of .75%
in the case of the two global and two international portfolios or .50% in the
case of all other portfolios of the average net asset value of such portfolio.
The expense limitation will continue in effect from year to year unless
otherwise terminated at any year end by the Adviser on 30 days' notice to the
Trust.
In addition to providing the services and expense limitation described
above, the Adviser selects, contracts with and compensates subadvisers to manage
the investment and reinvestment of the assets of the Trust portfolios. The
Adviser monitors the compliance of such subadvisers with the investment
objectives and related policies of each portfolio and reviews the performance of
such subadvisers and reports periodically on such performance to the Trustees of
the Trust.
As compensation for its services, the Adviser receives a fee from the Trust
computed separately for each portfolio. The fee for each portfolio is stated as
an annual percentage of the current value of the net assets of such portfolio.
The fee, which is accrued daily and payable monthly, is calculated for each day
by multiplying the daily equivalent of the annual percentage prescribed for a
portfolio by the value of its net assets at the close of business on the
previous business day of the Trust. The following is a schedule of the
management fees each portfolio currently is obligated to pay the Adviser:
20
<PAGE> 79
<TABLE>
<CAPTION>
PORTFOLIO
- ---------------------------------------------------------
<S> <C>
Small/Mid Cap Trust .................... 1.000%
International Small Cap Trust .......... 1.100%
Global Equity Trust .................... .900%
Pasadena Growth Trust .................. .975%
Equity Trust ........................... .750%
Growth Trust ........................... .850%
Value Equity Trust ..................... .800%
Growth and Income Trust ................ .750%
International Growth and Income Trust .. .950%
Strategic Bond Trust ................... .775%
Global Government Bond Trust ........... .800%
Investment Quality Bond Trust .......... .650%
U.S. Government Securities Trust ....... .650%
Money Market Trust ..................... .500%
Aggressive Asset Allocation Trust ...... .750%
Moderate Asset Allocation Trust ........ .750%
Conservative Asset Allocation Trust .... .750%
</TABLE>
<TABLE>
The fees shown above, other than those paid by the Investment Quality Bond
and U.S. Government Securities Trusts and the Money Market Trust, are higher
than those paid by most funds to their advisers, but are not higher than the
fees paid by many funds with similar investment objectives and policies. For the
years ended December 31, 1995, 1994 and 1993 the aggregate investment advisory
fee payable by the Trust under the fee schedule then in effect, absent the
expense limitation provision, was $33,808,255, $27,076,438 and $16,988,737
allocated among the portfolios as follows:
<CAPTION>
PORTFOLIO 1995 1994 1993
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Global Equity .................. $5,513,312 $4,916,694 $1,813,650
Pasadena Growth ................ $2,115,434 $1,255,314 $ 675,183
Equity ......................... $5,643,363 $3,483,279 $1,953,233
Value Equity ................... $2,459,247 $1,274,807 $ 308,485
Growth and Income .............. $3,922,671 $2,670,229 $1,544,607
International Growth & Income .. $ 450,200* N/A N/A
Strategic Bond ................. $ 767,448 $ 588,051 $ 189,565
Global Government Bond ......... $1,757,909 $1,742,81 $ 947,963
Investment Quality Bond ........ $ 798,045 $ 709,069 $ 529,433
U.S. Government Securities ..... $1,291,668 $1,350,850 $1,153,241
Money Market Trust ............. $1,318,573 $1,158,400 $ 606,603
Aggressive Asset Allocation .... $1,463,421 $1,354,682 $1,226,006
Moderate Asset Allocation ...... $4,667,061 $4,783,431 $4,341,909
Conservative Asset Allocation .. $1,639,903 $1,788,821 $1,698,859
<FN>
*For the period January 9, 1995 (commencement of operations) to December 31,
1995
</TABLE>
For the period March 4, 1996 to June 15, 1996, the Small/Mid Cap Trust paid
investment advisory fees of $102,833 and the International Small Cap Trust paid
investment advisory fees of $54,605.
Prior to April 23, 1991, the investment advisory fees paid by the Trust
were generally lower than the fees set forth above and were subject to a
different expense limitation. Pursuant to the Advisory Agreement, no advisory
fee was charged to the Growth and Income Trust until the portfolio reached
$10,000,000 in net assets, which occurred on June 21, 1991.
THE SUBADVISORY AGREEMENTS
Under the terms of each of the current subadvisory agreements, including
the SBAM Limited Consulting Agreement (collectively "Subadvisory Agreements"),
the Subadviser manages the investment and reinvestment of the assets of the
assigned portfolios, subject to the supervision of the Trust's Trustees. The
Subadviser formulates a continuous investment program for each such portfolio
consistent with its
21
<PAGE> 80
investment objectives and policies outlined in the Prospectus. Each Subadviser
implements such programs by purchases and sales of securities and regularly
reports to the Adviser and the Trustees of the Trust with respect to the
implementation of such programs. Each Subadviser, at its expense, furnishes all
necessary investment and management facilities, including salaries of personnel
required for it to execute its duties, as well as administrative facilities,
including bookkeeping, clerical personnel, and equipment necessary for the
conduct of the investment affairs of the assigned portfolios. With regards to
the Pasadena Growth Trust subadvisory agreement, the subadviser shall reimburse
the Pasadena Growth Trust for its "Other Expenses" to a maximum on an annual
basis of .15% of the average net assets of the portfolio. For purposes of this
provision, "Other Expenses" means all the expenses of the portfolio excluding:
(1) taxes, (ii) portfolio brokerage commissions, (iii) interest, (iv) litigation
and indemnification expenses and other extraordinary expenses not incurred in
the ordinary course of the portfolio's business, (v) advisory fees, and (vi)
expenses for services assumed by the Adviser under the Advisory Agreement. The
Adviser shall be entitled to deduct such reimbursement from the amount of
subadviser's subadvisory fees payable pursuant to the subadvisory agreement.
<TABLE>
As compensation for their services, the Subadvisers receive fees from the
Adviser computed separately for each portfolio. The fee for each portfolio is
stated as an annual percentage of the current value of the net assets of the
portfolio. The fees are calculated on the basis of the average of all valuations
of net assets of each portfolio made at the close of business on each business
day of the Trust during the period for which such fees are paid. Once the
average net assets of a portfolio exceed specified amounts, the fee is reduced
with respect to such excess. The following is a schedule of the management fees
the Adviser currently is obligated to pay the Subadvisers out of the advisory
fee it receives from each portfolio as specified above:
<CAPTION>
BETWEEN BETWEEN
$50,000,000 $200,000,000
FIRST AND AND EXCESS OVER
PORTFOLIO $50,000,000 $200,000,000 $500,000,000 $500,000,000
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Small/Mid Cap Trust .............. .525% .500% .475% .450%
International Small Cap Trust .... .650% .600% .500% .400%
Global Equity Trust .............. .500% .450% .375% .325%
Pasadena Growth Trust ............ .550% .500% .450% .375%
Equity Trust ..................... .325% .275% .225% .150%
Growth Trust ..................... .450% .450% .350% .300%
Value Equity Trust ............... .400% .300% .200% .200%
Growth and Income Trust .......... .325% .275% .225% .150%
International Growth and
Income Trust .................... .500% .450% .400% .350%
Strategic Bond Trust ............. .350% .300% .250% .200%
Global Government Bond Trust ..... .375% .350% .300% .250%
Investment Quality Bond Trust .... .225% .225% .150% .100%
U.S. Government Securities Trust . .225% .225% .150% .100%
Money Market Trust ............... .075% .075% .075% .020%
Aggressive Asset Allocation Trust. .325% .275% .225% .150%
Moderate Asset Allocation Trust .. .325% .275% .225% .150%
Conservative Asset Allocation
Trust ........................... .325% .275% .225% .150%
<FN>
*The prospectus refers to a subadvisory consulting agreement between SBAM
and Salomon Brothers Asset Management Limited ("SBAM Limited") which is subject
to certain conditions as set forth in the prospectus. Under that agreement SBAM
Limited provides certain investment advisory services to SBAM relating to
currency transactions and investments in non-dollar denominated debt securities
for the benefit of the Strategic Bond Trust. SBAM pays SBAM Limited, as full
compensation for all services provided under the subadvisory consulting
agreement, a portion of its subadvisory fee, such amount being an amount equal
to the fee payable under SBAM's subadvisory agreement multiplied by the current
value of the net assets of the portion of the assets of the Strategic Bond Trust
that SBAM Limited has been delegated to manage divided by the current value of
the net assets of the portfolio. The Trust will not incur any expenses in
connection with SBAM Limited's services. SBAM Limited is a wholly owned
subsidiary of Salomon Brothers Europe Limited ("SBEL"). Salomon (International)
Finance A G ("SIF") owns 100% of SBEL's Convertible Redeemable Preference Shares
and 36.8% of SBEL's Ordinary Shares, while the remaining 63.2% of SBEL's
Ordinary Shares are owned by Salomon Brothers Holding Company Inc ("SBH"). SIF
is wholly owned by SBH, which is in turn, a wholly owned subsidiary of Salomon
Inc.
</TABLE>
For the years ended December 31, 1995, 1994 and 1993, the Adviser paid
aggregate subadvisory fees of $12,007,940 $9,905,072, and $6,285,555,
respectively, allocated among the portfolios as follows:
22
<PAGE> 81
<TABLE>
<CAPTION>
PORTFOLIO 1995 1994 1993
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Global Equity .................. $2,415,918 $2,192,713 $ 905,318
Pasadena Growth ................ $ 978,146 $ 558,057 $ 280,422
Equity ......................... $1,628,673 $1,166,032 $ 710,703
Value Equity ................... $ 864,812 $ 525,739 $ 148,581
Growth and Income .............. $1,267,236 $ 926,068 $ 579,977
International Growth & Income .. $ 232,320* N/A N/A
Strategic Bond ................. $ 322,077+ $ 252,633 $ 85,576
Global Government Bond ......... $ 771,716 $ 766,324 $ 427,234
Investment Quality Bond ........ $ 276,246 $ 245,447 $ 183,265
U.S. Government Securities ..... $ 442,603 $ 458,245 $ 395,910
Money Market Trust ............. $ 197,786 $ 173,760 $ 90,990
Aggressive Asset Allocation .... $ 560,019 $ 521,717 $ 474,535
Moderate Asset Allocation ...... $1,433,417 $ 456,691 $1,368,386
Conservative Asset Allocation .. $ 616,971 $ 661,646 $ 634,658
<FN>
*For the period January 9, 1995 (commencement of operations) to December 31,
1995.
+ Of this amount, $63,231 was paid by SBAM to SBAM Limited under the
Subadvisory Consulting Agreement.
</TABLE>
For the period March 4, 1996 to June 15, 1996 the Adviser paid subadvisory
fees of $53,557 to Alger for subadvisory services to the Small/Mid Cap Trust and
paid subadvisory fees of $32,265 to Founders for subadvisory services to the
International Small Cap Trust.
Subject to the expense limitations discussed above, the Trust is
responsible for the payment of all expenses of its organization, operations and
business, except those which the Adviser or Subadvisers have agreed to pay
pursuant to the Advisory or Subadvisory Agreements. Expenses borne by the Trust
include charges and expenses of the custodian, independent accountants and
transfer, bookkeeping and dividend disbursing agent appointed by the Trust;
brokers' commissions and issue and transfer taxes on securities transactions to
which the Trust is a party; taxes and fees payable by the Trust; and legal fees
and expenses in connection with the affairs of the Trust, including registering
and qualifying its shares with regulatory authorities and in connection with any
litigation.
The Advisory Agreement and each Subadvisory Agreement will continue in
effect as to a portfolio for a period no more than two years from the date of
its execution or the execution of an amendment making the agreement applicable
to that portfolio only so long as such continuance is specifically approved at
least annually either by the Trustees or by the vote of a majority of the
outstanding voting securities of the Trust, provided that in either event such
continuance shall also be approved by the vote of the majority of the Trustees
who are not interested persons of any party to the Agreements, cast in person at
a meeting called for the purpose of voting on such approval. The required
shareholder approval of any continuance of any of the Agreements shall be
effective with respect to any portfolio if a majority of the outstanding voting
securities of the series of shares of beneficial interest of that portfolio vote
to approve such continuance, notwithstanding that such continuance may not have
been approved by a majority of the outstanding voting securities of (i) any
other portfolio affected by the Agreement or (ii) all of the portfolios of the
Trust.
If the holders of any series of shares of beneficial interest of any
portfolio fail to approve any continuance of the Advisory Agreement or the
Subadvisory Agreement, the Adviser or Subadviser (including SBAM Limited) will
continue to act as investment adviser or subadviser with respect to such
portfolio pending the required approval of the continuance of such Agreement, of
a new contract with the Adviser or Subadviser or different adviser or
subadviser, or other definitive action. In the case of the Adviser, or Oechsle
International, the compensation received by the Adviser or Subadviser in respect
of such a portfolio during such period will be no more than its actual costs
incurred in furnishing investment advisory and management services to such
portfolio or the amount it would have received under the Advisory Agreement or
Subadvisory Agreement in respect of such portfolio, whichever is less. In the
case of Alger, Founders, J.P. Morgan, Wellington Management, FMTC, SBAM, GSAM or
REMC, the compensation received by it in respect of such a portfolio during such
period will be no more than that permitted by Rule 15a-4 under the Investment
Company Act of 1940. With respect to REMC, in the event the subadvisory
agreement with REMC is terminated the Adviser has agreed to take any action
necessary to cause the Trust to discontinue the use of the name "Pasadena" in
any portfolio. The Adviser has further agreed that it will use such name in
connection with any portfolio of the Trust only so long as REMC serves as the
subadviser to such portfolio.
The Advisory Agreement and the Subadvisory Agreements may be terminated at
any time without the payment of any penalty on 60 days' written notice to the
other party or parties to the Agreements, and to the Trust in the case of the
Subadvisory Agreements, (i) by the Trustees of the Trust; (ii) by the vote of a
majority of the outstanding voting securities of the Trust, or with respect to
any portfolio, by the vote of a majority of the outstanding voting securities of
the series of shares of beneficial interest of such portfolio; and (iii) by the
Adviser,
23
<PAGE> 82
and in the case of the Subadvisory Agreements, by the respective Subadvisers.
The Agreements will automatically terminate in the event of their assignment.
The Advisory Agreement may be amended by the Trust and the Adviser and the
Subadvisory Agreements by the Adviser and respective Subadvisers provided such
amendment is specifically approved by the vote of a majority of the outstanding
voting securities of the Trust and by the vote of a majority of the Trustees of
the Trust who are not interested persons of the Trust, the Adviser or the
applicable Subadviser (including SBAM Limited) cast in person at a meeting
called for the purpose of voting on such approval. The required shareholder
approval of any amendment shall be effective with respect to any portfolio if a
majority of the outstanding voting securities of that portfolio vote to approve
the amendment, notwithstanding that the amendment may not have been approved by
a majority of the outstanding voting securities of (i) any other portfolio
affected by the amendment or (ii) all the portfolios of the Trust.
AGREEMENT WITH PRIOR SUBADVISER
The Conservative, Moderate and Aggressive Asset Allocation Trusts for which
Sass Investors acted as Subadviser up until December 13, 1991, and the Bond
Trust (now Investment Quality Bond Trust) for which Sass Investors acted as
Subadviser up until April 23, 1991, acquired certain taxable revenue bonds, the
value of which has declined substantially due to the default of the bonds caused
by the Conservatorship of Executive Life Insurance Company. The Trust retained
legal counsel to advise it as to any potential claims it may have arising out of
its purchase of such bonds. On the basis of the advice received and, to avoid
any prejudice resulting from the passage of time, the Trust has sought to obtain
agreements from certain persons which would toll the running of statutes of
limitations that might in time bar the assertion of any claims related to its
purchase of the bonds. In February 1991 the Trust entered into an agreement with
Sass Investors, its principals and affiliated companies concerning any claims
the Trust may have arising out of Sass Investors' performance under the Sass
Subadvisory Agreement in connection with the purchase or sale of the
aforementioned bonds. The parties agreed that the running of time under any
statute of limitations or by way of laches with respect to any claims or
defenses arising out of such purchase or sale would be tolled until thirty days
after termination of the agreement by either party giving written notice to the
other.
PORTFOLIO BROKERAGE
Pursuant to the Subadvisory Agreements, the Subadvisers are responsible for
placing all orders for the purchase and sale of portfolio securities of the
Trust. The Subadvisers have no formula for the distribution of the Trust's
brokerage business, their intention being to place orders for the purchase and
sale of securities with the primary objective of obtaining the most favorable
overall results for the Trust. The cost of securities transactions for each
portfolio will consist primarily of brokerage commissions or dealer or
underwriter spreads. Bonds and money market instruments are generally traded on
a net basis and do not normally involve either brokerage commissions or transfer
taxes.
Occasionally, securities may be purchased directly from the issuer. For
securities traded primarily in the over-the-counter market, the Subadvisers
will, where possible, deal directly with dealers who make a market in the
securities unless better prices and execution are available elsewhere. Such
dealers usually act as principals for their own account.
In selecting brokers or dealers through whom to effect transactions, the
Subadvisers will give consideration to a number of factors, including price,
dealer spread or commission, if any, the reliability, integrity and financial
condition of the broker-dealer, size of the transaction and difficulty of
execution. Consideration of these factors by a Subadviser, either in terms of a
particular transaction or the Subadviser's overall responsibilities with respect
to the Trust and any other accounts managed by the Subadviser, could result in
the Trust paying a commission or spread on a transaction that is in excess of
the amount of commission or spread another broker-dealer might have charged for
executing the same transaction. In selecting brokers and dealers, the
Subadvisers will also give consideration to the value and quality of any
research, statistical, quotation or valuation services provided by the broker or
dealer. In placing a purchase or sale order, a Subadviser may use a broker whose
commission in effecting the transaction is higher than that of some other broker
if the Subadviser determines in good faith that the amount of the higher
commission is reasonable in relation to the value of the brokerage and research
services provided by such broker, viewed in terms of either the particular
transaction or the Subadviser's overall responsibilities with respect to the
Trust and any other accounts managed by the Subadviser. Brokerage and research
services provided by brokers and dealers include advice, either directly or
through publications or writings, as to the value of securities, the
advisability of purchasing or selling securities, the availability of securities
or purchasers or sellers of securities, and analyses and reports concerning
issuers, industries, securities, economic factors and trends and portfolio
strategy. Consistent with the foregoing considerations and the Rules of Fair
Practice of the NASD, sales of contracts for which the broker-dealer or an
affiliate thereof is responsible may be considered as a factor in the selection
of such brokers or dealers. A higher cost broker-dealer will not be selected,
however, solely on the basis of sales volume but will be selected in accordance
with the criteria set forth above.
To the extent research services are used by the Subadvisers in rendering
investment advice to the Trust, such services would tend to reduce the
Subadvisers' expenses. However, the Subadvisers do not believe that an exact
dollar value can be assigned to these services.
24
<PAGE> 83
Research services received by the Subadvisers from brokers or dealers executing
transactions for the Trust will be available also for the benefit of other
portfolios managed by the Subadvisers.
The Subadvisers manage a number of accounts other than the Trust's
portfolios. Although investment recommendations or determinations for the
Trust's portfolios will be made by the Subadvisers independently from the
investment recommendations and determinations made by them for any other
account, investments deemed appropriate for the Trust's portfolios by the
Subadvisers may also be deemed appropriate by them for other accounts, so that
the same security may be purchased or sold at or about the same time for both
the Trust's portfolios and other accounts. In such circumstances, the
Subadvisers may determine that orders for the purchase or sale of the same
security for the Trust's portfolios and one or more other accounts should be
combined, in which event the transactions will be priced and allocated in a
manner deemed by the Subadvisers to be equitable and in the best interests of
the Trust Portfolios and such other accounts. While in some instances combined
orders could adversely affect the price or volume of a security, the Trust
believes that its participation in such transactions on balance will produce
better overall results for the Trust.
<TABLE>
For the years ended December 31, 1995, 1994 and 1993, the Trust paid
brokerage commissions in connection with portfolio transactions of $6,609,957,
$5,510,656 and $2,877,317, respectively, allocated among the portfolios as
follows:
<CAPTION>
PORTFOLIO 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Equity .................... $2,684,254 $2,358,799 $1,196,630
Pasadena Growth .................. $ 388,904 $ 187,089 $ 114,811
Equity ........................... $ 861,497 $1,011,437 $ 600,555
Value Equity ..................... $ 606,918 $ 383,033 $ 181,956
Growth and Income ................ $ 697,618 $ 487,223 $ 308,818
International Growth and Income .. $ 374,962* NA NA
Aggressive Asset Allocation ...... $ 286,517 $ 280,679 $ 122,305
Moderate Asset Allocation ........ $ 604,766 $ 682,814 $ 292,232
Conservative Asset Allocation .... $ 104,521 $ 119,582 $ 60,010
<FN>
*For the period January 9, 1995 (commencement of operations) to December 31,
1995.
</TABLE>
Goldman Sachs & Co. ("Goldman"), Salomon Brothers Inc. ("Salomon"), J.P. Morgan
Securities Inc and J.P. Morgan Securities Ltd. (J.P. Morgan"), Dresdner Bank
and Fidelity Capital Markets are affiliated brokers of the Trust due to the
positions of Goldman, Salomon, J.P. Morgan, Oechsle International and FMTC
respectively, as Subadviser to Trust Portfolios.
<TABLE>
For the years ended December 31, 1995, 1994 and 1993, brokerage commissions
were paid to GOLDMAN, SACHS & CO. by the portfolios as follows:
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
% OF AGGREGATE
% OF TRUST'S BROKERAGE $ AMOUNT OF
COMMISSIONS REPRESENTED TRANSACTIONS
PORTFOLIO COMMISSIONS FOR THE PERIOD FOR THE PERIOD
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Equity .................... $ 6,951 0.26% 0.08%
Pasadena Growth .................. $24,855 6.39% 0.52%
Equity ........................... $13,799 1.60% 0.62%
Value Equity ..................... $63,836 10.52% 0.19%
Growth and Income ................ $33,000 4.73% 0.46%
International Growth and Income .. $ 6,651* 1.77% 1.05%
Agressive Asset Allocation ....... $ 7,202 2.51% 0.43%
Moderate Asset Allocaton ......... $11,975 1.98% 0.69%
Conservative Asset Allocation .... $ 2,080 1.99% 0.80%
<FN>
* For the period January 9, 1995 (commencement of operations) to December 31, 1995.
</TABLE>
25
<PAGE> 84
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
% OF AGGREGATE
% OF TRUST'S BROKERAGE $ AMOUNT OF
COMMISSIONS REPRESENTED TRANSACTIONS
PORTFOLIO COMMISSIONS FOR THE PERIOD FOR THE PERIOD
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pasadena Growth ................ $ 6,376 3.41% 5.71%
Equity ......................... $ 8,032 0.79% 0.03%
Value Equity ................... $20,741 5.41% 3.98%
Growth and Income .............. $12,612 2.59% 1.14%
Agressive Asset Allocation ..... $10,644 3.79% 0.53%
Moderate Asset Allocaton ....... $25,501 3.73% 3.21%
Conservative Asset Allocation .. $ 676 0.57% 0.08%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
% OF AGGREGATE
% OF TRUST'S BROKERAGE $ AMOUNT OF
COMMISSIONS REPRESENTED TRANSACTIONS
PORTFOLIO COMMISSIONS FOR THE PERIOD FOR THE PERIOD
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Equity ................ $15,566 1.30% 1.95%
Pasadena Growth .............. $ 4,500 3.92% 9.33%
Equity ....................... $ 5,755 0.96% 1.71%
Value Equity ................. $27,565 15.15% 16.68%
Growth and Income ............ $ 9,480 3.07% 3.73%
</TABLE>
<TABLE>
For the years ended December 31, 1995, 1994 and 1993, brokerage commissions
were paid to SALOMON BROTHERS INC by the portfolios as follows:
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
% OF AGGREGATE
% OF TRUST'S BROKERAGE $ AMOUNT OF
COMMISSIONS REPRESENTED TRANSACTIONS
PORTFOLIO COMMISSIONS FOR THE PERIOD FOR THE PERIOD
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Equity .................. $ 34,352 1.28% 0.19%
Pasadena ....................... $ 16,380 4.21% 0.26%
Equity ......................... $ 13,968 1.62% 0.14%
Value Equity ................... $ 35,568 5.86% 0.14%
Growth and Income .............. $128,844 18.47% 1.45%
Aggressive Asset Allocation .... $ 3,072 1.07% 0.88%
Moderate Asset Allocation ...... $ 3,967 0.66% 1.42%
Conservative Asset Allocaton ... $ 999 0.96% 1.87%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
% OF AGGREGATE
% OF TRUST'S BROKERAGE $ AMOUNT OF
COMMISSIONS REPRESENTED TRANSACTIONS
PORTFOLIO COMMISSIONS FOR THE PERIOD FOR THE PERIOD
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Equity ................. $17,818 0.76% 0.43%
Pasadena ...................... $ 4,200 2.24% 2.08%
Equity ........................ $24,110 2.38% 2.59%
Value Equity .................. $17,052 4.45% 4.09%
Growth and Income ............. $46,848 9.62% 3.08%
Aggressive Asset Allocation ... $ 1,063 0.38% 4.74%
Moderate Asset Allocation ..... $ 2,641 0.39% 6.03%
Conservative Asset Allocaton .. $ 607 0.51% 2.07%
</TABLE>
26
<PAGE> 85
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
% OF AGGREGATE
% OF TRUST'S BROKERAGE $ AMOUNT OF
COMMISSIONS REPRESENTED TRANSACTIONS
PORTFOLIO COMMISSIONS FOR THE PERIOD FOR THE PERIOD
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Equity .................... $14,144 1.18% 0.71%
Equity ........................... $15,426 2.57% 1.58%
Value Equity ..................... $ 8,748 4.81% 3.34%
Growth and Income ................ $23,534 7.62% 6.93%
</TABLE>
<TABLE>
For the year ended December 31, 1995, brokerage commissions were paid to J.P.
Morgan Securities by the portfolios as follows:
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
% OF AGGREGATE
% OF TRUST'S BROKERAGE $ AMOUNT OF
COMMISSIONS REPRESENTED TRANSACTIONS
PORTFOLIO COMMISSIONS FOR THE PERIOD FOR THE PERIOD
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Equity .................... $15,349 0.57% 0.90%
Pasadena ......................... $ 2,482 0.64% 0.03%
Equity ........................... $ 8,890 1.03% 0.06%
Value Equity ..................... $40,124 6.61% 0.20%
Growth and Income ................ $12,798 1.83% 0.30%
International Growth and Income .. $ 554* 0.15% 0.41%
Aggressive Asset Allocation ...... $ 721 0.25% 0.24%
Moderate Asset Allocation ........ $ 1,680 0.28% 0.31%
Conservative Asset Allocaton ..... $ 397 0.38% 0.14%
<FN>
*For the period January 9, 1995 (commencement of operations) to December 31, 1995.
</TABLE>
<TABLE>
For the year ended December 31, 1995, brokerage commissions were paid to
Dresdner Bank by the portfolios as follows:
<CAPTION>
% OF AGGREGATE
% OF TRUST'S BROKERAGE $ AMOUNT OF
COMMISSIONS REPRESENTED TRANSACTIONS
PORTFOLIO COMMISSIONS FOR THE PERIOD FOR THE PERIOD
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity ........................... $277 0.03% 0.00%
International Growth & Income .... 408* 0.11% 0.04%
<FN>
*For the period January 9, 1995 (commencement of operations) to December 31, 1995.
</TABLE>
<TABLE>
For the year ended December 31, 1995, brokerage commissions were paid to
Fidelity Capital Markets by the portfolios as follows:
<CAPTION>
% OF AGGREGATE
% OF TRUST'S BROKERAGE $ AMOUNT OF
COMMISSIONS REPRESENTED TRANSACTIONS
PORTFOLIO COMMISSIONS FOR THE PERIOD FOR THE PERIOD
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Equity .................... $31,110 1.16% 0.77%
International Growth & Income .... 197* 0.05% 0.15%
Aggressive Asset Allocation ...... 3,240 1.13% 0.08%
Moderate Asset Allocation ........ 8,815 1.46% 0.07%
Conservative Asset Allocation .... 1,920 1.84% 0.05%
<FN>
*For the period January 9, 1995 (commencement of operations) to December 31, 1995.
</TABLE>
27
<PAGE> 86
PURCHASE AND REDEMPTION OF SHARES
The Trust will redeem all full and fractional portfolio shares for cash at
the net asset value per share of each portfolio. Payment for shares redeemed
will generally be made within seven days after receipt of a proper notice of
redemption. However, the Trust may suspend the right of redemption or postpone
the date of payment beyond seven days during any period when (a) trading on the
New York Stock Exchange is restricted, as determined by the Securities and
Exchange Commission, or such Exchange is closed for other than weekends and
holidays; (b) an emergency exists, as determined by the Commission, as a result
of which disposal by the Trust of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Trust fairly to
determine the value of its net assets; or (c) the Commission by order so permits
for the protection of security holders of the Trust.
DETERMINATION OF NET ASSET VALUE
The following supplements the discussion of the valuation of portfolio
assets set forth in the Prospectus under the caption "Purchase and Redemption of
Shares."
Securities held by the portfolios except for debt instruments with
remaining maturities of 60 days or less and all debt instruments held by the
Money Market Trust will be valued as follows: securities which are traded on
stock exchanges (including securities traded in both the over-the-counter market
and on an exchange) are valued at the last sales price as of the close of the
regularly scheduled trading of the New York Stock Exchange on the day the
securities are being valued, or, lacking any sales, at the closing bid prices.
Securities traded only in the over-the-counter market are valued at the last bid
prices quoted by brokers that make markets in the securities at the close of
trading on the New York Stock Exchange. Securities and assets for which market
quotations are not readily available are valued at fair value as determined in
good faith by or under the direction of the Trustees.
Generally, trading in non-U.S. securities, as well as U.S. Government
securities and money market instruments, is substantially completed each day at
various times prior to the close of the regularly scheduled trading of the New
York Stock Exchange. The values of such securities used in computing the net
asset value of a portfolio's shares are generally determined as of such times.
Occasionally, events which affect the values of such securities may occur
between the times at which they are generally determined and the close of the
New York Stock Exchange and would therefore not be reflected in the computation
of a portfolio's net asset value. If events materially affecting the value of
such securities occur during such period, then these securities will be valued
at their fair value as determined in good faith by the Subadvisers under
procedures established and regularly reviewed by the Trustees.
Debt instruments with a remaining maturity of 60 days or less held by each
of the portfolios other than the Money Market Trust, and all instruments held by
the Money Market Trust, will be valued on an amortized cost basis. Under this
method of valuation, the instrument is initially valued at cost (or in the case
of instruments initially valued at market value, at the market value on the day
before its remaining maturity is such that it qualifies for amortized cost
valuation); thereafter, the Trust assumes a constant proportionate amortization
in value until maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument. While this
method provides certainty in valuation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price that
would be received upon sale of the instrument.
The Money Market Trust uses the amortized cost valuation method in reliance
upon Rule 2a-7 under the Investment Company Act of 1940. As required by the
Rule, the Money Market Trust will maintain a dollar weighted average maturity of
90 days or less. In addition, the Money Market Trust is permitted to purchase
only securities that the Trustees determine to present minimal credit risks and
which are at the time of purchase "eligible securities," as defined by the Rule.
Generally, eligible securities must be rated by a nationally recognized
statistical rating organization in one of the two highest rating categories for
short-term debt obligations or be of comparable quality. The Money Market Trust
will invest only in obligations that have remaining maturities of thirteen
months or less.
The Trustees have established procedures designed to stabilize, to the
extent reasonably possible, the Money Market Trust's price per share as computed
for the purpose of sales and redemptions at $10.00. Such procedures include a
direction to the Adviser to establish procedures which will allow for the
monitoring of the propriety of the continued use of amortized cost valuation to
maintain a constant net asset value of $10.00 per share. Such procedures include
a directive to the Adviser that requires that on determining net asset value per
share based upon available market quotations, the Money Market Trust shall value
weekly (a) all portfolio instruments for which market quotations are readily
available at market, and (b) all portfolio instruments for which market
quotations are not readily available or are not obtainable from a pricing
service, at their fair value as determined in good faith by the Trustees,
although the actual calculations may be made by persons acting pursuant to the
direction of the Trustees. If the fair value of a security needs to be
determined, the Subadviser will provide determinations, in accordance with
procedures and methods established by the Trustees of the Trust, of the fair
value of securities held by the Money Market Trust for which market quotations
are not readily available for purposes of enabling the Money Market Trust's
Custodian to calculate net asset value. The Adviser, with the Subadviser's
assistance, periodically (but no less frequently than annually) shall prepare a
28
<PAGE> 87
written report to the Trustees verifying the accuracy of the pricing system or
estimate. A non-negotiable security which is not treated as an illiquid security
because it may be redeemed with the issuer, subject to a penalty for early
redemption, shall be assigned a value that takes into account the reduced amount
that would be received if it were currently liquidated. In the event that the
deviation from the amortized cost exceeds .50 of 1% or more or a difference of
$.05 per share in net asset value, the Adviser shall promptly call a special
meeting of the Trustees to determine what, if any, action should be initiated.
Where the Trustees believe the extent of any deviation from the Money Market
Trust's amortized cost price per share may result in material dilution or other
unfair results to investors or existing shareholders, they shall take such
action as they deem appropriate to eliminate or reduce to the extent reasonably
practical such dilution or unfair results. The actions that may be taken by the
Trustees include, but are not limited to: (a) redeeming shares in kind; (b)
selling portfolio instruments prior to maturity to realize capital gains or
losses or to shorten the average portfolio maturity of the Money Market Trust;
(c) withholding or reducing dividends;(d) utilizing a net asset value per share
based on available market quotations; (e)investing all cash in instruments with
a maturity on the next business day. The Money Market Trust may also reduce the
number of shares outstanding by redeeming proportionately from shareholders,
without the payment of any monetary compensation, such number of full and
fractional shares as is necessary to maintain the net asset value at $10.00 per
share. Any such redemption will be treated as a negative dividend for purposes
of the Net Investment Factor under the contracts issued by North American
Security Life Insurance Company.
PERFORMANCE DATA
Each of the portfolios may quote total return figures in its advertising
and sales materials. Such figures will always include the average annual total
return for recent one year and, when applicable, five and ten year periods and
where less than five or ten years, the period since the portfolio, including its
predecessor prior to the reorganization of the Fund on December 31, 1988, became
available for investment. Where the period since inception is less than one
year, the total return quoted will be the aggregate return for the period. The
average annual total return is the average annual compounded rate of return that
equates the initial amount invested to the market value of such investment on
the last day of the period for which such return is calculated. For purposes of
the calculation it is assumed that an initial payment of $1,000 is made on the
first day of the period for which the return is calculated and that all
dividends and distributions are reinvested at the net asset value on the
reinvestment dates during the period. All recurring fees such as advisory fees
charged to the Trust and all Trust expenses are reflected in the calculations.
There are no non-recurring fees such as sales loads, surrender charges or
account fees charged by the Trust. If the period since inception is less than
one year, the figures will be based on an aggregate total return rather than an
average annual total return. Because the Investment Quality Bond Trust changed
its investment objective and investment subadviser effective April 23, 1991, the
Trust has elected to quote performance for that portfolio only since the date of
the change in order to quote returns representative of its current objectives
and/or produced by its current portfolio manager. For the same reasons, the
Trust may elect to quote performance for the Equity, U.S. Government Securities,
Money Market, and the three Asset Allocation Trusts only since December 13, 1991
when such portfolios changed portfolio managers.
29
<PAGE> 88
<TABLE>
TOTAL ANNUALIZED RETURN
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Trust One Year Ended Five Years Ended Since Inception or 10 Date first Available
12/31/95 12/31/95 Years, whichever is shorter
through 12/31/95
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Global Equity 7.68% 10.27% 8.07% 03/18/88
Pasadena Growth 26.53% N/A 4.70% 12/11/92
Equity 42.79% 16.03% 13.73%** 06/18/85
Value Equity 23.69% N/A 12.75% 02/19/93
Growth and Income 29.20% N/A 13.06% 04/23/91
International Growth
and Income 6.98%* N/A N/A 01/9/95
Strategic Bond 19.22% N/A 7.17% 02/19/93
Global Government Bond 23.18% 10.36% 9.13% 03/18/88
Investment Quality Bond 19.49% N/A 9.46% 04/23/91
U.S. Government
Securities 15.57% 8.26% 8.54% 05/01/89
Money Market 5.62% 4.23% 5.60%** 06/18/85
Cons. Asset Allocation 18.07% 10.01% 7.25% 08/03/89
Mod. Asset Allocation 20.68% 11.40% 7.75% 08/03/89
Aggr. Asset Allocation 22.77% 12.35% 8.02% 08/03/89
Small/Mid Cap 7.52%*** N/A N/A 03/04/96
International Small Cap 5.84%*** N/A N/A 03/04/96
- -------------------------------------------------------------------------------------------------------------------------
<FN>
* Aggregate total return from January 9, 1995 (inception date).
** 10 Years
***Aggregate total return from March 4, 1996 (inception date) to June 15, 1996 (unaudited).
</TABLE>
The Trust may also from time to time include in advertising and sales
literature the following: 1) information regarding its portfolio subadvisers,
such as information regarding a subadvisers specific investment expertise,
client base, assets under management or other relevant information; 2)
quotations about the Trust, its portfolios or its investment subadvisers that
appear in various publications and media; and 3) general discussions of economic
theories, including but not limited to discussions of how demographics and
political trends may effect future financial markets, as well as market or other
relevant information.
ORGANIZATION OF THE TRUST
SHARES OF THE TRUST
The Declaration of Trust authorizes the Trustees of the Trust to issue an
unlimited number of full and fractional shares of beneficial interest having a
par value of $.01 per share, to divide such shares into an unlimited number of
series of shares and to designate the relative rights and preferences thereof,
all without shareholder approval. The Trust currently has seventeen series of
shares: the Small/Mid Cap, the International Small Cap, the Global Equity Trust,
the Pasadena Growth Trust, the Growth Trust, the Equity Trust, the Value Equity
Trust, the Growth and Income Trust, the International Growth and Income Trust,
the Strategic Bond Trust, the Global Government Bond Trust, the Investment
Quality Bond Trust, the Money Market Trust, the U.S. Government Securities
Trust, the Conservative Asset Allocation Trust, the Moderate Asset Allocation
Trust and the Aggressive Asset Allocation Trust. The shares of each portfolio,
when issued and paid for, will be fully paid and non-assessable and will have no
preemptive or conversion rights. Holders of shares of any portfolio are entitled
to
30
<PAGE> 89
redeem their shares as set forth under "Purchase and Redemption of Shares."
The Trust reserves the right to later issue additional series of shares or
separate classes of existing series of shares without the consent of outstanding
shareholders.
Each issued and outstanding share is entitled to participate equally in
dividends and distributions declared by the respective portfolio and upon
liquidation in the net assets of such portfolio remaining after satisfaction of
outstanding liabilities. For these purposes and for purposes of determining
the sale and redemption prices of shares, any assets which are not clearly
allocable to a particular portfolio will be allocated in the manner determined
by the Trustees. Accrued liabilities which are not clearly allocable to one or
more portfolios will also be allocated among the portfolios in the manner
determined by the Trustees.
Shareholders of each portfolio of the Trust are entitled to one vote for
each full share held (and fractional votes for fractional shares held)
irrespective of the relative net asset values of the shares of the portfolio.
All shares entitled to vote are voted by series, except that when voting for the
election of Trustees and when otherwise permitted by the Investment Company Act
of 1940, shares are voted in the aggregate and not by series. Only shares of a
particular portfolio are entitled to vote on matters determined by the Trustees
to affect only the interests of that portfolio. Pursuant to the Investment
Company Act of 1940 and the rules and regulations thereunder, certain matters
approved by a vote of a majority of all the shareholders of the Trust may not be
binding on a portfolio whose shareholders have not approved such matter. There
will normally be no meetings of shareholders for the purpose of electing
Trustees unless and until less than a majority of the Trustees holding office
has been elected by shareholders, at which time the Trustees then in office will
call a shareholders' meeting for the election of Trustees. Holders of not less
than two-thirds of the outstanding shares of the Trust may remove a Trustee by a
vote cast in person or by proxy at a meeting called for such purpose. Shares of
the Trust do not have cumulative voting rights, which means that the holders of
more than 50% of the Trust's shares voting for the election of Trustees can
elect all of the Trustees if they so choose. In such event, the holders of the
remaining shares would not be able to elect any Trustees. Shares held in
Security Life's registered separate account are voted in accordance with
instructions from variable contract owners.
Under Massachusetts law, shareholders of the Trust could, under certain
circumstances, be held personally liable for the obligations of the Trust. The
Declaration of Trust contains an express disclaimer of shareholder liability for
acts or obligations of the Trust and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by
the Trustees or any officer of the Trust. The Declaration of Trust provides for
indemnification out of the property of a Trust portfolio for all losses and
expenses of any shareholder held personally liable for the obligations of such
portfolio. The Declaration of Trust also provides that the Trust shall, upon
request, assume the defense of any claim made against any shareholder for any
act or obligation of the Trust and satisfy any judgment thereon, but only out of
the property of a particular portfolio. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which a particular portfolio would be unable to meet its
obligations.
PRINCIPAL HOLDERS OF SECURITIES
Security Life, a Delaware corporation and a wholly-owned subsidiary of
North American Life, provided the initial capital for the Fund, the Trust's
corporate predecessor, by purchasing for its general account 100,000 shares of
the Equity Portfolio, 100,000 shares of the Bond Portfolio and 100,000 shares of
the Money Market Portfolio, each at a price of $10.00 per share. On March 20,
1987, North American Life purchased all of Security Life's shares from Security
Life at a price equal to the net asset value of the shares at the close of
business on March 20, 1987. On December 23, 1987, the Fund redeemed all of the
shares of the Equity and Bond Portfolios owned by North American Life. On
February 12, 1988 North American Life provided the initial capital to the Global
Equity, Global Government Bond and Convertible Securities Portfolios (now the
U.S. Government Securities Trust) by purchasing 25,000 shares of each such
portfolio at a price of $10.00 per share. On April 1, 1991 Security Life
provided the initial capital to the Growth and Income Trust by purchasing 10,000
shares at the price of $10.00 per share. On January 6, 1995 and January 9, 1995,
Security Life provided the initial capital to the International Growth and
Income Trust by purchasing one share and 500,000 shares, respectively, at 10.00
per share. On March 1, 1996, Security Life purchased one share of the Small/Mid
Cap Trust and one share of the International Small Cap Trust at $12.50 per
share. On March 4, 1996, Security Life provided the initial capital for the
Small/Mid Cap and the International Small Cap Trusts by purchasing 80,000 shares
of each Trust at $12.50 per share. On July 12, 1996 Security Life provided the
initial capital for the Growth Trust by purchasing one share of the Growth Trust
at $10.00 per share.
The Trust currently has three shareholders: The Manufacturers Life
Insurance Company of America ("Manulife America"), Security Life and First North
American Life Assurance Company ("FNAL"). Each shareholder holds Trust shares
attributable to variable and variable life contracts in their separate accounts
registered under the Investment Company Act of 1940. Each shareholder will
solicit voting instructions from such variable and variable life contract owners
and vote all shares held in proportion to the instructions received.
Reflecting the conditions of section 817(h) and other provisions of the
Internal Revenue Code and regulations thereunder, the By-laws of the Trust
provide that shares of the Trust may be purchased only by the following eligible
shareholders: (a) separate accounts of Security Life or of other insurance
companies; (b) Security Life; (c) NASL Financial; (d) any corporation related in
a manner specified in section 267(b) of the Internal Revenue Code to Security
Life or to NASL Financial, including North American Life; and (e) any Trustee of
a
31
<PAGE> 90
qualified pension of retirement plan. As a matter of operating policy, shares of
the Trust may be purchased only by the eligible shareholders of categories (a),
(b) and (d).
REPORTS TO SHAREHOLDERS
Annual and semi-annual reports containing financial statements of the Trust
will be sent to contract owners.
INDEPENDENT ACCOUNTANTS
The audited financial statements of the Trust at December 31, 1995 included
in this Statement of Additional Information and the Supplementary Information
for the period from the commencement of operations of the Trust's corporate
predecessor through December 31, 1995 included in the Prospectus have been
audited by Coopers & Lybrand L.L.P., independent public accountants, as
indicated in their report in this Statement of Additional Information and are
included herein in reliance upon such report and upon the authority of such firm
as experts in accounting and auditing.
LEGAL COUNSEL
Messrs. Jones & Blouch L.L.P., 1025 Thomas Jefferson Street, N.W., N.W.,
Washington, DC 20007, have passed upon certain legal matters relating to the
federal securities laws.
32
<PAGE> 91
NASL SERIES TRUST
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES - JUNE 15, 1996 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------
<CAPTION>
INTERNATIONAL
SMALL/MID SMALL CAP
ASSETS CAP TRUST TRUST
----------- -------------
<S> <C> <C>
Investments in securities, at value* (Includes
a repurchase agreement of $11,080,000 in the
International Small Cap Trust)(See accompanying
portfolio of investments)................................ $84,876,762 $40,539,755
Forward foreign currency contracts to buy, at value
(Cost: $441,234) (Notes 2 and 7)......................... ----- 442,160
Cash....................................................... ----- 216
Foreign currency (Cost: $40,492)........................... ----- 40,694
Receivables:
Investments sold..................................... 964,869 -----
Dividends............................................ 17,809 36,782
Interest............................................. 8,778 1,462
Foreign tax withholding reclaim...................... ----- 4,583
Other assets......................................... 101 55
----------- -----------
Total assets................................... 85,868,319 41,065,707
----------- -----------
LIABILITIES
Payables:
Forward foreign currency contracts to buy
(Notes 2 and 7).................................... ----- 441,234
Investments purchased................................ 3,859,484 1,040,597
Dividend and interest withholding tax................ 408 6,556
Investment adviser................................... 29,648 14,903
Custodian fee........................................ 9,400 4,337
Other accrued expenses............................... 50 116
----------- -----------
Total liabilities.............................. 3,898,990 1,507,743
----------- -----------
NET ASSETS................................................. $81,969,329 $39,557,964
=========== ===========
Net assets consist of:
Accumulated undistributed net investment
income (Note 2)................................... $46,044 $100,519
Accumulated undistributed net realized gain
(loss) on investments.............................. (1,074,068) 114,337
Unrealized appreciation (depreciation) on:
Investments........................................ 1,895,823 945,664
Foreign currency and forward foreign currency
contracts........................................ ----- (456)
Capital shares at par value of $.01 (Note 3)......... 60,997 29,903
Additional paid-in capital........................... 81,040,533 38,367,997
----------- -----------
Net assets..................................... $81,969,329 $39,557,964
=========== ===========
6,099,680 2,990,316
Capital shares outstanding (Note 3)........................ ----------- -----------
Net asset value, offering price and redemption price
per share............................................ $ 13.44 $ 13.23
=========== ===========
Investments in securities, at identified cost (Note 2)..... $82,980,939 $39,594,091
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
1
<PAGE> 92
NASL SERIES TRUST
<TABLE>
STATEMENTS OF OPERATIONS - FOR THE PERIOD ENDED JUNE 15, 1996 (UNAUDITED)
- -----------------------------------------------------------------------------------------------------
<CAPTION>
INTERNATIONAL
SMALL/MID SMALL CAP
Investment Income: CAP TRUST * TRUST *
----------- -------------
<S> <C> <C>
Interest.............................................. $ 145,207 $ 93,674
Dividends (Net of $408 and $14,265 withholding
tax in the Small/Mid Cap and International Small
Cap Trusts, respectively)........................... 22,754 80,860
Total income................................... 167,961 174,534
--------- ----------
Expenses:
Investment advisor fee (Note 5)....................... 102,833 54,604
Custodian fee......................................... 18,462 18,896
Trustee fees and expenses ............................ 97 63
Registration and filing fees.......................... 88 56
Audit and legal fees.................................. 393 258
Miscellaneous......................................... 44 138
--------- ----------
Total expenses................................. 121,917 74,015
--------- ----------
Net investment income ......................... 46,044 100,519
--------- ----------
Realized and unrealized gain (loss) on investments and foreign currency:
Net realized gain (loss) on:
Investment transactions............................. (1,074,068) 134,240
Foreign currency and forward foreign
currency contracts................................ ----- (19,903)
Change in unrealized appreciation (depreciation) on:
Investments......................................... 1,895,823 945,664
Translation of foreign currency and forward
foreign currency contracts........................ ----- (456)
Net gain on investments and
foreign currency............................. 821,755 1,059,545
--------- ----------
Net increase in net assets
resulting from operations................................ $ 867,799 $1,160,064
========= ==========
<FN>
* For the period March 4, 1996 (commencement of operations) to June 15, 1996.
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE> 93
NASL SERIES TRUST
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<CAPTION>
SMALL/MID INTERNATIONAL SMALL
CAP TRUST CAP TRUST
----------- -------------------
03/04/96* 03/04/96*
TO TO
Increase in net assets: 06/15/96 06/15/96
(UNAUDITED) (UNAUDITED)
----------- -------------------
<S> <C> <C>
Operations:
Net investment income ................ $ 46,044 $ 100,519
Net realized gain (loss) on:
Investment transactions ............ (1,074,068) 134,240
Foreign currency and forward foreign
currency contracts ............... -- (19,903)
Change in unrealized appreciation
(depreciation) on:
Investments ........................ 1,895,823 945,664
Foreign currency and forward foreign
currency contracts ............... -- (456)
----------- -----------
Net increase in net assets
resulting from operations ............. 867,799 1,160,064
Increase in net assets from
capital share transactions (Note 3) ... 81,101,530 38,397,900
----------- -----------
Increase in net assets .................. 81,969,329 39,557,964
Net assets at beginning of period ....... -- --
----------- -----------
Net assets at end of period ............. $81,969,329 $39,557,964
=========== ===========
Accumulated undistributed net
investment income ..................... $ 469,044 $ 100,519
=========== ===========
<FN>
- --------------------------------
* Commencement of operations
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 94
NASL SERIES TRUST
<TABLE>
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- -----------------------------------------------------------------------------------------
<CAPTION>
SMALL/MID CAP
TRUST
-------------
03/04/96*
TO
06/15/96
(UNAUDITED)
-------------
<S> <C>
Net asset value, beginning of period............... $ 12.50
Income from investment operations:
- ---------------------------------
Net investment income.............................. 0.01
Net realized and unrealized gain on investments.... 0.93
-------
Total from investment
operations............................. 0.94
Net asset value, end of period..................... $ 13.44
=======
Total return............................. 7.52%
Net assets, end of period (000's)................. $81,969
Ratio of operating expenses to
average net assets .............................. 1.19%(A)
Ratio of net investment income to
average net assets............................... .45%(A)
Portfolio turnover rate............................ 48%(A)
Average commission rate per share (B).............. $ 0.069
<FN>
- -----------------------------
* Commencement of operations.
(A) Annualized
(B) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged. In certain foreign markets the
relationship between the translated U.S. dollar price per share and
commission paid per share may vary from that of domestic markets.
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 95
NASL SERIES TRUST
<TABLE>
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- -----------------------------------------------------------------------------------------
<CAPTION>
INTERNATIONAL
SMALL CAP
-------------
03/04/96*
TO
06/15/96
(UNAUDITED)
-------------
<S> <C>
Net asset value, beginning of period............... $ 12.50
Income from investment operations:
- ---------------------------------
Net investment income ............................. 0.03
Net realized and unrealized gain on investments
and foreign currency transactions................ 0.70
-------
Total from investment
operations............................. 0.73
Net asset value, end of period..................... $ 13.23
=======
Total return............................. 5.84%
Net assets, end of period (000's)................. $39,558
Ratio of operating expenses to
average net assets............................... 1.50%(A)
Ratio of net investment income to
average net assets............................... 2.03%(A)
Portfolio turnover rate............................ 16%(A)
Average commission rate per share (B).............. $ 0.019
<FN>
- -----------------------------
* Commencement of operations.
(A) Annualized
(B) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share of all security
trades on which commissions are charged. In certain foreign markets the
relationship between the translated U.S. dollar price per share and
commission paid per share may vary from that of domestic markets.
