<PAGE> 1
Registration No. 2-94157/811-4146
As filed with the Securities and Exchange Commission
on April 25, 1996
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM N-1A
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO.31
and
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 32
_________________________
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 APRIL 30, 1996 pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)
_____ 75 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 International Small Cap Trust,
Global Equity Trust; Pasadena Growth Trust;
Equity Trust; Value Equity 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 and
Transfer and Dividend Disbursing Agent)
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)
<PAGE> 3
19. 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 sixteen 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 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 AUTOMATIC ASSET ALLOCATION TRUSTS seek the highest potential total
return consistent with a specified level of risk tolerance -- conservative,
moderate or aggressive -- by investing primarily in the kinds of securities in
which the Equity, Investment Quality Bond, U.S. Government Securities and Money
Market Trusts may invest.
* 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 May 1, 1996.
<PAGE> 6
NASL SERIES TRUST
TABLE OF CONTENTS
<TABLE>
<S> <C>
SYNOPSIS .................................................. 3
FINANCIAL HIGHLIGHTS ...................................... 4
INVESTMENT OBJECTIVES AND POLICIES......................... 18
Small/Mid Cap Trust .................................... 19
International Small Cap Trust .......................... 20
Global Equity Trust .................................... 21
Pasadena Growth Trust .................................. 21
Equity Trust............................................ 22
Value Equity Trust ..................................... 22
Growth and Income Trust ................................ 22
International Growth and Income Trust .................. 23
Strategic Bond Trust ................................... 24
Global Government Bond Trust ........................... 26
Investment Quality Bond Trust .......................... 27
U.S. Government Securities Trust ....................... 28
Money Market Trust ..................................... 29
Automatic Asset Allocation Trusts ...................... 30
RISK FACTORS .............................................. 32
Investment Restrictions Generally ...................... 32
Additional Investment Restrictions on Borrowing and
Foreign Investing...................................... 33
High Yield Securities................................... 33
Corporate Debt Securities............................... 34
Foreign Sovereign Debt Securities ...................... 34
Foreign Securities...................................... 35
Warrants ............................................... 36
Lending Securities...................................... 36
When-Issued Securities ................................. 36
Repurchase Agreements and Reverse Repurchase Agreements. 37
Mortgage Dollar Rolls .................................. 37
Hedging and Other Strategic Transactions................ 37
Illiquid Securities .................................... 38
MANAGEMENT OF THE TRUST ................................... 38
Advisory Arrangements................................... 39
Subadvisory Arrangements................................ 40
Expenses ............................................... 45
Performance Data ....................................... 45
GENERAL INFORMATION ....................................... 46
Shares of the Trust .................................... 46
Taxes .................................................. 46
Dividends .............................................. 47
Purchase and Redemption of Shares ...................... 47
Custodian .............................................. 48
Appendix I - Debt Security Ratings ........................ 48
Appendix II - Strategic Bond Trust Debt Ratings............ 50
</TABLE>
______________________
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 sixteen such
portfolios: the Small/Mid Cap Trust, the International Small Cap Trust, the
Global Equity Trust, the Pasadena 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 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 sixteen 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 International Small Cap Trust. 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
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> 9
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> 10
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> 11
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> 12
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> 13
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> 14
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 $53,640
Ratio of operating expenses to
average net assets........................... 0.92% 0.91% 1.00%(A)
Ratio of net investment income to
average net assets........................... 8.76% 7.49% 6.56%(A)
Portfolio turnover rate........................ 181% 197% 356%(A)
- ----------
<FN>
* Commencement of operations.
(A) Annualized
</TABLE>
10
<PAGE> 15
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL GOVERNMENT BOND TRUST
-------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 3/18/88*
--------------------------------------------------------------- TO
1995 1994 1993 1992 1991 1990 1989 12/31/88
---- ---- ---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................................$ 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> 16
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> 17
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> 18
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> 19
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> 20
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> 21
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> 22
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.
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.
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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.
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").
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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 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."
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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 "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.
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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 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
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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
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
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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.
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
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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.
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
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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.
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
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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.
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.
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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."
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
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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 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 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.
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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. 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.
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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.
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
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
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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.
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.
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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 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.
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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 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.
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<PAGE> 43
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 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.
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:
PORTFOLIO
<TABLE>
<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%
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>
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<PAGE> 44
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.
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.
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.
Robert Stansky has been primarily responsible for the day-to-day
management of the Equity Trust since December 1991. 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.
Robert Stansky is presently the Portfolio Manager of the Fidelity Growth
Company Fund and the Fidelity Advisor Equity Portfolio: Growth. In addition,
Mr. Stansky has worked as an assistant on the Magellan Fund, managed both the
Emerging Growth Fund and the Fidelity Select Defense and Aerospace Fund. Mr.
Stansky has worked for Fidelity since 1983.
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 March 31, 1996 manages approximately $8.7 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 25 different countries, averaging 600 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.
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<PAGE> 45
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 March 31, 1996 are approximately $4.6 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.
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 March 27, 1996, GSAM and its affiliates managed a total of
approximately $58.5 billion of assets; approximately $39.4 billion in mutual
fund assets and approximately $19.1 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 December 31, 1995, Wellington Management
had investment management authority with respect to approximately $104.6
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, 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.
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<PAGE> 46
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 $179 billion (of which J.P.
Morgan advises over $5 billion) as of December 31, 1995. J.P. Morgan has
managed international securities for institutional investors since 1974. As of
December 31, 1995, the non-U.S. securities under J.P. Morgan's management was
approximately $42 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.
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, Assistant 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
eleven other institutional and investment company accounts that invest in
international securities constituting approximately $2.6 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 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 March 31, 1996, SBAM Limited, SBAM and their advisory affiliates had
investment advisory responsibility for approximately $14.3 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.
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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 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 December 31, 1995 had
approximately $4.8 billion under management, including $3 billion in mutual
fund accounts and $ 1.8 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 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 March 31, 1996, Founders had approximatelly $3.5 billion of assets under
management, including $2.8 billion in mutual fund accounts and $.7 billion in
other advisory accounts.
To facilitate the day-to-day investment management of 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
43
<PAGE> 48
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.
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.
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:
<TABLE>
<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> <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%
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%
</TABLE>
* 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.
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.)
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".
44
<PAGE> 49
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, 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.
45
<PAGE> 50
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 sixteen 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, 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 Fund 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.
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<PAGE> 51
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 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
47
<PAGE> 52
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, 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:
<TABLE>
<S> <C>
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.
</TABLE>
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.
48
<PAGE> 53
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")
Commercial Paper:
<TABLE>
<S> <C>
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 established
industries; (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.
</TABLE>
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> 54
APPENDIX II
STRATEGIC BOND TRUST DEBT RATING
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:
<TABLE>
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%
</TABLE>
Unrated as a Group 34%
U.S. Government Securities* 22%
100%
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
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:
<TABLE>
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%
</TABLE>
Unrated as a Group 0%
U.S. Government Securities* 59%
---
100%
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.
50
<PAGE> 55
PART B
<PAGE> 56
- --------------------------------------------------------------------------------
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 May 1, 1996 which may be
obtained from NASL Series Trust, 116 Huntington Avenue, Boston, Massachusetts,
02116.
The date of this Statement of Additional Information is May 1, 1996.
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<PAGE> 57
TABLE OF CONTENTS
<TABLE>
<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> 58
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> 59
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 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> 60
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> 61
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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<PAGE> 62
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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<PAGE> 63
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 International Small Cap, 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
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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.
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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.
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<PAGE> 70
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> 71
(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> 72
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
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 Small/Mid Cap and the
International Small Cap Trusts anticipate that their turnover rates generally
will not exceed 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:
<TABLE>
<S> <C> <C>
1994 1995
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%
</TABLE>
*Annualized
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> 73
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, Willian E. Simon Graduate School of Business
136 Knickerbocker Road Administration, University of Rochester
Pittsford, NY 14534
Age: 67
- ------------------------------------------------------------------------------------------------------------------------------------
William J. Atherton* President President and Director, North American Security Life Insurance Company;
116 Huntington Avenue Vice President, U.S. Annuities (Boston), Manulife, January 1, 1996 to
Boston, MA, 02116 date
Age: 56
- ------------------------------------------------------------------------------------------------------------------------------------
Charles L. Bardelis Trustee President and Executive Officer, Island Commuter Corp. (Marine
297 Dillingham Ave. Transport)
Falmouth, MA 02450
Age: 54
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel Hoar** Trustee Senior Mediator, Judicial Arbitration Mediation Services
73 Tremont Street "JAMS/Endispute," June 1, 1994 to date; Partner, Goodwin, Proctor and
Boston, MA 02109 Hoar , prior to June 1, 1994
Age: 67
- ------------------------------------------------------------------------------------------------------------------------------------
Brian L. Moore* Chairman of Exective vice President, Canadian Insurance Operations, The
5650 Yonge Street Trustees Manufacturers Life Insurance Company, January 1, 1996 to date;
North York, Ontario Canada, M2M 4G4 Chief Executive Officer, The North American Group, Oct. 1993 to December
Age: 51 31, 1995; Executive Vice President and Chief Financial Officer, Sept.
1988 to Oct. 1993, North American Life Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
Roobert J. Myers Trustee Consulting Actuary (self-employed), April 1983 to date; Chairman,
9610 Wire Avenue Commision on Railroad Retirement Reform, 1988 to 1990
Silver Springs, MD 20921
Age: 82
- ------------------------------------------------------------------------------------------------------------------------------------
John G. Vrysen Vice President Vice President, Chief Financial Officer, U.S. Operations, of Manulife,
116 Huntington Avenue January to date; Vice President and Actuary, January 1986 to date, North
Boston, MA 02116 American Security Life Insurance Company
====================================================================================================================================
</TABLE>
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<PAGE> 74
<TABLE>
====================================================================================================================================
<S> <C> <C>
James D. Gallagher Secretary Vice President, Legal Services, of Manulife, January to date; Vice
116 Huntington Avenue President, Secretary and Gneral Cousel, June 1994 to date, North
Boston, MA 02116 American Security Life Insurance Company; Vice President and Associate
Age: 41 General Counsel, 1990 to 1994, The Prudential Insurance Company of
America
- ------------------------------------------------------------------------------------------------------------------------------------
Richard C. Hirtle Vice President Vice President, Chief Financial Officer, Annuities, of Manulife, January
116 Huntington Avenue and Treasurer to date; Vice President, Treasurer and Chief Financial Officer, November
Boston, MA 02116 1988 to date, North American Security Life Insurance Comopany
====================================================================================================================================
</TABLE>
*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.
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 $14,000, 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>
NAMES OF PERSON, POSTION AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM FROM TRUST COMPLEX
TRUST FOR PRIOR FOR PRIOR FISCAL
FISCAL YEAR* 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
</TABLE>
*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 Security Life is the investment advisor.
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> 75
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.
The Founders Subadvisory Agreement and an amendment to the Advisory Agreement,
both to provide for the management of the 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 the related amendment to
the Advisory Agreement have been approved by the sole shareholder of 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:
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<PAGE> 76
PORTFOLIO
- -----------------------------------------------
<TABLE>
<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%
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 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:
<TABLE>
<S> <C> <C> <C>
PORTFOLIO 1995 1994 1993
- --------------------------------------------------------------------
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
</TABLE>
*For the period January 9, 1995 (commencement of operations) to December 31,
1995
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 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
21
<PAGE> 77
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.
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:
<TABLE>
<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%
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%
</TABLE>
*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.
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> 78
<TABLE>
<S> <C> <C> <C>
PORTFOLIO 1995 1994 1993
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
Intern'l 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
</TABLE>
*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.
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, and in the case of the Subadvisory Agreements, by the respective
Subadvisers. The Agreements will automatically terminate in the event of their
assignment.
23
<PAGE> 79
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. 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.
24
<PAGE> 80
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
</TABLE>
*For the period January 9, 1995 (commencement of operations) to December 31,
1995.
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:
YEAR ENDED DECEMBER 31, 1995
<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 .................... $ 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%
</TABLE>
* For the period January 9, 1995 (commencement of operations) to December
31, 1995.
25
<PAGE> 81
<TABLE>
YEAR ENDED DECEMBER 31, 1994
<CAPTION>
% 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>
YEAR ENDED DECEMBER 31, 1993
<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 ...... $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>
For the years ended December 31, 1995, 1994 and 1993, brokerage commissions
were paid to SALOMON BROTHERS INC by the portfolios as follows:
<TABLE>
YEAR ENDED DECEMBER 31, 1995
<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 ................. $ 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>
YEAR ENDED DECEMBER 31, 1994
<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 ................. $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> 82
<TABLE>
YEAR ENDED DECEMBER 31, 1993
<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 ...... $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>
For the year ended December 31, 1995, brokerage commissions were paid to J.P.
Morgan Securities by the portfolios as follows:
<TABLE>
YEAR ENDED DECEMBER 31, 1995
<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 .................... $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%
</TABLE>
*For the period January 9, 1995 (commencement of operations) to December 31,
1995.
<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%
</TABLE>
*For the period January 9, 1995 (commencement of operations) to December 31,
1995.
<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%
</TABLE>
*For the period January 9, 1995 (commencement of operations) to December 31,
1995.
27
<PAGE> 83
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> 84
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> 85
<TABLE>
TOTAL ANNUALIZED RETURN
==================================================================================================
<CAPTION>
Since Incerption or
10 Years,
whochever is
One Year Ended Five Years Ended shorter through
Trust 12/31/95 12/31/95 12/31/95 Date First Available
- --------------------------------------------------------------------------------------------------
<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
<FN>
* Aggregate total return from January 9, 1995 (inception date).
** 10 Years
</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 sixteen series of
shares: the Small/Mid Cap, the International Small Cap, the Global Equity
Trust, the Pasadena 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
30
<PAGE> 86
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 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.
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
31
<PAGE> 87
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 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> 88
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> 89
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> 90
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> 91
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> 92
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> 93
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> 94
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> 95
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> 96
NASL SERIES TRUST
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> 97
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> 98
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> 99
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> 100
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> 101
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> 102
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> 103
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> 104
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> 105
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 $53,640
Ratio of operating expenses to
average net assets........................... 0.92% 0.91% 1.00%(A)
Ratio of net investment income to
average net assets........................... 8.76% 7.49% 6.56%(A)
Portfolio turnover rate........................ 181% 197% 356%(A)
- ----------
<FN>
* Commencement of operations.
(A) Annualized
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE> 106
NASL SERIES TRUST
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL GOVERNMENT BOND TRUST
-------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 3/18/88*
--------------------------------------------------------------- TO
1995 1994 1993 1992 1991 1990 1989 12/31/88
---- ---- ---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................................$ 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> 107
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> 108
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> 109
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> 110
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> 111
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> 112
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> 113
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> 114
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> 115
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> 116
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> 117
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> 118
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> 119
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> 120
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> 121
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> 122
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> 123
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> 124
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> 125
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> 126
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> 127
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> 128
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> 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> <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> 130
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> 131
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> 132
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> 133
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> 134
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> 135
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> 136
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> 137
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> 138
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> 139
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
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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>
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
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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
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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> 145
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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
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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
<PAGE> 150
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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 pad of the financial statements.
65
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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>
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
<PAGE> 157
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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
<PAGE> 159
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>
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
<PAGE> 160
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>
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> 161
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 pad of the financial statements.
74
<PAGE> 162
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> 163
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> 164
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> 165
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> 166
<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> 167
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> 168
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> 169
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> 170
<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> 171
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> 172
PART C. OTHER INFORMATION
<PAGE> 173
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
--------- ----------
(1) Audited Financials at December 31, 1995 - Parts A and B.
(2) 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
(b) Exhibits:
---------
(1)(a) Agreement and Declaration of Trust dated September 29, 1988 -
Filed herewith.
(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 - Filed herewith.
(1)(c) Establishment and Designation of Additional Series of Shares of
Beneficial Interest - Conservative, Moderate and Aggressive Asset
Allocation Trusts dated May 1, 1989 - Filed herewith.
(1)(d) Establishment and Designation of Additional Series of Shares of
Beneficial Interest - Growth & Income Trust dated February 1, 1991
- Filed herewith.
(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 - Filed herewith.
(1)(f) Establishment and Designation of Additional Series of Shares of
Beneficial Interest - Redesignation of the Series of Shares known
as the "U.S.
<PAGE> 174
Government Bond Trust" to the "U.S. Government Securities Trust"
dated June 14, 1991 - Filed herewith.
(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 - Filed herewith.
(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 - Filed herewith.
(1)(i) Establishment and Designation of Additional Series of Shares of
Beneficial Interest - International Growth and Income Trust dated
December 28, 1994 - Filed herewith.
(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.
(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.
<PAGE> 175
(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-e ffective 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.
(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)(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.
<PAGE> 176
(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 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.
<PAGE> 177
(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.
(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.
(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)(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.
<PAGE> 178
(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.
(16)(e) Additional Schedule of Computations - general formula - Filed
herewith.
(17) Financial Data Schedule for financial statements for the period
ended December 31, 1995 - filed herewith.
(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.
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> 179
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 (100%)
(a) Wood Logan Associate Inc. - Connecticut (85%)
(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%)
16. Balmoral Developments Inc. - Canada (100%)
<PAGE> 180
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 Altamir
Investments Services Inc. and 5% by Altamira Financial Services Inc.)
(b) Altamira (Alberta) Ltd. - Alberta (100%)
(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%)
<PAGE> 181
(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) Family Financial Services Limited - Ontario (100%)
i. 742166 Ontario Inc. - Ontario (100%)
ii. Family Trust Corporation - Ontario (100%)
A. Family Financial Mortgage Corporation - Ontario (100%)
B. Family Realty Firstcorp Limited - Ontario (100%)
C. Thos. N. Shea Investment Corporation Limited - Ontario (100%)
(b) 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%)
38. NAL Resources Limited - Alberta (100%)
39. Manulife Reinsurance Corporation (U.S.A.) - Michigan (100%)
(a) Manulife Reinsurance Limited - Bermuda (100%)
<PAGE> 182
(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. The Manulife Property Management of Washington, D.C., Inc. - Washington,
D.C. (100%)
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
As of April 15, 1996 the number of holders of the shares of beneficial
interest of each series of shares of the Registrant is as follows:
<CAPTION>
Title of Series Number of Record Holders
- ------------------------------------- ------------------------
<S> <C>
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
Shares of Beneficial Interest 3
Money Market Trust Shares of
Beneficial Interest 2
Conservative Asset Allocation Trust
</TABLE>
<PAGE> 183
<TABLE>
<S> <C>
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
</TABLE>
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.
ITEM 29. PRINCIPAL UNDERWRITERS
Not applicable.
<PAGE> 184
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
International Small Cap Trust, 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.
ITEM 32. UNDERTAKINGS
previously supplied
<PAGE> 185
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 Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
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 24th day of April, 1996.
NASL SERIES TRUST
(Registrant)
By: /s/ William J. Atherton
------------------------------
William J. Atherton, President
Attest:
/s/ Kimberly Skidmore
--------------------------------------
Kimberly Skidmore, Assistant Secretary
<PAGE> 186
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.
<TABLE>
<S> <C> <C>
* Trustee April 24, 1996
--------------------- --------------
Don B. Allen (Date)
* President- April 24, 1996
--------------------- (Chief Executive Officer) --------------
William J. Atherton (Date)
* Trustee April 24, 1996
--------------------- --------------
Charles L. Bardelis (Date)
* Trustee April 24, 1996
--------------------- --------------
Samuel Hoar (Date)
* Trustee April 24, 1996
--------------------- --------------
Brian L. Moore (Date)
* Trustee April 24, 1996
--------------------- --------------
Robert J. Myers (Date)
* Vice President and April 24, 1996
--------------------- Treasurer (Prin- --------------
Richard C. Hirtle cipal Financial and (Date)
Accounting Officer)
*By: /s/ James D. Gallagher April 24, 1996
- --------------------------- --------------
James D. Gallagher (Date)
Attorney-in-Fact
Pursuant to Powers
of Attorney
</TABLE>
<PAGE> 187
EXHIBITS
<PAGE> 188
<TABLE>
EXHIBIT INDEX
<CAPTION>
NO. DESCRIPTION
- --- -----------
<S> <C>
(1)(a) Declaration of Trust
(1)(b) Establishment and Designation of Additional Series of Shares
(1)(c) Establishment and Designation of Additional Series of Shares
(1)(d) Establishment and Designation of Additional Series of Shares
(1)(e) Establishment and Designation of Additional Series of Shares
(1)(f) Establishment and Designation of Additional Series of Shares
(1)(g) Establishment and Designation of Additional Series of Shares
(1)(h) Establishment and Designation of Additional Series of Shares
(1)(i) Establishment and Designation of Additional Series of Shares
(b)(10)(b) Consent of Jones and Blouch
(b)(11) Consent of Coopers & Lybrand
(b)(13) Schedule of Computation
(b)(17) Financial Data Schedule
</TABLE>
<PAGE> 1
Exhibit (1)(a)
<PAGE> 2
NASL SERIES TRUST
AGREEMENT AND DECLARATION OF TRUST
<PAGE> 3
NASL SERIES TRUST
AGREEMENT AND DECLARATION OF TRUST
Table of Contents
-----------------
<TABLE>
<S> <C> <C>
ARTICLE I Name and Definitions
1.1 Name...................................... 1
1.2 Definitions............................... 1
ARTICLE II Purpose of Trust................................ 2
ARTICLE III The Trustees
3.1 Number, Designation, Election,
Term, etc. ............................... 3
(a) Initial Trustee
(b) Number
(c) Election and Term
(d) Resignation and Retirement
(e) Removal
(f) Vacancies
(g) Effect of Death, Resignation, etc.
(h) No Accounting
(i) Meetings
3.2 Powers of Trustees......................... 5
(a) By-Laws
(b) Series of Shares
(c) Officers, Agents, etc.
(d) Committees
(e) Advisory Boards
(f) Advice and Custody
(g) Transfer and Dividend Agents
(h) Distribution
(i) Record Dates
(j) Compensation
(k) Delegation
(l) Investments
(m) Disposition of Assets
(n) Ownership Powers
(o) Subscription
(p) Form of Holding
</TABLE>
<PAGE> 4
ii
<TABLE>
<S> <C> <C> <C>
(q) Reorganization
(r) Voting Trusts, etc.
(s) Compromise
(t) Partnerships
(u) Borrowing and Security
(v) Guarantees, etc.
(w) Indemnification
(x) Insurance
(y) Pensions, etc.
(z) Minimum Total Investment
3.3 Certain Contracts............................ 8
(a) Advisory
(b) Administration
(c) Distribution
(d) Custodian and Depository
(e) Transfer and Dividend Disbursing Agency
(f) Shareholder Servicing
(g) Accounting
3.4 Parties to Contracts....................... 10
3.5 Payment of Trust Expenses and
Compensation of Trustees................... 11
3.6 Ownership of Assets of the Trust........... 11
ARTICLE IV Shares
4.1 Description of Shares...................... 11
(a) Series of Shares
(b) Classes of Shares
(c) Number and Issuance of Shares
4.2 Establishment and Designation of
Series of Shares........................... 13
(a) Assets Belonging to Series of Shares
(b) Liabilities Belonging to Series of Shares
(c) Income and Capital
(d) Dividends and Distributions
(e) Liquidation
(f) Voting
(g) Redemption by Shareholder
(h) Redemption by Trust
(i) Net Asset Value
(j) Transfer
</TABLE>
<PAGE> 5
iii
<TABLE>
<S> <C> <C> <C>
(k) Equality
(l) Fractions
(m) Conversion and Exchange Rights
4.3 Ownership of Shares..................... 18
4.4 Investments in the Trust................ 19
4.5 No Preemptive Rights.................... 19
4.6 Trust Only.............................. 19
4.7 Status of Shares and Limitation of
Personal Liability...................... 19
ARTICLE V Shareholders' Voting Powers and Meetings
5.1 Voting Powers........................... 20
5.2 Proxies................................. 20
5.3 Meetings................................ 21
5.4 Place of Meetings....................... 21
5.5 Record Dates............................ 21
5.6 Quorum and Required Vote................ 22
5.7 Action by Written Consent............... 22
5.8 Additional Provisions................... 22
ARTICLE VI Limitation of Liability; Indemnification
6.1 Trustees, Shareholders, etc. Not
Personally Liable; Notice............... 22
6.2 Trustee's Good Faith Action; Expert
Advice; No Bond or Surety............... 23
6.3 Indemnification of Shareholders......... 23
6.4 Indemnification of Trustees,
Officers, etc. ......................... 24
</TABLE>
<PAGE> 6
iv
<TABLE>
<S> <C> <C> <C>
6.5 Exceptions to Indemnification............. 24
6.6 Indemnification Not Exclusive, etc. ...... 25
6.7 Liability of Third Persons Dealing
with Trustee.............................. 25
ARTICLE VII Miscellaneous
7.1 Duration and Termination of Trust......... 25
7.2 Reorganization............................ 25
7.3 Amendments................................ 26
7.4 Resident Agent............................ 27
7.5 Filing of Copies; References; Headings.... 27
7.6 Applicable Law............................ 28
7.7 Reliance by Third Parties................. 28
7.8 Provisions in Conflict with Law
or Regulations............................ 28
</TABLE>
<PAGE> 7
NASL SERIES TRUST
_______________________
AGREEMENT AND DECLARATION OF TRUST
_______________________
AGREEMENT AND DECLARATION OF TRUST, made at Boston, Massachusetts, this
29th day of September, 1988, by the Trustees hereunder and by the holders of
shares of beneficial interest to be issued hereunder as hereinafter provided.
W I T N E S S E T H
WHEREAS, this Trust has been formed to carry on the business of an
investment company and exercise all powers necessary and appropriate to the
conduct of such operations;
WHEREAS, this Trust is authorized to issue its shares of beneficial
interest in separate series, all in accordance with the provisions hereinafter
set forth; and
WHEREAS, the Trustees have agreed to manage all property coming into their
hands as trustees of a Massachusetts voluntary association with transferable
shares, in accordance with the provisions hereinafter set forth;
NOW, THEREFORE, the Trustees hereby declare that they will hold all cash,
securities and other assets which they may from time to time acquire in any
manner as Trustees hereunder IN TRUST to manage and dispose of the same upon
the following terms and conditions for the benefit of the holders from time to
time of shares of beneficial interest in this Trust or in the separate series
of shares created hereunder as hereinafter set forth.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1 NAME. This Trust shall be known as "NASL Series Trust," and
the Trustees shall conduct the business of the Trust, have all documents
executed and sue or be sued under that name or any other name or names as they
may from time to time determine.
Section 1.2 DEFINITIONS. Whenever used herein, unless otherwise required
by the context or specifically provided:
(a) The "Trust" refers to the Massachusetts business trust established by
this Declaration of Trust, as amended from time to time, inclusive of each and
every Series of Shares established and designated hereunder.