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 96
NASL SERIES TRUST
<TABLE>
PORTFOLIO OF INVESTMENTS - JUNE 15, 1996 - UNAUDITED (SHOWING PERCENTAGE OF
TOTAL VALUE OF INVESTMENTS)
- ---------------------------------------------------------------------------
<CAPTION>
SMALL/MID CAP TRUST
Shares Value
------ -----
<S> <C> <C>
COMMON STOCKS - 84.70%
AGRICULTURAL MACHINERY - 0.91%
Delta & Pine Land Company 18,500 $ 770,062
-----------
ALUMINUM - 0.34%
Reynolds Metals Company* 5,400 287,550
-----------
APPAREL & TEXTILES - 4.17%
Cintas Corporation 9,000 488,250
G & K Services, Class A 30,500 884,500
Gucci Group NV* 20,000 1,415,000
Tommy Hilfiger Corporation* 14,000 752,500
-----------
3,540,250
BROADCASTING - 2.39%
Chancellor Broadcasting
Company, Class A* 9,000 245,250
Clear Channel Communications* 6,000 513,000
Evergreen Media, Class A* 4,000 169,000
Young Broadcasting, Incorporated, Class A 29,000 1,102,000
-----------
2,029,250
BUSINESS SERVICES - 5.65%
Caribiner International, Incorporated 3,000 110,250
The Gymboree Corporation* 34,700 1,153,775
Loewen Group, Incorporated 38,900 1,125,669
Service Corporation International 28,900 1,712,325
Steris Corporation* 20,100 690,937
-----------
4,792,956
CHEMICALS - 0.87%
NPS Pharmaceuticals, Incorporated 14,000 203,000
Waters Corporation* 19,000 534,375
-----------
737,375
COMPUTERS & BUSINESS EQUIPMENT - 6.14%
3Com Corporation* 34,300 1,612,100
Bay Networks, Incorporated 7,300 198,013
Cisco Systems, Incorporated 26,000 1,436,500
Individual, Incorporated 10,000 161,250
Seagate Technology* 6,000 288,000
Sundstrand Corpration 42,500 1,514,063
-----------
5,209,926
DRUGS & HEALTH CARE - 12.50%
American Oncology Resources,
Incorporated* 45,000 1,001,250
BioChem Pharma, Incorporated* 28,000 1,228,500
Biopsys Medical, Incorporated 38,000 950,000
CNS, Incorporated* 15,000 354,375
Conceptus, Incorporated* 21,600 399,600
Cygnus, Incorporated 10,000 186,250
Cytotherapeutics* 2,000 24,000
Fuisz Technologies, Ltd.* 25,000 543,750
Genzyme Corporation* 22,000 255,750
Guidant Corporation 7,000 381,500
Healthsource, Incorporated* 19,200 391,200
<CAPTION>
Shares Value
------ -----
DRUGS & HEALTH CARE - CONTINUED
IDEC Pharmaceuticals Corporation 31,500 $ 783,563
IDEXX Laboratories, Incorporated* 9,000 398,250
Imagyn Medical, Incorporated* 47,500 659,062
INCYTE Pharmacuticals, Incorporated 1,000 38,000
Neuromedical Systems, Incorporated 54,000 945,000
Oxford Health Plans, Incorporated* 9,400 405,375
Phycor, Incorporated* 10,000 585,000
United Healthcare Corporation 15,000 783,750
VISX, Incorporated* 8,600 296,700
----------
10,610,875
ELECTRICAL EQUIPMENT - 1.67%
Cable Design Technologies Corporation 33,000 1,414,875
-----------
ELECTRONICS - 8.70%
Adaptec, Incorporated* 13,900 696,737
Altera Corporation* 15,100 651,188
Glenayre Technologies, Incorporated* 28,000 1,375,500
Hologic, Incorporated* 19,800 905,850
Linear Technology Corporation 5,500 176,000
Maxim Integrated Products,
Incorporated* 20,600 618,000
Spectran Corporation 37,800 807,975
Target Therapeutics, Incorporated 10,000 481,250
Xilinx, Incorporated* 50,000 1,668,750
-----------
7,381,250
FINANCIAL SERVICES - 3.07%
Case Corporation 11,200 533,400
Green Tree Financial Corporation 33,800 1,047,800
Money Store, Incorporated 41,900 1,021,312
-----------
2,602,512
FOOD & BEVERAGES - 0.83%
DEKALB Genetics Corporation, Class B 10,000 296,250
Outback Steakhouse, Incorporated* 11,600 411,800
-----------
708,050
HOTELS AND RESTAURANTS - 5.22%
Boston Chicken, Incorporated* 53,000 1,768,875
Lone Star Steakhouse and
Saloon, Incorporated* 53,100 2,157,188
Mirage Resorts, Incorporated* 9,000 500,625
-----------
4,426,688
HOUSEHOLD APPLIANCES FURNISHING - 0.79%
Odetics, Incoporated, Class A 46,700 671,313
-----------
INSURANCE - 0.17%
CompDent Corporation* 3,000 148,500
-----------
INVESTMENT COMPANIES - 1.72%
The Charles Schwab Corporation 59,000 1,460,250
-----------
LEISURE TIME - 0.25%
Sports Authority, Incorporated 6,800 214,200
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE> 97
NASL SERIES TRUST
<TABLE>
PORTFOLIO OF INVESTMENTS - JUNE 15, 1996 - UNAUDITED - CONTINUED (SHOWING
PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- -------------------------------------------------------------------------
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
MEDICAL SUPPLIES - 1.08%
Heartport, Incorporated* 23,000 $ 914,250
-----------
METAL & METAL PRODUCTS - 1.06%
Titanium Metals Corporation 36,000 900,000
-----------
MOBILE HOMES - 0.55%
Clayton Homes, Incorporated 23,500 467,062
-----------
OFFICE FURNISHINGS & SUPPLIES - 2.96%
OfficeMax, Incorporated* 71,300 1,639,900
Viking Office Products, Incorporated* 28,000 871,500
-----------
2,511,400
PETROLEUM SERVICES - 1.01%
Halliburton Company 17,000 860,625
-----------
PLASTICS - 0.89%
Sealed Air Corporation* 21,600 758,700
-----------
POLLUTION CONTROL - 2.22%
United Waste System, Incorporated* 18,000 1,062,000
USA Waste Services, Incorporated* 26,000 822,250
-----------
1,884,250
RETAIL TRADE - 5.32%
Charming Shoppes, Incorporated* 110,000 749,375
Gap, Incorporated 30,000 1,001,250
Nautica Enterprises, Incorporated 20,000 470,000
Nine West Group, Incorporated 20,000 980,000
Nordstrom, Incorporated 11,000 528,000
TJX Companies, Incorporated 22,100 787,312
-----------
4,515,937
SOFTWARE - 7.02%
Business Objects SA, ADR 15,000 525,000
Compuware Corporation* 39,000 1,542,938
IMNET Systems, Incorporated 18,000 531,000
Inference Corporation, Class A* 15,000 354,375
Informix Corporation* 85,900 1,932,750
Microchip Technology, Incorporated* 800 17,600
PeopleSoft, Incorporated 15,000 1,053,750
-----------
5,957,413
TELECOMMUNICATION SERVICES - 3.10%
Ascend Communications, Incorporated* 14,500 868,187
Cascade Communications Corporation* 16,000 972,000
MFS Communications, Incorporated 21,600 793,800
-----------
2,633,987
TELEPHONE - 3.27%
LCI International, Incorporated* 27,400 835,700
Worldcom, Incorporated* 37,600 1,936,400
-----------
2,772,100
TUCKING & FREIGHT FORWARDING - 0.83%
Tidewater, Incorporated 18,500 705,313
-----------
TOTAL COMMON STOCKS
(Cost $69,991,096) $71,886,919
-----------
Shares Value
------ -----
SHORT TERM INVESTMENTS - 15.30%
JMG Funding, Ltd.
5.32% due 06/18/96 3,000,000 $ 2,998,670
Merrill Lynch & Company, Incorporated
5.31% due 06/18/96 1,300,000 1,299,425
Toshiba America, Incorporated 3,731,000 3,729,346
5.32% due 06/18/96
Seven Seas Money Market Fund 4,962,402 4,962,402
-----------
12,989,843
TOTAL INVESTMENTS
(Small/Mid Cap Trust) (Cost $82,980,939) $84,876,762
===========
INTERNATIONAL SMALL CAP TRUST
Shares Value
------ -----
COMMON STOCKS- 71.14%
AGRICULTURAL MACHINERY - 1.03%
Kverneland AS 18,000 $ 415,940
-----------
ALUMINUM - 1.43%
Madeco SA, ADR 18,900 578,813
-----------
AUTOMOBILES - 1.93%
Mabuchi Motor Company 12,500 784,372
-----------
BANKING - 2.14%
Banco de A. Edwards, ADR 20,000 427,500
Banco Latinoamericano
de Exportaciones SA 7,750 437,875
-----------
865,375
BROADCASTING - 2.80%
Flextech PLC 80,000 645,161
Sistem Televisyen Malaysia 244,000 488,978
-----------
1,134,139
BUSINESS SERVICES - 1.69%
Kobenhavns Lufthavne 6,700 684,022
-----------
CHEMICALS - 0.70%
Budi Acid Jaya 100,000 285,020
-----------
CONGLOMERATES - 1.55%
Hunter Douglas NV 9,150 627,043
-----------
CONTAINERS & GLASS - 1.12%
Republic Glass Holdings 1,200,000 453,695
-----------
DRUGS & HEALTH CARE - 3.61%
De Rigo SPA, ADR* 11,900 287,087
Medeva PLC 41,825 663,972
Schwarz Pharma AG 7,250 511,300
-----------
1,462,359
ELECTRICAL EQUIPMENT - 1.76%
TLG PLC 290,000 712,750
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE> 98
NASL SERIES TRUST
<TABLE>
PORTFOLIO OF INVESTMENTS - JUNE 15, 1996 - UNAUDITED - CONTINUED (SHOWING
PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- -------------------------------------------------------------------------
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
ELECTRONICS - 4.75%
Austria Mikro Systeme International AG 6,050 $ 572,431
Gandalf Technologies, Incorporated* 25,000 215,625
Saes Getters 10,000 200,485
Toolex-Alpha NV 18,100 477,387
VTech Holdings, Ltd.* 279,000 457,584
-----------
1,923,512
FINANCIAL SERVICES - 4.08%
Guoco Group 104,500 489,875
JBA Holdings 84,000 670,968
Manhattan Card Company 1,000,000 493,963
-----------
1,654,806
FOOD & BEVERAGES - 4.45%
Doutor Coffee Company 13,000 531,490
Grolsch NV* 15,000 629,063
J.D. Wetherspoon PLC 40,108 645,055
-----------
1,805,608
HOUSEHOLD APPLIANCES FURNISHING - 4.20%
DFS Furniture Company 50,000 450,845
Industrie Natuzzi SPA, ADR 10,000 532,500
Laox Company 32,000 717,350
-----------
1,700,695
INDUSTRIAL MACHINERY - 5.78%
IHC Caland NV 18,500 888,537
KCI Konecranes International* 19,750 522,442
Tomra Systems AS 35,000 342,791
Valmet 37,000 591,198
-----------
2,344,968
INTERNATIONAL OIL - 1.16%
Gulf Canada Resources, Ltd.* 93,000 476,625
LEISURE TIME - 3.05%
AAPC, Ltd. 325,000 200,840
Euro Disney SCA 207,500 589,933
Village Roadshow 10,000 444,462
-----------
1,235,235
MISCELLANEOUS - 0.14%
Shanghai Industrial Holdings 44,000 54,833
OFFICE FURNISHINGS & SUPPLIES - 1.17%
Corporate Express Australia* 5,000 8,636
Turbon International AG 16,700 465,624
-----------
474,260
PAPER - 0.81%
Guilbert SA 2,250 328,111
-----------
PETROLEUM SERVICES - 1.24%
Petroleum Geological Services AS, ADR* 17,000 503,625
-----------
PUBLISHING - 1.38%
Dorling Kindersley Holdings PLC 60,000 560,369
-----------
RETAIL TRADE - 6.08%
Bulgari SPA* 20,600 321,740
Matahari Putra Prima 269,000 497,634
Shares Value
------ -----
RETAIL TRADE - continued
Next 79,000 $ 685,258
Paris Miki, Incorporated 6,000 271,211
Puma AG 4,500 166,945
Santa Isabel SA, ADR* 19,000 520,125
-----------
2,462,913
SOFTWARE - 4.56%
Baan Company NV* 13,900 481,288
OzEmail, Ltd., ADR 6,000 82,500
Planning Sciences International
PLC, ADR 1,970 47,280
Psion PLC 104,000 686,943
TT Tieto OY 12,000 550,388
-----------
1,848,399
TELECOMMUNICATION SERVICES - 1..08%
Comcast UK Cable Partners, Ltd.* 34,000 437,750
-----------
TELEPHONE - 1.31%
Cellular Communications International* 16,000 532,000
-----------
TOYS, AMUSEMENTS & SPORTING GOODS - 3.09%
Salomon SA 1,000 769,751
Skis Rossignol SA 1,300 484,750
-----------
1,254,501
TRANSPORTATION - 3.05%
ASG AB 32,000 573,794
Tranz Rail Holdings, Ltd., ADR 47,875 664,266
-----------
1,238,060
TOTAL COMMON STOCKS
(Cost $27,905,082) $28,839,798
-----------
PREFERRED STOCK -1.53%
FINANCIAL SERVICES -1.53%
Marschollek Lautenschlaeger und
Partner AG 600 619,957
-----------
TOTAL PREFERRED STOCKS
(Cost $609,009) $ 619,957
-----------
REPURCHASE AGREEMENT - 27.33%
Principal
Amount Value
------ -----
$11,080,000 Repurchase Agreement with State
Street Bank & Trust Company dated
06/14/96 at 4.75% to be repurchased
at $11,084,386 on 06/17/96,
collateralized by $11,225,000 U.S.
Treasury Note, 6.50% due 04/30/99
(valued at $11,395,133,
including interest) $11,080,000
-----------
TOTAL INVESTMENTS (International
Small Cap Trust) (Cost $39,594,091) $40,539,755
===========
</TABLE>
KEY TO SECURITY ABBREVIATIONS
ADR -American Depository Receipt
* -Non-Income producing
The accompanying notes are an integral part of the financial statements.
8
<PAGE> 99
NASL SERIES TRUST
NOTES TO FINANCIAL STATEMENTS - (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION OF THE TRUST. The Small/Mid Cap and International Small Cap
Trusts are series of the NASL Series Trust (the "Trust"), a no-load, open-end
management investment company organized as a Massachusetts business trust. The
Trust is a series company, which means that it has several portfolios, each with
a stated investment objective which it pursues through separate investment
policies. The Trust currently offers the following sixteen portfolios: The
Small/Mid Cap Trust ("Small/Mid Cap"), the International Small Cap Trust
("International Small Cap"), the Global Equity Trust ("Global Equity"), the
Pasadena Growth Trust ("Pasadena Growth"), the Equity Trust ("Equity"), the
Value Equity Trust ("Value Equity"), the Growth and Income Trust ("Growth and
Income"), the International Growth and Income Trust ("International Growth and
Income"), the Strategic Bond Trust ("Strategic Bond"), the Global Government
Bond Trust ("Global Government Bond"), the Investment Quality Bond Trust
("Investment Quality Bond"), the U.S. Government Securities Trust ("U.S.
Government Securities"), the Money Market Trust ("Money Market"), the Aggressive
Asset Allocation Trust ("Aggressive Asset Allocation"), the Moderate Asset
Allocation Trust ("Moderate Asset Allocation"), and the Conservative Asset
Allocation Trust ("Conservative Asset Allocation"). Each of the Trusts with the
exception of Global Government Bond is diversified for purposes of the
Investment Company Act of 1940.
Shares of the Trust are presently offered only to the NASL Variable Account, the
NASL Group Variable Account and the NASL Variable Life Account, separate
accounts of North American Security Life Insurance Company ("Security Life"), to
the FNAL Variable Account, a separate account of First North American Life
Assurance Company ("First North American") and in case of certain portfolios, to
Separate Accounts One, Two, Three and Four, separate accounts of The
Manufacturers Life Insurance Company of America ("Manulife America"). Security
Life is controlled by The Manufacturers Life Insurance Company ("Manulife"), a
mutual life insurance company based in Toronto, Canada. First North American is
a wholly-owned subsidiary of Security Life and Manulife America is a
wholly-owned subsidiary of Manulife.
At June 15, 1996, Security Life owned seed money shares in the Small/Mid Cap and
Interntional Small Cap Trusts.
NASL Financial Services, Inc. ("NASL Financial"), a wholly-owned subsidiary of
Security Life, serves as investment adviser for the Trust (Note 5). NASL
Financial is also the principal underwriter of the variable contracts issued by
Security Life and First North American.
NEW PORTFOLIOS. On March 4, 1996, the Small/Mid Cap and International Small Cap
Trusts commenced operations. The subadvisor's are Fred Alger Management, Inc.
and Founder's Asset Management, Inc., respectively.
2. SIGNIFICANT ACCOUNTING POLICIES. The policies described below are followed by
the Trust in the preparation of the financial statements for its portfolios in
conformity with generally accepted accounting principles (GAAP).
BASIS OF PRESENTATION. The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, all
adjustments necessary for a fair presentation of the financial position and the
results of operations have been included. Results for the period March 4, 1996
(commencement of operations) to June 15, 1996 are not necessarily indicative of
annual results.
SECURITY VALUATION. Short term instruments with remaining maturities of 60 days
or less are valued on an amortized cost basis or at original cost plus accrued
interest, both of which approximate current market value. All other securities
held by the Trust 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 prices. Securities traded only in the over-the-counter market
are valued at the last bid prices quoted by brokers making markets in the
securities at the close of trading on the Exchange.
Trust securities for which there are no such quotations, principally debt
securities, are valued on the basis of the valuation provided by a pricing
service which utilizes both dealer-supplied and electronic data processing
techniques. Other assets and securities for which no such quotations 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 Board of Trustees.
FOREIGN CURRENCY TRANSLATIONS. The accounting records of the Trust 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;
(ii) purchases and sales of securities, income and expenses at the rate
of exchange quoted on the respective dates of such transactions.
9
<PAGE> 100
NASL SERIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
NOTE 2 - CONTINUED
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. The Small/Mid Cap and International Small
Cap Trusts may purchase and sell forward foreign currency contracts in order to
hedge a specific transaction or portfolio position.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held at the end of the period and the resulting net unrealized
appreciation (depreciation) and related net receivable or payable amount are
determined using forward foreign currency exchange rates supplied by a quotation
service. The Trust 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 foreign currency and forward foreign currency
contracts shown in the Statements of Operations, includes net gains or losses
realized by a portfolio on contracts which have matured or which the portfolio
has terminated by entering into an offsetting commitment with the same broker.
FUTURES. The Small/Mid Cap and International Small Cap Trusts may purchase and
sell financial futures contracts and options on those contracts. The portfolios
invest in contracts based on financial instruments such as U.S. Treasury bonds
or notes or on securities indices such as the S&P 500 Index, in order to hedge
against a decline in the value of securities owned by the portfolios.
When a portfolio sells a futures contract based on a financial instrument, the
portfolio becomes obligated to deliver that kind of instrument at an agreed upon
date for a specified price. The portfolio realizes a gain or loss depending on
whether the price of an offsetting purchase is less or more than the price of
the initial sale or on whether the price of an offsetting sale is more or less
than the price of the initial purchase . The Trust could be exposed to risks if
it could not close out futures positions because of an illiquid secondary market
or the inability of counterparties to meet the terms of their contracts. Upon
entering into futures contracts, the Trust is required to deposit with a broker
an amount, initial margin, which represents 5% of the purchase price indicated
in the futures contract.
Payments to and from the broker, known as variation margin, are required to be
made on a daily basis as the price of the futures contract fluctuates, making
the long or short positions in the contract more or less valuable. If the
position is closed out by taking an opposite position prior to the settlement
date of the futures contract, a final determination of variation margin is made,
cash is required to be paid to or released by the broker, and the portfolio
realizes a gain or loss.
FORWARD COMMITMENTS. The Small/Mid Cap and International Small Cap Trusts may
purchase debt securities on a when issued or forward delivery basis, which means
that the obligations will be delivered to the portfolios of the Trust at a
future date, which may be a month or more after the date of commitment. The
price of the underlying securities and the date when the securities will be
delivered and paid for are fixed at the time the transaction is negotiated. The
value of the securities underlying a forward commitment to purchase securities,
and the subsequent fluctuations in their value, is taken into account when
determining the Trust's net asset value starting on the day the Trust agrees to
purchase the securities.
SECURITIES LENDING. The Small/Mid Cap and International Small Cap Trusts may
lend securities in amounts up to 33 1/3% 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 secured by cash, cash
equivalents or securities issued or guaranteed by the U.S. government or its
agencies or instrumentalities, marked to market to the value of the loaned
securities on a daily basis. The Trust 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 Trust
receives compensation for lending its securities either in the form of fees or
by retaining a portion of interest on the investment of any cash received as
collateral. Income generated from the investment of cash collateral is included
as interest income in the Statements of Operations. All collateral received will
be in an amount equal to at least 100% of the market value of the loaned
securities and must be maintained at that level during the period of the loan.
During the loan period, the fund continues to retain rights of ownership,
including dividends and interest of the loaned securities. At June 15, 1996, the
Small/Mid Cap and International Small Cap Trusts had no securities on loan.
FEDERAL INCOME TAXES. The Trust's policy is 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 of the Trust is treated
as a separate taxpayer for federal income tax purposes.
10
<PAGE> 101
NASL SERIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
NOTE 2 - CONTINUED
DISTRIBUTION OF INCOME AND GAINS. During any particular year, net realized gains
from investment transactions of each portfolio, in excess of available capital
loss carryforwards of each portfolio would be taxable to such portfolio if not
distributed. Therefore, the Trust intends to distribute all of its investment
company taxable income and any net realized capital gains in order to avoid
federal income tax. The Trust is exempt from federal excise tax. Net investment
income is reported in the accompanying statements under GAAP. The Trust's
distributions are based on income amounts determined in accordance with federal
income tax regulations. Overdistributions of net investment income as determined
in accordance with GAAP have been presented in the financial statements as
distributions in excess of net investment income. Net investment income and net
realized gains differ for financial statement and tax purposes due to
distributions in accordance with income tax regulations which may differ from
GAAP: marking-to-market of certain financial instruments, the deferral of
certain losses for tax purposes and the treatment of currency gains or losses.
As a result, the character of distributions made during the year from net
investment income may differ from its ultimate characterization for tax
purposes.
EXPENSE ALLOCATION. Expenses not directly attributable to a particular portfolio
are allocated based on the relative share of net assets of each portfolio for
the time during which the expense was incurred.
REPURCHASE AGREEMENTS. The Small/Mid Cap and International Small Cap Trusts may
enter into repurchase agreements. When a portfolio enters into a repurchase
agreement through its custodian, it receives delivery of the underlying
securities, the amount of which at the time of purchase and each subsequent
business day is required to be maintained at such a level that the market value
is generally at least 102% of the repurchase amount. Each portfolio will take
constructive receipt of all securities underlying the repurchase agreements they
have entered into until such agreements expire. If the seller defaults, the
portfolio would suffer a loss to the extent that proceeds from the sale of
underlying securities were less than the repurchase amount.
OTHER. Investment security transactions are accounted for on a trade date plus
one basis. 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 tax reporting purposes. The Trust
uses the First In, First Out method for determining realized gain or loss on
investments for both financial and federal income tax reporting purposes. The
preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the reported amount of assets and
liabilities. Actual results may differ from these estimates.
<TABLE>
3. CAPITAL SHARES. Share activity for the period March 4, 1996 (commencement of
operations) to June 15, 1996, was as follows:
<CAPTION>
ADDITIONAL
SHARES PAR VALUE PAID-IN CAPITAL
--------- --------- ---------------
<S> <C> <C> <C>
SMALL/MID CAP
Outstanding at March 4, 1996 (commencement
of operations) ......................... -- --
Sold ..................................... 6,166,407 $61,664 $81,932,007
Redeemed ................................. (66,727) (667) (891,474)
--------- ------- -----------
Net increase ........................... 6,099,680 60,997 81,040,533
--------- ------- -----------
Outstanding at June 15, 1996 ............. 6,099,680 $60,997 $81,040,533
========= ======= ===========
INTERNATIONAL SMALL CAP
Outstanding at March 4, 1996 (commencement
of operations) ......................... -- --
Sold ..................................... 3,006,995 $30,070 $38,577,146
Redeemed ................................. (16,679) (167) (209,149)
--------- ------- -----------
Net increase ........................... 2,990,316 29,903 38,367,997
--------- ------- -----------
Outstanding at June 15, 1996 ............. 2,990,316 $29,903 $38,367,997
========= ======= ===========
</TABLE>
11
<PAGE> 102
NASL SERIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
4. PURCHASES AND SALES OF SECURITIES. The following summarizes the securities
transactions (except for short-term investments) for all portfolios for the
period March 4, 1996 (commencement of operations) to June 15, 1996:
<CAPTION>
PURCHASES SALES
-------------------------------- ---------------------------------
U.S U. S.
PORTFOLIO GOVERNMENT OTHER ISSUES GOVERNMENT OTHER ISSUES
- -------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Small/Mid Cap .......................... ----- $79,134,753 ----- $8,069,599
International Small Cap ................ ----- 29,305,723 ----- 926,200
</TABLE>
<TABLE>
5. INVESTMENT ADVISORY AGREEMENTS. Effective March 20, 1987, the Trust entered
into an Investment Advisory Agreement with NASL Financial, a wholly-owned
subsidiary of Security Life and the principal underwriter of the variable
annuity contracts issued by Security Life and First North American. The Adviser
is responsible for managing the corporate and business affairs of the Trust and
for selecting and compensating subadvisers to handle the investment and
reinvestment of the assets of each portfolio of the Trust, subject to the
supervision of the Trust's Board of Trustees. As compensation for its services,
NASL Financial receives an advisory fee from the Trust cmputed seperately for
each portfolio at an annual percentage of average net assets as follows:
<CAPTION>
PORTFOLIO FEE
--------- -----
<S> <C>
Small/Mid Cap................................................ 1.00%
International Small Cap...................................... 1.10%
</TABLE>
EXPENSE REIMBURSEMENT. Pursuant to the Advisory Agreement, NASL Financial
reimburses the Trust for expenses (excluding advisory fees, taxes, portfolio
brokerage commissions, and interest) incurred in excess of 0.50% and 0.75% of
the average annual net assets on an annualized basis in the Small/Mid Cap and
International Small Cap Trusts, respectively. There were no expenses reimbursed
by NASL Financial for the period March 4, 1996 (commencement of operations) to
June 15, 1996.
6. TRUSTEES' FEES. The Trust pays each Trustee who is not an employee or a
director of the Adviser or its affiliates a fee of $4,750 plus travel expenses
for each Board of Trustees meeting attended. The Trust also pays each Trustee
who is not an employee of the Adviser or its affiliates an annual retainer of
$18,000.
<TABLE>
7. COMMITMENTS. At June 15, 1996, the International Small Cap Trust had entered
into forward foreign currency contracts which contractually obligate the
portfolio to deliver currencies at future dates. Open sale and purchase
contracts at June 15, 1996 were as follows:
<CAPTION>
NET
CONTRACTS IN EXCHANGE SETTLEMENT UNREALIZED
TO DELIVER FOR DATE VALUE APPRECIATION
----------- ----------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
INTERNATIONAL SMALL CAP TRUST:
PURCHASES $441,234 ATS 4,743,267 6/17/96 $442,160 $926
-------- -------- ----
</TABLE>
12
<PAGE> 103
REPORT OF INDEPENDENT ACCOUNTANTS
- ----------------------------------------------------------------------------
To the Board of Trustees and Shareholders of NASL Series Trust:
We have audited the accompanying statements of assets and liabilities of
NASL Series Trust (comprising, respectively, the Global Equity, Pasadena
Growth, Equity, Value Equity, Growth and Income, International Growth and
Income, Strategic Bond, Global Government Bond, Investment Quality Bond,
U.S. Government Securities, Money Market and Aggressive, Moderate and
Conservative Asset Allocation Trusts), including the portfolio of
investments, as of December 31, 1995, and the related statements of
operations, the statements of changes in net assets and the financial
highlights for each of the periods indicated therein. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995 by correspondence
with the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentations. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of each of the Trusts comprising NASL Series Trust as of December 31,
1995, and the results of their operations, the changes in their net assets
and the financial highlights for each of the periods indicated therein, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 15, 1996
1
<PAGE> 104
NASL SERIES TRUST
STATEMENTS OF ASSETS AND LIABILITIES - DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL PASADENA VALUE GROWTH AND
EQUITY GROWTH EQUITY EQUITY INCOME
TRUST TRUST TRUST TRUST TRUST
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at value* (Includes repurchase
agreements of $100,188,000 and $43,932,000 in the
Equity and Value Equity Trusts, respectively) (See
accompanying portfolio of investments)................... $641,380,864 $277,336,287 $976,065,248 $395,072,032 $671,637,979
Receivable for forward foreign currency contracts to sell
(Notes 2 and 8).......................................... 61,469,216 --- --- --- ---
Forward foreign currency contracts to buy, at value
(Cost: $695,035 and $754,098 in the Global Equity
and Equity Trusts, respectively) (Notes 2 and 8)........ 691,930 --- --- --- ---
Cash....................................................... 720 523 436 979 80
Foreign currency (Cost: $3,360,167 and $12,691 in
the Global Equity and Growth and Income Trusts,
respectively)........................................... 3,363,884 --- --- --- 12,446
Receivables:
Investments sold..................................... 179,026 --- 12,352,489 2,482,291 ---
Fund shares sold..................................... 3,115,242 23,627 622,018 679,814 ---
Dividends............................................ 746,923 361,811 1,177,702 493,226 1,482,685
Interest............................................. 3,043 8,810 41,745 21,051 290,650
Foreign tax withholding reclaims..................... 295,928 2,860 --- --- ---
Deferred organization expenses (Note 2).................... --- 3,901 --- 4,284 3,982
Other assets............................................... 6,862 2,420 8,285 3,357 5,639
------------ ------------ ------------ ------------ ------------
Total assets................................... 711,253,638 277,740,239 991,017,931 398,757,034 673,433,461
------------ ------------ ------------ ------------ ------------
LIABILITIES
Forward foreign currency contracts to sell, at value
(Cost: $61,469,216) (Notes 2 and 8)...................... 61,343,070 --- --- --- ---
Payables:
Forward foreign currency contracts to buy
(Notes 2 and 8).................................... 695,035 --- 754,098 --- ---
Investments purchased................................ 691,930 22,266 1,327,519 1,878,666 ---
Fund shares redeemed................................. 113 37 199 118 3,936,441
Dividend and interest withholding tax................ 48,554 4,741 5,389 --- 28,124
Custodian fee........................................ 245,614 21,979 63,554 27,494 41,799
Due to custodian..................................... --- --- 8,744 --- ---
Other accrued expenses............................... 46,684 17,023 58,223 24,200 39,853
------------ ------------ ------------ ------------ ------------
Total liabilities.............................. 63,071,000 66,046 2,217,726 1,930,478 4,046,217
------------ ------------ ------------ ------------ ------------
NET ASSETS................................................. $648,182,638 $277,674,193 $988,800,205 $396,826,556 $669,387,244
============ ============ ============ ============ ============
Net assets consist of:
Accumulated undistributed net investment income
(Note 2)........................................... $ 11,144,253 $ 908,877 $ 4,695,040 $ 5,009,152 $ 11,667,389
Accumulated undistributed net realized gain
(loss) on investments.............................. (17,623,479) (10,560,793) 95,984,414 25,890,743 15,781,628
Unrealized appreciation (depreciation) on:
Investments....................................... 60,373,069 50,433,536 165,527,270 29,865,194 121,037,410
Foreign currency and forward foreign currency
contracts....................................... 131,742 --- (583) --- 585
Capital shares at par value of $.01 (Note 4)......... 402,496 243,632 475,620 287,336 408,931
Additional paid-in capital........................... 593,754,557 236,648,941 722,118,444 335,774,131 520,491,301
------------ ------------ ------------ ------------ ------------
Net assets..................................... $648,182,638 $277,674,193 $988,800,205 $396,826,556 $669,387,244
============ ============ ============ ============ ============
Capital shares outstanding (Note 4)....................... 40,249,612 24,363,208 47,562,040 28,733,585 40,893,098
------------ ------------ ------------ ------------ ------------
Net asset value, offering price and redemption price
per share............................................ $ 16.10 $ 11.40 $ 20.79 $ 13.81 $ 16.37
============ ============ ============ ============ ============
*Investments in securities, at identified cost (Note 2).... $581,007,795 $226,902,751 $810,537,978 $365,206,838 $550,600,569
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE> 105
NASL SERIES TRUST
STATEMENTS OF ASSETS AND LIABILITIES - DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL GLOBAL INVESTMENT U.S.
GROWTH AND STRATEGIC GOVERNMENT QUALITY GROWTH AND
INCOME BOND BOND BOND SECURITIES
TRUST TRUST TRUST TRUST TRUST
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in securities at value* (Includes a repurchase
agreement of $44,490,000 in the U.S. Government
Securities Trust) (See accompanying portfolio of
investments)............................................. $ 87,198,943 $124,924,833 $227,153,803 $142,715,378 $256,049,772
Receivable for forward foreign currency contracts to sell
(Notes 2 and 8).......................................... 17,464,735 25,190,430 37,531,659 --- ---
Forward foreign currency contracts to buy, at value
(Cost: $3,978,000, $12,176,927 and $27,021,808 in
the International Growth and Income, Strategic Bond
and Global Government Bond Trusts, respectively)
(Notes 2 and 8).......................................... 3,894,573 12,240,348 26,955,123 --- ---
Cash....................................................... 586 2,778 438 809 183
Foreign currency (Cost: $1,313,615, $74,923 and
$980,292 in the International Growth and Income,
Strategic Bond and Global Government Bond Trusts,
respectively)............................................ 1,309,544 68,838 981,243 --- ---
Receivables:
Investments sold..................................... 155,214 289,844 --- --- 10,063,542
Fund shares sold..................................... 321,297 272,483 1,295,000 474,391 1,346,586
Dividends............................................ 93,761 3,200 --- --- ---
Interest............................................. 146,235 2,661,951 5,418,631 2,466,906 3,027,603
Foreign tax withholding reclaims..................... 72,170 11,073 37,352 --- ---
Deferred organization expenses (Note 2).................... 9,531 6,427 --- --- ---
Other assets............................................... 1,477 1,041 2,355 1,227 2,075
------------ ------------ ------------ ------------ ------------
Total assets.................................... 110,668,066 165,673,246 299,375,604 145,658,711 270,489,761
------------ ------------ ------------ ------------ ------------
LIABILITIES
Forward foreign currency contracts to sell, at value
(Cost: $17,464,735, $25,190,430 and $37,531,659 in
the International Growth and Income, Strategic Bond
and Global Government Bond Trusts, respectively)
(Notes 2 and 8).......................................... 17,104,645 25,352,278 36,899,027 --- ---
Payables:
Forward foreign currency contracts to buy
(Notes 2 and 8).................................... 3,978,000 12,176,927 27,021,808 --- ---
Investments purchased................................ 830,745 5,381,312 --- 2,524,479 53,664,033
Fund shares redeemed................................. --- 39 50 32 51
Dividend and interest withholding tax................ 13,897 910 121,343 544 ---
Custodian fee........................................ 102,745 48,059 72,711 21,015 20,337
Other accrued expenses............................... --- 8,180 17,731 10,037 16,921
Deferred mortgage dollar roll income....................... --- 1,365 --- --- ---
------------ ------------ ------------ ------------ ------------
Total liabilities............................... 22,030,032 42,969,070 64,132,670 2,556,107 53,701,342
------------ ------------ ------------ ------------ ------------
NET ASSETS................................................. $ 88,638,034 $122,704,176 $235,242,934 $143,102,604 $216,788,419
============ ============ ============ ============ ============
Net assets consist of :
Accumulated undistributed net investment
income (loss) (Note 2)............................. ($ 70,205) $ 10,644,655 $ 20,496,692 $ 8,478,262 $ 12,847,931
Accumulated undistributed net realized gain (loss)
on investments..................................... (233,834) (3,633,638) (7,654,732) (4,660,721) (2,689,400)
Unrealized appreciation (depreciation) on:
Investments..................................... 2,485,964 2,064,219 11,626,147 8,108,959 4,786,681
Foreign currency and forward foreign currency
contracts..................................... 267,627 (103,335) 602,685 --- ---
Capital shares at par value of $.01 (Note 4)......... 84,621 108,985 161,601 116,180 158,806
Additional paid-in capital........................... 86,103,861 113,623,290 210,010,541 131,059,924 201,684,401
------------ ------------ ------------ ------------ ------------
Net assets...................................... $ 88,638,034 $122,704,176 $235,242,934 $143,102,604 $216,788,419
============ ============ ============ ============ ============
Capital shares outstanding (Note 4)........................ 8,462,125 10,898,515 16,160,125 11,618,055 15,880,625
------------ ------------ ------------ ------------ ------------
Net asset value, offering price and redemption price
per share............................................ $ 10.47 $ 11.26 $ 14.56 $ 12.32 $ 13.65
============ ============ ============ ============ ============
*Investments in securities, at identified cost (Note 2).... $ 84,712,979 $122,860,614 $215,527,656 $134,606,419 $251,263,091
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 106
NASL SERIES TRUST
STATEMENTS OF ASSETS AND LIABILITIES - DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE MODERATE CONSERVATIVE
MONEY ASSET ASSET ASSET
MARKET ALLOCATION ALLOCATION ALLOCATION
TRUST TRUST TRUST TRUST
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities at value* (Includes a repurchase
agreement of $28,289,000 in the Conservative Asset
Allocation Trust) (See accompanying portfolio of
investments)............................................. $258,581,602 $211,255,251 $648,772,669 $224,247,646
Cash....................................................... 701 45 19 666
Foreign currency (Cost: $668,359, $1,374,374 and
$173,662 in the Aggressive, Moderate and Conservative
Asset Allocation Trusts, respectively)................... --- 670,983 1,380,451 174,353
Receivables:
Investments sold..................................... --- 5,676,891 13,635,978 2,792,279
Variation margin for open futures contracts.......... --- --- --- 274
Dividends............................................ --- 224,167 465,505 91,168
Interest............................................. 446,107 811,153 5,078,193 2,193,821
Foreign tax withholding reclaims..................... --- 33,216 62,604 10,128
Other assets............................................... 2,865 2,058 6,508 2,247
------------ ------------ ------------ ------------
Total assets............................... 259,031,275 218,673,764 669,401,927 229,512,582
------------ ------------ ------------ ------------
LIABILITIES
Payables:
Investments purchased................................ --- 6,451,236 18,628,439 4,673,692
Variation margin for open futures contracts.......... --- 8,211 18,437 2,100
Fund shares redeemed................................. 877,850 360,587 425,485 361,305
Dividend and interest withholding tax................ --- 8,711 25,288 4,892
Custodian fee........................................ 17,052 71,415 116,078 62,164
Other accrued expenses............................... 19,410 16,652 52,063 18,429
------------ ------------ ------------ ------------
Total liabilities........................... 914,312 6,916,812 19,265,790 5,122,582
------------ ------------ ------------ ------------
NET ASSETS................................................. $258,116,963 $211,756,952 $650,136,137 $224,390,000
============ ============ ============ ============
Net assets consist of :
Accumulated undistributed net investment
income (Note 2).................................... --- $ 5,427,633 $ 26,460,562 $ 10,622,367
Accumulated undistributed net realized gain
on investments..................................... --- 10,450,155 26,127,969 2,923,461
Unrealized appreciation on:
Investments..................................... --- 25,134,308 59,137,555 14,724,168
Futures contracts............................... --- 182,187 369,218 61,996
Foreign currency and forward foreign currency
contracts..................................... --- 1,759 4,594 462
Capital shares at par value of $.01 (Note 4)......... $ 258,117 164,844 524,617 193,632
Additional paid-in capital........................... 257,858,846 170,396,066 537,511,622 195,863,914
------------ ------------ ------------ ------------
Net assets........................................... $258,116,963 $211,756,952 $650,136,137 $224,390,000
============ ============ ============ ============
Capital shares outstanding (Note 4)........................ 25,811,696 16,484,402 52,461,719 19,363,198
------------ ------------ ------------ ------------
Net asset value, offering price and redemption price
per share............................................ $ 10.00 $ 12.85 $ 12.39 $ 11.59
============ ============ ============ ============
*Investments in securities, at identified cost (Note 2).... $258,581,602 $186,120,943 $589,635,114 $209,523,478
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 107
NASL SERIES TRUST
STATEMENTS OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL PASADENA VALUE GROWTH AND
EQUITY GROWTH EQUITY EQUITY INCOME
TRUST TRUST TRUST TRUST TRUST
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Investment Income:
Interest (Net of $1,035 withholding tax in the
Equity Trust)...................................... $ 891,167 $ 696,239 $ 2,722,339 $ 3,046,996 $ 1,545,025
Dividends (Net of $1,014,252, $25,871, $34,217,
$4,543 and $169,439 withholding tax in the Global
Equity, Pasadena Growth, Equity, Value Equity
and Growth and Income Trusts, respectively)........ 9,309,807 2,328,072 8,022,622 4,568,101 14,278,070
------------ ----------- ------------ ----------- ------------
Total income.................................... 10,200,974 3,024,311 10,744,961 7,615,097 15,823,095
------------ ----------- ------------ ----------- ------------
Expenses:
Investment adviser fee (Note 6)...................... 5,513,312 2,115,434 5,643,363 2,459,247 3,922,671
Custodian fee........................................ 785,264 74,896 252,762 86,085 129,943
Audit and legal fees................................. 83,433 29,420 101,513 40,856 70,047
Amortization of deferred organization expenses
(Note 2)........................................... --- 2,000 --- 2,000 14,983
Trustees fees and expenses (Note 7).................. 21,687 7,971 27,892 11,364 19,050
Miscellaneous........................................ 49,554 4,726 16,087 6,393 11,805
------------ ----------- ------------ ----------- ------------
Expenses before reimbursement by
subadviser (Note 6).............................. 6,453,250 2,234,447 6,041,617 2,605,945 4,168,499
Reimbursement of expenses by subadviser............ --- 119,013 --- --- ---
------------ ----------- ------------ ----------- ------------
Net expenses.................................... 6,453,250 2,115,434 6,041,617 2,605,945 4,168,499
------------ ----------- ------------ ----------- ------------
Net investment income........................... 3,747,724 908,877 4,703,344 5,009,152 11,654,596
------------ ----------- ------------ ----------- ------------
Realized and unrealized gain (loss) on investments and
foreign currency:
Net realized gain (loss) on:
Investment transactions......................... (14,280,171) (2,374,757) 103,448,333 25,890,743 15,108,131
Foreign currency and forward foreign
currency contracts........................... 7,051,110 --- (319,018) --- 686,290
Change in unrealized appreciation (depreciation) on:
Investments..................................... 48,700,520 49,321,341 142,487,931 29,918,641 103,848,140
Translation of foreign currency and
forward foreign currency contracts............ 156,091 --- (1,045) --- 1,588
------------ ----------- ------------ ----------- ------------
Net gain on investments and
foreign currency................................... 41,627,550 46,946,584 245,616,201 55,809,384 119,644,149
------------ ----------- ------------ ----------- ------------
Net increase in net assets resulting
from operations............................... $ 45,375,274 $47,855,461 $250,319,545 $60,818,536 $131,298,745
============ =========== ============ =========== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 108
NASL SERIES TRUST
STATEMENTS OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL GLOBAL INVESTMENT U.S.
GROWTH AND STRATEGIC GOVERNMENT QUALITY GROWTH AND
INCOME BOND BOND BOND SECURITIES
TRUST* TRUST TRUST TRUST TRUST
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Investment Income:
Interest (Net of $2,498, $7,132, $219,802 and
$544 withholding tax in the International Growth
and Income, Strategic Bond, Global Government
Bond and Investment Quality Bond Trusts,
respectively)...................................... $ 344,831 $ 9,588,869 $17,051,448 $ 9,389,063 $14,251,650
Dividends (Net of $102,758 withholding tax in the
International Growth and Income Trust)............. 689,974 --- --- --- ---
---------- ----------- ----------- ----------- -----------
Total income................................... 1,034,805 9,588,869 17,051,448 9,389,063 14,251,650
Expenses:
Investment adviser fee (Note 6)..................... 450,200 767,448 1,757,909 798,045 1,291,668
Custodian fee........................................ 202,978 122,909 236,109 77,646 73,716
Audit and legal fees................................. 9,464 13,950 32,342 18,173 30,850
Amortization of deferred organization expenses
(Note 2)........................................... 3,100 3,000 --- --- ---
Trustees fees and expenses (Note 7).................. 3,478 3,585 7,854 4,698 7,431
Miscellaneous........................................ 27,065 2,966 12,523 4,284 5,273
---------- ----------- ----------- ----------- -----------
Total expenses.................................. 696,285 913,858 2,046,737 902,846 1,408,938
---------- ----------- ----------- ----------- -----------
Net investment income........................... 338,520 8,675,011 15,004,711 8,486,217 12,842,712
---------- ----------- ----------- ----------- -----------
Realized and unrealized gain (loss) on investments and
foreign currency:
Net realized gain (loss) on:
Investment transactions......................... 1,781,900 653,754 3,183,386 934,173 6,615,440
Foreign currency and forward foreign
currency contracts............................ (549,770) 827,091 5,204,326 --- ---
Change in unrealized appreciation (depreciation) on:
Investments..................................... 2,485,964 7,494,670 21,692,894 12,443,229 9,054,850
Translation of foreign currency and
forward foreign currency contracts............ 267,627 (60,522) 662,786 --- ---
---------- ----------- ----------- ----------- -----------
Net gain on investments and
foreign currency................................... 3,985,721 8,914,993 30,743,392 13,377,402 15,670,290
---------- ----------- ----------- ----------- -----------
Net increase in net assets resulting
from operations............................... $4,324,241 $17,590,004 $45,748,103 $21,863,619 $28,513,002
========== =========== =========== =========== ===========
<FN>
* For the period January 9, 1995 (commencement of operations) to December 31, 1995.
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE> 109
STATEMENTS OF ASSETS AND LIABILITIES - DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE MODERATE CONSERVATIVE
MONEY ASSET ASSET ASSET
MARKET ALLOCATION ALLOCATION ALLOCATION
TRUST TRUST TRUST TRUST
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Investment Income:
Interest (Net of $1,020, $10,807 and $2,724
withholding tax in the Aggressive, Moderate and
Conservative Asset Allocation Trusts, respectively) $15,862,051 $ 4,557,825 $ 25,112,904 $11,016,349
Dividends (Net of $130,512, $283,361 and $39,594
withholding tax in the Aggressive, Moderate and
Conservative Asset Allocation Trusts, respectively) --- 2,609,671 5,596,929 1,117,122
----------- ----------- ----------- -----------
Total income.................................... 15,862,051 7,167,496 30,709,833 12,133,471
Expenses:
Investment adviser fee (Note 6)...................... 1,318,573 1,463,421 4,667,061 1,639,903
Custodian fee........................................ 52,444 269,362 434,383 213,781
Audit and legal fees................................ 35,918 29,273 93,532 33,581
Trustees fees and expenses (Note 7).................. 9,424 7,033 22,306 7,834
Miscellaneous........................................ 7,222 5,486 17,954 6,235
----------- ----------- ----------- -----------
Total expenses................................. 1,423,581 1,774,575 5,235,236 1,901,334
----------- ----------- ----------- -----------
Net investment income........................... 14,438,470 5,392,921 25,474,597 10,232,137
----------- ----------- ----------- -----------
Realized and unrealized gain (loss) on investments and
foreign currency:
Net realized gain (loss) on:
Investment transactions......................... --- 10,182,865 23,729,858 8,403,516
Futures contracts............................... --- (1,726,285) (3,962,742) (658,525)
Foreign currency and forward foreign
currency contracts............................ --- 1,938,306 7,845,216 727,483
Change in unrealized appreciation (depreciation) on:
Investments..................................... --- 23,406,053 62,959,219 17,450,440
Futures contracts............................... --- 371,422 782,113 129,621
Translation of foreign currency and
forward foreign currency contracts............ --- (10,764) (71,271) (34,355)
----------- ----------- ----------- -----------
Net gain on investments, futures and
foreign currency................................... --- 34,161,597 91,282,393 26,017,820
----------- ----------- ----------- -----------
Net increase in net assets resulting
from operations............................... $14,438,470 $39,554,518 $116,756,990 $36,249,957
=========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE> 110
NASL SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL PASADENA VALUE
EQUITY TRUST GROWTH TRUST EQUITY TRUST EQUITY TRUST
------------------------- ------------------------- ------------------------- -------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
12/31/95 12/31/94 12/31/95 12/31/94 12/31/95 12/31/94 12/31/95 12/31/94
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Increase in net
assets:
Operations:
Net investment
income.......... $ 3,747,724 $ 2,412,913 $ 908,877 $ 834,112 $ 4,703,344 $ 4,079,883 $ 5,009,152 $ 1,721,862
Net realized
gain (loss) on:
Investment
transactions.. (14,280,171) 27,723,033 (2,374,757) (6,205,010) 103,448,333 (5,142,011) 25,890,743 2,091,517
Foreign
currency and
forward
foreign
currency
contracts..... 7,051,110 (3,297,130) --- --- (319,018) 12,970 --- ---
Change in
unrealized
appreciation
(depreciation)
on:
Investments.... 48,700,520 (30,879,531) 49,321,341 (746,806) 142,487,931 (2,473,332) 29,918,641 (5,044,529)
Foreign
currency and
forward
foreign
currency
contracts..... 156,091 29,893 --- --- (1,045) 462 --- ---
------------ ------------ ------------ ----------- ------------ ------------ ------------ ------------
Net increase
(decrease) in
net assets
resulting
from
operations....... 45,375,274 (4,010,822) 47,855,461 (6,117,704) 250,319,545 (3,522,028) 60,818,536 (1,231,150)
Distribution to
shareholders
from:
Net investment
income......... (2,969,604) (677,274 ) (834,112) (520,348) (4,092,853) (1,293,216) (1,721,862) (499,620)
Net realized
gains on
investments and
foreign
currency
transactions.... (27,013,345) (7,076,483) --- --- --- (21,652,190) (2,091,517) (262,345)
Increase in net
assets from
capital share
transactions
(Note 4)......... 16,652,433 250,031,306 78,926,143 53,398,858 208,011,562 173,187,168 117,986,065 137,356,061
------------ ------------ ------------ ----------- ------------ ------------ ------------ ------------
Increase in net
assets........... 32,044,758 238,266,727 125,947,492 46,760,806 454,238,254 146,719,734 174,991,222 135,362,946
Net assets at
beginning of
period........... 616,137,880 377,871,153 151,726,702 104,965,896 534,561,951 387,842,217 221,835,334 86,472,388
Net assets at end
of period........ $648,182,638 $616,137,880 $277,674,194 $151,726,702 $988,800,205 $534,561,951 $396,826,556 $221,835,334
============ ============ ============ ============ ============ ============ ============ ============
Accumulated
undistributed
net investment
income........... $ 11,144,253 $ 2,412,913 $ 908,877 $ 834,112 $ 4,695,040 $ 4,079,883 $ 5,009,152 $ 1,721,862
============ ============ ============ ============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE> 111
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STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL GLOBAL
GROWTH AND GROWTH AND STRATEGIC GOVERNMENT
INCOME TRUST INCOME TRUST BOND TRUST BOND TRUST
------------------------- ------------- --------------------------- -------------------------
YEAR YEAR 01/09/95* YEAR YEAR YEAR YEAR
ENDED ENDED to ENDED ENDED ENDED ENDED
12/31/95 12/31/94 12/31/95 12/31/95 12/31/94 12/31/95 12/31/94
------------ ------------ -------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Increase in net
assets:
Operations:
Net investment
income............. $ 11,654,596 $ 8,554,134 $ 338,520 $ 8,675,011 $ 5,682,980 $ 15,004,711 $ 13,288,441
Net realized
gain (loss) on:
Investment
transactions.. 15,108,131 4,449,869 1,781,900 653,754 (2,356,585) 3,183,386 (15,161,567)
Foreign
currency and
forward
foreign
currency
contracts..... 686,290 (4,973) (549,770) 827,091 (2,128,445) 5,204,326 2,805,755
Change in
unrealized
appreciation
(depreciation)
on:
Investments..... 103,848,140 (4,089,736) 2,485,964 7,494,670 (5,649,435) 21,692,894 (14,313,961)
Foreign
currency and
forward
foreign
currency
contracts..... 1,588 (1,002) 267,627 (60,522) (138,382) 662,786 (252,058)
------------ ------------ ----------- ------------ ----------- ------------ ------------
Net increase
(decrease) in
net assets
resulting from
operations...... 131,298,745 8,908,292 4,324,241 17,590,004 (4,589,876) 45,748,103 (13,633,390)
Distribution to
shareholders
from:
Net investment
income......... (8,549,161) (4,722,494) (998,757) (4,125,434) (1,838,642) (11,483,093) 4,984,315)
Net realized
gains on
investments
and foreign
currency
transactions... (4,313,653) (4,429,956) (875,932) --- (291,974) --- (6,059,984)
Increase in net
assets from
capital share
transactions
(Note 4)......... 141,416,968 121,013,774 86,188,482 24,806,640 37,513,081 (7,534,746) 36,373,364
------------ ------------ ----------- ------------ ----------- ------------ ------------
Increase in net
assets........... 259,852,899 120,769,616 88,638,034 38,271,210 30,792,598 26,730,264 11,695,675
Net assets at
beginning of
period........... 409,534,345 288,764,729 --- 84,432,966 53,640,368 208,512,670 196,816,995
------------ ------------ ----------- ------------ ----------- ------------ ------------
Net assets at end
of period........ $669,387,244 $409,534,345 $88,638,034 $122,704,176 $84,432,966 $235,242,934 $208,512,670
============ ============ =========== ============ =========== ============ ============
Accumulated
undistributed net
investment income
(loss)........... $ 11,667,389 $ 8,554,134 ($ 70,205) $ 10,644,655 $ 5,682,980 $ 20,496,692 $ 13,288,441
============ ============ =========== ============ =========== ============ ============
<FN>
- ----------------------------
* Commencement of operations
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE> 112
NASL SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT QUALITY U.S. GOVERNMENT MONEY MARKET
BOND TRUST SECURITIES TRUST TRUST
-------------------------- -------------------------- --------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
12/31/95 12/31/94 12/31/95 12/31/94 12/31/95 12/31/94
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income.................... $ 8,486,217 $ 7,074,815 $ 12,842,712 $ 11,807,528 $ 14,438,470 $ 9,112,848
Net realized gain (loss) on
investment transactions................ 934,173 (4,776,012) 6,615,440 (9,158,110) --- ---
Change in unrealized appreciation
(depreciation) on investments........... 12,443,229 (7,428,247) 9,054,850 (5,645,645) --- ---
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations................. 21,863,619 (5,129,444) 28,513,002 (2,996,227) 14,438,470 9,112,848
Distribution to shareholders from:
Net investment income.................... (7,077,320) (4,745,354) (11,856,226) (8,773,625) (14,438,470) (9,112,848)
Net realized gains on investments........ --- --- --- (2,599,570) --- ---
Increase (decrease) in net assets from
capital share transactions (Note 4)........ 16,892,949 21,823,760 11,318,295 (18,888,972) (18,556,843) 144,399,345
------------ ------------ ------------ ------------ ------------ ------------
Increase (decrease) in net assets........... 31,679,248 11,948,962 27,975,071 (33,258,394) (18,556,843) 144,399,345
Net assets at beginning of period........... 111,423,356 99,474,394 188,813,348 222,071,742 276,673,806 132,274,461
------------ ------------ ------------ ------------ ------------ ------------
Net assets at end of period................. $143,102,604 $111,423,356 $216,788,419 $188,813,348 $258,116,963 $276,673,806
============ ============ ============ ============ ============ ============
Accumulated undistributed
net investment income...................... $ 8,478,262 $ 7,074,815 $ 12,847,931 $ 11,807,528 --- ---
============ ============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE> 113
NASL SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE ASSET MODERATE ASSET CONSERVATIVE ASSET
ALLOCATION TRUST ALLOCATION TRUST ALLOCATION TRUST
-------------------------- -------------------------- --------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
12/31/95 12/31/94 12/31/95 12/31/94 12/31/95 12/31/94
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income.................... $ 5,392,921 $ 5,235,271 $ 25,474,597 $ 25,570,598 $ 10,232,137 $ 11,588,833
Net realized gain (loss) on:
Investment transactions................ 10,182,865 6,569,414 23,729,858 5,151,440 8,403,516 (5,512,747
Futures contracts...................... (1,726,285) (180,011) (3,962,742) (921,011) (658,525) 49,768
Foreign currency and forward
foreign currency contracts........... 1,938,306 17,865 7,845,216 (657,486) 727,483 (352,436)
Change in unrealized appreciation
(depreciation) on:
Investments............................ 23,406,053 (12,785,972) 62,959,219 (39,233,463) 17,450,440 (10,429,286)
Futures contracts...................... 371,422 (185,853) 782,113 (404,043) 129,261 (54,855)
Foreign currency and forward
foreign currency contracts........... (10,764) 12,523 (71,271) 75,865 (34,355) 34,817
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations................. 39,554,518 (1,316,763) 116,756,990 (10,418,100) 36,249,957 (4,675,906)
Distribution to shareholders from:
Net investment income.................... (5,166,253) (4,671,543) (24,223,191) (22,106,187) (10,860,847) (10,206,968)
Net realized gains on investments, futures
and foreign currency transactions...... (6,299,483) (6,656,551) (5,181,586) (20,585,004) --- (5,487,838)
Increase (decrease) in net assets from
capital share transactions (Note 4)........ (993,645) 22,858,831 (41,707,151) 13,343,677 (17,714,850) (13,031,012)
------------ ------------ ------------ ------------ ------------ ------------
Increase (decrease) in net assets........... 27,095,137 10,213,974 45,645,062 (39,765,614) 7,674,260 (33,401,724)
Net assets at beginning of period........... 184,661,815 174,447,841 604,491,075 644,256,689 216,715,740 250,117,464
------------ ------------ ------------ ------------ ------------ ------------
Net assets at end of period................. $211,756,952 $184,661,815 $650,136,137 $604,491,075 $224,390,000 $216,715,740
============ ============ ============ ============ ============ ============
Accumulated undistributed
net investment income..................... $ 5,427,633 $ 5,235,271 $ 26,460,562 $ 25,570,598 $ 10,622,367 $ 11,588,833
============ ============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE> 114
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL EQUITY TRUST
------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 3/18/88*
------------------------------------------------------------------------------ TO
1995 1994 1993 1992 1991 1990 1989 12/31/88
--------- --------- --------- --------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period........................... $ 15.74 $ 15.73 $ 12.00 $ 12.24 $ 11.00 $ 12.57 $ 10.15 $10.03
Income from investment operations:
- ----------------------------------
Net investment income (loss) (B)... 0.29 0.05 0.12 0.10 0.16 0.12 0.10 (0.05)
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions.... 0.84 0.22 3.79 (0.19) 1.23 (1.41) 2.32 0.17
-------- -------- -------- -------- ------- ------- ------- ------
Total from investment
operations................. 1.13 0.27 3.91 (0.09) 1.39 (1.29) 2.42 0.12
Less distributions:
- -------------------
Dividends from net investment
income............................ (0.08) (0.02) (0.18) (0.15) (0.15) (0.04) --- ---
Distributions from capital gains.... (0.69) (0.24) --- --- --- (0.24) --- ---
-------- -------- -------- -------- ------- ------- ------- ------
Total distributions............. (0.77) (0.26) (0.18) (0.15) (0.15) (0.28) --- ---
-------- -------- -------- -------- ------- ------- ------- ------
Net asset value, end of period........ $ 16.10 $ 15.74 $ 15.73 $ 12.00 $ 12.24 $ 11.00 $ 12.57 $10.15
======== ======== ======== ======== ======= ======= ======= ======
Total return.................... 7.68% 1.74% 32.89% (0.72%) 12.80% (10.43%) 23.84% 1.20%
Net assets, end of period (000's)..... $648,183 $616,138 $377,871 $116,731 $89,003 $63,028 $26,223 $2,143
Ratio of operating expenses to
average net assets (C)............. 1.05% 1.08% 1.16% 1.16% 1.23% 1.28% 1.62% 3.98%(A)
Ratio of net investment income (loss)
to average net assets............... 0.61% 0.44% 0.77% 1.12% 1.47% 1.97% 1.82% (1.71%)(A)
Portfolio turnover rate............... 63% 52% 52% 69% 74% 67% 109% 81%(A)
- ---------------------------------
<FN>
* Commencement of operations.