(b) "Trustees" refers to the Trustees of the Trust named herein so long
as they shall continue in office and to all other individuals who may from time
to time be duly appointed or elected, qualified and
<PAGE> 8
2
serving as Trustees in accordance with the provisions hereof, and reference
herein to a Trustee or the Trustees shall refer to each such individual in his
or her capacity as a trustee hereunder.
(c) "Shares" refers to the transferable units of interest into which the
beneficial interest in the Trust and each Series of Shares (as the context may
require) shall be divided from time to time, and includes (i) fractions of
Shares as well as whole Shares and (ii) each separate class of Shares into
which each Series of Shares shall be divided from time to time.
(d) "Series of Shares" refers to series of Shares established and
designated under or in accordance with the provisions of Article IV.
(e) "Shareholder" means a record owner of Shares.
(f) The "1940 Act" refers to the Investment Company Act of 1940 and the
Rules and Regulations thereunder, all as amended from time to time.
(g) "Declaration of Trust" shall mean this Agreement and Declaration of
Trust as amended or restated from time to time.
(h) "By-Laws" shall mean the By-Laws of the Trust as amended or restated
from time to time.
(i) "Affiliated Person," "Assignment," "Commission," "Interested Person,"
"Majority Shareholder Vote" (the 67% or 50% requirement of the third sentence
of Section 2(a) (42) of the 1940 Act, whichever may be applicable) and
"Principal Underwriter" shall have the meanings given them in the 1940 Act.
(j) "Trust Property" shall mean as of any particular time any and all
property, real or personal, tangible or intangible, which at such time is owned
or held by or for the account of the Trust or the Trustees.
ARTICLE II
PURPOSE OF TRUST
The purpose of the Trust is to operate as an investment company and to
offer Shareholders one or more investment programs primarily in securities,
debt instruments and other instruments and rights of a financial character.
ARTICLE III
THE TRUSTEES
Section 3.1 NUMBER, DESIGNATION, ELECTION, TERM, ETC.
(a) INITIAL TRUSTEE. Upon the execution by him of this Declaration of
Trust or a counterpart hereof or some other writing in which he accepts such
Trusteeship and agrees to the provisions hereof, J. Jacques
<PAGE> 9
3
Deschenes, whose address is 116 Huntington Avenue, Boston, Massachusetts 02116,
shall become a Trustee of the Trust.
(b) NUMBER. The Trustees serving as such, whether named above or
hereafter becoming a Trustee, may increase or decrease the number of Trustees
to a number other than the number theretofore determined; provided that after
the initial meeting of Trustees, the number may not be decreased to less than
three. No decrease in the number of Trustees shall have the effect of removing
any Trustee from office prior to the expiration of his term, but the number of
Trustees may be decreased in conjunction with the removal of a Trustee pursuant
to subsection (e) of this Section 3.1.
(c) ELECTION AND TERM. The Trustees shall be elected by the Shareholders
of the Trust at the first meeting of Shareholders. Each Trustee, whether named
above or hereafter becoming a Trustee, shall serve as a Trustee of the Trust
during the lifetime of this Trust and until its termination as hereinafter
provided except as such Trustee sooner dies, resigns, retires or is removed.
The Trustees may elect successor Trustees and may, pursuant to Section 3.1(f)
hereof, appoint Trustees to fill vacancies. Trustees need not own Shares.
(d) RESIGNATION AND RETIREMENT. Any Trustee may resign his or her trust
or retire as a Trustee, by written instrument signed by him or her and
delivered to the other Trustees or to the Chairman, if any, the President or
the Secretary of the Trust, and such resignation or retirement shall take
effect upon such delivery or upon such later date as is specified in such
instrument.
(e) REMOVAL. Any Trustee may be removed with or without cause at any
time: (i) by action of two-thirds of the Trustees prior to such removal; or
(ii) by vote of Shareholders holding not less than two-thirds of the Shares
then outstanding, cast in person or by proxy at any meeting called for the
purpose. Any such removal shall be effective as of the date of such action or
such later date as may be specified in such action.
(f) VACANCIES. Any vacancy or anticipated vacancy resulting from any
reason, including without limitation the death, resignation, retirement or
removal of any of the Trustees, or resulting from an increase in the number of
Trustees by the other Trustees may be filled by action of a majority of the
remaining Trustees through the appointment in writing of such other person as
such remaining Trustees in their discretion shall determine. Until a vacancy
is filled, the Trustees in office, regardless of their number, shall have all
the powers granted to the Trustees and shall discharge all the duties imposed
on the Trustees by this Declaration of Trust. An appointment as Trustee shall
be effective upon the written acceptance of the person named therein to serve
as a Trustee and agreement by such person to be bound by the provisions of this
Declaration of Trust, except that any such appointment in anticipation of a
vacancy to occur by reason of retirement, resignation, or increase in number of
Trustees to be effective at a later date shall become effective only at or
after the effective date of said retirement, resignation or increase in number
of Trustees. As soon as any Trustee so appointed shall have accepted such
appointment and shall have agreed in writing to be bound by this Declaration of
Trust and the appointment is effective, the Trust estate shall vest in the new
Trustee, together with the continuing Trustees, without any further act or
conveyance.
(g) EFFECT OF DEATH, RESIGNATION, ETC. The death, resignation,
retirement, removal, or incapacity of the Trustees, or any one of them, shall
not operate to annul or terminate the Trust or to revoke or terminate any
existing agency or contract created or entered into pursuant to the terms of
this Declaration of Trust. When a Trustee ceases to be a Trustee, his right,
title and interest in the assets of the Trust shall automatically cease and
vest in the remaining Trustees. Such cessation and vesting shall be effective
whether or not conveyancing documents have been executed and delivered, but the
individual (or his legal representative) shall execute and deliver such
documents as the remaining Trustees shall require for the purpose of recording
the conveyance to the remaining Trustees or the Trust of any Trust Property
held in the name of that individual.
<PAGE> 10
4
(h) NO ACCOUNTING. Except to the extent required by law or under
circumstances which would justify his removal for cause, no person ceasing to
be a Trustee as a result of his death, resignation, retirement, removal or
incapacity (nor the estate of any such person) shall be required to make an
accounting to the Shareholders or remaining Trustees upon such cessation.
(i) MEETINGS. Regular meetings of the Trustees may be held without call
or notice at a time and place fixed by the By-Laws or by resolution of the
Trustees. Special meetings of the Trustees shall be held from time to time
upon the call of the Chairman, if any, the President, the Secretary or any two
Trustees. Notice of any special meeting shall be mailed or otherwise given as
specified in the By-Laws. A quorum for all meetings of the Trustees shall be a
majority of the Trustees then in office. Unless provided otherwise in this
Declaration of Trust or the By-Laws, any action of the Trustees may be taken at
a meeting by vote of a majority of the Trustees present (a quorum being
present).
All or any one or more Trustees may participate in a meeting of the
Trustees by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other
and participation in a meeting pursuant to such communications systems shall
constitute presence in person at such meeting.
Unless provided otherwise in this Declaration of Trust, any action that
may be taken at a meeting by the Trustees may be taken without a meeting by
written consents of a majority of the Trustees then in office.
Section 3.2 POWERS OF TRUSTEES. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be managed by the
Trustees, and they shall have all powers necessary or convenient to carry out
that responsibility and the purpose of the Trust. The Trustees shall have
power to conduct the business of the Trust and carry on its operations in any
and all of its branches and maintain offices both within and without The
Commonwealth of Massachusetts, in any and all states of the United States of
America, in the District of Columbia, in any and all foreign countries and in
any and all commonwealths, territories, dependencies, colonies, possessions,
agencies or instrumentalities of the United States of America and of foreign
governments, and to do all such other things and execute all such instruments
as they deem necessary, proper or desirable in order to promote the interests
of the Trust although such things are not herein specifically mentioned. The
Trustees shall not in any way be bound or limited by any present or future law
or custom in regard to investments by trustees. Any determination as to what
is in the interests of the Trust made by the Trustees in good faith shall be
conclusive. In construing the provisions of this Declaration of Trust, the
presumption shall be in favor of a grant of power to the Trustees. The
Trustees will not be required to obtain any court order to deal with trust
property.
Without limiting the foregoing, the Trustees may:
(a) BY-LAWS. Adopt By-Laws, not inconsistent with this Declaration of
Trust, providing for the conduct of the business and affairs of the Trust and
may amend and repeal them to the extent that such By-Laws do not reserve that
right to the Shareholders;
(b) SERIES OF SHARES. From time to time in accordance with the
provisions hereof establish Series of Shares, each such Series of Shares to
operate as a separate investment medium; allocate assets, liabilities and
expenses of the Trust to a particular Series of Shares or apportion the same
among two or more Series of Shares provided that any liabilities or expenses
incurred or arising in connection with a particular Series of Shares, as
determined by the Trustees, shall be payable solely out of the assets of that
Series of Shares;
<PAGE> 11
5
(c) OFFICERS, AGENTS, ETC. As they consider appropriate, elect and
remove officers and appoint and terminate agents and consultants and hire and
terminate employees, any one or more of the foregoing of whom may be a Trustee,
and may provide for the compensation of all of the foregoing;
(d) COMMITTEES. Appoint from their own number, and terminate, any one or
more committees consisting of two or more Trustees, including without implied
limitation an executive committee, which may, when the Trustees are not in
session, exercise some or all of the power and authority of the Trustees as the
Trustees may determine; notice, quorum, voting and other procedures for each
committee shall be as determined by the Trustees or, in the absence of such
determination, shall be the same as the procedures that apply to meetings and
other proceedings of the Trustees;
(e) ADVISORY BOARDS. Appoint one or more advisory boards for the Trust
or for one or more Series of Shares, the members of each of which shall not be
Trustees and need not be Shareholders;
(f) ADVICE AND CUSTODY. Employ one or more advisers, administrators,
depositories and custodians and may authorize any depository or custodian to
employ domestic and foreign subcustodians or agents and to deposit all or any
part of such assets in one or more domestic and foreign systems for the central
handling of securities;
(g) TRANSFER AND DIVIDEND AGENTS. Retain transfer, dividend, accounting
or Shareholder servicing agents or any of the foregoing;
(h) DISTRIBUTION. Provide for the distribution of Shares by the Trust
through one or more distributors, principal underwriters or otherwise;
(i) RECORD DATES. Set record dates or times for the determination of
Shareholders or various of them with respect to various matters;
(j) COMPENSATION. Compensate or provide for the compensation of the
Trustees, officers, advisers, administrators, custodians, other agents,
consultants and employees of the Trust or the Trustees on such terms as they
may deem appropriate;
(k) DELEGATION. In general, delegate to any officer of the Trust, to any
committee of the Trustees and to any employee, adviser, administrator,
distributor, depository, custodian, transfer and dividend disbursing agent, or
any other agent or consultant of the Trust such authority, powers, functions
and duties as they consider desirable or appropriate for the conduct of the
business and affairs of the Trust, including without implied limitation the
power and authority to act in the name of the Trust and of the Trustees, to
sign documents and to act as attorney-in-fact for the Trustees;
(l) INVESTMENTS. Invest and reinvest cash and other property, and hold
cash or other property univested;
(m) DISPOSITION OF ASSETS. Sell, exchange, lend, pledge, mortgage,
hypothecate, write options on and lease any or all of the assets of the Trust;
(n) OWNERSHIP POWERS. Vote or give assent, or exercise any rights of
ownership with respect to stock or other securities, including without
limitation debt instruments, or other property; and execute and deliver proxies
or powers of attorney to such person or persons as the Trustees shall deem
proper, granting to such
<PAGE> 12
6
person or persons such power and discretion with relation to securities or
other property as the Trustees shall deem proper;
(o) SUBSCRIPTION. Exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of securities;
(p) FORM OF HOLDING. Hold any security or other property in a form not
indicating any trust, whether in bearer, unregistered or other negotiable form,
or in the name of the Trustees or of the Trust or of any Series of Shares or in
the name of a custodian, subcustodian or other depository or a nominee or
nominees or otherwise;
(q) REORGANIZATION, ETC. Consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or issuer, any
security of which is or was held in the Trust; consent to any contract, lease,
mortgage, purchase or sale of property by such corporation or issuer; and pay
calls or subscriptions with respect to any security held in the Trust;
(r) VOTING TRUSTS, ETC. Join with other holders of any securities in
acting through a committee, depository, voting trustee or otherwise, and in
that connection deposit any security with, or transfer any security to, any
such committee, depository or trustee, and delegate to them such power and
authority with relation to any security (whether or not so deposited or
transferred) as the Trustees shall deem proper, and agree to pay, and pay, such
portion of the expenses and compensation of such committee, depository or
trustee as the Trustees shall deem proper;
(s) COMPROMISE. Compromise, prosecute, defend, arbitrate or otherwise
adjust any claims, actions, suits, proceedings, or demands in favor of or
against the Trust or any Series of Shares or any matter in controversy,
including but not limited to claims for taxes;
(t) PARTNERSHIPS, ETC. Enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(u) BORROWING AND SECURITY. Borrow funds and mortgage and pledge the
assets of the Trust or any part thereof to secure obligations arising in
connection with such borrowing;
(v) GUARANTEES, ETC. Endorse or guarantee the payment of any notes or
other obligations of any person; make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof; and mortgage and pledge the
Trust Property or any part thereof to secure any of or all such obligations;
(w) INDEMNIFICATION. To the extent permitted by law, provide for the
indemnification out of the assets of the Trust of any person with whom the
Trust has dealings, including any investment adviser, administrator, transfer
agent, distributor, principal underwriter and selected dealers to such extent
as the Trustees shall determine;
(x) INSURANCE. Purchase and pay for entirely out of Trust Property such
insurance as they may deem necessary or appropriate for the conduct of the
business, including, without limitation, insurance policies insuring the assets
of the Trust and payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, consultants, investment advisers, managers,
administrators, distributors, principal underwriters, or independent
contractors, or any thereof (or any person connected therewith), of the Trust
individually against all claims and liabilities of every nature arising by
reason of holding or having held any such office or position, or by reason of
any action
<PAGE> 13
7
alleged to have been taken or omitted by any such person in any such capacity,
including any action taken or omitted that may be determined to constitute
negligence, whether or not the Trust would have the power to indemnify such
person against such liability;
(y) PENSIONS, ETC. Pay pensions for faithful service, as deemed
appropriate by the Trustees, and adopt, establish and carry out pension,
profit-sharing, share bonus, share purchase, savings, thrift and other
retirement, incentive and benefit plans, trusts and provisions, including the
purchasing of life insurance and annuity contracts as a means of providing such
retirement and other benefits, for any or all of the Trustees, officers,
employees and agents of the Trust; and
(z) MINIMUM TOTAL INVESTMENT. Establish, from time to time, a minimum
total investment for Shareholders of any Series of Shares, and require
redemption of the Shares of any Shareholders whose investment is less than such
minimum.