(A) Annualized
(B) After expense reimbursement per share of $0.02 in 1988.
(C) The ratio of operating expenses, before reimbursement from the investment adviser, was 4.53% in 1988.
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE> 115
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PASADENA GROWTH TRUST
-----------------------------------------------------------
YEARS ENDED DECEMBER 31, 12/11/92*
----------------------------------------- TO
1995 1994 1993 12/31/92
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period....................... $ 9.05 $ 9.55 $ 9.93 $ 10.00
Income from investment operations:
- ----------------------------------
Net investment income (B)................................. 0.03 0.04 0.05 0.00
Net realized and unrealized gain
(loss) on investments.................................... 2.36 (0.50) (0.42) (0.07)
-------- -------- -------- -------
Total from investment operations.................. 2.39 (0.46) (0.37) (0.07)
Less distributions:
- -------------------
Dividends from net investment income....................... (0.04) (0.04) (0.01) ---
-------- -------- -------- -------
Total distributions............................... (0.04) (0.04) (0.01) ---
-------- -------- -------- -------
Net asset value, end of period............................. $ 11.40 $ 9.05 $ 9.55 $ 9.93
======== ======== ======== =======
Total return...................................... 26.53% (4.80%) (3.80%) (0.70%)
Net assets, end of period (000's).......................... $277,674 $151,727 $104,966 $31,118
Ratio of operating expenses to
average net assets (C).................................. 0.975% 0.975% 0.975% 1.06%(A)
Ratio of net investment income to
average net assets....................................... 0.42% 0.65% 0.75% 1.04%(A)
Portfolio turnover rate.................................... 57% 33% 12% 0%(A)
- -----------------------------
<FN>
* Commencement of operations.
(A) Annualized
(B) After subadviser expense reimbursement per share of $0.004, $0.006 and $0.01 for the years ended
December 31, 1995, 1994 and 1993, respectively.
(C) The ratio of operating expenses, before reimbursement from the subadviser, was 1.03%, 1.06% and
1.09% for the years ended December 31, 1995, 1994 and 1993, respectively.
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE> 116
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY TRUST
------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 6/18/85*
------------------------------------------------------------------------------------------------- TO
1995 1994 1993** 1992 1991 1990 1989 1988 1987 1986 12/31/85
-------- -------- -------- -------- ------- -------- -------- --------- --------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............ $ 14.66 $ 15.57 $ 13.97 $ 13.12 $ 11.33 $ 19.14 $ 15.17 $ 12.57 $ 13.01 $11.39 $10.72%
Income from
investment
operations:
-----------
Net investment
income (B)...... 0.10 0.11 0.07 0.64 0.14 0.24 0.29 0.15 0.19 0.27 0.12
Net realized
and unrealized
gain (loss) on
investments and
foreign currency
transactions.... 6.14 (0.18) 2.11 0.38 1.88 (1.95) 3.87 2.45 0.97 1.80 0.55
-------- -------- -------- -------- ------- -------- -------- --------- --------- ------ ------
Total from
investment
operations...... 6.24 (0.07) 2.18 1.02 2.02 (1.71) 4.16 2.60 1.16 2.07 0.67
Less
distributions:
--------------
Dividends from
net investment
income........... (0.11) (0.05) (0.58) (0.17) (0.23) (0.29) (0.12) --- (0.14) (0.24) ---
Distributions
from capital
gains............ --- (0.79) --- --- --- (5.81) (0.07) --- (1.46) (0.21) ---
-------- -------- -------- -------- ------- -------- -------- --------- --------- ------ ------
Total
distributions.. (0.11) (0.84) (0.58) (0.17) (0.23) (6.10) (0.19) --- (1.60) (0.45) ---
-------- -------- -------- -------- ------- -------- -------- --------- --------- ------ ------
Net asset value,
end of period...... $ 20.79 $ 14.66 $ 15.57 $ 13.97 $ 13.12 $ 11.33 $ 19.14 $ 15.17 $ 12.57 $13.01 $11.39
======== ======== ======== ======== ======= ======== ======== ========= ========= ====== ======
Total return... 42.79% (0.53%) 16.31% 7.93% 17.94% (11.79%) 27.70% 20.71% 6.87% 18.50% 6.20%
Net assets, end of
period (000's)..... $988,800 $534,562 $387,842 $192,626 $88,235 $36,564 $32,108 $133,852 $37,001 $1,408 $1,143
Ratio of operating
expenses to
average net
assets (C)......... 0.80% 0.84% 0.88% 0.95% 0.89% 0.97% 1.02% 1.08% 1.15% 1.41% 1.57%(A)
Ratio of net
investment income
to average net
assets............. 0.63% 0.88% 0.50% 7.31% 2.23% 2.74% 1.90% 1.80% 1.33% 1.19% 2.05%(A)
Portfolio turnover
rate............... 88% 132% 173% 782% 172% 95% 111% 49% 64% 209% 214%(A)
- --------------------------
<FN>
* Commencement of operations.
** Net investment income per share was calculated using the average shares method for fiscal year 1993.
(A) Annualized
(B) After expense reimbursement per share of $0.02, $0.53 and $0.14 in 1987, 1986 and 1985, respectively.
(C) The ratio of operating expenses, before reimbursement from the investment adviser, was 1.30%, 3.71% and 4.69% in 1987, 1986
and 1985, respectively.
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE> 117
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE EQUITY TRUST
-----------------------------------------------------------
YEARS ENDED DECEMBER 31, 02/19/93*
---------------------------------------- TO
1995 1994** 12/31/93
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net asset value, beginning
of period.................................... $ 11.33 $ 11.31 $ 10.00
Income from investment operations:
- ----------------------------------
Net investment income.......................... 0.17 0.12 0.07
Net realized and unrealized gain
(loss) on investments........................ 2.49 (0.03) 1.24
-------- -------- -------
Total from investment
operations....................... 2.66 0.09 1.31
Less distributions:
- -------------------
Dividends from net investment income........... (0.08) (0.05) ---
Distributions from capital gains............... (0.10) (0.02) ---
-------- -------- -------
Total distributions................ (0.18) (0.07) ---
-------- -------- -------
Net asset value, end of period................. $ 13.81 $ 11.33 $ 11.31
======== ======== =======
Total return....................... 23.69% 0.79% 13.10%
Net assets, end of period (000's).............. $396,827 $221,835 $86,472
Ratio of operating expenses to
average net assets........................... 0.85% 0.87% 0.94%(A)
Ratio of net investment income to
average net assets........................... 1.63% 1.08% 1.30%(A)
Portfolio turnover rate........................ 52% 26% 33%(A)
- -----------------------------
<FN>
* Commencement of operations.
** Net investment income per share was calculated using the average shares method for fiscal year 1994.
(A) Annualized
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE> 118
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH AND INCOME TRUST
---------------------------------------------------------------
YEARS ENDED DECEMBER 31, 4/23/91*
------------------------------------------------- TO
1995 1994 1993 1992 12/31/91
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period.................................... $ 13.04 $ 13.05 $ 12.10 $ 11.08 $ 10.00
Income from investment operations:
- ----------------------------------
Net investment income....................... 0.27 0.25 0.17 0.20 0.13
Net realized and unrealized gain
on investments and foreign currency
transactions............................. 3.45 0.11 0.98 0.92 0.95
-------- -------- -------- -------- -------
Total from investment operations...... 3.72 0.36 1.15 1.12 1.08
Less distributions:
- -------------------
Dividends from net investment income........ (0.26) (0.19) (0.18) (0.10) ---
Distributions from capital gains............ (0.13) (0.18) (0.02) --- ---
-------- -------- -------- -------- -------
Total distributions................... (0.39) (0.37) (0.20) (0.10) ---
-------- -------- -------- -------- -------
Net asset value, end of period................. $ 16.37 $ 13.04 $ 13.05 $ 12.10 $ 11.08
======== ======== ======== ======== =======
Total return......................... 29.20% 2.85% 9.62% 10.23% 10.80%
Net assets, end of period (000's).............. $669,387 $409,534 $288,765 $130,984 $57,404
Ratio of operating expenses to
average net assets........................... 0.80% 0.82% 0.85% 0.85% 0.98%(A)
Ratio of net investment income to
average net assets........................... 2.23% 2.40% 2.29% 2.78% 2.92%(A)
Portfolio turnover rate....................... 39% 42% 39% 44% 62%(A)
- ------------------
<FN>
* Commencement of operations.
(A) Annualized
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE> 119
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL
GROWTH AND
INCOME TRUST
------------------
01/09/95*
TO
12/31/95
------------------
<S> <C>
Net asset value, beginning
of period.................................... $ 10.00
Income from investment operations:
- ----------------------------------
Net investment income....................... 0.11
Net realized and unrealized loss
on investments and foreign currency
transactions............................. 0.59
--------
Total from investment
operations.......................... 0.70
Less distributions:
- -------------------
Dividends from net investment income......... (0.12)
Distributions from capital gains............. (0.11)
--------
Total distributions................... (0.23)
--------
Net asset value, end of period................. $ 10.47
========
Total return.......................... 6.98%
Net assets, end of period (000's).............. $88,638
Ratio of operating expenses to
average net assets........................... 1.47%(A)
Ratio of net investment income to
average net assets........................... 0.71%(A)
Portfolio turnover rate........................ 112%(A)
- -----------------------------
<FN>
* Commencement of operations.
(A) Annualized
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE> 120
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STRATEGIC BOND TRUST
---------------------------------------
YEARS ENDED DECEMBER 31, 02/19/93*
------------------------- TO
1995 1994 12/31/93
---- ---- --------
<S> <C> <C> <C>
Net asset value, beginning
of period.................................... $ 9.91 $10.88 $ 10.00
Income from investment operations:
- ----------------------------------
Net investment income....................... 0.78 0.57 0.33
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions............................. 1.04 (1.22) 0.55
-------- ------ -------
Total from investment
operations.......................... 1.82 (0.65) 0.88
Less distributions:
- -------------------
Dividends from net investment income........ (0.47) (0.28) ----
Distributions from capital gains............ ---- (0.04) ----
-------- ------ -------
Total distributions................... (0.47) (0.32) --
-------- ------ -------
Net asset value, end of period................. $ 11.26 $ 9.91 $ 10.88
======== ======= =======
Total return.......................... 19.22% (5.99%) 8.80%
Net assets, end of period (000's).............. $122,704 $84,433 $53,640
Ratio of operating expenses to
average net assets........................... 0.92% 0.91% 1.00%(A)
Ratio of net investment income to
average net assets........................... 8.76% 7.49% 6.56%(A)
Portfolio turnover rate........................ 181% 197% 356%(A)
- ----------
<FN>
* Commencement of operations.
(A) Annualized
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE> 121
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL GOVERNMENT BOND TRUST
-------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 3/18/88*
--------------------------------------------------------------- TO
1995 1994 1993 1992 1991 1990 1989 12/31/88
---- ---- ---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................................$ 12.47 $ 13.93 $ 12.47 $ 12.88 $ 11.59 $ 10.50 $10.21 $10.03
Income from investment operations:
- ----------------------------------
Net investment income.................... 1.16 0.74 0.59 0.42 0.55 0.25 0.45 0.14
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions........ 1.62 (1.54) 1.67 (0.16) 1.21 1.13 -- 0.04
Total from investment operations.. 2.78 (0.80) 2.26 0.26 1.76 1.38 0.45 0.18
Less distributions:
- -------------------
Dividends from net investment income..... (0.69) (0.30) (0.70) (0.43) (0.46) (0.24) (0.09) --
Distributions from capital gains......... -- (0.36) (0.10) (0.24) (0.01) (0.05) (0.07) --
-------- -------- -------- ------- ------- ------- ------ ------
Total distributions............... (0.69) (0.66) (0.80) (0.67) (0.47) (0.29) (0.16) --
-------- -------- -------- ------- ------- ------- ------ ------
Net asset value, end of period.............$ 14.56 $ 12.47 $ 13.93 $ 12.47 $ 12.88 $ 11.59 $10.50 $10.21
======== ======== ======== ======= ======= ======= ====== ======
Total return..................... 23.18% (5.75%) 18.99% 2.27% 15.86% 13.49% 4.49% 1.79%
Net assets, end of period (000's)......... $235,243 $208,513 $196,817 $67,859 $28,251 $11,582 $4,065 $1,355
Ratio of operating expenses to
average net assets....................... 0.93% 0.96% 1.06% 1.05% 1.14% 1.21% 1.50% 3.39%(A)
Ratio of net investment income to
average net assets....................... 6.83% 6.10% 5.61% 6.71% 17.28% 6.62% 7.15% 3.74%(A)
Portfolio turnover rate.................... 171% 157% 154% 132% 164% 142% 50% 234%(A)
- ----------
<FN>
* Commencement of operations.
(A) Annualized
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE> 122
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT QUALITY BOND TRUST
------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 6/18/85*
-------------------------------------------------------------------------------- TO
1995 1994 1993 1992 1991** 1990 1989 1988 1987 1986 12/31/85
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period....... $ 11.01 $ 12.12 $ 11.58 $ 11.33 $ 10.74 $ 12.37 $ 11.55 $ 10.79 $ 11.58 $11.18 $10.28
Income from investment
operations:
- ----------------------
Net investment
income (B).............. 0.77 0.66 0.60 0.63 0.76 1.12 0.75 0.57 0.81 1.02 0.55
Net realized and
unrealized gain (loss)
on investments.......... 1.28 (1.23) 0.53 0.15 0.85 (1.50) 0.51 0.19 (0.50) 0.37 0.35
Total from investment
operations......... 2.05 (0.57) 1.13 0.78 1.61 (0.38) 1.26 0.76 0.31 1.39 0.90
Less distributions:
- -------------------
Dividends from net
investment income....... (0.74) (0.54) (0.59) (0.53) (1.02) (1.25) (0.44) -- (0.88) (0.69) --
Distributions from
capital gains........... -- -- -- -- -- -- -- -- (0.22) (0.30) --
-------- -------- ------- ------- ------- ------- ------- -------- ------- ------ ------
Total distributions.. (0.74) (0.54) (0.59) (0.53) (1.02) (1.25) (0.44) -- (1.10) (0.99) --
-------- -------- ------- ------- ------- ------- ------- -------- ------- ------ ------
Net asset value,
end of period............. $ 12.32 $ 11.01 $ 12.12 $ 11.58 $ 11.33 $ 10.74 $ 12.37 $ 11.55 $ 10.79 $11.58 $11.18
======== ======== ======= ======= ======= ======= ======= ======== ======= ====== ======
Total return......... 19.49% (4.64%) 10.01% 7.21% 16.07% (2.73%) 11.34% 7.09% 2.61% 13.25% 8.72%
Net assets, end of
period (000's)............ $143,103 $111,423 $99,474 $60,185 $38,896 $20,472 $26,965 $114,221 $25,131 $1,295 $1,120
Ratio of operating expenses
to average net
assets (C)................ 0.74% 0.76% 0.77% 0.80% 0.85% 0.70% 0.83% 0.89% 0.95% 1.16% 1.31%(A)
Ratio of net investment
income to average net
assets.................... 6.91% 6.49% 6.03% 6.96% 7.47% 8.41% 8.77% 7.97% 7.46% 8.11% 9.99%(A)
Portfolio turnover rate.... 137% 140% 33% 59% 115% 120% 351% 94% 201% 127% 165%(A)
- ----------
<FN>
* Commencement of operations.
** The Investment Quality Bond Trust is the successor to the Bond Trust
effective April 23, 1991.
(A) Annualized
(B) After expense reimbursement per share of $0.02, $0.28 and $0.12 in 1987, 1986 and 1985, respectively.
(C) The ratio of operating expenses, before reimbursement from the investment adviser, was 1.14%, 3.38% and 3.55% in 1987,
1986 and 1985, respectively.
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE> 123
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES TRUST
--------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 3/18/88*
--------------------------------------------------------------------- TO
1995 1994 1993 1992 1991 1990 1989** 12/31/88
---- ---- ---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................................ $ 12.64 $ 13.48 $ 13.05 $ 12.85 $ 11.83 $ 10.98 $ 9.81 $10.03
Income from investment operations:
- ----------------------------------
Net investment income (B)............... 0.89 0.77 0.48 0.10 0.19 1.07 0.20 0.07
Net realized and unrealized gain
(loss) on investments.................. 0.99 (0.95) 0.49 0.65 1.40 (0.13) 1.08 (0.29)
-------- -------- -------- -------- ------- ------- ------ ------
Total from investment operations.. 1.88 (0.18) 0.97 0.75 1.59 0.94 1.28 (0.22)
Less distributions:
- -------------------
Dividends from net investment income..... (0.87) (0.51) (0.46) (0.38) (0.53) (0.08) (0.11) --
Distributions from capital gains......... -- (0.15) (0.08) (0.17) (0.04) (0.01) -- --
-------- -------- -------- -------- ------- ------- ------ ------
Total distributions............... (0.87) (0.66) (0.54) (0.55) (0.57) (0.09) (0.11) --
-------- -------- -------- -------- ------- ------- ------ ------
Net asset value, end of period............. $ 13.65 $ 12.64 $ 13.48 $ 13.05 $ 12.85 $ 11.83 $10.98 $ 9.81
======== ======== ======== ======== ======= ======= ====== ======
Total return..................... 15.57% (1.25%) 7.64% 6.19% 14.01% 8.63% 13.16% (2.19%)
Net assets, end of period (000's).......... $216,788 $188,813 $222,072 $125,945 $29,246 $10,469 $5,905 $ 344
Ratio of operating expenses to
average net assets (C).................. 0.71% 0.73% 0.75% 0.76% 0.87% 1.04% 0.90% 5.16%(A)
Ratio of net investment income to
average net assets....................... 6.46% 5.68% 5.05% 6.12% 7.09% 7.70% 6.66% 1.16%(A)
Portfolio turnover rate.................... 212% 387% 213% 141% 233% 284% 330% 156%(A)
- ----------
<FN>
* Commencement of operations.
** The U.S. Government Securities Trust is the successor to the Convertible
Securities Trust effective May 1, 1989.
(A) Annualized
(B) After expense reimbursement per share of $0.01 and $0.06 in 1989 and 1988, respectively.
(C) The ratio of operating expenses, before reimbursement from the investment adviser, was 1.62% and 6.16% in 1989 and 1988,
respectively.
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE> 124
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET TRUST
--------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 6/18/85*
---------------------------------------------------------------------------------------- TO
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 12/31/85
------- ------- ------ ------ ------ ------- ------ ------ ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period....... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $10.00 $10.00 $10.00
Income from investment
operations:
- ----------------------
Net investment
income (B)............... 0.55 0.38 0.27 0.33 0.56 0.75 0.72 0.57 0.60 0.56 0.36
Less distributions:
- -------------------
Dividends from net
investment income....... (0.55) (0.38) (0.27) (0.33) (0.56) (0.75) (0.72) (0.57) (0.60) (0.56) (0.36)
-------- -------- -------- ------- ------- ------- ------- ------- ------ ------ ------
Net asset value, end
of period.................. $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $10.00 $10.00 $10.00
======== ======== ======== ======= ======= ======= ======= ======= ====== ====== ======
Total return...... 5.62% 3.78% 2.69% 3.36% 5.71% 7.76% 8.56% 6.77% 6.13% 5.74% 3.61%
Net assets, end of
period (000's)............. $258,117 $276,674 $132,274 $89,535 $79,069 $85,040 $19,403 $12,268 $7,147 $1,046 $1,001
Ratio of operating
expenses to average net
assets (C)................ 0.54% 0.57% 0.59% 0.60% 0.60% 0.57% 0.79% 0.99% 0.78% 1.11% 1.21%(A)
Ratio of net investment
income to average net
assets..................... 5.48% 3.93% 2.66% 3.28% 5.65% 7.27% 8.26% 6.68% 5.86% 6.84% 6.84%(A)
<FN>
- ---------------------------------
* Commencement of operations.
(A) Annualized
(B) After expense reimbursement per share of $0.08, $0.23 and $0.12 in 1987, 1986 and 1985, respectively.
(C) The ratio of operating expenses, before reimbursement from the investment adviser, was 1.57%, 3.43% and 3.50% in 1987, 1986
and 1985, respectively.
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE> 125
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE ASSET ALLOCATION TRUST
----------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------- 8/83/89*
TO
1995 1994 1993 1992 1991 1990 12/31/89
-------- ------- ------- ------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period............................... $ 11.17 $ 12.03 $ 11.25 $ 10.72 $ 9.08 $ 9.88 $ 10.00
Income from investment operations:
- ----------------------------------
Net investment income .................. 0.35 0.31 0.34 0.30 0.36 0.36 0.08
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions....... 2.07 (0.41) 0.79 0.55 1.69 (1.07) (0.20)
-------- -------- -------- -------- -------- ------- -------
Total from investment operations. 2.42 (0.10) 1.13 0.85 2.05 (0.71) (0.12)
Less distributions:
- -------------------
Dividends from net investment income.... (0.33) (0.31) (0.30) (0.32) (0.41) (0.07) ----
Distributions from capital gains........ (0.41) (0.45) (0.05) ---- ---- (0.02) ----
-------- -------- -------- -------- -------- ------- -------
Total distributions................. (0.74) (0.76) (0.35) (0.32) (0.41) (0.09) ----
-------- -------- -------- -------- -------- ------- -------
Net asset value, end of period............ $ 12.85 $ 11.17 $ 12.03 $ 11.25 $ 10.72 $ 9.08 $ 9.88
======== ======== ======== ======== ======== ======= =======
Total return....................... 22.77% (0.69%) 10.30% 8.24% 22.96% (7.27%) (1.20%)
Net assets, end of period (000's)......... $211,757 $184,662 $174,448 $151,627 $124,632 $91,581 $87,301
Ratio of operating expenses to
average net assets...................... 0.91% 0.89% 0.86% 0.89% 0.88% 0.78% 0.89%(A)
Ratio of net investment income to
average net assets...................... 2.76% 2.90% 2.96% 3.08% 3.63% 4.08% 3.32%(A)
Portfolio turnover rate................... 111% 136% 92% 123% 172% 82% 22%(A)
<FN>
- -----------------------------
* Commencement of operations.
(A) Annualized
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE> 126
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MODERATE ASSET ALLOCATION TRUST
-----------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 8/03/89*
-------------------------------------------------------------------- TO
1995 1994 1993 1992 1991 1990 12/31/89
------- ------ ------ ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................................ $ 10.79 $ 11.76 $ 11.14 $ 10.72 $ 9.29 $ 10.03 $ 10.00
Income from investment operations:
- ----------------------------------
Net investment income ................... 0.50 0.45 0.41 0.41 0.42 0.48 0.11
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions........ 1.65 (0.65) 0.67 0.43 1.50 (1.10) (0.08)
-------- -------- -------- -------- -------- -------- --------
Total from investment operations.. 2.15 (0.20) 1.08 0.84 1.92 (0.62) 0.03
Less distributions:
- -------------------
Dividends from net investment income..... (0.45) (0.40) (0.39) (0.42) (0.49) (0.10) ----
Distributions from capital gains......... (0.10) (0.37) (0.07) ---- ---- (0.02) ----
-------- -------- -------- -------- -------- -------- --------
Total distributions.................. (0.55) (0.77) (0.46) (0.42) (0.49) (0.12) ----
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period............. $ 12.39 $ 10.79 $ 11.76 $ 11.14 $ 10.72 $ 9.29 $ 10.03
======== ======== ======== ======== ======== ======== ========
Total return........................ 20.68% (1.61%) 10.06% 8.30% 21.23% (6.23%) 0.30%
Net assets, end of period (000's).......... $650,136 $604,491 $644,257 $505,967 $420,074 $327,328 $318,439
Ratio of operating expenses to
average net assets....................... 0.84% 0.85% 0.84% 0.87% 0.86% 0.73% 0.79%(A)
Ratio of net investment income to
average net assets....................... 4.09% 4.01% 4.02% 4.21% 4.38% 5.10% 4.51%(A)
Portfolio turnover rate.................... 129% 180% 135% 169% 168% 76% 41%(A)
<FN>
- -----------------------------
* Commencement of operations.
(A) Annualized
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE> 127
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONSERVATIVE ASSET ALLOCATION TRUST
-----------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 8/03/89*
------------------------------------------------------------------- TO
1995 1994 1993 1992 1991 1990 12/31/89
------ ------ ------ ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................................. $ 10.34 $ 11.26 $ 10.78 $ 10.63 $ 9.56 $ 10.11 $ 10.00
Income from investment operations:
- ----------------------------------
Net investment income .................... 0.54 0.55 0.50 0.47 0.58 0.62 0.15
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions......... 1.26 (0.76) 0.44 0.26 1.15 (1.01) (0.04)
-------- -------- -------- -------- -------- -------- --------
Total from investment operations... 1.80 (0.21) 0.94 0.73 1.73 (0.39) 0.11
Less distributions:
- -------------------
Dividends from net investment income...... (0.55) (0.46) (0.46) (0.58) (0.66) (0.13) ----
Distributions from capital gains.......... ---- (0.25) ---- ---- ---- (0.03) ----
-------- -------- -------- -------- -------- -------- --------
Total distributions................... (0.55) (0.71) (0.46) (0.58) (0.66) (0.16) ----
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period.............. $ 11.59 $ 10.34 $ 11.26 $ 10.78 $ 10.63 $ 9.56 $ 10.11
======== ======== ======== ======== ======== ======== ========
Total return......................... 18.07% (1.84%) 8.99% 7.36% 18.80% (3.84%) 1.10%
Net assets, end of period (000's)........... $224,390 $216,716 $250,117 $201,787 $165,167 $149,901 $141,191
Ratio of operating expenses to
average net assets........................ 0.87% 0.87% 0.86% 0.89% 0.88% 0.76% 0.82%(A)
Ratio of net investment income to
average net assets........................ 4.68% 4.86% 4.78% 4.99% 5.65% 6.68% 6.00%(A)
Portfolio turnover rate..................... 110% 220% 170% 252% 211% 78% 85%(A)
<FN>
- -----------------------------
* Commencement of operations.
(A) Annualized
</TABLE>
The accompanying notes are an integral part of the financial statements.
25
<PAGE> 128
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
GLOBAL EQUITY TRUST
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
COMMON STOCK - 97.85%
AEROSPACE - 0.80%
British Aerospace 415,000 $ 5,129,091
-----------
ALUMINUM - 0.50%
Aluminum Company of America 60,800 3,214,800
-----------
APPAREL & TEXTILES - 1.88%
Albany International Corporation 200,000 3,625,000
Itochu Corporation 1,000,000 6,731,235
Oneida, Ltd. 95,000 1,674,375
-----------
12,030,610
AUTO PARTS - 0.88%
Danaher Corporation 178,000 5,651,500
-----------
AUTOMOBILES - 3.36%
Daimler Benz AG 18,177 9,148,689
Fiat SPA 2,962,798 9,626,470
Hayes Wheels International,
Incorporated 109,000 2,793,125
-----------
21,568,284
BANKING - 6.12%
Bangkok Bank 280,200 3,403,779
Bankamerica Corporation 48,000 3,108,000
Hang Seng Bank 759,000 6,797,381
HSBC Holdings 461,400 7,205,120
Sakura Bank 260,000 3,298,789
Societe Generale 53,180 6,570,125
Sumitomo Bank 230,000 4,878,450
Sumitomo Trust & Banking 280,000 3,959,322
-----------
39,220,966
BROADCASTING - 0.76%
Wolters Kluwer 51,640 4,884,995
-----------
BUILDING CONSTRUCTION - 1.03%
Fluor Corporation 100,000 6,600,000
-----------
BUSINESS SERVICES - 4.05%
Eaux (Cie Generale) 51,400 5,131,603
Havas 52,030 4,127,763
Interpublic Group Companies,
Incorporated 100,000 4,337,500
Secom Company 178,000 12,378,111
-----------
25,974,977
CHEMICALS - 4.93%
Dow Chemical Company 83,700 5,890,388
Imperial Chemical Industries
PLC, ADR 509,300 6,031,080
Sekisui Chemical 520,000 7,655,206
Sumitomo Chemical 1,200,000 5,985,472
Toray Industries, Incorporated 920,000 6,059,080
-----------
31,621,226
COMPUTERS & BUSINESS EQUIPMENT - 3.15%
International Business Machines
Corporation 15,400 $ 1,412,950
Olivetti & C SPA* 22,175,000 17,774,908
Tandy Corporation 25,000 1,037,500
-----------
20,225,358
CONGLOMERATES - 3.71%
Berjaya Sports 1,968,000 4,571,879
BTR PLC 1,425,100 7,259,401
Hutchison Whampoa 1,262,000 7,687,061
Renong BHD 2,908,000 4,305,264
-----------
23,823,605
CONSTRUCTION MATERIALS - 0.99%
Maeda Road Construction 342,000 6,326,586
-----------
CONTAINERS & GLASS - 0.78%
Mark IV Industries, Incorporated 254,822 5,032,734
-----------
DOMESTIC OIL - 0.70%
Phillips Petroleum Company 132,400 4,518,150
-----------
DRUGS & HEALTH CARE - 5.45%
Astra AB, Series A 502,685 20,062,883
Astra AB, Series B 273,760 10,843,695
Bristol Myers Squibb Company 17,700 1,519,988
Isolyser Company, Incorporated* 180,000 2,520,000
-----------
34,946,566
ELECTRICAL EQUIPMENT - 2.32%
General Electric Company 126,600 9,115,200
NEC Corporation 470,000 5,735,593
-----------
14,850,793
ELECTRONICS - 6.91%
AMP, Incorporated 152,200 5,840,675
Emulex Corporation* 138,600 1,420,650
Intel Corporation 53,600 3,041,800
Kyocera Corporation 43,000 3,194,286
Mitsumi Electric 615,000 14,831,477
Rohm Company 135,000 7,622,760
TDK Corporation 103,000 5,257,240
Tokyo Electron 80,000 3,099,274
-----------
44,308,162
ENERGY SERVICES - 0.25%
Companhia Energetica De Sao Paulo* 182,400 1,592,735
-----------
FINANCIAL SERVICES - 2.07%
Daiwa Securities 600,000 9,181,598
Partner Re Holding 150,000 4,125,000
-----------
13,306,598
FOOD & BEVERAGES - 1.77%
Fraser & Neave 404,000 5,141,039
Universal Foods Corporation 155,000 6,219,375
-----------
11,360,414
</TABLE>
The accompanying notes are an integral part of the financial statements.
26
<PAGE> 129
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
GAS & PIPELINE UTILITIES - 1.29%
Osaka Gas Company 2,400,000 $ 8,298,305
------------
GOLD - 1.40%
Placer Dome, Incorporated 371,300 8,957,613
------------
HOMEBUILDERS - 1.84%
Toyo Exterior Company 65,000 1,599,031
Yokogawa Bridge Company 676,000 10,213,656
------------
11,812,687
HOUSEHOLD APPLIANCES FURNISHING - 1.70%
Sharp Corporation 681,000 10,882,809
------------
HOTELS & RESTAURANTS - 1.80%
Equity Inns, Incorporated 100,200 1,152,300
HFS, Incorporated* 100,000 8,175,000
Morrison Restaurants, Incorporated 157,700 2,207,800
------------
11,535,100
INDUSTRIAL MACHINERY - 6.26%
Ebara Corporation 456,000 6,668,862
Exedy Corporation 323,000 5,130,460
Keppel Corporation 752,000 6,698,621
Kolbenschmidt AG* 29,946 4,279,491
Mannesmann AG 26,758 8,518,912
Mitsubishi Heavy Industries 1,110,000 8,847,748
------------
40,144,094
INSURANCE - 0.80%
Tokio Marine & Fire Insurance
Company, Ltd. 390,000 5,099,274
------------
LEISURE TIME - 1.29%
Genting BHD 292,000 2,437,453
Resorts World BHD 1,091,000 5,842,265
------------
8,279,718
LIQUOR - 1.04%
LVMH Moet Hennessy 32,060 6,677,803
------------
MISCELLANEOUS - 0.41%
New World Infrastructure, Ltd. 731 1,399
Warehouse Group 1,000,000 2,654,289
------------
2,655,688
MUTUAL FUNDS - 1.34%
India Gateway Fund* 78,000 1,364,220
Indian Opportunities Fund* 180,088 1,685,624
Korea Equity Fund, Incorporated 319,000 2,631,750
R.O.C. Taiwan Fund* 280,100 2,941,050
------------
8,622,644
NEWSPAPERS - 0.77%
Gannett, Incorporated 80,000 4,910,000
------------
NON-FERROUS METALS - 3.09%
QNI, Ltd. 6,505,400 13,732,225
WMC, Ltd. 949,525 6,097,737
------------
19,829,962
PAPER - 0.53%
Schmalbach Lubeca 24,200 $ 3,404,364
------------
PETROLEUM SERVICES - 1.24%
Schlumberger, Ltd. 114,700 7,942,975
------------
PHOTOGRAPHY - 0.65%
Minolta Camera Company* 711,000 4,152,378
------------
PUBLISHING - 0.90%
Ver Ned Uitgevers 42,210 5,794,767
------------
REAL ESTATE - 2.72%
Mitsubishi Estate 350,000 4,372,881
New World Development Company 439,000 1,913,262
Storage USA, Incorporated 30,000 978,750
Sun Hung Kai Properties 1,247,000 10,200,162
------------
17,465,055
RETAIL GROCERY - 0.74%
Hac-Kimisawa Company 298,000 4,733,366
------------
RETAIL TRADE - 4.53%
Carrefour 6,510 3,949,604
Friedmans, Incorporated, Class A* 160,000 3,080,000
Wal Mart Stores, Incorporated 240,000 5,370,000
Walgreen Company 250,000 7,468,750
Xebio Company 260,000 9,191,283
------------
29,059,637
STEEL - 1.34%
Nippon Steel Corporation 2,500,000 8,571,429
------------
TELECOMMUNICATION SERVICES - 1.13%
Cable & Wireless 603,100 4,317,893
Seibu Electric & Machine 448,000 2,950,508
------------
7,268,401
TELEPHONE - 6.96%
British Telecommunications PLC 1,086,400 5,955,881
DDI Corporation 1,378 10,676,998
Nippon Telegraph & Telephone
Corporation 1,295 10,469,646
Telefonica De Espana SA 738,230 10,224,455
Telephone & Data Systems,
Incorporated 30,000 1,185,000
VodaFone Group 1,709,500 6,132,854
------------
44,644,834
TIRES AND RUBBER - 0.57%
Michelin Company Generale De
Establishment, Class B 91,710 3,657,538
------------
TRUCKING & FREIGHT - 1.09%
Yamato Transport 588,000 7,004,746
------------
TOTAL COMMON STOCKS
(Cost: $566,710,109) $627,593,337
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
27
<PAGE> 130
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
PREFERRED STOCK - 0.46%
AUTOMOBILES - 0.39%
Porsche AG* 4,803 $ 2,504,457
------------
MUTUAL FUNDS - 0.07%
India Gateway Fund* 80,000 441,600
------------
TOTAL PREFERRED STOCKS
(Cost: $3,920,896) $ 2,946,057
------------
WARRANTS - 0.55*
MISCELLANEOUS - 0.55%
Volkswagen International AG
(Expiration date 10/27/98;
strike price DEM 221) 39,800 3,537,470
------------
TOTAL WARRANTS
(Cost: $3,072,790) $ 3,537,470
------------
REPURCHASE AGREEMENT - 1.14%
Principal
Amount Value
- ---------- -----
$7,304,000 Repurchase Agreement with State
Street Bank & Trust Company, dated
12/29/95 at 5.00%, to be repurchased
at $7,308,058 on 01/02/96
collateralized by $6,670,000 U.S.
Treasury Notes, 7.50% due 05/15/02
(valued at $7,513,147 including
interest) $ 7,304,000
------------
TOTAL INVESTMENTS
(Global Equity Trust) (Cost: $581,007,795) $641,380,864
============
PASADENA GROWTH TRUST
<CAPTION>
Shares Value
------ -----
COMMON STOCK - 92.09%
AUTO PARTS - 1.15%
Autozone, Incorporated* 110,000 $ 3,176,250
------------
BANKING - 4.83%
First Interstate Bancorporation 15,000 2,047,500
Nationsbank Corporation 25,000 1,740,625
Roosevelt Financial Group, Incorporated 50,000 968,750
Wells Fargo & Company 40,000 8,640,000
------------
13,396,875
BUSINESS SERVICES - 7.45%
Automatic Data Processing,
Incorporated 45,000 3,341,250
Comshare, Incorporated* 45,000 1,170,000
Electro Rent Corporation* 50,000 1,087,500
First Data Corporation 55,000 3,678,125
General Motors Corporation, Class E 55,000 2,860,000
The Gymboree Corporation* 50,000 1,031,250
BUSINESS SERVICES - CONTINUED
Interpublic Group Companies,
Incorporated 34,000 $ 1,474,750
Legato Systems, Incorporated* 25,000 775,000
Mail Boxes, Etc.* 80,000 1,000,000
Mecon, Incorporated* 7,000 111,125
Nokia Corporation, ADR 32,000 1,244,000
Polygram NV, ADR 20,000 1,050,000
StrataCom, Incorporated* 25,000 1,837,500
------------
20,660,500
COMPUTERS & BUSINESS EQUIPMENT - 5.82%
3Com Corporation* 29,000 1,352,125
Bay Networks, Incorporated* 30,000 1,233,750
Casino Data Systems* 75,000 1,875,000
Cisco Systems, Incorporated* 55,000 4,104,375
Compaq Computer Corporation* 34,000 1,632,000
DST Systems, Incorporated* 60,000 1,710,000
Hewlett-Packard Company 25,000 2,093,750
Saville Systems PLC, ADR* 70,000 997,500
Verifone, Incorporated* 40,000 1,145,000
------------
16,143,500
COSMETICS & TOILETRIES - 0.99%
Avon Products, Incorporated 20,000 1,507,500
International Flavours 26,000 1,248,000
------------
2,755,500
DRUGS & HEALTH CARE - 10.64%
ARV Assisted Living* 20,000 235,000
Columbia/HCA-Healthcare Corporation 50,000 2,537,500
Elan Corporation PLC, ADR* 30,000 1,458,750
IDEXX Laboratories, Incorporated* 80,000 3,760,000
Johnson & Johnson 30,000 2,568,750
Luxottica Group SPA, ADR 30,000 1,755,000
Medtronic, Incorporated 65,000 3,631,875
Merck & Company, Incorporated 65,000 4,273,750
Pfizer, Incorporated 100,000 6,300,000
Roche Holdings, Ltd., ADR* 38,000 2,997,250
------------
29,517,875
ELECTRICAL EQUIPMENT - 1.71%
Alliance Semiconductor Corporation* 30,000 348,750
ANADIGICS, Incorporated* 30,000 637,500
Duracell International, Incorporated 45,000 2,328,750
General Electric Company 20,000 1,440,000
------------
4,755,000
ELECTRIC UTILITIES - 0.72%
Korea Electric Power Corporation, ADR 75,000 2,006,250
------------
ELECTRONICS - 8.56%
Altera Corporation* 10,000 497,500
Burr-Brown Corporation* 23,400 596,700
DSC Communications Corporation* 20,000 737,500
Elantec Semiconductor, Incorporated* 25,000 256,250
L.M. Ericsson Telephone Company,
Class B, ADR 123,500 2,408,250
ETEC Systems, Incorporated* 50,000 562,500
</TABLE>
The accompanying notes are an integral part of the financial statements.
28
<PAGE> 131
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
ELECTRONICS - CONTINUED
Integrated Device Technology* 11,000 $ 141,625
Intel Corporation 75,000 4,256,250
KLA Instruments Corporation* 20,000 521,250
Linear Technology Corporation 55,000 2,158,750
LSI Logic Corporation* 62,000 2,030,500
Maxim Integrated Products,
Incorporated* 30,000 1,155,000
MicroCom, Incorporated* 35,000 910,000
Motorola, Incorporated 60,000 3,420,000
Photon Dynamics, Incorporated* 50,000 400,000
Silicon Graphics, Incorporated* 45,000 1,237,500
Tellabs, Incorporated* 40,000 1,480,000
VLSI Technology, Incorporated* 20,000 362,500
Xilinx, Incorporated* 20,000 610,000
-----------
23,742,075
FINANCIAL SERVICES - 7.85%
American Express Company 75,000 3,103,125
Dean Witter Discover & Company 55,000 2,585,000
Federal Home Loan Mortgage
Corporation 80,000 6,680,000
Federal National Mortgage Association 55,000 6,826,875
Imperial Credit Industries, Incorporated* 100,000 2,175,000
Mercury Finance Corporation 30,000 397,500
-----------
21,767,500
FOOD & BEVERAGES - 5.04%
The Coca Cola Company 100,000 7,425,000
PepsiCo, Incorporated 75,000 4,190,625
WM Wrigley Jr. Company 45,000 2,362,500
-----------
13,978,125
HOTELS & RESTAURANTS - 1.39%
McDonald's Corporation 70,000 3,158,750
Mirage Resorts, Incorporated* 20,000 690,000
-----------
3,848,750
HOUSEHOLD APPLIANCES FURNISHING - 0.45%
Aaron Rents, Incorporated, Class B 70,000 1,260,000
-----------
HOUSEHOLD PRODUCTS - 4.24%
Colgate Palmolive Company 40,000 2,810,000
Gillette Company 140,000 7,297,500
Procter & Gamble Company 20,000 1,660,000
-----------
11,767,500
INDUSTRIAL MACHINERY - 1.13%
Applied Materials, Incorporated* 35,000 1,378,125
MSC Industrial Direct, Incorporated,
Class A 50,000 1,375,000
Silicon Valley Group, Incorporated* 15,000 378,750
-----------
3,131,875
INVESTMENT COMPANIES - 0.70%
Invesco PLC, ADR 50,000 1,937,500
-----------
LEISURE TIME - 5.69%
Anchor Gaming* 156,600 $ 3,562,650
Carnival Corporation 200,000 4,875,000
Circus Circus Enterprises, Incorporated* 65,000 1,811,875
The Walt Disney Company 75,000 4,425,000
Regal Cinemas, Incorporated* 37,500 1,115,625
-----------
15,790,150
MUTUAL FUNDS - 2.21%
Asia Tigers Fund, Incorporated 125,000 1,390,625
Central European Equity Fund,
Incorporated 50,000 818,750
India Fund, Incorporated* 200,000 1,775,000
Korea Fund, Incorporated 55,759 1,226,698
Thai Fund, Incorporated 41,128 920,239
-----------
6,131,312
NEWSPAPERS - 2.22%
News Corporation, Ltd., ADR 93,000 1,790,250
Reuters Holdings PLC, ADR 79,000 4,354,875
-----------
6,145,125
OFFICE FURNISHINGS & SUPPLIES - 0.99%
Staples, Incorporated* 75,000 1,828,125
Viking Office Products, Incorporated* 20,000 930,000
-----------
2,758,125
POLLUTION CONTROL - 1.08%
WMX Technologies, Incorporated 100,000 2,987,500
-----------
RETAIL GROCERY - 0.41%
Albertsons, Incorporated 35,000 1,150,625
-----------
RETAIL TRADE - 9.02%
Bed Bath & Beyond, Incorporated* 30,000 1,164,375
Circuit City Stores, Incorporated 50,000 1,381,250
Claire's Stores, Incorporated 50,000 881,250
Department 56, Incorporated* 20,000 767,500
Dollar General Corporation 110,000 2,282,500
Home Depot, Incorporated 105,000 5,026,875
Kohl's Corporation* 50,000 2,625,000
Leslie's Poolmart* 52,500 735,000
Office Depot, Incorporated* 85,000 1,678,750
Trend Lines, Incorporated* 67,500 675,000
Wal Mart Stores, Incorporated 225,000 5,034,375
Williams Sonoma, Incorporated* 150,000 2,775,000
-----------
25,026,875
SOFTWARE - 2.79%
Informix Corporation* 48,000 1,440,000
Insignia Solutions PLC, ADR* 40,000 470,000
Microsoft Corporation* 30,000 2,632,500
Oracle Systems Corporation* 64,000 2,712,000
Pinnacle Systems, Incorporated* 20,000 495,000
-----------
7,749,500
</TABLE>
The accompanying notes are an integral part of the financial statements.
29
<PAGE> 132
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
TELECOMMUNICATION SERVICES - 1.29%
CKS Group, Incorporated* 25,000 $ 975,000
MRV Communications, Incorporated* 15,000 380,625
Paging Network, Incorporated* 45,000 1,096,875
Spectrian Corporation* 20,000 445,000
Visioneer Communications,
Incorporated* 30,000 667,500
------------
3,565,000
TELEPHONE - 0.46%
PT Telekomunikasi Indonesia, ADR* 50,000 1,262,500
------------
TOBACCO - 1.47%
Philip Morris Companies, Incorporated 45,000 4,072,500
------------
TRUCKING & FREIGHT - 1.77%
Federal Express Corporation* 34,000 2,511,750
Harper Group, Incorporated 75,000 1,331,250
Smart & Final, Incorporated 50,000 1,062,500
------------
4,905,500
TOTAL COMMON STOCKS
(Cost: $204,631,642) $255,389,787
------------
WARRANTS - 0.29%
ELECTRONICS - 0.29%
Intel Corporation (Expiration date
03/14/98; strike price $38.75) 30,000 802,500
------------
TOTAL WARRANTS (Cost: $1,127,109) $ 802,500
------------
REPURCHASE AGREEMENT - 7.62%
<CAPTION>
Principal
Amount Value
------ -----
$21,144,000 Repurchase Agreement with State
Street Bank & Trust Company dated
12/29/95 at 5.00%, to be repurchased
at $21,155,747 on 01/02/96,
collateralized by $14,830,000 U.S.