Section 3.3 CERTAIN CONTRACTS. Notwithstanding any limitations of any
present or future law or custom in regard to delegation of powers by trustees
generally, the Trustees may, at any time and from time to time and without
limiting the generality of their power and authority otherwise set forth
herein, enter into one or more contracts with any one or more corporations,
trusts, associations, partnerships, limited partnerships, other types of
organizations, and individuals, including North American Life Assurance Company
and its affiliates ("Contracting Party"), to provide for the performance and
assumption of services, duties and responsibilities to, for or on behalf of the
Trust, with respect to the entire Trust or any Series of Shares, or on behalf
of the Trustees, including but not limited to those set forth in paragraphs (a)
to (g) below, as the Trustees may determine appropriate.
(a) ADVISORY. Subject to the general supervision of the Trustees and in
conformity with the stated policy of the Trustees with respect to the
investments of the Trust or of the assets belonging to any Series of Shares, to
manage such investments and assets, make investment decisions with respect
thereto, furnish statistical and research facilities and services, and to place
purchase and sale orders for portfolio transactions relating to such
investments and assets. The Trustees may authorize the investment adviser to
employ one or more subadvisers, from time to time, to perform such of the acts
and services of the investment adviser, and upon such terms and conditions, as
may be agreed upon between the investment adviser and subadviser;
(b) ADMINISTRATION. Subject to the general supervision of the Trustees
and in conformity with any policies of the Trustees with respect to the
operations of the Trust and each Series of Shares, to supervise all or any part
of the operations of the Trust and each Series of Shares, and to provide all or
any part of the administrative and clerical personnel, office space and office
equipment and services appropriate for the efficient administration and
operations of the Trust and each Series of Shares;
(c) DISTRIBUTION. To distribute the Shares of the Trust and each Series
of Shares, to be principal underwriter of such Shares, and to act as agent of
the Trust and each Series of Shares in the sale of Shares and the acceptance or
rejection of orders for the purchase of Shares;
(d) CUSTODIAN AND DEPOSITORY. To act as a depository for and to maintain
custody of property of the Trust and each Series of Shares and accounting
records in connection therewith;
(e) TRANSFER AND DIVIDEND DISBURSING AGENCY. To maintain records of the
ownership of outstanding Shares, the issuance and redemption and the transfer
thereof, and to disburse any dividends declared by the Trustees and in
accordance with the policies of the Trustees and the instructions of any
particular Shareholder to reinvest any such dividends;
<PAGE> 14
8
(f) SHAREHOLDER SERVICING. To provide service with respect to the
relationship of the Trust and its Shareholders, records with respect to
Shareholders and their Shares, and similar matters; and
(g) ACCOUNTING. To handle all or any part of the accounting
responsibilities, whether with respect to the Trust Property, Shareholders or
otherwise.
Section 3.4 PARTIES TO CONTRACTS. The same person may be the Contracting
Party for some or all of the services, duties and responsibilities to, for and
of the Trust and the Trustees, and the contracts with respect thereto may
contain such terms interpretive of or in addition to the delineation of the
services, duties and responsibilities provided for, including provisions
relating to the standard duty of and the rights to indemnification of the
Contracting Party and others, as the Trustees may determine. Nothing herein
shall preclude, prevent or limit the Trust or a Contracting Party from entering
into subcontractual arrangements relative to any of the matters referred to in
Sections 3.3(a) through (g) hereof.
The fact that:
(a) any of the Shareholders, Trustees, or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager, adviser,
principal underwriter or distributor or agent of or for any Contracting Party,
or of or for any parent or affiliate of any Contracting Party or that the
Contracting Party or any parent or affiliate thereof is a Shareholder or has an
interest in the Trust or any Series of Shares, or that
(b) any Contracting Party may have a contract providing for the rendering
of any similar services to one or more other corporations, trusts,
associations, partnerships, limited partnerships or other organizations, or
have other business or interests, shall not affect the validity of any contract
for the performance and assumption of services, duties and responsibilities to,
for or of the Trust or any Series of Shares or the Trustees or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust, any Series of
Shares or Shareholders, provided that in the case of any relationship or
interest referred to in the preceding clause (a) on the part of any Trustee or
officer of the Trust either:
(c) the material facts as to such relationship or interest have been
disclosed to or are known by the Trustees not having any such relationship or
interest and the contract involved is approved in good faith by a majority of
such Trustees not having any such relationship or interest (even though such
unrelated or disinterested Trustees are less than a quorum of all the
Trustees),
(d) the material facts as to such relationship or interest and as to the
contract have been disclosed to or are known by the Shareholders entitled to
vote thereon and the contract involved is specifically approved in good faith
by vote of the Shareholders, or
(e) the specific contract involved is fair to the Trust as of the time it
is authorized, approved or ratified by the Trustees or by the Shareholders.
Section 3.5 PAYMENT OF TRUST EXPENSES AND COMPENSATION OF TRUSTEES. The
Trustees are authorized to pay or cause to be paid out of the assets of the
Trust or any Series of Shares and to charge or allocate the same to, between or
among such one or more of the Series of Shares that may be established and
designated pursuant to Article IV, as the Trustees deem fair, all expenses,
fees, charges, taxes and liabilities incurred or
<PAGE> 15
9
arising in connection with the Trust or any Series of Shares, or in connection
with the management thereof, including, but not limited to, the Trustees'
compensation and such expenses and charges for the services of the Trust's
officers, employees, investment adviser, administrator, distributor, principal
underwriter, auditor, counsel, depository, custodian, transfer agent, dividend
disbursing agent, accounting agent, Shareholder servicing agent, and such other
agents, consultants, and independent contractors and such other expenses and
charges as the Trustees may deem necessary or proper to incur; provided,
however, that all expenses, fees, charges, taxes and liabilities incurred or
arising in connection with a particular Series of Shares, as determined by the
Trustees, shall be payable solely out of the assets of that Series of Shares.
Without limiting the generality of any other provision hereof, the Trustees
shall be entitled to reasonable compensation from the Trust for their services
as Trustees and may fix the amount of such compensation.
Section 3.6 OWNERSHIP OF ASSETS OF THE TRUST. Title to all of the assets
of each Series of Shares and of the Trust shall at all times be considered as
vested in the Trustees. No Shareholder shall be deemed to have a severable
ownership in any individual asset of the Trust or any Series of Shares or any
right of partition or possession thereof, but each Shareholder shall have an
undivided beneficial interest in each Series of Shares in which he or she is a
Shareholder.
ARTICLE IV
SHARES
Section 4.1 DESCRIPTION OF SHARES. The beneficial interest in the Trust
shall be divided into Shares, par value $0.01 per share.
(a) SERIES OF SHARES. The Trustees shall have the authority, without
action or approval of the Shareholders, from time to time to divide the Shares
into two or more Series of Shares as they deem necessary or desirable. Each
Series of Shares shall be separate from each other Series of Shares. The
Trustees shall have exclusive power without the requirement of shareholder
approval to establish and designate such separate Series of Shares, and to fix
and determine the relative rights and preferences as between the Shares of the
separate Series of Shares as to purchase price, right of redemption and the
price, terms and manner of redemption, special and relative rights as to
dividends and other distributions and on liquidation, sinking or purchase fund
provisions, conversion rights, and conditions under which the several Series of
Shares shall have separate voting rights or no voting rights.
Each Share of a Series of Shares shall represent a beneficial interest
only in the assets belonging to that Series of Shares, and such interest shall
not extend to the assets of any other Series of Shares or to the assets of the
Trust generally. Shareholders of a particular Series of Shares shall not be
entitled to participate in a derivative or class action on behalf of any other
Series of Shares or the Shareholders of any other Series of Shares.
The establishment and designation of any Series of Shares in addition to
those established and designated in Section 4.2 shall be effective upon the
execution by a majority of the Trustees of an instrument setting forth such
establishment and designation and the relative rights and preferences of the
Shares of such Series of Shares. At any time that there are no Shares
outstanding of any particular Series of Shares previously established and
designated, the Trustees may by an instrument executed by a majority of their
number abolish that Series of Shares and the establishment and designation
thereof.
Any Trustee, officer or other agent of the Trust, and any organization in
which any such person is interested, may acquire, own, hold and dispose of
Shares of any Series of Shares to the same extent as if such
<PAGE> 16
10
person were not a Trustee, officer or other agent of the Trust; and the Trust
may issue and sell or cause to be issued and sold and may purchase Shares of
any Series of Shares from any such person or any such organization subject only
to the general limitations, restrictions or other provisions applicable to the
sale or purchase of Shares of such Series of Shares generally.
(b) CLASSES OF SHARES. The Trustees shall have authority, without action
or approval of the Shareholders, from time to time to divide the Shares of any
Series of Shares into two or more classes as they deem necessary or desirable.
The Trustees may allocate liabilities and expenses of a Series of Shares to a
particular class of Shares of that Series of Shares or apportion the same among
two or more classes of Shares of that Series of Shares. The liabilities and
expenses being borne solely by a class of Shares shall be appropriately
reflected (in the manner determined by the Trustees) in the net asset value,
dividends and liquidation rights of the Shares of such class. As provided in
Section 4.2(f), a class may have exclusive voting rights with respect to the
liabilities and expenses being borne solely by such class and with respect to
any other matter which does not affect the interest of any other class.
(c) NUMBER AND ISSUANCE OF SHARES. The number of authorized Shares is
unlimited as is the number of Shares of each Series of Shares and of each class
that may be issued. The Trustees may issue Shares of any Series of Shares and
of any class for such consideration and on such terms as they may determine (or
for no consideration if pursuant to a Share dividend or split-up), all without
action or approval of the Shareholders. All Shares when so issued on the terms
and for the consideration determined by the Trustees shall be fully paid and
non-assessable. The Trustees may classify or reclassify any unissued Shares or
any Shares previously issued and reacquired into one or more Series of Shares
that may be established and designated from time to time. The Trustees may
hold as treasury shares, reissue for such consideration and on such terms as
they may determine, or cancel, at their discretion from time to time, any
Shares of any Series of Shares reacquired by the Trust. The Trustees may from
time to time divide or combine the Shares of any Series of Shares or any class
into a greater or lesser number without thereby changing the proportionate
beneficial interest in the Series of Shares or class. The Trustees may from
time to time close the transfer books or establish record dates and time for
the purposes of determining the holders of Shares entitled to be treated as
such, to the extent provided or referred to in Section 5.5.
Section 4.2 ESTABLISHMENT AND DESIGNATION OF SERIES OF SHARES. Without
limiting the authority of the Trustees set forth in Section 4.1 to establish
and designate any further Series of Shares, the Trustees hereby establish and
designate six Series of Shares:
1. Equity Trust
2. Bond Trust
3. Money Market Trust
4. Global Equity Trust
5. Global Government Bond Trust
6. Convertible Securities Trust
The Shares of these Series of Shares and any Shares of any further Series of
Shares that may from time to time be established and designated by the Trustees
shall have the relative rights and preferences described below in
<PAGE> 17
11
this Section 4.2; provided that the Trustees may determine otherwise with
respect to some further Series of Shares at the time of establishing and
designating the same; and provided further that the Trustees, in their absolute
discretion, may amend any previously established relative rights and
preferences as they may deem necessary or desirable to enable the Trust to
comply with the 1940 Act or other applicable law.
(a) ASSETS BELONGING TO SERIES OF SHARES. All consideration received by
the Trust for the issue or sale of Shares of a particular Series of Shares,
together with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in whatever form the
same may be (collectively, "Specific Asset Items"), shall be held by the
Trustees in trust for the benefit of the holders of Shares of that Series of
Shares and shall irrevocably belong to that Series of Shares for all purposes,
and shall be so recorded upon the books of account of the Trust. In the event
that there are any assets, income, earnings, profits, and proceeds thereof,
funds or payments which are not readily identifiable as belonging to any
particular Series of Shares (collectively "General Asset Items"), the Trustees
shall allocate such General Asset Items to and among any one or more of the
Series of Shares established and designated from time to time in such manner
and on such basis as they, in their sole discretion, deem fair and equitable;
and any General Asset Items so allocated to a particular Series of Shares shall
belong to that Series of Shares. Each allocation of assets by the Trustees
shall be conclusive and binding upon the Shareholders of all Series of Shares
for all purposes. The Specific Asset Items of a Series of Shares together with
any General Asset Items allocated to that Series of Shares are hereby referred
to as "assets belonging to" that Series of Shares.