Treasury Bonds, 9.875% due 11/15/15
(valued at $21,756,996 including
interest) $ 21,144,000
------------
TOTAL INVESTMENTS
(Pasadena Growth Trust) (Cost: $226,902,751) $277,336,287
============
EQUITY TRUST
<CAPTION>
Shares Value
------ -----
COMMON STOCK - 89.73%
AEROSPACE - 1.38%
Computer Sciences Corporation* 20,700 $ 1,454,175
Sun Microsystems, Incorporated* 83,100 3,791,437
U.S. Robotics Corporation* 94,200 8,266,050
------------
13,511,662
AGRICULTURAL MACHINERY - 0.63%
Deere & Company 174,300 $ 6,144,075
------------
AIR TRAVEL - 1.25%
America West Airlines,
Incorporated, Class B* 73,400 1,247,800
AMR Corporation* 44,300 3,289,275
Atlantic Southeast Airlines, Incorporated 12,600 270,900
Delta Air Lines, Incorporated 49,600 3,664,200
Midwest Express Holdings, Incorporated* 800 22,200
Northwest Airlines Corporation, Class A* 17,600 897,600
Southwest Airlines Company 65,400 1,520,550
Trans World Airlines, Incorporated* 15,500 160,812
UAL Corporation * 6,100 1,088,850
------------
12,162,187
ALUMINUM - 0.84%
Aluminum Company of America 154,700 8,179,762
------------
APPAREL & TEXTILES - 1.26%
American Eagle Outfitters* 17,200 101,050
Cygne Designs, Incorporated* 24,300 22,781
Gucci Group NV* 3,400 132,175
Intimate Brands, Incorporated* 19,200 288,000
Just For Feet, Incorporated* 38,650 1,381,738
Kellwood Company 14,200 289,325
Mohawk Industrials, Incorporated* 9,800 153,125
Nautica Enterprises, Incorporated* 8,400 367,500
Nike, Incorporated, Class B 58,200 4,052,175
Reebok International, Ltd. 42,900 1,211,925
Talbots, Incorporated 65,800 1,891,750
Tommy Hilfiger Corporation* 57,800 2,449,275
------------
12,340,819
AUTOMOBILES - 3.66%
Chrysler Corporation 240,000 13,290,000
General Motors Corporation 166,900 8,824,837
General Motors Corporation, Class E 175,200 9,110,400
General Motors Corporation, Class H 86,100 4,229,662
Honda Motor Company 11,000 226,925
------------
35,681,824
AUTO PARTS - 0.53%
Autozone, Incorporated* 155,900 4,501,613
Dana Corporation 22,100 646,425
Lear Seating Corporation* 1,900 55,100
------------
5,203,138
BANKING - 3.60%
Banc One Corporation 16,400 619,100
Bank of New York, Incorporated 51,900 2,530,125
Bank of Boston Corporation 17,900 827,875
Chase Manhattan Corporation 31,000 1,879,375
Chemical Banking Corporation 71,400 4,194,750
Citicorp 149,500 10,053,875
First Interstate Bancorp 56,300 7,684,950
Nationsbank Corporation 105,000 7,310,625
------------
35,100,675
</TABLE>
The accompanying notes are an integral part of the financial statements.
30
<PAGE> 133
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
BROADCASTING - 1.61%
American Radio Systems Corporation* 7,100 $ 198,800
Belo (A.H.) Corporation 6,300 218,925
British Sky Broadcast Group, ADR* 1,300 48,913
Clear Channel Communications* 26,000 1,147,250
Comcast Corporation 42,000 763,875
Grupo Televisa S.A., ADR 29,700 668,250
Emmis Broadcasting Corporation* 8,100 251,100
Infinity Broadcasting Corporation* 75,692 2,819,527
Viacom, Incorporated, Class A* 6,952 318,923
Viacom, Incorporated, Class B* 195,873 9,279,483
-----------
15,715,046
BUSINESS SERVICES - 1.75%
America Online, Incorporated* 100,000 3,750,000
Automatic Data Processing,
Incorporated 51,500 3,823,875
Boca Research, Incorporated* 4,700 124,550
CUC International, Incorporated* 158,025 5,392,603
Danka Business Systems, ADR 3,400 125,800
First Data Corporation 25,691 1,718,086
Nokia Corporation, ADR 30,600 1,189,575
Paychex, Incorporated 13,650 680,794
Spectrum Holobyte, Incorporated* 12,000 78,000
Stratacom, Incorporated* 3,300 242,550
-----------
17,125,833
CHEMICALS - 0.92%
Airgas, Incorporated* 28,700 954,275
E.I. Du Pont De Nemours & Company,
Incorporated 54,500 3,808,187
First Mississippi Corporation 15,500 410,750
Guilford Pharmaceuticals, Incorporated* 19,900 315,913
Monsanto Company 5,100 624,750
Rohm & Haas Company 1,800 115,875
Union Carbide Corporation 67,600 2,535,000
Wang Laboratories, Incorporated* 13,700 227,763
-----------
8,992,513
COMPUTERS & BUSINESS EQUIPMENT - 9.20%
3Com Corporation* 186,916 8,714,958
Bay Networks, Incorporated* 270,900 11,140,762
Cabletron Systems, Incorporated* 8,200 664,200
Ceridian Corporation* 43,800 1,806,750
Cisco Systems, Incorporated* 263,900 19,693,537
Compaq Computer Corporation* 357,300 17,150,400
Dell Computer Corporation* 170,000 5,886,250
Digital Equipment Corporation* 53,600 3,437,100
Digital Link Corporation* 12,900 182,213
DST Systems, Incorporated* 4,600 131,100
Hewlett-Packard Company 76,200 6,381,750
International Business Machines
Corporation 63,100 5,789,425
Komag, Incorporated* 28,100 1,296,112
Oak Technology* 21,300 899,925
Seagate Technology* 63,700 3,025,750
COMPUTERS & BUSINESS EQUIPMENT - CONTINUED
Stratus Computer, Incorporated* 11,300 391,263
Tech Data Corporation* 19,900 298,500
Xerox Corporation 20,800 2,849,600
Xircom, Incorporated* 4,300 53,213
-----------
89,792,808
CONSTRUCTION & MINING EQUIPMENT - 0.36%
Caterpillar, Incorporated 60,100 3,530,875
-----------
CONSTRUCTION MATERIALS - 0.07%
Armstrong World Industrials,
Incorporated 11,400 706,800
-----------
CRUDE PETROLEUM AND NATURAL GAS - 0.27%
Barrett Resources Corporation* 2,100 61,688
Burlington Resources, Incorporated 23,200 910,600
Enron Oil and Gas Company 31,100 746,400
Union Pacific Resources Group,
Incorporated 36,100 916,037
-----------
2,634,725
DOMESTIC OIL - 0.04%
Unocal Corporation 11,900 346,588
-----------
DRUGS & HEALTH CARE - 11.18%
Allergan, Incorporated 26,800 871,000
Alza Corporation* 45,900 1,136,025
American Home Products Corporation 58,400 5,664,800
Amgen, Incorporated* 151,800 9,013,125
Baxter International, Incorporated 35,000 1,465,625
Becton Dickinson & Company 43,000 3,225,000
Biogen, Incorporated* 81,500 5,012,250
Bristol Myers Squibb Company 77,700 6,672,487
Columbia/HCA-Healthcare
Corporation 114,480 5,809,860
Elan Corporation PLC, ADR* 12,350 600,519
Exogen, Incorporated* 10,500 202,125
General Nutrition Companies,
Incorporated* 138,300 3,180,900
Genetics Institute, Incorporated* 5,100 272,850
Grupo Casa Autrey, ADR 18,400 246,100
Guidant Corporation 9,400 397,150
Healthsouth Corporation 154,600 4,502,725
IVAX Corporation 7,800 222,300
Johnson & Johnson 188,500 16,140,312
Eli Lilly & Company 67,000 3,768,750
Lincare Holdings, Incorporated* 4,900 122,500
Medisense, Incorporated* 13,300 420,613
Medtronic, Incorporated 22,600 1,262,775
Merck & Company, Incorporated 182,300 11,986,225
National Surgery Centers, Incorporated* 600 13,800
Pfizer, Incorporated 125,800 7,925,400
Rhone Poulenc Rorer, Incorporated 20,100 1,070,325
Schering Plough Corporation 175,600 9,614,100
St. Jude Medical, Incorporated 29,550 1,270,650
</TABLE>
The accompanying notes are an integral part of the financial statements.
31
<PAGE> 134
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
DRUGS & HEALTH CARE - CONTINUED
Therapeutic Discovery Corporation* 3,000 $ 21,750
U.S. Healthcare, Incorporated 135,000 6,277,500
Vencor, Incorporated* 15,700 510,250
Watson Pharmaceuticals, Incorporated* 4,600 225,400
------------
109,125,191
EDUCATIONAL SERVICES - 0.01%
Apollo Group, Incorporated, Class A* 6,799 266,011
------------
ELECTRICAL EQUIPMENT - 3.61%
Atmel Corporation* 108,200 2,420,975
Boston Scientific Corporation* 20,200 989,800
General Electric Company 402,400 28,972,800
Hitachi 1,000 10,073
Micros Systems, Incorporated* 36,200 1,782,850
Millipore Corporation 8,200 337,225
Novellus Systems, Incorporated* 14,000 756,000
------------
35,269,723
ELECTRONICS - 6.54%
Adaptec, Incorporated 34,700 1,422,700
ADC Telecommunications, Incorporated* 25,000 912,500
Adflex Solutions, Incorporated* 8,700 232,725
Altera Corporation* 118,900 5,915,275
Analog Devices, Incorporated* 126,250 4,466,094
DSC Communications Corporation* 246,200 9,078,625
General Instrument Corporation* 4,900 114,538
Intel Corporation 108,000 6,129,000
Inter-Tel, Incorporated* 10,600 163,637
Iomega Corporation 1,500 72,938
Leitch Technology Corporation* 14,100 353,662
Linear Technology Corporation 144,000 5,652,000
LSI Logic Corporation* 129,300 4,234,575
Maxim Integrated Products,
Incorporated* 167,300 6,441,050
Microcom, Incorporated* 16,000 416,000
Newbridge Networks Corporation* 52,400 2,168,050
S 3, Incorporated* 95,300 1,679,661
Scientific Atlanta, Incorporated 53,000 795,000
SGS Thomson Microelectronics,
Incorporated* 38,900 1,565,725
Silicon Graphics, Incorporated* 197,970 5,444,175
Tencor Instruments* 42,900 1,045,688
Texas Instruments, Incorporated 19,000 983,250
Uniphase Corporation* 47,600 1,701,700
Xilinx, Incorporated* 93,300 2,845,650
-----------
63,834,218
FINANCIAL SERVICES - 6.52%
Allmerica Financial Corporation* 1,700 45,900
Allstate Corporation 35,876 1,475,400
American Express Company 314,600 13,016,575
Beneficial Corporation 29,000 1,352,125
Case Corporation 54,900 2,511,675
FINANCIAL SERVICES - CONTINUED
Corporate Express, Incorporated* 47,000 1,415,875
Daiwa Securities 72,000 1,101,792
Federal Home Loan Mortgage
Corporation 136,300 11,381,050
Federal National Mortgage Association 164,300 20,393,737
Green Tree Financial Corporation 79,800 2,104,725
Household International, Incorporated 700 41,388
Merrill Lynch & Company, Incorporated 105,500 5,380,500
Student Loan Marketing Association 13,100 862,963
Travelers Group, Incorporated 23,199 1,458,637
Yamaichi Securities Company 142,000 1,104,368
------------
63,646,710
FOOD & BEVERAGES - 0.61%
Nabisco Holdings Corporation 49,400 1,611,675
Outback Steakhouse, Incorporated* 19,600 703,150
Panamerican Beverages, Incorporated* 14,900 476,800
PepsiCo, Incorporated 55,900 3,123,412
------------
5,915,037
HOMEBUILDERS - 0.04%
Centex Corporation 10,600 368,353
------------
HOTELS AND RESTAURANTS - 0.20%
Brinker International, Incorporated* 8,100 122,512
Bristol Hotel Company* 1,100 26,813
HFS, Incorporated* 10,100 825,675
La Quinta Inns, Incorporated 10,500 287,437
Mirage Resorts, Incorporated* 21,000 724,500
------------
1,986,937
HOUSEHOLD APPLIANCES FURNISHING - 0.30%
Campo Electronics Appliances* 30,000 90,000
Leggett & Platt, Incorporated 29,800 722,650
Whirlpool Corporation 40,000 2,130,000
------------
2,942,650
INDUSTRIAL MACHINERY - 0.38%
Applied Materials, Incorporated* 49,700 1,956,938
Integrated Process Equipment
Corporation* 24,000 564,000
Magna International, Incorporated 17,500 756,875
MSC Industrial Direct, Incorporated,
Class A* 3,500 96,250
Pall Corporation 3,600 96,750
Thermo Electron Corporation* 5,500 286,000
------------
3,756,813
INTERNATIONAL OIL - 0.26%
British Petroleum PLC, ADR 25,214 2,574,980
------------
INSURANCE - 0.52%
Aetna Life & Casualty Company 22,200 1,537,350
American International Group,
Incorporated 4,300 397,750
Chubb Corporation 5,100 493,425
</TABLE>
The accompanying notes are an integral part of the financial statements.
32
<PAGE> 135
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
INSURANCE - CONTINUED
Cigna Corporation 16,200 $ 1,672,650
General Re Corporation 4,300 666,500
Prudential Reinsurance Holdings,
Incorporated* 11,500 268,813
-----------
5,036,488
INVESTMENT COMPANIES - 0.32%
Morgan Stanley Group, Incorporated 4,500 362,813
Nomura Securities 47,000 1,024,213
Charles Schwab Corporation 86,700 1,744,837
-----------
3,131,863
LEISURE TIME - 0.69%
Callaway Golf Company 46,300 1,047,537
Carnival Corporation 39,200 955,500
Cobra Golf, Incorporated* 31,100 1,107,937
The Walt Disney Company 48,500 2,861,500
Hollywood Entertainment Corporation* 61,900 518,413
International Game Technology 19,400 210,975
-----------
6,701,862
LIQUOR - 0.08%
Pete's Brewing Company* 600 8,400
Boston Beer Company,
Incorporated, Class A* 500 11,875
Seagram, Ltd. 23,300 806,762
-----------
827,037
MINING - 0.31%
Diamond Offshore Drilling, Incorporated* 20,900 705,375
Inco, Ltd. 68,400 2,274,300
-----------
2,979,675
MISCELLANEOUS - 0.05%
Adidas AG* 6,900 365,082
ARV Assisted Living* 7,800 91,650
Mecon, Incorporated* 600 9,525
Spacetex IMC Corporation * 1,700 19,975
-----------
486,232
NEWSPAPERS - 0.58%
Dow Jones & Company, Incorporated 33,300 1,327,837
Gannett, Incorporated 30,300 1,859,662
News Corporation, Ltd., ADR 15,600 333,450
Knight Ridder, Incorporated 34,200 2,137,500
-----------
5,658,449
OFFICE FURNISHINGS & SUPPLIES - 1.47%
OfficeMax, Incorporated* 217,850 4,874,394
Staples, Incorporated* 338,175 8,243,016
U.S. Office Products Company* 1,900 43,225
Viking Office Products, Incorporated* 24,700 1,148,550
-----------
14,309,185
PAPER - 0.37%
Alco Standard Corporation 47,400 2,162,625
Champion International Corporation 35,600 1,495,200
-----------
3,657,825
PETROLEUM SERVICES - 0.83%
Dresser Industrials, Incorporated 15,400 375,375
McDermott International, Incorporated 6,900 151,800
Petroleum Geo-Services A/S, ADR* 13,300 332,500
PETROLEUM SERVICES - CONTINUED
Schlumberger, Ltd. 79,800 $ 5,526,150
Western Atlas, Incorporated* 33,500 1,691,750
-----------
8,077,575
PHOTOGRAPHY - 0.38%
Canon, Incorporated 91,000 1,648,136
Eastman Kodak Company 31,200 2,090,400
-----------
3,738,536
POLLUTION CONTROL - 0.43%
Sanifill, Incorporated* 6,300 210,263
WMX Technologies, Incorporated 132,800 3,967,400
-----------
4,177,663
PUBLISHING - 0.59%
Big Flower Press Holdings,
Incorporated* 30,700 475,850
Time Warner, Incorporated 138,700 5,253,262
-----------
5,729,112
RAILROADS & EQUIPMENT - 0.93%
Burlington Northern Santa Fe 6,900 538,200
Conrail, Incorporated 19,200 1,344,000
CSX Corporation 145,600 6,643,000
Swift Transportation Company,
Incorporated* 38,200 582,550
-----------
9,107,750
REAL ESTATE - 0.01%
Welcome Home, Incorporated* 18,000 51,750
-----------
RETAIL GROCERY - 0.09%
Starbucks Corporation* 41,000 861,000
-----------
RETAIL TRADE - 6.78%
Barnes & Noble, Incorporated* 16,200 469,800
Bed Bath & Beyond, Incorporated* 43,900 1,703,869
Circuit City Stores, Incorporated 57,600 1,591,200
CompUSA, Incorporated* 129,800 4,040,025
Dayton Hudson Corporation 125,700 9,427,500
Ellett Brothers, Incorporated 25,300 202,400
Federated Department Stores,
Incorporated* 35,000 962,500
GAP, Incorporated 81,600 3,427,200
Global Directmail Corporation* 7,600 209,000
Henry Schein, Incorporated* 5,400 159,300
Home Depot, Incorporated 141,700 6,783,887
Limited, Incorporated 212,300 3,688,713
Lowes Companies, Incorporated 431,900 14,468,650
Nine West Group, Incorporated* 2,700 101,250
Office Depot, Incorporated* 119,825 2,366,544
PeopleSoft, Incorporated* 38,800 1,668,400
Pep Boys (Manny Moe & Jack) 56,800 1,455,500
Petco Animal Supplies, Incorporated* 7,500 219,375
Price Costco, Incorporated* 10,500 160,125
Price Enterprises, Incorporated* 93,200 1,432,950
Sears Roebuck & Company 38,700 1,509,300
Sunglass Hut International, Incorporated* 78,700 1,869,125
TJX Companies, Incorporated 94,400 1,781,800
</TABLE>
The accompanying notes are an integral part of the financial statements.
33
<PAGE> 136
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
RETAIL TRADE - CONTINUED
ValueVision International, Incorporated* 1,700 $ 9,456
Waban, Incorporated* 19,400 363,750
Wal Mart Stores, Incorporated 265,800 5,947,275
Woolworth Corporation* 15,600 202,800
------------
66,221,694
SOFTWARE - 6.72%
A.D.A.M. Software, Incorporated* 6,500 42,250
Arbor Software Corporation* 300 14,175
Broderbund Software, Incorporated* 52,600 3,195,450
Business Objects SA, ADR* 2,400 116,100
Cadence Design Systems, 169,950 7,137,900
Incorporated*
Cooper & Chyan Technology,
Incorporated* 1,200 18,900
Diamond Multimedia Systems,
Incorporated* 5,200 186,550
Discreet Logic, Incorporated* 19,200 480,000
Electronic Arts* 103,500 2,703,937
FTP Software, Incorporated* 21,800 632,200
Insignia Solutions PLC, ADR* 8,100 95,175
Madge Networks NV* 26,200 1,172,450
Mercury Interactive Corporation* 20,400 372,300
Micro Warehouse, Incorporated* 71,900 3,109,675
Microsoft Corporation* 153,500 13,469,625
Oracle Systems Corporation* 576,550 24,431,306
Parametric Technology Corporation* 93,200 6,197,800
Softkey International, Incorporated* 5,000 115,625
Sterling Software, Incorporated* 900 56,138
Structural Dynamics Research
Corporation* 30,000 881,250
Symantec Corporation* 39,300 913,725
Tivoli Systems, Incorporated* 6,300 212,625
Verity, Incorporated* 400 17,700
Visio Corporation* 700 19,775
------------
65,592,631
STEEL - 0.09%
Nucor Corporation 15,300 874,012
------------
TELECOMMUNICATION SERVICES - 2.65%
Ascend Communications, Incorporated* 82,900 6,725,262
Cascade Communications Corporation* 19,700 1,679,425
Hummingbird Communications, Ltd.* 7,700 311,850
K-III Communications Corporation* 30,700 372,238
NETCOM On-Line Communications* 18,800 676,800
Palmer Wireless, Incorporated* 7,900 173,800
SBC Communications, Incorporated 211,400 12,155,500
Tele-Communications, Incorporated,
Class A 55,000 1,093,125
Tele-Communications, Incorporated 13,750 369,531
Telular Corporation* 9,500 81,938
TeleCommun Brasil-Telebras, ADR* 36,000 1,705,500
Vanguard Cellular Systems,
Incorporated* 27,500 556,875
------------
25,901,844
TELEPHONE - 6.22%
AirTouch Communications,
Incorporated* 269,435 $ 7,611,539
Ameritech Corporation 189,500 11,180,500
American Telephone & Telegraph
Corporation 163,700 10,599,575
Bell Atlantic Corporation 70,700 4,728,062
Bellsouth Corporation 333,200 14,494,200
Frontier Corporation 116,700 3,501,000
LCI International, Incorporated* 62,600 1,283,300
NYNEX Corporation 99,500 5,373,000
Telefonos De Mexico SA, ADR 25,300 806,438
Worldcom, Incorporated* 33,200 1,170,300
------------
60,747,914
TIRES & RUBBER - 0.08%
Goodyear Tire and Rubber 16,400 744,150
------------
TOBACCO - 2.31%
Philip Morris Companies, Incorporated 246,000 22,263,000
RJR Nabisco Holdings Corporation 10,360 319,865
------------
22,582,865
TRUCKING & FREIGHT - 0.18%
Airborne Freight Corporation 11,500 306,187
J.B. Hunt Transport Services,
Incorporated 15,300 256,275
PST Vans, Incorporated* 3,300 15,263
Landstar Systems, Incorporated* 44,900 1,201,075
------------
1,778,800
TOTAL COMMON STOCKS
(Cost: $710,326,341) $875,831,865
------------
PREFERRED STOCK - 0.01%
SOFTWARE - 0.01%
Sap AG 300 45,383
------------
TOTAL PREFERRED STOCKS
(Cost: $23,637) $ 45,383
------------
REPURCHASE AGREEMENT - 10.26%
<CAPTION>
Principal
Amount Value
------ -----
$100,188,000 Repurchase Agreement with State
Street Bank & Trust Company dated
12/29/95 at 5.00%, to be
repurchased at $100,243,660 on
01/02/96, collateralized by
$89,055,000
U.S. Treasury Bonds, 7.25% due
05/15/16 (valued at $102,998,896
including interest) $100,188,000
-----------
TOTAL INVESTMENTS
(Equity Trust) (Cost: $810,537,978) $976,065,248
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
34
<PAGE> 137
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
VALUE EQUITY TRUST
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
COMMON STOCK - 88.88%
AEROSPACE - 4.53%
McDonnell Douglas Corporation 86,600 $ 7,967,200
Northrop Grumman Corporation 155,400 9,945,600
-----------
17,912,800
AIR TRAVEL - 1.97%
AMR Corporation 104,600 7,766,550
-----------
AUTOMOBILES - 2.91%
Ford Motor Company 396,400 11,495,600
------------
AUTO PARTS - 2.37%
Lear Seating Corporation* 323,300 9,375,700
-----------
BANKING - 2.79%
Nationsbank Corporation 158,300 11,021,637
-----------
CHEMICALS - 1.95%
Geon Company 316,800 7,722,000
-----------
COMPUTERS & BUSINESS EQUIPMENT - 1.11%
Compaq Computer Corporation* 91,200 4,377,600
-----------
CONTAINERS & GLASS - 0.62%
Owens-Illinois, Incorporated* 167,800 2,433,100
-----------
CONSTRUCTION & MINING EQUIPMENT - 1.60%
Harnischfeger Industries, Incorporated 189,800 6,310,850
-----------
DOMESTIC OIL - 1.06 %
Tenneco, Incorporated 84,300 4,183,388
-----------
DRUGS & HEALTH CARE - 5.78%
Beverly Enterprises, Incorporated* 46,500 494,063
Columbia/HCA Healthcare Corporation 115,400 5,856,550
Tambrands, Incorporated 60,100 2,869,775
Tenet Healthcare Corporation* 537,600 11,155,200
U.S. Healthcare, Incorporated 52,700 2,450,550
-----------
22,826,138
ELECTRICAL EQUIPMENT - 3.30%
Fisher Scientific International,
Incorporated 148,900 4,969,538
Millipore Corporation 196,000 8,060,500
-----------
13,030,038
ELECTRIC UTILITIES - 0.91%
Long Island Lighting Company 220,600 3,612,325
-----------
ELECTRONICS - 3.01%
Intel Corporation 71,800 4,074,650
National Semiconductor Corporation* 91,500 2,035,875
Perkin Elmer Corporation 93,200 3,518,300
Varian Associates, Incorporated 47,100 2,249,025
-----------
11,877,850
FINANCIAL SERVICES - 7.78%
Federal Home Loan Mortgage
Corporation 7,900 $ 659,650
Federal National Mortgage Association 65,900 8,179,838
First USA, Incorporated 183,600 8,147,250
Fleet Financial Group, Incorporated 96,179 3,919,294
Partner Re Holding 298,100 8,197,750
Salomon, Incorporated 46,200 1,640,100
-----------
30,743,882
FOOD & BEVERAGES - 0.44%
Chiquita Brands International,
Incorporated 126,100 1,733,875
-----------
FOREST PRODUCTS - 3.05%
Georgia Pacific Corporation 175,300 12,029,962
-----------
HOUSEHOLD PRODUCTS - 2.10%
Snap On, Incorporated 183,300 8,294,325
-----------
INDUSTRIAL MACHINERY - 3.04%
Keystone International, Incorporated 37,000 740,000
Pall Corporation 279,700 7,516,937
Silicon Valley Group, Incorporated* 149,400 3,772,350
-----------
12,029,287
INSURANCE - 1.37%
Integon Corporation 53,800 1,109,625
Lincoln National Corporation,
Incorporated 79,900 4,294,625
-----------
5,404,250
INTERNATIONAL OIL - 5.49%
Amoco Corporation 24,300 1,746,563
Chevron Corporation 27,800 1,459,500
Exxon Corporation 29,300 2,347,662
Mobil Corporation 32,200 3,606,400
Royal Dutch Petroleum Company 12,900 1,820,513
Texaco, Incorporated 136,300 10,699,550
-----------
21,680,188
INVESTMENT COMPANIES - 1.01%
Lehman Brothers Holdings,
Incorporated 188,300 4,001,375
-----------
NEWSPAPERS - 0.61%
Knight Ridder, Incorporated 38,500 2,406,250
-----------
PAPER - 2.08%
Stone Container Corporation 572,800 8,234,000
-----------
PLASTICS - 0.82%
First Brands Corporation 67,900 3,233,737
-----------
RAILROADS & EQUIPMENT - 0.65%
Trinity Industries, Incorporated 81,400 2,564,100
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
35
<PAGE> 138
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
RETAIL TRADE - 9.90%
Charming Shoppes, Incorporated 864,300 $ 2,484,863
Dillard Department Stores,
Incorporated 362,100 10,319,850
Musicland Stores Corporation* 376,500 1,600,125
J.C. Penney Company, Incorporated 78,600 3,743,325
Sears Roebuck & Company 48,800 1,903,200
Service Merchandise Company,
Incorporated* 531,900 2,659,500
TJX Companies, Incorporated 399,300 7,536,788
Wal Mart Stores, Incorporated 395,300 8,844,837
------------
39,092,488
STEEL - 0.88%
Quanex Corporation 178,600 3,460,375
------------
TELECOMMUNICATION SERVICES - 4.76%
Tele-Communications, Incorporated* 484,400 9,627,450
Valassis Communications,
Incorporated* 525,100 9,189,250
------------
18,816,700
TELEPHONE - 1.75%
American Telephone & Telegraph
Corporation 106,900 6,921,775
------------
TOBACCO - 5.38%
Philip Morris Companies, Incorporated 108,800 9,846,400
RJR Nabisco Holdings Corporation 123,600 3,816,150
Universal Corporation 312,100 7,607,437
------------
21,269,987
TRUCKING & FREIGHT - 3.87%
Consolidated Freightways,
Incorporated 423,100 11,212,150
Kirby Corporation* 250,200 4,065,750
------------
15,277,900
TOTAL COMMON STOCKS
(Cost: $321,274,838) $351,140,032
------------
REPURCHASE AGREEMENT - 11.12%
<CAPTION>
Principal
Amount Value
------ -----
$43,932,000 Repurchase Agreement with State
Street Bank & Trust Company dated
12/29/95 at 5.75%, to be
repurchased at $43,960,068 on
01/02/96, collateralized by
$28,310,000
U.S. Treasury Bonds, 12.00% due
08/15/13 (valued at $46,087,004
including interest) $ 43,932,000
------------
TOTAL INVESTMENTS
(Value Equity Trust) (Cost: $365,206,838) $395,072,032
============
GROWTH AND INCOME TRUST
<CAPTION>
Shares Value
------ -----
COMMON STOCK - 94.70%
AEROSPACE - 1.84%
Boeing Company 60,000 $ 4,702,500
Northrop Grumman Corporation 120,000 7,680,000
------------
12,382,500
ALUMINUM - 1.16%
Alcan Aluminum, Ltd. 250,000 7,781,250
------------
AUTOMOBILES - 2.56%
Chrysler Corporation 149,450 8,275,794
Ford Motor Company 306,436 8,886,638
------------
17,162,432
BANKING - 4.44%
Citicorp 139,000 9,347,750
J.P. Morgan & Company, Incorporated 170,000 13,642,500
Republic New York Corporation 110,000 6,833,750
------------
29,824,000
BROADCASTING - 2.12%
Viacom, Incorporated, Class B* 300,000 14,212,500
------------
BUSINESS SERVICES - 1.85%
First Data Corporation 107,000 7,155,625
Nokia Corporation, ADR 135,000 5,248,125
------------
12,403,750
CHEMICALS - 4.80%
Dow Chemical Company 120,900 8,508,338
Engelhard Corporation 270,000 5,872,500
Morton International, Incorporated 290,000 10,403,750
Zeneca Group PLC, ADR 127,500 7,442,812
------------
32,227,400
COMPUTERS & BUSINESS EQUIPMENT - 4.47%
Hewlett Packard Company 115,000 9,631,250
International Business Machines
Corporation 145,000 13,303,750
Metatools, Incorporated 200 5,200
Xerox Corporation 51,600 7,069,200
------------
30,009,400
CONSTRUCTION & MINING EQUIPMENT - 1.04%
Foster Wheeler Corporation 165,000 7,012,500
------------
DOMESTIC OIL - 1.86%
Unocal Corporation 430,000 12,523,750
------------
DRUGS & HEALTH CARE - 10.23%
Abbott Labs 220,000 9,185,000
Bristol Myers Squibb Company 90,000 7,728,750
Johnson & Johnson 97,000 8,305,625
McKesson Corporation 183,000 9,264,375
Pfizer, Incorporated 236,000 14,868,000
Rhone Poulenc Rorer, Incorporated 187,500 9,984,375
Sankyo Company 265,000 5,954,479
Warner Lambert Company 35,000 3,399,375
------------
68,689,979
</TABLE>
The accompanying notes are an integral part of the financial statements.
36
<PAGE> 139
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
ELECTRICAL EQUIPMENT - 2.51%
General Electric Company 125,000 $ 9,000,000
Hubbell, Incorporated, Class B 120,000 7,890,000
------------
16,890,000
ELECTRIC UTILITIES - 4.12%
DPL, Incorporated 350,000 8,662,500
Pinnacle West Capital Corporation 275,000 7,906,250
Texas Utilities Company 270,000 11,103,750
------------
27,672,500
ELECTRONICS - 2.42%
AMP, Incorporated 300,000 11,512,500
General Instrument Corporation 202,105 4,724,210
------------
16,236,710
FINANCIAL SERVICES - 3.63%
Federal National Mortgage Association 60,000 7,447,500
Fleet Financial Group, Incorporated 238,000 9,698,500
State Street Boston Corporation 161,000 7,245,000
------------
24,391,000
FOOD & BEVERAGES - 3.10%
General Mills, Incorporated 117,000 6,756,750
PepsiCo, Incorporated 115,000 6,425,625
Sara Lee Corporation 239,900 7,646,813
------------
20,829,188
FOREST PRODUCTS - 0.78%
Georgia Pacific Corporation 76,200 5,229,225
------------
HOUSEHOLD PRODUCTS - 2.61%
Colgate Palmolive Company 120,000 8,430,000
Procter & Gamble Company 109,900 9,121,700
------------
17,551,700
INDUSTRIAL MACHINERY - 2.14%
Keystone International, Incorporated 356,000 7,120,000
York International Corporation 154,200 7,247,400
------------
14,367,400
INSURANCE - 4.75%
Chubb Corporation 126,000 12,190,500
General Re Corporation 88,000 13,640,000
Marsh & McLennan Companies,
Incorporated 68,400 6,070,500
------------
31,901,000
INTERNATIONAL OIL - 5.04%
Amoco Corporation 165,000 11,859,375
Chevron Corporation 208,500 10,946,250
Exxon Corporation 138,000 11,057,250
------------
33,862,875
LIQUOR - 1.37%
Anheuser-Busch Companies,
Incorporated 138,000 9,228,750
------------
NEWSPAPERS - 1.69%
Gannett, Incorporated 185,000 11,354,375
------------
PAPER - 5.24%
International Paper Company 300,000 $ 11,362,500
Kimberly Clark Corporation 145,000 11,998,750
Minnesota Mining & Manufacturing
Company 179,000 11,858,750
------------
35,220,000
PETROLEUM SERVICES - 1.02%
Dresser Industries, Incorporated 280,000 6,825,000
------------
PHOTOGRAPHY - 0.52%
Eastman Kodak Company 51,900 3,477,300
------------
POLLUTION CONTROL - 1.12%
Browning Ferris Industries,
Incorporated 255,000 7,522,500
------------
PUBLISHING - 1.49%
Dun & Bradstreet Corporation 155,000 10,036,250
------------
REAL ESTATE - 0.53%
Storage USA, Incorporated 108,200 3,530,025
------------
RETAIL TRADE - 4.49%
May Department Stores Company 175,000 7,393,750
J.C. Penney Company, Incorporated 140,000 6,667,500
Rite Aid Corporation 255,000 8,733,750
Wal Mart Stores, Incorporated 330,000 7,383,750
------------
30,178,750
SOFTWARE - 0.99%
Policy Management Systems
Corporation* 140,000 6,667,500
------------
TELEPHONE - 7.78%
American Telephone & Telegraph
Corporation 179,000 11,590,250
BCE, Incorporated 250,000 8,625,000
NYNEX Corporation 228,400 12,333,600
U.S. West, Incorporated 388,860 13,901,745
VodaFone Group PLC, ADR 165,000 5,816,250
------------
52,266,845
TIRES & RUBBER - 0.98%
Goodyear Tire and Rubber 145,000 6,579,375
------------
TOTAL COMMON STOCKS
(Cost: $516,858,855) $636,047,729
------------
PREFERRED STOCKS - 0.70%
COMPUTERS & BUSINESS EQUIPMENT - 0.70%
Ceridian Corporation 50,900 4,708,250
------------
TOTAL PREFERRED STOCKS
(Cost: $2,575,030) $ 4,708,250
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
37
<PAGE> 140
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
CONVERTIBLE BONDS - 3.25%
AMR Corporation,
6.125% due 11/01/24 $6,000,000 $ 6,210,000
Beverly Enterprises, Incorporated,
5.50% due 08/01/18 7,500,000 7,200,000
Noble Affiliates, Incorporated,
4.25% due 11/01/03 8,400,000 8,400,000
------------
TOTAL CONVERTIBLE BONDS
(Cost: $22,094,684) $ 21,810,000
------------
REPURCHASE AGREEMENT - 1.35%
<CAPTION>
Principal
Amount Value
------ -----
$9,072,000 Repurchase Agreement with
Shearson Lehman dated 12/29/95 at
5.93%, to be repurchased at
$9,077,977 on 01/02/96,
collateralized by $26,310,000 U.S.
Treasury Strips, 5.59% due 02/15/13
(valued at
$9,657,068 including interest) $ 9,072,000
------------
TOTAL INVESTMENTS
(Growth & Income Trust)
(Cost: $550,600,569) $671,637,979
============
INTERNATIONAL GROWTH & INCOME TRUST
<CAPTION>
Shares Value
------ -----
COMMON STOCK - 83.30%
AIR TRAVEL - 0.11%
Singapore Airlines 10,000 $ 93,319
------------
AGRICULTURAL MACHINERY - 0.23%
Kvaerner AS 6,000 200,818
------------
ALUMINUM - 0.33%
Sankyo Aluminium 53,000 283,864
------------
APPAREL & TEXTILES - 1.13%
Christian Dior 2,925 315,377
Kurabo Industries 60,000 229,540
Tomen Corporation 120,000 442,809
------------
987,726
AUTO PARTS - 0.50%
Fuji Heavy Industries* 80,000 315,351
Nissan Diesel Motor* 25,000 116,465
------------
431,816
AUTOMOBILES - 3.81%
Cycle & Carriage 12,000 119,618
Daimler Benz AG 335 168,609
Honda Motor Company 20,000 412,591
Mitsubishi Motor Corporation 45,000 366,538
AUTOMOBILES - CONTINUED
Nissan Motor Company, Ltd. 25,000 $ 192,010
Regie Nationale Des Usines Renault 7,100 204,431
Rolls Royce PLC 73,000 213,139
Toyota Motor Corporation 60,000 1,272,639
Volkswagen AG 1,120 374,452
------------
3,324,027
BANKING - 12.87%
ABN AMRO Holdings NV 6,000 273,322
Asahi Bank, Ltd. 50,000 629,540
Barclays 26,000 297,997
Banco Intercontinental Espanol 1,580 153,702
Banco Popular Espanol SA 1,250 230,523
Credit Company France 5,800 295,981
Credit Local De France 2,070 165,701
CS Holdings AG 4,485 459,776
Dai Ichi Kangyo Bank 35,000 688,136
Daiwa Bank 120,000 970,460
Deutsche Bank AG 8,000 379,059
Development Bank Singapore 16,000 199,081
Dresdner Bank AG 5,000 133,496
Deutsche Pfandbrief & Hypobk 5,180 201,133
Fukui Bank 30,000 159,806
Generale De Banque 925 320,591
Hokkaido Takushoku Bank, Ltd. 90,000 266,731
HSBC Holdings - HKD 24,000 363,143
HSBC Holdings - [Pound Sterling] 16,000 249,852
Hyakugo Bank 30,000 171,429
Juroku Bank 35,000 181,695
Lloyds TSB Group PLC 43,264 222,737
Nanto Bank 15,000 103,148
National Australia Bank, Ltd. 44,600 401,115
National Westminster 30,000 302,143
Nippon Credit Bank 40,000 182,857
Public Bank BHD 190,000 363,586
The Royal Bank of Scotland Group 29,000 263,923
Sakura Bank 50,000 634,383
Sanwa Bank 25,000 508,475
Schweizerische Bankgesellschaft 130 140,876
Schweizerischer Bankverein 715 291,951
Shiga Bank 16,000 94,528
Societe Generale 2,258 278,965
Standard Chartered Bank 18,000 153,191
Toyo Trust & Banking 12,000 105,995
United Overseas Bank 9,000 86,532
Yasuda Trust & Banking 50,000 295,884
------------
11,221,443
BROADCASTING - 0.78%
Gakken Company* 10,000 65,860
News Corporation 35,000 186,785
Pearson 16,000 154,931
Television Broadcast 41,000 146,078
TV Francaise 1,210 129,722
------------
683,376
</TABLE>
The accompanying notes are an integral part of the financial statements.
38
<PAGE> 141
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
BUILDING CONSTRUCTION - 0.12%
SXL Corporation 10,000 $ 103,632
----------
BUSINESS SERVICES - 1.74%
Eaux (Cie Generale Des) 3,576 357,016
Havas 1,750 138,835
Inchcape 49,000 189,486
Kawasho Corporation* 40,000 167,361
Nichias Corporation 15,000 78,596
SGS Holdings 380 130,126
South West Water 32,000 257,928
Toppan Printing Company, Ltd. 15,000 197,579
----------
1,516,927
CHEMICALS - 4.21%
Air Liquide 1,466 242,787
Allied Colloids 83,000 171,440
Bayer AG 1,020 269,132
BOC Group 5,500 76,961
Ciba Geigy AG 590 519,159
Hoechst AG 540 146,434
Kumiai Chemical Industry Company 8,000 45,869
Kuraray Company 15,000 164,165
Mitsubishi Chemical Corporation 60,000 291,719
Mitsubishi Gas Chemical Company 30,000 135,109
Mitsui Petrochemical Industry 40,000 327,361
Mitsui Toatsu Chemicals 50,000 200,968
Nagase & Company 15,000 129,007
Nippon Zeon Company 30,000 161,259
Rhone-Poulenc SA, Class A 7,300 156,375
Showa Denko K.K.* 90,000 282,421
Solvay SA 335 181,842
UBE Industries 45,000 169,976
----------
3,671,984
COMPUTERS & BUSINESS EQUIPMENT - 0.16%
Ricoh Company 13,000 142,276
----------
CONGLOMERATES - 1.85%
Aker AS 6,000 72,939
Asatsu, Incorporated 3,000 126,102
BIC Corporation 750 76,271
BTR PLC 61,800 314,807
CSR, Ltd. 85,200 277,372
Grand Metropolitan 35,000 251,941
Hanson 42,600 127,026
Preussag AG 380 106,225
Tomkins 37,000 161,756
Tractebel International 245 101,147
----------
1,615,586
CONSTRUCTION MATERIALS - 0.66%
Holderbank Financier Glarus AG 110 84,395
Lafarge 1,470 94,708
Tarmac 104,000 166,361
Toyo Construction Company 40,000 233,220
----------
578,684
CONSTRUCTION & MINING EQUIPMENT - 0.43%
Daito Trust Construction 10,000 118,160
Ryobi 50,000 257,143
----------
375,303
CONTAINERS & GLASS - 0.56%
Caradon PLC 55,000 166,990
Central Glass Company* 10,000 33,801
Companie De Saint-Gobain 1,280 139,579
Nippon Sheet Glass 35,000 152,203
----------
492,573
CRUDE PETROLEUM AND NATURAL GAS - 0.37%
Societe Nationale Elf Aquitaine 4,347 320,277
----------
DRUGS & HEALTH CARE - 5.02%
Amersham International 12,300 169,438
Chugai Pharmaceutical Company 35,000 335,254
Daiichi Pharmaceutical Company 9,000 128,136
Essilor International 825 157,688
Glaxo Wellcome 50,900 723,303
Hafslund Nycomed, Class B 7,000 177,373
Kaken Pharmaceutical 25,000 225,182
Kissei Pharmaceutical Company 3,000 90,654
Kyowa Hakko Kogyo 8,000 75,467
Lion Corporation 30,000 176,949
Ono Pharmaceutical 7,000 269,153
Roche Holdings AG 57 450,910
Sandoz AG 550 503,511
Sanofi 3,805 243,902
Schering AG 1,540 102,019
SmithKline Beecham, Class A 33,000 363,876
Synthelabo 2,955 185,133
----------
4,377,948
ELECTRIC UTILITIES - 2.36%
Electrabel 1,280 304,451
Empresa Nacional De Electricidad SA 5,400 305,837
Fuerzas Electricas De Catalunal SA 30,600 218,211
Hong Kong Electric 73,000 239,321
RWE AG 300 108,749
Scottish Hydro Electric PLC 29,000 161,912
Shikoku Electric Power 11,700 269,695
Tohoku Electric Power 11,700 282,160
Tokyo Electric Power 6,300 168,407
----------
2,058,743
ELECTRICAL EQUIPMENT - 4.63%
Alcatel Alsthom Cie Generale D'Electric 3,237 279,081
BBC Brown Boveri AG 90 104,551
BICC Group PLC 25,700 109,761
Fuji Electric Company 60,000 305,085
General Electric Company 49,000 269,390
Hitachi, Ltd. 65,000 654,722
Japan Radio Company 15,000 159,806
Legrand 280 43,226
Mitsubishi Cable Industries 25,000 133,172
Mitsubishi Electric Corporation 35,000 251,864
</TABLE>
The accompanying notes are an integral part of the financial statements.
39
<PAGE> 142
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
ELECTRICAL EQUIPMENT - CONTINUED
NEC Corporation 40,000 $ 488,136
Sanden Corporation 25,000 160,291
Siemens AG 975 533,548
Toenec Corporation 20,000 178,208
Yaskawa Electric Corporation* 50,000 235,835
Yorkshire Electricity Group 12,600 130,716
----------
4,037,392
ELECTRONICS - 1.16%
Alps Electric Company, Ltd. 20,000 230,508
Kyocera Corporation 2,000 148,571
Kyowa Exeo Corporation, Class A 10,000 89,782
National Grid Group PLC* 9,533 29,463
Nippon Densetsu 15,000 151,090
Racal Electronics 30,100 132,993
Shimadzu Corporation 40,000 232,058
----------
1,014,465
FINANCIAL SERVICES - 0.92%
Cetelem 1,400 262,732
Daiwa Securities 20,000 306,053
Internationale Nederlanden Groep NV 3,500 233,813
----------
802,598
FOOD & BEVERAGES - 3.97%
Dalgety 27,000 170,034
Danone 1,981 326,863
Guinness 27,500 202,225
Hillsdown Holdings 84,800 223,886
Itoham Foods, Incorporated 28,000 211,525
Japan Tobacco, Incorporated 15 130,024
Nestle SA 405 448,010
Nippon Flour Mills 20,000 104,600
Orkla 6,000 286,071
Reckitt & Colman PLC 8,500 94,056
Scottish & Newcastle Breweries 18,500 176,122
Snow Brand Milk Products
Company, Ltd. 30,000 191,768
Southcorp Holdings, Ltd. 143,600 334,078
Toyo Suisan Kaisha 10,000 123,971
United Biscuits PLC 35,500 140,864
Yamazaki Baking Company 16,000 297,530
----------
3,461,627
FOREST PRODUCTS - 0.35%
Sumitomo Forestry 20,000 306,053
----------
GAS & PIPELINE UTILITIES - 0.45%
British Gas PLC 43,000 169,623
Osaka Gas Company 65,000 224,746
----------
394,369
HOMEBUILDERS - 0.81%
Bilfinger & Berger
Bauaktiengesellschaft AG 465 176,016
Bouygues 2,305 232,195
Kinden Corporation 6,000 102,276
Sekisui House 15,000 191,768
----------
702,255
HOTELS & RESTAURANTS - 0.21%
Ladbroke Group 82,000 186,566
----------
HOUSEHOLD APPLIANCES FURNISHING - 1.73%
Matsushita Electric Industrial
Company, Ltd. 35,000 569,492
Sony Corporation 10,000 599,516
Thorn Emi PLC 8,000 188,414
Victor Company of Japan, Ltd.* 12,000 152,252
----------
1,509,674
HOUSEHOLD PRODUCTS - 0.91%
Eridania Beghin-Say SA 700 120,074
Uni Charm Corporation 5,000 125,908
Uniden Corporation 10,000 167,554
Unilever NV 2,700 379,417
----------
792,953
INDUSTRIAL MACHINERY - 3.58%
Daikin Industries 25,000 244,552
Ebara Corporation 15,000 219,370
Fischer AG 60 78,023
Glynwed International PLC 35,000 173,397
Ishikawajima-Harima Heavy Industries 90,000 379,177
Kawasaki Heavy Industries 15,000 69,007
Kitz Corporation 30,000 122,324
M.A.N. AG 890 240,725
Minebea Company 20,000 167,748
Mitsubishi Kakoki 15,000 141,065
NSK Corporation 20,000 145,278
Okamura Corporation 15,000 114,770
Sembawang Corporation, Ltd. 13,000 72,146
Sidel 800 249,295
Toshiba Corporation 25,000 195,884
Toyo Umpanki Company 5,000 22,518
Tsubakimoto Chain 40,000 240,581
Valeo 2,700 125,048
Vickers 31,000 122,286
----------
3,123,194
INSURANCE - 3.88%
Aegon NV 3,260 144,239
Allianz Holdings AG 246 479,481
AXA Company 6,030 406,351
Britannic Assurance 15,000 178,910
Chuo Trust & Banking 20,000 193,705
Compagnie Financiere Richemont 100 149,978
Fortis AG 1,100 133,622
Guardian Royal Exchange 63,500 272,185
Koa Fire & Marine 15,000 91,816
Munchener Ruckvers 234 508,944
Tokio Marine & Fire Insurance Company 40,000 523,002
Willis Corroon Group PLC 61,700 135,109
Zurich Versicherung 560 167,490
----------
3,384,832
</TABLE>
The accompanying notes are an integral part of the financial statements.
40
<PAGE> 143
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
INTERNATIONAL OIL - 1.43%
The British Petroleum Company 42,000 $ 350,598
Cosmo Oil Company 60,000 327,748
Petrofina SA 520 159,198
Shell Transport & Trading Company 30,800 407,302
----------
1,244,846
INVESTMENT COMPANIES - 1.47%
Marubeni Corporation 75,000 406,053
Nomura Securities 40,000 871,671
----------
1,277,724
LEISURE TIME - 0.51%
Forte 28,000 143,718
Granada Group PLC 18,000 180,308
Japan Airport Terminal 10,000 121,065
----------
445,091
MINING - 0.67%
Dowa Mining Company 30,000 144,697
DSM NV 2,150 176,855
Mitsui Mining & Smelting Company* 65,000 260,630
----------
582,182
MISCELLANEOUS - 0.36%
Seita 5,000 181,233
SKW Trostberg AG 1,000 21,087
Yuasa Trading Company 20,000 108,475
----------
310,795
NON-FERROUS METALS - 0.88%
Fuji Denki Reiki 15,000 200,484
Mitsubishi Material 30,000 155,448
RTZ Corporation PLC 10,900 158,447
Western Mining Corporation Holdings 39,500 253,664
----------
768,043
PAPER - 0.67%
Koninklijke KNP BT NV 4,200 107,833
Nippon Paper Industries 45,000 312,494
Rexam PLC 30,000 164,932
----------
585,259
PETROLEUM SERVICES - 3.37%
Broken Hill Proprietary Company, Ltd. 24,540 346,559
Norsk Hydro AS 19,900 835,699
Repsol SA 6,610 216,610
Royal Dutch Petroleum Company 7,570 1,057,639
Total SA, "B" Shares 7,100 479,181
----------
2,935,688
PUBLISHING - 1.08%
Citic Pacific, Ltd. 96,000 328,380
Elsevier NV 13,600 181,367
Lagardere Groupe 6,600 121,299
Reuters Holdings 15,000 137,327
Singapore Press Holdings, Ltd. 10,000 176,741
----------
945,114
RAILROADS & EQUIPMENT - 1.31%
East Japan Railway Company 75 364,649
Hitachi Transport Systems 20,000 193,705
Nagoya Railroad Company 25,000 125,908
RAILROADS & EQUIPMENT - CONTINUED
Tobu Railway Company 40,000 $ 250,266
Zexel Corporation 30,000 203,971
----------
1,138,499
REAL ESTATE - 1.62%
Cheung Kong Holdings 97,000 590,844
Daiwa Kosho Lease 20,000 199,516
MEPC PLC 26,000 159,295
Mitsui Fudosan Company 15,000 184,504
Tokyu Land Corporation 50,000 217,918
United Overseas Land 33,000 62,757
----------
1,414,834
RETAIL GROCERY - 0.89%
Izumi Company 13,000 287,070
Maruetsu, Incorporated 30,000 244,068
J Sainsbury PLC 40,000 243,827
----------
774,965
RETAIL TRADE - 3.13%
Argos 19,000 175,718
Argyll Group 32,800 173,195
Ava Allgemeine Handles-Der Verbr AG 320 108,191
Carrefour 495 300,315
Castorama Dubois 560 91,713
Daiei, Incorporated 25,000 302,663
Douglas Holdings AG 2,300 81,129
Familymart Company 2,000 90,266
Izumiya Company 13,000 207,748
Kingfisher 31,000 260,941
Promodes 1,160 272,649
Sears PLC 142,000 229,352
Takashimaya Company, Ltd. 20,000 319,613
Tokyu Store Chain 15,000 115,061
----------
2,728,554
SOFTWARE - 0.11%
SAP AG 600 93,064
----------
STEEL - 2.05%
Arbed SA 1,000 113,150
Daido Steel Company 15,000 75,545
Nisshin Steel Company 60,000 242,325
NKK Corporation* 160,000 430,799
Sumitomo Metal Industry 200,000 606,295
Thyssen AG* 980 178,033
Usinor Sacilor* 10,800 142,802
----------
1,788,949
TELECOMMUNICATION SERVICES - 0.20%
Cable and Wireless 24,000 171,828
----------
TELEPHONE - 1.66%
British Telecommunications 79,000 433,095
Hong Kong Telecommunications, Ltd. 136,000 242,716
Royal PTT Nederland NV 3,300 119,892
Nippon Telegraph & Telephone
Corporation 15 121,308
</TABLE>
The accompanying notes are an integral part of the fiancial statements.