(b) LIABILITIES BELONGING TO SERIES OF SHARES. The assets belonging to
each particular Series of Shares shall be charged with all the liabilities,
expenses, costs, charges and reserves which, as determined by the Trustees, are
readily identifiable as belonging to that particular Series of Shares
(collectively "Specific Liability Items"). Any general liabilities, expenses,
costs, charges or reserves of the Trust which are not readily identifiable as
belonging to any particular Series of Shares (collectively "General Liability
Items") shall be allocated and charged by the Trustees to and among any one or
more of the Series of Shares established and designated from time to time in
such manner and on such basis as the Trustees, in their sole discretion, deem
fair and equitable. Expenses related to the distribution of the Shares of a
class may be borne solely by that class (as shall be determined by the
Trustees). Each allocation of liabilities, expenses, costs, charges and
reserves by the Trustees shall be conclusive and binding upon the Shareholders
of all Series of Shares and of all classes for all purposes. The Specific
Liability Items of a Series of Shares together with any General Liability Items
allocated to that Series of Shares are herein referred to as "liabilities
belonging to" that Series of Shares. Distribution expenses being borne solely
by a class of Shares are herein referred to as "expenses being borne solely" by
a class. Under no circumstances shall the assets belonging to any particular
Series of Shares be charged with the liabilities belonging to any other Series
of Shares. All persons who have extended credit which the Trustees have
allocated to a particular Series of Shares, or who have a claim or contract
which the Trustees have allocated to a particular Series of Shares, shall look
only to the assets of that particular Series of Shares for payment of such
credit, claim or contract.
(c) INCOME AND CAPITAL. The Trustees shall have full discretion to
determine which items shall be treated as income and which items as capital;
and each such determination and allocation shall be conclusive and binding upon
the Shareholders.
(d) DIVIDENDS AND DISTRIBUTIONS. The Trustees shall from time to time
distribute ratably among the Shareholders of a Series of Shares such proportion
of the net profits, surplus (including paid-in surplus), capital, or assets
held by the Trustees with respect to that Series of Shares as they may deem
proper with any expenses being borne solely by a class of Shares of that Series
of Shares being reflected in the net profits or
<PAGE> 18
12
other assets being distributed to such class. Dividends and distributions may
be paid with such frequency as the Trustees may determine, which may be daily
or otherwise, pursuant to a standing resolution or resolutions adopted only
once or with such frequency as the Trustees may determine. Distributions may
be made in cash or property (including without limitation any type of
obligations of the Trust or any assets thereof), and the Trustees may
distribute ratably among the Shareholders additional Shares issuable hereunder
in such manner, at such times, and on such terms as the Trustees deem proper.
Such distributions may be among the Shareholders of record at the time of
declaring a distribution or among the Shareholders of record at such later date
as the Trustees shall determine. The Trustees may always retain from the net
profits of a Series of Shares such amount as they may deem necessary to pay the
liabilities belonging to the Series of Shares or to meet obligations of the
Series of Shares, or as they may deem desirable to use in the conduct of its
affairs or to retain for future requirements or extensions of the business.
The Trustees may adopt and offer to Shareholders such dividend reinvestment
plans, cash dividend payout plans or related plans as the Trustees shall deem
appropriate.
Inasmuch as the computation of net income and gains for Federal income tax
purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust and the Series of Shares to avoid or reduce liability for
taxes.
(e) LIQUIDATION. In the event of the liquidation or dissolution of the
Trust or of any Series of Shares, the Shareholders of each affected Series of
Shares shall be entitled to receive, when and as declared by the Trustees, the
excess of the assets belonging to that Series of Shares over the liabilities
belonging to that Series of Shares. The assets so distributable to the
Shareholders of any particular Series of Shares shall be distributed among the
Shareholders of each class according to their respective rights taking into
account the proper allocation of expenses being borne solely by any class of
Shares of that Series of Shares.
(f) VOTING. Shareholders shall be entitled to vote only with respect to
such matters as may be required by law, the Declaration of Trust or the By-Laws
and such additional matters as the Trustees may consider necessary or
desirable. On each matter submitted to a vote of the Shareholders, each holder
of a Share shall be entitled to one vote for each whole Share and to a
proportionate fractional vote for each fractional Share standing in his name on
the books of the Trust. All Shares of the Trust then entitled to vote shall be
voted by Series of Shares, except that when voting for the election of Trustees
and when otherwise permitted by the 1940 Act, Shares shall be voted in the
aggregate and not by Series of Shares. As to any matter which does not affect
the interest of a particular Series of Shares, only the holders of Shares of
the one or more affected Series of Shares shall be entitled to vote. As to any
matter relating to expenses being borne solely by a class of a Series of Shares
or to any other matter which does not affect the interest of a particular class
of a particular Series of Shares, only the holders of Shares of the one or more
affected classes of the Series of Shares shall be entitled to vote.
(g) REDEMPTION BY SHAREHOLDER. Each holder of Shares of a particular
Series of Shares shall have the right at such time as may be permitted by the
Trust to require the Trust to redeem all or any part of his Shares of that
Series of Shares, subject to the terms and conditions set forth in this
Declaration of Trust and to such additional terms and conditions that may be
adopted by the Trustees. Shares of any particular Series of Shares may be
redeemed solely out of the assets belonging to that Series of Shares. Payment
of the redemption price shall be in cash; provided, however, that if the
Trustees determine, which determination shall be conclusive, that conditions
exist which make payment wholly in cash unwise or undesirable, the Trust may
make payment wholly or partly in securities or other assets belonging to the
Series of Shares of which the Shares being redeemed are part at the value of
such securities or assets used in such determination of net asset value. The
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amount per Share at which the Trust redeems or repurchases Shares shall be
determined by the application of a formula adopted for such purpose by
resolution of the Trustees provided that (i) such amount per Share shall not
exceed the cash equivalent of the proportionate interest of each Share in the
assets of the particular Series of Shares at the time of the purchase or
redemption and (ii) if so authorized by the Trustees, the Trust may, at any
time and from time to time, charge fees for effecting such redemption, at such
rates as the Trustees may establish. Notwithstanding the foregoing, the Trust,
at the discretion of the Trustees, may postpone payment of the redemption price
and may suspend the right of the holders of Shares of any Series of Shares to
require the Trust to redeem Shares of that Series of Shares during any period
or at any time when and to the extent permissible under the 1940 Act.
(h) REDEMPTION BY TRUST. Each Share of each Series of Shares is subject
to redemption by the Trust at the redemption price determined pursuant to
subsection (g) of this Section 4.2: (i) at any time, if the Trustees determine
in their sole discretion that failure to so redeem may have materially adverse
consequences to the holders of the other Shares of the Trust or any Series of
Shares, or (ii) upon such other conditions as may from time to time be
determined by the Trustees and described in the then current Prospectus for a
Series of Shares with respect to maintenance of Shareholder accounts of a
minimum or maximum amount, number of Shares or percentage of Shares in that
Series of Shares. Upon such redemption the holders of the Shares so redeemed
shall have no further right with respect thereto other than to receive payment
of such redemption price.
(i) NET ASSET VALUE. The net asset value of a Series of Shares shall be
the amount determined by subtracting the liabilities belonging to that Series
of Shares from the assets belonging to that Series of Shares. The net asset
value of each outstanding Share of each Series of Shares shall be determined at
such time or times on such days as the Trustees may determine. The method of
determination of the net asset value of a Series of Shares shall be determined
by the Trustees from time to time with any expenses being borne solely by a
class of Shares being reflected in the net asset value of such Shares. The
power and duty to make the calculations may be delegated by the Trustees to the
adviser, administrator, manager, custodian, transfer agent or such other person
as the Trustees may determine. The Trustees may suspend the determination of
net asset value to the extent permitted by the 1940 Act.
The Trustees may determine to maintain the net asset value per Share of
any of the classes of any Series of Shares at a designated constant dollar
amount and in connection therewith may adopt procedures for the continuing
declarations of income and capital gains attributable to that Series of Shares
as dividends payable in additional Shares of that Series of Shares at the
designated constant dollar amount and for the handling of any losses
attributable to that Series of Shares. Such procedures may provide that in the
event of any loss each Shareholder shall be deemed to have contributed to the
capital of the Trust attributable to that Series of Shares his pro rata portion
of the total number of Shares required to be cancelled in order to permit the
net asset value per Share of that Series of Shares to be maintained, after
reflecting such loss, at the designated constant dollar amount. Each
Shareholder of the Trust shall be deemed to have agreed, by his investment in
any Series of Shares with respect to which the Trustees shall have adopted any
such procedure, to make the contribution referred to in the preceding sentence
in the event of any such loss.
(j) TRANSFER. Subject to such limitations as may be set forth herein or
in the By-Laws, all Shares shall be transferable, but transfers of Shares of a
particular Series of Shares will be recorded on the Share transfer records of
the Trust applicable to that Series of Shares only at such times as
Shareholders shall have the right to require the Trust to redeem Shares of that
Series of Shares and at such other times as may be permitted by the Trustees.
Shares shall be transferable on the records of the Trust upon delivery to the
Trust or its transfer agent of such evidence of assignment, transfer,
succession or authority to transfer as the Trustees or the transfer agent may
reasonably require, accompanied by any certificate or certificates representing
such shares previously issued to the transferor. Upon such delivery the
transfer shall be recorded on the books of the Trust.
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The Trust shall be entitled to treat the record holder of Shares as shown on
its books as the owner of such Shares for all purposes, including the payment
of dividends and the right to receive notice and to vote with respect thereto,
regardless of any transfer, pledge or other disposition of such Shares until
the Shares have been transferred on the books of the Trust in accordance with
the requirements of this Declaration of Trust.
(k) EQUALITY. All Shares of each Series of Shares shall represent an
equal proportionate interest in the assets belonging to that Series of Shares
(subject to the liabilities belonging to that Series of Shares), and each Share
of each Series of Shares shall be equal to each other Share of that Series of
Shares; provided that such equality need not be maintained among all Shares of
a Series of Shares but shall be maintained among all Shares of each class of
that Series of Shares whenever the Trustees divide the Shares of the Series of
Shares into classes pursuant to Section 4.1.
(l) FRACTIONS. Any fractional Share of any class or any Series of
Shares, if any such fractional Share is outstanding, shall carry
proportionately all the rights and obligations of a whole Share of that class
of that Series of Shares, including rights and obligations with respect to
voting, receipt of dividends and distributions, redemption of Shares, and
liquidation of the Trust.
(m) CONVERSION AND EXCHANGE RIGHTS. The Trustees shall have the
authority to provide that holders of Shares of any class of any Series of
Shares shall have the right to convert such Shares into, or to exchange such
Shares for, Shares of the same or one or more other Series of Shares in
accordance with such requirements and procedures as may be established by the
Trustees.
Section 4.3 OWNERSHIP OF SHARES. The ownership of Shares shall be
recorded on the books of the Trust or of a transfer or similar agent for the
Trust. No certificates certifying the ownership of Shares need be issued
except as the Trustees may otherwise determine from time to time. The Trustees
may make such rules as they consider appropriate for the issuance of Shares
certificates, the use of facsimile signatures, the transfer of Shares and
similar matters. The record books of the Trust as kept by the Trust or any
transfer or similar agent, as the case may be, shall be conclusive for all
purposes as to who are the Shareholders of the Trust and of any Series or class
of Shares and as to the number of Shares of each class of each Series of Shares
held from time to time by each such Shareholder.
Section 4.4 INVESTMENTS IN THE TRUST. The Trustees may accept
investments in the Trust from such persons and on such terms and for such
consideration, as they from time to time authorize. The Trustees may authorize
any distributor, principal underwriter, custodian, transfer agent or other
person to accept orders for the purchase of Shares that conform to such
authorized terms and to reject any purchase orders for Shares whether or not
conforming to such authorized terms.
Section 4.5 NO PREEMPTIVE RIGHTS. Shareholders shall have no preemptive
or other right to receive, purchase or subscribe to any additional Shares or
other securities issued by the Trust.
Section 4.6 TRUST ONLY. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to
create a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust on
the terms and conditions described herein. Nothing in this Declaration of
Trust shall be construed to make the Shareholders, either by themselves or with
the Trustees, partners or members of a joint stock association.
Section 4.7 STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY.
Shares shall be deemed to be personal property giving only the rights provided
in this instrument. Every Shareholder by virtue of having
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become a Shareholder shall be held to have expressly assented and agreed to the
terms hereof and to have become a party hereto. The death of a Shareholder
during the continuance of the Trust shall not operate to terminate the Trust or
any Series of Shares thereof nor entitle the representative of any deceased
Shareholder to an accounting or to take any action in court or elsewhere
against the Trust or the Trustees, but only to the rights of said decent under
this Trust. Ownership of Shares shall not entitle the Shareholder to any title
in or to the whole or any part of the Trust Property or right to call for a
partition or division of the same or for an accounting, nor shall the ownership
of Shares constitute the Shareholders partners. Neither the Trust nor the
Trustees nor any officer, employee or agent of the Trust shall have any power
to bind personally any Shareholder nor, except as specifically provided herein,
to call upon any Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time personally agree
to pay.