41
<PAGE> 144
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C> <C>
TELEPHONE - CONTINUED
Telekom Malaysia 34,000 $ 265,071
VodaFone Group 74,000 265,476
-----------
1,447,558
TIRES & RUBBER - 0.28%
Yokohama Rubber Company 40,000 242,131
-----------
TOBACCO - 0.37%
B.A.T. Industries 37,000 325,812
-----------
TOYS, AMUSEMENTS & SPORTING GOODS - 0.35%
Mizuno Corporation 35,000 303,390
-----------
TRUCKING & FREIGHT - 1.05%
Kawasaki Kisen Kaisha, Ltd.* 60,000 190,605
Nippon Express Company 30,000 288,814
Nippon Road Company 30,000 252,785
Peninsular & Oriental Steam
Navigation Company 10,000 73,925
TNT, Ltd.* 81,000 107,165
-----------
913,294
TOTAL COMMON STOCKS
(Cost: $70,349,485) $72,633,920
-----------
PREFERRED STOCKS - 0.37%
ELECTRICAL EQUIPMENT - 0.09%
Legrand 805 80,549
-----------
FOOD & BEVERAGES - 0.22%
Henkel Kgaa 500 188,045
-----------
ELECTRIC UTILITIES - 0.06%
RWE AG 200 55,769
-----------
TOTAL PREFERRED STOCKS
(Cost: $327,210) $ 324,363
-----------
WARRANTS - 0.29%*
ELECTRICAL EQUIPMENT - 0.07%
Philips Electronics NV (Expiration
date 06/30/98; strike price NLG 34) 3,900 61,002
-----------
FINANCIAL SERVICES - 0.22%
Veba International Finance BV (Expiration
date 04/06/98; strike price DEM 375) 1,200 189,055
-----------
TOTAL WARRANTS
(Cost: $232,411) $ 250,057
-----------
<CAPTION>
Principal
Amount Value
------ -----
CONVERTIBLE BONDS - 2.08%
Bot Cayman Finance,
4.25% due 03/31/49 $90,000,000 $1,202,906
Daido Hoxan, Incorporated,
1.60% due 03/29/02 10,000,000 110,896
Matsushita Electric Works,
2.70% due 05/31/02 20,000,000 236,707
Sandoz Capital, 1.25% due 10/23/02 265,000 259,601
TOTAL CONVERTIBLE BONDS
(Cost: $1,741,695) $1,810,110
----------
CORPORATE BONDS - 1.11%
Swiss Re Finance Bermuda,
2.00% due 07/06/00 $ 180,000 214,200
Treuhandanstalt,
7.75% due 10/01/02 DEM 970,000 753,753
----------
TOTAL CORPORATE BONDS
(Cost: $941,887) $ 967,953
----------
FOREIGN GOVERNMENT OBLIGATIONS - 6.76%
GOVERNMENT OF CANADA - 0.70%
8.75% due 12/01/05 CAD 750,000 613,868
----------
KINGDOM OF DENMARK - 0.33%
7.00% due 12/15/04 DKK 400,000 71,751
8.00% due 11/15/01 1,100,000 212,076
----------
283,827
GOVERNMENT OF FRANCE - 0.83%
6.75% due 10/25/03 FRF 1,500,000 311,364
7.50% due 04/25/05 310,000 67,083
8.50% due 04/25/03 1,500,000 342,455
----------
720,902
FEDERAL REPUBLIC OF GERMANY - 0.87%
7.375% due 01/03/05 DEM 1,000,000 761,799
----------
GOVERNMENT OF GREAT BRITAIN - 1.18%
United Kingdom Treasury, [pound
6.75% due 11/26/04 sterling] 200,000 297,309
United Kingdom Treasury,
7.00% due 11/06/01 470,000 730,839
----------
1,028,148
GOVERNMENT OF JAPAN - 1.89%
5.70% due 03/20/07 [yen] 138,750,000 1,647,665
----------
GOVERNMENT OF NETHERLAND - 0.96%
6.75% due 11/15/05 NLG 1,280,000 840,331
----------
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS (Cost: $5,804,291) $5,896,540
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
42
<PAGE> 145
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
REPURCHASE AGREEMENT - 6.10%
$5,316,000 Repurchase Agreement with State
Street Bank & Trust Company, dated
12/29/95 at 5.00%, to be repurchased at
at $5,318,953 on 01/02/96,
collateralized by $4,855,000 U.S.
Treasury Notes, 7.50% due 05/15/02
(valued at $5,468,715 including
interest) $ 5,316,000
-----------
TOTAL INVESTMENTS
(International Growth & Income Trust)
(Cost: $84,712,979) $87,198,943
===========
STRATEGIC BOND TRUST
<CAPTION>
Principal
Amount Value
------ -----
CORPORATE BONDS - 42.64%
BUSINESS SERVICES - 2.18%
A Plus Network, Incorporated,
11.875% due 11/01/05 $ 750,000 $ 759,375
Borg-Warner Security Corporation,
9.125% due 05/01/03 1,000,000 900,000
Katz Corporation,
12.75% due 11/15/02 1,000,000 1,070,000
-----------
2,729,375
COMMUNICATION - 3.10%
Adelphia Communications
Corporation, 12.50% due 05/15/02 1,250,000 1,225,000
In Flight Phone Corporation, Series B
Step up to 14.00% due 05/15/02 1,500,000 472,500
United International Holdings,
Incorporated, zero coupon
due 11/15/99 2,250,000 1,395,000
Wireless One, Incorporated,
13.00% due 10/15/03 750,000 783,750
-----------
3,876,250
DRUGS & HEALTH CARE - 0.90%
Dade International, Incorporated,
13.00% due 02/01/05 1,000,000 1,120,000
-----------
ENERGY & UTILITIES - 1.80%
Petro PSC Properties,
12.50% due 06/01/02 1,500,000 1,410,000
Waters Corporation, Series B,
12.75% due 09/30/04 750,000 843,750
-----------
2,253,750
FINANCE & BANKING - 8.32%
Empress River Casino Finance
Corporation, 10.75% due 04/01/02 1,000,000 1,032,500
Foamex Capital Corporation,
11.875% due 10/01/04 1,500,000 1,470,000
Paine Webber Group, Incorporated,
6.30% due 02/15/96 3,600,000 3,602,326
FINANCE & BANKING - CONTINUED
Trump Taj Mahal Funding, Incorporated,
zero coupon due 11/15/99 $1,029,625 $ 991,014
United States Banknote Corporation,
11.625% due 08/01/02 1,000,000 760,000
United States Leasing International,
8.45% due 01/25/05 1,500,000 1,696,875
Venture Holdings Trust,
9.75% due 04/01/04 1,000,000 835,000
-----------
10,387,715
FOOD STORES - 1.43%
Carr Gottstein Foods Company,
12.00% due 11/15/05 1,000,000 1,010,000
Penn Traffic Company,
9.625% due 04/15/05 1,000,000 780,000
-----------
1,790,000
HOUSEHOLD APPLIANCE FURNISHING - 1.98%
Decorative Home Accents,
Incorporated, 13.00% due 06/30/02 1,500,000 1,485,000
Selmer, Incorporated,
11.00% due 05/15/05 1,000,000 985,000
-----------
2,470,000
INDUSTRIALS - 14.57%
American Safety Razor Company,
Series B, 9.875% due 08/01/05 1,100,000 1,119,250
Bally's Grand, Incorporated,
10.375% due 12/15/03 1,000,000 1,020,000
Berry Plastics Corporation,
12.25% due 04/15/04 1,150,000 1,236,250
Comcast UK Cable Partners, Ltd.,
Step up to 11.20% due 11/15/07 1,200,000 708,000
Consolidated Cigar Corporation,
10.50% due 03/01/03 1,000,000 1,025,000
Harris Chemical, Incorporated,
Step up to 10.25% due 07/15/01 1,000,000 950,000
International Semi Tech Microelectronic,
Step up to 11.50% due 08/15/03 2,000,000 1,072,500
Jordan Industries, Incorporated,
Step up to 11.75% due 08/01/05 2,000,000 1,160,000
Jordan Industries, Incorporated,
10.375% due 08/01/03 306,000 272,340
Marcus Cable Company,
14.25% due 12/15/05 1,750,000 1,190,000
Norcal Waste Systems,
Incorporated, 12.50% due 11/15/05 1,000,000 1,010,000
Pathmark Stores, Incorporated,
9.625% due 05/01/03 1,500,000 1,458,750
RBX Corporation,
11.25% due 10/15/05 1,500,000 1,485,000
Renco Metals, Incorporated,
12.00% due 07/15/00 1,000,000 1,085,000
Revlon Worldwide Corporation,
Series B, zero coupon due 03/15/98 1,000,000 742,500
</TABLE>
The accompanying notes are an integral part of the financial statements.
43
<PAGE> 146
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C> <C>
INDUSTRIALS - CONTINUED
SC International Services, Incorporated,
13.00% due 10/01/05 $ 1,000,000 $ 1,040,000
Specialty Equipment Companies,
Incorporated, 11.375% due 12/01/03 750,000 761,250
Terex Corporation,
13.75% due 05/15/02 1,000,000 867,500
-----------
18,203,340
LEATHER PRODUCTS - 0.38%
Samsonite Corporation,
11.125% due 07/15/05 500,000 480,000
-----------
LEISURE - 1.79%
Bally's Park Place Funding,
Incorporated, 9.25% due 03/15/04 750,000 763,125
Grand Casino, Incorporated,
10.125% due 12/01/03 750,000 786,560
Hollywood Casino, Incorporated,
12.75% due 11/01/03 750,000 690,000
-----------
2,239,685
METAL PRODUCTS - 0.80%
Cole National Group, Incorporated,
11.25% due 10/01/01 1,000,000 1,002,500
-----------
PRINTING & PUBLISHING - 0.42%
Williamhouse Regency, Incorporated,
13.00% due 11/15/05 500,000 518,750
-----------
OTHER - 2.17%
Hines Horticulture, Incorporated,
11.75% due 10/05/05 1,000,000 1,037,500
Outdoor Systems, Incorporated,
10.75% due 08/15/03 1,000,000 950,000
Specialty Foods Corporation,
11.125% due 10/01/02 750,000 727,500
-----------
2,715,000
RESTAURANTS - 0.34%
Family Restaurants, Incorporated,
9.75% due 02/01/02 750,000 420,000
-----------
RETAIL TRADE - 2.45%
Apparel Retailers, Incorporated, Series
B, Step up to 12.75% due 08/15/05 2,000,000 1,220,000
Crown Paper Company,
11.00% due 09/01/05 1,000,000 875,000
Finlay Fine Jewerly Corporation,
10.625% due 05/01/03 1,000,000 970,000
-----------
3,065,000
TOTAL CORPORATE BONDS
(Cost: $53,895,511) $53,271,365
-----------
U.S. TREASURY OBLIGATIONS - 6.38%
U.S. TREASURY BONDS - 0.77%
6.875% due 08/15/25 $ 850,000 $ 958,639
-----------
U.S. TREASURY NOTES - 5.61%
5.625% due 11/30/00 2,000,000 2,018,120
6.50% due 08/15/05 1,000,000 1,065,310
6.75% due 04/30/00 500,000 526,170
7.50% due 02/15/05 3,000,000 3,400,320
-----------
7,009,920
TOTAL U.S. TREASURY OBLIGATIONS
(Cost: $7,690,336) $ 7,968,559
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 10.14%
FEDERAL HOME LOAN BANK - 0.41%
5.94% due 06/13/00 500,000 507,736
-----------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 2.47%
759.5% due 07/15/06 IO 28,859 396,814
8.00% due 05/01/10 1,846,331 1,913,592
8.50% due 05/01/08 744,924 779,488
-----------
3,089,894
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 7.26%
6.50% TBA** 2,400,000 2,371,488
6.50% due 11/01/10 - 12/01/10 1,799,999 1,808,999
7.00% TBA** 3,000,000 3,024,360
7.52% due 08/26/05 1,800,000 1,868,035
-----------
9,072,882
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS (Cost: $12,430,625) $12,670,512
-----------
FOREIGN GOVERNMENT OBLIGATIONS - 31.77%
REPUBLIC OF ARGENTINA - 3.31%
6.812% due 03/31/05 $5,800,000 4,132,500
-----------
KINGDOM OF BELGIUM - 0.39%
6.50% due 03/31/05 BEF 14,600,000 489,544
-----------
FEDERAL REPUBLIC OF BRAZIL - 6.98%
4.00% due 04/15/14 $ 2,653,025 1,518,857
4.25% due 04/15/24 6,500,000 3,432,819
6.00% due 09/15/13 1,250,000 693,750
6.687% due 01/01/01 2,375,000 2,045,469
6.812% due 04/15/06 1,500,000 1,033,125
-----------
8,724,020
NATIONAL REPUBLIC OF BULGARIA - 3.22%
2.00% due 07/28/12 $ 4,750,000 1,442,812
6.75% due 07/28/11 3,000,000 1,383,750
6.75% due 07/28/24 2,250,000 1,195,312
-----------
4,021,874
</TABLE>
The accompanying notes are an integral part of the financial statements.
44
<PAGE> 147
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C> <C>
GOVERNMENT OF CANADA - 0.52%
6.25% due 02/01/98 CAD 275,000 $ 202,392
9.00% due 12/01/04 549,000 453,131
------------
655,523
GOVERNMENT OF COSTA RICA - 0.31%
Series B, 6.25% due 05/21/15 $ 700,000 392,000
------------
KINGDOM OF DENMARK - 0.26%
7.00% due 12/15/04 DKK 600,000 107,627
9.00% due 11/15/98 1,100,000 215,800
------------
323,427
REPUBLIC OF ECUADOR - 1.44%
3.00% due 02/28/15 $ 2,553,715 855,495
3.00% due 02/27/15 2,809,070 941,038
------------
1,796,533
FEDERAL REPUBLIC OF GERMANY - 4.08%
7.375% due 01/03/05 DEM 1,550,000 1,180,788
8.375% due 05/21/01 4,900,000 3,910,094
------------
5,090,882
REPUBLIC OF ITALY - 1.02%
9.50% due 12/01/97 ITL 1,460,000,000 909,670
9.50% due 01/01/05 610,000,000 359,749
------------
1,269,419
GOVERNMENT OF JAPAN - 1.18%
4.20% due 09/21/15 [Yen] 142,000,000 1,469,511
------------
GOVERNMENT OF MEXICO - 2.74%
6.25% due 12/31/19 $ 4,000,000 2,605,000
6.25% due 12/31/19 1,250,000 814,062
Mexican United States Rights,
0% due 12/31/19 1,250,000 0
------------
3,419,062
GOVERNMENT OF NETHERLANDS - 0.80%
6.25% due 07/15/98 NLG 850,000 554,854
7.00% due 06/15/05 660,000 439,877
------------
994,731
REPUBLIC OF POLAND - 3.38%
3.25% due 10/27/14 $6,500,000 4,216,876
------------
GOVERNMENT OF SPAIN - 0.37%
10.00% due 02/28/05 ESP 8,380,000 70,053
11.45% due 08/30/98 45,750,000 396,324
------------
466,377
GOVERNMENT OF GREAT BRITIAN - 1.78%
United Kingdom Treasury, [Pound
7.00% due 11/06/01 Sterling] 1,430,000 2,223,618
------------
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS (Cost $37,543,142) $ 39,685,897
------------
<CAPTION>
Shares Value
------ -----
COMMON STOCK - 0.01%
HOUSEHOLD APPLIANCES & FURNISHINGS - 0.01%
Decorative Home Accents, Incorporated 1,500 $ 15,000
------------
TOTAL COMMON STOCK (Cost: $0) $ 15,000
------------
WARRANTS - 0.01%
BPC Holdings Corporation due 04/15/04 1,000 12,500
In Flight Phone Corporation 1,500 0
------------
TOTAL WARRANTS (Cost: $0) $ 12,500
------------
REPURCHASE AGREEMENT - 9.05% ***
<CAPTION>
Principal
Amount Value
------ -----
$11,301,000 Repurchase Agreement with State
Street Bank & Trust Company
dated 12/29/95 at 5.75%, to be
repurchased at $11,308,220 on
01/02/96, collateralized by
$11,465,000 U.S. Treasury Notes,
5.125% due 04/30/98 (valued at
$11,629,009 including interest) $ 11,301,000
------------
TOTAL INVESTMENTS
(Strategic Bond Trust) (Cost: $122,860,614) $124,924,833
============
GLOBAL GOVERNMENT BOND TRUST
<CAPTION>
Principal
Amount Value
------ -----
U.S. GOVERNMENT AGENCY OBLIGATIONS - 12.03%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 7.55%
6.07% due 11/20/98 $ 5,000,000 $ 5,021,875
6.50% due 06/08/00 12,000,000 12,127,500
------------
17,149,375
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 4.48%
6.25% due 10/28/98 5,000,000 5,044,550
6.85% due 05/26/00 5,000,000 5,133,600
------------
10,178,150
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS (Cost: $26,967,610) $ 27,327,525
------------
FOREIGN GOVERNMENT OBLIGATIONS - 52.65%
COMMONWEALTH OF AUSTRALIA - 11.75%
New South Wales Treasury,
5.202% due 04/01/04 $ 7,000,000 4,784,079
New South Wales Treasury,
7.00% due 04/01/04 AUD 13,000,000 8,884,718
Queensland Treasury,
6.50% due 06/14/05 20,000,000 13,029,583
------------
26,698,380
</TABLE>
The accompanying notes are an integral part of the financial statements.
45
<PAGE> 148
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<C> <C> <C> <C>
GOVERNMENT OF CANADA - 6.27%
8.00% due 06/01/23 CAD 15,000,000 $ 11,512,256
Province of Ontario,
zero coupon due 01/10/40 50,000,000 1,310,875
Province of Ontario,
zero coupon due 01/10/35 40,000,000 1,423,654
------------
14,246,785
GOVERNMENT OF FRANCE - 2.24%
6.00% due 10/25/25 FRF 30,000,000 5,084,746
------------
REPUBLIC OF ITALY - 15.59%
5.625% due 06/09/98 $ 12,000,000 12,045,000
8.50% due 08/01/04 ITL 20,000,000,000 11,111,216
10.00% due 08/01/03 20,000,000,000 12,258,481
------------
35,414,697
FEDERAL REPUBLIC OF GERMANY - 1.35%
5.625% due 09/20/16 DEM 5,000,000 3,062,042
------------
GOVERNMENT OF SPAIN - 11.89%
8.00% due 05/30/04 ESP 750,000,000 5,604,905
10.30% due 06/15/02 1,500,000,000 12,785,367
10.50% due 10/30/03 1,000,000,000 8,615,086
------------
27,005,358
KINGDOM OF SWEDEN - 3.56%
10.25% due 05/05/00 SEK 50,000,000 8,082,820
------------
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS (Cost: $111,062,945) $119,594,828
------------
SUPRANATIONAL ORGANIZATIONS - 8.74%
European Investment Bank,
8.00% due 06/10/03 GBP 4,000,000 6,390,744
International Bank for Reconstruction
and Development, 5.875%
due 11/10/03 DEM 10,000,000 7,001,046
International Bank for Reconstruction
and Development, 10.80%
due 05/19/03 ITL 10,000,000,000 6,462,023
------------
19,853,813
TOTAL SUPRANATIONAL ORGANIZATIONS
(Cost: $19,337,635) $ 19,853,813
------------
CORPORATE BONDS - 15.42%
BANKING & FINANCE - 12.02%
Credit Local de France,
zero coupon due 09/03/02 CAD 10,000,000 4,535,884
LKB Baden Wurtenberg,
6.50% due 09/15/08 DEM 15,000,000 10,399,094
Treuhandanstalt,
7.125% due 01/29/03 10,000,000 7,529,453
BANKING & FINANCE - CONTINUED
Unidec, 5.50%
due 11/25/02 FRF 25,000,000 $ 4,839,697
------------
27,304,128
ELECTRIC SERVICES - 3.40%
Hydro-Quebec,
zero coupon due 08/15/20 CAD 85,000,000 7,725,009
------------
TOTAL CORPORATE BONDS
(Cost: $32,982,216) $ 35,029,137
------------
OTHER BONDS (FOREIGN GOVERNMENT - BACKED
OR GUARANTEED) - 5.28%
ELECTRIC SERVICES - 5.28%
Tokyo Gas Company,
5.50% due 07/21/98 $12,000,000 11,985,000
------------
TOTAL OTHER BONDS (FOREIGN
GOVERNMENT-BACKED OR
GUARANTEED) (Cost: $11,957,500) $11,985,000
------------
CONVERTIBLE BONDS - 1.82%
Hanson America, Incorporated,
2.39% due 03/01/01 5,000,000 4,137,500
------------
TOTAL CONVERTIBLE BONDS
(Cost: $3,993,750) $ 4,137,500
------------
REPURCHASE AGREEMENT - 4.06%
<CAPTION>
Principal
Amount Value
------ -----
$9,226,000 Repurchase Agreement with State
Street Bank & Trust Company
dated 12/29/95 at 5.00%, to be
repurchased at $9,231,126 on
01/02/96, collateralized by
$8,425,000 U.S. Treasury Notes,
7.50% due 05/15/02 (valued at
$9,489,994 including interest) $ 9,226,000
------------
TOTAL INVESTMENTS
(Global Government Bond Trust)
(Cost: $215,527,656) $227,153,803
============
INVESTMENT QUALITY BOND TRUST
<CAPTION>
Principal
Amount Value
------ -----
CORPORATE BONDS - 32.49%
DRUGS & HEALTH CARE - 0.28%
OrNda Healthcorp,
11.375% due 08/15/04 $350,000 $ 393,750
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
46
<PAGE> 149
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
ELECTRIC UTILITIES - 1.81%
Cincinnati Gas & Electric Company,
6.90% due 06/01/25 $1,300,000 $ 1,402,908
Cleveland Electric Illuminating Company,
Series B, 9.50% due 05/15/05 125,000 129,375
Duke Power Company,
7.50% due 04/01/99 700,000 732,697
Virginia Electric & Power Company,
9.375% due 06/01/98 300,000 325,068
-----------
2,590,048
FINANCE & BANKING - 20.36%
American General Finance
Corporation, 8.00% due 02/15/05 1,270,000 1,367,206
Associates Corporation of North
America, 9.125% due 04/01/00 300,000 335,745
Associates Corporation of North
America, 6.95% due 08/01/02 2,325,000 2,442,505
BankAmerica Corporation,
9.625% due 02/13/01 1,475,000 1,707,961
Beneficial Corporation,
8.40% due 05/15/08 350,000 413,287
Beneficial Corporation,
8.90% due 06/06/01 470,000 533,276
Comerica, Incorporated,
7.125% due 12/01/13 1,325,000 1,333,454
Commercial Credit Group,
Incorporated, 10.00% due 05/01/99 290,000 326,671
Equitable Life Assurance Society of the
United States, 6.95% due 12/01/05 1,150,000 1,164,375
Exxon Capital Corporation,
6.625% due 08/15/02 2,000,000 2,074,980
First National Bank of Boston,
8.00% due 09/15/04 1,775,000 1,967,623
First Union Corporation,
7.50% due 04/15/35 2,000,000 2,214,700
General Motors Acceptance
Corporation, 7.00% due 09/15/02 1,400,000 1,452,710
General Motors Acceptance
Corporation, 6.00% due 01/11/99 950,000 957,220
International Lease Finance
Corporation, 7.50% due 03/01/99 1,500,000 1,574,055
National Westminster Bank PLC,
9.45% due 05/01/01 1,000,000 1,158,980
NBD Bancorp, 8.25% due 11/01/24 2,000,000 2,447,540
Norwest Corporation,
6.00% due 03/15/00 900,000 904,329
Sun Canada Financial Company,
7.25% due 12/15/15 1,500,000 1,522,275
Texaco Capital, Incorporated,
8.93% due 07/23/01 940,000 1,072,446
United Bankshares, Incorporated,
8.625% due 04/15/98 1,967,000 2,083,505
-----------
29,054,843
FOOD STORES - 0.07%
Big V Supermarkets, Incorporated,
Series B, 11.00% due 02/15/04 $ 125,000 $ 101,875
-----------
FOREST PRODUCTS - 1.33%
Boise Cascade Corporation,
9.85% due 06/15/02 1,620,000 1,893,164
-----------
INDUSTRIALS - 3.36%
Armco, Incorporated,
9.375% due 11/01/00 450,000 445,500
Cablevision Industries Corporation,
Series B, 9.25% due 04/01/08 100,000 107,000
Cablevision Systems Corporation,
9.25% due 11/01/05 200,000 209,000
Cincinnati Milacron, Incorporated,
7.875% due 05/15/00 870,000 888,488
Container Corporation of America,
9.75% due 04/01/03 150,000 146,250
Fort Howard Corporation,
9.25% due 01/03/15 450,000 456,750
Interlake Corporation,
12.00% due 11/15/01 100,000 101,000
K & F Industries, Incorporated,
11.875% due 12/01/03 250,000 268,750
Repap New Brunswick, Incorporated,
9.875% due 07/15/00 250,000 247,500
Tele Communications, Incorporated,
9.80% due 02/01/12 1,600,000 1,918,672
-----------
4,788,910
INTERNATIONAL OIL - 0.70%
Amoco Canada Petroleum Company,
7.95% due 10/01/22 900,000 998,622
-----------
NON-BANK FINANCE - 1.03%
KFW International Financial,
Incorporated, 8.85% due 06/15/99 1,340,000 1,474,429
-----------
PUBLISHING - 1.58%
Time Warner, Incorporated,
9.125% due 01/15/13 2,000,000 2,253,900
-----------
SOCIAL SERVICES - 0.26%
Kindercare Learning Centers,
Incorporated, 10.375% due 06/01/01 350,000 369,250
-----------
TELECOMMUNICATION SERVICES - 0.26%
Comcast Corporation,
9.125% due 10/15/06 50,000 52,125
Heritage Media Services,
11.00% due 06/15/02 150,000 159,375
Videotron, Ltd., 10.25% due 10/15/02 150,000 158,250
-----------
369,750
</TABLE>
The accompanying notes are an integral part of the financial statements.
47
<PAGE> 150
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount Value
------ -----
<S> <C> <C>
TELEPHONE - 1.07%
GTE Florida, Incorporated, Series A,
6.31% due 12/15/02 $ 1,400,000 $ 1,421,938
Paging Network, Incorporated,
10.125% due 08/01/07 100,000 108,250
------------
1,530,188
TRANSPORTATION - 0.39%
Southern Railway Company,
8.75% due 10/15/03 470,000 549,524
------------
TOTAL CORPORATE BONDS
(Cost: $43,205,275) $ 46,368,253
------------
U.S. TREASURY OBLIGATIONS - 35.36%
U.S. TREASURY BONDS - 30.88%
8.875% due 02/15/19 3,800,000 5,122,286
10.75% due 02/15/03 9,400,000 12,265,496
12.00% due 08/15/13 17,320,000 26,686,310
------------
44,074,092
U.S. TREASURY NOTES - 4.47%
8.875% due 11/15/97 6,000,000 6,386,220
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost: $46,601,862) $ 50,460,312
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 21.49%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 12.95%
6.50% due 08/17/11 - 08/1/25 4,472,639 4,436,833
6.50% due 06/25/19,
Series I5, Class H - REMIC 900,000 913,779
7.00% due 01/01/99 2,500,000 2,522,650
7.00% due 06/01/23 - 12/01/25 8,441,318 8,518,031
8.00% due 11/15/99, Series CL 2,000,000 2,093,740
------------
18,485,033
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.70%
5.90% due 10/25/19 - REMIC 1,000,000 993,430
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 7.84%
6.50% due 07/15/08 - 05/15/09 242,482 244,679
7.00% due 09/15/23 - 02/15/24 1,636,328 1,655,751
7.50% due 12/15/99 - 10/15/25 4,661,564 4,795,537
8.20% due 12/06/15 50,250 52,103
8.50% due 09/15/16 - 04/15/22 4,206,812 4,434,262
9.50% due 09/10/15 1,746 1,872
------------
11,184,204
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS (Cost: $29,801,406) $ 30,662,667
------------
FIXED INCOME - OTHER - 5.36%
MISCELLANEOUS ASSET BACKED SECURITIES - 5.36%
Advanta Credit Card Master
Trust, Series 1994, Class A,
6.217% due 10/01/01 $ 1,450,000 $ 1,453,625
American Express Master Trust, Series
1992, Class A, 6.60% due 05/15/00 1,500,000 1,544,055
Premier Auto Trust, Series 1993,
Class A2, 4.65% due 11/02/99 1,550,870 1,535,361
Premier Auto Trust, Series 1994,
Class A3, 6.35% due 05/02/00 1,500,000 1,512,180
World Omni Automobile Lease, Series
1995, Class A, 6.05% due 11/25/01 1,600,000 1,609,488
------------
7,654,709
TOTAL FIXED INCOME - OTHER
(Cost: $7,595,100) $ 7,654,709
------------
FOREIGN BONDS - 1.99%
CANADIAN - 1.76%
Hydro-Quebec, 8.05% due 07/07/24 2,200,000 2,511,872
------------
GOVERNMENT OF NEW ZEALAND - 0.23%
10.625% due 11/15/05 250,000 334,565
------------
TOTAL FOREIGN BONDS
(Cost: $2,679,776) $ 2,846,437
------------
REPURCHASE AGREEMENT - 3.31%
<CAPTION>
Principal
Amount Value
- --------- -----
<S> <C> <C>
$4,723,000 Repurchase Agreement with
Shearson Lehman dated 12/29/95 at
5.93%, to be repurchased at
$4,726,112 on 01/02/96,
collateralized by $13,700,000 U.S.
Treasury Strips, 5.59% due 02/15/13
(valued at
$5,027,044 including interest) $ 4,723,000
------------
TOTAL INVESTMENTS
(Investment Quality Bond Trust)
(Cost: $134,606,419) $142,715,378
============
U.S. GOVERNMENT SECURITIES TRUST
<CAPTION>
Principal
Amount Value
--------- -----
<S> <C> <C>
U.S. TREASURY OBLIGATIONS - 31.30%
U.S. TREASURY BONDS - 4.71%
8.875% due 08/15/17 $ 9,000,000 $ 12,054,330
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
48
<PAGE> 151
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
U.S. TREASURY NOTES - 26.60%
5.625% due 11/30/00 $10,000,000 $ 10,090,600
5.75% due 10/31/00 2,000,000 2,028,740
6.125% due 05/31/97 6,000,000 6,073,140
6.50% due 08/15/05 7,000,000 7,457,170
6.75% due 04/30/00 10,300,000 10,839,102
7.75% due 01/31/00 29,100,000 31,609,875
------------
68,098,627
TOTAL U.S. TREASURY OBLIGATIONS
(Cost: $76,918,000) $ 80,152,957
------------
U.S. GOVERNMENT AGENCY AND
MORTGAGE-BACKED OBLIGATIONS - 50.50%
FEDERAL HOME LOAN BANK - 6.57%
5.94% due 06/13/00 3,300,000 3,351,051
6.49% due 09/08/97 250,000 254,727
7.81% due 07/17/96 5,000,000 5,064,850
8.25% due 09/25/96 8,000,000 8,161,280
------------
16,831,908
FEDERAL HOME LOAN MORTGAGE CORPORATION - 12.83%
6.00% due 09/01/10 - 11/01/10 32,765,674 32,407,218
6.50% due 07/01/06 39,782 39,570
7.00% due 12/01/04 167,992 170,226
8.25% due 07/01/06 224,424 233,587
------------
32,850,601
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 19.93%
6.50% TBA** 17,500,000 17,292,100
6.50% due 10/01/05 249,744 251,635
7.00% TBA** 8,125,000 8,190,975
7.52% due 08/26/05 17,000,000 17,642,549
8.00% due 08/01/04-10/01/24 38,361 39,755
8.25% due 09/01/08 380,564 397,945
8.50% due 02/01/09 69,158 74,114
8.75% due 08/01/09 380,295 401,847
10.00% due 04/01/16 5,210 5,736
10.50% due 03/01/16 35,648 39,118
11.50% due 02/01/20 5,865,018 6,682,426
------------
51,018,200
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 7.57%
7.00% TBA** 18,000,000 18,213,660
7.50% due 02/15/07 262,873 274,366
8.00% due 10/15/05 15,587 16,401
9.50% due 09/15/20 473,159 510,075
11.00% due 09/15/15 62,583 70,855
12.00% due 03/15/15 - 07/15/15 257,859 299,761
------------
19,385,118
STUDENT LOAN MARKETING ASSOCIATION - 1.80%
7.50% due 03/08/00 4,300,000 4,606,375
------------
OTHER U.S. GOVERNMENT AGENCY OBLIGATIONS - 1.80%
Tennessey Valley Authority,
8.25% due 11/15/96 4,500,000 4,604,580
------------
TOTAL U.S. GOVERNMENT AGENCY
AND MORTGAGE- BACKED OBLIGATIONS
(Cost: $127,653,887) $129,296,782
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.82%
Drexel Burnham Lambert,
9.30% due 06/01/17,
(Collateralized by GNMA 10.00%) $ 61,618 $ 62,735
Goldman Sachs Trust 7, Series C,
Class C2, 9.10% due 04/27/17,
(Collateralized by FNMA 9.50%) 19,505 19,462
Merrill Lynch Trust XXV, Class B,
8.75% due 03/20/19 (Collateralized
by FHLMC 10.00%) 47,341 47,252
Shearson Lehman, Incorporated,
7.50% due 06/01/18, (Collateralized
by GNMA 11.50%) 2,017,792 1,980,584
------------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS (Cost: $2,201,204) $ 2,110,033
------------
REPURCHASE AGREEMENT - 17.38% ***
<CAPTION>
Principal
Amount Value
------ -----
$44,490,000 Repurchase Agreement with State
Street Bank & Trust Company
dated 12/29/95 at 5.75%, to be
repurchased at $44,518,424 on
01/02/96, collateralized by
$45,120,000 U.S. Treasury Notes,
5.125% due 04/30/98 (valued at
$45,765,317 including interest) $ 44,490,000
------------
TOTAL INVESTMENTS
(U.S. Government Securities Trust)
(Cost: $251,263,091) $256,049,772
============
MONEY MARKET TRUST
<CAPTION>
Principal
Amount Value
------ -----
U.S. GOVERNMENT AGENCY OBLIGATIONS - 6.92%
STUDENT LOAN MARKETING ASSOCIATION - 6.92%
5.24% due 09/28/98 $10,000,000 $ 10,000,000
5.25% due 02/22/99 7,900,000 7,900,807
------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS $ 17,900,807
------------
COMMERCIAL PAPER - 92.56%
American Express Credit
Corporation, 5.61% due 03/15/96 9,000,000 8,896,215
American Home Products
Corporation, 5.72% due 02/09/96 2,000,000 1,987,607
</TABLE>
The accompanying notes are an integral part of the financial statements.
49
<PAGE> 152
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
------ -----
<S> <C> <C>
COMMERCIAL PAPER - CONTINUED
Assets Securitization Cooperative
Corporation, 5.70% due 01/16/96 $5,500,000 $ 5,486,937
Associates Corporation of North
America, 5.68% due 02/09/96 8,000,000 7,950,773
Avco Financial Services,
Incorporated, 5.75% due 01/23/96 9,000,000 8,968,375
BankAmerica,
5.74% due 02/16/96 4,000,000 3,999,950
The Bank of New York,
5.52% due 05/22/96 4,000,000 3,998,781
Banque National de Paris,
5.51% due 05/21/96 6,500,000 6,359,725
Bayerische Hypotheken,
6.14% due 10/29/96 7,000,000 7,000,000
BCI Funding Corporation,
5.70% due 02/09/96 5,000,000 4,969,125
BCI Funding Corporation,
5.71% due 02/16/96 5,000,000 4,963,520
Bear Stearns Companies,
Incorporated, 5.77% due 01/16/96 8,000,000 7,980,767
Burlington Northern Santa Fe,
5.90% due 02/28/96 2,500,000 2,476,236
Cariplo Finance, Incorporated,
5.61% due 03/04/96 6,500,000 6,436,186
Chase Manhattan Corporation,
5.65% due 02/29/96 1,500,000 1,486,110
Chase Manhattan Corporation,
5.77% due 04/15/96 7,500,000 7,500,000
Chevron Transport Corporation,
5.60% due 03/14/96 1,000,000 988,644
Chevron UK Investment PLC,
5.72% due 01/30/96 8,000,000 7,963,138
CIT Group Holdings, Incorporated,
5.70% due 01/24/96 5,000,000 4,981,792
Corestates Capital Corporation,
5.68% due 02/16/96 3,000,000 2,978,227
Corestates Capital Corporation,
5.86% due 01/05/96 6,000,000 6,000,000
Delaware Funding Corporation,
5.71% due 01/08/96 500,000 499,445
Den Danske Corporation,
5.63% due 03/04/96 7,500,000 7,426,106
Dresdner U.S. Finance,
5.72% due 01/22/96 7,000,000 6,976,643
ESC Securitization, Incorporated,
5.72% due 02/02/96 9,000,000 8,954,240
ESC Securitization, Incorporated,
5.68% due 02/22/96 2,000,000 1,983,591
First Bank System,
FRN due 05/06/96 5,000,000 4,999,669
General Electric Capital Corporation,
5.59% due 03/01/96 7,000,000 6,934,783
COMMERCIAL PAPER - CONTINUED
General Electric Capital Services,
Incorporated, 5.70% due 02/09/96 $2,000,000 $ 1,987,650
General Motors Acceptance
Corporation, 5.58% due 04/15/96 8,000,000 7,869,800
Glaxo PLC, 5.57% due 03/11/96 4,000,000 3,956,678
Her Majesty In Right of Canada,
5.50% due 03/22/96 6,680,000 6,597,335
Hitachi America, Ltd.,
5.72% due 01/12/96 1,490,000 1,487,396
Household Finance Corporation,
5.70% due 01/31/96 3,000,000 2,985,750
Household International,
Incorporated, 5.73% due 02/08/96 3,000,000 2,981,855
Household International,
Incorporated, 5.65% due 03/08/96 3,000,000 2,968,454
KFW International Finance,
Incorporated, 5.68% due 02/08/96 9,000,000 8,946,040
Kreditbank North America,
5.70% due 03/01/96 7,500,000 7,428,750
National Westminister Bank of
Canada, 5.76% due 02/22/96 4,000,000 4,000,000
Norwest Financial, Incorporated,
5.69% due 02/28/96 4,000,000 3,963,331
PNC Funding Corporation,
5.75% due 02/05/96 700,000 696,087
PNC Funding Corporation,
5.76% due 02/05/96 5,965,000 5,931,596
PNC Funding Corporation,
5.77% due 02/05/96 600,000 596,634
Sears Roebuck Acceptance
Corporation, 5.70% due 02/22/96 8,000,000 7,934,133
SMM Trust, 5.925% due 11/15/96 8,000,000 8,000,000
Toshiba America,
5.65% due 01/12/96 7,000,000 6,987,915
Zeneca Wilmington Company,
5.70% due 01/19/96 2,875,000 2,866,806
------------
TOTAL COMMERCIAL PAPER $239,332,795
------------
REPURCHASE AGREEMENT - 0.52%
<CAPTION>
Principal
Amount Value
------ -----
$1,348,000 Repurchase Agreement with
Aubrey Lanston dated 12/29/95 at
5.90%, to be repurchased at
$1,348,884 on 01/02/96,
collateralized by $1,350,000 U.S
Treasury Notes, 5.125% due
12/31/98 (valued at
$1,372,781 including interest) $ 1,348,000
------------
TOTAL INVESTMENTS
(Money Market Trust) $258,581,602
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
50
<PAGE> 153
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
ASSET ALLOCATION TRUSTS
<CAPTION>
AGGRESSIVE MODERATE CONSERVATIVE
---------------- ----------------- ------------------
Shares Value Shares Value Shares Value
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCKS: 66.91% 42.99% 25.34%
AEROSPACE: 0.76% 0.46% 0.33%
Boeing Company -- -- 1,400 $ 109,725 700 $ 54,862
Lockheed Martin Corporation 1,800 $ 142,200 -- -- -- --
McDonnell Douglas Corporation 2,100 193,200 6,300 579,600 1,300 119,600
Northrop Grumman Corporation 3,300 211,200 4,200 268,800 900 57,600
Oerlikon Buhrle AG* 720 58,674 -- -- -- --
Rockwell International Corporation 3,100 163,913 7,500 396,563 2,800 148,050
Thiokol Corporation 3,400 115,175 5,300 179,537 900 30,488
Transtechnology Corporation 4,100 55,350 8,800 118,800 2,300 31,050
TRW, Incorporated 1,000 77,500 -- -- -- --
United Technologies Corporation 6,500 616,687 14,200 1,347,225 2,900 275,137
Watkins Johnson Company -- -- -- -- 700 30,625
---------- ---------- --------
1,633,899 3,000,250 747,412
AGRICULTURAL MACHINERY: 0.08% 0.06% 0.03%
Deere & Company 5,000 176,250 10,300 363,075 1,800 63,450
---------- ---------- --------
AIR TRAVEL: 0.74% 0.47% 0.28%
AMR Corporation* 1,200 89,100 2,700 200,475 600 44,550
Atlantic Southeast Airlines, Incorporated 2,900 62,350 5,800 124,700 2,100 45,150
British Airways 19,800 143,296 31,000 224,352 5,500 39,804
Delta Air Lines, Incorporated 11,000 812,625 23,400 1,728,675 4,800 354,600
Japan Air Lines Company* 38,000 252,107 62,000 411,332 11,000 72,978
KLM Royal Dutch Airlines* 5,700 200,925 9,700 341,925 1,900 66,975
Northwest Airlines Corporation* 400 20,400 700 35,700 -- --
---------- ---------- --------
1,580,803 3,067,159 624,057
ALUMINUM: 0.64% 0.44% 0.28%
Aluminum Company of America 26,000 1,374,750 54,000 2,855,250 11,700 618,637
---------- ---------- --------
APPAREL & TEXTILES: 0.33% 0.24% 0.15%
Kellwood Company 3,800 77,425 8,800 179,300 800 16,300
Pacific Sunwear of California* 5,100 45,900 11,600 104,400 2,600 23,400
Talbots, Incorporated 9,900 284,625 21,800 626,750 4,300 123,625
Urban Outfitters, Incorporated* 7,600 176,700 17,500 406,875 4,200 97,650
Warnaco Group, Incorporated, Class A 4,800 120,000 10,600 265,000 3,400 85,000
---------- ---------- --------
704,650 1,582,325 345,975
AUTO PARTS: 0.78% 0.57% 0.35%
Echlin, Incorporated 18,400 671,600 33,600 1,226,400 7,300 266,450
Gentex Corporation* 1,600 35,200 3,500 77,000 800 17,600
Genuine Parts Company 20,400 836,400 50,300 2,062,300 10,200 418,200
Monro Muffler Brake, Incorporated* 5,365 74,439 11,125 154,359 3,150 43,706
A.O. Smith Corporation 400 8,300 800 16,600 200 4, 150
Spartan Motors, Incorporated* 5,300 58,300 11,900 130,900 2,900 31,900
---------- ---------- --------
1,684,239 3,667,559 782,006
AUTOMOBILES: 1.30% 0.74% 0.42%
Chrysler Corporation 6,000 332,250 12,500 692,187 2,700 149,513
Ford Motor Company 16,200 469,800 30,700 890,300 6,300 182,700
General Motors Corporation 13,300 703,237 24,000 1,269,000 4,900 259,087
</TABLE>
The accompanying notes are an integral part of the financial statements.
51
<PAGE> 154
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE MODERATE CONSERVATIVE
----------------- ----------------- ------------------
Shares Value Shares Value Shares Value
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Automobiles - continued
Honda Motor Company 18,000 $ 371,332 26,000 $ 536,368 5,000 $103,148
Toyota Motor Corporation 29,000 615,109 47,000 996,901 8,000 169,685
Volvo AB, Series B 14,400 294,953 20,200 413,754 3,700 75,787
2,786,681 4,798,510 939,920
---------- ---------- --------
BANKING: 6.85% 4.01% 2.21%
Asahi Bank 22,000 276,998 26,000 327,361 4,000 50,363
Banc One Corporation 11,500 434,125 21,600 815,400 2,700 101,925
Bank of New York, Incorporated 27,700 1,350,375 62,900 3,066,375 13,500 658,125
Bank of Tokyo 17,000 298,015 26,000 455,787 5,000 87,651
Bank of Yokohama 9,000 73,656 24,000 196,416 -- --
Bankamerica Corporation 4,600 297,850 6,300 407,925 1,000 64,750
Banponce Corporation 12,200 472,750 26,100 1,011,375 6,300 244,125
Banco Bilbao Vizcaya SA 6,250 225,165 9,750 351,257 1,900 68,450
Barclays 2,965 33,978 4,738 54,304 857 9,817
Boatmens Bancshares, Incorporated 2,100 85,838 4,200 171,675 1,000 40,875
Banque National Paris 4,443 200,420 6,866 309,720 1,205 54,357
Chemical Banking Corporation 7,200 423,000 15,200 893,000 2,800 164,500
Christiania Bank O 63,800 149,072 99,900 233,422 20,200 47,199
Citicorp 3,800 255,550 3,300 221,925 600 40,350
Collective Bancorp, Incorporated 3,000 76,125 8,000 203,000 2,300 58,363
Comerica, Incorporated 1,900 76,238 4,000 160,500 800 32,100
Crestar Financial Corporation -- -- 1,300 76,863 300 17,737
CS Holding 3,235 331,633 5,625 576,642 1,200 123,017
Dai Ichi Kangyo Bank, Ltd. 19,000 373,559 32,000 629,153 6,000 117,966
Den Norske Bank 117,800 308,723 188,300 493,484 31,100 81,505
Deutsche Bank AG 8,050 381,428 12,650 599,387 2,300 108,979
Fifth Third Bancorp 1,100 80,575 2,300 168,475 400 29,300
First Bank System, Incorporated 2 900 143,913 -- -- 400 19,850
First Chicago Corporation 12,093 477,674 27,631 1,091,424 3,815 150,693
First Interstate Bancorp 2,900 395,850 6,700 914,550 1,100 150,150
Fokus Bank* 27,800 150,102 35,900 193,837 7,650 41,305
Fuji Bank 22,000 485,811 35,000 772,881 6,000 132,494
Generale De Banque 150 51,988 300 103,976 50 17,329
HSBC Holdings - HKD 6,700 102,285 68,000 1,028,904 1,800 27,479
HSBC Holdings -[pound sterling] 43,400 656,683 10,500 160,297 12,200 184,597
Hubco, Incorporated 12,000 265,500 20,400 451,350 3,800 84,075
Istituto Nazionale delle Assicurazioni -- -- -- -- 16,800 22,268
Industrial Bank of Japan 15,000 454,722 21,000 636,610 5,000 151,574
Lloyds TSB Group, PLC 64,896 334,105 103,293 531,784 18,117 93,271
Mitsubishi Bank 6,000 141,211 9,000 211,816 2,000 47,070
Mitsubishi Trust & Banking Corporation 5,000 83,293 11,000 183,245 1,000 16,659
Mitsui Trust & Banking Corporation 26,000 284,552 35,000 383,051 9,000 98,499
Nationsbank Corporation 848 59,042 1,480 103,045 364 25,344
Overseas Union Bank 27,000 186,108 49,000 337,752 9,000 62,036
Public Bank BHD 36,000 68,890 50,000 95,681 10,000 19,136
Royal Bank of Scotland Group 21,949 199,753 34,321 312,348 6,102 55,533
Sakura Bank* 43,000 545,569 65,000 824,697 12,000 152,252
Schwiez Bankverein 475 193,953 770 314,408 170 69,415
Sparebanken NOR 8,000 206,504 12,600 325,240 2,500 64,532
Standard Chartered -- -- -- -- 106 898
Standard Federal Bancorporation 17,300 861,188 42,500 1,673,437 6,900 271,688
The Sumitomo Bank, Ltd. 23,000 487,845 27,000 572,688 5,000 106,053
</TABLE>
The accompanying notes are an integral part of the financial statements.
52
<PAGE> 155
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE MODERATE CONSERVATIVE
----------------- ----------------- ------------------
Shares Value Shares Value Shares Value
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Banking - continued
Sumitomo Trust & Banking 8,000 $ 113,123 19,000 $ 268,668 4,000 $ 56,562
The Tokai Bank, Ltd. 18,000 251,041 28,000 390,508 5,000 69,734
Unidanmark 4,300 212,967 6,950 344,214 1,175 58,195
United Overseas Bank 37,800 363,436 56,600 544,192 11,200 107,685
Westpac Banking Corporation 78,900 349,520 123,600 547,537 21,800 96,572
Zions Bancorp 7,100 569,775 15,500 1,243,875 3,800 304,950
---------- ----------- ----------
14,721,476 25,985,461 4,959,352
BROADCASTING: 1.00% 0.63% 0.36%
Canal Plus 1,400 262,446 2,525 473,341 475 89,044
Capital Cities/ABC, Incorporated 400 49,350 700 86,362 200 24,675
Peoples Choice TV Corporation* 7,000 133,000 20,100 381,900 2,100 39,900
TV 4 AB 11,800 204,377 18,500 320,421 3,600 62,352
TV Francaise 5,150 520,574 6,350 641,873 1,100 111,190
Viacom, Incorporated, Class A* -- -- -- -- 272 12,478
Viacom, Incorporated, Class B* 20,800 985,400 46,200 2,188,725 97,600 462,380
---------- ----------- ---------
2,155,147 4,092,622 802,019
BUILDING CONSTRUCTION: 0.32% 0.21% 0.13%
American Buildings Company* 800 18,000 -- -- 200 4,500
Fluor Corporation 5,600 369,600 14,800 976,800 3,400 224,400
Harsco Corporation 5,200 302,250 3,900 226,688 1,200 69,750
Kaneshita Construction -- -- 11,000 148,087 -- --
---------- ----------- ---------
689,850 1,351,575 298,650
BUSINESS SERVICES: 1.19% 0.84% 0.43%
ADVO, Incorporated -- -- 3,800 98,800 800 20,800
America On-Line, Incorporated* 5,500 206,250 11,600 435,000 3,000 112,500
Catalina Marketing Corporation* 3,900 244,729 8,400 527,100 1,900 119,225
EA Engineer Science and Technology,
Incorporated* 6,200 25,575 15,400 63,525 2,300 9 488
Eaux (Cie Generale) 1,150 114,812 1,720 171,719 420 41 931
Flightsafety International, Incorporated 4,400 221,100 8,100 407,025 800 40 200
Medaphis Corporation* 1,600 59,200 3,900 144,300 600 22 200
Microage, Incorporated* 9,600 78,000 24,400 198,250 5,500 44 688
North West Water 17,300 165,504 27,000 258,301 4,800 45 920
Ogden Corporation 2,000 42,750 1,600 34,200 500 10 687
Omnicom Group 5,200 193,700 21,800 812,050 2,200 81 950
PHH Corporation -- -- 600 28,050 -- --
Prosegur Compania 4,200 104,221 6,500 161,294 -- --
Securitas AB 2,000 94,884 7,000 332,093 1,300 61,674
Serv-Tech, Incorporated* 6,200 36,425 6,700 39,362 -- --
SunGuard Data Systems* 19,100 544,350 34,900 994,650 7,800 222,300
Syratech Corporation* 3,500 70,438 7,600 152,950 -- --
TETRA Technologies, Incorporated* 7,250 164,938 16,000 364,000 3,625 82,469
Tracor, Incorporated* 2,700 39,150 -- -- -- --
TRC Companies, Incorporated* 4,400 28,600 10,600 68,900 2,500 16,250
Yorkshire Water 12,600 115,648 19,700 180,815 3,500 32,125
--------- ----------- ---------
2,550,274 5,472,384 964,407
</TABLE>
The accompanying notes are an integral part of the financial statements.
53
<PAGE> 156
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
ASSET ALLOCATION TRUSTS
<CAPTION>
AGGRESSIVE MODERATE CONSERVATIVE
----------------- ----------------- ------------------
Shares Value Shares Value Shares Value
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
CHEMICALS: 1.72% 1.10% 0.59%
Akzo Nobel NV 2,500 $ 289,151 4,450 $ 514,688 700 $ 80,962
Ciba-Geigy AG 225 197,984 360 316,775 -- --
Cytec Industries, Incorporated* 1,200 74,850 1,900 118,513 600 37,425
E.I.Du Pont De Nemours & Company 16,200 1,131,975 33,700 2,354,788 7,200 503 100
W.R. Grace & Company 1,600 94,600 3,200 189,200 700 41 387
Great Lakes Chemical Corporation 1,800 129,600 2,500 180,000 300 21 600
Martek Biosciences Corporation* 2,700 68,175 14,700 371,175 1,600 40 400
Metacorp BHD 11,000 28,586 17,000 44,178 8,000 20 790
Metallgesellschaft* 6,800 148,846 14,600 319,582 3,000 65 667
Nippon Shokubai Company 30,000 293,462 50,000 489,104 9,000 88 039
Olin Corporation -- -- 800 59,400 200 14,850
Om Group, Incorporated 2,200 72,875 2,900 96,063 -- --
Riken Vinyl Industry Company 29,000 266,828 46,000 423,245 8,000 73,608
Sekisui Chemical 16,000 235,545 25,000 368,039 3,000 44,165
Shin Etsu Chemical Company 12,000 248,717 22,000 455,981 4,000 82,906
Special Devices, Incorporated* 2,100 27,300 -- -- -- --
Union Carbide Corporation 10,400 390,000 22,500 843,750 5,500 206,250
---------- ----------- ----------
3,698,494 7,144,481 1,321,149
COMPUTERS & BUSINESS EQUIPMENT: 2.35% 1.61% 1.03%
Bay Networks, Incorporated* 1,650 67,856 -- -- -- --
3Com Corporation -- -- 4,800 223,800 1,100 51,288
Cisco Systems, Incorporated* 11,600 865,650 21,500 1,604,437 4,500 335,813
Compaq Computer Corporation* 26,400 1,267,200 60,400 2,899,200 11,700 561,600
Digital Equipment Corporation* 5,600 359,100 6,300 403,988 2,500 160,313
Fujitsu 8,000 89,104 13,000 144,794 2,000 22,276
Hewlett-Packard Company 4,300 360,125 8,600 720,250 2,000 167,500
Hutchinson Technology, Incorporated* 1,100 46,475 -- -- -- --
International Business Machines Corporation 18,900 1,734,075 41,500 3,807,625 9,500 871,625
International Imaging Materials* 4,500 113,625 9,700 244,925 2,500 63,125
Natural Microsystems Corporation* 5,200 158,600 12,300 375,150 2,200 67,100
Tech Data Corporation* -- -- -- -- 1,000 15,000
---------- ----------- ----------
5,061,810 10,424,169 2,315,640
CONGLOMERATES: 1.14% 0.66% 0.34%
AlliedSignal, Incorporated 3,200 152,000 13,000 617,500 2,800 133,000
Berjaya Sports 33,000 76,663 83,000 192,818 10,000 23,231
BIC 4,700 477,966 6,975 709,322 1,225 124,576
BTR PLC 55,200 281,187 86,300 439,609 15,200 77,428
Corporacion Financiera Alba 2,500 153,957 3,650 224,777 600 36,950
First Pacific Company 119,089 132,449 189,734 211,020 20,185 22,449
Hutchison Whampoa 71,000 432,473 106,000 645,664 19,000 115,732
Jardine Matheson* 16,000 118,563 31,600 234,156 6,600 48,912
Nokia OY AB, Series A 6,100 239,826 15,350 607,026 1,600 62,905
Nokia OY AB, Series K 6,350 251,115 4,250 167,092 1,850 73,160
Tomkins 32,200 140,772 50,300 219,901 8,900 38,909
---------- ----------- ----------
2,456,971 4,268,885 757,252
</TABLE>
The accompanying notes are an integral part of the financial statements.
54
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PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE MODERATE CONSERVATIVE
---------------- ----------------- ------------------
Shares Value Shares Value Shares Value
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
CONSTRUCTION MATERIALS: 0.65% 0.42% 0.23%
BPB Industries 26,600 $ 123,519 41,700 $ 193,637 7,400 $ 34,362
Lafarge Corporation 15,900 298,125 24,100 451,875 4,000 75,000
Medusa Corporation 6,100 161,650 16,150 427,975 3,800 100,700
RMC Group 4,400 67,719 6,900 106,195 1,200 18,469
Tostem Corporation 10,000 332,203 16,000 531,525 3,000 99,661
Vulcan Materials Company 7,000 403,375 17,700 1,019,962 3,100 178,638
---------- ---------- ----------
1,386,591 2,731,169 506,830
CONSTRUCTION & MINING EQUIPMENT: 0.50% 0.36% 0.25%
Caterpillar, Incorporated 11,900 699,125 25,500 1,498,125 5,900 346,625
Harnischfeger Industries, Incorporated 10,791 358,801 24,534 815,756 6,691 222,476
Japan Foundation Engineer 700 13,763 -- -- -- --
---------- ---------- ----------
1,071,689 2,313,881 569,101
COSMETICS & TOILETRIES: 0.35% 0.28% 0.17%
Alberto-Culver Company, Class A 10,900 332,450 26,000 793,000 5,000 152,500
Avon Products, Incorporated 2,200 165,825 7,600 572,850 1,600 120,600
CCA Industries, Incorporated* 12,500 15,625 28,400 35,500 6,300 7,875
Guest Supply, Incorporated* 10,500 237,562 19,050 431,006 4,500 101,813
---------- ---------- ----------
751,462 1,832,356 382,788
DOMESTIC OIL: 1.47% 1.10% 0.69%
Amerada Hess Corporation 14,500 768,500 33,900 1,796,700 6,200 328,600
Atlantic Richfield Company 6,200 686,650 15,600 1,727,700 3,200 354,400
Exxon Corporation 8,700 697,087 16,100 1,290,013 2,800 224,350
Kerr-McGee Corporation 1,400 88,900 -- -- 900 57,150
Mobil Corporation 500 56,000 400 44,800 100 11,200
Unocal Corporation 29,400 856,275 77,700 2,263,012 19,300 562,113
---------- ---------- ----------
3,153,412 7,122,225 1,537,813
DRUGS & HEALTH CARE: 5.75% 3.78% 2.24%
Allergan, Incorporated 1,100 35,750 2,200 71,500 500 16,250
American Home Products Corporation 2,900 281,300 5,300 514,100 1,400 135,800
Amgen, Incorporated* 16,200 961,875 38,400 2,280,000 8,200 486,875
Baxter International, Incorporated 22,800 954,750 45,300 1,896,938 11,100 464,812
Biogen, Incorporated 500 30,750 900 55,350 -- --
Bristol-Myers Squibb Company 19,000 1,631,625 29,500 2,533,313 6,300 541,012
Columbia/HCA-Healthcare Corporation 15,900 806,925 39,200 1,989,400 8,000 406,000
Cor Therapeutics, Incorporated* 8,100 67,837 15,600 130,650 4,300 36,012
Gehe AG 750 381,666 1,187 604,050 187 95,162
Genentech, Incorporated* 6,500 344,500 17,900 948,700 3,900 206,700
Glaxo Wellcome PLC, ADR 21,400 304,100 33,445 475,263 6,077 86,356
Health Management Association, Class A* 750 19,594 1,600 41,800 550 14,369
Integrated Health Services, Incorporated 2,700 67,500 3,700 92,500 1,300 32,500
Johnson & Johnson 10,500 899,063 22,000 1,883,750 4,700 402,437
Merck & Company, Incorporated 30,000 1,972,500 57,900 3,806,925 11,600 762,700
Pfizer, Incorporated 5,100 321,300 11,000 693,000 2,400 151,200
Pharmacia & Upjohn, Incorporated* 10,320 399,900 22,600 875,750 4,455 172,631
Protein Design Laboratories, Incorporated* 7,900 182,687 15,700 363,063 3,200 74,000
Sankyo Company 7,000 157,288 11,000 247,167 2,000 44,939
Schering AG 4,650 308,044 7,650 506,783 1,300 86,120
Schering-Plough Corporation 6,100 333,975 12,700 695,325 2,700 147,825
</TABLE>
The accompanying notes are an integral part of the financial statements.
55
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PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE MODERATE CONSERVATIVE
----------------- ----------------- -----------------
Shares Value Shares Value Shares Value
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
DRUGS & HEALTH CARE - CONTINUED
SmithKline Beecham 24,000 $ 264,637 38,100 $ 420,112 6,700 $ 73,878
SmithKline Beecham PLC, ADR 600 33,300 4,000 222,000 -- --
SmithKline BCH/BEC 29,400 320,528 45,900 500,416 8,100 88,309
Spacelabs, Incorporated* 2,800 80,500 6,100 175,375 1,900 54,625
St. Jude Medical, Incorporated 1,950 83,850 15,200 653,600 -- --
Takeda Chemical Industries 18,000 296,368 28,000 461,017 5,000 82,324
Thermedics, Incorporated* 8,100 224,775 15,300 424,575 3,900 108,225
Universal Health Services, Incorporated* 4,300 190,813 7,900 350,562 3,400 150,875
Yamanouchi Pharmaceutical 19,000 408,523 29,000 623,535 5,000 107,506
---------- ----------- ----------
12,366,223 24,536,519 5,029,442
ELECTRICAL EQUIPMENT: 1.76% 1.18% 0.68%
Alliance Semiconductor Corporation* -- -- 1,200 13,950 -- --
Austria Mikro Systeme International AG 360 58,402 672 109,016 156 25,307
Boston Scientific Corporation* 2,600 127,400 5,200 254,800 1,600 78,400
CAI Wireless Systems, Incorporated* 14,025 134,991 32,670 314,449 7,095 68,289
Exide Corporation 7,700 353,237 13,800 633,075 1,900 87,162
General Electric Company 20,000 1,440,000 51,100 3,679,200 10,700 770,400
Hitachi 28,000 282,034 44,000 443,196 8,000 80,581
Mitsubishi Electric Company 26,000 187,099 43,000 309,433 5,000 35,981
NEC Corporation 12,000 146,441 19,000 231,864 4,000 48,814
NTT Data Communications System 8 268,862 11 369,685 2 67,215
Omron Corporation 11,000 253,559 17,000 391,864 20,000 46,102
Sanmina Corporation* 4,300 223,063 8,200 425,375 2,100 108,937
Sumitomo Electric Industries 23,000 276,223 30,000 360,291 7,000 84,069
Thermo Voltek Corporation* 1,900 28,975 9,700 147,925 1,500 22,875
---------- ----------- ----------
3,780,286 7,684,123 1,524,132
ELECTRIC UTILITIES: 1.02% 0.65% 0.36%
Eastern Utilities Associates 10,500 248,063 21,800 515,025 4,700 111,037
Entergy Corporation 10,100 295,425 22,700 663,975 4,700 137,475
Hong Kong Electric Holdings, Ltd. 58,000 190,145 85,000 278,661 15,500 50,815
Kansai Electric Power -- -- 9,000 217,918 20,000 48,426
Nipsco Industries, Incorporated 7,600 290,700 16,100 615,825 3,500 133,875
Pinnacle West Capital Corporation 9,800 281,750 21,200 609,500 4,500 129,375
Scottish Power 38,800 222,954 60,500 347,647 7,800 44,821
Tohoku Electric Power, Incorporated 5,500 132,639 -- -- -- --
Tokyo Electric Power, Incorporated 10,100 269,985 20,700 553,337 2,900 77,521
VEBAAG 6,150 261,091 9,750 413,925 2,000 84,908
---------- ----------- ----------
2,192,752 4,215,813 818,253
ELECTRONICS: 2.05% 1.36% 0.77%
Adaptec, Incorporated* 5,700 233,700 5,200 213,200 -- --
Adflex Solutions, Incorporated* 2,100 56,175 4,800 128,400 2,200 58,850
AMP, Incorporated 3,000 115,125 8,000 307,000 3,000 115,125
Analog Devices, Incorporated* 10,300 364,363 26,700 944,512 2,000 70,750
DSC Communications Corporation* 8,000 295,000 17,000 626,875 3,700 136,438
L.M. Ericsson Telephone Company,
Class B, ADR 18,300 356,850 32,500 633,750 8,400 163,800
Fanuc 5,400 233,782 10,900 471,893 2,000 86,586
Glenayre Technologies, Incorporated* 8,400 522,900 10,300 641,175 4,100 255,225
Harris Corporation 1,200 65,550 3,400 185,725 -- --
</TABLE>
The accompanying notes are an integral part of the financial statements.
56
<PAGE> 159
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PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE MODERATE CONSERVATIVE
----------------- ----------------- -----------------
Shares Value Shares Value Shares Value
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
ELECTRONICS - CONTINUED
Intel Corporation 13,200 $749,100 27,600 $1,566,300 5,900 $334,825
Kyocera Corporation 1,000 74,286 -- -- -- --
Liberty Technologies, Incorporated* -- -- 17,500 87,500 3,900 19,500
Linear Technology Corporation -- -- 17,500 686,875 -- --
Maxim Integrated Products, Incorporated* 2,200 84,700 4,700 180,950 1,000 38,500
Motorola, Incorporated 5,300 302,100 11,000 627,000 2,400 136,800
Murata Manufacting Company, Ltd -- -- 3,000 110,412 1,000 36,804
National Grid Group* 23,500 72,628 36,800 113,732 6,500 20,089
National Semiconductor Corporation* 2,000 44,500 4,100 91,225 1,000 22,250
Raytheon Company 3,400 160,650 10,200 481,950 -- --
Richey Electronics, Incorporated* 4,000 52,000 2,900 37,700 1,100 14,300
Rohm Company 3,000 169,395 5,000 282,324 1,000 56,465
Scientific-Atlanta, Incorporated 7,700 115,500 2,600 39,000 600 9,000
Sequa Corporation, Class A* 2,200 67,100 -- -- 1,300 39,650
SGS Thomson Microelectronics NV 2,800 107,208 5,100 195,273 900 34,460
SGS Thomson Microelectronics NV FRF 1,000 40,250 -- -- 1,000 40,250
Unitrode Corporation* 3,300 93,225 4,500 127,125 1,100 31,075
Xilinx, Incorporated* 1,100 33,550 2,300 70, 150 500 15,250
--------- --------- ---------
4,409,637 8,850,046 1,735,992
FINANCIAL SERVICES: 4.06% 2.61% 1.62%
Acom Company 5,700 238,489 8,000 334,722 1,400 58,576
Allstate Corporation 37,842 1,556,252 73,544 3,024,497 15,762 648,212
American Express Company 20,400 844,050 43,400 1,795,675 8,800 364,100
Astoria Financial Corporation* 7,200 328,500 16,500 752,813 4,200 191,625
Beneficial Corporation 5,500 256,438 5,300 247,113 900 41,962
BHC Financial, Incorporated 2,900 52,200 8,600 154,800 1,000 18,000
Daiwa Securities 23,000 351,961 36,000 550,896 6,000 91,816
Equitable Companies, Incorporated -- -- -- -- 1,000 24,000
Federal Home Loan Mortgage Corporation 11,800 985,300 26,400 2,204,400 5,500 459,250
Federal National Mortgage Association 17,000 2,110,125 35,800 4,443,675 8,000 993,000
Fleet Financial Group, Incorporated 10,398 423,719 21,545 877,959 5,060 206,189
Internationale Nederlanden Groep NV 2,967 198,198 6,169 412,112 828 55,314
Japan Associated Finance Company* 2,000 211,138 3,000 316,707 1,000 105,569
Jefferies Group, Incorporated 2,400 113,400 4,300 203,175 1,100 51,975
Legg Mason, Incorporated 10,700 294,250 16,200 445,500 3,000 82,500
Long Island Bancorp, Incorporated 3,000 79,125 500 13,187 300 7,912
Nikko Securities 21,000 270,508 29,000 373,559 4,000 51,525
Security Services 1,900 26,380 3,000 41,652 500 6,942
Tab Corporation Holdings, Ltd. 29,200 82,474 23,100 65,245 8,100 22,879
Travelers Group, Incorporated 4,933 310,162 10,733 674,837 2,233 140,400
--------- ---------- ---------
8,732,669 16,932,524 3,621,746
FOOD & BEVERAGES: 3.89% 2.48% 1.63%
Anheuser-Busch Companies, Incorporated 900 60,187 -- -- 1,300 86,938
Archer-Daniels-Midland Company 4,017 72,306 18,230 328,140 3,882 69,876
Bass 19,100 213,129 30,000 334,757 5,300 59,140
Cadbury Schweppes PLC 21,090 174,086 32,943 271,923 8,418 69,487
The Coca Cola Company 5,800 430,650 10,800 801,900 2,700 200,475
Dean Foods Company 10,800 297,000 20,300 558,250 4,700 129,250
Dekalb Genetics Corporation, Class B 6,300 284,287 12,700 573,087 2,500 112,813
Dole Food Company, Incorporated 7,500 262,500 12,800 448,000 2,900 101,500
General Mills, Incorporated 2,400 138,600 -- -- -- --
</TABLE>
The accompanying notes are an integral part of the financial statements.
57
<PAGE> 160
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PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE MODERATE CONSERVATIVE
----------------- ----------------- -----------------
Shares Value Shares Value Shares Value
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
FOOD & BEVERAGES - CONTINUED
Goodmark Foods, Incorporated 4,600 $ 81,650 10,800 $ 191,700 2,600 $ 46,150
Kellogg Company 10,400 803,400 20,700 1,599,075 4,600 355,350
Nabisco Holdings Corporation, Class A 5,800 189,225 6,000 195,750 6,100 199,013
Nestle SA 192 212,390 340 376,108 61 67,478
Nippon Meat Packer 10,000 145,278 15,000 217,918 3,000 43,584
PepsiCo, Incorporated 43,600 2,436,150 91,300 5,101,387 19,600 1,095,150
Pioneer Hi Bred International, Incorporated 3,700 205,812 6,800 378,250 1,600 89,000
Ralcorp Holdings, Incorporated* 15,266 370,200 34,100 826,925 7,800 189,150
Ralston Purina Company 16,500 1,029,188 36,600 2,282,925 7,200 449,100
Southcorp Holdings, Ltd. 98,300 228,690 154,500 359,436 28,000 65,140
Tabacalera SA 7,550 286,315 10,800 409,563 2,350 89,118
Tate & Lyle 20,700 151,738 32,400 237,503 5,700 41,783
Tyson Foods, Incorporated, Class A 11,300 295,212 22,000 574,750 3,300 86,212
---------- ----------- ----------
8,367,993 16,067,347 3,645,707
FOREST PRODUCTS: 0.08% 0.04% 0.03%
Georgia-Pacific Corporation 1,400 96,075 3,100 212,738 700 48,037
Weyerhaeuser Company 1,200 51,900 -- -- -- --
Wickes Lumber Company* 4,600 23,000 7,300 36,500 1,800 9,000
---------- ----------- ----------
170,975 249,238 57,037
GAS & PIPELINE UTILITIES: 0.91% 0.65% 0.38%
Eastern Enterprises 4,300 151,575 15,900 560,475 2,900 102,225
Enron Corporation 16,700 636,687 35,200 1,342,000 8,000 305,000
MCN Corporation 8,800 204,600 16,000 372,000 4,600 106,950
Pacific Enterprises 13,800 389,850 34,700 980,275 5,900 166,675
Piedmont National Gas, Incorporated 7,900 183,675 14,200 330,150 3,200 74,400
Questar Corporation 4,100 137,350 9,300 311,550 1,700 56,950
UGI Corporation 11,800 244,850 16,700 346,525 2,400 49,800
---------- ----------- ----------
1,948,587 4,242,975 862,000
GOLD: 0.56% 0.47% 0.23%
Barrick Gold Corporation 21,500 567,062 54,300 1,432,163 7,800 205,725
Newmont Mining Corporation 14,000 633,500 36,300 1,642,575 6,700 303,175
---------- ----------- ----------
1,200,562 3,074,738 508,900
HOMEBUILDERS: 0.20% 0.13% 0.09%
Beazer Homes USA, Incorporated* 3,500 72,187 -- -- -- --
Castle & Cooke, Incorporated * 2,500 41,875 4,267 71,467 967 16,192
Lennar Corporation 3,700 92,963 10,100 253,762 2,600 65,325
Pulte Corporation 6,700 225,287 14,500 487,562 3,800 127,775
---------- ----------- ----------
432,312 812,791 209,292
HOTELS & RESTAURANTS: 0.56% 0.31% 0.21%
La Quinta Inns, Incorporated 4,950 135,506 9,900 271,013 2,850 78,019
Marriot International, Incorporated 8,400 321,300 19,100 730,575 2,600 99,450
McDonald's Corporation 6,800 306,850 15,700 708,462 3,900 175,987
Mirage Resorts, Incorporated* 1,400 48,300 3,100 106,950 700 24,150
Promus Hotel Corporation* -- -- 1,550 34,487 350 7,788
Quick Restaurants 2,200 205,946 1,900 177,863 500 46,806
Yoshinoya D&C Company, Ltd. 11 191,768 -- -- 2 34,867
---------- ----------- ----------
1,209,670 2,029,350 467,067
</TABLE>
The accompanying notes are an integral part of the financial statements.
58
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PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE MODERATE CONSERVATIVE
----------------- ----------------- -----------------
Shares Value Shares Value Shares Value
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
HOUSEHOLD APPLIANCES FURNISHING: 0.87% 0.47% 0.24%
Fedders USA, Incorporated 10,000 $ 57,500 23,800 $136,850 -- --
Industrie Natuzzi SPA, ADR 2,600 117,975 5,300 240,487 500 $ 22,687
Matsushita Electronic Industries 31,000 504,407 51,000 829,831 10,000 162,712
Philips Electronics 13,900 502,399 21,100 762,635 4,400 159,033
Sony Corporation 8,100 485,608 12,700 761,385 2,200 131,893
Thorn EMI PLC 8,900 209,611 14,000 329,725 2,500 58,879
--------- --------- -------
1,877,500 3,060,913 535,204
HOUSEHOLD PRODUCTS: 0.34% 0.20% 0.11%
Procter & Gamble Company 2,900 240,700 2,700 224,100 500 41,500
Stanhome, Incorporated 2,500 72,812 7,100 206,787 2,600 75,725
Unilever NV 2,000 281,049 4,550 639,387 700 98,367
Wickes 67,700 130,374 106,000 204,131 18,700 36,012
------- --------- -------
724,935 1,274,405 251,604
INDUSTRIAL MACHINERY: 1.27% 0.82% 0.50%
AES Corporation* 44,500 1,062,437 91,900 2,194,112 19,600 467,950
Autoliv AB 1,500 87,655 2,700 157,778 500 29,218
Bearings, Incorporated -- -- -- -- 150 4,387
Bekaert SA 200 164,798 300 247,197 50 41,199
Goulds Pumps, Incorporated 6,500 162,500 13,700 342,500 3,600 90,000
Ingersoll Rand Company 6,000 210,750 13,400 470,675 3,100 108,887
Mannesmann AG 800 254,695 1,350 429,798 200 63,674
Memtec, Ltd., ADR* 4,000 66,500 3,400 56,525 1,400 23,275
Nacco Industries, Incorporated 3,200 177,600 8,600 477,300 1,600 88,800
NGK Spark Plug Company 11,000 138,499 18,000 226,634 6,000 37,772
Park Ohio Industries, Incorporated 3,600 58,050 5,600 90,300 1,000 16,125
T & N PLC 52,600 132,337 82,400 207,312 14,500 36,481
Tan Chong Motor Holdings BHD 74,000 73,135 108,000 106,737 22,000 21,743
Thermo Electron Corporation* 2,550 132,600 4,650 241,800 1,300 67,600
TSI, Incorporated -- -- 7,200 100,800 1,200 16,800
--------- --------- ---------
2,721,556 5,349,468 1,113,911
INSURANCE: 2.40% 1.50% 0.87%
Alexander & Alexander Services, Incorporated -- -- 7,100 134,900 -- --
AXA 5,500 370,635 8,600 579,538 1,500 101,082
Baloise Holdings 80 166,450 125 260,078 35 72,822
W.R. Berkley Corporation 6,000 322,500 15,800 849,250 1,700 91,375
Chubb Corporation 4,300 416,025 9,200 890,100 2,600 251,550
Cincinnati Financial Corporation 855 55,789 1,825 119,081 420 27,405
Corporacion Mapfre 3,700 207,115 5,650 316,270 950 53,178
Dai Tokyo Fire & Marine 23,000 175,535 37,000 282,383 7,000 53,424
Equitable of Iowa Companies, Incorporated 2,500 80,313 -- -- -- --
Frontier Insurance Group, Incorporated 3,900 124,800 10,400 332,800 1,900 60,800
General Re Corporation 1,900 294,500 4,500 697,500 1,500 232,500
Gryphon Holdings, Incorporated* 3,300 63,525 7,100 136,675 1,500 28,875
Harleysville Group, Incorporated 3,500 113,313 7,300 236,337 2,000 64,750
Horace Mann Educators Corporation 8,700 271,875 18,300 571,875 3,900 121,875
MBIA, Incorporated 3,700 277,500 7,300 547,500 1,900 142,500
Mitsui Marine & Fire Insurance
Company, Ltd. 18,000 128,310 -- -- -- --
Providian Corporation 7,400 301,550 15,400 627,550 3,300 134,475
Prudential Corporation 40,577 261,208 65,532 421,851 11,900 76,604
</TABLE>
The accompanying notes are an integral part of the financial statements.
59
<PAGE> 162
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PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE MODERATE CONSERVATIVE
----------------- ----------------- -----------------
Shares Value Shares Value Shares Value
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
INSURANCE - CONTINUED
Royal Insurance 28,083 $ 166,386 44,039 $ 260,923 7,831 $ 46,399
Schweiz Ruckversicherungs 100 116,342 140 162,878 -- --
Selective Insurance Group, Incorporated 6,700 237,850 14,000 497,000 3,100 110,050
Skandia Foersaekrings AB 12,600 340,633 19,700 532,577 3,100 83,807
Sumitomo Marine & Fire 41,000 336,736 64,000 525,637 7,000 57,491
Tokio Marine & Fire 11,000 143,826 19,000 248,426 3,000 39,225
Triad Guaranty, Incorporated* 7,200 190,800 18,300 484,950 3,700 98,050
--------- --------- ---------
5,163,516 9,716,079 1,948,237
INTERNATIONAL OIL: 0.45% 0.23% 0.13%
British Petroleum 61,500 513,376 96,100 802,201 17,000 141,909
British Petroleum Company PLC, ADR 4,500 459,563 6,800 694,450 1,400 142,975
--------- --------- ---------
972,939 1,496,651 284,884
INVESTMENT COMPANIES: 0.49% 0.33% 0.17%
Brierley Investment, Ltd. 42,500 33,620 70,000 55,374 13,000 10,284
Inter-Regional Financial Group, Incorporated 5,400 136,350 8,100 204,525 1,950 49,238
McDonald Company Investments,
Incorporated 2,400 43,200 5,400 97,200 800 14,400
Morgan Keegan, Incorporated -- -- 17,050 215,256 1,800 22,725
Morgan Stanley Group, Incorporated 600 48,375 2,700 217,687 600 48,375
Nomura Securities Company, Ltd. 24,000 523,002 31,000 675,545 5,000 108,959
Piper Jaffray Companies, Incorporated 10,000 137,500 22,500 309,375 4,800 66,000
Waterhouse Investors Services, Incorporated 4,875 120,656 13,875 343,406 2,625 64,969
--------- --------- ---------
1,042,703 2,118,368 384,950
LEISURE TIME: 0.57% 0.33% 0.18%
Children's Discovery Centers of America,
Incorporated* 3,700 18,962 9,200 47, 150 2, 100 10,762
The Walt Disney Company 7,300 430,700 9,800 578,200 2,600 153,400
Donnelly Corporation -- -- 3,700 54,575 700 10,325
Genting BHD 20,000 166,949 24,000 200,339 5,000 41,737
Kuoni Reisen Holding, Series B 220 352,839 340 545,297 75 120,286
Movie Gallery, Incorporated* 2,800 85,400 10,200 311,100 -- --
Resorts World BHD 13,000 69,615 37,000 198,134 6,000 32,130
Sodak Gaming, Incorporated* 4,800 99,000 9,400 193,875 2,100 43,312
--------- --------- -------
1,223,465 2,128,670 411,952
MINING: 0.11% 0.05% 0.03%
Addington Resource, Incorporated* 8,600 125,775 9,200 134,550 1,900 27,788
Cookson Group 23,700 112,261 37,000 175,260 6,500 30,789
------- ------- ------
238,036 309,810 58,577
NEWSPAPERS: 0.26% 0.13% 0.07%
Independent News 53,444 330,345 83,737 517,584 14,795 91,448
The E.W. Scripps Company, Class A 5,700 224,437 8,500 334,687 1,600 63,000
------- ------- -------
554,782 852,271 154,448
NON-FERROUS METALS: 0.26% 0.14% 0.07%
Imco Recycling, Incorporated 7,100 173,950 10,200 249,900 2,000 49,000
IMI PLC 38,100 194,376 59,700 304,573 10,500 53,568
Inco, Ltd -- -- 100 3,325 -- --
Sumitomo Sitix 10,000 182,082 18,000 327,748 3,000 54,625
------- ------- -------
550,408 885,546 157,193
</TABLE>
The accompanying notes are an integral part of the financial statements.
60
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PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE MODERATE CONSERVATIVE
----------------- ----------------- -----------------
Shares Value Shares Value Shares Value
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
OFFICE FURNISHINGS & SUPPLIES: 0.12% 0.08% 0.05%
Miller Herman, Incorporated 8,300 $249,000 17,300 $ 519,000 3,700 $ 111,000
-------- --------- ---------
PAPER: 0.92% 0.64% 0.38%
Alco Standard Corporation 900 41,063 1,900 86,688 400 18,250
Champion International Corporation 1,500 63,000 3,100 130,200 700 29,400
Fort Howard Corporation -- -- 1,300 29,250 -- --
James River Corporation of Virginia 2,700 65,138 2,200 53,075 -- --
Kimberly Clark Corporation 21,400 1,770,850 44,900 3,715,475 9,500 786,125
Mosinee Paper Corporation -- -- 1,600 41,200 -- --
Wausau Paper Mills Company 1,600 43,600 -- -- -- --
Westvaco Corporation -- -- 2,350 65,213 -- --
Willamette Industries, Incorporated -- -- -- -- 400 22,500
--------- --------- -------
1,983,651 4,121,101 856,275
PETROLEUM AND NATURAL GAS: 0.37% 0.16% 0.12%
Ampolex, Ltd.* 37,944 82,916 82,399 180,060 10,167 22,217
Anadarko Petroleum Corporation 9,800 530,425 5,200 281,450 1,100 59,537
Burlington Resources, Incorporated 2,300 90,275 6,300 247,275 1,200 47, 100
Chesapeake Energy Corporation* 2,700 89,775 5,700 189,525 1,200 39,900
Newfield Exploration Company -- -- 600 16,200 -- --
Occidental Petroleum Corporation -- -- 7,000 149,625 4,900 104,738
------- --------- -------
793,391 1,064,135 273,492
PETROLEUM SERVICES: 1.42% 0.93% 0.57%
Broken Hill Propriertary Company, Ltd. 8,140 114,955 13,991 197,584 2,266 32,001
Camco International, Incorporated 2,500 70,000 5,600 156,800 1,400 39,200
Halliburton Company 7,800 394,875 17,900 906,187 4,400 222,750
Schlumberger. Ltd. 21,900 1,516,575 45,300 3,137,025 9,800 678,650
Total SA 'B' Shares 3,528 238,079 5,840 394,143 1,050 70,865
Total SA, ADR 9,100 309,400 25,500 867,000 4,900 166,600
Western Atlas, Incorporated* 7,000 353,500 7,900 398,950 1,500 75,750
--------- --------- ---------
2,997,384 6,057,689 1,285,816
PHOTOGRAPHY: 0.45% 0.22% 0.12%
Canon, Incorporated 14,000 253,559 22,000 398,450 4,000 72,446
Fuji Photo Film Company 11,000 317,482 16,000 461,792 3,000 86,586
Konica Corporation 54,000 391,206 81,000 586,809 15,000 108,668
------- --------- -------
962,247 1,447,051 267,700
POLLUTION CONTROL: 0.26% 0.22% 0.13%
Continental Waste Industries, Incorporated 20,167 234,438 24,000 279,000 4,333 50,375
Sanifill, Incorporated* 2,500 83,437 4,500 150,187 1,400 46,725
TETRA Technologies, Incorporated* 14,300 248,463 33,100 575,113 8,100 140,737
United Waste Systems, Incorporated* -- -- 10,800 402,300 1,300 48,425
------- --------- -------
566,338 1,406,600 286,262
PUBLISHING: 0.55% 0.35% 0.20%
Meredith Corporation 13,700 573,687 28,600 1,197,625 5,600 234,500
Pulitzer Publishing Company 3,125 149,219 7,125 340,219 1,750 83,562
Reuters Holdings 26,400 241,696 41,400 379,023 7,300 66,833
Ver Ned Uitgevers 1,650 226,519 2,650 363,803 500 68,642
--------- --------- -------
1,191,121 2,280,670 453,537
</TABLE>
The accompanying notes are an integral part of the financial statements.
61
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PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE MODERATE CONSERVATIVE
----------------- ----------------- -----------------
Shares Value Shares Value Shares Value
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
RAILROADS & EQUIPMENT: 0.67% 0.48% 0.33%
Burlington Northern Santa Fe 8,200 $ 639,600 15,200 $1,185,600 3,800 $ 296,400
CSX Corporation 17,600 803,000 39,600 1,806,750 9,800 447,125
Wisconsin Central Transportation Corporation -- -- 1,500 98,625 -- --
--------- --------- -------
1,442,600 3,090,975 743,525
REAL ESTATE: 0.36% 0.18% 0.09%
Cheung Kong Holdings 24,000 146,188 41,000 249,738 8,000 48,729
Lion Land BHD 90,000 89,302 98,000 97,240 14,000 13,891
Mitsubishi Estate 10,000 124,939 16,000 199,903 3,000 37,482
New World Development Company 40,000 174,329 65,000 283,285 7,000 30,508
Sun Hung Kai Properties 30,000 245,393 44,000 359,909 8,000 65,438
------- --------- -------
780,151 1,190,075 196,048
RETAIL GROCERY: 0.20% 0.15% 0.07%
Giant Foods, Incorporated, Class A 6,900 217,350 20,500 645,750 2,900 91,350
Tesco 46,749 215,630 73,086 337,110 12,916 59,575
------- ------- -------
432,980 982,860 150,925
RETAIL TRADE: 2.54% 1.66% 0.83%
Amway Japan, Ltd. 7,000 295,593 11,000 464,504 2,000 84,455
Argyll Group 32,800 173,195 51,300 270,881 9,100 48,051
Boots Company 21,900 198,287 34,200 309,654 6,000 54,325
Burton Group* 66,300 138,490 103,700 216,612 18,300 38,226
Chiyoda Company 8,000 185,956 12,500 290,557 2,200 51,138
Consolidated Stores Corporation* 7,400 160,950 16,000 348,000 4,400 95,700
Cygne Designs, Incorporated -- -- -- -- 900 844
D leteren Trading 1,400 118,213 3,400 287,088 400 33,775
Federated Department Stores, Incorporated* 4,200 115,500 7,300 200,750 800 22,000
Friedman's, Incorporated* 5,500 105,875 16,900 325,325 3,200 61,600
Haverty Furniture Companies, Incorporated 5,600 77,700 -- -- -- --
Home Depot, Incorporated 15,300 732,487 26,300 1,259,113 4,200 201,075
Ito Yokado Company 4,000 246,392 7,000 431,186 1,000 61,598
Karstadt AG 250 101,952 -- -- 50 20,390
Leslie's Poolmart 9,450 132,300 21,315 298,410 5,250 73,500
Lillian Vernon Corporation 4,500 60,187 10,500 140,438 2,500 33,438
Lowes Companies, Incorporated 15,900 532,650 32,700 1,095,450 8,300 278,050
Marks & Spencer 23,900 167,029 37,500 262,075 6,600 46,125
Marui Company 12,000 249,879 21,000 437,288 3,000 62,470
Mitsubishi Corporation 13,000 159,903 33,000 405,908 4,000 49,201
Nine West Group, Incorporated* 12,400 465,000 30,300 1,136,250 4,200 157,500
Old American Stores, Incorporated* 5,600 45,500 12,300 99,937 3,400 27,625
Sears Roebuck & Company 7,500 292,500 34,800 1,357,200 4,200 163,800
Shimachu Company 6,000 192,349 10,000 320,581 2,000 64,116
Storehouse 21,500 111,524 33,600 174,288 5,900 30,604
Strawbridge & Clothier 2,500 60,000 5,100 122,400 1,200 28,800
Takashimaya Company 15,000 239,709 23,000 367,554 4,000 63,922
Younkers, Incorporated* 3,700 93,887 5,500 139,563 500 12,688
--------- ---------- ---------
5,453,007 10,761,012 1,865,016
SAVINGS AND LOAN: 0.09% 0.10% 0.07%
Commercial Federal Corporation* 5,300 200,075 10,600 400,150 2,600 98,150
Peoples Heritage Financial Group -- -- 12,200 277,550 2,100 47,775
------- ------- -------
200,075 677,700 145,925
</TABLE>
The accompanying notes are an integral part of the financial statements.
62
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PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE MODERATE CONSERVATIVE
----------------- ----------------- -----------------
Shares Value Shares Value Shares Value
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
SHIPBUILDING: 0.08% 0.03% 0.03%
Anangel American Shipholdings, Ltd., ADR 5,000 $55,625 7,700 $85,662 2,700 $30,038
West Marine, Incorporated* 3,500 109,375 3,200 100,000 1,000 31,250
------- ------- ------
165,000 185,662 61,288
SOFTWARE: 1.21% 0.74% 0.53%
FTP Software, Incorporated* 900 26,100 1,400 40,600 2,100 60,900
Mercury Interactive Corporation* 8,100 147,825 13,500 246,375 3,100 56,575
Micro Focus Group, Incorporated, ADR* 4,300 36,012 -- -- 10,400 87,100
Microsoft Corporation* 16,000 1,404,000 32,600 2,860,650 7,100 623,025
Oracle Systems Corporation* 20,000 847,500 39,700 1,682,288 8,650 366,544
Policy Management Systems Corporation* 3,100 147,637 -- -- -- --
--------- --------- ---------
2,609,074 4,829,913 1,194,144
STEEL: 0.49% 0.27% 0.13%
Huntco, Incorporated, Class A 3,700 56,888 7,400 113,775 500 7,688
Kawasaki Steel Corporation 68,000 237,094 115,000 400,969 20,000 69,734
Kobe Steel* 68,000 210,092 107,000 330,586 20,000 61,792
Kurimoto 13,000 132,203 24,000 244,068 4,000 40,678
Nippon Steel Corporation 44,000 150,857 70,000 240,000 14,000 48,000
Sumitomo Metal Industry 86,000 260,707 140,000 424,407 24,000 72,755
--------- --------- -------
1,047,841 1,753,805 300,647
TELECOMMUNICATION SERVICES: 1.00% 0.76% 0.45%
Echostar Communications Corporation* 2,925 70,931 8,910 216,067 -- --
L.M. Ericsson Telephone Company 11,440 223,986 16,280 318,749 2,640 51,689
Micom Communications* -- -- 7,900 60,238 1,800 13,725
SBC Communications, Incorporated 30,300 1,742,250 67,800 3,898,500 14,200 816,500
Tele-Communications, Incorporated, Series A* 5,700 113,288 23,500 467,062 6,500 129,188
--------- --------- ---------
2,150,455 4,960,616 1,011,102
TELEPHONE: 4.14% 2.63% 1.58%
AirTouch Communications, Incorporated* 39,200 1,107,400 67,100 1,895,575 16,100 454,825
Ameritech Corporation 25,600 1,510,400 57,500 3,392,500 10,900 643,100
American Telephone & Telegraph
Corporation 18,500 1,197,875 38,000 2,460,500 8,000 518,000
Bell Atlantic Corporation 7,900 528,313 12,400 829,250 2,900 193,938
Bellsouth Corporation 16,700 726,450 41,500 1,805,250 9,800 426,300
British Telecommunication 32,500 178,172 50,900 279,045 9,000 49,340
DDI Corporation 30 232,445 40 309,927 10 77,482
Koninklijke PTT Nederland NV 5,600 203,452 -- -- -- --
NYNEX Corporation 36,100 1,949,400 75,700 4,087,800 16,200 874,800
Pacific Telesis Group 1,700 57,163 4,100 137,862 -- --
STET 150,000 306,021 203,000 414,149 34,000 69,365
Tele Danmark AS, Series B 2,875 156,889 5,000 272,850 725 39,563
Telecom Italia SPA 133,000 162,636 217,500 265,965 38,000 46,467
Telecom Italia Mobile SPA 91,000 95,691 137,500 144,589 1,800 18,928
Telefonica de Espana SA 12,600 174,509 19,700 272,844 3,150 43,627
Telekom Malaysia 6,000 46,777 11,000 85,758 2,000 15,592
U.S. West, Incorporated 500 9 500 -- -- -- --
VodaFone Group 68,519 245,811 107,234 384,703 18,945 67,965
--------- ---------- ---------
8,888,904 17,038,567 3,539,292
</TABLE>
The accompanying notes are an integral part of the financial statements.
63
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PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE MODERATE CONSERVATIVE
----------------- ----------------- -----------------
Shares Value Shares Value Shares Value
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
TIRES AND RUBBER: 0.19% 0.10% 0.05%
Bandag, Incorporated 400 $ 21,650 900 $48,713 -- --
Bridgestone Corporation 25,000 397,094 39,000 619,467 7,000 $ 111,186
------- ------- -------
418,744 668,180 111,186
TOBACCO: 1.43% 0.99% 0.60%
B.A.T. Industries PLC 10,600 93,341 16,600 146,175 2,900 25,537
Philip Morris Companies, Incorporated 32,200 2,914,100 67,300 6,090,650 14,400 1,303,200
RJR Nabisco Holdings Corporation 2,500 77,188 6,500 200,688 700 21,612
--------- --------- ---------
3,084,629 6,437,513 1,350,349
TRUCKING & FREIGHT: 0.42% 0.23% 0.13%
Bergesen DY AS 12,300 244,676 12,700 252,633 2,600 51,720
Fukuyama Transport 19,000 178,499 30,000 281,840 5,000 46,973
J.B. Hunt Transport Services, Incorporated 5,400 90,450 20,000 335,000 2,100 35,175
ICB Shipping 24,000 206,033 30,800 264,410 4,500 38,631
Landstar Systems, Incorporated* 5,200 139,100 7,900 211,325 2,500 66,875
New World Infrastructure, Ltd.* 66 126 108 207 11 21
Pittston Services Group -- -- 3,000 94,125 1,800 56,475
TNT Freightways Corporation 2,000 40,250 3,000 60,375 -- --
------- --------- -------
899,134 1,499,915 295,870
TOTAL COMMON STOCK (COST:
$120,484,430, $231,908,014 and
$47,115,143, respectively) $143,835,680 $278,934,020 $56,816,385
------------ ------------ -----------
PREFERRED STOCK: 0.28% 0.24% 0.01%
BANKING: 0.02% 0.01% 0.01%
Creditanstalt Bank 800 41,117 1,340 68,871 230 11,821
------ ------ ------
BROADCASTING: 0.11% 0.11%
Cablevision Systems Corporation 2,200 227,700 6,600 683,100 -- --
------- -------
FINANCIAL SERVICES: 0.00% 0.00%
S D Warren Company 169 5,324 558 17,577 -- --
----- ------
TELECOMMUNICATION SERVICES: 0.15% 0.12%
Panamsat Corporation* 291 326,010 700 784,000 -- --
------- -------
TOTAL PREFERRED STOCK
(COST: $564,068, $1,457,480
and $12,712, respectively) $600,151 $1,553,548 $11,821
-------- ---------- -------
WARRANTS: 0.00% 0.00% 0.00%
BUSINESS SERVICES: 0.00% 0.00% 0.00%
Protection One, Incorporated* 960 5,280 3,200 17,600 -- --
----- ------
INDUSTRIAL MACHINERY: 0.00% 0.00%
MVE Holding, Incorporated* 80 1,200 80 1,200 -- --
----- -----
MISCELLANEOUS: 0.00% 0.00%
SDW Holdings Corporation* 169 845 558 2,790 -- --
--- -----
TOTAL WARRANTS (COST:
$1,726 and $4,352, respectively) $7,325 $21,590
------ -------
</TABLE>
The accompanying notes are an integral part of the financial statements.
64
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PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE MODERATE CONSERVATIVE
---------------------- -------------------- ---------------------
Principal Principal Principal
Amount Value Amount Value Amount Value
--------- ----- --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C>
U.S GOVERNMENT AGENCY AND
MORTGAGE-BACKED OBLIGATIONS: 6.15% 16.35% 7.04%
FEDERAL FARM CREDIT BANKS: 0.05% 0.22% 0.27%
6.20% due 09/23/02 $ 100,000 $ 102,859 $ 720,000 $ 740,585 $ 300,000 $ 308,577
6.40% due 10/03/02 -- -- 230,000 237,190 100,000 103,126
6.56% due 08/05/02 -- -- 440,000 457,613 190,000 197,606
------- --------- -------
102,859 1,435,388 609,309
FEDERAL HOME LOAN BANKS: 0.11% 0.21% 0.24%
5.40% due 08/03/98 230,000 228,533 1,400,000 1,391,068 540,000 536,555
FEDERAL HOME LOAN MORTGAGE CORPORATION: 0.08% 1.58% 2.52%
4.78% due 02/10/97 60,000 59,644 360,000 357,862 140,000 139,168
6.50% due 07/01/06 -- -- -- -- 91,179 90,692
7.50% due 06/01/07 55,431 56,152 -- -- -- --
8.00% due 04/01/23 - 08/01/24 -- -- 3,320,396 3,440,783 1,671,921 1,733,483
9.50% due 12/01/19 - 12/01/22 44,539 47,716 5,978,812 6,432,177 3,418,177 3,679,071
------- ---------- ---------
163,512 10,230,822 5,642,414
FEDERAL NATIONAL MORTGAGE ASSOCIATION: 3.32% 8.14% 10.34%
5.45% due 10/10/03 165,000 161,365 1,110,000 1,085,547 560,000 547,663
6.00% TBA** 450,000 445,356 4,390,000 4,344,695 2,170,000 2,147,606
6.50% due 09/01/07 - 09/01/10 2,329,304 2,340,951 7,871,441 7,910,798 4,804,847 4,828,871
7.00% due 05/01/24 - 12/01/25 1,287,000 1,297,450 10,199,921 10,282,747 4,455,001 4,491,175
7.40% due 07/01/04 130,000 142,939 1,060,000 1,165,502 470,000 516,779
7.50% due 11/01/06 - 08/01/25 934,739 957,808 19,859,927 20,352,350 6,366,321 6,523,587
7.71% due 04/25/06 - REMIC 442,223 460,741 3,046,426 3,173,995 1,228,397 1,279,837
8.00% due 12/01/19 - 12/01/25 997,227 1,033,002 3,294,067 3,411,784 1,633,501 1,691,687
8.50% due 05/01/17 - 06/01/24 -- -- 1,054,968 1,107,801 1,102,888 1,154,618
8.75% due 08/01/09 270,210 285,523 -- -- -- --
9.00% due 10/01/05 2,795 2,943 -- -- -- --
--------- ---------- ----------
7,128,078 52,835,219 23,181,823
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION: 1.57% 3.85% 4.07%
6.50% due 11/15/23 - 12/15/23 794,210 787,753 5,158,557 5,116,618 899,563 892,250
7.50% due 10/15/22 - 10/15/23 1,514,615 1,559,979 5,215,569 5,371,840 2,545,939 2,622,673
8.50% due 06/15/16 - 12/15/21 177,922 188,280 1,823,638 1,918,841 582,652 617,303
9.00% due 12/15/99 - 10/15/25 451,685 478,896 10,549,870 11,191,591 4,716,311 5,003,461
9.50% due 07/15/17 - 09/15/21 324,229 349,674 1,261,292 1,361,303 -- --
--------- ---------- ---------
3,364,582 24,960,193 9,135,687
RESOLUTION TRUST CORPORATION: 0.05% 0.14% 0.18%
6.90% due 02/25/27, Class C 100,000 99,219 900,000 892,969 400,000 396,875
------ ------- -------
GUARANTEED: 1.00% 2.20% 2.76%
Financing Corporations,
8.60% due 09/26/19 80,000 101,300 600,000 759,750 260,000 329,225
Financing Corporations,
10.70% due 10/06/17 110,000 165,103 930,000 1,395,874 400,000 600,376
Government Backed Trust,
9.625% due 05/15/02 40,000 44,498 240,000 266,988 100,000 111,245
Government Loan Trust,
7.75% due 04/01/98 36,912 37,794 229,859 235,357 88,923 91,051
</TABLE>
The accompanying notes are an integral part of the financial statements.
65
<PAGE> 168
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE MODERATE CONSERVATIVE
---------------------- -------------------- ---------------------
Principal Principal Principal
Amount Value Amount Value Amount Value
--------- ----- --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C>
GUARANTEED - CONTINUED
Government Loan Trust,
8.50% due 04/01/06 $ 310,000 $ 354,445 $ 1,810,000 $ 2,069,500 $ 720,000 $ 823,226
Government Trust Certificates,
9.25% due 11/15/01 296,000 328,826 1,973,000 2,191,806 945,000 1,049,800
Government Trust Certificates,
9.40% due 05/15/02 310,000 345,858 1,940,000 2,164,400 860,000 959,476
Guaranteed Export Trust,
5.20% due 10/15/04 28,000 27,421 254,400 249,138 112,800 110,467
Guaranteed Export Trust,
5.23% due 05/15/05 48,511 47,646 436,596 428,811 194,043 190,583
Guaranteed Export Trust,
6.28% due 06/15/04 110,000 111,917 930,000 946,210 410,000 417,146
Guaranteed Export Trust,
6.61% due 09/15/99 22,124 22,588 162,245 165,646 66,373 67,764
Guaranteed Export Trust,
8.187% due 12/15/04 424,106 460,210 2,629,458 2,853,301 1,102,676 1,196,546
Guaranteed Trade Trust,
7.02% due 09/01/04 72,000 74,515 423,000 437,778 171,000 176,974
Guaranteed Trade Trust,
7.39% due 06/26/06 17,500 19,451 122,500 136,158 52,500 58,353
--------- ---------- ---------
2,141,572 14,300,717 6,182,232
TOTAL U.S. GOVERNMENT AND
MORTGAGE-BACKED OBLIGATIONS
(Cost: $12,700,749, $98,990,064 and
$44,247,186, respectively) $13,228,355 $106,046,376 $45,684.895
----------- ------------ -----------
U.S. TREASURY OBLIGATIONS: 4.40% 12.78% 24.77%
U.S. TREASURY BONDS: 2.96% 8.66% 11.28%
8.125% due 08/15/19 480,000 603,523 4,430,000 5,570,016 3,010,000 3,784,593
8.75% due 05/15/20 340,000 455,386 4,300,000 5,759,291 1,330,000 1,781,362
8.875% due 02/15/19 1,660,000 2,237,630 10,200,000 13,749,294 4,540,000 6,119,784
9.00% due 11/15/18 930,000 1,266,688 6,490,000 8,839,575 2,870,000 3,909,026
11.75% due 02/15/10 540,000 770,008 4,630,000 6,602,102 2,140,000 3,051,512
12.00% due 08/15/13 640,000 986,099 7,850,000 12,095,123 2,770,000 4,267,961
12.75% due 11/15/10 -- -- -- -- 1,040,000 1,584,045
13.875% due 05/15/11 30,000 48,830 2,210,000 3,597,128 490,000 797,553
--------- ---------- ----------
6,368,164 56,212,529 25,295,836
U.S. TREASURY NOTES: 1.44% 4.12% 13.49%
5.875% due 11/15/05 30,000 30,675 230,000 235,175 100,000 102,250
6.25% due 08/31/96 **** 2,300,000 2,313,294 16,500,000 16,595,370 25,000,000 25,144,500
6.25% due 02/15/03 280,000 292,118 2,000,000 2,086,560 460,000 479,910
7.75% due 12/31/99 -- -- 1,110,000 1,204,527 480,000 520,877
8.50% due 05/15/97 270,000 281,559 1,200,000 1,251,372 90,000 93,853
9.125% due 05/15/99 64,000 71,420 707,000 788,969 345,000 384,999
9.25% due 01/15/96 -- -- 1,000,000 1,001,410 2,000,000 2,002,820
9.25% due 08/15/98 100,000 109,687 3,230,000 3,542,890 1,390,000 1,524,649
--------- ---------- ----------
3,098,753 26,706,273 30,253,858
TOTAL U.S. TREASURY OBLIGATIONS
(Cost: $8,814,336, $76,829,594 and
$52,615,596, respectively) $ 9,466,917 $82,918,802 $55,549,694
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
66
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PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE MODERATE CONSERVATIVE
---------------------- -------------------- ---------------------
Principal Principal Principal
Amount Value Amount Value Amount Value
--------- ----- --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C>
CORPORATE BONDS: 9.31% 13.61% 8.49%
AEROSPACE: 0.26% 0.21% 0.00%
Alliant Techsystems, Incorporated,
11.75% due 03/01/03 $ 300,000 $ 330,750 $ 760,000 $ 837,900 -- --
Rohr, Incorporated, 11.625% due 05/15/03 100,000 107,250 100,000 107,250 -- --
Tracor, Incorporated,
10.875% due 08/15/01 120,000 124,200 380,000 393,300 -- --
------- ---------
562,200 1,338,450
APPAREL & ACCESSORY STORE: 0.05% 0.06% 0.00%
Mothers Work, Incorporated,
12.625% due 08/01/05 120,000 117,900 380,000 373,350 -- --
------- -------
BUSINESS SERVICES: 0.37% 0.62% 0.46%
Bell & Howell Holdings Company, Series B,
Step up to 11.50% due 03/01/05 430,000 283,800 1,420,000 937,200 -- --
Comdisco, Incorporated,
6.50% due 06/15/00 200,000 203,590 1,700,000 1,730,515 $ 750,000 $ 763,462
Comdisco, Incorporated,
7.25% due 04/15/98 60,000 61,781 540,000 556,027 270,000 278,014
Protection One Alarm, Incorporated,
Step up to 13.625% due 06/30/05 300,000 235,500 1,000,000 785,000 -- --
------- --------- ---------
784,671 4,008,742 1,041,476
CHEMICAL PRODUCTS: 0.67% 0.85% 0.38%
Methanex Corporation,
8.875% due 11/15/01 240,000 266,002 1,780,000 1,972,845 760,000 842,338
NL Industries, Incorporated,
Step up to 13.00% due 10/15/05 130,000 99,775 400,000 307,000 -- --
NL Industries, Incorporated,
11.75% due 10/15/03 220,000 234,850 740,000 789,950 -- --
Revlon Consumer Products Corporation,
10.50% due 02/15/03 460,000 469,200 1,540,000 1,570,800 -- --
Revlon Worldwide Corporation,
zero coupon due 03/15/98 490,000 363,825 1,210,000 898,425 -- --
--------- --------- -------
1,433,652 5,539,020 842,338
CONSTRUCTION AND BUILDING MATERIALS: 0.86% 1.00% 0.18%
Building Material Corporation of America,
Series B, Step up to 11.75% due 07/01/04 470,000 324,300 1,190,000 821,100 -- --
Crown Packaging Holdings,
Step up to 12.25% due 11/01/03 490,000 218,050 1,510,000 671,950 -- --
G-I Holdings, Incorporated,
zero coupon due 10/01/98 405,000 313,875 1,165,000 902,875 -- --
Georgia-Pacific Corporation,
9.85% due 06/15/97 110,000 115,974 890,000 938,336 380,000 400,638
Greystone Homes, Incorporated,
10.75% due 03/01/04 230,000 212,750 770,000 712,250 -- --
Harvard Industries, Incorporated,
11.125% due 08/01/05 470,000 470,000 1,530,000 1,530,000 -- --
Stratosphere Corporation,
14.25% due 05/15/02 180,000 203,625 820,000 927,625 -- --
--------- --------- -------
1,858,574 6,504,136 400,638
</TABLE>
The accompanying notes are an integral part of the financial statements.