ARTICLE V
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 5.1 VOTING POWERS. The Shareholders shall have power to vote
only (i) for the election or removal of Trustees as provided in Section 3.1,
(ii) with respect to any contract with a Contracting Party as provided in
Section 3.3 as to which Shareholder approval is contemplated by the 1940 Act,
(iii) with respect to any termination or reorganization of the Trust or any
Series of Shares to the extent and as provided in Sections 7.1 and 7.2, (iv)
with respect to any amendment of the Declaration of Trust to the extent and as
provided in Section 7.3, (v) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a court action,
proceeding or claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Trust or any Series of Shares thereof or
the Shareholders (provided, however, that a Shareholder of a particular Series
of Shares shall not be entitled to bring, maintain or participate in a
derivative or class action on behalf of any other Series of Shares (or
Shareholder of any other Series of Shares)) and (vi) with respect to such
additional matters relating to the Trust as may be required by this Declaration
of Trust, the By-Laws or any registration of the Trust with the Commission (or
any successor agency ) or any state, or as the Trustees may consider necessary
or desirable. Only Shareholders of record shall be entitled to vote. There
shall be no cumulative voting in the election of Trustees. Until Shares of any
Series or class of Shares are issued, the Trustees may exercise all rights of
Shareholders and may take any action required by law, this Declaration of Trust
or the By-Laws to be taken by Shareholders as to such Series or class of
Shares.
Section 5.2 PROXIES. At any meeting of Shareholders, any holder of
Shares entitled to vote thereat may vote in person or by proxy, provided that
no proxy shall be voted at any meeting unless it shall have been placed on file
with the Secretary, or with such other officer or agent of the Trust as the
Secretary may direct, for verification prior to the time at which such vote
shall be taken. Pursuant to a resolution of the Trustees, proxies may be
solicited in the name of one or more persons, including one or more Trustees or
one or more of the officers of the Trust. When any Shares are held in the
names of two or more persons, any one of them may vote at any meeting in person
or by proxy in respect of such Shares, but if more than one of them shall be
present at such meeting in person or by proxy, and such joint owners or their
proxies so present disagree as to any vote to be cast, such vote shall not be
received in respect of such Shares. If the holder of any Shares is a minor or
a person of unsound mind, and subject to guardianship or to the legal control
of any other person as regards the charge or management of such Shares, he may
vote by his guardian or such other person appointed or having such control, and
such vote may be given in person or by proxy. A proxy purporting to be
executed by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise, and the burden of proving invalidity
shall rest on the challenger.
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Section 5.3 MEETINGS. Meetings of Shareholders of the Trust or of any
Series of Shares may be called by the Trustees (or such other person or persons
as may be specified in the By-Laws) from time to time for the purpose of taking
action upon any matter requiring the vote or authority of such Shareholders as
herein provided or upon any other matter deemed by the Trustees to be necessary
or desirable. Written notice of any meeting of Shareholders shall be given at
least seven days before such meeting by mailing such notice, postage prepaid
stating the time, place and purpose of the meeting, to each Shareholder
entitled to vote at such meeting at the Shareholder's address as it appears on
the records of the Trust. If the Trustees (or such other person or persons as
may be specified in the By-Laws) fail to call or give notice of any meeting of
Shareholders for 30 days after written application by Shareholders holding at
least 25% of the Shares issued and outstanding, and entitled to vote at the
meeting, requesting a meeting be called for a purpose requiring action by the
Shareholders as provided herein or in the By-Laws, then Shareholders holding at
least 25% of such Shares then outstanding may call and give notice of such
meeting, and thereupon the meeting shall be held in the manner provided for
herein in case of call thereof by the Trustees. The preceding sentence shall
apply upon written application by Shareholders holding less than 25% of the
Shares issued and outstanding, and entitled to vote at the meeting, when the
By-Laws so provide. Notice of a meeting need not be given to any Shareholder
if a written waiver of notice, executed by him or her before or after the
meeting, is filed with the records of the meeting, or to any Shareholder who
attends the meeting without protesting prior thereto or at its commencement the
lack of notice to him or her.
Section 5.4 PLACE OF MEETINGS. All meetings of the Shareholders shall be
held at the principal office of the Trust or at such other place within the
United States as shall be designated by the Trustees or the President of the
Trust.
Section 5.5 RECORD DATES. For the purpose of determining the
Shareholders who are entitled to notice of and to vote or act at any meeting or
any adjournment thereof, or who are entitled to receive any dividend or
distribution, or for the purpose of any other action, the Trustees may from
time to time close the transfer books for such period, not exceeding 30 days
(except at or in connection with the termination of the Trust), as the Trustees
may determine; or without closing the transfer books, the Trustees may fix a
date and time not more than 60 days prior to the date of any meeting of
Shareholders or other action as the date and time of record for the
determination of Shareholders entitled to notice of and to vote at such meeting
or any adjournment thereof or to be treated as Shareholders of record for
purposes of such other action, and any Shareholder who was a Shareholder at the
date and time so fixed shall be entitled to vote at such meeting or any
adjournment thereof or to be treated as a Shareholder of record for purposes of
such other action, even though he has since that date and time disposed of his
Shares, and no Shareholder becoming such after that date and time shall be so
entitled to vote at such meeting or any adjournment thereof or to be treated as
a Shareholder of record for purposes of such other action.
Section 5.6 QUORUM AND REQUIRED VOTE. Thirty percent of the Shares
entitled to vote on a matter shall be a quorum for the transaction of business
on that matter at a Shareholders' meeting, but any lesser number shall be
sufficient for adjournments. Any adjourned session or sessions may be held,
within a reasonable time after the date set for the original meeting, without
the necessity of further notice. A majority of the Shares voted, at a meeting
at which a quorum is present, shall decide any questions and a plurality shall
elect a Trustee, except when a different vote is required or permitted by any
provision of the 1940 Act or other applicable law or by this Declaration of
Trust or the By-Laws. If voting is by a Series of Shares or a class of Shares,
the aforesaid quorum and voting requirements shall apply to the action to be
taken on those matters by the Shareholders of such Series of Shares or class of
Shares.
Section 5.7 ACTION BY WRITTEN CONSENT. Any action taken by Shareholders
may be taken without a meeting if the Shareholders of a majority of the
outstanding shares entitled to vote on the matter (or such larger
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proportion thereof as shall be required by the 1940 Act or by any express
provision of this Declaration of Trust or the By-Laws) consent to the action in
writing and such written consents are filed with the records of the meetings of
Shareholders. Such consents shall be treated for all purposes as a vote taken
at a meeting of Shareholders.
Section 5.8 ADDITIONAL PROVISIONS. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
ARTICLE VI
LIMITATION OF LIABILITY; INDEMNIFICATION
Section 6.1 TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE; NOTICE.
All persons extending credit to, contracting with or having any claim against
the Trust shall look only to the assets of the Series of Shares with respect to
which such persons extended credit or contracted, or with respect to which such
claim arose for payment under such credit, contract or claim; and neither the
Shareholders of any Series of Shares nor the Trustees nor any of the Trust's
officers, employees or agents, whether past, present or future, nor any other
Series of Shares shall be personally liable therefor. Every note, bond,
contract, instrument, certificate or undertaking and every other act or thing
whatsoever executed or done by or on behalf of the Trust, any Series of Shares
or the Trustees or any of them shall be conclusively deemed to have been
executed or done only by or for the Trust (or the Series of Shares) or the
Trustees and not personally. Nothing in this Declaration of Trust shall
protect any Trustee or officer against any liability to the Trust or the
Shareholders to which such Trustee or officer would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of Trustee or of
such officer.
Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officers or officer shall give notice that
this Declaration of Trust is on file with the Secretary of The Commonwealth of
Massachusetts and shall recite that the same was executed or made by or on
behalf of the Trust or by them as Trustees or Trustee or as officers or officer
and not individually and that the obligations of such instrument are not
binding upon any of them or the Shareholders individually but are binding only
upon the assets belonging to the Trust, or the particular Series of Shares in
question, as the case may be, but the omission thereof shall not operate to
bind any Trustees or Trustee or officers or officer or Shareholders or
Shareholder individually.
Section 6.2 TRUSTEE'S GOOD FAITH ACTION; EXPERT ADVICE; NO BOND OR
SURETY. The exercise by the Trustees of their powers and discretions hereunder
shall be binding upon everyone interested. A Trustee shall be liable for his
own willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of the office of Trustee, and for nothing
else, and shall not be liable for errors of judgment or mistakes of fact or
law. Subject to the foregoing, (a) the Trustees shall not be responsible or
liable in any event for any neglect or wrongdoing of any officer, agent,
employee, consultant, adviser, administrator, distributor or principal
underwriter, custodian, or transfer, dividend disbursing, Shareholder servicing
or accounting agent of the Trust, nor shall any Trustee be responsible for the
act or omission of any other Trustee; (b) the Trustees may take advice of
counsel or other experts with respect to the meaning and operation of this
Declaration of Trust and their duties as Trustees, and shall be under no
liability for any act or omission in accordance with such advice or for failing
to follow such advice; and (c) in discharging their duties, the Trustees, when
acting in good faith, shall be entitled to rely upon the books of account of
the Trust and upon written reports made to the Trustees by any officer
appointed by them, any independent public accountant, and (with respect to the
subject matter of the contract involved) any officer, partner or responsible
employee of a Contracting Party appointed
<PAGE> 24
18
by the Trustees pursuant to Section 3.3. The Trustees as such shall not be
required to give any bond or surety or any other security for the performance
of their duties.
Section 6.3 INDEMNIFICATION OF SHAREHOLDERS. In case any Shareholder (or
former Shareholder) of any Series of Shares shall be charged or held to be
personally liable solely by reason of being or having been a Shareholder and
not because of such Shareholder's acts or omissions or for some other reason,
the Trust (upon proper and timely request by the Shareholder) shall assume the
defense against such charge and satisfy any judgment thereon, and the
Shareholder or former Shareholder (or his heirs, executors, administrators or
other legal representatives or in the case of a corporation or other entity,
its corporate or other general successor) shall be entitled to be held harmless
from and indemnified against all loss and expense arising from such liability,
but in each case only out of the assets of such Series of Shares.
Section 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. The Trust shall
indemnify (from the assets of the Series of Shares in question) each of its
Trustees and officers (including persons who serve at the Trust's request as
directors, officers, or trustees of another organization in which the Trust has
an interest as a shareholder, creditor or otherwise) (herein referred to as a
"Covered Person") 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 by any Covered Person 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
Covered Person 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,
director or trustee, except as otherwise provided in Section 6.5. Expenses,
including accountants and counsel fees so incurred by any such Covered Person
(but excluding amounts paid in satisfaction of judgments, in compromise or as
fines or penalties), shall be paid from time to time from the assets of the
Series of Shares in question in advance of the final disposition of any such
action, suit or proceeding, upon receipt of an undertaking by or on behalf of
the Covered Person to repay the amounts so paid to the Series of Shares in
question if it is ultimately determined that indemnification of such expenses
is not authorized under this Article, provided that (i) the Covered Person
shall have provided security for such undertaking, (ii) the Trust shall be
insured against losses arising by reason of any lawful advances, or (iii) a
majority of a quorum of the Trustees who are neither Interested Persons of the
Trust (the "disinterested Trustees") nor parties to the proceeding, or an
independent legal counsel in a written opinion, shall have determined, based on
a review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the Covered Person ultimately will be
found entitled to indemnification.
Section 6.5 EXCEPTIONS TO INDEMNIFICATION. Indemnification shall not be
provided to a Covered Person under Section 6.4 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 Covered Person (i) did not act in good
faith in the reasonable belief that such Covered Person's action was in the
best interests of the Trust or (ii) is liable to the Trust or its Shareholders
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such Covered Person's office
(either and both of the conduct described in (i) and (ii) being referred to
hereafter as "Disabling Conduct"). As to any matter disposed of (whether by a
compromise payment, pursuant to a consent decree or otherwise) without a final
adjudication in a decision on the merits that such Covered Person is liable by
reason of Disabling Conduct, indemnification shall be provided if there has
been (i) a determination by the court or other body before which the proceeding
was brought that the Covered Person was not liable by reason of Disabling
Conduct, (ii) a dismissal of a court action or any administrative or other
proceeding against a Covered Person for insufficiency of evidence of Disabling
Conduct, or (iii) a reasonable determination, based upon a review of the
readily available facts (as opposed to a full trial-type inquiry), that the
Covered Person was not liable by reason of Disabling Conduct either by a vote
<PAGE> 25
19
a majority of a quorum of disinterested Trustees who are not parties to the
proceeding, or by an independent legal counsel in a written opinion. Approval
by the Trustees or by independent legal counsel of indemnification as to any
matter disposed of by a compromise payment by the Covered Person shall not
prevent the recovery from the covered Person of any amount paid to such Covered
Person as indemnification for such payment or for any other expenses if such
Covered Person is subsequently adjudicated by a court of competent
jurisdiction to be liable by reason of Disabling Conduct.
Section 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of
indemnification provided by this Article shall not be exclusive of or affect
any other rights to which any such Covered Person may be entitled. As used in
this Article, "Covered Person" shall include such person's heirs, executors and
administrators. Nothing contained in this Article shall affect any rights to
indemnification to which personnel of the Trust, other than Trustees and
officers, and other persons may be entitled by contract or otherwise under law,
nor the power of the Trust to purchase and maintain liability insurance on
behalf of any such person.
Section 6.7 LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEE. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
ARTICLE VII
MISCELLANEOUS
Section 7.1 DURATION AND TERMINATION OF TRUST. Unless terminated as
provided herein, the Trust shall continue without limitation of time and,
without limiting the generality of the foregoing, no change, alteration or
modification with respect to any Series of Shares shall operate to terminate
the Trust. The Trust may be terminated at any time by the Trustees by written
notice to the Shareholders or by a Majority Shareholder Vote, Shares of each
Series of Shares voting separately by Series of shares. Any Series of Shares
may be terminated at any time by the Trustees by written notice to the
Shareholders of that Series of Shares or by a Majority Shareholder Vote of the
Shares of that Series of Shares.