67
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PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE MODERATE CONSERVATIVE
---------------------- -------------------- ---------------------
Principal Principal Principal
Amount Value Amount Value Amount Value
--------- ----- --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C>
ELECTRICAL EQUIPMENT: 0.20% 0.18% 0.00%
Dictaphone Corporation,
11.75% due 08/01/05 $110,000 $ 108,900 $ 330,000 $ 326,700 -- --
S C International Services, Incorporated,
13.00% due 10/01/05 300,000 310,500 800,000 832,000 -- --
------- ---------
419,400 1,158,700
ELECTRIC UTILITIES: 0.56% 1.05% 1.20%
Berg Electrics, Incorporated,
11.375% due 05/01/03 230,000 258,750 770,000 866,250 -- --
Gulf States Utilities Company,
9.72% due 07/01/98 300,000 312,879 1,583,000 1,650,958 $652,000 $ 679,990
Long Island Lighting Company,
7.30% due 07/15/99 155,000 156,358 1,170,000 1,180,249 625,000 630,475
Long Island Lighting Company,
8.75% due 05/01/96 300,000 303,687 1,900,000 1,923,351 800,000 809,832
Public Service Company of New Hampshire,
8.875% due 05/15/96 170,000 171,858 1,150,000 1,162,569 560,000 566,121
--------- --------- ---------
1,203,532 6,783,377 2,686,418
ELECTRONICS: 0.12% 0.12% 0.00%
Ivac Corporation, 9.25% due 12/01/02 250,000 258,750 750,000 776,250 -- --
ENERGY: 0.64% 0.93% 0.61%
Chesapeake Energy Corporation,
10.50% due 06/01/02 240,000 252,600 760,000 799,900 -- --
Clark USA, Incorporated,
10.875% due 12/01/05 100,000 105,000 310,000 325,500 -- --
Enron Corporation, 10.00% due 06/01/98 60,000 65,625 300,000 328,128 150,000 164,064
Enron Corporation, 8.50% due 02/01/00 40,000 41,116 290,000 298,091 130,000 133,627
Occidental Petroleum Corporation,
5.85% due 11/09/98 50,000 50,123 300,000 300,738 130,000 130,320
Occidental Petroleum Corporation,
5.93% due 11/09/98 60,000 60,272 470,000 472,129 210,000 210,951
Plains Resources, Incorporated,
12.00% due 10/01/99 10,000 10,375 20,000 20,750 -- --
Southwest Gas Corporation,
9.75% due 06/15/02 40,000 46,996 290,000 340,724 130,000 152,738
Tenneco, Incorporated,
10.00% due 08/01/98 150,000 164,895 1,210,000 1,330,153 530,000 582,630
Transtexas Gas Corporation,
11.50% due 06/15/02 230,000 237,475 770,000 795,025 -- --
Transamerican Refining Corporation,
zero coupon due 02/15/02 380,000 239,400 1,180,000 743,400 -- --
Vintage Petroleum, Incorporated,
9.00% due 12/15/05 100,000 100,750 250,000 251,875 -- --
--------- --------- ---------
1,374,627 6,006,413 1,374,330
FINANCE & BANKING: 1.20% 2.93% 3.63%
Beal Financial Corporation,
12.75% due 08/15/00 120,000 121,200 380,000 383,800 -- --
Citicorp Bank Corporation,
6.062% due 01/30/97 140,000 139,699 950,000 947,957 510,000 508,903
Citicorp Bank Corporation,
8.80% due 02/01/00 80,000 82,588 580,000 598,763 240,000 247,764
</TABLE>
The accompanying notes are an integral part of the financial statements.
68
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PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE MODERATE CONSERVATIVE
--------------------- ---------------------- ---------------------
Principal Principal Principal
Amount Value Amount Value Amount Value
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
FINANCE & BANKING - CONTINUED
Federal Agricultural Mortgage Corporation,
7.04% due 08/10/05 $100,000 $ 107,391 $ 700,000 $ 751,737 $ 300,000 $ 322,173
First Fidelity Bancorporation,
9.625% due 08/15/99 30,000 33,709 160,000 179,784 70,000 78,655
First Tennessee National Corporation,
6.75% due 11/15/05 40,000 40,818 350,000 357,161 150,000 153,069
First USA Bank, 5.75% due 01/15/99 180,000 179,473 1,240,000 1,236,367 660,000 658,066
Firstar Corporation, 7.15% due 09/01/00 100,000 102,918 820,000 843,928 360,000 370,505
Fleet Financial Group, Incorporated,
7.625% due 12/01/99 20,000 21,118 150,000 158,383 60,000 63,353
General Motors Acceptance Corporation,
8.375% due 01/19/99 230,000 246,790 1,730,000 1,856,290 1,000,000 1,073,000
Household Finance Corporation,
7.625% due 12/15/96 280,000 284,903 1,340,000 1,363,463 780,000 793,658
Manufacturers Hanover Corporation,
8.50% due 02/15/99 320,000 344,627 2,220,000 2,390,851 210,000 226,162
Private Export Funding Corporation,
5.80% due 02/01/04 20,000 20,100 120,000 120,598 50,000 50,249
Private Export Funding Corporation,
6.90% due 01/31/03 20,000 21,330 120,000 127,978 50,000 53,324
Private Export Funding Corporation,
8.75% due 06/30/03 180,000 211,397 1,280,000 1,503,270 540,000 634,192
Private Export Funding Corporation,
9.50% due 03/31/99 50,000 55,917 400,000 447,336 170,000 190,118
Provident Bank,
6.125% due 12/15/00 130,000 130,628 1,000,000 1,004,829 440,000 442,125
Secured Finance, 9.05% due 12/15/04 180,000 212,447 2,500,000 2,950,650 1,300,000 1,534,338
Shawmut National Corporation,
8.625% due 12/15/99 110,000 120,343 840,000 918,985 360,000 393,851
Union Planters Corporation,
6.75% due 11/01/05 100,000 101,752 850,000 864,892 350,000 356,132
---------- ---------- ---------
2,579, 148 19,007,022 8,149,637
FOOD PRODUCTS: 0.33% 0.55% 0.18%
Chiquita Brands International,
Incorporated, 11.50% due 06/01/01 110,000 113,850 390,000 403,650 ---- ----
Quaker Oats Company,
7.30% due 08/29/05 40,000 42,634 300,000 319,755 130,000 138,560
Foodmaker, Incorporated,
9.25% due 03/01/99 130,000 124,800 1,370,000 1,315,200 ---- ----
RJR Nabisco, Incorporated,
6.25% due 01/31/97 110,000 108,780 680,000 672,459 270,000 267,006
Specialty Foods Corporation, Series B,
11.125% due 10/01/02 240,000 232,800 760,000 737,200 ---- ----
Specialty Foods Corporation, Series B,
11.25% due 08/15/03 100,000 90,000 100,000 90,000 ---- ----
---------- ---------- ---------
712,864 3,538,264 405,566
INDUSTRIALS: 0.96% 0.98% 0.00%
Harris Chemical North America,
Incorporated, step up to 10.25%
due 07/15/01 320,000 304,000 1,070,000 1,016,500 ---- ----
</TABLE>
The accompanying notes are an integral part of the financial statements.
69
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PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE MODERATE CONSERVATIVE
--------------------- --------------------- ---------------------
Principal Principal Principal
Amount Value Amount Value Amount Value
---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
INDUSTRIALS - CONTINUED
International Wire Group, Incorporated,
11.75% due 06/01/05 $230,000 $ 219,650 $ 770,000 $ 735,350 ---- ----
MVE, Incorporated, 12.50% due 02/15/02 80,000 79,200 80,000 79,200 ---- ----
Pioneer Americans Acquisition
Corporation, 13.625% due 04/01/05 490,000 514,500 1,510,000 1,585,500 ---- ----
RBX Corporation, 11.25% due 10/15/05 250,000 247,500 750,000 742,500 ---- ----
S D Warren Company,
12.00% due 12/15/04 350,000 385,875 1,150,000 1,267,875 ---- ----
Williamhouse-Regency, Incorporated,
13.00% due 11/15/05 150,000 155,625 440,000 456,500 ---- ----
UCAR Global Enterprises, Incorporated,
12.00% due 01/15/05 65,000 75,075 200,000 231,000 ---- ----
Venture Holdings Trust,
9.75% due 04/01/04 110,000 91,850 290,000 242,150 ---- ----
---------- ----------
2,073,275 6,356,575
INSURANCE: 0.52% 1.21% 1.33%
American Financial Corporation,
9.75% due 04/20/04 350,000 357,000 1,150,000 1,173,000 ---- ----
Metropolitan Life Insurance Company,
6.30% due 11/03/03 320,000 316,019 2,660,000 2,626,910 $1,025,000 $1,012,249
Nationwide Life Insurance Company,
6.50% due 02/15/04 350,000 348,999 3,410,000 3,400,247 1,630,000 1,625,338
New York Life Insurance Company,
6.40% due 12/15/03 90,000 90,772 650,000 655,577 340,000 342,917
---------- ---------- ----------
1,112,790 7,855,734 2,980,504
MEDIA & LEISURE: 0.44% 0.38% 0.00%
Casino America, Incorporated,
11.50% due 11/15/01 20,000 18,500 40,000 37,000 ---- ----
Grand Casino, Incorporated,
10.125% due 12/01/03 230,000 241,212 700,000 734,125 ---- ----
HMH Properties, Incorporated, Series B,
9.50% due 05/15/05 230,000 235,175 770,000 787,325 ---- ----
Marvel Parent Holdings, Incorporated,
zero coupon due 04/15/98 160,000 114,000 480,000 342,000 ---- ----
Players International, Incorporated,
10.875% due 04/15/05 240,000 225,600 470,000 441,800 ---- ----
President Riverboat Casinos,
Incorporated, 13.00% due 09/15/01 140,000 117,600 180,000 151,200 ---- ----
---------- ----------
952,087 2,493,450
METAL PRODUCTS: 0.17% 0.13% 0.00%
Howmet Corporation,
10.00% due 12/01/03 20,000 21,100 50,000 52,750 ---- ----
Republic Engineered Steels, Incorporated,
9.875% due 12/15/01 300,000 270,000 680,000 612,000 ---- ----
Wyman Gordon Company,
10.75% due 03/15/03 70,000 73,850 200,000 211,000 ---- ----
---------- ----------
364,950 875,750
</TABLE>
The accompanying notes are an integral part of the financial statements.
70
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PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE MODERATE CONSERVATIVE
-------------------- ------------------------ ----------------------
Principal Principal Principal
Amount Value Amount Value Amount Value
--------- --------- ---------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
MISCELLANEOUS: 0.31% 0.28% 0.00%
Mohegan Tribal Gaming Authority,
13.50% due 11/15/02 $400,000 $434,000 $1,100,000 $1,193,500 ---- ----
HMC Acquisition Properties, Incorporated,
9.00% due 12/15/07 220,000 222,200 600,000 606,000 ---- ----
-------- ----------
656,200 1,799,500
NON-BANK FINANCE: 0.02% 0.20% 0.25%
Ford Capital BV, 9.00% due 08/15/98 ---- ---- 920,000 992,910 $400,000 $ 431,700
Ford Capital BV, 9.375% due 01/01/98 40,000 42,838 300,000 321,288 130,000 139,225
-------- ---------- ---------
42,838 1,314,198 570,925
PAPER PRODUCTS: 0.18% 0.15% 0.00%
Stone Container Corporation,
10.75% due 04/01/02 40,000 39,200 120,000 117,600 ---- ----
Stone Container Corporation,
10.75% due 10/01/02 60,000 61,950 140,000 144,550 ---- ----
Stone Container Corporation,
11.00% due 08/15/99 140,000 138,600 460,000 455,400 ---- ----
Stone Container Corporation,
11.50% due 09/01/99 100,000 100,500 200,000 201,000 ---- ----
Stone Container Corporation,
11.50% due 10/01/04 40,000 39,800 80,000 79,600 ---- ----
-------- ----------
380,050 998,150
PRINTING, PUBLISHING: 0.22% 0.36% 0.27%
News America Holdings, Incorporated,
8.625% due 02/01/03 80,000 89,878 1,030,000 1,157,184 530,000 595,444
Sullivan Graphics, Incorporated,
12.75% due 08/01/05 370,000 377,400 1,130,000 1,152,600 ---- ----
-------- ---------- ---------
467,278 2,309,784 595,444
RETAIL AND WHOLESALE: 0.26% 0.25% 0.00%
Alliance Entertainment Corporation,
11.25% due 07/15/05 360,000 361,800 1,140,000 1,145,700 ---- ----
Pathmark Stores, Incorporated,
Step up to 10.75% due 11/01/03* 330,000 202,125 810,000 496,125 ---- ----
-------- ----------
563,925 1,641,825
TELEPHONE: 0.12% 0.28% 0.00%
Paging Network, Incorporated,
10.125% due 08/01/07 230,000 248,975 770,000 833,525 ---- ----
USA Mobil Communication, Incorporated
9.50% due 02/01/04 10,000 9,900 1,020,000 1,009,800 ---- ----
-------- ----------
258,875 1,843,325
TELEVISION SERVICES: 0.30% 0.35% 0.00%
Echostar Communications Corporation,
Step up to 12.875% due 06/01/04 650,000 422,500 1,980,000 1,287,000 ---- ----
People's Choice TV Corporation,
Step up to 13.125% due 06/01/04 220,000 128,150 1,570,000 914,525 ---- ----
Telemundo Group, Incorporated,
10.25% due 12/30/01 100.000 99,500 100,000 99,500 ---- ----
-------- ----------
650,150 2,301,025
TEXTILE MILL PRODUCTS: 0.03% 0.03% 0.00%
Interface, Incorporated,
9.50% due 11/15/05 70,000 71,750 190,000 194,750 ---- ----
-------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
71
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PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE MODERATE CONSERVATIVE
--------------------- ------------------------- ---------------------
Principal Principal Principal
Amount Value Amount Value Amount Value
--------- ----------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
TRANSPORTATION: 0.29% 0.25% 0.00%
Transtar Holdings L.P.,
Step up to 13.375% due 12/15/03 $ 400,000 $ 266,000 $1,100,000 $ 731,500 ---- ----
U.S. Air, Incorporated,
9.625% due 02/01/01 190,000 165,300 490,000 426,300 ---- ----
U.S. Air, Incorporated,
10.00% due 07/01/03 210,000 182,700 555,000 482,850 ---- ----
----------- -----------
614,000 1,640,650
TRANSPORTATION EQUIPMENT: 0.23% 0.25% 0.00%
Aftermarket Technology Corporation,
Series B, 12.00% due 08/01/04 470,000 500,550 1,530,000 1,629,450 ---- ----
----------- -----------
TOTAL CORPORATE BONDS
(Cost: $19,651,016, $87,267,870
and $18,901,978, respectively) $20,014,036 $88,287,890 $19,047,276
----------- ----------- -----------
FIXED INCOME - OTHER: 3.89% 4.94% 6.23%
MISCELLANEOUS ASSET BACKED SECURITIES: 2.93% 2.98% 3.81%
Discover Card Master Trust, Series
1993 2, Class A, 5.40% due 11/16/01 1,000,000 996,870 ---- ---- ---- ----
Discover Card Trust, Series 1992,
Class B, 6.125% due 05/15/98 260,000 259,917 1,515,000 1,514,515 $ 600,000 $ 599,808
Discover Card Trust, 1992 B B,
7.50% due 06/16/00 150,000 155,625 1,330,000 1,379,875 580,000 601,750
Ford Credit Auto Loan Master Trust,
Series 92 2, 7.375% due 04/15/99 ---- ---- 650,000 664,826 775,000 792,678
Ford Credit Grantor Trust, 1995 B
Certificates, Class A, 5.90% due 10/15/00 ---- ---- 2,674,916 2,687,434 1,167,236 1,172,699
MBNA Master Card, Series 1992 1A,
7.25% due 06/15/99 ---- ---- ---- ---- 650,000 665,028
Premier Auto Trust, Series 933, Class A3,
4.90% due 12/15/98 227,162 225,813 1,436,468 1,427,935 574,587 571,174
Railcar Trust, 7.75% due 06/01/04 171,538 184,850 1,663,918 1,793,043 898,859 968,613
Standard Credit Card Master Trust,
5.50% due 09/07/98 140,000 139,562 990,000 986,901 525,000 523,357
Standard Credit Card Master Trust,
9.00% due 08/07/97 210,000 214,003 1,270,000 1,294,206 520,000 529,911
Standard Credit Card Master Trust,
Series 1991 3 Certificates, Class B,
9.25% due 09/07/99 380,000 411,586 2,260,000 2,447,851 920,000 996,470
Standard Credit Card Master Trust,
Series 1992 1 Certificates, Class B,
6.25% due 09/07/98 ---- ---- 5,075,000 5,113,063 1,120,000 1,128,400
---------- ----------- -----------
2,588,226 19,309,649 8,549,888
OTHER COLLATERIZED MORTGAGE OBLIGATIONS: 0.96% 1.96% 2.42%
American Housing Trust, Series IV,
9.552% due 09/25/20 700,000 721,000 4,300,000 4,429,000 1,740,000 1,792,200
Green Tree Securitized Net, Series 1994 A
Certificates, Series A, 6.90% due 02/15/04 140,696 141,291 1,025,072 1,029,404 535,985 538,251
Kearny Real Estate L.P.,Series 95-1,
Class B, 6.60% due 10/15/02 100,000 100,674 500,000 503,370 200,000 201,348
</TABLE>
The accompanying notes are an integral part of the financial statements.
72
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PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE MODERATE CONSERVATIVE
--------------------- ------------------------- ----------------------
Principal Principal Principal
Amount Value Amount Value Amount Value
--------- --------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
OTHER COLLATERIZED MORTGAGE
OBLIGATIONS - CONTINUED
Lennar Partners, L.P., Series 1994 1,
Class C, 8.12% due 09/15/02 $197,000 $ 198,612 $1,100,000 $ 1,109,001 $ 450,000 $ 453,682
Meritor Mortgage Securities Corporation,
9.40% due 06/01/99 64,121 64,602 406,099 409,145 149,616 150,738
Nomura Asset Securities Corporation,
Series 1994, 7.240% due 07/07/03 156,067 155,067 1,092,469 1,085,471 546,235 542,735
Overseas Private Investment Corporation,
Series 1995, 6.08% due 08/15/04 100,000 101,278 830,000 840,607 360,000 364,601
Structured Asset Securities Corporation,
Series 95 C4, Class A 1A, 6.90%
due 06/25/26 100,000 100,550 690,000 693,792 300,000 301,649
Structured Asset Securities Corporation,
Series 95 C1, Class D, 7.375%
due 09/25/24 500,000 487,344 2,700,000 2,631,656 1,100,000 1,072,156
---------- ----------- -----------
2,070,418 12,731,446 5,417,360
TOTAL FIXED INCOME - OTHER
(Cost: $4,532,284, $34,687,639
and $13,689,815, respectively) $4,658,644 $32,041,095 $13,967,248
---------- ----------- -----------
FOREIGN BOND OBLIGATIONS: 0.90% 1.81% 2.18%
FOREIGN CORPORATE BONDS: 0.26% 0.40% 0.25%
Acetex Corporation, 9.75% due 10/01/03 60,000 62,700 180,000 188,100 ---- ----
British Columbia Hydro & Power,
12.50% due 01/15/14 60,000 73,256 460,000 561,632 200,000 244,188
Korea Development Bank,
9.29% due 03/13/98 50,000 53,664 430,000 461,515 190,000 203,925
Korea Development Bank,
9.48% due 04/02/01 30,000 34,568 220,000 253,497 90,000 103,703
Repap New Brunswick, Incorporated,
10.625% due 04/15/05 350,000 343,000 1,150,000 1,127,000 ---- ----
---------- ----------- -----------
567,188 2,591,744 551,816
FOREIGN GOVERNMENT BONDS: 0.63% 1.41% 1.93%
Israel State, Class 1C,
5.75% due 03/15/00 130,000 131,094 780,000 786,566 300,000 302,525
Israel Export Trust, Series 1994-1
Certificates, 6.88% due 01/26/03 61,765 63,926 494,118 511,412 211,765 219,176
Israel State, U.S. Government GTD Notes,
Class 3A, 6.00% due 02/15/99 ---- ---- ---- ---- 570,000 573,745
Israel State, U.S. Government GTD Notes,
Class 1D, 6.125% due 03/15/03 100,000 101,443 600,000 608,658 250,000 253,608
Israel State, U.S. Government GTD Notes,
Class 6B, 6.25% due 08/15/02 290,000 298,999 2,240,000 2,309,507 960,000 989,789
Israel State, U.S. Government GTD Notes,
7.125% due 08/15/99 110,000 115,131 900,000 941,985 390,000 408,193
Israel State, U.S. Government GTD Notes,
Class 5B, 8.00% due 11/15/01 580,000 646,362 3,570,000 3,978,476 1,420,000 1,582,475
---------- ----------- -----------
1,356,955 9,136,604 4,329,511
TOTAL FOREIGN BOND OBLIGATIONS
(Cost: $1,852,334, $11,249,101 and
$4,652,048, respectively) $1,924,143 $11,728,348 $ 4,881,327
---------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
73
<PAGE> 176
NASL SERIES TRUST
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 - CONTINUED
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE MODERATE CONSERVATIVE
-------------- ------------ --------------
Value Value Value
--------- ---------- ----------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS: *** 8.15% 7.28% 12.62%
Repurchase Agreement with State Street Bank & Trust Company dated 12/29/95
at 5.00%, to be repurchased at $17,529,733 on 01/02/96, collateralized by
$15,575,000 U.S. Treasury Bonds, 7.25% due 05/15/16
(valued at $18,013,674 including interest) $ 17,520,000
------------
Repurchase Agreement with State Street Bank & Trust Company dated 12/29/95
at 5.00%, to be repurchased at $47,267,245 on 01/02/96, collateralized by
$41,995,000 U.S. Treasury Bonds, 7.25% due 05/15/16
(valued at $48,570,219 including interest) $ 47,241,000
------------
Repurchase Agreement with State Street Bank & Trust Company dated 12/29/95
at 5.00%, to be repurchased at $28,304,716 on 01/02/96, collateralized by
$25,150,000 U.S. Treasury Bonds, 7.25% due 05/15/16
(valued at $29,087,891 including interest) $ 28,289,000
------------
TOTAL INVESTMENTS (Aggressive, Moderate and Conservative Asset Allocation
Trusts) (Cost: $186,120,943, $589,635,114 and $209,523,478, respectively) $211,255,251 $648,772,669 $224,247,646
============ ============ ============
<FN>
Key to Currency Abbreviations
- -----------------------------
AUD - Australian Dollar
BEF - Belgian Franc
CAD - Canadian Dollar
DKK - Danish Krone
FRF - French Franc
DEM - German Deustche Mark
[Pound] - Great British Pound
ITL - Italian Lira
[Yen] - Japanese Yen
MYR - Malaysian Ringgit
NLG - Netherland Guilder
ESP - Spanish Peseta
SEK - Swedish Krone
CHF - Swiss Franc
Key to Security Abbreviations
- -----------------------------
ADR - American Depository Receipt
FRN - Floating Rate Note
GTD - Guaranteed
IO - Interest Only (Carries notional principal amount)
REMIC - Real Estate Mortgage Investment Conduit
TBA - To Be Announced
* - Non-Income producing
** - Purchased on a forward commitment (Note 2)
*** - At December 31, 1995 a portion of this security was pledged to cover forward commitments purchased.
**** - At December 31, 1995 a portion of this security was pledged to cover margin requirements for open futures contracts.
</TABLE>
The accompanying notes are an integral part of the financial statements.
74
<PAGE> 177
NASL SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. ORGANIZATION OF THE TRUST. The NASL Series Trust (the "Trust") is a
no-load, open-end management investment company organized as a Massachusetts
business trust. It is a series company, which means that it has several
portfolios, each with a stated investment objective which it pursues through
separate investment policies. The Trust currently offers the following
fourteen portfolios: The Global Equity Trust ("Global Equity"), the Pasadena
Growth Trust ("Pasadena Growth"), the Equity Trust ("Equity"), the Value Equity
Trust ("Value Equity"), the Growth and Income Trust ("Growth and Income"), the
International Growth and Income Trust ("International Growth and Income"), the
Strategic Bond Trust ("Strategic Bond"), the Global Government Bond Trust
("Global Government Bond"), the Investment Quality Bond Trust ("Investment
Quality Bond"), the U.S. Government Securities Trust ("U.S. Government
Securities"), the Money Market Trust ("Money Market"), the Aggressive Asset
Allocation Trust ("Aggressive Asset Allocation"), the Moderate Asset Allocation
Trust ("Moderate Asset Allocation") and the Conservative Asset Allocation Trust
("Conservative Asset Allocation"). Each of the Trusts with the exception of
Global Government Bond is diversified for purposes of the Investment Company
Act of 1940.
Shares of the Trust are presently offered only to the NASL Variable Account,
the NASL Group Variable Account and the NASL Variable Life Variable Account,
separate accounts of North American Security Life Insurance Company ("Security
Life") and to the FNAL Variable Account, a separate account of First North
American Life Assurance Company ("First North American"), which are available
for funding certain variable contracts issued by them. Security Life, a
Delaware corporation, is a wholly-owned subsidiary of North American Life
Assurance Company ("North American Life"), a mutual insurance company based in
North York, Canada. First North American, a New York corporation, is a
wholly-owned subsidiary of Security Life.
At December 31, 1995, Security Life owned seed money shares in Growth and
Income.
NASL Financial Services, Inc. ("NASL Financial"), a wholly-owned subsidiary of
Security Life, serves as investment adviser for the Trust (Note 6). NASL
Financial is also the principal underwriter of the variable contracts issued by
Security Life and First North American.
NEW PORTFOLIO. On January 9, 1995, International Growth and Income commenced
operations. The subadviser to this portfolio is J.P. Morgan Investment
Management Inc. Deferred organization costs of $12,631 were incurred and are
being amortized over five years.
2. SIGNIFICANT ACCOUNTING POLICIES. The policies described below are followed
by the Trust in the preparation of the financial statements for its portfolios
in conformity with generally accepted accounting principles ("GAAP").
SECURITY VALUATION. Securities held by Money Market and short term instruments
with remaining maturities of 60 days or less held by the other portfolios of
the Trust are valued on an amortized cost basis or at original cost plus
accrued interest, both of which approximate current market value. All other
securities held by the Trust 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 prices. Securities traded only in the
over-the-counter market are valued at the last bid prices quoted by brokers
making markets in the securities at the close of trading on the Exchange.
Trust securities for which there are no such quotations, principally debt
securities, are valued on the basis of the valuation provided by a pricing
service which utilizes both dealer-supplied and electronic data processing
techniques. Other assets and securities for which no such quotations 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 Board of Trustees.
FOREIGN CURRENCY TRANSLATIONS. The accounting records of the Trust 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;
(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.
75
<PAGE> 178
NASL SERIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- -------------------------------------------------------------------------------
SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
FORWARD FOREIGN CURRENCY CONTRACTS. All portfolios with the exception of
Investment Quality Bond, U.S. Government Securities and Money Market may
purchase and sell forward foreign currency contracts in order to hedge a
specific transaction or portfolio position.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held at the end of the period and the resulting net unrealized
appreciation (depreciation) and related net receivable or payable amount are
determined using forward foreign currency exchange rates supplied by a
quotation service. The Trust 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 foreign currency and forward foreign currency
contracts shown in the Statements of Operations, include net gains or losses
realized by a portfolio on contracts which have matured or which the portfolio
has terminated by entering into an offsetting commitment with the same broker.
FUTURES. All portfolios other than Investment Quality Bond and Money Market
may purchase and sell financial futures contracts and options on those
contracts. The portfolios invest in contracts based on financial instruments
such as U.S. Treasury bonds or notes or on securities indices such as the S&P
500 Index, in order to hedge against a decline in the value of securities owned
by the portfolios.
When a portfolio sells a futures contract based on a financial instrument, the
portfolio becomes obligated to deliver that kind of instrument at an agreed
upon date for a specified price. The portfolio realizes a gain or loss
depending on whether the price of an offsetting purchase is less or more than
the price of the initial sale or on whether the price of an offsetting sale is
more or less than the price of the initial purchase . The Trust could be
exposed to risks if it could not close out futures positions because of an
illiquid secondary market or the inability of counterparties to meet the terms
of their contracts. Upon entering into futures contracts, the Trust is
required to deposit with a broker an amount, initial margin, which represents
5% of the purchase price indicated in the futures contract.
Payments to and from the broker, known as variation margin, are required to be
made on a daily basis as the price of the futures contract fluctuates, making
the long or short positions in the contract more or less valuable. If the
position is closed out by taking an opposite position prior to the settlement
date of the futures contract, a final determination of variation margin is
made, cash is required to be paid to or released by the broker, and the
portfolio realizes a gain or loss.
FORWARD COMMITMENTS. The portfolios of the Trust may purchase debt securities
on a when issued or forward delivery basis, which means that the obligations
will be delivered to the portfolios of the Trust at a future date, which may be
a month or more after the date of commitment. The price of the underlying
securities and the date when the securities will be delivered and paid for are
fixed at the time the transaction is negotiated. The value of the securities
underlying a forward commitment to purchase securities, and the subsequent
fluctuations in their value, is taken into account when determining the Trust's
net asset value starting on the day the Trust agrees to purchase the
securities. At December 31, 1995 forward commitments in Strategic Bond, U.S.
Government Securities, and Aggressive, Moderate and Conservative Asset
Allocation were valued at $5,395,848, $43,696,735, $445,356, $4,344,695 and
$2,147,606, respectively.
MORTGAGE DOLLAR ROLLS. Strategic Bond and U.S. Government Securities may enter
into mortgage dollar rolls in which they sell mortgage securities for 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 Trusts
receive 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.
ORGANIZATION COSTS. Costs incurred by a portfolio in connection with its
organization, initial registration and public offering of shares are being
amortized on a straight-line basis for Pasadena Growth, Value Equity, Growth
and Income, International Growth and Income and Strategic Bond over a five-year
period beginning with the commencement of operations of each portfolio.
FEDERAL INCOME TAXES. The Trust's policy is 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 of
the Trust is treated as a separate taxpayer for federal income tax purposes.
76
<PAGE> 179
NASL SERIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
DISTRIBUTION OF INCOME AND GAINS. All of the net investment income of Money
Market is declared as a dividend to shareholders of record as of the close of
business each day and is reinvested daily. During any particular year, net
realized gains from investment transactions of each portfolio, in excess of
available capital loss carryforwards of each portfolio would be taxable to such
portfolio if not distributed. Therefore, each portfolio of the Trust intends
to distribute all of its investment company taxable income and any net realized
capital gains in order to avoid federal income tax. Each portfolio of the
Trust is exempt from federal excise tax. Net investment income is reported in
the accompanying statements under GAAP. The Trust's distributions are based on
income amounts determined in accordance with federal income tax regulations.
Overdistributions of net investment income as determined in accordance with
GAAP have been presented in the financial statements as distributions in excess
of net investment income. Net investment income and net realized gains differ
for financial statement and tax purposes due to distributions in accordance
with income tax regulations which may differ from GAAP: marking-to-market of
certain financial instruments, the deferral of certain losses for tax purposes
and the treatment of currency gains or losses. As a result, the character of
distributions made during the year from net investment income may differ from
its ultimate characterization for tax purposes.
EXPENSE ALLOCATION. Expenses not directly attributable to a particular
portfolio are allocated based on the relative share of net assets of each
portfolio for the time during which the expense was incurred.
REPURCHASE AGREEMENTS. Each portfolio of the Trust may enter into repurchase
agreements. When a portfolio enters into a repurchase agreement through its
custodian, it receives delivery of the underlying securities, the amount of
which at the time of purchase and each subsequent business day is required to
be maintained at such a level that the market value is 102% of the repurchase
amount. Each portfolio will take constructive receipt of all securities
underlying the repurchase agreements it has entered into 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 amount.
CAPITAL ACCOUNTS. The Trust 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 Trust may
periodically make reclassifications among certain capital accounts without
impacting the net asset value.
OTHER. Investment security transactions are accounted for on a trade date plus
one basis. 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 tax reporting purposes.
The Trust uses the First In, First Out method for determining realized gain or
loss on investments for both financial and federal income tax reporting
purposes. The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amount of assets and liabilities. Actual results may differ from these
estimates.
<TABLE>
3. CAPITAL LOSS CARRYFORWARDS. At December 31, 1995, capital loss
carryforwards available to offset future realized gains were approximately:
<CAPTION>
CAPITAL LOSS CARRYFORWARD
EXPIRATION YEAR
---------------------------------------------------
PORTFOLIO 1999 2000 2001 2002 2003
- --------- ---- ---- -------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Global Equity ............... ----- ----- ----- ----- $17,415,000
Pasadena Growth ............. ----- ----- $1,981,000 $6,191,000 2,371,000
Strategic Bond .............. ----- ----- ----- 2,962,000 656,000
Global Government Bond ...... ----- ----- ----- 7,553,000 -----
Investment Quality Bond ..... $60,000 ----- ----- 4,412,000 -----
U.S. Government Securities .. ----- ----- ----- 2,625,000 -----
</TABLE>
<TABLE>
4. CAPITAL SHARES. Share activity for the Trust for the year ended December
31, 1995, was as follows:
<CAPTION>
ADDITIONAL
PAR PAID-IN
SHARES VALUE CAPITAL
----------- --------- ---------------
<S> <C> <C> <C>
GLOBAL EQUITY
Outstanding at December 31, 1994 .. 39,140,838 $391,408 $ 577,113,212
Sold ............................. 6,207,847 62,079 95,785,329
Reinvestment of distributions .... 2,048,016 20,480 29,962,469
Redeemed ......................... (7,147,089) (71,471) (109,106,453)
---------- -------- -------------
Net increase .................... 1,108,774 11,088 16,641,345
---------- -------- -------------
Outstanding at December 31, 1995 .. 40,249,612 $402,496 $ 593,754,557
========== ======== =============
</TABLE>
77
<PAGE> 180
NASL SERIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
CAPITAL SHARES, CONTINUED
<TABLE>
<CAPTION>
ADDITIONAL
PAID-IN
SHARES VALUE CAPITAL
----------- -------- -------------
<S> <C> <C> <C>
PASADENA GROWTH
Outstanding at December 31, 1994 ........... 16,757,839 $167,578 $157,798,853
Sold ...................................... 10,076,574 100,766 103,544,741
Reinvestment of distributions ............. 85,550 856 833,257
Redeemed .................................. (2,556,755) (25,567) (25,527,910)
---------- -------- ------------
Net increase ............................ 7,605,369 76,055 78,850,088
---------- -------- ------------
Outstanding at December 31, 1995 ........... 24,363,208 $243,632 $236,648,941
========== ======== ============
EQUITY
Outstanding at December 31, 1994 ........... 36,452,063 $364,521 $514,217,981
Sold ...................................... 15,461,830 154,618 287,151,438
Reinvestment of distributions ............. 261,859 2,618 4,090,234
Redeemed .................................. (4,613,712) (46,137) (83,341,209)
---------- -------- ------------
Net increase ............................ 11,109,977 111,099 207,900,463
---------- -------- ------------
Outstanding at December 31, 1995 ........... 47,562,040 $475,620 $722,118,444
========== ======== ============
VALUE EQUITY
Outstanding at December 31, 1994 ........... 19,575,533 $195,755 $217,879,647
Sold ...................................... 10,319,618 103,196 132,779,380
Reinvestment of distributions ............. 314,376 3,144 3,810,235
Redeemed .................................. (1,475,942) (14,759) (18,695,131)
---------- -------- ------------
Net increase ............................ 9,158,052 91,581 117,894,484
---------- -------- ------------
Outstanding at December 31, 1995 ........... 28,733,585 $287,336 $335,774,131
========== ======== ============
GROWTH AND INCOME
Outstanding at December 31, 1994 ........... 31,409,684 $314,097 $379,169,167
Sold ...................................... 10,336,698 103,367 154,483,408
Reinvestment of distributions ............. 945,795 9,458 12,853,356
Redeemed .................................. (1,799,079) (17,991) (26,014,630)
---------- -------- ------------
Net increase ............................ 9,483,414 94,834 141,322,134
---------- -------- ------------
Outstanding at December 31, 1995 ........... 40,893,098 $408,931 $520,491,301
========== ======== ============
INTERNATIONAL GROWTH AND INCOME
Outstanding at January 9, 1995 (commencement
of operations) ............................. ----- ----- -----
Sold ...................................... 12,066,223 $120,662 $122,853,036
Reinvestment of distributions ............. 179,396 1,794 1,872,895
Redeemed .................................. (3,783,494) (37,835) (38,622,070)
---------- -------- ------------
Net increase ............................ 8,462,125 84,621 86,103,861
---------- -------- ------------
Outstanding at December 31, 1995 ........... 8,462,125 $84,621 $ 86,103,861
========== ======== ============
STRATEGIC BOND
Outstanding at December 31, 1994 ........... 8,519,256 $85,193 $ 88,840,442
Sold ...................................... 3,611,326 36,113 37,537,011
Reinvestment of distributions ............. 431,080 4,311 4,121,123
Redeemed .................................. (1,663,147) (16,632) (16,875,286)
---------- -------- ------------
Net increase ............................ 2,379,259 23,792 24,782,848
---------- -------- ------------
Outstanding at December 31, 1995 ........... 10,898,515 $108,985 $113,623,290
========== ======== ============
GLOBAL GOVERNMENT BOND
Outstanding at December 31, 1994 ........... 16,716,312 $167,163 $217,539,724
Sold ...................................... 3,271,665 32,716 43,618,334
Reinvestment of distributions ............. 914,987 9,150 11,473,943
Redeemed .................................. (4,742,839) (47,428) (62,621,464)
---------- -------- ------------
Net decrease ............................ (556,187) (5,562) (7,529,187)
---------- -------- ------------
Outstanding at December 31, 1995 ........... 16,160,125 $161,601 $210,010,541
========== ======== ============
INVESTMENT QUALITY BOND
Outstanding at December 31, 1994 ........... 10,123,550 $101,235 $114,181,920
Sold ...................................... 4,829,840 48,298 55,677,616
Reinvestment of distributions ............. 651,687 6,517 7,070,803
Redeemed .................................. (3,987,022) (39,870) (45,870,415)
---------- -------- ------------
Net increase ............................ 1,494,505 14,945 16,878,004
---------- -------- ------------
Outstanding at December 31, 1995 ........... 11,618,055 $116,180 $131,059,924
========== ======== ============
</TABLE>
78
<PAGE> 181
<TABLE>
NASL SERIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARES, CONTINUED
<CAPTION>
ADDITIONAL
SHARES PAR VALUE PAID-IN CAPITAL
--------- --------- ---------------
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES
Outstanding at December 31,1994 ... 14,941,588 $ 149,416 $ 190,375,496
Sold ............................. 5,766,460 57,665 75,165,041
Reinvestment of distributions .... 956,919 9,569 11,846,657
Redeemed ......................... (5,784,342) (57,844) (75,702,793)
---------- --------- -------------
Net increase ................... 939,037 9,390 11,308,905
---------- --------- -------------
Outstanding at December 31, 1995 .. 15,880,625 $ 158,806 $ 201,684,401
========== ========= =============
MONEY MARKET
Outstanding at December 31, 1994 .. 27,667,381 $ 276,674 $ 276,397,132
Sold ............................. 31,669,307 316,693 316,376,373
Reinvestment of distributions .... 1,443,847 14,438 14,424,031
Redeemed ......................... (34,968,839) (349,688) (349,338,690)
---------- --------- -------------
Net decrease ................... (1,855,685) (18,557) (18,538,286)
---------- --------- -------------
Outstanding at December 31, 1995 .. 25,811,696 $ 258,117 $ 257,858,846
========== ========= =============
AGGRESSIVE ASSET ALLOCATION
Outstanding at December 31, 1994 .. 16,525,699 $ 165,257 $ 171,389,298
Sold ............................. 2,106,928 21,069 25,086,648
Reinvestment of distributions .... 1,046,144 10,461 11,455,275
Redeemed ......................... (3,194,369) (31,944) (37,535,154)
---------- --------- -------------
Net decrease ................... (41,297) (413) (993,232)
---------- --------- -------------
Outstanding at December 31, 1995 .. 16,484,402 $ 164,844 $ 170,396,066
========== ========= =============
MODERATE ASSET ALLOCATION
Outstanding at December 31, 1994 .. 56,010,309 $ 560,103 $ 579,183,287
Sold ............................. 1,091,213 10,912 12,744,722
Reinvestment of distributions .... 2,735,328 27,353 29,377,424
Redeemed ......................... (7,375,131) (73,751) (83,793,811)
---------- --------- -------------
Net decrease ................... (3,548,590) (35,486) (41,671,665)
---------- --------- -------------
Outstanding at December 31, 1995 .. 52,461,719 $ 524,617 $ 537,511,622
========== ========= =============
CONSERVATIVE ASSET ALLOCATION
Outstanding at December 31, 1994 .. 20,956,187 $ 209,562 $ 213,562,834
Sold ............................. 773,201 7,732 8,397,679
Reinvestment of distributions .... 1,060,630 10,606 10,850,241
Redeemed ......................... (3,426,820) (34,268) (36,946,840)
---------- --------- -------------
Net decrease ................... (1,592,989) (15,930) (17,698,920)
---------- --------- -------------
Outstanding at December 31, 1995 .. 19,363,198 $ 193,632 $ 195,863,914
========== ========= =============
</TABLE>
<TABLE>
5. PURCHASES AND SALES OF SECURITIES. The following summarizes the securities
transactions (except for short-term investments) for the portfolios (with the exception of Money Market) for the
year ended December 31, 1995:
<CAPTION>
PURCHASES SALES
------------------------------------- -------------------------------------
PORTFOLIO U.S. GOVERNMENT OTHER ISSUES U.S. GOVERNMENT OTHER ISSUES
--------------- ------------ --------------- ------------
<S> <C> <C> <C> <C>
Global Equity ..................... ----- $379,584,413 ----- $377,046,540
Pasadena Growth ................... ----- 186,751,186 ----- 116,996,713
Equity ............................ ----- 749,746,383 ----- 622,889,562
Value Equity ...................... ----- 258,556,259 ----- 133,640,524
Growth and Income ................. ----- 350,418,269 ----- 199,814,869
International Growth and Income* .. ----- 126,281,059 ----- 47,275,357
Strategic Bond .................... $ 83,632,008 142,505,422 $ 84,927,592 117,983,453
Global Government Bond ............ 43,927,820 305,566,986 24,487,366 335,144,653
Investment Quality Bond ........... 137,842,069 43,382,904 131,107,656 33,131,331
U.S. Government Securities ........ 908,829,476 ----- 885,115,803 9,922,983
Aggressive Asset Allocation ....... 69,569,151 130,687,830 82,311,958 133,626,087
Moderate Asset Allocation ......... 432,659,879 326,832,997 466,386,128 376,597,180
Conservative Asset Allocation ..... 168,207,799 57,717,939 194,002,297 74,266,633
<FN>
* For the period January 9, 1995 (commencement of operations) to December 31,
1995.
</TABLE>
79
<PAGE> 182
NASL SERIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
PURCHASES AND SALES OF SECURITIES, CONTINUED
<TABLE>
Purchases and sales (including maturities) for Money Market for the year ended
December 31, 1995 were $2,322,303,562 and $2,351,015,623, respectively. At
December 31, 1995, tax basis net unrealized appreciation (depreciation) 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:
<CAPTION>
TAX BASIS NET
UNREALIZED TAX BASIS TAX BASIS
TAX BASIS APPRECIATION UNREALIZED UNREALIZED
PORTFOLIO COST (DEPRECIATION) APPRECIATION DEPRECIATION
- --------- --------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
Global Equity ................................ $581,493,444 $ 59,887,420 $ 82,381,252 $22,493,832
Pasadena Growth .............................. 226,921,177 50,415,110 59,089,133 8,674,023
Equity ....................................... 812,924,416 163,140,832 176,943,455 13,802,623
Value Equity ................................. 365,220,110 29,851,922 46,173,302 16,321,380
Growth and Income ............................ 550,600,569 121,037,410 126,549,451 5,512,041
International Growth and Income............... 84,946,812 2,252,131 4,396,761 2,144,630
Strategic Bond ............................... 122,876,684 2,048,149 5,221,879 3,173,730
Global Government Bond ....................... 215,615,785 11,538,018 11,538,018 -----
Investment Quality Bond ...................... 134,795,576 7,919,802 7,977,989 58,187
U.S. Government Securities ................... 251,307,678 4,742,094 5,292,053 549,959
Aggressive Asset Allocation .................. 186,269,731 24,985,520 27,144,161 2,158,641
Moderate Asset Allocation .................... 589,957,010 58,815,659 63,150,948 4,335,289
Conservative Asset Allocation ................ 209,617,332 14,630,314 15,826,122 1,195,808
</TABLE>
<TABLE>
The following is a summary of futures contracts activity during the year ended
December 31, 1995:
SALES OF FUTURES CONTRACTS PURCHASES OF FUTURES CONTRACTS
------------------------------------------ -----------------------------------------------
NUMBER OF AGGREGATE FACE UNREALIZED NUMBER OF AGGREGATE FACE UNREALIZED
CONTRACTS VALUE OF CONTRACTS GAIN CONTRACTS VALUE OF CONTRACTS GAIN (LOSS)
--------- ----------------- ---------- -------------------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
AGGRESSIVE ASSET ALLOCATION:
US TREASURY BOND FUTURES:
Outstanding, December 31, 1994 .. --- ---- --- ----
Contracts opened ............... --- ---- 25 $ 2,500,000
Contracts closed ............... --- ---- (25) (2,500,000)
--- -----------
Outstanding, December 31, 1995 .. --- ---- --- ----
=== ============ === ===========
S&P 500 FUTURES:
Outstanding, December 31, 1994 .. 51 $ 12,750,000 --- ----
Contracts opened ............... 166 41,500,000 --- ----
Contracts closed ............... (198) (49,500,000) --- ----
--- ------------
Outstanding, December 31, 1995 .. 19 $ 4,750,000 $11,210 --- ----
=== ============ ======= === ===========
CAC 40 FUTURES:
Outstanding, December 31, 1994 .. --- ---- --- ----
Contracts opened ................ --- ---- 38 FRF 304,000
Contracts closed ................ --- ---- (25) (200,000)
--- -----------
Outstanding, December 31, 1995 .. --- ---- 13 FRF 104,000 $ 18,523
=== ============ === =========== ========
DAX 30 FUTURES:
Outstanding, December 31, 1994 .. --- ---- --- ----
Contracts opened ................ --- ---- 21 DEM 63,000
Contracts closed ................ --- ---- (13) (39,000)
--- -----------
Outstanding, December 31, 1995 .. --- ---- 8 DEM 24,000 ($ 12,130)
=== ============ === =========== ========
FTSE 100 FUTURES:
Outstanding, December 31, 1994 .. --- ---- --- ----
Contracts opened ................ --- ---- 25 [Pounds] 62,500
Contracts closed ................ --- ---- (16) (40,000)
--- -----------
Outstanding, December 31, 1995 .. --- ---- 9 [Pounds] 22,500 $ 6,635
=== ============ === =========== ========
NIKKEI 300 FUTURES:
Outstanding, December 31, 1994 .. --- ---- --- ----
Contracts opened ................ --- ---- 365 [Yen] 3,650,000
Contracts closed ................ --- ---- (262) (2,620,000)
--- -----------
Outstanding, December 31, 1995 .. --- ---- 103 [Yen] 1,030,000 $157,949
=== ============ === =========== ========
</TABLE>
80
<PAGE> 183
NASL SERIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
PURCHASES AND SALES OF SECURITIES, CONTINUED
<CAPTION>
SALES OF FUTURES CONTRACTS PURCHASES OF FUTURES CONTRACTS
-------------------------------------------- -----------------------------------------------
NUMBER OF AGGREGATE FACE UNREALIZED NUMBER OF AGGREGATE FACE UNREALIZED
CONTRACTS VALUE OF CONTRACTS GAIN CONTRACTS VALUE OF CONTRACTS GAIN (LOSS)
--------- ------------------ ---------- ------------------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
MODERATE ASSET ALLOCATION:
US TREASURY BOND FUTURES:
Outstanding, December 31, 1994 .. --- ---- --- ----
Contracts opened ................ --- ---- 48 $ 4,800,000
Contracts closed ................ --- ---- (48) (4,800,000)
--- -----------
Outstanding, December 31, 1995 .. --- ---- --- ----
=== ============= === ===========
S&P 500 FUTURES:
Outstanding, December 31, 1994 .. 107 $ 26,750,000 --- ----
Contracts opened ................ 363 90,750,000 --- ----
Contracts closed ................ (429) (107,250,000) --- ----
--- -------------
Outstanding, December 31, 1995 .. 41 $ 10,250,000 $24,190 --- ----
=== ============= ======= === ===========
CAC 40 FUTURES:
Outstanding, December 31, 1994 .. --- ---- --- ----
Contracts opened ................ --- ---- 75 FRF 600,000
Contracts closed ................ --- ---- (47) (376,000)
--- -----------
Outstanding, December 31, 1995 .. --- ---- 28 FRF 224,000 $ 39,992
=== ============= === =========== ========
DAX 30 FUTURES:
Outstanding, December 31, 1994 .. --- ---- --- ----
Contracts opened ................ --- ---- 41 DEM 123,000
Contracts closed ................ --- ---- (25) (75,000)
--- -----------
Outstanding, December 31, 1995 .. --- ---- 16 DEM 48,000 ($ 24,248)
=== ============= === =========== ========
FTSE 100 FUTURES:
Outstanding, December 31, 1994 .. --- ---- --- ----
Contracts opened ................ --- ---- 45 [P] 112,500
Contracts closed ................ --- ---- (28) (70,000)
--- -----------
Outstanding, December 31, 1995 .. --- ---- 17 [P] 42,500 $ 12,549
=== ============= === =========== ========
NIKKEI 300 FUTURES:
Outstanding, December 31, 1994 .. --- ---- --- ----
Contracts opened ................ --- ---- 651 [Yen] 6,510,000
Contracts closed ................ --- ---- (442) (4,420,000)
--- ------------
Outstanding, December 31, 1995 .. --- ---- 209 [Yen] 2,090,000 $316,735
=== ============= === =========== ========
CONSERVATIVE ASSET ALLOCATION:
US TREASURY BOND FUTURES:
Outstanding, December 31, 1994 .. --- ---- --- ----
Contracts opened ................ --- ---- 6 $600,000
Contracts closed ................ --- ---- (6) (600,000)
--- -----------
Outstanding, December 31, 1995 .. --- ---- --- ----
=== ============= === ===========
S&P 500 FUTURES:
Outstanding, December 31, 1994 .. 19 $4,750,000 --- ----
Contracts opened ................ 65 16,250,000 --- ----
Contracts closed ................ (78) (19,500,000) --- ----
--- -------------
Outstanding, December 31, 1995 .. 6 $ 1,500,000 $ 3,540 --- ----
=== ============= ======= === ===========
CAC 40 FUTURES:
Outstanding, December 31, 1994 .. --- ---- --- ----
Contracts opened ................ --- ---- 11 FRF 88,000
Contracts closed ................ --- ---- (7) (56,000)
--- -----------
Outstanding, December 31, 1995 .. --- ---- 4 FRF 32,000 $ 2,450
=== ============= === =========== ========
DAX 30 FUTURES:
Outstanding, December 31, 1994 .. --- ---- --- ----
Contracts opened ................ --- ---- 6 DEM 18,000
Contracts closed ................ --- ---- (4) (12,000)
--- -----------
Outstanding, December 31, 1995 .. --- ---- 2 DEM 6,000 ($ 3,043)
=== ============= === =========== =========
FTSE 100 FUTURES:
Outstanding, December 31, 1994 .. --- ---- --- ----
Contracts opened ................ --- ---- 8 [Pounds] 20,000
Contracts closed ................ --- ---- (5) (12,500)
--- -----------
Outstanding, December 31, 1995 .. --- ---- 3 [Pounds] 7,500 $ 2,214
=== ============= === =========== ========
NIKKEI 300 FUTURES:
Outstanding, December 31, 1994 .. --- ---- --- ----
Contracts opened ................ --- ---- 109 [Yen] 1,090,000
Contracts closed ................ --- ---- (72) (720,000)
--- ---------
Outstanding, December 31, 1995 .. --- ---- 37 [Yen] 370,000 $ 56,835
=== ============= === =========== ========
</TABLE>
81
<PAGE> 184
NASL SERIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
6. INVESTMENT ADVISORY AGREEMENTS. Effective March 20, 1987, the Trust entered
into an Investment Advisory Agreement with NASL Financial (the "Adviser"), a
wholly-owned subsidiary of Security Life and the principal underwriter of the
variable annuity contracts issued by Security Life and First North American.