Upon termination of the Trust or any Series of Shares, after paying or
otherwise providing for all charges, taxes, expenses and liabilities, whether
due or accrued or anticipated as may be determined by the Trustees, the Trust
shall, in accordance with such procedures as the Trustees consider appropriate,
reduce the remaining assets to distributable form in cash, securities or other
property, or any combination thereof, and distribute the proceeds to the
Shareholders of the Series of Shares involved, in conformity with provisions of
subsection (e) of Section 4.2.
Section 7.2 REORGANIZATION. The Trust or one or more Series of Shares
may merge or consolidate with any other trust, partnership, association,
corporation or other organization and the Trustees may sell, convey and
transfer the assets of the Trust, or the assets belonging to any one or more
Series of Shares ("Transferor Series of Shares"), to another trust,
partnership, association, corporation or other organization, or to the Trust to
be held as assets belonging to another Series of Shares, in exchange for cash,
securities or other consideration (including, in the case of a transfer to
another Series of Shares of the Trust, Shares of such other Series of Shares)
with such transfer being made subject to, or with the assumption by the
transferee of, the liabilities belonging to each Transferor Series of Shares;
provided, however, that no merger, consolidation or sale of all or
substantially all the assets belonging to any particular Series of Shares shall
be effected unless the terms of such transaction shall have first been approved
by a Majority Shareholder Vote of the Shareholders of that Series of Shares.
<PAGE> 26
20
Section 7.3 AMENDMENTS. All rights granted to the Shareholders under
this Declaration of Trust are granted subject to the reservation of the right
to amend this Declaration of Trust as herein provided, except that no amendment
shall repeal the limitations on personal liability of any Shareholder or
Trustee or repeal the prohibition of assessment upon the Shareholders without
the express consent of each Shareholder or Trustee involved. Subject to the
foregoing, the provisions of this Declaration of Trust (whether or not related
to the rights of Shareholders) may be amended at any time by an instrument in
writing signed by a majority of the then Trustees (or by an officer of the
Trust pursuant to the vote of a majority of such Trustees): (a) for one or more
of the following purposes: to change the name of the Trust, to supply any
omission, to cure, correct or supplement any ambiguous, defective or
inconsistent provision hereof or, as the Trustees deem necessary or advisable,
to conform this Declaration of Trust to the requirements of applicable federal
laws or regulations, including the requirements of the Internal Revenue Code
with respect to regulated investment companies, but the Trustees shall not be
liable for failing to do so; and (b) for any other purpose so long as such
amendment does not adversely affect the rights of any Shareholder with respect
to which such amendment is or purports to be applicable. Any amendment to this
Declaration of Trust that adversely affects the rights of Shareholders may be
effected at any time by an instrument in writing signed by a majority of the
then Trustees (or by an officer of the Trust pursuant to a vote of a majority
of such Trustees) when authorized to do so by a Majority Shareholder Vote in
accordance with subsection (f) of Section 4.2. An amendment which would
adversely affect the Shareholders of one or more Series of Shares but not the
Shareholders of all Series of Shares shall be authorized by a Majority
Shareholder Vote of the Shareholders of each Series of Shares so affected, and
no vote of Shareholders of a Series of Shares not so affected shall be
required.
Section 7.4 RESIDENT AGENT. The Trustees shall have power to appoint on
behalf of the Trust a resident agent and maintain a resident agent for the
Trust in The Commonwealth of Massachusetts, and from time to time, to replace
the resident agent so appointed.
Section 7.5. FILING OF COPIES; REFERENCES; HEADINGS. The original or a
copy of this instrument and of each amendment hereto shall be kept at the
office of the Trust where it may be inspected by any Shareholder. A copy of
this instrument and of each amendment hereto shall be filed by the Trust with
the Secretary of The Commonwealth of Massachusetts and with the Boston City
Clerk, as well as any other governmental office where such filing may from time
to time be required, but the failure to make any such filing shall not impair
the effectiveness of this instrument or any such amendment. Anyone dealing
with the Trust may rely on a certificate by an officer of the Trust as to
whether or not any such amendments have been made, as to the identities of the
Trustees and officers, and as to any matters in connection with the Trust
hereunder; and, with the same effect as if it were the original, may rely on a
copy certified by an officer of the Trust to be a copy of this instrument or of
any such amendments. A restated Declaration of Trust, containing the original
Declaration of Trust and all amendments theretofore made, may be executed from
time to time by a majority of Trustees and shall, upon filing with the
Secretary of The Commonwealth of Massachusetts, be conclusive evidence of all
amendments contained therein and may thereafter be referred to in lieu of the
original Declaration of Trust and the various amendments thereto. In this
instrument and in any such amendment, references to this instrument, and all
expressions like "herein," "hereof" and "hereunder" shall be deemed to refer to
this instrument as a whole as the same may be amended or affected by any such
amendments. Headings are placed herein for convenience of reference only and
shall not be taken as a part hereof or control or affect the meaning,
construction or effect of this instrument. This instrument may be executed in
any number of counterparts each of which shall be deemed an original.
Section 7.6 APPLICABLE LAW. This Declaration of Trust is made in The
Commonwealth of Massachusetts and is created under and is to be governed by and
construed and administered according to the laws of The Commonwealth of
Massachusetts. The Trust shall be of the type referred to in Section 1 of
<PAGE> 27
21
Chapter 182 of the Massachusetts General Laws and of the type commonly called a
Massachusetts business trust, and without limiting the provisions hereof, the
Trust may exercise all powers which are ordinarily exercised by such a trust.
Section 7.7 RELIANCE BY THIRD PARTIES. Any certificate executed by an
individual who, according to the records of the Trust, appears to be a Trustee
hereunder, or Secretary or Assistant Secretary of the Trust, certifying to: (a)
the number or identity of Trustees or Shareholders, (b) the due authorization
of the execution of any instrument or writing, (c) the form of any vote passed
at a meeting of Trustees or Shareholders, (d) the fact that the number of
Trustees or Shareholders present at any meeting or executing any written
instrument satisfies the requirement of this Declaration of Trust, (e) the form
of any By-Laws adopted by or the identity of any officers elected by the
Trustees, or (f) the existence of any fact or facts which in any manner relate
to the affairs of the Trust, shall be conclusive evidence as to the matters so
certified in favor of any person dealing with the Trustees and their
successors.
Section 7.8 PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS. The
provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code, the laws of The Commonwealth of Massachusetts or other
applicable laws and regulations, the conflicting provisions shall be deemed
superseded by such law or regulation to the extent necessary to eliminate such
conflict; provided, however, that such determination shall not affect any of
the remaining provisions of this Declaration of Trust or render invalid or
improper any action taken or omitted prior to such determination.
If any provision of this Declaration of Trust shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
pertain only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration of Trust in any jurisdiction.
<PAGE> 1
EXHIBIT (b)(1)(b)
<PAGE> 2
NASL SERIES TRUST
Establishment and Designation
of Additional Series of Shares of Beneficial Interest
($0.01 par value per share)
The undersigned, being a majority of the Trustees of NASL Series Trust
(the "Trust"), acting pursuant to Section 4.1(a) of the Agreement and
Declaration of Trust of the Trust dated September 29, 1988 (the "Declaration of
Trust") hereby redesignate the Series of Shares known as the "Convertible
Securities Trust" as the "U.S. Government Bond Trust," such Series to continue
to have the relative rights and preferences described in Section 4.2 of the
Declaration of Trust, provided that the Trustees, in their absolute discretion,
may amend any previously established relative rights and preferences as they
may deem necessary or desirable to enable the Trust to comply with the
Investment Company Act of 1940 or other applicable law.
In witness whereof, the undersigned have executed this instrument in
duplicate original counterparts and have caused a duplicate original to be
lodged among the records of the Trust as of the 31st day of March, 1989, to be
effective as of May 1, 1989.
/S/ Don B. Allen /S/ William J. Atherton
------------------------ ------------------------
Don B. Allen William J. Atherton
/S/ Charles L. Bardelis
------------------------- -------------------------
Charles L. Bardelis Brian L. Moore
/S/ Robert J. Meyers
-------------------------
Robert J. Meyers
The Agreement and Declaration of Trust of the Trust, September 29, 1988, a copy
of which together with all amendments thereto is on file in the office of the
Secretary of The Commonwealth of Massachusetts, provides that this instrument
was executed by the Trustees of the Trust as Trustees and not individually and
that the obligations of this instrument are not binding upon any of them or the
shareholders of the Trust individually but are binding only upon the assets
belonging to the Trust, or the particular Series of Shares in question, as the
case may be.
<PAGE> 1
EXHIBIT (b)(1)(c)
<PAGE> 2
NASL SERIES TRUST
Establishment and Designation
of Additional Series of Shares of Beneficial Interest
($0.01 par value per share)
The undersigned, being a majority of the Trustees of NASL Series Trust (the
"Trust"), acting pursuant to Section 4.1(a) of the Agreement and Declaration of
Trust of the Trust dated September 29, 1988 (the "Declaration of Trust") hereby
establish and designate three new Series of Shares (as defined in the
Declaration of Trust), such Series of Shares to have the following special and
relative rights:
1. The new Series of Shares shall be designated the "Conservative Asset
Allocation Trust," the "Moderate Asset Allocation Trust" and the
"Aggressive Asset Allocation Trust."
2. The new Series of Shares shall have the relative rights and preferences
described in Section 4.2 of the Declaration of Trust, provided that the
Trustees, in their absolute discretion, may amend any previously
established relative rights and preferences as they may deem necessary or
desirable to enable the Trust to comply with the Investment Company Act of
1940 or other applicable law.
In witness whereof, the undersigned have executed this instrument in
duplicate original counterparts and have caused a duplicate original to be
lodged among the records of the Trust as of the 31st day of March, 1989, to be
effective as of the 1st day of May, 1989.
/S/ Don B. Allen /S/ William J. Atherton
------------------------ ---------------------------
Don B. Allen William J. Atherton
/S/ Charles L. Bardelis
------------------------ ---------------------------
Charles L. Bardelis Brian L. Moore
/S/ Robert J. Myers
------------------------
Robert J. Myers
The Agreement and Declaration of Trust of the Trust, September 29, 1988, a copy
of which together with all amendments thereto is on file in the office of the
Secretary of The Commonwealth of Massachusetts, provides that this instrument
was executed by the Trustees of the Trust as Trustees and not individually and
that the obligations of this instrument are not binding upon any of them or the
shareholders of the Trust individually but are binding only upon the assets
belonging to the Trust, or the particular Series of Shares in question, as the
case may be.
<PAGE> 1
EXHIBIT (b)(1)(d)
<PAGE> 2
NASL SERIES TRUST
Establishment and Designation
of Additional Series of Shares of Beneficial Interest
($0.01 par value per share)
The undersigned, being a majority of the Trustees of NASL Series Trust
(the "Trust"), acting pursuant to Section 4.1(a) of the Agreement and
Declaration of Trust of the Trust dated September 29, 1988 (the "Declaration of
Trust") hereby establish and designate three new Series of Shares (as defined
in the Declaration of Trust), such Series of Shares to have the following
special and relative rights:
1. The new Series of Shares shall be designated the "Growth and Income Trust."
2. The new Series of Shares shall have the relative rights and preferences
described in Section 4.2 of the Declaration of Trust, provided that the
Trustees, in their absolute discretion, may amend any previously established
relative rights and preferences as they may deem necessary or desirable to
enable the Trust to comply with the Investment Company Act of 1940 or other
applicable law.
In witness whereof, the undersigned have executed this instrument in
duplicate original counterparts and have caused a duplicate original to be
lodged among the records of the Trust as of the 1st day of February, 1991.
/S/ Don B. Allen
----------------------- --------------------------
Don B. Allen William J. Atherton
/S/ Charles L. Bardelis
----------------------- --------------------------
Charles L. Bardelis Brian L. Moore
/S/ Samuel Hoar /S/ Robert J. Meyers
----------------------- --------------------------
Samuel Hoar Robert J. Meyers
The Agreement and Declaration of Trust of the Trust, September 29, 1988, a copy
of which together with all amendments thereto is on file in the office of the
Secretary of The Commonwealth of Massachusetts, provides that this instrument
was executed by the Trustees of the Trust as Trustees and not individually and
that the obligations of this instrument are not binding upon any of them or the
shareholders of the Trust individually but are binding only upon the assets
belonging to the Trust, or the particular Series of Shares in question, as the
case may be.
<PAGE> 1
EXHIBIT (b)(1)(e)
<PAGE> 2
NASL SERIES TRUST
Establishment and Designation
of Additional Series of Shares of Beneficial Interest
($0.01 par value per share)
The undersigned, being a majority of the Trustees of NASL Series Trust
(the "Trust"), acting pursuant to Section 4.1(a) of the Agreement and
Declaration of Trust of the Trust dated September 29, 1988 (the "Declaration of
Trust") hereby redesignate the Series of Shares known as the "Bond Trust" as
the "Investment Quality Bond Trust," such Series to continue to have the
relative rights and preferences described in Section 4.2 of the Declaration of
Trust, provided that the Trustees, in their absolute discretion, may amend any
previously established relative rights and preferences as they may deem
necessary or desirable to enable the Trust to comply with the Investment
Company Act of 1940 or other applicable law.
In witness whereof, the undersigned have executed this instrument in
duplicate original counterparts and have caused a duplicate original to be
lodged among the records of the Trust as of the 3rd day of April, 1991, to be
effective as of April 16, 1991.