The Adviser is responsible for managing the corporate and business affairs of
the Trust and for selecting and compensating subadvisers to handle the
investment and reinvestment of the assets of each portfolio of the Trust,
subject to the supervision of the Trust's Board of Trustees. As compensation
for its services, NASL Financial receives an advisory fee from the Trust based
on the average annual net assets of each particular portfolio. Advisory fees
charged to each portfolio were as follows for the year ended December 31, 1995:
<CAPTION>
PORTFOLIO FEE
---------- ----
<S> <C>
Global Equity .................... .90%
Pasadena Growth .................. .975%
Equity ........................... .75%
Value Equity ..................... .80%
Growth and Income ................ .75%
International Growth and Income .. .95%
Strategic Bond ................... .775%
Global Government Bond ........... .80%
Investment Quality Bond .......... .65%
U.S. Government Securities ....... .65%
Money Market ..................... .50%
Aggressive Asset Allocation ...... .75%
Moderate Asset Allocation ........ .75%
Conservative Asset Allocation .... .75%
</TABLE>
EXPENSE REIMBURSEMENT. Pursuant to the Advisory Agreement, NASL Financial
reimburses the Trust for expenses (excluding advisory fees, taxes, portfolio
brokerage commissions and interest) incurred in excess of 0.50% of the average
annual net assets of each portfolio, respectively, on an annualized basis in
Pasadena Growth, Equity, Value Equity, Growth and Income, Strategic Bond,
Investment Quality Bond, U.S. Government Securities, Money Market and
Aggressive, Moderate and Conservative Asset Allocation and 0.75% in Global
Equity, International Growth and Income and Global Government Bond. There were
no expenses reimbursed by NASL Financial for the year ended December 31, 1995.
The Subadviser to Pasadena Growth, Roger Engemann Management Co., Inc. has
agreed to reimburse "other expenses" of Pasadena Growth up to a maximum on an
annual basis of .15% of average annual net assets. For the year ended December
31, 1995, all "other expenses", .06%, were reimbursed by them.
7. TRUSTEES' FEES. The Trust pays each Trustee who is not an employee or a
director of the Adviser or its affiliates a fee of $4,750 plus travel expenses
for each Board of Trustees meeting attended. The Trust also pays each Trustee
who is not an employee of the Adviser or its affiliates an annual retainer of
$18,000.
<TABLE>
8. COMMITMENTS. At December 31, 1995, Global Equity, Equity, International
Growth and Income, Strategic Bond and Global Government Bond had entered into
forward foreign currency contracts which contractually obligate the portfolio
to deliver currencies at future dates. Open sale and purchase contracts at
December 31, 1995 were as follows:
NET
UNREALIZED
CONTRACTS IN EXCHANGE SETTLEMENT APPRECIATION
TO DELIVER FOR DATE VALUE (DEPRECIATION)
---------- ----------- ---------- ----- --------------
<S> <C> <C> <C> <C> <C> <C>
GLOBAL EQUITY:
SALES
German Deutschemark .. 26,708,000 $18,786,753 3/21/96 $18,694,362 $ 92,391
French Franc ......... 155,670,000 31,659,549 3/21/96 31,831,330 (171,781)
Japanese Yen ......... 1,104,000,000 11,022,914 3/21/96 10,817,378 205,536
----------- ----------- ---------
$61,469,216 $61,343,070 $ 126,146
=========== =========== ---------
PURCHASES
$ 403,389 [Yen] 41,432,050 1/04/96 $ 401,279 $ (2,110)
120,084 [Yen] 12,306,238 1/05/96 119,189 (895)
171,562 [Yen] 17,703,483 1/08/96 171,462 (100)
-------------- ----------- ---------
$ 695,035 $ 691,930 (3,105)
============== =========== ---------
$ 123,041
=========
</TABLE>
82
<PAGE> 185
<TABLE>
NASL SERIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
COMMITMENTS, CONTINUED
NET
UNREALIZED
CONTRACTS IN EXCHANGE SETTLEMENT APPRECIATION
TO DELIVER FOR DATE VALUE (DEPRECIATION)
--------- ----------- ---------- ------ --------------
<S> <C> <C> <C> <C> <C> <C>
EQUITY:
PURCHASES
$ 543,211 [Yen] 55,744,977 1/04/96 $539,903 $ (3,308)
210,887 [Yen] 21,693,396 1/05/96 210,105 (782)
-------------- ----------- ---------
$ 754,098 $ 750,008 $ (4,090)
============== =========== =========
INTERNATIONAL GROWTH
AND INCOME:
SALES
Japanese Yen .................. 1,739,182,683 $ 17,319,495 2/16/96 $16,962,456 $ 357,039
Norwegian Krone ............... 900,193 145,240 2/16/96 142,189 3,051
-------------- ----------- ---------
$ 17,464,735 $17,104,645 $ 360,090
============== =========== ---------
PURCHASES
$ 3,978,000 [Yen] 399,315,618 2/16/96 $ 3,894,573 $ (83,427)
============== =========== ---------
$ 276,663
=========
STRATEGIC BOND:
SALES
Belgian Franc ................. 16,823,675 $ 564,584 1/22/96 $ 572,452 $ (7,868)
Canadian Dollar ............... 851,000 621,713 1/22/96 623,188 (1,475)
German Deutschemark ........... 17,315,606 12,047,535 1/22/96 12,087,076 (39,541)
Danish Krone .................. 1,862,047 333,781 1/22/96 335,559 (1,778)
Spanish Peseta ................ 82,817,833 664,803 1/22/96 680,978 (16,175)
French Franc .................. 15,257,098 3,043,281 1/22/96 3,117,230 (73,949)
Great British Pound Sterling .. 2,076,583 3,238,413 1/22/96 3,223,092 15,321
Italian Lira .................. 3,478,951,297 2,132,523 1/22/96 2,183,070 (50,547)
Japanese Yen .................. 157,884,383 1,567,868 1/22/96 1,534,682 33,186
Netherland Guilder ............ 1,594,191 975,929 1/22/96 994,951 (19,022)
-------------- ----------- ---------
$ 25,190,430 $25,352,278 $(161,848)
============== =========== ---------
PURCHASES
$ 6,909,376 DEM 9,915,996 1/22/96 $ 6,921,813 $ 12,437
197,368 ESP 25,259,150 1/22/96 207,696 10,328
1,414,177 FRF 6,906,217 1/22/96 1,411,033 (3,144)
1,039,378 [P] 678,445 1/22/96 1,053,024 13,646
865,174 ITL 1,396,132,106 1/22/96 876,084 10,910
1,751,454 FRF 8,666,196 1/24/96 1,770,698 19,244
-------------- ----------- ---------
$ 12,176,927 $12,240,348 $ 63,421
============== =========== ----------
$ (98,427)
=========
GLOBAL GOVERNMENT BOND:
SALES
German Deutschemark ........... 32,399,187 $ 22,531,659 2/09/96 $22,635,216 $(103,557)
Japanese Yen .................. 432,900,000 5,000,000 8/09/96 4,319,907 680,093
German Deutschemark ........... 14,099,500 10,000,000 8/29/96 9,943,904 56,096
-------------- ----------- ---------
$ 37,531,659 $36,899,027 $ 632,632
============== =========== ---------
PURCHASES
$ 22,140,211 DEM 32,399,187 2/09/96 $22,635,216 $ 495,005
4,881,597 [Yen] 432,900,000 8/09/96 4,319,907 (561,690)
-------------- ----------- ---------
$ 27,021,808 $26,955,123 $ (66,685)
============== =========== ---------
$ 565,947
=========
</TABLE>
83
<PAGE> 186
NASL SERIES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
9. SUBSEQUENT EVENT. On September 7, 1995, North American Life announced plans
to "amalgamate" with The Manufacturers Life Insurance Company ("MLI"). An
amalgamation is the exclusive method of combining federally chartered mutual
life insurers under the applicable Insurance Companies Act (Canada).
The amalgamation required and received the approval of the Superintendent of
Financial Institutions in Canada, certain US regulatory approvals and the
approval of the policyholders of both mutual companies. The amalgamation of
North American Life and MLI became effective as of January 1, 1996.
MLI is a Canadian federally chartered mutual life insurance company with $29.9
billion (US) in consolidated assets and $2.4 billion (US) in policyholder
surplus as of June 30, 1995. North American Life, also a Canadian federally
chartered mutual life insurance company, had $4.5 billion (US) in assets and
$0.6 billion (US) in policyholders surplus as of June 30, 1995.
The surviving company will conduct business under the name "The Manufacturers
Life Insurance Company".
Effective January 1, 1996, immediately following the amalgamation, Security
Life experienced a corporate restructuring which resulted in the formation of
a newly organized holding corporation, NAWL Holding Company, Inc. ("NAWL").
NAWL holds all of the outstanding shares of Security Life and Wood Logan
Associates, Inc. ("WLA"). WLA is a broker-dealer registered with the
Securities and Exchange Commission and is a member of the National Association
of Securities Dealers, Inc. WLA acts as the promotional agent for distribution
of the Trust.
MLI owns all of the class A shares of NAWL, representing 85% of the voting
shares of NAWL. Certain employees of WLA own all of the class B shares, which
represent the remaining 15% voting interest in NAWL.
84
<PAGE> 187
PART C. OTHER INFORMATION
-----------------
<PAGE> 188
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
(a) Financial Statements:
--------------------
(1) Audited Financials
Report of Independent Accountants, February 15,1996 -- Part B
Statements of Assets and Liabilities, December 31, 1995 -- Part B
Statements of Operations for the year ended December 31, 1995 --
Part B
Statements of Changes in Net Assets for the years ended December
31, 1995 and December 31, 1994 -- Part B
Notes to Financial Statements, December 31, 1995 -- Part B
Portfolios of Investments, December 31, 1995 -- Part B -
Financial Highlights -- Parts A and B
(2) Unaudited Financial Statements for period March 4, 1996 through
June 15, 1996 - Small/Mid Cap Trust and International Small Cap
Trust
(b) Exhibits:
--------
(1)(a) Agreement and Declaration of Trust dated September 29, 1988 --
previously filed as exhibit (1)(a) to post-effective amendment no.
31 filed on February 28, 1996.
(1)(b) Establishment and Designation of Additional Series of Shares of
Beneficial Interest - Redesignation of the Series of Shares known
as the "Convertible Securities Trust" to the "U.S. Government Bond
Trust" dated May 1, 1989 -- previously filed as exhibit (1)(b) to
post-effective amendment no. 31 filed on February 28, 1996.
(1)(c) Establishment and Designation of Additional Series of Shares of
Beneficial Interest - Conservative, Moderate and Aggressive Asset
Allocation Trusts dated May 1, 1989 -- previously filed as exhibit
(1)(c) to post-effective amendment no. 31 filed on February 28,
1996.
(1)(d) Establishment and Designation of Additional Series of Shares of
Beneficial Interest - Growth & Income Trust dated February 1, 1991
-- previously filed as exhibit (1)(d) to post-effective amendment
no. 31 filed on February 28, 1996.
<PAGE> 189
(1)(e) Establishment and Designation of Additional Series of Shares of
Beneficial Interest - Redesignation of the Series of Shares known
as the "Bond Trust" to the "Investment Quality Bond Trust" dated
April 16, 1991 -- previously filed as exhibit (1)(e) to
post-effective amendment no. 31 filed on February 28, 1996.
(1)(f) Establishment and Designation of Additional Series of Shares of
Beneficial Interest - Redesignation of the Series of Shares known
as the "U.S. Government Bond Trust" to the "U.S. Government
Securities Trust" dated June 14, 1991 -- previously filed as
exhibit (1)(f) to post-effective amendment no. 31 filed on February
28, 1996.
(1)(g) Establishment and Designation of Additional Series of Shares of
Beneficial Interest - Pasadena Growth Trust, Growth Trust and
Strategic Income Trust dated August 7, 1992 -- previously filed as
exhibit (1)(g) to post-effective amendment no. 31 filed on February
28, 1996.
(1)(h) Establishment and Designation of Additional Series of Shares of
Beneficial Interest - Redesignation of the Series of Shares known
as the "Strategic Income Trust" to the "Strategic Bond Trust" and
the Series of Shares known as the "Growth Trust" to the "Value
Equity Trust" dated April 4, 1993 -- previously filed as exhibit
(1)(h) to post-effective amendment no. 31 filed on February 28,
1996.
(1)(i) Establishment and Designation of Additional Series of Shares of
Beneficial Interest - International Growth and Income Trust dated
December 28, 1994 -- previously filed as exhibit (1)(i) to
post-effective amendment no. 31 filed on February 28, 1996.
(2) By-laws of NASL Series Trust -- previously filed as exhibit (2) to
post-effective amendment no. 7 filed on October 31, 1988.
(4)(a) Specimen Share Certificate for Equity Trust --previously filed as
exhibit (4)(a) to post- effective amendment no. 7 filed on October
31, 1988.
(4)(b) Specimen Share Certificate for Growth and Income Trust --
previously filed as exhibit (4)(b) to post-effective amendment no.
13 filed on February 15, 1991.
(4)(c) Specimen Share Certificate for Investment Quality Bond Trust-
-previously filed as exhibit (4)(c) to post-effective amendment no.
14 filed on April 15, 1991.
(4)(d) Specimen Share Certificate for Money Market Trust -- previously
filed as exhibit (4)(c) to post-effective amendment no. 7 filed on
October 31, 1988.
<PAGE> 190
(4)(e) Specimen Share Certificate for Global Equity Trust - previously
filed as exhibit (4)(d) to post-effective amendment no. 7 filed on
October 31, 1988.
(4)(f) Specimen Share Certificate for Global Government Bond Trust-
-previously filed as exhibit (4)(e) to post-effective amendment no.
7 filed on October 31, 1988.
(4)(g) Specimen Share Certificate for U.S. Government Securities Trust --
previously filed as exhibit (4)(g) to post-effective amendment no.
14 filed on April 15, 1991.
(4)(h) Specimen Share Certificate for Conservative Asset Allocation Trust
-- previously filed as exhibit (4)(g) to post-effective amendment
no. 10 filed on May 19, 1989.
(4)(i) Specimen Share Certificate for Moderate Asset Allocation Trust --
previously filed as exhibit (4)(h) to post-effective amendment no.
10 filed on May 19, 1989.
(4)(j) Specimen Share Certificate for Aggressive Asset Allocation Trust --
previously filed as exhibit (4)(i) to post-effective amendment no.
10 filed on May 19, 1989.
(4)(k) Specimen Share Certificate for Value Equity Trust -- previously
filed as exhibit (4)(k) to post-effective amendment no. 21 filed
on August 24, 1992.
(4)(l) Specimen Share Certificate for Strategic Bond Trust -- previously
filed as exhibit (4)(l) to post-effective amendment no. 21 filed on
August 24, 1992.
(4)(m) Specimen Share Certificate for Pasadena Growth Trust -- previously
filed as exhibit (4)(m) to post-effective amendment no. 21 filed on
August 24, 1992.
(4)(n) Specimen Share Certificate for International Growth and Income
Trust -- previously filed as exhibit (4) (n) to post-effective
amendment no. 27 filed October 20, 1994.
(4)(o) Specimen Share Certificate for the Small/Mid Cap Trust - Previously
filed as exhibit (4)(o) to post effective amendment no. 30 filed
December 14, 1995.
(4)(p) Specimen Share Certificate for the International Small Cap Trust
Previously filed as exhibit (4)(p) to post effective amendment no.
30 filed December 14, 1995.
<PAGE> 191
(4)(q) Specimen Share Certificate for the Growth Trust - Previously filed
as exhibit (4)(q) to post-effective amendment no. 32 filed May 13,
1996..
(5)(a)(1) Advisory Agreement between NASL Series Trust and NASL
Financial Services, Inc. - Previously filed as exhibit
(5)(a)(1) to post effective amendment no. 30 filed December
14, 1995.
(5)(a)(2) Amendment to Advisory Agreement between NASL Series Trust
and NASL Financial Services, Inc. adding the Growth
Trust - Filed herewith
(5)(b)(i) Restated Subadvisory Agreement Between NASL Financial
Services, Inc. and Oechsle International Advisors, L.P.,
previously filed as exhibit (5)(b)(ii) to post-effective
amendment no. 16 on October 23, 1991.
(5)(b)(ii) Subadvisory Agreement Between NASL Financial Services, Inc.
and Wellington Management Company, previously filed as
exhibit (5)(b)(iii) to post-effective amendment no. 16 on
October 23, 1991.
(5)(b)(iii) Amendment to Subadvisory Agreement Between NASL Financial
Services, Inc. and Wellington Management Company dated
December 13, 1991, previously filed as exhibit (5)(b)(iii) to
post-effective amendment no. 18 on December 19, 1991.
(5)(b)(iv) Subadvisory Agreement Between NASL Financial and Fidelity
Management Trust Company dated December 6, 1991, previously
filed as exhibit (5)(b)(iv) to post-effective amendment no.
18 on December 19, 1991.
(5)(b)(v) Subadvisory Agreement Between NASL Financial and Salomon
Brothers Asset Management Inc dated December 6, 1991,
previously filed as exhibit (5)(b)(v) to post-effective
amendment no. 18 on December 19, 1991.
(5)(b)(vi) Amendment to Subadvisory Agreement Between NASL Financial and
Salomon Brothers Asset Management Inc dated August 20, 1992
-- previously filed as exhibit no. (5)(a)(3) to
post-effective amendment no. 22 filed on October 30, 1992.
(5)(b)(vii) Subadvisory Agreement Between NASL Financial and Goldman
Sachs Asset Management dated December 3, 1992 -- previously
filed
<PAGE> 192
as exhibit no. (5)(b)(vii) to post-effective amendment no. 23
filed on February 2, 1993.
(5)(b)(viii) Subadvisory Agreement Between NASL Financial and Roger
Engemann Management Co., Inc. dated August 31, 1992 -
previously filed as exhibit (5)(b)(v) to post-effective
amendment no. 18 on December 19, 1991.
(5)(b)(ix) Subadvisory Consulting Agreement Between Salomon Brothers
Asset Management Inc and Salomon Brothers Asset Management
Limited dated February 19, 1993. -- previously filed as
exhibit (5)(b)(ix) to post-effective amendment 24 on April 2,
1993.
(5)(b)(x) Subadvisory Agreement between NASL Financial Services, Inc.
and J.P. Morgan Investment Management Inc. dated December 1,
1994 -- previously filed as exhibit (5)(b)(xi) to
post-effective amendment no. 28 on March 2, 1995.
(5)(b)(xi) Form of Subadvisory Agreement between NASL Financial
Services, Inc. and Fred Alger Management, Inc. - Previously
filed as exhibit (5)(b)(xi) to post-effective amendment no.
30 filed December 14, 1995.
(5)(b)(xii) Form of Subadvisory Agreement between NASL Financial
Services, Inc. and Founders Asset Management, Inc. --
Previously filed as exhibit (5)(b)(xii) to post-effective
amendment no. 30 filed December 14, 1995.
(5)(b)(xiii) Amendment to Subadvisory Agreement between NASL Financial
Services, Inc. and Founders Asset Management, Inc. adding
the Growth Trust - Filed herewith
(8)(a) Custodian Agreement Between NASL Series Trust and Boston Safe
Deposit and Trust Company, previously filed as exhibit (8)
(a) to post-effective amendment no. 16 filed on October 23,
1991.
(8)(b) Custodian Agreement Between NASL Series Fund, Inc. and State
Street Bank and Trust Company -- previously filed as exhibit
(8)(b) to post-effective amendment no. 6 filed on March 14,
1988.
(10)(a)(i) Opinion and Consent of Ropes & Gray -- previously filed as
exhibit (10)(a) to post-effective amendment no. 7 filed on
October 31, 1988.
<PAGE> 193
(10)(a)(ii) Opinion and Consent of Tina M. Perrino, Esq. -- previously
filed as exhibit (10)(a)(ii) to post-effective amendment no.
14 filed on April 15, 1991.
(10)(a)(iii) Opinion and Consent of Tina M. Perrino, Esq. -- previously
filed as exhibit (10)(a)(iii) to post-effective amendment no.
22 filed October 30, 1992.
(10)(a)(iv) Opinion and Consent of Betsy A. Seel, Esq.-- previously filed
as exhibit (10)(a)(iv) to post-effective amendment no. 27
filed October 20, 1994.
(10)(a)(v) Opinion and Consent of Betsy A. Seel, Esq. - Previously filed
as exhibit (10)(a)(v) to post effective amendment no. 30
filed December 14, 1995.
(10)(a)(vi) Opinion and Consent of Betsy Anne Seel.- Filed herewith.
(10)(b) Consent of Jones & Blouch - Filed herewith.
(11) Consent of Coopers & Lybrand - Filed herewith.
(13) Letter Containing Investment Undertaking of North American
Life Assurance Company -- previously filed as exhibit 13 to
post-effective amendment no. 4 filed on December 24, 1987.
(16)(a) Schedule of computations of Total Return Figures for the U.S.
Government Securities, Growth and Income and Investment
Quality Bond Trusts, previously filed as exhibit (16)(a) to
post-effective amendment no. 16 filed on October 23, 1991.
(16)(b) Schedule of Computations of Total Return Figures for the
Equity, Global Equity and Global Government Bond --
previously filed as exhibit 16 to post-effective amendment
no. 10 filed on May 19, 1989.
(16)(c) Schedule of Computations of Total Return Figures for the
Asset Allocation Trusts, Value Equity Trust, Pasadena Growth
Trust and the Strategic Bond Trust -- previously filed as
exhibit 16(c) to post-effec tive amendment no. 25 filed on
March 2, 1994.
(16)(d) Schedule of Computations of Total Return Figures for the
International Growth & Income Trust. - previously filed as
Exhibit 16(d) to post-effective amendment no. 29 on June 29,
1995.
<PAGE> 194
(16)(e) Additional Schedule of Computations - general formula --
previously filed as exhibit (b)(16)(e) to post-effective
amendment no. 31 filed February 28, 1996.
(18)(a) Power of Attorney - Trustees, previously filed as Exhibit
(17) to post-effective amendment no. 23 filed on February 2,
1993.
(18)(b) Power of Attorney - Richard C. Hirtle, Vice President and
Treasurer (Principal Financial and Accounting Officer) --
previously filed as exhibit 17(b) to post effective amendment
no. 24 filed April 2, 1993.
(18)(c) Power of Attorney - Frederick W. Gorbet -- previously filed
as exhibit 17(c) to post-effective amendment no. 25 filed on
March 2, 1994.
(18)(d) Powers of Attorney -- previously filed as exhibit 17(d) to
post effective amendment no. 27 filed October 20, 1994.
(27) Financial Data Schedule for financial statements for the
period ended December 31, 1995 - Filed herewith.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
The Trust has three shareholders: (i) North American Security Life
Insurance Company ("Security Life"), (ii) its wholly-owned subsidiary, First
North American Life Assurance Company ("FNAL") and (iii) The Manufacturers Life
Insurance Company of America ("Manulife America"). Security Life, FNAL and
Manulife America hold Trust shares attributable to variable contracts in their
respective separate accounts registered under the Investment Company Act of 1940
and will solicit voting instructions from variable contract owners and vote all
shares held in proportion to the instructions received.
<PAGE> 195
THE MANUFACTURERS LIFE INSURANCE COMPANY
(Subsidiaries Organization Chart
- including certain Significant Investments)
The Manufacturers Life Insurance Company (Canada)
1. ManuLife Holdings (Hong Kong) Limited - H.K. (100%)
2. ManuLife Financial Systems (Hong Kong) Limited - H.K. (100%)
3. P.T. Asuransi Jiwa Dharmala Manulife - Indonesia (51%)
4. ManuLife (International) Limited - Bermuda (100%)
5. OUB Manulife Pte. Ltd. - Singapore (50%)
6. Manulife (Malaysia) SDN. BHD. - Malaysia (100%)
7. Manulife (Thailand) Ltd. - Thailand (100%)
8. Young Poong Manulife Insurance Company - Korea (50%)
9. Ennal, Inc. - Ohio (100%)
10. 495603 Ontario Limited - Ontario (100%)
11. 994744 Ontario Inc. - Ontario (100%)
12. 1056416 Ontario Limited - Ontario (100%)
13. 484551 Ontario Limited - Ontario (100%)
(a) 911164 Ontario Limited - Ontario (100%)
14. NAWL (North American Wood Logan Holding Company) - Delaware (85%)
(a) Wood Logan Associates, Inc. - Connecticut (100%)
(i) Wood Logan Distributors, Inc. - Connecticut (100%)
(b) North American Security Life Insurance Company - Delaware (100%)
(i) NASL Financial Services, Inc. - Massachusetts (100%)
(ii) First North American Life Assurance Company - New York (100%)
(iii) North American Funds - Massachusetts (100%)
(iv) NASL Series Trust - Massachusetts (100%)
15. Domlife Realty Limited - Canada (100%)
<PAGE> 196
16. Balmoral Developments Inc. - Canada (100%)
17. Cantay Holdings Inc. - Ontario (100%)
18. 576986 Ontario Inc. - Ontario (100%)
19. KY Holding Corporation - Canada (100%)
20. 172846 Canada Limited - Canada (100%)
21. First North American Realty, Inc. - Minnesota (100%)
22. North American Capital Corporation - Ontario (100%)
23. Elliott & Page Mutual Fund Corporation - Ontario (100%)
24. TBD Life Insurance Company - Canada (100%)
25. The North American Group Inc. - Canada (100%)
26. Capitol Bankers Life Insurance Company - Minnesota (100%)
27. Manulife Investment Management Corporation - Canada (100%)
(a) 159139 Canada Inc. - Canada (50%)
i. Altamira Management Ltd. - Canada (60.96%)
A. ACI2 Limited - Cayman (100%)
a/ Regent Pacific Group Limited-Cayman (63.8%)
a.1 Manulife Regent Investment Corporation - Barbados
(100%)
(50% by Regent Pacific Group Limited and 50% by
Manulife Data Services Inc.)
b.1 Manulife Regent Investment Asia Limited - Hong Kong
(100%)
B. Altamira Financial Services Inc. - Ontario (100%)
a/ AIS Securities (Partnership) - Ontario (100%) (5% by
Altamira Financial Services, Inc. and 95% by Altamira
Investment Services Inc.)
b/ Altamira Investment Services Inc. - Ontario (100%)
(a) AIS Securities (Partnership) - Ontario (100%) (95% by
Altamira Investments Services Inc. and 5% by Altamira
Financial Services Inc.)
(b) Altamira (Alberta) Ltd. - Alberta (100%)
<PAGE> 197
(c) Capital Growth Financial Services Inc. - Ontario
(100%)
28. Manulife International Investment Management Limited - U.K. (100%)
(a) Manulife International Fund Management Limited - U.K. (100%)
29. ManuCab Ltd. - Canada (100%)
(a) Plazcab Service Limited - Canada (100%)
30. Manulife Data Services Inc.- Barbados (100%)
(a) Manulife Regent Investment Corporation - Barbados - (100%) (50% by
Manulife Data Services Inc. and 50% by Regent Pacific Group Limited)
(b) Manulife Regent Investment Asia Limited - Hong Kong (100%)
31. 16351 Canada Limited - Canada (100%)
32. Manufacturers Life Capital Corporation Inc. - Canada (100%)
33. Townvest Inc. - Ontario (100%)
34. Manulife Financial Holdings Limited - Ontario (100%)
(a). 742166 Ontario Inc. - Ontario (100%)
(b). Family Realty Firstcorp Limited - Ontario (100%)
(c). Thos. N. Shea Investment Corporation Limited - Ontario (100%)
(d) Manulife Bank of Canada - Canada (100%)
i. Manulife Securities International Ltd. - Canada (100%)
ii. Cabot Financial Services Corporation - Ontario (100%)
iii. Cabot Investments Limited - Ontario (100%)
35. NALACO Mortgage Corporation - Ontario (100%)
(a) Underwater Gas Developers Limited - Ontario (100%)
36. Manulife (International) Reinsurance Limited - Bermuda (100%)
(a) Manulife (International) P&C Limited - Bermuda (100%)
(b) Manufacturers P&C Limited - Bermuda (100%)
37. FNA Financial Inc. - Canada (100%)
(a) NAL Resources Management Limited - Canada (100%)
(b) First North America Insurance Company - Canada (100%)
(c) NAL Trustco Inc. - Ontario (100%)
(d) North American Life Financial Services Inc. - Ontario (100%)
(e) Nalafund Investors Limited - Canada - (100%)
(f) Seamark Asset Management Ltd. - Canada (69.175%)
(g) Elliott & Page Limited - Ontario (100%)
<PAGE> 198
38. NAL Resources Limited - Alberta (100%)
39. Manulife Reinsurance Corporation (U.S.A.) - Michigan (100%)
(a) Manulife Reinsurance Limited - Bermuda (100%)
(b) Manulife Holding Corporation - Delaware (100%)
i. Manufacturers Life Mortgage Securities
Corporation - Delaware (100%)
ii. Underwriters International Inc. - Delaware (50%)
iii. Capital Design Corporation - California - (100%)
iv. ManEquity, Inc. - Colorado (100%)
v. Manulife Service Corporation - Colorado (100%)
(c) The Manufacturers Life Insurance Company (U.S.A.) - Michigan (100%)
(d) The Manufacturers Life Insurance Company of America - Michigan (100%)
i. Manulife Series Fund, Inc. - Maryland (100%)
ii. Manufacturers Adviser Corporation - Colorado (100%)
40. The Manufacturers Investment Corporation - Michigan (100%)
41. Manulife Property Management of Washington D.C., Inc. - Washington D.C.
(100%)
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of June 30, 1996 the number of holders of the shares of beneficial
interest of each series of shares of the Registrant is as follows:
Title of Series Number of Record Holders
--------------- ------------------------
Global Equity Trust Shares of
Beneficial Interest 2
Pasadena Growth Trust Shares of
Beneficial Interest 2
Equity Trust Shares of
Beneficial Interest 3
Value Equity Trust Shares of
Beneficial Interest 3
Growth and Income Trust Shares
of Beneficial Interest 3
Strategic Bond Trust Shares
of Beneficial Interest 2
Global Government Bond Trust
Shares of Beneficial Interest 2
Investment Quality Bond Trust Shares
of Beneficial Interest 2
U.S. Government Securities Trust
<PAGE> 199
Shares of Beneficial Interest 3
Money Market Trust Shares of
Beneficial Interest 2
Conservative Asset Allocation Trust
Shares of Beneficial Interest 3
Moderate Asset Allocation Trust
Shares of Beneficial Interest 3
Aggressive Asset Allocation Trust
Shares of Beneficial Interest 3
International Growth and Income Trust
Shares of Beneficial Interest 2
Small/Mid Cap Trust
Shares of Beneficial Interest 2
International Small Cap Trust
Shares of Beneficial Interest 2
ITEM 27. INDEMNIFICATION
---------------
Sections 6.4 and 6.5 of the Agreement and Declaration of Trust of the
Registrant provide that the Registrant shall indemnify each of its Trustees and
officers against all liabilities, including but not limited to amounts paid in
satisfaction of judgments, in compromise or as fines and penalties, and against
all expenses, including but not limited to accountants and counsel fees,
reasonably incurred in connection with the defense or disposition of any action,
suit or other proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Trustee or officer may be or
may have been involved as a party or otherwise or with which such person may be
or may have been threatened, while in office or thereafter, by reason of being
or having been such a Trustee or officer, except that indemnification shall not
be provided if it shall have been finally adjudicated in a decision on the
merits by the court or other body before which the proceeding was brought that
such Trustee or officer (i) did not act in good faith in the reasonable belief
that his or her action was in the best interests of the Registrant or (ii) is
liable to the Registrant or its shareholders by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of such person's office.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
----------------------------------------------------
See "Management of the Trust" in the Prospectus and "Investment Management
Arrangements" in the Statement of Additional Information for information
regarding the business of the Adviser and each of the Subadvisers. For
information as to the business, profession, vocation or employment of a
substantial nature of each director, officer or partner of the Adviser and each
of the Subadvisers, reference is made to the respective Form ADV, as amended,
filed under the Investment Advisers Act of 1940, each of which is herein
incorporated by reference.
<PAGE> 200
ITEM 29. PRINCIPAL UNDERWRITERS
----------------------
Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
--------------------------------
All accounts, books and other documents required to be maintained under
Section 31(a) of the Investment Company Act of 1940 are kept by NASL Financial
Services, Inc., the Registrant's investment adviser, at its offices at 116
Huntington Avenue, Boston, Massachusetts 02116, by Fidelity Management Trust
Company, the investment subadviser to the Equity, Conservative Asset Allocation,
Moderate Asset Allocation and Aggressive Asset Allocation Trusts, at its offices
at 82 Devonshire Street, Boston, MA 02109, by Oechsle International Advisors,
L.P., the investment subadviser to the Global Equity and Global Government Bond
Trusts, at its offices at One International Place, Boston, Massachusetts 02110,
by Wellington Management Company, the investment subadviser to the Growth and
Income , Money Market and Investment Quality Bond Trusts, at its offices at 75
State Street, Boston, Massachusetts 02109, by Salomon Brothers Asset Management
Inc, the investment subadviser to the U.S. Government Securities and Strategic
Bond Trusts, at its offices at 7 World Trade Center, New York, New York 10048,
by Goldman Sachs Asset Management, the investment subadviser for the Value
Equity Trust, at 32 Old Slip, New York, New York 10005, by Roger Engemann
Management Co., Inc., the investment subadviser for the Pasadena Growth Trust,
at 600 North Rosemead Boulevard, Pasadena, California 91107, by Fred Alger
Management, Inc., the investment subadviser for the Small/Mid Cap Trust, at 30
Montgomery Street, Jersey City, New Jersey, by Founders Asset Management, Inc.,
the investment subadviser for the Growth and International Small Cap Trusts, at
2930 East Third Avenue, Denver, Colorado, by J.P.Morgan Investment Management
Inc., the investment subadviser to the International Growth and Income Trust at
its offices at 522 5th Avenue, New York, New York, 10036, by the Registrant at
its principal business office located at 116 Huntington Avenue, Boston,
Massachusetts 02116, by Boston Safe Deposit and Trust Company, One Boston Place,
Boston, Massachusetts 02108, custodian for the Global Equity and Global
Government Bond Trusts' assets, or by State Street Bank and Trust Company, the
custodian and transfer agent for all the other portfolio's of the Trust, at its
offices at 225 Franklin Street, Boston, Massachusetts 02110.
ITEM 31. MANAGEMENT SERVICES
-------------------
Not applicable.
<PAGE> 201
ITEM 32. UNDERTAKINGS
------------
Previously supplied
-------------------
<PAGE> 202
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant, NASL Series Trust, certifies that
it meets all of the requirements for effectiveness of this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Boston, and
Commonwealth of Massachusetts, on the 9th day of July, 1996.
NASL SERIES TRUST
-----------------
(Registrant)
By: /s/ William J. Atherton
------------------------------
William J. Atherton, President
Attest:
/s/ Kimberly Skidmore
- --------------------------------------
Kimberly Skidmore, Assistant Secretary
<PAGE> 203
<TABLE>
Pursuant to the requirements of the Securities Act of 1933, this amended
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<CAPTION>
<S> <C> <C>
* Trustee July 9, 1996
----------------------- ---------------------
Don B. Allen (Date)
* President - July 9, 1996
----------------------- (Chief Executive Officer) ---------------------
William J. Atherton (Date)
* Trustee July 9, 1996
----------------------- ---------------------
Charles L. Bardelis (Date)
* Trustee July 9, 1996
----------------------- ---------------------
Samuel Hoar (Date)
* Trustee July 9, 1996
----------------------- and Chairman ---------------------
Brian L. Moore (Date)
* Trustee July 9, 1996
----------------------- ---------------------
Robert J. Myers (Date)
* Vice President and July 9, 1996
----------------------- Treasurer (Prin- ---------------------
Richard C. Hirtle cipal Financial and (Date)
Accounting Officer)
<FN>
*By: /s/ James D. Gallagher July 9, 1996
---------------------- ---------------------
James D. Gallagher (Date)
Attorney-in-Fact
Pursuant to Powers
of Attorney
</TABLE>
<PAGE> 204
EXHIBITS
<PAGE> 205
EXHIBIT INDEX
NO. DESCRIPTION
- --- -----------
(5)(a)(2) Amendment to Advisory Agreement
(5)(b)(xiii) Amendment to Founders Asset Management Subadvisory Agreement
(10)(a)(vi) Opinion and Consent of Betsy Anne Seel
(10)(b) Consent of Jones & Blouch
(11) Consent of Coopers & Lybrand
(27) Financial Data Schedules for December 31, 1995 and June 15,
1996 financials
<PAGE> 1
Exhibit 5(a)(2)
NASL SERIES TRUST
AMENDMENT TO ADVISORY AGREEMENT
AMENDMENT made this 20th day June, 1996, to the Advisory Agreement dated
January 1, 1996 between NASL Series Trust, a Massachusetts business trust (the
"Trust") and NASL Financial Services, Inc., a Massachusetts corporation ("NASL
Financial" or the "Adviser"). In consideration of the mutual covenants contained
herein, the parties agree as follows:
1. CHANGE IN APPENDIX A
Appendix A to this Agreement is revised to reflect the appointment and
compensation of NASL Financial as investment adviser for the Growth Trust
(the "Portfolio") as set forth in Appendix A to this Amendment.
2. CHANGE IN APPENDIX B
Appendix B to this Agreement is revised to include the Portfolio as set
forth in Appendix B to this Amendment.
3. EFFECTIVE DATE
This Amendment shall become effective with respect to the Portfolio on the
later of (i) the date of its execution, (ii) the effective date of the
post-effective amendment to the registration statement of NASL Series Trust
under the Securities Act of 1933 that incorporates with respect to the Portfolio
the terms of the Agreement as amended herein and (iii) the date of the meeting
of shareholders (or sole shareholder if applicable) of the Portfolio called for
the purpose of voting on this Amendment, at which meeting this Amendment shall
have been approved by the vote of a majority of the outstanding voting
securities (as defined in the Investment Company Act of 1940, as amended) of the
Portfolio.
NASL SERIES TRUST
BY: /s/ William J. Atherton
---------------------------
William J. Atherton,
President
NASL FINANCIAL SERVICES, INC.
BY: /s/ William J. Atherton
---------------------------
William J. Atherton,
President
<PAGE> 2
APPENDIX A
1. Global Equity Trust: .90% of the current net assets of the Portfolio.
2. Pasadena Growth Trust: .975% of the current net assets of the Portfolio.
3. Equity Trust: .75% of the current net assets of the Portfolio.
4. Value Equity Trust: .80% of the current net assets of the Portfolio.
5. Growth and Income Trust: .75% of the current net assets of the
Portfolio.
6. Strategic Bond Trust: .775% of the current net assets of the Portfolio.
7. Global Government Bond Trust: .80% of the current net assets of the
Portfolio.
8. Investment Quality Bond Trust: .65% of the current net assets of the
Portfolio.
9. U.S. Government Securities Trust: .65% of the current net assets of the
Portfolio.
10. Money Market Trust: .50% of the current net assets of the Portfolio.
11. Aggressive Asset Allocation Trust: .75% of the current net assets of
the Portfolio.
12. Moderate Asset Allocation Trust: .75% of the net assets of the Portfolio.
13. Conservative Asset Allocation Trust: .75% of the net assets of the
Portfolio.
14. International Growth and Income Trust: .95% of the net assets of the
Portfolio.
15. Small/Mid Cap Trust: 1.0% of the net assets of the Portfolio.
16. International Small Cap Trust: 1.10% of the net assets of the Portfolio.
17. Growth Trust: .85% of the net assets of the Portfolio.
The Percentage Fee for each Portfolio shall be accrued for each calendar
day and the sum of the daily fee accruals shall be payable monthly to the
Adviser. The daily fee accruals will be computed by multiplying the fraction of
one over the number of calendar days in the year by the applicable annual rate
described in the preceding paragraph, and multiplying this product by the net
assets of the Portfolio as determined in accordance with the Trust's prospectus
and statement of additional information as of the close of business on the
previous business day on which the Trust was open for business.
If this Agreement becomes effective or terminates before the end of any
month, the fee for the period from the effective date to the end of such month
or from the beginning of such month to
<PAGE> 3
the date of termination, as the case may be, shall be prorated according to the
proportion which such period bears to the full month in which such effectiveness
or termination occurs.
<PAGE> 4
APPENDIX B
----------
The Expense Limit for each Portfolio for the purposes of paragraph 2.d.i(C)
shall be:
Portfolio Percent
--------- -------
Pasadena Growth Trust .50%
Value Equity Trust .50%
Equity Trust .50%
Growth and Income Trust .50%
Conservative Asset Allocation Trust .50%
Moderate Asset Allocation Trust .50%
Aggressive Asset Allocation Trust .50%
Global Equity Trust .75%
Global Government Bond Trust .75%
Strategic Bond Trust .50%
U.S. Government Securities Trust .50%
Investment Quality Bond Trust .50%
Money Market Trust .50%
International Growth and Income Trust .75%
Small/Mid Cap Trust .50%
International Small Cap Trust .75%
Growth Trust .50%
<PAGE> 1
Exhibit 5(b)(xiii)
AMENDMENT TO
SUBADVISORY AGREEMENT
NASL SERIES TRUST
AMENDMENT made this 20TH day of JUNE 1996 to the Subadvisory Agreement
dated January 4, 1996 (the "Agreement"), between NASL Financial Services, Inc.,
a Massachusetts corporation (the "Adviser"), and Founders Asset Management,
Inc., a Delaware Corporation (the "Subadvisers"). In considertion of the mutual
covenants contained herein, the parties agree as follows:
1. CHANGE IN APPENDIX A
Providing for the appointment and compensation of the Subadviser for the
new Growth Trust. Section 3 of the Agreement, "Compensation of Subadviser," is
hereby amended by adding an additional portfolio to Appendix A as follows:
2. Growth Trust: .450% of the first $50,000,000, .450% between
$50,000,000 and $200,000,000, .350% between $200,000,000 and
$500,000,000 and .300% on the excess over $500,000,000 of the average
daily value of the net assets of the Portfolio.
2. SUBADVISORY AGREEMENT
In all other respects, the Agreement is confirmed and remains in full
force and effect.
3. EFFFECTIVE DATE
This Amendment shall become effective with respect to the Growth Trust on
the later of: (i) the date of its execution, (ii) the effective date of the
post-effective amendment to the registration statement of NASL Series Trust
under the Securities Act of 1933 that incorporates with respect to the Growth
Trust the terms of the Agreement as amended herein and (iii) the date of the
meeting of shareholders (or sole shareholder if applicable) of the Growth Trust
called for the purpose of voting on this Amendment, at which meeting this
Amendment shall have been approved by the vote of a majority of the outstanding
voting securities (as defined in the Investment Company Act of 1940, as amended)
of the Growth Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed under seal by their duly authorized officers as of the date first
mentioned above.
NASL Financial Services, Inc.
By: /s/ William J. Atherton
---------------------------
William J. Atherton,
President
Founders Asset Management, Inc.
By: David L. Ray
------------
<PAGE> 1
EXHIBIT (10)(a)(vi)
-------------------
<PAGE> 2
North American Security Life Insurance Company
116 Huntington Avenue
Boston, Massachusetts 02116
(617) 266-6008
July 9, 1996
To Whom it may concern:
This opinion is written in reference to the shares of beneficial interest, $.01
par value (the "Shares") of the Growth Trust of NASL Series Trust, a
Massachusetts business trust (the "Trust"), to be offered and sold pursuant to a
Registration Statement on Form N-1A (registration no. 2-94157) (the
"Registration Statement") filed by the Trust pursuant to the Securities Act of
1933.
I have examined such records and documents and reviewed such questions of law as
I deemed necessary for purposes of this opinion.
1. The Trust has been duly recorded under the laws of the Commonwealth
of Massachusetts and is a validly existing Massachusetts business trust.
2. The Shares have been duly authorized and, when sold, issued and paid
for in the manner contemplated by the Registration Statement, will be legally
issued, fully paid and non-assessable.
I consent to the filing of this opinion with the Securities and Exchange
Commission as an exhibit to the Registration Statement.
Very truly yours,
Betsy Anne Seel
Betsy Anne Seel, Esq.
<PAGE> 1
EXHIBIT (10)(b)
---------------
<PAGE> 2
Jones & Blouch L.L.P.
Suite 405 West
1025 Thomas Jefferson Street, N.W.
Washington, D.C. 20007-0805
July 9, 1996
NASL
116 Huntington Avenue
Boston, MA 02116
Dear Sirs:
We hereby consent to the reference to this firm under the caption "Legal
Counsel" in the Statement of Additional Information included in Post-Effective
Amendment No. 33 under the Securities Act of 1993 and Amendment No. 34 under the
Investment Company Act of 1940 to the Registration Statement for NASL Series
Trust to be filed with the Securities and Exchange Commission, File No. 2-94157.
Very truly yours,
/s/ Jones & Blouch L.L.P.
------------------------------
Jones & Blouch L.L.P.
<PAGE> 1
EXHIBIT (11)
------------
<PAGE> 2
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We consent to the inclusion in this Post-Effective Amendment No. 33 under the
Securities Act of 1933 and Amendment No. 34 under the Investment Company Act of
1940 to the Registration Statement on Form N-1A (File No. 2-94157) of our report
dated February 15, 1996, on our audit of the financial statements and financial
highlights of NASL Series Trust which are included in the Registration
Statement. We also consent to the reference to our Firm under the caption
"Independent Accountants" in Part B of the Registration Statement.
Boston, Massachusetts
July 9, 1996
Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST ANNUAL REPORT DATED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
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<SERIES>
<NUMBER> 01
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<S> <C>
<PERIOD-TYPE> YEAR
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<NET-ASSETS> 988,800,205
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<NUMBER-OF-SHARES-SOLD> 15,461,830
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<ACCUMULATED-NII-PRIOR> 4,079,883
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<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST ANNUAL REPORT DATED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
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<SERIES>
<NUMBER> 02
<NAME> INVESTMENT QUALITY BOND TRUST
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<S> <C>
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<OTHER-ITEMS-ASSETS> 809
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<NUMBER-OF-SHARES-SOLD> 4,829,840
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<GROSS-EXPENSE> 902,846
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<PER-SHARE-DIVIDEND> .74
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<PER-SHARE-NAV-END> 12.32
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST ANNUAL REPORT DATED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 03
<NAME> MONEY MARKET TRUST
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
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<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 258,581,602
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<OTHER-ITEMS-LIABILITIES> 914,312
<TOTAL-LIABILITIES> 914,312
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<PAID-IN-CAPITAL-COMMON> 258,116,963
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<NET-ASSETS> 258,116,963
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<NUMBER-OF-SHARES-SOLD> 31,669,307
<NUMBER-OF-SHARES-REDEEMED> 34,968,839
<SHARES-REINVESTED> 1,443,847
<NET-CHANGE-IN-ASSETS> (18,556,843)
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<GROSS-ADVISORY-FEES> 1,318,573
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<GROSS-EXPENSE> 1,423,581
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<PER-SHARE-NAV-BEGIN> 10.00
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST ANNUAL REPORT DATED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 04
<NAME> GLOBAL EQUITY TRUST
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
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<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 581,007,795
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<OTHER-ITEMS-LIABILITIES> 62,379,070
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<PAID-IN-CAPITAL-COMMON> 594,157,053
<SHARES-COMMON-STOCK> 40,249,612
<SHARES-COMMON-PRIOR> 39,140,838
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<ACCUMULATED-NET-GAINS> (17,623,479)
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<ACCUM-APPREC-OR-DEPREC> 60,504,811
<NET-ASSETS> 648,182,638
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<GROSS-ADVISORY-FEES> 5,513,312
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<GROSS-EXPENSE> 6,453,250
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST ANNUAL REPORT DATED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 05
<NAME> GLOBAL GOVERNMENT BOND TRUST
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
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<OTHER-ITEMS-LIABILITIES> 64,132,670
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<PAID-IN-CAPITAL-COMMON> 210,172,142
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<ACCUMULATED-NET-GAINS> (7,654,732)
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<NET-ASSETS> 235,242,934
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<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST ANNUAL REPORT DATED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 06
<NAME> US GOVERNMENT SECURITIES TRUST
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<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> YEAR
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST ANNUAL REPORT DATED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 07
<NAME> CONSERVATIVE ASSET ALLOCATION TRUST
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST ANNUAL REPORT DATED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 08
<NAME> MODERATE ASSET ALLOCATION TRUST
<MULTIPLIER> 1
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST ANNUAL REPORT DATED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
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<PERIOD-TYPE> YEAR
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST ANNUAL REPORT DATED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 10
<NAME> GROWTH AND INCOME TRUST
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<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROMNASL SERIES
TRUST ANNUAL REPORT DATED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 11
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<PERIOD-TYPE> YEAR
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<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST ANNUAL REPORT DATED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 12
<NAME> VALUE EQUITY TRUST
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<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST ANNUAL REPORT DATED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 13
<NAME> STRATEGIC BOND TRUST
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<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST ANNUAL REPORT DATED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 14
<NAME> INTERNATIONAL GROWTH AND INCOME TRUST
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
NASL SERIES TRUST FINANCIAL STATEMENTS FOR THE PERIOD ENDED JUNE 15, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 1
<NAME> SMALL/MID CAP TRUST
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<NUMBER-OF-SHARES-REDEEMED> 66,727
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 81,101,530
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 102,833
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 121,917
<AVERAGE-NET-ASSETS> 36,440,929
<PER-SHARE-NAV-BEGIN> 12.50
<PER-SHARE-NII> .01
<PER-SHARE-GAIN-APPREC> .93
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.44
<EXPENSE-RATIO> 1.19
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFROMATION EXTRACTED FROM THE
NASL SERIES TRUST FINANCIAL STATEMENTS FOR THE PERIOD ENDED JUNE 15, 1996.
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000756913
<NAME> NASL SERIES TRUST
<SERIES>
<NUMBER> 1
<NAME> INTERNATIONAL SMALL CAP TRUST
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> MAR-04-1996
<PERIOD-END> JUN-15-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 39,594,091
<INVESTMENTS-AT-VALUE> 40,539,755
<RECEIVABLES> 42,827
<ASSETS-OTHER> 55
<OTHER-ITEMS-ASSETS> 483,070
<TOTAL-ASSETS> 41,065,707
<PAYABLE-FOR-SECURITIES> 1,481,831
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 25,912
<TOTAL-LIABILITIES> 1,507,743
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 38,397,900
<SHARES-COMMON-STOCK> 2,990,316
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 100,519
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 114,337
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 945,208
<NET-ASSETS> 39,557,964
<DIVIDEND-INCOME> 80,860
<INTEREST-INCOME> 93,674
<OTHER-INCOME> 0
<EXPENSES-NET> 74,015
<NET-INVESTMENT-INCOME> 100,519
<REALIZED-GAINS-CURRENT> 114,337
<APPREC-INCREASE-CURRENT> 945,208
<NET-CHANGE-FROM-OPS> 1,160,064
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,006,995
<NUMBER-OF-SHARES-REDEEMED> 16,679
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 38,397,900
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 54,604
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 74,015
<AVERAGE-NET-ASSETS> 17,591,320
<PER-SHARE-NAV-BEGIN> 12.50
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> .70
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.23
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