/S/ Don B. Allen
--------------------------- --------------------------
Don B. Allen William J. Atherton
/S/ Charles L. Bardelis
--------------------------- --------------------------
Charles L. Bardelis Brian L. Moore
/S/ Samuel Hoar /S/ Robert J. Meyers
--------------------------- --------------------------
Samuel Hoar Robert J. Meyers
The Agreement and Declaration of Trust of the Trust, September 29, 1988, a copy
of which together with all amendments thereto is on file in the office of the
Secretary of The Commonwealth of Massachusetts, provides that this instrument
was executed by the Trustees of the Trust as Trustees and not individually and
that the obligations of this instrument are not binding upon any of them or the
shareholders of the Trust individually but are binding only upon the assets
belonging to the Trust, or the particular Series of Shares in question, as the
case may be.
<PAGE> 1
EXHIBIT (b)(1)(f)
<PAGE> 2
NASL SERIES TRUST
Establishment and Designation
of Additional Series of Shares of Beneficial Interest
($0.01 par value per share)
The undersigned, being a majority of the Trustees of NASL Series Trust
(the "Trust"), acting pursuant to Section 4.1(a) of the Agreement and
Declaration of Trust of the Trust dated September 29, 1988 (the "Declaration of
Trust") hereby redesignate the Series of Shares known as the "U.S. Government
Bond Trust" as the "U.S. Government Securities Trust," such Series to continue
to have the relative rights and preferences described in Section 4.2 of the
Declaration of Trust, provided that the Trustees, in their absolute discretion,
may amend any previously established relative rights and preferences as they
may deem necessary or desirable to enable the Trust to comply with the
Investment Company Act of 1940 or other applicable law.
In witness whereof, the undersigned have executed this instrument in
duplicate original counterparts and have caused a duplicate original to be
lodged among the records of the Trust as of the 17th day of April, 1991, to be
effective as of June 14, 1991.
/S/ Don B. Allen
------------------------ -------------------------
Don B. Allen William J. Atherton
/S/ Charles L. Bardelis
------------------------ -------------------------
Charles L. Bardelis Brian L. Moore
/S/ Samuel Hoar /S/ Robert J. Meyers
------------------------ ---------------------
Samuel Hoar Robert J. Meyers
The Agreement and Declaration of Trust of the Trust, September 29, 1988, a copy
of which together with all amendments thereto is on file in the office of the
Secretary of The Commonwealth of Massachusetts, provides that this instrument
was executed by the Trustees of the Trust as Trustees and not individually and
that the obligations of this instrument are not binding upon any of them or the
shareholders of the Trust individually but are binding only upon the assets
belonging to the Trust, or the particular Series of Shares in question, as the
case may be.
<PAGE> 1
EXHIBIT (b)(1)(g)
<PAGE> 2
NASL SERIES TRUST
Establishment and Designation
of Additional Series of Shares of Beneficial Interest
($0.01 par value per share)
The undersigned, being a majority of the Trustees of NASL Series Trust
(the "Trust"), acting pursuant to Section 4.1(a) of the Agreement and
Declaration of Trust of the Trust dated September 29, 1988 (the "Declaration of
Trust") hereby establish and designate three new Series of Shares (as defined
in the Declaration of Trust), such Series of Shares to have the following
special and relative rights:
1. The new Series of Shares shall be designated the "Pasadena Growth Trust,"
the "Growth Trust" and the "Strategic Income Trust."
2. The new Series of Shares shall have the relative rights and preferences
described in Section 4.2 of the Declaration of Trust, provided that the
Trustees, in their absolute discretion, may amend any previously established
relative rights and preferences as they may deem necessary or desirable to
enable the Trust to comply with the Investment Company Act of 1940 or other
applicable law.
In witness whereof, the undersigned have executed this instrument in
duplicate original counterparts and have caused a duplicate original to be
lodged among the records of the Trust as of the 7th day of August, 1992.
/S/ Don B. Allen
--------------------- ----------------------
Don B. Allen William J. Atherton
/S/ Charles L. Bardelis
--------------------- ----------------------
Charles L. Bardelis Brian L. Moore
/S/ Samuel Hoar /S/ Robert J. Meyers
---------------------- ----------------------
Samuel Hoar Robert J. Meyers
The Agreement and Declaration of Trust of the Trust, September 29, 1988, a copy
of which together with all amendments thereto is on file in the office of the
Secretary of The Commonwealth of Massachusetts, provides that this instrument
was executed by the Trustees of the Trust as Trustees and not individually and
that the obligations of this instrument are not binding upon any of them or the
shareholders of the Trust individually but are binding only upon the assets
belonging to the Trust, or the particular Series of Shares in question, as the
case may be.
<PAGE> 1
EXHIBIT (b)(1)(h)
<PAGE> 2
NASL SERIES TRUST
Establishment and Designation
of Additional Series of Shares of Beneficial Interest
($0.01 par value per share)
The undersigned, being a majority of the Trustees of NASL Series Trust
(the "Trust"), acting pursuant to Section 4.1(a) of the Agreement and
Declaration of Trust of the Trust dated September 29, 1988 (the "Declaration of
Trust") hereby redesignate the Series of Shares known as the "Growth Trust" as
the "Value Equity Trust" and the Series of Shares known as the "Strategic
Income Trust" as the "Strategic Bond Trust," such Series to continue to have
the relative rights and preferences described in Section 4.2 of the Declaration
of Trust, provided that the Trustees, in their absolute discretion, may amend
any previously established relative rights and preferences as they may deem
necessary or desirable to enable the Trust to comply with the Investment
Company Act of 1940 or other applicable law.
In witness whereof, the undersigned have executed this instrument in
duplicate original counterparts and have caused a duplicate original to be
lodged among the records of the Trust as of the 10th day of December, 1992, to
be effective as of December 30, 1992, in the case of the Strategic Bond Trust
and as of April 4, 1993, in the case of the Value Equity Trust.
/S/ Don B. Allen
----------------------- ----------------------
Don B. Allen William J. Atherton
/S/ Charles L. Bardelis
----------------------- ----------------------
Charles L. Bardelis Brian L. Moore
/S/ Samuel Hoar /S/ Robert J. Meyers
----------------------- ----------------------
Samuel Hoar Robert J. Meyers
The Agreement and Declaration of Trust of the Trust, September 29, 1988, a copy
of which together with all amendments thereto is on file in the office of the
Secretary of The Commonwealth of Massachusetts, provides that this instrument
was executed by the Trustees of the Trust as Trustees and not individually and
that the obligations of this instrument are not binding upon any of them or the
shareholders of the Trust individually but are binding only upon the assets
belonging to the Trust, or the particular Series of Shares in question, as the
case may be.
<PAGE> 1
EXHIBIT (b)(1)(i)
<PAGE> 2
NASL SERIES TRUST
Establishment and Designation
of Additional Series of Shares of Beneficial Interest
($0.01 par value per share)
The undersigned, being a majority of the Trustees of NASL Series Trust (the
"Trust"), acting pursuant to Section 4.1(a) of the Agreement and Declaration of
Trust of the Trust dated September 29, 1988 (the "Declaration of Trust") hereby
establish and designate a new Series of Shares (as defined in the Declaration of
Trust), such Series of Shares to have the following special and relative rights:
1. The new Series of Shares shall be designated the "International Growth and
Income Trust."
2. The new Series of Shares shall have the relative rights and preferences
described in Section 4.2 of the Declaration of Trust, provided that the
Trustees, in their absolute discretion, may amend any previously
established relative rights and preferences as they may deem necessary or
desirable to enable the Trust to comply with the Investment Company Act of
1940 or other applicable law.
In witness whereof, the undersigned have executed this instrument in
duplicate original counterparts and have caused a duplicate original to be
lodged among the records of the Trust this28th day of December, 1994.
/S/ Don B. Allen
-------------------------- -------------------------
Don B. Allen William J. Atherton
/S/ Charles L. Bardelis /S/ Frederick W. Gorbet
--------------------------- -------------------------
Charles L. Bardelis Frederick W. Gorbet
/S/ Samuel Hoar
--------------------------- --------------------------
Samuel Hoar Brian L. Moore
/S/ Robert J. Myers
---------------------------
Robert J. Myers
The Agreement and Declaration of Trust of the Trust, September 29, 1988, a copy
of which together with all amendments thereto is on
<PAGE> 3
file in the office of the Secretary of The Commonwealth of Massachusetts,
provides that this instrument was executed by the Trustees of the Trust as
Trustees and not individually and that the obligations of this instrument are
not binding upon any of them or the shareholders of the Trust individually but
are binding only upon the assets belonging to the Trust, or the particular
Series of Shares in question, as the case may be.
<PAGE> 1
EXHIBIT (b)(10)(b)
<PAGE> 2
Jones & Blouch L.L.P.
Suite 405 West
1025 Thomas Jefferson Street, N.W.
Washington, D.C. 20007-0805
April 24, 1996
NASL Series Trust
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. 31 under the Securities Act of 1933 and Amendment
No. 32 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 (b)(11)
<PAGE> 2
CONSENT OF INDEPENDENT ACCOUNTANTS
==================================
We consent to the inclusion in this Post-Effective Amendment No. 31 under the
Securities Act of 1933 and Amendment No. 32 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 Part B of the Registration
Statement. We also consent to the reference to our Firm under the caption
"Independent Accountants" in Part B of the Registration Statement.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
April 24, 1996
<PAGE> 1
EXHIBIT (b)(13)
<PAGE> 2
EXHIBIT 13
TOTAL RATE OF RETURN CALCULATION
FORMULA
-------
P(1 + T)[superscript caret]n = ERV
P = A hypothetical payment of $1,000
T = Average annual total return
n = Number of years
T = (ERV/P)[superscript caret]1/n - 1
<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> 01
<NAME> EQUITY TRUST
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 810,537,978
<INVESTMENTS-AT-VALUE> 976,065,248
<RECEIVABLES> 14,193,954
<ASSETS-OTHER> 8,285
<OTHER-ITEMS-ASSETS> 750,444
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<SHARES-COMMON-STOCK> 47,562,040
<SHARES-COMMON-PRIOR> 36,452,063
<ACCUMULATED-NII-CURRENT> 4,695,040
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 95,984,414
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 165,526,687
<NET-ASSETS> 988,800,205
<DIVIDEND-INCOME> 8,022,622
<INTEREST-INCOME> 2,722,339
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<NET-INVESTMENT-INCOME> 4,703,344
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<DISTRIBUTIONS-OF-INCOME> 4,092,853
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 15,461,830
<NUMBER-OF-SHARES-REDEEMED> 4,613,712
<SHARES-REINVESTED> 261,859
<NET-CHANGE-IN-ASSETS> 454,238,254
<ACCUMULATED-NII-PRIOR> 4,079,883
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<PER-SHARE-NII> .10
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<PER-SHARE-DIVIDEND> .11
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<PER-SHARE-NAV-END> 20.79
<EXPENSE-RATIO> .80
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<AVG-DEBT-PER-SHARE> 0
</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
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<SERIES>
<NUMBER> 02
<NAME> INVESTMENT QUALITY BOND TRUST
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
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<INVESTMENTS-AT-COST> 134,606,419
<INVESTMENTS-AT-VALUE> 142,715,378
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<OTHER-ITEMS-ASSETS> 809
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<OTHER-ITEMS-LIABILITIES> 31,628
<TOTAL-LIABILITIES> 2,556,107
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 131,176,104
<SHARES-COMMON-STOCK> 11,618,055
<SHARES-COMMON-PRIOR> 10,123,550
<ACCUMULATED-NII-CURRENT> 8,478,262
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4,660,721)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8,108,959
<NET-ASSETS> 143,102,604
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<EXPENSES-NET> 902,846
<NET-INVESTMENT-INCOME> 8,486,217
<REALIZED-GAINS-CURRENT> 934,173
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<NET-CHANGE-FROM-OPS> 21,863,619
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7,077,320
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,829,840
<NUMBER-OF-SHARES-REDEEMED> 3,987,022
<SHARES-REINVESTED> 651,687
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<PER-SHARE-NII> .77
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<PER-SHARE-DIVIDEND> .74
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<AVG-DEBT-PER-SHARE> 0
</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
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 258,581,602
<INVESTMENTS-AT-VALUE> 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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<SHARES-COMMON-PRIOR> 27,667,381
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<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 258,116,963
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<EXPENSES-NET> 1,423,581
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<NET-CHANGE-FROM-OPS> 14,438,470
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<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 31,669,307
<NUMBER-OF-SHARES-REDEEMED> 34,968,839
<SHARES-REINVESTED> 1,443,847
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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
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<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
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 581,007,795
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<OTHER-ITEMS-ASSETS> 65,525,750
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<TOTAL-LIABILITIES> 63,071,000
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 594,157,053
<SHARES-COMMON-STOCK> 40,249,612
<SHARES-COMMON-PRIOR> 39,140,838
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<ACCUM-APPREC-OR-DEPREC> 60,504,811
<NET-ASSETS> 648,182,638
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<NET-INVESTMENT-INCOME> 3,747,724
<REALIZED-GAINS-CURRENT> (7,229,061)
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<DISTRIBUTIONS-OF-GAINS> 27,013,345
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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
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<SERIES>
<NUMBER> 05
<NAME> GLOBAL GOVERNMENT BOND 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> 215,527,656
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 64,132,670
<TOTAL-LIABILITIES> 64,132,670
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 210,172,142
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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> 06
<NAME> US GOVERNMENT SECURITIES TRUST
<MULTIPLIER> 1
<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
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<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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<NUMBER-OF-SHARES-SOLD> 773,201
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<CIK> 0000756913
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
TRUST ANNUAL REPORT DATED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROMNASL SERIES
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REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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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
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NASL SERIES
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</LEGEND>
<CIK> 0000756913
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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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